Annual Report2010
for the year ended March 31, 2010

Profile
Founded in 1907 in Muroran, Hokkaido — the centerof steel production in Japan — The Japan SteelWorks, Ltd. began as a joint venture with Britain’s Sir
W.G. Armstrong, Whitworth & Co., Ltd., and Vickers
Sons and Maxim, Ltd. with the goal of domestic
weapons production in Japan.
After World War II, the Company turned its sophisticated technologies and considerable experienceto the task of meeting peacetime needs. From steel
manufacturing and machinery development, to
new business fields such as automobiles, electricalequipment, information equipment, as well as heavy
industries such as electricity, steel, shipbuilding, andpetrochemicals, the Company widened its businesshorizons, and began to earn a worldwide reputation
as an integrated producer of steel materials andmanufacturer of machinery.
At present, meeting the needs of IT-relatedindustries, such as information and communication,
JSW’s global activities stretch beyond its existing
fields to encompass the development of such cuttingedge technologies as new energy, natural energy,
new materials, optics, and electronics. The Company
is also active in new fields such as environmental
businesses as a comprehensive material provider
and manufacturer of mechatronic products. Always
ahead of trends in society and industry, JSW is
preparing for sustained and vigorous growth in a wide
number of emerging areas to satisfy the demands of
its customers, shareholders and employees. In thisway JSW aims to enhance its enterprise value.

Contents
1
2
6
8
10
13
14
18
20
21
22
42
43

Financial Highlights (Consolidated)
Message from the President
Medium-Term Management Plan
(JGP2012)
Our Business Domains
Review of Operations
Research and Development
Corporate Governance
The Environment
Board of Directors and Corporate
Auditors
Financial Section
Financial Performance (Consolidated)
Corporate Directory
Offices & Plants

Forward-Looking Statements
The forward-looking statements in this annual
report reflect judgments based on information
available at the present time. Actual results
may differ widely due to various factors.

Financial Highlights (Consolidated)
THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Years ended March 31, 2010, 2009 and 2008

Thousands of
U.S. Dollars

Millions of Yen

2010

2009

2008

2010

Net sales .........................................................

¥201,680¥227,113¥220,851$2,167,670

Operating income ...........................................

32,18536,63332,475345,926

Net income......................................................

17,52816,034

17,484

188,392

Total assets.....................................................

322,986

296,909262,453

3,471,475

Total net assets...............................................

111,149

90,12585,231

1,194,637

ROE.................................................................

17.6%

18.3%

21.8%

Equity ratio ......................................................

34.0%

30.3%

32.4%

Net income......................................................

¥47.22¥43.19¥47.10$0.51

Cash dividends applicable to the year............

12.00

12.00

12.00

0.12

For the year:

At year-end:

Ratios:Amounts per share (yen and U.S. dollars):

Note: Amounts in U.S. dollars are presented solely for convenience and based on the rate of ¥93.04 = US$1.00,
the rate of exchange on March 31, 2010, the date of the Company’s most recent balance sheet.

47.22

25.00

12.50

43.19

37.50

33.71

2006 2007 2008 2009 2010

50.00

17.57

6,586

0

0

¥

47.10

17,52812,515

10,0005,000

60,00016,03415,000Net Income per Share¥ million
20,00017,484Net Income

201,680

227,113173,353

120,000

220,851

180,000

207,138Net Sales¥ million
240,000

02006 2007 2008 2009 20102006 2007 2008 2009 20101

Message from the President

Aiming to be the number one
global monozukuri company

Ikuo Sato
Representative Director &President

Business performance
In the fiscal year ended March 31, 2010, while global financial market confusion subsided
and economic recovery in emerging nations including China drove overseas demand,
Japan’s economy, appeared to have bottomed due to inventory adjustments and otherfactors. Nevertheless, with the strong yen and low capital investments along with
continuing deflation and still adverse employment conditions, the economic situation
remained unpredictable.
Amid this environment, and despite our focus on capturing demand in emerging
economies to further build up Group enterprise value, orders received in fiscal 2009 fell
13% year on year on a consolidated basis to ¥209,843 million (US$2,255 million), due toa weak performance by the Steel Products and Machinery Products businesses. The
lackluster year for these two divisions also pushed sales down 11% year on year on aconsolidated basis, to ¥201,680 million (US$2,167 million).
At the bottom line, we took proactive steps to lower our break-even point by slashing
the cost of sales (targeting variable costs and further pruning fixed costs), increasing
production volume and streamlining production through large-scale capital investments,
and rationalizing inventory and accounts receivable management to further strengthen our

2financial position. Nonetheless, operating income fell 12% year on year to ¥32,185 million(US$345 million) in light of the lower sales figure, and ordinary income slipped 13% to¥31,246 million (US$335 million). Net income climbed 9% to ¥17,528 million (US$188
million) due to a shrinking loss on disposal of tangible and intangible assets resulting from
capital investments recorded in the previous fiscal year and a decreasing loss on writedowns of investment securities. Orders were also down, therefore net sales declined in boththe Steel Products and Machinery Products segments, coming in at ¥209,843 million(US$2,255 million), a 13% year-on-year decrease.
Taking into consideration the large-scale investment in equipment being undertaken at
the Muroran Plant and the need to ensure a sufficient level of retained earnings, we havedecided to keep our annual dividend at the previous year’s level of ¥12 per share, with ¥6
per share paid mid-term, and ¥6 per share to be paid at the term-end.

Forecasts for fiscal 2010
Despite a recovery phase in Japan’s economic situation, its future remains uncertain due tofinancial instability and the appreciating yen. By segment, against a backdrop of growing
global energy demand including that from emerging countries, sales in the Steel Products
segment for components for thermal and nuclear power plants are expected to remain firm.
Demand for clad pipe for use in natural gas fields should also increase. In the Machinery
Products segment, while demand for wind turbine system equipment, which depends
heavily on future government policies, is expected to decline due to a temporary slow downin growth, demand for plastic injection molding machines should rise thanks to a pickup
in automotive demand in China and a step up in LED-related investments in Japan. Despite
stiff competition with European firms that have been heavily hit by fluctuating exchange
rates, demand for plastics manufacturing and processing machinery should increase owing
to the expected resumption of planned investment in China and other emerging countries.
Thanks to rising capacity utilization due to increased orders and extensive and rigorous
cost reduction activities, we can expect to see a rise in profitability. Even so, we expect
profits to decline temporarily owing to a higher depreciation burden associated with large
capital investments in the Muroran Plant, the effects of sharply rising raw material prices
and other factors.
Demand for components for nuclear power plants and clad pipes should remain brisk.
Although pressure vessels for oil refineries are expected to face stiffer competition due tothe appreciating yen, demand is expected to increase in emerging countries. In the
Machinery Products segment, despite an expected decrease in demand for wind turbine3

Message from the President
system equipment, the outlook is for higher demand for plastics manufacturing andprocessing machinery and plastic injection molding machines due to a resurging need forcapital investments in emerging countries.
As a result, the consolidated forecast for fiscal 2010 is net sales of ¥208,000 million,
operating income of ¥25,500 million, ordinary income of ¥25,000 million and net incomeof ¥14,000 million. We expect to pay an annual dividend in fiscal 2010 of ¥12 per share,with ¥6 per share to be paid mid-term, and ¥6 per share to be paid at the term-end, thesame as in fiscal 2009.
JSW will do its utmost to further develop and improve its proprietary technology andexpand its foundation for growth. To that end, I ask for the continued understanding andsupport of all shareholders.

New Medium-Term Management Plan “JGP2012”
Beginning from May 2010, we initiated “JGP2012,” our medium-term management planthat covers the three-year period starting from fiscal 2010. JSW’s business vision is tobecome a “company that creates change” with creative technology, and contributes to thedevelopment of society. The goal is to further develop monozukuri (good manufacturing
practices)—the source of corporate value—and to become the number one global
monozukuri company. (Please see pages 6 and 7, Medium-Term Management Plan
(JGP2012), for more details)

Business Projections for Fiscal Year Ending March 31, 2011(¥ billion)
FY20084FY2009(A)

FY2010 forecast(B)

Year-on-year change(B) – (A)Net sales

227.1

201.6

208.0

6.4

Operating income

36.6

32.1

25.5

(6.6)

(Operating margin)

16.1%

16.0%

12.3%

Ordinary income

35.9

31.2

25.0

(6.2)

Net income

16.0

17.5

14.0

(3.5)

Net income pershare (yen)

43.19

47.22

37.72

(9.5)

Dividend per share
(yen)

12.0

12.0

12.0

0.0

Forecast for FY2010• Sales of steel products, plastics manufacturing and processing machinery, and molding machines
are projected to exceed the previous year, while sales of wind turbine systems and other machinery are expected to decrease. As a result, net sales are projected to increase by 6.4 billion yen overthe previous year.
• Operating income is projected to decrease by 6.6 billion yen from the previous year. This ismainly due to the increase in depreciation expenses in the Steel Products Segment and higher
raw material prices.

June 2010

Ikuo Sato
Representative Director & President

TopicsNew 14,000-ton hydraulic press installed at Muroran Plant
Against a background of growing demand for steel products,
JSW’s equipment investments total ¥80.0 billion (¥50.0 billion in
the first phase of the project and ¥30.0 billion in the second).
We have completed the No.2 Forging Shop, and the No.2
Heat Treatment Shop, key facilities in the first phase of ourinvestment plan, and launched operations of a second hydraulicpress that can handle up to 14,000 tons. The first phase isscheduled to complete during fiscal 2010, ending March 2011,
and the second phase in the second half of fiscal 2011.

Our new 14,000-ton hydraulic press at the Muroran
Plant, which has now come onstream.

5

Medium-Term Management Plan (JGP2012)
JSW has drawn up a medium-term management plan (JGP2012) that covers
the three-year period from fiscal 2010 through fiscal 2012.
Basic Policies
JSW’s business vision is to become a “company that createschange” with creative technology, and contributes to thedevelopment of society. Under this vision, to further develop
monozukuri—the source of corporate value—and continue toprovide products and services that win customer trust, JSW
has instituted the following basic policies.

1) Strengthen product competitiveness and raise earnings
2) Execute strategic investments and achieve results3) Pass technologies and skills to the next generation anddevelop human resources
4) Create a culture of innovation
5) Build a stronger foundation to support our businessactivities

Our Corporate Ideal
Since its founding in 1907, JSW has accumulated rich reservesof sophisticated technologies and skills by meeting a wide
range of market needs in the steel and machinery fields. JSW
has inherited innovator’s DNA, which enables it to work diligently toward the further improvement of these reserves.
As a company that has made monozukuri its foundation,
JSW has set its sights on becoming the “number one global

monozukuri company” (see note below) to further meet thewide-ranging needs of this day and age.
Note:
Number one global monozukuri company: A company that creates the world’s
most advanced creative technologies (differentiated technologies) in the areasof materials and mechatronics, provides the world’s best products that continue
to meet market and customer needs, and can compete in global markets overthe long-term.

Numerical Targets (Consolidated)(1) Outline of Medium-Term Management Plan Corporate Objective:“No. 1 Global Company in Monozukuri” (customer-centered manufacturing)
Vision— Company that Creates Change —A company that contributes to the development of society by using proprietary technologies to create changeManagement Philosophy• Always provide customers with excitement and inspiration • Seek ongoing innovation • Achieve sustained profits through cooperation with societyManagement Policies• Strengthen product competitiveness and boost profitability • Implement strategic investment and pursue results• Transfer technologies and skills to develop new generation of human resources • Establish a corporate culture for innovation• Strengthen the foundations for corporate activities

Priority Objectives• Increase presence in growth markets • Continue strategic investment• Develop markets for non-price competition through product differentiation strategies • Develop strategies for winning in price-competition markets• Develop global human resources • Strengthen the foundations for corporate activities

No. 1 Global Company in Monozukuri
JSW is committed to utilizing its proprietary materials and mechatronics technologies (differentiating technologies)that stand at the forefront of the world to supply No. 1 products meeting the demands of markets and customers,
thereby moving forward as a company capable of battling it out in global markets over the medium to long term.

6(2) Outline of Medium-Term Management Plan:
Timeframe and Numerical Goals
Title:JGP2012 (JSW Growth Plan FY2010 – FY2012)
Duration:
FY2010 – FY2012
Numerical goals:
FY2010JGP2012Net sales: 201.6 billion yen
Operating income: 32.1 billion yen

Net sales: 260.0 billion yen or more
Operating income: 37.0 billion yen or more

Sales

Operating income

Steel products
Machinery products
Regional development
Total
Steel products
Machinery products
Regional development
Expenses that could not
be disposed or allocatedTotal

Ordinary income
Net income(¥ million)
2011 forecast 2012 forecast 2013 forecast
109,000
108,000
120,000
97,200120,000
138,000
1,800
2,000
2,000
208,000
230,000
260,000
28,00024,00030,5004,300
8,500
13,500
700
700
700

2009
107,883
117,462
1,767
227,11331,473
11,435743

2010
101,736
98,164
1,779
201,680
31,6406,535
733(7,019)(6,723)(7,500)(7,200)(7,700)36,63335,94916,03432,18531,246
17,52825,50025,00014,00026,00025,50014,50037,00036,50021,000Priority Issues by Segment• Steel Products
1) Thermal and nuclear power products
As the world’s leading and most trusted business with thenumber one market share, we will expand our businessscale by executing our capital investment plan as scheduled(now in progress), and swiftly unleash our competitive
power.
2) Pressure vessels for oil refineries
Being the world’s number one business supplying inevitable components for oil refineries, we will further strengthen
our advantages in technology, quality and delivery as amanufacturer that handles every phase of the total production process, from materials to welding and final assembly.
3) Clad steel plates and pipes
As a global business that supplies a diverse range of products that address natural gas and desalination demand, we
will stabilize and expand business through unrivaled production capacity and more high value-added products.

• Machinery Products
1) Plastics manufacturing and processing machinery
As a comprehensive plastics machinery business with alineup of market leading products, we will develop differentiated products and technologies and further expand
globally.
2) Molding machinery
As a comprehensive molding machinery business focusedon medium- and large-scale machinery, we will address
demand in emerging countries and pursue synergies with
Meiki Co., Ltd.
3) Wind turbine system equipment
As a business with the number one market share in Japanfor high-performance products and improved maintenancesystems, we will flexibly accommodate changing market
demands while winning greater customer trust withimproved maintenance systems.

• Regional Development
As a business that ensures stable earnings, we will continue
to maintain the value of Company-owned land.

7

Our Business Domains
JSW and the JSW Group carry out awide range of business activities in a

Steel Products

variety of fields. In the steel products
area, these activities include the production and sale of steel castings and forgings and the production and sale of steel

Sales Composition

plates and structures. In the machinery
area, these activities include the production and sale of plastics and other50.4%

machinery, magnesium alloy injection
molding machines and molded products,
IT equipment, and wind turbine systemequipment, which is a business area
developed in recent years. In addition,
we are active in regional development
and information systems as part of ourprogram of business diversification.

Machinery Products

Sales Composition

48.7%

Regional Development
Sales Composition

0.9%

8

Steel Castings and Forgings

Main Business Lines

Making steel in electric furnaces, we produce a broad range of cast products and steel ingots
for forged products. In ingots for forgings, we have one of the world’s largest production
capacities, of 650 tons. Our range of presses and hammers of various types and sizes, including two 14,000-ton hydraulic presses, ensures that we can deliver forgings in any needed
shape. After undergoing heat treatment, machining and finishing, the forged products areused in the electric power generation industry (fossil fuel, hydroelectric and nuclear), andthe steel-making, oil refinery and industrial machinery sectors. In addition to being a leading
global supplier of extra large forged products, our plant produce a wide range of high-quality
small- and medium-sized steel cast and forged products.

Production and sale of products for power generation,
steel-making, chemical machinery, nuclear powerrelated machinery and equipment, and roll molds

Steel Plates and Structures

Main Business Lines

With one of Japan’s largest 4-thick plate reversing rolling mills, we can roll high-quality,
extremely thick, wide, and long steel plates (maximum thickness: 350 millimeters, maximum
width: 4.8 meters, maximum length: 20 meters). Using advanced manufacturing technology
we now mainly produce high-quality clad steel plates and clad steel pipes using clad steel
plates. In addition, by integrating various forged steel products and leveraging our state-ofthe-art welding technologies and facilities, we produce a range of pressure vessels for verylarge welded structures such as oil refineries and petrochemical plants, in an integrated process from raw materials to finished products. All of our products are used in a wide range ofindustrial applications in Japan and overseas, giving this business a unique profile.

Production and sale of products for oil refining, petrochemical, general chemical, and power generationindustries, as well as a wide range of pressure vessels,
clad steel plates, and clad steel pipes

Plastics Machinery

Main Business Lines

Having established a microcellular foam processing technology for greater weight reduction and heat retention,
we lead the competition in developing products that address the growing sophistication and diversity of plastics
materials. We have built up a solid position as a comprehensive plastics machinery manufacturer involved ineverything from pelletizers to processing machinery.
In injection molding machines, we are meeting current market demand for greater molding precision, productivity and environment-friendliness by upgrading basic performance of existing injection molding systems
and developing energy-saving, electrically-driven injection molding machines.
To respond to diversifying needs in these product markets, we have established a Technology Development
Center and engage in wide-ranging consultation with product users, enabling us to put in place an integrated
development system to cope with changing demand, from manufacturing to processing machinery.

Production and sale of plastic injection molding
machines, plastics production and processing machinery (including pelletizers, compound extruders, films
and sheet manufacturing equipment, and others) andblow-molding machines

Other Machinery

Main Business Lines

Supported by a proprietary technologies and facilities, JSW produces industrial machinery fora wide range of demand, including defense equipment, power plant equipment, magnesium
alloy injection molding machines, aluminum die-casting machines, laser annealing systems,
rolling stock parts, wind turbine system equipment, and environmental facilities.

Production, sale, and maintenance of fluid machinery,
hydraulic machines, machinery for the production ofelectronic components and displays (laser annealing
systems, rubbing machines, etc.), metal-working
machinery (presses, manipulators, etc.), magnesium
alloy injection molding machines, aluminum die-castingmachine, wind turbine system equipment, JSW-type
automatic tightlock couplers / W-type vehicle shock
absorbers, and defense equipment

Regional Development

Main Business Lines

Centered on the construction of office buildings, commercial facilities, and rental condominiums on Company-owned land, we engage in regional development operations with the objective of ensuring stable earnings through the utilization of idle assets. Our goal is to raise ourearnings and revitalize local communities through a more effective application of our assets,based on the reserves of expertise we have accumulated in our business operations.

Rental of property, and development/subdivision forsale

9Review of Operations

Steel Products
Steel Castings and Forgings Sector/Steel Plates and Structures Sector

Shell Flange Used for Pressure Chamber for
Nuclear Power Plant

Performance in fiscal 2009

94,342120,011

102,700

70,000118,007

105,000

105,299

Orders Received¥ million
140,000

35,00002006 2007 2008 2009 2010

Sales

¥ million
120,000

101,736

64,36676,30592,613

107,883

90,00060,00030,00002006 2007 2008 2009 201010

Clad Steel Plate

Orders decreased ¥25,668 million, or 21%, to ¥94,342 million (US$1,013
million). Despite large projects for clad pipes for natural gas pipelines andincreased orders for components used in nuclear power plants, total orders
declined on the back of intensifying price competition for pressure vessels foroil refineries and clad steel plates due to the yen’s appreciation, and the effects
of fewer projects and project postponements.
Sales were down ¥6,147 million, or 6%, to ¥101,736 million (US$1,093
million). This was attributable to a sharp decline in orders from projects forclad steel plates, despite growing sales of components for thermal and nuclear
power plants and brisk sales of pressure vessels for oil refineries.
Operating income edged up ¥167 million, or 1%, to ¥31,640 million(US$340 million). Despite lower earnings from decreased sales, the increase
was mainly due to higher production efficiency that supported a strong orderbacklog from the previous term forward.

Forecast for fiscal 2010
We expect sales to reach ¥109.0 billion in fiscal 2010, given the order backlogs
for thermal and nuclear power plant products and pressure vessels for oil refineries, and the recovery in demand for clad steel plates and pipes.
Operating income is projected to decrease by ¥3.6 billion from the previous year to total ¥28.0 billion. Economic benefits of greater operating efficiency
from higher levels of production are likely to be outweighed by the increase indepreciation expenses related to large-scale capital investments.

Machinery Products
Plastics Machinery Sector/Other Machinery Sector

Polyolefin Extruder/Pelletizer

Performance in fiscal 2009

113,711

118,643

124,11880,000144,461

120,000

119,347

Orders Received¥ million
160,000

40,00002006 2007 2008 2009 2010

98,164

117,462

126,155

106,906

127,866

Sales¥ million
120,000

90,000Die-casting Machine

60,00030,00002006 2007 2008 2009 2010

Orders slipped ¥4,931 million, or 4%, to ¥113,711 million (US$1,222 million). A contributing factor was a drop in orders for plastic injection molding machines, especially for automotive and consumer electronics industries,
despite large project orders for wind turbine system equipment and solid
demand for plastics manufacturing processing machinery.
Sales fell ¥19,297 million, or 16%, to ¥98,164 million (US$1,055 million). Despite a sizable increase from project orders for wind turbine systemequipment made in the previous fiscal year, the decrease was mainly due toplastics manufacturing and processing machinery and plastic injection molding machines being affected by waning capital investments. Operating income
tumbled ¥4,900 million, or 43%, to ¥6,535 million (US$70 million).

Forecast for fiscal 2010
Sales of machinery products are expected to total ¥97.2 billion, down ¥0.9 billion year-on-year, due to a falloff in shipments of wind turbine system equipment pending launch of new products. This is likely to outweigh the sales
increase from recovering demand for plastics manufacturing and processing
machinery and molding machines.
We forecast operating income of ¥4.3 billion, a ¥2.2 billion decline yearon-year due to increased competition in our mainstay products in the wake ofthe financial crisis triggered by the Lehman Brothers collapse.

11Review of Operations

Regional Development
Regional Development

Business Office Development(Fuchu Intelligent Park)

Sales

3,000

Performance in fiscal 2009

¥ million
4,000

2,965

2,000

2,000

1,779

1,767

1,000

2,082

0

2,081

1,789

1,766

2,082

1,985

1,000

Orders totaled ¥1,789 million (US$19 million), sales came to ¥1,779 million (US$19
million) and operating income amounted to¥733 million (US$7 million).

3,000

3,010

Orders Received¥ million
4,000

JSW Apartment Building Development(Fuchu, Tokyo)

02006 2007 2008 2009 20102006 2007 2008 2009 2010

Capital Expenditures
Capital expenditures for the reporting period totaled ¥31,864 million (US$342 million), with the majority spent on installation,
improvement and maintenance work on a variety of production facilities.
Details of capital expenditure by individual business segment are as follows.
In the steel products business, capital expenditures totaled ¥30,251 million (US$325 million). This expenditure consisted
largely of investments to construct new buildings and equipment for the forging and heat treatment facilities at Muroran Plant, toinstall new equipment and upgrade existing equipment at the same Plant, as well as upgrade equipment at steel-making plants.
In the machinery products business, capital expenditures came to ¥1,178 million (US$12 million) as a result of investments toraise machine processing efficiency at our Hiroshima Plant.
In the regional development business, capital expenditure consisted primarily of the upgrading of facilities on real estate forrental purposes, totaling ¥42 million (US$0.4 million).
Capital expenditures unallocable to individual segments came to ¥391 million (US$4 million).

12

Research and Development

Muroran Research Laboratory

Research and development activities were almost entirely
funded by the Company (The Japan Steel Works, Ltd.).
Combined spending on research and development for the
Steel Products business and the Machinery Products business amounted to ¥4,141 million (US$44 million).
As a materials and mechatronics company, we strive
to develop new products and production techniques using
our own technology, while also actively promoting widespread technical alliances and joint development in aneffort to put new products and technologies into effect as
quickly as possible.
In terms of the direction of research and development,
our Research & Development Headquarters continues topromote cooperation with individual business divisions
in order to: (1) improve the capabilities, performance andreliability of our core products and (2) develop products
and businesses in new business fields based on our coreand differentiated technologies.
Our Research & Development Headquarters encompasses our headquarters (located at Head Office), theMuroran Research Laboratory (situated on the premisesof the Muroran Plant), and the Hiroshima ResearchLaboratory (located at the Hiroshima Plant).
Our basic research and development policy is as follows.
1. Promoting the development of new products and businesses by focusing on the technological fields of newenergy & energy savings, information & telecommunications, nanotechnology & materials, and new production
technologies, which are directly related to our current
business activities. We aim to develop our business byfocusing on increasing and upgrading our core technologies while pursuing increased collaboration between
the Research & Development Headquarters and ourbusiness divisions.
2. Promoting not only basic research aimed at future technologies and the needs of 21st century society but also
research on component technologies used in existingproducts, we will develop these into research and development projects that will translate into new products
and businesses in the future as well as into innovations
and new possibilities for existing products.
3. In product development for Steel Products, we arefocusing on energy fields and on further expanding thenumber of our many number one products while at

Hiroshima Research Laboratory

the same time commercializing products in new fields.
In Machinery Products, we are aggressively promoting
the expansion and upgrade of industrial machinery
including plastics machinery and IT equipment. We willprioritize investments in business resources by defining
a framework for commercialization with an eye toward
mergers and acquisitions and the forging of alliances.

Overview of R&D activities by businesssegment
GGG Steel Products
In terms of the development of materials-related products,
we have been carrying out materials development in suchareas as clad steel pipes for natural gas transportation, highalloy materials for high-efficiency thermal power generation, forged steel products for next-generation nuclear
power plants, and high-performance nonferrous alloys, aswell as manufacturing process technology development.
We have also been pursuing technological development
to create more advanced materials and component technologies for existing products. For fiscal 2009, spending
on steel product research and development totaled ¥1,631
million (US$17 million).
GGG Machinery Products
In the field of machinery-related products, we have beendeveloping low-cost production technologies for high performance magnesium alloy injection molding machines,
the commercialization of aluminum die-casting devices,and high-precision molding technology for plastic extruder
and injection molding machinery. We have also beendeveloping higher performance compressors and equipment for making film, as well as laser applications, including systems for cutting-edge laser annealing equipmentused in the production of TFT (thin-film transistor) liquid
crystal displays, and other applications for laser devices.
In the field of new energy, we have set out to design windturbine blades for use at wind power generation plants,
establish various reliability-related analytical technologies and develop more advanced component technologies
for power generators. Spending on machinery productresearch and development totaled ¥2,510 million (US$26
million) for fiscal 2009.

13

Corporate Governance
Basic Stance on Corporate Governance
At JSW, we believe we must earn the trust of all our stakeholders, including our shareholders and employees,
not merely to raise our enterprise value, which comprises both the Company’s economic value and its value
to society in the broader sense, but to make possible our very existence.
We have, therefore, designed a set of management structures to ensure an effective system of corporate
governance, and have taken all necessary measures to facilitate the appropriate disclosure of corporate
information so as to achieve the level of management transparency demanded by investors today.

An Outline of our Corporate
Governance System
The Company employs the traditional statutory auditor
system, comprising 13 directors and four statutory
auditors, two of whom are outside auditors. The Boardof Directors debates and passes resolutions on mattersof importance to the management of the Company,
including basic management policies and matters
stipulated by legal statute. The Board is also responsible
for overseeing the management of day-to-day
operations by the heads of departments and plants, andother managers of similar rank.
Meetings are also held by the Executive Board,
composed of the Company’s president, executive vicepresidents, senior managing directors, and any otherperson as shall be designated by the president. This
committee, augmented when deemed necessary by theheads of operating divisions, plant general managers
and managers at corporate headquarters to form theManagement Council, analyzes the businessenvironment, monitors the progress of business plans,and ensures that knowledge is widely shared among theCompany’s management staff. In also ensures that theopinions of specialists are heard and reflected in the
final decisions made by the Company’s top
management. The activities of these bodies ensure that
corporate governance is conducted effectively, and, inparticular, that the principles of legal and ethical risk
management and compliance are properly observed.
The Company’s statutory auditors (hereafter“corporate auditors”) attend meetings of the Board of
Directors, the Executive Board, the Management Council,

14

and other important meetings. They also pay regularinspection visits to all the Company’s plants and offices,and to Group subsidiaries, and exercise strict oversightwith regard to the execution of their duties by theCompany’s directors, such as by receiving important
reports when needed from the aforementioned divisions
and exchanging views with directors and key employees.
Based on this, they express their views to managementfrom an objective and neutral point of view.

Our Internal Control
and Risk Management System
JSW regards it as a management issue of crucial
importance to have an effective internal control system
in place to ensure the correct performance of business
operations. We are, therefore, working to improve oursystem of internal control in line with our Basic Policy
on Internal Control Systems resolved at the meetings ofthe Board of Directors as well as detailed measures
decided each year for dealing with specific internal
control issues. In addition, we will respond to socialchanges and work to achieve a more appropriate andefficient system by properly reviewing internal control
issues and responses. The points below delineate thefundamental stance adopted by the management of
JSW toward the issue of internal control, and theprogress achieved thus far in strengthening theCompany’s internal control system.
1. Improving the internal control system
In addition to setting up a specialist unit dedicated tosupervising the Company’s internal control system,
the Internal Control Committee holds meetings both
regularly and ad hoc as deemed necessary.
2. Observance of legal regulations and theCompany’s Articles of Incorporation
JSW does not limit compliance to the prevention ofillegal acts and the observance of legal regulations
and the Company’s Articles of Incorporation. It
views compliance in the broader context of generalsocial responsibilities and the upholding of a wide
variety of rules and regulations, which include theCompany’s Vision, its Management Philosophy, andAction Guidelines. The key to success for complianceactivities is that the directors take the initiative insetting an example and practicing truthfulness, whileraising employee awareness on compliance issues
through training sessions and other means.
The implementation of compliance activities isoverseen by a director who has been appointed tosupervise CSR activities. Committees have been
formed to oversee internal controls, security andexport controls, environmental management, safety
and hygiene (hereafter collectively referred to as “thecommittees”). These committees undertake activities
companywide.
Meanwhile, the planning and administration
departments of each business unit closely collaborate
with the corresponding departments of management
planning, personnel training, accounting and financing,
general affairs and legal affairs within the headquarters(hereafter, “headquarters departments”) to carry out
compliance duties. In this way, we have achieved adivision of duties from the overall management
control function, and through mutual cooperation,
management controls are overseen in every area.
We have established a department responsiblefor internal controls to ensure that the Company’s
overall administrative operations observe all laws andregulations, as well as in-house rules. In addition toperiodic audits, this department conducts spot audits
at other times, as deemed necessary. The results ofthese audits are reported to the president.
We have also created a system of internal andexternal routes for reporting and discussing

compliance violations when discovered. The person
filing the report is guaranteed anonymity. Violators,
regardless of whether they are directors or staff, will
be punished accordingly, and measures will be taken
swiftly to prevent any recurrence.
The Company has clarified in writing its policyof strict opposition to the activities of criminalorganizations or individuals. As specific measures
within its internal control system to ensure
noninvolvement with such criminal elements, theCompany has mandated careful background checks
on business partners, the inclusion in basic contracts
drawn up with other companies of clauses specifying
the exclusion of known criminal organizations or
individuals, the requirement to report all contacts
with such criminal elements, and the establishmentof a single dedicated office for the investigation ofsuch reports and the management ofcountermeasures.
3. Safeguarding and management of information
We have appointed a chief information security
officer (CISO) to ensure the safeguarding andmanagement of information. In accordance withinhouse regulations governing the safeguarding of
documents and other information and basic data
security guidelines, the minutes of general shareholder
meetings, meetings of the Board of Directors andStrategy Council meetings, as well as written requests
for approval of managerial decisions (rinshinsho),and other important documents are stored in written
form or in the Company’s computer database, where
they are held in safekeeping. We also store andmanage information relating to our internal controls
system, to ensure an adequate degree of disclosure ofcorporate information.
4. Risk management
The risk management system confirms that thepresident, the division chief, the general plant
managers, the directors in charge of departments
within headquarters, and other executives arecarrying out their duties within the scope of theirauthority, as stipulated by job authority regulations
and the system for managerial decisions (ringisho),15

Corporate Governanceand that they control the risks involved in the loss ordamage to authority in the execution of duties.
Important items pertaining to risk management are
discussed at meetings of the Board of Directors or of
the Strategy Council.
To manage the wide variety of risks to which theCompany is exposed, a director of the Company has
been placed in charge of overall risk management.
Controls are being implemented across divisionboundaries by the Internal Controls Committee andother committees. Simultaneously, each business
unit’s planning and administration departments, aswell as the plants’ departments and headquarters
departments work together with the departments
responsible for overseeing every area of risk
management. Reports are made on the status of risk
management and the suitability of the measures inplace at meetings of the Board of Directors and theStrategy Council.
Risk managers are assigned within each divisionat the headquarters, within each business unit, andat each plant. These risk managers ascertain theappropriateness of existing measures and work toeliminate everyday risks. In the case of critical risk
situations, a crisis management headquarters isestablished to provide the appropriate response. In
this way, we are responding to risks under bothordinary and extraordinary circumstances.
5. Ensuring efficient performance of duties
The president is the chief executive officer, anddirectors have been assigned to departments within
the headquarters and our plants. In addition,
directors have been put in charge of business units
that are responsible for the profitability planningand budget controls of each product division. The
directors must perform their duties in an efficientmanner within the scope of their authority, as
specified in the job authority regulations for theposts of president, director in charge, business unit
chief, and general plant manager, or else indicatedunder the ringisho system for managerial decisionmaking. High-priority items are brought before theBoard of Directors or the Strategy Council for
discussion, approval and reporting.

16

At JSW, the management drafts a list of common
goals to be shared companywide by directors andemployees through incorporation in the Company’s
Medium-Term Management Plan, and the businessplans for each business unit. Each director develops
specific measures for achieving these goals. A
division of duties is undertaken in line with theinhouse regulations, and the specific measures areplanned and implemented. Each director conducts areview of the results and provides periodic progress
reports, as well as impromptu reports at meetings ofthe Board of Directors, the Strategy Council and theManagement Council. All members of the JSW
management are working to ensure impartial
personnel evaluations.
The Company has prepared an outline of duties
to be executed by each director of the Board, and theorder in which these duties are to be performed. Also
indicated are the types of work experience,
knowhow, specialized skills, and technology
required. These documents are revised on an
ongoing basis to reflect the actual situation, taking
into account all varieties of laws, regulations and risk
countermeasures. In addition, the appropriate
educational activities and training are recommended
for each director and employee.
6. Ensuring appropriate management conduct at
Group companies
The Company encourages its subsidiaries to follow
its Vision, Management Philosophy and Action
Guidelines, and also create their own systems ofinternal controls. In addition, the Company supports
the autonomy of their management.
The Company has drafted regulations
concerning the operation and management of its
subsidiaries. The responsibilities of each division of
the Company will be made clear with regard to thecontrols governing operations and the nurturing ofoperations of subsidiaries. At the same time, theCompany is creating a system whereby reports andnotifications can be made regarding subsidiaries’
decisions on important issues and other matters ofconcern, and data can be collected.
Corporate governance system has been adopted

whereby directors and statutory auditors can be
assigned to JSW subsidiaries. To ensure oursubsidiaries’ strict adherence to all laws andregulations, as well as in-house company regulations,
we request that these companies conduct in-house
audits, both periodic and spot audits, through thedepartments in charge of each subsidiary, and also by
a department responsible for the internal auditing ofsubsidiaries. We will also directly audit operations
and provide guidance for improving internal controlsof subsidiaries.
7. Appointing staff to assist corporate auditors, andensuring the independence thereof
The Company appoints staff from among its
employees to assist the corporate auditors in theperformance of their duties. The opinions of theauditors themselves are sought with respect to theappointment and dismissal of the said staff and allother personnel-related measures such as
performance evaluation and bonuses, and no action
is taken without the auditors’ agreement, so as toensure the independence of the auditors’ assistantsfrom the influence of the directors of the Company.
8. System for submission of reports to the auditors by
the directors and employees of the Company
In addition to attending meetings of the Board of
Directors, the Executive Board, and the Management
Council, as well as other important managerial
meetings, the corporate auditors also request memos
and the minutes of decision-making meetings fortheir perusal, and hold regular meetings (as well as
ad hoc meetings when deemed necessary) with thedirectors and managerial-level employees. The
auditors may request reports from directors or
employees at any time as they deem this necessary.
The timing of these reports and the method to be
used are agreed beforehand through discussions
between the auditors and the directors or employees.
The corporate auditors of the Company conduct
audits of the Company’s subsidiaries to ascertain thestate of management of these companies. This isdone through close liaison with the corporate
auditors of the subsidiaries and the staff of theCompany’s divisions responsible for supervision ofsubsidiaries, as well as the Internal Audit Divisionand other head office divisions.
9. Ensuring effective performance of audits by the
corporate auditors
The directors and employees of the Company are fully
aware of the importance of audits performed by the
corporate auditors, and wherever possible give priority
to cooperating with the auditors in their duties.
The corporate auditors have the authority torequest the cooperation of the Company’s Internal
Audit Division, other head office divisions, and allother divisions of the Company in the performanceof audits.
The corporate auditors collaborate closely withthe accounting auditors (an external accounting firm
meeting). The corporate auditors have the authority
to employ the services of legal advisors and otheroutside experts as appropriate.

Policy Regarding Large-Scale
Purchases of Company Shares
By resolution of a meeting of the Board of Directors of
The Japan Steel Works, Ltd. held on September 10,
2007, the Company instituted a set of rules to beobeyed and procedures to be followed by any party
seeking to make a tender offer for the purchase of 20%
or more of the total shares issued and outstanding of theCompany. These rules and procedures were adopted
under the name of Measures Against Large-Scale Share
Acquisitions (Measures to Prevent Takeover).
Subsequent to this resolution, an amended versionof these measures (hereinafter “the present plan”) waspresented to the Company’s 82nd Regular General
Meeting of Shareholders held on June 27, 2008, and theagenda item was approved by vote of a majority ofshareholders present.
The present plan is a preemptive measure to preventa takeover which utilizes the gratis issue of sharesubscription rights, and is effective for a three-year
period ending with the Regular General Meeting of
Shareholders to be held in June 2011.

17

The Environment
Environmental Policy
The Company recognizes that as a responsible member of society it has an important duty to operate
in harmony with the environment. We engage in business with the aim of contributing to the sustainable
development of society through production activities that respect environmental integrity, and by developing environmental preservation technologies.

Action plan
1. We aim to carry out environmental tasks in an
organized way, and to implement environmental
preservation activities continuously.
2. We will set appropriate objectives and targets for
reducing the burden our activities impose on theenvironment.
3. We aim to provide society with products and services
that contribute to the preservation of the environment, as detailed below.
(1) Through our products we endeavor to increase
our value to society in terms of environmental
protection, safety and hygiene.
(2) We provide products and services to reduce
environmental loads by obtaining a clear grasp ofenvironmental needs and technical development.
Common policy for business facilities
Taking into consideration its business activities, thelocal community and the surrounding environment,each plant sets out its own environmental policy,
objectives and targets using methods compliant withinternational standards and operates in line with thefollowing guidelines.

1. Respect laws and regulations and agreements wehave concluded with external parties.
2. Prevent pollution and reduce and appropriately treat
waste.
3. Improve “resource productivity” through implementation of energy efficiency, resource efficiency, andrecycling.
4. Inform employees and other companies residing
within our facilities of our policies and require theircooperation.
Environmental Management System
The Environmental Management Committee,
headed by the Director in charge of Environmental
Management, determines matters such as annual environmental management policies and programs of environmental activities for the whole company. Each plant
has its own Environmental Supervisory Committee,
which promotes environmental management activities
and works hand in hand with other Group companies
including affiliates to reduce the environmental impactof the Company’s activities.
President

Environmental
Management Committee

Environmental
Supervisory Committees

Chief Environmental
Management Supervisor/
Environmental Management
Committee Chairman(Director in charge ofEnvironmental Management)

Environmental Management
Plant Supervisors(General Plant Managers)

Special Committees• Energy Saving Committees• Product Committees

Departments

18

Environmental Management
Supervisors

Affiliated companies

Medium-Term Plan for Environmental Management Activities (Fiscal 2009 – 2012)
We are promoting environmental management activities at our Muroran, Hiroshima and Yokohama plants. Social
awareness has changed greatly regarding the need to deal with such issues as the mitigation of global warming,saving energy, and processing waste.
We are working to attain the targets in our medium-term plan for environmental management activities covering the four years from fiscal 2009 – 2012. In fiscal 2009, the opening year of the plan, measures were taken ateach plant to meet these targets.
With regard to the observance of laws and regulations, we implement environmental patrols at environmentalrelated facilities, plants, and other sites in the vicinity. We confirm that all environmental preservation-related laws
and regulations are being observed, and that the environmental management system is functioning properly. To
effectively communicate the results of the environmental patrols, we carry out employee training programs foraffiliates and collaborating companies, as well as at our headquarter.

Environmental Preservation Activities
The following section introduces some of JSW’s wide range of environmental preservation activities.
Reducing atmospheric emission of nickel compounds
At the Muroran Plant, we are working to ensure that atmospheric emission ofnickel compounds are within prescribed standards by making the necessary
revisions to operations, processes, and equipment, and through the introduction of new equipment.
Working together with the local municipal government since fiscal 2005,
we have created our own voluntary controls, and have been undertaking various activities. In 2009, we installed dust collectors in four locations to addressenvironmental issues.
Safety and disaster prevention activities
We regularly implement environmental patrols at each plant to verify management status and audit data relating to specific air- and water-related facilities,
pretreatment facilities, oil-water separation tanks and other facilities.

Community contribution
As part of our social contribution activities, we conduct a cleanup campaign
along the main streets in the vicinity of our Yokohama Plant in April each year.
The cleanup campaign is conducted along roads between a nearest Stationand our Yokohama Plant’s main gate. Employees collect empty cans and pickup plastic bottles and cigarette butts. The trash is then separated and disposedof. We intend this to be an ongoing activity.

19

Board of Directors and Corporate Auditors(as of June 25, 2010)

Board of Directors and Corporate Auditors
Representative Director & President

Directors

Ikuo Sato

Tamotsu Hayakawa

Representative Director & Executive Vice President
Hisao Iwashita

General Plant Manager of Muroran Plant, General Manager of
MR-21 Promotion Office

Yutaka Mizutani

Assisting president, In charge of Safety & Hygiene Control, In charge of
Personnel Department and Finance & Accounting Department, CFO

Representative Director & Senior Managing
Directors
Atsushi Igarashi
Assisting president, In charge of CSR & Risk Management, Secretary
Office, General Affairs Department, Business Administration Department,
and Export Control Administration

Yuichi Yoshino
Assisting president, In charge of Research & Development Headquarters,
Laser & Plasma System Office, Environmental Management, CTO

Managing Directors
Yoshitomo Tanaka

General Plant Manager of Yokohama Plant, General Manager of
NY Promotion Office

Akira Kadota
Deputy Director of Steel Business Division, General Manager ofPressure Vessel & Equipment Sales Department

Hiroshi Hamao
Director of Ordnance Business Headquarter

Corporate Auditors
Seiichi Uehara
Kenji Uetani
Yasuhisa Naka
Hiroo Suto

Director of Injection Moulding Machinery DivisionNobuyuki Toda
Deputy in charge of CSR & Risk Management, CISO, General Manager ofCorporate Planning Office, Director of Urban Development Division

Koichi Murao
Director of Machinery Business Division

Etsuo Murai
Director of Steel Business Division

Takao Ishido
General Plant Manager of Hiroshima Plant

Organization

Corporate Planning Office
Personnel Dept.

General Meeting of Shareholders
Secretary Office
General Affairs Dept.
Finance & Accounting Dept.
Board of Directors

Domestic Offices
Business Administration Dept.
Overseas Offices

Executive Board

Research & Development
Headquarters
Muroran ResearchLaboratory

PresidentInternal
Auditors Office
Board of Corporate
Auditors

20

Hiroshima ResearchLaboratory

Steel Business Division

Muroran Plant

Machinery Business Division

Yokohama Plant

Injection Moulding Machinery Division

Laser & Plasma System Office
Ordnance Business Headquarters
Urban Development Division

Hiroshima Plant

Financial Section
THE JAPAN STEEL WORKS, LTD.

Six-Year SummaryYears ended March 31

Millions of Yen

Consolidated

2010

2009

2008

2007

2006

2005

Net sales ...................................
Net income ................................
Total assets ...............................

¥201,680¥227,113¥220,851¥207,138¥173,353¥158,274

17,52816,034

17,484

12,515

6,586

3,284

322,986

296,909262,453

232,444

196,656

184,683

Total net assets .........................

111,149

90,12585,23175,621

66,03958,075

Amounts per share (yen):
Net income ............................

¥47.22¥43.19¥47.10¥33.71¥17.57¥8.70

Non-Consolidated

2010

2009

2008

2007

2006

2005

Net sales ...................................
Net income ................................
Total assets ...............................

¥175,333¥196,030¥189,318¥177,493¥145,555¥129,948

16,665

15,44915,878

12,233

6,026

2,429

298,783

277,301

243,433

215,693

180,734

168,808

Total net assets .........................

101,615

82,44977,95869,90760,602

52,899¥44.90¥41.62¥42.77¥32.95¥16.07¥6.39¥12.00¥12.00¥12.00

¥9.00

¥5.00

¥3.00

Millions of Yen

Amounts per share (yen):
Net income ............................
Cash dividends applicable tothe year ................................

Contents
21 Six-Year Summary
22 Financial Performance (Consolidated)
24 Consolidated Balance Sheets
26 Consolidated Statements of Income
27 Consolidated Statements of Changes in Net Assets
28 Consolidated Statements of Cash Flows
29 Notes to Consolidated Financial Statements
41 Report of Independent Auditors

21

Financial Performance (Consolidated)
Operating Results
Net Sales
Sales in the Machinery Products Business were sharply
down in the reporting period. Net sales were down
¥25,433 million, or 11%, year on year, to ¥201,680
million (US$2,167 million).

Net Income
Net income increased ¥1,494 million, or 9%, to¥17,528 million (US$188 million). The increase wasmainly due to a shrinking loss on disposal of tangible
and intangible assets associated with capital investments posted in the previous fiscal year and a loss on
write-downs of investment securities.

Operating Income
Operating income declined ¥4,448 million, or 12%,to ¥32,185 million (US$345 million). This was
mainly attributable to aggressive cost-cutting including
improved variable costs and further reductions in fixed
costs as well as efforts to lower the break-even point.
Other factors included efforts to raise production volume
and efficiency through large-scale capital investments,
strengthening our financial position through more
efficient balance between inventory turnover and notes
and accounts receivable. Nevertheless, operating income
declined in line with lower net sales.

Overseas Sales
Sales in East Asian markets increased 1.5% from theprevious year, to ¥45,013 million (US$483 million).
Sales in North America jumped 62.7% to ¥20,256
million (US$217 million), while sales in other regions
declined 54.6% to ¥28,633 million (US$307 million).
Total overseas sales decreased 21.7% to ¥93,903 million (US$1,009 million), accounting for 46.6% of theCompany’s net sales on a consolidated basis.

Cash Flows
Cash and cash equivalents stood at ¥45,603 million(US$490 million) at the reporting term-end, up ¥5,698
million year on year after adjusting noncash items.
This was attributable to the posting of income before
income taxes and minority interests in the amount of¥29,603 million, compared with ¥27,630 million for

Oversea sales% of total sales

11,500

0

5,854

0

2006 2007 2008 2009 2010

23,00026,3191435,63093,90328

34,50045,6684202006 2007 2008 2009 2010

22

103,937

85,92175,000119,853

37.9

46.6

¥ million
46,00042,04047.1
41.5

112,500

37,500%56

52.8

Net Cash Provided by Operating Activities¥ million
150,000

65,776

12,8760Overseas Sales

32,18532,47521,00010,50036,63331,50024,678Operating Income¥ million
42,000the previous term, in addition to proceeds from shortterm bank loans. These positive factors more than offset
capital investments for the enhancement of production
efficiency and expenditures for the purchases of investment securities.

2006 2007 2008 2009 2010

the previous term. This was due mainly to an investmentof ¥35,892 million in tangible assets for the purpose ofraising production efficiency.

Cash Flow from Operating Activities
Net cash provided by operating activities amounted
to ¥45,668 million (US$490 million), compared with
¥26,319 million in the previous term. This was mainly
due to the posting of ¥29,603 million in income before
income taxes and minority interests, as well as depreciation
expenses in the amount of ¥14,422 million, which was nota physical cash outflow, and a decrease in working capital
due to advances received and other factors.

Cash Flow from Financing Activities
Net cash used in financing activities amounted to ¥2,687
million (US$28 million) compared with a net cash inflowof ¥10,614 million for the previous term. This net cash
outflow resulted from an outflow of ¥4,454 million in
dividend payments, and repayment of long-term bankloans, which more than exceeded the inflow of ¥5,467
million from short-term bank loans.

Cash Flow from Investing Activities
Net cash used in investing activities amounted to ¥37,287
million (US$400 million), up from ¥33,148 million for

Financial Position
Total assets as of the end of March 2010 stood at ¥322,986
million (US$3,471 million), up ¥26,077 million, or 8.8%,
from the previous term-end. This was due to an increasein property, plant and equipment from the acquisitionof such tangible fixed assets as machinery and transport
equipment as a result of capital expenditures, mainly in the
Steel Products Business, despite a decrease in current assets
owing to a decline in notes and accounts receivable.
Liabilities at the reporting term-end stood at ¥211,837
million (US$2,276 million), up ¥5,054 million, or 2.4%,
over the previous term-end. This was largely attributable toan increase in short-term bank loans. Interest-bearing debt
stood at ¥58,440 million (US$628 million), up ¥5,052
million from the previous fiscal year.

Net assets at the reporting term-end totaled ¥111,149
million (US$1,194 million), for an increase of ¥21,023
million, or 23.3%, over the previous term-end.

53,38836,00028,592

32,07618,00058,44054,00046,954

Interest-Bearing Debt

¥ million
72,00002006 2007 2008 2009 2010

30,000

%
36.0

ROE

90,12585,23175,621

66,03960,000Equity Ratio

90,000111,149

Net Assets¥ million
120,000

33.5

32.4 32.4

27.0

2006 2007 2008 2009 2010

21.8

34.0
30.3

17.7

18.0

18.0

12.0

9.0

6.0

0

0

%
24.0

18.3

17.6

2009

2010

10.7

0

2006

2007

2008

2009

2010

2006

2007

2008

23

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
March 31, 2010 and 2009

Thousands of
U.S. Dollars (Note 3)

Millions of Yen

ASSETS

2010

2009

2010

¥ 45,646¥ 39,957$ 490,606

708
41,734
1,228(281)
69,627
4,206
8,648
171,518

903
48,622143(278)
72,586
3,499
8,823
174,258

7,610
448,560
13,199(3,020)748,356
45,206
92,9491,843,487

Less accumulated depreciation ..........................................................
Property, plant and equipment, net .............................................

11,44884,634
119,904
8,551
11,564
236,102(124,936)
111,166

9,642
71,42895,302
8,075
15,546
199,996(108,669)
91,327123,044909,652
1,288,736
91,907124,291
2,537,640(1,342,820)
1,194,819

Intangible assets ...................................................................................

1,236

1,318

13,285Investments, long-term loans and other assets:
Investments in unconsolidated subsidiaries and affiliates .....................
Investment securities (Notes 15 and 20) ..............................................
Other long-term loans receivable .........................................................
Deferred tax assets (Note 12) .............................................................
Other assets........................................................................................
Less allowance for doubtful accounts .................................................
Total investments, long-term loans and other assets ............
Total assets ..............................................................................

737
31,710
61
1,934
5,036
(415)
39,064¥322,986

691
21,450
61
2,017
6,011
(226)
30,004¥296,909

7,921
340,821656
20,787
54,127(4,460)419,862$3,471,475

Current assets:
Cash on hand and in banks (Notes 8, 11 and 20) ...............................
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates .......................................
Trade (Notes 8 and 20) ..................................................................
Other .............................................................................................
Less allowance for doubtful accounts ............................................
Inventories (Note 4) ............................................................................
Deferred tax assets (Note 12) .............................................................
Other current assets ...........................................................................
Total current assets ...................................................................

Property, plant and equipment, at cost (Notes 5, 6 and 8):
Land ..................................................................................................
Buildings and structures ......................................................................
Machinery and equipment ..................................................................
Leased assets ....................................................................................
Construction in progress ....................................................................

The accompanying notes are an integral part of these statements.

24

Thousands of
U.S. Dollars (Note 3)

Millions of Yen

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term borrowings (Notes 8 and 20) ..............................................
Current portion of long-term debt (Notes 8 and 20) ..............................
Notes and accounts payable:
Unconsolidated subsidiaries and affiliates ...........................................
Trade (Note 20) ..................................................................................
Other ..................................................................................................
Advances received for products ...........................................................
Accrued income taxes (Note 12) ..........................................................
Other current liabilities (Note 8) ............................................................
Total current liabilities ......................................................................
Long-term liabilities:
Long-term debt (Notes 8 and 20) ..........................................................
Accrued retirement benefits (Note 14):For employees ....................................................................................
For directors and corporate auditors ...................................................
Deferred tax liabilities (Note 12) ............................................................
Other long-term liabilities (Note 8) ........................................................
Total long-term liabilities ..................................................................

2010¥ 13,722
12,694

2009

¥

2010

6,198
4,447

$ 147,485
136,43634
36,197
7,556
42,131
6,436
23,965
142,738

95
42,457
10,03344,068
4,038
23,526
134,866365
389,048
81,212452,827
69,175257,577
1,534,157

32,02542,742

344,207

8,520
161
2,661
25,73069,0986,303
185
522,68071,917

91,574
1,730
28,601
276,548
742,670

Net assets:
Shareholders’ equity (Note 17):
Common stock:
Authorized — 1,000,000,000 shares
Issued — 371,463,036 shares ............................................................
Capital surplus .....................................................................................
Retained earnings .................................................................................
Treasury stock, at cost (261,340 shares in 2010 and
234,126 shares in 2009) ....................................................................
Total shareholders’ equity ..............................................................

19,694
5,425
82,701

19,694
5,424
69,627

211,672
58,308888,876(213)
107,607(182)
94,563(2,289)1,156,567

Valuation, translation adjustments and other:
Net unrealized gain (loss) on investment securities...............................
Net deferred loss on hedges ...............................................................
Translation adjustments ......................................................................
Total valuation, translation adjustments and other ...........................

2,949
(213)
(425)
2,310

(3,868)(379)(435)(4,683)31,696(2,289)(4,568)24,828

Minority interests ...............................................................................
Total net assets ................................................................................
Total liabilities and net assets ......................................................

1,231
111,149¥322,986

246
90,125¥296,909

13,231
1,194,637$3,471,475

25

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income
For the years ended March 31, 2010 and 2009

Millions of Yen

2010

2009

2010

Net sales ................................................................................................
Cost of sales (Note 13) ...........................................................................
Gross profit ....................................................................................
Selling, general and administrative expenses (Note 13) .....................
Operating income ...........................................................................
Other income (expenses):
Interest and dividend income...............................................................
Interest expense .................................................................................
Other, net (Note 9) ..............................................................................

¥201,680
143,708
57,97125,78632,185¥227,113
161,560
65,552
28,91936,633$2,167,670
1,544,583
623,076
277,150
345,926445(694)(2,333)(2,582)695(440)(9,259)(9,003)

4,783(7,459)(25,075)(27,752)

Income before income taxes and minority interests ...........................
Income taxes (Note 12):Current ................................................................................................
Deferred .............................................................................................
Minority interests in net income of consolidated subsidiaries............
Net income (Note 19) ............................................................................

29,603

27,630318,175

12,142(89)
22¥ 17,528

11,612(39)
23¥ 16,034

130,503(957)
236$ 188,392

The accompanying notes are an integral part of these statements.

26

Thousands of
U.S. Dollars (Note 3)

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2010 and 2009

Thousands of
U.S. Dollars(Note 3)

Millions of Yen

Millions of Yen

2010

2009

2010

2010

Balance at beginning of year .....

¥ 19,694¥19,694$ 211,672

Balance at beginning of year .....

Balance at end of year ..............

¥ 19,694¥19,694$ 211,672

Capital surplus:

Net changes in items other thanthose in shareholders’ equity ...

Balance at beginning of year .....

¥ 5,424¥ 5,422$

Balance at end of year ..............

Disposal of treasury stock .........

1

1

Balance at end of year ..............

¥ 5,425¥ 5,424

Common stock:

58,29811$

58,308¥ 69,627¥58,492$ 748,356

—

111

—

Net income ...............................

17,52816,034

188,392

Cash dividends paid ..................

(4,454)(5,011)(47,872)

Balance at end of year ..............

¥ 82,701¥69,627$ 888,876

¥

(182)

¥ (137) $(1,956)

Purchases of treasury stock ......

(32)

(47)

(344)

Disposal of treasury stock .........

1

2

11

(213)

¥ (182) $(2,289)Treasury stock, at cost:

Balance at end of year ..............

2010

¥

Total shareholders’ equity:

¥

(379)

¥ (254) $(4,074)

165

(124)

1,773

¥

(213)

¥ (379) $(2,289)¥(435)¥ (160) $(4,675)

9

(275)

97

¥

(425)

¥ (435) $(4,568)Translation adjustments:
Balance at beginning of year .....
Net changes in items other thanthose in shareholders’ equity ...
Balance at end of year ..............

Change in the scope of
consolidation ...........................

Balance at beginning of year .....

2009

Deferred loss on hedges:

Retained earnings:
Balance at beginning of year .....

Thousands of
U.S. Dollars(Note 3)

Total valuation, translation
adjustments and other:
Balance at beginning of year .....

¥ (4,683)¥ 1,514$ (50,333)

Net changes in items other thanthose in shareholders’ equity ...

6,994(6,198)75,172

Balance at end of year ..............

¥ 2,310¥ (4,683) $24,828

¥

¥

2,644

Minority interests:
Balance at beginning of year .....

246

Net changes in items other thanthose in shareholders’ equity ...

984

Balance at end of year ..............

¥ 1,231

¥

244

$

2
246

10,576$

13,231

Balance at beginning of year .....

¥ 94,563¥83,472$1,016,369

Net income ...............................

17,52816,034

188,392

Balance at beginning of year .....

¥ 90,125¥85,231$ 968,669

Cash dividends paid ..................

(4,454)(5,011)(47,872)

Net income ...............................

17,52816,034

188,392

Purchases of treasury stock ......

(32)

(47)

(344)

Cash dividends paid ..................

(4,454)(5,011)(47,872)

Purchases of treasury stock ......

(32)

(47)

(344)

Total net assets:

Change in the scope of
consolidation ...........................

—

111

—

Disposal of treasury stock .........

3

4

32

Change in the scope of
consolidation ...........................

—

111

—

Balance at end of year ..............

¥107,607¥94,563$1,156,567

Disposal of treasury stock .........

3

4

32

Net unrealized gain (loss) on
investment securities:
Balance at beginning of year .....

¥ (3,868)¥ 1,930$ (41,574)

Net changes in items other thanthose in shareholders’ equity ...

6,818(5,798)73,280

Balance at end of year ..............

¥ 2,949¥ (3,868) $31,696

Net changes in items other thanthose in shareholders’ equity ...

7,979(6,196)85,759Balance at end of year ..............

¥111,149¥90,125$1,194,637

The accompanying notes are an integral part of these statements.

27

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2010 and 2009

Millions of Yen

Operating activities:
Income before income taxes and minority interests .............................
Depreciation and amortization .............................................................
Loss on impairment of goodwill ...........................................................
Interest and dividend income ..............................................................
Interest expense ..................................................................................
Equity in (earnings) losses of affiliates ..................................................
Loss on abandonment of investments .................................................
Loss on write-downs of investment securities......................................
Amortization of net retirement benefit obligation at transition ...............
Loss on disposal of tangible and intangible assets ..............................
Gain and loss on sales of property, plant and equipment.....................
Changes in operating assets and liabilities:
Trade assets (Note 20) ....................................................................
Trade liabilities ................................................................................
Inventories (Note 4) .........................................................................
Other ..............................................................................................
Subtotal ......................................................................................
Interest and dividends received ...........................................................
Interest paid ........................................................................................
Income taxes paid ..............................................................................
Net cash provided by operating activities ..............................
Investing activities:
Increase in tangible and intangible assets ............................................
Decrease in tangible and intangible assets .........................................
Purchases of investment securities ......................................................
Proceeds from sales of investment securities .....................................
Reimbursement of long-term deposits on contracts ............................
(Increase) decrease in short-term loans receivable...............................
Collection of long-term loans receivable ..............................................
Purchase of investment of unconsolidated subsidiaries .......................
Proceeds from purchase of investments in subsidiaries resulting inchange in scope of consolidation ......................................................
Purchases of common stock of affiliates..............................................
Other...................................................................................................
Net cash used in investing activities ......................................
Financing activities (Notes 8 and 20):
Increase in short-term borrowings ......................................................
Decrease in short-term borrowings ....................................................
Increase in long-term dept ..................................................................
Decrease in long-term dept ................................................................
Redemption of bonds and debentures ................................................
Cash dividend paid..............................................................................
Acquisition of treasury stock ...............................................................
Proceeds from sales of treasury stock .................................................
Repayments of finance lease obligations .............................................
Other...................................................................................................
Net cash provided by (used in) financing activities ................
Effect of exchange rate changes on cash and cash equivalents .......
Increase in cash and cash equivalents ...............................................
Cash and cash equivalents at beginning of the year ..........................
Increase due to inclusion in consolidation...........................................
Cash and cash equivalents at end of the year (Notes 11 and 20) .......
The accompanying notes are an integral part of these statements.

28

Thousands of
U.S. Dollars (Note 3)

2010

2009

2010

¥29,603
14,512
—
(445)
693
(1)
680
105
765
847
(11)

¥27,630
11,963
2
(695)
440
—
—
6,067
765
2,109
(11)

$318,175
155,976—(4,783)
7,448
(11)
7,309
1,129
8,222
9,104
(118)

8,672
(7,708)
4,957
3,012
55,683447(698)(9,763)45,6687,734(7,058)(5,771)533
43,707696(434)(17,650)
26,31993,207(82,846)
53,27832,373
598,485
4,804(7,502)(104,933)
490,843(35,892)
20(1,673)
19
(436)
(1)
—
(35)

(22,200)
133(10,411)
4
(426)
300
152
(50)

(385,770)
215(17,982)
204(4,686)
(11)
—
(376)

754
(3)
(38)
(37,287)

—
(363)
(287)
(33,148)

8,104
(32)
(408)
(400,763)

5,467
—
900
(2,322)—(4,454)(32)
3(2,241)(6)(2,687)
5
5,698
39,904—¥45,603—(20)
20,000(2,105)(30)(5,011)(47)
4(2,172)(2)
10,614(114)
3,672
36,13399¥39,904

58,760—9,673(24,957)—(47,872)(344)
32(24,086)(64)(28,880)54
61,242428,891—$490,144

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements
Fiscal year 2009 (Year ended March 31, 2010)

1. Basis of Presentation
The Japan Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintain their books of account in conformity with the financial
accounting standards of Japan, and its foreign subsidiaries maintaintheir books of account in conformity with those of their respective
countries of domicile.
Effective April 1, 2008, the Company adopted the “Practical
Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements” (PITF No. 18). In
accordance with PITF No. 18, the accompanying consolidated financial
statements for the year ended March 31, 2009 have been preparedby using, the accounts of foreign consolidated subsidiaries preparedin accordance with either International Financial Reporting Standards(IFRS) or accounting principles generally accepted in the United States
as adjusted for certain items including those for goodwill, actuarial
differences and capitalized development costs.
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally acceptedin Japan, which are different in certain respects as to the applicationand disclosure requirements of IFRS, and have been compiled from theconsolidated financial statements prepared by the Company as requiredby the Financial Instruments and Exchange Law of Japan.
As permitted by the Financial Instruments and Exchange Law ofJapan, amounts of less than one million yen have been omitted. As
a result, the totals shown in the accompanying consolidated financial
statements (both in yen and in U.S. dollars) do not necessarily agreewith the sums of the individual amounts.
Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year’s
presentation.
2. Summary of Significant Accounting Policies(a) Principles of consolidation and accounting for investments inunconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include theaccounts of the Company and any significant companies controlled
directly or indirectly by the Company.
Companies over which the Company exercises significant influencein terms of their operating and financial policies have been accounted
for by the equity method. All significant intercompany balances andtransactions have been eliminated in consolidation.
As of March 31, 2010, the numbers of consolidated subsidiaries,and subsidiaries and affiliates accounted for by the equity method were
37 and 1 (36 and 1 in 2009), respectively. Effective March 31, 2010,
Meiki Co., Ltd has been in the scope of consolidation, because theCompany’s ownership increased to 50.96%.
Certain foreign subsidiaries are consolidated on the basis of fiscal
periods ended December 31, and one domestic subsidiary’s year end
is January 31, both of which differ from that of the Company. However,the necessary adjustments have been made if the effect of the difference is material.
Investments in subsidiaries and affiliates which are neither
consolidated nor accounted for by the equity method are carried at costor less. Where there has been a permanent decline in the value of suchinvestments, the Company has written them down.
Differences, between the cost and the underlying net equity at fairvalue of investments in consolidated subsidiaries and in companies
accounted for by the equity method have been amortized by straightline method over the next five years after acquisition and are included inselling, general and administrative expenses.

(b) Foreign currency translation
The balance sheet accounts of the foreign consolidated subsidiaries
are translated into yen at the rates of exchange in effect at the balance
sheet date, except for the components of net assets excluding minority
interests which are translated at their historical exchange rates.
Revenue and expense accounts are translated at the average rates of
exchange in effect during the year. Differences arising from the translation are presented as translation adjustments and minority interests in
its consolidated financial statements.
Revenue and expense items arising from transactions denominatedin foreign currencies are generally translated into yen at the rates of
exchange in effect at the respective transaction dates.
All monetary assets and liabilities denominated in foreign currencies
are translated into yen at the rates of exchange in effect at the balance
sheet date and differences arising from the translation are included in
the consolidated statements of income.
(c) Cash equivalents
Short-term investments with a maturity of three months or less whenpurchased which can easily be converted to cash and are subject tolittle risk of change in value are considered to be cash equivalents.
(d) Inventories
Real estate for sale, finished products and work in process are statedat cost determined principally by the specific identification method.
Raw materials are stated at cost determined principally by the moving
average method.
On July 5, 2006, the Accounting Standards Board of Japanissued Statement No. 9, “Accounting Standard for Measurement of
Inventories.” The standard requires that inventories held for sale in
the ordinary course of business be measured at the lower of cost or
net selling value, which is defined as the selling price less additional
estimated manufacturing costs and estimated direct selling expenses.
The replacement cost may be used in place of the net selling value if
appropriate. The standard also requires that inventories held for trading
purposes be measured at the market price.
Effective the year ended March 31, 2009, the Company and its
domestic consolidated subsidiaries adopted this accounting standard.
As a result, operating income decreased by ¥919 million and income
before income taxes and minority interests decreased by ¥1,038 million
compared with the corresponding amounts which would have beenrecorded under the previous method.
(e) Short-term investments and investment securities
Trading securities are carried at fair value and held-to-maturity securities
are carried at amortized cost. Marketable securities classified as othersecurities are carried at fair value with changes in unrealized holding
gain or loss, net of the applicable income taxes, included directly in
net assets. Non-marketable securities classified as other securities arecarried at cost. Cost of securities sold is determined by the moving
average method.
(f) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for possible bad debts
at an amount estimated based on the historical experience with bad
debts on normal receivables plus an additional allowance for specificuncollectible amounts determined by reference to the collectability of
individual doubtful accounts.
(g) Provision for warranties for completed construction
The Company provides a provision for warranties for completed29

construction by estimating losses on future possible claims.
(h) Provision for losses on orders received
The Company provides a provision for losses on orders received, butwhich had not been delivered by the fiscal year end, in the estimatedamount of total losses anticipated in the following fiscal year andthereafter for losses deemed certain to be incurred and whose amounts
can be reasonably estimated.
(i) Property, plant and equipment and depreciation
Property, plant and equipment is stated on the basis of cost.
Depreciation of property, plant and equipment is determined by the
declining-balance method over the estimated useful lives of the respective assets, except that the straight-line method is applied to buildings.
With regard to the depreciation method of leased assets, the straightline method is applied where the lease period is taken as the estimateduseful life and the residual value is zero.
Significant renewals and additions are capitalized at cost.
Maintenance and repairs are charged to income as incurred.
(j) Bond issuance expenses
Bond issuance expenses are charged to income as incurred.
(k) Leases
Effective the year ended March 31, 2009, the Company and its
domestic subsidiaries adopted the “Accounting Standard for Lease
Transactions” (Corporate Accounting Standards No. 13 (June 17, 1993
(First Committee of the Business Accounting Council), revised on March
30, 2007)) and the “Implementation Guidance of Accounting Standards
for Lease Transactions” (Implementation Guidance of Corporate
Accounting Standards, No. 16 (January 18, 1994 (Accounting System
Committee of the Japanese Institute of Certified Public Accountants),
revised on March 30, 2007)), and finance lease transactions which do
not stipulate the transfer of ownership of the leased assets to the lessee
are accounted for as normal course of sales and purchase transactions.
The effects of this change on operating income, income before
income taxes and minority interests were not material for the year ended
March 31, 2009.
(l) Retirement benefits
An employee whose employment is terminated is entitled, in mostcases, to a lump-sum severance payment determined by reference tothe current basic rate of pay, length of service and the conditions underwhich the termination occurs.
Accrued retirement benefits for employees at March 31, 2010 and2009 have been provided primarily at an amount calculated based on
the retirement benefit obligation and the fair value of the pension plan
assets at the balance sheet dates, as adjusted for the unrecognized
net retirement benefit obligation at transition, prior service cost andunrecognized actuarial gain or loss. The retirement benefit obligation is
attributed to each period by the straight-line method over the estimatedyears of service of the eligible employees. The net retirement benefit
obligation at transition is being amortized principally over a period of ten
years by the straight-line method.
Prior service cost is being amortized as incurred by the straight-line
method over ten years, which is shorter than the average remaining
years of service of the eligible employees.
Actuarial gain or loss is amortized in the year following the year in30

which the gain or loss is recognized by the straight-line method over ten
years, which is shorter than the average remaining years of service ofthe employees participating in the plans.
Effective the year ended March 31, 2010, the Company and its
domestic subsidiaries adopted the “Partial Amendments to AccountingStandards for Retirement Benefits (Part 3)” (Corporate AccountingStandards No. 19 July 31, 2008).
The effects of this change on operating income, income before
income taxes and minority interests were not material for the year ended
March 31, 2010.
(m) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated balance sheets at March 31, 2010 and 2009 with respect to thedifferences between financial reporting and the tax bases of the assets
and liabilities, and are measured using the enacted tax rates and laws
which will be in effect when the differences are expected to reverse.
(n) Research and development expenses
Research and development expenses are charged to income whenincurred.
(o) Revenue recognition
Revenues generally are recognized on sales of products at thetime of shipment. For construction contracts effective the year
ended March 31, 2010, the Company and its domestic subsidiaries
adopted the “Accounting Standards for Construction Contracts”(Corporate Accounting Standards No. 15 December 27, 2007) and the“Implementation Guidance of Accounting Standards for Construction
Contracts” (Implementation Guidance of Corporate AccountingStandards, No. 18 December 27, 2007), the construction recognizedproduct of certainty which are recognized by the percentage-ofcompletion method, and except for those construction which arerecognized by the completed-contract basis.
The effects of this change on operating income, income before
income taxes and minority interests were not material for the year ended
March 31, 2010.
(p) Derivatives financial instruments
Derivatives financial instruments are carried at fair value. Gain or loss onderivatives designated as hedging instruments is deferred as a component of net assets until the loss or gain on the underlying hedged items
is recognized. Foreign currency receivables and payables are translated
at the applicable forward foreign exchange rates if certain conditions are
met. In addition, the related interest differential paid or received underinterest-rate swaps utilized as hedging instruments is recognized over
the terms of the swap agreements as an adjustment to the interest
expense of the underlying hedged items if certain conditions are met.
(q) Consumption tax
Accounting treatment of consumption tax is tax excluded method.
3. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollars is included solely forconvenience, as a matter of arithmetic computation only, at ¥93.04 =U.S.$1.00, the approximate rate of exchange prevailing on March 31,
2010. This translation should not be construed as a representation that
all amounts shown could be converted into U.S. dollars at such rate.

4. Inventories
Inventories at March 31, 2010 and 2009 consisted of the following:
Millions of Yen
2010
2009

Real estate for sale ..................
Finished products ....................
Work in process ......................
Raw materials and supplies .....
Total...................................

¥

33
1,370
62,187
6,036¥69,627

¥

43
1,577
65,137
5,829¥72,586

Thousands of
U.S. Dollars
2010

355
14,725668,390
64,875$748,356

5. Depreciation
Depreciation expense on property, plant and equipment for the years
ended March 31, 2010 and 2009 consisted of the following:

Depreciation expense ..............

¥14,422¥11,460

Thousands of
U.S. Dollars
2010$155,009

6. Advanced Depreciation
Accumulated advanced depreciation related to government grants
received has been deducted directly from the acquisition costs ofcertain tangible fixed assets (plant, machinery and equipment). Suchaccumulated depreciation at March 31,2010 and 2009 is summarized
as follows:
Millions of Yen
2010
2009

Accumulated advanced
depreciation expense .............

¥951

¥308

Thousands of
U.S. Dollars
2010$10,221

7. Contingent Liabilities
Contingent liabilities at March 31, 2010 and 2009 consisted of thefollowings:
Millions of Yen
2010
2009

As endorsers of trade notes receivable:
Endorsed to other .................
As guarantors of loans:
Muroran Environmental Plant
Service Co., Ltd. ................
Gotsu Wind Power Co., Ltd. ...
Meiko Co., Ltd. .....................
Contingent liabilities foruncollected receivables inleasing company .................
Medical Corporation Bokoi ....
Employees and other.............
Total...................................

¥

72

¥

81

Thousands of
U.S. Dollars
2010$

The work in process which have likelihood of loss by the construction
contracts was offset with Provision for losses on order received of ¥353
million ($3,794 thousand) at March 31, 2010.

Millions of Yen
2010
2009

8. Short-Term Borrowings and Long-Term Debt
All short-term borrowings, with interest at annual rates ranging from
0.63% to 4.625% at March 31, 2010 and 0.84% to 1.895% at March
31, 2009, were unsecured.
Long-term debt at March 31, 2010 and 2009 was as follows:

Thousands of
U.S. Dollars
2010

$

774

591
1,881
4

616
—
—

6,352
20,217
43

64
1,500
633
¥4,746—2,000
781¥3,480688
16,122
6,804$51,010

Millions of Yen
2010
2009

Loans from banks andinsurance companies withinterest at annual rates ranging
from 1.0% to 2.26% ...............
Less those maturing within
one year .................................
Lease obligations......................
Less those maturing within
one year .................................
0.92% straight bonds,
due 2010 ................................
Less those maturing within
one year .................................
Long-term indebtedness
reflected in the consolidatedbalance sheets .......................

¥28,837¥30,239$309,942

(667)
5,882

(2,322)
6,951(7,169)63,220(2,026)(2,125)(21,776)

10,00010,000107,481(10,000)—(107,481)¥32,025¥42,742$344,207

The aggregate annual maturities of long-term debt and lease obligations
subsequent to March 31, 2010 are summarized below:
Long-term debt

Lease obligations

Year ending March 31,

Millions of Thousands of
Yen
U.S. Dollars

Millions of Thousands of
Yen
U.S. Dollars

2011....................................
2012....................................
2013....................................
2014....................................
2015....................................
2016 and thereafter .............

¥10,667 $114,650
635
6,825
13,670 146,926
10,370 111,457
2,550
27,408945
10,157¥2,026 $21,776
1,674 17,992
1,258 13,521
525
5,643
247
2,655
149
1,601

The assets pledged as collateral for long-term debt at March 31, 2010
and 2009 were as follows:
Millions of Yen
2010
2009

Cash on hand and in banks ......
Notes receivable-trade .............
Property, plant and equipment,
at net book value ....................

¥ 206
102
4,533

¥

Thousands of
U.S. Dollars
2010

—
—

$ 2,214
1,096

9,723

48,72131

9. Other Income (Expenses) — Other, Net
The details of “Other, net” in “Other income (expenses)” for the years
ended March 31, 2010 and 2009 were as follows:
Millions of Yen
2010
2009

Loss on sales or disposal ofproperty, plant andequipment ..............................
Gain on sales of property,
plant and equipment...............
Gain on sales of raw
materials and supplies ............
Amortization of net
retirement benefit obligation attransition ................................
Provision for warranties forcompleted construction ..........
Loss on write-downs ofinvestment securities ..............
Impairment loss ........................
Loss on abandonment ofinvestments ............................
Other, net ................................
Total...................................

Thousands of
U.S. Dollars
2010¥ (847)¥(2,112)$ (9,104)

12

14

129

214

225

2,300

Millions of Yen
2010
2009

Cash on hand and in banks
in the consolidatedbalance sheets .......................
Investment with a maturity of
three months or less from thedate of acquisition ..................
Time deposits with maturities ofmore than three months .........
Cash and cash equivalents inthe consolidated statements ofcash flow ................................

2010.........................................
2011 and thereafter ..................
Total...................................

50

137

537

(93)

(190)

(1,000)¥45,603¥39,904$490,144

(338)

(93)

(3,633)(105)—(6,067)(2)(1,129)—(b) Significant transactions without cash flow
Regarding finance lease transactions, assets and liabilities that havebeen capitalized by the Company and its domestic consolidated
subsidiaries amounted to ¥1,088 million ($11,694 thousand) and ¥1,145
million ($12,307 thousand) for the year ended March 31, 2010 and¥6,933 million and ¥6,951 million for the year ended March 31, 2009.

(680)
105
¥(2,333)—(529)¥(9,259)(7,309)1,129$(25,075)(c) Summary of assets acquired and liabilities assumed through theacquisition of shares of Meiki Co., Ltd. For the year ended March 31,
2010, relating acquisition costs and net disbursement

Millions of Yen

Thousands of
U.S. Dollars¥1,0272,138¥3,166$11,038
22,979$34,028

Millions of Yen

¥ 765
1,485
¥2,251

11. Cash Flow Information(a) Cash and cash equivalents
The reconciliation between Cash and cash equivalents in the accompanying consolidated statements of cash flows and cash on hand and inbanks in the accompanying consolidated balance sheets at March 31,
2010 and 2009 are summarized as follows:

32$490,606(7,448)Year ended March 31, 2009
Future minimum lease payments subsequent to March 31, 2009 under
non-cancelable operating leases are summarized as follows:Year ending March 31,¥39,957(693)

Year ended March 31, 2010
Future minimum lease payments subsequent to March 31, 2010 under
non-cancelable operating leases are summarized as follows:

2011.........................................
2012 and thereafter ..................
Total...................................

¥45,646(693)

10. Leases

Year ending March 31,

Thousands of
U.S. Dollars
2010

Current assets ..........................
Noncurrent assets ....................
Current liabilities .......................
Noncurrent liabilities..................
Negative Goodwill.....................
Minority interests ......................
Company’s interest at the dateof acquisition ..........................
Acquisition costs of
Meiki Co., Ltd. ........................
Cash and cash equivalents(Meiki Co., Ltd.) ......................
Net proceeds from acquisitionof Meiki Co., Ltd. ....................

Millions of Yen

Thousands of
U.S. Dollars¥4,364
2,175(3,223)(1,340)
(358)
(968)

$46,905
23,377(34,641)(14,402)(3,848)(10,404)(122)(1,311)

527

5,664

(1,281)(13,768)¥ 754$ 8,104

12. Income Taxes
The Company has omitted reconciliation between the statutory tax rate
and the effective tax rate for financial statement purposes for the year
ended March 31, 2010 and 2009 because the difference between these
rates was less than 5%.

The significant components of the Company’s deferred tax assets
and liabilities at March 31, 2010 and 2009 were as follows:
Millions of Yen
2010
2009

Deferred tax assets:
Accrued enterprise taxes .......
Accrued bonuses ..................
Unrealized gain on
intercompany transactions ...
Accrued retirement benefits
for employees......................
Accrued retirement benefits
for directors and corporate
auditors ...............................
Loss on revaluation of
inventory items ....................
Loss on revaluation offinancial instruments ............
Depreciation ..........................
Amortization of deferredassets .................................
Provision for warranties forcompleted construction .......
Provision for losses onorders received ...................
PCB disposal expenses.........
Tax loss carry forwards .........
Deferred loss on hedges........
Unrealized loss on
investment securities ...........
Other .....................................
Gross deferred tax assets .........
Valuation allowance ...............
Total deferred tax assets ..........
Deferred tax liabilities:
Reserve for advanced
depreciation ........................
Reserve for special
depreciation ........................
Prepaid pension cost.............
Unrealized gain on
investment securities ...........
Deferred gain on hedges .......
Reversal of allowance for
doubtful accounts ...............
Other .....................................
Total deferred tax liabilities ........
Net deferred tax assets.............

¥

506
1,402

¥

326
1,430

Thousands of
U.S. Dollars
2010

$

5,439
15,069

677

639

7,276

4,032

3,934

43,336

128

179

1,376

501

423

5,385

289
1,144

1,004
1,213

3,106
12,296

211

—

2,268

502

369

5,396

737
162
2,306
199

149
164
305
418

7,921
1,741
24,785
2,139

505
319
13,626(3,363)
10,262

2,322
469
13,350(3,197)
10,153

5,428
3,429
146,453(36,146)
110,297

2,411

2,526

25,914

1,480
246

161
945

15,907
2,644

2,514
54

757
160

27,021
580

48
29
6,784
¥ 3,478

61
30
4,643
¥ 5,510516
312
72,915$ 37,382

13. Research and Development Expenses
Research and development expenses included in manufacturing costs,
and selling, general and administrative expenses for the years ended
March 31, 2010 and 2009 were as follows:

Millions of Yen
2010
2009

Research and development
expenses ................................

¥4,141¥4,178

Thousands of
U.S. Dollars
2010$44,508

14. Employees’ Retirement Benefit Plans
The following table sets forth the funded and accrued status of theplans, and the amounts recognized in the accompanying consolidatedbalance sheets at March 31, 2010 and 2009 for the Company’s and theconsolidated subsidiaries’ defined benefit pension plans:

Retirement benefit obligation ....
Plan assets at fair value ............
Unfunded retirement benefit
obligation................................
Unrecognized net retirement
benefit obligation at transition ....
Unrecognized actuarial loss ......
Unrecognized prior service
cost ........................................
Net retirement benefit
obligation................................
Accrued retirement benefits ......
Prepaid pension cost ................

Millions of Yen
2010
2009

Thousands of
U.S. Dollars
2010¥(28,685) ¥(27,596)
15,332
13,081$(308,308)
164,789(13,352)(14,515)(143,508)

—
6,219

765
8,961

—
66,842

694

819

7,459

(6,438)(3,968)¥ (8,520) ¥ (6,303)¥ 2,082 ¥ 2,334(69,196)$ (91,574)$ 22,377

The components of retirement benefit expenses for the years ended
March 31, 2010 and 2009 are outlined as follows:
Millions of Yen
2010
2009

Service cost..............................
Interest cost .............................
Expected return onplan assets ............................
Amortization of net retirement
benefit obligation
at transition.............................
Amortization of actuarial loss ....
Amortization ofprior service cost ....................
Retirement benefit expenses.....

Thousands of
U.S. Dollars
2010¥1,653319¥1,785434$17,767
3,429

(190)

(329)

(2,042)

765
1,479

765
974

8,222
15,896140¥4,166155¥3,784

1,505$44,776

The assumptions used in accounting for the above plans were as
follows:
Discount rate ..........................................
Expected rate of return on plan assets....

2010

2009

1.50%
1.50%

2.00%
2.00%

15. Securities
Securities are judged to be “substantially declined” when their fair values
have declined 30% or more. When their fair values have declined 50%
or more, the impairment losses are recorded on those securities. Whentheir fair values have declined between 30% and 50%, the impairment
losses are recorded on those securities unless such values are considered to be recoverable individually.

33

March 31, 2010(a) Held-to-maturity securities:

16. Liquidation of Accounts Receivable
Accounts receivable transferred to other for liquidation at March 31,
2010 and 2009 are summarized as follows:

Millions of Yen

Fair value does not exceed
carrying amount:
Other .......................................
Total ..............................

Fair value

Carrying
amountUnrealized
gain (loss)

¥50
¥50

¥50
¥50

¥—
¥—

Accounts receivable .................

Thousands of U.S. Dollars
Fair value

Fair value does not exceed
carrying amount:
Other .......................................
Total ..............................

Carrying
amountUnrealized
gain (loss)

$537
$537

$537
$537

Carrying
amountUnrealized
gain (loss)¥15,699¥21,910¥6,211

8,832¥24,532

7,582¥29,492

1,250¥4,960Thousands of U.S. Dollars
Acquisition
cost

Carrying
amountUnrealized
gain (loss)$168,734$235,490$66,756

94,927$263,672

81,492$316,982

13,435$53,310

March 31, 2009(a) Other securities with determinable fair value were as follows:
Millions of Yen

Carrying amount exceeds
acquisition cost:
Stocks.....................................
Carrying amount does notexceed acquisition cost:
Stocks.....................................
Total ..............................

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥ 3,174¥ 5,045¥ 1,870

26,378¥29,553

14,573¥19,618(11,805)¥ (9,934)(b) Other securities without determinable fair value were as follows:
Millions of Yen

Unlisted securities......................................................

34¥6,011$63,768

17. Supplementary Information for Consolidated Statements of
Changes in Net Assets
Year ended March 31, 2010(a) Information regarding the number and type of shares issued andtreasury stock:$—$—

Millions of Yen
Acquisition
cost

Carrying amount exceeds
acquisition cost:
Stocks.....................................
Carrying amount does notexceed acquisition cost:
Stocks.....................................
Total ..............................

¥5,933

Number of shares(b) Other securities:

Carrying amount exceeds
acquisition cost:
Stocks.....................................
Carrying amount does notexceed acquisition cost:
Stocks.....................................
Total ..............................

Thousands of
U.S. Dollars
2010

Millions of Yen
2010
2009

¥1,831

Shares issued:
Common stock ......
Treasury stock:
Common stock(Notes 1 and 2).....

End ofMarch 31,
2009

Increaseduringthe year

Decreaseduringthe yearEnd ofMarch 31,2010

371,463,036——

371,463,036

261,340

28,8682,500

287,708

Notes 1: The increase in Treasury stock-Common stock of 28,868 wasdue to the acquisition of fractional shares of less than one unit.
2: The decrease in Treasury stock-Common stock of 2,500 was
due to sales of fractional shares of less than one unit.
(b) Dividends(1) Dividends paid to shareholders(i) Resolution:
Annual general meeting ofshareholders held on June 29, 2009
Type of shares:
Common stock
Total amount ofdividends:¥2,227 million ($23,936 thousand)
Dividends per share:¥6 ($0.064)
Cut-off date:
March 31, 2009
Effective date:June 30, 2009(ii) Resolution:

Meeting of Board of Directors held on
November 2, 2009
Common stock

Type of shares:
Total amount ofdividends:¥2,227 million ($23,936 thousand)
Dividends per share:¥6 ($0.064)
Cut-off date:
September 30, 2009
Effective date:
December 7, 2009
(2) Dividends whose cut-off date was in the year ended March 31,
2010, but whose effective date is in the following fiscal year
Resolution:
Annual general meeting ofshareholders held on June 25, 2010
Type of shares:
Common stock
Total amount ofdividends:¥2,227 million ($23,936 thousand)
Dividends per share:¥6 ($0.064)
Cut-off date:
March 31, 2010
Effective date:June 28, 2010
Source ofdividends:
Retained earnings

Year ended March 31, 2009(a) Information regarding the number and type of shares issued andtreasury stock:
Number of shares

Shares issued:
Common stock ......
Treasury stock:
Common stock(Notes 1 and 2).....

End ofMarch 31,
2008

Increaseduringthe year

371,463,036—

234,126

30,687

Decreaseduringthe year—

3,473

End ofMarch 31,2009

371,463,036

261,340

Notes 1: The increase in Treasury stock-Common stock of 30,687 wasdue to the acquisition of fractional shares of less than one unit.
2: The decrease in Treasury stock-Common stock of 3,473 wasdue to sales of fractional shares of less than one unit.
(1) Dividends paid to shareholders(i) Resolution:
Annual general meeting ofshareholders held on June 27, 2008
Type of shares:
Common stock
Total amount ofdividends:¥2,784 million
Dividends per share:¥7.5
Cut-off date:
March 31, 2008
Effective date:June 30, 2008(ii) Resolution:

19. Amounts per Share
Net income per share is calculated based on the net income available
for distribution to shareholders of common stock and the weightedaverage number of shares of common stock outstanding during theyear. Net assets per share are calculated based on the number ofshares of common stock outstanding at the year end. Amounts per
share at March 31, 2010 and 2009 and for the years then ended wereas follows:

Meeting of Board of Directors held on
November 4, 2008
Common stock

Type of shares:
Total amount ofdividends:¥2,227 million
Dividends per share:¥6
Cut-off date:
September 30, 2008
Effective date:
December 8, 2008
(2) Dividends whose cut-off date was in the year ended March 31,
2009, but whose effective date is in the following fiscal year
Resolution:
Annual general meeting ofshareholders held on June 29, 2009
Type of shares:
Common stock
Total amount ofdividends:¥2,227 million
Dividends per share:¥6
Cut-off date:
March 31, 2009
Effective date:June 30, 2009
Source ofdividends:
Retained earnings
18. Shareholders’ Equity
The Corporation Law of Japan provides that an amount equal to 10%of the amount to be disbursed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the capital stock account. Such distributions can bemade at any time by resolution of the meeting of shareholders, or by the
Board of Directors if certain conditions are met.

Net income ...............................
Net assets ................................

Yen

U.S. Dollars

Year ended March 31,
2010
2009

Year ended
March 31,2010

¥ 47.22296.13¥ 43.19242.13$0.51
3.18

20. Financial Instrument
Overview
Year ended March 31, 2010(a) Policy for financial instruments
In consideration of plans for capital investment, the Company and its
consolidated subsidiaries invests funds provided by operating cash
flows. The Group uses bond issuances and bank borrowings in order
to raise additional funds, if needed. The Company manages temporary
cash surpluses through low-risk financial assets. The Company uses
derivatives for the purpose of reducing risk and does not enter into
derivatives for speculative or trading purposes.
(b) Types of financial instruments and related risk
Trade receivables — trade notes and accounts receivable — areexposed to credit risk in relation to customers. In addition, the Company
is exposed to foreign currency exchange risk arising from receivables
denominated in foreign currencies. The foreign currency exchange risks
deriving from the trade receivables denominated in foreign currencies
are hedged by forward foreign exchange contracts, if needed.
Investment securities are exposed to market risk. Those securities
are composed of mainly the shares of common stock of other companies with which the Company has business relationships.
Trade payables — trade notes and accounts payable — havepayment due dates within one year. Although the Company is exposed
to foreign currency exchange risk arising from those payables denominated in foreign currencies, forward foreign exchange contracts arearranged to reduce the risk, if needed.
Loans payables and bonds are raised mainly in connection withcapital investments. The repayment dates of the long-term debt extend
up to five years from the balance sheet date. Long-term debt with variable interest rates is exposed to interest rate fluctuation risk. However,to reduce such risk and fix interest expense for long-term debt bearing
interest at variable rates, the Company utilizes interest rate swap
transactions as a hedging instrument.
Regarding derivatives, the Company enters into forward foreignexchange contracts to reduce the foreign currency exchange risk arisingfrom the receivables and payables denominated in foreign currencies.
The Company also enters into interest rate swap transactions to reduce
fluctuation risk deriving from interest payable for long-term debt bearing
interest at variable rates.
Information regarding the method of hedge accounting, hedging
instruments and hedged items, hedging policy, and the assessment of
the effectiveness of hedging activities is found in Note 2 (p).

35

(c) Risk management for financial instruments(i) Monitoring of credit risk (the risk that customers or counterparties
may default)
In accordance with the internal policies of the Company for
managing credit risk arising from receivables, each related divisionmonitors credit worthiness of their main customers periodically,
and monitors due dates and outstanding balances by individual
customer. In addition, the Company is making efforts to identify
and mitigate risks of bad debts from customers who are having
financial difficulties. The consolidated subsidiaries also manage
credit risk using the Company’s internal policies and manners.
The Company also believes that the credit risk of derivatives
is insignificant as it enters into derivative transactions only withfinancial institutions which have a high credit-rating.
(ii) Monitoring of market risk (the risk arising from fluctuations inforeign exchange rates, interest rates and others)
For trade receivables and payables denominated in foreign
currencies, the Company identifies the foreign currency exchange
risk for each currency on a monthly basis and enters into forward
foreign exchange contracts to hedge such risk. In order tomitigate the interest rate risk for loans payable bearing interest at
variable rates, the Company may also enter into interest rate swap
transactions.
For investment securities, the Company periodically reviews
the fair values of such financial instruments and the financial
position of the issuers. In addition, the Company continuously
evaluates whether securities other than those classified as
held-to-maturity should be maintained taking into account their fairvalues and relationships with the issuers.
In conducting derivative transactions, the division in chargeof each derivative transaction follows the internal policies, which
set forth delegation of authority. Monthly reports including actual
transaction data are submitted to top management for theirreview. The consolidated subsidiaries also conduct derivativetransactions using the Company’s internal policies.
(iii) Monitoring of liquidity risk (the risk that the Company may not beable to meet its obligations on scheduled due dates)
Based on the report from each division, the Company preparesand updates its cash flow plans in a timely basis to manage liquidity risk. The consolidated subsidiaries manage the liquidity risk
using cash flow plans and report to the Company periodically.
(d) Supplementary explanation of the estimated fair value of financial
instruments
The fair value of financial instruments is based on their quoted market
price, if available. When there is no available quoted market price available, fair value is reasonably estimated. Since various assumptions andfactors are reflected in estimating the fair value, different assumptions
and factors could result in different fair value. In addition, the notionalamounts of derivatives in Note 22 Derivative Transactions-Supplemental
explanation on Quantitative Information are not necessarily indicative of
the actual market risk involved in derivative transactions.
Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance
sheet as of March 31, 2010 and estimated fair value are shown in thefollowing table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Pleaserefer to Note (ii) below).

36

Year ended March 31, 2010
Millions of Yen

AssetsCash on hand and in banks .....
Trade notes and accounts
receivable ..............................
Securities
Other securities withmaturity ..............................
Other securities ....................
Total assets ................................
Liabilities
Trade notes and accountpayable .................................
Short-term borrowings ............
Current portion of long-term
debt ......................................
Bonds with maturity within
one year ................................
Long-term debt .......................
Total liabilities .............................
Derivatives (*) ..............................

Carrying
amountEstimated
fair value

Difference¥ 45,646¥ 45,646¥ —42,43142,424(6)

50
30,148¥118,27650
30,148¥118,269

—
—
¥ (6)

¥ 36,232
13,722¥ 36,232
13,722

¥ —
—

667

669

1

10,00010,012
28,17028,609¥ 88,792 ¥ 89,246¥(358) ¥
(358)

12
439
¥453
¥ —

Thousands of U.S. Dollars
Carrying
amountAssetsCash on hand and in banks .....
Trade notes and accounts
receivable ..............................
Securities
Other securities withmaturity ..............................
Other securities ....................
Total assets ................................
Liabilities
Trade notes and accountpayable .................................
Short-term borrowings ............
Current portion of long-term
debt ......................................
Bonds with maturity within
one year ................................
Long-term debt .......................
Total liabilities .............................
Derivatives (*) ..............................

Estimated
fair value$ 490,606 $ 490,606
456,051

Difference$—

455,976

(64)

537
537
324,033
324,033$1,271,238 $1,271,163

—
—
(64)

$ 389,424 $ 389,424
147,485
147,485
7,169

$

$

—
—

7,190

11

107,481
107,610
302,773
307,491$ 954,342 $ 959,222$(3,848)$(3,848)129
4,718$4,869$—(*) The value of assets and liabilities arising from derivatives is shownat net value, and with the amount in parentheses representing net
liability position.
(i) Method to determine the estimated fair value of financial instruments
and other matters related to securities and derivative transactions.
AssetsCash on hand and in banks
The carrying amount is used for bank deposit without maturity,
because the fair value approximates the carrying value. The fair valueof held-to-maturity in bank is calculated from the percent value ofthe total principal and interest discounted at a rate supposing newly
conducted deposit.
Trade notes and accounts receivables
These fair values are calculated periodically-compartmentalized each
receivable from the percent value of the interest discounted at rate
adding the period to maturity day and credit risk.
Securities
The carrying amount is used for other securities with maturity,
because the fair value approximates the carrying amount.
Liabilities
Trade notes and accounts payable and Short-term borrowings
The carrying amount is used for these items, because the fair value isapproximates the carrying amount.
Current portion of long-term debt, Bonds with maturity within
one year and long-term debt
These fair values are calculated by applying discount rate to the totalof principal and interest. That discount rate is based on the assumed
interest if similar new bonds issue. Current portion of long-term loans
and long-term loans with variable interest rates are intended special
treatment of interest rate swap, and calculates by applying discountrate to the total of principal and interest. That discount rate is basedon the assumed interest if similar new bonds issue.
Derivatives Transactions
Please refer to Note 22, Derivatives of the notes the consolidated
financial statements.
(ii) Financial instruments for which it is extremely difficult to determine
the fair value

Thousands of U.S. Dollars
Due after
one year
Due in one through five
years
year or less

Cash on hand and in banks ........
Trade notes and accounts
receivable .................................
Securities
Other securities withmaturities ..............................
Total ...........................................

$490,606—$—

449,796

6,255

—

537
$940,950—$6,255—$—(iv) The redemption schedule for long-term debt
Year ended March 31, 2010
Millions of Yen

Due in 1 year or less ...................
Due after 1 year through2 years .....................................
Due after 2 years through3 years .....................................
Due after 3 years through4 years .....................................
Due after 4 years through5 years .....................................
Due after 5 years ........................

Bonds

Long-term
loans

Lease
obligations¥10,000¥

667¥2,026

—

635

1,674

—

13,6701,258—

10,370

525

—
—

2,550
945

247
149

Thousands of
U.S. Dollars

Millions of Yen

Thousands of U.S. Dollars
Long-term
loans

Lease
obligations

$

7,169

$21,776—

6,825

17,992—

146,926

13,521—

111,457

5,643

—
—

27,408
10,157

2,655
1,601

2010

Unlisted stocks .........................

¥2,217(iii) Redemption schedule for receivables and securities with maturities at
March 31, 2010.
Year ended March 31, 2010
Millions of Yen
Due after
one year
Due in one through five
years
year or less

Cash on hand and in banks ........
Trade notes and accounts
receivable .................................
Securities
Other securities withmaturities ..............................
Total ...........................................

Bonds$23,828

Because the fair values of these financial instruments are extremely
difficult to determine, given that they do not have quoted market prices
and future cash flows cannot be estimated, they are not included in“Securities” of about table.

Due after
five years¥45,646¥ —¥—41,849582—$

Due after
five years

Due in 1 year or less ...................
Due after 1 year through2 years .....................................
Due after 2 years through3 years .....................................
Due after 3 years through4 years .....................................
Due after 4 years through5 years .....................................
Due after 5 years ........................

$107,481

Effective the year ended March 31, 2010, the Company and its domestic consolidated subsidiaries adopted the “Accounting Standards for
Financial Instruments” (Corporate Accounting Standards No. 10 March
10, 2008) and the “Implementation Guidance of Accounting Standards
for Financial Instruments” (Implementation Guidance of Corporate
Accounting Standards, No. 19 March 10, 2008).
21. Investment and Rental Properties

50¥87,546

—
¥582

—
¥—

Year ended March 31, 2010
The Company has omitted Investment and Rental Properties due to theimmateriality for the year ended March 31, 2010.
Effective the year ended March 31, 2010, the Company and its
domestic consolidated subsidiaries adopted the “Accounting Standards
for Investment and Rental Properties” (Corporate Accounting Standards
No. 20 November 28, 2008) and the “Implementation Guidanceof Accounting Standards for Investment and Rental Properties”(Implementation Guidance of Corporate Accounting Standards, No. 23
November 28, 2008).
37

22. Derivative Transactions
Year ended March 31, 2010(a) Derivatives not subject to hedge accounting
None applicable(b) Derivatives subject to hedge accounting
The contract amounts or the amount corresponding to principal as specified by the contract as of the date of the closing of the consolidated
accounts is shown below by type of hedge accounting method.
(i) Currency-related transactions
Hedge accounting method

Allocation method

Type of derivative

Foreign exchange forward contracts Notes and accounts receivable
Sold options
U.S. dollars
Euros
Foreign exchange forward contracts Notes and accounts payable
Purchased options
U.S. dollars
Euros
Sterling pound

Hedge accounting method

Allocation method

Principal items hedged

Type of derivative

Principal items hedged

Foreign exchange forward contracts Notes and accounts receivable
Sold options
U.S. dollars
Euros
Foreign exchange forward contracts Notes and accounts payable
Purchased options
U.S. dollars
Euros
Sterling pound

Millions of Yen
Contract amount

Fair valueOver one year
¥6,087129¥1,396—¥ (41)
5

¥ 117
4,042
139

¥

¥ 0
(315)
(7)

—
1
—

Thousands of U.S. Dollars
Contract amount
Fair valueOver one year
$65,423
1,387$15,004—$ (441)54$ 1,258
43,444
1,494

$

$
0
(3,386)
(75)

—
11
—

Note: Calculation of fair value is based on the forward exchange rate.
(ii) Interest-related transactions
Hedge accounting method

Special treatment ofinterest rate swap

Type of derivative

Principal items hedged

Receive / floating and pay / fixedSpecial treatment ofinterest rate swap

Type of derivative

Fair valueOver one year
Current portion of long-termborrowings
Long-term borrowings

Hedge accounting method

Millions of Yen
Contract amountPrincipal items hedged¥23,540¥23,360(*)

Thousands of U.S. Dollars
Contract amount
Fair value

Receive / floating and pay / fixedOver one year
Current portion of long-termborrowings
Long-term borrowings$253,009$251,075(*)(*) Since amounts in interest rate swap contracts treated by the Special treatment of interest rate swap are handle together with Long-term borrowings that are subject to hedging, the estimated fair value of such Long-term borrowings is shown as the estimated fair value in the preceding table.
Note: Calculation of fair value is based on the stated price by financial institutions.

38Year ended March 31, 2009(a) Items related to the status of derivative transactions(1) Description of financial derivatives and objectives in their usage
The Company makes use of forward foreign exchange contracts to
reduce risks related to currency exchange fluctuations that may be
incurred by the Company in its export and import transactions andcapital transactions.
The Company makes use of interest rate swap to reduce risks
related to currency exchange fluctuations by rising.
Please note that the Company makes use of such derivativetransactions and has adopted hedge accounting principles.
(i) Method of hedge accounting
The Company use deferral hedge accounting.
(ii) Hedging instruments and hedged items
Hedging instruments; Forward foreign exchange contracts andinterest rate swap
Hedging items; Foreign currency forecasted transactions andborrowing(iii) Hedging policy
The Company enters into forward foreign exchange contracts andinterest rate swap as hedging instruments within the limit of plan
foreign transactions and objective obligation to reduce risk arisingfrom future fluctuations of foreign exchange rates and interest
rate.

(iv) Evaluation of hedging effectiveness
The Company evaluates the effectiveness of hedging based on
the strong correlation between changes in market rates underhedging coverage, cash flow, and hedging instruments.
(2) Policy for derivative transactions
The Company policy regarding derivatives related to foreign currency
and interest rate is to limit usage to those derivative transactions thatare needed for the Company’s business purposes and not to engage insuch transactions for speculative or trading purposes.
(3) Risk inherent in derivative transactions
Because derivative transactions of contract are more-credible domesticbank or business firm, the Company judges few credit risks.
(4) Risk management system for derivative transactions
The Company establish internal rule for the management of derivatives.
Regarding internal rule, it is express transaction of authority andmanagement of rules and regulations.
(b) Market value of derivatives
Because hedge accounting is appropriately applied to all derivativetransactions, the market value of derivative is not shown.

23. Segment Information(a) Business segment information
The Company and its consolidated subsidiaries operate in the following three business segments:• Operations in the steel products segment include steel castings and forgings, steel plates, pressure vessels and steel structures.
• Operations in the machinery products segment include injection molding machines, film and sheet machinery, blow molding machines, magnesium injection molding machines, waste treatment equipment and manufacturing equipment for electronic products.
• Operations in the regional development segment include the Fuchu Intelligent Park Project and the leasing of real estate.
As described in Note 2(d), effective the year ended March 31, 2009, the Company and its domestic consolidated subsidiaries have adopted“Accounting Standard for Measurement of Inventories.”
As a result, “Operating expenses” increased in “Steel products” segment by ¥677 million, in “Machinery products” segment by ¥241 million,
respectively, and decreased “Operating income” in both segments by the same amounts compared with the corresponding amounts which would
have been accounted for under the previous method.
Millions of Yen
Year ended March 31, 2010

Sales and operating income:Sales to third parties ....................................................
Intra-segment sales and transfers ................................
Net sales .....................................................................
Operating expenses .....................................................
Operating income ........................................................
Total assets, depreciation expense, loss on impairment of
goodwill and capital expenditures:
Total assets .................................................................
Depreciation expense ..................................................
Loss on impairment of goodwill ....................................
Capital expenditures ....................................................

Steel
Products

Machinery
Products

Regional
Development

Total

Eliminations
and Corporate Consolidated¥101,736
1,653
103,390
71,749¥ 31,640¥98,164
1,210
99,37592,839¥ 6,535¥ 1,779
6
1,785
1,052
¥ 733

¥201,680
2,870
204,551
165,641¥ 38,909¥—(2,870)(2,870)3,853¥ (6,723)¥201,680—
201,680
169,494¥ 32,185¥145,635
10,564—30,251¥85,943
3,329
—
1,178

¥12,711305—
42¥244,290
14,199—31,472¥78,696
223—
391¥322,986
14,422—
31,86439

Thousands of U.S. Dollars
Steel
Products

Year ended March 31, 2010

Sales and operating income:Sales to third parties ....................................................
Intra-segment sales and transfers ................................
Net sales .....................................................................
Operating expenses .....................................................
Operating income ........................................................
Total assets, depreciation expense, loss on impairment of
goodwill and capital expenditures:
Total assets .................................................................
Depreciation expense ..................................................
Loss on impairment of goodwill ....................................
Capital expenditures ....................................................

Machinery
Products

Regional
Development

Total

Eliminations
and Corporate Consolidated$1,093,465 $1,055,073
17,767
13,005
1,111,242 1,068,089
771,163
997,840$ 340,069 $ 70,239$ 19,121
64
19,185
11,307$ 7,878$2,167,670
30,847
2,198,528
1,780,320$ 418,196$$1,565,294 $ 923,721
113,543
35,780——325,140
12,661$136,619
3,278
—
451

$2,625,645
152,612—338,263$845,722
2,397
—
4,202

— $2,167,670(30,847)—(30,847) 2,167,670
41,412
1,821,733$ (72,259) $ 345,926$3,471,475
155,009—342,476

Millions of Yen
Year ended March 31, 2009

Sales and operating income:Sales to third parties ....................................................
Intra-segment sales and transfers ................................
Net sales .....................................................................
Operating expenses .....................................................
Operating income ........................................................
Total assets, depreciation expense, loss on impairment of
goodwill and capital expenditures:
Total assets .................................................................
Depreciation expense ..................................................
Loss on impairment of goodwill ....................................
Capital expenditures ....................................................

Steel
Products

Machinery
Products

Regional
Development

Total¥107,883
1,956
109,840
78,367¥ 31,473¥117,462
328
117,791
106,355¥ 11,435¥ 1,767
6
1,773
1,029
¥ 743

¥227,113
2,291
229,405
185,751¥ 43,653¥—(2,291)(2,291)
4,727¥ (7,019)¥227,113—
227,113
190,479¥ 36,633¥122,832
7,559
1
22,555¥ 94,727
3,755
—
3,135

¥13,016311—
43¥230,575
11,625
1
25,734¥66,333247
1
147¥296,909
11,873
2
25,882(b) Geographical segment information
The Company has omitted geographical segment information for theyear ended March 31, 2010 and 2009 because net sales and total
assets in Japan were more than 90% of those of all segments.
(c) Overseas sales information
Overseas sales, which include export sales of the Company and its
domestic consolidated subsidiaries, and sales (other than exports toJapan) of its overseas consolidated subsidiaries, for the years ended
March 31, 2010 and 2009 are summarized as follows:
Millions of Yen
NorthAmericaYear ended March 31, 2010

East Asia

Overseas sales ..................
Net consolidated sales ......
Overseas sales as apercentage of net
consolidated sales (%) .....

¥45,013 ¥20,256 ¥28,633 ¥ 93,903¥201,680

22.3

10.0

Other

14.2

Total

46.6

Thousands of U.S. Dollars

40Year ended March 31, 2010

East Asia

North
America

Overseas sales ..................
Net consolidated sales ......
Overseas sales as apercentage of net
consolidated sales (%) .....

$483,803$217,713

22.3

10.0

Other

Total

$307,749 $1,009,276$2,167,670

14.2

46.6

Eliminations
and Corporate Consolidated

Millions of Yen
NorthAmericaYear ended March 31, 2009

East Asia

Overseas sales ..................
Net consolidated sales ......
Overseas sales as apercentage of net
consolidated sales (%) .....

¥44,343 ¥12,443 ¥63,065 ¥119,853¥227,113

19.5

5.5

Other

27.8

Total

52.8

Report of Independent Auditors

41

Corporate Directory
Stock Information

Corporate Data

Authorized Shares

Trade Name

1,000,000,000 shares

The Japan Steel Works, Ltd.

Issued and Outstanding Shares

Head Office371,463,036 shares
39,384Gate City Ohsaki-West Tower,
11-1, Osaki 1-chome,
Shinagawa-ku, Tokyo, Japan

Stock Listings

Foundation

Shareholders

Tokyo, Osaka, Nagoya, Fukuoka and Sapporo

November 1, 1907

Transfer Agent and Registrar

Paid-in Capital

The Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku,
Tokyo, Japan¥19,694 million

Employees

Major Shareholders (holding %)AuditorJapan Trustee Services Bank, Ltd.
(Trust Account) ..................................................... 5.28%
The Master Trust Bank of Japan, Ltd.
(Trust Account) ..................................................... 4.93%
Sumitomo Mitsui Banking Corp. ............................ 3.38%
The Chuo Mitsui Trust & Banking Co., Ltd. ............ 2.96%
Mitsui Sumitomo Insurance Co., Ltd. ..................... 2.38%
Mitsui Life Insurance Co., Ltd. ............................... 2.27%
Hitachi, Ltd. ............................................................ 1.36%
BNP-PARIBAS SECURITIES SERVICESPARIS/JASDEC FRENCH RESIDENTS ................ 1.36%
Mitsubishi Heavy Industries, Ltd. ........................... 1.36%
JP MORGAN CHASE BANK 380055...................... 1.35%

Ernst & Young ShinNihon LLC
Hibiya Kokusai Bldg.,
2-3, Uchisaiwai-cho 2-chome,
Chiyoda-ku, Tokyo, Japan

2,048 (Consolidated 4,905)(as of March 31, 2010)

JSW’s Stock Prices
Stock prices (¥)

Tokyo stock price index (TOPIX) (Points)

2,000

1,500

1,500

1,000

1,000

500

500

0
Trading volumes (Thousands of shares)

100,000

50,0000
2009/4

42

5

6

7

8

9

10

11

12

2010/1

2

3

Offices & Plants★ Düsseldorf Office

Japan Steel Works America, Inc.
Beijing Office★ Teheran Office★

★
★

★ Head Office★ ★ New York Office (Head Office)Detroit Office

Japan Steel Works India Private Limited Shanghai Office

Singapore Office ★

Domestic
Head Office
Gate City Ohsaki-West Tower, 11-1, Osaki
1-chome, Shinagawa-ku, Tokyo 100-8456
Phone: +81-3-5745-2001
Facsimile: +81-3-5745-2025
Osaka Office
Shinanobashi Mitsui Bldg., 11-7,
Utsubohonmachi 1-chome, Nishi-ku,
Osaka-shi, Osaka 550-0004
Phone: +81-6-6446-2480
Facsimile: +81-6-6446-2488
Fukuoka Office23-2, Sakuragaoka 1-chome, Kasuga-shi,
Fukuoka 816-0872
Phone: +81-92-582-8111
Facsimile: +81-92-582-8124

Nagoya Office
Mitsui Sumitomo Kaijo Nagoya Shirakawa
Bldg., 9-15, Sakae 2-chome, Naka-ku,
Nagoya-shi, Aichi 460-0008
Phone: +81-52-222-1271
Facsimile: +81-52-222-1275
Hiroshima Office6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602
Phone: +81-82-822-0991
Facsimile: +81-82-822-0997
Sapporo OfficeKitaichijo Mitsui Bldg., 2-9,
Nishi 5-chome, Kita-ichijo, Chuo-ku,
Sapporo-shi, Hokkaido 060-0001
Phone: +81-11-241-2271
Facsimile: +81-11-241-2275

Muroran Plant
4, Chatsumachi, Muroran-shi,
Hokkaido 051-8505
Phone: +81-143-22-0143
Facsimile: +81-143-24-3440
Hiroshima Plant
6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602
Phone: +81-82-822-3181
Facsimile: +81-82-285-2038
Yokohama Plant
2-1, Fukuura 2-chome, Kanazawa-ku,
Yokohama-shi, Kanagawa 236-0004
Phone: +81-45-781-1111
Facsimile: +81-45-787-7200

Overseas
Düsseldorf OfficeFriedrichstr. 19, 40217 Düsseldorf,
F.R.Germany
Phone: +49-211-3116660
Facsimile: +49-211-31166640
Teheran Office
Argentine SQ., ZAGROS St.,ZAGROS Bldg. No.25, Apt. No.21, 2F,
1516663111, Teheran, I.R. of IranPhone: +98-21-8774636
Facsimile: +98-21-8774636
Singapore Office
16 Raffles Quay, #27-01C,
Hong Leong Bldg., Singapore 048581,
Republic of Singapore
Phone: +65-62206227
Facsimile: +65-62240726
Shanghai Office
24-G, Huamin Empire Plaza,No.726, Yanan Rd. (W), Shanghai 200050,
People’s Republic of China
Phone: +86-21-5239-1438+86-21-5239-4335
Facsimile: +86-21-5239-3450

Beijing Office
Room No. 1007, Beijng Fortune Bldg.,
5 Dong Sanhuan Bei-lu,
Chaoyang District, Beijing,
People’s Republic of China
Phone: +86-10-6590-8966
Facsimile: +86-10-6590-8968
Japan Steel Works America, Inc.
New York Office (Head Office)1211 Ave. of the Americas, Suite 4302,
New York, NY 10036, U.S.A.
Phone: +1-212-490-2630
Facsimile: +1-212-490-2575
Detroit Office41135 Vincenti Court Novi, MI 48375 U.S.A.
Phone: +1-248-536-0288
Facsimile: +1-248-536-5615
Japan Steel Works India Private Limited
611, Time Tower, MG Road, Sector 28,
Gurgaon, Haryana, 122001, India
Phone: +91-124-469-4444
Facsimile: +91-124-469-4433

JSW Plastics Machinery, Inc.
555 South Promenade Ave., Unit 104
Corona, California 92879, U.S.A.
Phone: +1-951-898-0934
Facsimile: +1-951-898-0944
JSW Plastics Machinery (S) Pte Ltd.
17 Gul Lane, Jurong Town,
Singapore 629413, Republic of Singapore
Phone: +65-68614511
Facsimile: +65-68623166
JSW Plastics Machinery (H.K.) Co., Ltd.
Room 907, Corporation Park, 11 On Lai
St., Shatin, N. T., Hong Kong
Phone: +852-2648-0720
Facsimile: +852-2686-8204
JSW Plastics Machinery (M) SDN. BHD.
D6-5-G Block D6, Pusat Perdagangan Dana, 1
Jalan PJU 1A/46, 47301 Petaling Jaya,
Selangor Malaysia
Phone: +60-3-7842-6076/6077
Facsimile: +60-3-7842-6078
JSW Plastics Machinery (T) Co., Ltd.
368/4 Soi Soonvijai 4,(Soi Japanese School Rama IX),
Bangkapi, Huaykwang, Bangkok 10310,
Kingdom of Thailand
Phone: +66-2-369-4007
Facsimile: +66-2-369-4035

43

Printed in Japan DJ AJ. AJ. JH. A