TOYO KANETSU K.K.
annual report 2009

Contents
Profile ····························································2
Financial Highlights ············································3
To Our Shareholders ···········································4
Board of Directors ··············································5Line of Business ················································5
Qualification ····················································5
Subsidiaries and Affiliated Companies ······················6Analysis of Operating Environment and Results ·········7Business Risks ··················································8Report of Independent Auditors ······························10Consolidated Balance Sheets ·································11
Consolidated Statements of Operations ·····················13
Consolidated Statements of Changes in Net Assets········14
Consolidated Statements of Cash Flows ····················17Notes to the Consolidated Financial Statements ···········18
Corporate Data ··················································30
Offices of Subsidiaries and Affiliated Companies ·········30

Profile
Toyo Kanetsu K.K. (TKK) was established in the year of 1941. Since that time, TKK has continued to meet therequirements of the industry through our policy of “Customers First”.
TKK will continue to provide the advanced technology to answer the needs of our clients for today and tomorrow.

The Plant & Machinery Business was established in 1950 when in-house welding technology
was developed for welded storage tanks. Since then, our expertise has expanded to provide
customers various kinds of storage tanks consisting of more than 5,000 units varying fromcrude oil storage tanks to LNG storage tanks. Particularly, we are proud of our outstanding
track record of LNG Storage Tank construction in Japan and in overseas sites in Asia, Africa,
Middle East, Oceania and the Western Hemisphere. Our technical expertise and our outstanding
record of Safety, Quality & Delivery have been recognized and appreciated by the major clients
throughout the world.

The Material Handling Business was begun in 1953 for manufacture and installation of highly
standardized conveyors systems. Since that time, the Division has continued to develop thetechnology to meet the needs of our clients. The Division supplied one of the largest Airport
Baggage Handling Systems in the world in 1998 at Kuala Lumpur International Airport in
Malaysia. Also, as a leading provider company of Logistics Solutions in Japan, the Division has
successfully completed numerous projects such as Distribution Center System, Truck Terminal
System, Food Distribution Processing Center and Postal Sorting System. The Division becamea subsidiary company of TKK under the name of Toyo Kanetsu Solutions K.K. in 2002 in orderto maximize the efficiency and also to vitalize TKK Group companies

The Building Construction Division was started in 1989 for construction of apartment houses
with application of modular steel frame structures. The Division has expanded its activities toshop and office buildings with use of prefabricated construction methods as well as
conventional construction methods.

-2-

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Financial Highlights
Thousands of
U.S. dollars

2009

2008

Millions of yen
2007¥ 47,661
26,392
11,961
5,020
592
3,696
1,867
3,005
533

¥ 49,785
23,355
15,243
5,756
581
4,850
3,686
3,810
415

¥ 45,548
17,02917,316
5,944
521
4,738
1,887
2,836
277

¥ 45,530
14,643
20,909
5,668
4,310
1,904
1,626
-

¥ 39,734
15,217
13,595
7,533
3,389
1,349
1,011
-

$485,201
268,677
121,769
51,103
6,023
37,62919,00430,594
5,435

33,705
13,046
7,920
274
54,94521,555
5,375-

30,245
16,324
12,269221
59,05921,272
8,988-

30,226
16,956
21,498322
69,002
22,865
14,195-25,30916,56624,852413
67,14020,084
15,647
10
31,39922,796
16,54416,300317
55,957
20,42011,50725
24,005343,126
132,807
80,624
2,790
559,347
219,430
54,720----67,14055,957-

Shareholders’ Equity
Valuation and Translation Adjustments
Minority Interests in Consolidated Subsidiaries
Total Liabilities and Net Assets

27,824102
89
54,94526,5642,235
59,05924,6517,283
869,002--283,251
1,034
912
559,347

Order Backlog¥66,071¥57,412¥34,176¥38,467¥34,232$672,613

Per Share:
Net Income
Cash dividends
Shareholders' Equity

2009¥ 22.99
4.00¥222.092008¥ 27.90
4.00¥216.05

Yen
2007¥ 20.52
3.00¥231.102006¥ 11.76
2.00¥227.112005¥7.31¥173.57

2009
14,400629

2008
15,747597

2007
16,797573

2006
17,005552

2005
16,418525

For the Years Ended 31st March:
Net Sales
Plant & Machinery Division
Material Handling Systems Division
Building Construction Division
Real Estate Utilizing Division
Other
Operating Income
Net Income
Cash dividends
At 31st March:
Current Assets
Net Property, Plant and Equipment
Investments and Advances
Intangibles
Total Assets
Current Liabilities
Long-Term Liabilities
Minority Interests in Consolidated Subsidiaries

Shareholders' Equity
Total Liabilities, Minority Interests andShareholders' Equity

Number of Shareholders
Number of Employees

2006

2005

2009

U.S.dollars

The U.S. dollar amounts in this annual report represent translations of Japanese yen at the rate of ￥98.23=$1.00, solely for the reader's convenience.

-3-

2009
$ 0.23$ 0.04$ 2.26

To Our Shareholders
In the year ended March 31, 2009, the sales and profit of the
Toyo Kanetsu Group decreased, unfortunately failing to reachthe previous fiscal year’s level which was a record high,affected by fewer profitable projects, as a number of suchprojects had run their course, higher material costs andexchange fluctuations.
Under this business environment, we proposed a dividend of 4
yen per share for the year ended March 31, 2009, which is thesame as the previous fiscal year. In addition, between
November and December last year, we bought back approx.
1.2 billion yen’s worth of our own shares, taking a long-term
perspective for our shareholder return policy.
Taking into account our business results and the rapidlychanging business environment, the Group will further raise
its corporate value by formulating a mid-term business plan(for fiscal years 2009 through 2011), conducting business from a mid- to long-term standpoint more than ever, meeting the
expectations of stakeholders including shareholders, and ensuring the implementation of the following priority measures.
1. Basic policy of our core businesses
Under the Group’s management vision of being “a group that sustainably grows and develops backed by its superior
technology, products and services,” the Company’s Plant & Machinery Business and Material Handling Systems Businesshave respective business policies of securing a stable profit and revitalizing operations and establishing an operating base.
2. Priority measures for our core businesses
・Plant & Machinery Business
The Plant & Machinery Business will implement five priority measures to achieve its business policy of securing a stableprofit.
1) Reinforcing price competitiveness2) Expanding the PJ handling capability and developing a handling framework
3) Reinforcing sales and marketing capabilities
4) Promoting research and development
5) Reinforcing human resource management
・Material Handling Systems Business
The Material Handling Systems Business will implement five priority measures to achieve its business policy of revitalizing
operations and establishing an operating base.
1) Reinforcing price competitiveness2) Reinforcing its suggestion-making capability3) Further cultivating the core market and expanding into growth markets
4) Fostering human resources and enhancing organizational agility5) Reinforcing cooperation with maintenance subsidiaries
・Building Construction BusinessAlthough the business environment surrounding the construction industry is challenging, we will strive to further reinforce
our revenue base by eliminating unprofitable projects and developing new fields, while enhancing our sales and marketing
capabilities and construction management framework, and making cost reduction efforts.
We look forward to your continued understanding and support in the future.
August 2009

Takeshi Mizukami
President & Representative Director-4-Board of Directors and Corporate Auditors
President & Representative Director･･････････････Takeshi MizukamiManaging Director ･････････････････････････････ Shinji Shimazaki
Director･･･････････････････････････････････････ Sadao Arita･･･････････････････････････････････････ Toru Yanagawa･･･････････････････････････････････････ Shoji Fujiyoshi
Auditor･･･････････････････････････････････････ Teruo Nojo･･･････････････････････････････････････ Masaharu Hino (Outside Auditor)･･･････････････････････････････････････ Keiichi Miyakawa (Outside Auditor)･･･････････････････････････････････････ Takashi Nakamura (Outside Auditor)

Line of Business
Plant & Machinery Business
Design & Engineering, Procurement, Shop-Fabrication and Construction of :Floating Roof Tank
Cone Roof Tank
Dome Roof Tank
- LNG/Ethylene Storage Tank, etc.
- LPG Storage Tank, etc.
Spherical Tank
Material Handling Systems Business
Planning, Design, Manufacturing, Construction and Marketing of :Distribution Center System
Truck Terminal System
Production Line System
Airport Baggage Handling System
Postal Sorting System
Inter-hospital Handling System
Food Processing Center System
Food Production Factory System
Apparel Center System
Building Construction Business
Design and Construction of :Apartment House
Shop Building
Office and Warehouse Buildings
Real Estate Leasing Business
Sale, Brokerage and Leasing of :Office Building
Apartment House
Distribution Center
Real Estate

Qualification-Listed in primary stock exchanges (Tokyo).
-Quality Management System to ISO 9001 certified by Bureau Veritas Quality International (BVQI) for flat bottomed verticalcylindrical storage tank for low temperature service.
-Quality Management System to ISO 9001 and ISO 14001 certified by Bureau Veritas Quality International (BVQI) for baggage
handling system, slide shoe type sorting conveyor and wheel up sorting conveyor.

-5-Subsidiaries, Affiliated Companies and Line of BusinessSubsidiaries which are consolidated, and affiliated companies which are accounted for by the equity method, are as follows.
Consolidated Subsidiaries
Domestic

Toyo Kanetsu Solutions K.K.
Share Capital: 100.0%
Line of Business : Logistics solution provider
K-Techno Inc.
Share Capital: 100.0%
Line of Business : Consulting & Maintenance of Material Handling System
TKL Co., Ltd.
Share Capital: 100.0%
Line of Business : Rental/Leasing & Insurance Agent
Toyo Service System K.K.
Share Capital: 100.0%
Line of Business : Real Estate Management, Welfare Facilities Management,
Gardening/Floriculture Business & Property, Plant and Equipment Maintenance
Global Eight Corporation
Share Capital: 65.0%Line of Business : Commodity & Foodstuffs Trading

Overseas

P.T. Toyo Kanetsu Indonesia
Share Capital: 100%
Line of Business : Storage Tanks/Pressure Vessels/Onshore & Offshore Steel Structures
Al Ghallilah Engineering & Construction L.L.C.
Share Capital: 65.0%Line of Business : Storage Tanks/Pressure Vessels/Onshore & Offshore Steel Structures
Toyo Kanetsu Singapore Pte. Ltd.
Share Capital: 100%
Line of Business : Storage Tanks/Pressure Vessels/Onshore & Offshore Steel Structures
TKK-USA, Inc.
Share Capital: 100%
Line of Business : Storage Tanks/Pressure Vessels/Onshore & Offshore Steel Structures
Toyo Kanetsu (Malaysia) Sdn. Bhd.
Share Capital: 49.0%Line of Business : Material handling Systems, Storage Tanks/Pressure Vessels/Onshore & Offshore
Steel Structures

Affiliated Companies (Equity Method)
Domestic

Toyo Koken K.K.
Share Capital: 39.3%
Line of Business : Electric-driven winches, Conveyors, Balancer & Robots
Toyo Miyama Co., Ltd.
Share Capital: 49.0%Line of Business : Prefabrication of Unit House
Manavis Co., Ltd.
Share Capital: 16.1%
Line of Business : Cosmetics, Cleaning Products-6-Analysis of Operating Environment and Results
In the consolidated fiscal year ended March 31, 2009, Japan experienced extremely severe economic conditions, including adrastic decrease in corporate earnings and business investment along with the slowdown of the world economy which wasaffected by the U.S. financial crisis and strengthening of the yen, and lower consumer spending due to worsened labor
conditions and falling household income.
In the Plant & Machinery Business, although some projects were suspended or postponed due to the abrupt slowdown of theworld economy and a drastic fall in crude oil prices, there was a stable demand for LNG as clean energy, which helped to limit
the decline in investment in storage facilities. Domestically, demand for quakeproofing work remained firm in the maintenancefield.
Meanwhile, the Material Handling Systems Business benefited from diverse and sophisticated corporate needs for logistics
systems, amid further progress in the reorganization and streamlining of logistics bases and the outsourcing of logistics,
reflecting a social trend toward logistics that are efficient and have less environmental impact.
In the Building Construction Business, the business climate remained severe because of intensified competition to win orders
and higher prices of building materials.
Under this business environment, consolidated net sales for the fiscal year were JPY 47.6 billion (US$ 485 million), down
4.3% from the previous year. Operating income was JPY 1.9 billion (US $19 million), down 49.4% and income before
extraordinary items was JPY 2.1 billion (US$ 21 million), down 50.1%. Net income was JPY 3.0 billion (US$ 31 million),
down 21.1%. Total orders received were JPY 51.9 billion (US$ 529 million), down 23.1%.

Plant & Machinery Business
Making use of our extensive experience and technical capabilities, reliability as a specialist manufacturer, and intentional
competitiveness, we won orders for large-scale LNG projects in the domestic market. In the area of maintenance work, there
was high demand for quakeproof work for floating roof tanks as a result of a partial amendment to the Fire Service Law. In
response, we strengthened our maintenance work-related organization and sales activities. As a consequence, the orders we
received for such work increased substantially.
Although ongoing large-scale construction projects and domestic repair constructions progressed smoothly, affected by fewer
profitable projects as the number of such projects had run their course, the Group’s sales and profit decreased, failing to reachthe previous fiscal year’s level which was a record high.
As a result, net sales for this business were JPY 26.3 billion (US$ 269 million) in the fiscal year under review, up 13.0% fromthe previous year, and operating income was JPY 2.1 billion (US$ 21 million), down 36.1%. Orders received totaled JPY 34.6
billion (US$ 353 million), down 21.4%.

Material Handling Systems BusinessAlthough we conducted sales activities aggressively, focusing on our mainstay picking system for consumer cooperatives,sorting system for retailers, and baggage conveyor system for airports, the orders received decreased due to rapidly
deteriorating economic conditions. The sales and profit generated by this business decreased due to a decrease in the orders
received in the previous fiscal year and the fact that we needed a longer-than-expected lead time to complete a large-scale
project.
As a result, net sales for this business were JPY 11.9 billion (US$ 122 million) in the fiscal year under review, down 21.5%
from the previous year, and operating loss was JPY 0.4 billion (US$ 5 million). Orders received totaled JPY 13.3 billion(US$ 136 million), down 20.7%.

Building Construction BusinessAlong with the rapidly deteriorating construction market, it has become extremely difficult to win orders for the mainstay
business of leased apartment construction and steel pipe pile construction.
As a result, net sales for this business were JPY 5.0 billion (US$ 51 million) in the fiscal year under review, down 12.8% fromthe previous year, and operating income was JPY 0.1 billion (US$ 2 million) up 13.7%. Orders received totaled JPY 4.0 billion(US$ 41 million), down 40.0%.

Real Estate Leasing Business and Other Businesses
Net sales for group companies that are engaged in the Real Estate Leasing Business and businesses other than those mentioned above
was JPY 4.3 billion (US$ 44 million) down 21.0% from the previous year, and operating income was JPY 0.5 billion (US$ 5 million),up 88.8%.

-7-

Business Risks
The following risks may affect the business results, stock price and financial position of the Group.
(1) Potential risks associated with international activities and overseas advance
The Group conducts some operations in overseas markets, primarily those of the Plant & Machinery Business. Further, its
subsidiary manufactures tank materials in Indonesia. These overseas operations carry inherent risks as stated below, and theGroup’s business results and financial position may be adversely affected by such risks.
1)
2)
3)
4)
5)

Unexpected changes in laws and regulations
Political and economic instability
Difficulties in securing human resources
Tax system revisions that could be unfavorable to the Group
Social confusion arising from acts of terror, war or any other factor(2) Exchange rate fluctuations
The Group’s business activities include manufacturing products, selling materials and implementing construction operations
in overseas countries. Foreign-currency-denominated accounting items such as sales, expenses and assets are translated into
Japanese yen for the purpose of preparing consolidated financial statements. The exchange rates used in currency conversion
may affect the yen-denominated value. As most of our payments and receipts are denominated in US dollars or euros, astronger yen will adversely affect the Group’s business while a weaker yen will favorably affect the Group’s business.
The Group makes an effort to minimize the adverse effects of such exchange rate fluctuations by flexibly entering into
forward exchange contracts or option contracts, and by implementing structural solutions such as using overseas
manufacturing bases and internationally procuring raw materials. However, an unexpected change in exchange rates may
adversely affect the Group’s business results and financial position.
(3) Dependency on business results of specific customers in the Building Construction Business
The Group’s building construction business depends on obtaining construction work contracted with specific customers andsupplying building materials to such customers. Consequently, the Group’s sales generated from this business may besignificantly affected by the business results of such customers or other factors that are beyond the Group’s control.
Further, any price reductions that we make in response to customers’ requests may shrink the Group’s profit margins.
(4) Competition for winning orders
All of the major businesses of the Group are being operated under the make-to-order type system and the Group is facing
severe competition to win orders. Depending on the circumstances, we recognize the possibility that a competitor may
disregard profitability and enter into price competition with the Group. Although the Group strives to reduce all kinds ofcosts and reinforce its price competitiveness, such unreasonable downward pressure on the Group’s earnings may adversely
affect the Group’s business results and financial position.
(5) Changes in raw material prices
Steel and steel-processed products account for a relatively large part of the raw materials that the group uses to make its
products. Any unexpected sharp rise in the price of steel or other raw materials may increase our purchase cost of raw
materials and decrease our estimated profit for each project.

-8-

Consolidated Financial Statements
for the year ended March 31, 2009 and 2008-9-

- 10 -

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Balance Sheets
As at March 31, 2009 and 2008

2009

2008

Thousands of
U.S. dollars(Note 3)2009

Investments in leases
Inventories (Note 4)
Deferred tax assets (Note 9)
Other current assets
Total current assets¥6,97812,674(316)
12,358
4,011
8,741
812
805
33,705¥7,57911,641(289)
11,352
8,998
935
1,381
30,245$71,039
129,022(3,218)125,804
40,83888,9888,267
8,190
343,126

Property, Plant and Equipment:
Buildings and structures (Note 6)
Machinery and equipment (Note 6)
Land (Note 7)
Lease assets
Construction in progress
Less: Accumulated depreciation
Total property, plant and equipment

10,214
4,830
9,041
225
(11,264)
13,046

10,408
4,815
9,065
6,823
(14,787)
16,324

103,978
49,172
92,034
2,295(114,672)
132,807

Investments and Advances:
Investments in securities (Notes 5 and 6)
Long-term loans receivable
Other investments
Less: Allowance for doubtful accounts
Total investments and advances

6,421
476
1,398
(375)
7,920

9,790
1,017
1,935
(473)
12,26965,3704,843
14,228(3,817)80,624274
274¥54,945221
221¥59,059

2,790
2,790
$559,347

ASSETS
Millions of yen

Current Assets:
Cash on hand and at bankNotes and accounts receivable
Less: Allowance for doubtful accounts

Intangibles:
Intangible fixed assets
Total intangibles
Total assets
The accompanying notes are an integral part of the consolidated financial statements.

- 11 -

2009

2008

Thousands of
U.S. dollars(Note3)2009

Current Liabilities:
Short-term debt and current portion of long-term debt (Note 6)
Notes and accounts payable
Accrued income taxes
Accrued liabilities
Advances from customers
Lease obligations (Note 6)
Accrued bonuses
Reserve for losses on work in progress
Reserve for warranty costs for completed works
Reserve for contingent loss
Other current liabilities
Total current liabilities¥8,815
3,082
105
4,418
3,304
194
198
1,070
119
250
21,555¥4,610
2,216
139
4,233
7,180
242
1,089
263
542
758
21,272$89,736
31,377
1,065
44,97633,637
1,979
2,013
10,892
1,212
2,543
219,430

Long-Term Liabilities:
Long-term debt (Note 6)
Lease obligations (Note 6)
Deferred tax liabilities on revaluation of land (Note 7 and 9)
Deferred tax liabilities (Note 9)
Accrued retirement benefits for employees (Note 8)
Accrued retirement benefits for directors and corporate auditors
Other long-term liabilities
Total long-term liabilities

1,340
522
2,189
210
966
148
5,375

3,194
2,174
1,786
1,631
193
10
8,988

13,643
5,311
22,289
2,134
9,834
1,509
54,72018,580
1,104
10,953(2,813)27,824

18,5801,104
8,481(1,601)
26,564

189,149
11,239111,500(28,637)
283,251

338
40
376
(652)
102
89
28,015¥54,945

2,576
(94)
391
(638)
2,235
28,799¥59,059

3,443
403
3,828
(6,640)1,034
912
285,197$559,347

LIABILITIES and NET ASSETS
Millions of yen

Commitments and Contingent Liabilities (Note 10)
Net Assets
Shareholders' Equity:
Common stock:
Authorized: 297,000,000 shares
Issued: 138,730,741 shares
Additional paid-in capital
Accumulated earnings
Less: Treasury stock, at cost
Total shareholders’ equity
Valuation and Translation Adjustments:
Net unrealized holding gains on investments in securities
Deferred gains or losses on hedges
Unrealized gains on revaluation of land (Note 7)
Foreign currency translation adjustments
Total valuation and translation adjustments
Minority Interests
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes are an integral part of the consolidated financial statements.

- 12 -

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Operations
For the years ended March 31, 2009 and 2008

2009

2008

Thousands of
U.S. dollars(Note3)
2009¥47,661
41,514
6,147
4,280
1,867

¥49,785
42,377
7,408
3,722
3,686

$485,201
422,62262,57943,57519,004

384
(87)
(586)
422
58
191
2,058

352
(152)
(140)
322
53
435
4,121

3,909
(880)
(5,960)
4,292
588
1,949
20,953

15
(25)
(49)
(37)
146
542
(55)
133
292

6
19
(3)
(151)
97
-

150
(248)
(500)
(378)
1,491
5,518
(563)
1,352
2,977

100
1,062
3,120

(11)
(43)
4,078

1,015
10,814
31,767

151
(39)
112
3
¥3,005

184
91
275
(7)
¥3,810

1,542
(402)
1,140
33
$30,594

Millions of yen

Net Sales
Cost of Sales (Note 12)
Gross profit
Selling, General and Administrative Expenses (Notes 11 and 12)
Operating Income
Other Income (Expenses):
Interest and dividend income
Interest expense
Foreign currency exchange gain (loss)
Equity in income (loss) of affiliates
Other, net
Income before extraordinary items
Extraordinary Profit (Loss):
Gain on sale or disposal of property, plant and equipment, net
Gain on sale of investment in affiliate, net
Loss on sale of investments in securities, net
Loss on write-down of investments in securities, net
Provision for bad debts
Reversal of provision for bad debts
Reversal of provision for contingent loss
Impairment loss
Gain on forgiveness of debts
Gain on adjustment for changes of accounting standard forlease transaction
Other, net
Income before income taxes and minority interests
Income Taxes (Note 9):
Current
Deferred
Minority Interests in Net Income (Loss) of Consolidated Subsidiaries
Net Income

2009

2008

U.S. dollars(Note3)2009¥22.99¥27.90$0.23

Yen
Per Share (Note 19)
Net income

The accompanying notes are an integral part of the consolidated financial statements.

- 13 -

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2008 and 2007
Millions of yen

Balance at March 31, 2007
Cash dividends paid
Net income for the year
Purchase of treasury stock
Effect of increase in number
consolidated subsidiaries
Effect of decrease in number
affiliated subsidiaries

Treasury
stock

Total
Shareholders’Equity¥5,050
(415)
3,810
-

¥(83)
(1,518)¥24,651(415)
3,810(1,518)

-

(1)

-

(1)

-

-

37

-

37

-

-

-

-

-

-

138,730,741¥18,580¥1,104¥8,481¥(1,601)¥26,564

Number of shares ofcommon stock

Common stock

138,730,741-¥18,580-¥1,104
-

-

-

-

of
of

Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2008

Additional
Accumulated
paid-in capital earnings (deficit)

Millions of yen
Net unrealized
holding (gains)losses on
investment
securities

Balance at March 31, 2007
Cash dividends paid
Net income for the year
Purchase of treasury stock
Effect of increase in number
consolidated subsidiaries
Effect of decrease in number
affiliated subsidiaries

ofof

Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2008

Deferred
gains orlosses onhedges

Total
Foreign
Unrealized
valuation andcurrency
gains ontranslation
revaluation of translation
adjustments adjustments
land

Minority
interests

Total Net Assets¥7,557
-

¥(16)
-

¥391
-

¥(649)-¥7,283-¥8-¥31,942(415)
3,810(1,518)

-

-

-

-

-

-

(1)

-

-

-

-

-

-

37

(4,981)---(4,981)-(4,981)¥2,576

(78)
¥(94)

¥391

11
¥(638)(78)
11¥2,235

(8)
-

(78)
11
(8)
¥28,799- 14 -

For the years ended March 31, 2009 and 2008
Millions of yen
Treasury
stock

Total
Shareholders’Equity¥8,481
(533)
3,005
-

¥(1,601)(1,212)¥26,564(533)
3,005(1,212)

-

-

-

-

¥1,104¥10,953¥(2,813)¥27,824

Additional
Accumulated
paid-in capital earnings (deficit)

Number of shares ofcommon stock

Common stock

Balance at March 31, 2008
Cash dividends paid
Net income for the year
Purchase of treasury stock
Net unrealized holding gains on
investments

138,730,741-¥18,580-¥1,104---

Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

138,730,741¥18,580

Minority interests
Balance at March 31, 2009

Millions of yen
Net unrealized
holding (gains)losses on
investment
securities

Deferred
gains orlosses onhedges

Total
Foreign
Unrealized
valuation andcurrency
gains ontranslation
revaluation of translation
adjustments adjustments
land

Minority
interests

Total Net Assets

Balance at March 31, 2008
Cash dividends paid
Net income for the year
Purchase of treasury stock
Net unrealized holding gains on
investments¥2,576
-

¥(94)
-

¥391
-

¥(638)-¥2,235--¥28,799(533)
3,005(1,212)(2,238)---(2,238)-(2,238)Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

¥338

134
¥40

(15)
¥376

(14)
¥(652)

134
(15)
(14)
¥102

89
¥89

134
(15)
(14)
89
¥28,015

Minority interests
Balance at March 31, 2009- 15 -

For the years ended March 31, 2009 and 2008
Thousands of U.S. dollars (Note 3)
Treasury
stock

Total
Shareholders’Equity$86,341(5,435)30,594-$(16,297)(12,340)$270,432(5,435)30,594(12,340)

-

-

-

-

$11,239$111,500$(28,637)$283,251

Minority
interests

Total Net Assets

Number of shares ofcommon stock

Common stock

Balance at March 31, 2008
Cash dividends paid
Net income for the year
Purchase of treasury stock
Net unrealized holding gains on
investments

138,730,741-$189,149-$11,239---

Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

138,730,741$189,149

Minority interests
Balance at March 31, 2009

Additional
Accumulated
paid-in capital earnings (deficit)

Thousands of U.S. dollars (Note 3)
Net unrealized
holding (gains)losses on
investment
securities

Deferred
gains orlosses onhedgesBalance at March 31, 2008
Cash dividends paid
Net income for the year
Purchase of treasury stock
Net unrealized holding gains on
investments$26,219-$(959)-$3,986-$(6,499)-$22,747--$293,179(5,435)30,594(12,340)(22,776)---(22,776)-(22,776)

Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments$3,443

1,362
$403

(158)
$3,828(141)$(6,640)

1,362
(158)
(141)
$1,034

912
$912

1,362
(158)
(141)
912
$285,197

Minority interests
Balance at March 31, 2009

Total
Foreign
Unrealized
valuation andcurrency
gains ontranslation
revaluation of translation
adjustments adjustments
land

The accompanying notes are an integral part of the consolidated financial statements.

- 16 -

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
For the years ended March 31, 2009 and 2008
Thousands of
U.S. dollars(Note 3)2009

Millions of yen

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Amortization of long-term prepaid expenses
Impairment loss
Increase (decrease) in provision for allowance for doubtful accounts
Increase (decrease) in provision for employees’ retirement benefits
Increase (decrease) in provision for retirement benefit for directors
and corporate auditors
Increase (decrease) in provision for losses on work in progress
Increase (decrease) in provision for warranty costs for completed works
Increase (decrease) in provision for contingent loss
Interest and dividend income
Interest expense
Exchange loss (gain)
Equity in loss (income) of affiliates
Loss (gain) on sale of investments in securities
Loss (gain) on write-down of investments in securities
Loss (gain) on sale of investments in affiliate
Loss (gain) on sale of property, plant and equipment
Loss on disposal of property, plant and equipment
Decrease (increase) in notes and accounts receivables
Decrease (increase) in investments in leases
Decrease (increase) in inventories
Decrease (increase) in accrued income
Increase (decrease) in notes and accounts payable
Increase (decrease) in advances from customers
Other
Sub totalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Payments into time deposits (over 3-month term)
Proceeds from withdrawal of time deposits
Payments for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchase of investments in securities
Proceeds from sales of investments in securities
Payments of loans receivableCollection of loans receivable
Purchase of long-term prepaid expenses
Other
Net cash used in investing activities
Cash Flows from Financing Activities:
Increase (decrease) in short-term debt, net
Proceeds from long-term debt
Repayment of long-term debt
Purchase of treasury stock
Capital dividend paid
Net cash provided by (used in) financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Increase in Cash and Cash Equivalents from newly consolidated subsidiaries
Cash and Cash Equivalents at End of Year (Note 14)
The accompanying notes are an integral part of the consolidated financial statements.

- 17 -

20092008¥3,120¥4,078$31,767

680
402
55
(5)
(666)

1,776
818
(27)
(719)

6,922
4,095
563
(55)
(6,788)(193)

52(1,963)

167
(144)
(542)
(384)
87
441
(422)
25
49
(46)
21
(578)
105
257
(166)
987
(3,855)
(47)
(652)
392
(93)
(169)
(522)

(84)
243
(97)
(352)
152
40
(322)
3
(19)
(8)
0
(2,859)
1,153
870
718
(2,273)
142
3,285
356
(140)
(201)
3,300

1,696
(1,461)(5,518)(3,909)880
4,493(4,292)
248
500
(465)
213
(5,881)
1,068
2,616(1,686)
10,045(39,240)(483)(6,635)
3,988(949)(1,716)(5,312)

(36)
176
(737)
68
(199)
27
(168)
690
(155)
(334)

(76)
60
(1,333)
25
(61)
56
122
(1)
153
(1,055)

(366)
1,792
(7,496)689(2,020)270(1,711)
7,023(1,579)(3,398)3,979(1,553)(1,212)
(530)
684
(325)
(497)
7,326
36
¥6,865331
450(2,143)(1,518)(411)(3,291)(27)(1,073)8,399
0¥7,326

40,511(15,808)(12,340)(5,397)
6,966(3,314)(5,058)74,577366$69,885

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Notes to the Consolidated Financial Statements
For the years ended March 31, 2009 and 2008

1. Basis of Presenting the Consolidated Financial Statements
The accompanying consolidated financial statements of Toyo Kanetsu Kabushiki Kaisha (hereinafter the "Company") and its
domestic consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are
different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, andare compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments andExchange Law of Japan. The accounts of overseas-consolidated subsidiaries are based on their financial statements prepared inconformity with generally accepted accounting principles and practices prevailing in the respective countries in which thesubsidiaries are incorporated.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau in Japan
have been reclassified in these accounts for the convenience of readers outside Japan.
2. Summary of Significant Accounting Policies(1) Principles of Consolidation and Investments in Affiliated Companies
The consolidated financial statements include the accounts of the Company and those of its subsidiaries in which it has control.
The consolidated financial statements include the accounts of its ten subsidiaries (nine subsidiaries in 2008). All significant
inter-company transactions and accounts and unrealized inter-company profits are eliminated on consolidation.
The affiliated company, Toyo Kanetsu (Malaysia) Sdn. Bhd. has been included in consolidated subsidiaries for the year ended
March 31, 2009, because of the increased significance of business transaction with the Company and certain consolidated
subsidiaries.
Investments in affiliated companies in which the Company has significant influence are accounted for under the equity method.
These affiliated companies to which the equity method is applied total three at March 31, 2009 and five at March 31,2008.
Consolidated net income includes the Company’s equity in the current earnings of those companies after elimination of
unrealized inter-company profits.
The excess of the cost over the underlying net equity of investments in consolidated subsidiaries as well as companies
accounted for on an equity basis, is deferred and amortized on a straight-line basis over a period of five years from the date ofacquisition.
Five subsidiaries were consolidated on the basis of their fiscal years ended at December 31, 2008 for the current year
consolidation and four subsidiaries were consolidated on the basis of their fiscal years ended at December 31, 2007 for theprevious year consolidation, respectively. Material differences in inter-company transactions and accounts arising from the useof the different fiscal year ends are appropriately adjusted for on consolidation.
(Changes in accounting method)
The Company applied to “Standard Accounting Treatments to the Accounting of Overseas Subsidiaries in the Consolidated
Financial Statements” (Statement No.18 corresponding business reporting issued by the Accounting Standards Board of Japan(hereinafter the “ASBJ”) on May 17, 2006). The standards require the Company to make necessary adjustments to conform theaccounts of foreign subsidiaries with the accounting principles and practices generally accepted in Japan.
These had no effect on the consolidated financial statements.
(2) Revaluation of Assets and Liabilities of the Subsidiaries
All assets and liabilities of the subsidiaries are fair valued as of the date of acquisition of control.
(3) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits able to bewithdrawn on demand and short-term investments with an original maturity of three months or less and which represent a
minor risk of fluctuation in value.
(4) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided at an amount for losses which are expected to occur but cannot be determinedon an item-by-item or group basis. This general allowance is calculated using historical write-off experience from prior periods.
In addition, an amount for expected losses on individual uncollectible receivables is calculated based on management’s
estimate.

- 18 -

(5) Inventories
Inventories are valued at cost as determined by the following methods:
Raw materials……………………….Moving-average method (a carrying amount on the balance sheet is written down
if the profitability decreases)
Work in process and supplies ………Specific identification method (a carrying amount on the balance sheet is written
down if the profitability decreases)(Changes in accounting method)“Accounting Standards for Revaluation of Inventories (Statement No.9 issued by ASBJ on July 5, 2006)” were effective for theyear ended March 31, 2009.
Accordingly, the Company and its consolidated subsidiaries have determined costs of inventory mainly based on specificidentification method and have written off carrying amount to reflect the lower profitability for the year ended March 31, 2009.
The effects on consolidated finance statements resulted from the above change were immaterial.
(6) Financial Instruments(a) Derivatives
All derivatives are stated at fair value except for certain derivatives that are designated as "hedging instruments" (see 16.
Derivative and Hedging Activities below).
(b) Investments in Securities
Securities held by the Company and its subsidiaries are classified into two categories:“Investments of the Company in equity securities issued by the affiliated companies” are accounted for by the equity method.
Other investments in debt and equity securities are classified as “Other securities”. “Other securities” with market quotations
are stated at fair value with any unrealized holding gains and losses, net of tax, being reported in separate component of net
assets. The cost of sold is determined by the moving-average method.
“Other securities” without market quotations are stated at cost determined by the moving-average method.
(c) Hedge Accounting
Gains or losses arising from changes in the fair value of the derivatives designated as "hedging instruments" are deferred as an
asset or liability and included in net assets in the same period during which the gains and losses on the hedged items ortransactions are recognized. However, in cases where forward exchange contracts used as hedges meet certain hedging criteria,
the existing foreign currency receivables or payables are translated at their contract rates. In addition, if interest rate swap
contracts meet certain exceptional criteria, the net amount to be paid or received under these swap contracts is added to or
deducted from the interest on the related hedged liabilities.
Derivatives designated as hedging instruments by the Company are principally forward exchange contracts, interest swaps,
currency swaps, and currency options. The related hedged items are expected account receivables in foreign currency, andlong-term bank loans.
The Company has a policy for utilizing the above hedging instruments in order to reduce the Company's exposure to the risk offoreign exchange and interest rate fluctuations. Thus, the Company's purchases of hedging instruments are limited to, at
maximum, the amounts of the related hedged items.
The Company evaluates the effectiveness of its hedging activities by reference to the accumulated gains or losses on thehedging instruments and the related hedged items beginning from the commencement of the hedges. The Company, however,skips to evaluate the effectiveness of interest swaps because of exceptional accounting treatment.
(7) Property, Plant and Equipment
Property, plant and equipment are stated at cost. The cost of maintenance, repairs and minor renewals is charged to current
operations; major renewals and enhancements are capitalized. Depreciation is mainly computed using the declining-balancemethod, except for buildings acquired after April 1, 1998, to which the straight-line method is applied for the Company and its
domestic subsidiaries. The principal estimated the range of useful lives from 3 to 50 years for buildings and from 6 to 13 years
for machinery and equipment. Depreciation of overseas subsidiaries is computed using the straight-line method.
(Changes in accounting method)
Effective from the year ended March 31, 2009, the Company and its domestic consolidated subsidiaries has changed the useful
lives for the machinery and equipment in connection with the amendments of Corporation Tax Law in Japan.
The impact of this change on operating income, income before extraordinary items and income before income taxes andminority interests is immaterial, respectively.
- 19 -

(8) Intangible Assets
Amortization of intangible assets is computed using the straight-line method. Software for internal use is amortized over its
expected useful life (5 years), on a straight-line basis.
(9) Reserve for losses on work in progress
A reserve for losses on work in progress is provided based on an estimate of the total losses which can be anticipated for the
next fiscal year and beyond in respect of construction projects on which eventual losses are deemed inevitable and amounts
thereof can reasonably be estimated.
(10) Reserve for warranty costs for completed works
A reserve for warranty costs for completed works is provided based on the past experience rates for warranty costs andafter-sales service costs for completed works on an item-by-item or group basis.
(11) Reserve for contingent loss
A reserve for contingent loss is provided at the amount which can be reasonably estimated according to the occurrence ofcontingency and considering the risks of each contingency.
(12) Income Taxes
The income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants’ taxes andenterprise taxes.
Income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities are recognized in
respect of temporary differences between the tax base of assets and liabilities and those as reported in the consolidated
financial statements.
(13) Accrued Bonuses
Accrued bonuses to employees are provided for at the estimated amounts which the Company and its consolidated subsidiaries
are obligated to pay to employees after the fiscal year-end, based on services provided during the current period.
(14) Accrued Retirement Benefits for Employees
Accrued retirement benefits to employees of the Company and its major consolidated subsidiaries are provided based on theestimated present value of projected benefit obligations and fair value of funded plan assets. For other insignificant
consolidated subsidiaries, accrued retirement benefits to employees are calculated using the simplified method. The amount of
actuarial gains (losses) is amortized on a straight-line basis over five years and recognized as deductions from expenses or
included in expenses, respectively, in the next fiscal year. Prior service cost is recognized as deductions from expenses or
included in expenses, respectively, in the year of occurrence.
(15) Accrued Retirement Benefits for Directors and Corporate Auditors
The retirement benefits plan for directors and corporate auditors of the Company and its domestic consolidated subsidiaries
was abolished by the resolution in the general shareholder’s meeting held on June 2008.
As a result, “Accrued retirement benefits for directors and corporate auditors” ¥138 million ($1,407 thousand) as of March 31,
2009 was classified in “Other long-term liabilities”.
(16) Leases(Changes in accounting method)
Effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries have adopted “AccountingStandard for Lease Transactions (Statement No.13 issued by the ASBJ on March 30, 2007)” and “Guidance on AccountingStandard for Lease Transactions (Guidance No.16 issued by the ASBJ on March 30, 2007)”.
Lessee;Adoption of the above accounting standards and the guidances was immaterial to operating income, income before
extraordinary items and income before income taxes and minority interests.
Lessor;In accordance with the above standards, finance leases, prior to April 1, 2008 without transferring ownership of the lease assets
to the lessee have been accounted for as sales-type transactions while they were previously accounted for as operating leases.
In addition, depreciation of assets on finance leases without transferring ownership of the lease assets to the lessee is computed
using the straight-line with no residual value over lease period as useful lives. In this regard, however, all leases transacted onor before March 31, 2008 are accounted for as operating leases.
For the year ended March 31, 2009, as a result of the changes, “Current Assets” was increased by ¥3,845 million ($39,147
thousand), “Property, Plant and Equipment” was decreased by ¥2,861 million ($29,128 thousand), “Current Liabilities” wasincreased by ¥194 million ($1,979 thousand), and “Long-Term Liabilities” was increased by ¥622 million ($6,329 thousand)- 20 -

compared with the previous accounting method. “Operating income” and “Income before extraordinary items” wererespectively decreased by ¥24 million ($246 thousand), and “Income before income taxes and minority interests” wasincreased by ¥268 million ($2,729 thousand). Accordingly, “Cash Flows from Operating Activities” was decreased by ¥882
million ($8,982 thousand) and “Cash Flows from Investing Activities” was increased by the same amount.
The effect on the segment information is described at the relevant footnote.
(17) Accounting for consumption tax
The Company and its domestic consolidated subsidiaries account for consumption tax by the tax-exclusion method.
(18) Revenue Recognition
The Company uses the percentage-of-completion method for the recognition of sales and gross profit in respect of certain
contracts that take more than one year to complete. In all other cases, sales and gross profit are recorded when the relevant
items are completed or delivered. One consolidated subsidiary recognizes revenue on the installment basis.
Regarding finance lease transactions, sales and cost of sales were recorded when the revenues from them were received.

3. United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥98.23=U.S. $1.00, theapproximate rate of exchange prevailing at March 31, 2009, has been used in translation. The inclusion of such amounts are
not intended to imply that the Japanese yen has been or could be readily converted, realized or settled in U.S. dollars at thisrate or any other rates.

4. Inventories
Inventories as at March 31, 2009 and 2008 consisted as follows:
Thousands of
U.S. dollars
2009
$297
6,326
82,365$88,988

Millions of yen
2008
2009
¥233
¥29
406
621
8,359
8,091
¥8,998¥8,741March 31
Merchandise
Raw materials and supplies
Work in process
Total

5. Investments in Securities
The aggregate acquisition cost and carrying amount of other securities with market quotations at March 31, 2009 and 2008
were as follows:
Millions of Yen
March 31
Equity securities
Bonds
Other
Total

Thousands of U.S. dollars
2009

2008

2009
Acquisition
Cost

Carrying
AmountDifference

Acquisition
Cost

Carrying
AmountDifference

Acquisition
Cost

Carrying
AmountDifference¥3,193¥3,193¥3,803¥3,803¥610¥610¥3,045¥3,045¥7,425¥7,425¥4,380¥4,380$32,504$32,504$38,719$38,719$6,215$6,215The Company writes down the book value of other securities when the market value declines by more than 50%, or the market
value declines by more than 30% but less than 50% and the Company management determines the decline to be other than
temporary.
Proceeds from sale of other securities were ¥26 million ($262 thousand) and nothing for the years ended March 31, 2009 and2008, respectively. On those sales, gross realized gains were ¥0 million ($2 thousand) and nothing for the years ended March
31, 2009 and 2008, respectively. Gross realized losses were ¥ 25 million ($250 thousand) and nothing for the years ended
March 31, 2009 and 2008, respectively.
Investment in securities whose fair value was not determinable was unquoted equity securities. For the years ended March 31,
2009 and 2008, the carrying amounts of them on the balance sheets were respectively ¥803 million ($8,173 thousand) and¥814 million.
- 21 -

For the year ended March 31, 2009, no investment in securities held to maturity existed and for the year ended March 31, 2008,
due after five years through ten years were ¥48 million.
Investments in affiliates included in investments in securities were ¥1,815 million ($18,478 thousand) and ¥1,552 million forthe years ended March 31, 2009 and 2008, respectively.

6. Short-Term Debt, Long-Term Debt, and Lease Obligations
Short-term debt, long-term debt and lease obligations as at March 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars
2009

Millions of Yen
2008

2009
March 31
Short-term debt
Current portion of long-term debt
Lease obligations (Current liabilities)
Long-term debt
Lease obligations (Long-term liabilities)
Total

Weighted
averageinterest rate

¥6,951
1,864
194
1,340
522
¥10,871

Weighted
averageinterest rate

¥3,047
1,563
3,194¥7,804

1.07%
2.28%
2.29%
-

2.36%
2.15%
2.11%
-

$70,761
18,975
1,979
13,643
5,311$110,669*The above interest rates were calculated by weighted average method based on the balance of debt at end of fiscal year.

Secured debt as at March 31, 2009 and 2008 were as follows:
March 31
Short-term debt secured by buildings, machinery and landLong-term debt secured by buildings, machinery and land
Total
Short-term debt secured by investments in securities
Long-term debt secured by investments in securities
Total

Millions of yen
2008
2009
¥670
¥2,520
750
100
1,420
2,620
230
100
¥330

333
100
¥433

Thousands of
U.S. dollars
2009$25,654
1,018
26,672
2,346
1,018$3,364

Assets pledged as collateral for the short-term debt and the long-term debt as at March 31, 2009 and 2008 were as follows:
Millions of yen
2008
2009
¥617
¥572
19
14
5,459
5,459
¥6,095¥6,045

March 31
Buildings (at net book value)
Machinery (at net book value)
Land
Total
Investments in Securities

¥374

¥515

Annual maturities of long-term debt and lease obligations as at March 31, 2009 were as follows:Year ending on March 31,
2011
2012
2013
2014

Long-term debt
Thousands ofMillions of yen
U.S. dollars¥1,029$10,472
311
3,171
-

- 22 -

Lease obligations
Thousands ofMillions of yen
U.S. dollars¥157$1,598
160
1,629
74
751
78
796

Thousands of
U.S. dollars
2009$5,825
139
55,574$61,538$3,805

7. Revaluation of Land
In accordance with the “Law on Land Revaluation” issued on March 31, 1998 and the “Law Related to the Revision of the
Law of Land Revaluation” issued on March 31, 2001, the Company revalued its business-purpose land. Of the revaluationdifference, the amount related to tax is recognized as a deferred tax liability and the revaluation difference, net of tax, is
recognized as a component of net assets.
The revaluation was performed on March 31, 2002 based on the fixed asset tax revaluation amount set in the “Law on Land
Revaluation” No.2 article 3, and is calculated based on land prices set in the “Law on Land Revaluation” No.2 article 4, withcertain reasonable adjustments.
The excess of the book value over the current market value of such revalued land held at March 31, 2009 amounted to ¥3,612
million ($36,771 thousand).

8. Retirement Benefits Plan
The Company and some consolidated subsidiaries have defined benefits pension plans and employee’s pension funds bymulti-employer plan as the system of defined benefits. The other consolidated subsidiaries have tax-qualified pension plans
and termination allowance plans.
The Company and certain consolidated subsidiaries also have the defined contribution pension plans.
The accrued retirement benefits as of March 31, 2009 and 2008 were as follows:
Millions of yen
2008
2009
¥(3,341)¥(3,012)
1,619
1,888
(1,722)(1,124)91
158¥(1,631)¥(966)

Projected benefit obligations
Plan assets
Net unreserved projected benefit obligations
Unrecognized actuarial differences
Accrued retirement benefits recognized in balance sheets

Thousands of
U.S. dollars
2009$(30,659)
19,221(11,438)
1,604$(9,834)

Net pension and severance costs related to the retirement benefit plans for the years ended March 31, 2009 and 2008 were as
follows:
Millions of yen
2008
2009
¥158
¥159
53
51
(11)
(16)
(6)
16
46
45
¥262
¥255

Thousands of
U.S. dollars
2009$1,615
522
(164)
160
459
$2,592

2009
1.5 %
1.0 %

2008
1.5 %
1.0 %

Straight- line basis

Straight- line basis

Expensed in the year ofoccurrence

Expensed in the year ofoccurrence

5 years

5 years

Service costs
Interest cost
Expected return on plan assets
Net amortization
Amortization of prior service costs
Transfer to defined contribution pension plans
Net pension and severance costs

Assumptions used in calculation of the above information were as follows:

Discount rate
Expected rate of return on plan assets
Method of attributing the projected benefit
Obligations to periods of service
Amortization of prior service costs
Amortization of unrecognized actuarial differences- 23 -

9. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on income, which in the aggregate resulted in thestatutory income tax rate of approximately 40.69% for the years ended March 31, 2009 and 2008. Foreign subsidiaries are
subject to income taxes of the countries in which they operate.
At March 31, 2009 and 2008, significant components of deferred tax assets and liabilities were as follows:
Millions of yen
2008
2009
Deferred tax assets
Tax losses carried forward
Accrued enterprise tax
Accrued severance and pension costs for employees
Accrued bonuses
Allowance for doubtful accounts
Reserve for losses on work in progress
Accrued severance and pension costs for directors andcorporate auditors
Reserve for contingent loss

Thousands of
U.S. dollars
2009¥2,000
15
239
81
274
438

¥2,484
25
660
98
344
443

$20,358
148
2,432
825
2,785
4,464

-

78

-

Less: valuation allowance
Gross deferred tax assets

348
92
424
96
189
4,196
(3,359)
837

221
342
95
32
421
73
245
5,561
(4,602)
959

3,545
941
4,320
974
1,929
42,721(34,199)
8,522

Deferred tax liabilities
Deferred tax liabilities on revaluation of land
Net unrealized gains on investments in securities
Special item for lease
Other
Gross deferred tax liabilities

2,189
109
100
1
¥2,3992,174
1,786¥3,96022,289
1,102
1,018
14
$24,423

Loss on write-down of investments in securities
Loss on write-down of investments
Loss on write-down of inventories
Impairment losses on fixed assets
Depreciation and amortization

Other

Deferred tax assets and liabilities as at March 31, 2009 and 2008 were recorded in the consolidated balance sheet as follows:
Millions of yen
2008
2009
Deferred tax assets (Current assets)
Deferred tax assets (Other assets in Investments and Advances)
Deferred tax liabilities (Long-term liabilities)
Deferred tax liabilities on revaluation of land (Long-term liabilities)

¥812
25
210
¥2,189Thousands of
U.S. dollars
2009

¥935
24
1,786
¥2,174$8,267255
2,134$22,289

The reconciliation of the statutory income tax rate to the effective income tax rate for the years ended March 31, 2009 and2008 were as follows:
Statutory income tax rate
Increase (decrease) in tax rate due to;Increase and decrease of valuation allowance
Permanently non-deductible expenses
Permanently non-taxable dividends received
Local inhabitant’s tax
Difference in tax rates for foreign subsidiaries
Equity in income of affiliates
Adjustment for unrealized gains and losses
Other
Effective income tax rate
- 24 -

2009
40.7%

2008
40.7%

(32.5)
2.5
(2.6)
0.9
(0.3)
(5.5)
0.2
0.2
3.6%

(31.7)
2.0
(1.8)
0.6
(0.1)
(3.2)
0.3
6.8%

10. Commitments and Contingent Liabilities
As at March 31, 2009, the Company was contingently liable for the affiliated company as follows:
Thousands of
U.S. dollars$16,288

Millions of yen¥1,600March 31, 2009
Trade liabilities

11. Selling, General and Administrative Expenses
Significant components of Selling, General and Administrative expenses for the years ended March 31, 2009 and 2008 were as
follows:
Thousands of
U.S. dollars
2009$13,708
714
1,872
154
1,296

Millions of yen
2008
2009
¥1,196¥1,347
74
70
155
184
52
15
22
127

March 31
Salaries and benefits
Accrued bonuses
Pension and severance costs
Accrued retirement benefits for directors and corporate auditors
Allowance for doubtful accounts

12. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years
ended March 31, 2009 and 2008 were ¥496million ($5,052 thousand) and ¥428 million, respectively.

13. Supplements for Consolidated Statements of Changes in Net Assets
Type and number of shares as at March 31, 2009 were as follows:

Type of shares
Issued stock
Common stock
Total
Treasury stock
Common stock
Total

Balance at the
beginning of the
fiscal year

Thousands of shares
Increase in
Decrease inshares during
shares during
fiscal year
fiscal year

Balance at theend of the fiscalyear

138,731
138,731--

138,731
138,731

5,433
5,433

7,557
7,557

-

12,99012,990Treasury stock increased by 7,557 thousand shares resulting from purchasing treasury stock 7,491 thousand shares based on
decision in the board of director’s meeting and purchasing 66 thousand shares less than one unit.
Cash dividends paid to shareholders from the beginning of the effective date were as follows:
Approved by
Annual general
Shareholder’smeeting

Date of approval

Type of shares

Date of record

Effective date

Per share(Yen)

June 27, 2008

Common stock

March 31,2008

June 30,2008

4.00

Amount cash dividends
Thousands ofMillions of Yen
U.S. dollars¥533$5,435

Cash dividends for the year ended March 31, 2009 as a date of record but an effective date subsequent to the current fiscal year
were as follows:
Resolution approvedbyAnnual general
Shareholder’s meeting
held on June 26, 2009

Type of shares
Common stock

Date of record
March 31,2009

Effective date

Paid from

June 29, 2009

Accumulated
earnings- 25 -Per share
(Yen)
4.00

Amount cash dividends
Thousands ofMillions of Yen
U.S. dollars¥504$5,127

14. Cash and Cash Equivalents
Cash and cash equivalents as at March 31, 2009 and 2008 for the purpose of statement of cash flows consisted of:
2009

2008

Thousands of
U.S. dollars
2009¥6,978(112)(1)¥6,865¥7,579(252)(1)¥7,326$71,039(1,140)(14)$69,885

Millions of yen

March 31
Cash on hand and at bankLess: Time deposits, over 3-month term
Less: Other
Cash and cash equivalents

15. Leases
A. Lessee
Finance leases that do not transfer ownership of the leased property to lessee are comprised of part of office equipments andmanufacturing facilities in addition to “Property, Plant and Equipment” that is accounted on the consolidated balance sheet.
The method of depreciation has been changed resulting from adopting revised accounting standards (see 2. Summary of
Significant Accounting Policies (16) Leases above).
B. Lessor
The breakdown of investments in leases on the consolidated balance sheets was as follows:

March 31
Current assets
Receivables from lease rental revenue
Estimated salvage value
Interest income
Investments in leases

Millions of yen
2009

Thousands of
U.S. dollars
2009¥4,435179(603)¥4,011$45,152
1,823(6,137)$40,838

Expected amount of collection from receivables of lease rental revenue and investments in leases in each annual period are as
follows:
Year ending on March 31,
2010
2011
2012
2013
2014
2015 or later

Receivables from lease rental revenue
Thousands ofMillions of yen
U.S. dollars¥1,443$14,692
1,083
11,025
911
9,274
643
6,550
225
2,287
¥130
$1,324

Investments in leases
Thousands ofMillions of yen
U.S. dollars¥1,231$12,535
931
9,475
828
8,426
615
6,265
271
2,758
¥135
$1,379

16. Derivative and Hedging Activities
Derivatives designated as hedging instruments by the Company are principally forward exchange contracts, interest swaps,
currency swaps, and currency options. The related hedged items are expected account receivables in foreign currency, andlong-term bank loans.
The Company has a policy for utilizing the above hedging instruments in order to reduce the Company's exposure to the risk offoreign exchange and interest rate fluctuations. Thus, the Company's purchases of hedging instruments are limited to, at
maximum, the amounts of the related hedged items.
The Company use forward currency exchange contracts and currency option transactions to hedge against the exchange raterisk associated with monetary receivables and payables denominated in foreign currencies. Interest rate swap transactions areused in order to minimize the risk of fluctuation in interest rates on borrowings. Currency swap transactions are used to hedge
the account receivables in foreign currency against fluctuations in foreign exchange rate as at the end of period.
- 26 -

Gains or losses arising from changes in the fair value of the derivatives designated as "hedging instruments" are deferred as an
asset or liability and included in net assets in the same period during which the gains and losses on the hedged items ortransactions are recognized. However, in cases where forward exchange contracts used as hedges meet certain hedging criteria,
the existing foreign currency receivables or payables are translated at their contract rates. In addition, if interest rate swap
contracts meet certain exceptional criteria, the net amount to be paid or received under these swap contracts is added to or
deducted from the interest on the related hedged liabilities.
The Company evaluates the effectiveness of its hedging activities by reference to the accumulated gains or losses on thehedging instruments and the related hedged items beginning from the commencement of the hedges. The Company, however,skips to evaluate the effectiveness of interest swaps because of exceptional accounting treatment.
The Company and some consolidated subsidiaries are exposed to certain market risks arising from their forward exchange
contracts and swap agreements. The Company is also exposed to the risk of credit loss in the event of non-performance by thecounterparties to the currency and interest; however, the Company does not anticipate non-performance by any of thesecounterparties, all of whom are financial institutions with high credit ratings.
The Company has established an internal control that includes policies and procedures for risk assessment and for the approval,reporting and monitoring of transactions involving derivative financial instruments.
17. Segment Information(1) Industry Segment Information
The operations of the Company and its consolidated subsidiaries for the years ended March 31, 2009 and 2008 weresummarized by product group as follows:
Millions of yen
Sub Total

EliminationorCorporate
Assets*Consolidated
Total¥3,696825
4,521¥47,661
948
48,609

¥
(948)
(948)

¥ 47,661
47,661

351
365

4,377
144

46,382
2,227

(588)
(360)

45,794
1,867

4,972
144
30

6,656
148
55
86

48,087
661
55
753

6,858
19
3

54,945680
55756

Sub Total

EliminationorCorporate
Assets*Consolidated
Total

Material
Handling
Systems
Division

Plant &
Machinery
Division

Building
Construction
Division

Real Estate
Utilizing
Division¥11,961
11,961¥26,392
26,392¥5,020
(1)
5,019

¥592
124
716

Operating costs and expenses
Operating income (loss)

12,460(499)

24,331
2,061

4,863
156

AssetsDepreciation
Impairment loss
Capital expenditure

10,401
185
389

22,112
174
243

3,946
10
5

Year ended March 31, 2009
Sales
Sales to external customers
Inter-segment sales
Total

Other

Millions of yen
Material
Handling
Systems
Division

Plant &
Machinery
Division

Building
Construction
Division

Real Estate
Utilizing
Division¥15,243
15,243¥23,355
23,355¥5,756
(1)
5,755

¥581
139
720

¥4,850913
5,763¥49,785
1,051
50,836¥(1,051)(1,051)¥ 49,785
49,785

Operating costs and expenses
Operating income (loss)

14,839404

20,128
3,227

5,618
137

399
321

5,814
(51)

46,798
4,038

(699)
(352)

46,0993,686

AssetsDepreciation
Capital expenditure

11,794150
58

17,963
171
482

8,110
9
16

4,592
134
2

9,217
1,290
903

51,676
1,754
1,461

7,383
22
55

59,0591,776
1,516Year ended March 31, 2008
Sales
Sales to external customers
Inter-segment sales
Total

Other

* Major products of each division are as follows:
Material Handling Systems Division……. material handling systems for delivery, sorting, control and various type of convey instruments
Plant & Machinery Division……….……. storage tanks for LNG, LPG, crude oil and other gas/liquid
Building Construction Division…………. apartment house, office building, shop building and warehouse building
Real Estate Utilizing Division…………… real estate rental
Other………………………………..……. leasing etc.

- 27 -

* Corporate assets consisted of cash on hand and at bank, investments in securities and the assets belonging to the administration department of the Company.
Corporate assets at March 31, 2009 and 2008 were ¥8,000 million ($ 81,445 thousand) and ¥9,665 million, respectively.
* As previously mentioned in 2. Summary of Significant Accounting Policies (17) Leases, for the year ended March 31st, 2009, in regard to the transactions offinance leases without transferring ownership of the lease assets to the lessee, the accounting method of lease transaction has been changed to the method ofsales-type transaction in accordance with “Accounting Standard for Lease Transactions” and “Guidance on Accounting Standard for Lease Transactions”.
As a result of this change, for the year ended March 31, 2009 “Assets” was decreased by ¥984 million ($10,019 thousand) and “Operating income” wasincreased by ¥24 million ($246 thousand) in “Other” division as compared with the calculation adopting the previous method.
Thousands of U.S. dollars
Other

Sub Total

EliminationorCorporate
Assets*Consolidated
Total$6,023
1,264
7,287$37,629
8,397
46,026$485,2019,649
494,850$(9,649)(9,649)$485,201
485,20149,505
1,586

3,576
3,711

44,564
1,462

472,184
22,666(5,987)(3,662)

466,197
19,004

40,168100
48

50,6151,464
307

67,763
1,507
563
871

489,538
6,729
563
7,666

69,809193
27559,347
6,922
563
7,693

Material
Handling
Systems
Division

Plant &
Machinery
Division

Building
Construction
Division

Real Estate
Utilizing
Division$121,769
121,769$268,677
268,677$51,103(12)
51,091

Operating costs and expenses
Operating income (loss)

126,845(5,076)247,694
20,983

AssetsDepreciation
Impairment loss
Capital expenditure

105,890
1,882
3,963

225,102
1,776
2,477

Year ended March 31, 2009
Sales
Sales to external customers
Inter-segment sales
Total(2) Geographic Segment Information
Segment information classified by geographic area is not presented because the majority of the Companies’ operations are
conducted in Japan.
(3) Export sales and sales by overseas subsidiaries
Millions of yen
Year ended March 31, 2009
Overseas sales
Consolidated Sales
Ratio

South-east
Asia¥4,3109.0%

AfricaMiddle East
¥1,787
3.8%¥5,967
12.5%

Other
¥593
1.3%

Total
¥12,657¥47,661
26.6%

Millions of yen
Year ended March 31, 2008
Overseas sales
Consolidated sales
Ratio

South-east
Asia¥7,336
14.7%

Middle East
¥5,05610.2%

Other¥3,5087.0%

Total¥15,900¥49,785
31.9%* “Africa” area was segregated from “Other” area for the year ended March 31, 2009 to reflect the growing significance of this area to theconsolidated sales. Without the change in segments, “Other” area would have been ¥6,560 million ($66,783 thousand) for the year ended March 31,
2009.
* Major countries included in the above geographic areas were as follows:
South-east Asia:……Singapore, Indonesia
Middle East:………..Iran, Yemen
Africa:…….………..Angola, Algeria
Other:………………China

Thousand of U.S. dollars
Year ended March 31, 2009
Overseas sales
Consolidated Sales
Ratio

South-east
Asia$43,879
9.0%

Middle East
$18,192
3.8%

Africa$60,747
12.5%

Other
$6,036
1.3%

Total$128,854$485,201
26.6%

18. Related Party Transactions
Material transactions of the Company with its related companies and individuals, excluding transactions with consolidated
subsidiaries which are eliminated in the consolidated financial statements and other than those disclosed elsewhere in thesefinancial statements, for the years ended March 31, 2008 and 2007 were as follows:- 28 -Name of Related
Company

Paid-in
CapitalToyo Koken K.K.

¥897
MillionToyo Miyama Co.,
Ltd.

¥100
MillionPrincipal
Business
Production andsale ofelectric-driven
winchesArchitecturalbusiness

Millions of yen / Thousands of U.S. dollars
Transactions
BalancesYear ended March 31
At March 31

EquityOwnership
Percentage
by theCompany

Description oftheCompany’s
Transactions

2009

2008

Account

39%

Loans made--Short-term
loans

-

¥119

-

-

Long-term
loans

-

¥960

¥1,600$16,288¥1,60049%

Guarantee
obligation

2008

2009

The terms and conditions of the above transactions are on an arm's-length basis.

(Changes in accounting method)
Effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries adopted “Accounting Standard
for Related Party Disclosures (Statement No.11 issued by the ASBJ on October 17, 2006)” and “Guidance on AccountingStandard for Related Party Disclosures (Guidance No.13 issued by the ASBJ on October 17, 2006)”.
This change did not result in changing the scope of related party disclosure.

19. Amount Per Share
Amounts per share at March 31, 2009 and 2008 and for the years then ended were as follows:
Yen
2009¥222.09
22.99

Net assets
Net income

2008¥216.05
27.90

U.S. dollars
2009
$2.26
0.23

Diluted net income per share for the years ended March 31, 2009 and 2008 has not been presented because no potentiallydilutive shares of common stock were outstanding.
Net income per share were calculated on the following basis:
Millions of yen
2008
2009
¥3,810¥3,005¥3,810¥3,005

Net income
Net income not available to shareholders of common stock
Net income available to shareholders of common stock

Weighted-average number of outstanding shares of common stockThousands of
U.S. dollars
2009$30,594$30,594

Thousands of shares
2008
2009
136,570
130,724

20. Subsequent Event
The Company resolved to sell the land, buildings and structures to the affiliated company on June 30, 2009, pursuant to its
shareholder’s approval at the general shareholder’s meeting held on June 26, 2009.
Accordingly, ¥273 million ($2,775 thousand) of “Gain on sales of property, plant and equipment” is expected to be recognizedin the Consolidated Statements of Operations, and ¥401 million ($4,080 thousand) will be reduced from “Unrealized gains onrevaluation of land” of Net Assets in the Consolidated Balance Sheet on the next fiscal year ending March 31, 2010.

- 29 -

Corporate Data
Head Office
19-20, Higashisuna 8-Chome, Koto-ku,
Tokyo 136-8666, Japan
Tel : +81-3-5857-3333
Fax: +81-3-5857-3170
URL: http://www.toyokanetsu.co.jp

Security Traded
Tokyo Stock Exchange Market, 1st Section
Transfer Agent and Registrar
The Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-Chome, Chiyoda-ku,
Tokyo 100-8212, Japan

Date of Establishment
16th May, 1941
Common Stock
Authorized
IssuedAnnual Meeting
The annual Meeting of Shareholders is normally held in June inTokyo, Japan: 297,000,000: 138,730,741

Offices of Subsidiaries and Affiliated Companies
Domestic Offices
Toyo Kanetsu K.K. Osaka Sales Office
1-9-2, Senrioka-Higashi, Settsu, Osaka 566-0011, Japan
Tel: +81-72-645-2520 Fax: +81-72-645-2532
Toyo Kanetsu K.K. Chiba Business Establishment
2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: +81-438-36-7161 Fax: +81-438-36-8211

Domestic Subsidiaries & Affiliates

Overseas Subsidiaries

Toyo Kanetsu Solutions K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3126 Fax: +81-3-5857-3185

P.T. Toyo Kanetsu Indonesia(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62 (21) 570-7805 / 7739 Fax: +62 (21) 570-3950

K-Techno Inc.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3155 Fax: +81-3-5857-7248

Toyo Kanetsu Singapore Pte, Ltd.
38, Robinson Road, #17-00, The Corporate Office, Singapore
068906
Tel: +62 6228 0561 Fax: +62 6223 1735

TKL Co., Ltd.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-3644-1399
Toyo Service System K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5690-7778 Fax: +81-3-5690-7775

Toyo Kanetsu (Malaysia) Sdn. Bhd.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60 (86) 338122 Fax: +60 (86) 338123

Global Eight Corporation
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3699-1601 Fax: +81-3-3699-4330

Al Ghallilah Engineering & Construction L.L.C.
P.O. Box 121, Postal Code 118, Al Harthy Complex, Sultanate of
Oman

Toyo Koken K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3161 Fax: +81-3-5857-3198
Toyo Miyama Co., Ltd.
2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: +81-438-37-2233 Fax: +81-438-37-2201- 30 -

TOYO KANETSU K.K.
http://www.toyokanetsu.co.jp