May 12, 2016
Company name: Tokuyama Corporation
Representative name: 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 the Company’s Medium-Term Management Plan
Tokuyama Corporation (hereinafter referred to as “Tokuyama” or “the Company”) today announced detailsof its Medium-Term Management Plan that covers the period from fiscal 2016, the fiscal year ending March
31, 2017 to fiscal 2020, the fiscal year ending March 31, 2021. Brief details are presented as follows.
1. Overview of the Previous Medium-Term Management Plan and Details of the New
Medium-Term Management Plan
Tokuyama announced its Medium-Term Management Plan 2017 in July 2015 with the view of rebuilding its
financial platform. In the ensuing period, the Group as a whole worked in unison to rebuild its management
structure in a bid to secure profits. Based on these endeavors, the Company reported an increase in both net
sales and operating income in fiscal 2015, the fiscal year ended March 31, 2016. Despite achieving a certain
level of success, however, Tokuyama was forced to incur a net loss for the period owing mainly to a
substantial impairment loss.
Looking ahead, forecasts for certain existing businesses indicate that the general-purpose product market in
Japan will contract. At the same time, a slowdown in electronic materials business growth is also expected.
Under these circumstances, and recognizing the need to create the necessary driving force to propel new
profit growth, Tokuyama undertook a fundamental review of its previous Medium-Term Management Plan.
Guided by the overarching vision of “New Foundation,” the Company put in place a five-year medium-term
management plan, commencing from fiscal 2016, as the “cornerstone of the Group’s revitalization.”
A number of factors led to the Company’s difficult position. On top of the massive loss in the Group’s
overseas business, this is largely due to delays in new product development, low levels of investment
efficiency, and weakening corporate governance. Taking these factors into consideration, Tokuyama is
cognizant of the vital need to overcome these issues and to create the necessary driving force to propel new
profit growth. With this in mind, the Company will accordingly work to definitively change its organizational
climate, rebuild its business strategies, strengthen Group management, and improve its financial position.

12. Pertinent Details of the New Medium-Term Management Plan
(1) Term of the Plan
April 1, 2016 to March 31, 2021
(2) Priority issues and measures
1. Change the Group’s organizational culture and structure
Steps will be taken to review personnel evaluation systems, actively promote the exchange of humanresources between Group companies, and drastically reform structures and systems through a variety
of initiatives including the vigorous introduction of outside personnel.
2. Rebuild the Group’s business strategies
The Group will strictly adhere to a customer-oriented approach on the conduct of its businessactivities. At the same time, the Group will transition to a research and development structure that isin tune with customers’ needs. Through these means, energies will be channeled toward cultivating
new business domains that employ unique technologies.
The Group will reinforce management resources including personnel and information throughalliance with other companies.
3. Strengthen Group management
Each company of the Tokuyama Group will once again clarify its role and position. Seeking tocontribute to the Group’s growth strategy as well as the reduction of costs, particular emphasis will
be placed on further strengthening the management of the Group as a whole.
4. Improve the Company’s financial position
Every effort will be made to restore the Company’s shareholders’ equity by steadily building up
profits.
Tokuyama will issue classified stock (preferred stock) to quickly stabilize the Company’s financial
position, thereby ensuring that the Group is well positioned to flexibly pursue opportunities
including M&As that are designed to accelerate the pace of growth.
(3) Targets to be achieved by the final fiscal year of the Medium-Term Management Plan
Net sales:¥335.0 billion

Operating income:¥36.0 billion

ROA:

10%

CCC:

55 daysD/E ratio

1.0[Assumptions]Exchange rate:¥110/US$

Domestic naphtha price:¥58,000/kL
2

3 Medium-Term Management Plan
1. Current Understanding of Conditions
2. Management Policy
3. Medium-Term Management Plan
4. Financial Strategy

12

3Medium-Term Management Plan

Results to Date

1. Current Understanding of Conditions~ Performance Trends ~With a business platform that is grounded in inorganic and organic chemicals, Tokuyama weathered the oilcrises of the 1970s and has continued to explore opportunities in the specialty chemicals field, pursue
overseas business development, and steadily expand its operations.
*TMSB: Tokuyama Malaysia

Long-term Performance Trend
Net sales (billions of yen)

Operating income (billions of yen)

400

40.0
(4) Investing in TMSB

350
Net sales300(3) Expanding overseas business

Operating income

30.0(2) Restructuring of business

250

35.0

25.0

(1) Commenced new businesses

200
150
100

20.0

Expansion of the organic
chemicals business

15.0

Expansion of the inorganic
chemicals business

10.0

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

1963

1961

1959

FY

1957

0.0

1955

0

1953

5.0
1951

50

(1) Commenced new businesses(2) Restructuringof business(2) 事業再構築期(3) Expanding overseas business(4) Investing in TMSB

1976 Commenced film business1978 Commenced dental products business
1981 Commenced plastic sashes business1983 Commenced high-purity chemicals
business
1984 Commenced polysilicon business1992 Established Sun・Tox Co., Ltd.
1995 Established Shin Dai-ichi Vinyl Corp.
2001 Established Tokuyama
Polypropylene Co., Ltd.
2004 Consolidated membrane businessto ASTOM Corp.

1996 Established Tokuyama Electronic Chemicals Pte. Ltd
1996 Established Taiwan Tokuyama Corp.
2002 Established Shanghai Tokuyama Plastics Co., Ltd.
2005 Established Tokuyama Chemicals (Zhejiang) Co., Ltd.
2013 Established Tokuyama Nouvelle Calédonie S.A.

2009 Established Tokuyama Malaysia
2011 Commenced construction of PS-1
2012 Commenced construction of PS-2
2014 Completed construction of PS-2

13

3

Medium-Term Management Plan

Results to Date

1. Current Understanding of Conditions~ Performance Trends ~Tokuyama reported increased profitability in its Specialty Products business during the second half of the 2000s. In
its general-purpose product activities centered on the Chemicals and Cement businesses, the Company has
witnessed a drop in profitability due to shrinking markets in Japan.
Performance Trend by Business Segment
Operating income (billions of yen)

45.0
40.0
35.0

30.0

Specialty
Products

25.0

Others20.0
OthersLife & Amenity

15.0
Specialty
Products

Cement andbuilding materials

10.0
5.0

Cement andbuilding materials

Chemicals

CementChemicals

Chemicals

0.0
Corporate

14

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

FY

1995

(10.0)

1994

(5.0)

3

Medium-Term Management Plan

1. Current Understanding of Conditions

Results to Date

~ Accumulated Strengths and Technologies towhich the Company Will Entrust Its Future ~Building on its chemicals, cement, and other foundation activities that make the most of the Company’s inherent
strengths including its highly efficient factory and Japan’s leading in-house power generation capacity, Tokuyama has
advanced into the specialty chemicals field and developed new strengths.
New Technology
Strengths

Powder control

Organic andinorganic synthesis

Purification

Crystallization
Deposition

SinteringSpecialty
Business

Specialty chemicals field(Polysilicon, Silica, Ceramic Materials, Organic Functional Materials, Pharmaceutical Intermediates, Other)

Entry Into
Traditional
Businesses

Foundation
Strengths
15

Chemicals

Cement(Electrolysis and Refining Technologies)(Firing and Resource Reprocessing Technologies)

Good natural harborand competitive
industrial complex

Highly efficient
Tokuyama Factorythrough integration

Japan’s 8th leading
in-house power
generation capacity

Employee integrityand perseveranceSound management

Medium-Term Management Plan

3

Reflecting on the Past

1. Current Understanding of Conditions~ Delays in New Product Development ~Unable to fully expand technological capabilities developed in the specialty chemicals field into businesses
outside semiconductor-grade polysilicon operations

Silicon chloride

Polysilicon

Caustic soda

PVC

Plastic window sash

Ion exchange membranes

Medical diagnosis systems

Chlorine
derivatives,
organic
solvent

IPA

Polypropylene

High purity chemicals forelectronics manufacturing
Microporous film

Polyolefin film

CementAlN(alminum nitride）

Dental materials/
equipment
Plastic lens monomer

Photochromic lensGas sensor
Active pharmaceuticalingredients

1970

16

1980

1990

Blank period in the creation of new businesses

Soda ash &Calcium chloride

Fumed silica

Liquid hydrogen

Plaster
Reclaimed dihydrate gypsumBN(boron nitride)

DUV-LED

2010

2020

Medium-Term Management Plan3

1. Current Understanding of Conditions

Reflecting on the Past

~ Substantial Loss in Overseas Operations ~Despite reducing net interest-bearing debt to nearly zero in real terms in 2009, dramatic increase following the
procurement of funds to finance large-scale investment in Malaysia and substantial deterioration in financial position
Long-term Trend of Financial Position and Financial Indicator(billions of yen)

(D/E ratio)

700.0

7.0

D/E ratio (FY2015): 4.7
600.0

6.0

500.0

5.0

Reduce interest-bearing
debt to zero in real terms(taking into account cash inhand and deposits at bank)

400.0

4.0

17

2015

2013

2011

2009

2007

2005

2003

2001

1999

FY
(Note) D/E ratio = Interest-bearing debt / Shareholders’ equity etc.

1997

1995

1993

1991

1989

0.0
1987

0.0
1985

1.0

1983

100.0

1981

2.0

1979

200.0

1977

3.0

1975

300.0

Total Assets
Shareholders' equity
Interest bearing debt
D/E ratio

3

Medium-Term Management Plan

1. Current Understanding of Conditions

Reflecting on the Past
~ Points to be Improved ~Forecasts for traditional businesses indicate that the general-purpose product markets in Japan will contract. At thesame time, a slowdown in electronic materials business growth is also expected. Under these circumstances, it isvital that Tokuyama overcomes the issues mentioned below and creates the necessary driving force to propel new
profit growth.
Reflecting on the Past ― Points to be Improved as Tokuyama Enters the Next Century ―Point to be Improved (1)Point to be Improved (2)Overconfidence in andInward and passive posturedependence on Tokuyama Factoryspread among employees

Point to be Improved (3)Corporate governance

Point to be Improved (4)Uncertainty surrounding the strategic direction of the Group and each department

It is vital that Tokuyama overcomes these issues andcreates the necessary driving force to propel new profit growth.
18

3

Medium-Term Management Plan

2. Management Policy

New Foundation
MissionCentered on the field of chemistry, the TokuyamaGroup will continue to create value that enhances people’s lives

Aspirations
Shift from a focus on quantity to quality
FY2025 Global leader in advanced materials
Leader in its traditional businesses in Japan

ValuesCustomer satisfaction is the source of profits
A higher and broader perspective
Personnel who consistently surpass their predecessors
Integrity, perseverance, and a sense of fun
19

3

Medium-Term Management Plan

2. Management Policy

Medium to Long-term Management Strategies

The Tokuyama Group has positioned the following medium- to long-term management strategies as the driving
force behind its business activities. The goal is to carry out each of these strategies by fiscal 2025.

Management Strategies
Transition to a robust business structure that is resilient
against changes in its operating environment andcapable of sustainable growth・Growth businesses: Become a global leader in advanced materials
through unique technologies
・Traditional businesses: Become a leader in Japan in each of the Cement and Chemicals
businesses through strengthening competitivenessTransition to a Group-wide low-cost structure by undertaking
a comprehensive review of existing work practices
20

3

Medium-Term Management Plan

2. Management Policy

Rebuild Business Strategies

Strive toward definitive profit growth by becoming a global leader in advanced materials through unique
technologies in growth businesses. Work to become a leader in traditional businesses in Japan by strengthening
competitiveness and overcome competition in the domestic general-purpose product market.
Aspirations

Means of Achieving Goals

Key Management
Indicators

Businesses

Become a global leader inadvanced materials throughunique technologies
・Thoroughly understand customers’
needs, and meet requirements
through unique technologies

EBITDA growth rate

Specialty ProductsLife & Amenity
New businesses■ Adhere strictly to customer-oriented
business activities■ Utilize open innovation■ Leverage alliances■ Review the research anddevelopment structure

GrowthBecome a leader in Japan

Traditional
Businesses
Chemicals
Cement21

through strengthening
competitiveness・Overcome competition in thegeneral-purpose products market
・Become an entity that maintains
a thirst for increased efficiency■ Adopt a stringent approach toward
maintaining and renewing investments;
undertake strategic investments aimed
at strengthening competitiveness■ Increase the efficiency of repairs andmaintenance expenses by shortening
the periods of periodic maintenance■ Strengthen cross-departmental
improvement activities■ Leverage alliances

ROA,
Cash conversion
cycle (CCC)3

Medium-Term Management Plan

2. Management Policy

Steadily Expand Growth Businesses

Utilize the Company’s unique technologies that draw on capabilities nurtured in advanced fields and develop
products that address the needs of society
Increasing
environmental awarenessSocial Trends
Growing interestin health
Aging population
Reduction in CO2 emissions
Widespread use of energy-efficient equipment

Widespread mobility
Increased networking
Miniaturization of devices
Reduction in
healthcare expenses

Society’s Needs

Preventive andimproved healthcare

Advanced healthcare
Addressing society’s needs

Addressing society’s needs

Reduction
High
Sintering
nitridization
purification
Crystallization,
Electrode
Powder control
Sol-geldeposition
and membrane
Organic synthesis /Photopolymeri
Molecular
Direct hydration
zationdesignTokuyama’s Unique Technologies
22

3

Medium-Term Management Plan

3. Medium-Term Management Plan

Outline of the Plan

Medium-Term Management Plan Cornerstone of the Group’s Revitalization
Positioning of
the PlanPriority Issues

The Medium-Term Management Plan has been set up as a milestone toward achieving the Group’s aspirations.
Through implementing the Plan, the Tokuyama Group will lay the cornerstone for the Group’s revitalization.

Period: From April 1, 2016 to March 31, 2021
(1) Change the Group’s organizational culture and structure (2) Rebuild the Group’s business strategies(3) Strengthen Group management (4) Improve the Company’s financial position
Consolidated Operating Income Trend

50.0(billions of yen)

Specialty Chemicals (New Products)

Medium-Term Management Plan

40.0
30.0

Specialty Chemicals (Existing Products): Cultivate new markets in advanced chemical material fields; generate
definitive growth

20.0
Traditional Businesses: Maintain a thirst for increased efficiency
and excel in the general-purpose products market

10.0
0.0
TMSB

23

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

FY

2013

(10.0)

3

Medium-Term Management Plan

3. Medium-Term Management Plan

Target Indicators

Set numerical targets for FY2020 as a milestone toward achieving the Group’s aspirations in FY2025
Numerical Targets under the Medium-Term Management Plan

FY2020Target

FY2015Net sales¥307.1 billion

Emphasize quality over quantity¥335.0 billion

Operating income¥23.0 billion

Shift toward high-value-added
products and reduce costs¥36.0 billion

5.7%

Realize Tokuyama Factory’s potential

10%

7.5%

Pursue a thirst for increased efficiency

10%

Total asset
turnover0.77 times

Promote improvements through various
measures including efforts to shorten
the periods of periodic maintenance

1.0 times

CCC

69 days

Reduce inventories,
improve trading terms and conditions

55 daysD/E ratio

4.7

Promote improvement by building up
profits and utilizing external capital

1.0

ROA

OperatingmarginFinancial indicators

Note 1: Cash Conversion Cycle (CCC): Accounts receivable turnover period + Inventory turnover period – Accounts payable turnover period;
ROA: Operating income / Total assets

24(Assumptions)Exchange rate：¥110/US$
Domestic naphtha price：¥58,000/kl

3Medium-Term Management Plan

3. Medium-Term Management Plan

Changes in Operating Income by Factor

Build up the effects of measures implemented by each department including those taken in the Specialty
Products segment and cost reduction efforts at Tokuyama Factory, and target operating income of ¥36.0 billion in
the lead-up to FY2020
Changes in Operating Income by Factor(billions of yen)

40.0
35.0

Decrease in domestic
demand and the growing riskof a surge in resource prices

Upswing in sales mainly ingrowth businesses (Specialty
Products, Life & Amenity)

+2.2

30.0

+5.4

25.0

(13.6)+12.2
Reduction in cross-departmental
costs at Tokuyama Factory, increaselogistics efficiency, and other factors

20.0
15.0
10.0

+6.6

36.0

23.0

5.0

9.5

0.0
FY201525

Risk factors

FY2020
TMSB(before actions) improvement

Sales
expansion

Marginimprovement

Cost
reduction

FY20203Medium-Term Management Plan

3. Medium-Term Management Plan Cross-Departmental Cost Reduction Activities
Adopt a cross-departmental approach that differs from conventional methods and work to reduce costs byundertaking strategic capital expenditures as a part of efforts to cutback principal costs including raw
material, fuel, repairs and maintenance, and distribution expenses
Cross-Departmental Cost Reduction at Tokuyama Factory
Overall Costs at Tokuyama Factory(billions of yen)

Implement a ¥4.0 billion
reduction in cross-departmental
costs in fiscal 2020 comparedwith fiscal 2015

130.0
129.0
128.0

Expansionof portfacilities

Reduce coal stock expenses throughan increase in the amount of coalhandled as a result of large-scale
expansion¥1.1

Repairefficiency

Put in place a project team andpromote activities that utilize external
expertise¥1.0

Unit material
consumption
reduction

Also consider undertaking strategic
renewal investments, continue toimprove the unit consumption of raw
materials and fuels¥0.6

Distribution
cost saving

Strengthen efforts aimed at
optimizing the logistics function as awhole, spearheaded by the
Tokuyama Factory general manager¥0.5

OthersIncrease the selling of electric powerby shortening the periods of periodic
maintenance and reduce other costs

¥0.8

Total

Target amount of Group-wide cost
reduction in fiscal 2020

127.0
126.0
125.0

billonbillonbillonbillonbillon

124.0
123.0
2015

26

2016

2017

2018

2019

2020

¥4.0
billon3

Medium-Term Management Plan

3. Medium-Term Management Plan

Research and Development

Make changes to the Group’s research and develop structure to better reflect the needs of customers as a part ofefforts to expand existing businesses and develop opportunities in new areas by utilizing its unique technologies
Future research anddevelopment activities

Optimize the allocationof human resources
Breakdown of R&D Personnel

Introduce external technologies

Research, development,
andproduction technologies

Undertake performance
management based on results

Manufacturing andquality technologies

Grasp customers’ needs throughdevelopment marketing

Sales and marketing,Priority allocation Utilize open innovationof humantechnical support service resources

63%

Corporate

Fundamental andelement technologies

Business divisions
Group companies

Customer informationPriority allocation Bring onboard external
human resourcesof human
Customer needs
resources

37%

・

80%
76%

Apr. 2015

20%
24%
Apr. 2016

Promote customer-oriented research and development as well as development marketing27

3Medium-Term Management Plan

3. Medium-Term Management Plan

Capital Expenditure Planand Strategic Investment Limit

Build a platform for growth by allocating 26% of capital expenditures to the construction of new and additional
facilities. At the same time, set aside a separate amount of ¥20.0 billion for strategic investments aimed at
expanding growth businesses and enhancing the competitiveness of traditional businesses.

CAPEX Plan
（FY2016 – FY2020: ¥96.0 billion）

R&D, others
17%

Expansion of capacity
and sales
26%
CAPEX

Rationalization,
infrastructure FY2016-2020¥96.0 billion
17%(accumulated)

Maintenance and renewal
40%

Major Capital Investment Plans
・Expand shipping and receiving
facilities (Shunan Bulk Terminal)（~ ¥20.0 billion）

・Expand the coal storage and waste
acceptance facilities of Tokuyama
Factory・Investments aimed at increasing thequality of polysilicon
・Investments aimed at increasing thequality of IPA-SE・Investments aimed at upgrading andexpanding heat dissipation materials
・Investments aimed at upgrading andexpanding healthcare-related products
・Introduction of the latest polyolefin film
facilities (Sun・Tox)
・Investments aimed at increasing thequality of microporous film

28

Strategic Investment Limit

GrowthStrategic
businesses
Investment Limit35%~ ¥20.0 billion
Traditional businesses
65%3Medium-Term Management Plan

3. Medium-Term Management Plan

Strengthen Group Management

Take steps to again clarify the position of each company within the Group. Call on each Group company to boost
its contributions toward carrying out the Group’s growth strategies and reducing costs while further strengthening
management control of the Group as a whole
Clarify the position of each company within the Group and its expected role
Conventional Group Management

Tokuyama
Inadequate management control
Unilateral human resource exchange
Inadequate support from amanagement resource perspective

The position of each Group company is unclear(core or non-core; growth or functional; other)
The strategic direction of eachGroup company is unclear

Group companies

29

Ideal Group Management
Strengthen management control
across the Group as a whole

Tokuyama
Strong support from ahuman resource perspective
Flexible capital policy

Cost reduction activities in unisonwith Tokuyama Factory

Business Subsidiaries

Functional Subsidiaries

Contribute to theGroup’s growth strategies

Contribute to the Groupthrough the reduction of costs

3

Medium-Term Management Plan

3. Medium-Term Management Plan

Tokuyama Malaysia

Schedule Going Forward
FY2015 (ending Mar-16) FY2016 (ending Mar-17) FY2018 (ending Mar-19)

からTokuyama Malaysia

P
S
1

Consider promoting
effective use

Utilize as a backup for
PS-2

P
S
2

(Posted impairment
loss in 3Q)

Implement cost reduction

Achieve profitable
operations

Tokuyama Malaysia Business Plan

30

(Billions of yen)

Net sales

8.8

11.0

18.0

Operating income(10.2)(4.0)

2.0

Spot price of solar-grade polysilicon

US$14.6./kg

US$13.5/kg

US$15.0/kg

Sales Qty

5,000 tonnes

8,000 tonnes

11,000 tonnes

Exchange rate (¥/US$)

120

110

110

Exchange rate (¥/MYR)

30

28

28

3

Medium-Term Management Plan

4. Financial Strategy

Cash Flow Plan

Posted cash inflows of ¥28.7 billion from the sales of assets and investment securities in fiscal 2015. Continue tosecure stable free cash flows by undertaking certain activities including the increase of business profits and thecontrol of investments.
Cash Flow Trend(Billions of yen)

*In addition to the below, we plan to utilize strategic investment limit of ¥20 billion

60.0
43.4
34.1

40.0
20.0

30.0

30.7

17.0

26.7
13.4

5.2

0.0
(20.0)(40.0)

8.8(17.8)(30.2) (25.5)(43.6)

Operating CF
Investing CF
Free CF(60.0)(60.6)(64.4)FY2012FY2013(80.0)

31

FY2014FY2015FY2016Plan

FY2017Plan

FY2018Plan

FY2019Plan

FY2020Plan

3Medium-Term Management Plan

4. Financial Strategy

Issuance of Classified Stock (Preferred Stock)

Issue A-classified stock in a total amount of ¥20.0 billion in order to quickly rebuild a stable financial platform andput in place a robust business operating structure that is capable of carrying out the new Medium-Term
Management Plan.
A-classified stock to be issued to Japan Industrial Solutions Fund 1.
Objectives for the Issuance of Classified Stock

1

2

32

Strengthen
the Group’s
financialplatform

Securestrategic
investment
funds

•

Address substantial deterioration in the Company’s net assets due toimpairment losses on Tokuyama Malaysia PS-1 and PS-2•

Quickly address the Company’s thin capital base and secure a robust business
operating structure•

Secure strategic investment funds aimed at expanding growth businesses andenhancing the competitiveness of traditional businesses•

Undertake investments totaling ¥9.5 billion in capital expenditures aimed at
expanding sales of advanced materials, ¥4.8 billion in rationalization
expenditures aimed at increasing the competitiveness of Tokuyama Factory, and¥5.4 billion in M&As

3

Medium-Term Management Plan

4. Financial Strategy

Issuance of Classified Stock (Preferred Stock)

Avoid the favorable issuance and stock that may have a dilutive effect as much as possible. Design the issuanceof stock that takes into consideration existing shareholders
Features of the Design of Classified Stock•
JIS put option restricted to a period of
three years after issuanceTerms and conditions allow for conversion
to advantageous
C-classified stock

The Company’s call option
takes preference

Partial redemption is allowed•

In principle, JIS cannot exercise its common stock, monetary, and B-classified
stock put options until July 1, 2019
Tokuyama plans to redeem the amount in full after putting in place a robust
financial platform through the buildup of profits•

Tokuyama holds a right of conversion allowing the Company to convert stock to
C-classified stock, which has a lower dividend yield and redemption premiumcompared with A-classified stock in the event that the amount available for
distribution is a certain amount or more* after March 31, 2018•

The Company’s call option will take preference within the scope of the amountavailable for distribution even in the event JIS exercised its common stock put
option•Partial redemption in lots of ¥5.0 billion is allowed. Monetary redemption isallowed on a flexible basis depending on financial conditions*The number of A-classified stock outstanding×¥1 million + ¥40 billion or more

33

3Medium-Term Management Plan

4. Financial Strategy

Shareholders’ Equity and Interest-Bearing Debt

Promote the reduction of interest-bearing debt as previously planned.
Quickly address the substantial deterioration in the Company’s shareholders’ equity attributable to two consecutive periodsof net loss through the sale of assets, buildup of business profits, and the issuance of classified stock totaling ¥20.0 billion
Shareholders’ Equity and Financial Index Trend
Shareholders’
D/E equity
ratio ratio
5.0 50%Share-holders’ equity(Billions of yen)
D/E ratio
4.7

300.0
250.0
200.0

40%

229.6

150.0

Shareholders’ equity ratio
33%
29%

126.0
Loss due toimpairment

13%

51.4

Profit140.0

1.5
1.0 10%1.2

Classified
Stock

0.9

0.5
0.0 0%

0.0
FY 201334

2.5
2.0 20%

87.5

+20.0

4.0 40%
3.5

22%

1.7
1.0

37%

3.0 30%

2.5

162.5

100.0
50.0

4.5

FY2014FY2015FY2016Plan

FY2018Plan

FY2020Plan

3Medium-Term Management Plan

4. Financial Strategy

Basic Policy for Profit Distribution and Dividends

After taking into consideration the negative impact on net assets after posting a net loss
and the decision to prioritize efforts aimed at restoring the Company’s sound financial
position, after accounting for business risks, Tokuyama deeply regrets that it has decided toforego the payment of a year-end dividend for the fiscal year under review.

For the reasons stated above, we have also decided to forego the payment of an interim
and year-end dividend for the next fiscal year. Tokuyama is committed to quickly restoring
its financial condition and to securing stable earnings power. We will work diligently toensure a resumption in the payment of dividends to shareholders at the earliest possible
opportunity.

35

3Medium-Term Management Plan

In Closing
Tokuyama’s Medium-Term Management Plan as well as its associated financial strategies
was determined in a bid to further enhance the Company’s shareholder value after
extensive deliberation at meetings of the Board of Directors.
In order to achieve its Medium-Term Management Plan and to implement the appropriate
financial strategies, Tokuyama will also review its corporate governance structure andsystems going forward.
As we work toward achieving our goals, we sincerely ask for the continued support andunderstanding of shareholders and investors.

36