Consolidated Financial Statements
Toho Zinc Co., Ltd.
and Consolidated Subsidiaries
For the year ended March 31, 2016
with Independent Auditor’s ReportToho Zinc Co., Ltd. and Consolidated Subsidiaries
Contents to Consolidated Financial Statements

Independent Auditor’s Report-------------------------------------------------------------

1

Consolidated Balance Sheet---------------------------------------------------------------

2

Consolidated Statement of Operations---------------------------------------------------

4

Consolidated Statement of Comprehensive Income (Loss) -----------------------------

5

Consolidated Statement of Changes in Net Assets -------------------------------------

6

Consolidated Statement of Cash Flows --------------------------------------------------

8

Notes to Consolidated Financial Statements --------------------------------------------

9Independent Auditor’s Report
The Board of Directors
Toho Zinc Co., Ltd.
We have audited the accompanying consolidated financial statements of Toho Zinc Co., Ltd. and its consolidated subsidiaries,
which comprise the consolidated balance sheet as at March 31, 2016, and the consolidated statements of operations,comprehensive income, changes in net assets, and cash flows for the year then ended and a summary of significant
accounting policies and other explanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith accounting principles generally accepted in Japan, and for designing and operating such internal control as management
determines is necessary to enable the preparation and fair presentation of the consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. The purpose of an audit of theconsolidated financial statements is not to express an opinion on the effectiveness of the entity’s internal control, but inmaking these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentationof the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates madeby management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Toho Zinc Co., Ltd. and its consolidated subsidiaries as at March 31, 2016, and their consolidated
financial performance and cash flows for the year then ended in conformity with accounting principles generally accepted inJapan.
Convenience Translation
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented for the convenienceof readers, and, in our opinion, the accompanying consolidated financial statements have been properly translated on thebasis described in Note 2.

Ernst & Young ShinNihon LLC
June 29, 2016
Tokyo, Japan1

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31,2016
2015
(Millions of yen)

AssetsCurrent assets:
Cash and time deposits (Notes 14 and 16)
Notes and accounts receivable, trade (Note 14)
Inventories (Note 3)
Deferred tax assets (Note 11)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥

Property, plant and equipment:
Buildings and structures (Notes 5 and 7)
Machinery and equipment (Notes 5 and 7)
Land (Notes 4 and 7)
Leased assets
Construction in progress
Less: Accumulated depreciation
Net property, plant and equipment

Investments and other assets:
Investment securities (Notes 7, 14 and 15)
Investments in unconsolidated subsidiaries and associates(Note 6)
Deferred tax assets (Note 11)
Goodwill (Note 5)
Mining rights (Note 5)
Other assets
Less: Allowance for doubtful accounts
Total investments and other assets

Total assets¥

2016(Thousands of
U.S. dollars)(Note 2)9,801 ¥
13,80736,205
568
1,227
(0)
61,6108,628
15,95343,068
511
1,989
(0)
70,15024,607
76,20816,993
171
866
118,847(74,736)
44,11026,64482,187
16,991
184
606
126,614(76,561)
50,052

218,379
676,322150,8071,517
7,685
1,054,730(663,258)
391,462

3,083

3,720

27,360457
119–11,113
2,388(723)
16,439719
55
510
24,9962,398(634)
31,766

4,055
1,056
–
98,624
21,192(6,416)
145,891

151,970$ 1,084,132

122,160¥$

86,980122,532
321,308
5,040
10,889(0)546,7692

March 31,
2015
2016
(Millions of yen)

Liabilities and net assets
Current liabilities:
Notes and accounts payable, trade (Note 14)
Short-term borrowings (Notes 7 and 14)
Current portion of long-term debt (Notes 7 and 14)
Commercial papers (Note 7)
Lease obligations (Note 7)
Accrued income taxes
Accrued expenses
Other current liabilities
Total current liabilities¥

Long-term liabilities:
Long-term debt (Notes 7 and 14)
Lease obligations (Note 7)
Deferred tax liabilities (Note 11)
Deferred tax liabilities related to land revaluation (Notes 4
and 11)
Net defined benefit liability (Note 8)
Accrued directors’ and audit & supervisory board members’
retirement benefits
Provision for environmental measures
Asset retirement obligations (Note 9)
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets (Note 10):
Shareholders’ equity:
Common shares:
Authorized – 264,000,000 shares
Issued– 135,855,217 shares in 2016 and 2015
Capital surplus
Retained earnings
Less: Treasury shares, at cost – 59,683 shares in 2016 and
58,025 shares in 2015
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on other securities
Deferred losses on hedges
Revaluation reserve for land (Note 4)
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

¥

6,344
14,749
7,339
3,000
44
192
2,091
3,912
37,674¥

6,686
16,853
7,800
6,000
48
1,575
2,607
4,639
46,2102016(Thousands of
U.S. dollars)(Note 2)$56,301130,892
65,131
26,624390
1,703
18,556
34,717334,345

31,16089
182

32,332
138
345

276,535
789
1,615

4,348
651

4,592
551

38,587
5,777

21
49
2,610
1,185
40,297
77,971

21
11
1,555
1,668
41,21887,428186
434
23,162
10,516357,623
691,968

14,6309,876
8,054

14,6309,876
25,226

129,836
87,646
71,476(24)
32,537(24)
49,709(212)
288,755

622
(8)
9,003
2,114
(81)
11,65044,188122,160 ¥

1,054
5,520
(28)
(70)
8,759
79,898
4,822
18,761
224(718)
14,832
103,39064,542
392,154
151,970 $ 1,084,132

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

3

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Operations
Year ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Net sales
Cost of sales
Gross profit¥ 114,144
102,136
12,008¥ 121,093
103,336
17,756$ 1,012,992
906,425
106,567

6,177
1,566
31
92
381
117
2,243
10,611
1,397

6,870
1,507
45
0
263
147
2,025
10,8606,895

54,81813,897
275
816
3,381
1,038
19,905
94,16912,397

90
(582)
–
(376)
(247)
(15,403)
–
103

113
(542)
46
(1,002)
(174)
(0)
458
108

798
(5,165)–(3,336)(2,192)(136,696)
–
914

(266)
403
(16,279)(14,882)–(39)(1,033)5,862(2,360)3,576(144,471)(132,073)

1,283
56
1,339
(16,221)¥ (16,221)

2,756
362
3,119
2,743
2,743

11,386496
11,883(143,956)(143,956)

Selling, general and administrative expenses:
Transportation expense
Salaries and wages
Retirement benefit expenses
Provision of allowance for doubtful accounts
Depreciation
Research and development costs
Other
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Royalty income
Foreign exchange losses
Loss on retirement of property, plant and equipment
Impairment loss on fixed assets (Note 5)
Gain on sales of investment securities
Corporate housing rents borne by employees
Loss on valuation of investments in capital of subsidiaries andassociates
Other, net(Loss) profit before income taxes
Income taxes (Note 11):
Current
Deferred(Loss) profit(Loss) profit attributable to owners of the parent¥$(U.S. dollars)(Note 2)(Yen)
Per share:(Loss) profit – basic¥ (119.45)

¥

20.20

$

(1.06)Cash dividends

¥

¥

7.00

$

0.04

5.00

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

4

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income (Loss)Year ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
(Loss) profit¥(16,221)Comprehensive (loss) income

¥

(431)
19
244
(2,707)(305)(3,181)(19,402)

Comprehensive (loss) income attributable to:
Owners of the parent
Non-controlling interests¥

Other comprehensive income (Note 18):
Net unrealized (losses) gains on other securities
Deferred gains (losses) on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total other comprehensive (loss) income(19,402)
–

¥

2,743

¥

230
(3,824)
(102)
168
468
2,165
1,453
(24,023)
177(2,706)2,228(28,230)
4,972 $ (172,186)

¥

4,972
–

$ (143,956)$ (172,186)–

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

5

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets
Shareholders’ equity
Number ofshares ofcommonshares issued(Thousands)
Balance as of March 31, 2014
Cumulative effect of change in accounting
policies
Balance as of April 1, 2014
Dividends of surplus
Profit attributable to owners of the parent
Acquisition of treasury shares
Net changes in items other than those inshareholders’ equity

135,855

Balance as of March 31, 2015
Dividends of surplus
Loss attributable to owners of the parent
Acquisition of treasury shares
Disposal of treasury shares
Net changes in items other than those inshareholders’ equity
Balance as of March 31, 2016

Commonshares¥

14,630Capitalsurplus¥

9,876

Retained
Treasury
earnings
shares (*)(Millions of yen)¥

22,687

¥

(24)

Total
shareholders’equity¥47,171

–
–
–
–
–

–
14,630
–
–
–

–
9,876
–
–
–

474
23,162
(678)
2,743
–

–
(24)
–
–
(0)

474
47,645
(678)
2,743
(0)

–

–

–

–

–

–

135,855––––

14,630
–
–
–
–

9,876
–
–
–
(0)

25,226(950)(16,221)
–
–

(24)
–
–
(0)
0

49,709(950)(16,221)(0)0–135,855¥–
14,630

¥

–
9,876

¥

–
8,054

¥

–
(24)

¥

–
32,537

Shareholders’ equity
CommonsharesBalance as of March 31, 2015
Dividends of surplus
Loss attributable to owners of the parent
Acquisition of treasury shares
Disposal of treasury shares
Net changes in items other than those inshareholders’ equity
Balance as of March 31, 2016

$ 129,836–––––$ 129,836

CapitalRetained
Treasury
surplusearnings
shares (*)(Thousands of U.S. dollars )(Note 2)$$

87,646–––(0)$ 223,872(8,430)(143,956)–––
87,646$–
71,476$$

Total
shareholders’equity

(212)
–
–
(0)
0

$ 441,151(8,430)(143,956)
(0)
0

–
(212)

–
$ 288,755

6

Accumulated other comprehensive income

Balance as of March 31, 2014
Cumulative effect of change inaccounting policies
Balance as of April 1, 2014
Dividends of surplus
Profit attributable to owners of theparentAcquisition of treasury shares
Net changes in items other than thosein shareholders’ equity

Net
unrealized
gains onothersecurities

Deferred
losses onhedgesRemeasureForeign
ments ofcurrency
Revaluation
definedtranslation
reserve foradjustment benefit plans
land(Millions of yen)

¥

¥

¥

Balance as of March 31, 2015
Dividends of surplus
Loss attributable to owners of theparentAcquisition of treasury shares
Disposal of treasury shares
Net changes in items other than thosein shareholders’ equity
Balance as of March 31, 2016

¥

823

73

8,290

¥

3,368

¥

47

Total
accumulated
othercomprehensive
incomeTotal
net assets¥

12,603¥ 59,774

–
823
–

–
73
–

–
8,290
–

–
3,368
–

–
47
–

–
12,603–474
60,249
(678)

–
–

–
–

–
–

–
–

–
–

–
–

2,743
(0)

230

(102)

468

1,453

177

2,228

2,228

1,054
–

(28)
–

8,759
–

4,822
–

224
–

14,832–64,542
(950)

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

(16,221)(0)0(3,181)
11,650(3,181)¥ 44,188

Total
accumulated
othercomprehensive
incomeTotal
net assets

1,987
–

$ 131,629–$ 572,790(8,430)

–
–
–

–
–
–

(143,956)(0)0(2,706)(718)(28,230)$ 103,390(28,230)$ 392,154

(431)
622

¥

19
(8)

¥

244
9,003

¥

(2,707)
2,114

(305)
(81)

¥

¥

Accumulated other comprehensive incomeNet
unrealized
gains onothersecurities

Deferred
losses onhedgesBalance as of March 31, 2015
Dividends of surplus
Loss attributable to owners of theparentAcquisition of treasury shares
Disposal of treasury shares
Net changes in items other than thosein shareholders’ equity$$

Balance as of March 31, 2016

$

9,353
–
–
–
–
(3,824)
5,520$

RemeasureForeign
ments ofcurrency
Revaluation
definedtranslation
reserve foradjustment benefit plans
land(Thousands of U.S. dollars )(Note 2)(248)–

$ 77,733–$ 42,793
–

–
–
–

–
–
–

–
–
–

168
(70)

2,165
$ 79,898(24,023)$ 18,761$$(*) There were 59,683 and 58,025 of treasury shares as of March 31, 2016 and 2015, respectively.

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

7

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Cash flows from operating activities:(Loss) profit before income taxes
Depreciation
Impairment loss on fixed assets
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Decrease in net defined benefit liability
Interest and dividend income
Interest expenses
Foreign exchange losses
Net loss on sales and retirement of property, plant and equipment
Decrease (increase) in notes and accounts receivable, trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable, trade
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities¥ (14,882)
7,924
15,403
30
88
(350)
(90)
582
195
219
1,953
6,553
371
(785)
17,21693(566)(2,885)
13,858¥ 5,862
8,349
0
43
(120)
(290)
(113)
542
835
161
(1,999)(8,057)
(539)
287
4,962
123
(393)
(2,480)2,212$ (132,073)
70,323
136,696266
780(3,106)
(798)
5,165
1,730
1,943
17,33258,155
3,292(6,966)
152,786825(5,023)(25,603)
122,985

Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of intangible assets
Payments for purchases of investment securities
Other, net
Net cash used in investing activities(3,853)363(1,925)(3)(199)(5,619)(3,004)12(2,343)(3)
268(5,070)(34,194)
3,221(17,083)(26)(1,766)(49,866)

Cash flows from financing activities:
Decrease in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
(Decrease) increase in commercial papers
Cash dividends paid
Other, net
Net cash used in financing activities(1,685)
11,400(12,747)(3,000)(950)(47)(7,030)(5,731)
11,427(10,989)
6,000
(678)
(52)
(25)

(14,953)
101,171(113,125)(26,624)(8,430)(417)(62,389)

(35)
1,173
8,628
9,801

18
(2,864)
11,493¥ 8,628(310)
10,41076,57086,980Effect 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 16)¥$

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

8

Toho Zinc Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2016

1.

Summary of Significant Accounting Policies(a) Basis of presentation
Toho Zinc Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their books of account inconformity with accounting principles generally accepted in Japan, and its foreign subsidiaries
maintain their books of account in conformity with International Financial Reporting Standards(“IFRS”) or those of their countries of domicile.
The accompanying consolidated financial statements of the Company and its consolidated subsidiaries(collectively, the “Companies”) are prepared on the basis of accounting principles generally acceptedin Japan, which are different in certain respects as to application and disclosure requirements of IFRS,
and are compiled from the consolidated financial statements prepared by the Company as required by
the Financial Instruments and Exchange Act of Japan.
Certain amounts in the prior year’s financial statements have been reclassified to conform to thecurrent year’s presentation.
As permitted under the Financial Instruments and Exchange Act, amounts of less than one million yen
have been omitted. As a result, the totals shown in the accompanying consolidated financial
statements (both in yen and in U.S. dollars) do not necessarily agree with the sums of the individual
amounts.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto
Local Finance Bureau in Japan have been reclassified in the accompanying consolidated financial
statements for the convenience of readers outside Japan.
(b) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its
significant subsidiaries that are controlled by the Company. Under the effective control approach, allsignificant majority-owned companies are to be consolidated. Additionally, companies in whichshare ownership equals 50% or less may be required to be consolidated in cases where suchcompanies are effectively controlled by other companies through the interests held by a party who has
a close relationship with the parent. All significant intercompany transactions and accounts are
eliminated in consolidation.
(c) Foreign currency translation(1) Foreign currency transactions
All receivables and payables denominated in foreign currencies are translated into Japanese yenat the exchange rate prevailing at the balance sheet date.

9(2) Foreign currency financial statements
Assets and liabilities of the foreign consolidated subsidiaries are translated into Japanese yen at
the current exchange rate prevailing at the balance sheet date. Revenue and expense accounts
are translated at the average exchange rate in effect during the year. Foreign currencytranslation adjustments are included in net assets.
(d) Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of cash flows are composed of cash on hands,bank deposits withdrawable on demand and short-term investments with original maturities of threemonths or less and minor risk for the fair value fluctuation.
(e) Inventories
Merchandise, finished goods, semi-finished goods, work in process and raw materials are stated at thelower 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 determined by
the moving average method.
(f)Financial instruments(1) Investment securities
Marketable securities classified as other securities are carried at fair value based on the averageof market price during the last month of the fiscal year with any changes in unrealized gains orlosses, net of income taxes, included directly in net assets. Cost of securities sold is determinedby the moving average method. Non-marketable securities classified as other securities arecarried at cost determined by the moving average method.
(2) Derivatives
The Company has entered into various derivative transactions, including forward foreignexchange contracts, interest rate swaps and commodity futures, in order to manage certain risks
arising from adverse fluctuations in foreign currency exchange rates, interest rates andcommodity prices, respectively.
All derivatives are recognized in the balance sheet at fair value, with changes in fair value
included in profit for the period in which they arise, except for derivatives 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 profit in the period during which
the gains and losses on the hedged items or transactions are recognized.
Hedging instruments are derivative transactions including commodity futures, interest rate swaps
and holding of foreign currency deposits. The related hedged items are receivables andpayables in connection with raw materials and finished goods, long-term debt and purchases of
fixed assets in foreign currencies, respectively.
The Company has a policy to utilize the above hedging instruments in order to reduce theCompany’s exposure to the risks of the price, interest rate and cash flow fluctuations.

10

The Company evaluates the effectiveness of its hedging activities by reference to theaccumulated gains or losses on the hedging instruments and the underlying hedged items fromthe commencement of the hedging transactions regarding commodity futures and foreign
currency deposits. Hedge effectiveness is omitted for interest rate swaps which qualify forhedge accounting and meet specific criteria.
(g) Property, plant and equipment and depreciation
Property, plant and equipment, except for leased assets, are stated at cost and mainly depreciated by
the straight-line method over the estimated useful lives of the respective assets.
(h) Intangible assets and amortization
Mining rights are mainly amortized by using the unit-of-production method. Goodwill, software forinternal use and other assets are amortized by using the straight-line method. The amortization
period of goodwill is determined on a reasonable basis within 20 years. Software for internal use isamortized over the estimated useful life (5 years).
(i)

LeasesLeased assets which are under finance leases and capitalized are primarily the storage equipment(structures) in Smelting business and depreciated over the lease terms of the respective assets by thestraight-line method with no residual value.

(j)

Allowance for doubtful accounts
Allowance for doubtful accounts is provided at an amount sufficient to cover possible losses oncollection. The allowance consists of the estimated uncollectible amounts with respect to specificreceivables plus an amount based on historical experience of bad debt with respect to otherreceivables.

(k) Retirement benefits(1) Method for attribution of expected retirement benefits to periods
In the calculation of retirement benefit obligations, the expected retirement benefits are
attributed to the period up to the end of the current fiscal year based on the benefit formula
method.
(2) Accounting method for actuarial gains and losses and past service costs
Actuarial gains and losses are amortized by the straight-line method over a certain period (10years) which is within the average remaining years of service of the eligible employees when
the gains or losses arise, from the year following the year in which the gains and losses arise.
Past service costs are amortized as incurred by the straight-line method over a certain period (10years) which is within the average remaining years of service of the eligible employees when
the gains or losses arise.
(3) Accounting method for unrecognized actuarial gains and losses and unrecognized past service
costs
Unrecognized actuarial gains and losses and unrecognized past service costs are recorded as11remeasurements of defined benefit plans under accumulated other comprehensive income of net
assets after tax effect adjustments.
(4) Application of the simplified method for small enterprises, etc.
Some of its consolidated subsidiaries apply the simplified method in the calculation of their net
defined benefit liability and retirement benefit expenses. Under the simplified method, thebenefits payable assuming the voluntary retirement of all eligible employees at the year-end are
deemed as retirement benefit obligations.
(l) Accrued directors’ and audit & supervisory board members’ retirement benefits
In order to prepare for the disbursements of the directors’ and audit & supervisory board members’
retirement benefits, the Companies record an amount required to be paid out at the end of the fiscal
year which is calculated based on internal rules.
Note that the Company discontinued the system for directors’ and audit & supervisory board members’
retirement benefits in accordance with a resolution by the board of directors held on May 22, 2007,
and hence the balance at the fiscal year-end is the amount based on the periods in which the directors
and audit & supervisory board members served prior to June 2007.
(m) Provision for environmental measures
Provision for environmental measures is estimated and recorded to provide for future potential costs
related to disposal of polychlorinated biphenyl waste.
(n) Provision for loss on construction contracts
Provision for loss on construction contracts is provided in amounts sufficient to cover probable loss on
construction contracts at fiscal year-end when substantial loss in the future is anticipated and can bereasonably estimated.
(o) Income taxes
Deferred tax assets and liabilities are determined based on the differences between the financial
reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates
and laws which will be in effect when the differences are expected to reverse.
(p) Recognition of revenues
Revenues and costs of construction contracts of which the percentage of completion can be reliably
estimated are recognized by the percentage-of-completion method. The percentage of completion is
calculated as the cost incurred to the estimated total cost. The completed-contract method continues tobe applied to contracts for which the percentage of completion cannot be reliably estimated.
(q) Appropriation of retained earnings
Cash dividends and transfers to legal reserve are recorded in the fiscal year in which the proposed
appropriation of retained earnings is approved at the shareholders’ meeting.

12

(r)

Profit (loss) per share
Profit (loss) per share is computed based on the profit available for distribution to shareholders ofcommon shares and the weighted average number of common shares outstanding during the year.

(s) Asset retirement obligations
Asset retirement obligations are calculated based on the estimated exploration period fromcommencement of operations, which is deemed as the estimated usable period, using the discount rateof 1% for the years ended March 31, 2016 and 2015. The amount mainly represents the obligationsof CBH Resources Ltd. (“CBH”) to restore its mine sites at Endeavor Mine and Rasp Mine to their
original states upon closure.
(t) Change in accounting policy(Application of the Accounting Standard for Business Combinations and Others)
The Company has applied the “Revised Accounting Standard for Business Combinations”(Accounting Standards Board of Japan (“ASBJ”) Statement No. 21, issued on September 13, 2013),
the “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22,
issued on September 13, 2013), and the “Revised Accounting Standard for Business Divestitures”(ASBJ Statement No. 7, issued on September 13, 2013) and other standards from the fiscal year ended
March 31, 2016. Consequently, differences arising from changes in the Company’s ownershipinterests in its subsidiaries over which it retains control are recognized in capital surplus, andacquisition-related costs are expensed as incurred. For business combinations completed on or after
the beginning of the fiscal year ended March 31, 2016, the revised allocation of acquisition costs, due
to the finalization of the tentative accounting treatment, is reflected in the consolidated financial
statements for the period in which the business combination occurred. In addition, the Company
changed the presentation of net income, and minority interests are now presented as non-controllinginterests. The consolidated financial statements for the fiscal year ended March 31, 2015 have been
reclassified in order to reflect these changes in the presentation.
For the application of these accounting standards, the Company has adopted the transitional provisions
in item (4), paragraph 58-2 of the Revised Accounting Standard for Business Combinations, item (4),paragraph 44-5 of the Revised Accounting Standard for Consolidated Financial Statements, and item
(4), paragraph 57-4 of the Revised Accounting Standard for Business Divestitures effective from the
beginning of the fiscal year ended March 31, 2016.
There was no impact of these changes on the consolidated financial statements for the year ended
March 31, 2016.
(u) Accounting standards and guidance issued but not yet adopted- “Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No.
26, issued on March 28, 2016)(1) Overview
Upon transferring the accounting and auditing practical guidelines on tax effect accounting(the section relating to accounting treatment) from the Japanese Institute of Certified Public
Accountants (JICPA) to the ASBJ, a necessary review was conducted by the ASBJ for certain
parts of the classification requirements and treatments of the recorded amounts of deferred tax
assets. The review was focused mainly on the guidance on recoverability of deferred tax
assets prescribed in the Auditing Treatment on Determining the Recoverability of Deferred Tax

13

Assets (JICPA Auditing Committee Report No. 66). Under the revised implementation
guidance, the ASBJ basically continues to apply the treatment under which companies areclassified into five categories and deferred tax assets are estimated in accordance with theclassification. The revised implementation guidance is intended for use when applying the
Accounting Standards for Tax Effect Accounting (Business Accounting Council) in assessing
the recoverability of deferred tax assets.
(2) Date of application
The revised guidance will be applied effective from the beginning of fiscal years beginning on
or after April 1, 2016.
(3) Effect of applying revised guidance
The Company is currently evaluating the effect of applying the “Revised Implementation
Guidance on Recoverability of Deferred Tax Assets” on its consolidated financial statements.

2.

U.S. Dollar Amounts

U.S. dollar amounts presented in the accompanying consolidated financial statements and notes areincluded solely for the convenience of readers outside Japan, at the prevailing exchange rate of ¥112.68 to
U.S. $1 on March 31, 2016. These translations should not be construed as representations that the yenamounts actually represent, or have been or could be converted into U.S. dollars at that or any other rate.

3.

Inventories

Inventories as of March 31, 2016 and 2015 consisted of the following:
March 31,
2015
2016
(Millions of yen)

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

2016
(Thousands of
U.S. dollars)¥

13,196
8,779
14,229¥14,082
9,114
19,871$

117,110
77,910126,277¥

36,205¥43,068$321,308

Inventories for construction contracts with anticipated substantial loss and provision for loss on
construction contracts were not offset. There were no inventories, for which a corresponding provision
for loss on construction contracts was provided for the year ended March 31, 2016. The amount of
inventories based on the construction contracts, for which a provision for loss on construction contracts wasprovided for the year ended March 31, 2015, was ¥48 million. The entire amount was included in work inprocess.
Provision for loss on construction contracts included in the cost of sales for the year ended March 31, 2015was ¥48 million.

14

4.

Land Revaluation

In accordance with the Act on Revaluation of Land, the Company’s land used for its business operations
was revalued as follows:
Date of revaluation: March 31, 2000
The differences between total fair value of land and the total book value after revaluation of land as ofMarch 31, 2016 and 2015 were ¥7,732 million ($68,619 thousand) and ¥7,569 million, respectively.
The tax effect of the excess on revaluation is recorded as deferred tax liabilities related to land revaluation
which is included in liabilities, and the remainder, net of income taxes portion of the excess on revaluation,is presented as revaluation reserve for land which is included in net assets.

5.

Impairment Loss on Fixed Assets

The Companies recognized impairment losses on certain asset groups for the years ended March 31, 2016
and 2015 as follows:Year ended March 31, 2016
Location
Use
Category
Annaka City, Gunma Idle assets
Buildings and structures
Machinery and equipment(Millions of
yen)
¥
3
5
9

(Thousands of
U.S. dollars)
$
26
44
79

Fujioka City, Gunma

Idle assets

Buildings and structures
Machinery and equipment

14
5
19

124
44
168

The State of New
South Wales,
Australia

Asset for Mineral
Resource business(Mine assets)

Buildings and structures
Machinery and equipment
Mining rights
Goodwill

631
2,988
11,147442
15,2095,599
26,517
98,926
3,922
134,975

163
15,403

1,446
136,696

Asset for Mineral
The State of New
Resource business
South Wales,
Australia and others (Exploration rights) Mining rights
Total
Year ended March 31, 2015
Location
Annaka City, Gunma

Use
Idle assets

Category
Machinery and equipment¥$(Millions of
yen)
¥
0

Business assets of the Company are grouped based on the categories used for its managerial accounting.
With respect to idle assets, each asset is treated as an individual unit to apply the accounting for the
impairment.
For the years ended March 31, 2016 and 2015, the Company recognized impairment losses for the entire
book value of idle assets on the grounds that they were not projected to generate any future cash inflows
and were not readily salable either.

15

For the year ended March 31, 2016, the Company recognized impairment losses for the amount of the
reduction in the book value of an asset group in the Mineral Resource business to its recoverable amountfor the two mines (Endeavor Mine and Rasp Mine) in the State of New South Wales, Australia. These twomines were not projected to generate sufficient future cash flows corresponding to capital invested due todecreasing recoverable reserves and changes in market environments. The recoverable amount wasmeasured at value in use and calculated by discounting the future cash flows at 7%.
In addition, for the exploration rights at the mines in the State of New South Wales, Australia and otherlocations, the Company recognized impairment losses for the book value of the exploration rights recorded
as assets on the grounds that there would be no additional exploration in the future.

6.

Investments in Unconsolidated Subsidiaries and Associates

Investments in unconsolidated subsidiaries and associates as of March 31, 2016 and 2015 are summarized
as follows:
March 31,
2015
2016
(Millions of yen)

Unconsolidated subsidiaries
Associates

7.

2016
(Thousands of
U.S. dollars)

¥

363
94

¥

625
94

$

3,221
834

¥

457

¥

719

$

4,055

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt as of March 31, 2016 and 2015 consisted of the following:
March 31,

Amount(Millions ofyen)
Short-term borrowings
Commercial papers
Current portion of
long-term debt
Current portion of leaseobligations
Long-term debt
Lease obligations

¥

Total

¥

2016
Weighted
averageinterest rate

14,749
3,000

1.3%
0.1

7,339

0.5

44
31,16089–
0.9–

56,383

Due in2015

2016

Amount(Millions ofyen)Amount(Thousands of
U.S. dollars)¥$2017.4 – 2023.10
2017.4 – 2025.3¥

16,8536,000

130,892
26,6247,800

65,131

48
32,332
138

390
276,535
789

63,173$500,381

Average interest rates are calculated by using weighted-average interest rates as of March 31, 2016.
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 on a straight-line basis.

16

The maturities of long-term debt and lease obligations outstanding as of March 31, 2016 were as follows:

2017
2018
2019
2020
2021
ThereafterLong-term
Lease
debt
obligations(Millions of yen)
¥
7,339
¥
44
4,259
21
8,460
9
10,050
9
4,210
9
4,179
38

Long-term
Lease
debt
obligations(Thousands of U.S. dollars)$
65,131 $390
37,797
186
75,07979
89,19079
37,362
79
37,087
337

Total

¥

$

Year ending March 31,

38,499¥134341,666$

1,189

Assets pledged as collateral for the long-term debt, including the current portion, as of March 31, 2016 and2015 were as follows:
March 31,
2015
2016
(Millions of yen)

Pledged assets

Land (*1)
Buildings and structures (*1)
Machinery and equipment (*1)
Investment securities (*2)
Total

2016
(Thousands of
U.S. dollars)¥

13,792
4,634
6,391
18

¥

13,792
4,782
6,667
125

$

122,399
41,12556,718
159¥

24,837¥25,367$

220,420(*1) For the above assets, a revolving mortgage is set at the maximum amount of ¥1 million ($8thousand) with one bank as of March 31, 2016 and 2015.
(*2) These assets are pledged for the long-term debt, including the current portion, of ¥11 million($97 thousand) and ¥20 million as of March 31, 2016 and 2015, respectively.

8.

Retirement Benefit Plans

The Company and its domestic consolidated subsidiaries have funded and unfunded defined benefit plans
and lump-sum payment plans. The defined benefit corporate pension plans, all of which are funded, provide
lump-sum or pension benefits based on salaries and the length of service. The lump-sum payment plans,
which are unfunded, provide lump-sum benefits based on salaries and the length of service. In addition,certain consolidated subsidiaries apply the simplified method to calculate retirement benefit liabilities andretirement benefit expenses, where the required contributions to the pension fund are accounted for as
retirement benefit expenses.
Information regarding the Company’s defined benefit plans for the years ended March 31, 2016 and 2015
was as follows:17

(a) The changes in the retirement benefit obligations for the years ended March 31, 2016 and 2015 are as
follows:
Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Retirement benefit obligation at beginning of year
Cumulative effects of changes in accounting
policies
Restated balance
Service costs
Interest costs
Actuarial gains and losses arising during year
Retirement benefits paid¥

Retirement benefit obligation at end of year

¥

3,494

¥

$

(737)
3,399
258
22
65
(251)

–
3,494
266
13
172
(358)
3,588

4,137

¥

3,494

31,008–31,008
2,360
115
1,526
(3,177)$

31,842(b) The changes in plan assets for the years ended March 31, 2016 and 2015 are as follows:Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Plan assets at beginning of year
Expected return on plan assets
Actuarial gains and losses arising during year
Contributions from employer
Retirement benefits paid

¥

3,133
62
(206)
471
(358)

¥

2,488 $
49
369
476
(251)

27,804550(1,828)4,179(3,177)

Plan assets at end of year

¥

3,101

¥

3,133

27,520$(c) The changes in net defined benefit liability accounted for using the simplified method for the years
ended March 31, 2016 and 2015 are as follows:Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Net defined benefit liability at beginning of year
Retirement benefit expenses
Retirement benefits paid

¥

190
20
(46)
–

¥

190 $
11
(11)
–

1,686
177
(408)
–

¥

164

¥

190

1,455

Contribution to plans
Net defined benefit liability at end of year$18

(d) The following table sets forth the funded status of the plans and the amounts recognized in the
consolidated balance sheets as of March 31, 2016 and 2015.
March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Retirement benefit obligation for funded plans
Plan assets¥

Retirement benefit obligation for unfunded plans
Net balance of liability and asset recognized on the
consolidated balance sheet
Net defined benefit liability
Net balance of liability and asset recognized on the
consolidated balance sheet¥

3,494 $
(3,133)361

31,842(27,520)
4,313

164

190

1,455

651

551

5,777

651

551

5,777

3,588
(3,101)
486

651

¥

¥

551

$

5,777

(e) The components of retirement benefit expenses for the years ended March 31, 2016 and 2015 are as
follows:
Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)Service costs
Interest costs
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service costs
Retirement benefit expenses calculated using thesimplified method
Retirement benefit expenses under defined benefit
plans
(f)

¥

263
13
(62)
(31)
(38)

¥

20
¥

164

¥

255 $
22
(49)
(5)
(38)

2,334
115
(550)
(275)
(337)

11

177

193

$

1,455

Remeasurements of defined benefit plans
The components of remeasurements of defined benefit plans included in other comprehensive income(before tax effect) for the years ended March 31, 2016 and 2015 are as follows:Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Actuarial gains and losses

¥

(379)
–

¥

304
–

$

(3,363)
–

¥

(379)

¥

304

$

(3,363)

Past service costs
Total

19

(g) The components of remeasurements of defined benefit plans included in accumulated othercomprehensive income (before tax effect) as of March 31, 2016 and 2015 are as follows:
March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Unrecognized actuarial gains and losses
Unrecognized past service costs

¥

(195)
77

¥

215
116

$

(1,730)
683

Total

¥

(117)

¥

332

$

(1,038)(h) Plan assets(1) Breakdown of plan assets
Percentage of each main category to total plan assets is as follows:Year ended March 31,
2015
2016
Debt securities
Equity securities
General account
Other

33%
51
13
3

27%
58
12
3

Total

100%

100%

(2) Determination of expected long-term rate of return on plan assets
In determining the expected long-term rate of return on plan assets, the Company takes into
consideration the current and future plan asset allocation as well as the current and expectedlong-term rate of return on various asset categories comprising plan assets.
(i)

Actuarial assumptions
Year ended March 31,
2015
2016
Weighted-average actuarial assumptions at end of year:
Discount rate
Expected long-term rate of returnLump-sum election rate(0.1)%
2.0
100.0

0.4%
2.0
100.0

20

9.

Asset Retirement Obligations

The changes in asset retirement obligations for the years ended March 31, 2016 and 2015 were as follows:Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Balance at beginning of year
Additional provisions associated with the purchasesof property, plant and equipment
Increase due to change in estimate
Adjustment due to passage of time
Decrease due to settlement
Other

¥

Balance at end of year

¥

1,555

¥

$

13,800

140
–
12
(15)
58

14
1,249
5
(25)
(190)
2,610

1,359

¥

1,555

124
11,08444(221)(1,686)$23,162For the fiscal year ended March 31, 2016, the estimate for restoration costs was changed in accordance withthe assessment by the local environmental authorities in the State of New South Wales, Australia for theasset retirement obligations, which had been recorded as restoration obligations at the time of closing theEndeavor Mine and Rasp Mine held by CBH, a consolidated subsidiary of the Company.
Consequently, an increase of ¥1,249 million ($11,084 thousand) due to the change in the estimate has been
added to the balance of the asset retirement obligations.

10. Net Assets
Information regarding changes in net assets for the years ended March 31, 2016 and 2015 is as follows:(a) Shares issued and outstanding / Treasury shares
For the year ended March 31, 2016

Types of shares
Shares issued and outstanding:Common shares
Treasury shares:
Common shares (Notes 1 and 2)

Number ofshares as ofApril 1, 2015

Increase
Decrease(Thousands of shares)

Number ofshares as ofMarch 31, 2016

135,855––

135,855

58

1

0

59

Notes 1. The increase of 1 thousand shares is due to purchase of shares of less than standard unit.
2. The decrease of 0 thousand shares is due to purchase requests of shares of less than standard unit.

21

For the year ended March 31, 2015
Number ofshares as ofApril 1, 2014

Types of shares
Shares issued and outstanding:Common shares
Treasury shares:
Common shares (Note)

Increase
Decrease(Thousands of shares)

Number ofshares as ofMarch 31, 2015

135,855––

135,855

57

0

–

58

Note: The increase of 0 thousand shares is due to purchase of shares of less than standard unit.
(b) Dividends(1) Dividends paid
For the year ended March 31, 2016
Resolution

Type ofsharesAnnual general meeting of theshareholders on June 26, 2015

CommonsharesTotal dividends(Millions of yen)

Dividends per
share
(Yen)

¥

¥

950

7

Cut-off
date

Effective
date

March 31,2015

June 29,2015

Cut-off
date

Effective
date

March 31,2014

June 30,
2014

Cut-off
date

Effective
date

March 31,2015

June 29,2015

For the year ended March 31, 2015
Resolution

Type ofsharesAnnual general meeting of theshareholders on June 27, 2014

CommonsharesTotal dividends(Millions of yen)

Dividends per
share
(Yen)

¥

¥

678

5

For the year ended March 31, 2016
Resolution

Type ofsharesAnnual general meeting of theshareholders on June 26, 2015

CommonsharesTotal dividends(Thousands of U.S.
dollars)$

8,430

Dividends per
share(U.S. dollars)

$

0.06

(2) Dividends with the cut-off date in the year ended March 31, 2016 and the effective date in theyear ending March 31, 2017

Resolution

Type ofsharesTotal
dividends

Source ofdividends

Dividends
per share(Millions of

Cut-off
date

Effective
date

March 31,2016

June 30,
2016

(Yen)

yen)

Annual general meeting of theshareholders on June 29, 2016

Commonshares¥

678

Retainedearnings¥

5

22

Type ofsharesResolution

Total
dividends

Source ofdividends(Thousands ofDividends
per share

Cut-off
date

Effective
date

March 31,2016

June 30,
2016(U.S. dollars)

U.S. dollars)

Annual general meeting of theshareholders on June 29, 2016

Commonshares$6,017

Retainedearnings$

0.04

The Companies Act 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 capitalreserve and the legal reserve equals 25% of the common shares. Such distributions can be made at any
time by resolution of the shareholders, or by the board of directors if certain conditions are met.

11.

Income Taxes

As of March 31, 2016 and 2015, significant components of deferred tax assets and liabilities were as
follows:
March 31,
2015
2016
(Millions of yen)
Deferred tax assets:
Net defined benefit liability¥

Asset retirement obligations
Inventories write-off
Property, plant and equipment
Accrued employees’ bonus
Accrued enterprise tax
Deferred losses on hedges
Elimination of intercompany profits
Other
Gross deferred tax assets
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gains on other securities
Mining rights
Deferred gains on hedges
Special tax-purpose reserve for reduction entry of
fixed assets
Reserve for special depreciation
Asset retirement obligations
Other
Total deferred tax liabilities

205
776

¥

161
461

2016
(Thousands of
U.S. dollars)
$

1,819
6,886

189
1,267

201
653

1,677
11,244

145
103

167
119

1,286
914

6
50
3,659

13
61
1,857

53
443
32,472

6,404(4,506)
1,897

3,697
(1,686)2,010

56,833(39,989)
16,835

(275)
(532)

(481)
(578)

(2,440)(4,721)

(1)

–

(8)

(9)

(10)

(79)

(57)

(70)

(505)

(4)
(511)
(1,391)(1)(646)(1,789)(35)(4,534)(12,344)

Net deferred tax assets

¥

505

¥

221

$

4,481

Deferred tax liabilities:
Deferred tax liabilities related to land revaluation

¥

4,348

¥

4,592

$

38,58723

The reconciliation between the statutory tax rate and the effective tax rate for the year ended March 31,
2015 was as follows:Year ended March 31,
2015
Statutory tax rate
Increase (decrease) due to:Loss of foreign consolidated subsidiaries
Reduction of deferred tax assets due to change in income tax rate
Other

35.6%

Effective tax rate

53.2%

17.3
0.2
0.1

For the fiscal year ended March 31, 2016, the reconciliation between the statutory tax rate and the effective
tax rate is not shown as loss before income taxes was recorded.
The “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 15 of 2016) and the “Act for Partial
Revision of the Local Tax Act, etc.” (Act No. 13 of 2016) were enacted in the Japanese Diet on March 29,
2016, and the corporate tax rate was reduced from years beginning on or after April 1, 2016. Consequently,
the statutory tax rate used to calculate deferred tax assets and deferred tax liabilities was changed from
32.3% to 30.9% for temporary differences expected to be settled or realized in the years beginning April 1,2016 and 2017, and to 30.6% for temporary differences expected to be settled or realized in or after theyear beginning April 1, 2018.
As a result of this change, deferred tax assets, after deducting deferred tax liabilities, and remeasurementsof defined benefit plans decreased by ¥14 million ($124 thousand) and ¥2 million ($17 thousand),
respectively, while income taxes – deferred, net unrealized gains on other securities and deferred lossed onhedges increased by ¥27 million ($239 thousand), ¥15 million ($133 thousand) and ¥0 million ($0thousand), respectively, for the year ended March 31, 2016.
In addition, deferred tax liabilities related to land revaluation decreased by ¥244 million ($2,165 thousand)and revaluation reserve for land increased by the same amount.

12.

LeasesAs lessee:
There were no impairment losses allocated to leased assets for the years ended March 31, 2016 and 2015.

24

13.

Commitments and Contingent Liabilities

The Companies were contingently liable as guarantors for loans of an unconsolidated subsidiary and an
associate in the aggregate amount of ¥354 million as of March 31, 2015.
The Company has entered into loan commitment agreements amounting to ¥5,600 million($49,698 thousand) and ¥5,600 million with two financial institutions as of March 31, 2016 and 2015,
respectively. There were no related loans payable outstanding, and therefore, the unused balance was¥5,600 million ($49,698 thousand) and ¥5,600 million under the credit facilities as of March 31, 2016 and2015, respectively.
The Company had repurchase obligations of ¥502 million ($4,455 thousand) and ¥606 million inconnection with the securitization of receivables as of March 31, 2016 and 2015, respectively.

14.

Financial Instruments(a) Overview(1) Policy for financial instruments
The Companies raise funds mainly through bank borrowings in consideration of their business plans.
The Companies invest their temporary surplus funds in highly liquid financial assets and raise
short-term operating capital through bank borrowings and issuances of commercial papers. The
Companies use derivatives to avoid after-mentioned risks and do not enter into derivatives for
speculative or trading purposes.
(2) Descriptions of financial instruments and related risks
Trade receivables––notes and accounts receivable, trade––are exposed to customer credit risk. Trade
receivables denominated in foreign currencies which are derived from foreign operations are exposed
to foreign currency risk, and such risk is hedged by forward foreign exchange contracts.
Investment securities are mainly composed of equity securities of companies with business
relationships and exposed to market risk.
Trade payables––notes and accounts payable, trade––are mostly due within two months or less.
Certain trade payables denominated in foreign currencies are exposed to foreign currency risk, andsuch risk is hedged by forward foreign exchange contracts.
Trade receivables and payables in connection with the Smelting business are exposed to commodity
price fluctuation risk of London Metal Exchange (“LME”), and such risk is hedged by metal futurescontracts.
Long-term debt is principally for the purpose of making capital investments, and due up to 7 years
from the consolidated balance sheet date. Certain long-term debt is exposed to interest rate
fluctuation risk, and such risk is hedged by derivatives (interest rate swaps).
As for derivatives, the Companies have entered into the forward foreign exchange contracts and others
to hedge the foreign currency risk arising from the trade receivables and payables denominated inforeign currencies, metal futures contracts to hedge the commodity price fluctuation risk of LME
arising from the trade receivables and payables on the Smelting business and interest rate swaps tohedge the fluctuation risk deriving from interest payment of long-term debt. See Note 1. (f) (3)25Hedge accounting for information about the method of hedge accounting, hedging instruments andhedged items, hedging policy, and assessment of hedge effectiveness.
(3) Risk management for financial instruments(i)Management of credit risk (risk of default by customers or counterparties)
For trade receivables, sales departments of each division of the Companies periodically monitor
creditworthiness of their main customers and manage due dates and outstanding balances bycustomer in accordance with the internal rules of the Company. In addition, the Companies aremaking efforts to identify uncollectibility in the earlier stage and mitigate risks of bad debts, due
to customers with financial difficulties.
The Companies believe that the credit risk of derivatives is insignificant as they enter into
derivative transactions only with financial institutions with high credit ratings.

(ii)Management of market risks (risks of fluctuations in foreign exchange rates, commodity prices,interest rates and others)
For trade receivables and payables denominated in foreign currencies, the foreign currency riskof the Company identified by currency on a monthly basis is hedged by forward foreignexchange contracts and others. In order to mitigate the commodity price fluctuation risks of
LME for trade receivables and payables on the Smelting business, the Company has entered into
the metal futures contracts. In addition, the Company has entered into interest rate swap
transactions to mitigate the interest rate fluctuation risk for interest payment of long-term debt.
For investment securities, the Companies periodically monitor the fair values and financial
position of the issuers and continuously review the holding status taking into account market
conditions and relationships with the issuers.
Derivative transactions are conducted and managed by treasury personnel including directors
and each division, and risk management is sufficiently conducted by making reports tomanagement every time transactions are executed as well as on a periodical basis.

(iii) Management of liquidity risk on funding (risk of default at due dates)
Based on the report from each department, subsidiaries and associates, the department in chargeof the Company prepares and updates its cash flow plan on a timely basis and manages liquidity
risk by maintaining liquid funds.
(4) Supplementary explanation of the fair value of financial instruments
Fair values of financial instruments are based on their respective market prices if available. When
there is no market price available, fair value is reasonably calculated. Since various assumptions andfactors are reflected in the calculation of the fair value, different assumptions and factors could resultin different fair value. In addition, the notional amounts of derivatives in Note 17. Derivative
Transactions are not indicative of the market risk involved in derivative transactions.

26

(b) Fair Values of Financial Instruments
Carrying values of financial instruments on the consolidated balance sheets as of March 31, 2016 and 2015
and their fair values are shown in the following table. Financial instruments whose fair value is extremely
difficult to determine are not included in the following table (Please refer to Note 2 below).

Carrying value

March 31, 2016
Fair value(Millions of yen)

(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Investment securities
Total assets

¥

9,801
13,8072,470
26,079¥(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Long-term debt (*1)
Total liabilities

¥

¥

¥

6,344
14,74938,49959,593¥(9)

Derivatives (*2)

(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) Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥

¥

9,801
13,8072,470
26,079

¥

¥

¥

¥

(9)

¥

–

¥

8,628
15,953
3,108
27,689

¥

¥

¥

6,686
16,85340,132
63,672

¥

(73)

¥

8,628
15,953
3,108
27,689

¥

–
–
–
–
–
–
1,016
1,016

Carrying value

¥

¥

6,344
14,74939,51560,609March 31, 2015
Fair value(Millions of yen)¥

Difference

Difference

¥

¥
¥

–
–
–
–

¥

6,686
16,85340,81664,356

¥

–
–
683
683

¥

(73)

¥

–

March 31, 2016
Carrying value
Fair value
Difference(Thousands of U.S. dollars)(1) Cash and time deposits(2) Notes and accounts receivable, trade(3) Investment securities
Total assets$(1) Notes and accounts payable, trade(2) Short-term borrowings(3) Long-term debt (*1)
Total liabilities$

Derivatives (*2)

86,980122,532
21,920231,443$$$

56,301130,892
341,666
528,869

$

(79)

$

$

86,980122,532
21,920231,443

$

$

–
–
–
–

$

$

56,301130,892
350,683
537,886

$

–
–
9,016
9,016

$

(79)

$

–

(*1) Current portion of long-term debt is included in long-term debt as of March 31, 2016 and 2015.
(*2) The value of assets and liabilities arising from derivatives is shown at net value, and the net liability
position is shown in parentheses.

27Notes:1.

Methods to calculate the fair value of financial instruments and other matters related to securities andderivative transactions
Assets(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 approximates fair value.
(3) Investment securities
The fair value of equity securities is based on a quoted market price. For information on securities
classified by holding purpose, please refer to Note 15. Investment Securities.
Liabilities(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 approximates fair value.
(3) Long-term debt
For long-term debt with floating interest rates, its carrying value approximates fair value since thedebt reflects the market interest rates in a short period of time and the credit condition of theCompany has not changed significantly since the debt was executed. For long-term debt with fixedinterest rates, the fair value is based upon the present value of the total of principal and interest
discounted by the interest rate to be applied if similar new borrowings were entered into.
Derivative transactions
Please refer to Note 17. Derivative Transactions.

2.

Financial instruments whose fair value is extremely difficult to determine

2016

Unlisted equity securities¥

March 31,
2015
(Millions of yen)

701

¥

696

2016
(Thousands of
U.S. dollars)
$

6,221

These are not included in (3) Investment securities in the above table because there were no market
prices available and it was extremely difficult to determine the fair value.
3.

Redemption schedule for monetary receivables as of March 31, 2016

Due in one
year or less

Cash and time deposits
Notes and accounts receivable, trade
Total

¥
¥

9,793
13,807
23,600March 31, 2016
Due after
Due after
one yearfive years
through fivethrough ten
years
years
(Millions of yen)
¥
¥

–
–
–

¥
¥

–
–
–

Due after
ten years

¥
¥

–
–
–

28

Due in one
year or less

Cash and time deposits
Notes and accounts receivable, trade$

86,909122,532$ 209,442

Total

March 31, 2016
Due after
Due after
one yearfive years
through fivethrough ten
years
years
(Thousands of U.S. dollars)
$

–
–
–

$

$

–
–
–

$

Due after
ten years

$

–
–
–

$

4.

The redemption schedule for long-term debt is disclosed in Note 7. Short-Term Borrowings andLong-Term Debt.

15.

Investment Securities

Investment securities held by the Companies are all classified as other securities.
The aggregate cost and fair value (carrying value) of marketable securities classified as other securities asof March 31, 2016 and 2015 were as follows:

Cost
Securities whose fair value exceeds theircost:
Equity securities
Securities whose fair value does notexceed their cost:
Equity securities
Total

¥

1,088

¥

479
1,568

Cost
Securities whose fair value exceeds theircost:
Equity securities
Securities whose fair value does notexceed their cost:
Equity securities
Total

¥

1,262

¥

304
1,567

March 31, 2016
Fair value(carrying value)(Millions of yen)

Unrealized gains(losses)

¥

2,133

¥

1,044

¥

337
2,470

¥

(141)
902

March 31, 2015
Fair value(carrying value)(Millions of yen)

Unrealized gains(losses)

¥

2,869

¥

1,606

¥

239
3,108

¥

(65)
1,540

29

March 31, 2016
Fair value
Unrealized gains(carrying value)(losses)(Thousands of U.S. dollars)

Cost
Securities whose fair value exceeds theircost:
Equity securities
Securities whose fair value does notexceed their cost:
Equity securities
Total

$

9,655

$

4,250
13,915$18,929$2,990
21,920

$

9,265

$

(1,251)
8,004

As of March 31, 2016 and 2015, unlisted equity securities amounting to ¥701 million ($6,221 thousand)and ¥696 million, respectively, were not included in the above table because there were no market prices
available and it was extremely difficult to determine the fair value.
Information about sales of securities classified as other securities for the years ended March 31, 2016 and2015 was as follows:Year ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Sales proceeds
Aggregate gains
Aggregate losses

¥

–
–
–

¥

682
458
–

$

–
–
–

16. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2016 and 2015 were composed of the following:
March 31,
2015
2016
(Millions of yen)

Cash and time deposits
Less: Time deposits with maturities in excess of
three months
Cash and cash equivalents

¥

9,801

¥

9,801

$

–

–
¥

8,628

2016
(Thousands of
U.S. dollars)

¥

8,628

86,980–$86,98030

17.

Derivative Transactions(a) Summarized below are the notional amounts and the fair value of derivative instruments outstanding asof March 31, 2016 and 2015, for which hedge accounting has not been applied.
(1) Currency-related transactions
There were no currency-related transactions as of March 31, 2016.
March 31, 2015
Notional amount
Maturing afterContract
one year
Fair value
amount(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Forward foreign exchange
contracts
Sell:
US Dollar
Buy:Australian Dollar
Total

¥

3

¥

–

¥

(0)

¥

(0)

¥

2,787
2,790

¥

–
–

¥

(29)
(29)

¥

(29)
(29)

Note: The calculation of fair value is based on prices obtained from counterparty financial
institutions and others.
(2) Commodity-related transactions
March 31, 2016
Notional amount
Maturing afterContract
one year
Fair value
amount(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Commodity futures contracts
Sell:
Metals
Total

¥
¥

133
133

¥
¥

–
–

¥
¥

4
4

¥
¥

4
4

March 31, 2015
Notional amountContract
Maturing after
amountone year
Fair value(Millions of yen)

Unrealized
gains (losses)

OTC transactions:
Commodity futures contracts
Sell:
Metals
Total

¥
¥

113
113

¥
¥

–
–

¥
¥

(1)
(1)

¥
¥

(1)
(1)

31

March 31, 2016
Notional amountContract
Maturing after
amountone year
Fair value(Thousands of U.S. dollars)

Unrealized
gains (losses)

OTC transactions:
Commodity futures contracts
Sell:
Metals
Total

$
$

1,180
1,180

$
$

–
–

$
$

35
35

$
$

35
35

Note: The calculation of fair value is based on prices obtained from counterparties and others.
(b) Summarized below are the notional amounts and the fair value of derivative instruments outstanding
as of March 31, 2016 and 2015, for which hedge accounting has been applied.
(1) Interest-related transactions
March 31, 2016
Notional amountContract
Maturing after
one yearamount(Millions of yen)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

¥
¥

16,517
16,517¥¥

13,385
13,385

March 31, 2015
Notional amountContract
Maturing after
one yearamount(Millions of yen)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

¥
¥

10,392
10,392

¥
¥

7,987
7,987

Fair value(Note)

Fair value(Note)March 31, 2016
Notional amountContract
Maturing after
amountone year
Fair value(Thousands of U.S. dollars)Interest rate swaps hedging long-term debt,
accounted for by exceptional treatment:
Receive/floating and pay/fixed
Total

$
$

146,583
146,583$ 118,787$ 118,787(Note)

Note: Interest rate swaps to which exceptional treatment is applied are accounted for together withthe long-term debt designated as a hedged item. Therefore, their fair values are included in
the fair value of long-term debt.

32

(2) Commodity-related transactions
March 31, 2016
Notional amount
Maturing afterContract
one yearamount(Millions of yen)
Commodity futures contracts, accounted for as partof raw materials and finished goods:
Sell: Metals
Total

¥
¥

9,844
9,844

¥
¥

–
–

Fair value¥¥

March 31, 2015
Notional amount
Maturing afterContract
one yearamount(Millions of yen)
Commodity futures contracts, accounted for as partof raw materials and finished goods:
Sell: Metals
Total

¥
¥

11,462
11,462

¥
¥

–
–

6
6

Fair value

¥
¥

(42)
(42)

March 31, 2016
Notional amountContract
Maturing after
amountone year
Fair value(Thousands of U.S. dollars)Commodity futures contracts, accounted for as partof raw materials and finished goods:
Sell: Metals
Total

$
$

87,36287,362

$
$

–
–

$
$

53
53

Note: The calculation of fair value is based on prices obtained from counterparties and others.

33

18.

Other Comprehensive Income

Reclassification adjustments and tax effects allocated to each component of other comprehensive income(loss) for the years ended March 31, 2016 and 2015 were as follows:
Years ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Net unrealized (losses) gains on other securities:(Losses) gains arising during the year
Reclassification adjustments
Amount before tax effectTax effect¥

Deferred gains (losses) on hedges:
Gains arising during the year
Reclassification adjustments
Amount before tax effectTax effectRevaluation reserve for land:Tax effectForeign currency translation adjustment:
Adjustments arising during the year
Remeasurements of defined benefit plans:(Losses) gains arising during the year
Reclassification adjustments
Amount before tax effectTax effectTotal other comprehensive income (loss)

¥

(637)
0
(637)
205
(431)

¥

714
(458)
255
(24)
230

$

(5,653)0(5,653)
1,819(3,824)

1,580(1,551)
28
(9)
19

494
(651)
(156)
54
(102)

14,022(13,764)
248
(79)
168

244
244

468
468

2,165
2,165

(2,707)(2,707)

1,453
1,453

(24,023)(24,023)

(379)
(70)
(450)
144

304
(44)
259
(81)

(3,363)(621)(3,993)
1,277

(305)

177

(2,706)(3,181)

¥

2,228

$

(28,230)

34

19.

Segment Information(a) Overview of reportable segments
The Company defines reportable segments as components of the Company for which separate
financial information is available and whose operating results are regularly evaluated by the board of
directors to make decisions about how resources are allocated and assess its performance.
Operating departments of the Company are organized according to products and services, and eachdepartment plans comprehensive domestic and overseas strategies for its products and services anddevelops business activities through the Company and its consolidated subsidiaries. Thus, reportablesegments of the Company are determined based on such operating departments; namely, “Smelting,”“Mineral Resource” (organized based on CBH, a consolidated subsidiary), “Electronic Components
and Materials” and “Environment and Recycling”.
 The Smelting segment engages in sales and production of zinc and lead products, electric silver
and sulfuric acid.
 The Mineral Resource segment engages in exploration, development and production of non-ferrous
metal resources and sales of their output.
 The Electronic Components and Materials segment engages in sales and production of electronicparts, electrolytic iron, plating and machine parts.
 The Environment and Recycling segment engages in sales and production of zinc oxide andrecycling of waste materials.
(b) Basis of measurement for the amounts of net sales, profit or loss, assets and other items for eachreportable segment
The accounting policies of each reportable segment are generally consistent to those described in Note
1. Summary of Significant Accounting Policies. The segment profit is based on operating income, andintersegment sales and transfers are based on actual market prices.
(c) Information about net sales, profit or loss, assets and other items
Year ended March 31, 2016
Reportable segment
Electronic
CompoEnvironMineral nents and ment andSmelting Resource Materials Recycling

Other(Note 1)

Total

Total

Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)¥¥

(Millions of yen)
Net sales:
External customers
Intersegment
Total
Segment profit (loss)
Segment assets
Other items:
Depreciation
Increase in property,
plant and equipment
and intangible assets
Impairment losses on
fixed assets
Amortization of
goodwill
Unamortized balanceof goodwill¥ 77,903
775¥ 78,678¥ 1,813¥ 62,721¥ 18,154 ¥ 6,155
1,283
0¥ 19,437 ¥ 6,156¥ (2,413) ¥675¥ 24,154 ¥ 10,687¥ 2,671 ¥ 4,518 ¥282¥ 4,663–¥ 4,663¥751¥ 4,711¥106,876
2,060¥108,937¥
827¥102,274

¥

7,268
4,058
¥ 11,326¥751¥ 5,042¥264¥ 7,736¥¥ 114,144
6,119¥ 120,263¥ 1,579¥ 107,316

118 ¥

7,855

–
(6,119)¥ (6,119)¥(182)¥ 14,843¥¥¥

114,144–
114,144
1,397
122,160

¥

¥

7,924

68

1,555

3,415

266

207

5,446

178

5,625

11

5,637

–

15,373––

15,373–

15,37329

15,403

–

30

–

–

30

–

30

–

30

–

–

–

–

–

–

–

–

–

35

Year ended March 31, 2015
Reportable segment
Electronic
CompoEnvironMineral nents and ment andSmelting Resource Materials Recycling

Other(Note 1)

Total

Total

Reconciliation(Note 2)

Amounts on
consolidated
financialstatements(Note 3)¥¥

(Millions of yen)
Net sales:
External customers
Intersegment
Total
Segment profit (loss)
Segment assets
Other items:
Depreciation
Increase in property,
plant and equipment
and intangible assets
Impairment losses on
fixed assets
Amortization of
goodwill
Unamortized balanceof goodwill¥ 81,262
5,604¥ 86,866¥ 5,138¥ 71,098¥ 18,853 ¥ 7,049
5,233
39¥ 24,086 ¥ 7,088¥ (1,641) ¥ 1,050¥ 45,354 ¥ 11,006¥ 2,695 ¥ 4,896 ¥306¥ 5,978
0¥ 5,978¥ 1,715¥ 5,140¥113,143
10,877¥124,020¥ 6,262¥132,600

¥

7,949
4,146
¥ 12,096¥
742¥ 5,310¥278¥ 8,176¥¥ 121,093
15,024¥ 136,117¥ 7,005¥ 137,910

111 ¥

8,288

–
(15,024)¥ (15,024)¥(109)¥ 14,060¥¥¥

121,093–
121,093
6,895
151,970

¥

¥

8,349

60

1,741

3,313

217

293

5,566

96

5,663

12

5,675

–

–

–

–

–

–

–

0

0

–

43

–

–

43

–

43

–

43

–

510

–

–

510

–

510

–

510

Year ended March 31, 2016
Reportable segment

Smelting

MineralResource

Electronic
CompoEnvironnents and ment andMaterials Recycling

Other(Note 1)

Total

Amounts on
consolidated
financialstatements(Note 3)

Reconciliation(Note 2)

Total

(Thousands of U.S. dollars)
Net sales:
External customers
Intersegment
Total
Segment profit (loss)
Segment assets
Other items:
Depreciation
Increase in property,
plant and equipment
and intangible assets
Impairment losses on
fixed assets
Amortization of
goodwill
Unamortized balanceof goodwill$ 691,364 $ 161,111
6,877
11,386$ 698,242 $ 172,497$ 16,089 $ (21,414)$ 556,629 $ 214,359$ 54,623
0$ 54,632$ 5,990$ 94,843$ 23,704 $ 40,095 $2,502$ 41,382–$ 41,382$ 6,664$ 41,808$ 948,491
18,281$ 966,782$
7,339$ 907,649

$

$

2,342

$ 64,501 $ 1,012,992
36,01354,304$ 100,514 $ 1,067,296$ 6,664 $ 14,013$ 44,746 $ 952,396$–(54,304)$ (54,304)$ (1,615)$ 131,727

68,654 $1,047 $

69,710 $603$ 1,012,992–$ 1,012,992$
12,397$ 1,084,132$

70,32313,80030,307

2,360

1,837

48,331

1,579

49,92097

50,026–

136,430––

136,430–

136,430257

136,696

–

266

–

–

266

–

266

–

266

–

–

–

–

–

–

–

–

–

Notes 1. “Other” represents business segments not belonging to reportable segments and includes
sound insulation building materials, civil engineering, construction and plant engineering,transportation, environmental analysis and others.
2. “Reconciliation” included the followings:
Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)

Segment profit (loss):
Intersegment elimination
Corporate expenses (*)

¥

164
(346)

¥

(20)
(89)

$

1,455
(3,070)

Total

¥

(182)

¥

(109)

$

(1,615)(*) “Corporate expenses” represents mainly general and administrative expenses that are notallocated to reportable segments.

36

Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)

Segment assets:
Corporate assets (*)¥

14,843¥14,060$131,727(*) “Corporate assets” represents mainly the Company’s investments of surplus funds
including cash and investment securities and assets relating to administrative divisions.
Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)

Other items:
Depreciation
Increase in property, plant and equipment
and intangible assets (*)

¥

68

¥

60

$

12

11

603
97

(*) “Increase in property, plant and equipment and intangible assets” represents mainly
capital expenditures that do not belong to reportable segments.
3. Segment profit or loss is reconciled to operating income on the consolidated statement ofoperations.
(d) Related information(1) Information by product and service
Information by product and service has been omitted since similar information is disclosed insegment information described above.
(2) Information by geographical area
Net sales information by geographical area for the years ended March 31, 2016 and 2015 was asfollows:
Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Japan
Asia
Oceania¥

95,534
9,896
8,713

¥

100,590
12,158
8,344

$

Total

¥ 114,144¥

121,093$ 1,012,992

847,834
87,82377,32537

Property, plant and equipment information by geographical area as of March 31, 2016 and 2015
was as follows:
March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)
Japan

¥

33,623
10,486¥

34,687
15,365$

298,393
93,059¥44,110¥50,052$

391,462

Australia
Total(3) Information by major customer

Information by major customer has been omitted since there were no sales to a single externalcustomer accounting for 10% or more of consolidated net sales.

38