Tokuyama Corporation Annual Report 2018

1

Contents
Profile3

Consolidated Financial Highlights

6

Segment Information

8

Medium-Term Management Plan

16

Message from the President

18

Research and Development

21

CSR Initiatives

23

Corporate Governance25

Business and Other Risks

29

Corporate Officers

31

Financial Section

33

Independent Auditor’s Report

81

Major Subsidiaries and Affiliates

82

Corporate Data and Stock Information

84

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 20182

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

Company History
1918～1944 Establishment and specialization in soda production
1918
1938
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
1952

The Factory as it was established

Commenced electrolytic chlor-alkali business

1961～1974 Entry into petrochemicals business
1964
1966
1967
1970

Commenced petrochemicals business
Commenced polyvinyl chloride business
Commenced ion exchange membrane business
Commenced polypropylene business
1960’s Cement kiln (length: 185m)

1975～1989 Entry into specialty and processing business
1976
1978
1981
1982
1983

1984
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 businessTokuyama Factory (Current)

1990～2004 Strengthening and restructuring of business
1992
1995
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 of polyvinyl chloride
Commenced recycling & environment-related business2005～ Accelerating overseas business expansion
2005

2013

Established Tokuyama Chemicals (Zhejiang) Co., Ltd. in Zhejiang, China as a manufacturing and sales
company of fumed silica
Established Tokuyama Trading (Shanghai) Co., Ltd., as a China-based local subsidiary.
Established Tokuyama Nouvelle Calédonie S.A., in New Caledonia, as a manufacturing and sales company
of cement.

Tokuyama Corporation Annual Report 20183

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

Tokuyama Corporation Annual Report 2018

4

Tokuyama Corporation Annual Report 20185

Consolidated Financial Highlights
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31

Millions of yen
2009

2010

2011

2012

2013

Net sales

300,999

273,154289,786

282,381258,632

Operating profit (Note 1)

21,796

15,486

19,313

12,721

3,993

Profit (loss) attributable to owners of parent(5,597)

7,458

9,765

9,351

(37,916)(102.08)

117.58140.32134.37(544.88)

6.00

6.00

6.00

6.00

3.00

Net assets

3,349.01

3,410.17

3,465.91

3,581.95

3,126.42

Total assets

403,613452,893474,708

501,181518,251

Net assets

189,757

243,606

247,656

255,460

223,871

Cash flows from operating activities

42,48029,38037,04327,06017,071

Cash flows from investing activities(56,506)(36,468)(88,508)(57,666)(60,673)

Cash flows from financing activities

29,24646,99023,994

20,791

36,465

Cash and cash equivalents at end of the year

55,36595,945

68,62458,47652,431

Capital expenditures

52,55026,55735,80777,602

97,549Depreciation and amortization (Note 3)

22,986

37,68831,47628,492

23,242R&D expenses

11,872

11,817

11,46911,704

10,076

Shareholders' equity ratio (%)

45.5

52.4

50.8

49.7

42.0

Return on equity (%)

(2.9)

3.5

4.1

3.8

(16.2)

Number of employees

5,295

5,444

5,493

5,506

5,651

Consolidated subsidiaries

46

49

50

48

49

Per share amounts (in yen) (Note 2)
Basic earnings (loss)
Cash dividends(Note 1): Regarding the calculation of operating profit, “Cost of idle operations” is included in “Cost of sales” from the fiscal year ending March 31, 2018, andfor before the fiscal year ended March 31, 2017, it was reclassified from “Non-operating expenses” to “Cost of sales”.
(Note 2): The Company consolidated its common shares at a ratio of one share for each five shares effective as of October 1, 2017. On this basis, basic earnings(loss) per share and net assets per share are calculated on the assumption that the consolidation of shares was conducted as of the beginning fiscal year ending
March 31, 2009. The cash dividends per share for the fiscal year ending March 31, 2018 is the total after the share consolidation. The cash dividends per share
before the fiscal year ended March 31, 2016 are not re-calculated retrospectively.
(Note 3): Depreciation and amortization includes amortization of long-term prepaid expenses.

Tokuyama Corporation Annual Report 2018

6

Thousands of
U.S. dollars

Millions of yen(Note4)

2014

2015

2016

2017

2018

2018

Net sales

287,330

302,085

307,115

299,106

308,061

2,906,239

Operating profit (Note 1)

17,96018,70521,93638,533

41,268389,323

Profit (loss) attributable to owners of parent

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

52,165

19,698

185,833

146.86(939.26)(1,445.49)

738.92259.81

2.45

6.00

-

-

-

30.00

0.283

Net assets

3,300.88

2,336.78

739.901,527.42

1,806.56

17.04

Total assets

576,315554,527

401,342424,433

361,949

3,414,619

Net assets

236,453

169,445

60,205

135,976

136,591

1,288,601

Cash flows from operating activities

34,10530,77230,09820,012

61,885583,825

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

13,400(10,089)(12,665)(119,484)

Cash flows from financing activities

45,93940,502(37,689)(11,911)(101,209)(954,806)

Cash and cash equivalents at end of the year

69,973

116,122

121,166

118,819

66,807630,255

Capital expenditures

61,051

25,345

13,945

17,36015,941

150,391

Depreciation and amortization (Note 3)

16,77018,84520,084

14,215

13,985

131,940

R&D expenses

8,709

10,156

8,522

7,508

7,903

74,559

Shareholders' equity ratio (%)

39.9

29.3

12.8

29.9

34.7

-

Return on equity (%)

4.6(33.3)(94.0)

58.5

15.6

-

Number of employees

5,756

5,852

5,759

5,406

4,889

-

Consolidated subsidiaries

53

54

55

51

49

-

Per share amounts (in yen, U.S. dollars) (Note 2)
Basic earnings (loss)
Cash dividends(Note 1): Regarding the calculation of operating profit, “Cost of idle operations” is included in “Cost of sales” from the fiscal year ending March 31, 2018, andfor before the fiscal year ended March 31, 2017, it was reclassified from “Non-operating expenses” to “Cost of sales”.
(Note 2): The Company consolidated its common shares at a ratio of one share for each five shares effective as of October 1, 2017. On this basis, basic earnings(loss) per share and net assets per share are calculated on the assumption that the consolidation of shares was conducted as of the beginning fiscal year ending
March 31, 2009. The cash dividends per share for the fiscal year ending March 31, 2018 is the total after the share consolidation. The cash dividends per share
before the fiscal year ended March 31, 2016 are not re-calculated retrospectively.
(Note 3): Depreciation and amortization includes amortization of long-term prepaid expenses.
(Note 4):U.S. dollar amounts above and elsewhere in this annual report are converted from Japanese yen, for convenience only, at the rate of ¥106=US$1.

Tokuyama Corporation Annual Report 20187

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 and Sodium silicate

Chlor-Alkali and Vinyl Chloride

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

New Organic Chemicals

Isopropyl alcohol (IPA)
Soda ash and Calcium chloride [Tokuyama & Central Soda Inc.]

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

Operating Results for the Fiscal Year ended March 31, 2018
Sales of caustic soda were up compared with the previous fiscal year both domestic sales and export volumes increased
due to the upward trend of Asian market, and the revision of selling prices was also progressed.
Sales of vinyl chloride monomer (VCM) were up compared with the previous fiscal year. The volume of export mainly
for Asian market increased and the selling prices were steady.
Sales of vinyl chloride resin increased. The revision of selling price was progressed.
As a result of the above, segment net sales increased 12.2% compared with the previous fiscal year, to ¥93,546 million
and operating profit increased 24.4% to ¥16,175 million. The segment reported higher earnings on higher sales.

Tokuyama Corporation Annual Report 20188

Strategies Going Forward
Tokuyama will contribute to the development of customers’ businesses by delivering high-quality, cost-competitive
basic chemical materials and services that properly and promptly reflect customers’ needs. At the same time, we will
help to ensure the Company’s stable and continuous earnings growth, all through our activities as the core business of
the Company.
Guided by this basic policy, we will push forward the following priority measures.
■ Soda Ash and Calcium Chloride BusinessWe will ensure the stable supply while maintaining the quality of products as a sole domestic manufacturer.
■ Chlor-Alkali and Vinyl Chloride BusinessWe will strengthen the competitiveness of our in-house power generation and electrolytic chlor-alkali production withthe aim of further reducing the cost of caustic soda and chlorine. We will expand VCM exports and maintain plant
operations at full capacity. At the same time, we will strengthen the profitability of the chlorine derivatives businessincluding vinyl chloride, propylene oxide, and chloromethane.

Tokuyama Corporation Annual Report 20189

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

26.6%

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

Business Unit

Major ProductsElectronic Materials

Polycrystalline silicon

Fumed Silica

Fumed silica and Tetrachlorosilane

Thermal Management Material

Aluminum nitride

IC Chemicals

High-purity chemicals for electronics manufacturing and photoresist developer

Cleaning System

Methylene chloride for metal cleaning
Fumed silica [Tokuyama Chemicals (Zhejiang) Co., Ltd.]Group Companies

Aluminum nitride substrate [Tokuyama-Dowa Power Materials Co., Ltd.]
High-purity chemicals for electronics manufacturing [Taiwan Tokuyama Corporation]

Operating Results for the Fiscal Year ended March 31, 2018
Sales of polycrystalline silicon decreased. Despite a robust sales volume of semiconductor-grade polycrystalline silicon,
this was primarily due to removal of Tokuyama Malaysia Sdn. Bhd. from the Company's scope of consolidation.
Sales of fumed silica increased compared with the previous fiscal year due to increased sales of such applications as apolishing material for semiconductors.
With regard to high-purity chemicals for electronics manufacturing, sales increased compared with the previous fiscal
year, mainly due to the robust sales volume in such applications as semiconductor manufacturing.
With regard to thermal management material, sales increased compared with the previous fiscal year. This was
attributable to an increase in sales volumes of such applications used for semiconductor manufacturing equipment.
As a result of the above, segment net sales decreased 13.4% compared with the previous fiscal year, to ¥58,678 million
and operating profit increased 19.4% to ¥11,003 million. The segment reported higher earnings on lower sales.

Tokuyama Corporation Annual Report 201810

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

Strategies Going Forward

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

Tokuyama Corporation Annual Report 201811

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

26.6%

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

Major Products and Services

CementCement, Ready-mixed concrete and Cement-type soil solidifier

Recycling and Environment

Resource recycling business
Cement and Ready-mixed concrete [Hiroshima Ready Mixed Concrete Co., Ltd andGroup Companies
Tokuyama Tsusho Trading Co., Ltd., etc.]

Operating Results for the Fiscal Year ended March 31, 2018
Sales of cement increased. While the construction of infrastructure related to Tokyo Olympic was becoming more active,
domestic sales increased at Tokyo and the other areas, and the volume of exports increased on the back of robust
demand in the Asia region. Meanwhile, manufacturing costs increased due to a rise in raw material prices such as coal.
In the resource recycling business, despite the Company accepted a lower volume of waste, the waste disposable fees
increased compared with the previous fiscal year. As a result of this, sales was almost same as the previous fiscal year.
Consolidated subsidiary net sales increased. This mainly reflected the robust shipping trends of such products asready-mixed concrete.
As a result of the above, segment net sales increased 5.2% compared with the previous fiscal year, to ¥87,345 million
and operating profit decreased 39.5% to ¥4,568 million. The segment reported lower earnings on higher sales.

Tokuyama Corporation Annual Report 201812

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

Tokuyama Corporation Annual Report 201813

LIFE & AMENITY
The Life & Amenity Division consists of Group companies that
handle such wide-ranging products as polyolefin films, medical
diagnosis systems, dental materials, ion exchange membranes andplastic window sashes. The Division is also in charge of theTokuyama’s fine chemicals and NF businesses. From April 2013, theAdvanced 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.
Business Unit

Major Products

Fine Chemicals

Active pharmaceutical ingredients and intermediates, Plastic lens-related materials

NF

Microporous film

Group Companies

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

Operating Results for the Fiscal Year ended March 31, 2018
With regard to dental materials and equipment, sales increased compared with the previous fiscal year, due to higher
sales volumes of new products and an increase in the volume of export.
With regard to ion exchange membranes, sales were up compared with the previous fiscal year. This largely reflected
the increase of sales on large-scale projects compared with the previous fiscal year.
Sales of active pharmaceutical ingredients and intermediates decreased compared with the previous fiscal year, owing
mainly to the downswing in the sales volumes of generic pharmaceuticals.
With regard to microporous film, sales of such applications as sanitary articles including disposable diapers decreased atoversea subsidiaries. As a result of this, sales decreased compared with the previous fiscal year.
In gas sensors, Figaro Engineering Inc. was removed from the Company’s scope of consolidation effective from thesecond quarter of the previous fiscal year. This reflected the transfer of a portion of the company’s shares.
As a result of the above, segment net sales increased 1.6% compared with the previous fiscal year, to ¥ 51,579 million
and operating profit decreased 30.8% to ¥ 3,728 million. The segment reported lower earnings on higher sales.

Tokuyama Corporation Annual Report 201814

Strategies Going Forward
Tokuyama is securing a position of advantage
17.7%in markets both in Japan and overseas, pursuing business expansion, andcontributing to the improvement of people’s quality of life by establishing and strengthening its customer-oriented
development, manufacturing, and sales structure. Driven by this policy, we will advance the following priority
measures.
■ NF Business (Microporous Film)
We will endeavor to improve earnings by improving the quality and reducing costs at subsidiaries in China.
■ Fine Chemicals BusinessWe will expand market share and cultivate new applications in photochromic dye materials for use in eyeglass lenses.
■ Dental Materials/Equipment Business (Tokuyama Dental Corporation)
Steps will be taken to accelerate the pace of overseas business development focusing mainly on aesthetic fillingmaterials (composite resins).
■ Polyolefin Film Business (Sun･Tox Co., Ltd.)
Every effort will be made to expand sales by using the manufacturing facilities implemented scrap and build.
■ Plastic Sash Business (Excel Shanon Corp.)
We will expand Zero Energy House (ZEH)-related sales.

Tokuyama Corporation Annual Report 201815

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

Going forward, Tokuyama is committed to carrying out the following two priority management strategies by fiscal 2025,
the fiscal year ending March 31, 2026.
1. Transition toward a robust business structure that is resilient against changes in the Company’s operating
environment and is capable of sustainable growth
The Tokuyama Group has set the goal of becoming a global leader in advanced materials through unique technologies
across growth businesses including the Specialty Products as well as Life & Amenity segments together with thedevelopment of new products. In such traditional businesses as the Cement and Chemicals segments, the Group will
work to become a leader in Japan through strengthening competitiveness.
2. Transition to a Group-wide low-cost structure by undertaking a comprehensive review of existing work
practices
The Tokuyama Group will reduce costs by adopting a cross-departmental approach that differs from conventional
methods and undertaking strategic capital expenditures as a part of efforts to cut back principal costs including raw
material, fuel, repairs and maintenance, and distribution expenses.
Tokuyama is cognizant of the vital need to create the necessary driving force to propel new profit growth. With this inmind, the Company will accordingly work to definitively change its organizational climate, rebuild its businessstrategies, strengthen Group management, and improve its financial position.
1. Change its organizational climate
Recognizing the need to promote an environment in which key positions take the initiative to foster a vibrant corporate
culture that encourages independent thinking and rapid business execution among employees, we adopted a new
performance-based personnel system for management and employees over the age of 60. Looking ahead, we plan toexpand this system to all employees. In order to incorporate fresh perspectives in the Group’s business promotion
activities, we will also actively recruit outside personnel with specialized skills and a wealth of experience as a part ofour human resources development system.
2. Rebuild its business strategies
In order to realize the aspirations of becoming a leader in its traditional businesses in Japan and a global leader inadvanced materials identified under its Medium-Term Management Plan, Tokuyama will strengthen thecompetitiveness of each business utilizing ICT and accelerate the pace of overseas business development.
In addition, steps will be taken to introduce a new business evaluation system that focuses on capital efficiency and to
optimize the business portfolio.
As far as research and development is concerned, we will rebuild our R&D structure so that it is more in tune withcustomers’ needs and cultivate new business domains by implementing open innovation with other companies.

Tokuyama Corporation Annual Report 201816

3. Strengthen Group management
In order to fully capitalize on synergies within the Tokuyama Group, every effort was made to accelerate the pace ofsales strategies with strong support for a human resource perspective and management decision-making based on
flexible capital policies. As a result, reform of the Group as a whole will also gather pace. In addition to applying the
new business evaluation system to consolidated subsidiaries and clarifying the degree of contribution to enhancing
corporate value, we will work to reinforce internal control at Group companies.
4. Improve its financial structure
Steps were taken to execute an unsecured bond trust-type debt assumption agreement, undertake the repayment inadvance of loan agreements with financial covenants, and reduce interest-bearing debt in order to quickly stabilize theCompany’s financial position. Moving forward, Tokuyama will continue to reduce interest-bearing debt while working
to enhance its shareholders’ equity by building up profits for the period.

Progress

ROA (operating profit/total assets) came in at 10.5%, surpassing the numerical target of 10% set under the
Medium-Term Management Plan. In addition to the increase in operating profit, this improvement in the Company’s
ROA largely reflected the contraction in total assets as a result of such factors as the decrease in cash and deposits
following the execution of an unsecured bond debt assumption agreement and the repayment of long-term loans
payable. The Company’s cash conversion cycle (CCC) improved six days compared with the previous fiscal year, to 62
days. This was largely attributable to the contraction in inventory and changes in the trading terms and conditions ofcertain purchased products. Tokuyama’s D/E ratio also came in at 1.11, an improvement of 0.57 compared with theprevious fiscal year. This was mainly due to the accumulation of profits and cutbacks in interest-bearing debt.

Tokuyama Corporation Annual Report 201817

Message from the President

Hiroshi Yokota, President

Looking Back, Up Until Fiscal 2017
Looking back, my first year as the Company’s president started with the posting of a huge impairment loss related toour solar-grade polycrystalline silicon business. Given this situation, we took decisive action, implementing various
reform measures that placed priority on rebuilding our financial platform to ensure the revitalization of the TokuyamaGroup. In fiscal 2016, my second year, amid this difficult management situation, operating income substantiallyexceeded forecasts at the beginning of the fiscal year owing to the fair winds of falling raw material and fuel costs,
among other factors. We also reached the decision to transfer the shares of the consolidated subsidiary engaged in thesolar-grade polycrystalline silicon business that had been the cause of so much concern, Tokuyama Malaysia Sdn. Bhd.,
to a Korean firm. In my third year, fiscal 2017, we marked the completion of this sale of Tokuyama Malaysia shares,
and together with this, on June 14, 2017, we also acquired and canceled a total of ¥20 billion worth of Class A sharesissued in fiscal 2016 as a cash consideration.
In terms of profitability, despite the headwinds of soaring raw materials and fuel costs, a reversal from the previous
fiscal year, in fiscal 2017 we were able to post record-setting net sales and operating income. This was attributable to a
firm foundation of manufacturing, such as with cost cutting and stable operations. On top of this, though, we alsoendeavored to revise selling prices of caustic soda and polyvinyl chloride in our Chemicals segment, and in Specialty
Products, we were able to increase sales volumes as we were recognized for our distinctive products in thesemiconductor-related market.
With regard to cash dividends, we set the fiscal 2017 interim dividend at ¥2 per share (the Company consolidated its
common shares at a ratio of one share for each five shares, effective as of October 1, 2017. After the consolidation, thedividend essentially became ¥10 per share). The year-end dividend per share
Hiroshi Yokota, President
amounted to ¥20, which was comprised of a base dividend of ¥10 per share, as well as
an additional ¥10 per share as a 100th anniversary commemorative dividend. This essentially made for fiscal year
dividends of ¥30 per share. We are planning fiscal 2018 interim and year-end dividends of ¥25 per share, respectively,
for a total of ¥50 per share.

Tokuyama Corporation Annual Report 201818

Medium-Term Management Plan Foundation: “Change the Group’s Organizational Culture
and Structure”
Two years have passed since we launched the Medium-Term Management Plan in May 2016. This fiscal year wewelcome a turnaround point.
With regard to planning, we newly formulated our “Tokuyama Vision” as a revision of our corporate basic policy,
which after 27 years had become outdated. In tandem with this, as our vision of an ideal Tokuyama Group in 2025, we
set forth a goal of becoming a “global leader in advanced materials through unique technologies” in growth businesses
such as Specialty Products and Life & Amenity, and in our traditional Chemicals and Cement businesses, to become “aleader in Japan through strengthening competitiveness.” For this Medium-Term Management Plan, we also formulated
management numerical targets for fiscal 2020 that we would treat as milestones, and we are addressing priority issues
toward achieving those targets.
In promoting the Medium-Term Management Plan, the theme of critical importance is to change the Group’s
organizational culture and structure. I am aware that Tokuyama’s insular corporate culture has emerged as a factor thathas contributed to the posting of enormous losses for two consecutive fiscal years and that has hindered business growth.
I believe that bringing back the vital culture of “focusing on our customers” and having an “outward-looking approach,”which Tokuyama had lost over a period of many years, will result in achieving our targets for fiscal 2020 and realizing
an ideal Tokuyama Group in fiscal 2025.
On the other hand, it is not easy to change a culture and a mindset that have been entrenched for many years. It is mybelief that when those in senior management seize the initiative to drive things forward, this is what will greatly
motivate division leaders and division staff members.
For this reason, from fiscal 2016, the first year of the Medium-Term Management Plan, we endeavored to exchange
opinions and provide on-site guidance to employees, particularly those in the managerial class who will bear the
responsibilities of the Company going forward. This guidance concerned transformation, specifically of business
functions, the work itself, and of their consciousness so as to instill the “Tokuyama Vision” in each and every employeeof the Tokuyama Group. This initiative is ongoing even today. Together with this, we revised overall personnel systems
so as to reflect the results we achieve to how we do things.

Toward “Global Leader in Advanced Materials” and “Leader in Japanthrough Strengthening Competiveness in Traditional Business”
Enhanced Profitability by Restructuring of Business Strategies
We will build a lean and sturdy business structure that stands up well to changes in the economic environment so that
we can successfully accomplish the Medium-Term Management Plan. At the same time, we will also endeavor tostrengthen profitability from the Medium-Term Management Plan’s two underpinning pillars, namely, “GrowthBusinesses” and “Traditional Businesses.”
In semiconductor-related products, which represent an important business domain, we will further hone the high quality
and high purity that are Tokuyama’s strengths amid ever-increasing demand for miniaturization and build a value chainthat meets qualitative and quantitative requirements.
In the healthcare domain, we will cultivate business as four pillars: plastic lens-related materials; diagnostic reagent andclinical systems; dental materials and equipment; and active pharmaceutical ingredients (API). Here, the key tomonetization lies in marketing. By firmly putting in place sales channels for our healthcare-related materials, we will
accelerate the growth of our market share.
In the traditional business segments of Chemicals and Cement, although Japan is a market of mature industries, surging
demand in overseas markets remains unabated. Amid the dramatic changes swelling up outside of Japan, I would like to
see us gain the trust of customers so as to achieve business continuity and maximize profits.

Tokuyama Corporation Annual Report 2018

19

A “Global Leader in Advanced Materials” and a “Leader in Japan through Strengthening
Competitiveness in Traditional Business”
As was the case last fiscal year, raw materials costs are projected to continue to soar in fiscal 2018. Our concerted
efforts to promote changes to the Group’s organizational culture and structure are ongoing, and we will work to foster avibrant corporate culture in which we execute business operations with a sense of urgency. In this way we aim toachieve our budget, and furthermore, to surpass those results of the previous fiscal year. For myself as well, I will work
to fulfill my role in top management so that we will be able to achieve these results.
All of us in the Company will work vigorously and as one to achieve the fiscal 2020 targets of the Medium-Term
Management Plan, and to realize our vision of the Tokuyama Group in fiscal 2025. As we move toward achieving thosetargets, we kindly request the continued support and understanding of all our shareholders and other stakeholders.

Hiroshi Yokota
President

June 2018

Tokuyama Corporation Annual Report 201820

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

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

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

Tsukuba Research Laboratory

Tokuyama Research Laboratory

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

R&D Activities in Fiscal 2017
Based on our basic philosophy of "Centered on the field of chemistry, the Tokuyama Group will continue to create
value that enhances people’s lives ", Tokuyama is doing Research and Development with aiming to expand and develop
each business based on chemistry, with priority areas being "Specialty Chemicals for ICT and Healthcare".
In combination with the existing Analytical Science Department and Intellectual Property Department, the TokuyamaGroup R&D Divisions consist of a five-department system after dividing the previous Corporate Development
Department into the Tsukuba Research Laboratory, Tokuyama Research Laboratory, and New Business Promotion
Department in July 2017. The purpose of this reorganization is to help accelerate development based on a clear
responsibility-taking system and creating marketing functions based on successful Group development themes that
anticipate customer/market needs and technological changes.
The Tsukuba Research Laboratory and Tokuyama Research Laboratory have continued to develop scintillator materials
for neutron detectors, single crystal aluminum nitride substrates, and battery materials while also establishing new
development themes for semiconductor peripheral materials, organic inorganic composite materials, nano particle
materials, chlorine compound materials, medical materials, and veterinary peripheral materials. In November 2017, theTokuyama Corporation Annual Report 201821

Company commenced domestic sales of livestock nipple protective material Teatner , which is the first productdeveloped under the new system.
The New Business Promotion Department engages in marketing in cooperation with internal and external organizations,fine-tuning its business strategies and proprietary technologies starting with customers, and is tasked with creating newthemes in the fields of IoT and life sciences.
In fiscal year ended March 31, 2018, the Tokuyama Group’s R&D spending totaled ¥7,903 million, including ¥1,564
million for basic research expenditures that are not allocable to a specific segment.
Below is a description of R&D projects underway and spending by segment.
Chemicals Segment
Tokuyama develops technologies to cope with needs of environmental load reduction of chlorine-related products,
reduce costs by improving production efficiency, and maintain and improve product quality. With vinyl chloride resin,
Tokuyama also strengthened its technical services to supply products according to customers' requests, and actively
worked on developing new grades that make use of the findings acquired from technical service. In developing
inorganic chemicals, Tokuyama focused on investigating marketability based on customer evaluation, improvement ofphysical properties and manufacturing process.
R&D expenditures totaled ¥ 627 million in the Chemicals segment.
Specialty Products Segment
Regarding polycrystalline silicon, Tokuyama upgrades and develops technologies in order to both improve the purity
and quality of polycrystalline silicon for semiconductors as well as reduce costs through more efficient production.
With regards to silica, Tokuyama has not only upgraded its existing fumed silica products, but also developed new
conformal silica to meet customer requests.
As for heat dissipating materials, in addition to aluminum nitride and boron nitride fillers used in heat dissipationmaterials such as power semiconductors and LEDs, Tokuyama has begun developing silicon nitrides.
With regard to high-purity chemicals for the electronics industry, Tokuyama has redoubled its efforts to continually
reduce impurities.
R&D expenditures came to ¥ 1,958 million in the Specialty Products segment.
Cement Segment
Tokuyama has continued to aggressively pursue R&D in the use of various wastes as raw materials and fuels for the
production of cement. In particular, Tokuyama focused on exploring substitutes for coal. Focusing on applications
outside of cement manufacturing processes, Tokuyama has concentrated on developing technologies to effectively use
coal ash and waste gypsum boards. As basic research on cement, Tokuyama continued to examine the reduction ofburning temperature of cement clinker from the viewpoint of energy saving. As cement-related products, Tokuyama
promoted development and improvement of various building materials products applied to repair and reinforce concrete
structures such as cross section repairing materials, development and improvement of various grades of cement-based
soil solidifiers.
R&D expenditures were ¥712 million in the Cement segment.
Life & Amenity Segment
We made progress developing next-generation photochromic dye materials for lenses-related materials. We also workedon the development of manufacturing processes for active pharmaceutical ingredients. In the healthcare and clinicaltesting fields, marked progress was made on the integrated development of products including diagnostic reagents andlaboratory information systems, clinical analyzers, and laboratory automation systems. In the dental care field,
continued steps were taken to develop products such as restorative composite resins, dental adhesives and dental resin
composite block. In ion exchange membranes, progress was made on the development of high-efficiency bipolar
membrane electrodialysis technology, highly functional ion exchange membranes, and other products.
R&D expenditures totaled ¥3,039 million in the Life & Amenity segment.

Tokuyama Corporation Annual Report 201822

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

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

Tokuyama’s Environmental Performance for Fiscal 2017
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 2017, Tokuyama achieved its goals for unit energy consumption, recycling and zero emissions. Regarding otherperformance data, Tokuyama has set a separate numerical management target for each department to maintain thecurrent low-impact situation.

Tokuyama Corporation Annual Report 201823

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.
Donations under the Mikage Bunko ProgramThis year, the Tokuyama Factory ran its 41st Mikage Bunko charity program, which began in 1978 as a part of theCompany’s 60th anniversary celebrations. Under the program, library bookstore gift certificates are donated toelementary and junior high schools in Shunan City each year. The total amount of donations to date has exceeded ¥200
million.
The Company donated ¥100,000 each to 41 elementary and junior high schools in Shunan City in 2018 together withbookcases to mark its 100th anniversary. Mr. Kenichiro Kimura, Mayor of Shunan City, in expressing his sincere
gratitude and commenting that many children who grew up reading Mikage Bunko were now thriving at the heart ofsociety presented Mr. Hideki Adachi, General Manager of Tokuyama Factory, with a certificate of appreciation.

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

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

Tokuyama Corporation Annual Report 201824

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

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

Board of Directors and Executive Officer System
In addition to deliberating and making resolutions on important matters relating to the activities of the Company, theBoard of Directors supervises business operations. During fiscal 2017, the Board of Directors met on 20 occasions.
As of June 25, 2018, Tokuyama’s Board of Directors comprised 11 members. The Company appointed three external
directors thereby bolstering the supervisory function of the Board of Directors. Meanwhile, the term of office of
directors (excluding directors who are Audit and Supervisory Committee members) is set at one year in order to ensure clear
accountability as well as the ability to swiftly address changes in the operating environment.
Tokuyama adopted an executive officer system in April 2011 with the aim of separating the executive and supervisory

Tokuyama Corporation Annual Report 201825

functions for business operations. As of June 25, 2018, the Company had 13 executive officers.
Based on the rules for approval determined by the Board of Directors, authority is delegated to the business executive
system.

Audit and Supervisory Committee
Directors who are Audit and Supervisory Committee members attend meetings of the Board of Directors and otherimportant internal meetings for purposes such as gathering information on the status of the execution of businesses, andconduct audits of how the executive officers are executing their duties. During fiscal 2017, Audit and Supervisory
Committee met on 18 occasions, making reports, consultations and resolutions on important matters. As of June 25,
2018, the Audit and Supervisory Committee consists of five directors who are the members of the Committee, including
three external directors who are Audit and Supervisory Committee members.

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

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

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

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

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

Seven Committees of Experts
With regard to areas requiring specialist expertise and of great importance from the viewpoint of risk management andcompliance, the Company has set up and is developing the activities of seven committees of experts—covering
accounting, antitrust law and competition law compliance, trade control, information security, environmental measures,
safety measures, product safety and quality—under the CSR Promotion Committee and separate from the Risk andCompliance Committee.

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 201826

Policies and Procedures for Appointing Management Executives and Nominating Directorand Auditor Candidates
To enable supervision of appropriate decision making and business execution with regard to the Company’s business
operations that are centered on chemicals, the selection of internal candidates for directorships appoints people who are
well-balanced in terms of their knowledge of each business segment and area as well as the experience they possess. By
adding external directors who possess high-level insight and wide-ranging experience as managers, the Company
ensures the balance and diversity of the Board of Directors as a whole.
When nominating director (excluding directors who are Audit and Supervisory Committee members) candidates,
discussions are held at a Human Resources Committee meeting in advance of the subject appearing on the agenda at a
Board of Directors’ meeting. Comprising representative directors and external directors, the Human Resources
Committee is the entity that nominates directors, executive officers and others, and discusses such matters as
remuneration. The Board of Directors makes its decisions in response to the Human Resources Committee’s report.
In the case of the nomination of directors who are Audit and Supervisory Committee members candidates, the Board of
Directors makes its decisions having received the assent of the Audit and Supervisory Committee.

Policies and Procedures for Determining the Company’s Executives Remuneration
The policy relating to the amount of remuneration for the Company’s executives and determining method to calculate
such amounts is based on rules of executive remuneration, which are as follows.
1. The remuneration of directors who are Audit and Supervisory Committee members and other directors shall bewithin a range of remuneration obtained by resolution at a Shareholders’ Meeting.
2. Having received the proposals of remuneration of directors (excluding directors who are Audit and Supervisory
Committee members) from the president and executive officer in advance, such proposals shall be discussed at a
Human Resources Committee meeting.
3. Individual directors (excluding directors who are Audit and Supervisory Committee members) remuneration shallbe in accordance with the amounts decided for each executive and determined by Board of Directors’ resolution.
4. The specific amounts of remuneration for directors who are Audit and Supervisory Committee members shall be
determined by the resolution of Audit & Supervisory Board.
At its 154th Ordinary General Meeting of Shareholders, which was held on June 22, 2018, the Company decided to
introduce a performance-based stock remuneration program for directors of the Company (excluding directors who are
Audit and Supervisory Committee members, non-executive directors, external directors, and persons not resident inJapan) and executive officers (excluding persons not resident in Japan; hereinafter collectively referred to with directors
as “Directors, etc.”). The aim of introducing the program is to clarify the interrelationship between the remuneration of
Directors, etc., and the Company’s corporate value toward the realization of the Medium-Term Management Plan,
which was formulated in 2016, to enhance motivation to achieve the business performance targets in the Medium-Term
Management Plan, and further ensure interests are shared with shareholders by promoting the holding of the Company’s
shares by Directors, etc.
In fiscal 2017, a total of ¥171 million and ¥32 million was paid to seven directors (excluding external directors) and two
Audit and Supervisory Board members (excluding external directors), respectively. In addition to the aforementioned
compensation, a total of ¥9 million and ¥49 million was paid to two corporate auditors (excluding external directors)
and seven external officers, respectively.
In addition to the aforementioned compensation, an amount of ¥42 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.
The decision of whether to accept a Large-Scale Purchase is ultimately left to the discretion of Tokuyama’s shareholders.
Consequently, in cases where a Large-Scale Purchase is being attempted, we believe that the Large-Scale Purchaser’s
provision of an adequate amount of information is necessary. In addition, we believe that the appraisal and opinions ofTokuyama’s Board of Directors, as well as the provision of information and the like based on the business features
pertaining to any Large-Scale Purchase, are critical for the shareholders to make a decision of whether to accept said

Tokuyama Corporation Annual Report 201827

Large-Scale Purchase, and contribute to the common interests of Tokuyama’s shareholders.
Accordingly, the Company established a set of large-scale purchase rules to ensure that these interests and theCompany’s corporate value are preserved. Under these rules, each Large-Scale Purchaser is required to provide anadequate amount of information to Tokuyama’s Board of Directors prior to undertaking a Large-Scale Purchase.
Moreover, an appropriate amount of time must be set aside to allow the Company’s Board of Directors to assess andconsider the terms and conditions of the Large-Scale Purchase and to put forward its opinion as well as alternative
proposals.
In cases where a Large-Scale Purchaser fails to comply with the large-scale purchase rules, or when a Large-Scale
Purchaser complies with the large-scale purchase rules, but is deemed to significantly damage the common interests of
the Company’s shareholders and the Company’s corporate value, Tokuyama’s Board of Directors may take suchmeasures as the allotment of share options without contribution as stipulated under Article 277 and the following
provisions of Japan’s Companies Act and oppose the Large-Scale Purchase on the condition that the Company obtains
approval at the Ordinary General Meeting of Shareholders concerning.
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 22, 2018.
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 201828

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

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

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

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

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

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

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

Tokuyama Corporation Annual Report 201829

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

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

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

(10) Financing Arrangements
Tokuyama Group arranges financing through loans or issuance of unsecured bonds, and in preparation for changes in
the market environment such as interest rates, in principle, measures to mitigate risks by hedging transactions such as
fixed rate contracts or fixed interest rate swaps, however, there is a possibility that with some borrowing, cost offinancing arrangements could increase due to changes in the market environment such as interest rate, which may havea significant impact on the performance and financial contents of the Tokuyama Group. In addition to changes in themarket environment such as interest rates, since the amount of interest-bearing debt exceeded the amount of equity
capital at the end of the consolidated fiscal year, or depending on the credit ratings or other conditions, there is no
guarantee that the financing is always available under same conditions in arranging financing through a new loan from afinancial institution or the issuance of unsecured bonds.

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

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

Tokuyama Corporation Annual Report 201830

Corporate Officers(As of June 25, 2018)

Masao Kusunoki

Hiroshi Yokota

Representative Director
Chairman and Executive Officer

Representative Director
President and Executive Officer

Takeshi Nakahara

Hideki Adachi

Akihiro Hamada

Hideo Sugimura

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

Masaki Akutagawa

Youji Miyamoto

Shin KatoToshihide Mizuno

Yoshikazu Tsuda

Director, Audit &Supervisory Committee
Chair

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

Director, Audit &Supervisory Committee
Member（External Director）

Director, Audit &Supervisory Committee
Member（External Director）

Tokuyama Corporation Annual Report 201831

Executive Officers
Chairman and Executive Officer

Masao Kusunoki

President and Executive Officer

Hiroshi Yokota

Managing Executive Officer

Takeshi Nakahara

General Manager of Social Responsibility Div.

Hideki Adachi

General Manager of Tokuyama Factory

Akihiro Hamada

General Manager of Financial Div.

Masao Fukuoka

General Manager of General & Personnel Affairs Div.

Toshihiko Annaka

General Manager of Procurement & Logistics Div.

Ryo Sugiyama

General Manager of Life & Amenity Business Div.

Hideo Sugimura

General Manager of Corporate Planning Div.

Hiroshi Nomura

General Manager of Specialty Products Business Div.

Kazuo Matsuya

General Manager of Chemicals Business Div.

Fumiaki Iwasaki

General Manager of Research & Development Div.,

Executive Officer

Tsukuba Research Laboratory and Medical AssociatedDept.
Takahide Taniguchi

Tokuyama Corporation Annual Report 201832

General Manager of Cement Business Div.

Financial Section
Financial Review

34

Consolidated Balance Sheets

40

Consolidated Statements of Income

42

Consolidated Statements of Comprehensive Income

43

Consolidated Statements of Changes in Net Assets

44

Consolidated Statements of Cash Flows45

Notes to Consolidated Financial Statements

46

Tokuyama Corporation Annual Report 201833

Financial Review

Income Analysis
In the fiscal year ended March 31, 2018 (April 1, 2017 to March 31, 2018), the momentum of recovery across the global
economy gathered strength. This was largely due to an upswing in investment in developed countries, smartphone
penetration and growth in emerging nations, increased application of information technology in the automobile, home
appliance, and other sectors, and growing use of IoT and big data.
As far as the Japanese economy is concerned, export and manufacturing activities continued to improve with corporate
earnings reaching record highs. In addition to improvements in employment and disposable income conditions,domestic demand also exhibited signs of a recovery on the back of such factors as personal consumption andprivate-sector capital investment. Taking the aforementioned into consideration, Japan advanced toward a positive
economic cycle.
Under these circumstances, the Tokuyama Group continued to implement the priority measures identified in its
Medium-Term Management Plan.
As a result, despite increases in raw material and fuel costs including coal and naphtha, Tokuyama benefitted from suchfactors as an increase in sales volume and efforts to adjust selling prices. As a result, both net sales and operating profit
improved.
Consolidated net sales increased 3.0%, or ¥8,954 million compared with the previous fiscal year, to ¥308,061 million(US$2,906 million). This was largely attributable to an increased sales volume in major products such as cement andrevision in selling prices of caustic soda and petroleum products.
Cost of sales increased 2.6%, or ¥5,222 million compared with the previous fiscal year, to ¥207,715 million (US$1,959
million). This was due mainly to an increase in raw material and fuel costs as a result of the surge in coal and domestic
naphtha prices.
SG&A expenses increased 1.7%, or ¥997 million compared with the previous fiscal year, to ¥59,077 million (US$557
million). This was largely attributable to the increase in logistics costs associated with the increased sales volumes.
Operating profit increased 7.1%, or ¥2,735 million compared with the previous fiscal year, to ¥41,268 million (US$389
million). Despite an increase in fuel and raw material costs, this was due mainly to an increased sales volume in major
products and improved profitability with the effect of the revision in selling prices. The operating margin (the ratio of
operating profit to net sales) was 13.4 %, an increase of 0.5 percentage points compared with the figure of 12.9%
recorded in the previous fiscal year.

Tokuyama Corporation Annual Report 201834

Non-operating income/expenses deteriorated ¥537 million compared with the previous fiscal year.
As a result of the above, ordinary profit increased 6.5%, or ¥2,197 million compared with the previous fiscal year, to¥36,196 million (US$341 million).
Extraordinary income/losses deteriorated by ¥7,827 million compared with the previous fiscal year. This was largely
attributable to the posting of a loss on transfer of business due to the completion of transfer of Tokuyama Malaysia Sdn.
Bhd.
As a result of the above, profit before income taxes decreased 14.6%, or ¥5,630 million compared with the previous
fiscal year, to ¥32,895 million (US$310 million).
Profit after deducting income taxes calculated in an appropriate way decreased 52.5%, or ¥28,015 million comparedwith the previous fiscal year, to ¥25,381 million (US$239 million).
Profit attributable to owners of parent decreased 62.2%, or ¥32,467 million compared with the previous fiscal year, to¥19,698 million (US$185 million).
Basic earnings per share was profit of ¥259.81 (US$2.451), down from ¥738.92 in the previous fiscal year. Dividends
per share were ¥30.00 (US$0.283).
Return on equity (ROE) and return on assets (ROA:operating profit/total assets) were15.6% and 5.4%, respectively,
compared with 58.5% and 12.3% in the previous fiscal year.

Tokuyama Corporation Annual Report 201835

Segment Information
The Tokuyama Group is composed of the parent company, Tokuyama Corporation (“the Company”), 49 subsidiaries
and 29 affiliated companies. The Group’s operations are divided into the four business segments of Chemicals,
Specialty Products, Cement, and Life & Amenity. For accounting purposes, 49 of the Company’s subsidiaries areconsolidated, while 10 affiliates are accounted for using the equity method.
Chemicals
The Chemicals segment includes the operations of the Company and three consolidated subsidiaries.
Sales of caustic soda were up compared with the previous fiscal year both domestic sales and export volumes increased
due to the upward trend of Asian market, and the revision of selling prices was also progressed.
Sales of vinyl chloride monomer (VCM) were up compared with the previous fiscal year. The volume of export mainly
for Asian market increase and the selling prices were steady.
Sales of vinyl chloride resin increased. The revision of selling price was progressed.
As a result of the above, segment net sales increased 12.2% compared with the previous fiscal year, to ¥93,546 million(US$882 million) and operating profit increased 24.4% to ¥16,175 million (US$152 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.
Sales of polycrystalline silicon decreased. Despite a robust sales volume of semiconductor-grade polycrystalline silicon,
this was primarily due to exclusion of Tokuyama Malaysia Sdn. Bhd. from the Company’s scope of consolidation.
Sales of fumed silica increased compared with the previous fiscal year due to increased sales of such applications as apolishing material for semiconductors.
With regard to high-purity chemicals for electronics manufacturing, sales increased compared with the previous fiscal
year, mainly due to the robust sales volume in such applications as semiconductor manufacturing.
With regard to thermal management material, sales increased compared with the previous fiscal year. This was
attributable to an increase in sales volumes of such applications used for semiconductor manufacturing equipment.
As a result of the above, segment net sales decreased 13.4% compared with the previous fiscal year, to ¥58,678 million(US$553 million) and operating profit increased 19.4% to ¥11,003 million (US$103 million). The segment reported
higher earnings on lower sales.
Cement
The Cement segment comprises the operations of the Company, 17 consolidated subsidiaries and five equity-method
affiliates.
Sales of cement increased. While the construction of infrastructure related to Tokyo Olympic was becoming more active,
domestic sales increased at Tokyo and the other areas, and the volume of exports increased on the back of robust
demand in the Asia region. Meanwhile, manufacturing costs increased due to a rise in raw material prices such as coal.
In the resource recycling business, despite the Company accepted a lower volume of waste, the waste disposable fees
increased compared with the previous fiscal year. As a result of this, sales was almost same as the previous fiscal year.
Consolidated subsidiary net sales increased. This mainly reflected the robust shipping trends of such products asready-mixed concrete.

Tokuyama Corporation Annual Report 201836

As a result of the above, segment net sales increased 5.2% compared with the previous fiscal year, to ¥87,345 million(US$824 million) and operating profit decreased 39.5% to ¥4,568 million (US$43 million). The segment reported lower
earnings on higher sales.
Life & Amenity
The Life & Amenity segment includes the operations of the Company, 11 consolidated subsidiaries and one
equity-method affiliate.
With regard to dental materials and equipment, sales increased compared with the previous fiscal year, due to higher
sales volumes of new products and an increase in the volume of export.
With regard to ion exchange membranes, sales were up compared with the previous fiscal year. This largely reflected
the increase of sales on large-scale projects compared with the previous fiscal year.
Sales of active pharmaceutical ingredients and intermediates decreased compared with the previous fiscal year, owing
mainly to the downswing in the sales volumes of generic pharmaceuticals.
With regard to microporous film, sales of such applications as sanitary articles including disposable diapers decreased atoversea subsidiaries. As a result of this, sales decreased compared with the previous fiscal year.
In gas sensors, Figaro Engineering Inc. was excluded from the Company’s scope of consolidation effective from thesecond quarter of the previous fiscal year. This reflected the transfer of a portion of the company’s shares.
As a result of the above, segment net sales increased 1.6% compared with the previous fiscal year, to ¥ 51,579 million(US$486 million) and operating profit decreased 30.8% to ¥ 3,728 million (US$35 million). The segment reported
lower earnings on higher sales.

Tokuyama Corporation Annual Report 201837

Financial Position and Liquidity
As of March 31, 2018, total assets amounted to ¥361,949 million (US$3,414 million), a decrease of ¥62,483 million
compared with the previous fiscal year-end.
Current assets decreased 19.9% compared with the previous fiscal year-end to ¥197,652 million (US$1,864 million).
This was due primarily to a decrease in cash and cash equivalents. Current liabilities increased 17.5% to ¥93,032
million (US$877 million). This mainly reflected an increase in notes and accounts payable. As a result, the current ratio
was down to 2.12 times, from 3.12 times as of the previous fiscal year-end.
Property, plant and equipment decreased 7.5% in comparison with the previous fiscal year-end to ¥110,242 million(US$1,040 million). This was primarily due to the removal of Tokuyama Malaysia Sdn. Bhd. from the consolidation.
Intangible assets and investments and other assets decreased 7.7% over the previous fiscal year-end to ¥54,054 million(US$509 million). This was primarily due to a decrease in deferred tax asset.
As of March 31, 2018, total liabilities amounted to ¥225,357 million (US$2,126 million), a decrease of 21.9%
compared with the previous fiscal year-end figure of ¥288,457 million. The main contributory factor was a decrease inbonds payable, long-term loans payable and current portion of long-term loans payable. Interest-bearing debt decreased
34.6% from ¥213,955 million as of the previous fiscal year-end to ¥139,917 million (US$1,319 million).
Non-controlling interests increased 22.0% from ¥8,960 million as of the previous fiscal year-end to ¥10,935 million(US$103 million). Net assets increased 0.5% compared with the previous fiscal year-end, from ¥135,976 million to¥136,591 million (US$1,288 million). The ratio of shareholders’ equity to total assets was 34.7%, up from 29.9% as ofthe previous fiscal year-end. The amount of net assets per share was ¥1,806.56 (US$17.04), up from ¥1,527.42 as of theprevious fiscal year-end.

Tokuyama Corporation Annual Report 201838

Capital Expenditures
Capital expenditures totaled ¥15,941 million (US$150 million), a decrease of 8.2% compared with the previous fiscal
year’s figure of ¥17,360 million.

Cash FlowsNet cash provided by operating activities totaled ¥61,885 million (US$583 million). Principal items included profit
before income tax of ¥32,895 million (US$310 million) (¥38,525 million in the previous fiscal year) and depreciation of¥13,985 million (US$131 million) (¥14,215 million in the previous fiscal year).
Net cash used by investing activities totaled ¥12,665 million (US$119 million). Major contributory factors were
payments for purchases of property, plant and equipment of ¥15,526 million (US$146 million) (¥16,693 million in theprevious fiscal year), proceeds from sales of shares in subsidiary of ¥5,362 million (US$50 million) (¥2,926 million in
the previous fiscal year).
Net cash used in financing activities came to ¥101,209 million (US$954 million). This was primarily attributable torepayment of long-term loans payable of ¥50,384 million (US$475 million) (¥17,297 million in the previous fiscal year),redemption of bonds of ¥36,014 million (US$339 million) (¥10,000 million in the previous fiscal year), increase intreasury shares of ¥21,650 (US$204 million) (¥7 million in the previous fiscal year).
As a result of the above, cash and cash equivalents decreased by ¥52,012 million (US$490 million) compared with theprevious fiscal year-end, to ¥66,807 million (US$630 million).

Tokuyama Corporation Annual Report 201839

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2018 and 2017
Millions of yen
2018
2017

Assets :Current assets :Cash and deposits *Note(2)Notes and accounts receivable - trade *Note(2),(7)Lease receivables
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets :Property, plant and equipment :Buildings and structures *Note(2),(3)Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles *Note(2),(3)Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and fixtures *Note(3)Accumulated depreciation
Tools, furniture and fixtures, net
Land *Note(2)Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress
Total property, plant and equipment
Intangible assets
Goodwill
Leased assets
Other *Note(3)Total intangible assets
Investments and other assets
Investment securities *Note(1),(2)Long-term loans receivable
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201840

Thousands of
U.S. dollars
201857,22979,66028
10,00014,028
10,075
15,327
6,620
4,809
(127)
197,652

121,598
73,945
6
12,348
9,919
16,567
1,627
10,798(150)
246,661

539,900
751,511273
94,339132,344
95,051
144,596
62,45745,377(1,206)
1,864,645

102,761(73,455)
29,305446,278(404,441)
41,836
21,887(19,748)2,138
30,9953,760(1,753)
2,007
3,959
110,242

100,430(72,723)
27,707450,926(404,912)
46,01422,015(20,222)
1,793
31,2893,533(1,329)2,203
10,225
119,233

969,446(692,977)
276,468
4,210,170(3,815,488)
394,682
206,484(186,307)
20,176292,41135,476(16,540)
18,93637,3491,040,024

1,158
51
1,556
2,766

2,367
35
2,384
4,787

10,925487
14,688
26,101

24,302
2,627
11,680
9,657
3,162
(141)
51,287
164,297
361,949

19,083
2,833
19,824
8,936
3,221
(148)
53,750177,771424,433

229,271
24,784
110,188
91,10429,833(1,334)
483,848
1,549,974
3,414,619

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2018 and 2017
Millions of yen
2018
2017

Liabilities :Current liabilities :Notes and accounts payable-trade *Note(2)Short-term loans payable *Note(2)Current portion of long-term loans payable *Note(2)Lease obligations
Income taxes payable
Deferred tax liabilities
Provision for bonuses
Provision for repairs
Provision for product warranties
Provision for loss on purchase contract
Other *Note(2)Total current liabilities
Noncurrent liabilities :Bonds payable
Long-term loans payable *Note(2)Lease obligations
Deferred tax liabilities
Provision for directors' retirement benefits
Provision for repairs
Allowance for loss on compensation for building materials
Provision for environmental measures
Net defined benefit liability
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities

Net assets :Shareholders' equity :Capital stock
Authorized：
Issued：Capital surplus

200,000,000
69,934,375

Retained earnings
Treasury stock2017 ：
370,1562018 ：
378,378
Total shareholders' equity

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
Non-controlling interests
Total net assets
Total liabilities and net assets
See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201841

Thousands of
U.S. dollars
201847,6102,549
15,684
641
3,688
0
2,557
4,332
98
15,87093,032

37,0352,138
15,235
577
1,335
2,103
1,628
81
2,671
16,346
79,153449,152
24,049147,967
6,048
34,801
24,12640,874930
149,717877,667

119,521
1,521
298
143
1,594
261
253
1,527
5
7,197
132,325
225,357

34,400160,555
1,787
268
143
2,829
318
287
1,430
6
7,275
209,303
288,457

1,127,558
14,3542,812
1,358
15,0422,467
2,388
14,40956
67,902
1,248,349
2,126,017

10,00020,00810,00041,54594,339188,757

90,75272,511

856,152(1,472)
119,288(1,446)
122,609(13,889)
1,125,360

1,352
(151)
2,093
3,074
6,368
10,935
136,591
361,949

319
(274)
1,528
2,833
4,406
8,960
135,976
424,433

12,757(1,432)
19,74629,00860,080103,160
1,288,601
3,414,619

Consolidated Statements of Income
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2018 and 20172018
308,061
207,715
100,3462017
299,106
202,492
96,613Thousands of
U.S. dollars
20182,906,239
1,959,578
946,661

39,26819,80959,07741,26837,916
20,16458,08038,533

370,453
186,884
557,337
389,323

210
272
957
878
540
1,785
4,645

54
249
900
53
27
464
115
1,293
3,159

1,989
2,573
9,034
8,283
5,102
16,844
43,827

3,714
1,604
4,398
9,717
36,196

4,224
3,469
7,693
33,99835,045
15,13541,49591,676
341,475

528
6
7,705
144
145
8,529

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

4,981
60
72,6881,366
1,372
80,469

5
1,098
4
110
715
6
8,059
1,431
398
11,83032,895

5
1,683
90
50
560
399
2,790
38,52549
10,365
40
1,043
6,753
60
76,03013,507
3,756
111,607
310,336

4,777
2,736
7,514
25,381
5,682
19,6982,967(17,838)(14,870)
53,396
1,231
52,16545,07525,81770,892
239,444
53,610185,833

Millions of yen
Net sales
Cost of sales *Note(1),(4)Gross profit
Selling, general and administrative expenses :Selling expenses *Note(2)General and administrative expenses *Note(3),(4)Total selling, general and administrative expenses
Operating profit
Non-operating income :Interest income
Dividend income
Share of profit of entities accounted for using equity method
Fiduciary obligation fee
Trial products income
Compensation income
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses :Interest expenses
Loss on bond retirement
Other
Total non-operating expenses
Ordinary profit
Extraordinary income :Gain on sales of noncurrent assets *Note(5)Gain on sales of investment securities
Gain on sales of shares of subsidiaries and associates
Compensation income for damage
Subsidy income
Gain on insurance adjustment
Gain on write-off debts
Gain on sales of patent right and otherSettlement received
Other
Total extraordinary income
Extraordinary loss :Loss on sales of non-current assets *Note(6)Impairment loss *Note(7)Loss on disaster
Loss on reduction of non-current assets
Loss on disposal of noncurrent assets
Loss on sales of investment securities
Loss on transfer of business
Loss on contract cancellation
Other
Total extraordinary losses
Profit before income taxes
Income taxes :Current
Deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

Yen
2018
Per share amounts :Net income
Cash dividends

259.8130

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 2018

42

2017
738.92-

U.S. dollars（Note 2）
2018
2.451
0

Consolidated Statements of Comprehensive Income
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2018 and 2017
Thousands of
U.S. dollars

Millions of yen
2018ProfitOther 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 *Note(1)Total comprehensive income
Attributable to:
Owners of parent
Non-controling interests

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 2018

43

2017

2018

25,38153,396

239,444

1,039
178
425
241
170

1,333
240
(717)
448
(138)

9,804
1,685
4,010
2,278
1,609

2,055

1,166

19,38827,43654,562258,832

21,6605,775

53,3691,193

204,343
54,489

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

Years ended March 31, 2018 and 2017[2018]
Shareholders' equity

Balance at biginning of year
Changes during the fiscal year
Profit attributable to owners of parent
Dividends of surplus
Purchase of treasury stock
Retirement of treasury shares
Disposal of treasury stock
Purchase of shares of consolidated subsidiaries
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of year

Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total

10,00041,54572,511(1,446)

122,609

19,698(1,457)(21,651)
21,6260(21,626)(0)
89

19,698(1,457)(21,651)
0
89
1,032

122

564

241

1,962

1,974

18,241(25)(3,321)

1,032

122

564

241

1,962

1,974

615

10,00020,00890,752(1,472)

119,288

1,352

(151)

2,093

3,074

6,368

10,935

136,591

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

3,936

Non
-controli
Totalng
net assetsinterests

Capitalstock

CapitalsurplusRetainedearnings

Treasurystock

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

53,458--(81,928)

8,732

60,205-52,16552,16552,165

(7)

(7)

(7)

0

0

0

(302)

(302)

(302)

Change of scope of consolidation

48,270-(0)

Disposal of treasury stockTotal

81,928Purchase of treasury stock

2,482

2,482

2,482
1,339

251

(834)

446

1,203

228

1,432

(43,458)(15,987)

133,792(7)

74,338

1,339

251

(834)

446

1,203

228

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

122,609

319

(274)

1,528

2,833

4,406

8,960

135,976[2018]
Shareholders' equity

Balance at biginning of year
Changes during the fiscal year
Profit attributable to owners of parent
Dividends of surplus
Purchase of treasury stock
Retirement of treasury shares
Disposal of treasury stock
Purchase of shares of consolidated
subsidiaries
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of year

135,976(21,536)

Profit attributable to owners of parent

Balance at end of year

8,960

-

Shareholders' equity

Capital increase of consolidated subsidiaries
Net changes of items other thanshareholders' equity
Total changes of items during theperiodNon-controli
Totalng
net assetsinterests

19,698(1,457)(21,651)
0
89[2017]

Balance at biginning of year
Changes during the fiscal year
Issuance of new shares
Transfer to other capital surplus from capitalstock
Deficit disposition

Millions of yen
Accumulated other comprehensive income
Valuation
Remeasurdifference Deferred
Foreign
ements ofongains orcurrency
definedTotal
available-f losses
translation
benefitor-sale on hedges adjustment
plans
securities
319
(274)
1,528
2,833 4,406

Capitalstock

CapitalsurplusRetainedearnings

Treasurystock

94,339391,934

684,067(13,650) 1,156,691

185,833(13,747)(204,019)(0)

185,833(13,747)(204,258) (204,258)
204,019
0
0

842

842

Total

Thousands of U.S. dollars
Accumulated other comprehensive income
Valuation
Remeasurdifference Deferred
Foreign
ements ofgains orcurrencyondefinedTotal
availablelosses
translation
benefitfor-sale on hedges adjustment
plans
securities
3,014(2,592)
14,41826,729 41,570- (203,177)
188,757

172,085
856,152

(239)

842
1,159

5,328

2,279 18,509

18,626

37,135
5,805(31,330)

9,742

1,159

5,328

2,279 18,509

18,626(13,889) 1,125,360

12,757(1,432)

19,74629,008 60,080

103,160 1,288,601

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201884,534 1,282,796
185,833(13,747)(204,258)
0

9,742

94,339Non-conTotal
troling
net assetsinterests

44

Consolidated Statements of Cash Flows
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2018 and 2017
Millions of yen
2018
2017

Thousands of
U.S. dollars
2018

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

32,895
13,985
1,433
95
(485)
(483)
(56)
(522)
(0)
(957)
(144)
3,714
110
1,098
715
(145)
8,059
(7,705)1,431
1,604(5,857)(6,463)(414)
11,344
1,673
972
55,899805(3,775)
145
7,705
(959)
2,064
61,88538,525
14,215(3,149)
135
(290)
(304)
(13)
(14)
(1)
(1,934)(900)(2,298)
4,224
50
1,683
560
98
(1,268)
(255)
(500)
(836)
(7,744)
824
(574)
3,095
(815)
(1,693)40,818750(4,246)255
500(18,065)
20,012

310,336
131,940
13,522902(4,582)(4,562)(531)(4,931)(0)(9,034)(1,366)35,045
1,043
10,365
6,753(1,372)
76,030(72,688)
13,507
15,135(55,262)(60,974)(3,912)
107,027
15,787
9,178
527,356
7,603(35,617)
1,372
72,688(9,056)
19,477
583,825

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

(288)
161
(15,526)
1,618(3,359)
76
5,362
(7)
234
144
(1,081)(12,665)(84)130(16,693)
197
(305)
341
2,926
(9)
270
2,298
905
(65)
(10,089)(2,717)
1,526(146,479)
15,267(31,695)
718
50,590
(74)
2,215
1,366
(10,202)(119,484)

Cash flows from financing activities
Increase (decrease) in short-term loans payable
Proceeds of long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Proceeds from issuance of common shares
Cash dividends paid
Cash dividends paid to non-controlling interests
Decrease (increase) in treasury stock
Other, net
Net cash provided by (used in) financing activities

2
10,120(50,384)(36,014)78(1,454)(406)(21,650)(1,500)(101,209)(6,625)
3,116(17,297)(10,000)
19,712
(0)
(294)
(7)
(514)
(11,911)24
95,480(475,325)(339,757)
736(13,724)(3,837)(204,246)(14,155)(954,806)

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
Cash and cash equivalents at end of period *Note(1)(23)(52,012)
118,819
66,807(358)(2,346)
121,166
118,819(220)(490,686)
1,120,942
630,255

See notes to consolidated financial statements

Tokuyama Corporation Annual Report 201845

Notes to Consolidated Financial Statements
Tokuyama Corporation and Consolidated Subsidiaries

1. BASIS OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared from accounts and records maintained by
Tokuyama Corporation (the “Company”) and its subsidiaries. The Company and its consolidated domestic subsidiaries
have maintained their accounts and records in accordance with the provisions set forth in the Companies Act (the“Act”) and the Financial Instruments and Exchange Act and in conformity with accounting principles and practices
generally accepted in Japan, which are different from the accounting and disclosure requirements of International
Financial Reporting Standards.
The accounts of consolidated overseas subsidiaries are based on their accounting records maintained in conformity withgenerally accepted accounting principles and practices prevailing in the respective countries of domicile.
The consolidated financial statements are not intended to present the consolidated financial position, results ofoperations and cash flows in accordance with accounting principles and practices generally accepted in countries andjurisdictions other than Japan.

2. U.S. DOLLAR AMOUNTSThe U.S. dollar amounts included in the consolidated financial statements and notes represent the arithmetic results oftranslating Japanese yen to U.S. dollars at the rate of ¥106=US$1, the approximate exchange rate on March 31, 2018.
The U.S. dollar amounts are included solely for the convenience of readers outside Japan, and are not intended to imply
that the assets and liabilities that originated in yen have been or could be readily converted, realized, or settled in U.S.
dollars at this or at any other rate.

3. SCOPE OF CONSOLIDATIONThe consolidated financial statements include the accounts of the Company and its 49 significant subsidiaries (51 in2017). Significant intercompany transactions and accounts have been eliminated in consolidation.
Major consolidated subsidiaries are as follows;
Sun•Tox Co., Ltd.
Shin Dai-ichi Vinyl Corporation
A&T Corporation
Excel Shanon Corporation
Tokuyama Dental Corporation
ASTOM Corporation
Hiroshima Tokuyama Ready Mixed Concrete Co., Ltd.
Tokuyama Mtech Corporation
Tokuyama Chemicals (Zhejiang) Co., Ltd.
Taiwan Tokuyama Corporation
A wholly owned subsidiary up until the previous consolidated fiscal year, Tokuyama Siltech Co., Ltd. was dissolved
following an absorption-type merger in which the Company was the surviving company and has been excluded from thescope of consolidation with effect from the fiscal year under review.
As the Company sold all the shares owned in Tokuyama Malaysia Sdn. Bhd., which had also been a wholly owned
subsidiary up until the previous consolidated accounting fiscal year, that company has been excluded from the scope of
consolidation with effect from the fiscal year under review. However, as the completion date for the transfer of theshares was May 31, 2017, the results for the fiscal year under review include the Tokuyama Malaysia results from April
1 to May 31, 2017.
Of consolidated subsidiaries, A&T Corporation closes its accounts on December 31. Its financial statements as ofDecember 31 are used in the preparation of consolidated financial statements, and adjustments necessary forconsolidation purposes are made to material transactions arising between that date and the consolidated fiscal year-end.
Of consolidated subsidiaries, Tokuyama Chemicals (Zhejiang) Co., Ltd. and other four companies whose original fiscal
year-end is December 31, are consolidated by performing provisional settlement of accounts on March 31, theconsolidated fiscal year-end, in compliance with the regular settlement of accounts.
Investments in 10 affiliates (10 in 2017) are accounted for by the equity method.

Tokuyama Corporation Annual Report 201846

Major equity method affiliate is Hantok Chemicals Co., Ltd.
The equity method does not apply to them because they have little impact on the consolidated financial statements when
they are excluded from the scope of application of the equity method, nor have any material impact on an aggregate
basis.
Major affiliate that are not accounted for by the equity is Oita Mining Co., Ltd.
Of equity method affiliates, with regard to the company of which the last date of its fiscal year is different from theconsolidated fiscal year-end, the financial statements of its fiscal year are used in the preparation of consolidated
financial statements.

4. SIGNIFICANT ACCOUNTING POLICIES(1) Valuation basis and valuation methods for significant assets(i) Securities
Available-for-sale securities
Securities with fair value
Stated at the fair value based on the quoted market price as of the fiscal year-end (Valuation differences arerecognized in net assets; The cost of securities sold is calculated by the moving-average method).
Securities without fair value
Stated at cost by moving-average method.
(ii) Derivatives
Derivatives are stated at fair value.
(iii) Inventories
Inventories held for sale in the ordinary course of businessStated at cost mainly by the moving-average method. (The balance sheet value of the inventories is calculated by
write-down based on the decreased profitability.)(2) Depreciation and amortization methods of significant depreciable and amortizable assets(i) Property, plant and equipment (excluding leased assets)
Buildings and structures acquired on or after April 1, 2016: Depreciated mainly by the straight-line method.
Other than the above:
Depreciated mainly by the declining-balance method.
The estimated useful lives of major items are as follows:
Buildings and structures: 2 to 75 years
Machinery, equipment and vehicles: 2 to 20 years(ii) Intangible assets (excluding leased assets)
Mining right:
Amortized by the unit-of-production method.
Other:
Amortized mainly by the straight-line method.
Internal use software is amortized by the straight-line method over the internally expected useful life (5 years).
(iii) Leased assets
Leased assets in finance lease transactions that do not transfer ownership
Depreciated by the straight-line method based on the assumption that the useful life is equal to the lease term and theresidual value is equal to zero.
(3) Significant allowances and provisions(i) Allowance for doubtful accounts
To cover possible bad debt expenses on notes and accounts receivable – trade, loans receivable and others, theallowance for doubtful accounts is provided at the estimated uncollectable amounts based on the historical default rate
for normal receivables, or taking into account collectability on a case-by-case basis for certain receivables such as
doubtful receivables with higher possibility of default.
(ii) Provision for bonuses
To prepare for the payment of next bonuses to employees, provision for bonuses is recorded based on the portion of theestimated amount of bonus payments attributable to the fiscal year under review.
(iii) Provision for repairs
Repair expenses are calculated individually and recorded to prepare for periodic repairs of manufacturing facilities.
(iv) Provision for product warranties
For required expenses incurred during the warranty period with free servicing (warranty expenses for free servicing) for
clinical test information systems and laboratory test automation systems, the estimated amount of expenses is recorded
based on the historical rate of incurrence (proportion of expenses paid to net sales).

Tokuyama Corporation Annual Report 201847

(v) Provision for directors’ retirement benefits
At certain consolidated subsidiaries, the amount to be required at the end of the fiscal year under review in accordancewith internal rules is recorded to prepare for payment of directors’ retirement benefits.
(vi) Allowance for loss on compensation for building materials
The estimated amount of losses incurred in replacement, renovation, etc. is recorded to prepare for repairs andmaintenance of plastic sashes for houses and buildings (fire protection and resistance grade).
(vii) Provision for environmental measures
Pursuant to the “Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes,” the estimatedamount at the end of the fiscal year under review is recorded to prepare for payments for disposal of PCB waste.
(4) Accounting method of retirement benefits(i) Methods of attributing estimated retirement benefits to accounting periods
When calculating retirement benefit obligations, the benefit formula basis is used to attribute estimated retirement
benefits to the period through the end of the fiscal year under review.
(ii) Amortization of actuarial differences
Actuarial differences are amortized by using the straight-line method over a period of time within the average remaining
service period of employees (14 years), from the subsequent fiscal year when they are incurred.
(iii) Application of simplified accounting method used by small companies
In calculating net defined benefit liability and retirement benefit expenses, some of the consolidated subsidiaries apply asimplified accounting method in which an assumed amount of benefits to be paid for voluntary base retirement at the
fiscal year-end is deemed as retirement benefit obligations.
(5) Accounting method for deferred assets
All deferred assets are charged to expenses when incurred.
(6) Translation of significant assets or liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rate in effect atthe balance sheet date and the resulting exchange gains or losses are credited or charged to income as incurred.
Assets and liabilities of overseas subsidiaries and the like are translated into yen at the exchange rate in effect at thebalance sheet date, while their revenues and expenses are translated into yen at the average rates of exchange prevailing
during the year. The resulting translation adjustments are included in “Foreign currency translation adjustment” and“Non-controlling interests” in net assets.
(7) Method of significant hedge accounting(i) Method of hedge accounting
For the method of hedge accounting, in general, the deferral hedge accounting is applied. Among hedging instruments,
forward exchange contracts that fulfill the requirement for allocation method are subjected to the allocation method.
Interest rate swaps that fulfill the requirement for special treatment are subjected to the special treatment.
(ii) Hedging instruments and hedged items
Hedging instruments and hedged items to which hedge accounting has been applied in the fiscal year under review are
as follows:
Hedging instruments:
Forward exchange contracts, interest rate swaps
Hedged items:
Forecast transactions in foreign currencies, accounts receivable denominated in foreign
currencies and loans payable(iii) Hedging policy
Foreign exchange risk and interest rate risk of hedged items are hedged within a certain range.
(iv) Method of assessing hedge effectivenessHedge effectiveness is assessed by comparing cumulative changes in cash flows or market fluctuations of hedged items
and cumulative changes in cash flows or market fluctuations of hedging instruments on a quarterly basis and based onchanges in the both, etc. For interest rate swaps to which the special treatment is applied, assessment of hedge
effectiveness is omitted.
(8) Amortization method and amortization period of goodwill
Goodwill is equally amortized over five years.
(9) Scope of cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents in the consolidated statements of cash flows consist of cash on hand, at-call deposits with

Tokuyama Corporation Annual Report 201848

banks, and short-term investments that have maturities within three months from acquisition, are readily convertible tocash, and are subject to an insignificant risk of changes in value.
(10) Other significant matters forming the basis of preparing the consolidated financial statements
Accounting for consumption taxes
Consumption tax and local consumption tax are accounted for using the tax-excluded method. Non-deductible
consumption tax and local consumption tax are accounted for as expenses for the fiscal year under review.

5. CHANGES IN ACCOUNTING POLICY
Not applicable.

6. NEW ACCOUNTING STANDARDS NOT YET APPLIED• “Implementation Guidance on Tax Effect Accounting ,” (Accounting Standards Board of Japan [ASBJ] Corporate
Accounting Standards Implementation Guidance No. 28, revised February 16, 2018)• “Implementation Guidance on Recoverability of Deferred Tax Assets,” (ASBJ Corporate Accounting Standards
Implementation Guidance No. 26, final revision February 16, 2018)
1. Summary
In the case of the “Implementation Guidance on Tax Effect Accounting,” when transferring control of the practicalguidelines on tax effect accounting at the Japanese Institute of Certified Public Accountants to the ASBJ, the content
was basically followed, but the following revisions were thought necessary and made.
(Main treatments that were subjected to review of the accounting process)• Treatment of taxable temporary differences pertaining to subsidiary stock, etc. in non-consolidated financial
statements• Treatments pertaining to recoverability of deferred tax assets in companies falling under (Category 1)
2. Planned date for implementation
The Company will implement these accounting standards from the beginning of the fiscal year ending March 2019.
3. Impact of implementing said accounting standards
The impact of applying the “Implementation Guidance on Tax Effect Accounting” on the consolidated financial
statements is being evaluated at this time.
• “Accounting Standard for Revenue Recognition ,” (ASBJ Corporate Accounting Standard No. 29, revised March 30,
2018)• “Implementation Guidance on Accounting Standard for Revenue Recognition,” (ASBJ Corporate AccountingStandard Implementation Guidance No. 30, dated March 30, 2018)
1. Summary
Having jointly developed comprehensive accounting standards pertaining to revenue recognition, the International
Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) officially announced
Revenue from Contracts with Customers (issued as International Financial Reporting Standards (IFRS) 15 by the IASB,
as Topic 606 by the FASB) in May 2014. On the basis of IFRS 15 being applied from the fiscal year beginning on orafter January 1, 2018, and Topic 606 being applied from the fiscal year beginning after December 15, 2017, a
comprehensive accounting standard on revenue recognition was developed by the ASBJ Committee and officiallyannounced in conjunction with the application guidelines.
As a basic policy in developing the ASBJ’s accounting standards pertaining to revenue recognition from the viewpointof the comparability between financial statements, which is one of the benefits of conformity with IFRS 15, accounting
standards were formulated for which it was decided to incorporate the basic principles of IFRS 15 as the starting point.
In addition, in the event of there being items that should be taken into consideration, such as any practical work that has
previously been conducted in Japan, alternative treatments will be added to the extent needed for comparability not becompromised.
2. Planned date for implementation
The Company will implement this accounting standard from the beginning of the fiscal year ending March 2022.

Tokuyama Corporation Annual Report 201849

3. Impact of implementing said accounting standards
The impact of implementing the “Accounting Standard for Revenue Recognition ” to the consolidated financial
statements is being evaluated at this time.

7. CHANGES IN PRESENTATION(Consolidated Statements of Income)”Cost of idle operations” which was included in “Non-operating expenses” in the previous fiscal year was reviewed forthe purpose of stricter cost control, and some amount of “Cost of idle operations” is included under “Cost of sales”
from the fiscal year under review. In order to reflect this change in presentation method, the consolidated financial
statements for the previous fiscal year have been reclassified.
As a result, ¥1,187million (US$11 million) of ¥1,200million (US$11 million) that was stated in “Cost of idle operations”
under “Non-operating expenses” in the previous fiscal year has been reclassified under “Cost of sales.”In the fiscal year under review, “Fiduciary obligation fee” in “Non-operating income” is separately presented due to its
increased significance. Items in the consolidated financial statements for the previous fiscal year have been reclassified
to reflect this change in the presentation.
Consequently, ¥53 million (US$1 million) that was presented in “Other” under “Non-operating income” in the previous
fiscal year has been reclassified to “Fiduciary obligation fee.”
In the fiscal year under review, “Trial products income” in “Non-operating income” is separately presented due to its
increased significance. Items in the consolidated financial statements for the previous fiscal year have been reclassified
to reflect this change in the presentation.
Consequently, ¥ 27 million (US$0 million) that was presented in “Other” under “Non-operating income” in the previous
fiscal year has been reclassified to “Trial products income.”
As the significance of “Trial production expenses” of “Non-operating expenses” declined in the fiscal year under review,
this is now included in “Other” under “Non-operating expenses”. Items in the consolidated financial statements for theprevious fiscal year have been reclassified to reflect this change in the presentation.
Consequently, ¥ 1,853 million (US$17 million) that was presented in “Trial production expenses” in the previous fiscal
year has been reclassified to “Other” in “Non-operating expenses.”(Consolidated Statements of Cash Flows)
As the significance of “Increase (decrease) in allowance for loss on compensation for building materials” under “Cashflows from operating activities” declined in the fiscal year under review, this is now included in “Increase (decrease) in
provision”. In order to reflect this change in presentation method, the consolidated financial statements for the previous
fiscal year have been reclassified.
As a result, the decrease of ¥65 million (US$1 million) presented as “Increase (decrease) in allowance for loss oncompensation for building materials” under “Cash flows from operating activities” in the previous fiscal year has been
reclassified under “Increase (decrease) in provision.”As the significance of “Increase (decrease) in provision for loss on purchase contract” under “Cash flows fromoperating activities” declined in the fiscal year under review, this is now included in “Increase (decrease) in provision.”
In order to reflect this change in presentation method, the consolidated financial statements for the previous fiscal year
have been reclassified.
As a result, the decrease of ¥2,701 million (US25 million) presented as “Increase (decrease) in provision for loss onpurchase contract” under “Cash flows from operating activities” in the previous fiscal year has been reclassified under“Increase (decrease) in provision.”

8. CHANGES IN ACCOUNTING ESTIMATES
Not applicable.

9. ADDITIONAL INFORMATION(Application of the consolidated corporate-tax system)
The Company is applying the “Practical Solution on Tentative Treatment of Tax Effect Accounting under Consolidated
Taxation System (Part 1)” (ASBJ Practical Issues Task Force No. 5, January 16, 2015) and “Practical Solution on
Tentative Treatment of Tax Effect Accounting under Consolidated Taxation System (Part 2)” (ASBJ Practical Issues
Task Force No. 7, January 16, 2015)” from the current fiscal year on the premise that the Company file a tax return as a

Tokuyama Corporation Annual Report 201850

consolidated entity, since the Commissioner of the National Tax Agency has approved the application of theconsolidated corporate-tax system by the Company and some consolidated subsidiaries from the fiscal year started on orafter April 1, 2018.

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

Millions of yen
2018
2017
Investment securities

7,803

5,954

Thousands of
U.S. Dollars
2018
73,618(2) Assets pledged as collateral and liabilities for which collateral is pledged
Assets pledged as collateral are as follows:

Millions of yen
2018
2017
Pledged Assets
Cash and deposits
Notes and accounts receivable - trade
Buildings and structures
Machinery, equipment and vehicles
Land
Investment securities
Total

1
73
562
26
663

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

Thousands of
U.S. Dollars
2018
9
693
5,305
247
6,255

(Note) In addition to the above, although there was ¥195 million (US2 million) at the end of the previous fiscal year for
shares of subsidiaries that had been eliminated in consolidation, there are no corresponding assets at the end of the
fiscal year under review.
Liabilities for which collateral is pledged are as follows:

Millions of yen
2018
2017
Pledged Debts
Notes and accounts payable - trade
Short-term loans payable
Curent portion of long-term loans payable
Long-term loans payable
Other
Total

1
351
33
117
19
522

228
325
559
3,560
18
4,692

Thousands of
U.S. Dollars
2018
9
3,315
315
1,104
181
4,926

(3) Reduction entry
In the fiscal year under review, reduction entries of ¥1 million (US$0 million) for buildings and structures, ¥96 million(US$0 million) for machinery, equipment and vehicles, and ¥12 million (US$0 million) for tools, furniture and fixtures
were made due to receipt of subsidies, etc.
In addition, as a result of the retirement of machinery, equipment and vehicles that were subject to the reduction entry,
cumulative reduction entries decreased by ¥1 million (US$0 million), and as a result of the retirement of tools, furnitureand fixtures that were subject to the reduction entry, cumulative reduction entries decreased by ¥15 million (US$0
million).
The cumulative reduction entries due to the receipt of subsidies, etc. in association with property, plant and equipment
are as follows:

Tokuyama Corporation Annual Report 201851

Thousands of
U.S. Dollars
2018

Millions of yen
2018
2017
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Software
Total

1,441
2,784
183
4
4,412

1,439
2,688
186
4
4,319

13,59826,265
1,728
38
41,631(4) Guarantee obligation
The Company provides guarantee of obligations concerning loans from financial institutions by the following
companies, etc.

Millions of yen
2018
2017
90

Employee

90

Thousands of
U.S. Dollars
2018
854

(5) Contingent liabilities pertaining to unsecured bond debt assumption agreements
With regard to the next unsecured bonds, the Company will be delegating the performance of the obligation based on an
unsecured bond trust-type debt assumption agreement that has been executed with a bank. Accordingly, although theliabilities pertaining to those unsecured bonds and the amount paid under that same contract offset each other, theobligation to redeem the Company’s unsecured bonds to bondholders continue until the time of their redemption.

Thousands of
U.S. Dollars
2018

Millions of yen
2018
2017
20th unsecured bonds without collateral
22th unsecured bonds without collateral
24th unsecured bonds without collateral
Total

10,00015,0009,400
34,400-94,339141,50988,679324,528

Millions of yen
2018
2017
480
508

Thousands of
U.S. Dollars
2018
4,535

(6) Notes receivable endorsed

Notes endorsed(7) Trade notes that mature on last day of consolidated fiscal year
Settlement processing for trade notes that mature at the end of the fiscal year is carried out on their clearing days.
As the last day of the fiscal year under review fell on a weekend and financial institutions were closed, trade notes
maturing at the end of the current fiscal year are included in the fiscal year-end balance.

Millions of yen
2018
2017
1,055

Notes receivable- - trade-

Thousands of
U.S. Dollars
2018
9,954

(8) Financial covenants
The Company is working to reduce its interest-bearing debt in an effort to improve its financial structure, which isstated as a priority issue under the Medium-Term Management Plan. As a result of having undertaken repayments inadvance with the agreement of financial institutions, as of the fiscal year under review, all borrowing agreements withfinancial covenants were terminated as follows.
With regard to the term out-type, medium-term commitment line contract signed with The Bank of Tokyo-Mitsubishi
UFJ, Ltd. (contract date September 30, 2011), the Company paid the full principal amount and settled the clearing
amount on September 29, 2017. In addition, the following financial covenant provisions were attached to this contract.

Tokuyama Corporation Annual Report 2018

52

The borrower must not let the amount calculated after deducting subscription rights to shares, non-controlling interests,
deferred gains or losses on hedges, foreign currency translation adjustment, and valuation difference on
available-for-sale securities from total net assets on the borrower’s consolidated balance sheet at the end of each fiscal
year, fall below 75% of identically calculated amounts at the end of the first half and second half of the preceding fiscal
year.
With regard to the syndicated loan contract (contract date December 22, 2011) co-financed by seven companies with theDevelopment Bank of Japan, Inc. acting as coordinator, the Company paid the full principal amount and settled theclearing amount on December 29, 2017. In addition, the following financial covenant provisions were attached to thiscontract.
(1) The amount calculated after deducting subscription rights to shares, non-controlling interests, deferred gains orlosses on hedges, foreign currency translation adjustment, and valuation difference on available-for-sale securities fromtotal net assets on the borrower’s consolidated balance sheet at the end of each fiscal year, must not fall below 75% of
the larger of either (i) the identically calculated amount as of the end of the preceding fiscal year or (ii) the identicallycalculated amount as of March 31, 2016.
(2) There must not be two consecutive fiscal years of ordinary losses.
(3) The borrower must maintain a credit rating of better than BB+ from Rating and Investment Information, Inc.
With regard to the syndicated loan contract (contract date July 24, 2012) co-financed by six companies with The Bankof Tokyo-Mitsubishi UFJ, Ltd. acting as coordinator, the Company paid the full principal amount and settled theclearing amount on January 29, 2018. In addition, the following financial covenant provisions were attached to thiscontract.
(1) The borrower promises to not let the amount calculated after deducting subscription rights to shares, non-controllinginterests, deferred gains or losses on hedges, foreign currency translation adjustment, and valuation difference on
available-for-sale securities from total net assets on the borrower’s consolidated balance sheet at the end of each fiscal
year, fall below 75% of the larger of either the identically calculated amount as of the end of the preceding fiscal year or
the identically calculated amount as of March 31, 2016.
(2) The borrower firmly promises to not record two consecutive fiscal years of ordinary losses on its consolidated
statements of income.

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

Loss on valuation of inventories

Millions of yen
2018
2017
185
(26)

Thousands of
U.S. Dollars
2018
1,748

Millions of yen
2018
2017

Thousands of
U.S. Dollars
2018(2) Major items and amounts of selling expenses are as follows:

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

Tokuyama Corporation Annual Report 201822,276
5,582
5,066
360
53
14
(6)

53

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

210,158
52,66247,800
3,397
500
132
(62)

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

Thousands of
U.S. Dollars
2018

Millions of yen
2018
2017
General and administrative expenses :Technical research expenses
Salaries and bonuses
Provision for bonuses
Provision for directors' retirement benefits
Retirement benefit expenses

6,798
3,663
326
56
33

6,473
3,997
261
47
68

64,13634,557
3,076
536
311

(Note) Technical research expenses for the previous fiscal year include provision for bonuses of ¥215 million andretirement benefit expenses of ¥42 million.
Technical research expenses for the fiscal year under review include provision for bonuses of ¥272 million (US$2
million) and retirement benefit expenses of ¥22 million (US$0 million).
(4) Total amount of research and development expenses included in general and administrative expenses and production
costMillions of yen
2018
2017
7,903
7,508

Research and development expenses

Thousands of
U.S. Dollars
2018
74,559(5) The breakdown of gain on sales of non-current assets is as follows:

Millions of yen
2018
2017
13
5
68
440
528

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

Thousands of
U.S. Dollars
2018
5
12
2
0
20

124
52
646
4,157
4,981

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

Millions of yen
2018
2017
3
1
0
5

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

Thousands of
U.S. Dollars
2018
0
0
4
5

30
13
5
49

(7) Impairment loss
Fiscal year ended March 31, 2018
The Group groups its assets mainly according to the smallest units independently generating cash flows based on
business categories. During the fiscal year ended March 31, 2018, the Group recorded impairment losses for thefollowing asset groups.
Details of the Company’s impairment loss have been omitted due to the low level of importance except for those items,
which are presented briefly as follows.

Tokuyama Corporation Annual Report 2018

54

Use

Manufacturing
facilities for
microporous film

Location

Shnghai,China

Asset category

Millions of yen
2018

Thousands of
U.S. Dollars
2018

Building and structures
Machinery, equipment andvehiclesTools, furniture and fixtures

152

1,437

480

4,529

4

41

Intangible assets-other

37

356

Total

674

6,364

Shanghai Tokuyama Plastics Co., Ltd. decided to write down the book value of the above asset to its recoverable
amount and to post the amount of write-down as an impairment loss in extraordinary losses due to deterioration inmarket conditions for microporous film.
The recoverable amount has been determined using value in use and a discount rate of 11.72% for calculating the value
in use based on future cash flows.
Fiscal year ended March 31, 2017
The Group groups its assets mainly according to the smallest units independently generating cash flows based on
business categories. During the fiscal year ended March 31, 2017, the Group recorded impairment losses for thefollowing asset groups.

Use
Idle fixed
assetsLocation
Oita-shi,
Oita

Asset category

Millions of yen
2017

Land

33

Total

33

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

Use
Manufacturing
facilities forpolycrystalline
siliconLocation

Asset category

Millions of yen
2017

Shunan-shi,
Yamaguchi

Construction in progress

31

Total

31

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

Use
Manufacturing
facilities for
ethylenedichloride

Location

Asset category

Millions of yen
2017

Shunan-shi,
Yamaguchi

Construction in progress

128

Total

128

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

Tokuyama Corporation Annual Report 2018

55

The recoverable amount has been determined using value in use and written down to its memorandum value for theabove reason.

Use

Location

Manufacturing
facilities for
microporous film

Tianjin,China

Asset category
Machinery, equipment andvehiclesInvestments and otherassets-other
Total

Millions of yen
2017
1,278
212
1,490

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

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

Thousands of
U.S. Dollars
2018

Millions of yen
2018
2017
Valuation difference on available-for-sale securities :Gains arising during the year
Reclassification adjustment to profit or loss
Amount before income tax effect
Income tax effectTotal valuation difference on available-for-salesecurities
Deferred gains or losses on hedges :Gains arising during the year
Reclassification adjustment to profit or loss
Amount before income tax effect
Income tax effectTotal deferred gains or losses on hedges
Foreign currency translation adjustment :Gains arising during the year
Reclassification adjustment to profit or loss
Total Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax :Gains arising during the year
Reclassification adjustment to profit or loss
Amount before income tax effect
Income tax effectTotal remeasurements of defined benefit plans, netof taxShare of other comprehensive income of entities
accounted for using equity :Gains arising during the year
Total Share of other comprehensive income ofentities accounted for using equity
Total other comprehensive income

Tokuyama Corporation Annual Report 2018

56

1,499
1,499
(460)

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

14,14814,148(4,343)

1,039

1,333

9,804

168
168
9
178

373
(10)
363
(122)
240

1,592
1,592
93
1,685

425
425

(663)
(53)
(717)

4,010
4,010

49
183
233
7

755
(106)
648
(200)

471
1,735
2,206
71

241

448

2,279

170

(138)

1,609

170
2,055

(138)
1,166

1,609
19,388

13. CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Fiscal year ended March 31, 2018
(1) Class and total number of shares issued and class and number of treasury stock[2018]
Beginning ofyear
Issuanced shares
Common shares (Note 1,2)
Class A shares (Note 3)
Total
Treasury shares
Common shares (Note 1,4,5)
Total

Thousand shares
Increase
Decreaseduring theduring the
fiscal year
fiscal year

End of year

349,67120
349,691-

279,73720
279,757

69,934
69,934

1,850
1,850

15
15

1,488
1,488

378
378

(Note 1) The Company consolidated its common shares at a ratio of one share for each five shares effective as of
October 1, 2017.
(Note 2) The 279,737,000 decrease in the total number of common shares outstanding is due to consolidation of shares.
(Note 3) The 20,000 decrease in issued and outstanding Class A shares is due to cancellation.
(Note 4) The 15,000 increase in the number of treasury stock of common stock is due to an increase of 1,000 shares due
to purchase of fractional shares in accordance with the consolidation of shares and an increase of 13,000 sharespurchased in less than a share-trading unit (9,000 shares before, 4,000 shares after consolidation of shares).
(Note 5) The 1,488,000 decrease in the number of treasury stock of common stock is due to a decrease of 1,488,000
shares following the consolidation of shares and a decrease of 0 thousand shares (0 thousand shares after the
consolidation of shares) due to requests for the additional purchase of shares constituting less than one unit.
(2) Dividends(i) Dividend amount paid

Resolution
Ordinary
GeneralMeeting of
Shareholders(June 23, 2017)
Board ofDirectors(October 27,
2017)

Resolution
Ordinary
GeneralMeeting of
Shareholders(June 23, 2017)
Board ofDirectors(October 27,
2017)

Class of shares

Dividend(Millions ofyen)

Dividend pershares (yen)Reference date

Effective date

38,082.20 March 31, 2017

June 26, 2017Class A shares

761

Commonshares695

2.00

September 30,
2017

November 30,
2017

Class of shares

Dividend(Thousands of
U.S. Dollars)

Dividend pershares (U.S.
Dollars)

Reference date

Effective date

Class A shares

7,185

359.27 March 31, 2017

June 26, 2017

Commonshares6,562

September 30,
2017

November 30,
2017

0.02

(Note) The Company consolidated its common shares at a ratio of one share for each five shares effective as of October
1, 2017. The amount of dividend for the end of the fiscal year ending March 31, 2018 is presented as the amount ofdividend prior to share consolidation.

Tokuyama Corporation Annual Report 201857

(ii) Dividends whose record date is within the fiscal year and whose effective date is in the following fiscal year

Resolution

Class of shares

Ordinary
GeneralMeeting of
Shareholders(June 22, 2018)

CommonsharesResolution

Class of shares

Ordinary
GeneralMeeting of
Shareholders(June 22, 2018)

CommonsharesDividend(Millions of
yen)
1,391

Dividend(Thousands of
U.S. Dollars)
13,123

Dividend pershares (yen)Reference date Effective date

20.00 March 31, 2018

Dividend pershares (U.S.
Dollars)

June 25, 2018

Reference date Effective date

0.19 March 31, 2018

June 25, 2018

(Note) The Company consolidated its common shares at a ratio of one share for each five shares effective as of October
1, 2017. The amount of dividend for the end of the fiscal year ending March 31, 2018 is presented as the amount ofdividend after share consolidation and includes a 100th anniversary commemorative dividend of 10.00 per share.
Fiscal year ended March 31, 2017
(1) Class and total number of shares issued and class and number of treasury stock[2017]
Beginning ofyear
Issuanced shares
Common sharesClass A shares (Note 1)
Total
Treasury shares
Common shares (Note 2,3)
Total

Thousand shares
Increase
Decreaseduring theduring the
fiscal year
fiscal year

End of year

349,671349,67120
20-349,67120
349,691

1,832
1,832

18
18

0
0

1,850
1,850

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

Resolution

Class of shares

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

Tokuyama Corporation Annual Report 2018

Dividend(Millions of
yen)
761

58

Dividend pershares (yen)Reference date

Effective date

38,082.20 March 31, 2017

June 26, 201714. CONSOLIDATED STATEMENTS OF CASH FLOWS(1) Reconciliation between the balance of cash and cash equivalents at end of period and relevant amount on the
consolidated balance sheets

Millions of yen
2018
2017
57,229121,598(2,482)
10,000-Cash and deposits
Restricted cash
Securities (negotiable certificate of deposit)
Time deposit whose deposit period
exceeds 3 months
Cash and cash equivalents

Thousands of
U.S. Dollars
2018
539,900
94,339

(422)

(296)

(3,984)66,807

118,819

630,255

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

505
1,030
1,535

Thousands of
U.S. Dollars
2018
4,458
13,681
18,140Millions of yen
2018
2017
129
120
1,121
1,183
1,251
1,304

Thousands of
U.S. Dollars
2018
1,223
10,57911,803

Millions of yen
2018
472
1,450
1,922

Due within one year
Due beyond one year
Total

2017

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

Due within one year
Due beyond one year
Total

16. FINANCIAL INSTRUMENTS(1) Matters Regarding Financial Instruments(i) Management policy on financial instruments
The Group raises funds as required (mainly through bank loans and the issuance of corporate bonds) in line with its
business investment program aimed at implementing a customer-oriented approach toward “strengthening the
profitability of its businesses.” The Group invests temporary surplus funds in highly secure financial assets, and raises
short-term operating capital with bank loans and CP (commercial paper). We use derivatives only to hedge risks
described below, and have a policy of not implementing derivative transactions for speculative purposes.
(ii) Type and risk of financial instruments
Notes and accounts receivable – trade, which are operating receivables, are exposed to credit risks of customers.
Investment securities are mainly shares related to business or capital tie-ups with counterparties, etc., andavailable-for-sale securities are exposed to the risk of market price fluctuations. In addition, the Group provides
long-term loans to counterparties and others.
Notes and accounts payable – trade, which are operating payables, mostly become due within one year. Loans payable
and bonds payable are principally for raising funds necessary for capital investments, and the repayment date comes up
to 55 years after the balance sheet date. Some of these loans and bonds are exposed to interest volatility risk because
they bear floating interest rates, but the risk is hedged using derivative transactions (interest rate swap transactions).
Interest rate swap transactions are used in order to fix interest rates on loans payable or reduce interest payable. For

Tokuyama Corporation Annual Report 201859

hedging instruments and hedged items, hedging policy, method of assessing hedge effectiveness, etc., see “4. (7)Method of significant hedge accounting.”(iii) Risk management system for financial instruments(a) Management of credit risk (risk related to default of counterparties, etc.)
With regard to operating receivables and loans receivable, the Company has a division in charge in each businessdepartment monitor the status of major counterparties regularly and manage maturities and balances for eachcounterparty in accordance with the credit management rules and others, while making efforts to early identify andmitigate any concerns about collection arising from deterioration in the economic environment, their financial position,etc. Consolidated subsidiaries also conduct similar management as necessary, in conformity with the Company’s credit
management rules and others.
In the use of derivative transactions, the Company conducts transactions only with financial institutions with high credit
ratings to mitigate counterparty risk.
(b) Management of market risk (fluctuation risk of foreign exchange, interest rates, etc.)
The Company and certain consolidated subsidiaries use interest rate swap transactions to reduce fluctuation risk ofinterest rate payable on loans payable.
The Company periodically assesses the fair value of securities and investment securities as well as financial conditionsof issuers (counterparty companies), etc., and continuously reviews the holding status in view of relationships withcounterparty companies.
With regard to derivative transactions, the Management Support Center conducts transactions based on management
policy of the interest rate risk and the foreign exchange risk approved by the Board of Directors, makes entries andcollates the balances with contract partners, etc. For consolidated subsidiaries, the Management Support Center also
manages derivative transactions by having them report the content of derivative transactions to the center when they
conduct such transactions or by other means.
(c) Management of liquidity risk associated with financing (risk of inability to make a payment on due date)
The Company manages liquidity risk through timely preparation and updating of the cash flow management plan by theManagement Support Center based on reports from each division and by maintaining liquidity on hand at a certain leveland other means.
(iv) Supplemental remarks on fair values of financial instruments
Fair values of financial instruments comprise values based on market prices and reasonably determined values where
market prices are unavailable. Since variable factors are incorporated in calculation of the fair value, the value may varydepending on different preconditions employed. In addition, the contract amounts of derivative transactions describedin “(2) Fair values of financial instruments” should not be, in themselves, considered indicative of the market risk
associated with derivative transactions.
(2) Fair values of financial instruments
The book value of financial instruments, their fair value, and the differences between the two were as follows. The
financial instruments whose fair value is extremely difficult to determine are not given in the table below.

Tokuyama Corporation Annual Report 201860

As of March 31, 2018
Fiscal year ended March 31, 2018[2018]Cash and deposits
Notes and accounts receivable - trade
Securities and Investment securities
Securities
Available-for-sale securities
Long-term loans receivable
Total assets
Notes and accounts payable - trade
Short-term loans payable
Bonds payable
Long-term loans payable *1
Total liabilities
Derivative financial instruments *2
In which hedge accounting is applied
Total derivative financial instruments[2018]

Book value
57,22979,660Millions of yen
Fair value
57,22979,66010,00014,635
2,627
164,152

10,00014,635
2,627
164,152-

47,6102,549
135,205
185,365

47,6102,549
136,052
186,212

846
846

(218)
(218)

(225)
(225)

(7)
(7)

Difference-

Thousands of U.S. Dollars
Book value
Fair value
Difference
539,900
539,900
751,511751,511-

Cash and deposits
Notes and accounts receivable - trade
Securities and Investment securities
Securities
Available-for-sale securities
Long-term loans receivable
Total assets
Notes and accounts payable - trade
Short-term loans payable
Bonds payable
Long-term loans payable *1
Total liabilities
Derivative financial instruments *2
In which hedge accounting is applied
Total derivative financial instruments

94,339138,068
24,784
1,548,605

94,339138,068
24,784
1,548,605-

449,152
24,0491,275,525
1,748,727

449,152
24,0491,283,516
1,756,718

7,990
7,990

(2,060)(2,060)(2,127)(2,127)(67)(67)(*1) The book value and fair value of long-term loans payable include current portion of long-term loans payable.
(*2) Receivables and payables arising from derivative transactions are presented on a net basis, and a value of a net
payable after totaling receivables and payables is shown in parentheses.

Tokuyama Corporation Annual Report 201861

As of March 31, 2017[2017]Cash and deposits
Notes and accounts receivable - trade
Securities and Investment securities
Available-for-sale securities
Long-term loans receivable
Total assets
Notes and accounts payable - trade
Short-term loans payable
Bonds payable
Long-term loans payable *1
Total liabilities
Derivative financial instruments *2
In which hedge accounting is applied
Total derivative financial instruments

Book value
121,598
73,945

Millions of yen
Fair value
121,598
73,945

11,355
2,833
209,733

11,355
2,833
209,733-

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

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

(390)
(390)

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

Difference-(*1) The book value and fair value of long-term loans payable include current portion of long-term loans payable.
(*2) Receivables and payables arising from derivative transactions are presented on a net basis, and a value of a net
payable after totaling receivables and payables is shown in parentheses.
(Note 1) Method for calculating the fair value of financial instruments, and matters regarding securities and derivativetransactions
Assets(i) Cash and deposits, (ii) Notes and accounts receivable – trade
Because these assets are mostly settled in a short period, their fair value is nearly equal to their book value. Therefore,
their fair value is based on the book value.
(iii) Securities and investment securities
Because negotiable certificate of deposit are settled in a short period, their fair value is nearly equal to their book value.
Therefore, their fair value is based on the book value.
The fair value of available-for-sale securities is based on the price on the relevant exchange.
For matters to be noted on securities for each holding purpose, refer to the note “17. SECURITIES.”(iv) Long-term loans receivable
Because all long-term loans receivable bear floating interest rates and reflect market interest rates in a short period, andcredit standing of borrowers has not changed significantly since the loans were extended, their fair value is based on thebook value.
Liabilities(i) Notes and accounts payable – trade, (ii) Short-term loans payable
Because these liabilities are settled in a short period, their fair value is nearly equal to their book value. Therefore, theirfair value is based on the book value.
(iii) Bonds payable
The fair value of these liabilities is based on market price for those with market price, and determined as the present
value, which is calculated by discounting the total of principal and interest using the interest rate that takes into accountthe remaining period and credit risk of the bond payable, for those with no market price.
(iv) Long-term loans payable
The fair value of these liabilities is determined as the present value, which is calculated by discounting the total ofprincipal and interest using the interest rate that would be charged for a new similar loan.
Derivatives
Refer to the note “18. DERIVATIVES.”

Tokuyama Corporation Annual Report 2018

62

(Note 2) Financial instruments whose fair value is extremely difficult to determine

Millions of yen
2018
2017
1,863
1,773
6,723
5,954
1,080
9,667
7,727

Unlisted shares
Shares of associates
Bonds of associates
Total

Thousands of
U.S. Dollars
201817,58363,430
10,18891,202

These financial instruments have no market price, and estimation of their future cash flows is expected to require
excessive cost. Therefore, since it is considered extremely difficult to determine the fair value, they are not included in“Securities and investment securities.”(Note 3) Redemption schedule for monetary receivables and securities with maturities after the consolidated balance
sheet date
As of March 31, 2018[2018]
Millions of yen
More than More thanWithin 1
1 year,5 year,More thanyear
within 5
within 10
10 years
years
years
Cash and deposits
Notes and accounts
receivable - trade
Securities and Investment
securities
Securities
Long-term loans receivable
Total

57,229---79,660---10,000

-

-

-

208

708

849

1,069

147,098

708

849

1,069

[2018]
Within 1
year

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

More than
10 years

Cash and deposits
Notes and accounts
receivable - trade
Securities and Investment
securities

539,900---

751,511---

Securities
Long-term loans receivable

94,339
1,970

6,682

8,016

10,085

1,387,721

6,682

8,016

10,085Total
As of March 31, 2017[2017]

Within 1
year
Cash and deposits
Notes and accounts
receivable - tradeLong-term loans receivable
Total

Tokuyama Corporation Annual Report 2018

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

More than
10 years

121,598---

73,945

-

-

-

229

744

849

1,238

195,774

744

849

1,238

63

(Note 4) Repayment schedule by term for bonds payable, long-term loans payable, and other interest-bearing debt after
the consolidated balance sheet date
As of March 31, 2018[2018]
Millions of yen
More than More than More than More thanWithin 1
1 year,2 year,3 year,4 year,More thanyear
within 2
within 3
within 4
within 5
5 years
years
years
years
years
Short-term loans payable

2,549

-

-

-

-

-

-

-

-

-

-

-

Long-term loans payable

15,684

12,076

15,434

9,419

21,58961,001

Total

18,233

12,076

15,434

9,419

21,58961,001

Bonds payable(*1)[2018]

Thousands of U.S. Dollars
More than More than More than More thanWithin 1
1 year,2 year,3 year,4 year,More thanyear
within 2
within 3
within 4
within 5
5 years
years
years
years
years
Short-term loans payable
24,049Bonds payable(*1)
Long-term loans payable
147,967
113,925
145,606
88,864
203,675
575,487
Total
172,016
113,925
145,606
88,864
203,675
575,487(*1) In the cases of the 20th, 22nd and 24th series of unsecured bonds, we delegated the performance of the obligation
based on an unsecured bond trust-type debt assumption agreement that had been executed with a bank. Accordingly,
although the liabilities pertaining to those unsecured bonds and the amount paid under that same contract offset eachother, since the obligation to redeem the Company’s unsecured bonds to bondholders continue until the time of theirredemption, this is noted as a contingent liability on the consolidated balance sheets.
As of March 31, 2017[2017]

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

Within 1
year

More than
1 year,within 2
years

2,138

-

-

-

-

Long-term loans payable

15,235

Total

17,373

Short-term loans payable
Bonds payable

More than
4 year,within 5
years

More than
5 years---

10,00015,0009,400-

19,70815,337

18,967

12,362

94,18019,70825,33733,967

21,762

94,18017. SECURITIES(1) Trading securities
Not applicable.
(2) Held-to-maturity debt securities
Not applicable.

Tokuyama Corporation Annual Report 201864

(3) Available-for-sale securities
As of March 31, 2018

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

Millions of yen
Acquisition
cost

Unrealized
gain

6,980

3,965

3,015

7,654
14,635

8,679
12,644(1,024)
1,990

Thousands of U.S. Dollars
Acquisition
UnrealizedBook value
cost
gain
Available-for-sale securities:
Securities with book values exceeding acquisition
costs
Securities with book values not exceedingacquisition costs
Total

65,85437,40828,44572,214
138,068

81,883
119,291(9,668)18,777

As of March 31, 2017

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

Millions of yen
Acquisition
cost

Unrealized
gain

4,620

2,714

1,905

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

Millions of yen
Gain on sales

Loss on sales

38

6

6

38

6

6

(4)Available-for-sale securities sold
As of March 31, 2018

Proceeds
Available-for-sale securities sold during 2018 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

Tokuyama Corporation Annual Report 2018

65

Thousands of U.S. Dollars
Proceeds
Gain on sales
Loss on sales
Available-for-sale securities sold during 2018 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

365

60

60

365

60

60

Millions of yen
Gain on sales

Loss on sales

4,632

1,936

0

4,632

1,936

0

As of March 31, 2017

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

18. DERIVATIVES(1) Derivative transactions to which hedge accounting is not applied
Not applicable.
(2) Derivative transactions to which hedge accounting is applied(i)Currency-related derivatives
As of March 31, 2018
Not applicable.
As of March 31, 2017[2017]
Main hedging targets

Millions of yen
Maturing
Notional
after
Fair
value
one yearvalue

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

Forecast transaction inforeign currencies

90
90(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

Tokuyama Corporation Annual Report 2018

66

-

(9)
(9)

(ii) Interest
As of March 31, 2018[2018]
Main hedging targets
Hedge accounting method
Principle-based accounting
Interest rate swaps
Pay fixed rate, receive
floating rate
SubtotalSpecial accounting procedures forinterest rate swaps
Interest rate swaps
Pay fixed rate, receive
floating rate
Subtotal
Total

Long-term loans payable

67,00067,000

5,400
5,400

(218)
(218)

Long-term loans payable

810
810
67,810

630
630
6,030

(7)
(7)
(225)

[2018]
Main hedging targets
Hedge accounting method
Principle-based accounting
Interest rate swaps
Pay fixed rate, receive
floating rate
SubtotalSpecial accounting procedures forinterest rate swaps
Interest rate swaps
Pay fixed rate, receive
floating rate
Subtotal
Total

Millions of yen
Maturing
Notional
after
Fair
value
one yearvalue

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

Long-term loans payable

632,075
632,075

50,94350,943(2,060)(2,060)Long-term loans payable

7,641
7,641
639,716

5,943
5,943
56,886(67)(67)(2,127)(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

Tokuyama Corporation Annual Report 201867

As of March 31, 2017[2017]
Main hedging targets
Hedge accounting method
Principle-based accounting
Interest rate swaps
Pay fixed rate, receive
floating rate
SubtotalSpecial accounting procedures forinterest rate swaps
Interest rate swaps
Pay fixed rate, receive
floating rate
Subtotal
Total

Millions of yen
Maturing
Notional
after
Fair
value
one yearvalue

Long-term loans payable

60,79260,79260,79260,792

(380)
(380)

Long-term loans payable

38,96738,96799,75933,32133,321
94,113(1,037)(1,037)(1,418)(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

19. RETIREMENT BENEFITS(1) Outline of adopted retirement benefit plans
The Company and its consolidated domestic subsidiaries have lump-sum severance benefits plans and defined benefit
pension plans as vested benefits system (DB scheme). They also have defined contribution pension plans as DC scheme.
The Company and its consolidated domestic subsidiaries may pay, under certain circumstances, extra retirement
allowances when their employees leave the companies. The Company has a retirement benefit trust.
(2) Defined benefit plans(i) Reconciliation of beginning and ending balances of retirement benefit obligations

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

Millions of yen
2018
2017
17,286
18,764
850
917
128
140
(417)
(400)
(903)
(2,135)
8
16,952
17,286

Thousands of
U.S. Dollars
2018
163,076
8,020
1,214(3,935)(8,522)78
159,932(Note) The consolidated domestic subsidiaries, except for two companies, have adopted the simplified accounting
method in calculating retirement benefit obligations.
(ii) Reconciliation of beginning and ending balances of pension assets

Millions of yen
2018
2017
24,792
25,467
467
576
0
141
582
609
(761)
(2,001)
25,082
24,792

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

Tokuyama Corporation Annual Report 2018

68

Thousands of
U.S. Dollars
2018
233,895
4,407
9
5,498
(7,182)
236,628

(iii) Reconciliation of ending balances of retirement benefit obligations and pension assets to net defined benefit
liability and net defined benefit asset recorded in the consolidated balance sheets

Millions of yen
2018
2017
15,567
15,995(25,082)(24,792)(9,514)(8,797)
1,384
1,290

Funded defined benefit obligations
Pension assets
Unfunded defined benefit obligations

Thousands of
U.S. Dollars
2018
146,867(236,628)(89,760)
13,065

Net amount shown on balance sheets(8,129)(7,506)(76,695)

Net defined benefit liability
Net defined benefit asset

1,527(9,657)1,430(8,936)

14,409(91,104)

Net amount shown on balance sheets(8,129)(7,506)(76,695)

Millions of yen
2018
2017
850
917
128
140
467
576
(183)
106
1,262
1,740

Thousands of
U.S. Dollars
2018
8,020
1,214
4,407
(1,735)
11,907(iv) Retirement benefit expenses and a breakdown of the retirement benefit expenses

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

(Note) Retirement benefit expenses of the consolidated domestic subsidiaries that have adopted the simplified
accounting method are included in “Service cost.”(v) Adjustment of retirement benefit
A breakdown of items recorded in adjustment of retirement benefit (before deduction of tax effects) is as follows:

Millions of yen
2018
2017
(233)
(648)
(233)
(648)

Actuarial gain and loss
Total

Thousands of
U.S. Dollars
2018(2,206)(2,206)(vi) Accumulated adjustment of retirement benefits
A breakdown of items recorded in accumulated adjustment of retirement benefit plans (before deduction of tax effects)
is as follows:

Millions of yen
2018
2017
(4,412)(4,178)(4,412)(4,178)Unrecognized actuarial gain and loss
Total

Tokuyama Corporation Annual Report 201869

Thousands of
U.S. Dollars
2018(41,624)(41,624)

(vii) Matters relating to pension assets(a) Principal items of pension assets
The proportion of each principal category to the total of pension assets is as follows:%
2018
Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Insurance product (General account)
Deposits
Other
Total

2017
10
7
27
12
16
21
7
100

5
6
32
12
15
28
1
100

(Note 1) Total of pension assets as of March 31, 2017 and March 31, 2018 included a retirement benefit trust,established for the Company’s pension plans that represented 10% and 10% of the total of pension assets, respectively.
(Note 2) Assets included under “Other” in the previous fiscal year have been separately listed as “Deposits ” from thefiscal year under review to enhance the clarity of disclosure. In order to reflect the changes in presentation method, thenotes in the previous fiscal year have been reclassified. As a result, the 29% indicated under “Other” in the previous
fiscal year has been reclassified as “Deposits” 28% and “Other” 1%.
(b) Method for setting the expected long-term rate of return
The expected long-term rate of return on pension assets has been set based on the allocation of the pension assets aswell as the current and expected rate of return from each category of the pension assets.
(viii) Matters relating to the basis for calculation used in the actuarial calculation
Main basis for calculation used in the actuarial calculation (principally represented by the rate used)

2018
0.8%
2.1%

Discount rate
Expected long-term return on pension assets

2017
0.8%
2.5%

(3) Defined contribution plans
The amount which the Company and its consolidated subsidiaries were required to contribute to the defined
contribution plans was ¥529 million for the previous fiscal year and ¥527 million (US$4 million) for the fiscal year
under review.

20. STOCK OPTION
Not applicable.

Tokuyama Corporation Annual Report 201870

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

Millions of yen
2018
2017

Thousands of
U.S. Dollars
2018

Deferred tax assets：
Deficits
Property, plant and equipment
Provision for repairs
Provision for bonuses
Inventories
Provision for retirement benefits
Other
SubtotalLess valuation allowance
Total deferred tax assets

60,832
3,308
1,656
792
578
500
2,176
69,846(46,541)
23,30528,961
3,901
1,345
655
173
463
10,604
46,105(19,930)
26,175573,889
31,216
15,631
7,478
5,460
4,720
20,531
658,928(439,067)
219,860

Deferred tax liabilities：
Prepaid benefit costReserve for reduction entry
Valuation difference on available-for-sale securities
Retained earnings of subsidiaries and affiliates
Other
Total deferred tax liabilities
Net deferred tax assets(2,751)(1,154)
(604)
(576)
(216)
(5,302)18,002(2,602)(1,163)
(147)
(530)
(547)
(4,992)
21,183(25,956)(10,887)(5,699)(5,441)(2,042)(50,027)
169,833(Note) Net deferred tax assets as of March 31, 2017 and March 31, 2018 are included in the items below of theconsolidated balance sheets.

Millions of yen
2018
2017
6,620
1,627
11,68019,824
(0)
(298)
(268)

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

Thousands of
U.S. Dollars
201862,457110,188(0)(2,812)(2) Reconciliation of significant difference between the statutory tax rate and the effective tax rate after applying tax
effect accounting

Statutory tax rate
Increase (decrease) in income taxes resulting from：
Change in valuation allowance allocated to income tax
expenses
Effect of exclusion of subsidiary from consolidation
Impact of adoption of consolidated tax payment
system in next year
Dividend and other items excluded permanently fromtaxable income
Inter-company eliminations of dividends income
Inter-company eliminations of allowance for doubtful
accounts
Other
Effective income tax rate

Tokuyama Corporation Annual Report 2018

71

2018
30.7 %

201730.7 %(13.2)(55.9)

12.0

0.9

(6.9)

-

(1.8)

(2.3)

1.5

2.1

(1.3)

(14.4)

1.9
22.8 %

0.4(38.6) %22. BUSINESS COMBINATIONBusiness separation (sale of subsidiary shares)
The company has transferred the whole shares of Tokuyama Malaysia Sdn. Bhd., which had been a wholly owned
subsidiary up until the previous consolidated accounting fiscal year, to OCI Company Ltd. on May 31, 2017.
1. Business separation summary(1) Name of successor company
OCI Company Ltd.
(2) Content of separated business
Name:Tokuyama Malaysia Sdn. Bhd.
Business :Production and sale of polycrystalline silicon(3) Main reason for business separation
Tokuyama Malaysia was established in August 2009 to expand the semiconductor-grade and solar-grade polycrystalline
silicon business. Due to the technological issues of manufacturing facilities and deteriorating market condition ofsolar-grade polycrystalline silicon, two huge impairment losses in connection with plants were posted. To continue
Tokuyama Malaysia’s business, the efforts to improve the manufacturing facilities and the productivity were taken, andcertain level of productivity has been achieved. In addition, to further strengthen Tokuyama Malaysia’s businessstructure, the Company has been evaluating every option including Tokuyama Malaysia’s alliance with other company.
As a result, the Company has reached to the conclusion that transferring the business of Tokuyama Malaysia to OCI, aglobal player of solar power business including the production of polycrystalline silicon, will be the best choice forparties, and finally the Company reached an agreement with OCI about transfer of shares of Tokuyama Malaysia to
OCI.
(4) Date of business separation
May 31, 2017(5) Matters concerning outline of other transactions, including legal form
Transfer of business limiting consideration received to asset such as cash
2. Outline of accounting processes implemented(1) Amount of gain/loss transferred
Loss on transfer of business ¥8,059 million (US$76 million)(2) Appropriate carrying amount of assets and liabilities relating to the transferred business and major breakdown ofthem.

Millions of yen
2018
21,5389,839
31,3783,655
3,655

Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities

Thousands of
U.S. Dollars
2018
203,194
92,828296,023
34,48534,485(3) Accounting treatment
The difference between the consolidated carrying amount of Tokuyama Malaysia Sdn. Bhd. and the selling price isrecorded as “Loss on transfer of business” under “extraordinary loss”.
3. Reportable segments that included separated businesses
Specialty Products
4. Approximate amount of gain/loss on separated businesses recorded in the consolidated income statement for the
fiscal year under review

Millions of yen
2018
1,632
(682)

Net sales
Operating profit

Tokuyama Corporation Annual Report 201872

Thousands of
U.S. Dollars
201815,401(6,438)

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

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

25. SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION(1) Summary of reportable segments
The reportable segments in the Company Group are defined as individual units, where separate financial information isavailable and which are subject to regular review to evaluate their results and decide the allocation of management
resources by the board of directors of the Company.
The Company has business divisions by product group, and the Company Group conducts business operations througheach business division devising its comprehensive product strategy for domestic and overseas markets.
The Company Group is, therefore, composed of reportable segments by product group based on business divisions, andhas four reportable segments, “Chemicals,” “Specialty Products,” “Cement,” and “Life & Amenity.”
Main products and services of each reportable segment are as follows:
Chemicals: Caustic soda, soda ash, calcium chloride, sodium silicate, vinyl chloride monomer, polyvinyl chloride resin,
propylene oxide, isopropyl alcohol and chlorinated solvents
Specialty Products: Polycrystalline silicon, fumed silica, tetrachlorosilane, aluminum nitride, high-purity chemicals forelectronics manufacturing, and photoresist developer
Cement: Cement, ready-mixed concrete, cement-type stabilizer, and resourece recycling businessLife & Amenity: Polyolefin film, plastic window sashes, medical diagnosis systems, dental materials and equipment,
ion exchange membranes, pharmaceutical ingredients and intermediates, plastic lens-related materials for glasses, andmicroporous film
(2) Calculation of sales, income (loss), assets and other financial items by reportable segment
The accounting treatment methods applied to reportable segments are identical to those stated in “4. SIGNIFICANTACCOUNTING POLICIES.”
Inter-segment sales or transfer are based on market prices.
Reportable segment’s profit (loss) is based on operating profit.

Tokuyama Corporation Annual Report 201873

(3) Information on net sales, profit (loss), assets and other items by reportable segment
Fiscal year ended March 31, 2018[2018]

Millions of yen

Chemical SpecialtysProducts
Sales
Sales to customers
Inter-segment
sales/transfer
Total sales
Segment profit
Segment assets
Other items
Depreciation andamortization(Note 4)
Increase in tangible
and intangible fixed
assets(Note 5)

CementLife &
Amenity

Others(Note 1)

Total

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

92,51247,64087,05849,586

31,263308,061-

308,061

1,034
93,546
16,17553,981

11,03858,67811,00352,471286
87,345
4,568
53,835

1,993
51,5793,728
57,57723,26254,526
6,214
46,862

37,615
345,676
41,691
264,728(37,615)(37,615)(422)
97,221

308,061
41,268361,949

2,244

2,445

3,195

2,086

3,159

13,131854

13,985

2,753

3,386

3,059

4,857

1,813

15,871424

16,295[2018]

Thousands of U.S. Dollars
Chemical SpecialtysProducts

CementLife &
Amenity

Others(Note 1)

Total

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

Sales
Sales to customers
872,759 449,438 821,305 467,797 294,938 2,906,239- 2,906,239
Inter-segment
sales/transfer
9,756 104,132
2,707
18,805 219,459 354,861 (354,861)
Total sales
882,516 553,570 824,012 486,603 514,398 3,261,101 (354,861) 2,906,239
Segment profit
152,598 103,811
43,09735,17858,626 393,311(3,988) 389,323
Segment assets
509,255 495,018 507,881 543,186 442,097 2,497,438 917,180 3,414,619
Other items
Depreciation andamortization(Note 4)
21,17423,07130,144
19,68029,810 123,881
8,059 131,940
Increase in tangible
and intangible fixed
assets(Note 5)
25,977
31,944
28,86645,827
17,111 149,727
4,006 153,734(Note 1) The “Others” segment comprises businesses other than those of the reportable segments, and includes overseas
sales companies, a distribution company, a real estate business, etc.
(Note 2) Adjustments are as follows:(i) The segment profit adjustment amount consists mainly of basic R&D expenses that are not allocable to a specificreportable segment and the amount of inter-segment eliminations.
(ii) The segment assets adjustment amount includes corporate assets that are not allocated to a specific reportablesegment (¥124,248 million / US$1,172 million).
(Note 3) Segment profit is adjusted for operating profit in the consolidated financial statements.
(Note 4) Depreciation includes amortization of long-term prepaid expenses.
(Note 5) Increase in property, plant and equipment and intangible assets includes the amount of increase in long-term
prepaid expenses.
(Items related to the changes in reportable segment)
As referred to “7. CHANGES IN PRESENTATION”, ”Cost of idle operations” which was included in “Non-operating
expenses” in the previous fiscal year was reviewed for the purpose of stricter cost control, and some amount of “Cost ofidle operations” is included under “Cost of sales” from the fiscal year under review. In order to reflect this change inpresentation method, the segment information for the previous fiscal year have been reclassified.

Tokuyama Corporation Annual Report 201874

Fiscal year ended March 31, 2017[2017]
Chemical SpecialtysProducts

Millions of yen
CementLife &
Amenity

Others(Note 1)

Total

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

Sales
Sales to customers
82,432
56,79282,873
48,61228,396 299,106- 299,106Inter-segment
sales/transfer
913
10,934
121
2,139
23,72837,836 (37,836)
Total sales
83,34667,72682,99550,751
52,124 336,943 (37,836) 299,106
Segment profit
12,999
9,215
7,552
5,389
5,965
41,122(2,589)38,533
Segment assets
47,66365,55553,511
53,631
42,696 263,057 161,375 424,433
Other items
Depreciation andamortization(Note 4)
2,276
2,679
3,194
1,824
3,286
13,261
953
14,215
Increase in tangible
and intangible fixed
assets(Note 5)
2,410
1,474
3,907
6,425
2,473
16,692898
17,591(Note 1) The “Others” segment comprises businesses other than those of the reportable segments, and includes overseas
sales companies, a distribution company, a real estate business, etc.
(Note 2) Adjustments are as follows:(i) The segment profit adjustment amount consists mainly of basic R&D expenses that are not allocable to a specificreportable segment.
(ii) The segment assets adjustment amount includes corporate assets that are not allocated to a specific reportablesegment (¥194,566 million).
(Note 3) Segment profit is adjusted for operating profit in the consolidated financial statements.
(Note 4) Depreciation includes amortization of long-term prepaid expenses.
(Note 5) Increase in property, plant and equipment and intangible assets includes the amount of increase in long-term
prepaid expenses.
[Related information]
Fiscal year ended March 31, 2018(1) Information by product and service
Information is omitted as identical information is disclosed in segment information.
(2) Information by region(i) Net sales

Millions of yen
2018
244,135
53,032
10,892
308,061Japan
Asia
Others
Total

Thousands of U.S.
Dollars
2018
2,303,166
500,311
102,761
2,906,239(Note) Net sales are categorized into countries or regions based on the location of customers.
(ii) Property, plant and equipment

Millions of yen
2018
102,207
8,035
110,242Japan
Others
Total

Thousands of U.S.
Dollars
2018
964,21775,8071,040,024(Changes in presentation)
As the significance of “Asia” declined in the fiscal year under review, this is now included in “Others.” In order toreflect this change in presentation method, notes to consolidated financial statements for the previous fiscal year havebeen reclassified.
Consequently, ¥17,021 million (US$161 million) that was presented in “Asia” in the previous fiscal year has been
reclassified to “Others.”

Tokuyama Corporation Annual Report 201875

(3) Information by major customer
Information is omitted because no external customer accounts for 10% or more of net sales in the consolidated
statements of income.
Fiscal year ended March 31, 2017(1) Information by product and service
Information is omitted as identical information is disclosed in segment information.
(2) Information by region(i) Net sales

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

Japan
Asia
Others
Total(Note) Net sales are categorized into countries or regions based on the location of customers.
(ii) Property, plant and equipment

Millions of yen
2017
101,133
18,100119,233

Japan
OthersTotal(3) Information by major customer
Information is omitted because no external customer accounts for 10% or more of net sales in the consolidated
statements of income.
[Information on impairment loss of non-current assets by reportable segment]
Fiscal year ended March 31, 2018[2018]
Millions of yen
SpecialtyLife &
Adjustme
Chemicals Products
CementOthersAmenitynt
Impairment loss
22
1,076
[2018]
Impairment loss

Chemicals Specialty
Products
208

Thousands of U.S. Dollars
Life &
Adjustme
CementOthersAmenitynt
10,156-

Fiscal year ended March 31, 2017[2017]

Total
1,098

Total
10,365

Millions of yen
SpecialtyLife &
Adjustme
Chemicals
CementOthers
Total
Products
Amenitynt
Impairment loss
128
31
1,490
33
1,683
(Note) The amount of “Adjustment” is impairment loss related to corporate assets that are not attributable to any
segment.

Tokuyama Corporation Annual Report 201876

[Information on amortization of goodwill and unamortized balance by reportable segment]
Fiscal year ended March 31, 2018[2018]
Millions of yen
Life &
Adjustme
Chemicals Specialty
CementOthers
Products
Amenitynt
Amortization of
goodwill
7
1,282
Unamortized balance
17
1,140[2018]
Chemicals

Specialty
Products

Thousands of U.S. Dollars
Life &
CementOthersAmenity

Adjustme
nt

Total
1,289
1,158

Total

Amortization of
goodwill
66
12,10012,166
Unamortized balance
165
10,76010,925
There is neither amortization of negative goodwill nor unamortized balance arising from business combinations
conducted on and before April 1, 2010.
Fiscal year ended March 31, 2017[2017]
Chemicals

Specialty
Products

Millions of yen
Life &
CementOthersAmenity

Adjustment

Total

Amortization of
goodwill
7
1,246
1,253
Unamortized balance
24
2,343
2,367
There is neither amortization of negative goodwill nor unamortized balance arising from business combinations
conducted on and before April 1, 2010.
[Information on gain on bargain purchase by reportable segment]
Fiscal year ended March 31, 2018
Not applicable.
Fiscal year ended March 31, 2017
Not applicable.

26. INFORMATION ON RELATED PARTIES
Fiscal years ended March 31, 2018 and 2017
Not applicable.

27. PER SHARE INFORMATIONyen
Net assets per share
Earnings per share
Diluted earnings per share

2018

2017

1,806.56
259.81-

1,527.42
738.92599.66

U.S. Dollars
2018(*1)Diluted earnings per share for the fiscal year ended March 31, 2018 are not presented because there were no
dilutive shares.
(Note 1) The basis for calculation

Tokuyama Corporation Annual Report 2018

77

17.04
2.45
-

1

Net assets per share

Millions of yen
2018
2017
136,591
135,976
125,656
106,254

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

10,935

Number of shares outstanding of common shares
Number of treasury shares of common shares
Number of common shares used to calculate net assets per
share
2

103,160

Thousand shares
2018
2017
69,934
69,934378
370
69,55569,564

Earnings per share

Profit attributable to owners of parent
Amount not attributable to common shareholders
Profit related to common shares attributable to owners ofparentAverage number of common shares during the period
320,761
8,960

Thousandsof U.S.
Dollars
2018
1,288,601
1,185,441

Millions of yen
2018
2017
19,69852,165
1,626
761
18,07251,403Thousandsof U.S.
Dollars
2018
185,833
15,339170,493

Thousand shares
2018
2017
69,56069,566

Diluted earnings per share

Adjustment amount of profit attributable to owners of parent
Preferred Dividend

Millions of yen
2018
2017
761
-

761

Thousandsof U.S.
Dollars
2018-

Thousand shares
2018
2017
17,426

Increase in number of common shares(Note 2) All of the Class A shares issued by the Company (total paid-in amount: 20 billion yen) have been acquired andcancelled on June 14, 2017.
(Note 3) The Company consolidated its common shares at a ratio of one share for each five shares effective as of
October 1, 2017. On this basis, net assets per share, earnings per share and diluted earnings per share data are calculatedon the assumption that the consolidation of shares was conducted as of the beginning of the preceding fiscal year.

28. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

Tokuyama Corporation Annual Report 201878

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

Issue
20th unsecured bonds
without collateral
22nd unsecured bonds
without collateral
24th unsecured bonds
without collateral

Total
The amounts to be redeemedwithin 1 year

Date ofIssuance
March 10,2010
September
9, 2010
September
8, 2011－

Interest
rate

collateral

the term ofredemption

2018

2017

2018

1.760%No

March 10, 2020

1.478%

10,00010,00094,339No

September 9, 2020

15,00015,000141,509

9,400
34,400-9,400
34,400-88,679324,528-

1.371%

No

September 8, 2021

－

－

－

(Note 1) In the cases of the 20th, 22nd and 24th series of unsecured bonds, we delegated the performance of theobligation based on an unsecured bond trust-type debt assumption agreement (debt assumption agreement) that had
been executed with a bank. Accordingly, although the liabilities pertaining to those unsecured bonds and the amount
paid under that same contract offset each other, since the obligation to redeem the Company’s unsecured bonds tobondholders continued until the time of their redemption, this is noted as a contingent liability on the consolidatedbalance sheets.
(Note 2) Amounts of redemption within five years after the consolidated balance sheet date are as follows:Year ending March 31
2019
2020
2021
2022
2023

Millions of yen

Thousands of
U.S. Dollars

10,00015,0009,400-

94,339141,50988,679-(2) Schedule of loans payable

Short-term loans payable (1.33%)
Current portion of long-term loans payable (1.25%)
Current portion of lease obligations
Long-term loans payable, due in 2019-2074 (2.17%)
Lease obligations, due in 2019-2025
Total

Millions of yen
2018
2017
2,549
2,138
15,684
15,235641
577
119,521
160,555
1,521
1,787
139,917
180,294

Thousands of
U.S. Dollars
2018
24,049147,967
6,048
1,127,558
14,354
1,319,978(Note 1) “Average interest rate” shows the weighted average interest rate on the ending balance of loans payable, etc.
(Note 2)The average interest rate on lease obligations is not presented because lease obligations are recorded at theamount before deduction of the amount equivalent to interest included in total lease payments, in the consolidatedbalance sheets.
(Note 3)The amounts of long-term loans payable and lease obligations (excluding current portion of them) to be repaid
within five years after the consolidated balance sheet date are as follows:

Long-term loans payable

Millions of yen

Year ending March 31
2020
2021
2022
2023

Tokuyama Corporation Annual Report 201812,076
15,434
9,419
21,58979

Thousands of
U.S. Dollars

113,925
145,606
88,864
203,675

Lease liabilities
Year ending March 31
2020
2021
2022
2023

Millions of yen

Thousands of
U.S. Dollars

555
428
332
154

5,239
4,039
3,138
1,462

(3) Schedule of asset retirement obligations
Information is omitted since the amounts of asset retirement obligations at the beginning and end of the fiscal year
under review are 1% or less of the total of liabilities and net assets at the beginning and end of the fiscal year underreview.
(4) Others
Quarterly information for the fiscal year ended March 31, 2018

【Millions of yen】

Accumulated period

1Q

2Q

72,473

146,166

Current
consolidate
d fiscal year
226,090308,061(542)

13,952

24,56432,895

3Q

Net sales (Millions of yen)
Profit (loss) before income taxes (Millionsof yen)Profit (loss) attributable to owners of parent(Millions of yen)
Net income (loss) per share (yen)(8,143)

174

7,342

19,698(140.44)(20.87)82.18

259.81

Accumulated period
Net income (loss) per share (yen)1Q(140.44)2Q
119.573Q
103.05

4Q
177.64

1Q

2Q【Thousands of U.S. Dollars】

Accumulated period

Current
consolidate
d fiscal year
2,132,927
2,906,239
3Q

Net sales (Thousands of U.S. Dollars)Profit (loss) before income taxes(Thousands of U.S. Dollars)

683,716

1,378,931(5,114)

131,630

231,737

310,336

Profit (loss) attributable to owners of parent(Thousands of U.S. Dollars)
Net income (loss) per share (U.S. Dollars)(76,824)

1,645

69,267

185,833(1.32)(0.19)

0.77

2.45

Accounting period
Net income (loss) per share (U.S. Dollars)

1Q(1.32)

2Q

3Q
1.12

4Q
0.97

1.67

(Note 1) The Company consolidated its common shares at a ratio of one share for each five shares effective as of
October 1, 2017. On this basis, net income (loss) per share is calculated on the assumption that the consolidation ofshares was conducted as of the beginning of the fiscal year.

Tokuyama Corporation Annual Report 201880

Tokuyama Corporation Annual Report 201881

Major Subsidiaries and Affiliates(As of March 31, 2018）

Company

Capital(millions ofyen)

Ownership
(%)

Scope

Chemicals
Tokuyama & Central Soda Inc.

10

100

Sale of soda ash and calcium chloride

Shin Dai-ichi Vinyl Corporation

2,000

85.5

Production and sale of polyvinyl chloride

98

100

Production and sale of polyvinyl chloride compounds

CNY
407 million

100

Production and sale of fumed silica

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

50.0

Production and sale of photoresist developer

Sun Arrow Kasei Co., Ltd.
Category also includes another 4 affiliates
Specialty Products
Tokuyama Chemicals (Zhejiang) Co., Ltd.
Tokuyama-Dowa Power Materials Co., Ltd.
Tokuyama Electronic Chemicals Pte. Ltd.
Taiwan Tokuyama Corporation*Hantok Chemicals Co., Ltd.

SGD
11,000thousandTWD
200 million
KRW
4,500 million

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

67.2

Production and sale of ready-mixed concrete

Tokuyama Nouvelle Calédonie S.A.

100
XPF
210 million

75.6

Production and sale of cement

Tokyo Tokuyama Concrete Co., Ltd.

80

99.9

Production and sale of ready-mixed concrete andconcrete products

Seibu Tokuyama Ready Mixed Concrete Co., Ltd.

100

100

Production and sale of ready-mixed concrete

Kawasaki Tokuyama Ready Mixed Concrete Co.,
Ltd.

40

100

Production and sale of ready-mixed concrete

Kyushu Tokuyama Ready Mixed Concrete Co., Ltd.

50

100

Production and sale of ready-mixed concrete

Chugoku Ready Mixed Concrete Co., Ltd.

80

52.3

Production and sale of ready-mixed concrete

Notsuharu Co., Ltd

3

100

Production and sale of ready-mixed concrete

Tokuyama Tsusho Trading Co., Ltd.

95

100

Sale of cement and ready-mixed concrete

Kansai Tokuyama Trading Co., Ltd.

80

100

Sale of cement and ready-mixed concrete

Tokusho Co., Ltd.

40

100

Sale of cement and ready-mixed concrete

Tokushin Co., Ltd.

40

100

Sale of cement and ready-mixed concrete

Tokuyama Mtech Corporation

50

100

Processing and sale of building materials*Yamaguchi Eco-tech Corporation

90

50.0

Recycling business of incinerated ash of wastes

100

Production and sale of microporous film

Category also includes another 4 consolidated
subsidiaries, 4 equity method affiliates and 13
affiliates
Life & Amenity

100

Production and sale of microporous film

Sun•Tox Co., Ltd.

CNY
85 million
CNY
129 million
300

80.0

A&T Corporation

577

40.2

Tokuyama Dental Corporation

100

100

Production and sale of polyolefin films
Production and sale of diagnostic reagents, analyzers
and systems
Production and sale of dental and medical materials

Shanghai Tokuyama Plastics Co., Ltd.
Tianjin Tokuyama Plastics Co., Ltd.

Tokuyama Corporation Annual Report 201882

Company

Capital(millions ofyen)

Ownership
(%)

Scope

ASTOM Corporation

450

55.0

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

Excel Shanon Corporation

495

100

Production and sale of plastic window sashes

Tohoku Shanon Co., Ltd.

300

72.0

Production of plastic window sashes* Figaro Engineering Inc.

99

33.4

Production and sale of sensor devices

100

Sale of Tokuyama’s products

100

Sale of Tokuyama’s products

100

Sale of Tokuyama’s products

Category also includes another 3 consolidated
subsidiary
Other

Tokuyama (Shanghai) Co., Ltd.

SGD
800
thousandEUR
255
thousandCNY
5 million
KRW
500 million
CNY
12 million

100

Tomitec Co., Ltd.
Shunan System Sangyo Co., Ltd.

100
100

60.0
100

Management company to provide services for othergroup companies in China
Production and sale of plastic molded products
Real estate, civil engineering, construction

Tokuyama Logistics Corporation

100

100

Transportation and warehousing

Tokuyama Information Service Corporation

20

100

Information processing services

Shunan Bulk Terminal Co., Ltd.

150

72.2

Warehouse operations for bulk cargoes of coal etc.

* CoorsTek Tokuyama Corporation

100

30.0

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

100

50.0

Production and sale of polypropylene

50.0

Production of metal parts and anti-rust surface coating
materials

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

* Nishinihon Resicoat Co., Ltd.

50

Category also includes another 3 consolidated
subsidiaries and 2 affiliates*Equity method affiliates

Tokuyama Corporation Annual Report 2018

83

100

Sale of Tokuyama’s products

Corporate Data and Stock Information(As of March 31, 2018)

Composition of Shareholders
Company Name:

Tokuyama Corporation

Established:

February 16, 1918

Capital:¥10,000 million

Employees:

4,889 (Consolidated)

Fiscal Year:

From April 1 to March 31

General Meeting of
Shareholders:

June

Stock Listing:Tokyo

Minimum Number of
Shares per Trade:

100 shares

Stock:

4043

Major Shareholders
Number of Shares Held(Thousands)

Percentage ofTotal Shares

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

8,144

11.71

Japan Trustee Services Bank, Ltd. (trust account)

7,399

10.64

Nippon Life Insurance Company

2,174

3.13

The Yamaguchi Bank, Ltd.

1,649

2.37

Meiji Yasuda Life Insurance Company

1,488

2.14

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1,419

2.04

Sojitsu Corporation

1,296

1.86

Sumitomo Metal Mining Co., Ltd.

1,180

1.70

Mitsubishi UFJ Trust and Banking Corporation

1,170

1.68

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

1,161

1.67

Name

Stock Chart

Tokuyama Corporation Annual Report 201884

Tokuyama Corporation Annual Report 201885