Washington, D.C. 20549

(Mark One)

TOR Minerals International, Inc.
(Name of small business issuer in its charter)

(Address, including zip code, of principal executive offices)

Issuer's telephone number: (361) 883-5591

Securities registered under Section 12(b) of the Act: None.

Securities registered under section 12(g) of the Act:
Common Stock, $0.25 par value

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $30,476,000

State the aggregate market value of the voting stock and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of February 28, 2005, computed by reference to the closing sale price of the registrant's Common Stock on The NASDAQ SmallCap Market tier of the NASDAQ Stock Market on such date: $31,036,531.

Number of shares of the registrant's Common Stock outstanding as of February 28, 2005

7,797,553

Certain portions of the registrant's definitive Proxy Statement to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, in connection with the Annual Meeting of Stockholders of the registrant to be held May 14, 2004, are incorporated by reference into Part III of this report.

TOR MINERALS INTERNATIONAL, INC.
Annual Report on Form 10-KSB

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TOR Minerals International, Inc. ("TOR", "We" or the "Company") is a global specialty chemical company engaged in the business of manufacturing and marketing mineral products for use as pigments, pigment extenders and flame retardants used in the manufacture of paints, industrial coatings, plastics, catalysts and solid surface applications.

We were organized by Benilite Corporation of America ("Benilite") in 1973. Benilite, which was incorporated in Delaware in 1969, developed the then patented "Benilite process" for producing synthetic rutile, the principal ingredient used in the manufacture of HITOX® (high-grade titanium dioxide), from ilmenite ore. Benilite licensed and helped design several synthetic rutile plants located throughout the world which utilize this process (including the plant located in Ipoh, Malaysia, owned by the Company, as discussed below). Benilite concluded that synthetic rutile produced by the Benilite process could be further processed into a buff-colored titanium dioxide pigment having many of the characteristics of standard white titanium dioxide at a significant cost savings. These efforts by Benilite were the beginning of the Company's business. In 1980, the subsidiary of Benilite engaged in the development of HITOX was spun off by Benilite to its shareholders. In December 1988, the Company became a publicly owned company after completing a public offering of 1.38 million shares of its common stock. Our stock symbol is TORM.

We are headquartered in Corpus Christi, Texas, USA. This location houses senior management, customer service, logistics, and corporate research and development/technical service laboratories. Our financial and accounting functions also operate from this location. Our principal offices in Corpus Christi are located at 722 Burleson Street, Corpus Christi, Texas 78402, and our telephone number is (361) 883-5591. Our website is located at www.torminerals.com. Information contained in our website or links contained on our website is not part of this Annual Report of Form 10-KSB.

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The US manufacturing plant is situated alongside its own docks in Corpus Christi. This facilitates the easy handling of bulk mineral shipments by barge. The site has its own railhead and easy access to major highways linking it to the rest of the US and to Mexico. HITOX, BARTEX® and HALTEX® are all produced at this location.

We acquired TOR Minerals Malaysia, Sdn. Bhd. ("TMM") in 2000. Located in Ipoh, Perak, Malaysia close to the port of Lumut, TMM is a processor of local ilmenite, upgrading it to synthetic rutile ("SR"). This material is the basic building block for HITOX, but also is used as feed stock for white TiO₂ and used as a component in welding rod flux. The site has its own processing lines to manufacture HITOX. The sales team and the quality assurance laboratory for Asia are located at the offices in Ipoh.

In 2001, we acquired TOR Processing and Trade, B.V. ("TP&T"). Situated within reach of the major shipping port of Rotterdam in Hattem, Netherlands, TP&T specializes in the manufacturing of premium alumina products ("ALUPREM®") for use worldwide. Customer applications, quality assurance laboratory and support facilities are located in Hattem. TOR Minerals' global headquarters in Texas provides customer service and shipping logistics for TP&T's North American customers.

TOR and our subsidiaries operate in the business of pigment manufacturing and related products in three geographic segments. All United States manufacturing is done at the facility located in Corpus Christi, Texas. Foreign manufacturing is done by the Company's wholly owned subsidiaries, TMM, located in Malaysia and TP&T, located in the Netherlands. Our products are currently marketed in the United States and in more than 60 other countries. We sell our products through a network of direct sales representatives employed by the Company and independent stocking distributors in the United States, as well as distributors and agents overseas. Our sales representatives sell directly to end-users and provide marketing support and guidance for our independent distribution network.

Our principal product, HITOX, accounted for approximately 40% of net sales in 2004 and approximately 48% in 2003. HITOX, a light buff-colored titanium dioxide pigment, is made from SR. Titanium dioxide is the most widely used primary pigment in paints, coatings, plastics, paper and many other types of products. Normally titanium dioxide, or TiO₂, gives opacity and whiteness to end products. Most TiO₂ is white; however, HITOX is a unique color pigment that is beige. HITOX occupies a special marketing niche as a high quality, color pigment that can replace some of the other more costly color pigments and some of the white TiO₂. HITOX pigments are used by major international paint and plastics manufacturers. Uses include interior and exterior architectural paints, yellow traffic marking paints, industrial primers and coatings, roofing granules, PVC pipe and conduit, plastic sheeting and siding as well as plastic film.

HITOX, manufactured at plants located in both the US and Malaysia, utilizes SR manufactured at TMM as its primary raw material. In the milling process used to process HITOX, particles of SR mechanically abrade each other to form the end product, which after other processing, including testing and quality control procedures, is collected for bagging and shipping. The manufacturing process for producing HITOX is not simple and the details of the process and the operating parameters of the systems are not widely known. The HITOX manufacturing process is not patented.

In 2004, we completed the new HITOX production facility in Corpus Christi. The plant expansion will increase production of HITOX by approximately 10,000 tons annually and utilize a new proprietary production process that we expect to reduce costs and increase the size of the market for HITOX.

Our alumina trihydrate ("ATH") products were expanded in 2001 with the introduction of ALUPREM, which is manufactured at our subsidiary, TP&T, in the Netherlands. ALUPREM, which stands for premium alumina,

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represented approximately 27% of TOR's 2004 net sales compared to approximately 20% in 2003. TP&T's Managing Director, Dr. Olaf Karasch, developed the manufacturing process for ALUPREM. The details of the process and the operating parameters of the systems are not widely known. The ALUPREM manufacturing process is not patented.

ALUPREM products are for color critical applications as fillers and flame retardants, such as Solid Surface/Onyx and performance driven uses such as specialty wire and cable insulation, catalysts, high-tech polishing, pigments and specialty papers.

SR, the basic building block for HITOX, is manufactured at the Malaysian plant using the Benilite process for producing SR. Raw materials used in the manufacturing process include ilmenite, acid and fuel oil. The ilmenite is first treated in a reduction kiln and then subjected to leaching in hydrochloric acid where soluble iron and other impurities are removed. SR is also used as feed stock for white TiO₂ and as a component in welding rod flux. External sales of synthetic rutile accounted for approximately 17% of the net sales in 2004 compared to 15% in 2003.

BARTEX, manufactured at the US plant, is produced from high grade barites (barium sulfate) utilizing a milling process. The plant dedicates one of eight milling lines to the production of BARTEX, which accounted for approximately 10% of our 2004 and 2003 net sales.

Barium Sulfate's high density is one of the primary reasons it is used in coatings. As an inert extender pigment, BARTEX, characterized as ultra fine with high brightness and narrow particle size distribution, gives weight and body to products ranging from powder coatings used in appliance and office furniture finishes to rubber products such as carpet and curtain backings and plastics including billiard balls and poker chips. BARTEX allows more expensive prime white pigments, such as white TiO₂, to be supplemented or replaced to some degree. BARTEX is manufactured in several different grades which are differentiated by average particle size and whiteness.

HALTEX, manufactured at the US plant, is produced from Bayer grade aluminum hydroxide using some of the same production technologies of our other products. In 2004, one of the plant's eight milling lines was dedicated to the production of a small particle size HALTEX pigment which accounted for approximately 3% of the Company's net sales in both 2004 and 2003.

HALTEX features engineered narrow particle sizing and high purity for optimum physical properties. The quality of our HALTEX is suitable for a broad range of technical applications including electrical wire and cable insulation, thermoset SMC/BMC molding compounds, thermoplastic profiles, PVC and rubber products, specialty coatings as well as adhesives and sealants.

TP&T began producing commercial quantities of both TOR COAT and TOR BRITE in late 2004, which are alumina mono oxyhydrate based pigments for use in the coatings industry. We have established one European customer for TOR COAT and are shipping truckload quantities to this customer. Sampling of TOR BRITE is underway in the US and Canadian markets and both TOR COAT and TOR BRITE are being tested in Europe. TP&T has received approval from one large manufacturer of automotive coatings for the production of TOR COAT and intends to begin supplying later in 2005.

Laboratory testing of production methods of manufacturing a .3 micron titanium dioxide pigment made from SR, which we have named HITOX-SF, occurred in 2001 through 2003. Laboratory quantities of the product were made before progressing to tests at various equipment manufacturers which were conducted in 2002 and 2003. In late 2003 and early 2004, TOR conducted commercial scale production tests at its Ipoh, Malaysia plant and manufactured a commercial lot in March 2004. Samples of .3 Micron HITOX-SF have been sent to more than 19 potential customers. During 2004 we designed and constructed a new HITOX processing line at the Corpus Christi operation specifically to allow for the production of .3 Micron HITOX-SF. Final production tests were conducted in January and February 2005 and commercial production commenced in March 2005.

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We utilize a variety of raw materials in the manufacture of our products. Outlined below are the principal raw materials for TOR's products.

SR: Titanium dioxide pigment can be produced using ilmenite, natural rutile, SR or titanium slag. SR is produced from ilmenite and typically has a titanium dioxide content ranging from 92% to 95%. Ilmenite is a black material found in natural mineral deposits and typically has a titanium dioxide content ranging from 44% to 60%. Ilmenite is found throughout the world, including China, India, Australia and North America. In Malaysia, ilmenite historically has been recovered incidental to tin mining, but as tin mining has decreased in Malaysia, the source and quality of ilmenite has been declining.

We are actively seeking alternative sources of supply for ilmenite. The price for our ilmenite has remained fairly stable, however, alternative offshore supplies could be 70% to 100% higher due to market conditions and freight. We expect to start utilizing a limited quantity of offshore ilmenite in 2006.

HITOX: TMM is the Company's sole suppler of SR, the raw material for HITOX. The cost of SR has increased approximately 18% primarily due to increase in freight cost associated with transporting SR from TMM to Corpus Christi. Other than TMM, there is only one other available source for the quality of SR required for the production of HITOX. If supplies of SR from TMM are interrupted and we are unable to arrange for alternative sources, this could result in our inability to produce HITOX, which accounted for 40% of our sales in 2004.

ALUPREM: Alumina trihydrate, the chief raw material for ALUPREM, is manufactured throughout the world including Europe and North America. The ATH material used for chemicals, fillers and flame-retardants is produced by the Bayer alumina process. This grade of ATH accounts for approximately 5% of the total ATH produced worldwide. The Company purchases Alumina from various suppliers in Europe. In 2004, the average prices for ATH increased approximately 5%.

BARTEX: High grade barites (barium sulfate) are mined in China, India, Turkey and Mexico and are the raw materials used to produce BARTEX. The quality of our barites has decreased thus decreasing our yield and increasing costs approximately 17% over our 2003 costs.

HALTEX: Bayer grade aluminum hydroxide, used to produce HALTEX, is purchased from two of the three suppliers located in the US.

Energy: We are highly dependent on energy in our manufacturing processes. Natural gas is the predominate energy source in Corpus Christi. Fuel oil is the predominate energy source at TMM and electricity is the primary source of energy at TP&T. Energy pricing has been highly volatile over the last year. The average price for natural gas in Corpus Christi increased approximately 17% over the 2003 average price. Fuel oil and electricity also increased but not to the extent of natural gas.

Our expenditures for research and development and technical services were approximately $453,000 in 2004 and $473,000 in 2003. We conduct our research and technical service primarily at our facilities in Corpus Christi and our efforts are principally focused on process technology, product development and technical service to our customers. There are no research and development costs borne directly by our customers.

Mr. Richard L. Bowers was appointed President and Chief Executive Officer by the Board on May 23, 2001. Mr. Bowers had served as President and Chief Operating Officer since February 26, 2001. He had served as Executive Vice President/Director of Sales and Marketing since June 1, 1999. Previously, he had served from

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1981 to 1994 as President and Chief Executive Officer of the Company. Since 1995, Mr. Bowers has served as a director and is a shareholder of Environmental Analytics, Inc., a company that monitors fugitive emissions at chemical plants. Mr. Bowers has a Bachelor of Arts degree from Furman University.

Dr. Olaf Karasch was appointed Executive Vice President, Operations, by the Board on September 4, 2002. Dr. Karasch had served as Managing Director of TOR's wholly owned Netherlands subsidiary, TP&T, since joining the Company on May 16, 2001. In January 1996, Dr. Karasch was managing director for Flohme Chrome Plating and Plasma Coating. In 1997, he joined the Royal Begemann Group in the Netherlands, the predecessor of TP&T, until its purchase by TOR in 2001. Dr. Karasch received his Ph.D. in Mineralogy at Reinisch-Westfalische University in Aachen, Germany where he specialized in submicronization (particle size reduction below one micron).

Mr. Mark Schomp was appointed Vice President, Sales and Marketing, by the Board on September 4, 2002. Mr. Schomp is a Chemical Engineer who spent 15 years in sales and sales management with AluSussie-Lonza, a large European manufacturer of aluminum, aluminas, and other products. He has wide experience in selling pigments and fillers to plastics and coatings applications. Mr. Schomp joined the Company's sales department in 2001.

Mr. Lawrence W. Haas was appointed Treasurer and Chief Financial Officer by the Board on October 13, 2003. Prior to joining the Company, Mr. Haas served as the Vice President of Finance at Hi-Rise Recycling Systems, Inc., a manufacturer of solid waste processing equipment and recycling systems. Mr. Haas has a Masters of Business Administration degree from the University of Texas and is a CPA.

Mr. Hee Chew Lee, the Managing Director of TMM, was appointed Vice President of Asian Operations by the Board on December 5, 2002. Mr. Lee, a Chemical Engineer, joined the Company in 1994 as General Manager and has served as the Managing Director of TMM since 1998.

TOR's sales efforts are managed out of Corpus Christi, Texas, by the Vice President, Sales and Marketing. We have sales offices at each of our three locations. The Vice President has a number of area and product managers that work for the Company and help him both deal directly with customers and manage agent and distributor relations.

We utilize a network of both domestic and foreign distributors and agents. Within North America there are multiple agents serving us on either a regional or a product basis. In most other countries there is one stocking distributor who purchases directly from TOR and resells in their territory. In certain large countries there may be multiple distributors. In this way we get the benefit of sales specialists with specific trade knowledge in each country.

Our end use customers include companies in the paints, coatings, solid surface, and PVC pipe industries. For the year ended December 31, 2004, approximately 17% and 16% of our total sales were to Kerr-McGee Chemical Corporation ("KMG") and Engelhard Corporation, respectively. For the year ended December 31, 2003, sales to KMG and Engelhard Corporation were approximately 15% and 9%, respectively. We expect that a limited number of customers will continue to account for a substantial portion of our revenue for the foreseeable future. After eliminating the effects of KMG and Engelhard Corporation, the next top 10 customers accounted for 34% of the remaining sales in 2004 and 37% of sales in 2003. The foreign customers accounted for 25% of total net sales in 2004 and 29% in 2003. The Company has historically maintained a relatively stable customer base.

In March 2003, we entered into a five year sales agreement with KMG. Under the agreement, KMG agreed to purchase a minimum amount of SR from us annually for the term of the agreement. KMG has the option to purchase from us any additional amounts of SR they may require above the minimum amount. Pricing for the

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annual shipments are established annually, with the price for the first year specified in the agreement. Subsequent prices are adjusted annually based on cost increases or decreases year over year, with any cost savings shared equally in the adjusted annual prices. If no cost savings are realized or the cost is higher year over year, the parties will negotiate the next year's price. The agreement contains customary termination provisions in the event of a default by either party. If the parties cannot agree on the product price after negotiation, KMG is not required to purchase the minimum amount of SR from us that year.

In February 2004, we entered into an agreement with Engelhard Corporation to supply 100% of their 2004 requirements for a specific grade of ALUPREM. On December 20, 2004, we entered into a new agreement with Engelhard Corporation to supply 100% of their 2005 requirement for a specific grade of ALUPREM. Either party may cancel the agreement in the event the other has failed to perform or observe the terms and conditions of the purchase order by giving ten days prior written notice.

We sell our products in North, Central and South America, Asia and Europe and market them to customers located in more than 60 foreign countries. No individual foreign country accounted for 10% or more of the foreign sales in either 2004 or 2003. Sales to external customers are attributed to geographic area based on country of distribution.

A summary of the Company's sales by geographic area is presented below:

Competitors range from large corporations with a full line of production capabilities and products to small local firms specializing in one or two products. A number of these competitors are owned and operated by large diversified corporations. Many of these competitors, such as E.I. DuPont de Nemours & Co., Inc., Millennium Chemicals, Kerr-McGee Chemical Corporation, Kronos Inc. and J.M. Huber, have substantially greater financial and other resources, and their share of industry sales is substantially larger than TOR's.

In addition to the factors discussed in the Forward-Looking Statement section provided at the beginning of this Annual Report on Form 10-KSB, the following are important factors that could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company. In addition, you should know that the risks and uncertainties described below are not the only ones we face. Unforeseen risks could arise and problems or issues that we now view as minor could become more significant. If we were unable to adequately respond to any risks, our business, financial condition and results of operations could be materially adversely affected. Additionally, we cannot be certain or give any assurances that any actions taken to reduce known risks or uncertainties will work.

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Our plant in Corpus Christi is subject to regulations promulgated by the Federal Environmental Protection Agency ("EPA") and state and local authorities with respect to the discharge of substances into the environment. We believe that the Corpus Christi plant is in compliance with all applicable federal, state and local laws and

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regulations relating to the discharge of substances into the environment, and we do not expect that any material capital expenditures for environmental control facilities will be necessary in order to continue such compliance.

TMM's SR plant is required to be licensed by the Malaysian Atomic Energy Licensing Board ("AELB") because the ilmenite used by the plant is derived from tin tailings, which are a source of small amounts of monazite and hafnium which are radioactive rare earth compounds. As part of the licensing requirements, TMM is required to maintain a monitoring program for various emissions from the plant. The monitoring is done in-house by TMM personnel and results are reported to the AELB as required. The plant is subject to various other licensing and permitting requirements, all of which TMM is currently in compliance.

TP&T operates an alumina processing plant in Hattem, the Netherlands, and is governed by rules promulgated by both The Netherlands and the European Community. We believe that the Hattem plant is in compliance with all environmental and safety regulations.

HITOX and the ingredient from which it is produced, SR, are non-toxic and non-hazardous. HITOX complies with all applicable laws and regulations enforced by the United States Food and Drug Administration (the "FDA") and is an acceptable component of packaging materials used in direct contact with meat, poultry and other food products; of paints used in incidental contact with such products; and of other packaging materials, such as paper and paperboard. HITOX also complies with current color additive regulations promulgated by the FDA. In addition, HITOX has been tested for compliance with the applicable standards promulgated by the National Sanitation Foundation (the "NSF"), and we are authorized to use applicable NSF seals and/or logos in connection with the marketing of HITOX. This authorization is significant in that end users of titanium dioxide pigments who wish their products to be NSF approved must use component materials that also meet NSF standards.

We normally manufacture our pigment products in anticipation of, and not in response to, customer orders and generally fill orders within a short time after receipt. Consequently, we seek to maintain adequate inventories of our pigment products in order to permit us to fill orders promptly after receipt. As of February 28, 2005, we do not have a significant backlog of customer orders.

We currently hold no patents on the processes for manufacturing any of our products. Six of TOR's products, HITOX (4/30/2015), ALUPREM (8/13/2011), HALTEX (7/28/2012), BARTEX (2/24/2007), OSO® (6/6/2009) and TITOX® (5/26/2012), are marketed under names which have been registered with the United States Patent and Trademark Office. Trademarks are also registered in certain foreign countries.

As of December 31, 2004, we had a total of 45 full-time employees in the US, 24 at TP&T in the Netherlands and 134 at TMM in Malaysia, of which 62 are covered by a collective bargaining agreement with an in-house union. Our current collective bargaining agreement runs through December 31, 2005 and we do not anticipate any problems associated with the renewal/negotiations. We have not experienced any work stoppages and believe that our relations with all our employees are good.

TOR's internet website address is www.torminerals.com. Our Annual Report on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 are available through our internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange

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Commission. Our internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-KSB.

We own the improvements on the plant site, including a 3,400 square-foot office, a 5,000 square-foot laboratory building, a maintenance shop and several manufacturing and warehousing buildings containing a total of approximately 90,000 square feet of space. The leased premises include approximately 350 lineal feet of bulkheaded industrial canal frontage, which provides access to the Gulf of Mexico intercoastal waterway system through the Corpus Christi ship channel. This property also is serviced by a Company owned railroad spur that runs through our property to the canal.

TOR Processing and Trade, located in Hattem, Netherlands, is located near the major shipping port of Rotterdam. The factory site, which the Company owns, was expanded in 2004 from approximately one acre to two acres and consists of a steel frame metal building which we are in the process of expanding from 10,000 square feet to 20,000 square feet, a 2,000 square foot office house which was purchased in July 2004 in conjunction with a land purchase and a 10,000 square foot warehouse with a loading dock which was purchased in January 2005. (See "Subsequent Liquidity Events", page 25).

In July 2004, TP&T entered into a mortgage loan in the amount of Euro 485,000 ($658,000 at December 31, 2004) which will be repaid over 25 years with interest fixed at 5.2% per year for the first four years. TP&T utilized Euro 325,000 ($441,000 at December 31, 2004) of the loan to finance the July 14, 2004 purchase of land and an office building, as well as to remodel the office building. The balance of the loan proceeds, Euro 160,000 ($217,000 at December 31, 2004), was used for expansion of their existing building. Monthly principal and interest payments commenced on September 1, 2004, and will continue through July 1, 2029. The monthly principal payment is Euro 1,616 ($2,192 at December 31, 2004). The loan balance at December 31, 2004 was Euro 479,000 ($650,000 at December 31, 2004).

TP&T entered into an additional mortgage loan on January 3, 2005, to fund the acquisition of a 10,000 square foot warehouse with a loading dock that is located adjacent to their existing production facility on the land purchased in July 2004. The mortgage, in the amount of Euro 470,000 ($633,000 on January 3, 2005), will be repaid over 25 years with interest fixed at 4.672% per year for the first five years. Thereafter, the rate will change to bank prime plus 1.75%. Monthly principal and interest payments will commence on February 28, 2005 and will continue through January 31, 2030. The monthly principal payment will be Euro 1,566 ($2,125 at December 31, 2004). The mortgage is secured by the land and building purchased on January 3, 2005.

At December 31, 2004, the expansion of TP&T's existing facility from 10,000 square feet to 20,000 square feet was approximately 80% complete. The expansion is scheduled for completion during the first quarter 2005. The estimated cost to complete the project is Euro 125,000 ($170,000 at December 31, 2004) which will be funded with cash generated by TP&T's operations.

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TOR Minerals Malaysia operates the SR manufacturing plant in Ipoh, Malaysia, and is close to the source of their major raw material - ilmenite. The plant site has 38 acres of land that TMM has a commitment to use through 2074.

TMM owns the improvements on the plant site, including a 3,960 square-foot office, a 1,980 square-foot laboratory, a spare parts storage warehouse, an employee cafeteria, and several manufacturing and warehousing buildings containing a total of approximately 106,500 square feet of space.

We believe that all of the facilities and equipment of the Company are adequately insured.

The Company is involved in routine litigation incidental to its business.

No matters were submitted to a vote of security holders during the fourth quarter of the Company's fiscal year ended December 31, 2004.

The names of the members of the Company's executive officers at February 28, 2005, each of whom is elected annually, are set forth below:

Richard L. Bowers, President, Chief Executive Officer and Director - Richard Bowers was appointed President and Chief Executive Officer on May 23, 2001. He joined Benilite in 1969 and was stationed in Singapore and Malaysia. In 1971, Mr. Bowers joined the staff of the Hitox Division of Benilite in Corpus Christi and was employed until the spin-off of the Company in 1980. From 1981 until 1994 he held positions of President, Chief Executive Officer and Chairman of the Board of the Company. Since 1995, Mr. Bowers has served as a director and is a shareholder of Environmental Analytics, Inc., a company that monitors fugitive emissions at chemical plants. Mr. Bowers has a Bachelor of Arts degree from Furman University.

Dr. Olaf Karasch, Executive Vice President, Operations - Dr. Olaf Karasch was appointed Executive Vice President, Operations by the Board on September 4, 2002. Dr. Karasch had served as Managing Director of TOR's wholly owned Netherlands subsidiary, TP&T, since joining the company on May 16, 2001. In January 1996, Dr. Karasch was managing director for Flohme Chrome Plating and Plasma Coating. In 1997, he joined the Royal Begemann Group in the Netherlands until its purchase by TOR in 2001. Dr. Karasch received his Ph.D. in Mineralogy at Reinisch-Westfalische University in Aachen, Germany where he specialized in submicronization (particle size reduction below one micron).

Mark Schomp, Vice President, Sales and Marketing - Mark Schomp was appointed Vice President, Sales and Marketing, by the Board on September 4, 2002. Mr. Schomp is a Chemical Engineer who spent 15 years in sales and sales management with AluSussie-Lonza, a large European manufacturer of aluminum, aluminas, and

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other products. He has wide experience in selling pigments and fillers to plastics and coatings applications. Mr. Schomp joined the Company's sales department in 2001.

Lawrence W. Haas, Treasurer and Chief Financial Officer - Lawrence W. Haas was appointed Treasurer and Chief Financial Officer by the Board on October 13, 2003. Prior to joining the Company, Mr. Haas served as the Vice President of Finance at Hi-Rise Recycling Systems, Inc., a manufacturer of solid waste processing equipment and recycling systems. Mr. Haas has a Masters of Business Administration degree from the University of Texas and is a CPA.

Hee Chew Lee, Vice President, Asian Operations - Hee Chew Lee was appointed Vice President, Asian Operations, by the Board on December 5, 2002. Mr. Lee, a Chemical Engineer, joined TOR in 1994 as General Manager and has served as the Managing Director of TMM since 1998.

Elizabeth Morgan, Secretary - Elizabeth Morgan has served as Secretary since November 1988, Director Administration since 1999 and as Assistant to the President since September 1988. Prior to joining the Company, she served as Administrative Assistant to the President of Carl Oil & Gas Co., an independent oil and gas exploration company based in Corpus Christi, Texas.

No executive officer of the Company has any family relationship with any other director or executive officer of the Company.

The table below sets forth the high and low closing sales price of our common stock for the periods indicated, according to published sources.

No cash dividends have ever been paid on our Common Stock.

The approximate number of holders of record of TOR's Common Stock as of December 31, 2004 was 125.

On December 6, 2004, we declared a dividend, in the amount of $15,000, for the quarterly period ending December 31, 2004, payable on January 1, 2005, to the holders of record of the Series A Convertible Preferred Stock as of the close of business on December 6, 2004. In 2004, dividends declared on the Series A Convertible Preferred Stock totaled $56,000.

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The following table provides information as of December 31, 2004, about our Common Stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans (including individual arrangements):

Our 1990 Incentive Plan for TOR Minerals International, Inc. (the "1990 Plan") provided for the award of a variety of incentive compensation arrangements to such employees and directors as may be determined by a Committee of the Board. The ability to issue new options under the 1990 Plan expired in February of 2000, with options to acquire 372,200 shares of common stock still outstanding. At December 31, 2004, the 1990 Plan had 108,150 options outstanding.

On February 21, 2000, our Board of Directors approved the adoption of the 2000 Incentive Plan for TOR Minerals International (the "Plan"). The Plan provides for the award of a variety of incentive compensation arrangements to such employees and directors as may be determined by a Committee of the Board. The maximum number of shares of TOR's common stock initially authorized to be sold or issued under the Plan was 750,000. In the Annual Shareholders' meeting on May 14, 2004, the maximum number of shares of our common stock that may be sold or issued under the Plan was increased 300,000 shares from 750,000 shares to 1,050,000 shares subject to certain adjustments upon recapitalization, stock splits and combinations, merger, stock dividend and similar events. At December 31, 2004, the Plan had 701,800 options outstanding.

In 1999, an additional 75,000 options were issued outside the 1990 Plan at an exercise price of $2.125. Of the options issued outside the Plan, 50,000 options were outstanding at December 31, 2004.

Both the 1990 Plan and the 2000 Plan provide for the award of a variety of incentive compensation arrangements, including restricted stock awards, performance units or other non-option awards.

The number of options exercisable at December 31, 2004 and 2003 was 476,450 and 421,650, respectively. The weighted-average remaining contractual life of options outstanding at December 31, 2004, is 7.32 years. Exercise prices on outstanding options ranged from $0.92 to $5.41 per share as noted below.

The Company has no reportable purchases of equity securities.

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We are a global specialty chemical company engaged in the business of manufacturing and marketing mineral products for use as pigments, pigment extenders and flame retardants used in the manufacture of paints, industrial coatings, plastics, catalysts and solid surface applications. We have three production facilities located in Corpus Christi, Texas, Ipoh, Malaysia, and in the Netherlands.

The facility in Corpus Christi, Texas, manufactures HITOX, BARTEX, and HALTEX. The facility is also the Global Headquarters for the Company. The facility in Ipoh, Malaysia, manufactures SR and HITOX. SR is the main raw material for HITOX. The Company also supplies SR to outside customers. The facility in Hattem, the Netherlands, manufactures Alumina based products. (See "Our Products" on page 4).

Approximately $7,689,000 or 25% of the 2004 sales are outside of the United States. Of these sales, approximately 31% are in currencies other than the US dollar, primarily Euro based. Of the $22,787,000 sales in the United States, $4,758,000 or 21% were Euro denominated sales.

Operating expenses in the foreign locations are primarily in local currencies. Accordingly, we have exposure to fluctuation in foreign currency exchange rates. These fluctuations impact the translation of sales, earnings, assets and liabilities from local currency to the US dollar. "Foreign Operations - Impact of Exchange Rate" on page 27).

Our business is closely correlated with the construction industry and its demand for materials that use pigments, such as paints and plastic pipe. This has generally led to higher sales in our second and third quarters due to increases in construction and maintenance during warmer weather. Also, pigment consumption is closely correlated with general economic conditions. When the economy is in an expansionary state, there is typically an increase in pigment consumption while a slow down typically results in decreased pigment consumption. When the construction industry or the economy is in a period of decline, TOR's sales and profit are likely to be adversely affected.

Critical success factors for the Company include managing its overall global manufacturing facilities to maximize efficiencies in the manufacturing process, controlling costs, increasing market share, developing new markets for our products and the effects of foreign currency fluctuations.

Our 2004 sales were $30,476,000, up approximately 26% from 2003. Net income was $1,104,000, down approximately 13% from 2003 net income of $1,264,000. The primary reason for the reduction in net income is due to significant increases in energy, freight and raw material costs which negatively affected our gross margin. While we generally increase prices to offset cost increases, these actions tend to lag the cost increases.

Our financial performance continues to be heavily dependent on sales of a single product line, HITOX pigment, which accounted for approximately 40% of the 2004 total sales as compared with 48% in 2003. As a result, we continually strive to diversify our sales by developing new products and expanding our existing product lines. During 2004 we designed and constructed a new HITOX processing line at the Corpus Christi operation specifically to allow for the production of .3 Micron HITOX-SF. Final production tests were conducted in January and February 2005 and commercial production commenced in March 2005. In addition, TP&T began producing commercial quantities of both TOR COAT and TOR BRITE in late 2004, which are alumina mono oxyhydrate based pigments for use in the coatings industry. We have established one European customer for TOR COAT and are shipping truckload quantities to this customer. Sampling of TOR BRITE is underway in the US and Canadian markets and both TOR COAT and TOR BRITE are being tested in Europe. TP&T has received approval from one large manufacturer of automotive coatings for the production of TOR COAT and intends to begin supplying later in 2005.

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Net Sales: Consolidated net sales for 2004 were approximately $30,476,000, an increase of approximately $6,349,000 or 26% compared with 2003 net sales of approximately $24,127,000. Net sales are higher primarily due to increased volumes in all of our major product lines and to pricing increases. These increases are primarily due to the continued strengthening of the economy in the US and the rest of the world. Also contributing to the increase is the foreign currency exchange rate effect of the weakening US dollar against the Euro.

Following is a summary of our consolidated products sales for 2004 and 2003 (in thousands):

The increase in sales of our HITOX, BARTEX and HALTEX is primarily due to the continued strengthening of the US economy.

Our net sales to customers in the US increased approximately $5,754,000 or 34% from $17,033,000 in 2003 to $22,787,000 in 2004. Of the 2004 US sales, approximately $4,758,000 were denominated in Euros. The effect of the US dollar weakening against the Euro was to increase these sales by approximately $434,000 as compared to 2003 exchange rates.

Foreign net sales increased approximately $595,000 or 8% from approximately $7,094,000 in 2003 to $7,689,000 in 2004. The effect of the weakening US dollar was to increase these sales by approximately $182,000 as compared to 2003 exchange rates.

17

Following is a summary of net sales for our Corpus Christi operation for 2004 and 2003 (in thousands):

Our subsidiary in the Netherlands, TP&T, manufactures and sales ALUPREM to third party customers, as well as to our Corpus Christi operation for distribution to our US customers. The following table represents TP&T's ALUPREM sales (in thousands) for 2004 and 2003 to third party customers. All inter-company sales have been eliminated.

Our subsidiary in Malaysia, TMM, manufactures and sells SR and HITOX to third party customers, as well as to our Corpus Christi operation. The following table represents TMM's sales (in thousands) for 2004 and 2003 to third party customers. All inter-company sales have been eliminated.

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• HITOX Sales - Decreased $55,000 as a result of a decrease in volume of $187,000 over 2003 offset by price increases of $132,000. The volume decrease is primarily due to a reduction in TMM's third party sales to one customer.
• Other Product Sales - Decreased $147,000 due primarily to a one time sale of Zircon in 2003.
• TMM also supplies SR to the Corpus Christi operation which is used in the production of HITOX and supplies the Corpus Christi operation HITOX which is sold to the US customers on the West Coast (these sales are excluded from the above table).

Gross Margin: Gross margin increased $735,000 over 2003, however, as a percentage of sales the margin decreased 2% from 24% in 2003 to 22% in 2004. Significant factors contributing to the gross margin increase are:

• Volume increases of approximately $1,575,000 primarily due to volume increases throughout all of our product lines.
• Net sales price increases of approximately $750,000 primarily related to HITOX, BARTEX and HALTEX sold through the Corpus Christi location. The price effect increased margin percentage by approximately 3%.
• Reduction of TMM's shutdown costs of approximately $190,000. The main production facility at TMM was shutdown during the first quarter of 2003 and was in production during all of 2004. This improved the margin by approximately 1%.
• The effect of the Euro strengthening against the US dollar on translating Euro denominated sales and expenses resulted in approximately $190,000 increase in the margin. The change in mix of Euro based sales and expenses resulted in a 1% increase to the margin.

Offsetting the margin improvements are increased costs of production which are primarily due to:

• Fuel price increases at all locations of approximately $630,000 (2% of sales).
• Raw material cost increases related to the production of ALUPREM at TP&T and BARTEX and HALTEX at Corpus Christi of approximately $515,000 (2% of sales).
• Freight cost increases, primarily relating to freight-in costs associated with transporting SR from TMM to Corpus Christi, of approximately $480,000 (2% of sales).
• Maintenance expenses, primarily at TMM and Corpus Christi, increased approximately $350,000 (1% of sales). The increase in maintenance expenses are necessary in order to maintain present and future operating efficiencies.

General, Administrative and Selling Expenses: Total general, administrative and selling expenses ("SG&A") increased from $3,680,000 in 2003 to $4,567,000 in 2004, an increase of $887,000 or 24%. Significant factors contributing to the increase are:

• Salary and benefits increased approximately $325,000 primarily due to an increase in personnel and wage/benefit increases.
• Stock option expense increased $110,000 due to additional options granted during the year.
• Travel and entertainment and sales promotion expenses increased approximately $115,000 due to activity promoting our products.

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• Accounting fees increased $185,000 primarily due to an increase in audit fees and Sarbanes-Oxley Section 404 implementation costs.
• Legal fees increased approximately $50,000.
• Investor relations increased $40,000 and various other SG&A expenses increased approximately $62,000

Interest Expense: Net interest expense in 2004 decreased $67,000 from $295,000 in 2003 to $228,000 in 2004. Included in the decrease was an adjustment in the amount of $33,000 which we recorded in the first quarter 2004 to reduce interest expense which represented a refund of excess interest payments made in 2003. Interest expense at the Corpus Christi operation decreased approximately $24,000 compared to 2003 primarily related to a reduction in related party debt and outstanding debt on the line of credit. TMM's interest expense decreased $54,000 primarily due to a decrease in TMM's utilization of its line of credit and ECR financing. TP&T's interest expense increased $44,000 compared to 2003 primarily due to new long-term debt on equipment financing and their facility expansion.

Income Taxes: We recorded $183,000 in income taxes in 2004, a $122,000 increase over 2003. Income taxes consisted of approximately $32,000 in State income taxes in the US and $151,000 of deferred tax expense recorded for TMM.

As noted on the following table, cash and cash equivalents decreased $40,000 from the end of 2003 to the end of 2004. Cash provided by operations accounted for $2,326,000 and financing activities provided $3,359,000. The Company used $5,665,000 in investment activities related primarily to the facility expansion at TP&T and the purchase of fixed assets at both the Corpus Christi operation and TP&T. The effect of the exchange rate fluctuations accounted for a decrease in cash of $60,000.

• Deferred Income Taxes: The increase in our deferred income taxes was due to the recognition of deferred tax liabilities at both TMM and TP&T.
• Accounts Receivable: Accounts receivable increased approximately $526,000 from the end of 2003 to the end of 2004 primarily due to the increase in sales volume offset by an increase in collection efforts during the fourth quarter 2004. Accounts receivable at the Corpus Christi operation decreased $350,000 on higher fourth quarter sales due primarily to increased collection efforts; TP&T's increased $195,000 due primarily to higher sales in the fourth quarter 2004; and TMM's increased $681,000 primarily due to a larger the fourth quarter sale of SR to KMG.

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• Inventories: Inventories increased approximately $1,054,000 from the end of 2003 to the end of 2004. Inventories at the Corpus Christi operation increased $1,087,000 primarily as a result of an increase in their raw materials of $2,125,000 (primarily SR and Barite) which was offset by a decrease in HITOX finished goods inventories of approximately $1,038,000. TP&T's inventories increased $131,000 primarily as a result of an increase their raw materials due to an increase in the operation's production requirements. TMM's inventories decreased $164,000 primarily relating to a decrease in their SR inventory.
• Other Current Assets: Other current assets increased approximately $123,000 primarily due to an increase in VAT tax at TP&T which is refundable.
• Accounts Payable and Accrued Expenses: Trade accounts payable and accrued expenses increased approximately $1,033,000 from the end of 2003 to the end of 2004. Of the increase, the Corpus Christi operation accounted for approximately $1,029,000 primarily related to the HITOX plant expansion that came on line the end of 2004. TP&T's increased approximately $502,000 primarily due to the expansion of their plant facility and TMM's decreased $498,000 due to the timing of funds received from inter-company sales.

Cash used in investing activities increased approximately $5,665,000 from the end of 2003 to the end of 2004 primarily for the purchase of fixed assets related to the expansion of our HITOX and ALUPREM production and the facility expansion at TP&T. Net investments for each of the Company's three locations are as follows:

• Corpus Christi Operation: We invested approximately $2,983,000 primarily related to the new HITOX production facility. The plant expansion will increase production of HITOX titanium dioxide pigment at Corpus Christi by approximately 10,000 tons annually and utilize a new proprietary production process, which is expected to reduce costs and we believe has the potential to increase the size of the market for HITOX.
• Netherlands Operation: We invested approximately $2,301,000 at TP&T primarily relating to their facility expansion and equipment to expand the ALUPREM production capacity. TP&T purchased the property adjacent to their existing plant site consisting of land and a small office building. In addition, TP&T has nearly completed the expansion of their existing building that effectively added another 10,000 square feet of plant space. The estimated cost to complete the facility expansion, which is scheduled for the first quarter 2005, is approximately $170,000. The equipment purchased in 2004 will allow TP&T to double their output of alumina and ultra fine white pigments. On January 3, 2005, TP&T finalized their purchase commitment for the acquisition of a 10,000 square foot warehouse with a loading dock at a cost of approximately $674,000. TP&T has restricted cash of approximately $219,000 that will be utilized during the first quarter 2005 towards the cost to complete the building expansion.
• Malaysian Operation: Our net investment in 2004 at TMM of approximately $162,000 was primarily related to equipment upgrades for the production of SR.

Financing activities provided cash of approximately $3,359,000 for the twelve-month period ending December 31, 2004. Significant factors relating to financing activities include the following:

• Lines of Credit: Our borrowings on the domestic line of credit ("US Line") decreased $700,000 from $2,825,000 at the end of 2003 to $2,125,000 at the end of 2004. The decrease in the Company's US Line was due primarily to the funds received in the placement of common and preferred stock issued in January 2004. TP&T's bank line of credit increased approximately $115,000 from the end of 2003 to the end of 2004. The increase in TP&T's line of credit was due primarily to the financing of new equipment and their facility expansion.

21

• Export Credit Refinancing - Malaysia: TMM's borrowings under the export credit refinancing facility ("ECR") decreased approximately $280,000 from $840,000 at the end of 2003 to $560,000 at the end of 2004 due primarily to the timing of cash receipts related to large SR sales to Corpus Christi and third parties. The ECR is a government supported financing arrangement specifically for exporters. TMM uses the ECR short-term financing of 150 days against customers' and inter-company purchase orders.
• Related Party Term Loan: In February 2004, we reduced the term loan received from members of our Board of Director's from $1,000,000 to $500,000. In addition, our loan to Paulson Ranch, in the amount of $231,000 was paid off in February 2004.
• Long-term Debt - Financial Institutions: TP&T's net long-term debt increased approximately $1,475,000 due to a new term loan for the purchase of equipment ($825,000) and a mortgage loan ($650,000). On January 3, 2005, TP&T entered into a new mortgage loan, in the amount of $633,000 to fund the acquisition of a 10,000 square foot warehouse located adjacent to their existing production facility. TMM paid off their long-term debt of approximately $70,000 in February 2004.
• Issuance of Preferred and Common Stock: In January 2004, we raised approximately $2,500,000 through the placement of 526,316 shares of common stock and $1,000,000 through the placement of 200,000 shares of convertible preferred stock. We used $2,700,000 of the proceeds to pay amounts owed under our domestic line of credit and $500,000 to reduce the related party term loan from members of our Board of Directors (David Hartman and Douglas Hartman). The balance of the proceeds was used for working capital purposes.
• Issuance of Common Stock Options: The Company received proceeds of $253,000 in 2004 as a result of employees and Directors exercising their common stock options.

The terms of the our borrowings contain restrictions and covenants, including subjective acceleration clauses and demand clauses on our foreign debt and covenants on our US debt based on our performance. Our failure to comply with such restrictions and covenants, or the exercise of subjective acceleration or demand clauses, could adversely affect our financial position. Management believes that it has adequate liquidity for fiscal year 2005 and expects to maintain compliance with all financial covenants throughout 2005.

On January 3, 2005, TP&T entered into a new mortgage loan with Rabobank to fund the acquisition of a 10,000 square foot warehouse with a loading dock that is located adjacent to TP&T's existing production facility. The mortgage, in the amount of Euro 470,000 ($633,000 on January 3, 2005), will be repaid over 25 years with interest fixed at 4.672% per year for the first five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. Monthly principal and interest payments will commence on February 28, 2005 and will continue through January 31, 2030. The monthly principal payment will be Euro 1,566 ($2,125 at December 31, 2004). The mortgage is secured by the land and building purchased on January 3, 2005.

On February 1, 2005, Paulson Ranch, Ltd. extended the maturity date of its $500,000 loan to us from February 15, 2005 to February 15, 2006 under the same terms and conditions.

TOR's discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principals generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debt, inventories, investments, intangible assets, income taxes, financing operations, and contingencies and litigation. TOR bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Results of operations for our foreign subsidiaries, TMM and TP&T, are translated from the designated functional currency to the US dollar using average exchange rates during the period, while assets and liabilities are translated at the exchange rate in effect at the reporting date. Resulting gains or losses from translating foreign currency financial statements are reported as other comprehensive income (loss). The effect of changes in exchange rates between the designated functional currency and the currency in which a transaction is denominated are recorded as foreign currency transaction gains (losses) in earnings. However, the effects of changes in exchange rates associated with our US dollar denominated loans to TP&T that are of a long-term investment nature are reported as part of the cumulative foreign currency translation adjustment in our consolidated financial statements.

Our policy is to depreciate the SR production equipment (with a net book value of at December 31, 2004 and 2003 of $5,563,000 and $6,667,000, respectively which is included in machinery and equipment) over its remaining useful life using the units of production method and to evaluate the remaining life and recoverability of such equipment based on the projected units of production. There have been no material changes in the estimates of the units to produce upon which the units of production method of depreciation is based. All other property, plant and equipment is depreciated on the straight line basis from three to 39 years.

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TOR maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Our effective tax rate is based on our level of pre-tax income, statutory rates and tax planning strategies. Significant management judgment is required in determining the effective rate and in evaluating our tax position. We have domestic and foreign net deferred tax assets resulting primarily from net operating loss carryforwards. These deferred tax assets are netted against our deferred tax liabilities in the jurisdiction in which they arose. If the result is a net deferred tax asset, it is fully reserved due to uncertainties related to future taxable income levels.

We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

We adopted the provisions of Financial Accounting Standards Board Statement No. 142, "Goodwill and Intangible Assets", effective January 1, 2002. Under the provisions of Statement No. 142, the value of our goodwill (with a carrying value of approximately Euro 1,460,000 or $1,981,000 based on December 31, 2004 exchange rate) is not subject to amortization. We evaluate the carrying value of the goodwill at least annually, or more frequently if indicators of impairment are noted. First, we identify potential impairments by comparing the fair value of the reporting unit with its book value, including goodwill. If the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired. If the carrying amount exceeds the fair value, we calculate the possible impairment loss by comparing the implied fair value of goodwill with the carrying amount. If the implied goodwill is less than the carrying amount, a write-down is recorded. Based upon our most recent analysis, we believe that no impairment exists at December 31, 2004. There can be no assurance that future goodwill impairment tests will not result in a charge to net earnings (loss).

The impairment of tangible and intangible assets is assessed when changes in circumstances (such as, but not limited to, a decrease in market value of an asset, current and historical operating losses or a change in business strategy) indicate that their carrying value may not be recoverable. This assessment is based on estimates of future cash flows, salvage values or net sales proceeds. These estimates take into account management's expectations and judgments regarding future business and economic conditions, future market values and disposal costs. Actual results and events could differ significantly from management's estimates.

As of December 31, 2004, the Company leased 12.86 of the land at the facility located in Corpus Christi, Texas, from the Port of Corpus Christi Authority and manufacturing equipment from Banc of America Leasing & Capital, LLC. The minimum future rental payments under these and other immaterial operating leases as of December 31, 2004 are as follows:

26

On July 20, 2004, we announced that our subsidiary, TP&T, has committed to the purchase of a 10,000 square foot warehouse with a loading dock located adjacent to TP&T's existing production facility for Euro 470,000 ($633,000). TP&T purchased this property on January 3, 2005.

At December 31, 2004, the expansion of TP&T's existing facility from 10,000 square feet to 20,000 square feet was approximately 80% complete. The expansion is scheduled for completion during the first quarter 2005. The estimated cost to complete the project is approximately Euro 125,000 ($170,000 at December 31, 2004)

Except as noted above, we did not have any off-balance sheet arrangements that have or are likely to have a material current or future effect on our financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

The following is a summary of all significant contractual obligations, both on and off Balance Sheet, as of December 31, 2004, that will impact our liquidity.

At December 31, 2004, we had $681,000 in assets not yet placed in service. These assets consist primarily of equipment and other construction costs related to the US Alumina plant construction. We originally planned to complete construction of the Alumina plant and begin US production in 2004. However, due to the need to quickly add Alumina production capacity in 2003, we elected to add production capacity at our existing Alumina plant at TP&T. We expect to complete construction and begin production of the US Alumina plant in the next two to three years. The expected costs to complete the US Alumina production line are approximately $4,000,000 to $6,000,000 depending upon the final scope of the project.

General inflation has not had a significant impact on our business, and it is not expected to have a major impact in the foreseeable future.

We have two foreign operations, TMM in Malaysia and TP&T in the Netherlands. TMM measures and records its transactions in terms of the local Malaysian currency, the Ringgit, which is also the functional currency. If the value of the Ringgit compared with the US dollar floated, the Company would report the effects of translating the Ringgit to the US dollar in an equity account in the consolidated balance sheet. However, Malaysia imposed capital controls and fixed its Ringgit currency at 3.8 Ringgits per 1 US dollar in September of 1998 to stem the outflow of short-term capital in the wake of the Asian financial crisis. The Malaysian government has not changed the fixed exchange rate since that time. The majority of TMM's sales are denominated in US dollars and expenses are denominated in the Malaysian Ringgit. As the Malaysian Ringgit is pegged to the US dollar, there is insignificant translation and/or transaction effects of changing foreign currency rates. Because there is no guarantee that the Malaysian Government will maintain the pegged rate to the US dollar, TMM's non-Ringgit transactions and balance sheet items are hedged using forward exchange contracts. (See "Foreign Currency Forward Contracts" on page 28).

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In the first quarter 2004, we changed TP&T's functional currency from U.S. dollar (USD) functional to Euro functional currency primarily as a result in a shift of a substantial majority of TP&T's sales contracts to Euro based contracts. In 2003, a substantial majority (approximately 64%) of TP&T's sales were USD denominated. Gains and losses resulting from translating the Balance Sheet from Euros to US dollars (including long-term Intercompany investments which are considered part of the net-investment in TP&T) are now recorded as cumulative translation adjustments (which are included in accumulated other comprehensive income, a separate component of shareholders' equity) on the Consolidated Balance Sheet. As a result of this change in functional currency, non-monetary assets and liabilities that had previously been accounted for using historical exchange rates between the Euro and USD have been translated at current exchange rates. Had the Company not made this change, year to date pretax income would have decreased approximately $135,000. As of December 31, 2004, the cumulative translation adjustment related to the change in functional currency totaled $1,737,000, net of taxes of $128,000. Such adjustment had an effect on the following balance sheet items:

To protect against the increase in the cost of natural gas used in the manufacturing process, we have instituted a selective natural gas hedging program. We hedge portions of our forecasted natural gas purchases with forward contracts. When the price of natural gas increases, its cost is offset by the gains in the value of the forward contracts designated as hedges. Conversely, when the price of natural gas declines, the decrease in the cash flows on natural gas purchases is offset by losses in the value of the forward contract.

On September 3, 2002, we entered into a natural gas contract with Bank of America, N.A. to achieve the objectives of the hedging program. The contract was designated as a cash flow hedge. The contract was settled based on natural gas market prices for January 1, 2003 through April 30, 2003. We paid fixed prices averaging $3.90 per MM Btu on notional quantities amounting to 60,000 MM Btu's. The fair value of the hedge decreased $56,145 from December 31, 2002, to April 30, 2003 due to the settlement of the hedge.

On September 16, 2003, we entered into a new natural gas contract with Bank of America, N.A. to achieve the objectives of the hedging program. We designated the contract as a cash flow hedge, with the expectation that it would be highly effective in offsetting the price of natural gas. The contract was settled based on natural gas market prices from January 1, 2004 through April 30, 2004. We paid fixed prices averaging $5.26 per MM Btu on notional quantities amounting to 80,000 MM Btu's. The fair value of the hedge decreased $73,000 from December 31, 2003 to April 30, 2004 due to the settlement of the hedge. The recognition of this gain had no effect on our cash flow.

At December 31, 2004, we did not have a natural gas hedge contract outstanding.

To protect our exposure to foreign exchange risks, we enter into foreign currency forward contracts. Gains and losses on foreign exchange contracts designated as hedges of identified exposure are offset against the foreign exchange gains and losses on the hedged financial assets and liabilities. Where the instrument is used to hedge against anticipated future transactions, gains and losses are not recognized until the transaction occurs. At December 31, 2004, we marked the contracts to market, recording a net gain of approximately $37,000 as a component of "Other Comprehensive Income", $54,000 as a current asset and $17,000 as a current liability on the balance sheet at December 31, 2004. The recognition of this net gain had no effect on our cash flow.

The US Internal Revenue Service ("IRS") is currently examining our 2002 tax year. Although the IRS has yet to issue any proposed assessments, they have questioned the allowability of a 1994 NOL carryforward of approximately $9,810,000 that is scheduled to expire in 2009. We believe that our position complies with applicable tax law and we do not anticipate any material earnings impact.

28

The Financial Statements are set out in this annual report on Form 10-KSB commencing on page F-1.

No disagreements between the Company and its accountants have occurred within the 24-month period prior to the date of the Company's most recent financial statements or during any subsequent interim period.

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-14(c) and Rule 15d-14 under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the date of the evaluation, the Company's disclosure controls and procedures are effective in timely alerting them to the material information relating to the Company required to be included in its periodic filings with the Securities and Exchange Commission.

Changes in Internal Controls. During the period covered by this report, there were no changes that would have materially affected, or which were reasonably likely to materially offset, the Company's internal control over financial reporting.

On November 19, 2004, the Board of Directors approved an increase in the fee for the Audit Committee Chairman from $500 to $1,000 for each committee meeting beginning in 2005.

The Company had adopted a Code of Ethics that applies to all of its directors, officers (including its chief executive officer, chief financial officer, controller and any person performing similar functions) and employees. The Code of Ethics can be viewed on the Company's web site at www.torminerals.com. The Company intends to post amendments to, or waivers from, its Code of Ethics that apply to its Chief Executive Officer, Chief Financial Officer, Controller and any other person performing similar functions, on its website.

29

Information under the caption "Executive Compensation", which will be contained in the Company's Definitive Proxy Statement for its 2005 Annual Meeting of Shareholders, is incorporated herein by reference.

Information under the caption "Executive Compensation - Security Ownership of Management", which will be contained in the Company's Definitive Proxy Statement for its 2005 Annual Meeting of Shareholders, is incorporated herein by reference.

The discussion under the caption "Certain Transactions", which will be contained in the Company's Definitive Proxy Statement for its 2005 Annual Meeting of Shareholders, is incorporated herein by reference.

30

Information under the caption "Disclosure on Fees - Audit Fees and Tax Fees", which will be contained in the Company's Definitive Proxy Statement for its 2005 Annual Meeting of Shareholders, is incorporated herein by reference.

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

32

TOR MINERALS INTERNATIONAL, INC. AND SUBSIDIARIES
Annual Report on Form 10-KSB

F - 1

To the Board of Directors and Shareholders of

TOR Minerals International, Inc.

We have audited the accompanying consolidated balance sheet of TOR Minerals International, Inc. and Subsidiaries ("the Company") as of December 31, 2004, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TOR Minerals International, Inc. and Subsidiaries as of December 31, 2004, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ UHY Mann Frankfort Stein & Lipp CPAs, LLP

Houston, Texas

March 28, 2005

F - 2

Board of Directors and Shareholders

TOR Minerals International, Inc.

We have audited the accompanying consolidated balance sheet of TOR Minerals International, Inc. as of December 31, 2003 and the related consolidated statement of operations, shareholders' equity, and cash flows for the year then ended. The consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TOR Minerals International, Inc. at December 31, 2003 and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 1 to the financial statements, in 2003 the Company changed its method of accounting for stock-based compensation.

/s/ Ernst & Young LLP

San Antonio, Texas

February 3, 2004

F - 3

See accompanying notes.

F - 4

See accompanying notes.

F - 5

See accompanying notes.

F - 6