Financial Section2016 ANNUAL REPORT
Year Ended March 31, 2016

CONTENTS
Eleven-Year Summary ············································
Financial Review ··················································
Consolidated Statement of Financial Position ·················
Consolidated Statement of Income ······························
Consolidated Statement of Comprehensive Income ··········
Consolidated Statement of Changes in Equity ·················
Consolidated Statement of Cash Flows ·························
Notes to the Consolidated Financial Statements ··············
Independent Auditor’s Report····································

1
4
18
19
20
21
23
25
72

Eleven-Year Summary
Hitachi Metals, Ltd. and Consolidated Subsidiaries
As of and for the Years Ended March 31
Thousands of U.S.
dollars(except per shareamounts)

Millions of yen(except as otherwise noted)

Thousands of
euros(except per shareamounts)

IFRS

Results for the period:
Revenues ····································································
Cost of sales ································································
Selling, general and administrative expenses ····················
Other income ·······························································
Other expenses ····························································
Operating income ·························································
Income (loss) before income taxes and non-controllinginterests ······································································Net income (loss) attributable to shareholders of theparent company ···························································Cash flows for the period:
Cash flows from operating activities ·······························Cash flows from investing activities ·······························
Free cash flows ····························································
Growth initiative costs:
Capital expenditures ·····················································
Depreciation and amortization ·······································
Research and development ············································At the period-end:
Total assets··································································
Interest-bearing debt ·····················································Net assets ····································································
Number of outstanding shares (thousands) ·······················
Number of shareholders ················································
Number of employees ···················································Per share of common stock (yen, U.S. dollars and euros):
Net income (loss):
Basic ······································································Cash dividends ························································Net assets ····································································
Key financial indicators:
Operating income margin (%) ········································
Return on Sales (ROS) (%) ············································
Return on Assets (ROA) (%)··········································
Return on Equity (ROE) (%)··········································
Shareholders’ equity ratio (%) ········································
Debt/equity ratio (times) ···············································
Notes:

2016

2015

2014

2016

2016

¥ 1,017,584(819,433)(122,090)
36,416(12,523)
99,954¥ 1,004,373(793,517)(126,446)
21,303(21,306)
84,407¥ 807,794(637,081)(106,851)
5,844(16,278)
53,42896,23386,391

55,820854,038

753,587

69,05670,56948,133612,851

540,767

115,742(32,147)
83,595

108,983(113,750)(4,767)

99,171(9,832)
89,339

1,027,174(285,295)
741,879

906,359(251,738)
654,62159,602
42,927
19,12151,47439,917
20,90331,98733,762
16,814

528,949
380,964
169,693

466,735
336,155
149,734¥1,033,311
220,376
504,675
427,580
28,582
29,157¥1,083,450
255,350
476,176
427,601
26,28730,278¥848,772
177,195
382,840
427,657
29,30826,850¥161.50
26.00
1,159.70¥165.02
23.00
1,090.64¥116.7917.00
870.36$ 1.430.23
10.29€ 1.26
0.20
9.08

9.8
6.8
9.1
14.4
48.0
0.44

8.4
7.0
8.9
16.8
43.0
0.55

6.6
6.0
8.0
15.6
43.9
0.48

—
—
—
—
—
—

—
—
—
—
—
—

$ 9,030,742 € 7,968,551(7,272,213) (6,416,860)(1,083,511)(956,069)
323,181285,168(111,138)(98,065)
887,061
782,725$ 9,170,314 € 8,091,707
1,955,769 1,725,732
4,478,834 3,952,036
—
—
—
—
—
—

1. The amounts are accounted for and presented in accordance with the International Financial Reporting Standards.
2. The translation of Japanese yen amounts into U.S. dollars and euros for the year ended March 31, 2016, is included in this annual report solely for the convenience of readers
outside Japan. The translation has been made at the rates of ¥112.68=$1 and ¥127.70=€1, the approximate exchange rates as of March 31, 2016.
3. Diluted net income per share is not provided as Hitachi Metals, Ltd. had no dilutive common stock outstanding during the fiscal year ended March 31, 2016.
4. Net income (loss) represents net income (loss) attributable to shareholders of the parent company. Net income (loss) per share is calculated by dividing net income (loss) by
the average number of outstanding shares for the period. Net assets per share are calculated by dividing net assets less non-controlling interests by the number of outstanding
shares as of the period-end.
5. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders’ equity and the average total accumulated comprehensive
income (the average of beginning and ending of the year).
6. Results for the year ended March 31, 2014 (FY2014) are reported in accordance with both J-GAAP and IFRS.

1Millions of yen(except as otherwise noted)
Japanese GAAP

Results for the period:
Net sales ·············································································
Cost of sales········································································
Selling, general and administrative expenses ···························
Operating income ································································
Income (loss) before income taxes and minority interests ··········Net income (loss) attributable to shareholders of the parent
company·············································································Cash flows for the period:
Cash flows from operating activities ·······································Cash flows from investing activities ·······································
Free cash flows ···································································
Growth initiative costs:
Capital expenditures ·····························································
Depreciation and amortization ···············································
Research and development ····················································At the period-end:
Total assets ·········································································
Interest-bearing debt ····························································Net assets ···········································································
Number of outstanding shares (thousands) ······························
Number of shareholders ························································
Number of employees ··························································Per share of common stock (yen):
Net income (loss):
Basic ·············································································Cash dividends ·······························································Net assets ···········································································
Key financial indicators:
Operating income margin (%)················································
Return on Sales (ROS) (%) ···················································
Return on Assets (ROA) (%) ·················································
Return on Equity (ROE) (%) ·················································
Shareholders’ equity ratio (%) ···············································
Debt/equity ratio (times) ·······················································
Notes:

2014

2013

2012

2011

¥ 807,952(638,872)(109,544)
59,53650,796
39,417¥ 535,779(440,684)(74,016)
21,07917,23012,955¥ 556,914(438,930)(73,117)44,86736,414
17,886¥ 520,186(406,282)(70,761)
43,14336,061
22,204

100,557(30,906)
69,651

62,975(28,718)
34,257

3,008(21,769)(18,761)

42,688(24,607)
18,081

31,987
33,63916,814

26,68824,21911,07624,30027,544
12,153

20,36928,38912,224¥ 840,742
175,958
373,198
427,632
29,30826,850¥ 541,286
145,935
259,865
365,420
16,93017,308¥ 579,862
169,232
240,395
352,430
12,417
18,056¥ 529,869
149,822228,010352,442
12,711
18,008¥ 95.6517.00
848.73¥ 36.20
14.00
684.96¥ 50.75
12.00
625.04¥ 63.00
12.00
591.51

7.4
4.9
7.4
12.9
43.2
0.48

3.9
2.4
3.1
5.5
46.2
0.58

8.1
3.2
6.6
8.3
38.0
0.77

8.3
4.3
6.9
11.0
39.3
0.72

1. The amounts are accounted for and presented in accordance with the generally accepted accounting principles in Japan.
2. Diluted net income per share is not provided as Hitachi Metals, Ltd. had no dilutive common stock outstanding during the fiscal year ended March 31, 2016.
3. Net income (loss) per share is calculated by dividing net income (loss) by the average number of outstanding shares for the period. Net assets per share are calculated by
dividing net assets less minority interests by the number of outstanding shares as of the period-end.
4. Hitachi Metals, Ltd. adopted the revised accounting standard for presentation of net assets in the consolidated balance sheet, effective from the year ended March 31, 2007.
Figures for the years ended March 31, 2006, represent total shareholders’ equity as originally reported.
“Net assets per share” is calculated based on such figures of net assets as presented.
5. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders’ equity and the average total accumulated comprehensive
income (the average of beginning and ending of the year).

2Millions of yen(except as otherwise noted)
Japanese GAAP

2010

2009

2008

2007

2006

¥ 431,683(352,382)(65,952)
13,3495,727
1,937¥ 590,704(495,948)(79,698)
15,058(200)(3,016)¥701,075(552,459)(88,918)
59,69851,42727,034¥ 646,311(504,089)(87,500)
54,722
46,562
22,062¥ 590,678(458,945)(84,231)47,50239,497
17,16557,012(21,495)
35,51732,699(37,347)(4,648)

72,106(38,112)33,99453,011(122,583)(69,572)

55,547(27,983)
27,564

16,48530,494
10,626

43,76831,81413,08349,327
29,385
13,28336,787
24,392
12,96529,64022,57912,054¥ 517,984
170,664
212,783
352,472
13,88517,806¥ 530,191
190,119
214,576
352,498
14,17518,740¥ 619,466
190,427
235,507352,561
13,472
20,308¥ 629,590
218,716
222,626
345,118
14,176
20,826¥ 554,275
161,018
179,960
346,456
15,041
22,213¥ 5.5012.00
548.76¥ (8.56)13.00
550.79¥ 76.4812.00
604.22¥ 63.8110.00
575.04¥ 48.95
10.00
518.93

3.1
0.4
1.1
1.0
37.3
0.88

2.5
(0.5)
(0.0)
(1.5)
36.6
0.98

8.5
3.9
8.2
13.1
34.4
0.89

8.5
3.4
7.9
11.7
31.5
1.10

8.0
2.9
7.3
10.0
32.5
0.89

3

Financial Review
Adoption of International Financial Reporting Standards (IFRS)From the fiscal year ended March 31, 2015, the Group voluntarily adopted IFRS for the purposes of better understanding of group management,stronger governance, and more efficient business operations.

Market Environment
While the global economy during the fiscal year ended March 31, 2016 remained on a modest growth track primarily in advanced countries, theslowdown in emerging economies that began last summer fueled uncertainty over future economic prospects. Amid the circumstance, the market,
in which Hitachi Metals, Ltd. (the “Company”) and its consolidated subsidiaries (collectively, the “Group”) operate, the automobile industry
experienced strong demand in the United States; however, the domestic market saw continued inventory adjustments of small cars and demand
was weak in China and some emerging countries. Steel production was on a declining path due to the effects of the worsened balance of supply
and demand in Asia accompanied by the inventory adjustments. Further, public investment fell, while the Japanese housing construction market
remained unchanged. The demand in the electronics industry fell due to weaker sales of personal computers and air-conditioning units.

Business Overview
Under these business circumstances as described above, the conversion of Waupaca Foundry, Inc. into a consolidated wholly owned subsidiary
as of November 10, 2014 contributed to the financial results of the Group for the fiscal year ended March 31, 2016. When compared with thosefor the fiscal year ended March 31, 2015, revenues of the Group increased by 1.3% to ¥1,017,584 million and operating income increased by¥15,547 million to ¥99,954 million. Operating income increased mainly due to posting gains on business reorganization and others of ¥30,232
million in other income arising from a transfer of shares equivalent to 51% of the issued shares of Hitachi Tool Engineering, Ltd. (currently
named Mitsubishi Hitachi Tool Engineering, Ltd.) to Mitsubishi Materials Corporation as of April 1, 2015, despite a decrease in gross profit. For
the fiscal year ended March 31, 2016, income before income taxes increased by ¥9,842 million to ¥96,233 million and net income attributable toowners of the parent company decreased by ¥1,513 million to ¥69,056 million, compared with the year ended March 31, 2015.

Business Results for the Year Ended March 31, 2016
Net Sales
Net sales for the fiscal year ended March 31, 2016, increased by ¥13,211 million to ¥1,017,584 million, up 1.3% year-on-year.
Domestic sales, accounting for 44.3% of total net sales, were ¥451,116 million, down 14.5% from the previous year.
Overseas sales increased globally in the fiscal year ended March 31, 2016, reaching ¥566,468 million, up 18.8% from the previous year. In
particular, sales in North America surged to ¥312,847 million, up ¥112,485 million or 56.1% year-on-year, largely attributable to the acquisitionof Waupaca Foundry, Inc., which is engaged in the iron casting business for transportation machinery in the area.
Overseas sales accounted for 55.7% of total net sales in the year ended March 31, 2016, up from 47.5% in the previous year. The Group aims toincrease the percentage of overseas sales to 58.0% in the fiscal year ending March 31, 2019.

Operating Income
Operating income rose ¥15,547 million or 18.4% year-on-year to ¥99,954 million. Operating income margin was 9.8%, increasing by 1.4
percentage points year-on-year. Despite a decrease in gross margin, the increase in operating income was mainly due to posting gains on businessreorganization and others of ¥30,232 million in other income arising from a transfer of shares equivalent to 51% of the issued shares of Hitachi
Tool Engineering, Ltd. (currently named Mitsubishi Hitachi Tool Engineering, Ltd.) to Mitsubishi Materials Corporation as of April 1, 2015.

4

Net Income and ROE
Interest income less interest charges for the year ended March 31, 2016 amounted to net expense of ¥2,845 million, an increase of ¥654 million
from ¥2,191 million year-on-year. Income before income taxes increased by ¥9,842 million to ¥96,233 million and net income attributable toowners of the parent company decreased by ¥1,513 million to ¥69,056 million, compared with the year ended March 31, 2015. Net income for theyear ended March 31, 2016 decreased by ¥2,938 million from the previous year to ¥68,980 million. Net income per share was ¥161.50 while itwas ¥165.02 for the previous year.
Return on equity (ROE) declined to 14.4% for the year ended March 31, 2016, mainly due to a decrease in net income. Return on assets (ROA)
was 9.1%, return on sales (ROS) was 6.8%, and the financial leverage ratio was 2.2 times for the year ended March 31, 2016.

Business Results by Segment
Business Segment Information
Segment sales include intersegment sales and transfers. Business segment results are as follows.
Sales by Business Segment
Millions of yen

Years ended March 31
Sales (including intersegment sales and transfers):
High-Grade Metal Products and Materials
Magnetic Materials and Applications
High-Grade Functional Components and Equipment
Wires, Cables, and Related Products
OthersAdjustments
Consolidated net sales

5

2016

2015

Percentage
Increase (decrease)¥ 241,987
119,944
365,118
288,246
3,547(1,258)¥ 1,017,584¥ 260,794
135,486
282,330
327,992
4,359(6,588)¥ 1,004,373(7.2)%(11.5)
29.3(12.1)(18.6)－
1.3%

Operating Income by Business Segment
Millions of yen

Years ended March 31
Operating income:High-Grade Metal Products and Materials
Magnetic Materials and Applications
High-Grade Functional Components and Equipment
Wires, Cables, and Related Products
OthersAdjustments
Consolidated operating income
Operating income margin (%):
High-Grade Metal Products and Materials
Magnetic Materials and Applications
High-Grade Functional Components and Equipment
Wires, Cables, and Related Products
Consolidated operating income margin (%)

Difference

2016

2015

¥ 53,343
9,574
25,47917,682
143(6,267)¥ 99,954¥ 34,661
11,492
28,074
19,845206(9,871)¥84,407¥ 18,682(1,918)(2,595)(2,163)(63)
3,604¥ 15,547

22.0%
8.0
7.0
6.1
9.8%

13.3%
8.5
9.9
6.1
8.4%

8.7%
(0.5)
(2.9)
0.0
1.4%

High-Grade Metal Products and Materials
Sales
Revenues in the High-Grade Metal Products and Materials segment for the fiscal year ended March 31, 2016, were ¥241,987 million, adecrease of 7.2% as compared with those for the fiscal year ended March 31, 2015. Operating income of the segment increased by ¥18,682
million to ¥53,343 million for the same period, partly due to gains on business reorganization and others of ¥25,931 million arising from thetransfer of shares in Hitachi Tool Engineering, Ltd. (currently named Mitsubishi Hitachi Tool Engineering, Ltd.) on April 1, 2015.
Specialty Steels: Despite the effect of economic slowdown on sales of tool steels in Asia, overall sales remained at the same level as comparedwith those for the fiscal year ended March 31, 2015, due to robust demand for automotive mold materials in Japan as well as a further shift
towards high-value-added products in product lines. For industrial equipment materials, despite the expanded sales of environmentally friendly
products and steady demand for other industrial components for overseas markets, sales fell compared to those for the fiscal year ended March 31,
2015, due to a continued partial production adjustment for automobile-related materials. Sales of aircraft-related and energy-related materials
considerably increased because of continuing robust demand, as well as reflecting the performance of Hitachi Metals MMC Superalloy, Ltd.,
which became a consolidated subsidiary of the Group from the second quarter of the fiscal year ended March 31, 2015. Sales of alloys forelectronic products, both display-related materials and semiconductors and other package materials, decreased as compared to those for the fiscal
year ended March 31, 2015.
Rolls: Sales of rolls increased due to growth in exports during the fiscal year ended March 31, 2016. Despite a decrease in demand for mobile
devices, sales of injection molding machine parts remained steady year-on-year, thanks to robust demand mainly for large machinery.
Amorphous Materials: Sales of amorphous metals decreased as compared with those for the fiscal year ended March 31, 2015, due to a drop in
demand in China, the major market for the products.

6

Capital Expenditures, Depreciation and Amortization, and R&D expenses

Billions of yen

Years Ended March 31

2016

2015

Capital Expenditures¥ 23.2¥ 18.7

Depreciation and Amortization

11.4

11.8

Research and Development Expenses

5.2

5.9

Magnetic Materials and Applications
Sales
Revenues in the Magnetic Materials and Applications segment for the fiscal year ended March 31, 2016 were ¥119,944 million, a decrease of
11.5% as compared with those for the fiscal year ended March 31, 2015. Operating income of the segment decreased by ¥ 1,918 million to ¥9,574
million for the same period.
Magnets: Sales of rare earth magnets decreased as compared with those for the fiscal year ended March 31, 2015, because of the slowdown indemand for industrial equipment and household appliances, despite strong demand in automotive electronic components for electric power
steering and hybrid automobiles. Sales of ferrite magnets increased due to solid demand for automotive electronic components and household
appliance parts, both in Japanese and overseas markets.
Soft Magnetic Materials and Components for Information and Telecommunication Equipment: Sales of ferrite applied products were negatively
affected by a decline in demand for solar power generation systems parts. Sales of ferrite cores were weak, affected by a slowdown in demand in
the Chinese market. Sales of FINEMET® diminished due to a decrease in demand for automotive electronic components and the production
adjustment of air-conditioners.
Capital Expenditures, Depreciation and Amortization, and R&D expenses

Billions of yen

Years Ended March 31

2016

2015

Capital Expenditures¥ 6.8¥ 10.2

Depreciation and Amortization

6.1

6.5

Research and Development Expenses

2.6

2.9

7

High-Grade Functional Components and Equipment
Sales
Revenues in the High-Grade Functional Components and Equipment segment for the fiscal year ended March, 2016, were ¥365,118 million, an
increase of 29.3% as compared with those for the fiscal year ended March 31, 2015. Operating income of the segment decreased by ¥2,595
million to ¥25,479 million year-on-year due to the Group posting gain on reorganization of ¥9,684 million following the transfer of all shares ofHitachi Metals Techno, Ltd. (currently, named SENQCIA Corporation) in the fiscal year ended March 31, 2015.
Casting Components for Automobiles: Sales of casting components for automobiles increased significantly as a whole compared with those forthe fiscal year ended March 31, 2015, reflecting the incorporation of the performance of Waupaca Foundry, Inc., which became a consolidated
wholly owned subsidiary from November 2014. Sales of heat-resistant exhaust casting components increased as compared with those for the
fiscal year ended March 31, 2015, due to an increase in demand in both Europe and North America beginning from the second half of the fiscal
year ending March 31, 2016, despite a temporary decline in demand during the first half of the fiscal year. Sales of aluminum wheels increased ascompared with those for the fiscal year ended March 31, 2015, supported by robust demand in the United States.
Piping Components: Sales of casting iron fittings remained flat as a whole year-on-year in both the Japanese and overseas markets. Despite strong
demand for gas piping components, sales of stainless steel and plastic piping components remained flat as a whole year-on-year due to a decline
in housing starts.
Capital Expenditures, Depreciation and Amortization, and R&D expenses

Billions of yen

Years Ended March 31

2016

2015

Capital Expenditures¥ 16.8¥ 12.6

Depreciation and Amortization

15.0

10.7

Research and Development Expenses

2.2

2.5

8

Wires, Cables, and Related Products
Sales
Revenues in the Wires, Cables, and Related Products segment for the fiscal year ended March 31, 2016 were ¥288,246 million, a decrease of
12.1% as compared with those for the fiscal year ended March 31, 2015. Operating income of the segment decreased by ¥2,163 million to¥17,682 million for the same period.
Electric Wires and Cables: While revenues from electric wires and cables decreased due to review of the Group’s business portfolio, sales ofelectric wires and cables grew significantly, backed by steady demand for wires and cables for rolling stock, which is one of the focus areas of theGroup, especially in overseas markets, and an increase in sales of probe cables for medical use.
Automotive Products: Sales of automotive products increased as compared with those for the fiscal year ended March 31, 2015, since bothelectronic components and brake hoses showed a steady increase, supported by continuing brisk demand for automobiles, especially in North
America.
Information System Devices and Materials: Sales of information system devices and materials decreased as compared with those for the fiscal
year ended March 31, 2015, as a result of weak demand in network products and wireless systems, due to prolonged sluggish capital investments
in infrastructure by telecommunications carriers.
Capital Expenditures, Depreciation and Amortization, and R&D expenses
Billions of yen

Years Ended March 31

2016

2015

Capital Expenditures¥ 11.5¥ 9.1

Depreciation and Amortization

9.2

9.9

Research and Development Expenses

9.1

9.6

Financial Conditions and Liquidity
Source of Funds and Liquidity Management
The Company endeavors to generate stable operating cash flows and maintain liquidity to secure sufficient funds for its business activities andbuild a solid financial position. In principal, the Company draws largely on cash and cash equivalents, and operating cash flows to fund working
capital and strategic investments to secure sustainable growth. At the same time, the Company harnesses interest-bearing debt, equity finance, anda wide range of other instruments for raising funds.
To enhance efficient fund management among the Group companies, the Company and subsidiaries located in Japan have set up a cash poolingsystem (CPS) that ensures financial flexibility and efficient management of centrally managed surplus funds within the Group. The Group
companies in North America manage their funds efficiently through a similar CPS.
As of March 31, 2016, the current ratio was 175%, the liquidity level that management considers adequate.
Rating Information
It is the Company’s top management priority to build and maintain a solid credit rating, and lower financing costs for an appropriate level ofliquidity, mobility, and flexibility of financial policy. Rating and Investment Information, Inc. (R&I), a major credit rating agency in Japan,
assigned a rating of “A+” for the Company’s long-term bonds for the year ended March 31, 2016, and “A” for consecutive years since the year
ended March 31, 2009.

9

Rating Information

R&I
RatingLong-term Issue Rating

2016
A+

2015
A

Rating Symbols and Definitions:[Long-term Issue Rating]Rating “A” – High creditworthiness supported by some excellent factors.
Rating “A+” - Very high creditworthiness supported by some excellent factors.

Financial Position
Total assets were ¥1,033,311 million as of March 31, 2016, a decrease of ¥50,139 million or 4.6% year-on-year.
Current assets were ¥483,855 million, a decrease of ¥60,765 million or 11.2% year-on-year, mainly due to decreases in trade receivable andinventories of ¥42,266 million and ¥19,522 million, respectively. Further, noncurrent assets were ¥549,456 million, an increase of¥10,626 million or 2.0% year-on-year, which was mainly attributable to an increase in investments accounted for using the equity methodof¥11,545 million due to Hitachi Tool Engineering, Ltd. (currently named Mitsubishi Hitachi Tool Engineering, Ltd.) being excluded from thescope of consolidation and being accounted for using the equity method.
ROA was recorded as 9.1% in the year ended March 31, 2016, compared to 8.9% in the year ended March 31, 2015 on the back of decreasing
total assets during the year.

Total liabilities as of March 31, 2016, were ¥528,636 million, a decrease of ¥78,638 million year-on-year. This was mainly attributable todecreases in trade payables, long-term debt, and liabilities related to assets held for trading of ¥29,615 million, ¥26,082 million, and ¥10,264
million, respectively.
As a result, interest-bearing debt decreased by ¥34,974 million from the previous year-end to ¥220,376 million as of March 31, 2016, the debtto-equity ratio decreased to 0.4.
Total equity as of March 31,2016, was ¥504,675 million, an increase of ¥28,499 million compared to the end of the fiscal year ended March 31,
2015. This was mainly attributable to an increase in retained earnings of ¥58,285 million.
The equity ratio stood at 48.0%, 5 percentage points higher than that of the prior year, due to a decrease in total assets of ¥50,139 million.
Return on invested capital was 8.3% during the year, relatively consistent with that of the prior year.
For the year ending March 31, 2017, the management will continue to reinforce the Company’s consolidated financial position by constraining
interest-bearing debt further while accelerating realization of investment effects.

10Cash Flows
The Company’s operating cash flows are the primary source of funding for operating capital necessary for business activities and capital
expenditures. Repayments of interest-bearing debts and cash dividends paid to shareholders are made mainly from free cash flows.
Cash and cash equivalents as of the end of the fiscal year ended March 31, 2016 were ¥120,300 million, an increase of ¥41,271 million fromthe end of the fiscal year ended March 31, 2015, as a result of cash used in investing activities and financing activities exceeding net cash
provided by operating activities.
Net cash provided by operating activities was ¥115,742 million, which increased by ¥6,759 million from the previous year, due in part toincome before income taxes of ¥68,980 million and depreciation and amortization of intangible assets of ¥42,927 million. Net cash provided fromworking capital was ¥21,868 million in the fiscal year ended March 31, 2016 (i.e. increase in trade notes and accounts receivable of¥33,731 million, increase in inventories of ¥12,974 million, and decrease in trade notes and accounts payable of ¥24,837 million).
The operating cash flow margin was 11.4% for the year ended March 31, 2016, up from 10.9% for the previous year.
The Company aims to reduce inventories to enhance the operating cash flow margin and shorten the working capital turnover period. The
Company maintains a structure to manage appropriate inventory levels considering future trends and to reduce inventory volume over medium
term to long term. Production bases and procurement units are responsible for raw material inventories. Production bases and internal companies
are responsible for manufactured inventories, including work in process and finished products. Domestic and overseas sales divisions andsubsidiaries, and internal companies are responsible for distribution stocks. The Company will maintain such structure and continue to manage
inventories proactively.
Net cash used in investing activities was ¥32,147 million, mainly attributable to the following: proceeds of ¥31,191 million from sale ofinvestments in securities and other financial assets by transferring shares equivalent to 51% of the issued shares of Hitachi Tool Engineering, Ltd.
(currently, named Mitsubishi Hitachi Tool Engineering, Ltd.) to Mitsubishi Materials Corporation as of April 1, 2015, and payment of ¥53,646
million for the purchase of property, plant and equipment.
Net cash used in financing activities amounted to ¥37,872 million, mainly attributable to repayment of long-term debts of ¥30,034 million anddividend payments of ¥11,543 million.

11

Capital Expenditures, Depreciation, and Amortization
The Group invests strategically to innovate its core business processes for enhancement of production capacity and streamlining. This is in linewith the Group’s goals of cultivating businesses that focus on products with low environmental impacts and energy efficiency, growth
opportunities, and cost competitiveness of market-dominant products.
For the year ended March 31, 2016, capital expenditures were ¥59,602 million, a 15.8% increase from the previous year, mainly for prioritizedinvestments in developing new businesses and new products as well as improving production processes. The ratio of capital expenditures(CAPEX) to operating cash flows was 0.51 times for the fiscal year ended March 31, 2016, and the entire expenditures were covered by operating
cash flows.
Capital expenditures for individual business segments were as follows: ¥23,160 million for High-Grade Metal Products and Materials to boost
production capabilities for high value-added products and to strengthen and streamline production systems in Japan; ¥6,795 million for Magnetic
Materials and Applications to bolster production systems for magnet products in Japan; ¥16,819 million for High-Grade Functional Components
and Equipment to boost production capacities in Japan and to streamline production efficiency overseas; and ¥11,524 million for Wires, Cables,
and Related Products to upgrade and streamline large-scale facilities in Japan and to develop production systems for new products overseas.
For the year ending March 31, 2017, management plans to allocate ¥72,000 million (a 20.8% increase year-on-year) to capital expenditures(including new and additional expenditures). The High-Grade Metal Products and Materials segment will focus on investments in Japan to boost
production capabilities and build production systems for high value-added products. The Magnetic Materials and Applications segment will
increase its production capacity for rare earth magnet products overseas and boost its production capacity overseas. The High-Grade Functional
Components segment will strengthen its production lines in Japan and streamline production facilities overseas. The Wires, Cables, and Related
Products segment will invest to upgrade and streamline large-scale facilities in Japan and to boost production capabilities overseas.
For both existing and new initiatives, management will endeavor to improve returns on investment and accelerate realization of investment
effects.
Depreciation and amortization for the year ended March 31, 2016 were ¥42,927 million, which increased by 7.5% from the previous year.
Depreciation and amortization for the year ended March 31, 2016 for High-Grade Metal Products and Materials, Magnetic Materials andApplications, High-Grade Functional Components and Equipment, and Wires, Cables, and Related Products were ¥11,391 million, ¥6,132 million,¥14,958 million, and ¥9,203 million, respectively.
The Group forecasts depreciation and amortization expenses for the year ending March 31, 2017, to be ¥47,000 million.
Capital Expenditures by Business Segment
Millions of yen

Years ended March 31
High-Grade Metal Products and Materials
Magnetic Materials and Applications
High-Grade Functional Components and Equipment
Wires, Cables, and Related Products
OthersAdjustments
Total
Operating cash flows
CAPEX to operating cash flow ratio (times)

2016¥ 23,160
6,795
16,81911,524
182
1,122¥ 59,602¥ 115,742
0.51

12

2015
¥ 18,724
10,20912,576
9,094
357
514
¥ 51,474¥108,983
0.47

Depreciation and Amortization by Business Segment
Millions of yen

Years ended March 31
High-Grade Metal Products and Materials
Magnetic Materials and Applications
High-Grade Functional Components and Equipment
Wires, Cables, and Related Products
OthersAdjustments
Total

2016
¥ 11,391
6,132
14,958
9,203
453
790
¥ 42,927

2015¥ 11,847
6,456
10,704
9,907
418
585
¥ 39,917

Research and Development (R&D) Activities
The Group operates R&D activities through market-oriented divisional laboratories. Each internal company pursues development activities at
its own R&D section in line with its own business strategies. In addition, new products and technologies, which will play a major role in the next
generation as well as fundamental technologies, are developed in the strong alliance between the Group and laboratories of Hitachi, Ltd. The
Group also collaborates closely with other related divisions of the Hitachi Group to expand new applications of existing products.
At the same time, the Group actively conducts and utilizes joint researches with external domestic and foreign institutions, such as universities,
to cultivate new materials and technologies, which lead to a development of new products in the future. Top management is involved in thedevelopment activities, in particular, for the products and technologies that may have a substantial impact on the Group.
For the year ended March 31, 2016, the Group invested ¥19,121 million in R&D, an 8.5% decrease from the previous year. R&D to net sales
was 1.9% in the year ended March 31, 2016.
Breaking down R&D expenses by segment, the Group allocated ¥5,235 million for High-Grade Metal Products and Materials segment,¥2,622 million for Magnetic Materials and Applications segment, ¥2,211 million for High-Grade Functional Components and Equipment segment,and ¥9,053 million for Wires, Cables, and Related Products segment.
The Group forecasts R&D expenses for the year ending March 31, 2017 to be ¥22,000 million.
R&D by Business Segment
Millions of yen

Years ended March 31
High-Grade Metal Products and Materials
Magnetic Materials and Applications
High-Grade Functional Components and Equipment
Wires, Cables, and Related Products
Total
Consolidated net sales
R&D to net sales (%)

2016¥ 5,235
2,622
2,211
9,053
¥ 19,121¥ 1,017,584
1.9%

13

2015
¥ 5,903
2,861
2,516
9,623
¥ 20,903¥ 1,004,373
2.1%

Outlook
Performance Outlook for the year ending March 31, 2017
As for the Group’s business environment, although the Group expects the U.S. and European economies to continue on a recovery path, caution
is required going forward, as there are many uncertainties stemming from concerns about further economic slowdown in emerging countries, suchas China and resource-rich countries, sudden fluctuations in exchange rates, and declines in the price of crude oil and other resources.
Under this business environment, the Group established the Fiscal 2018 Medium-Term Management Plan (ending March 31, 2019) to position
itself as a top-class global manufacturer of highly functional materials.

Management Strategies for the Future
Challenges
The economy today is restructuring drastically around the world. The Group expects that markets will globalize at an ever faster pace,intensifying competition. In response to these circumstances, the Group aims to globally expand business to increase profitability. To that end, theGroup will work to increase organic growth and continuously remodel its portfolio by making bold strategic investments for growth, including
M&A. In this manner, the Group will aim for sustained development by building a stronger business base: strengthening materials and productdevelopment; strengthening and expanding our markets and customer base; and preparing systems for global production and sales.
In order to address the great changes underway and enter into a new stage of development, the Group established the Fiscal 2018 MediumTerm Management Plan as outlined above.
Under the Fiscal 2018 Medium-Term Management Plan, the Group aims to “change to be a competitive business” and “challenge to meet new
targets.” Setting “change” and “challenge” as keywords, the Group will build a stronger business base and pursue a growth strategy to become theworld’s leading high-performance materials company and grow sustainably over the long term.
Major focus areas are as follows:(a) Accelerate the creation and execution of growth strategies
The Group aims to promote new product development and growth strategy investment (including M&A) through proactive R&D based on amarket-in perspective that is attuned to what markets and customers are looking for. The Group will pick up the speed from development tocommercial release, mass production, and sales expansion and accelerate the creation and cultivation of what will become the next core products.
Also, in addition to strengthening the business base, the Group will invest strategically for growth to globally expand business and thereby
increase profitability. These will make the Group more competitive, being able to develop global markets and expand the business domains inindustrial infrastructure, energy, automotive, and electronics fields.
(b) Achieve a robust business structure and highly efficient business management
To build a robust business structure capable of responding flexibly to changes in the market environment, the Group will concentrate
management resources on fields where growth is expected, promoting efficient business operations, and increasing corporate value. By
continuously remodeling its business portfolio, the Group aims to further strengthen its business base and establish a business structure that cancompete and win on the global market level. Moreover, the Group will promote the “Corporate Monozukuri Innovation Project,” merging
GEMBA (workplace) improvement and technology development, and will further strengthen profitability to become the world’s leading highperformance materials company.
(c) Strive to establish a business base that is sustainable over the long-term
By achieving the “creation and execution of growth strategies” and a “robust business structure and highly efficient business management”–theaction plans in the FY2018 Medium-Term Management Plan–the Group will enhance management efficiency to maintain sound financial strengthand become a company that is sustainable over the long term.
In addition, the Group plans to build an innovative corporate culture and achieve sustained growth by practicing diversity management andempowering people of all types to play an active role.
The Company’s basic policy for the management, which controls the Company’s decision on financial and operation matters, prescribes that
the Company, as a development-driven entity, strives for providing new values for the society through further sophistication of fundamental
technologies and creation of new products and businesses by challenging new technologies. In order to pursue such commitments, as a member ofthe Hitachi Group led by Hitachi, Ltd., the parent company, the Company secures close relationship with Hitachi Group companies through R&D
activities, which enables the Company to utilize management resources and to offer high-quality products and services, while the Company
maintains its autonomy in its business operations and transactions with Hitachi, Ltd. Moreover, considering the expectations and evaluation fromshareholders, investors, and the stock market, the Company, as a listed entity, ensures timely and appropriate disclosure. Furthermore, theCompany focuses on rational and intense management through implementation of management strategies for sustainable growth as well as
enhancement of corporate governance. Through these measures, the Company strives to increase its corporate value while maximizing values tobe offered to stakeholders, including its shareholders and the parent company.

Business Risk
The following risks may significantly influence investor’s decisions. The forward-looking statements stated below are based on certain
assumptions and predictions determined by the Group as of the issuance date of the Securities Report (available only in Japanese).
(1) Economic Conditions of Market and Product Demand
Demand for the Group’s products is subject to market trends in the following industries: the iron and steel industry; the home electronicsrelated industry, such as personal computers, cell phones, smart phone, air-conditioning equipment, and semiconductors; the automotive industry;
the aviation industry; and the construction industry. The Group sells its products in Japan, the United States of America, Asia, and Europe.
Accordingly, economic conditions of those countries affect the sales of the Group’s products.
The Group endeavors to build a profitable structure that is less subjected to changes in the business climate, by raising productivity, reducing
fixed and variable costs and lowering the break-even point. However, declining demand in related industries or worsening economic conditions in
the countries in which the Group’s products are sold may affect the Group’s operating results.

14

(2) Fluctuation in Prices of Raw Materials
Raw materials for the Group’s metal products include scrap iron, as well as cobalt, nickel, molybdenum, and rare metals, such as rare earths,
for which suppliers and production areas are limited. Prices for these raw materials may fluctuate dramatically depending on market conditions.
Shipment volumes may also be affected by resource policies and other factors in production areas.
The Group reflects the increase in raw material cost to selling prices of its products. Nonetheless, there is a time lag between the increase in
raw material cost and the revision of selling prices in response to higher costs, and not all of the increased costs will be reflected to selling prices.
Accordingly, increases in raw material cost, which are not reflected in selling prices, may affect the Group’s operating results.
(3) Funding
The Group raises its funds through borrowings from financial institutions, commercial paper, and capital markets, and is subjected tofluctuations in interest rate and credit risks.
(4) Fluctuations in Foreign Exchange Rates
The Group imports raw materials from overseas and exports products manufactured in Japan to overseas. Thus, fluctuations in foreignexchange rates affect transactions, assets, and liabilities denominated in foreign currencies. The Group hedges the risks of fluctuations in foreignexchange rates that affect import and export transactions denominated in foreign currencies through financial instruments, including forward
exchange contracts and currency options. Nonetheless, significant fluctuations in foreign exchange rates may affect the Group’s operating results
and financial position. The Group translates the financial statements of foreign consolidated subsidiaries into yen to prepare its consolidated
financial statements. Therefore, fluctuations in foreign exchange rates may affect the Group’s operating results and financial position.
(5) Fluctuations in Value of Marketable Securities
The Group holds marketable securities subject to impairment due to a downturn in securities markets or deteriorating financial position of
issuing companies, which may affect the Group’s operating results or consolidated financial position.
(6) Overseas Expansion
The Group is expanding its operations overseas, including Asia, the United States, and Europe in response to maturing Japanese markets andthe offshore shifts of customers.
When expanding its operations overseas, the Group is required to make large initial investments into manufacturing and other facilities and, inmany cases, to take time for starting its operations. Overseas expansion entails three inherent risks that may interrupt business activities: (1)regulatory changes in legal and tax system, (2) underdeveloped social systems and infrastructures, and (3) economic, social, and politicalconditions. If such risks materialize, they may negatively affect overseas operations and the Group’s operating results or financial position.
(7) Competitive Advantage and Development and Commercialization of New Technologies and Products
The Group’s competitors offer similar products in the businesses in which the Group operates. Products in the electronics and IT devices
business are typically subjected to dramatic changes in technologies and customer needs, and the markets for existing products may shrink in the
short term. Markets for products in other businesses may also shrink as those markets mature.
Accordingly, the Group is subjected to competition in terms of price, quality, and delivery, and is affected by ability to develop andcommercialize new technologies and products.
The Group endeavors to maintain its competitiveness by identifying customer needs and developing and commercializing new technologies
and products. However, if the Group is unable to respond properly to changes in technologies and customer needs or if lead times of development
and commercialization for new technologies or products are prolonged, the Group’s growth potential and profitability may deteriorate and theGroup’s operating results or financial position may be affected.
(8) Intellectual Property Rights
The Group owns and licenses numerous intellectual property rights. In case where deemed necessary or effective, the Group may obtainlicenses to use the intellectual property rights of third parties. If those rights are not protected, maintained or obtained as planned, the Group’s
operations or competitiveness may be affected. In case where the Group becomes a party to litigation regarding intellectual property rights,
litigation-related costs would be incurred and may affect its operating results or financial position.
(9) Environmental Regulations
The operations of customers with which the Group does business are subjected to extensive environmental and other regulations. Regulations
have generally become stricter. The Group is required to ensure regulatory compliance with regard to the materials and parts for manufacturing its
products and may unavoidably incur expenditures to meet customers’ specifications.
The Group’s businesses are subjected to various environmental and occupational health and safety laws and regulations covering air and waterpollution, using and handling hazardous substances, rationalizing use of energy, disposing waste, and soil and groundwater contamination. The
Group is responsible for risks relating to environment, health, and safety associated with its past, present, and future business activities. As related
laws and regulations become stricter and new ordinances are released, the costs related to such restrictions may affect the Group’s operating
results or financial position.
(10) Product Defects
Certain products of the Group, such as high-security parts, are required to be exceptionally reliable. The Group has built a rigorous quality
control system to prevent manufacturing and distribution of defective products.
However, in case defective products are distributed to the market, costs for relevant repairs, replacements, recalls, damage compensation claims,
and litigation may be incurred and, accordingly, such costs may affect the Group’s operating results or financial position.
(11) Laws and Regulations, and Official Restrictions
The Group is subject to economic laws and regulations for trade, foreign exchange and taxation, and other related regulations and official
restrictions in Japan and other countries in which it operates. The Group endeavors to comply with these laws and regulations, and official
restrictions by designing and improving internal controls. However, in case the Group is considered failing to comply with these requirements,
administrative punishment would be imposed, or in case these requirements are revised, such revision may increase related expenses. These
expenditures may affect the Group’s operating results or financial position.

15

(12) Earthquakes and Other Natural Disasters
The Group may experience turmoil in its logistics or supply chain in case earthquakes, typhoons or other natural disasters damage its facilities,
or even if such disasters do not directly damage its facilities, and force it to halt operations. Epidemics of a new influenza virus or other infectious
diseases may also cause turmoil in the Group’s business activities. In case natural disasters or other events lead to turmoil, the Group’s operations
may be disturbed and its operating results or financial position may be affected.
(13) Information Security
The Group recognizes the increasing importance of information systems for the Group business. In the case information systems are corrupted
due to computer viruses or for other reasons, the Group’s operations may be disturbed and its operating results or financial position may beaffected.
The Group holds and manages personal information obtained from customers, and various confidential information on the Group, andcustomers’ technologies, research and development, manufacturing, sales, and marketing activities. The Group manages and protects theconfidential information; however, there is no guarantee that the Group’s information management is effective enough to protect the confidential
information. In case such information is disclosed without proper authority, the Group may be charged with compensation claims or filed alawsuit. Such events may negatively affect the Group’s operating results, financial position, reputation or credibility.
(14) Retirement and severance benefits
The Group owes a significant amount of retirement benefit costs and obligation derived from actuarial valuations. Inherent in these valuations
are key assumptions used in estimating the amount of pension plan assets, including mortality, withdrawal rate, retirement rate, changes in wages,
discount rates and expected return on plan assets. The Group is required to make judgments regarding these key assumptions by taking into
account various factors, including personnel demographics, current market conditions and expected trends in interest rates. Although we believethat the key assumptions are reasonable in light of the various underlying factors, there is no assurance that the key assumptions will align withactual results. A decrease in the discount rate may result in an actuarial increase in retirement benefit obligations. Changes in key assumptions
may affect the Group’s financial position or operating results.
(15) Business Relationship with the Parent Company
Hitachi, Ltd. is the Company’s parent company and holds 53.2% and 53.5% (including indirect ownership of 0.5%) of the total number ofshares issued and voting rights of the Company, respectively, as of March 31, 2016. Hitachi, Ltd. has a number of affiliates and engages in a broad
range of business activities from product manufacturing to sales and services in 9 segments, including Information & Telecommunication Systems,
Social Infrastructure & Industrial Systems, Electronic Systems & Equipment, Construction Machinery, High Functional Materials & Components,
Automotive Systems, Life and Eco System, Financial Services, and Others (Logistics and Other Services.). The Company partially engages inHigh Functional Materials & Components. As of the issuance date of the Securities Report (available only in Japanese), one of eight directors of
the Company concurrently serve as the director of Hitachi, Ltd. Further, the Company has transactions with Hitachi, Ltd., including productsupplies. While securing the Company’s independence, it actively participates in the Hitachi Group management and intends to maximize theeffective use of Hitachi Group’s research and development capabilities, as well as brand and other management resources. Thus, the Company’sbusiness may be affected by the management strategy of Hitachi, Ltd.
(16) M&A
The Group may be involved in transactions, including acquiring other entities, establishing joint ventures, and entering into strategic businessalliances aimed at developing new technologies and products, enhancing competitiveness in each of the Group’s business domains, and expanding
business areas. Executing these strategies may require time before the Group realizes synergy benefits for certain transactions, as it addresses
complex issues involving integration of businesses, technologies, products, and human resources, a process that entails both time and costs. When
strategy execution does not go according to plan, there is a possibility that initially expected benefits may not be realized. Furthermore, businesscollaborations might be negatively affected by factors that are beyond the Group’s control, such as decisions or capabilities of its strategic alliancepartners and market trends. Moreover, significant costs may be incurred owing to post-integration management issues, including restructuring ofacquired entities or businesses, which may impair the Group’s performance or financial position.
(17) Medium-Term Management Plan
The Group has prepared the Fiscal 2018 Medium-Term Management Plan ending March 31, 2019, under which the Group aims to “change to
be a competitive business” and “challenge to meet new targets.” Setting “change” and “challenge” as keywords, the Group plans to build astronger business base and pursue a growth strategy to become the world’s leading high-performance materials company and grow sustainably
over the long term.
Although the Group strives to achieve the Medium-Term Management Plan, unforeseen changes in the business climate or problems arisingfrom any of the above risks described at (1) through (16) may negatively affect the Group’s operating results or financial position. Accordingly,
the Medium-Term Management Plan may not be implemented as planned, or the Group may fail to reach its targeted management benchmarks.

16

Table of contents

1
Consolidated Financial Statements and Notes ........................................................................................................... 18(1)
Consolidated Financial Statements ..................................................................................................................... 18
1)
Consolidated Statement of Financial Position........................................................................................................ 18
2)
Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ................................ 19
3)
Consolidated Statement of Changes in Equity ....................................................................................................... 21
4)
Consolidated Statement of Cash Flows .................................................................................................................. 23
Notes to the Consolidated Financial Statements................................................................................................................... 25
Note 1. Nature of the Reporting Company ..................................................................................................................... 25
Note 2. Basis of Presentation ............................................................................................................................................ 25
Note 3. Summary of Significant Accounting Policies ..................................................................................................... 25
Note 4. Segment Information ........................................................................................................................................... 31
Note 5. Business Combinations ........................................................................................................................................ 36
Note 6. Trade Receivables ................................................................................................................................................. 37
Note 7. Inventories ............................................................................................................................................................ 37
Note 8. Assets Held for Sale .............................................................................................................................................. 38
Note 9. Investments Accounted for Using the Equity Method ...................................................................................... 38
Note 10. Property, Plant and Equipment .......................................................................................................................... 39
Note 11. Goodwill and Intangible Assets ........................................................................................................................... 41
Note 12. Deferred Taxes and Income Taxes ...................................................................................................................... 43
Note 13. Trade Payables...................................................................................................................................................... 45
Note 14. Provisions .............................................................................................................................................................. 46
Note 15. Employee Benefits ................................................................................................................................................ 47
Note 16. Equity ................................................................................................................................................................... 50
Note 17. Accumulated Other Comprehensive Income and Other Comprehensive Income ......................................... 51
Note 18. Dividends............................................................................................................................................................... 55
Note 19. Other Income and Other Expenses ..................................................................................................................... 56
Note 20. Other Financial Income and Expenses ............................................................................................................... 56
Note 21. Earnings per Share............................................................................................................................................... 56
Note 22. Financial Instruments and Other Related Information .................................................................................... 57
Note 23. Pledged Assets ....................................................................................................................................................... 67
Note 24. Major Subsidiaries and Associates ..................................................................................................................... 68
Note 25. Transactions with Related Parties ...................................................................................................................... 70
Note 26. Commitments and Contingencies (Other Than Liabilities Recognized as Provisions) .................................. 71
Note 27. Subsequent Events ............................................................................................................................................... 71

17

1 Consolidated Financial Statements and Notes(1)1)

Consolidated Financial Statements

Consolidated Statement of Financial Position
As ofMarch 31, 2016

As ofMarch 31, 2015

Thousands of
U.S. dollars
As ofMarch 31, 2016

¥ 120,300
178,281
146,964
38,310483,855•
483,855¥ 79,029
220,547
166,486
49,989516,051
28,569544,620$ 1,067,625
1,582,189
1,304,260
339,989
4,294,063
4,294,063

36,437

24,89222, 23
10, 2311
12

22,446304,292
158,915
12,552
14,814549,456¥ 1,033,311

18,411
299,669
160,269
15,91819,671
538,830¥ 1,083,450

2,700,497
1,410,321
111,395
131,470
4,876,251$ 9,170,314

22
22
22
13, 22¥ 25,251
27,131
26,714
148,999
38,0672,426
8,126
276,714•
276,714¥ 32,039
29,23530,765
178,614
41,9862,520
4,955
320,114
10,264
330,378$ 224,095
240,779
237,078
1,322,320
337,833
21,53072,1162,455,751
2,455,751

22
22
15
12
14

167,994
3,482
66,8207,933
5,693
251,922528,636

194,076
2,415
63,007
11,5405,858
276,896607,274

1,490,895
30,901
593,00770,40350,5232,235,729
4,691,480

16

26,284
115,806
336,141
18,780(1,146)

26,284
115,805
277,856
47,519(1,105)233,262
1,027,742
2,983,147
166,667(10,170)

495,8658,810
504,675¥ 1,033,311

466,359
9,817
476,176¥ 1,083,450

Millions of yen
Note
AssetsCurrent assets
Cash and cash equivalents
Trade receivables
Inventories
Other current assets
Subtotal
Assets held for sale
Total current assets
Non-current assets
Investments accounted for using the equity
methodInvestments in securities and other financial
assetsProperty, plant and equipment
Goodwill and intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Short-term debt
Current portion of long-term debt
Other financial liabilities
Trade payables
Accrued expenses
Advances received
Other current liabilities
Subtotal
Liabilities related to assets held for sale
Total current liabilities
Non-current liabilities
Long-term debt
Other financial liabilities
Retirement and severance benefits
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
EquityEquity attributable to shareholders of theparent company
Common stock
Capital surplus
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost
Total equity attributable to shareholders of
the parent company
Non-controlling interests
Total equity
Total liabilities and equity

6
7
22
8

9

14
8

17
16

See accompanying notes to the consolidated financial statements.

18323,367
199,201

4,400,648
78,186
4,478,834$ 9,170,314

2)Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income

For the year ended
March 31, 2016
¥ 1,017,584(819,433)
198,151

For the year ended
March 31, 2015
¥ 1,004,373(793,517)
210,856

Thousands of
U.S. dollars
For the year ended
March 31, 2016
$ 9,030,742(7,272,213)
1,758,529(122,090)
36,416(12,523)
99,954(126,446)
21,303(21,306)
84,407(1,083,511)
323,181(111,138)
887,061

847
385(3,692)(1,689)805
3,170(2,996)
•

7,517
3,417
(32,765)(14,990)428
96,233(27,253)
68,980

1,005
86,391(14,473)
71,918854,038(241,862)
612,176

69,056(76)¥ 68,980

70,5691,349¥ 71,918

612,851(675)$ 612,176

For the year ended
March 31, 2016

For the year ended
March 31, 2015

U.S. dollars
For the year ended
March 31, 2016

¥ 161.50•¥ 165.02•$ 1.43•

Millions of yen
Note
Revenues
Cost of sales
Gross profit
Selling, general, and administrative expenses
Other income
Other expenses
Operating income
Interest income
Other financial income
Interest charges
Other financial expenses
Share of (profits) losses of investments accounted
for using the equity method
Income before income taxes
Income taxes
Net income

19
19

20
20
9
12

Net income attributable to:Shareholders of the parent company
Non-controlling interests
Net income

Yen

Earnings per share attributable to shareholders of
the parent company
Basic
Diluted21
21

See accompanying notes to the consolidated financial statements.

19

3,798

Consolidated Statement of Comprehensive Income

For the year ended
March 31, 2016
¥ 68,980

For the year ended
March 31, 2015
¥ 71,918

Thousands of
U.S. dollars
For the year ended
March 31, 2016
$ 612,176(1,166)(6,456)740
10,002(10,348)(57,295)

(119)

683

(1,056)(7,741)

11,425(19,960)(233)

20,582(1,070)(177,139)(2,068)

9

(964)

1,586

(8,555)

17(21,157)(28,898)¥ 40,082

21,09832,523¥ 104,441(187,762)(256,461)$ 355,715¥ 40,664(582)¥ 40,082¥ 102,576
1,865¥ 104,441$ 360,880(5,165)$ 355,715

Note

Net income
Other comprehensive income
Items not to be reclassified into net income
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Share of other comprehensive income ofinvestments accounted for using the equity
methodTotal items not to be reclassified into net
incomeItems that can be reclassified into net income
Foreign currency translation adjustments
Net change in fair value of cash flow hedges
Share of other comprehensive income ofinvestments accounted for using the equity
methodTotal items that can be reclassified into net
incomeTotal other comprehensive income
Comprehensive income

Millions of yen

9Comprehensive income attributable to:Shareholders of the parent company
Non-controlling interests
Comprehensive income
See accompanying notes to the consolidated financial statements.

20(68,699)

3)

Consolidated Statement of Changes in Equity
Millions of yen
Note Common
stockBalance at April 1, 2014
Changes in equity
Net income
Other comprehensive income
Dividends to shareholders of theparent company
Dividends to non-controllinginterests
Acquisition of treasury stock
Sales of treasury stock
Change in the scope of
consolidation
Transfer to retained earnings
Changes in the parent’s equity ina subsidiary that do not result in
the parent losing control of thesubsidiary
Other
Total changes in equity
Balance at March 31, 2015
Changes in equity
Net income
Other comprehensive income
Dividends to shareholders of theparent company
Dividends to non-controllinginterests
Acquisition of treasury stock
Sales of treasury stock
Change in the scope of
consolidation
Transfer to retained earnings
Changes in the parent’s equity ina subsidiary that do not result in
the parent losing control of thesubsidiary
Other
Total changes in equity
Balance at March 31, 2016

¥ 26,284

Capitalsurplus

Total equity
attributable toNonshareholders controllingof the parent
interests
company¥ (1,010)¥ 372,217 ¥ 10,623

AccumuTreasury
Retained lated otherstock, atearnings comprehencost
sive income¥ 115,591 ¥ 215,603¥ 15,749

Total
equity¥ 382,840

•
•

•
•

70,569••32,007••70,56932,0071,349
516

71,91832,52318••(8,553)••(8,553)•(8,553)

16
16

•
•
•

•
•
1

•
•
•

•
•
•

•
(107)
12

•
(107)
13

(550)
•
•

(550)
(107)
13

•
•

•
•

•
237

•
(237)

•
•

•
•

(1,946)•(1,946)••••
26,284213•
214
115,805••
62,253277,856••
31,77047,519••(95)(1,105)

213•
94,142
466,359

(229)
54
(806)
9,817

(16)
54
93,336476,176••••

69,056••(28,392)••

69,056(28,392)

(76)
(506)

68,980(28,898)

18••(11,118)••(11,118)•(11,118)

16
16

•
•
•

•
•
1

•
•
•

•
•
•

•
(41)
0

•
(41)
1

(425)
•
•

(425)
(41)
1

•
•

•
•

•
347

•
(347)

•
•

•
•

•
•

•
•

•
•
•
¥ 26,284••1
115,806••
58,285336,141••(28,739)
18,780••(41)(1,146)••
29,506495,865••(1,007)8,810••
28,499504,675

See accompanying notes to the consolidated financial statements.

21

Thousands of U.S. dollars
Note

Commonstock

Capitalsurplus

Balance at March 31, 2015
$ 233,262 $ 1,027,733
Changes in equity••
Net income••••
Other comprehensive
incomeDividends to shareholdersof the parent company
18••
Dividends to noncontrolling interests••
Acquisition of treasury
•
•
16
stock
Sales of treasury stock
16•
9
Change in the scope of
consolidation••
Transfer to retained••
earnings
Changes in the parent’s
equity in a subsidiary that
do not result in the parent
losing control of thesubsidiary
•
•
Other
•
•
9
Total changes in equity•
Balance at March 31, 2016
$ 233,262 $ 1,027,742

Total equity
Accumulated
attributable to
NonRetained
Treasury
Total
other
shareholders controllingcomprehensive stock, at costearnings
equityof the parent interests
incomecompany$ 2,465,885$ 421,717$ (9,806) $ 4,138,791 $ 87,123 $ 4,225,914
•
•
•
•
•
•
612,851••
612,851(675)
612,176•(251,970)•(251,970)(4,491)(256,461)(98,669)••(98,669)•(98,669)

•
•

•
•

•

•

(3,771)

(364)

(364)

(3,771)
•

•

•

0

9

•

9

•

•

3,080

(3,080)

•
•

•
•

•
•

•
•

•
•
517,262$ 2,983,147••(255,050)$ 166,667

•
•
(364)
$ (10,170)••
261,857$ 4,400,648

See accompanying notes to the consolidated financial statements.

22

(364)

•
•
•
•
(8,937)
252,920$ 78,186 $ 4,478,834

4)Consolidated Statement of Cash Flows
For the year ended
March 31, 2016

For the year ended
March 31, 2015

Thousands of
U.S. dollars
For the year ended
March 31, 2016

¥ 68,980¥ 71,918$ 612,176

42,927
1,372

39,917497

380,964
12,176

(428)
4,149
1,377
3,250

(1,005)
(979)
1,453
6,792

(3,798)36,821
12,22028,843(29,841)•
27,25333,731
12,974(12,724)
2,367
14,473
23,972(8,146)(264,830)•
241,862
299,352
115,140

6,540(24,837)(1,291)

2,726(11,944)
4,853(220,421)(11,457)(701)(9,407)136,048
1,641(3,780)(3,239)•(14,928)
115,7423,601(9,811)
127,960732(2,860)(1,572)
1,731(17,008)
108,983(6,221)(83,483)
1,207,384
14,563(33,546)(28,746)•(132,481)
1,027,174(53,646)(4,112)(44,063)(4,087)(476,092)(36,493)

1,844

1,811

(12,940)(90,230)

Millions of yen
Note
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
Impairment losses
Share of (profits) losses of investments
accounted for using the equity method
Financial expenses (income)Losses on sale of property, plant and equipment
Restructuring expenses
Net (gain) loss on business reorganization andothersLoss on revision of retirement benefit plan
Income taxes
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in accounts receivable other
Increase (decrease) in trade payables
Increase (decrease) in accrued expenses
Increase (decrease) in retirement and severance
benefits
Other
SubtotalInterest and dividends received
Interest paid
Payments for structural reforms
Foreign value added taxes refunded
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of property, plant andequipment
Purchase of investments in securities and otherfinancial assets (including investments in
subsidiaries and investments accounted for using
the equity method)
Proceeds from sale of investments in securities
and other financial assets (including investments
in subsidiaries and investments accounted forusing the equity method)
Proceeds from transfer of business
Payments for transfer of business
Other
Net cash used in investing activities

58,04016,365(114,838)
276,810

31,191
1,694(1,399)5,221(32,147)(Continued)

23

15,838
9,678(1,900)(797)(113,750)

15,034(12,416)
46,335(285,295)

For the year ended
March 31, 2016

For the year ended
March 31, 2015

Thousands of
U.S. dollars
For the year ended
March 31, 2016

(2,255)6,000(30,034)(11,118)
(425)
(41)
1

(25,182)
123,923(98,411)(8,553)
(550)
(102)
3

(20,012)53,248(266,542)(98,669)(3,772)(364)
9•(37,872)(12)(8,884)(336,102)(4,452)

6,208(39,510)

41,271(7,443)366,267

79,02992,911

701,358•¥ 120,300(6,439)¥ 79,029•$ 1,067,625

Millions of yen
Note
Cash flows from financing activities:
Net decrease in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Dividends paid to shareholders
Dividends paid to non-controlling interests
Acquisition of common stock for treasury
Proceeds from sales of treasury stock
Purchase of shares of consolidated subsidiaries
from non-controlling interests
Net cash used in financing activities

18

Effect of exchange rate changes on cash and cash
equivalents
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at the beginning of theyear
Decrease in cash and cash equivalents resulting
from transfer to assets held for sale
Cash and cash equivalents at the end of the year
See accompanying notes to the consolidated financial statements.

24•Notes to the Consolidated Financial Statements
Note 1. Nature of the Reporting Company
Hitachi Metals, Ltd. (the “Company”) is a Japan-based company whose shares are listed on the First Section of the Tokyo Stock
Exchange. Its principal office is located at 2-70 Konan 1-chome, Minato-ku, Tokyo, which moved from 2-1 Shibaura 1-chome,
Minato-ku, Tokyo on December 1, 2015. The Company’s consolidated financial statements comprise the financial statements of theCompany and its subsidiaries, as well as its share of the profit or loss of associates and joint ventures. The Company and its
subsidiaries (the “Group”) primarily manufacture and sell high-grade metal products, magnetic materials and applications, highgrade functional components and equipment, and wires, cables, and related products.

Note 2. Basis of Presentation
As the Company meets the qualification for a “Specified Company applying Designated IFRSs” pursuant to Article 1-2 of theOrdinance on Terminology, Forms and Preparation Method of Consolidated Financial Statements (Ordinance of Ministry of Finance ofJapan Regulation No. 28, 1976), the consolidated financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board, as permitted by theprovision of Article 93 of the above Ordinance.
The consolidated financial statements have been prepared on a historical cost basis except for derivative financial instruments
measured at fair value, financial instruments measured at fair value through profit or loss (FVTPL), financial instruments measured atfair value through other comprehensive income (FVTOCI), and assets and liabilities associated with defined benefit plans. The
consolidated financial statements are presented in millions of Japanese yen. Amounts are rounded to the nearest million yen forpresentation.
The accompanying consolidated financial statements were approved by Hideaki Takahashi, president and chief executive officer, on
June 23, 2016.
Management of the Company is required to make a number of judgments, estimates, and assumptions related to the application of
accounting policies and reporting of revenues and expenses, and assets and liabilities to prepare the consolidated financial statementsin accordance with IFRS. Actual results may differ from those estimates.
Estimates and assumptions are continually reviewed. The effects of a change in accounting estimates, if any, are recognized in thereporting period in which the change was made and in future periods.
The translation of Japanese yen amounts into U.S. dollars as of and for the year ended March 31, 2016, is included in this annual
report solely for the convenience of readers outside Japan. The translation has been made at the rates of ¥112.68=$1, the approximate
exchange rates as of March 31, 2016.
The following notes include information regarding judgments in applying accounting policies that could materially affect theCompany’s consolidated financial statements:
・Note 3. (1) “Basis of Consolidation”
・Note 3. (4) “Financial Instruments” and Note 22. “Financial Instruments and Other Related Information”
The following notes include information regarding uncertainties arising from assumptions and estimates that may materially affect theCompany’s consolidated financial statements in the following fiscal year:
・Note 3. (9) “Impairment of Non-financial Assets”
・Note 3. (11) “Post-employment benefits” and Note 15. “Employee Benefits”
・Note 3. (12) “Provisions,” Note 3. (13) “Contingencies,” Note. 14. “Provisions” and Note 26. “Commitments and Contingencies(Other Than Liabilities Recognized as Provisions)”
・Note 3. (15) “Income Taxes” and Note 12. “Deferred Taxes and Income Taxes”

Note 3. Summary of Significant Accounting Policies(1)

Basis of Consolidation(a) Subsidiaries
Subsidiaries are entities that mainly the Group controls through direct or indirect ownership of a majority voting right.
The Company consolidates all subsidiaries from the date on which the Group acquired control until the date on which the Group loses
control.
The financial statements of the Company’s subsidiaries have been adjusted, if accounting policies applied by such subsidiaries
differ from those of the Group, if necessary.

25

Changes in ownership interest in subsidiaries without a loss of control are accounted for as equity transactions. On the other hand,changes in ownership interest in subsidiaries with a loss of control are accounted for by derecognizing assets and liabilities, noncontrolling interests, and accumulated other comprehensive income attributable to the subsidiary.
Financial statements of subsidiaries whose fiscal closing dates differ from the consolidated account closing date are included in the
consolidated financial statements on the basis of a provisional account closing as of the consolidated account closing date.
(b) Associates and joint ventures (accounted for using the equity method)
Associates are entities over which the Group has the ability to exercise significant influence over operational and financial policies
mainly by holding 20%-50% ownership directly or indirectly, but does not control such entities.
Joint ventures are entities jointly controlled by more than one party, including the Group, and decisions about operational and financial
policies require unanimous consent of all parties where the Group has a right to the net assets of the arrangement.
Investments in associates and joint ventures (“equity-method investees”) are accounted for using the equity method.
Consolidated financial statements include changes in net income and other comprehensive income of the equity method investees fromthe date on which the Group obtains significant influence or joint control over the investees to the date on which it loses significant
influence or joint control.
The financial statements of the Group’s equity-method investees have been adjusted, if necessary, when the accounting policies of such
equity-method investees differ from those of the Group.
(2)

Cash Equivalents
The Group considers highly liquid investments with insignificant risk of changes in value and original maturities of three months or lesswhen purchased to be cash equivalents.

(3)

Foreign Currency Translation
The consolidated financial statements are presented in Japanese yen, which is also the Company’s functional currency.
(a) Foreign currency transactions
Foreign currency transactions are translated into each functional currency of the Group using exchange rates prevailing at the datesof the transactions or rates that approximate such rates. Monetary assets and liabilities denominated in foreign currencies are translatedusing the exchange rate at the end of the reporting period. Foreign exchange gains and losses resulting from currency translation andsettlement are recognized in profit or loss.
(b) Translation of the financial statements of foreign operations
Assets and liabilities of the Company’s foreign operations are translated into Japanese yen using the exchange rate at the end of thereporting period. Income and expense items are translated at the average exchange rate prevailing during the year.
Foreign exchange gains and losses resulting from the translation of financial statements of foreign operations are included in othercomprehensive income.

(4)

Financial Instruments
The Group has applied IFRS 9 Financial Instruments (issued in November 2009, amended in October 2010 and December 2011) earlier
than the mandatory effective date.
(a) Non-derivative financial assets
The Group initially recognizes trade receivables on the actual transaction dates. All other financial assets are initially recognized on thedates on which the Group becomes party to the agreement.
The Group derecognizes financial assets when the contractual rights to cash flows from the financial assets expire or are transferred,
and the risks and rewards of ownership of the financial assets are substantially transferred.
Classification and measurement models of non-derivative financial assets are summarized as follows:
Financial assets measured at amortized cost
Financial assets are subsequently measured at amortized cost when they meet the following requirements:
・The financial asset is held in accordance with the Group’s business model whose objective is to hold the asset in order to collectcontractual cash flows.
・The contractual terms of financial assets give rise on specified dates to cash flows that are solely payments of principal andinterest on the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value (including direct transaction costs). The carrying
amount of financial assets measured at amortized cost is subsequently measured using the effective interest method, less impairment
losses when necessary.

26

Impairment of financial assets measured at amortized cost
The Group evaluates financial assets measured at amortized cost for possible impairment on a periodic basis, but no less frequently
than at the end of each quarterly reporting period when there is objective evidence of impairment resulting from one or more eventsoccurring after the initial recognition and when the estimated future cash flows from the financial assets or group of assets can bereliably measured. Objective evidence of impairment includes historical credit loss; the existence of overdue payments; extended
payment terms; a negative evaluation by third-party credit rating agencies; excessive debts; and findings indicating a deteriorating
financial position or operating results.
An impairment loss is estimated based on the present value of estimated future cash flows of the financial asset discounted at theeffective interest rate or an observable market price.
In addition, an impairment loss is recognized based on the actual bad debt ratio calculated based on factors such as historicalexperience, or the estimated collectible amount, after assessing multiple potential risks associated with a country in which a debtor
conducts its business or business environment, including special business customs particular to the region.
In the consolidated statement of financial position, impairment losses of debt securities are directly deducted from their carrying
amount and impairment losses of financial assets other than debt securities are indirectly decreased through the allowance account.
For financial assets other than debt securities, account balances are generally written off against the allowance only after all meansof collection have been exhausted and the recoverability of the assets is considered remote. Write-offs are generally recognized only
when a debtor commences bankruptcy or liquidation proceedings because it is considered that all collection efforts will have been
exhausted by that time.
FVTPL financial assets
The Group classifies equity instruments not designated as FVTOCI financial assets at the initial recognition and debt instruments
not classified as financial assets measured at amortized cost as FVTPL financial assets. These instruments are subsequently
measured at fair value and any changes in fair value are recognized in profit or loss.
FVTOCI financial assets
The Group holds certain equity instruments to expand its revenue base by maintaining and strengthening business relations withinvestees. The Group makes an irrevocable election to designate these equity instruments as FVTOCI financial assets at initialrecognition. They are measured at fair value after initial recognition and changes in fair value are recognized in othercomprehensive income. The cumulative amount of the changes in fair value is recognized in accumulated other comprehensive
income. Dividends from equity instruments designated as FVTOCI are recognized in profit or loss unless it is obviously a return ofinvestment.
Derecognition of financial assets
The Group derecognizes financial assets when the contractual rights to cash flows from the financial assets expire or are transferred,
and the risks and rewards of ownership of the financial assets are substantially transferred.
(b) Non-derivative financial liabilities
The Group initially recognizes debt securities issued on the date of issuance. All other financial liabilities are initially recognized on
the transaction dates on which the Group becomes party to the agreement.
The Group derecognizes financial liabilities when extinguished, that is, when the obligation in the contract is redeemed, or the liability
is discharged, cancelled, or expires.
Non-derivative financial liabilities that the Group holds include bonds, debts, operating payables, and other liabilities. They are
initially measured at fair value (less direct transaction costs) and subsequently measured at amortized cost using the effective interest
method.
(c) Derivatives and hedge accounting
The Group uses derivative instruments, including forward exchange contracts, interest rate swaps, and copper futures trading, in orderto hedge currency risks, interest rate risks, and raw material (copper) price fluctuation risks, respectively.
The Group applies hedge accounting as follows:・Fair value hedge: a hedge against changes in the fair value of a recognized asset or liability, or an unrecognized firm commitment.
The changes in the fair value of the recognized assets or liabilities, or unrecognized firm commitments, and the related derivatives
are recognized in profit or loss if the hedge is considered highly effective.
・Cash flow hedge: a hedge against variability in cash flows attributable to a forecasted transaction or related to a recognized asset or
liability. The changes in the fair value of derivative instruments designated as cash flow hedges are recorded in other comprehensive
income (loss) if the hedge is considered highly effective. This treatment is continued until net income is affected by the variability incash flows or the unrecognized firm commitment of the designated hedged item, at which point changes in fair value of thederivative instruments are recognized in profit or loss.

27

The Group documents risk management objectives and strategies for undertaking various hedge transactions. In addition, the Groupassesses whether the derivative used in hedging activities is highly effective in offsetting changes in fair value or cash flows of thehedged item at the hedge’s inception and periodically on an ongoing basis. Hedge accounting is discontinued for ineffective hedges.
Subsequent changes in the fair value of derivatives related to discontinued hedges are immediately recognized in profit or loss.
(d) Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position only when
the Group currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize theasset and settle the liability simultaneously.
(5)

Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the specific identification method or average cost
method for merchandise and finished products, and work in process, and generally by the moving average cost method or average cost
method for raw materials and supplies. Net realizable value is the estimated selling price in the ordinary course of business, less theestimated costs of completion and the estimated costs necessary to sell.

(6)

Property, Plant and Equipment
The Group applies the cost model to property, plant and equipment and states such assets at cost, less accumulated depreciation andaccumulated impairment losses. The cost of an item of property, plant and equipment includes the direct cost of acquisition, and the cost ofits dismantlement, removal, and restoration. Property, plant and equipment are principally depreciated using the straight-line method overthe following estimated useful lives:
Buildings and structures:
2 to 60 years
Machinery and vehicles:
2 to 20 years
Tools, furniture, and fixtures:
2 to 30 years
The estimated useful lives and the method of depreciation are reviewed at each fiscal year-end. Changes in estimated useful lives ordepreciation method are accounted for as a change in an accounting estimate and applied prospectively.

(7)

Goodwill and Other Intangible Assets(a) Goodwill
Goodwill is stated at cost, less any accumulated impairment losses.
(b) Intangible assets (excluding goodwill)
The Group applies the cost model to intangible assets and states such assets at cost, less accumulated amortization and impairment
losses.
Intangible assets with finite useful lives are amortized principally using the straight-line method over the following estimated useful
lives:
Software:2 to 10 years
Other intangible assets:
2 to 20 years(8)

Equity(a) Common stock and capital surplus
The amounts of equity instruments issued by the Company are recognized in common stock and capital surplus at their issued prices,and the costs incurred directly related to the issuance are deducted from capital surplus.
(b) Treasury stock
When the Company acquires treasury stock, the acquisition costs are recognized as deductions from equity. When treasury stock issold, the differences between the carrying amounts and the considerations are recognized in capital surplus.

(9)

Impairment of Non-financial Assets
The Group performs impairment testing for non-financial assets whenever events or circumstances have occurred that indicate that thecarrying amount of the assets may not be recoverable. The Group tests goodwill and intangible assets with indefinite lives for impairment
annually, generally during the fourth quarter, irrespective of whether there is any indication of impairment. The Group performs
impairment testing by estimating the recoverable amount per cash generating unit (CGU) to which the asset belongs. When performing an
impairment test, assets are grouped into the smallest identifiable group whose cash flows are independent.
In determining the recoverable amount, the Group uses available quoted market prices or the income approach (a present value technique)based on the estimated future cash flows expected to result from the use of the assets and their eventual disposition. If the carrying amountof the assets allocated to a CGU exceeds the recoverable amount, an impairment loss on the assets of that CGU is recognized.
When there is a significant change in the facts and circumstances used to calculate the recoverable amount of an asset other than goodwill,
and there is an indication that an impairment loss previously recognized on the asset may no longer exist or be decreased, the recoverable
amount of the asset or the CGU is estimated. If the recoverable amount of the asset or the CGU exceeds its carrying amount, then the
impairment loss is reversed to the extent of the carrying amount that would have been determined, net of depreciation or amortization, had
no impairment loss been recognized for the asset in prior years.

28

(10) Assets Held for Sale
The Group classifies an asset or a disposal group of assets whose carrying amount will be recovered through a sales transaction, rather than
through continuing use, as an asset or assets held for sale, if its sale is highly probable and it is available for immediate sale in its present
condition. Assets held for sale are not depreciated or amortized, and measured at the lower of carrying amount or fair value, less costs tosell.
(11) Post-employment Benefits
The Company and its subsidiaries have contributory defined benefit pension plans as well as funded and unfunded lump-sum payment
plans to provide retirement and severance benefits to employees. The present value of defined benefit obligations and retirement benefit
costs are measured based on the projected unit credit method.
The effects of remeasurements of the net defined benefit asset or liability are recognized in other comprehensive income when incurred.
Past service cost is immediately recognized in profit or loss.
The net amount of a defined benefit asset or liability is calculated as the present value of the defined benefit obligation, less the fair valueof the plan assets, and is recognized as an asset or liability in the consolidated statement of financial position.
Additionally, the Company and certain subsidiaries have defined contribution pension plans, recognizing the contributions to the plans as
expenses during the fiscal year when employees have rendered service. Further, certain subsidiaries participate in multi-employer defined
benefit plans, accounting for the plans in the same manner as a defined contribution pension plan when sufficient information is notavailable to account for the plans as a defined benefit pension plan.
(12) Provisions
The Group recognizes provisions when it has a present obligation (legal or constructive) as a result of a past event, when it is probable thatan outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of obligation can be reliably
estimated.
When the time to settle an obligation is expected to be long and the time value of money is material, the amount of a provision is measured
at the present value of the expenditures expected to be required to settle the obligation. The discount rate used in calculating the present
value is a pre-tax rate that reflects the time value of money and the risks specific to the liability.
The nature and the amount of the provisions that the Group recorded are described in Note 14 “Provisions.”(13) Contingencies
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the Group discloses contingent liabilities in Note 26“Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)” for outflows of resources embodying economic
benefits whose realization is uncertain at the end of the reporting period, if it cannot be determined as a present obligation as of the end of
the reporting period or if it does not meet the recognition criteria of provisions prescribed in (12) “Provisions,” unless the possibility of any
outflow in settlement is remote.
The Group has financial guarantee contracts that require the group to make specified payments to reimburse thecreditor for a loss when the debtor fails to make payment when due in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value adjusted for transaction costs that are directly
attributable to the issuance of the guarantee. Subsequent to initial recognition, the Group accounts for liabilities related
to the financial guarantee contracts at the higher of the best estimate of expenditures required for settling the present
obligation at the reporting date or the amount initially recognized, less cumulative amortization.
(14) Revenue Recognition
The Group recognizes revenue when persuasive evidence of an arrangement exists, it is probable that future economic benefits will flow to
the Group, and these benefits can be measured reliably.
Revenues from the sale of products are measured at the fair value of the consideration received or receivable. The fair value is the amountless discounts and rebates.
Revenue from sales of products is recognized when the significant risks and rewards of ownership of the products have been transferredto the customer; the Group has no continuing involvement nor effective control over the products; the amount of revenue and the costs
incurred related to the transaction can be measured reliably; and it is probable that the economic benefits associated with the transaction
will flow to the Group. Primarily, the Group recognizes revenue from the sale of products upon delivery to the customer. The Group sells
products, such as high-grade specialty steel products, precision cast components, various mill rolls, injection molding machine parts,
structural ceramic products, steel-frame joints for construction, amorphous metals and related applied products, magnets, soft magnetic
materials and related applied products, materials and components for information and telecommunication equipment, materials andcomponents for medical equipment, casting components for automobiles, aluminum wheels, other aluminum components, forgedcomponents for automobiles, piping and infrastructure components, electric wires and cables, automotive products, and information
systems.

29

(15) Income Taxes
Deferred tax assets and liabilities arising from temporary differences, unused tax losses and unused tax credits are recognized based on
the asset and liability method. A deferred tax liability is not recognized on the temporary difference arising from goodwill, and thetemporary difference arising from the initial recognition of an asset or liability in a transaction which is not a business combination, and at
the time of transaction, affects neither accounting nor taxable profit or loss. It is also not recognized on outside-basis difference arisingfrom investments in subsidiaries and associates when the Group is able to control the timing of the reversal of the temporary difference andit is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured using
enacted tax rates expected to be applied to taxable income in the fiscal year when those temporary differences are expected to be recovered.
The effects of a change in tax rates on deferred tax assets and liabilities are recognized in profit or loss in the fiscal year that includes thedate of enactment of the change in the tax rate. Deferred tax assets are recognized to the extent that it is probable that future taxable
income will be available against which any unused tax losses, unused tax credits, and future deductible temporary difference can beutilized.
(16) Consumption Tax
Consumption tax collected and remitted to taxing authorities is excluded from revenues, cost of sales, and expenses in the consolidated
statements of income.
(17) Earnings per Share
Basic earnings per share (“EPS”) attributable to shareholders of the parent company is calculated based on the weighted average ofordinary shares outstanding during the period. Diluted EPS attributable to shareholders of the parent company is calculated based on thesum of the weighted average of ordinary shares outstanding during the period and the weighted average of dilutive potential ordinary
shares issuable or convertible into ordinary shares.
(18) Business Combinations
Business combinations are accounted for using the acquisition method. Acquisition cost is determined as the total consideration transferred,measured at the acquisition date fair value and the non-controlling interests in the acquiree. For each business combination, the Groupchooses to measure any non-controlling interest in the acquiree at fair value or on the basis of its proportionate interest in the acquiree’s
identifiable net assets at fair value. Acquisition-related costs are recognized as incurred in profit or loss.
Business combinations under common control, in other words, business combinations in which all the combining entities or businesses areultimately controlled by the same party or parties both before and after the business combinations and when the control is not temporary,
are accounted for based on carrying amounts.
(19) Standards Issued but Not Yet Effective
The Group has not applied the following standards and interpretations that were issued, amended, or revised but not yet effective before
the approval date of the accompanying consolidated financial statements as of and for the year ended March 31, 2016. The potential
impacts of applying these standards or interpretations on the consolidated financial statements are under evaluation.
Mandatory effective
Expected
application date bydate(beginning on or
the Group
after)
January 1, 2018
To de determined

Summary of new or amended standards
and interpretations

IFRSs

Title

IFRS 9Financial
Instruments

IFRS 15

Revenue fromContracts with
Customers

January 1, 2018

To be determined

Revision of accounting treatments and disclosures forrevenue recognition

IFRS 16

LeasesJanuary 1, 2019

To be determined

Revision of definition of a lease and accounting treatments
for a lessee.

30

Revision of hedge accounting (November 2013)
Revision of classification and measurement of financial
instruments and introduction of the expected loss model forthe impairment of financial assets (July 2014)

Note 4. Segment Information
Business Segments
The Group’s operating segments are components for which independent financial information is available and which are regularly reviewed by
the Board of Directors to assist the Board in making decisions about resources to be allocated to the segments and to assess performance.
The Group has adopted a company-based organization structure and established seven business headquarters based on the type of products andservices. Each of the seven business units prepares a comprehensive strategy and engages in business activities related to their products andservices for both the domestic and overseas markets.
Hitachi Tool Engineering, Ltd. (currently, Mitsubishi Hitachi Tool Engineering, Ltd.) was excluded from the scope of consolidation andaccounted for as an equity-method investee investment effective on April 1, 2015, as the Company transferred 51% of the total issued shares
to Mitsubishi Materials Corporation.
Based on the above, the High-Grade Metal Products and Materials segment comprises the Specialty Steel Business, Roll Business, and Soft
Magnetic Materials Business. The Magnetic Materials and Applications segment comprises the NEOMAX Business and Information System
Components Business. The High-Grade Functional Components and Equipment segment comprises the Automotive Components Business andPiping Components Business. The Wire, Cables, and Related Products segment comprises the Electric Wires and Cables Business.
The primary products and services included in each segment are as follows:
Reportable segment

Major products and services
TM

High-Grade Metal Products
and Materials

YSS brand high-grade specialty steel products (tool steel, alloys for electronic products [display-relatedmaterials and semiconductor and other package materials], industrial equipment materials [automobile-,
aircraft-, and energy-related materials], and razor and blade materials); precision cast components; rolls forsteel mills; injection molding machine parts; structural ceramic products; steel-frame joints for construction;and Metglas® amorphous metals.

Magnetic Materials andApplications

Magnets (NEOMAX® rare-earth magnets, ferrite magnets, and other magnets and applied products); soft
magnetic materials (soft ferrite and FINEMET® nanocrystalline magnetic material) and applied products;
Metglas® amorphous metals applied products; materials and components for information andtelecommunication equipment; and materials and components for medical equipment

High-Grade Functional
Components and Equipment

Casting components for automobiles (HNMTM high-grade ductile cast iron products, cast iron products fortransportation machinery, and HERCUNITE® heat-resistant exhaust casting components); SCUBATM
aluminum wheels; other aluminum components; forged components for automobiles; piping andinfrastructure components ( Gourd® brand pipe fittings, stainless steel and plastic piping components, watercooling equipment, precision mass flow control devices, and sealed expansion tanks)

Wires, Cables, and Related
Products

Electric wires and cables (electric power and industrial systems, electronic and telecommunication materials,
electric equipment materials, and industrial rubber products); automotive products (electronic components
and brake hoses); and information systems (information networks and wireless systems)

The same accounting policies as the ones described in Note 3. “Summary of Significant Accounting Policies” are applied to the reportablesegments.
Income by reportable segment is based on operating income. Intersegment revenues are based on prevailing market price.

31

The following tables show business segment information for the years ended March 31, 2016 and 2015:
For the year ended March 31, 2016
Millions of yen
Reportable segment
High-Grade
High-Grade
Magnetic
Wires,
Functional
Metal
Materials
Cables, andComponents
Products andand
RelatedandMaterials
Applications
Products
Equipment
Revenues
Externalcustomers
Intersegment
transactions
Total revenues
Segment profit(loss)
Financial income
Financialexpenses
Share of profits
ofinvestments
accounted
forusing the equity
methodIncomebeforeincome taxes
Segment assets
Other items:
Depreciation andamortization
Capitalexpenditure
Impairment
lossesOthersSubtotal

Total

Adjustments

Consolidated
statement ofincome¥ 241,678¥ 119,922¥ 365,112¥ 288,216¥ 1,014,928¥ 2,656¥ 1,017,584¥ •¥ 1,017,584

309

22

6

30

367

891

1,258

(1,258)－

241,987

119,944

365,118

288,246

1,015,295

3,547

1,018,842(1,258)1,017,584

53,343

9,574

25,47917,682106,078143

106,221(6,267)

99,954

•

•

•

•

•

•

•

•

1,232

•

•

•

•

•

•

•

•

(5,381)

•

•

•

•

•

•

•

•

428

•

•

•

•

•

•

•

•

96,233304,855

115,830

326,600

269,031

1,016,316

15,262

1,031,578

1,733

1,033,311

11,391

6,132

14,9589,203

41,684453

42,137790

42,927

23,1606,795

16,81911,52458,298

182

58,4801,122

59,602

25

16

1,187

•

1,228

•

1,228

144

1,372

32

Thousands of U.S. dollars
Reportable segment
High-Grade
High-Grade
Magnetic
Wires,
Functional
Metal
Materials
Cables, andComponents
Products andand
RelatedandMaterials
Applications
Products
Equipment
Revenues
Externalcustomers
Intersegment
transactions
Total revenues
Segment profit(loss)
Financial income
Financialexpenses
Share of profits
of investments
accounted forusing the equity
methodIncome before
income taxes
Segment assets
Other items:
Depreciation andamortization
Capitalexpenditure
Impairment
lossesOthersSubtotal

Total

Adjustments

Consolidated
statement ofincome$•$ 9,030,742$ 2,144,817$ 1,064,271$ 3,240,256$ 2,557,827$ 9,007,171$ 23,571$ 9,030,742

2,743

195

53

266

3,257

7,907

11,164(11,164)•

2,147,560

1,064,466

3,240,309

2,558,093

9,010,428

31,4789,041,906(11,164)

9,030,742

473,403

84,966226,118

156,922

941,409

1,269

942,678(55,617)887,061

•

•

•

•

•

•

•

•

10,934

•

•

•

•

•

•

•

•

(47,755)

•

•

•

•

•

•

•

•

3,798

•

•

•

•

•

•

•

•

854,038

2,705,493

1,027,955

2,898,474

2,387,567

9,019,489

135,445

9,154,934

15,3809,170,314

•

•

•

•

•

•

•

•

•

101,092

54,420132,747

81,674369,933

4,020

373,953

7,011

380,964

205,538

60,304

149,263102,272

517,377

1,615

518,992

9,957

528,949

222

142

10,534•

10,898•

10,898

1,278

12,176

Notes: 1. Segment profit (loss) is based on operating income.
2. Intersegment transactions are recorded at the same prices used in transactions with third parties. Adjustments represent mainly generaland administrative expenses for corporate assets, which are not allocated to each reportable segment.
3. Adjustments represent mainly cash and cash equivalents, investments in securities, and other financial assets allocated to corporate
assets and eliminations of intersegment transactions.
4. Capital expenditure represents increases in property, plant and equipment, intangible assets, and investment property.

33

For the year ended March 31, 2015
Millions of yen
Reportable segment
High-Grade
High-Grade
Magnetic
Wires,
Metal
Functional
Materials
Cables, andComponents
Products
andRelatedandandApplications
Products
Materials
Equipment

Subtotal¥ 257,396¥ 135,400¥ 282,018¥ 327,595

3,398

86

312

260,794

135,486

Adjustments

Consolidated
statement ofincome¥ 1,004,373¥•¥ 1,004,373

2,395

6,588

(6,588)－1,006,602

4,359

1,010,961(6,588)1,004,373

OthersTotal¥ 1,002,409¥ 1,964

397

4,193

282,330

327,992

Revenues
External customers
Intersegment
transactions
Total revenues
Segment profit (Loss)

34,661

11,492

28,074

19,845

94,072

206

94,278(9,871)

84,407

Financial income

•

•

•

•

•

•

•

•

3,975

Financial expenses

•

•

•

•

•

•

•

•

(2,996)

•

•

•

•

•

•

•

•

1,005

•

•

•

•

•

•

•

•

86,391

313,453

151,812344,029

282,085

1,091,379

17,971

1,109,350(25,900)

1,083,450

Depreciation andamortization

11,847

6,456

10,704

9,907

38,914418

39,332585

39,917

Capital expenditure

18,724

10,20912,576

9,094

50,603357

50,960514

51,474

Impairment losses

•

5,209

88

410

5,707

•

5,707

174

5,881

Share of profits (losses)
of investments
accounted for using theequity method
Income before income
taxes
Segment assets
Other items:

Notes: 1. Segment profit (loss) is based on operating income.
2. Intersegment transactions are recorded at the same prices used in transactions with third parties. Adjustments represent mainly generaland administrative expenses for corporate assets, which are not allocated to each reportable segment.
3. Adjustments represent mainly cash and cash equivalents, investments in securities, and other financial assets allocated to corporate
assets and eliminations of intersegment transactions.
4. Capital expenditure represents increases in property, plant and equipment, intangible assets, and investment property.

34

Other Related Information
For the year ended March 31, 2016
1. Product and service information
Information is similar to that presented under Segment Information above and is therefore omitted.
2. Geographic information(1) Revenues
Millions of yen
Japan

North America

Asia

Europe¥ 451,116¥ 312,847¥ 192,773

Other areas¥ 45,844¥ 15,004

Total¥ 1,017,584

Thousands of U.S. dollars
Japan

North America

Asia

EuropeOther areas

Total$ 4,003,514$ 2,776,420$ 1,710,800$ 406,851$ 133,157$ 9,030,742
Note: Revenues are classified by country or region based on the customer’s location.
Revenues from external customers attributed to any individual country or region other than Japan, the United States, and China
were not material.
Revenues from external customers in the United States and China were ¥276,616 million (US $2,454,881 thousand) and¥73,988 million (US $656,621 thousand), respectively.
(2) Non-current assets (excluding financial instruments)
Millions of yen
Japan

North America¥ 276,691¥ 194,215

Asia

Europe¥ 40,597

Other areas¥ 171¥ 1,311

Total¥ 512,985

Thousands of U.S. dollars
Japan

North America

Asia

EuropeOther areas

Total$ 2,455,547$ 1,723,598$ 360,286$ 1,518$ 11,634$ 4,552,583
Note: Non-current assets (excluding financial instruments) attributed to any individual country or region other than Japan and theUnited States were not material.
Non-current assets (excluding financial instruments) attributable to the United States were ¥194,215 million(US $1,723,598 thousand).
3. Significant customer information
There was no concentration of revenues from a specific customer for the year ended March 31, 2016.
For the year ended March 31, 2015
1. Product and services information
Information is similar to that presented under Segment Information above and is therefore omitted.
2. Geographic information(1) Revenues
Millions of yen
Japan

North America

Asia

EuropeOther areas

Total¥ 527,660¥ 200,362¥ 212,499¥ 49,244¥ 14,608¥ 1,004,373
Note: Revenues are classified by country or region based on the customer’s location.
Revenues from external customers attributed to any individual country or region other than Japan, the United States, and China
were not material.
Revenues from external customers in the United States and China were ¥177,973 million and ¥84,508 million, respectively.
(2) Non-current assets (excluding financial instruments)
Millions of yen
Japan

North America

Asia

EuropeOther areas

Total¥ 253,251¥ 193,470¥ 51,460¥ 177¥ 1,214¥ 499,572
Note: Non-current assets (excluding financial instruments) attributed to any individual country or region other than Japan and the UnitedStates were not material. Non-current assets (excluding financial assets) attributable to the United States were ¥193,470 million.

35

3. Significant customer information
There was no concentration of revenues from a specific customer for the year ended March 31, 2015.

Note 5.

Business Combinations

Major business combinations in the fiscal year ended March 31, 2015, are summarized below.
Acquisition of a new subsidiary, Waupaca Foundry Holdings, Inc. (“Waupaca HD”) by acquiring its shares
1. Objective of the acquisition
The Company is focusing on continued global growth. Under the current Medium-Term Management Plan, it is working to strengthen andexpand its customer base globally, while developing its global production capabilities and sales networks.
The iron casting business has been a focus for many years, particularly in the automotive market. Particularly in high-grade ductile ironcasting and other categories, it has been strengthening its global capacity through the construction of new production facilities in Japan,
Korea, and the United States. It also acquired its Indian automotive casting subsidiary in April 2014, to expand its business and building afoundation for future growth.
Waupaca Foundry, Inc. (“Waupaca”), which is a 100% subsidiary of Waupaca HD, is headquartered in Wisconsin, United States, and is thelargest worldwide supplier of iron castings, operating six plants in the United States. Waupaca serves the transport machinery market inNorth America and supplies a wide array of applications, from automotive brake parts to industrial, agricultural, and construction
machinery. Utilizing excellent production technologies and production management, Waupaca has the world’s largest-scale production
capacity and a leading share of the North American market. Waupaca has forged strong customer relationships based on a stable productsupply over many years, which has translated into a source of its competitive power. Waupaca is expected to grow even further in the
global market for iron casting in transport machinery, which is anticipated to see continued growth driven by demand for automobiles inemerging countries.
Based on these circumstances, the Company viewed this acquisition as a tremendous opportunity to acquire Waupaca’s overwhelmingly
large production capacity, extensive business domain, and solid customer base, which will fuel the growth of its iron casting business overthe medium- to long-term.
Consequently, the Company’s wholly owned subsidiary, Hitachi Metals Foundry Holdings, Inc. (presently Hitachi Metals America
Holdings, Inc.) conducted a cash funded acquisition to acquire all of the shares (100% voting rights) of Waupaca HD.
This acquisition will make the Company a supplier of iron castings with the largest worldwide production capacity, combining its existinghigh-value-added niche-zone business, which is the Company’s focused area, with Waupaca’s cost-competitive volume zone business.
Furthermore, the Company will expand its revenue base and offer new products and service solutions to meet market and customer
expectations, with a focus on continued growth in the global market.
2. Name and business details of the acquiree(1) Company name: Waupaca Foundry Holdings, Inc.
(2) Business details: Hold interests in Waupaca, a 100% subsidiary, and manage its businessNote: Waupaca’s business operations include research and development (R&D), manufacturing, and sales of iron-casting products fortransportation machinery.
3. Share acquisition date: November 10, 2014
4. Acquired voting rights ratio: 100%36

5. Acquisition price and fair value of assets acquired and liabilities assumed
Thousands of
U.S. dollars

Millions of yen
Cash and cash equivalents¥ 888$ 7,881

Trade receivables

26,446

234,700

Inventory

5,457

48,429Other current assets

6,675

59,239Non-current assets (excluding intangible assets)

57,216

507,774

Intangible assets

35,173

312,149¥ 131,855$ 1,170,172¥ (27,801)$ (246,725)(83,148)(737,913)¥ (110,949)$ (984,638)¥ 91,896$ 815,548

70,990630,014

Total
Current liabilities
Non-current liabilities
Total
Acquisition price (cash)
Goodwill

Goodwill mainly represents synergy effects emerging from previous earnings capabilities and existing businesses. Furthermore, theCompany recorded ¥1,485 million (US $13,179 thousand) in acquisition-related costs for the business combination of Waupaca HD under
selling, general, and administrative expenses.
6. Revenues and net income of the acquiree
From the acquisition date to March 31, 2015, Waupaca HD recorded revenues of ¥82,528 million (US $732,410 thousand) and net incomeof ¥3,319 million (US $29,455 thousand).
7. The Group’s revenues and net income assuming that the business combination was conducted at the beginning of the fiscal year
Assuming the acquisition was completed on April 1, 2014, the Group’s revenues and net income for the fiscal year ended March 31,
2015, were ¥1,119,252 million and ¥77,169 million, respectively.

Note 6. Trade Receivables
Trade receivables as of March 31, 2016 and 2015, are summarized as follows:

March 31, 2016

March 31, 2015

Thousands of
U.S. dollars
March 31, 2016

¥ 159,162¥ 197,370$ 1,412,514

19,48023,721

172,879(361)¥ 178,281(544)¥ 220,547(3,204)$ 1,582,189

Millions of yen

Accounts receivable
Notes receivable and electronically recordedmonetary claims
Allowance for doubtful accounts
Total

For credit risk control and fair value of trade receivables, see Note 22. “Financial Instruments and Other Related Information.”

Note 7.

Inventories

Inventories as of March 31, 2016 and 2015, are summarized as follows:
Millions of yen

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

March 31, 2016
¥ 55,814
53,046
38,104¥ 146,964

March 31, 2015
¥ 63,440
57,64745,399¥ 166,486

Thousands of
U.S. dollars
March 31, 2016
$ 495,332

470,767
338,161$ 1,304,260

The amount of inventories written down for the years ended March 31, 2016 and 2015, was ¥4,070 million (US $36,120 thousand) and¥1,564 million, respectively.

37

Note 8.

Assets Held for Sale

Details of assets held for sale and liabilities related to assets held for sale as of March 31, 2016 and 2015, are as follows:

March 31, 2016

March 31, 2015

Thousands of
U.S. dollars
March 31, 2016

¥ •
•
•
•
•
¥ •

¥ 6,4392,560
4,840
11,051
3,679¥ 28,569

$ •
•
•
•
•
$ •

¥ •
•
•
¥ •

¥ 755
3,154
6,355
¥ 10,264

$ •
•
•
$ •

Millions of yen
Assets held for sale
Cash and cash equivalents
Trade receivables
Inventories
Property, plant and equipment
Other
Total
Liabilities related to assets held for sale
Trade payables
Liabilities for retirement benefits
Other
Total

Assets held for sale and liabilities related to assets held for sale as of March 31, 2015, are assets and liabilities held by group companies ofHitachi Tool Engineering, Ltd. (currently named Mitsubishi Hitachi Tool Engineering, Ltd.) within the High-Grade Metal Products andMaterials segment. On September 26, 2014, the Company and Mitsubishi Materials Corporation (“Mitsubishi Materials”) entered into anagreement, under which Mitsubishi Materials acquired 51% of the issued shares of Hitachi Tools. The shares were transferred under theagreement on April 1, 2015.

Note 9.

Investments Accounted for Using the Equity Method

The summarized financial information, in aggregate, for individually immaterial associates and joint ventures accounted for using the equity
method as of and for the years ended March 31, 2016 and 2015, is as follows:
These amounts represent the Group’s share of the associates and joint ventures per ownership percentage.
(1) Investments in associates
Millions of yen
Carrying amount of investments

March 31, 2016
¥ 31,312

March 31, 2015
¥ 16,895

Millions of yen
2016
Net income
Other comprehensive income
Total comprehensive income

2015
¥ 844
(1,032)¥ (188)¥ 1,210973¥ 2,183

Thousands of
U.S. dollars
March 31, 2016
$ 277,884
Thousands of
U.S. dollars
2016$ 7,490(9,158)$ (1,668)(2) Investments in joint ventures
Millions of yen
Carrying amount of investments

March 31, 2016
¥ 5,125

March 31, 2015
¥ 7,997

Millions of yen
Net income
Other comprehensive income
Total comprehensive income

2016¥ (416)(51)¥ (467)38

2015¥ (205)
1,296¥ 1,091

Thousands of
U.S. dollars
March 31, 2016
$ 45,483
Thousands of
U.S. dollars
2016$ (3,692)(452)$ (4,144)

Note 10. Property, Plant and Equipment
The following tables show the reconciliation of the carrying amount, acquisition costs, accumulated depreciation, and accumulated impairment
losses of property, plant and equipment as of and for the years ended March 31, 2016 and 2015:
Millions of yen
Tools,
Machineryfurnitureand vehicles
and fixtures

Buildings
andstructures

Land

Other
tangible
assetsConstruction inprogress¥ 566¥ 8,670¥ 234,918

Total

Carrying amountAt April 1, 2014

¥ 59,106¥ 67,562¥ 87,429¥ 11,585

Additions

•

262

3,328

1,458

•

43,001

48,049

Disposals
Depreciation

(227)
•

(732)
(6,542)(2,025)(21,826)(294)(6,114)

(9)
(102)

(68)
•

(3,355)(34,584)

Impairment losses
Effects of exchange rate changes
Transfer from construction in
Progress
Change in the scope of consolidation
Transfer to assets held for sale

(382)
474

(1,433)
4,507(3,581)
8,154

(179)
837

•
0

(130)
671

(5,705)
14,643•(674)(3,180)4,760
18,263(2,194)26,25234,506(4,866)

6,362
3,237
(432)

10
60
(19)

(37,384)
1,749
(360)

•
57,141(11,051)(761)(1,102)

1,673

206

(76)

(327)

(387)

Other
At March 31, 2015

¥ 54,356¥ 83,351¥ 129,044¥ 16,666¥ 430¥ 15,822¥ 299,669

Additions

4

331

1,508

1,057

92

52,49855,490

Disposals
Depreciation

(159)
•

(787)
(6,889)(1,682)(22,675)(331)(6,786)

(10)
(114)

(105)
•

(3,074)(36,464)

Impairment losses
Effects of exchange rate changes
Transfer from construction in
Progress
Change in the scope of consolidation

(172)
(368)

(203)
(2,709)(519)(5,547)

(10)
(603)

•
(2)

•
(665)

(904)
(9,894)

•

7,326
(471)

30,419
(86)

7,299
(42)

•
•

(45,044)
21

•
(578)

111

(1,117)

(550)

5

(660)

47

¥ 80,060¥ 129,345¥ 16,700¥ 401¥ 21,867¥ 304,292

Construction inprogress

Total

Other
At March 31, 2016•
2,258
¥ 55,919

Thousands of U.S. dollars
Tools,
Other
Machineryfurnituretangibleand vehicles
andassetsfixtures

Land

Buildings
andstructures$ 482,393$ 739,714$ 1,145,225$ 147,906$ 3,816$ 140,415$2,659,469

Additions
Disposals

35(1,411)

2,938(6,984)

13,384(14,927)

9,381(2,938)816(89)465,903(932)

492,457(27,281)

Depreciation
Impairment losses•(1,526)(61,137)(1,802)(201,234)(4,606)(60,224)(89)(1,012)•••(323,607)(8,023)

Effects of exchange rate changes
Transfer from construction in
Progress
Change in the scope of consolidation(3,266)(24,042)(49,228)(5,351)(17)(5,902)(87,806)••

65,016(4,180)269,959(763)

64,776(373)••(399,751)
186

Other

20,039985(9,913)(4,881)44(5,856)418

At March 31, 2016
$496,264$710,508$1,147,897$148,207
Note: Property, plant and equipment under construction are presented as construction in progress.

$3,558$194,063$2,700,497

Carrying amountAt April 1, 2015•
(5,130)Depreciation charges recognized for the years ended March 31, 2016 and 2015, are included in cost of sales and selling, general andadministrative expenses of the consolidated statement of income. Impairment losses are included in other expenses of the consolidated
statement of income.

39

Land

Buildings
andstructures

MachineryandvehiclesMillions of yen
Tools,
furnitureand fixtures

At April 1, 2014

¥ 60,608¥ 235,794¥ 547,774¥ 78,229¥ 1,994¥ 9,347¥ 933,746

At March 31, 2015

55,228

256,534

606,660

87,555

1,180

16,662

1,023,819

At March 31, 2016
Accumulated depreciation andaccumulated impairment losses
At April 1, 2014

56,837250,953

580,858

88,4991,128

22,0471,000,322

Othertangible
assetsConstructionin progress

Total

Acquisition cost

¥ 1,502¥ 168,232¥ 460,345¥ 66,644¥ 1,428¥ 677¥ 698,828

At March 31, 2015

872

173,183

477,61670,889750

840

724,150

At March 31, 2016

918

170,893451,51371,799727

180

696,030

Land

Buildings
andstructures

Thousands of U.S. dollars
Machinery
Tools,
Other
andfurnituretangible
vehiclesand fixtures
assets$ 504,411$ 2,227,130$ 5,154,934$ 785,401$ 8,147$ 1,516,622$ 4,007,038$ 637,194

Constructionin progress

Total$ 10,011$ 195,660$ 8,877,547$ 6,452$ 1,597$ 6,177,050

Acquisition cost
At March 31, 2016
Accumulated depreciation andaccumulated impairment losses
At March 31, 2016

Items of property, plant and equipment are grouped by the smallest identifiable group of assets that generate cash inflows and that are largely
independent of the cash inflows.
The Group recognized impairment losses of ¥904 million (US $8,023 thousand) and ¥5,705 million on property, plant and equipment for theyears ended March 31, 2016 and 2015, respectively.
Impairment losses were recognized for the year ended March 31, 2015, to reduce the carrying amounts of business-use assets (mainly buildings
and machinery) due to a decline in profitability in part of the Magnetic Materials and Applications business and idle assets (mainly land,buildings, and machinery) in the Magnetic Materials and Applications business and the Wires, Cables, and Related Products business to theirrecoverable amounts.
Impairment losses were recognized for the year ended March 31, 2016, to reduce the carrying amounts of business-use assets (mainly machineryand buildings) due to a decline in profitability in part of the High-Grade Functional Components and Equipment business and idle assets (mainly
land and buildings) in the High-Grade Metal Products and Materials business, Magnetic Materials and Applications business, and High-Grade
Functional Components and Equipment business to their recoverable amounts.

40

Note 11. Goodwill and Intangible Assets
The following tables show the reconciliation of the carrying amounts, acquisition costs, and the accumulated amortization and accumulated
impairment losses of goodwill and intangible assets as of and for the years ended March 31, 2016 and 2015:
Software forinternal use

Goodwill

Millions of yen
Software for
sale

Other
intangible assets

Total

Carrying amountAt April 1, 2014

¥ 36,114¥ 2,759¥ 4,369¥ 4,024¥ 47,266

Purchases

556

81

7

5,115

5,759

Amortization•(1,112)(2,313)(1,637)(5,062)

Impairment losses

•

(1)

•

•

(1)

Disposals
Effects of exchange rate changes

•
4,001

(37)
10

•
143

(58)
2,175

(95)
6,329

Transfer from software in progress
Change in the scope of consolidation•
71,455

1,015
(94)

1,835
•

(2,850)35,064•
106,425

•

(174)

•

(64)

(238)

Transfer to assets held for sale
Other
At March 31, 2015
Purchases
Amortization
Impairment losses

•

(41)

41

(114)

(114)

¥ 112,126••¥ 2,406¥ 4,082¥ 41,655¥ 160,269

217

3

3,892

4,112

(2,170)•(2,882)•(6,309)
(468)

(468)

(1,257)•

Disposals
Effects of exchange rate changes•(5,622)

(132)
(23)

•
(43)

(7)
(2,316)(139)(8,004)

Transfer from software in progress
Change in the scope of consolidation

•
7,422

2,572
(1)

871
•

(3,443)
2,431

•
9,852

Other
At March 31, 2016

(123)

155

•

(430)

(398)

¥ 113,335¥ 3,937¥ 2,743¥ 38,900¥ 158,915

Software forinternal use

GoodwillThousands of U.S. dollars
Software for
Other
sale
intangible assets

Total

Carrying amount$ 995,083$ 21,354$ 36,226$ 369,675$ 1,422,338

•
•

1,926
(11,155)

27(19,258)

34,540(25,577)

36,493(55,990)

Impairment losses
Disposals(4,153)••(1,172)

•
•

•
(62)

(4,153)(1,234)

Effects of exchange rate changes
Transfer from software in progress(49,893)•(204)
22,826

(382)
7,730

(20,554)(30,556)(71,033)•

At April 1, 2015
Purchases
Amortization

Change in the scope of consolidation

65,868(9)•21,57487,433Other(1,092)

1,374•(3,815)(3,533)$ 1,005,813$ 34,940$ 24,343$ 345,225$ 1,410,321

At March 31, 201641

Amortization recognized for the years ended March 31, 2016 and 2015, was included in the cost of sales and selling, general and administrative
expenses of the consolidated statement of income. Impairment losses are included in other expenses in the consolidated statement of income.

Software forinternal use

Goodwill

Millions of yen
Software for
sale

Other intangible
assets

Total

Acquisition cost
At April 1, 2014

¥ 36,114¥ 16,133¥ 15,653¥ 7,035¥ 74,935

At March 31, 2015

112,126

15,527

17,77446,045

191,472

At March 31, 2016
Accumulated amortization andaccumulated impairment losses
At April 1, 2014
At March 31, 2015

113,830

16,14918,54245,408

193,929•

13,374

11,284

3,011

27,669•13,121¥ 12,212

13,692¥ 15,799

4,390¥ 6,508

31,203¥ 35,014

At March 31, 2016

495

Goodwill

Software forinternal use

Thousands of U.S. dollars
Software for
Other intangible
saleassets

Total

Acquisition cost
At March 31, 2016
Accumulated amortization andaccumulated impairment losses
At March 31, 2016

$ 1,010,206$ 143,317$ 164,554$ 402,982$ 1,721,059$ 4,393$ 108,377$ 140,211$ 57,757$ 310,738

For the years ended March 31, 2016 and 2015, there were no material intangible assets with indefinite useful lives.
The Group recorded impairment losses of ¥468 million (US $4,153 thousand) and ¥1 million on goodwill and intangible assets for the years
ended March 31, 2016, and 2015, respectively.
Impairment losses were recognized for the year ended March 31, 2015, to reduce the carrying amount of software for internal use to its
recoverable amount due to a decline in profitability in part of the Magnetic Materials and Applications business.
Impairment losses were recognized for the year ended March 31, 2016, to reduce the carrying amount of goodwill to its recoverable amount due
to a decline in profitability in part of the High-Grade Functional Components and Equipment business.
The Group expenditures on R&D recognized as expenses for the years ended March 31, 2016 and 2015, are ¥19,121 million(US $169,693 thousand) and ¥20,903 million, respectively. R&D expenses are included in cost of sales and selling, general and administrative
expense in the consolidated statement of income.
The Group performs impairment testing for goodwill acquired through business combinations by comparing the carrying amount and therecoverable amount per CGU or group of CGUs.
Significant goodwill recognized in the consolidated statement of financial position is primarily goodwill related to the High-Grade Functional
Components and Equipment business arising from the acquisition of Waupaca in 2014 (¥69,731 million (US $618,841 thousand) and¥74,930 million as of March 31, 2016 and 2015, respectively) and that related to the Magnetic Materials and Applications business inconnection with the acquisition of additional shares in NEOMAX Co., Ltd. through a tender offer in 2006 (¥35,781 million(US $317,545 thousand) as of March 31, 2016 and 2015).
The Group measures the recoverable amount for each CGU or group of CGUs by the value in use. In assessing the value in use, estimated future
cash flows based on management-approved business plans are discounted to their present values using the discount rate based on the weightedaverage cost of capital. The business plan to be used is based on external information and reflects historical trends, generally with a maximum
period of five years. Since the Group is engaged in a wide range of business activities from development, production, and sale of diverse
products to providing various services, appropriate external information for each business activity is used for evaluating the value in use. In
addition, the estimated future cash flows subsequent to the business plan are calculated using the estimated growth rate not exceeding the longterm average growth rate of the market to which the CGU belongs.
The discount rate used for impairment testing of the significant goodwill is estimated based on prior years’ weighted average cost of capital(approximately 3.0% to 9.0%). For future cash flows, a permanent growth rate (maximum 2.0%) is applied. Such rate is determined not toexceed the growth rate of countries and regions making estimates, including budgets, and engaged in business activities. Furthermore, evenwhen primary assumptions used for the impairment test change within a reasonable and foreseeable range, the Group management considers
that any significant impairment losses will be unlikely to occur.

42

Note 12. Deferred Taxes and Income Taxes
The following table shows major components of income taxes:
Thousands of
U.S. dollars
2016

Millions of yen

Income taxes
Current tax expense
Deferred tax expense
Accruals and reversals of temporary differences
Changes in realizability of deferred tax assets
Total

2016

2015

¥ 22,851¥ 18,574$ 202,796

7,323(2,921)¥ 27,253

18,902(23,003)¥ 14,473

64,989(25,923)$ 241,862

The Company is subject to a national corporate tax, inhabitant tax and deductible business tax, and those taxes resulted in combined statutory
income tax rates of 32.8% and 35.4% for the years ended March31, 2016 and 2015, respectively.
The Company has elected to file a consolidated income tax return.
On March 29, 2016, the Japanese Diet passed the Act on Partial Revision of the Income Tax Act, etc. (Act No. 15 of 2016), and Act on Partial
Revision of the Local Tax Act, etc. (Act No. 13 of 2016) to change corporate tax rates effective from the fiscal years beginning on or after April
1, 2016. In accordance with this change, the effective statutory tax rate used to calculate deferred tax assets and liabilities has been reduced fromthe previous rate of 32.1% to 30.7% for temporary differences expected to be reversed in the fiscal years beginning on April 1, 2016 and 2017,
and to 30.5% for temporary differences expected to be reversed in fiscal years beginning on or after April 1, 2018.
As a result, deferred tax expense for the year ended March 31, 2016, increased by ¥1,553 million (US $13,782 thousand).
The reconciliation between the combined statutory income tax rate and the effective income tax rate as a percentage of income before income
taxes is as follows:
2016
Combined statutory income tax rate
Share of profits of investments accounted for using the equity method
Expenses not deductible for tax purposes
Adjustments to deferred tax assets and liabilities due to enacted tax laws and rates
Change in realizability of deferred tax assets
Other, net
Effective income tax rate

2015

32.8%
(0.4)
0.2
1.6
(3.0)
(2.9)

35.4%
(1.2)
0.3
2.1
(26.6)
6.8

28.3%

16.8%

Changes in significant portion of the deferred tax assets and liabilities are as follows:

April 1, 2015
Deferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reserve regulated by
Japanese tax laws
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

Recognized in
profit or loss
(benefit)

Millions of yen
Recognized inothercomprehensive
income (loss)

Changes in thescope ofconsolidation

March 31, 2016

¥ 19,160
4,082
5,707
1,980
15,796¥ 46,725¥ (1,698)¥ 4,419¥•¥ 21,881(152)
62(1,076)523¥ (2,341)

•
•
•
152
¥ 4,571

•
•
•
(749)
¥ (749)

3,930
5,769
904
15,722¥ 48,206(1,929)(2,805)(7,965)

110
(192)
(408)

•
821
•

•
•
•

(1,819)(2,176)(8,373)(13,795)(15,853)¥ (42,347)¥ 4,378

1,810(3,381)¥ (2,061)¥ (4,402)

•
•
¥ 821
¥ 5,392••¥•¥ (749)(11,985)(19,234)¥ (43,587)¥ 4,61943

Deferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reserve regulated by
Japanese tax laws
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

April 1, 2014

Recognized in
profit or loss
(benefit)¥ 5,106
2,745
1,671
6,640
7,468
¥ 23,630¥ 2,247
751
4,292(4,660)7,399¥ 10,029(1,171)(2,783)••(11,778)¥ (15,732)¥ 7,898

April 1, 2015

Deferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reserve regulated by
Japanese tax laws
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

Millions of yen
Recognized inothercomprehensive
income (loss)

Changes in thescope ofconsolidation

March 31, 2015

¥ 4,473•••429¥ 4,902¥ 7,334
586
(256)
•
500
¥ 8,164¥ 19,160
4,082
5,707
1,980
15,796¥ 46,725

(764)
•
(560)

•
(158)
•

6
136
(7,405)(1,929)(2,805)(7,965)(245)(4,359)¥ (5,928)¥ 4,101••¥ (158)¥ 4,744(13,550)284¥ (20,529)¥ (12,365)(13,795)(15,853)¥ (42,347)¥ 4,378

Thousands of U.S. dollars
Recognized in
Recognized in
Changes in theotherprofit or loss
scope ofcomprehensive(benefit)
consolidation
income (loss)

March 31, 2016

$ 170,039
36,22650,64817,572
140,185$ 414,670$ (15,069)(1,349)550(9,549)4,641$ (20,776)$ 39,217
•
•
•
1,349
$ 40,566••••(6,647)$ (6,647)$ 194,187
34,877
51,198
8,023
139,528$ 427,813(17,119)

976

•

•

(16,143)(24,894)(70,687)(1,703)(3,621)

7,286
•

•
•

(19,311)(74,308)(122,426)

16,063••(106,363)(140,691)$ (375,817)$ 38,853(30,005)$ (18,290)$ (39,066)•$7,286$ 47,852••$ (6,647)(170,696)$ (386,821)$ 40,992

Deferred tax liabilities have not been recognized for excess amounts over the tax bases of investments in foreign subsidiaries and associates thatare considered to be reinvested indefinitely, because such differences will not reverse in the foreseeable future. Total temporary differences
related to undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognized as of March 31, 2016 and 2015, were¥135,285 million (US $1,200,612 thousand) and ¥131,567 million, respectively.
In assessing the realizability of deferred tax assets, the Group considers whether it is probable that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in specific tax
jurisdictions during periods in which these deductible temporary differences become deductible or unused tax credits can be used. Althoughrealization is not assured, the Group considers the scheduled reversals of deferred tax liabilities and projected future taxable income in making
the assessment. Based on these factors, the Group believes that it is probable that it will realize the recognized deferred tax assets as of March 31,
2016.
Deductible temporary differences, net operating loss carryforwards, and unused tax credits carry-forwards for which no deferred tax asset isrecognized are as follows:44Millions of yen

Deductible temporary difference
Net operating loss carry-forwards
Unused tax credits carry-forwards
Total

March 31, 2016
¥ 49,260
7,635
730¥ 57,625

March 31, 2015
¥ 57,501
13,365549¥ 71,415

Thousands of
U.S. dollars
March 31, 2016
$ 437,167

67,7586,479$ 511,404

Carry-forwards related to net operating losses and unused tax credits on which no deferred tax asset is recognized will expire as follows:
Millions of yen

Thousands of
U.S. dollars
March 31, 2016

March 31, 2016

March 31, 2015

¥ 6,751884¥ 7,635¥ 7,581
5,784¥ 13,365$ 67,758

¥ 730
•
¥ 730

¥ 549
•
¥ 549

$ 6,479•$ 6,479

March 31, 2016

March 31, 2015

Thousands of
U.S. dollars
March 31, 2016

¥ 136,347¥ 172,501$ 1,210,037

Net operating loss carry-forwards
Within 5 years
After 5 years but not more than 10 years
Total net operating loss carry-forwards
Unused tax credits carry-forwards
Within 5 years
After 5 years but not more than 10 years
Total unused tax credits carry-forwards$ 59,913

7,845

Note 13. Trade Payables
Trade payables as of March 31, 2016 and 2015, are summarized as follows:
Millions of yen

Accounts payable
Notes payable and electronically recorded obligations
Total

12,652

6,113

112,283¥ 148,999¥ 178,614$ 1,322,32045

Note 14. Provisions
Details and the reconciliation of provisions included in other current liabilities and other non-current liabilities as of and for the year ended March
31, 2016, are as follows:

Balance at April 1, 2015

Millions of yen
Asset retirement
Provision for
obligations
environmental measures¥ 1,034¥ 1,528

AdditionsUtilized
Effects of exchange rate changes
Balance at March 31, 2016
Current
Non-current

Balance at April 1, 2015

4

170

(9)
(67)

(135)
•

¥ 962

¥ 1,563

•

•

¥ 962

¥ 1,563

Thousands of U.S. dollars
Asset retirement
Provision for
obligations
environmental measures$ 9,176$ 13,561

Additions$ 35$ 1,509

Utilized
Effects of exchange rate changes

(79)
(595)

(1,199)•Current$ 8,537•$ 13,871•

Non-current$ 8,537$ 13,871

Balance at March 31, 2016

Asset retirement obligations:
The Group recognizes asset retirement obligations principally based on estimated future expenditures using historical trends when the Group
has a legal obligation associated with the retirement of property, plant and equipment used in normal operation, such as obligations to restore
the site in relation to lease agreements for plant facilities and premises.
Provision for environmental measures:
A provision for environmental measures is provided for disposal costs anticipated to be incurred with respect to the Law Concerning Special
Measures Against PCB Waste.

46Note 15. Employee Benefits(1)

Post-employment Benefits
The Company, its subsidiaries located in Japan, and certain overseas subsidiaries have contributory defined benefit pension plans andfunded and unfunded lump-sum payment plans to provide retirement and severance benefits to employees. An employee retirement benefit
trust is established for the pension plans and the lump-sum payment plans.
The Company and some of its subsidiaries have contract-type pension plans based on the pension rules. They also have established a postemployment benefits committee as an advisory body for significant matters related to the pension plans. The committee holds meetings toreport various matters, such as asset management performance, plan status, and accounting treatments, and to discuss agendas, such as plan
revisions and investment policy changes, as necessary.
Under the unfunded lump-sum payment plans, employees are entitled to receive lump-sum payments based on their earnings and thelength of service at retirement.
In addition, the Company and certain subsidiaries have defined contribution pension plans.
Further, certain subsidiaries participate in multi-employer welfare pension fund plans. Such plans are accounted for as if they were defined
contribution plans because the proportionate share of plan assets for the multi-employer welfare pension fund plans cannot be determinedreliably.
Reconciliations of the beginning and ending balances of the benefit obligation and the fair value of the plan assets of the defined benefit
pension plans are as follows:
Millions of yen
2016¥ 204,058
7,832
2,582
6,302
30
(14,407)••(3,667)¥ 202,730

Defined benefit obligations at the beginning of the year
Service costs
Interest costs
Actuarial gains and losses
Past service cost
Benefits paid
Changes in the scope of consolidation
Transfer to liabilities related to assets held for sale
Effects of exchange rate changes and others
Defined benefit obligation at the end of the year2015
¥ 174,945
5,855
2,465
4,054
2,360
(14,099)
21,178(3,154)
10,454¥ 204,058

Thousands of
U.S. dollars
2016$ 1,810,951
69,507
22,91455,928266(127,858)••(32,543)$ 1,799,165

Thousands of
U.S. dollars
2016
2016
2015
¥ 145,977$ 1,295,501
Fair value of plan assets at the beginning of the year
¥ 129,319
1,808
2,258
20,039Interest income
8,726(3,774)(33,493)
Return on plan assets (excluding interest income)
4,919
3,461
30,715Contributions to defined benefit pension plans (Note)(9,584)(9,778)(86,777)
Benefits paid
4,786
•
•
Changes in the scope of consolidation
6,003
(761)
(6,754)
Effects of exchange rate changes and others
Fair value of plan assets at the end of the year
¥ 137,383¥ 145,977$ 1,219,231
Note: As of March 31, 2016, the estimated contributions to the defined benefit pension plans for the year ending March 31, 2017, were
¥3,519 million (US $31,230 thousand).
Millions of yen

47

The amounts recognized in relation to defined benefit plans in the consolidated statement of financial position are as follows:

March 31, 2016
¥ (195,039)
137,383(57,656)(7,691)March 31, 2015
¥ (197,306)
145,977(51,329)(6,752)Thousands of
U.S. dollars
March 31, 2016
$ (1,730,910)
1,219,231(511,679)(68,255)¥ (65,347)¥ (58,081)$ (579,934)

Millions of yen
Present value of defined benefit obligations (funded)
Fair value of plan assets
Funded status
Present value of defined benefit obligations (unfunded)
Net asset (liability) recognized in the consolidated
statement of financial position
Components of actuarial gains and losses are as follows:
Millions of yen
2016¥ 4,440642
1,220

Arising from changes in financial assumptions
Arising from changes in demographic assumptions
Other

2015
¥ 3,587(54)
521

Thousands of
U.S. dollars
2016$ 39,404
5,698
10,826The Company and all of its subsidiaries use their year-end as a measurement date. The primary assumptions used for actuarial valuation
are as follows:
Discount rate

March 31, 2016
1.0%

March 31, 2015
1.3%

If, as of March 31, 2016, the discount rate rose by 0.5%, the defined benefit obligations would decrease by ¥9,804 million(US $87,007 thousand), and the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥8,546 million(US $75,843 thousand). If, as of March 31, 2015, the discount rate rose by 0.5%, the defined benefit obligations would decrease by¥10,353 million, and the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥10,774 million.

Although sensitivity analysis is based on the assumption that all other variables are constant, in reality, changes in other assumptions may
affect the sensitivity analysis.
The weighted average duration (weighted average maturity) of defined benefit obligations is as follows:
Duration

March 31, 201611.1 years

March 31, 2015
11.3 years

The objective of the investment policy of the plan is to ensure stable returns from investments over the long term, which allows thepension funds to meet their future benefit payments, and to maintain the pension funds in a sound condition.
In order to achieve the above objective, the plan establishes a target rate of return, taking into consideration the participants’ demographics,
funded status, the Company’s and certain subsidiaries’ capacity to absorb risks, and the current economic environment. To meet the target
rate of return, the plan also employs strategic target asset allocation based on the expected rate of return by asset class, the standard
deviation of the rate of return, and the correlation coefficient among assets.
When markets fluctuate in excess of certain levels, the asset allocation of the plan assets is rebalanced to the strategic target asset
allocation. The Company and certain subsidiaries periodically review actual returns on the plan assets, economic trends, and their capacity
to absorb risks and realign the strategic target asset allocation, if necessary.

48

The following tables show the fair value of the plan assets as of March 31, 2016 and 2015:

StocksGovernment and municipal debt securities
Corporate and other debt securities
Hedge funds
Securitized products
Cash and cash equivalents
Life insurance company general accounts
Commingled funds
Other
Total

StocksGovernment and municipal debt securities
Corporate and other debt securities
Hedge funds
Securitized products
Cash and cash equivalents
Life insurance company general accounts
Commingled funds
Other
Total

With a quoted market
price in an active market¥ 9,417
471
•
•
28
7,318
•
•
200
¥ 17,434

Millions of yen
March 31, 2016
Without a quoted market
price in an active market
¥ 186
545
1,311
•
2,006
16
18,627
91,296
5,962¥ 119,949

With a quoted market
price in an active market¥ 10,834
253
•
•
•
4,154
•
•
3,464
¥ 18,705

Millions of yen
March 31, 2015
Without a quoted market
price in an active market
¥ 289
•
350
5,230
1,417
18
15,441103,988539¥ 127,272

Total¥ 9,603
1,016
1,311
•
2,034
7,334
18,627
91,296
6,162¥ 137,383

Total¥ 11,123
253
350
5,230
1,417
4,172
15,441103,988
4,003¥ 145,977

Thousands of U.S. dollars
March 31, 2016
With a quoted market
Without a quoted market
Total
price in an active market
price in an active market
Stocks$ 83,573$ 1,651$ 85,224
Government and municipal debt securities
4,180
4,837
9,017
Corporate and other debt securities•
11,635
11,635Hedge funds•••
Securitized products
248
17,80318,051
Cash and cash equivalents
64,945142
65,087
Life insurance company general accounts•
165,309
165,309
Commingled funds•
810,224
810,224
Other
1,775
52,90954,684$ 154,721$ 1,064,510$ 1,219,231
Total
Commingled funds represent pooled institutional investments. Approximately 32% and 33% of commingled funds were invested in listed
stocks as of March 31, 2016 and 2015, respectively. Approximately 49% and 46% were invested in government and municipal debt
securities as of March 31, 2016 and 2015, respectively. Approximately 11% and 10% were invested in corporate and other debt securities
as of March 31, 2016 and 2015, respectively. Approximately 8% and 11% were invested in other assets as of March 31, 2016 and 2015,
respectively.
Expenses recognized in relation to the Company’s and certain subsidiaries’ contributions to the defined contribution plans amounted to¥3,501 million (US $31,070 thousand) and ¥2,789 million for the years ended March 31, 2016 and 2015, respectively.
Contributions to the multiemployer welfare pension plan funds accounted for as a defined contribution plan are as follows:

Contributions

Millions of yen
March 31, 2016
March 31, 2015
¥ 55
¥ 228

Thousands of U.S. dollars
March 31, 2016
$ 488

As of March 31, 2016, the estimated contributions for the year ending March 31, 2017, were ¥9 million (US $80 thousand).

49

Funded status of the multi-employer plans are as follows:

Plan assets
Retirement benefit obligations
Difference

Thousands of U.S. dollars
Millions of yen
March 31, 2015
March 31, 2014
March 31, 2015
¥ 19,313¥ 143,791$ 171,397
15,528162,221
137,806
3,785(18,430)
33,591The proportion of the Group’s total contributions to the plans was 4.38% and 2.98% for the years ended March 31, 2016 and 2015,
respectively.
(2)

Employee benefit expense
The aggregated amounts of employee benefit expenses recognized in the consolidated statement of income for the years ended March 31,
2016 and 2015, were ¥143,440 million (US $1,272,985 thousand) and ¥155,564 million, respectively.

Note 16. Equity(1)

Common Stock
Authorized issuance

March 31, 2016

March 31, 2015

500,000,000 shares

500,000,000 shares

Issued shares
Balance as of April 1, 2014
Changes during the year
Balance as of March 31, 2015
Changes during the year
Balance as of March 31, 2016

428,904,352•
428,904,352•
428,904,352

Shares issued by the Company are non-par value common stock. The issued shares above include treasury stock. Changes in treasury stock
for the years ended March 31, 2016 and 2015, are as follows:
SharesBalance as of April 1, 2014
Acquisition of treasury stock
Sales of treasury stock
Balance as of March 31, 2015
Acquisition of treasury stock
Sales of treasury stock
Balance as of March 31, 2016

1,247,222
59,002(3,067)1,303,157
22,137(874)
1,324,420

Treasury stock held by the Company’s associates as of March 31, 2016 and 2015,was 71,885 shares and 71,885 shares, respectively.
(2)

Surplus(a) Capital surplus
The Japanese Company Law mandates that at least half of paid-in capital be appropriated as common stock and the rest be
appropriated as legal reserves as part of capital surplus.
(b) Retained earnings
The Japanese Company Law provides that an amount equal to 10% of appropriated retained earnings to be paid as dividends bereserved as legal reserve or retained earnings reserve to the extent that the total legal reserve and retained earnings reserve equals 25%of the nominal value of common stock. Retained earnings reserve may be made available for dividend payments upon a shareholders’meeting resolution.

50Note 17. Accumulated Other Comprehensive Income and Other Comprehensive Income
Accumulated other comprehensive income, net of related tax effects, as presented in the consolidated statement of changes in equity is asfollows:
Thousands of
U.S. dollars
2016

Millions of yen
2016
Foreign currency translation adjustments on foreign operations:
Balance at the beginning of the year2015
¥ 9,572

Net other comprehensive income¥ 30,173(20,419)

20,601$ 267,776(181,212)

Balance at the end of the year

9,754

30,17386,564

9,256(6,296)(791)

82,144

Net other comprehensive income

10,047

Balance at the end of the year

2,960

9,256

(55,875)
26,269Balance at the beginning of the year
Transfer to retained earnings

9,220
(347)

8,059
(237)

Net other comprehensive income(1,270)1,398(3,080)(11,271)

Balance at the end of the year

7,603

9,220

67,474(1,130)(407)(1,091)(39)(10,028)(1,537)(1,130)(13,640)

47,519(347)(28,392)

15,749(237)
32,00747,519421,717

Remeasurements of defined benefit pension plans:
Balance at the beginning of the year

Net change in fair value of financial assets measured at FVTOCI:
81,825

Net change in fair value of cash flow hedges:
Balance at the beginning of the year
Net other comprehensive income
Balance at the end of the year

(3,612)

Total accumulated other comprehensive income:Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income
Balance at the end of the year

18,78051(3,080)(251,970)
166,667

The following is a summary of reclassification adjustments, by line item, made to other comprehensive income, including non-controllinginterests and related tax effects arising during the years ended March 31, 2016 and 2015:
Millions of yen
2016
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

52

¥ (18,647)(10,076)

¥ •
3,620

¥ (18,647)(6,456)(1,908)(1,957)742
594(1,166)(1,363)(450)¥ (33,038)

107¥ 5,063(343)¥ (27,975)¥ (1,313)
1,572

¥ •
(442)

¥ (1,313)
1,130

(740)
¥ (481)•¥ (442)(740)¥ (923)¥ (19,960)(10,076)

¥ •
3,620

¥ (19,960)(6,456)(1,908)
(385)

742
152

(1,166)(233)(1,190)¥ (33,519)

107¥ 4,621(1,083)¥ (28,898)¥ (505)
(160)
(15)
174
¥ (506)¥ (19,455)(6,296)(1,151)(407)(1,083)¥ (28,392)

Millions of yen
2015
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted
for using the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted
for using the equity method
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted
for using the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted
for using the equity method
Total

53

¥ 21,007
4,672

¥ •
5,330

¥ 21,007
10,002

1,133

(393)

740

(1,405)396(1,009)1,706¥ 27,113(342)¥ 4,991

1,364¥ 32,104¥ (425)
(94)

¥ •
33

¥ (425)
(61)

1,510
¥ 991

(605)
¥ (572)905¥ 419¥ 20,582
4,672

¥ •
5,330

¥ 20,582
10,002

1,133

(393)

740

(1,499)429(1,070)3,216¥ 28,104(947)¥ 4,419

2,269¥ 32,523

¥ 662
(45)
25
(126)
¥ 516

¥ 19,920
10,047
715
(944)
2,269
¥ 32,007

Thousands of U.S. dollars
2016
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

54

$ (165,486)(89,421)$ •32,126$ (165,486)(57,295)(16,933)

6,585(10,348)(17,368)

5,272(12,096)(3,994)950(3,044)$ (293,202)$ 44,933$ (248,269)$ (11,653)
13,951•(3,923)$ (11,653)
10,028(6,567)•(6,567)$ (4,269)$ (3,923)$ (8,192)$ (177,139)(89,421)•32,126$ (177,139)(57,295)(16,933)

6,585(10,348)(3,417)1,349(2,068)(10,561)

950(9,611)$ (297,471)$41,010$ (256,461)$ (4,482)(1,420)(133)
1,544$ (4,491)$ (172,657)(55,875)(10,215)(3,612)(9,611)$ (251,970)

Note 18. Dividends
Dividends paid for the years ended March 31, 2016 and 2015, are as follows:
Resolution adopted
Board of directors’
meeting on
May 28, 2014
Board of directors’
meeting on
October 27, 2014
Board of directors’
meeting on
May 28, 2015
Board of directors’
meeting on
October 27, 2015

Resolution adopted
Board of directors’
meeting on
May 28, 2015
Board of directors’
meeting on
October 27, 2015

Type ofsharesMillions of yen

Yen

Aggregate
amountAppropriation fromAmount per
share

Record date

Effective dateOrdinaryshares¥ 4,277

Retained earnings¥ 10.0March 31, 2014

May 30, 2014

Ordinaryshares¥ 4,276

Retained earnings¥ 10.0

September 30,
2014

November 26,
2014

Ordinaryshares¥ 5,559Retained earnings¥ 13.0March 31, 2015

May 29, 2015

Ordinaryshares¥ 5,559Retained earnings¥ 13.0

September 30,
2015

November 30,
2015

Record date

Effective date

Type ofsharesThousands of
U.S. dollars
Appropriation from
Aggregate
amountU.S. dollars
Amount per
share

Ordinaryshares$ 49,334

Retained earnings$ 0.12

March 31, 2015

May 29, 2015

Ordinaryshares$ 49,334

Retained earnings$ 0.12September 30,
2015

November 30,
2015

Dividends whose record date is during the year ended March 31, 2016, but whose effective date is in the following fiscal year are as follows:
Resolution adopted

Type ofsharesBoard of directors’
meeting on
May 30, 2016

Millions of yen

Yen

Aggregate
amountAppropriation fromAmount per
share

Record date

Effective dateOrdinaryshares¥ 5,559Retained earnings¥ 13.0March 31, 2016

May 31, 2016

Resolution adopted

Type ofsharesThousands of
U.S. dollars
Aggregate
amountAppropriation from

Record date

Effective date

Board of directors’
meeting on
May 30, 2016

Ordinaryshares$ 49,334

Retained earnings

March 31, 2016

May 31, 2016

U.S. dollars

55

Amount pershare$ 0.12

Note 19. Other Income and Other Expenses
Other income and other expenses consist of the following items for the years ended March 31, 2016 and 2015:
Millions of yen
2016

Thousands of U.S. dollars
2016

2015

Other income:Gain on reorganization (*)
Other
Total other income
Other expenses:

Restructuring expenses
Loss on disposal of property, plant andequipment

Impairment
losses of property, plant and equipment
Loss on revision of retirement benefit plan

¥ 30,232
6,184¥ 36,416¥ 13,961
7,342¥ 21,303$ 268,300
54,881$ 323,181¥ 3,250¥ 6,792$ 28,843

2,538
1,372

2,368
497

22,524
12,176

•
2,367
•
Other
5,363
9,282
47,595
Total other expenses¥ 12,523¥ 21,306$ 111,138(*) Gain on reorganization for the year ended March 31, 2016, includes ¥29,079 million (US $258,067 thousand) (before tax effects) as
a result of the Group losing control of certain subsidiaries. Part of the gain includes ¥6,740 million (US $59,815 thousand) (before tax

effects) resulting from the remeasurement at fair value of the investment retained in the former subsidiary.

Note 20. Other Financial Income and Expenses
Other financial income and expenses for the years ended March 31, 2016 and 2015, are summarized as follows:
Millions of yen
Thousands of U.S. dollars
2016
2015
2016
(Other financial income)
Dividend income (*)
¥ 361
¥ 287
$ 3,204
Exchange gain
•
2,883
•
Other
24
•
213
Total
¥ 385
¥ 3,170$ 3,417(Other financial expenses)
Exchange loss
1,679•
14,901
Other
10
•
89
Total
¥ 1,689¥•$ 14,990(*) Dividend income is from financial assets measured at FVTOCI.

Note 21. Earnings per Share
The calculation of basic earnings per share (EPS) attributable to shareholders of the parent company is summarized as follows:
Thousands of shares
2016
Weighted-average number of ordinary shares on which basic
EPS is calculated

2015

427,583

427,629

Millions of yen
2016¥ 69,056

Net income attributable to shareholders of the parent company

2015¥ 70,569

Yen
2016

Thousands of
U.S. dollars
2016$ 612,851

U.S. dollars
2015

2016

Basic EPS attributable to shareholders of the parent company:¥ 161.50

56¥ 165.02$ 1.43

Thousands of
U.S. dollars
2016

Millions of yen

2016
2015
Euro-yen convertible
Euro-yen convertible
Euro-yen convertible
type bonds with stock
type bonds with stock
type bonds with stock
Potential ordinary shares without dilutive effects and not usedacquisition rights
acquisition rights
acquisition rights
in calculating diluted EPS attributable to shareholders of thesubject to call at par
subject to call at par
subject to call at parparent company
due in 2019: ¥ •due in 2019: ¥ 4,495 due in 2019: $ •(outstanding issues)(outstanding issues)(outstanding issues)
Note that diluted EPS attributable to shareholders of the parent company is not presented because no potentially dilutive shares of common
stock were issued or outstanding.

Note 22. Financial Instruments and Other Related Information(1)

Financial Risk
The Group is engaged in business activities worldwide, and therefore exposed to various risks, including interest rate risk, currency
exchange rate risk, and credit risk.
(a) Market risk
The Group’s major manufacturing bases are located in Japan and Asia, but its customers are geographically diversified. As a result, theGroup is exposed to market risks from fluctuations in foreign currency exchange rates.
(i) Interest rate risk
The Group is exposed to interest rate risks related principally to long-term liabilities. In order to minimize interest rate risks, theGroup enters into interest rate swap agreements to hedge future cash flow exposures to fluctuations in interest rates. Those interest
rate swaps are receive-floating, pay-fixed interest rate swaps. For interest rate swaps, the Group receives floating interest rate
payments on long-term liabilities, including borrowings, and pays fixed interest rate payments, thereby creating fixed interest rate
long-term liabilities.
Sensitivity analysis:
Sensitivity analysis for the interest rates shown below indicates the impact of assumed changes in interest rates on the income
before income taxes in the Company’s consolidated statement of income. If interest rates increase by 1% on financial instruments(floating-interest financial assets and liabilities measured at amortized cost, financial assets and liabilities measured at FVTPL, andderivatives), and all other variables were constant, the impact on the income before income taxes for the years ended March 31,
2016 and 2015, would have been as follows:
Millions of yen
2016
¥ 743

Impact on income before income taxes

2015
¥ 597

Thousands of
U.S. dollars
2016$ 6,594(ii) Currency exchange risk
The Group holds assets and liabilities exposed to currency exchange risks. In order to hedge currency exchange risks, the Grouputilizes forward exchange contracts.
In order to stabilize future net cash flows from transactions denominated in foreign currencies for trade receivables and payables aswell as forecast transactions, each month the Group measures the net amount of future cash flows on the settlement date for eachcurrency and hedges fluctuation risk mainly using forward exchange contracts for a portion of these transactions. As per theGroup’s policy, these contracts generally expire in one year.
Hedge relationships between forward exchange contracts and hedged items are highly effective in offsetting effects on hedged
items (assets and liabilities denominated in foreign currencies) arising from changes in foreign currency exchange rates.
Sensitivity analysis:
Sensitivity analysis for the currency exchange rates shown below indicates the impact of increases or decreases in currency
exchange rates on income before income taxes in the Company’s consolidated statement of income. If the Japanese yen had
depreciated by 1% against foreign-currency denominated financial instruments held by the Group, and all other variables wereconstant, the impact on the income before income taxes for the years ended March 31, 2016 and 2015, would have been as follows:
Millions of yen

Currency

Impact on income before income taxes

2016
135
42
3

US Dollar
Euro
Other

57

2015
148
36
(8)

Thousands of
U.S. dollars
2016
1,198
373
27

(b) Credit risk
Credit risk refers to the risk that the Group will incur a financial loss because customers or counterparties fail to discharge theircontractual obligations related to a financial instrument or contract. The Group is exposed to credit risks because of its operating
activities (primarily trade receivables) and financing activities, including deposits at financial institutions, currency transactions, andother financial instruments. No significant concentration of credit risk is present, as the Group has a diverse group of trading parties
situated in many different regions.
The Group sets credit limits according to the credit risks of certain instruments or customers by periodically reviewing relevant factors,
such as financial conditions and ratings.
The Group’s maximum exposure to credit risk, without considering collateral held, is represented as the carrying amount of financial
assets (excluding contingent liabilities) net of impairment losses, if any, in the consolidated statement of financial positions. The
maximum exposure to credit risk from contingent liabilities is represented as the balance of contingent liabilities disclosed in Note 26.
“Commitments and Contingencies (Other Than Liabilities Recognized as Provisions).” Balances by contractual maturity of tradereceivables and other assets that are past due at the end of the reporting period but not impaired are omitted from disclosures becausesuch balances are not material.
Fluctuation of allowance for doubtful receivables is as follows:
Thousands of
U.S. dollars
March 31, 2016
$ 6,168
1,358(1,819)(1,917)44
3,834Millions of yen
Balance at the beginning of the year
Additions (provision)
Utilized (write off)
Unused amount reversed (recovery)
Other
Balance at the end of the year

March 31, 2016
¥ 695
153
(205)
(216)
5
432

March 31, 2015
¥ 917
373
(159)
(420)
(16)
695

(c) Liquidity risk
The Group’s fundamental financial policy is to maintain an appropriate level of liquidity and secure adequate funds for current andfuture business operations. The Group works to optimize capital utilization for its business operations through the efficientmanagement of working capital. Further, the Group endeavors to improve group-wide capital management by centralizing thismanagement function of the Company.
The Group also raises funds from both capital markets and commercial banks. The Group finances its capital expenditures primarily bydrawing down internally generated funds and also through the issuance of debts and equity securities when necessary.
The Group also maintains commitment line agreements with a number of financial institutions to secure efficient funding as necessary.
The total unused commitment lines as of March 31, 2016, are disclosed in Note 26. “Commitments and Contingencies (Other Than
Liabilities Recognized as Provisions).”
The following tables present balances by maturity of non-derivative financial liabilities held by the Group as of the reporting dates:
Note that the carrying amounts of trade payables and contractual cash flows match, and their due dates are all within one year. Hencethey are not included in the tables below.

Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease obligations
Long-term debt
Long-term borrowings
Corporate bonds payable
Lease obligations

Millions of yen
March 31, 2016
Less than
one year¥ 25,595

Carrying
amount¥ 25,251

Contractual
cash flows¥ 25,595

21,86822,03622,036

•

•

4,987
276

5,049
277

5,049
277

•
•

•
•

137,556
29,967471

142,477
30,782
475

1,665
456
•

120,098
30,326475

20,714••58

Between one
and five years¥•

Over five years¥•

Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease obligations
Long-term debt
Long-term borrowings
Corporate bonds payable
Lease obligations

Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease obligations
Long-term debt
Long-term borrowings
Corporate bonds payable
Lease obligations

Millions of yen
March 31, 2015
Less than
one year¥ 32,108

Carrying
amount¥ 32,039

Contractual
cash flows¥ 32,108

24,437

24,702

24,702

•

•

4,490
308

4,490
315

4,490
315

•
•

•
•

158,463
34,923
690

165,550
36,342
695

1,827
504
•

95,11235,838677

68,611•
18

Thousands of U.S. dollars
March 31, 2016
ContractualLess than
Between one
cash flows
one yearand five years$ 227,148$ 227,148••••

Over five years••

Carrying
amount$ 224,095•

Between one
and five years¥•

Over five years¥•

194,072

195,563

195,563••

44,25844,80844,808

•

•

2,449
•
1,220,767
265,948
4,180

2,458
•
1,264,438
273,181
4,215

2,458
•
14,776
4,047•••
1,065,832
269,134
4,215••
183,830••

The weighted average interest rates of short-term debt, the current portion of long-term debt, and long-term debt are 1.47%, 1.34% and1.06%, respectively. The maturities range from 2016 to 2026. The details of corporate bonds by issue are as follows:
Thousands of Secured/
U.S. dollars Unsecured

Millions of yen
IssuerIssue

Issue date
March 31, 2016

March 31,

March 31,

2015

2016

Interest
rate(%)

Maturity

Euro yenconvertible bondThe
Company

type bond (2019)with subscription
rights to shareswith acquisition

September13, 2007

September

•

4,490

• Unsecured－

19,984

19,974$ 177,352 Unsecured

1.97

4,987

4,973

$ 44,258 Unsecured

1.24

9,983

9,976

$ 88,596 Unsecured

0.79

September13, 2018

34,954

39,413$ 310,206－－

13, 2019

clause (net sharesettlement)
The
CompanyThe

The 29th unsecured
corporate bondHitachi Cable, Ltd.

October29, 2007
March 16,

Company

the 5th unsecured
corporate bond

The
Company

The 30th unsecured September
corporate bond13, 2011

Total

－

2010

－

59

－

October 27,
2017
March 16,2017

Contingent liabilities disclosed in Note 26. “Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)” arenot included in the above tables.
The following tables show the maturities of derivatives. Net settlement derivatives are also disclosed in gross amounts.

Forward exchange contracts
Copper futures contracts
Interest rate swaps
Put options

Forward exchange contracts
Copper futures contracts
Interest rate swaps

Forward exchange contracts
Copper futures contracts
Interest rate swaps
Put options

In
Out
In
Out
In
Out
In
Out

In
Out
In
Out
In
Out

In
Out
In
Out
In
Out
In
Out

Within one year
¥ 179
16
1
4
•
52
•
•

Millions of yen
March 31, 2016
After one and but
not more than five
years
Over five years
¥1
¥•
28
•
•
•
•
•
•
•
1,181
1,029
6,061
•
•
•

Within one year
¥7
(317)
•
(65)
•
•

Millions of yen
March 31, 2015
After one and but
not more than five
years
Over five years
¥•
¥•
•
•
•
•
•
•
•
•
(415)
(1,020)Within one year
$ 1,588
142
9
35
•
461
•
•

Thousands of U.S. dollars
March 31, 2016
After one and but
not more than five
years
Over five years
$9
•
248
•
•
•
•
•
•
•
10,481
9,132
53,789
•
•
•

Total
¥ 180
44
1
4
•
2,262
6,061
•

Total
¥7
(317)
•
(65)
•
(1,435)

Total$ 1,597390
935•
20,07453,789•(d) Capital management
The Group’s fundamental capital management policy is to maintain an appropriate level of assets, liabilities, and capital for current andfuture business operations and to optimize capital efficiency for its business operations.
The ratio of equity attributable to shareholders of the parent company is viewed as a significant indicator for the Group’s capitalmanagement. A specific ratio is targeted under the Group’s mid-term management plan and continuously monitored.
The Group is not subject to significant capital requirements except for general rules, such as the Japanese Company Law.
Equity attributable to shareholders of the parent company at March 31, 2016, was ¥495,865 million (US $4,400,648 thousand), which
increased by ¥29,506 million (US $261,857 thousand) from the year ended March 31, 2015. As a result, the ratio of equity attributable
to shareholders of the parent company as of March 31, 2016, was 48.0%, an increase from 43.0% of previous year.
(e) Risk of stock price fluctuations
The Group pursues profit in its business and enhances corporate value through reinforcing relationships, particularly with customers
and suppliers, or by delivering proposals to its investees. As part of maintaining the relationship with customers, suppliers, or otherparties, the Group occasionally invests in marketable securities and therefore is exposed to the risk of stock price fluctuations. To
manage this risk, the Group regularly monitors the fair values of these instruments, financial conditions, and other factors of investees.
Further, holdings of stocks are reviewed by the relevant department as appropriate, considering relationships with its business partners.

60

(2)

Fair Value of Investments in Securities and Other Financial Assets and Liabilities(a) Methods and assumptions of fair value measurements
The following methods and assumptions are used to measure fair values of financial assets and liabilities:
Cash and cash equivalents, trade receivables, short-term debt, and trade payables:
Carrying amount of these assets and liabilities approximates their estimated fair value because of their short-term maturity.
Long-term debt:
Fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using market
interest rates under similar contractual terms.
Investments in securities and other financial assets and liabilities (excluding long-term loans receivable):
Refer to fair value hierarchy at (e) “Fair value hierarchy” below.
Long-term loans receivable:
Fair value of long-term loans receivable is estimated based on the present value of future cash flows using interest rates applicableto obtain an additional loan under similar contractual terms.
(b) Fair value of investments in securities and other financial assets
Carrying amounts and estimated fair values of financial assets for the years ended March 31, 2016 and 2015, are as follows:
Millions of yen
March 31, 2016
Carrying
Estimatedamounts
fair values
Financial assets measured at
FVTPL
Current
Securities
Derivatives
Forward exchange
contracts
Copper futurescontracts
Non-current
Securities
Derivatives
Forward exchange
contracts
Put options
Financial assets measured at
FVTOCI
Non-current
Securities
Financial assets measured atamortized cost
Current
Securities
Short-term loans
receivable
Non-current
Securities
Long-term loans
receivable

March 31, 2015
Carrying
Estimatedamounts
fair values¥ 1,393¥ 1,393

¥ 686

¥ 686

179

179

7

7

1

1

•

•

2,220

2,220

2,625

2,625

1

1

•

•

6,061

6,061

•

11,799

11,799•Thousands of
U.S. dollars
March 31, 2016
Carrying
Estimatedamounts
fair values$ 12,362$ 12,362

1,588

1,588

9

9

19,702

19,7029

9•53,78953,78914,09914,099•104,712•
104,712

•

1

1

•

•

•

•

3,431

3,431

•

•

1,624

1,624

1,493

1,493

14,412

14,412

688

688

103

103

6,106

6,106

Equity instruments are securities measured at FVTOCI, whereas debt instruments are those measured at amortized cost.

61

(c) Fair value of financial assets measured at FVTOCIThe following is a list of major equity instruments designated as FVTOCI and their fair values as of the reporting dates:
Millions of yen
March 31, 2016
Equity instruments
Riken Corporation
Kakimoto Co., Ltd.
Kowa Kogyosho Co., Ltd.
Konwa Kaikan
OSG Corporation
Tsuchiura Cable Television Co., Ltd.
Daido Steel Co., Ltd.
Owari Precise Products Co., Ltd.
NHK Integrated Technology Inc.
Kojima Co., Ltd.

Fair value¥ 1,312
1,205
1,070
803
769
685
663
441
319
316

Millions of yen
March 31, 2015
Equity instruments
Riken Corporation
Daido Steel Co., Ltd．
Opto Tech Corporation
Kowa Kogyosho Co., Ltd.
Kakimoto Co., Ltd.
OSG Corporation
Nichia Corporation
Konwa Kaikan
Naito & Co., Ltd.
Tsuchiura Cable Television Co., Ltd.

Fair value¥ 1,693
1,183
1,162
1,004
961
856
847
792
718
604

Thousands of U.S. dollars
March 31, 2016
Equity instruments
Riken Corporation
Kakimoto Co., Ltd.
Kowa Kogyosho Co., Ltd.
Konwa Kaikan
OSG Corporation
Tsuchiura Cable Television Co., Ltd.
Daido Steel Co., Ltd.
Owari Precise Products Co., Ltd.
NHK Integrated Technology Inc.
Kojima Co., Ltd.

Fair value$ 11,644
10,694
9,496
7,126
6,825
6,079
5,884
3,914
2,831
2,804

62

(d) Fair value of financial liabilities
Carrying amounts and estimated fair value of financial liabilities as of the reporting dates are as follows:
The Group holds no financial liabilities designated at initial recognition as financial liabilities measured at FVTPL.
Millions of yen
March 31, 2016
Carrying
Estimatedamounts
fair values

March 31, 2015
Carrying
Estimatedamounts
fair values

Thousands of
U.S. dollars
March 31, 2016
Carrying
Estimatedamounts
fair values

Financial liabilities
measured at FVTPL
Current
Derivatives
Interest rate swaps

¥ 52

¥ 52

¥•

¥•

Forward exchange
contracts
Copper futures contracts

16

16

317

317

4

4

65

65

$ 461

$ 461

142

142

35

35

Non-current••

Derivatives••

19,613

19,613

248

248

•

•

Interest rate swaps

2,210

2,210

1,435

1,435

Forward exchange
contracts
Financial liabilities
measured at amortized cost
Current

28

28

•

•

Short-term debt
Current portion of longterm debt
Current portion of
long-term borrowings
Current portion of
corporate bonds
payableLease obligations

25,25125,251

32,03932,039••22,01024,437

24,593

194,072

195,332

4,987

5,055

4,490

4,556

44,25844,862

276

276

308

308

2,449

2,449

•

•

•

•

Long-term debt

Lease obligations•
224,095

21,868Non-current

Long-term
borrowings
Corporate bonds
payable•224,095

137,556

141,852

158,463

163,2121,220,767

1,258,892

29,96730,77734,92336,182

265,948

273,136

471

471

690

690

4,180

4,180

Since the fair value of finance lease obligations is not material to the consolidated statement of financial position, it is measured as thepresent value of the minimum lease payments discounted by the interest rates used at the initial recognition of lease obligations.
Accordingly, the fair value is based on the relevant carrying amount.
(e) Fair value hierarchy
Financial instruments measured at fair value on a recurring basis after initial recognition are classified into three levels of a fair value
hierarchy based on observability and materiality of inputs used for fair value measurement. The three levels of the hierarchy are as
follows:
Level 1:
Fair value measured using quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2:
Fair value measured using direct or indirect observable inputs other than the quoted prices included in Level 1.
Level 3:
Fair value measured using unobservable inputs.

63When several inputs are used for a fair value measurement, the measurement is categorized in its entirety in the same level of the fairvalue hierarchy as the lowest level input that is significant to the entire measurement. Transfers between levels are deemed to haveoccurred at the beginning of each quarter period.
Securities:
Securities that can be measured at fair value through quoted market prices are included in Level 1. Those securities include listed
stocks, government bonds or other debt securities, and exchange traded funds.
In the absence of an active market for securities, the following are used as inputs for fair value measurement: quoted prices for
similar securities; quoted prices for transactions that are not distressed for identical or similar securities; or other relevant
information, including observable interest rates and yield curves, credit spreads, and default rates. These inputs are included in
Level 2. Included in Level 2 are short-term investments and listed stocks traded over-the-counter.
Shares of non-listed companies and other instruments, whose significant inputs for fair value measurement are unobservable, areincluded in Level 3. The Group uses price information provided by financial institutions to evaluate these investments. The Group
corroborates the information using an income approach based on its own valuation model or a market approach, such as comparison
with prices of similar securities.
Derivatives:
Derivatives measured in a model using the following are included in Level 2: quoted prices under transactions that are not distressed,
quoted prices in markets that are not active, and observable interest rates and yield curves or forward and spot prices for currencies
and commodities. Level 2 derivatives mainly include interest rate swaps, forward foreign exchange contracts, and commodity
futures contracts.
Financial assets and liabilities measured at amortized cost:
Financial assets and liabilities measured at amortized cost are included primarily in Level 2 or Level 3.
The following tables present financial instruments that are measured at fair value on a recurring basis and the fair value hierarchyclassification as of March 31, 2016 and 2015:
Millions of yen
March 31, 2016
Level 2
Level 3

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
Derivatives
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)

Total¥ 1,393
•

¥•
180

¥•
•

¥ 1,393
180

•
•
3,532

1,092
1
•

1,128
6,061
8,267

2,220
6,062
11,799

•
•

72
2,238

•
•

72
2,238

64

Millions of yen
March 31, 2015
Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)

Level 2

Total

¥ 686
•

¥•
7

¥•
•

¥ 686
7

296
6,161

144
•

2,185
7,938

2,625
14,099

•
•

382
1,435

•
•

382
1,435

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
Derivatives
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)

Level 3

$ 12,362••••
31,345•••

Thousands of U.S. dollars
March 31, 2016
Level 2
Level 3

$•
1,597
•
9,691
9
•
•
638
19,861

Total

$•
•
•
10,01153,78973,367•••$ 12,362
1,597•
19,70253,798104,712•638
19,861

Financial liabilities (current and non-current) measured at FVTPL represent derivatives.
The following tables present the changes in Level 3 instruments whose fair value were measured on a recurring basis for the years
ended March 31, 2016 and 2015:
Millions of yen

At April 1, 2014

FVTPL

FVTOCI

Total¥ 2,187¥ 7,672¥ 9,859
4

Gains (losses) in profit or loss

4•

Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2015

•
(90)
232
(148)
¥ 2,185

107
(55)
146
68
¥ 7,938

107
(145)
378
(80)
¥ 10,123

Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2016

91
•
(805)
6,096
(378)
¥ 7,189

•
(16)
(353)
•
698
¥ 8,26791(16)(1,158)6,096
320¥ 15,456

65

Thousands of U.S. dollars
FVTPL
At March 31, 2015
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2016

$ 19,391
808•(7,144)
54,100(3,355)$ 63,800

FVTOCI$ 70,447•(142)(3,133)•
6,195$ 73,367

Total$ 89,838
808(142)(10,277)
54,1002,840$ 137,167

Changes in unrealized gains (losses) recognized in profit or loss relating to assets held as of March 31, 2016 and 2015, were
¥91 million (US $808 thousand) and ¥ (16) million respectively.
Such gains (losses) in profit or loss are included in other financial income and other financial expenses in the consolidated statement ofincome.
(3)

Derivative Instruments and Hedging Activities
Cash flow hedge:
Foreign currency exposure:
Changes in the fair value of forward exchange contracts designated as cash flow hedges for forecasted foreign currency transactions
are reported in other comprehensive income. These amounts are reclassified into profit or loss in the same period as foreignexchange gains or losses on hedged items are recognized in profit or loss.
Interest rate exposure:
Changes in fair values of interest rate swaps designated as hedging instruments for fluctuation in cash flows associated with longterm debt obligations are reported in other comprehensive income. The amount in accumulated other comprehensive income issubsequently reclassified to other financial income and expenses over the period in which interest expenses are recognized in profit
or loss.
As of March 31, 2016, the expected period for cash flows arising from hedged items and affecting profit or loss is to be from April
2016 to June 2021.
The fair values of derivatives designated as hedging instruments as of March 31, 2016 and 2015, are as follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2016
March 31, 2015
March 31, 2016
Asset
Liability
Asset
Liability
Cash flow hedges
Forward exchange
contracts
¥ 107
¥ 44
¥4
¥ 317
$ 949
$ 390
Interest rate swaps
•
2,262
•
1,435
•
20,075
Copperfutures••
contracts
1
•
•
•
9
•
Total

¥ 108

¥ 2,306¥4¥ 1,752$ 958$ 20,465

The fair values of derivative assets and liabilities to which hedge accounting is not applied were ¥6,134 million (US $54,437 thousand)and ¥4 million (US $35 thousand), respectively, as of March 31, 2016, and ¥3 million and ¥65 million, respectively, as of March 31,
2015.
The contract or notional amounts of derivatives as of March 31, 2016 and 2015, are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2016
March 31, 2015
March 31, 2016
Forward exchange contracts:
To sell foreign currencies¥ 3,843¥ 3,525$ 34,105
To buy foreign currencies
3,243
1,306
28,781
Interest rate swaps
127,474
148,611
1,131,292
Copper futures contracts
4,231
2,021
37,54966

The following tables present the amounts in relation to cash flow hedges recognized in the consolidated statement of income for theyear ended March 31, 2016:
Gain or loss recognized in OCI
Effective portion of derivatives designated as hedging instruments
Derivatives¥ 70(2,028)
1

Thousands of
U.S. dollars$ 621(17,998)9¥ (1,957)$ (17,368)

Millions of yen

Forward exchange contracts
Interest rate swaps
Copper futures contracts
Total
Gain or loss reclassified from OCI into profit or loss
Effective portion of derivatives designated as hedging instruments
Derivatives
Forward exchange contracts
Interest rate swaps

Recognized in consolidated statement ofincomeOther financial income and expenses
Other financial income and expenses

¥ 281
1,291

Thousands of
U.S. dollars$ 2,494
11,457¥ 1,572$ 13,951

Millions of yen

Total

The following tables present the amounts in relation to cash flow hedges recognized in the consolidated statement of income for theyear ended March 31, 2015:
Gain or loss recognized in OCI
Effective portion of derivatives designated as hedging instruments
Derivatives

Millions of yen

Forward exchange contracts
Interest rate swaps¥ 238(1,643)Total¥ (1,405)

Gain or loss reclassified from OCI into profit or loss
Effective portion of derivatives designated as hedging instruments
Derivatives
Forward exchange contracts
Interest rate swaps

Recognized inconsolidated statement ofincomeOther financial income
and expenses
Other financial income
and expenses

Millions of yen¥ (598)504

Total¥ (94)

Note 23. Pledged Assets
As a general contractual term for long-term and short-term debts, banks may demand collateral and guarantees for present and future obligations,and retain rights to offset liabilities with bank deposits when repayment is overdue or any breach of contract occurs.
Per trustee agreements of secured bonds and particular secured or unsecured loan agreements, trustees or lenders generally have the right to preapprove profit distributions, including dividend payments and new stock issues, as well as the right to demand additional collateral or mortgage.
The following assets were pledged as collateral by certain subsidiaries for their bank borrowings as of March 31, 2016 and 2015:
Millions of yen
Land
Buildings and structures
Other property, plant and equipment
Securities and other financial assets
Total

March 31, 2016¥•

March 31, 2015
¥ 195
652

•
•
105
¥ 105

67

Thousands of
U.S. dollars
March 31, 2016
$•

•

•
•

117
¥ 964

932
$ 932

Note 24. Major Subsidiaries and Associates
The Company’s parent company is Hitachi, Ltd., which is located in Japan. The Company’s consolidated financial statements include thefollowing subsidiaries:

Name

Location

Hitachi Metals Tool Steel, Ltd.

Minato-ku, Tokyo

High-Grade Metal Products and Materials

100.0

NEOMAX MATERIALS Co., Ltd.

Suita, Osaka

High-Grade Metal Products and Materials

100.0

Hitachi Metals Wakamatsu, Ltd.

Kita-kyushu, Fukuoka

High-Grade Metal Products and Materials

100.0

Hitachi Metals Precision, Ltd.

Minato-ku, Tokyo

High-Grade Metal Products and Materials

100.0

HMY, Ltd.

Yasugi, Shimane

High-Grade Metal Products and Materials

100.0

Hitachi Metals MMC Superalloy, Ltd.

Okegawa, Saitama

High-Grade Metal Products and Materials

51.0

NEOMAX KINKI Co., Ltd.

Yabu, Hyogo

Magnetic Materials and Applications

100.0

NEOMAX ENGINEERING Co., Ltd.

Takasaki, Gunma

Magnetic Materials and Applications

100.0

Hitachi Ferrite Electronics, Ltd.

Tottori, Tottori

Magnetic Materials and Applications

100.0

NEOMAX KYUSHU Co., Ltd.

Takeo, Saga

Magnetic Materials and Applications

100.0

Hitachi Metals FineTech, Ltd.

Kuwana, Mie

Hitachi Valve, Ltd.

Mie, Mie

Alcast, Ltd.

Kumagaya, Saitama

Kyushu Technometal Co., Ltd.

Miyako, Fukuoka

Hitachi Metals Trading, Ltd.

Minato-ku, Tokyo

Sales of products

100.0

Hitachi Magnet Wire Corp.

Hitachi, Ibaraki

Wires, Cables, and Related Products

100.0

Tonichi Kyosan Cable, Ltd.

Ishioka, Ibaraki

Wires, Cables, and Related Products

100.0

Hitachi Cable Fine Tech, Ltd.

Hitachi, Ibaraki

Wires, Cables, and Related Products

100.0

Hitachi Cable Networks, Ltd.

Taito-ku, Tokyo

Wires, Cables, and Related Products

100.0

Hitachi Metals Solutions, Ltd.

Chuo-ku, Tokyo

Real estate business and others

100.0

Metglas, Inc.

South Carolina, U.S.A.

High-Grade Metal Products and Materials

100.0

Hitachi Metals Korea Co., Ltd.

Gyeonggi-do,
South Korea

High-Grade Metal Products and Materials

100.0

Baosteel Hitachi Rolls (Nantong) Co., Ltd.

Jiangsu, China

High-Grade Metal Products and Materials

70.0

San Technology, Inc.

Cavite, Philippines

Magnetic Materials and Applications

100.0

Pacific Metals Co., Ltd.

North Gyeongsang,South Korea

Magnetic Materials and Applications

100.0

PT. NX INDONESIA

Banten, Indonesia

Magnetic Materials and Applications

100.0

Hitachi Metals North Carolina, Ltd.

North Carolina, U.S.A.

Magnetic Materials and Applications

100.0

Waupaca Foundry, Inc.

Wisconsin, U.S.A.

High-Grade
Equipment

68

Principal business

As of March 31, 2016
Ownership%

High-Grade
Equipment
High-Grade
Equipment
High-Grade
Equipment
High-Grade
Equipment

Functional

Components

andFunctional

Components

andFunctional

Components

andFunctional

Components

andFunctional

Components

and

100.0
100.0
100.0
100.0

100.0

Name

Location
High-Grade
Equipment
High-Grade
Equipment
High-Grade
Equipment
High-Grade
Equipment

As of March 31, 2016
Ownership
Principal business%
Functional Components and
100.0

AAP St. Marys Corp.

Ohio, U.S.A.

Hitachi Metals Automotive Components USA, LLC

Pennsylvania, U.S.A.

Namyang Metals Co., Ltd.

Daegu, South Korea

Ward Manufacturing, LLC

Pennsylvania, U.S.A.

Hitachi Metals America, Ltd.

New York, U.S.A.

Sales of products

100.0

Hitachi Metals Hong Kong Ltd.

Hong Kong, China

Sales of products

100.0

Hitachi Metals Europe GmbH

Dusseldorf, Germany

Sales of products

100.0

Hitachi Metals Singapore Pte. Ltd.

Singapore

Sales of products

100.0

Hitachi Metals Taiwan, Ltd.

New Taipei, Taiwan

Manufacturing and sales of products

100.0

Hitachi Metals (Thailand) Ltd.

Ayutthaya, Thailand

Manufacturing and sales of products

100.0

Hitachi Metals (Suzhou) Technology, Ltd.

Jiangsu, China

Manufacturing and sales of products

100.0

Hitachi Metals (China), Ltd.

Shanghai, China

Regional headquarters and sales of products

100.0

Hitachi Cable America Inc.

New York, U.S.A.

Wires, Cables, and Related Products

100.0

Hitachi Cable (Suzhou) Co., Ltd.

Jiangsu, China

Wires, Cables, and Related Products

100.0

Hitachi Cable (Johor) Sdn. Bhd.

Johor, Malaysia

Wires, Cables, and Related Products

100.0

Hitachi Cable Vietnam Co., Ltd.

Hai Duong, Vietnam

Wires, Cables, and Related Products

100.0

Thai Hitachi Enamel Wire Co., Ltd.

Bangpakong
Wires, Cables, and Related Products
Chachoengsao, Thailand

49.4

Others44 companies•

69

Functional

Components

andFunctional

Components

andFunctional

Components

and

•

100.0
90.8
100.0

•

Note 25. Transactions with Related Parties(1) Transactions with Related Parties
Transactions with the related parties are as follows:
For the year ended March 31, 2016:
Attribution

Parentcompany

Name

Nature of transaction

Deposits with HitachiGroup cash poolingsystem(*1) (*2)

Hitachi, Ltd.

Millions of yen
Transaction
Balance atamountyear-endThousands of U.S. dollars
Transaction
Balance atamountyear-end

DepositDeposit¥ 41,298(*3)¥ 65,869$ 366,507(*3)$ 584,567

Substitute purchase ofmaterial and others
27,448
11,537
243,592
102,387(*4)*1 The Company participates in the Hitachi Group’s cash pooling system, an initiative intended to provide integrated management offunds. Balances at the end of the fiscal year indicate deposit balances as of the year-end.
*2 Interest rates on funding are reasonably determined based on market interest rates.
*3 As deposits and withdrawals are made on a daily basis, transaction amounts represent differences between the beginning and endingbalances for the year.
*4 Transaction terms for substitute purchase of material are determined in the same manner as regular transaction terms based on theirmarket prices.
Joint
ventureSH Copper Products Co., Ltd.

For the year ended March 31, 2015:
Attribution

Name

Nature of transaction

Parentcompany

Hitachi, Ltd.

Deposits with HitachiGroup cash poolingsystem(*1) (*2)

JointventureSH Copper Products Co., Ltd.

Substitute purchase ofmaterial and others(*4)

Associate

Sumiden Hitachi Cable, Ltd.

Sales of products(*4)

Millions of yen
Transaction
Balance atamountyear-end
Withdrawal¥ 24,625(*3)¥ 24,571

41,40016,06824,79814,006*1 The Company participates in the Hitachi Group’s cash pooling system, an initiative intended to provide integrated management offunds. Balances at the end of the fiscal year indicate deposit balances as of the year-end.
*2 Interest rates on funding are reasonably determined based on market interest rates.
*3 As deposits and withdrawals are made on a daily basis, transaction amounts represent differences between the beginning and endingbalances for the year.
*4 Transaction terms for sales of products and substitute purchase of material are determined in the same manner as regular transaction
terms based on their market prices.
(2) Compensation for Key Management Personnel
Compensation for key management personnel of the Group is as follows:

Short-term employee benefits

Millions of yen
For the year ended
For the year ended
March 31, 2016
March 31, 2015
¥ 620
¥ 438

70

Thousands of U.S. dollars
For the year ended
March 31, 2016
$ 5,502

Note 26. Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)(1)

Loan Commitments
The Group has lines of credit arrangements with banks in order to secure a financing source for business operations. The total unused linesof credit as of March 31, 2016 and 2015, were ¥40,000 million (US $354,988 thousand) and ¥40,000 million respectively. The Group also
has overdraft facilities with banks. The unused facilities under these agreements as of March 31, 2016 and 2015, were ¥69,242 million(US $614,501 thousand) and ¥68,742 million respectively.

(2)

Commitments for Acquisition of Assets
Outstanding commitments for the purchase of property, plant and equipment as of March 31, 2016 and 2015, were ¥25,284 million(US $224,388 thousand) and ¥14,650 million respectively.

(3) Guarantee Obligations
The Group was contingently liable for loan guarantees and other guarantees to its associates and third parties in the amounts of¥8,868 million (US $78,701 thousand) and ¥12,605 million as of March 31, 2016 and 2015, respectively.

Note 27. Subsequent Events
There is no applicable item.

7172