Consolidated Financial Statements
Toho Zinc Co., Ltd.
and Consolidated Subsidiaries
For the years ended March 31, 2009, 2008 and 2007
with Report of Independent Auditors

Report of Independent Auditors
The Board of Directors
Toho Zinc Co., Ltd.
We have audited the accompanying consolidated balance sheets of Toho Zinc Co., Ltd. andconsolidated subsidiaries as of March 31, 2009 and 2008, and the related consolidated
statements of operations, changes in net assets, and cash flows for the years then ended, allexpressed in yen. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements basedon our audits. The consolidated financial statements of Toho Zinc Co., Ltd. andconsolidated subsidiaries for the year ended March 31, 2007 were audited by other auditors
whose report dated June 28, 2007, expressed an unqualified opinion on those financial
statements.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Toho Zinc Co., Ltd. and consolidated subsidiaries at
March 31, 2009 and 2008, and the consolidated results of their operations and their cash flows
for the years then ended in conformity with accounting principles generally accepted in Japan.
Without qualifying our opinion, we draw attention to the following.
(1) As described in Note 1 (d), effective April 1, 2008, the Company changed the method of
accounting for inventories exclusive of supplies.
(2) As described in Note 1 (d), the Companies adopted the “Accounting Standard for
Measurement of Inventories” in the year ended March 31, 2009.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect
to the year ended March 31, 2009 are presented solely for convenience. Our audit also
included the translation of yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 2.

Ernst & Young ShinNihon LLC
June 25, 2009

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)
AssetsCurrent assets:
Cash and time deposits
Notes and accounts receivable, trade
Inventories (Note 17)
Advance payment
Deferred tax assets (Note 13)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥ 14,358
20,121
26,516
5,247
539
3,007
(52)
69,736¥ 22,284
11,12921,651
462
1,351
3,441
(27)
60,291$ 226,851
113,294
220,412
4,702
13,75935,028(276)
613,770

Less: Accumulated depreciation
Net property, plant and equipment

16,96018,58955,055763
91,367(56,991)
34,376

16,951
18,96855,772
1,894
93,585(58,136)
35,449172,561
193,100
567,766
19,282
952,709(591,833)
360,876

Investments and other assets:
Investment securities (Notes 3, 10 and 18)
Investments in non-consolidated subsidiaries (Note 3)
Deferred tax assets (Note 13)
Intangible assets
Other assets (Note 3)
Less: Allowance for doubtful accounts
Total investments and other assets

11,621
411
887
93
8,388
(862)
20,538

4,985
411
2,777
112
4,607
(807)
12,08550,7504,190
28,271
1,142
46,897(8,219)123,031¥124,650¥107,825$1,097,677

Property, plant and equipment:
Land (Notes 4 and 18)
Buildings and structures (Note 18)
Machinery and equipment (Note 18)
Construction in progress

Total assets

2March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)
Liabilities and net assets
Current liabilities:
Short-term borrowings (Note 18)
Current portion of long-term debt (Note 18)
Notes and accounts payable, trade
Accrued expenses
Accrued income taxes
Accrued directors’ bonus
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Note 18)
Accrued employees’ pension and severance costs (Note 12)
Accrued directors’ and statutory auditors’ retirement
allowances
Deferred tax liabilities related to land revaluation (Note 4)
Accrued environmental allowances
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders’ equity:
Common stock:
Authorized – 264,000,000 shares
Issued– 135,855,217 shares in 2008 and
135,855,217 shares in 2009
Capital surplus
Retained earnings
Less: Treasury stock, at cost –50,794 shares in 2008 and53,066 shares in 2009
Total shareholders’ equity
Revaluation and translation adjustments:
Net unrealized gains on other securities
Loss on deferred hedges
Surplus from land revaluation (Note 4)
Foreign currency translation adjustments
Total revaluation and translation adjustments
Total net assets
Total liabilities and net assets¥ 24,601
4,896
8,133
3,118
1,130
39
4,277
46,194¥ 24,478
3,390
6,299
2,944
335
–
3,597
41,043$ 249,191
34,514
64,12329,966
3,414–
36,614
417,822

11,618
3,394

8,928
3,148

90,89032,044

166
5,786
158
78
21,20067,394

73
5,781
158
95
18,18359,226748
58,851
1,600
972
185,105
602,927

14,6309,877
23,83914,6309,877
17,176

148,943
100,549
174,857(21)
48,325(22)
41,661(230)
424,119

1,039
(69)
7,580
381
8,931
57,256¥124,650

625
(116)
7,574
(1,145)
6,938
48,599¥107,825

6,361(1,177)
77,101(11,654)
70,631
494,750$1,097,677

The accompanying notes are an integral part of these financial statements.
3

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Operations

2007

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses:
Transportation expense
Salaries and wages
Pension and severance costs
Research and development costs (Note 6)
Depreciation
Directors’ and statutory auditors’ retirement costs
Directors’ bonus
Provision for doubtful accounts
Other
Operating income
Other income (expenses):
Interest and dividend income
Gain on sale of securities
Derivative gains (losses)
Interest expenses
Foreign Exchange gains (losses), net
Loss on disposal of property, plant and equipment
Investment gains (losses) on equity method
Impairment losses on fixed assets (Note 7)
Losses on hedge transactions
Provision for environmental measures
Write-down of investment securities
Other, net
Income (loss) before income taxes
Income taxes:
Current
Deferred
Net income (loss)

Year ended March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)¥127,876
102,216
25,660¥147,390
123,827
23,563¥92,686
85,095
7,591$943,558
866,279
77,279

3,067
1,024
93
262
81
44
38
52
1,535
6,196
19,464

3,223
965
82
261
73
26
39
94
1,517
6,280
17,283

3,000
884
64
284
53
–
–
–
1,412
5,697
1,894

30,540
9,000
646
2,896
537
–
–
–
14,37457,993
19,286

231
0
82
(467)
233
(797)
425
(8)
(1,977)
(157)
(17)
(55)
(2,507)
16,957

440
–
(14)
(657)
(118)
(265)
577
(4)
(496)
–
(367)
164
(740)
16,543

510
–
–
(543)
69
(298)
(3,460)(131)––(4,531)(102)(8,486)(6,592)

5,196––(5,533)704(3,039)(35,224)(1,330)––(46,126)(1,038)(86,390)(67,104)

7,946(1,076)
6,870¥ 10,087

5,139
1,455
6,594
¥ 9,949

1,061(2,419)(1,358)¥ (5,234)

10,805(24,628)(13,823)$ (53,281)(Yen)
Per share:
Net income (loss) – basic
Cash dividends¥75.26¥10.00¥73.26¥10.00(U.S. dollars)¥(38.54)¥ 5.00$(0.39)$ 0.05The accompanying notes are an integral part of these financial statements.

4

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets
Shareholders’ equity
Number ofshares ofcommon stock
issuedCommonstock

CapitalsurplusRetainedearnings

Revaluation and translation adjustments

Treasurystock (*)

(Thousands)Net
unrealized
gains onothersecurities

Losses ondeferredhedgesSurplusfrom land
revaluation

Foreigncurrencytranslation
adjustments

Total
net assets(Millions of yen)

Balance at March 31, 2006
Issuance of new shares
Cash dividends paid
Bonuses to directors
Decrease due to change inscope of consolidation
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equity125,855
10,000––¥10,240
4,390––¥5,4904,387––¥ 6,103
–
(629)
(28)

¥ (9)
–
–
–

¥2,420
–
–
–

–
–
–
–

¥7,585
–
–
–

–
–
–
–

–
–
–
–

–
–
–
0

(289)
10,087
–
5

–
–
(9)
(0)

–
–
–
–

–
–
–
–

–

–

–

–

Balance at March 31, 2007
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equity135,855––––

14,630
–
–
–
–

9,877
–
–
–
0

15,249(1,359)
9,949
–
–

–

700

(18)
–
–
(4)
1

3,120
–
–
–
–

–

–

–

–

Balance at March 31, 2008
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equity135,855––––

14,630
–
–
–
–

9,877
–
–
–
(0)

23,839(1,358)(5,234)–(72)–(2,081)

(21)
–
–
(2)
1

1,039
–
–
–
–

–

–

–

–

–

(414)

(47)

(6)

(1,526)(1,993)

Balance at March 31, 2009

135,855¥14,630¥9,877¥17,176

¥(22)

¥ 625

¥ (116)¥7,574¥(1,145)¥48,599

Treasurystock (*)

Net
unrealized
gains onothersecurities

Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

¥

¥

96
–
–
–

¥31,925
8,777
(629)
(28)

–
–
–
–

–
–
–
–

(289)
10,087(9)
5(2,711)(5)

106(1,910)(2,711)
–
–
–
–

7,580
–
–
–
–

202
–
–
–
–

47,929(1,359)
9,949
(4)
1

(2,642)

–

179

740

(69)
–
–
–
–

7,580
–
–
–
–

381
–
–
–
–

57,256(1,358)(5,234)(2)(70)

Revaluation and translation adjustments

Losses ondeferredhedgesSurplusfrom land
revaluation

Foreigncurrencytranslation
adjustments

Total
net assets$77,162––––$ 3,880––––$582,887(13,825)(53,281)
(20)
(720)

(Thousands of U.S. dollars )Balance at March 31, 2008
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equity$148,943––––$100,554–––(5)$242,692(13,825)(53,281)–(729)$(224)––(20)
14$10,585––––$ (705)
–
–
–
–

–

–

–

–

(4,224)

(472)

(61)

(15,534)(20,291)

Balance at March 31, 2009

$148,943$100,549$174,857$(230)$ 6,361$(1,177)$77,101$(11,654)$494,750(*) There were 50,974 shares and 53,066 shares of treasury stock as of March 31, 2008 and 2009,
respectively.

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

5

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows

2007

Year ended March 31,
2008
2009
(Millions of yen)

Cash flows from operating activities:
Income (loss) before income taxes
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization
Impairment loss on fixed assets
Write-down of investments securities
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in accrued directors’ bonus
Increase (decrease) in accrued employees’ pension andseverance costs
Interest and dividend income
Interest expenses
Investment (gains) losses on equity method
Net loss on sale and disposal of property, plant andequipment
Gain on sale of securities(Increase) decrease in notes and accounts receivable, trade(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable, tradeOther
Sub totalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by operating activities

2009(Thousands of
U.S. dollars)¥16,957¥ 16,543¥ (6,592)$ (67,104)

2,285
8
17
99
38

2,660
4
367
12
1

3,104
131
4,531
(80)
(39)

31,5991,330
46,126
(818)
(397)

(154)
(231)
467
(425)

(197)
(440)
657
(577)

(246)
(510)
543
3,460

(2,507)(5,196)
5,533
35,224797(0)(8,330)(1,882)
(33)
110
9,723
221
(473)
(3,475)
5,996

266
–
11,176(6,010)(3,853)302
20,911437(654)(10,534)
10,160

298
–
8,987
4,865
2,952
807
22,211
557(552)(3,986)
18,2303,039–
91,49049,52730,0538,213
226,112
5,674(5,615)(40,581)
185,590

Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for purchases of investment securities
Proceeds from sale of investments securities
Payments for purchases of investments in affiliates
Additions to loans receivable
Other
Net cash used in investing activities(1,978)21(1,567)
4(2,495)(1,361)(742)(8,118)(2,795)15(5,168)
–
(294)
–
(128)
(8,370)(4,439)
15
(5)
–
–
–
(199)
(4,628)(45,193)
157
(58)
–
–
–
(2,027)(47,121)

Cash flows from financing activities:
Increase in short-term borrowings
Increase (decrease) in commercial paper, net
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of stock
Cash dividends paid
Other
Net cash provided by (used in) financing activities

–
3,000
–
(2,286)
8,776
(629)
(9)
8,852

–
(5,000)8,000(2,318)–(1,359)
(4)
(681)

877
(1,000)700(4,896)–(1,358)(1)(5,678)

8,928(10,180)
7,126(49,844)–(13,825)(11)(57,806)

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 8)

(4)
6,726
6,506
¥13,232(8)
1,101
13,232¥ 14,333

2
7,926
14,333¥22,259

21
80,684145,912$226,596

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

6

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 20091.

Summary of Significant Accounting Policies(a) Basis of presentation
The accompanying consolidated financial statements of Toho Zinc Co., Ltd. (the“Company”) and its consolidated subsidiaries (the “Companies”) are prepared on thebasis of accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial
Reporting Standards, and are compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments and Exchange Law ofJapan.
Certain items presented in the consolidated financial statements submitted to the
Direction of Kanto Financial Bureau in Japan have been reclassified in theaccompanying consolidated financial statements for the convenience of readers outside
Japan.
(b) Principles of consolidation
The accompanying consolidated financial statements include the accounts of theCompany and any significant subsidiaries that are controlled by the Company. Under
the effective control approach, all majority-owned companies are to be consolidated.
Additionally, companies in which share ownership equals 50% or less may be required tobe consolidated in cases where such companies are effectively controlled by othercompanies through the interests held by a party who has a close relationship with theparent in accordance with Japanese accounting standards.
All significant
inter-company transactions and accounts are eliminated in consolidation.
(c) Financial instruments(1) Investment securities
Marketable securities classified as other securities are carried at fair value with any
changes in unrealized gains or losses, net of income taxes, included directly in net
assets.
Non-marketable securities classified as other securities are carried at cost.
securities sold is determined by the moving average method.

Cost of(2) Derivatives
All derivatives are recognized in the balance sheet at fair value, with changes in fairvalue included in net income for the period in which they arise, except forderivatives that are designated as “hedging instruments” (see Note 1-(c)-(3) Hedge
accounting below).
7

1.

Summary of Significant Accounting Policies (continued)(c) Financial instruments (continued)(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 net
income in the same period during which the gains and losses on the hedged items ortransactions are recognized.
The derivatives designated as hedging instruments held by the Companies arecommodities futures. The related hedged items are commodities.
The Companies has a policy to utilize the above hedging instruments in order toreduce the Companies’ exposure to the risk of the price fluctuation.
The Company evaluates effectiveness of its hedging activities by reference to theaccumulated gains or losses on the hedging instruments and the related hedged
items from the commencement of the hedging transactions.
(d) Inventories
Finished goods, work in process and raw materials are stated at the lower of cost or
market, which cost is primarily determined by the first-in first-out method. Supplies
are stated at the lower of cost or market, which cost is determined by the averagemethod.
(Changes in accounting policy)(1) The Companies adopted the “Accounting Standard for Measurement of Inventories”(Statement No. 9 issued by the Accounting Standards Boards of Japan (the “ASBJ”)
on July 5, 2006) for the year ended March 31, 2009. Under this standard,
inventories held for sale in the ordinary course of business in principle, shall be
stated at the lower of cost or net selling value, which is defined as the selling priceless additional estimated manufacturing costs and direct selling expenses. As aresult, operating income decreased by ¥1,717 million ($17,478 thousand), and loss
before income taxes increased by the same amounts for the year ended March 31,
2009 from the corresponding amounts which would have been reported under theprevious method.
The effect of the change on the segment information is described in Note 15.
(2) Effective April 1, 2008, the Company changed the method of accounting for
inventories exclusive of supplies, from the last-in first-out method to the first-in
first-out method. The reasons for this change are as follows:•

With the adoption of the “Accounting Standard for Measurement of Inventories”(Statement No. 9 issued by the ASBJ on July 5, 2006);•

To remedy the fact that major fluctuations in raw material prices in recent years
have caused a sharp deviation between the values shown on the balance sheets
and current market prices, enabling a more accurate representation of theCompany’s financial position; and,8

1.

Summary of Significant Accounting Policies (continued)(d) Inventories (continued)•

Working to accelerate international convergence in accounting standards, the
ASBJ scheduled to abolish the last-in first-out method effective April 1, 2010.

As a result, operating income decreased by ¥1,915 million ($19,497 thousand), andloss before income taxes increased by the same amounts for the year ended March
31, 2009 from the corresponding amounts which would have been reported under
the previous method.
The effect of the change on the segment information is described in Note 15.
(e) Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost and have been mainly depreciated by thestraight-line method over the estimated useful lives of respective assets.
(Changes in accounting policy)
In accordance with the revision made to the Corporate Tax Law of Japan (the “TaxLaw”) which went into effect on April 1, 2007, effective the year ended March 31, 2008,
the Company and domestic consolidated subsidiaries have adopted the new method
prescribed in the revised Tax Law for depreciating tangible fixed assets acquired on orafter April 1, 2007. The effect of this change on operating income, and income before
income taxes was immaterial.
(Additional information)(1) Effective from the year ended March 31, 2008, the Company and domestic
consolidated subsidiaries depreciate the difference between 5% of acquisition costand nominal value by the straight-line method over a period of five years from theyear following the year in which the accumulated depreciation has reached 95% of
acquisition cost with respect to the tangible fixed assets acquired on or before
March 31, 2007. As a result, operating income, and income before income taxes
both decreased by ¥411 million for the year ended March 31, 2008 from thecorresponding amounts which would have been reported under the previous
method.
The effect of the change on the segment information is described in Note 15.
(2) Effective from the year ended March 31, 2009, the Company and domestic
consolidated subsidiaries, accompanying the revision of the Tax Law, changed theuseful lives of machinery and equipment. As a result, operating income decreasedby ¥391 million ($3,985 thousand), and loss before income taxes increased by thesame amounts for the year ended March 31, 2009 from the corresponding amounts
which would have been reported under the previous method.
The effect of the change on the segment information is described in Note 15.
91.

Summary of Significant Accounting Policies (continued)(f)Intangible assets and amortization
Software for internal use is amortized by using the straight-line method over estimateduseful lives (less than 5 years).

(g) Leases
Lease assets used under finance leases and capitalized, are depreciated over the leaseterms of respective assets by the straight-line method.
Finance leases which took place prior to April 1, 2008, and do not transfer ownership ofthe leased assets to the lessee, continue to be accounted for as operating leases.
(Changes in accounting policy)
Prior to April 1, 2008, the Company and domestic consolidated subsidiaries accounted
for finance leases which do not transfer ownership of the leased assets to the lessee as
operating leases. Effective from the year ended March 31, 2009, the Company anddomestic consolidated subsidiaries adopted the “Accounting Standard for Lease
Transactions” (Statement No. 13 issued by the ASBJ on March 30, 2007) and “Guidanceon Accounting Standard for Lease Transactions” (Guidance No. 16 issued by the ASBJ
on March 30, 2007), and capitalized assets used under such leases, except for certain
immaterial or short-term finance leases, which are accounted for as operating leases.
As permitted, finance leases which took place prior to April 1, 2008, and have beenaccounted for as operating leases, continue to be accounted for as operating leases.
Effect of this change on operating income, and loss before income taxes was zero.
(h) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount sufficient to coverpossible losses on collection. The allowance consists of the estimated uncollectible
amounts with respect to specific receivables plus a percentage based on historical credit
losses.
(i)

Accrued directors’ and statutory auditor’s retirement allowances
In order to prepare for the disbursements of the directors’ and statutory auditor’s
retirement allowances, the Company records an amount required to be paid out as at theend of the fiscal year which is calculated based on internal rules.
Note that the Company discontinued the system for directors’ and statutory auditor’s
retirement allowances in accordance with a decision by the board of directors held on
May 22, 2007, and hence the balance as at the end of this consolidated fiscal year is theamount for periods in which the directors and statutory auditors served prior to June
2007.

10

1.

Summary of Significant Accounting Policies (continued)(j)Accrued directors’ bonuses
Accrued directors’ bonuses at the balance sheet date are based on an estimate of theamount to be paid as bonuses for services rendered by that date.
(Changes in accounting policy)
Effective from the year ended March 31, 2007, the Company adopted the “Accounting
standard for directors’ bonus” (Statement No. 4 issued by the ASBJ on November 29,2005). As a result, operating income and income before income taxes decreased by ¥38
million, respectively, for the year ended March 31, 2007 from the corresponding amounts
which would have been reported under the previous method.
The effect of the change on the segment information is described in Note 15.

(k) Accrued environmental allowances
Accrued environmental allowances are estimated and recorded to provide for future
potential costs, such as costs related to disposal of polychlorinated biphenyl (PCB).
(l)

Accrued expected losses on construction contracts in process allowances
In order to prepare for future losses related to construction orders, the Company hasrecorded an estimated amount for construction which has yet to be transferred as at theend of the consolidation fiscal year.

(m) Accrued employees’ pension and severance costs
Accrued employees’ retirement benefits are provided mainly at an amount calculated
based on the retirement benefit obligation and the fair value of the pension plan assets asof the balance sheet date, as adjusted for unrecognized actuarial gain or loss andunrecognized prior service cost. The retirement benefit obligation is attributed to eachperiod by the straight-line method over the estimated years of service of the employees.
Actuarial gain and loss are amortized in the year following the year in which the gain orloss is recognized primarily by the straight-line method over the period of 10 years
which are the average remaining year of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method over theperiod of 10 years which are the average remaining years of service of the employees.
(n) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of
cash on hands, bank deposits be able to withdraw on demand and short-term investmentswith original maturity of three months or less and minor risk for the fair value
fluctuation.

11

1.

Summary of Significant Accounting Policies (continued)(o) Income taxes
Deferred tax assets and liabilities are determined based on the differences between
financial reporting and the tax bases of the assets and liabilities and are measured using
the enacted tax rates and laws which will be in effect when the differences are expected
to reverse.
(p) Foreign currency translation(1) Foreign currency transaction
All receivables and payables denominated in foreign currencies are translated into
Japanese yen at the exchange rate prevailing at the balance sheet date.
(2) Foreign currency financial statements
The assets and liabilities of the foreign consolidated subsidiaries are translated into
Japanese yen at current exchange rate prevailing at the balance sheet date.
Revenue and expense accounts are translated at current exchange rate prevailing at
the balance sheet date. Foreign currency translation adjustments are included in
net assets.
(q) Appropriation of retained earnings
Cash dividends and transfers to legal reserve are recorded in the fiscal year that the
proposed appropriation of retained earnings is approved at the shareholders’ meeting.
(r) Net income per share
Net income per share is computed based on the net income available for distribution toshareholders of common stock and the weighted average number of shares of common
stock outstanding during the year.
2.

U.S. Dollar Amounts

U.S. dollar amounts presented in the accompanying consolidated financial statements and inthese notes are included solely for the convenience of readers onside of Japan, at theprevailing exchange rate of ¥98.23 to U.S.$1 on March 31, 2009. 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.

12

3.

Investments in Non-Consolidated Subsidiaries and Affiliates

Investments in non-consolidated subsidiaries and affiliates as of March 31, 2008 and 2009were summarized as follows:
March 31,
2009
2009
2008
(Millions of yen)(Thousands of
U.S. dollars)
Subsidiaries
Affiliates

4.

¥ 411
11,082¥11,493

¥ 411
2,342
¥2,753$ 4,190
23,842$28,032

Land Revaluation

In accordance with the Land Revaluation Law, the Company’s land used for its business
operations was revalued as follows:
Date of revaluation: March 31, 2000
The difference between total fair value of land at March 31, 2009 and the total bookvalue after revaluation of land:¥5,340 million($54,357 thousand)
The tax effect of the excess on revaluation is recorded as “Deferred tax liabilities related toland revaluation” which is included in liabilities, and the remainder, net of income taxes
portion of the excess on revaluation is presented as “Surplus from land revaluation” which isincluded in net assets.
5.

Commitments and Contingent Liabilities

The Companies were contingently liable as guarantors for loans of other companies in theaggregate amount of ¥707 million ($7,198 thousand) at March 31, 2009.
The Company has entered into loan commitment agreements amounting to ¥5,600 million($57,009 thousand) with financial institutes at March 31, 2009. The loans payable
outstanding was zero, and therefore, the unused balances was ¥5,600 million ($57,009
thousand) under the credit facilities as of March 31, 2009.
6.

Research and Development Costs

Research and development costs, which are included in selling, general and administrative
expenses, were ¥262 million, ¥261 million and ¥284 million ($2,896 thousand) for the years
ended March 31, 2007, 2008 and 2009, respectively.

13

7.

Impairment Loss on Fixed Assets

The Company has recognized impairment losses on the assets group for the year ended March
31, 2007, 2008 and 2009 as follows:Year ended March 31, 2007
Location
Use
Category
Annaka City,
Gumma, other

Location

Idle assets

Machinery,
Buildings andstructures,
OthersYear ended March 31, 2008
Use
Category

Shandong, China

Idle assets

Machinery,
OthersIdle assets

¥7
1
0
¥8
(Millions of
yen)
¥4
0
¥4

Year ended March 31, 2009
Location
Use
Category
Iwaki City,
Fukushima(Millions ofyen)

Machinery,
Structures(Millions of (Thousands of
U.S. dollars)
yen)
¥ 96
35
¥131

$ 980
350
$1,330

The Company determined asset group based on the categories used for their managerial
accounting. With respect to idle assets, each asset is treated as an individual unit to apply
the accounting for the impairment.
The Company recognized impairment losses for entire book value of idle assets on the groundthat they were projected to generate no future cash-in flows and were not readily salable
either.
8.

Cash and Cash Equivalents

Cash and cash equivalents at March 31, 2008 and 2009 were composed of the followings:
March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Less:Time deposits with a maturity of morethan three months when purchased
Cash and cash equivalents¥14,358¥22,284$226,851(25)¥14,333(25)¥22,259(255)$226,596
14

9.

LeasesAs lessees:
As described in Note 1 (g), the Company and domestic consolidated subsidiaries accounted
for finance leases which took place prior April 1, 2008, and do not transfer ownership of theleased assets to the lessee, as operating leases.
The following pro forma amounts represent the acquisition cost, accumulated depreciationand net book value of the leased assets at March 31, 2008 and 2009 which would have beenreflected in the consolidated balance sheets if these lease transactions had been accounted for
as financing leases:
March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)
Acquisition cost of machinery and equipment
Accumulated depreciation of machineryand equipment
Net book value
Acquisition cost of furniture and fixtures
Accumulated depreciation of furniture andfixtures
Net book value

¥ 137

¥ 137

$ 1,402

(39)
¥ 98

(61)
¥ 76

(623)
$ 779

¥ 151

¥ 151

$ 1,544

(109)
¥ 42

(125)
¥ 26

(1,273)$ 271

Future minimum lease payments (including the interest portion thereon) subsequent to March
31, 2009 for finance leases accounted for as operating leases are summarized as follows:Year ending March 31,(Millions ofyen)(Thousands of
U.S. dollars)

20102011 and thereafter
Net book value

¥ 31
72
¥103

$ 320
730
$1,050

Lease payments relating to finance leases accounted for as operating leases in theaccompanying consolidated financial statements for the years ended March 31, 2007, 2008
and 2009 totaled ¥36 million, ¥42 million and ¥37 million ($378 thousand), respectively.
The pro forma depreciation of the assets leased under finance leases accounted for as
operating leases for the years ended March 31, 2007, 2008 and 2009 amounted to ¥36 million,¥42 million and ¥37 million ($378 thousand), respectively.

15

10.

Investment Securities

The Company classified investment securities other than those of subsidiaries and affiliates
into two categories: held-to-maturity securities or other securities.
The aggregate cost and fair value (carrying value) of marketable securities which were
included in investment securities at March 31, 2008 and 2009 were as follows:
March 31, 2008
Fair value(carrying value)(Millions of yen)

Unrealized
gains (losses)¥1,785–¥4,192–¥2,407–794
4,963¥7,542676
4,461¥9,329(118)(502)¥1,787

March 31, 2009
Fair value(carrying value)(Millions of yen)

Unrealized
gains (losses)¥1,655–¥2,758–¥1,103–657
705¥3,017593
705¥4,056(64)–¥1,039

Cost
Securities for which fair value
exceeds cost:
Equity securities
Debt securities
Securities for which cost exceeds
fair value:
Equity securities
Debt securities
Total

Cost
Securities for which fair value
exceeds cost:
Equity securities
Debt securities
Securities for which cost exceeds
fair value:
Equity securities
Debt securities
Total

Securities for which fair value
exceeds cost:
Equity securities
Debt securities
Securities for which cost exceeds
fair value:
Equity securities
Debt securities
Total

March 31, 2009
Fair value
Unrealized
Cost(carrying value) gains (losses)(Thousands of U.S. dollars)$16,852–$28,078–$11,226
–

6,690
7,173
$30,715

6,033
7,173
$41,284(657)–$10,569

As at March 31, 2008 and 2009, the carrying amount of non-marketable equity securities anddebt securities, which were included in investment securities, were ¥929 million and 1,361
million, and ¥929 million ($9,461 thousand) and none, respectively.
16

11.

Derivative Financial Instruments

The Company enters into forward exchange contracts, commodity futures and interest rate
swaps. Forward exchange contracts and commodity futures are utilized to hedge currency
risk exposures. Interest rate swaps are utilized to hedge against possible future changes ininterest rates on borrowings. The Company uses derivative instruments only for hedging
purposes and not for purposes of trading or speculation.
All derivative contracts that the Company held as of March 31, 2008 and 2009, are qualified
for hedge accounting and excluded from the disclosure of fair value information.
12.

Employees’ Pension and Severance Costs

The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e.,
defined benefit corporate pension plans and lump-sum payment plans, covering substantiallyall employees who are entitled to lump-sum or annuity payments, the amounts of which are
determined by reference to their basic rates of pay, length of service, and the conditions underwhich termination occurs.
The funded status of retirement benefit obligations at March 31, 2008 and 2009 were as
follows:
March 31,
2009
2009
2008
(Millions of yen)(Thousands of
U.S. dollars)
Projected benefit obligations
Plan assets at fair value
Unfunded status
Unrecognized actuarial loss
Unrecognized prior service benefit
Accrued employees’ pension and severance costs¥ 4,729(1,510)
3,219
(214)
389
¥ 3,394¥ 4,601(1,385)
3,216
(419)
351
¥ 3,148$ 46,840(14,096)
32,744(4,272)
3,572$ 32,044

The compositions of employees’ pension and severance expense for the years ended March 31,
2007, 2008 and 2009 were as follows:

2007

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service costs
Total

¥271
108
(31)
78
–
¥426

Year ended March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)
¥251
103
(34)
73
–
¥393

¥213
89
(30)
79
(39)
¥312

$2,172
912
(308)
800
(397)
$3,17917

12.

Employees’ Pension and Severance Costs (continued)

The assumptions used for in accounting for the defined benefit pension plans for the years
ended March 31, 2007, 2008 and 2009 were as follows:Year ended March 31,
2008
2009
2007
Discount rate
Expected rate of return on plan assets
13.

2.0%
2.0%

2.0%
2.0%

2.0%
2.0%

Income Taxes

At March 31, 2008 and 2009, significant components of deferred tax assets and liabilities
were as follows:
March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued employees’ pension and severance
costs
Accrued employees’ bonus
Inventories write-off
Elimination of intercompany profits
Accrued enterprise tax
Write-down of investment securities
Losses on deferred hedges
Other
Gross deferred tax assets
Less: Valuation allowance
Total deferred tax assets¥1,370
319
–
116
111
–
47
220
2,183
67
2,116

¥1,275
157
699
112
55
1,733
79
967
5,077
514
4,563

$12,975
1,599
7,114
1,140
562
17,644808
9,843
51,685
5,233
46,452

Deferred tax liabilities:
Special tax-purpose reserve for condensed
booking of tangible assets
Unrealized gains on other securities
Total deferred tax liabilities
Net deferred tax assets

(30)
(660)
(690)
¥1,426

(28)
(407)
(435)
¥4,128(283)(4,139)(4,422)$42,030

Deferred tax liabilities:
Deferred tax liabilities related to land
revaluation¥5,785¥5,781$58,851

The reconciliation between the statutory tax rate and the effective tax rate for the years ended
March 31, 2007 and 2008 is not shown because the difference was less than 5% of thestatutory tax rate, and for the year ended March 31, 2009 is not shown because the Company
incurred loss before income taxes.

18

14.

Net Assets

The Corporation Law 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 capital reserve and the legal reserve equals 25% of
the common stock. Such distributions can be made at any time by resolution of thestockholders, or by the Board of Directors if certain conditions are met.
15.

Segment Information

Business segment information
Information about business segment of the Companies for the years ended March 31, 2007,2008 and 2009 is as follows:

Industry A
Net sales:
Customers
Inter-segment
Total
Cost and expenses
Operating income (loss)
Total assets
Depreciation andamortization
Impairment loss of fixed
assetsCapital expenditures¥97,623506
98,12981,98016,149¥10,84413
10,857
10,271586¥9,481
124
9,605
7,871
1,734

¥ 9,928
3,621
13,54912,151
1,398

65,017

11,942

9,473

1,402

320

8
¥ 1,569

Industry A
Net sales:
Customers
Inter-segment
Total
Cost and expenses
Operating income (loss)
Total assets
Depreciation andamortization
Impairment loss of fixed
assetsCapital expenditures

Year ended March 31, 2007
Business segment
Eliminations
Industry B
Industry C
Otherand corporate Consolidated(Millions of yen)¥–
(4,264)(4,264)(3,861)(403)¥127,876–
127,876
108,412
19,464

5,483

33,931

125,847

311

156

96

2,285

–

–

–

–

8

259

¥ 172

¥ 2,071

¥

50

¥

2,121

Year ended March 31, 2008
Business segment
Eliminations
Industry B
Industry C
Otherand corporate Consolidated(Millions of yen)

¥113,729
730
114,459
102,001
12,458¥10,901
11
10,912
9,786
1,126¥12,287
162
12,44910,137
2,312¥10,473
4,949
15,422
13,606
1,816

66,343

11,658

7,608

1,853

354

356

–
¥ 2,136

¥

¥

4
373

¥

–
315

¥

–
(5,852)(5,852)(5,423)(429)¥147,390–
147,390130,107
17,283

5,394

33,646124,650

10

86

2,660

–
231

¥

¥

–
90

¥

4
3,146

19

15.

Segment Information (continued)

Business segment information (continued)

Industry A
Net sales:
Customers
Inter-segment
Total
Cost and expenses
Operating income (loss)
Total assets
Depreciation andamortization
Impairment loss of fixed
assetsCapital expenditures

Year ended March 31, 2009
Business segment
Eliminations
Industry B
Industry C
Otherand corporate Consolidated(Millions of yen)

¥67,132
431
67,563
68,294(731)¥ 7,795
12
7,807
7,334
473

¥6,952
98
7,050
6,437
613

¥10,807
4,359
15,166
13,505
1,661

47,832

11,015

6,047

2,072

391

–
¥ 3,323–
536

Industry A¥–(4,900)(4,900)(4,778)(122)¥ 92,686–
92,686
90,792
1,894

4,898

38,033

107,825

409

155

77

3,104

131
¥ 392

–
126

–
113

131
¥ 4,490¥$683,415
4,384
687,799695,245(7,446)$ 79,356
121
79,47774,661
4,816$70,774
1,001
71,77565,527
6,248$110,013
44,379154,392
137,481
16,911

Total assets

486,935

112,133

61,561

21,092

3,982–$ 33,833

Capital expenditures¥

Year ended March 31, 2009
Business segment
Eliminations
Industry B
Industry C
Otherand corporate Consolidated(Thousands of U.S. dollars)

Net sales:
Customers
Inter-segment
Total
Cost and expenses
Operating income (loss)
Depreciation andamortization
Impairment loss of fixed
assets¥$–(49,885)(49,885)(48,642)(1,243)$ 943,558–
943,558924,272
19,28649,864

387,184

1,097,677

4,168

1,573

784

31,599

–

1,330

–

–

1,330

$ 5,454$ 3,989$ 1,286$ 1,146$

45,708Notes: (a) The primary products of each business segment are as follows:•

Industry A of Smelting industry consists of mainly zinc, lead, electric silver
and sulfuric acid etc.;•

Industry B of Electric Material industry consists of battery material andbuilding material etc.;•

Industry C of Environment and Recycling industry consists of Zinc oxide etc.;
and,•Other consists of Soundproofing construction materials etc.

20

15.

Segment Information (continued)

Business segment information (continued)
Notes: (b) (Changes in accounting policy)(1) As described in Note 1 (j), effective from the year ended March 31, 2007,
the Company adopted the “Accounting standard for directors’ bonus”(Statement No. 4 issued by the ASBJ on November 29, 2005). As a result,operating income of “Eliminations and corporate” decreased by ¥38 million
for the year ended March 31, 2007 from the corresponding amounts which
would have been reported under the previous method.
(2) As described in Note 1 (d), the Companies adopted the “AccountingStandard for Measurement of Inventories” (Statement No. 9 issued by the
ASBJ on July 5, 2006) for the year ended March 31, 2009. As a result,operating loss of Industry A increased by ¥1,438 million ($14,641 thousand),
operating income of Industry B and Industry C decreased by ¥29 million($301 thousand) and ¥249 million ($2,537 thousand), respectively, for theyear ended March 31, 2009 from the corresponding amounts which would
have been reported under the previous method.
(3) As described in Note 1 (d), effective April 1, 2008, the Company changed
the method of accounting for inventories exclusive of supplies, from thelast-in first-out method to the first-in first-out method. As a result,operating loss of Industry A increased by ¥1,939 million ($19,749 thousand),
operating income of Industry C increased by ¥24 million ($252 thousand),for the year ended March 31, 2009 from the corresponding amounts which
would have been reported under the previous method.
Notes: (c) (Additional information)(1) As described in Note 1 (e), effective from the year ended March 31, 2008,
the Company and its domestic subsidiaries depreciate the difference between
5% of acquisition cost and nominal value by the straight-line method over a
period of five years from the year following the year in which theaccumulated depreciation has reached 95% of acquisition cost with respect
to the tangible fixed assets acquired on or before March 31, 2007. As aresult, operating income of Industry A, Industry B, Industry C and otherdecreased by ¥351 million, ¥24 million, ¥46 million and ¥14 million,
respectively for the year ended March 31, 2008 from the corresponding
amounts which would have been reported under the previous method.
(2) As described in Note 1 (e), effective from the year ended March 31, 2009,
the Company and its domestic subsidiaries changed the durable years ofmachinery and equipment. As a result, operating income of Industry A,
Industry B and other decreased by ¥282 million ($2,879 thousand), ¥50
million ($519 thousand) and ¥57 million ($585 thousand), respectively forthe year ended March 31, 2009 from the corresponding amounts which
would have been reported under the previous method.

21

16. Related Party Transactions(Additional information)
The Company adopted the “Accounting Standard for Related Party Disclosures” (Statement
No. 11 issued by the ASBJ on October 17, 2006) and “Implementation Guidance on
Accounting Standard for Related Party Disclosures” (Guidance No. 13 issued by the ASBJ on
October 17, 2006) for the year ended March 31, 2009. As a result, significant related party
to be additionally disclosed was none.
1.

Related party transactions
The Company owns 28.5% of outstanding shares of CBH Resources Ltd., which
operates mining business.
The transactions and account balances with CBH Resources Ltd. as of March 31 2009
was as follows:•

Transactions
Year ended March 31,
2007
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)
Loans
Underwriting convertible bonds
Converte bonds into stocks
Interests•¥1,361
1,361
–
73

¥
–
4,963
–
377

¥

–
–
1,361
296

$

–
–
13,8593,016

Account balances
March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)Long-term loans receivable
Investment securities
Other current assets¥1,3615,822
208¥1,361705
213$13,859
7,173
2,165

Terms of transactions:•Terms of loan and convertible bonds’ interest rate are determined under generalmarket conditions.

•Terms of loan and convertible bonds’ repayment period are 5 years.

•

The collaterals for the loan and convertible bonds are not provided.

•

Convertible bonds were converted into ordinary stocks for ¥37 per stock.

22

16. Related Party Transactions (continued)
2.

Note about significant affiliate
For the year ended March 31, 2009, CBH Resources Ltd., was recognized as significant
affiliate and summary of its financial statements were as follows:(Millions ofyen)(Thousands of
U.S. dollars)¥ 4,976
12,934$ 50,657
131,676

Total current liabilities
Total long-term liabilities

1,844
12,14018,779123,591

Total net assets

3,926

39,963

12,993(10,711)(9,678)132,276(109,041)(98,531)

Total current assets
Total fixed assets

Net sales
Income (loss) before income taxes
Net income (loss)
17. Inventories

Inventories at March 31, 2008 and 2009 consisted of the following:
March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)
Finished goods
Work in process
Raw materials and supplies
Total¥ 6,911
6,028
13,577¥26,516¥ 6,384
4,897
10,370¥21,651$ 64,989
49,858105,565$220,412

23

18.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at March 31, 2008 and 2009 consisted of thefollowing:
2008

Amount(Millions of yen)
Short-term bank loans
Current portion of
long-term debt
Long-term debt
Commercial papers
Total

March 31,2009
Weighted
averageinterest
rate
Last due on

2009(Thousands of
U.S. dollars)¥21,601
4,896¥22,478
3,390

1.1%
1.3

11,6183,000¥41,115

8,928
2,000
¥36,7961.5
0.9$228,830
34,5142010.4 ~ 2022.9

90,89020,361$374,595

Average interest rates are calculated by using weighted-average interest rates as at March 31,
2009.
The maturities of long-term debt outstanding as at March 31, 2009 were as follows:Year ending March 31,(Millions ofyen)(Thousands of
U.S. dollars)¥ 3,390
6,031
2,082
601
182
32
¥12,318$ 34,514
61,401
21,190
6,123
1,847
329
$125,404

2010
2011
2012
2013
2014
Thereafter
Total

Assets pledged as collateral for the short-term borrowings and the long-term debt at March 31,
2008 and 2009 were as follows:
Pledged assets

Land
Buildings and structures
Machinery and equipment
Investment securities
Total

March 31,
2008
2009
2009
(Millions of yen)(Thousands of
U.S. dollars)¥13,794
5,037
10,203487¥29,521¥13,794
5,206
10,113
196¥29,309$140,434
53,000102,957
1,995$298,386

24

18.

Short-Term Borrowings and Long-Term Debt (continued)
March 31,
2009
2009
2008
(Millions of yen)(Thousands of
U.S. dollars)
Short-term bank loans
Current portion of long-term debt
Long-term debt
Total

¥

30
2,122
5,510
¥7,662

¥

–
1,494
4,016
¥5,510$–15,20940,883$56,09225