Contents
Profile2

Consolidated Financial Highlights
Segment Information

3

5

Medium-Term Management Plan

13

Message from the President

15

Research and Development

17

CSR Initiatives

20

Corporate Governance22

Business and Other Risks
Corporate Officers

27

Financial Section

29

25

Independent Auditor’s Report
Business Locations

61

62

Major Subsidiaries and Affiliates

64

Corporate Data and Stock Information

66

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 2015

1

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, and the environment and energy business, which handles polycrystalline
silicon for solar cells as well as cement, recycling and environment-related businesses.
Tokuyama's 100th anniversary is February 16, 2018. Centered on the field of chemistry, we, the Tokuyama Group, will
strive to help realize a prosperous society by creating value that enhances people’s lives.

Company History
1918～1944 Establishment and specialization in soda production
February 1918
March 1938
January 1940

Nihon Soda Kogyo Co., Ltd. (currently Tokuyama Corporation)
was established to produce soda ash
Commenced cement business
Expansion of inorganic chemicals business

1945～1960 Further expansion of inorganic chemicals business
March 1952

Commenced electrolytic chlor-alkali business

1961～1974 Entry into petrochemicals business
July 1964
September 1966
March 1967
March 1970

Commenced petrochemicals business
Commenced polyvinyl chloride business
Commenced ion exchange membrane business
Commenced polypropylene business

1975～1989 Entry into specialty and processing business
January 1976
March 1978
February 1981
April 1982
August 1982
August 1983
December 1983
July 1984
April 1985
December 1985

Commenced polyolefin film business
Commenced dental materials and equipment business
Commenced building materials business
Commenced life-related business
Commenced fine chemicals business
Commenced IC chemicals business (high-purity chemicals
for electronics manufacturing)
Commenced medical diagnosis systems business
Commenced electronic materials business (polycrystalline silicon)
Commenced aluminum nitride business
Commenced gas sensors business1990～2004 Strengthening and restructuring of businessFebruary 1992
July 1995
August 2000

Established Sun • Tox Co., Ltd. as a joint venture for manufacture and sale of polyolefin film
Established Shin Dai-ichi Vinyl Corporation as a joint concern for manufacture and sale ofpolyvinyl chloride
Commenced recycling & environment-related business2005～ Aiming toward raising corporate value
August 2009
June 2013

Established Tokuyama Malaysia Sdn. Bhd. in Malaysia as a manufacturing and sales company ofpolycrystalline siliconStarted operation of Tokuyama Chiyoda Gypsum Co., Ltd as a joint venture for developing a waste
gypsum board recycling businessTokuyama Corporation Annual Report 20152

Consolidated Financial Highlights
Years ended March 31

Tokuyama Corporation and Consolidated Subsidiaries

Millions of yen
2006

2007

2008

2009

2010

Net sales

263,373292,764

307,453

300,999

273,154

Operating income

24,311

34,73735,32522,73816,483

Net income (loss)

13,964

18,46018,888(5,597)

7,458

Net income (loss)

52.61

67.24

68.85

(20.42)

23.52

Cash dividends

6.00

6.00

9.00

6.00

6.00

Net assets

651.64699.69725.37669.80682.03

Total assets

361,103373,745

383,264

403,613452,893

Net assets

179,024

197,811206,135

189,757

243,606

Cash flows from operating activities

25,74834,22547,69842,48029,380Cash flows from investing activities(22,758)(22,531)(25,664)(56,506)(36,468)

Cash flows from financing activities

13,155(13,836)(10,176)

29,24646,990Cash and cash equivalents at end of the year

30,99829,222

41,05755,36595,945

Capital expenditures

20,96922,65637,001

52,55026,557

Depreciation and amortization (Note 1)

18,132

18,144

21,451

22,986

37,688R&D expenses

9,396

10,756

11,161

11,872

11,817

Shareholders' equity ratio (%)

49.6

51.4

51.9

45.5

52.4

Return on equity (%)

8.9

10.0

9.7

(2.9)

3.5

Number of employees

4,630

4,852

5,057

5,295

5,444

Consolidated subsidiaries

43

44

47

46

49

Per share amounts (in yen)

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

Tokuyama Corporation Annual Report 20153

Thousands of
U.S. dollars

Millions of yen(Note2)

2011

2012

2013

2014

2015

2015

Net sales

289,786

282,381258,632

287,330

302,085

2,517,377

Operating income

20,144

13,720

6,772

20,27019,530162,754

Net income (loss)

9,765

9,351

(37,916)

10,218(65,349)(544,576)

Net income (loss)

28.06

26.87

(108.98)

29.37(187.85)(1.565)

Cash dividends

6.00

6.00

3.00

6.00

-

-

Net assets

693.18716.39625.29660.18467.36

3.894

Total assets

474,708

501,181518,251

576,315554,527

4,621,064

Net assets

247,656

255,460

223,871

236,453

169,445

1,412,045

Cash flows from operating activities

37,04327,06017,071

34,10530,772

256,437

Cash flows from investing activities(88,508)(57,666)(60,673)(64,402)(25,519)(212,664)

Cash flows from financing activities

23,994

20,791

36,46545,93940,502

337,519

Cash and cash equivalents at end of the year

68,62458,47652,431

69,973

116,122967,684

Capital expenditures

35,80777,602

97,54961,051

25,345211,212

Depreciation and amortization (Note 1)

31,47628,492

23,242

16,77018,845

157,042

R&D expenses

11,46911,704

10,076

8,709

10,156

84,638

Shareholders' equity ratio (%)

50.8

49.7

42.0

39.9

29.3

-

Return on equity (%)

4.1

3.8

(16.2)

4.6(33.3)-

Number of employees

5,493

5,506

5,651

5,756

5,852

-

Consolidated subsidiaries

50

48

49

53

54

-

Per share amounts (in yen, dollars)Note 1: Depreciation and amortization includes amortization of long-term prepaid expenses.
Note 2: U.S. dollar amounts above and elsewhere in this annual report are converted from Japanese yen, for convenience only, at the rate of ¥120=US$1.

Tokuyama Corporation Annual Report 2015

4

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, Propylene oxide and Methylene chloride

New Organic Chemicals

Isopropyl alcohol (IPA)

Group Companies

Polyvinyl chloride (PVC) [Shin Dai-ichi Vinyl Corp.]

Operating Results for the Fiscal Year ended March 31, 2015
With regard to caustic soda, sales increased compared with the previous fiscal year. In addition to steady domestic sales,
this was attributable to our efforts to revise selling prices in order to absorb a rise in raw materials prices.
Vinyl chloride monomers (VCM) sales were essentially unchanged from the previous fiscal year. While domestic sales
volumes declined, this was offset by an increase in the volume of exports where selling prices continued to hover at ahigh level due mainly to the impact of the weak yen.
Sales of vinyl chloride resin declined. Despite efforts to revise selling prices to account for the rise in raw material
prices, this decline was largely attributable to market corrections following the rush in demand in the lead up to theconsumption tax rate hike and the downturn in sales volume resulting from such factors as the slump in housing starts.

Tokuyama Corporation Annual Report 20155

With regard to soda ash and calcium chloride, sales increased compared with the previous fiscal year. This was
attributable to the commencement of the operation of TOKUYAMA & CENTRAL SODA Inc.
As a result of the above, segment net sales increased 6.3% compared with the previous fiscal year, to ¥91,927 million
and operating income increased 126.1% to ¥5,056 million. The segment reported higher earnings on higher sales.

Strategies going forward
In addition to recording stable profits and providing the underlying strength to support the Company’s earnings as awhole, we will work toward further growth by reviewing the business portfolio. To achieve this end, we will undertakethe following priority measures.
■Soda Ash and Calcium Chloride BusinessTokuyama reached an agreement with Central Glass Co., Ltd. to transfer and consolidate marketing activities inconnection with the sales of soda ash and calcium chloride. As a part of this agreement, a joint-venture business,
TOKUYAMA & CENTRAL SODA Inc. was established in March 2014. With this initiative, the production of soda ash
in Japan from June 2015 has been consolidated under Tokuyama as a single company structure. Looking ahead, every
effort will be made to build a stable sales platform and to improve business profitability.
■Chlor-Alkali and Vinyl Chloride Business
The production of liquid hydrogen began at Yamaguchi Liquid Hydrogen Corporation, a joint venture formed with
Iwatani Corporation, in June 2013. In addition to rocket fuel, liquid hydrogen is used in the manufacture of solar cells
and LEDs. Looking ahead, demand is projected to expand substantially as use is extended to such areas as fuel-cell
powered vehicles. While liquefaction capacity currently stands at 3,000L/h, sights are being set on enhancing capacity.
Shin Dai-ichi Vinyl Corporation has decided to close its Chiba factory, which manufactures vinyl chloride, at the end of
September 2015. At the same time, Shin Dai-ichi Vinyl will endeavor to rebuild a production and shipment structurethat entails the consolidation of production at the more competitive Tokuyama factory. These initiatives are consistent
with efforts to undertake a drastic reform its vinyl chloride business profit structures.

Tokuyama Corporation Annual Report 2015

6

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, copier toner and other applications. Aluminum nitride,
which boasts excellent heat dissipation properties, is used forsemiconductor 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 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
Polycrystalline silicon [Tokuyama Malaysia Sdn. Bhd.]

Group Companies

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

Operating Results for the Fiscal Year ended March 31, 2015
With regard to semiconductor-grade polycrystalline silicon, sales volume increased owing mainly to strong demand formobile terminals including smartphones. On the other hand, with regard to solar cell-grade polycrystalline silicon, theCompany’s consolidated subsidiary Tokuyama Malaysia Sdn. Bhd. commenced shipments of solar cell-grade
polycrystalline silicon under circumstances where demand for solar panels continued to expand. As a result of the above,sales of polycrystalline silicon increased compared with the the previous fiscal year.
With regard to fumed silica, sales were steady, mainly of its application as a polishing material for semiconductors. As aresult of this, sales increased compared with the previous fiscal year.
With regard to aluminum nitride, sales increased compared with the previous fiscal year. This was attributable to anincrease in sales volumes of such applications as heat dissipation materials used for power devices for industrial
machinery and LEDs.
With regard to high-purity chemicals for electronics manufacturing, sales increased compared with the previous fiscal
year, owing to strong sales of such applications as semiconductor and liquid crystal production.

Tokuyama Corporation Annual Report 20157

As a result of the above, segment net sales increased 5.7% compared with the previous fiscal year, to ¥55,450 million,
26.8%
while operating income decreased 32.3% to ¥4,122 million. The segment reported lower earnings on higher sales.

Strategies going forward

16.3%

We will promote a sales strategy that fully addresses changes in the operating environment including customer needs
and market conditions and build and optimal production structure.
■Electronic Materials Business (Polycrystalline Silicon)
In the semiconductor-grade Polycrystalline Silicon Business, demand for higher levels of quality is increasing each year
in line with higher levels of semiconductor performance (miniaturization). Steps will be taken to further strengthen
relationships with customers and to expand transactions by establishing an optimal production structure that addresses
this demand and the need to further enhance quality at Tokuyama Factory, which manufactures semiconductor-grade
polycrystalline silicon.
While Tokuyama Malaysia has continued with efforts to establish a second production plant for the manufacture ofsemiconductor-grade polycrystalline silicon, an amount totaling ¥85.7 billion in impairment losses and related expenses
was posted as an extraordinary loss for the fiscal year ended March 31, 2015 in connection with Tokuyama Malaysia
PS-1, which failed to secure the initially anticipated quality and production stability. Looking ahead, energies will bechanneled toward finding alternative uses for the plant including the shift to solar-grade polycrystalline silicon
production.
The manufacture and sale of solar-grade polycrystalline silicon began at Tokuyama Malaysia PS-2 in October 2014. At
the time of periodic maintenance planned for fall of 2015, improvements were made to correct defects. Plans are now inplace to secure full-fledged operations in fiscal 2016 and profitability in fiscal 2017.
■Fumed Silica BusinessWe will work toward optimizing business operations of fumed silica, a co-product with polycrystalline silicon, at thetwo bases of Tokuyama Factory and Tokuyama Chemicals (Zhejiang) Co., Ltd. A portion of the annual production of
2,000 tons of surface treatment-grade fumed silica, which is exhibiting notable growth in the Asian market andparticularly in China, undertaken at Tokuyama Factory was transferred to Tokuyama Chemicals (Zhejiang) Co., Ltd.
operations commenced from June 2015.
Steps will be taken to pursue increased highly functional product lineup differentiation at Tokuyama Factory targeting
the CMP, toner, and electronics materials fields, and to strengthen the earnings structure.
■Shapal Business (Aluminum Nitride)
In order to address robust demand in the power device, LED, and semiconductor equipment fields, successful efforts
were made to expand aluminum nitride powder manufacturing facilities (annual production from 320 tons to 480 tons)
and to start production from March 2015. In the future, we will upgrade and expand our filler application and otherproduct lineups targeting the heat sink market, which is expected to enjoy continuous demand growth, and promote theestablishment of a structure that is capable of providing optimal heat sink materials.

Tokuyama Corporation Annual Report 20158

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 a various types of building material products including
cement-type products and mortar-type products. Moreover, the Cement segment strives to develop products that cancreate new business possibilities. For example, FL Tokuyama Corporation has applied Tokuyama's proprietary plastersheet-making technology to develop interior design materials and Fresco Giclee, a plaster-coated paper for inkjet
printers.
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, 2015
In the cement business, total sales volumes declined slightly year on year. Despite an increase in exports mainly to Asia,
which is exhibiting firm demand, this downturn was primarily due to labor shortages in the construction industry inJapan and delays in construction work caused by unseasonably bad weather. On the cost front, distribution costs
increased due largely to the construction of new cement tankers.
In the recycling and environment-related business, the Company accepted a lower volume of waste owing mainly to adrop in the volume of clinker ash production.
With regard to consolidated subsidiaries, sales increased compared with the previous fiscal year, mainly because
Hiroshima Tokuyama Ready Mixed Concrete Co., Ltd. launched its operations.
As a result of the above, segment net sales increased 2.8% compared with the previous fiscal year, to ¥81,219 million,
while operating income decreased 33.5% to ¥4,446 million. The segment reported lower earnings on higher sales.

Tokuyama Corporation Annual Report 20159

Strategies going forward
We will put in place an optimal production, sales, and distribution structure that is capable of addressing changes in thebusiness environment while cultivating and strengthening overseas as well as new businesses. To achieve this end, we
will undertake the following priority measures.
■Cement Business
From a production perspective, we will cutback costs by focusing on efforts aimed at reducing the use of burning coaland increasing the use and intake of combustible waste. In our overseas business, we will establish a clinker export
structure and expand the volume of exports with an eye on also recommencing operations at idle kilns.
Tokuyama Mtech Corp., which is engaged in the infrastructure maintenance and reinforcement business, established theMetropolitan Cement Building Materials Development Center in Sodegaura City, Chiba Prefecture and commenced
operations from January 2015 in order to put in place a product development structure that works in close collaboration
with users. We will work to expand business in the infrastructure maintenance field, which is projected to experience
demand growth.
■Recycling and Environment-related Business
Building on its Yokkaichi factory, which came online in 2013, Tokuyama Chiyoda Gypsum Co., Ltd., which is active inthe recycling of waste gypsum boards, commenced construction of a Kanto factory in Sodegaura City, Chiba Prefecture.
Operations are scheduled to begin in May 2016. For the most part, the growing volume of waste gypsum board is
subject to landfill disposal. As a result, recycling is a major issue. In addition to solving a major social issue, thisinitiative is also expected to provide gypsum board makers with a valuable source of supply of raw material gypsum.
Plans are in place to expand the business on a nationwide basis going forward.

Tokuyama Corporation Annual Report 201510

LIFE & AMENITY
The Life & Amenity segment oversees Group companies
manufacturing and selling polyolefin films, plastic window sashes,
medical diagnosis systems, dental materials and equipment, gassensors, ion exchange membranes and other products, and is also incharge of Tokuyama's fine chemicals business and NF business. 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

Plastic lens-related materials, Active pharmaceutical ingredients and intermediates

NF

Microporous film

Group Companies

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

Operating Results for the Fiscal Year ended March 31, 2015
Sales of active pharmaceutical ingredients grew owing to increased sales volumes of generic pharmaceuticals and otherapplications. As a result of this, sales increased compared with the previous fiscal year.
With regard to plastic lens-related materials, sales volumes of photochromic dye materials increased. As a result of this,sales increased compared with the previous fiscal year.
With regard to microporous film, the manufacturing facilities of Tianjin Tokuyama Plastics Co., Ltd. commenced
operations, and due to this, sales volumes of such applications as sanitary articles including disposable diapers increased.
As a result of this, sales increased compared with the previous fiscal year.
With regard to polyolefin film, in addition to steady sales mainly of its application as packaging material for everyday
items at convenience stores, we revised selling prices to absorb a rise in raw material prices. As a result of the above,sales increased compared with the previous fiscal year.
With regard to plastic window sashes, sales decreased compared with the previous fiscal year. This was attributable to adecrease in sales volume arising from reaction to the rush demand before the consumption tax increase.

Tokuyama Corporation Annual Report 201511

With regard to medical diagnosis systems, profitability rose compared with the previous fiscal year. In addition tosteady sales of products for blood testing, this was attributable to our cost reduction efforts including in-houseproduction.
With regard to gas sensors, sales increased compared with the previous fiscal year. This was attributable to strong
overseas sales of such applications as gas alarm devices and air cleaners.
As a result of the above, segment net sales increased 2.5% compared with the previous fiscal year, to ¥58,457 million
and operating income increased 6.1% to ¥5,159 million. The segment reported higher earnings on higher sales.

Strategies going forward
We will expand our business by establishingand strengthening a customer-oriented development, production and sales
17.7%
structure while obtaining an advantageous position in the domestic and international markets, thereby contributing to
the enhancement of people’s quality of life (QOL). To achieve this end, we will undertake the following priority
measures.
■Fine Chemicals BusinessWe will increase the number of ingredient items for generic pharmaceuticals and promote the development of a
production structure. In this manner, we will work to stabilize earnings. We will also expand our market share in
photochromic dye materials for use in eyeglass lenses by capturing new orders.
■NF Business
Addressing the rapid increase in the usage of disposable diapers, a main application of microporous films, in China andother Asian countries, we will expand microporous film manufacturing capacity of the Group’s manufacturing base inShanghai and Tianjin. We will capture rapidly growing demand steadily by promoting ties with disposable diaper
manufacturers, who possess factories in China.
■Polyolefin Film Business (Sun • Tox Co., Ltd.)We will increase profits by developing and expanding sales of new grades while reducing costs.
■Plastic Window Sash Business (Excel Shanon Corporation)
We will expand market share by strengthening alliances with building contractors and major home builders and promoteincreased use of plastic window sashes.
■Medical Diagnosis System Business (A&T Corporation)
Harnessing the strengths of blood test sensor technologies accumulated since foundation, we will increase sales bystrengthening collaboration with existing OEM partners while at the same time cultivating new relationships. We will
also work to establish a global sales network in order to secure further growth.
■Dental Materials/Equipment Business (Tokuyama Dental Corporation)
Steps will be taken to accelerate the pace of development and overseas rollout of new products focusing mainly on
composite resins (restorative materials), in which we hold a leading market share in Japan and overseas.
■Gas Sensors Business (Figaro Engineering Inc.)
We will promote the development and commercial release of the world’s smallest micro electro mechanical system typegas sensors that are projected to enjoy growing application in power devices, smartphones, and wearable terminals.

Tokuyama Corporation Annual Report 201512

Medium-Term Management Plan

Outline of the plan
Based on the key words “accelerating our growth strategies,” Tokuyama put in place a three-year plan in May 2012.
Over the period of this plan, the Company has taken steps to establish a structure that is capable of accelerating the paceof growth, and to address pending issues. Despite promoting a variety of growth-oriented strategies including efforts to
expand the polycrystalline silicon business at Tokuyama Malaysia Sdn. Bhd., as a principal component of theoverarching goal to strengthen strategically growing businesses, and to create new businesses, the results of theseendeavors have fallen short of expectations.
Under these circumstances, the new management has returned to its existing businesses and taken steps to reevaluate
the latent competitive advantage and potential of those businesses. As a part of this endeavor, the Company has put inplace the new three-year Medium-Term Management Plan 2017, which covers the period from fiscal 2015 to fiscal
2017 and identifies the key issues of strengthening business profitability, generating profits at Tokuyama Malaysia Sdn.
Bhd., and rebuilding the Company’s financial platform.
By steadfastly addressing the issues, we will revitalize the foundation of the Tokuyama Group and restore the trust of all
stakeholders over the three-year period of the plan.

[Medium-Term Management Plan 2017]

Tokuyama Corporation Annual Report 201513

Issues of the utmost priority and relevant countermeasures
Strengthen business profitability
In addition to increasing productivity and reducing costs through the exhaustive use of assets, we will also steadfastly
promote customer-oriented growth while strengthening business profitability. Through each of these initiatives, we planto achieve an increase in operating income of ¥9.2 billion compared with the fiscal year ended March 31, 2015 in the
final year of the plan.
Working to exhaustively use assets, we will push forward a variety of measures including efforts to utilize port
infrastructure, optimize distribution, and bolster plant engineering technology in order to strengthen competitiveness at
Tokuyama Factory. In addition, we will work to exhaustively use and reinforce those business assets in which theCompany maintains its strength. This will include increasing production of polycrystalline silicon for semiconductor
and restarting cement kiln operations. Moreover, we will consolidate the vinyl chloride resin business and promote
integration effects of the soda ash and calcium chloride businesses while pursuing other measures in order to rationalize
and rebuild operations to extend our strengths. Together with efforts to strengthen Factory competitiveness, we will
streamline head office functions and promote relocation to Tokuyama Factory. Energies will also be channeled toward
transforming our corporate development stance to research and development strategy that is committed to business.
Turning to customer-oriented growth, we will build on the proprietary inorganic and organic core technologies that wehave nurtured over many years and position energy-saving, the environment, and health care as priority fields. Against
this backdrop, we will engage in product development that match customer needs and differentiated technologies.
Looking ahead, we will actively pursue alliances that bolster our business and business expansion based on marketing.
Generate profits at Tokuyama Malaysia Sdn. Bhd.
After posting an impairment loss on the Tokuyama Malaysia PS-1 Plant during the fiscal year ended March 31, 2015,
we are considering various measures that will allow effective use including the transition to solar-grade polycrystalline
silicon production.
We will also look to secure optimal production at the PS-2 Plant, which manufactures solar-grade polycrystalline silicon,
through repairs conducted in line with periodic maintenance from October 2015 while improving defective areas. Plans
are therefore in place to establish a full-scale production structure. On top of this, we will step up efforts to reduce costs
through to the fiscal year ending March 31, 2017. The goals are to achieve profitable operation for the full period in the
final year of the plan and to secure an increase in operating income of ¥8.0 billion compared with the fiscal year ended
March 31, 2015.
Rebuild the Company’s financial platform
As a part of efforts to rebuild the Company’s financial platform, which underpins business growth, we will work toincrease business profits by strengthening profitability at existing businesses and cutback fixed expenses. We will also
strive to bring about a quick recovery in net assets by liquidating assets. The profits generated from these initiatives willthen be used to repay interest-bearing debt in advance with the aim of reducing interest-bearing debt by more than ¥100
billion over the three years of the plan.

Targets for the final year of the plan
Net Sales ¥335.0 billion
Operating Income ¥34.0 billion
Operating Margin 10%
Interest-Bearing Debt Reduce of ¥100.0 billions.

Tokuyama Corporation Annual Report 201514

Message from the President“Tokuyama will foster the management culture that enables us securing stable earnings.
Recognizing rebuilding our financial platform as the top priority, we will work diligently to
reinvigorate Tokuyama.”

Hiroshi Yokota, President
I would first like to express my sincerest apologies to all shareholders for the Company’s decision to forego thepayment of an interim and year-end dividend for fiscal 2014, the fiscal year ended March 31, 2015. This decision is by
no means taken lightly and is based on the significant impairment loss incurred on the polycrystalline silicon
manufacturing facilities of Tokuyama Malaysia Sdn. Bhd. together with related expenses totaling ¥85.7 billion thathave in turn resulted in a substantial deterioration in our performance for the fiscal year under review.
Against this backdrop, we have positioned year 2015 as the year in which we will adopt an unwavering stance toward
management reform. Rebuilding the financial foundation has our top priority and we are committed to taking renewed
steps to reinvigorate the Company. We will take all conceivable actions including a through cost reduction, improving
the profitability of existing businesses, review of our research and development structure, and undertake every possible
measure in the effort to foster the management culture that enables us securing stable earnings.
With this in mind, I attach the utmost importance to promoting dialogue with the market. Business growth can only beachieved by ascertaining and consistently meeting the genuine needs of customers. It is therefore vital that we refrainfrom adopting an inward-looking approach and evolve into an outward-looking company that focuses upon providing
customer-oriented solutions. Particularly at this time when operating conditions are extremely harsh, each and every
employee must direct their attention and mindset outward to pursue the Company’s growth.

Business Results for Fiscal 2014
As a result of posting the aforementioned extraordinary loss of ¥85.7 billion, our net loss for the fiscal year underreview came to ¥65.3 billion. This in turn drove down the Company’s shareholders’ equity to ¥162.5 billion. We view
these figures most seriously and with an acute sense of crisis.
We recognize that business conditions remain difficult in the solar-grade polycrystalline silicon market due toprolonged excess supply and that the Company is yet to recoup investments in the Tokuyama Malaysia second plant(PS-2 Plant).
On a positive note, the steps we have taken to reconstruct and streamline the operations in our existing businesses
including Chemicals, Cement and Life & Amenity coupled with favorable operating conditions including the weaker

Tokuyama Corporation Annual Report 201515

yen and the recovery in demand have helped us to improve our performance and generate the operating income of ¥19.5
billion on the net sales of ¥302.0 billion for the fiscal year under review.

Management Policies Onward
Tokuyama identifies rebuilding the financial platform, reconstructing the polycrystalline silicon business at Tokuyama
Malaysia and further enhancing the earnings of existing businesses as its three most pressing issues.
(1) Rebuild the Company’s financial platform
Our top priority is to rebuild our financial platform. We will look to bring shareholders’ equity and interest-bearing debt
close to parity by restoring the shareholders’ equity ratio, which has deteriorated substantially, and reducing
interest-bearing debt.
In order to bolster our shareholders’ equity, we will aim at enhancing the earnings of existing businesses with efforts to
cut back fixed costs and more effective utilization of assets. Working to cut back fixed costs, we will curtail personnel
expenses by reducing executive and employee salaries and lump-sum payments. Moreover, we will adopt emergency
measures aimed at controlling investments and overhead expenses while streamlining back-office divisions, which will
include the rationalization of personnel and bases in Tokyo and Osaka. Turning to the effective utilization of assets, wewill promote the sale of securities and unused real estate. Earnings generated by these initiatives will be applied to theearly repayment of interest-bearing debt.
While acknowledging that these goals represent significant hurdles, we will endeavor to achieve each target over thethree-year period of our new medium-term management plan, which begins in fiscal 2015, as we work toward our 100th
anniversary in 2018.
(2) Reconstruct the Tokuyama Malaysia polycrystalline silicon businessWe will look to increase productivity and optimize production through the repairs and improvement of PS-2 Plant,
where we produce solar-grade polycrystalline silicon, conducted in line with the periodic maintenance this fall. We aim
securing the full-scale production in fiscal year 2016 and our goal is to achieve profitable operations in fiscal year 2017.
We will consider every possible option with the PS-1 Plant, on which an impairment loss was posted, including theconversion from producing semiconductor-grade to solar-grade polycrystalline silicon while researching in othereffective utilization.
(3) Enhancing the earnings of existing businesses
To enhance the earnings of existing businesses, we plan to pursue a variety of complementary measures. In addition to
engaging in customer oriented approaches, we will reduce production costs, reinforce our marketing capabilities, andreview R&D themes and systems to accelerate the growth.
Fortunately, current operating conditions are favorable thanks largely to the weaker yen and positive domestic demand.
A variety of factors including investment activities in the lead-up to the Tokyo Olympics in 2020 and the “National
Resilience” project, plans by the government to build a robust and resilient nation , are helping to drive up demand for
cement. At the same time, the drop in the prices of such raw materials and fuel as naphtha and coal are contributing to adownturn in manufacturing costs. The electronics field, smartphones in particular, is also exhibiting a considerable
vitality and the demand for polycrystalline silicon, fumed silica and other semiconductor-related products continues thefirm trend.
Turning to the direction of research and development, we will look to raise the level of existing businesses by shifting
our focus away from corporate development centered on basic research to R&D activities that enhances the Company’s
existing strengths. For example, we will address the new needs of customers in the heat sink materials field focusing
mainly on aluminum nitride by developing composites with other materials as well as new heat sink materials. In otherfields, we will promote higher qualities to the polycrystalline silicon and focus increasingly on developing specialized
products that reflect the requirements of customers including photochromic lens materials and active pharmaceuticalingredients (API).

In Closing
My mission is to rebuild and reinvigorate Tokuyama by resolving current high-priority issues for the Company. My
goal is to quickly resume the payment of dividends and to regain the trust of stakeholders including shareholders at theearliest possible opportunity. As we work to achieve our established goals, we kindly request your continued supportand understanding.

Hiroshi Yokota
President
June 2015

Tokuyama Corporation Annual Report 201516

Research and Development
Research and Development Principles and Policies
Based on the principle that research and development should contribute to the advancement of society throughchemistry, Tokuyama engages in R&D with the aim of 1) creating best-in-class, state-of-the-art technologies throughthe refinement of its core technologies and their fusion with new technologies, and 2) creating proprietary products
suitable for market needs, centered on its technologies.
To achieve the targets above, Tokuyama proactively pursues open innovation through joint research with universities
and partnerships with external research institutions and other organizations, based on extensive technologies it has
accumulated over many years as a chemical maker in such areas as inorganic and organic materials synthesis,
refinement, crystallization, electrochemistry, and polymer chemistry. Moreover, Tokuyama continues to rapidly develop
technologies and products that address social issues and needs, such as the creation of new materials for the clean
energy and energy conservation fields

Research and Development Bases
Tokuyama’s two-pronged R&D structure comprises the Corporate Development Dept. (Tsukuba Research Laboratory)in Tsukuba City, Ibaraki Prefecture, in Eastern Japan, and the Analytical Science Dept. (Tokuyama ResearchLaboratory) in Shunan City, Yamaguchi Prefecture, in Western Japan.

Corporate Development Dept.
(Tsukuba Research Laboratory)
The Tsukuba Research Laboratory is situatedin the peaceful setting of Tsukuba Science Cityin Ibaraki Prefecture. The lab pursues
leading-edge technologies from a medium- tolong-term perspective, conducting researchand development of analysis techniques as
platform technologies, composite materials
used especially in the field of dentistry, andhigh-value-added products targeting theorganic fine chemicals field.

Tsukuba Research Laboratory

Tokuyama Research Laboratory

Analytical Science Dept. (Tokuyama Research Laboratory)
Located on the grounds of the Tokuyama Factory, the Tokuyama Research Lab serves as the Company’s research anddevelopment facility. Tokuyama Research Lab provides a solid environment for the development units in the Tokuyama
region. It also takes full advantage of its immediate proximity to the Company’s manufacturing operations at the factory
to further enhance the research environment.

R&D Activities in Fiscal 2014
Positioning chemicals as the cornerstone to further expand business, the Tokuyama Group has continued to engage in
research and development in each of the key business fields, such as ‘information and electronics’, ‘the environment
and energy’, and ‘life and healthcare’
In April 2014, Tokuyama integrated the corporate research and development function with the new businessdevelopment responsibilities undertaken by the Technology Strategy Department and the Business Promotion
Department all under the umbrella of the newly established Management of Technology Division. Working through adual structure that is comprised of the aforementioned Companywide Management of Technology Division and thedevelopment groups of each business segment, the Tokuyama Group is looking to contribute to society through acontinuous stream of results while enhancing the mobility and efficacy of its R&D activities.
The Management of Technology Division has positioned the environment, health, and longevity as its next-generation
business domain. In an effort to create new businesses, the Division is engaging a wide range of activity from the search
for new development themes through basic research to the development of technologies. In addition to that, the Division
is endeavoring to develop the basic technologies based on the requirements of the development groups of each businesssegment. Then the development group of each business segment undertakes final processing and completion.

Tokuyama Corporation Annual Report 201517

Turning to the Group’s efforts to create new businesses, considerable energies have been expended on uncovering new
research themes and developing neutron-detection scintillators as well as deep ultraviolet LEDs. With respect to efforts
aimed at uncovering new themes, the Group is selectively narrowing the number of promising projects while pursuing
basic studies. As far as neutron-detection scintillators are concerned, the Group is undertaking the trial manufacture ofradioactive material detectors. At the same time, performance assessments are underway. Turning to deep ultraviolet
LEDs, the Group has achieved high-power operations through emission wavelengths with a high bactericidal effectsuing a nano-optic structure. Moves are now being made toward mass production.

Aluminum nitride single-crystal substrates(Deep ultraviolet light emitting diode)

Fluoride single crystal for scintillators

In fiscal year ended March 31, 2015, the Tokuyama Group’s R&D spending totaled ¥10,156 million, including ¥4,599
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
R&D is aggressively pursued in this segment to strengthen the competitiveness of existing product lineups and todevelop new applications for these products. Focusing on the development of processes, research into catalysts and thedevelopment of environmentally conscious products, R&D strengthens our technological prowess and contributes tobusiness. In polyvinyl chloride, we continued to reduce costs, improve production technologies, and develop various
grades and upgrade them to meet the specific requirements of our customers. In crystalline-layered sodium silicate,progress was made on developing applications as a builder for commercial and industrial detergents and as a material
for functional materials.
R&D expenditures totaled ¥540 million in the Chemicals segment.
Specialty Products Segment
In polycrystalline silicon, Tokuyama has carried on the process development to increase the production efficiency ofsilicon at its existing plants in order to reduce costs amid a slump in the polycrystalline silicon market. Regarding silica,
the Company developed new silica in response to customers’ requests. With regard to aluminum nitride, efforts focusedon the development of high heat dissipation sheets for use as heat sink materials for such devices as power
semiconductors and power LEDs and aluminum nitride fillers targeting heat-dissipating adhesive materials.
R&D expenditures came to ¥1,298 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. On this front, the Company concentrated on the development of technologies for recycling waste
gypsum boards and coal ash. The Tokuyama Group also conducts basic research into cement and concrete. Ongoingstudy is being given to the reduction of cement clinker firing temperatures from an energy conservation and efficiency
perspective. In addition, Tokuyama improved and developed various grades of cement-related products, such as soil
solidifiers, grout materials, and self-leveling materials. Moreover, the Company focused on the development andimprovement of various products for repairing and reinforcing concrete structures, such as cross section repairing
materials.
Meanwhile, Tokuyama has also been working to develop environmentally conscious plaster material and broaden its
application. As a part of these endeavors, we developed and improved a new grade of printing media called Fresco
Giclee for inkjet printers.
R&D expenditures were ¥667 million in the Cement segment.

Tokuyama Corporation Annual Report 201518

Life & Amenity Segment
We made progress developing next-generation photochromic materials for eyeglass lenses. We also worked on thedevelopment 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 gas sensors, we advanced thedevelopment of various sensors and applied products in the alarm device and air quality fields. In the dental care field,
continued steps were taken to develop products such as restorative composite resins and orthodontic adhesives. 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 ¥3,050 million in the Life & Amenity segment.

Tokuyama Corporation Annual Report 201519

CSR Initiatives
Tokuyama approaches and promotes its CSR activities in accordance with its CSR management philosophy and policyof engaging in corporate management that is responsive to society. In this manner, we work diligently to establish anddevelop stronger relationships with stakeholders.
At the same time, we place particular emphasis on building an optimally balanced CSR platform. Recognizing thatinternal control systems provide the foundation for CSR, we make every effort to promote proper corporate governanceand compliance, strengthen risk management, and pursue responsible care (RC), an important activity given our status
as a chemical manufacturer.
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 2014
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 2014, Tokuyama achieved its goals for soot, water pollutant reductions (COD, nitrogen, and phosphorus),
PRTR, recycling, and zero emissions from among the Company’s targets for reducing environmental impact. Turning tounit energy consumption, Tokuyama is making steady progress toward meeting its newly established target of a 3%
improvement compared with the level recorded in fiscal 2005 by fiscal 2020.

*Result for Fiscal 2014 (Non-consolidated)

Tokuyama Corporation Annual Report 201520

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.
Tokuyama Factory Responsible Care Community Dialogue
Since fiscal 2004, Tokuyama Factory has held and conducted an annual responsible care community dialogue. The
purpose of this event is to provide the neighboring residents' association with a deeper understanding of Tokuyama
Factory’s process safety, disaster prevention, and environmental protection activities. In fiscal 2014, the event was held
on September 19, with the dialogue comprising three parts: a presentation meeting; tour of the facility; and a roundtablediscussion to exchange information. Representing the 11th annual community dialogue meeting, 39 members of theresidents' association, four representatives from Shunan City, and 16 employees from Tokuyama Factory including thegeneral manager took part in discussions on the principal topic of earthquakes and tsunamis.

A tour of the liquid hydrogen factory during Tokuyama Factory’s
annual responsible care community dialogue initiative

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 and Corporate Profile or theCompany's website:
http://www.tokuyama.co.jp/eng/csr/index.html

Tokuyama Corporation Annual Report 201521

Corporate GovernanceTokuyama believes that corporate governance is an important foundation for maximizing its corporate value. The
Company also believes that it must conduct daily inspections and periodic reviews to ensure its corporate governancesystems always work appropriately.
At the same time, Tokuyama is working consistently to strengthen its compliance with corporate ethics, laws andregulations as a means of enhancing its corporate value. Furthermore, we believe that we can gain the trust of
stakeholders—including shareholders, customers, supplyers, employees and local communities—by accurately
understanding our social responsibility and pursuing corporate management that is responsive to society.

Corporate Governance Structure
Tokuyama is a company with a board of corporate auditors (audit & supervisory board). In order to bolster thesupervisory function of the Board of Directors, Tokuyama appointed an external director in June 2011. The number ofexternal appointments to the Company’s Board of Directors was subsequently increased to two and then three in June2013 and June 2015, respectively.
Working to reinforce the audit function of the Audit & Supervisory Board, Tokuyama appointed an additional member
from outside the Company in June 2015. The Audit & Supervisory Board is accordingly comprised of two internal
auditors and three external auditors.
Meanwhile, Tokuyama adopted an executive officer system in April 2011 for the purpose of separating the supervisoryand business execution functions.
Through these means and the selection of the aforementioned structure and systems, the Company is making every
effort to maintain sound management by ensuring the transparency and fairness of its corporate management.
Below are main organizations and committees that compose the Company's corporate structure.

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 2014, the Board of Directors met on 18 occasions
As of June 24, 2015, Tokuyama’s Board of Directors comprised eight members. On the same day, the Company
appointed three external directors thereby bolstering the supervisory function of the Board of Directors. Meanwhile, theterm of office of directors 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 Corporation Annual Report 201522

Tokuyama adopted an executive officer systems in April 2011 with the aim of separating the supervisory and executivefunctions for business operations. As of April 1, 2015, the Company had 16 executive officers.
Based on a resolution of the Board of Directors, executive officers are empowered with the delegated authority to carryout business operations.

Audit & Supervisory Board
Members of the Audit & Supervisory Board attend meetings of the Board of Directors and various other key meetings
to listen carefully to reports on the status of business execution. Audit & Supervisory Board members also audit theexecution of duties by directors. In fiscal 2014, the Audit & Supervisory Board met on 15 occasions to report on,
discuss and make resolutions on important matters. As of June 24, 2015, the Company’s Audit & Supervisory Board
consisted of five members, three of whom were appointed from outside the Company.

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 representative director and president from among theCompany’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 approvalrules 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

Tokuyama Corporation Annual Report 201523

Compensation Paid to Directors and Corporate Auditors
In fiscal 2014, a total of ¥172 million, ¥42 million and ¥48 million was paid to eight directors, two corporate auditors(Audit & Supervisory Board members) and four external officers, respectively.
In addition to the aforementioned compensation, an amount of ¥44 million was paid as salaries to four 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.
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 may take such measures as the allotment ofshare options without contribution as stipulated under Article 277 and the following provisions of Japan’s Companies
Act, for the purpose of protecting the common interests of Tokuyama’s shareholders and Tokuyama’s corporate value,
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 201524

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 25, 2015.

(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.

Tokuyama Corporation Annual Report 201525

(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.

(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 new 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 the issuance of unsecured bonds and the cost of financing
arrangements, such as interest rates, could increase due to the changes in market environment. There is thus thepossibility that such a situation greatly affects Tokuyama Group’s business performance and financial condition. Also,in arranging financing through a new loan from a financial institution or the issuance of unsecured bonds, there is no
guarantee that the financing is always available under the same conditions. In the event that Tokuyama Group is unable
to raise funds in a timely manner by means of loans from financial institutions or by issuing unsecured bonds, there is
the possibility that any such situation greatly affects Tokuyama Group’s financing arrangements.

Tokuyama Corporation Annual Report 201526

Corporate Officers(As of June 24, 2015)

Directors(From the left of the back row)

Takeru Ishibashi

Akihiro Hamada

Akio Fujiwara

Toshihide Mizuno

External Director

Director
Managing Executive Officer

External Director

External Director

Takeshi Nakahara

Masao Kusunoki

Hiroshi Yokota

Hideki Adachi

Director
Managing Executive Officer

Chairman
Representative Director

President
Representative Director

Director
Managing Executive Officer(From the left of the front row)

Tokuyama Corporation Annual Report 201527

Audit & Supervisory Board
Masaki Akutagawa

Youji Miyamoto

Standing Auditor

Audit & Supervisory Board Member

Ryuji Hori

Shin Kato

Yoshikazu Tsuda

External Auditor

External Auditor

External Auditor

Executive Officers
Chairman and Executive Officer

Masao Kusunoki

President and Executive Officer

Hiroshi Yokota

Managing Executive Officer

Hisashi Yasui

General Manager of Chemicals Business Div.

Hideyoshi Koya

General Manager of Cement Business Div.

Takeshi Nakahara

General Manager of Research & Development Div.

Takeo Suzuki

President of Tokuyama Malaysia Sdn. Bhd.

Hideki Adachi

General Manager of Tokuyama Factory

Akihiro Hamada

General Manager of Corporate Administration Div.

Masao Fukuoka

General Manager of General & Personnel Affairs

Executive Officer

Div.
Hiroshi Terao

General Manager of Manufacturing Technology Div.

Fuminori Sekiguchi

Tokuyama Logistics Corporation

Hiroya Yamashita

General Manager of Corporate Development Dept.

Ryo Sugiyama

General Manager of Life & Amenity Business Div.

Toshihiko Annaka

General Manager of Corporate Social Responsibility
Div., Legal & Credit Management Dept.

Tokuyama Corporation Annual Report 2015

Hiroshi Nomura

General Manager of Specialty Products Business Div.

Hideo Sugimura

General Manager of Corporate Planning Div.

28

Financial Section
Financial Review

30

Consolidated Balance Sheets

36

Consolidated Statements of Income

38

Consolidated Statements of Comprehensive Income

39

Consolidated Statements of Changes in Net Assets

40

Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Tokuyama Corporation Annual Report 2015

41
42

29

Financial Review

Income Analysis
In the fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015), uncertainty clouded the future of the global
economy as a whole. Despite firm trends in the United States on the back of high levels of personal consumption and arecovery in employment conditions, this uncertainty was largely attributable to a slowdown in the rate of economic
growth in China and a growing sense of stagnation in Europe. Moreover, feelings of instability toward economic
activity were exacerbated by the sudden drop in crude oil prices in the second half of the fiscal year under review.
Turning to the Japanese economy, conditions were supported by expectations toward the economic policy measures of
the government and the Bank of Japan. Despite these expectations, however, the overall economy remained sluggish
due mainly to the impact of the consumption tax rate hike on personal consumption.
Under these circumstances, Tokuyama Group continued to reconstruct the polycrystalline silicon business, improve
profits in existing and new businesses, and improve Companywide profitability. As a result, while net sales increased,
the Company reported a decline in operating income and ordinary income due to such factors as the increase indepreciation expenses in line with the commencement of operations at consolidated subsidiary Tokuyama Malaysia Sdn.
Bhd. Moreover, net income deteriorated substantially owing to the extraordinary loss of ¥85,792 million recorded by
Tokuyama Malaysia Sdn. Bhd.
Consolidated net sales increased 5.1%, or ¥14,755 million compared with the previous fiscal year, to ¥302,085 million(US$2,517million). In addition to increased sales volumes of polycrystalline silicon and high-purity chemicals forelectronics manufacturing and selling price revisions of caustic soda, this was largely attributable to strong sales mainlyof active pharmaceutical ingredients and the commencement of the operation of the newly added consolidated
subsidiaries.
Despite a downturn in manufacturing costs as a result of the drop in the prices of such raw materials and fuel as coaland domestic naphtha, an increase in sales volumes of polycrystalline silicon attributable to the commencement ofoperations at Tokuyama Malaysia Sdn. Bhd. and other factors served to boost the cost of sales 5.8%, or ¥11,928 million
compared with the previous fiscal year, to ¥218,917 million (US$1,824 million).
SG&A expenses increased 5.9%, or ¥3,567 million compared with the previous fiscal year, to ¥63,636 million (US$530
million), due mainly to higher distribution costs resulting from increased sales volumes and increases in R&D expenses
and amortization of goodwill.

Tokuyama Corporation Annual Report 201530

Operating income decreased 3.7%, or ¥740 million compared with the previous fiscal year to ¥19,530 million (US$162
million). Despite such positive factors as improvement in the profitability of petrochemicals, this decrease was mainly
due to the increase in depreciation expenses in line with the commencement of operations at Tokuyama Malaysia Sdn.
Bhd. The operating margin (the ratio of operating income to net sales) was 6.5%, a decrease of 0.6 percentage points
compared with the figure of 7.1% recorded in the previous fiscal year.
Non-operating income/expenses deteriorated by ¥1,303 million year on year. While non-operating activities benefited
from a decrease in cost of idle operations and the absence of borrowing-related costs which arose from the procurementof funds through a subordinated loan recorded in the previous fiscal year, this deterioration was mainly due to theincrease in interest expenses and the posting of trial production expenses at Tokuyama Malaysia Sdn. Bhd. As a result,ordinary income decreased 13.7%, or ¥2,044 million compared with the previous fiscal year, to ¥12,920 million(US$107 million).
In extraordinary income and losses, the Company recorded a gain on sales of investment securities. However, this wasmore than offset by such factors as the impairment loss on the polycrystalline silicon manufacturing facilities ofTokuyama Malaysia Sdn. Bhd. As a result, extraordinary income/losses deteriorated by ¥75,882 million compared withthe previous fiscal year.
As a result of the above, income/loss before income taxes and minority interests deteriorated by ¥77,926 million
compared with the previous fiscal year, to a loss of ¥64,986 million (US$541 million).
Income/loss before minority interests deteriorated by ¥75,821 million compared with the previous fiscal year, to a lossof ¥65,327 million (US$544 million). After deducting minority interests, the Company recorded a net loss of ¥65,349
million (US$544 million). Consequently, net income/loss deteriorated by ¥75,567 million compared with the previous
fiscal year.
Net loss per share was ¥187.85 (US$1.565), down from net income per share of ¥29.37 in the previous fiscal year.
Dividends per share were ¥0.00 (US$0.000).
Return on equity (ROE) and return on assets (ROA) were -33.3% and -11.8%, respectively, compared with 4.6% and1.8% in the previous fiscal year.

Tokuyama Corporation Annual Report 201531

Segment Information
Tokuyama Group is composed of the parent company, Tokuyama Corporation (“the Company”), 55 subsidiaries and 30
affiliated companies. The Group’s operations are divided into the four business segments of Chemicals, Specialty
Products, Cement, and Life & Amenity. For accounting purposes, 54 of the Company’s subsidiaries are consolidated,while 10 affiliates are accounted for using the equity method.
Chemicals
The Chemicals segment includes the operations of the Company and four consolidated subsidiaries.
With regard to caustic soda, sales increased compared with the previous fiscal year. In addition to steady domestic sales,
this was attributable to our efforts to revise selling prices in order to absorb a rise in raw materials prices.
Vinyl chloride monomers (VCM) sales were essentially unchanged from the previous fiscal year. While domestic sales
volumes declined, this was offset by an increase in the volume of exports where selling prices continued to hover at ahigh level due mainly to the impact of the weak yen.
Sales of vinyl chloride resin declined. Despite efforts to revise selling prices to account for the rise in raw material
prices, this decline was largely attributable to market corrections following the rush in demand in the lead up to theconsumption tax rate hike and the downturn in sales volume resulting from such factors as the slump in housing starts.
With regard to soda ash and calcium chloride, sales increased compared with the previous fiscal year. This was
attributable to the commencement of the operation of TOKUYAMA & CENTRAL SODA Inc.
As a result of the above, segment net sales increased 6.3% compared with the previous fiscal year, to ¥91,927 million(US$766 million) and operating income increased 126.1% to ¥5,056 million (US$42 million). The segment reported
higher earnings on higher sales.
Specialty Products
The Specialty Products segment includes the operations of the Company, five consolidated subsidiaries and one
equity-method affiliate.
With regard to semiconductor-grade polycrystalline silicon, sales volume increased owing mainly to strong demand formobile terminals including smartphones. On the other hand, with regard to solar cell-grade polycrystalline silicon, theCompany’s consolidated subsidiary Tokuyama Malaysia Sdn. Bhd. commenced shipments of solar cell-grade
polycrystalline silicon under circumstances where demand for solar panels continued to expand. As a result of the above,sales of polycrystalline silicon increased compared with the previous fiscal year.
With regard to fumed silica, sales were steady, mainly of its application as a polishing material for semiconductors. As aresult of this, sales increased compared with the previous fiscal year.
With regard to aluminum nitride, sales increased compared with the previous fiscal year. This was attributable to anincrease in sales volumes of such applications as heat dissipation materials used for power devices for industrial
machinery and LEDs.
With regard to high-purity chemicals for electronics manufacturing, sales increased compared with the previous fiscal
year, owing to strong sales of such applications as semiconductor and liquid crystal production.
As a result of the above, segment net sales increased 5.7% compared with the previous fiscal year, to ¥55,450 million(US$462 million), while operating income decreased 32.3% to ¥4,122 million (US$34 million). The segment reported
lower earnings on higher sales.

Tokuyama Corporation Annual Report 201532

Cement
The Cement segment comprises the operations of the Company, 18 consolidated subsidiaries and four equity-method
affiliates.
In the cement business, total sales volumes declined slightly year on year. Despite an increase in exports mainly to Asia,
which is exhibiting firm demand, this downturn was primarily due to labor shortages in the construction industry inJapan and delays in construction work caused by unseasonably bad weather. On the cost front, distribution costs
increased due largely to the construction of new cement tankers.
In the recycling and environment-related business, the Company accepted a lower volume of waste owing mainly to adrop in the volume of clinker ash production.
With regard to consolidated subsidiaries, sales increased compared with the previous fiscal year, mainly because
Hiroshima Tokuyama Ready Mixed Concrete Co., Ltd. launched its operations.
As a result of the above, segment net sales increased 2.8% compared with the previous fiscal year, to ¥81,219 million(US$676 million), while operating income decreased 33.5% to ¥4,446 million (US$37 million). The segment reported
lower earnings on higher sales.
Life & Amenity
The Life & Amenity segment includes the operations of the Company, 14 consolidated subsidiaries and twoequity-method affiliates.
Sales of active pharmaceutical ingredients grew owing to increased sales volumes of generic pharmaceuticals and otherapplications. As a result of this, sales increased compared with the previous fiscal year.
With regard to plastic lens-related materials, sales volumes of photochromic dye materials increased. As a result of this,sales increased compared with the previous fiscal year.
With regard to microporous film, the manufacturing facilities of Tianjin Tokuyama Plastics Co., Ltd. commenced
operations, and due to this, sales volumes of such applications as sanitary articles including disposable diapers increased.
As a result of this, sales increased compared with the previous fiscal year.
With regard to polyolefin film, in addition to steady sales mainly of its application as packaging material for everyday
items at convenience stores, we revised selling prices to absorb a rise in raw material prices. As a result of the above,sales increased compared with the previous fiscal year.
With regard to gas sensors, sales increased compared with the previous fiscal year. This was attributable to strong
overseas sales of such applications as gas alarm devices and air cleaners.
With regard to medical diagnosis systems, profitability rose compared with the previous fiscal year. In addition tosteady sales of products for blood testing, this was attributable to our cost reduction efforts including in-houseproduction.
With regard to plastic window sashes, sales decreased compared with the previous fiscal year. This was attributable to adecrease in sales volume arising from reaction to the rush demand before the consumption tax increase.
As a result of the above, segment net sales increased 2.5% compared with the previous fiscal year, to ¥58,457 million(US$487 million) and operating income increased 6.1% to ¥5,159 million (US$42million). The segment reported higher
earnings on higher sales.

Tokuyama Corporation Annual Report 201533

Financial Position and Liquidity
As of March 31, 2015, total assets amounted to ¥554,527 million (US$4,621 million), a decrease of ¥21,787 million
from the figure of ¥576,315 million as of the previous fiscal year-end.
Current assets increased 27.3% compared with the previous fiscal year-end to ¥243,975 million (US$2,033 million).
This was due primarily to an increase in cash and deposits. Current liabilities increased 18.1% to ¥117,298 million(US$977 million). This mainly reflected an increase in current portion of long-term loans payable. As a result, thecurrent ratio was up to 2.08 times, from 1.93 times as of the previous fiscal year-end.
Property, plant and equipment decreased 21.6% in comparison with the previous fiscal year-end to ¥253,331 million(US$2,111 million). This was largely attributable to a decrease in property, plant and equipment resulting from theposting of a loss on the impairment of polycrystalline silicon manufacturing facilities of Tokuyama Malaysia Sdn. Bhd.
Intangible assets and investments and other assets dropped 7.1% over the previous fiscal year-end to ¥57,220 million(US$476 million). This was primarily due to a decrease in investment securities.
As of March 31, 2015, total liabilities amounted to ¥385,082 million (US$3,209 million), an increase of 13.3%
compared with the previous fiscal year-end figure of ¥339,862 million. The main contributory factor was an increase inlong-term loans payable. Interest-bearing debt increased 17.6% from ¥240,767 million as of the previous fiscal year-end
to ¥283,196 million (US$2,359 million).
Minority interests increased 1.2% from ¥6,785 million as of the previous fiscal year-end to ¥6,868 million (US$57
million). Net assets decreased 28.3% compared with the previous fiscal year-end, from ¥236,453 million to ¥169,445
million (US$1,412 million). This was due chiefly to a decrease in retained earnings. The ratio of shareholders’ equity tototal assets was 29.3%, down from 39.9% as of the previous fiscal year-end. The amount of net assets per share was¥467.36 (US$3.895), down from ¥660.18 as of the previous fiscal year-end.

Tokuyama Corporation Annual Report 201534

Capital Expenditures
Capital expenditures totaled ¥25,345 million (US$211 million), a decrease of 58.8% compared with the previous fiscal
year’s figure of ¥61,503 million.

Cash FlowsNet cash provided by operating activities totaled ¥30,772 million (US$256 million). Principal items included
depreciation expenses of ¥18,845 million (US$157 million), up from ¥16,642 million in the previous fiscal year.
Net cash used in investing activities totaled ¥25,519 million (US$212 million). Major contributory factors werepurchase of property, plant and equipment, from ¥29,907 million in the previous fiscal year to ¥32,470 million (US$270
million), and proceeds from sales of investment securities of ¥16,746 million (US$139 million) (¥984 million in theprevious fiscal year).
Net cash provided by financing activities came to ¥40,502 million (US$337 million). This was primarily attributable toproceeds from long-term loans payable of ¥84,311 million (US$702 million), up from ¥68,829 million in the previous
fiscal year, and repayments of long-term loans payable of ¥41,286 million (US$344 million) (¥22,623 million in theprevious fiscal year).
As a result of the above, cash and cash equivalents increased by ¥46,148 million (US$384 million) compared with theprevious fiscal year-end, to ¥116,122 million (US$967 million).

Tokuyama Corporation Annual Report 201535

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2015 and 2014
Thousands of U.S.
dollars (Note 2)
2015

Millions of yen
2015
Assets :Current assets :Cash and deposits (Note 5)
Notes and accounts receivable - trade (Note 5)
Lease receivables
Securities (Note 5, Note 15)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 6)
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets :Property, plant and equipment :Buildings and structures (Note 5)
Accumulated depreciation
Buildings and structures, net

201461,364
69,37130
55,053
15,456
11,60618,026
4,772
8,396
(103)

27,60567,49543,05014,131
9,896
17,878
1,068
10,635(138)

511,368
578,099257
458,779
128,80296,723150,217
39,77069,968(858)

243,975

191,623

2,033,128

137,347(74,090)

102,709(71,685)

1,144,564(617,419)

63,25731,024

527,144

Machinery, equipment and vehicles (Note 5)
Accumulated depreciation

546,388(401,461)

441,874(392,062)

4,553,236(3,345,509)

Machinery, equipment and vehicles, net

144,927

49,812

1,207,727

23,261(20,974)

23,002(21,360)

193,842(174,785)

Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land (Note 5)
Lease assets
Accumulated depreciation

2,286

1,642

19,05733,1492,135(936)

32,6672,156(895)

276,244
17,796(7,800)

Lease assets, net

1,199

1,261

9,996

Construction in progress

8,511

206,692

70,926

253,331

323,100

2,111,096

5,097
44
4,641

3,608
29
6,493

42,482370
38,681

9,784

10,131

81,53531,062
3,248
669
8,765
4,015
(22)
(303)

33,334
3,473
839
7,804
6,264
(21)
(233)

258,854
27,073
5,581
73,04633,465(191)(2,526)

Total property, plant and equipment
Intangible assets
Goodwill
Lease assets
Other
Total intangible assets
Investments and other assets
Investment securities (Note 4 , Note 5)Long-term loans receivable
Deferred tax assets (Note 6)
Net defined benefit asset (Note 7)
Other
Allowance for investment loss
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 2015

36

47,436

51,460395,303

310,552

384,692

2,587,935

554,527

576,315

4,621,064

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2015 and 2014
Thousands of U.S.
dollars (Note 2)
2015

Millions of yen
2015
Liabilities :Current liabilities :Notes and accounts payable - trade
Short-term loans payable (Note 5)
Commercial papers (Note 5)
Current portion of long-term loans payable (Note 5)
Current portion of bonds
Lease obligations (Note 5)
Income taxes payable (Note 6)
Deferred tax liabilities (Note 6)
Provision for bonuses
Provision for repairs
Provision for product warranties
Provision for loss on compensation for damage
Provision for restructuring
Provision for loss on purchase contract
Other
Total current liabilities
Noncurrent liabilities :Bonds payable (Note 5)Long-term loans payable (Note 5)
Lease obligations (Note 5)
Deferred tax liabilities (Note 6)
Provision for directors' retirement benefits
Provision for repairs
Allowance for loss on compensation for building materials
Provision for environmental measures
Provision for loss on purchase contract
Net defined benefit liability (Note 7)
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities

2014

40,567
12,212
3,000
25,110
5,000
340
1,318
1,911
1,284
132
50
3,183
23,186117,298

40,08912,347
4,000
8,811
376
1,865
1
2,056
1,429
132
13
28,17399,297

338,064
101,770
25,000209,256
41,666
2,833
10,98915,93010,703
1,106
416
26,525
193,223
977,488

45,000191,552
981
6,409
226
3,458
574
91
6,250
1,162
5
12,071
267,783
385,082

50,000164,278
953
7,338
207
2,747
842
131
1,112
5
12,946
240,565
339,862

375,000
1,596,270
8,176
53,4091,890
28,8184,784
763
52,086
9,687
48
100,595
2,231,530
3,209,019

53,45857,67053,45857,670445,491
480,584

39,286

107,155

327,386(1,434)
148,981(1,428)
216,856(11,953)
1,241,509

5,829
330
4,196
3,239
13,596
6,868
169,445

8,369
749
2,710
982
12,811
6,785
236,453

48,5782,753
34,973
26,995
113,301
57,234
1,412,045

554,527

576,315

4,621,064

Contingent liabilities (Note 17)
Net assets :Shareholders' equity (Note 12) :Capital stock
Authorized：
700,000,000
Issued：349,671,876
Capital surplus
Retained earnings
Treasury stock2014 ：
2015 ：
Total shareholders' equity

1,782,644
1,805,814

sharessharessharesshares

Accumulated other comprehensive income :Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201537

Consolidated Statements of Income
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2015 and 20142015
302,085
218,917
83,167

2014
287,330
206,989
80,340Thousands of U.S.
dollars (Note 2)
2015
2,517,377
1,824,316
693,061

36,566
27,07063,636
19,53035,275
24,79460,06920,270304,719
225,587
530,306
162,754

110
629
684
312
1,153
2,889

45
552
519
373
432
1,143
3,067

917
5,247
5,702
2,600
9,613
24,081

4,756
1,577
3,165
9,499
12,920

2,755
5,617
8,372
14,96539,63813,144
26,37879,161
107,67473
510,44220
24
10,566

212
379
3
96
692

611
41
87,018174
203
88,050Millions of yen
Net sales
Cost of sales (Note 10)
Gross profit
Selling, general and administrative expenses (Note 9) :Selling expenses
General and administrative expenses (Note 10)
Total selling, general and administrative expenses
Operating income
Non-operating income :Interest income
Dividends income
Equity in earnings of affiliates
Technical support fee
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses :Interest expenses
Trial production expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary income :Gain on sales of noncurrent assets
Gain on bargain purchase
Gain on sales of investment securities
Gain on sales of subsidiaries and affiliates' stocks
State subsidy
Other
Total extraordinary income
Extraordinary loss :Loss on sales of noncurrent assets
Impairment loss (Note 11)
Loss on disaster
Loss on reduction of noncurrent assets
Loss on disposal of noncurrent assets
Loss on sales of investment securities
Loss on sales of shares of subsidiaries and associates
Provision for loss on purchase contract
Loss on purchase contract
Cost of compensation for building materials
Other
Total extraordinary losses
Income (loss) before income taxes and minority interests
Income taxes (Note 6) :Current
Deferred
Total income taxes
Income (loss) before minority interests
Minority interests in income

876,010
383
27
420
8
9,433
1,489
692
88,473(64,986)

84
374
120
1
1,671
1
78
336
49
2,717
12,93970
633,418
3,195
226
3,501
74
78,612
12,4085,770
737,278(541,554)

3,747(3,405)341(65,327)
21

2,870
(423)
2,446
10,493274

31,228(28,383)2,844(544,399)
177

Net income (loss)(65,349)

10,218Yen
2015
Per share amounts :Net income (loss)
Cash dividends(187.85)-

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 2015

38

(544,576)
U.S. dollars（Note 2）
2015

2014
29.37
6.00

(1.565)-

Consolidated Statements of Comprehensive Income
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2015 and 2014
Thousands of U.S.
dollars (Note 2)
2015

Millions of yen
2015
Income (loss) before minority interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted for using equity
Total other comprehensive income

2014(65,327)

10,493(544,399)(2,535)
(419)
1,299
2,257
189

816
(1,488)
3,540
‐
392

(21,130)(3,492)
10,827
18,810
1,581

791

3,261

6,596

Total comprehensive income(64,536)

13,754(537,802)

Attributable to:
Owners of parent
Minority interests(64,564)28

13,265488(538,037)
235

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201539

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

Years ended March 31, 2015 and 2014[2015]
Shareholders' equity

Balance at beginning of year
Cumulative effects of changes inaccounting policies
Restated balance
Changes during the fiscal year
Cash dividends
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Effect of changes in fiscal
year of consolidated
subsidiaries
Change of scope of
consolidation
Net changes of items otherthan shareholders' equity
Total changes of items
during the period
Balance at end of year

Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

53,45857,670107,155(1,428)

216,856(1,842)53,45857,670105,313

12,811

6,785

236,453

12,811

6,785

234,610(1,842)215,013(7)
2(1,043)(65,349)(7)
0(1,043)(65,349)
(7)
0

356

356

356

10

10

8,369

749

2,710

982

10
(2,539)

(419)

1,486

2,257

784

82

867

(66,026)(5)(66,032)(2,539)

(419)

1,486

2,257

784

82

(65,165)

39,286(1,434)

148,981

5,829

330

4,196

3,239

13,596

6,868

169,445

Total

Minority
interests

8,781

6,316

223,871

8,781

6,316

223,871[2014]
Shareholders' equity

Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

Balance at beginning of year
Cumulative effects of changes inaccounting policies

53,45857,67099,058(1,414)

208,773

Restated balance
Changes during the fiscal year
Cash dividends
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Effect of changes in fiscal
year of consolidated
subsidiaries
Change of scope of
consolidation
Net changes of items otherthan shareholders' equity
Total changes of items
during the period
Balance at end of year

53,458Millions of yen
Accumulated other comprehensive income
Valuation
Deferreddifference
Foreign
Remeasuregains oroncurrency
ments oflossesavailable-fortranslation
definedon-sale
adjustment benefit planshedgessecurities
7,566
2,238
(1,023)
‐

Total
net
assets‐
57,67099,058(1,414)

208,773(14)
0(2,087)
10,218(14)
0(2,087)
10,218(0)(33)‐
53,458‐57,670Capitalsurplus445,491

480,584

445,491

480,584(2,087)
10,218
(14)
0
‐
(33)
802

(1,488)

3,733

982

4,029

469

4,499

(13)

8,083

802

(1,488)

3,733

982

4,029

469

12,582(1,428)

216,856

8,369

749

2,710

982

12,811

6,785

236,453

Total

Minority
interests

Retainedearnings

Treasury
stock

Total

892,964(11,904) 1,807,136(15,353)(15,353)877,610(11,904) 1,791,782

Thousands of U.S. dollars (Note 2)
Accumulated other comprehensive income
Valuation
Deferreddifference
Foreign
Remeasuregains orcurrency
ments ofonlossestranslation
definedavailable-foron-saleadjustment benefit planshedgessecurities
69,743
6,246
22,587
8,185

Total
net
assets106,762

56,545 1,970,444

106,762

56,545 1,955,090(15,353)
69,743

6,246

22,587

8,185(8,697)(544,576)(66)
6(8,697)(544,576)
(66)
6

2,973

2,973

2,973

86

86

(66)
17

86
(21,164)(3,492)

12,386

18,810

6,539

688

7,227

(550,223)(49) (550,273)(21,164)(3,492)

12,386

18,8106,539

688 (543,045)

327,386(11,953) 1,241,509

48,5782,753

34,973

26,995

113,301

57,234 1,412,045

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 2015

‐

8,097

(10)

‐
480,584(1,023)

107,155(8,697)(544,576)‐
445,491

2,238‐

Shareholders' equity

Capital
stock

‐
7,566

(33)

[2015]

Balance at beginning of year
Cumulative effects of changes inaccounting policies
Restated balance
Changes during the fiscal year
Cash dividends
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Effect of changes in fiscal
year of consolidated
subsidiaries
Change of scope of
consolidation
Net changes of items otherthan shareholders' equity
Total changes of items
during the period
Balance at end of year

Minority
interests(1,428)(1)‐
57,670Total
netassetsTotal(1,842)(1,043)(65,349)‐
53,458Millions of yen
Accumulated other comprehensive income
Valuation
Deferreddifference
Foreign
Remeasuregains oroncurrency
ments oflossesavailable-fortranslation
definedon-sale
adjustment benefit planshedgessecurities
8,369
749
2,710
982

40

Consolidated Statements of Cash Flows
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2015 and 2014
Millions of yen
2015
2014

Thousands of U.S.
dollars (Note 2)
2015

Net cash provided by (used in) operating activities
Income (loss) before income taxes and minority interests
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
Increase(decrease) in net defined benefit asset
Interest and dividends income
Foreign exchange losses (gains)
Gain on bargain purchase
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
Equity in (earnings) losses of affiliates
Subsidy income
Interest expenses
Loss on reduction of noncurrent assets
Impairment loss
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
Income taxes paid
Net cash provided by (used in) operating activities(64,986)
18,845
(268)
9,433
450
79
442
(739)
1,070
(5)
(64)
(10,442)
(12)
(684)
(24)
4,756
27
76,010420(2,520)
1,136
681
1,443
808
2,689
38,546
1,189(4,732)(4,232)
30,772

12,93916,642
(433)
‐
(260)
118
629
(598)
(78)
‐
(128)
(378)
78
(519)
(3)
2,755
1
374
1,671
(484)
9,485
(1,619)710(1,290)(1,510)38,100498(2,153)(2,340)34,105(541,554)
157,042(2,239)78,612
3,750
662
3,688
(6,165)
8,923
(41)
(541)
(87,018)(100)(5,702)(203)
39,638226
633,418
3,501(21,006)
9,470
5,676
12,031
6,740
22,413321,224
9,916(39,434)(35,268)
256,437

Net cash provided by (used in) 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
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Payments for sales of shares of subsidiaries resulting in change in scope of consolidation
Additional purchase of investments in consolidated subsidiaries
Payments of long-term loans receivableCollection of long-term loans receivable
Purchase of money held in trust
Proceeds from cancellation of money held in trust
Proceeds from subsidy income
Payments for transfer of business
Other, net
Net cash provided by (used in) investing activities

(34)
429
(32,470)
109(7,967)
16,746
‐
(633)
(23)
(20)
244
‐
‐
2,659
(3,750)(810)(25,519)(37)
211(29,907)
520
(812)
984
(4,115)
‐
‐
(15)
257
(34,300)
3,492
3
‐
(682)
(64,402)

(283)
3,576
(270,583)
915(66,399)
139,556‐(5,275)
(197)
(171)
2,037
‐
‐
22,164(31,250)(6,754)(212,664)

Net cash provided by (used in) 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
Cash dividends paid
Cash dividends paid to minority shareholders
Decrease (increase) in treasury stock
Other, net
Net cash provided by (used in) financing activities(5)(1,000)84,311(41,286)(1,043)
(437)
(75)
40
40,502

2,668‐
68,829(22,623)(2,080)
(397)
(97)
(359)
45,939(47)(8,333)
702,592(344,056)(8,699)(3,642)(627)
333
337,519

392
46,147
69,97310

1,485
17,12752,431
414

3,266
384,558
583,11483(8)116,122‐69,973(72)
967,684

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
Increase (decrease) in cash and cash equivalents resulting from change in fiscal period of
consolidated subsidiaries
Cash and cash equivalents at end of period

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201541

Notes to Consolidated Financial Statements
Tokuyama Corporation and Consolidated Subsidiaries

1. BASIS OF FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared from accounts and records maintained by
Tokuyama Corporation (the “Company”) and its subsidiaries. The Company and its consolidated domestic subsidiaries
have maintained their accounts and records in accordance with the provisions set forth in the Companies Act (the“Act”) and the Financial Instruments and Exchange Act and in conformity 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 ¥120=US$1, the approximate exchange rate on March 31, 2015.
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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESCONSOLIDATION:
The consolidated financial statements include the accounts of the Company and its 54 significant subsidiaries (53 in2014). Significant intercompany transactions and accounts have been eliminated in consolidation.
A&T Corporation is consolidated on the basis of their original fiscal years ended at December 31. Material differences
in intercompany transactions and accounts arising from the use of the different fiscal year-end are appropriately
adjusted in consolidation.
Investments in 10 affiliates (9 in 2014) are accounted for by the equity method. Investments in unconsolidated
subsidiaries and affiliates not accounted for by the equity method are carried at cost.
The excess of investment cost over equity in net assets acquired is amortized on a straight-line basis over five years.
FOREIGN CURRENCY TRANSACTIONS:
Revenue and expenses items denominated in foreign currencies are translated into Japanese yen at the rates ofrespective transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into yen at
the exchange rate in effect at the balance sheet date and the resulting exchange gains or losses are credited or charged toincome as incurred.
FOREIGN CURRENCY FINANCIAL STATEMENTS (ACCOUNTS OF OVERSEAS SUBSIDIARIES AND
AFFILIATES):
All assets and liabilities are translated into yen at the exchange rate in effect at the balance sheet date except forshareholders’ equity, which is translated at the historical exchange rates. Revenue and expense accounts of theconsolidated overseas subsidiaries are translated at the average rates of exchange prevailing during the year. The
resulting translation adjustments are shown as “Foreign currency translation adjustments” in net assets.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include all highly liquid time deposits with maturities of three months or less, and certificatesof deposit included in securities.

Tokuyama Corporation Annual Report 201542

MARKETABLE AND INVESTMENT SECURITIES:
Securities are classified into four groups: trading securities, held-to-maturity debt securities, securities of subsidiaries
and affiliates, and available-for-sale securities. Trading securities are stated at fair market value, held-to-maturity debt
securities at amortized cost, and securities of subsidiaries and affiliates are stated at cost determined by themoving-average method. Available-for-sale securities with a quoted current price are stated at fair value, and those
without a quoted current price are stated at cost determined by the moving-average method. Net unrealized gains orlosses of available-for-sale securities are stated as “Valuation difference on available-for-sale securities” in net assets
after applying tax effect accounting. The Company and its subsidiaries do not hold trading securities.
INVENTORIES:
Inventories held for sale in the ordinary course of business are stated at cost determined mainly by the moving-averagemethod. The balance sheet value of the inventories is determined by write-down based on their decreased profitability.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is computed mainly by the straight-line method forbuildings, and mainly by the declining-balance method for property, plant and equipment other than buildings at rates
based on the estimated useful lives of assets prescribed by the Corporation Tax Act. The range of estimated useful lives
is principally from 3 to 75 years for buildings and structures, and from 2 to 20 years for machinery, equipment andvehicles.
Significant renewals and betterments are capitalized. Maintenance expenses are charged to income as incurred.
RESEARCH AND DEVELOPMENT EXPENSES:
Research and development expenses are charged to income as incurred.
DERIVATIVES AND HEDGE ACCOUNTING:
All derivative financial instruments, except hedging instruments, are stated at fair value. For the method of hedge
accounting, in general, the deferral hedge accounting is applied. Among hedging instruments, Interest rate swaps that
fulfill the requirement for preferential treatment are subjected to the preferential treatment. The Company uses forward
exchange contracts and interest rate swaps in hedging instruments subject to hedge accounting.
The Company utilizes financial derivative transactions only for the purpose of hedging foreign exchange risk arisingfrom normal operating activities and for managing interest rate risks. The Company does not hold or issue derivatives
for dealing or speculative purposes. All derivative transactions are performed and controlled by the financial section.
Directors in charge approve all derivative transactions entered into.
As the counterparties to these derivative transactions are limited to major financial institutions with high credit
standings, the Company does not anticipate nonperformance by the counterparties to these agreements, and no material
losses are expected.
LEASES:
Leased assets related to finance lease transactions that do not transfer ownership are depreciated by the straight-line
method using the lease term as the useful life and until the residual value becomes zero.
With respect to finance lease transactions that do not transfer ownership whose starting date was on or before March 31,
2008, the accounting treatment similar to that applicable to ordinary rental transactions continues to be applied.
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
The allowance for doubtful accounts of the Company and its consolidated subsidiaries is provided in amounts sufficient
to cover possible losses on collection. In determining the allowance for doubtful accounts for normal receivables,
regard is taken of the historical default rate. With receivables where there is an acknowledged credit risk, allowances for
doubtful accounts are provided for taking account of collectability on a case-by-case basis.
INCOME TAXES:
The tax effects of temporary differences between the carrying amounts of assets and liabilities for tax and financial
reporting is recognized as deferred tax assets (liabilities). The provision for income taxes is computed based on the

Tokuyama Corporation Annual Report 201543

pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes.
RETIREMENT BENEFITS:(i) Employees
Recognition of accrued retirement benefits for employees for the fiscal year under review is based on actual valuationof projected benefit obligations and plan assets at the end of the fiscal year.
Prior service costs are charged to income as incurred.
Actuarial differences are amortized by using the straight-line method over a period of time within the average remaining
service period of employees (mainly 16 years), from the subsequent fiscal year when they are incurred.
(ii) Directors and corporate auditors
Certain consolidated subsidiaries record accrued retirement benefits for directors and corporate auditors on the basis of
the amounts required as of the end of the fiscal year under review based on internal rules.
ACCOUNTING FOR CONSUMPTION TAX:
Consumption tax and local consumption tax are accounted for using the tax-excluded method. The consumption tax
amount not subject to tax credit is classified as a period expense.
NET INCOME PER SHARE:
Net income per share is computed by dividing net income available to common stockholders by the weighted average
number of common shares outstanding during each fiscal year. Diluted net income per share is calculated based on theassumption that all diluted convertible bonds were converted at the beginning of the fiscal year. Diluted net income pershare for the fiscal years ended March 31, 2015, 2014 and 2013 was not presented because there was no dilutive effecton any assumed conversion of convertible bonds for the fiscal years ended March 31, 2015, 2014 and 2013.
ADOPTION OF THE ACCOUNTING STANDARD FOR RETIREMENT BENEFITS:
Effective from the fiscal year under review, the Company has adopted the provisions set forth under Article 35 of the“Accounting Standard for Retirement Benefits” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 26
issued on May 17, 2012) and the provisions set forth under Article 67 of the “Guidance on Accounting Standard for
Retirement Benefits” (ASBJ Guidance No. 25 issued on March 26, 2015). Accordingly, we have revised the method for
calculating the amount of retirement benefit obligations and service costs. The method for attributing retirement benefit
obligations to each period has been changed from the straight-line method to a method for calculating the amount of
retirement obligations for each period. The method for determining the discount rate used in the calculation has also
been changed from one in which the number of years approximately equal the average remaining service period of
employees is used as the basis for calculating the discount rate to one in which a single weighted average discount rateis used that reflects each forecasted period of payment of retirement benefit and the amount of benefit payment for eachestimated period.
In accordance with the interim measures stipulated under Article 37 of the Accounting Standard for Retirement Benefits,
the effect of the change in the calculation methods for the amount of retirement benefit obligations and service costs isreflected in retained earnings as of the beginning of the fiscal year under review.
As a result, net defined benefit asset, net defined benefit liability, and retained earnings decreased by ¥1,850 million(US$15 million), ¥31 million (US$0.2 million), and ¥1,842 million (US$15 million), respectively. The effect on
operating income, ordinary income, and loss before income taxes and minority interests in the fiscal year under review
is immaterial.
While net assets per share declined by ¥5.30 (US$0.044) in the fiscal year under review, the effect on net loss per shareis immaterial. There was no impact on the amount of diluted net income per share because the Company reported a net
loss per share and there were no shares with a dilutive effect in the fiscal year under review.

Tokuyama Corporation Annual Report 201544

4. SECURITIES
Held-to-maturity debt securities at March 31, 2015 were as follows:
Millions of yen

Book value
Held-to-maturity debt securities :Government and municipal bonds
Corporate bonds
Other
Total

Fair value

Unrealized gain

3
3

3
3

-

Thousands of U.S. Dollars

Book value
Held-to-maturity debt securities :Government and municipal bonds
Corporate bonds
Other
Total

Fair value

29
29

Unrealized gain
29
29

-

Available-for-sale securities at March 31, 2015 were as follows:
Millions of yen

Book value
Available-for-sale securities:
Equity securities
Total

Acquisition cost Unrealized gain

15,636
15,63624,20624,206

8,570
8,570

Thousands of U.S. Dollars

Book value
Available-for-sale securities:
Equity securities
Total

Acquisition cost Unrealized gain

130,300
130,300

201,718
201,718

71,41871,418The sales amount of available-for-sale securities for the fiscal year ended March 31, 2015 was as follows:
Millions of yen

Proceeds
Available-for-sale securities sold during 2015 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

Gain on sales

Loss on sales

16,701

10,442-

16,701

10,442-Thousands of U.S. Dollars

Proceeds
Available-for-sale securities sold during 2015 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

Tokuyama Corporation Annual Report 2015

45

Gain on sales

Loss on sales

139,178

87,018-139,178

87,018-

5. BORROWINGS
Bonds payable at March 31, 2015 and 2014 were as follows:
Thousands of
U.S. Dollars

Millions of yen

2015

2014

2015

0.537% unsecured bonds in yen
due September 9, 2015

5,000

5,000

41,666

0.575% unsecured bonds in yen
due September 8, 2016

10,00010,00083,3331.760% unsecured bonds in yen
due March 10, 2020

10,00010,00083,333

1.478% unsecured bonds in yen
due September 9, 2020

15,00015,000125,000

1.371% unsecured bonds in yen
due September 8, 2021
Total

10,00050,00010,00050,00083,333416,666

The aggregate annual maturities at March 31, 2015 are summarized as follows:Year ending March 31
2016
2017
2018
2019
2020
Thereafter
Total

Millions of yen

Thousands of
U.S. Dollars

5,000
10,00010,00025,00050,00041,666
83,333
83,333208,333
416,666

Loans payable at March 31, 2015 and 2014 were as follows:
Thousands of
U.S. Dollars

Millions of yen

2015
12,212

2014
12,347

2015
101,770

Current portion of long-term loans payable(1.25%)
Current portion of lease obligations

25,110
340

8,811
376

209,256
2,833

Long-term loans payable, due in 2016-2074(1.67%)
Lease obligations, due in 2016-2021
Commercial papers (0.13%)
Total

191,552981
3,000
233,196

164,278953
4,000
190,767

1,596,270
8,176
25,0001,943,307

Short-term loans payable (1.35%)

Tokuyama Corporation Annual Report 2015

46

The aggregate annual maturities of long-term loans payable at March 31, 2015 are summarized as follows:Year ending March 31
2016
2017
2018
2019
2020
Thereafter
Total

Millions of yen

Thousands of
U.S. Dollars

25,11016,956
14,91618,101
14,048
127,528
216,663

209,256
141,307124,307
150,847
117,073
1,062,733
1,805,526

The aggregate annual maturities of lease obligations at March 31, 2015 are summarized as follows:Year ending March 31
2016
2017
2018
2019
2020
Thereafter
Total

Millions of yen

Thousands of
U.S. Dollars

340
302
245
224
146
62
1,321

2,833
2,524
2,041
1,870
1,217
522
11,010Assets pledged as collateral for certain loans and other liabilities at March 31, 2015 and 2014 are summarized asfollows:
Thousands ofMillions of yen
U.S. Dollars

2015
Pledged Assets
Cash and deposits
Notes and accounts receivable - trade
Buildings and structures
Machinery, equipment and vehicles
Land
Investment securities
Total

270
80
2,225
2,118
785
3
5,483

2014
228
18
2,245
2,332
785
3
5,613

2015
2,254
672
18,546
17,6506,544
2945,698The Company has a loan commitment agreement with eight banks in order to procure operating capital efficiently.
The balance of unexecuted loans under this agreement at March 31, 2015 and 2014 was as follows:
Thousands ofMillions of yen
U.S. Dollars

2015
15,00015,000Lines of credit
Credit used
Available credit

Tokuyama Corporation Annual Report 2015

47

2014
15,00015,0002015
125,000
125,000

6. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to a number of income taxes that, in the aggregate,
indicate a statutory tax rate in Japan for the respective fiscal years. Overseas subsidiaries are subject to income taxes ofcountries where they are domiciled.
The significant differences between the statutory tax rate and effective tax rate for consolidated financial statement
purposes for the fiscal years ended March 31 were summarized as follows.

Statutory tax rate
Increase (decrease) in income taxes resulting from：
Change in valuation allowance allocated to income tax expenses
Inter-company eliminations of allowance for investment loss
Permanent difference
Equity in earnings of affiliates
Effect of tax credits
Amortization of goodwill
Inter-company eliminations of provision for loss on business of
subsidiaries and affiliates
Retained earnings of subsidiaries and affiliates
Difference tax rate of recovery special tax
Unrealized intercompany profits
Lower tax rates of overseas consolidated subsidiaries
Inter-company eliminations of allowance for doubtful accounts
Inter-company eliminations of dividends income
Other
Effective income tax rate

2015
This
informationis omitted, as
the company
posted a loss
beforeincome taxes
during theperiod underreview.

2014
37.8 %(34.9)
(7.2)
(6.1)
(1.4)
(1.4)
1.1
1.1
1.2
2.1
3.1
5.1
7.1
8.1
3.3
18.9 %

Significant components of deferred tax assets and liabilities at March 31, 2015 and 2014 were as follows:
Thousands ofMillions of yen
U.S. Dollars

2015
Deferred tax assets：
Property, plant and equipment
Deficits
Provision for repairs
Provision for bonuses
Other
SubtotalLess valuation allowance
Total deferred tax assets
Deferred tax liabilities：
Valuation difference of available-for-sale securities
Appropriations for advanced depreciation
Retained earnings of subsidiaries and affiliates
Other
Total deferred tax liabilities
Net deferred tax assets/(liabilities)

Tokuyama Corporation Annual Report 2015

48

2014

2015

6,109
3,984
1,224
636
844
12,800(8,309)
4,490

8,618
9,122
1,313
735
947
20,738(18,389)
2,348

50,91633,200
10,2075,304
7,040
106,669(69,249)
37,420(2,748)(1,422)(839)(446)(5,457)(966)(4,554)(1,581)(776)(867)(7,780)(5,431)(22,907)(11,850)(6,996)(3,722)(45,477)(8,057)

7. RETIREMENT AND SEVERANCE PLAN
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.
The reconciliation of beginning and ending balances of benefit obligations for the fiscal year ended March 31, 2015 and2014 was as follows:
Thousands ofMillions of yen
U.S. Dollars

Balance of defined benefit obligations at beginning of year
Cumulative effects of changes in accounting policies
Restated balance
Service cost
Interest cost
Occurrence of actuarial loss
Payments of retirement benefits
Occurrence of prior service cost
Other
Balance of defined benefit obligations at end of year2015
18,301
1,837
20,139
960
158
(205)
(1,553)(33)
19,465

2014
18,832
18,832
860
358
(190)
(1,609)642
18,301

2015
152,51215,313
167,826
8,007
1,319(1,713)(12,946)(280)
162,212

The reconciliation of beginning and ending balances of plan assets for the fiscal year ended March 31, 2015 and 2014
was as follows:
Thousands ofMillions of yen
U.S. Dollars

2015
24,9920
2,870
632(1,420)27,075

Balance of plan assets at beginning of year
Expected return on plan assets
Occurrence of actuarial loss
Corporation's contributions
Payments of retirement benefits
Balance of plan assets at end of year2014
23,203
3
2,533
699(1,447)
24,992

2015
208,273
1
23,924
5,272(11,840)
225,631

The reconciliation of the defined benefit obligations and plan assets to the liabilities and assets on retirement benefits
recognized in the consolidated balance sheet as of March 31, 2015 and 2014 was as follows:
Thousands ofMillions of yen
U.S. Dollars

Unfunded defined benefit obligations

2015
18,355(27,075)(8,720)1,117

2014
17,283(24,992)(7,709)1,018

2015
152,962(225,631)(72,669)
9,310

Net amount shown on balance sheets(7,603)(6,691)(63,358)

Net defined benefit liability
Net defined benefit asset
Net amount shown on balance sheets

1,162(8,765)(7,603)

1,112(7,804)(6,691)

9,687(73,046)(63,358)

Funded defined benefit obligations
Plan assets

Tokuyama Corporation Annual Report 201549

Benefit costs and a breakdown of the benefit costs for the fiscal year ended March 31, 2015 and 2014 were as follows:
Thousands ofMillions of yen
U.S. Dollars

2015
Service cost
Interest cost
Expected return on plan assets
Recognized actuarial loss
Amortization of prior service cost
Other
Periodic benefit costs of retirement benefit plan

2014

960
158
0
178
1,298

860
358
(3)
350
6
53
1,626

2015
8,007
1,319
1
1,489
10,818The remeasurements of defined benefit plans for the fiscal year ended March 31, 2015 were as follows:
Thousands of
U.S. Dollars

Millions of yen

2015(3,248)(3,248)Actuarial loss
Total

2014
-

2015
(27,067)(27,067)

The remeasurements of defined benefit plans for the fiscal year ended March 31, 2015 and 2014 were as follows:
Thousands ofMillions of yen
U.S. Dollars

2015(4,768)(4,768)Unrecognized actuarial loss
Total

2014
(1,519)(1,519)2015(39,733)(39,733)

Principal items of plan assets for the fiscal year ended March 31, 2015 and 2014 were as follows:%

2015
Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Insurance product (General account)
Other
Total

2014
19
10
42
4
16
9
100

31
19
17
7
23
3
100

(Note) The total of plan assets includes the retirement benefit trust, which has been established for the Company’s
pension plans, of 10%.
Method for setting the expected long-term rate of return
The expected long-term rate of return on plan assets has been set based on the allocation of the plan assets as well as thecurrent and expected rate of return from each category of the plan assets.
Items regarding the basis for calculation used in the actuarial calculation for the fiscal year ended March 31, 2015 and2014 were as follows:2015
Mainly 0.8%
Mainly 0.0%

Discount rate
Expected long-term return on plan assets

2014
Mainly 2.0%
Mainly 0.0%

Defined contribution scheme
The amount which the Company and its consolidated subsidiaries were required to contribute to the defined
contribution scheme was ¥536million (US$4 million).

Tokuyama Corporation Annual Report 201550

8. LEASES(1)Lessee(i) Operating lease
The future lease payments on noncancellable operating lease transactions at March 31, 2015 and 2014 were as follows.
Thousands ofMillions of yen
U.S. Dollars

2015
Due within one year
Due beyond one year
Total

2014
503
200
703

2015
491
689
1,180

4,191
1,669
5,861

(2) Lessor(i) Operating lease
The future lease payments on noncancellable operating lease transactions at March 31, 2015 and 2014 were as follows.
Thousands ofMillions of yen
U.S. Dollars

2015
Due within one year
Due beyond one year
Total

2014
9
131
140

2015
9
141
151

80
1,093
1,173

9. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling expenses for the fiscal years ended March 31, 2015 and 2014 were as follows:
Thousands of
U.S. Dollars

Millions of yen

2015
Selling expenses :Freight-out expenses
Salaries and bonuses
Shipping charges
Provision for bonuses
Retirement benefit expenses
Provision of allowance for doubtful accounts
Provision for repairs

20,330
5,260
4,618
261
137
122
-

2014
19,413
4,947
4,739
264
165
22
0

2015
169,423
43,83838,485
2,182
1,147
1,022
-

General and administrative expenses for the fiscal years ended March 31, 2015 and 2014 were as follows:
Thousands ofMillions of yen
U.S. Dollars

2015
General and administrative expenses :Technical research expenses
Salaries and bonuses
Provision for bonuses
Retirement benefit expenses
Provision for directors' retirement benefits

9,235
4,950
220
178
59

2014
7,816
5,146
291
231
59

2015
76,95941,250
1,840
1,483
499

10. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the fiscal years ended March 31, 2015 and 2014 were as follows:
Thousands ofMillions of yen
U.S. Dollars

2015
10,156

Research and development expenses

Tokuyama Corporation Annual Report 2015

51

2014
8,709

2015
84,638

11. IMPAIRMENT LOSSThe Company’s 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, 2015, the Group recorded impairment losses forthe following asset groups.
Millions of yen

Use
Manufacturing
facilities forpolyvinyl
chloride resin

Location

Ichihara-shi,
Chiba

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

2015
884
208
0
3
5
1,101

Thousands of
U.S. Dollars

2015
7,371
1,734
2
27
44
9,180

Shin Dai-ichi Vinyl Corporation wrote down the carrying amount of a certain asset group to the recoverable amount andposted this write-down amount to extraordinary losses as an impairment loss. This reflects the decision to close the
Chiba Factory in line with the restructuring of business.
Meanwhile, the recoverable value of the asset group is measured using the value in use up to the closure.

Millions of yen

Use

Location

Manufacturing
facilities forpolycrystalline
siliconSarawak,
Malaysia

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

2015
3,387
1,743
271
335
69,13274,870Thousands of
U.S. Dollars

2015
28,232
14,5272,259
2,795
576,105
623,920

The manufacturing facilities of the Group’s Tokuyama Malaysia PS-1 Plant are designated mainly for the manufactureand sale of semiconductor-grade polycrystalline silicon. To date, the Group has completed construction and undertaken
trial operations. Due to recent issues relating to deposition equipment, the decision was made that the shipment ofsamples for customer certification was virtually impossible even after resolving outstanding technological issues.
Taking into consideration the inability to put forward a business plan that allows for projected future cash flows at thistime, the Company has written down the carrying amount to the recoverable amount (residual value) and posted thiswrite-down amount to extraordinary losses as an impairment loss.

Use

Idle fixed
assetsLocation
Kamisu-shi,
IbarakiShunan-shi,
Yamaguchi
Hofu-shi,
Yamaguchi

Asset category

Millions of yen

Thousands of
U.S. Dollars

2015

2015

Land

17

147

Land

14

122

Land

5

46

Total

38

317

With regard to land described above, because there was a significant difference between the book value and the market
value due to a drop in the price of land, the book value of this asset was written down to the recoverable value, and theamount of the write-downs was accounted for as an impairment loss in the extraordinary loss. The recoverable value
was measured based on the net selling value. The net selling value was valued based on the appraisal evaluated by areal estate appraiser.

Tokuyama Corporation Annual Report 201552

12. SHAREHOLDERS’ EQUITYThe “Act” provides that an amount equal to 10% of dividends from surplus shall be appropriated and set aside as a legal
reserve until the total amount of legal reserve and additional paid-in capital equals 25% of capital stock.
On condition that the total amount of legal reserve and additional paid-in capital remains being equal to or exceeding
25% of capital stock, they are available for distributions and certain other purposes by the resolution of the shareholders’meeting.
The legal reserve is included in the retained earnings and is not allowed to show separately in the accompanying
consolidated financial statements.
13. ASSET RETIREMENT OBLIGATIONS
Since the amount of asset retirement obligations at the fiscal year-end under review was immaterial, the preparation ofan asset retirement obligations schedule was omitted.
14. 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 segments by product group based on business divisions, and 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 methylene chloride
Specialty Products: Polycrystalline silicon, fumed silica, aluminum nitride, metal cleaning solvent, high-purity
chemicals for electronics manufacturing, and environment-related equipment
Cement: Ordinary Portland cement, high early strength Portland cement, Portland blast-furnace slag cement,
ready-mixed concrete, cement-type soil solidifier and waste treatment
Life & Amenity: Polyolefin film, plastic window sashes, medical diagnosis systems, dental materials and equipment, gassensors, ion exchange membranes, active pharmaceutical ingredients and intermediates, plastic lens-related materials
for glasses, and microporous film

Tokuyama Corporation Annual Report 201553

(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 income (loss) is based on operating income.
[2015]

Millions of yen
CementLife &
Amenity

Others*1

Total

43,787

81,10056,68329,391

302,085-

302,085805

11,663

118

1,774

22,07636,438(36,438)-

Chemicals

Specialty
Products

Sales to customers
Inter-segment
sales/transfer

91,122

Total sales

Adjustment*2

Consolidated*3

Sales

91,92755,45081,21958,45751,468338,523(36,438)

302,085

Segment income

5,056

4,122

4,446

5,159

6,023

24,808(5,278)19,530

Segment assets

55,785

194,868

60,77051,352

28,260391,037

163,490554,527

2,706

4,314

2,841

2,341

1,447

13,6505,194

18,8452,054

17,456

3,734

1,693

1,085

26,023239

26,262Other items
Depreciation andamortization
Increase in tangible
and intangible fixed
assets(Note 1) The “Others” segment comprises businesses other than those of the reportable segments. Concretely, thesegment includes overseas sales companies, a distribution company, a real estate business, etc.
(Note 2) The segment income adjustment amount consists mainly of basic R&D expenses that are not allocable to a
specific reportable segment. Included in the segment assets adjustment amount are corporate assets that are notallocated to a specific reportable segment (¥190,190million).
(Note 3) With regard to segment income, operating income in the consolidated financial statements has been calculated
by making an adjustment to the sum total of the reportable segments’ income and the “Others” segment’s income.
(Note 4) Long-term prepaid expenses are included.
[2014]

Millions of yen
Chemicals

Specialty
Products

CementLife &
Amenity

Others*1

Total

Sales to customers
Inter-segment
sales/transfer

85,38541,89078,81455,552

25,687287,330-

287,330

1,071

10,593

166

1,505

21,59434,931(34,931)-

Total sales

86,45752,48378,98157,05747,281

322,262(34,931)

287,330

Adjustment*2

Consolidated*3

Sales

Segment income

2,235

6,090

6,682

4,863

4,168

24,041(3,770)20,270

Segment assets

55,421

256,736

58,05851,13328,374

449,724

126,590576,315

2,967

1,676

2,776

2,005

1,349

10,774

5,868

16,642

1,142

53,871

2,824

2,309

1,239

61,386

117

61,503

Other items
Depreciation andamortization
Increase in tangible
and intangible fixed
assets(Note 1) The “Others” segment comprises businesses other than those of the reportable segments. Concretely, thesegment includes overseas sales companies, a distribution company, a real estate business, etc.
(Note 2) The segment income adjustment amount consists mainly of basic R&D expenses that are not allocable to a
specific reportable segment. Included in the segment assets adjustment amount are corporate assets that are notallocated to a specific reportable segment (¥145,249 million).
(Note 3) With regard to segment income, operating income in the consolidated financial statements has been calculated
by making an adjustment to the sum total of the reportable segments’ income and the “Others” segment’s income.

Tokuyama Corporation Annual Report 201554

[2015]

Thousands of U.S. Dollars
Chemicals

Specialty
Products

CementLife &
Amenity

Others*1

Total

Sales to customers
Inter-segment
sales/transfer

759,353364,892

675,836472,362

244,932

2,517,377-

2,517,377

6,710

97,194988

14,785

183,972

303,651(303,651)-

Total sales

766,064

462,086

676,825

487,148

428,904

2,821,029(303,651)

2,517,377

Segment income

42,13634,35037,05742,99950,196

206,740(43,985)

162,754

Segment assets

464,877

1,623,906

506,417427,938

235,5073,258,647

1,362,417

4,621,064

22,55635,953

23,677

19,50812,060113,756

43,285

157,042

17,120145,466

31,117

14,1099,044

216,858

1,994

218,852

Adjustment*2

Consolidated*3

Sales

Other items
Depreciation andamortization
Increase in tangible
and intangible fixed
assets(Note 1) The “Others” segment comprises businesses other than those of the reportable segments. Concretely, thesegment includes overseas sales companies, a distribution company, a real estate business, etc.
(Note 2) The segment income adjustment amount consists mainly of basic R&D expenses that are not allocable to a
specific reportable segment. Included in the segment assets adjustment amount are corporate assets that are notallocated to a specific reportable segment (US$1,584 million).
(Note 3) With regard to segment income, operating income in the consolidated financial statements has been calculated
by making an adjustment to the sum total of the reportable segments’ income and the “Others” segment’s income.
(Note 4) Long-term prepaid expenses are included.
RELATED INFORMATION
Information by Region(1) Sales
Thousands of
U.S. Dollars

Millions of yen

Japan
Asia
OthersTotal

2015
240,932
47,09914,052
302,085

2014
233,557
40,176
13,596287,3302015
2,007,771
392,499
117,106
2,517,377(2) Property, plant and equipment
Thousands of
U.S. Dollars

Millions of yen

Japan
Malaysia
OthersTotal

2015
104,791
133,584
14,955
253,331

Tokuyama Corporation Annual Report 20152014
107,398
201,256
14,445323,100

55

2015
873,262
1,113,207
124,626
2,111,096

INFORMATION ON IMPAIRMENT LOSS OF NON-CURRENT ASSETS BY REPORTABLE SEGMENT[2015]
Chemicals

Specialty
Products

1,101

74,870Chemicals

Specialty
Products

Impairment loss

Millions of yen
Life &
CementOthersAmenity
5[2014]

Impairment loss--

[2015]
Chemicals
9,180

623,920

Impairment loss-

Millions of yen
Life &
CementOthersAmenity-

Specialty
Products-

Adjustment

5

Adjustment-

Thousands of U.S. Dollars
Life &
CementOthersAmenity
46

-

32

368

Adjustment
-

270

Total
76,010

Total
374

Total
633,418

INFORMATION ON AMORTIZATION OF GOODWILL AND UNAMORTIZED BALANCE BYREPORTABLE SEGMENT[2015]

Millions of yen
Life &
CementOthersAmenity

Specialty
Products

Chemicals

Adjustment

Total

Amortization of goodwill

-

-

1,212

-

-

-

1,212

Unamortized balance

-

-

5,097

-

-

-

5,097

[2014]

Millions of yen
Life &
CementOthersAmenity

Specialty
Products

Chemicals

Adjustment

Total

Amortization of goodwill

-

-

419

0

-

-

419

Unamortized balance

-

-

3,622

-

-

-

3,622

[2015]

Thousands of U.S. Dollars
Life &
CementOthersAmenity

Specialty
Products

Chemicals

Adjustment

Total

Amortization of goodwill--

10,103---

10,103

Unamortized balance--

42,482---

42,482[2015]

Millions of yen
Life &
CementOthersAmenity

Specialty
Products

Chemicals

Adjustment

Total

Amortization of negative
goodwill

-

-

14

-

-

-

14

Unamortized balance

-

-

-

-

-

-

-

[2014]

Millions of yen
Life &
CementOthersAmenity

Specialty
Products

Chemicals

Adjustment

Total

Amortization of negative
goodwill

-

-

29

-

-

-

29

Unamortized balance

-

-

14

-

-

-

14

[2015]

Thousands of U.S. Dollars
Life &
CementOthersAmenity

Specialty
Products

Chemicals

Adjustment

Total

Amortization of negative
goodwill

-

-

121

-

-

-

121

Unamortized balance

-

-

-

-

-

-

-

Tokuyama Corporation Annual Report 201556

15. FINANCIAL INSTRUMENTS(1) Management policy on financial instruments
The Company’s Group raises necessary funds (mainly with bank loans and by the issuance of corporate bonds) in linewith its business investment program to implement its growth strategies, such as “Further select and concentrate foraggressive business expansion,” “Create new businesses for us to win in the global markets,” and “Reinforce
competitiveness by improving productivity” based on two basic strategies, “Strengthen strategically growing businesses”
and ”Bolster our international competitiveness.”
The Group invests occasional spare cash in financial assets with high safety, and raises short-term operating capital withbank loans and CP (commercial paper). We use derivatives only to hedge against risks, and have a management policyof not implementing derivative transactions for speculative purposes.
(2)Fair value of financial instruments
As at March 31, 2015, the book value of financial instruments, their fair value, and the differences between the twowere as follows. The financial instruments whose fair value is extremely difficult to estimate are not given in the tablebelow.
Millions of yen

Cash and deposits
Notes and accounts receivable - trade
Securities and Investment securities
Securities
Held-to-maturity debt securities
The other securities
Long-term loans receivable
Total assets
Notes and accounts payable - trade
Short-term loans payable
Commercial papers
Bonds payable
Long-term loans payable
Total liabilities
Derivative financial instruments
In which hedge accounting is not applied
In which hedge accounting is applied
Total derivative financial instruments

Tokuyama Corporation Annual Report 201557

Book value
61,364
69,371

Fair value
61,364
69,371

Difference

55,0503
24,206
3,248
213,244

55,0503
24,206
3,248
213,244-

40,567
12,2123,000
50,000216,663
322,443

40,567
12,2123,000
49,933
216,850
322,563

(66)
186
120

141
141

(1,055)(1,055)(1,197)(1,197)-

Thousands of U.S. Dollars

Cash and deposits
Notes and accounts receivable - trade
Securities and Investment securities
Securities
Held-to-maturity debt securities
The other securities
Long-term loans receivable
Total assets

Book value
511,368
578,099

Fair value
511,368
578,099458,75029
201,718
27,073
1,777,039

458,75029
201,718
27,073
1,777,039-

338,064
101,770
25,000416,666
1,805,526
2,687,028

338,064
101,770
25,000416,112
1,807,083
2,688,031

(554)
1,556
1,002

1,180
1,180

(8,796)(8,796)(9,977)(9,977)

Notes and accounts payable - trade
Short-term loans payable
Commercial papers
Bonds payable
Long-term loans payable
Total liabilities
Derivative financial instruments
In which hedge accounting is not applied
In which hedge accounting is applied
Total derivative financial instruments

Difference-

16. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative transactions to which hedge accounting is not applied(1) Currency-related derivatives
There are no currency-related derivative transactions to which hedge accounting is not applied.
(2) Interest-related derivatives
There are no interest-related derivative transactions to which hedge accounting is not applied.
Derivative transactions to which hedge accounting is applied(1) Currency-related derivatives

Main hedging targets

Notional
value

Millions of yen
Maturing
after
one year
Fair value

Hedge accounting method
Principle-based accounting
Forward exchange agreements
Call
U.S. dollars

Forecast transaction in foreign currencies

1,289

-

147

Euros

Forecast transaction in foreign currencies

113

-

(5)

1,402

-

141

1,963

-

(0)

Subtotal

1,963

-

(0)

Total

3,365

-

141

Subtotal
Allocation method
Forward exchange agreements
Call
U.S. dollars

Tokuyama Corporation Annual Report 2015

Forecast transaction in foreign currencies

58

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

Main hedging targets
Hedge accounting method
Principle-based accounting
Forward exchange agreements
Call
U.S. dollars

Forecast transaction in foreign currencies

10,744

-

1,228

Euros

Forecast transaction in foreign currencies

943

-

(48)

11,688-1,180

16,359-(0)

Subtotal

16,359

-

(0)

Total

28,047-

1,180

Subtotal
Allocation method
Forward exchange agreements
Call
U.S. dollars

Forecast transaction in foreign currencies(2) Interest-related derivatives

Notional
value

Main hedging targets

Millions of yen
Maturing
after
one year
Fair value

Hedge accounting method
Special accounting procedures forinterest rate swaps
Interest rate swaps
Pay fixed rate, receive
floating rateLong-term loans payable

Total

53,65447,763(1,197)53,65447,763(1,197)

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

Main hedging targets
Hedge accounting method
Special accounting procedures forinterest rate swaps
Interest rate swaps
Pay fixed rate, receive
floating rateLong-term loans payable

Total

447,121398,030(9,977)447,121398,030(9,977)

17. CONTINGENT LIABILITIESAs at March 31, 2015 and 2014, the Company and its consolidated subsidiaries were contingently liable as follows:
Thousands ofMillions of yen
U.S. Dollars

2015
Notes discounted or endorsed
Loans guaranteed
Commitments to guarantee

Tokuyama Corporation Annual Report 2015

2014
331
165
32

59

204
164
96

2015
2,761
1,377
266

18. FINANCIAL COVENANTS
The Company has a syndicated loan agreement (issue date: December 22, 2011) with seven lenders with theDevelopment 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 of total net assets on the borrower’s consolidated balance sheet at the end of each fiscal year, less any
amounts of subscription rights to shares, minority interests, deferred gains or losses on hedges, foreign currencytranslation adjustment, or valuation difference on available-for-sale securities, 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 identically calculated
amount as of the end of the second quarter of the fiscal year ending March 31, 2015 (however, (ii) shall only apply as
the base for the account settlement period at the close of the fiscal year ending March 31, 2015).
(2) There must not be two consecutive fiscal years of ordinary losses.
(3) The borrower must maintain a credit rating of at least BB+ from Rating and Investment Information, Inc.
The Company has a syndicated loan agreement (issue date: July 24, 2012) with six lenders with The Bank ofTokyo-Mitsubishi UFJ, Ltd. as the lead manager. The Company also has a syndicated loan agreement (issue date:
September 26, 2012) with nine lenders with Sumitomo Mitsui Trust Bank, Limited as the lead manager. These
agreements have the following financial covenants.
(1) The borrower promises to not let the amount of total net assets on its consolidated balance sheet at the end of eachfiscal year, less any amounts of subscription rights to shares, minority interests, deferred gains or losses on hedges,
foreign currency translation adjustment, or valuation difference on available-for-sale securities, fall below 75% of thelarger of either the identically calculated amount as of the end of the preceding fiscal year or the identically calculated
amount as of September 30, 2014 (however, the first half account settlement period ended September 30, 2014 shall
only apply as the base for the account settlement period at the close of the fiscal year ending March 31, 2015).
(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 of total net assets on its consolidated balance sheet at the end of the first half andsecond half of each fiscal year, less any amounts of subscription rights to shares, minority interests, deferred gains orlosses on hedges, foreign currency translation adjustment, or valuation difference on available-for-sale securities, fall
below 75% of identically calculated amounts at the end of the first half and second half of the preceding fiscal year.
19. SUBSEQUENT EVENTS
The decision not to pay a period-end cash dividend for the fiscal year ended March 31, 2015 was approved at theCompany’s Ordinary General Meeting of Shareholders held on June 24, 2015.

Tokuyama Corporation Annual Report 201560

Independent Auditor’s Report
TO THE BOARD OF DIRECTORS OF TOKUYAMA CORPORATION
We have audited the accompanying consolidated balance sheet of Tokuyama Corporation and consolidated subsidiaries
as of March 31, 2015, and the related consolidated statements of income, comprehensive income, changes in net assets,
and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inconformity with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in conformity with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Tokuyama Corporation and consolidated subsidiaries as of March 31, 2015, and theconsolidated results of their operations and their cash flows for the year then ended in conformity with accounting
principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made in conformity with the basis stated in Note 2. Such U.S. dollar amounts are presented
solely for the convenience of readers outside Japan.

YAMAGUCHI Audit Corporation
Shunan, Japan
June 15, 2015

Tokuyama Corporation Annual Report 2015

61

Business Locations
JAPANTokyo Head Office
Kasumigaseki Common Gate West Tower, 2-1, Kasumigaseki 3-chome, Chiyoda-ku, Tokyo 100-8983, Japan
TEL: +81-3-6205-4800
FAX: +81-3-6205-4886
Domestic Offices:
Osaka, Hiroshima, Takamatsu, Fukuoka, Sendai, Nagoya
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
Tianjin Figaro Electronic Co., Ltd.
No.19, Weishan Road, Tianjin Economic-Technological Development Area, Tianjin China 300457
TEL: +86-22-6629-7458
FAX: +86-22-2532-5908
Email: tfyyb@tjfigaro.com
Tokuyama Korea Co., Ltd.
#415 Korea Air City Terminal Bldg., 22, Teheran-ro 87-gil, Gangnam-gu, Seoul 135-728，Korea
TEL: +82-2-517-3851
FAX: +82-2-517-3856
Hantok Chemicals Co., Ltd.
Samsung Fine Chemical Research Center 4th Fl., Electronics Material Research Park,
130 Samsung-Ro, YoungTong-Gu, Gyeonggi-Do, Suwon 443-803 Korea
TEL: +82-31-8061-3890
FAX: +82-31-8061-3899

Tokuyama Corporation Annual Report 2015

62

Taiwan Tokuyama Corporation
21 Shi Jian Road,Hsin Chu Industrial Park, Hu Kou, Hsin Chu 303,Taiwan, R.O.C.
TEL: +886-3-597-9108
FAX: +886-3-597-9208
Tokuyama 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 Malaysia Sdn. Bhd.
Lot 600, 6th Floor Wisma Bukit Mata Kuching, Jalan Tunku Abdul Rahman 93100 Kuching, Sarawak, Malaysia
TEL: +60-82-422-705
FAX: +60-82-427-708
http://www.tokuyama.com.my/
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

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/
Figaro USA, Inc.
121 South Wilke Road, Suite 300, Arlington Heights, IL 60005, U.S.A.
TEL: +1-847-385-1701
FAX: +1-847-832-1705
http://www.figarosensor.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 2015

63

Major Subsidiaries and Affiliates(As of March 31, 2015）

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.

113,169100

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

KRW
4,500 million

50.0

Production 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

900

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

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.

CementTokuyama Mtech Corporation

50

100

Processing and sale of building materials

Tokuyama Nouvelle Calédonie S.A.

XPF
210 million

74.6

Production and sale of cement*Yamaguchi Eco-tech Corporation

90

50.0

Recycling business of incinerated ash of wastes

Category also includes another 6 consolidated subsidiaries, 3 equity method affiliates and 12 affiliates
Life & Amenity
Shanghai Tokuyama Plastics Co., Ltd.
Tianjin Tokuyama Plastics Co., Ltd.
Sun•Tox Co., Ltd.
A&T Corporation
Figaro Engineering Inc.
Tianjin Figaro Electronic Co., Ltd.

Tokuyama Corporation Annual Report 2015

CNY
85 million
CNY
78 million

100

Production and sale of microporous film

100

Production and sale of microporous film

1,600

100

Production and sale of polyolefin films

577

40.2

Production and sale of diagnostic reagents, analyzers
and systems

99

100

Production and sale of sensor devices

CNY
23 million

55.7

Production and sale of sensor devices

64

Company
Figaro USA, Inc.
Tokuyama Dental Corporation

Capital(millions of
yen)
USD
200
thousand

Ownership
（%）

100

100

Production and sale of dental and medical materials

100

Scope
Production and sale of sensor devices

ASTOM Corporation

450

55.0

Production and sale of ion-exchange membranes andrelated equipment

Excel Shanon Corporation

495

100

Production and sale of plastic window sashes

300

72.0

Production of plastic window sashes

CNY
60 million

49.0

Production and sale of diagnostic reagents, analyzers
and systems

Tohoku Shanon Co., Ltd.
*Neusoft A&T Diagnostics Co., Ltd.

Category also includes another 3 consolidated subsidiaries, 1 unconsolidated subsidiary, 1 equity method affiliates and 2 affiliates
Other
SGD
800
thousandEUR
255
thousandCNY
5 million
CNY
12 million

100

Sale of Tokuyama’s products

100Management company to provide services for othergroup companies in China

Tomitec Co., Ltd.

100

60.0

Production and sale of plastic molded products

Shunan System Sangyo Co., Ltd.

151

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.

Tokuyama Asia Pacific Pte. Ltd.
Tokuyama Europe GmbH
Tokuyama Trading (Shanghai) Co., Ltd.
Tokuyama (Shanghai) Co., Ltd.

100

Sale of Tokuyama’s products

100

Sale of Tokuyama’s products

sportstraining,

health* Covalent Materials Tokuyama Corporation

100

30.0

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

500

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 2 affiliates

Tokuyama Corporation Annual Report 201565

Corporate Data and Stock Information(As of March 31, 2015)

Composition of Shareholders
Company Name:

Tokuyama Corporation

Established:

February 16, 1918

Capital:¥53,458 million

Employees:

5,852 (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)

20,011

5.72

Nippon Life Insurance Company

10,874

3.11

Japan Trustee Services Bank, Ltd. (trust account)

10,7843.08

CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

9,778

2.80

The Yamaguchi Bank, Ltd.

8,246

2.36

STATE STREET BANK AND TRUST COMPANY 505041

7,500

2.14

Meiji Yasuda Life Insurance Company

7,442

2.13

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

7,095

2.03

Sojitsu Corporation

6,484

1.85

CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW

6,322

1.81

Name

Stock Chart

Tokuyama Corporation Annual Report 2015

66