FY2008-2010 Medium-Term Management Plan

March 26, 2008

To Our Stakeholders

Tokuyama celebrated the 90th anniversary of its establishment on Feb. 16, 2008.
We would like to thank all our stakeholders for their warm
support which helped us attain our 90th year. We will carry amanagement policy, “Venture Spirit & Innovation,” toward ourCentennial into execution with a fresh spirit.
We would like to explain our Centennial Vision and new medium-term
management plan as the first step toward our Centennial.

ContentsⅠ． Review of the Previous Medium-Term Management Plan
Ⅱ． CENTENNIAL VISIONⅢ． Outline of a New Medium-Term Management Plan

Ⅰ. Review of the Previous Medium-Term Management Plan

Theme
“Promote advance investment of management resources while also maintaining
the upward profit trend”

Growth Strategies“Promote Business growth, Functional growth and Infrastructure growth”

Business Growth

Classify our businesses as “attack,” “defend” and “innovate” business

Implement Volume/Quality growth for each businessⅠ. Review of the Previous Medium-Term Management Plan

Main Results of the Previous Plan

成 長 戦 略Completion of electrolysis S&B, Launch of fumed silica operations
Volume/ Quality Growthin China, Decision and start of polysilicon expansion, Accelerationof verification test to establish the VLD method, Establishment ofTD Power Material

Start of the Skills education & training center, Introduction ofbalanced scorecard, Establishment of Management Support Center
Functional Growthand CSR Division, Start of Himawari (Sunflower) Committee forinternal control

Reinforcement of berth for imported salt, Fuel changeover of No.7
Infrastructure Growth boiler, Acquisition of reclaimed land, Start of assessment for a newpower station, Establishment of ERP Promotion Division

Ⅰ. Review of the Previous Medium-Term Management PlanTargets

FY2007 (Forecast)■More than ¥260 billion¥309 billion

Operating Margin

Higher than 10%

11.3%

Operating Margin before depreciation

Higher than 18%

18.3%

R O A■

Higher than 3.0%

5.2%

■NetSales

Numerical targets are
expected to be achieved

StrongStrongperformance
performanceofofthe
theelectronic
electronicmaterials
materialsbusinessbusiness
Price
Pricerevisions
revisionsand
andcostcostreduction
reductionininresponse
responsetotorisingrisingraw
rawmaterials
materialsand
andfuelfuelprices
pricesBecoming
Becomingdifficult
difficulttotomaintain
maintainprofitability
profitabilitythroughthroughpricepricerevisionsrevisionsand
andcostcostreduction
reduction

New Issues

・・Securing
Securingthe
thesamesamelevel
levelofofbusinessbusinessscale
scaleasasotherotherleading
leadingcompanies
companies
andandprofit
profitgrowth
growthiningrowth
growthbusinesses
businesses
・・Maintaining
Maintainingand
andimproving
improvingprofit
profitlevels
levelsininother
otherbusinesses
businesses

Ⅱ. CENTENNIAL VISION

Our ideal image“A manufacturing company that creates a brighter future
through vitality of human resources and creativity of chemistryin harmony with society”

Numerical Targets
Net Sales
More than ¥500 billion
Operating Margin
Higher than 15%Overseas Sales Ratio
Higher than 30%・Toward
・Toward aa company
company thatthat isis equal
equal toto
globally
globally competitivecompetitive companies
companies
・This・This goal
goal cannot
cannot be
be achievedachieved without
withoutchangingchanging ourour present
present businessbusiness structure,structure,but
but cancan be
be achievedachieved by
by “Venture“Venture Spirit
Spirit &&Innovation.”
Innovation.”Ⅱ. CENTENNIAL VISION

Key Word
Basic Strategies“Venture Spirit & Innovation”“Strengthening of Strategically Growing Businesses”
l“Strengthening of International Competitiveness”

Principle“Promotion of CSR”

Basis

“Human resources”

Basic strategies image

Foundations of Basic Strategies

Business Categories
Strategically Growing Businesses
Growing Materials
Business

Si business

Growing Components
Business
Figaro Engineering,
Tokuyama Dental, etc.

Newbusiness

Advanced Materials
Foundation Business

CementChemicals

Independent Components
Business

Sun・Tox, A&T,Shanon, etc.

Ⅱ. CENTENNIAL VISION【Basic Strategy1】 Strengthening of Strategically Growing Businesses
Strengthening of Growing Materials/ Components Businesses
Business (e.g.)
Polycrystalline silicon

Operating environment

Stable growth of application to Developingsemiconductor
production bases
Rapid growth of solar cells
Increasing new comers into
the market

Fumed silica

MeasuresEstablishingcompetitive processes

Expanding supply
Rapid growth of application to capacity
Improvement ofCMP
profitability

Growth of application tosilicone

Goal

Maintaining theworld’s leading
position

No.1 in Asia

Expanding bases inChina

Fine chemicals

Increasing adoptions ofphotochromic dye materials

Expanding strategic
alliances拡
Acceleration ofoverseas development

The world’s No.1
in niche markets

Ⅱ. CENTENNIAL VISION【 Basic Strategy1 】
Strengthening of StrategicallyGrowing Businesses
Creation of New Businesses

TechnologicalPlatform

Environment & Energy

Electronic materials
and components

New
Business

New
Business

New
Business

New BusinessTechnology
Introduction,
M&A

R&D,e.g.：Membrane forI
fuel cells

New
Business

New Business

New
Business

Business Planninge.g.：Stepper lens materials

Ⅱ. CENTENNIAL VISION【 Basic Strategy 2 】 Strengthening of International CompetitivenessStrengthening our Mother Factory (Tokuyama Factory)
C2’ C3’

IPA

EDC

Cl2

ShunanComplex

VCM

PVC

Consider structural reform
Restriction by balance

Chloromethanes
Electrolysis

Causticsoda

Polysilicon

H2SaltInsidewaste

Power Station
Soda ash

Outsidewaste

Rapidly changing
operating environment

PO

CementGanister

Limestone

Coal

Fumed silica
CO2

Metallic
siliconEstablish highly profitable structure by responding
to rapidly changing operating environment－Promote－Promoteenergy
energysavingsaving－Utilize－Utilizethe
thelarger
largeramountamountofofwaste
waste－Consider－ConsiderM&A,M&A,alliances
alliancestotolower
lowerexposure
exposure
ofofproducts
relatedtointegrated
operations
products related to integrated operations
totofluctuations
fluctuationsininraw
rawmaterials/materials/fuelfuelprices
prices－Share－Shareinformation
informationandandsave
savelaborlaborthroughthroughconsolidating
consolidatinginstrument
instrumentrooms,rooms,etc.
etc.
－Considerbusinessvalueevaluation－Consider business value evaluationsystems
systems

Ⅱ. CENTENNIAL VISION【 Basic Strategy 2 】 Strengthening of International Competitiveness

Execute structural reform byVenture Spirit & Innovation!

Build new production bases, while making themost of Tokuyama Factory as the mother factory

Ⅱ. CENTENNIAL VISION

Foundations to realize sustainable growth

Promotion
PromotionofofCSR
CSR
・Enhance evaluation from our stakeholders properly・ Realize permanence of the company
Corporate governanceComplianceInternal control

Human
HumanResources-based
Resources-basedManagement
Management・Maximize vitality of human resources through enhancing employees’ motivation
・Realize global business growth through nurturing human resources
Innovation

Efficient assignment

Securing & Nurturing

Ⅲ. Outline of a New Medium-Term Management Plan

New Medium-term Management Plan in the Road to Centennial
The first step toward Centennial Vision

Start ofnew medium-term
management plan

FY2008

Next medium-term
management plan

Medium-term
management plan
after next

Centennial Vision

Centennial of our establishment
FY2011Growth strategies in
new medium-term management plan・Selection & Concentration for Attacking
・Strengthening of Competitiveness throughl Productivity Improvement
・Creation of New, Globally Competitivel Businesses

FY20142018
Basic strategies for Centennial Vision
・Strengthening of Strategically Growing
llllllllllll

Businesses

・Strengthening of Internationalllllllllllll

CompetitivenessⅢ. Outline of a New Medium-Term Management Plan

Growth Strategy1
Selection & Concentration for Attacking
Business category
Growing Materials
Business(Si, Advanced materials)

Growing Components
Business(Advanced materials, FigaroIssues

Direction

Holding and raising the market shares
Improvement of production process efficiency

Scale expansion

Improvement of profitability

Engineering, Tokuyama Dental, etc.)

Foundation Business(Cement, Chemicals)

Optimum utilization ofmanagement resources
Improvement of profitabilityof integrated operations

Independent
Components Business Enhancement of presence(Sun-Tox, Shanon, A&T, etc.)

Selection &Efforts andConcentration,decision-making
Alliances, etc.

Ⅲ. Outline of a New Medium-Term Management Plan

Growth Strategy 2Strengthening of Competitiveness through Productivity Improvement

CategoryIssues

Manufacturing
Infrastructure

Restructuring of integrated operations
The most suitable locations for production

Information
Infrastructure

Enhancing the level of managerial control
Improvement of productivity in
manufacturing and office work departments

Direction

Selection &Concentration,
Labor saving/
Improvement ofefficiency

Ⅲ. Outline of a New Medium-Term Management Plan

Growth Strategy 3
Creation of New, Globally Competitive Businesses
ThemeIssues

Development themes enteringcommercial stages(VLD, CF-10)

Make it realized that VLD, CF-10, etc. which
already have reached commercial stages willcontribute to profits ASAP

Medium- to long-term
development themes

Nurture medium- to long-term themes, such as
electrolyte membranes for fuel cells and singlecrystal aluminum nitride

Themes in fields related to
strategically growingbusinesses

Nurture promising business themes in the fields
related to growing businesses (electronicmaterials/components, energy & environment) incollaboration with business planningⅢ. Outline of a New Medium-Term Management Plan

Building Systems for Growth Strategies

・Consider governance systems in a time of change

・Optimum assignment of human resources, with quickness
・Globally competitive HR development
・Promote “transparent approaches” in measures to achieve our objectives(Full utilization of the balanced scorecard)

Ⅲ. Outline of a New Medium-Term Management Plan

Final Targets under the New Plan

FY2007 (Forecast)

Final FY Targets■¥309 billion

More than ¥ 370 billion

Operating Margin

11.3%

Higher than 12%

Overseas Sales Ratio

18.5%

Higher than 22%■Net Sales※Overseas sales ratio in FY2007：Results in the 3rd Quarter are used.

Basis for the Plan
・Exchange Rate
・Domestic Naphtha Price¥110/$¥66,000/kl

Ⅲ. Outline of a New Medium-Term Management Plan

Capital Expenditures(Consolidated)

Allocation
Allocation

Others16%

New facilities
Rationalization 2%
expansion/ sales
expansion
R&D 6%
Total (3 years) 35%
Maintenance/renewal ¥150 billion
16%
Infrastructure 25%

Ⅲ. Outline of a New Medium-Term Management Plan

R&D Investment(Consolidated)

BusinessBusinesscategories
categories

New Fields 38%

Growing Materials
27%

Total (3 years)¥40 billion
Independent Components 5%

Foundation Business 6%

Growing Components
24%

Ⅲ. Outline of a New Medium-Term Management Plan

Interest-bearing Debt
Consider taking advantage of interest-bearing debt as far as healthy financial condition
can be maintained.
Interest-bearing debt
（ Ybn）

D/E ratio

1.6

200

1.54
1.31

1.4
1.2

164

1.31
1.18

159

0.8

180

D/E ratio

160
140

149
131

1.0

Interest-bearing debt

0.84

120
100

0.66

D/E ratio＝0.45

104

0.6

89

0.4

83

72

67

80
60

0.47

0.2

0.37

40

0.33

0.0

20
0

00/3

01/3

02/3

03/3

04/3

05/3

06/3

07/3

※D/E ratio is calculated by dividing gross interest-bearing debt by total net assets.

07/9

Shareholder Returns

While considering our performance trends andbusiness plans, we will consider how shareholder
returns should be implemented and aim for theenhancement of their quality.

Disclaimer regarding this material• This material is supplied to provide information of our company,
and is not intended as a solicitation for investment or otheractions.
• This material was prepared by our company based on theinformation currently available, and involves uncertainties.
Therefore, we, Tokuyama Corporation, will not takeresponsibility for correctness and perfection of this material.
• We will not take responsibility for any losses or deficits caused
by decision-making of investment based entirely on projections,numerical targets and other information contained in thismaterial.