F i n a n c i a l

S t a t e m e n t s

2004

TAYCA CORPORATION
Hitochiyodoyabashi 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
2004

2003

2002

2001

2000

Net sales.......................................................................

¥24,866¥25,971¥24,844¥26,820¥24,825

Income (loss) before income taxes............................

1,324

665

(918 )

582

843

Net income (loss) ........................................................

854

498

(809 )

543

803

Total assets ..................................................................

33,33331,311

31,26733,79633,177

Shareholders’ equity ...................................................

19,63917,805

17,215

18,46618,182

Common stock.............................................................

9,855

9,855

9,855

9,855

9,855

Net income (loss)...................................................

¥ 16.31¥ 9.69¥ (15.75 )¥ 10.57¥ 15.63

Shareholders’ equity ..............................................

390.54346.58334.75359.07353.55Per share of common stock (in yen):

Notes: (1) Figures for 2000 – 2004 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.

1

C ONSOLIDATED B ALANCE S HEETSTAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIESMarch 31, 2004 and 2003

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

Millions of yen

ASSETS

2004

2003

2004

Cash and time deposits ............................................................................

¥ 2,672¥ 2,787$ 25,300

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

35

35

340

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

7,276

7,971

68,887

Inventories (Note 4) ..................................................................................

5,462

4,837

51,716

Other current assets .................................................................................

543

350

5,147

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

(8)

(14)

(80)

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

15,983

15,969151,312Investment securities ...............................................................................

5,687

3,406

53,845Investments in unconsolidated affiliated companies (Note 6) ............

20

412

195

Other investments ....................................................................................

856

1,586

8,112

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

—

(21)

—

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

87

125

831

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

6,653

5,508

62,985Land ...........................................................................................................

979

829

9,273

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

13,586

13,100128,623

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

33,49232,853

317,069

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

149

162

1,419

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

1,833

1,740

17,353

Construction in progress ..........................................................................

421

84

3,989

Less, accumulated depreciation ..............................................................

(39,764)(38,937)(376,455)

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

10,697

9,833

101,273¥33,333¥31,311$315,571

Current assets:

Investments and other assets:

Property, plant and equipment:

See the accompanying Notes to Consolidated Financial Statements.

2

LIABILITIES, MINORITY INTERESTS ANDSHAREHOLDERS’ EQUITY

Thousands of
U.S. dollars (Note 3)

Millions of yen
2004

2003

2004

Current liabilities:
Bank loans ..................................................................................................

¥

242

¥

248

$

2,295

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

1,901

2,055

18,000Trade notes and accounts payable ..........................................................

2,716

2,973

25,719Accrued income taxes ...............................................................................

446

265

4,226

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

48

50

462

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

2,565

2,333

24,285

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

7,921

7,926

74,990Long-term borrowings (Note 5) ...............................................................

3,819

4,158

36,160Liabilities for severance indemnities ......................................................

1,294

1,151

12,257

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

279

256

2,647

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

333

—

3,158

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

5,727

5,566

54,224

Minority interests...........................................................................................

44

12

425

Issued — 51,428,828 shares at March 31, 2004 and 2003.............

9,855

9,855

93,306

Capital surplus ..........................................................................................

6,767

6,767

64,067Retained earnings .....................................................................................

2,028

1,349

19,200

Unrealized gain (loss) on available-for-sale securities ..........................

1,393

(157)

13,188Translation adjustments ...........................................................................

(22)

—

(208)

Treasury stock.............................................................................................

(382)

(10)

(3,622)

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

19,63917,805

185,931¥33,333¥31,311$315,571

Long-term liabilities:

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

3

C ONSOLIDATED S TATEMENTS OF I NCOMETAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIESFor the Years Ended March 31, 2004 and 2003

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 ...................................................................
Income taxes:
Current..............................................................................................................
Deferred ............................................................................................................
Minority interests ............................................................................................
Net income ...............................................................................................

2004

2003

2004

¥24,866
18,811
6,054
4,368
1,686

¥25,971
20,396
5,574
3,968
1,606

$235,408
178,088
57,31941,356
15,963

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

49
(128)
(861)
(940)
665

504
(1,196)(2,731)(3,422)
12,540

639
(157)
(11)
854

311
(146)
1
¥ 498

6,053
(1,495)(110)$ 8,093¥

U.S. dollars(Note 3)Yen

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

¥ 16.31

¥

9.69

$

0.15

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, 2004 and 2003

Balance, March 31, 2002 .................
Net income.....................................
Increase resulting from wider scope of consolidation ...
Cash dividends...............................
Bonuses to directors .....................
Net decrease in unrealized gain (loss)
on available-for-sale securities........
Increase in treasury stock .............
Balance, March 31, 2003 .................
Net income.....................................
Cash dividends...............................
Bonuses to directors .....................
Increase resulting from wider scope of consolidation ...
Net increase in unrealized gain (loss)
on available-for-sale securities........
Translation adjustments ...............
Increase in treasury stock .............
Balance, March 31, 2004 .................

Millions of yen

Number ofcommonshares(Thousands)

Commonstock

CapitalsurplusRetainedearnings

51,428¥9,855¥6,767

¥

757
498
94
(0)
(0)

Unrealized gain
(loss) on available- Translation
for-sale securities adjustments¥ (163)

¥ —

¥

¥ —

(9)
¥ (10)

6
51,428¥9,855¥6,767¥ 1,349
854
(163)
(3)
(9)

¥ (157)1,550
51,428¥9,855¥6,767¥2,028Treasurystock
at cost

(22)

(1)

¥(22)

(372)
¥(382)$ —$ (96)¥1,393Thousands of U.S. dollars (Note 3)

Balance, March 31, 2003 .................................... $93,306
Net income ........................................................
Cash dividends ..................................................
Bonuses to directors.........................................
Increase resulting from wider scope of consolidation ....
Net increase in unrealized gain (loss) on
available-for-sale securities ...........................
Translation adjustments ..................................
Increase in treasury stock .................................
Balance, March 31, 2004 .................................... $93,306
See the accompanying Notes to Consolidated Financial Statements.

4$64,067$12,776
8,093(1,545)(35)(89)$ (1,491)

14,680$64,067$19,200$13,188(208)$(208)(3,525)$(3,622)

C ONSOLIDATED S TATEMENTS OF C ASH F LOWSTAYCA CORPORATION AND C ONSOLIDATED S UBSIDIARIESFor the Years Ended March 31, 2004 and 2003

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

Millions of yen
2004

2003

2004

¥1,324
1,645
196
165
(53)
126
4
0

¥ 665
1,708
128
78
(64)
123
8
726

$12,540
15,580
1,860
1,571
(504)
1,196
41
7

696
(602)
(355)
(256)
2,893
39
(106)
(425)

820
429
(335)
156
4,445
64
(124)
(73)

6,593
(5,703)(3,362)(2,424)27,395370(1,006)(4,029)

2,400

4,312

22,729Investing activities:
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 ..................................................

(24)
24(1,490)
(111)
425
(34)

(25)
25
(1,765)
(531)
15
19

(236)
236
(14,114)(1,058)
4,026
(328)

(1,212)(2,262)(11,475)

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

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

(116)
1,900
(2,308)(8)(0)(3,341)
16,044(20,703)(3,525)(1,450)(1,370)(534)(12,977)

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

0

0

1

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

(182)
2,708
67

1,514
1,111
82

(1,723)25,640634

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

¥2,593¥2,708$24,552

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 ..............................
Increase in reserve for retirement benefits, net ......................................
Interest and dividend income ...................................................................
Interest expense .........................................................................................
Loss on sale of investment securities ......................................................
Loss on valuation of marketable securities and investments................
Changes in assets and liabilities:
Decrease in notes and accounts receivable, trade..................................
Decrease (increase) in inventories ...........................................................
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..........................................

5

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS
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, 2004 and 2003 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, 2004**Not consolidated for the year ended March 31, 2003.
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 translation
Short-term receivables in foreign currencies are translated into Japanese yenat the current exchange rates as of the balance sheet dates.
Long-term assets and liabilities are translated at the rates on the dates
they are acquired or incurred. Gains or losses resulting from exchange
adjustments are credited or charged to income as incurred.
4) Inventories
Inventories are stated at cost, substantially determined by the moving average 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.

67) 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 ¥105.63=$1, the approximate rate of March 31, 2004 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
2004

Finished goods and merchandise .... ¥3,395
Raw materials and supplies.............. 1,830
Work in process .................................
237¥5,462Thousands of
U.S. dollars

2003

2004

¥2,994
1,567
274¥4,837$32,143
17,3282,244$51,716TAYCA CORPORATION

5. Short-term borrowings and Long-term debt

Short-term borrowings...................... ¥ 242
Current portion of long-term debt ... 1,901
Long-term debt.................................. 3,819¥5,963

Contingent liabilities at March 31, 2004 were as follows:

Thousands of
U.S. dollars

Millions of yen
2004

6. Contingent liabilities

2003

2004

¥ 248
2,055
4,158
¥6,461$ 2,295
18,00036,160$56,457

Millions ofyen

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

Thousands of
U.S. dollars

¥61

$580

7. Segment information
Industry segment information
The Companies operate principally in three industrial segments.
Each segment has the following main products:
Commodity chemicals:
Titanium dioxide, Surfactants, Sulfuric acid
Specialty chemicals:
Micro titanium dioxide, Surface treatment business Aluminum triphosphate
Business warehouse, others: Business warehouse, Electro-ceramics products

Loans from banks due through 2036, interest 1.0% to 4.9%.

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 (loss)........................................................................
Identifiable assets at March 31, 2004...................................................
Depreciation...........................................................................................
Capital expenditures .............................................................................

Commodity
chemicals

Specialty
chemicals

Businesswarehouse others

Elimination ofinter-segment items

Consolidated
total¥17,560
3,000
20,56020,642¥(81)¥18,228¥ 942¥ 1,102¥5,998
181
6,180
4,550
¥1,630¥4,393¥ 374¥ 684¥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

Commodity
chemicals

Specialty
chemicals

Businesswarehouse others

Elimination ofinter-segment items

Consolidated
total¥ 19,146
3,446
22,592
22,568¥24¥ 18,015¥ 1,078¥870¥ 5,473
138
5,611
4,165
¥ 1,446¥ 3,889
¥ 293
¥ 252

¥ 1,351
1,089
2,440
2,361
¥
79
¥ 1,448
¥
60
¥ 288

¥
—
(4,673)(4,673)(4,729)¥55¥ 7,958¥ 276¥
31¥ 25,971—
25,971
24,365¥ 1,606¥ 31,311¥ 1,708¥ 1,443

Commodity
chemicals

Specialty
chemicals

Businesswarehouse others

Elimination ofinter-segment items

Consolidated
total$166,246
28,401
194,648
195,423$(774)$172,568$ 8,924$ 10,434$56,791
1,719
58,51043,074$15,435$41,593$ 3,541$ 6,483$12,370
13,67526,04624,879$ 1,166$17,286
$ 557
$ 447

$
—
(43,796)(43,796)(43,932)$ 135$84,122$ 2,557$ 158$235,408—
235,408
219,445$ 15,963$315,571$ 15,580$ 17,524

Millions of yen

For the year ended March 31, 2003
Sales:
Sales to outside customers ..............................................................
Inter-segment sales and transfers....................................................
Total................................................................................................
Operating expenses ...............................................................................
Operating income .................................................................................
Identifiable assets at March 31, 2003...................................................
Depreciation...........................................................................................
Capital expenditures .............................................................................

Thousands of U.S. dollars

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

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

Millions of yen

Thousands of U.S. dollars

¥251
¥ 16
¥600

$2,377$ 158$5,6807

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, 2004
and 2003, and the related consolidated statements of income, shareholders’ equity and cash flows for the years ended
March 31, 2004 and 2003, 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, 2004 and 2003, and theconsolidated results of their operations and their cash flows for the years ended March 31, 2004 and 2003, 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, 2004

8

Masao Oishi
Certified Public Accountant