Contents
Profile of NIKKO

1Financial Highlights

3

Consolidated Balance Sheets

4

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income

6

Consolidated Statement of Shareholders' Equity

7

Consolidated Statement of Cash Flows8

Notes to the Consolidated Financial Statements

9

Board of Directors and Satutory Auditors

21

Corporate Data

21

WIND

WATER

EARTH

Water Purification
Wind Energization

Water treatment facilities/Housing & Environment
Equipment

Wind turbine system

Business Units

Earth Reproduction
Pottery & Porcelain / Tiles /Electro-Ceramics

陶 磁器
POTTERY &PORCELAIN

住設環境機器HOUSING &ENVIRONMENTAL
EQUIPMENT

電子セラミック

ELECTRO－CERAMICS

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

Sales by Segment Information
14.8％
14.8％

14.1％
14.1％

14.0％
14.0％

2011
(5months)

2010
Sales
17,961

54.5％
54.5％

56.6％
56.6％

Sales
7,754

Million yen

2012(forecast)
Sales
19,500Million yen

30.5％
30.5％

Million yen

29.7％
29.7％

29.0％
29.0％

Business Segment
million \Housing &Environmental
Equipment

2010

2011

'09.11'10.10(5months)'10.11'11.3

2012(forecast)'11.4'12.3

9,780 4,390 10,900

Tabletop

5,482 2,247 5,800

ElectroCeramics

2,656 1,085 2,750

Others

55.9％
55.9％

42

31

（About 2011）
Due to the change in fiscal year end
to March 31, the figures for the fullyear are for 5-month period from
November 1,2010 to March 31,2011.

50

ＮＥＴＷＯＲＫNIKKOMIDDLE EAST
TRADING LLC
(UAE)

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

Overseas Customers

・・・Sales Activities

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

Financial Highlights
NIKKO COMPANY

Consolidated

Data
Total Assets &Shareholders' Equity

Net Income

Net Sales(Million Yen)
200

(Million Yen)

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

(%)

0
20,000(Million Yen)
Δ200

20,00080.0

15,00060.0

10,000

40.0

5,000

20.0

15,000Δ400

Δ600

10,000Δ800
5,000
Δ1,000Δ2,303
Δ2,628

Δ2,400Δ1,200

0
'07

'08

'09

'07

'10 2011
2011

'08

'07

'08

'09

（5 months)（5 months)

'07

0.0

0

'10 2011
2011

'09

'08

（5 months)

'09

'10

2011

Millions of yen(except per share amounts and %)Consolidated Data
Net Sales
Net Income
Total Assets
Shareholders' Equity
Shareholders' Equity Ratio (%)
Return on Shareholders' Equity (%)
Number of Shares2007
22,359(643)
19,826
10,251
51.7
(6.3)

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

2009
17,063(1,175)（2,303）
13,8285,258
38.0(35.9)

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

2011
7,754
(755)
13,2883,381
25.4(20.1)

19,572,000

19,572,000

19,572,000
Yen

19,572,000

19,572,000(122.84)
280.59－(54.54)221.13－

Per Share of Common StockNet Income
Shareholders' Equity
Cash Dividends(38.79)541.894.00(139.46)403.55
1.00

Notes: ￥83.15 = U.S.$1.00; See Notes to the Consolidated Financial Statements.

The Company has changed its fiscal year-end from October 31 to March 31,
resulting in an irregular 5-month period for fiscal 2011.

-3-'10 2011
2011

Thousands of
U. S. dollar(except per
share amounts)
2011
93,255(9,084)
159,81740,669U. S. dollar(40.31)180.49－(0.484)
2.170－

Consolidated Balance Sheets
NIKKO COMPANY

March 31, 2011 and October 31, 2010

Thousands of
U. S. dollar
2011

Millions of yen
2011
2010

ASSETS
Current Assets:
Cash and deposits
Notes and accounts receivable:
Trade
Subsidiaries and affiliates
Other
Allowance for doubtful accounts¥1,468¥1,431$17,662

3,002
92
0
(158)

3,306
33
0
(269)

36,112
1,112
6(1,905)

3,388
2
96
7,893

3,635
1
149
8,289

40,74728
1,166
94,929Investments and Other Assets:
Investment securities
Stocks of affiliates
Other
Allowance for doubtful accounts
Total investments and other assets

476
66
525
(388)
679

486
37
432
(285)
670

5,728
800
6,324
(4,675)
8,177

Property, plant and equipment, at cost:
Land
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Construction in progress
Lease Assets
Accumulated depreciation
Total property, plant and equipment

1,261
6,750
5,407
1,249
11
230
(10,516)
4,395

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

15,165
81,19065,03515,027144
2,777(126,476)
52,863

Intangible Assets:
Lease Assets
Other
Total intangible assets and other

211
108
319

237
121
359

2,540
1,306
3,846

Total Assets¥13,288¥13,939$159,817

Inventories
Deferred tax assets
Prepaid expenses and other current assets
Total current assets

See Notes to the Consolidated Financial Statements.

-4-Consolidated Balance Sheets
NIKKO COMPANY

March 31, 2011 and October 31, 2010

Thousands of
U. S. dollar
2011

Millions of yen
2011
2010

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:
Notes and accounts payable:
Trade
Subsidiaries and affiliates
Other
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Construction notes payable
Accrued expenses
Income taxes payable
Provision for bonuses
Provision for product warranties
Other
Total current liabilities¥3,142
222
39
793
162
127
23
179
30
373
103
1,014
6,212

¥3,251
249
49
446
172
126
136
176
60
203
86
1,101
6,060

$37,791
2,673
477
9,544
1,948
1,536
283
2,164
371
4,486
1,238
12,202
74,719Noncurrent liabilities:
Long-term loans payable
Lease obligations
Provision for directors' retirement benefits
Provision for retirement benefits
Other
Total noncurrent liabilities
Total Liabilities

1,720
293
99
1,414
166
3,694
9,907

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

20,685
3,526
1,199
17,0152,001
44,428
119,147

Shareholders' Equity:
Authorized-60,000,000 shares;
Issued-19,572,000 shares in 2011
and 19,572,000 shares in 2010
Capital surplus

3,200
2,066

3,200
3,045

38,48424,854(1,231)(334)(1,454)(334)(14,805)(4,022)

(191)
(128)
3,381

(180)
(132)
4,143

(2,299)(1,541)
40,669¥13,288¥13,939$159,817

Retained earnings
Treasury stocks
835,419 shares in 2011 and 833,316 shares in 2010
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total shareholders' equity
Total Liabilities
and Shareholders' Equity

See Notes to the Consolidated Financial Statements.

-5-Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
NIKKO COMPANY

For the five months ended March 31, 2011 and years ended October 31, 2010

Consolidated Statement of Income
Millions of yen
2011
2010
¥7,754¥17,961
5,665
13,4452,088
4,516

Net Sales
Cost of Sales
Gross profit

Thousands of
U. S. dollar
2011$93,255
68,135
25,119Selling, General and Administrative Expenses
Operating income (loss)

2,497
(408)

5,471
(954)

30,038(4,918)Other (Income) Expenses:
Interest expenses
Interest and dividend income(Gain) on sale or loss on disposal of noncurrent assets, net
Other, net
Income before taxes (loss)

22
(0)
2
311
(744)

52
(1)
11
(42)
(975)

273
(6)
26
3,745
(8,957)

17
(6)
10

44
2
46

207
(80)
127

(755)

－

(9,084)¥(755)¥(1,022)$(9,084)

Income taxes-current
Income taxes-deferred
Income taxes
Income (loss) before minority interests
Net income (loss)

Yen
2011
Amounts Per Share of Common Stock:
Net Income (loss)
Cash dividends

Yen
2010

¥(40.31)－¥(54.54)－

U. S. dollar
2011$(0.484)－

Consolidated Statement of Comprehensive Income

Income(loss) before minority interests
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Other comprehensive income
Comprehensive income
Comprehensive income attributable to owners of theparentComprehensive income attributable to minority interests

See Notes to the Consolidated Financial Statements.

-6-－

Thousands of
U. S. dollar
2011(9,084)

(10)
3
(6)
(761)

－
－
－
－

(122)
47
(75)
(9,159)

(761)
－

－
－

(9,159)－Millions of yen
2011
2010
(755)

Consolidated Statement of Changes in Equity
NIKKO COMPANY

For the five months ended March 31, 2011 and years ended October 31, 2010
Number ofshares ofcommon stock(thousands)
Balance, October 31, 2009
19,572
Deficit disposition－
Net income (loss) for the year－－
Purchase of treasury stock－
Other
Balance, October 31, 2010
19,572
Deficit disposition－
Net income (loss) for the year－－
Purchase of treasury stock－
Other
Balance, March 31, 2011
19,572

Balance, October 31, 2009
Deficit disposition
Net income (loss) for the year
Purchase of treasury stock
Other
Balance, October 31, 2010
Deficit disposition
Net income (loss) for the year
Purchase of treasury stock
Other
Balance, March 31, 2011

Capitalstock¥3,200－－－－¥3,200－－－－¥3,200CapitalsurplusMillions of yen
Retainedearnings¥3,620(575)－－－¥3,045(978)－－－¥2,066

Millions of yen
Foreign
Total valuation
Valuation
Currency
and translationdifference on
Translation
adjustments
availablefor-sale
Adjustments
securities¥(109)¥(111)¥(220)
－
－
－
－
－
－
－
－
－
(71)
(20)
(92)
¥(180)¥(132)¥(313)
－
－
－
－
－
－
－
－
－
(10)
3
(6)
¥(191)¥(128)¥(319)

Capitalstock

Capitalsurplus$38,484－－－－$38,484

Balance, October 31, 2010
Deficit disposition
Net income (loss) for the year
Purchase of treasury stock
Other
Balance, March 31, 2011

Thousands of dollars
Foreign
Total valuation
Valuation
Currency
and translationdifference on
Translation
adjustments
availablefor-sale
Adjustments
securities$(2,176)$(1,589)$(3,765)
－
－
－
－
－
－
－
－
－
(122)
47
(75)
$(2,299)$(1,541)$(3,841)-7-¥(333)－－(0)－¥(334)－－(0)－¥(334)$36,621(11,766)－－－$24,854

Total
shareholders'equity¥5,479－(1,022)(0)－¥4,456
－
(755)
(0)
－
¥3,701Total
neｔ assets¥5,258－(1,022)(0)(92)¥4,143
－
(755)
(0)
(6)
¥3,381Thousands of dollars
Treasury
Retainedearnings
stock

Balance, October 31, 2010
Deficit disposition
Net income (loss) for the year
Purchase of treasury stock
Other
Balance, March 31, 2011

See Notes to the Consolidated Financial Statements.

¥(1,007)575(1,022)－－(1,454)
978
(755)
－
－
¥(1,231)

Treasurystock$(17,488)
11,766(9,084)－－$(14,805)
Total
neｔ assets$49,833－(9,084)(4)(75)
40,669$(4,018)－－(4)－$(4,022)

Total
shareholders'equity$53,599－(9,084)(4)－$44,510

Consolidated Statement of Cash Flows
NIKKO COMPANY

For the five months ended March 31, 2011 and years ended October 31, 2010
Thousands of
U. S. dollar
2011

Millions of yen
2011
2010
Net cash provided by (used in) operating activities
Income (Loss) before income taxes and minority interests
Depreciation and amortization
Loss on adjustment for changes of Accounting Standard for asset
retirement obligations
Loss on liquidation of subsidiaries and affiliates
Business structure improvement expenses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for retirement benefits¥(744)
244¥(975)
580$(8,957)
2,937

43
7
344
(8)
169
46

―
―
―
59
(103)
171

527
95
4,141
(98)
2,044
561

―
17
(3)
22
(0)
2
―
―
279

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

―
204
(37)
273
(2)
29
―
―
3,361

(102)

10

(1,235)

43
(140)
(114)
107
3
(22)
(42)

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

519
(1,689)(1,381)
1,294
37
(273)
(507)

¥45

¥(132)$550

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

(106)
106
(200)
0
―
(30)
(7)
¥(237)

(180)
178
(411)
8
20
―
(39)
¥(424)(1,285)
1,285(2,409)
2
―
(360)
(90)
$(2,858)

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

346
―
(68)
(52)
(0)
―
(0)
¥225

25
600
(100)
(109)
(0)
(0)
―
¥415

4,169
―
(817)
(631)
(4)
―
(4)
$2,712

Effect of exchange rate change on cash and cash equivalents

3

(9)

40

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

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

Net increase (decrease) in cash and cash equivalents

36

(151)

444

Cash and cash equivalents at beginning of period

1,251

1,402

15,045

Cash and cash equivalents at end of period¥1,287¥1,251$15,489

See Notes to the Consolidated Financial Statements.

-8-Notes to the Consolidated Financial Statements
NIKKO COMPANY

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

The accompanying consolidated financial statements have been prepared from the accounts maintained by
Nikko Company (the "Company") and its consolidated subsidiaries in accordance with the provisions set forthin the Japanese Commercial Code and other countries' regulations and in conformity with accounting
principles and practices generally accepted in Japan, which are different in certain respects as to applicationand disclosure requirements from International Accounting Standards.
Certain items presented in the consolidated financial statements filed with the Ministry of Finance (the"MOF") in Japan have been reclassified for the convenience of readers outside Japan.
The consolidated financial statements are not intended to present the consolidated financial position, resultsof operations and cash flows in accordance with accounting principles and practices generally accepted incountries and jurisdictions other than Japan.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of¥83.15=U.S.$1 the approximate rate of exchange at March 31, 2011, has been used in translation. The
inclusion of such amounts is not intended to imply that Japanese yen have been or could be readily converted,
realized or settled in U.S. dollars at the rate or any other rate.

(2) Scope of Consolidation

The Company had 3 subsidiaries as at March 31, 2011. The consolidated financial statements include theaccounts of the Company and 3 of its subsidiaries. The consolidated subsidiaries are listed below:
As at March 31, 2011
Equity ownership percentage,
Capital stockincluding indirect ownership(thousands)
Nikko Ceramics, Inc.

100.00 %$1,250

Nikko Hanbai Co., Ltd.

94.85 %

¥470,000

Nikko ME Co., Ltd.

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

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

(4) Investments in Non-consolidated Subsidiaries and Affiliates

At March 31, 2011, the Company had 2 non-consolidated subsidiaries and 2 affiliates. They have not beenaccounted for by the equity method for the following reasons: insignificant amount of net income and retained
earnings. The investments in affiliates are stated at cost.

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

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

(2) Inventories

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

(3) Property, Plant and Equipment

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

(4)Lease Assets

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

(5) Foreign Currency Translation

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

(6) Recognition of Income Taxes

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

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

-10-(8) Amortization

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

(9) Allowance for Doubtful Accounts

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

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

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

(11) Derivatives

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

(12) Cash Equivalents

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

(13) Shareholders’ Equity

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

(14) Research and Development Costs

Expenses relating to research and development activities are charged to income as incurred. Such researchand development expenses were included in cost of goods sold and selling, general and administrative
expenses in the accompanying consolidated statements of income and amounted to ¥122million ($1,470
thousand) and ¥335million ($4,146 thousand) for the years ended March 31, 2011 and October 31, 2010,
respectively.

(15) Change in Fiscal Year End

The company had changed its fiscal year end from October 31 to March 31 being authorized by the General
Meeting of Shareholders to be held on January 28, 2011. This was done to bring its fiscal year into line withthat of its main business partners, considering that their fiscal year end on March 31 each year, to disclose its
business performance and other such management information more appropriately and execute operations inan efficient manner. As a result of the change, we have an irregular 5-month period for fiscal 2011. Further, 3
consolidated subsidiaries had changed its fiscal year end from October 31 to March 31 to increase efficiency of
preparing financial statements.

-11-

3. Short-term and Long-term Bank Loans
Short-term loans and Long-term loans are consisted mainly of borrowing from banks.
The composition of Short and Long-term loans maturing and Lease obligations due within one year as ofMarch 31, 2011 and October 31, 2010 are as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2011

2010

Short-term loans payable (1.11%)
¥793
¥446
Current portion of long-term loans payable
172
162(2.14%)
Lease obligations
127
126
Percentages show the annual weighted average interest rate at March 31, 2011

$9,544
1,948
1,536

Long-term loans and Lease obligations at March 31, 2011 and October 31, 2010 are as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2011

2010

Long-term loans payable (2.24%)¥1,720¥1,778
Lease obligations
293
346
Percentage shows the annual weighted average interest rate at March 31, 2011

$20,685
3,526

The aggregate annual maturities of the non-current portion of long-term loans and lease obligations at March
31, 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen
long-term loans
2013
2014
2015
2016
2017 and thereafterLease
obligations

¥319
349
323
257
471

long-term loans

Leaseobligations$3,838
4,198
3,886
3,092
5,669

$1,299
1,138
640
282
164

¥108
94
53
23
13

4. Pledged Assets
The carrying amounts of assets pledged as collateral at March 31, 2011 and October 31, 2010.
Millions of yen
2011
Land
Buildings and structures
Investment securities
Merchandise and finished goods

¥947
1,284
328
472

-12-

2010
¥947
1,311
344
479

Thousands of
U.S. dollars
2011$11,397
15,4463,944
5,685

5. Contingent Liabilities
Contingent liabilities at March 31, 2011 and October 31, 2010 are as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2011
Guarantee of indebtedness of affiliate
Guarantees of indebtedness of employees
Guarantees of the lease liabilities of the company(Transport duties trust)

2010
¥26
5

¥25
6

$317
62

21

23

255

6. Retirement Plans and Severance Indemnities(1) The Company and certain domestic consolidated subsidiaries have a defined benefit plan, qualified pension
plan, covering substantially all employees. They may grant additional benefits in case where certain
requirements are met when employees retire. Furthermore, certain domestic consolidated subsidiaries
changed its retirement benefit plan as of November 1, 2010 from qualified pension plan to defined
contribution pension plan and lump-sum severance indemnity plans.

(2) Detail on the reserve for retirement benefits as of March 31, 2011 and October 31, 2010 are analyzed asfollows:
Millions of yen
Retirement benefit obligation at end of year
Plan assets
Unfunded retirement benefit obligation
Unrecognized net retirement benefit obligation
at transition
Unrecognized actuarial loss
Unrecognized prior service cost
Net amount recognized on the balance sheet
Prepaid pension expenses
Accrued retirement benefits

Thousands of
U.S. dollar
2011

2011

2010

¥(3,040)
1,177(1,863)¥(3,048)
1,136(1,911)$(36,571)
14,158(22,412)

302

341

3,639

146
―
(1,414)―(1,414)201―(1,368)―(1,368)1,757―(17,015)―(17,015)

Note: Certain domestic consolidated subsidiaries calculate retirement benefit obligation by thesimplified method permitted under the accounting standards generally accepted in Japan.

-13-(3) Components of retirement benefit expenses for the year ended March 31, 2011 and October 31, 2010 are as
follows:
Thousands of
U.S. dollar
2011

Millions of yen
2011
Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of transition of transfers
Amortization of actuarial gains and losses
Premium paid into the defined-contribution plan
Other
Retirement benefit expenses (Total)
Gain/ loss on transfers between pension plans
Total

¥70
24
(9)
―
27
16
3
0
133
(14)
119

2010
¥191
58
(22)
68
―
40
―
5
342
―
―

$851
293
(108)
―
330
196
38
6
1,607
(172)
1,435

Notes: (1) In certain domestic consolidated subsidiaries, except premium paid into thedefined-contribution plan and Amortization of transition obligation, retirement expenses under
the simplified method are included in service cost.
(2) Certain domestic consolidated subsidiaries has changed its retirement benefit plan as ofNovember 1, 2010, from qualified pension plan to defined contribution pension plan, and has
applied “Accounting Standard for Transfer between Retirement Benefit Plan” (ASBJ GuidanceNo.1). In accordance with this transfer, we resulted ￥14million ($172thousand) as
extraordinary gain.
(4) Assumptions used for calculation of retirement benefits for the year ended March 31, 2011 and October 31,
2010 are as follows:
2011
Method of attributing the project benefits to periods of service
Discount rate
Expected return on plan assets
Amortization period of unrecognized actuarial gains or losses
Amortization period of net transition obligation

-14-

2010

Straight-line method
2.0 %
2.0 %
2.0 %
2.0 %
13 years
15 years7. Deferred Tax
Deferred tax assets and liabilities (both current and non-current) consisted of the following elements:
Thousands
ofU.S. dollar
2011

Millions of yen
2011
Deferred tax assets:
Provision for bonuses not deductible until paid
Provision for product warranties
Allowance for doubtful accounts
Loss on valuation of inventories
Loss on disposal of inventories
Impairment loss on fixed assets
Provision for retirement benefits
Provision for directors' retirement benefits
Valuation difference on available-for-sale securities
Business structure improvement expenses
Tax loss carried forward
Other
Subtotal
Allowance for valuation
Net deferred tax assets
Deferred tax liabilities:
Deferred gains on sales of property
Net deferred tax liabilities

2010

¥146
41
161
319
42
44
571
39
―
139
2,653
112
4,270
(4,267)
¥2

¥79
34
170
309
45
48
552
40
73
―
2,697
74
4,127
(4,125)¥1$1,762
500
1,937
3,838
506
534
6,870
475
―
1,673
31,9091,347
51,356(51,328)
$28

―
―

(6)
¥(6)

―
―

The reconciliation of the statutory tax rate to the income tax rate reflected in the Consolidated
Statements of Income for the year ended March 31, 2011 and October 31, 2010 are not shown since theoperating result for the year was a loss before provision for income taxes.

-15-

8. Accounting for Leases
The Company and certain subsidiaries lease mainly machinery and equipment as lessee.
The Group continues to account for finance leases which existed at March 31, 2011 and does not transfer
ownership of the leased property to the lessee as operating lease transactions.
Pro forma information of these leased property such as acquisition cost, accumulated depreciation, obligations
under finance leases, depreciation expense and interest expense on an “as if capitalized” basis at March 31,
2011 and October 31, 2010 is as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2011
Acquisition cost
Machinery and equipment
Other assets
Accumulated depreciation
Machinery and equipment
Other assets

¥509
54
¥563

¥513
80
¥594

$6,125650$6,775

¥224
37
¥262

¥199
57
¥256

$2,699454$3,153

¥2
―
¥2

―
―
―

$34
―
34

¥281
16

¥314
22

$3,391
196

¥298

¥337

$3,587

Fair loss
Machinery and equipment
Other assets
Net book value
Machinery and equipment
Other assets

2010

Obligations under finance leases as of March 31, 2011 and October 31, 2010 are as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2011
Due within one year
Due after one year

2010

¥77
237
¥315

¥84
269
¥353

$934
2,858
$3,793¥2―$25

Allowance for impairment loss on leased property

Depreciation expenses and interest expenses under finance leases as of 2011 and 2010, are as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2011
Lease expenses for the year
Depreciation expense
Interest expenses
Impairment loss

2010
¥36
34
6
2

¥88
90
17
―

$435
420
74
25

Depreciation expenses and interest expense, which are not reflected in the accompanying consolidated
statements of income, are computed by the straight-line method and the interest method.
The minimum rental commitments under non-cancellable operating leases at March 31, 2011 and October 31,
2010 are as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2011
Due within one year
Due after one year

2010
¥11
12
¥23

-16-

¥11
16
¥27

$134
145
$280

9. Financial Instruments
Fair Value of Financial Instruments
Fair value and variance with carrying value presented on the balance sheets as of March 31, 2011 are as
follows. Fair values that are not readily determinable are not included in the following table. (See *2 foradditional information.).
Millions of yen
2011
Carrying value¥1,468Fair value¥1,468

Variance
¥ ―

3,060

3,060

―

Held-to-maturity securities

50

36

(13)

Available-for-sale securities

377

377

―

4,956

4,943

(13)

3,364

3,364

―

(1) Cash and time deposits(2) Notes and accounts receivable(3) Investments in securities

AssetsTotal(4) Notes and accounts payable(5) Short-term bank borrowings

793

793

―

1,882

1,916

34

(7) Lease obligations

420

411

(9)

(8) Income tax payable

30

30

―

Liabilities Total

6,492

6,516

24

(6) Long-term borrowings from banks

Thousands of U.S. dollars
2011(1) Cash and time deposits(2) Notes and accounts receivable

Carrying value$17,662

Fair value$17,662

Variance$ ―36,80836,808―(3) Investments in securities
Held-to-maturity securities

601

444

(156)

Available-for-sale securities

4,542

4,542

―

59,61459,457(156)(4) Notes and accounts payable

AssetsTotal

40,46540,465―(5) Short-term bank borrowings

9,544

9,544

―

(6) Long-term borrowings from banks

22,63323,046412(7) Lease obligations

5,062

4,943

(118)

(8) Income tax payable

371

371

―

Liabilities Total

78,07778,370293(1) Cash and time deposits; (2) Notes and accounts receivable
Carrying value is used for fair value for these short-term items because these amounts areapproximately the same.
(3) Investments in securities
Market prices on exchanges are used to determine the fair valueof equity securities. Prices quoted by financial institutions are used to determine the fair value of bonds.
(4) Notes and accounts payable; (5) Short-term bank borrowings;(8) Income tax payable
Carrying value approximates fair value for these short-term items.
(6) Long-term borrowings from banks
Fair value of long-term borrowing is the discounted value of total principal and interest using anassumed interest rate on equivalent new borrowings.
(7) Lease obligations
The fair value of lease obligations is the discounted present value of total principal and interest using anassumed interest rate on equivalent new lease transactions-17-*2: Fair values that are difficult to determine:
Thousands of
U.S. dollars
Carrying value

Millions of yen
Carrying value

Unlisted shares¥48$584
Shares of subsidiaries and affiliates
36
439
Investments in capital of subsidiaries and360
30
affiliates
Market prices do not exist for these items. These items are not included in (3) investments in securities,
because their fair values are not readily determinable.

10. Investments
In accordance with the accounting standard for financial instruments, investment securities include equity

securities, bonds and other, of which the aggregate cost, gross unrealized gains/losses and fairvalue pertaining to held-to-maturity securities and available-for-sale securities at March 31,
2011 and October 31, 2010 were as follows.
(1) Held-to-maturity securities
Securities with book values exceeding
Millions of yen
2011

Other securities
Millions of yen
2011Book value

Fair value

DifferenceBook value

Fair value

Difference

―

―

―

¥50

¥36

¥(13)

Thousands of U.S. dollars
2011

Thousands of U.S. dollars
2011Book value
Fair value
Difference―――
Held-to-maturity securities
Securities with book values exceeding
Millions of yen
2010
Book value―

Fair value―

Book value
$601

¥1

Acquisitioncost¥1Millions of yen
2010

Difference―Book value¥50

DifferenceBook value

¥0

¥376

Acquisition
cost
¥567

Difference¥(191)

Thousands of U.S. dollars
2011

Acquisition
Difference
cost
$14
$13
$0
Available-for-sale securities
Securities with book values exceeding
Millions of yen
2010

¥1

Difference¥(10)

Millions of yen
2011Book value

Acquisition
cost¥1

Fair value¥39

Other securities

Thousands of U.S. dollars
2011Book value

Difference$(156)

Other securities(2) Available-for-sale securities
Securities with book values exceeding
Millions of yen
2011Book value

Fair value$444

Book value$4,527

Acquisition
cost$6,827

Difference$(2,300)

Other securities
Millions of yen
2010

DifferenceBook value

¥0

¥386

-18-

Acquisition
cost
¥567

Difference¥(181)

11. Segment Information(1) Overview of reportable segments
Segments used for financial reporting are the Nikko Group’s constituent units for which separate financial
information is available and for which the Board of Directors performs periodic studies for the purposes ofdetermining the allocation of resources and evaluating performance.
The Group has established business divisions that comprise of the company and its subsidiaries and affiliates, andeach division conducts business in line with the comprehensive strategies they have devised for products,
merchandise and services in both domestic and overseas markets.
Therefore, the Group consists of segments by products, merchandise and services on the basis of the businessdivisions, and the “Housing & Environmental equipment”, “Tabletop” and “Electro-Ceramics” are three reportablesegments.
Septic tanks, Bathroom units, Tiles, Water treatment facilities,
Wind turbine system
Fine bone china, Fine vitrified china, Fine porcelain, Oven ware
Alumina substrates, LTCC substrates, Dielectric ceramics

Housing & Environmental
Equipment
Tabletop
Electro-Ceramics(2) Information related to net sales and profit or loss for each reportable segment
Millions of yen
2011

Net sales:
Sales to outside customers
Intersegment sales orTransfers
Total
Segment profit (loss)(Operating income(loss))
Segment assets
Other items:
Depreciation andAmortization
Increase in Property,
plant and equipment
and Intangible assets
Impairment loss

Housing &Environmental
Equipment

Tabletop

ElectroCeramics

Other

Total

Adjustment

Amounts ontheconsolidated
financialstatements¥4,390¥2,247¥1,085¥31¥7,754―¥7,754

―

―

―

―

―

―

―

4,390

2,247

1,085

31

7,754

―

7,754

(20)

(79)

(18)

(16)

(135)

(273)

(408)

3,593

4,493

2,563

8

10,6602,628

13,288

¥70

¥72

¥76

¥0

¥219

¥24

¥244

8

17

40

―

67

0

67

111

―

―

―

111

―

111

-19-

Thousands of U.S. dollars
2011

Adjustment

Amounts ontheconsolidated
financialstatements$93,255―$93,255

―

―

―

―

13,051

376

93,255―93,255

(961)

(227)

(196)

(1,628)(3,289)(4,918)43,21754,04630,832

105

128,20231,615

159,817

$842

$871

$923

$8

$2,644$289$2,934

104

211

491

―

807

3

810

1,339

―

―

―

1,339

―

1,339

Housing &Environmental
Equipment
Net sales:
Sales to outside
customers
Intersegment sales orTransfers
Total
Segment profit (loss)(Operating
income(loss))
Segment assets
Other items:
Depreciation andAmortization
Increase in Property,
plant andequipment andIntangible assets
Impairment loss

Tabletop

ElectroCeramics

Other

Total

$52,802$27,024$13,051

$376

―

―

―

52,802

27,024(243)

Millions of yen
2010

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

Housing &Environmental
Equipment

Tabletop

ElectroCeramics

Other

Total

Eliminations/
Consolidated
Corporate¥9,780¥5,482¥2,656¥42¥17,961―¥17,961

―
9,780
9,872

―
5,482
5,603

―
2,656
2,724

―
42
125

―
17,961
18,325――590―
17,961
18,916

(92)

(121)

(67)

(83)

(363)

(590)

(954)

¥4,088213
59¥4,691145
297¥2,520
160
130

¥9
1
―

¥11,310521
488¥2,62959
2¥13,939580
490

Note: Beginning with the current fiscal year, the Company has applied “Accounting Standard for Disclosure of
Segment Information” (ASBJ Statement No. 17, March 27, 2009) and “Application Guidance on AccountingStandard for Disclosure of Segment Information” (ASBJ Guidance No. 20, March 21, 2008).

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

-20-

Board of Directors and Statutory Auditors
NIKKO COMPANY(As of June 30th, 2011)
Chairman
Akitoshi Sakai
Chief Executive Officer
Makoto Yoshida
Board Director, Senior Managing Officer
Kazuto Futamata
Board Director, Executive Managing Officer
Kazuo Miyanabe(Housing & Environmental Equipment Division, General Manager)
Board Director, Managing Officer
Kenji Kita
Yoshiaki Iwasaki
Makoto Aoki
Yasuhiro Kurauchi(Tabletop Division, General Manager)(Tabletop Division, Head-Factory Manager)(Electro-Ceramics Division, General Manager)(Finance & Administration, General Manager)

Board Director
Mitsuru Mitani
Ryuji Iwata
Akiko Mitani
Executive Auditing Director
Shigekazu Kaneda
Auditors
Shigeru Sawa
Takao Anzai

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

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

Date of Establishment
May 11th, 1908

Annual General Meeting
The annual general meeting of shareholders
is held in June each year in Ishikawa-PrefectureShow RoomHead Office, Tokyo, Osaka, Nagoya, New York
Concept Shop "SAWA"
Directly Managed Shop "TABLE WITH"
Factories
Head Factory, Tsurugi Factory, Saitama Factory

Auditors
AZSA & CO.

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

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