Tokai Carbon Co., Ltd. announced that its 100% owned companies, Tokai Fine Carbon Machining Co., Ltd. (TFM) (formerly Tokai Seiko Eng. Co., Ltd.) and Tokai Techno-Trading Co., Ltd. (TTT) have adopted a merger agreement between TFM and TTT in the extraordinary shareholders’ meeting on November 27, 2006 and it was resolved.

1. Purpose of Reorganization

Tokai Carbon Co., Ltd., as a step in strengthening its fine carbon business, has been carrying out a reorganization of machining and sales subsidiary companies for further business efficiency and competitiveness. The fine carbon business, a part of Graphite Chemical Engineering Co., Ltd. (GCE) 100% Tokai owned company was devolved to Tokai Seiko Eng. Co., Ltd. (TSE) on September 1, 2006 by a corporate split agreement between GCE and TSE. And TSE changed its company name to Tokai Fine Carbon Machining Co., Ltd at the same time. As a second step, January 1, 2007, TFM will merge with TTT, which is a trading company dealing in Tokai group products. Thereafter, TFM will newly become the central core company to support machining and sales in our fine carbon business. We will continue efforts to improve our machining skills and sales support system through TFM’s activities and will provide better service.

2. Impact on the Company’s business results

We understand that the effect of this change (between our wholly-owned subsidiaries) on our consolidated results for this year will be small to negligible.

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