Tokai Carbon Co., Ltd. signed a joint venture agreement with SGL Carbon AG on June 21, 2006 for developing the impervious graphite business jointly in Asia.

The impervious graphite market in Japan is being exposed to tougher international competition as European manufacturers are shifting their production to Asia and one of them formed alliance with a Japanese manufacturer. Target of the JV is to efficiently strengthen competitiveness and develop the Asian business mainly in Japan, China and Korea in order to participate in the increasing demand in this region. The details of the joint venture is yet to be discussed between the parties, who are planning to establish a joint venture company with an equity ratio of SGL 51% and TOKAI 49%.

After the establishment, the joint venture company will acquire three subsidiaries from the parties (one from TOKAI and two from SGL). We understand that the effect of this change on our consolidated results for the year will be small enough to be negligible. As regards the market in Japan, we will sell the products of the joint venture as its exclusive sales representative.