’14
for the year ended March 31, 2014

Contents
01

Financial Highlights (Consolidated)

02

Message from the President

05

Special Feature

08

Our Business Domains

10

Review of Operations

12

Research and Development

14

Corporate Governance18

The Environment

20

Board of Directors, Corporate Auditorsand Executive Oﬃcers

21

Financial Section

22

Financial Performance (Consolidated)

46

Corporate Directory

47

Network

Forward-looking statements
The performance forecasts included in this report are judgments
based on the information that was available to the JSW Group at thetime this report was prepared and the actual results may differ
significantly from these forecasts due to a variety of factors.

ProfileIn 1907, the Japanese government launched a joint venture for the
purpose of domestic weapons production in Muroran, Hokkaido—later tobecome a major steel manufacturing center—consisting of two British
firms (W.G. Armstrong and Vickers) and one Japanese company. That was
the birth of The Japan Steel Works, Ltd. (JSW).
After World War II, the company turned its sophisticated technologies andconsiderable experience to meeting peacetime needs. Continuing to
produce high-quality steel, it developed machinery making use of thissteel and endeavored to open up new business fields. In addition to heavy
and chemical industries such as electric power, steel, shipbuilding, andpetrochemicals, the company broadened into areas from automobiles toelectrical machinery and information equipment, earning a worldwide
reputation as an integrated producer of steel materials and machinery.
Today, having grown into a comprehensive materials provider andmanufacturer of mechatronics products, JSW is meeting society’s needs
at the forefront. In the steel and energy products business, we are serving
the needs of the energy industry in areas such as electrical power
generation, oil refining, natural gas, and wind power generation. In theindustrial machinery products business, we supply equipment for
manufacturing and processing plastic materials, along with a diverse
range of products in areas from information technology to defense.

Financial Highlights (Consolidated)
The Japan Steel Works, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014, 2013 and 2012
Millions of yen

Thousands of
U.S. dollars

2012

2014

2014

2013

¥188,719¥220,653

Operating income

8,864

16,68023,911

86,125

Net income

5,527

8,281

12,59153,702

Total assets

293,139

303,970

325,653

2,848,222

Total net assets

139,268

134,368

128,613

1,353,168

ROE

4.1%

6.3%

10.2%

Equity ratio

47.1%

43.8%

39.2%

¥14.92¥22.33¥33.93

$0.14

5.00

10.00

10.00

0.05

For the year
Net sales¥221,368 $1,833,647

At year-end

RatiosAmounts per share (yen and U.S. dollars)
Net income
Cash dividends applicable to the year

Note: Amounts in U.S. dollars are presented solely for convenience and based on the rate of ¥102.92 =US$1.00, the rate of exchange on March 31, 2014.

Net Income

Yen

0

0

2010

2011

2012

2013

2014

44.54

47.22

12.5

14.92

25.0

22.33

5,000

33.93

10,000

37.5

5,527

16,532

50.0

8,281

60,00015,000Net Income per Share

12,591

120,00188,719

220,653

180,000

221,368

20,000212,929

Millions of yen

240,000

201,680

Millions of yen

17,528Net Sales

0.0

2010

2011

2012

2013

2014

2010

2011

2012

2013

2014

01

Message from the President

Overview of Fiscal 2013

policies, as well as a surge in demand ahead of aconsumption tax hike.

Business performance

Operating conditions were mixed for the
JSW Group. In the Industrial Machinery Products

In fiscal 2013, ended March 31, 2014, the U.S.

Business, the export climate improved for plastic

economy continued its gradual recovery, while

production and processing machinery owing to such

Europe showed signs of picking up. At the same

factors as a weaker yen. In contrast, the situation

time, growth remained stagnant in China and otherwas again adverse in the Steel and Energy Products

emerging nations. Japan’s economy recovered

Business, as demand recoveries were weaker thanmodestly, reflecting the impacts of the government’s

anticipated in electric and nuclear power products

fiscal policies and the Bank of Japan’s monetary

and in wind turbine system equipment.

Ikuo Sato

Representative Director &President
02

Message from the President

In May 2012, we embarked on JGP2014, aOrders thus rose 1.0% from the previous

medium-term management plan covering threefiscal year, to ¥186,574 million (US$1,812 million).

years through fiscal 2014. Under this initiative, weThis reflected a gain in the Industrial Machinery

seek to become the world’s leading manufacturing

Products Business, which offset a drop in the Steel(monozukuri) group, underpinned by a stable

and Energy Products Business. Consolidated net

earnings structure and strong financial position. We

sales fell 14.5%, to ¥188,719 million (US$1,833

are deploying a four-step basic policy to achieve

million), a key factor being declines in both thethese goals. The first is to cultivate our products to

Industrial Machinery Products and Steel and Energy

become global market leaders. The second is to

Products businesses. Operating income declined

expand into growth markets and fields. The third is

46.9%, to ¥8,864 million (US$86 million). Ordinary

to create worldwide manufacturing alliances, andincome was down 43.3%, to ¥9,704 million (US$94

the fourth is to reinforce our business platform. In

million), and net income decreased 33.3%, to ¥5,527

what is a challenging business climate, we accorded

million (US$53 million).

top priority to securing solid orders for electric andnuclear power products while expanding orders forclad steel plates and pipes, plastic production andprocessing machinery, injection molding machinery,and other offerings for which demand is robust.

03

Message from the President

Future Initiatives

these offerings and nuclear power products.
Demand is robust in the Industrial Machinery

Although we expect the global economy to continue

Products Business, while a weaker yen shouldr ecovering m o de rat e ly, t he sca li n g b a ck o fcontribute to our competitiveness—so we willquantitative easing in the United States and slower

endeavor to boost orders for these offerings. We will

growth in emerging nations are concerns. The

formulate a new medium-term management plan

outlook for Japan remains unclear. A reaction to the(JGP2017) based on these initiatives. We aim to

consumption tax hike could derail a gradualfurther expand our operation as a “top corporate

recovery stemming from improvements in the exportgroup that serves a special niche.”environment owing to a weaker yen and the impactof the governmentʼs economic and fiscal policies.
So, in fiscal 2014, the final year of JGP2014,

June 2014

we will address our challenges while enhancing
results. In the Steel and Energy Products Business,
demand should recover somewhat for electric
power products. We will strive to secure orders for04

Ikuo Sato

Representative Director & President

’14
Special Feature

1

Electric and Nuclear Power Product Initiatives

Medium-term demand trends
for nuclear power products

In the near term, we will
provide high-value-added offerings
for new projects in China, South
Korea, the United Kingdom, andother countries while attracting
orders for spent fuel rod casks thatwill be needed when nuclear power
facilities in Japan return to service.

There are numerous plansworldwide to construct nuclear
power stations. Progress withprojects already underway suggeststhat full-fledged demand for our
products should emerge fromaround 2018.

2015

In fiscal 2013, orders rose forhigh-efficiency thermal power plantmaterials, mainly in China andemerging nations.
Plans are in place to construct
and upgrade thermal generating
facilities in Japan, so demand should
remain brisk. We aim to attract more

Potential major projects
2014

Robust thermal power
products

2016

2017

2018 〜

New projects in coastal China, South Korea, and the United Kingdom

demand for large generator rotor
shafts, in which we are the global
market leader, and peripheral
equipment.

Casks in Japan
Equipment replacement in France
Installations in inland China
Installations inemerging nations
Generator rotor shaft

05

2

Attaining Record Orders for Pelletizers

Cultivating new markets andexpanding orders
We have been expanding our pivotal
pelletizer business, particularly in
Asia. In fiscal 2013, we increasedorders in Russia and other countries
in the Commonwealth of Independent States (CIS), enabling us to post
record orders.

Companies are planning worldwide to construct petrochemicalplants, which need pelletizers, andwe will cultivate demand in Russia
and other countries in the CIS as wellas in North America, where there areseveral large projects.

Russia
and
CIS
Asia

Reinforcing Services andSolutions BusinessWe will reinforce our highly
profitable Services and Solutions
Business by setting up specialized
new units and concluding businessalliances with European corporations.

North
America

We are expanding ourpelletizer sales channels
Large pelletizer

3

Pursuing Further Growthin the Global Molding
Machinery Market

Concluding an alliance with
Toyo Machinery & Metal in
March 2014
W e o ff e r a c o m p l e t e l i n e u p o f
all-electric injection molding
machines, and are particularly strongin mid-sized and large models.
We aim to increase our competitiveness in an expanding global
market. To that end, we are drawing
06

on a capital and business alliancewith Toyo Machinery & Metal Co.,
Ltd., which is particularly strong insmall models, to shorten productdevelopment lead times and bolster
price competiveness. Initiatives will
include jointly developing small
injection molding machines, sharing
the supply chain, and engaging in
joint purchasing.

A JSW injection molding machine plant

We intend to solidify ourpresence as a leading manufacturerof injection molding machines.

Special Feature

3
Overview of capital and business alliances• Jointly developing small injection molding machines• Sharing the supply chain• Outsourcing injection molding machine production• Sales and service for injection molding machines• Collaboration for overseas production

J3000AD, a large
injection molding machine4

Anticipated benefits• Cutting costs by using common parts• Complementing strengths and weaknesses• A full, economical lineup• Global market leadership

J350AD, a mid-sized
injection molding machine

Expanding Information Equipment Business

Cultivating the plasma
deposition systems businessWe are pushing into the plasma
deposition systems business togenerate more growth in suchpromising information technology
equipment areas as smartphones,
tablets, PCs, large high-definition
TVs, and vehicle displays.

Establishing a new company
to manufacture, sell, andservice plasma deposition
systems
In February 2014, we established
JSW AFTY Corporation in Hachioji,
Tokyo, to manufacture, sell, andservice plasma deposition systems.

annealing systems, the plasma
deposition systems business that werecently entered, and fromafter-sales service operations tomore than double informationequipment business sales, to morethan ¥20 billion.

Information equipment business

Excimer device
business(Existing businesses)• Excimer laser annealing
equipment• Solid state excimer laser
annealing equipment• Annealing furnace

Excimer laser annealing system
JSW AFTY Corporation premises

Outlook for informationequipment businessAtomic layer deposition system

We will draw on synergies from our
excimer device business, centeredon our popular excimer laser

Plasmadeposition
systems business(New business)• Chemical vapor
deposition systems• Sputtering equipment• Electron cyclotron resonancesystems• Atomic layer
deposition systems

After-sales
service• Parts• Maintenance07

Our Business Domains
The JSW Group comprises 53 subsidiaries (of which 34 are consolidated) and five affiliates (of which one isan equity-method affiliate). Our operating domains are the Steel and Energy Products Business, theIndustrial Machinery Products Business, and the Real Estate and Other Businesses.
We maintain the Muroran, Hiroshima, and Yokohama plants. Our integrated lineup ranges from steel
manufacturing to machinery.

Steel and Energy Products Business

Sales Composition

36%

Steel Products
At the Muroran Plant, which manufactures steel in electric furnaces, we produce a
broad range of cast products and steel ingots for forged products. In ingots forforgings, we have one of the worldʼs largest production capacities, of 650 tons. Ourrange of presses and hammers of various types and sizes, including two
14,000-ton hydraulic presses, ensures that we can deliver forgings in any needed
shape. After undergoing heat treatment, machining and finishing, the cast, andforged steel products are used in the electric power generation industry (fossil
fuel, hydroelectric and nuclear) as well as for steel-making, oil refinery, andindustrial machinery and facilities. In addition to being a leading global supplier ofnumerous extra-large cast and forged steel products, our plants produce a wide
range of high-quality small and medium-sized steel cast and forged products.

Business Lines
Production and sale ofproducts for power
generation, steel-making,chemical machinery,
nuclear power-related
equipment, die materials,
and other areas

Steel Plates and Structures
At the Muroran Plant, which has one of Japanʼs largest 4-thick plate reversing
rolling mills, we can roll high-quality, extremely thick, wide, and long steel plates(maximum thickness: 350 millimeters, maximum width: 4.8 meters, maximum
length: 20 meters). Using advanced manufacturing technology we now mainly
produce high-quality clad steel plates and clad steel pipes using clad steel plates.
All of our products are used in a wide range of industrial applications in Japan andoverseas, giving this business a unique profile. In addition, the Muroran Plant
integrates the various forged steel products it manufactures and leverages theCompanyʼs state-of-the-art welding technologies and facilities to produce verylarge welded structures, such as pressure vessels for oil refineries andpetrochemical plants, in an integrated process extending from raw materials tofinished products. As a result, we are meeting demand both in Japan and overseas.

Business Lines

This sector deals with the entire wind turbine power generation system business,
designing its own towers, blades and equipment required by wind power
generator businesses. Among these businesses, higher power generation
efficiency and reliability as well as ease of maintenance have been achieved for
power generators (J82) through the use of permanent magnet synchronous
generators and the elimination of step-up gears.

Business Lines

Production and sale ofproducts for oil refining,
petrochemical, generalchemical, and power
generation industries, aswell as a wide range ofpressure vessels, clad
steel plates, clad steel
pipes, extra-thick steel
plates, and other areas

Wind Turbines

08

Production, sale andmaintenance of windturbine systemeq u i pm e nt

Our Business Domains

Production encompasses steel casting and forging products (Muroran), steel plate and steel
structures (Muroran), wind turbines (Muroran), plastics machinery (Hiroshima and Yokohama),
and other machinery (Muroran, Hiroshima, and Yokohama). We have responded to changes in theindustrial structure by diversifying our businesses and launching environmental businesses.

Industrial Machinery Products Business

Sales Composition

63%

Plastics Machinery
At the Hiroshima Plant, we produce injection molding machines, pelletizers,
twin-screw extruders, and film and sheet manufacturing equipment. At the
Yokohama Plant, we produce blow molding machines and spinning extruders. In
injection molding machines, we offer a lineup of electrically driven machines, all ofwhich feature both improved productivity and energy-saving standards along withenhanced basic performance and molding precision. We also have leveraged power
regeneration technology already in place while creating more advanced temperature
controls, thereby conserving even more energy. To respond to diversifying needs inthese product markets, we have established a Technology Development Center
within the Hiroshima Plant and engage in wide-ranging consultation with productusers, enabling us to put in place an integrated development system to cope withchanging demand, from plastic manufacturing to processing machinery.

Business Lines

Supported by proprietary technologies and facilities at the Hiroshima, Yokohama,and Muroran plants, JSW produces industrial machinery for a wide range ofdemand, including defense equipment, power plant equipment, magnesium alloy
injection molding machines, aluminum die-casting machines, laser annealing
systems, rolling stock parts, and environmental facilities.

Business Lines

Production and sale ofplastic injection molding
machines, plastic production and processing
machinery (includingpelletizers, compound
extruders, film and sheet
manufacturing equipment, etc.), and blow
molding machines

Other Machinery
Production, sale and maintenance of fluid machinery,
hydraulic machines, machinery for the production ofelectronic components anddisplays (laser annealing
systems, etc.), magnesium
alloy injection molding
machines, aluminum die-casting machines, tightlock
couplers and dampers, anddefense equipment09Review of Operations
Steel and Energy Products Business
Steel Products Sector
Steel Plates and Structures Sector
Wind Turbines Sector

Performance in Fiscal 2013
Orders decreased 6.9% from the previous fiscal year, to ¥57,128 million (US$555
million). This was the result of weak recoveries in demand for electric andnuclear power products and a decline in demand for clad steel pipes and windturbine system equipment, which overshadowed gains in clad steel plates andpressure vessels for oil refineries.
Segment sales dropped 23.4%, to ¥67,602 million (US$656 million). This
reflected a downturn in demand for electric and nuclear power products and adrop in sales of clad steel pipes after major sales in the previous fiscal year.

Shell flange used for pressurechamber for nuclear power plant

The operating loss was ¥3,606 million (US$35 million), from ¥534 million ayear earlier, owing to lower sales and delays in restoring operations.

030,000

0

2011

10

67,602

57,12830,00060,00088,27590,000105,001

90,00061,390120,000

78,068Millions of yen

120,000

98,829Millions of yen

60,000Clad steel plate

Sales

112,915

Orders Received

2012

2013

2014

J82 wind turbine system

2011

2012

2013

2014

Review of Operations

Industrial Machinery Products Business
Plastics Machinery Sector
Other Machinery Sector

Performance in Fiscal 2013
Orders increased 4.7% from the previous fiscal year, to ¥126,699 million(US$1,231 million). This was despite orders for laser annealing equipment beingbrought forward to the previous fiscal year, and reflected gains in plastic
production and processing machinery, injection molding machines, andcompressors.
Sales decreased 9.0%, to ¥118,385 million (US$1,150 million). This was theresult of declines in orders in the previous fiscal year for plastic production andprocessing machinery offsetting gains in laser annealing equipment andPolyolefin extruder/pelletizer

injection molding machines.
Operating income fell 27.4%, to ¥12,185 million (US$118 million), reflecting
lower sales.

60,00060,00030,00030,0000118,385

130,138

90,000113,959

126,699

121,016

120,000

118,858

Millions of yen

120,000

115,699

Millions of yen

90,000Large-size all-electric injection molding
machineSales

97,664

Orders Received

0

2011

2012

2013

2014

Magnesium alloy injection molding machine

2011

2012

2013

2014

11

Research and Development

Muroran Research Laboratory

Hiroshima Research Laboratory

Yokohama Research Laboratory

12

Research and development activities
were almost entirely funded by theCompany during fiscal 2013.
Combined spending on research andde velopment for the Steel andEnergy Products Business and theI n d u s t r i a l M a c h i n e r y P ro d u c t s
Business amounted to ¥3,836 million(US$37 million).
As a materials and mechatronics company, we strive to innovate
products and production techniques
w h i l e a l s o e n ga g i n g i n d i v e rs etechnical alliances and joint development to deploy new offerings as
quickly as possible.
Our Research and Development
Headquarters collaborates withbusiness divisions to 1) improve thecapabilities, performance, andreliability of core products; and 2)
develop offerings in new businessfields based on core and differentiated technologies.
The Research and Development Headquarters is based at ourhead office, and the Muroran, Hiroshima, and Yokohama research laboratories are located at the Muroran,
Hiroshima, and Yokohama plants,
re s p e c t i v e l y. ( T h e Yo ko h a m a
Research Laboratory commenced
operations on April 1, 2014, upon theclosure of the Yokohama Research &Development Center.)

Basic Research andDevelopment Policy
W e d e v e l o p n e w p ro d u c t s a n dbusinesses by focusing on ne w
energy and energy savings, informat i o n a n d te l e co m m u n i ca t i o n s ,nanotechnology and materials, andnew production technologies, which
relate directly to existing businesses.
We have increased collaboration
between the Research and Development Headquarters and businessdivisions, and aim to cultivate
existing business by expanding andupgrading core technologies.
We engage in basic research for
future technologies and contemporary social needs and in researchingcomponent technologies for existingproducts. We will build on these
efforts to undertake R&D projects
t h a t c r ea t e n e w p r o d u c t s a n dbusinesses and pursue innovations
for existing products.
In Steel Products, we emphasize advances in energy and creatingeven more industry-leading offerings
while commercializing new areas.
The focuses in Machinery Products
are to enhance plastics machinery, IT
equipment, and other industrial
machiner y. We will allocate
significant resources to such machinery by clarifying that our commercialization framework is open tom e r g e r s a n d a cq u i s i t i o n s a n dalliances.

Research and Development

Activities by Business
Segment
Steel and Energy Products
Business
Product development centers onmaterials, notably for clad steel pipes
for natural gas transportation, large
steel castings, and forgings and highalloys for high-efficiency thermal
power generation, forged steel
products for advanced nuclear power
plants, a n d h i g h - p e r f o r m a n ce
nonferrous alloys, as well as manufacturing process technology development. We improve materials andcomponent technologies for existingproducts. In the renewables arena,

we develop material and component
technologies to create lighter andmore reliable pressure accumulatorsfor hydrogen fueling stations. We
create analytical technologies andenhance component technologies toimprove the reliability of wind power
plants.
Segment R&D spending totaled¥1,360 million (US$13 million) in fiscal
2013.

Industrial Machinery Products
Business
We develop low-cost production
technologies for high-performancemagnesium alloy injection molding
machines. We develop dampers

complying with European specifications and improve technologies forplastic extruders and injection
molding machines. We develop
advanced micro-nano melt transcription molding machines and create
advanced compressors andequipment for film-making
machines. We also develop laser
annealing systems for thin-film
transistor liquid cr ystal display
production and other applications
for laser devices. Our work alsoe n c o m p a s s e s c h e m i c a l va p o r
deposition and plasma systems.
R&D spending in this segment
was ¥2,476 million (US$24 million) in
fiscal 2013.

13

Corporate GovernanceCorporate Governance Structure
JSW recognizes that it must earn the trust of shareholders, customers, employees, and other stakeholders to aim toenhance enterprise value and thereby contribute to the economy and society as a whole.
We therefore created a corporate governance setup that encompasses a management organization andframework to implement essential measures and pursues fair disclosure to ensure business transparency.

Overview of Corporate
Governance Structure

plan. Its goals are to share suchcorporate officers.

knowledge throughout management

An Executive Board of three

and reflect it in their decisions as

We employ a statutory auditor sys-

representative directors and otherwell as to ensure risk management

tem comprising eight directors, one

president-designated directors

and compliance.

of whom is independent, and fourm e et s o n ce w e e k l y. T h e o t h e r

The Board of Corporate Auditors

statutory auditors (hereafter, “corpo-

attendees are one outside director

comprises four corporate auditors,

rate auditors”), two of whom are

and one corporate auditor (chosen

two of whom are external (one serves

external.

by rotation). This gathering is tofull time). These auditors attend

The term of office of directors isdeliberate and decide on matters

meetings of the Board of Directors,

one year. We maintain a corporatethat are important for management

the Executive Board, the Management

officer system and separate deci-or the performances of directors andC o u n c i l , a n d o t h e r i m p o r ta n t

sion-making and oversight from thecorporate officers. Another function

gatherings. In principle, they visit theexecutive functions of corporate

is to discuss, report, and monitor

Company’s plants and offices andofficers. The goal is to accelerate

overall operational matters.

major subsidiaries once every six

Our Management Council alsomonths. The auditors receive

convenes once monthly, in principle.

divisional reports as necessary andIn principle, the Board of Direc-

Members include directors, corporate

exchange opinions with directors andtors convenes once monthly to decide

auditors, divisional heads, plant

key employees. Based on theseand report on important manage-

general managers, headquarters

efforts, the auditors express theirment issues, including basic opera-

managers, and others with executivev i e w s to m a n a ge m e n t f ro m a ntional policies and legally stipulated

responsibilities. This body’s tasks

objective and neutral perspective,

matters. Senior executive officers andinclude assessing the businessand exercise strict oversight witha b o v e a t t e n d t h e s e m e et i n g s ,environment and monitoring theregard to the execution of directors’

positioning the Board as a vehicle forprogress of the Company’s businessduties.

decision-making and enhance oversight and execution.

14

mutual oversight of directors andCorporate GovernanceInternal Control and Risk
Management Systems

laws and regulations and in-house

3. Safeguarding information

rules to encompass diverse rules forfulfilling broad social responsibilities.

The Company appoints a director orAn effective internal control system is

Our efforts center on directors andc o r p o r a t e o ff i c e r t o o v e r s e evital for business performance. We

corporate officers taking the lead in

information safeguards. In keeping

are therefore improving internal

practicing integrity and in raisingwith document and information

controls in line with our Basic Policy

employee awareness of compliancemanagement rules and regulations,on Internal Control Systems, whichi s s u e s t h ro u g h e d u ca t i o n a n d

the Company stores and manages

the Board of Directors adopted, andtraining.

important information relating to the

our Regulations Regarding theWe established the Internal

work of directors and corporate

P ro m o t i o n o f I n te r n a l C o n t ro l

Audit Division to ensure that

officers as printed or digital records.

Activities. We will address social

operations observe all laws andThis information includes thechanges and streamline our setup of

regulations and in-house rules. The

minutes of important meetings,

internal controls by reviewing ourdivision conducts scheduled andwritten requests for management

issues and responses.

spot audits. It submits reports on theapprovals, and other important

The points below delineate

results to the president and relevant

information. Further, directors andmanagement’s basic stance onparties. They may include the Board

corporate auditors may view or copy

internal controls.

of Directors, the Executive Board, thethis information as needed.

Management Council, and corporate

1. Implementation structure

auditors.
We created internal and

The Internal Control Committee setsexternal channels for reporting andup a specialist unit, which meets as

discussing compliance violations,necessar y, to super vise internala n d g u a ra n te e a n o n y m i t y a n dcontrols with the aim of streamlining

protection from reprisals.

our internal control system.

The Company properly discloses financial and important management information.

The Corporate Code of Conduct
opposes criminal behavior. We

2. Adhering to laws andmaintain an office to share relevant

regulations and the Articles

information and manage counter-of Incorporation

measures to help eliminate criminal
elements.

At JSW, compliance extends beyond
preventing fraud and adhering to15

4. Risk management

5. Ensuring efficiency

6. Ensuring appropriate conduct
at Group companies

16

Directors, corporate officers, andWe ensure rapid decision-making

employees concurrently serving as

and flexible and efficient manage-

We encourage subsidiaries to employ

general managers identify andment by having the president act as

our Vision, Management Philosophy

evaluate risks arising in the course ofchief executive officer, with directors

and Corporate Code of Conduct, andbusiness. They address these risks inoverseeing key headquarters

to create their own internal controls

keeping with regulations and thedivisions and business units. The

in keeping with our respect for their

management approval system. The

Board of Directors appoints andautonomy.

Board of Directors and the Executives u p e r v i s e s co r p o ra t e o ff i ce r s .

We drafted operational and

Board deliberate on key risks.

Directors and corporate officers

management rules for subsidiaries

We maintain risk management

discuss, decide, and report on

and defined the related manage-

rules and a Companywide risk man-important matters in meetings of thement responsibilities and leadershipagement system. Divisions oversee-

Board of Directors and the Executive

structures. We maintain a system foring risks in such areas as safety andBoard.

reporting, notifying, and gathering

hygiene, environmental manage-

The Board of Directors formu-

data about subsidiary decisions on

ment, information security, andlates the medium-term management

important matters. At the same time,

export controls set up committees

plan and annual business plans as

we ensure that listed subsidiaries

and create and administer rules for

Companywide objectives forretain a degree of management

containing such risks throughout thedirectors, corporate officers, andautonomy.

Company. A risk management direc-

employees. Directors and corporate

W e d i s p a t c h o ff i c e r s a n d

tor or corporate officer monitors

officers produce and implement

employees as directors and corpo-

progress in collaboration with thespecific policies for reaching goals,

rate auditors of Group subsidiaries.

Internal Audit Division and reports tos e g r e g a t i n g ta s k s i n l i n e w i t h

We ensure that subsidiaries comply

the Board of Directors or the Execu-

in-house regulations. They alsowith all laws and regulations andtive Board.

review progress and submit periodic

in-house rules by mandating sched-

Risk managers at all divisionaland spot reports to the Board ofuled and spot internal audits

headquarters, business units, andDirectors, the Executive Board, andthrough relevant departments or thep l a n t s e va l u a te m ea s u re s a n d

the Management Council.

Internal Audit Division. We also audit

identify daily risks. A crisis manage-

operations directly and instructment headquarters tackles emer-

subsidiaries on internal control

gency situations.

improvements.

Corporate Governance

7. Appointing corporate auditor
assistants and ensuring their

9. Ensuring corporate auditor
effectivenessindependence

Policy Regarding
Large-Scale Purchaseof Company Shares

We encourage directors, corporate
On request from corporate auditors,

officers, and employees to value

On May 7, 2014, the Board of Direc-

we offer employees as assistants. We

corporate auditors and to accord

tors resolved to amend Measuresseek the opinions and consent ofthem their fullest cooperation. Theseagainst Large-Scale Share Acquisi-

these auditors for appointments,

auditors can seek assistance fromtions (takeover defense measures), a

dismissals, evaluations, and otherthe Internal Audit Division, otherset of rules and procedures for par-personnel treatment regarding theseheadquarters divisions, and all otherties seeking to purchase our sharesassistants to secure their indepen-

divisions for auditing tasks.

(namely, holders of Company-issued

dence from directors and corporate
officers.

8. System for directors andemployees to submit reports
to corporate auditors
As is their right, corporate auditors

We enable corporate auditors

shares seeking to increase their

to collaborate closely with thestakes to more than 20% throughaccounting auditor and the Internalpurchases, or those making a tender

Audit Division.

offer to boost their combined share-

Corporate auditors have theholding ratio with the inclusion of

discretion to employ the services of

the holdings of special parties tolegal advisors and other outside

more than 20% through a tenderexperts.

offer). The amendment was approved

attend meetings of the Board of
Directors, the Executive Board, theManagement Council, and otherat the 88th Regular General Meeting

10. Ensuring reliable financialof Shareholders on June 25, 2014.

reportingmanagerial meetings that discuss,
determine, and report on important

We evaluate the effectiveness ofmatters.

internal controls for financial reports

These auditors receive man-in keeping with basic policies. The

agement decision approval records,

Board of Directors and the Executive

and may request reports from direc-

Board discuss the findings.

tors, corporate officers, or employees
whenever necessary.

17

The Environment

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

Action Plan
1. We aim to carry out environmental
tasks in an organized way, and to
implement environmental
preservation activities continuously.
2. We will set appropriate objectives
and targets for reducing the burden
our activities impose on theenvironment with conser vingbiodiversity.
3. We aim to provide society withproducts and ser vices that
contribute to the preservation of
the environment.
(1) We endeavor to increase the social
value of our products in terms ofenvironmental protection, safety
and hygiene.
(2) We will provide products andservices that reduce environmental loads by obtaining a clear graspof environmental needs anddeveloping technologies.

Common Policy for Business
Facilities

facilities of our policies and require
their cooperation

Taking into consideration respective
business activities, local communities
and the surrounding environments,
each plant operates by setting out its
own environmental policy, objectives
and targets, drawing on methods
compliant with international
standards. Toward such ends, JSW
plants continually strive:
1. To respect laws and regulations andagreements we have concluded
with external parties
2. To prevent pollution and reduceand appropriately treat waste, andto conserve the ecosystem
3. To improve “resource productivity”
through implementation of energy
efficiency, resource efficiency, andrecycling
4. To inform employees and othercompanies residing within ourEnvironmental Management
Structure

Environmental Management Committee

President

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

The Environmental Management
Committee, headed by the director
in charge of environmental management, determines matters such as
annual environmental management
policies and programs of environmental activities for the whole
company. Each plant has its own
Environmental Supervisory Committee, which promotes environmental
management activities and works
hand in hand with other Group
companies including affiliates toreduce the environmental impact of
the Company’s activities.

Environmental Supervisory Committees

JSW plants
Environmental Management Plant
Supervisors (Plant general managers)

JSW plants
Environmental
Management Supervisors

JSW Group companies
Environmental Management Supervisors(Company presidents)

JSW Group companies
Environmental
Management Supervisors

Environmental Supervisory Committees

18

Departments
Affiliated companies
Departments
Affiliated companies

The Environment

ISO 14001 Certification
Progress

ISO 14001, an international standard for environmental management systems.
We leverage third-party
certification bodies and internal
inspections to conduct checks atleast once annually to ensure thatISO 14001-certified business sites

The Muroran, Hiroshima, andYokohama plants and Group comp a n i e s M e i k i C o . , Lt d . a n d F i n e
Cr ystal Precision (S.Z.) Co., Ltd.
have obtained certification underare endeavoring to maintain andimprove their environmental
management systems.
The Company and Group
companies have adhered strictly
to laws and ordinances, and there
were again no violations in fiscal
2013.

ISO 14001 Certifications of Business Sites
Business Site

Certification Date

Current Certification Body

Muroran Plant

December 18, 1998

Lloyd’s Register Quality Assurance

Hiroshima Plant

December 18, 1998

Japan Quality Assurance Organization

Yokohama Plant

September 4, 2006

Lloyd’s Register Quality Assurance

Meiki Co., Ltd.

March 4, 2005

ASR International Corporation

Fine Crystal Precision(S.Z.) Co., Ltd.

March 7, 2007

Intertek

Launching Operations at
Upgraded PCB Waste
Treatment Facilities
In 2006, the Company establishedM u r o ra n E n v i r o n m e n ta l P l a n t
Services Co., Ltd. with Nippon Steel &Sumikin Engineering Co., Ltd. andKobelco Eco-Solutions Co., Ltd., torun a polychlorinated biphenyl (PCB)
waste treatment operation for a

facility that the Japan Environmental
Safety Corporation (JESCO) launchedin Hokkaido for such treatment. The
initial Hokkaido facility has operated
continuously since 2008, with atreatment capacity of up to 1.8
metric tons daily of PCB oil fromtransformers, capacitors, and otherequipment . In September 2013,
operations commenced at upgradedfacilities that have a treatment

capacity of up to 4.8 metric tons daily
and employ plasma melting
decomposition to neutralize PCB
p o l l u ta n t s f ro m ba l l a s t , s m a l lelectrical equipment, and othersources. As a result, there are PCB
treatment facilities in 16 prefectures,
including Hokkaido, and in the
Tohoku, north Kanto, Koshinetsu,
and Hokuriku regions.
Initial facility

Objects TreatedUpgraded facilities

JESCO Hokkaido business site

High-voltage transformers(at initial facility)

High-voltage capacitors(at initial facility)

Ballast(at upgraded facilities)

Plasma Melting Decomposition
This treatment process uses synergies from plasma heated to more than 15,000°C
through electrical energy and a molten slag bath to maintain high temperatures within afurnace, employing that heat source to neutralize PCBs.

19

Board of Directors,
Corporate Auditors and Executive Oﬃcers

Board of Directors and Corporate Auditors

Executive Officers

As of June 25, 2014

Representative Director &President

Ikuo Sato

Representative Director &Executive Vice President

Yoshitomo Tanaka

Representative Director &Senior Managing
Executive Officer

Yutaka Mizutani

As of June 25, 2014

Managing Executive
Officers

Hiroshi Hamao
Nobuhisa Kobayashi
Shin-ichi Ono
Kazuo Kitamura

Senior Executive Officers

Hirohisa Matsuo
Yoshinao Ishibashi
Hiroshi Fujimura

Executive Officers

Hiroo Akabane
Naotaka Miyauchi
Takashi Shibata
Makoto Shimizu
Katsutoshi Orita
Masao Ooshita
Hiroshi Murakami

Directors andAkira Kadota
Managing Executive Officers Nobuaki Shimizu
Directors andSenior Executive Officers

Kenji Watanabe
Yutaka Higashiizumi

Director

Motonobu Sato (Outside)

Corporate Auditors

Hisao Iwashita
Takao Ishido
Mamoru Kawakami (Outside)
Akira Sato (Outside)

Organization

Domestic Office
Corporate Planning Office

General Meeting of Shareholders

Overseas Office
Personnel Dept.
Secretary Office
General Affairs Dept.
Finance & Accounting Dept.

Board of Directors
Research & Development Headquarters
Executive Board

Muroran Research Laboratory
Hiroshima Research Laboratory

PresidentInternal Auditors Office

Yokohama Research Laboratory
Laser & Plasma System OfficeWind Power Business Office
Steel Business Division

Muroran Plant

Machinery Business Division

Hiroshima Plant

Ordnance Business Headquarters

Yokohama Plant

Board of Corporate Auditors

20

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

Financial Section

The Japan Steel Works, Ltd.

Six-Year SummaryYears ended March 31

Millions of yen

2014

2013

2012

2011

2010

2009

¥188,719¥220,653¥221,368¥212,929¥201,680¥227,113

Net income

5,527

8,281

12,591

16,532

17,52816,034

Total assets

293,139

303,970

325,653

339,263

322,986

296,909

Total net assets

139,268

134,368

128,613120,820

111,149

90,125

Amounts per share (yen):
Net income¥

Consolidated
Net sales

14.92

¥

22.33

¥

33.93

¥

44.54

¥

47.22

¥

43.19

Non-Consolidated¥155,211¥184,312¥189,329¥179,325¥175,333¥196,030

Net income

6,645

7,519

11,257

14,527

16,665

15,449Total assets

267,241

277,086

302,550

316,176

298,783

277,301

Total net assets

127,416

120,866

116,255

109,734

101,615

82,449Net sales

Amounts per share (yen):¥
Net income
Cash dividends applicable to the year ¥

17.93
5.00

¥
¥

20.28
10.00

¥
¥

30.33
10.00

¥
¥

39.14
12.00

¥
¥

44.90
12.00

¥
¥

41.62
12.00

Contents
21

Six-Year Summary

22

Financial Performance (Consolidated)

24

Consolidated Balance Sheet

26

Consolidated Statement of Income

27

Consolidated Statement of Comprehensive Income

28

Consolidated Statement of Changes in Net Assets

29

Consolidated Statement of Cash Flows30

Notes to Consolidated Financial Statements

45

Independent Auditor’s Report21Financial Performance (Consolidated)

Operating Results

Cash FlowsNet Sales

At year-end, cash and cash equivalents stood at ¥42,297
million (US$410 million), down ¥8,675 million from a year
earlier.

Net sales decreased ¥31,933 million, or 14.5% year on year,to ¥188,719 million (US$1,833 million), owing to declines in
the Steel and Energy Products Business and the Industrial
Machinery Products Business.

Cash Flow from Operating Activities
Net cash provided by operating activities was ¥11,549 million(US$112 million), compared with ¥23,735 million in theprevious year. The principal factors contributing to thischange were ¥9,504 million in net income before taxes andminority interests, from ¥14,802 million a year earlier, as wellas the posting of such non-cash items as depreciation andamortization and an increase in working capital.

Operating Income
Operating income declined ¥7,816 million, or 46.9%, to¥8,864 million (US$86 million). The operating income margin
stood at 4.7%, a 2.9 percentage-point decline compared withthe previous year.
Net Income

Cash Flow from Investing Activities
Net cash used in investing activities was ¥5,719 million(US$55 million), compared with ¥5,832 million a year earlier,owing mainly to an increase in tangible assets.

Net income decreased ¥2,754 million, or 33.3%, to ¥5,527
million (US$53 million). This equates to net income of ¥14.92
for the period on a per-share basis.
Sales by Region
The Japanese market accounted for sales of ¥95,966 million(US$932 million), the Chinese market for ¥27,159 million(US$263 million), with all other markets accounting for¥65,593 million (US$637 million).

2010

2011

2012

2013

2014

2010

2011

2012

2013

2014

Millions of yen
60,00045

45,00030

30,00015

15,000

0

0

2010

2011

2012

2013

11,549%60

23,73552.3

49.1
92,752

49.8
115,472

110,211

46.6

0

0

22

30,000Net Cash Provided byOperating Activities

32,507

8,864

10,00060,00016,68020,000113,858

90,00093,90330,00023,911

120,000

28,495

Millions of yen

40,00032,185

Millions of yen

53.5% of total sales

21,774

Overseas Sales

45,668Operating Income2014Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

Financial Position
Cash Flow from Financing Activities

Total assets at March 31, 2014, stood at ¥293,139 million(US$2,848 million), down ¥10,831 million, or 3.6%, from theclose of the previous year. This change was due largely todecreases in cash and cash equivalents, notes and accounts
receivable, and property, plant and equipment, which offset
increases in work in process and in investment securities
owing to higher share prices.
Total liabilities were ¥153,870 million (US$1,495
million) at year-end, down ¥15,731 million, or 9.3%, from theclose of the previous year. This was attributable mainly todecreases in current portion of long-term debt and long-term
debt. Interest-bearing debt was ¥42,092 million (US$408
million), down ¥11,150 million.
Net assets stood at ¥139,268 million (US$1,353 million),up ¥4,900 million, or 3.6%, from the previous year. The main
factors contributing to this change were increases in retained
earnings and in an unrealized holding gain on securities.

Net cash used in financing activities was ¥15,007 million(US$145 million), compared with ¥15,259 million a year
earlier. This change was due mainly to repayments ofsyndicated loans and other long-term borrowings and to
payments of dividends.

Interest-Bearing Debt
Millions of yen

2012

20,00042,092

2011

53,24263,60740,00058,44060,00065,68580,00002014

Equity Ratio
%

%

30

30

15

15

2010

2011

2012

2013

2014

4.1

43.8

39.2

45

0

0

60

6.3

40,00045

35.3

139,268

134,368

128,613120,820

111,149

120,000

34.0

60

160,000

47.1

Millions of yen

80,000

ROE

10.2

Net Assets

14.4

2013

17.5

2010

0

2010

2011

2012

2013

2014

2010

2011

2012

2013

2014

23

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheet
March 31, 2014 and 2013

Assets

2014

Millions of yen

Thousands of
U.S. dollars(Note 3)

2013

2014

Current assets:
Cash on hand and in banks (Notes 13 and 15)
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates
Trade (Note 15)
OtherLess allowance for doubtful accounts
Inventories (Note 4)
Deferred tax assets (Note 19)
Other current assets¥ 42,329¥ 51,005 $ 411,281

376
48,520540(310)
65,488
5,374
5,155

690
51,288199(225)
59,516
6,473
5,076

3,653
471,434
5,247(3,012)
636,300
52,21550,087

167,476

174,024

1,627,244

Land
Buildings and structures
Machinery and equipment
Leased assets
Construction in progress

10,50996,456
141,603
3,799
559

11,05096,883140,932
6,382
737

102,108
937,194
1,375,855
36,912
5,431

Less accumulated depreciation

252,928(167,255)

255,986 2,457,530(161,510) (1,625,097)

Total current assets

Property, plant and equipment, at cost (Notes 5 and 6):

Property, plant and equipment, net

Intangible assets

85,672

94,476

832,414

855

789

8,307

1,009
32,444
88
2,427
1,249
2,487
(572)

753
27,307
103
—
1,310
5,799
(594)

9,804
315,235
855
23,581
12,13624,164(5,558)39,13434,680380,237

Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates
Investment securities (Notes 15 and 16)
Long-term loans receivable
Retirement benefit asset (Note 18)
Deferred tax assets (Note 19)
Other assets
Less allowance for doubtful accounts
Total investments and other assets
Total assets
The accompanying notes are an integral part of these statements.

24¥293,139¥303,970 $2,848,222

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

Liabilities and Net Assets

2014

Millions of yen

Thousands of
U.S. dollars(Note 3)

2013

2014

Current liabilities:
Short-term borrowings (Notes 8 and 15)
Current portion of long-term debt (Notes 8 and 15)
Notes and accounts payable:
Unconsolidated subsidiaries and affiliates
Trade (Note 15)
Other
Advances received for products
Accrued income taxes (Note 19)
Other current liabilities
Total current liabilities¥ 12,292
3,454¥ 12,703 $ 119,433
33,56011,40470
42,2681,059
22,0481,802
15,85237
42,1791,498
21,3892,373
19,710680
410,688
10,290214,225
17,509154,023

98,848111,296

960,435

26,345

29,134

255,976—
115
10,405
1,391
16,761

9,419
124
—
1,128
18,497—
1,117
101,098
13,515
162,855

55,02158,305534,600

19,694
5,425
110,635(730)

191,353
19,69452,711
5,425
107,861 1,074,961(7,093)(413)

135,026

132,568

1,311,951

4,293
(130)
(96)
(1,042)

1,475
(332)
(474)
—

41,712(1,263)(933)(10,124)

3,024

668

29,382

1,218

1,131

11,834

139,268

134,368

1,353,168¥293,139¥303,970 $2,848,222

Long-term liabilities:
Long-term debt (Notes 8 and 15)
Accrued retirement benefits (Note 18)
For employees
For directors and corporate auditors
Retirement benefit liability (Note 18)
Deferred tax liabilities (Note 19)
Other long-term liabilities
Total long-term liabilities
Net assets:
Shareholders’ equity (Note 12)
Common stock:
Authorized—1,000,000,000 shares
Issued—371,463,036 shares
Capital surplus
Retained earnings
Treasury stock, at cost (1,189,350 shares in 2014 and 632,211 shares in 2013)
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Remeasurement of retirement benefit plans
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

25

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Income
For the years ended March 31, 2014 and 20132014

Thousands of
U.S. dollars(Note 3)

2013

2014

Net sales¥188,719¥220,653 $1,833,647

Cost of sales (Note 9)

153,137

176,172

1,487,923

Gross profit

35,581

44,480345,715

26,717

27,799259,590

8,864

16,68086,125

757
(424)
307

537
(635)
(1,780)7,355(4,120)2,983

639(1,878)

6,209

Income before income taxes and minority interests

9,504

14,802

92,344

Income taxes (Note 19):
Current
Deferred

3,530
344

6,049
272

34,298
3,342

Income before minority interests
Minority interests in net income of consolidated subsidiaries

5,629
102

8,479
198

54,693991¥ 8,281 $

53,702

Selling, general and administrative expenses (Note 9)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Other, net (Note 10)

Net income (Note 25)
The accompanying notes are an integral part of these statements.

26

Millions of yen¥ 5,527

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Comprehensive Income
For the years ended March 31, 2014 and 2013

2014

Millions of yen

Thousands of
U.S. dollars(Note 3)

2013

2014

Income before minority interests
Other comprehensive income:Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments¥5,629¥8,479$54,693

2,817
202
390

1,089
(269)
185

27,371
1,963
3,789

Total other comprehensive income (Note 11)

3,410

1,004

33,133Comprehensive income¥9,039¥9,484$87,825

Total comprehensive income attributable to:Shareholders of The Japan Steel Works, Ltd.
Minority interests¥8,924¥ 114¥9,277¥ 206$86,708$ 1,108

The accompanying notes are an integral part of these statements.

27

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Changes in Net Assets
For the years ended March 31, 2014 and 2013
Millions of yen

Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Treasurystock(Note 12)

Total
Retirement
accumulated
benefitUnrealized Unrealizedotherliability
holding gain gain (loss)
Total
shareholders’ (loss) on from hedging Translation adjustments comprehensive
securities instruments adjustments (Note 18)
equityincome¥ (62)¥(650)¥—¥ (327)

Total net
assetsBalance at April 1, 2012 ¥19,694
Changes during the year
Cash dividends paid
Net income
Increase by merger
Purchases of treasury
stock
Disposal of treasurystock
Net changes in items
other than those inshareholders’ equity
Total changes during—
the year¥5,426 ¥103,288¥(408) ¥128,000(3,708)8,281(3,708)8,281(3,708)
8,281

(5)

(5)

(5)

0

0

0

Balance at April 1, 2013 ¥19,694
Changes during the year
Cash dividends paid
Net income
Increase by merger
Purchases of treasury
stock
Disposal of treasurystock
Net changes in items
other than those inshareholders’ equity
Total changes during—
the year
Balance at March 31, 2014 ¥ 19,694

(0)

¥ 385

Minority
interests¥ 940 ¥128,613

1,089

(269)

176

—

995

191

1,187

4,567

1,089

(269)

176

—

995

191

5,755

¥5,425 ¥107,861¥(413) ¥132,568¥1,475¥(332)¥(474)—¥ 668(2,781)5,527
28(2,781)5,527
28(2,781)
5,527
28

(316)

(316)

(0)

4,752

(5)

(316)

—
2,774
¥5,425 ¥110,635

(316)
2,457
¥(730) ¥135,026

2,817

202

2,817
¥4,293202¥(130)¥

377(1,042)

2,355

377(1,042)¥ (96) ¥(1,042)

2,355¥3,024¥1,131 ¥134,368

86

2,422

86
4,900
¥1,218 ¥139,268

Thousands of U.S. dollars (Note 3)

Shareholders’ equity

Commonstock

Balance at April 1, 2013 $191,353
Changes during the year
Cash dividends paid
Net income
Increase by merger
Purchases of treasury
stock
Disposal of treasurystock
Net changes in items
other than those inshareholders’ equity
Total changes during—
the year
Balance at March 31, 2014 $191,353

CapitalsurplusRetainedearnings

Total
Retirement
accumulated
benefitUnrealized Unrealizedotherliability
holding gain gain (loss)
Total
shareholders’ (loss) on from hedging Translation adjustments comprehensive
securities instruments adjustments (Note 18)
equityincomeMinority
interests

Total net
assets$10,989$1,305,558$52,771 $1,048,008$(4,013) $1,288,068(27,021)53,702272(27,021)53,702272(27,021)53,702272(3,070)(3,070)(3,070)—26,953$52,771 $1,074,961

The accompanying notes are an integral part of these statements.

28

Treasurystock(Note 12)

Accumulated other comprehensive income(3,070)23,872$(7,093) $1,311,951$14,332$(3,226)$(4,606)$—$ 6,490

27,371

1,963

3,663

(10,124)

22,882

27,371$41,712

1,963$(1,263)

3,663$ (933)(10,124)$(10,124)

22,882$29,382836

23,727836
47,610$11,834 $1,353,168

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
For the years ended March 31, 2014 and 2013

Millions of yen

Thousands of
U.S. dollars(Note 3)

2014

2013

2014

¥ 9,504
12,878
(756)
424
0
(46)
147
(65)
44
116

¥14,802
15,990
(537)
635
(0)
—
1,927
(30)
—
—

$ 92,344
125,126(7,346)
4,120
0
(447)
1,428
(632)
427
1,127

2,827
(2,219)(5,772)(1,760)(16,333)(422)
19,840(4,210)27,468(21,560)(56,082)(17,101)

15,323

31,662

148,883754(435)(4,093)539(643)(7,823)

7,326(4,226)(39,769)

11,54923,735112,213(4,610)
138
(821)
86
(223)
(17)
14
(300)
(79)
94

(6,209)
88
(10)
1
(201)
(68)
35
(107)
(12)
653

(44,792)
1,341(7,977)836(2,167)(165)
136(2,915)(767)
913

Net cash used in investing activities(5,719)(5,832)(55,567)

Financing activities (Notes 8 and 15)
Net decrease in short-term borrowings
Increase in long-term debt
Decrease in long-term debt
Cash dividends paid
Acquisition of treasury stock
Repayments of finance lease obligations
Other

(411)
200
(10,740)(2,781)
(316)
(955)
(2)

(281)
4,400
(13,830)(3,708)(23)(1,814)(1)(3,993)
1,943(104,353)(27,021)(3,070)(9,279)(19)

Net cash provided by (used in) financing activities(15,007)(15,259)(145,812)

Effect of exchange rate changes on cash and cash equivalents

432

222

4,197

(8,744)50,972

2,865
48,107(84,959)495,258

69

—

670

¥42,297¥50,972$410,970

Operating activities

Income before income taxes and minority interests
Depreciation and amortization
Interest and dividend income
Interest expense
Equity in (earnings) losses of affiliates(Gain) loss on sales of investment securities
Loss on disposal of tangible and intangible assets(Gain) loss on sales of property, plant and equipment
Loss on valuation of shares of subsidiaries and associates
Increase (decrease) in provision for loss on business of subsidiaries and associates
Changes in operating assets and liabilities:
Trade assets (Note 15)
Trade liabilities
Inventories (Note 4)
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Investing activities
Increase in tangible and intangible assets
Decrease in tangible and intangible assets
Purchases of investment securities
Proceeds from sale of investment securities
Reimbursement of long-term deposits on contracts(Increase) decrease in short-term loans receivableCollection of long-term loans receivable
Payments for investments in capital of subsidiaries and affiliates
Purchase of investments in subsidiaries
Other(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents resulting from merger
Cash and cash equivalents at end of the year (Notes 13 and 15)
The accompanying notes are an integral part of these statements.

29

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
1. Basis of Presentation
The Japan Steel Works, Ltd. (the “Company”) and its domestic
subsidiaries maintain their books of account in conformity with thefinancial accounting standards of Japan, and its foreign subsidiaries
maintain their books of account in conformity with those of theirrespective countries of domicile.
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally acceptedin Japan, which are different in certain respects as to the applicationand disclosure requirements of IFRS, and have been compiled from theconsolidated financial statements prepared by the Company as
required by the Financial Instruments and Exchange Law of Japan.
As permitted by the Financial Instruments and Exchange Law ofJapan, amounts of less than one million yen have been omitted. As aresult, the totals shown in the accompanying consolidated financial
statements (both in yen and in U.S. dollars) do not necessarily agreewith the sums of the individual amounts.
Certain amounts in the prior year’s consolidated financial
statements have been reclassified to conform to the current year’s
presentation.
2. Summary of Significant Accounting Policies(a) Principles of consolidation and accounting for investments inunconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include theaccounts of the Company and any significant companies controlled
directly or indirectly by the Company.
Companies over which the Company exercises significant influencein terms of their operating and financial policies have been accounted
for by the equity method. All significant intercompany balances andtransactions have been eliminated in consolidation.
As of March 31, 2014, the numbers of consolidated subsidiaries, andsubsidiaries and affiliates accounted for by the equity method were 34
and 1 (35 and 1 in 2013), respectively. Effective March 31, 2014, JSW
AFTY Co., Ltd. was included in the scope of consolidation as a result of
establishment of the company. YPK Co., Ltd. was excluded from thescope of consolidation, after YPK Co., Ltd. was absorbed by Nikko Shoji
Co., Ltd, in accordance with the merger. Nikko Shoji Co., Ltd. changed
corporate name to Nikko YPK Shoji Co., Ltd. and THE ARM REAL ESTATE
CO., LTD. was absorbed by the Company. NIKKO MURORANMANAGEMENT Service Co., Ltd. which was unconsolidated subsidiary in
the previous fiscal year was absorbed by Hokkaido Kosan Co., Ltd. inaccordance with the merger. Hokkaido Kosan Co., Ltd. changed
corporate name to NIKKOU MURORAN SERVICE Co., Ltd.
Certain foreign subsidiaries are consolidated on the basis of fiscal
periods ended December 31, which differ from that of the Company.
However, the necessary adjustments have been made if the effect of thedifference is material.
Investments in subsidiaries and affiliates which are neither
consolidated nor accounted for by the equity method are carried atcost or less. Where there has been a permanent decline in the value ofsuch investments, the Company has written them down.
Differences between the cost and the underlying net equity at fairvalue of investments in consolidated subsidiaries and in companies
accounted for by the equity method have been amortized by thestraight-line method over five years after acquisition and are included inselling, general and administrative expenses.
30(b) Foreign currency translation
The balance sheet accounts of the foreign consolidated subsidiaries aretranslated into yen at the rates of exchange in effect at the balance
sheet date, except for the components of net assets excluding minority
interests which are translated at their historical exchange rates.
Revenue and expense accounts are translated at the average rates of
exchange in effect during the year. Differences arising from thetranslation are presented as translation adjustments and minority
interests in the consolidated financial statements.
Revenue and expense items arising from transactions
denominated in foreign currencies are generally translated into yen at
the rates of exchange in effect at the respective transaction dates.
All monetary assets and liabilities denominated in foreign
currencies are translated into yen at the rates of exchange in effect atthe balance sheet date and differences arising from the translation are
included in the consolidated statements of income.
(c) Cash equivalents
Short-term investments with a maturity of three months or less whenpurchased which can easily be converted to cash and are subject tolittle risk of change in value are considered to be cash equivalents.
(d) Inventories
Real estate held for sale, finished products and work in process arestated at the lower of cost or net realizable value determined principallyby the specific identification method. Raw materials are stated at thelower of cost or replacement cost determined principally by the moving
average method.
(e) Investment securities
Marketable securities classified as other securities are carried at fairvalue with changes in unrealized holding gain or loss, net of theapplicable income taxes, included directly in net assets.
Non-marketable securities classified as other securities are carried at cost.
Cost of securities sold is determined by the moving average method.
(f) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for possible bad debts
at an amount estimated based on the historical experience with bad
debts on normal receivables plus an additional allowance for specificuncollectible amounts determined by reference to the collectability of
individual doubtful accounts.
(g) Provision for warranties for completed construction
The Company provides a provision for warranties for completed
construction by estimating losses on possible future claims.
(h) Provision for loss on construction contracts
The Company provides a provision for loss on construction contracts,
which has not been delivered by the fiscal year end, by estimating theamount of total losses anticipated in the following fiscal year andthereafter to be incurred, when the amounts can be reasonably estimated.
(i) Provision for loss on business of subsidiaries and affiliates
Provision for loss on business of subsidiaries and affiliates are provided
based on the evaluation of individual financial and other conditions ofsubsidiaries and affiliates.
(j) Property, plant and equipment and depreciation
Property, plant and equipment is stated on the basis of cost. Depreciationof property, plant and equipment is determined by the declining-balancemethod over the estimated useful lives of the respective assets, except forbuildings to which the straight-line method is applied.
Significant renewals and additions are capitalized at cost.
Maintenance and repairs are charged to income as incurred.

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report(k) Leases and depreciation
Finance lease transactions which do not stipulate the transfer ofownership of the leased assets to the lessee are accounted for aspurchase and sales transactions.
With regard to the depreciation method of leased assets, thestraight-line method is applied using the lease period as the estimateduseful life and a residual value of zero.
(l) Retirement benefit
The retirement benefit obligation for employees is attributed to eachperiod by the straight-line method over the estimated years of service ofthe eligible employees.
Prior service cost is being amortized as incurred by the straight-line
method over ten years, which is shorter than the average remaining
years of service of the eligible employees.
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method over ten
years, which is shorter than the average remaining years of service ofthe employees participating in the plans.
Certain subsidiaries adopted a simplified method in the calculationof their retirement benefit obligation.
(m) Income taxes
Deferred tax assets and liabilities have been recognized in the
consolidated balance sheets with respect to the differences between
financial reporting and the tax bases of the assets and liabilities, and aremeasured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
(n) Research and development expenses
Research and development expenses are charged to income whenincurred.
(o) Revenue and cost recognition
Revenues on sales of products are generally recognized at the time of
shipment.
Revenues and costs, of which the percentage of completion can bereliably estimated, are recognized by the percentage-of-completion
method. The percentage of completion is calculated at the cost
incurred as a percentage of the estimated total cost. The
completed-contract method is applied to contracts for which thepercentage of completion cannot be reliably estimated.
(p) Derivative financial instruments
Derivative financial instruments are carried at fair value. Gain or loss onderivatives designated as hedging instruments is deferred as acomponent of net assets until the loss or gain on the underlying hedged
items is recognized. Foreign currency receivables and payables aretranslated at the applicable forward foreign exchange rates whencertain conditions are met. In addition, the related interest differential
paid or received under interest-rate swaps utilized as hedging
instruments is recognized over the terms of the swap agreements as an
adjustment to the interest expense of the underlying hedged items
when certain conditions are met.
(q) Consumption tax
Accounting treatment of consumption tax is the tax exclusion method.
(r) Provision for directors’ bonuses
Provision for directors’ bonuses is provided based on estimatedamounts to be paid in the subsequent period that are applicable to thecurrent period.
(s) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is provided based on estimatedamounts determined by internal rules.
(t) Accounting changes
Disclosure for the year ended March 31, 2014
The Company adopted “Accounting Standard for Retirement Benefits”(ASBJ Statement No. 26 of May 17, 2012) and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25 of May 17,2012) (except for certain provisions described in the main clause of
Section 35 of the standard and in the main clause of Section 67 of theguidance) as of the end of the fiscal year ended March 31, 2014.
These accounting standards require entities to apply a revised
method for recording the retirement benefit obligation, after deducting
pension plan assets, as a retirement benefit liability or asset. In
addition, unrecognized actuarial differences and unrecognized priorservice costs are recorded as a liability for retirement benefits.
Concerning the application of the Accounting Standard for
Retirement Benefits, based on the provisional treatment set out inClause 37 of the standard, the effects of such changes in the current
fiscal year have been recorded in remeasurement of retirement benefits
plans through accumulated other comprehensive income.
As a result of this change, retirement benefit liability was recognizedin the amount of ¥10,405 million ($101,098 thousand) and retirement
benefit asset was recognized in the amount of ¥2,427 million ($23,581
thousand). In addition, accumulated other comprehensive income
decreased by ¥1,042 million ($10,124 thousand) as of March 31, 2014.
In addition, net assets per share decreased by ¥2.81 ($0.03).
(u) Standards issued but not yet effective
On May 17, 2012, the ASBJ issued “Accounting Standard for Retirement
Benefits” (ASBJ Statement No. 26) and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25), which
replaced the Accounting Standard for Retirement Benefits that had
been issued by the Business Accounting Council in 1998 with aneffective date of April 1, 2000 and the other related practical guidance,
being followed by partial amendments from time to time through 2009.
(1) Overview
The standard provides guidance for the accounting forunrecognized actual differences and unrecognized prior service
costs, the calculation methods for retirement benefit obligationand service costs, and enhancement of disclosures taking into
consideration improvements to financial reporting andinternational trends.
(2) Scheduled date of adoption
The revised accounting standard and guidance were adopted
as of the end of the fiscal year ended March 31, 2014. However,revisions to the calculation methods for the retirement benefit
obligation and service costs are scheduled to be adopted fromthe beginning of the fiscal year ending March 31, 2015.
(3) Impact of adopting revised accounting standard and guidance
The Company is currently evaluating the effect thesemodifications will have on its consolidated results of operations
and financial position.
3. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollars is included solely forconvenience, as a matter of arithmetic computation only, at ¥102.92 =U.S.$1.00, the approximate rate of exchange prevailing on March 31,
2014. This translation should not be construed as a representation that
all amounts shown could be converted into U.S. dollars at such rate.
31

4. Inventories
Inventories at March 31, 2014 and 2013 consisted of the following:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014
Real estate held for sale
Finished products
Work in process
Raw materials and supplies

¥

6
1,795
59,477
4,208

¥

18
1,363
53,4284,705$

58
17,441
577,895
40,886

Total¥65,488¥59,516$636,300

Work in process related to construction contracts of which a loss isanticipated to be incurred was offset with a provision for loss on
construction contracts of ¥1,291 million ($12,544 thousand) at March
31, 2014 and ¥2,035 million at March 31, 2013.
5. Depreciation
Depreciation expense on property, plant and equipment for the years
ended March 31, 2014 and 2013 were as follows:

Depreciation expense

Millions of yen

Thousands of
U.S. dollars

2014

2013

2014

¥12,950¥16,061$125,826

6. Advanced Depreciation
Accumulated advanced depreciation related to government grants
received has been deducted directly from the acquisition costs ofcertain tangible fixed assets (plant, machinery and equipment). Suchaccumulated depreciation at March 31, 2014 and 2013 are summarized
as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014
Accumulated advanced
depreciation expense¥1,286¥1,286$12,495

7. Contingent Liabilities
Contingent liabilities at March 31, 2014 and 2013 consisted of thefollowing:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014
As endorsers of trade notes
receivable:
Endorsed to otherAs guarantors of loans:
Muroran Environmental Plant
Service Co., Ltd.
Gotsu Wind Power Co., Ltd.
Uncollected receivables inleasing companies
Employees and other
32

¥

98

¥

70

$

8. Short-Term Borrowings and Long-Term Debt
All short-term borrowings, with interest at annual rates ranging from
0.5118% to 1.975% at March 31, 2014 and 0.57% to 2.1% at March 31,
2013, were unsecured.
Long-term debt at March 31, 2014 and 2013 were as follows:

2014

588
1,509

5,111
13,457

6
153

16
238

58
1,487

Thousands of
U.S. dollars

2013

2014

Loans from banks and insurancecompanies with interest at annual rates
ranging from 0.1778% to 1.8863%¥17,795
Less those maturing within one year
(2,700)
Lease obligations
2,004
Less those maturing within one year(754)
0.48% straight bonds, due 2015
10,000¥28,335 $172,901(10,530)(26,234)
2,203
19,471(874)(7,326)
10,00097,163Long-term indebtedness reflected in
the consolidated balance sheets¥29,134¥26,345$255,976

The aggregate annual maturities of long-term debt and leaseobligations subsequent to March 31, 2014 are summarized as follows:
Millions of yen

2015
2016
2017
2018
2019
2020 and thereafterYear ending March 31,

2015
2016
2017
2018
2019
2020 and thereafterThousands of
U.S. dollars

Bonds

Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

Long-term loans¥—
10,000————$—97,163————

Millions of yen

Thousands of
U.S. dollars¥ 2,700 $ 26,234
10,980 106,685
1,117
115
38,865
4,000
—
—
—
—

Lease obligations
¥754
549
372
241
84
1

$7,326
5,334
3,614
2,342
816
10

9. Research and Development Expenses
Research and development expenses included in manufacturing costs,
and selling, general and administrative expenses for the years ended
March 31, 2014 and 2013 were as follows:

952

526
1,385

Millions of yen

Research and development
expensesMillions of yen

Thousands of
U.S. dollars

2014

2013

2014

¥3,836¥4,054$37,272

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

10. Other Income (Expenses)—Other, Net
The details of “Other, net” in “Other income (expenses)” for the years
ended March 31, 2014 and 2013 were as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014
Foreign exchange gain
Amortization of negative goodwill
Equity in losses of affiliates
Gain on adjustment of insurance
Provision for warranties forcompleted construction
Gain on sales of property,
plant and equipment
Gain on sales of investment
securities
Loss on sales or disposal ofproperty, plant and equipment
Loss on valuation of subsidiaries
and associates
Provision for loss on business of
subsidiaries and associates
Other, net

¥376
71
(0)
531

¥

132
71
—
295

$3,653
690
(0)
5,159

(818)

(2,393)(7,948)

107

34

1,040

46

0

447

(189)

(1,931)(1,836)

(44)

—

(428)

(116)
344

—
2,010

(1,127)
3,342

Total

¥307

¥(1,780)$2,983

11. Other Comprehensive Income
The following table presents reclassification adjustments and tax
effects allocated to each component of other comprehensive income
for the years ended March 31, 2014 and 2013:2014
Unrealized holding gain (loss) on
securities:
Amount arising during the year ¥4,401
Reclassification adjustments for gains
and losses realized in net income(46)
The amount of unrealized
holding gain (loss) on securities
before tax effectTax effectUnrealized holding gain (loss) on
securities
Unrealized gain (loss) fromhedging instruments:
Amount arising during the year
Tax effectUnrealized gain (loss) fromhedging instruments
Translation adjustments:
Amount arising during the year
Translation adjustments
Total other comprehensive income

Millions of yen

Thousands of
U.S. dollars

2013

2014

¥1,672$42,761

13

(447)

4,355
(1,537)

1,686
(596)

42,314(14,934)

2,817

1,089

27,371

332
(130)

(433)
163

3,226
(1,263)

202

(269)

1,963

390

185

3,789

390

185

3,789

¥3,410¥1,004$33,133

12. Supplementary Information for Consolidated Statement of
Changes in Net Assets
Year
ended March 31, 2014―――――――――――――――(a) Information regarding the number and type of shares issued andtreasury stock:

Number of sharesYear ended
March 31,2013
Shares issued:
Common stock 371,463,036
Treasury stock:
Common stock(Note 1 and 2)
632,211

Increaseduringthe year—
557,139

Decreaseduringthe yearYear ended
March 31,2014

— 371,463,036—

1,189,350

Notes: The increase in treasury stock—common stock of 511,000 was due to theacquisition from the dissenting shareholders under the provisions of 797,
Paragraph 1 of the Companies Act and common stock of 6,139 was due tothe acquisition of fractional shares of less than one unit.

(b) Dividends( i ) Dividends paid to shareholders
Annual general meeting of① Resolution:
shareholders held on June 25, 2013
Type of shares:
Common stock
Total amount ofdividends:¥1,854 million ($18,014 thousand)
Dividends per share: ¥5 ($0.049)
Cut-off date:
March 31, 2013
Effective date:June 26, 2013
Meeting of Board of Directors② Resolution:
held on November 5, 2013
Type of shares:
Common stock
Total amount ofdividends:¥927 million ($9,007 thousand)
Dividends per share: ¥2.5 ($0.024)
Cut-off date:
September 30, 2013
Effective date:
December 4, 2013(ii) Dividends of which the cut-off date was in the year ended March 31,
2014, but the effective date is in the following fiscal year
Resolution:
Annual general meeting of shareholders
held on June 25, 2014
Type of shares:
Common stock
Total amount ofdividends:¥925 million ($8,988 thousand)
Dividends per share: ¥2.5 ($0.024)
Cut-off date:
March 31, 2014
Effective date:June 26, 2014
Source of dividends: Retained earnings

33

Year
ended March 31, 2013―――――――――――――――(a) Information regarding the number and type of shares issued andtreasury stock:

Number of shares

Shares issued:
Common stock
Treasury stock:
Common stock(Note 1 and 2)

Year ended
March 31,
2012

Increaseduringthe year

Decreaseduringthe yearYear ended
March 31,2013

371,463,036——

371,463,036

621,564

11,507860

632,211

Notes: 1. The increase in treasury stock—common stock of 11,507 was due to theacquisition of fractional shares of less than one unit.
2. The decrease in treasury stock—common stock of 860 was due to salesof fractional shares of less than one unit.

(b) Dividends( i ) Dividends paid to shareholders
Annual general meeting of① Resolution:
shareholders held on June 26, 2012
Type of shares:
Common stock
Total amount ofdividends:¥1,854 million
Dividends per share: ¥5
Cut-off date:
March 31, 2012
Effective date:June 27, 2012
Meeting of Board of Directors② Resolution:
held on October 29, 2012
Type of shares:
Common stock
Total amount ofdividends:¥1,854 million
Dividends per share: ¥5
Cut-off date:
September 30, 2012
Effective date:
December 3, 2012(ii) Dividends of which the cut-off date was in the year ended March 31,
2013, but the effective date is in the following fiscal year
Resolution:
Annual general meeting of shareholders
held on June 25, 2013
Type of shares:
Common stock
Total amount ofdividends:¥1,854 million
Dividends per share: ¥5
Cut-off date:
March 31, 2013
Effective date:June 26, 2013
Source of dividends: Retained earnings

34

13. Cash Flow Information(a) Cash and cash equivalents
The reconciliation between cash and cash equivalents in theaccompanying consolidated statements of cash flows and cash on
hand and in banks in the accompanying consolidated balance sheetsat March 31, 2014 and 2013 are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

¥51,005$411,281

(32)

(311)

¥50,972$410,970

2014
Cash on hand and in banks in the
consolidated balance sheet¥42,329
Time deposits with maturities ofmore than three months(32)
Cash and cash equivalents in the
consolidated statement ofcash flows¥42,297(b) Significant transactions without cash flows
Assets and liabilities corresponding to finance lease transactions thathave been recorded by the Company and its domestic consolidated
subsidiaries at March 31, 2014 and 2013 were as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

2014
Lease assets
Lease obligations

¥745
772

¥732
766

$7,2397,501

14. Leases
Year ended March 31, 2014―――――――――――――――
Future minimum lease payments subsequent to March 31, 2014 under
non-cancelable operating leases are summarized as follows:Year ending March 31,

Millions of yen

Thousands of U.S. dollars

20152016 and thereafter¥3,1294,305$30,40241,829

Total¥7,434$72,231Year
ended March 31, 2013―――――――――――――――
Future minimum lease payments subsequent to March 31, 2013 under
non-cancelable operating leases are summarized as follows:Year ending March 31,

Millions of yen

2014
2015 and thereafter¥2,846
5,291

Total

¥8,138

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

15. Financial Instruments
Overview(a) Policy for financial instruments
In consideration of plans for operations and capital investment, theCompany and its consolidated subsidiaries (collectively, the “Group”)
utilize funds provided by operating cash flows first. The Group uses
bond issuances and bank borrowings in order to raise additional funds,
if needed. The Company manages temporary cash surpluses throughlow-risk financial assets. The Company uses derivatives for the purposeof reducing risks and does not enter into derivative contracts for
speculative or trading purposes.
(b) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivable—are exposedto credit risk in relation to customers. In addition, the Company is
exposed to foreign currency exchange risk arising from receivables
denominated in foreign currencies. The foreign currency exchange risks
deriving from the trade receivables denominated in foreign currencies
are hedged by forward foreign exchange contracts, if needed.
Investment securities are exposed to market risk. These securities
are mainly composed of the shares of common stock of companies
with which the Company has business relationships.
Trade payables—trade notes and accounts payable—havepayment due dates within one year. Since the Company is exposed toforeign currency exchange risk arising from those payables
denominated in foreign currencies, forward foreign exchange contracts
are arranged to reduce the risk, if needed.
Loans payable and bonds are used to raise funds mainly inconnection with capital investments. The repayment dates of thelong-term debts extend up to four years from the balance sheet date.
Long-term debt with variable interest rates is exposed to interest rate
fluctuation risk. However, to reduce such risk and fix the interest
payments for long-term debt with variable rates, the Company utilizes
interest rate swap transactions as hedging instruments.
Regarding derivatives, the Company enters into forward foreignexchange contracts to reduce the foreign currency exchange risk arisingfrom the receivables and payables denominated in foreign currencies.
The Company also enters into interest rate swap transactions to reduce
the fluctuation risk of interest payments for long-term debt withvariable rates.
Information regarding the method of hedge accounting, hedging
instruments and hedged items, hedging policy, and the assessment of
the effectiveness of hedging activities is found in Note 2 (p).
(c) Risk management for financial instruments( i ) Monitoring of credit risk (the risk that customers or
counterparties may default)
In accordance with the internal policies of the Company for
managing credit risk arising from receivables, each related
division monitors credit worthiness of their main customers
periodically, and monitors due dates and outstanding balancesby individual customer. In addition, the Company is making
efforts to identify and mitigate risks of bad debts from
customers who are having financial difficulties. The
consolidated subsidiaries also manage credit risk using theCompany’s internal policies and methods.

The Company also believes that the credit risk of derivatives
is insignificant as it enters into derivative transactions only withfinancial institutions which have a high credit-rating.
(ii) Monitoring of market risk (the risk arising from fluctuations inforeign exchange rates, interest rates and others)
For trade receivables and payables denominated in foreign
currencies, the Company identifies the foreign currency
exchange risk for each currency on a monthly basis and enters
into forward foreign exchange contracts to hedge such risk. In
order to mitigate the interest rate risk for loans payable bearing
interest at variable rates, the Company may also enter into
interest rate swap transactions.
For investment securities, the Company periodicallyreviews the fair values of such financial instruments and thefinancial position of the issuers. In addition, the Company
continuously evaluates whether securities should bemaintained taking into account their fair values andrelationships with the issuers.
In conducting derivative transactions, the division in chargeof each derivative transaction follows the internal policies,
which set forth delegation of authority. Monthly reports
including actual transaction data are submitted to top
management for their review. The consolidated subsidiaries
also conduct derivative transactions using the Company’s
internal policies.
(iii) Monitoring of liquidity risk (the risk that the Company may not
be able to meet its obligations on scheduled due dates)
Based on the report from each division, the Company preparesand updates its cash flow plans on a timely basis to manage
liquidity risk. The consolidated subsidiaries manage theliquidity risk using cash flow plans and report to the Company
periodically.
(d) Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted market
price, if available. When there is no available quoted market price, fairvalue is reasonably estimated. Since various assumptions and factors
are reflected in estimating the fair value, different assumptions andfactors could result in different fair value. In addition, the notionalamounts of derivatives in Note 17 Derivative Transactions are notnecessarily indicative of the actual market risk involved in derivativetransactions.

35

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance
sheet as of March 31, 2014 and estimated fair value are shown in thefollowing table. The following table does not include financial
instruments for which it is extremely difficult to determine the fair value(Please refer to Note (ii) below).
Year
ended March 31, 2014―――――――――――――――

Millions of yen

Carrying Estimatedamount fair value Difference
AssetsCash on hand and in banks
Trade notes and accounts
receivable
Securities:
Other securities
Total assets¥ 42,329 ¥ 42,329¥ —48,86948,866(2)

30,86630,866—¥122,066 ¥122,063¥ (2)Liabilities
Trade notes and accounts payable ¥ 42,339 ¥ 42,339
12,292
12,292
Short-term borrowings
2,732
2,700
Current portion of long-term debt
10,031
10,000Bonds
15,151
15,095Long-term debt

¥ —
—
32
31
56

Total liabilities¥ 82,426 ¥ 82,548¥121

Derivatives (*)¥(201) ¥—

(201)

Thousands of U.S. dollars

Carrying Estimatedamount fair value Difference
AssetsCash on hand and in banks
Trade notes and accounts
receivable
Securities:
Other securities
Total assets$ 411,281 $ 411,281

$

—
(19)

474,825474,796

299,903299,903—$1,186,028 $1,185,999$ (19)

Liabilities
Trade notes and accounts payable $ 411,378 $ 411,378
119,433
119,433
Short-term borrowings
26,54526,234Current portion of long-term debt
97,464
97,163
Bonds
147,211
146,667
Long-term debt
Total liabilities$ 800,874 $ 802,060

Derivatives (*)$(1,953) $(1,953)

$

—
—
311
301
544

$1,176—(*) The value of assets and liabilities arising from derivatives is shown at net value,with the amount in parentheses representing net liability position.

36

Year
ended March 31, 2013―――――――――――――――

Millions of yen

Carrying Estimatedamount fair value Difference
AssetsCash on hand and in banks
Trade notes and accounts
receivable
Securities:
Other securities¥ 51,005¥ 51,005¥ —51,97051,967(3)

25,71525,715—¥128,691¥128,687¥ (3)Liabilities
Trade notes and accounts payable ¥ 42,216
12,703
Short-term borrowings
10,530Current portion of long-term debt
10,000Bonds
17,805Long-term debt

¥ 42,216
12,703
10,562
10,034
17,929

¥ —
—
32
34
124

Total liabilities¥ 93,255¥ 93,446¥190

Derivatives (*)¥

Total assets(534) ¥

(534)—(*) The value of assets and liabilities arising from derivatives is shown at net value,with the amount in parentheses representing net liability position.

( i) Method to determine the estimated fair value of financial
instruments and other matters related to securities and derivativetransactions
AssetsCash on hand and in banks
The carrying amount is used for bank deposits without maturities,
because the fair value approximates the carrying value. The fairvalue of time deposits in banks with maturities is calculated basedon the present value of the total principal and interest discounted at
a rate supposing a newly made deposit.
Trade notes and accounts receivables
The fair value is calculated by categories of the remaining periods ofthe receivables based on the present value using discount rates
determined by the period to maturity and credit risk.
Securities
The carrying amount is used for other securities with maturities,
because the fair value approximates the carrying amount.
Quoted market price is used for other securities.
Liabilities
Trade notes and accounts payable and short-term borrowings
The carrying amount is used for these items because the fair value
approximates the carrying amount.
Current portion of long-term debt, bonds and long-term debt
The fair values are calculated by applying a discount rate, based on
the assumed interest rate if a similar new debt is issued, to the totalof the principal and interest. The current portion of long-term debt
and long-term debt with variable interest rates are subject to thespecial treatment of interest rate swaps and is calculated byapplying a discount rate, based on the assumed interest rate if asimilar new debt is issued, to the total of the principal and interest
including that of the interest rate swap.
Derivative Transactions
Please refer to Note 17, Derivative Transactions, of the notes to theconsolidated financial statements.

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s ReportThousands of U.S. dollars(ii) Financial instruments for which it is extremely difficult to determine
the fair value
Thousands ofMillions of yen

U.S. dollars

2013

2014

2014
Unlisted stocks¥1,949¥1,949$18,937

Because the fair values of these financial instruments are extremely
difficult to determine, given that they do not have quoted market prices
and future cash flows cannot be estimated, they are not included in“Securities” in the preceding table.
(iii) Redemption schedule for receivables and securities with maturities
at March 31, 2014 and 2013.
Year
ended March 31, 2014―――――――――――――――
Millions of yen

Due inone
year orless

Due after
one yearthroughfive years

Due after
five years

Cash on hand and in banks
Trade notes and accounts receivable¥42,329
48,244

¥ —
624

—
—

Total

¥90,574¥624—

Thousands of U.S. dollars

Due inone
year orless

Due after
one yearthroughfive years

Due after
five years$411,281
Cash on hand and in banks
Trade notes and accounts receivable 468,752

$ —
6,063

—
—

$880,043$6,063

—

Total
Year
ended March 31, 2013―――――――――――――――

Millions of yen

Due after
one yearthroughfive years

Due after
five years¥ 51,005
Cash on hand and in banks
51,275Trade notes and accounts receivable

¥ —
695

—
—

¥102,280¥695—

Due inone
year or
less

Total

(iv) The redemption schedule for long-term debt
Year
ended March 31, 2014―――――――――――――――

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years

Bonds

Lease
Long-term
obligations
loans

$
—
97,163————$ 26,234
106,685
1,117
38,865
—
—

Bonds

Lease
Long-term
obligations
loans

Year
ended March 31, 2013―――――――――――――――

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years

Millions of yen——
10,000———¥10,530
2,660
10,940175
4,030—

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥20,309¥7,604

Millions of yen

Carrying amount exceeding the acquisition cost:¥12,704
StocksCarrying amount not exceeding the acquisition cost:
Stocks11,150

10,185(964)¥23,855¥30,494¥6,639Acquisition
cost

Carrying
amountThousands of U.S. dollars

Carrying amount exceeding the acquisition cost:$123,436 $197,328
StocksCarrying amount not exceeding the acquisition cost:
Stocks108,337
98,960Total$231,782 $296,288

March 31, 2013
Millions of yen

Bonds

Lease
Long-term
obligations
loans

¥
—
10,000————¥ 2,700
10,980
115
4,000
—
—

¥754
549
372
241
84
1

¥874
598
389
220
105
16

¥

16. Securities
Other securities:
March
31, 2014―――――――――

Total$7,326
5,334
3,614
2,342
816
10

Carrying amount exceeding the acquisition cost:
StocksCarrying amount not exceeding the acquisition cost:
Stocks
Total

Unrealized
gain (loss)$73,883(9,366)$64,506
Millions of yen

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥ 5,410¥10,457¥5,047

17,663

14,900(2,763)¥23,073¥25,357¥2,284

When their fair values have declined by 50% or more, impairment losses
are recorded on those securities. When their fair values have declined
by 30% up to 50%, impairment losses are recorded on those securities
on an individual basis to the values considered to be recoverable.
3717. Derivative Transactions(a) Derivatives not subject to hedge accountingYear
ended March 31, 2014―――――――――――――――
None applicableYear
ended March 31, 2013―――――――――――――――
None applicable(b) Derivatives subject to hedge accounting
The contract amounts or the amount corresponding to principal as specified by the contract as of the date of theclosing of the consolidated accounts is shown below by type of hedge accounting method.
( i ) Currency-related transactions
Year ended March 31, 2014―――――――――――――――
Hedge accounting method

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
Canadian dollars
Hong Kong dollars
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros
Sterling pound
Hong Kong dollars

Notes and accounts receivable

Hedge accounting method

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
Canadian dollars
Hong Kong dollars
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros
Sterling pound
Hong Kong dollars

Notes and accounts receivable

Notes and accounts payable

Millions of yen

Contract amount¥16,405
554
—
13
¥

745
1,126
143
—

Fair valueOver one year¥(254)¥3,294
(3)
13
—
—
(0)
—
—
—
—
—

¥

6
51
(0)
—

Thousands of U.S. dollars

Notes and accounts payable

Contract amount$159,396
5,383
—
126
$

7,239
10,941
1,389—

Fair valueOver one year$(2,468)$32,005
(29)
126
—
—
(0)
—
—
—
—
—

$

58
496
(0)
—

Note: Calculation of fair value is based on the forward exchange rates.

Year
ended March 31, 2013―――――――――――――――

Millions of yen

Hedge accounting method

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
Canadian dollars
Hong Kong dollars
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros
Sterling pound
Hong Kong dollars

Notes and accounts receivable

Note: Calculation of fair value is based on the forward exchange rates.

38

Notes and accounts
Notes and accounts payable

Contract amount¥8,284751
22
12¥5,003521
120
7Fair valueOver one year¥(774)
¥298
(44)
84
0
—
(1)
—
—
—
—
—

¥ 229
48
8
(0)

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report(ii) Interest-related transactions
Year
ended March 31, 2014―――――――――――――――

Millions of yen

Hedge accounting method

Type of derivative

Principal items hedged

Special treatment for interest
rate swaps

Receive/floating and pay/fixedContract amount

Fair valueOver one year
Long-term borrowings¥4,000Principal items hedged

Contract amount¥4,000(*)

Thousands of U.S. dollars

Hedge accounting method

Type of derivative

Special treatment for interest
rate swaps

Receive/floating and pay/fixed

Fair valueOver one year
Long-term borrowings$38,865$38,865(*)(*) Since interest rate swap contracts accounted for by the special treatment for interest rate swaps are treated together with the long-term borrowings subject to hedging,
the estimated fair value of such interest rate swap contracts is included in the estimated fair value of the corresponding long-term borrowings.
Note: Calculation of fair value is based on the stated price by financial institutions.

Year
ended March 31, 2013―――――――――――――――

Millions of yen

Hedge accounting method

Type of derivative

Principal items hedged

Special treatment for interest
rate swaps

Receive/floating and pay/fixedContract amount

Fair valueOver one year
Current portion of long-termborrowings
Long-term borrowings¥14,100¥4,000(*)(*) Since interest rate swap contracts accounted for by the special treatment for interest rate swaps are treated together with the long-term borrowings subject to hedging,
the estimated fair value of such interest rate swap contracts is included in the estimated fair value of the corresponding long-term borrowings.
Note: Calculation of fair value is based on the stated price by financial institutions.

18. Retirement Benefit Plans
For the year ended March 31, 2014
The Company and its consolidated subsidiaries have either funded or
unfunded defined benefit plans and/or defined contribution plans.
The Company and its domestic consolidated subsidiaries havedefined benefit plans, i.e. lump-sum payment plans, defined benefit
plans, welfare pension fund and tax-qualified pension plans, covering
substantially all employees who are entitled to lump-sum or annuity
payments, the amounts of which are determined by reference to theirbasic rates of pay, length of service, and the conditions under which
termination occurs.
The changes in the retirement benefit obligation during the year ended
March 31, 2014 are as follows:
Millions of yen

The changes in plan assets during the year ended March 31, 2014 are as
follows:
Millions of yen

Thousands of
U.S. dollars

Plan assets at beginning of year
Expected return on plan assets
Actuarial (gain) or loss
Contributions by the Company
Retirement benefit paid

¥14,968
224
901
459(1,030)$145,433
2,176
8,754
4,460
(10,008)

Plan assets at end of year

¥15,524$150,836

The changes in retirement benefit liability, for which the simplified
method was applied, for the year ended March 31, 2014 are as follows:

Thousands of
U.S. dollars

Retirement benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) or loss
Retirement benefit paid

¥20,367 $197,892
9,357
963
2,643
272
(797)
(82)
(16,527)(1,701)Retirement benefit obligation at end of year

¥19,819$192,567

Millions of yen

Thousands of
U.S. dollars

Retirement benefit liability at beginning of year
Retirement benefit expense
Retirement benefit paid
Contributions by the Company
Other¥3,804
561
(467)
(197)
28

$36,961
5,451(4,538)(1,914)272

Retirement benefit liability at end of year

¥3,729$36,232
39

The following table sets forth the funded status of the plans and theamounts recognized in the consolidated balance sheet as of March 31,
2014 for the Company’s and its consolidated subsidiaries’ retirement
benefit plans:Millions of yen

Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation

Thousands of
U.S. dollars¥ 19,093 $ 185,513(16,338) (158,745)
2,754

26,7595,223

50,748Net liability for retirement benefits on the balance sheet ¥ 7,978 $ 77,517
Retirement benefit liability
Retirement benefit asset¥ 10,405 $ 101,098(2,427) (23,581)

Net liability for retirement benefits on the balance sheet ¥ 7,978 $ 77,517
The components of retirement benefit expense for the year ended
March 31, 2014 are as follows:
Millions of yen

Thousands of
U.S. dollars

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Retirement benefit expense, which were
calculated by the simple method
Other

¥ 963
272
(224)
139
155

$ 9,357
2,643(2,176)
1,351
1,506

561
65

5,451
632

Retirement benefit expense¥1,930$18,752

Unrecognized prior service cost and unrecognized actuarial loss
included in accumulated other comprehensive income (before tax
effect) as of March 31, 2014 are as follow:
Millions of yen

Thousands of
U.S. dollars

Unrecognized prior service cost
Unrecognized actuarial loss

¥ (180)(1,442)$ (1,749)(14,011)

Total¥(1,622)$(15,760)

The fair value of plan assets by major category, as a percentage of total
plan assets as of March 31, 2014, is as follows:
March 31, 2014

Bonds
StocksCash on hand and in banks
General account
Other

29%
38
0
16
16

Total

100%

19% of the total plan assets consist of the, retirement benefit trust thatwere set for the lump-sum and corporate pension plans.
The expected rate of return on plan assets has been estimatedbased on the anticipated allocation to each asset class and the
expected long-term returns on assets held in each category.

40

The assumptions used in accounting for the above plans were as
follow:

March 31, 2014

Discount rates
Expected rates of return on plan assets

1.50%
1.50%

The amount of contributions to defined contribution plans by
consolidated subsidiaries was ¥32 million ($311 thousand).
For the year ended March 31, 2013
The following table sets forth the funded and accrued status of theplans, and the amounts recognized in the accompanying consolidatedbalance sheets at March 31, 2013 for the Company’s and theconsolidated subsidiaries’ defined benefit pension plans:Millions of yen

Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized actuarial loss
Unrecognized prior service cost
Net retirement benefit obligation
Prepaid pension cost¥(25,153)
16,012(9,141)
2,611
274(6,254)
3,164

Liability for retirement benefits¥ (9,419)

The components of retirement benefit expense for the year ended
March 31, 2013 are as follows:

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost

¥1,549
289
(204)
440
140

Retirement benefit expenses¥2,214

The assumptions used in accounting for the above plans were as
follows:

March 31, 2013

Discount rates
Expected rates of return on plan assets

1.50%
1.50%

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

19. Income Taxes
The significant components of the Company’s deferred tax assets andliabilities at March 31, 2014 and 2013 were as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2014

239
1,144

$ 1,749
9,755

592
—

6,704
44,812

4,453

—

69

505

1,492

11,679

274
184
1,107

2,458
816
9,386

105

1,117

1,202

8,978

1,351
145
490
256
2,085
319

6,801
1,642
4,372
5,995
23,436962

974
354
16,882

3,313
3,682
148,4262014
Deferred tax assets:
Accrued enterprise taxes¥ 180
Accrued bonuses
1,004
Unrealized gain on
intercompany transactions
690
Retirement benefit liability
4,612
Accrued retirement benefits
for employees—
Accrued retirement benefits for52
directors and corporate auditors
Loss on revaluation of
1,202
inventory items
Loss on revaluation offinancial instruments
253
Impairment loss
84
Depreciation
966
Amortization of long-term
prepaid expenses
115
Provision for warranties forcompleted construction
924
Provision for loss on
construction contracts
700
169
Less allowance for doubtful accounts
450
Asset retirement obligations
617
Percentage-of-completion method
2,412
Tax loss carry forwards
99
Deferred loss on hedges
Unrealized loss on investment341
securities
379
Other
15,276Gross deferred tax assets¥

Valuation allowance(3,706)(3,676)(36,009)

Total deferred tax assets

11,56913,205

112,408

1,702
864
696
—

1,853
1,342
—
1,120

16,537
8,395
6,763
—

283

289

2,750

2,698
28
397

1,794
117
390

26,215272
3,857

Deferred tax liabilities:
Reserve for advanced depreciation
Reserve for special depreciation
Net defined benefit asset
Prepaid pension cost
Disposal cost with asset
retirement obligations
Unrealized gain on investment
securities
Deferred gain on hedges
Other
Total deferred tax liabilities
Net deferred tax assets

6,337

6,551

61,572¥ 5,231¥ 6,653$ 50,826

The reconciliation between the effective tax rates reflected in the
consolidated statement of income and the statutory tax rates for theyears ended March 31, 2014 and 2013 were as follows:

2014

2013

Statutory tax rates
Effect of:Permanent differences
Tax credit
Decrease in deferred tax assets due to tax
rate change
Other

37.8%

37.8%

3.0
(2.5)

1.3
(1.9)

3.0
(0.5)

—
5.5

Effective tax rates

40.8%

42.7%

Adjustment of deferred tax liabilities and deferred tax assets due tochange in the corporate tax rate
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 10
of 2014) was promulgated on March 31, 2014 and, as a result, theCompany is no longer subject to the Special Reconstruction
Corporation Tax effective for fiscal years beginning on or after April 1,
2014. In addition, the “Act for Partial Amendment of the Local Tax Act,etc.” (Act No. 4 of 2014) and the “Act for Partial Amendment of the Local
Corporate Tax Act, etc.” (Act No. 11 of 2014) were promulgated on March
31, 2014, and the Company is subject to the amended Local Corporate
Tax effective for fiscal years beginning on or after April 1, 2015.
As a result, the effective statutory tax rate used to measure theCompany’s deferred tax assets and liabilities was changed from 37.8 to35.4% for the temporary differences expected to be realized or settled
from fiscal years beginning on April 1, 2014. The effect of the announced
reduction of the effective statutory tax rate was to decrease deferred tax
assets after offsetting deferred tax liabilities by ¥292 million ($2,837
thousand) and deferred tax liabilities after offsetting deferred tax assets
by ¥5 million ($49 thousand), increase deferred income taxes by ¥283
million ($2,750 thousand), and decrease unrealized gain (loss) fromhedging instruments by ¥3 million ($29 thousand) as of and for the year
ended March 31, 2014.

41

20. Business Combinations
Transaction under common control(a) Outline of the transaction
Combination between Nikko Shoji Co., Ltd. and YPK Co., Ltd.
① Name and business of companies
Name of surviving company: Nikko Shoji Co., Ltd.
Business: Sales of injection molding machines, plastics machinery,machine tools, semiconductor manufacturing
equipment, general industrial machinery, forging
casting machine and import-export operations andlease, etc.
Name of absorbed company: YPK Co., Ltd.
Business: Sales of injection molding machines, blow-molding
machines, extruders, vacuum forming machines andpowder processing machines, etc.
Installation services and international trading services② Date of business combination
January 1, 2014
③ Legal form of business combination
Absorption-type merger with Nikko Shoji Co., Ltd. as thesurviving company④ Name of company after business combination
Nikko YPK Shoji Co., Ltd.
⑤ Purpose of transaction
The Company intends to construct an efficient and rational
operating structure. In addition, the Company plans to enhance
productivity and profitability, the effective use of humanresources and support a responsive organization.

(b) Outline of the accounting treatment
The Company treated the transaction as transaction under common
control based on Accounting Standard for Business Combinations(Accounting Standards Board of Japan (ASBJ), Statement No. 21,
issued on December 26, 2008) and the Guidance on AccountingStandard for Business Combinations and Accounting Standard forBusiness Divestitures (ASBJ Guidance No. 10, issued on December 26,2008).
21. Asset Retirement Obligations
The following table presents the changes in asset retirement
obligations for the years ended March 31, 2014 and 2013:
Millions of yen

Thousands of
U.S. dollars

2014

2013

2014

Balance at beginning of year
Liabilities incurred due to theacquisition of property,
plant and equipment
Accretion expense
Liabilities settled
Other¥1,371¥1,299$13,321

—
20
—
(120)

—
19
(47)
100

—
194
—
(1,166)

Balance at end of year

¥1,271¥1,371$12,349

22. Investment and Rental Properties
The Company has omitted the disclosure of investment and rental
properties due to immateriality for the years ended March 31, 2014 and2013.

23. Segment Information
The reportable segments of the Group are components for which discrete financial information is available and whose operating results are regularly
reviewed by the Executive Committee to make decisions about resource allocation and to assess performance.
The Steel and Energy Products segment includes steel castings and forgings, steel plates, pressure vessels and steel structures. The Industrial
Machinery Products segment includes injection molding machines, film and sheet machinery, blow molding machines, magnesium injection molding
machines, waste treatment equipment and manufacturing equipment for electronic products. The Real Estate and Other Businesses segment includes
regional development.
Millions of yen

42

Year ended March 31, 2014

Reportable segments
Steel andIndustrial
Real Estate
EnergyMachineryand Other
Products
Products
Businesses

Sales and operating income:Sales to third parties
Intra-segment sales and transfers¥ 67,602
3,167¥118,385
1,766¥ 2,731
3,190¥188,719
8,123

Total sales
Operating income

70,769¥ (3,606)

120,152¥ 12,185

5,921¥ 1,149

196,842¥ 9,728¥

Assets, depreciation, and capital expenditures:
Total assets
Depreciation and amortization
Capital expenditures¥111,561
9,897
2,216

¥ 99,309
2,649
2,793

¥ 12,984
281
114¥223,855
12,828
5,125

Total

AdjustmentsandEliminations¥

Consolidated—(8,123)¥188,719—(8,123)(864)

188,719¥ 8,864¥ 69,283
122
117¥293,139
12,9505,242

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s ReportThousands of U.S. dollars

Year ended March 31, 2014

Reportable segments
Steel andIndustrial
Real Estate
EnergyMachineryand Other
Products
Products
Businesses

Sales and operating income:Sales to third parties
Intra-segment sales and transfers$ 656,840
30,771$ 1,150,262
17,159$ 26,535
30,995$1,833,647
78,925$—(78,925)$1,833,647—

Total sales
Operating income

687,612$ (35,037)

1,167,431$ 118,393

57,530$ 11,164

1,912,573$ 94,520(78,925)$ (8,395)

1,833,647$ 86,125

Assets, depreciation, and capital expenditures:
Total assets
Depreciation and amortization
Capital expenditures$1,083,958
96,162
21,531$ 964,914
25,73827,138$126,156
2,730
1,108

$2,175,039
124,640
49,796$673,173
1,185
1,137

$2,848,222
125,826
50,933AdjustmentsandEliminations

Total

Consolidated

Notes: 1. Adjustments and eliminations for segment profit of ¥864 million ($8,395 thousand) include elimination of inter-segment profit on inventories and corporate generaladministration expense which are not allocable to a reportable segment.
2. Adjustments and eliminations for segment assets of ¥69,283 million ($673,173 thousand) include offset of inter-segment debt and credit, and corporate assets
which are not allocable to a reportable segment.
3. Adjustments and eliminations for depreciation and amortization of ¥122 million ($1,185 thousand) include depreciation and amortization for corporate assets.
Adjustments and eliminations for capital expenditures of ¥117 million ($1,137 thousand) include capital expenditures for corporate assets.
Millions of yen

Year ended March 31, 2013

Reportable segments
Steel andIndustrial
Real Estate
EnergyMachineryand Other
Products
Products
Businesses

Sales and operating income:Sales to third parties
Intra-segment sales and transfers¥ 88,275
4,972¥130,138
2,164¥ 2,239
3,071¥220,653
10,207¥—(10,207)¥220,653—

Total sales
Operating income¥

93,248(534)

132,302¥ 16,784

¥

5,310
840

230,861¥ 17,090(10,207)¥ (410)220,653¥ 16,680

Assets, depreciation, and capital expenditures:
Total assets
Depreciation and amortization
Capital expenditures¥120,250
13,056
2,575¥ 96,895
2,580
2,860

¥13,396291
73¥230,542
15,9285,509¥ 73,427
133
60¥303,970
16,061
5,570

Total

AdjustmentsandEliminations

Consolidated

Notes: 1. Adjustments and eliminations for segment profit of ¥410 million include elimination of inter-segment profit on inventories and corporate general administration
expense which are not allocable to a reportable segment.
2. Adjustments and eliminations for segment assets of ¥73,427 million include offset of inter-segment debt and credit, and corporate assets which are not allocable toa reportable segment.
3. Adjustments and eliminations for depreciation and amortization of ¥133 million include depreciation and amortization for corporate assets. Adjustments andeliminations for capital expenditures of ¥60 million include capital expenditures for corporate assets.

(a) Product and service information

Millions of yen

Year ended
March 31, 2014

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales to third parties¥67,602¥118,385¥2,731¥188,719

Millions of yen

Year ended
March 31, 2013

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales to third parties¥88,275¥130,138¥2,239¥220,653

Thousands of U.S. dollars

Year ended
March 31, 2014

Steel andEnergyProducts

Industrial
Machinery
Products

Real Estate
and OtherBusinesses

Total

Sales to third parties$656,840 $1,150,262$26,535$1,833,647

43

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

Millions of yen(b) Geographical information( i ) Sales

2014

Millions of yen

Thousands of
U.S. dollars

2013

2014

Japan
China
Others¥ 95,966
27,15965,593¥105,180 $ 932,433
27,131
263,885
88,341
637,320

Consolidated¥188,719¥220,653 $1,833,647

Note: Net sales information above is based on customer location.

(ii) Tangible assets
The Company has omitted the disclosure of tangible assets bycountry or region as of March 31, 2014 and 2013 because theamount of tangible assets in Japan accounted for more than 90%of the carrying amount in the consolidated balance sheet.
(c) Significant customer information
The Company has omitted the disclosure of significant customer
information for the years ended March 31, 2014 and 2013 because no
individual customer accounted for more than 10% of net sales in the
consolidated statement of income.
(d) Information on loss on impairment of fixed assets
Impairment losses on fixed assets by reportable segment for the years
ended March 31, 2014 and 2013 are summarized as follows:Year
ended March 31, 2014―――――――――――――――
None applicableYear ended
March 31, 2013

Steel andEnergyProducts

Impairment loss

¥87

Millions of yen

Industrial Real Estate Adjustments
Machinery and Other
and
Products Businesses Eliminations

Total

¥—

¥446

¥59

¥300

(e) Amortization and balance of goodwill
The following table presents the amortization and balance of negative
goodwill arising from business combinations on or prior to March 31,
2010 as of and for the years ended March 31, 2014 and 2013 byreportable segment:
Millions of yen

Year ended
March 31, 2014

Amortization
Balance as ofMarch 31

Steel andEnergyProducts

Industrial Real Estate Adjustments
Machinery and Other
and
Products Businesses Eliminations

Total

—

¥71

—

—

¥71

—

71

—

—

71

Thousands of U.S. dollars

Year ended
March 31, 2014

Amortization
Balance as ofMarch 31

44

Steel andEnergyProducts

Industrial Real Estate Adjustments
Machinery and Other
and
Products Businesses Eliminations

Total

—

$690

—

—

$690

—

690

—

—

690

Year ended
March 31, 2013

Amortization
Balance as ofMarch 31

Steel andEnergyProducts

Industrial Real Estate Adjustments
Machinery and Other
and
Products Businesses Eliminations

Total

—

¥ 71

—

—

¥ 71

—

143

—

—

143

(f) Information on gain on negative goodwillYear
ended March 31, 2014―――――――――――――――
None applicableYear
ended March 31, 2013―――――――――――――――In the Industrial Machinery Products segment, YPK Co., Ltd. became aconsolidated subsidiary as a result of additional acquisition of shares.
This resulted in a gain on negative goodwill of ¥55 million in the fiscal
year ended March 31, 2013. Furthermore, the Company acquired
additional shares of Meiki Co., Ltd., a consolidated subsidiary. This also
resulted in a gain on negative goodwill of ¥1 million in the fiscal year
ended March 31, 2013.
24. Shareholders’ Equity
The Corporation Law of Japan provides that an amount equal to 10% of
the amount to be disbursed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the capital stock account. Such distributions can bemade at any time by resolution of the meeting of shareholders, or by
the Board of Directors if certain conditions are met.
25. Amounts per Share
Net income per share is calculated based on the net income available
for distribution to shareholders of common stock and theweighted-average number of shares of common stock outstanding
during the year. Net assets per share are calculated based on thenumber of shares of common stock outstanding at year end. Amounts
per share at March 31, 2014 and 2013 and for the years then ended wereas follows:

Net income
Net assets

Yen

U.S. dollars

2014

2013

2014

¥ 14.92372.83¥ 22.33
359.29$0.14
3.62

Independent Auditor’s Report

Six-Year Summary
Financial Performance (Consolidated)
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report

45Corporate Directory

Corporate Data

Stock Information
Authorized Shares

1,000,000,000 shares

Trade Name

The Japan Steel Works, Ltd.

Issued and Outstanding Shares

371,463,036 shares

Head Office

Shareholders

30,366

Stock Listings

Tokyo and Nagoya

Gate City Ohsaki-West Tower,
11-1, Osaki 1-chome,
Shinagawa-ku, Tokyo, Japan

Sumitomo Mitsui Trust Bank, Ltd.
4-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo, JapanFoundation

November 1, 1907

Transfer Agent and Registrar

Paid-in Capital¥19,694 million

Employees

2,165 (Consolidated 4,754)

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

Major Shareholders (holding %)The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
Mitsui Life Insurance Co., Ltd.
Sumitomo Mitsui Banking Corp.
Mitsui Sumitomo Insurance Co., Ltd.
Sumitomo Mitsui Trust Bank, Ltd.
Juniper
Nippon Steel & Sumitomo Metal Corp.
Hitachi, Ltd.
Mitsubishi Heavy Industries, Ltd.

5.96%
4.72%
3.82%
3.39%
2.38%
2.20%
2.18%
1.76%
1.36%
1.36%

(as of March 31, 2014)(as of March 31, 2014)

JSW’s Stock Prices
Stock prices (Yen)Tokyo stock price index (TOPIX) (Points)

900

1,500

700

1,000

500

500

300

0

Trading volumes (Thousands of shares)
100,000

50,0000

2013/4

46

5

6

7

8

9

10

11

12

2014/1

2

3

Network

Düsseldorf

Gurgaon(near Delhi)
Hanoi
Bangkok

Shanghai
ShenzhenTaipeiHong Kong
ManilaCorona(near Los Angeles)

Detroit

New York

Houston

Kuala Lumpur
Singapore
JakartaDomestic
Head Office
Gate City Ohsaki-West Tower, 11-1,
Osaki 1-chome, Shinagawa-ku,
Tokyo 141-0032, Japan
Phone: +81-3-5745-2001
Facsimile: +81-3-5745-2025
Osaka Office
Shinanobashi Mitsui Bldg., 11-7,
Utsubohonmachi 1-chome, Nishi-ku,
Osaka-shi, Osaka 550-0004, Japan
Phone: +81-6-6446-2480
Facsimile: +81-6-6446-2488
Fukuoka Office23-2, Sakuragaoka 1-chome, Kasuga-shi,
Fukuoka 816-0872, Japan
Phone: +81-92-582-8111
Facsimile: +81-92-582-8124

Nagoya Office
Mitsui Sumitomo Kaijo Nagoya Shirakawa
Bldg. 7F, 9-15, Sakae 2-chome, Naka-ku,
Nagoya-shi, Aichi 460-0008, Japan
Phone: +81-52-222-1271
Facsimile: +81-52-222-1275
Hiroshima Office6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602, Japan
Phone: +81-82-822-0991
Facsimile: +81-82-822-0997
Sapporo OfficeKitaichijo Mitsui Bldg., 2-9,
Nishi 5-chome, Kita-ichijo, Chuo-ku,
Sapporo-shi, Hokkaido 060-0001, Japan
Phone: +81-11-241-2271
Facsimile: +81-11-241-2275

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

Japan Steel Works America, Inc.
Head Office
122 East 42nd Street, Suite 3810
New York, N.Y. 10168, U.S.A.
Phone: +1-212-490-2630
Facsimile: +1-212-490-2575
Detroit Office41135 Vincenti Court Novi, MI 48375 U.S.A.
Phone: +1-248-536-0288
Facsimile: +1-248-536-5615
Houston Office9801 Westheimer Road, Suite 220,
Houston, TX 77042
Phone: +1-713-588-1303
Facsimile: +1-713-588-1322

JSW Machinery Trading (Shanghai) Co., Ltd.
28A, Strength Plaza, No. 600-4, Tianshan Road,
Shanghai 200051, CHINA
Phone: +86-21-6192-1022
Facsimile: +86 -21-6192-1023

JSW Injection Machine Maintenance(Shenzhen) Co., Ltd.
1F, YiBen Electronic & Business Industrial Park,No. 1063 Chaguang Road, Xili Town,
Nanshan District, Shenzhen City,
Guangdong Province, P.R.C.
Phone: +86-755-8602-0930
Facsimile: +86-755-8602-0934

Japan Steel Works India Private Limited
611, Time Tower, MG Road, Sector 28,
Gurgaon, Haryana, 122001, India
Phone: +91-124 -469-4444
Facsimile: +91-124-469-4433

JSW Plastics Machinery (Philippines) Inc.
Unit 802 Alabang Business Tower,
1216 Acacia Avenue, Madrigal Business Park
Alabang Muntinlupa City Metro Manila 1771,
Philippines
Phone: +63-2-478-2533
Facsimile: +63-2-809-6221

Overseas

Japan Steel Works Europe GmbHFriedrichstr. 19, 40217 Düsseldorf, F.R. Germany
Phone: +49-211-3116660
Facsimile: +49-211-31166640
The Japan Steel Works (Singapore) Pte. Ltd.
17, Gul Lane, Jurong Town, Singapore 629413,
Republic of Singapore
Phone: +65-68614511
Facsimile: +65-68623166

JSW Plastics Machinery, Inc.
555 South Promenade Ave., Unit 104,
Corona, California 92879, U.S.A.
Phone: +1-951-898-0934
Facsimile: +1-951-898-0944
PT. JSW Plastics Machinery Indonesia
Gajah Building Unit K, Jl. Dr. Saharjo No. 111
Tebet, Jakarta Selatan 12810, Indonesia
Phone: +62-21-8370-2536
Facsimile: +62-21-829-8264

JSW Plastics Machinery (H.K.) Co., Ltd.
Room 907, Corporation Park, 11 On Lai Street,
Sha Tin, N.T, Hong Kong
Phone: +852-2648-0720
Facsimile: +852-2686-8204

JSW Plastics Machinery Vietnam Ltd.
Thang Long Industrial Park,
Dong Anh District, Hanoi, Vietnam
Phone: +84-4-951-6383
Facsimile: +84-4-951-6384
JSW Plastics Machinery (TAIWAN) Corp.
1F., No. 23, Da Hu 1st Rd., Guishan Shiang,
Taoyuan, Taiwan, R.O.C.
Phone: +886-3-396-2102
Facsimile: +886-3-396-2104
JSW Plastics Machinery (M) SDN. BHD.
D6-5-G Block D6, Pusat Perdagangan Dana,
1 Jalan PJu 1A/46, 47301 Petaling Jaya,
Selangor Darul Ehsan Malaysia
Phone: +60-3-7842-6076/6077
Facsimile: +60-3-7842-6078
The Japan Steel Works (Thailand) Co., Ltd.
78/6 JST Building 4th Floor, Moo 7
Kingkaew Road, Racha Tewa, Bangplee
Samutprakam 10540 Thailand
Phone: +66-2-738-5272
Facsimile: +66-2-738-5277
47