Consolidated Financial Statements
Toho Zinc Co., Ltd.
and Consolidated Subsidiaries
For the year ended March 31, 2018with Independent Auditor’s ReportToho Zinc Co., Ltd. and Consolidated Subsidiaries
Contents to Consolidated Financial Statements

Independent Auditor’s Report-------------------------------------------------------------

1

Consolidated Balance Sheet---------------------------------------------------------------

2

Consolidated Statement of Operations---------------------------------------------------

Consolidated Statement of Comprehensive Income4------------------------------------- 5

Consolidated Statement of Changes in Net Assets -------------------------------------

6

Consolidated Statement of Cash Flows --------------------------------------------------

8

Notes to Consolidated Financial Statements --------------------------------------------

9Independent Auditor’s Report
The Board of Directors
Toho Zinc Co., Ltd.
We have audited the accompanying consolidated financial statements of Toho Zinc Co., Ltd. and its consolidated subsidiaries,
which comprise the consolidated balance sheet as at March 31, 2018, and the consolidated statements of operations,comprehensive income, changes in net assets, and cash flows for the year then ended and a summary of significant accounting
policies and other explanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith accounting principles generally accepted in Japan, and for designing and operating such internal control as management
determines is necessary to enable the preparation and fair presentation of the consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. The purpose of an audit of theconsolidated financial statements is not to express an opinion on the effectiveness of the entity’s internal control, but in making
these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Toho Zinc Co., Ltd. and its consolidated subsidiaries as at March 31, 2018, and their consolidated financial
performance and cash flows for the year then ended in conformity with accounting principles generally accepted in Japan.
Convenience Translation
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented for the convenience ofreaders, and, in our opinion, the accompanying consolidated financial statements have been properly translated on the basis
described in Note 2.

Ernst & Young ShinNihon LLC
June 28, 2018
Tokyo, Japan1

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31,2018
2017
(Millions of yen)

AssetsCurrent assets:
Cash and time deposits (Notes 15 and 17)
Notes and accounts receivable, trade (Notes 3 and 15)
Electronically recorded monetary claims (Note 15)
Inventories (Note 4)
Deferred tax assets (Note 12)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥

Property, plant and equipment:
Buildings and structures (Notes 6 and 8)
Machinery and equipment (Notes 6 and 8)
Land (Notes 5 and 8)
Leased assets
Construction in progress
Less: Accumulated depreciation
Net property, plant and equipment

Investments and other assets:
Investment securities (Notes 8, 15 and 16)
Investments in unconsolidated subsidiaries and associates(Note 7)
Net defined benefit asset (Note 9)
Deferred tax assets (Note 12)
Mining rights (Note 6)
Other assets
Less: Allowance for doubtful accounts
Total investments and other assets

Total assets¥

2018(Thousands of
U.S. dollars)(Note 2)13,802 ¥16,814
3,303
41,928
889
1,923
(17)
78,643

10,368 $16,805
3,665
38,072
674
1,921
(16)
71,491

25,212
79,133
17,104
152
740
122,342(81,392)
40,94925,07676,80817,030152
743
119,811(78,213)
41,598237,311744,851
160,9931,430
6,965
1,151,562(766,114)
385,438

3,489

3,528

32,840453
281
86
12,454
2,163(649)
18,279457–
93
11,051
2,158(678)
16,610

4,263
2,644
809
117,225
20,359(6,108)172,053

129,700$ 1,297,740

137,872¥

129,913
158,264
31,089394,653
8,367
18,100(160)
740,2392

March 31,
2017
2018
(Millions of yen)

Liabilities and net assets
Current liabilities:
Notes and accounts payable, trade (Notes 3 and 15)
Short-term borrowings (Notes 8 and 15)
Current portion of long-term debt (Notes 8 and 15)
Commercial papers (Notes 8 and 15)
Lease obligations (Note 8)
Accrued income taxes
Accrued expenses
Provision for directors’ bonuses
Other current liabilities (Note 3)
Total current liabilities¥

Long-term liabilities:
Long-term debt (Notes 8 and 15)
Lease obligations (Note 8)
Deferred tax liabilities (Note 12)
Deferred tax liabilities related to land revaluation (Notes 5
and 12)
Net defined benefit liability (Note 9)
Accrued directors’ and audit & supervisory board members’
retirement benefits
Provision for environmental measures
Provision for loss on business of subsidiaries and associates
Asset retirement obligations (Note 10)
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets (Note 11):
Shareholders’ equity:
Common shares:
Authorized – 26,400,000 shares in 2018 and
264,000,000 shares in 2017
Issued– 13,585,521 shares in 2018 and
135,855,217 shares in 2017
Capital surplus
Retained earnings
Less: Treasury shares, at cost – 7,011 shares in 2018 and
62,710 shares in 2017
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on other securities
Deferred gains (losses) on hedges
Revaluation reserve for land (Note 5)
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

¥

7,728
11,462
9,548
8,000
10
463
2,456
40
2,989
42,699¥6,709
14,592
5,377
3,000
21
2,751
2,518
50
3,219
38,2402018(Thousands of
U.S. dollars)(Note 2)$

72,740107,887
89,87175,301
94
4,358
23,117376
28,134401,910

23,60858
997

30,853
68
408

222,213
545
9,384

4,345
145

4,348
201

40,897
1,364

–
52
165
2,736
684
32,79275,492

21
37
165
2,437
939
39,48077,721–489
1,553
25,7536,438
308,659
710,579

14,6309,876
25,211

14,6309,876
16,189137,707
92,959237,302(30)
49,688(26)
40,671(282)
467,695

908
43
8,997
2,576
165
12,691
62,380137,872

938
8,546
(247)
404
9,003
84,685
1,576
24,24638
1,553
11,308
119,455
51,979587,161
129,700 $ 1,297,740¥

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

3

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Operations
Year ended March 31,
2018
2017
2018
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Net sales
Cost of sales
Gross profit¥ 133,625
111,840
21,784¥ 113,952
92,88321,068$ 1,257,765
1,052,710
205,045

4,263
1,512
42
0
269
163
40
2,388
8,681
13,102

4,126
1,354
50
5
217
107
50
2,390
8,301
12,76640,126
14,231
395
0
2,532
1,534
376
22,477
81,711
123,324

189
(452)
172
80
9
(483)
(100)
0
87
–
–
(26)
(523)
12,579

78
(522)
129
21
16
(175)
(33)
0
54
(165)
(194)
71
(720)
12,046

1,778(4,254)
1,618
753
84
(4,546)
(941)
0
818
–
–
(244)
(4,922)
118,401

2,009
196
2,205
10,373
10,373

3,165
66
3,232
8,814
8,814

18,9101,844
20,754
97,637
97,637

Selling, general and administrative expenses:
Transportation expense
Salaries and wages
Retirement benefit expenses
Provision of allowance for doubtful accounts
Depreciation
Research and development costs
Provision for directors’ bonuses
Other
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Royalty income
Insurance income
Foreign exchange gains
Loss on retirement of property, plant and equipment
Impairment loss on fixed assets (Note 6)
Gain on sales of investment securities
Corporate housing rents income
Provision for loss on business of subsidiaries and associates
Loss on valuation of other investments
Other, net
Profit before income taxes
Income taxes (Note 12):Current
DeferredProfitProfit attributable to owners of the parent

¥

¥

$

(U.S. dollars)(Note 2)(Yen)
Per share:
Profit – basic¥

763.94¥649.08$

7.19

Cash dividends (Note 11)¥125.00

¥

10.00

$

1.17

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

4

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year ended March 31,
2018
2017
2018
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Profit¥10,373Comprehensive income

¥

(29)
291
1,000
127
1,389
11,762Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥

Other comprehensive income (Note 19):
Net unrealized (losses) gains on other securities
Deferred gains (losses) on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total other comprehensive income (loss)

11,762
–

¥

8,814

$

97,637

¥

315
(239)
(538)
119
(342)
8,471 $

(272)
2,739
9,412
1,195
13,074
110,7118,471–

110,711–¥$

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

5

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets
Shareholders’ equity
Number ofshares ofcommonshares issued(Thousands)

Commonshares

–

–

–

–

–

–

Balance as of March 31, 2017
Dividends of surplus
Profit attributable to owners of the parent
Acquisition of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for land
Net changes in items other than those inshareholders’ equity
Decrease due to share consolidation (Note11)

135,855–––––

14,630
–
–
–
–
–

9,876
–
–
–
0
–

16,189(1,357)
10,373
–
–
5

(26)
–
–
(3)
0
–

40,671(1,357)
10,373
(3)
0
5

–

–

–

–

–

–

¥

–
14,630

¥

¥

9,876
–
–
–

–
9,876

¥

¥

8,054
(678)
8,814
–

–
25,211

¥

¥

(24)
–
–
(1)

Total
shareholders’equity135,855–––(122,269)
13,585

14,630–––Retained
Treasury
earnings
shares (*)(Millions of yen)

Balance as of April 1, 2016
Dividends of surplus
Profit attributable to owners of the parent
Acquisition of treasury shares
Net changes in items other than those inshareholders’ equity

Balance as of March 31, 2018¥

Capitalsurplus

–
(30)

¥

¥

32,537
(678)
8,814
(1)

–
49,688

Shareholders’ equity
CommonsharesBalance as of March 31, 2017
Dividends of surplus
Profit attributable to owners of the parent
Acquisition of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for land
Net changes in items other than those inshareholders’ equity
Decrease due to share consolidation (Note 11)
Balance as of March 31, 2018

$ 137,707
–
–
–
–
–
–
–
$ 137,707

Capitalsurplus$$Retained
Treasury
earnings
shares (*)(Thousands of U.S. dollars)(Note 2)

92,959–––0–$ 152,381(12,772)
97,637––47––
92,959––$ 237,302

$

$

Total
shareholders’equity

(244)
–
–
(28)
0
–

$ 382,821(12,772)
97,637
(28)
0
47

–
–
(282)

–
–
$ 467,695

6

Accumulated other comprehensive income

Balance as of April 1, 2016
Dividends of surplus
Profit attributable to owners of theparentAcquisition of treasury shares
Net changes in items other than thosein shareholders’ equity

Net
unrealized
gains onothersecurities

Deferred
gains(losses) onhedges¥¥Balance as of March 31, 2017
Dividends of surplus
Profit attributable to owners of theparentAcquisition of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for land
Net changes in items other than thosein shareholders’ equity
Decrease due to share consolidation(Note 11)
Balance as of March 31, 2018

¥

622
–

(8)
–

RemeasureForeign
ments ofcurrency
Revaluation
definedtranslation
reserve foradjustment benefit plans
land(Millions of yen)
¥
9,003
¥
2,114
¥
(81)
–
–
–

Total
accumulated
othercomprehensive
income¥11,650–Total
net assets¥

44,188
(678)

–
–

–
–

–
–

–
–

–
–

–
–

8,814
(1)

315

(239)

–

(538)

119

(342)

(342)

938
–

(247)
–

9,003
–

1,576
–

38
–

11,308–51,979(1,357)

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

10,373
(3)
0
5

(29)

291

(5)

1,000

127

1,383

1,383

–
12,691–¥ 62,380

Total
accumulated
othercomprehensive
incomeTotal
net assets

357–$ 106,438–$ 489,260(12,772)

–
908

¥

–
43

¥

–
8,997

¥

–
2,576

–
165

¥

¥

Accumulated other comprehensive incomeNet
unrealized
gains onothersecurities

Deferred
gains(losses) onhedgesRemeasureForeign
ments ofcurrency
Revaluation
definedtranslation
reserve foradjustment benefit plans
land(Thousands of U.S. dollars)(Note 2)

Balance as of March 31, 2017
Dividends of surplus
Profit attributable to owners of theparentAcquisition of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for land
Net changes in items other than those inshareholders’ equity
Decrease due to share consolidation(Note 11)$$(2,324)–$ 84,742–$ 14,834
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

97,637
(28)
0
47

(272)

2,739

(47)

9,412

1,195

13,01713,017

Balance as of March 31, 2018

$

8,829
–

–
8,546

$

–

–

–

404

$ 84,685$ 24,246

$

$

–

–

–

1,553

$ 119,455$ 587,161(*) There were 7,011 and 62,710 treasury shares as of March 31, 2018 and 2017, respectively. (Note 11)

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

7

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year ended March 31,
2018
2017
2018
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Cash flows from operating activities:
Profit before income taxes
Depreciation
Impairment loss on fixed assets
Decrease in allowance for doubtful accounts
Increase in net defined benefit asset
Increase (decrease) in net defined benefit liability
Interest and dividend income
Interest expenses
Foreign exchange (gains) losses
Net loss on sales and retirement of property, plant and equipment
Decrease (increase) in notes and accounts receivable, trade
Increase in inventories
Increase (decrease) in notes and accounts payable, trade
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities¥ 12,579
5,877
100
(28)
(281)
127
(189)
452
(73)
342
263
(3,743)
1,432(370)
16,489189(462)(4,179)12,036¥ 12,046
5,347
33
(28)
–
(277)
(78)
522
43
102
(6,625)(1,901)
(267)
(284)
8,632
78
(520)
(550)
7,639

Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of intangible assets
Payments for purchases of investment securities
Collection of loans receivable
Other, net
Net cash used in investing activities(3,690)12(2,083)(3)
0(325)(6,089)(2,935)73(1,122)(3)
7(144)(4,125)(34,732)
112(19,606)(28)
0(3,059)(57,313)

Cash flows from financing activities:
Decrease in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Increase in commercial papers
Purchase of treasury shares
Cash dividends paid
Other, net
Net cash used in financing activities(3,216)
2,477(5,390)5,000(3)(1,357)(21)(2,512)–5,550(7,769)
–
(1)
(678)
(42)
(2,941)(30,271)
23,315(50,734)
47,063(28)(12,772)(197)(23,644)03,434
10,368¥ 13,802

(6)
566
9,801
¥ 10,368

032,323
97,590129,913

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 17)$$

118,401
55,318941(263)(2,644)
1,195(1,778)
4,254
(687)
3,219
2,475
(35,231)
13,478(3,482)
155,205
1,778(4,348)(39,335)
113,290

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

8

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2018

1.

Summary of Significant Accounting Policies(a) Basis of presentation
Toho Zinc Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their books of account inconformity with accounting principles generally accepted in Japan, and its foreign subsidiaries maintaintheir books of account in conformity with International Financial Reporting Standards (“IFRS”) or thoseof their countries of domicile.
The accompanying consolidated financial statements of the Company and its consolidated subsidiaries(collectively, the “Companies”) are prepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to application and disclosure requirements of IFRS, andare compiled from the consolidated financial statements prepared by the Company as required by the
Financial Instruments and Exchange Act of Japan.
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current
year’s presentation.
As permitted under the Financial Instruments and Exchange Act, amounts of less than one million yen
have been omitted. As a result, the totals shown in the accompanying consolidated financial statements(both in yen and in U.S. dollars) do not necessarily agree with the sums of the individual amounts.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto Local
Finance Bureau in Japan have been reclassified in the accompanying consolidated financial statements
for the convenience of readers outside Japan.
(b) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its
significant subsidiaries that are controlled by the Company. Under the effective control approach, allsignificant majority-owned companies are to be consolidated. Additionally, companies in which shareownership equals 50% or less may be required to be consolidated in cases where such companies are
effectively controlled by other companies through the interests held by a party who has a close
relationship with the parent. All significant intercompany transactions and accounts are eliminated inconsolidation.
(c) Foreign currency translation(1) Foreign currency transactions
All receivables and payables denominated in foreign currencies are translated into Japanese yenat the exchange rate prevailing at the balance sheet date.

9(2) Foreign currency financial statements
Assets and liabilities of the foreign consolidated subsidiaries are translated into Japanese yen at
the current exchange rate prevailing at the balance sheet date. Revenue and expense accounts
are translated at the average exchange rate in effect during the year. Foreign currency translation
adjustments are included in net assets.
(d) Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of cash flows are composed of cash on hands,bank deposits withdrawable on demand and short-term investments with original maturities of threemonths or less and minor risk for the fair value fluctuation.
(e) Inventories
Merchandise, finished goods, semi-finished goods, work in process and raw materials are stated at thelower of cost or net selling value, for which cost is primarily determined by the first-in first-out method.
Supplies are stated at the lower of cost or net selling value, for which cost is determined by the moving
average method.
(f)Financial instruments(1) Investment securities
Marketable securities classified as other securities are carried at fair value based on the average ofmarket price during the last month of the fiscal year with any changes in unrealized gains or losses,
net of income taxes, included directly in net assets. Cost of securities sold is determined by themoving average method. Non-marketable securities classified as other securities are carried atcost determined by the moving average method.
(2) Derivatives
The Company has entered into various derivative transactions, including forward foreignexchange contracts, interest rate swaps and metal forward contracts, in order to manage certain
risks arising from adverse fluctuations in foreign currency exchange rates, interest rates andcommodity prices, respectively.
All derivatives are recognized in the balance sheet at fair value, with changes in fair value included
in profit or loss for the period in which they arise, except for derivatives that are designated as“hedging instruments” (see Note 1. (f) (3) Hedge accounting below).
(3) Hedge accounting
Gains or losses arising from changes in fair value of the derivatives designated as “hedging
instruments” are deferred as an asset or liability and included in profit or loss in the period during
which the gains and losses on the hedged items or transactions are recognized.
Hedging instruments are derivative transactions including metal forward contracts, interest rate
swaps and holding of foreign currency deposits. The related hedged items are raw materials andfinished goods exposed to commodity price fluctuation risk, interest payments on debt loan andpurchases of fixed assets in foreign currencies, respectively.
The Company has a policy to utilize the above hedging instruments in order to reduce theCompany’s exposure to the risks of fluctuations in prices, interest rates and cash flows.

10

The Company evaluates the effectiveness of its hedging activities by reference to the accumulated
gains or losses on the hedging instruments and the underlying hedged items from thecommencement of the hedging transactions regarding metal forward contracts and foreign
currency deposits. Hedge effectiveness is omitted for interest rate swaps which qualify for hedge
accounting and meet specific criteria.
(g) Property, plant and equipment and depreciation
Property, plant and equipment, except for leased assets, are stated at cost and mainly depreciated by thestraight-line method over the estimated useful lives of the respective assets.
(h) Intangible assets and amortization
Mining rights are mainly amortized by using the unit-of-production method. Other intangible assets
are mainly amortized by using the straight-line method. Software for internal use is amortized by using
the straight-line method over the estimated useful life (5 years).
(i)

LeasesLeased assets which are under finance leases and capitalized are primarily the storage equipment(structures) in Smelting business and depreciated over the lease terms of the respective assets by thestraight-line method with no residual value.

(j)

Allowance for doubtful accounts
Allowance for doubtful accounts is provided at an amount sufficient to cover possible losses oncollection. The allowance consists of the estimated uncollectible amounts with respect to specificreceivables plus an amount based on historical experience of bad debt with respect to other receivables.

(k) Retirement benefits(1) Method for attribution of expected retirement benefits to periods
In the calculation of retirement benefit obligations, the expected retirement benefits are attributed
to the period up to the end of the current fiscal year based on the benefit formula method.
(2) Accounting method for actuarial gains and losses and past service costs
Actuarial gains and losses are amortized by the straight-line method over a certain period (10years) which is within the average remaining years of service of the eligible employees when thegains or losses arise, from the year following the year in which the gains and losses arise.
Past service costs are amortized as incurred by the straight-line method over a certain period (10years) which is within the average remaining years of service of the eligible employees when thegains or losses arise.
(3) Accounting method for unrecognized actuarial gains and losses and unrecognized past service
costs
Unrecognized actuarial gains and losses and unrecognized past service costs are recorded asremeasurements of defined benefit plans under accumulated other comprehensive income of net
assets after tax effect adjustments.

11(4) Application of the simplified method for small enterprises, etc.
Some of its consolidated subsidiaries apply the simplified method in the calculation of their net
defined benefit liability and retirement benefit expenses. Under the simplified method, thebenefits payable assuming the voluntary retirement of all eligible employees at the year-end are
deemed as retirement benefit obligations.
(l)Provision for directors’ bonuses
In order to prepare for the payments of bonuses to directors, provision for directors’ bonuses is recorded
based on the estimated amount to be paid at the end of the fiscal year.

(m) Accrued directors’ and audit & supervisory board members’ retirement benefits
In order to prepare for the disbursements of the directors’ and audit & supervisory board members’
retirement benefits, the Companies record an amount required to be paid out at the end of the fiscal year
which is calculated based on internal rules.
Note that the Company discontinued the system for directors’ and audit & supervisory board members’
retirement benefits in accordance with a resolution by the board of directors held on May 22, 2007.
(n) Provision for environmental measures
Provision for environmental measures is estimated and recorded to provide for future potential costs
related to disposal of polychlorinated biphenyl waste.
(o) Provision for loss on business of subsidiaries and associates
Provision for loss on business of subsidiaries and associates is recorded based on the estimated loss
burden amount corresponding to financial situation of those companies.
(p) Income taxes
Deferred tax assets and liabilities are determined based on the differences between the financial
reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates andlaws which will be in effect when the differences are expected to reverse.
(q) Recognition of revenues
Revenues and costs of construction contracts of which the percentage of completion can be reliably
estimated are recognized by the percentage-of-completion method. The percentage of completion is
calculated as the cost incurred to the estimated total cost. The completed-contract method continues tobe applied to contracts for which the percentage of completion cannot be reliably estimated.
(r)

Appropriation of retained earnings
Cash dividends and transfers to legal reserve are recorded in the fiscal year in which the proposed
appropriation of retained earnings is approved at the shareholders’ meeting.

12

(s) Profit per share
Profit per share is computed based on the profit available for distribution to shareholders of commonshares and the weighted average number of common shares outstanding during the year.
(t)

Asset retirement obligations
Asset retirement obligations are calculated based on the estimated life of mine from commencement ofoperations, which is deemed as the estimated usable period, using the discount rates of 0.5% and 0.7%
for the years ended March 31, 2018 and 2017, respectively. The amount mainly represents theobligations of CBH Resources Ltd. (“CBH”) to restore its mine sites at Endeavor Mine and Rasp Mineto their original states upon closure.

(u) Accounting standards and guidance issued but not yet adopted- “Revised Implementation Guidance on Tax Effect Accounting” (Accounting Standards Board of Japan(ASBJ) Guidance No. 28, issued on February 16, 2018)- “Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No.
26, issued on February 16, 2018)(1) Overview
Upon transferring the practical guidelines on tax effect accounting from the Japanese Institute ofCertified Public Accountants (JICPA) to the ASBJ, the ASBJ basically followed the same
framework and made the following modifications deemed necessary to the “Revised
Implementation Guidance on Tax Effect Accounting” and “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets.”(Main modified accounting treatments)- The treatment of taxable temporary differences relating to shares of subsidiaries in nonconsolidated financial statements- The treatment of recoverability of deferred tax assets for companies under Category 1(2) Date of application
These guidances will be applied effective from the beginning of fiscal years ending March 31,
2019.
(3) Effect of applying the revised guidances
The Company is currently evaluating the effect of applying the “Revised Implementation Guidanceon Tax Effect Accounting” and the “Revised Implementation Guidance on Recoverability ofDeferred Tax Assets” on its consolidated financial statements.

13

- “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, issued on March 30, 2018)- “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No.
30, issued on March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards
Board (FASB) have jointly developed a comprehensive accounting standard for revenue
recognition and issued “Revenue from Contracts with Customers” (IFRS 15 issued by the IASB
and Topic 606 issued by the FASB) on May 2014.
Considering that IFRS 15 is effective from fiscal years beginning on or after January 1, 2018 andTopic 606 is effective from fiscal years beginning after December 15, 2017, the ASBJ developed
the comprehensive accounting standard for revenue recognition and issued it together with theimplementation guidance.
The ASBJ’s basic policy in developing the accounting standard for revenue recognition was toadopt the basic principles of IFRS 15 as a starting point from the viewpoint of comparability offinancial statements, which is one of the benefits of maintaining consistency with IFRS 15, and to
add alternative treatments to the extent not to impair comparability in cases where previous
practices and other factors in Japan should be considered.
(2) Date of application
The accounting standard and guidance will be applied effective from the beginning of fiscal years
ending March 31, 2022.
(3) Effect of applying the standard and guidance
The Company is currently evaluating the effect of applying the “Accounting Standard for Revenue
Recognition” and the “Implementation Guidance on Accounting Standard for Revenue
Recognition” on its consolidated financial statements.
(v) Reclassifications
Certain reclassifications have been made to the prior year amounts to conform to the current year
presentation.

2.

U.S. Dollar Amounts

U.S. dollar amounts presented in the accompanying consolidated financial statements and notes are included
solely for the convenience of readers outside Japan, at the prevailing exchange rate of ¥106.24 to U.S. $1 on
March 31, 2018. These translations should not be construed as representations that the yen amounts actually
represent, or have been or could be converted into U.S. dollars at that or any other rate.

14

3.

Notes Receivable and Notes Payable Maturing at Fiscal Year-End

Although March 31, 2018 was a bank holiday, notes maturing on that date were accounted for as if they weresettled on their maturity date. The corresponding amounts of notes receivable and notes payable maturing on
March 31, 2018 were as follows:
March 31,2017
2018
(Millions of yen)

Notes receivable
Notes payable
Notes payable – equipment (other current liabilities)

4.

¥

27
156
101

¥

–
–
–

2018
(Thousands of
U.S. dollars)
$

254
1,468
950

Inventories

Inventories as of March 31, 2018 and 2017 consisted of the following:
March 31,2017
2018
(Millions of yen)

5.

2018
(Thousands of
U.S. dollars)

Merchandise and finished goods
Work in process
Raw materials and supplies¥

10,713
9,901
21,312¥

11,7309,269
17,072$

100,837
93,194200,602

Total¥

41,928¥38,072$394,653

Land Revaluation

In accordance with the Act on Revaluation of Land, the Company’s land used for its business operations wasrevalued as follows:
Date of revaluation: March 31, 2000
The differences between total fair value of land and the total book value after revaluation of land as ofMarch 31, 2018 and 2017 were ¥7,943 million ($74,764 thousand) and ¥7,841 million, respectively.
The tax effect of the excess on revaluation is recorded as deferred tax liabilities related to land revaluation
which is included in liabilities, and the remainder, net of income taxes portion of the excess on revaluation,is presented as revaluation reserve for land which is included in net assets.

15

6.

Impairment Loss on Fixed Assets

The Companies recognized impairment losses on certain asset groups for the years ended March 31, 2018and 2017 as follows:Year ended March 31, 2018
Location
Use
Category
Annaka City, Gunma Idle assets
Buildings and structures
Machinery and equipment(Millions of
yen)
¥
89
10
¥
100

Year ended March 31, 2017
Location
Use
Category
The State of New
Asset for Mineral
South Wales,
Resource business
Australia and others (Exploration rights) Mining rights(Millions of
yen)

¥
¥

Total

(Thousands of
U.S. dollars)
$
837
94
$
941

33
33

Business assets of the Company are grouped based on the categories used for its managerial accounting.
With respect to idle assets, each asset is treated as an individual unit to apply the accounting for the
impairment.
For the year ended March 31, 2018, the Company recognized impairment losses for the entire book value of
idle assets on the grounds that they were not projected to generate any future cash inflows nor readily salable.
For the year ended March 31, 2017, for the exploration rights at the mines in the State of New South Wales,
Australia and other locations, the Company recognized impairment losses for the book value of the
exploration rights recorded as assets on the grounds that there would be no additional exploration in the future.

7.

Investments in Unconsolidated Subsidiaries and Associates

Investments in unconsolidated subsidiaries and associates as of March 31, 2018 and 2017 are summarized asfollows:
March 31,2017
2018
(Millions of yen)

Unconsolidated subsidiaries
Associates

2018(Thousands of
U.S. dollars)

¥

12
440

¥

16
440

$

112
4,141

¥

453

¥

457

$

4,263

16

8.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt as of March 31, 2018 and 2017 consisted of the following:
March 31,2018
Weighted
averageinterest rate

Amount(Millions ofyen)
Short-term borrowings
Commercial papers
Current portion of longterm debt
Current portion of leaseobligations
Long-term debt
Lease obligations
Total

¥

¥

Due in2017

2018

Amount(Millions ofyen)Amount(Thousands of
U.S. dollars)¥$

14,592
3,000

11,462
8,000

0.6%
0.0

9,548

0.9

5,377

89,871

10
23,60858–
0.9

2019.4 – 2023.10–

2019.4 – 2025.3

2130,853
68

94
222,213545¥

52,68853,913$

107,887
75,301495,933

Average interest rates are calculated by using weighted-average interest rates as of March 31, 2018.
Average interest rates on lease obligations are not provided because interest equivalents included in the totallease payments are allocated to each applicable fiscal year on a straight-line basis.
The maturities of long-term debt and lease obligations outstanding as of March 31, 2018 were as follows:

2019
2020
2021
2022
2023
ThereafterLong-term
Lease
debt
obligations(Millions of yen)
¥
9,548
¥
10
11,113
9
7,675
9
1,591
9
2,260
9
966
19

Total

¥

Year ending March 31,

33,157¥

68

Long-term
Lease
debt
obligations(Thousands of U.S. dollars)$
89,871 $94
104,60284
72,242
84
14,975
84
21,272
84
9,092
178
$

312,095

$

640

17

Assets pledged as collateral for the long-term debt, including the current portion, as of March 31, 2018 and2017 were as follows:
March 31,2017
2018
(Millions of yen)

Pledged assets

Land (*1)
Buildings and structures (*1)
Machinery and equipment (*1)
Investment securities (*2)
Total

2018
(Thousands of
U.S. dollars)¥

13,785
4,581
5,742
–

¥

13,787
4,835
6,227
23

$

129,753
43,11954,047–¥

24,108¥24,873$226,920(*1) For the above assets, a revolving mortgage is set at the maximum amount of ¥1 million ($9thousand) with one bank as of March 31, 2018 and 2017.
(*2) These assets are pledged for the current portion of long-term debt of ¥2 million as of March 31,
2017.

9.

Retirement Benefit Plans

The Company and its domestic consolidated subsidiaries have funded and unfunded defined benefit plans
and lump-sum payment plans. The defined benefit corporate pension plans, all of which are funded, provide
lump-sum or pension benefits based on salaries and the length of service. The lump-sum payment plans,
which are unfunded, provide lump-sum benefits based on salaries and the length of service. In addition,certain consolidated subsidiaries apply the simplified method to calculate retirement benefit liabilities andretirement benefit expenses, where the required contributions to the pension fund are accounted for as
retirement benefit expenses.
Information regarding the Company’s defined benefit plans for the years ended March 31, 2018 and 2017
was as follows:(a) The changes in the retirement benefit obligations for the years ended March 31, 2018 and 2017 are as
follows:
Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Retirement benefit obligation at beginning of year
Service costs
Interest costs
Actuarial gains and losses arising during year
Retirement benefits paid

¥

3,575
278
2
(21)
(235)

¥

3,588 $
281
(2)
(59)
(232)

33,650
2,616
18
(197)
(2,211)Retirement benefit obligation at end of year

¥

3,599

¥

3,575

33,876$18

(b) The changes in plan assets for the years ended March 31, 2018 and 2017 are as follows:Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Plan assets at beginning of year
Expected return on plan assets
Actuarial gains and losses arising during year
Contributions from employer

¥

3,524
70
177
344
(235)

¥

3,101 $
62
117
476
(232)

33,170
658
1,666
3,237
(2,211)

¥

3,881

¥

3,524

36,530Retirement benefits paid
Plan assets at end of year$(c) The changes in net defined benefit liability accounted for using the simplified method for the years
ended March 31, 2018 and 2017 are as follows:Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Net defined benefit liability at beginning of year
Retirement benefit expenses

¥

150
10
(15)

¥

164 $
11
(25)

1,411
94
(141)

¥

145

¥

150

1,364

Retirement benefits paid
Net defined benefit liability at end of year$(d) The following table sets forth the funded status of the plans and the amounts recognized in the
consolidated balance sheets as of March 31, 2018 and 2017.
March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Retirement benefit obligation for funded plans
Plan assets¥

Retirement benefit obligation for unfunded plans
Net balance of liability and asset recognized on the
consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net balance of liability and asset recognized on the
consolidated balance sheet¥

3,575 $
(3,524)51

33,876(36,530)(2,644)

145

150

1,364

(135)

201

(1,270)

145
(281)

201
–

1,364
(2,644)

3,599(3,881)
(281)

(135)

¥

¥

201

$

(1,270)19

(e) The components of retirement benefit expenses for the years ended March 31, 2018 and 2017 are as
follows:
Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)Service costs
Interest costs
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service costs
Retirement benefit expenses calculated using thesimplified method
Retirement benefit expenses under defined benefit
plans
(f)

¥

275
2
(70)
23
(38)

¥

10
¥

203

¥

278 $
(2)
(62)
35
(38)

2,588
18
(658)
216
(357)

11

94

221

$

1,910

Remeasurements of defined benefit plans
The components of remeasurements of defined benefit plans included in other comprehensive income(before tax effect) for the years ended March 31, 2018 and 2017 are as follows:Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Actuarial gains and losses

¥

198
–

¥

176
–

$

1,863
–

¥

198

¥

176

$

1,863

Past service costs
Total(g) The components of remeasurements of defined benefit plans included in accumulated othercomprehensive income (before tax effect) as of March 31, 2018 and 2017 are as follows:
March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Unrecognized actuarial gains and losses
Unrecognized past service costs

¥

238
–

¥

15
38

$

2,240
–

Total

¥

238

¥

54

$

2,240

20

(h) Plan assets(1) Breakdown of plan assets
Percentage of each main category to total plan assets is as follows:Year ended March 31,
2017
2018
Debt securities
Equity securities
Life insurance general account
Other

36%
48
13
3
100%

37%
49
12
2
100%

Total
(2) Determination of expected long-term rate of return on plan assets

In determining the expected long-term rate of return on plan assets, the Company takes into
consideration the current and future plan asset allocation as well as the current and expected longterm rate of return on various asset categories comprising plan assets.
(i)

Actuarial assumptions
Year ended March 31,
2017
2018
Weighted-average actuarial assumptions at end of year:
Discount rate
Expected long-term rate of returnLump-sum election rate

0.1%
2.0
100.0

0.0%
2.0
100.0

10. Asset Retirement Obligations
The changes in asset retirement obligations for the years ended March 31, 2018 and 2017 were as follows:Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Balance at beginning of year
Adjustment due to passage of time
Other

¥

2,437
13
285

¥

2,610
6
(179)

$

22,938122
2,682

Balance at end of year

¥

2,736

¥

2,437

$

25,753

21

11.

Net Assets

Information regarding changes in net assets for the years ended March 31, 2018 and 2017 is as follows:(a) Shares issued and outstanding / Treasury shares
For the year ended March 31, 2018

Types of shares

Number ofshares as ofApril 1, 2017

Number ofshares as ofMarch 31, 2018

Increase
Decrease(Thousands of shares)

Shares issued and outstanding:Common shares (Notes 1 and 2)
135,855–(122,269)
13,585
Treasury shares:
Common shares (Notes 1, 3 and
4)
62
1
(57)
7
Notes 1. The Company consolidated its common shares at the ratio of 10 shares to 1 share as of October 1,
2017.
2. The decrease of 122,269 thousand shares was due to share consolidation.
3. The increase of 1 thousand shares was due to purchase of fractional shares arising from shareconsolidation (0 thousand shares) and purchase of shares of less than standard unit (1 thousand
shares: 1 thousand shares before share consolidation, 0 thousand shares after share consolidation).
4. The decrease of 57 thousand shares was due to share consolidation.
For the year ended March 31, 2017

Types of shares
Shares issued and outstanding:Common shares
Treasury shares:
Common shares (Note)

Number ofshares as ofApril 1, 2016

Number ofshares as ofMarch 31, 2017

Increase
Decrease(Thousands of shares)

135,855––

135,855

59

3

–

62

Note: The increase of 3 thousand shares was due to purchase of shares of less than standard unit.

(b) Dividends(1) Dividends paid
For the year ended March 31, 2018
Resolution

Type ofsharesAnnual general meeting of theshareholders on June 29, 2017

CommonsharesTotal dividends(Millions of yen)

Dividends per
share
(Yen)

¥

¥

1,357

10

Cut-off
date

Effective
date

March 31,2017

June 30,
2017

For the year ended March 31, 201722

Resolution

Type ofsharesAnnual general meeting of theshareholders on June 29, 2016

CommonsharesTotal dividends(Millions of yen)

Dividends per
share
(Yen)

¥

¥

678

5

Cut-off
date

Effective
date

March 31,2016

June 30,
2016

Cut-off
date

Effective
date

March 31,2017

June 30,
2017

For the year ended March 31, 2018
Resolution

Type ofsharesAnnual general meeting of theshareholders on June 29, 2017

CommonsharesTotal dividends(Thousands of U.S.
dollars)$

Dividends per
share(U.S. dollars)

12,772$0.09

Note: The Company consolidated its common shares at the ratio of 10 shares to 1 share as of October 1,
2017. Dividends per share reflect the amount before share consolidation.
(2) Dividends with the cut-off date in the year ended March 31, 2018 and the effective date in the year
ending March 31, 2019

Resolution

Type ofsharesTotal
dividends

Source ofdividends

Dividends
per share(Millions of

Cut-off
date

Effective
date

June 29,
2018

(Yen)

yen)

Annual general meeting of theshareholders on June 28, 2018

CommonsharesResolution

Type ofshares¥ 1,697

Retainedearnings¥

125

March 31,
2018

Total
dividends

Source ofdividends

Dividends
per share

Cut-off
date

Effective
date

March 31,2018

June 29,
2018(Thousands of(U.S. dollars)

U.S. dollars)

Annual general meeting of theshareholders on June 28, 2018

Commonshares$ 15,973

Retainedearnings$

1.17

The Companies Act of Japan provides that an amount equal to 10% of the amount to be disbursed as
distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the common shares. Such distributions can be made at any timeby resolution of the shareholders, or by the board of directors if certain conditions are met.

23

12. Income Taxes
As of March 31, 2018 and 2017, significant components of deferred tax assets and liabilities were as follows:
March 31,2017
2018
(Millions of yen)
Deferred tax assets:
Net defined benefit liability¥

Asset retirement obligations
Inventories write-off

49
813

¥

66
724

2018
(Thousands of
U.S. dollars)
$

461
7,652
5,421

576
2,361

129
2,566

233
55

239
151

Elimination of intercompany profits
Other

–
33
1,709

111
38
1,630

–
310
16,086Gross deferred tax assets
Less: Valuation allowance

5,832(3,474)

5,659(3,691)

54,894(32,699)

2,358

1,968

22,195

(392)
(727)

(406)
(547)

(3,689)(6,842)

(19)

–

(178)

(6)

(7)

(56)

Depreciation in excess of tax limit
Accrued employees’ bonus
Accrued enterprise tax
Deferred losses on hedges

Total deferred tax assets
Deferred tax liabilities:
Unrealized gains on other securities
Depreciation in foreign subsidiary
Deferred gains on hedges
Special tax-purpose reserve for reduction entry of
fixed assets
Reserve for special depreciation

22,223
2,193
517

(37)

(47)

(348)

Reserve for overseas exploration

(136)

–

(1,280)Net defined benefit asset
Removal cost related to asset retirement
obligations
Other

(86)

–

(809)

(4)
(969)
(2,379)(4)(594)(1,608)(37)(9,120)(22,392)

Total deferred tax liabilities
Net deferred tax assets (liabilities)

¥

(21)

¥

359

$

(197)

Deferred tax liabilities:
Deferred tax liabilities related to land revaluation

¥

4,345

¥

4,348

$

40,897

24

The reconciliation between the statutory tax rate and the effective tax rate for the years ended March 31, 2018and 2017 was as follows:Year ended March 31,
2017
2018

13.

Statutory tax rate
Increase (decrease) due to:Tax loss carryforwards of foreign consolidated subsidiaries
Elimination of intercompany profits
Change in valuation allowance
Other

30.86%

30.86%(17.59)5.06
0.05(0.84)(5.48)
0.85
0.61(0.01)

Effective tax rate

17.54%

26.83%

LeasesAs lessee:
There were no impairment losses allocated to leased assets for the years ended March 31, 2018 and 2017.

14.

Commitments and Contingent Liabilities

The Company has entered into loan commitment agreements amounting to ¥5,600 million ($52,710
thousand) and ¥5,600 million with two financial institutions as of March 31, 2018 and 2017, respectively.
There were no related loans payable outstanding, and therefore, the unused balance was ¥5,600 million($52,710 thousand) and ¥5,600 million under the credit facilities as of March 31, 2018 and 2017, respectively.
The Company had repurchase obligations of ¥571 million ($5,374 thousand) and ¥529 million in connection
with the securitization of receivables as of March 31, 2018 and 2017, respectively.

15.

Financial Instruments(a) Overview(1) Policy for financial instruments
The Companies raise funds mainly through bank borrowings in consideration of their business plans.
The Companies invest their temporary surplus funds in highly liquid financial assets and raise shortterm operating capital through bank borrowings and issuances of commercial papers. The Companies
use derivatives to avoid after-mentioned risks and do not enter into derivatives for speculative or trading
purposes.
(2) Descriptions of financial instruments and related risks
Trade receivables––notes and accounts receivable, trade and electronically recorded monetary claims ––are exposed to customer credit risk. Trade receivables denominated in foreign currencies which arederived from foreign operations are exposed to foreign currency risk, and such risk is hedged by forward
foreign exchange contracts.

25

Investment securities are mainly composed of equity securities of companies with business relationships
and exposed to market risk.
Trade payables––notes and accounts payable, trade––are mostly due within two months or less.
Certain trade payables denominated in foreign currencies are exposed to foreign currency risk, and suchrisk is hedged by forward foreign exchange contracts.
Trade receivables and payables in connection with the Smelting business are exposed to commodity
price fluctuation risk of London Metal Exchange (“LME”), and such risk is hedged by metal forward
contracts.
Borrowings are principally for the purpose of working capital (mainly short-term), and capital
investments (long-term). Certain long-term debt is exposed to interest rate fluctuation risk, and such risk
is hedged by derivatives (interest rate swaps).
As for derivatives, the Companies have entered into the forward foreign exchange contracts and others
to hedge the foreign currency risk arising from the trade receivables and payables denominated inforeign currencies, metal forward contracts to hedge the commodity price fluctuation risk of LME
arising from the trade receivables and payables on the Smelting business and interest rate swaps to hedge
the fluctuation risk deriving from interest payment of long-term debt. See Note 1. (f) (3) Hedge
accounting for information about the method of hedge accounting, hedging instruments and hedged
items, hedging policy, and assessment of hedge effectiveness.
(3) Risk management for financial instruments(i)Management of credit risk (risk of default by customers or counterparties)
For trade receivables, sales departments of each division of the Companies periodically monitor
creditworthiness of their main customers and manage due dates and outstanding balances bycustomer in accordance with the internal rules of the Company. In addition, the Companies aremaking efforts to identify uncollectibility in the earlier stage and mitigate risks of bad debts, due
to customers with financial difficulties.
The Companies believe that the credit risk of derivatives is insignificant as they enter into
derivative transactions only with financial institutions with high credit ratings.

(ii)Management of market risks (risks of fluctuations in foreign exchange rates, commodity prices,interest rates and others)
For trade receivables and payables denominated in foreign currencies, the foreign currency risk of
the Company identified by currency on a monthly basis is hedged by forward foreign exchange
contracts and others. In order to mitigate the commodity price fluctuation risks of LME for tradereceivables and payables on the Smelting business, the Company has entered into the metal
forward contracts. In addition, the Company has entered into interest rate swap transactions to
mitigate the interest rate fluctuation risk for interest payment of long-term debt.
For investment securities, the Companies periodically monitor the fair values and financial
position of the issuers and continuously review the holding status taking into account market
conditions and relationships with the issuers.
Derivative transactions are conducted and managed by treasury personnel including directors andeach division, and risk management is sufficiently conducted by making reports to management
every time transactions are executed as well as on a periodical basis.

26

(iii) Management of liquidity risk on funding (risk of default at due dates)
Based on the report from each department, subsidiaries and associates, the department in chargeof the Company prepares and updates its cash flow plan on a timely basis and manages liquidity
risk by maintaining liquid funds.
(4) Supplementary explanation of the fair value of financial instruments
Fair values of financial instruments are based on their respective market prices if available. When
there is no market price available, fair value is reasonably calculated. Since various assumptions andfactors are reflected in the calculation of the fair value, different assumptions and factors could result indifferent fair value. In addition, the notional amounts of derivatives in Note 18. Derivative
Transactions are not indicative of the market risk involved in derivative transactions.
(b) Fair values of financial instruments
Carrying values of financial instruments on the consolidated balance sheets as of March 31, 2018 and 2017
and their fair values are shown in the following table. Financial instruments whose fair value is extremely
difficult to determine are not included in the following table (Please refer to Note 2 below).

Carrying value

March 31, 2018
Fair value(Millions of yen)

(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Electronically recorded monetary claims(4) Investment securities
Total assets¥

13,802
16,8143,303
2,876
36,796¥(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Commercial papers(4) Long-term debt (*1)
Total liabilities

¥

¥

¥

7,728
11,4628,000
33,15760,348¥72

Derivatives (*2)¥

13,802
16,8143,303
2,876
36,796

¥

¥

¥

7,728
11,4628,000
33,28760,479

¥

–
–
–
130
130

¥

72

¥

–

¥

Carrying value

March 31, 2017
Fair value(Millions of yen)

(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Electronically recorded monetary claims(4) Investment securities
Total assets¥

10,36816,805
3,665
2,915
33,755¥(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Long-term debt (*1)
Total liabilities

¥

¥

¥

6,709
14,592
36,23057,533¥(364)

Derivatives (*2)¥

Difference

¥

–
–
–
–
–

Difference

10,36816,805
3,665
2,915
33,755

¥

¥

¥

6,709
14,59236,44757,749

¥

–
–
216
216

¥

(364)

¥

–

¥

¥

–
–
–
–
–

27

March 31, 2018
Carrying value
Fair value
Difference(Thousands of U.S. dollars)(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Electronically recorded monetary claims(4) Investment securities
Total assets$(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Commercial papers(4) Long-term debt (*1)
Total liabilities$

Derivatives (*2)

129,913
158,264
31,08927,070346,347$$$

72,740107,887
75,301
312,095
568,034$677$

129,913
158,264
31,08927,070346,347$$$

72,740107,887
75,301
313,318
569,267

$

–
–
–
1,223
1,223

$

677

$

–

$

$

–
–
–
–
–

(*1) Current portion of long-term debt is included in long-term debt as of March 31, 2018 and 2017.
(*2) The value of assets and liabilities arising from derivatives is shown at net value, and the net liability
position is shown in parentheses.
Notes:
1.

Methods to calculate the fair value of financial instruments and other matters related to securities andderivative transactions
Assets(1) Cash and time deposits, (2) Notes and accounts receivable, trade and (3) Electronically recordedmonetary claims
Since these items are settled in a short period of time, their carrying value approximates fair value.
(4) Investment securities
The fair value of equity securities is based on a quoted market price. For information on securities
classified by holding purpose, please refer to Note 16. Investment Securities.
Liabilities(1) Notes and accounts payable, trade, (2) Short-term borrowings and (3) Commercial papers
Since these items are settled in a short period of time, their carrying value approximates fair value.
(4) Long-term debt
For long-term debt with floating interest rates, its carrying value approximates fair value since the debt
reflects the market interest rates in a short period of time and the credit condition of the Company has
not changed significantly since the debt was executed. For long-term debt with fixed interest rates,
the fair value is based upon the present value of the total of principal and interest discounted by theinterest rate to be applied if similar new borrowings were entered into.
Derivative transactions
Please refer to Note 18. Derivative Transactions.

28

2.

Financial instruments whose fair value is extremely difficult to determine
March 31,2018
2017
(Millions of yen)

Unlisted equity securities

¥

696

¥

701

2018
(Thousands of
U.S. dollars)
$

6,551

These are not included in (4) Investment securities in the above table because there were no market
prices available and it was extremely difficult to determine the fair value.
3.

Redemption schedule for monetary receivables as of March 31, 2018

Due in one
year or less

Cash and time deposits
Notes and accounts receivable, trade
Electronically recorded monetary claims
Total

¥

¥

13,795
16,814
3,303
33,912Due in one
year or less

Cash and time deposits
Notes and accounts receivable, trade
Electronically recorded monetary claims
Total
4.

$ 129,847
158,264
31,089$ 319,201

March 31, 2018
Due after
Due after
one yearfive years
through fivethrough ten
years
years
(Millions of yen)
¥

¥

–
–
–
–

¥

¥

–
–
–
–

Due after
ten years¥¥

March 31, 2018
Due after
Due after
one yearfive years
through fivethrough ten
years
years
(Thousands of U.S. dollars)
$

$

–
–
–
–

$

$

–
–
–
–

–
–
–
–

Due after
ten years

$

$

–
–
–
–

The redemption schedule for long-term debt is disclosed in Note 8. Short-Term Borrowings and LongTerm Debt.

29

16.

Investment Securities

Investment securities held by the Companies are all classified as other securities.
The aggregate cost and fair value (carrying value) of marketable securities classified as other securities as ofMarch 31, 2018 and 2017 were as follows:

Cost

March 31, 2018
Fair value(carrying value)(Millions of yen)

Unrealized gains(losses)

Securities whose fair value exceeds theircost:
Equity securities

¥

1,261

¥

2,693

¥

1,432

Securities whose fair value does notexceed their cost:
Equity securities
Total

¥

313
1,575

¥

182
2,876

¥

(131)
1,301

Cost
Securities whose fair value exceeds theircost:
Equity securities
Securities whose fair value does notexceed their cost:
Equity securities
Total

¥

1,265

¥

306
1,571

Cost
Securities whose fair value exceeds theircost:
Equity securities
Securities whose fair value does notexceed their cost:
Equity securities
Total

$

11,869$2,946
14,824

March 31, 2017
Fair value(carrying value)(Millions of yen)

Unrealized gains(losses)

¥

2,712

¥

1,447

¥

203
2,915

¥

(102)
1,344

March 31, 2018
Fair value
Unrealized gains(carrying value)(losses)(Thousands of U.S. dollars)$

25,348$

1,713
27,070$13,478$(1,233)
12,245

As of March 31, 2018 and 2017, unlisted equity securities amounting to ¥696 million ($6,551 thousand) and¥701 million, respectively, were not included in the above table because there were no market prices available
and it was extremely difficult to determine the fair value.

30

Information about sales of securities classified as other securities for the years ended March 31, 2018 and2017 was as follows:Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Sales proceeds
Aggregate gains
Aggregate losses

¥

–
–
–

¥

0
0
–

$

–
–
—

17. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2018 and 2017 were composed of the following:
March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Cash and cash equivalents¥¥

13,80213,802¥¥

10,36810,368$$

129,913
129,91331

18.

Derivative Transactions(a) Summarized below are the notional amounts and the fair value of derivative instruments outstanding asof March 31, 2018 and 2017, for which hedge accounting has not been applied.
(1) Currency-related transactions
March 31, 2018
Notional amount
Maturing afterContract
one yearamountFair value(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Forward foreign exchange
contracts
Sell:
US Dollar
Total

¥
¥

30
30

¥
¥

–
–

¥
¥

0
0

¥
¥

0
0

March 31, 2018
Notional amountContract
Maturing after
amountone year
Fair value(Thousands of U.S. dollars)

Unrealized
gains (losses)

OTC transactions:
Forward foreign exchange
contracts
Sell:
US Dollar
Total

$
$

282
282

$
$

–
–

$
$

0
0

$
$

0
0

Note: The calculation of fair value is based on prices obtained from counterparty financial institutions
and others.
There were no currency-related transactions as of March 31, 2017.
(2) Commodity-related transactions
March 31, 2018
Notional amount
Maturing afterContract
one year
Fair value
amount(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Metal forward contracts
Sell:
Metals
Total

¥
¥

109
109

¥
¥

–
–

¥
¥

9
9

¥
¥

9
9

32

March 31, 2017
Notional amount
Maturing afterContract
one yearamountFair value(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Metal forward contracts
Sell:
Metals
Total

¥
¥

163
163

¥
¥

–
–

¥
¥

(5)
(5)

March 31, 2018
Notional amount
Maturing afterContract
one yearamountFair value(Thousands of U.S. dollars)

¥
¥

(5)
(5)

Unrealized
gains (losses)

OTC transactions:
Metal forward contracts
Sell:
Metals
Total

$
$

1,025
1,025

$
$

–
–

$
$

84
84

$
$

84
84

Note: The calculation of fair value is based on prices obtained from counterparties and others.
(b) Summarized below are the notional amounts and the fair value of derivative instruments outstanding asof March 31, 2018 and 2017, for which hedge accounting has been applied.
(1) Interest-related transactions
March 31, 2018
Notional amount
Maturing afterContract
one yearamount(Millions of yen)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

¥
¥

12,554
12,554¥¥

11,722
11,722

March 31, 2017
Notional amount
Maturing afterContract
one yearamount(Millions of yen)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

¥
¥

13,385
13,385¥¥

11,677
11,677

Fair value(Note)

Fair value(Note)

33

March 31, 2018
Notional amount
Maturing afterContract
one yearamountFair value(Thousands of U.S. dollars)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

$
$

118,166
118,166$ 110,335$ 110,335(Note)

Note: Interest rate swaps to which exceptional treatment is applied are accounted for together with thelong-term debt designated as a hedged item. Therefore, their fair values are included in thefair value of long-term debt.

(2) Commodity-related transactions
March 31, 2018
Notional amount
Maturing afterContract
one yearamount(Millions of yen)
Metal forward contracts, accounted for as part of
raw materials and finished goods:
Sell: Metals
Buy: Metals
Total

¥
¥

10,103
6,306
16,410¥¥–––Fair value¥¥

March 31, 2017
Notional amount
Maturing afterContract
one yearamount(Millions of yen)
Metal forward contracts, accounted for as part of
raw materials and finished goods:
Sell: Metals
Total

¥
¥

10,873
10,873

¥
¥

–
–

336
(274)
62

Fair value

¥
¥

(341)
(341)

March 31, 2018
Notional amount
Maturing afterContract
one year
Fair value
amount(Thousands of U.S. dollars)
Metal forward contracts, accounted for as part of
raw materials and finished goods:
Sell: Metals
Buy: Metals
Total

$
$

95,09559,356
154,461

$
$

–
–
–

$
$

3,162
(2,579)583

Note: The calculation of fair value is based on prices obtained from counterparties and others.

34

19.

Other Comprehensive Income

Reclassification adjustments and tax effects allocated to each component of other comprehensive loss for theyears ended March 31, 2018 and 2017 were as follows:
Years ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Net unrealized (losses) gains on other securities:(Losses) gains arising during the year
Reclassification adjustments
Amount before tax effectTax effect¥

Deferred gains (losses) on hedges:
Gains (losses) arising during the year
Reclassification adjustments
Amount before tax effectTax effectForeign currency translation adjustment:
Adjustments arising during the year
Remeasurements of defined benefit plans:
Gains arising during the year
Reclassification adjustments
Amount before tax effectTax effectTotal other comprehensive income (loss)

¥

(43)
(0)
(43)
13
(29)

¥

448
(0)
448
(133)
315

$

(404)
(0)
(404)
122
(272)

502
(80)
422
(130)
291

(1,764)
1,418
(345)
106
(239)

4,725
(753)
3,972
(1,223)
2,739

1,000
1,000

(538)
(538)

9,412
9,412

198
(15)
183
(56)

176
(3)
172
(52)

1,863
(141)
1,722
(527)

127

119

1,195

1,389

¥

(342)

$

13,07435

20.

Segment Information(a) Overview of reportable segments
The Company defines reportable segments as components of the Company for which separate financial
information is available and whose operating results are regularly evaluated by the board of directors tomake decisions about how resources are allocated and assess its performance.
Operating departments of the Company are organized according to products and services, and eachdepartment plans comprehensive domestic and overseas strategies for its products and services anddevelops business activities through the Company and its consolidated subsidiaries. Thus, reportablesegments of the Company are determined based on such operating departments; namely, “Smelting,”“Mineral Resource” (organized based on CBH, a consolidated subsidiary), “Electronic Components andMaterials” and “Environment and Recycling.” The Smelting segment engages in sales and production of zinc and lead products, electric silver andsulfuric acid.
 The Mineral Resource segment engages in exploration, development and production of non-ferrous
metal resources and sales of their output.
 The Electronic Components and Materials segment engages in sales and production of electronicparts, electrolytic iron, plating and machine parts.
 The Environment and Recycling segment engages in sales and production of zinc oxide andrecycling of waste materials.
(b) Basis of measurement for the amounts of net sales, profit or loss, assets and other items for eachreportable segment
The accounting policies of each reportable segment are consistent to those described in Note 1. Summaryof Significant Accounting Policies. The segment profit is based on operating income, and intersegment
sales and transfers are based on actual market prices.
(c) Information about net sales, profit or loss, assets and other items
Year ended March 31, 2018
Reportable segment
Electronic
CompoEnvironMineral nents and ment andSmelting Resource Materials Recycling

Other(Note 1)

Total

Total

Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)¥¥

(Millions of yen)
Net sales:
External customers
Intersegment
Total
Segment profit
Segment assets
Other items:
Depreciation
Increase in property,
plant and equipment
and intangible assets
Impairment losses on
fixed assets¥ 94,984
691¥ 95,675¥ 3,328¥ 73,519¥ 20,173
5,482¥ 25,656¥ 7,350¥ 25,186¥ 6,1903¥ 6,193¥560¥ 10,034¥ 5,394–¥ 5,394¥ 2,011¥ 4,705¥126,743
6,176¥132,920¥ 13,250¥113,445

6,881
5,096
¥ 11,978¥846¥ 4,742¥ 133,625
11,273¥ 144,898¥ 14,097¥ 118,188–(11,273)¥ (11,273)¥(994)¥ 19,684¥¥¥

133,625–
133,625
13,102
137,872¥ 2,543¥ 2,619¥¥258¥ 5,670

¥

¥

¥

¥

5,877

1,513

3,837

169

262

5,782

120

5,903

33

5,937

–

–

–

–

–

–

–

100

100

249

¥

148

5,818

58

36

Year ended March 31, 2017
Reportable segment
Electronic
CompoEnvironMineral nents and ment andSmelting Resource Materials Recycling

Other(Note 1)

Total

Total

Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)¥¥

(Millions of yen)
Net sales:
External customers
Intersegment
Total
Segment profit
Segment assets
Other items:
Depreciation
Increase in property,
plant and equipment
and intangible assets
Impairment losses on
fixed assets¥ 87,341
559¥ 87,901¥ 8,339¥ 70,919¥ 9,128
4,197¥ 13,326¥ 1,985¥ 23,088¥ 5,906
1¥ 5,907¥636¥ 10,416¥ 4,536–¥ 4,536¥ 1,410¥ 4,871¥106,912
4,758¥111,671¥ 12,372¥109,296

7,039
3,576
¥ 10,616¥
739¥ 4,816¥ 113,952
8,335¥ 122,287¥ 13,112¥ 114,113–(8,335)¥ (8,335)¥(345)¥ 15,587¥¥¥

113,952–
113,952
12,766
129,700¥ 2,570¥ 2,076¥¥249¥ 5,162

¥

¥

¥

¥

5,347

1,529

1,397

154

208

3,289

423

3,713

31

3,745

–

33

–

–

33

–

33

–

33

265

¥

130

5,293

53

Year ended March 31, 2018
Reportable segment

Smelting

MineralResource

Electronic
CompoEnvironnents and ment andMaterials Recycling

Other(Note 1)

Total

Total

Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)—(106,108)$ (106,108)$ (9,356)$ 185,278$ 1,257,765—$ 1,257,765$ 123,324$ 1,297,740(Thousands of U.S. dollars)
Net sales:
External customers
Intersegment
Total
Segment profit
Segment assets
Other items:
Depreciation
Increase in property,
plant and equipment
and intangible assets
Impairment losses on
fixed assets$ 894,051
6,504$ 900,555$ 31,325$ 692,008$ 189,881
51,600$ 241,490$ 69,182$ 237,067$ 58,26428$ 58,292$ 5,271$ 94,446$ 23,936 $ 24,651 $2,343$ 50,771—$ 50,771$ 18,928$ 44,286$ 1,192,987
58,132$ 1,251,129$ 124,717$1,067,818

$

$

2,428

$ 64,768 $ 1,257,765
47,966106,108$ 112,744 $ 1,363,874$ 7,963 $ 132,690$ 44,634 $1,112,462$

53,369 $1,393 $

54,762 $545$

55,31814,241

36,116

1,590

2,466

54,423

1,129

55,562310

55,882

–

–

–

–

–

–

–

941

941

Notes 1. “Other” represents business segments not belonging to reportable segments and includes soundinsulation building materials, civil engineering, construction and plant engineering,transportation, environmental analysis and others.
2. “Reconciliation” included the followings:
Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)

Segment profit (loss):
Intersegment elimination

¥

(592)
(401)

¥

60
(406)

$

(5,572)(3,774)

¥

(994)

¥

(345)

$

(9,356)

Corporate expenses (*)Total(*) “Corporate expenses” represents mainly general and administrative expenses that are notallocated to reportable segments.

37

Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)

Segment assets:
Corporate assets (*)¥

19,684¥

15,587$

185,278(*) “Corporate assets” represents mainly the Company’s investments of surplus funds
including cash, time deposits and investment securities and assets relating to administrative
divisions.
Year ended March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)

Other items:
Depreciation
Increase in property, plant and equipment
and intangible assets (*)

¥

58
33

¥

53
31

$

545
310

(*) “Increase in property, plant and equipment and intangible assets” represents mainly capital
expenditures that do not belong to reportable segments.
3. Segment profit is reconciled to operating income on the consolidated statement of operations.
(d) Related information(1) Information by product and service
Information by product and service has been omitted since similar information is disclosed insegment information described above.
(2) Information by geographical area
Net sales information by geographical area for the year ended March 31, 2018 was as follows:Year ended March 31,
2018(Millions of yen)(Thousands of U.S.
dollars)Japan
Asia
Oceania¥

113,563
9,949
10,112$

1,068,928
93,646
95,180Total¥

133,625$

1,257,765

Net sales information by geographical area for the year ended March 31, 2017 has been omitted
since sales to external customers in Japan exceed 90% of consolidated net sales.

38

Property, plant and equipment information by geographical area as of March 31, 2018 and 2017
was as follows:
March 31,
2017
2018
2018
(Millions of yen)(Thousands of
U.S. dollars)
Japan

¥

31,341
9,607¥

32,651
8,947$

295,001
90,427¥40,949¥41,598$385,438

Australia
Total(3) Information by major customer

Information by major customer has been omitted since there were no sales to a single externalcustomer accounting for 10% or more of consolidated net sales.

39