Contents
Profile of NIKKO

1Financial Highlights

3

Consolidated Balance Sheets

4

Consolidated Statement of Income

6

Consolidated Statement of Shareholders' Equity

7

Consolidated Statement of Cash Flows8

Notes to the Consolidated Financial Statements

9

Board of Directors and Satutory Auditors

21

Corporate Data

21

WIND

WATER

EARTH

Water Purification
Wind Energization

Water treatment facilities/Housing & Environment
Equipment

Wind turbine system

Business Units

Earth Reproduction
Pottery & Porcelain / Tiles /Electro-Ceramics

陶 磁器
POTTERY &PORCELAIN

住設環境機器HOUSING &ENVIRONMENTAL
EQUIPMENT

電子セラミック

ELECTRO－CERAMICS

環境ｴﾈﾙｷﾞｰ
機器
ENVIRONMENTAL
ENERGYEQUIPMENT-1-

Sales by Segment Information
13.3％
13.3％

12.8％
12.8％

14.8％
14.8％

2009

2011
(forecast)

2010

Sales
17,063

57.2％
57.2％

Sales
17,961Million yen

54.5％
54.5％

Sales
8,000

Million yen

29.3％
29.3％

Million yen

29.6％
29.6％

30.5％
30.5％

Business Segment

2009

2011

2010
againstpreviousyear'08.11'09.10'09.11'10.10

9,756

9,780

24

4,400

Tabletop

5,007

5,482

475

2,460

ElectroCeramics

2,268

2,656

388

1,140

30

42

12

20

million \Housing &Environmental
Equipment

Others

57.6％
57.6％

'10.11'11.3（About 2011）
Forecast at Dec.10 2010
Due to the change in fiscal
year end to March 31, theforecast figures for the fullyear are for 5-month period
from November 1,
2010 to March 1, 2011 andcomparisons with the previous
year are not provided.

ＮＥＴＷＯＲＫNIKKOMIDDLE EAST
TRADING LLC
(UAE)

NIKKO
CERAMICS,
Inc. (USA)PATRA
PORCELAIN
Co., Ltd.
(Thailand)
・・・Product Activities

Overseas Customers

・・・Sales Activities

USA, Korea, China,
South-East Asia(Taiwan, Singapore,
Vietnam etc.), India, UAE-2-

Financial Highlights
NIKKO COMPANY

Consolidated

Data
Total Assets &Shareholders' Equity

Net Income

Net Sales(Million Yen)
200

(Million Yen)

Total Assets
Shareholders' Equity
Shareholders' Equity Ratio (%)
100.0

(%)

0
20,000(Million Yen)
Δ200

20,00080.0

15,00060.0

10,000

40.0

5,000

20.0

15,000Δ400

Δ600

10,000Δ800
5,000
Δ1,000Δ2,303
Δ2,628

Δ2,400Δ1,200

0
'06

'07

'08

'09

2010
2010

'06

'06

'07

'07

0.0

0

'09 2010
2010

'08

'08

'06

'09

'07

'08

2010

Millions of yen(except per share amounts and %)Consolidated Data
Net Sales
Net Income
Total Assets
Shareholders' Equity
Shareholders' Equity Ratio (%)
Return on Shareholders' Equity (%)
Number of Shares

2006
22,660(943)
19,854
10,252
51.6
(8.7)

2007
22,359(643)
19,826
10,251
51.7
(6.3)

2008
21,267(1,210)（2,628）18,046
7,586
42.0(29.5)

2009
17,063(1,150)（2,303）
13,8285,258
38.0(35.9)

2010
17,961(1,022)
13,9394,143
29.7(21.7)

17,072,000

19,572,000

19,572,000
Yen

19,572,000

19,572,000(139.46)403.551.00(122.84)
280.59－Per Share of Common StockNet Income
Shareholders' Equity
Cash Dividends(57.07)621.433.00(38.79)541.894.00

Note: ￥80.89 = U.S.$1.00; See Notes to the Consolidated Financial Statements.

-3-'09 2010
2010

Thousands of
U. S. dollar(except per
share amounts)
2010
222,054(12,635)
172,332
51,225U. S. dollar(54.54)221.13－(0.674)2.733－

Consolidated Balance Sheets
NIKKO COMPANY

October 31, 2010 and 2009

Thousands of
U. S. dollar
2010

Millions of yen
2010
2009

ASSETS
Current Assets:
Cash and deposits
Notes and accounts receivable:
Trade
Subsidiaries and affiliates
Other
Allowance for doubtful accounts
Inventories
Deferred tax assets
Prepaid expenses and other current assets
Total current assets
Investments and Other Assets:
Investment securities
Stocks of affiliates
Other
Allowance for loss on valuation of investments of subsidiaries
and affiliates
Allowance for doubtful accounts
Total investments and other assets
Property, plant and equipment, at cost:
Land
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Construction in progress
Lease Assets
Accumulated depreciation
Net property, plant and equipment
Intangible Assets:
Lease Assets
Other
Intangible Assets and otherTotal Assets

See Notes to the Consolidated Financial Statements.

-4-¥1,431¥1,580$17,698

3,306
33
0
(269)

2,911
30
0
(198)

40,880413
6(3,332)

3,635
1
149
8,289

3,619
4
148
8,096

44,945
21
1,848
102,480

486
37
432

557
218
450

6,012
459
5,342

－
(285)
670

(157)
(298)
770

－
(3,530)
8,284

1,261
6,726
5,863
1,315
4
341
(10,890)
4,621

1,261
6,633
5,874
1,362
1
342
(10,763)
4,711

15,58983,15072,482
16,26452
4,220(134,632)
57,127

237
121
359

162
87
249

2,937
1,502
4,439

¥13,939¥13,828$172,332

Consolidated Balance Sheets
NIKKO COMPANY

October 31, 2010 and 2009

Thousands of
U. S. dollar
2010

Millions of yen
2010
2009

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:
Notes and accounts payable:
Trade
Subsidiaries and affiliates
Other
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Construction notes payable
Accrued expenses
Income taxes payable
Provision for bonuses
Provision for product warranties
Other
Total current liabilities¥3,251
249
49
446
172
126
136
176
60
203
86
1,101
6,060

¥2,919
196
40
422
100
101
44
181
42
306
105
965
5,427

$40,198
3,089
609
5,524
2,126
1,566
1,682
2,187
748
2,510
1,063
13,61674,925

Noncurrent liabilities:
Long-term loans payable
Lease obligations
Provision for directors' retirement benefits
Provision for retirement benefits
Other
Total noncurrent liabilities
Total Liabilities

1,778
346
104
1,368
137
3,735
9,796

1,350
362
88
1,196
144
3,141
8,569

21,9804,286
1,295
16,913
1,705
46,181
121,106

Shareholders' Equity:
Capital stock, ￥50 par value per share
Authorized-60,000,000 shares;
Issued-19,572,000 shares in 2010
and 19,572,000 shares in 2009
Capital surplus

3,200
3,045

3,200
3,620

39,55937,644(1,454)(334)(1,007)(333)(17,976)(4,130)

(180)
(132)
4,143

(109)
(111)
5,258

(2,237)(1,633)51,225¥13,939¥13,828$172,332

Retained earnings
Treasury stocks
833,316 shares in 2010 and 831,026 shares in 2009
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total shareholders' equity
Total Liabilities
and Shareholders' Equity

See Notes to the Consolidated Financial Statements.

-5-Consolidated Statement of Income
NIKKO COMPANY

Years ended October 31, 2010 and 2009

Millions of yen
2010
2009
¥17,961¥17,063
13,445
13,5894,516
3,473

Net Sales
Cost of Sales
Gross profit

Thousands of
U. S. dollar
2010$222,054
166,21555,839Selling, General and Administrative Expenses
Operating income (loss)

5,471
(954)

5,796
(2,322)

67,635(11,796)

Other (Income) Expenses:
Interest expenses
Interest and dividend income(Gain) on sale or loss on disposal of noncurrent assets, net
Other, net
Income before taxes (loss)

52
(1)
11
(42)
(975)

36
(3)
(20)
(73)
(2,262)

651
(15)
146
(519)
(12,059)

44
2
46

41
0
41

548
26
575

¥(1,022)¥(2,303)$(12,635)

Income taxes-current
Income taxes-deferred
Income taxes
Net income (loss)

Yen
2010
Amounts Per Share of Common Stock:
Net Income (loss)
Cash dividends¥(54.54)－

See Notes to the Consolidated Financial Statements.

-6-

Yen
2009
¥(122.84)－

U. S. dollar
2010$(0.674)－

Consolidated Statement of Changes in Equity
NIKKO COMPANY

Years ended October 31, 2010 and 2009
Number ofshares ofcommon stock(thousands)
Balance, October 31, 2008
19,572
Net income (loss) for the year－－
Purchase of treasury stock－
Other
Balance, October 31, 2009
19,572
Deficit disposition－
Net income (loss) for the year－－
Purchase of treasury stock－
Other
Balance, October 31, 2010
19,572

Balance, October 31, 2008
Net income (loss) for the year
Purchase of treasury stock
Other
Balance, October 31, 2009
Deficit disposition
Net income (loss) for the year
Purchase of treasury stock
Other
Balance, October 31, 2010

Capitalstock¥3,200－－－¥3,200－－－－¥3,200CapitalsurplusMillions of yen
Retainedearnings¥3,620－－－¥3,620(575)－－－¥3,045

Millions of yen
Foreign
Total valuation
Valuation
Currency
and translationdifference on
Translation
adjustments
availablefor-sale
Adjustments
securities¥(116)¥(94)¥(210)
－
－
－
－
－
－
7
(17)
(10)
¥(109)¥(111)¥(220)
－
－
－
－
－
－
－
－
－
(71)
(20)
(92)
¥(180)¥(132)¥(313)

Capitalstock

Capitalsurplus$39,559－－－－$39,559

Balance, October 31, 2009
Deficit disposition
Net income (loss) for the year
Purchase of treasury stock
Other
Balance, October 31, 2010

Thousands of dollars
Foreign
Total valuation
Valuation
Currency
and translationdifference on
Translation
adjustments
availablefor-sale
Adjustments
securities$(1,348)$(1,381)$(2,730)
－
－
－
－
－
－
－
－
－
(888)
(252)
(1,141)$(2,237)$(1,633)$(3,871)-7-¥(319)－(14)－¥(333)－－(0)－¥(334)$44,754(7,110)－－－$37,644

Total
shareholders'equity¥7,796(2,303)(14)－¥5,479－(1,022)(0)－¥4,456Total
neｔ assets¥7,586(2,303)(14)(10)¥5,258－(1,022)(0)(92)¥4,143Thousands of dollars
Treasury
Retainedearnings
stock

Balance, October 31, 2009
Deficit disposition
Net income (loss) for the year
Purchase of treasury stock
Other
Balance, October 31, 2010

See Notes to the Consolidated Financial Statements.

¥1,296(2,303)－－(1,007)575(1,022)－－¥(1,454)

Treasurystock$(12,451)
7,110(12,635)－－$(17,976)
Total
neｔ assets$65,007－(12,635)(5)(1,141)(51,225)$(4,125)－－(5)－$(4,130)

Total
shareholders'equity$67,737－(12,635)(5)－$55,096

Consolidated Statement of Cash Flows
NIKKO COMPANY

Years ended October 31, 2010 and 2009
Millions of yen
2010
2009
Net cash provided by (used in) operating activities
Income (Loss) before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for retirement benefits

Thousands of
U. S. dollar
2010¥(975)
580
59
(103)
171

¥(2,262)
782
315
(124)
161

$(12,059)
7,179
740(1,282)
2,122

(157)
(19)
(9)
52
(5)
17
0
2
(417)

58
11
(11)
36
(41)
20
1
19
1,113

(1,950)
(234)
(120)
651
(70)
217
8
29
(5,155)

10

(215)

131

(32)
403
369
(52)
9
(52)
(36)

427
(1,198)
200
(705)
11
(36)
(52)

(402)
4,983
(4,566)
(646)
120
(651)
(457)

¥(132)¥(783)$(1,634)

Net cash provided by (used in) investment activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Acquisition of investments in affiliates
Other, net
Net cash provided by (used in) investment activities

(180)
178
(411)
8
―
20
(39)
¥(424)

(78)
176
(988)
106
(1)
―
(0)
¥(785)(2,232)2,201(5,086)
99
－
254
(486)
$(5,250)

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Payments into long-term loans payable
Repayments of lease obligations
Purchase of treasury stock
Cash dividents paid
Net cash provided by (used in) financing activities

25
600
(100)
(109)
(0)
(0)
¥415

(2,111)
1,500
(50)
(49)
(14)
(0)
¥(726)

309
7,417(1,236)(1,350)(5)(3)$5,130Effect of exchange rate change on cash and cash equivalents

(9)

(17)

(121)

Net increase (decrease) in cash and cash equivalents(151)(2,311)(1,875)

Cash and cash equivalents at beginning of period

1,402

3,714

17,340Cash and cash equivalents at end of period¥1,251¥1,402$15,465

Increase (decrease) in provision of allowance for loss on valuation of investmentsof subsidiaries and affiliates

Increase (decrease) in provision for product warranties
Interest and dividends income
Interest expenses
Loss (gain) on sales of property, plant and equipment
Loss on retirement of noncurrent assets
Loss (gain) on valuation of investment securities
Loss (gain) on valuation of derivatives
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in claims provable in bankruptcy, claims provable inrehabilitation
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

See Notes to the Consolidated Financial Statements.

-8-Notes to the Consolidated Financial Statements
NIKKO COMPANY

1. Basis of Presenting Consolidated Financial Statements(1) Accounting Principles and Presentation

The accompanying consolidated financial statements have been prepared from the accounts maintained by
Nikko Company (the "Company") and its consolidated subsidiaries (the "Companies") in accordance with theprovisions set forth in the Japanese Commercial Code and other countries' regulations and in conformity withaccounting principles and practices generally accepted in Japan, which are different in certain respects as toapplication and disclosure requirements from International Accounting Standards.
Certain items presented in the consolidated financial statements filed with the Ministry of Finance (the"MOF") in Japan have been reclassified for the convenience of readers outside Japan.
The consolidated financial statements are not intended to present the consolidated financial position, resultsof operations and cash flows in accordance with accounting principles and practices generally accepted incountries and jurisdictions other than Japan.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of¥80.89=U.S.$1 the approximate rate of exchange at October 31, 2010, has been used in translation. The
inclusion of such amounts is not intended to imply that Japanese yen have been or could be readily converted,
realized or settled in U.S. dollars at the rate or any other rate.

(2) Scope of Consolidation

The Company had 3 subsidiaries as at October 31, 2010 and 2009. The consolidated financial statements
include the accounts of the Company and 3 of its subsidiaries. The consolidated subsidiaries are listed below:
As at October 31, 2010
Equity ownership percentage,
Capital stockincluding indirect ownership(thousands)
Nikko Ceramics, Inc.

100.00 %$1,250

Nikko Hanbai Co., Ltd.

94.85 %

¥470,000

Nikko ME Co., Ltd.

100.00 %¥30,000(3) Consolidation and Elimination

For the purposes of preparing the consolidated financial statements, all significant intercompany
transactions, account balances and unrealized profits among the Companies have been eliminated, and the
portion thereof attributable to minority interests is charged to minority interests.
The cost of investments in the common stock of consolidated subsidiaries is eliminated with the underlying
equity in net assets of such subsidiaries. The material difference between the cost of an investment and theamount of underlying equity in net assets of such subsidiary is deferred and amortized over a reasonable
period within 5 years on a straight-line basis.

(4) Investments in Unconsolidated Subsidiaries and Affiliates

At October 31, 2010, the Company had 4 affiliates. They have not been accounted for by the equity method forthe following reasons: insignificant amount of net income and retained earnings. The investments in affiliates
are stated at cost.

-9-2. Summary of Significant Accounting Policies(1) Valuation of Securities

The accounting standard for financial instruments requires that securities be classified into three categories:
trading, held-to-maturity or other securities. Trading securities are carried at fair value and held-to-maturity
securities are carried at amortized cost. Marketable securities classified as other securities are carried at fairmarket value with any changes in unrealized gain or loss, net of the applicable income taxes, included directly
in shareholders’ equity. Non-marketable securities classified as other securities are carried at cost. The cost of
securities sold is determined by the moving average method.

(2) Inventories

At the Company and its domestic consolidated subsidiaries, finished goods, semi-finished products and workin process are stated at cost, cost being determined by the period-average method, merchandise, raw materials
and supplies are valued at cost being determined by the moving average (the carrying value on the balance
sheet is written down to reflect the effect of lower profit margins), costs on uncompleted construction contracts
are stated at cost, cost being determined by the specific identification method (the carrying value on thebalance sheet is written down to reflect the effect of lower profit margins)
Merchandise of overseas consolidated subsidiary is stated at the lower cost method determined by the first-in
first-out method.

(3) Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment except forbuildings of the Company is computed on the declining-balance method and depreciation of buildings iscomputed on the straight-line method, at rates based on the estimated useful lives of the assets. Depreciationof property, plant and equipment of the domestic consolidated subsidiary is computed on the declining-balancemethod and buildings (except for structures attached to the buildings) acquired on and after April 1, 1998
have been depreciated by the straight-line method. The estimated useful lives are based on the prescribed by
the Japanese income tax laws. The overseas consolidated subsidiary has computed by the straight-line
method. Normal repairs and maintenance, including minor renewals and improvements, are charged toincome as incurred.

(4)Lease Assets

Depreciation of lease assets is calculated using the straight-line method with the respective lease terms as theuseful lives. The residual value is zero unless there is a residual value guarantee, in which case the amount of
the guarantee is the residual value. For finance lease transactions where there is no transfer of ownershipbeginning prior to the fiscal year when these standards are first applied, the Company uses an accounting
method that is based on the method used for ordinary lease transactions.

(5) Foreign Currency Translation

Foreign currency amounts except for those covered by forward exchange contracts are translated into
Japanese yen on the basis of the rates of exchange in effect at the balance sheet date for monetary current
assets and current liabilities, and at historical rates for other assets and liabilities unless they have accrued
significant exchange losses. Foreign currency amounts covered by forward exchange contracts are translated
into Japanese yen at the relevant contract rates. Historical rates are used for translation of income andexpenses.

(6) Recognition of Income Taxes

The Companies adopted deferred tax accounting, whereby tax effects on temporary differences are adequatelyreflected and recognized as additions to or deductions from "Income Taxes" in the accompanying Consolidated
Statements of Income.

(7) Translation of Foreign Currency Financial Statements(Accounts of Overseas Subsidiaries and Affiliates)
Financial statements of foreign subsidiary is translated into Japanese yen at the current exchange rates as of
the balance sheet date for all balance sheet accounts except for shareholders’ equity accounts, which istranslated at the historical exchange rate. The annual average rate is used for revenue and expense accounts.

-10-(8) Amortization

The amortization of intangible assets of the Company and the domestic consolidated subsidiary are computedby the straight-line method, at rates based on the prescribed by the Japanese income tax laws.
Expenditures related to computer software intended for internal use are amortized over the useful life of therespective assets (5 years).
The overseas consolidated subsidiary has computed by the straight-line method.

(9) Allowance for Doubtful Accounts

Allowance for doubtful accounts is calculated based on the aggregate amount of estimated credit losses for
doubtful receivables plus an amount for receivables other than doubtful receivables calculated using historical
write-off experience from certain prior periods.

(10) Reserve for guarantee for after-care of products

As warranty expenses for certain products sold by the Company are subsequently realized, a provision for
product warranty has been recorded in order to reflect the results of their operations more accurately.

(11) Derivatives

Derivatives are valued at fair value if hedging accounting is not appropriate or where there is no hedging
designation, and the gains or losses on derivatives are recognized in the current earnings.

(12) Net Income and Dividends per Share"Net income per share" of common stock is based upon the weighted average number of shares of common
stock outstanding during each year. Cash dividends per share shown for each year in the Consolidated
Statements of Income represent dividends declared as applicable to the respective year, rather than those
paid in each year.

(13) Cash Equivalents

Cash Equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits and investment trusts that
represent short-term investments, all of which mature or become due within three months of the date ofacquisition.

(14) Shareholders’ Equity

The amount of retained earnings available for dividends under the Commercial Code of Japan is based on theamount stated in the statutory financial statements of the Company. Dividends are approved by theshareholders at a meeting held subsequent to the fiscal year to which the dividend is applicable. In addition, asemi-annual interim dividend payment may be made by resolution of the Board of Directors subject to certain
limitations imposed by the Commercial Code.

(15) Research and Development Costs

Expenses relating to research and development activities are charged to income as incurred. Such researchand development expenses were included in cost of goods sold and selling, general and administrative
expenses in the accompanying consolidated statements of income and amounted to ¥335million ($4,146
thousand) and ¥263million ($2,882 thousand) for the years ended October 31, 2010 and 2009, respectively.

-11-

3. Short-term and Long-term Bank Loans
Short-term loans and Long-term loans are consisted mainly of borrowing from banks.
The composition of Short and Long-term loans maturing and lease obligations due within one year as of
October 31, 2010 and 2009 are as follows:
Thousands of
U.S. dollars
2010

Millions of yen
2010

2009

Short-term loans payable (1.38%)
¥446
¥422
Current portion of long-term loans payable100
172(2.17%)
Lease obligations
126
101
Percentages show the annual weighted average interest rate at October 31, 2010

$5,524
2,126
1,566

Long-term loans and lease obligations at October 31, 2010 and 2009 are as follows:
Thousands of
U.S. dollars
2010

Millions of yen
2010

2009

Long-term loans payable (2.24%)¥1,778¥1,350
Lease obligations
346
362
Percentage shows the annual weighted average interest rate at October 31, 2010

$21,980
4,286

The aggregate annual maturities of the non-current portion of long-term loans and lease obligations at
October 31, 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen
long-term loans
2012
2013
2014
2015
2016 and thereafterLease
obligations

¥250
329
329
269
600

long-term loans

Leaseobligations$3,097
4,068
4,068
3,327
7,417

$1,495
1,209
890
437
253

¥120
97
72
35
20

4. Pledged Assets
The carrying amounts of assets pledged as collateral at October 31, 2010 .
Thousands of
U.S. dollars
2010

Millions of yen
2010
Land
Buildings and structures

2009

¥947
1,311

¥657
1,330

$11,716
16,215Investment securities

344
479

―
―

4,264

Merchandise and finished goods

-12-

5,932

5. Contingent Liabilities
Contingent liabilities at October 31, 2010 and 2009 are as follows:
Thousands of
U.S. dollars
2010

Millions of yen
2010
Guarantee of indebtedness of affiliate
Guarantees of indebtedness of employees
Guarantees of the lease liabilities of the company(Transport duties trust)

2009
¥25

―

$314

6

¥6

74

23

―

292

6. Retirement Plans and Severance Indemnities(1) The Company and its domestic consolidated subsidiaries have defined benefit plans, tax-qualified pension
plans, covering substantially all employees who are entitled to lump-sum or annuity payments, the amountsof which are determined by reference to their basic rates of pay, length of service, and the conditions underwhich termination occurs.
The following table sets forth the funded and accrued status of the plans, and the amounts recognized in the
consolidated balance sheet as of October 31, 2010 and 2009 for the Company’s and the consolidated
subsidiaries’ defined benefit plans(2) Components of accrued pension and severance costs as of October 31, 2010 and 2009 are as follows:
Thousands ofMillions of yen
U.S. dollar
2010
2009
2010
Retirement benefit obligation at end of year
Plan assets
Unfunded retirement benefit obligation
Unrecognized net retirement benefit obligation
at transition
Unrecognized actuarial loss
Unrecognized prior service cost
Net amount recognized on the balance sheet
Prepaid pension expenses
Accrued retirement benefits¥(3,048)
1,136(1,911)¥(3,059)
1,180(1,879)$(37,685)
14,051(23,634)

341

410

4,227

201
―
(1,368)―(1,368)272―(1,196)―(1,196)

2,492―(16,913)―(16,913)

Consolidated subsidiaries use the simplified method.
(3) Components of retirement benefit expenses for the year ended October 31, 2010 and 2009 are as follows
Thousands ofMillions of yen
U.S. dollar
2010
2009
2010
Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of actual loss
Amortization of prior service cost
Retirement benefit expenses

¥191
58
(22)
68
40
5
342

¥183
59
(24)
68
40
40
367

Retirement expenses under the simplified method are included in service cost.

-13-$2,371
723
(276)
845
500
66
4,231

(4) Assumptions used for calculation of retirement benefits for the year ended October 31, 2010 and 2009 are as
follows:
2010
2009
Method of attributing the project benefits to periods of service
Discount rate
Expected return on plan assets
Amortization period of unrecognized actuarial gains or losses
Amortization period of net transition obligation

Straight-line method
2.0 %
2.0 %
2.0 %
2.0 %
13 years
15 years

7. Deferred Tax
Deferred tax assets and liabilities (both current and non-current) consisted of the following elements:
Thousands
ofU.S. dollar
2010

Millions of yen
2010
Deferred tax assets:
Provision for bonuses not deductible until paid
Provision for product warranties
Allowance for doubtful accounts
Allowance for loss on valuation of investments ofsubsidiaries and affiliates
Loss on valuation of inventories
Loss on disposal of inventories
Impairment loss on fixed assets
Provision for directors' retirement benefits
Provision for retirement benefits
Valuation difference on available-for-sale securities
Tax loss carried forward
Other
Subtotal
Allowance for valuation
Net deferred tax assets
Deferred tax liabilities:
Deferred gains on sales of property
Net deferred tax liabilities

2009
¥79
34
170

¥123
42
138

$984
429
2,107

―

63

―

309
45
48
40
552
73
2,697
74
4,127
(4,125)
¥1

307
48
61
35
483
44
2,331
76
3,758
(3,753)
¥4

3,829
558
602
501
6,833
903
33,351921
51,023(51,002)
$21

(6)
¥(6)

(6)
¥(6)

(74)
$(74)

The reconciliation of the statutory tax rate to the income tax rate reflected in the Consolidated
Statements of Income for the year ended October 31, 2010 and 2009 are not shown since the operating
result for the year was a loss before provision for income taxes.

-14-8. Accounting for Leases
The Company and certain subsidiaries lease mainly machinery and equipment as lessee.
The Group continues to account for finance leases which existed at October 31, 2010 and do not transfer
ownership of the leased property to the lessee as operating lease transactions.
Pro forma information of these leased property such as acquisition cost, accumulated depreciation, obligations
under finance leases, depreciation expense and interest expense on an “as if capitalized” basis at October 31,
2010 and 2009is as follows:
Thousands of
U.S. dollars
2010

Millions of yen
2010
Acquisition cost
Machinery and equipment
Other assets
Accumulated depreciation
Machinery and equipment
Other assets
Net book value
Machinery and equipment
Other assets

2009

¥513
80
¥594

¥513
110
¥624

$6,351
994$7,346

¥199
57
¥256

¥125
68
¥194

$2,462712$3,174

¥314
22

¥388
41

$3,889282

Obligations under finance leases as of October 31, 2010 and 2009, are as follows:
Thousands of
U.S. dollars
2010

Millions of yen
2010
Due within one year
Due after one year

2009

¥84
269
¥353

¥88
353
¥441

$1,043
3,329$4,372

Depreciation expenses and interest expenses under finance leases as of 2010 and 2009, are as follows:
Thousands of
U.S. dollars
2010

Millions of yen
2010
Lease expenses for the year
Depreciation expense
Interest expenses

2009
¥88
90
17

¥88
96
20

$1,091
1,114
213

Depreciation expenses and interest expense, which are not reflected in the accompanying consolidated
statement of income, computed by the straight-line method and the interest method.
The minimum rental commitments under non-cancellable operating leases at October 31, 2010 and 2009 are as
follows:
Thousands of
U.S. dollars
2010

Millions of yen
2010
Due within one year
Due after one year

2009
¥11
16
¥27

-15-

¥11
27
¥39

$138
207
$345

9. Financial Instruments
Fair Value of Financial Instruments
Fair value and variance with carrying value presented on the balance sheets as of October 31, 2010 are as
follows. Fair values that are not readily determinable are not included in the following table. (See *2 foradditional information.).
Millions of yen
2010(1) Cash and time deposits

Carrying value¥1,431

Fair value¥1,431

Variance
¥ ―

3,338

3,338

―

50

39

(10)

(2) Notes and accounts receivable(3) Investments in securities
Held-to-maturity securities
Available-for-sale securities
AssetsTotal(4) Notes and accounts payable(5) Short-term bank borrowings

387

387

―

5,207

5,195

(10)

3,501

3,501

―

446

446

―

1,950

2,002

52

(7) Lease obligations

473

461

(12)

(8) Income tax payable

60

60

―

Liabilities Total

6,432

6,473

40

(6) Long-term borrowings from banks

Thousands of U.S. dollars
2010(1) Cash and time deposits

Carrying value$17,698

Fair value$17,698

Variance$ ―41,266

41,266―(2) Notes and accounts receivable(3) Investments in securities
Held-to-maturity securities

618

483

(134)

Available-for-sale securities

4,793

4,793

―

64,37664,242(134)(4) Notes and accounts payable

AssetsTotal

43,28843,288―(5) Short-term bank borrowings

5,524

5,524

―

(6) Long-term borrowings from banks

24,106

24,760654(7) Lease obligations

5,853

5,705

(148)

(8) Income tax payable

748

748

―

Liabilities Total

79,52180,027505(1) Cash and time deposits; (2) Notes and accounts receivable
Carrying value is used for fair value for these short-term items because these amounts areapproximately the same.
(3) Investments in securities
Market prices on exchanges are used to determine the fair valueof equity securities. Prices quoted by financial institutions are used to determine the fair value of bonds.
(4) Notes and accounts payable; (5) Short-term bank borrowings;(8) Income tax payable
Carrying value approximates fair value for these short-term items.
(6) Long-term borrowings from banks
Fair value of long-term borrowing is the discounted value of total principal and interest using anassumed interest rate on equivalent new borrowings.

-16-

(7) Lease obligations
The fair value of lease obligations is the discounted present value of total principal and interest using anassumed interest rate on equivalent new lease transactions.
*2: Fair values that are difficult to determine:
Thousands of
U.S. dollars
Carrying value

Millions of yen
Carrying value

Available-for-sale securities¥85$1,0602,717
Shares of subsidiaries and affiliates
219
Market prices do not exist for these items. These items are not included in 3 investments in securities,
because their fair values are not readily determinable.

9. Investments
In accordance with the accounting standard for financial instruments, investment securities include equity
securities, bonds and other, of which the aggregate cost, gross unrealized gains/losses and fair value pertaining
to available-for-sale securities and held-to-maturities at October 31, 2010 and 2009 were as follows.
Available-for-sale securities
Securities with book values exceeding
Millions of yen
2010
Acquisition
cost¥1

Other securities
Millions of yen
2010

Book value

Difference¥1¥0Acquisition
cost
¥567

Thousands of U.S. dollars
2010

Difference¥386¥(181)

Thousands of U.S. dollars
2010

Acquisition
Book value
Difference
cost
$12
$13
$0
Available-for-sale securities
Securities with book values exceeding
Millions of yen
2009
Acquisition
cost
¥168

Book value

Book value

Difference

¥176

¥7

Acquisition
cost$7,018Book value

Difference$4,780$(2,238)

Other securities
Millions of yen
2009
Acquisition
cost
¥399

Book value

Difference¥283¥(116)

Available-for-sale securities whose fair value is not readily available as of October 31, 2010 and 2009 comprisefollowing:
Millions of yen
2010
Unlisted stocks
Others
Total

2009
¥85
50
135

-17-

¥266
50
316

Thousands of
U.S. dollars
2010$1,060648
1,678

10. Segment Information(1) Industry Segment Information
The Companies operate principally in the following three industrial segments:
Housing & Environmental Equipment
Tabletop
Electro-Ceramics

Septic tanks, Garbage Disposer system, Bathroom units,
Water treatment facilities, Tiles, Ferrite tiles, Wind turbine system
Fine bone china, Fine vitrified china, Fine porcelain, Oven ware
Alumina substrates, Glazed substrates, Hybrid IC,
LTCC substrates, Dielectric ceramics

The segment information of the Companies ended October 31, 2010 and 2009 are presented below:
Millions of yen
2010

Net sales:
Sales to outside customers
Intersegment sales
Total
Operating expenses
Operating income (loss)
Total assets:
Depreciation:
Capital expenditure:

Housing &Environmental
Equipment

Tabletop

ElectroCeramics¥9,780
―
9,780
9,782
(92)
¥4,088213
59¥5,482
―
5,482
5,603
(121)
¥4,691145
297¥2,656
―
2,656
2,724
(67)
¥2,520
160
130

Other

Eliminations/
Consolidated
Corporate

Total

¥42
―
42
125
(83)
¥9
1
―

¥17,961―
17,961
18,325(363)¥11,310
521
488

―
―
―
590
(590)
¥2,62959
2¥17,961―
17,961
18,916(954)¥13,939580
490

Thousands of U.S. dollars
2010
Housing &Environmental Tabletop
Equipment
Net sales:
Sales to outside customers
Intersegment sales
Total
Operating expenses
Operating income (loss)
Total assets:
Depreciation:
Capital expenditure:$120,907―
120,907122,046(1,139)$50,5472,642
740

ElectroCeramics$67,777―
67,777
69,275(1,498)$58,002
1,803
3,677

$32,845―
32,84533,678(833)$31,163
1,978
1,618

Other

Total

$524
―
524
1,551
(1,027)$114
20―$222,054―
222,054226,552(4,498)$139,827
6,444
6,036

Eliminations/
Consolidated
Corporate
―
―
―
7,297
(7,297)$32,504734
29$222,054―
222,054
233,850(11,796)$172,332
7,179
6,066

Millions of yen
2009
Housing &Environmental Tabletop
Equipment
Net sales:
Sales to outside customers
Intersegment sales
Total
Operating expenses
Operating income (loss)
Total assets:
Depreciation:
Capital expenditure:¥9,756―
9,756
10,103(347)¥4,022421
319

ElectroCeramics¥5,007
―
5,007
5,615
(607)
¥4,552
146
54

-18-

¥2,268
―
2,268
2,971
(703)
¥2,159
164
92

Other
¥30
―
30
88
(57)
¥8
2
―

Total
¥17,063―
17,063
18,778(1,715)¥10,743735
466

Eliminations/
Consolidated
Corporate
―
―
―
606
(606)
¥3,08443
37¥17,063―
17,063
19,385(2,322)¥13,828778
503

(2) Information by Geographic Segment
Geographical segment information is not presented since domestic sales exceeded 90% of total segment sales.

(3) Overseas Sales and Sales by Overseas Subsidiaries
Overseas sales of the Companies (meaning the amounts of export made by the Company and its domestic
subsidiaries plus the sales of overseas consolidated subsidiaries) ended October 31, 2010 and 2009 arepresented below:

Millions of yen
2010
Overseas sales and sales by overseas subsidiaries:
Americas
Overseas sales¥1,028
Consolidated net sales
5.7%
Percentage of overseas sales against consolidated net sales

Asia¥1,096

Other
¥59

6.1%

0.3%

Total
¥2,184
17,961
12.2%

Thousands of U.S. dollars
2010
Overseas sales and sales by overseas subsidiaries:
Overseas sales
Consolidated net sales

Americas$12,717Asia$13,550

Other
$737

Total
$27,005
222,054

Millions of yen
2009
Overseas sales and sales by overseas subsidiaries:
Americas
Overseas sales¥870
Consolidated net sales
5.1%
Percentage of overseas sales against consolidated net sales

-19-

Asia
¥699

Other
¥46

4.1%

0.3%

Total
¥1,616
17,0639.5%

11. Derivative Financial Instruments
The Company has entered into forward exchange contracts and into commodity swap with banks as hedges
against purchase price of fuel. These derivative financial transactions are utilized solely for hedging purposes
under the internal control rules and the supervision by the Board of Directors.
The following tables summarize market value information as of October 31, 2010 and 2009, of derivatives forwhich hedge accounting has not been applied.

Commodity Related

Thousands of
U.S. dollars
2010

Millions of yen
2010

Oil Swap Contracts:
Receive floating/ Pay Fixed
Contract amountDue after one year
Fair value
Unrealized Gain/(loss)

2009

―
―
―
―

¥43
―
8
8

―
―
―
―

12. Amounts Per Share Common Stock
Net income per share is computed by dividing income available to common shareholders by the weightedaverage number of shares of common stock outstanding during the respective years.

-20-

Board of Directors and Statutory Auditors
NIKKO COMPANY(As of January 28th, 2011)
Chairman
Akitoshi Sakai
Chief Executive Officer
Makoto Yoshida
Board Director, Executive Managing Officer
Kazuto Futamata(Housing & Environmental Equipment Division, General Manager)
Shigekazu Kaneda(Finance & Administration, General Manager)
Board Director, Managing Officer
Kenji Kita
Yoshiaki Iwasaki
Kazuo Miyanabe
Makoto Aoki

(Tabletop Division, General Manager)(Tabletop Division, Head-Factory Manager)(General Manager, Housing & Environmental Equipment Division,
Ceramics Tile Section& Comptroller General,
General Manager, Corporate Technical & Production Engineering)(Electro-Ceramics Division, General Manager)

Board Director
Mitsuru Mitani
Executive Auditing Director
Norio Yamamoto
Auditors
Shigeru Sawa
Takao Anzai

Corporate Data
Head Office
383 Ainoki-Machi, Hakusan-City,
Ishikawa-Prefecture 924-8686 Japan
Tel : 076-276-2121 /Facsimile : 076-276-3309

Japanese Stock Exchange
Nagoya Stock Exchange

Date of Establishment
May 11th, 1908

Transfer Agent and Registrar
The Sumitomo Trust & Banking Co., Ltd.
5-33 Kitahama 4-chome, Chuo-ku, Osaka 541-0041
Japan

Show RoomHead Office, Tokyo, Osaka, Nagoya, New York
Concept Shop "SAWA"

Annual General Meeting
The annual general meeting of shareholders
is held in June each year in Ishikawa-Prefecture

Factories
Head Factory, Tsurugi Factory, Saitama Factory

Auditors
AZSA & CO.

Subsidiaries and Affiliates
NIKKO CERAMICS, INC. (U.S.A.)
Nikko Hanbai Co., Ltd. (Japan)
Nikko ME Co., Ltd. (Japan)
N&I ASIA PTE LTD. (Singapore)
NIKKO MIDDLE EAST TRADING LLC (UAE)
Nikko Care Co., Ltd. (Japan)

URL
http://www.nikko-company.co.jp/-21-