NIPPON LIGHT METAL COMPANY, LTD. ANNUAL REPORT 2005

Nippon Light Metal Company, Ltd.

ANNUAL REPORTNYK Tennoz Building,2-20, Higashi-Shinagawa 2-chome

2005

Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp

Year ended March 31, 2005

Uses soybean ink inconsideration of the enviroment

100% recycled paper

Printed in Japan

PROFILE

CORPORATE DATA

Since its foundation in 1939, Nippon Light Metal Company, Ltd. has been constantly
involved with aluminum. Today, Nippon Light Metal is Japan’s sole fully integrated aluminum manufacturer with activities ranging from alumina refining to fabrication ofvarious products.
Nippon Light Metal comprises four business segments: Aluminum Ingot andChemicals concerning the production of alumina and related chemicals and aluminum ingot; Aluminum Sheet and Extrusions involving the production of sheets andshapes; Fabricated Products and Others including the production of transportationrelated products, electronic materials, foil and powder; and Building Materials covering the production of residential and office building materials. Through thesesegments, 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.
The NLM Group—the preeminent source of products and services combining
aluminum’s excellent characteristics with new functionality and added value that caterto pressing customer needs—delivers customer satisfaction and contributes to environmental protection.
Contents
Consolidated Financial Highlights .............................................. 1
To Our Shareholders ................................................................. 2
Special Feature ......................................................................... 4
NLM Group Topics .................................................................... 7
Basic Stance on Corporate Governance ..................................... 8
NLM Group At a Glance ............................................................. 9
Review of Operations ................................................................ 10
Fact and Figures ........................................................................ 12
Financial Review ....................................................................... 14
Consolidated Balance Sheets ..................................................... 16
Consolidated Statements of Income ........................................... 18
Consolidated Statements of Shareholders’ Equity ...................... 19
Consolidated Statements of Cash Flows ..................................... 20
Notes to the Consolidated Financial Statements ......................... 21
Report of Independent Auditors ................................................ 32
Overseas Network ..................................................................... 33
Directors and Officers ............................................................... 34
Corporate Data ......................................................................... 35

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 andforeign exchange rates, as well as shifts in Japanese government policies and regulations. The Company cautions, therefore,that the projections and estimates contained herein involve risk and uncertainty, and that actual results could differ materially from those expressed or implied.
On the Cover:
1)Aluminum indoor spiral staircase, 2)aluminum extrusions, 3)aluminum coils, 4)E series refrigeration van (using Nikkei
Ecolas featured in Topics on Page 7)

Head Office

NYK Tennoz Building
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp
Phone: 81-3-5461-9333
Fax: 81-3-5461-9344
EstablishedMarch 30, 1939
Paid-In Capital¥39,085 million
Shares of Common Stock

Authorized: 1,600,000,000
Issued: 543,350,370

Asahi Mutual Life Insurance Co.
(2.8%)

Nikkei Logistics Co., Ltd.
Transport, warehousing *The Light Metal Educational
Foundation, Inc.
(2.7%)

Nikkei Extrusions Co., Ltd.
Aluminum extruded products(100%)

Namekawa Aluminium Co., Ltd.
(2.7%)

Nikkei Aluminium Core Technology
Co., Ltd.
Aluminum extrusions and fabricatedproducts(100%)

3

Nikkei-Keiyu-Kai(2.1%)
Mizuho Corporate Bank, Ltd.
(2.1%)

Nikkei Panel System Co., Ltd.
Panel for pre-fabricated freezer/refrigerator and cleanroom(100%)

Mizuho Trust employee pension trust
Mizuho Corporate accounts(1.6%)

Number of Shareholders

45,981
Stock Exchange Listings

Tokyo, Osaka and three otherdomestic stock exchanges
Transfer Agent of Common Stock

The Chuo Mitsui Trust & Banking Co., Ltd.

Major Domestic Subsidiaries

Shin Nikkei Co., Ltd.
Aluminum sashes, construction materials *1

Aluminium Wire and Rod Co., Ltd.
Aluminum rough drawing wire
(58.3%)

Nippon Fruehauf Co., Ltd.
Aluminum vans, trucks, trailers,
containers(66%)

Matsuo Industry Co., Ltd.
Aluminum castings and forgings *4June 29, 2005

Toyo Aluminium K.K.
Aluminum foil, powder and paste(100%)

Major Shareholders

Riken Light Metal Industrial Co., Ltd.
Aluminum construction materials *Last Shareholders’ Meeting(Ratio of Stock Holding)Japan Trustee Services Bank, Ltd.
(trust accounts)(12.6%)The Master Trust Bank of Japan, Ltd.
(trust accounts)(10.8%)
Nippon Life Insurance Co.
(Special Pension Account)(3.7%)The Dai-ichi Mutual Life Insurance Co.
(3.7%)NLM ECAL Co., Ltd.
Housing for cellular and mobile
telecommunications base stations(100%)

2

Nippon Electrode Co., Ltd.
Carbon for iron and steel blast furnaces
and for aluminum smelting, and othertypes of carbon(100%)*1 98%; Direct interest by NLM
2%; Interest held by Nikkei Sangyo Co., Ltd.
*2 98.5%; Direct interest by NLM
1.5%; Interest held by Nikkei Logistics Co., Ltd.
*3 46%; Direct interest by NLM
44%; Interest held by Shin Nikkei Co., Ltd.
10%; Interest held by Nippon Fruehauf Co., Ltd.
*4 99.1%; Direct interest by NLM
0.1%; Interest held by Nikkei Sangyo Co., Ltd.

Nikkei Sangyo Co., Ltd.
Aluminum welding rods, various kindsof contract work
(98.6%)
Nikkei Information System Co., Ltd.
Development, maintenance and operation of computer software(100%)(As of March 31, 2005)

35

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

Thousands of
U.S. dollars

Millions of yen
2004

2005

2005

For the year:
Net sales.................................................................................................................. ¥532,201 ¥560,284 $5,217,283
Operating profit ...................................................................................................... 26,355 30,560
284,570
Net income.............................................................................................................. 11,525 13,488
125,598
At year-end:
Total assets.............................................................................................................. 520,585 514,781 4,793,566
Shareholders’ equity ............................................................................................... 102,458 115,282 1,073,489
Short-term borrowings and long-term debt,
including bonds and capital lease obligation ......................................................... 229,682 209,042 1,946,568
Per share data (yen and dollars):
Net income—basic ................................................................................................ ¥ 21.24 ¥ 24.78 $Net income—diluted .............................................................................................
—
23.83
Cash dividends ........................................................................................................
2.50
3.50
Shareholders’ equity ............................................................................................... 188.84 212.63

0.23
0.22
0.03
1.98

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

2.91
2.04

293 ¥
105

312 $
219

Note: U.S. dollar amounts have been translated, for convenience only, at the exchange rate of ¥107.39 = U.S.$1.00. See Note 2 of the Notes to the Consolidated
Financial Statements.

Net Sales
600

Operating Profit
35

Total Assets
750

30
600
450

25
450

20
300
15

300

10

150

150
5
0

2000 2001 2002 2003 2004 2005

Billions of yen

Years ended March 31

02000 2001 2002 2003 2004 2005

Billions of yen

Years ended March 31

02000 2001 2002 2003 2004 2005

Billions of yen

As of March 31

1

TO OUR SHAREHOLDERS

I am pleased to report on the operating results for
Nippon Light Metal Company, Ltd. (NLM) and its consolidated group companies for fiscal 2004 (the year from
April 1, 2004, to March 31, 2005), the business issues facing the Group, and the outlook for the future.

Shigesato Sato President and CEO

Operating Results
During the year under review, solid economic growth in Japan and overseas fueled a steady increase in demand for aluminum products, especially in the electronic and electrical machinery, transport, and food products sectors. In these economic circumstances, the NLM Group steadily seized opportunities for profit growth and mounted a group-wide effort toimplement the action plan for the third year of the NLM Group Mid-Term Management Plan (effective from fiscal 2002
through fiscal 2006) with the aim of constructing a continuously growing corporate group with a highly profitable businessstructure. As a result of that effort, NLM recorded consolidated net sales of ¥560.3 billion, ordinary profit of ¥21.9 billion,
results that exceeded the initial forecast.
NLM paid a cash dividend of ¥3.50 per share, an increase of ¥1.0 from the previous year.
New Developments in Fiscal 2004
In April 2004 NLM established an extrusion fabricating company in Shenzhen as an initiative to enter the automotive market
in China and began supplying parts to Japanese-affiliated automobile manufacturers. In February 2005 Mitsubishi
Corporation and NLM reached an agreement for NLM to take an equity stake in an aluminum alloy manufacturer Mitsubishi
Corporation owns in Kunshan City, Jiang Su Province. NLM will seek to expand its business in China through these bases.
In May 2005 NLM acquired new shares issued by Tokai Aluminum Foil Co., Ltd., resulting in Tokai Aluminum becoming a
newly consolidated subsidiary (conversion from an equity-method associate to a consolidated subsidiary). The NLM Groupaims to strengthen collaboration between Tokai Aluminum and Toyo Aluminium K.K. to upgrade and expand the Group’s
aluminum foil business and increase competitiveness.
With regard to the disposition of under-performing businesses, having judged that the prospects for recovery in businessperformance were poor, management decided in March 2005 to withdraw from the household utensils business of Nikkei
Products Co., Ltd. We will continue to provide after-sales service to customers who have purchased the products in question.

2

Future Management Priorities
Implementation of the Mid-Term Management Plan—whose objectives are the strengthening of core businesses, the reorganization and return to profitability of under-performing businesses, and the creation of new businesses and new productsthat leverage the Group’s collective strength—has borne fruit, and NLM has steadily improved its business performance. We
have made mounting an all-out effort to completely achieve the goals of the Mid-Term Management Plan and the prompt,
unerring implementation of measures to make possible subsequent growth our key future management priorities.
That is to say, the NLM Group will make focused investments to further strengthen the strong products that drive growthand investments to enhance product competitiveness in core businesses and will actively engage in development activities totake maximum advantage of the Group’s collective strength in aluminum, our core competency. Because upgrading andexpanding infrastructure is essential to achieving these goals, we will continue to engage in core research, materials development, process development, productivity improvements, and human resources development.
The exercise of exemplary corporate social responsibility is vital for increasing enterprise value and sustaining the business over time. To fulfill its social responsibility in every field connected with business activities such as product safety, theenvironment, occupational safety and disaster prevention, NLM will seek to further strengthen corporate governance byenhancing its compliance system and risk management system.
Outlook for Fiscal 2005
Although sharp increases in the price of raw materials, economic deceleration owing to monetary tightening in the UnitedStates and China, and other factors that exert downward pressure on profits give cause for concern, and no certain economic growth drivers are in evidence, the NLM Group will endeavor to achieve consolidated net sales of ¥580.0 billion andordinary profit of ¥22.0 billion in fiscal 2005 through the rigorous implementation of streamlining measures, responses
attuned to customer needs, and the development and promotion of new products.
The NLM Group aims to become a corporate group that combines sustainable growth potential and high social value by
leveraging the comprehensive aluminum technologies that constitute its core competency and deftly coping with change inthe business environment.
I would greatly appreciate the continuing support and understanding of our shareholders in the coming years.
June 2005

Shigesato Sato
President and CEO
3

SPECIAL FEATURE

The Quest for Further Growth
The Nippon Light Metal Group’s Growth Strategy
The distinctive characteristic and great strength of the NLM Group is the ability to skillfully meet new needs
and changing needs by leveraging a broad range of management resources that encompasses everythingfrom a complete range of aluminum-based materials to fabrication available within the group. The businessresults in fiscal 2004 nearly reached the numerical targets for fiscal 2006, the final year of the Mid-Term
Management Plan. NLM believes this is the right time to make the next strategic move in order to maximize
the Group’s strength and achieve additional growth. This special feature explains initiatives aimed at securing further growth for the NLM Group.

Business Results for Fiscal 2004
Fiscal 2004 Actual

Fiscal 2006 Target

Net sales

560.3 billions of yen

590 billions of yen

Operating profit

30.6 billions of yen

32 billions of yen

Ordinary profit

21.9 billions of yen

23 billions of yen

8.6 %exceeding 8 %210.3 billions of yen

200 billions of yen

ROCE (Return on capital employed)
Balance of interest-bearing debt

In fiscal 2004, NLM recorded consolidated net sales of ¥560.3 billion, an increase of 5.3% year on year, operating profit of¥30.6 billion, an increase of 16.0%, ordinary profit of ¥21.9 billion, an increase of 35.8%, and net income of ¥13.5 billion,
an increase of 17.0%. Although spikes in the prices of ingots, crude oil, and other materials and fuels affected performance, on the whole business results were favorable. The impact of adjustments to sales prices and management streamlining measures contributed to increases in sales and profits for the second consecutive year. The solid businessperformance in fiscal 2004 opens the way to complete achievement of the goals in the Mid-Term Management Plan.

Initiatives to Secure Further Growth
Enhancing the Power of NLM
The balance of interest-bearing debt at March 31, 2005, of ¥210.3 billion
represented a decrease of ¥21.5 billion from the previous term and an
improvement over the initial target. As indicated by the equity ratio of
22.4%, the Group’s financial position has steadily improved owing to its
greater earning power.
Nevertheless, achievement of the Mid-Term Management Plan will take the
NLM Group only to the level of an unexceptional company in terms of returnon investment and financial standing. Following the conclusion of the
Mid-Term Management Plan it will be necessary to achieve further
growth to raise the NLM Group to the level of a truly powerfulcompany.

4Planned Capital Expenditures of ¥68.0 Billion over Three Years
Capital Expenditures( Billions of yen )25
Aluminum Ingot and Chemicals

5.0

20

5.0

5.0

3.0

3.0

9.0

10.0

3.0

15

3.0
1.9

10

10.0
6.8

Aluminum Sheet and Extrusions
Fabricated Products and Others

5
0

5.3

6.0

5.0

4.0

Fiscal 2004

Fiscal 2005

Fiscal 2006

Fiscal 2007

( Actual )( Forecast )( Forecast )Building Materials( Forecast )Investments to upgrade the product mix and increase the ability to supply strong products and investments in model changes
to increase the competitiveness of core products in terms of cost, quality, and function are an essential strategic move to raise
the level of the NLM Group. The NLM Group will make these investments while at the same time continuing with research anddevelopment, the upgrading of information systems and infrastructure, and overseas business development.
The plan for the capital investment to underpin these measures calls for total capital investment of ¥68.0 billion over athree-year period: ¥24.0 billion in fiscal 2005, ¥22.0 billion in fiscal 2006, and ¥22.0 billion in fiscal 2007. The following
is an overview of the capital investment plan.
Investment in Strong Products
Toyo Aluminium K.K. will execute capital investment of ¥6.0 billion in fiscal 2005 and ¥17.0 billion during the three-year
period until fiscal 2007 with the prime objective of strengthening its powder and paste operations. Toyo Aluminium has ahigh market share in this business for which future growth in demand is expected.
In the alumina and chemicals business, NLM will execute capital investment of ¥2.5 billion in fiscal 2005 and ¥7.5 billion
during the three-year period until fiscal 2007 to strengthen its range of fine and high-purity products, including fine aluminum hydroxide, super-white aluminum hydroxide, low-soda aluminum hydroxide and low-soda alumina, and increase
market share in the automotive, electrical machinery and electronics sectors, where high performance and high added value
are required.
Investment in Core Products
Shin Nikkei Co., Ltd. aims to further increase market share by strengthening its product range through measures including
full-scale model changes for residential sashes and other mainstay products and additions to the CB (new surface treatment
technology) Series. To that end, it plans to execute capital investment of ¥5.5 billion in fiscal 2005 and ¥15.0 billion during
the three-year period until fiscal 2007.
Furthermore, the NLM Group holds the highest market share in the truck outfitting business and panel system business,and management considers strategies to further increase market share to be the most important priority for these operations. Nippon Fruehauf Co., Ltd., which operates the truck outfitting business, anticipates a sharp decrease in demand fortrucks from 2007 onward. For this reason, it seeks to increase its market share by stressing temperature control trucks, forwhich demand is expected to grow, notably a full model change for its mainstay side-loading gull wing truck bodies. Nikkei
Panel Systems Co., Ltd. will seek to increase its market share through the production of panels modified to add insulationand durability and the industry’s only environmentally friendly panels that use no chlorofluorocarbons.
Investment in New Product Development
New products that resulted from cross-organizational activities aimed at developing new products and businesses are
already contributing to sales increases at Nikkeikin Aluminium Core Technology (ACT) Co., Ltd. and Shin Nikkei. The shift
to high-value-added fabricated products has brought about dramatic improvement in business results at Nikkeikin ACT. The
cross-organizational development has contributed to the creation of products in the automotive, electrical machinery andelectronics sectors that leverage the Group’s comprehensive strength. Using these successes as models, NLM will step up
new product development and cross-organizational development activities.
5

SPECIAL FEATURE
The cross-organizational team to develop new products in the information and telecommunications infrastructure sector
established last year is leveraging the technological, development and analysis capabilities of the Group to engage in thedevelopment of electromagnetic shielding products and other products.
Investment in Information Systems and Infrastructure
The NLM Group is actively investing in information systems and infrastructure that is essential to strengthening the business.
Shin Nikkei plans to invest about ¥2.0 billion during the coming five years in the VIT Project, an initiative to reconstruct its
core business systems. Shin Nikkei anticipates an ultimate cost-saving effect of ¥3.0 billion per year from improvements inoperating efficiency to result from this investment.
Contribution from Existing Investments
NLM seeks to bring forward the contribution to results from facilities investments and development investments made inprevious years, such as the investment in the FLEXCASTER aluminum sheet continuous casting facilities newly introduced toenter the market for automobile materials, the investment in automotive heat exchange materials at wholly owned subsidiary Nikkei Siam Aluminium Ltd., and the investment to boost special alloy billet capacity at Kambara Smelting and Casting Plant.
Overseas Business Development
The NLM Group already maintains secondary alloy production operations in Thailand and Malaysia and extrusion fabricating operations* in China and sells products to Japanese automotive component manufacturers that operate in these countries. In addition to these operations, the NLM Group plans to set up an alloy operation in China in 2005 and aggressively
engage in overseas business development using the alloy operation in China as a base.
* Refer to Topics on Page 7.

Nippon Fruehauf established an office in Shanghai in January 2005 from which it is researching and studying the possibility of components procurement and the establishment of local business operations.

Business Outlook to Fiscal 2007
Change in Consolidate Business Results( Billions of yen )

40

650

35
560.3

30

30.6

580
30

15

600
33

Operating profit

550

31

25
20

610 Net sales

595

25
21.9

Fiscal 2004
( Actual )22

Fiscal 2005
( Forecast )23

Ordinary profit

500
450

Fiscal 2006
( Forecast )Fiscal 2007400

( Forecast )Aiming for Further Growth
On the basis of these measures the NLM Group aims to achieve the business performance target for fiscal 2006 in the MidTerm Management Plan of consolidated ordinary profit of ¥23.0 billion and forecasts even higher ordinary profit of ¥25.0
billion in fiscal 2007. In this way, the NLM Group is poised to take a solid first step toward growth following completion of
the Mid-Term Management Plan.
Although the nature of the NLM Group’s business portfolio is such that a sudden increase in the level of earnings cannot
be achieved from one or two materials or products, the Group will effectively use its management resources to steadilyraise the level of profits while engaging in risk management.

“Aluminum is our foundation. We will use it as a springboard to new heights.”
With this as the basic concept of business operations, the NLM Group will seek to strengthen its business base and increase
earnings to reward the trust and meet the expectations of shareholders.

6

NLM GROUP TOPICSNLM Establishes NI Nikkei Shenzhen Co. Ltd.
Launches Aluminum Automobile Components Business in ChinaIn April 2004 Nippon Light Metal Co., Ltd. and Nonfemet
International Aluminium Co., Ltd., with which NLM has acapital tie established joint venture NI Nikkei Shenzhen Co.,
Ltd. (NNS) in China. In September 2004 the company began
producing aluminum automobile bumper extrusions forshipment to Dongfeng Motor Co., Ltd., a leading Chinese
automobile manufacturer in which a Japanese automobile
manufacturer has an equity stake.
At this time nearly all products produced by aluminum
extrusion manufacturers in China are construction materials; NNS is the only company with automobile components
production technology. NLM Group subsidiary Nikkeikin
Aluminum Core Technology Co., Ltd. controls business

operations at NNS and aims to expand the automotive
extruded products business by applying the NLM Group’s
production, operation and marketing expertise. NNS plans toship roof rails and other products to other Japanese-affiliated automotive companies in the next fiscal year.

Company name: NI Nikkei Shenzhen Co. Ltd.
Registered capital: RMB 5.18 million yuan
Equity ownership: Nippon Light Metal Co., Ltd. 55%;
Nonfemet International Aluminium Co., Ltd. 45%
Date of establishment: April 2004

NLM Develops
Nikkei Ecolas Eco-Friendly Chrome-Free Colored Aluminum SheetsN

ippon Light Metal
lations controlling the use
Ordinary Colored Aluminum Sheets
Nikkei Ecolas
Co., Ltd. has succeededof organic volatile subTop coatin developing the industry’s
stances, which are expected
Undercoat
Top coatfirst chrome-free colored aluto be tightened.
Chrome-free undercoat
Chromating
minum sheets for precoating
As companies that have
Aluminum alloy sheet
Aluminum alloy sheetwith water-based coatings.
obtained ISO 14000 certiThe sheets, named Nikkei
fication are establishing
Chromating
Chrome-free undercoat
Underside
Underside
Ecolas, were launched intime limits on the use of
Future:Current situation:
Chromate treatment is the principal method
Switch to chrome-free coloring because of
November 2004.
hexavalent chromium, it isof producing colored aluminum.
restrictions on environmentally harmful substances.
● Demand for non-construction applications (transport, electrical equipment, machinery) will increase.
As shown in the figure
necessary for materials● Using high-performance emulsion coating, chrome-free colored aluminum has high durability,
corrosion resistance, and weather resistance.
right, after degreasing ordimanufacturers to urgently
nary colored aluminum sheets
convert to chrome-free
are preprocessed with chroparts. To meet this sociallymate to increase adhesion of the coating film. Newly develbeneficial requirement, the NLM Group will propose
oped Nikkei Ecolas exhibits the same performance aschrome-free specifications to users in the electrical prodchromate-treated color aluminum without the requirement
ucts, transport, construction and other industries. In thefor chromate preprocessing.
coming years the Group will continue to strive to provide
Since Nikkei Ecolas is manufactured using a water-based
products that satisfy customers and to create environmencoating that contains no heavy metals that have an impact ontally friendly products.
the human body and the environment, it complies with regu-

7

BASIC STANCE ON CORPORATE GOVERNANCE

NLM is striving to establish a management system that earns the confidence of shareholders, business
partners, employees, local communities and all other stakeholders by ensuring its business activities
satisfy international standards with respect to transparency and fairness, and moreover, that is capableof responding to changes in Japan and overseas precisely and swiftly amid ongoing globalization of theeconomy and society.
Corporate governance structure and measures implemented• In June 2000, an executive officer system was introduced with the aim of separating execution and supervision.
• The Executive Committee consisting of senior executive officers and higher echelons is convened at least twice per month.
• A meeting of the Board of Director’s is held once per month.
• At present, the Board of Directors consists of 11 directors, two of whom are outside directors, thus satisfying the requirement for outside directors provided for in the Commercial Code of Japan.
• Although no staff is assigned exclusively to support the outside directors, Legal Dept., Planning Dept., General Affairs
Dept., Accounting and Finance Dept. and other relevant organizations provide support, as necessary.
• By the resolution of the general meeting of shareholders held on June 27, 2003, the tenure of a director was reduced
from two years to one year.
• The Board of Statutory Auditors audits the execution of operations.
• There are three auditors, one of whom is outside auditor as provided for in the Law for Special Exceptions to theCommercial Code concerning Audit etc. of Joint-stock Companies.
• The Auditing Office consisting of four staff is an internal audit organization.
NLM’s Corporate Governance Structure
General Meeting of Shareholders
Appointment/Removal

Appointment / Removal
Audit reports

Accounting
auditorAccounting
audit

Board of Directors
Reports andproposals

President and CEO
Executive Committee
Operations,subsidiaries and affiliates

Exchange of opinions

Appointment/RemovalInternal
audit
Auditing Office

Audit byauditors

Compliance
Committee

Board of
Statutory
Auditors

Compliance
Promotion Office
Exchange of opinions

Audit reports/Exchange of opinions

Risk management system
NLM has put in place a risk management system to enable swift responses to deal with risks. In the event of any contingency
which may have a material impact on the Company’s management, the General Affairs Dept. will manage all information in
an integrated manner and an emergency headquarters will be established.
In regard to the compliance system, on July 1, 2004, NLM established the Compliance Committee as a vehicle for implementing compliance measures under the Committee, and also established the Compliance Promotion Office, which is thesecretariat of the Compliance Committee.
8

NLM Group At a Glance(Consolidated Basis)

Aluminum Ingot and Chemicals

Aluminum Sheet and Extrusions

The Alumina and Chemicals Operations produces the aluminumhydroxide, alumina and chemicals that are essential raw
materials for water treatment chemicals, flame retardants,
ceramics and other products. The Aluminum and Aluminum Alloy
Operations comprises a recycling business to recover aluminum
scrap for use as alloy ingots and the production of highperformance alloys developed by Nippon Light Metal
Co., Ltd. The NLM Group operates Japan's only
aluminum smelting business. The smelted
aluminum is further refined and the resulting
high-purity aluminum is used as a raw
material for electronic materials.

Aluminum sheet and extrusions are commonplace materials
widely used in many industries. The NLM Group is actively
developing technologies and applications with the aim ofsupplying higher-value-added sheet and extrusions. The sheet
and extrusion materials adapted to customer needs that result
from these activities are used as functional materials in
the automotive and rail transportation sectors andfor incorporation in electronic materials andfor other applications in the precisionequipment sector.

92,94872,824

(17%)

(13%)

219,802

Consolidated
Net Sales by Segment560,284(Millions of yen)

174,710
(31%)

(39%)

Fabricated Products and Others

Building Materials

The NLM Group includes a number of distinctive fabrication
businesses. Advanced technological capabilities and productsuperiority have made Toyo Aluminium K.K. (aluminum foil,
aluminum powder and paste), Nippon Fruehauf Co., Ltd. (vanand truck bodies), and Nikkei Panel System Co., Ltd.
(commercial refrigerator and freezer panels) leaders in theirrespective industries. The anodized aluminum foil for thealuminum electrolytic capacitors produced within the Group isan essential core material for electronic components. In addition
to these items, NLM offers packaging materials and otherfamiliar consumer products.

Shin Nikkei Co., Ltd. plays a leading role in the NLM Group's
operations in the housing materials sector (windows, front
doors, terrace materials), the exterior materials sector (gates,
fences, garden materials) and the commercial building material
sector (aluminum curtain walls for high-rise buildings). In its
role as a comprehensive supplier of building materials offering
an extensive range of products, Shin Nikkei aims to enhance thequality of residential environments through development andprovision of high-performance, high-quality products adapted tocustomer needs for energy conservation, environmental
coexistence, and universal design.

9

REVIEW OF OPERATIONS

Aluminum Ingot and Chemicals

Aluminum Sheet and Extrusions

In Alumina andChemicals
Operations, overallrobust demand continued and sales
increased sharply
year on year.
Shipments of many
products developed
favorably, notably allpurpose products
such as aluminumhydroxide for coagulants and alumina for flame retardants and differentiated products
such as low-soda alumina used in semiconductors and electronicmaterials and white aluminum hydroxide used in artificial marble.
Progress with price adjustments based on increases in materials
and fuel costs also contributed to the sales increase.
Sales of chemicals increased year on year. Although shipmentsof caustic soda, hydrochloric acid and other soda and inorganic
chlorine products and organic chorine products developed favorably, shipments of coagulants slumped. Sales of fluoride products
developed favorably as shipments of hydrofluoric acid to new users
became established following a previous sharp decrease in shipments to a high-volume user. Also, shipments from the Kambara
Complex’s dichlorobenzene plant, which resumed in November
2003, returned to near the level before the plant fire.
For Alumina and Chemicals Operations as a whole, althoughfactors such as sharp increases in the price of heavy oil and inocean freight for bauxite put upward pressure on manufacturingcosts, progress with product price adjustments led to sharp
improvement in business results from the previous term.
Revenues from Aluminum and Aluminum Alloy Operations
increased from the previous term. In the mainstay automotive sector, against a backdrop of robust demand amid continued improvement in the global market situation, selling price adjustments tookhold and NLM engaged in product mix improvement to increase
added value. In other market sectors, although harsh business conditions continued for aluminum for electric cables and aluminumfor flat rolled products, primarily building materials, higher sales ofalloy ingots for surface-treated steel sheet and of ingots for deoxidizing for the steel industry fueled an overall revenue increase. With
regard to raw materials, the opening of Osaka Logistics Center andother measures to develop a scrap aluminum procurement route
made possible an increase in the procurement of raw materials at
low prices. NLM also implemented a sales expansion strategy inoverseas markets in fiscal 2004, including a decision to take anequity stake in an aluminum alloy manufacturer in China.
As a result of these developments, sales in the Aluminum Ingot
and Chemicals segment increased by 12.2% year on year to¥92,948 million, and operating profit increased by 87.6% to¥8,866 million.

In Aluminum Sheet
Operations, sales
increased sharply
owing to strong shipments of aluminum
foil stock for capacitors, aluminum plate
for liquid crystal manufacturing equipment,
and products for thetransport sector aswell as the full-year
impact of sales of
Nikkei Siam Aluminium Ltd., which was included in the scope of
consolidation in September 2003. Improvement in selling prices andefforts to reduce costs led to a sharp increase in profits year on year.
The FLEXCASTER aluminum sheet continuous casting facilities
completed in September 2004 have already passed customer final
evaluation testing for a number of products and delivery of products has begun. NLM will take advantage of the ability to manufacture sheet that is vastly superior to previous products with respect
to strength and thermal conductivity to increase share in various
market sectors, primarily automotive materials and equipment forheat exchangers.
Sales and profits of Aluminum Extrusion Operations increased
year on year. Sales of building materials were sluggish and truckrelated sales decreased due to the fact that the period of peakdemand for replacement purchases of truck products necessitatedby the strengthening of exhaust regulations had passed. On theother hand, shipments of railway products rose sharply, fueled by
shipments for Taiwan High Speed Rail. Sales of pipe stock, automotive products and IT products also developed favorably.
As a result of these developments, sales in the Aluminum Sheetand Extrusions segment increased by 12.3% year on year to¥72,824 million, and operating profit increased by 57.8% to¥5,785 million.

10

Fabricated Products and Others
The following is asummary of resultsfrom principal businesses in the
Fabricated Products
and Others segment.
In Aluminum Foil,
Aluminum Powder
and Paste Operations,sales increased year
on year owing tostrong sales of highpurity aluminum foil
for capacitors and general-purpose foil for food products andpharmaceuticals packaging. In the aluminum powder and paste
sector, favorable sales of aluminum paste for automobile paints
for Japan and overseas markets and aluminum paste for home
appliances coupled with strong performance from new products
and exports drove a year-on-year increase in sales. With theobjective of further strengthening the Group’s foil business, NLM
accepted a third-party allocation of new shares from associate
Tokai Aluminum Foil Co., Ltd. and made the company an NLM
subsidiary.
In Transport-Related Operations, sales from the van and trailer
equipping business decreased year on year as a result of lower
replacement demand in connection with the strengthening ofdiesel engine exhaust regulations, especially in the Tokyo metropolitan area.
Sales of automobile air conditioning capacitors increased year
on year owing to brisk business in the automobile industry, growthin the market share of existing models, and orders for new models. Sales of shaped parts increased year on year as orders formainstay brake calipers and peripheral engine parts and orders
for truck parts developed favorably.
In Electronic Materials Operations, although sales of anodized
aluminum foil for electrolytic capacitors were affected by inventory
adjustments in the IT industry during the second half of the term,
overall sales increased sharply year on year as a result of increased
demand for industrial equipment owing to higher capital expenditures in China and other markets, higher demand for air conditioners due to the hot summer, and expansion of the market for
digital appliances increased due to the Athens Olympics.
Consequently, profits also improved substantially.
Overall sales from Panel Systems Operations increased year on
year. Sales of panels for commercial freezers and refrigerators
decreased; although sales for small and medium-sized projects
were at the same level as for the previous year, sales for large projects fell owing to a slump in capital expenditure for food processing equipment. Sales of clean rooms, primarily those for liquid
crystal and plasma display panel (PDP) projects and semiconductor projects, rose sharply from the previous year as a result of asteady increase in demand for digital appliances.
Regarding other fabricated products and related businesses,
sales of aluminum mini-kegs for beer fell year on year as sales ofcompeting alcoholic beverages that resemble beer led to adecrease in the volume of beer shipments. Continued contractionof public works spending brought harsh trading conditions forlandscaping products. Although emphasis was placed on increasing sales of aluminum movable covers and the guard fence andfloodgate repair businesses, a reduction in the number of large
projects led to a year-on-year decline in sales. Sales and profits
from the household utensils business decreased owing to diversification of consumer preferences, an influx of low-priced foreign
products, and the recall of two-handled pressure cookers. Because
the prospects for recovery in business performance were unfavorable, management decided to withdraw from this business inMarch 2005.
As a result of these developments, sales in the FabricatedProducts and Others segment increased by 2.0% year on year to¥219,802 million, and operating profit increased by 5.8% to¥14,883 million.

Building Materials
In the Building
Materials segment,
sales in the housing
construction materials sector increased
from the previous
year. The operating
environment wascomparatively firm as
new housing starts
increased by 1.7%
year-on-year to
1.193 million owing
to growth in starts of detached houses. In these circumstances,
Shin Nikkei Co., Ltd. strove to increase sales of mainstay products including the CB Series of window sashes and doors—thefruit of proprietary surface treatment technology—and the
Alupla 70 Series of interior insulation sashes. At the same time,
we worked to strengthen the product line to meet diversifying
customer needs by developing new products and differentiatedproducts such as insulated front entrance doors and productsthat incorporate security features. We also aggressively engaged
in marketing activities that integrate the production and sales
functions with the aim of increasing sales, such as lead time
reduction through the implementation of a system for three-day
fulfillment from receipt of order to delivery and reinforcement of
the sales network.
In the commercial building construction materials sector,
although the floor area of building construction started in the
non-wood construction sector increased slightly from the previous term, unit prices fell. Amid a harsh price environment, Shin
Nikkei completed construction of large-scale projects that drew
on its advanced technological capabilities and worked to secureorders by actively engaging in product development in sectors
where demand is expected to increase in the future, such as
development of the RMG-90 line of next-generation sashes forcondominiums and the Plala line of plastic sashes for buildings.
As a result of these efforts, sales of commercial building construction materials remained at the prior-year level.
Shin Nikkei worked to improve profitability by continuing to
implement a number of group-wide, cross-organizational projects
to improve quality and delivery times, reduce purchasing costs,
and rigorously cut overheads.
As a result of these developments, sales in the Building
Materials segment increased by 3.4% year on year to ¥174,710
million. Nevertheless, deterioration of conditions in the commercial building market and the impact of spikes in materials prices
led to a decrease in operating profit of 39.2% year on year to¥4,068 million.
11

FACT AND FIGURESPRINCIPAL PRODUCTS AND SERVICES
Aluminum Ingot and Chemicals
Plant Name

Principal Competitors

Alumina

Principal Products

Shimizu Plant

Sumitomo Chemical Co., Ltd., Showa Denko K.K.

Aluminum hydroxide

Shimizu Plant

Sumitomo Chemical Co., Ltd., Showa Denko K.K.

Chemicals (chemical products)

Kambara Chemical Plant

Japanese and overseas chemical manufacturers

Caustic soda

Kambara Chemical Plant

Japanese and overseas chemical manufacturers

Chlorinated chemical products

Kambara Chemical Plant

Japanese and overseas chemical manufacturers

Aluminum ingot

Kambara Smelting and Casting Plant

None (NLM is the only smelter in Japan)

Aluminum alloys

Mie Plant, Koda Plant

Major secondary alloy manufacturers

Aluminum Sheet and Extrusions
Applications

Automobile

Transport

Principal ProductsPlant and Company Name

Principal Competitors

Automobile suspension parts

Nikkei Kambara Co., Ltd., Nikkei Niigata Co., Ltd.

Major extruded products manufacturers

Lead-free cut aluminum alloy

Nikkei Kambara Co., Ltd., Nikkei Niigata Co., Ltd.

Major extruded products manufacturers

Quick freezing coagulated powder extruded materials

Nikkei Kambara Co., Ltd.

Major extruded products manufacturers

High-intensity molded aluminum sheet

Nagoya Plant

Major rolled products manufacturers

Large structural materials for railway rolling stock

Nikkei Niigata Co., Ltd.

Major extruded products manufacturers

Side block for trucks

Nikkei Niigata Co., Ltd.

Major extruded products manufacturers

Nagoya Plant

Major rolled products manufacturers

Thick aluminum sheet for semiconductor andElectronics

Industrial
Building materials
and infrastructurematerials

LCD manufacturing equipment, Foil stock
Photosensitive drum materials

Nikkei Kambara Co., Ltd.

Major extruded products manufacturers

Printing roll

NTC Co., Ltd.

None in particular

Industrial materials

Nikkei Niigata Co., Ltd.

Major extruded products manufacturers

Scaffolding

Nikkei Niigata Co., Ltd.

Major extruded products manufacturers

Principal ProductsPlant and Company Name

Principal Competitors

Powder and paste

Toyo Aluminium K.K.

Showa Aluminum Powder K.K., Asahi Kasei Metals Ltd.

Fabricated Products and Others
Applications

Automobile

Transport

Electronics

Building materials
and infrastructurematerials
Food andlifestyle

Cast and forged parts for automobiles

Kambara Complex , Tomakomai Complex ,Matsuo Industry Co., Ltd.

Major automobile parts manufacturers

Heat exchangers for automobiles

Kambara Heat Exchanger Plant

Van truck bodies and trailers

Nippon Fruehauf Co., Ltd.

Showa Denko K.K.
PABCO Co., Ltd., Nippon Trex Co., Ltd.

Aluminum foil for electrolytic capacitors

Toyo Aluminium K.K.

Major aluminum foil manufacturers
Major capacitor manufacturers

Chemical foil for electrolytic capacitors

Kambara Capacitor Foil Plant

Clean rooms

Nikkei Panel System Co., Ltd.

Sanyo Showa Panel System Corp., Sogo Corp.

Landscape engineering products

Sumikei-Nikkei Engineering Co., Ltd.

None in particular

Solid truss structural materials (Aluminum truss)

Funabashi Plant

None in particular

Plant package for communication base stations

NLM ECAL Co., Ltd.

Matsuda Mfg. Co., Ltd., SPC Electronics Corp.

Aluminum foil

Toyo Aluminium K.K.

Major aluminum foil manufacturers

Panels for commercial refrigerators and freezers

Nikkei Panel System Co., Ltd.

Sanyo Showa Panel System Corp.

Building Materials
Applications
Building

12

Principal ProductsCompany Name

Principal Competitors

Commercial building materials

Shin Nikkei Co., Ltd.

TOSTEM Corp., YKK AP Inc.

Building materials and for fixtures for houses

Shin Nikkei Co., Ltd.

TOSTEM Corp., YKK AP Inc.

Exterior products

Shin Nikkei Co., Ltd.

Toyo Exterior Co., Ltd., Sankyo Aluminium Industry Co., Ltd.

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

Millions of yen
2000

2001

2002

2003

2004

2005

2005

549,194
18.4
2,150(9,499)(14,096)565,223
18.4
12,205
2,906(21,905)

521,861
19.7
11,7234,805
1,518

514,042
20.1
20,086
12,325
7,116

532,201
21.1
26,35516,092
11,525560,284
21.0
30,56021,857
13,4885,217,283
21.0
284,570
203,529
125,598

86,642
55,990221,849
184,713549,194

91,17269,006
225,763
179,282565,223

84,77554,239207,652
175,195
521,861

81,49558,374204,171
170,002514,042

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

92,94872,824
219,802174,710560,284865,518
678,127
2,046,764
1,626,874
5,217,283

7,528
645
(216)
(1,798)(4,009)
2,150

8,523
1,379
10,811(5,285)(3,223)
12,205

5,589
(620)
9,524
328
(3,098)
11,723

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

4,727
3,667
14,071
6,687(2,797)
26,3558,866
5,785
14,883
4,068(3,042)30,56082,55953,870138,588
37,880(28,327)
284,570

Financial Position
Current Assets ......................................................
Fixed Assets..........................................................
Current Liabilities.................................................
Long-term Liabilities ............................................
Minority Interest in Consolidated Subsidiaries....................
Shareholders' Equity ............................................
Interest-bearing Debt ...........................................

320,592
284,754282,920
202,903
19,014
100,509
314,952

331,378
268,995
332,866
181,808
4,221
81,478
304,569

305,813
258,474
334,732
141,870
4,371
83,314295,255

287,083
238,678
294,637
138,623
3,155
89,346
258,831

290,625
229,960
291,799
122,593
3,735
102,458
231,807285,252
229,529
266,212129,237
4,050
115,282
210,368

2,656,225
2,137,341
2,478,928
1,203,436
37,713
1,073,489
1,958,916

Cash Flows
Cash Flows from Operating Activities....................
Depreciation and Amortization........................
Cash Flows from Investing Activities .....................
Capital Expenditures........................................
Cash Flows from Financing Activities ....................

22,23323,047(7,629)(13,425)(27,560)

22,69819,368(9,320)(17,662)(14,288)

26,685
18,542(12,250)(14,947)(9,416)33,507
17,128224(13,501)(36,504)

23,44816,504(5,556)(17,516)(27,703)

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

301,192
154,493(131,586)(158,050)(211,398)

Financial Results
Net Sales ..............................................................
Gross Profit Margin (%) .....................................
Operating Profit ...................................................
Ordinary Profit (Loss)..........................................
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 ...........................................
Corporate or Elimination.................................
Total................................................................

Per Share Data (yen and dollars)
Net Income(loss) - basic......................................
- diluted ...................................
Shareholders' Equity ............................................
Cash Dividends.....................................................

(31.01)(41.22)

2.79

13.34

21.24

—
198.452.0—
149.96——
153.361.5—
167.01
2.0—
188.84
2.5

24.78
23.83
212.63
3.5

0.23
0.22
1.98
0.03

Indices
Return on Capital Employed (ROCE)(%) ...................
Return on Equity (ROE)(%) ................................
Equity Ratio (%) ..................................................

(0.6)(14.5)
16.6

2.3(24.1)
13.6

3.1
1.8
14.8

5.5
8.2
17.0

7.0
12.0
19.7

8.6
12.4
22.4

8.6
12.4
22.4

OthersNumber of Shares Outstanding (thousands)...................
R&D Expenditures................................................
Number of Employees ..........................................

510,825
5,166
14,074543,350
4,703
12,931

543,350
4,686
12,705543,350
4,427
12,328543,350
4,804
12,598543,350
5,538
12,927543,350
51,56912,927

Note: U.S. dollar amounts have been translated, for convenience only, at the exchange rate of ¥107.39 = U.S.$1.00. See Note 2 of the Notes to the Consolidated
Financial Statements.

13

FINANCIAL REVIEWOverview
During fiscal 2004 (the year ended March 31, 2005), theJapanese economy performed relatively well. However,inventory adjusted in the IT-related industry and increases inprices of oil and materials heightened concerns as toprospects for the Japanese economy.
In the aluminum industry, despite sluggish demand fromthe construction sector, total product demand exceeded theprevious fiscal year’s level thanks to generally brisk demandfor electric and electronic products, transport equipment
and food products due to recovery of the Japanese economy
in general and an unusually hot summer.

associated with the acquisition of the equity of Shin Nikkei
Co., Ltd. in August 2000 and due to reporting of equity inlosses of associates compared with equity in earnings ofassociates of ¥0.3 billion for the previous fiscal year. Nonoperating expenses decreased 24.1% to ¥11.8billion($110million) mainly attributable to the decrease in interest
expense as a result of redemption of corporate bonds andreporting of equity in losses of associates. As a result,ordinary profit soared 35.8% to ¥21.9 billion($204million).
Special gains decreased from ¥4.9 billion for theprevious fiscal year to ¥1.1 billion ($10 million), as a resultof the decrease in the gain on sale of investment securities
from ¥1.2 billion for the previous fiscal year to ¥0.8 billion($8 million) and the decrease in the gain on sale of fixed
assets from ¥3.7 billion for the previous fiscal year to ¥0.3
billion ($3 million). Special losses increased from ¥1.9
billion for the previous year to ¥3.4 billion ($31 million).
This increase was attributable to the fact that although noloss on devaluation of investment securities was reported forthe year under review compared with reporting of a ¥1.9
billion loss on devaluation of investment securities for theprevious fiscal year, a loss on impairment of fixed assets
amounting to ¥2.2 billion ($20 million) was reported owing
to early adoption of the accounting standards for
impairment of fixed assets and a loss on liquidation of ahousehold utensils business amounting to ¥1.2 billion ($11
million) was reported.
The total amount of current income taxes increased ¥2.9
billion from the previous fiscal year to ¥7.5 billion ($70

Earnings and Expenses
In these circumstances, consolidated net sales of the NLMGroup increased 5.3% year on year to ¥560.3 billion($5,217 million). Please refer to the Review of Operations(Pages10 and 11) for an overview of the results ofoperations.
The cost of sales increased 5.4% from the previous fiscal
year to ¥442.5 billion ($4,121 million), and the cost of sales
ratio increased 0.1 percentage points to 79.0%. Selling,
general and administrative expenses increased 1.4% to¥87.2 billion ($812 million). As a result, operating profit
rose 16.0% to ¥30.6 billion ($285million).
Non-operating income declined 41.4% to ¥3.1 billion($29million). This was mainly due to a ¥1.2 billion decreasein the amount of amortization of consolidation adjustments
compared with that for the previous year as a result ofcompletion in July 2003 of amortization of negative goodwill

Net Sales By Segment

Total Shareholders’ Equity

Equity Ratio

750

150

25

600

120

20

450

90

15

300

60

10

150

30

5

0

2001

2002

2003

2004

2005

*including intersegment transactions
Billions of yen
Years ended March 31
Aluminum Ingot and Chemicals
Aluminum Sheet and Extrusions
Fabricated Products and Others
Building Materials

14

0

2001

Billions of yen

2002

2003

2004

0

2005

As of March 31

%

2001

2002

2003

2004

2005

As of March 31

million). The principal reason for this increase was theincrease in taxable income because the deficit carriedforward of the Company was resolved. For the previous fiscal
year, deferred income tax amounted to ¥2.3 billion due toreversal of deferred tax assets in connection with offsettingof taxable income of the consolidated subsidiaries by theCompany’s deficit carried forward. For the fiscal year underreview, deferred tax assets amounting to ¥2.0 billion ($19
million) were reported by recognizing tax effects because it
became possible to reschedule temporary differences
concerning investments in certain consolidated subsidiaries.
Consequently, consolidated net income rose 17.0% from theprevious fiscal year to ¥13.5 billion ($126 million). The
average number of shares outstanding during the fiscal year
increased from 540,507,663 shares in fiscal 2003 to
542,106,572 shares in fiscal 2004. As a result, basic net
income per share of common stock was ¥24.78 ($0.23),
16.7% higher than for the previous fiscal year. Payment ofcash dividends of ¥3.5 per share of common stock, ¥1.0
higher than for the previous fiscal year, was approved by the
resolution of the ordinary general meeting of shareholdersof the Company held on June 29, 2005.
Assets, Liabilities and Shareholders’ Equity
Total assets decreased 1.1% from the end of the previous
fiscal year to ¥514.8 billion ($4,794 million). The decrease
was mainly attributable to the lower book value of land due
to early adoption of the accounting standards for
impairment of fixed assets and the Company’s efforts to
reduce assets, despite increases in notes and accounts
receivable-trade in line with the higher net sales.
Total liabilities decreased 4.6% from the end of theprevious fiscal year to ¥395.4 billion ($3,682 million),
mainly due to decreases in both short-term borrowings andlong-term debt. Interest-bearing debt decreased 9.2% to¥210.3 billion.
Minority interest in consolidated subsidiaries amounted
to ¥4.1 billion ($38 million), 8.4% higher than at the end of
the previous fiscal year. Shareholders’ equity rose 12.5% to¥115.3 billion ($1,073 million), due to an increase inretained earnings as a result of the higher net income.
Shareholders’ equity per share of common stock was¥212.63 ($1.98), an increase of 12.6%. The equity ratio was
22.4%, an improvement of 2.7 percentage points.
Cash Flows
Cash and cash equivalents at March 31, 2005, were ¥30.3
billion ($282 million), 12.8% lower than at the end of theprevious fiscal year.

Net cash provided by operating activities amounted to¥32.3 billion ($301 million), 37.9% higher. This increase
was attributable to reporting of a loss on impairment of fixed
assets, a loss on liquidation of a business and a decrease in
the amount of amortization of negative goodwill, which did
not accompany cash expenditure, and an increase inworking capital compared with the previous fiscal year,
which is the sum of increases in notes and accounts
receivable-trade and in inventories.
Net cash used for investing activities amounted to ¥14.1
billion ($132 million), having increased by 154.3%
compared with the previous fiscal year. This was mainly
owing to decreases in proceeds from sale of fixed assets andproceeds from sale of investment securities, an increase inpayments for purchase of fixed assets, and the fact that
whereas proceeds from the purchase of 100% equity of
Alcan Nikkei Siam Ltd. (present Nikkei Siam AluminiumLtd.) were reported in the previous year, no such cash
inflow was reported in the fiscal year under review.
Net cash used for financing activities was ¥22.7 billion($211 million), having decreased by 18.1%. This decrease
was mainly attributable to reporting of proceeds fromissuance of corporate bonds, whereas no proceeds fromissuance of corporate bonds were reported in the previous
fiscal year, and lower expenditure for redemption of
corporate bonds, despite decreases in short-termborrowings and long-term debt.
Outlook for Fiscal 2005
The business environment is expected to remain uncertainas sharp increases in the prices of raw materials andsupplies and monetary tightening in the United States andChina may cause the economy to lose momentum. The
aluminum industry in Japan forecasts lower growth inoverall demand in fiscal 2005. Although no certain
economic growth drivers are in evidence, the Company will
endeavor to increase sales and profits through the rigorous
implementation of streamlining measures, meticulous
response to customers, and the development and promotionof new products.
For fiscal 2005, the Company forecasts net sales of¥580.0 billion, ordinary profit of ¥22.0 billion and net
income of ¥11.0 billion on a consolidated basis. Net income
per share of common stock is expected to be ¥20.29. Yearend cash dividends are expected to be ¥4.0 per share ofcommon stock, ¥0.5 higher than for fiscal 2004.

Note: The above forecasts were revised and announced on August 3,
2004.

15

CONSOLIDATED BALANCE SHEETS
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
As of March 31, 2004 and 2005

Thousands of
U.S. dollars(Note 2)Millions of yen

ASSETS
2004
Current assets:
Cash and deposits (Notes 3 and 6) .............................................................. ¥ 35,564
Notes and accounts receivable—trade (Note 14) ....................................... 169,184
Inventories (Note 4) ...................................................................................
69,236
Deferred income taxes (Note 8) ..................................................................
5,413
Other current assets (Note 3) .....................................................................
13,347
Allowance for doubtful accounts .................................................................
(2,119)Total current assets ..................................................................... 290,625

2005

2005

¥ 30,800
171,743
69,7695,257
10,469(2,786)285,252$ 286,805
1,599,246
649,679
48,952
97,486(25,943)2,656,225

Fixed assets:
Property, plant and equipment (Note 6)—
Buildings and structures ........................................................................ 136,784
Machinery and equipment ..................................................................... 274,458
Land ......................................................................................................
64,722
Construction-in-progress .......................................................................
2,819
Accumulated depreciation ..................................................................... (296,221)
182,562

137,443
278,138
62,3693,424(301,760)
179,614

1,279,849
2,589,980
580,771
31,884(2,809,945)
1,672,539

3,935

3,895

36,27029,466
6,385
11,576(3,964)
43,463229,960

30,703
7,956
10,233(2,872)
46,020229,529

285,90274,085
95,288(26,743)
428,532
2,137,341

Total assets ................................................................................... ¥ 520,585¥514,781$4,793,566

Intangible fixed assets .................................................................................

Investments and other assets—
Investment securities (Notes 5 and 6) ...................................................
Deferred income taxes (Note 8) ............................................................
Other assets ...........................................................................................
Allowance for doubtful accounts ...........................................................
Total fixed assets .........................................................................

The accompanying notes are an integral part of these statements.

16

LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
Millions of yen
SUBSIDIARIES AND SHAREHOLDERS’ EQUITY
2004
2005
Current liabilities:
Short-term borrowings (Note 6) ................................................................. ¥ 96,628 ¥ 81,542
Current portion of long-term debt (Note 6) ................................................
43,25731,009Notes and accounts payable—trade ............................................................ 104,437
107,354
Income taxes payable...................................................................................
3,475
6,008
Other current liabilities ...............................................................................
44,00240,299Total current liabilities .................................................................... 291,799
266,212

Thousands of
U.S. dollars(Note 2)
2005

$ 759,307
288,751
999,665
55,946375,2592,478,928

Long-term liabilities:
Long-term debt (Note 6) .............................................................................
Accrued pension and severance costs—
for employees (Note 7) .........................................................................
for directors and statutory auditors .......................................................
Negative goodwill ........................................................................................
Other long-term liabilities (Note 8) .............................................................
Total long-term liabilities ................................................................

89,79796,491

898,51025,039
1,416
480
5,861
122,593

25,638
1,445
288
5,375
129,237

238,737
13,456
2,682
50,051
1,203,436

Minority interests in consolidated subsidiaries .......................................

3,735

4,050

37,713

Shareholders’ equity:
Common stock—
Authorized: 1,600,000,000 shares
Issued:543,350,370 shares .....................................................
Additional paid-in capital ............................................................................
Retained earnings (Note 9) .........................................................................
Revaluation surplus (Note 10) ....................................................................
Net unrealized gains on securities (Note 5) .................................................
Foreign currency translation adjustment .....................................................
Treasury stock, at cost
(1,028,654 shares in 2004 and 1,436,424 shares in 2005).........................
Total shareholders’ equity ................................................................

39,08524,56936,097
508
2,621
(289)

39,08524,56948,651
145
3,017
52

363,954
228,783
453,0311,350
28,094484(133)
102,458(237)
115,282(2,207)
1,073,489

Total liabilities, minority interest inconsolidated subsidiaries and shareholders’ equity ................... ¥ 520,585¥514,781$4,793,566

Contingent liabilities (Note 14)

17

CONSOLIDATED STATEMENTS OF INCOME
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2004 and 2005

Thousands of
U.S. dollars(Note 2)Millions of yen
2004

2005

Net sales ......................................................................................................... ¥ 532,201 ¥560,284
Cost of sales (Note 13) ................................................................................. 419,908
442,543
Gross profit .............................................................................................. 112,293
117,741
Selling, general and administrative expenses (Note 13) ........................
85,93887,181
Operating profit .......................................................................................
26,35530,560Non-operating income:Interest income ...........................................................................................
80
73
Amortization of negative goodwill ................................................................
1,409
192
Equity in earnings of associates ...................................................................
304—
Other ..........................................................................................................
3,484
2,829
Total non-operating income ..................................................................
5,277
3,094
Non-operating expenses:
Interest expense ..........................................................................................
5,438
4,335
Equity in losses of associates........................................................................
—
365
Amortization of transition obligation for employees retirement benefits (Note 7) ....
2,130
2,086
Other ..........................................................................................................
7,972
5,011
Total non-operating expenses ...............................................................
15,54011,797
Ordinary profit ........................................................................................
16,092
21,857
Special gains:
Gain on sale of investment securities (Note 5) ............................................
1,231
813
Gain on sale of fixed assets ..........................................................................
3,699
269
Total special gains ...................................................................................
4,930
1,082
Special losses:
Loss on impairment of fixed assets...............................................................
—
2,160
Loss on liquidation of business ....................................................................
—
1,200
Loss on devaluation of investment securities ................................................
1,914—
Total special losses .................................................................................
1,914
3,360
Income before income taxes and minority interests .........................
19,10819,579
Income taxes (Note 8)—current ...................................................................
4,562
7,500
—deferred .................................................................
2,309(2,042)
6,871
5,458
Minority interests in income of consolidated subsidiaries ....................
712
633
Net income ............................................................................................... ¥ 11,525 ¥ 13,488
Per share of common stock (Note 15):
Net income —basic .................................................................................... ¥—diluted .................................................................................
Cash dividends ............................................................................................ ¥The accompanying notes are an integral part of these statements.

18

2005

$5,217,283
4,120,896
1,096,387
811,817284,570680
1,788—
26,34328,81140,367
3,399
19,424
46,662
109,852
203,529
7,571
2,505
10,076
20,114
11,174—31,288
182,31769,839(19,015)50,824
5,895$ 125,598
U.S. dollars(Note 2)

Yen

21.24
—
2.50

¥
¥

24.78
23.83
3.50

$
$

0.23
0.22
0.03

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2004 and 2005

Millions of yen

Number ofshares issued

Balance at March 31, 2003: .......................
Net income ...............................................
Cash dividends .........................................
Directors’ and statutory auditors’ bonuses ...
Equity on revaluation gain for land of an
associate ...........................................
Net unrealized gains on securities (Note 5) ..
Foreign currency translation adjustment ..
Net increase in treasury stock ..................
Gain on sale of treasury stock ..................
Reversal of gain on sale of treasury stock
recorded by an associate due to thesale of its shares.................................
Balance at March 31, 2004: .......................
Net income................................................
Cash dividends ..........................................
Directors’ and statutory auditors’ bonuses
Transfer of revaluation gain for land of an
associate ...........................................
Net unrealized gains on securities (Note 5)
Foreign currency translation adjustment ...
Net decrease in treasury stock...................
Change in functional currency by a foreignsubsidiary of an associate...................
Inclusion in consolidation due to the merger
with an unconsolidated subsidiary .....
Balance at March 31, 2005 ........................

Commonstock

Additional
paid-in capital

Retainedearnings

543,350,370 ¥39,085 ¥24,680 ¥25,697
11,525(1,085)(40)

Net unrealized
Revaluation
gains onsurplussecurities

¥510

¥ 743

Foreigncurrencytranslation
Treasury
adjustment stock, at cost(¥505)(¥864)

(2)
1,878
216
731
345

543,350,370

39,085(456)
24,569 36,097
13,488(1,356)
(45)
363

508

2,621

(289)

(133)

(363)
396
341
(104)

70
34
543,350,370 ¥39,085 ¥24,569 ¥48,651¥145¥3,017¥ 52(¥237)

Thousands of U.S. dollars (Note 2)

Number ofshares issued

Balance at March 31, 2004: .......................
Net income ...............................................
Cash dividends .........................................
Directors’ and statutory auditors’ bonuses ...
Transfer of revaluation gain for land of an
associate ...........................................
Net unrealized gains on securities (Note 5) ..
Foreign currency translation adjustment ..
Net decrease in treasury stock ..................
Change in functional currency by a foreignsubsidiary of an associate...................
Inclusion in consolidation due to the merger
with an unconsolidated subsidiary .....
Balance at March 31, 2005 ........................

Commonstock

Additional
paid-in capital

Retainedearnings

Net unrealized
Revaluation
gains onsurplussecurities

Foreigncurrencytranslation
Treasury
adjustment stock, at cost

543,350,370 $363,954 $228,783 $336,130 $4,730 $24,406 ($2,691)
125,598(12,627)
(419)
3,380

($1,238)(3,380)
3,688
3,175
(969)

652
317
543,350,370 $363,954 $228,783 $453,031$1,350 $28,094$ 484($2,207)

The accompanying notes are an integral part of these statements.

19

CONSOLIDATED STATEMENTS OF CASH FLOWS
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2004 and 2005

Millions of yen
2004

Cash flows from operating activities:
Income before income taxes and minority interests .................................... ¥ 19,108
Depreciation and amortization ....................................................................
16,504
Amortization of negative goodwill ................................................................
(1,409)Loss on impairment of fixed assets...............................................................
—
Loss on liquidation of business ....................................................................
—
Gain on sale of fixed assets, net ...................................................................
(3,699)Gain on sale of investment securities ...........................................................
(1,231)
Loss on devaluation of investment securities ...............................................
1,914
Increase in accrued pension and severance costs .......................................
1,145
Interest and dividend income ......................................................................
(281)
Interest expense ..........................................................................................
5,438
Equity in (earnings) losses of associates ......................................................
(304)
Increase in notes and accounts receivable—trade ...................................... (11,479)
Increase in inventories ................................................................................
(264)
Increase in notes and accounts payable—trade ..........................................
4,829
Other ..........................................................................................................
957
Sub total ........................................................................................
31,228Interest and dividend income received ........................................................
403
Interest paid ................................................................................................
(5,409)
Income taxes paid .......................................................................................
(2,774)
Net cash provided by operating activities ................................
23,448Cash flows from investing activities:(Increase) decrease in time deposits ..........................................................
(182)
Payments for purchase of investment securities ...........................................
(335)
Proceeds from sale of investment securities ................................................
3,538
Payments for purchase of fixed assets ......................................................... (13,571)
Proceeds from sale of fixed assets ...............................................................
5,556
Decrease in long-term loans receivable .......................................................
176
Proceeds from purchase of consolidated subsidiary (Note 3) .....................
1,346
Other ..........................................................................................................
(2,084)
Net cash used for investing activities ........................................
(5,556)
Cash flows from financing activities:
Decrease in short-term borrowings .............................................................
(2,775)
Proceeds from long-term debt ....................................................................
28,380
Payments of long-term debt ......................................................................... (51,627)
Cash dividends paid by the Company ...........................................................
(1,082)
Cash dividends paid to minority interests ....................................................
(186)
Other ..........................................................................................................
(413)
Net cash used for financing activities ....................................... (27,703)
Effect of exchange rate changes on cash and cash equivalents .....................
(59)
Net decrease in cash and cash equivalents ..................................................
(9,870)Cash and cash equivalents at beginning of year ...........................................
44,651
Increase in cash and cash equivalents due to the merger
with an unconsolidated subsidiary..........................................................
—Cash and cash equivalents at end of year (Note 3) .................. ¥ 34,781

The accompanying notes are an integral part of these statements.

20

2005

Thousands of
U.S. dollars(Note 2)2005

¥ 19,579
16,591
(192)
2,160
1,200
(269)
(813)
—
591
(274)
4,335
365
(8,253)
(501)
3,867
3,370
41,756499(4,471)(5,439)32,345$182,317
154,493(1,788)
20,114
11,174(2,505)(7,571)—
5,503(2,551)40,367
3,399(76,851)(4,665)36,00931,381
388,826
4,646(41,633)(50,647)
301,192

337
(345)
1,071
(14,920)
461
74
—
(809)
(14,131)

3,138(3,213)
9,973(138,933)
4,293
689
—
(7,533)(131,586)(15,094)
41,964(47,418)(1,355)(358)(441)(22,702)12(4,476)34,781(140,553)
390,763(441,549)(12,618)(3,334)(4,107)(211,398)
112(41,680)
323,87528¥ 30,333

261$282,456

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

1. SIGNIFICANT ACCOUNTING POLICIES:(a) Basis of presenting financial statements —The accompanying consolidated financial statements of Nippon Light Metal Company, Ltd. (“the Company”) and its consolidated subsidiaries(together “the Companies”) are prepared in accordance with accounting principles and practices generally accepted in Japan, which are different
in certain respects as to application and disclosure requirements of International Financial Reporting Standards. The notes to the consolidated
financial statements include financial information which is not required under accounting principles and practices generally accepted in Japan,
but is presented herein as additional information. In addition, the consolidated statements of shareholders’ equity are not required in Japan, but
are also presented herein as additional information. The accompanying consolidated financial statements include certain reclassifications andmodifications for the purpose of presenting them in a form more familiar to readers outside Japan.
(b) Consolidation and investments in associates —The consolidated financial statements include the accounts of the Company and, with minor exceptions, companies substantially controlled by theCompany. All significant intercompany transactions and accounts are eliminated.
Investments in significant companies where the Company has significant influence over management (associates) are stated at cost plus theCompany’s share of undistributed earnings.
The difference between the cost and the underlying net equity of investments in consolidated subsidiaries or associates accounted for by theequity method has been allocated to identifiable assets based on fair market value at the date of acquisition. Any unassigned residual amount isrecognized as goodwill and deferred or amortized on a straight-line basis over the effective period, with the exception of minor amounts which arecharged to income in the year of acquisition.
(c) 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. Resulting gains and losses are included in the net income for the year.
Assets and liabilities of foreign subsidiaries and associates are translated into Japanese yen at the exchange rates prevailing at the balance sheet
date. Profit and loss accounts for the year are translated into Japanese yen using the average exchange rate during the year. The resulting
translation adjustments are accounted for as a component of “Shareholders’ equity”, except for the minority interest portion which is allocated to“Minority interests in consolidated subsidiaries”.
(d) Cash and cash equivalents —“Cash and cash equivalents” in the consolidated statements of cash flows comprise cash on hand, bank deposits available for withdrawal on
demand and short-term investments with an original maturity of three months or less and which represent a minor risk of fluctuation in value.
(e) Inventories —Inventories are principally stated at cost, determined by the moving-average method, except for costs related to construction-type-contracts which
are specifically identified.
(f) Financial instruments —i) Derivatives:
All derivatives are stated at fair value with changes in fair value being included in the net income of the year in which they arise, except forderivatives designated as hedging instruments (see iii Hedge accounting).
ii) Securities:
Securities held by the Companies are classified into ‘held-to-maturity debt securities’, ‘investments in equity securities issued by unconsolidated
subsidiaries and associates’ and ‘other securities’.
‘Held-to-maturity debt securities’ that the Companies intend to hold to maturity are stated at cost, after accounting for any premium or
discount on acquisition which is amortized over the period to maturity.
‘Investments in equity securities issued by unconsolidated subsidiaries and associates’ are accounted for using the equity method.
Exceptionally, investments in certain unconsolidated subsidiaries and associates are stated at cost because the effect of application of the equity
method would be immaterial.
‘Other securities’ for which market quotations are available are stated at fair value as of the end of the year with net unrealized gains or losses
being included as a separate component of shareholders’ equity, net of related taxes. Realized gains and losses on sales are determined using the
average cost method and are included in the net income for the year.
‘Other securities’ for which market quotations are not available are stated at cost, except as stated in the paragraph below.
In cases where the fair value of ‘held-to-maturity debt securities’, ‘investments in equity securities issued by unconsolidated subsidiaries andassociates’, or ‘other securities’ has declined significantly and such impairment of value is not temporary, such securities are written-down to fairvalue and the resulting losses are charged to income for the year.

21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSiii) Hedge accounting:
The Companies use derivatives to reduce the Companies’ exposure to the risk of fluctuations in foreign exchange rates, interest rates, and the priceof aluminum ingot in the market. Derivatives designated as hedging instruments by the Companies are principally forward exchange contracts,
interest rate swap contracts and aluminum ingot forward contracts. The related hedged items are trade accounts receivable and payable, long-termbank loans and sales or purchases of aluminum ingot. Thus, the Companies’ purchases of hedging instruments are limited to, at maximum, theamounts of the hedged items.
Gains or losses arising from changes in the fair value of derivatives designated as hedging instruments are deferred as an asset or liability andincluded in net income in the same period in which the gains and losses on the hedged items or transactions are recognized. The Companies 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 over the terms of the agreements in interest expense.
The Companies evaluate the effectiveness of their hedging activities by reference to the accumulated gains or losses on the hedging
instruments and the related hedged items from the commencement of the hedges.
(g) Allowance for doubtful accounts —The 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-collectable receivables is provided on an individual account basis.
(h) 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, principally, ranging from 2 years to 60 years for buildings and structures, and from 2 years to 22
years for machinery and equipment.
(i) Impairment of fixed assets —An accounting standard for impairment of fixed assets (“Opinion Concerning Establishment of Accounting Standard for Impairment of Fixed
Assets” issued by the Business Accounting Deliberation Council on August 9, 2002) and the implementation guidance for the impairment of fixed
assets (the Financial Accounting Standard Implementation Guidance No. 6 issued by the Accounting Standards Board of Japan on October 31,2003) were issued and are effective for fiscal years beginning on or after April 1, 2005 with early adoption permitted for fiscal years ending on orafter March 31, 2004.
The Company and its domestic subsidiaries adopted the new standard and the guidance for the annual consolidated financial statements fromthe year ended March 31, 2005. The standards require that fixed assets be reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset or asset group exceeds the sum of undiscounted future cash flows expected to result from thecontinued use and eventual disposal of the asset or asset group. An impairment loss is recognized in the income statement as the amount by which
the carrying amount of the asset exceeds its recoverable amount, which is the higher of net selling price at disposal or the discounted cash flows
from the continued use and eventual disposal of the asset.
As a result of adopting the new standard and guidance, income before income taxes and minority interests decreased by ¥2,160 million($20,114 thousand) compared to what would have been recorded under the previous accounting standard. In addition, accumulated impairment
losses are deducted directly from the related fixed assets.
(j) Accrued pension and severance costs —“Accrued pension and severance costs for employees” represent the estimated present value of projected benefit obligations in excess of the fairvalue of the plan assets, except for the unrecognized transition amount and unrecognized actuarial differences. The unrecognized transition
amount is amortized on a straight-line basis over 12 years and the unrecognized actuarial differences are amortized on a declining-balance basis
over 12 years from the year following that in which they arise, except for unrecognized costs in respect of retired employees who retired under the
early retirement program, which were fully amortized at the time of employees’ retirement.
“Accrued pension and severance costs for directors and statutory auditors” represents the estimated amount to be paid if all directors andstatutory auditors retired at the balance sheet date, based on the Company’s retirement rules.
(k) Lease transactions —Under Japanese accounting practices, finance leases are capitalized in principle. However, finance leases without an option to transfer ownership ofthe leased assets to the lessee may be accounted for as operating leases subject to appropriate footnote disclosure. Therefore, the Companies charge
or credit periodic lease payments and receipts to income as incurred.
(l) Income taxes —The income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants’ taxes and enterprise taxes.
The Company and its wholly-owned domestic subsidiaries use the Japanese consolidated taxation system.
The Company and its subsidiaries adopt the deferred tax accounting method. Income taxes are determined using the asset and liability
approach, whereby deferred tax assets and liabilities are recognized in respect of temporary differences between the tax basis of assets and liabilities
and those as reported in the financial statements.
22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On March 31, 2003, the Japanese National Diet approved various changes to the calculation of the statutory local enterprise tax for companies
with capital in excess of ¥100 million, effective from April 1, 2004. Under the amended legislation, the enterprise tax is the sum of three tax
components; a taxable income based component, a value added component and a capital based component, although there was only an “taxable
income based component” before the amendment.
In addition, the Company adopted the treatment of practical report No. 12 issued by Accounting Standards Board of Japan, resulting inenterprise tax being based on a value added component and a capital based component amounting to ¥720 million ($6,705 thousand) included in“Selling, general and administrative expenses”.
(m) Research and development costs and computer software —Research and development costs are charged to income as incurred. Expenditure relating to computer software developed for internal use ischarged to income as incurred, except in cases where it contributes to the generation of income or to future cost savings. In these cases, it iscapitalized and amortized using the straight-line method over its estimated useful life, which is no longer than 5 years.
(n) Appropriation of retained earnings —The company is required to obtain the approval of shareholders at an ordinary general meeting for appropriations of retained earnings inconformity with the Japanese Commercial Code. 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 fiscal year after
shareholders’ approval has been obtained.
(o) Net income and dividends per share —Basic net income per share of common stock shown in the accompanying consolidated statements of income is computed based on the weighted
average number of shares outstanding during the respective period.
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 related interest expense and net of tax.
Cash dividends per share, shown in the accompanying consolidated statements of income, represents dividends declared as applicable to therespective fiscal year.
(p) Reclassifications —Certain reclassifications of previously reported amounts have been made to conform with current classifications.
2. U.S. DOLLAR AMOUNTS:
The rate of ¥107.39 = U.S.$1, the approximate current rate prevailing on March 31, 2005, has been used for the purpose of presentation of the U.S.
dollar amounts in the accompanying consolidated financial statements. These amounts are included solely for convenience and are not computedin accordance with generally accepted translation procedure. Accordingly, they should not be construed as representations that the yen amounts
actually represent, or have been or could be readily converted, realized or settled in U.S. dollars at the rate or at any other rate.
3. CASH AND CASH EQUIVALENTS:
Reconciliation of “Cash and cash equivalents” to the accounts disclosed on the balance sheets at March 31, 2004 and 2005 is as follows:
Thousands of
U.S. dollars

Millions of yen
2004

Cash and deposits...............................................................................................................................
Time deposits with maturity in excess of 3 months..........................................................................
Cash equivalents included in “Other current assets” .......................................................................
Cash and cash equivalents.................................................................................................................

¥35,564(903)
120¥34,781

2005

2005

¥30,800(567)
100¥30,333$286,805(5,280)931$282,456

23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended March 31 2004, the Company acquired a share of Alcan Nikkei Siam Aluminium Ltd. (which changed its company name to
Nikkei Siam Aluminium Ltd. on December 1, 2003), which became a newly consolidated subsidiary. At the time of consolidation, the assets andliabilities and the proceeds from the purchase of the consolidated subsidiary were as follows:
Millions of yen
2004

Current assets ..................................................................................................................................................................
Fixed assets ......................................................................................................................................................................
Current liabilities ............................................................................................................................................................
Long-term liabilities........................................................................................................................................................
Negative goodwill ............................................................................................................................................................
Acquisition cost ........................................................................................................................................................
Payment in kind of investment securities for the acquisition .......................................................................................
Cash and cash equivalents held by a newly consolidated subsidiary(“proceeds from purchase of consolidated subsidiary”) .......................................................................................

¥2,821
1,227
(819)
(220)
(575)
¥2,434(¥2,434)¥1,346

4. INVENTORIES:
Inventories at March 31, 2004 and 2005 comprised the following:Thousands of
U.S. dollars

Millions of yen
2004

Finished products...............................................................................................................................
Work-in-process, including costs related to construction-type-contracts ........................................
Raw materials and supplies...............................................................................................................

¥21,945
35,346
11,945¥69,236

2005

2005

¥24,381
33,096
12,292¥69,769$227,032
308,185
114,462$649,679

5. INVESTMENT SECURITIES:(a) ‘Other securities’ with available market value —The aggregate cost, carrying amount and gross unrealized gains and losses of ‘other securities’ with available market values at March 31, 2004
and 2005 were as follows:
Millions of yen
2004

Equity securities....................................................................................................

Cost

Unrealized
gains

Unrealized
losses¥ 3,661¥ 3,661¥ 4,437¥ 4,437¥ 36¥ 36

Carrying
amount¥ 8,062¥ 8,062

Millions of yen
2005

Equity securities....................................................................................................

Cost

Unrealized
gains

Unrealized
losses¥3,703¥3,703¥5,127¥5,127¥15¥15

Carrying
amount¥8,815¥8,815

Thousands of U.S. dollars
2005

Equity securities....................................................................................................

24

Cost

Unrealized
gains

Unrealized
losses$34,482$34,482$47,742$47,742$140$140

Carrying
amount$82,084$82,084

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(b) Sale of ‘other securities’ —The realized gains and losses on the sale of ‘other securities’ during the years ended March 31, 2004 and 2005 were as follows:
Thousands of
U.S. dollars

Millions of yen
2004

Selling amount ..................................................................................................................................
Realized gains on sale .......................................................................................................................
Realized losses on sale .......................................................................................................................

2005¥ 2,857
1,231
—

2005

¥ 1,071
813
—

$

9,973
7,571
—

(c) ‘Held-to-maturity securities’ and ‘other securities’ without available market values —The carrying amounts of ‘held-to-maturity securities’ and ‘other securities’ without available market values at March 31, 2004 and 2005, were as
follows:
Thousands of
U.S. dollars

Millions of yen
2004(1) ‘Held-to-maturity securities’:
Domestic debt securities privately offered ..................................................................................
(2) ‘Other securities’:
Equity investments in non-public companies ...........................................................................
Other ...........................................................................................................................................

2005

2005

¥ 130

¥

117

11,33949¥11,518

11,505
72¥11,694$

1,089

107,133
670$108,892(d) Maturity of debt securities —The redemption schedules for maturity of debt securities at March 31, 2004 and 2005 are as follows:
Millions of yen
2004
Due within
one year

Debt securities:
Government and municipal bonds ......................................................................
Corporate debt securities.......................................................................................
Other......................................................................................................................

¥ 13
—
13
¥ 26

Due after one year, but Due after five years, but
within five years
within ten years

¥ 45
10
15
¥ 70

¥ 49
—
—
¥ 49

Due after morethan ten years

¥ 14
—
—
¥ 14

Millions of yen
2005
Due within
one year

Debt securities:
Government and municipal bonds ......................................................................
Corporate debt securities.......................................................................................
Other......................................................................................................................

¥12
—
—
¥12

Due after one year, but Due after five years, but
within five years
within ten years

¥47
10
25
¥82

¥36
—
—
¥36

Due after morethan ten years

¥12
—
—
¥12

Thousands of U.S. dollars
2005
Due within
one year

Debt securities:
Government and municipal bonds ......................................................................
Corporate debt securities.......................................................................................
Other......................................................................................................................

$112
—
—
$112

Due after one year, but Due after five years, but
within five years
within ten years

$438
93
233
$764

$335
—
—
$335

Due after morethan ten years

$112
—
—
$112
25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT:“Short-term borrowings” at March 31, 2005 bore interest at annual rates ranging from 0.590% to 3.000% and generally represented bank loans or
short-term notes maturing at various dates within one year.
“Long-term debt” at March 31 comprised the following:Thousands of
U.S. dollars

Millions of yen
2004

Loans, principally from banks and insurance companies due from 2004 to 2015
with interest rates ranging from 0.660% to 5.700%:
Secured........................................................................................................................................
Unsecured ...................................................................................................................................
Loans, principally from banks and insurance companies due from 2005 to 2014
with interest rates ranging from 1.100% to 5.600%:
Secured........................................................................................................................................
Unsecured ...................................................................................................................................
Secured 1.25% bonds due July 20, 2006, redeemable before due date .............................................
Unsecured 2.675% bonds due August 20, 2004, redeemable before due date ..................................
Zero coupon convertible bonds due September 30 2009, convertible currently at ¥350 .................
Capital lease obligations due from 2005 to 2029 with interest rates ranging from6.900% to 7.200% .............................................................................................................................
Capital lease obligations due from 2004 to 2029 with interest rates ranging from1.900% to 7.200% .............................................................................................................................
.............................................................................................................................................
Less: portion due within one year.....................................................................................................
Total long-term debt..........................................................................................................................

2005¥109,155
3,845

¥

2005

—
—

$

—
—

—
—
9,000
10,000—88,506
19,011
9,000—
10,000824,155
177,028
83,807—
93,118

—

983

9,153

1,054
133,054(43,257)¥ 89,797—
127,500(31,009)¥ 96,491—
1,187,261(288,751)$ 898,510

A summary of assets pledged as collateral for “Short-term borrowings” and “Long-term debt” at March 31, 2005 is as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and deposits............................................................................................................................................................ ¥60
Property, plant and equipment.......................................................................................................................................
98,100Investment securities.......................................................................................................................................................
354

$

559
913,493
3,296

The aggregate annual maturities of “Long-term debt” beyond March 31, 2005 are as follows:
Years ending March 31

Millions of yen

2006 ................................................................................................................................................................................. ¥ 31,009
2007 .................................................................................................................................................................................
35,2452008 .................................................................................................................................................................................
22,1242009 .................................................................................................................................................................................
17,0942010 .................................................................................................................................................................................
18,072
Thereafter ........................................................................................................................................................................
3,956¥127,500

26

Thousands of
U.S. dollars$ 288,751
328,196
206,015
159,177
168,284
36,838$1,187,261

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. RETIREMENT BENEFIT PLANS:The Company and its domestic subsidiaries have defined benefit tax qualified pension plans and a non-contributory plan covering substantially all
employees. Additional benefits may be granted to employees according to the conditions under which termination of employment occurs. Certain
foreign subsidiaries have defined contribution plans.
“Accrued pension and severance costs” as of March 31, 2004 and 2005 are analyzed as follows:
Thousands of
U.S. dollars

Millions of yen

Projected benefit obligations .............................................................................................................
Fair value of plan assets.....................................................................................................................
Unrecognized transition amount ......................................................................................................
Unrecognized actuarial differences...................................................................................................
Accrued pension and severance costs ................................................................................................

2004

2005

2005

(¥65,500)
19,333(46,167)
16,683
4,445(¥25,039)(¥64,995)
21,705(43,290)
14,597
3,055(¥25,638)($605,224)
202,114(403,110)
135,925
28,448($238,737)

The net pension costs related to retirement benefits for the years ended March 31, 2004 and 2005 were as follows:
Thousands of
U.S. dollars

Millions of yen
2004

Service costs........................................................................................................................................
Interest costs.......................................................................................................................................
Expected return on plan assets ..........................................................................................................
Amortization of transition amount ...................................................................................................
Amortization of unrecognized actuarial differences.........................................................................
Net pension and severance cost .........................................................................................................
*1¥ 3,420
1,420
(368)
*1
2,130
1,531
¥ 8,133

2005

2005

¥ 3,390
1,384
(410)
2,086
726
¥ 7,176$ 31,567
12,888(3,818)19,424
6,761$ 66,822

The above figure includes an amount of ¥38 million for the year ended March 31, 2004, in respect of employees who retired underthe early retirement program. These amounts were fully amortized at the time of the employees’ retirement.
Assumptions used in calculation of the above information were as follows:
2004

Discount rate ......................................................................................................................................
Expected rate of return on plan assets...............................................................................................
Method of attributing the projected benefits to periods of employee service....................................
Amortization of unrecognized actuarial differences.........................................................................
Amortization of transition amount ...................................................................................................

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

2005

2.5%
Mainly 2.5%
Straight-line basis
Mainly 12 years
12 years27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8. INCOME TAXES:
The Company and its domestic subsidiaries are subject to a number of different taxes based on income which, in aggregate, indicate a statutory
effective tax rate of approximately 42.0% and 40.7% for the years ended March 31, 2004 and 2005, respectively.
Tax losses can be carried forward for a five or seven-year period for offset against future taxable income.
Significant components of deferred tax assets and liabilities at March 31, 2004 and 2005 were as follows:
Thousands of
U.S. dollars

Millions of yen
2004

Deferred tax assets:
Accrued pension and severance costs ................................................................................................
Tax loss carry forwards ......................................................................................................................
Allowance for doubtful accounts .......................................................................................................
Accrued bonuses.................................................................................................................................
Loss on disposal of fixed assets ..........................................................................................................
Others ..........................................................................................................................................
Total gross deferred tax assets.............................................................................................
Valuation allowance...................................................................................................................
Total deferred tax assets, net of valuation allowance.........................................................
Deferred tax liabilities:
Unrealized gains on securities....................................................................................................
Valuation gain on subsidiaries...................................................................................................
Others ..........................................................................................................................................
Total gross deferred tax liabilities.......................................................................................
Net deferred tax assets ........................................................................................................................

2005

2005

¥ 9,511
11,339
1,499
2,383
1,828
8,929
35,489(21,561)
13,928¥10,212
6,992
4,016
2,487
1,420
9,202
34,329(18,194)
16,135$ 95,093
65,10837,39623,15913,22385,688319,667(169,420)
150,247(1,677)(708)(399)(2,784)¥11,144(2,072)(721)(446)(3,239)¥12,896(19,294)(6,714)(4,153)(30,161)$120,086

Reconciliation of the difference between the statutory tax rate and the effective income tax rate for the years ended March 31, 2004 and 2005 is
as follows:
2004

Statutory tax rate................................................................................................................................
Increase (decrease) in taxes resulting from:
Permanently non-deductible expenses ......................................................................................
Amortization of negative goodwill .............................................................................................
Impairment on investments in certain consolidated subsidiaries ............................................
Decrease in valuation allowance................................................................................................
Other ...........................................................................................................................................
Effective income tax rate ...................................................................................................................

2005

42.0%

40.7%

3.6
(3.1)
—
(4.7)
(1.8)
36.0%

2.4
(0.4)
(9.2)
(9.3)
3.7
27.9%

9. APPROPRIATIONS OF RETAINED EARNINGS:
The following appropriation was approved at the ordinary general meeting of shareholders of the Company held on June 29, 2005.

Cash dividends.................................................................................................................................................................

Millions of yen

Thousands of
U.S. dollars¥1,897$17,665

10. REVALUATION SURPLUS:
An equity associate of the Company revalued its land used for business purposes in accordance with the Land Revaluation Law. As a result of thisrevaluation, the Company recognized its portion of the associate’s revaluation surplus net of related taxes.

28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11. LEASE TRANSACTIONS:The Companies charge or credit to income periodic lease payments and receipts for finance leases that do not have options to transfer ownership ofthe leased assets to the lessee. Such periodic lease payments under finance lease contracts totaled ¥1,777 million and ¥1,732 million ($16,128
thousand), and receipts under finance lease contracts totaled ¥76 million and ¥82 million ($764 thousand), for the years ended March 31, 2004
and 2005, respectively. Future lease payments and receipts under the Companies’ finance leases and non-cancelable operating leases, including
amounts representing interest, at March 31, 2004 and 2005 are as follows:
Thousands of
U.S. dollars

Millions of yen

Lease payments:
Due within one year....................................................................................................................
Due beyond one year ..................................................................................................................
Lease receipts:
Due within one year....................................................................................................................
Due beyond one year ..................................................................................................................

2004

2005

2005

¥1,7594,925¥6,684¥1,984
6,783¥8,767$18,475
63,162$81,637

¥

¥

$

¥

73
19
92

95
32
¥ 127

885
298
$ 1,183

Leased assets under the Companies’ finance leases, where lessors retain ownership of leased assets, are accounted for as operating leases by theCompanies. If such leases had been capitalized, then the cost of the assets and the related accumulated depreciation at March 31, 2004 and 2005
would have been as follows:

Cost

Buildings and structures .......................................................................................
Machinery and equipment....................................................................................
Intangible fixed assets ...........................................................................................

¥

36
10,093171¥ 10,300

Cost

Buildings and structures .......................................................................................
Machinery and equipment....................................................................................
Intangible fixed assets ...........................................................................................

¥

36
12,588185¥12,809

Millions of yen
2004
Accumulated
depreciation

¥

13
3,789
96
¥ 3,898

Millions of yen
2005
Accumulated
depreciation

¥

21
4,099
59
¥4,179Net
amount

¥

23
6,304
75
¥ 6,402Net
amountThousands of
U.S. dollars
2005Netamount

¥

$

15
8,489
126
¥8,630140
79,0481,173$80,361

The depreciation amount for these leased assets computed using the straight-line method over the period of the leases would have been ¥1,777
million and ¥1,732 million ($16,128 thousand) for the years ended March 31, 2004 and 2005, respectively.
Fixed assets, excluding sub-leased assets, which are leased to other companies under finance leases without options to transfer ownership ofthe leased assets to the lessee at March 31, 2004 and 2005, were as follows:

Cost

Machinery and equipment....................................................................................

¥ 81

Cost

Machinery and equipment....................................................................................

¥186

Millions of yen
2004
Accumulated
depreciation¥ 51
Millions of yen
2005
Accumulated
depreciation

¥68

Net
amount¥ 30

Netamount¥118

Thousands of
U.S. dollars
2005Netamount$1,099The depreciation amount for these leased assets computed using the straight-line method over the period of the leases would have been ¥38
million and ¥66 million ($615 thousand) for the years ended March 31, 2004 and 2005, respectively.
29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. DERIVATIVES:
In the normal course of business, the Companies utilize various derivative financial instruments in order to manage the exposure resulting fromfluctuations in foreign currency exchange rates, interest rates and the prices of aluminum ingot in the market. The Companies do not hold or
issue derivative financial instruments for trading purposes.
At March 31, 2004 and 2005, there were no derivative financial instruments, except those instruments to which hedge accounting is applied.
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, 2004
and 2005 were ¥4,804 million and ¥5,538 million ($51,569 thousand), respectively.
14. CONTINGENT LIABILITIES:Contingent liabilities at March 31, 2005 for loans guaranteed and other guarantees (including construed guarantees) given in the ordinary course ofbusiness amounted to ¥17,046 million ($158,730 thousand), including ¥3,394 million ($31,604 thousand) shared by other joint guarantors,¥2,284 million ($21,268 thousand) for notes discounted, and ¥25 million ($233 thousand) for notes endorsed.
15. NET INCOME PER SHARE:
Reconciliation of the differences between basic and diluted net income per share for the years ended March 31, 2004 and 2005 is as follows:
Millions of yen

Thousands of shares

Yen

2004
Net income

Net income.............................................................................................................
Net income unavailable to common shareholders ..............................................
Basic net income ...................................................................................................

¥11,525(46)¥11,479
Millions of yen

Weighted
averageshares

540,508
Thousands of sharesNet
incomeper share¥21.24Yen

2005
Net income

Net income.............................................................................................................
Net income unavailable to common shareholders ..............................................
Basic net income ...................................................................................................
Effect of warrant ....................................................................................................
Diluted net income................................................................................................

¥13,488(53)¥13,435(4)¥13,431

U.S. dollars
2005

Weighted
averagesharesNet
incomeper shareNet
incomeper share

542,106
21,536563,642¥24.78$0.23¥23.83$0.22

16. SUBSEQUENT EVENTS:
On May 11, 2005, the Company acquired new shares (common stock : 3,250,000 shares, preferred stock : 130,000 shares) issued by Tokai Aluminum
Foil Co., Ltd. (“Tokai”) for an aggregate amount of ¥1,300 million ($12,106 thousand)(¥650 million ($6,053 thousand) each for common stock
and preferred stock), resulting in Tokai becoming a newly consolidated subsidiary with 53.4% shareholding, in order to enhance the comprehensive
strength of the Companies’ aluminum foil business.
Principal business of Tokai is production and sale of aluminum foil and related manufactured goods and annual net sales for the year ended March
31, 2005 was ¥13,983 million ($130,208 thousand) and total assets at March 31, 2005 was ¥10,266 million ($95,595 thousand).

30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. SEGMENT INFORMATION:
The Companies operate within four distinct industry segments, mainly in Japan: “Aluminum ingot and chemicals”, “Aluminum sheet andextrusions”, “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
for transport 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 general and administrative expenses and other expenses not specifically related to business segments.
Export sales and operations outside Japan are insignificant.
Information by industry segment for the years ended March 31, 2004 and 2005 is as follows:
Millions of yen
2004
Fabricatedproducts
Buildingand others
materials

Aluminumingot andchemicals

Aluminum
sheet andextrusions

Sales:
Customers............................................
Intersegment .......................................
Total.............................................
Operating expenses.....................................
Operating profit (loss)................................
Identifiable assets .......................................
Depreciation ...............................................
Capital expenditures...................................

¥ 82,851
52,681
135,532
130,805¥ 4,727¥ 94,899¥ 2,816¥ 3,618¥ 64,860
22,96287,822
84,155¥ 3,667¥ 71,366¥ 1,702¥ 1,657*1 Netting of corporate items …¥2,847 million*2 Netting of corporate items …¥20,480 million¥ 215,461
19,544
235,005
220,934¥ 14,071¥ 201,848¥ 5,150¥ 7,459

Millions of yen
2005
Fabricatedproducts
Buildingand others
materials

Aluminumingot andchemicals

Aluminum
sheet andextrusions

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

¥ 92,948
62,026
154,974
146,108¥ 8,866¥ 99,070¥ 2,856¥—¥ 3,007¥72,824
23,144
95,96890,183¥ 5,785¥69,689¥ 1,794¥—¥ 1,900*1 Netting of corporate items …¥2,924 million*2 Netting of corporate items …¥20,389 million

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

Aluminumingot andchemicals

Aluminum
sheet andextrusions$ 865,518
577,577
1,443,095
1,360,536$ 82,559$ 922,526$ 26,595$—$ 28,001$678,127
215,514893,641
839,771$ 53,870$648,934$ 16,705$—$ 17,693*1 Netting of corporate items …$27,228 thousand¥ 169,029
5,188
174,217
167,530¥ 6,687¥ 164,674¥ 6,746¥ 4,709¥219,802
19,871
239,673
224,790¥ 14,883¥201,252¥ 5,737¥ 2,130¥ 6,619¥174,710
4,413
179,123
175,055¥ 4,068¥156,853¥ 6,127¥30¥ 5,324

Thousands of U.S. dollars
2005
Fabricatedproducts
Buildingand others
materials$2,046,764
185,036
2,231,800
2,093,212$ 138,588$1,874,029$ 53,422$ 19,834$ 61,635

Eliminationor
corporate items¥

Consolidated—(100,375)(100,375)(97,578)*1(¥ 2,797)(¥ 12,202)*2
¥
90
¥
73

¥ 532,201—532,201
505,846¥ 26,355¥ 520,585¥ 16,504¥ 17,516

Eliminationor
corporate items

Consolidated¥—(109,454)(109,454)(106,412)*1(¥ 3,042)(¥ 12,083)*2
¥
77
¥
—
¥
123

¥560,284—
560,284
529,724¥ 30,560¥514,781¥ 16,591¥ 2,160¥ 16,973

Eliminationor
corporate items

Consolidated$1,626,874 $—$5,217,283
41,093 (1,019,220)—
1,667,967 (1,019,220)
5,217,283
1,630,087(990,893)*1 4,932,713$ 37,880 ($ 28,327) $ 284,570$1,460,592 ($ 112,515)*2 $4,793,566$ 57,054 $717$ 154,493$
280 $—$ 20,114$ 49,576 $1,145$ 158,050*2 Netting of corporate items …$189,859 thousand

31

REPORT OF INDEPENDENT AUDITORS32

OVERSEAS NETWORKOVERSEAS SUBSIDIARIES AND ASSOCIATES
North America
Nikkei North America
Aluminum Inc.
Ohio, U.S.A.
Phone: 1-330-463-5565
Trading and marketing(100%)

East Asia
Alcan Nikkei China Limited
Hong Kong, SAR, China
Phone: 852-2522-3001
Trading and marketing(51%)

Toyal America Inc.
Illinois, U.S.A.
Phone: 1-815-740-3037
Aluminum powder and paste(100%)

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

EuropeToyal Europe Société par
Actions Simplifiée
Accous, France
Phone: 33-5-59-983-535
Aluminum powder and paste(100%)

Nonfemet International(China-Canada-Japan)
Aluminium Co., Ltd.
Shenzhen, China
Phone: 86-755-2661-1569
Extrusion(18%)
NI Nikkei Shenzhen Co., Ltd.
Shenzhen, China
Phone: 86-755-2650-5656
Automobile components(55%)

Southeast Asia
Amalgamated Aluminium
and Alloys Sdn. Bhd.
Malaysia
Phone: 60-3-341-9500
Aluminum alloys(35%)
Daiki Nikkei Thai Co., Ltd.
ThailandPhone: 66-3821-4631
Aluminum alloys(35%)
Nikkei Siam Aluminium
LimitedThailandPhone: 66-2-529-0136
Aluminum sheet, foil
(100%)
Nikkei Singapore
Aluminium Pte. Ltd.
Singapore
Phone: 65-6222-8991
Trading and marketing(100%)(As of March 31, 2005)

33

DIRECTORS AND OFFICERS

Directors
Shigesato Sato

Officers
Shigesato Sato

President
Representative Director

President
Chief Executive Officer

Yoshisato Hiratsuka
Takashi Ishiyama
Shigeru Kohmura
Motoi Kobayashi
Tsuyoshi Nakajima
Makoto Fujioka
Kazuyuki Hasegawa
Masao Imasu
Yasuo Noda
Hidetane Iijima

Yoshisato Hiratsuka

Akira Kato
Tadakazu Miyauchi
Koji Ueno
Mitsuaki Asano
Yoshitaka Ohtsu

Executive Vice President
Senior Executive Officer

Shigeru Kohmura
Senior Executive Officer

Takashi Ishiyama
Senior Executive Officer

Motoi Kobayashi
AuditorsShozo Ueda
Koji Tajima
Seiichi Takeda

Senior Executive Officer

Tsuyoshi Nakajima
Executive Officer
Makoto Fujioka
Executive Officer
Koji Kawakami
Executive Officer
Toshikazu Wasa
Executive Officer
Mitsuru Ishihara
Executive Officer
Yoshiaki Kurihara
Executive Officer(As of September 1, 2005)

34

PROFILE

CORPORATE DATA

Since its foundation in 1939, Nippon Light Metal Company, Ltd. has been constantly
involved with aluminum. Today, Nippon Light Metal is Japan’s sole fully integrated aluminum manufacturer with activities ranging from alumina refining to fabrication ofvarious products.
Nippon Light Metal comprises four business segments: Aluminum Ingot andChemicals concerning the production of alumina and related chemicals and aluminum ingot; Aluminum Sheet and Extrusions involving the production of sheets andshapes; Fabricated Products and Others including the production of transportationrelated products, electronic materials, foil and powder; and Building Materials covering the production of residential and office building materials. Through thesesegments, 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.
The NLM Group—the preeminent source of products and services combining
aluminum’s excellent characteristics with new functionality and added value that caterto pressing customer needs—delivers customer satisfaction and contributes to environmental protection.
Contents
Consolidated Financial Highlights .............................................. 1
To Our Shareholders ................................................................. 2
Special Feature ......................................................................... 4
NLM Group Topics .................................................................... 7
Basic Stance on Corporate Governance ..................................... 8
NLM Group At a Glance ............................................................. 9
Review of Operations ................................................................ 10
Fact and Figures ........................................................................ 12
Financial Review ....................................................................... 14
Consolidated Balance Sheets ..................................................... 16
Consolidated Statements of Income ........................................... 18
Consolidated Statements of Shareholders’ Equity ...................... 19
Consolidated Statements of Cash Flows ..................................... 20
Notes to the Consolidated Financial Statements ......................... 21
Report of Independent Auditors ................................................ 32
Overseas Network ..................................................................... 33
Directors and Officers ............................................................... 34
Corporate Data ......................................................................... 35

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 andforeign exchange rates, as well as shifts in Japanese government policies and regulations. The Company cautions, therefore,that the projections and estimates contained herein involve risk and uncertainty, and that actual results could differ materially from those expressed or implied.
On the Cover:
1)Aluminum indoor spiral staircase, 2)aluminum extrusions, 3)aluminum coils, 4)E series refrigeration van (using Nikkei
Ecolas featured in Topics on Page 7)

Head Office

NYK Tennoz Building
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp
Phone: 81-3-5461-9333
Fax: 81-3-5461-9344
EstablishedMarch 30, 1939
Paid-In Capital¥39,085 million
Shares of Common Stock

Authorized: 1,600,000,000
Issued: 543,350,370

Asahi Mutual Life Insurance Co.
(2.8%)

Nikkei Logistics Co., Ltd.
Transport, warehousing *The Light Metal Educational
Foundation, Inc.
(2.7%)

Nikkei Extrusions Co., Ltd.
Aluminum extruded products(100%)

Namekawa Aluminium Co., Ltd.
(2.7%)

Nikkei Aluminium Core Technology
Co., Ltd.
Aluminum extrusions and fabricatedproducts(100%)

3

Nikkei-Keiyu-Kai(2.1%)
Mizuho Corporate Bank, Ltd.
(2.1%)

Nikkei Panel System Co., Ltd.
Panel for pre-fabricated freezer/refrigerator and cleanroom(100%)

Mizuho Trust employee pension trust
Mizuho Corporate accounts(1.6%)

Number of Shareholders

45,981
Stock Exchange Listings

Tokyo, Osaka and three otherdomestic stock exchanges
Transfer Agent of Common Stock

The Chuo Mitsui Trust & Banking Co., Ltd.

Major Domestic Subsidiaries

Shin Nikkei Co., Ltd.
Aluminum sashes, construction materials *1

Aluminium Wire and Rod Co., Ltd.
Aluminum rough drawing wire
(58.3%)

Nippon Fruehauf Co., Ltd.
Aluminum vans, trucks, trailers,
containers(66%)

Matsuo Industry Co., Ltd.
Aluminum castings and forgings *4June 29, 2005

Toyo Aluminium K.K.
Aluminum foil, powder and paste(100%)

Major Shareholders

Riken Light Metal Industrial Co., Ltd.
Aluminum construction materials *Last Shareholders’ Meeting(Ratio of Stock Holding)Japan Trustee Services Bank, Ltd.
(trust accounts)(12.6%)The Master Trust Bank of Japan, Ltd.
(trust accounts)(10.8%)
Nippon Life Insurance Co.
(Special Pension Account)(3.7%)The Dai-ichi Mutual Life Insurance Co.
(3.7%)NLM ECAL Co., Ltd.
Housing for cellular and mobile
telecommunications base stations(100%)

2

Nippon Electrode Co., Ltd.
Carbon for iron and steel blast furnaces
and for aluminum smelting, and othertypes of carbon(100%)*1 98%; Direct interest by NLM
2%; Interest held by Nikkei Sangyo Co., Ltd.
*2 98.5%; Direct interest by NLM
1.5%; Interest held by Nikkei Logistics Co., Ltd.
*3 46%; Direct interest by NLM
44%; Interest held by Shin Nikkei Co., Ltd.
10%; Interest held by Nippon Fruehauf Co., Ltd.
*4 99.1%; Direct interest by NLM
0.1%; Interest held by Nikkei Sangyo Co., Ltd.

Nikkei Sangyo Co., Ltd.
Aluminum welding rods, various kindsof contract work
(98.6%)
Nikkei Information System Co., Ltd.
Development, maintenance and operation of computer software(100%)(As of March 31, 2005)

35

NIPPON LIGHT METAL COMPANY, LTD. ANNUAL REPORT 2005

Nippon Light Metal Company, Ltd.

ANNUAL REPORTNYK Tennoz Building,2-20, Higashi-Shinagawa 2-chome

2005

Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp

Year ended March 31, 2005

Uses soybean ink inconsideration of the enviroment

100% recycled paper

Printed in Japan