F i n a n c i a l

S t a t e m e n t s

2005

TAYCA CORPORATION
Nittochi Yodoyabashi Bldg., 6-13, Kitahama 3-chome, Chuo-ku, Osaka, Japan

Phone: (06) 6208-6400

Fax: (06) 6208-6422

C ONSOLIDATED F IVE -Y EAR S UMMARYTAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIES
Millions of yen
2005

2004

2003

2002

2001

Net sales ................................................................ ¥26,067
Income (loss) before income taxes .....................
1,209
Net income (loss) .................................................
732
Total assets............................................................ 34,702
Shareholders’ equity............................................. 20,149
Common stock ......................................................
9,855¥24,866
1,324
854
33,333
19,6399,855¥25,971665
498
31,311
17,805
9,855¥24,844(918)(809)
31,267
17,215
9,855¥26,820582
543
33,796
18,466
9,855

Per share of common stock (in yen):
Net income (loss) ............................................. ¥ 14.17
Shareholders’ equity......................................... 400.92¥ 16.31390.54¥¥ (15.75)
334.75¥ 10.57
359.079.69
346.58Notes: (1) Figures for 2001 – 2005 represent the fiscal year ended March 31, respectively.
(2) The computation of net income (loss) per share is based upon the weighted average number of shares outstanding during
the period.

C ONSOLIDATED B ALANCE S HEETSTAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIESMarch 31, 2005 and 2004

TAYCA CORPORATION
Thousands of
U.S. dollars (Note 3)

Millions of yen

ASSETS

2005

2004

2005

Cash and cash equivalents .......................................................................

¥ 3,121¥ 2,593$ 29,060

Time deposits ............................................................................................

79

79

735

Marketable securities ...............................................................................

35

35

334

Trade notes and accounts receivable ......................................................

7,768

7,276

72,324Inventories (Note 4) ..................................................................................

5,244

5,462

48,822Other current assets .................................................................................

450

543

4,196

Allowance for doubtful accounts .............................................................

(9)

(8)

(88)

Total current assets ........................................................................

16,69015,983

155,386

Land ...........................................................................................................

876

979

8,164

Buildings and structures ..........................................................................

14,022

13,586

130,548

Machinery and equipment .......................................................................

34,62633,492

322,377

Vehicles ......................................................................................................

150

149

1,400

Tools, furniture and fixtures .....................................................................

2,025

1,833

18,855Construction in progress ..........................................................................

540

421

5,032

Less: accumulated depreciation ..............................................................

(40,772)(39,764)(379,592)

Net property, plant and equipment ..............................................

11,46910,697

106,786

Investment securities ...............................................................................

5,613

5,687

52,260Investments in unconsolidated affiliated companies (Note 6) ............

20

20

192

Other assets ...............................................................................................

846

856

7,881

Intangible fixed assets ..............................................................................

61

87

572

Total investments and other assets ..............................................

6,542

6,653

60,907¥34,702¥33,333$323,080

Current assets:

Property, plant and equipment:

Investments and other assets:

See the accompanying Notes to Consolidated Financial Statements.

1

LIABILITIES, MINORITY INTERESTS ANDSHAREHOLDERS’ EQUITY

Thousands of
U.S. dollars (Note 3)

Millions of yen
2005

2004

2005

Current liabilities:
Short-term borrowings (Note 5) ..............................................................

¥

233

¥

242

$

2,176

Current portion of long-term debt (Note 5) ...........................................

1,921

1,901

17,887

Trade notes and accounts payable ..........................................................

3,413

2,716

31,775

Accrued income taxes ...............................................................................

302

446

2,816

Accrued expenses .....................................................................................

56

48

527

Other current liabilities ............................................................................

2,843

2,565

26,471

Total current liabilities ...................................................................

8,770

7,921

81,654Long-term debt (Note 5) ..........................................................................

3,704

3,819

34,485

Deferred income taxes ..............................................................................

303

333

2,827

Liabilities for severance indemnities ......................................................

1,508

1,294

14,041

Allowance for directors’ and statutory auditors’ retirement .................

228

279

2,125

Total long-term liabilities ..............................................................

5,744

5,727

53,480Minority interests...........................................................................................

37

44

351

Issued — 51,428,828 shares in 2005 and 2004 ..................................

9,855

9,855

91,760Capital surplus ..........................................................................................

6,767

6,767

63,005Retained earnings .....................................................................................

2,488

2,028

23,170

Unrealized gain on available-for-sale securities ....................................

1,453

1,393

13,529Translation adjustments ..........................................................................

(23)

(22)

(218)

1,222,046 shares in 2005 and 1,191,632 shares in 2004 ....................

(392)

(382)

(3,654)

Total shareholders’ equity .............................................................

20,14919,639187,593¥34,702¥33,333$323,080

Long-term liabilities:

Contingent liabilities (Note 6)
Shareholders’ equity:
Common stock:
Authorized — 150,000,000 shares

Treasury stock, at cost:2

C ONSOLIDATED S TATEMENTS OF I NCOMETAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIESFor the Years Ended March 31, 2005 and 2004

TAYCA CORPORATION
Thousands of
U.S. dollars (Note 3)

Millions of yen

Net sales ...............................................................................................................
Cost of sales .........................................................................................................
Gross profit ...............................................................................................
Selling, general and administrative expenses...............................................
Operating income ....................................................................................
Other income (expenses):
Interest and dividend income ........................................................................
Interest expenses.............................................................................................
Other, net .........................................................................................................
Total other expenses ...............................................................................
Income before income taxes and minority interests ............................
Income taxes:
Current..............................................................................................................
Deferred ............................................................................................................
Minority interests ................................................................................................
Net income ...............................................................................................

2005

2004

2005

¥26,067
20,330
5,736
4,373
1,363

¥24,866
18,811
6,054
4,368
1,686

$242,689
189,278
53,41040,721
12,689

74
(113)
(114)
(153)
1,209

53
(126)
(288)
(361)
1,324

689
(1,054)(1,066)(1,432)
11,257

563
(79)
(6)
732

639
(157)
(11)
¥ 854

5,244
(741)
(62)
6,817

¥

$

U.S. dollars(Note 3)Yen

Net income per share.........................................................................................

¥ 14.17¥ 16.31$

0.13

See the accompanying Notes to Consolidated Financial Statements.

C ONSOLIDATED S TATEMENTS OF S HAREHOLDERS ’ E QUITYTAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIESFor the Years Ended March 31, 2005 and 2004

Balance, March 31, 2003 ...........................
Net income ..............................................
Cash dividends ........................................
Bonuses to directors ...............................
Increase resulting from wider scope of consolidation...
Unrealized gain on available-for-sale securities ...
Translation adjustments.........................
Increase in treasury stock .......................
Balance, March 31, 2004 ...........................
Net income ..............................................
Cash dividends ........................................
Bonuses to directors ...............................
Unrealized gain on available-for-sale securities ...
Translation adjustments.........................
Increase in treasury stock .......................
Balance, March 31, 2005 ...........................

Number ofshares ofcommon stock(Thousands)

Commonstock

Capitalsurplus51,428¥9,855¥6,767

Millions of yen
Unrealized gain
Retained(loss) on availableearnings
for-sale securities¥1,349
854
(163)
(3)
(9)

Translation
adjustments

Treasurystock
at cost¥—¥ (10)¥ (157)1,550(22)51,428¥9,855¥6,767¥2,028
732
(251)
(20)

¥1,393

¥(22)

(372)
¥(382)

60(1)
51,428¥9,855¥6,767

Balance, March 31, 2004 ..................................................
Net income .....................................................................
Cash dividends...............................................................
Bonuses to directors......................................................
Unrealized gain on available-for-sale securities .........
Translation adjustments ...............................................
Increase in treasury stock..............................................
Balance, March 31, 2005 ..................................................

$91,760$63,005¥2,488¥1,453¥(23)(9)¥(392)$(205)$(3,562)

Thousands of U.S. dollars (Note 3)$12,970559(13)$91,760

See the accompanying Notes to Consolidated Financial Statements.

3$18,8826,817(2,338)(190)$63,005$23,170$13,529$(218)(92)$(3,654)

C ONSOLIDATED S TATEMENTS OF C ASH F LOWSTAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIESFor the Years Ended March 31, 2005 and 2004

TAYCA CORPORATION
Thousands of
U.S. dollars (Note 3)

Millions of yen
2005

2004

2005

¥1,209
1,684
110
(74)
113
—
(191)

¥1,324
1,645
196
(53)
126
4
—

$11,257
15,678
1,031
(689)
1,054
—
(1,781)

(491)
218
696
673
3,948
74
(112)
(750)

696
(602)
(355)
(91)
2,893
39
(106)
(425)

(4,578)
2,036
6,481
6,266
36,758689(1,045)(6,987)

3,159

2,400

29,415Investing activities:
Payments for purchases of time deposits................................................
Proceeds from maturities of time deposits .............................................
Payments for purchases of marketable securities...................................
Proceeds from sale of marketable securities...........................................
Payments for acquisition of property, plant and equipment .................
Payments for purchases of investment securities...................................
Proceeds from sale of investment securities...........................................
Other ...........................................................................................................
Net cash used in investing activities ..................................................

(100)
100
(24)
24
(2,744)
(30)
396
110

—
—
(24)
24
(1,490)
(111)
425
(34)

(931)
931
(232)
232
(25,548)
(279)
3,692
1,032

(2,266)(1,212)(21,103)

Financing activities:
Net decrease in short-term borrowings ...................................................
Proceeds from long-term debt ..................................................................
Repayment of long-term debt...................................................................
Payments for purchases of treasury stock................................................
Dividends paid............................................................................................
Net cash used in financing activities ..................................................

(8)
1,900
(1,995)
(9)
(250)

(352)
1,694
(2,186)
(372)
(153)

(81)
17,689(18,579)(92)(2,330)(364)(1,370)(3,394)

Effect of exchange rate change on cash and cash equivalents..................

(0)

0

(2)

Net increase (decrease) in cash and cash equivalents................................
Cash and cash equivalents, beginning of year ..............................................
Increase resulting from wider scope of consolidation ................................

528
2,593
—

(182)
2,708
67

4,917
24,146—

Cash and cash equivalents at end of year ...................................................

¥3,121¥2,593$29,060

Operating activities:
Adjustments to reconcile net income to net cash provided byoperating activities:
Income before income taxes .....................................................................
Depreciation and amortization .................................................................
Loss on disposal of property, plant and equipment ..............................
Interest and dividend income ...................................................................
Interest expense .........................................................................................
Loss on sale of investment securities ......................................................
Gain on sale of investment securities ......................................................
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable, trade ................
Decrease (increase) in inventories ...........................................................
Increase (decrease) in notes and accounts payable, trade ....................
Other ...........................................................................................................
Subtotal .................................................................................................
Interest and dividend income, received...................................................
Interest expense, paid................................................................................
Income taxes, paid .....................................................................................
Net cash provided by operating activities..........................................

See the accompanying Notes to Consolidated Financial Statements.

4

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS
TAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIESFor the Years Ended March 31, 2005 and 2004

TAYCA CORPORATION

1. Basis of presenting consolidated financial statements
TAYCA CORPORATION (the “Company”) and its subsidiaries maintain theiraccounts in conformity with the financial accounting standards of Japan.
The accompanying consolidated financial statements have been preparedin accordance with accounting principles and practices generally accepted inJapan and compiled from the consolidated financial statements filed with
the Minister of Finance as required by the Securities and Exchange Law ofJapan and include certain additional financial information for the convenience of readers outside these consolidated financial statements, althoughsuch statements are not required in Japan.

2. Summary of significant accounting policies
1) Consolidated subsidiary accounts
The accompanying consolidated financial statements for the years ended
March 31, 2005 and 2004 include the accounts for the Company and the 5 subsidiaries listed below:
Name of consolidated subsidiaries

Tayca Ware housing Co., Ltd. ...............................
Tayca Syoji Co., Ltd. ..............................................
TFT Co., Ltd. ...........................................................
- Co., Ltd. ...........................................
Asahi shoun
TAYCA (Thailand) Co., Ltd. ..................................

Equity ownership
percentage*
%

100
100
100
100
86

*Represents ownership at March 31, 2005
2) Principles of consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its significant subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. All subsidiaries are consolidated on the basis of their results for fiscal years ended
December 31.
3) Foreign currency transaction
All short-term and long-term monetary receivables and payables denominatedin foreign currencies are translated into Japanese yen at the current exchange
rates at the balance sheet date.
Revenue and expense items denominated in foreign currencies are translated using the rate on the date of the transaction. Related exchange gains orlosses are credited or charged to income as incurred.
4) Inventories
Inventories are stated at cost, substantially determined by the movingaverage method.
5) Marketable and investment securities
Available-for-sale securities
With market quotations: stated at fair market value based on market prices
at the account settlement date (Unrealized losses are directly charged toshareholders’ equity and cost of sale is calculated using the movingaverage method.)
Without market quotations: stated at cost using the moving-averagemethodThe accounting standard for available-for-sale securities with market
quotations was changed in accordance with the new accounting standard
for financial instruments (“Recommendations on Establishment of
Accounting Standard for Financial Instruments”). Effective the term underreview, securities in question were stated at fair market value based onmarket prices at the account settlement date. (Unrealized loss is directly
charged to shareholders’ equity and cost of sale is calculated using themoving-average method. These securities had previously been stated atmoving-average cost.)
6) Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed with the declining-balance method or
straight-line method, at rates based on the estimated useful lives of theassets.

57) Liabilities for severance indemnities
The Company made provisions for liabilities for severance indemnities inan amount deemed necessary at the term-end, based on the estimatedamounts of projected benefit obligations and the fair value of the plan
assets. Transitional obligations in the amount of ¥1,222 million are charged
to expenses using the straight-line method over 10 years.
Actuarial gains/losses are recognized in income/expenses using thestraight-line method over 10 years, which is shorter than the average of theestimated remaining service lives commencing with the following period.
Overseas subsidiaries are outside the scope of application.
8) Income taxes
Current income taxes are provided for based on amounts currently payablefor each year. Deferred income arising from temporary differences in therecognition of assets and liabilities for tax and financial reporting purposes
are reflected in the consolidated financial statements.
9) Appropriation of retained earnings
Under the Commercial Code of Japan, proposals by the Board of Directors forthe appropriation of retained earnings (principally the payment of annual cash
dividends) should be approved by a shareholders’ meeting which must be
held within three months of the end of each financial year.
The appropriation of retained earnings reflected in the accompanying consolidated financial statements for each financial year represents the appropriation which was approved by the shareholders’ meeting or by the Board of
Directors and disposed of during that year.
The payment of bonuses to directors and corporate auditors is made out ofretained earnings instead of being charged to income for the year and constitutes a part of the appropriations referred to above.
10) Research and development costs
Research and development costs are charged to income as incurred.
11) Net income and dividend per share
Net income and dividend per share amounts are based upon the weighted
average number of shares of common stock outstanding during each year.
12) Cash equivalents
All deposits at banks with an original maturity date of three months or lessincluding time deposits are considered to be cash equivalents in theaccompanying statements of cash flows.
13) Consumption tax
Consumption tax is imposed at the flat rate of 5 percent on all domestic
consumption of goods and services with certain exceptions. The consumption tax withheld upon sales and consumption tax paid by the Companies
on the purchases of goods and services is not included in the amounts ofrespective revenues or costs and expenses in the accompanying consolidated statements of income, but is recorded as an asset or a liability, as thecase may be, and the net balance is included in other current liabilities.

3. U.S. dollar amounts
Amounts in U.S. dollars are included solely for the convenience of thereader. The rate of ¥107.41=$1, the approximate rate of March 31, 2005 has
been used. The inclusion of such amounts is not intended to imply that yen
amounts have been or could be readily converted, realized or settled in U.S.
dollars at that or any other rate.

4. Inventories
At the end of each fiscal year, inventories consisted of the following:
Millions of yen
2005

Finished goods and merchandise .... ¥2,885
Raw materials and supplies.............. 2,045
Work in process .................................
313¥5,244

Thousands of
U.S. dollars

2004

2005

¥3,3951,830
237¥5,462$26,860
19,041
2,921$48,822TAYCA CORPORATION

5. Short-term borrowings and long-term debt
Thousands of
U.S. dollars

Millions of yen
2005

Short-term borrowings...................... ¥ 233
Current portion of long-term debt ... 1,921
Long-term debt.................................. 3,704¥5,859

6. Contingent liabilities

2004

2005

¥ 242
1,901
3,819
¥5,963$ 2,176
17,88734,485$54,549

Contingent liabilities at March 31, 2005 were as follows:
Millions ofyen

Guaranty for bank loan ....................................

¥63

Thousands of
U.S. dollars$590

Loans from banks due through 2036, interest 0.8% to 4.9%.

7. Segment information
Industry segment information
The Companies operate principally in three industrial segments. (This segmentation was adopted from the reporting term. The figures shown below for theterm ended March 2004 have been restated in line with the new classification.)
Each segment has the following main products:
Titanium dioxide and its derivatives: Titanium dioxide, Micro titanium dioxide, Surface treatment business
Other chemicals:
Surfactants, Sulfuric acid, Aluminum triphosphate
Others:Business warehouses, Electro-ceramics products
Millions of yen

For the year ended March 31, 2005
Sales:
Sales to outside customers .............................................
Inter-segment sales and transfers...................................
Total...............................................................................
Operating expenses ..............................................................
Operating income .................................................................
Identifiable assets at March 31, 2005..................................
Depreciation..........................................................................
Capital expenditures ............................................................

Titanium dioxide
and its derivatives

Otherchemicals

OthersElimination ofinter-segment items

Consolidated
total¥15,994609
16,604
15,744¥ 860¥16,738¥ 1,017¥ 1,409¥ 8,632
3,044
11,677
11,379¥ 297¥ 7,848¥ 510¥ 1,113¥1,439
1,550
2,990
2,779
¥ 211
¥2,061
¥ 120
¥ 79

¥
—
(5,204)(5,204)(5,199)¥(5)¥8,053¥ 36¥ 92¥26,067—
26,067
24,704¥ 1,363¥34,702¥ 1,684¥ 2,695

Titanium dioxide
and its derivatives

Otherchemicals

OthersElimination ofinter-segment items

Consolidated
total¥15,424285
15,70914,421¥ 1,288¥16,298¥ 969¥ 1,107¥ 8,135
2,896
11,031
10,771¥ 260¥ 6,323
¥ 347
¥ 679

¥1,306
1,444
2,751
2,628
¥ 123
¥1,825
¥ 58
¥ 47

¥ —
(4,626)(4,626)(4,640)¥ 14¥8,885¥ 270¥ 16¥24,866—
24,86623,180¥ 1,686¥33,333¥ 1,645¥ 1,851

Titanium dioxide
and its derivatives

Otherchemicals

OthersElimination ofinter-segment items

Consolidated
total$148,910
5,678
154,589
146,581$ 8,007$155,841$ 9,469$ 13,124$ 80,373
28,341
108,714105,949$ 2,765$ 73,068$ 4,751$ 10,368$13,405
14,43827,84325,875$ 1,968$19,195$ 1,119$ 736$—(48,457)(48,457)(48,406)$(51)$74,975
$ 338
$ 865

$242,689—
242,689
229,999$ 12,689$323,080$ 15,678$ 25,094

Millions of yen

For the year ended March 31, 2004
Sales:
Sales to outside customers .............................................
Inter-segment sales and transfers...................................
Total...............................................................................
Operating expenses ..............................................................
Operating income .................................................................
Identifiable assets at March 31, 2004..................................
Depreciation..........................................................................
Capital expenditures ............................................................

Thousands of U.S. dollars

For the year ended March 31, 2005
Sales:
Sales to outside customers .............................................
Inter-segment sales and transfers...................................
Total...............................................................................
Operating expenses ..............................................................
Operating income .................................................................
Identifiable assets at March 31, 2005..................................
Depreciation..........................................................................
Capital expenditures ............................................................

8. Subsequent event
Undisposed deficits at the end of the term under review were disposed
through reversal of general reserve, as approved by the General Meeting of
Shareholders held on June 29, 2005.

Year-end cash dividends paid ...............
Bonus to directors and corporate auditors...
Transfer of general reserve ....................

Millions of yen

Thousands of
U.S. dollars

¥251
15
400

$2,337
148
3,724

6

R EPORT OF I NDEPENDENT P UBLIC A CCOUNTANTS
To the Board of Directors of
TAYCA CORPORATION
We have examined the consolidated balance sheets of TAYCA CORPORATION and its subsidiaries at March 31, 2005
and 2004, and the related consolidated statements of income, shareholders’ equity and cash flows for the years ended
March 31, 2005 and 2004, all expressed in Japanese yen. The consolidated financial statements are the responsibilityof the Company’s management. Our responsibility is to express our opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the auditing standards generally accepted in Japan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of TAYCA CORPORATION and its subsidiaries at March 31, 2005 and 2004, and theconsolidated results of their operations and their cash flows for the years ended March 31, 2005 and 2004, in conformity with generally accepted accounting principles in Japan applied on a consistent basis.
Note: Effective with the term under review, consolidated financial statements were prepared in accordance with the new accounting
standard for available-for-sale securities, which were stated at fair market value at the account settlement date. See additional information.

Yukihiro Ikehata
Certified Public Accountant
Osaka, Japan
June 29, 2005

Masao Oishi
Certified Public Accountant