NIPPON LIGHT METAL COMPANY, LTD. ANNUAL REPORT 2008

Nippon Light Metal Company, Ltd.
NYK Tennoz Building, 2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp

Uses soybean ink inconsideration of the enviroment

Printed in Japan

CORPORATE DATAPROFILE

Since its foundation in 1939, Nippon Light Metal Company, Ltd. has been constantly involved withaluminum. Today, Nippon Light Metal is Japan’s sole fully integrated aluminum manufacturer with

Head Office

Major Shareholders

activities ranging from alumina refining to fabrication of various products.

NYK Tennoz Building
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp
Phone: 81-3-5461-9211
Fax: 81-3-5461-9344(Ratio of Stock Holding)

Nippon Light Metal comprises four business segments: Aluminum Ingot and Chemicals
concerning the production of alumina and related chemicals and aluminum ingot; Aluminum
Sheet and Extrusions involving the production of sheets and shapes; Fabricated Products and Others
including the production of transportation-related products, electronic materials, foil and powder;
and Building Materials covering the production of residential and office building materials. ThroughEstablishedMarch 30, 1939

these segments, Nippon Light Metal is actively engaged in a wide range of fields such as automobiles
and railroads, electric machinery and electronics, industrial products and construction.

Paid-In Capital¥39,085 million

The NLM Group—the preeminent source of products and services combining aluminum’s
excellent characteristics with new functionality and added value that cater to pressing customer

Shares of Common Stockneeds—delivers customer satisfaction and contributes to environmental protection.

Authorized: 1,600,000,000
Issued: 545,126,049
Number of Shareholders

CONTENTS

59,039Stock Exchange Listings

CONSOLIDATED FINANCIAL HIGHLIGHTS ................................................................................................ 1
TO OUR SHAREHOLDERS.............................................................................................................................. 2
SPECIAL FEATURE ......................................................................................................................................... 4
NLM GROUP TOPICS ..................................................................................................................................... 7
CORPORATE GOVERNANCE AND INTERNAL CONTROL SYSTEMS...................................................... 8
NLM GROUP ENVIRONMENTAL ACTIVITIES ........................................................................................... 10
REVIEW OF OPERATIONS ............................................................................................................................. 11
NLM GROUP .................................................................................................................................................... 15
CONSOLIDATED SIX-YEAR SUMMARY ...................................................................................................... 16
FINANCIAL REVIEW ...................................................................................................................................... 18
CONSOLIDATED BALANCE SHEETS ........................................................................................................... 20
CONSOLIDATED STATEMENTS OF INCOME ............................................................................................. 22
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS............................................................. 23
CONSOLIDATED STATEMENTS OF CASH FLOWS.................................................................................... 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS........................................................................... 25
REPORT OF INDEPENDENT AUDITORS ...................................................................................................... 36
OVERSEAS NETWORK .................................................................................................................................. 37
DIRECTORS AND OFFICERS ......................................................................................................................... 38
CORPORATE DATA ......................................................................................................................................... 39

Tokyo, Osaka, Nagoya, Fukuoka, Sapporo
Transfer Agent of Common Stock

The Chuo Mitsui Trust & Banking Co., Ltd.
Last Shareholders’ Meeting

June 26, 2008

The Dai-ichi Mutual Life Insurance Co.
(3.7%)
Namekawa Aluminium Co., Ltd.
(3.2%)The Master Trust Bank of Japan, Ltd.
(trust accounts)(3.2%)
Japan Trustee Services Bank, Ltd.
(trust accounts)(3.0%)
Asahi Mutual Life Insurance Co.
(2.8%)The Light Metal Educational
Foundation, Inc.
(2.7%)Morgan Stanley and Company Inc.
(2.4%)
Nikkei-Keiyu-Kai(2.2%)
Mizuho Corporate Bank, Ltd.
(2.1%)
Mizuho Trust employee pension trust
Mizuho Corporate accounts(1.5%)

Cautionary Statement
This annual report contains various projections and estimates. Important factors that could alter these projections and estimates include
changes in the balance of aluminum supply and demand, fluctuations in the price of aluminum ingot and foreign exchange rates, aswell as shifts in Japanese government policies and regulations. The Company cautions, therefore, that the projections and estimates(As of March 31, 2008)

contained herein involve risk and uncertainty, and that actual results could differ materially from those expressed or implied.
39

CONSOLIDATED FINANCIAL HIGHLIGHTS
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
Years ended March 31

2008

2007

Millions of yen

For the year:
Net sales
Operating profit
Net income (loss)

2008
Thousands of
U.S. dollars¥618,158 ¥647,846 $6,466,174
30,51917,998
179,639
12,755 (10,310) (102,904)

At year-end:
Total assets
Net assets
Short-term borrowings and long-term debt,
including bonds and capital lease obligation
Per share data (yen and dollars):
Net income (loss)—basic—diluted
Cash dividends
Net assets¥

Stock information (TSE) (yen and dollars):
Stock price:
High
Low

¥

579,463
142,111

540,473
128,997

5,394,480
1,287,524

222,884

224,075

2,236,500

23.56 ¥ (19.00) $
22.36
—
5.00
3.00
254.82223.61

399 ¥
267

363 $
134

(0.19)
—
0.03
2.23

3.62
1.34

Note1: U.S. dollar amounts have been translated, for convenience only, at the exchange rate of ¥100.19 = U.S.$1.00. See Note 2 of the Notes to the Consolidated
Financial Statements.
Note2: Effective the year ended March 31, 2007, the Company adopted the new accounting standard “Accounting Standard of Presentation of Net Assets in the
Balance Sheet”. See Note1 (b) of the Consolidated Financial Statements.

Net Sales
800

Operating Profit
35

Total Assets
600

30
600

450

25
20

400

300
15
10

200

150

5
0

2003 2004 2005 2006 2007 2008

Billions of yen

Years ended March 31

02003 2004 2005 2006 2007 2008

Billions of yen

Years ended March 31

02003 2004 2005 2006 2007 2008

Billions of yen

As of March 31

1

TO OUR SHAREHOLDERS

I am pleased to report on the operating resultsfor Nippon Light Metal Company, Ltd. and its consolidated
group companies for fiscal 2007
(the year from April 1, 2007 to March 31, 2008).

Takashi Ishiyama President and CEO

Overview of Fiscal 2007

Consequently, NLM recorded consolidated net sales

During the year under review, although the alumi-of ¥647.8 billion, operating profit of ¥18.0 billion and

num industry experienced continued robust demandordinary profit of ¥11.2 billion. Also, NLM recorded afrom the automotive industry and its relevant fields,

net loss of ¥10.3 billion, the first loss in seven years,

inventory adjustments occurred or demand declined

mainly owing to the extraordinary loss resulting fromin the electrical, electronics and construction indus-

recording of an impairment loss on fixed assets in thetries. In the construction industry, demand fell sharp-

Residential Building Materials Operation of thely owing to steep decrease by 19.4% year-on-year in

Building Materials segment.

house building sector attributable to the impact of therevised Building Standards Law which came into force

NLM paid a year-end cash dividend of ¥3.0 per
share, a ¥2.0 decrease from the previous year.

in June 2007. In addition, soaring prices of raw materials and fuel and of aluminum ingot brought about

Overview by Business Segment

adverse consequences for profits.

Sales in the Aluminum Ingot and Chemicals segment

In these circumstances, in accordance with theincreased by 41.1% year-on-year to ¥156.2 billion, while

three-year Mid-Term Management Plan (for the peri-

operating profit fell by 21.4% year-on-year to ¥9.2 billion.

od from fiscal 2007 to fiscal 2009), NLM Group strove

Sales in the Aluminum Sheet and Extrusions segment

to create new businesses and new products and under-

increased by 0.6% year-on-year to ¥79.3 billion, while

took to maintain and increase earning power throughoperating income decreased 74.7% to ¥1.6 billion.

such measures as product price adjustments. In spite

Sales in the Fabricated Products and Others segmentof these efforts, deterioration in the bauxite quality

decreased by 1.4% year-on-year to ¥252.0 billion, andplus sharp price increase in raw materials, fuel andoperating income decreased by 6.7% to ¥13.2 billion.

other materials, notably aluminum ingot, brought

Sales in the Building Materials segment fell by 7.4%

about steep decrease in profit unavoidably.
2

year-on-year to ¥160.3 billion, while an operating loss of¥3.0 billion was recorded, a ¥4.0 billion decrease fromdifficult to produce using the then available technology,

operating income recorded for the previous year.

sold from October 1999 to March 2005. However, sinceApril 2005, only the conforming products have been sold

Structural Improvement of the Building Materials
Operationwith the certified specifications.
NLM expresses deep regret and apology for the law vio-

In April of 2008, NLM announced a series of measures tolation above. NLM Group is to implement group-wideachieve structural improvement of the Building Materials

measures to prevent similar incidents from recurring andOperation and an operating alliance with Sankyo-

to further reinforce and advance product safety and quali-

Tateyama Holdings, Inc.

ty assurance systems.

Firstly, the management system was overhauled from
top to bottom aiming at the forthcoming structure renew-

Outlook for Fiscal 2008

al. Secondly, the workforce is being reduced in accordance

As the economic deceleration triggered by the subprime

with the market environment: Shin Nikkei Co.,Ltd. plans

loan problem in the U.S. is spreading to Asia and Europe,

to downsize 200 of regular employees and 200 of tempo-

the anxiety has been increasing about the possibility of arary employees, totally 400 of employees. Thirdly, realign-global economic downturn. In the aluminum industry, thement and consolidation are underway at the production

current high prices are expected to continue for alumi-

sites. Fourthly, various costs are actively being cut notably

num ingot, the principal raw material, fuel and various

in the areas of logistics and purchasing. The anticipatedresources. In this adverse business environment, NLM

effect of above measures will be cost reduction of someGroup plans to achieve consolidated net sales of ¥660.0¥3.0 billion through downsizing of the workforce, somebillion, operating income of ¥21.5 billion and ordinary¥4.0 billion through productivity improvements and someincome of ¥14.5 billion for Fiscal 2008.

¥3.0 billion through improvements in logistics and pro-NLM Group has accumulated extensive management

curement. Together with these, the deficit ridden Shinresources, centering on aluminum, in areas ranging from

Nikkei Co., Ltd., the key sector for the operation, is tomaterials to processing. We intend to deploy these resourc-

achieve some operating profit in fiscal 2008 and further

es to the maximum effect in pursuit of increased profits inan ordinary profit in fiscal 2009.

accordance with the Mid-Term Management Plan. I would(For information on the operating alliance with Sankyo-

like to ask for continuing support of our shareholders in

Tateyama Holdings, Inc., please refer to the Special Feature

years to come.

on Page 5.)

June 2008
The Sale of Improper Products not in Conformity
with Fire-resistance Certification Specifications
In January 2008 NLM announced that NLM and its wholly
owned subsidiary Nikkei Panel System Co., Ltd. had soldheat insulation panels that did not conform with fireretardant materials certification specifications. The prod-

Takashi Ishiyama

ucts involved are some of heat insulation panels that were

President and CEO
3

SPECIAL FEATUREAN INTERVIEW WITH TAKASHI ISHIYAMA, PRESIDENT AND CEO

Activities of the NLM Group and Future Challenges
Question >>> One year has passed since you

difficult to copy. I havebecame President and CEO. How

also kept this philosophy

is this elapse of days for the cor-and practice for ourporate performance?

products since I became
President and CEO. For

Answer : In a word, it was a year in which external

instance, we changed ourenvironment changes far exceeded our expectations. Toge-laboratory organization

ther with material prices skyrocketed, exports slumped fol-from a vertical system to a matrix one that dynamicallylowing the subprime loan problem. Also political turmoil

interweaves market needs with skewers of each businessin Japan resulted in stalled decision-making of the nation

segment. With this, contents of research reports havethat caused people’s unsettling atmosphere. In addition,changed considerably: Namely, reports are prepared quick-the revised Building Standards Law had a major impact

ly, stating simply and clearly what and when to be accom-on the businesses of the NLM Group, notably those of NLM

plished according to customer needs.

Large structural materials for railway
rolling stock

itself, Shin Nikkei, Riken Light Metal Industrial and Nikkei

One of the outcomes from the practice above is the

Extrusions. Meanwhile, since the beginning of 2008, we

aluminum material used for N700 Shinkansen bullet

have experienced decreasing demand from the automo-

trains in Japan. The NLM Group holds a dominant market

tive, electrical equipment and electronics sectors, whichshare for this material that is used for the train bodies,

had once been increasing since the second half of 2007.

luggage racks and underbody cowls. It is also used fortrains of Taiwan High Speed Rail and those of China High

Question >>> As aluminum products are widelyused throughout the society,
NLM business has inevitably

Speed Rail.

Question >>> In April, NLM announced struc-been affected significantly by thetural renovation of the Building

economic environment in Japan

Materials Operation. What are

and around the world. In what

the problems and what areareas did you make efforts dur-

improved with the renovation?

ing the past one year?

Also, what do you expect Shin
Nikkei now that Mr. Tsuyoshi

Answer : Since I became the senior executive officer in

Nakajima has become the2001, I had endeavored to create enduring products andpresident?

businesses that were not influenced by the economic environment or external circumstances. I had sought to nur-

Answer : The biggest problem with Shin Nikkei is thatture the seeds of future businesses aiming at products thatprofit-and-loss management for each product has beenothers weren’t trying to develop and products that wereentirely inadequate. Clearly, above management should

4definitely include the marketing, production and logistics.

second in Japan’s build-

It is also necessary for special-order products to maintaining materials industry.

and even increase their contribution to profit in the budget

Although I do not deny

by reducing the cost for production and logistics. However,this alliance has possibil-

at Shin Nikkei, above management has not prevailed

ity for future manage-

through to the frontline.

ment integration, we
Press conference

The newly appointed president, Mr. Tsuyoshi Nakajima

have to reliably achieve

who, as a director of Shin Nikkei, I had frequently dis-intended effects of the operating alliance first, which may

cussed this issue with is determined to carry out the struc-be followed by future merger of both companies.

ture renovation, for which I am to give him full support.
He had also served as a corporate officer to Nikkeikin ACTQuestion >>>Please elaborate measures toand Nikkei Extrusions, which made him fully acquainted

reinforce core businesses andwith the industry trends.

activities oriented to growing
markets.

Question >>>Please elaborate the comprehensive alliance with Sankyo-

Answer : First, let’s look at some developments in the

Tateyama Holdings, Inc.

automotive parts and materials sector, where business has(“Sankyo-Tateyama”), which was

been fairly healthy. Nikkei Matsuo (“Matsuo Industry” until

announced at the same time.

July 2007) which has enjoyed robust demand for its castparts such as engine mount brackets and brake calipers is

Answer : The point of the alliance is the pursuit of man-

expanding production capacity by taking in the Cast Metalufacturing cost reductions by mutual OEM supply throughBusiness at Tomakomai, which was previously a unit ofeffective utilization of each production facilities. In addi-

NLM’s Shaped Parts Division.

tion, we aim to achieve cost reductions of about ¥10.0 bil-

Honda Motor Co., Ltd. has adopted ourlion over a period of three years through joint procurement

FLEXCAST5000,5000-series alloy plate mate-of raw materials and parts, and mutual utilization of logis-

rial with the FLEXCASTER tech-tics infrastructure.

nology, for their automobiles

The domain identity of Sankyo-Tateyama and Shinas the hood inner layer

Nikkei are complementary in that Sankyo-Tateyama is

material of the Acura RL, astrong in housing sector while Shin Nikkei in commer-

model to be sold in North

cial building sector. These days, the business environ-

America. This material isment has been tough for the Building Materials

attracting attention in the

Operation. If the two companies were merged,

automotive

the sales of resulting company would rank

industry5

SPECIAL FEATURE

as the revolutionary one that contributes to weight reduc-ment, the sale of sunroof rail are expected to grow follow-

tion in cars.

ing the start of its full production.

In other developments, Nikkei Niigata has commenced

Nikkei Siam Aluminium (Thailand) is also performing

production of automobile suspension component ofwell. It aims to improve quality and boost productivity by“Radius Rod” for Nissan Motor Co., Ltd. For this, NLM has

modifying its cold rolling mill and reinforcing its finishing

adopted the friction welding method to realize high stabili-equipment.

ty. We are seeking to expand the market for this product.
Toyo Aluminium is enjoying brisk business of the solar

Question >>>In view of these circumstances incells back sheets, a product for which demand is increasing

the NLM Group, what is the near-worldwide. It has decided to invest in the expansion of pro-future image of the Group to

duction capacity at three sites in Japan and overseas.

which you aspire?

We have received orders from North America andEurope for Maxus, a specialty aluminum material for use

Answer : Although the NLM Group is an aggregate ofin nuclear fuel storage containers. Currently Nikkei Niigata

business units that operate in diverse domain identities

is expanding its rolling machine facilities, aiming at ship-and differ in business structure and scale, we aim to be anments from December this year.

aggregate of highly profitable and independent operations

Nippon Electrode is also enjoying brisk business. The

in each domain identity. I would like to make the NLM

demand is increasing for the bottom carbon of blast fur-Group a business group that continues to grow, even innaces used in the steel industry and for the negative elec-

adverse circumstances, by trying to nurture potential seeds

trode carbon for aluminum smelting.

in forward-looking spirit.

1, 2 Please refer to the NLM Group Topics section on Page 7.

Question >>>Question >>>Finally, what message would you

How are the overseas

like to send to the shareholders

businesses?

and other stakeholders.

Answer : Constructions are going on smoothly with Toyo

Answer : Business conditions in Japan and around theAluminium’s paste plant in China and Nikkeikin ACT’s sec-

world are fraught with great uncertainty, and also theond plant in China (Nikkei (shanghai) Body Parts Co.,

harsh business environment for NLM is likely to continueLtd.). With regard to Nikkei (shanghai) Body Parts, wefor some time. Nevertheless, the NLM Group always keeps

receive orders for extruded material for sunroof rails in

its social mission in mind, seeking to achieve businesslots of 100,000 units. In addition to the existing superb

development through the management in harmony withplant of NI Nikkei Shenzhen, NLM quality control systems,

shareholders, business partners, employees and theirhigh productivity, etc. have been favorably evaluated, con-families, and local communities. I would like to ask all

tributing to gain customers’ trust in us. In China, with

our stakeholders for the continued support and encour-sunroofs installed for luxury cars as the standard equip-

agement as ever.

6

NLM GROUP TOPICS

Commercial Production Started for the Automobile Body Plate Materialof the Honda Acura RL model.

Hood inner

Acura RL

In 2008, NLM started commercial production of FLEXCAST5000, the world’s first automobile body ofaluminum alloy plate manufactured by FLEXCASTER* technology, and commenced shipments to
Honda Motor Co., Ltd. The product is used as layer materials of the hood inner for “Acura RL”, a model
Honda sells in the U.S..
As the strength and high formability are required for the automobile body plate material,
FLEXCAST5000 is an accomplishment of joint development with Honda in pursuit of these requirements above.
As the NLM Group has supplied a variety of automotive materials and components, we will continue
to meet the needs for weight reduction of automobiles through the development of new technologies
and new products.
* FLEXCASTER ) Introduced from the former Alcan International, FLEXCASTER is thin-sheet continuous casting equipment based on belt
casting technology. FLEXCASTER enables to manufacture such alloys and products of high-strength with high formability that are difficult to produce through conventional casting and rolling processes.

Toyo Aluminium Expands Production Facilities for Solar Cell Back Sheets
May 2008, Toyo Aluminium K.K., one of the NLM Group companies, decided to expand its production
facilities to cope with the rapid increase in demand for solar cell back sheets marketed as “Toyal Solar”.
The market for solar cells is expanding by some 30% every year around the world, with Europe
serving as the center of growth owing to the solar power purchase policies of governments of Germany,
Spain, Italy, etc. Solar cell back sheets, an essential component of solar cells, need to be highly moisture-proof plastic film sheets to be attached to the back of solar cells to maintain the power generation
efficiency of silicon cells.
Toyo Aluminium plans to invest in the facility expansion at its sites in China and Japan, aiming todouble the current production capacity for the back sheet, or more, in 2010. In Guangdong Province,
China, NLM will install four production lines at Toyal Zhaoqing Co., Ltd., of which Toyo Aluminium isthe 90% shareholder and plans to start up four production lines in series from May 2009 to August
2010. In Japan, Toyo Aluminium will add one more production line at the Yao Plant in Osaka, currently the main production site for the back sheets, and newly build one line in the Yabata Plant of
Tokai Aluminum Foil Co., Ltd., a subsidiary of Toyo Aluminium. Toyo Aluminium plans to conclude its
production expansion investment by September of 2008 and anticipates total investment of some ¥2.5
billion in China and Japan.

7

CORPORATE GOVERNANCE AND INTERNAL CONTROL SYSTEMS

1. Summary of Corporate Governance
NLM takes it as one of the most important management issues to develop the Corporate Governance System in order to fulfill
the trustful management for stakeholders including shareholders, business partners, employees and local communities.
NLM has adopted an executive officer system. The Board of Directors consists of 11 directors, of whom two are outside
directors. This system makes it possible for the Board of Directors to fulfill the agile management and sufficient deliberation. To ensure for the directors and executive officers to take their roles and responsibilities clearly and definitely, their term ofoffice is set to be one year. Twelve meetings of Board of Directors were held in fiscal 2007.
For multifaceted examinations of important matters that affect the entire Group, NLM has set up an Executive Committee
under the Board of Directors consisting of the President and CEO, the senior executive / executive officers, and some directors of subsidiaries who concurrently serve as NLM directors. The Executive Committee is held at least twice a month.
NLM has also adopted a statutory auditor system. The Board of Statutory Auditors consists of five statutory auditors, ofwhom three are outside auditors. The Auditor is an independent agency that plays a key role in the corporate governance,
including attending the Board of Directors meeting and other important internal meetings.

NLM’s CORPORATE GOVERNANCE STRUCTURE
General Meeting of Shareholders
Appointment / removal
Audit reports

Appointment / removal

Directors
Outside directors

Audit reports

Board of Directors
Appointment/ removal

Accounting
auditorAppointment / removal

Accounting
audit

Board of
Statutory
Auditors

Appointment / removal
President and CEO

Audit bystatutory
auditors

Executive Committee
Executive officers
Reports andproposals

Information exchange

Operations,subsidiaries and affiliates
Internal
audit

Subcommittees under the
Executive Committee• Compliance Committee• Internal Control Promotion Office• Quality Committee• Environment Committee, etc.,

Auditing Office

Statutory
auditors
Outsideauditors

Information exchange

Audit reports/ Information exchange

Support Systems for Outside Directors and Outside Statutory Auditors
The Planning Department and the Legal Department, jointly serving as the secretariat of the Board of Directors meeting, circulate handouts for the meeting to those directors and auditors in advance. The secretariat also elaborates issues of particular importance to them prior to the meeting.
The Auditors Office serves as the staff section assisting the auditors.
8

Accounting Audits
Ernst & Young ShinNihon LLC is responsible for accounting audits of NLM for fiscal 2007 based on the Companies Act andthe Financial Instruments and Exchange Act of Japan.
2. Summary of Implementation of Internal Control Systems
In order to fulfill the Corporate Governance, NLM takes it as another important management issue to develop the Internal
Control Systems for all the NLM Group employees for the purpose of risk management, compliance with laws and ordinances,efficient job ongoing and appropriate financing activities in every aspect of NLM business process.
At the Board of Directors meeting held on May 17, 2006, a basic policy was resolved for the implementation of theInternal Control Systems. At the same time, the Internal Control Office was established under the Executive Committee as anorganization to develop the infrastructure for the Internal Control Systems.
Establishment of the Compliance Code and the Internal Whistle-Blower System
In July 2004, NLM established the Compliance Committee to clarify its corporate social responsibility and to effectively
implement the Internal Compliance Systems. The President&CEO chairs the committee. On April 1, 2006, NLM also establishedthe Group Compliance Code, which is posted on the Group intranet site, with the code leaflet distributed at the same time forits penetration to every member in the Group companies. Concurrently, a hotline is established as the internal whistle-blower
system.
With regard to compliance awareness activities, NLM believes it very important to create an atmosphere that officers andemployees can frankly exchange opinions about their compliance fulfillment in the workplace, always with significanceof the compliance in mind. Each year NLM holds a total of more than 300 compliance meetings with all the employees
participated.
Establishment of Group Risk Management Regulations
NLM has been developing the risk management system, with The Group Risk Management Regulations established in May
2006 that specifies responsible department for it and risk management guidelines, according to the risk significance levelof 1) Product and service defects, 2) Environmental problems, 3) Disasters (natural and accidental) and 4) Information
systems problems.
Establishment of Regulations Concerning the Preservation and Management ofDocuments containing Important Decisions
In accordance with the corporate regulations, NLM appropriately preserves and manages information on duty executionsof directors, which is occasionally disclosed to the statutory auditors upon their request. On May 29, 2006, NLM established
Regulations Concerning the Preservation and Management of Documents containing Important Decisions, which lays down
the criteria for the preservation and management of documents at each NLM Group company, including those of Executive
Committee decisions, miscellaneous committee minutes and the departmental decisions (approval applications, the data
and annex included).
9

NLM GROUP ENVIRONMENTAL ACTIVITIESWe shall comply with relevant laws and ordinances andshall furthermore take action independently and actively for global environmental problem.
NLM Group’s management policies reflect the recognition that initiatives to tackle global environmental problems are vital.
Basic Principle

Action Guidelines

Declaring the basic policy, we shall voluntarily and actively tackle theglobal environmental problem in compliance with relevant laws andordinances by all means.
NLM Group management policy declares that the environment protection effort is one of the most important assignments for the group.
With the following Basic Policy for Environmental Issues and Action
Guidelines set forth based on the principle above, we are committed tocontributing to the society in terms of the environment protection.
Basic Policy for Environmental Issues
Environmental issues are no longer confined to one locality, but they
have been spreading and worsening to the extent that they can endanger the global environment and very existence of human beings.
Actions and dedications are deadly required for the national government, local governments, citizens and companies to construct a sustainable, recycling-oriented economy and society capable of coexistingwith the environment preserved Earth. With this mission strongly in
mind, the NLM Group seeks for the harmonious coexistence with thenatural environment in every aspect of corporate activities.
Those efforts above eventually lead to sound corporate activities
together with protecting the interests of shareholders, customers,
employees and local communities, which are the basis of NLM existence. We also endeavor, as decent corporate citizens, to realize a truly
affluent society through the environment-oriented social contributions.

1. Compliance with Environment-related Laws and Regulations
We comply with laws and regulations for the environment
protection.
2. Improvement of Energy Efficiency and Reduction of CO2
Emissions
We endeavor to improve the energy efficiency and reduce CO2 emissions by improving efficiencies of production processes and equipments, raising the productivity and rationalizing logistics.
3. Facilitating Resource Savings and 3 R campaign
We make efficient use of all production resources including thealuminum, and disseminate the 3 R (reduction, reuse and recycling) campaign throughout the Group.
4. Business Activities in Consideration of Environmental
Impacts
Prior to determining where to build the production facility or what
products to develop, we take necessary measures for their impacts
to the environment based on scientific evaluations. We also makeevery effort to reduce the load to the environment even in usualbusiness activities.
5. Development of Technologies Contributing to Environment
Protection
We serve the environment protection by providing those fruits thatare to be obtained from our development of products and processes
giving less load to the environment with the aluminum characteristic advantage.

Voluntary Action Plan for Reduction of Greenhouse Gas Emissions / NLM Group(t-CO2/million yen)

2.5
2.26
2.11

2.16

2.12

2.10
1.97

2.0

2.11

2.18

10% reduction

2.07
1.99

1.88

1.90

1.5

1.0

The NLM Group formulated a voluntary action plan to actively promote the environment protection measures on voluntary basis mentioned in its management policies. The Group action plan was set
forth in 2005 focused on reduction of greenhouse gas emissions,which can be a comprehensive indicator for diversified environment
aspect such as the atmosphere and water quality, also with the background of the Kyoto Protocol that came into effect.
As shown in the graph, despite fluctuations, a downward trend ofgreenhouse gas emissions can be seen over the long term. NLM constituted a “Team for Energy Savings and Carbon Lowering” in September
2008. We strive for further reduction of greenhouse gas emissions.

0.5

0.0

NLM Group Voluntary Action Plan for Reduction of Greenhouse
Gas Emissions
1990

1998 1999 2000 2001 2002 2003 2004 2005 2006 20072010 (FY)* The graph in the Annual Report 2007 has been revised to reflect the criteria changes for evaluation ofgreenhouse gas emissions at some sites.

10

Reduce the ratio of greenhouse gas emissions to net
sales by 10% by 2010 compared with in1990

REVIEW OF OPERATIONS

Aluminum Ingot and Chemicals
ProfileAlumina and Chemicals Operations produces aluminum hydroxide, alumina, and chemicals used in various
fields. These products are used as raw materials for flame retardants, ceramics, and other products and as
industrial materials in paper and pulp manufacturing. Aluminum and Aluminum Alloy Operations manufactures primary and secondary aluminum alloys and enjoys an excellent reputation for the development ofhigh-performance alloys in response to customer requirements. High-purity aluminum manufactured at
Japan’s only aluminum smelting plant is used as a raw material for electronic materials and other products.
Consolidated Net Sales

12,50010,000156,189
Millions of Yen

Principal Products

Consolidated Operating profit(Millions of Yen)

7,500
5,000
2,500
0

’04

’05

’06

’07

’08

• Aluminum• Aluminum hydroxide• Chemicals (chemical products)• Caustic soda
• Chlorinated chemical products• Aluminum ingot• Aluminum alloys■ Overview of results for fiscal 2007
In Alumina and Chemicals Operations,although the alumina demand has remainedrobust for flame retardants and electricalequipment & electronics materials withaluminum hydroxide. However, shipments ofaluminum hydroxide for building materials
have slumped owing to the worsening businessenvironment in construction-related industries.
In addition, production volumes decreased
owing to quality deterioration of bauxite, theraw material of alumina and aluminumhydroxide. These factors led to a decrease in
overall shipments of alumina.
In Chemicals, although the manufacturing
and sale of fluoride products were ceased at theend of the previous term, shipments havedeveloped favorably with organic and inorganic
chlorine products. Shipments of soda products
have been especially brisk for their scarce supply.

As a result, Aluminum and Chemical sales
increased year-on-year. However, prices soared
for raw materials and fuel, notably bauxite,
crude salt, heavy oil and city gas. Moreover,ocean freight charges rose sharply andproductivity declined due to the bauxite quality
deterioration. All these above make the profit
from both Operations drop sharply from theprevious fiscal year, despite efforts to pass on
cost increases to product prices as well as efforts
to promote sales of value-added products.
In Ingot Operations, sales rose sharply yearon-year mainly owing to the launch of Nikkei
MC Aluminium Co., Ltd. on April 1, 2007, a joint

High-purity aluminum products

Spark plugs (Low soda alumina)

venture with Mitsubishi Corporation, as well as
on-going strong demand from the automotive
sector. However, profits did not reach the budget
target although NLM boosted buying power
through an alliance with the Mitsubishi
Corporation Group and passed on cost increases
to product prices to cope with difficulties of
sharp price increases in crude oil andaluminum scrap.
As a result of the above, sales in the
Aluminum, Chemicals and Ingot segment
increased by 41.1% year-on-year to ¥156,189
million, while operating profit fell by 21.4% to¥9,172 million.

11

REVIEW OF OPERATIONS

Aluminum Sheet and Extrusions
ProfileThe NLM Group’s aluminum sheet and extrusions are used in a wide range of market sectors, for instancefor automotive parts and railway cars in the transport industry and for semiconductor and liquid crystal
manufacturing equipment and photosensitive drums in the electrical machinery and electronics
industries. The Group applies technologies and expertise accumulated over many years to actively develop
products that meet user needs and provides customers with high-performance sheets and extrusions.

■ Consolidated Net Sales■ Consolidated Operating profit■ Applications■ Principal Products(Millions of Yen)

• Automobile• Automobile suspension parts • Lead-free cut aluminum alloy• Quick freezing coagulated powder extruded materials• High-intensity molded aluminum sheet• Large structural materials for railway rolling stock• Truck body parts• Thick plate for semiconductor and LCD manufacturing
equipment, Foil stock • Photosensitive drum materials• Printing roll • Industrial materials• Aluminum honeycomb panel • Scaffolding

7,500
6,000

79,375
Millions of Yen• Transport

4,500• Electronics

3,000
1,500
0

’04

’05

’06

’07

’08

• Industrial• Building materials andinfrastructure materials■ Overview of results for fiscal 2007
In Aluminum Sheet Operations, sales remainedat the same level as the previous year. To be
more precise, shipments of aluminum plates forsemiconductor, manufacturing equipments ofliquid crystal display and general-purpose
aluminum sheet for building materials fell
sharply owing to slumping demand. Shipmentsof aluminum foil stock for capacitors developed
favorably and sales of personal computer
housings and lithium-ion battery cases
increased in the electrical equipment sector.
Also, the raised selling prices contributed to
product sales to some extent. However, profits
fell significantly owing to sharp price increases
in fuel and subsidiary materials, and depleted
gain on ingot inventories that was recorded in
the previous term.

In Aluminum Extrusion Operations, sales
decreased in extrusion products for building
materials, reflecting a slump in construction
demand. So did motorcycle parts as a result of
inventory adjustments in response to weakereconomic conditions in the U.S. However,overall sales rose slightly year-on-year as
shipments increased for Shinkansen train
carriages and other railway cars, and theelectrical & electronics products. However,profits fell sharply year-on-year owing to

Photosensitive drums

Fuel tankprotector

12

slumping demand as well as the significant
impact of soaring prices for fuel and subsidiarymaterials.
As a result of the above, sales in the
Aluminum Sheet and Extrusions segment
increased by 0.6% year-on-year to ¥79,375
million, while operating profit fell by 74.7% to¥1,630 million.

REVIEW OF OPERATIONS

Fabricated Products and Others
ProfileThe NLM Group includes a number of companies that handle distinctive fabricated products.In particular,
Toyo Aluminium’s aluminum foil and aluminum powder and paste, Nippon Freuhauf’s van and truck
bodies, and Nikkei Panel System’s commercial refrigerator and freezer panels enjoy an excellent reputation
for quality and are market share leaders in their respective fields. In addition, the Group pro-vides familiar
consumer products, including anodized aluminum foil for aluminum electrolytic capa-citors, automotive
parts, landscaping products, containers, and packaging materials.
■ Consolidated Net Sales■ Consolidated Operating profit■ Applications■ Principal Products(Millions of Yen)

• Automobile• Powder and paste • Cast and forged parts for automobiles• Heat exchangers for automobiles• Van truck bodies and trailers• Aluminum foil for electrolytic capacitors • Clean rooms• Anodized foil for electrolytic capacitors• Landscape engineering products• Solid truss structural materials (Aluminum truss)• Plant package for communication base stations• Aluminum foil • Panels for commercial refrigerators and freezers

17,500• Transport• Electronics

14,000251,998
Millions of Yen

10,5007,000• Building materials

3,500

and infrastructurematerials

0’04■ Overview of results for fiscal 2007
In Aluminum Foil, Aluminum Powder and Paste
Operations, sales of aluminum foil were strong.
Robust demand kept on going for high-purity
aluminum foil for electrolytic capacitors
successively from the previous term. Also sales
developed favorably for electronic materials,
notably back sheets of solar cell and antennas
for smart cards. So did sales of plain foil andprocessed foil for food products andpharmaceuticals packaging.
In the aluminum powder and paste sector,
overall sales decreased from the previous term.
Sales of aluminum paste for automotive paintand plastic coatings decreased owing to changes
in color trends. Meanwhile, exports compensatedfor the domestic sales reduction in functional
ink for solar cells resulting from lower
production of cells by raw materials shortage atsome cell makers. However, profits increased
year-on-year owing to the selling price raise
implemented for the steep price increases inaluminum ingot and subsidiary materials.
On October 1, 2007, Tokai Aluminum Foil Co.,
Ltd. became a subsidiary of Toyo Aluminium
K.K.. The two companies will strive to construct astable earnings structure by utilizing
management resources more effectively.
In Transport-Related Operations, sales of thevan and truck outfitting business fell sharply inreaction to advanced demand in the previous
term for the strengthening of exhaust gas
regulations. Profits also decreased year-on-year
owing to the price increase in aluminum

’05

’06

’07

’08

• Food and lifestylematerials and stainless steel materials.
Sales of capacitors for car air conditioners
rose year-on-year owing to firm shipments of the
production backlog for subcompact cars thanks
to favorable automobile production in Japan
plus sharp increases in export shipments of the
products for new orders of automobiles.
Sales of shaped parts increased sharply yearon-year as demand for cast products remained
strong since the introduction of new products inthe previous term, in addition to recovered
demand for forged products by major customers.
However, profits fell slightly from the previous
term owing to the higher energy costs following
sharp increase in crude oil price.
In Electronic Material Operations, sales ofanodized aluminum foil for electrolytic
capacitors surpassed the previous one owing to
growing demand for digital appliances andrelevant robust corporate investments. However,the profit outcome was adverse owing to fallingmarket prices of digital appliances and otherend-products, despite efforts to raise productivity
by means of technological and operational
improvements.
In Panel Systems Operations, sales fell sharply
year-on-year as demands continued to fall forlarge-size freezers and refrigerators as well as
small and medium-size ones, in addition to
selective acceptance of orders for profit securing.
Sales for clean rooms fell year-on-year owing toslumps in building projects as a result of thestricter building certification following therevised Building Standards Law.

Profits fell sharply on account of the slumping
demand above plus the recording of an
extraordinary loss on correction costs for
products sold in previous years that did notconform to the certification specifications of fireretardant materials.
In other fabricated products and related
businesses, overall sales of containers fell sharply
from the previous fiscal year. Although demandhas been strong for commercial washingcontainers for beer servers and other beer-related
containers, shipments of mainstay aluminum
mini-kegs for beer fell sharply owing to demanddecrease in authentic beer resulting from theprevailed preference of sparkling liquor andbeer-tasting alcoholic beverages.
With regard to landscaping products, although
NLM has proactively worked to increase sales ofdifferentiated products, especially with brazed
honeycomb panels centered, sales fell year-onyear owing to decrease in public investment ofmajor projects such as aluminum movable
covers for water purification plants, which has
resulted in spending contraction of public works.
However, profits improved as NLM focused on
reducing expenses through in-housemanufacturing of products and parts, notably
aluminum railings.
As a result of the above, sales in the
Fabricated Products and Related Businesses
segment decreased by 1.4% year-on-year to¥251,998 million, and operating profit fell by
6.7% to ¥13,212 million.
13

REVIEW OF OPERATIONSBuilding Materials
ProfileShin Nikkei plays a central role in providing high-quality aluminum building materials, operating inaccordance with the basic concept of placing importance on the preferences of residents and users. Products
include everything frombuilding construction materials such as curtain walls, to window sashes, front
doors, and other housing materials as well as gates, fences, and other exterior products. Also, Shin Nikkei isdeveloping products adapted to wideranging user needs for energy conservation, environmental coexistence,
universal design, and security enhancement.
■ Consolidated Net Sales■ Consolidated Operating profit■ Applications■ Principal Products(Millions of Yen)

• Building• Building materials• Housing materials• Exterior products

12,0009,000

160,284
Millions of Yen

6,000
3,000
0
-3,000

’04

’05

’06

’07

’08

■ Overview of results for fiscal 2007
In Building Materials Operations, the housebuilding and non-wood floor construction
dropped sharply year-on-year because of thestricter building certification following therevised Building Standards Law. Meanwhile,
prices of materials, notably aluminum ingot,
the key raw material, has remained at highlevels, which has brought about adverse
business environment.
In these circumstances, the NLM Group has
promoted dynamic policies such as introducing
competitive new products satisfying customer
needs, and deploying profit-oriented sales
activities.

Furthermore, to cope with soaring prices ofaluminum ingot, NLM has concentrated on
securing profits through enhanced costreduction activities throughout various projects.
However, unable to fully overcome the impact
by sharp decrease in demand, in spite of these
efforts, both sales and profits fell sharply yearon-year.

Spandrel

Residential gate and fence

14

As a result, sales in the Building Materials
segment decreased by 7.4% year-on-year to¥160,284 million, also operating profit
decreased to ¥4,049 million, resulting in an
operating loss of ¥2,976 million.

NLM GROUP
Nippon Light Metal Group consists of 121subsidiaries and 47 affiliates,
The Group's major operations and the business relations between the Company, major consolidated subsidiaries andaffiliates accounted for by the equity method are shown in the diagram below.

(Manufacture and Sales)(Sales and Others)● Aluminium Wire and Rod Co., Ltd.

● Nikkei Sangyo Co., Ltd.

● Nikkei MC Aluminium Co., Ltd.

● Tamai Steamship Co., Ltd.

● Nikkei MC Aluminum America Inc.

Aluminum
Ingot andChemicals● Nikkei MC Aluminum (Korat) Co., Ltd.
● Nikkei MC Aluminum (Thailand) Co., Ltd.
● Nikkei MC Aluminum (Kunshan) Co., Ltd.
● Ihara Nikkei Chemical Industry Co., Ltd.

Aluminum
Sheet andExtrusions(Manufacture and Sales)(Sales and Others)● Nikkei Extrusions Co., Ltd.

● Nikkei Sangyo Co., Ltd.

● Nikkeikin Aluminium Core Technology Co., Ltd.
● Nikkei Siam Aluminium Ltd.
● Nonfemet International(China-Canada-Japan)

Aluminium Co., Ltd.

Nippon Light Metal Company, Ltd.
(Manufacture and Sales)(Manufacture and Sales)(Sales and Others)● NLM ECAL Co., Ltd.

● Nikkei Information System Co., Ltd.

● Toyo Aluminium K.K.

● Nikkei Logistics Co., Ltd.

● Tokai Aluminum Foil Co., Ltd.

● Sumikei Nikkei Engineering Co., Ltd.

● Toyal America Inc.

● Toho Earthtech Inc.

● Toyal Europe S.A.S.U.

FabricatedProducts
and Others● Toyo Aluminium Ekco Products Co., Ltd.
● Nikkei Sangyo Co., Ltd.
● Nikkei Panel System Co., Ltd.
● Nippon Electrode Co., Ltd.
● Nippon Fruehauf Co., Ltd.
● Matsuo Industry Co., Ltd.
● Sam-a Aluminium Co., Ltd.
● Nikkei Heat Exchanger Co., Ltd.

Building
Materials(Manufacture and Sales)(Sales and Others)● Shin Nikkei Co., Ltd.

● Shinnikkei Best System Co., Ltd.

● Riken Light Metal Industrial Co., Ltd.

● Nikkei Sangyo Co., Ltd.

● Cosmo Industry Co., Ltd.

Customer● Consolidated subsidiaries............113companies● Affiliates accounted for by the equity method . . .19companies

Flow of products and raw materials
Flow of services(As of July 31, 2008)

15

CONSOLIDATED SIX-YEAR SUMMARY
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
Years ended March 31

Gross Profit and
Gross Profit Margin2003%

150,000

Gross Profit
Gross Profit Margin20

90,00015

60,00010

30,0005

02003 2004 2005 2006 2007 2008

Millions of yen

0Years ended March 31

Interest-bearing Debt
300,000

250,000

200,000

150,000

100,000

50,00002003 2004 2005 2006 2007 2008

Millions of yen

Years ended March 31

Free Cash Flows
35,00030,00025,00020,00015,00010,0005,000
0-5,0002003 2004 2005 2006 2007 2008

Millions of yen(Millions of yen)25

120,000

Years ended March 31

2004

Financial Results
Net Sales .................................................................................................
Gross Profit Margin (%) ........................................................................
Operating Profit .....................................................................................
Ordinary Profit.......................................................................................
Net Income (loss) ..................................................................................
Segment Information
Net Sales:
Aluminum Ingot and Chemicals .....................................................
Aluminum Sheet and Extrusions.....................................................
Fabricated Products and Others ......................................................
Building Materials ............................................................................
Total ..................................................................................................
Operating Profit (Loss):
Aluminum Ingot and Chemicals .....................................................
Aluminum Sheet and Extrusions.....................................................
Fabricated Products and Others ......................................................
Building Materials ............................................................................
Elimination or corporate items .......................................................
Total ..................................................................................................
Financial Position
Current Assets.........................................................................................
Property, plant and equipment .............................................................
Intangible assets ....................................................................................
Investments and other assets ................................................................
Current liabilities ..................................................................................
Long-term liabilities ..............................................................................
Shareholders’ equity (Note 3) ...............................................................
Valuation and translation adjustments (Note 3) .................................
Minority interests in consolidated Subsidiaries (Note 3) .....................
Interest-bearing Debt (Note 2) ..............................................................
Cash Flows
Cash Flows from Operating Activities....................................................
Depreciation and Amortization .......................................................
Cash Flows from Investing Activities .....................................................
Capital Expenditures ........................................................................
Cash Flows from Financing Activities ...................................................
Per Share Data (yen and dollars)
Net Income (loss) - basic.......................................................................
- diluted ....................................................................
Net Assets (Note3) ..................................................................................
Cash Dividends .......................................................................................
Indices
Return on Capital Employed (ROCE)(%)....................................................
Return on Equity (ROE)(%)..................................................................
Equity Ratio (%) ....................................................................................
OthersNumber of Shares Outstanding (thousands) ..................................................
R&D Expenditures .................................................................................
Number of Employees ............................................................................

¥514,042
20.1
20,086
12,325
7,116¥532,20121.1
26,35516,092
11,52581,49558,374204,171
170,002514,042

82,85164,860215,461
169,029532,201

4,946
1,027
11,0695,875(2,831)
20,086

4,727
3,667
14,071
6,687(2,797)
26,355

287,083
184,506
4,414
49,758294,637
138,623
88,598748
3,155
258,831

290,625
182,562
3,935
43,463291,799
122,593
99,6182,840
3,735
231,807

33,507
17,128224
13,501(36,504)

23,44816,504(5,556)
17,516(27,703)¥ 13.34—167.01
2.0¥ 21.24—
188.84
2.5

5.5
8.2
17.0

7.0
12.0
19.7

543,350¥ 4,427
12,328543,350¥ 4,804
12,598Note1: U.S. dollar amounts have been translated, for convenience only, at the exchange rate of ¥100.19 =U.S.$1.00. See Note 2 of the Notes to the Consolidated Financial Statements.
Note2: Interest-bearing Debt = Long-term debt and Short-term borrowings, excluding capital lease obligations +Notes discounted + Notes endorsed
Note3: Effective the year ended March 31, 2007, the Company adopted the new accounting standard“Accounting Standard for Presentation of Net Assets in the Balance Sheet”.
See Note 1(b) of the Notes to the Consolidated Financial Statements.

16

2005

2006

2007

2008

Return on Capital Employed(ROCE)

2008(Thousands of
U.S. dollars)(Note1)(Millions of yen)10

8¥560,284
21.0
30,56021,857
13,488¥577,061
20.1
28,92322,3539,684¥618,158
19.5
30,51925,24812,755¥647,846
16.8
17,998
11,222(10,310)$6,466,174
16.8
179,639
112,007(102,904)

6

4

2

92,94872,824
219,802174,710560,284

97,07770,714
238,422
170,848
577,061

110,667
78,929255,514173,048
618,158

156,189
79,375251,998
160,284
647,846

1,558,928
792,245
2,515,201
1,599,800
6,466,174

8,866
5,785
14,883
4,068(3,042)30,5609,640
6,435
15,848(163)(2,837)28,923

11,667
6,443
14,156
1,073(2,820)30,519

9,172
1,630
13,212(2,976)(3,040)17,99891,546
16,269131,870(29,704)(30,343)
179,638

285,252
179,614
3,895
46,020266,212129,237
112,068
3,214
4,050
210,368

294,331
185,005
5,261
48,929281,505
122,033
119,7196,275
3,994
208,817340,897
184,070
5,969
48,527
287,436
149,916130,176
7,770
4,165
223,607

311,083
179,243
6,189
43,958
270,545
140,931
118,294
3,465
7,238
223,660

3,104,931
1,789,031
61,772438,7462,700,319
1,406,637
1,180,697
34,58472,2432,232,359

32,345
16,591(14,131)
16,973(22,702)

26,77917,315(19,724)
19,819(9,862)

21,397
17,481(19,514)
20,702
12,48325,018
20,160(25,051)
25,263(9,028)249,706
201,218(250,035)
252,151(90,109)¥ 24.7823.83
212.633.5¥ 17.79
16.89
232.544.0¥ 23.5622.36
254.825.0¥ (19.00)—
223.61
3.0

8.6
12.4
22.4

8.6
8.0
23.6

9.3
9.7
23.8

4.5
(7.9)
22.5

543,350¥ 5,538
12,927543,350¥ 5,133
13,492

543,350¥ 5,504
13,493545,126¥ 5,858
14,084$(0.19)
—
2.23
0.03
4.5
(7.9)
22.5

$

545,126
58,46914,08402003 2004 2005 2006 2007 2008

Years ended March 31%

Return on Equity (ROE)
15

10

5

0

-5

-10

2003 2004 2005 2006 2007 2008

Years ended March 31%

R&D Expenditures
6,000

5,000

4,000

3,000

2,000

1,000

0

2003 2004 2005 2006 2007 2008

Millions of yen

Years ended March 31

17

FINANCIAL REVIEW

income, etc.. Non-operating expenses increased by 16.6% to¥10.6 billion ($106 million) , mainly because of theincreased loss in the disposal of inventories included in nonoperating expenses. As a result, the ordinary profit decreasedby 55.6% year on year to ¥11.2 billion ($112 million).
Special gains amounted to ¥2.5 billion ($25 million)
which includes the gain on changes in equity interest inaffiliates of ¥1.1 billion ($11 million) and from reversal of
allowance for doubtful accounts of ¥1.1 billion ($11 million).
Special loss amounted to ¥15.8 billion ($158 million) which
includes impairment loss of ¥11.8 billion ($118 million), forfixed assets owned by the Housing Materials Operation in the
Building Materials segment, and additional retirement
allowance for early retirement program of ¥2.3 billion ($23
million) as the downsizing benefit for employees at the
Building Materials segment, as well as, in addition to these,
expenses expected for the facility renovation of the insulation
panel production as the cost of corrective measures for
product defects.
As a result, a loss before income taxes and minority
interests was reported to be ¥2.1 billion ($21 million).
Although the total amount of corporation, current income
taxes decreased by ¥5.2 billion from the previous fiscal yearto ¥6.2 billion ($62 million) owing to the reduced income,deferred income taxes for the fiscal year increased by ¥1.8
billion from the previous fiscal year to ¥1.4 billion ($14
million). This is mainly because of a decrease in deductible
temporary differences which is able to schedule.
As a result, the consolidated net income of ¥12.8 billion

Overview
During fiscal 2007 (ended on March 31, 2008), decelerationof the Japanese economy became apparent in the midst of
turmoil in financial markets around the world triggered by
the subprime loan problem in the U.S. and rising prices ofcrude oil and raw materials.
In the Japanese aluminum industry, despite brisk
demand from the automotive sector, those from other sectors
had been generally sluggish, reflecting sharp decline in the
new house building sector owing to the stricter process forbuilding certification following the enforcement of therevised Building Standards Law in June 2007. Also, soaring
prices of raw materials, fuel and aluminum ingot had
adverse effect on profits.
Earnings and Expenses
In these circumstances, consolidated net sales of the NLMGroup increased by 4.8% year on year to ¥647.8 billion($6,466 million). For the overview of the operation results,
refer to the Review of Operations (Pages 11 to 14).
The cost of sales increased by 8.3% from the previous
fiscal year to ¥538.9 billion ($5,379 million) and the cost of
sales ratio decreased by 2.7 percentage points to 83.2%.
Selling, general and administrative expenses amounted to¥90.9 billion ($908 million), an increase of 1.2%. As a result,operating profit decreased by 41.0% to ¥18.0 billion ($180
million).
Non-operating income slightly increased to ¥3.8 billion($38 million), mainly because of the increased dividend
Net Sales By Segment
700
600

Total Net Assets

Equity Ratio

150

25

120

20

90

15

60

10

30

5

500
400
300
200
100
0

2004

Billions of yen

2005

2006

2007

Years ended March 31

Aluminum Ingot and Chemicals
Aluminum Sheet and Extrusions
Fabricated Products and Others
Building Materials

18

2008

0

2004

Billions of yen

2005

2006

2007

0

2008

As of March 31

%

2004

2005

2006

2007

2008

As of March 31

for the previous term turned into a net loss of ¥10.3 billion($103 million) for this term. With the average number ofshares during the fiscal year increased from previous
541,475,859 to current 542,732,677, previous basic net
income per share of common stock of ¥23.56 turned intocurrent basic net loss of ¥19.0 ($0.19). Consequently, the cash
dividend amounts to be ¥3.0 per share of common stock, ¥2.0
lower than the previous term, which was approved by the
resolution of the ordinary general meeting of NLM
shareholders on June 26, 2008.
Assets, Liabilities and Net Assets
Total assets decreased by 6.7% from the previous fiscal year to¥540.5 billion ($5,394 million). This decrease wasattributable to decreases in cash, deposits, outstanding notes
and accounts receivable-trade because of the previous fiscal
year ended on a holiday, as well as the impairment loss on
fixed assets.
Total liabilities decreased by 5.9% from the end of theprevious fiscal year to ¥411.5 billion ($4,107 million),
mainly owing to a decrease in outstanding notes andaccounts payable-trade also because of the above fiscal year
ending, as well as to the decrease in income taxes payable
following a decrease in taxable income.
Interest-bearing debt was ¥223.7 billion ($2,232 million),virtually unchanged to the previous fiscal year .
Total net assets decreased by 9.2% year on year to ¥129.0
billion ($1,288 million), reflecting a ¥13.0 billion ($130
million) decrease in retained earnings following the net loss,
and a decrease in valuation and translation adjustments.
Consequently, net assets per share of common stock
amounted to ¥223.61 ($2.23), a decrease by 12.2% from theprevious term. Also the equity ratio amounted to 22.5%, adecrease by 1.3 percentage points from the previous term.
Cash Flows
Cash and cash equivalents at the end of March, 2008, were¥33.0 billion ($329 million), worsened by ¥9.1 billion or
21.6% than the end of the previous fiscal year.
Net cash resulted from operating activities amounted to¥25.0 billion ($250 million), increased by ¥3.6 billion or
16.9% from the previous term, mainly because of decreases innotes and accounts receivable-trade and notes and accounts
payable-trade.
Net cash resulted from investing activities amounted to¥25.0 billion ($250 million), increased by ¥5.5 billion or
28.4% from the previous term, mainly because of paymentsfor purchase of fixed assets amounting to ¥24.4 billion
increased by ¥6.0 billion from the previous term.

Net cash resulted from financing activities turned into
¥9.0 billion ($90 million) of payment from ¥12.5 billion ofrevenue for the previous term. This is mainly because of adecrease in cash inflow rather than the cash outflow as aresult of repayment of long-term debt.
Outlook for Fiscal 2008
The slowdown of the Japanese economy is expected tocontinue for the time being in view of the impact of thesubprime loan problem and rising prices of crude oil andother raw materials. In addition to the overall downturn in
the Japanese economy, prices of aluminum ingot and additive
metals for alloys are expected to remain high, also with prices
of bauxite and other raw materials expected to increase. This
makes the business environment for the NLM Group toughand challenging.
In these circumstances, however, in order to meetincreasingly sophisticated and diversifying needs, our Groupis promoting the development of new products and new
businesses based on the Group’s accumulated expertise andtechnological capabilities that make the most of whatmaterials have. At the same time, the Group is pouring its
efforts in overseas business development in response to thecustomers’ international deployment of operations. In order
to cope with increases in prices of raw materials, we are
striving to further reduce costs throughout the operations,while asking for sales price revisions based on our customers
understanding.
For fiscal 2008, consolidated net sales of ¥660.0 billion is
expected affected by the soaring ingot prices. Profits are
expected to increase owing to the restructuring effect at the
Building Materials Operation, despite the increases in prices
of ingot, crude oil and other raw materials. Consequently, we
forecast overall profit increase resulting in the operating
profit of ¥21.5 billion, the ordinary profit of ¥14.5 billion andthe net income of ¥6.5 billion on the consolidated basis.
Thus, with net income per share of common stock expected tobe ¥11.94, cash dividends are expected to be ¥3.0 per share ofcommon stock, the same as fiscal 2007.

19

CONSOLIDATED BALANCE SHEETS
Nippon Light Metal Company, Ltd. and consolidated subsidiaries

2007

March 31,
2008

(Millions of yen)

2008
(Thousands of
U.S. dollars)(Note 2)

AssetsCurrent assets:
Cash and deposits (Notes 3 and 6)
Notes and accounts receivable – trade
Inventories (Note 4)
Deferred tax assets (Note 8)
Other current assets
Allowance for doubtful accounts
Total current assets¥ 42,433 ¥ 31,287
194,207
174,848
86,23586,9255,405
5,381
15,532
14,953(2,915)(2,311)
340,897
311,083$ 312,277
1,745,164867,60253,708149,246(23,066)
3,104,931

Property, plant and equipment (Note 6):Land
Buildings and structures
Machinery and equipment
Construction-in-progress
Accumulated depreciation
Total property, plant and equipment

64,195
144,475
293,560
4,007(322,167)
184,070

63,603147,096
286,480
5,056(322,992)
179,243634,824
1,468,171
2,859,367
50,464(3,223,795)
1,789,031

Intangible assets:
Goodwill
Other intangible assets
Total intangible assets

872
5,097
5,969

1,984
4,205
6,189

19,802
41,97061,772

Investments and other assets:
Investment securities (Notes 5 and 6)
Deferred tax assets (Note 8)
Other assets
Allowance for doubtful accounts
Total investments and other assets

35,3605,881
9,416(2,130)48,52729,593
6,356
9,662(1,653)
43,958295,369
63,43996,437(16,499)
438,746¥579,463¥540,473$5,394,480

Total assets

20

2007

March 31,
2008

(Millions of yen)

Liabilities and net assets
Current liabilities:
Short-term borrowings (Note 6)
Current portion of long-term debt (Note 6)
Notes and accounts payable – trade
Income taxes payable
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Note 6)
Accrued pension and severance costs (Note 7)
Deferred tax liabilities on land revaluation surplus (Notes 8 and 10)
Other long-term liabilities (Notes 6 and 8)
Total long-term liabilities
Total liabilities
Net assets (Note 1(b)):
Shareholders’ equity:
Common stock:
Authorized: 1,600,000,000 shares
Issued: 543,350,370 shares in 2007 and 545,126,049 shares in 2008
Additional paid-in capital
Retained earnings
Treasury stock, at cost
(2,006,054 shares in 2007 and 621,759 shares in 2008)
Total shareholders’ equity
Valuation and translation adjustments:
Net unrealized gains on securities (Note 5)
Net unrealized gains on hedges (Note 1(n))
Revaluation surplus (Note 10)
Foreign currency translation adjustments
Total valuation and translation adjustments
Minority interests in consolidated subsidiaries
Total net assets
Contingent liabilities (Note 14)
Total liabilities and net assets

2008(Thousands of
U.S. dollars)(Note 2)

¥ 81,588
28,531
129,608
7,005
40,704287,436¥ 93,070
26,450108,1122,435
40,478
270,545$ 928,935
263,998
1,079,070
24,304
404,0122,700,319

112,765
27,857522
8,772
149,916
437,352

104,555
28,145522
7,709
140,931411,476

1,043,567
280,916
5,210
76,944
1,406,637
4,106,956

39,08524,56966,92839,08525,42053,911

390,109
253,718
538,088

(406)

(122)

(1,218)130,176

118,294

1,180,697

5,449
619
145
1,557
7,770
4,165
142,111

2,219
308
145
793
3,465
7,238
128,997

22,148
3,074
1,447
7,915
34,58472,243
1,287,524¥579,463¥540,473$5,394,480

The accompanying notes are an integral part of these financial statements.

21

CONSOLIDATED STATEMENTS OF OPERATIONS
Nippon Light Metal Company, Ltd. and consolidated subsidiaries

Year ended March 31,
2008

2007

(Millions of yen)

Net sales
Cost of sales (Note 13)
Gross profit
Selling, general and administrative expenses (Notes 13 and 16)
Operating profit
Non-operating income:Interest income
Equity in earnings of affiliates
Rental income
Royalty income
Other
Total non-operating income
Non-operating expenses:
Interest expense
Amortization of transition obligation for employees’ retirement benefits (Note 7)
Other
Total non-operating expenses
Ordinary profit
Special gains:
Gain on changes in equity interest in affiliates
Reversal of allowance for doubtful accounts
Gain on insurance settlement
Gain on sales of fixed assets
Total special gains
Special losses:
Loss on impairment of fixed assets
Additional retirement allowance for early retirement program
Cost of corrective measures for product defects
Land restoration expense
Loss on disposal of fixed assets
Total special losses
Income (loss) before income taxes and minority interests
Income taxes (Note 8):
Current
Deferred
Minority interests in net income of consolidated subsidiaries
Net income (loss)
Per share of common stock (Note 17):
Net income (loss):
Basic
DilutedCash dividends
The accompanying notes are an integral part of these financial statements.

22

2008
(Thousands of
U.S. dollars)(Note 2)

¥618,158
497,813120,345
89,82630,519¥647,846
538,900
108,946
90,94817,998$6,466,174
5,378,780
1,087,394
907,755
179,639

153
476
719
322
2,157
3,827

138
350
663
414
2,263
3,828

1,378
3,493
6,617
4,132
22,587
38,207

3,677
2,137
3,284
9,098
25,248

3,931
2,070
4,603
10,604
11,222

39,235
20,66145,943
105,839
112,007

—
—
—
357
357

1,101
1,056
318
—
2,475

10,98910,5403,174—
24,703

502
—
—
547
391
1,440
24,165

11,839
2,300
1,679
—
—
15,818(2,121)

118,165
22,956
16,758——157,879(21,169)

11,476(466)
11,010400¥ 12,755

6,233
1,383
7,616
573
¥ (10,310)

62,21213,80476,016
5,719$ (102,904)(U.S. dollars)(Note 2)(Yen)

¥ 23.56
22.36
5.00¥ (19.00)
—
3.00

$

(0.19)—
0.03

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Nippon Light Metal Company, Ltd. and consolidated subsidiaries

Shareholders’ equity

Balance at March 31, 2006
Net income
Cash dividends (Note 9)
Directors’ and statutory
auditors’ bonuses (Note 16)
Net increase in treasury stock
Net unrealized losses on
securities (Note 5)
Net unrealized gains onhedges (Note 1(n))
Foreign currency translation
adjustments
Net increase in minority interests
in consolidated subsidiaries
Balance at March 31, 2007
Share exchange
Net loss
Cash dividends (Note 9)
Net increase in treasury stock
Net unrealized losses on
securities (Note 5)
Net unrealized losses on hedges
Foreign currency translation
adjustments
Net increase in minority interests
in consolidated subsidiaries
Balance at March 31, 2008

Commonstock

Additional
paid-in
capital¥39,085¥24,569

Retainedearnings¥56,385
12,755(2,167)¥(320)¥5,629

¥—

¥145

¥501

¥3,994 ¥129,988
12,755(2,167)

(45)

(45)
(86)

(86)
(180)

(180)
619

619
1,056

39,08524,569851

66,928

(406)
407

5,449

619

145

1,557

1,056
171
4,165

(10,310)(2,707)(123)(3,230)¥39,085¥25,420¥53,911

Commonstock

Additional
paid-in
capitalRetainedearnings$390,109$245,224$668,011

8,494¥(122)¥2,219

¥308

¥145

(764)

(764)

¥793

3,073
3,073
¥7,238 ¥128,997

Valuation and translation adjustments
Minority
Net
Net
Foreign
Treasury
unrealized unrealized Revaluation currency interests inconsolidated
stock,
gains ongains onsurplustranslation
at costsecurities
hedges(Note 10) adjustments subsidiaries(Thousands of U.S. dollars) (Note 2)($4,052)$54,387$6,178$1,447$15,540

4,062(102,904)(27,019)(1,228)(3,104)($1,218) $22,148$3,074

Total net
assets$41,571 $1,418,415
12,556(102,904)(27,019)(1,228)(32,239)(3,104)(32,239)$390,109 $253,718 $538,088

171
142,111
1,258(10,310)(2,707)(123)(3,230)
(311)

(311)

Shareholders’ equity

Balance at March 31, 2007
Share exchange
Net loss
Cash dividends (Note 9)
Net increase in treasury stock
Net unrealized losses on
securities (Note 5)
Net unrealized losses on hedges
Foreign currency translation
adjustments
Net increase in minority interests
in consolidated subsidiaries
Balance at March 31, 2008

Treasurystock,
at costValuation and translation adjustments
Minority
Net
Net
Foreignunrealized unrealized Revaluation currency interests ingains ongains onsurplustranslation consolidated Total net
assetssecurities
hedges(Note 10) adjustments subsidiaries(Millions of yen)

$1,447(7,625)(7,625)$7,91530,67230,672$72,243 $1,287,524

The accompanying notes are an integral part of these financial statements.

23

CONSOLIDATED STATEMENTS OF CASH FLOWS
Nippon Light Metal Company, Ltd. and consolidated subsidiaries

2007

Year ended March 31,
2008(Millions of yen)

Cash flows from operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Gain on changes in equity interest in affiliates
Gain on insurance settlement
Gain on sales of fixed assets
Loss on impairment of fixed assets
Additional retirement allowance for early retirement program
Cost of corrective measures for product defects
Land restoration expense
Loss on disposal of fixed assets
Decrease in allowance for doubtful accounts(Decrease) increase in accrued pension and severance costs
Interest and dividend income
Interest expense
Equity in earnings of affiliates(Increase) decrease in notes and accounts receivable - trade(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable - trade
Other
SubtotalInterest and dividend income received
Interest paid
Insurance proceeds received for disasters
Payments for corrective measures for product defects
Payments for charges on sales of aluminum foil (Note 18)
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Net decrease in time deposits
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments for purchases of fixed assets
Proceeds from sales of fixed assets
Net decrease in long-term loans receivable
Cash received from acquisitions
Other
Net cash used in investing activities
Cash flows from financing activities(Decrease) increase in short-term borrowings
Proceeds from long-term debt
Repayment of long-term debt
Cash dividends paid
Cash dividends paid to minority interests
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of year (Note 3)
The accompanying notes are an integral part of these financial statements.

24

2008
(Thousands of
U.S. dollars)(Note 2)

¥24,165
17,481
—
—
(357)
502
—
—
547
391
—
(33)
(514)
3,677
(476)
(22,217)(9,703)18,456
3,879
35,798614(3,679)——(1,061)(10,275)
21,397¥(2,121)
20,160(1,101)(318)—
11,839
2,300
1,679
—
—
(1,083)
309
(857)
3,931
(350)
22,272
3,253(17,641)(2,013)40,2591,075(3,951)905(489)—(12,781)
25,018$ (21,169)
201,218(10,989)(3,174)—
118,165
22,956
16,758——(10,211)3,084(8,554)
39,235(3,493)
222,298
32,468(176,074)(20,691)
401,827
10,730(39,435)
9,033(4,881)—(127,568)
249,706

118
(83)
153
(18,407)628
45—(1,968)(19,514)

14
(43)
261
(24,370)401
11
308(1,633)(25,051)

140
(429)
2,605
(243,238)
4,002
110
3,074
(16,299)(250,035)(1,013)57,367(41,392)(2,157)(223)(99)
12,48363
14,42927,696—¥42,125

4,821
18,918(29,756)(2,685)(214)(112)(9,028)(94)(9,155)42,12536¥33,006

48,119188,821(296,996)(26,799)(2,136)(1,118)(90,109)(938)(91,376)
420,451359$329,434

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nippon Light Metal Company, Ltd. and consolidated subsidiaries

1. SIGNIFICANT ACCOUNTING POLICIES(a) Basis of presentation
The accompanying consolidated financial statements of Nippon Light Metal Company, Ltd. (the “Company”) and its consolidated subsidiaries areprepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by
the Company as required by the Financial Instruments and Exchange Law of Japan. The notes to the consolidated financial statements include
certain financial information which is not required under accounting principles generally accepted in Japan, but is presented herein as additional
information. The accompanying consolidated financial statements include certain reclassifications for the purpose of presenting them in a form
familiar to readers outside Japan.
(b) Accounting Standard for Presentation of Net Assets in the Balance SheetOn December 9, 2005, the Accounting Standards Board of Japan (“ASBJ”) issued ASBJ Statement No. 5, “Accounting Standard for Presentation of
Net Assets in the Balance Sheet,” and ASBJ Guidance No. 8, “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet.”
Effective the year ended March 31, 2007, the Company adopted this accounting standard and guidance.
(c) Principles of consolidation and accounting for investments in affiliates
The accompanying consolidated financial statements include the accounts of the Company and, with minor exceptions, companies substantiallycontrolled by the Company. All significant intercompany transactions and accounts have been eliminated in consolidation.
Investments in equity securities issued by unconsolidated subsidiaries and affiliates are accounted for by the equity method, except thatinvestments in certain unconsolidated subsidiaries and affiliates are stated at cost because the effect of application of the equity method would be
immaterial.
The difference between the cost and the underlying net assets of investments in consolidated subsidiaries or affiliates accounted for by theequity method has been allocated to identifiable assets based on fair value at the respective dates of acquisition. Any unassigned residual amount isrecognized as goodwill and amortized by the straight-line method over an estimated useful life, with the exception of minor amounts which arecharged to income in the year of acquisition.
On October 31, 2003, the Business Accounting Council issued “Accounting Standard for Business Combinations” and on December 27, 2005,
the ASBJ issued ASBJ Statement No. 7, “Accounting Standard for Business Divestitures,” and ASBJ Guidance No. 10, “Guidance on AccountingStandard for Business Combinations and Accounting Standard for Business Divestitures.” Effective the year ended March 31, 2007, the Company
and its consolidated subsidiaries adopted these accounting standards.
(d) Translation of foreign currencies
All monetary assets and liabilities denominated in foreign currencies, whether long-term or short-term, are translated into Japanese yen at theexchange rates prevailing at the balance sheet date. The resulting gains and losses are included in net income (loss) for the year.
Assets and liabilities of foreign subsidiaries and affiliates are translated into Japanese yen at the exchange rates prevailing at the balance sheet
date. Income statement accounts for the year are translated into Japanese yen using the average exchange rates during the year. The resulting
translation adjustments are accounted for as foreign currency translation adjustments, except for the minority interest portion which is allocatedto minority interests in consolidated subsidiaries.
(e) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows comprise of cash in hand, bank deposits available for withdrawal on
demand and short-term investments with an original maturity of three months or less and which are exposed to a minor risk of fluctuation invalue.
(f) Inventories
Inventories are principally stated at cost, determined by the moving average method, except that the specific identification method is applied tocosts related to construction-type contracts.
(g) Investment securities
Securities other than equity securities issued by subsidiaries and affiliates are classified into held-to-maturity securities or available-for-salesecurities.
Held-to-maturity securities are stated at amortized cost. Available-for-sale securities for which market quotations are available are stated at fairvalue with net unrealized gains or losses being included in net assets, net of the related taxes. Available-for-sale securities for which market
quotations are not available are stated at cost. Realized gains and losses on sales are determined using the average cost method and are included
in net income (loss) for the year.
In cases where the fair value of held-to-maturity securities or available-for-sale securities has declined significantly and such impairment isother than temporary, such securities are written down to fair value and the resulting losses are charged to income for the year.
(h) Allowance for doubtful accounts
Allowance for doubtful accounts is estimated by applying the average percentage of actual bad debts in the past to the balance of receivables. In
addition, an amount deemed necessary to cover non-collectible receivables is provided on an individual account basis.
25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(i) Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost. Depreciation is computed principally using the straight-line method at rates based on theestimated useful lives of the respective assets, ranging from 2 years to 60 years for buildings and structures, and from 2 years to 22 years formachinery and equipment.
Effective April 1, 2007, the Company and its domestic consolidated subsidiaries have changed their method of accounting for depreciation ofproperty, plant and equipment purchased on or after April 1, 2007 in accordance with the revision made to the Corporate Tax Law which went into
effect on April 1, 2007. The effect of this change for the year ended March 31, 2008 was to decrease operating profit and ordinary profit by ¥332
million ($3,314 thousand), increase loss before income taxes and minority interests by ¥332 million ($3,314 thousand), and increase net loss by¥213 million ($2,126 thousand) as compared to the amounts which would have been recorded under the previous method.
In addition, effective April 1, 2007 the Company and its domestic consolidated subsidiaries have changed their method of accounting fordepreciation of property, plant and equipment purchased on or before March 31, 2007. Such assets which have been depreciated to 5% of theirrespective acquisition cost under the Corporate Tax Law prior to the revision are further depreciated to their respective memorandum value fromthe following fiscal year using the straight-line method over a period of 5 years, and such depreciate is included in depreciation cost. The effect of
this change for the year ended March 31, 2008 was to decrease operating profit by ¥1,566 million ($15,630 thousand), decrease ordinary profit by¥1,534 million ($15,311 thousand), increase loss before income taxes and minority interests by ¥1,534 million ($15,311thousand), and increase
net loss by ¥1,042 million ($10,400 thousand) as compared to the amounts which would have been recorded under the previous method.
(j) Intangible assets
Intangible assets are amortized by the straight-line method over their respective estimated useful lives. Expenditure relating to computer softwaredeveloped for internal use is charged to income as incurred, except in cases where it contributes to the generation of income or future cost savings.
In these cases, it is capitalized and amortized using the straight-line method over its estimated useful life, which is no longer than 5 years.
(k) Accrued pension and severance costs
Accrued pension and severance costs for employees represent the projected benefit obligation in excess of the fair value of the plan assets, except forunrecognized transition obligation and unrecognized actuarial gain or loss. Unrecognized transition obligation is amortized by the straight-line
method over a period of 12 years and unrecognized actuarial gain or loss is amortized by the declining-balance method over a period of 12 years
from the year following that in which it arises, except for unrecognized costs with respect to employees who retired under the early retirement
program which were fully amortized at the time of the employees’ retirement.
(l) Lease transactions
Under Japanese accounting practices, finance leases without options to transfer ownership of the leased assets to the lessee may be accounted for as
operating leases subject to appropriate footnote disclosure. Therefore, the Company and its consolidated subsidiaries charge or credit periodic lease
payments and receipts related to finance leases to income as incurred.
(m) Income taxes
The income taxes of the Company and its domestic consolidated subsidiaries consist of corporate income taxes, local inhabitants’ taxes andenterprise taxes. The Company and its wholly-owned domestic subsidiaries use the Japanese consolidated taxation system.
The Company and its consolidated subsidiaries apply the deferred tax accounting method. Deferred tax assets and liabilities are determinedusing the asset and liability approach, and recognized for temporary differences between the tax bases of assets and liabilities and those as reported
in the consolidated financial statements.
(n) Derivatives
All derivatives are stated at fair value with changes in fair value being included in net income for the year in which they arise, except for derivatives
designated as hedging instruments.
The Company and its consolidated subsidiaries use derivatives to reduce their exposure to fluctuation in foreign exchange rates, interest rates,
and the prices of aluminum ingot in the market. Derivatives designated as hedging instruments are principally forward foreign exchange
contracts, interest rate swap contracts and aluminum ingot forward contracts. The underlying hedged items are trade accounts receivable andpayable, long-term bank loans and sales or purchases of aluminum ingot.
Gains and losses arising from changes in fair value of derivatives designated as hedging instruments are deferred and included in net incomein the same period in which the corresponding gains and losses on the underlying hedged items or transactions are recognized. The Company andits consolidated subsidiaries use interest rate swaps to hedge their interest rate risk exposure. The related interest differentials paid or received under
the interest rate swap agreements are recognized in interest expense over the term of the agreements.
Effective the year ended March 31, 2007, the Company and its consolidated subsidiaries adopted ASBJ Statement No. 5 and ASBJ Guidance No. 8(see Note 1.(b), “Accounting Standard for Presentation of Net Assets in the Balance Sheet”). Prior to April 1, 2006, gains or losses arising fromchanges in fair value of derivatives designated as hedging instruments were deferred as an asset or a liability until they were recognized in income.
Under the new accounting standard, such gains or losses are recorded as net unrealized gains on hedges in net assets, net of the related taxes.
The Company and its consolidated subsidiaries evaluate the effectiveness of their hedging activities by reference to the accumulated gains orlosses on the hedging instruments and the underlying hedged items from the commencement of the hedges.
(o) Research and development costs
Research and development costs are charged to income as incurred.

26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(p) Appropriation of retained earnings
Appropriation of retained earnings is reflected in the consolidated financial statements for the year in which the appropriation is approved at an
ordinary general meeting of shareholders.
The Company’s retained earnings consist of unappropriated retained earnings and a legal reserve as required by the Corporation Law of Japan.
The Corporation Law provides that an amount equal to 10% of distributions from unappropriated retained earnings paid by the Company and its
Japanese subsidiaries be appropriated to the legal reserve. Such appropriations are no longer required when the total amount of additional paid-in
capital and the legal reserve equals 25% of their respective stated capital.
Under the Corporation Law, the Company is permitted to transfer to unappropriated retained earnings the portion of its statutory reserve(additional paid-in capital and the legal reserve) in excess of 25% of common stock upon approval at a shareholders’ meeting. Any suchtransferred portion is available for dividend distribution.
(q) Net income (loss) per share
Basic net income (loss) per share of common stock, presented in the accompanying consolidated statements of operations, is computed based on
the weighted average number of shares outstanding during each year.
Diluted net income per share reflects the potential dilution that could occur if securities were converted into common stock. Diluted net
income per share of common stock assumes full conversion of the outstanding convertible bonds at the time of issuance with an applicableadjustment for the related interest expense on a net of tax basis.
(r) Reclassifications
Certain reclassifications of previously reported amounts have been made to conform them to the current year’s classifications.
2. U.S. DOLLAR AMOUNTS
The rate of ¥100.19 = U.S.$1, the approximate exchange rate prevailing on March 31, 2008, has been used for the purpose of presenting the U.S.
dollar amounts in the accompanying consolidated financial statements. These amounts are included solely for the convenience of the reader.
Accordingly, they should not be construed as representations that yen amounts actually represent, or have been or could be readily converted,
realized or settled in U.S. dollars at that rate.
3. CASH AND CASH EQUIVALENTS
A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows to cash and deposits disclosed in theaccompanying consolidated balance sheets at March 31, 2007 and 2008 is summarized as follows:
2008

2007
(Millions of yen)

Cash and deposits
Time deposits with maturities in excess of 3 months
Certificates of deposit included in “Other current assets”
Cash and cash equivalents¥42,433(308)—¥42,125

2008(Thousands of
U.S. dollars)¥31,287(281)
2,000¥33,006$312,277(2,805)
19,962$329,434

4. INVENTORIESInventories at March 31, 2007 and 2008 comprised the following:
2008

2007
(Millions of yen)Finished products
Work-in-process, including costs related to construction-type contracts
Raw materials and supplies¥32,348
37,85016,037¥86,235

2008(Thousands of
U.S. dollars)¥31,098
33,32922,498¥86,925$310,390
332,658
224,554$867,602

5. INVESTMENT SECURITIES(a) Available-for-sale securities with available market quotations
The aggregate cost, carrying amount and gross unrealized gains and losses of available-for-sale securities comprising equity securities withavailable market quotations at March 31, 2007 and 2008 were as follows:
2008

2007
(Millions of yen)

Cost
Unrealized gains
Unrealized losses
Carrying amount¥ 3,9329,013(34)¥12,911

2008(Thousands of
U.S. dollars)¥3,954
3,868(218)¥7,604$39,465
38,607(2,176)$75,896
27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(b) Sales of available-for-sale securities
The realized gains on sales of available-for-sale securities for the years ended March 31, 2007 and 2008 were as follows:
2008

2007

2008

(Millions of yen)

Sales proceeds
Realized gains on sales(Thousands of
U.S. dollars)

¥153
41

¥261
160

$2,6051,597(c) Held-to-maturity securities and available-for-sale securities without available market quotations
The carrying amounts of held-to-maturity securities and available-for-sale securities without available market quotations at March 31, 2007 and2008 were as follows:
2008

2007

2008

(Millions of yen)Held-to-maturity securities:
Privately offered domestic debt securities
Available-for-sale securities:
Equity investments in non-public companies
Other

¥

93

(Thousands of
U.S. dollars)¥

11,26884¥11,445

86

11,153
2,084¥13,323$858

111,319
20,800$132,977(d) Maturities of debt securities
Maturities of debt securities at March 31, 2007 and 2008 were as follows:2007
Due within
one year

Due after one year but
within five years

Due after five years but
within ten years

Due after
ten years(Millions of yen)

Debt securities:
Government and municipal bonds
Corporate debt securities
Other

¥7
—
—
¥7

¥54
10
25
¥89

¥14
—
—
¥14

¥8
—
—
¥8

2008
Due within
one year

Due after one year but
within five years

Due after five years but
within ten years

Due after
ten years(Millions of yen)

Debt securities:
Government and municipal bonds
Corporate debt securities
Other

¥14
—
15
¥29

¥47
10
10
¥67

¥9
—
—
¥9

¥6
—
—
¥6

2008
Due within
one year

Due after one year but
within five years

Due after five years but
within ten years

Due after
ten years(Thousands of U.S. dollars)

Debt securities:
Government and municipal bonds
Corporate debt securities
Other

28

$140
—
150
$290

$469
100
100
$669

$90
—
—
$90

$60
—
—
$60

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2008 bore interest at annual rates ranging from 1.01% to 6.04% and mainly consisted of bank loans andshort-term notes maturing at various dates within one year.
Long-term debt at March 31, 2007 and 2008 comprised the following:
2008

2007

2008

(Millions of yen)

Loans, principally from banks and insurance companies due from 2007 to 2016
with interest rates ranging from 0.80% to 4.51%:
SecuredUnsecured
Loans, principally from banks and insurance companies due from 2008 to 2017with interest rates ranging from 0.75% to 7.74%:
SecuredUnsecured
Unsecured 3.06% bonds due June 1, 2007, redeemable before due dateUnsecured 4.00% bonds due June 1, 2017, redeemable before due date
Zero coupon convertible bonds due September 30, 2009 (*1)
Zero coupon convertible bonds due September 30, 2016 (*2)
Capital lease obligations due from 2007 to 2029 with interest rates ranging from
6.52% to 7.20%
Capital lease obligations due from 2008 to 2029 with interest rates ranging from
6.52% to 7.41%
Less: portion due within one year
Total long-term debt

¥ 36,411
73,106(Thousands of
U.S. dollars)

¥

—
—

$

—
—

—
—
708
—
10,02420,092

24,727
74,695—
601
9,964
20,083

246,801
745,534—
5,999
99,451
200,449

955

—

—

—
141,296(28,531)¥112,765

935
131,005(26,450)¥104,555

9,332
1,307,565(263,998)$1,043,567(*1) The details of the zero coupon convertible bonds due September 30, 2009 are summarized as follows:
Stock type to be issued:
Issue price per stock acquisition right:
Initial exercise price:
Total issue price:
Exercisable period of stock acquisition rights:

Common stockNone¥350 per share¥10,050 million
From August 9, 2004 to September 16, 2009(*2) The details of the zero coupon convertible bonds due September 30, 2016 are summarized as follows:
Stock type to be issued:
Issue price per stock acquisition right:
Initial exercise price:
Total issue price:
Exercisable period of stock acquisition rights:

Common stockNone¥406 per share¥20,100 million
From August 4, 2006 to September 16, 2016

A summary of assets pledged as collateral for short-term borrowings and long-term debt at March 31, 2008 is as follows:(Millions of yen)

Cash and deposits
Property, plant and equipment
Investment securities¥(Thousands of
U.S. dollars)

11
79,080373$
110789,300
3,723(Millions of yen)(Thousands of
U.S. dollars)¥ 26,450
33,37917,544
12,86011,37729,298¥130,908$ 263,998
333,157
175,108
128,356
113,554
292,424$1,306,597

The aggregate annual maturities of long-term debt outstanding at March 31, 2008 are summarized as follows:
Years ending March 31,

2009
2010
2011
2012
2013
Thereafter

On August 11, 2006, the ASBJ issued ASBJ Statement No. 10, “Accounting Standard for Financial Instruments.” Effective the year ended March 31,
2007, the Company and its consolidated subsidiaries adopted this accounting standard. Prior to April 1, 2006, premium on bonds had beenrecorded as other long-term liabilities in the consolidated balance sheets. Under the new accounting standard, the premium is included in longterm debt or current portion of long-term debt.
29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. RETIREMENT BENEFIT PLANS
The Company and its domestic consolidated subsidiaries have defined benefit tax-qualified pension plans and a non-contributory plan covering
substantially all employees in Japan. Additional benefits may be granted to employees according to the conditions under which termination of
employment occurs. Certain foreign subsidiaries have defined contribution pension plans.
Accrued pension and severance costs at March 31, 2007 and 2008 are summarized as follows:
2008

2007

2008

(Millions of yen)

Projected benefit obligation
Fair value of plan assets
Unrecognized transition obligation
Unrecognized actuarial loss
Accrued pension and severance cost¥(65,717)
27,317(38,400)
10,394
149¥(27,857)(Thousands of
U.S. dollars)¥(63,884)
24,074(39,810)
8,100
3,565
¥(28,145)$(637,629)
240,284(397,345)
80,84635,583$(280,916)

The net pension and severance costs related to retirement benefits for the years ended March 31, 2007 and 2008 are summarized as follows:
2008

2007

2008

(Millions of yen)

Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of unrecognized actuarial gain
Net pension and severance costs¥3,646
1,370
(559)
2,137
(25)
¥6,569(Thousands of
U.S. dollars)¥3,903
1,339
(585)
2,070
(7)
¥6,720$38,956
13,365(5,839)20,661(70)$67,073

Assumptions used in calculating the above information are summarized as follows:
2008

2007

Discount rate
Expected rate of return on plan assets
Method of attributing projected benefits to periods of employee service
Period of amortization of unrecognized actuarial gain
Period of amortization of transition obligation

2.5%
Mainly 2.5%
Straight-line basis
Mainly 12 years
12 years

2.5%
Mainly 2.5%
Straight-line basis
Mainly 12 years
12 years

8. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income which, in the aggregate,
indicate a statutory income tax rate of approximately 40.7% for the years ended March 31, 2007 and 2008.
Tax losses can be carried forward for a seven-year period to be offset against future taxable income.
Significant components of deferred tax assets and liabilities at March 31, 2007 and 2008 were as follows:
2008

2007
(Millions of yen)

Deferred tax assets:
Accrued pension and severance costs
Tax loss carryforwards
Loss on impairment of fixed assets
Allowance for doubtful accounts
Accrued bonuses
Loss on disposal of fixed assets
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Unrealized gain on securities
Revaluation gain on subsidiaries
Other
Total deferred tax liabilities
Net deferred tax assets
30

2008(Thousands of
U.S. dollars)¥ 11,217
5,578
–
3,807
2,667
1,623
10,66635,558(19,976)
15,582¥ 10,968
6,901
5,450
3,542
2,632
1,435
11,321
42,249(27,793)
14,456$109,472
68,87954,39735,353
26,27014,323112,995
421,689(277,403)
144,286(3,507)(746)(851)(5,104)¥ 10,478(1,476)(887)(665)(3,028)¥ 11,428(14,732)(8,853)(6,638)(30,223)$114,063

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets and liabilities that comprise net deferred tax assets are included in the accompanying consolidated balance sheets as follows:
2008

2007
(Millions of yen)

Deferred tax assets (current assets)
Deferred tax assets (investments and other assets)
Other long-term liabilities¥5,405
5,881
(808)

2008
(Thousands of
U.S. dollars)¥5,381
6,356(309)$53,708
63,439(3,084)

In addition to the above, the Company recorded deferred tax liabilities on land revaluation surplus of ¥522 million ($5,210 thousand) at March
31, 2007 and 2008 separately.
A reconciliation of the differences between the statutory income tax rate and the effective income tax rate for the year ended March 31, 2007 issummarized as follows:
2007

Statutory income tax rate
Increase (decrease) in taxes resulting from:
Increase in valuation allowance
Permanent non-deductible expenses
Other
Effective income tax rate

40.7%
2.4
2.0
0.5
45.6%

Due to the recording of loss before income taxes and minority interests, the corresponding reconciliation for the year ended March 31, 2008 has
been omitted.
9. APPROPRIATIONS OF RETAINED EARNINGS
The following appropriation was approved at the ordinary general meeting of shareholders of the Company held on June 26, 2008:(Millions of yen)

Cash dividends¥1,634(Thousands of
U.S. dollars)$16,309

The Company is required to obtain the approval of shareholders at an ordinary general meeting of shareholders for appropriations of retained
earnings in conformity with the Corporation Law. Appropriations of retained earnings are, therefore, not reflected in the consolidated financial
statements for the year to which they relate but are recorded in the consolidated financial statements in the subsequent year after shareholders’approval has been obtained.
10. REVALUATION SURPLUS
A consolidated subsidiary of the Company revalued its land used for business purposes in accordance with the Land Revaluation Law, when it was
an affiliate. As a result of this revaluation, the Company recognized its portion of the affiliate’s revaluation surplus and the related deferred tax
liabilities.
11. LEASE TRANSACTIONSThe Company and its consolidated subsidiaries charge or credit to income periodic lease payments and receipts for finance leases that do not have
options to transfer ownership of the leased assets to the lessee. Such periodic lease payments under finance lease contracts totaled ¥1,920 millionand ¥1,884 million ($18,804 thousand), and receipts under finance lease contracts totaled ¥144 million and ¥138 million ($1,377 thousand) for
the years ended March 31, 2007 and 2008, respectively. Future lease payments and receipts under finance leases and non-cancelable operatingleases, including interest, at March 31, 2007 and 2008 are summarized as follows:
2008

2007
(Millions of yen)

Lease payments:
Due within one year
Due after one year
Lease payments:
Due within one year
Due after one year

2008
(Thousands of
U.S. dollars)¥3,1304,455¥7,585¥1,8603,999¥5,859$18,565
39,914$58,479

¥

¥ 112
45
¥ 157

$ 1,118449$ 1,567

¥

66
9
75

31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Leased assets under finance leases, where lessors retain ownership of the leased assets, are accounted for as operating leases. If such leases had
been capitalized, then the cost of the assets, and the related accumulated depreciation (amortization), accumulated impairment loss and net
amount at March 31, 2007 and 2008 would have been as follows:
2007
Cost

Accumulated
depreciation/amortization¥ 26
13,194217¥13,437

¥ 23
5,750
89
¥5,862

Accumulated
impairment loss

Netamount(Millions of yen)

Buildings and structures
Machinery and equipment
Intangible assets

¥ —
1,464
3
¥1,467

¥ 3
5,980
125
¥6,108

2008
Cost

Machinery and equipment
Intangible assets¥ 9,603884¥10,487

Accumulated
depreciation/
Accumulated
amortization
impairment loss
(Millions of yen)

¥4,256391¥4,647Net
amount¥1,105—¥1,105Net
amount(Thousands of
U.S. dollars)¥4,242493¥4,735$42,340
4,920$47,260

Depreciation (amortization) for these leased assets computed using the straight-line method over the respective lease periods would have been
¥1,920 million and ¥1,884 million ($18,804 thousand) for the years ended March 31, 2007 and 2008, respectively.
Fixed assets, which are leased to other companies under finance leases without options to transfer ownership of the leased assets to the lessee atMarch 31, 2007 and 2008, are summarized as follows:
2007
Cost

Accumulated
impairment loss

Netamount(Millions of yen)

Machinery and equipment

¥204

¥137

¥67
2008

Cost

Accumulated
impairment loss

Netamount(Millions of yen)

Machinery and equipment

¥227

¥95

Net
amount(Thousands of
U.S. dollars)¥132$1,317

Depreciation for these leased assets computed using the straight-line method over the respective lease periods would have been ¥112 millionand ¥109 million ($1,088 thousand) for the years ended March 31, 2007 and 2008, respectively.
12. DERIVATIVESIn the normal course of business, the Company and its consolidated subsidiaries utilize various derivative financial instruments in order tomanage the exposure resulting from fluctuation in foreign currency exchange rates, interest rates and the prices of aluminum ingot in the market.
The Company and its consolidated subsidiaries do not hold or issue derivative financial instruments for trading purposes.
At March 31, 2007 and 2008, there were no derivative financial instruments, except for those instruments to which hedge accounting wasapplied.
13. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to cost of sales and selling, general and administrative expenses for the years ended March 31, 2007 and2008 were ¥5,504 million and ¥5,858 million ($58,469 thousand), respectively.
14. CONTINGENT LIABILITIESContingent liabilities at March 31, 2008 amounted to ¥9,050 million ($90,328 thousand) for loans guaranteed and other guarantees given in theordinary course of business, including ¥2,027 million ($20,232 thousand) shared by other joint guarantors, and ¥520 million ($5,190 thousand)for notes discounted.

32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. LOSS ON IMPAIRMENT OF FIXED ASSETSThe Company and its consolidated subsidiaries recognized ¥502 million and ¥11,839 million ($118,165 thousand) of loss on impairment of fixed
assets, of which the significant items for the years ended March 31, 2007 and 2008, are presented below:
2007
Location

Ichikawa City, Chiba Prefecture

Major use

Asset category

Office site for head office of a
subsidiary company(Millions of yen)

Land

¥402

Since the market price of land in Ichikawa City, Chiba Prefecture has gone down remarkably and has shown a sign of impairment, the Company
and its consolidated subsidiaries recognized ¥402 million of loss on impairment, upon deeming such assets to be impaired. The fair value less costto sell was applied when the recoverable amount of the assets was computed. The fair value less cost to sell was assessed on the basis of the realestate appraisal value in accordance with the real-estate appraisal standard. In addition, the operating assets have been grouped by the
independent operating division, which generates cash flows, the rental assets by administrative business division and idle assets by individual asset.
2008
Location

Takaoka City,
Toyama Prefecture and other

Major use

Manufacturing facilities forbuilding materials andrelated assets

Asset category(Millions of yen)(Thousands of
U.S. dollars)

Machinery and equipment
Buildings and structures
Land
Other assets¥6,144
2,205
1,297
1,286

$61,324
22,00812,945
12,836Since the cash flows generated from operating activities resulting from the use of the groups of assets have been continuously negative, after
having noted a sign of impairment and recognized it, the Company and its consolidated subsidiaries recognized ¥10,932 million ($109,113
thousand) as the related loss. The recoverable amounts of the asset groups were measured at their respective value in use and cash flows were
calculated at a discount rate 3.5%. In addition, the operating assets have been grouped by independent operating division, which generates cash
flows, the rental assets by administrative business division and idle assets by individual asset.
16. DIRECTORS’ BONUSESOn November 29, 2005, the ASBJ issued ASBJ Statement No. 4, “Accounting Standard for Directors’ Bonus.” Effective the year ended March 31, 2007,
the Company and its consolidated subsidiaries adopted this standard. Prior to April 1, 2006, directors’ bonuses had been recorded as a decrease inunappropriated retained earnings by appropriation based on shareholders’ approval. Under the new accounting standard, these bonuses are
accrued and recorded as an expense. As a result of the adoption of this accounting standard, operating profit and income before income taxes andminority interests decreased by ¥52 million for the year ended March 31, 2007, from the corresponding amounts which would have been recorded
under the previous method.
17. NET INCOME (LOSS) PER SHARE
A reconciliation of the differences between basic and diluted net income (loss) per share for the years ended March 31, 2007 and 2008 issummarized as follows:
2007

Net income
Basic net income
Effect of convertible bonds
Diluted net income

Net
income(Millions of yen)

Weighted
averagenumber ofshares(Thousands of shares)¥12,755
12,755(6)¥12,749

541,476
28,714570,190

Net
loss(Millions of yen)

Weighted
averagenumber ofshares(Thousands of shares)¥10,310
10,310—¥10,310542,732—
542,732

Net
incomeper share(Yen)¥23.56¥22.362008

Net loss
Basic net loss
Effect of convertible bonds
Diluted net loss

(Yen)

Net loss per share(U.S. dollars)¥19.00

$0.19

¥

$ —

—

33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18. CHARGES ON SALES OF ALUMINUM FOIL
On November 11, 2005, the Japan Fair Trade Commission submitted its findings, based on Article 48, Section 2 of the Antimonopoly Act of Japan,
to the Company’s consolidated subsidiaries, Toyo Aluminium K.K. and Tokai Aluminium Foil Co., Ltd., that they had violated Article 3 (prohibitionof illegal trade limitation) of the act with respect to sales of aluminum foil. These two companies accepted the findings on November 18, 2005 andpaid the related charges during the year ended March 31, 2007.
19. BUSINESS COMBINATIONOn April 1, 2007, the Company acquired 55% of the outstanding shares of common stock of M.C. Aluminum Co., Ltd. (“MCA”) in exchange for atransfer of certain of the Company’s assets and liabilities to MCA. The operating results of MCA have been included in the consolidated financial
statements since that date. MCA is engaged in production and sale of aluminum for die-cast products. Through this business integration, theCompany intends further growth in its corporate value with the synergy of the Company’s manufacturing technology and development capability
and MCA’s domestic and overseas production bases and business experience. Upon this transaction, MCA has changed its name to Nikkei MC
Aluminum Co., Ltd.
The acquisition cost amounted to ¥2,299 million ($22,946 thousand), which consisted of MCA’s shares of common stock of ¥2,273 million($22,687 thousand) and acquisition-related direct costs of ¥26 million ($259 thousand).
In connection with this transaction, the Company recognized negative goodwill of ¥83 million ($828 thousand) and fully amortized it during
the year ended March 31, 2008.
Assets acquired and liabilities assumed on the date of the business combination are summarized as follows:
2008(Millions of yen)

Assets:Current assets
Non-current assets
Total assets
Liabilities:
Current liabilities
Long-term liabilities
Total liabilities(Thousands of
U.S. dollars)¥13,616
5,712¥19,328$135,902
57,011$192,913¥12,856634¥13,490$128,316
6,328$134,644

20. SEGMENT INFORMATIONThe Company and its consolidated subsidiaries operate within four distinct business segments mainly in Japan: “Aluminum ingot and chemicals,”“Aluminum sheet and extrusions,” “Fabricated products and others” and “Building materials.”
The “Aluminum ingot and chemicals” segment supplies aluminum primary and remelted ingot used for various industrial materials, andproduces a wide spectrum of aluminas and alumina hydrates ranging from raw materials to basic materials for ceramic compounds. The“Aluminum sheet and extrusions” segment produces sheet, coil, and extrusion products consisting primarily of shapes, tubes and rods. The“Fabricated products and others” segment produces a variety of products which include aluminum foil, aluminum powder, wing bodies fortransport vehicles, automobile components and electronic materials. The “Building materials” segment produces a wide range of materials
including sashes, curtain walls, and doors and fences for commercial and residential construction. “Corporate items” include unallocatedoperating expenses and corporate assets not specifically related to business segments.
Information by business segment for the years ended March 31, 2007 and 2008 was as follows:

Sales:
Customers
Intersegment
Total
Operating expenses
Operating profit
Total assets
Depreciation and amortization
Loss on impairment of fixed assets
Capital expenditures*1 Corporate items of ¥2,820 million are included.

34

Aluminumingot andchemicals

Aluminum
sheet andextrusions

2007
Fabricatedproducts
Buildingand others
materials(Millions of yen)

¥110,667
91,044
201,711
190,044¥ 11,667¥121,300¥ 2,885¥—¥ 4,125¥ 78,929
32,163111,092
104,649¥ 6,443¥ 81,674¥ 2,004¥—¥ 2,221¥255,514
17,275
272,789
258,633¥ 14,156¥225,685¥ 6,579¥17¥ 8,342*2 Corporate items of ¥26,340 million are included.

¥173,048
4,508
177,556
176,483¥ 1,073¥162,289¥ 5,925¥ 485¥ 5,963

Eliminationor
corporate items¥—(144,990)(144,990)(142,170)*1¥ (2,820)¥ (11,485)*2
¥
88
¥
—
¥
51

Consolidated¥618,158—
618,158
587,639¥ 30,519¥579,463¥ 17,481¥ 502¥ 20,702

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Sales:
Customers
Intersegment
Total
Operating expenses
Operating profit (loss)
Total assets
Depreciation and amortization
Loss on impairment of fixed assets
Capital expenditures*1 Corporate items of ¥3,040 million are included.

Sales:
Customers
Intersegment
Total
Operating expenses
Operating profit (loss)
Total assets
Depreciation and amortization
Loss on impairment of fixed assets
Capital expenditures

Aluminumingot andchemicals

Aluminum
sheet andextrusions¥156,189
88,331
244,520
235,348¥ 9,172¥131,598¥ 3,944¥—¥ 5,238¥ 79,375
33,311
112,686
111,056¥ 1,630¥ 75,859¥ 2,759¥—¥ 5,165

2008
Fabricatedproducts
Buildingand others
materials(Millions of yen)

¥251,998
16,420268,418
255,206¥ 13,212¥220,952¥ 7,528¥50¥ 8,993

Eliminationor corporate
items¥160,284
4,010
164,294
167,270¥ (2,976)¥123,995¥ 5,839¥ 11,789¥ 5,785¥—(142,072)(142,072)(139,032)*1¥ (3,040)¥ (11,931)*2
¥
90
¥
—
¥
82

Consolidated¥647,846—
647,846
629,848¥ 17,998¥540,473¥ 20,160¥ 11,839¥ 25,263*2 Corporate items of ¥23,096 million are included.

Aluminumingot andchemicals

Aluminum
sheet andextrusions$1,558,928
881,635
2,440,563
2,349,017$ 91,546$1,313,484$ 39,365$—$ 52,281$ 792,245
332,478
1,124,723
1,108,454$ 16,269$ 757,151$ 27,538$—$ 51,552*1 Corporate items of $30,342 thousand are included.

2008
Fabricatedproducts
Buildingand others
materials(Thousands of U.S. dollars)$2,515,201
163,889
2,679,090
2,547,220$ 131,870$2,205,330$ 75,137$499$ 89,760

Eliminationor corporate
items$1,599,800 $—
40,024 (1,418,026)
1,639,824 (1,418,026)
1,669,528 (1,387,683)*1$ (29,704) $ (30,343)$1,237,599 $ (119,084)*2$ 58,279 $899$ 117,666 $—$ 57,740 $818

Consolidated$6,466,174—
6,466,174
6,286,536$ 179,638$5,394,480$ 201,218$ 118,165$ 252,151*2 Corporate items of $230,522 thousand are included.

As more than 90% of sales for the years ended March 31, 2007 and 2008 were made in Japan, the disclosure of geographical segment information
has been omitted.
Export sales and operations outside Japan for the year ended March 31, 2007 were insignificant. Export sales and operations outside Japan for theyear ended March 31, 2008 are summarized as follows:
2008
Export sales andoperations
outside Japan

Consolidated
net sales(Millions of yen)

¥65,298¥647,846

Percentage ofconsolidated
net sales

10.1%

2008
Export sales andoperations
outside Japan

Percentage ofConsolidated
consolidated
net sales
net sales(Thousands of U.S. dollars)$651,742$6,466,174

10.1%

35

REPORT OF INDEPENDENT AUDITORS36

OVERSEAS NETWORKOVERSEAS SUBSIDIARIES AND AFFILIATES
North America
Nikkei MC Aluminum
America Inc.
Indiana, U.S.A.
Phone: 1-812-342-1141
Aluminum alloys(60%)
Toyal America Inc.
Illinois, U.S.A.
Phone: 1-815-740-3037
Aluminum powder and paste(100%)
EuropeToyal Europe Société par
Actions Simplifiée
Unipersonnelle
Accous, France
Phone: 33-5-59-983-535
Aluminum powder and paste(100%)

East Asia
Alcan Nikkei China Limited
Hong Kong, SAR, China
Phone: 852-2522-3001
Trading and marketing(49%)

Southeast Asia
Nikkei MC Aluminum(Korat) Co., Ltd.
ThailandPhone: 66-44-327-621
Aluminum alloys(75%)

Nikkei MC Aluminum(Kunshan) Co., Ltd.
Kunshan, China
Phone: 86-512-5763-1946
Secondary aluminum alloy(85%)

Nikkei MC Aluminum(Thailand) Co., Ltd.
ThailandPhone: 66-38-522296(79%)

Nikkei (Shanghai) Body Parts
Co., Ltd.
Shanghai, China
phone: 86-21-5986-9388
Automobile components(100%)

Nikkei Siam Aluminium
LimitedThailandPhone: 66-2-529-0136
Aluminum sheet, foil
(100%)NI Nikkei Shenzhen Co., Ltd.
Shenzhen, China
Phone: 86-755-2650-5656
Automobile components(55%)

Nikkei Singapore
Aluminium Pte. Ltd.
Singapore
Phone: 65-6222-8991
Trading and marketing(100%)

Nippon Light Metal (HongKong) Limited
Hong Kong, SAR, China
Phone: 852-2541-5563
Building materials(100%)

Thai Nikkei Trading Co., Ltd.
ThailandPhone: 66-2726-9001
Aluminum alloy, scrap(100%)

Nonfemet International(China-Canada-Japan)
Aluminium Co., Ltd.
Shenzhen, China
Phone: 86-755-2661-1569
Extrusion(18%)(As of July 31, 2008)

37

DIRECTORS AND OFFICERS

Directors

Officers

Koji Ueno

Chairman
Representative Director

Chairman

Supervision of Personnel Dept.,
General Affairs Dept. and IR & Public
Relations, In Charge of Safety

Shigesato Sato

Shigesato Sato
President
Representative Director

Takashi Ishiyama
Director

Makoto Fujioka
Akira Kato
Mitsuru Ishihara
Mitsuaki Asano
Masao Imasu
Tsuyoshi Nakajima
Yoshinobu Hiki
Hidetane Iijima*
Kuniya Sakai*

President
Chief Executive Officer

Takashi Ishiyama
Supervision of Strategic Committee
for Product Commercialization andBusiness Development

Atsushi Inoue
General Manager of Sheet & Extrusion
Fabricated Products Controlling Dept.,
Supervision of Panel Products andLandscape Products Dept.

Senior Executive Officer

Makoto Fujioka

Officer

General Manager of Internal Control
Office, In Charge of Compliance,
Supervision of Auditing Office andLegal Dept., In charge of Environment
and Specific Projects for Group Sales

Ichiro Okamoto
General Manager of Group Technology
Center of Technology & Development
Group

Tadashi Asahi
Akira Kato

Divisional Manager of Rolling ProductToshihide Murakami

Auditors

General Manager of Technology &Development Group and Central
Product Safety & Quality Assurance
Division, Supervision of Capacitor Foil

Standing Statutory Auditor

Mitsuru Ishihara

Yoshihiko Hamabe
Hideki Nakamura

Divisional Manager of Chemicals,Supervision of Rolling Products Div.

Takashi Hara

Executive Officer

Hiroyashi Hiruma

Mitsuaki Asano

General Manager of Personnel Dept.

Supervision of Accounting Dept. andPurchasing & Logistics Dept.

Yasunori Okamoto* Outside Director

Outside Statutory Auditor

Yuzuru Fujita
Katsuo Wajiki
Yasuo Yuki

Yoshiaki Kurihara
In Charge of Group Sales Promotion,
General Manager of Osaka/Nagoya
Regional Office, Supervision of Group
Metal Center

General Manager of Kambara
Complex, Divisional Manager ofCapacitor Foil

Divisional Manager of Shaped Parts

General Manager of Planning Dept., In
charge of China and Southeast Asia,
Supervision of Tomakomai Complex

Hirokazu Takatoku
General Manager of Legal Dept., andCompliance Office

Tadakazu Miyauchi
Divisional Manager of Metal & Alloy,
Supervision of Shaped Parts Div., Heat
Exchanger Div. and Kambara Complex(As of June 30, 2008)38

CORPORATE DATAPROFILE

Since its foundation in 1939, Nippon Light Metal Company, Ltd. has been constantly involved withaluminum. Today, Nippon Light Metal is Japan’s sole fully integrated aluminum manufacturer with

Head Office

Major Shareholders

activities ranging from alumina refining to fabrication of various products.

NYK Tennoz Building
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp
Phone: 81-3-5461-9211
Fax: 81-3-5461-9344(Ratio of Stock Holding)

Nippon Light Metal comprises four business segments: Aluminum Ingot and Chemicals
concerning the production of alumina and related chemicals and aluminum ingot; Aluminum
Sheet and Extrusions involving the production of sheets and shapes; Fabricated Products and Others
including the production of transportation-related products, electronic materials, foil and powder;
and Building Materials covering the production of residential and office building materials. ThroughEstablishedMarch 30, 1939

these segments, Nippon Light Metal is actively engaged in a wide range of fields such as automobiles
and railroads, electric machinery and electronics, industrial products and construction.

Paid-In Capital¥39,085 million

The NLM Group—the preeminent source of products and services combining aluminum’s
excellent characteristics with new functionality and added value that cater to pressing customer

Shares of Common Stockneeds—delivers customer satisfaction and contributes to environmental protection.

Authorized: 1,600,000,000
Issued: 545,126,049
Number of Shareholders

CONTENTS

59,039Stock Exchange Listings

CONSOLIDATED FINANCIAL HIGHLIGHTS ................................................................................................ 1
TO OUR SHAREHOLDERS.............................................................................................................................. 2
SPECIAL FEATURE ......................................................................................................................................... 4
NLM GROUP TOPICS ..................................................................................................................................... 7
CORPORATE GOVERNANCE AND INTERNAL CONTROL SYSTEMS...................................................... 8
NLM GROUP ENVIRONMENTAL ACTIVITIES ........................................................................................... 10
REVIEW OF OPERATIONS ............................................................................................................................. 11
NLM GROUP .................................................................................................................................................... 15
CONSOLIDATED SIX-YEAR SUMMARY ...................................................................................................... 16
FINANCIAL REVIEW ...................................................................................................................................... 18
CONSOLIDATED BALANCE SHEETS ........................................................................................................... 20
CONSOLIDATED STATEMENTS OF INCOME ............................................................................................. 22
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS............................................................. 23
CONSOLIDATED STATEMENTS OF CASH FLOWS.................................................................................... 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS........................................................................... 25
REPORT OF INDEPENDENT AUDITORS ...................................................................................................... 36
OVERSEAS NETWORK .................................................................................................................................. 37
DIRECTORS AND OFFICERS ......................................................................................................................... 38
CORPORATE DATA ......................................................................................................................................... 39

Tokyo, Osaka, Nagoya, Fukuoka, Sapporo
Transfer Agent of Common Stock

The Chuo Mitsui Trust & Banking Co., Ltd.
Last Shareholders’ Meeting

June 26, 2008

The Dai-ichi Mutual Life Insurance Co.
(3.7%)
Namekawa Aluminium Co., Ltd.
(3.2%)The Master Trust Bank of Japan, Ltd.
(trust accounts)(3.2%)
Japan Trustee Services Bank, Ltd.
(trust accounts)(3.0%)
Asahi Mutual Life Insurance Co.
(2.8%)The Light Metal Educational
Foundation, Inc.
(2.7%)Morgan Stanley and Company Inc.
(2.4%)
Nikkei-Keiyu-Kai(2.2%)
Mizuho Corporate Bank, Ltd.
(2.1%)
Mizuho Trust employee pension trust
Mizuho Corporate accounts(1.5%)

Cautionary Statement
This annual report contains various projections and estimates. Important factors that could alter these projections and estimates include
changes in the balance of aluminum supply and demand, fluctuations in the price of aluminum ingot and foreign exchange rates, aswell as shifts in Japanese government policies and regulations. The Company cautions, therefore, that the projections and estimates(As of March 31, 2008)

contained herein involve risk and uncertainty, and that actual results could differ materially from those expressed or implied.
39

NIPPON LIGHT METAL COMPANY, LTD. ANNUAL REPORT 2008

Nippon Light Metal Company, Ltd.
NYK Tennoz Building, 2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp

Uses soybean ink inconsideration of the enviroment

Printed in Japan