FINANCIAL SECTIONCONTENTS

44 TWELVE-YEAR SUMMARY
46 MANAGEMENT’S DISCUSSION
AND ANALYSIS
52 BUSINESS RISKS
54 CONSOLIDATED BALANCESHEETS
56 CONSOLIDATED STATEMENTS
OF INCOME
57 CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME

58 CONSOLIDATED STATEMENTS
OF CHANGES IN NET ASSETS
59 CONSOLIDATED STATEMENTS
OF CASH FLOWS
60 NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
72 INDEPENDENT AUDITORS’ REPORT
73 CONSOLIDATED SUBSIDIARIESAND EQUITY-METHOD AFFILIATES
74 INVESTOR INFORMATION

For purposes of presentation, in this annual report, all amounts less than one billion yen or one million yen have been rounded down,
and hundredths of a percentage point have been rounded to the nearest whole number.

TOKYO GAS ANNUAL REPORT 2011

In addition, all graphs and tables represent fiscal years ended March 31 of the respective years.

43

TWELVE-YEAR SUMMARY
Years ended March 31

Millions of yen, except per share amounts

2011

2010

2009

2008

2007

¥ 1,535,242¥ 1,415,718¥ 1,660,162¥ 1,487,496¥ 1,376,958

1,137,077

1,046,166

Gas appliances and installation work

177,472

169,784

Other energies

221,292

157,297

Real estate

32,79732,784

162,302

161,690
1,257,574

1,087,044

999,521

Gas appliance sales

122,363132,236

135,407

Installation work

49,09457,32559,229For the Years
Net sales (Notes) 1, 5
City gas sales

Other
Gas sales

Real estate rental

35,63735,16934,034

Other business

363,783

320,361

285,407

Operating income

122,451

85,22965,20470,048

162,315

Net income

95,46753,781

41,70842,487

100,699

Comprehensive income

80,440————Depreciation*

149,336

146,117

141,083

142,421

133,142

Capital expenditures**150,202148,186

145,929

138,006

124,556

Free cash flow (Note) 2

94,601

51,71236,862

46,902

109,285

Amounts per share ofcommon stock (Yen)
Net income
Diluted net income (Note) 4
Net assets (Note) 3
Cash dividends applicable to the year

¥

35.63

¥

19.86

¥

15.63

¥

15.94

¥

37.50

—

—

15.37

15.50

35.69

320.70301.58284.72289.49293.11

9.00

9.00

8.00

8.00

8.00

At Year-End
Total assets¥ 1,829,661¥ 1,840,972¥ 1,764,185¥ 1,703,651¥ 1,692,635

Interest-bearing debt

584,169

555,919593,230

558,716

525,467

Total net assets

874,094

826,291

784,616

780,455

806,045

—

—

—

—

—

Operating income to net sales

8.0%

6.0%

3.9%

4.7%

11.8%

Net income to net sales

6.2%

3.8%

2.5%

2.9%

7.3%

ROE

11.4%

6.8%

5.4%

5.4%

13.2%

ROA

5.2%

3.0%

2.4%

2.5%

5.9%

Equity ratio

46.9%

44.2%

43.8%

45.1%

47.0%

Total shareholders’ equity

TOKYO GAS ANNUAL REPORT 2011

Ratios44

Notes:
1 Segment sales include intersegment transactions.
2 Free cash flow = net income + depreciation* – capital expenditures*** including amortization of long-term prepayments** purchases of property, plant and equipment + purchases of intangible assets + long-term prepayments
3 Effective from the year ended March 31, 2007, the Company and its consolidated subsidiaries have adopted the “Accounting Standard for Presentation of Net Assets in the
Balance Sheet” (Accounting Standards Board of Japan (ASBJ) Statement No.5; December 9, 2005) and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance
Sheet” (ASBJ Guidance No.8; December 9, 2005).
4 From the year ended March 31, 2010, diluted net income per share is not presented in the above table because there are no residual securities from the beginning of the fiscal year.
5 Effective from the year ended March 31, 2011, the Company and its consolidated subsidiaries have adopted the “Accounting Standard for Disclosures about Segments of an Enterpriseand Related Information” (ASBJ Statement No.17; March 27, 2009) and “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information”(ASBJ Guidance No.20; March 21, 2008). Segment sales for the year ended March 31, 2010, are reference values reclassified to conform to the current segment classification.

TWELVE-YEAR SUMMARY

2000

2006

2005

2004

2003

2002

2001

¥ 1,266,501¥ 1,190,783¥ 1,151,824¥ 1,127,633¥ 1,097,589¥ 1,086,770

910,320834,658

831,114

792,453

750,438

740,731

672,069

130,825

135,108

133,873

142,635

149,203

146,516

127,916

59,74664,794

68,03370,56871,337

71,90768,651

992,255

34,187

34,70135,44336,34637,55137,60137,841

252,595

234,720

172,160

158,326

156,011

159,577

158,819

112,345

145,349

152,287

123,294

110,607

103,659

69,233

62,114

84,04744,78759,201

51,911

27,595

26,698

—

—

—

—

—

—

—

136,376

140,271

146,895

141,027

145,564

150,374

140,306

119,435

107,529

107,441

111,988

105,296111,397

124,975

79,057116,789

84,241

88,24092,17866,57242,029

23.48

¥

31.47

¥

16.44

¥

21.18

¥

18.47

¥

9.82

¥

9.50

21.70

28.24

14.98

19.11

16.66

9.13

8.84

270.46244.73221.53208.65200.75

196.72172.33

7.00

7.00

7.00

6.00

6.00

6.00

5.00

¥ 1,693,898¥ 1,668,734¥ 1,666,828¥ 1,676,064¥ 1,702,712¥ 1,797,669¥ 1,805,086

559,911624,105

682,744731,301

775,894

870,347

957,085

—

—

—

—

—

—

—

728,231648,766

598,453

579,706

564,077552,790484,239

8.9%

12.2%

13.2%

10.9%

10.1%

9.5%

7.0%

4.9%

7.1%

3.9%

5.3%

4.7%

2.5%

2.7%

9.0%

13.5%

7.6%

10.4%

9.3%

5.3%

5.9%

3.7%

5.0%

2.7%

3.5%

3.0%

1.5%

1.5%

43.0%

38.9%

35.9%

34.6%

33.1%

30.8%

26.8%

TOKYO GAS ANNUAL REPORT 2011

¥

¥

45

MANAGEMENT’S DISCUSSION AND ANALYSIS

Summary
In the fiscal year ended March 31, 2011, gas sales volume
increased 7.9% year-on-year, to 14,745 million m3, owing
to the commissioning of new power generation facilities
and other factors.
The rise in gas sales volume, together with an increasein gas unit prices under the gas rate adjustment system,
pushed up sales of city gas. In addition, there was an increasein electric power sales stemming from the commencementof operations at the Ohgishima Power Station. Consequently,
net sales climbed 8.4%, to ¥1,535.2 billion. Operating
expenses grew 6.2%, to ¥1,412.7 billion, as increases incity gas raw materials costs were partly offset by a decline
in depreciation of pension actuarial difference. As a result,operating income jumped 43.7%, to ¥122.4 billion, and ordinary income rose 45.5%, to ¥121.5 billion. Net income forthe year surged 77.5%, to ¥95.4 billion, boosted by ¥39.7
billion in extraordinary income from the sale of land in Toyosu.
With respect to appropriations to shareholders, theCompany maintained its existing policy of a total payout ratioof 60%. This means the sum of cash dividends and share
repurchases will be at least 60% of net income for the year.

TOKYO GAS ANNUAL REPORT 2011

Operating Environment in the Year Under Review
Macroeconomic Conditions
In the fiscal year ended March 31, 2011, the Japanese economy, despite showing signs of a turnaround on the back of
economic recovery trends worldwide, remained in a difficult-to-predict state due to several factors. These included
ongoing stagnation in personal consumption, the rapid appreciation of the yen, and rising crude oil prices. Reflecting thissituation, demand for energy languished amid consumption
restraint and contraction in corporate activities. Due to moderate economic recovery, however, the gas sales volume
for general industry bottomed out after a period of decline
following the collapse of Lehman Brothers, and recovered
to around 90% of pre-collapse levels. The gas sales volume
for power generation use also rose significantly, owing tocommencement of operations at the Ohgishima Power
Station and increased utilization of power generation facilities following the Great East Japan Earthquake.

46

Influence of Fluctuating Oil Prices and Foreign
Exchange Rates on the Company’s Operations
The purchase price of LNG, which accounts for the majorityof the resources used in the Group’s core city gas business,
is linked to the Japan Customs-cleared Crude price (hereafter JCC). Under the gas rate adjustment system, the gas
resource costs for the city gas business are reflected in sales,
and the Company’s revenues and operating expenses are
significantly influenced by fluctuations in crude oil prices.
In the first half of the year under review, the JCC remainedin the US$75 to US$79 per barrel range. In the second half,
however, it rose to above US$90 in January 2011 and above
US$100 in March. For the full fiscal year, the average was
US$84.14 per barrel, up US$14.76 from the previous year.
In foreign exchange rates, the yen remained at a high level,
and the average yen-dollar exchange rate was ¥85.74 forthe full fiscal year, reflecting the yen’s appreciation of ¥7.15
compared with a year earlier.
As a result, the year’s trends in crude oil prices had theeffect of pushing up the Company’s LNG purchase priceand contributing to increases in sales and gas resource costs.
Prices of Crude Oil and LNG
US$/MMBtu

US$/barrel

18

120

15

100

12

80

9

60

6

40

3

20

0

0

10/4

5

6

7

8

9

10

11

12

11/1

2

3

12

11/1

2

3

All Japan LNG prices (Trade statistics) (left)
JCC prices (Trade statistics) (right)

Yen–Dollar Exchange Rate
Yen/US$

100

90

80

70

10/4

5

6

7

8

9

10

11

Analysis of the City Gas Business
Sales increased year-on-year across all sectors (residential,commercial and others, industrial, and wholesale).
Residential Sector
There was a decline in sales volume per customer due toa decrease in the number of household occupants and afocus on saving energy and economizing. By contrast, there
was increase in the number of customers, while cool temperatures at the beginning and end of the fiscal year helped
boost demand for hot water and indoor heating. Accordingly,
residential demand grew 2.4%, to 3,520 million m3.
Commercial and Others Sector
For the year, our commercial business was affected by customers’ focus on saving energy and economizing, as wellas ongoing stiff competition from electricity. However, hightemperatures in the summer helped boost demand for air
conditioning. As a result, commercial demand climbed
3.4%, to 3,042 million m3.
Industrial Sector
In addition to increased demand for power generation at
the Ohgishima Power Station, demand from general industry was buoyed by moderate economic recovery, while theGreat East Japan Earthquake also pushed up power generation demand. Consequently, industrial demand rose
14.5%, to 6,237 million m3.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Wholesale Sector
Thanks to increased demand from other gas utilities, wholesale supplies grew 5.8%, to 1,947 million m3.
As a result, the overall gas sales volume increased 7.9%,
or 1,079 million m3, to 14,745 million m3.
Gas Sales Volume by Sector (Years ended March 31)
Million m3, 45MJ/m3

16,000Analysis of Segments
City Gas Sales
Gas sales increased 8.7%, or ¥90.9 billion, year on year, to¥1,137.0 billion, due to higher gas sales volume and a risein gas unit prices under the gas rate adjustment system. At
the same time, there were increases in LNG prices andresource costs associated with the higher gas sales volume.
As a result, operating income in this segment rose 17.9%,or ¥20.6 billion, to ¥136.1 billion.
Gas Appliances and Installation Work
Sales in this segment grew 4.5%, or ¥7.7 billion, year on
year, to ¥177.4 billion, while operating income declined
14.3%, or ¥0.3 billion, to ¥1.8 billion.

12,000

8,000

4,000

07
Residential

08

09

Commercial and others

10

11

Industrial

Wholesale

Analysis of Income and Expenses
Sales increased for the first time in two years, while income
rose for the second consecutive year.
In the fiscal year under review, gas sales increased 8.7%, or¥90.9 billion, to ¥1,137.0 billion, due to higher gas unit prices
under the gas rate adjustment system and a 7.9% rise in gas
sales volume. As a result, total net sales rose 8.4%, or ¥119.5
billion, from the previous year, to ¥1,535.2 billion.
Despite a ¥19.5 billion decline in the retirement benefits
accounting actuarial difference burden, which was deducted from miscellaneous salaries, there was a ¥103.6 billion
increase in gas resource costs due to high crude oil prices.
Accordingly, operating expenses increased 6.2%, or ¥82.3
billion, to ¥1,412.7 billion. As a result, operating income
jumped 43.7%, or ¥37.2 billion, to ¥122.4 billion.
Ordinary income climbed 45.5%, or ¥38.0 billion, to ¥121.5 billion, as income from weather derivatives compensated for a ¥4.7
billion decline in foreign exchange gains of overseas subsidiaries.
Among extraordinary items, a ¥39.7 billion gain on thesale of land in Toyosu to the Tokyo Metropolitan Government
was included as extraordinary income. We also reported
extraordinary losses in the form of a ¥2.1 billion loss on valuation of available-for-sale securities and a ¥3.2 billion loss
on disaster associated with damage from the Great East
Japan Earthquake that occurred on March 11. Accordingly,
net income surged 77.5%, or ¥41.7 billion, to ¥95.4 billion.
Net Income and Net Income per Share(Years ended March 31)¥ billion

Real Estate
Sales in this segment remained mostly unchanged, at ¥32.7
billion. Operating income declined 15.1%, or ¥1.0 billion, to¥5.7 billion.
Other
This segment includes facility construction and engineering, information processing, shipping, and credit and leasing.
In the year under review, sales edged up 0.4%, or ¥0.7 billion, to ¥162.3 billion, and operating income jumped 52.5%,
or ¥3.5 billion, to ¥9.9 billion.
Business Results by Segment (¥ million)
Sales
Years ended March 31

City gas sales
Gas appliances andinstallation work
Other energies
Real estate
Other
Total
Adjustments
Consolidated

2010

2011

1,046,166

1,137,077

169,784
157,297
32,784
161,690
1,567,722(152,004)
1,415,718

177,472
221,292
32,797
162,3021,730,942(195,699)
1,535,242

¥

120

40

90

30

60

20

30

10

0

Sales figures for each segment include intersegment transactions.

TOKYO GAS ANNUAL REPORT 2011

0

Other Energies
This segment consists of energy services, LPG, electric
power, industrial gas, and other products and services. In
the year under review, segment sales increased 40.7%, or¥64.0 billion, year on year, to ¥221.2 billion, and operating
income jumped 62.4%, or ¥4.3 billion, to ¥11.1 billion. Within
this segment, the electric power sales posted a 150.3%, or¥42.2 billion, to ¥70.2 billion, owing to the commencementof operations at the Ohgishima Power Station. Operating
income surged 271.4%, or ¥4.4 billion, to ¥6.0 billion.

007
Net income (left)

08

09

10

Net income per share (right)

11

47

MANAGEMENT’S DISCUSSION AND ANALYSIS

Operating Income
Years ended March 31

City gas sales
Gas appliances andinstallation work
Other energies
Real estate
Other
Total
Adjustments
Consolidated

2010

2011

115,539

136,181

2,184
6,874
6,732
6,497
137,828(52,598)
85,229

1,872
11,166
5,713
9,907
164,841(42,389)
122,451

Operating income figures for each segment include intersegment transactions.

Contribution to Net Sales by Segment
Years ended March 31

2010

2011

City gas sales
Gas appliances andinstallation work
Other energies
Real estate
Other

66.7%

65.6%

–0.9 point

10.8%
10.0%
2.1%
10.3%

10.3%
12.8%
1.9%
9.4%

–0.5 point+2.8 points–0.2 point–0.9 point

TOKYO GAS ANNUAL REPORT 2011

Equity Ratio
Total equity increased 5.5%, or ¥45.1 billion, to ¥858.9 billion. This was due primarily to an increase in retained
earning stemming from net income, which outweighed¥25.5 billion in cash dividend payments. Because total
assets edged down 0.6%, or ¥11.3 billion, to ¥1,829.6 billion, the equity ratio rose 2.7 percentage points, to 46.9%.

ChangeFinancial Position
Assets
At fiscal year-end, total assets amounted to ¥1,829.6 billion, down 0.6%, or ¥11.3 billion, from a year earlier. Total
property, plant and equipment rose 1.0%, or ¥11.4 billion,to ¥1,120.2 billion, due mainly to an increase in power generation equipment associated with the inclusion of
Ohgishima Power Co., Ltd. into the scope of consolidation. Total intangible assets jumped 47.1%, or ¥13.2 billion,to ¥41.1 billion, due mainly to investments in software.
Total investments and other assets declined 14.7%, or¥39.4 billion, to ¥228.9 billion, due mainly to a decrease in
the balance of long-term loans receivable.
Total current assets edged up 0.8%, or ¥3.6 billion, to¥439.3 billion. Within this amount, other current assets
increased ¥25.0 billion, to ¥98.0 billion, and cash anddeposits fell ¥17.0 billion, to ¥90.3 billion.

48

Changes in Treasury Stock
In the fiscal year ended March 31, 2011, the Company purchased 14.03 million shares of treasury stock due to arequest by shareholders opposed to merger by absorptionof consolidated subsidiaries. Despite the cancellation of
19,568 thousand shares during the year, total treasury
stock rose 18.6%, or ¥0.4 billion, to ¥2.3 billion.

Liabilities
Total liabilities declined 5.8%, or ¥59.1 billion, to ¥955.5
billion. Total noncurrent liabilities were down 1.2%, or¥7.6 billion, to ¥646.7 billion. Within this amount, bonds
payable increased ¥10.0 billion, but provision for retirement benefits decreased ¥34.1 billion. Total current liabilities fell 14.3%, or ¥51.5 billion, to ¥308.8 billion.
Within this amount, notes and accounts payable —trade fell ¥58.8 billion, to ¥76.1 billion, and other current
liabilities rose ¥7.6 billion, to ¥133.2 billion.
Net Assets
Total net assets increased 5.8%, or ¥47.8 billion, to ¥874.0
billion. This was due mainly to ¥95.4 billion in net income,as well as a 7.6%, or ¥60.6 billion, rise in total shareholders’equity, to ¥859.9 billion, which outweighed ¥25.5 billion in
cash dividends paid and a ¥15.6 billion decline in total accumulated other comprehensive income.

Interest-Bearing Debt
In the year under review, total interest-bearing debt
increased 5.1%, or ¥28.2 billion, to ¥584.1 billion, due
primarily to an increase in capital investments. As aresult, the D/E ratio remained unchanged, at 0.68.
Credit Ratings
To secure financial flexibility in regard to liquidity on handand capital policy, and to secure access to financial
resources through the capital markets, the Company
believes that it is necessary to maintain its credit rating
at a certain level. Tokyo Gas has acquired ratings from
Moody’s, Standard & Poor’s (S&P), Rating andInvestment Information, Inc. (R&I), and Japan Credit
Rating Agency, Ltd. (JCR). As of March 31, 2011, the ratings were as follows.
Moody’s

Aa2High creditworthiness and very low credit risk to meet long-term obligations.

S&P

AA–

Very strong capacity to meet obligations.
Difference from the highest rating, AAA, issmall. (Plus and minus signs indicate relative standing within each rating category.)

R&I

AA+

Very high creditworthiness supported bysome excellent factors.

JCR

AAA

The highest level of capacity of the obligor to honor its financial commitment on
the obligation.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Capital Expenditures and Depreciation
Capital expenditures rose 1.4%, or ¥2.1 billion, to ¥150.2
billion. This was principally attributable to investments in
the Ohgishima Power Station, which commenced operations during the period. Similarly, depreciation was up 2.2%,
or ¥3.2 billion, to ¥149.3 billion.

Cash Flows from Financing Activities
Net cash used in financing activities was ¥7.2 billion,
compared with ¥69.3 billion used in the previous year.
Main factors included ¥40.0 billion in proceeds fromissuance of bonds (up ¥10.0 billion), ¥20.0 billion in theredemption of bonds (down ¥40.2 billion), and a ¥15.0
billion increase in commercial papers.

Total Equity and Equity Ratio (At March 31)¥ billion

%

1,000

50

800

40

600

30

400

20

200

10

0

0

07

08

09

10

11

Operating Cash Flow
Aiming to aggressively invest in the gas business to prepare for future growth in demand, Tokyo Gas has madeoperating cash flow a key management indicator andhas disclosed its allocation policy. Operating cash flow is
calculated by adding depreciation to net income.
Operating cash flow for the fiscal year ended March
31, 2011 amounted to ¥244.8 billion, a year-on-yearincrease of ¥45.0 billion. The higher figure reflects a¥41.7 billion increase in net income and a ¥3.2 billion
increase in depreciation.

Total equity (left)

Interest-bearing Debt and D/E Ratio (At March 31)¥ billion

Times

600

1.2

400

0.8

200

0.4

0

0

07

08

09

10

11

Interest-bearing debt (left)
D/E ratio (right)

Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities amounted to¥162.3 billion, down ¥131.8 billion from the previous
year. Main factors were a ¥52.5 billion decrease in notes
and accounts payable — trade (down ¥81.9 billion fromthe previous year), a ¥34.1 billion decrease in provision
for retirement benefits (down ¥64.2 billion), and a ¥39.8
billion gain on sales of noncurrent assets (down ¥39.5
billion). Main contrasting factors were ¥155.4 billion inincome before income taxes (up ¥71.9 billion) and a¥24.2 billion decrease in accounts receivable — other (up¥31.0 billion).
Cash Flows from Investment Activities
Net cash used in investment activities totaled ¥172.3 billion, compared with ¥177.2 billion used in the previous
year. Main components were ¥150.8 billion in the purchase of property, plant and equipment and intangible
assets (up ¥5.3 billion from the previous year), ¥21.7 billion in the purchase of investment securities (up ¥8.3 billion), and ¥3.1 billion in payments of long-term loans
receivable (down ¥14.7 billion).

Total Payout Ratio
Tokyo Gas has set an objective of a 60% total payout
ratio, which means to return 60% of net income toshareholders, as an indicator of its commitment toshareholder returns. Specifically, we define this new
indicator as the ratio of the sum of the income distributed as dividends funded by net income in FY n andshare repurchasing in FY n+1 to the net income in FY n.
In the fiscal year ended March 31, 2011, the Company
posted extraordinary income of ¥39.9 billion, due primarily to a gain on sales of noncurrent assets from the saleof land in Toyosu. Including this amount, the Company
maintained its existing policy of returning 60% of net
income to shareholders.
The Company plans dividends of ¥9.00 per share forthe fiscal year ended March 31, 2011, unchanged fromthe previous year, and share repurchases of ¥34.0 billion
in the fiscal year ending March 31, 2012. As a result, thetotal payout ratio for the fiscal year ended March 31,
2011 was 60.9%.
In regard to dividends, we maintained dividends at¥9.00 per share. In the future, our priority is to ensurestable dividends, with consideration for gradual increases over the long term and without reducing dividends.
With respect to share repurchases, our basic principle
is to cancel the shares. In the fiscal year ended March 31,
2011, we purchased treasury stock totaling ¥34.0 billion,
and we plan to cancel those shares at an early stage.
Millions of yen
Years ended March 31

2009

2010

2011

Net cash provided byoperating activities
159,561 294,110 162,345
Net cash used
in investment activities (163,575) (177,290) (172,305)
Net cash provided by(used in) financing
activities
30,932(69,375)(7,212)

TOKYO GAS ANNUAL REPORT 2011

Equity ratio (right)

49

MANAGEMENT’S DISCUSSION AND ANALYSISKey Management Indicators
ROA and ROE improve due to higher net income.
ROA
The average balance of total assets decreased, and net
income jumped 77.5% year-on-year, to ¥95.4 billion.
Accordingly, ROA improved 2.2 percentage points, to 5.2%.
ROE
The average balance of total equity increased, and net
income jumped 77.5% year-on-year, to ¥95.4 billion. As
a result, ROE improved 4.6 percentage points, to11.4%—the first double-digit result in four years.
TEP
Our goal is to generate profit in excess of capital costs.
This is reflected in our adoption of Tokyo Gas Economic
Profit (TEP: Net operating profit after tax prior to interest
payments minus the cost of capital) as one of our main
management indicators.
In the fiscal year ended March 31, 2011, Net
Operating Profit After Tax Prior to Interest Payments(NOPAT) increased ¥46.1 billion year-on-year, to ¥108.8
billion. The Weighted Average Cost of Capital (WACC)
remained unchanged, at 3.2%, and the cost of capitalincreased ¥0.7 billion, to ¥44.8 billion. Consequently,
TEP improved ¥45.4 billion, to ¥64.0 billion.
ROA and ROE (Years ended March 31)%

16

Forecast
We forecast an increase in sales, but a decline inincome in the fiscal year ending March 31, 2012.
In the fiscal year ending March 31, 2012, we expect consolidated net sales to increase 14.1%, or ¥216.8 billion, to¥1,752.0 billion; operating income to decline 53.5%, or¥65.4 billion, to ¥57.0 billion; and net income to fall 65.4%,
or ¥62.4 billion, to ¥33.0 billion.
In the fiscal year ended March 2011, ordinary income
was ¥121.5 billion, but in the year ahead we forecast a
decline of 57.2%, or ¥69.5 billion, to ¥52.0 billion. Principal
factors include a ¥61.1 billion year-on-year decline in nonconsolidated ordinary income of Tokyo Gas, a ¥12.2 billion
fall in ordinary income of consolidated subsidiaries, and a¥3.8 billion increase due to consolidated adjustments.
On a non-consolidated basis, Tokyo Gas is expected torecord a ¥61.1 billion year-on-year decline in ordinary income
compared with the year under review. Despite an expected
increase in sales stemming from high gas unit prices under thegas rate adjustment system, this will be surpassed by gas
resource costs, leading to a ¥27.5 billion decrease in gross profits on gas. The under-recovery of gas resource costs due to theslide time lag under the gas rate adjustment system is expected to push down profits by ¥26.7 billion. Although a decreasein miscellaneous expenses is expected, we also forecast a¥20.0 billion increase in operating expenses, due mainly tohigher miscellaneous salaries stemming from amortization of
the retirement benefit accounting actuarial differences.
Ordinary income of consolidated subsidiaries is projected to decline ¥12.2 billion, due primarily to the lower foreignexchange gains of overseas subsidiaries.
* The above forecasts are valid as of the date of the Company’s
consolidated financial results announcement for the fiscal year
ended March 31, 2011.

12

8

4

0

07
ROA

08

09

10

11

ROE

ROA = Net income / total assets(average of positions at start and end of fiscal year)
ROE = Net income / total equity(average of positions at start and end of fiscal year)

TEP (Years ended March 31)¥ billion

70
60
50

TOKYO GAS ANNUAL REPORT 2011

40

50

30

External Risks Affecting Business Activities
Gas Resource Purchase Price Fluctuation Risk
City gas supplied by Tokyo Gas is produced mainly from imported LNG. Since contracts are denominated in U.S. dollars,earnings are at risk from fluctuations in the yen-dollar exchange
rate. Also, the dollar-denominated LNG prices are linked to crude
oil prices on a sliding scale, which exposes the Company to risk
from changes in the international market price for crude oil.
Fluctuations in the cost of gas resources are passed on
to gas rates after at most five months under the “gas rateadjustment system.” Accordingly, in a single fiscal year there
can be under-recovery or over-recovery. However, over the
medium to long term, the effect on income is minimal.
The extent to which fluctuations in exchange rates andcrude oil prices will affect gross profit in the fiscal year ending March 31, 2012 is as follows.

20
10
0
-10

07

08

09

10

TEP = NOPAT – cost of capital (Invested capital x WACC)NOPAT: Net operating profit after tax prior to interest payments

11

Exchange rate: Approximately ¥1.5 billion down (up) withdepreciation (appreciation) of ¥1/dollar
Crude oil price: Approximately ¥1.2 billion down (up) withan increase (decrease) in crude oil price of US$1/barrel
In the fiscal year ended March 31, 2011, the average exchange
rate was ¥85.74 to one dollar, and the crude oil price averaged US$84.14 per barrel. Forecasts for the fiscal year ending
March 31, 2012 are based on an exchange rate of ¥85.00 to
one dollar and an average crude oil price of US$116.25 per

MANAGEMENT’S DISCUSSION AND ANALYSIS

Ordinary Income Plan for Fiscal Year Ending March 31, 2012: Analysis of Factors (Year on Year)Gas gross margin decreased(Slide time lag effect – ¥26.7 billion) – ¥27.5 billion• Net sales: +¥168.4 billion(Gas sales volume & composition – ¥9.2 billion,
Sliding +¥177.4 billion, Other +¥0.2 billion• Gas resource costs: – ¥195.9 billion(Amount & composition +¥6.5 billion, Sliding – ¥204.1 billion, Other +¥1.7 billion)

FY2010¥121.5 billion

FY2011 (forecast)¥52.0 billion

Tokyo Gas
(Non-consolidated)– ¥61.1 billion

Fixed costs increased – ¥20.0 billion• General expenses decreased: +¥2.7 billion(Costs for advertising for marketing +¥3.2 billion,
Consignment costs – ¥2.7 billion, Rental fee +¥1.4 billion, etc.)• Personnel expenses increased on pension actuarial difference: –¥21.4 billion(Pension actuarial differences – ¥22.6 billion (+¥19.9 billion– ¥2.7 billion))• Depreciation and amortization increased: – ¥1.3 billion and others(Acquisition of new facility)
Other operation/Supplementary income decreased – ¥8.3 billion
Appliance sales – ¥1.2 billion,
Electric power (resource costs increased) – ¥5.9 billion and others

Consolidated
subsidiaries– ¥12.2 billion

Internal offset, etc.
+¥3.8 billion

Non-operating income decreased – ¥5.2 billion(-) Decrease in dividends income – ¥3.0 billion, Increase in interest expenses
paid on bonds – ¥0.6 billion,
Interest expenses paid on loans – ¥0.5 billion and others

Eliminations of dividends income +¥2.0 billion and others

barrel (as of the announcement date of the consolidated financial results for the fiscal year ended March 31, 2011.)
In regard to the risk of fluctuations in the gas resource
purchase price, although there can be under-recovery orover-recovery in a single fiscal year under the gas rate adjustment system, the Company hedges a certain portion of thisrisk through LNG swaps. In regard to foreign exchange rate
fluctuations, meanwhile, the Company hedges a certain
portion of the risk through forward exchange contracts.
Temperature Fluctuation Risk
Temperatures affect the volume of city gas sales, which
account for around 70% of consolidated sales. In the residential sector, gas is used mainly for water heating and indoor
heating. Mild winter weather can erode revenues and income
by reducing the volume of gas sold. In the commercial andothers sector, gas is mainly used for air conditioning systems,
so if temperatures are low in the summer or high in the winter, such temperature fluctuations can erode revenues andincome by reducing the volume of gas sold.
The average temperatures in the fiscal year ended
March 31, 2011 were 23.0˚C in the first half of the year,
10.4˚C in the second half, and 16.7˚C for the whole year.
Forecasts for the fiscal year ending March 31, 2012 arebased on an average of 16.7˚C for the whole year.
To control the risk of temperature-related fluctuations
in earnings, the Company hedges a certain portion ofthat risk through weather derivatives.

Interest Rate Fluctuation Risk
The Company’s interest-bearing liabilities, both longand short-term, mostly carry fixed interest rates, so
there is only a very small interest rate fluctuation risk
during the term of an obligation. However, there may befluctuation risk when loans are refinanced.
Stock Price Fluctuation Risk
The equities held by Tokyo Gas are primarily those of its
necessary business partners, which are held with theobjective of fostering mutual growth. Among them,equities of publicly listed companies are subject to market risk. Tokyo Gas has established management policies and rules and regularly reviews the necessity ofequity holdings and their asset valuations for handling ofsuch equities.
Monthly Gas Sales Volume for the Fiscal Year Ended
March 31, 2011 (Non-consolidated)
Million m3, 45MJ/m3

1,500
1,200
900
600
300
0

Impact of 1ºC Temperature Rise on Overall Gas Sales Volume
Rate of change

Summer (June–September)
0.1%
Winter (December–March)–2.3%
Intervening months (April, May, October, November) –2.1%
Annual–2.1%

10/4 5Residential

6

7

8

9

10

Commercial and others11

12 11/1 2
Industrial

3

WholesaleTOKYO GAS ANNUAL REPORT 2011

Change– ¥69.5 billion

51

BUSINESS RISKS

Described below are items in the annual Yuho securities
report concerning the Company’s business results andfinancial condition that could have a significant influence
on investor decisions. Forward-looking statements are
based on the judgments of the Group as of the end of
the fiscal year (March 31, 2011).
1. Accidents and Disasters(1) Resource Procurement Supply Interruption Risk
Because Tokyo Gas relies on imports for the majority of its
natural gas and other city gas resources, supplier country
risk, accidents at fields or LNG liquefaction plants, accidents
involving LNG vessels in transit, restrictions on port entry
into Tokyo Bay, or other situations preventing the procurement of gas resources may disrupt the supply of naturalgas. The Company strives to disperse procurement risks,
thereby ensuring its ability to procure LNG in a stable andflexible manner, through supply diversification. These efforts
include importing LNG from six countries and through 10
projects and flexibly allocating its own LNG ships.

TOKYO GAS ANNUAL REPORT 2011

(2) Natural Disaster Risk
Tokyo Gas engages in facility-dependent businesses
because city gas production and supply facilities are thefoundation of its business. The Company therefore enforces
measures to minimize the aftermath of natural disasters.
Some such measures include making facilities earthquakeproof to permit uninterrupted production and supply of city
gas even in the event of large-scale earthquakes of a magnitude equivalent to the Great Hanshin-Awaji Earthquake;taking emergency measures to prevent secondary disasters; preparation of a business continuity plan (BCP) thattakes into account large-scale earthquakes such as are
assumed by Japan’s Cabinet Office; the improvement ofcontingency plans; and regular drills for natural disasters
including earthquakes, typhoons, and tsunami. Despite suchmeasures, major natural disasters may cause damage to
LNG terminals and other production facilities or pipelines
and other supply facilities and disrupt the supply of city gas.
Costs accompanying recovery efforts could affect revenues.

52(3) City Gas and Electricity Production/Supply
Accidents or Supply Disruption
The production and supply of city gas and electricity that isessential to the life of customers and industry is the core of
the Company’s business activities. For this reason, Tokyo
Gas is implementing measures to prevent accidents and supply-side impairments through the systematic implementationof various security measures—including the formulation ofbusiness continuity plans to prepare for major interruptions
or accidents affecting gas supply—as well as the preparation of emergency response plans and the execution of regulardrills. However, large-scale leakages, explosions, or supply
difficulties in the process of city gas production or supply could
result not only in direct damages but also in tangible and intangible losses, including social responsibility. Remedying power
supply impairments may result in additional losses.
(4) Ensuring the Safety of City Gas and Quality
Problems Affecting Gas Equipment
Tokyo Gas has a responsibility to ensure the safe supply ofcity gas. Accordingly, the Company has in place safety measures that include reinforcing periodic customer safety checks,
increasing the number of categories included in checks, andencouraging upgrades to safer appliances. Tokyo Gas sells

gas appliances and other equipment under the Tokyo Gas
brand through consolidated subsidiaries and related companies and promotes the development of gas applianceswith enhanced safety features. Nevertheless, costs accompanying responses to accidents caused by city gas supply,
appliances, or other equipment could affect future earnings,
and other direct and indirect losses could result.
(5) Damage to Reputation Resulting from City Gas
Accidents Caused by Other Gas Companies
Accidents involving city gas supply by other gas companies
could have a serious effect on the reputation of the city gas
industry as a whole. This could result in tangible and intangible losses.
2. Market Risks(1) Market Price and Interest Rate Fluctuation Risks
Tokyo Gas might incur losses in the event of fluctuations
in market prices of Company-owned real estate, stocks,
pension assets, or other assets. In addition, interest rate
fluctuations could raise the Company’s interest burden.
However, as most of its interest-bearing debts are longterm, fixed-rate debts, Tokyo Gas expects the impact ofinterest rate fluctuations to be minimal.
3. Risks Accompanying Business Execution(1) Risks Faced by Existing Business
A. Changes in procurement costs
Changes in terms of contracts and negotiations with suppliers of LNG, from which city gas is produced, may affectprofitability. Also, as LNG and crude oil prices are linked,
and as crude oil sales contracts are denominated in U.S.
dollars, changes in crude oil prices and fluctuations in yendollar exchange rates can impact profitability.
Furthermore, if demand increases more than the amountprocured through LNG projects based on long-term contracts,
or trouble occurs at a shipping terminal or during transportation, or there are delays of LNG supply by new projects,
revenues may be affected by the cost of procuring spot LNG.
On the other hand, under the provisions for adjusting gas
rates to reflect resource costs, fluctuations in gas resource
prices are reflected in rates within five months at maximum.
However, if such fluctuations exceed 160% of the standard resource price, the excess amount cannot be collected.
In the event that such changes are reflected in gas rates
beyond the fiscal term, the bottom line may be affectedduring the following fiscal term as a result of the underrecovery or over-recovery of gas resource costs.
B. Decline in gas sales volume due to weather fluctuations
As sales of city gas accounts for approximately 70% of Groupsales, particularly hot summer and unseasonably warm winterweather can cause fluctuations in residential sales of gas used
to supply hot water and heating, as well as commercial and others sales to air condition buildings, thereby affecting revenues.
C. Decline in demand due to intensified competition
Tokyo Gas strives aggressively to enhance its sales activities
through such measures as introducing gas appliances that areenvironmentally conscious, efficient and convenient.
Nevertheless, the Company may face falling demand owing
to increasing competition with electric utilities and major companies entering into the gas business, as well as the possible
loss of LNG competitiveness against other energy sources due
to crude oil price fluctuation. Such factors may affect revenues.

BUSINESS RISKS

E. Delay in the development of new technology
Although the Group is developing new products and technologies with enhanced environmental designs and a highlevel of safety, it may not be able to develop and deliver theseproducts and technologies in a timely manner. This situation
could cause competitiveness to fall in comparison with otherforms of energy, and affect the Group’s execution of business.
F. Changes in laws, regulatory systems, or energy policies of the national governments or local governments
Tokyo Gas manages its operations in compliance with the
Gas Utility Industry Law, the Companies Act, the Financial
Instruments and Exchange Act, and other laws, regulations,and institutions, as well as the energy policies of the national and local governments. Any revisions to these laws,
regulations, institutions, or policies that prove detrimental
to the Tokyo Gas Group may affect business performance.
(2) Delayed Cultivation of New Markets
As described in its medium-term management plan, theCompany is cultivating new markets by promoting the adoption of the “ENE-FARM” residential fuel cell and new energy
systems incorporating solar light and heat. However, subsequent changes in the operating environment, includingchanges in energy policy by national or local governments,
could delay this cultivation, compel a change in businessstrategy and prevent the recovery of investment.
(3) Inability to Recover Investments
Tokyo Gas makes large ongoing investments in keepingwith the goal of “advancing and developing the integrated
energy business strategy” expressed in its medium-term
management plan. The Company evaluates profitability andrisks of all investments, capital contributions, loans, and debt
guarantees at the Investment Evaluation Committee, andmakes investment decisions based on a conclusion fromthe committee while consulting with the management council and the Board of Directors’ meeting, if necessary, froma standpoint of comprehensive management judgment. The
targets of these investments include construction of pipelines
and reinforcement of foundations for stable supply throughthe construction of LNG terminals and other facilities, the electric power and energy service businesses, development ofgas fields overseas, the LNG transport business, and IT andother elements required for ongoing business, as well as investment related to the use of owned real estate. Changes in theeconomic situation could render it impossible to recover theseinvestments or to benefit from their intended effects, consequently affecting the Company’s balance of payments.
4. Risks Related to Information Management
and System Operation(1) Outflows of Personal Information
To conduct its business as a public utility, Tokyo Gas collects
and manages personal information on its customers. The
Company has implemented measures to prevent leakage of

personal information by constructing a groupwide information
security system, conducting training on information security,and voluntarily monitoring such information. The Group also
performs internal audits to ensure proper construction andoperational status. Outflows of customers’ personal information despite these efforts may result in direct costs to remedy
the situation, as well as tangible and intangible losses, including damage to the trust of customers and other parties, withmore serious consequences than for other companies.
(2) Failure or Malfunctioning of IT Backbone Systems
Because the Group relies on IT systems for customer service and the calculation of gas rates, it has implemented
measures to minimize the impact on operations of unexpected events. Tokyo Gas employs a robust data centerwith superior fault resilience and disaster tolerance. The
Company also prepares and implements various security
measures and regular drills to ensure stable operation of
the systems. The shutdown or malfunction of these systems could delay customer response, as well as cause
tangible and intangible losses, such as reputational loss.
However, such IT system malfunctions are unlikely tohave any serious impact on the production and supply ofcity gas because the IT system for adjusting the production
and supply of city gas has its independent security measures in place. These include a backup system and wirelessnetwork operated by the Group.
(3) Interruption of Communication with Call Centers
Most communications between Tokyo Gas and its customers
take place via call centers. Interruptions to telephone service
to call centers would disrupt service to customers over wide
areas, and could incur serious tangible and intangible losses,
including damage to the Tokyo Gas Group’s brand image.
5. Risks Related to Corporate Social Responsibility(1) Response to New Environmental Regulations
The need to comply with new environmental laws or additional obligations to improve the environment might affectbusiness operations, and it could affect revenues.
(2) Compliance Violations
As compliance is fundamental to its operations, the Group has
established the Management Ethics Committee, chaired by
the president. This committee sets out the basic policies underwhich the Group executes actions to improve compliance.
Internal audits help ensure a full understanding of the Group’s
compliance with laws and regulations, corporate ethics, andsocial norms, and confirm the status of such compliance. Any
violations of laws, rules, and regulations or inappropriate responses to information disclosure or any action which contravenes
corporate ethics or social norms that occur despite these efforts
may result in direct costs to remedy the situation, as well as intangible and intangible losses, including social sanctions.
(3) Inadequate Customer Satisfaction or Responses
to Customer Needs
The Group considers customer satisfaction a key management
priority. Accordingly, the Group is pursuing a CS improvement
program under the basic policies set out by a CS improvement
committee chaired by the president. Inadequate customer satisfaction or inappropriate customer service may result in declining
corporate competitiveness and in tangible and intangible losses, including damage to the Tokyo Gas Group’s brand image.

TOKYO GAS ANNUAL REPORT 2011

D. Decline in existing demand
Decreased facility utilization due to economic recession,
the advancement of energy conservation activities, changes
in industry structure, or other factors may result in a partial
decrease in existing gas demand in the industrial and commercial sectors. Also, smaller families, changes in lifestyles,
the penetration of energy-saving appliances, and other factors may reduce demand from the residential sector.

53

CONSOLIDATED BALANCE SHEETSMarch 31, 2011 and 2010

Thousands of
U.S. dollars (Note 1)

Millions of yen

Assets

2010

2011

2011

¥ 186,467¥ 180,446$ 2,174,048

475,932

461,1095,555,530

Noncurrent assets
Property, plant and equipment (Note 11)
Production facilities
Distribution facilities (Note 3)Service and maintenance facilities (Note 3)

59,16962,149748,783

Other facilities (Notes 3 and 15)

295,494318,239

3,834,205
5,386

Inactive facilities

742

447

91,037

97,8501,178,916

1,108,843

1,120,243

13,496,904

Goodwill

1,460

1,198

14,434

Other (Note 15)

26,51739,944

481,253

27,977

41,143495,699

Investment securities (Notes 3, 5 and 6)

139,052

137,456

1,656,096

Long-term loans receivable (Note 3)

40,996

21,340257,108

Deferred tax assets (Note 10)

53,08739,085

470,904

Other

36,35031,928384,675

Construction in progress
Total property, plant and equipment

Intangible assets

Total intangible assets

Investments and other assets

Allowance for doubtful accounts(1,130)(909)(10,952)

268,357

228,900

2,757,831

1,405,178

1,390,286

16,750,434

Cash and deposits (Notes 3 and 13)

107,391

90,302

1,087,976

Notes and accounts receivable — trade156,398

160,128

1,929,253

Lease receivables and lease investment assets (Note 15)25,88826,789322,759

Merchandise and finished goods

3,291

3,591

43,265Work in process

16,388

8,937

107,675

Raw materials and supplies

37,41236,451

439,169

Deferred tax assets (Note 10)

16,606

15,624

188,241

Other (Note 3)

73,03498,096

1,181,880

Total investments and other assets
Total noncurrent assets

Current assets

TOKYO GAS ANNUAL REPORT 2011

Allowance for doubtful accounts

54

Total current assets
Total assets
Accompanying notes are an integral part of these financial statements.

(619)

(546)

(6,578)435,794439,374

5,293,663¥ 1,840,972¥ 1,829,661$ 22,044,108

CONSOLIDATED BALANCE SHEETS

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and net assets

2010

2011

2011

¥ 301,491¥ 311,492$ 3,752,916

186,681

188,2392,267,940

4,448

17,330208,795

Noncurrent liabilities
Bonds payable (Notes 5 and 7)
Long-term loans payable (Notes 3, 5 and 7)
Deferred tax liabilities (Note 10)
Provision for retirement benefits (Note 9)

130,903

96,8701,167,108

Provision for gas holder repairs

3,597

3,565

42,952

Provision for safety measures

184

—

—

Asset retirement obligations

—

3,679

44,32527,012

25,535

307,651

654,319646,713

7,791,723

Current portion of noncurrent liabilities (Notes 3, 5 and 7)

53,456

48,765587,530

Notes and accounts payable — trade134,946

76,180917,831

Short-term loans payable (Note 7)

11,34817,825

214,759

Income taxes payable

34,94532,795395,120

8

6

72

Other
Total noncurrent liabilities
Current liabilities

Deferred tax liabilities (Note 10)
Asset retirement obligations
Other (Note 3)
Total current liabilities
Total liabilities

—

77

928

125,656

133,2031,604,855

360,362

308,853

3,721,120

1,014,681

955,567

11,512,855

Net assets (Note 12)
Shareholders’ equity
Capital stock*141,844

141,844

1,708,964

Legal capital surplus

2,065

2,065

24,880Retained earnings

657,387

718,439

8,655,892

Treasury stock**(1,986)(2,355)(28,373)

799,310

859,994

10,361,373

Valuation difference on available-for-sale securities

20,175

14,788178,169

Deferred gains or losses on hedges

1,690

1,145

13,795

Foreign currency translation adjustment(7,290)(17,008)(204,916)

Total accumulated other comprehensive income

14,575(1,073)(12,928)

Minority interests

12,404

15,174

182,819

Total net assets

826,291874,094

10,531,253¥ 1,840,972¥ 1,829,661$ 22,044,108

Total shareholders’ equity

Total liabilities and net assets***

Capital stock
Common stock
Authorized: 6,500,000,000 shares
Issued: 2,684,193,295 shares as of March 31, 2011 / 2,703,761,295 shares as of March 31, 2010
Treasury stock: 5,899,491 shares as of March 31, 2011 / 5,062,893 shares as of March 31, 2010TOKYO GAS ANNUAL REPORT 2011

Accumulated other comprehensive income

55

CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 2011 and 2010

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net sales (Note 14)

2010

2011

2011

¥ 1,415,718¥ 1,535,242$ 18,496,892

Cost of sales

854,231974,781

11,744,349

Gross profit

561,487

560,460

6,752,530

Supply and sales expenses

403,671374,919

4,517,096

General and administrative expenses

72,58663,090760,120476,257

438,009

5,277,217

85,229122,451

1,475,313

Interest income

1,112

1,215

14,639Dividends income

1,091

1,541

18,566Equity in earnings of affiliates

3,796

3,605

43,434Foreign exchange gains

6,175

2,421

29,169Selling, general and administrative expenses

Total selling, general and administrative expenses
Operating income
Non-operating income

Miscellaneous income

8,450

8,111

97,723

20,626

16,895203,554

Interest expenses

10,303

9,689

116,735

Adjustments of charges for construction of distribution facilities

3,186

2,361

28,446

Miscellaneous expenses

8,845

5,747

69,241

22,336

17,798214,434

83,519121,548

1,464,434

Gain on sales of noncurrent assets—

39,927

481,048

Gain on sales of investment securities

—

726

8,747

—

40,653489,795

Total non-operating income
Non-operating expenses

Total non-operating expenses
Ordinary income
Extraordinary income

Total extraordinary income
Extraordinary losses
Impairment loss—

834

10,048Loss on disaster

—

3,268

39,373

Loss on valuation of investment securities

—

2,100

25,301

Product compensation extraordinary expenses

—

503

6,060

Total extraordinary losses

—

6,707

80,807

Income before income taxes

83,519155,494

1,873,422

Income taxes — current

43,41927,522

331,590

Income taxes — deferred(14,552)

31,901

384,349

Total income taxes

28,86659,424

715,952

54,652

96,0701,157,470

871

603

7,265

95,467$ 1,150,205

Income before minority interests
Minority interests in income
TOKYO GAS ANNUAL REPORT 2011

Net income

56¥

53,781¥Yen

U.S. dollars (Note 1)

2010

2011

2011

Amounts per share of common stock
Net income
Cash dividends applicable to the year

¥

19.86
9.00

¥

35.63
9.00

$

0.43
0.11

Accompanying notes are an integral part of these financial statements.
From the fiscal year ended March 31, 2011, the Company and its consolidated subsidiaries have applied the “Accounting Standard for Presentation of Comprehensive Income”(ASBJ Statement No.25; June 30, 2010). The said Accounting Standard was not applicable for the previous fiscal year ended March 31, 2010. However, income before minority
interests is shown for the sake of reference.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended March 31, 2011 and 2010

Thousands of
U.S. dollars (Note 1)

Millions of yen

2010
Income before minority interests¥

54,652

2011

2011
¥

96,070$ 1,157,470

8,769(5,375)(64,759)

771

(604)

(7,277)

5,065(7,095)(85,482)

Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income

258(2,554)(30,771)

14,865(15,630)(188,313)

69,51780,440969,157

68,58479,818

961,663

Comprehensive income attributable to:Shareholders
Minority interests

¥

932

¥

622

$

7,494

Accompanying notes are an integral part of these financial statements.
From the fiscal year ended March 31, 2011, the Company and its consolidated subsidiaries have applied the “Accounting Standard for Presentation of Comprehensive Income”(ASBJ Statement No.25; June 30, 2010).

TOKYO GAS ANNUAL REPORT 2011

The said Accounting Standard was not applicable for the previous fiscal year ended March 31, 2010.
However, figures for the previous fiscal year have been restated to conform to the presentation of the fiscal year ended March 31, 2011 for the sake of reference.

57

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years ended March 31, 2011 and 2010

Thousands of
U.S. dollars (Note 1)

TOKYO GAS ANNUAL REPORT 2011

Millions of yen

Shareholders’ equity
Capital stock
Balance at the end of previous period
Changes of items during the period
Total changes of items during the period
Balance at the end of period
Legal capital surplus
Balance at the end of previous period
Changes of items during the period
Changes of items during the period
Balance at the end of period
Retained earnings
Balance at the end of previous period
Changes of items during the period
Dividends from surplus
Net income
Disposal of treasury stock
Retirement of treasury stock
Change of scope of consolidation
Total changes of items during the period
Balance at the end of period
Treasury stock
Balance at the end of previous period
Changes of items during the period
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Total changes of items during the period
Balance at the end of period
Total shareholders’ equity
Balance at the end of previous period
Changes of items during the period
Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Total changes of items during the period
Balance at the end of period
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of period
Deferred gains or losses on hedges
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of period
Foreign currency translation adjustment
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of period
Total accumulated other comprehensive income
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of period
Minority interests
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of period
Total net assets
Balance at the end of previous period
Changes of items during the period
Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of period
Accompanying notes are an integral part of these financial statements.

58

2010

2011

2011

¥ 141,844¥ 141,844$ 1,708,964—
141,844—
141,844—
1,708,964

2,065

2,065

24,880

—
2,065

—
2,065

—
24,880631,045657,387

7,920,325(21,701)53,781(21)(5,418)(298)
26,342
657,387(25,549)
95,467(1)(7,919)(943)
61,052
718,439(307,819)
1,150,205(12)(95,410)(11,361)735,566
8,655,892(2,361)(1,986)(23,928)(5,149)
105
5,418
374
(1,986)(8,314)
25
7,919
(369)
(2,355)(100,169)
301
95,410(4,446)(28,373)772,594

799,310

9,630,241(21,701)53,781(5,149)84(298)
26,716
799,310(25,549)
95,467(8,314)23(943)
60,683859,994(307,819)
1,150,205(100,169)277(11,361)
731,120
10,361,373

11,466

20,175

243,072

8,709
8,709
20,175(5,386)(5,386)
14,788(64,892)(64,892)
178,169

920

1,690

20,361

769
769
1,690

(544)
(544)
1,145

(6,554)(6,554)
13,795(12,615)(7,290)(87,831)

5,324
5,324
(7,290)(9,717)(9,717)(17,008)(117,072)(117,072)(204,916)(228)

14,575

175,602

14,80314,803
14,575(15,649)(15,649)(1,073)(188,542)(188,542)(12,928)

12,25012,404

149,446

154
154
12,404

2,769
2,769
15,17433,36133,361
182,819784,616

826,291

9,955,313(21,701)53,781(5,149)84(298)
14,957
41,674¥ 826,291(25,549)
95,467(8,314)23(943)(12,879)
47,803¥ 874,094(307,819)
1,150,205(100,169)277(11,361)(155,169)
575,940$ 10,531,253

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2011 and 2010

2010
Net cash provided by (used in) operating activities
Income before income taxes¥ 83,519
Depreciation and amortization
142,110
Impairment loss—
Amortization of long-term prepaid expenses
4,007
Loss on retirement of property, plant and equipment
3,239
Loss (gain) on sales of noncurrent assets(382)
Loss (gain) on sales of investment securities(52)
Loss (gain) on valuation of investment securities
147
Increase (decrease) in provision for retirement benefits
30,168Interest and dividends income(2,204)
Interest expenses
10,303Equity in (earnings) losses of affiliates(3,796)
Decrease (increase) in notes and accounts receivable — trade15,419Decrease (increase) in inventories
19,740
Increase (decrease) in notes and accounts payable — trade
29,482
Increase (decrease) in accrued consumption taxes
5,106
Decrease (increase) in accounts receivable — other(6,830)Decrease (increase) in lease receivables and lease investment assets(294)
Other, net
9,695
Subtotal
339,380
Interest and dividends income received
6,249
Interest expenses paid
(10,755)
Income taxes paid
(40,763)
Net cash provided by (used in) operating activities
294,110
Net cash provided by (used in) investment activities
Payments into time deposits(8,181)
Proceeds from withdrawal of time deposits
6,625
Purchase of investment securities(13,462)
Proceeds from sales and redemption of securities
794
Purchase of property, plant and equipment(136,511)
Purchase of intangible assets(8,964)Purchase of long-term prepaid expenses(1,599)Proceeds from sales of noncurrent assets
735
Payments of long-term loans receivable(17,814)
Collection of long-term loans receivable
1,712
Other, net(623)
Net cash provided by (used in) investment activities(177,290)
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
4,931
Increase (decrease) in commercial papers—
Repayments of lease obligations(640)
Proceeds from long-term loans payable
13,066
Repayment of long-term loans payable(29,279)
Proceeds from issuance of bonds
30,000
Redemption of bonds(60,200)
Proceeds from stock issuance to minority shareholders
758
Repayments to minority shareholders(907)
Proceeds from sales of treasury stock
84
Purchase of treasury stock(5,149)Cash dividends paid
(21,695)
Cash dividends paid to minority shareholders(345)
Net cash provided by (used in) financing activities(69,375)
Effect of exchange rate change on cash and cash equivalents
1,064
Net increase (decrease) in cash and cash equivalents
48,509Cash and cash equivalents at beginning of year
64,009
Increase in cash and cash equivalents from newly consolidated subsidiary349
Cash and cash equivalents at end of year (Note 13)¥ 112,868
Accompanying notes are an integral part of these financial statements.

Thousands of
U.S. dollars (Note 1)

2011

2011

¥ 155,494
145,389
834
3,946
3,248
(39,849)
(725)
2,100
(34,104)(2,757)
9,689(3,605)(7,095)8,181(52,523)(5,260)24,227(871)(9,071)
197,248
6,900(9,840)(31,963)
162,345$ 1,873,422
1,751,675
10,04847,542
39,133(480,108)(8,735)25,301(410,892)(33,217)
116,735(43,434)(85,482)
98,566(632,807)(63,373)
291,892(10,494)(109,289)
2,376,482
83,133(118,554)(385,096)
1,955,964(5,847)
7,115(21,737)
2,331(137,624)(13,191)(2,814)653(3,188)1,719
277(172,305)(70,446)
85,723(261,892)
28,084(1,658,120)(158,928)(33,904)
7,867(38,410)
20,711
3,337(2,075,964)

8,915
15,000(659)
17,339(33,541)
40,000(20,000)——
23(8,314)(25,524)(451)(7,212)(3,716)(20,889)
112,868
68¥ 92,048

107,410
180,723(7,940)208,904(404,108)481,928(240,964)——
277(100,169)(307,518)(5,434)(86,892)(44,771)(251,675)
1,359,855
819$ 1,109,012

TOKYO GAS ANNUAL REPORT 2011

Millions of yen

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2011 and 2010TOKYO GAS ANNUAL REPORT 2011

1. Basis of Presenting Consolidated Financial
Statements
Tokyo Gas Co., Ltd. (the “Company”) and its consolidated
subsidiaries maintain their accounts and records inaccordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act (formerly, theSecurities and Exchange Law) and its related accounting
regulations, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which
are different in certain respects as to application anddisclosure requirements from International Financial
Reporting Standards. The Company, as a regulatedcompany, also follows the Ordinance for Accounting of
Gas Business for preparing such financial statements.
The accompanying consolidated financial statements
were prepared in accordance with the above-mentioned
principles, and a translation was prepared of these
consolidated financial statements as filed with theappropriate Local Finance Bureau of the Ministry of Financeand as required by the Financial Instruments and ExchangeAct. However, the financial statements, excluding the notes
to consolidated financial statements, are not restructured.
Furthermore, the information presented herein does notnecessarily constitute all of the information included in theJapanese version of the consolidated financial statements
filed as per the Financial Instruments and Exchange Act.
Equivalent U.S. dollar amounts are included for theconvenience of readers outside Japan, and are converted at
a rate of ¥83 per U.S. dollar, the prevailing exchange rate on
March 31, 2011. These conversions should not be construed
as representations that the Japanese yen amounts havebeen, could have been, or could in the future be, converted
into U.S. dollars at this or any other rate of exchange.

60

2. Significant Accounting Policies(1) Consolidation — The consolidated financial statements
include the accounts of the Company and all of its
significant subsidiaries. For the years ended March 31,
2011 and 2010, 63 and 61 subsidiaries, respectively, wereconsolidated. All significant inter-company transactions
and account balances are eliminated in consolidation.
The following four companies were newly establishedand added to the scope of consolidation from the current
fiscal year:
Ohgishima Power Co., Ltd.
Tokyo Gas QCLNG Pty Ltd.
Tokyo Gas Lifeval Sagamihara Co., Ltd.
Tokyo Gas Lifeval Minami-tama Co., Ltd.
In addition, TG Enterprise Co., Ltd. was removed fromthe scope of consolidation, owing to its absorption merger
into the Company, and Capty Customer Service Co., Ltd.
was also removed as a result of its liquidation.
The Company’s major unconsolidated subsidiaries
include TG e PRTEC Corporation.
Unconsolidated subsidiaries were not included in thescope of the consolidation because total assets, net sales,
the amount of net income/loss equivalent to the portion of
the Company’s interests, and the amount of retained
earnings, etc., equivalent to the portion of the Company’s
interests were small and lacking in qualitative significance,

and therefore they do not have a significant impact on the
consolidated financial statements.
(2) Equity method — Significant investments in unconsolidated subsidiaries and affiliates over which theCompany has the ability to exercise significant influencewith regard to operating and financial policies of theinvestees are accounted for by the equity method. For
the years ended March 31, 2011 and 2010, 5 and 4 affiliated companies, respectively, were accounted for by theequity method. MT Falcon Holdings Company, S.A.P.I.
de C.V. newly became an affiliated company accounted
for by the equity method from the current fiscal year.
The unconsolidated subsidiaries and affiliates notaccounted for by the equity method were excluded fromthe scope of application of equity methods, due to theimmaterial effect of the Company’s total interest on their
net income/loss and retained earnings on the consolidated
financial statements and were totally insignificant.
(3) Accounting period of consolidated subsidiaries —Although the Company’s fiscal year ends on March 31, thefollowing companies end their year on December 31:
TOKYO GAS AUSTRALIA PTY LTD
Tokyo Gas International Holdings B.V.
Tokyo Gas Bajio B.V.
Tokyo Gas Darwin LNG Pty Ltd
TOKYO GAS-MITSUI & CO. HOLDINGS SDN. BHD.
Tokyo Gas QCLNG Pty Ltd
Tokyo Gas Pluto Pty Ltd
Tokyo Gas Gorgon Pty Ltd
TGE (SHANGHAI) LNG ENGINEERING CO., LTD.
All significant adjustments considered necessary during
the period from December 31 to the consolidated fiscal
year-end have been made with consolidation.
(4) Property, plant and equipment — For property, plantand equipment, the acquisition cost is shown. However,in the case of acquisition expenses of the Company and its
consolidated subsidiaries that have been subsidized by thenational government, etc., the amount of such subsidiaries
are offset against the acquisition cost of the corresponding
asset (reduction entry).
Primarily, the declining-balance method of depreciation
is applied, based on the estimated useful life of the asset.
However, the straight-line method is applied for certain
buildings (excluding ancillary equipment). Previously, thedeclining balance method was used for the depreciation ofships owned by consolidated subsidiary Tokyo LNG Tanker
Co., Ltd., but from this fiscal year the straight-line method isbeing applied to more rationally reflect the relationshipbetween revenue and expenses, because the long-term
stable revenues achieved through freight contracts withshippers are expected to constitute a major part of the total
revenues of Tokyo LNG Tanker Co., Ltd. from this fiscal
year. As a result of this change, the cost of sales for this fiscal
year was ¥2,954 million less than would have been thecase under the previous method, and gross profit, operating
income, ordinary income, and income before income taxes
were greater by the same amount.
Accumulated depreciation on property, plant andNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(5) Intangible assets — the straight-line method is applied.
For software used by the Company and its consolidated
subsidiaries, the straight-line method is applied based on
the period of useful life within the Company and its
consolidated subsidiaries.
(6) Accounting for certain lease transactions — Financelease transactions that do not transfer ownership use
the same accounting method as is applied for ordinary
sales and purchase transactions.
When the Company is the lessee, those finance leasetransactions that do not transfer ownership andcommenced on or before March 31, 2008 are accounted
for based on standards for ordinary rental transactions.
(7) Goodwill — Goodwill is amortized on a straight-line
basis within 20 years (mainly 10 years), with the duration
determined by the reasons for accrual.
(8) Cash and cash equivalents — Cash and cash equivalents include cash on hand, readily-available deposits
and short-term highly-liquid investments with maturities
not exceeding three months at the time of purchase,
which are readily convertible to known amounts of cash
such that they present insignificant risk of change.
(9) Securities — The Company and its consolidated
subsidiaries classify their securities under the following
three categories, in accordance with the Japanese
Accounting Standard for Financial Instruments.
(a) Debt securities intended to be held to maturity(hereafter, “held-to-maturity debt securities”) are stated
at amortized cost.
(b) Equity securities issued by unconsolidated subsidiaries
and affiliated companies that are not accounted for using
the equity method are stated at moving-average cost.
(c) Other securities with fair value, which are defined as
securities other than held-to-maturity debt securities,
equity securities issued by unconsolidated subsidiaries
and affiliated companies, and securities held for trading
purposes, are stated at fair value at the yearend, if
their fair values are readily available. The difference
between acquisition costs and book values of thesesecurities are reported, net of applicable taxes, as aseparate component of net assets. The cost of
securities sold is determined based on the moving
average method. Other securities with no fair values
are stated at moving-average cost.
If the fair value of held-to-maturity debt securities,
equity securities issued by unconsolidated subsidiaries
and affiliated companies, and other securities declines

significantly, and the decline is not considered recoverable,
such securities are stated at fair value and the difference
between fair value and the carrying amount is recognized
as loss in the period of the decline.
(10) Financial instruments — The Company and its
consolidated subsidiaries raise funds as necessary,reflecting their plans for facility investment in theirmainstay gas business, and invest temporary surpluses inhighly stable financial assets. The Company may procure
funds through short-term bond issuance and othermeasures. The Company and its consolidated subsidiaries
use derivative financial instruments to hedge the belowmentioned risks, but do not use derivative financial
instruments for speculative trading purposes.
Trade notes and accounts receivable, which areoperating receivables, are subject to credit risks ofcustomers. A control system is in place to check
periodically the outstanding balances for each transaction
partner. Investment securities are subject to market pricefluctuation risk, so the Company regularly monitors market
prices and issuers’ financial conditions. Certain borrowings
bear floating rates of interest and are therefore subject tointerest rate fluctuation risk. Derivative transactions(interest rate swaps) are used to hedge this risk on a
portion of these borrowings.
The Company and its consolidated subsidiaries execute
various derivative financial transactions to hedge risks offoreign exchange rate fluctuations, fluctuations in prices ofraw materials, interest rate fluctuations and the effects ofchanges in temperature. The Company and its consolidated
subsidiaries manage the credit risk inherent in suchtransactions by executing them with creditworthy financial
institutions. Also, the use of derivative financial instruments
is based on internal policies and procedures for risk control.
For information on methods of accounting for derivativetransactions, please refer to Note 2. (11) Derivatives.
(11) Derivatives — Derivatives are stated at fair value at the
year-end. The Company and its consolidated subsidiaries
apply hedge accounting, using the deferral hedge accounting,provided that all criteria are met for hedge accounting.
Regarding forward exchange contracts and foreign
currency swap contracts that fulfilled certain conditions,the hedged foreign currencies receivable and payable arerecorded using the Japanese yen amount of thecontracted forward rate or swap rate (Designation
method). Regarding interest rate swap contracts that
fulfilled certain conditions, the net amount to be paid or
received under the interest rate swap contract is added toor deducted from the interest on the liabilities for which
the swap contract was executed (Exceptional accounting).
(12) Inventories — Inventory values are based on themoving-average cost method. Balance sheet values arecalculated using the book value reduction method basedon declining profitability.
(13) Allowance for doubtful accounts — For normal
receivables, an allowance for doubtful accounts is provided
using the historical experienced default ratio. For specificTOKYO GAS ANNUAL REPORT 2011

equipment is deducted directly from the balances of thecorresponding assets.
In the accompanying consolidated financial statements,
accumulated depreciation on property, plant and equipment
amounted to ¥3,141,760 million (US$37,852,530 thousand)and ¥3,028,281 million as of March 31, 2011 and 2010,
respectively.
The total amount of impairment loss is directly deductedfrom the amount shown for the respective asset.

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

receivables such as bankruptcy/rehabilitation claims, anallowance for doubtful accounts is provided for theestimated amounts considered to be uncollectible after
reviewing individual collectability.

amount of such obligation is calculated using a discountrate of 2.3%, based on the assumption that the land will
be used for 30 years from the acquisition date. The impactof this change on profit and loss was negligible.

(14) Provision for retirement benefits — The Company andits consolidated subsidiaries provide an unfunded lumpsum payment plan and a funded pension plan as
retirement benefit schemes. The Company and certain
consolidated subsidiaries provide defined benefit plansand defined contribution plans. Retirement benefits underthese plans are determined based on the level of wages
and salaries, length of service and certain other factors.
The Company and its consolidated subsidiaries
determine benefit obligations and expenses for reserve forretirement benefits based on the amounts actuariallycalculated using certain assumptions.
Provision for retirement benefits is provided based on
the estimated amounts of projected benefit obligations
and the fair value of the plan assets.
The estimated amount of all retirement benefits to be
paid at the future retirement date is assumed as
generating equally to each service year using theestimated number of total service years. Prior service
costs are mainly charged to income when incurred, andactuarial gains and losses are charged to income mainly inthe fiscal year following the year in which they arise.

(18) Income taxes — Income taxes comprise corporation tax,
inhabitants’ taxes and enterprise tax (excluding enterprisetaxes based on “amount of net sales,” “amount of added
value” and “amount of capital”). The Company and its
consolidated subsidiaries recognize tax effects of temporary
differences between the financial statement basis and thetax basis of assets and liabilities. The Company and its
consolidated subsidiaries do not recognize deferred tax
assets that are not expected to reduce future income taxes.

(15) Provision for gas holder repairs — The Company andcertain consolidated subsidiaries provide for periodic
repairs of gas holders by estimating future expendituresand charging them to income in equal annual amounts.
The difference between the actual expenditure and theamount provided is charged to income in the year repairs
are completed.

TOKYO GAS ANNUAL REPORT 2011(16) Translation of financial statements denominated inforeign currency — The Company’s receivables and payables
denominated in foreign currencies are translated into
Japanese yen at the year-end rates, and foreign exchange
gains or losses are charged to current income/expense.
Assets and liabilities of the foreign subsidiaries are translated
into Japanese yen at the exchange rates prevailing at theiryear-end date. Profit and loss accounts for the year aretranslated into Japanese yen at the exchange rates prevailingat their year-end date as well. Differences in yen amounts
arising from the use of different rates are presented as“Foreign currency translation adjustment” and “Minority
interests” in net assets.

62(17) Adoption of accounting standards for asset retirement
obligations — Effective from the year ended March 31,
2011, the Company and its consolidated domestic
subsidiaries have adopted the “Accounting Standards for
Asset Retirement Obligations” (ASBJ Statement No.18;
March 31, 2008) and “Guidance on Accounting Standards
for Asset Retirement Obligations” (ASBJ Guidance No.21;
March 31, 2008). The asset retirement obligation inquestion is mainly the obligation to restore the land to precontract status in connection with the real estate rental
contract of the land for power generation facilities. The(19) Enterprise tax — In the case of companies engaged ingas businesses, enterprise tax that is levied, not on taxable
income but on net sales, is accounted for in “Selling, generaland administrative expenses.” Enterprise taxes based on“amount of added value” and “amount of capital” are also
included in “Selling, general and administrative expenses.”In the accompanying consolidated statements ofincome, enterprise tax included in “Selling, general andadministrative expenses” amounted to ¥15,613 million(US$188,108 thousand) and ¥14,539 million for the years
ended March 31, 2011 and 2010, respectively.
(20) Research and development expenses — Researchand development expenses are charged to income as
incurred. In the accompanying consolidated statements ofincome, research and development expenses included
in “Selling, general and administrative expenses” and“Cost of sales” amounted to ¥9,913 million (US$119,434
thousand) and ¥9,232 million for the years ended March
31, 2011 and 2010, respectively.
(21) Amounts per share of common stock — Basic net
income per share is computed based on the net income
available for distribution to common shareholders and theweighted-average number of common shares outstanding
for the period. Diluted net income per share is omitted
because the Company does not have any residual securities.
Cash dividends per share have been presented on an
accrual basis and include dividends approved or to beapproved after the balance sheet dates, but they areapplicable to the year then ended.
(22) Comprehensive Income — Effective from the year
ended March 31, 2011, the Company and its consolidated
subsidiaries have adopted the “Accounting Standard for
Presentation of Comprehensive Income” (ASBJ Statement
No.25; June 30, 2010). The amounts corresponding to“Valuation and translation adjustments” and “Total valuationand translation adjustments” in the previous term areshown as “Accumulated other comprehensive income”
and “Total accumulated other comprehensive income.”(23) Reclassifications — Certain prior year amounts havebeen reclassified to conform to the fiscal year ended
March 31, 2011 presentation. These changes had no
impact on previously reported results of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Pledged Assets
Pledged assets at March 31, 2011 and 2010 were as follows:
Millions of yen

2010

Thousands of
U.S. dollars

2011—
Distribution facilities¥ 6,535 ¥Service and—maintenance facilities
13
8,319
Other facilities
10,370350 13,198
Investment securities
Long-term loans
2,824
receivable
35
1,487
1,760
Cash and deposits
55Other current assets¥ 19,071 ¥ 25,835

2011
$

—

2010

2011

Long-term loans payable(including current
portion of noncurrent
liabilities)¥ 8,071 ¥ 6,616
54
56
Other current liabilities¥ 8,127 ¥ 6,670

At March 31, 2011

Book value

Fair value

Difference(1) Bonds payable $ 4,114,361 $ 4,250,735 $ (136,361)(2) Long-term loans
2,493,108 2,543,072(49,964)
payableNote: including items due within one year—
100,229
159,01234,024
17,91660$ 311,265

Liabilities secured by the above assets at March 31, 2011
and 2010 were as follows:
Millions of yen

Thousands of U.S. dollars

Thousands of
U.S. dollars

2011$ 79,711
651$ 80,361

4. Extraordinary Income and Losses
In the fiscal year ended March 31, 2011, the Company andits consolidated subsidiaries recorded extraordinary incomeof ¥39,927 million (US$481,048 thousand) mainly due togains from the transfer of land resulting from the sale ofreal estate, and disaster-related extraordinary losses of¥3,268 million (US$39,373 thousand) associated withdamage from the Great East Japan Earthquake.

5. Financial Instruments
Book values and fair values of the financial instruments asof March 31, 2011 and 2010 were as follows:

Method of calculating the fair value of financial
instruments, and items related to securities andderivative transactions(1) Bonds payable — the fair value is calculated bydiscounting to their present value the total amount ofprincipal and interest on bonds issued by theCompany and consolidated subsidiaries by an interest
rate that takes into account the period remaining andcredit risk.
(2) Long-term loans payable — the fair value is calculatedby discounting to their present value the total amountof principal and interest by the assumed interest rateon new borrowings of the same type.
The items of which estimated fair value was deemed to
be extremely difficult are not included in the above table.
Also, the items described below are not included in theabove table.
As notes and accounts receivable-trade (with a bookvalue of ¥160,128 million (US$1,929,253 thousand)) aresettled within a short time, their fair values and bookvalues are nearly identical. For information about
investment securities (with a book value of ¥62,566 million(US$753,807 thousand)) and derivative transactions (witha book value of ¥175 million (US$2,108 thousand)(receivables)), please refer to Note 6. Securities and Note
8. Derivative Transactions, respectively. Most financial
receivables and securities with maturities are redeemed ina short period (within one year).
The maturity amounts of bonds payable, long-termloans payable and other interest-bearing debt maturating
after the balance sheet date are indicated in Note 7.
Short-Term Loans Payable, Bonds Payable and Long-Term
Loans Payable.

Millions of yen

At March 31, 2011

Book value(1) Bonds payable(2) Long-term loans
payable¥ 341,492 ¥ 352,811 ¥ (11,318)
211,075

Difference(4,147)(A) Held-to-maturity debt securities

Millions of yen

At March 31, 2010

Book value(1) Bonds payable(2) Long-term loans
payable¥ 321,491 ¥ 336,354 ¥ (14,862)
220,060

Fair value

224,155

6. Securities
Acquisition costs, book values and fair values of securities
with available fair values at March 31, 2011 and 2010
were as follows:

Difference(4,094)

Millions of yen

2010

Thousands of
U.S. dollars

2011

Securities with fair value exceeding book value:$Book value
¥
45 ¥
40
46
41
Fair value
$
¥
1 ¥
1
Difference

2011
482
494
12

TOKYO GAS ANNUAL REPORT 2011

206,928

Fair value

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(B) Available-for-sale securities
Millions of yen

2010

2011

Thousands of
U.S. dollars

2011

Securities with book value exceeding acquisition cost:
Acquisition cost
¥ 23,571 ¥ 12,478 $ 150,337
459,687
57,43838,154
Book value¥ 33,867 ¥ 25,675 $ 309,337
Difference

Thousands of
U.S. dollars

Millions of yen

2010

2011

2011

Securities with book value not exceeding acquisition cost:
Acquisition cost
¥ 12,218 ¥ 26,669 $ 321,313
293,639
11,93924,372
Book value¥ (278) ¥ (2,296) $ (27,663)
Difference

Available-for-sale securities not included in the above table amounted to ¥34,416 million (US$414,651 thousand) and ¥35,368
million at March 31, 2011 and 2010, respectively. Investments in unconsolidated subsidiaries and affiliated companies
amounted to ¥45,478 million (US$547,928 thousand) and ¥44,267 million for the years ended March 31, 2011 and 2010,
respectively. These items do not have market value and determining their estimated fair value was deemed to be
extremely difficult and therefore, they are not included in the above table.

7. Short-Term Loans Payable, Bonds Payable and Long-Term Loans Payable
The average annual interest rates for short-term loans payable at March 31, 2011 and 2010 were 0.3% and 0.6%,
respectively.
Bonds payable and long-term loans payable at March 31, 2011 and 2010 were as follows:
Thousands of
U.S. dollars

Millions of yen

Domestic unsecured bonds

Due in 2016 at a rate of 4.0%
Due in 2018 at a rate of 2.625%
Due in 2010 at a rate of 2.01%
Due in 2011 at a rate of 1.39%
Due in 2012 at a rate of 1.35%
Due in 2023 at a rate of 1.01%
Due in 2013 at a rate of 1.41%
Due in 2014 at a rate of 1.59%
Due in 2024 at a rate of 2.29%
Due in 2025 at a rate of 2.14%
Due in 2015 at a rate of 4.1%
Due in 2027 at a rate of 2.29%
Due in 2015 at a rate of 1.4%
Due in 2015 at a rate of 1.658%
Due in 2019 at a rate of 1.405%
Due in 2040 at a rate of 2.135%
Due in 2020 at a rate of 1.203%
Loans from banks, insurance companies and government agencies
at rates of 0.43% to 5.28%:
SecuredUnsecuredTOKYO GAS ANNUAL REPORT 2011

Less: amounts due within one year

64

2010

2011

¥ 27,700
40,00020,00030,00020,00020,00030,00020,00010,00010,00013,80019,996
9,995
20,00030,000——¥ 27,700
40,000—30,00020,00020,00030,00020,00010,00010,00013,80019,996
9,995
20,00030,00020,00020,000$8,071
211,989
541,552
53,379¥ 488,173

6,616
200,311548,420
48,688¥ 499,732

79,711
2,413,386
6,607,470
586,602$ 6,020,867

2011
333,735
481,928—
361,446
240,964
240,964
361,446
240,964
120,482
120,482
166,265
240,916
120,422240,964
361,446
240,964
240,964

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The annual maturities of bonds payable and long-termloans payable at March 31, 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

2012
2013
2014
2015
2016
2017 and thereafter$

586,602522,855
549,771
571,723
644,410
3,732,072$ 6,607,470¥ 48,688
43,39745,63147,45353,486
309,762¥ 548,420

Note: The Company has a specific commitment line contract with the main correspondent financial institution of ¥30,000 million (US$361,446 thousand) in total.

8. Derivative Transactions
Contract amounts, fair values and recognized gains on interest rate swaps and the commodity derivatives not accounted
for using hedge accounting and weather derivatives at March 31, 2011 and 2010 were as follows:
Millions of yen

Thousands of U.S. dollars

Contract amounts
Total

Of which,longer thanContract amounts
Fair value

Recognized
gains

At March 31, 2011
one year(losses)Interest
rate swaps¥ 23,208 ¥ 23,208 ¥ (1,352) ¥ (1,352)
Weatherderivatives
300
—
—
—
¥ 23,508 ¥ 23,208 ¥ (1,352) ¥ (1,352)

Total

Of which,longer than

Fair value

Recognized
gains

At March 31, 2011
one year(losses)Interest
rate swaps$ 279,614 $ 279,614 $ (16,289) $(16,289)
Weatherderivatives
3,614
—
—
—
$ 283,229 $ 279,614 $ (16,289) $(16,289)

Millions of yen
Contract amounts
Total

At March 31, 2010
Commodity
derivatives¥ 4,438
Weatherderivatives
600¥ 5,038

Of which,longer than
one year

Fair value

Recognized
gains(losses)

¥ —

¥ 745

¥ 745

—
¥ —

—
¥ 745

—
¥ 745

The table below indicates hedge accounting methods, main items hedged, contract amounts and fair values as of March
31, 2011 and 2010, on derivatives transactions to which hedge accounting is applied.
Millions of yen

At March 31, 2011

Contract amounts
Type of contracts

Main items hedged
Total

Currency related
Forward foreign
Deferral hedge
accounting
exchange contracts
Deferral hedge
Foreign currency
accounting
swap contracts
Designation method Forward foreignfor forward
exchange contracts
foreign exchange
contracts, others

Accounts payabletrade
Accounts payabletrade
Accounts payabletrade

Commodity related
Deferral hedge
Price swap
accounting
contracts

Accounts payabletrade

Interest related
Deferral hedge
accounting
Exceptional
accounting

Bonds and longterm loans payable
Long-term loans
payableInterest rate swap
contracts
Interest rate swap
contracts¥

921

Of which,longer than one year

¥

1,026

Fair value

831¥ (135)——(Note 2)

10,715¥ 12,664

¥

—
831

¥

—

¥ 13,996¥ 13,996

¥
¥

—
—

¥
¥

246
246

¥ 25,441¥ 25,441¥ 1,432

8,414¥ 33,856

414¥ 25,856¥

TOKYO GAS ANNUAL REPORT 2011

Hedge accounting method(Note 2)—65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Millions of yen

At March 31, 2010

Contract amounts
Hedge accounting method

Type of contracts

Main items hedged

Of which,longer than one year

Total

Currency related
Forward foreign
Deferral hedge
accounting
exchange contracts
Designation method Forward foreignfor forward
exchange contracts
foreign exchange
contracts, others

Accounts payabletrade
Accounts payabletrade

Commodity related
Deferral hedge
Price swap
accounting
contracts

Accounts payabletrade

Interest related
Deferral hedge
accounting
Exceptional
accounting

Bonds and longterm loans payable
Long-term loans
payableInterest rate swap
contracts
Interest rate swap
contracts

Fair value

1,007

¥

921

¥

15,790¥ 16,798

¥

—
921

¥

—

¥ 23,643¥ 23,643

¥
¥

—
—

¥
¥

1,651
1,651

¥ 10,512¥ 10,512¥959

10,472¥ 20,984

8,414¥ 18,926

¥

¥

(67)

(Note 2)

(Note 2)—Thousands of U.S. dollars

At March 31, 2011

Contract amounts
Hedge accounting method

Type of contracts

Currency related
Forward foreign
Deferral hedge
accounting
exchange contracts
Deferral hedge
Foreign currency
accounting
swap contracts
Designation method Forward foreignfor forward
exchange contracts
foreign exchange
contracts, others

Main items hedged

Accounts payabletrade
Accounts payabletrade
Accounts payabletrade

Commodity related
Deferral hedge
Price swap
accounting
contracts

Accounts payabletrade

Interest related
Deferral hedge
accounting
Exceptional
accounting

Bonds and longterm loans payable
Long-term loans
payableInterest rate swap
contracts
Interest rate swap
contracts

Total

Of which,longer than one year

Fair value$ 11,096$ 10,012$ (1,627)

12,361——129,096$ 152,578—$ 10,012$—$ 168,627$ 168,627

$
$

$
$

2,964
2,964

$ 306,518$ 306,518$ 17,253

101,373$ 407,904

4,988$ 311,518$——(Note 2)

(Note 2)—

TOKYO GAS ANNUAL REPORT 2011

Note1: Fair values of exchange forward contracts, commodity derivatives and interest rate swaps are calculated at the rates indicated by the financial institutions handling thesetransactions for the Company. Contract amounts of commodity derivatives are solely nominal values, and are not indicative of the magnitude of market risk or credit risk concerningderivatives transactions. Contract amounts of weather derivatives are stated at the maximum receivable or payable amounts under the contracts. Fair values of weather derivatives are not stated, as their fair values cannot be calculated.
Note2: The accounting for exchange forward contracts employing designation method and interest rate swaps employing exceptional accounting are included in the fair values of the hedged
items (accounts payable-trade and long-term loans payable).

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Millions of yen

2010

2011

Thousands of
U.S. dollars

2011

Projected benefit
obligation¥ 340,792 ¥ 343,085 $4,133,554
Unrecognized priorservice costs
1,723
1,531
18,446
Unrecognizedactuarial differences
16,832(5,847)(70,446)
Less: Fair value ofpension assets(228,447) (241,898) (2,914,434)
Provision for
retirement benefits ¥ 130,903 ¥ 96,870 $1,167,108
Net periodic retirement benefit expenses for the years
ended March 31, 2011 and 2010 were as follows:
Millions of yen

2010

2011

Thousands of
U.S. dollars

2011

Service costs —benefits earned
during the year
¥ 9,199 ¥ 8,634 $ 104,024
Interest cost on projected
benefit obligation
6,405
7,045
84,880
Expected return onplan assets(4,359)(4,555)(54,880)
Amortization of
actuarial differences
32,284(19,599) (236,133)
Amortization of priorservice costs
(192)
(192)
(2,313)
Other
4,313
4,105
49,458Net periodic retirement
benefit expenses¥ 47,651 ¥ (4,561) $ (54,952)

Significant components of deferred tax assets andliabilities as of March 31, 2011 and 2010 were as follows:

1.5
0.5
38.2

Note is omitted for the year ended March 31, 2010, as thedifference between the statutory effective tax rate and theactual effective tax rate after the adoption of tax-effectaccounting is less than 5% of the statutory effective tax rate.

(8,469)90,198(10,653)
76,766(128,349)
924,892—

16,249195,771

11,74813,21324,961—
23,14339,393—278,831474,614

65,236 ¥ 37,373 $ 450,277

Millions of yen

2010
94,233

Change during
the year¥ (8,680)

2011¥

85,553

Fair value as ofMarch 31, 2011

¥ 326,869

Millions of yen
Book value

¥

36.2%

47,778 ¥ 35,440 $ 426,988
626,253
51,97950,889Book value

2009

Statutory effective tax rate
(Adjustments)
Valuation allowance
Other
Actual effective tax rate after the adoptionof tax-effect accounting

2011

11. Investment and Rental Properties
Book values and the fair values of investment and rental
properties owned by the Company and some of its
consolidated subsidiaries are indicated below. Book value
is determined by subtracting accumulated depreciationfrom the acquisition cost. Fair values as of March 31,
2011 and 2010 are based primarily on the real estateappraisal value determined by a real estate appraiser.

¥

2011

2011

2010
Deferred tax assets:
Provision for
retirement benefits ¥
Other
Less:
Valuation allowance
Subtotal
Deferred tax liabilities:
Reserve for advanced
depreciation of
noncurrent assets
Valuation difference
on available-for-salesecurities
Other
Subtotal
Deferred tax¥
assets-net

The discount rate and the rate of expected return on plan
assets used by the Company and its consolidated subsidiaries
are mainly 2.0% and 2.0% for the year ended March 31,
2011, and 2.1% and 2.0% for the year ended March 31, 2010.

10. Income Taxes
The Company is subject to multiple taxes based on taxable
income, which, in the aggregate, indicate a statutory
effective tax rate in the Company of approximately 36.2%
for the years ended March 31, 2011 and 2010.

Thousands of
U.S. dollars

Millions of yen

98,150Change during
the year¥ (3,916)2010¥

94,223

Fair value as ofMarch 31, 2010

¥ 378,103

Thousands of U.S. dollars
Book value

2010

Change during
the year2011$ 1,135,337$(104,578)$ 1,030,759

Fair value as ofMarch 31, 2011

$ 3,938,181
TOKYO GAS ANNUAL REPORT 2011

9. Provision for Retirement Benefits
Provision for retirement benefits included in the liabilities
section of the consolidated balance sheets as of March 31,
2011 and 2010 were as follows:67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Net Assets(A) Distribution to shareholders
Under the Japanese Companies Act (“the Act”), dividends
can be paid at any time during the fiscal year in addition to
the year-end dividend upon resolution at a shareholders’meeting. Interim dividends may also be paid upon aresolution of the Board of Directors provided that thearticles of incorporation of the company so stipulate, andthat the company meets certain criteria.
The Act provides certain limitations on the amounts
available for dividends and/or the purchase of treasury
stock. The limitation is defined as the amount available for
distribution to the shareholders, and it is calculated mainly
based on other capital surplus, other retained earnings andtreasury stock. Under the Act, the balance of net assets
after distribution of dividends must amount to no lessthan ¥3 million.
The maximum amount that the Company can distributeas dividends is calculated based on the non-consolidated
financial statements of the Company in accordance withJapanese laws and regulations.
At the general meeting of shareholders held on June 29,
2011, the Company’s shareholders approved payment ofyear-end cash dividends of ¥4.5 (US$0.05) per share
aggregating ¥12,052 million (US$145,205 thousand) tothe shareholders of record as of March 31, 2011.
Such appropriations have not been accrued in the
consolidated financial statements for the year ended
March 31, 2011. Such appropriations are recognized in the
period in which they are approved by the shareholders.

(B) Increases/decreases and transfer of capital stock,reserve and surplus
Under the Act, the entire amount paid for new shares isrequired to be designated as capital stock. However, acompany may, through a resolution of the Board of
Directors, designate an amount not exceeding one-half ofthe price of the new shares as legal capital surplus, whichis included in capital surplus.
Under the Act, in cases in which a dividend fromsurplus is made, the smaller of an amount equal to 10%of the dividend or the excess, if any, of 25% of capitalstock over the total of legal capital surplus and legal
retained earnings must be set aside as legal capitalsurplus or legal retained earnings. Legal retained earnings
are included in retained earnings in the accompanying
consolidated balance sheets.
Under the Act, legal retained earnings and legal capitalsurplus could be used to eliminate or reduce a deficit, or
could be capitalized generally by a resolution of theshareholders’ meeting.
Legal capital surplus and legal retained earnings may not
be distributed as dividends. Under the Act, however, alllegal capital surplus and all legal retained earnings may betransferred to other capital surplus and other retained
earnings, respectively, which are potentially available fordividends.
(C) Treasury stock
The Act provides for companies to purchase treasury
stock and dispose of such treasury stock by a resolution of
the Directors’ meetings. The amount of treasury stock
purchased cannot exceed the amount available for
distribution to the shareholders which is determined by aspecific formula.

13. Additional Information for Cash Flows
Reconciliation of cash and deposits shown in the consolidated balance sheets and cash and cash equivalents shown in the
consolidated statements of cash flows as of March 31, 2011 and 2010 were as follows:
Thousands of
U.S. dollars

Millions of yen

2011

2010

TOKYO GAS ANNUAL REPORT 2011

Cash and deposits
Less: Time deposits with maturities over three months, etc.
Negotiable certificates of deposit included in other current assets
Cash and cash equivalents

68¥ 107,391(4,522)
10,000¥ 112,868¥¥

90,302(3,254)5,000
92,0482011$ 1,087,976(39,205)
60,241$ 1,109,012

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Segment Information
Effective from the year ended March 31, 2011, the Company and its consolidated subsidiaries have adopted the“Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Statement
No.17; March 27, 2009) and “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and RelatedInformation” (ASBJ Guidance No.20; March 21, 2008). The Group’s reported segments are regularly reviewed by the Boardof Directors using the segregated financial information available within each segment to determine the allocation ofmanagement resources and evaluate business results.
The Group uses the four reported segments of (1) city gas sales, (2) gas appliances and installation work, (3) otherenergies, and (4) real estate.
The same accounting method which is applied to the consolidated financial statements is applied to segment accounting.
Income of a reported segment is calculated based on operating income. Intersegment sales and transfers are attributable
to transactions within group companies, and are calculated based on the market value.
The amount of net sales, income and loss, assets, and other items by reported segment is as follows:
Millions of yen

For 2011
City gas sales

Net sales:
External sales
Intersegment sales& transfers
Total
Segment income
Segment assets
Depreciation expenses
Increase in property,
plant, equipment,
and intangible assets

Gas appliances
and installation
work

Other energies

Real estate¥1,077,221 ¥ 164,814 ¥ 208,329 ¥

11,715 ¥Other

Adjustments

73,161 ¥Consolidated— ¥1,535,242

59,856
12,658
12,962
21,08189,140(195,699)—
1,137,077
177,472
221,292
32,797
162,302(195,699) 1,535,242¥ 136,181 ¥
1,872 ¥ 11,166 ¥5,713 ¥
9,907 ¥ (42,389) ¥ 122,451¥ 981,747 ¥ 57,125 ¥ 163,400 ¥ 196,567 ¥ 161,588 ¥ 269,232 ¥1,829,661
114,435
1,048
16,454
8,716
7,167(2,432)
145,389

105,880

1,111City gas sales

Gas appliances
and installation
work

21,0542,940

19,485(3,084)

147,388

Millions of yen

For 2010
Net sales:
External sales
Intersegment sales& transfers
Total
Segment income
Segment assets
Depreciation expenses
Increase in property,
plant, equipment,
and intangible assets

Other energies¥1,017,692 ¥ 160,150 ¥ 151,524 ¥Real estate

11,472 ¥Other

Adjustments

74,878 ¥Consolidated— ¥1,415,718

28,473
9,633
5,772
21,31286,812(152,004)—
1,046,166
169,784
157,297
32,784
161,690(152,004) 1,415,718¥ 115,539 ¥
2,184 ¥
6,874 ¥
6,732 ¥
6,497 ¥ (52,598) ¥ 85,229¥1,009,021 ¥ 63,458 ¥ 111,913 ¥ 163,523 ¥ 162,471 ¥ 330,584 ¥1,840,972
113,217
947
9,846
9,136
11,208(2,246)142,110

113,697

774

6,110

3,019

25,697(2,712)

146,586

TOKYO GAS ANNUAL REPORT 2011

The amounts by segment have been reclassified to conform to the newly adopted segment classification from the year ended March 31, 2011.

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Thousands of U.S. dollars

For 2011
City gas sales

Net sales:
External sales
Intersegment sales& transfers
Total
Segment income
Segment assets
Depreciation expenses
Increase in property,
plant, equipment,
and intangible assets

Gas appliances
and installation
work

Other energies$12,978,566 $ 1,985,711 $ 2,509,988 $Real estate

141,145 $Other

Adjustments

881,458 $Consolidated— $18,496,892

721,157
152,506
156,169
253,988
1,073,976 (2,357,819)—
13,699,723
2,138,217
2,666,169
395,145
1,955,446 (2,357,819) 18,496,892$ 1,640,735 $
22,554 $ 134,530 $
68,831 $ 119,361 $ (510,711) $ 1,475,313$11,828,277 $ 688,253 $ 1,968,675 $ 2,368,277 $ 1,946,843 $ 3,243,759 $22,044,108
1,378,735
12,627
198,241
105,012
86,349(29,301) 1,751,675

1,275,663

13,386

253,663

35,422

234,759(37,157)

1,775,759

Segment income adjustments for the years ended March 31, 2011 and 2010 are –¥42,389 million (–$510,711 thousand)and –¥52,598 million respectively. The segment income adjustment includes corporate expenses not allocated to therespective reported segments. Corporate expenses are primarily general and administrative expenses that are notassignable to a reported segment.
Segment asset adjustments for the years ended March 31, 2011 and 2010 are ¥269,232 million ($3,243,759 thousand) and¥330,584 million respectively. The segment asset adjustment includes corporate assets not allocated to the respective
reported segments. Corporate assets are primarily financial assets that are not assignable to a reported segment.
Segment income is adjusted to reflect operating income as recorded on the Consolidated Statements of Income.

15. Information for Certain Leases
Finance leases
Information as lessee
The Company and its consolidated subsidiaries use certain
other facilities and other intangible assets under lease
contracts. Finance lease transactions that do not transfer
ownership and commenced on or before March 31, 2008
are accounted for based on standards for ordinary rental
transactions.
Lease payments and amounts equivalent to depreciation
for the finance lease transactions shown above that do nottransfer ownership for the years ended March 31, 2011
and 2010, and future lease payments including interest asof March 31, 2011 and 2010, are shown below.
Millions of yen

2010

TOKYO GAS ANNUAL REPORT 2011

70

Millions of yen
Acquisition
cost

Accumulated
depreciation

Net book
value

Other facilities¥ 3,955
58
Other intangible assets¥ 4,014¥ 1,80551¥ 1,856¥ 2,1507¥ 2,157¥ 1,534131¥ 1,665¥ 2,54632¥ 2,578

For 2011

For 2010¥ 4,080
Other facilities
163
Other intangible assets¥ 4,244

Thousands of
U.S. dollars

2011

422
Lease payments
¥
441 ¥
422
441
Depreciation expenses
Future lease payments
inclusive of interest:
380
421
Within 1 year
1,776
2,157
Over 1 year
¥ 2,578 ¥ 2,157

leased property to the lessee on an “as if capitalized”
basis as of March 31, 2011 and 2010 were as follows:

2011
$

5,084
5,084

4,578
21,398$ 25,988

Acquisition cost, accumulated depreciation and net
book value for property held under the above-mentioned
finance leases that do not transfer ownership of theThousands of U.S. dollars
Acquisition
cost

Accumulated
depreciation

Net book
value

Other facilities$47,651
699
Other intangible assets$48,361$21,747614$22,361$25,904
84$25,988

For 2011

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information as lessor
The breakdown of lease investment assets as of March
31, 2011 and 2010 were as follows:
Millions of yen

2010

Thousands of
U.S. dollars

2011

2011

Information as lessor
Future lease payments under noncancelable operatingleases as of March 31, 2011 and 2010 were as follows:
Millions of yen

2010

2011

Thousands of
U.S. dollars

2011

Claims for lease fees
¥ 21,797 ¥ 23,433 $ 282,325
116
131
1,578
Estimated residual value
Equivalent interest
received(3,545)(3,877)(46,711)¥ 18,368 ¥ 19,686 $ 237,181

Future lease payments:
Within 1 year
¥ 1,622 ¥ 1,611
10,3809,426Over 1 year
¥ 12,003 ¥ 11,037

Scheduled recovery amounts of claims for lease fees
related to lease receivables and investment assets as ofMarch 31, 2011 and 2010 are as follows:

16. Commitment and Contingent Liabilities
At March 31, 2011, the Company and its consolidated
subsidiaries were contingently liable for (1) debt
guarantees in the amount of ¥13,148 million (US$158,410
thousand) for financial institution loans to companies
other than consolidated subsidiaries and (2) ¥38,700
million (US$466,265 thousand) as guarantors for domestic
unsecured bonds issued by the Company, and assigned tocertain banks under debt assumption agreements made in
the years ended March 31, 2002, 2003 and 2004.

Millions of yen

2010
Lease receivables
Within 1 year
More than 1 year
but within 2 years
More than 2 years
but within 3 years
More than 3 years
but within 4 years
More than 4 years
but within 5 years
More than 5 years

2011¥ 1,177 ¥ 1,243

2011$ 14,976

1,178

1,206

14,530

1,134

1,093

13,169

1,029

1,020

12,289

959
3,007

953
2,396

11,482
28,867

Millions of yen

2010
Lease investment assets
Within 1 year¥
More than 1 year
but within 2 years
More than 2 years
but within 3 years
More than 3 years
but within 4 years
More than 4 years
but within 5 years
More than 5 years

Thousands of
U.S. dollars

Thousands of
U.S. dollars

2011

4,933 ¥ 5,137

2011$ 61,892

4,246

4,481

53,988

3,568

3,814

45,952

2,882

3,167

38,157

2,266
3,899

2,472
4,360

29,78352,530$ 19,410
113,566$ 132,976

17. Subsequent Events(1) Resolution on acquisition of treasury stock
At a meeting on April 28, 2011, the Board of Directors
resolved for the Company to acquire treasury stock, as
follows.
No. of shares to be acquired: Limited to 110 million shares
Total value of shares to be acquired:
Limited to ¥34,000 million (US$409,639 thousand)
Period of acquisition:
From May 2, 2011 to March 31, 2012

Operating leases
Information as lessee
Future lease payments under noncancelable operatingleases as of March 31, 2011 and 2010 were as follows:

2010
Future lease payments:
Within 1 year¥
Over 1 year¥

Thousands of
U.S. dollars

2011

238 ¥
326
720
864
959 ¥ 1,190

2011
$

3,928
10,410$ 14,337

TOKYO GAS ANNUAL REPORT 2011

Millions of yen

71

INDEPENDENT AUDITORS’ REPORTTo the Board of Directors of Tokyo Gas Co., Ltd.:We have audited the accompanying consolidated balance sheets of Tokyo Gas Co., Ltd. (the “Company”) andconsolidated subsidiaries as of March 31, 2011 and 2010, and the related consolidated statements of income, consolidated
statements of comprehensive income, changes in net assets and cash flows for the years then ended, expressed inJapanese yen. These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to independently express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis forour opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Tokyo Gas Co., Ltd. and subsidiaries as of March 31, 2011 and 2010, and the results of their operations and their
cash flows for the years then ended, in conformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31,
2011 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar
amounts and, in our opinion, such translation has been made on the basis described in Note 1 to the consolidated
financial statements.

TOKYO GAS ANNUAL REPORT 2011

Tokyo, Japan
June 29, 201172