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Annual Report 2010Year Ended March 31, 2010

From Integration to Sustaining Power

Printed in Japan

JX Holdings, Inc.

Annual R

eport 2010

JX Holdings, Inc., was incorporated on April 1, 2010 accompanying the management

integration of two companies, each with more than 100 years of history: Nippon Oil

Corporation and Nippon Mining Holdings, Inc.

The Birth of JX Holdings

“JX” is a name which represents the basic philosophy of the integrated Group. “J” represents a

Japanese and world-leading “integrated energy, resources and materials business group,” and “X”

represents challenges of the unknown, growth and development for the future, and creativity and

innovation, among others. The economic and social environments are undergoing major change,

and, as uncertainty about the future rises, we will continue to take up the challenge of searching to

find the solutions for the unknown, as represented by “X.”

April 1, 2010 : JX Holdings, Inc., was established as the holding company for the JX Group.

July 1, 2010 : The three core operating companies of the JX Group—JX Nippon Oil & Energy Corporation, JX Nippon Oil & Gas Exploration Corporation, and JX Nippon Mining & Metals Corporation––were launched.

Unified brand

NEXUS & NEXT

Annual Report 2010 1

Fiscal 2009 (Actual) Nippon Oil Nippon Mining Holdings JX Holdings

Petroleum Refining and Marketing

Market share of domestic petroleum products sales 24% 10% 34%

Paraxylene supply capacity 1.6 million tons/year 1.02 million tons/year 2.62 million tons/year

Oil and Natural Gas Exploration and Production (E&P)

Oil and gas production (a project company basis) 129 thousand BOE*1/day 14 thousand BOE*1/day 143 thousand BOE*1/day

Metals

Refined copper production capacity — 1.17 million tons/year*2 1.17 million tons/year*2

Mine production(Sum of equity entitled copper production in copper concen-trate at invested mines)

— 82 thousand tons/year 82 thousand tons/year

Manufacture and sale of electric materials —Product groups with No.1

global market sharesProduct groups with No.1

global market shares

Notes:*1: BOE: Barrels of oil equivalent*2: This figure is the sum of Pan Pacific Copper (66% owned by JX Nippon Mining & Metals), 610 thousand tons/year, and LS-Nikko Copper (39.9% owned by JX Nippon

Mining & Metals), 560 thousand tons/year.

NEXUSObjectives of the Management Integration

Background for the Management Integration

Major structural changes are taking place in the fields where both the companies are pursuing the further develop-ment of their business activities.

• In the Petroleum Refining and Marketing business, the balance between supply and demand is deteriorating as domestic demand declines.

• In the Oil and Natural Gas E&P business and the Metals business, the amounts of investments are increasing along with the growing competi-tion for resources.

To stay ahead of changes in the business environment and be a successful winner in increasingly competitiveconditions, a substantially stronger management base will be indispensable.

Implement fundamental business reforms speedily that we could not have carried out

without the integration

Pursue global growth and development based on our dominant competitive strengths

2 JX Holdings, Inc.

Structuring an integrated production system from upstream to downstream in the fields of energy, resources andmaterials

NEXUS


Adopt the ENEOS brandfor all our service stations

To maximize efforts to rationalize and increase

efficiency following the management integra-

tion, we will adopt the existing major brand,

“ENEOS”, for all our service stations.

As of March 31, 2010

ENEOS 9,514

JOMO 3,173

JX Group total 12,687

Number of Service Stations

Put priority on allocation of management resourcesto growth businesses

We will restrain our capital expenditures and loans in the Petroleum Refining and

Marketing business to about 80% of cash flow from depreciation, while we plan to

make investments in the Oil and Natural Gas E&P and Metals businesses that will

be substantially larger than depreciation.

(Billions of yen)

CapitalExpenditures and Loans

Depreciation

Petroleum Refiningand Marketing

300 375

Oil and Natural Gas E&P 320 148

Metals 300 82

Listed subsidiariesand others

40 51

Three-year total 960 656

Plans for Capital Expenditures and Loansfrom FY 2010 to FY 2012

Reduce petroleum refining capacity

We will evaluate our overall competitiveness

from the perspectives of our unit configurations,

location, and other considerations, and then

complete the reduction of refining capacity by

400 thousand barrels per day (BD) during fiscal

2010 (see table on the right). We are planning

to make additional reductions in the capacity of

200 thousand BD by the end of fiscal 2013.

(Thousand BD)

Negishi (70)

Osaka (115)

Mizushima (110)

Oita (24)

Kashima (21)

Toyama (60)

Total (400)*

Breakdown of the Reductionsin Refining Capacity

* After reductions, refining capacity is 1,392 thousand BD.

NEXTPursuing Best Practices

With “best practices” as our key word, we have put aside the past and selected the

best methods for the new JX Group.

We will optimize our corporate value by realizing integration synergies, reducing

costs, and investing in growth fields.

4 JX Holdings, Inc.

NEXT

We will work aggressively and on a global scale to increase our corporate value by drawing on the managementresources obtained from the management integration and our competitive strengths to become a world-leading “energy,resources and materials business group”.


Contents

JX Nippon Oil & Gas Exploration Corporation

Oil and Natural GasExploration

andProduction

Business

PetroleumRefining

andMarketing

Business

JX Nippon Oil & Energy Corporation

MetalsBusiness

JX Nippon Mining & MetalsCorporation

6 JX Holdings, Inc.

8

20

2627

30

32

126

128

132

36

38

41

35

44

58

93

43

Financial Highlights/Operating Highlights

To Our Shareholders and Investors

Interview with the President

JX Group Medium-Term Management Plan

Review of Operations

Petroleum Refining and Marketing Business

Oil and Natural Gas Exploration and Production (E&P) Business

Metals Business

Corporate Profile/Organization Structure

Principal Group Companies

Investor Information

Financial Section

Nippon Oil Corporation

JX Holdings, Inc.

Nippon Mining Holdings, Inc.

Cautionary Statement RegardingForward-Looking Statements

This notice contains certain forward-looking statements. These forward-looking statements may be identified by words such as “believes”, “expects”, “anticipates”, “projects”, “intends”, “should”, “seeks”, “estimates”, “future” or similar expressions or by discussion of, among other things, strategy, goals, plans, or intentions. Actual results may differ materially in the future from those reflected in forward-looking statements contained in this notice, due to various factors including but not limited to: (1) macroeconomic conditions and general industry condi-tions such as the competitive environment for companies in energy, resources, and materials industries; (2) regulatory and litigation matters and risks; (3) legislative developments; and (4) changes in tax and other laws and the effect of changes in general economic conditions.

Management Systems

Board of Directors and Auditors

Corporate Governance

Corporate Social Responsibility (CSR)

10

12


Financial HighlightsNippon Oil Corporation and Consolidated SubsidiariesNippon Mining Holdings, Inc. and Consolidated SubsidiariesYears ended March 31

Millions of U.S. dollars Billions of yen

2010 2010 2009 2008

For the Year

Net sales

Pro Forma ....................................................... 96,860 9,008.0Nippon Oil Corporation .................................... 62,089 5,774.3 7,389.2 7,524.0 Nippon Mining Holdings, Inc. ........................... 34,756 3,233.7 4,065.1 4,339.5

Operating income (loss)

Pro Forma ....................................................... 1,403 130.5 Nippon Oil Corporation .................................... 933 86.7 (312.5) 264.0Nippon Mining Holdings, Inc. ........................... 470 43.7 (101.7) 103.2

Ordinary income (loss)

Pro Forma ....................................................... 2,014 187.3 Nippon Oil Corporation .................................... 1,218 113.3 (275.4) 275.7Nippon Mining Holdings, Inc. ........................... 795 74.0 (67.4) 192.0

Ordinary income (loss) (excluding inventory valuation factors)

Pro Forma ....................................................... (166) (15.3) Nippon Oil Corporation .................................... (468) (43.5) 171.6 107.8 Nippon Mining Holdings, Inc. ........................... 302 28.1 92.1 143.2

Net income (loss)

Pro Forma ....................................................... 786 73.1 Nippon Oil Corporation .................................... 466 43.3 (251.6) 148.3Nippon Mining Holdings, Inc. ........................... 320 29.8 (40.8) 99.3

At Year-End

Total assets

Pro Forma ....................................................... 66,632 6,196.7Nippon Oil Corporation .................................... 44,400 4,129.2 3,969.7 4,594.2Nippon Mining Holdings, Inc. ........................... 22,222 2,067.5 1,886.1 2,251.2

Total assets

Pro Forma ....................................................... 18,986 1,765.7Nippon Oil Corporation .................................... 11,388 1,059.1 1,016.3 1,429.3Nippon Mining Holdings, Inc. ........................... 7,594 706.6 659.9 765.3

U.S. dollars Yen

Per Share

Net income (loss)

Nippon Oil Corporation .................................... 0.32 29.70 (172.42) 101.49Nippon Mining Holdings, Inc. ........................... 0.35 32.17 (44.02) 107.14

Cash dividends

Nippon Oil Corporation .................................... 0.19 18 20 12Nippon Mining Holdings, Inc. ........................... 0.16 15 14 16

Note: U.S. dollar amounts have been converted at the rate of March 31, 2010.

8 JX Holdings, Inc.

August 2010 ■ Agreement concluded with a subsidiary of China National Petroleum Corporation located in Japan to establish a joint venture of Osaka Refinery.

August ■ The Russian government gave its approval for the first joint implementation proj-ect for flare-gas recovery with the Gazprom Group and Mitsubishi Corporation.

July ■ Made the decision to build an LNG satellite terminal in Kushiro

July ■ Established Nippon Oil & Energy (RUS), LLC, a company for marketing lubricants in Russia

July ■ Participated in the U.N. Global Compact

July ■ Launched the three core operating companies of the JX Group

May ■ Prepared the JX Group Medium-Term Management Plan and Long-Term Vision (Refer to page 20)

May ■ Acquired a 2.5% joint (three-company) ownership interest in the Escondida Cop-per Mine in Chile from the International Finance Corporation

April ■ Commenced operations of a pilot plant for recovery of valuable metals from used lithium ion batteries and other sources

April ■ JX Holdings, Inc., established

March ■ Acquired an additional 10% of the shares in United Petroleum Development Co., Ltd. (Japan)

February ■ Made final decision for full-fledged development of the Caserones Copper and Molybdenum Deposit project in Chile (Pan Pacific Copper Co., Ltd.)

January ■Nippon Oil Corporation and Nippon Mining Holdings, Inc., held extraordinary meetings of shareholders to approve a Share Transfer Plan for the establishment of JX Holdings, Inc.

December 2009 ■ Final investment decision made regarding the Papua New Guinea LNG Project

November ■ Acquired exploration rights in coal bed methane (CBM) in Indonesia

November ■ The Quechua Copper Deposit development project in Peru moved to the feasibil-ity study stage (Pan Pacific Copper Co., Ltd.)

October ■ Agreement concluded for the management integration of Nippon Oil Corporation and Nippon Mining Holdings, Inc.

October ■ First ETBE (ethyl tertiary butyl ether) facilities in Japan completed at the Negishi Refinery

October ■ Construction began on a testing and research facility at the Mizushima Refinery for the high-severity fluid catalytic cracking (HS-FCC) process

August ■ Acquired rights for offshore exploration in joint development areas between Australia and East Timor

July ■ Shipments began from the Tangguh LNG project in Indonesia

April ■ Construction completed on a new plant for residential-use fuel cells (ENEOS CellTech Co., Ltd.)

April ■ Commercial production began in the West Don field (in the U.K. North Sea)

Operating Highlights

Agreement concluded in October 2010 for the management integration of Nip-pon Oil Corporation and Nippon Mining Holdings, Inc.

Tangguh LNG project (Indonesia)

Escondida Mine (Chile)

■ JX Holdings ■ Petroleum Refining and Marketing ■ Oil and Natural Gas E&P ■ Metals


The newly formed JX Group was able to make a smooth start. We believe

that the factors making this possible were two special aspects of the man-

agement integration.

The first of these is that the integration created an optimal combination.

Prior to the integration, Nippon Oil managed the largest petroleum refining and

marketing business operations in Japan as well as was engaged in aggressive

oil and natural gas exploration and production (E&P) business. On the other

hand, Nippon Mining Holdings, along with its petroleum refining and market-

ing as well as E&P business, managed its Metals business as a growth area,

including copper resource development, copper smelting and refining, recy-

cling and environmental services, and electronic materials, and was working to

realize the optimal portfolio. As a result of this combination of the businesses

of the two predecessor groups, the JX Group has the dominant market share

in petroleum refining and marketing in Japan. This strong position will make it

possible to create a petroleum refining platform that will be a step ahead of the

decline in domestic demand. In addition, the management integration will allow

us to realize synergies of ¥80 billion within three years after the integration and

¥100 billion or more in five years. Because of the attainment of these objec-

tives, we will be able to implement a strategy of restructuring and optimizing

our Petroleum Refining and Marketing business while we also make aggressive

investments in the growth areas of the Oil and Natural Gas E&P and Metals

businesses. The implementation of this strategy became a viable option only

following the management integration of Nippon Oil and Nippon Mining

Holdings. (Please refer to page 22 for further information.)

Another special aspect is “best practices.” Nevertheless, just putting

together a good combination of businesses does not mean that we can

realize the maximum positive benefits from the integration. Both Nippon Oil

JX Holdings, Inc., was incorporated in April 2010

accompanying the management integration of Nippon

Oil Corporation and Nippon Mining Holdings, Inc. In July,

all the businesses of the groups centered around these

two companies were realigned into three core companies

under JX Holdings. These companies then commenced

operations as JX Nippon Oil & Energy Corporation, JX

Nippon Oil & Gas Exploration Corporation, and JX Nippon

Mining & Metals Corporation. The JX Group has, therefore,

begun full-scale operations, following this realignment and

management integration.

Shinji Nishio

Representative Directorand Chairman of the Board

To Our Shareholders and Investors

10 JX Holdings, Inc.

and Nippon Mining Holdings have more than 100 years of history and have

grown and developed over the years. The two companies have no small

measure of insistence on their ways of doing things and their experiences of

success. Therefore, we have decided to start with a clean slate in choosing

to make “best practices” their fundamental criterion for making judgments

and decisions. In the JX Group’s first Medium-Term Management Plan, we

have adopted “best practices” as our key word and have not taken the

interests of the predecessor companies into account. Instead, we have put

the profit and development of the new JX Group first in preparing our plans.

(Please refer to page 20 for further information.) We have put aside insis-

tence on previous ways of thinking and will create a new corporate culture

built on “best practices.” We might say that our single-minded determination

and ability to get things done represented the “birth” of the JX Group in the

real sense.

The business environment that we are confronting is undergoing major

change and is expected to continue to present difficult challenges. Domestic

demand for petroleum is on the decline; the sense of crisis regarding envi-

ronmental issues is rising; and resource nationalism is on the rise. However,

to cope successfully with changes in the business environment, we have

chosen the path to change—on our own initiative and ahead of competi-

tors. In accordance with the concept in the JX Group’s corporate mission

statement “innovation in the areas of energy, resources and materials,” we

will now work to maximize the corporate value of the JX Group through

innovation––in our business activities and technologies—that will contribute

to creating a better global environment.

We ask our shareholders and investors to give us your even deeper

understanding and stronger support.

Mitsunori Takahagi

Representative Director and President


We are aiming to be a world-

leading “integrated energy,

resources and materials

business group” and are

working to achieve the optimal

allocation and use of our

management resources.

We are reforming our

existing businesses to win

a high evaluation by world-

class standards. We are also

establishing the foundation for

business growth in the future,

including the development of

new energy businesses.



Q1 Summary and Appraisal of Fiscal 2009: Issues

to Be Addressed (Evaluation of Performance)

Q2 Outlook for Margins in the Petroleum Refining and

Marketing Business (Strategy)

Q3 Strategic Significance of the Reduction

in Refining Capacity (Strategy)

Q4Business Strategies in the Oil & Natural Gas E&P

and Metals Businesses: Positioning of the

Medium-Term Management Plan (Strategy)

Q5 Strengthening of the New Energy Businesses Contained in the

Long-Term Vision (Strategy)

Q6 Capital Policy, Providing Returns to Shareholders, and Financial

Soundness (Capital and Dividend Policies)


On a pro-forma summation basis, ordinary income for fiscal 2009, ended March 31,

2010, for Nippon Oil and Nippon Mining Holdings amounted to ¥187.3 billion. However,

after excluding the positive effect of inventory valuation factors,* the companies reported

a combined loss of ¥15.3 billion. Within this total, the Petroleum Refining and Marketing

business, which accounts for the majority of our sales, reported an ordinary loss of ¥135.8

billion. As these figures suggest, we began our first year under extremely challenging

circumstances. These results were due to structural issues of excess production capacity

in the industry that accompanied the sharp downturn in domestic demand and made it

difficult to earn appropriate margins on our products.

Therefore, the issue of greatest urgency for the JX Group is how to escape from the

loss-generating structure of the petroleum product industry, secure stable earnings, and

put into place a competitive petroleum refining and marketing structure at the earliest pos-

sible time. Under the Medium-Term Management Plan, by fiscal 2012, we are working to

make improvements in the real ordinary income of our Petroleum Refining and Marketing

business of approximately ¥300 billion in comparison with fiscal 2009 through the imple-

mentation of fundamental structural reforms as quickly as possible.

*The valuation of inventories under the gross average method reduced the cost of sales.

First, I would like to ask you to review the financial results for

fiscal 2009, which was the starting position for the JX Group.Q1



Margins on petroleum products in fiscal 2009 shrank to half the level in fiscal

2008, resulting in major losses throughout the Japanese petroleum refining and

marketing industry. Looking ahead, demand for fuels in the domestic market is

forecast to continue to decline at between 3% to 4% at an annual rate. So, if we

take no action, we cannot expect margins to recover.

In view of this situation, as the leading company in the industry, we made the

decision to take the initiative in cutting refining capacity. We will reduce capacity

by 400 thousand barrels per day (BD) during fiscal 2010. Next, we have moved

our original target date for a further reduction in capacity of 200 thousand BD

forward one year and now plan to make these cutbacks by the end of March

2014. We will make flexible judgments regarding this goal depending on supply

and demand conditions.

If we make reductions in capacity and eliminate the problem of excess sup-

ply, we should be able to secure appropriate margins without fail, and, in point

of fact, we must do this. Our expectations for improved margins are not ground-

less, and, after taking the measures that we must take, we will aim to make these

margins a reality. Moreover, the margins we are assuming are realistic judging

from past levels in markets in Japan and overseas, and from the point of view of

aiming to structure a market where we can secure appropriate margins, these are

minimum levels. Even though demand is declining, Japan is a major market with

total demand close to twice that of Germany and three times that of the United

Kingdom. If we can reform the supply structure to one that is appropriate for

demand, we should still be able to generate ample cash flows.

In your Medium-Term Management Plan, about half of the

improvement in the profitability of the Petroleum Refining and

Marketing business will be due to improvement in margins. Is this

perhaps somewhat too optimistic?

Q2


In fiscal 2009, refining capacity in Japan as a whole was about 4.8 million BD, but, in reality,

the throughput of crude oil was only 3.6 million BD. In Japan, as all refineries require regular

maintenance, a 100% utilization rate is not possible. Even taking account of this, however,

we still have about 1.0 million BD of excess capacity. Since we are planning to cut capacity

by 0.4 million BD in fiscal 2010, this will not cut the excess capacity in Japan as a whole.

We want to reduce the scale of the supply system to match the level of actual sales. Al-

though the capacity utilization of the JX Group refineries will rise dramatically, other refining

companies will continue to operate at low utilization rates if they do not reduce their capac-

ity. Also, since the JX Group is looking for integration synergies of ¥80 billion for the first

three years after the integration and ¥100 billion for the first five years, the gap between the

competitiveness of JX refineries and that of refiners with low utilization rates will widen.

Therefore, I believe other refining companies will reduce their capacity as well. In fact,

after the JX Group announced its specific plans to cut capacity by 0.4 million BD, some

companies have also announced capacity-reduction plans. I believe the movement toward

adjusting the supply system to match overall demand in Japan will proceed steadily.

Even if the JX Group reduces refining capacity, if other refining

companies raise their rates of utilization, would that not cancel out

the merits for you?Q3



We plan to make capital expenditures, including investments and loans, of ¥960 billion

over the three-year plan, and ¥690 billion out of this expenditure will be strategic invest-

ments in growth fields.

The entire ¥320 billion we plan to invest in the Oil and Natural Gas E&P business will

all be placed in strategic investments. This amount includes investments for the additional

development in existing oil and gas fields to recover depletion in their production levels, but

still, we must anticipate declines in production volume during the course of the Medium-

Term Management Plan. Immediate increases in production volume may be achieved by

acquiring assets that are already developed, but, as the competition for obtaining re-

sources grows more intense, the prices of such assets have risen to extremely high levels.

As the JX Group must consider the profitability of its investments discreetly, there may not

be many suitable assets that we can acquire. Therefore, despite the length of the lead time

until the commencement of production, we will position exploration as the basis of these

activities, and aim for a reserve replacement ratio* of 100% or more as the source of our

future growth. We will fully leverage the expertise and technology that we have accumu-

lated as operators of the projects in Vietnam, Malaysia, and elsewhere.

Investments in the Metals business overall will total ¥300 billion under the plan. Of total

expenditure, ¥220 billion will be strategic investments, of which copper mines development

projects undertaken by the resource development business will compose a large part.

We will aim to establish a highly profitable business structure based on a good balance

between the resource development business and the smelting and refining business, by

raising our so-called “self-sufficiency ratio” of copper concentrate, which is measured by

the percentage of equity entitled copper mine production against the requirements of our

smelters. To this end, we are moving ahead with the development of the Caserones project

in Chile and the Quechua project in Peru. When these two projects go into operation, the

self-sufficiency ratio is expected to exceed 60% in fiscal 2015.

Investment will run ahead of returns in both business areas, oil and natural gas E&P as

well as metals, during the Medium-Term Management Plan as I have mentioned. By the

time when these investments begin to produce results in fiscal 2015, profits of the Oil and

Natural Gas E&P and Metals businesses will expand, and, as a result, our policy to build a

well-balanced business portfolio for the Group will be realized, and we will generate ordi-

nary income of ¥500 billion.

*Reserve replacement ratio: Increase in reserves for the period divided by production during the period

Why is the expectation for improvement in profitability during the

Medium-Term Management Plan not so high, even though you are

planning to make major investments in the Oil and Natural Gas E&P

business as well as in the Metals business?

Q4


If we take a global perspective, the outlook is for the total demand for energy to increase

going forward. In addition, the sense of crisis regarding environmental issues is rising, and

the industrialized countries, in particular, are moving toward the creation of low-carbon,

recycling societies. For the JX Group, which has accumulated know-how and technology

in this field, these trends are likely to bring major opportunities.

Especially in the case of residential-use fuel cells, the JX Group will take initiatives to

establish related technologies as its core technologies for the long term. With its original

hydrogen production, catalyst development, and other technologies from the petroleum

refining business as a base, the JX Group has developed residential-use fuel cells over the

years. Also, we anticipate that there will be many synergies between the residential-use

fuel cell business, which uses mainly liquid petroleum (LP) gas as a fuel, and the Petroleum

Refining and Marketing business. The JX Group has built a new plant and successfully

established systems for mass production with the aim of capturing the future market as

well as gaining a leading position in this area, and it started sales in May 2009. We are

also moving ahead with the development of next-generation fuel cells that will enable the

realization of large cost reductions.

Moreover, as we aim to become a world-leading integrated energy, resources, and

materials business group, we have positioned the field of photovoltaic power generation,

where demand is increasing in line with rising awareness of environmental issues, as

essential for our business portfolio.

In the new energy field, rather than simply marketing such equipment products as fuel

cells and solar cell panels, we are establishing a business model that calls for increasing

customer value through the integrated provision of fuel cells, photovoltaic cells, storage

batteries, and other products. In this way, we want to promote growth in our systems

integrator business.

Taking initiatives to address environmental problems is an important and urgent is-

sue affecting the future survival and prosperity of mankind. One of the JX Group values is

“Harmony with the environment,” and we regard this as one of the most-important man-

agement themes we must pursue. At present, we are in a challenging time of creation and

innovation, but we believe that the establishment of profitable platforms for new energy

businesses will be indispensable for the sustained development of the JX Group.

How will you strengthen the new energy businesses that are

mentioned in the Long-Term Vision?Q5



Under the Medium-Term Management Plan, we are going to implement initiatives to

strengthen our management base and make strategic investments with a view to future

growth. At the same time, we will be moving ahead with improving our financial position by

reducing interest-bearing debt as well. In fiscal 2012, the final year of the plan, our plans

call for attaining ordinary income of ¥300 billion or more, a return on shareholders’ equity

(ROE) of 10% or higher, and a net D/E (debt to equity) ratio of 1.0.

As regards dividends, our fundamental policy will be to redistribute profits reflecting

consolidated business results while striving to maintain stable dividends.

Q6 Could you please explain your positions as regards capital policy,

providing returns to shareholders, and financial soundness?


JX Group Medium-TermManagement Plan (Fiscal 2010 to Fiscal 2012)

Basic PoliciesWith “best practices” as the key word, the JX Group will work to

maximize corporate value through fundamental reforms in its Petroleum Refining and Marketing business, based on realizing integration synergies and making thoroughgoing reductions in costs, while also allocating management resources to highly profitable divisions on a priority basis.

Make thoroughgoing cost reductions through realizing integration synergies + increasing efficiency of refineries

Implement fundamental business reforms in petroleum refining and marketing

1.

Make investments in Oil and Natural Gas E&P and Metals businesses substantially above depreciation

Step up aggressive investments in growth fields2.

Reduce interest-bearing debt using free cash flow

Invest for growth while also improving financial position3.


Return on shareholders’ equity (ROE): 10% or more

0 3 96

*Since a net loss was reported for fiscal 2009 excluding the effects of inventory valuation factors, ROE in that fiscal year was impossible to calculate.

*Excluding the effects of inventory valuation factors

Ordinary (loss) income: ¥300 billion or more

-50 0 100 200 300

FY 2009*

FY 2012

FY 2012

FY 2009*

Net D/E (debt to equity) ratio: 1.0 time

0 0.5 1.0 1.5

End of FY 2009

End of FY 2012

End of FY 2009

End of FY 2012

End of FY 2009

End of FY 2012

0

(Billions of yen)

(Billions of yen)

(Billions of yen)

2,0001,000

Interest-bearing debt

0 2,000

(Times)

(%)

1,5001,000500

1,500500

Shareholders’ equity

Financial Targets for Fiscal 2012Assumptions: Currency rate: ¥90/US$1 Crude oil price (Dubai spot): US$80/barrel Copper price (LME): 280 cents/pound


We will realize ¥80 billion in integration synergies by fiscal 2012. This target is ¥20 billion higher

than the one we announced prior to the management integration. In addition, we are looking

for improvements amounting to ¥29 billion through the activities to enhance the efficiency that

our refineries have been pursuing prior to the integration. Therefore, we will realize a total of

¥109 billion in cost reductions and improvements in efficiency.

Furthermore, by fiscal 2014, we will realize accumulated management integration synergies

of more than ¥100 billion.

■ Integration Synergies, Improvements in Refinery Efficiency


Cost ReductionsComparison with

FY 2009

Refining division

Crude oil procurement,supply coordination,transportation divisions

Purchase division (including metals)

Other cost reductions

Integrationsynergies

FY 2012

Improvement inrefining efficiency

80 29

109(Billions of yen)

21 299

10

40

*For an outline of the Petroleum Refining and Marketing business, please refer to pages 27 to 29.

Source: Ministry of Economy, Trade and Industry, Agency for Natural Resources and Energy

Outlook for Domestic Demand for Fuels(Million kiloliters)

250

200

150

100

50

0(FY) 2008

(Actual)2010 2012

Gasoline Kerosene Diesel fuel

Heavy fuel oil A Heavy fuel oils B and C

Naphtha, jet fuel

-3.7%/year201

173

Earnings Plan (Ordinary Income)

187.3

500.0

202.6

26.145.4

49.0

(135.8)

25.0

160.0

115.0

200.0

FY 2009(Actual)

FY 2012 (Final year of the Medium-Term Management Plan)

FY 2015(For reference)

330.024.0

82.0

61.0

163.0

*NIPPO and Toho Titanium

Petroleum refining and marketing Listed subsidiaries*, othersMetalsOil and natural gas E&P Inventory valuation factors(Billions of yen)

Ordinary loss excludinginventory valuation factors:–¥15.3 billion

Increase in earnings ingrowth areas

Improvement in earningsin Petroleum Refining andMarketing business

To make breakthroughs in performance in fiscal 2013 and subsequent years, we are moving

ahead with the preparation of a growth strategy for the rest of Asia, where demand for energy

and materials is rising, and are working to upgrade our operational base. Specific activities

include increasing the production of petrochemical products, including paraxylene, high

performance functional petrochemicals, and others; expanding our overseas lubricants

business; and developing our new energy businesses.

■ Future-Oriented Growth Strategy

The demand for petroleum products in Japan is expected to remain on a declining trend.

We will create a petroleum refining platform that will be the most competitive in Japan as we

reduce refining capacity to match the demand and raise refinery capacity utilization to the

highest levels as well as make the previously mentioned further cost reductions. Our plans call

for cutting capacity by 400 thousand BD during fiscal 2010, and by a further 200 thousand

BD by the end of fiscal 2013.

■ Reduction in Refining Capacity ahead of the Decline in Domestic Demand


Oil and Natural Gas E&P

Metals

Sales Volume*1 and Reserves*2

of Crude Oil and Natural Gas

Mining Production*1 (Left) andSelf-Sufficiency Ratio of CopperConcentrate*2 (Right)

Positioning exploration activities as the basis for growth, along with promoting additional

development of existing oil and gas fields and asset acquisitions, we are working to replen-

ish and expand our reserves, and accordingly to maintain and expand medium- to long-term

production volume.

■ Maintain and Expand Production Volume in the Medium-to-Long Term

Proceed with the development of the Caserones Copper and Molybdenum Deposit project in

Chile, and move forward with developing the Quechua Copper Deposit in Peru, which is now un-

der a feasibility study, with the goal of increasing the self-sufficiency ratio of copper concentrate.

■ Implement Copper Resource Development

Move ahead with the development of new mining and smelting technologies, including the

Nikko Chloride Process and biomining technology applicable for low-grade ore

■ Develop New Mining and Smelting Technologies

We will proceed with the development of products and markets in targeted growth fields, such

as bringing the Hitachi Metal Recycling Complex (HMC) Works* into full operation, developing so-

phisticated functions in electric materials, and proceeding with polysilicon for photovoltaic power

generation business.

*A recycling plant located in Hitachi City, Ibaragi Prefecture, which is capable of recovering 16 kinds of valuable metals

■ Take Initiatives in Growth Fields, Such as Recycling and Environmental Services, Electronic Materials, and Other Areas

Proceed with priority allocation of management resources, positioning Vietnam, Malaysia, and

the U.K. North Sea as core business geographic areas.

■ Restructure the Resource Portfolio, Principally in Core Countries

*For an outline of the Oil and Natural Gas E&P business, please refer to pages 30 and 31.

*For an outline of the Metals business, please refer to pages 32 to 34.

Sales volume (FY 2009)

Reserves (As of December

31, 2009)

Thousand BOED*3 Million BOE*4

United States 11 48Canada 14 280U.K. North Sea 13 21Vietnam, Malaysia, Indonesia 74 312

Australia, Papua New Guinea 10 88

Middle East, etc. 21 64Total 143 813

（Thousand tons） (%)

300

200

100

0 0

60

40

20

2009 2010(Forecast)

2012(Planned)

2015(For reference)

60% or more

(FY)

Capital Expenditures and Loans and Depreciation over the Three Years of the Plan

375

148

82

51

Depreciation:

¥656 billion

For expanding earnings in growth fields,we will make investments in

the Oil and Natural Gas E&P andMetals businesses substantially

above depreciation.

(Billions of yen)Petroleum refining and marketing Listed subsidiaries*, othersMetalsOil and natural gas E&P

320

300

300

40

Capital Expenditures and Loans:

¥960 billion

Notes:*1. On a project company basis. However, for the Middle

East and certain other areas, on an equity share basis*2. Proven and probable reserves*3. BOED: Barrels of oil equivalent per day*4. BOE: Barrels of oil equivalent

Notes:*1. Sum of equity entitled copper production in copper

concentrate at the invested mines of JX Nippon Mining & Metals and Pan Pacific Copper

*2. Equity entitled copper production in copper concen-trate (as in *1) divided by the volume of the same necessary for the domestic smelters


Roadmap for theLong-Term Vision

Realization of integration synergies: ¥80 billion(From FY 2010 to FY 2012)

Match production capacity to demand: Reduction of 400 thousand BD(By FY 2010)

Increase efficiency of refineries: ¥29 billion(From FY 2010 to FY 2012)

Restructure LPG business organization, implement LNG terminal projects, expand lubricants business overseas, strengthen such petrochemical business as paraxylene, high performance functional petrochemicals, and other products

FY 2012

163

61

82

24

Ordinary income inFY 2012:

¥330 billion(Final year of the Medium-Term Management Plan)

Assumptions

Foreign exchange rate: ¥90/US$1Crude oil price: US$80/barrelCopper price: 280¢/lb

NEXUS

Oil andNatural Gas E&P

Replenish and expand reserves with exploration and development as a baseTake initiatives in enhanced oil recovery technology

New EnergySources

Further development of:Residential-use fuel cellsPhotovoltaic power generationStorage batteries

PetroleumRefining and

Marketing

MetalsCaserones Mine (Chile)begins production(From FY 2013 onward)

Proceed with copper mine developmentTake initiatives in developing new mining and smelting technologies

“For the Future of Energy,Resources and Materials”


FY 2015 FY 2020

A lean and strong production platform appropriate to the level of domestic demand

Develop the most-competitive refining and marketingstructure in Japan

Strengthen overseas business operations focusing on initia-tives to capture demand in Asia outside Japan

¥100 billion(From FY 2010 to FY 2014)

Begin production of LNGin Papua New Guinea(From 2014 onward)

Further increases in efficiency

Further reduction of 200 thousand BD(By FY 2013)

115

160200

25

Ordinary income inFY 2015:

¥500 billion

Assumptions

Foreign exchange rate: ¥90/US$1Crude oil price: US$90/barrelCopper price: 300¢/lb

Petroleum refining and marketing Listed subsidiaries, othersMetalsOil and natural gas E&P

NEXT

Become a sustainably growing oil and natural gas E&P company, focusing on operator activities

Establish solid earnings base

Acquire assets and develop environment-friendly operations

Quechua Copper Mine(Peru) begins production(From 2014 onward)

Further increase in self-sufficiency ratio of copper concentrate

Long-Term

Vision

Become a

world-leading

integrated

energy,

resources

and materials

business

group


Yasushi KimuraRepresentative Director and President

JX Nippon Oil & Energy Corporation

Masanori OkadaRepresentative Director and President

JX Nippon Mining & Metals Corporation

PetroleumRefining and MarketingBusiness

MetalsBusiness

Market share of domestic petroleumproduct sales

35%(No. 1 in Japan)

Paraxylene supply capacity:

2.62 million tons/year(No. 1 in Asia)

*1: This figure is the sum of Pan Pacific Copper (66% owned by JX Nippon Mining & Metals), 610 thousand tons/year, and LS-Nikko Copper (39.9% owned by JX Nippon Mining & Metals), 560 thousand tons/year.

*2: Sum of equity entitled copper production in copper concentrate at invested mines

Refined copper production capacity:

Manufacture and sale of electronic materials:

Approximately80 thousand tons/year*2

(Self-sufficiency ratio of copper concentrate 17%)

1.17 million tons/year*1

(No. 2 in the world)

Mine production volume:

Product groups with market share of No. 1in the world

Makoto KosekiRepresentative Director and President

JX Nippon Oil & Gas Exploration Corporation

Oil andNatural GasExploration and ProductionBusiness

Business activities ofcrude oil, LNG, and oil sands

around the world

Production volume of crude oiland natural gas (a project company basis):

*BOED: Barrels of oil equivalent per day

Approximately

143 thousand BOED*

Review of Operations


Review of Fiscal 2009Domestic demand for petroleum products in fiscal 2009 con-

tinued to decline, reflecting the stagnation in the economy,

the wider use of fuel-efficient automobiles, and the shift

toward gas, electric power, and other energy sources. As a

consequence, annual demand slipped below the 200 mil-

lion kiloliter mark for the first time in 22 years. On the other

hand, the crude oil price was on a rising trend over the fiscal

year, sustained by economic growth in emerging economies

in Asia, including China and India. The price of Dubai crude

oil, which stood at below US$50 a barrel at the beginning of

the fiscal year, was on a rising trend over the fiscal year and

reached US$78 a barrel at fiscal year-end.

Amid this operating environment, Nippon Oil reported an

ordinary loss of ¥111.3 billion from its refining and marketing

business, after the exclusion of inventory valuation factors.

Similarly, Nippon Mining Holdings reported an ordinary loss

of ¥24.5 billion in its refining and marketing business, after

the exclusion of inventory valuation factors. These results

reflect the severity of the refining and marketing business

environment.

JX Nippon Oil & Energy (“NOE”) was formed in July 2010 through the merger of Nippon Oil, Nippon

Petroleum Refining, and Japan Energy. As the Petroleum Refining and Marketing business is the largest

within the JX Group in terms of sales and assets, the NOE Group will play an important role in order for the

JX Group to become a “world-leading integrated energy, resources and materials business group”.

The production bases of the NOE Group comprise eight oil refineries and three plants in Japan. The

NOE Group’s petroleum-refining capacity of 1.73 million barrels per day (BD)* is the largest in Japan, and

its annual production of paraxylene, a petrochemical product, is 2.62 million tons, thus making it the largest

supplier in Asia. In addition, the NOE Group has a network of more than 12 thousand service stations* and

holds a dominant No. 1 position in sales in the Japanese petroleum product market with a 35% share.*As of March 31, 2010


JX Nippon Oil & Energy

(Billions of yen)

2007(FY) 2008 2009

0

-100

-200

-300

-400

-500

100

200

Nippon Oil

Nippon Oil (After exclusion of inventory valuation factors)

Nippon Mining Holdings

Nippon Mining Holdings (After exclusion of inventory valuation factors)

Pro-forma sum (After exclusion of inventory valuation factors)

(23.0)

61.7

(135.8)

■ Ordinary Income (Loss)


■ Strengthening Competitiveness of Refineries

Sendai140

Negishi340 to 270(Scheduled for October 2010)

Osaka115

(October 2010)(To specialize in exports)

Marifu127

Muroran180

Kashima210 to 189(May 2010)Oita

160 to 136(May 2010)

Mizushima455 to 345

(June 2010)

Toyama60 to zero(March 2009)

1,3921,792

March

2009March

2011

After reduction of

400

Maintain a highutilization rate

1,192

March

2014

After reduction of

600

(Thousand BD) (Thousand BD)

Capacity of JX Group Refineries and Plans for Reducing Capacity Refining Capacity

Petroleum Refining and MarketingThe most-important theme in this management integration is to undertake

fundamental structural reforms in the Petroleum Refining and Marketing

business. Policies to attain this objective are (1) to reduce refining capacity

and (2) to develop the most-competitive petroleum refining and marketing

structure in Japan by realizing integration synergies and increasing the

efficiency of refineries.

As domestic demand declines, the biggest issue is reducing excess refin-

ing capacity. The NOE Group will cut its refining capacity by 400 thousand

BD during fiscal 2010.* In addition, in advance of further declines in do-

mestic demand, the NOE Group is planning to reduce refining capacity by

another 200 thousand BD by the end of fiscal 2013, and maintain a high

utilization rate.

Moreover, to increase the efficiency of refineries, the NOE Group will

implement reductions of in-house fuel costs and fixed costs as well as attain

greater efficiencies in operations, with the aim of realizing refineries with a

clearly dominant competitive position.

Integration synergies will have a positive impact of ¥80 billion by fiscal

2012 and ¥100 billion by fiscal 2014. Of these total figures, in the refining

operations, efficiencies will be realized by the reduction in refining capacity

and the implementation of optimal production plans. In addition, in distri-

bution and marketing, the NOE Group will adopt the ENEOS brand in all

its operations, integrate delivery terminals and branches and make thor-

oughgoing reductions in costs, including selling, general and administrative

expenses.

*This figure includes the capacity of the Toyama Refinery (60 thousand BD), which was closed in March 2009.

Mizushima Refinery (located in Kurashiki, Okayama Prefecture)

ENEOS brand to be adopted in all distribution and marketing activities


Paraxylene is used in manufacturing a wide range of prod-ucts, including PET bottles.

CLAF, a nonwoven polyolefin product

PetrochemicalsOn an annual basis, the NOE Group has the capacity for production of

990 thousand tons of propylene, 1,320 thousand tons of benzene, and

2,620 thousand tons of paraxylene. A high percentage of the output of

these products is exported, and the NOE Group competes in the whole

of Asia; however, its strengths include its capabilities for the production

using the equipment, infrastructure, and other facilities of the largest

petroleum refineries in Japan. In the case of paraxylene in particular, the

NOE Group is the No.1 supplier in Asia and will implement a strategy of

competitive dominance based on its market presence.

In parallel with these initiatives, the NOE Group will work to aggres-

sively develop its high performance functional petrochemicals business

through further expanding sales of ethylidene norbornene (ENB), which

is a raw material for synthetic rubber; XYDAR®*, a liquid crystal polymer;

nonwoven fabrics CLAF and MILIFE; and other products that, even if their

sales are relatively small, have high global market shares, and thereby

establish solid market positions in Japan and overseas.

The residential-use fuel cells loaded and waiting for the first shipment

New EnergyAs the awareness of environmental issues becomes more acute around

the world, the NOE Group has positioned the development of new

energy businesses, principally residential-use fuel cells, as a growth

business and is working aggressively to develop these businesses. Sales

of residential-use fuel cells, which are based on hydrogen technology

derived from the refining business, began in May 2009, and about 1,200

units were sold that year. Going forward, the NOE Group will strengthen

its revenue base and plans to expand its sales channels and work to

lower costs to sell into a wider market, as well as further develop its busi-

ness model to offer proposals for energy systems that also incorporate

photovoltaic power generation. Demand for residential-use fuel cells is expected to expand in the years ahead.

■ End Uses of Principal Functional Petrochemical Products

Main end products

ENB Rubber parts for automobiles (windshield wiper rubber), win-dow rubber sealing components, etc.

XYDAR®* Connector parts for electronic devices, such as PCs, mobile phones, digital appliances, etc.

CLAF, MILIFE Bags for produce, household wraps, wallpaper, window blinds

*XYDAR® is a registered trademark of Solvay Advanced Polymers, LLC.


Oil and Natural Gas Exploration and Production (E&P) Business

JX Nippon Oil & Gas Exploration (“NOEX”) was formed as one of the core companies of the JX Group to

play an important role in the Group’s overall growth strategy through the merger of Nippon Oil Exploration

and Japan Energy Development. The NOEX Group currently conducts its activities in 15 countries around

the world and produces crude oil and natural gas amounting to 143 thousand barrels of oil equivalent per

day (BOED)*. The NOEX Group acts as operator in a crude oil production project in Vietnam, a natural gas

production project in Malaysia, and an exploration project in the North Sea area of the United Kingdom, as

well as taking a leadership role in their implementation.*Actual production in fiscal 2009

JX Nippon Oil & Gas Exploration

Review of Fiscal 2009In 2009, crude oil and gas prices declined below those of

the previous year, having an adverse impact on the financial

results of both Nippon Oil and Nippon Mining Holdings. In the

E&P business of Nippon Oil, the volume of sales increased

about 3,000BD, but ordinary income was ¥43.2 billion,

representing a ¥77.9 billion decline from the previous year.

In the E&P business of Nippon Mining Holdings due to a

decline in the volume of sales of about 1,000BD, ordinary

income was ¥5.8 billion, a decline of ¥3.5 billion from the

previous year.

2007(FY) 2008 2009

100

80

60

40

20

0

120

140

Nippon Oil Nippon Mining Holdings

124.2 130.4

49.0

Pro-forma sum

(Billions of yen)

■ Ordinary Income


Equipment for crude oil shipments

The Rang Dong oil field (Vietnam)

Basic StrategiesIn the Oil and Natural Gas E&P business, the NOEX Group is positioning

exploration activities as the basis for growth, along with promoting addi-

tional development of existing oil and gas fields and asset acquisitions, as

it works to replenish and expand its reserves, and, thereby, maintain and

expand medium-to long-term production volume. Geographically, the NOEX

Group has positioned Vietnam, Malaysia, and the U.K. North Sea as the

three core countries and will focus on where the NOEX Group has an ac-

cumulated record of accomplishments and knowledge as well as being able

to take the initiative in increasing the value of assets. Accordingly, the NOEX

Group will allocate management resources primarily to these regions.

The NOEX Group will review exploration in new areas while continuing

to actively explore the existing operation areas in the core business

countries with thorough risk management.

In terms of the development of production activities, the NOEX Group

strives to undertake additional development to restrain depletion in its

main crude oil and gas fields, which are in the mature stage, and actively

promotes approaches to new technology, such as enhanced oil recovery.

Work on the Papua New Guinea LNG project, for which the NOEX

Group made the final investment decision in December 2009, is now

under way, with a target date for the first shipments of LNG in 2014.

The NOEX Group will fulfill its mission to contribute to both the

JX Group’s profit and cash flow by carrying out the above strategies

for further growth and development with thorough risk management.

Canada

UAE/Qatar

JapanLibya U.S. (Gulf of Mexico)

U.K. (North Sea)

MyanmarMyanmarMyanmarMyanmarMyanmarMyanmarMyanmar

Thailand

East Timor

ThailandThailandThailandThailandThailandThailand

Vietnam

Australia

Papua New Guinea

Indonesia

Core countries and locations Countries and locations under consideration for core status

Investments of ¥320 billion (Total for three years)

■ Implementation of Growth Strategy

Acquisition of assets, etc.: ¥125 billion

Exploration: ¥75 billion

Development: ¥120 billion

Will steadily carry out investment plans for expansion

of production volume and reserves, with exploration

as the basis for these activities

■ Areas for Crude Oil and Natural Gas Development Activities


■ Ordinary Income

2007(FY) 2008 2009

0

50

-50

100

150

Resource development Smelting and refining

Recycling and environmental services andElectronic materials businesses

Effect of inventory valuation factors

Ordinary income (After exclusion of the effect of inventory valuation factors)

57.3

26.542.6

14.65.928.7

(15.2) (18.5)

2.0

4.913.1

27.4

47.0 45.4

128.6

(Billions of yen)

The JX Nippon Mining & Metals (“NMM”) Group engages in integrated operations, centering on copper, in-

volving resource development, smelting and refining, recycling and environmental services, and electronic

materials businesses.

In the resource development business, the NMM Group owns rights in some of the world’s lead-

ing mines, while Pan Pacific Copper Co., Ltd. (PPC)—a joint venture between NMM and Mitsui Mining &

Smelting Co., Ltd.—is engaged in the development of copper mines in Chile and Peru. In the smelting

and refining business, PPC’s three domestic smelters and refineries account for about 40% of Japan’s

refined copper production, and, together with LS-Nikko Copper Inc., a joint venture in South Korea,

the NMM Group’s refined copper production capacity is the second largest in the world.

In its recycling and environmental services business, the NMM Group leverages technologies developed

in its smelting and refining business to engage in recycling business—which recovers such valuable met-

als as copper, precious metals, and rare metals from used electric appliances and electronic devices—and

provides environmental services involving the processing of industrial waste to render them harmless.

In the electronic materials business, the NMM Group manufactures a diverse range of electronic

materials by drawing on its advanced technologies in the fields of high-purification, high-density

sintering, surface treatment, and precision rolling and processing and other areas. Accordingly, the NMM

Group boasts high shares in the world market for many of these materials.

JX Nippon Mining & Metals

Metals Business

Review of Fiscal 2009The price of copper in the international market rose during

the fiscal year under review, but because of the effects of

the appreciation of the yen, prices quoted in yen were below

those of the previous fiscal year. The sales volume of refined

copper declined from the level of the previous fiscal year,

reflecting weak demand in the domestic market. On the other

hand, the sales volume of electronic material products, with

the exception of some products, increased, reflecting recov-

ery in demand for their end-use products. However, product

prices dropped below the level of the previous fiscal year, in

particular, sputtering targets for flat panel displays (FPDs),

reflecting the drop in prices of indium, a key raw material.

Amid this operating environment, excluding the impact of

inventory valuation factors of ¥2.0 billion, ordinary income in

the Metals business in fiscal 2009 amounted to ¥45.4 billion,

which was ¥1.5 billion lower than in the prior fiscal year.


■ Outline of Resource Development and Smelting and Refining Business

Caserones Copper and Molybdenum Deposit (Chile)

Saganoseki Smelter & Refinery (located in Oita City,Oita Prefecture)

Deposit Current status Ownership ratio Expected annual output Period for production

Caserones Copper andMolybdenum Deposit (Chile)

Under developmentScheduled to begin operation in 2013

PPC 75%Mitsui & Co. 25%

Copper concentrate (copper content): About 110 thousand tons/year Refined copper (SX-EW process)*: About 10 thousand tons/year Molybdenum: About 3,000 tons/year

2013 to 2040

Quechua Copper Deposit (Peru) Feasibility study in progress PPC 100% Copper concentrate (copper content): About 76 thousand tons/year 2014 to 2030

■ Outline of Copper Mines under Development

* SX-EW process: Solvent extraction electrowinning process

*1: Source: Brook Hunt *2: Indirect ownership portion of JX Nippon Mining & Metals *3: PPC owns 63.51% of the total of 260 thousand tons/year production capacity.

Overseas Mines

Collahuasi Mine(Chile)

Escondida Mine (Chile)

Los Pelambres Mine (Chile)

3.6%*2

3%*2

15%*2

Smelting and Refining Alliances

Pan Pacific Copper (PPC) LS-Nikko Copper

39.9% *2

100%

JX Nippon Mining & Metals

JX Holdings

610 thousand tons/year (Japan) 560 thousand tons/year (South Korea)

Onsan Plant

66.0%

34.0% 5.0%

Mitsui Mining & Smelting Co., Ltd.

450 thousand tons/year 160 thousand tons/year*3

Saganoseki Smelter & Refinery/Hitachi Works Tamano Smelter, Hibi Kyodo Smelting Co., Ltd.

Investment

Investmentreturn

Stableprocurement

of copper concentrate

Refined copper production capacity ranks No. 2 in the world and No. 1 in Asia*1 (Total Group capacity: 1.17 million tons)

Resource Development and Smelting and Refining BusinessDemand for refined copper is rising rapidly, along with the economic devel-

opment of China and other newly emerging economies. Meanwhile, as the

supply and demand condition of copper concentrate is tight due to strong

demand, buoyed by the increase in smelting capacity in China, revenues

of mining companies are rising while smelting and refining margins remain

under severe pressure.

In this business, the NMM Group is actively engaged in the develop-

ment of copper resources, with the objective of securing long-term, stable

supplies of high-quality concentrate. By increasing the self-sufficiency ratio

of copper concentrate*, the NMM Group is endeavoring to establish a busi-

ness structure generating high levels of profitability not easily influenced by

fluctuations in the smelting and refining margins. At present, PPC is moving

forward with the development of the Caserones Copper and Molybdenum

Deposit project and the Quechua Copper Deposit project. The production

of these projects is expected to boost the NMM Group’s self-sufficiency

ratio from slightly less than 20% at present to more than 60% in fiscal 2015.

Among other activities, this business is engaged in the development of

new, environment-friendly mining and smelting technologies. These include

biomining technology utilizing bacteria—currently under development in

collaboration with Corporación Nacional del Cobre de Chile (CODELCO),

the Chilean state-owned copper company, and the Nikko Chloride Process

(N-Chlo Process), a new smelting process that is undergoing commer-

cialization trials in Australia. These technologies will make it possible to

extract copper from low-grade ore efficiently and contribute to reducing

the burden on the natural environment. By leveraging the advantages of

these technologies as it obtains new mining concessions, the NMM Group

is aiming to increase its self-sufficiency ratio to 80% and thereby realize a

well-balanced business structure of resources and smelting and refining.

*Equity entitled copper production content in copper concentrate divided by the volume of the same necessary for the domestic smelters


Raw materials for recycling containing copper andprecious metals (purchased)

Nikko EnvironmentalServices Co., Ltd.

(Kanto region)

Electric appliances andelectronic devicesConsumers Electronic

materials

Render harmless/Reclamation

HMC Works, JX Nippon Mining & Metals

Saganoseki Smelter & Refinery, PPC

Metals recovery process

4 core environmental services companies

TomakomaiChemical Co., Ltd.

(Hokkaido and Tohoku regions)

Nikko TsurugaRecycle Co., Ltd.

(Kansai, Tokai, and Hokuriku regions)

Nikko MikkaichiRecycle Co., Ltd.

(Hokuriku and Chubu regions)

Collection of used products

■ Flowchart of the Recycling and Environmental Services Business

Recycling and Environmental Services BusinessIn view of the growing global awareness of environmental issues and short-

ages of natural resources, the JX Metals Group expects to achieve growth in

its recycling and environmental services business.

During fiscal 2009, this business completed the construction of the Hitachi

Metal Recycling Complex (HMC) Works, which efficiently recovers 16 kinds

of rare, precious, and other valuable metals. The NMM Group will realize

stable raw materials collection for full-scale operation of the HMC Works,

using domestic infrastructure as well as overseas sources, including the

Chiongpin Recycling Center in Taiwan.

In addition, the NMM Group is promoting the development of technologies

for recovering valuable metals from used lithium-ion batteries and is aiming to

commercialize these technologies in fiscal 2011.

Treated rolled copper foil

Product nameWorldwide

market share (As of 2009)

Primary uses

Treated rolled copper foil 1st 75% Flexible printed circuit boards

Electro-deposited copper foil 3rd 12% Rigid printed circuit boards

Sputtering targets for LSIs 1st 60% CPUs, memory chips, etc.

Sputtering targets for FPDs 1st 45% Transparent electrodes

Sputtering targets formagnetic applications 2nd 30% HDDs (Hard disk drives), etc.

Corson alloys (C7025) 1st 40% Lead frames, connectors

Titanium copper alloys 1st 60% High-quality connectors, etc.

Phosphor bronze alloys 1st 19%* Connectors, springs forelectronic components

■ Principal Electronic Materials

* Share in Asia

Electronic Materials BusinessThe electronic materials business is working to further enhance profitability

by developing products targeted at growth fields and creating new markets.

The NMM Group’s initiatives include the development of treated rolled cop-

per foil for use in smart phones and other compact and high performance

electronic gadgets as well as the securing of a considerable market posi-

tion in sputtering targets used at leading-edge semiconductor production

lines. As a result of the adverse economical impact after Lehman’s fall, the

market for electronic materials shrank temporarily, but is now on a rising

trend. The NMM Group has large global market shares and strong product

development capabilities, and is well positioned to make the most of these

strengths by responding quickly to the expansion of markets and emer-

gence of new demand.

Aiming to realize additional growth in the future, this business is imple-

menting new initiatives. For example, the NMM Group is reinforcing its

under-bump metallurgy (UBM) formation services for semiconductor wafers,

which draw on its unique, in-house developed electrode-less plating pro-

cess. Also, the NMM Group is moving forward with the commercialization

of cathode materials for use in lithium-ion batteries, for which demand is

expected to increase rapidly when such next-generation automobiles as

hybrid and electric-powered cars come into wider use.


Management Systems

36 Board of Directors and Auditors

38 Corporate Governance

41 Corporate Social Responsibility (CSR)


Board of Directors and Auditors

Representative Director,Chairman of the Board

Shinji Nishio

Representative Director,President

Mitsunori Takahagi

Director, Executive Vice President

Shigeo HiraiIn overall charge of Post-mergerIntegration Department and Corporate Planning Department Ⅰ, andresponsible for Finance & InvestorRelations Department

Director

Yasushi KimuraRepresentative Director,President, JX Nippon Oil & Energy Corporation

Director

Isao MatsushitaRepresentative Director,Executive Vice President,JX Nippon Oil & Energy Corporation

Director

Makoto KosekiRepresentative Director,President, JX Nippon Oil & Gas Exploration Corporation

Director

Masanori OkadaRepresentative Director,President, JX Nippon Mining & Metals Corporation

Director,Senior Vice President

Kiyonobu SugiuchiIn overall charge of CorporatePlanning Department Ⅱ, and responsible for Controller Department

As of July 1, 2010



Yukio YamagataResponsible for Internal AuditDepartment


Kazuo KagamiResponsible for GeneralAdministration Department


Ichiro UchijimaResponsible for Post-merger Inte-gration Department and Corporate Planning Department Ⅰ


Junichi KawadaResponsible for Corporate Social Responsibility Department and Legal Affairs Department, appointed as General Manager of Legal Affairs Department

Outside Director

Etsuhiko Shoyama2009 Chairman Emeritus, Hitachi, Ltd.

(current)

2006 Director, Representative Executive Officer and Chairman, Hitachi, Ltd.

Outside Director

Juichi Takamura2008 Professor Emeritus, Musashino

University (current)

1998 Professor, Department of Contemporary Sociology, Musashino Women’s University, currently called Musashino University

1991 Editorial Director, Nikkei Inc. (Nihon Keizai Shimbun)

Outside Director

Masahiro Sakata2006 Registered as Attorney-at-law

(current)

Advisor, Anderson Mori & Tomotsune (current)

2004 Director-General of the Cabinet Legislation Bureau

Outside Director

Hiroshi Komiyama2009 Chairman, Mitsubishi Research

Institute, Inc. (current)

2005 President of the University of Tokyo

1998 Professor, Department of Chemical Engineering, Faculty of Engineering, the University of Tokyo

Outside Corporate Auditor

Hiroyasu Watanabe2004 Professor, Graduate School of

Finance, Accounting and Law, Waseda University (current)

2002 Director-General, Japan’s National Tax Agency


Mitsudo Urano2007 Representative Director and

Chairman, Nichirei Corporation (current)


Corporate Auditor

Fumio ItoCorporate Auditor

Hideo TabuchiOutside Corporate Auditor

Masao Fujii2003 Registered as Attorney-at-law

(current)

1995 Justice of Japan’s Supreme Court


Hidehiko Haru2002 Member of the Policy Board

of the Bank of Japan

2000 Representative Director and Executive Vice President, The Tokyo Electric Power Company, Inc.

JX Holdings is aware that its mission is to contribute to sustainable economic and social development

through creation and innovation in the fields of energy, resources and materials. In addition, JX Holdings is

cognizant of the importance of promoting all of its business activities as a fair and responsible player and

maximizing its corporate value.

The basic approach to corporate governance of JX Holdings is to make decisions and execute opera-

tional activities quickly and flexibly to implement growth strategies for the JX Group as a whole and to make

appropriate responses to changes in the business environment. In addition, JX Holdings endeavors to

secure the soundness and transparency of its management to respond to the trust and confidence from all

its stakeholders.

Basic Approach to Corporate Governance

As the holding company, JX Holdings focuses especially on formulating medium- to long-term strategies for

the JX Group and strategically allocating management resources to implement these strategies. Under the

holding company, the core operating companies are responsible for actual business activities in the Group:

JX Nippon Oil & Energy Corporation, which is responsible for the Petroleum Refining and Marketing business;

JX Nippon Oil & Gas Exploration Corporation, which runs the Oil and Natural Gas E&P business; and JX

Nippon Mining & Metals Corporation, which is in charge of the Metals business.

Corporate Governance System and ActivitiesCorporate Governance Structure

JX Group Corporate Governance Framework

Business operationExecutive Committee

General Meeting of Shareholders

JX Holdings

Core operating companies

Board of Directors(Chaired by the Representative Director, Chairman)

16 directors, including 4 outside directors

Board of Corporate Auditors6 corporate auditors, including 4 outside corporate auditors

CompensationAdvisory Committee(Chaired by outside director)

Independent auditors

JX Nippon Oil & EnergyCorporation

JX Nippon Oil & Gas ExplorationCorporation

JX Nippon Mining & MetalsCorporation Other Group companies

Representative Director and Chairman

Representative Director and President

Presidents of core operatingcompanies and others

Executive OfficersExecutive Vice PresidentsSenior Vice Presidents

Internal Audit Department (Internal Audit Division)

Management supervision

Internal audits

Election andremoval of auditors

Election and removal ofthe independent auditor (audit firm)

Election andremoval of directors

Monitoring and supervision

Election and removal ofexecutive officers

Audits

Audits

RecommendationsConsultation

Financial audits

Corporate Governance


Meetings of the Board of Directors, under the Rules for the Board of Directors, in principle are held once a

month. After due deliberation, the Board makes decisions on important matters and receives reports from

other directors regarding the conduct of business activities.

Directors are elected for a term of one year and must stand for re-election each year by the General

Meeting of Shareholders. In addition, to strengthen the supervision of management from an objective

perspective, among the total of 16 directors, 4 outside directors are appointed, who are selected on the

basis of their management insight and extensive experience. Moreover, the presidents of the core operat-

ing companies are elected as directors of the holding company and attend the Board meetings to facilitate

discussion and decision making on a Groupwide basis related to management plans and execution of busi-

ness operations by the core operating companies. Also, to support the activities of the outside directors, the

Legal Affairs Department, which acts as the secretariat for the Board of Directors, is responsible for provid-

ing advance briefings regarding the agenda at upcoming Board meetings.

In addition, to ensure the transparency and objectivity of the decision-making processes related to

compensation of directors and executive officers as well as related matters, a Compensation Advisory

Committee has been formed as an advisory body to the Board of Directors.

Board of Directors

Name Position, background, and other information Reasons for election

Etsuhiko Shoyama Chairman Emeritus at Hitachi, Ltd. Mr. Shoyama served in management positions in Hitachi for many years and has strong insight, extensive experience, and a solid record of accomplishments in corporate management. He was elected as Outside Director because, by drawing on his background, he is able to provide proper guidance and advice and supervise the management of the Company from his outside perspective.

Juichi Takamura Professor Emeritus at Musashino University Mr. Takamura’s prior experience includes serving as a member of senior management and edito-rial director of Nikkei Inc. (Nihon Keizai Shimbun). Subsequently, he was appointed to lecture at Musashino Women’s University (currently, Musashino University) and served as a member of the textiles and coal subcommittees of Japan’s Industrial Structure Council. He was elected as Outside Director because, by drawing on his sophisticated professional knowledge and strong insight into corporate management, he is able to provide proper guidance and advice and supervise the management of the Company from his outside perspective.

Masahiro Sakata Attorney-at-law and a former Director-General of the Cabinet Legislation Bureau

Mr. Sakata served for many years in the Ministry of Finance and held other key positions, includ-ing that of Director-General of the Cabinet Legislation Bureau. He was elected as Outside Direc-tor because, based on his extensive specialized knowledge and experience in administrative and legal matters, he is able to provide proper guidance and advice and supervise the management of the Company from his outside perspective.

Hiroshi Komiyama Former President of the University of Tokyo Mr. Komiyama’s fields of specialization are chemical systems engineering, functional materi-als chemistry, and global environmental engineering. He held the position of professor and conducted research for many years at the University of Tokyo and later served as president of that institution. He was elected as Outside Director because, based on his extensive special-ized knowledge and experience in the management of a major university, he is able to provide proper guidance and advice and supervise the management of the Company from his outside perspective.

Information Regarding Outside Directors

The Executive Committee has been formed to discuss and authorize important matters related to opera-

tional execution that require the approval of the President. Meetings of this committee are held periodically

(normally, every other week). In the Executive Committee, through group consideration and discussion by

management of the holding company and the core operating companies, decisions are made appropriately

and efficiently.

Executive Committee


Among the total of six corporate auditors, a majority, or four outside auditors, are appointed who are se-

lected on the basis of their management insight and extensive experience. This is a structure in accordance

with Japan’s Companies Act, in which the authority of the corporate auditors and the Board of Auditors has

been strengthened and expanded to secure the effectiveness of their audits to the performance of manage-

ment duties by the directors. Under this system, the corporate auditors attend the meetings of the Board

and the Executive Committee as well as other important meetings, receive reports, and, as necessary, state

their opinions. In addition, to create efficient auditing systems for the JX Group as a whole, some of the cor-

porate auditors of the holding company serve as auditors of the core operating companies of the JX Group.

The corporate auditors meet periodically with the representative directors and other members of man-

agement and maintain close teamwork with the audit firm (independent auditors) and the Internal Audit

Department, which is responsible for internal auditing activities. Moreover, the corporate auditors receive

reports on the conduct of business activities periodically from the directors and various departments, and,

when violations of legal regulations occur, they receive reports promptly on such matters.

To further enhance the auditing functions that are performed by all the auditors including outside auditors,

an Auditors’ Affairs Office has been formed, which is clearly independent of the business execution depart-

ments. Dedicated staff are assigned to this office, and they assist the auditors in the conduct of their duties.

Decisions regarding personnel matters related to the employees assigned to the Auditors’ Affairs Office,

including performance evaluations, reassignment, and other matters, are decided after prior consultation

with the corporate auditors. In addition, to support the activities of the outside corporate auditors, the Legal

Affairs Department, which acts as the secretariat for the Board of Directors, is responsible for providing

advance briefings regarding the agenda at upcoming Board meetings.

Name Position, background, and other information Reasons for election

Masao Fujii Attorney-at-law; Former Justice of Japan’s Supreme Court

Mr. Fujii served for many years as a court judge, including the position of Chief Justice of the Osaka High Court and as a member of the Supreme Court and in other capacities. He, therefore, has extensive specialized knowledge and experience regarding legal matters. He was elected as Outside Corporate Auditor because, from his objective, outside, and fair perspective, he is able to audit the management of the Company in the conduct of their duties.

Hidehiko Haru Former member of the Policy Board of the Bank of Japan

Mr. Haru served for many years with The Tokyo Electric Power Company, Inc., and on the Delib-eration Committee, the Policy Board of the Bank of Japan. He, therefore, has extensive special-ized knowledge and experience regarding corporate management and monetary policy. He was elected as Outside Corporate Auditor because, from his objective, outside, and fair perspective, he is able to audit the management of the Company in the conduct of their duties.

HiroyasuWatanabe

Professor, Graduate School of Finance,Accounting and Law, Waseda University

Mr. Watanabe served in key positions in the Ministry of Finance for many years, including Director-General of National Tax Agency, and, subsequently, became a professor in the Graduate School of Waseda University, and that of the University of Tokyo. He, therefore, has sophisti-cated specialized know-how and deep insight into corporate management. He was elected as Outside Corporate Auditor because, from his objective, outside, and fair perspective, he is able to audit the management of the Company in the conduct of their duties.

Mitsudo Urano Representative Director and Chairman,Nichirei Corporation

Mr. Urano served in the management of Nichirei Corporation for many years and has strong insight into corporate management, extensive experience, and a solid record of accomplishments. He was elected as Outside Corporate Auditor because, from his objective, outside, and fair perspec-tive, he is able to audit the management of the Company in the conduct of their duties.

Information Regarding Outside Corporate Auditors

Readers can access and download the JX Group’s Corporate Governance Report (Japanese only) at the following URL:

http://www.hd.jx-group.co.jp/ir/system/governance.html

Board of Auditors

The ceiling on the total amount of compensation to be paid to directors and auditors from the time of the

establishment of JX Holdings on April 1, 2010 to the time of the first General Meeting of Shareholders

was as follows:

1) The total amount of compensation for all directors: Equal to or less than ¥1.1 billion in one fiscal year (However, if directors also hold positions as employees, the salary and bonuses to be paid in compensation

for these services are not included.) 2) The total amount of compensation for all auditors: Equal to or less than ¥200 million in one fiscal year

Executive Compensation


Corporate Social Responsibility (CSR)

— JX Group Mission Statement —

The JX Group will contribute to the development of a sustainable economy andsociety through innovation in the areas of energy, resources and materials.

— JX Group Slogan —

“The Future of Energy, Resources and Materials”

● Participation in management through voting rights

● Expansion in corporate value (higher dividend levels)

● Timely and appropriate information disclosure

● Robust IR activities

● Put the JX Group mission statement into practice● Contribute to growth in corporate value

● Prepare working environments

● Provide fair and honest opportunities and maintain diversity● Establish human resource development systems● Boost employee satisfaction

● Monitoring of corporate activities

● Requests for cooperation and sponsorship

● Support and cooperation with NPO/NGO activities

● Exchange of viewpoints with NPOs/NGOs

● Demands for corporate activities

● Support for corporate activities

● Relationship with society

● Preservation of the global environment

● Participation in the United Nations Global Compact

● Guidance from and compliance with national and regional governments

● Maintain fair, honest relationships

● Project participation

● Laws and regulations

● Supply raw materials of reliable quality

● Supply environmentally friendly products

JX Group

● Provide safe and reliable products and services of real value● Improve customer satisfaction

● Further enhance quality

● Offer environmentally friendly products and services

● Purchase of products and services

● Increasingly diverse and complex needs

● Ensure fair, honest business opportunities

● Promote green purchasing

Shareholders/Investors

Employees

Local andInternationalCommunities

NPOs andNGOs

GovernmentalOrganizations

BusinessPartners

Customers

The JX Group conducts business activities while maintaining relationships with a variety of stakeholders, among them

shareholders, investors, customers, employees, and business partners. By accurately assessing the needs

of these many stakeholders, and sincerely responding to them, we seek to earn society’s trust.

Relationships with stakeholders

Ethics

Advanced ideas

Relationship with society

Trustworthy products/services

Harmony with the environment

— JX Group Values —

“Our actions will respect the EARTH”


As the requirements grow for structuring a low-carbon, recycling-oriented society,

the roles performed by the energy, resources and materials industries are becoming

increasingly important than ever before. The JX Group is proceeding with research

and technology development in many fields that will contribute to the development

of a sustainable economy and society. The following paragraphs introduce a portion

of these R&D projects.

Working to Create a Better Natural Environment

CSR Activities of the JX Group

The JX Group CSR Report 2010 is available fordownloading from our Website. Please visit

http://www.hd.jx-group.co.jp/english/csr/report

JX Nippon Oil & Gas Exploration is taking initiatives to develop eco-friendly oil fields that make effec-

tive use of the associated gas, which is given off by the production of crude oil, as well as CO2, which

is a cause of global warming. At the Rang Dong oil field in Vietnam, we are making preparations for

pilot tests of a technology that will involve injecting CO2 into the oil layer where it interacts with the oil

to boost the crude oil recovery rate. In addition, at the Mubarraz oil field in the United Arab Emirates

(UAE), we have introduced a technology, for the first time in the Middle East, that involves re-injecting

associated-gas (containing sulfur oxides, CO2, and other substances) that was flared before, back into

the oil layer.

Increasing Crude Oil Production while Reducing the Load on the Natural Environment

Rang Dong oil field (Vietnam)

JX Nippon Mining & Metals, working jointly with CODELCO, the Chilean state-owned copper mining

company, is going ahead with the development of a biomining technology for dissolving and recovering

valuable metals from ore. This technology will make it possible to effectively use low-grade copper ore as

a resource, which, thus far, has been thrown away. At present, an industrial-scale biomass plant is under

construction at CODELCO’s Radomiro Tomic Copper Mine in Chile.

Making Effective Use of Waste Copper Ore

Bioreactor

Copper electrowinningSolvent extraction

Heap of low-gradesulfide copper ore

Bioleachingmicroorganisms

Copper recovery process utilizingbiomining technology

JX Nippon Oil & Energy is moving forward with the development of the high-severity fluid catalytic crack-

ing (HS-FCC) process for heavy fuel oil. This process will generate higher yields of propylene (which is a

raw material for plastic), high-octane gasoline, and other petroleum products. As a result, we will be able

to make more-effective use of heavy fuel oil, and this will make possible the production of higher yields

of petroleum products that are in high demand. At present, a facility that will serve as a demonstration

system for the HS-FCC process technology is under construction at the Mizushima Refinery.

Working toward More-Sophisticated Use of Petroleum

3-D diagram of the complete HS-FCC demonstration system

Exhaust gas flue

Catalyst regeneration tower

Downflow reactor

Entire system

Reaction-catalyst cyclic regeneration system


Financial Section

JX Holdings, Inc.

44 Fact Data

48 Five-Year Financial Summary

50 Unaudited Pro Forma Combined Consolidated Balance Sheets

51 Unaudited Pro Forma Combined Consolidated Statements of Income

52 Business and Other Risks

Nippon Oil Corporation

58 Management’s Discussion and Analysis of Operations

64 Consolidated Balance Sheets

66 Consolidated Statements of Income

67 Consolidated Statements of Changes in Net Assets

68 Consolidated Statements of Cash Flows

69 Notes to Consolidated Financial Statements

92 Report of Independent Auditors

Nippon Mining Holdings, Inc.

93 Management’s Discussion and Analysis of Operations

96 Consolidated Balance Sheets

98 Consolidated Statements of Income

99 Consolidated Statements of Changes in Net Assets

100 Consolidated Statements of Cash Flows

101 Notes to Consolidated Financial Statements

125 Report of Independent Auditors


Fact Data

MARKET DATA (Related to Petroleum Refining/Marketing Business and Oil & Gas Exploration Business)

1. Structures of Primary Energy Consumption in Major Industrialized Countries

%

Crude Oil Conversion Basis (millions of tons)

(Calendar 2009) Oil Coal Natural Gas Nuclear Hydroelectric Total Total

Japan 42.6 23.5 17.0 13.4 3.6 100 463.9United States 38.6 22.8 27.0 8.7 2.9 100 2,182.0United Kingdom 37.4 14.9 39.2 7.9 0.6 100 198.9France 36.2 4.2 15.9 38.4 5.4 100 241.9China 18.6 70.6 3.7 0.7 6.4 100 2,177.0Russia 19.7 13.0 55.2 5.8 6.3 100 635.3World 34.8 29.4 23.8 5.5 6.6 100 11,164.3Source: BP

2. Global Oil Consumption Trends and Growth RateGlobal Oil Consumption Volume

Thousands of BD(Calendar Years) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

North America 23,548 23,571 23,665 24,050 24,898 25,023 24,904 25,020 23,795 22,826Europe 19,577 19,766 19,760 19,940 20,139 20,301 20,498 20,203 20,193 19,372Asia/Pacific 21,126 21,282 21,891 22,671 23,957 24,331 24,721 25,462 25,662 25,998Middle East 4,838 4,979 5,164 5,394 5,706 6,010 6,247 6,469 6,864 7,146Africa 2,484 2,517 2,552 2,614 2,691 2,800 2,786 2,931 3,045 3,082Latin America 4,855 4,916 4,913 4,754 4,871 5,047 5,210 5,533 5,681 5,653World 76,428 77,032 77,945 79,424 82,261 83,513 84,367 85,619 85,239 84,077

Growth in Global Oil Consumption Volume %(Calendar Years) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

North America/Europe 100.0 100.5 100.7 102.0 104.4 105.1 105.3 104.9 102.0 97.9Asia/Pacific 100.0 100.7 103.6 107.3 113.4 115.2 117.0 120.5 121.5 123.1World 100.0 100.8 102.0 103.9 107.6 109.3 110.4 112.0 111.5 110.0Note: Growth in global oil consumption figures are percentages of 2000 levels.Source: BP

3. Japanese Consumption by Type of Petroleum Products

Japan Ten-thousands of BD %(Calendar Years) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008

Gasoline 98 100 102 103 103 105 105 103 102 98 21Kerosene & jet fuel 73 72 74 73 73 70 74 69 63 59 12Diesel fuel 126 124 124 121 119 117 115 108 100 92 19Heavy fuel oil 70 65 60 57 66 59 58 55 52 54 11Others 197 191 181 178 182 181 181 185 187 175 37 Total 564 552 541 532 543 532 533 520 504 478 100

(Reference)United States Ten-thousands

of BD %Europe Ten-thousands

of BD %Asia Ten-thousands

of BD %

Gasoline 899 46 Gasoline 236 15 Gasoline 421 17Kerosene & jet fuel 155 8 Kerosene & jet fuel 132 9 Kerosene & jet fuel 216 8Diesel fuel 395 20 Diesel fuel 635 41 Diesel fuel 714 28Heavy fuel oil 62 3 Heavy fuel oil 164 11 Heavy fuel oil 359 14Others 439 23 Others 367 24 Others 839 33 Total 1,950 100 Total 1,534 100 Total 2,549 100Note: Data for the United States and Europe is for calendar 2008, while data for Asia is for calendar 2007.Source: International Energy Agency (IEA)

4. Supply and Demand for Petrochemical Products in Asia (Propylene, Benzene, and Paraxylene)

Thousands of Tons(Calendar Years) 2004 2005 2006 2007 2008

Propylene Demand 23,314 25,508 26,841 28,980 29,095Production 23,688 25,213 26,862 28,970 28,879

Benzene Demand 14,132 15,022 15,883 17,894 17,107Production 14,526 15,518 16,505 18,606 18,028

Paraxylene Demand 14,437 15,573 16,479 18,834 18,178Production 13,200 14,520 16,324 18,074 17,606

Note: Asia includes figures for Oceania. Source: Ministry of Economy, Trade and Industry (METI)


MARKET DATA (Related to Metals Business)

5. Metals Prices

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

LME copper price (Calendar years) (¢/lb) 82 72 71 81 130 167 305 323 316 234LME copper price (Fiscal years) (¢/lb) 82 69 72 93 136 186 316 344 266 277Gold price (Fiscal years) ($/troy oz) 272 278 326 378 414 477 629 766 867 1,023

6. Copper Mine Production of Principal Countries

Thousands of tons(Calendar Years) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

China 593 587 568 604 742 762 873 928 1,076 961Indonesia 1,006 1,047 1,163 1,003 842 1,064 817 789 650 970Chile 4,602 4,739 4,581 4,904 5,413 5,321 5,361 5,557 5,330 5,390Peru 554 722 845 843 1,036 1,010 1,048 1,190 1,268 1,275Australia 832 896 879 830 854 930 875 871 886 854United States 1,444 1,340 1,140 1,120 1,160 1,140 1,197 1,168 1,310 1,204 Global total 13,244 13,755 13,566 13,713 14,710 15,188 15,180 15,539 15,660 15,851Source: WBMS

7. Refined Copper Production of Principal Countries


Japan 1,437 1,426 1,401 1,430 1,380 1,395 1,532 1,577 1,540 1,440China 1,371 1,523 1,633 1,836 2,199 2,583 3,003 3,499 3,795 4,110India 259 325 374 391 419 518 627 719 669 721United States 1,802 1,800 1,512 1,310 1,310 1,260 1,250 1,326 1,280 1,160Chile 2,668 2,882 2,850 2,902 2,837 2,824 2,811 2,937 3,060 3,272Germany 710 694 696 598 653 642 662 666 690 669Russia 824 888 860 818 885 1,008 959 923 913 874 Global total 14,816 15,683 15,683 15,239 15,853 16,665 17,341 18,029 18,497 18,515Source: WBMS

8. Refined Copper Consumption of Principal Countries


Japan 1,349 1,145 1,164 1,202 1,279 1,227 1,282 1,252 1,184 875China 1,928 2,307 2,737 3,084 3,364 3,639 3,614 4,863 5,149 7,144India 240 293 295 308 342 398 407 516 515 552Other Asia 2,508 2,415 2,751 2,708 3,057 2,996 3,036 3,124 3,053 3,096United States 3,026 2,619 2,364 2,290 2,410 2,270 2,096 2,123 2,020 1,650Chile 83 90 81 96 100 103 111 105 103 91Europe total 4,579 4,342 4,327 4,284 4,648 4,652 4,962 4,757 4,583 3,594 Global total 15,192 14,685 15,039 15,362 16,745 16,817 16,974 18,108 18,096 18,256Source: WBMS

9. Global Copper Demand by Product

Thousands of tons(Calendar Years) 2001 2002 2003 2004 2005 2006 2007 2008 2009

Electric wire 10,415 10,499 10,957 11,949 11,915 12,259 12,531 12,472 11,727Copper and copper alloy fabricated products 7,040 7,124 7,455 8,878 8,890 9,231 9,468 9,174 8,591Other 1,052 793 833 851 853 970 1,020 999 839 Total 18,508 18,415 19,245 21,679 21,658 22,461 23,019 22,644 21,157Note: Including direct copper scrap consumptionSource: Brook Hunt—A Wood Mackenzie Company, September 2010


OPERATING DATA (Related to Petroleum Refining/Marketing Business and Oil & Gas Exploration Business)

1. Crude Oil Prices and End User Gasoline Prices

(Fiscal Years) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Crude Oil (CIF*) Price ($/bbl) 28.37 23.84 27.40 29.43 38.77 55.81 63.50 78.72 90.52 69.40 (¥/KL) 19,617 18,645 21,034 20,955 26,158 39,736 46,659 56,335 58,541 40,373

Regular gasoline price (¥/L) 103 101 100 101 115 128 136 146 146 125Note: Regular gasoline prices since 2004 include consumption tax.* CIF = Cost, Insurance, and FreightSource: “Customs Clearance Statistics,” Ministry of Finance (MOF)

2. Comparison with Other Major Oil Companies in Japan

Refining Capacity Paraxylene Production CapacityThousands

of BDThousands

of tons

JX Group 1,831 JX Group 2,610ExxonMobil Group 836 ExxonMobil Group 490Idemitsu Kosan 640 Idemitsu Kosan 479Cosmo Oil 555 Other 400Showa Shell Sekiyu Group 515 Total 3,979Other 417 Note: Figures represent capacities as of December 31, 2009.

Total 4,793Note: Figures represent capacities as of March 31, 2010.

3. Domestic Refining Capacity and Capacity Utilization Rates

Refining CapacityThousands of BD

Capacity Utilization Rates%

(Fiscal Years) 2005 2006 2007 2008 2009 (Fiscal Years) 2005 2006 2007 2008 2009

Industry total 4,770 4,830 4,895 4,835 4,793 Industry total 87 83 83 79 75JX Group 1,767 1,787 1,852 1,792 1,831 JX Group 89 86 85 79 75Note: Figures for refining capacity represent levels as of March 31 each year.

4. Sales Volume of Principal Products and Numbers of Service Stations

Sales Volume of Principal Products Number of Stationary Service Stations

Industry Total Millionsof KL

JX Group Millionsof KL

(Fiscal Year) 2009 (Fiscal Year) 2009 (Fiscal Years) 2005 2006 2007 2008 2009

Gasoline/naphtha 104.9 Gasoline/naphtha 30.9 Industry total 47,000 45,000 43,000 41,000 39,000Middle distillates*1 73.6 Middle distillates 29.0 JX Group 15,325 14,746 14,144 13,318 12,687Heavy fuel oil*2 16.4 Heavy fuel oil 6.3 Company-owned 3,674 3,541 3,375 3,140 2,893 Total 194.9 Total 66.2 Company-owned

proportion (%) 24.0 24.0 23.9 23.6 22.8Note: Figures represent domestic sales volumes of petroleum products.*1. Total of kerosene, diesel, jet fuel, and heavy fuel oil A*2. Total of heavy fuel oils B and C

5. JX Group’s Oil/Natural Gas Production Volume in Principal Locations

Production Volume Total ReservesProject companies’ entitlement basis, BOED*1 Millions of BOE*2

(Calendar Years)2005 2006 2007 2008 2009

Reserves as of December 31, 2009

United States 9,400 10,200 13,200 8,900 11,700 48Canada*3 10,700 12,900 15,200 14,400 14,000 280United Kingdom (North Sea) 16,900 13,700 12,500 14,600 12,700 21Southeast Asia 104,100 102,900 94,500 83,600 81,600 352Oceania 17,400 14,200 11,400 6,100 10,200 88Middle East, etc. 16,400 16,200 14,400 13,700 12,900 24 Total 174,900 170,100 161,200 141,300 143,100 813*1. BOED = Barrels of oil equivalent per day*2. BOE = Barrels of oil equivalent *3. Synthetic crude oil


OPERATING DATA (Related to Metals Business)

6. Resource Development Business

Copper Concentrate Sales Volume*1 % Thousands of tons

(Calendar Years)Investment

ratio2001 2002 2003 2004 2005 2006 2007 2008 2009

Escondida Mine 2.0*2 663 622 852 1,018 1,104 1,158 1,230 991 792Los Pelambres Mine 15.0 376 328 343 364 330 336 300 353 324Collahuasi Mine 3.6 389 377 326 424 364 381 396 412 488*1. Copper content in copper concentrate*2. Current investment ratio of Escondida Mine is 3.0% as a result of the additional acquisition in May 2010.

(Reference) Global Ranking of Copper Mines Thousands of tons

Production volumeRank Country 2009

1. Escondida Chile 1,1042. PT Freeport Indonesia Indonesia 7713. Chuquicamata Chile 6044. Collahuasi Chile 5365. El Teniente Chile 4146. Norilsk Russia 3897. Los Pelambres Chile 3238. Antamina Peru 3159. Cerro Verde Peru 309

10. Radomiro Tomic Chile 308Note: Including refined copper production by SX-EW process Source: Brook Hunt—A Wood Mackenzie Company, September 2010

7. Copper Smelting and Refining Business

Thousands of tons(Fiscal Years) 2001 2002 2003 2004 2005 2006 2007 2008 2009

Refined copper sales volume by Pan Pacific Copper (PPC) 584 583 622 607 588 645 660 619 605

(Reference) Global Ranking of Refined Copper Producers

Thousands of tons

Production volumeRank 2009

1. Codelco 1,868.62. PPC and LS-Nikko Copper (JX Group) 1,091.8*3. Freeport McMoRan Copper & Gold 1,025.44. Aurubis 818.35. Jiangxi Copper 800.06. Xstrata 761.87. BHP Billiton 606.08. Tongling Nonferrous Metals 517.29. Sumitomo Metal Mining 516.4

10. KGHM Polska Miedz 502.0* This figure was compiled by JX Holdings.Source: Brook Hunt—A Wood Mackenzie Company estimations

8. Recycling and Environmental Services Business

Tons(Fiscal Years) 2007 2008 2009

Volume of gold recovered 7.2 7.0 6.3

9. Electronic Materials Business

(Fiscal Years) 2001 2002 2003 2004 2005 2006 2007 2008 2009

Treated rolled copper foil sales volume (km/month) 1,059 2,009 3,097 3,393 3,794 3,588 3,509 2,554 2,724Precision rolled products sales volume (tons/month) 3,323 4,107 3,954 3,748 3,407 3,600 3,721 2,714 3,507


Five-Year Financial SummaryNippon Oil Corporation and Consolidated SubsidiariesNippon Mining Holdings, Inc. and Consolidated SubsidiariesYears ended March 31

Thousands ofU.S. dollars Millions of yen

2010 2010 2009 2008 2007 2006

For the Year

Net sales

Pro Forma ........................................ $96,860,398 ¥9,008,017

Nippon Oil Corporation .................... 62,089,022 5,774,279 ¥7,389,234 ¥7,523,990 ¥6,624,256 ¥6,117,988

Nippon Mining Holdings, Inc. ........... 34,756,427 3,233,738 4,065,059 4,339,472 3,802,447 3,026,262

Operating income (loss)

Pro Forma ........................................ 1,402,935 130,473

Nippon Oil Corporation .................... 932,634 86,735 (312,506) 263,962 159,684 303,930

Nippon Mining Holdings, Inc. ........... 470,099 43,738 (101,667) 103,186 132,258 144,448

Ordinary income (loss)

Pro Forma ........................................ 2,013,645 187,269

Nippon Oil Corporation .................... 1,218,301 113,302 (275,448) 275,666 186,611 309,088


Net income (loss)

Pro Forma ........................................ 786,086 73,106



At Year-End

Total assets

Pro Forma ........................................ $66,631,602 ¥6,196,739

Nippon Oil Corporation .................... 44,400,344 4,129,232 ¥3,969,730 ¥4,594,197 ¥4,385,533 ¥4,231,814

Nippon Mining Holdings, Inc. ........... 22,221,700 2,067,507 1,886,083 2,251,208 2,056,407 1,859,583

Net assets

Pro Forma ........................................ 18,985,505 1,765,652

Nippon Oil Corporation .................... 11,388,054 1,059,089 1,016,306 1,429,266 1,331,981 1,130,328

Nippon Mining Holdings, Inc. ........... 7,594,185 706,563 659,938 765,264 701,064 467,479

Cash Flows

Cash flows from operating income

Pro Forma ........................................ $ 437,355 ¥ 40,674

Nippon Oil Corporation .................... 333,140 30,982 ¥ 441,202 ¥ 103,216 ¥ 205,867 ¥ 34,021

Nippon Mining Holdings, Inc. ........... 104,170 9,692 275,068 56,830 41,200 24,258

Cash flows from investing activities

Pro Forma ........................................ (2,595,043) (241,339)

Nippon Oil Corporation .................... (1,564,849) (145,531) (324,641) (199,709) (143,487) (115,073)

Nippon Mining Holdings, Inc. ........... (1,029,751) (95,808) (93,775) (114,391) (97,576) (37,594)

Cash flows from financing activities

Pro Forma ........................................ 1,221,613 113,610



Note: U.S. dollar amounts have been converted at the rate of March 31, 2010.


U.S. dollars Yen

2010 2010 2009 2008 2007 2006

Per Share

Net income (loss)

Nippon Oil Corporation .................... $0.32 ¥ 29.70 ¥(172.42) ¥101.49 ¥ 48.12 ¥114.08

Nippon Mining Holdings, Inc. ........... 0.35 32.17 (44.02) 107.14 117.91 113.87

Shareholders’ equity

Nippon Oil Corporation .................... 7.08 658.54 627.90 896.06 829.64 775.62

Nippon Mining Holdings, Inc. ........... 6.94 646.04 612.44 735.22 671.56 551.36

Cash dividends

Nippon Oil Corporation .................... 0.19 18 20 12 12 12

Nippon Mining Holdings, Inc. ........... 0.16 15 14 16 16 15

%

2010 2009 2008 2007 2006

Ratio

ROE

Nippon Oil Corporation ................................................ 4.62% (22.62)% 11.76% 5.94% 15.98%

Nippon Mining Holdings, Inc. ....................................... 5.1 (6.5) 15.2 19.5 23.6

Shareholders’ equity ratio

Nippon Oil Corporation ................................................ 23.2 23.1 28.5 27.7 26.7

Nippon Mining Holdings, Inc. ....................................... 29.0 30.1 30.3 30.3 25.1

Market Date

Exchange rate (¥/$) ........................................................ ¥93 ¥101 ¥114 ¥117 ¥113

Crude oil price (Dubai spot price) ($/bbl) ........................ $70 $82 $77 $61 $54

Copper price (LME) (¢/lb) ............................................... 277¢ 266¢ 344¢ 316¢ 186¢


Unaudited Pro Forma Combined Consolidated Balance SheetsNippon Oil Corporation and Consolidated SubsidiariesNippon Mining Holdings, Inc. and Consolidated SubsidiariesYears ended March 31

Millions of yenThousands ofU.S. dollars

2010 2009 2010

AssetsCurrent assets: Cash and deposits ¥ 269,309 ¥ 384,519 $ 2,895,796 Inventories 1,258,563 1,003,927 13,532,935 Other 1,322,854 1,162,124 14,224,237

Total current assets 2,850,727 2,550,571 30,652,978

Total investments and other assets 642,705 586,367 6,910,806

Property, plant and equipment Land 968,807 946,997 10,417,280 Other, net 1,059,152 1,124,248 11,388,731

Total property, plant and equipment 2,027,959 2,071,246 21,806,011

Intangible assetsOther assets 675,346 647,627 7,261,785

Total assets ¥6,196,739 ¥5,855,813 $66,631,602

Liabilities and net assetsCurrent liabilities: Short-term loans payable ¥ 719,342 ¥ 656,368 $ 7,734,860 Current portion of bonds 173,176 129,207 1,862,108 Commercial paper 352,000 242,000 3,784,946 Other 1,730,685 1,621,138 18,609,516

Total current liabilities 2,975,204 2,648,714 31,991,441

Long-term liabilities: Bonds and long-term loans payable 1,059,446 1,130,547 11,391,892 Other 396,434 400,306 4,262,731

Total long-term liabilities 1,455,881 1,530,854 15,654,634

Net assetsShareholders’ equity: Common stock: Capital stock 213,357 213,357 2,294,161 Capital surplus 502,473 502,446 5,402,935 Retained earnings 844,906 814,358 9,085,011 Treasury stock (4,906) (5,272) (52,753)

Total shareholders’ equity 1,555,831 1,524,890 16,729,366

Total valuation and translation adjustments 3,189 (42,137) 34,290

Stock acquisition rights 499

Minority interests 206,631 192,992 2,221,839

Total net assets 1,765,652 1,676,244 18,985,505

Total liabilities and net assets ¥6,196,739 ¥5,855,813 $66,631,602


Unaudited Pro Forma Combined Consolidated Statements of IncomeNippon Oil Corporation and Consolidated SubsidiariesNippon Mining Holdings, Inc. and Consolidated SubsidiariesYears ended March 31

Millions of yenThousands ofU.S. dollars

2010 2009 2010

Net sales ¥9,008,017 ¥11,454,293 $96,860,398Cost of sales 8,415,922 11,384,466 90,493,785

Gross profit 592,094 69,828 6,366,602Selling, general and administrative expenses 461,620 484,001 4,963,656

Operating income (loss) 130,473 (414,173) 1,402,935

Non-operating income (expenses): Interest and dividend income 25,639 36,981 275,688 Interest expenses (30,553) (41,254) (328,527) Foreign exchange gains 18,048 4,462 194,065 Equity in earnings of affiliates 41,174 54,719 442,731 Other, net 2,487 16,383 26,742

56,795 71,291 610,699

Ordinary income (loss) 187,269 (342,881) 2,013,645

Special loss (35,319) (108,523) (379,774)

Income (loss) before income taxes and minority interests 151,949 (451,405) 1,633,860

Income taxes 61,292 (178,437) 659,054

Income (loss) before minority interests 90,657 (272,967) 974,806Minority interests in income (17,550) (19,440) (188,710)

Net income (loss) ¥ 73,106 ¥ (292,407) $ 786,086

Notes: 1. The unaudited pro forma combined consolidated financial statements are prepared based on the mathematical sum of corresponding balances in Nippon Oil Corporation and Nippon Mining Holdings, Inc.’s consolidated financial statements. They do not represent consolidated financial statements of these companies under generally accepted accounting principles in Japan.

2. Amounts of less than one million yen and one thousand U.S. dollars have been eliminated. As a result, yen and U.S. dollar totals shown herein do not necessarily agree with the sum of the individual amounts.

3. The translations of yen amounts into U.S. dollar amounts are included solely for the convenience of the reader and have been made, as a matter of arithmetical computation only, at the rate of ¥93=U.S.$1, which is the approximate rate prevailing at March 31, 2010. The translations should not be construed as representations that such yen amounts have been, could have been, or could in the future be converted into U.S. dollars at that or any other rates.


(1) Risks of not attaining the anticipated positive effects

of the integration

JX Holdings, Inc., was established on April 1, 2010, through a joint

transfer of shares between Nippon Oil Corporation and Nippon

Mining Holdings, Inc., as the first step in the management integra-

tion. On July 1, 2010, as the second step in the management inte-

gration, the JX Group made up its Group organization with JX

Holdings as the holding company and three core operating compa-

nies of the Petroleum Refining and Marketing business, the Oil and

Natural Gas E&P business, and the Metals business.

The JX Group is taking initiatives to realize integration synergies

and implanting thoroughgoing measures to reduce costs.

However, in the event that the JX Group cannot deal with the range

of issues it will confront in the process of integration, there is a pos-

sibility that the JX Group will not be able to attain the positive

effects of the integration. The principal issues that must be

addressed are as follows.

(1) Country risks relating to sources of raw material supplies

The JX Group procures large quantities of raw materials outside

Japan. In particular, it is almost entirely dependent on limited crude

oil reserves in the Middle East as well as on limited copper concen-

trate sources in South America, Southeast Asia, and Australia.

Country risks in those countries or regions—for example, involving

political instability, social unrest, deterioration in economic condi-

tions, or changes in laws or policies—may have an impact on the

JX Group’s performance.

(2) Risks relating to business operations in China

and other East Asian countries

Sales of such products as refined copper, petrochemical products,

and electronic materials made by the JX Group depend heavily on

demand in Asian countries, notably China, and the JX Group is

expected to undertake further business expansion in those regions.

� Integration of the organizations and cultures of the JX Group

companies� Rationalization of redundant equipment and facilities, including

reduction of petroleum refining capacity and related issues� Rapid and efficient unification of products and services� Efficient allocation of management resources� Integration of information systems

(2) Risks of changes in relationships with customers

and business partners as a result of the integration

Since the JX Group has become a holding company group, there

may be requests from customers, suppliers, and business partners

of the Nippon Oil Group and the Nippon Mining Holdings Group to

delay or suspend transactions or dissolve joint business relation-

ships. As a result, if relationships with such customers, suppliers,

and/or business partners change, this may have a material impact

on the JX Group’s financial position and business performance.

In the event that, for whatever reason, there is a decline or other

changes in demand for the JX Group’s products in these areas, it

may have a material impact on the JX Group’s financial position

and business performance.

(3) Risks relating to foreign exchange rate fluctuations

Portions of the JX Group’s receipts and payments arise from busi-

ness transactions denominated in foreign currencies, and the JX

Group also has substantial assets and liabilities denominated in for-

eign currencies. Consequently, fluctuations in foreign exchange

rates may affect the value of assets, liabilities, receipts, and pay-

ments when converted into yen.

In addition, fluctuations in foreign exchange rates may also have

a material impact when the financial statements of overseas con-

solidated subsidiaries or equity-method affiliates are converted into

yen.

Business and Other Risks

The JX Holdings Group (hereinafter, JX Group) faces a variety of risks that may have an important impact on its business performance.

The principal risks are those outlined below. Please note that forward-looking statements made in this section are, unless otherwise

stated, judgments made by JX Holdings, Inc., as of the date of presentation of this report.

RISKS OF THE MANAGEMENT INTEGRATION

RISKS AFFECTING THE ENTIRE JX GROUP


(4) Risks relating to collaboration with third parties and busi-

ness investments

In a variety of business fields, the JX Group collaborates with third

parties through joint ventures and other arrangements, and also

makes strategic investments in other companies. These partner-

ships and investments play an important role in the JX Group’s

businesses, and, in the event that, for various reasons, key joint

ventures experience financial difficulties, or it is not possible to

achieve the desired results from collaborative relationships or

investment, this may have a material impact on the JX Group’s

financial position and business performance.

(5) Risks relating to business restructuring

The JX Group is taking steps to reduce costs, concentrate its busi-

ness activities, and enhance efficiency. However, it is possible that

substantial special losses related to such restructuring may occur.

In the event that the JX Group is unable to execute business

restructuring appropriately, or that the restructuring does not

achieve the envisaged improvements in the JX Group’s business

operations, this may have a material impact on the JX Group’s


(6) Risks relating to capital expenditures and investments

Continuing capital expenditures, including investments and loans,

are necessary for the ongoing maintenance and growth of the JX

Group’s businesses. However, it is possible that, for such reasons

as inadequacy of cash flows, it may become difficult to implement

these plans. In addition, it is possible that actual investment

amounts will greatly exceed projections, or that projected earnings

will not materialize.

(7) Risks relating to resource development

The JX Group conducts exploration and development activities

related to oil and natural gas fields and copper deposits. At pres-

ent, these activities are in various stages of development on the

way toward full commercial operation. The success of exploration

and development is influenced by a wide range of factors, including

the choice of areas for exploration and development, the construc-

tion cost of equipment, permits that must be received from govern-

ments, and fund-raising. In the event that individual projects do not

reach the commercial viability stage and funds invested cannot be

recovered, this may have a material impact on the JX Group’s


(8) Risks relating to environmental regulations

The JX Group’s businesses are subject to a wide range of environ-

mental regulations. These regulations impose expenses for environ-

mental cleanups, and, if environmental pollution were to occur, the

payment of fines and compensation would be required, making it

difficult for the JX Group to continue its operations.

The JX Group’s operations give rise to considerable quantities of

wastewater, gas emissions, and waste materials, and unforeseen

circumstances may cause the volumes of these discharges to rise

above their permitted levels. It is also possible that in the future

environmental regulations may be tightened. The obligations and

burdens imposed on the JX Group by these environmental regula-

tions and standards may have a material impact on the JX Group’s


(9) Risks relating to operations

The JX Group’s businesses are exposed to a variety of risks relating

to its operations, such as risks of fire, explosions, accidents, import

or export restrictions, natural disasters, mine collapses, climatic or

other natural phenomena, labor disputes, and restrictions on the

transportation of raw materials or products. If such accidents or

disasters were to occur, considerable losses may ensue.

The JX Group obtains insurance coverage for accidents, disas-

ters, and other contingencies, to the possible and appropriate

extent, but it is possible that compensation may not cover the full

cost of any damages that occur.

(10) Risks relating to intellectual property rights

In the execution of its businesses, the JX Group owns patents and

other intellectual property rights of various kinds, but, in certain cir-

cumstances, it is possible that intellectual property rights may be

difficult to obtain or their validity may be contested. It is also possi-

ble that the JX Group’s corporate secrets may be disclosed or mis-

used by a third party, or that owing to the speed of technical

progress, the protection afforded by intellectual property rights

becomes inadequate with respect to technologies vital to the JX

Group’s businesses.

In addition, a claim from a third party of infringement of intellectu-

al property rights in regard to the JX Group’s technologies may lead

to the payment of substantial royalties or to the prohibition of use

of the relevant technologies.

In such cases as those referred to above, in which the JX Group

is unable to obtain or make adequate use of intellectual property

rights for the conduct of its businesses, the JX Group’s business

performance may be affected.


(11) Risks relating to interest-bearing debt

The large size of its interest-bearing debt may restrict the business

activities of the JX Group. In addition, to make repayments of prin-

cipal and interest relating to this debt, it may be necessary for the

JX Group to raise funds through additional borrowings or the sale

of assets. However, the JX Group’s ability to conduct such fund-

raising may depend upon a variety of factors, such as the state of

financial markets, the JX Group’s share price, and whether or not

there are buyers for the assets. Additionally, if interest rates rise—

either within Japan or overseas—the resultant increase in interest

burden may have a material impact on the JX Group’s financial

position and business performance.

(12) Risks relating to write-down of inventories

owing to decreased profitability

The JX Group has large amounts of inventories. In the event that

the net market value of inventories at the end of the fiscal period is

lower than the corresponding book value owing mainly to declines

in market prices of crude oil, petroleum products, and rare metals,

the book value must be reduced in line with net market value. The

difference between book values and net market value must be

charged to cost of sales and will result in a decline in profitability.

Such write-down of inventories may have an impact on the JX

Group’s financial position and business performance.

(13) Risks relating to the impairment of fixed assets

The JX Group has substantial fixed assets. In the future, if such

factors as changes in the business environment cause the profit-

ability of fixed assets to decline and make it unlikely that funds

invested can be recovered, their book value will be reduced to

reflect the likelihood of recovery, and it will be necessary to post the

amount of the reduction as an impairment loss. This may affect the

JX Group’s financial position and business performance.

(14) Risks relating to information systems

Information systems may become inoperative, as a result of earth-

quake and other natural disasters as well as accidents, and busi-

ness operations may have to be suspended. In such an event, this

may disrupt the production and marketing activities of the JX

Group and have a serious impact on the business of business part-

ners.

(15) Risks relating to the establishment

of internal control systems

The JX Group is making every effort to enhance compliance, risk

management, and other functions as well as to strengthen its inter-

nal control systems, including internal financial reporting systems.

In cases where the JX Group’s internal control systems do not

function effectively, or situations arise in which the reliability of dis-

closure cannot be guaranteed, there is a risk that confidence

among its stakeholders may be significantly impaired, and this may

materially affect the financial position and business performance of

the JX Group.

(16) Risks relating to the management of personal information

The JX Group manages personal information in relation to such

services as petroleum product sales and periodic precious metal

investment plans. The implementation of measures necessary to

protect that information may require considerable expenses going

forward. Furthermore, the leakage or misuse of customers’ person-

al information may have a material impact on the aforementioned

business activities.



(1) Risks relating to fluctuations in margins

in the Petroleum business

The margins in the JX Group’s Petroleum business are determined

by factors beyond the control of the JX Group, largely by the differ-

ence between crude oil prices and the prices of petroleum prod-

ucts.

Factors influencing crude oil prices include the Japanese yen to

U.S. dollar exchange rate, the political situation in oil-producing

regions, production adjustments by the Organization of the

Petroleum Exporting Countries (OPEC), and global demand for

crude oil. Factors that influence the prices of petroleum products

include demand for petroleum products, overseas petroleum prod-

uct market conditions, domestic petroleum-refining capacity and

capacity utilization ratios, and the total number of service stations

in Japan.

Previously, the JX Group had decided to link the prices of petro-

leum products to fluctuations in crude oil prices, but in order to

construct a fair and transparent price system that accurately

reflects petroleum product supply and demand conditions and

market trends, from November 2008, the JX Group changed to a

price system reflecting the petroleum product market. Accordingly,

changes in crude oil prices or petroleum product market conditions

may have a significantly adverse effect on margins, thereby result-

ing in a material impact on the JX Group’s financial position and

business performance.

Furthermore, margins for petrochemical products are affected by

the difference between prices for major raw materials, such as

crude oil and naphtha, and prices for petrochemical products.

These margins are determined by factors beyond the control of the

JX Group. Petrochemical product prices are affected by such fac-

tors as increases in supply capacity through the construction of

new production facilities or the expansion of existing facilities, and

demand trends for apparel, automobiles, home electronics, and

other goods. Owing to weak market conditions, it may be difficult

to pass on cost increases stemming from higher crude oil and

naphtha prices to product prices. This may have a material impact


(2) Risks relating to demand fluctuations and competition

in domestic petroleum products

Mainly in the industrialized countries, initiatives related to the Earth’s

environment have been stepped up, with the aim of accelerating

the development of a “low carbon society.” These initiatives include

making reductions in greenhouse gas emissions and promoting the

saving of energy and natural resources. Amid these developments,

the demand for petroleum products in Japan is expected to contin-

ue to decline along with the trends toward the wider use of fuel-

efficient automobiles and the progress toward transition to other

energy sources, such as gas and electricity. In the event that this

decline in domestic demand continues or accelerates, this may

have a negative impact on the JX Group’s financial position and

business performance. Moreover, in the domestic petroleum refin-

ing and marketing business, competition among industry partici-

pants at present is intense, and there is a possibility that the trend

toward lower demand in the domestic market may accelerate such

competition. More-intense competition may have a material impact


(3) Risks relating to sources of procurement of crude oil

and petroleum products

The JX Group procures all its crude oil from overseas, primarily

from the Middle East, and some petroleum products are procured

abroad and in Japan. Such factors as changes in the political situa-

tion in oil-producing countries, and changes in the supply and

demand balance for petroleum products in Japan and abroad, may

hamper the procurement of crude oil and petroleum products.

Inability to secure an appropriate alternative supply source may

have a material impact on the JX Group’s financial position and


(4) Risks relating to valuation of inventories

The JX Group values inventories, including crude oil and petroleum

products, by the average cost method. During a phase of rising

crude oil prices, inventories initially valued at a comparatively low

level will act to increase profits by pushing down the cost of sales.

However, in a phase of falling crude oil prices, inventories initially

valued at a comparatively high level will act to decrease profits by

pushing up the cost of sales. This may have a material impact on

the JX Group’s financial position and business performance.

RISKS BY SEGMENT


Oil and Natural Gas Exploration

and Production (E&P)

(1) Risks relating to crude oil prices and currency exchange

rate fluctuations in oil and natural gas E&P

Sales in the Oil and Natural Gas E&P business fluctuate along with

changes in crude oil prices and movements in foreign currency

exchange rates. When crude oil prices are rising and the value of

the yen is declining, sales in yen terms increase. When the crude oil

prices are falling and the yen is appreciating, sales in yen terms

decrease. Therefore, during times when crude oil prices move

downward and when the yen is appreciating, the performance of

the JX Group is adversely affected because of the decline in sales

in yen terms.

(2) Risks relating to securing human resources

For the JX Group to show sustained growth in its Oil and Natural

Gas E&P business, it must recruit personnel with high-level special-

ized expertise and broad experience. On the other hand, the com-

petition for recruiting top-quality personnel in the industry is intense,

and there are no guarantees that the JX Group can secure such

personnel. If the JX Group cannot hire such personnel, it may lose

profit-making opportunities and its competitiveness may decline.

This may have a negative impact on the JX Group’s financial posi-

tion and business performance.

(3) Risks relating to securing reserves

As a result of international competition for resources, competitive-

ness conditions for the JX Group to secure reserves have become

substantially more challenging. The future oil and gas output of the

JX Group will depend on the extent to which it can secure reserves

through exploration, development, and acquisition of resources

rights that make possible production on a commercial basis. In the

event that the JX Group cannot supplement its reserves of oil and

gas, its production volume may decline in the future, and this may

have a negative impact on the JX Group’s financial position and


(4) Risk relating to equipment for oil and natural gas E&P

To conduct exploration and production of oil and natural gas, the

JX Group must obtain drilling and other equipment and related ser-

vices from third parties. When the price of crude oil is rising and in

similar circumstances, such equipment and services are in short

supply. In the event that the JX Group cannot obtain such equip-

ment and services with the proper timing and on economical con-

ditions, this may have a negative impact on the JX Group’s financial

position and business performance.

Metals

(1) Risks relating to fluctuations in market conditions

in the copper business

The JX Group’s copper business mainly derives its profit from its

copper smelting and refining business and investments in overseas

copper mines. Any changes in related market prices, as listed

below, could have a material impact on the financial position and

business performance of the JX Group.

The JX Group’s copper smelting and refining business operates

as a custom smelter that purchases copper concentrate from over-

seas copper mines and produces and sells refined copper. The

gross margin mainly comprises smelting and refining margins and

sales premiums.

Smelting and refining margins are determined by negotiations

with the mines that produce copper concentrate, but in recent

years, the supply of copper concentrate to the market has tended

to be inadequate owing to such factors as a lower concentrate

grade, the emergence of an oligopoly of mining majors, and

increasing demand in China, India, and other emerging economies.

With these factors, copper concentrate remains in short supply,

placing downward pressure on smelting and refining margins. In

addition, the smelting and refining margins have been concluded in

U.S. dollars, and in some contracts must partially reflect fluctua-

tions in the international refined copper price. Therefore, smelting

and refining margins decline when the yen appreciates in value and

when international copper prices fall.

Sales premiums, which are added to the international refined

copper price, are determined through negotiations with customers

in consideration of a variety of factors, such as importation costs

and product quality. Depending on the outcome of such talks,

sales premiums could be adversely affected.

The JX Group is also exposed to the risk of reduced returns on

equity-method investments in overseas copper mines, should there

be any fall in international prices of refined copper, since prices of

copper concentrate are based on international prices of refined

copper.

(2) Risks relating to the stable procurement

of copper concentrate

In view of the tight supply and demand conditions for copper con-

centrate, the JX Group has been investing in and financing over-

seas copper mines with the objective of securing stable supplies of

copper concentrate. However, if the JX Group is unable to procure

the copper concentrate its smelting and refining business needs at

the appropriate time, owing to any disruption of operations of over-

seas copper mines, whether the JX Group has invested or not, the

financial position and business performance of the JX Group could

be materially affected.


(3) Risks relating to such factors as demand fluctuations and

technical innovation in the electronic materials business

Many customers of the electronic materials business are in the

IT-related products and consumer electronics industries.

Consequently, such factors as supply and demand conditions and

price movements in those industries may have a material impact on

the JX Group’s business performance. Additionally, if the JX Group

is unable to respond appropriately to rapid technical innovation or

changes in customer needs, this may have a material impact on

the JX Group’s financial position and business performance.

(4) Risks relating to competition in the electronic materials

business

The electronic materials business is facing fierce competition, and

some competitors in this field have powerful corporate strengths in

comparison with those of the JX Group. This competition may have

a material impact on the JX Group’s business performance.

(5) Risks relating to fluctuations in raw material prices in elec-

tronic materials

The prices of the raw materials used in electronic materials fluctu-

ate in accordance with the market prices of metals and other mate-

rials. If increases in the costs of these raw materials cannot be

passed on in the product prices, or if there is some extent of

decline in the market value of inventories compared with the corre-

sponding book value at the start of the fiscal period, there may be

a material impact on the JX Group’s business performance.

(6) Risks relating to environmental issues

surrounding Gould Electronics, Inc. (a U.S. subsidiary)

In relation to environmental problems that arose in the past in its

business activities, Gould Electronics, Inc., a U.S.-based subsid-

iary, is a potential responsible party with regard to specific desig-

nated areas within the United States under U.S. environmental

laws, such as the Superfund Act. The ultimate financial burden the

subsidiary will bear may depend on numerous factors, including the

quantity of the substance and its toxicity for which the areas were

designated, the total number of other potential responsible parties

and their financial position, and remedial methods and technolo-

gies.

In relation to this matter, Gould Electronics, Inc., is providing

reserves that it considers appropriate, but owing to the factors

referred to above, the actual amount of the burden may exceed

these reserves, in which case the JX Group’s business perfor-

mance may be affected.

Other Operations

(1) Risks relating to fluctuating demand

in the construction business

The JX Group’s construction business relies heavily on the demand

for contracted paving, civil engineering, and construction projects.

Therefore, declines in public investment and private capital invest-

ment (including private residential investment) may have a negative

impact on the JX Group’s construction business.

(2) Risks relating to fluctuating demand

in titanium business

The demand for titanium metals (titanium sponge and titanium

ingots) is linked primarily to demand for specific purposes, such as

for aircraft, electric power plants, chemical plants, and seawater

desalination plants. Moreover, its use in catalysts is almost entirely

confined to propylene polymerization.

If demand for titanium in these specific applications fluctuates

substantially, due to changes in domestic or overseas political and

economic conditions, or due to major changes in related consum-

ing industries, it may have an impact on the JX Group’s business

performance, since such fluctuations in demand give similar extent

of effect to the sales volume and prices of titanium products.


Management’s Discussion and Analysis of OperationsNippon Oil Corporation and Consolidated Subsidiaries

1. PERFORMANCE DURING THE YEAROverview

Consolidated Financial Results

On a consolidated basis, the net sales of the Nippon Oil Group

(“the Group”) in the fiscal year ended March 31, 2010, under review

decreased 21.9%, to ¥5,774.3 billion. Operating income amounted

to ¥86.7 billion (an improvement of ¥399.2 billion compared with

the previous fiscal year). This improvement was due to a rebound

from the worsening of operating income in the previous fiscal year

that was attributable to inventory valuation factors (by which inven-

tory valuation under the gross average method pushed up the cost

of sales due to a decline in crude oil prices and the write-down of

inventories that depressed profitability). After excluding inventory

valuation factors, the Group reported an operating loss of ¥70.1

billion (representing a deterioration of ¥204.6 billion from the previ-

ous fiscal year) owing to factors that include declines of sales vol-

ume and the margin on petroleum products, and lower income

from the Oil and Natural Gas E&P business segment.

The Group reported non-operating income of ¥26.6 billion, a

decrease of ¥10.5 billion year on year, due to factors that included

a decline in interest and dividend income and a foreign exchange

gain.

As a result, ordinary income amounted to ¥113.3 billion (an

improvement of ¥388.7 billion year on year). After exclusion of

inventory valuation factors, the ordinary loss was ¥43.5 billion (a

deterioration of ¥215.1 billion year on year).

Due to a loss on write-down of investments in securities and

other assets, a loss on impairment of fixed assets, and other items,

the Group reported other expenses amounting to ¥21.8 billion (an

improvement of ¥68.4 billion year on year).

As a result of the above factors, the Group recorded consolidat-

ed net income of ¥43.3 billion (an improvement of ¥294.9 billion

year on year).

General Economic Climate and the Operating

Environment Surrounding the Group

During the fiscal year under review, despite the commencement of

upward trends in personal consumption and exports, the Japanese

economy failed to escape from difficult circumstances, owing to the

slump in private capital investment and the steep decline in resi-

dential housing investment. On the other hand, the economies of

Asia, excluding Japan, showed stronger upward trends, led by

economic growth in China and India.

Amid this operating environment, the price of Dubai crude oil,

which was below US$50 per barrel at the beginning of the fiscal

year, rose over the course of the year, accompanying the recovery

in the world economy and the growing anticipation that the demand

for petroleum would rise, to reach US$78 per barrel at the end of

the fiscal year.

8,000

0

2,000

4,000

6,000

1009080706

320

-500

0

80

160

240

1009080706

180

-300

60

0

120

1009080706

5,774.3

43.3

113.3

Net Sales

(Billions of yen)

Years ended March 31

Ordinary Income (Loss)

(Billions of yen)


�� Ordinary income (loss) (excluding inventory valuation)

�� Inventory valuation

Net Income (Loss)

(Billions of yen)



The yen to U.S. dollar exchange rate appreciated from ¥99 tem-

porarily to ¥86, but, at the end of the fiscal year, the rate stood at

¥93 to one U.S. dollar. The average rate for the fiscal year under

review was ¥93 compared with ¥101 for the previous fiscal year.

In this business environment, domestic demand for petroleum

products continued to decline and fell below 200 million kiloliters

for the year, the lowest level in 22 years. This downtrend was due

to stagnation in distribution and industrial activities accompanying

the weakness in the Japanese economy and the impact of higher

ownership rates of fuel-efficient automobiles and the shift to other

sources of energy, including gas and electric power. On the other

hand, demand for petroleum and petrochemical products in the

rest of Asia increased, reflecting the economic recovery in the

region.

Business Progress and Results of Operations

In this economic climate, the Group has united in concerted efforts

to promote structural reforms in existing businesses centered on

refining and marketing with the aim of developing an integrated

operating framework and to become an “integrated energy compa-

ny,” while at the same time reinforcing the foundation of new busi-

ness areas, including new energy. During the fiscal year, the Group

implemented the following policies and measures in its business

segments.

Refining and Marketing Segment

(Including Petrochemicals)

1. Production-Side Measures

In the area of production, amid prospects for a long-range decline

in domestic demand for petroleum products, the most-urgent issue

to be addressed is reducing excess refining capacity. Accordingly,

we prepared plans for reducing refining capacity and creating an

optimal production system through the integration with Nippon

Mining Holdings, Inc.

Specific plans call for reducing production capacity by March 31,

2011, by a total of 400,000 barrels per day (BD), in comparison

with December 2008, when the “Memorandum for a basic agree-

ment concerning the business integration” was signed between the

Group and Nippon Mining Holdings, Inc. The Group’s refining

capacity is scheduled to be reduced by 380,000BD. This figure

includes the termination of refining operations at the Toyama

Refinery, which has already been completed; the scheduled reposi-

tioning of the Osaka Refinery to focus on exports; and reductions

in capacity at the Group’s Negishi, Mizushima, and Oita refineries.

In addition, the Nippon Mining Holdings Group has decided to cut

capacity at its Kashima Refinery by about 20,000BD. Specific mea-

sures are now under consideration for making even further reduc-

tions in refining capacity amounting to 200,000BD.

8,000

0

2,000

4,000

6,000

1009080706

200

-500

0

-100

100

1009080706

250

0

50

100

150

200

1009080706

150

0

30

60

90

120

1009080706

5,192.4

31.0143.4

27.4

Refining and Marketing Net Sales(Billions of yen)


Refining and MarketingOperating Income (Loss)(Billions of yen)


�� Operating income (loss) (excluding inventory valuation)


Oil and Natural Gas E&PNet Sales(Billions of yen)


Oil and Natural Gas E&POperating Income(Billions of yen)



In addition, the Group has been aggressively implementing mea-

sures to promote the wider use of biogasoline, which is an effective

energy source for preventing global warming. In October 2009, the

Group completed production facilities at its Negishi Refinery for

using ethyl tertiary butyl ether (ETBE) as a raw material for biogaso-

line. Thus far, Japan has relied on overseas sources for all its

requirements for ETBE, but, with the completion of this facility, it will

be possible to produce 100,000 kiloliters annually of ETBE in Japan

and conduct mixing and shipment operations from the Negishi

Refinery.

Moreover, as part of its policies for making the Group’s refineries

more competitive, the Group participates in the National Project for

Developing Innovative Next-Generation Petroleum Refining and

Other Technologies. As part of this project, the Group is proceed-

ing with the development of high-severity fluid catalytic cracking

(the HS-FCC Process) technology, and, with a target date for com-

pletion in 2011, has begun to build a facility for experimental study

of this technology at the Mizushima Refinery. This trial facility will

have the heavy oil cracking capacity of 3,000BD, and its goal will

be to establish the technology that will make possible the design of

heavy oil cracking facilities that will have capacities of several tens

of thousands of BD. By commercializing this HS-FCC Process, it

will become possible to produce a higher percentage of propylene,

a petrochemical product, than conventional fluid catalytic cracking

facilities. Also, since this process will make it possible to produce

higher octane gasoline, this is expected to contribute to enhancing

the competitiveness of the refineries.

2. Marketing-Side Measures

Among marketing initiatives, as in the previous fiscal year, in the

Japanese market, the Group worked to introduce and further

expand acceptance of a new product pricing system that links the

wholesale prices of its gasoline, kerosene, diesel oil, and heavy fuel

oil A to prices in the domestic petroleum products wholesale spot

market. Activities to apply and expand this new pricing system

more broadly were stepped up during the fiscal year under review.

In June 2009, the Group significantly expanded its network of

service stations selling biogasoline and began sales at 861 service

station locations, including those in Tokyo and Kanagawa,

Yamanashi, Saitama, Nagano, Gunma, and Tochigi prefectures.

On the other hand, in the lubricants business, the Group made

SANKYO YUKA KOGYO K.K., a leading manufacturer of basic

lubricant products (base oil), a wholly owned subsidiary and

worked to expand and strengthen this business.

Also, in April 2010, the Group took steps to strengthen the busi-

ness base for LP gas (liquefied petroleum gas), which is experienc-

ing severe competition from other forms of energy, and began

specific consideration of integrating the LP gas operations of Mitsui

& Co., Ltd., Marubeni Corporation, and Mitsui Marubeni Liquefied

Gas Co., Ltd.

Among marketing activities overseas, the Group exported petro-

leum products aggressively, while giving due consideration to profit-

ability, principally to Asian markets, where demand for petroleum

has begun to recover. Also, to strengthen its lubricants business

overseas, the Group increased the lubricant production capacity of

subsidiary Tianjin Nisseki Lubricants & Grease Company, Ltd., in

China. Among other initiatives, the Group opened representative

offices in New Delhi in India and in Ho Chi Minh City in Vietnam as

well as established a subsidiary in São Paulo, Brazil. In addition, in

July 2010, the Group is scheduled to set up a subsidiary for the

marketing of lubricants in Moscow in the Russian Federation.

Through aggressive marketing activities at these various overseas

locations, the Group intends to substantially expand its channels

for the sale of lubricant products.

Please note that following the integration of Nippon Oil

Corporation with Nippon Mining Holdings, Inc., the Nippon Oil

Corporation, Nippon Petroleum Refining Co., Ltd., and Japan

Energy Corporation (which was a wholly owned subsidiary of

Nippon Mining Holdings, Inc.) were integrated on July 1, 2010, to

form JX Nippon Oil & Energy Corporation, and this newly integrated

company has decided to adopt the ENEOS brand uniformly for all

its petroleum product marketing activities.

3. Marketing of Gas, Electricity, and Coal

In addition to its main businesses of petroleum and petrochemical

products, the Group is engaged in supplying other forms of energy

(namely, gas, electricity, and coal) in response to customer needs.

In the gas business, the Group has established an importing ter-

minal for LNG (liquefied natural gas) jointly with Chugoku Electric

Power Co., Inc. This facility is located on the grounds of the

Group’s Mizushima Refinery in Kurashiki, Okayama Prefecture. In

addition, the Group has a wholly owned LNG satellite terminal

located on land that was formerly used for an oil depot in

Hachinohe, Aomori Prefecture, and markets natural gas and LNG

to users located near the terminal. Among these facilities, the

Mizushima LNG importing terminal is moving ahead with the con-

struction of new LNG tanks with a target completion date in fiscal

2011 to facilitate expansion of its supply capacity to meet growing

customer demand. In addition, to respond to rising demand in

Aomori, Iwate, and Akita prefectures and prepare for further expan-

sion of the areas that the Group supplies, the Group has decided

to construct a new LNG importing terminal, with a target date for

beginning operations in fiscal 2015, on reclaimed land in the

Hachinohe port area near the existing Hachinohe LNG satellite ter-

minal.


In the electric power business, the Group operates wholesale

power supply and retail power supply businesses on the grounds

of its refineries and other business sites. The total electric power

sold by these facilities has risen to 1.89 million kW.

The Group’s coal business is actively engaged in marketing to

domestic electric power and steel companies, but, as a result of

the stagnation in demand for coal, the total volume sold was below

the level of the previous fiscal year and amounted to 6.52 million

tons.

4. New Energy Initiatives

With its objectives of “becoming an integrated energy company

group” and establishing a firm base for future development, the

Group continued to aggressively promote the development of new,

eco-friendly energy businesses, including fuel cells and photovolta-

ic power generation systems.

With regard to residential-use fuel cell systems, ENEOS CellTech

Co., Ltd., a subsidiary of the Group, completed the construction of

a new plant for manufacturing residential-use fuel cells in April

2009. Sales of fuel cells began in May 2009, and the total number

of residential-use fuel cells sold during the fiscal year under review

amounted to 1,200.

In the photovoltaic power generation systems business, where

considerable further expansion of demand is anticipated, the Group

has actively entered the development, manufacturing, and market-

ing of supply chains and is moving ahead with initiatives to consoli-

date a solid position in this field. Specific activities include

increasing the Group’s equity share in Space Energy Corporation, a

manufacturer of silicon wafers, which are an important material for

single crystal solar cells, and making that company a consolidated

subsidiary.

In addition, Power Carbon Technology Co., Ltd., a joint venture

established with South Korean oil company GS Caltex Corporation,

completed a plant for manufacturing of capacitor carbon materials

for electrodes in Korea, and it began production activities in April

2010. Capacitors are efficient electrical storage devices that can

store electric power energy discharged in such situations as the

use of brakes on moving vehicles, and to retrieve large amounts of

electricity in a short time. Demand for capacitors is expected to

increase for use in construction equipment, trucks, and trains. The

Group plans to take advantage of expertise accumulated through

the manufacture of coke for electrodes at the Marifu Refinery and

supply coke produced at the refinery for use as a raw material for

capacitor carbon materials manufactured for Power Carbon

Technology.

Please note that the Group has decided to implement an experi-

mental project for supplying electric power generated by solar cell

systems at service stations to provide high-speed battery recharg-

ing services for electric vehicles (EVs), which are expected to come

into wider use in the years ahead. Through these initiatives, the

Group will be showing its concern for “harmony with nature” and

structure a new business model for future service stations, which

will enable them to provide a wider diversity of energy sources.

As a result of the previously mentioned activities, in the fiscal year

under review, the Group’s Refining and Marketing segment report-

ed net sales of ¥5,192.4 billion (23.2% lower than in the previous

fiscal year). In addition, operating income of the segment amounted

to ¥31.0 billion (representing an improvement of ¥465.4 billion year

on year). However, this improvement was due to a rebound from

the worsening of operating income in the previous fiscal year that

was attributable to inventory valuation factors (by which inventory

valuation under the gross average method pushed up the cost of

sales due to a decline in crude oil prices and the write-down of

inventories that depressed profitability). After excluding inventory

valuation factors, this segment reported an operating loss of

¥125.8 billion (representing a deterioration of ¥138.4 billion from

the previous fiscal year), owing to factors that include a decline of

sales of petroleum products in volume terms and a deterioration in

the margin on petroleum products.

Oil and Natural Gas E&P Segment

In the Oil and Natural Gas E&P segment, the Group implemented

the following policies and measures for sustained long-range busi-

ness development and for contributing to maintaining and improv-

ing the Group’s profitability.

In production operations, the Group began the production of

crude oil in the West Don oil field in the U.K. North Sea in April

2009. Also, in the Tangguh LNG Project in Indonesia, the develop-

ment of gas fields and construction of an LNG plant were complet-

ed, and shipments of LNG began in July 2009.

In development operations, following the Group’s LNG projects

in Malaysia (Tiga) and Indonesia (Tangguh), the Group decided to

implement a third new LNG project in Papua New Guinea with

other business partners. This will be the first LNG project in that

country. The output of the natural gas fields and oil wells located

inland will be transported from the production points to the capital

city of Port Moresby, located near the coastal region, via a 750-kilo-

meter pipeline. After liquefaction at the LNG plant, the output will

be loaded and transported by LNG carriers. Preparations for com-

mencement of shipments with a target date in 2014 are moving

forward at a high pitch.


In exploratory operations, work continued in promising new oil

and gas concessions, and drilling continued in Vietnam, Libya, the

U.S. Gulf of Mexico, and elsewhere. As a result, in January 2010, a

new natural gas reservoir was discovered in the U.S. Gulf of

Mexico, and, at present, evaluation of the size of the reservoir, its

commercial viability, and other matters is in progress.

As a result of the above initiatives, net sales in the Oil and Natural

Gas E&P segment in the fiscal year under review decreased 34.4%

year on year, to ¥143.4 billion, and operating income declined

¥79.0 billion, to ¥27.4 billion, as a result of declines in prices of

crude oil and natural gas.

Construction Segment

In the Construction segment, NIPPO Corporation, which plays a

central role in the Group’s construction business, continued to con-

front a difficult operating environment. This was because of the

substantial decline in corporate capital investment and the emer-

gence of uncertainties about the direction of public-sector con-

struction investment, which had held relatively firm. However,

NIPPO worked aggressively to improve profitability by obtaining

orders based on its technological superiority, reducing costs, and

increasing efficiency.

As a result of these developments, sales in the Construction seg-

ment rose 5.9% year on year, to ¥377.4 billion, and operating

income rose ¥11.2 billion, to ¥18.7 billion.

Other Segment

In the Other segment, the Group manages a variety of businesses,

largely centered on ENEOS brand products, including retail sales of

automotive products; real estate leasing as well as marketing; and

other operations.

Net sales in the Other segment in the fiscal year under review

increased 13.9% year on year, to ¥61.1 billion, and operating

income rose ¥0.5 billion, to ¥5.8 billion.

Promotion of CSR Management

The Nippon Oil Group engages, at all times, in activities that reflect

the importance it places on corporate social responsibility (CSR).

As one aspect of CSR activities, based on the concept that “har-

mony with nature” is an important mission for energy suppliers,

during the fiscal year under review, the Group continued its initia-

tives for curbing global warming and reducing the burden its activi-

ties place on the natural environment. Specific activities included

initiatives to reduce CO2 emissions along the overall supply chains

for its products, restraining emergence of volatile organic com-

pounds (VOCs) from its refineries, and conducting activities to sub-

stantially lower the amounts of waste for final disposal (defined as

waste that cannot be reduced further in volume through reuse,

removal of the water content, or other means) generated by its

business sites.

On the other hand, among social contribution activities, the

Group continued its activities from the previous fiscal year and pro-

vided assistance for original basic research on supplying hydrogen

energy through the ENEOS Hydrogen Trust Fund, which was

established with the aim of broadly disseminating hydrogen energy

systems in society. Also, the Group engaged in forest protection

activities in its seven “ENEOS Forest” locations in Japan and spon-

sored the “ENEOS Environmental Classrooms” in 32 primary and

middle schools in Japan. Similarly, in Vietnam, where the Group is

producing crude oil, donations were made for the construction of a

new school building to contribute to the development of the educa-

tional system in that country.

2. ANALYSIS OF FINANCIAL POSITIONBalance Sheet Analysis

Consolidated total assets at the end of the fiscal year under review

totaled ¥4,129.2 billion, an increase of ¥159.5 billion from the end

of the previous fiscal year. This increase was primarily attributable

to a rise in inventories accompanying the increase in crude oil pric-

es.

Consolidated net assets at the fiscal year-end amounted to

¥1,059.1 billion, an increase of ¥42.8 billion over the end of the

previous fiscal year. This increase was attributable to factors that

included the reporting of consolidated net income.

Please note that interest-bearing debt at the fiscal year-end was

¥1,525.0 billion, which was ¥112.6 billion higher than at the end of

the previous fiscal year. This increase was attributable to factors

that included the increase in working capital requirements accom-

panying the rise in crude oil prices.

As a result of these developments, the shareholders’ equity ratio

at fiscal year-end was 23.2%.


Cash Flow Analysis

Cash and cash equivalents (hereinafter “cash”) at the end of the fis-

cal year under review totaled ¥184.0 billion, a decrease of ¥43.3

billion from the previous fiscal year-end. Cash flows and factors

affecting cash flows are discussed below.

Net cash provided by operating activities was ¥31.0 billion.

Factors contributing to cash from operating activities—such as

income before income taxes and minority interests (¥91.5 billion),

depreciation and amortization (¥170.8 billion) that are not accom-

panied by cash outflows, and an increase in notes and accounts

payable and excise taxes payable (¥116.3 billion)—were greater

than factors contributing to a decline in cash from operations—

such as the increase in inventories (¥154.7 billion) and the rise in

notes and accounts receivable (¥165.3 billion).

Net cash used in investing activities amounted to ¥145.5 billion.

This was principally attributable to investment in petroleum product

production facilities at refineries and investment in the Oil and

Natural Gas E&P business segment.

Net cash provided by financing activities amounted to ¥62.5 bil-

lion. This was attributable to an increase in borrowings for working

capital, which exceeded cash dividends paid and other factors that

contributed to the outflow of cash for financing activities.

The following table shows the trends in cash flow related indices

for the Group.

Years ended March 31 2010 2009 2008 2007

Shareholders’ Equity Ratio (%) 23.2 23.1 28.5 27.7Debt Service Years (%) 49.2 3.2 12.9 6.3

Notes: 1. Definitions of indicators are as follows: � Shareholders’ equity ratio: Equity/Total assets � Debt service years: Interest-bearing debt/Operating cash flow

2. All indicators have been calculated based on consolidated financial data. 3. Cash flow is the cash flow from operations shown in the Consolidated

Statements of Cash Flows. 4. Interest-bearing debt is actual interest-bearing debt, defined as the interest-

bearing debt liabilities shown on the Consolidated Balance Sheets less the funds managed (credit assets) of finance subsidiaries. In addition, interest paid has been calculated by subtracting the amount of interest paid by finance sub-sidiaries to fund their credit asset portfolios from the amount of interest paid shown in the Consolidated Statements of Cash Flows.

Commitment Line Contracts

To raise working capital efficiently, Nippon Oil has concluded a

commitment line contract with a syndicate of six banks. The maxi-

mum amount that can be made available under this contract is

¥150 billion. At the end of the fiscal year under review, there were

no borrowings under the commitment line.

With the same objective of raising working capital efficiently, a

commitment line contract has been concluded, jointly with three

foreign subsidiaries of the Group, with a syndicate of three banks.

The maximum amount under this contract is US$200 million. At the

end of the fiscal year under review, there were no borrowings under

the commitment line.

3. BASIC POLICIES REGARDING ALLOCATION OF PROFIT AND DETERMINATION OF CASH DIVIDENDS

The basic stance of the Company (Nippon Oil Corporation) regard-

ing the allocation of profits is to maintain stable dividends, as it

gives due consideration to increasing retained earnings necessary

for making investments targeting the implementation of its growth

strategies with the objective of increasing shareholder value. After

considering the balance between performance and cash, the basic

policy of the Company is to make decisions regarding the level of

cash dividends from a medium- to long-term perspective.

In accord with these policies, the Company has decided to pay a

final dividend for the fiscal year under review of ¥8 per share.

Together with the interim dividends already paid, the dividend for

the full fiscal year will be ¥18 per share. This decision was made

after giving due consideration to the substantially more-challenging

conditions in the operating environment the Company confronts,

principally in the domestic petroleum refining and marketing busi-

ness, the funding of structural reform costs accompanying the

management integration, and other factors.


Consolidated Balance SheetsNippon Oil Corporation and Consolidated SubsidiariesAs of March 31, 2010 and 2009

Millions of yen

Thousands ofU.S. dollars

(Note 2)

Assets 2010 2009 2010

Current assets: Cash and cash equivalents ¥ 183,992 ¥ 227,257 $ 1,978,409 Time deposits 92 276 989 Short-term investments in securities (Note 4) — 40,000 — Notes and accounts receivable (Note 9): Trade 709,860 540,409 7,632,903 Other 121,516 176,153 1,306,624 Less allowance for doubtful receivables (2,114) (3,285) (22,731) Inventories (Note 5) 815,128 664,560 8,764,817 Deferred income taxes (Note 10) 25,515 55,132 274,355 Other current assets 51,274 57,986 551,333

Total current assets 1,905,267 1,758,489 20,486,742

Investments and long-term receivables: Investments in unconsolidated subsidiaries and affiliates (Note 9) 145,453 140,409 1,564,011 Investments in other securities (Notes 4, 7 and 9) 239,042 217,835 2,570,344 Long-term receivables (Note 7) 9,718 10,030 104,495

Total investments and long-term receivables 394,214 368,275 4,238,860

Property, plant and equipment (Notes 6 and 7): Land 690,453 663,813 7,424,226 Buildings 786,657 795,153 8,458,677 Oil tanks 273,314 274,306 2,938,860 Machinery and equipment 1,787,377 1,773,184 19,219,108 Construction in progress 20,387 30,780 219,215

3,558,190 3,537,238 38,260,108 Less accumulated depreciation (2,261,135) (2,200,794) (24,313,280)

Property, plant and equipment, net 1,297,054 1,336,444 13,946,817

Deferred income taxes (Note 10) 167,927 173,073 1,805,667Exploration & development investment 237,836 211,985 2,557,376Other assets 126,930 121,461 1,364,839

Total assets ¥4,129,232 ¥3,969,730 $44,400,344

See accompanying notes to consolidated financial statements.


Millions of yen


(Note 2)

Liabilities and Net Assets 2010 2009 2010

Current liabilities: Short-term loans (Notes 7 and 9) ¥ 399,394 ¥ 336,260 $ 4,294,559 Current portion of corporate bonds 20,060 40,000 215,699 Current portion of long-term loans (Notes 7 and 9) 70,025 46,277 752,957 Commercial paper 317,000 242,000 3,408,602 Notes and accounts payable (Note 9): Trade 496,980 366,208 5,343,871 Other 229,279 232,718 2,465,366 Excise taxes payable (Notes 9 and 11) 311,570 324,298 3,350,215 Accrued income taxes 25,072 30,452 269,591 Accrued expenses 39,849 43,514 428,484 Deferred income taxes (Note 10) 4,996 8,367 53,720 Other current liabilities 164,264 220,165 1,766,280

Total current liabilities 2,078,492 1,890,264 22,349,376

Long-term liabilities: Corporate bonds 165,161 185,021 1,775,925 Long-term loans (Notes 7 and 9) 563,341 607,894 6,057,430 Accrued retirement benefits (Note 8) 42,039 54,482 452,032 Reserve for inspection of oil tanks, machinery and equipment, and vessels 38,998 36,321 419,333 Deferred income taxes (Note 10) 101,494 114,417 1,091,333 Accrued estimated cost of abandonment of wells 37,084 24,650 398,753 Other long-term liabilities 43,529 40,372 468,054

Total long-term liabilities 991,649 1,063,159 10,662,892

Net assets: Shareholders’ equity: Common stock: Authorized—5,000,000,000 shares in 2010 and 2009 Issued—1,464,508,343 shares in 2010 and 2009 139,437 139,437 1,499,323 Capital surplus 275,696 275,698 2,964,473 Retained earnings 519,572 507,371 5,586,796 Less treasury stock, at cost:

6,871,791 shares in 2010 and 6,629,916 shares in 2009 (4,507) (4,389) (48,462)

Total shareholders’ equity 930,199 918,118 10,002,140

Valuation and translation adjustments: Unrealized holding gain on securities, net of deferred income taxes 38,774 25,534 416,925 Unrealized holding gain on hedging derivatives 13,322 9,218 143,247 Translation adjustments (22,389) (37,465) (240,742)

Total valuation and translation adjustments 29,707 (2,712) 319,430 Minority interests in consolidated subsidiaries 99,182 100,900 1,066,473

Total net assets 1,059,089 1,016,306 11,388,054



Consolidated Statements of IncomeNippon Oil Corporation and Consolidated SubsidiariesFiscal years ended March 31, 2010 and 2009

Millions of yen


(Note 2)

2010 2009 2010

Net sales (Notes 11 and 18) ¥5,774,279 ¥7,389,234 $62,089,022Cost of sales (Note 11) 5,406,740 7,414,998 58,136,989

Gross profit (loss) 367,538 (25,763) 3,952,022Selling, general and administrative expenses (Notes 12 and 13) 280,802 286,743 3,019,376

Operating income (loss) (Note 18) 86,735 (312,506) 932,634

Non-operating income (expenses): Interest expense (21,120) (28,727) (227,097) Interest and dividend income 22,018 32,851 236,753 Foreign exchange gain 17,417 8,101 187,280 Asset rental income 8,848 8,142 95,140 Amortization of negative goodwill 1,173 1,339 12,613 Equity in earnings of unconsolidated subsidiaries and affiliates 2,953 5,822 31,753 Gain on valuation of derivatives — 15,451 — Loss on valuation of derivatives (5,258) (1,865) (56,538) Other, net 534 (4,057) 5,742

26,566 37,057 285,656

Ordinary income (loss) 113,302 (275,448) 1,218,301

Other income (expenses): Gain on sales of property, plant and equipment 36,880 14,610 396,559 Loss on sales of property, plant and equipment (12,752) (3,950) (137,118) Loss on disposal of property, plant and equipment (10,002) (8,155) (107,548) Write-downs of investments in securities and other assets (27,302) (7,861) (293,570) Gain on sales of securities 5,155 56 55,430 Loss on sales of securities (2,212) (12) (23,785) Loss on impairment of fixed assets (Notes 6 and 18) (12,444) (75,404) (133,806) Business structure improvement expenses (3,375) — (36,290) Other, net 4,275 (9,402) 45,968

(21,776) (90,120) (234,151)

Income (loss) before income taxes and minority interests 91,525 (365,569) 984,140Income taxes (Note 10): Current 35,536 49,672 382,108 Deferred 3,565 (170,473) 38,333

Income (loss) before minority interests 52,423 (244,767) 563,688Minority interests in earnings of consolidated subsidiaries (9,127) (6,846) (98,140)

Net income (loss) ¥ 43,295 ¥ (251,613) $ 465,538

YenU.S. dollars

(Note 2)

Net income (loss) per share—basic ¥29.70 ¥(172.42) $0.32Cash dividends per share attributable to the year 18.00 20.00 0.19



Consolidated Statements of Changes in Net AssetsNippon Oil Corporation and Consolidated SubsidiariesFiscal years ended March 31, 2010 and 2009

Millions of yen

Shareholders’ equity Valuation and translation adjustment

Common stock

Capital surplus

Retained earnings

Treasury stock

Totalshareholders’

equity

Net unreal-ized holding

gains on securities

Unrealized holding gain on hedging derivatives

Translation adjustments

Total valua-tion and

translation adjustments

Minority interests in

consolidated subsidiaries

Total net

assets

Year ended March 31, 2010Beginning of year ¥139,437 ¥275,698 ¥507,371 ¥(4,389) ¥ 918,118 ¥25,534 ¥ 9,218 ¥(37,465) ¥ (2,712) ¥100,900 ¥1,016,306

Cash dividends — — (29,199) — (29,199) — — — — — (29,199)Net income — — 43,295 — 43,295 — — — — — 43,295Acquisition of treasury stock — — — (137) (137) — — — — — (137)Disposal of treasury stock — (2) — 20 18 — — — — — 18Net decrease resulting from inclusion of subsidiaries in consolidation — — (1,895) — (1,895) — — — — — (1,895)Net changes other than shareholders' equity — — — — — 13,240 4,103 15,076 32,420 (1,718) 30,702

End of year ¥139,437 ¥275,696 ¥519,572 ¥(4,507) ¥ 930,199 ¥38,774 ¥13,322 ¥(22,389) ¥ 29,707 ¥ 99,182 ¥1,059,089

Year ended March 31, 2009Beginning of year ¥139,437 ¥275,782 ¥782,037 ¥(2,595) ¥1,194,662 ¥85,725 ¥18,355 ¥ 11,045 ¥115,125 ¥119,478 ¥1,429,266

Effect of application of ASBJ PITF No. 18 — — (452) — (452) — — — — — (452)

Cash dividends — — (23,383) — (23,383) — — — — — (23,383)Net loss — — (251,613) — (251,613) — — — — — (251,613)Acquisition of treasury stock — — — (2,191) (2,191) — — — — — (2,191)Disposal of treasury stock — (83) — 397 313 — — — — — 313Net increase resulting from inclusion of subsidiaries in consolidation — — 765 — 765 — — — — — 765Net increase resulting from inclusion of affiliates in equity method — — 17 — 17 — — — — — 17Net changes other than shareholders' equity — — — — — (60,191) (9,136) (48,510) (117,838) (18,577) (136,415)

End of year ¥139,437 ¥275,698 ¥507,371 ¥(4,389) ¥ 918,118 ¥25,534 ¥ 9,218 ¥(37,465) ¥ (2,712) ¥100,900 ¥1,016,306

Thousands of U.S. dollars (Note 2)


Common stock

Capital surplus

Retained earnings

Treasury stock

Totalshareholders’

equity

Net unrealized holding gains on securities

Unrealized holding gain on hedging derivatives

Translation adjustments

Total valuation and transla-tion adjust-

ments



Total net

assets

Year ended March 31, 2010Beginning of year $1,499,323 $2,964,495 $5,455,602 $(47,194) $ 9,872,237 $274,559 $ 99,118 $(402,849) $ (29,161) $1,084,946 $10,928,022

Cash dividends — — (313,968) — (313,968) — — — — — (313,968)Net income — — 465,538 — 465,538 — — — — — 465,538Acquisition of treasury stock — — — (1,473) (1,473) — — — — — (1,473)Disposal of treasury stock — (22) — 215 194 — — — — — 194Net decrease resulting from inclusion of subsidiaries in consolidation — — (20,376) — (20,376) — — — — — (20,376)Net changes other than shareholders’ equity — — — — — 142,366 44,118 162,108 348,602 (18,473) 330,129

End of year $1,499,323 $2,964,473 $5,586,796 $(48,462) $10,002,140 $416,925 $143,247 $(240,742) $319,430 $1,066,473 $11,388,054



Consolidated Statements of Cash FlowsNippon Oil Corporation and Consolidated SubsidiariesFiscal years ended March 31, 2010 and 2009

Millions of yen


(Note 2)

2010 2009 2010

Operating activitiesIncome (loss) before income taxes and minority interests ¥ 91,525 ¥(365,569) $ 984,140Depreciation and amortization 170,818 170,106 1,836,753Amortization of excess of cost over net assets acquired 913 485 9,817Reversal of allowance for doubtful receivables (2,110) (180) (22,688)Reversal of allowance for accrued retirement benefits (12,442) (13,663) (133,785)(Reversal of) provision for reserve for inspection of oil tanks, machinery and equipment, and vessels 2,676 (2,541) 28,774(Reversal of) provision for allowance for accrued cost of abandonment of wells 10,845 (3,151) 116,613Interest and dividend income (22,179) (32,851) (238,484)Interest expense 21,120 28,727 227,097Loss (gain) on derivative instruments, net 5,211 (13,586) 56,032Gain on sales of property, plant and equipment (36,880) (14,610) (396,559)Loss on disposal of property, plant and equipment 17,735 8,588 190,699Loss on impairment of fixed assets 12,444 75,404 133,806Gain on sales of investments in securities (5,155) (56) (55,430)(Increase) decrease in notes and accounts receivable (165,305) 421,856 (1,777,473)(Increase) decrease in inventories (154,687) 584,338 (1,663,301)Increase (decrease) in notes and accounts payable and excise taxes payable 116,338 (218,015) 1,250,946Other, net (625) (84,419) (6,720)

Subtotal 50,244 540,861 540,258Interest and dividends received 22,506 33,567 242,000Interest paid (21,986) (27,506) (236,409)Income taxes paid (19,517) (105,115) (209,860)Early retirement incentive payments (264) (1,365) (2,839)Other, net — 760 —

Net cash provided by operating activities 30,982 441,202 333,140Investing activitiesDecrease (increase) in time deposits 183 1,559 1,968Increase in short-term investments in securities and investments in other securities (4,525) (35,758) (48,656)Additions to property, plant and equipment (134,618) (102,983) (1,447,505)Proceeds from sales of property, plant and equipment 51,386 21,012 552,538Payments for purchases of shares of consolidated subsidiaries 1,165 (12,658) 12,527Increase in cost of exploration and production of oil and related assets (52,263) (66,084) (561,968)(Increase) decrease in long-term receivables 1,812 1,135 19,484(Increase) decrease in short-term receivables (1,053) (130,211) (11,323)Other (7,619) (653) (81,925)

Net cash used in investing activities (145,531) (324,641) (1,564,849)Financing activitiesIncrease (decrease) in short-term loans 135,432 (199,399) 1,456,258Repayment of finance lease obligations (759) (276) (8,161)Proceeds from long-term debt 17,542 279,887 188,624Repayment of long-term debt (47,094) (124,769) (506,387)Expenditure for purchase of treasury stock (216) (1,176) (2,323)Cash dividends paid (41,935) (41,406) (450,914)Other (469) 304 (5,043)

Net cash provided by financing activities 62,499 (86,836) 672,032Effect of exchange rate changes on cash and cash equivalents 8,782 (36,941) 94,430

(Decrease) increase in cash and cash equivalents (43,266) (7,216) (465,226)Cash and cash equivalents at beginning of year 227,257 226,792 2,443,624Increase in cash and cash equivalents resulting from merger of companies — 648 —Increase in cash and cash equivalents resulting from inclusion of consolidated subsidiaries 2 7,034 22

Cash and cash equivalents at end of year ¥183,992 ¥ 227,257 $1,978,409



Notes to Consolidated Financial StatementsNippon Oil Corporation and Consolidated Subsidiaries

1. SIGNIFICANT ACCOUNTING POLICIES(a) Basis of preparation

The Company and its domestic consolidated subsidiaries maintain

their accounting records and prepare their financial statements in

accordance with accounting principles generally accepted in

Japan, and its overseas consolidated subsidiaries maintain their

books of account in conformity with those of their countries of

domicile.

The accompanying consolidated financial statements have been

compiled from the accounts prepared by the Company in accor-

dance with the provisions set forth in the Financial Instruments and

Exchange Act of Japan and in conformity with accounting princi-

ples generally accepted in Japan, which are different in certain

respects as to the application and disclosure requirements of

International Financial Reporting Standards.

In addition, the notes to the consolidated financial statements

include information which is not required under accounting princi-

ples generally accepted in Japan but is presented herein as addi-

tional information.

As permitted under the Financial Instruments and Exchange Act

of Japan, 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 neces-

sarily agree with the sums of the individual amounts.

Certain amounts in the prior year’s financial statements have

been reclassified to conform to the current year’s presentation.

(b) Principles of consolidation and accounting

for investments in unconsolidated

subsidiaries and affiliates

The accompanying consolidated financial statements include the

accounts of the Company and all its significant subsidiaries.

Investments in certain unconsolidated subsidiaries and significant

affiliates are accounted for by the equity method. As of March 31,

2010, the numbers of consolidated subsidiaries and subsidiaries

and affiliates accounted for by the equity method were 52 and 25

(53 and 25 in 2009), respectively. Japan Vietnam Petroleum Co.,

Ltd., Nippon Oil Exploration U.S.A. Ltd., and 21 other subsidiaries

are consolidated by using their financial statements as of their

respective fiscal year end, and necessary adjustments are made to

their financial statements to reflect any significant transactions from

January 1 to March 31. All significant inter-company balances and

transactions have been eliminated in consolidation.

Effective the year ended March 31, 2010, Nippon Oil Exploration

Limited and two other Japanese subsidiaries had changed their

closing dates of the fiscal year from December 31 to March 31.

Accordingly, the consolidated operating results for the year ended

March 31, 2010 included operating results for 15 months from

January 1, 2009 to March 31, 2010.

Goodwill and negative goodwill at the dates of acquisition of the

major consolidated subsidiaries whose amortization period can be

reasonably estimated is amortized over the estimated period.

Otherwise goodwill and negative goodwill are amortized by the

straight-line method over 5 years.

Investments in unconsolidated subsidiaries and affiliates not

accounted for by the equity method are stated at cost or less.

Where there has been a permanent decline in the value of the

investments, the Company has written them down to reflect the

impairment.

(c) Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies

included in the current and non-current foreign currency accounts

of the Company, of its domestic consolidated subsidiaries and of

its affiliates accounted for by the equity method have been translat-

ed into yen at the rates of exchange in effect at the year end.

Translation differences are charged or credited to income.

The accounts of the overseas consolidated subsidiaries are

translated into yen as follows: all assets, liabilities and retained

earnings at the end of the year and items in the consolidated state-

ments of income including net income, at the rate of exchange in

effect at the year end; capital stock, at historical rates; and cash

dividends paid, at the rate of exchange in effect when paid.

Translation differences arising from the balance sheet items are

included in shareholders’ equity, and those arising from minority

interests in consolidated subsidiaries are reflected as translation

adjustments.

(d) Cash equivalents

The Company and its consolidated subsidiaries substantially con-

sider all highly liquid investments with a maturity of three months or

less when purchased to be cash equivalents.

(e) Securities

The accounting standard applicable to securities requires that all

securities be classified into three categories: trading, held-to-matu-

rity securities or other. Held-to-maturity securities have been stated

at their amortized cost. Marketable securities classified as other

securities have been stated at fair value with any changes in unreal-

ized holding gain or loss, net of the applicable income taxes,

included directly in shareholders’ equity. Non-marketable securities

classified as other securities have been stated at cost. Cost of

securities sold has been determined by the moving average meth-

od.


(f) Property, plant and equipment and depreciation

Property, plant and equipment is stated at cost.

Depreciation of property, plant and equipment is computed prin-

cipally by the straight-line method for buildings, and by the declin-

ing-balance method for other property, plant and equipment, over

the estimated useful lives of the respective assets.

Significant renewals and improvements are capitalized at cost.

Maintenance and repairs are charged to income as incurred.

(g) Inventories

Inventories are stated mainly at cost determined principally by the

average method. (Balance sheet values are calculated using the

devaluating book value method based on decrease in profitability.)

(h) Accounting procedure for exploration

and development investments

Expenditures relating to exploration and development under certain

agreements are capitalized as assets and recovered in accordance

with the terms of the respective agreements.

(i) Leases

Leased assets are accounted for using the straight-line method in

which the lease period is used as the useful lives and it is assumed

that residual value of the relevant asset falls to zero at the end of

the leased period. Finance lease transaction executed on or before

March 31, 2008 that do not involve a transfer of ownership are

accounted for using the same method as operating leases.

(j) Retirement benefits

Accrued retirement benefits are stated principally at the amount

calculated based on the present value of the retirement benefit

obligation and the fair value of the pension plan assets, as adjusted

for unrecognized actuarial gain or loss, and unrecognized prior ser-

vice cost. Prior service cost is amortized as incurred by the

straight-line method, principally over 5 years. Actuarial gain or loss

is amortized commencing in the subsequent period by the straight-

line method, principally over 5 years.

(k) Income taxes

Deferred income taxes are determined based on the differences

between the amounts determined for financial reporting purposes

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.

(l) Reserve for inspection of oil tanks, machinery

and equipment, and vessels

The Company and its domestic consolidated subsidiaries are

required periodically to inspect their oil tanks, the machinery and

equipment of their oil refineries, and their vessels. A reserve for the

inspection of oil tanks, machinery and equipment, and vessels is

provided for the current portion of the estimated total cost for such

work.

(m) Accrued estimated cost

for abandonment of wells

The accrued estimated cost of abandonment of wells is provided

to cover the costs to be incurred upon the abandonment of wells

at an estimated amount allocated over a scheduled period based

on consolidated subsidiaries’ plans for the abandonment of such

wells.

(n) Research and development costs

Research and development costs are charged to income when

incurred.

(o) Derivatives

Derivatives are stated at fair value with any changes in unrealized

gain or loss charged or credited to income, except for those which

meet the criteria for deferral hedge accounting under which unreal-

ized gain or loss is carried as net assets in the balance sheets.

Receivables and payables hedged by qualified forward foreign

exchange contracts and currency swaps are translated at the cor-

responding contract rates.

(p) Amounts per share

Basic net income per share for the years ended March 31, 2010

and 2009 has been computed based on the net income attribut-

able to shareholders of common stock and the weighted-average

number of shares of common stock outstanding during the year.

(q) Application of “PITF No. 18”

Effective April 1, 2008, the Company applied the “Practical Solution

on Unification of Accounting Policies Applied to Foreign

Subsidiaries for Consolidated Financial Statements (PITF No. 18).”

In accordance with PITF No. 18, the accompanying consolidated

financial statements for the year ended March 31, 2009 have been

prepared by using, the accounts of foreign consolidated subsidiar-

ies prepared in accordance with either International Financial

Reporting Standards (IFRS) or accounting principles generally

accepted in the United States as adjusted for certain items. Until

March 31, 2008, the accompanying consolidated financial state-

ments had been prepared by using the accounts of foreign consoli-

dated subsidiaries prepared in accordance with accounting

principles generally accepted in their countries of domicile. Please

see Note 3 (f).


2. U.S. DOLLAR AMOUNTSThe translation of yen amounts into U.S. dollar amounts is included solely for convenience and has been made, as a matter of arithmetic

computation only, at ¥93=U.S.$1.00, the approximate rate of exchange in effect on March 31, 2010. The translation should not be con-

strued as a representation that yen have been, could have been, or could in the future be, converted into U.S. dollars at that or any other

rate.

3. CHANGE IN ACCOUNTING POLICY(a) Application of “Accounting Standard

for Construction Contracts”

Previously, the Company had recognized revenues on construction

contracts based on the completed contract method. However, the

Company has applied the “Accounting Standard for Construction

Contracts” (ASBJ Statement No. 15 issued December 27, 2007)

and the “Implementation Guidance on Accounting Standard for

Construction Contracts” (ASBJ Guidance No. 18 issued December

27, 2007) against construction contracts. Accordingly, effective

from contracts for which construction commenced during the fiscal

year ended March 31, 2010, the percentage of completion method

has been applied if the completed portion of the construction work

is deemed certain at the end of the fiscal year ended March 31,

2010 (The percentage of completion is estimated based on the

percentage of cost incurred against the estimated total cost.), for

other construction, the completed contract method has been

applied.

As a result of this change, sales increased by ¥33,202 million

($357,011 thousand), and operating income, ordinary income and

income before income taxes and minority interests increased by

¥2,043 million ($21,968 thousand), respectively. The financial

impact of this change on each segment is described in Note 18.

(b) Application of “Partial Amendments

to Accounting Standard for

Retirement Benefits (Part 3)”

Effective the fiscal year ended March 31, 2010, the Company has

applied “Partial Amendments to Accounting Standard for

Retirement Benefits (Part 3)” (ASBJ Statement No. 19 issued July

31, 2008). This change in accounting standard had no effect on

operating income, ordinary income and net income before income

taxes and minority interests.

(c) Application of “Accounting Standard

for Measurement of Inventories”

Effective the fiscal year beginning April 1, 2008, the Company has

applied “Accounting Standard for Measurement of Inventories”

(ASBJ Statement No. 9, issued July 5, 2006).

As a result of this change, operating loss, ordinary loss and loss

before income taxes and minority interests increased by ¥30,027

million respectively. The financial impact of this change on each

segment is described in Note 18.

(d) Change in Useful Lives of

Property, Plant and Equipment

Effective the fiscal year beginning April 1, 2008, the Company and

its domestic consolidated subsidiaries reviewed the useful lives for

depreciation of property, plant and equipment, mainly machinery

and equipment for petroleum refining, etc. in accordance with an

amendment to the Corporate Tax Act of Japan and used the new

useful lives defined under the amended Corporate Tax Act of

Japan.

As a result of this change, depreciation expenses increased by

¥5,778 million, operating loss, ordinary loss and loss before income

taxes and minority interests increased by ¥5,520 million respective-

ly. The financial impact of this change on each segment is

described in Note 18.

(e) Application of “Accounting Standard

for Lease Transactions”

Previously, finance lease transactions that do not transfer owner-

ship were accounted for by the same method as operating leases.

Effective the fiscal year beginning April 1, 2008, “Accounting

Standard for Lease Transactions” (ASBJ Statement No. 13, issued

June 17, 1993 (First Committee of Business Accounting Council),

revised March 30, 2007) and “Guidance on Accounting Standard

for Lease Transactions” (ASBJ Guidance No. 16, issued January

18, 1994 (Accounting System Committee of Japanese Institute of

Certified Public Accountants), revised March 30, 2007) have been

applied and all finance lease transactions are capitalized, except

finance lease transactions executed on or before March 31, 2008

that do not transfer ownership, are accounted for by the same

method as former fiscal years. The financial impact on each seg-

ment is immaterial.

(f) Application of “PITF No. 18”

Effective April 1, 2008, PITF No. 18 has been applied, and the

Company has recorded the required adjustments on the consoli-

dated financial statements since the fiscal year beginning April 1,

2008. The financial impact on each segment is immaterial.


4. SECURITIESYear ended March 31, 2010 (From April 1, 2009 to March 31, 2010)

a) Held-to-maturity securities at March 31, 2010 were as follows:

Millions of yen

Year ended March 31, 2010 Carrying valueAggregated market value

Net unrealized holding

gain (loss)

Securities whose market value exceeds their carrying value: Government and municipal bonds ¥62 ¥64 ¥ 1

Sub-total 62 64 1Securities whose market value is below their carrying value

Sub-total — — —

Total ¥62 ¥64 ¥ 1

Thousands of U.S. dollars



gain (loss)

Securities whose market value exceeds their carrying value: Government and municipal bonds $667 $688 $11



Total $667 $688 $11

b) Other securities at March 31, 2010 were as follows:

Millions of yen

Year ended March 31, 2010 Carrying valueAcquisition

cost


gain (loss)

Securities whose carrying value exceeds their acquisition costs: Stock ¥190,548 ¥116,617 ¥73,931

Sub-total 190,548 116,617 73,931Securities whose carrying value is below their acquisition costs: Stock 17,955 20,699 (2,744) Bonds: Government and municipal bonds 80 80 — Corporate bonds 5,769 5,769 — Other bonds 0 1 0 Others 494 500 (5)

Sub-total 24,299 27,050 (2,750)

Total ¥214,847 ¥143,667 ¥71,180




cost


gain (loss)

Securities whose carrying value exceeds their acquisition costs: Stock $2,048,903 $1,253,946 $794,957

Sub-total 2,048,903 1,253,946 794,957Securities whose carrying value is below their acquisition costs: Stock 193,065 222,570 (29,505) Bonds: Government and municipal bonds 860 860 — Corporate bonds 62,032 62,032 — Other bonds 0 11 0 Others 5,312 5,376 (54)

Sub-total 261,280 290,860 (29,570)

Total $2,310,183 $1,544,806 $765,376

Note: The above information excluded unlisted stock of ¥24,195 million ($260,161 thousand).

c) Sales of securities classified as other securities for the year ended March 31, 2010 were as follows:

Millions of yen

Year ended March 31, 2010Proceeds from sales

Gain on sales

Loss on sales

Type of securities: Stock ¥11,307 ¥5,135 ¥1,985

Total ¥11,307 ¥5,135 ¥1,985


Year ended March 31, 2010Proceeds from sales

Gain on sales

Loss on sales

Type of securities: Stock $121,581 $55,215 $21,344

Total $121,581 $55,215 $21,344

d) Loss on impairment of securities (From April 1, 2009 to March 31, 2010)

The Company recorded loss on impairment of securities of ¥27,302 million ($293,570 thousand).

Year ended March 31, 2009 (From April 1, 2008 to March 31, 2009)

a) Marketable securities classified as held-to-maturity securities at March 31, 2009 were as follows:

Millions of yen



gain (loss)

Securities whose market value exceeds their carrying value: Government and municipal bonds ¥62 ¥63 ¥ 1



Total ¥62 ¥63 ¥ 1


b) Marketable securities classified as other securities at March 31, 2009 were as follows:

Millions of yen


cost


gain (loss)

Securities whose carrying value exceeds their acquisition costs: Stock ¥148,397 ¥ 90,076 ¥58,321

Sub-total 148,397 90,076 58,321Securities whose carrying value is below their acquisition costs: Stock 39,964 51,310 (11,346) Others 472 500 (27)

Sub-total 40,436 51,180 (11,374)

Total ¥188,833 ¥141,887 ¥46,946

c) Sales of securities classified as other securities amounted to ¥760 million with a net aggregate gain of ¥22 million for the year ended

March 31, 2009.

d) The redemption schedule at March 31, 2009 for securities with maturity dates is summarized as follows:

Millions of yen

Due in one year or less ¥40,000Due after one year through five years 5,882Due after five years through ten years 30Due after ten years —

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

Millions of yen Thousands of U.S. dollars

2010 2009 2010

Merchandise and finished products ¥184,363 ¥155,834 $1,982,398Crude oil 202,695 146,197 2,179,516Crude oil and others in transit 185,410 101,188 1,993,656Work in process 166,785 186,302 1,793,387Containers and supplies 54,458 51,311 585,570Real estate for sale 21,414 23,726 230,258

¥815,128 ¥664,560 $8,764,817


6. LOSS ON IMPAIRMENT OF FIXED ASSETSRecognition of impairment losses on fixed assets for the years ended March 31, 2010 and 2009 resulted primarily from a significant

decrease in the market value of crude oil as well as from the overall deterioration of its business environment.

Loss on impairment of fixed assets for the years ended March 31, 2010 and 2009 consisted of the following:


2010 2009 2010

Service stations Land ¥ 129 ¥ 5,008 $ 1,387Buildings 116 — 1,247Others 77 — 828

324 5,008 3,484Plants Land 77 — 828

Buildings 354 376 3,806Others 362 727 3,892

795 1,103 8,548Real estate for rent Land — 114 —

Buildings — 6 —Others — 4 —

— 125 —Assets for oil and natural gas exploration and production

Exploration & development investment 5,957 63,279 64,054

Other businesses Land — 634 —

Idle properties and others Land 4,681 4,216 50,333Buildings 435 672 4,677Others 250 363 2,688

5,367 5,253 57,710

Total ¥12,444 ¥75,404 $133,806

An impairment loss on service stations, plants and real estate for rent for the year both ended March 31, 2010 and 2009 was recorded at

the total of the amount by which the acquisition cost of each asset group exceeded its future cash flows, discounted at 4.5%.

An impairment loss on assets for oil and natural gas exploration and production for the year both ended March 31, 2010 and 2009 was

recorded at the total of the amount by the future cash flows of which proved oil and natural gas reserve will generate, discounted at 10.0%.

An impairment loss on other businesses, certain idle properties and others for the year ended March 31, 2010 and 2009 was recorded at

the total of the amount by which the acquisition cost of each asset exceeded its estimated fair value. The estimated fair value of land, if

material, was determined in accordance with real estate appraisal standards.


7. SHORT-TERM LOANS AND LONG-TERM DEBTShort-term loans are principally unsecured and generally represent bank overdrafts, commercial paper and notes maturing within one year.

The weighted-average interest rates for the years ended March 31, 2010 and 2009 were approximately 0.6% and 1.0%, respectively.

Long-term debt at March 31, 2010 and 2009 is summarized as follows:


2010 2009 2010

Unsecured bonds in yen, due through June 2018, at interest rates ranging from 0.90% to 2.48% ¥180,240 ¥220,000 $1,938,065Unsecured Eurobonds in yen, due through April 2013, at interest rates ranging from 1.16% to 1.62% 4,981 5,021 53,559Loans from banks, life insurance companies and government agencies, due through March 2021, at interest rates ranging from 0.44% to 4.51%:

Secured 19,334 18,615 207,892 Unsecured 614,031 635,556 6,602,484Lease obligations 7,978 5,028 85,785

826,566 884,221 8,887,806Less current portion (91,656) (87,033) (985,548)

¥734,910 ¥797,187 $7,902,258

Assets pledged at March 31, 2010 and 2009 as collateral for long-term debt or other debt were as follows:


2010 2009 2010

Land ¥243,601 ¥247,284 $2,619,366Other property, plant and equipment, net 288,639 339,283 3,103,645Investments in other securities 486 451 5,226Long-term receivables 556 1,074 5,978

The aggregate annual maturities of long-term debt subsequent to March 31, 2010 are summarized as follows:

Year ending March 31, Millions of yen Thousands of U.S. dollars

2011 ¥ 91,656 $ 985,5482012 86,039 925,1512013 106,628 1,146,5382014 96,401 1,036,5702015 and thereafter 445,841 4,793,989

¥826,567 $8,887,817

8. RETIREMENT BENEFITSThe Company and its major consolidated subsidiaries have defined benefit pension plans for their employees who are covered by non-con-

tributory plans which fall under the Welfare Pension Fund Plan of Japan.

Accrued retirement benefits at March 31, 2010 and 2009 consisted of the following:


2010 2009 2010

Retirement benefit obligation ¥(245,379) ¥(252,849) $(2,638,484)Plan assets at fair value 191,218 168,870 2,056,108

Unfunded retirement benefit obligation (54,161) (83,978) (582,376)Unrecognized actuarial gain 12,644 32,047 135,957Unrecognized prior service cost (504) (2,546) (5,419)Prepaid pension cost (17) (5) (183)

Accrued retirement benefits ¥ (42,039) ¥ (54,482) $ (452,032)


Retirement benefit expenses for the years ended March 31, 2010 and 2009 are outlined as follows:


2010 2009 2010

Service cost ¥6,837 ¥6,933 $73,516Interest cost 4,900 5,085 52,688Expected return on plan assets (3,708) (3,063) (39,871)Amortization of actuarial gain 2,588 (1,538) 27,828Amortization of prior service cost (2,186) (1,956) (23,505)

¥8,433 ¥5,460 $90,677

The assumptions used in accounting for the above plans were as follows:

2010 2009

Discount rate Mainly 2.0% Mainly 2.0%Expected rate of return on plan assets Mainly 2.0% Mainly 2.0%

9. FINANCIAL INSTRUMENTS(For the year ended March 31, 2010)

(a) Status of financial instruments

(1) Management policy for financial instruments

The Company raises funds that are required in light of investment

plans mainly through bank loans and issuing bonds. Temporary

surplus funds are managed by only highly safe financial instru-

ments. Short-term operating funds are raised through bank loans

or issuing commercial papers. Derivative transactions shall be used

to hedge risks as described below, and speculative transactions

shall not be undertaken.

(2) Types of financial instruments and related risks

Trade receivables such as notes and accounts receivable—trade

are exposed to credit risk of customers. In order to minimize such

risk, the Company properly analyzes major customers’ credit status

and manages customers’ accounts for early detection and reduc-

tion of default risks.

Trade receivables denominated in foreign currencies and derived

from export sales of products, etc. are exposed to exchange rates

fluctuation risk, however the balance is constantly within outstand-

ing balance of accounts payable—trade denominated in the same

foreign currencies.

Investment securities are exposed to market price fluctuation

risk. The Company mainly holds the shares of business partners,

regularly analyzes market prices of the shares and financial position

of business partners, and ownership status is reviewed continu-

ously, considering relationships with business partners.

Trade payables such as notes and accounts payable—trade are

due mostly within one year. Some of those payables denominated

in foreign currencies and derived from import purchases of crude

oil and other raw materials are exposed to exchange rates fluctua-

tion risk, however the net position after netting trade receivables

denominated in foreign currencies is hedged by forward foreign

exchange contracts.

Short-term loans including commercial papers are raised mainly

for operating transactions, and long-term debts are raised mainly

for investment in plant and equipment. Loans with variable interest

rates are exposed to interest rate fluctuation risk, and interest rate

swaps are used for certain long-term debts in order to hedge this

risk.

Regarding derivative transactions, in addition to forward foreign

exchange contracts and interest-rate swaps noted above, com-

modity swaps are used in order to hedge market price fluctuation

risk of crude oil as main raw materials.

The Company complies with the management policy which clari-

fies the authorization to execute derivative transactions. Further, the

Company only makes transactions with counterparties with high

credit ratings to minimize credit risks for using derivatives.

Please see Note 1 (o) for information on hedging instruments,

hedged items, hedging policy, the method for assessment of the

effectiveness of hedging.

The Company manages liquidity risk through controlling cash

management based on monthly financing plan prepared by each

group company.

(3) Supplementary explanation of items related to fair value of

financial instruments

Fair value of financial instruments are measured based on the

quoted market price, if available, or reasonably estimated value if a

quoted price is not available. Since various assumptions and fac-

tors are reflected in estimating fair value, different assumptions and

factors could result in different fair value. In addition, the notional

amount of the derivative transactions in Note 17 would not repre-

sent the market risk of the derivative transactions.


(b) Fair value of financial instruments

A following table represents carrying value, fair value, and unrealized gain (loss) as of March 31, 2010. Financial instruments, for which it is

extremely difficult to determine the fair value, are not included. Please see Note 2.

Millions of yen

As of March 31, 2010Carrying

value Fair valueUnrealized gain (loss)

Assets: (1) Notes and accounts receivable—trade ¥ 709,860 ¥ 709,860 ¥ — (2) Investment securities 221,115 218,034 (3,081)

Total ¥ 930,976 ¥ 927,895 ¥(3,081)

Liabilities: (1) Notes and accounts payable—trade ¥ 496,980 ¥ 496,980 ¥ — (2) Short-term loans*1 399,394 399,394 — (3) Commercial paper 317,000 317,000 — (4) Accounts payable—other 229,279 229,279 — (5) Excise taxes payable 311,570 311,570 — (6) Long-term loans*1 633,366 639,008 5,642

Total ¥2,387,591 ¥2,393,233 ¥ 5,642

Derivatives*2 ¥ 21,516 ¥ 16,532 ¥(4,983)


As of March 31, 2010Carrying

value Fair valueUnrealized gain (loss)

Assets: (1) Notes and accounts receivable—trade $ 7,632,903 $ 7,632,903 $ — (2) Investment securities 2,377,581 2,344,452 (33,129)

Total $10,010,495 $ 9,977,366 $(33,129)

Liabilities: (1) Notes and accounts payable—trade $ 5,343,871 $ 5,343,871 $ — (2) Short-term loans*1 4,294,559 4,294,559 — (3) Commercial paper 3,408,602 3,408,602 — (4) Accounts payable—other 2,465,366 2,465,366 — (5) Excise taxes payable 3,350,215 3,350,215 — (6) Long-term loans*1 6,810,387 6,871,054 60,667

Total $25,673,022 $25,733,688 $ 60,667

Derivatives*2 $ 231,355 $ 177,763 $(53,581)

*1. Current portions of long-term loans are included in (6) Long-term loans.*2. The value of assets and liabilities arising from derivatives is shown at net value, and with the amount in parentheses representing net liability position.

(Notes)1. Method to determine the fair value of financial instruments and matters related to securities and derivative transactions� Assets(1) Notes and account receivable—trade

The carrying value approximates fair value because of the short-term settlement period of these instruments.(2) Investment securities

The fair value of equity securities is based on the quoted market price and the fair value of bonds is based on the quoted market price, or the price provided by the financial institutions. Please see Note 4 for information on securities classified by holding purpose.

� Liabilities(1) Notes and accounts payable—trade, (2) Short-term loans, (3) Commercial paper, (4) Accounts payable—other, and (5) Excise taxes payable

The carrying value approximates fair value because of the short-term settlement period of these instruments.(6) Long-term loans

The fair value of long-term loans is based on the present value of the total of principal and interest discounted by interest rates for instruments with similar terms and remaining maturi-ties.

� DerivativesPlease see Note 17.


2. Financial instruments for which it is extremely difficult to determine the fair value.

As of March 31, 2010 Millions of yen Thousands of U.S. dollars

Unlisted shares ¥163,380 $1,756,774

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

3. The redemption schedule at March 31, 2010 for monetary receivable and securities with maturity date

Millions of yen


Due in one year or less

Due after one year through

five years

Due after five years through

ten yearsDue after ten years

Notes and accounts receivable—trade ¥708,129 ¥1,730 ¥— ¥—

Investment securities:

Held-to-maturity debt securities:

(1) Government and municipal bonds — 65 — —

Other securities with maturity date:


(2) Other bonds — 6,006 — —

Total ¥708,129 ¥7,881 ¥— ¥—





five years



Notes and accounts receivable—trade $7,614,290 $18,602 $— $—

Investment securities:

Held-to-maturity debt securities:


Other securities with maturity date:


(2) Other bonds — 64,581 — —

Total $7,614,290 $84,742 $— $—

4. With reference to the redemption schedule at March 31, 2010 for long-term loans, please see Note 7.

(Additional information)Effective the fiscal year ended March 31, 2010, the Company applied “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, issued March 10, 2008) and its “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, issued March 10, 2008).

10. INCOME TAXESIncome taxes applicable to the Company and its domestic consolidated subsidiaries comprise corporation, enterprise and inhabitants’ taxes

which, in the aggregate, resulted in a statutory tax rate of approximately 41% for the year ended March 31, 2010 and 2009.

An analysis of the difference between the statutory tax rate and the effective tax rate for the year ended March 31, 2010 has been omitted

due to the immaterial difference between the statutory and effective tax rates for the year then ended.

A corresponding analysis for the year ended March 31, 2009 has been omitted as the Company was in a loss before income tax position.


The significant components of deferred tax assets and liabilities at March 31, 2010 and 2009 were as follows:


2010 2009 2010

Deferred tax assets: Property, plant and equipment ¥ 15,353 ¥ 15,697 $ 165,086 Accrued retirement benefits 17,602 22,483 189,269 Depreciation 9,564 9,809 102,839 Net operating loss carryforwards 223,198 233,703 2,399,978 Loss on revaluation of securities 30,705 24,844 330,161 Loss on impairment of assets 72,141 72,293 775,710 Other 84,030 75,139 903,548 Valuation allowance (145,923) (138,129) (1,569,065)

Total deferred tax assets 306,674 315,843 3,297,570

Deferred tax liabilities: Fair value of subsidiaries on consolidation 77,430 77,546 832,581 Reserves under Act on Special Measures Concerning Taxation 32,501 35,694 349,473 Net unrealized holding gain on securities 27,761 17,692 298,505 Other 82,028 79,489 882,022

Total deferred tax liabilities 219,721 210,422 2,362,591

Net deferred tax liabilities ¥ 86,952 ¥105,421 $ 934,968

11. EXCISE TAXESExcise taxes are levied on gasoline and diesel fuel when delivered to the customers and are included under net sales and cost of sales in the

consolidated statements of income.

Excise taxes amounted to ¥1,001,396 million ($10,767,699 thousand) and ¥939,844 million for the years ended March 31, 2010 and

2009, respectively, and represented approximately 17% and 13% of net sales for the respective years.

12. SELLING, GENERAL AND ADMINISTRATIVE EXPENSESSelling, general and administrative expenses at March 31, 2010 and 2009 consisted of the following:


2010 2009 2010

Freight ¥ 99,317 ¥103,885 $1,067,925Personnel expenses 66,253 66,983 712,398Retirement benefits 3,784 1,726 40,688Repair and inspection costs 11,361 11,259 122,161Rental expenses 18,131 18,833 194,957Depreciation and amortization 21,366 20,781 229,742Other 60,587 63,273 651,473

¥280,802 ¥286,743 $3,019,376

13. RESEARCH AND DEVELOPMENT EXPENSESResearch and development expenses of ¥14,319 million ($153,968 thousand) and ¥12,311 million were charged to income as incurred for

the years ended March 31, 2010 and 2009, respectively.


14. CONTINGENT LIABILITIESThe Company and its consolidated subsidiaries had the following contingent liabilities at March 31, 2010 and 2009:


2010 2009 2010

As guarantors of indebtedness of: Unconsolidated subsidiaries and affiliates ¥26,446 ¥16,973 $284,366 Other 32,632 31,650 350,882

¥59,079 ¥48,623 $635,258

15. CASH FLOW INFORMATIONThe following is the summary of assets acquired and liabilities assumed through the acquisition of shares of Space Energy Corporation for

the year ended March 31, 2010, relating acquisition costs and net earnings:


Current assets ¥ 4,194 $ 45,097Fixed assets 12,342 132,710Current liabilities (7,592) (81,634)Long-term liabilities (7,120) (76,559)Goodwill 681 7,323Minority interest (715) (7,688)Investment value of shares at acquisition (953) (10,247)

Acquisition value of shares for the year ended March 31, 2010 836 8,989Cash and cash equivalents (2,002) (21,527)

Net earnings due to the acquisition ¥ 1,165 $ 12,527

16. LEASESLessee

(a) Finance leases

The lease transactions entered into a contract on and before March 31, 2008 are continuously accounted for in the same method as operat-

ing leases.

The following pro forma amounts represent the acquisition costs, accumulated depreciation, accumulated loss on impairment and net

book value of the leased buildings and machinery and equipment at March 31, 2010 and 2009, which would have been reflected in the con-

solidated balance sheets if finance lease accounting had been applied to the finance leases currently accounted for as operating leases:


2010 2009 2010

Acquisition costs ¥16,029 ¥17,492 $172,355Accumulated depreciation 9,322 8,979 100,237Accumulated loss on impairment 59 59 634

Net book value ¥ 6,647 ¥ 8,453 $ 71,473


The following amounts represent the lease payments relating to finance leases accounted for as operating leases, reversal of allowance for

loss on impairment of leased property, the pro forma depreciation expense of the leased assets (calculated by the straight-line method over

the lease terms), the pro forma interest portion of the lease payments (calculated by the interest method) and loss on impairment at March

31, 2010 and 2009:


2010 2009 2010

Lease payments ¥1,991 ¥2,136 $21,409Reversal of allowance for loss on impairment of leased property 7 641 75Depreciation 1,765 1,935 18,978Interest expense 199 232 2,140

Future minimum lease payments (exclusive of the interest portion thereon) subsequent to March 31, 2010 for finance leases accounted for

as operating leases are summarized as follows:


2011 ¥1,419 $15,2582012 and thereafter 5,907 63,516

Total ¥7,326 $78,774

(b) Operating leases

Future minimum lease payments subsequent to March 31, 2010 for noncancelable operating leases are summarized as follows:


2011 ¥ 1,716 $ 18,4522012 and thereafter 8,412 90,452

Total ¥10,128 $108,903

Lessor

(a) Finance leases

The following amounts represent the acquisition costs, accumulated depreciation and net book value of machinery and equipment leased

out at March 31, 2010 and 2009:


2010 2009 2010

Acquisition costs ¥49 ¥61 $527Accumulated depreciation 25 34 269

Net book value ¥23 ¥26 $247

The following amounts represent lease revenues relating to finance leases accounted for as operating leases, the pro forma depreciation

expense of the leased assets and the pro forma interest income on lease revenues (calculated by the interest method) at March 31, 2010

and 2009:


2010 2009 2010

Lease revenues ¥2 ¥3 $22Depreciation 2 2 22Interest income 0 0 0

Future minimum lease revenues (exclusive of the interest portion thereon) subsequent to March 31, 2010 for finance leases accounted for

as operating leases are summarized as follows:


2011 ¥ 1 $ 112012 and thereafter 13 140

Total ¥15 $161


(b) Operating leases

Future minimum lease revenues subsequent to March 31, 2010 for noncancelable operating leases are summarized as follows:


2011 ¥ 259 $ 2,7852012 and thereafter 3,711 39,903

Total ¥3,970 $42,688

17. DERIVATIVESThe Company and its consolidated subsidiaries utilize forward foreign exchange contracts, currency options, currency swaps, interest-rate

swaps, interest-rate caps, commodity swaps and commodity collars in order to manage the risk arising from adverse fluctuation in foreign

currency exchange rates, interest rates and commodity prices.

The notional amounts, fair value and unrealized gain or loss on open derivatives positions not applied to hedge accounting at March 31,

2010 are summarized as follows:

Not applied to hedge accounting


As of March 31, 2010Notional amount

Fair value

Unrealized gain (loss)

Notional amount

Fair value


Currency: Forward foreign exchange contracts ¥ 7,155 ¥ 17 ¥ 17 $ 76,935 $ 183 $ 183

Commodity swaps ¥15,941 ¥(3,263) ¥(3,263) $171,409 $(35,086) $(35,086)

The main hedged items, notional amounts and fair value on open derivatives positions applied to hedge accounting at March 31, 2010 are

summarized as follows:

Applied to hedge accounting


As of March 31, 2010 Main hedged itemsNotional amount

Fair value

Notional amount

Fair value

Currency: Forward foreign exchange contracts Accounts receivable and payable ¥211,270 ¥ 4,463 $2,271,720 $ 47,989

Interest swaps Long-term loans ¥249,895 ¥ (9,632) $2,687,043 $(103,570)

Commodity swaps Commodity (Forecasted transaction) ¥ 16,684 ¥24,947 $ 179,398 $ 268,247

The notional amounts, fair value and unrealized gain or loss on open derivatives positions at March 31, 2009 are summarized as follows:

Millions of yen


Fair value


Currency: Forward foreign exchange contracts ¥ 8,010 ¥8,315 ¥ 284

Currency swaps ¥19,003 ¥ 488 ¥ 488

Commodity swaps ¥20,845 ¥1,905 ¥1,905

Note: The above information does not include derivative transactions applied to hedge accounting.


18. SEGMENT INFORMATIONThe business of the Company and its consolidated subsidiaries is divided into the following four categories: Refining and Marketing, Oil and

Natural Gas E&P*, Construction, and Other. The Refining and Marketing segment comprises gasoline, naphtha, kerosene, diesel fuel, heavy

fuels, petrochemical products (paraxylene, benzene), plastics and others; the Oil and Natural Gas E&P segment comprises exploration for,

and production of, oil and natural gas; the Construction segment comprises paving, civil engineering and construction; and the Other seg-

ment comprises leasing, finance, insurance, data processing and other businesses.

* Exploration and Production

The business and geographical segment information of the Company and its consolidated subsidiaries for the years ended March 31,

2010 and 2009 is summarized as follows:

Business segments

Millions of yen

Year ended March 31, 2010

Refining and

Marketing

Oil and Natural

Gas E&P Construction Other Total Eliminations Consolidated

Sales to third parties ¥5,192,418 ¥143,431 ¥377,435 ¥60,992 ¥5,774,279 ¥ — ¥5,774,279Intergroup sales and transfers 10,698 — 27,514 23,575 61,788 (61,788) —

Total sales 5,203,117 143,431 404,950 84,567 5,836,067 (61,788) 5,774,279Operating expenses 5,172,092 116,015 386,224 78,748 5,753,080 (65,536) 5,687,543

Operating income ¥ 31,025 ¥ 27,416 ¥ 18,725 ¥ 5,819 ¥ 82,987 ¥ 3,748 ¥ 86,735

Assets ¥3,417,938 ¥471,340 ¥350,953 ¥40,471 ¥4,280,704 ¥(151,471) ¥4,129,232

Depreciation and amortization ¥ 124,026 ¥ 40,486 ¥ 6,486 ¥ 614 ¥ 171,613 ¥ (795) ¥ 170,818

Loss on impairment of fixed assets ¥ 6,400 ¥ 5,957 ¥ 86 ¥ — ¥ 12,444 ¥ — ¥ 12,444

Capital expenditures ¥ 111,935 ¥ 58,282 ¥ 8,468 ¥ 556 ¥ 179,243 ¥ — ¥ 179,243

Millions of yen


Refining and

Marketing

Oil and Natural


Sales to third parties ¥6,760,525 ¥218,623 ¥356,540 ¥53,545 ¥7,389,234 ¥ — ¥7,389,234Intergroup sales and transfers 8,806 — 28,526 24,983 62,316 (62,316) —


Operating income (loss) ¥ (434,402) ¥106,377 ¥ 7,499 ¥ 5,349 ¥ (315,176) ¥ 2,670 ¥ (312,506)

Assets ¥3,218,077 ¥489,758 ¥359,281 ¥51,549 ¥4,118,666 ¥(148,936) ¥3,969,730

Depreciation and amortization ¥ 123,880 ¥ 39,711 ¥ 6,318 ¥ 767 ¥ 170,678 ¥ (571) ¥ 170,106

Loss on impairment of fixed assets ¥ 11,311 ¥ 63,279 ¥ 813 ¥ — ¥ 75,404 ¥ — ¥ 75,404

Capital expenditures ¥ 94,687 ¥ 75,163 ¥ 8,675 ¥ 991 ¥ 179,517 ¥ — ¥ 179,517




Refining and

Marketing

Oil and Natural


Sales to third parties $55,832,452 $1,542,269 $4,058,441 $655,828 $62,089,022 $ — $62,089,022Intergroup sales and transfers 115,032 — 295,849 253,495 664,387 (664,387) —

Total sales 55,947,495 1,542,269 4,354,301 909,323 62,753,409 (664,387) 62,089,022Operating expenses 55,613,892 1,247,473 4,152,946 846,753 61,861,075 (704,688) 61,156,376

Operating income $ 333,602 $ 294,796 $ 201,344 $ 62,570 $ 892,333 $ 40,301 $ 932,634

Assets $36,752,022 $5,068,172 $3,773,688 $435,172 $46,029,075 $(1,628,720) $44,400,344

Depreciation and amortization $ 1,333,613 $ 435,333 $ 69,742 $ 6,602 $ 1,845,301 $ (8,548) $ 1,836,753

Loss on impairment of fixed assets $ 68,817 $ 64,054 $ 925 $ — $ 133,806 $ — $ 133,806

Capital expenditures $ 1,203,602 $ 626,688 $ 91,054 $ 5,978 $ 1,927,344 $ — $ 1,927,344

Note: In addition to the above, loss on impairment of ¥585 million ($6,290 thousand) for the Refining and Marketing segment was included in the item “Business structure improvement expenses” of Consolidated Statements of Income for the year ended March 31, 2010.

Change in Accounting Policy

(Year ended March 31, 2010)

Application of “Accounting Standard

for Construction Contracts”















applied.


($356,989 thousand) in the Construction segment and by ¥2 mil-

lion ($22 thousand) in the Other segment. In addition, operating

income increased by ¥2,043 million ($21,968 thousand) in the

Construction segment and by ¥0 million ($0 thousand) in the Other

segment.


(1) Application of “Accounting Standard

for Measurement of Inventories”

As described in Note 3 (c), effective the fiscal year beginning April

1, 2008, the Company has applied “Accounting Standard for

Measurement of Inventories” (ASBJ Statement No. 9 issued July 5,

2006).

As a result of this change, operating expenses increased by

¥28,127 million in the Refining and Marketing segment, by ¥1,560

million in the Construction segment, and by ¥339 million in the

Other segment. Operating loss increased by ¥28,127 million in the

Refining and Marketing segment, operating income decreased by

¥1,560 million in the Construction segment, and by ¥339 million in

the Other segment.

(2) Change in Useful Lives of Property, Plant and Equipment

As described in Note 3 (d), effective the fiscal year beginning April

1, 2008, the Company and its domestic consolidated subsidiaries

reviewed the useful lives for depreciation of property, plant and

equipment, mainly machinery and equipment for petroleum refin-

ing, etc. in accordance with an amendment to the Corporate Tax

Act of Japan and used the new useful lives defined under the

amended Corporate Tax Act of Japan.

As a result of this change, depreciation expenses increased by

¥5,820 million in the Refining and Marketing segment, and

decreased by ¥41 million in the Construction segment. Operating

expenses increased by ¥5,561 million in the Refining and Marketing

segment, and decreased by ¥41 million in the Construction seg-

ment. Operating loss increased by ¥5,561 million in the Refining

and Marketing segment, and operating income increased by ¥41

million in the Construction segment.


Geographical segments

Millions of yen

Year ended March 31, 2010 JapanAsia and Oceania

North America Europe Total Eliminations Consolidated

Sales to third parties ¥5,598,182 ¥ 93,784 ¥ 57,799 ¥ 24,513 ¥5,774,279 ¥ — ¥5,774,279Intergroup sales and transfers 8,213 111,110 — 12,534 131,858 (131,858) —


Operating income ¥ 45,984 ¥ 33,110 ¥ 4,803 ¥ 2,673 ¥ 86,571 ¥ 164 ¥ 86,735

Total assets ¥3,905,399 ¥300,516 ¥148,559 ¥107,427 ¥4,461,903 ¥(332,670) ¥4,129,232

Millions of yen



Sales to third parties ¥7,085,158 ¥173,023 ¥ 79,921 ¥ 51,130 ¥7,389,234 ¥ — ¥7,389,234Intergroup sales and transfers 68,279 462,232 — 67,893 598,406 (598,406) —


Operating income (loss) ¥ (421,277) ¥ 74,228 ¥ 15,503 ¥ 18,460 ¥ (313,085) ¥ 579 ¥ (312,506)

Total assets ¥3,725,806 ¥376,168 ¥160,805 ¥131,394 ¥4,394,175 ¥(424,444) ¥3,969,730




Sales to third parties $60,195,505 $1,008,430 $ 621,495 $ 263,581 $62,089,022 $ — $62,089,022Intergroup sales and transfers 88,312 1,194,731 — 134,774 1,417,828 (1,417,828) —

Total sales 60,283,817 2,203,172 621,495 398,355 63,506,860 (1,417,828) 62,089,022Operating expenses 59,789,366 1,847,140 569,839 369,613 62,575,978 (1,419,602) 61,156,376

Operating income $ 494,452 $ 356,022 $ 51,645 $ 28,742 $ 930,871 $ 1,763 $ 932,634

Total assets $41,993,538 $3,231,355 $1,597,409 $1,155,129 $47,977,452 $(3,577,097) $44,400,344

Notes: 1. Geographical segments correspond to categories of geographical similarity, classified primary by nations and regions. 2. Each segment outside Japan includes the following nations and regions:

(a) Asia and Oceania: Singapore, Vietnam, Malaysia, Myanmar, China and Australia (b) North America: U.S.A. and Canada (c) Europe: U.K. and The Netherlands


Change in Accounting Policy


Application of “Accounting Standard for

Construction Contracts”















applied.


($357,011 thousand) in Japan segment. In addition, operating

income increased by ¥2,043 million ($21,968 thousand) in Japan

segment.


(1) Application of “Accounting Standard for

Measurement of Inventories”

As described in Note 3 (c), effective the fiscal year beginning April

1, 2008, the Company has applied “Accounting Standard for

Measurement of Inventories” (ASBJ Statement No. 9 issued July 5,

2006).


¥30,027 million and operating loss increased by ¥30,027 million in

Japan segment.

(2) Change in Useful Lives of Property, Plant and Equipment

As described in Note 3 (d), effective the fiscal year beginning April

1, 2008, the Company and its domestic consolidated subsidiaries

reviewed the useful lives for depreciation of property, plant and

equipment, mainly machinery and equipment for petroleum refin-

ing, etc. in accordance with an amendment to the Corporate Tax

Act of Japan and used the new useful lives defined under the

amended Corporate Tax Act of Japan.


¥5,520 million, and operating loss increased by ¥5,520 million in

Japan segment.

Overseas sales

Overseas sales for the year ended March 31, 2010 were as follows:


Overseas sales ¥ 628,043 $ 6,753,151Total consolidated sales 5,774,279 62,089,022Ratio of overseas sales to total consolidated sales 10.9%

Notes: 1. Overseas sales are not given by country or region as the information is not deemed to be material. 2. The major countries or regions in the category: China, Singapore and Korea 3. Overseas sales is the Company’s and its consolidated subsidiaries’ sales to customers outside of Japan.

Overseas sales for the year ended March 31, 2009 were as follows:

Millions of yen

Overseas sales ¥ 832,006Total consolidated sales 7,389,234Ratio of overseas sales to total consolidated sales 11.3%

Notes: 1. Overseas sales are not given by country or region as the information is not deemed to be material. 2. The major countries or regions in the category: China, Singapore and Malaysia 3. Overseas sales is the Company’s and its consolidated subsidiaries’ sales to customers outside of Japan.


19. RELATED PARTY TRANSACTIONSThere were no applicable transactions with related parties for the year ended March 31, 2010, and no applicable notes on the parent com-

pany and affiliated companies for the both year ended March 31, 2010 and 2009.

Significant transactions with related parties for the years ended March 31, 2009 were as follows:

For the year ended March 31, 2009

Name Capital

Voting right share owning (share owned) Transactions (Millions of yen) Closing balances (Millions of yen)

Nippon Oil Exploration (PNG) Pty. Limited

(Thousands of A$) 0 Indirect 100.0% Loan ¥74,240

Short-term Receivables ¥—

Note: Nippon Oil Exploration (PNG) Pty. Limited is consolidated from March 31, 2009, at the end of this fiscal year. Amount of transactions is included in the above table before starting the consolidation of balance sheet, however, the amount of closing balance is not included in the above table because it has been eliminated from the consolidated balance sheet of this fiscal year.

20. AMOUNT PER SHARECalculation of net income (loss) per share and net assets per share for the years ended March 31, 2010 and 2009 was as follows:

1. Net income (loss) per share


2010 2009 2010

Net income (loss) attributable to common shares ¥43,295 ¥(251,613) $465,538Weighted-average number of common shares outstanding (Thousands of shares) 1,457,757 1,459,326

Yen U.S. dollars

Net income (loss) per share ¥29.70 ¥(172.42) $0.32

Diluted net income per share was not calculated herein since the Company had no potential common shares, which have dilutive effect

issuable upon conversion of convertible bonds, outstanding for the years ended March 31, 2010 and 2009.

2. Net assets per share


2010 2009 2010

Total net assets ¥1,059,089 ¥1,016,306 $11,388,054Minority interests deducted from total net assets 99,182 100,900 1,066,473Net assets attributable to shares of common stock 959,907 915,405 10,321,581

The number of shares of common stock used for the calculation of net assets per share 1,457,636 1,457,878

Yen U.S. dollars

Net assets per share ¥658.54 ¥627.90 $7.08


21. SUBSEQUENT EVENTS(1) The following appropriations of retained earnings, which have not been reflected in the accompanying consolidated financial statements

for the year ended March 31, 2010, were approved at a meeting of the shareholders of the Company held on June 28, 2010:


Year-end cash dividends (¥8=$0.09 per share) ¥11,678 $125,570

(2) The establishment of JX Holdings, Inc. as a wholly owning parent company through a joint share transfer between the Company and

Nippon Mining Holdings, Inc. was approved at the extraordinary shareholders’ meeting of the Company on January 27, 2010.

JX Holdings, Inc. was established on April 1, 2010, when the Company became a wholly owned subsidiary thereof.

Corporate name JX Holdings, Inc.

Headquarters location 2-6-3 Otemachi, Chiyoda-ku, Tokyo

Representative Mitsunori Takahagi, Representative Director, President

Capital ¥100,000 million

Business details Management and administration, and related activities, of subsidiaries and other group compa-nies engaged in the refining and marketing, E&P of oil and natural gas, and metals businesses

Ratio of the share transfer

Allotment to 1.07 shares of JX Holdings, Inc. for each share of the Company, to 1.00 shares of JX Holdings, Inc. for each share of Nippon Mining Holdings, Inc.

Main reason for share transfer

The two corporate groups will undertake a full-scale business integration to further strengthen the management basis of both groups and in order to achieve dynamic growth and development under a new management philosophy.

Effective date of share transfer

April 1, 2010

(3) At a meeting of the Board of Directors held on May 26, 2010, it was resolved that the Company would enter into the absorption merger

agreement with Japan Energy Corporation, and the absorption demerger agreement with JX Holdings, Inc.

The agreement was signed on the same day.

(a) The absorption merger agreement with Japan Energy Corporation

The agreement noted that the Company would merge with Japan Energy Corporation, the specified and wholly owned subsidiary of

Nippon Mining Holdings, Inc. which is equally the wholly owned subsidiary of JX Holdings, Inc.

The overview is as follows:

1) Outline of company absorbed in absorption merger

Corporate name Japan Energy Corporation

Headquarters location 2-10-1 Toranomon, Minato-ku, Tokyo

Representative Isao Matsushita, Representative Director, President

Capital ¥48,000 million (at March 31, 2010)

Net assets ¥219,855 million (at March 31, 2010)

Total assets ¥922,325 million (at March 31, 2010)

Sales ¥2,113,450 million (for the fiscal year ended March 31, 2010)

Net income ¥11,217 million (for the fiscal year ended March 31, 2010)

Business details Refining and selling petrochemical products

2) Purpose of absorption merger

This purpose is to establish the subsidiary in the petroleum refining and marketing business as one of the core integrated operating sub-

sidiaries in JX Group, as a part of the business integration between the Company and Nippon Mining Holdings, Inc.


3) Method and nature of absorption merger

� Method

Absorption merger on which the Company is defined as the surviving company and Japan Energy Corporation is defined as the

absorbed company

� Date (Effective date)

July 1, 2010

� Allotment of shares

Upon the absorption merger, the Company would issue 411,800,000 new shares of common stock and allot them to Nippon Mining

Holdings Inc. as the final shareholder of Japan Energy Corporation on the day before the effective date.

� Shareholders’ meeting where the agreement is approved

The absorption merger agreement was approved at a shareholders’ meeting of the Company and Japan Energy Corporation, respec-

tively.

4) Accounting method

This transaction would be accounted for as a transaction under common control based on “Accounting Standard for Business

Combinations” (ASBJ Statement No. 21) and “Revised Guidance on Accounting Standard for Business Combinations and Accounting

Standard for Business Divestitures” (ASBJ Guidance No. 10).

5) Outline of surviving company after absorption merger

Corporate name JX Nippon Oil & Energy Corporation (Planned to be changed from Nippon Oil Corporation on July 1, 2010)

Headquarters location 2-6-3 Otemachi, Chiyoda-ku, Tokyo (Planned to be moved on July 1, 2010)

Representative Yasushi Kimura, Representative Director, President (Planned to inaugurate on July 1, 2010)

Business details Refining and selling petrochemical products, importing and selling gas, generating and selling electricity

(b) The absorption demerger agreement with JX Holdings, Inc.

The agreement noted that the Company would transfer its rights and obligations for the subsidiaries management function to JX

Holdings, Inc. as the wholly owning parent.

This overview is as follows:

1) Outline of successor company in absorption demerger




Capital ¥100,000 million (at April 1, 2010)

Net assets ¥1,171,301 million (at April 1, 2010)

Total assets ¥1,171,301 million (at April 1, 2010)


2) Purpose of absorption demerger

This purpose is that the Company would transfer its assets and liabilities for the subsidiaries management function to JX Holdings, Inc., an

integrated holding company, as a part of the business integration between the Company and Nippon Mining Holdings, Inc.


3) Method and nature of absorption demerger

� Method

Absorption demerger on which the Company is defined as the demerged company and JX Holdings, Inc. is defined as the successor

company

� Date (Effective date)

July 1, 2010

� Allotment of shares

Since JX Holdings, Inc. is a wholly owning parent for the Company, no consideration including allotment of shares etc. will be noted.

� Simple absorption demerger, simplified absorption demerger

Under Article 784 Clause 1 of the Companies Act of Japan, the Company is not required to approve the absorption demerger agree-

ment at shareholders’ meeting of the Company. Under Article 796 Clause 3 of the Companies Act of Japan, JX Holdings, Inc. is not

required to approve the absorption demerger agreement at shareholders’ meeting of JX Holdings, Inc.

4) Accounting method

This transaction would be accounted for as a transaction under common control based on “Accounting Standard for Business

Combinations” (ASBJ Statement No. 21) and “Revised Guidance on Accounting Standard for Business Combinations and Accounting

Standard for Business Divestitures” (ASBJ Guidance No. 10).

5) Outline of successor company after absorption demerger







5,000

0

1,000

2,000

3,000

4,000

1009080706

240

-160

-80

0

80

160

1009080706

150

-50

0

50

100

1009080706

3,233.7

29.8

74.0

Management’s Discussion and Analysis of OperationsNippon Mining Holdings, Inc. and Consolidated Subsidiaries

1. PERFORMANCE DURING THE YEAROverview

For the fiscal year ended March 31, 2010, on a consolidated basis,

Nippon Mining Holdings reported ¥3,233.7 billion in net sales, a

20.5% decline year on year; income before special items of ¥74.0

billion compared with a loss before special items of ¥67.4 billion in

the previous fiscal year; and net income of ¥29.8 billion versus a

net loss of ¥40.8 billion for the prior fiscal year. After excluding the

impact of inventory valuation, income before special items amount-

ed to ¥28.1 billion, a 69.5% decline from ¥92.1 billion reported in

the previous fiscal year.

Petroleum (Japan Energy Group)

Domestic petroleum products sales volume declined year on year

because of the drop in demand for petroleum products accompa-

nying the downturn in the economy. Prices of petroleum products

decreased, as a result of the fall in crude oil prices and a deteriora-

tion in the supply and demand balance for petroleum products.

Although the sales volume of petrochemical products, including

such aromatic products (aromatic-type hydrocarbons) as benzene

and paraxylene, increased, prices dropped. The sales volume of LP

gas expanded, as a result of a corporate merger in this product

area, but prices decreased. The sales volume of lubricating oil

increased, but prices declined.

Overall, the Petroleum business recorded a 22.4% drop in net

sales year on year, to ¥2,417.7 billion. Although petroleum prod-

ucts margins deteriorated, income before special items rose to

¥26.2 billion, compared with a loss before special items of ¥105.2

billion in the previous fiscal year. Because in addition to a decline in

energy costs, increases in the cost of sales that were experienced

in the previous fiscal year caused by the impact of inventory valua-

tion accompanying the drop in crude oil prices were resolved.

Metals (Nippon Mining & Metals Group)

Conditions in the copper market were stagnant during the first half

of the fiscal year under review because of the deterioration in the

world economy, but, as a result of recovery in demand, the inflow

of speculative funds, and other factors, the price of copper on the

London Metal Exchange (LME) rose from 180 cents per pound at

the beginning of the fiscal year to 355 cents at the end. As a result,

the average price for the fiscal year was 277 cents, versus 266

cents in the previous fiscal year.

In the copper business, the sales volume of refined copper

declined from the previous fiscal year, reflecting weakness in

domestic demand. The price of copper in the international market

rose over the previous fiscal year, but, as a result of the apprecia-

tion in the value of the yen, the average price for the fiscal year in

yen was lower than in the prior fiscal year. Purchase conditions for

copper concentrate and sales prices of sulfuric acid remained at a

relatively weak level. In the recycling and environmental services

business, difficult operating conditions continued.

In the electronic materials business, the sales volume of copper

foil (electro-deposited copper foil and treated rolled copper foil),

thin-film forming materials (such as sputtering targets for LSIs and

other products), precision rolled products (such as phosphor

bronze, Corson alloys, and other products), and precision fabricat-

ed products (gold-plated products, etc.) exceeded the level of the

previous fiscal year, with the exception of some products, reflecting

recovery in the demand for end-use products. The sales volume of

Net Sales

(Billions of yen)


Income (Loss) before Special Items(Billions of yen)


�� Income before special items (excluding inventory valuation)


Net Income (Loss)

(Billions of yen)



1,200

0

300

600

900

1009080706

4,000

0

1,000

2,000

3,000

1009080706

100

-150

-50

0

-100

50

1009080706

150

-50

0

50

100

1009080706

780.72,417.7

26.2

47.4

Petroleum BusinessNet Sales(Billions of yen)


Petroleum Business Income (Loss) before Special Items(Billions of yen)


�� Income (loss) before special items (excluding inventory valuation)


Metals BusinessNet Sales(Billions of yen)


Metals Business Income before Special Items(Billions of yen)


�� Income before special items (excluding inventory valuation)


sputtering targets for flat panel displays (FPDs), in particular,

increased considerably as a result of strong demand for LCD televi-

sions in the Chinese, European, U.S., and other markets. Prices of

FPD targets declined, reflecting the drop in prices of indium, a key

raw material. Prices of other products were generally below the lev-

els of the previous fiscal year, principally because of a change in

product mix.

Under these circumstances, net sales in the Metals business

were down 13.5% from the previous fiscal year, to ¥780.7 billion,

while income before special items rose 66.4%, to ¥47.4 billion,

owing to the recovery of copper prices and the improvement in the

cost of sales accompanying the impact of inventory valuation

despite the appreciation of the yen and reduced margins on sulfuric

acid and electronic materials products.

Other Operations (Independent Operating Companies and Functional Support Companies)

Net sales from the Other Operations segment decreased 17.0%

year on year, to ¥70.3 billion, and income before special items

decreased 75.1% from the previous fiscal year, to ¥2.4 billion.

Toho Titanium Co., Ltd. (titanium business), reported declines in

net sales and income before special items because of the effects of

postponement of the delivery of products to the aircraft industry

and lower demand from the general industrial sector as a result of

the world economic downturn. Nichiyo Engineering Corporation

(engineering business) and other independent operating companies

worked to expand their operational foundations and enhance prof-

itability. Functional support companies, such as Nippon Mining

Finance Co., Ltd., efficiently conduct operations in support of

group-wide activities, including finance, administrative services,

environmental management, research and consulting, materials

procurement, and IT planning and management.

Tatsuta Electric Wire & Cable Co., Ltd., and Maruwn Corporation

are listed, equity-method affiliates in the Company Group. Tatsuta

Electric Wire & Cable reported a decline in revenue due to a decline

in demand for electric wire and cable, but an increase in income, in

part because the adverse impact of the decline in copper prices

during the previous year was resolved. Maruwn Corporation, a

company in the transportation sector, showed declines in sales and

income owing to the decline in transport volume.

Please note that sales figures for the segments reviewed here

include ¥35.0 billion in inter-segment transactions, compared with

¥37.9 billion in the previous fiscal year.


2. ANALYSIS OF FINANCIAL POSITIONConsolidated Balance Sheet Analysis

Consolidated Balance Sheets

Billions of yen

As of March 31 2010 2009 Change

Total assets 2,067.5 1,886.1 181.4

Total liabilities 1,360.9 1,226.1 134.8

Total net assets 706.6 659.9 46.6

Total assets stood at ¥2,067.5 billion as of March 31, 2010, an

increase of ¥181.4 billion over the previous fiscal year-end.

Although cash and cash equivalents decreased ¥31.9 billion and

other current assets were down ¥20.3 billion, total assets increased

because of an increase in notes and accounts receivable, trade of

¥113.0 billion owing to higher crude oil prices and other factors, an

increase in inventories of ¥104.1 billion, and expansion in invest-

ments in securities of ¥22.8 billion, and other factors.

Total liabilities were ¥1,360.9 billion as of March 31, 2010, an

increase of ¥134.8 billion from the end of the previous fiscal year.

This rise in total liabilities was due to an increase in interest-bearing

liabilities of ¥69.6 billion, an increase of ¥66.1 billion in notes and

accounts payable, trade accompanying the rise in crude oil prices,

and other factors.

Total net assets stood at ¥706.6 billion as of March 31, 2010,

¥46.6 billion higher than at the end of the previous fiscal year.

Factors accounting for this were an increase in retained earnings of

¥18.3 billion, a decrease in deferred hedge loss of ¥7.3 billion, an

increase in minority interests in consolidated subsidiaries of ¥15.4

billion, and other factors.

As a result, the shareholders’ equity ratio stood at 29.0% at the

end of the fiscal year under review, a 1.1 percentage point

decrease from the previous fiscal year-end. The debt to equity (D/E)

ratio rose 0.05 point over the previous fiscal year-end, to 1.29 times.

As of March 31 2010 2009 2008 2007

Shareholders’ equity ratio (%) 29.0 30.1 30.3 30.3

D/E ratio (times) 1.29 1.24 1.17 1.11

Interest-bearing debt (billions of yen) 774.6 705.0 795.9 689.4

Consolidated Cash Flow Analysis

Net cash provided by operating activities was ¥9.7 billion. The pri-

mary positive factors were income before income taxes and minori-

ty interests of ¥60.4 billion, depreciation and amortization of ¥74.8

billion, and an increase in trade payables of ¥72.0 billion. The pri-

mary negative factors were an increase of ¥111.7 billion in trade

receivables, an increase of ¥100.7 billion in inventories, and a ¥7.7

billion difference arising from equity-method investments (equity in

income of affiliates accounted for by the equity method of ¥38.2

billion less ¥30.5 billion in dividends received from affiliates

accounted for by the equity method).

Net cash used in investing activities was ¥95.8 billion, mainly due

to payments of ¥82.9 billion for acquisition of property, plant and

equipment as well as intangible assets and payments of ¥13.8 bil-

lion for acquisition of investments in securities.

Net cash provided by financing activities amounted to ¥51.1 bil-

lion. Negative factors for cash flow from financing activities included

cash dividends paid of ¥12.5 billion and cash dividends paid to

minority shareholders of ¥6.0 billion, but interest-bearing debt

increased ¥64.4 billion.

As a result, cash and cash equivalents at the end of the fiscal

year under review amounted to ¥85.2 billion, a decrease of ¥31.8

billion compared with cash and cash equivalents at the beginning

of the fiscal year.

Consolidated Statements of Cash Flows

Billions of yen

Years ended March 31 2010 2009

Cash flows from operating activities 9.7 275.1

Cash flows from investing activities (95.8) (93.8)

Cash flows from financing activities 51.1 (124.3)

Effect of exchange rate changes on cash and cash equivalents 0.3 (4.0)

Net increase (decrease) in cash and cash equivalents (34.7) 53.1

Cash and cash equivalents at beginning of year 117.0 62.6

Increase in cash and cash equivalents related to subsidiaries newly included in consolidation, corporate division, and merger of consolidated subsidiaries 2.9 1.3

Cash and cash equivalents at end of year 85.2 117.0

3. BASIC POLICIES REGARDING ALLOCATION OF PROFIT AND DETERMINATION OF CASH DIVIDENDS

The Company maintains the policy of determining dividends to

shareholders by giving comprehensive consideration to its business

results, the management environment, and its intention of maintain-

ing stable dividend payments and retained earnings.

The Company has decided to pay a year-end dividend for the

fiscal year ended March 31, 2010, of ¥7.5 per share to give a total

annual dividend of ¥15.0 per share when combined with the interim

dividend of ¥7.5 per share.


Consolidated Balance SheetsNippon Mining Holdings, Inc. and Consolidated SubsidiariesAs of March 31, 2010 and 2009

Millions of yen

Thousands ofU.S. dollars(Note 1-A)

Assets 2010 2009 2010

Current assets: Cash and cash equivalents ¥ 85,224 ¥ 116,986 $ 915,993 Trade receivables: Notes and accounts, less allowance for doubtful accounts

of ¥965 million in 2010 and ¥754 million in 2009 345,150 232,376 3,709,695 Inventories (Note 3) 443,435 339,367 4,766,068 Deferred tax assets—current (Note 11) 10,179 21,843 109,405 Other current assets (Note 7) 61,472 81,510 660,705

Total current assets 945,460 792,082 10,161,866

Investments and long-term loans: Investments in securities (Notes 4 and 7) 50,499 49,755 542,767 Investments in non-consolidated subsidiaries and affiliates (Note 5) 162,621 140,599 1,747,861 Long-term loans 12,422 4,323 133,512 Other investments (Note 7) 22,949 23,415 246,658

Total investments and long-term loans 248,491 218,092 2,670,798

Property, plant and equipment (Note 7): Land (Note 6) 278,354 283,184 2,991,767 Buildings and structures 451,124 445,621 4,848,710 Machinery and equipment 947,556 921,379 10,184,393 Leased assets (Note 2-A (2)) 4,085 3,779 43,906 Construction in progress 58,464 41,465 628,375

1,739,583 1,695,428 18,697,151 Less: Accumulated depreciation (1,008,678) (960,626) (10,841,337)

Net property, plant and equipment 730,905 734,802 7,855,814

Intangible assets and deferred charges: Goodwill 9,951 9,924 106,954 Other (Note 7) 71,293 71,896 766,262

Total intangible assets and deferred charges 81,244 81,820 873,216

Deferred tax assets—non-current (Note 11) 61,407 59,287 660,006

Total assets ¥2,067,507 ¥1,886,083 $22,221,700

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


Millions of yen


Liabilities and Net Assets 2010 2009 2010

Current liabilities: Short-term borrowings (Note 8) ¥ 354,948 ¥ 320,108 $ 3,815,004 Current portion of long-term debt (Note 8) 81,548 41,834 876,483 Lease obligations (Notes 2-A (2) and 8) 1,543 1,096 16,584 Trade payables: Notes and accounts 252,568 186,455 2,714,617 Excise tax 76,448 70,742 821,668 Accrued income taxes 5,403 4,309 58,072 Allowance for employee bonuses 6,861 7,328 73,742 Other current liabilities 117,393 126,578 1,261,749

Total current liabilities 896,712 758,450 9,637,919

Long-term liabilities: Long-term debt (Note 8) 330,944 337,632 3,557,008 Lease obligations (Notes 2-A (2) and 8) 5,621 4,361 60,415 Deferred tax liabilities—non-current (Note 11) 37,741 29,313 405,643 Allowance for retirement benefits (Note 9) 58,672 59,427 630,610 Accrued retirement benefits for corporate directors and auditors 852 986 9,157 Allowance for periodic repair works 12,397 15,890 133,244 Negative goodwill 1,113 439 11,963 Other long-term liabilities 16,892 19,647 181,556

Total long-term liabilities 464,232 467,695 4,989,596

Commitments and contingent liabilities (Note 12)

Net assets: Common stock: Authorized—3,000,000 thousand shares Issued—928,462 thousand shares in 2010 and 2009 73,920 73,920 794,497 Capital surplus 226,777 226,748 2,437,414 Retained earnings 325,334 306,987 3,496,711 Less: Treasury stock, at cost (399) (883) (4,288)

Total shareholders’ equity 625,632 606,772 6,724,334

Unrealized gain on marketable securities 13,757 10,008 147,861 Deferred hedge loss (1,063) (8,328) (11,425) Surplus from land revaluation (Note 6) (3,236) (3,091) (34,781) Accumulated translation adjustment (35,976) (38,014) (386,673)

Total valuation and translation adjustment (26,518) (39,425) (285,018)

Stock acquisition rights — 499 —

Minority interests in consolidated subsidiaries 107,449 92,092 1,154,869

Total net assets 706,563 659,938 7,594,185



Consolidated Statements of IncomeNippon Mining Holdings, Inc. and Consolidated SubsidiariesFiscal years ended March 31, 2010 and 2009

Millions of yen


2010 2009 2010

Net sales ¥3,233,738 ¥4,065,059 $34,756,427Cost of sales (Notes 3 and 17) 3,009,182 3,969,468 32,342,884

Gross profit 224,556 95,591 2,413,543

Selling, general and administrative expenses (Notes 16, 17 and 19) 180,818 197,258 1,943,444

Operating income (loss) 43,738 (101,667) 470,099

Other income (expenses): Interest and dividend income 3,621 4,130 38,919 Interest expenses (9,433) (12,527) (101,387) Exchange gain (loss) 631 (3,639) 6,782 Equity in income of non-consolidated subsidiaries and affiliates 38,221 48,897 410,802 Amortization of negative goodwill 498 912 5,353 Loss on sales of copper slag (2,213) — (23,785) Other, net (1,096) (3,539) (11,781)

Income (loss) before special items 73,967 (67,433) 795,002

Special profit (loss): Gain on sales of investments in securities 321 204 3,450 Gain on sales of investment in subsidiary — 1,075 — Loss on sales and disposal of property, plant and equipment, net (3,843) (6,430) (41,305) Impairment losses (Note 18) (2,086) (7,539) (22,420) Loss on write-down of investments in securities (5,685) (1,969) (61,103) Provision for allowance for environmental remediation (911) (343) (9,791) Provision for allowance for cost of disposal of

unutilized property, plant and equipment (33) (29) (355) Restructuring loss — (1,490) — Loss on business withdrawal — (1,075) — Loss on fire accident — (878) — Other, net (1,306) 71 (14,037)

Income (loss) before income taxes and minority interests 60,424 (85,836) 649,441

Income taxes: Current 13,651 18,663 146,722 Deferred 8,539 (76,299) 91,777

22,190 (57,636) 238,499

Income (loss) before minority interests 38,234 (28,200) 410,942

Minority interests in earnings of consolidated subsidiaries (8,423) (12,594) (90,531)

Net income (loss) ¥ 29,811 ¥ (40,794) $ 320,411

YenU.S. dollars(Note 1-A)

Net income (loss) per share: Basic ¥32.17 ¥(44.02) $0.35 Diluted 32.14 — 0.35

Cash dividends per share ¥15.00 ¥ 14.00 $0.16



Consolidated Statements of Changes in Net AssetsNippon Mining Holdings, Inc. and Consolidated SubsidiariesFiscal years ended March 31, 2010 and 2009

Millions of yen


Common stock

Capital surplus

Retained earnings

Treasury stock Total

Unrealized gain on

marketable securities

Deferred hedge gain

(loss) on derivatives

under hedge

accounting

Surplus from land

revaluation

Accumulated translation adjustment

Stock acquisition

rights



Total net

assets

Balance as of March 31, 2008 ¥73,920 ¥226,759 ¥362,360 ¥(717) ¥662,322 ¥23,241 ¥ 16 ¥(3,088) ¥ (1,080) ¥361 ¥ 83,492 ¥765,264

Effect of changes in accounting policies applied to foreign subsidiaries (Note 2-A (1)) — — 16 — 16 — — — — — 317 333

Cash dividends paid — — (14,840) — (14,840) — — — — — — (14,840) Net loss — — (40,794) — (40,794) — — — — — — (40,794) Purchase of treasury stock — — — (265) (265) — — — — — — (265) Disposal of treasury stock — (8) — 57 49 — — — — — — 49 Grant of treasury stock

with exercise of stock acquisition rights — (3) — 42 39 — — — — — — 39

Reclassification with surplus from land revaluation — — 1 — 1 — — — — — — 1

Change of scope of consolidation — — 244 — 244 — — — — — — 244

Net changes of items other than shareholders’ equity — — — — — (13,233) (8,344) (3) (36,934) 138 8,283 (50,093)

Total changes of items during the period — (11) (55,389) (166) (55,566) (13,233) (8,344) (3) (36,934) 138 8,283 (105,659)

Balance as of March 31, 2009 ¥73,920 ¥226,748 ¥306,987 ¥(883) ¥606,772 ¥10,008 ¥(8,328) ¥(3,091) ¥(38,014) ¥499 ¥ 92,092 ¥659,938

Cash dividends paid — — (12,515) — (12,515) — — — — — — (12,515) Net income — — 29,811 — 29,811 — — — — — — 29,811 Purchase of treasury stock — — — (80) (80) — — — — — — (80) Disposal of treasury stock — (1) — 7 6 — — — — — — 6 Grant of treasury stock

with exercise of stock acquisition rights — 30 — 557 587 — — — — — — 587

Reclassification with surplus from land revaluation — — 145 — 145 — — — — — — 145

Change of scope of consolidation — — 855 — 855 — — — — — — 855

Increase by merger — — 51 — 51 — — — — — — 51 Net changes of items other

than shareholders’ equity — — — — — 3,749 7,265 (145) 2,038 (499) 15,357 27,765

Total changes of items during the period — 29 18,347 484 18,860 3,749 7,265 (145) 2,038 (499) 15,357 46,625

Balance as of March 31, 2010 ¥73,920 ¥226,777 ¥325,334 ¥(399) ¥625,632 ¥13,757 ¥(1,063) ¥(3,236) ¥(35,976) ¥ — ¥107,449 ¥706,563

Thousands of U.S. dollars (Note 1-A)


Common stock

Capital surplus

Retained earnings

Treasury stock Total

Unrealized gain on

marketable securities

Deferred hedge gain

(loss) on derivatives

under hedge

accounting

Surplus from land

revaluation

Accumulated translation adjustment

Stock acquisition

rights



Total net

assets

Balance as of March 31, 2009 $794,497 $2,437,103 $3,299,516 $(9,490) $6,521,626 $107,567 $(89,510) $(33,223) $(408,577) $5,363 $ 989,811 $7,093,057

Cash dividends paid — — (134,512) — (134,512) — — — — — — (134,512) Net income — — 320,411 — 320,411 — — — — — — 320,411 Purchase of treasury stock — — — (860) (860) — — — — — — (860) Disposal of treasury stock — (11) — 75 64 — — — — — — 64 Grant of treasury stock

with exercise of stock acquisition rights — 322 — 5,987 6,309 — — — — — — 6,309

Reclassification with surplus from land revaluation — — 1,558 — 1,558 — — — — — — 1,558

Change of scope of consolidation — — 9,190 — 9,190 — — — — — — 9,190

Increase by merger — — 548 — 548 — — — — — — 548 Net changes of items other

than shareholders’ equity — — — — — 40,294 78,085 (1,558) 21,904 (5,363) 165,058 298,420

Total changes of items during the period — 311 197,195 5,202 202,708 40,294 78,085 (1,558) 21,904 (5,363) 165,058 501,128

Balance as of March 31, 2010 $794,497 $2,437,414 $3,496,711 $(4,288) $6,724,334 $147,861 $(11,425) $(34,781) $(386,673) $ — $1,154,869 $7,594,185



Consolidated Statements of Cash FlowsNippon Mining Holdings, Inc. and Consolidated SubsidiariesFiscal years ended March 31, 2010 and 2009

Millions of yen


2010 2009 2010

Cash flows from operating activities: Income (loss) before income taxes and minority interests ¥ 60,424 ¥ (85,836) $ 649,441 Depreciation and amortization 74,810 76,758 804,063 Impairment losses 2,086 7,539 22,420 Interest expenses 9,433 12,527 101,387 Equity in income of non-consolidated subsidiaries and affiliates (38,221) (48,897) (410,802) Gain on sales of investments in securities (321) (204) (3,450) Gain on sales of investment in subsidiary — (1,075) — Loss on write-down of investments in securities 5,685 1,969 61,103 Loss on sales and disposal of property, plant and equipment, net 3,843 6,430 41,305 Gain on change in equity of consolidated subsidiary (869) — (9,340) Other, net (1,312) 8,437 (14,101) Changes in operating assets and liabilities: Trade receivables (111,701) 180,132 (1,200,570) Inventories (100,661) 231,600 (1,081,911) Trade payables 71,974 (105,566) 773,581 Accrued consumption tax 4,298 (16,975) 46,195 Other, net 13,617 13,617 146,356 Receipts of interest and dividends 34,206 58,341 367,648 Payments for interest (9,501) (13,174) (102,117) Payments for income taxes (7,587) (50,272) (81,546) Payments for special retirement benefit (511) (283) (5,492)

Net cash provided by operating activities 9,692 275,068 104,170

Cash flows from investing activities: Decrease (increase) in time deposits, net 683 (1,591) 7,341 Payments for acquisition of investments in securities (13,809) (2,157) (148,420) Proceeds from sales or maturities of investments in securities 3,875 479 41,649 Payments for acquisition of property, plant and equipment (74,851) (88,789) (804,503) Proceeds from sales of property, plant and equipment 9,698 4,877 104,235 Payments for acquisition of intangible assets (8,031) (5,199) (86,318) Payments for long-term prepaid expenses (1,742) (2,048) (18,723) Decrease (increase) in short-term loans, net 2,505 (233) 26,924 Payments for lending of long-term loans (11,306) (1,362) (121,518) Collection of long-term loans 3,209 1,926 34,491 Payments for transfer of business (3,077) — (33,072) Other, net (2,962) 322 (31,837)

Net cash used in investing activities (95,808) (93,775) (1,029,751)

Cash flows from financing activities: Increase (decrease) in short-term borrowings, net (2,164) (22,283) (23,259) Increase (decrease) in commercial paper, net 35,000 (126,000) 376,182 Proceeds from borrowings of long-term bank loans and other 76,758 88,580 825,000 Repayments of long-term bank loans and other (43,766) (60,154) (470,400) Proceeds from issuance of bonds — 20,000 — Repayments of lease obligations (1,476) (575) (15,864) Proceeds from issuance of stock to minority shareholders 2,244 2,940 24,119 Proceeds from third-party share allotment of consolidated subsidiary 3,116 — 33,491 Cash dividends paid (12,515) (14,840) (134,512) Cash dividends paid to minority shareholders (6,012) (11,730) (64,617) Other, net (74) (218) (796)

Net cash provided by (used in) financing activities 51,111 (124,280) 549,344

Effect of exchange rate changes on cash and cash equivalents 299 (3,958) 3,214

Net increase (decrease) in cash and cash equivalents (34,706) 53,055 (373,023)

Cash and cash equivalents at beginning of year 116,986 62,621 1,257,373

Increase due to subsidiaries newly included in consolidation 17 1,131 183

Increase due to corporate division 2,808 — 30,181

Increase due to merger of consolidated subsidiaries 119 179 1,279

Cash and cash equivalents at end of year ¥ 85,224 ¥116,986 $ 915,993



Notes to Consolidated Financial StatementsNippon Mining Holdings, Inc. and Consolidated Subsidiaries

1. SIGNIFICANT ACCOUNTING POLICIESA) Basis of Presenting

Consolidated Financial Statements

The accompanying consolidated financial statements of NIPPON

MINING HOLDINGS, INC. (the “Company”) and its subsidiaries are

prepared on the basis of accounting principles generally accepted

in Japan, which are different in certain respects as to application

and disclosure requirements of International Financial Reporting

Standards. In presenting the accompanying consolidated financial

statements, certain accounts and items reported in the consolidat-

ed financial statements that have been filed with the Financial

Services Agency in Japan have been reclassified for the conve-

nience of readers outside Japan.

The U.S. dollar amounts included in the accompanying consoli-

dated financial statements are the arithmetical result of translating

Japanese yen to U.S. dollars at the rate of ¥93.04 to $1, the rate

prevailing as at March 31, 2010. These translations are solely for

the convenience of the reader and are not intended to imply that

Japanese yen amounts have been or could have been converted,

realized or settled in dollars at this rate or any other rate.

B) Principles of Consolidation


accounts of the Company and its significant subsidiaries that are

controlled by the Company (hereinafter referred to as the “Company

Group”). As of March 31, 2010 and 2009, the Company had 108

and 109 consolidated subsidiaries, respectively. The consolidated

financial statements for the fiscal year ended March 31, 2010 do

not include the accounts of Japan Energy Analytical Research

Center Co., Ltd. and certain other subsidiaries as they are consid-

ered immaterial.

The investments in Japan Energy Analytical Research Center

Co., Ltd. and certain other non-consolidated subsidiaries are car-

ried at cost, less any write-down due to impairment deemed nec-

essary, as they are considered immaterial in terms of the Company

Group’s total assets, net sales, net income (loss) and retained earn-

ings.

All material inter-company transactions and accounts and unreal-

ized inter-company profits are eliminated in the consolidated finan-

cial statements, and the portion thereof attributable to minority

shareholders is credited to them.

Goodwill and negative goodwill, which represent the difference

between the carrying amount of an investment in a subsidiary and

underlying equity, are amortized over 5 years.

Investments in affiliates over which the Company Group has sig-

nificant influence are accounted for under the equity method. The

Company Group’s consolidated income includes equity in net

income of those affiliates, after elimination of unrealized inter-

company profits. As of March 31, 2010 and 2009, the Company

had 13 affiliates that are accounted for under the equity method.

The Company did not apply the equity method to its investments in

certain affiliates, as they were considered immaterial. The invest-

ments in these affiliates are carried at cost, less any write-down

due to impairment deemed necessary.


accounts of consolidated subsidiaries that have fiscal year ends

other than March 31. The fiscal year ends of such subsidiaries are

principally December 31, and the accounts of these subsidiaries

have been used for consolidation purposes, with necessary adjust-

ments being made for significant transactions taking place in the

intervening period.

C) Translations of Foreign Currency

Transactions and Accounts

Foreign currency transactions are generally translated using the for-

eign exchange rates prevailing at the respective transaction dates.

All assets and liabilities denominated in foreign currencies are

translated at the foreign exchange rates prevailing at the respective

balance sheet dates. Foreign exchange gains and losses are

charged to income.

Revenues and expenses of foreign consolidated subsidiaries are

translated into Japanese yen using the average exchange rates for

the period. Assets and liabilities are translated into Japanese yen

using the foreign exchange rates prevailing at the balance sheet

dates, and equity accounts are translated using historical rates.

The resultant difference is presented as accumulated translation

adjustment and minority interests in consolidated subsidiaries in a

separate component of net assets.

D) Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash on hand,

demand deposits in banks and investments with original maturities

of three months or less.

E) Investment Securities

The Company Group does not classify any of its investment securi-

ties as trading or held-to-maturity. Consequentially, the Company

Group classifies all of investment securities as other securities.

Other securities with readily determinable market values are carried

at market value as of each respective balance sheet date, and

associated unrealized gains and losses, net of taxes, are reported

as a separate component of net assets. The Company Group

determines the cost basis of these securities based on moving

average. Other securities that do not have readily determinable

market values are stated at cost.

Significant declines in the value of other securities that are

deemed unrecoverable are charged to income.


F) Inventories

With respect to domestic consolidated subsidiaries:� Petroleum inventories are stated at the lower of cost or market

using the average cost method.� Metals inventories are stated at the lower of cost or market using

the first-in, first-out method.

Inventories held by the Company’s foreign consolidated subsid-

iaries are primarily stated at the lower of cost or market using the

first-in, first-out method.

G) Property, Plant and Equipment

Property, plant and equipment, including significant renewals and

additions, are carried at cost less accumulated depreciation.

Maintenance and repairs, including minor renewals and improve-

ments, and small purchases of equipment are expensed as

incurred.

Depreciation of property, plant and equipment is primarily calcu-

lated based on the straight-line method, and is provided over the

estimated useful lives as summarized below:� Buildings and structures 7 - 60 years� Machinery and equipment 3 - 15 years

H) Intangible Assets

Amortization of intangible assets, including software for internal

use, is primarily computed using the straight-line method over their

estimated useful lives.

I) Leases

(Lessee)

Depreciation of leased assets of finance lease transactions that do

not transfer ownership and whose contract date falls on or after

April 1, 2008, is calculated based on the straight-line method over

the lease term of leased assets assuming no residual value.

Finance lease transactions that do not transfer ownership and

whose contract date falls prior to April 1, 2008, are continuously

accounted for as operating leases. Please refer to Note 2-A (2).

(Lessor)

Sales and cost of sales are recognized on receipt of lease incomes

in finance lease transactions.

J) Allowance for Periodic Repair Works

The Company Group has an allowance for periodic repair works in

an amount equal to the estimated cost of periodically required

repairs for oil tanks and machinery and equipment of oil refineries.

K) Allowance for Doubtful Accounts

The allowance for doubtful accounts is calculated based on the aggre-

gate amount of individually estimated credit losses for doubtful receiv-

ables plus an amount calculated using historical write-off experience

over a certain period for receivables other than doubtful receivables.

L) Allowance for Employee Bonuses

The allowance for employee bonuses is calculated and provided for

based on an estimated amount of future payments attributable to

the employee services that have been rendered to the date of the

balance sheet.

M) Allowance for Retirement Benefits

The allowance for employee retirement benefits, which is provided

for future pension and severance to be paid at retirement, is

recorded at the amount actuarially computed based on the pro-

jected benefit obligation and the estimated fair value of pension

plan assets at the end of the fiscal year.

Unrecognized net transition liabilities at the date of initial applica-

tion of the accounting standard for retirement benefits has been

amortized on a straight-line basis over a period of ten years.

Unrecognized actuarial gains or losses and unrecognized prior

service cost are recognized as income or expenses for the fiscal

year of occurrence, except for certain consolidated subsidiaries

which have elected to amortize them over the average remaining

service period of participating employees.

Please refer to Note 2-B (2).

N) Accrued Retirement Benefits

for Corporate Directors and Auditors

Accrued retirement benefits for corporate directors and auditors

are provided for based on the amounts computed based on the

internal policy of each company of the Company Group.

In June 2005, the Company abolished its retirement benefit pro-

gram for the directors and officers of the Company and its core

subsidiaries of the Company Group, and replaced it with a stock

option program. Accordingly, no provision is made for the related

retirement allowance account thereafter.

O) Hedge Accounting

The Company Group utilizes various derivative financial instruments

as well as debt in foreign currencies as hedging instruments to

manage its exposure to fluctuating commodity prices, variability in

foreign currency exchange rates and changes in interest rates. The

Company Group utilizes derivative financial instruments for supply-

demand adjustment and/or for arbitration, not for speculation, in

accordance with the Company’s internal policy. The Company’s

purchases of these risk-avoiding derivative financial instruments

and debt in foreign currencies as hedging instruments are limited

to, at maximum, the value or units of the items that are being

hedged, with the hedge accounting applied in principle.

With respect to forward currency exchange contracts, interest

rate swaps, commodity forwards, commodity swaps and debt in

foreign currencies as hedging instruments, the Company Group

performs hedge effectiveness assessment to confirm if the critical

terms of the hedging instruments and those of the hedged items


are continuously the same during the period of hedging and, as

such, the hedging is expected to be highly effective.

In addition, when interest rate swaps that meet certain required

conditions have critical terms matching exactly with those of finan-

cial assets or liabilities that are being hedged, such interest rate

swaps are not recognized in the balance sheet, and net interest

paid or received on the swaps is recognized as adjustment to the

interest income or expenses on the financial assets or liabilities that

are being hedged.

Derivative financial instruments that are not designated as hedg-

es are carried at market value, with changes in market value

charged to income for the period in which they arise.

P) Income Taxes

Provision for income taxes is computed based on income before

income taxes and minority interests. The asset and liability

approach is used to recognize deferred tax assets and liabilities for

the expected future tax consequences of temporary differences

between the carrying value amounts and the tax bases of assets

and liabilities.

Valuation allowance is established against deferred tax assets to

the extent that it is more likely than not that the deferred tax assets

may not be realized within the foreseeable future.

The Company and its certain domestic wholly-owned subsidiar-

ies have been filing the consolidated corporate tax return in Japan.

(Additional information)

As of April 1, 2010, the Company became a wholly-owned subsid-

iary of JX Holdings, Inc. and the Company and its certain domestic

wholly-owned subsidiaries ceased the adoption of the consolidated

corporate tax return system in Japan thereof.

On the same day, JX Holdings, Inc. and its certain domestic

wholly-owned subsidiaries introduced the consolidated corporate

taxation system.

Q) Net Income (Loss) per Share

Net income (loss) per share is determined based on the weighted

average number of shares of common stock outstanding during

the relevant fiscal year.

Diluted net income per share assumes the dilution that could

occur if stock acquisition rights to issue common stock were exer-

cised with a stock option program and resulted in the issuance of

common stock.

2. ACCOUNTING CHANGES AND ADOPTION OF NEW ACCOUNTING STANDARDS

A) For the Fiscal Year Ended March 31, 2009

(1) Practical Solution on Unification of Accounting Policies

Applied to Foreign Subsidiaries for Consolidated Financial

Statements

Effective for the year ended March 31, 2009, the Company adopt-

ed “Practical Solution on Unification of Accounting Policies Applied

to Foreign Subsidiaries for Consolidated Financial Statements”

(ASBJ Practical Issues Task Force No.18, May 17, 2006) and

applied it to its consolidated foreign subsidiaries. As a result of this

adoption, operating loss increased by ¥1,052 million, loss before

special items increased by ¥997 million and loss before income

taxes and minority interests increased by ¥912 million, respectively,

for the fiscal year ended March 31, 2009.

(2) Accounting Standard for Lease Transactions

Effective for the year ended March 31, 2009, the Company and its

domestic consolidated subsidiaries adopted “Accounting Standard

for Lease Transactions” (ASBJ Statement No.13, revised on March

30, 2007) and “Guidance on Accounting Standards for Lease

Transactions” (ASBJ Guidance No.16, revised on March 30, 2007)

for finance lease transactions that do not transfer ownership and

whose contract date falls on or after April 1, 2008. As a result of

this adoption, the effect on operating loss, loss before special items

and loss before income taxes and minority interests for the fiscal

year ended March 31, 2009 was immaterial. These finance lease

transactions are accounted for as finance leases, while they were

accounted for as operating leases before adoption. On the other

hand, finance lease transactions that do not transfer ownership

and whose contract date falls prior to April 1, 2008, are continu-

ously accounted for as operating leases with certain information in

the notes to financial statements.

(3) Accounting Standard for Related Party Disclosures


domestic consolidated subsidiaries adopted “Accounting Standard

for Related Party Disclosures” (ASBJ Statement No.11, October

17, 2006) and “Guidance on Accounting Standards for Related

Party Disclosures” (ASBJ Guidance No.13, October 17, 2006).

B) For the Fiscal Year Ended March 31, 2010

(1) Change in Accounting Standard for Construction Contracts

Effective for the fiscal year ended March 31, 2010, the Company

and its domestic subsidiaries adopted “Accounting Standard for

Construction Contracts” (ASBJ Statement No.15, December 27,

2007) and “Guidance on Accounting Standard for Construction

Contracts” (ASBJ Guidance No.18, December 27, 2007). Prior to

April 1, 2009, certain domestic consolidated subsidiaries principally

applied the percentage-of-completion method for the construction


contracts whose contract amounts were more than ¥1 billion and

whose contracted construction terms were longer than one year

and the completed-contract method was applied for other than

those. Under ASBJ Statement No.15 and Guidance No.18, the

percentage-of-completion method is applied for the construction

contracts started on or after April 1, 2009, if the outcome of the

construction activity can be deemed certain during the course of

the activity in the fiscal year ended March 31, 2010, otherwise the

competed-contract method is applied. The percentage of comple-

tion at the end of each quarterly period is estimated based on the

percentage of the cost incurred to the estimated total cost. This

adoption had insignificant impact on the Company’s consolidated

financial results for the fiscal year ended March 31, 2010.

(2) Partial Amendments to Accounting Standard

for Retirement Benefits


domestic subsidiaries adopted “Partial Amendments to Accounting

Standard for Retirement Benefits (Part 3)” (ASBJ Statement No.19,

July 31, 2008). This adoption had no impact on the Company’s

consolidated financial results for the fiscal year ended March 31,

2010.

(3) Revised Accounting Standard for Financial Instruments


domestic consolidated subsidiaries adopted a revised “Accounting

Standard for Financial Instruments” (ASBJ Statement No.10,

revised on March 10, 2008) and “Guidance on Disclosures about

Fair Value of Financial Instruments” (ASBJ Guidance No.19, March

10, 2008). Please refer to Note 14.

3. INVENTORIESInventories as of March 31, 2010 and 2009 consisted of the following:


2010 2009 2010

Merchandise and finished goods ¥114,435 ¥ 88,222 $1,229,955Work in process 70,250 69,767 755,051Raw materials and supplies 258,750 181,378 2,781,062

Total ¥443,435 ¥339,367 $4,766,068

The amount of a reversal of write-down of inventories for the fiscal year ended March 31, 2010 was ¥63,856 million ($686,328 thousand),

which was charged off in cost of sales.

On the other hand, the amount of write-down of inventories due to decreased profitability for the fiscal year ended March 31, 2009 was

¥58,706 million, which was charged to cost of sales.

4. SECURITIESA) Equity Securities

The fair values of investments in marketable securities as of March 31, 2010 and 2009 were as follows:


2010 2009 2010

Acquisition cost ¥17,636 ¥18,028 $189,553Fair value 41,923 36,333 450,591

Gross unrealized gain ¥24,287 ¥18,305 $261,038

As of March 31, 2010, unlisted equity securities and bonds (¥8,576 million ($92,175 thousand)) were excluded from the above table,

because they were extremely difficult to acquire the quotation since they had no market values. The amount of principal investments in non-

marketable securities as of March 31, 2009 was ¥13,422 million, which was excluded from the above table.

B) Losses on Impairment of Securities

The amount of losses on impairment of securities was ¥5,685 million ($61,103 thousand) for the fiscal year ended March 31, 2010.


5. INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES AND AFFILIATES

Investments in non-consolidated subsidiaries and affiliates as of March 31, 2010 and 2009 were as follows:


2010 2009 2010

Marketable equity securities ¥ 14,567 ¥ 14,462 $ 156,567Non-marketable equity securities 147,018 125,067 1,580,159Other 1,036 1,070 11,135

Total ¥162,621 ¥140,599 $1,747,861

6. LAND REVALUATIONPursuant to the Law for Land Revaluation, the Company and certain group companies in Japan revalued their land used for business activi-

ties at March 31, 2000. The resultant adjustment was reflected, net of taxes, in surplus from land revaluation in net assets of the accompa-

nying consolidated balance sheets.

The land value for the revaluation was determined based on the market prices in the official notice of the Commissioner of the National Tax

Agency in accordance with Article 2, Paragraph 4 of the Enforcement Ordinance Concerning Land Revaluation, with reasonable adjustments

to the market price made by the Company Group. The revaluation is permitted only one time.

7. ASSETS PLEDGED AS COLLATERAL AND SECURED LIABILITIESAssets pledged as collateral as of March 31, 2010 and 2009 were as follows:


2010 2009 2010

Investments in securities ¥ 9,034 ¥ 8,669 $ 97,098Property, plant and equipment (at net book value) 323,989 346,902 3,482,255Other current assets (time deposits) 1,005 930 10,802Other 169 366 1,816

Total ¥334,197 ¥356,867 $3,591,971

In addition, the stock of consolidated subsidiaries used as collateral as of March 31, 2010 and 2009 was ¥3,593 million ($38,618 thou-

sand) and ¥3,593 million, respectively, which has been eliminated in the consolidated financial statements.

Secured liabilities as of March 31, 2010 and 2009 were as follows:


2010 2009 2010

Long-term debt (inclusive of current portion) ¥29,994 ¥45,627 $322,377Trade payables (excise tax) 46,389 46,405 498,592Short-term borrowings 675 426 7,255

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBTA) Short-term borrowings as of March 31, 2010 and 2009 were as follows:


2010 2009 2010

Loans principally from banks with the weighted average interest rate 0.60% as of March 31, 2010 and of 0.86% as of March 31, 2009 ¥319,948 ¥320,108 $3,438,822Commercial paper 35,000 — 376,182

Total ¥354,948 ¥320,108 $3,815,004


B) Long-term debt as of March 31, 2010 and 2009 was as follows:


2010 2009 2010

1.37% unsecured bonds, due 2013 ¥ 15,000 ¥ 15,000 $ 161,2211.78% unsecured bonds, due 2013 10,000 10,000 107,4812.32% unsecured bonds, due 2018 10,000 10,000 107,481Loans principally from banks, due 2010 to 2019 with the weighted average interest rate of 1.53% as of March 31, 2010 and due 2009 to 2019 with the weighted average interest rate of 1.59% as of March 31, 2009:

Collateralized 29,994 45,627 322,377 Unsecured 347,498 298,839 3,734,931Lease obligations due 2010 to 2042 7,164 5,457 76,999

419,656 384,923 4,510,490Less: Amounts due within one year (83,091) (42,930) (893,067)

¥336,565 ¥341,993 $3,617,423

Annual maturities of long-term debt as of March 31, 2010 are as follows:

Fiscal year ending March 31, Millions of yen Thousands of U.S. dollars

2011 ¥ 83,091 $ 893,0672012 44,676 480,1812013 110,239 1,184,8562014 78,969 848,7642015 60,014 645,0342016 and thereafter 42,667 458,588

¥419,656 $4,510,490

9. RETIREMENT BENEFITSThe Company’s domestic consolidated subsidiaries have defined benefit plans and severance indemnity plans. Certain domestic consolidat-

ed subsidiaries also have defined contribution pension plans. A premium on employees’ retirement benefits may be added upon retirement

of the employee. Certain of the Company’s foreign consolidated subsidiaries have defined benefit plans and defined contribution plans.

A) Allowance for retirement benefits as of March 31, 2010 and 2009 was as follows:


2010 2009 2010

Projected benefit obligation ¥(82,696) ¥(81,837) $(888,822)Plan assets at fair value 24,053 21,120 258,523

Unfunded projected benefit obligation (58,643) (60,717) (630,299)Unrecognized net transition liabilities — 1,100 —Unrecognized net actuarial losses 252 501 2,709Unrecognized prior service cost — (10) —Prepaid pension cost (281) (301) (3,020)

Allowance for retirement benefits recognized in consolidated balance sheets* ¥(58,672) ¥(59,427) $(630,610)

* Effective for the fiscal year ended March 31, 2010, the Company and its domestic subsidiaries adopted “Partial Amendments to Accounting Standard for Retirement Benefits (Part 3)” (ASBJ Statement No.19, July 31, 2008). This adoption had no impact on the Company’s consolidated financial results for the fiscal year ended March 31, 2010. Please refer to Note 2-B (2).


B) Net retirement benefit expenses for the fiscal years ended March 31, 2010 and 2009 were as follows:


2010 2009 2010

Service cost ¥3,246 ¥3,098 $34,888Interest cost on projected benefit obligation 1,964 1,861 21,109Expected return on plan assets (585) (669) (6,288)Amortization of unrecognized net transition liabilities 1,100 1,100 11,823Amortization of unrecognized net actuarial losses* (455) 3,885 (4,890)Amortization of unrecognized prior service cost 378 (21) 4,063

Net retirement benefit expenses* ¥5,648 ¥9,254 $60,705

* In addition to the above “net retirement benefit expenses,” special retirement benefit costs of ¥605 million ($6,503 thousand) and ¥962 million, the contributions to defined contribution pension plans of ¥551 million ($5,922 thousand) and ¥541 million and the required contributions to the corporate pensions under multi-employer pension plans of ¥378 million ($4,063 thousand) and ¥380 million were charged to income for the fiscal years ended March 31, 2010 and 2009, respectively.

C) The assumptions used in the calculation of the above information were as follows:

2010 2009

Discount rate for projected benefit obligation Mainly 2.5% Mainly 2.5%Expected return on plan assets Mainly 3.0% Mainly 3.0%Amortization period of prior service cost Mainly 1 year Mainly 1 yearAmortization period of net actuarial losses Mainly 1 year Mainly 1 yearAmortization period of net transition liabilities 10 years 10 years

10. BUSINESS COMBINATIONSA) For the Fiscal Year Ended March 31, 2010

New company to integrate Liquefied Petroleum Gas (“LPG”) operation

Japan Energy Corporation (a wholly-owned subsidiary) (“JEC”) established a new company, Japan Gas Energy Corporation, with Osaka

Gas Co., Ltd., Nissho Petroleum Gas Corporation (“Nissho”), Itochu Corporation and Itochu Enex Co., Ltd. (“Enex”) to integrate each com-

pany’s LPG operations ranging from import to wholesales.

JEC holds 51% of the common shares of the new company, which is therefore a consolidated subsidiary of the Company.

� Name: Japan Gas Energy Corporation (“JGE”)� Business details: Importing and selling (wholesales) LPG� Main reason for the integration: To create an LPG business group which is capable of efficiently providing a stable supply of LPG products� Date of establishment: April 1, 2009

(Outline and method of business integration)

JEC’s and Nissho’s businesses of import and wholesales and Enex’s business of lorry-wholesales were integrated into JGE as follows:

� JEC and Nissho separated each running business of LPG import and wholesales on April 1, 2009 and transferred them to JGE.

JGE issued 29,000 shares of common stock in this business transfer.

The purchase method of accounting has been applied to the business transfer from Nissho as follows:


Assets ¥6,323 $67,960Liabilities (2,909) (31,266)Goodwill 1,103 11,855

Net acquisition cost ¥4,517 $48,549

Since JEC and JGE are in the same consolidated company group, accounting treatments regarding the business transfer from JEC were

eliminated in the accompanying consolidated financial statements.


� Enex transferred its and its subsidiaries’ running business of lorry-wholesales to JGE.

The purchase method of accounting has been applied to the business transfer from Enex and its subsidiaries as follows:


Assets ¥ 96 $ 1,032Goodwill 2,981 32,040

Acquisition cost ¥3,077 $33,072


There was no material business combination.

11. INCOME TAXESA) The components of deferred tax assets and liabilities as of March 31, 2010 and 2009 were as follows:

As of March 31, 2010 Millions of yen Thousands of U.S. dollars

Net operating loss carryforwards ¥103,364 $1,110,963Retirement benefit obligations 23,203 249,387Eliminations of inter-company transactions 4,509 48,463Securities 19,800 212,812Land 14,166 152,257Impairment of land 7,162 76,978Property, plant and equipment 6,193 66,563Allowance for periodic repair works 2,658 28,568Other investments 1,613 17,337Inventories 653 7,018Accrued bonuses to employees 2,840 30,525Loss on business withdrawal 2,606 28,009Other 19,593 210,587

Subtotal 208,360 2,239,467

Valuation allowance (81,699) (878,106)

Total deferred tax assets ¥126,661 $1,361,361

Land ¥ (40,477) $ (435,049)Unrealized gain on marketable securities (9,274) (99,678)Difference between market value and cost of assets and liabilities of consolidated subsidiaries (9,863) (106,008)Reserve for losses on overseas investments (5,072) (54,514)Undistributed earnings of foreign affiliates (18,991) (204,117)Unrealized gain on the rights to mineral property (3,200) (34,394)Other (5,939) (63,833)

Total deferred tax liabilities (92,816) (997,593)

Net deferred tax assets ¥ 33,845 $ 363,768


As of March 31, 2009 Millions of yen

Net operating loss carryforwards ¥107,525Retirement benefit obligations 23,440Eliminations of inter-company transactions 6,663Securities 18,790Land 14,766Impairment of land 7,351Property, plant and equipment 5,205Allowance for periodic repair works 4,507Other investments 1,668Inventories 2,188Accrued bonuses to employees 2,980Loss on business withdrawal 3,063Deferred hedge gain 8,167Other 20,310

Subtotal 226,623

Valuation allowance (85,672)

Total deferred tax assets ¥140,951

Land ¥ (43,175)Unrealized gain on marketable securities (7,158)Difference between market value and cost of assets and liabilities of consolidated subsidiaries (9,900)Reserve for losses on overseas investments (5,068)Undistributed earnings of foreign affiliates (15,834)Unrealized gain on the rights to mineral property (3,163)Other (4,836)

Total deferred tax liabilities (89,134)

Net deferred tax assets ¥ 51,817

B) Net deferred tax assets as of March 31, 2010 and 2009 were included in the accompanying consolidated balance sheets under the fol-

lowing captions:


2010 2009 2010

Deferred tax assets—current ¥10,179 ¥21,843 $109,405Deferred tax assets—non-current 61,407 59,287 660,006Deferred tax liabilities—non-current (37,741) (29,313) (405,643)

Net deferred tax assets ¥33,845 ¥51,817 $363,768

C) Reconciliation of statutory tax rate and the effective income tax rate for the fiscal years ended March 31, 2010 and 2009 was as follows:

2010 2009

Statutory tax rate 40.7%

Not available due to loss before income taxes and minority interests.

Increase (decrease) in taxes resulting from: Eliminations of dividend income 1.9 Change in valuation allowances 1.4 Adjustments on unrealized gains 6.2 Equity in income of non-consolidated subsidiaries

and affiliates (25.7) Deferred tax liabilities for undistributed earnings

of foreign affiliates 11.1 Other 1.1

Effective income tax rate 36.7%


12. COMMITMENTS AND CONTINGENT LIABILITIESCommitments and contingent liabilities as of March 31, 2010 and 2009 were as follows:


2010 2009 2010

Debt guarantees: Non-consolidated subsidiaries and affiliates ¥2,682 ¥3,866 $28,826 Other companies and employees 3,966 1,967 42,627

Total ¥6,648 ¥5,833 $71,453

13. LEASES(Lessee)

Leased assets of finance leases mainly consisted of facilities of service stations of the Petroleum business for the fiscal years ended March

31, 2010 and 2009.

A) Finance Leases Accounted for as Operating Leases (Note 2-A (2))

Finance leases that do not transfer ownership and whose contract date falls prior to April 1, 2008 were as follows:

(1) Estimated purchase cost (inclusive of related interest expenses), estimated accumulated depreciation, estimated accumulated impairment

losses and estimated book value of leased assets as of March 31, 2010 and 2009 were as follows:

Millions of yen

As of March 31, 2010Estimated

purchase cost

Estimated accumulated depreciation

Estimated book value

Buildings and structures ¥13,207 ¥ 9,977 ¥3,230Machinery and equipment 10,591 5,731 4,860Other 236 161 75

Total ¥24,034 ¥15,869 ¥8,165

Millions of yen


purchase cost



Buildings and structures ¥13,525 ¥ 9,697 ¥ 3,828Machinery and equipment 12,016 5,577 6,439Other 328 187 141

Total ¥25,869 ¥15,461 ¥10,408



purchase cost



Buildings and structures $141,950 $107,233 $34,717Machinery and equipment 113,833 61,598 52,235Other 2,537 1,731 806

Total $258,320 $170,562 $87,758

The above estimated purchase cost includes related interest expenses.


(2) Future lease payments (inclusive of related interest expenses) under finance leases accounted for as operating leases as of March 31,

2010 and 2009 were as follows:


2010 2009 2010

Due within one year ¥2,918 ¥ 3,792 $ 31,363Due after one year 7,033 9,926 75,591

Total ¥9,951 ¥13,718 $106,954

(3) Lease expenses, reversal of the allowance for impairment losses on leased assets and estimated depreciation for the fiscal years ended

March 31, 2010 and 2009 were as follows:


2010 2009 2010

Lease expenses ¥2,534 ¥2,772 $27,236Reversal of allowance for impairment losses on leased assets — 1 —

Estimated depreciation ¥2,534 ¥2,771 $27,236

(4) Method of calculation of amount of estimated depreciation

Estimated depreciation is calculated based on the straight-line method over the lease term of the leased assets assuming no residual value.

B) Operating Leases

Future lease payments for non-cancelable operating leases as of March 31, 2010 and 2009 were as follows:


2010 2009 2010

Due within one year ¥ 3,004 ¥ 4,366 $ 32,287Due after one year 23,126 18,729 248,560

Total ¥26,130 ¥23,095 $280,847

(Lessor)

C) Finance Leases Accounted for as Operating Leases (Note 2-A (2))

Finance leases that do not transfer ownership and whose contract date falls prior to April 1, 2008, were as follows:

(1) Purchase cost, accumulated depreciation, and book value of the leased assets as of March 31, 2010 and 2009 were as follows:

Millions of yen

As of March 31, 2010Purchase

costAccumulated depreciation Book value

Buildings and structures ¥1,192 ¥ 626 ¥ 566Machinery and equipment 2,086 1,350 736Other 46 31 15

Total ¥3,324 ¥2,007 ¥1,317

Millions of yen



Buildings and structures ¥1,017 ¥ 500 ¥ 517Machinery and equipment 2,979 1,835 1,144Other 87 56 31

Total ¥4,083 ¥2,391 ¥1,692





Buildings and structures $12,812 $ 6,728 $ 6,084Machinery and equipment 22,420 14,510 7,910Other 494 333 161

Total $35,726 $21,571 $14,155

(2) Future lease revenues (inclusive of related interest income) under finance leases accounted for as operating leases as of March 31, 2010

and 2009 were as follows:


2010 2009 2010

Due within one year ¥1,373 ¥2,019 $14,757Due after one year 1,896 3,296 20,378

Total ¥3,269 ¥5,315 $35,135

The above figures have not been reduced by the future lease revenues under non-cancelable subleases as of March 31, 2010, which

were as follows:


2010 2009 2010

Due within one year ¥ 995 ¥1,495 $10,694Due after one year 874 1,968 9,394

Total ¥1,869 ¥3,463 $20,088

The almost same amounts as the future lease revenues under non-cancelable subleases above were included in the future lease pay-

ments under finance leases accounted for as operating leases as of March 31, 2010 and 2009, stated in A-(2) of (lessee).

(3) Lease incomes and depreciation for the fiscal years ended March 31, 2010 and 2009 were as follows:


2010 2009 2010

Lease incomes ¥485 ¥643 $5,213Depreciation 442 572 4,751

D) Operating Leases

Future lease revenues for non-cancelable operating leases as of March 31, 2010 and 2009 were as follows:


2010 2009 2010

Due within one year ¥ 360 ¥ 344 $ 3,869Due after one year 3,680 3,437 39,553

Total ¥4,040 ¥3,781 $43,422


14. FINANCIAL INSTRUMENTSA) Overview of Financial Instruments

(1) The Company’s policy for utilizing financial instruments

For the fiscal year ended March 31, 2010, the Company Group

raises funds for the Petroleum and Metals operations through bank

loans, issuing bonds and commercial paper and so on. Surplus

funds are managed mainly by short-term deposits. The Company

Group utilizes various derivative financial instruments to manage its

exposure to fluctuating commodity prices, foreign currency

exchange rates and interest rates. The Company Group utilizes

derivative instruments for supply-demand adjustment and/or arbi-

tration, not for speculation.

(2) Financial instruments, risks and risk management

(Assets)� Trade receivables such as notes and accounts receivable are

exposed by the credit risks of customers. The Company Group is

minimizing the risks by the internal management rules.� Investments in securities, mainly shares, are exposed by the risks

of the fluctuation of the stock market prices. The Company Group

is continuously monitoring those fair values and the investees’

financial condition.

(Liabilities)� Almost all of trade payables such as notes and accounts payable

are due within one year.� Trade receivables and trade payables in foreign currencies are

exposed by the foreign currency fluctuation risks but the

Company Group is hedging the risks by using foreign exchange

forward contracts.

� Short-term borrowings are mainly related to working capital.

Long-term loans are related to capital expenditures and invest-

ments. Although loan payables with variable interest rates are

exposed to interest rate risks, interest rate swaps are used for

most of them in order to hedge the risks. In addition, as for the

interest rate swaps that meet certain required conditions, the

Company Group confirms if it meets with the critical terms of the

hedging instruments and those of the hedged items and omits

performing hedge effectiveness assessments.

(Derivative transactions)

The purpose of derivative transactions is to hedge risks. Because

the gains/losses from those transactions are almost offset with the

physical transactions, the substantial market risks are limited. The

Company Group utilizes derivative financial instruments for supply-

demand adjustment and/or for arbitration, not for speculation, in

accordance with the Company’s internal policy. Those market risks

are also substantially small. The Company Group is minimizing the

credit risks by limiting the counter partners of these derivative

transactions to major financial institutions and trading companies,

etc. Internal control is effectively working since derivative transac-

tions have been made in accordance with internal policies for risk

management as well as strictly controlling and reporting by the

departments which enter into derivative transactions.

(3) Supplemental explanation related to the fair value

of financial instruments

In regard to the contractual amounts of derivative transactions in

“B) Fair Value of Financial Instruments” below, the amount itself

does not show the market risk of derivative transactions.


B) Fair Value of Financial Instruments

The carrying amounts in the consolidated balance sheet, fair values, and its differences as of March 31, 2010, were as follows. In addition,

financial instruments, of which it is extremely difficult to measure the fair values, are not included in the table below.

Millions of yen

As of March 31, 2010Carrying amount Fair value

Unrealized gains (losses)

(Assets)Cash and cash equivalents ¥ 85,224 ¥ 85,224 ¥ —Notes and accounts receivable—trade, net 345,150 345,150 —Marketable securities and investments in securities: Investments in affiliated companies 14,567 8,021 (6,546) Other securities 41,923 41,923 —

Asset total ¥486,864 ¥480,318 ¥(6,546)

(Liabilities)Trade payables—Notes and accounts ¥252,568 ¥252,568 ¥ —Short-term borrowings (excluding current portion) 319,948 319,948 —Long-term debt (including current portion) 377,492 378,967 1,475

Liability total ¥950,008 ¥951,483 ¥ 1,475

(Derivative transactions) ¥ (1,880) ¥ (4,340) ¥(2,460)


As of March 31, 2010Carrying amount Fair value

Unrealized gains (losses)

(Assets)Cash and cash equivalents $ 915,993 $ 915,993 $ —Notes and accounts receivable—trade, net 3,709,695 3,709,695 —Marketable securities and investments in securities: Investments in affiliated companies 156,567 86,210 (70,357) Other securities 450,591 450,591 —

Asset total $ 5,232,846 $ 5,162,489 $(70,357)

(Liabilities)Trade payables—Notes and accounts $ 2,714,617 $ 2,714,617 $ —Short-term borrowings (excluding current portion) 3,438,822 3,438,822 —Long-term debt (including current portion) 4,057,308 4,073,161 15,853

Liability total $10,210,747 $10,226,600 $ 15,853

(Derivative transactions) $ (20,206) $ (46,646) $(26,440)

(Notes)1. Methods used to calculate fair values of financial instruments

� Cash and cash equivalents� Notes and accounts receivable—trade, net� Notes and accounts payable—trade� Short-term borrowings

Carrying amounts are used as fair values of these items. The fair values are nearly equal to such carrying amounts because they are settled within a short period.

Marketable securities and investments in securitiesThe fair values of listed equity securities are based on market prices. Please see Note 4 for the descriptions related to marketable securities and investment in securities.

Long-term debt The fair values are calculated by discounting the total amount of principal and interest by interest rates that would presumably apply if similar borrowings were newly made.

Derivative transactions Please see Note 15.

2. As of March 31, 2010, unlisted equity securities and bonds including investments in unlisted non-consolidated subsidiaries and affiliates (¥155,594 million ($1,672,334 thousand)) are not included in marketable securities and investments in securities in the above table because they were extremely difficult to acquire the quotation since they had no market values.


3. Maturities of financial assets and securities with contractual maturities

Millions of yen




five years



Notes and accounts receivable—trade, net ¥343,646 ¥1,372 ¥132 ¥—





five years



Notes and accounts receivable—trade, net $3,693,530 $14,746 $1,419 $—

4. In regard to the contractual maturities of long-term debt, please refer to Note 8.

(Additional information)Effective for the fiscal year ended March 31, 2010, the Company and its domestic consolidated subsidiaries adopted a revised “Accounting Standard for Financial Instruments” (ASBJ Statement No.10, revised on March 10, 2008) and “Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No.19, March 10, 2008).

15. DERIVATIVE TRANSACTIONSThe Company Group primarily utilizes various derivative financial instruments in order to offset the risks of assets and liabilities due to fluctua-

tions in commodity prices, foreign currency exchange rates and interest rates and applies hedge accounting. The Company Group does not

utilize derivative financial instruments for speculative purposes.

Principal hedging instruments and hedged items are as follows:

Hedging instruments Hedged items

� Forward currency contracts � Import of raw materials and export of products

� Interest rate swap contracts � Long-term debt and loans

� Commodity forward contracts and commodity swap contracts

� Purchase of raw materials and sale of products

A) Non-Hedge Accounting

The notional amounts, fair values and unrealized gains (losses) on derivatives to which hedge accounting was not applied as of March 31,

2010 and 2009 were as follows:

Millions of yen


Notional amount due

after one year Fair valueUnrealized

gains (losses)

Foreign exchange forward contracts: To sell (U.S. dollars) ¥ 9,666 ¥— ¥ (241) ¥ (241) To buy (U.S. dollars) 34,150 — 1,075 1,075

Total ¥(0,834

Commodity-related transactions: To sell ¥ 4,251 ¥— ¥(1,205) ¥(1,205) To buy 8,166 — 740 740

Total ¥ (465)


Millions of yen


Notional amount due


gains (losses)

Foreign exchange forward contracts: To sell (U.S. dollars) ¥ 6,594 ¥— ¥ 6,337 ¥ 257 To buy (U.S. dollars) 36,993 — 36,986 (6)

Total ¥ 250

Commodity-related transactions: To sell ¥ 1,969 ¥— ¥ 2,160 ¥(191) To buy 2,516 — 1,781 (735)

Total ¥(925)



Notional amount due


gains (losses)

Foreign exchange forward contracts: To sell (U.S. dollars) $103,891 $— $ (2,590) $ (2,590) To buy (U.S. dollars) 367,046 — 11,554 11,554

Total $ 8,964

Commodity-related transactions: To sell $ 45,690 $— $(12,952) $(12,952) To buy 87,769 — 7,954 7,954

Total $ (4,998)

B) Hedge Accounting

The notional amounts and fair values on derivatives to which hedge accounting was applied at March 31, 2010 were as follows:

Millions of yen


Notional amount due

after one year Fair value

Foreign exchange forward contracts: To sell (U.S. dollars) (deferral hedge accounting) Accounts receivable ¥ 62,904 ¥ — ¥(1,745) To buy (U.S. dollars) (deferral hedge accounting) Accounts payable 6,749 — 182 To sell (U.S. dollars) (alternative method) Accounts receivable 18,262 — — * To buy (U.S. dollars) (alternative method) Accounts payable 62,394 — — * To buy (Japanese yen) (fair value hedge accounting) Accounts payable 400 — (17)

Total ¥(1,580)

Interest swaps: Deferral hedge accounting Long-term loans ¥ 7,968 ¥ 6,420 ¥ (274) Alternative method Long-term loans 164,326 121,822 (2,475)

Total ¥(2,749)

Commodity-related transactions (swaps): Receiving floating rate and paying fix rate Accounts payable ¥ 345 ¥ — ¥ 15 Receiving fix rate and paying floating rate Accounts receivable 91 — 44Commodity-related transactions (forward transactions): To sell Accounts receivable 72,183 — (5,170) To buy Accounts payable 24,291 1,154 4,731

Total ¥ (380)




Notional amount due

after one year Fair value

Foreign exchange forward contracts: To sell (U.S. dollars) (deferral hedge accounting) Accounts receivable $ 676,096 $ — $(18,755) To buy (U.S. dollars) (deferral hedge accounting) Accounts payable 72,539 — 1,956 To sell (U.S. dollars) (alternative method) Accounts receivable 196,281 — — * To buy (U.S. dollars) (alternative method) Accounts payable 670,615 — — * To buy (Japanese yen) (fair value hedge accounting) Accounts payable 4,299 — (183)

Total $(16,982)

Interest swaps: Deferral hedge accounting Long-term loans $ 85,641 $ 69,003 $ (2,945) Alternative method Long-term loans 1,766,187 1,309,351 (26,601)

Total $(29,546)

Commodity-related transactions (swaps): Receiving floating rate and paying fix rate Accounts payable $ 3,708 $ — $ 161 Receiving fix rate and paying floating rate Accounts receivable 978 — 473Commodity-related transactions (forward transactions): To sell Accounts receivable 775,828 — (55,567) To buy Accounts payable 261,081 12,403 50,849

Total $ (4,084)

* Fair values are not shown in the above table, but included in relevant items in a table of Note 14-B.

16. SELLING, GENERAL AND ADMINISTRATIVE EXPENSESThe main components of selling, general and administrative expenses for the fiscal years ended March 31, 2010 and 2009 were as follows:


2010 2009 2010

Freight ¥35,197 ¥34,997 $378,300Sales commission 7,987 8,913 85,845Fees for outsourced services 11,057 12,786 118,841Rental expenses 13,861 13,846 148,979Employees’ salaries 23,554 24,330 253,160Employees’ bonuses 6,547 6,295 70,368Retirement benefit expenses 2,212 6,484 23,775Depreciation and amortization 10,313 12,836 110,845

17. RESEARCH AND DEVELOPMENT COSTSResearch and development costs included in manufacturing cost and selling, general and administrative expenses for the fiscal years ended

March 31, 2010 and 2009 were ¥12,848 million ($138,091 thousand) and ¥15,098 million, respectively.


18. IMPAIRMENT LOSSESFor the fiscal years ended March 31, 2010 and 2009, the Company Group recognized impairment losses on fixed assets related to the signifi-

cant decline in the market value of its land as well as to the overall deterioration of its business environment, which consisted of the following:

For the fiscal year ended March 31, 2010 Millions of yen Thousands of U.S. dollars

Domestic: Unutilized assets (land and leasehold) ¥1,548 $16,638 Assets for rent (land) 47 505 Assets for Metals business (machinery and equipment and other) 154 1,655

Domestic subtotal 1,749 18,798

Overseas: Assets for Metals business (machinery and equipment and other) 337 3,622

Total ¥2,086 $22,420

In Japan, the recoverable amounts of the assets for rent were primarily measured as net selling price based on scheduled selling price and

those of the assets for each business as value in use equivalent to the present value of their future cash flows discounted at 5%, with the

unutilized assets’ measured as net selling price.

Overseas, the recoverable amounts of the assets for the Metals business were measured as value in use equivalent to the present value of

their future cash flows, discounted at 10%.

For the fiscal year ended March 31, 2009 Millions of yen

Domestic: Unutilized assets (land and leasehold) ¥2,025 Assets for rent (land, buildings and other) 1,270 Assets for Petroleum business (land) 72 Assets for Metals business (machinery and equipment, buildings and other) 2,412 Assets for Other Operations business (machinery and equipment) 5

Domestic subtotal 5,784

Overseas: Assets for Metals business (machinery and equipment and other) 1,755

Total ¥7,539

In Japan, the recoverable amounts of the assets for rent were primarily measured as net selling price based on scheduled selling price and

those of the assets for each business as value in use equivalent to the present value of their future cash flows discounted at 5%, with the

unutilized assets’ measured as net selling price.

Overseas, the recoverable amounts of the assets for the Metals business were measured as value in use equivalent to the present value of

their future cash flows, discounted at 7.6%.

19. STOCK OPTION PLANSA) Expensed Amounts

Expensed amounts on stock options for the fiscal years ended March 31, 2010 and 2009 were as follows:


2010 2009 2010

Selling, general and administrative expenses ¥239 ¥177 $2,569


B) Information on Stock Options

Exercise periodNumber of shares

initially granted

Stock options granted on July 1, 2005 From July 2, 2005 to June 30, 2025 362,000Stock options granted on July 26, 2006 From July 27, 2006 to June 30, 2026 210,500Stock options granted on August 9, 2007 From August 10, 2007 to June 30, 2027 204,000Stock options granted on August 14, 2008 From August 15, 2008 to June 30, 2028 339,500Stock options granted on August 14, 2009 From August 15, 2009 to June 30, 2029 534,000

C) Changes in Number and Unit Price

Changes in the number and the unit price of stock options outstanding for the fiscal years ended March 31, 2010 and 2009 were as follows:

(1) Changes in number of stock options

Number of shares

For the fiscal year ended March 31, 2010

Stock options granted on

July 1, 2005


July 26, 2006


August 9, 2007


August 14, 2008


August 14, 2009

As of March 31, 2009 269,000 176,000 184,000 339,500 —Vested — — — — 534,000Exercised 251,500 162,500 174,500 289,000 300,000Expired 17,500 13,500 9,500 50,500 234,000As of March 31, 2010 — — — — —

Number of shares



July 1, 2005


July 26, 2006


August 9, 2007


August 14, 2008

As of March 31, 2008 304,000 200,500 204,000 —Vested — — — 339,500Exercised 35,000 24,500 20,000 —Expired — — — —As of March 31, 2009 269,000 176,000 184,000 339,500

(2) Unit price of stock options

Yen



July 1, 2005


July 26, 2006


August 9, 2007


August 14, 2008


August 14, 2009

Exercise price ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1Average market price of share at exercise 416 418 417 419 416Fair value per stock option at grant date* — 860 926 521 447

Yen



July 1, 2005


July 26, 2006


August 9, 2007


August 14, 2008

Exercise price ¥ 1 ¥ 1 ¥ 1 ¥ 1Average market price of share at exercise 564 533 591 —Fair value per stock option at grant date* — 860 926 521

* Stock options granted on July 1, 2005 were issued at no cost under the former Corporate Law (the Commercial Code), while those issued thereafter were issued under the Corporate Law implemented in 2006.


20. SUPPLEMENTAL INFORMATION FOR CASH FLOWSA) For the Fiscal Year Ended March 31, 2010

There was no supplemental information for cash flows.


Assets and liabilities of Toho Titanium Co., Ltd., which was newly included in consolidation of the Company in the fiscal year ended March

31, 2009 were as follows:

At beginning of fiscal year ended March 31, 2009 Millions of yen

Current assets ¥18,284Non-current assets 33,216

Total assets ¥51,500

Current liabilities ¥ 9,872Non-current liabilities 7,438

Total liabilities ¥17,310

21. SEGMENT INFORMATIONA) Business Segment Information

The operations of the Company Group for the fiscal years ended March 31, 2010 and 2009 were summarized by product group as follows:

Millions of yen

As of and for the fiscal year ended March 31, 2010 Petroleum Metals

Other operations Total

Eliminations or corporate Consolidated

Sales: Outside customers ¥2,413,851 ¥777,736 ¥ 42,151 ¥3,233,738 ¥ — ¥3,233,738 Inter-segment 3,873 2,969 28,191 35,033 (35,033) —

Total 2,417,724 780,705 70,342 3,268,771 (35,033) 3,233,738Operating costs and expenses 2,391,109 763,811 69,216 3,224,136 (34,136) 3,190,000

Operating income 26,615 16,894 1,126 44,635 (897) 43,738

Income before special items 26,215 47,447 2,409 76,071 (2,104) 73,967

Identifiable assets, depreciation and amortization, impairment losses and capital expenditures: Assets ¥1,208,977 ¥683,998 ¥727,536 ¥2,620,511 ¥(553,004) ¥2,067,507 Depreciation and amortization 47,425 25,682 5,819 78,926 112 79,038 Impairment losses 1,546 491 — 2,037 49 2,086 Capital expenditures 31,470 31,751 23,485 86,706 160 86,866


Millions of yen




Sales: Outside customers ¥3,111,673 ¥898,514 ¥ 54,872 ¥4,065,059 ¥ — ¥4,065,059 Inter-segment 4,456 3,613 29,838 37,907 (37,907) —

Total 3,116,129 902,127 84,710 4,102,966 (37,907) 4,065,059Operating costs and expenses 3,221,103 907,513 76,706 4,205,322 (38,596) 4,166,726

Operating income (loss) (104,974) (5,386) 8,004 (102,356) 689 (101,667)

Income (loss) before special items (105,150) 28,512 9,666 (66,972) (461) (67,433)

Identifiable assets, depreciation and amortization, impairment losses and capital expenditures: Assets ¥1,091,869 ¥600,939 ¥681,884 ¥2,374,692 ¥(488,609) ¥1,886,083 Depreciation and amortization 45,271 29,570 5,718 80,559 31 80,590 Impairment losses 3,367 4,167 5 7,539 — 7,539 Capital expenditures 32,106 43,097 70,811 146,014 143 146,157





Sales: Outside customers $25,944,228 $8,359,157 $ 453,042 $34,756,427 $ — $34,756,427 Inter-segment 41,628 31,911 302,998 376,537 (376,537) —

Total 25,985,856 8,391,068 756,040 35,132,964 (376,537) 34,756,427Operating costs and expenses 25,699,796 8,209,490 743,938 34,653,224 (366,896) 34,286,328

Operating income 286,060 181,578 12,102 479,740 (9,641) 470,099

Income before special items 281,761 509,963 25,892 817,616 (22,614) 795,002

Identifiable assets, depreciation and amortization, impairment losses and capital expenditures: Assets $12,994,164 $7,351,655 $7,819,604 $28,165,423 $(5,943,723) $22,221,700 Depreciation and amortization 509,727 276,032 62,543 848,302 1,204 849,506 Impairment losses 16,617 5,277 — 21,894 526 22,420 Capital expenditures 338,242 341,262 252,418 931,922 1,719 933,641

Main products for each segment are the following:

PetroleumResource development, gasoline, naphtha, kerosene, gas oil, heavy fuel oil, petrochemicals, liquefied

petroleum gas, lubricating oil, ship transport, etc.

MetalsResource development, copper, gold, silver, sulfuric acid, recycling and environmental services, copper

foils, thin film materials, precision rolled products, precision fabricated products, ship transport, etc.

Other OperationsTitanium, engineering, electric wires, cables, land transport, common group administrative activities

such as fund procurement, etc.

B) Overseas Sales

Overseas sales, which represents sales to overseas customers, and the ratios of overseas sales to consolidated net sales for the fiscal years

ended March 31, 2010 and 2009 were summarized by geographic region as follows:

Millions of yen

For the fiscal year ended March 31, 2010 Asia Others Total

Overseas sales ¥503,060 ¥68,295 ¥ 571,355Consolidated net sales — — 3,233,738

Ratio of overseas sales to consolidated net sales (%) 15.6 2.1 17.7


Millions of yen


Overseas sales ¥590,239 ¥90,702 ¥ 680,941Consolidated net sales — — 4,065,059




Overseas sales $5,406,922 $734,039 $ 6,140,961Consolidated net sales — — 34,756,427


22. RELATED PARTY INFORMATIONA) For the Fiscal Year Ended March 31, 2010

(1) Transactions with related parties

Transactions with related parties were as follows:

� Name of parties: Directors and senior officers of the Company and directors and officers of the Company’s significant subsidiaries, etc.

(26 persons in total)� Parties’ ownership rates of

voting rights of the Company: 0.1%� Details of transactions: Buyback of stock options� Amount of transactions: ¥116 million*

* The buyback price was fair value as of the day when the Company held the extraordinary shareholders’ meeting regarding the business integration with Nippon Oil Corporation.

(2) Significant affiliates

The significant affiliate was Minera Los Pelambres, whose condensed financial information was as follows:

For the fiscal year ended March 31, 2010 Millions of yen Thousands of U.S. dollars

Current assets ¥ 65,638 $ 705,482Non-current assets 249,216 2,678,590Current liabilities 55,928 601,118Non-current liabilities 67,149 721,722Net assets 191,777 2,061,232

Net sales 189,434 2,036,049Income before income taxes 113,019 1,214,736Net income 89,467 961,597


Transactions with related parties were immaterial. The significant affiliate was Minera Los Pelambres, whose condensed financial information

was as follows:

For the fiscal year ended March 31, 2009 Millions of yen

Current assets ¥ 53,111Non-current assets 207,785Current liabilities 64,447Non-current liabilities 30,217Net assets 166,232

Net sales 224,535Income before income taxes 133,271Net income 105,618


23. SUBSEQUENT EVENTSFor the fiscal year ended March 31, 2010

A) Establishment of a Joint Holding Company

through a Transfer of Shares

The establishment of JX Holdings, Inc. as a wholly-owning parent

company through a joint share transfer between the Company and

Nippon Oil Corporation was approved at the extraordinary share-

holders’ meeting of the Company on January 27, 2010.

JX Holdings, Inc. was established on April 1, 2010, when the

Company became a wholly-owned subsidiary thereof.

� Name: JX Holdings, Inc.� Address: 6-3, Otemachi 2-chome, Chiyoda-ku, Tokyo, Japan� Representative: Shinji Nishio, Representative Director and

Chairman of the Board; Mitsunori Takahagi, Representative

Director and President� Common stock: ¥100,000 million � Business details: Management and administration, and related

activities, of subsidiaries and other group companies engaged in

the refining and marketing, E&P of oil and natural gas, and metals

businesses.� Main reason for the share transfer: The two corporate groups will

undertake a full-scale business integration to further strengthen

the management base of both groups and to achieve dynamic

growth and development under a new management philosophy.� Date of share transfer: April 1, 2010

B) The Absorption Merger Agreement

The absorption merger agreement with Nippon Oil Corporation

(“NOC”) was approved at the meeting of the Board of Directors on

May 26, 2010.

As of July 1, 2010, NOC would merge with Japan Energy

Corporation (“JEC”) and Nippon Petroleum Refining Co., Ltd., and

change its company name to “JX Nippon Oil & Energy

Corporation.”

(1) Main reason for the absorption merger

The main reason is to establish a subsidiary in the petroleum refin-

ing and marketing business as one of the core integrated operating

subsidiaries in the JX Group, as a part of the business integration

between the Company and NOC.

(2) Method and nature of absorption merger

The method is the absorption merger on which NOC is defined as

the surviving company and JEC is defined as the absorbed com-

pany. Upon the absorption merger, NOC would issue 411,800,000

new shares of common stock and allot them to the Company as

the final shareholder of JEC on the day before the effective date.

The absorption merger agreement was approved at a sharehold-

ers’ meeting of JEC and NOC, respectively.

(3) Basis of allotment

The number of new shares issued by NOC was calculated based

on notional amounts of net assets and the number of issued shares

of JEC and NOC, respectively, as of March 31, 2010.

(4) Outline of surviving company� Name: JX Nippon Oil & Energy Corporation (Changed from NOC

on July 1, 2010)� Address: 6-3, Otemachi 2-chome, Chiyoda-ku, Tokyo, Japan� Representative: Yasushi Kimura, Representative Director and

President� Common stock: ¥139,437 million � Business details: Refining and selling petrochemical products,

importing and selling gas, generating and selling electricity� Date of the merger: July 1, 2010

(5) Accounting method

This transaction would be accounted for as a transaction under

common control based on “Accounting Standard for Business

Combinations” (ASBJ Statement No.21) and “Revised Guidance on

Accounting Standard for Business Combinations and Accounting

Standard for Business Divestitures” (ASBJ Guidance No.10).


C) The Absorption Demerger Agreement

The absorption demerger agreement with JX Holdings, Inc.

(“JXHD”) was approved at the meeting of the Board of Directors on

May 26, 2010.

As of July 1, 2010, the Company would transfer its rights and

obligations for the subsidiaries management function to JXHD as

the wholly-owning parent.

(1) Main reason for the absorption demerger

The main reason is that the Company would transfer its assets and

liabilities for the subsidiary management function to JXHD, as a

part of the business integration between the Company and NOC.

(2) Method and nature of absorption demerger

The method is the absorption demerger on which the Company is

defined as the demerged company and JXHD is defined as the

successor company. Since JXHD is a wholly-owning parent for the

Company, no consideration including allotment of shares etc. will

be noted. Under Article 784 Clause 1 of the Companies Act of

Japan, the Company is not required to approve the absorption

demerger agreement at shareholders’ meeting of the Company.

Under Article 796 Clause 3 of the Companies Act of Japan, JXHD

is not required to approve the absorption demerger agreement at

shareholders’ meeting of JXHD.

(3) Outline of successor company� Name: JX Holdings, Inc.� Address: 6-3, Otemachi 2-chome, Chiyoda-ku, Tokyo, Japan� Representative: Mitsunori Takahagi, Representative Director and

President� Common stock: ¥100,000 million � Business details: Management and administration, and related

activities, of subsidiaries and other group companies engaged in

the refining and marketing, E&P of oil and natural gas, and metals

businesses.

(4) Accounting method

This transaction would be accounted for as a transaction under

common control based on “Accounting Standard for Business

Combinations” (ASBJ Statement No.21) and “Revised Guidance on

Accounting Standard for Business Combinations and Accounting

Standard for Business Divestitures” (ASBJ Guidance No.10).



Principal Group CompaniesAs of September 30, 2010


Company Name Principal Business ActivitiesPercentage of Voting Rights

JX Nippon Oil & Energy Corporation Manufacturing and marketing of petroleum and petrochemical products 100.0

Kashima Oil Co., Ltd. Manufacturing of petroleum and petrochemical products 70.7

Wakayama Petroleum Refining Co., Ltd. Manufacturing and sale of petroleum products 99.8

Kashima Aromatics Co., Ltd. Manufacturing of petroleum and petrochemical products 80.0

JX Nippon ANCI Corporation Manufacturing and selling/purchasing of synthetic resin products 100.0

Nippon Oil Staging Terminal Company, Limited Storage, receiving, and shipment of petroleum products 100.0

Nippon Oil Tanker Corporation Sea transport of crude oil and petroleum products 100.0

Nippon Global Tanker Co., Ltd. Sea transport of crude oil 65.0

Nissho Shipping Co., Ltd. Sea transport of crude oil and petroleum products 72.5

Nippon Tanker Co., Ltd. Sea transport of petroleum products 100.0

Nippon Oil (U.S.A.) Limited Sale of petroleum products 100.0

Nippon Oil Lubricants (America) LLC Manufacturing and sale of lubricants 100.0

Nippon Oil (Asia) Pte. Ltd.*1 Sale of petroleum products 100.0

Japan Energy (Singapore) Pte. Ltd.*1 Sale of petroleum products 100.0

JX Nippon Oil & Energy (Australia) Pty. Ltd. Making investments in companies extracting coal 100.0

ENEOS Frontier Company, Limited Sale of petroleum products 100.0

JOMO-NET Co., Ltd. Sale of petroleum products 100.0

JOMO Retail Service Co., Ltd. Sale of petroleum products 100.0

J-Quest Co., Ltd. Sale of petroleum products 100.0

JOMO Sun Energy Co., Ltd. Sale of petroleum products 100.0

Japan Gas Energy Corporation Sales of LP gas products 51.0

Kawasaki Natural Gas Generation Company, Limited Generation and supply of electric power 51.0

ENEOS Celltech Co., Ltd. Manufacturing and marketing of fuel cells 81.0

Space Energy Corporation Manufacturing and marketing of silicon wafers for solar batteries 85.1

Nippon Oil Finance (Netherlands) B.V. Making investments in LNG development companies 100.0

Nippon Oil Trading Corporation*2 Sale and lease of automobile-related parts 100.0

JOMO Support System Co., Ltd.*2 Sale and lease of automobile-related parts 100.0

Japan Oil Transportation Co., Ltd. Overland transportation of petroleum products 29.4

*1. Nippon Oil (Asia) Pte. Ltd. merged with Japan Energy (Singapore) Pte. Ltd. on October 1, 2010, and the new company’s name became JX Nippon Oil & Energy Asia Pte. Ltd.*2. Nippon Oil Trading Corporation merged with JOMO Support System Co., Ltd. on October 1, 2010, and the new company’s name became JX Nippon Oil & Energy Trading Corporation.

Oil and Natural Gas E&P Business


JX Nippon Oil & Gas Exploration CorporationExploration, development, production, and marketing of petroleum and natural gas

100.0

Japan Vietnam Petroleum Company, LimitedExploration, development, production, and marketing of petroleum and natural gas

97.1

Nippon Oil Exploration (Malaysia), LimitedExploration, development, production, and marketing of petroleum and natural gas

78.7

Nippon Oil Exploration (Sarawak), LimitedExploration, development, production, and marketing of petroleum and natural gas

76.5

Nippon Oil Exploration (Myanmar) LimitedExploration, development, production, and marketing of petroleum and natural gas

50.0

Nippon Oil Exploration and Production U.K. Ltd.Exploration, development, production, and marketing of petroleum and natural gas

100.0

Mocal Energy Ltd. Exploration, development, production, and marketing of petroleum 100.0

Abu Dhabi Oil Co., Ltd. Exploration, development, production, and marketing of petroleum 31.5

United Petroleum Development Co., Ltd. Exploration, development, production, and marketing of petroleum 45.0


Metals Business


JX Nippon Mining & Metals CorporationManufacturing and marketing of nonferrous metal products and electronic materials products as well as recycling of nonferrous metals

100.0

Nikko Shoji Co., Ltd. Marketing of nonferrous metal products, etc. 100.0

Pan Pacific Copper Co., Ltd. Manufacturing and marketing of nonferrous metal products 66.0

Hibi Kyodo Smelting Co., Ltd. Smelting and refining of copper 63.5

Changzhou Jinyuan Copper Co., Ltd. Manufacturing and marketing of copper wire rods 61.4

Minera Lumina Copper Chile S.A. Development of Caserones Copper and Molybdenum Deposit 100.0

Nikko Environmental Services Co., Ltd. Recycling of nonferrous metals, processing of industrial waste 100.0

Nikko Metals Taiwan Co., Ltd.Manufacturing and marketing of electronic materials products, etc., collection of materials for nonferrous metal recycling

100.0

Nikko Metals Philippines, Inc. Manufacturing and marketing of copper foil 100.0

Gould Electronics GmbH Manufacturing and marketing of copper foil 100.0

Nikko Metals USA, Inc. Manufacturing and marketing of thin-film forming materials 100.0

Nippon Mining & Metals (Suzhou) Co., Ltd. Manufacturing and marketing of rolled and processed materials 100.0

Nippon Marine Co., Ltd. Sea transport for nonferrous metal products, etc. 100.0

LS-Nikko Copper Inc. Smelting and refining of copper 49.9

Minera Los Pelambres Copper ore mining 25.0

Japan Collahuasi Resources B.V. Making investments in Collahuasi Mine 30.0

JECO Corporation Making investments in Escondida Mine 20.0

JECO 2 LTD Making investments in Escondida Mine 40.0

Others


NIPPO CORPORATIONPlanning, design, and construction of roads, pavement, civil engineering works, and petroleum-related facilities

57.2

Dai Nippon Construction Subcontracting for building and civil engineering construction 79.5

Nichiyo Engineering CorporationDesign, construction, and supervision of construction for machinery, electricity, civil engineering, and building construction as well as maintenance

100.0

Toho Titanium Co., Ltd. Manufacturing and marketing of titanium 42.6

Nippon Oil Real Estate Company, Limited Sales, rental, and management of real estate 100.0

Nikko Real Estate Co., Ltd. Sales, rental, and management of real estate 100.0

JX Nippon Procurement Corporation Performance of procurement work on a subcontracting basis 100.0

JX Nippon Finance Corporation Performance of finance-related work on a subcontracting basis 100.0

JX Nippon Business Services CorporationPerformance of accounting, payroll, and welfare-related work on a subcontracting basis

100.0

Nippon Mining Research & Technology Co., Ltd.*3 Survey, research, evaluation, and consulting services 100.0

Nippon Oil Research Institute Co., Ltd.*3 Survey, research, evaluation, and consulting services 100.0

Tatsuta Electric Wire and Cable Co., Ltd. Manufacturing and marketing of wire and cable 35.9

Maruwn Corporation Overland transportation 38.8

*3. Nippon Mining Research & Technology Co., Ltd. merged with Nippon Oil Research Institute Co., Ltd. on October 1, 2010, and the new company’s name became JX Nippon Research Institute, Ltd.


Corporate Profile/Organization StructureAs of September 30, 2010

JX Holdings Corporate Name JX Holdings, Inc.

Representative Directors Shinji Nishio, Chairman of the Board

Mitsunori Takahagi, President

Head Office 6-3, Otemachi 2-chome, Chiyoda-ku, Tokyo 100-8161, Japan

Date of Establishment April 1, 2010

Capital ¥100.0 billion

Number of Employees 24,695 (Consolidated)

Securities Code 5020

Website www.hd.jx-group.co.jp/english

Organization ChartAs of September 30, 2010

Chairman of the Board

Board of Auditors

Auditors Affairs Office

Secretariat

Corporate PlanningDept. II

(Director Responsible)

Corporate PlanningDept. I


Finance & Investor Relations Dept.


Internal Audit Dept.(Director Responsible)

Legal Affairs Dept.(Director Responsible)

Corporate Social Responsibility Dept.


General Administration Dept.


Post Merger Integration Dept.


Controller Dept.(Director Responsible)

Board of DirectorsGeneral Meeting of

Shareholders

Executive Vice President

Senior Vice President

Executive Officer

President


JX Nippon Oil & Energy Corporate Name JX Nippon Oil & Energy Corporation

Representative Directors Yasushi Kimura, President

Isao Matsushita, Executive Vice President


Capital ¥139.4 billion (100% investment of JX Holdings, Inc.)

Principal Business Refining and marketing of petroleum products (gasoline, kerosene, lubricant oils),

manufacture and marketing of petrochemical products, import and marketing of

gas (LPG and LNG), and generation and marketing of electric power

Website www.noe.jx-group.co.jp/english


(Head Office) Secretariat Chemicals Division Chemicals Planning & Coordination Dept.

Director Responsible Corporate Social Responsibility Dept. Olefins Dept.

Director Responsible Corporate Planning & Management Dept. Aromatics Dept.

Board of Directors

Director Responsible Osaka JV EstablishmentOffice*

Specialty & Performance Chemicals Dept. I

President Director Responsible Controller Dept. Specialty & Performance Chemicals Dept. II

Executive Vice President Director Responsible Human Resources Dept. Advanced Polymers Dept.

Director Responsible Public Relations Dept. Energy System Business Division

System Integration Business Dept.

Corporate Auditor Corporate Auditors’ Office Director Responsible Information Systems Dept. Energy System Development

Dept.

Director Responsible General Administration Dept. Research & Development Division

Research & Development Planning Dept.

Environment, Safety & Quality Management Division Environment & Safety Dept. Central Technical Research

Laboratory

Quality Assurance Dept.

Refining Technology & Engineering Division Refining Dept.

Technical & Engineering Service Dept.

Overseas Business Division Petroleum Trading & Shipping Dept.

Global Business Dept.

Supply Division Supply Planning & Optimization Dept.

Distribution Dept.

Fuel Retail Sales Division Marketing Planning Dept.

Retail Marketing Dept.

Home Energy Dept.

LPG Company Establishment Office

Lubricants & Specialties Business Division

Lubricants & Specialties Business Coordination Dept.

Lubricants & Specialties Sales Dept.

Energy Solution Division Energy Solution Dept. I

Energy Solution Dept. II

Energy Solution Dept. III

Gas Business Dept.* The Osaka JV Establishment Office and the Osaka

Refinery were shut down on September 30, 2010.

(Refineries/Plants) (Branch Offices) (Offi ces)

Muroran Refinery Hokkaido Branch Office Funakawa Terminal

Sendai Refinery Tohoku Branch Office Niigata Terminal

Negishi Refinery Kanto Branch Office Toda Terminal

Osaka Refinery* Tokyo Branch Office Sodegaura Terminal

Mizushima Refinery Chubu Branch Office Kawasaki Terminal

Marifu Refinery Kansai Branch Office Kudamatsu Terminal

Oita Refinery Chugoku Branch Office Abu Dhabi Office

Kawasaki Plant Kyushu Branch Office Beijing Office

Yokohama Plant Okinawa Branch Office New Delhi Office

Chita Plant Dealers Sales Branch Office Ho Chi Minh City Office


JX Nippon Oil & Gas Exploration Corporate Name JX Nippon Oil & Gas Exploration Corporation

Representative Director Makoto Koseki, President



Principal Business Exploration for and development of oil, natural gas, and other mineral

resources and extraction, processing, storage, marketing, and shipment

of oil, natural gas, and other mineral resources and their secondary products

Website www.nex.jx-group.co.jp/english


(Offices/Oil & Gas Field)

London OfficeNippon Oil Exploration and Production U.K. Ltd.

Houston OfficeNippon Oil Exploration U.S.A. Ltd.

Ho Chi Minh City Representative Office

Vietnam Office (Vung Tau)Japan Vietnam Petroleum Company, Ltd.

Miri OfficeJX Nippon Oil & Gas Exploration Corporation,

Nippon Oil Exploration (Malaysia), Ltd., Nippon Oil Exploration (Sarawak), Ltd., and

Nippon Oil Exploration (Peninsula Malaysia) Ltd.

Jakarta Office

Brisbane Office

Perth OfficeJAPAN ENERGY E&P AUSTRALIA PTY LTD.

Nakajo Oil and Gas Field

Tripoli Office

(Head Office)

Board of Directors

PresidentCorporate Social

Responsibility Dept.

Executive Vice President Corporate Planning Dept.

Senior Vice President

Production Dept.

Executive Officer

Exploration Dept.

Corporate Auditor Corporate Auditors’ Office

Administration Dept.

Human Resources Dept.

Finance & Accounting Dept.

Project Coordination and Business Development Dept. I

Project Coordination and Business Development Dept. II

Project Coordination and Business Development Dept. III

Project Coordination and Business Development Dept. IV


JX Nippon Mining & Metals Corporate Name JX Nippon Mining & Metals Corporation

Representative Director Masanori Okada, President



Principal Business Development of nonferrous metal resources, copper smelting and

refining, electronic materials, and recycling and environmental services

Website www.nmm.jx-group.co.jp/english


Corporate Planning Dept.

Accounting & Finance Dept.

IT Dept.

Administration Dept.

Secretariat

Human Resources Dept.

CSR Dept.

Environment & Safety Dept.

Logistics Dept.

Internal Auditing Office

Technology Development Group Coordination Dept.

Intellectual Property Dept.

Technology Development Center

Kurami Branch

Shirogane Branch

Isohara Branch

Toda Branch

Metals Group Coordination Dept.

Planning Dept.

Resources Development Dept. Chile Office

Australia Office

Saganoseki Smelter & Refinery

Recycling & Environmental Services Group

Coordination Dept.

Planning Dept.

Marketing Dept.

Technology Dept.

HMC Works

Tsuruga Plant

Electronic Materials Group Coordination Dept.

Planning Dept.

Technology Dept.

Functional Materials Division Electro-Deposited Copper Foil Dept.

Treated Rolled Copper Foil Dept.

Rolled & Fabricated Products Dept.

Shirogane Works

Kurami Works

Hitachi Fabricating Works

Isohara Fabricating Works

Thin Film Materials Division Semiconductor Dept.

Compound Semiconductor Dept.

FPD Dept.

Surface Treatment Dept.

Isohara Works

Toda Works

Hitachi Area Coordination Center

Board of Directors

President

Corporate Auditor Secretariat to Auditors


Investor InformationAs of September 30, 2010

SHARE INFORMATION

MAJOR SHAREHOLDERS

Name of shareholdersNumber of shares held

Percentage of total issued shares (%)

The Master Trust Bank of Japan, Ltd. (held in trust account) 184,441,000 7.4

Japan Trustee Services Bank, Ltd. (held in trust account) 177,914,080 7.1

Mizuho Corporate Bank, Ltd. 65,451,258 2.6

Sumitomo Mitsui Banking Corporation 65,398,360 2.6

Japan Trustee Services Bank, Ltd. (held in trust account 9) 49,346,200 2.0

Mitsubishi Corporation 48,882,792 2.0

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 38,920,444 1.6

SSBT OD 05 OMNIBUS ACCOUNT-TREATY CLIENTS 37,445,278 1.5

INPEX Corporation 33,264,732 1.3

Tokio Marine & Nichido Fire Insurance Co., Ltd. 32,665,656 1.3

Securities Code 5020

Number of Shares Issued 2,495,485,929

Number of Shareholders 183,387

Stock Exchange Listings Tokyo, Osaka, Nagoya

Contact Points for Investors

JX Holdings, Inc.

Investor Relations Group,

Finance & Investor Relations Department

6-3, Otemachi 2-chome, Chiyoda-ku,

Tokyo 100-8161, Japan

Telephone: 81-(0) 3-6275-5009

Facsmile: 81-(0) 3-3276-1245

E-mail: [email protected]

Website:

http://www.hd.jx-group.co.jp/english


Annual Report 2010Year Ended March 31, 2010

From Integration to Sustaining Power

Printed in Japan

JX Holdings, Inc.

Annual R

eport 2010

Documents

JX Holdings, Inc. Annual Report 2010 - hd.jxtg-group.co.jp · PDF fileJX Holdings, Inc. Annual Report 2010. ... July Shipments began from the Tangguh LNG project in Indonesia April