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					What makes OSG so special?
                  OSG Corporation
                  AnnuAl RepORt 2011
                  Year ended November 30, 2011
pROfile




is it the renowned quality of our products?

OSG Corporation is the world’s leading manufacturer

of taps. As a comprehensive cutting tool maker, it also

manufactures and sells end mills, drills, rolling dies and

many other products.

  Cutting tools are essential to all manufacturing activities,

and OSG products are used in a wide range of industries.

the future of the world economy is expected to bring

dramatic expansion to automotive manufacturing and other

global manufacturing industries. OSG is determined to

achieve sustainable growth by creating new products and

processing technologies to meet the needs of its customers.
CORpORAte pHilOSOpHy




Global presence
As a comprehensive cutting tool manufacturer, we make products that at a fundamental
level contribute to enhancing people’s quality of life. through continuous growth,
we have established a production, sales and technical support network spanning 25
countries. Our corporate aim is to continue to expand our operations globally and
strengthen our contribution to the manufacturing industries in the world.


tool Communication
to OSG, there is a close link between tools and communication. not only is active two-
way communication with customers an essential part of our product development, it
is also vital when we assist them in the selection and application of tools, and provide
after-sales service. thus, communication is key to the success of our operations and to
our commitment to develop ever-better products. Moreover, the excellent results brought
by the use of high-quality tools help to enhance business relationships.




is it our top-grade R&D and manufacturing?


CO nte ntS

 1 Corporate philosophy
 2 OSG Characteristics
 5 to Our Shareholders
 6 financial Highlights
 7 An interview with the president
     Special feature: Our future as the world’s leading
 12 manufacturer of hole-making cutting tools

 16 Social Contribution and environmental protection
 17 financial Section
 51 Board of Directors
 51 investor information


                                                                                           1
    OSG CHARACteRiStiCS




    We like to think
    it’s our ability to listen
    OSG has built a global support organization. We seek out customers’ experiences and
    offer technical advice to our customers about optimal tools and processing methods for
    use in manufacture of products ranging from automotive and aerospace components to
    molds and dies. Our corporate policy is to work exhaustively to find optimal solutions to
    each customer’s needs throughout the world.




    01            … and deliver tailor-made total solutions

    OSG listens to its customers and considers problems from the          Sales by Industry                                  Oversea

    customer’s perspective before designing, developing, producing
    and delivering products tailored to customer needs. After delivery,       18%                    Automotive industry
                                                                                                     Aerospace industry
    we provide extensive after-sales service while gathering feedback      7%                        Mold and die industry
                                                                                        54%          Precision instruments
                                                                                                                               50%
    information. Our strength derives from a business model that            15%                      Other

    integrates development, production and sales. This allows us to             6%

    communicate with customers through the medium of tools and
    apply the knowledge gained through this process to the creation       Customer Solution Business Model                   Sales by

    of superior products. We are able to offer customers worldwide                                                                 94
    optimized tools and processing methods thanks to our ability to                            Proposal
                                                                                              capability
    develop applications based on our advanced cutting technology,
    together with our powerful global support network.

                                                                                                 OSG
                                                                                Technical                     Support
                                                                                 strength                    capability
                                                                                                                                   ’
                                                                                                                              Asia
                                                                                                                              Europe
                                                                          Manufacturing, development and sales are united,
                                                                          and satisfy customer needs.



2   OSG Corporation
02               … throughout the world
                      Sales by Industry


                               18%                 Automotive industry
                                                                                           Overseas Sales Ratio

                                                                                                               8%
                                                                                                                                   Europe
                                                                                                                                                                  Overse


                                                                                                                                                                     1
                                                   Aerospace States
OSG established its first overseas subsidiary in the United industry                                             16%                                               10%
                            7%                                                                                                     The Americas
                                                   Mold and die industry
                                       54%toward Precision instruments                          50%                                Asia
in 1968. Since that time, we have worked           the realization of                                                              Japan
                            15%                    Other                                                        26%                                                23%
our corporate vision of establishing a global presence by building a
                                6%
network of manufacturing, sales and technical support facilities in
25 countries. Through this network, we have consistently provided
                             Customer Solution Business Model                              Sales by Geographical Area (Millions of yen/%)
customers worldwide with high-quality, high-performance products
and effective customer support. Despite the rising value of the                                      94,164 97,024
                                            Proposal                                                                                           80,959
yen, our overseas sales ratio reached almost 50% in 2011. This
                                           capability
                                                                                                                                      69,513
is indicative of the steady progress that we have made toward the
                                                                                                                            53,326
globalization of our activities. With a history of overseas business                                                                               49.7
                                                                                                                      45.8      49.8      48.6
                                                                                                             44.3
                                            OSG
activities spanning more than 40 years, we have considerable
experience in the development of new markets, as well as staff with
                                    Technical                      Support
                                                       We will
wide-ranging international knowledge and perspectives.capability
                               strength
                                                                                                         ’07        ’08      ’09       ’10       ’11
continue to apply these resources to global market development,
                                                                                              Asia             The Americas            Overseas sales ratio
which we see as a core growth driver. development and sales are united,                       Europe           Japan
                         Manufacturing,
                             and satisfy customer needs.

Expansion of Overseas Business

europe
•1997 OSG Europe (Belgium)        •1997 OSG MAC World (Netherlands)          •2002 OSG Comaher (Spain)
•1997 OSG Belgium                 •1999	 OSG UK                              •2003 OSG GmbH (Germany)
•1997 OSG France                  •2000 OSG Scandinavia (Denmark)            •2003 OSG ITALIA (Italy)




                                                                                         Business base
                                                                                         Manufacturing and
                                                                                         business base
the Americas
•1968 OSG Tap & Die (USA)                                  Asia
•1974 OSG Sulamericana de                                  •1970   Taiho Tool (Taiwan)                       •2005        OSG INDIA
      Ferramentas (Brazil)                                 •1985   OSG Korea                                 •2007        OSG INDONESIA
•1988 OSG Canada                                           •1990   OSG Asia (Singapore)                      •2007        NINGBO TAIHO (China)
•1994 OSG Royco (Mexico)                                   •1996   OSG THAI                                  •2007        TRADING SHANGHAI (China)
•2004 OSG-Sterling Die (USA)                               •1997   Dabao (Dongguan) Tool (China)             •2008        OSG Vietnam
•2008 OSG Argentina (Argentina)                            •2001   OSG Shanghai (China)                      •2008        FUDIAN (China)
                                                           •2001   Carbide Cutting Tool (India)              •2008        KUNSHAN TAIHO (China)
                                                           •2004   OSG Shanghai Plant (China)                •2008        OSG Philippines



                                                                                                                                     Annual Report 2011       3
                                                                                                                             10%
                                                                                             % of Net Sales                9%
                                                                                                                                     36%



    03
                                                                                               Taps
                                                                                               Drills                      22%
                                                                                               End mills
                      … for wide-ranging applications                                          Rolling dies                      23%
                                                                                               Gauges and other products



                                net Sales (Billions of yen)
     taps                                                                     Taps are used to cut screw threads on the inside surfaces
                                                                              of holes, creating the “female” half (nut) of the screw.
                                 28.4 30.4                           28.9     High precision is of vital importance, particularly in areas
                                                            23.2              such as automotive engines, which require precision
                                               16.9                           screws. We offer a lineup of taps with diameters ranging
                                                                              from small to large and with specifications suitable for a
                                                                              wide variety of uses. We have the top market share for
                                                                              taps not just in Japan but also in the world.
                                 ’07    ’08    ’09      ’10 ’11


                                net Sales (Billions of yen)
     Drills                                                                   Drills are used to make holes in a wide range of surfaces.
                                                                              We have received high acclaim for our development of
                                        21.7                                  high-precision, high-value-added products for use in
                                 19.6
                                                            16.3
                                                                     18.3     automotive and aircraft part manufacture, which
                                                                              demands advanced processing techniques and zero
                                               11.8
                                                                              margin of error.


                                 ’07    ’08    ’09      ’10 ’11



                                net Sales (Billions of yen)
     end Mills                                                                End mills are used to cut and contour molds for plastic
                                                                              parts, for instance for electric home appliances, as well
                                 24.6 24.1
                                                                              as die-casting dies for automotive parts and stamping
                                                            16.2
                                                                     17.8     molds. To meet today’s demanding requirements, such
                                               12.9                           as smaller size, lower weight and reduced cost, we are
                                                                              currently focusing on developing new products that
                                                                              utilize our advanced proprietary coating technology.
                                 ’07    ’08    ’09      ’10 ’11



                                net Sales (Billions of yen)
     Rolling Dies                                                             Thread rolling dies are used to copy threading onto
                                                                              metal bars to make “male” screws (bolts); the
                                 8.4    8.0                                   process consists of rolling the bar between two
                                                            6.7      7.1      thread rolling dies tightly pressed to each side. OSG
                                                4.7                           manufactures cylindrical and flat rolling dies for
                                                                              screws, worms and serrations, thread rolling planetary
                                                                              dies and counter-flow rolling dies, in accordance with
                                                                              their intended use.
                                 ’07    ’08    ’09      ’10 ’11



                                net Sales (Billions of yen)
     Gauges and                                                               Gauges are used to inspect the final dimension of
                                  Gauges       Other products                 holes and threads. We started to market screw thread
     Other products                                                           gauges for ISO-class specifications soon after JIS
                                 13.2 12.8
                                    1.6 1.5                                   (Japan Industrial Standards) introduced the ISO
                                                                     8.9      gauge standard. OSG provides not only gauges but
                                                7.0         7.2         1.1
                                    11.6 11.3         0.9      1.1            also a gauge calibration service to meet customer
                                                      6.1      6.1      7.8   demand.

                                 ’07    ’08    ’09      ’10 ’11




4   OSG Corporation
tO OuR SHAReHOlDeRS




Meeting global needs
for state-of-the-art
cutting tool solutions

We aim to accelerate our global presence strategy while achieving
sustainable growth through continuing adaptation to change.
    In fiscal 2011 (ended November 30, 2011), we worked in a business
environment in which the world economy was increasingly led by emerging
countries, especially those in Asia. Our corporate priority in this context
was to build the robust income base needed to support our return to
a significant growth trend. This strategy allowed us to turn expanding
demand for tools into reliable income flows and to achieve financial results
that exceeded our initial targets.
    A key priority as we work to lay foundations for sustainable growth will
be the acceleration of our global presence strategy. To achieve this, we will
need to increase our overseas production capacity, expand our business
activities globally through integrated initiatives linking development,
production and marketing, and train people to be capable of moving these
initiatives forward decisively. By steadily building a structure to sustain our
role as a truly global company, we aim to adapt to change while achieving
sustainable growth and improvement in our corporate value.
    Corporate value improvement and sustainable growth also
require effective corporate governance. We will continue to strengthen
our governance systems by establishing efficiency and transparent
management structures and actively disclosing information.
    We look forward to the continuing support and understanding of
our stakeholders.




                                Teruhide Osawa
                                Chairman and CEO
    finAnCiAl HiGHliGHtS




                                                                                                 Millions of yen                          Thousands of U.S. dollars

    FOR THE YEAR:                                                                    2011                          2010                              2011

    Net sales                                                                      ¥ 80,959                    ¥ 69,513                      $ 1,037,936
       Domestic                                                                      40,695                      35,701                          521,744
       Overseas                                                                      40,264                        33,812                            516,192
    Operating income                                                                 12,305                         7,525                            157,756
    Net income                                                                           5,905                      3,773                              75,705
    EBITDA                                                                           17,962                        12,833                            230,282
    EBITDA margin                                                                        22.2%                      18.5%

    AT YEAR-END:
    Total assets                                                               ¥ 104,374                     ¥ 105,636                       $ 1,338,128
    Total equity                                                                     65,348                        63,163                            837,795

    PER SHARE:                                                                                         Yen                                         U.S. dollars

    Net income                                                                      ¥ 62.18                        ¥ 39.34                               $ 0.80
    Cash dividends applicable to the year                                                18.00                      12.00                                   0.23


    Payout ratio                                                                         28.9%                      30.5%
    Equity ratio                                                                         56.9%                      54.1%
    * The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have
      been made at the rate of US$1=¥78.




    net Sales (Millions of yen)                        Operating income and Operating                               eBitDA and eBitDA Margin
                                                       income Margin (Millions of yen/%)                            (Millions of yen/%)
    With strong demand in Asia offsetting
    the effect of a higher yen, net sales              By giving priority to increased                              The EBITDA margin was at the same
    exceeded the initial target.                       production in our core product                               level as in fiscal 2008. This reflects an
                                                       category, taps, we were also able to                         improved operating income margin and
                                                       improve income performance.                                  aggressive capital investment.


    94,164 97,024                                       15,357                                                       22,801
                                                                 14,416                                                       21,551
                                        80,959                                               12,305
                                                                                                                                                            17,962
                               69,513
                                                             16.3                    7,525
                      53,326                                          14.9                          15.2                  24.2                     12,831
                                                                                                                                   22.2                           22.2
                                                                                          10.8
                                                                                                                                                        18.5


                                                                      2,735                                                        3,113     5.8
                                                                                   5.1

     ’07      ’08     ’09         ’10   ’11              ’07        ’08      ’09     ’10         ’11                 ’07         ’08      ’09      ’10         ’11
                                                               Operating Income                                            EBITDA
                                                               Operating Income Margin                                     EBITDA Margin




6   OSG Corporation
An inteRvieW WitH tHe pReSiDent




                                           We aim to achieve sustainable growth
                                           by strategically allocating management
                                           resources to create an income base that
                                           will yield robust earnings even in a
                                           high-yen environment.



                                                                         Norio Ishikawa
                                                                         President and COO




Q.1 How wereimpacted by
    activities
               your business
                                    A.1 First, I would like to offer our sincere condolencestheeveryone
                                        affected by the Great East Japan Earthquake and
                                                                                             to
                                                                                                flooding
the Great east Japan earthquake     in Thailand, and our prayers for a speedy recovery in the disaster areas.
and the major floods in thailand?       Some of our business sites were damaged in the Great East Japan
                                    Earthquake. However, our head office and production sites are located
                                    in Aichi Prefecture, which is about 600km from the epicenter, and
                                    fortunately the effects on production facilities were negligible. We were
                                    also unaffected by the disruption of supply chains. This was mainly
                                    because the raw materials that we use have long delivery lead times,
                                    and because we have sufficient stocks for several months.
                                        Our factory in Thailand is located in the Wellgrow Industrial Estate,
                                    which is about 50km south of Bangkok, and was not affected by the
                                    floods. However, we anticipate that the disruption of supply chains to a
                                    cluster of Japanese motorcycle and automotive manufacturing
                                    operations in Thailand will affect our orders until early 2012.
                                        Learning from our observations of these natural disasters, we are
                                    now building systems that will ensure supplies of our main products
                                    when disasters occur. We will enhance our business continuity by
                                    expanding our production facilities in Asia, which is geographically close
                                    to Japan, and by creating systems that will allow personnel to be
                                    dispatched from Japan in times of emergency.



Q.2 your financial results for
    fiscal 2011 exceeded            A.2 Production increases byautomotive, construction demand
                                        sectors, which include
                                                                customers in our main
                                                                                        equipment
your initial forecasts. What        and electronic equipment manufacturing, were reflected in higher
initiatives did you implement       demand for cutting tools for machining parts and molds. As a result,
during the year, and what is your   our net sales in fiscal 2011 were 17% above the previous year’s level at
personal assessment of your         ¥80,959 million.
company’s performance?                  This company was founded to manufacture taps, and today we are


                                                                                             Annual Report 2011   7
                                                     the world’s leading manufacturer in terms of market share. In the year
                                                     under review, we moved forward aggressively with policies designed to
                                                     build a clear lead in this area. Our initial goal was to develop a
                                                     production structure capable of producing 2.75 million taps per month
                                                     by the end of November 2011. In fact, we reached this target ahead of
                                                     schedule, with production capacity reaching 2.8 million pieces per
                                                     month in June 2011. We achieved this by giving first priority to
                                                     expanding tap production capacity to meet a rapid increase in orders.
                                                     There was also dramatic growth in demand for taps in Asia, where
                                                     industrial production has remained buoyant. This trend was apparent
                                                     not only in China, which is now the world’s biggest automotive producer,
                                                     but also in South Korea and Southeast Asia. We responded by
                                                     expanding our production capacity, and by improving our ability to win
                                                     orders through combined efforts by our sales, production and
                                                     technology organizations. As a result, we set new records in Asia both
                                                     for net sales and operating income.
                                                          We also targeted reductions in the manufacturing cost ratios for
                                                     tools through a variety of cost-cutting measures. These efforts resulted
                                                     in lower cost ratios for almost all of our products. Higher operating rates
                                                     at our factories in Japan, which account for two-thirds of our production
                                                     capacity, helped to lift our operating income by 64% over the previous
                                                     year’s level to ¥12,305 million.
    Comparison of non-Consolidated                        My assessment of fiscal 2011 is that we made tangible progress
    financial Results (Millions of yen/%)            toward the reinforcement of our income structure. The non-
                            FY2008          fy2011   consolidated net sales for OSG Corporation were over ¥5,000 million
     Net Sales               47,898         42,762   below their pre-Lehman shock level of fiscal 2008, and our income
     Operating income         3,357          3,678   was eroded by over ¥3,000 million because of the exchange rate
     Operating income
     margin
                               7.0%          8.6%    movements. Despite this, our non-consolidated operating income
                                                     surpassed the fiscal 2008 level. We achieved this by carefully reviewing
                                                     our processes at all stages from the acceptance of orders through the
                                                     delivery and after-delivery support, and by improving efficiency in all
                                                     areas, including production methods, inventory management and sales
                                                     methods. I believe that our efforts to strengthen our business structures
                                                     and improve our adaptability as an organization are driving sustained
                                                     improvement in our earning performance.



    Q.3 What progress have you
        made under “the next                         A.3 Our three main priorities under serve,Next Stage 11 are the
                                                         expansion of key industries we
                                                                                         The
                                                                                                the expansion of orders
    Stage 11” three-year                             in Asian markets and the expansion of our product lineup.
    management plan?                                      Our core user industries are the automotive, mold and die and



8   OSG Corporation
   Business Domains                                                 aerospace industries. We are also working to develop customers in
                                                                    other growth markets, including energy, medical, precision parts, IT
                              Energy                                parts, construction equipment and forming. We aim to make the
                                                                    aerospace industry our second biggest customer group after the
                                           new
                                           markets                  automotive industry by increasing our sales to that industry, especially
 Forming                     Automotive                 Medical
                                                                    in North America. In 2010, we established a specialist sales team for
                                          Core                      the aerospace industry, and by November 2011 we had installed
                                          markets
                               OSG                                  systems in our American manufacturing facilities to produce high-
                              Group
                                                                    quality products specifically for aerospace manufacturers. North
                Aerospace                    Mold
                                            and die                 America is a huge market for the aerospace industry, and we are
Construction                                            Precision
 equipment                                                parts     determined to capture demand for cutting tools in that market. Our
                                                                    patented diamond coating technology is ideal for tools used in the
                                                                    processing of carbon fiber reinforced plastic (CFRP), which is a key
                              IT parts
                                                                    next-generation aviation material. CFRP will be used extensively in the
                                                                    mass-production of the Boeing 787 and is also likely to be used in other
                                                                    aircraft. With our diamond coating technology, we are ready to meet
                                                                    demand for carbide drills and end mills.
   Sales and Operating income in Asia
   (Millions of yen)
                                                                         Our second priority under The Next Stage 11 is the expansion of
                                                                    orders in Asian markets. We have expanded our sales forces in several
                                                    21,327
                                                                    countries, especially China, Southeast Asian nations and India, to enhance
                  19,100
      17,753                             17,198                     our ability to monitor the needs of more customers in these markets.
                                                                         Despite the dramatic rise in the value of the yen, we set a new
                             12,070
                                                                    record for sales in Asia in fiscal 2011. Asian markets have become
                                                                    growth drivers for the world. We will work to build a robust income
                                                        4,332
               3,001    3,478                3,086                  structure by enhancing our ability to discover customer needs and
                                  1,139
                                                                    providing a timely and effective response to those needs with our
         ’07           ’08      ’09        ’10        ’11           expanded sales forces.
               Sales
               Operating income
                                                                         Our third priority is the expansion of our product lineup. We have
                                                                    substantially expanded our range of drills and indexable tools. Our
                                                                    indexable tools are marketed under the OSG Phoenix Brand. We sold
                                                                    these products mainly in Japan in fiscal 2011, but we will commence
                                                                    full-scale marketing in overseas markets from fiscal 2012 onwards.
                                                                    This will allow us to pursue enhanced synergies with OSG’s existing
                                                                    solid tools, including taps, end mills and drills. In the drill category,
                                                                    users have responded very positively to our high-performance TRS
                                                                    drills and our WDO drills, which are manufactured using newly
                                                                    developed drill materials and coatings, and these products will be the
                                                                    main targets for intensive customer development initiatives. By
                                                                    expanding our product lineup, we will raise OSG’s global profile as a
   New OSG Phoenix brand indexable tools                            comprehensive cutting tool manufacturer.
   launch overseas in fiscal 2012



                                                                                                                             Annual Report 2011   9
     Q.4 What are your thoughts
         on capital investment?                         A.4 Wheninto account changeoninthe level of capital investment, we
                                                            take
                                                                  making decisions
                                                                                        our business environment, and
                                                        we also strive to maintain a proper balance with depreciation. In fiscal
                                                        2011, we responded to extremely strong customer demand by rapidly
                                                        expanding our production facilities, although the level of expenditure
                                                        varied according to the product category. We increased production
     Depreciation and Amortization/                     capacity at our six tap manufacturing facilities around the world by
     Capital expenditure
     (Millions of yen)
                                                        20%. We also installed more coating furnaces at our manufacturing
                                                        sites worldwide to meet growing demand for coatings that improve the
           8,784
                                                8,225   wear-resistance and heat-resistance of taps, end mills and other tools.
       7,444       7,136
                       6,455
                                                        In July 2011, we decided to establish a new factory in South Korea to
                            5,849                       serve anticipated expanding demand for cutting tools used in the
                                    5,308 5,657
                                                        processing of automotive and IT products.
                                        3,568
                               2,547                        This aggressive investment activity lifted our capital investment in
                                                        fiscal 2011 to ¥8,225 million. In fiscal 2012 (ending November 30,
                                                        2012), we plan to spend ¥9,400 million. In addition to production
          ’07       ’08      ’09       ’10      ’11     capacity increases in key product categories, we will also implement an
            Depreciation and amortization
                                                        extremely wide range of investments relating to drills and indexable
            Capital expenditure
                                                        tools. Priority will be given to new products and products for which
                                                        orders can be expected. We also plan to build reliable supply systems
                                                        capable of accommodating quantitative growth in demand for cutting
                                                        tools, and to expand our production infrastructure to support net sales
                                                        of ¥100,000 million.



     Q.5 What are your priorities
         for the future?                                A.5 Our basic scenario for the economic environmentadvanced
                                                            unchanged. We anticipate a slow recovery in the
                                                                                                            remains


                                                        economies, and growth in the markets of the emerging economies.
                                                        However, we are also aware of challenges in our business environment,
                                                        including the prolonged debt crisis in Europe, the persistent upward
                                                        trend in the value of the yen, and rising raw material prices.
                                                            To achieve sustainable growth under these conditions, we need to
                                                        create a structure capable of yielding income even in a high-yen
                                                        environment, through ongoing cost-cutting measures, and through the
                                                        strategic allocation of our management resources. Other priorities
                                                        include the development of customers in growth markets, and the
                                                        training of personnel capable of working effectively at the global level.
                                                        We will also accelerate the global implementation of our three-year
                                                        management plan, The Next Stage 11. Our targets for fiscal 2012 are
                                                        net sales of ¥84,000 million and net income of ¥7,400 million.




10   OSG Corporation
Q.6 Could youyour strategies
    details of
               provide more
                                    A.6 The valuethreethe yen is extremely highefforts to build an
                                        adopted
                                                   of
                                                        strategies to guide our
                                                                                at present. We have


in relation to the high yen?        income structure under which we can operate profitably in this
                                    environment. First, we are expanding our overseas production
                                    capacity with the aim of increasing overseas capacity to 50% in
                                    volume terms. Second, we will reduce manufacturing costs by
                                    aggressively introducing automated facilities at our plants in Asia, as
                                    well as those in Japan. We will also explore the revolutionary
                                    possibility of using automated facilities to manufacture tools that
                                    require high-mix, low-volume production. Our third strategy is to
                                    maintain selling prices at appropriate levels.
                                        By implementing these initiatives and continuing our efforts to
                                    reduce costs, we will survive in the harsh environment created by
                                    the high yen.



Q.7 What is your financial
    position, and what are          A.7 We havethat our equity our financial position,54.1% to 56.9%
                                        the fact
                                                 strengthened
                                                               ratio improved from
                                                                                       as evidenced by


your policies on the distribution   as of November 30, 2011. We will continue to keep future needs in
of income to shareholders?          mind as we manage our business operations. For example, we aim to
                                    maintain sufficient financial reserves to meet our needs in any business
                                    environment, including our future M&A needs.
                                        Our policy on the distribution of income to shareholders is to
                                    maintain a consolidated payout ratio of 30%. The dividend for fiscal
                                    2011 was ¥18 per share, consisting of an interim dividend of ¥6 and a
                                    final dividend of ¥12. We will continue our efforts to provide appropriate
                                    returns to our shareholders. We look forward to the continuing guidance
                                    and support of our shareholders.




                                                                                            Annual Report 2011   11
     SpeCiAl feAtuRe:
     Our future as the world’s leading manufacturer
     of hole-making cutting tools




     part 1

     Achieving clear leadership
     in the tap market
     OSG aims to be the world’s leading manufacturer of hole-making cutting
     tools. We are working to achieve that goal by building a clear leadership
     position in the market for taps. We will strive to become the clear leader on
     three levels: product performance, world market share and manufacturing
     technology. under this strategy, we will further enhance the competitiveness
     of our taps, while also enhancing the growth potential of the entire OSG
     Group by reinvesting income from this area in other product areas.




     Taps are OSG’s main income driver, and OSG taps have gained the biggest
     share of the world market. We will continue to build a robust income base
     by strategically allocating management resources to the development of taps
     that are superior to those of our competitors.
          To keep pace with growing demand for OSG taps, we are accelerating
     the expansion of our worldwide production capacity. In fiscal 2011 (ended
     November 30, 2011), we increased monthly capacity at our six factories
     around the world to 2.75 million pieces. We plan to increase that to 3 million
     pieces per month in fiscal 2012 (ending November 30, 2012), and to 3.3
     million pieces in fiscal 2013.
          Supply is still insufficient to meet demand, especially in the growth
     markets of Asia. OSG is determined to respond to this demand ahead of Asian
     manufacturers in China and elsewhere, and to establish a strong position for
     itself as the world’s leading manufacturer. To become number one in Asia,
     we must first become the clear leader in terms of cost competitiveness.
     Our strategies for the improvement of our cost competitiveness include the
     installation of automated facilities at local plants.




12   OSG Corporation
the yana factory—the World’s Biggest tap production facility

With world demand for taps expanding, we are increasing production capacity at the
Yana Factory in Japan, which is the world’s leading tap production facility in terms of both
production volumes and production efficiency. The Yana Factory is the mother plant for tap
production in the OSG Group. Equipped with the most advanced production facilities, it
boasts the highest standards of productivity in the world for products ranging from general-
                                               purpose items to high-added-value tools,
                                               and across a wide spectrum of production
                                               volumes. We will continue to strengthen the
                                               Yana Factory’s position as the world’s top
                                               production facility by expanding its capacity
                                               and improving production efficiency.



                                               The Yana Factory




Buoyant tap Demand in Asia

Expanding production of motorcycles, automobiles and electronic products in Asia has
been accompanied by rapid growth in the demand for taps. OSG is responding to this
buoyant demand in Asia by installing automated production facilities in its plants in
Taiwan, China, South Korea and Japan. Automotive production is expected to remain on
a sustained growth trend. OSG is determined to increase its share of the tap market by
anticipating demand growth and maintaining adequate supply capacity.

                                                     projected Automotive production
 expansion of Order intake
                                                     (Thousands of vehicles)
 in the Asian Market
                                                                                        45,993
                                                                        41,124 42,800
                                                       37,046 37,278




                                                        ’10     ’11     ’12     ’13     ’14
                                                           China    Japan and South Korea
 • Business base                                           Southern Asia
 • Manufacturing and business base                                             Source: IHS Automotive




                                                                               Annual Report 2011       13
     SpeCiAl feAtuRe:
     Our future as the world’s leading manufacturer
     of hole-making cutting tools




     part 2

     Accelerating our global expansion as a
     manufacturer of carbide tools
     We are accelerating OSG’s global expansion as a manufacturer of carbide tools
     in line with our long-term vision for OSG as the world’s top manufacturer of
     hole-making cutting tools. Our goal is to achieve continuing expansion of
     our production and sales of carbide tools, a growth category that includes
     drills and indexable tools. By providing customers with total solutions to
     their cutting tool needs, we will further enhance our competitiveness as a
     comprehensive cutting tool manufacturer.




     OSG involvement in carbide tool manufacturing is more recent than its
     history as a tap manufacturer, and its market share is consequently smaller.
     We therefore see carbide tools as a growth segment, and we will build a
     path to future growth by aggressively investing management resources.
          In fiscal 2011, our product catalog included high-performance TRS
     drills, which are by far the best in the world in terms of performance,
     and WDO drills manufactured using newly developed drill materials and
     coatings. In addition to developing applications based on these products,
     which we are introducing worldwide to meet specific customer needs, we
     are also supplying them increasingly for use as standard catalog items.
     We will use various strategies, such as sales through major distributors,
     to expand our business opportunities. In fiscal 2012, we will increase
     production at our carbide drill manufacturing facilities in Japan and start
     full-scale local production in China and North America. Our goals are
     to enhance our ability to meet customer needs worldwide, to strengthen
     our marketing to the automotive, aerospace and construction equipment
     industries, and to expand our market share.




14   OSG Corporation
expanding production of Carbide tools

World demand for carbide tools manufactured from carbide alloys has expanded in recent
years because of the increased need to process hardened materials and achieve high
levels of processing efficiency. OSG responded to this trend by commencing an expansion
project at its Shanghai Factory in December 2010. The new building was completed in
September 2011, and we are now progressively installing new facilities that will double
the factory’s production capacity for carbide end
mills and add production capacity of carbide drills.
This factory will supply the best carbide tools
manufactured to the world’s most exacting quality
standards not only in China, where production of
automotive and IT products is expected to expand,
but worldwide.
                                                                         The Shanghai Factory


Demand for Carbide tools expanding in the Aerospace industry

Long-term growth is predicted for the world aerospace market. The number of passenger
aircraft in operation is expected to increase from around 19,000 today to 40,000 over the
next 20 years. OSG aims to make the aerospace industry our second biggest customer
group after the automotive industry, and we are determined to increase our share of
the market for carbide tools in North America, where there is a large concentration of
aerospace-related manufacturers. Moves toward this goal include the start of full-scale
production of diamond-coated tools in North America in December 2011.

number of Jet Aircraft and projected Demand by Aircraft Size


            Regional jets       Narrow-body jets         Wide-body jets

                                           22,595
                                   18,451 18,451




                                  10,958
                                                                     8,981
                    6,291                            7,885           7,885         Total aircraft in operation
             3,455 4,832                                                           End of 2010: 17,706
                                                             3,293
                                           4,144                                   End of 2030: 37,867
                    1,459                            1,096           1,096         New demand 2011–2030:
     Year     ’10    ’30           ’10      ’30               ’10     ’30                                31,168
No. seats        20-99               100-229                 230-400 over

  Existing aircraft         New demand
Based on forecasts by Japan Aircraft Development Corporation (JADC)



                                                                                            Annual Report 2011    15
     SOCiAl COntRiButiOn AnD enviROnMentAl pROteCtiOn




     following the establishment of a three-point declaration in 1996,
     in which the Company set out to become a “Global presence,” an “environment-friendly Company” and a
     “Company enjoying Sound Growth,” OSG has actively engaged in environmental protection activities.



     Regrinding and Recoating
     Used Tools Restored to Same Sharpness as New Products           the rare metals used in the manufacture of tools. With
     Tool reconditioning services provided by the OSG                regrinding facilities in 12 overseas countries, the OSG
     Group restore used tools to the same sharpness as new           Group can respond to customer needs worldwide.
     products. Because even worn cutting tools and rolling dies       Before                                             After
     can be restored to new condition, reconditioning is more
     economical for customers than the purchase of new tools.
     Reconditioning also helps to reduce waste and ensure
     effective utilization of limited natural resources, including




     Dry and Semi-dry Machining
                                                                     Carbide drill suitable for MQl
     Developing Environment-Friendly Products
     The OSG Group is developing cutting tools for use in
     oil-free dry machining and semi-dry, or minimal quantity                                                  Oil and air
     lubrication (MQL), machining. Tools developed by OSG
     for use in dry machining provide high standards of
     precision and performance. OSG also develops extra-
                                                                                                                                             Mist
     long non-step drills and high-speed taps with lubricant
     mist spray holes for use in semi-dry (MQL) machining.



     promotion of Carbide tool Recycling
     Effective Utilization of Valuable Resources                     Recycling end-of-life products
     OSG is contributing to the creation of a recycling-oriented
                                                                                                             NH Techno Co., Ltd.
     society by recovering valuable resources through group-                                                   (Product recycling)
                                                                                       End-of-life carbide tools                 End-of-life carbide tools
     wide efforts to promote the reuse of valuable resources                           Sludge

     by means of carbide tool recycling. The raw materials for
                                                                                                                           Sludge
     carbide tools include rare resources, such as tungsten
                                                                       Rare metal     Refineries and                                           Customers
     and cobalt. OSG is working with product recovery                   Tungsten      manufacturers                                         (Carbide tool users)

     company NH Techno Co., Ltd. and carbide alloy material
     manufacturer Nihon Hardmetal Co., Ltd. to recover used              Materials                     Nihon Hard Metal    OSG
                                                                         Products                          Co., Ltd.    (Carbide tool
     tools so that the valuable materials they contain can be            Collection                     (Carbide compound manufacturer)
                                                                                                       material manufacturer)
     recycled and effectively reused.




16   OSG Corporation
FInAnCIAl seCtIon




Co nte nts

18 Five-year summary
19 Corporate Governance
20 Business Risks and other Risks
21 Management’s Discussion and Analysis
24 Consolidated Balance sheets
26 Consolidated statements of Income
27 Consolidated statements of Comprehensive Income
28 Consolidated statements of Changes in equity
29 Consolidated statements of Cash Flows
30 notes to Consolidated Financial statements
50 Independent Auditors’ Report


                                                     Annual Report 2011   17
     FIve-yeAR suMMARy




                                                                                                      Thousands of
                                                             Millions of yen
                                                                                                       U.S. dollars

     For the year                        2007       2008        2009             2010      2011          2011
     Net sales                         ¥ 94,164   ¥ 97,024   ¥ 53,326          ¥ 69,513   ¥ 80,959   $ 1,037,936
      Domestic                           52,448     52,549     26,745            35,701     40,696       521,744
      Overseas                           41,716     44,475     26,581            33,812     40,263       516,192
     Cost of sales                       58,160     60,450     39,203            44,605     48,439       621,013
     Selling, general and
                                         20,647     22,158       16,858          17,383     20,215       259,167
      administrative expenses
     Operating income (loss)             15,357     14,416        (2,735)         7,525     12,305       157,756
     Net income (loss)                    8,014      7,376        (3,770)         3,773      5,905        75,705

     At year-end
     Total assets                       127,044    122,384     113,382          105,636    104,374    1,338,128
     Total equity                        71,824     70,454      61,735           63,163     65,348      837,795

                                                                  Yen                                  U.S. dollars
     Per share
     Equity                              667.01     666.71       582.19          601.44     625.14             8.01
     Net income (loss)                    82.42      76.53       (39.22)          39.34      62.18             0.80
     Cash dividends                       26.00      24.00         3.00           12.00      18.00             0.23

                                                                                                      Thousands of
                                                             Millions of yen
     eBItDA                                                                                            U.S. dollars

      EBITDA                             22,800     21,551         3,114         12,833     17,962       230,282
      EBITDA margin (%)                  24.2%      22.2%          5.8%          18.5%       22.2%

     Major operating Ratio
     Equity ratio (%)                    50.6%      52.5%         49.3%          54.1%      56.9%
     Return on equity (%)                12.9%      11.5%         (6.3%)          6.7%      10.1%

     sales by Products
     Cutting tools:
      Taps                               28,384     30,431     16,934            23,159     28,906       370,590
      End mills                          24,608     24,094     12,917            16,199     17,838       228,692
      Drills and other cutting tools     19,577     21,697     11,771            16,266     18,285       234,423
        Total                            72,569     76,222     41,622            55,624     65,029       833,705
      Rolling dies                        8,412      8,025      4,669             6,664      7,067        90,603
      Gauges                              1,580      1,476        877             1,085      1,137        14,577
      Other products                     11,603     11,301      6,158             6,140      7,726        99,051
     Total                             ¥ 94,164   ¥ 97,024   ¥ 53,326          ¥ 69,513   ¥ 80,959   $ 1,037,936




18   osG Corporation
CoRPoRAte GoveRnAnCe




Basic Philosophy                                                    capacity to supervise operational performance. The resulting
Our fundamental management policy calls for fair and                structure has also improved management efficiency and
transparent business activities in compliance with regulatory       given us the capacity to make management decisions that are
requirements and guided by a social conscience. We believe          both appropriate and strategic.
that this approach to business contributes to sustainable               Management supervision is provided by four corporate
corporate growth and the enhancement of corporate value.            auditors, who audit the performance of directors’ duties and
    Good corporate governance is essential to the                   business operations, as well as the financial situation. Two of
achievement of this goal, and we regard the continuing              the four auditors are appointed from outside of the Company.
improvement of governance as a vital management priority.           Both have submitted notifications as independent officers
Related policies include the establishment of efficient and         under the listing rules. The presence of these outside auditors
transparent management structures, and the development              creates an environment in which there is effective
of systems to ensure the prompt and fair disclosure of              management supervision from outside of the Company. On
accurate information.                                               this basis, we believe that our corporate governance structure
    One of the tools that we use to strengthen our corporate        is capable of verifying and ensuring appropriate and
governance is the OSG Philosophy, a specific code of conduct        transparent management.
designed to raise our corporate ethical standards. We improve
compliance awareness and contribute to society in general by        3. Internal Control systems
disseminating the OSG Philosophy to all directors, auditors,        To strengthen OSG’s internal control systems, in June 2006
executive officers and employees of OSG Group companies,            we established a Management Audit Section that reports
including OSG Corporation itself.                                   directly to the President. We have also taken steps to ensure
                                                                    compliance with laws, regulations and the Articles of
Development of Corporate Governance and                             Incorporation by developing internal regulations, including
Internal Control systems                                            rules on corporate ethics and risk management under the
1. Corporate Governance structure                                   Basic Policy on Internal Control Systems, which was adopted
OSG is structured as a company with auditors. We have nine          by the Board of Directors in May 2006. Through these efforts,
directors and four corporate auditors, including two appointed      we maintain internal control systems capable of earning and
from outside of the Company. The Board of Directors normally        retaining the confidence of our stakeholders.
convenes once a month, but special meetings may be held if
required. Directors deliberate on important matters and make        4. Risk Management systems
management decisions. They also supervise the performance           We strive to maintain high standards of management
of business operations. We have set the term of office for          transparency and fairness through timely disclosure. We have
directors at one year to maintain the vitality of the Board.        also established risk management regulations as a framework
    We have introduced an executive officer system to clarify       for our efforts to maintain financial soundness and good
operational executive functions and responsibilities, ensure        business ethics. To ensure effective and efficient risk
an appropriate response to changing business conditions,            management under these regulations, we have established a
and improve speed and flexibility in the performance of             Risk and Compliance Management Committee, which
business operations.                                                formulates basic risk management policies and systems,
    Monthly meetings of the Management Committee, which             assesses the significance and urgency of risks, and considers,
consists of directors, executive officers and heads of divisions,   adopts and implements timely countermeasures.
are forums for lively discussion. The meetings are used to
disseminate management policies and business plans                  Internal Audits, Audits by Corporate Auditors,
adopted by the Board of Directors, and to receive reports           Independent Audits
about business operations from executive officers and heads         1. Internal Audits
of divisions.                                                       The mission of the two-member Management Audit Section
                                                                    is to verify that the business operations of the OSG Group
2. Reasons for Adopting this structure                              are performed in an appropriate manner. It regularly checks
By establishing these systems, we have enhanced the                 compliance with management policies, internal regulations
decision-making functions of the Board of Directors and its         and other requirements. The Management Audit Section


                                                                                                               Annual Report 2011     19
     also works with the Corporate Auditors and independent               The task of the two outside auditors is to strengthen
     auditors to improve internal control functions by ensuring       management supervision and ensure transparent and
     the soundness of business activities and the reliability of      appropriate management. They also enhance management
     financial reports.                                               supervision by sharing information with the standing auditors
                                                                      and independent auditors.
     2. Audits by Corporate Auditors
     The corporate auditors attend important meetings,                3. Independent Audits
     including meetings of the Board of Directors, to audit           We have an audit agreement with Deloitte Touche Tohmatsu,
     decisions and monitor the performance of directors. They         which provides independent audit services. In accordance
     formulate audit policies and plans based on standards            with the audit plan, the independent auditors audit the
     established by the Board of Corporate Auditors and audit         accounts of the parent company and subsidiaries and discuss
     the Company’s operational and financial situation. When          their findings with management. Reports are regularly
     necessary, the corporate auditors also obtain business           submitted to the corporate auditors.
     reports from subsidiaries.




     BusIness RIsks AnD otheR RIsks


     Demand Risks Arising from the economic                           increases in raw material prices and adjustments to selling
     situation in the Market                                          prices, and because it is not always possible to fully pass on
     The products of the OSG Group are used in a wide range of        increases in raw material prices.
     industries, and sold in Japan, other Asian countries, Europe
     and the Americas. The Group’s business performance and           Risks Relating to overseas Business expansion
     financial position could therefore be affected by reduced        Major users in automotive industries and other sectors are
     demand in the relevant industries, and by economic               relocating operations overseas. The OSG Group is responding
     recessions in Japan and other parts of the world.                by developing business operations in the Americas, Europe,
                                                                      Asia and elsewhere, and by establishing production and sales
     Risks Relating to exchange Rate Fluctuations                     systems in optimal locations close to its markets. The
     The OSG Group uses forward exchange contracts to hedge           business performance and financial position of the OSG
     against the risk of exchange rate fluctuations. However, it is   Group could be affected if its operations are impeded as a
     possible that the Group’s business performance and financial     result of changes to legal and tax systems or shifts in social
     position could be affected by exchange rate fluctuations.        and political conditions in other countries.


     Risks Relating to Changes in Raw Material Prices                 Risks Relating to Price Fluctuation of Marketable securities
     The main products of the OSG Group are cutting tools, made       The OSG Group owns marketable securities, such as stock.
     primarily from carbide alloys, high-speed steel and die steel.   The business performance and fiscal position of the OSG
     The raw materials used include rare metals, such as cobalt,      Group could be affected if the price of these securities falls.
     vanadium, molybdenum and tungsten. Rare metals must be
     obtained from a limited range of sources and suppliers, and      Risks Relating to earthquakes and other natural Disasters
     market prices can fluctuate dramatically. Such fluctuations      The head office and production and R&D facilities of the OSG
     may affect the procurement costs of the OSG Group.               Group are concentrated in the Higashi-Mikawa district of
         We endeavor to reflect raw material price increases in       Aichi Prefecture. The business performance and fiscal
     our product prices. However, this could affect the Group’s       position of the OSG Group could be affected if this area is
     business performance, since there may be a time lag between      struck by a natural disaster, such as a major earthquake.



20   osG Corporation
MAnAGeMent’s DIsCussIon AnD AnAlysIs




overview                                                                       Selling, general and administrative expenses increased
net sales                                                                   by 16.3% to ¥20,215 million because of an increase in
The global economy expanded in fiscal 2011 (December                        depreciation, higher labor costs resulting from increased
1, 2010 to November 30, 2011) due largely to increasing                     sales, and other factors. However, OSG maintained cost-
domestic demand in emerging nations such as China and                       cutting efforts at the development, production and sales
India. However, the weak economic trend continued in Europe                 stages and achieved reductions in manufacturing cost ratios
and North America. In Japan, the March 2011 earthquake                      for almost all product categories.
and tsunami caused a rapid decline in economic performance,                    These factors caused operating income to increase
but there were signs of recovery as the reconstruction process              by 63.5% to ¥12,305 million. Of particular significance
moved forward, and trends remained firm.                                    was an improvement in profitability resulting from efforts
       While the outlook for the cutting tool industry was still            to increase production of taps, which is one of our core
clouded by uncertainty caused by the financial crisis, trends               product categories.
remained generally firm thanks to a production recovery in
Japan’s automotive sector and the underpinning effect of                    Regional overview
demand in Asian growth markets, as well as in Europe and                    Japan
the Americas.                                                               A recovery trend in the market was sustained not only by
       Demand in Asian markets, which had previously been                   rising production by automotive manufacturers, which are
buoyant, showed signs of a slowdown starting in the fourth                  major users of our products, but also by strong overseas
quarter but still remained high. Within Japan, demand                       demand. Demand growth in Asia was particularly significant,
continued to recover in summer and beyond. These factors                    and while some signs of stagnation lingered in the fourth
offset the impact of the high yen, allowing the OSG Group to                quarter and beyond, overall demand remained high. A
achieve net sales that exceeded our initial target.                         recovery in demand for core products, taps and carbide
       As a result, consolidated net sales in the period under              drills, brought year-on-year increases in both net sales and
review were 16.5% higher at ¥80,959 million. Despite the                    operating income.
impact of rapid exchange rate fluctuations, overseas sales                     Net sales increased by 17.7% year on year to ¥55,527
increased by 19.1% to ¥40,263 million thanks to growth in                   million. Operating income was 121.4% higher at ¥6,326 million.
Asian markets. The overseas sales ratio increased by 1.1
percentage points to 49.7%.                                                 the Americas
                                                                            North America is a key market for OSG. Increased production
Costs and Profits                                                           by users of our products, including automotive manufacturers,
Cost of sales increased by 8.6% year on year to ¥48,439                     brought a market recovery that lifted sales to a new record on
million, and the cost of sales ratio was 4.4 percentage points              a local currency basis. There was a recovery in demand not
lower at 59.8% because of the resulting improvements in                     only for taps, which are a flagship product category, but also
factory operating rates and other factors.                                  for carbide drills, carbide end mills and other items. Both net




net sales                                Cost of sales                        operating Income (loss)                       net Income (loss)
(Billions of yen)                        (Billions of yen)                    (Billions of yen/%)                           (Billions of yen/%)

94.2     97.0                            58.2   60.5                           15.4                                          8.0
                                                                                        14.4                                         7.4
                              81.0                                                                                  12.3                                       5.9
                                                                     48.4
                       69.5                                   44.6
                                                       39.2                     16.3      14.9                       15.2
                                                                                                         7.5                                         3.8
                53.3
                                                                                                                               8.5     7.6                      7.3
                                                                                                             10.8                                        5.4
                                                                                                 (2.7)                                       (3.8)

                                                                                                                                                 (7.1)
                                                                                                     (5.1)
’07     ’08     ’09    ’10    ’11        ’07    ’08    ’09    ’10    ’11      ’07       ’08 ’09 ’10 ’11                     ’07      ’08 ’09 ’10               ’11
                                                                                      Operating income ratio                       Net income ratio




                                                                                                                                   Annual Report 2011                 21
      sales and operating income were higher year on year.                                                 to ¥1,286 million. This increase resulted mainly from a
             Net sales reached ¥12,884 million, an increase of 12.5%,                                      ¥319 million write-down of investments in unconsolidated
      while operating income rose by 33.7% to ¥1,373 million.                                              subsidiaries and associated companies due to the liquidation
                                                                                                           of a non-consolidated subsidiary in Manaus, Brazil as part of
      europe                                                                                               an efficiency review of our operations in South America.
      While the European economies generally showed signs                                                      On this basis, net income before income taxes and
      of recession due to the currency crisis, export industries                                           minority interests was 76.4% above the previous year’s level
      performed strongly thanks to falling exchange rates. This                                            at ¥11,019 million. Minority interests, which consist mainly of
      factor helped us to achieve record sales on a local currency                                         the interests of minority shareholders in subsidiaries in Japan
      basis in a number of markets, including Germany and the                                              and Asia, increased by ¥287 million year on year to ¥874
      United Kingdom. A recovery in demand for taps, carbide end                                           million. Net income was 56.5% higher at ¥5,905 million.
      mills and carbide drills resulted in year-on-year increases in
      both net sales and operating income.                                                                 Financial Position
             Net sales were 18.3% higher at ¥6,564 million, and                                            Assets
      operating income increased by 62.1% to ¥850 million.                                                 Total assets as of November 30, 2011 amounted to ¥104,374
                                                                                                           million, a reduction of ¥1,262 million from the position at
      Asia                                                                                                 the previous fiscal year-end. Despite increases in notes
      Asia is a priority region for the OSG Group, and we worked                                           and accounts receivable, inventories, deferred tax assets
      hard to strengthen our capacity to meet the needs of                                                 and other items, current assets were ¥1,450 million lower
      customers in Asian markets. Market trends remained buoyant                                           at ¥50,266 million, mainly because of reductions in cash
      in South Korea and Southeast Asia because of expanding                                               and cash equivalents and time deposits. Property, plant
      production in various industries, including automotive                                               and equipment was ¥1,914 million above the previous
      manufacturing and IT. Growth trends in some segments of the                                          year’s figure at ¥42,160 million because of increases in
      Chinese and Taiwanese markets showed signs of deceleration                                           land, machinery and equipment, and other assets. Total
      from the fourth quarter onwards because of the impact of the                                         investments and other assets was ¥1,726 million lower at
      recession in Europe and North America. However, demand                                               ¥11,948 million because of decreases in deferred tax assets
      remained high on a yearly basis. Buoyant demand, especially                                          and other intangible assets.
      in the key category of taps, allowed us to set new records for
      both net sales and operating income.                                                                 liabilities and equity
             Net sales rose by 24.0% year on year to ¥21,327 million,                                      Total liabilities as of November 30, 2011 amounted to
      and operating income by 40.4% to ¥4,332 million.                                                     ¥39,026 million, a reduction of ¥3,447 million from the
                                                                                                           position a year earlier. Despite increases in notes and
      net Income                                                                                           accounts payable, short-term borrowings and other items,
      In fiscal 2011, other expenses increased by ¥8 million                                               current liabilities were ¥174 million lower at ¥22,801 million,



      sales and operating                          sales and operating                                       sales and operating                                  sales and operating
      Income (loss) in Japan                       Income in the Americas                                    Income in europe                                     Income in Asia
      (Billions of yen/%)                          (Billions of yen/%)                                       (Billions of yen/%)                                  (Billions of yen/%)

      65.5        64.7                              16.8        17.1                                                       9.2                                                                                 21.3
                                         55.5                                                                                                                                  19.1
                                                                                                               7.5                                                  17.8                           17.2
           13.2                   47.2                                                         12.9
                                            11.4                                   11.5                                                                  6.6                                                     20.3
                    10.2 33.4                                                                                                                 5.5          12.9         16.9     18.2
                                                         13.2               9.6                                    14.8     15.9 5.4                                                    12.1
                                                                  10.2                                                                                                                                  17.9
                                     6.1                                                            10.7
     8.6                                                                                9.0
              6.6                 2.9 6.3                                                                                                         9.5
                                                                            3.0                                       1.5                                                  3.5              9.4            4.3
                                                   2.5      2.4                                              1.1                      1.7                         3.0                             3.1
                    (4.5)                                                         1.0         1.4                                                   0.9
                              (13.6)                                  0.3                                                                   0.5                                       1.1
                                                                                                                                0.1
     ’07          ’08       ’09   ’10    ’11       ’07          ’08      ’09      ’10         ’11            ’07          ’08     ’09       ’10         ’11       ’07          ’08      ’09       ’10          ’11
             Operating income (loss)                      Operating income                                           Operating income                                     Operating income
             Sales                                        Sales                                                      Sales                                                Sales
             Operating income ratio                       Operating income ratio                                     Operating income ratio                               Operating income ratio


22    osG Corporation
mainly because of a reduction in current portion of long-term               net Cash used in Financing Activities
debt. At ¥16,225 million, long-term liabilities were ¥3,273                 Net cash used in financing activities was ¥9,707 million lower
million below the level as of November 30, 2010 because of                  at ¥5,855 million. The main factors were a ¥1,503 million
reductions in long-term debt and other items.                               net increase in short-term debt, a ¥5,894 million outflow for
       Despite reductions in foreign currency translation                   the repayment of long-term debt, ¥1,334 million for dividend
adjustments and other items, total equity as of November 30,                payments, and ¥479 million for payment of dividends to
2011 were ¥2,185 million higher year on year at ¥65,348 million             minority shareholders.
because of increases in retained earnings and other items.
As a result, the equity ratio rose to 56.9%, an increase of 2.8             Basic Policy on Income Distribution, Dividends for the
percentage points over the previous year-end figures of 54.1%.              Current and next Fiscal years
                                                                            We regard the distribution of income to shareholders as
Cash Flows                                                                  a central management priority, and we aim to maintain a
Consolidated cash and cash equivalents amounted to                          consolidated payout ratio of 30% or higher. Factors taken into
¥10,413 million as of November 30, 2011, a reduction of                     account when setting dividends include cash flows and our
¥3,112 million from the figure at the previous fiscal year-end.             financial position. Priority is given to the investment of free
                                                                            cash flows in ways that will further enhance our corporate
net Cash Provided by operating Activities                                   value, including the expansion of our existing core businesses
Net cash provided by operating activities was ¥2,752 million                and the development of our global business activities. We
below the previous year’s level at ¥11,344 million. The                     also make flexible use of share buyback schemes as a way
main factors were income before income taxes and minority                   of returning profits to shareholders. Our aim is to maximize
interests of ¥11,019 million, depreciation of ¥5,657 million,               investment efficiency from a long-term perspective. Retained
a ¥1,075 million increase in accounts payable, a ¥1,954                     earnings are used in new product development, the
million increase in trade accounts receivable, a ¥2,610                     strengthening and expansion of production and marketing in
million increase in inventories, and income tax payments of                 Japan and overseas, and the reinforcement of our financial
¥2,589 million.                                                             position and management infrastructure from a long-term
                                                                            perspective.
net Cash used in Investing Activities                                          We have set the final dividend for fiscal 2011 at ¥12 per
Net cash used in investing activities increased by ¥2,673                   share. Together with the interim dividend of ¥6, this brings
million year on year to ¥8,196 million. The main items were                 the total dividend for the year to ¥18 per share, an increase of
a ¥2,927 million inflow from time deposit redemptions, a                    ¥6 compared with the previous year’s figure. In the next fiscal
¥2,404 million outflow for new time deposits, and an ¥8,225                 year, we plan to pay a dividend of ¥23 per share, consisting
million outflow for the acquisition of tangible fixed assets.               of an interim dividend of ¥10 and a final dividend of ¥13.




total shareholders’ equity               total equity                         equity Ratio                           eBItDA
(Billions of yen)                        (Billions of yen)                    (%)                                    (Billions of yen/%)

64.3     64.3                            71.8   70.5                                                       56.9       22.8
                              59.4                                   65.3                                                       21.6
                55.9   57.1                            61.7   63.2
                                                                                                    54.1            7.4                                         18.0
                                                                                      52.5                                    7.1
                                                                                                                                                                      5.7
                                                                               50.6          49.3                 24.2                                 12.8
                                                                                                                                                                   22.2
                                                                                                                             22.2              18.5       5.3
                                                                                                                   15.4
                                                                                                                             14.4            3.1                      12.3
                                                                                                                                       5.8                7.5
                                                                                                                                               5.8
                                                                                                                                               (2.7)

’07     ’08     ’09    ’10    ’11        ’07    ’08    ’09    ’10    ’11      ’07     ’08    ’09    ’10    ’11        ’07      ’08       ’09       ’10          ’11
                                                                                                                             Depreciation
                                                                                                                             Operating income (loss)
                                                                                                                             EBITDA margin


                                                                                                                             Annual Report 2011                              23
     ConsolIDAteD BAlAnCe sheets

     OSG Corporation and Consolidated Subsidiaries
     November 30, 2011 and 2010


                                                                                                  Thousands of
                                                                  Millions of yen              U.S. dollars (Note 1)
                                                           2011                     2010             2011
     Assets
     Current Assets:
        Cash and cash equivalents (Note 12)              ¥ 10,413             ¥ 13,525          $ 133,500
        Time deposits (Notes 6 and 12)                        655                     2,789              8,397
        Notes and accounts receivable (Note 12):
           Trade notes                                      3,169                     3,233            40,628
           Trade accounts                                  13,227                    12,127          169,577
           Other                                               448                      527               5,744
           Allowance for doubtful accounts                    (160)                    (170)             (2,051)
                                                           16,684                    15,717          213,898
        Inventories (Note 4)                               18,797                    16,972          240,987
        Deferred tax assets (Note 9)                        1,914                     1,105            24,538
        Prepaid expenses and other current assets           1,803                     1,608            23,116
           Total current assets                            50,266                    51,716          644,436


     Property, Plant and equipment (Note 6):
        Land                                               11,636                    10,909          149,179
        Buildings and structures                           32,376                    32,194          415,077
        Machinery and equipment                            70,721                    69,261          906,679
        Tools, furniture and fixtures                       4,645                     4,885            59,551
        Construction in progress                            2,029                      993             26,013
        Other                                                  96                      223              1,232
          Total                                           121,503                   118,465        1,557,731
       Accumulated depreciation                            (79,343)                 (78,219)      (1,017,218)
           Net property, plant and equipment               42,160                    40,246          540,513


     Investments and other Assets:
        Investment securities (Notes 3 and 12)              3,238                     3,334            41,513
        Investments in unconsolidated subsidiaries and
                                                              393                      792               5,038
          associated companies
        Goodwill                                              461                      624               5,910
        Other intangible assets                             2,448                     3,009            31,385
        Deferred tax assets (Note 9)                        2,692                     4,556            34,513
        Other assets                                        2,716                     1,359            34,820
         Total investments and other assets                 11,948               13,674             153,179
     totAl                                               ¥ 104,374            ¥ 105,636         $ 1,338,128




24   osG Corporation
                                                                                                                Thousands of
                                                                            Millions of yen                  U.S. dollars (Note 1)
                                                                     2011                     2010                 2011
lIABIlItIes AnD eQuIty
Current liabilities:
   Short-term borrowings (Notes 5, 6 and 12)                     ¥    5,977             ¥      4,654          $      76,628
   Current portion of long-term debt (Notes 5, 6 and 12)              3,491                    5,831                 44,756
   Notes and accounts payable (Notes 6 and 12):
      Trade notes                                                       799                      669                 10,244
      Trade accounts                                                  3,587                    3,062                 45,987
      Other                                                             818                      918                 10,487
                                                                      5,204                    4,649                 66,718
   Income taxes payable (Note 12)                                     1,597                    1,359                 20,474
   Accrued expenses                                                   5,794                    5,515                 74,282
   Deferred tax liabilities (Note 9)                                      1                        1                      13
   Other current liabilities                                            737                      966                   9,449
      Total current liabilities                                      22,801                   22,975               292,320

long-term liabilities:
   Long-term debt (Notes 5, 6 and 12)                                14,585                   17,987               186,987
   Liability for employees’ retirement benefits (Note 7)                269                      228                   3,449
   Retirement allowances for directors and corporate auditors               52                       49                   667
   Deferred tax liabilities (Note 9)                                    281                      120                  3,603
   Other long-term liabilities                                        1,038                    1,114                 13,307
      Total long-term liabilities                                    16,225                   19,498               208,013

Contingent liabilities (Note 14)

equity (Notes 8 and 16):
   Common stock:
      Authorized —
         200,000 thousand shares at November 30, 2011 and 2010
      Issued —
         98,955 thousand shares at November 30, 2011 and 2010        10,404                   10,404               133,385
   Capital surplus                                                   14,198                   14,198               182,026
   Retained earnings                                                 50,082                   45,622               642,077
   Treasury stock—at cost
      3,988 thousand and 3,986 thousand shares at November 30,
                                                                      (4,830)                 (4,828)                (61,923)
      2011 and 2010, respectively
   Accumulated other comprehensive income
      Unrealized gain on available-for-sale securities                  715                      577                   9,167
      Deferred loss on derivatives under hedge accounting                 (8)                     (1)                  (103)
      Foreign currency translation adjustments                       (11,193)                 (8,854)              (143,501)
      Total                                                          59,368                   57,118               761,128
   Minority interests                                                 5,980                    6,045                 76,667
     Total equity                                                   65,348                 63,163                 837,795
totAl                                                            ¥ 104,374              ¥ 105,636             $ 1,338,128
See notes to consolidated financial statements.




                                                                                                          Annual Report 2011         25
     ConsolIDAteD stAteMents oF InCoMe

     OSG Corporation and Consolidated Subsidiaries
     Years Ended November 30, 2011 and 2010


                                                                                                                 Thousands of
                                                                               Millions of yen                U.S. dollars (Note 1)
                                                                        2011                     2010                2011
     net sales:                                                        ¥ 80,959             ¥ 69,513           $ 1,037,936
     Cost of sales:                                                     48,439                   44,605              621,013
        Gross profit                                                    32,520                   24,908              416,923
     selling, General and Administrative expenses (Note 10)             20,215                   17,383              259,167
        Operating income                                                12,305                    7,525              157,756
     other Income (expenses):
        Interest and dividend income                                       226                      221                  2,897
        Interest expense                                                  (428)                    (516)                (5,487)
        Foreign exchange loss                                             (443)                    (250)                (5,679)
        Sales discounts                                                   (548)                    (469)                (7,026)
        Loss on sales of property, plant and equipment—net                  (14)                        (5)                (179)
        Loss on disposals of property, plant and equipment                  (58)                   (115)                   (744)
        Loss on impairment of long-lived assets (Note 2(i))                  —                       (21)                     —
        Gain on sales of securities—net                                      —                          2                     —
        Write-down of securities                                             —                          (2)                   —
        Equity in earnings of unconsolidated subsidiaries                      5                        5                     64
        Grants received                                                      —                       29                       —
        Loss on cancellation of system development agreement                 —                     (268)                      —
        Write-down of investments in unconsolidated subsidiaries and
                                                                           (319)                      —                 (4,090)
         associated companies
        Other—net                                                          293                      111                  3,757
           Other expenses—net                                            (1,286)                  (1,278)             (16,487)
               Income before income taxes and minority interests        11,019                    6,247              141,269
     Income taxes (Note 9):
        Current                                                          2,793                    2,064                35,808
        Deferred                                                         1,447                     (177)               18,551
               Total income taxes                                        4,240                    1,887                54,359
               Net income before minority interests                      6,779                    4,360                86,910
     Minority Interests in net Income                                      874                      587                11,205
               Net income                                              ¥ 5,905              ¥ 3,773            $       75,705

                                                                                    Yen                            U.S. dollars

     Per share of Common stock (Notes 2(u) and 16):
        Net income                                                      ¥ 62.18                  ¥ 39.34               $ 0.80
        Cash dividends applicable to the year                            18.00                    12.00                    0.23
     See notes to consolidated financial statements.




26   osG Corporation
ConsolIDAteD stAteMents oF CoMPRehensIve InCoMe

OSG Corporation and Consolidated Subsidiaries
Year Ended November 30, 2011


                                                                                 Thousands of
                                                         Millions of yen      U.S. dollars (Note 1)
                                                            2011                    2011
net Income Before Minority Interests                      ¥ 6,779                $ 86,910


other Comprehensive loss (Note 15):
   Unrealized gain on available-for-sale securities             136                   1,744
   Deferred loss on derivatives under hedge accounting             (8)                  (103)
   Foreign currency translation adjustments                 (2,814)                (36,077)
   Share of other comprehensive income in associates                1                      13
   Total other comprehensive loss                           (2,685)                (34,423)


Comprehensive Income (Note 15)                            ¥ 4,094                $ 52,487


total Comprehensive Income Attributable to (Note 15):
   Owners of the parent                                   ¥ 3,697                $ 47,397
   Minority interests                                           397                   5,090
See notes to consolidated financial statements.




                                                                           Annual Report 2011         27
     ConsolIDAteD stAteMents oF ChAnGes In eQuIty

     OSG Corporation and Consolidated Subsidiaries
     Years Ended November 30, 2011 and 2010


                                                                                    Thousands                                  Millions of yen

                                                                                 Outstanding
                                                                                  Number of            Common            Capital           Retained           Treasury
                                                                                  Shares of             Stock            Surplus           Earnings            Stock
                                                                                Common Stock

     Balance, December 1, 2009                                                       96,071          ¥ 10,404          ¥ 14,198           ¥ 42,471            ¥ (3,871)
        Net income                                                                       —                 —                 —                3,773                 —
        Cash dividends, ¥7 per share                                                     —                 —                 —                 (672)                —
        Net change in unrealized gain on available-for-sale securities                   —                 —                 —                   —                  —
        Net change in foreign currency translation adjustments                           —                 —                 —                   —                  —
        Purchase of treasury stock                                                   (1,102)               —                 —                   —                (957)
        Other                                                                            —                 —                 —                   50                 —
        Net change in the year                                                           —                 —                 —                   —                  —
     Balance, november 30, 2010                                                      94,969            10,404            14,198             45,622              (4,828)
        Net income                                                                       —                 —                 —                5,905                 —
        Cash dividends, ¥14 per share                                                    —                 —                 —               (1,330)                —
        Net change in unrealized gain on available-for-sale securities                   —                 —                 —                   —                  —
        Net change in foreign currency translation adjustments                           —                 —                 —                   —                  —
        Purchase of treasury stock                                                        (2)              —                 —                   —                  (2)
        Other                                                                            —                 —                 —                 (115)                —
        Net change in the year                                                           —                 —                 —                   —                  —
     Balance, november 30, 2011                                                      94,967          ¥ 10,404          ¥ 14,198           ¥ 50,082            ¥ (4,830)


                                                                                                                               Millions of yen
                                                                                     Accumulated Other Comprehensive Income
                                                                                  Unrealized        Deferred Loss        Foreign                              Minority            Total
                                                                                    Gain on         on Derivatives      Currency             Total            Interests          Equity
                                                                               Available-for-sale   under Hedge        Translation
                                                                                  Securities         Accounting        Adjustments

     Balance, December 1, 2009                                                       ¥ 103                —           ¥ (7,374)           ¥ 55,931            ¥ 5,804          ¥ 61,735
        Net income                                                                      —                 —                  —                3,773                 —              3,773
        Cash dividends, ¥7 per share                                                    —                 —                  —                 (672)                —               (672)
        Net change in unrealized gain on available-for-sale securities                 474                —                  —                  474                 —                474
        Net change in foreign currency translation adjustments                          —                 —              (1,480)            (1,480)                 —            (1,480)
        Purchase of treasury stock                                                      —                 —                  —                 (957)                —               (957)
        Other                                                                           —               ¥ (1)                —                   49                 —                  49
        Net change in the year                                                          —                 —                  —                   —                241                241
     Balance, november 30, 2010                                                        577                (1)            (8,854)            57,118              6,045            63,163
        Net income                                                                      —                 —                  —                5,905                 —              5,905
        Cash dividends, ¥14 per share                                                   —                 —                  —               (1,330)                —             (1,330)
        Net change in unrealized gain on available-for-sale securities                 138                —                  —                  138                 —                138
        Net change in foreign currency translation adjustments                          —                 —              (2,339)             (2,339)                —             (2,339)
        Purchase of treasury stock                                                      —                 —                  —                    (2)               —                  (2)
        Other                                                                           —                 (7)                —                 (122)                —               (122)
        Net change in the year                                                          —                 —                  —                   —                 (65)               (65)
     Balance, november 30, 2011                                                      ¥ 715              ¥ (8)         ¥ (11,193)          ¥ 59,368            ¥ 5,980          ¥ 65,348




                                                                                                  Thousands of U.S. dollars (Note 1)
                                                                                                    Accumulated Other Comprehensive Income
                                                                                                                      Deferred
                                                Common       Capital     Retained      Treasury       Unrealized                  Foreign                          Minority        Total
                                                                                                                      Loss on                         Total
                                                 Stock       Surplus     Earnings       Stock          Gain on                   Currency                          Interests      Equity
                                                                                                                     Derivatives
                                                                                                     Available-for- under Hedge Translation
                                                                                                    sale Securities Accounting Adjustments

     Balance, november 30, 2010               $ 133,385 $ 182,026 $ 584,897 $ (61,897)                 $ 7,397        $ (13) $ (113,513) $ 732,282 $ 77,500 $ 809,782
        Net income                                   —         —     75,705        —                        —            —           —      75,705       —     75,705
        Cash dividends, $0.18 per share              —         —    (17,051)       —                        —            —           —     (17,051)      —    (17,051)
        Net change in unrealized gain on              —            —           —                —        1,770             —                —           1,770             —         1,770
          available-for-sale securities
        Net change in foreign currency                —            —           —                —            —             —           (29,988)       (29,988)            —       (29,988)
          translation adjustments
        Purchase of treasury stock                   —         —          —       (26)                      —             —           —          (26)     —         (26)
        Other                                        —         —      (1,474)      —                        —         $ (90)          —       (1,564)     —      (1,564)
        Net change in the year                       —         —          —        —                        —             —           —           —     (833)      (833)
     Balance, november 30, 2011               $ 133,385 $ 182,026 $ 642,077 $ (61,923)                 $ 9,167        $ (103) $ (143,501) $ 761,128 $ 76,667 $ 837,795




28   osG Corporation
ConsolIDAteD stAteMents oF CAsh FloWs

OSG Corporation and Consolidated Subsidiaries
Years Ended November 30, 2011 and 2010


                                                                                                                            Thousands of
                                                                                      Millions of yen                    U.S. dollars (Note 1)
                                                                               2011                      2010                  2011
operating Activities:
   Income before income taxes and minority interests                           ¥ 11,019                 ¥ 6,247              $ 141,269
   Adjustments for:
      Income taxes—paid                                                          (2,589)                  (1,191)               (33,192)
      Income taxes—refund                                                            46                      466                    590
      Depreciation and amortization                                               5,657                    5,308                 72,526
      Amortization of goodwill                                                      141                      129                  1,808
      Loss on sales of property, plant and equipment—net                             14                        5                    179
      Loss on disposals of property, plant and equipment                             58                      115                    744
      Loss on impairment of long-lived assets                                        —                        21                      —
      Gain on sales of securities—net                                                —                        (2)                     —
      Write-down of securities                                                       —                         2                      —
      Equity in earnings of an associated company                                     (5)                     (5)                    (64)
      Loss on cancellation of system development agreement                           —                       268                      —
      Write-down of investments in unconsolidated subsidiaries and
                                                                                   319                          —                  4,090
        associated companies
      Changes in assets and liabilities:
         Increase in notes and accounts receivable                               (1,954)                  (4,521)               (25,051)
         (Increase) Decrease in inventories                                      (2,610)                   3,092                (33,462)
         Increase in notes and accounts payable                                   1,075                    1,793                 13,782
         Increase in accrued expenses                                               364                    1,874                  4,667
         Increase (Decrease) in liability for employees’ retirement benefits         49                      (56)                   628
         Increase (Decrease) in retirement allowances for directors
                                                                                      3                         (4)                    38
           and corporate auditors
         Decrease (Increase) in interest and dividends receivable                    15                     (11)                    192
         (Decrease) Increase in allowance for doubtful accounts                       (5)                    28                      (64)
         Decrease in interest payable                                               (10)                    (38)                   (128)
      Other—net                                                                   (243)                     576                  (3,116)
         Net cash provided by operating activities                              11,344                   14,096                145,436
Investing Activities:
   Payments for time deposits                                                    (2,404)                  (3,016)              (30,821)
   Proceeds from refunds of time deposits                                         2,927                    2,288                37,526
   Purchases of investment securities                                                (62)                    (11)                  (795)
   Proceeds from sales of investment securities                                        0                      24                      0
   Acquisitions of property, plant and equipment                                 (8,225)                  (3,568)             (105,449)
   Acquisitions of intangible assets                                               (176)                  (1,123)                (2,256)
   Proceeds from sales of property, plant and equipment                             125                       78                  1,603
   Payments for purchases of subsidiaries’ stock                                   (310)                     (97)                (3,974)
   Investments in and advances to unconsolidated subsidiaries
                                                                                    (11)                        —                   (141)
     and associated companies
   Other—net                                                                        (60)                     (98)                 (770)
         Net cash used in investing activities                                   (8,196)                  (5,523)             (105,077)
Financing Activities:
   Increase (Decrease) in short-term borrowings—net                               1,503                  (11,660)                19,270
   Proceeds from issuance of long-term debt                                         351                    1,607                   4,500
   Repayments of long-term debt                                                  (5,894)                  (3,700)               (75,564)
   Dividends paid                                                                (1,334)                    (675)               (17,103)
   Dividends paid to minority shareholders                                         (479)                    (177)                 (6,141)
   Purchases of treasury stock                                                        (2)                   (957)                     (26)
         Net cash used in financing activities                                   (5,855)                 (15,562)               (75,064)
Foreign currency translation adjustments on cash and cash equivalents              (534)                    (378)                 (6,846)
net decrease in cash and cash equivalents                                        (3,241)                  (7,367)               (41,551)
Cash and cash equivalents of
                                                                                   129                          75                 1,654
  newly consolidated subsidiaries, beginning of year
Cash and cash equivalents, beginning of year                                     13,525                   20,817               173,397
Cash and cash equivalents, end of year                                         ¥ 10,413                 ¥ 13,525             $ 133,500
See notes to consolidated financial statements.


                                                                                                                      Annual Report 2011         29
     notes to ConsolIDAteD FInAnCIAl stAteMents

     OSG Corporation and Consolidated Subsidiaries
     Years Ended November 30, 2011 and 2010


     1. BAsIs oF PResentInG ConsolIDAteD FInAnCIAl stAteMents
     The accompanying consolidated financial statements have been prepared and maintained by OSG CORPORATION (the
     “Company”) and its domestic and foreign consolidated subsidiaries (together, the “Group”) in accordance with the provisions set
     forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with
     accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application
     and disclosure requirements of International Financial Reporting Standards.
          Under Japanese GAAP, a consolidated statement of comprehensive income is required from the fiscal year ended March 31,
     2011 and has been presented herein. Accordingly, accumulated other comprehensive income is presented in the consolidated
     balance sheet and the consolidated statement of changes in equity. Information with respect to other comprehensive income for
     the year ended November 30, 2010 is disclosed in Note 15. In addition, “net income before minority interests” is disclosed in the
     consolidated statement of income from the year ended November 30, 2011.
          In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the
     consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside
     Japan. In addition, certain reclassifications have been made in the 2010 financial statements to conform to the classifications
     used in 2011.
          The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is
     incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the
     convenience of readers outside Japan and have been made at the rate of ¥78 to $1, the approximate rate of exchange at
     November 30, 2011. Such translations should not be construed as representations that the Japanese yen amounts could be
     converted into U.S. dollars at that or any other rate.

     2. suMMARy oF sIGnIFICAnt ACCountInG PolICIes
     (a) Consolidation
     The consolidated financial statements as of November 30, 2011 include the accounts of the Company and its 48 significant (48 in
     2010) subsidiaries.
          Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise
     control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant
     influence are accounted for by the equity method.
          Investments in two (one in 2010) associated companies were accounted for by the equity method in 2011. Investments in the
     remaining 10 (9 in 2010) unconsolidated subsidiaries are stated at cost. If the equity method of accounting had been applied to
     the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
          The difference between the cost and the fair value of the net assets of the acquired subsidiaries at the date of the acquisition
     are accounted for as goodwill. Goodwill arising from domestic consolidated companies is amortized by the straight-line method
     over five years and that from foreign consolidated companies over ten years.
          All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit
     included in assets resulting from transactions within the Group is eliminated.
          The accounts of those subsidiaries that have fiscal periods differing from that of the parent company have been adjusted for
     significant transactions to properly reflect their financial positions at November 30 of each year and their results of operations for
     the years then ended.

     (b) unification of Accounting Policies Applied to Foreign subsidiaries for the Consolidated Financial statements
     In May 2006, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Practical Issues Task Force (PITF) No. 18,
     “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
     Statements”. PITF No. 18 prescribes: (1) that the accounting policies and procedures applied to a parent company and its
     subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of
     the consolidated financial statements, (2) financial statements prepared by foreign subsidiaries in accordance with either
     International Financial Reporting Standards or generally accepted accounting principles in the United States of America tentatively
     may be used for the consolidation process, (3) however, the following items should be adjusted in the consolidation process so
     that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2)
     scheduled amortization of actuarial gains or losses of pensions that has been directly recorded in equity; 3) expensing capitalized
     development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment
     properties and incorporation of cost model accounting; 5) recording the prior years’ effects of changes in accounting policies in the
     income statement where retrospective adjustments to financial statements have been incorporated; and 6) exclusion of minority
     interests from net income, if contained.




30   osG Corporation
(c) unification of Accounting Policies Applied to Foreign Associated Companies for the equity Method
In March 2008, the ASBJ issued ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments”.
The new standard requires adjustments to be made to conform the associate’s accounting policies for similar transactions and
events under similar circumstances to those of the parent company when the associate’s financial statements are used in applying
the equity method unless it is impracticable to determine adjustments. In addition, financial statements prepared by foreign
associated companies in accordance with either International Financial Reporting Standards or the generally accepted accounting
principles in the United States tentatively may be used in applying the equity method if the following items are adjusted so that net
income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled
amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized
development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment
properties and incorporation of the cost model accounting; 5) recording the prior years’ effects of changes in accounting policies in
the income statement where retrospective adjustments to the financial statements have been incorporated; and 6) exclusion of
minority interests from net income, if contained. This standard was applicable to equity method of accounting for fiscal years
beginning on or after April 1, 2010.
     The Company applied this accounting standard effective December 1, 2010.

(d) Business Combination
In October 2003, the Business Accounting Council (the “BAC”) issued a Statement of Opinion, “Accounting for Business
Combinations”, and in December 2005, the ASBJ issued ASBJ Statement No. 7, “Accounting Standard for Business Divestitures”
and ASBJ Guidance No. 10, “Guidance for Accounting Standard for Business Combinations and Business Divestitures”. The
accounting standard for business combinations allows companies to apply the pooling of interests method of accounting only when
certain specific criteria are met such that the business combination is essentially regarded as a uniting-of-interests. For business
combinations that do not meet the uniting-of-interests criteria, the business combination is considered to be an acquisition and the
purchase method of accounting is required. This standard also prescribes the accounting for combinations of entities under
common control and for joint ventures.
     In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21,
“Accounting Standard for Business Combinations.” Major accounting changes under the revised accounting standard are as
follows: (1) The revised standard requires accounting for business combinations only by the purchase method. As a result, the
pooling of interests method of accounting is no longer allowed. (2) The current accounting standard accounts for the research and
development costs to be charged to income as incurred. Under the revised standard, in-process research and development
(IPR&D) acquired in the business combination is capitalized as an intangible asset. (3) The previous accounting standard provided
for a bargain purchase gain (negative goodwill) to be systematically amortized over a period not exceeding 20 years. Under the
revised standard, the acquirer recognizes the bargain purchase gain in profit or loss immediately on the acquisition date after
reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after a review of
the procedures used in the purchase allocation. This standard was applicable to business combinations undertaken on or after
April 1, 2010 with early adoption permitted for fiscal years beginning on or after April 1, 2009.

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

(f) Inventories
The inventories of the Company and domestic consolidated subsidiaries are stated at the lower of cost, as determined principally
by the average method, or net selling value.
     The inventories of foreign consolidated subsidiaries are stated at the lower of cost, determined principally by the average
method or first-in first-out method, or net selling value.

(g) Marketable and Investment securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows:
  i ) trading securities, which are held for the purpose of earning capital gains in the near term are reported at fair value, and the
      related unrealized gains and losses are included in earnings;
 ii) held-to-maturity debt securities, which are expected to be held to maturity with the intent and ability to hold to maturity, are
      reported at amortized cost; and
iii) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with
      unrealized gains and losses, net of applicable taxes, reported as a separate component of equity.


                                                                                                                    Annual Report 2011      31
         Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other than
     temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.

     (h) Property, Plant and equipment
     Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and domestic
     consolidated subsidiaries is computed by the declining-balance method while the straight-line method is applied to buildings
     acquired after April 1, 1998. Foreign consolidated subsidiaries mainly utilize the straight-line method. The range of useful lives is
     principally 3 to 50 years for buildings and structures and principally 4 to 12 years for machinery and equipment.

     (i) long-lived Assets
     The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
     amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an
     asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and
     eventual disposition of the asset or asset group.
          The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable
     amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net
     selling price at disposition. In 2011, the Group did not recognize any impairment losses. In 2010, a subsidiary recognized an
     impairment loss on investment property in the amount of ¥21 million.

     (j) other Intangible Assets
     Intangible assets are amortized by the straight-line method.

     (k) Bonuses to Directors and Corporate Auditors
     Bonuses to directors and corporate auditors are accrued at the year end to which such bonuses are attributable.

     (l) liability for employees’ Retirement Benefits
     The Company has a defined contribution plan for a majority of employees and an unfunded retirement benefit plan for certain
     employees. Subsidiaries have non-contributory funded defined benefit pension plans, unfunded retirement benefit plans and
     defined contribution plans. The Company and subsidiaries which have defined benefit pension plans, applied the simplified
     method to record the liability at the amount which would be paid if the employees retired less the fair value of plan assets at the
     balance sheet date.

     (m) Retirement Allowances for Directors and Corporate Auditors
     Certain domestic consolidated subsidiaries provide for retirement allowances to directors and corporate auditors. The liability is
     recorded at the amount which would be paid if they retired at the balance sheet date in accordance with internal policies.

     (n) Asset Retirement obligations
     In March 2008, the ASBJ published the accounting standard for asset retirement obligations, ASBJ Statement No. 18 “Accounting
     Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21 “Guidance on Accounting Standard for Asset Retirement
     Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law
     or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is
     associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the
     discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a
     reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the
     asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation
     can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by
     increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently
     allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its
     present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash
     flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related
     asset retirement cost. This standard was effective for fiscal years beginning on or after April 1, 2010.
          The Company applied this accounting standard effective December 1, 2010. There is no effect of this change on the
     income statement.




32   osG Corporation
(o) Research and Development Costs
Research and development costs are charged to costs and expenses as incurred.

(p) leases
In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions”, which revised the
previous accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions
was effective for fiscal years beginning on or after April 1, 2008.

(Lessee)
Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the
lessee were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain
“as if capitalized” information was disclosed in the notes to the lessee’s financial statements. The revised accounting standard
requires that all finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance
sheet. In addition, the accounting standard permits leases which existed at the transition date and do not transfer ownership of the
leased property to the lessee to continue to be accounted for as operating lease transactions.

(Lessor)
Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the
lessee were treated as sales. However, other finance leases were permitted to be accounted for as operating lease transactions if
certain “as if sold” information was disclosed in the notes to the lessor’s financial statements. The revised accounting standard
requires that all finance leases that are deemed to transfer ownership of the leased property to the lessee should be recognized as
lease receivables, and all finance leases that are deemed not to transfer ownership of the leased property to the lessee should be
recognized as investments in leases.
     The Company applied the revised accounting standard effective December 1, 2008. In addition, the Company continues to
account for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee as
operating lease transactions.
     All other leases are accounted for as operating leases.

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

(r) Foreign Currency transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese
yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the
consolidated statements of operations.

(s) Foreign Currency Financial statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate
as of the balance sheet date except for equity, which is translated at the historical exchange rate. Differences arising from such
translation are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a
separate component of equity. The revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at
the average exchange rates.

(t) Derivatives and hedging Activities
The Company and certain subsidiaries use derivative financial instruments to manage their exposure to fluctuations in foreign
exchange and interest rates. The Group does not enter into derivatives for trading or speculative purposes.
     Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: a) all derivatives
are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are
recognized in the income statement and b) for derivatives used for hedging purposes, if the derivatives qualify for hedge
accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses
on those derivatives are deferred until the maturity of the hedged transactions.
     Foreign exchange forward contracts employed to hedge foreign exchange exposures for export sales are measured at the fair
value and the unrealized gains / losses are recognized in income.


                                                                                                                  Annual Report 2011      33
         The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not revalued at market
     value but the differential paid or received under the swap arrangements is recognized and included in interest expense or income.

     (u) Per share Information
     Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average
     number of common shares outstanding for the period, retroactively adjusted for stock splits.
          Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the
     respective years including dividends to be paid after the end of the year.

     (v) new Accounting Pronouncements
     Accounting Changes and error Corrections—In December 2009, ASBJ issued ASBJ Statement No. 24 “Accounting Standard for
     Accounting Changes and Error Corrections” and ASBJ Guidance No. 24 “Guidance on Accounting Standard for Accounting
     Changes and Error Corrections”. Accounting treatments under this standard and guidance are as follows:

     (1) Changes in Accounting Policies — When a new accounting policy is applied with revision of accounting standards, the new policy
         is applied retrospectively unless the revised accounting standards include specific transitional provisions. When the revised
         accounting standards include specific transitional provisions, an entity shall comply with the specific transitional provisions.
     (2) Changes in Presentations — When the presentation of financial statements is changed, prior period financial statements are
         reclassified in accordance with the new presentation.
     (3) Changes in Accounting Estimates — A change in an accounting estimate is accounted for in the period of the change if the
         change affects that period only, and is accounted for prospectively if the change affects both the period of the change and
         future periods.
     (4) Corrections of Prior Period Errors — When an error in prior period financial statements is discovered, those statements are
         restated. This accounting standard and the guidance are applicable to accounting changes and corrections of prior period
         errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.

     3. MARketABle AnD InvestMent seCuRItIes
     Marketable and investment securities at November 30, 2011 and 2010 consisted of the following:
                                                                                                                               Thousands of
                                                                                                Millions of yen                 U.S. dollars
                                                                                       2011                        2010          2011
     Non-current:
       Marketable equity securities                                                  ¥ 3,187                      ¥ 3,330      $ 40,859
       Debt securities                                                                    51                            4           654
         Total                                                                       ¥ 3,238                      ¥ 3,334      $ 41,513

     The carrying amounts of aggregate fair values of investment securities at November 30, 2011 and 2010 were as follows:
                                                                                                Millions of yen
     November 30, 2011                                              Cost           Unrealized Gains        Unrealized Losses    Fair Value

     Securities classified as:
       Available-for-sale:
            Equity securities                                     ¥ 2,221            ¥ 1,052                      ¥ 157         ¥ 3,116
            Debt securities                                            51                 —                          —               51


                                                                                                Millions of yen
     November 30, 2010                                              Cost           Unrealized Gains        Unrealized Losses    Fair Value

     Securities classified as:
       Available-for-sale:
            Equity securities                                     ¥ 2,215             ¥ 1,228                     ¥ 186         ¥ 3,257
            Debt securities                                             4                  —                         —                4




34   osG Corporation
                                                                                  Thousands of U.S. dollars
November 30, 2011                                             Cost         Unrealized Gains         Unrealized Losses         Fair Value

Securities classified as:
  Available-for-sale:
       Equity securities                                   $ 28,474          $ 13,488                      $ 2,013           $ 39,949
       Investment trusts and other                              654                —                            —                 654

No available-for-sale security was sold during the year ended November 30, 2011.
    Information on available-for-sale securities which were sold during the year ended November 30, 2010 was as follows:
                                                                                                      Millions of yen

November 30, 2010                                                             Proceeds                Realized Gains        Realized Losses

Available-for-sale:
                                                                                ¥ 24                         ¥2                 ¥—
  Investment trusts and other
Total                                                                           ¥ 24                         ¥2                 ¥—

Impairment losses on available-for-sale equity securities for the years ended November 30, 2011 and 2010 were nil and
¥2 million, respectively.

4. InventoRIes
Inventories at November 30, 2011 and 2010 consisted of the following:
                                                                                                                             Thousands of
                                                                                         Millions of yen                      U.S. dollars
                                                                               2011                         2010                2011
Merchandise                                                                  ¥ 4,135                   ¥ 3,769              $ 53,013
Finished products                                                               7,148                     7,160                91,641
Work-in-process                                                                 3,444                     2,741                44,154
Raw materials                                                                   3,238                     2,486                41,513
Supplies                                                                          832                       816                10,666
       Total                                                                 ¥ 18,797                  ¥ 16,972             $ 240,987


5. shoRt-teRM BoRRoWInGs AnD lonG-teRM DeBt
Short-term borrowings at November 30, 2011 and 2010 mainly consisted of notes to banks. The weighted average interest rate on
short-term bank loans was 1.1% as of November 30, 2011 and 0.8% as of November 30, 2010.
    Long-term debt at November 30, 2011 and 2010 consisted of the following:
                                                                                                                             Thousands of
                                                                                         Millions of yen                      U.S. dollars
                                                                               2011                         2010                2011
Borrowings from banks and other financial institutions                       ¥ 17,035                  ¥ 22,664              $ 218,397
Lease obligations                                                                   13                       33                     167
Other                                                                            1,028                    1,121                  13,179
        Total                                                                  18,076                    23,818                231,743
Less: Portion due within one year                                               (3,491)                  (5,831)                (44,756)
Long-term debt, less current portion                                         ¥ 14,585                  ¥ 17,987              $ 186,987




                                                                                                                        Annual Report 2011    35
     The annual maturities of long-term debt at November 30, 2011 for the next five years and thereafter were as follows:
                                                                                                                             Thousands of
     Year ending November 30                                                                               Millions of yen    U.S. dollars

     2012                                                                                                   ¥ 3,491          $ 44,756
     2013                                                                                                      3,412            43,744
     2014                                                                                                      9,840           126,154
     2015                                                                                                        288             3,692
     2016                                                                                                        213             2,731
     2017 and thereafter                                                                                         832            10,666
           Total                                                                                            ¥ 18,076         $ 231,743


     6. PleDGeD Assets
     The carrying amounts of assets pledged as collateral for notes and accounts payable of ¥11 million ($141 thousand), short-term
     borrowings of ¥1,913 million ($24,526 thousand) and long-term debt (including current portion) of ¥167 million ($2,141
     thousand), as of November 30, 2011 were as follows:
                                                                                                                             Thousands of
                                                                                                           Millions of yen    U.S. dollars

     Time deposits                                                                                              ¥       1    $        13
     Property, Plant and Equipment
          Land                                                                                                 3,488            44,718
          Buildings and structures                                                                             5,931            76,038
          Machinery and equipment                                                                                705             9,038
          Tools, furniture and fixtures                                                                          121             1,551
     Other assets                                                                                              1,304            16,718
       Total                                                                                                ¥ 11,550         $ 148,076


     7. lIABIlIty FoR eMPloyees’ RetIReMent BeneFIts
     The Company and certain domestic subsidiaries have defined contribution plans for the majority of employees. Other subsidiaries
     have non-contributory and contributory funded defined benefit pension plans and unfunded retirement benefit plans. Contributions
     to the defined contribution plans for the years ended November 30, 2011 and 2010 were ¥430 million ($5,513 thousand) and
     ¥445 million, respectively.
          The contributory funded defined benefit pension plan is a multiemployer plan and the Company and domestic subsidiaries
     recognize as net pension cost the required contribution for the period. Contributions for the years ended November 30, 2011 and
     2010 for this plan were ¥541 million ($6,936 thousand) and ¥443 million, respectively.
          The liability for employees’ retirement benefits at November 30, 2011 and 2010 consisted of the following:
                                                                                                                             Thousands of
                                                                                              Millions of yen                 U.S. dollars
                                                                                     2011                       2010             2011
     Projected benefit obligation                                                    ¥ 820                      ¥ 855        $ 10,513
     Fair value of plan assets                                                        (648)                      (732)          (8,308)
       Net liability                                                                   172                        123            2,205
       Prepaid pension cost                                                             97                        105            1,244
       Amount recognized as liability                                                ¥ 269                      ¥ 228        $ 3,449

     The components of net periodic benefit costs for the years ended November 30, 2011 and 2010 were as follows:
                                                                                                                             Thousands of
                                                                                              Millions of yen                 U.S. dollars
                                                                                     2011                       2010             2011
     Service cost                                                                    ¥ 110                      ¥ 164         $ 1,410
            Net periodic benefit costs                                               ¥ 110                      ¥ 164         $ 1,410




36   osG Corporation
8. eQuIty
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are summarized below:

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

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

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




                                                                                                                Annual Report 2011      37
     9. InCoMe tAxes
     The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate,
     resulted in normal effective statutory tax rates of approximately 39.9% for the years ended November 30, 2011 and 2010. The tax
     effects of significant temporary differences and tax loss carry forwards which resulted in deferred tax assets and liabilities at
     November 30, 2011 and 2010 were as follows:
                                                                                                                         Thousands of
                                                                                            Millions of yen               U.S. dollars
                                                                                     2011                     2010         2011
     Deferred tax Assets:
       Retirement benefits for employees                                            ¥ 121                     ¥   116    $ 1,551
       Retirement allowances for directors and corporate auditors                        21                        20         269
       Unrealized gains on inventories and property, plant and equipment                347                       279       4,449
       Tax loss carryforwards                                                         3,038                     4,264      38,949
       Enterprise taxes payable                                                          79                        85       1,013
       Bad debt allowance                                                                38                        47         487
       Depreciation                                                                      80                        63       1,026
       Write-down of inventories                                                        209                       227       2,679
       Write-down of golf memberships                                                   121                       120       1,551
       Write-down of securities                                                         601                       603       7,705
       Other                                                                          1,043                     1,455      13,371
       Deferred tax assets sub-total                                                  5,698                     7,279      73,050
       Less: valuation allowance                                                       (904)                     (947)    (11,589)
     Deferred tax assets total                                                      ¥ 4,794                   ¥ 6,332    $ 61,461
     Deferred tax liabilities:
       Revaluation of property, plant and equipment of
                                                                                     ¥      1                 ¥      1    $       13
         foreign consolidated subsidiaries
       Deferred gains on property, plant and equipment                                  116                       124       1,487
       Unrealized gains on available-for-sale securities                                135                       420       1,731
       Other                                                                            218                       247       2,795
       Deferred tax liabilities                                                     ¥ 470                     ¥ 792      $ 6,026
     Net deferred tax assets                                                        ¥ 4,324                   ¥ 5,540    $ 55,435

     A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
     consolidated statements of income for the years ended November 30, 2011 and 2010 is as follows:
                                                                                                              2011            2010
     Normal effective statutory tax rate                                                                      39.9%         39.9%
     Expenses not deductible for income tax purposes                                                           1.5           2.0
     Income not taxable for income tax purposes                                                               (0.2)         (0.3)
     Per capita tax                                                                                            0.4           0.7
     Lower income tax rates applicable to income in certain foreign countries                                 (7.7)        (10.1)
     Amortization of goodwill                                                                                  0.5           0.8
     Unrecognized deferred taxes on unrealized intercompany profit                                             2.2           1.2
     Net change in valuation allowance                                                                        (0.6)         (4.0)
     Other—net                                                                                                 2.5           0.0
     Actual effective tax rate                                                                                38.5%         30.2%

     On December 2, 2011, a tax reform law was enacted in Japan which changed the normal effective statutory tax rate from
     approximately 39.9% to 37.3% for the years ending November 30, 2013, 2014 and 2015 and 34.9% for the years ending on or
     after November 30, 2016, effective for years beginning on or after April 1, 2012. If the law was enacted before December 1, 2011,
     the effect of this change on the consolidated financial statements for the year ended November 30, 2011 would have been to
     decrease deferred tax assets (non-current) by ¥118 million and increase unrealized gains on available-for-sale securities by ¥15
     million in the balance sheet and to increase deferred taxes in the income statement.




38   osG Corporation
10. ReseARCh AnD DeveloPMent Costs
Research and development costs charged to costs and expenses were ¥975 million ($12,500 thousand) and ¥868 million for the
years ended November 30, 2011 and 2010, respectively.

11. leAses
(As lessee)
The Group leases certain machinery, equipment, tools, furniture, fixtures and other assets as a lessee. As discussed in Note 2(p),
the Group accounts for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee
as operating lease transactions. Total lease payments under finance leases accounted for as operating lease transactions for the
years ended November 30, 2011 and 2010 were ¥403 million ($5,167 thousand) and ¥630 million, respectively.
    Pro forma information of such finance leases which existed at the transition date, such as acquisition cost, accumulated
depreciation, obligations under finance leases and depreciation expense, on a “as if capitalized” basis for the years ended
November 30, 2011 and 2010 was as follows:
                                                                                            Millions of yen
                                                            Machinery and      Tools, Furniture
                                                                                                                  Other           Total
November 30, 2011                                            Equipment          and Fixtures

Acquisition cost                                              ¥ 2,301              ¥ 34                           ¥8           ¥ 2,343
Accumulated depreciation                                        1,696                28                            7             1,731
Net leased property                                           ¥ 605                ¥ 6                            ¥1           ¥ 612


                                                                                            Millions of yen
                                                            Machinery and      Tools, Furniture
                                                                                                                  Other           Total
November 30, 2010                                            Equipment          and Fixtures

Acquisition cost                                              ¥ 3,626              ¥ 174                          ¥8           ¥ 3,808
Accumulated depreciation                                        2,361                124                           5             2,490
Net leased property                                           ¥ 1,265              ¥ 50                           ¥3           ¥ 1,318


                                                                                      Thousands of U.S. dollars
                                                            Machinery and      Tools, Furniture
                                                                                                                  Other           Total
November 30, 2011                                            Equipment          and Fixtures

Acquisition cost                                             $ 29,500              $ 435                          $ 103        $ 30,038
Accumulated depreciation                                       21,744                358                             90          22,192
Net leased property                                          $ 7,756               $ 77                           $ 13         $ 7,846

Obligations under finance leases:
                                                                                                                              Thousands of
                                                                                            Millions of yen                    U.S. dollars
                                                                                   2011                           2010           2011
Due within one year                                                               ¥ 261                       ¥   868          $ 3,346
[amount of sub-lease]                                                                 [1]                          [3]              [13]
Due after one year                                                                  224                           482            2,872
[amount of sub-lease]                                                                [—]                           [1]               [—]
Total                                                                             ¥ 485                       ¥ 1,350          $ 6,218
[amount of sub-lease]                                                                 [1]                          [4]              [13]

Depreciation expense and interest expense under finance leases:
                                                                                                                              Thousands of
                                                                                            Millions of yen                    U.S. dollars
                                                                                   2011                           2010           2011
Depreciation expense                                                              ¥ 364                       ¥ 567            $ 4,667
Interest expense                                                                     20                          32                256




                                                                                                                          Annual Report 2011   39
     Depreciation expenses are computed by the straight-line method and interest expenses are computed by the interest method.
         Minimum rental payments under non-cancelable operating leases subsequent to November 30, 2011 and 2010 were as follows:
                                                                                                                         Thousands of
                                                                                              Millions of yen             U.S. dollars
                                                                                      2011                      2010       2011
     Due within one year                                                             ¥ 70                       ¥ 129     $ 897
     [amount of sub-lease]                                                             [10]                       [15]      [128]
     Due after one year                                                                  60                       126         769
     [amount of sub-lease]                                                             [13]                       [16]      [167]
     Total                                                                           ¥ 130                      ¥ 255     $ 1,666
     [amount of sub-lease]                                                             [23]                       [31]      [295]

     (As lessor)
     A consolidated subsidiary leases certain machinery and equipment as a lessor. As discussed in Note 2(p), the Group accounts for
     leases which existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease
     transactions.
          Total lease revenue from finance leases accounted for as operating lease transactions for the years ended November 30, 2011
     and 2010 was ¥4 million ($51 thousand) and ¥4 million, respectively.
          Pro forma information of such leases which existed at the transition date on a “as if sold” basis for the years ended November
     30, 2011 and 2010 was as follows:

     Leased property under finance leases:
                                                                                                                         Thousands of
                                                                                              Millions of yen             U.S. dollars
                                                                                      2011                      2010       2011
     Acquisition cost                                                                 ¥—                        ¥ 21        $—
     Accumulated depreciation                                                          —                          16         —
     Net leasing property                                                             ¥—                        ¥ 5         $—

     Expected revenues:
                                                                                                                         Thousands of
                                                                                              Millions of yen             U.S. dollars
                                                                                      2011                      2010       2011
     Due within one year                                                              ¥3                        ¥ 9         $ 38
     [amount of sub-lease]                                                             [3]                        [5]        [38]
     Due after one year                                                                 0                          2            0
     [amount of sub-lease]                                                             [0]                        [2]          [0]
     Total                                                                            ¥3                        ¥ 11        $ 38
     [amount of sub-lease]                                                             [3]                        [7]        [38]

     Depreciation expense and interest revenue under finance leases:
                                                                                                                         Thousands of
                                                                                              Millions of yen             U.S. dollars
                                                                                      2011                      2010       2011
     Depreciation expense                                                              ¥1                        ¥2         $ 13
     Interest revenue                                                                   0                         0            0
     Interest revenue is computed by the interest method.




40   osG Corporation
Expected lease revenues to be received under the non-cancelable operating lease subsequent to November 30, 2011 and 2010,
were as follows:
                                                                                                                              Thousands of
                                                                                               Millions of yen                 U.S. dollars
                                                                                      2011                       2010            2011
Due within one year                                                                  ¥ 65                        ¥ 76          $ 833
[amount of sub-lease]                                                                   [65]                       [76]           [833]
Due after one year                                                                       93                        102           1,192
[amount of sub-lease]                                                                   [93]                      [102]         [1,192]
Total                                                                                ¥ 158                       ¥ 178         $ 2,025
[amount of sub-lease]                                                                 [158]                       [178]         [2,025]


12. FInAnCIAl InstRuMents AnD RelAteD DIsClosuRes
In March, 2008, the ASBJ revised ASBJ Statement No. 10, “Accounting Standard for Financial Instruments” and issued ASBJ
Guidance No. 19, “Guidance on Accounting Standard for Financial Instruments and Related Disclosures”. This accounting
standard and the guidance are applicable to financial instruments and related disclosures at the end of the fiscal years ending on
or after March 31, 2010. The Group applied the revised accounting standard and the new guidance effective November 30, 2010.

(a) Group Policy for Financial Instruments
The Group uses financial instruments, mainly long-term debt including bank loans, based on its capital financing plan. Cash
surpluses, if any, are invested in low risk financial assets. Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described in (2) below.

(b) nature and extent of Risks Arising from Financial Instruments
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables in foreign
currencies are exposed to the risk of fluctuation in foreign currency exchange rates, the positions are hedged by using forward
foreign currency contracts. Marketable and investment securities, mainly equity instruments of customers and suppliers of the
Group, are exposed to the risk of market price fluctuations.
     Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign
currencies are exposed to the risk of fluctuation in foreign currency exchange rates, those risks are hedged by using forward
foreign currency contracts.
     Although a part of bank loans are exposed to risks from changes in variable interest rates, those risks are mitigated by using
interest-rate swaps.
     Derivatives mainly include forward foreign currency contracts and interest-rate swaps, which are used to manage exposure to
market risks from changes in foreign currency exchange rates of receivables and payables, and from changes in interest rates of
bank loans. Please see Note 13 for more detail about derivatives.

(c) Risk Management for Financial Instruments
Credit Risk Management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to the contractual terms.
The Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of payment terms
and balances of customers to identify default risk of customers in early stage. Please see Note 13 for more detail about derivatives.
     The maximum credit risk exposure of financial assets is limited to their carrying amounts as of November 30, 2011.

Market Risk Management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to risks resulting from fluctuations in foreign currency exchange
rates. Such foreign exchange risks are hedged principally by forward foreign currency contracts. In addition, when foreign currency
trade receivables and payables are expected from forecasted transactions, forward foreign currency contracts may be used under
the limited contract term of one year.
     Interest-rate swaps are used to manage exposure to risks from changes in interest rates of loan payables.
     Marketable and investment securities are managed by monitoring market values and the financial position of issuers on a
regular basis.
     Internal guidelines stating the basic principles for derivative transactions have been prepared and are required to be followed.
Reconciliation of the transactions and balances with customers is made, and the transaction data is reported to the director in
charge of the operations and the management meeting on a monthly basis.


                                                                                                                          Annual Report 2011   41
     liquidity Risk Management
     Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on maturity dates. The Group
     manages its liquidity risk by holding adequate volumes of liquid assets along with adequate financial planning by the finance group.

     (d) Fair values of Financial Instruments
     Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are not available, other rational
     valuation techniques are used instead. Please see Note 13 for the detail of the fair value of derivatives.

     (1) Fair value of financial instruments
                                                                                                        Millions of yen
                                                                                       Carrying              Fair               Unrealized
     November 30, 2011
                                                                                       Amount               Value              Gains (Losses)

     Cash and cash equivalents                                                       ¥ 10,413            ¥ 10,413                 ¥ —
     Time deposits                                                                        655                 655                    —
     Trade notes and accounts receivable                                               16,396              16,396                    —
     Investment securities                                                              3,167               3,167                    —
     Total                                                                           ¥ 30,631            ¥ 30,631                 ¥ —
     Short-term borrowings                                                           ¥ 5,977             ¥ 5,977                  ¥ —
     Trade notes and accounts payable                                                   4,386               4,386                    —
     Income taxes payable                                                               1,597               1,597                    —
     Long-term debt including current portion                                          18,076              18,328                   252
     Total                                                                           ¥ 30,036            ¥ 30,288                 ¥ 252


                                                                                                        Millions of yen
                                                                                       Carrying              Fair               Unrealized
     November 30, 2010
                                                                                       Amount               Value              Gains (Losses)

     Cash and cash equivalents                                                        ¥ 13,525            ¥ 13,525                ¥ —
     Time deposits                                                                       2,789               2,789                   —
     Trade notes and accounts receivable                                                15,360              15,360                   —
     Investment securities                                                               3,261               3,261                   —
     Total                                                                            ¥ 34,935            ¥ 34,935                ¥ —
     Short-term borrowings                                                            ¥ 4,654             ¥ 4,654                 ¥ —
     Trade notes and accounts payable                                                    3,731               3,731                   —
     Income taxes payable                                                                1,359               1,359                   —
     Long-term debt including current portion                                           23,818              24,153                  335
     Total                                                                            ¥ 33,562            ¥ 33,897                ¥ 335


                                                                                                   Thousands of U.S. dollars
                                                                                       Carrying              Fair               Unrealized
     November 30, 2011
                                                                                       Amount               Value              Gains (Losses)

     Cash and cash equivalents                                                      $ 133,500           $ 133,500               $    —
     Time deposits                                                                      8,397               8,397                    —
     Trade notes and accounts receivable                                              210,205             210,205                    —
     Investment securities                                                             40,603              40,603                    —
     Total                                                                          $ 392,705           $ 392,705               $    —
     Short-term borrowings                                                          $ 76,628            $ 76,628                $    —
     Trade notes and accounts payable                                                  56,231              56,231                    —
     Income taxes payable                                                              20,474              20,474                    —
     Long-term debt including current portion                                         231,743             234,974                 3,231
     Total                                                                          $ 385,076           $ 388,307               $ 3,231

     Cash and Cash equivalents and time Deposits
     The carrying values of cash and cash equivalents approximate fair value because of their short maturities.



42   osG Corporation
Investment securities
The fair values of marketable equity securities are measured at the quoted market price of the stock exchange for the equity
instruments. The fair value of debt securities are measured at the present value of the amounts to be received and are discounted
at the current rate for equivalent debt for certain debt instruments. Information about the fair value of marketable and investment
securities by classification is included in Note 3.

trade notes and Accounts Receivable and Payable and Income taxes Payable
The fair values of trade notes and accounts receivables and payables and income taxes payable approximate fair value because of
their short maturities.

short-term Borrowings and long-term Debt
The fair values of short-term borrowings and long-term debt including loans hedged by interest rate swaps, are determined by
discounting the cash flows related to the debt at the Group’s assumed corporate borrowing rate.

Derivatives
The information of the fair value for derivatives is included in Note 13.

(2) Carrying amount of financial instruments whose fair value cannot be reliably determined
                                                                                                                                  Thousands of
                                                                                             Millions of yen                       U.S. dollars
                                                                                    2011                       2010                  2011
Investments in equity instruments that do not have a
                                                                                    ¥ 71                       ¥ 73                 $ 910
  quoted market price in an active market
Investments in non-consolidated subsidiaries and an associated company              ¥ 162                      ¥ 157               $ 2,077

(e) Maturity Analysis for Financial Assets and securities with Contractual Maturities
                                                                                             Millions of yen
                                                             Due in One Year   Due after One Year      Due after Five Years         Due after
November 30, 2011                                                or Less       through Five Years       through Ten Years           Ten Years

Cash and cash equivalents                                     ¥ 10,413                 —                           —                     —
Time deposits                                                      655                 —                           —                     —
Trade notes and accounts receivable                             16,396                 —                           —                     —
Investment securities                                               —                  —                           —                     —
Available-for-sale securities with contractual maturities            1               ¥ 51                          —                     —
Total                                                         ¥ 27,465               ¥ 51                          —                     —


                                                                                       Thousands of U.S. dollars
                                                             Due in One Year   Due after One Year      Due after Five Years         Due after
November 30, 2011                                                or Less       through Five Years       through Ten Years           Ten Years

Cash and cash equivalents                                     $ 133,500                —                           —                     —
Time deposits                                                     8,397                —                           —                     —
Trade notes and accounts receivable                             210,205                —                           —                     —
Investment securities                                                —                 —                           —                     —
Available-for-sale securities with contractual maturities            13             $ 654                          —                     —
Total                                                         $ 352,115             $ 654                          —                     —

Please see Note 5 for annual maturities of long-term debt and Note 11 for obligations under finance leases.

13. DeRIvAtIves
The Company and certain subsidiaries enter into foreign currency forward contracts to hedge foreign exchange risk associated with
certain assets and liabilities denominated in foreign currencies and interest rate swap contracts to manage its interest rate
exposures on certain liabilities.
    All derivative transactions are entered into to hedge interest and foreign currency exposures incorporated within its business.
Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets or liabilities.



                                                                                                                              Annual Report 2011   43
         Because the counterparties to these derivatives are limited to major international financial institutions, the Company and
     subsidiaries do not anticipate any losses arising from credit risk.
         Derivative transactions entered into by the Company and subsidiaries have been made in accordance with internal policies
     which regulate the authorization and credit limit amount.

     Derivative transactions to Which hedge Accounting is not Applied
                                                                                                Millions of yen
                                                                Contract      Contract Amount due                   Fair       Unrealized Gains
     November 30, 2011                                          Amount           after One Year                    Value           (Losses)

     Foreign currency forward contracts:
        Buying U.S.$                                            ¥ 460                 ¥ 92                        ¥ 10             ¥ 10
                YEN                                                17                   —                             2                2
                EURO                                               39                   —                            (3)              (3)
        Selling U.S.$                                           ¥ 998                   —                         ¥ 7              ¥ 7
                EURO                                              194                   —                           12               12


                                                                                                Millions of yen
                                                                Contract      Contract Amount due                   Fair       Unrealized Gains
     November 30, 2010                                          Amount           after One Year                    Value           (Losses)

     Foreign currency forward contracts:
        Buying U.S.$                                            ¥ 280                  —                           ¥ (2)            ¥ (2)
                YEN                                                62                  —                             (1)              (1)
                EURO                                               14                  —                             (0)              (0)
        Selling U.S.$                                           ¥ 385                  —                           ¥ 5              ¥ 5
                EURO                                              269                  —                            10               10


                                                                                        Thousands of U.S. dollars
                                                                Contract      Contract Amount due                   Fair       Unrealized Gains
     November 30, 2011                                          Amount           after One Year                    Value           (Losses)

     Foreign currency forward contracts:
        Buying U.S.$                                           $ 5,897             $ 1,179                        $ 128            $ 128
                YEN                                                 218                 —                             26               26
                EURO                                                500                 —                            (38)             (38)
        Selling U.S.$                                          $ 12,795                 —                         $ 90             $ 90
                EURO                                              2,487                 —                           154              154

     Derivative transactions to Which hedge Accounting is Applied
                                                                                                Millions of yen
                                                                Hedged             Contract              Contract Amount due         Fair
     November 30, 2011                                           Item              Amount                   after One Year          Value

     Foreign currency forward contracts:
         Buying EURO                                           Payables            ¥ 220                           ¥—              ¥ (14)
     Interest rate swaps:
         (fixed rate payment, floating rate receipt)        long-term debt          ¥ 68                           ¥—              (note)


                                                                                                Millions of yen
                                                                Hedged             Contract              Contract Amount due         Fair
     November 30, 2010                                           Item              Amount                   after One Year          Value
     Foreign currency forward contracts:
         Buying EURO                                          Payables            ¥        88                     ¥—               ¥ (2)
         Selling U.S.$                                       Receivables          ¥        42                     ¥—               ¥ 1
     Interest rate swaps:
         (fixed rate payment, floating rate receipt)        Long-term debt        ¥ 1,515                         ¥ 68            (Note)




44   osG Corporation
                                                                                                Thousands of U.S. dollars
                                                                       Hedged                Contract         Contract Amount due               Fair
November 30, 2011                                                       Item                 Amount              after One Year                Value

Foreign currency forward contracts:
    Buying EURO                                                       Payables              $ 2,821                   $—                    $ (179)
Interest rate swaps:
    (fixed rate payment, floating rate receipt)                   long-term debt            $ 872                     $—                       (note)
Note: The above interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but
      the differential paid or received under the swap agreements is recognized and included in interest expense or income. In addition, the fair value
      of such interest rate swaps disclosed in Note 12 is included in the fair value of the hedged item (i.e., long-term debt).

14. ContInGent lIABIlItIes
At November 30, 2011, the Group had contingent liabilities for notes endorsed with recourse of ¥26 million ($333 thousand).

15. CoMPRehensIve InCoMe
For the year ended November 30, 2010

Total comprehensive income for the year ended November 30, 2010 was as follows:
                                                                                                                                          Millions of yen

                                                                                                                                               2010
Total comprehensive income attributable to:
  Owners of the parent                                                                                                                      ¥ 2,766
  Minority interests                                                                                                                            406
Total comprehensive income                                                                                                                  ¥ 3,172

Other comprehensive income for the year ended November 30, 2010 consisted of the following:
                                                                                                                                          Millions of yen

                                                                                                                                               2010
Other comprehensive income:
  Unrealized gain on available-for-sale securities                                                                                         ¥    471
  Deferred loss on derivatives under hedge accounting                                                                                            (1)
  Foreign currency translation adjustments                                                                                                   (1,659)
  Share of other comprehensive income in associates                                                                                               1
Total other comprehensive income                                                                                                           ¥ (1,188)


16. net InCoMe PeR shARe
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended November 30, 2011
and 2010 is as follows:
                                                                                          Thousands of                                          U.S.
                                                                    Millions of yen                                    Yen
                                                                                             shares                                            dollars
                                                                                             Weighted
                                                                      Net Income                                                    EPS
For the year ended November 30, 2011:                                                     Average Shares

   Basic EPS
     Net income available to common shareholders                      ¥ 5,905               94,968                 ¥ 62.18                  $ 0.80
Diluted EPS was not disclosed as the Company did not have any dilutive shares.

For the year ended November 30, 2010:

   Basic EPS
     Net income available to common shareholders                      ¥ 3,773               95,905                 ¥ 39.34
Diluted EPS was not disclosed as the Company did not have any dilutive shares.




                                                                                                                                    Annual Report 2011      45
     17. suBseQuent event
     The following appropriations of retained earnings at November 30, 2011 were approved at the Company’s shareholders’ meeting
     held on February 18, 2012:
                                                                                                                                                  Thousands of
                                                                                                                      Millions of yen              U.S. dollars
     Year-end cash dividends, ¥12 ($0.15) per share                                                                       ¥ 1,140                 $ 14,615


     18. seGMent InFoRMAtIon
     For the years ended november 30, 2011 and 2010
     In March 2008, the ASBJ revised ASBJ Statement No. 17 “Accounting Standard for Segment Information Disclosures” and issued
     ASBJ Guidance No. 20 “Guidance on Accounting Standard for Segment Information Disclosures”. Under the standard and
     guidance, an entity is required to report financial and descriptive information about its reportable segments. Reportable segments
     are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of
     an entity about which separate financial information is available and such information is evaluated regularly by the chief operating
     decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to
     be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate
     resources to operating segments. This accounting standard and the guidance are applicable to segment information disclosures
     for the fiscal years beginning on or after April 1, 2010.
          The segment information for the year ended November 31, 2010 under the revised accounting standard is also disclosed
     hereunder as required.

     1. Description of reportable segments
     The Group is engaged in the manufacturing and sale of cutting tools for industrial applications and has key entities at each region
     in Japan, The Americas (U.S.A, Canada, Mexico and Brazil), Europe (U.K., Belgium, France, Netherlands, Denmark, Spain,
     Germany and Italy), and Asia (China, Singapore, Thailand, Taiwan, South Korea and India). Such key entities are independent
     management units which develop and execute the comprehensive regional product strategy. Therefore, the Group consists of four
     regional segments (Japan, The Americas, Europe, and Asia).

     2. Methods of measurement for the amounts of sales, profit, assets, liabilities and other items for each reportable segment
     The accounting policies of each reportable segment are consistent to those disclosed in Note 2, “Summary of Significant
     Accounting Policies”.

     3. Information about sales, profit, assets, liabilities and other items is as follows.
                                                                                              Millions of yen
                                                                         Reportable segment
                                                                                                                                Reconciliations      Consolidated
     2011                                     Japan       The Americas        Europe               Asia           Total

     Sales
       Sales to external customers         ¥ 41,267       ¥ 12,700           ¥ 6,548          ¥ 20,444          ¥ 80,959               —            ¥ 80,959
       Intersegment sales or transfers       14,260            184                16               883            15,343        ¥ (15,343)                —
             Total                         ¥ 55,527       ¥ 12,884           ¥ 6,564          ¥ 21,327          ¥ 96,302        ¥ (15,343)          ¥ 80,959
     Segment profit                        ¥ 6,326        ¥ 1,373            ¥ 850            ¥ 4,332           ¥ 12,881        ¥    (576)          ¥ 12,305
     Segment assets                          78,312         11,301             5,513            27,454           122,580          (18,206)           104,374
     Other:
       Depreciation                            3,762            439               123              1,443           5,767                (110)             5,657
       Amortization of goodwill                   30             42                87                 —              159                  —                 159
       Amount of investment in
                                                  95               8                —                     —           103                 —                  103
         equity of affiliates
       Increase in property, plant and
                                               3,437          1,068               152              4,578           9,235                (582)             8,653
         equipment and intangible assets




46   osG Corporation
                                                                                               Millions of yen
                                                                       Reportable Segment
                                                                                                                                      Reconciliations    Consolidated
2010                                      Japan       The Americas            Europe                Asia                 Total

Sales
  Sales to external customers     ¥ 36,197             ¥ 11,295             ¥ 5,536             ¥ 16,485           ¥  69,513                  —          ¥ 69,513
  Intersegment sales or transfers   10,964                  155                  13                  713              11,845           ¥ (11,845)              —
        Total                     ¥ 47,161             ¥ 11,450             ¥ 5,549             ¥ 17,198           ¥ 81,358            ¥ (11,845)        ¥ 69,513
Segment profit                    ¥ 2,858              ¥ 1,027              ¥ 525               ¥ 3,086            ¥   7,496           ¥      29         ¥ 7,525
Segment assets                      79,451               11,201               5,191               25,636             121,479             (15,843)         105,636
Other:
  Depreciation                       3,390                   512                  145               1,302                  5,349               (41)           5,308
  Amortization of goodwill              45                    46                   67                  —                     158                —               158
  Amount of investment in
                                        90                       —                  —                      —                     90             —                   90
    equity of affiliates
  Increase in property, plant and
                                           3,219             314                  111               1,279                  4,923             (247)            4,676
    equipment and intangible assets


                                                                                          Thousands of U.S. dollars
                                                                       Reportable Segment
                                                                                                                                      Reconciliations    Consolidated
2011                                      Japan       The Americas            Europe                Asia                 Total

Sales
  Sales to external customers     $ 529,064           $ 162,820            $ 83,949            $ 262,103 $ 1,037,936         — $ 1,037,936
  Intersegment sales or transfers     182,821             2,359                 205               11,320     196,705 $ (196,705)          —
        Total                     $ 711,885           $ 165,179            $ 84,154            $ 273,423 $ 1,234,641 $ (196,705) $ 1,037,936
Segment profit                    $    81,103         $ 17,603             $ 10,897            $ 55,538 $ 165,141 $ (7,385) $ 157,756
Segment assets                      1,004,000           144,885              70,679              351,974   1,571,538   (233,410) 1,338,128
Other:
  Depreciation                         48,231              5,628               1,577               18,500                  7,396            (1,410)          72,526
  Amortization of goodwill                385                538               1,115                   —                   2,038                —             2,038
  Amount of investment in
                                        1,218                    103                 —                       —             1,321                 —            1,321
    equity of affiliates
  Increase in property, plant and
                                           44,064         13,692               1,949               58,692               118,397             (1,410)        110,936
    equipment and intangible assets
Notes: 1. The reconciliation amount for segment profit, segment assets, depreciation and increase in property, plant and equipment and intangible
          assets is the elimination of intersegment transactions.
       2. Segment profit is reconciled to operating income in the consolidated statement of income.

Associated Information
1. Information about products and services
                                                                                             Millions of yen

                                                                                                2011
                                                                       Drills and other
                                       Taps          End mills                                Rolling dies             Gauges         Other products        Total
                                                                        cutting tools

Sales to external customers         ¥ 28,906        ¥ 17,838            ¥ 18,285               ¥ 7,067             ¥ 1,137             ¥ 7,726           ¥ 80,959

                                                                                       Thousands of U.S. dollars
                                                                                                2011
                                                                       Drills and other
                                       Taps          End mills                                Rolling dies             Gauges         Other products        Total
                                                                        cutting tools

Sales to external customers        $ 370,590        $ 228,692          $ 234,423              $ 90,603             $ 14,577            $ 99,051         $ 1,037,936




                                                                                                                                               Annual Report 2011        47
     2. Geographical information
     (1) Sales
                                                                         Millions of yen

                                                                            2011
          Japan            U.S.A.       Other Americas           Europe                China          Other Asia           Other           Total

       ¥ 40,696          ¥ 8,234           ¥ 4,395              ¥ 6,618              ¥ 9,596         ¥ 11,418              ¥2            ¥ 80,959


                                                                  Thousands of U.S. dollars

                                                                            2011
          Japan            U.S.A.       Other Americas           Europe                China          Other Asia           Other           Total

       $ 521,744        $ 105,564         $ 56,346              $ 84,846           $ 123,026         $ 146,385            $ 25          $ 1,037,936
     Note: Sales are classified into countries or area based on the location of customers.

     (2) Property, plant and equipment
                                         Millions of yen

                                            2011
          Japan         The Americas         Europe               Asia                     Total

       ¥ 29,793          ¥ 2,989            ¥ 581               ¥ 8,797             ¥ 42,160


                                    Thousands of U.S. dollars

                                            2011
          Japan         The Americas         Europe               Asia                     Total

       $ 381,962        $ 38,321           $ 7,449          $ 112,781              $ 540,513

     3. Information about goodwill and negative goodwill by reportable segments
                                                                                                               Millions of yen

                                                                                                                   2011
                                                                                                                                           Corporate/
                                                                    Japan             The Americas       Europe                  Asia                      Total
                                                                                                                                           Elimination

     Amortization of goodwill                                      ¥ 31                     ¥ 41         ¥ 87                    —            —          ¥ 159
     Amount of goodwill at November 30, 2011                         —                        29          432                    —            —            461


                                                                                                          Thousands of U.S. dollars

                                                                                                                   2011
                                                                                                                                           Corporate/
                                                                    Japan             The Americas       Europe                  Asia                      Total
                                                                                                                                           Elimination

     Amortization of goodwill                                      $ 397                   $ 526       $ 1,115                   —            —          $ 2,038
     Amount of goodwill at November 30, 2011                          —                      372         5,538                   —            —            5,910




48   osG Corporation
The amount and amortization of negative goodwill allocated by business combination completed before April 1, 2010 are as follows:
                                                                                              Millions of yen

                                                                                                 2011
                                                                                                                         Corporate/
                                                   Japan       The Americas           Europe                    Asia                        Total
                                                                                                                         Elimination

Amortization of negative goodwill                   —             ¥ 2                     —                 ¥ 16             —             ¥ 18
Amount of negative goodwill
                                                    —                 15                  —                      96          —              111
 at November 30, 2011

                                                                                      Thousands of U.S. dollars

                                                                                                 2011
                                                                                                                         Corporate/
                                                   Japan       The Americas           Europe                    Asia                        Total
                                                                                                                         Elimination

Amortization of negative goodwill                   —            $ 26                     —               $ 205              —            $ 231
Amount of negative goodwill
                                                    —               192                   —                 1,231            —             1,423
 at November 30, 2011

For the year ended november 30, 2010
The Group’s business is specialized in the production and selling of cutting tools for industrial applications. Since the amount of
sales, operating income and total assets of the cutting tools business exceeds 90% of the amount of sales, operating income and
total assets of the Group, the information on operations by line of business is not disclosed.
     Information about operations by geographical segment and sales to foreign customers of the Group for the year ended
November 30, 2010 is as follows:

(a) operations by Geographical segment
The Group’s operations by geographical segment for the year ended November 30, 2010 are summarized as follows:
                                                                              Millions of yen
                                                                                                                       Eliminations/
                               Japan      The Americas       Europe                Asia                  Total                          Consolidated
                                                                                                                        Corporate

Sales to customers          ¥ 36,197      ¥ 11,295          ¥ 5,536           ¥ 16,485              ¥ 69,513                  —         ¥ 69,513
Interarea transfers           10,964           155               13                713                 11,845          ¥ (11,845)              —
       Total sales            47,161        11,450            5,549             17,198                 81,358            (11,845)          69,513
Operating expenses            44,303        10,423            5,024             14,112                 73,862            (11,874)          61,988
Operating income            ¥ 2,858       ¥ 1,027           ¥ 525             ¥ 3,086               ¥ 7,496            ¥      29        ¥ 7,525
Assets                      ¥ 79,451      ¥ 11,201          ¥ 5,191           ¥ 25,636              ¥ 121,479          ¥ (15,843)       ¥ 105,636

(b) sales to Foreign Customers
                                                                                                     Millions of yen
                                                           The Americas          Europe                   Asia            Other            Total

Foreign sales                                              ¥ 11,225            ¥ 5,617               ¥ 16,969               ¥1          ¥ 33,812
Net sales                                                                                                                                 69,513
Ratio of foreign sales to net sales                           16.1%                8.1%                  24.4%            0.0%            48.6%




                                                                                                                                  Annual Report 2011   49
     InDePenDent AuDItoRs’ RePoRt




50   osG Corporation
BOARd Of diReCtORS                                   inveStOR infORmAtiOn
(February 18, 2012)                                  (November 30, 2011)




directors                                            Corporate data
Chairman                                             Date Established:
                             teruhide Osawa
Chief Executive Officer
                                                     March 26, 1938
President
                             norio ishikawa          Capital:
Chief Operating Officer
Managing Director            tokushi Kobayashi       ¥10,404,381,114
Managing Director            masatoshi Sakurai       Headquarters:
Managing Director            Koji Sonobe             3-22, Honnogahara, Toyokawa,
Managing Director            toru endo               Aichi Prefecture 442-8543, Japan
Managing Director            nobuaki Osawa
                                                     URL: http://www.osg.co.jp/
                                                           http://www.osg-global.jp/
Managing Director            tetsuro Hayasaka
                                                     Telephone: (+81) 533-82-1113
Managing Director            Jiro Osawa              Fax: (+81) 533-82-1131
                                                     Number of Employees:
                                                     5,078 (Consolidated)
executive Officers
                                                     Number of Shares of Common Stock Issued
Executive Officer            Yushiro Osawa
                                                     and Outstanding:
Executive Officer            dane Winters            98,955,226 shares
Executive Officer            Katsuhiko Ono
                                                     Minimum Purchasing Unit of Shares:
Executive Officer            taeil Chung
                                                     100 shares
Executive Officer            toshitaka Yoshizaki
                                                     Number of Shareholders:
Executive Officer            Kenji matsumoto
                                                     10,977
Executive Officer            Koji takeo
                                                     Transfer Agent for Shares:
Executive Officer            mike Grantham
                                                     The Chuo Mitsui Trust and Banking Company, Limited
Executive Officer            Kazumasa Koike
Executive Officer            mitsuyoshi Hikosaka
Executive Officer            Hideaki Osawa           major Shareholders
                                                                                                   Number of Percent
                                                                                                  Shares Held Ownership
                                                                                                  (Thousands)   (%)

                                                     State Street Bank and Trust Company           3,858       4.06
Corporate Auditors
                                                     The Master Trust Bank of Japan, Co., Ltd.
Standing Corporate Auditor   Gohei Osawa                                                           3,759       3.96
                                                     (Trust Account)
Corporate Auditor            Koji Kato               Japan Trustee Service Bank, Ltd.
                                                                                                   3,526       3.71
                                                     (Trust Account)
Corporate Auditor            Hiroyuki Ohmori*1, *2
                                                     The Norinchukin Bank                          2,967       3.12
Corporate Auditor            Kyoshiro Ono*1, *2
                                                     OSG Agent Association                         2,843       2.99
*1 Outside Auditor                                   OSG Stock Holding Association                 2,708       2.85
*2 Independent Director
                                                     JUNiPeR                                       2,149       2.26
                                                     Sumitomo Mitsui Banking Corporation           2,100       2.21
                                                     Toyota Motor Corporation                      2,100       2.21
                                                     Nomura Trust and Banking Co., Ltd.
                                                                                                   2,068       2.18
                                                     (investment Trust Account)



                                                     Stock listings
                                                     Tokyo Stock exchange, Nagoya Stock exchange


                                                                                                 Annual Report 2011       51
3-22, Honnogahara, Toyokawa, Aichi Prefecture 442-8543, Japan
URL: http://www.osg.co.jp/
     http://www.osg-global.jp/




                                                                Printed in Japan

				
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