Contents
Profile2

Consolidated Financial Highlights

5

Segment Information

7

Medium-Term Management Plan

15

Message from the President

17

Research and Development

20

CSR Initiatives

22

Corporate Governance24

Business and Other Risks

27

Corporate Officers

29

Financial Section

31

Independent Auditor’s Report

80

Business Locations

82

Major Subsidiaries and Affiliates

84

Corporate Data and Stock Information

86

CAUTIONARY NOTES:FORWARD-LOOKING STATEMENTS
This annual report contains information about forward-looking statements related to such matters as the Company’s plans, strategies and businessresults. These forward-looking statements represent judgments made by the Company based on information available at the time of preparing thisreport, and are inherently subject to a variety of risks and uncertainties. The Company’s actual activities and business results could differ
significantly from the forward-looking statements due to changes including, but not limited to, those in the economic environment, businessenvironment, demand and exchange rates.

DISCLAIMER
This annual report is supplied to provide information of the Company, and is not intended as a solicitation for investment or other actions. The
Company assumes no responsibility whatever for any losses or deficits resulting from investment decisions based entirely on projections,numerical targets and other information contained in this report.

Tokuyama Corporation Annual Report 20171

Profile
Tokuyama Corporation was founded in 1918 to begin production in Japan of soda ash, also known as sodium carbonate,
which was being imported at that time. As a fundamental material for industry, soda ash was indispensable forfacilitating the country's industrial development in the early 20th century.
The company has gone on to produce and supply a wide range of chemical products. Building on this foundation,
Tokuyama is currently expanding its main businesses globally, with a special focus on its information and electronics
business, which markets semiconductor-related products, the life and healthcare business, which includes eyeglass lensmaterials, dental materials and other products, as well as cement, recycling and environment-related businesses.
Tokuyama's 100th anniversary is February 16, 2018. We at the Tokuyama Group are committed to creating new value
centered on the field of chemistry. In creating a constant stream of new value, we will contribute to people’s happinessas well as the growth and development of society.

Company History
1918〜1944 Establishment and specialization in soda production
1918
Nihon Soda Kogyo Co., Ltd. (currently Tokuyama Corporation)
was established to produce soda ash
1938
Commenced cement business
1940
Expansion of inorganic chemicals business
1945〜1960 Further expansion of inorganic chemicals business
1952
Commenced electrolytic chlor-alkali business

The Factory as it was established

1961〜1974 Entry into petrochemicals business
1964
Commenced petrochemicals business
1966
Commenced polyvinyl chloride business
1967
Commenced ion exchange membrane business
1970
Commenced polypropylene business
1960’s Cement kiln (length: 185m)

1975〜1989 Entry into specialty and processing business
1976
Commenced polyolefin film business
1978
Commenced dental materials and equipment business
1981
Commenced building materials business
1982
Commenced life-related business
Commenced fine chemicals business
1983
Commenced IC chemicals business (high-purity chemicals
for electronics manufacturing)
Commenced medical diagnosis systems business
1984
Commenced electronic materials business (polycrystalline silicon)
1985
Commenced aluminum nitride business
Commenced gas sensors businessTokuyama Factory (Current)

1990〜2004 Strengthening and restructuring of business
1992
Established Sun • Tox Co., Ltd. as a joint venture for manufacture and sale of polyolefin film
1995
Established Shin Dai-ichi Vinyl Corporation as a joint concern for manufacture and sale of polyvinyl chloride
2000
Commenced recycling & environment-related business2005〜 Accelerating overseas business expansion
2005
Established Tokuyama Chemicals (Zhejiang) Co., Ltd. in Zhejiang, China as a manufacturing and sales
company of fumed silica
2013
Started operation of Tokuyama Chiyoda Gypsum Co., Ltd as a joint venture for developing a waste
gypsum board recycling business
Established Tokuyama Nouvelle Calédonie S.A., in New Caledonia, as a manufacturing and sales company
of cement

Tokuyama Corporation Annual Report 20172

A Value Creation Cycle that Spans Close to a Century
Drawing on its unique technologies in the manufacture and development of inorganic and organic chemicals, Tokuyama
has continued to refine its capabilities as the driving force behind its value creation endeavors for just short of a century.
As a platform for the manufacture and seamless delivery of products that employ these technologies to reduce costs toan unprecedented level, the Company also makes full use of the industry-leading port infrastructure and in-house power
generation facilities owned and operated by Tokuyama Factory. Located in the Shunan Industrial Zone, Tokuyama
Factory works diligently to deepen ties with neighboring companies. In addition to the supply of electric power and raw
materials, Tokuyama Factory actively engages in the collection of waste. As the Group’s main manufacturing facility,
Tokuyama Factory boasts a highly efficient production structure and systems that link several plants and operational
units to ensure the integrated and effective use of raw materials, products, byproducts, and waste.
Taking full advantage of its tangible and intangible asset including unique technologies, competitive manufacturing
facilities as well as human resources and organizations with professional skills and experience, the Tokuyama Group
provides products and services that match the needs of the market. With a proven track record of creating value with ourcustomers for a century, we will continue to fine tune our business model as a core and inherent strength.

Tokuyama Corporation Annual Report 20173

Tokuyama Corporation Annual Report 20174

Consolidated Financial Highlights
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31

Millions of yen
2008

2009

2010

2011

2012

Net sales

307,453

300,999

273,154289,786

282,381

Operating profit

35,32522,73816,483

20,144

13,720

Profit (loss) attributable to owners of parent

18,888(5,597)

7,458

9,765

9,351

Basic earnings (loss)

68.85(20.42)

23.52

28.06

26.87

Cash dividends

9.00

6.00

6.00

6.00

6.00

Net assets

725.37669.80682.03693.18716.39Total assets

383,264

403,613452,893474,708

501,181

Net assets

206,135

189,757

243,606

247,656

255,460

Cash flows from operating activities

47,69842,48029,38037,04327,060Cash flows from investing activities(25,664)(56,506)(36,468)(88,508)(57,666)

Cash flows from financing activities(10,176)

29,24646,99023,994

20,791

Cash and cash equivalents at end of the year

41,05755,36595,945

68,62458,476

Capital expenditures

37,001

52,55026,55735,80777,602

Depreciation and amortization (Note 1)

21,451

22,986

37,68831,47628,492R&D expenses

11,161

11,872

11,817

11,46911,704

Shareholders' equity ratio (%)

51.9

45.5

52.4

50.8

49.7

Return on equity (%)

9.7

(2.9)

3.5

4.1

3.8

Number of employees

5,057

5,295

5,444

5,493

5,506

Consolidated subsidiaries

47

46

49

50

48

Per share amounts (in yen)

(Note 1): Depreciation and amortization includes amortization of long-term prepaid expenses.

Tokuyama Corporation Annual Report 20175

Thousands of
U.S. dollars

Millions of yen
2013

2014

2015

2016

2017

2017

258,632

287,330

302,085

307,115

299,106

2,670,594

6,772

20,27019,53023,071

39,720354,643(37,916)

10,218(65,349)(100,563)

52,165465,763(108.98)

29.37(187.85)(289.10)147.78

1.32

3.00

6.00

-

-

-

-

Net assets

625.29660.18467.36147.98305.492.73

Total assets

518,251

576,315554,527

401,342424,433

3,789,584

Net assets

223,871

236,453

169,445

60,205

135,976

1,214,075

Cash flows from operating activities

17,071

34,10530,77230,09820,012

178,683

Cash flows from investing activities(60,673)(64,402)(25,519)

13,400(10,089)(90,081)

Cash flows from financing activities

36,46545,93940,502(37,689)(11,911)(106,351)

Cash and cash equivalents at end of the year

52,431

69,973

116,122

121,166

118,819

1,060,892

Capital expenditures

97,54961,051

25,345

13,945

17,360155,007

Depreciation and amortization (Note 1)

23,242

16,77018,84520,084

14,215

126,920

R&D expenses

10,076

8,709

10,156

8,522

7,508

67,043

Shareholders' equity ratio (%)

42.0

39.9

29.3

12.8

29.9

-

Return on equity (%)(16.2)

4.6(33.3)(94.0)

58.5-

Number of employees

5,651

5,756

5,852

5,759

5,406

-

Consolidated subsidiaries

49

53

54

55

51

-

Net sales
Operating profit
Profit (loss) attributable to owners of parent
Per share amounts (in yen, dollars)
Basic earnings (loss)
Cash dividends(Note 1): Depreciation and amortization includes amortization of long-term prepaid expenses.

Tokuyama Corporation Annual Report 2017

6

Segment Information

CHEMICALS

Tokuyama's Chemicals segment handles basic chemicals used as raw
materials for an array of products that are essential for people's
livelihoods. Among these are soda ash, which Tokuyama has been
producing since its founding in 1918, and caustic soda, a material
which is said to be “essential for the manufacture of products infactories.” These and other chlorine derivatives are used in a very
wide range of applications and are essential for all kinds of industries.
The caustic soda business also plays an additional role in Tokuyama's
earnings platform, as its manufacturing process generates chlorine andhydrogen that are used in processes for producing the Company's
polycrystalline silicon. In addition, Yamaguchi Liquid Hydrogen
Corporation, a joint venture for liquid hydrogen production,commenced operations in 2013. Through these operations, theCompany’s hydrogen is also used for rocket fuel at the Tanegashima
Space Center of Japan Aerospace Exploration Agency (JAXA). In thisway, the segment is contributing to the development of space
exploration.

26.6%

With the goal to continue ensuring that Tokuyama is the preferred choice of customers, the Chemicals segment oversees
three business units and Group companies while working to provide a stable supply of products and services that meetthe expectations and needs of customers in a timely manner.
Business Unit

Major Products

Soda Ash and Calcium Chloride

Soda ash, Calcium chloride, Sodium silicate and Sodium bicarbonate

Chlor-Alkali and Vinyl Chloride

Caustic soda, Vinyl chloride monomer (VCM), Propylene oxide and Methylene chloride

New Organic Chemicals

Isopropyl alcohol (IPA)

Group Companies

Polyvinyl chloride (PVC) [Shin Dai-ichi Vinyl Corp.]
Soda ash and Calcium chloride [Tokuyama & Central Soda Inc.]

Operating Results for the Fiscal Year ended March 31, 2017
Sales of caustic soda were down compared with the previous fiscal year. While domestic sales volumes were steady, thisdecrease was attributable to weak trends in selling prices.
Sales of vinyl chloride monomer (VCM) were down compared with the previous fiscal year. Despite an increase in thevolume of export mainly for Asian market, the decline was primarily due to weak trends in selling prices as a result of
the drop in domestic naphtha prices.
Sales of vinyl chloride resin declined. While a recovery in the number of housing starts and other factors contributed tofirm trends in sales volumes, this downturn largely reflects weak selling prices as a result of the drop in domestic
naphtha prices. Earnings on the other hand improved due mainly to the suspension of operations at the Chiba factory ofShin Dai-ichi Vinyl Corporation.

Tokuyama Corporation Annual Report 20177

With regard to soda ash and calcium chloride, sales were essentially unchanged from the previous fiscal year. Despite
decreased sales volume, this was mainly owing to efforts to revise selling prices.
As a result of the above, segment net sales decreased 5.1% compared with the previous fiscal year, to ¥83,346 million
and operating income increased 48.1% to ¥13,183 million. The segment reported higher earnings on lower sales.

Strategies Going Forward
Tokuyama will contribute to the development of customers’ businesses by delivering high-quality, cost-competitive
basic chemical materials and services that accurately reflect customers’ needs. At the same time, we will help to ensure
the Company’s stable and continuous earnings growth, all through our activities as the core business of the Company.
Guided by this basic policy, we will push forward the following priority measures.
■ Soda Ash and Calcium Chloride BusinessWe will ensure the stable supply while maintaining the quality of products as a single domestic manufacturer.
Production capacity of granular calcium chloride for use in the melting of snow will be increased in this year.
■ Chlor-Alkali and Vinyl Chloride BusinessWe will strengthen the competitiveness of our in-house power generation and electrolytic chlor-alkali production withthe aim of further reducing the cost of caustic soda and chlorine. We will expand VCM exports and maintain plant
operations at full capacity. At the same time, we will strengthen the profitability of the chlorine derivatives businessincluding vinyl chloride, propylene oxide, and chloromethane. Moving forward, we will double the liquid hydrogenproduction capacity of Yamaguchi Liquid Hydrogen Corporation. The supply of liquid hydrogen produced by the
expanded line is scheduled to start in November 2017.

Tokuyama Corporation Annual Report 20178

SPECIALTY PRODUCTS
The Specialty Products segment offers products for a wide range offields including energy, electronics and the environment. Our
high-purity polycrystalline silicon is used for semiconductors andsolar cells. Tokuyama is one of the leading companies in the world's
polycrystalline silicon market. Fumed silica, which is produced froma by-product of polycrystalline silicon manufacture, is used forsilicone rubber, polishing material for semiconductors manufacturing,copier toner and other applications. Aluminum nitride, which boasts
excellent heat dissipation properties, is used for semiconductor
production equipment and energy-saving applications such as
inverters and LEDs. Our high-purity chemicals for electronics
manufacturing are used chiefly for production of semiconductors and
LCD panels.

26.6%

The Specialty Products segment will continue to build on its
advanced chemical technologies such as high purification, powder
control and others, to create unique products that are useful to society.

Business Unit

Major ProductsElectronic Materials

Polycrystalline silicon

Fumed Silica

Fumed silica

SHAPAL

Aluminum nitride

IC Chemicals

High-purity chemicals for electronics manufacturing

Cleaning System

Methylene chloride for metal cleaning

Group Companies

Fumed silica [Tokuyama Chemicals (Zhejiang) Co., Ltd.]
Aluminum nitride substrate [Tokuyama-Dowa Power Materials Co., Ltd.]

Operating Results for the Fiscal Year ended March 31, 2017
Sales of semiconductor-grade polycrystalline silicon increased. This was primarily due to robust shipping reflecting thegrowing trend to highly functional mobile devices including smartphones.
Sales of solar-grade polycrystalline silicon increased on the back of higher sales volumes, reflecting the operating rate
improvement at Tokuyama Malaysia Sdn. Bhd.
Sales of fumed silica increased compared with the previous fiscal year. This was mainly due to firm trend in sales ofsuch applications as a polishing material for semiconductors.
With regard to high-purity chemicals for electronics manufacturing, sales decreased compared with the previous fiscal
year. Despite robust sales volume in such applications as semiconductor manufacturing, this decrease was mainly owing
to appreciated yen.
With regard to aluminum nitride, sales increased from the previous fiscal year. This was attributable to robust sales
volumes in such applications used for semiconductor manufacturing equipment.

Tokuyama Corporation Annual Report 20179

As a result of the above, segment net sales increased 11.2% compared with the previous fiscal year, to ¥67,726 million
and operating income improved to income of ¥9,649 million (Posted operating loss of ¥1,157 million in the previous
fiscal year). The segment reported higher earnings on higher sales.

Strategies Going Forward

16.3%
Tokuyama will expand business activities and earnings by supplying products and putting forward development productproposals that are consistently preferred by customers. To achieve this end, we will undertake the following priority
measures.
■Semiconductor-grade Polycrystalline Silicon BusinessWe will accurately grasp the customers’ quality requirements of products including the latest ones; achieve
world-leading quality while minimizing costs.
■ Fumed Silica BusinessIn addition to upgrading and expanding highly functional products on top of silicone- and CMP-related products, wewill try to reduce production cost and promote high added value at Tokuyama Chemicals (Zhejiang) Co., Ltd.
■ IC Chemicals BusinessWe will expand sales and improve the quality of products that target the advanced semiconductor field.
■Thermal Management Material BusinessWe will increase production capacity of aluminum nitride powder by 120 tons per year to 600 tons per year with thestart of commercial operations scheduled in April 2018.
We will commercialize the boron nitride and aluminum nitride filler.

Tokuyama Corporation Annual Report 201710

CEMENT
Tokuyama launched its cement business in 1938 out of a desire toefficiently make use of by-products produced at the Tokuyama
Factory, an environmental approach that was ahead of its time inJapan. The segment produces cement and such related products as
cement-type soil solidifiers at the Nanyo Plant of the Tokuyama
Factory. These products are used for ready-mixed concrete andsecondary concrete items, which in turn are used to help build
infrastructure essential for people's lives, including residences,buildings, structures which support essential utilities, andtransportation facilities such as ports, bridges, and roads.

26.6%

In the cement production process, we accept a large volume of waste
matter, including waste plastic and household garbage incineration
ash from outside the Company as well as inside the Company, andutilize it as raw materials or fuel sources. In this way, the segment is
promoting a recycling approach that is responsive to the needs ofsociety, thereby helping promote a recycling-oriented society that
effectively makes use of resources as much as possible.
Tokuyama Mtech Corporation manufactures and sells various types of building materials products including cementand mortar-type products. Moreover, the Cement segment strives to develop products that can create new businesspossibilities by employing the technologies it has developed in the cement and building material fields. For example,
steps are being taken to roll out Fresco Graph and other cutting-edge techniques that incorporate 3-D modelingtechnologies using Shikkui Lemarge interior design materials and other classic style fresco painting plaster techniques.
Business Unit

Major Products

CementPortland cement, Portland blast furnace slag cement and Cement-type soil solidifier

Recycling and Environment

Recycling of wastes

Group Companies

Ready-mixed concrete [Tokyo Tokuyama Concrete Co., Ltd., etc.]

Operating Results for the Fiscal Year ended March 31, 2017
Sales of cement decreased. Despite an increase in the volume of exports on the back of robust demand in the Asia
region, this decrease was mainly due to the drop in export prices reflecting such factors as the impact of appreciation in
the value of the yen as well as a downturn in sales volumes in Japan due to weak public- and private-sector demand.
Meanwhile, successful steps were taken to reduce manufacturing costs. In addition to a drop in raw material and fuelprices, this reduction on manufacturing costs was mainly due to improvements in the basic unit of production.
In the recycling and environment-related business, the Company accepted a higher volume of waste including coal ash
compared with the previous fiscal year. As a result of this, sales increased from the previous fiscal year.
Consolidated subsidiary net sales declined. This mainly reflected corrections to robust shipping trends of such products
as ready-mixed concrete targeting large-scale projects in the previous fiscal year.
As a result of the above, segment net sales decreased 2.9% compared with the previous fiscal year, to ¥82,995 million
and operating income increased 35.1% to ¥7,878 million. The segment reported higher earnings on lower sales.

Tokuyama Corporation Annual Report 201711

Strategies Going Forward
We will upgrade and build optimal production, sales, and distribution systems that are capable of flexibly addressingchanges in the business environment, while maximizing waste acceptance earnings by increasing exports and working
to strengthen competitive advantage by reducing costs. To achieve this end, we will undertake the following priority
measures.
■ Cement BusinessTokuyama will improve production efficiency as well as unit consumption while reducing costs focusing mainly on
efforts to increase the use/intake of waste. We will endeavor to secure earnings by expanding exports that maximize theuse of the No. 4 kiln. Energies will also be channeled toward upgrading and expanding the infrastructure maintenanceand reinforcement business through Tokuyama Mtech Corporation.
■ Recycling and Environment BusinessWe will optimize the application of raw materials and promote the use of combustible waste and optimize the fuel plantbusiness. We will also promote stable operations in existing recycling businesses including the recycling of waste
gypsum boards; create new recycling businesses.

Expand Cement Clinker Exports

Clinker ship loader (Tokuyama Factory)

Tokuyama Corporation Annual Report 2017

Tokuyama Nouvelle Calédonie S.A.

12

LIFE & AMENITY
The Life & Amenity Division consists of Group companies that
handle such wide-ranging products as polyolefin films, medical
diagnosis systems, dental materials, gas sensors, ion exchange
membranes and plastic window sashes. The Division is also in chargeof the Tokuyama’s fine chemicals and NF businesses. From April
2013, the Advanced Components segment was renamed the Life &Amenity segment.

26.6%

In the fine chemicals business, utilizing our organic synthetic
technology to advantage, we are expanding this business witheyeglass lens materials, active pharmaceutical ingredients for genericpharmaceuticals, and intermediates as our main products. In the NF
business, we manufacture and sell air-permeable films (microporous
films) that repel water but allow air and moisture to penetrate.
Shanghai Tokuyama Plastics Co., Ltd., one of the Group companies
we are responsible for, manufactures and sells air-permeable films
used for disposable diapers, demand for which is climbing rapidly in
China and other emerging countries.
Business Unit

Major Products

Fine Chemicals

Active pharmaceutical ingredients and intermediates, Plastic lens-related materials

NF

Microporous film

Group Companies

Polyolefin film [Sun•Tox Co., Ltd.]
Medical diagnosis systems [A&T Corp.]
Dental materials/equipment [Tokuyama Dental Corp.]
Ion exchange membranes [ASTOM Corp.]
Plastic window sashes [Excel Shanon Corp.]

Operating Results for the Fiscal Year ended March 31, 2017
Sales of active pharmaceutical ingredients decreased. This reflected the decreased sales volume of genericpharmaceuticals compared with the previous fiscal year.
With regard to plastic lens-related materials, sales increased from the previous fiscal year. This reflected robust sales
volumes of photochromic dye materials for eyeglass lenses.
With regard to microporous film, sales of such applications as sanitary articles including disposable diapers at oversea
consolidated subsidiaries decreased. As a result of this, sales decreased compared with the previous fiscal year.
With regard to polyolefin film, sales were declined compared with the previous fiscal year. Despite firm trends in sales
mainly for application in packaging materials for products sold at convenience stores, this decrease was largely the
result of weak trends in selling prices on the back of the decline in domestic naphtha prices.
With regard to dental materials and equipment, sales increased compared with the previous fiscal year, due to higher
sales volumes of new products as well as products targeting overseas markets.
With regard to medical diagnosis systems, sales increased compared with the previous fiscal year. This largely reflectedrobust sales of blood testing products.

Tokuyama Corporation Annual Report 201713

In gas sensors, Figaro Engineering Inc. was removed from the Company’s scope of consolidation effective from thesecond quarter of the fiscal year under review. This reflected the transfer of a portion of the company’s shares.
As a result of the above, segment net sales decreased 12.0% compared with the previous fiscal year, to ¥50,751 million
and operating income decreased 14.6% to ¥5,632 million. The segment reported lower earnings on lower sales.

Strategies Going Forward
Tokuyama is securing a position of advantage
17.7%in markets both in Japan and overseas, pursuing business expansion, andcontributing to the improvement of people’s quality of life by establishing and strengthening its customer-oriented
development, manufacturing, and sales structure. Driven by this policy, we will advance the following priority
measures.
■ NF Business (Microporous Film)
We will endeavor to improve earnings by improving the quality and reducing costs at subsidiaries in China.
■ Fine Chemicals BusinessWe will expand market share and cultivate new applications in photochromic dye materials for use in eyeglass lenses.
■ Dental Materials/Equipment Business (Tokuyama Dental Corporation)
Steps will be taken to accelerate the pace of overseas business development focusing mainly on aesthetic fillingmaterials (composite resins).
■ Medical Diagnosis System Business (A&T Corporation)
We will strengthen the production structure and systems by expanding the Esashi Factory in September 2017.
■ Polyolefin Film Business (Sun･Tox Co., Ltd.)
Every effort will be made to improve productivity by implementing a scrap and build approach toward manufacturing
facilities.
■ Plastic Sash Business (Excel Shanon Corp.)
We will expand Zero Energy House (ZEH)-related sales.

Tokuyama Corporation Annual Report 201714

Medium-Term Management Plan
OutlineLooking ahead, forecasts for certain existing businesses indicate that the general-purpose product market in Japan willcontract. At the same time, a slowdown in electronic materials business growth is also expected. Under thesecircumstances, Tokuyama recognized the need to create the necessary driving force to propel new profit growth. Guided
by the overarching vision toward “New Foundation” in May 2016, the Company put in place a five-year medium-term
management plan, commencing from fiscal 2016, as the “cornerstone of the Group’s revitalization.”

Going forward, Tokuyama is committed to carrying out the following two priority management strategies by fiscal 2025,
the fiscal year ending March 31, 2026.
1. Transition toward a robust business structure that is resilient against changes in the Company’s operating
environment and is capable of sustainable growth
The Tokuyama Group has set the goal of becoming a global leader in advanced materials through unique technologies
across growth businesses including the Specialty Products as well as Life & Amenity segments together with thedevelopment of new products. In such traditional businesses as the Cement and Chemicals segments, the Group will
work to become a leader in Japan through strengthening competitiveness.
2. Transition to a Group-wide low-cost structure by undertaking a comprehensive review of existing work
practices
The Tokuyama Group will reduce costs by adopting a cross-departmental approach that differs from conventional
methods and undertaking strategic capital expenditures as a part of efforts to cut back principal costs including raw
material, fuel, repairs and maintenance, and distribution expenses.
Tokuyama is cognizant of the vital need to create the necessary driving force to propel new profit growth. With this inmind, the Company will accordingly work to definitively change its organizational climate, rebuild its businessstrategies, strengthen Group management, and improve its financial position.
1. Change the Group’s organizational culture and structure
Steps will be taken to review personnel evaluation systems, actively promote the exchange of human resources 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 business activities. At the sametime, the Group will transition to a research and development structure that is in tune with customers’ needs. Throughthese means, energies will be channeled toward cultivating new business domains that employ unique technologies. In
addition, the Group will reinforce management resources including personnel and information through alliance withother companies or utilizing open innovation.
3. Strengthen Group management
Each company of the Tokuyama Group will once again clarify its role and position. Seeking to contribute to the Group’s
growth strategy as well as the reduction of costs, particular emphasis will be placed on further strengthening themanagement of the Group as a whole.

Tokuyama Corporation Annual Report 201715

4. Improve the Company’s financial position
Every effort will be made to restore the Company’s shareholders’ equity by steadily building up profits. At the sametime, 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 toaccelerate the pace of growth.

Progress

1. Financial indicators

2. Transfer of Tokuyama Malaysia Sdn. Bhd.
With regard to Tokuyama Malaysia Sdn. Bhd. which has recorded a loss of more than 200 billion yen due to two
impairment losses so far, Tokuyama decided to transfer the whole shares of the company to OCI Company Ltd. in
Korea in September 2016 and completed the transfer on May 31 this year.
Tokuyama had repeatedly made efforts to continue the business of Tokuyama Malaysia Sdn. Bhd., however, since thecompetitive environment of the polycrystalline silicon market for solar cells was severe and the impact on the
Company’s business performance was very huge, the Company made the decision to transfer Tokuyama Malaysia Sdn.
Bhd.
Going forward, Tokuyama will concentrate its management resources on businesses that can take advantage of its
strengths, such as unique technologies, and will focus on achieving the goals set at medium-term management plan.
3. Acquisition and Cancellation of Class A shares.
In June 2016, in order to reinforce the deteriorated shareholders’ equity damaged by impairment losses posted for the
manufacturing facilities of Tokuyama Malaysia Sdn. Bhd., Tokuyama issued Class A shares of 20 billion yen to Japan
Industrial Solutions Fund I.
As the business risk was reduced due to the decision made to transfer Tokuyama Malaysia Sdn. Bhd., and based on theprevious year’s performance and the current outlook for this year, it was also expected to recover and enhance
consolidated net assets that were decreased, by steadily generating revenue, all of Class A shares have been acquiredfor cash consideration and canceled.
By the earlier acquisition and cancellation of Class A shares, the Company will reduce the cost of redemption premiums
and payment of dividends, and further improve its financial structure.

Tokuyama Corporation Annual Report 201716

Message from the President

Hiroshi Yokota, President

Toward “Global Leader in Advanced Materials” and “Leader in Japanthrough Strengthening Competiveness in Traditional Business”
The second year since I took office as president, the fiscal year ended March 31, 2017 (fiscal 2016), was one blessedwith good opportunities.
Looking back, my first year in office started with a posting of huge impairment loss related to our solar-grade
polycrystalline silicon business. Thus regarding the rebuilding of our financial platform as a priority issue, we had taken
decisive action by implementing various reforms to ensure the revitalization of the Tokuyama Group. In fiscal 2016, mysecond year in office, amid this difficult management situation, operating income greatly exceeded that forecast at the
beginning of the fiscal year due to the ongoing positive flow-on effects of cutbacks in raw material and fuel costs aswell as other factors, and we were able to complete the transfer of whole shares of the consolidated subsidiary engaged
in the solar-grade polycrystalline silicon business that had been the cause of so much concern. Since we were therefore
able to make progress with the regaining of shareholders’ equity at a greater speed than planned, on June 14, 2017, we
also acquired and canceled a total of ¥20 billion of Class A shares issued in fiscal 2016 as a cash consideration.
A harsh assessment of fiscal 2016 would be that the results were better than Tokuyama merited, particularly in terms of
the improvement from the profit standpoint. On the other hand, however, I recognize that it was our daily unwavering
efforts that enabled us to follow a course that enabled us to take advantage of the favorable conditions.
With regard to cash dividends, we are continuing to forego any payments for the time being. However, since we areprojecting that profit will progress in line with our Medium-Term Management Plan for the current fiscal year, we areplanning both interim and year-end* dividends of ¥2 per share for the current fiscal year, ending March 31, 2018,
thereby resuming the payment of cash dividends for the first time in four years.
(*) In the event that five shares are consolidated into one share, the year-end dividend will be 10 yen.

Foundation of Medium-Term Management Plan: “Change the Group’s Organizational
Culture and Structure”
We launched the Medium-Term Management Plan in May 2016. In addition to reviewing, after an interval of 27 years,
our corporate basic policy that had lost some of its substance and newly formulating the “Tokuyama Vision,” weTokuyama Corporation Annual Report 201717

decided on becoming a “global leader in advanced materials through unique technologies” in growth businesses, such as
Specialty Products as well as Life & Amenity, and “a leader in Japan through strengthening competiveness” in our
traditional Chemicals and Cement businesses as an ideal Tokuyama Group in fiscal 2025. For this Medium-Term
Management Plan, we also formulated management numerical targets for fiscal 2020 hence to act as milestones and are
addressing the priority issues toward achieving those targets.
In promoting the Medium-Term Management Plan, the most important theme is to change the Group’s organizational
culture and structure. I have become aware of the factor that has contributed to the posting of enormous losses for two
consecutive fiscal years and that has been hindering business growth; that factor is Tokuyama’s insular corporate
culture. I believe that recapturing the all-important culture of “focusing on our customers” and an “outward-looking
approach,” which Tokuyama had lost over a period of many years, will result in achieving our targets for fiscal 2020
and realizing an ideal Tokuyama Group in fiscal 2025.
On the other hand, it is not easy to change a culture and a mindset that have been entrenched for many years. It is mybelief that division leaders and division staff members are greatly motivated by senior management themselves firstly
taking bold action and playing a leading role.
For this reason, in the first half of fiscal 2016, the first year of the Medium-Term Management Plan, we conducted
briefings to explain our intentions directly to employees of the Group so that the “Tokuyama Vision” becomes deeply
ingrained in all Tokuyama Group employees. At roundtable discussions aimed at manager-level personnel in the second
half of fiscal 2016, we worked to exchange opinions and offer on-site guidance covering a number of areas, including
reforms of business functions, work and awareness, and collectively revised management personnel systems. Unlessthere is conscious reform on the part of management personnel, who are the key to any organization—particularly at the
manager level that offers guidance directly to division staff—the vision will not become deeply ingrained, and thechange in corporate culture underpinned by that vision will not be achieved. Going forward, I would like to continue
this course of action, in tandem with progress management, on a yearly basis.

Enhanced Profitability by Restructuring of Business Strategies
In order to accomplish the Medium-Term Management Plan, we have to not only reform the underlying organizational
culture but also change into a highly investment-efficient company. Rather than drawing up business plans based onhuge amounts of investment that would compromise the continued existence of an enterprise were they to fail, fromnow on we will devise a style of management that will enable us to generate earnings more steadily even on a small
scale. While building a slim yet robust business structure that is resilient against changes in the economic environment,
we will work to strengthen profitability from the two pillars that underpin the Medium-Term Management Plan:“Growth Businesses” and “Traditional Businesses.”
Growth businesses are particularly those in which profit growth is expected in the future. In semiconductor-related
products, which are an important business domain, we will further hone the high quality and high purity that are
Tokuyama’s strengths amid burgeoning needs for miniaturization, and build a value chain that meets qualitative andquantitative requirements.
In fiscal 2016, we restarted operations at the plant producing semiconductor-grade polycrystalline silicon at our
Tokuyama Factory, which had been inactive, and increased production capacity from 6,200 tonnes to 8,500 tonnes. At
the same time, if we rack our brains, we should be able to bring about further improvements in production efficiency.
Consequently, for the time being we will seek out new possibilities geared toward higher quality and greater
productivity without conducting any large-scale investment.
In heat dissipation materials, we have decided to increase production of the fifth line of high-purity aluminum nitride
powder at our Tokuyama Factory, and plan to build a 600-tonne system, representing an annual production increase of
120 tonnes, in April 2018. We will advance the expansion of our product lineup, including boron nitride, and upgrade
our systems to enable us to respond on the basis of customer needs. In the case of heat dissipation demand, we predictthat demand for heat dissipation materials will get into full swing from 2020 onward and are preparing a thoroughframework in terms of R&D and capital investment.
In the healthcare domain, we will cultivate business as four pillars: plastic lens-related materials; diagnostic reagent andclinical systems; dental materials and equipment; and active pharmaceutical ingredients (API). Here, the key tomonetization lies in marketing. Particularly with the aim of acquiring new sales channels overseas, we will build partner
relationships with market experts regardless of our own resources. Firmly putting channels for sales for ourhealthcare-related materials in place, we will accelerate the growth of our market share.

Tokuyama Corporation Annual Report 201718

In the traditional business segment of Cement, although the industries in Japan are mature, overseas represents a large
market where robust demand continues unabated. A socially beneficial business in that it accepts a large amount ofwaste, I believe that maintaining business soundness remains in the national interest. In the years to come, we willproactively promote the creation of mechanisms designed to expand sales channels primarily in Asia.

For Realization of “Global Leader in Advanced Materials” and “Leader in Japan throughStrengthening Competiveness in Traditional Business”
In fiscal 2017, we will robustly promote the changes on the Group’s organizational culture and structure and work tofoster a vibrant corporate culture that conducts business with more of a sense of urgency. To fulfill my role in top
management, I myself will work on building outside relationships and expanding business opportunities, such as byabsorbing and passing back to our company new knowledge and insights gleaned from meeting people from outside.
We will work hard on a daily basis to achieve the fiscal 2020 targets of the Medium-Term Management Plan and torealize an ideal Tokuyama Group for fiscal 2025.
As we move toward achieving those targets, we kindly request the continued support and understanding of all
stakeholders, including our shareholders.

Hiroshi Yokota
President
June 2017

Tokuyama Corporation Annual Report 201719

Research and Development
Research and Development Principles and Policies
Contributing to the world by applying chemistry-based technologies lies at the heart of Tokuyama’s research anddevelopment philosophy. Guided by this philosophy, the Company adheres strictly to a process of internal and external
collaboration in a bid to promote a customer-focused approach. At the same time, we endeavor to integrate newtechnologies drawing on the strengths of our inherently unique and specialist capabilities and engage in research anddevelopment activities with the aim of producing advanced materials that lead the world.
In order to take another step toward a research and development promotion structure that is committed to producing
technologies and materials with genuine commercial application, we organized our research and development activitiesof the Research and Development Division into three broad groups, the Tsukuba Research Laboratory, the Tokuyama
Research Laboratory, and the New Business Promotion Dept. from July 2017. At each laboratory, we undertake
development with our eyes fixed firmly on end results (a genuine commercial outcome) in collaboration with businesssegments in the medical and healthcare- as well as ICT-related domains. The New Business Promotion Dept. manages
market information on a centralized basis. This information is then used to uncover and anticipate customers’ needs andthe underlying platform to put forward new proposals.

Research and Development Bases
Tokuyama’s two-pronged R&D structure comprises Tsukuba Research Laboratory in Tsukuba City, Ibaraki Prefecture,
in Eastern Japan, and Tokuyama Research Laboratory in Shunan City, Yamaguchi Prefecture, in Western Japan.

Tsukuba Research Laboratory
The Tsukuba Research Laboratory is a
development base that focuses on the medical
and healthcare-related domain. The lab
pursues leading-edge technologies from a
medium- to long-term perspective, conducting
research and development of analysis
techniquesasplatform
technologies,
composite materials used especially in thefield of dentistry, and high-value-added
products targeting the organic fine chemicals
field.

Tsukuba Research Laboratory

Tokuyama Research Laboratory

Tokuyama Research Laboratory
The Tokuyama Research Laboratory is a development base that focuses on the ICT-related domain. Spanning a wide
variety of fields from basic chemicals to cement, the Laboratory engages in a broad array of research and development
activities including basic research, application research, and the development of processes.

R&D Activities in Fiscal 2016
Based on our basic philosophy of "Centered on the field of chemistry, the Tokuyama Group will continue to create
value that enhances people’s lives ", Tokuyama is doing Research and Development with aiming to expand and develop
each business based on chemistry, with priority areas being "Specialty Chemicals for ICT and Healthcare".
The Research and Development Division consists of three departments, Corporate Development Department, Analytical
Science Department and the Intellectual Property Department. In collaboration with the development group of thebusiness division belonging to each segment, the Research and Development Division is engaged in technologicaldevelopment of the theme of next generation and the theme around the field which cannot be handled by the businessdivision on the development portfolio of the business divisions and group companies.
Regarding the development of scintillator materials for neutron detectors that we have been working on for the past,
technological development has almost completed, and Tokuyama is waiting for new products made of this material
coming from customers.
Regarding the development of deep ultraviolet LEDs that we have been promoting as an application development of theTokuyama Corporation Annual Report 201720

single crystal aluminum nitride substrates by the HVPE method (hydride vapor phase epitaxy method), Tokuyama hastransferred know-how as well as development and production facilities related to our deep ultraviolet LEDs to Stanley
Electric Co., Ltd. which has high competitiveness in the LEDs market. Tokuyama will concentrate resources on thedevelopment of single-crystal aluminum nitride substrate, aiming to deepen the cultivation of this technology incooperation with customers such as Stanley Electric Co., Ltd., to realize early commercialization and new progress ofmaterial development.
Meanwhile, as a new initiative for healthcare, Tokuyama started material development in the field of animal healthcare.
This has been the theme that was in line with the planning of the business division, but for the purpose of a wide rangeof material development, Tokuyama has moved the theme from the business division to the Research and Development
Division and speed up the development.
In fiscal year ended March 31, 2017, the Tokuyama Group’s R&D spending totaled ¥7,508 million, including ¥1,636
million for basic research expenditures that are not allocable to a specific segment.
Below is a description of R&D projects underway and spending by segment.
Chemicals Segment
Tokuyama develops technologies to cope with needs of environmental load reduction of chlorine-related products,
reduce costs by improving production efficiency, and maintain and improve product quality. With vinyl chloride resin,
Tokuyama also strengthened its technical services to supply products according to customers' requests, and actively
worked on developing new grades that make use of the findings acquired from technical service. In developing
inorganic chemicals, Tokuyama focused on investigating marketability based on customer evaluation, improvement ofphysical properties and manufacturing process.
R&D expenditures totaled ¥545 million in the Chemicals segment.
Specialty Products Segment
Regarding polycrystalline silicon, in order to respond quickly to the demands for higher purity and higher quality ofpolycrystalline silicon for semiconductors, Tokuyama located and concentrated development teams near the production
side. With regard to silica, Tokuyama continued to develop new silica that responds to customers' requests, including
improvements to existing products. For heat dissipating materials, Tokuyama focused on developing aluminum nitride
and boron nitride fillers used in heat dissipation materials such as power semiconductors and LEDs. With regard tohigh-purity chemicals for the electronics industry, Tokuyama improved its analysis methods and worked to further
reduce impurities.
R&D expenditures came to ¥1,745 million in the Specialty Products segment.
Cement Segment
Tokuyama has continued to aggressively pursue R&D in the use of various wastes as raw materials and fuels for the
production of cement. In particular, Tokuyama focused on exploring substitutes for coal. From the viewpoint of further
effective utilization of waste, we focused on developing applications other than cement manufacturing processes. As
basic research on cement, Tokuyama continued to examine the reduction of burning temperature of cement clinker fromthe viewpoint of energy saving. As cement-related products, Tokuyama promoted development and improvement ofvarious building materials products applied to repair and reinforce concrete structures such as cross section repairing
materials, development and improvement of various grades of cement-based soil solidifiers.
R&D expenditures were ¥667 million in the Cement segment.
Life & Amenity Segment
We made progress developing next-generation photochromic materials for lenses-related materials. We also worked on
the development of manufacturing processes for active pharmaceutical ingredients. In the healthcare and clinical testing
fields, marked progress was made on the integrated development of products including diagnostic reagents andlaboratory information systems, clinical analyzers, and laboratory automation systems. In the dental care field,
continued steps were taken to develop products such as restorative composite resins, dental adhesives and dental resin
composite block. In ion exchange membranes, progress was made on the development of high-efficiency bipolar
membrane electrodialysis technology, highly functional ion exchange membranes, and other products.
R&D expenditures totaled ¥2,913 million in the Life & Amenity segment.

Tokuyama Corporation Annual Report 201721

CSR Initiatives
Tokuyama works diligently to fulfill its corporate social responsibility (CSR) in an effort to nurture sound relationships
with all stakeholders in accordance with its basic philosophy of CSR-oriented management. Recognizing that the
purpose and purport of the Corporate Governance Code―ensuring sustainable corporate growth while enhancing
corporate value over the medium to long term― is directly linked to the principles of CSR, Tokuyama has positioned
internal control at the heart of its CSR activities and is taking practical steps to adhere to the Corporate GovernanceCode. In this regard, we are placing considerable weight on both risk management and compliance as the key elementsof our internal control endeavors. As a company that manufactures chemicals, we are also aware of the importance that
responsible care plays in advancing CSR. In addition to putting in place a Companywide promotion structure, we areworking to ensure the proper operation and continuous upgrade of our safety, environmental and quality management
systems.
In order to realize sustainable growth as the corporate group of choice for our customers, we have put in place theTokuyama Group Code of Conduct as well as the Tokuyama Group’s Five Conscience Clauses for each and every
executive and employee. In order to ensure that all executives and employees are fully aware of both this Code of
Conduct and Conscience Clauses, posters are displayed at the Group’s business establishments and offices and ahandbook distributed to all staff. Moreover, we have issued the Tokuyama Group Guidelines for Business Activities asa means to clarify the principles for actions taken by members of the Tokuyama Group and to establish parameters for a
relationship with each stakeholder.

Involvement in the Environment
One of our most important corporate social responsibilities is to actively protect the global environment. Tokuyama
practices environmental management with an emphasis on environmental perspectives in all of its business activities.

Tokuyama’s Environmental Performance for Fiscal 2016
Tokuyama strives to obtain accurate data on the input and output of materials and substances in its business activities
and reduce the environmental impact of these activities to meet its environmental targets.
In fiscal 2016, Tokuyama achieved its goals for unit energy consumption, recycling and zero emissions. Regarding otherperformance data, Tokuyama has set a separate numerical management target for each department to maintain thecurrent low-impact situation.

Tokuyama Corporation Annual Report 201722

Involvement in Society
Tokuyama places great importance on communication with its stakeholders as a means of remaining a company neededby communities and society as a whole.

Social Contribution Activities
In an effort to deepen understanding toward the Company’s process safety, disaster prevention, and environmental
protection activities, Tokuyama places the utmost emphasis on promoting communication and dialogue with the local
community. We engage in a wide range of activities in a bid to remain an essential partner to the local community andsociety at large.
Employee’s Volunteer Activities Deepening Interaction with Local Communities
Tokuyama is doing a variety of activities in order to continue to be a company required by society. In response to thegas leakage accident at the factory, the "Mochitsuki Zo-san Group" was formed in 1983 by over 10 employees with theintention of restoring trust and security from neighboring residents. Since that time the group has been trying tocommunicate with the region through various volunteer activities for more than 30 years. Every year the group opens
bazaars at the Tokuyama Summer Festival and Shunan Winter Tree Festival, and finances the activity funds with theproceeds from bazaars. In 2016, the Group donated rice cake rice to "Shirobato Gakuen", the welfare facility fordisabled people, did the rice cake pounding with the students in the facility and tasted the rice cake together. In addition,
the group visited the Christmas party of "Nozomi no Ie", the welfare facility for the disabled people, gave donations andgifts, and enjoyed the game with the facility’s students and their families. The Company will continue to do steady
activities and create a bright society with local communities.

Volunteer Activity (Mochitsuki Zo-san)Process Safety, Disaster Prevention and Occupational Health and Safety
Tokuyama believes that safety is an essential part of business activities and that ensuring safety is the first step inachieving coexistence with society. In taking this stance on safety, Tokuyama thoroughly conducts process safety anddisaster prevention activities as well as occupational health and safety efforts. By doing so, the Company endeavors toprevent accidents and disasters while striving to provide a favorable working environment.

For more information on Tokuyama's CSR initiatives, see the Company's CSR Report or the Company's website:
http://www.tokuyama.co.jp/eng/csr/index.html

Tokuyama Corporation Annual Report 201723

Corporate GovernanceTokuyama strongly believes creating and continuously providing new value is made possible through the trust of andcooperation with its stakeholders, which include shareholders, customers, trading partners, employees and local
communities. This in turn enables the Company to grow on a sustainable basis and to increase its corporate value overthe medium to long term. In order to make this a reality, Tokuyama has positioned corporate governance as a key
management priority. Tokuyama has always been working to improve corporate governance. Taking into consideration
the introduction of the Corporate Governance Code in Japan, the Company places the utmost emphasis on ensuring therights and equality of its shareholders while strengthening the supervisory function and securing the independence of
the Board of Directors. At the same time, Tokuyama works diligently to accelerate decision making and to clarify thebusiness execution responsibilities of its Board of Directors while ensuring appropriate disclosure and transparency andpromoting constructive dialogue with shareholders.

Corporate Governance Structure
The Company introduced an executive officer system to separate the supervision and execution functions in April 2011,
assigning external directors in June of the said year. The number of external directors was subsequently increased instages. On June 23, 2017, the Company transitioned from a company with a Board of Auditors to a company with an
Audit and Supervisory Committee. The Audit and Supervisory Committee selects three external directors from five
Committee members and endeavors to ensure management transparency and fairness. By doing so, it strives to maintainmanagement soundness. As a company with an Audit and Supervisory Committee, the Company seeks to enhance
corporate governance at all times by making the best of its rapid decision-making functions and effective
supervising/auditing functions.

Board of Directors and Executive Officer System
In addition to deliberating and making resolutions on important matters relating to the activities of the Company, theBoard of Directors supervises business operations. During fiscal 2016, the Board of Directors met on 22 occasions.
As of June 23, 2017, Tokuyama’s Board of Directors comprised 12 members. The Company appointed three external
directors thereby bolstering the supervisory function of the Board of Directors. Meanwhile, the term of office of
directors (excluding directors who are Audit and Supervisory Committee members) is set at one year in order to ensure clear
accountability as well as the ability to swiftly address changes in the operating environment.
Tokuyama adopted an executive officer system in April 2011 with the aim of separating the supervisory and executive

Tokuyama Corporation Annual Report 201724

functions for business operations. As of June 23, 2017, the Company had 13 executive officers.
Based on the rules for approval determined by the Board of Directors, authority is delegated to the business executive
system.

Audit and Supervisory Committee
Directors who are Audit and Supervisory Committee members attend meetings of the Board of Directors and otherimportant internal meetings for purposes such as gathering information on the status of the execution of businesses, andconduct audits of how the executive officers are executing their duties. As of June 23, 2017, the Audit and Supervisory
Committee consists of five directors who are the members of the Committee, including three external directors.

Human Resources Committee
The Human Resources Committee consists of representative directors and external directors. This committee holds
discussions on such matters as the remuneration for directors and executive officers and the selection of director andexecutive officer candidates before Board of Directors meetings take place.

Executive Committee
Members of the Executive Committee are selected by the president and executive officer from among the Company’s
executive officers. The Executive Committee serves as the Company’s decision-making body with respect to the
execution of business operations. In principle, the committee meets two times each month. Based on the approval rules
and regulations determined by the Board of Directors, the Executive Committee deliberates and makes decisions on
strategies and other important matters.

Strategy Committee
Members of the Strategy Committee are selected by the president from among the Company’s executive officers. The
committee meets once a month and serves as an advisory body to the president. In addition to deliberating on the
direction of business execution, the Committee takes steps to confirm the allocation of management resources aimed atevaluating conditions relating to the execution of business with respect to important matters requiring approval whilesetting the direction of policies relating to the execution of business with respect to specific projects.

CSR Promotion Council
Chaired by the president, the CSR Promotion Council is comprised of all executive officers working in Japan. The
Council sets policies on CSR and lays out the goals of our CSR activities, facilitating the execution and attainment of all
such activities and goals. The Council focuses on maintaining appropriate corporate governance and internal control,
which together are the foundations of CSR. It also discusses important matters regarding internal control.

Risk Management and Compliance Committee
Tokuyama’s Risk Management and Compliance Committee, chaired by the director supervising the Corporate Social
Responsibility Division, operates under the CSR Promotion Council. The Committee takes the initiative in promoting
risk management and compliance, which are central to effective internal control.

Helpline Committee
The Helpline Committee is responsible for the administration of Tokuyama’s helpline (whistle-blowing) system, which
has been established for the purpose of enabling the internal reporting of legally questionable actions and behavior byGroup executives and employees.

Departments Responsible for Internal Auditing
Tokuyama has established the Auditing Department and the RC Management Department, which are responsible forinternal auditing. These departments perform internal audits of individual divisions and departments of the Company aswell as of Group companies.

Policies and Procedures for Appointing Management Executives and Nominating Directorand Auditor Candidates
To enable supervision of appropriate decision making and business execution with regard to the Company’s business
operations that are centered on chemicals, the selection of internal candidates for directorships appoints people who are
well-balanced in terms of their knowledge of each business segment and area as well as the experience they possess. By
adding external directors who possess high-level insight and wide-ranging experience as managers, the Company
ensures the balance and diversity of the Board of Directors as a whole.
When nominating director (excluding directors who are Audit and Supervisory Committee members) candidates,
discussions are held at a Human Resources Committee meeting in advance of the subject appearing on the agenda at a

Tokuyama Corporation Annual Report 201725

Board of Directors’ meeting. Comprising representative directors and external directors, the Human Resources
Committee is the entity that nominates directors, executive officers and others, and discusses such matters as
remuneration. The Board of Directors makes its decisions in response to the Human Resources Committee’s report.
In the case of the nomination of directors who are Audit and Supervisory Committee members candidates, the Board of
Directors makes its decisions having received the assent of the Audit and Supervisory Committee.

Policies and Procedures for Determining the Company’s Executives Remuneration
The policy relating to the amount of remuneration for the Company’s executives and determining method to calculate
such amounts is based on rules of executive remuneration, which are as follows.
1. The remuneration of directors who are Audit and Supervisory Committee members and other directors shall bewithin a range of remuneration obtained by resolution at a Shareholders’ Meeting.
2. Having received the proposals of remuneration of directors (excluding directors who are Audit and Supervisory
Committee members) from the president and executive officer in advance, such proposals shall be discussed at a
Human Resources Committee meeting.
3. Individual directors (excluding directors who are Audit and Supervisory Committee members) remuneration shallbe in accordance with the amounts decided for each executive and determined by Board of Directors’ resolution.
4. The specific amounts of remuneration for directors who are Audit and Supervisory Committee members shall be
determined by the resolution of Audit & Supervisory Board.
In fiscal 2016, a total of ¥114 million, ¥38 million and ¥71 million was paid to five directors, two corporate auditors(Audit and Supervisory Board members) and seven external officers, respectively.
In addition to the aforementioned compensation, an amount of ¥31 million was paid as salaries to three employees, whohold the concurrent position of director.

Anti-takeover Measures
Tokuyama recognizes the need to put in place appropriate countermeasures to protect both the interests of theCompany’s shareholders and the Company’s corporate value from large-scale purchases of its shares (hereinafterreferred to as a “Large-Scale Purchase”) by another party (hereinafter referred to as a “Large-Scale Purchaser”) in cases
where the Large-Scale Purchase is judged to significantly damage the common interests of Tokuyama’s shareholders
and Tokuyama’s corporate value.
The decision of whether to accept a Large-Scale Purchase is ultimately left to the discretion of Tokuyama’s shareholders.
Consequently, in cases where a Large-Scale Purchase is being attempted, we believe that the Large-Scale Purchaser’s
provision of an adequate amount of information is necessary. In addition, we believe that the appraisal and opinions ofTokuyama’s Board of Directors, as well as the provision of information and the like based on the business features
pertaining to any Large-Scale Purchase, are critical for the shareholders to make a decision of whether to accept said
Large-Scale Purchase, and contribute to the common interests of Tokuyama’s shareholders.
Accordingly, the Company established a set of large-scale purchase rules to ensure that these interests and theCompany’s corporate value are preserved. Under these rules, each Large-Scale Purchaser is required to provide anadequate amount of information to Tokuyama’s Board of Directors prior to undertaking a Large-Scale Purchase.
Moreover, an appropriate amount of time must be set aside to allow the Company’s Board of Directors to assess andconsider the terms and conditions of the Large-Scale Purchase and to put forward its opinion as well as alternative
proposals.
In cases where a Large-Scale Purchaser fails to comply with the large-scale purchase rules, or when a Large-Scale
Purchaser complies with the large-scale purchase rules, but is deemed to significantly damage the common interests of
the Company’s shareholders and the Company’s corporate value, Tokuyama’s Board of Directors may take suchmeasures as the allotment of share options without contribution as stipulated under Article 277 and the following
provisions of Japan’s Companies Act and oppose the Large-Scale Purchase.
Specific details outlined above were collated into the Company’s “Policy regarding Large-scale Purchases of Tokuyama
Corporation's Company Shares (Anti-Takeover Measures).” This policy was approved by the Company’s shareholders
at the 151th Ordinary General Meeting of Shareholders held on June 24, 2015.
Details of the Policy have been posted on the Company’s website:
URL: http://www.tokuyama.co.jp/eng/company/governance/anti_takeover.html

Tokuyama Corporation Annual Report 201726

Business and Other Risks
Set out below are those matters relevant to the Tokuyama Group’s business status and financial conditions that could
potentially have a significant influence on investor decisions. Please note that the matters listed do not cover all risks
relevant to the Tokuyama Group, and it is thought that there are risks other than those matters listed that could
potentially influence investor decisions.
The matters listed are those regarded as relevant as at June 26, 2017.

(1) Procurement/Market Conditions of Raw Materials and Fuels, etc.
Tokuyama Group procures the raw materials and fuels essential to conduct production operations from various area inthe world. Also, for some of its products, Tokuyama Group uses special raw materials and materials which have alimited number of suppliers. With regard to the procurement of raw materials and fuels, Tokuyama Group engages inlong-term, stable, low-cost procurement by combining, for example, medium- to long-term contracts and purchases on
spot markets. However, in the event that a soaring market or resource nationalism causes the tight supply of raw
materials and fuels or delays in delivery hinders Tokuyama Group’s production operations causing manufacturing costs
to rise drastically, there is the possibility that any such situation greatly affects Tokuyama Group’s business performanceand financial condition.

(2) Electronic Materials Business Market Environment
While the Electronic Materials Business is one of Tokuyama Group’s main businesses, in the event that the economical
trough in the information and electronics industry leads to a deterioration of the earnings from Electronics Materials
Business, there is the possibility that any such situation greatly affects Tokuyama Group’s business performance andfinancial condition.

(3) Environmental Regulations, etc.
Tokuyama Group operates a range of businesses that use natural resources and energy in large quantities. TokuyamaGroup enhances the investment in resource recycling systems and the facility designed to reduce its environmental
impact and accepts waste as an alternative fuel and raw materials. At the same time, Tokuyama Group also works to
reduce its environmental impact by, for example, promoting Zero Emission initiatives and improving its unit energy
consumption. However, in the event that more stringent environment-related regulation is approved or a new social
responsibility for environmental protection becomes required, there is the possibility that any such situation greatly
affects Tokuyama Group’s business performance and financial condition.

(4) Contractual Disputes/Litigation
The Legal & Credit Management Department and the Intellectual Property Department of Tokuyama Groups take leadin day-to-day precaution against patent or contract disputes and litigation. However, in both its domestic and overseas
businesses, there exists the possibility that Tokuyama Group becomes the subject of a legal dispute or litigation. In theevent that a major lawsuit is filed, there is the possibility that such a situation greatly affects Tokuyama Group’sbusiness performance and financial condition.

(5) Effect of Disasters/Accidents
Tokuyama Group performs day-to-day and periodic facility maintenance to minimize the adverse effects from any
disruption to its production operations. Such maintenance, however, is unable to completely prevent or may noteffectively reduce the adverse effects on production facilities from disasters or accidents (including earthquakes andother natural disasters). Also, while Tokuyama Group manufactures products for which alternative production
arrangements could not immediately be made, should events lead to a significant decrease in production volume or, inthe worst case, Tokuyama Group be forced to discontinue production for a protracted period, there is the possibility thatany such situation greatly affects Tokuyama Group’s business performance and financial condition.

(6) Product Liability
Tokuyama Group makes an honest effort to ensure the proper quality in accordance with product characteristics.
However, in the event that, due to unexpected circumstances, a quality problem leads to a product recall or a productsafety-related product liability (PL) issue arises, there is the possibility that any such situation greatly affects TokuyamaGroup’s business performance and financial condition.

Tokuyama Corporation Annual Report 201727

(7) Market Economic Trends/Conditions
The supply of and demand for Tokuyama Group products are subject to the trends of their respective markets, which areprimarily the chemical industries, the construction and construction material industries as well as the information andelectronic industries. The products from Tokuyama Group are sold mainly in Japan, the United States, Asia, and Europe,and the economic conditions in such country could exert a great influence on the sales. Tokuyama Group targets
production improvements and higher quality and also promotes cost reductions however a fall in demand in the market
and industries or an economic slowdown in the sales area may greatly affect Tokuyama Group’s business performanceand financial condition.

(8) Price CompetitivenessIn each of the business that Tokuyama Group conducts, similar products may be available from competitors. TokuyamaGroup supplies products to customers maintaining a competitive advantage in terms of quality and price. However, inthe event that low-cost imported products flood the market or a price war breaks out between rival companies due tounforeseen circumstances, and that the situation continues for a prolonged period of time deteriorating TokuyamaGroup’s profitability, there is the possibility that any such situation greatly affects Tokuyama Group’s businessperformance and financial condition.

(9) Overseas Business Development
The polycrystalline silicon factory that Tokuyama Group built in the Malaysian state of Sarawak is comparatively larger
in scale than Tokuyama Group’s other existing overseas facilities. In the event that the stable operation or sales isdisturbed, unexpected changes are made to the society system, laws and regulations or labor-management problems
arise, there is the possibility that any such situation greatly affects Tokuyama Group’s business performance andfinancial condition.

(10) Financing Arrangements
Tokuyama Group arranges financing through loans or issuance of unsecured bonds, and in preparation for changes in
the market environment such as interest rates, in principle, measures to mitigate risks by hedging transactions such as
fixed rate contracts or fixed interest rate swaps, however, there is a possibility that with some borrowing, cost offinancing arrangements could increase due to changes in the market environment such as interest rate, which may havea significant impact on the performance and financial contents of the Tokuyama Group. In addition to changes in themarket environment such as interest rates, since the amount of interest-bearing debt exceeded the amount of equity
capital at the end of the consolidated fiscal year, or depending on the credit ratings or other conditions, there is no
guarantee that the financing is always available under same conditions in arranging financing through a new loan from afinancial institution or the issuance of unsecured bonds. In the event that Tokuyama Group is unable to raise funds in atimely manner by means of loans from financial institutions or by issuing unsecured bonds, there is the possibility thatany such situation greatly affects Tokuyama Group’s financing arrangements.Part of the long-term loan is subject tofinancial covenants, and in the event that there is a conflict with this provision, it may have a significant impact on theperformance and financial content of the Group, such as an increase in the interest rate on loans or forfeiture of benefitsof time.

(11) Fluctuation of Exchange Rate
Tokuyama Group exports products and imports raw materials, fuels, etc in foreign currencies. Although TokuyamaGroup has taken measures to reduce risks by currency exposure management by balancing assets and liabilities
denominated in foreign currencies or hedging transactions such as forward exchange contracts, there is a possibility that
performance and financial content of the Tokuyama Group will be greatly affected by fluctuations in exchange rates.
There is also the possibility that it will adversely affect the yen converted value of the financial statements of overseas
consolidated subsidiaries when preparing consolidated financial statements.

(12) Impairment of Fixed Assets
Tokuyama Group adopts the accounting standard for impairment of fixed assets. In the event that there is a significant
deterioration in the business environment or a decline in real estate prices, etc, there is a possibility that performanceand financial content of the Tokuyama Group will be greatly affected by the recognition of impairment loss.

Tokuyama Corporation Annual Report 201728

Corporate Officers(As of July 1, 2017)

Masao Kusunoki

Hiroshi Yokota

Representative Director
Chairman and Executive Officer

Representative Director
President and Executive Officer

Takeshi Nakahara

Hideki Adachi

Akihiro Hamada

Hideo Sugimura

Hisashi Shimizu

Director
Director
Director
Director
Director
Managing Executive Officer Managing Executive Officer Managing Executive Officer Managing Executive Officer

Masaki Akutagawa

Youji Miyamoto

Shin KatoToshihide Mizuno

Yoshikazu Tsuda

Director, Audit &Supervisory Committee
MemberDirector, Audit &Supervisory Committee
MemberDirector, Audit &Supervisory Committee
Member（External Director）

Director, Audit &Supervisory Committee
Member（External Director）

Director, Audit &Supervisory Committee
Member（External Director）

Tokuyama Corporation Annual Report 201729

Executive Officers
Chairman and Executive Officer

Masao Kusunoki

President and Executive Officer

Hiroshi Yokota

Managing Executive Officer

Takeshi Nakahara

General Manager of Social Responsibility Div.

Hideki Adachi

General Manager of Tokuyama Factory

Akihiro Hamada

General Manager of Financial Div.

Masao Fukuoka

General Manager of General & Personnel Affairs Div.

Toshihiko Annaka

General Manager of Procurement & Logistics Div.

Ryo Sugiyama

General Manager of Life & Amenity Business Div.

Hideo Sugimura

General Manager of Corporate Planning Div.

Hiroshi Nomura

General Manager of Specialty Products Business Div.

Kazuo Matsuya

General Manager of Chemicals Business Div.

Sadayuki Kuzuhara

General Manager of Cement Business Div.

Fumiaki Iwasaki

General Manager of Research & Development Div.,

Executive Officer

Tsukuba Research Laboratory and Medical Associated
Dept.

Tokuyama Corporation Annual Report 201730

Financial Section
Financial Review

32

Consolidated Balance Sheets

38

Consolidated Statements of Income

40

Consolidated Statements of Comprehensive Income

41

Consolidated Statements of Changes in Net Assets

42

Consolidated Statements of Cash Flows

43

Notes to Consolidated Financial Statements

44

Tokuyama Corporation Annual Report 201731

Financial Review

Income Analysis
In the fiscal year ended March 31, 2017 (April 1, 2016 to March 31, 2017), the global economy experienced mixed
conditions. In the first half, the pace of economic growth slowed owing mainly to concerns that the Chinese economy
had stalled and confusion surrounding financial markets as a result of the U.K.’s decision to withdraw from theEuropean Union. In the second half, however, the global economic conditions recovered. This was largely due to a
pickup in the U.S. economy, various measures put forward by the Chinese government to arrest any decline, and theprompt action taken by the central banks of each country to prevent further confusion in financial markets.
Meanwhile, the Japanese economy continued to experience a modest recovery amid improvements in employment anddisposable income conditions.
Against this backdrop, the Tokuyama Group worked diligently to implement the priority measures identified in its
Medium-Term Management Plan announced in May 2016 in order to transition to a robust business structure that isresilient against changes in its operating environment and capable of sustainable growth. As a result, and despite net
sales falling below the level recorded in the previous fiscal year, the Company reported a substantial improvement in
operating profit for the fiscal year under review. This was mainly attributable to successful efforts aimed at narrowing
the loss incurred by Tokuyama Malaysia Sdn. Bhd., a consolidated subsidiary, and reducing manufacturing costs in linewith the downturn in raw material and fuel prices.
Consolidated net sales decreased 2.6%, or ¥8,008 million compared with the previous fiscal year, to ¥299,106 million(US$*2,670* million). Despite an increased sales volume in polycrystalline silicon for both solar-cells andsemiconductors, this was largely attributable to weak selling prices of petroleum products on the back of a downturn indomestic naphtha prices.
Cost of sales decreased 8.8%, or ¥19,332 million compared with the previous fiscal year, to ¥201,305 million(US$*1,797* million). Despite an increased sales volume in polycrystalline silicon, this was due mainly to a downturnin raw material costs as a result of the drop in domestic naphtha prices.
SG&A expenses decreased 8.4%, or ¥5,324 million compared with the previous fiscal year, to ¥58,080 million(US$*518* million). This primarily reflects a decrease in depreciation cost of mission-critical system and lower R&D
expenses.
Operating profit increased 72.2%, or ¥16,648 million compared with the previous fiscal year, to ¥39,720 million(US$*354* million). In addition to a decreased production costs as a result of the drop in raw material and fuel prices,
this was due mainly to operating rate improvement and decreased depreciation expenses at Tokuyama Malaysia Sdn.
Bhd. The operating margin (the ratio of operating profit to net sales) was 13.3%, an increase of 5.8 percentage points
compared with the figure of 7.5% recorded in the previous fiscal year.

Tokuyama Corporation Annual Report 201732

Non-operating income/expenses deteriorated ¥375 million compared with the previous fiscal year, due chiefly toincrease in trial production expenses at Tokuyama Malaysia Sdn. Bhd.
As a result of the above, ordinary profit increased 91.8%, or ¥16,273 million compared with the previous fiscal year, to¥33,998 million (US$*303* million).
Extraordinary income/losses improved by ¥108,752 million compared with the previous fiscal year.
As a result of the above, profit before income taxes improved by ¥125,025 million compared with the previous fiscal
year, to profit of ¥38,525 million (US$*343* million).
Income taxes decreased ¥27,891 million compared with the previous fiscal year. This was attributable to the decision on
the business transfer of Tokuyama Malaysia Sdn. Bhd. As a result of this, profit/loss improved by ¥152,917 million
compared with the previous fiscal year, to profit of ¥53,396 million (US$*476* million).
Profit/loss attributable to owners of parent improved by ¥152,729 million compared with the previous fiscal year, toprofit of ¥52,165 million (US$*465* million).
Basic earnings per share was profit of ¥147.78 (US$1.319), up from basic earnings per share of loss of ¥289.10 in theprevious fiscal year. Dividends per share were ¥0.00 (US$0.000).
Return on equity (ROE) and return on assets (ROA) were 58.5% and 12.3%, respectively, compared with -94.0% and-25.1% in the previous fiscal year.

Tokuyama Corporation Annual Report 201733

Segment Information
The Tokuyama Group is composed of the parent company, Tokuyama Corporation (“the Company”), 51 subsidiaries
and 28 affiliated companies. The Group’s operations are divided into the four business segments of Chemicals,
Specialty Products, Cement, and Life & Amenity. For accounting purposes, 51 of the Company’s subsidiaries areconsolidated, while 10 affiliates are accounted for using the equity method.
Chemicals
The Chemicals segment includes the operations of the Company and four consolidated subsidiaries.
Sales of caustic soda were down compared with the previous fiscal year. While domestic sales volumes were steady, thisdecrease was attributable to weak trends in selling prices.
Sales of vinyl chloride monomer (VCM) were down compared with the previous fiscal year. Despite an increase in thevolume of export mainly for Asian market, the decline was primarily due to weak trends in selling prices as a result of
the drop in domestic naphtha prices.
Sales of vinyl chloride resin declined. While a recovery in the number of housing starts and other factors contributed tofirm trends in sales volumes, this downturn largely reflects weak selling prices as a result of the drop in domestic
naphtha prices. Earnings on the other hand improved due mainly to the suspension of operations at the Chiba factory ofShin Dai-ichi Vinyl Corporation.
With regard to soda ash and calcium chloride, sales were essentially unchanged from the previous fiscal year. Despite
decreased sales volume, this was mainly owing to efforts to revise selling prices.
As a result of the above, segment net sales decreased 5.1% compared with the previous fiscal year, to ¥83,346 million(US$*744* million) and operating profit increased 48.1% to ¥13,183 million (US$*117* million). The segment
reported higher earnings on lower sales.
Specialty Products
The Specialty Products segment includes the operations of the Company, six consolidated subsidiaries and one
equity-method affiliate.
Sales of semiconductor-grade polycrystalline silicon increased. This was primarily due to robust shipping reflecting thegrowing trend to highly functional mobile devices including smartphones.
Sales of solar-grade polycrystalline silicon increased on the back of higher sales volumes, reflecting the operating rate
improvement at Tokuyama Malaysia Sdn. Bhd.
Sales of fumed silica increased compared with the previous fiscal year. This was mainly due to firm trend in sales ofsuch applications as a polishing material for semiconductors.
With regard to high-purity chemicals for electronics manufacturing, sales decreased compared with the previous fiscal
year. Despite robust sales volume in such applications as semiconductor manufacturing, this decrease was mainly owing
to appreciated yen.
With regard to aluminum nitride, sales increased from the previous fiscal year. This was attributable to robust sales
volumes in such applications used for semiconductor manufacturing equipment.
As a result of the above, segment net sales increased 11.2% compared with the previous fiscal year, to ¥67,726 million(US$*604* million) and operating profit improved to profit of ¥9,649 million (US$*86* million) (Posted operating
loss of ¥1,157 million in the previous fiscal year). The segment reported higher earnings on higher sales.

Tokuyama Corporation Annual Report 201734

Cement
The Cement segment comprises the operations of the Company, 17 consolidated subsidiaries and five equity-method
affiliates.
Sales of cement decreased. Despite an increase in the volume of exports on the back of robust demand in the Asia
region, this decrease was mainly due to the drop in export prices reflecting such factors as the impact of appreciation in
the value of the yen as well as a downturn in sales volumes in Japan due to weak public- and private-sector demand.
Meanwhile, successful steps were taken to reduce manufacturing costs. In addition to a drop in raw material and fuelprices, this reduction on manufacturing costs was mainly due to improvements in the basic unit of production.
In the recycling and environment-related business, the Company accepted a higher volume of waste including coal ash
compared with the previous fiscal year. As a result of this, sales increased from the previous fiscal year.
Consolidated subsidiary net sales declined. This mainly reflected corrections to robust shipping trends of such products
as ready-mixed concrete targeting large-scale projects in the previous fiscal year.
As a result of the above, segment net sales decreased 2.9% compared with the previous fiscal year, to ¥82,995 million(US$*741* million) and operating profit increased 35.1% to ¥7,878 million (US$*70* million). The segment reported
higher earnings on lower sales.
Life & Amenity
The Life & Amenity segment includes the operations of the Company, 11 consolidated subsidiaries and one
equity-method affiliate.
Sales of active pharmaceutical ingredients decreased. This reflected the decreased sales volume of genericpharmaceuticals compared with the previous fiscal year.
With regard to plastic lens-related materials, sales increased from the previous fiscal year. This reflected robust sales
volumes of photochromic dye materials for eyeglass lenses.
With regard to microporous film, sales of such applications as sanitary articles including disposable diapers at oversea
consolidated subsidiaries decreased. As a result of this, sales decreased compared with the previous fiscal year.
With regard to polyolefin film, sales were declined compared with the previous fiscal year. Despite firm trends in sales
mainly for application in packaging materials for products sold at convenience stores, this decrease was largely the
result of weak trends in selling prices on the back of the decline in domestic naphtha prices.
With regard to dental materials and equipment, sales increased compared with the previous fiscal year, due to higher
sales volumes of new products as well as products targeting overseas markets.
With regard to medical diagnosis systems, sales increased compared with the previous fiscal year. This largely reflectedrobust sales of blood testing products.
In gas sensors, Figaro Engineering Inc. was removed from the Company’s scope of consolidation effective from thesecond quarter of the fiscal year under review. This reflected the transfer of a portion of the company’s shares.
As a result of the above, segment net sales decreased 12.0% compared with the previous fiscal year, to ¥50,751 million(US$*453* million) and operating profit decreased 14.6% to ¥5,632 million (US$*50* million). The segment reported
lower earnings on lower sales.

Tokuyama Corporation Annual Report 201735

Financial Position and Liquidity
As of March 31, 2017, total assets amounted to ¥424,433 million (US$3,789 million), a increase of ¥23,091 million
compared with the previous fiscal year-end.
Current assets increased 1.2% compared with the previous fiscal year-end to ¥246,661 million (US$2,202 million). Thiswas due primarily to an increase in notes and accounts receivable. Current liabilities decreased 30.1% to ¥79,153
million (US$706 million). This mainly reflected a decrease in income taxes payable and current portion of bonds
payable. As a result, the current ratio was up to 3.12 times, from 2.15 times as of the previous fiscal year-end.
Property, plant and equipment decreased 0.4% in comparison with the previous fiscal year-end to ¥119,233 million(US$1,064 million). Intangible assets and investments and other assets increased 54.8% over the previous fiscal
year-end to ¥58,537 million (US$522 million). This was primarily due to a increase in deferred tax asset.
As of March 31, 2017, total liabilities amounted to ¥288,457 million (US$2,575 million), a decrease of 15.4%
compared with the previous fiscal year-end figure of ¥341,136 million. The main contributory factor was a decrease inlong-term loans payable, income taxes payable and bonds payable. Interest-bearing debt decreased 12.4% from¥244,152 million as of the previous fiscal year-end to ¥213,955 million (US$1,910 million).
Non-controlling interests increased 2.6% from ¥8,732 million as of the previous fiscal year-end to ¥8,960 million(US$80 million). Net assets increased 125.9% compared with the previous fiscal year-end, from ¥60,205 million to¥135,976 million (US$1,214 million). This was due chiefly to a increase in retained earnings. The ratio of shareholders’equity to total assets was 29.9%, up from 12.8% as of the previous fiscal year-end. The amount of net assets per sharewas ¥305.49 (US$2.728), up from ¥147.98 as of the previous fiscal year-end.

Tokuyama Corporation Annual Report 201736

Capital Expenditures
Capital expenditures totaled ¥17,360 million (US$155 million), a increase of 2.45% compared with the previous fiscal
year’s figure of ¥13,945 million.

Cash FlowsNet cash provided by operating activities totaled ¥20,012 million (US$178 million). Principal items included profit
before income tax of ¥38,525 million (US$343 million) (net loss of ¥86,500 million in the previous fiscal year) andincome tax paid of ¥18,065 million (US$161 million) (¥4,055 million in the previous fiscal year).
Net cash provided by investing activities totaled ¥10,089 million (US$90 million). Major contributory factors were
payments for purchases of property, plant and equipment of ¥16,693 million (US$149 million) (¥14,334 million in theprevious fiscal year), proceeds from sales of shares in subsidiary of ¥2,926 million (US$26 million) (no account in theprevious fiscal year), and subsidy profit of ¥2,298 million (US$20 million) (¥50 million in the previous fiscal year).
Net cash used in financing activities came to ¥11,911 million (US$106 million). This was primarily attributable toproceeds for issuance of shares of ¥19,712 million (US$176 million) (no account in the previous fiscal year), repaymentof long-term loans payable of ¥17,297 million (US$154 million) (¥31,175 million in the previous fiscal year),redemption of bonds of ¥10,000 million (US$89 million) (¥5,600 million in the previous fiscal year), and repayment ofshort-term loans payable of ¥6,625 million (US$59 million) (¥2,648 million in the previous fiscal year).
As a result of the above, cash and cash equivalents decreased by ¥2,346 million (US$20 million) compared with theprevious fiscal year-end, to ¥118,819 million (US$1,060 million).

Tokuyama Corporation Annual Report 201737

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2017 and 2016
Thousands ofMillions of yen

U.S. dollars
2016

2017

2017

Assets :Current assets :Cash and deposits *Note(2)121,598

121,508

1,085,704

Notes and accounts receivable - trade *Note(2)73,94568,569660,2286

6

6212,34814,012110,252

Work in process

9,919

10,882

88,566

Raw materials and supplies

16,567

15,933

147,922

Lease receivables
Merchandise and finished goods

Deferred tax assets

1,627

4,256

14,532

Other

10,798

8,788

96,413

Allowance for doubtful accounts
Total current assets

(150)

(192)

(1,345)

246,661

243,766

2,202,338

Non-current assets :Property, plant and equipment :Buildings and structures *Note(2),(3)100,430

101,982

896,704

Accumulated depreciation(72,723)(74,022)(649,320)

Buildings and structures, net

27,707

27,959247,384

450,926

461,619

4,026,133(404,912)(410,707)(3,615,287)

46,01450,912

410,846

Tools, furniture and fixtures *Note(3)22,01522,661

196,567

Accumulated depreciation(20,222)(20,890)(180,554)

1,793

1,771

16,01331,28931,327279,369

Machinery, equipment and vehicles *Note(2),(3)Accumulated depreciation
Machinery, equipment and vehicles, net

Tools, furniture and fixtures, net
Land *Note(2)Leased assets
Accumulated depreciation

3,533

2,237

31,546(1,329)(1,041)(11,871)

Leased assets, net

2,203

1,196

19,674

Construction in progress

10,225

6,597

91,298

Total property, plant and equipment

119,233

119,764

1,064,586

21,138Intangible assets
Goodwill

2,367

3,738

Leased assets

35

41

318

Other *Note(3)

2,384

2,613

21,291

Total intangible assets

4,787

6,393

42,748Investment securities *Note(1),(2)19,083

15,765

170,388

Long-term loans receivable

2,833

3,094

25,296

Deferred tax assets

19,824610

177,003

Net defined benefit asset

8,936

8,057

79,793

Other *Note(1)

3,221

4,190

28,760

-

(22)

-

(148)

(278)

(1,329)Investments and other assets

Allowance for investment loss
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201738

53,75031,417479,912

177,771

157,575

1,587,246

424,433

401,3423,789,584

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2017 and 2016
Thousands ofMillions of yen

U.S. dollars
2016

2017

2017

Liabilities :Current liabilities :Notes and accounts payable - trade *Note(2)37,03535,388

Short-term loans payable *Note(2)

2,138

9,382

19,091

Current portion of long-term loans payable *Note(2)15,235

17,036

136,029

Current portion of bonds

330,670-

10,000

-

577

356

5,156

Income taxes payable

1,335

11,888

11,926

Deferred tax liabilities

-

2

-

Provision for bonuses

2,103

1,830

18,777

Provision for repairs

1,628

1,480

14,538

81

85

729

2,671

2,656

23,854

Lease obligations

Provision for product warranties
Provision for loss on purchase contract
Other *Note(2)16,34623,093145,951

Total current liabilities

79,153

113,200

706,725

Non-current liabilities :Bonds payable

34,40034,400307,142

Long-term loans payable *Note(2)160,555

172,877

1,433,533
15,957

Lease obligations

1,787

931

Deferred tax liabilities

268

457

2,399

Provision for directors' retirement benefits

143

231

1,280
25,262

Provision for repairs

2,829

3,691

Allowance for loss on compensation for building materials

318

384

2,848

Provision for environmental measures

287

85

2,571

Provision for loss on purchase contract
Net defined benefit liability
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities

-

2,716

-

1,430

1,354

12,768

6

6

56

7,275

10,79964,962

209,303

227,935

1,868,784

288,457

341,136

2,575,509

Net assets :Shareholders' equity :Capital stock
Authorized：

700,000,000

sharesIssued：349,691,876

shares

10,00053,45889,285

Capital surplus

41,54557,532

370,938

Retained earnings

72,511(61,281)

647,420

Treasury stock
2016 ：

1,832,788

shares2017 ：

1,850,780

shares(1,446)(1,439)(12,919)

122,60948,2701,094,725

Valuation difference on available-for-sale securities

319(1,020)2,853

Deferred gains or losses on hedges

(274)

(526)

(2,453)

Total shareholders' equity
Accumulated other comprehensive income :Foreign currency translation adjustment

1,528

2,362

13,646

Remeasurements of defined benefit plans

2,833

2,386

25,297

Total accumulated other comprehensive income
Non-controllinginterests

Total net assets
Total liabilities and net assets

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 2017

39

4,406

3,202

39,343

8,960

8,732

80,005

135,976

60,205

1,214,075

424,433

401,3423,789,584

Consolidated Statements of Income
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2017 and 2016
Thousands of
U.S. dollars

Millions of yen
Net sales
Cost of sales *Note(1),(4)Gross profit
Selling, general and administrative expenses :Selling expenses *Note(2)General and administrative expenses *Note(3),(4)Total selling, general and administrative expenses
Operating profit
Non-operating income :Interest income
Dividend income
Share of profit of entities accounted for using equity method
Compensation income
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses :Interest expenses
Trial production expenses
Cost of idle operation
Other
Total non-operating expenses
Ordinary profit

2017299,106
201,305
97,8002016
307,115
220,638
86,4762017
2,670,594
1,797,372
873,22137,916
20,16458,08039,72038,09925,30563,40523,071

338,538
180,039
518,578354,643

54
249
900
464
115
1,374
3,159

121
443
668
542
1,576
3,353

489
2,228
8,044
4,146
1,027
12,271
28,208

4,224
1,853
1,200
1,602
8,880
33,998

4,668
636
1,134
2,259
8,699
17,72537,716
16,545
10,72014,30879,290303,561

20
1
1,934
2,298
1,268
836
500
255
202
7,317

14,144
6,190
50
21
1,071
21,477179
17
17,27020,518
11,329
7,465
4,464
2,280
1,808
65,333Extraordinary income :Gain on sales of non-current assets *Note(5)Gain on sales of investment securities
Gain on sales of shares of subsidiaries and associates
Subsidy income
Gain on write-off debts
Gain on sales of patent right and otherSettlement received
Gain on insurance adjustment
Other
Total extraordinary income
Extraordinary loss :Loss on sales of non-current assets *Note(6)Impairment loss *Note(7)Loss on disaster
Loss on reduction of non-current assets
Loss on disposal of noncurrent assets
Other
Total extraordinary losses
Profit(loss) before income taxes
Income taxes :Current
Deferred
Total income taxes
Profit (loss)
Profit attributable to non-controlling interests

5
1,683
90
50
560
399
2,790
38,525

130
124,706
5
108
486
264
125,702(86,500)

47
15,028
809
454
5,006
3,568
24,915343,980

2,967(17,838)(14,870)
53,396
1,231

14,408(1,387)
13,020(99,520)
1,043

26,492(159,268)(132,775)
476,755
10,992

Profit (loss) attributable to owners of parent

52,165(100,563)

465,763Yen
2017
Per share amounts :Net income (loss)
Cash dividends

147.78-

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 2017

40

2016
(289.10)-

U.S. dollars
2017
1.319
-

Consolidated Statements of Comprehensive Income
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2017 and 2016
Thousands ofMillions of yen
2016

2017
Profit(loss)

U.S. dollars
2017

53,396(99,520)476,755
11,903

Other comprehensive income
Valuation difference on available-for-sale securities

1,333(6,851)

Deferred gains or losses on hedges

240

(901)

2,147

Foreign currency translation adjustment(717)(1,758)(6,404)Remeasurements of defined benefit plans, net of tax

448

(861)

4,004

Share of other comprehensive income of entities accounted for using equity

(138)

(150)

(1,238)

1,166(10,522)

10,41254,562(110,043)

487,168

Owners of parent

53,369(110,957)

476,512

Non-controling interests

1,193

913

10,655

Total other comprehensive income *Note(1)Total comprehensive income
Attributable to:

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201741

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

Years ended March 31, 2017 and 2016[2017]
Shareholders' equity

Balance at beginning of year
Changes during the fiscal year
Issuance of new shares
Transfer to other capital surplus from
capital stock
Deficit disposition
Profit (loss) attributable to owners ofparentPurchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Capital increase of consolidated
subsidiaries
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of year

CapitalsurplusRetainedearnings

Treasurystock

53,45857,532(61,281)(1,439)10,00010,00020,00020,000(53,458)

53,458--(81,928)

Total

48,2708,732

60,20581,928--52,16552,16552,165

(7)
0
(302)

(7)
0
(302)

2,482

2,482

(7)
0

(0)
(302)
2,482

1,339

251

(834)

446

1,203

228

1,432

(43,458)(15,987)

133,792(7)

74,338

1,339

251

(834)

446

1,203

228

75,77010,00041,54572,511(1,446)

122,609

319

(274)

1,528

2,833

4,406

8,960

135,976

Shareholders' equity
Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

53,45857,67039,286(1,434)

148,981(100,563)-

Non-controling
Totalinterests
net assets

6,868

169,445(100,563)

(6)
0
(2)

(6)
0
(2)

(118)

(118)

(118)

(19)

(19)

(6)
1

(1)
(2)

(137) (100,567)

53,458Millions of yen
Accumulated other comprehensive income
Valuation
Remeasurdifference Deferred
Foreign
ements ofongains orcurrency
definedTotal
availablelosses
translation
benefitfor-sale on hedges adjustment
plans
securities
5,829
330
4,196
3,239
13,596(100,563)(0)57,532(61,281)(5) (100,710)(1,439)48,270[2017]
Shareholders' equity

Balance at beginning of year
Changes during the fiscal year
Issuance of new shares
Transfer to other capital surplus from
capital stock
Deficit disposition
Profit (loss) attributable to owners ofparentPurchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Capital increase of consolidated
subsidiaries
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of year

Non-controling
Totalinterests
net assets

Capitalstock[2016]

Balance at beginning of year
Changes during the fiscal year
Profit (loss) attributable to owners ofparentPurchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Capital increase of consolidated
subsidiaries
Purchase of shares of consolidated
subsidiaries
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of year

Millions of yen
Accumulated other comprehensive income
Valuation
Remeasurdifference Deferred
Foreign
ements ofongains orcurrency
definedTotal
availablelosses
translation
benefitfor-sale on hedges adjustment
plans
securities(1,020)
(526)
2,362
2,386
3,202

Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

477,312513,683 (547,152)(12,854)430,989(19)(6,849)(856)(1,833)(852)(10,393)

1,863(6,849)(856)(1,020)(526)(1,833)(852)(10,393)

1,863 (109,239)

2,362

2,386

3,202

Thousands of U.S. dollars
Accumulated other comprehensive income
Valuation
Remeasurdifference Deferred
Foreign
ements ofongains orcurrency
definedTotal
availablelosses
translation
benefitfor-sale on hedges adjustment
plans
securities(9,111)(4,700)21,097
21,30928,594

8,732(8,529)60,205

Non-controling
Totalinterests
net assets

77,965537,549

89,28589,285

178,571

178,571(477,312)

477,312--(731,508)

731,508--

465,763465,763465,763(70)
2(2,699)(70)
2(2,699)22,16822,168(70)
5(3)(2,699)22,168(388,026) (142,745) 1,194,572
89,285

370,938

647,420

11,964

2,247(7,451)

3,988

10,7482,040

12,789663,736

11,964

2,247(7,451)

3,988

10,7482,040

676,525(12,919) 1,094,725

2,853(2,453)

13,64625,29739,34380,005 1,214,075(64)

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201742

Consolidated Statements of Cash Flows
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2017 and 2016
Millions of yen
2017
2016

Thousands of
U.S. dollars
2017

Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Increase (decrease) in allowance for loss on compensation for building materials
Increase (decrease) in provision for loss on purchase contract
Increase (decrease) in other provision
Increase(decrease) in net defined benefit liability
Decrease(increase) in net defined benefit asset
Interest and dividends income
Foreign exchange losses (gains)
Loss (gain) on sales of property, plant and equipment
Loss (gain) on sales of investment securities
Loss (gain) on sales of shares of subsidiaries and associates
Share of profit of entities accounted for using equity method
Subsidy income
Interest expenses
Loss on reduction of noncurrent assets
Impairment loss
Gain on write-off of debts
Gain on insurance adjustment
Settlement received
Gain on sales of patent right and other
Loss (gain) on disposal of noncurrent assets
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in inventories
Decrease (increase) in other current assets
Increase (decrease) in notes and accounts payable - trade
Increase (decrease) in other current liabilities
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Proceeds from insurance income
Settlement package received
Income taxes paid
Net cash provided by (used in) operating activities

38,525
14,215(65)(2,701)
(381)
135
(290)
(304)
(13)
(14)
(1)
(1,934)(900)(2,298)
4,224
50
1,683
(1,268)
(255)
(500)
(836)
560
(7,744)
824
(574)
3,095
(815)
(1,594)40,818750(4,246)255
500(18,065)
20,012(86,500)
20,084(189)(4,059)
322
93
(431)
(565)
(176)
(14,013)(6,190)
(668)
(50)
4,668
108
124,706
486
301
4,402
(355)
(4,750)(130)
607
37,701
1,178(4,725)(4,055)30,098343,980
126,920(588)(24,123)(3,409)1,211(2,592)(2,718)
(120)
(131)
(17)
(17,270)(8,044)(20,518)
37,716454
15,028(11,329)(2,280)(4,464)(7,465)
5,006(69,147)
7,358(5,130)27,639(7,278)(14,239)
364,446
6,702(37,911)
2,280
4,464
(161,298)
178,683

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation
Payments of long-term loans receivableCollection of long-term loans receivable
Proceeds from subsidy income
Payments for transfer of business
Proceeds from sales of patent right and other
Other, net
Net cash provided by (used in) investing activities

(84)
130
(16,693)
197
(305)
341
2,926
(9)
270
2,298
905
(65)
(10,089)(84)
34(14,334)
17,841(12)
10,932
(40)
239
50
(37)
(1,187)
13,400(750)
1,160(149,049)
1,759(2,731)
3,052
26,133(86)
2,418
20,5188,080(586)(90,081)

Cash flows from financing activities
Increase (decrease) in short-term loans payable
Increase (decrease) in commercial papers
Proceeds of long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation
Proceeds from issuance of common shares
Cash dividends paid
Cash dividends paid to non-controlling interests
Decrease (increase) in treasury stock
Other, net
Net cash provided by (used in) financing activities(6,625)
3,116(17,297)(10,000)
19,712
(0)
(294)
(7)
(514)
(11,911)(2,648)(3,000)
4,631(31,175)(5,600)
(25)
(1)
(386)
(6)
523
(37,689)(59,152)
27,828(154,441)(89,285)
176,000(6)(2,633)(68)(4,592)(106,351)

Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting from change of scope of consolidation
Cash and cash equivalents at end of period *Note(1)(358)(2,346)
121,166
118,819

(792)
5,016
116,122
27
121,166(3,202)(20,951)
1,081,843
1,060,892

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201743

Notes to Consolidated Financial Statements
Tokuyama Corporation and Consolidated Subsidiaries

1. BASIS OF CONSOLIDATED 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 with accounting 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 based on their accounting records maintained in conformity withgenerally accepted accounting principles and practices prevailing in the respective countries of domicile.
The consolidated financial statements are not intended to present the consolidated financial position, results ofoperations and cash flows in accordance with accounting principles and practices generally accepted in countries andjurisdictions other than Japan.

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 ¥112=US$1, the approximate exchange rate on March 31, 2017.
The U.S. dollar amounts are included solely for the convenience of readers outside Japan, and are not intended to imply
that the assets and liabilities that originated in yen have been or could be readily converted, realized, or settled in U.S.
dollars at this or at any other rate.

3. SCOPE OF CONSOLIDATIONThe consolidated financial statements include the accounts of the Company and its 51 significant subsidiaries (55 in2016). Significant intercompany transactions and accounts have been eliminated in consolidation.
Major consolidated subsidiaries are as follows;
Sun•Tox Co., Ltd.
Shin Dai-ichi Vinyl Corporation
A&T Corporation
Excel Shanon Corporation
Tokuyama Dental Corporation
Hiroshima Tokuyama Ready Mixed Concrete Co., Ltd.
Tokuyama Mtech Corporation
Sun Arrow Kasei Co., Ltd.
Tokuyama Malaysia Sdn. Bhd.
Tokuyama Chemicals (Zhejiang) Co., Ltd.
Figaro Engineering Inc., which was a consolidated subsidiary until the previous fiscal year, was excluded from theCompany’s scope of consolidation effective from the fiscal year under review due to the sale of a portion of thecompany’s shares held by the Company. In line with the sale of a portion of the company’s shares, Tianjin Figaro
Electronic Co., Ltd., Figaro USA, Inc. and one other company, which were consolidated subsidiaries until the previous
fiscal year, were excluded from the scope of consolidation effective from the fiscal year under review due to a decline in
the Group’s ownership ratio.
Of consolidated subsidiaries, A&T Corporation closes its accounts on December 31. Its financial statements as ofDecember 31 are used in the preparation of consolidated financial statements, and adjustments necessary forconsolidation purposes are made to material transactions arising between that date and the consolidated fiscal year-end.
Of consolidated subsidiaries, Tokuyama Chemicals (Zhejiang) Co., Ltd. and other four companies whose original fiscal
year-end is December 31, are consolidated by performing provisional settlement of accounts on March 31, theconsolidated fiscal year-end, in compliance with the regular settlement of accounts.
Investments in 10 affiliates (10 in 2016) are accounted for by the equity method.
Major equity method affiliate is Hantok Chemicals Co., Ltd.
The equity method does not apply to them because they have little impact on the consolidated financial statements when

Tokuyama Corporation Annual Report 201744

they are excluded from the scope of application of the equity method, nor have any material impact on an aggregate
basis.
Major affiliate that are not accounted for by the equity is Oita Mining Co., Ltd.
Neusoft A&T Diagnostics Co., Ltd., which was an equity method affiliate until the previous fiscal year, was excluded
from the scope of application of the equity method effective from the fiscal year under review due to a decline in theownership ratio as a result of a capital increase by third-party allotment.
Figaro Engineering Inc., which was a consolidated subsidiary until the previous fiscal year, was excluded from thescope of consolidation and has been included in the scope of application of the equity method effective from the fiscal
year under review due to the sale of a portion of its shares held by the Company.
Of equity method affiliates, with regard to the company of which the last date of its fiscal year is different from theconsolidated fiscal year-end, the financial statements of its fiscal year are used in the preparation of consolidated
financial statements.
The excess of investment cost over equity in net assets acquired is amortized on a straight-line method over five years.

4. SIGNIFICANT ACCOUNTING POLICIES(1) Valuation basis and valuation methods for significant assets(i) Securities
Available-for-sale securities
Securities with fair value
Stated at the fair value based on the quoted market price as of the fiscal year-end (Valuation differences arerecognized in net assets; The cost of securities sold is calculated by the moving-average method).
Securities without fair value
Stated at cost by moving-average method.
(ii) Derivatives
Derivatives are stated at fair value.
(iii) Inventories
Inventories held for sale in the ordinary course of businessStated at cost mainly by the moving-average method. (The balance sheet value of the inventories is calculated by
write-down based on the decreased profitability.)(2) Depreciation and amortization methods of significant depreciable and amortizable assets(i) Property, plant and equipment (excluding leased assets)
Buildings and structures acquired on or after April 1, 2016: Depreciated mainly by the straight-line method.
Other than the above:
Depreciated mainly by the declining-balance method.
The estimated useful lives of major items are as follows:
Buildings and structures: 3 to 75 years
Machinery, equipment and vehicles: 2 to 30 years(ii) Intangible assets (excluding leased assets)
Mining right:
Amortized by the unit-of-production method.
Other:
Amortized mainly by the straight-line method.
Internal use software is amortized by the straight-line method over the internally expected useful life (5 years).
(iii) Leased assets
Leased assets in finance lease transactions that do not transfer ownership
Depreciated by the straight-line method based on the assumption that the useful life is equal to the lease term and theresidual value is equal to zero.
(3) Significant allowances and provisions(i) Allowance for doubtful accounts
To cover possible bad debt expenses on notes and accounts receivable – trade, loans receivable and others, theallowance for doubtful accounts is provided at the estimated uncollectable amounts based on the historical default rate
for normal receivables, or taking into account collectability on a case-by-case basis for certain receivables such as
doubtful receivables with higher possibility of default.
(ii) Allowance for investment loss
Allowance for investment loss is recorded, taking into account the asset position, etc. of investees.
(iii) Provision for bonuses
To prepare for the payment of next bonuses to employees, provision for bonuses is recorded based on the portion of theTokuyama Corporation Annual Report 201745

estimated amount of bonus payments attributable to the fiscal year under review.
(iv) Provision for repairs
Repair expenses are calculated individually and recorded to prepare for periodic repairs of manufacturing facilities.
(v) Provision for product warranties
For required expenses incurred during the warranty period with free servicing (warranty expenses for free servicing) for
clinical test information systems and laboratory test automation systems, the estimated amount of expenses is recorded
based on the historical rate of incurrence (proportion of expenses paid to net sales).
(vi) Provision for loss on purchase contract
The estimated amount of losses is recorded to cover losses incurred due to purchase contracts for utilities.
(vii) Provision for directors’ retirement benefits
At certain consolidated subsidiaries, the amount to be required at the end of the fiscal year under review in accordancewith internal rules is recorded to prepare for payment of directors’ retirement benefits.
(viii) Allowance for loss on compensation for building materials
The estimated amount of losses incurred in replacement, renovation, etc. is recorded to prepare for repairs andmaintenance of plastic sashes for houses and buildings (fire protection and resistance grade).
(ix) Provision for environmental measures
Pursuant to the “Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes,” the estimatedamount at the end of the fiscal year under review is recorded to prepare for payments for disposal of PCB waste.
(4) Accounting method of retirement benefits(i) Methods of attributing estimated retirement benefits to accounting periods
When calculating retirement benefit obligations, the benefit formula basis is used to attribute estimated retirement
benefits to the period through the end of the fiscal year under review.
(ii) Amortization of actuarial differences
Actuarial differences are amortized by using the straight-line method over a period of time within the average remaining
service period of employees (16 years), from the subsequent fiscal year when they are incurred.
(iii) Application of simplified accounting method used by small companies
In calculating net defined benefit liability and retirement benefit expenses, some of the consolidated subsidiaries apply asimplified accounting method in which an assumed amount of benefits to be paid for voluntary base retirement at the
fiscal year-end is deemed as retirement benefit obligations.
(5) Accounting method for deferred assets
All deferred assets are charged to expenses when incurred.
(6) Translation of significant assets or liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rate in effect atthe balance sheet date and the resulting exchange gains or losses are credited or charged to income as incurred.
Assets and liabilities of overseas subsidiaries and the like are translated into yen at the exchange rate in effect at thebalance sheet date, while their revenues and expenses are translated into yen at the average rates of exchange prevailing
during the year. The resulting translation adjustments are included in “Foreign currency translation adjustment” and“Non-controlling interests” in net assets.
(7) Method of significant hedge accounting(i) Method of hedge accounting
For the method of hedge accounting, in general, the deferral hedge accounting is applied. Among hedging instruments,
forward exchange contracts that fulfill the requirement for allocation method are subjected to the allocation method.
Interest rate swaps that fulfill the requirement for special treatment are subjected to the special treatment.
(ii) Hedging instruments and hedged items
Hedging instruments and hedged items to which hedge accounting has been applied in the fiscal year under review are
as follows:
Hedging instruments:
Forward exchange contracts, interest rate swaps
Hedged items:
Forecast transactions in foreign currencies, accounts receivable denominated in foreign
currencies and loans payable(iii) Hedging policy
Foreign exchange risk and interest rate risk of hedged items are hedged within a certain range.
(iv) Method of assessing hedge effectivenessHedge effectiveness is assessed by comparing cumulative changes in cash flows or market fluctuations of hedged items

Tokuyama Corporation Annual Report 201746

and cumulative changes in cash flows or market fluctuations of hedging instruments on a quarterly basis and based onchanges in the both, etc. For interest rate swaps to which the special treatment is applied, assessment of hedge
effectiveness is omitted.
(8) Amortization method and amortization period of goodwill
Goodwill is equally amortized over five years.
(9) Scope of cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents in the consolidated statements of cash flows consist of cash on hand, at-call deposits withbanks, and short-term investments that have maturities within three months from acquisition, are readily convertible tocash, and are subject to an insignificant risk of changes in value.
(10) Other significant matters forming the basis of preparing the consolidated financial statements
Accounting for consumption taxes
Consumption tax and local consumption tax are accounted for using the tax-excluded method. Non-deductible
consumption tax and local consumption tax are accounted for as expenses for the fiscal year under review.

5. CHANGES IN ACCOUNTING POLICY(Application of Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016)
Following the revision to the Corporation Tax Act, the Company has applied the “Practical Solution on a Change inDepreciation Method Due to Tax Reform 2016” (Accounting Standards Board of Japan (ASBJ) Practical Issues Task
Force (PITF) No. 32; issued on June 17, 2016) from the fiscal year under review, and changed the depreciation method
for structures acquired on or after April 1, 2016 from the declining-balance method to the straight-line method.
The impact of this change on operating profit, ordinary profit and profit before income taxes for the fiscal year underreview is immaterial.

6. NEW ACCOUNTING STANDARDS NOT YET APPLIED
Information is omitted because of immateriality.

7. CHANGES IN PRESENTATION(Consolidated Statements of Income)In the fiscal year under review, “Trial production expenses” in “Non-operating expenses” is separately presented due toits increased significance. Items in the consolidated financial statements for the previous fiscal year have been
reclassified to reflect this change in the presentation.
Consequently, ¥636 million (US$5 million) that was presented in “Other” in “Non-operating expenses” in the previous
fiscal year has been reclassified to “Trial production expenses.”In the past, “Subsidy income” in “Extraordinary income” was presented as “State subsidy” in the consolidated financial
statements, however, as the more appropriate item, “Subsidy income” is used from the fiscal year under review.
In the fiscal year under review, “Gain on insurance adjustment” in “Extraordinary income” is separately presented due
to its increased significance. Items in the consolidated financial statements for the previous fiscal year have been
reclassified to reflect this change in the presentation.
Consequently, ¥21 million (US$0 million) that was presented in “Other” in “Extraordinary income” in the previous
fiscal year has been reclassified to “Gain on insurance adjustment”.

8. CHANGES IN ACCOUNTING ESTIMATES
Not applicable.

9. ADDITIONAL INFORMATION(Application of ASBJ Guidance on Recoverability of Deferred Tax Assets)
Effective from the fiscal year under review, the Company has applied the “Guidance on Recoverability of Deferred Tax
Assets” (ASBJ Guidance No. 26; issued on March 28, 2016).

Tokuyama Corporation Annual Report 201747

10. CONSOLIDATED BALANCE SHEETS(1) Items corresponding to unconsolidated subsidiaries and affiliates are as follows:

Millions of yen
2017
2016
5,954
4,503
292

Investment securities
Investment and other assets-otherThousands of
U.S. Dollars
2017
53,164-(2) Assets pledged as collateral and liabilities for which collateral is pledged
Assets pledged as collateral are as follows:

Millions of yen
2017
2016
Pledged Assets
Cash and deposits
Notes and accounts receivable - trade
Buildings and structures
Machinery, equipment and vehicles
Land
Investment securities
Total

869
7
1,876
1,514
562
34
4,864

662
59
2,087
1,771
785
33
5,399

Thousands of
U.S. Dollars
2017
7,761
66
16,753
13,522
5,021
304
43,429(Note) In addition to the above assets, ¥195 million (US$1 million) as of the end of the previous fiscal year and ¥195
million (US$1 million) as of the end of the fiscal year under review have been pledged as collateral for shares ofsubsidiaries eliminated for consolidation purposes.
Liabilities for which collateral is pledged are as follows:

Millions of yen
2017
2016
Pledged Debts
Notes and accounts payable - trade
Short-term loans payable
Curent portion of long-term loans payable
Long-term loans payable
Other
Total

228
325
559
3,560
18
4,692

228
436
677
3,869
13
5,226

Thousands of
U.S. Dollars
2017
2,043
2,910
4,994
31,787165
41,901(3) Reduction entry
In the fiscal year under review, reduction entries of ¥0 million (US$0 million) for buildings and structures, ¥46 million(US$0 million) for machinery, equipment and vehicles, and ¥3 million (US$0 million) for tools, furniture and fixtures
were made due to receipt of subsidies, etc.
In addition, as a result of the retirement of machinery, equipment and vehicles that were subject to the reduction entry,
cumulative reduction entries decreased by ¥37 million (US$0 million), and as a result of the retirement of tools,
furniture and fixtures that were subject to the reduction entry, cumulative reduction entries decreased by ¥1 million(US$0 million).
The cumulative reduction entries due to the receipt of subsidies, etc. in association with property, plant and equipment
are as follows:

Millions of yen
2017
2016
1,439
1,439
2,688
2,679
186
183
4
4
4,319
4,306

Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Software
Total

Tokuyama Corporation Annual Report 201748

Thousands of
U.S. Dollars
201712,85524,006
1,665
36
38,563

(4) Guarantee obligation
The Company provides guarantee of obligations concerning loans from financial institutions by the following
companies, etc.

Employee
1 other company
Total

Millions of yen
2017
2016
90
94
63
90
157

Thousands of
U.S. Dollars
2017
810
810

Millions of yen
2017
2016
508
417

Thousands of
U.S. Dollars
2017
4,540

(5) Notes receivable endorsed

Notes endorsed(6). Financial covenants
The Company has a syndicated loan agreement (issue date: December 22, 2011) by seven lenders with the Development
Bank of Japan Inc. as the lead manager. This agreement has the following financial covenants related to the Company’s
consolidated financial statements.
(1) The amount calculated after deducting subscription rights to shares, non-controlling interests, deferred gains orlosses on hedges, foreign currency translation adjustment, and valuation difference on available-for-sale securities fromtotal net assets on the borrower’s consolidated balance sheet at the end of each fiscal year, must not fall below 75% of
the larger of either (i) the identically calculated amount as of the end of the preceding fiscal year or (ii) the identicallycalculated amount as of March 31, 2016.
(2) There must not be two consecutive fiscal years of ordinary losses.
(3) The borrower must maintain a credit rating of better than BB+ from Rating and Investment Information, Inc.
The Company has a syndicated loan agreement (issue date: July 24, 2012) by six lenders with The Bank ofTokyo-Mitsubishi UFJ, Ltd. as the lead manager. This agreement has the following financial covenants.
(1) The borrower promises to not let the amount calculated after deducting subscription rights to shares, non-controllinginterests, deferred gains or losses on hedges, foreign currency translation adjustment, and valuation difference on
available-for-sale securities from total net assets on the borrower’s consolidated balance sheet at the end of each fiscal
year, fall below 75% of the larger of either the identically calculated amount as of the end of the preceding fiscal year or
the identically calculated amount as of March 31, 2016.
(2) The borrower firmly promises to not record two consecutive fiscal years of ordinary losses on its consolidated
statements of income.
The Company has an agreement (issue date: September 30, 2011) for a term-out medium-term commitment line withThe Bank of Tokyo-Mitsubishi UFJ, Ltd. This agreement has the following financial covenant.
The borrower must not let the amount calculated after deducting subscription rights to shares, non-controlling interests,
deferred gains or losses on hedges, foreign currency translation adjustment, and valuation difference on
available-for-sale securities from total net assets on the borrower’s consolidated balance sheet at the end of each fiscal
year, fall below 75% of identically calculated amounts at the end of the first half and second half of the preceding fiscal
year.

11. CONSOLIDATED STATEMENTS OF INCOME(1) Inventories at the fiscal year-end represent the amount after the book value was reduced in connection with a decline
in the profitability, and the following losses on valuation of inventories (the amount in parentheses represents gains onreversal) are included in cost of sales.

Millions of yen
2017
2016
(26)
1,197

Loss on valuation of inventories

Tokuyama Corporation Annual Report 201749

Thousands of
U.S. Dollars
2017
(239)

(2) Major items and amounts of selling expenses are as follows:

Millions of yen
2017
2016
Selling expenses :Freight-out expenses
Shipping charges
Salaries and bonuses
Provision for bonuses
Retirement benefit expenses
Provision of allowance for doubtful accounts

21,367
5,668
5,017
289
66
(28)

21,328
5,489
5,079
246
60
(1)

Thousands of
U.S. Dollars
2017
190,782
50,60944,795
2,584
589
(250)

(3) Major items and amounts of general and administrative expenses are as follows:

Millions of yen
2017
2016
General and administrative expenses :Technical research expenses
Salaries and bonuses
Provision for bonuses
Retirement benefit expenses
Provision for directors' retirement benefits

6,473
3,997
261
68
47

7,506
4,573
256
57
61

Thousands of
U.S. Dollars
2017
57,79635,693
2,333
607
427

(Note) Technical research expenses for the previous fiscal year include provision for bonuses of ¥179 million andretirement benefit expenses of ¥39 million.
Technical research expenses for the fiscal year under review include provision for bonuses of ¥215 million (US$2
million) and retirement benefit expenses of ¥42 million (US$0 million).
(4) Total amount of research and development expenses included in general and administrative expenses and production
costMillions of yen
2017
2016
Research and development
expenses

7,508

Thousands of
U.S. Dollars
2017

8,522

67,043

Millions of yen
2017
2016
5
13
12
92
2
4
0
14,03420
14,144

Thousands of
U.S. Dollars
2017
48
107
20
3
179

(5) The breakdown of gain on sales of non-current assets is as follows:

Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Total

(6) The breakdown of loss on sales of non-current assets is as follows:

Millions of yen
2017
2016
0
13
0
4
117
5
130

Buildings and structures
Tools, furniture and fixtures
Land
Total

Tokuyama Corporation Annual Report 201750

Thousands of
U.S. Dollars
2017
8
0
38
47

(7) Impairment loss
Fiscal year ended March 31, 2017
The Group groups its assets mainly according to the smallest units independently generating cash flows based on
business categories. During the fiscal year ended March 31, 2017, the Group recorded impairment losses for thefollowing asset groups.

Use
Idle fixed
assetsLocation
Oita-shi,
Oita

Millions of yen
2017

Thousands of
U.S. Dollars
2017

Land

33

297

Total

33

297

Asset category

The Company recognized a notable difference between the book value and market value of the idle land describedabove owned by the Company owing to the drop in land prices. As a result, the Company decided to write down thebook value of idle land to its recoverable amount and to post the amount of write-down as an impairment loss in
extraordinary losses.
The recoverable amount represents an estimate of net realizable value based on the real estate appraisal value.

Use
Manufacturing
facilities forpolycrystalline siliconMillions of yen
2017

Thousands of
U.S. Dollars
2017

Location

Asset category

Shunan-shi,
Yamaguchi

Construction in progress

31

280

Total

31

280

Since expectations cannot be established for operation of the above construction in progress of the Company, which isfor reinforcing facilities, the Company decided to write down the book value of construction in progress to its
recoverable amount and to post the amount of write-down as an impairment loss in extraordinary losses.
The recoverable amount has been determined using value in use and written down to its memorandum value for theabove reason.

Use
Manufacturing
facilities for
ethylene dichloride

Millions of yen
2017

Thousands of
U.S. Dollars
2017

Location

Asset category

Shunan-shi,
Yamaguchi

Construction in progress

128

1,143

Total

128

1,143

Since the Company is no longer able to form a concrete business plan to use the above construction in progress, which
is a process package for expanding facilities, the Company decided to write down the book value of construction inprogress to its recoverable amount and to post the amount of write-down as an impairment loss in extraordinary losses.
The recoverable amount has been determined using value in use and written down to its memorandum value for theabove reason.

Use

Location

Manufacturing
facilities for
microporous film

Tianjin,China

Asset category
Machinery, equipment
and vehicles
Investments and otherassets-other
Total

Millions of yen
2017

Thousands of
U.S. Dollars
2017

1,278

11,414

212

1,890

1,490

13,305

Tianjin Tokuyama Plastics Co., Ltd. decided to write down the book value of the above asset to its recoverable amountand to post the amount of write-down as an impairment loss in extraordinary losses due to deterioration in market
conditions for microporous film.
The recoverable amount has been determined using value in use and a discount rate of 8.71% for calculating the value
in use based on future cash flows.

Tokuyama Corporation Annual Report 201751

Fiscal year ended March 31, 2016
The Group groups its assets mainly according to the smallest units independently generating cash flows based on
business categories. During the fiscal year ended March 31, 2016, the Group recorded impairment losses for thefollowing asset groups.
Details of impairment losses have been omitted due to immateriality except for the items presented below.

Use

Company houses

Location
Asset category
Sagamihara-shi, Buildings and structures
Kanagawa
Yokohama-shi, Land
Kanagawa
Buildings and structures
Koshigaya-shi,
Buildings and structures
Saitama
Saitama-shi,
Buildings and structures
Saitama
Tsukuba-shi, Land
IbarakiBuildings and structures
Kamisu-shi,
Ibaraki

Millions of yen
2016
12
94
68
25
77
189
80

Land

66

Buildings and structures
Tools, furniture andfixtures
Total

124
0
735

In light of the execution of sales contracts and the decision to dispose of certain assets, the Company recognized anotable difference between the recoverable amounts and book values of the housing facilities described above ownedby the Company and Shunan System Sangyo Co., Ltd. As a result, the Company decided to write down the book valuesof these assets to their recoverable amounts and to post the amount of write-down as an impairment loss in
extraordinary losses.
Recoverable amounts represent estimates of net realizable values based on sales contract and other factors.

Use
Idle fixed
assetsLocation
Ishikari-shi,
Hokkaido

Asset category

Millions of yen
2016

Land

73

Total

73

The Company recognized a notable difference between the book value and market value of the idle land describedabove owned by the Company owing to the drop in land prices. As a result, the Company decided to write down thebook value of idle land to its recoverable amount and to post the amount of write-down as an impairment loss in
extraordinary losses. The recoverable amount represents an estimate of net realizable value based on the real estateappraisal value.

Use
Manufacturing
facilities forpolyolefin film

Location
Shunan-shi,
Yamaguchi

Asset category
Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
Total

Millions of yen
2016
15
1
0
16

Sun•Tox Co., Ltd. determined that there was little or no prospect of a recovery following the decision to discontinue
operations at certain manufacturing facilities. As a result, the company wrote down the book values of the relevant
assets and posted the amount of write-down as an impairment loss in extraordinary losses. The recoverable amounts of
the asset groups represent estimates of net realizable values. The assets described above have been written down to theirmemorandum values.

Tokuyama Corporation Annual Report 2017

52

Use

Manufacturing
facilities forpolycrystalline silicon

Location

Sarawak,
Malaysia

Asset category
Buildings and structures
Machinery, equipment
and vehicles
Tools, furniture andfixtures
Intangible assets-otherConstruction in progress
Total

Millions of yen
2016
31,86690,143
625
172
1,069
123,875

Engaged in the manufacture of solar-grade polycrystalline silicon, the PS-2 Plant operated by Tokuyama Malaysia Sdn.
Bhd. came online in October 2014. Due to the global glut in supply and the prolonged substantial drop in sales prices,
however, the decision was made to write down the book value of the plant to its recoverable amount and to post theamount of write-down as an impairment loss in extraordinary losses. The decision to undertake this write-down reflects
the forecast continued decline in sales prices to a level that is significantly below the Company’s business plans.
The recoverable amount has been determined using value in use and a discount rate of 6.2% for calculating the value in
use based on future cash flows.
Meanwhile, an impairment loss of ¥389 million applicable to manufacturing facilities at the PS-1 Plant is included inconstruction in progress totaling ¥1,069 million.

Tokuyama Corporation Annual Report 201753

12. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(1) Reclassification adjustments and tax effects relating to other comprehensive income

Millions of yen
2017
2016
Valuation difference on available-for-sale securities :Gains arising during the year
Reclassification adjustment to profit or loss
Amount before income tax effect
Income tax effectTotal valuation difference on available-for-salesecurities
Deferred gains or losses on hedges :Gains arising during the year
Reclassification adjustment to profit or loss
Amount before income tax effect
Income tax effectTotal deferred gains or losses on hedges
Foreign currency translation adjustment :Gains arising during the year
Reclassification adjustment to profit or loss
Total Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax :Gains arising during the year
Reclassification adjustment to profit or loss
Amount before income tax effect
Income tax effectTotal remeasurements of defined benefit plans, netof taxShare of other comprehensive income of entities
accounted for using equity :Gains arising during the year
Total Share of other comprehensive income ofentities accounted for using equity
Total other comprehensive income

Tokuyama Corporation Annual Report 2017

54

Thousands of
U.S. Dollars
2017

1,916
(1)
1,914
(581)

(3,705)(6,328)(10,033)
3,182

17,112(17)
17,095(5,191)

1,333(6,851)

11,903

373
(10)
363
(122)
240

(1,296)(18)(1,315)
413
(901)

3,338
(95)
3,243
(1,096)
2,147

(663)
(53)
(717)

(1,758)(1,758)(5,923)(480)(6,404)

755
(106)
648
(200)

(1,244)
6(1,238)
377

6,741
(950)
5,791
(1,787)

448

(861)

4,004

(138)

(150)

(1,238)

(138)
1,166

(150)
(10,522)(1,238)
10,412

13. CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Fiscal year ended March 31, 2017
(1) Class and total number of shares issued and class and number of treasury stock[2017]
Beginning ofyear
Issuanced shares
Common sharesClass A shares (Note 1)
Total
Treasury shares
Common shares (Note 2,3)
Total

Thousand shares
Increase
Decreaseduring theduring the
fiscal year
fiscal year

End of year

349,671349,69120
20-

349,67120
349,691

1,832
1,832

18
18

0
0

1,850
1,850

(Note 1) The increase of 20 thousand shares in the total number of issued Class A shares is an increase in issuance of
new shares by third-party allotment.
(Note 2). The increase of 18 thousand shares in the number of treasury stock of common stock is an increase due to thepurchase of shares constituting less than one share unit.
(Note 3) The decrease of 0 thousand shares in the number of treasury stock of common stock is a decrease due to therequest for additional purchase of shares constituting less than one share unit.
(2) Dividends(i) Dividend amount paid
Not applicable.
(ii) Dividends whose record date is within the fiscal year and whose effective date is in the following fiscal year

Dividend(Millions ofyen)

Resolution

Class of shares

Ordinary
GeneralMeeting of
Shareholders(June 23, 2017)Class A shares

761

Resolution

Class of shares

Dividend(Thousands of
U.S. Dollars)

Ordinary
GeneralMeeting of
Shareholders(June 23, 2017)Class A shares

6,800

Tokuyama Corporation Annual Report 201755

Dividend pershares (yen)Reference date

Effective date

38,082.20 March 31, 2017

June 26, 2017

Dividend pershares(Dollars)

Reference date

Effective date

340.02 March 31, 2017

June 26, 2017

Fiscal year ended March 31, 2016
(1) Class and total number of shares issued and class and number of treasury stock[2016]
Beginning ofyear
Issuanced shares
Common shares
Total
Treasury shares
Common shares (Note 1,2)
Total

Thousand shares
Increase
Decreaseduring theduring the
fiscal year
fiscal year

End of year

349,671349,671--349,671349,671

1,805
1,805

28
28

1
1

1,832
1,832

(Note 1)The increase of 28 thousand shares in the number of treasury stock of common stock is an increase due to thepurchase of shares constituting less than one share unit.
(Note 2) The decrease of one thousand shares in the number of treasury stock of common stock is a decrease due to therequest for additional purchase of shares constituting less than one share unit.
(2) Dividends
Not applicable.

14. CONSOLIDATED STATEMENTS OF CASH FLOWS(1) Reconciliation between the balance of cash and cash equivalents at end of period and relevant amount on the
consolidated balance sheets

Millions of yen
2017
2016
121,598
121,508(2,482)-

Cash and deposits
Restricted cash
Time deposit whose deposit period
exceeds 3 months
Cash and cash equivalents

Thousands of
U.S. Dollars
2017
1,085,704(22,168)

(296)

(342)

(2,643)

118,819

121,166

1,060,892

Millions of yen
2017
2016
505
143
1,030
56
1,535
200

Thousands of
U.S. Dollars
2017
4,511
9,200
13,712

15. LEASE TRANSACTIONS(Lessee)(1) Operating Lease transactions
Future lease payments related to noncancelable operating leases transactions

Due within one year
Due beyond one year
Total

(Lessor)(1) Operating Lease transactions
Future lease payments related to noncancelable operating leases transactions

Millions of yen
2017
2016
120
9
1,183
121
1,304
131

Due within one year
Due beyond one year
Total

Tokuyama Corporation Annual Report 2017

56

Thousands of
U.S. Dollars
2017
1,080
10,568
11,648

16. FINANCIAL INSTRUMENTS(1) Matters Regarding Financial Instruments(i) Management policy on financial instruments
The Group raises funds as required (mainly through bank loans and the issuance of corporate bonds) in line with its
business investment program aimed at implementing a customer-oriented approach toward “strengthening the
profitability of its businesses.” The Group invests temporary surplus funds in highly secure financial assets, and raises
short-term operating capital with bank loans and CP (commercial paper). We use derivatives only to hedge risks
described below, and have a policy of not implementing derivative transactions for speculative purposes.
(ii) Type and risk of financial instruments
Notes and accounts receivable – trade, which are operating receivables, are exposed to credit risks of customers.
Investment securities are mainly shares related to business or capital tie-ups with counterparties, etc., andavailable-for-sale securities are exposed to the risk of market price fluctuations. In addition, the Group provides
long-term loans to counterparties and others.
Notes and accounts payable – trade, which are operating payables, mostly become due within one year. Loans payable
and bonds payable are principally for raising funds necessary for capital investments, and the repayment date comes up
to 56 years after the balance sheet date. Some of these loans and bonds are exposed to interest volatility risk because
they bear floating interest rates, but the risk is hedged using derivative transactions (interest rate swap transactions).
Some of long-term loans payable contain financial covenants and may affect liquidity risk associated with financing.
Interest rate swap transactions are used in order to fix interest rates on loans payable or reduce interest payable. For
hedging instruments and hedged items, hedging policy, method of assessing hedge effectiveness, etc., see “4. (7)Method of significant hedge accounting.”(iii) Risk management system for financial instruments(a) Management of credit risk (risk related to default of counterparties, etc.)
With regard to operating receivables and loans receivable, the Company has a division in charge in each businessdepartment monitor the status of major counterparties regularly and manage maturities and balances for eachcounterparty in accordance with the credit management rules and others, while making efforts to early identify andmitigate any concerns about collection arising from deterioration in the economic environment, their financial position,etc. Consolidated subsidiaries also conduct similar management as necessary, in conformity with the Company’s credit
management rules and others.
In the use of derivative transactions, the Company conducts transactions only with financial institutions with high credit
ratings to mitigate counterparty risk.
(b) Management of market risk (fluctuation risk of foreign exchange, interest rates, etc.)
The Company and certain consolidated subsidiaries use interest rate swap transactions to reduce fluctuation risk ofinterest rate payable on loans payable.
The Company periodically assesses the fair value of securities and investment securities as well as financial conditionsof issuers (counterparty companies), etc., and continuously reviews the holding status in view of relationships withcounterparty companies.
With regard to derivative transactions, the Board of Directors resolves authority over transactions, amount limit andother matters, while the Management Support Center conducts transactions, makes entries and collates the balanceswith contract partners, etc. For consolidated subsidiaries, the Management Support Center also manages derivativetransactions by having them report the content of derivative transactions to the center when they conduct suchtransactions or by other means.
(c) Management of liquidity risk associated with financing (risk of inability to make a payment on due date)
The Company manages liquidity risk through timely preparation and updating of the cash flow management plan by theManagement Support Center based on reports from each division and by maintaining liquidity on hand at a certain leveland other means. While some of long-term loans payable contain financial covenants, the Management Support Center
conducts management by regularly monitoring the possibility of any violation of financial covenants.
(iv) Supplemental remarks on fair values of financial instruments
Fair values of financial instruments comprise values based on market prices and reasonably determined values where
market prices are unavailable. Since variable factors are incorporated in calculation of the fair value, the value may varydepending on different preconditions employed. In addition, the contract amounts of derivative transactions describedin “(2) Fair values of financial instruments” should not be, in themselves, considered indicative of the market risk
associated with derivative transactions.

Tokuyama Corporation Annual Report 201757

(2) Fair values of financial instruments
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 determine are not given in the table below.
As of March 31, 2017
Fiscal year ended March 31, 2017

Millions of yen
Book value Fair value Difference
121,598
121,598
73,94573,945-[2017]Cash and deposits
Notes and accounts receivable - trade
Securities and Investment securities
Available-for-sale securities
Long-term loans receivable
Total assets
Notes and accounts payable - trade
Short-term loans payable
Bonds payable
Long-term loans payable *1
Total liabilities
Derivative financial instruments *2
In which hedge accounting is applied
Total derivative financial instruments

11,355
2,833
209,733

11,355
2,833
209,733-

37,0352,138
34,400175,791
249,364

37,0352,138
33,185
176,622
248,981(1,214)
831
(383)

(390)
(390)

(1,427)(1,427)(1,037)(1,037)

Thousands of U.S. Dollars
Book value Fair value Difference
1,085,704
1,085,704
660,228
660,228-[2017]Cash and deposits
Notes and accounts receivable - trade
Securities and Investment securities
Available-for-sale securities
Long-term loans receivable
Total assets
Notes and accounts payable - trade
Short-term loans payable
Bonds payable
Long-term loans payable *1
Total liabilities
Derivative financial instruments *2
In which hedge accounting is applied
Total derivative financial instruments

101,391
25,296
1,872,620

101,391
25,296
1,872,620-

330,670
19,091
307,142
1,569,563
2,226,467

330,670
19,091
296,300
1,576,984
2,223,046(10,841)
7,420(3,421)(3,482)(3,482)(12,745)(12,745)(9,263)(9,263)(*1) The book value and fair value of long-term loans payable include current portion of long-term loans payable.
(*2) Receivables and payables arising from derivative transactions are presented on a net basis, and a value of a net
payable after totaling receivables and payables is shown in parentheses.

Tokuyama Corporation Annual Report 201758

As of March 31, 2016[2016]

Millions of yen
Book value

Fair value

Difference

Cash and deposits

121,508

121,508-

Notes and accounts receivable - trade

68,56968,569

-

9,478

9,478

-

Long-term loans receivable

3,094

3,094

-

Total assets

202,651

202,651-

Notes and accounts payable - trade

35,38835,388-

Short-term loans payable

9,382

9,382

-

Bonds payable

44,40040,676(3,723)Long-term loans payable *1

189,914

191,032

1,118

Total liabilities

279,084

276,480(2,604)(834)(2,333)(1,499)(834)(2,333)(1,499)Securities and Investment securities
Available-for-sale securities

Derivative financial instruments *2
In which hedge accounting is applied
Total derivative financial instruments(*1) The book value and fair value of long-term loans payable include current portion of long-term loans payable.
(*2) Receivables and payables arising from derivative transactions are presented on a net basis, and a value of a net
payable after totaling receivables and payables is shown in parentheses.
(Note 1) Method for calculating the fair value of financial instruments, and matters regarding securities and derivativetransactions
Assets(i) Cash and deposits, (ii) Notes and accounts receivable – trade
Because these assets are mostly settled in a short period, their fair value is nearly equal to their book value. Therefore,
their fair value is based on the book value.
(iii) Securities and investment securities
The fair value of available-for-sale securities is based on the price on the relevant exchange.
For matters to be noted on securities for each holding purpose, refer to the note “SECURITIES.”(iv) Long-term loans receivable
Because all long-term loans receivable bear floating interest rates and reflect market interest rates in a short period, andcredit standing of borrowers has not changed significantly since the loans were extended, their fair value is based on thebook value.
Liabilities(i) Notes and accounts payable – trade, (ii) Short-term loans payable
Because these liabilities are settled in a short period, their fair value is nearly equal to their book value. Therefore, theirfair value is based on the book value.
(iii) Bonds payable
The fair value of these liabilities is based on market price for those with market price, and determined as the present
value, which is calculated by discounting the total of principal and interest using the interest rate that takes into accountthe remaining period and credit risk of the bond payable, for those with no market price.
(iv) Long-term loans payable
The fair value of these liabilities is determined as the present value, which is calculated by discounting the total ofprincipal and interest using the interest rate that would be charged for a new similar loan.

Tokuyama Corporation Annual Report 201759

Derivatives
Refer to the note “18. DERIVATIVES.”(Note 2) Financial instruments whose fair value is extremely difficult to determine

Millions of yen
2017
2016
1,773
1,783
5,954
4,503
7,727
6,286

Unlisted shares
Shares of associates
Total

Thousands of
U.S. Dollars
201715,83353,164
68,997

These financial instruments have no market price, and estimation of their future cash flows is expected to require
excessive cost. Therefore, since it is considered extremely difficult to determine the fair value, they are not included in“Securities and investment securities.”(Note 3) Redemption schedule for monetary receivables and securities with maturities after the consolidated balance
sheet date
As of March 31, 2017[2017]
Within 1
year
Cash and deposits
Notes and accounts
receivable - trade121,598

Long-term loans receivable
Total

-

-

-

-

-

229

744

849

1,238

195,774

744

849

1,238

Within 1
year
1,085,704

Thousands of U.S. Dollars
More than More than
1 year,5 year,within 5
within 10
years
years
-

-

More than
10 years-

660,228

-

-

-

2,050

6,650

7,587

11,058

1,747,983

6,650

7,587

11,058Long-term loans receivable
Total

-

More than
10 years

73,945[2017]Cash and deposits
Notes and accounts
receivable - trade

Millions of yen
More than More than
1 year,5 year,within 5
within 10
years
years

As of March 31, 2016[2016]
Within 1
year
Cash and deposits
Notes and accounts
receivable - tradeLong-term loans receivable
Total

Tokuyama Corporation Annual Report 2017

Millions of yen
More than More than
1 year,5 year,within 5
within 10
years
years

More than
10 years

121,508---

68,569

-

-

-

235

1,000

855

1,238

190,313

1,000

855

1,238

60

(Note 4) Repayment schedule by term for bonds payable, long-term loans payable, and other interest-bearing debt after
the consolidated balance sheet date
As of March 31, 2017[2017]

Millions of yen
More than More than
2 year,3 year,within 3
within 4
years
years

Within 1
year

More than
1 year,within 2
years

2,138

-

-

-

-

Long-term loans payable

15,235

Total

More than
4 year,within 5
years

More than
5 years---

10,00015,0009,400-

19,70815,337

18,967

12,362

94,18017,373

19,70825,33733,967

21,762

94,180Within 1
year

More than
1 year,within 2
years

Thousands of U.S. Dollars
More than More than
2 year,3 year,within 3
within 4
years
years

More than
4 year,within 5
years

More than
5 years

19,091

-

-

-

-

-

-

-

89,285

133,928

83,928-Long-term loans payable

136,029

175,972

136,938

169,352

110,375

840,895

Total

155,121

175,972

226,223

303,280

194,304

840,895

Within 1
year

More than
1 year,within 2
years

Millions of yen
More than More than
2 year,3 year,within 3
within 4
years
years

More than
4 year,within 5
years

More than
5 years

Short-term loans payable

9,382

-

-

-

-

-

Bonds payable

10,000--10,00015,0009,400

Long-term loans payable

17,036

15,26019,157

14,73318,318105,408

Total

36,41815,26019,157

24,73333,318114,808

Short-term loans payable
Bonds payable[2017]

Short-term loans payable
Bonds payable

As of March 31, 2016[2016]

17. SECURITIES(1) Trading securities
Not applicable.
(2) Held-to-maturity debt securities
Not applicable.
(3) Available-for-sale securities
As of March 31, 2017[2017]

Book value
Available-for-sale securities:
Securities with book values exceeding acquisition
costs
Securities with book values not exceedingacquisition costs
Total

Tokuyama Corporation Annual Report 2017

61

Millions of yen
Acquisition
cost

Unrealized
gain

4,620

2,714

1,905

6,735
11,3558,145
10,859(1,409)496

Thousands of U.S. Dollars
Acquisition
UnrealizedBook value
cost
gain

[2017]

Available-for-sale securities:
Securities with book values exceeding acquisition
costs
Securities with book values not exceedingacquisition costs
Total

41,25024,236

17,01460,140101,391

72,726
96,962(12,586)
4,428

As of March 31, 2016[2016]

Book value
Available-for-sale securities:
Securities with book values exceeding acquisition
costs
Securities with book values not exceedingacquisition costs
Total

Millions of yen
Acquisition
cost

Unrealized
gain

2,610

1,511

1,099

6,868
9,478

9,386
10,897(2,518)(1,418)Millions of yen
Gain on sales

Loss on sales

4,632

1,936

0

4,632

1,936

0

(4)Available-for-sale securities sold
As of March 31, 2017[2017]

Proceeds
Available-for-sale securities sold during 2017 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

Thousands of U.S. Dollars
Proceeds
Gain on sales
Loss on sales[2017]

Available-for-sale securities sold during 2017 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

Tokuyama Corporation Annual Report 201762

41,36017,287041,36017,2870As of March 31, 2016[2016]

Proceeds
Available-for-sale securities sold during 2016 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

Millions of yen
Gain on sales

Loss on sales

10,915

6,102-

10,915

6,102-

18. DERIVATIVES(1) Derivative transactions to which hedge accounting is not applied
Not applicable.
(2) Derivative transactions to which hedge accounting is applied(i)Currency-related derivatives
As of March 31, 2017[2017]
Main hedging targets
Hedge accounting method
Principle-based accounting
Forward exchange agreements
Call
Euros
Total

Forecast transaction inforeign currencies[2017]

Main hedging targets
Hedge accounting method
Principle-based accounting
Forward exchange agreements
Call
Euros
Total

Forecast transaction inforeign currencies

Millions of yen
Maturing
Notional
after
value
one year Fair value

90
90

63

(9)
(9)

Thousands of U.S. Dollars
Maturing
Notional
after
value
one year Fair value

806
806

(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

Tokuyama Corporation Annual Report 2017

-

-

(80)
(80)

As of March 31, 2016[2016]
Main hedging targets
Hedge accounting method
Principle-based accounting
Forward exchange agreements
Call
U.S. dollars
Euros
Subtotal
Allocation method
Forward exchange agreements
Put
U.S. dollars
Subtotal
Total

Forecast transaction inforeign currencies
Forecast transaction inforeign currencies

Forecast transaction inforeign currencies

Millions of yen
Maturing
Notional
after
value
one year Fair value

29

-

(0)

1,445
1,474

90
90

(59)
(59)

1,051
1,051
2,525

90

(59)

(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.
(ii) Interest
As of March 31, 2017[2017]
Main hedging targets

Millions of yen
Maturing
Notional
after
value
one year Fair value

Hedge accounting method
Principle-based accounting
Interest rate swaps
Pay fixed rate, receive floating Long-term loansratepayableSubtotal

60,79260,79260,79260,792

(380)
(380)

Special accounting procedures forinterest rate swaps
Interest rate swaps
Pay fixed rate, receive floating Long-term loansratepayableSubtotal
Total

38,96738,96799,75933,32133,321
94,113(1,037)(1,037)(1,418)Tokuyama Corporation Annual Report 201764

[2017]Main hedging targets

Thousands of U.S. Dollars
Maturing
Notional
after
value
one year Fair value

Hedge accounting method
Principle-based accounting
Interest rate swaps
Pay fixed rate, receive floating Long-term loansratepayableSubtotal

542,785
542,785

542,785
542,785(3,401)(3,401)

Special accounting procedures forinterest rate swaps
Interest rate swaps
Pay fixed rate, receive floating Long-term loansratepayableSubtotal
Total

347,925
347,925
890,711

297,515
297,515
840,301(9,263)(9,263)(12,664)(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.
As of March 31, 2016[2016]
Main hedging targets

Millions of yen
Maturing
Notional
after
value
one year Fair value

Hedge accounting method
Principle-based accounting
Interest rate swaps
Pay fixed rate, receive floating Long-term loansratepayableSubtotal

60,30060,30060,30060,300

(774)
(774)

Special accounting procedures forinterest rate swaps
Interest rate swaps
Pay fixed rate, receive floating Long-term loansratepayableSubtotal
Total

45,15945,159105,459

39,18339,183
99,483(1,499)(1,499)(2,273)(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

Tokuyama Corporation Annual Report 201765

19. RETIREMENT BENEFITS(1) Outline of adopted retirement benefit plans
The Company and its consolidated domestic subsidiaries have lump-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.
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.
(2) Defined benefit plans(i) Reconciliation of beginning and ending balances of retirement benefit obligations

Balance of defined benefit obligations at beginning of year
Service cost
Interest cost
Occurrence of actuarial gain and loss
Payments of retirement benefits
Other
Balance of defined benefit obligations at end of year

Millions of yen
2017
2016
18,764
19,465
917
931
140
153
(400)
(90)
(2,135)(1,702)
7
17,286
18,764

Thousands of
U.S. Dollars
2017
167,539
8,188
1,255(3,578)(19,063)
154,340(Note) The consolidated domestic subsidiaries, except for two companies, have adopted the simplified accounting
method in calculating retirement benefit obligations.
(ii) Reconciliation of beginning and ending balances of pension assets

Millions of yen
2017
2016
25,467
27,075576
602
141(1,322)609
625(2,001)(1,514)
24,792
25,467

Balance of pension assets at beginning of year
Expected return on pension assets
Occurrence of actuarial gain and loss
Corporation's contributions
Payments of retirement benefits
Balance of pension assets at end of year

Thousands of
U.S. Dollars
2017
227,387
5,148
1,262
5,437
(17,869)
221,365(iii) Reconciliation of ending balances of retirement benefit obligations and pension assets to net defined benefit
liability and net defined benefit asset recorded in the consolidated balance sheets

Millions of yen
2017
2016
15,995
17,524(24,792)(25,467)(8,797)(7,942)
1,290
1,239

Funded defined benefit obligations
Pension assets
Unfunded defined benefit obligations

Thousands of
U.S. Dollars
2017
142,819(221,365)(78,546)
11,521

Net amount shown on balance sheets(7,506)(6,702)(67,024)

Net defined benefit liability
Net defined benefit asset

1,430(8,936)1,354(8,057)

12,768(79,793)

Net amount shown on balance sheets(7,506)(6,702)(67,024)

Tokuyama Corporation Annual Report 201766

(iv) Retirement benefit expenses and a breakdown of the retirement benefit expenses

Service cost
Interest cost
Expected return on pension assets
Recognized actuarial gain and loss
Periodic benefit expenses of retirement benefit plan

Millions of yen
2017
2016
917
931
140
153
576
602
106
(6)
1,740
1,680

Thousands of
U.S. Dollars
2017
8,188
1,255
5,148
950
15,542(Note) Retirement benefit expenses of the consolidated domestic subsidiaries that have adopted the simplified
accounting method are included in “Service cost.”(v) Adjustment of retirement benefit
A breakdown of items recorded in adjustment of retirement benefit (before deduction of tax effects) is as follows:

Millions of yen
2017
2016
(648)
1,238
(648)
1,238

Actuarial gain and loss
Total

Thousands of
U.S. Dollars
2017(5,791)(5,791)(vi) Accumulated adjustment of retirement benefits
A breakdown of items recorded in accumulated adjustment of retirement benefit plans (before deduction of tax effects)
is as follows:

Millions of yen
2017
2016
(4,178)(3,529)(4,178)(3,529)Unrecognized actuarial gain and loss
Total

Thousands of
U.S. Dollars
2017(37,306)(37,306)(vii) Matters relating to pension assets(a) Principal items of pension assets
The proportion of each principal category to the total of pension assets is as follows:

%
2016

2017
Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Insurance product (General account)
Other
Total

5
6
32
12
15
29
100

15
7
27
3
27
21
100

(Note 1) Total of pension assets as of March 31, 2016 and March 31, 2017 included a retirement benefit trust,established for the Company’s pension plans that represented 8% and 10% of the total of pension assets, respectively.
(Note 2) The principal factor of the increase in the proportion of “Other” is that the policy asset mix was reviewed at thetime of actuarial revaluation in the fiscal year under review and some of pension assets were temporarily liquidated.
(b) Method for setting the expected long-term rate of return
The expected long-term rate of return on pension assets has been set based on the allocation of the pension assets aswell as the current and expected rate of return from each category of the pension assets.

Tokuyama Corporation Annual Report 201767

(viii) Matters relating to the basis for calculation used in the actuarial calculation
Main basis for calculation used in the actuarial calculation (principally represented by the rate used)

2017
0.8%
2.5%

Discount rate
Expected long-term return on pension assets

2016
0.8%
2.5%

(3) Defined contribution plans
The amount which the Company and its consolidated subsidiaries were required to contribute to the defined
contribution plans was ¥538 million for the previous fiscal year and ¥529 million (US$4 million) for the fiscal year
under review.

20. STOCK OPTION
Not applicable.

21. TAX EFFECT ACCOUNTING(1) Major breakdown of deferred tax assets and liabilities

Millions of yen
2017
2016

Thousands of
U.S. Dollars
2017

Deferred tax assets：
Deficits
Shares of subsidiaries and associates
Property, plant and equipment
Provision for repairs
Provision for bonuses
Accrued business taxes
Valuation difference on available-for-sale securities
Other
SubtotalLess valuation allowance
Total deferred tax assets

28,961
8,538
3,901
1,345
655
2,703
46,105(19,930)
26,175

3,272
86
4,496
1,313
578
899
528
3,555
14,729(6,029)8,700

258,583
76,234
34,83812,0095,850
24,142
411,658(177,950)
233,708

Deferred tax liabilities：
Prepaid pension costReserve for reduction entry
Retained earnings of subsidiaries and affiliates
Other
Total deferred tax liabilities
Net deferred tax assets(2,602)(1,163)(530)(695)(4,992)
21,183(2,180)(1,217)(751)(144)(4,293)
4,406(23,236)(10,389)(4,740)(6,206)(44,572)
189,135(Note) Net deferred tax assets as of March 31, 2016 and March 31, 2017 are included in the items below of theconsolidated balance sheets.

Millions of yen
2017
2016
1,627
4,256
19,824
610
(2)
(268)
(457)

Current assets - Deferred tax assets
Non-current assets - Deferred tax assets
Current liabilities - Deferred tax liabilities
Non-current liabilities - Deferred tax liabilities

Tokuyama Corporation Annual Report 2017

68

Thousands of
U.S. Dollars
2017
14,532
177,003(2,399)(2) Reconciliation of significant difference between the statutory tax rate and the effective tax rate after applying tax
effect accounting

Statutory tax rate
Increase (decrease) in income taxes resulting from：2017
30.7 %

Change in valuation allowance allocated to income tax
expenses(55.9)

Inter-company eliminations of allowance for doubtful
accounts(14.4)

Dividend and other items excluded permanently fromtaxable income
Retained earnings of subsidiaries and affiliates
Inter-company eliminations of allowance forinvestment loss
Inter-company eliminations of dividends income
Other

(2.3)

Effective income tax rate

2016
This
informationis omitted, as
the company
posted a loss
beforeincome taxes
during theperiod underreview.

(1.9)
(1.6)
2.1
4.7
(38.6) %22. BUSINESS COMBINATION
Information is omitted because of immateriality.

23. ASSET RETIREMENT OBLIGATIONS(1) Asset retirement obligations included in the consolidated balance sheets
The Group has obligations to restore site to its original state at the time of leaving or termination of the business andafter termination of mining for branches, etc. that use an office under an real estate lease agreement or certain businessoffices that use a plant or site for sales facilities, as well as mines. Of these obligations, for certain obligations to restoresite to its original state at the time of leaving a rental building under a building lease agreement for which the timing of
performance and amount can be reasonably estimated at the present moment based on past records, asset retirement
obligations have been recorded. The note on the content of asset retirement obligations is omitted because ofimmateriality.
(2) Asset retirement obligations not included in the consolidated balance sheets
Because past records, other than those stated in (1) above, are poor, the period of use of the leased asset related to the
obligations is uncertain, and there is no plan for relocation, etc. or mine closure at the present moment, it is difficult toreasonably estimate the timing and scope of performance and probability for the obligations. Therefore, asset retirement
obligations corresponding to the obligations have not been recorded.

24. INVESTMENT AND RENTAL PROPERTIES
Information is omitted because of immateriality of the total amount of investment and rental properties.

25. 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, and the Company Group conducts business operations througheach business division devising its comprehensive product strategy for domestic and overseas markets.
The Company Group is, therefore, composed of reportable segments by product group based on business divisions, andTokuyama Corporation Annual Report 201769

has four reportable segments, “Chemicals,” “Specialty Products,” “Cement,” and “Life & Amenity.”
Main products and services of each reportable segment are as follows:
Chemicals: Caustic soda, soda ash, calcium chloride, sodium silicate, vinyl chloride monomer, polyvinyl chloride resin,
propylene oxide, isopropyl alcohol and chlorinated solvents
Specialty Products: Polycrystalline silicon, fumed silica, tetrachlorosilane, aluminum nitride, high-purity chemicals forelectronics manufacturing, and photoresist developer
Cement: Cement, ready-mixed concrete, cement-type stabilizer, and resourece recycling businessLife & Amenity: Polyolefin film, plastic window sashes, medical diagnosis systems, dental materials and equipment,
gas sensors, ion exchange membranes, pharmaceutical ingredients and intermediates, plastic lens-related materials forglasses, and microporous film
(2) Calculation of sales, income (loss), assets and other financial items by reportable segment
The accounting treatment methods applied to reportable segments 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 profit (loss) is based on operating profit.
(Application of Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016)
Following the revision to the Corporation Tax Act, the Company has applied the “Practical Solution on a Change inDepreciation Method Due to Tax Reform 2016” (ASBJ PITF No. 32, June 17, 2016) from the fiscal year under review,and changed the depreciation method for structures acquired on or after April 1, 2016 from the declining-balancemethod to the straight-line method. As a result of this change, the impact on segment information is immaterial.
(3) Information on net sales, profit (loss), assets and other items by reportable segment
Fiscal year ended March 31, 2017[2017]

Millions of yen

Chemica Specialty Cementls
Products
Sales
Sales to customers
Inter-segment
sales/transfer
Total sales
Segment profit
Segment assets
Other items
Depreciation andamortization (Note 4)
Increase in tangible andintangible fixed assets(Note 5)

Life &
Amenity

Others(Note 1)

Total

Adjustm Consolid
ent
ated(Note 2) (Note 3)

82,432

56,79282,873

48,61228,396299,106-

299,106

913
83,346
13,18347,663

10,93467,726
9,649
65,555

121
82,995
7,878
53,5112,139
50,751
5,632
53,631

23,72852,124
5,965
42,696

37,836
336,943
42,309263,057(37,836)(37,836)(2,589)161,375

299,106
39,720424,433

2,276

2,679

3,194

1,824

3,286

13,261

953

14,215

2,410

1,474

3,907

6,425

2,473

16,692898

17,591Tokuyama Corporation Annual Report 201770

Thousands of U.S. Dollars[2017]

Chemica Specialty Cementls
Products

Life &
Amenity

Others(Note 1)

Total

Adjustm Consolid
ent
ated(Note 2) (Note 3)

Sales
Sales to customers
736,001 507,073 739,945 434,035 253,536 2,670,594- 2,670,594
Inter-segment
sales/transfer
8,160
97,628
1,085
19,098 211,857 337,830 (337,830)
Total sales
744,161 604,702 741,030 453,134 465,394 3,008,424 (337,830) 2,670,594
Segment profit
117,706
86,15770,34250,29253,265 377,765 (23,122) 354,643
Segment assets
425,563 585,313 477,778 478,853 381,220 2,348,730 1,440,854 3,789,584
Other items
Depreciation andamortization (Note 4)
20,32723,92528,521
16,28829,346 118,409
8,510 126,920
Increase in tangible andintangible fixed assets(Note 5)
21,524
13,16634,891
57,36722,089 149,040
8,022 157,062(Note 1) The “Others” segment comprises businesses other than those of the reportable segments, and includes overseas
sales companies, a distribution company, a real estate business, etc.
(Note 2) Adjustments are as follows:(i) The segment profit adjustment amount consists mainly of basic R&D expenses that are not allocable to a specificreportable segment.
(ii) The segment assets adjustment amount includes corporate assets that are not allocated to a specific reportablesegment (¥194,566 million / US$1,737 million).
(Note 3) Segment profit is adjusted for operating profit in the consolidated financial statements.
(Note 4) Depreciation includes amortization of long-term prepaid expenses.
(Note 5) Increase in property, plant and equipment and intangible assets includes the amount of increase in long-term
prepaid expenses.
Fiscal year ended March 31, 2016[2016]

Millions of yen

Chemica Specialty Cementls
Products

Life &
Amenity

Others(Note 1)

Total

Adjustm Consolid
ent
ated(Note 2) (Note 3)

Sales
Sales to customers
87,042
47,66485,32055,67931,408 307,115- 307,115
Inter-segment
sales/transfer
759
13,237148
1,998
22,27538,420 (38,420)
Total sales
87,80160,902
85,46957,67753,684 345,535 (38,420) 307,115
Segment profit (loss)
8,900(1,157)
5,832
6,598
5,668
25,842(2,771)
23,071
Segment assets
46,381
66,28755,952
56,64943,825 269,097 132,244 401,342
Other items
Depreciation and
2,517
5,956
3,211
2,132
3,565
17,3842,700
20,084amortization (Note 4)
Increase in tangible andintangible fixed assets(Note5)
2,000
4,588
2,437
3,111
1,595
13,733585
14,319(Note 1)The “Others” segment comprises businesses other than those of the reportable segments, and includes overseas
sales companies, a distribution company, a real estate business, etc.
(Note 2)Adjustments are as follows:(i) The segment profit (loss) adjustment amount consists mainly of basic R&D expenses that are not allocable to a
specific reportable segment.
(ii) The segment assets adjustment amount includes corporate assets that are not allocated to a specific reportablesegment (¥174,924 million ).
(Note 3) Segment profit (loss) is adjusted for operating profit in the consolidated financial statements.
(Note4) Depreciation includes amortization of long-term prepaid expenses.
(Note5) Increase in property, plant and equipment and intangible assets includes the amount of increase in long-term
prepaid expenses.
[Related information]
Fiscal year ended March 31, 2017(1) Information by product and service
Information is omitted as identical information is disclosed in segment information.

Tokuyama Corporation Annual Report 201771

(2) Information by region(i) Net sales

Millions of yen
2017
237,832
50,97910,295299,106

Japan
Asia
Others
Total

Thousands of U.S.
Dollars
2017
2,123,500
455,173
91,9202,670,594(Note) Net sales are categorized into countries or regions based on the location of customers.
(ii) Property, plant and equipment

Millions of yen
2017
101,133
17,021
1,078
119,233Japan
Asia
Others
Total

Thousands of U.S.
Dollars
2017
902,976
151,982
9,627
1,064,586(3) Information by major customer
Information is omitted because no external customer accounts for 10% or more of net sales in the consolidated
statements of income.
Fiscal year ended March 31, 2017(1) Information by product and service
Information is omitted as identical information is disclosed in segment information.
(2) Information by region(i) Net sales

Millions of yen
2016
239,143
54,714
13,257
307,115Japan
Asia
Others
Total(Note) Net sales are categorized into countries or regions based on the location of customers.
(ii) Property, plant and equipment

Millions of yen
2016
98,19920,415
1,149
119,764

Japan
Asia
OthersTotal(3) Information by major customer
Information is omitted because no external customer accounts for 10% or more of net sales in the consolidated
statements of income.

Tokuyama Corporation Annual Report 201772

[Information on impairment loss of non-current assets by reportable segment]
Fiscal year ended March 31, 2017[2017]
Millions of yen
SpecialtyLife &
Chemicals
CementOthers
Products
Amenity
Impairment loss

128

31

-

1,490

Adjustme
nt-

Thousands of U.S. Dollars
Life &
CementOthersAmenity[2017]
Chemicals Specialty
Products

33

Adjustme
nt

Total
1,683

Total

Impairment loss
1,143
280
13,305297
15,028(Note) The amount of “Adjustment” is impairment loss related to corporate assets that are not attributable to any
segment.
Fiscal year ended March 31, 2016[2016]

Millions of yen
Life &
CementOthersAmenity

Chemicals Specialty
Products

Adjustment

Total

Impairment loss
123,88216
276
531
124,706(Note) The amount of “Adjustment” is impairment loss related to corporate assets that are not attributable to any
segment.
[Information on amortization of goodwill and unamortized balance by reportable segment]
Fiscal year ended March 31, 2017[2017]
Millions of yen
SpecialtyLife &
Chemicals Products Cement
OthersAmenity
Amortization of goodwill
Unamortized balance

-

7
24

Specialty
Chemicals
Products---

Thousands of U.S. Dollars
Life &
CementOthersAmenity[2017]

Amortization of
goodwill
Unamortized balance

1,246
2,343

Adjustme
nt

62
218

11,133
20,919--Adjustme
nt
-

-

Total
1,253
2,367

Total
11,196
21,138There is neither amortization of negative goodwill nor unamortized balance arising from business combinations
conducted on and before April 1, 2010.
Fiscal year ended March 31, 2016[2016]

Millions of yen
Life &
CementOthersAmenity

Specialty
Chemicals
Products
Amortization of
goodwill
Unamortized balance

-

3
31

1,369
3,706

-

Adjustme
nt
-

-

Total
1,373
3,738

There is neither amortization of negative goodwill nor unamortized balance arising from business combinations
conducted on and before April 1, 2010.
[Information on gain on bargain purchase by reportable segment]
Fiscal year ended March 31, 2017
Not applicable.
Fiscal year ended March 31, 2016
Not applicable.

Tokuyama Corporation Annual Report 201773

26. INFORMATION ON RELATED PARTIES
Fiscal years ended March 31, 2017 and 2016
Not applicable.

27. PER SHARE INFORMATION

yen
2017
305.49147.78119.93

Net assets per share
Earnings (loss) per share
Diluted earnings per share2016
147.98(289.10)-

Dollars
2017
2.73
1.32
1.07

(Note 1)Diluted earnings per share for the fiscal year ended March 31, 2016 are not presented because basic loss per
share was posted and there were no dilutive shares.
(Note 2) The basis for calculation of net assets per share is as follows:

Millions of yen
2017
2016
135,976
60,205106,254
51,473

Total net assets on Balance Sheets
Net assets related to common shares
Major breakdown of difference
Net assets pertaining to class A shares
Non-controling interests

20,761
8,960

Number of shares outstanding of common shares
Number of treasury shares of common shares
Number of common shares used to calculate net assets per
share

8,732

Thousandsof U.S.
Dollars
2017
1,214,075
948,697
185,371
80,005

Thousand shares
2017
2016
349,671349,671
1,850
1,832
347,821347,839(Note 3) The basis for calculation of basic earnings (loss) per share is as follows:

Profit (loss) attributable to owners of parent
Amount not attributable to common shareholders
Profit (loss) related to common shares attributable to ownersof parent

Average number of common shares during the period

Millions of yen
2017
2016
52,165(100,563)
761
51,403(100,563)

Thousandsof U.S.
Dollars
2017
465,763
6,800
458,963

Thousand shares
2017
2016
347,830
347,852(Note 4) The basis for calculation of diluted earnings per share is as follows:

Adjustment amount of profit attributable to owners of parent
Preferred Dividend

Tokuyama Corporation Annual Report 2017

74

Millions of yen
2017
2016
761
761

-

Thousandsof U.S.
Dollars
2017
6,800
6,800

Thousand shares
2017
2016
87,132

Increase in number of common shares-

28. SIGNIFICANT SUBSEQUENT EVENTS
1. Acquisition and cancellation of the Class A shares
The Board of Directors of the Company, at its meeting held on April 28, 2017, made a resolution to acquire all of theClass A shares issued by the Company (total paid-in amount: 20 billion yen) in exchange for cash in accordance withthe provisions of Article 6-2, paragraph 5 of the Company’s Articles of Incorporation (call options, the consideration forwhich is cash) and cancel the shares on condition of the acquisition thereof in accordance with the provisions of Article
178 of the Companies Act, and the Company acquired and canceled the Class A shares on June 14, 2017.
(1) Reason for Acquisition and Cancellation
We aimed to expand the polysilicon business at Tokuyama Malaysia Sdn. Bhd., our consolidated subsidiary, (hereinafterreferred to as “Tokuyama Malaysia”). However, due to the failure to ensure the stabilization of the quality andproductivity of semiconductor-grade polysilicon and a worsening business environment caused by a slump in themarket of solar-grade polysilicon, we posted large impairment losses for the manufacturing facilities for both grades asa result of considering investment collectability. As a result, consolidated net assets decreased significantly. Hence, toquickly restore the trust of our stakeholders, including business partners with whom we have had close transactions fora long time, it is imperative for us to reinforce the deteriorated shareholders’ equity and strengthen the financial
platform. Accordingly, the Company issued a total of 20 billion yen of Class A shares to Japan Industrial Solutions
Fund I (hereinafter referred to as “JIS”) on June 27, 2016.
Then, the medium-term management plan beginning in FY2016 started with its highest-ever operating profit recorded,largely thanks to lower prices of raw materials in addition to implementation of operational measures in line with thepositioning of each business, execution of cross-business measures for strengthening the competitiveness of theTokuyama Factory, promotion of cost reduction and others. Consolidated profit attributable to owners of parent
amounted to 52.1 billion yen, and is expected to be 13.0 billion yen for FY2017. Moreover, the Company now has
the prospect of selling Tokuyama Malaysia, and expects to accordingly recover and enhance consolidated net assets thatwere decreased, by further promoting the medium-term management plan and steadily generating revenue.
Based on the above, the Company has judged that acquisition and cancellation of all of Class A shares have now comeinto sight.
With this acquisition and cancellation of Class A shares, the Company can avoid increases in the future financial burden
associated with dividend payment on Class A shares and in the amount of redemption caused by a rise in theredemption coefficient.
(2) Contents of Acquisition(i) Class of shares to be acquired
Class A shares(ii) Counterparty to the acquisition (shareholder)JIS(iii) Total number of shares to be acquired
20,000 shares(iv) Acquisition price of shares
1,081,301.4 yen per share(Note) The above acquisition price is the amount determined by adding the Class A daily prorated unpaid dividends(11,301.4 yen) to the amount that is calculated by multiplying the amount equivalent to the paid-in amount per ClassA share (1,000,000 yen) by the redemption coefficient of 1.07. This amount has been calculated on the assumptionthat there is no amount equivalent to Class A accumulated unpaid dividends, since preferred dividends for Class A for
the fiscal year ended March 31, 2017 (38,082.2 yen per Class A share) will be resolved at the Company’s Ordinary
General Meeting of Shareholders scheduled to be held in June 2017 and paid.
(v) Total amount of acquisition price of shares
21,626,028,000 yen(vi) Date of notification to the shareholder
April 28, 2017(vii) Acquisition dateJune 14, 2017
(3) Details of Cancellation(i) Class of shares to be cancelledClass A shares(ii) Total number of shares to be cancelled
20,000 shares(iii) Effective date of cancellation
June 14, 2017
This cancellation is subject to the condition that the Company acquires the Class A shares in accordance with 2. above.

Tokuyama Corporation Annual Report 201775

2. Transfer of Consolidated Subsidiary by Third-Party Allotment of the New Shares and Transfer of the Shares
The Board of Directors of the Company, at its meeting held on September 28, 2016, made a resolution that theCompany’s consolidated subsidiary in Malaysia, Tokuyama Malaysia Sdn. Bhd. (hereinafter referred to as “Tokuyama
Malaysia”) would issue new shares to OCI Company Ltd. in Korea (hereinafter referred to as “OCI”) as a third-party
allotment and the Company would transfer all shares of Tokuyama Malaysia to OCI.
The second third-party allotment of the new shares and the transfer of the shares of Tokuyama Malaysia were completed
as of May 31, 2017. As a consequence of the transactions, Tokuyama Malaysia had been excluded from theconsolidation of the Company on May 31, 2017.
(1) Reason for the Transfer of Shares
Tokuyama Malaysia was established in August 2009 to expand the semiconductor-grade and solar-grade polycrystalline
silicon business. Due to the technological issues of manufacturing facilities and deteriorating market condition ofsolar-grade polycrystalline silicon, two huge impairment losses in connection with plants were posted. To continue
Tokuyama Malaysia’s business, the efforts to improve the manufacturing facilities and the productivity were taken, andcertain level of productivity has been achieved. In addition, to further strengthen Tokuyama Malaysia’s businessstructure, the Company has been evaluating every option including Tokuyama Malaysia’s alliance with other company.
As a result, the Company has reached to the conclusion that transferring the business of Tokuyama Malaysia to OCI, aglobal player of solar power business including the production of polycrystalline silicon, will be the best choice forparties, and finally the Company reached an agreement with OCI about the third-party allotment of new share andtransfer of shares of Tokuyama Malaysia to OCI.
(2) Party of the Third-Party Allotment and the Share Transfer
OCI Company Ltd.
(3) Outline of the Consolidated Subsidiary whose Shares are to be transferred
Name:
Tokuyama Malaysia Sdn. Bhd.
Business:
Production and sale of polycrystalline siliconContents of Transaction:
Sale of products to the consolidated subsidiary(4) Outline of Third-Party Allotment of the New Shares of Consolidated Subsidiary

The number of shares issued
Total Issuance
Allotment
Due date of the payment

1st 50 million shares
2nd 210 million shares
1st 24 million U.S. Dollars
2nd 78 million U.S. Dollars
OCI Company Ltd.
1st October 7, 2016
2nd May 31, 2017

(Ownership share after issue : 83.5%)(Ownership share after issue : 49.3%)(5) Number of Shares to be transferred, Transfer Price, the Status of Shares before and after the Transfer, and loss on
Transfer

The number of shares owned
before change
The number of shares to betransferred
Transfer price
Assigned value
The number of shares owned
after change

252,356,839 shares(Ration of voting rights after the 2nd
third-party allotment of the New
Shares : 49.3% )252,356,839 shares
98 million U.S. Dollars
0 share(Ration of voting rights : 0.0%)(6) Impact on Profit and Loss of the Company
Impact on profit and loss of the Company caused by the completion of the transaction of share transfer is now underevaluation.

Tokuyama Corporation Annual Report 201776

(7) Timetable

Date of resolution by the Boardof Directors of the Company
on share transfer
Date of concluding the sharetransfer agreement
1st payment due date ofthird-party allotment of the
New Shares by OCI Company
Ltd.
2nd payment due date ofthird-party allocation of sharesby OCI Company Ltd.
Date of executing sharetransfer

September 28, 2016
September 29, 2016
October 7, 2016

May 31, 2017
May 31, 2017

3. Period-end Cash Dividend for the Fiscal Year Ended March 31, 2017
The decision not to pay a period-end cash dividend for the fiscal year ended March 31, 2017 was approved at theCompany’s Ordinary General Meeting of Shareholders held on June 23, 2017.

29. ANNEXED CONSOLIDATED DETAILED SCHEDULES(1) Schedule of bonds payable

Millions of yen
Company

Issue

Date ofIssuance

Interest
rate collateral the term of redemption

Tokuyama

20th unsecured bonds March 10,
without collateral
2010

1.760% No

March 10, 2020

Tokuyama

22nd unsecured bonds September
without collateral
9, 20101.478% No

September 9, 2020

Tokuyama

23rd unsecured bonds September
without collateral
8, 20110.575% No

September 8, 2016
The amounts to beredeemed within 1 year

24th unsecured bonds September
without collateral
8, 2011Total－
The amounts to be redeemedwithin 1 year
Tokuyama

1.371% No

September 8, 2021

－

－

－

2017

2016

2017

10,00010,00089,28515,00015,000133,928-

10,000--10,000-9,400
34,4009,400
44,40083,928307,142-

10,000-(Note) Amounts of redemption within five years after the consolidated balance sheet date are as follows:Year ending March 31
2018
2019
2020
2021
2022
Thereafter
Total

Tokuyama Corporation Annual Report 2017

77

Thousandsof U.S.
Dollars

Millions of yen

Thousands of
U.S. Dollars

10,00015,0009,400
34,40089,285
133,928
83,928307,142(2) Schedule of loans payable

Short-term loans payable (1.78%)
Current portion of long-term loans payable (0.67%)
Current portion of lease obligations
Long-term loans payable, due in 2018-2074 (1.77%)
Lease obligations, due in 2018-2023
Total

Millions of yen
2017
2016
2,138
9,382
15,235
17,036577
356
160,555
172,877
1,787
931
180,294
200,583

Thousands of
U.S. Dollars
2017
19,091
136,0295,156
1,433,533
15,957
1,609,768(Note 1) “Average interest rate” shows the weighted average interest rate on the ending balance of loans payable, etc.
(Note 2)The average interest rate on lease obligations is not presented because lease obligations are recorded at theamount before deduction of the amount equivalent to interest included in total lease payments, in the consolidatedbalance sheets.
(Note 3)The amounts of long-term loans payable and lease obligations (excluding current portion of them) to be repaid
within five years after the consolidated balance sheet date are as follows:

Long-term loans payableYear ending March 31
2019
2020
2021
2022
Total
Lease liabilities
Year ending March 31
2019
2020
2021
2022
Total

Millions of yen

Thousands of
U.S. Dollars

19,70815,337
18,967
12,362
66,375

175,972
136,938
169,352
110,375
592,638

Millions of yen

Thousands of
U.S. Dollars

555
470
348
257
1,632

4,962
4,204
3,113
2,297
14,578(3) Schedule of asset retirement obligations
Information is omitted since the amounts of asset retirement obligations at the beginning and end of the fiscal year
under review are 1% or less of the total of liabilities and net assets at the beginning and end of the fiscal year underreview.

Tokuyama Corporation Annual Report 201778

(4) Others
Quarterly information for the fiscal year ended March 31, 2017

【Millions of yen】
Accumulated period
Net sales (Millions of yen)
Profit before income taxes (Millions of yen)
Profit attributable to owners of parent(Millions of yen)
Net income per share (yen)Accumulated period

1Q

2Q

73,1638,900

142,593
20,414Current
consolidate
d fiscal year
218,100
299,106
29,73038,525

5,545

18,44924,86652,165

15.91

52.28

70.01

147.781Q

Net income per share (yen)

3Q

2Q

15.91

3Q

36.37

4Q

17.73

77.78

【Thousands of U.S. Dollars】
Accumulated period

1Q

Net sales (Thousands of U.S. Dollars)Profit before income taxes(Thousands of U.S. Dollars)Profit attributable to owners of parent(Thousands of U.S. Dollars)
Net income per share (Dollars)
Accumulated period

1,273,157

79,467

182,274

265,454

343,980

49,512

164,724

222,024465,763

0.14

0.47

0.63

1.32

2Q
0.14

79

Current
consolidate
d fiscal year
1,947,330
2,670,594
3Q

653,245

1Q

Net income per share (Dollars)

Tokuyama Corporation Annual Report 2017

2Q

3Q
0.32

4Q
0.16

0.69

Tokuyama Corporation Annual Report 201780

Tokuyama Corporation Annual Report 201781

Business Locations
JAPANTokyo Head Office
FRONT PLACE AKIHABARA, 7-5, Sotokanda 1-chome, Chiyoda-ku, Tokyo 101-8618, Japan
TEL: +81-3-5207-2500
FAX: +81-3-5207-2580
Domestic Offices:
Osaka, Hiroshima, Takamatsu, Fukuoka, Sendai, Nagoya, Shunan
Tokuyama Factory [Registered Address]
1-1, Mikage-cho, Shunan, Yamaguchi 745-8648, Japan
TEL: +81-834-34-2000
FAX: +81-834-33-3790
Kashima Factory
26 Sunayama, Kamisu, Ibaraki 314-0255, Japan
TEL: +81-479-46-4700
FAX: +81-479-46-1933
Tsukuba Research Lab
40 Wadai, Tsukuba, Ibaraki 300-4247, Japan
TEL: +81-29-864-6000
FAX: +81-29-864-6050

Asia/Oceania
Tokuyama (Shanghai) Co., Ltd.
1003, Shanghai International Group, Mansion, 511 WeiHai Road, Shanghai China 200041
TEL: +86-21-6218-1177
FAX: +86-21-5382-2894
Tokuyama Trading (Shanghai) Co., Ltd.
1003, Shanghai International Group, Mansion, 511 WeiHai Road, Shanghai China 200041
TEL: +86-21-6218-1177
FAX: +86-21-5382-2894
Tokuyama Chemicals (Zhejiang) Co., Ltd.
No.555 Yashan West Road, Economic Development Zone, Zhapu Port, Jiaxing, Zhejiang China 314201
TEL: +86-573-8552-7887
FAX: +86-573-8552-3355
http://www.tokuyama.net.cn/
Shanghai Tokuyama Plastics Co., Ltd.
138 Xintao Road, Qingpu Industrial Zone, Shanghai China 201707
TEL: +86-21-5970-5669
FAX: +86-21-5970-3756
http://www.tokuyama.com.cn/
Tianjin Tokuyama Plastics Co., Ltd.
Building 2, No.1, XEDA North 3rd Road, Xiqing Economic Development Area, Tianjin China 300385
TEL: +86-22-8720-2155
FAX: +86-22-8720-2156
Tokuyama Korea Co., Ltd.
#415 Korea Air City Terminal Bldg., 22, Teheran-ro 87-gil, Gangnam-gu, Seoul 06164, Korea
TEL: +82-2-517-3851
FAX: +82-2-517-3856
Hantok Chemicals Co., Ltd.
26th Fl., Glass Tower Bldg., 534, Teheran-ro, Gangnam-gu, Seoul 06181, Korea
TEL: +82-2-6974-4895
FAX: +82-2-6974-4899

Tokuyama Corporation Annual Report 201782

Taiwan Tokuyama Corporation(Head Office, Factory)
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(Taipei Branch)
70-3F-1 Min Chuan West Road, Taipei 104, Taiwan, R.O.C.
TEL: +886-2-2563-2340
FAX: +886-2-2522-2042
salesttc@tokuyama.com.tw
Tokuyama Asia Pacific Pte. Ltd.
61 Robinson Road, #14-02 Robinson Centre Singapore 068893
TEL: +65-6533-5258
FAX: +65-6533-5256
http://www.tokuyama-asia.com/
Tokuyama Electronic Chemicals Pte. Ltd.
21 Gul Road, Singapore 629355
TEL: +65-6862-1081
FAX: +65-6862-1267
Tokuyama Nouvelle Calédonie S.A.
Pointe Kuari, Baie de Numbo - BP 310 98845 NOUMÉA, Nouvelle Calédonie
TEL: +687-24-32-95
FAX: +687-28-18-12
http://www.tokuyama.nc/

AmericaTokuyama 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
http://www.tokuyama-a.com/

EuropeTokuyama Europe GmbH
Berliner Allee 38, 40212 Düsseldorf, Germany
TEL: +49-211-1754480
FAX: +49-211-357379
http://www.tokuyama-europe.com/

Tokuyama Corporation Annual Report 201783

Major Subsidiaries and Affiliates(As of March 31, 2017）

Company

Capital(millions ofyen)

Ownership
(%)

Scope

Chemicals
Shin Dai-ichi Vinyl Corporation

2,000

71.0

Production and sale of polyvinyl chloride

Tokuyama & Central Soda Inc.

10

65.0

Sale of soda ash and calcium chloride

Sun Arrow Kasei Co., Ltd.

98

100

Production and sale of polyvinyl chloride compounds

Tokuyama Siltech Co., Ltd.

200

100

Production and sale of layered sodium silicate

Tokuyama Chemicals (Zhejiang) Co., Ltd.

CNY
377 million

100

Production and sale of fumed silica

Tokuyama-Dowa Power Materials Co., Ltd.

250

65.0

Production and sale of aluminum nitride

100

Production and sale of high purity chemicals forelectronics manufacturing

100

Production and sale of high purity chemicals forelectronics manufacturing

Category also includes another 4 affiliates
Specialty Products

Taiwan Tokuyama Corporation

SGD
11,000thousandTWD
200 million

Tokuyama Malaysia Sdn. Bhd.

7,818

83.5

Production and sale of polycrystalline silicon*Hantok Chemicals Co., Ltd.

KRW
4,500 million

50.0

Production and sale of photoresist developer

Tokyo Tokuyama Concrete Co., Ltd.

80

99.9

Production and sale of ready-mixed concrete andconcrete products

Hiroshima Ready Mixed Concrete Co., Ltd

100

67.2

Production and sale of ready-mixed concrete

Seibu Tokuyama Ready Mixed Concrete Co., Ltd.

100

100

Production and sale of ready-mixed concrete

40

100

Production and sale of ready-mixed concrete

Kyushu Tokuyama Ready Mixed Concrete Co., Ltd.

50

100

Production and sale of ready-mixed concrete

Chugoku Ready Mixed Concrete Co., Ltd.

80

52.3

Production and sale of ready-mixed concrete

Notsuharu Co., Ltd

3

100

Production and sale of ready-mixed concrete

Tokuyama Tsusho Trading Co., Ltd.

95

100

Sale of cement and ready-mixed concrete

Kansai Tokuyama Trading Co., Ltd.

80

100

Sale of cement and ready-mixed concrete

Tokusho Co., Ltd.

40

100

Sale of cement and ready-mixed concrete

Tokushin Co., Ltd.

40

100

Sale of cement and ready-mixed concrete

Tokuyama Electronic Chemicals Pte. Ltd.

Category also includes another 1 consolidated subsidiary
CementKawasaki Tokuyama Ready Mixed Concrete Co.,Ltd.

Tokuyama Mtech Corporation

50

100

Processing and sale of building materials

Tokuyama Nouvelle Calédonie S.A.

XPF
210 million

75.3

Production and sale of cement*Yamaguchi Eco-tech Corporation

90

50.0

Recycling business of incinerated ash of wastes

Category also includes another 4 consolidated subsidiaries, 4 equity method affiliates and 13 affiliates
Life & Amenity
Shanghai Tokuyama Plastics Co., Ltd.
Tianjin Tokuyama Plastics Co., Ltd.
Sun•Tox Co., Ltd.

Tokuyama Corporation Annual Report 2017

CNY
85 million
CNY
129 million

100

Production and sale of microporous film

100

Production and sale of microporous film

300

80.0

Production and sale of polyolefin films

84Company

Capital(millions ofyen)

Ownership
(%)

Scope

A&T Corporation

577

40.2

Production and sale of diagnostic reagents, analyzers
and systems

Tokuyama Dental Corporation

100

100

Production and sale of dental and medical materials

ASTOM Corporation

450

55.0

Production, sale and maintenance of ion-exchange
membranes and related equipment

Excel Shanon Corporation

495

100

Production and sale of plastic window sashes

Tohoku Shanon Co., Ltd.

300

72.0

Production of plastic window sashes* Figaro Engineering Inc.

99

33.4

Production and sale of sensor devices

100

Sale of Tokuyama’s products

100

Sale of Tokuyama’s products

100

Sale of Tokuyama’s products

100Management company to provide services for othergroup companies in China

Category also includes another 3 consolidated subsidiary
Other
Tokuyama Asia Pacific Pte. Ltd.
Tokuyama Europe GmbH
Tokuyama Trading (Shanghai) Co., Ltd.
Tokuyama (Shanghai) Co., Ltd.

SGD
800
thousandEUR
255
thousandCNY
5 million
CNY
12 million

Tomitec Co., Ltd.

100

60.0

Production and sale of plastic molded products

Shunan System Sangyo Co., Ltd.

100

100

Real estate, civil engineering, construction

Shunan Swimming Club Corporation

50

100

Swimming and othermaintenance / promotion

Tokuyama Logistics Corporation

100

100

Transportation and warehousing

Tokuyama Information Service Corporation

20

100

Information processing services

Shunan Bulk Terminal Co., Ltd.

150

72.2

Warehouse operations for bulk cargoes of coal etc.

* CoorsTek Tokuyama Corporation

100

30.0

Production and sale of ceramics and electrochemical
products* Tokuyama Polypropylene Co., Ltd.

100

50.0

Production and sale of polypropylene* Nishinihon Resicoat Co., Ltd.

50

50.0

Production of metal parts and anti-rust surface coating
materials

Category also includes another 3 consolidated subsidiaries and 1 affiliates*Equity method affiliates

Tokuyama Corporation Annual Report 201785

sportstraining,

healthCorporate Data and Stock Information(As of March 31, 2017)

Composition of Shareholders
Company Name:

Tokuyama Corporation

Established:

February 16, 1918

Capital:¥10,000 million

Employees:

5,406 (Consolidated)

Fiscal Year:

From April 1 to March 31

General Meeting of
Shareholders:

June

Stock Listing:Tokyo

Minimum Number of
Shares per Trade:

1,000 shares

Stock:

4043

Major Shareholders
Number of Shares Held(Thousands)

Percentage ofTotal Shares

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

31,695

9.06

Japan Trustee Services Bank, Ltd. (trust account)

15,608

4.46

Nippon Life Insurance Company

10,874

3.10

The Yamaguchi Bank, Ltd.

8,246

2.35

Meiji Yasuda Life Insurance Company

7,442

2.12

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

7,095

2.02

Sojitsu Corporation

6,484

1.85

Japan Trustee Services Bank, Ltd. (trust account 5)

5,985

1.71

Sumitomo Metal Mining Co., Ltd.

5,904

1.68

Mitsubishi UFJ Trust and Banking Corporation

5,852

1.67

Name

Stock Chart

Tokuyama Corporation Annual Report 201786

Tokuyama Corporation Annual Report 201787

Tokuyama Corporation Annual Report 201788