Consolidated Financial Statements
Toho Zinc Co., Ltd.
and Consolidated Subsidiaries
For the years ended March 31, 2010, 2009 and 2008
with Report of Independent Auditors

Report of Independent Auditors

The Board of Directors
Toho Zinc Co., Ltd.
We have audited the accompanying consolidated balance sheets of Toho Zinc Co., Ltd. andconsolidated subsidiaries as of March 31, 2010 and 2009, and the related consolidated
statements of operations, changes in net assets, and cash flows for each of the three years in
the period ended March 31, 2010, all expressed in yen. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion onthese 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 are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Toho Zinc Co., Ltd. and consolidated subsidiaries at
March 31, 2010 and 2009, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended March 31, 2010, in conformity with accounting
principles generally accepted in Japan.
Without qualifying our opinion, we draw attention to the following.
As described in Note 19, on April 30, 2010, the Company agreed with CBH Resources Ltd.
(hereinafter “CBH”), the Company’s affiliate under equity method, to acquire all shares andconvertible bonds of CBH and then filed the takeover bid with the Australian Securities
Exchange on May 17, 2010.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect
to the year ended March 31, 2010 are presented solely for convenience. Our audit also
included the translation of yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 2.

Ernst & Young ShinNihon LLC
June 28, 2010

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31,
2009
2010
2010
(Millions of yen)(Thousands of
U.S. dollars)
AssetsCurrent assets:
Cash and time deposits
Notes and accounts receivable, trade
Inventories (Note 3)
Advance payment
Deferred tax assets (Note 10)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥ 22,284
11,12921,651
462
1,351
3,441
(27)
60,291¥ 12,216
17,161
29,559
2,219
765
878
(23)
62,779Less: Accumulated depreciation
Net property, plant and equipment

16,951
18,96855,772
1,894–
93,585(58,136)
35,44916,951
19,12855,652
2,382
175
94,290(58,958)
35,331

182,190
205,588598,151
25,601
1,880
1,013,435(633,684)
379,739

Investments and other assets:
Investment securities (Notes 6, 7 and 13)
Investments in non-consolidated subsidiaries (Note 6)
Deferred tax assets (Note 10)
Intangible assets
Other assets (Note 6)
Less: Allowance for doubtful accounts
Total investments and other assets

4,985
411
2,777
112
4,607
(807)
12,085

8,582
389
1,465
120
4,941
(786)
14,71392,2394,180
15,745
1,289
53,106(8,447)
158,136¥ 107,825¥ 112,823$ 1,212,628

Property, plant and equipment:
Land (Notes 4 and 7)
Buildings and structures (Note 7)
Machinery and equipment (Note 7)
Construction in progress
Lease assets

Total assets

2$

131,298
184,447
317,702
23,849
8,222
9,436
(247)
674,752

March 31,
2009
2010
2010
(Millions of yen)(Thousands of
U.S. dollars)
Liabilities and net assets
Current liabilities:
Short-term borrowings (Note 7)
Current portion of long-term debt (Note 7)
Notes and accounts payable, trade
Accrued expenses
Accrued income taxes
Lease obligations
Accrued directors’ bonus
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Note 7)
Accrued employees’ pension and severance costs (Note 8)
Accrued directors’ and statutory auditors’ retirement
allowances
Deferred tax liabilities related to land revaluation (Note 4)
Accrued environmental allowances
Lease obligations
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders’ equity:
Common stock:
Authorized – 264,000,000 shares
Issued– 135,855,217 shares in 2009 and
135,855,217 shares in 2010
Capital surplus
Retained earnings
Less: Treasury stock, at cost – 53,066 shares in 2009 and
54,528 shares in 2010
Total shareholders’ equity
Revaluation and translation adjustments:
Net unrealized gains on other securities
Loss on deferred hedges
Surplus from land revaluation (Note 4)
Foreign currency translation adjustments
Total revaluation and translation adjustments
Total net assets¥

24,478
3,390
6,299
2,944
335
–
–
3,597
41,043¥ 24,478
6,031
6,227
2,193
2,208
17
39
4,531
45,727

8,928
3,148

2,896
2,896

31,126
31,126

73
5,781
158
–
95
18,18359,226

67
5,779
157
160
91
12,04957,777

720
62,113
1,687
1,719
978
129,503620,990

14,6309,877
17,176

14,6309,876
21,153

157,244
106,147
227,353(22)
41,661(23)
45,637(247)
490,509

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

2,663
(176)
7,572
(649)
9,409
55,046¥ 112,823

28,622(1,891)
81,384(6,975)
101,128
591,638$ 1,212,628

Total liabilities and net assets
The accompanying notes are an integral part of these financial statements.

$

263,091
64,821
66,92823,57023,731
182
419
48,699491,4763

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

2008

Net sales
Cost of sales
Gross profit¥147,390
123,827
23,563¥92,686
85,095
7,591¥ 83,592
69,85013,741$ 898,452
750,752
147,689

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

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

2,974
848
68
237
54
–
39
–
1,217
5,439
8,301

31,964
9,114
730
2,547
580
–
419
–
13,10158,45889,219

440
(14)
(657)
(118)
(265)
577
(4)
(496)
(367)

510
–
(543)
69
(298)
(3,460)(131)–(4,531)

451
–
(416)
136
(292)
296
(418)
–
(321)

4,847
–
(4,471)
1,461(3,138)3,181(4,492)–(3,450)

–
164
(740)
16,543–(102)(8,486)(6,592)

13
34
(516)
7,784

139
365
(5,546)
83,662

5,139
1,455
6,594
9,949

1,061
(2,419)(1,358)¥ (5,234)

2,585
544
3,130
4,654

27,783
5,846
33,64150,021

Selling, general and administrative expenses:
Transportation expense
Salaries and wages
Pension and severance costs
Research and development costs (Note 20)
Depreciation
Directors’ and statutory auditors’ retirement costs
Directors’ bonus
Provision for doubtful accounts
Other
Operating income
Other income (expenses):
Interest and dividend income
Derivative losses
Interest expenses
Foreign exchange (losses) gains, net
Loss on disposal of property, plant and equipment
Investment gains (losses) on equity method
Impairment losses on fixed assets (Note 5)
Losses on hedge transactions
Write-down of investment securities
Gain on adjustment for changes of accounting
standard for construction contracts
Other, net
Income (loss) before income taxes
Income taxes:
Current
Deferred
Net income (loss)

Year ended March 31,
2009
2010
2010
(Millions of yen)(Thousands of
U.S. dollars)

¥

¥

(Yen)
Per share:
Net income (loss) – basic
Cash dividends

¥
¥

73.26
10.00

¥ (38.54)
¥
5.00

$

(U.S. dollars)
¥
¥

34.27
7.00

$
$

0.36
0.07

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

4

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

CapitalsurplusRetainedearnings

Revaluation and translation adjustments
Net
unrealized
gains onothersecurities

Treasurystock (*)

(Thousands)

Losses ondeferredhedgesSurplusfrom land
revaluation

Foreigncurrencytranslation
adjustments

¥

¥

Total
net assets(Millions of yen)

Balance at March 31, 2007
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equity135,855––––¥ 14,630––––¥ 9,877–––0¥ 15,249(1,359)
9,949
–
–

–

–

–

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

14,630
–
–
–
–

9,877
–
–
–
(0)

–

–

–

Balance at March 31, 2009
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equity135,855––––

14,630
–
–
–
–

9,877
–
–
–
(0)

–

–

–

–

Balance at March 31, 2010

135,855¥ 14,630¥ 9,876¥ 21,153

¥

(18)
–
–
(4)
1

¥ 3,120
–
–
–
–

–

–

(2,081)(2,642)

–

179

740

23,839(1,358)(5,234)
–
(72)

(21)
–
–
(2)
1

1,039
–
–
–
–

(69)
–
–
–
–

7,580
–
–
–
–

381
–
–
–
–

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

–

–

(414)

(47)

(6)

(1,526)(1,993)

17,176
(679)
4,654
–
1

(22)
–
–
(0)
0

625
–
–
–
–

(116)
–
–
–
–

7,574
–
–
–
–

(1,145)––––

48,599
(679)
4,654
(0)
1

–

2,038

(60)

(1)

495

2,470

(23)

¥ 2,663(649)¥ 55,046

Surplusfrom land
revaluation

Foreigncurrencytranslation
adjustments

Total
net assets$ 81,405––––$ (12,306)––––$ 522,345(7,297)50,021(0)
10¥

Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings¥¥(2,711)
–
–
–
–

(176)

¥

7,580
–
–
–
–

7,572

202
–
–
–
–

¥

¥ 47,929(1,359)
9,949
(4)
1

Revaluation and translation adjustments
Net
unrealized
gains onothersecurities

Treasurystock (*)

Losses ondeferredhedges(Thousands of U.S. dollars )Balance at March 31, 2009
Dividends from surplus
Net income
Acquisition of treasury stock
Other
Net charges in items otherthan those in shareholders’equityBalance at March 31, 2010

$ 157,244––––$ 106,158
–
–
–
(0)

$ 184,608(7,297)50,021–10$ (236)
–
–
(0)
0

$

6,717
–
–
–
–

$ (1,246)
–
–
–
–

–

–

–

–

21,904

(644)

(10)

$ 157,244$ 106,147$ 227,353$ (247)$ 28,622$ (1,891)$ 81,384$

5,320

26,547(6,975)$ 591,638(*) There were 53,066 shares and 54,528 shares of treasury stock as of March 31, 2009 and 2010,
respectively.

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

5

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

2008

Year ended March 31,
2009
2010
(Millions of yen)

Cash flows from operating activities:
Income (loss) before income taxes¥ 16,543
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization
2,660
Impairment loss on fixed assets
4
Write-down of investments securities
367
Increase (decrease) in allowance for doubtful accounts
12
Increase (decrease) in accrued directors’ bonus
1
Decrease in accrued employees’ pension and severance
costs
(197)
Interest and dividend income(440)Interest expenses
657
Investment (gains) losses on equity method(577)
Net loss on sale and disposal of property, plant andequipment
266
Decrease (increase) in notes and accounts receivable, trade
11,176(Increase) decrease in inventories(6,010)(Decrease) increase in notes and accounts payable, trade(3,853)302
Other, net
Sub total
20,911
Interest and dividend income received
437
Interest expense paid
(654)
(10,534)
Income taxes paid
10,160Net cash provided by (used in) operating activities¥ (6,592)

¥

7,784

2010
(Thousands of
U.S. dollars)$

83,662

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

3,184
418
321
(24)
39

34,221
4,492
3,450
(257)
419

(246)
(510)
543
3,460

(251)
(451)
416
(296)

(2,697)(4,847)
4,471(3,181)

298
8,987
4,865
2,952
807
22,211
557(552)(3,986)
18,230286(5,755)(7,908)(1,829)(108)(4,174)
403
(419)
1,366
(2,824)

3,073(61,855)(84,995)(19,658)(1,160)(44,862)4,331(4,503)
14,681(30,352)

Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for purchases of investment securities
Payments for purchases of investments in affiliates
Payments of loans receivable
Other, net
Net cash used in investing activities(2,795)15(5,168)
(294)
–
(128)
(8,370)(4,439)
15
(5)
–
–
(199)
(4,628)(2,890)
15
(5)
(139)
(11)
(128)
(3,158)(31,061)
161(53)(1,493)(118)(1,375)(33,942)

Cash flows from financing activities:
Increase in short-term borrowings
Decrease in commercial paper, net
Proceeds from long-term debt
Repayments of long-term debt
Cash dividends paid
Other, net
Net cash used in financing activities–(5,000)8,000(2,318)(1,359)
(4)
(681)

877
(1,000)700(4,896)(1,358)(1)(5,678)–––(3,390)(679)(6)(4,076)–––(36,435)(7,297)(64)(43,809)(8)
1,101
13,232¥ 14,333

2
7,926
14,333¥ 22,2592(10,056)
22,258¥ 12,20121(108,082)
239,230$ 131,137

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 15)

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

6

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2010
1.

Summary of Significant Accounting Policies(a) Basis of presentation
The accompanying consolidated financial statements of Toho Zinc Co., Ltd. (the“Company”) and its consolidated subsidiaries (the “Companies”) are prepared on thebasis of accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial
Reporting Standards, and are compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments and Exchange Law ofJapan.
As permitted under the Financial Instruments and Exchange Law, amounts of less than
one million yen have been omitted as of and for the year ended March 31, 2010. As aresult, the totals shown in the accompanying consolidated financial statements (both inyen and in U.S. dollars) do not necessarily agree with the sums of the individual amounts
as of and for the year ended March 31, 2010. As of March 31, 2009 and for the years
ended March 31, 2009 and 2008, amounts of less than one million yen have beenrounded off.
Certain items presented in the consolidated financial statements submitted to the
Direction of Kanto Financial Bureau in Japan have been reclassified in theaccompanying consolidated financial statements for the convenience of readers outside
Japan.
(b) Principles of consolidation
The accompanying consolidated financial statements include the accounts of theCompany and any significant subsidiaries that are controlled by the Company. Under
the effective control approach, all majority-owned companies are to be consolidated.
Additionally, companies in which share ownership equals 50% or less may be required tobe consolidated in cases where such companies are effectively controlled by othercompanies through the interests held by a party who has a close relationship with theparent in accordance with Japanese accounting standards.
All significant
inter-company transactions and accounts are eliminated in consolidation.

7

1.

Summary of Significant Accounting Policies (continued)(c) Foreign currency translation(1) Foreign currency transaction
All receivables and payables denominated in foreign currencies are translated into
Japanese yen at the exchange rate prevailing at the balance sheet date.
(2) Foreign currency financial statements
The assets and liabilities of the foreign consolidated subsidiaries are translated into
Japanese yen at current exchange rate prevailing at the balance sheet date.
Revenue and expense accounts are translated at the current exchange rate prevailingat the balance sheet date. Foreign currency translation adjustments are included in
net assets.
(d) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of
cash on hands, bank deposits be able to withdraw on demand and short-term investmentswith original maturity of three months or less and minor risk for the fair value
fluctuation.
(e) Inventories
Finished goods, work in process and raw materials are stated at the lower of cost or net
selling value, for which cost is primarily determined by the first-in first-out method.
Supplies are stated at the lower of cost or net selling value, for which cost is determinedby the moving average method.
(Changes in accounting policy)(1) The Companies adopted the “Accounting Standard for Measurement of Inventories”(Statement No. 9 issued by the Accounting Standards Boards of Japan (the “ASBJ”)
on July 5, 2006) for the year ended March 31, 2009. Under this standard,
inventories held for sale in the ordinary course of business in principle, shall be
stated at the lower of cost or net selling value, which is defined as the selling priceless additional estimated manufacturing costs and direct selling expenses. As aresult, operating income decreased by ¥1,717 million, and loss before income taxes
increased by the same amounts for the year ended March 31, 2009 from thecorresponding amounts which would have been reported under the previous
method.
The effect of the change on the segment information is described in Note 18.
(2) Effective April 1, 2008, the Company changed the method of accounting for
inventories exclusive of supplies, from the last-in first-out method to the first-in
first-out method. The reasons for this change are as follows:•

With the adoption of the “Accounting Standard for Measurement of Inventories”(Statement No. 9 issued by the ASBJ on July 5, 2006);
8

1.

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

To remedy the fact that major fluctuations in raw material prices in recent years
have caused a sharp deviation between the values shown on the balance sheets
and current market prices, enabling a more accurate representation of theCompany’s financial position; and,Working to accelerate international convergence in accounting standards, the
ASBJ scheduled to abolish the last-in first-out method effective April 1, 2010.

As a result, operating income decreased by ¥1,915 million, and loss before income
taxes increased by the same amounts for the year ended March 31, 2009 from thecorresponding amounts which would have been reported under the previous
method.
The effect of the change on the segment information is described in Note 18.
(f)

Financial instruments(1) Investment securities
Marketable securities classified as other securities are carried at fair value based on
the average of market price during the last month of the fiscal year with any
changes in unrealized gains or losses, net of income taxes, included directly in net
assets.
Non-marketable securities classified as other securities are carried at cost.
securities sold is determined by the moving average method.

Cost of(2) Derivatives
The Company has entered into various derivative transactions, including forward
foreign exchange contracts, interest rate swaps and commodity futures, in order tomanage certain risk arising from adverse fluctuations in foreign currency exchange
rates, interest rates and commodity prices.
All derivatives are recognized in the balance sheet at fair value, with changes in fairvalue included in net income for the period in which they arise, except forderivatives that are designated as “hedging instruments” (see Note 1 (f) (3) Hedge
accounting below).
(3) Hedge accounting
Gains or losses arising from changes in fair value of the derivatives designated as“hedging instruments” are deferred as an asset or liability and included in net
income in the same period during which the gains and losses on the hedged items ortransactions are recognized.
Hedging instruments are derivative transactions including forward exchange
contracts, commodity futures and interest rate swaps. The related hedged items areprimarily payables denominated in foreign currency in connection with purchases ofraw materials and products, commodities and long-term debt, respectively.
The Company has a policy to utilize the above hedging instruments in order to91.

Summary of Significant Accounting Policies (continued)(f)Financial instruments (continued)
reduce the Company’s exposure to the risk of the currency, price and interest rate
fluctuations.
The Company evaluates effectiveness of its hedging activities by reference to theaccumulated gains or losses on the hedging instruments and the related hedged
items from the commencement of the hedging transactions. The Company omits
to assess hedge effectiveness of interest rate swaps which qualify for hedge
accounting and meet specific matching criteria.

(g) Property, plant and equipment and depreciation
Property, plant and equipment, except for lease assets, are stated at cost and have been
mainly depreciated by the straight-line method over the estimated useful lives ofrespective assets.
(Changes in accounting policy)
In accordance with the revision made to the Corporate Tax Law of Japan (the “TaxLaw”) which went into effect on April 1, 2007, effective the year ended March 31,
2008, the Company and domestic consolidated subsidiaries have adopted the new
method prescribed in the revised Tax Law for depreciating tangible fixed assets
acquired on or after April 1, 2007. The effect of this change on operating income
and income before income taxes was immaterial.
(Additional information)(1) Effective from the year ended March 31, 2008, the Company and domestic
consolidated subsidiaries depreciate the difference between 5% of acquisition costand nominal value by the straight-line method over a period of five years from theyear following the year in which the accumulated depreciation has reached 95% of
acquisition cost with respect to the tangible fixed assets acquired on or before
March 31, 2007. As a result, operating income, and income before income taxes
both decreased by ¥441 million for the year ended March 31, 2008 from thecorresponding amounts which would have been reported under the previous
method.
The effect of the change on the segment information is described in Note 18.
(2) Effective from the year ended March 31, 2009, the Company and domestic
consolidated subsidiaries, accompanying the revision of the Tax Law, changed theuseful lives of machinery and equipment. As a result, operating income decreasedby ¥391 million, and loss before income taxes increased by the same amounts forthe year ended March 31, 2009 from the corresponding amounts which would havebeen reported under the previous method.
The effect of the change on the segment information is described in Note 18.

10

1.

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

LeasesLease assets used under finance leases, primarily the storage equipments (structures) in
Smelting industry, and capitalized, are depreciated over the lease terms of the respective
assets by the straight-line method with no residual value.
Finance leases which took place prior to April 1, 2008, and do not transfer ownership ofthe leased assets to the lessee, continue to be accounted for as operating leases.
(Changes in accounting policy)
Prior to April 1, 2008, the Company and domestic consolidated subsidiaries accounted
for finance leases which do not transfer ownership of the leased assets to the lessee as
operating leases. Effective from the year ended March 31, 2009, the Company anddomestic consolidated subsidiaries adopted the “Accounting Standard for Lease
Transactions” (Statement No. 13 issued by the ASBJ on March 30, 2007) and the“Guidance on Accounting Standard for Lease Transactions” (Guidance No. 16 issued by
the ASBJ on March 30, 2007), and capitalized assets used under such leases, except for
certain immaterial or short-term finance leases, which are accounted for as operatingleases. As permitted, finance leases which took place prior to April 1, 2008, and havebeen accounted for as operating leases, continue to be accounted for as operating leases.
Effect of this change on operating income and loss before income taxes was zero for theyear ended March 31, 2009.

(j)

Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount sufficient to coverpossible losses on collection. The allowance consists of the estimated uncollectible
amounts with respect to specific receivables plus a percentage based on historical credit
losses.

(k) Accrued directors’ bonuses
Accrued directors’ bonuses at the balance sheet date are based on an estimate of theamount to be paid as bonuses for services rendered by that date.
(l)

Accrued employees’ pension and severance costs
Accrued employees’ retirement benefits are provided mainly at an amount calculated
based on the retirement benefit obligation and the fair value of the pension plan assets asof the balance sheet date, as adjusted for unrecognized actuarial gain or loss andunrecognized prior service cost. The retirement benefit obligation is attributed to eachperiod by the straight-line method over the estimated years of service of the employees.
111.

Summary of Significant Accounting Policies (continued)(l)Accrued employees’ pension and severance costs (continued)
Actuarial gain and loss are amortized in the year following the year in which the gain orloss is recognized primarily by the straight-line method over the period of 10 years
which is the average remaining number of years of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method over theperiod of 10 years which is the average remaining number of years of service of theemployees.
(Changes in accounting policy)
Effective from April 1, 2009, the Company adopted the “Partial Amendments to
Accounting Standard for Retirement Benefits (Part 3)” (Statement No. 19 issued by
ASBJ on July 31, 2008). The effect of this change on operating income and income
before income taxes was zero.

(m) Accrued directors’ and statutory auditor’s retirement allowances
In order to prepare for the disbursements of the directors’ and statutory auditor’s
retirement allowances, the Company records an amount required to be paid out as at theend of the fiscal year which is calculated based on internal rules.
Note that the Company discontinued the system for directors’ and statutory auditor’s
retirement allowances in accordance with a decision by the board of directors held on
May 22, 2007, and hence the balance as at the end of this consolidated fiscal year is theamount for periods in which the directors and statutory auditors served prior to June
2007.
(n) Accrued environmental allowances
Accrued environmental allowances are estimated and recorded to provide for future
potential costs, such as costs related to disposal of polychlorinated biphenyl (PCB).
(o) Accrued expected losses on construction contracts in process allowances
In order to prepare for future losses related to construction orders, the Company hasrecorded an estimated amount for construction which has yet to be transferred as at theend of the consolidation fiscal year. The amounts were included in Other current
liabilities as of March 31, 2009 and 2010.
(p) Income taxes
Deferred tax assets and liabilities are determined based on the differences between
financial reporting and the tax bases of the assets and liabilities and are measured using
the enacted tax rates and laws which will be in effect when the differences are expected
to reverse.

12

1.

Summary of Significant Accounting Policies (continued)(q) Recognizing revenues and costs of construction contracts(Changes in accounting policy)
Until the year ended March 31, 2009, revenues and costs of construction contracts wererecognized by the completed-contract method. Effective April 1, 2009, the Company
and its consolidated subsidiaries have applied the “Accounting Standard for Construction
Contracts” (Statement No. 15 issued by ASBJ on December 27, 2007) and the “Guidanceon Accounting Standard for Construction Contracts” (Guidance No. 18 issued by ASBJ
on December 27, 2007). Under the new accounting standard and guidance, revenues
and costs of construction contracts that commenced on or before April 1, 2009, of which
the percentage of completion can be reliably estimated, are recognized by thepercentage-of-completion method. The percentage of completion is calculated at thecost incurred as a percentage of the estimated total cost. The completed-contract
method continues to be applied for contracts for which the percentage of completioncannot be reliably estimated.
As a result, net sales increased by ¥1,032 million ($11,092 thousand), operating income
increased by ¥165 million ($1,773 thousand), and income before income taxes increasedby ¥179 million ($1,923 thousand) for the year ended March 31, 2010 from thecorresponding amounts which would have been reported under the previous method.
Inventories and accrued expected losses on construction contracts in connection withconstruction contracts with expected future losses are presented in gross on the
consolidated balance sheet as of March 31, 2010.
Of inventories in connection with construction contracts with expected future losses, theamount corresponding to accrued expected losses on construction contracts was ¥14
million ($150 thousand), of which ¥14 million ($150 thousand) was for work in process.
Gain on adjustment for changes of the accounting standard for construction contracts in
the Consolidated Statements of Operations represents revenues corresponding to theconstruction completed in the prior years that are to be recognized upon changes ofaccounting standard for all construction contracts outstanding as at April 1, 2009 inaccordance with Paragraph 25 of the “Accounting Standard for Construction Contracts”(Statement No. 15 issued by ASBJ on December 27, 2007).
The amount of revenues corresponding to the construction completed in the prior years
and costs of construction contracts were ¥136 million ($1,461 thousand) and ¥122
million ($1,311 thousand), respectively.
(r) Appropriation of retained earnings
Cash dividends and transfers to legal reserve are recorded in the fiscal year that the
proposed appropriation of retained earnings is approved at the shareholders’ meeting.
(s) Net income per share
Net income per share is computed based on the net income available for distribution toshareholders of common stock and the weighted average number of shares of common
stock outstanding during the year.

13

2.

U.S. Dollar Amounts

U.S. dollar amounts presented in the accompanying consolidated financial statements and inthese notes are included solely for the convenience of readers outside of Japan, at theprevailing exchange rate of ¥93.04 to U.S.$1 on March 31, 2010. These translations should
not be construed as representations that the yen amounts actually represent, or have been or
could be converted into U.S. dollars at that or any other rate.
3.

Inventories

Inventories at March 31, 2009 and 2010 consisted of the following:
March 31,
2009
2010
2010
(Millions of yen)(Thousands of
U.S. dollars)
Finished goods
Work in process
Raw materials and supplies
Total

¥

6,384
4,897
10,370¥ 21,651

¥

6,352
7,326
15,881¥ 29,559$

68,27178,740170,690$ 317,702

Cost of sales for the years ended March 31, 2009 and 2010 included write-downs ofinventories due to decline in profitability for the amount of ¥1,716 million and ¥1,313 million($14,112 thousand), respectively.
4.

Land Revaluation

In accordance with the Land Revaluation Law, the Company’s land used for its business
operations was revalued as follows:
Date of revaluation: March 31, 2000
The difference between total fair value of land and the total book value after revaluationof land at March 31, 2009 and 2010 were ¥5,339 million and ¥5,743 million ($61,726
thousand), respectively.
The tax effect of the excess on revaluation is recorded as “Deferred tax liabilities related toland revaluation” which is included in liabilities, and the remainder, net of income taxes
portion of the excess on revaluation is presented as “Surplus from land revaluation” which isincluded in net assets.

14

5.

Impairment Loss on Fixed Assets

The Company has recognized impairment losses on the assets group for the years ended
March 31, 2008, 2009 and 2010 as follows:Year ended March 31, 2008
Location
Use
Category
Shandong, China

Idle assets(Millions ofyen)

Machinery,
Others

¥

4
0
4

¥

Location

Year ended March 31, 2009
Use
Category

Iwaki City,
Fukushima

Idle assets(Millions ofyen)

Machinery,
Structures

¥

96
35
131

¥

Location

Year ended March 31, 2010
Use
Category

Annaka City,
Gumma, other

Idle assets(Millions of (Thousands ofyen)
U.S. dollars)

Machinery, etc.
Structures, etc.
Others

¥

382
34
0
418

¥

$

$

4,105
365
0
4,492

The Company determined asset group based on the categories used for their managerial
accounting. With respect to idle assets, each asset is treated as an individual unit to apply
the accounting for the impairment.
The Company recognized impairment losses for entire book value of idle assets on the groundthat they were projected to generate no future cash-in flows and were not readily salable
either.
6.

Investments in Non-Consolidated Subsidiaries and Affiliates

Investments in non-consolidated subsidiaries and affiliates as of March 31, 2009 and 2010
were summarized as follows:
March 31,
2009
2010
2010
(Millions of yen)(Thousands of
U.S. dollars)
Subsidiaries
Affiliates

¥
¥

411
2,342
2,753

¥
¥

389
5,446
5,835

$
$

4,180
58,53362,71415

7.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at March 31, 2009 and 2010 consisted of thefollowing:2009

Amount(Millions of yen)
Short-term bank loans ¥ 22,478
Commercial papers
2,000
Current portion of
long-term debt
3,390
Current portion oflease obligations–
Long-term debt
8,928
Lease obligations–
Total¥ 36,796

March 31,2010
Weighted
averageinterest
rate
Last due on

2010(Thousands of
U.S. dollars)¥ 22,478
2,000

0.9%
0.1

6,031

1.5

17
2,896
160
¥ 33,584–
1.5–$ 241,595
21,49664,821
2011.4 ~ 2022.9
2011.4 ~ 2025.3

182
31,1261,719$ 360,963

Average interest rates are calculated by using weighted-average interest rates as at March 31,
2010. Average interest rates on lease obligations are not provided because interest
equivalents included in the total lease payments are allocated to each applicable fiscal year ona straight-line basis.
The maturities of long-term debt and lease obligation outstanding as at March 31, 2010 wereas follows:Year ending March 31,
2011
2012
2013
2014
2015
Thereafter
Total

Long-term
Lease
debt
obligation(Millions of yen)

Long-term
Lease
debt
obligation(Thousands of U.S. dollars)

¥

$

¥

6,031
2,081
601
181
9
24
8,928

¥

¥

17
17
17
16
13
97
177

$

64,821
22,366
6,459
1,945
96
257
95,958

$

$

182
182
182
171
139
1,042
1,902

16

7.

Short-Term Borrowings and Long-Term Debt (continued)

Assets pledged as collateral for the long-term debt, including the current portion, at March 31,
2009 and 2010 were as follows:
March 31,
2009
2010
2010
(Millions of yen)(Thousands of
U.S. dollars)

Pledged assets

Land
Buildings and structures
Machinery and equipment
Investment securities
Total

Current portion of long-term debt
Long-term debt
Total
8.

¥ 13,794
5,206
10,113196¥ 29,309¥ 13,792
5,048
9,768
172
¥ 28,781$ 148,237
54,256104,987
1,848$ 309,340

March 31,
2010
2010
2009
(Millions of yen)(Thousands of
U.S. dollars)¥ 1,494¥ 3,959$ 42,551
4,016
56
601
¥ 5,510¥ 4,015$ 43,153

Employees’ Pension and Severance Costs

The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e.,
defined benefit corporate pension plans and lump-sum payment plans, covering substantiallyall employees who are entitled to lump-sum or annuity payments, the amounts of which are
determined by reference to their basic rates of pay, length of service, and the conditions underwhich termination occurs.
The funded status of retirement benefit obligations at March 31, 2009 and 2010 were as
follows:
March 31,
2010
2010
2009
(Millions of yen)(Thousands of
U.S. dollars)
Projected benefit obligations
Plan assets at fair value
Unfunded status
Unrecognized actuarial loss
Unrecognized prior service costs
Accrued employees’ pension and severance costs

¥

4,601
(1,385)
3,216
(419)
351
¥ 3,148¥

4,468(1,719)
2,749
(164)
311
¥ 2,896$

48,022(18,475)
29,546(1,762)
3,342$ 31,126

17

8.

Employees’ Pension and Severance Costs (continued)

The compositions of employees’ pension and severance costs for the years ended March 31,
2008, 2009 and 2010 were as follows:Year ended March 31,
2009
2010
2010
2008
(Millions of yen)(Thousands of
U.S. dollars)Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service costs
Total

¥

¥

251
103
(34)
73
–
393

¥

¥

213
89
(30)
79
(39)
312

¥

¥

198
87
(27)
106
(38)
325

$

$

2,128
935
(290)
1,139
(408)
3,493

The assumptions used in accounting for the defined benefit pension plans for the years ended
March 31, 2008, 2009 and 2010 were as follows:Year ended March 31,
2008
2009
2010
Discount rate
Expected rate of return on plan assets
9.

2.0%
2.0%

2.0%
2.0%

2.0%
2.0%

Net Assets

The Corporation Law of Japan provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve) and retained
earnings (other than the legal reserve) be transferred to the capital reserve and the legal
reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of
the common stock. Such distributions can be made at any time by resolution of thestockholders, or by the Board of Directors if certain conditions are met.

18

10. Income Taxes
At March 31, 2009 and 2010, significant components of deferred tax assets and liabilities
were as follows:
March 31,
2010
2010
2009
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued employees’ pension and severance
costs
Accrued employees’ bonus
Inventories write-off
Elimination of intercompany profits
Accrued enterprise tax
Write-down of investment securities
Losses on deferred hedges
Other
Gross deferred tax assets
Less: Valuation allowance
Total deferred tax assets¥

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

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

¥

(28)
(407)
(435)
¥4,128

¥

5,781

1,173
279
164
109
172
1,733
121
722
4,474
418
4,056

$

(25)
(1,799)(1,825)¥2,231¥

5,779

12,607
2,998
1,762
1,171
1,848
18,6261,300
7,760
48,086
4,492
43,594(268)(19,335)(19,615)
23,978$62,113

The reconciliation between the statutory tax rate and the effective tax rate for the years ended
March 31, 2008 and 2010 is not shown because the difference was less than 5% of thestatutory tax rate, and for the year ended March 31, 2009 is not shown because the Company
incurred loss before income taxes.
11. Leases
As lessees:
As described in Note 1 (i), the Company and domestic consolidated subsidiaries accounted forfinance leases which took place prior to April 1, 2008, and do not transfer ownership of theleased assets to the lessee, as operating leases.
The following pro forma amounts represent the acquisition cost, accumulated depreciationand net book value of the leased assets at March 31, 2009 and 2010 which would have beenreflected in the consolidated balance sheets if these lease transactions had been accounted for
as financing leases:19

11. Leases (continued)
March 31,
2010
2010
2009
(Millions of yen)(Thousands of
U.S. dollars)
Acquisition cost of machinery and equipment ¥Accumulated depreciation of machineryand equipment
Net book value¥

137

Acquisition cost of furniture and fixtures
Accumulated depreciation of furniture andfixtures
Net book value

¥

137

$

1,472

(61)
76

¥

(80)
56

$

(859)
601

¥

151

¥

66

$

709

¥

(125)
26

¥

(52)
14

$

(558)
150

Future minimum lease payments (including the interest portion thereon) subsequent to March
31, 2010 for finance leases accounted for as operating leases are summarized as follows:(Millions ofyen)Year ending March 31,
20112012 and thereafter
Net book value

¥
¥

28
43
71

(Thousands of
U.S. dollars)
$
$

300
462
763

Lease payments relating to finance leases accounted for as operating leases in theaccompanying consolidated financial statements for the years ended March 31, 2008, 2009
and 2010 totaled ¥42 million, ¥37 million and ¥31 million ($333 thousand), respectively.
The pro forma depreciation of the assets leased under finance leases accounted for as
operating leases for the years ended March 31, 2008, 2009 and 2010 amounted to ¥42 million,¥37 million and ¥31 million ($333 thousand), respectively.
There were no impairment losses allocated to lease assets for the years ended March 31, 2009
and 2010.
12. Commitments and Contingent Liabilities
The Companies were contingently liable as guarantors for loans of other companies in theaggregate amount of ¥614 million ($6,599 thousand) at March 31, 2010.
The Company has entered into loan commitment agreements amounting to ¥5,600 million($60,189 thousand) with financial institutions at March 31, 2010. The loans payable
outstanding was zero, and therefore, the unused balance was ¥5,600 million ($60,189
thousand) under the credit facilities as of March 31, 2010.

20

13. Financial Instruments
Effective April 1, 2009, the Company adopted the “Accounting Standard for Financial
Instruments” (Statement No. 10 issued by ASBJ March 10, 2008) and the “Guidance on
Disclosures about Fair Value of Financial Instruments” (Guidance No. 19 issued by ASBJ
March 10, 2008).
Overview(1) Policy for financial instruments
In consideration of plans for capital investment, the Company and its consolidated
subsidiaries (collectively, the “Group”) raise funds mainly through bank borrowings.
The Group manages temporary cash surpluses through highly liquid financial assets.
The Group raises short-term capital through bank borrowings and issuances ofcommercial papers. The Group uses derivatives for the purpose of reducing
after-mentioned risks and does not enter into derivatives for speculative or trading
purposes.
(2) Types of financial instruments and related risk
Trade receivables––trade notes and accounts receivable––are exposed to credit risk inrelation to customers. In addition, the Group is exposed to foreign currency exchange
risk arising from receivables denominated in foreign currencies. However, the foreign
currency exchange risks deriving from the trade receivables denominated in foreign
currencies are hedged by forward foreign exchange contracts.
Investment securities are exposed to market risk. Those securities are composed of theshares of common stock and bonds of other companies with which the Group hasbusiness relationships.
Substantially all trade payables––trade notes and accounts payable––have payment due
dates within two months. Although the Group is exposed to foreign currency exchange
risk arising from those payables denominated in foreign currencies, forward foreignexchange contracts are arranged to reduce risk.
Trade receivables and payables in connection with Smelting industry are exposed tocommodity price fluctuation risks of London Metal Exchange (“LME”), but such risks
are hedged by metal futures contracts.
Long-term debt is taken out principally for the purpose of making capital investments
and its repayment dates extend up to 12 years from the balance sheet date. Althoughpart of long-term debt is exposed to interest rate fluctuation risk, interest rate swaps arearranged to mitigate the risk.

2113. Financial Instruments (continued)
Overview (continued)(2) Types of financial instruments and related risk (continued)
Regarding derivatives, the Group enters into forward foreign exchange contracts to
reduce the foreign currency exchange risk arising from the receivables and payables
denominated in foreign currencies, metal futures contracts to reduce commodity pricefluctuation risk of LME arising from the receivables and payables in connection withSmelting industry and interest rate swap transactions to reduce fluctuations risk derivingfrom interest payable for long-term debt. Information regarding the method of hedge
accounting, hedging instruments and hedged items, hedging policy, and assessment of
the effectiveness of hedging activities is found in Note 1 (f) (3).
(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk
arising from receivables, each related division monitors credit worthiness of theirmain customers periodically, and monitors due dates and outstanding balances by
individual customer. In addition, the Group is making efforts to identify andmitigate risks of bad debts from customers who are having financial difficulties.
Debt securities consist of bonds issued by CBH Resources Ltd., the Company’s
affiliate under equity method. Accordingly, the Company believes that the credit
risk deriving from such debt securities is insignificant.
The Group also believes that the credit risk of derivatives is insignificant as it enters
into derivative transactions only with financial institutions which have a soundcredit profile.
(b) Monitoring of market risks (the risks arising from fluctuations in foreign exchange
rates, commodity prices, interest rates and others)
For trade receivables and payables denominated in foreign currencies, the Groupidentifies the foreign currency exchange risk for each currency on a monthly basis
and enters into forward foreign exchange contracts to hedge such risk. In order tomitigate commodity price fluctuation risks of LME for trade receivables andpayables in connection with Smelting industry, the Group may enter into metal
futures contracts. In order to mitigate the interest rate risk for interest payments oflong-term debt, the Group may also enter into interest rate swap transactions.
For investment securities, the Group periodically reviews the fair values of suchfinancial instruments and the financial position of the issuers. In addition, theGroup continuously evaluates whether securities should be maintained taking into
account their fair values and relationships with the issuers.

2213. Financial Instruments (continued)
Overview (continued)(3) Risk management for financial instruments (continued)
Derivative transactions are conducted and managed by the treasury personnel
including Directors and each division in charge of each derivative transaction.
Risk management is sufficiently made by making reports to management every timea transaction is executed as well as on a periodical basis.
(c) Monitoring of liquidity risk (the risk that the Group may not be able to meet its
obligation on scheduled due dates)
Based on the report from each division and affiliates, the Group prepares andupdates its cash flow plans on a timely basis and maintains liquid funds to manage
liquidity risk.
(d) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if
available. When there is no quoted market price available, fair value is reasonably
estimated. Since various assumptions and factors are reflected in estimating thefair value, different assumptions and factors could result in different fair value. In
addition, the notional amounts of derivatives in Note 16 Derivative Transactions are
not necessarily indicative of the actual market risk involved in derivativetransactions.
Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet as of March 31,
2010 and estimated fair value are shown in the following table. The following table does notinclude financial instruments for which it is extremely difficult to determine the fair value(Please refer to Note 2 below).
March 31, 2010
Carrying
Estimated fair
value
value
Difference(Millions of yen)
(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Investment securities
Total assets(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Current portion of long-term debt
(4) Long-term debt
Total liabilities
Derivatives *¥¥12,216
17,161
7,668
37,047
6,227
22,4786,031
2,896
37,633(297)¥¥

12,216
17,161
7,668
37,047
6,227
22,4786,089
2,880
37,675
(297)

¥

¥

–
–
–
–
–
–
57
(16)
41
–

* The value of assets and liabilities arising from derivatives is shown at net value, and withamounts in parentheses representing net liability positions.
2313. Financial Instruments (continued)
Estimated Fair Value of Financial Instruments (continued)
March 31, 2010
Carrying
Estimated fair
value
value
Difference(Thousands of U.S. dollars)(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Investment securities
Total assets$ 131,298
184,447
82,416398,183$ 131,298
184,447
82,416398,183(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Current portion of long-term debt
(4) Long-term debt
Total liabilities
Derivatives

66,928
241,595
64,821
31,126404,481$(3,192)

66,928
241,595
65,44430,954404,933$(3,192)

$

$

–
–
–
–
–
–
612
(171)
440
–

Notes:
1.

Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactions(1) Cash and time deposits and (2) Notes and accounts receivable, trade
Since these items are settled in a short period of time, their carrying value approximatesfair value.
(3) Investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt
securities is based on either quoted market prices. For information on securities
classified by holding purpose, please refer to Note 14 Investment Securities of the notes
to the consolidated financial statements.
(1) Notes and accounts payable, trade and (2) Short-term borrowings
Since these items are settled in a short period of time, their carrying value approximatesfair value.
(3) Current portion of long-term debt and (4) Long-term debt
The fair value of long-term debt is based upon the present value of the total of principle
and interest discounted by the interest rate to be applied if similar new borrowings wereentered into.
Derivative transactions
Please refer to Note 16 Derivative Transactions of the notes to the consolidated financial
statements.

2413. Financial Instruments (continued)
Estimated Fair Value of Financial Instruments (continued)
2.

Financial instruments for which it is extremely difficult to determine the fair value
March 31, 2010
(Thousands of U.S.
(Millions of yen)dollars)
Unlisted stocks

¥

913

$

9,812

Because no quoted market price is available and it is extremely difficult to determine thefair value, the above financial instruments are not included in the above table.
3.

Redemption schedule for receivables and marketable securities with maturities at March
31, 2010

Due in one
year or less
Cash and time deposits
Notes and accounts receivable, trade
Investment securities
Other securities with maturities
Corporate bonds
Total¥ 12,134
17,161–¥ 29,296

March 31, 2010
Due after
Due after
one yearfive years
throughthrough ten
five years
years(Millions of yen)
¥

¥

–
–
4,963
4,963

¥

¥

–
–
–
–

Due after
ten years
¥

¥

–
–
–
–

March 31, 2010
Due after
Due after
one yearfive years
Due in one
throughthrough ten Due after
year or less five years
years
ten years(Thousands of U.S. dollars)
Cash and time deposits
Notes and accounts receivable, trade
Investment securities
Other securities with maturities
Corporate bonds
Total
4.

$ 130,417
184,447$–––$ 314,875$53,342$ 53,342

$

$

–
–
–
–

$

$

–
–
–
–

The redemption schedule for long-term debt is disclosed in Note 7.

25

14. Investment Securities
The Company classified investment securities other than those of subsidiaries and affiliates
into two categories: held-to-maturity securities or other securities.
The aggregate cost and fair value (carrying value) of marketable securities that were included
in investment securities at March 31, 2009 and 2010 were as follows:

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

¥

¥

1,655
–
657
705
3,017

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

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

¥

¥

1,775
704
728
–
3,207

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

¥

2,758
–
593
705
4,056

Unrealized
gains (losses)¥¥

March 31, 2010
Fair value(carrying value)(Millions of yen)
¥

¥

3,646
3,373
647
–
7,668

1,103
–
(64)
–
1,039

Unrealized
gains (losses)

¥

¥

1,871
2,668
(80)
–
4,460

March 31, 2010
Fair value
Unrealized
Cost(carrying value) gains (losses)(Thousands of U.S. dollars)$$

19,077
7,566
7,824
–
34,469$$39,18736,253
6,953–
82,416$$

20,10928,675(859)–
47,93626

14. Investment Securities (continued)
As at March 31, 2009 and 2010, non-marketable equity securities amounting to ¥929 millionand ¥913 million ($9,812 thousand), respectively, were not included in the above tablebecause there were no quoted market prices available and they are extremely difficult todetermine the fair value.
For the years ended March 31, 2009 and 2010, the Company recognized ¥4,530 million and¥321 million ($3,450 thousand) of impairment losses for marketable securities, respectively.
In the impairment of relevant equity and bond securities, in the case that the market value atthe end of the year is lower than the acquisition cost by 50% or more, impairment losses arerecognized for all carrying values of securities; and in the case that the market value is lower
than the acquisition cost by around 30 to 50%, impairment losses are recognized for theamount deemed necessary after taking into consideration factors such as the materiality andrecoverability of the amount.
15. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2009 and 2010 were composed of the followings:
March 31,
2010
2010
2009
(Millions of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Less:Time deposits with a maturity of morethan three months when purchased
Cash and cash equivalents¥ 22,284¥ 12,216$ 131,298(25)¥ 22,259(15)¥ 12,201(161)$ 131,137

16. Derivative Transactions
As of March 31, 2009
The Company enters into forward exchange contracts, commodity futures and interest rate
swaps. Forward exchange contracts and commodity futures are utilized to hedge currency
risk exposures. Interest rate swaps are utilized to hedge against possible future changes ininterest rates on borrowings. The Company uses derivative instruments only for hedging
purposes and not for purposes of trading or speculation.
All derivative contracts that the Company held as of March 31, 2009, are qualified for hedge
accounting and excluded from the disclosure of fair value information.
As of March 31, 2010
All derivative contracts that the Company held as of March 31, 2010, are qualified for hedge
accounting. Summarized below are the notional amounts and the estimated fair value of thederivative instruments outstanding at March 31, 2010, for which hedged accounting has been
applied.
27

16. Derivative Transactions (continued)
As of March 31, 2010 (continued)(a) Currency-related transactions
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)

Forward foreign exchange contracts,
accounted for as part of accounts
receivable:
Sell:
USD
Total

¥
¥

24
24

¥
¥

–
–

¥
¥

(0)
(0)

Note: The measurement of fair value is based on prices obtained from financial institutions
and others.
Notional amount
Maturing
Contract
after one
amountyear
Fair value(Thousands of U.S. dollars)

Forward foreign exchange contracts,
accounted for as part of accounts
receivable:
Sell:
USD
Total

$
$

257
257

$
$

–
–

$
$

(0)
(0)

(b) Interest-related transactions

Interest rate swaps hedging
long-term debt, accounted for byshort-cut method:
Receive/floating and pay/fixed
Total

Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)

¥
¥

2,540
2,540

¥
¥

460
460

(Note)

Note: Interest rate swaps, to which the matching criteria is applied, is accounted for together
with long-term debt designated as a hedged item (“short-cut method”), therefore, theirfair values are included in the fair value of long-term debt.

28

16. Derivative Transactions (continued)
As of March 31, 2010 (continued)

Interest rate swaps hedging
long-term debt, accounted for byshort-cut method:
Receive/floating and pay/fixed
Total

Notional amount
Maturing
Contract
after one
amountyear
Fair value(Thousands of U.S. dollars)$$

27,30027,300

$
$

4,944
4,944

(Note)(c) Commodity-related transactions

Commodity futures contracts,
accounted for as part of raw
materials and finished goods:
Sell: Metals
Total

Notional amount
Maturing
Contract
after one
amountyear
Fair value(Millions of yen)¥¥

12,497
12,497

¥
¥

–
–

¥
¥

(296)
(296)

Note: The measurement of fair value is based on prices obtained from counterparties andothers.

Commodity futures contracts,
accounted for as part of raw
materials and finished goods:
Sell: Metals
Total

Notional amount
Maturing
Contract
after one
amountyear
Fair value(Thousands of U.S. dollars)$ 134,318$ 134,318

$
$

–
–

$
$

(3,181)(3,181)29

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

Related party transactions
The Company owns 25.8%, 28.5% and 23.0% of outstanding shares of CBH Resources
Ltd., which operates mining business for the fiscal years ended March 31, 2008, 2009
and 2010, respectively.
The transactions and account balances with CBH Resources Ltd. were as follows:•

Transactions

Underwriting convertible bonds
Converted bonds into stocks
Interests•

Year ended March 31,
2008
2009
2010
2010
(Millions of yen)(Thousands of
U.S. dollars)¥ 4,963 ¥
– ¥
– $
–
–
1,361
–
–
377
296
323
3,471

Account balances
March 31,
2010
2010
2009
(Millions of yen)(Thousands of
U.S. dollars)Long-term loans receivable
Investment securities
Other current assets

¥

1,361
705
213

¥

1,361
3,373
167

$

14,62836,253
1,794

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

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

•

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

•

For the year ended March 31, 2009, convertible bonds were converted into ordinary
stocks for ¥37 per stock.

30

17. Related Party Transactions (continued)
2.

Note about significant affiliate
For the year ended March 31, 2009, CBH Resources Ltd., was recognized as significant
affiliate and summary of its financial statements is as follows:(Millions ofyen)
Total current assets
Total fixed assets

¥

4,976
12,934

Total current liabilities
Total long-term liabilities

1,844
12,140Total net assets

3,926

Net sales
Income (loss) before income taxes
Net income (loss)

12,993(10,711)(9,678)

18. Segment Information
Business segment information
Information about the business segments of the Companies for the years ended March 31,
2008, 2009 and 2010 is as follows:Year ended March 31, 2008
Business segment
Eliminations
Industry B
Industry C
Otherand corporate Consolidated(Millions of yen)

Industry A
Net sales:
Customers
Inter-segment
Total
Cost and expenses
Operating income (loss)
Total assets¥ 113,729
730
114,459
102,001
12,45866,343

Depreciation andamortization
Impairment loss of fixed
assetsCapital expenditures¥¥ 10,901
11
10,912
9,786
1,126
11,658¥ 12,287
162
12,44910,1372,312
7,608¥ 10,473
4,949
15,422
13,606
1,816
5,394

1,853

354

356

–

4

–

2,136

¥

373

¥

315

¥

–
(5,852)(5,852)(5,423)(429)
33,646¥ 147,390–
147,390130,107
17,283
124,650

10

86

2,660

–

–

4

231

¥

¥

90

¥

3,146

31

18. Segment Information (continued)
Business segment information (continued)
Year ended March 31, 2009
Business segment
Eliminations
Industry B
Industry C
Otherand corporate Consolidated(Millions of yen)

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

67,132431
67,563
68,294(731)¥¥

Total assets
Depreciation andamortization
Impairment loss of fixed
assetsCapital expenditures¥

Depreciation andamortization
Impairment loss of fixed
assetsCapital expenditures¥

10,807
4,359
15,166
13,505
1,661¥–(4,900)(4,900)(4,778)(122)¥

92,686–
92,686
90,792
1,894

6,047

4,898

38,033

107,825

2,072

391

409

155

77

3,104

–
3,323

–
536

131
392

–
126

–
113

131
4,490

63,513646
64,16058,230
5,929

¥

¥

¥

¥

¥

Year ended March 31, 2010
Business segment
Eliminations
Industry B
Industry C
Otherand corporate Consolidated(Millions of yen)
¥

6,646
2
6,649
6,234
414

¥

4,798
53
4,852
4,037
814

¥

8,632
3,882
12,515
11,212
1,302¥–(4,584)(4,584)(4,424)(160)¥

83,592–
83,59275,2908,301

62,744

11,208

6,275

5,441

27,152

112,823

2,265

436

391

9

81

3,184

345

58

14

–

–

418

3,027

$ 682,641
6,943
689,595
625,859
63,725674,376

$

6,952
98
7,050
6,437
613

11,015

¥

157

¥

176

¥

69

¥

61

¥

3,491

Year ended March 31, 2010
Business segment
Eliminations
Industry B
Industry C
Otherand corporate Consolidated(Thousands of U.S. dollars)

Industry A
Net sales:
Customers
Inter-segment
Total
Cost and expenses
Operating income (loss)
Total assets¥

47,832

Industry A
Net sales:
Customers
Inter-segment
Total
Cost and expenses
Operating income (loss)

7,795
12
7,807
7,334
473

$

71,431
21
71,46367,003
4,449
120,464$

51,569569
52,14943,3898,748
67,444$

92,777
41,723
134,512120,507
13,99358,480$–(49,269)(49,269)(47,549)(1,719)291,831$

898,452–
898,452
809,22189,2191,212,628

24,344

4,686

4,202

96

870

34,221

3,708

623

150

–

–

4,492

32,534

$

1,687

$

1,891

$

741

$

655

$

37,52132

18. Segment Information (continued)
Business segment information (continued)
Notes: (a)The business segment is determined by the similarity of primary products
including type, nature, manufacturing and marketing process.
The primary products of each business segment are as follows:•

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

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

Industry C, the Environment and Recycling industry, consists of Zinc oxideetc.; and,•

Other consists of Soundproofing construction materials etc.

Of Cost and expenses, the amounts of unallocated cost and expenses corresponding to theadministrative department of the parent company, which is included in Eliminations andcorporate, were ¥373 million, ¥128 million and ¥187 million ($2,009 thousand) for the years
ended March 31, 2008, 2009 and 2010, respectively.
Of Total assets, the amounts of corporate assets included in Eliminations and corporate were¥33,035 million, ¥37,390 million and ¥27,152 million ($291,831 thousand) for the years
ended March 31, 2008, 2009 and 2010, respectively. These amounts primarily consisted ofexcess funds such as cash or securities and other assets corresponding to the administrative
department.
Notes: (b) (Changes in accounting policy)(1) As described in Note 1 (e), the Companies adopted the “AccountingStandard for Measurement of Inventories” (Statement No. 9 issued by the
ASBJ on July 5, 2006) for the year ended March 31, 2009. As a result,operating loss of Industry A increased by ¥1,438 million, operating incomeof Industry B and Industry C decreased by ¥29 million and ¥249 million,
respectively, for the year ended March 31, 2009 from the corresponding
amounts which would have been reported under the previous method.
(2) As described in Note 1 (e), effective April 1, 2008, the Company changed
the method of accounting for inventories exclusive of supplies, from thelast-in first-out method to the first-in first-out method. As a result,operating loss of Industry A increased by ¥1,939 million, operating incomeof Industry C increased by ¥24 million, for the year ended March 31, 2009
from the corresponding amounts which would have been reported under theprevious method.

33

18. Segment Information (continued)
Business segment information (continued)(3) Until the year ended March 31, 2009, revenues and costs of construction
contracts were recognized by the completed-contract method. Effective
April 1, 2009, the Company and its consolidated subsidiaries have appliedthe “Accounting Standard for Construction Contracts” (Statement No. 15
issued by ASBJ on December 27, 2007) and the “Guidance on AccountingStandard for Construction Contracts” (Guidance No. 18 issued by ASBJ on
December 27, 2007). Under the new accounting standard and guidance,
revenues and costs of construction contracts that commenced on or before
April 1, 2009, of which the percentage of completion can be reliably
estimated, are recognized by the percentage-of-completion method. The
percentage of completion is calculated at the cost incurred as a percentage ofthe estimated total cost. The completed-contract method continues to be
applied for contracts for which the percentage of completion cannot be
reliably estimated.
As a result, net sales and operating income of Other increased by ¥1,032
million ($11,092 thousand) and ¥165 million ($1,773 thousand), respectively,
for the year ended March 31, 2010 from the corresponding amounts which
would have been reported under the previous method.
Notes: (c)(Additional information)(1) As described in Note 1 (g), effective from the year ended March 31, 2008,
the Company and its domestic subsidiaries depreciate the difference between
5% of acquisition cost and nominal value by the straight-line method over a
period of five years from the year following the year in which theaccumulated depreciation has reached 95% of acquisition cost with respect
to the tangible fixed assets acquired on or before March 31, 2007. As aresult, operating income of Industry A, Industry B, Industry C and otherdecreased by ¥351 million, ¥24 million, ¥46 million and ¥14 million,
respectively for the year ended March 31, 2008 from the corresponding
amounts which would have been reported under the previous method.
(2) As described in Note 1 (g), effective from the year ended March 31, 2009,
the Company and its domestic subsidiaries changed the durable years ofmachinery and equipment. As a result, operating income of Industry A,
Industry B and Industry C decreased by ¥282 million, ¥50 million and ¥57
million, respectively for the year ended March 31, 2009 from thecorresponding amounts which would have been reported under the previous
method.

Information about geographical segments for the years ended March 31, 2008, 2009 and 2010
has been omitted since sales and assets in Japan were more than 90% of the total consolidated
sales and assets, respectively.
Information about overseas sales for the years ended March 31, 2008, 2009 and 2010 has also
been omitted since overseas sales were less than 10% of the consolidated sales.

3419. Subsequent Events
On April 30, 2010, the Company agreed with CBH Resources Ltd. (hereinafter “CBH”), theCompany’s affiliate under equity method, to acquire all shares and convertible bonds of CBH
and then filed the takeover bid with the Australian Securities Exchange on May 17, 2010.
CBH is in a mineral resource company with total capital and total assets of AUD 181 millionand AUD 311 million as of December 31, 2009.
This acquisition is made for the purpose of owning CBH as a wholly-owned subsidiary.
Thus, the Company is able to enhance a stable supply of raw materials and ore, that is one of
the Company’s mid- and long-term management challenges.
The Company will make the takeover bid for the period from May 17, 2010 to July 7, 2010,
with the condition of acquiring 90% or more of CBH’s outstanding shares, based on thefollowing bids:
Stocks:

AUD 0.24 per share, subject to all CBH’s outstanding shares other thanshares already held by the Company

Convertible
bonds:

100% of face value (AUD 1,000 per unit), subject to all CBH’s outstanding
convertible bonds including bonds already held by the Company

The Company estimates the total amount required for the acquisition is approximately AUD
244.7 million and plans to utilize liquidity funds and borrowings from third parties.

35