Kaga Electronics Co., Ltd.
and Subsidiaries
Consolidated Financial Statements for theYears Ended March 31, 2010 and 2009,
and Independent Auditors' ReportINDEPENDENT AUDITORS' REPORTTo the Board of Directors of
Kaga Electronics Co., Ltd.:We have audited the accompanying consolidated balance sheets of Kaga Electronics Co., Ltd. and subsidiaries as ofMarch 31, 2010 and 2009, and the related consolidated statements of operations, changes in equity, and cash flows
for the years then ended, all expressed in Japanese yen. These consolidated financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant 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 consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Kaga Electronics Co., Ltd. and subsidiaries as of March 31, 2010 and 2009, andthe consolidated results of their operations and their cash flows for the years then ended in conformity withaccounting principles generally accepted in Japan.
Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts arepresented solely for the convenience of readers outside Japan.

June 29, 2010

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Balance Sheets
March 31, 2010 and 2009
Thousands of
U.S. Dollars(Note 1)Millions of Yen
ASSETSMillions of Yen
2010
2009

LIABILITIES AND EQUITY
2010

CURRENT ASSETS:
Cash and cash equivalents
Marketable securities (Note 3)
Notes and accounts receivables:
Trade
Other
Allowance for doubtful receivables
Inventories (Note 4)
Deferred tax assets (Note 9)
Other current assets
Total current assets
PROPERTY, PLANT AND EQUIPMENT (Note 2.f):Land
Buildings and structures
Machinery, equipment and vehicles
Molding dies and furniture
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3)
Guarantee deposits
Refundable insurance premium
Deferred tax assets (Note 9)
Other assets
Total investments and other assets¥

11,79770

2009¥

11,36959

2010$

CURRENT LIABILITIES:
Short-term bank loans (Notes 5 and 12)
Current portion of long-term debt (Notes 6 and 12)
Notes and accounts payables:
Trade
Other
Income taxes payables (Note 9)
Other current liabilities (Note 9)

126,849753

51,978
7,236(184)
18,141867
6,934

61,054
6,159(159)
18,296994
1,867

558,90377,806(1,978)
195,065
9,323
74,55996,83999,6391,041,280

1,298
3,720
3,491
3,272
120
11,901(5,466)

1,324
3,348
3,622
2,760
7
11,061(4,892)

13,95740,00037,53835,183
1,290
127,968(58,774)

6,435

6,169

69,194

4,607
2,149
1,056
249
2,627

4,854
2,411
965
346
2,867

49,538
23,108
11,3552,677
28,246

10,688

11,443

114,924

Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Notes 6 and 12)
Liability for employees' retirement benefits (Note 7)
Retirement benefits for directors and corporate
auditors (Note 7)
Deferred tax liabilities (Note 9)
Other long-term liabilities
Total long-term liabilities

EQUITY (Note 8):
Common stock—authorized, 80,000,000 shares;
issued, 28,702,118 shares in 2010 and 2009
Capital surplus
Retained earnings
Unrealized loss on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Foreign currency translation adjustments
Treasury stock—at cost, 1,103,943 shares in 2010 and
1,105,308 shares in 2009
Total
Minority interests

TOTAL¥ 113,962¥ 117,251

¥

7,816
1,135

¥

7,386
1,912

$

84,043
12,20443,536
891
1,050
4,351

44,772
1,369
950
4,132

468,129
9,581
11,29046,78558,77960,521

632,032

2,556
1,433

3,635
1,343

27,484
15,409

1,222
593
826

1,122
355
714

13,140
6,376
8,882

6,630

7,169

71,291

12,134
13,91224,012(196)
9(1,698)12,134
13,91225,159(364)(1,738)130,473
149,591
258,194(2,108)97(18,258)(1,332)
46,841
1,712(1,332)
47,771
1,790(14,323)
503,666
18,40948,55349,561

522,075¥ 113,962¥ 117,251$ 1,225,398

CONTINGENT LIABILITIES (Note 16)

Total equity

TOTAL

Thousands of
U.S. Dollars(Note 1)2010

$ 1,225,398

See notes to consolidated financial statements.

-2-

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Operations
Years Ended March 31, 2010 and 2009
Thousands of
U.S. Dollars(Note 1)
2010

Millions of Yen
2010
2009
NET SALES (Note 19)¥ 239,391¥ 273,610$ 2,574,097

COST OF SALES (Notes 10, 11 and 19)

211,153

243,226

2,270,463

Gross profit

28,23830,384

303,634

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Notes 10, 11 and 19)

26,65528,134

286,612

Operating income

1,583

2,250

17,022

152
138

1,634
1,484

181

241
134
39
17
6
(25)
(1,203)
(192)
(496)
(93)
(130)
(350)
(330)
181

(186)

(2,201)(2,000)

INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS

1,397

49

15,022

INCOME TAXES (Note 9):
Current
Deferred

1,412
348

1,459
(365)

15,183
3,742

1,760

1,094

18,925

(44)

(238)

(473)

OTHER INCOME (EXPENSES):Interest and dividend income
Commission received
Gain on liquidation of subsidiaries
Gain on sales of investment securities
Cash surrender on insurance dissolution
Devaluation gain (loss) on trading securities
Devaluation loss on investment securities
Interest expense
Exchange loss
Loss on operation of investment partnership
Loss on retirement of fixed assets
Impairment loss
Headquarter moving expenses
Others—net

481
11
(219)
(131)
(574)
(68)
(10)
(147)

Other expenses—net

Total income taxes
MINORITY INTERESTS IN NET LOSS
NET LOSS

¥

-3-

(319)

¥

(807)

5,172
118
(2,355)(1,409)(6,172)(731)(108)(1,581)
1,948$(3,430)(Continued)

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Operations
Years Ended March 31, 2010 and 2009Yen

PER SHARE OF COMMON STOCK (Note 2.r):Basic net loss
Cash dividends applicable to the year (Note 8)

2010

2009

U.S. Dollars
2010¥ (11.55 )30.00¥ (28.91 )40.00$ (0.12 )0.32

See notes to consolidated financial statements.

-4-(Concluded)

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended March 31, 2010 and 2009
Thousands
Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

28,059¥ 12,134¥ 13,912¥ 27,413

BALANCE, APRIL 1, 2008
Adjustment of retained
earnings due to an adoptionof PITF No. 18 (Note 2.b)Net loss
Cash dividends, ¥40 per share
Purchase of treasury stock
Net change in the year
BALANCE, MARCH 31, 2009
Net loss
Cash dividends, ¥30 per share
Purchase of treasury stock
Disposal of treasury stock
Net change in the year
BALANCE, MARCH 31, 2010

BALANCE, MARCH 31, 2009¥37

Millions of Yen
Deferred Gain
(Loss) on
Foreign
Derivatives
Currency
under Hedge
Translation
Accounting
Adjustments
¥3

¥

(515)

Treasury
Stock

Minority
Interests

Total
Equity¥51¥ 52,192

(44)
(807)
(1,403)(489)(1,627)

1,739

(44)
(807)
(1,403)(489)
112

47,771

1,790

49,561

(319)
(828)
(1)
1
217

(78)

(319)
(828)
(1)
1
139

¥ (1,332)¥ 46,841¥ 1,712¥ 48,553

Treasury
Stock

Total

Minority
Interests

Total
Equity$ (14,323)$ 513,667$ 19,247$ 532,914(3,430)(8,904)
(11)
11
2,333

(838)

(3,430)(8,904)
(11)
11
1,495

$ 503,666$ 18,409$ 522,075

¥

(843)

(44)
(807)
(1,403)
(462)

(489)
(401)

27,597

12,134

13,91225,159(3)(364)(1,223)(1,738)(1,332)

(319)
(828)
(1)
2

27,598(1)
1¥ 12,134¥ 13,912

168

9

40

¥ 24,012¥ (196)¥9¥ (1,698)

CommonStockCapitalSurplusRetained
Earnings

Unrealized
Gain (Loss)on Availablefor-Sale
Securities$130,473$149,591$ 270,528$ (3,914)

Net loss
Cash dividends, $0.32 per share
Purchase of treasury stock
Disposal of treasury stock
Net change in the year
BALANCE, MARCH 31, 2010

Unrealized
Gain (Loss)on Availablefor-Sale
Securities

Thousands of U.S. Dollars (Note 1)
Deferred Gain
(Loss) on
Foreign
Derivatives
Currency
under Hedge
Translation
Accounting
Adjustments$ (18,688)(3,430)(8,904)(11)11$ 130,473$ 149,591$ 258,194

1,806

$ 97

430

$ (2,108)$ 97$ (18,258)

See notes to consolidated financial statements.

-5-$ (14,323)

Total¥ 52,141

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2010 and 2009

Millions of Yen
2010
2009
OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes—paidDepreciation and amortization
Impairment loss
Loss on retirement of fixed assets
Provision for (reversal of) directors' and corporate auditors'
bonuses
Gain on sales of investment securities
Devaluation loss on investment securities
Gain on sales of property, plant and equipment
Provision for employees' retirement benefits
Provision for directors' and corporate auditors' retirement
benefits
Provision for doubtful accounts
Changes in assets and liabilities:
Decrease in notes and accounts receivable
Decrease in inventories
Increase in advance
Decrease in interest and dividend receivable
Decrease (increase) in prepaid expenses and othercurrent assets
Decrease in trade notes and accounts payable
Increase in accrued expenses and other current liabilities
Decrease in interest payable
Other—net
Total adjustments

49$ 15,022(1,344)
2,274
147
10

(3,817)
1,978
350
130

(14,452)
24,452
1,581
108

11
(464)
219
(17)
67

(128)
(16)
1,203
(3)
42

118
(4,989)
2,355
(183)
720

93
269

84
198

1,000
2,892

2,304
102
(344)
147

13,149
2,981
(312)
240

24,774
1,097(3,699)
1,581

1,058
(1,270)
855
(131)
345
4,331

(592)
(11,578)
1,459
(193)
210
5,385

11,376(13,656)
9,194(1,409)3,709
46,569Net cash provided by operating activities

5,728

5,434

61,591INVESTING ACTIVITIES:Payments for time deposits
Purchase of property, plant and equipment
Purchase of investment securities
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment securities
Purchase of stocks of consolidated subsidiaries
Sale of stocks of consolidated subsidiaries
Increase in short-term loan receivable
Increase in long-term loan receivable
Increase in refundable insurance premium—net
Increase in guarantee deposits—net
Others—net(120)(2,499)
(889)
(723)
104
1,550
164
(12)
(290)
(18)
(122)
(159)
(27)

Net cash used in investing activities¥ 1,397¥

Thousands of
U.S. Dollars(Note 1)
2010

(3,041)

FORWARD¥ 2,687

-6-

(202)
(73)
(76)
(270)
(109)

(1,290)(26,871)(9,559)(7,774)
1,118
16,6671,763(129)(3,118)(194)(1,312)(1,710)(290)(4,211)(32,699)

1,223$ 28,892(2,541)
(195)
(656)
230
121
(440)

¥

(Continued)

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2010 and 2009

FORWARD¥

FINANCING ACTIVITIES:
Increase (decrease) in short-term bank loans—net
Proceeds from long-term debt
Repayment of long-term debt
Dividends paid
Purchase of treasury stock—net
Others—net

Millions of Yen
2010
2009

Thousands of
U.S. Dollars(Note 1)
2010

2,687

$

483

¥

1,223

28,892(20,484)(9,344)(17)(4,310)5,000(2,124)(1,450)(489)(35)(2,308)(3,408)(24,817)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS

49

(458)

527

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

428(2,643)4,602

CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR11,36914,012

122,247

CASH AND CASH EQUIVALENTS, END OF YEAR

¥ 11,797¥ 11,369$ 126,849

¥509
399

¥8,366
4,467
1,834
2,065

$5,4704,287(1,905)(869)

Net cash used in financing activities

ADDITIONAL CASH FLOW INFORMATION:
Purchase of a newly consolidated subsidiary:
Fair value of assets acquired
Liabilities assumed
Minority interests
Cash paid for the capital

110

5,194

(183)

1,183

See notes to consolidated financial statements.

-7-(Concluded)

Kaga Electronics Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
Years Ended March 31, 2010 and 2009

1.

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in
conformity with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications have been made to theconsolidated financial statements issued domestically in order to present them in a form which is more familiar
to readers outside Japan. In addition, certain reclassifications have been made in the 2009 financial statements
to conform to the classifications used in 2010.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Kaga
Electronics Co., Ltd. (the "Company") is incorporated and operates. The translations of Japanese yen amounts
into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at
the rate of ¥93 to $1, the approximate rate of exchange at March 31, 2010. Such translations should not be
construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any
other rate.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation—The consolidated financial statements include the accounts of the Company and all of its
subsidiaries (48 in 2010 and 2009) (together, the "Group").
Under the control and influence concept, those companies in which the Company, directly or indirectly, isable to exercise control over operations are fully consolidated, and those companies over which the Group
has the ability to exercise significant influence are accounted for by the equity method.
Investments in 5 (13 in 2009) associated companies are accounted for by the equity method.
The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at thedate of acquisition is being amortized over a period of five years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.

b.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
Statements—In May 2006, the Accounting Standards Board of Japan (the "ASBJ") issued ASBJ Practical
Issues Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for the Consolidated Financial Statements." PITF No. 18 prescribes (1) the
accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions
and events under similar circumstances should in principle be unified for the preparation of theconsolidated-8-

financial statements, (2) financial statements prepared by foreign subsidiaries in accordance with either
International Financial Reporting Standards or the generally accepted accounting principles in the UnitedStates of America tentatively may be used for the consolidation process, (3) however, the following items
should be adjusted in the consolidation process so that net income is accounted for in accordance withJapanese GAAP unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of
actuarial gain or loss of pensions that has been directly recorded in the equity; (c) expensing capitalized
development costs of R&D; (d) cancellation of the fair value model accounting for property, plant andequipment and investment properties and incorporation of the cost model of accounting; (e) recording theprior years' effects of changes in accounting policies in the income statement where retrospective
adjustments to financial statements have been incorporated; and (f) exclusion of minority interests from net
income, if applicable. PITF No. 18 was effective for fiscal years beginning on or after April 1, 2008 withearly adoption permitted.
c.

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

d.

Inventories—The Company and domestic subsidiaries state specific merchandise inventories ordered bycustomers should be at the lower of cost, determined by the specific identification method, or market andthat other merchandise inventories should be at the lower of cost, determined principally by themoving-average method, or market.
The overseas subsidiaries state inventories at the lower of cost, determined principally by the first-in,
first-out method, or market.

e.

Marketable and Investment Securities—Marketable and investment securities are classified andaccounted for, depending on management's intent, as follows: (1) trading securities, which are held for the
purpose of earning capital gains in the near term are reported at fair value, and the related unrealized gains
and losses are included in earnings, and (2) available-for-sale securities, which are reported at fair value,with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.
Non-marketable available-for-sale securities are stated at cost as determined by the moving-averagemethod. For other than temporary declines in fair value, investment securities are reduced to net realizablevalue by a charge to income.

f.

Property, Plant and Equipment—Property, plant and equipment are stated at cost. Significant
replacements and additions are capitalized; maintenance and repairs, and minor replacements andimprovements are charged to income as incurred.
Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiaries
is computed substantially by the declining-balance method at rates based on the estimated useful lives of
the assets, while the straight-line method is applied to buildings acquired after April 1, 1998, lease assets of
the Company and its consolidated domestic subsidiaries, and all property, plant and equipment of foreignsubsidiaries.
The range of useful lives is as follows:
Buildings and structures
Machinery, equipment and vehicles
Molding dies and furniture

10 to 50 years
8 to 12 years
2 to 20 years

-9-

g.

Long-Lived Assets—The Group reviewed its long-lived assets for impairment for the year ended March
31, 2010 and, recognized an impairment loss of ¥147 million ($1,581 thousand) for certain projectprocessing buildings and structures. The carrying amount of the relevant buildings and structures, molding
dies and furniture was written down to its recoverable amount. The recoverable amount of the project'sgroup was measured at its value in use. The discount rate used for computation of the present value of
future cash flows was 3.96%.

h.

Goodwill—Purchased goodwill is amortized on a straight-line basis over five years.

i.

Software—Software is recorded in other assets and is amortized over five years.

j.

Retirement and Pension Plans—The Company and certain consolidated subsidiaries have defined
contribution pension plans. While other consolidated subsidiaries have unfunded retirement benefit plans.
Retirement allowances for directors and corporate auditors are recorded to state the liability at the amountthat would be required if all directors and corporate auditors retired at each balance sheet date.
Beginning with the fiscal year ending March 2010, the Company has adopted "Partial Amendments to
Accounting Standard for Retirement Benefits (Part 3)" (ASBJ Statement No. 19, July 31, 2008). Since
actuarial gains and losses are amortized starting next fiscal year, this change has no effect on operating
income, ordinary income or income before income taxes and minority interests in the current period.

k.

Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13, "Accounting Standard for Lease
Transactions," which revised the previous accounting standard for lease transactions issued in June 1993.
The revised accounting standard for lease transactions is effective for fiscal years beginning on or after
April 1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.
Under the previous accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee were capitalized. However, other finance leases were permitted to be accounted for
as operating lease transactions if certain "as if capitalized" information is disclosed in the notes to thelessee's financial statements. The revised accounting standard requires that all finance lease transactions
should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, theaccounting standard permits leases which existed at the transition date, and do not transfer ownership ofthe leased property to the lessee, to be accounted for as operating lease transactions.
The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company
accounted for its leases which existed at the transition date, and do not transfer ownership of the leased
property to the lessee, as operating lease transactions. All other leases are accounted for as operatingleases.

l.

Bonuses to Directors and Corporate Auditors—Bonuses to directors and corporate auditors are accrued
during the year in which such bonuses are attributable.

m. Income Taxes—The provision for income taxes is computed based on the pretax income included in the
consolidated statements of operations. The asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying
currently enacted tax laws to the temporary differences.
n.

Appropriations of Retained Earnings—Appropriations of retained earnings are reflected in the financial
statements in the year of shareholders' approval.

- 10 -

o.

Foreign Currency Transactions—All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance
sheet date. The foreign exchange gains and losses from translation are recognized in the income statement
to the extent that they are not hedged by forward exchange contracts.

p.

Foreign Currency Financial Statements—The balance sheet accounts of the foreign subsidiaries aretranslated into Japanese yen at the current exchange rate as of the balance sheet date of the subsidiaries
except for equity, which is translated at the historical rate.
Differences arising from such translation were shown as "Foreign currency translation adjustments" in a
separate component of equity.
Revenue and expense accounts of foreign subsidiaries are translated into yen at the average exchange rate.

q.

Derivatives and Hedging Activities—The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts are
utilized by the Group to reduce foreign currency exchange risk. The Group does not enter into derivatives
for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as
follows: (a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains
or losses on derivative transactions are recognized in the income statement and (b) for derivatives used forhedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items, gains or losses on derivatives are deferred until
maturity of the hedged transactions.
Foreign currency forward contracts are utilized to hedge foreign exchange exposure of export sales andprocurement of inventories from overseas suppliers. Trade receivables and payables denominated inforeign currencies are translated at the forward contract rates if the forward contracts qualify for hedge
accounting. Forward contracts that hedge forecasted transactions are measured and recorded at fair value
but unrealized gains/losses are deferred until the underlying transactions are completed.

r.

Per Share Information—Basic net loss per share is computed by dividing net loss available to commonshareholders by the weighted-average number of common shares outstanding for the period. Diluted net
income per share is not disclosed if it is anti-dilutive. Cash dividends per share presented in theaccompanying consolidated statements of operations are dividends applicable to the respective years
including dividends accrued in the current year but paid after the end of the year.

s.

New Accounting Pronouncements
Business Combinations—On December 26, 2008, the ASBJ issued a revised accounting standard forbusiness combinations, ASBJ Statement No. 21, "Accounting Standard for Business Combinations." Major
accounting changes under the revised accounting standard are as follows:(1) The revised standard requires to account for such business combination by the purchase method andthe pooling of interests method of accounting is no longer allowed;(2) In-process research and development (IPR&D) costs acquired by the business combination iscapitalized as an intangible asset;- 11 -

(3) The acquirer should recognize a bargain purchase gain in profit or loss on the acquisition date after
reassessing whether it has correctly identified all of the assets acquired and all of the liabilities
assumed.
This standard is applicable to business combinations undertaken on or after April 1, 2010 with early
adoption permitted for fiscal years beginning on or after April 1, 2009.
Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method—
The current accounting standard requires unified accounting policies within the consolidation group.
However, the current guidance allows application of the equity method for the financial statements of its
foreign associated companies which have been prepared in accordance with generally accepted accounting
principles in their respective jurisdictions, without unification of accounting policies.
In March 2008, the ASBJ issued ASBJ Statement No. 16, "Accounting Standard for Equity Method of
Accounting for Investments." The new standard requires adjustments to be made to conform the associate's
accounting policies for similar transactions and events under similar circumstances to those of the parent
company when the associate's financial statements are used in applying the equity method unless it isimpracticable to determine adjustments. In addition, financial statements prepared by foreign associatedcompanies in accordance with either International Financial Reporting Standards or the generally accepted
accounting principles in the United States of America tentatively may be used in applying the equity
method if the following items are adjusted (1) amortization of goodwill; (2) scheduled amortization of
actuarial gain or loss of pensions recorded in the equity; (3) expensing capitalized development costs of
R&D; (4) cancellation of the fair value model accounting for property, plant and equipment and investment
properties and incorporation of the cost model accounting; (5) recording the prior years' effects of changes
in accounting policies in the income statement where retrospective adjustments to the financial statements
have been incorporated; and (6) exclusion of minority interests from net income, applicable.
This standard is applicable to the equity method of accounting for fiscal years beginning on or after April
1, 2010 with early adoption permitted for fiscal years beginning on or after April 1, 2009.
Asset Retirement Obligations—On March 31, 2008, the ASBJ published a new accounting standard for
asset retirement obligations, ASBJ Statement No. 18 "Accounting Standard for Asset Retirement
Obligations" and ASBJ Guidance No. 21 "Guidance on Accounting Standard for Asset Retirement
Obligations." Under this guidance, an asset retirement obligation is defined as a legal obligation imposed
either by law or contract that results from the acquisition, construction, development and the normal
operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset.
The asset retirement obligation is recognized as the sum of the discounted cash flows required for the
future asset retirement and is recorded in the period in which the obligation is incurred if a reasonableestimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the
period the asset retirement obligation is incurred, the liability should be recognized when a reasonableestimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset
retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of therelated fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to
expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted
to its present value each period. Any subsequent revisions to the timing or the amount of the original
estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of theliability and the capitalized amount of the related asset retirement cost. This standard is effective for fiscal
years beginning on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or
before March 31, 2010.

- 12 -

Accounting Changes and Error Corrections—In December 2009, ASBJ issued ASBJ Statement No. 24"Accounting Standard for Accounting Changes and Error Corrections" and ASBJ Guidance No. 24"Guidance on Accounting Standard for Accounting Changes and Error Corrections." Accounting
treatments under this standard and guidance are as follows:(1) Changes in accounting policies
When a new accounting policy is applied following a revision of accounting standards, the new policy
is applied retrospectively unless the revised accounting standards include specific transitional
provisions. When the revised accounting standards include specific transitional provisions, an entity
shall comply with the specific transitional provisions.
(2) Changes in presentations
When the presentation of financial statements is changed, prior period financial statements arereclassified in accordance with the new presentation.
(3) Changes in accounting estimates
A change in an accounting estimate is accounted for in the period of the change if the change affects
that period only, and is accounted for prospectively if the change affects both the period of the change
and future periods.
(4) Corrections of prior period errors
When an error in prior period financial statements is discovered, those statements are restated.
This accounting standard and the guidance are applicable to accounting changes and corrections of priorperiod errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.
Segment Information Disclosures—In March 2008, the ASBJ revised ASBJ Statement No. 17"Accounting Standard for Segment Information Disclosures" and issued ASBJ Guidance No. 20 "Guidanceon Accounting Standard for Segment Information Disclosures." Under the standard and guidance, an entity
is required to report financial and descriptive information about its reportable segments. Reportablesegments are operating segments or aggregations of operating segments that meet specified criteria.
Operating segments are components of an entity about which separate financial information is available
and such information is evaluated regularly by the chief operating decision maker in deciding how toallocate resources and in assessing performance. Generally, segment information is required to be reported
on the same basis as is used internally for evaluating operating segment performance and deciding how toallocate resources to operating segments. This accounting standard and the guidance are applicable tosegment information disclosures for the fiscal years beginning on or after April 1, 2010.

- 13 -

3.

MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. Dollars
2010

Millions of Yen
2010
2009
Current—Marketable equity securities

¥

70

¥

59

$

753

Non-current:
Marketable equity securities
Non-marketable equity securities
Government and corporate bonds
Investments in associated companies
Others¥ 2,871
767
450
161
358

¥ 2,965
962
423
117
387

$ 30,871
8,247
4,839
1,731
3,850

Total

¥ 4,607¥ 4,854$ 49,538

The costs and aggregate fair values of marketable and investment securities at March 31, 2010 and 2009 wereas follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesMarch 31, 2010

Cost

Securities classified as:
Trading
Available-for-sale—equity securities
Government and corporate bonds¥ 2,976
624

¥ 341
7

¥ (446)(181)¥ 3,405556¥ 199¥ (639)
(133)

Fair
Value

¥

70
2,871
450

¥

59
2,965
423

March 31, 2009
Securities classified as:
Trading
Available-for-sale—equity securities
Government and corporate bonds

March 31, 2010
Securities classified as:
Trading
Available-for-sale—equity securities
Government and corporate bonds

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses

Cost

Fair
Value

$
$ 32,000
6,710$ 3,66775$ (4,796)(1,946)753
30,871
4,839

Available--securities whose fair value is not readily determinable as of March 31, 2009 were as follows. The
similar information for 2010 is disclosed in Note 13.
Carrying AmountMillions of Yen

March 31, 2009
Available-for-sale—Equity securities
Others¥Total¥ 1,349- 14 -

962
387

Proceeds from sales of available-for-sale securities were ¥1,525 million ($16,398 thousand) in 2010 and¥99 million in 2009. Gross realized gains and losses on these sales, computed on the moving average cost basis,
were ¥481 million ($5,172 thousand) and ¥17 million ($183 thousand) in 2010, respectively, and ¥17 millionand ¥2 million in 2009, respectively.
The carrying values of debt securities with contractual maturities for securities classified as available-for-sale atMarch 31, 2010 are as follows:

Millions of Yen
Available-for-SaleThousands of
U.S. Dollars
Available-for-Sale¥ 329$ 3,538

Due after ten years
4.

INVENTORIESInventories at March 31, 2010 and 2009 consisted of the following:

Millions of Yen
2010
2009

Thousands of
U.S. Dollars
2010

Merchandise
Finished products
Work in process
Raw materials
Supplies¥ 13,757
727
647
3,000
10

¥ 12,878
1,091
577
3,728
22

$ 147,925
7,818
6,957
32,257108

Total¥ 18,141¥ 18,296$ 195,065

5.

SHORT-TERM BANK LOANS
The annual average interest rates applicable to bank loans were 0.6% and 1.2% for the years ended March 31,
2010 and 2009, respectively.
As is customary in Japan, the Company maintains deposit balances with banks with which it has bank loans.
Such deposit balances are not legally or contractually restricted as to withdrawal.
Under certain basic agreements with banks, collateral must be provided if requested by the lending banks andcertain banks have the right to offset cash deposited with them against any bank loan or obligation that becomesdue, in the event of default and certain other specified events. The Company has never received any such
request.

6.

LONG-TERM DEBT
Long-debt at March 31, 2010 and 2009 consisted of the following:

Millions of Yen
2010
2009

Thousands of
U.S. Dollars
2010

Unsecured loans from banks and insurancecompanies, 1.29% to 1.48%, due seriallythrough June 2013
Obligations under finance leases
Less current portion¥ 3,62071(1,135)¥ 5,525
22(1,912)$ 38,925
763(12,204)

Total long-term debt, less current portion¥ 2,556¥ 3,635$ 27,484- 15 -

Annual maturities of long-term debt, excluding obligations under finance leases (see Note 12) at March 31,
2010, were as follows:Year Ending
March 31

Millions of Yen

Thousands of
U.S. Dollars

2011
2012
2013
2014

¥ 1,120
1,000
1,000
500

$ 12,043
10,753
10,753
5,376

Total

¥ 3,620$ 38,925

7.

RETIREMENT AND PENSION PLANS
Under the pension plan, employees terminating their employment are, in most circumstances, entitled topension payments based on their average pay during their employment, length of service and certain otherfactors.
The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders.
The liability for employees' retirement benefits at March 31, 2010 and 2009 consisted of the following:

Millions of Yen
2010
2009

Thousands of
U.S. Dollars
2010

Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial loss
Unrecognized prior service cost

¥ 3,710(1,610)
(164)
(503)

¥ 3,539(1,359)
(269)
(568)

$ 39,892(17,312)(1,763)(5,408)Net liability¥ 1,433¥ 1,343$ 15,409

The components of net periodic benefit costs for the years ended March 31, 2010 and 2009 are as follows:
Thousands ofMillions of Yen
U.S. Dollars
2010
2009
2010
Service cost
Interest cost
Expected return on plan assets
Recognized actuarial loss
Amortization of prior service cost

¥ 552
49
(24)
41
71

¥ 469
46
(19)
42
65

$ 5,935
527
(258)
441
764

Net periodic benefit costs

¥ 689

¥ 603

$ 7,409

Assumptions used for the years ended March 31, 2010 and 2009 are set forth as follows:

Discount rate
Expected rate of return on plan assets
Recognition period of actuarial gain/loss
Amortization period of prior service cost

- 16 -

2010

2009

2.07%
2.0%
10 years
10 years

2.0%
2.0%
10 years
10 years

8.

EQUITYJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:a.

Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to
the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteriasuch as; (1) having a Board of Directors, (2) having independent auditors, (3) having a Board of Corporate
Auditors, and (4) having the term of service of the directors prescribed as one year rather than two years ofnormal term by its articles of incorporation, the Board of Directors may declare dividends (except for
dividends in kind) if the company has prescribed so in its articles of incorporation. However, the Company
cannot do so if it does not meet all the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if
the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations
on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as theamount available for distribution to the shareholders, but the amount of net assets after dividends must be
maintained at no less than ¥3 million.

b.

Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-capital (a component of capital surplus)
depending on the equity account charged upon the payment of such dividends until the total of aggregate
amount of legal reserves and additional paid-capital equals 25% of the common stock. Under theCompanies Act, the total amount of additional paid-capital and legal reserves may be reversed without
limitation. The Companies Act also provides that common stock, legal reserve, additional paid-capital,
other capital surplus and retained earnings can be transferred among the accounts under certain conditions
upon resolution of the shareholders.

c.

Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act provides for companies to purchase treasury stock and dispose of such treasury stockby resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which is determined by a specific formula. Under theCompanies Act, stock acquisition rights are presented as a separate component of equity. The Companies
Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as a separate component of equity or deducted directlyfrom stock acquisition rights.

9.

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 41% for the years ended March
31, 2010 and 2009.

- 17 -

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2010 and 2009 are as follows:
Thousands of
U.S. Dollars
2010

Millions of Yen
2010
2009
Deferred tax assets:
Retirement benefits for directors and corporate
auditors
Allowance for doubtful accounts
Accrued bonuses
Retirement benefit for employees
Tax loss carryforwards
Operating losses of subsidiaries
Unrealized loss on available-for-sale securities
Devaluation of inventories
Impairment loss
Other
Sub-total
Less valuation allowance

¥

498
601
273
580
3,642
166
136
295
289
1,116
7,596
(5,782)

¥

457
446
296
541
3,189

$

168
311
284
1,300
6,992
(4,785)

5,355
6,462
2,935
6,237
39,161
1,785
1,462
3,172
3,108
12,00081,677(62,172)

Deferred tax assets—total

1,814

2,207

19,505

Deferred tax liabilities:
Undistributed earnings of overseas subsidiaries
Unrealized gain on property and equipment
Unrealized gain on available-for-sale securities
Advanced depreciation on fixed assets
Other

(636)
(202)
(17)
(348)
(100)

(573)
(208)
(36)
(375)
(30)

(6,839)(2,172)(183)(3,742)(1,074)(1,303)(1,222)(14,010)Deferred tax liabilities—total
Net deferred tax assets

¥

511

¥

985

$

5,495

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statements of operations for the years ended March 31, 2010 and 2009 is asfollows:
2010

2009

Normal effective statutory tax rate
Expenses not deductible for income tax purposesTax benefits not recognized on operating losses of subsidiaries
Difference in tax rates of foreign subsidiaries
Effect of rescheduling of deferred tax assets
Dividends from overseas subsidiaries and deferred income taxes
on retained profits of overseas subsidiaries
Effect of amortization of goodwill
Influence on drawing on deferred tax assets
Recognized devaluation loss on subsidiaries stocks
Other—net

41 %
9
31
(9)
13

41 %
361
3,561

13
8

(487)

20

840
( 2,332)240

Actual effective tax rate

126 %2,224 %

- 18 -

At March 31, 2010, the Company and certain subsidiaries have tax loss carryforwards aggregating
approximately ¥8,563 million ($92,075 thousand) which are available to be offset against future taxable incomeof the Company and such subsidiaries in future years. These loss carryforwards, if not utilized, will expire as
follows:
Year Ending
March 31

10.

Millions of Yen

2013
2014
2015
2016 and thereafter

¥

50
1,146
3,077
4,290

Total

¥ 8,563

Thousands of
U.S. Dollars$

538
12,32333,086
46,128$ 92,075

DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Depreciation of property, plant and equipment was ¥1,296 million ($13,935 thousand) and ¥1,235 million forthe years ended March 31, 2010 and 2009, respectively.

11.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,236 million ($13,290 thousand) and ¥2,154 million
for the years ended March 31, 2010 and 2009, respectively.

12.

LEASESThe Group leases buildings, machinery, equipment and vehicles and other assets. Total lease payments underfinance leases for the years ended March 31, 2010 and 2009 were ¥129 million ($1,387 thousand) and¥201 million, respectively.
Impairment losses recorded for the years ended March 31, 2010 and 2009 were ¥57 million ($613 thousand)and ¥57 million, respectively, and related to certain leased property held under finance leases that do nottransfer ownership.
As discussed in Note 2.k, ASBJ Statement No. 13, "Accounting Standard for Lease Transactions" requires that
all finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance
sheet. However, the ASBJ Statement No. 13 permits leases without ownership transfer of the leased property to
the lessee, whose lease inception was before March 31, 2008, to be accounted for as operating lease transactions
if certain "as if capitalized" information is disclosed in the note to the financial statements. The Company
applied the ASBJ Statement No. 13 effective April 1, 2008 and accounted for such leases as operating leasetransactions.

- 19 -

Pro forma information of leased property whose lease inception was before March 31, 2008 such as acquisition
cost, accumulated depreciation, accumulated impairment loss, obligations under finance leases, depreciation
expense, interest expense and other information of finance leases that do not transfer ownership of the leased
property to the lessee on an "as if capitalized" basis was as follows:
Millions of Yen
2010
Machinery,
Equipment
andVehiclesMolding
Dies andFurniture

¥ 93
(42)

Acquisition cost
Accumulated
depreciation
Accumulated
impairment loss
Net leased
property

¥ 51

2009

Total

Machinery,
Equipment
andVehiclesMolding
Dies andFurniture

Total

¥ 518

¥ 611

¥ 97

¥ 668

¥ 765

(317)

(359)

(37)

(364)

(401)

(57)

(57)

(57)

(57)

¥ 144

¥ 195

¥ 247

¥ 307

¥ 60

Thousands of U.S. Dollars
2010
Machinery,
Equipment
MoldingandDies and
VehiclesFurniture
Total
Acquisition cost
Accumulated
depreciation
Accumulated
impairment loss
Net leased
property$ 1,000$ 5,570$ 6,570(452)(3,408)(3,860)

(613)

(613)

$ 1,549$ 2,097$

548

Obligations under finance leases:

Millions of Yen
2010
2009

Thousands of
U.S. Dollars
2010

Due within one year
Due after one year

¥ 96
155

¥ 128
248

$ 1,032
1,667

Total

¥ 251

¥ 376

$ 2,699

Allowance for impairment loss on leased property of ¥57 million ($613 thousand) as of March 31, 2010 and¥57 million as of March 31, 2009 is not included in the obligations under finance leases.

- 20 -

Depreciation expense, interest expense and other information under finance leases:

Millions of Yen
2010
2009

Thousands of
U.S. Dollars
2010

Depreciation expense
Interest expense

¥ 118
10

¥ 188
14

$ 1,268
108

Total

¥ 128

¥ 202

$ 1,376

Lease payments
Reversal of allowance for impairment loss
on leased property
Impairment loss

¥ 129

¥ 201

$ 1,387

18
57

3
57

194
613

Depreciation expense and interest expense, which are not reflected in the accompanying consolidated
statements of operations, are computed by the straight-line method and the interest method, respectively.
The imputed interest expense portion, which is computed using the interest method, is excluded from the above
obligations under finance leases.
The minimum rental commitments under noncancelable operating leases at March 31, 2010 and 2009 were as
follows:

Millions of Yen
2010
2009

Thousands of
U.S. Dollars
2010

Due within one year
Due after one year

¥ 1,021
3,250

¥

780
4,273

$ 10,979
34,946Total¥ 4,271¥ 5,053$ 45,925

13.

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESOn March 10, 2008, the ASBJ revised ASBJ Statement No. 10 "Accounting Standard for Financial Instruments"
and issued ASBJ Guidance No. 19 "Guidance on Accounting Standard for Financial Instruments and Related
Disclosures." This accounting standard and guidance are applicable to financial instruments and related
disclosures at the end of the fiscal years ending on or after March 31, 2010 with early adoption permitted fromthe beginning of the fiscal years ending before March 31, 2010. The Group applied the revised accounting
standard and the new guidance effective March 31, 2010.
(1) Group Policy for Financial Instruments
The Group has financial instruments, mainly debt from financial institution, consistent with its capitalfinancing plan. Cash surpluses, if any, are invested in low risk financial assets. Derivatives are not used for
speculative purposes, but rather to manage exposure to foreign exchange risks.

- 21 -

(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although
receivables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange
rates, the position, net of payables in foreign currencies, is hedged by using forward foreign currency
contracts. Marketable and investment securities, mainly held-to-maturity securities and equity instrumentsof customers and suppliers of the Company, are exposed to the risk of market price fluctuations.
(3) Risk Management for Financial Instruments
Credit risk management
The Company manages its credit risk from receivables on the basis of internal guidelines, which include
monitoring the payment term and balances of major customers by each business administration department
to identify the default risk of customers in an early stage.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations inforeign currency exchange rates. Such foreign exchange risk is hedged principally by forward foreign
currency contracts.
Marketable and investment securities are managed by monitoring market values and financial position ofissuers on a regular basis.
(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are notavailable, other rational valuation techniques are used. Please see Note 15 for the detail of fair value forderivatives.
Cash and cash equivalents, receivables and payables, short-term bank loans, accrued expenses, income
taxes payables
The carrying value of cash and cash equivalents approximates fair value because of their short maturities.
Guarantee deposits
The fair value of guaranteed deposits is calculated by the contract amount supplier presented or calculated
from past experience and discounted by a risk free rate.
Marketable and investment securities
The fair values of marketable and investment securities are measured at the quoted market price for theequity instruments, and at the quoted price obtained from the financial institution for certain debt
instruments. The information of the fair value for the marketable and investment securities by classification
is included in Note 3.
Long-term debt
The fair value of long-term debt is determined by discounting the cash flows related to the debt at theGroup's assumed corporate borrowing rate.
Derivatives
The information of the fair value for derivatives is included in Note 15.

- 22 -

(a) Fair Value of Financial Instruments

March 31, 2010

Carrying
AmountMillions of Yen
Fair
Value

Unrealized
Loss

Cash and cash equivalents
Marketable securities
Notes and accounts receivables
Investment securities
Guarantee deposits¥ 11,797
70
59,214
3,321
1,218¥ 11,797
70
59,2143,321
952¥ (266)

Total¥ 75,620¥ 75,354¥ (266)

Short-term bank loans
Current portion of long-term debt
Notes and accounts payables
Accrued expenses
Income taxes payables
Long-term debt
Derivatives

¥

¥

Total

¥ 58,255

March 31, 2010

Carrying
AmountCash and cash equivalents
Marketable securities
Notes and accounts receivables
Investment securities
Guarantee deposits$ 126,849
753
636,71035,71013,096$ 126,849
753
636,71035,710
10,236$ (2,860)

Total$ 813,118$ 810,258$ (2,860)

Short-term bank loans
Current portion of long-term debt
Notes and accounts payables
Accrued expenses
Income taxes payables
Long-term debt
Derivatives

$

$

Total

$ 626,398

7,816
1,135
43,536
2,134
1,050
2,556
28

84,043
12,204
468,129
22,946
11,29027,484
302

7,816
1,135
43,536
2,134
1,050
2,571
28

¥ 58,270¥ (15)¥ (15)

Thousands of U.S. Dollars
Fair
Unrealized
Value
Loss

84,043
12,204
468,129
22,946
11,29027,645302$ 626,559

$

(161)

$

(161)

(b) Financial Instruments Whose Fair Value Cannot Be Reliably Determined
Carrying AmountThousands ofMillions of Yen
U.S. Dollars

March 31, 2010
Investments in equity instruments that
do not have a quoted market price inan active market
Guarantee deposits that do not have aquoted market price in an active market- 23 -¥ 1,287$ 13,839

931

10,011

14.

ASSETS PLEDGED AS COLLATERALAt March 31, 2010, time deposits of ¥100 million ($1,075 thousand) were deposited with vendors as collateral
for trade guarantees.

15.

DERIVATIVESThe Group enters into foreign exchange forward contracts to hedge foreign exchange risk associated with assets
and liabilities denominated in foreign currencies.
It is the Group's policy to use derivatives for the purpose of reducing market risks associated with assets andliabilities. The Group does not enter into derivative contracts for trading or speculative purposes.
Derivatives are subject to market and credit risk. The Group, however, does not anticipate any credit risk,
because the counterparties to those derivatives are limited to major financial institutions.
Each business department executes foreign exchange forward contracts, which are limited to the normal courseof business. The administrative department controls the position of derivative transactions. The manager of theaccounting department periodically provides detailed reports of derivative transactions to management.
As noted in Note 13, the Group applied ASBJ Statement No. 10 "Accounting Standard for Financial
Instruments" and ASBJ Guidance No. 19 "Guidance on Accounting Standard for Financial Instruments andRelated Disclosures." The accounting standard and the guidance are applicable to financial instruments andrelated disclosures at the end of the fiscal years ending on or after March 31, 2010; therefore, the required
information is disclosed only for 2010.
Derivative Transactions to Which Hedge Accounting Is Applied at March 31, 2010

March 31, 2010

Hedged Item

Millions of Yen
Contract
AmountContract
Due after
AmountOne Year

Foreign currency forward contracts:
Buying U.S.$
Buying Euro
Buying THB
Selling U.S.$
Selling THB

PayablesPayablesPayablesReceivables
Receivables¥ 1,984
54
123
1,163
561

March 31, 2010

Hedged Item

Thousands of U.S. Dollars
Contract
AmountContract
Due after
Fair
AmountOne Year
Value

Foreign currency forward contracts:
Buying U.S.$
Buying Euro
Buying THB
Selling U.S.$
Selling THB

PayablesPayablesPayablesReceivables
Receivables$ 21,333
581
1,323
12,505
6,032- 24 -

Fair
Value¥ 2,015
56
124
1,190
540

$ 21,667
602
1,333
12,796
5,806

The fair value of derivative transactions is measured at the quoted price obtained from the financial institution.
The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts exchanged by the parties and do not measure the Group's exposure tocredit or market risk.
16.

CONTINGENT LIABILITIESContingent liabilities at March 31, 2010 for employees' loans guaranteed, amounted to ¥67 million ($720 thousand) and for bank loans guaranteed of ELATEC VERTRIEBS GMBH,
which is affiliate, amounted to ¥31 million ($333 thousand).

17.

CONTINGENT LOSS
Regarding a software development project entrusted to the domestic subsidiary, Kaga Solution Network Co., LTD. ("KAGA SOLNET"), the delivery was delayed, and a contract
cancellation was required by a certain customer on May 7, 2008. The entrusted amount of the project was ¥475 million ($5,108 thousand). KAGA SOLNET was sued in the Tokyo
District Court on January 29, 2009 and is required to pay for the compensation loss of ¥513 million ($5,516 thousand). Although it is impossible to estimate the reasonable impact at thispoint, there is a possibility that it will affect the results of the Company's operation depending on the result of the trial.

18.

SUBSEQUENT EVENT
The following appropriation of retained earnings at March 31, 2010 was approved at the Company's shareholders meeting held on June 29, 2010:

Year-end cash dividends, ¥15.00 ($0.16) per share
19.

Millions of Yen

Thousands of
U.S. Dollars¥ 414$ 4,452

SEGMENT INFORMATIONa.

Operations in Different Industries
The Company and subsidiaries operate within one business segment, which is the electronic component trading business.

b.

Operations by Geographic Area
The following table shows segment information by geographic area for the years ended March 31, 2010 and 2009:
Millions of Yen
2010
Japan

North
America

EuropeEast Asia

Eliminations
or Corporate

Sales:
Outside customers
Interarea¥ 194,586
16,240¥ 263
113¥ 3,04237¥ 41,500
7,690¥ (24,080)

Total sales

210,826

376

3,079

49,190(24,080)

239,391

Operating expenses

210,175

498

3,157

48,663(24,685)

237,808¥651¥ (122)¥¥

94,429¥ 225¥ 1,423

Consolidated(1) Sales and operating income

Operating income (loss)(2) Total assets- 25 -(78)¥¥ 239,391

527

¥

605

¥ 23,994¥(6,109)¥1,583¥ 113,962

Millions of Yen
2009
Japan

North
America

EuropeEast Asia

Eliminations
or Corporate

Sales:
Outside customers
Interarea¥ 223,812
14,326¥ 326
205¥ 3,62555¥ 45,847
9,945¥ (24,531)

Total sales

238,138

531

3,680

55,792(24,531)273,610

Operating expenses

236,628

629

3,731

54,976(24,604)

271,360¥

1,510¥ (98)

¥

(51)

¥

816

¥

73

¥

98,543

¥ 277

¥

819

¥ 20,545¥(2,933)¥ 117,251

Consolidated

Consolidated(1) Sales and operating income

Operating income (loss)(2) Total assets¥ 273,610

¥

2,250

Thousands of U.S. Dollars
2010
Japan

North
America

EuropeEast Asia

Eliminations
or Corporate

Sales:
Outside customers
Interarea$ 2,092,323
174,624$ 2,828
1,215$ 32,710
398$ 446,236
82,688$ (258,925)

Total sales

2,266,947

4,043

33,108528,924(258,925)

2,574,097

Operating expenses

2,259,946

5,355

33,946523,258(265,430)

2,557,075

7,001$ (1,312)$$ 1,015,366$ 2,419$ 15,301(1) Sales and operating income

Operating income (loss)$(2) Total assets
c.

(838)

$

$ 2,574,097

5,666

$

6,505

$ 258,000$(65,688)

Sales to Foreign Customers
Sales to foreign customers for the years ended March 31, 2010 and 2009 are as follows:

Millions of Yen
2010
2009
Sales to:
North America
EuropeEast Asia

¥

Total

2,456
3,486
52,283¥ 58,225******- 26 -

¥

3,094
4,840
63,088¥ 71,022

Thousands of
U.S. Dollars
2010$

26,40937,484562,182$ 626,075$

17,022$ 1,225,398

- 26 -