ANNUAL REPORT 2013

3007,NAKASHIMA,SHIKAMA-KU HIMEJI, JAPANhttp://www.sanyo-steel.co.jp/english/index.html

This annual report can also be found at our website.

APRIL 1.2012-MARCH 31.2013
S A N Y O S P E C I A L S T E E L - T H E C O N F I D E N T C H OICE

Printed in japan.

CONSOLIDATED FINANCIAL HIGHLIGHTS

ProfileSince its founding in 1933, Sanyo Special Steel Co., Ltd. (“Sanyo Special Steel”) has been a stable supplier of high-quality special steel.
Our steel products fulfill a high level of confidence and are applied to a broad range of important industrial parts in such areas as

Sanyo Special Steel Co., Ltd. and consolidated subsidiaries

automobiles, industrial machinery, railways and wind-power generation equipment. Bearing steel, our mainstay product, enjoys a

FY2010particularly high reputation in many countries for its superior quality and confidence. Our bearing steel boasts a top share in the domestic
market.

FY2011

Confident Choice.”

Basic Management Policies
We adhere to “confidence-based management” as our corporate philosophy, seeking to establish the “confidence of society,” “confidence¥ 138,306（19.5）$ 1,471,188

Operating income (loss)

14,20011,3491,517（86.6）

16,136

Ordinary income (loss)

13,396

10,996

1,670（84.8）

17,764

Net income (loss)

7,822

6,408

509

（92.1）

5,416(Millions of Yen)(%)

Confidenceof Society

Confidenceof Customers

Confidence
among People(Thousands of
US Dollars)＊1

Net assets ＊2

92,591

96,993

97,1520.2

1,033,417

Total assets

188,213212,365

198,772（6.4）

2,114,371(%)

Financial Indicator

Confidence-based Management(Thousands of
US Dollars)＊1¥ 171,800

Financial Position (at year-end)of customers” and “confidence among people.”(%)¥ 159,512

Net sales

as development, product quality and stable supply. We will be striving to further enhance the brand power of “Sanyo Special Steel – theFY2012FY2011 / FY2012(Millions of Yen)

Operating Results (for the year)

We call our products “Steel You Can Count On,” as they receive a high level of market confidence in every aspect of our undertakings such

ChangeFY2012

ROS (Ordinary income to Net sales)

8.4

6.4

1.2

−

−

ROE (Net income to Net assets)

8.8

6.8

0.5

−

−

0.42
(0.14) ＊4

0.54(0.26) ＊4

0.53(0.38) ＊4−−

Net D/E Ratio ＊3(Yen)

Net income (loss) per share
Net assets per share“Confidence of society”

Cash dividends per share

We intend to earn the confidence of society by contributing to the realization of an affluent and cultural society and fulfilling ourcommitment as a member of society through "production of high-quality special steel."“Confidence of customers”
We intend to earn the confidence of customers by offering high-quality special steel and promptly and properly responding to their

＊1
＊2
＊3
＊4

(US Dollars)＊1

48.47

39.71

3.16

（92.0）

0.03

571

598

598

0.1

6.37

10.00

9.00

2.00

（77.8）

0.02

US dollar amounts are converted, for convenience purpose only, at the rate of ¥94.01=US$1, the approximate rate of exchange on March 31, 2013.
Minority interests are included in net assets.
Net debt equity ratio - (gross interest-bearing debt - cash and deposits) / equity
We have not implemented liquidation of receivables since the end of fiscal 2009.
Figures in parentheses show net debt equity ratio if we had liquidized receivables.

needs.

“Confidence among people”
We intend to establish the confidence among people through communicating with all stakeholders and carrying out self-reliant actions

Net Sales

Ordinary Income

200,000

15,000(Millions of Yen)

Net Income(Millions of Yen)

(Millions of Yen)

conforming to social norms.

162,735

159,512

Contents

150,000

01

Consolidated Financial Highlights

08

Corporate Governance

02

Message from President / The 8th Medium-term Business Plan

10

CSR-conscious Management

04

Segment Information

12

Financial Figures

06

Research and Development

34

Corporate Data

100,000

171,800

10,996
138,306

95,5175,000

50,000-5,000

6,408

3,000

4,799

0

FY2008 FY2009 FY2010 FY2011 FY2012

7,822

6,000

10,0001,670

0Earnings forecasts contained in this annual report have been prepared by the Sanyo Special Steel Group based on information available at the time of
their preparation. Please note that these forecasts involve various uncertainties and that actual performance may differ from the forecasted figures.

9,000

13,396509

0-1,023–3,632
FY2008 FY2009 FY2010 FY2011 FY201201-5,000–2,585
FY2008 FY2009 FY2010 FY2011 FY2012

MESSAGE FROM PRESIDENT
system. In terms of profit, ordinary income decreased byinvestments and other activities to enhance our corporate¥9,325 million to ¥1,670 million despite the cost reduction

value. Our measure of profit distribution is consolidated

efforts primarily owing to decline in sales volume, fuel cost

payout ratio of about 20% and a non-consolidated payout

hikes and increased depreciation expense. Net income fell by

ratio of about 30% based on our consolidated performance.

¥5,898 million to ¥509 million mainly due to posting of loss

However, since our priority is to reinforce our businesson sale and disposition of fixed asset.

foundation and improving our financial structure in order to

Fiscal 2013 Outlook

enhance corporate value, we would like to use slightly lower
figures than the standard values in implementing interim andyear-end dividend - a consolidated payout ratio of 15 - 20%
and a non-consolidated payout ratio of 20 -30% - andimplementing interim and year-end dividends at least for thepresent.
Regarding dividends for fiscal 2013, we are seeking to
implement dividend payment based on periodic earnings
performance in line with our dividend policy. However, theFiscal 2012 Overview

Concerning future prospects, demand will likely recoverDuring the year ended March 31, 2013, the Japanesepositive effect of the government’s fiscal stimulus package.

economy remained sluggish until the end of the year due to

Nonetheless, the business environment surrounding thethe slowdown of overseas economy and ongoing appreciation

Sanyo Special Steel Group is expected to remain difficult inof the yen caused by such factors as the European debt crisis

light of the slowdown of emerging economies’ growth andand financial dislocation, power supply problems andintensifying international competition, as well as the problem

worsening relationship between Japan and China since earlyof rising electricity costs in Japan.

autumn. After the turn of the year, however, the Japanese

Under such circumstances, the Sanyo Special Steel Groupeconomy started to show a sign of recovery fuelled by thewill be stepping up efforts to strengthen its non-pricecorrection of the extremely strong yen, expectation on thecompetitiveness. At the same time, the Group will be making

government’s fiscal stimulus measures and a rise in stock

all-out efforts to build a business structure capable of stably

prices.

supplying high-quality special steel that meet customers’

The special steel industry grew steadily at the beginning ofneeds by ensuring that production responds to demand trends

the year mainly supported by demand from the automobile

and by implementing an aggressive internal cost-cutting

industry. But in the summer, demand from the construction

measures.

machinery and industrial equipment industry fell sharply as a

By taking all these factors into account, in fiscal 2013, weresult of the deceleration of emerging economies including

expect net sales to be ¥160,000 million, ordinary income to

China and the yen continuing to hover at historic highs. In

be ¥5,000 million, and net income to be ¥3,000 million.

thanks to the correction of the extremely strong yen andaddition, the situation was worsened after early autumn by adecline of demand from the automobile industry and thesubsequent large-scale inventory adjustment triggered by

Dividend Policy

the Senkaku Islands dispute, and such trend continued until
the end of the year. After the turn of the year, special steel

Our basic policy on profit distribution is to reward ourdemand seemed to be on a recovery track as the inventory

shareholders by strengthening our business foundation while

adjustment came to an end and correction of the extremely

increasing profits available for distribution. Concerningstrong yen generated expectation on the economic recovery.
As a result, net sales of the Sanyo Special Steel Group fell by¥33,493 million from the previous year to ¥138,306 million,
reflecting a decline in sales volume and sales price due to the02

September 2013

Yasuo Takeda
Representative Director and President

1. Strategy

Create greater corporate value through enhancing the brand power of“Sanyo Special Steel – the Confident Choice”□ Strengthen technological innovation: “Sen-no-sen - Beyond the cutting edge- ”□ Further boost international competitiveness□ Improve our overall capabilities by building closer ties among our sectors (sales, technology andproduction) and group companies
We regard the new environment that surrounds us, namely multi-polar world economy brought about by the rise of
emerging countries and a changing demand structure resulting from the advancement of low-carbon societies, as ourbusiness opportunities as well as potential risks. We seek to establish a globally competitive company by enhancing our
non-price competitiveness while also improving cost competitiveness.
Through these efforts, we will pave the way for future profit growth. We will also continue to implement various measures
for further consolidating our business foundation and to promote growth strategies while maintaining a sound financial
basis.

2. Key Action Programs【1】
Grasp the changes in the demand structure due to growing【4】
Ensure upward flexibility to adequately respond to thedemand in emerging countries and the advancement of
low-carbon societies, and realize development and market

expectations primarily by distributing profits based onlaunches of new products.

to both the payout ratio and the amount of funds required forlower iron scrap price under the iron scrap surcharge

We would like to ask our shareholders and investors for theircontinued support and understanding of the Sanyo Special
Steel Group in the coming years.

THE 8TH MEDIUM-TERM BUSINESS PLAN ( FY2011 - FY2013 )dividend payment, we intend to meet our shareholders’periodic business performance while giving due consideration

specific amounts of dividend payments have not been
decided at this point.

changing demand structure【5】
Pursue environment-friendly manufacturing【6】
Develop human resources to realize sustainable growth【2】
Ensure adequate profit margins【3】
Further boost non-price competitiveness

03

SEGMENT INFORMATION
Specialty Steel

Formed and Fabricated Materials

In the Specialty Steel segment, we manufacture and sell various special steel products including bearing
steel, which boasts a top share in the total domestic production, as well as engineering steel, stainlesssteel, heat resistant steel and tool steel.

The Formed and Fabricated Materials segment uses an integrated process to manufacture high-quality
formed and fabricated materials from high-cleanliness steel, which is produced using our high-cleanlinesssteel manufacturing technology. Our formed and fabricated materials include cut rings produced by cutting
special steel tubes with high precision, forged rings/forged products/rolled products made from steel bars,
and cold roll formed rings made from ring materials.

Fiscal 2012 Overview
Sales volume declined in fiscal 2012, mainly due to a significant drop in demand from the construction
machinery and industrial equipment sectors, following the slowdown of the emerging economies such as
China. Furthermore, sales price also declined reflecting a drop in the iron scrap price under the iron scrap
surcharge system. As a result, net sales decreased to ¥125,303 million (down ¥32,806 million year-on-year).
On the profit front, although we focused on cost reduction, we registered operating loss of ¥277 million(down ¥11,741 million year-on-year) mainly due to such factors as decrease in sales volume, higher fuel costand increase in depreciation expenses.

Sales Breakdown

84.0％(FY2012)(Millions of Yen)

200,000

15,000148,364

158,110

Sales Breakdown

125,303

10,00050,0000FY2010FY2011FY2012

12,204-5,00015,00011,465

11.6％(FY2012)(Millions of Yen)FY2011

16,072

16,6122,000
16,051

1,500

10,000

1,000

5,000

500

0

△ 277
FY2010Operating Income

Net Sales(Millions of Yen)

20,00010,000150,000

0

In the Formed and Fabricated Materials segment, sales volume declined from the previous term primarily
due to lower demand from the construction machinery and industrial equipment sectors. As a result, thesegment recorded net sales of ¥16,051 million (down ¥560 million year-on-year). Operating income
amounted ¥1,334 million (up ¥84 million year-on-year) thanks to cost reduction at the formed andfabricated materials subsidiary.

Operating Income

Net Sales(Millions of Yen)

150,000

Fiscal 2012 Overview

FY2010FY2011FY20120

1,351

FY20101,250

FY2011

1,335

FY2012FY2012

Other

Special Materials

We provide information processing services through our subsidiaries.

The Special Materials segment manufactures and sells heat/corrosion-resistant alloys and metal powder
products, among others.

Fiscal 2012 Overview
Net sales increased to ¥1,367 million (up ¥142 million year-on-year), and operating income was ¥46 million (down ¥18 million year-on-year).

Fiscal 2012 Overview
In the Special Materials segment, net sales amounted ¥5,971 million (down ¥1,002 million year-on-year)
and operating income was ¥657 million (down ¥152 million year-on-year).

Sales Breakdown

Operating Income

Net Sales
8,000

4.3％
(FY2012)

1,000

5,971

5,672

1,000

1,039
810

4,000

0.1％
(FY2012)
657

1,367

1,047

150

100

105
65

500

46

50

500

2,000

0

(Millions of Yen)
1,224

1,500

6,974

Operating Income

Net Sales(Millions of Yen)

1,500

(Millions of Yen)

(Millions of Yen)

6,000

Sales Breakdown

0
FY2010FY201104

FY20120

FY2010FY2011FY2012FY2010FY2011FY20120

FY2010FY2011FY2012Note:
Net sales for each business segment include intersegment transactions. However, the sales breakdown is calculated based on net sales by each segment to outside
customers.

05

RESEARCH AND DEVELOPMENT“PremiumJ2, ” a new grade bearing steel“SPM X4N, ” nitride P/M high speed steels

Contributing to the greater longevity with enhanced
toughness and softening resistanceFourfold wear resistance compared to the conventional
product – contributing to extend dies’ longevity

QT41-HARMOTEX is a hot-die steel which is suitable forlarge-scale industrial equipment parts such as hot-die forhammer forging and hot press die holder. QT41-HARMOTEX istwice as tough as conventional steel and reduces die cracking or
chipping. In addition, the softening resistance is 1.5 times greaterthan that of conventional
Positioning of QT41-HARMOTEX
steel and reduces dieswear or loss of resilience
QT41when they are used for a
HARMOTEX
long period of time. QT41HARMOTEX is expected to
QT41contribute to increasing
the lifespan of dies.
SKT4

SPM X4N is manufactured by molding and sintering nitride metal
powder. It offers superior performance in terms of strength,
toughness, wear resistance and seizing resistance. The product’s
wear resistance in particular is four times greater than conventional products. SPM X4M is targeted to be applied to dies that areused in the extremely
harsh environments,
pierce punch and slitter,among others, and wehave already received
high appraisal fromour customers.

Higher toughness

QT41-HARMOTEX,” a hot-die steel

PremiumJ2 is a new grade bearing which has enabled us toextend the lifespan of the existing bearing in a stable manner.
Premium J2 was produced with a combination of newtechnologies, which are namely a new steelmaking technology to
reduce harmful non-metallic inclusions in steel, and a newinspection technology to evaluate the frequency of non-metallic
inclusions in large volumes of steel to prove the low incidence ofsuch inclusions. By using PremiumJ2,
it has become possible to decrease
variation in the minimum lifespan ofbearings. PremiumJ2 is expected torespond to the growing needs forsmaller bearings and peripheral
parts with greater longevity.
Image showing how variation in rolling contact
fatigue life has been improved

Positioning of QT41-HARMOTEX

PremiumJ2
3

SUJ2

QS12E

SUS416

Leaded steel
SUS403

1

Pierce punch

Toughness

An environmentally friendly product that does not contain lead
QS12E is a martensitic free cutting stainless steel that does notcontain lead that carry heavy environmental burden, yet it has
higher quality characteristics compared to conventional steel. By
reducing the lead content of steel, we can respond to the demandof users who wish to abolish totally the use of harmful
substances.
Usually, machinability andcorrosion resistance have an
inverse relationship. However,
QS12E offers better machinability than conventional leadcontaining steel while realizing
higher corrosion resistance.

Machinability

Our Major Newly Developed Products

Responding to the needs for smaller bearings withgreater longevity

Lifespan of bearings

We detect actual customer needs via a thorough analysis of data on social and industrial developments collected through our customer
satisfaction-oriented marketing approach and respond to a variety of customer needs with fast-paced research and development. By promoting
R&D that contributes to the expansion of technological innovation, we will be further enhancing the brand power of “Sanyo Special Steel – theConfident Choice.”“QS12E,” a lead-free cutting stainless steel

Corrosion resistance

Reliability of the cleanliness of steel

Sanyo Special Steel’s products satisfy the diverse needs in broad range of areas.
Wind power generation equipment
・Bearing steel
・Engineering Steel

Ships

Space probes

・Engineering Steel ・Heat Resistant Steel・Stainless Steel・Nickel Alloy・Bearing Steel・Engineering SteelElectrical cables・High Alloy Steel・Bearing Steel・Engineering Steel・Heat Resistant Steel・Metal Powders

RobotsPlants and Power stations

Automobiles
Seismic isolation
systems for buildings

・Tool Steel・High Alloy Steel・Stainless Tubes

Medical field・Bearing Steel・P/M High Speed Steel・Bearing Steel・Stainless Steel・Bearing Steel・Engineering Steel

Mobile-phones
Roads・Electric Arc Furnace Slag

Televisions

・Metal Powders

Railways, Shinkansen railways
・Bearing Steel

Personalcomputers

Construction machines

・Metal Powders
・Powder Metallurgy Products・Stainless Steel・Engineering Steel・Bearing Steel

06

07

CORPORATE GOVERNANCE
We are striving to enhance our corporate governance and internal control systems with a view to building management infrastructure that
ensures integrity, fairness and transparency of our operations.

Fundamental Measures for Corporate Governancedirector based on the audit results and, if necessary, also to businessexecution functions. We have a standing corporate auditor system inplace in order to further strengthen our auditing structure. (We havea standing corporate auditor system in place in order to further
strengthen our auditing structure.) Furthermore, we designate one ofthe outside corporate auditors as an independent director based on
the provision prescribed by the Tokyo Stock Exchange.
As for accounting audits, we formulate audit policies throughdiscussions between corporate auditors and accounting auditors,
and then audits are performed based on these policies. We also holdmeetings where accounting auditors can report and explain the audit
results to corporate auditors as necessary, so that corporate
auditors and accounting auditors can perform their audit duties inclose coordination.
Internal audits are also performed by the Internal Control &Inspection Department based on the internal audit plan preparedeach year. Audits are conducted on business execution of ourrespective business functions and subsidiaries.

The Company adopts a corporate auditor system.
Concerning business execution, we make decisions on important
issues and supervise execution of business operations at meetingsof the Board of Directors (held monthly) and at extraordinary
meetings of the Board of Directors (held as necessary). We also set
up company-wide committees and hold meetings to discuss
important matters concerning operations. These include the
Corporate Policy Committee to facilitate efficient decision-making on
management such as the Board of Directors meetings, the Corporate
Behavior and Ethics Special Committee to ensure thoroughcompliance and solid corporate governance, the Security & Trade
Control Committee, the Environmental Conservation Committee andthe Corporate Budget Committee.
Corporate auditors’ audits are conducted as necessary based on theauditing policies formulated each year by the Board of Corporate
Auditors. Audits are conducted on a broad range of areas, including
not only directors’ execution of their duties but also on risk
management and compliance from an internal control perspective.
Corporate auditors express their opinions to the representative■ Our organizational structure for corporate governance and internal control(As of June 27, 2013)

Development and Management of Internal Control Systems
Reporting” as required by the Financial Instruments and Exchange
Act since fiscal 2008. In this regard, we set up a working group forinternal control management, which is a cross-functional committee
composed of members from across the Sanyo Special Steel Group, inorder to address risks in financial reporting, share relevant
information, and discuss educational guidelines, and we are working
to further reinforce our internal control systems in order to ensure
the adequacy of information in financial reporting.

We drafted a basic policy to create internal control systems at theBoard of Directors meeting in accordance with the Company Law ofJapan and relevant laws and ordinances. We develop our internal
control systems which support our corporate management thatemphasizes integrity, fairness and transparency under this policy.
In addition, we established the Internal Control & Inspection
Department as an organ to evaluate our internal control systems,
and we have been working on the development and operation of the“Management’s Report system on Internal Control over Financial

Board of Directors(As of June 27, 2013)

President, Representative Director

Yasuo Takeda

Director and Executive Vice President

Nobuyuki Tanaka

Senior Managing Director, Member of the Board

Yutaka Tsukamoto

Managing Director, Member of the Board

Tatsuro Isomoto
Wataru Nishihama

Shin-ichi Tominaga
Hiroyuki Eiyama

Director, Member of the Board

Masaharu Kobayashi
Kazuhiko Nagano

Shigehiro Oi

Corporate Auditor

Toshihiko Yoshida
Hiroaki Kimura (Standing Corporate Auditor)
Masatoshi Murakami ＊Masaki Iwasaki ＊Akihiko Yanagitani
Katsu Yanagimoto

Kazuya Shin-no
Hideyuki Sasaki＊＊

Outside Corporate Auditor

General Shareholders’ Meeting
Election / Dismissal

Election / Dismissal

Board of Corporate
Auditors

AuditsReward &Punishment
Committee

Inspections(＊3)

Audits(13 directors)(5 auditors, including
3 outside auditors)

Corporate
Committees /Meetings

Board of Directors

Election / Dismissal

Accounting Auditors(accounting firm)

Decision /Supervision
Reference /ReportCorporate Policy
Committee

Consultation
ReportAudits(＊1)
Instruction

Representative Director

ReportAdministration of
the Company’s Business

AuditsAudits(＊2)

Internal
Control &Inspection
Department
Internal Auditing

Audits

Subsidiaries, Affiliated Companies

Rules on Large-scale Acquisition of Sanyo Special Steel’s Shares
secure and enhance the Company’s corporate value and theshareholders’ common interests. We also believe that, when alarge-scale acquisition of the Company’s shares has been proposed,
the ultimate judgment on whether or not to accept the proposal
should be made by the shareholders at the time of proposal. We also
believe that it is the Company’s responsibility to secure sufficient
time and information for the shareholders to examine the proposal
and make a final judgment in order to protect and enhance theCompany’s corporate value and shareholders’ common interests.
The Company has adopted the “Rules on Large-Scale Acquisition of
Sanyo Special Steel’s Shares” based on such beliefs.

The Company has adopted the “Rules on Large-scale Acquisition of
Sanyo Special Steel’s Shares.”
These rules were established for the purpose of securing sufficient
time and information for the Board of Directors to examine theconditions of acquisition proposals and offer alternative plans so that
our shareholders can make “informed judgment” (an appropriate
judgment based on sufficient time and information) and preventing
inappropriate large-scale purchases of shares that may damage theCompany’s corporate value and the common interests of theshareholders.
We believe that those who control the Company’s decisions on
financial matters and business policies should fully understand theCompany’s “Basic Management Policy” and consistently seek to(＊1) We audit of our subsidiaries and affiliated companies through auditing consolidated financial statements.
(＊2) Each of our subsidiaries and affiliated companies has a supervisory department.
(＊3) Corporate auditors perform inspections as necessary on the operations and asset status of subsidiaries.
Full-time corporate auditors serve concurrently as corporate auditors of our domestic subsidiaries and fulfill their responsibilities in that capacity.

08

09

CSR ACTIVITIES
While promoting corporate management with integrity, fairness, and transparency through the practice of our corporate philosophy,“confidence-based management,” we fulfill our economic and social missions in order to gain the confidence of all our stakeholders and build
a sustainable relationship with society.

Social Contributions
We are actively engaged in various regional and social contribution

school in our neighborhood. Our employees also participate

programs. For example, we hold concerts for elementary and middle

voluntarily in cleanup activities in the area surrounding our plant forschool students and assist in marathon events at the elementary

beautification purposes.

Compliance Structure
The Company has established the “Guidelines for Corporate
Behavior,” which indicate how we should act as a corporation, andthe “Helpline,” a whistle-blowing system, as a part our compliancestructure.
Furthermore, we provide compliance education encompassing
various themes and hold compliance lectures to improve our
employees’ compliance awareness.

Clearly-defined Company Rules

Holding chorus concerts of elementary school/
junior high school students

Hold lecture sessions on complianceTraining for a marathon of elementary school children
by members of the company track team

Cleaning areas around plants by voluntary employees■ Compliance Structure

Guidelines for Corporate Behavior
The Guidelines for Corporate Behavior indicate how we should
behave as a corporation. They underpin all corporate activities.

Corporate Behavior and Ethics Special Committee

Code of Conduct

Chairperson

The Code of Conduct provides guidance on conduct to be

Executive officer in charge of corporate ethics
Executive officer responsible for, or in charge of, the General Administration
Department

observed in the course of our business activities within theframework set by the Guidelines for Corporate Behavior.

Committee members
Director and Executive Vice President, Senior Managing Director,
Managing Director, Director, Presidents of domestic affiliated companies,
General Manager (General Administration), General Manager (Internal
Control & Inspection Department), and personnel appointed by the
Chairperson

Corporate Behavior and Ethics Regulations
The Corporate Behavior and Ethics Regulations specify thesystems and structure employed to ensure compliance.

The Committee discusses compliance policies and specificmeasures based on these policies. If any situation or behavior

Sanyo Special Steel has been making efforts so that all

through improving child care/nursing supports, implementing

employees can prove themselves at workplaces as part of its

rehabilitation support measures and creating a re-employment

work-life balance measures. Among others, we are trying "tosystem. We aim for workplaces where employees are notcreate workplaces where female employees feel comfortable,"

discriminated because of their sex.

Environmental Conservation
The Company’s core business is to manufacture special steel

products’ longevity and rationalize their manufacturing process,primarily out of iron scrap, thereby playing a part in the resource

contributing to society-wide energy saving.

Corporate ethics help deskcirculation society through recycling of iron resources. In addition,

We also promote other environmental initiatives such as reduction ofGeneral Manager (General Administration)
Group Manager (CSR & Legal Group)
Corporate lawyer

our special steel products with superior characteristics havegreenhouse emissions and efficient use of various resources.

(Whistle-blowing System : Helpline)

Establishment of a Corporate Behavior and Ethics
Special Committee

Workplaces where all employees can work actively to prove themselves

enabled us to reduce weight of the final products, extend thedeviates or is likely to deviate form lows and regulations etc., theCommittee investigates the actual situation, deliberates on

Domestic
affiliates

appropriate corrective measures, and takes other relevant actions.

President
Executive officer in chargeof corporate ethics

Establishment of a Whistle-blowing System
We have initiated a “Helpline,” a whistle-blowing system designed

Company help desk

to help prevent occurrence of misconduct.

By changing the transportation method to railways
and ships, we reduce carbon dioxide emission

The “Helpline” is aimed at detecting at an early stage any apparent

Introducing battery-powered company carsor probable circumstances/acts which are deemed inappropriate
in light of lows and regulations, social norms, and/or company

Whistle-blower

rules, and allowing prompt and appropriate action to be taken toprevent misconduct.

1011Planting trees inside and outside our plant

FINANCIAL FIGURESFINANCIAL FIGURESSanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSAs of March 31, 2012 and 2013
Thousands of U.S.
dollars (Note 3)

Millions of yen

ASSETS

2013

2012

2013

Current Assets:
Cash and bank deposits (Note 5 and 17)¥

Notes and accounts receivable, trade (Note 5, 10 and 20)

Total assets at the end of fiscal 2012 decreased to ¥198,772 million (¥13,592 million lower thanthe balance at the end of fiscal 2011) due primarily to decreases in trade notes and accounts
receivable despite increases in tangible fixed assets.
Total liabilities decreased to ¥101,620 million (¥13,750 million lower than the balance at theend of fiscal 2011) mainly attributable to decreases in trade notes and accounts payable andother accounts payable.
Net assets increased to ¥97,152 million (¥158 million higher than the balance at the end of
fiscal 2011) mainly due to increases in foreign currency translation adjustments.

and a decrease in trade payable (an increase in cash flow of ¥8,231 million).
Net cash used in investing activities was ¥20,535 million (an increase of ¥2,631 million in cash
outflow from fiscal 2011) primarily owing to capital investment to improve productivity, upgrade

(6)

(59)

45,780486,967

Deferred tax assets (Note 13)

2,017

2,081

22,132

Other

1,481

2,672

28,420133,032

114,645

1,219,493

7,119

7,123

75,770Total current assets

Property, Plant and Equipment:
Land (Note 9)
Buildings and structures (Note 9)44,87546,067490,020

Machinery and equipment (Note 9)

181,385

199,139

2,118,273

7,058

549

5,844

240,437

252,878

2,689,907(174,587)(183,938)(1,956,581)

65,85068,940733,326

712

757

8,058

Investments in securities (Note 5, 6 and 8)

8,139

10,364110,244

Long-term loans receivable

1,821

1,614

17,169Deferred tax assets (Note 13)

210

94

997

Prepaid pension cost (Note 12)

1,876

1,714

18,227

Other

1,016

812

8,638

Construction in progress

Investments and Others:

Less: Allowance for doubtful accounts
Total investments and other assets¥

Total assets

existing equipment and implement environmental/energy-saving measures.
Net cash provided by financing activities was ¥2,503 million (a decrease of ¥8,793 million in
cash inflow compared to fiscal 2011) mainly due to an increase in borrowings (¥3,488 million ).
The balance of cash and cash equivalents at the end of fiscal 2012 stood at ¥22,421 million(¥5,921 million higher than the balance at the end of fiscal 2011).

The accompanying notes are integral parts of these statements.

12

241,294440,739(9)

Intangibles

was ¥23,794 million (an increase of ¥19,642 million in cash inflow compared to fiscal 2011),
which resulted from net income before income taxes (¥1,280 million), depreciation expenses(¥11,581 million), a decrease in trade receivables (an increase in cash flow of ¥20,527 million )$49,123

Total property, plant and equipment

Cash flows for fiscal 2012 are summarized as follows. Net cash provided by operating activities

22,684
41,434Inventories (Note 7)

Less: Accumulated depreciation

Cash Flows¥

61,863

Less: Allowance for doubtful accounts

Financial Position

18,557

13

(291)

(168)

(1,781)

12,771

14,430

153,494

212,365¥

198,772$

2,114,371

FINANCIAL FIGURESSanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 2012 and 2013
Thousands of U.S.
dollars (Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2013

2012

2013

Short-term loans (Note 5 and 11)¥

31,603¥31,759$337,825

Current portion of long-term loans (Note 5, 9 and 11)

4,546

8,648

91,991

Notes and accounts payable, trade (Note 5 and 10)

18,345

13,342

141,917

Accounts payable, other

11,245

4,224

44,932

Accrued income taxes

2,456

150

1,592

Accrued expenses

9,273

6,241

66,383

697

693

7,387

78,16565,057

692,027

Other
Total current liabilities

2013

2012

Current Liabilities:

Net Sales
Cost of Sales (Note 15)¥

Gross profit

Selling, General and Administrative Expenses (Note 15)
Operating income

34,671

34,023361,908

Accrued employees' retirement benefits (Note 12)

1,234

936

9,956

Accrued directors' and corporate auditors' retirement benefits

58

73

772

Deferred tax liabilities (Note 13)

747

1,112

11,830Reserve for environmental measures

294

213

2,266

Other

203

206

2,195

Total long-term liabilities

37,20736,563388,927

Total liabilities

115,372

101,620

1,080,954

Contingent Liabilities (Note 20)¥

171,800
147,554
24,246

2013

138,306
125,048
13,258$

1,471,188
1,330,158
141,030

12,897
11,34911,741
1,517

124,894
16,136

176

178
501
579
1,258

1,896
5,330
6,155
13,381(435)(955)
10,996

(767)
(114)
(224)
(1,105)
1,670(8,164)(1,209)(2,380)(11,753)
17,764

3
(396)
5
(388)
10,608

17
(409)
2
(390)
1,280

184
(4,350)17(4,149)13,615

3,538
617
4,155
6,453

416
307
723
557

4,425
3,268
7,693
5,922

Other Income:Interest and dividend
Exchange gains
Other

—

426
602

Long-term Liabilities:
Long-term loans (Note 5, 9 and 11)

Thousands of U.S.
dollars (Note 3)

Millions of yen

Other Expenses:
Interest
Equity in losses of unconsolidated subsidiaries and affiliates
Other

(520)
—

Ordinary income

Extraordinary:Gain on sale of land
Loss on sale and disposition of property, plant and equipment
Gain on sale of investments in securities and others
Income before income taxes and minority interests

Net Assets (Note 14)
Shareholders’ Equity:
Common stock:

Income Taxes (Note 13):

Authorized - 474,392,000 shares¥

Issued - 167,124,036 shares

20,183¥

20,183$

214,687

Capital surplus

22,596

22,596240,359Retained earnings

54,93354,474579,450

Less: Treasury stock, at cost (5,770,712 shares in 2012 and 5,787,262 shares in 2013)(1,768)(1,773)(18,854)

95,944

95,4801,015,642

Total shareholders’ equity

Current
DeferredIncome before minority interests

Minority Interests in Net Income of Consolidated Subsidiaries
Net income

¥

45
6,408

Accumulated Other Comprehensive Income:
1,422

15,125

Valuation difference on available-for-sale securities

1,419

Foreign currency translation adjustments

(806)

(263)

(2,803)

613

1,159

12,322

436

513

5,453

96,993

97,152

1,033,417

Total accumulated other comprehensive income

Minority Interests
Total net assets¥

Total liabilities and net assets

The accompanying notes are integral parts of these statements.

212,365¥

198,772

$

Yen

$

506
5,416

U.S. dollars (Note 3)

2013

2012

2013

Per Share:¥¥¥

Net income (Note 16)
Cash dividends
Net assets

2,114,371

The accompanying notes are integral parts of these statements.

14

48
509

¥

15

39.71
9.00
598.42

¥
¥
¥

3.16
2.00
598.99

$
$
$

0.03
0.02
6.37

FINANCIAL FIGURESSanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2012

For the years ended March 31, 2012 and 2013
Thousands of U.S.
dollars (Note 3)

Millions of yen

2013

2012

Income Before Minority Interests
Other Comprehensive Income:¥

Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Share of other comprehensive income of an affiliate accounted for by the equity method
Total other comprehensive income (Note 4)

Comprehensive Income
Comprehensive income attributable to:
Owners of the parent
Minority interests

6,453

¥

2013
557

$

5,922

(309)
(88)
(23)
(420)
6,033

3
372
211
586
1,143

29
3,963
2,246
6,238
12,160

5,999
34

1,055
88

11,218942

Balance at beginning of year
Net income
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Other changes for fiscal year 2011, net
Total changes for fiscal year 2011
Balance at end of year

167,124,036

Treasury stock,at cost

¥

¥

¥

¥

¥

20,183

22,59550,1396,408(1,614)(1,757)

—

—

—

—

—

—

—

—

—

—

—

1

—

—

—

—

—

—

—

—

1
22,596

4,794
54,933(11)(1,768)

1,728¥

20,183¥¥

Millions of yen
Foreigncurrencytranslation
Minority
adjustmentsinterests

¥

(706)

¥

Total

409

—

—

—

—

—

—

—

—

—

—

—

—

(309)
(309)
1,419

(100)
(100)
(806)

27
27
436

17

¥

—

167,124,036

The accompanying notes are integral parts of these statements.

16

Common stock

Millions of yen
Retained
Capital surplus
earnings

Valuationdifference on
available-forsale securities

Balance at beginning of year
Net income
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Other changes for fiscal year 2011, net
Total changes for fiscal year 2011
Balance at end of year

The accompanying notes are integral parts of these statements.

Number ofoutstanding
common shares

¥

¥

¥

¥

92,591
6,408(1,614)
(13)
3
(382)
4,402
96,993

—
—

(13)
2

¥

FINANCIAL FIGURESSanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSCONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2012 and 2013

For the year ended March 31, 2013

Balance at beginning of year
Net income
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Other changes for fiscal year 2012, net
Total changes for fiscal year 2012
Balance at end of year

Number ofoutstanding
common shares

167,124,036

Common stock

Millions of yen
Retained
Capital surplus
earnings

Treasury stock,at cost¥¥¥Balance at beginning of year
Net income
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Other changes for fiscal year 2012, net
Total changes for fiscal year 2012
Balance at end of year

Balance at beginning of year
Net income
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Other changes for fiscal year 2012, net
Total changes for fiscal year 2012
Balance at end of year¥

(1,768)

—

—

—

—

—

—

—

—

—

(0)

—

—

—

—

—

—

—

—

(0)
22,596(459)
54,474(5)(1,773)

1,419¥

20,183

¥

¥

(806)

¥

—

—

—

—

—

—

—

—

—

—

3
3
1,422

543
543
(263)

77
77
513

¥

¥

—
—

(7)
2

¥

Total

436

—

167,124,036¥

Millions of yen
Foreigncurrencytranslation
Minority
adjustmentsinterests—¥¥

96,993
509
(968)
(7)
2
623
159
97,152

Common stockThousands of U.S. dollars (Note 3)
Retained
Capital surplus
earnings

Treasury stock,at cost$$$214,687

240,359$584,332
5,416(10,298)(18,800)

—

—

—

—

—

—

—

—

—

—

—

—

(0)

—

—

—

—

—

—

—

—

(0)
240,359(4,882)579,450(54)(18,854)

167,124,036$

Valuationdifference on
available-forsale securities

Thousands of U.S. dollars (Note 3)
Foreigncurrencytranslation
Minority
adjustmentsinterests$$

15,096214,687(8,576)

$

$

4,637

—

—

—

—

—

—

—

—

—

—

—

—

29
29
15,1255,773
5,773(2,803)

816
816
5,453

The accompanying notes are integral parts of these statements.

54,933
509
(968)

—

Number ofoutstanding
common shares

$

¥

—

167,124,036¥

22,596—

Valuationdifference on
available-forsale securities

Balance at beginning of year
Net income
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Other changes for fiscal year 2012, net
Total changes for fiscal year 2012
Balance at end of year

20,183

$

$

$

Total

$ 1,031,735
5,416(10,298)
(75)
21
6,618
1,682
$ 1,033,417

—
—

(75)
21

$

2013

2012
Cash Flows from Operating Activities:
Income before income taxes and minority interests
Adjustments Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Decrease in accrued employees' retirement benefits, less payments
Increase in prepaid pension cost
Increase in accrued directors' and corporate auditors' retirement benefits, less payments
Decrease in reserve for environmental measures
Interest and dividend income
Interest expense
Gain on sale of investments in securities
Equity in losses of unconsolidated subsidiaries and affiliates
Loss on sale and disposition of property, plant and equipment
Changes in assets and liabilities:
Notes and accounts receivable, trade
Inventories
Notes and accounts payable, trade
Other, net
SubtotalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by operating activities¥

10,608

¥

1,280

2013
$

13,615

10,927
4
(76)
158
1
(82)
(176)
520
(5)
−
392

11,581
(91)
(300)
163
15
(81)
(178)
767
(2)
114
392

123,194(971)(3,186)
1,729
159
(862)
(1,896)
8,164
(18)
1,209
4,167

(9,050)(7,026)
2,629
(525)
8,299
175
(520)
(3,803)
4,151

20,527
3,592(9,208)
3
28,574179(739)(4,220)23,794

218,349
38,212(97,951)27
303,941
1,908(7,864)(44,889)
253,096

Cash Flows from Investing Activities:
Acquisition of property, plant and equipment
Acquisition of intangible assets
Acquisition of investments in securities
Decrease (increase) in long-term loans receivable
Decrease (increase) in over three-month deposits
Other, net
Net cash used in investing activities(13,177)(153)
13(1,988)(2,055)(542)(17,902)(20,476)(227)(1,806)
211
1,794
(31)
(20,535)(217,805)(2,416)(19,211)2,243
19,089(329)(218,429)

Cash Flows from Financing Activities:
Increase in short-term loans
Proceeds from long-term loans
Repayment of long-term loans
Payments for purchase of treasury stock
Proceeds from sale of treasury stock
Cash dividends
Cash dividends to minority shareholders
Net cash provided by financing activities

227
16,700(4,000)(13)
3(1,614)(7)
11,29619
8,000(4,531)
(7)
2
(968)
(12)
2,503

202
85,097(48,197)(74)
21(10,298)(125)
26,626

Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of the Year
Cash and Cash Equivalents at End of the Year (Note 17)(33)(2,488)18,98816,500159
5,921
16,50022,421

1,695
62,988
175,509
238,497¥

The accompanying notes are integral parts of these statements.

18

Thousands of U.S.
dollars (Note 3)

Millions of yen

19

¥

$

FINANCIAL FIGURESSanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presenting Consolidated Financial Statements
Reporting Standards, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial
Instruments and Exchange Law of Japan.

The accompanying consolidated financial statements of Sanyo Special
Steel Co., Ltd. (the "Company") and its consolidated subsidiaries (together,the "Companies") have been prepared on the basis of accounting principles
generally accepted in Japan, which are different in certain respects as toapplication and disclosure requirements from International Financial

2. Summary of Significant Accounting Policies(1) Consolidation and investments in affiliates -(2) Foreign currency translation -Santoku Technos Co., Ltd.

Foreign currency transactions are translated into Japanese yen at theexchange rate prevailing at the respective transaction date. All monetary
assets and liabilities denominated in foreign currencies, whether long-termor short-term, are translated into Japanese yen at the exchange rate
prevailing at the each balance sheet date. Resulting gains and losses areincluded in net profit or loss for the period.
All assets and liabilities of the foreign subsidiaries are translated into
Japanese yen at the exchange rate prevailing at each balance sheet date. All
income and expense accounts for the year are also translated at the rate.
These differences are recorded as foreign currency translation adjustments.

Santoku Tech Co., Ltd.

(3) Securities -Santoku Computer Service Co., Ltd.

The accounting standard for financial instruments (“Accounting Standards
for Financial Instruments” (Accounting Standards Board of Japan (“ASBJ”)
Statement No. 10)) requires that securities be classified into 4 categories:
trading securities, held-to-maturity debt securities, equity securities issued
by subsidiaries and affiliates and available-for-sale securities. Except for theequity securities issued by subsidiaries and affiliates, securities that theCompany has are all classified as available-for-sale securities.
Under the standard, marketable securities classified as available-for-salesecurities are carried at fair value with changes in unrealized holding gains
or losses, net of the applicable income taxes, included directly in net assets.
Non-marketable securities classified as available-for-sale securities arecarried at cost. A decline in the value of available-for-sale securities isreflected in net profit or loss for the period unless deemed to be temporary.
Cost of securities sold is determined by the moving average method.

(a) Scope of consolidation and elimination
The Company has 13 subsidiaries as of March 31, 2013 (13 subsidiaries
as of March 31, 2012). The consolidated financial statements include theaccounts of the Company and 13 of its subsidiaries. The 13 subsidiaries thathave been consolidated for fiscal year 2013 are listed below:
Yohkoh Bussan Co., Ltd.
Santoku Seiken Co., Ltd.
Santoku Kogyo Co., Ltd.

Santoku Security Service Co., Ltd.
SKJ Metal Industries Co., Ltd.
P.T. Sanyo Special Steel Indonesia
Sanyo Special Steel U.S.A., Inc.
Ningbo Sanyo Special Steel Products Co., Ltd.
Sanyo Special Steel Trading (Shanghai) Co., Ltd.
Sanyo Special Steel India Pvt. Ltd.
The consolidated subsidiaries, except for the 6 foreign subsidiaries (SKJ
Metal Industries Co., Ltd., P.T. Sanyo Special Steel Indonesia, Sanyo Special
Steel U.S.A., Inc., Ningbo Sanyo Special Steel Products Co., Ltd., SanyoSpecial Steel Trading (Shanghai) Co., Ltd., and Sanyo Special Steel India Pvt.
Ltd.), use a fiscal year ending March 31, which is the same as that of theCompany. The 6 foreign subsidiaries use a fiscal year ending December 31.
For these 6 subsidiaries, certain adjustments are made, if appropriate, in
preparing the consolidated financial statements to reflect materialtransactions which occurred between their fiscal year-end and March 31.
For the purpose of preparing the consolidated financial statements, allsignificant intercompany transactions and balances and unrealized profits
among the Companies have been eliminated.
(b) Investments in affiliates
Investment in Mahindra Sanyo Special Steel Pvt. Ltd. for the year ended
March 31, 2013 is newly accounted for by the equity method.
Investment in Advanced Green Components, LLC, an affiliate of theCompany on which the Company has significant influence, is accounted forby the equity method.
The equity method has not been applied to the investment in anotheraffiliate since adoption of the equity method for this investment in theaffiliate would not have a material effect on the consolidated net income andretained earnings of the Companies.

(4) Derivative Transactions The Companies use foreign exchange forward contracts and interest rate
swaps to reduce their exposure to market risks from fluctuations in foreign
currencies and interest rates. The Companies do not hold or issue financial
derivative instruments for trading purposes. If derivative transactions areused as hedges and meet certain hedging criteria, the Companies use thedeferred hedge accounting method.
In addition, with regard to interest rate swap transactions that meet thecriteria, the exceptional method is adopted. Using this method, theCompanies do not account for gains or losses on those interest rate swap
transactions on a fair value basis, but recognize the interest on an accrualbasis.
The Companies compare the total change in cash flow or rate fluctuationof hedging instruments and those of hedged items every half year andevaluate the hedge effectiveness based on the differences.

(5) Inventories Inventories are stated at the lower of weighted-average cost or net

20

realizable value.

tax basis.

(6) Depreciation and amortization -(13) Revenue recognition -The Company computes depreciation using the straight-line method forbuildings (excluding leasehold improvements and auxiliary facilities attached
to buildings) which have been acquired on or after April 1, 1998. The
Companies compute depreciation mainly using the declining-balancemethod for property, plant and equipment other than those described above.
(Change in accounting policies that are difficult to distinguish fromchanges in accounting estimates)
In accordance with the revision of the Corporation Tax Law of Japan, thecompany and its domestic consolidated subsidiaries have begun applying
the depreciation method based on the revised Corporate Tax Law toproperty, plant and equipment acquired on and after April 1, 2012.
As a result of this change, depreciation expense have decreased by ¥539
million ($5,734 thousand), and operating income, ordinary income andincome before income taxes and minority interests have increased by ¥432
million ($4,598 thousand) from the corresponding amounts under theprevious depreciation method.
Amortization of capitalized software costs for internal use is computed on
the straight-line method based on the useful life estimated to be 5 years.
Amortization of other intangible assets is computed on the straight-line
method.

Sales are generally recognized at the time the goods are delivered or
shipped to customers.

(14) Net income and cash dividends per share Net income per share is computed by dividing net income available for
distribution to shareholders of common stock by the weighted-average
number of shares of common stock outstanding during the year.
Cash dividends per share shown for each year in the consolidated
statements of operations represent dividends declared as applicable to therespective years rather than those paid during the years.

(15) Cash and cash equivalents Cash and cash equivalents in the consolidated statements of cash flows
are composed of cash on hand, bank deposits able to be withdrawn on
demand and short-term investments with an original maturity of threemonths or less and which represent a minor risk of fluctuations in value.

(16) Consumption tax In Japan, a consumption tax, with certain exemptions, is imposed on
domestic consumption of goods and services at the rate of 5%. The
consumption tax imposed on the Company and its domestic subsidiaries
sales to customers is withheld at the time of sale and is subsequently paid
to the national government. The consumption tax withheld upon sale is notincluded in the amount of “net sales” in the consolidated statements ofoperations but is recorded as liabilities. The consumption tax imposed on thepurchases of products, merchandise and services from vendors borne by theCompany and its domestic subsidiaries, is not included in the amounts ofcosts and expenses but is recorded as assets. The balance of consumption
tax withheld, net of consumption tax paid, is included in “Other current
liabilities” in the consolidated balance sheets.

(7) Research and development costs Research and development costs are charged to profit or loss as incurred.

(8) Allowance for doubtful accounts Allowance for doubtful accounts is provided at the amount calculated
based on past loss experience plus the amount estimated to be uncollectible
based on an assessment of certain individual accounts.

(9) Accrued employees' retirement benefits -(17) Reclassifications and restatement -Employees whose service with the Company and its principal consolidated
subsidiaries terminates, under most circumstances, are entitled toretirement benefits determined by reference to the basic rate of pay at thetime of termination, length of service and conditions under which thetermination occurs.
Accrued employees’ retirement benefits are calculated based on an
actuarial valuation of the projected benefit obligation and the fair value ofplan assets. Prior service costs are amortized on a straight-line basis over a
period of 10 years from the year when they arise. Actuarial differences areamortized on a straight-line basis over a period of 10 years from the year
after the year when they arise.

Certain prior year amounts have been reclassified to conform to thecurrent year presentation.

(18) Accounting standards issued but not yet adopted“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26)
and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ
Guidance No. 25) were revised on May 17, 2012. However, these accounting
standards have not yet been adopted by the company as of March 31, 2013.
Under these revised accounting standards, the accounting treatment of
unrecognized actuarial gain and loss and prior service cost and thedetermination of retirement benefit obligations and current service costs anddisclosures were mainly revised. These revisions were made considering the
viewpoint of enhancing financial reporting and international convergence ofaccounting standards.
All revisions under the new standard, except those related to thedetermination of retirement benefit obligations and current service costs,
will be effective from the fiscal year ending March 31, 2014. However, therevisions for the determination of retirement benefit obligations and current
service costs will be effective from the fiscal year beginning April 1, 2014. At
present, the Company is in the process of evaluating the impact on the
consolidated financial statements from the adoption of these revised
accounting standards.

(10) Accrued directors' and corporate auditors' retirement benefits Certain consolidated subsidiaries provide for lump-sum payments toretiring directors and corporate auditors subject to shareholders' approval.
Accrued directors' retirement benefits are based on internal rules.

(11) Reserve for environmental measures
Reserve for environmental measures for obligatory PCB treatment isstated as an estimated cost at the end of the fiscal year.

(12) Income taxes The asset and liability method is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities and their

21

FINANCIAL FIGURES
3. U.S. Dollar Amounts(2) Fair values of financial instruments -The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan. These translations
should not be construed as representations that the Japanese yen amounts actually represent or have been or could be converted into U.S. dollars. The rateof ¥94.01 = U.S.$1.00, the approximate rate of exchange as at March 31, 2013, has been used for such translations.

Book values and fair values of the financial instruments on the consolidated balance sheet as of March 31, 2012 were as follows. Certain financial
instruments were excluded from the following table as the fair values were not available (see Note 2 below).
Millions of yen
Book value

4. Consolidated Statement of Comprehensive Income
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous periods and tax
effects for each component of other comprehensive income are as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2012
Valuation difference on available-for-sale securities
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Foreign currency translation adjustments
Increase (decrease) during the year
Share of other comprehensive income of an affiliate accounted for by the equity method
Increase (decrease) during the year
Total other comprehensive income

¥

(341)
32
(309)

95
(2)
93
(91)
2

(88)

373

(341)

¥

2013

—

$

1,008
(16)
992
(963)
29

(1) Cash and bank deposits(2) Notes and accounts receivable, trade(3) Investments in securities
Available-for-sale securities(4) Notes and accounts payable, trade(5) Short-term loans(6) Long-term loans(7) Derivative transactions①Hedge accounting is not applied②Hedge accounting is applied¥

Fair value

18,55761,863¥

7,169(18,345)(36,134)(34,569)

Difference

18,55761,863

̶

¥

̶

̶

7,169
(18,345)(36,134)(34,629)

̶
̶

△60

(1)

(1)

̶

̶

̶

̶

(※) The debt is displayed by ( ).
Book values and fair values of the financial instruments on the consolidated balance sheet as of March 31, 2013 are as follows. Certain financial
instruments are excluded from the following table as the fair values are not available (see Note 2 below).
Millions of yen

¥

(23)
(420)

¥

211
586

3,963

$

2,246
6,238

5. Financial Instruments(1) Status of financial instruments The Companies procure funds required in light of our business plan through bank loans, and temporary surplus funds are to be utilized in
short-term bank deposits, etc., with low probability of loss of principal. The Companies utilize derivative transactions mainly to hedge interest
rate fluctuation risk and limit the amount to actual demand.
Notes and accounts receivable are exposed to the credit risks of customers. In order to reduce such risks, the Companies regularly monitor
the maturity dates and the balances of receivables of all customers’ accounts and evaluate the main customers' credit risk due todeterioration of the financial situation, etc., according to Company regulations. Notes and accounts receivable denominated in foreign
currencies are exposed to exchange rate risks. The Companies reduce such risks by settling both notes and accounts receivable and notes
and accounts payable with the same foreign currencies.
Investments in securities, which are mainly shares in companies that have business relationships with us, are exposed to market pricerisks. The Companies regularly review the fair value of the securities and the financial position of the companies and revise their portfolios
considering the relationships with them.
Notes and accounts payable are paid within one year. Notes and accounts payable denominated in foreign currencies arising from theimport of raw materials, etc., are exposed to exchange rate risks. The Companies reduce such risks by settling both notes and accounts
receivable and notes and accounts payable with the same foreign currencies.
Bank loans are primarily for funding related to operating and investing activities. Bank loans with variable interest rates are exposed tointerest rate fluctuation risks. The Companies reduce such risks with long-term loans by interest rate swap contracts.
The Companies establish regulations which stipulate the authorization and management of derivative transactions. See Note 2(4),“Derivative Transactions,” about hedge accounting.
Notes and accounts payable and bank loans are exposed to liquidity risks. The Companies reduce such risks by making monthly cash flowplans. The Company has commitment line contracts in preparation for contingencies.
Fair values of financial instruments include values based on market price and values obtained by reasonable estimates when the financial
instruments do not have market price. Since certain assumptions are adopted for calculating such values, the values may differ whendifferent assumptions are adopted.

Book value(1) Cash and bank deposits(2) Notes and accounts receivable, trade(3) Investments in securities
Available-for-sale securities(4) Notes and accounts payable, trade(5) Short-term loans(6) Long-term loans(7) Derivative transactions①Hedge accounting is not applied②Hedge accounting is applied¥Thousands of U.S. dollars

Fair value

22,684
41,434¥

Difference

22,684
41,434¥

̶̶Book value

Fair value$ 241,294
440,739$ 241,294
440,739

76,880(141,917)(429,656)(360,983)

76,880(141,917)(429,656)(364,655)

$

̶
̶

7,227
(13,342)(40,392)(33,936)

7,227(13,342)(40,392)(34,281)

(0)

(0)

̶

(1)

(1)

̶

̶

̶

̶

̶

̶

̶

̶
̶
̶

△345

̶
̶
̶

△3,672(※) The debt is displayed by ( ).
1. The method of estimating fair values of financial instruments and matters about investments in securities and derivative transactions.
(1) Cash and bank deposits and (2) Notes and accounts receivable, trade
The book value approximates the fair value because of the short-term maturities of these instruments.
(3) Investments in securities
Market prices and quoted prices are used for equity securities.
See Note 6, “Securities.”(4) Notes and accounts payable, trade and (5) Short-term loans
The book value approximates the fair value because of the short-term maturities of these instruments.
Short-term loans payable includes the current portion of long-term loans.
(6) Long-term loans
The discounted cash flow method is used to estimate the fair value of long-term loans by using marginal borrowing rates as the discount rate.
(7) Derivative transaction
See Note 17, “Derivatives.”

2. Non-listed equity securities whose fair values are not available are excluded from investments in securities above. These instruments as of March 31,
2012 and 2013 are as follows.
Thousands of
U.S. dollars

Millions of yen

2013

2012
¥

Non-listed equity securities

22

Difference

23

478

¥

478

2013
$

5,083

FINANCIAL FIGURES
6. Securities

3. The aggregate maturities subsequent to March 31, 2012 for financial assets with maturities were as follows:
Millions of yen
Within 1 year

Cash and bank deposits
Notes and accounts receivable, trade
Total

¥
¥

18,55761,86380,4201 year or more but
within 5 years̶¥

5 years or more but
within 10 years
̶

¥

̶
̶

¥

Ten years or more

¥

̶
̶

¥

¥

¥
¥

22,684
41,434
64,118

1 year or more but
within 5 years

5 years or more but
within 10 years

Ten years or more

¥

¥

¥

̶

̶

̶

¥

̶

̶

¥

̶

̶
̶

¥

Acquisitioncost̶

Fair value(Book value)

Thousands of U.S. dollars
2013

2013

2012

̶

Millions of yen

Cash and bank deposits
Notes and accounts receivable, trade
Total

Millions of yen

̶The aggregate maturities subsequent to March 31, 2013 for financial assets with maturities are as follows:
Within 1 year

The aggregate acquisition costs and fair values (book values) of marketable securities classified as available-for-sale securities as of March 31, 2012 and2013 are as follows:

Unrealized
gain (loss)

Acquisition
cost

Fair value(Book value)

Unrealized
gain (loss)

Acquisition
cost

Fair value(Book value)

Unrealized
gain (loss)

Securities whose book value exceeds their acquisition cost:Stock¥ 3,666 ¥ 5,744 ¥ 2,078 ¥ 3,154 ¥ 5,335 ¥ 2,181 $ 33,546 $ 56,746$ 23,200

Securities whose acquisition cost exceeds their book value:
Stock
1,648
1,425
(223)
2,126
1,892
(234) 22,615
20,134
Total¥ 5,314 ¥ 7,169 ¥ 1,855 ¥ 5,280 ¥ 7,227 ¥ 1,947 $ 56,161 $ 76,880(2,481)$ 20,719

̶

Thousands of U.S. dollars
Within 1 year

$ 241,294
440,739$ 682,033

Cash and bank deposits
Notes and accounts receivable, tradeTotal

1 year or more but
within 5 years

5 years or more but
within 10 years

Ten years or more

$

$

$

̶

̶

̶

$

̶

̶

$

̶

̶

Short -term loans
Long-term loans
Other interest-bearing debt
Total

¥

36,134¥̶¥

15
36,149¥̶

34,56960
34,6295 years or more but
within 10 years̶¥¥

Ten years or more

¥

̶

̶

̶

42
42

̶

¥

̶

Merchandise
Finished products
Work-in-process
Raw materials and supplies
Total

¥

¥

¥

Short -term loans
Long-term loans
Other interest-bearing debt
Total

40,392

1 year or more but
within 5 years

5 years or more but
within 10 years

Ten years or more

¥

¥

¥

̶

¥

15
40,407¥33,93660
33,996

̶
̶

27
27

¥

̶

$ 429,656

Short -term loans
Long-term loans
Other interest-bearing debt
Total

̶

̶

160
$ 429,816

Ten years or more

$

$

$

360,983639$ 361,622

̶

$

285
285

$

17,09591,405226,181152,286
486,967

Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

Investments in securities (stocks)

¥

492

¥

2,659

$

28,281

9. Assets Pledged as Collateral
A breakdown of assets pledged as collateral and the related secured liabilities as of March 31, 2012 and 2013 are as follows:

5 years or more but
within 10 years
̶

$

̶

¥

1 year or more but
within 5 years
̶

¥

1,607
8,593
21,263
14,31745,780̶

Thousands of U.S. dollars
Within 1 year¥

8. Unconsolidated Subsidiaries and Affiliates

Millions of yen
̶

1,845
9,523
22,457
15,29849,123

Items relevant to unconsolidated subsidiaries and affiliates at March 31, 2012 and 2013 are as follows:

The aggregate maturities subsequent to March 31, 2013 for short-term loans, long-term loans and other interest-bearing debt are as follows:
Within 1 year

Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

̶

Millions of yen
Within 1 year

Inventories held by the Companies at March 31, 2012 and 2013 consist of the following:̶$

4. The aggregate maturities subsequent to March 31, 2012 for short-term loans, long-term loans and other interest-bearing debt were as follows:
1 year or more but
within 5 years

7. Inventories

̶
̶
̶

$

̶

Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

Assets pledged as collateral:
Land
Buildings and structures
Machinery and equipment

¥

¥

4,590
5,834
9,533
19,957¥

12,70012,700

Secured liabilities:
Long-term debt (including those due within one year)

¥

¥

4,590
4,903
7,716
17,209¥16,70016,700$$48,82852,151
82,074
183,053$

177,641
177,641

10. Accounting for Notes Receivable/Payable Which Reached the Maturity at Year-end
Notes receivable/payable which reached the maturity at year-end are treated as if they were settled at the clearing date for notes. Consequently, as theyear-end dates of March 31, 2012 and 2013 were holidays for banking institutions, the following notes receivable/payable which reached the maturity at
year-end are included in the ending balance of notes receivable/payable and other current liabilities:
Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

Notes receivable
Notes payable

24

¥
¥

25

1,862
131

¥
¥

1,193
53

$
$

12,687559

FINANCIAL FIGURES
11. Short-term Loans and Long-term Loans(2) Components of net retirement benefit expenses for the years ended March 31, 2012 and 2013 are as follows:

Short-term loans at March 31, 2012 and 2013 represent bank overdrafts with weighted-average interest rates of 0.60% and 0.57%, respectively. It is
normal business custom in Japan for short-term borrowings to be rolled over every year. The Company has commitment line contracts for short-term
financing arrangements with 3 financial institutions for an aggregate maximum amount of ¥20,000 million ($212,743 thousand). At March 31 2013, the total¥20,000 million ($212,743 thousand) is unused.

Long-term loans at March 31, 2012 and 2013, consist of the following:Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

Loans from banks and other financial institutions due 2013 to 2017 withinterest rates ranging from 0.24% to 1.75% at March 31, 2012 and due 2014
to 2017 with interest rates ranging from 0.29% to 1.75% at March 31, 2013
Other payables due 2010 to 2021 with interest of 4.05% at March 31, 2012and due 2010 to 2021 with interest of 4.05% at March 31, 2013¥

39,100¥117
39,217(4,546)
34,671¥

42,569¥102
42,671(8,648)34,023$452,814$

1,085
453,899(91,991)
361,908

The annual maturities of long-term loans outstanding at March 31, 2013 are as follows:Year ending at March 31,

Millions of yen

2014
2015
2016
2017
2018 and thereafter

¥

¥

¥

¥

385
221
(98)
(49)
154
188
801

¥

¥

395
220
(101)
(49)
95
185
745

$

4,200
2,339
(1,073)
(521)
1,013
1,965
7,923

$

13,7486,293
13,94015
27
34,023$$

146,240
66,940148,283160
285
361,908

The Company and certain consolidated subsidiaries have severance indemnity plans and defined contribution pension plans. Certain consolidated
subsidiaries have severance indemnity plans.
(1) Funded status of retirement benefit obligations at March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

¥

¥

(8,311)
7,359
(952)
1,643
(49)
642
1,876
(1,234)¥¥(9,164)
7,664(1,500)
2,278
−
778
1,714
(936)

(3) Assumptions used in the calculation of retirement benefit obligations for the years ended March 31, 2012 and 2013 are as follows:
Discount rate
Expected rate of return on plan assets
Method of attributing projected benefits to periods of service
Amortization period for unrecognized prior service costs
Amortization period for unrecognized actuarial differences

2012

2013

2.8%
1.2%
Straight-line basis
10 years
10 years

1.4%
1.4%
Straight-line basis
10 years
10 yearsThousands of
U.S. dollars

12. Retirement Benefits$$(97,478)
81,521(15,957)
24,228−
8,271
18,227(9,956)

Consolidated subsidiaries have adopted a simplified method permitted under the accounting standard for retirement benefits in Japan to calculate theirprojected benefit obligations.

26

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service costs
Amortization of actuarial loss
Payments for the defined contribution pension plan
Total
Expenses for employees' retirement benefits of consolidated subsidiaries are included in service cost.

Less: Current portion of long-term loans

Projected benefit obligation
Plan assets at fair value
Unfunded projected benefit obligation
Unrecognized actuarial loss
Unrecognized prior service costs
Net of Accrued employees’ retirement benefits recognized in the consolidated balance sheets
Prepaid pension costAccrued employees’ retirement benefits recognized in the consolidated balance sheets

Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

13. Income Taxes
The Companies are subject to a number of different income taxes which, in the aggregate, resulted in a statutory income tax rate in Japan of approximately
40.6% and 38.0% for the years ended March 31, 2012 and 2013, respectively.
At March 31, 2012 and 2013, significant components of deferred tax assets and liabilities are as follows:
Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

Deferred tax assets:
Amortization of transition obligations corresponding to contributionof certain marketable securities to employee retirement benefit trust
Devaluation loss on inventories
Accrued bonuses
Devaluation loss on marketable securities
Accrued employees’ retirement benefits
Tax losses carried forward
Other
Gross deferred tax assets
Less: Valuation allowance
Total deferred tax assets¥¥

Deferred tax liabilities:
Unrealized holding gains on securities
Gain on contribution of certain marketable securities to employee retirement benefit trust
Reserve for deferred capital gains from property, plant and equipment
Prepaid pension costReserve for special depreciation
Other
Total deferred tax liabilities
Net deferred tax assets

27

¥

¥

2,597
246
879
1,147
809
74
1,610
7,362
(1,485)
5,877

¥

(435)
(1,401)(1,168)
(668)
(471)
(254)
(4,397)
1,480

¥

¥

¥

2,597
264
541
1,146
747
1,124
936
7,355
(1,601)
5,754

$

(526)
(1,401)(1,125)
(610)
(658)
(371)
(4,691)
1,063

$

$

$

27,621
2,807
5,752
12,190
7,943
11,958
9,961
78,232(17,032)
61,200(5,594)(14,899)(11,965)(6,489)(6,998)(3,956)(49,901)
11,299

FINANCIAL FIGURESThe reconciliation between the statutory income tax rate and the effective income tax rate for the year ended March 31, 2013 is as follows:
38.0%

Statutory income tax rate
Add (deduct)
Nondeductible expenses, including entertainment expenses
Nontaxable income, including dividend income
Equalization tax
Decrease in valuation allowance
Other
Effective income tax rate

3.9
(4.7)
1.4
21.2
(3.3)
56.5%

18. Accounting for Leases(1) Finance leases –Non-capitalized finance leases at March 31, 2012 and 2013 are as follows:
As a lessee
Periodic lease charges to the Companies, as a lessee, which are charged to profit or loss for the years ended March 31, 2012 and 2013 are \168 millionand ¥149 million ($1,580 thousand), respectively.
Lease assets under finance leases, if capitalized, at March 31, 2012 and 2013 are as follows:
Millions of yen

The reconciliation between the statutory income tax rate and the effective income tax rate for the year ended March 31, 2012, was not required to bedisclosed due to the insignificance of the difference.

Machineryand vehicles

Acquisition cost
Accumulated depreciation
Net book value

14. Net Assets
At the Company’s Board of Directors meeting held on May 15, 2012, the directors approved cash dividends amounting to ¥645 million. There are no cash
dividends in the consolidated financial statements as of March 31, 2013.

15. Research and Development Costs

¥
¥

1,486
1,110
376

Machineryand vehicles

Other

¥
¥

Thousands of U.S. dollars
2013

2013

2012

38
35
3

¥
¥

Machineryand vehicles

Other

1,465
1,235
230

¥

—

$

—

¥

—

Other

$

15,584
13,141
2,443

$

—
—

$

—

Depreciation expense for lease assets computed by the straight-line method over the period of the finance leases with no residual value for the years
ended March 31, 2012 and 2013 are ¥168 million and ¥149 million ($1,580 thousand), respectively.
Outstanding future lease payments due at March 31, 2012 and 2013, including interest, are as follows:

Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years ended March 31, 2012
and 2013 totaled ¥1,840 million and ¥1,425 million ($15,155 thousand), respectively.
Due within one year
Due after one year
Total

16. Net Income Per Share
Basis for calculations of net income per share for the years ended March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

Net income
Net income for common stockholders

¥
¥

¥
¥

6,408
6,408

509
509

¥
¥

5,416
5,416

¥
¥

161,345

161,362
Yen

Net income per share¥

U.S. dollars
2013

2013

2012

39.71

¥

3.16

$

146
84
230

¥

$

1,546
897
2,443

$

(2) Non-cancelable operating leases –As a lessee
Outstanding future lease payments under non-cancelable operating leases at March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

2013

2012

¥

148
230
378

Thousands of shares

The weighted-average number of shares of common stockThousands of
U.S. dollars
2013

Millions of yen
2012
2013

Due within one year
Due after one year
Total

¥

¥

14
11
25

¥

15
5
20

¥

$

163
47
210

$

0.03

The Companies have no dilutive securities for the years ended March 31, 2012 and 2013.

19. Derivatives(1) Derivative transactions to which hedge accounting is not applied.
The contracted amount, fair value and unrealized gain (loss) of forward exchange contracts recognized for the year ended March 31, 2012 were as follows:

17. Cash and Cash Equivalents
Millions of yen

Cash and cash equivalents at March 31, 2012 and 2013 consist of:2012

Cash and bank deposits
Time deposits with deposit terms of over 3 months and otherCash and cash equivalents¥¥

Thousands of
U.S. dollars
2013

Millions of yen
2013

18,557(2,057)
16,500¥¥22,684(263)
22,421$$

241,294(2,797)
238,497

Contract
amountForward exchange contracts:
BuyingU.S. dollars
Japanese yen
Total

¥

121
77
198

¥

Unrealized
gain (loss)

Fair value

¥

¥

(1)
(0)
(1)

¥

(1)
(0)
(1)

¥

The contracted amount, fair value and unrealized gain (loss) of forward exchange contracts recognized for the year ended March 31, 2013 are as follows:
Millions of Yen
Contract
amountForward exchange contracts:
BuyingU.S. dollars
Japanese yen
Total

28

¥
¥

Thousands of U.S. Dollars
Unrealized
gain (loss)

Fair value

67
2
69

¥
¥

29

(0)
(0)
(0)

¥
¥

Contract
Amount

(0)
(0)
(0)

$
$

711
25
736

Unrealized
gain (loss)

Fair value

$
$

(1)
(0)
(1)

$
$

(1)
(0)
(1)

FINANCIAL FIGURES(2) Derivative transactions to which hedge accounting is applied.

(3) Information about reportable segment profit or loss and other material items

Derivative transactions to which hedge accounting is applied for the years ended March 31, 2012 and 2013 are as follows:
Method of hedge accounting
Type of derivative transactions
The main hedged items
Contract amount1 year or more of amount of contract
Fair value

Segment information for the years ended March 31, 2012 and 2013 is as follows:

2012
Exceptional method for interest rate swap
transactions
Interest rate swap transactions
Payment fixation, Receipt change

2013
Exceptional method for interest rate swap
transactions
Interest rate swap transactions
Payment fixation, Receipt change

Long-term loans¥18,550 million¥15,630 million※

Long-term loans¥23,630 million ($251,356 thousand)¥16,775 million ($178,438 thousand)※※ Because interest rate swap transactions accounted for by the exceptional method are managed together with long-term loans that are hedged items, thefair value is included in the fair value of long-term loans.

20. Contingent Liabilities

For the year ended March 31, 2012
Millions of yen
Reportable segment
Specialty Steel(a) Sales and operating income:Net sales
Outside customers
Intersegment transactions
Total
Segment income(b) Other:
Depreciation¥¥

Special Materials

Formed & FabricatedMaterials

—

¥
¥

6,974
810
339

6,974

¥

148,130 ¥9,980 ¥
158,110
11,465 ¥¥10,070 ¥16,612

Other

Total

¥

171,800 ¥11,120 ¥
182,920
13,590 ¥(11,120)(11,120)(2,241)¥

10,886 ¥

(25)

¥
¥

¥

84
1,140
1,224
65

¥

7

—

¥
¥

¥

16,612
1,250

¥

470

Consolidated
total

Adjustments—¥¥

171,800—¥

171,800
11,349¥10,861

1. The "Other" category is the information service segment not included in reportable segments.
2. Segment income adjustments of ¥2,241 million are adjustments for inventories of ¥2,232 million, intersegment elimination of ¥38 million and corporate expenses not

Guarantees against bank loans of employees and affiliates at March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

Advanced Green Components, LLC
UCHIDA-SATO TECH (THAILAND) CO., LTD.
Employees
Total

¥

282

¥

—

¥

47
329

¥

143
16
36
195

$

$

1,519
171
389
2,079

allocated to each reportable segment of ¥47 million. Corporate expenses are general and administrative expenses not attributed to reportable segments.
3. Segment income is adjusted with operating income in the consolidated statements of operations.
4. As information about segment assets and liabilities is not used to determine the distribution of management resources and evaluate business results, the Companies are notrequired to disclose information about segment assets and liabilities.

For the year ended March 31, 2012
Millions of yen

Notes discounted with banks and notes endorsed as of March 31, 2012 and 2013 are ¥218 million and ¥127 million ($1,352 thousand), respectively. Notes
discounted with banks and notes endorsed are netted against "Notes and accounts receivable, trade" in the consolidated balance sheets.

Reportable segment
Specialty Steel

21. Segment Information(1) General information about reportable segments
The Companies' reportable segments are the business units for which the Company is able to obtain separated financial information in order for the Boardof Directors to regularly conduct investigations to determine the distribution of management resources and evaluate business results. Each operating divisiondevelops business activities and establishes comprehensive strategies for domestic and overseas markets according to the products it handles. Therefore,
the Companies consist of business segments according to products based on operating divisions and have determined the reportable segments, "Specialty
Steel," "Special Materials" and "Formed and Fabricated Materials."
The "Specialty Steel" segment includes the manufacture and sale of various special steel products such as bearing steel, engineering steel, stainless steel,heat resistant steel and tool steel. The "Special Materials" segment includes the manufacture and sale of metal powder products, heat/corrosion-resistantalloys, etc. The "Formed and Fabricated Materials" segment includes the manufacture and sale of formed and fabricated materials made from special steel
bars/tubes.

(2) Basis of measurement about reportable segment profit or loss and other material items
The accounting methods applied to the reportable segments are generally the same as those described in Note 2, " Summary of Significant Accounting
Policies," except that inventories are stated at cost to evaluate business results. Segment income is based on operating income. Intersegment transactions
are based on market prices.
As those described in Note 2, " Summary of Significant Accounting Policies," in accordance with the revision of the Corporation Tax Law of Japan, thecompany and its domestic consolidated subsidiaries have begun applying the depreciation method based on the revised Corporate Tax Law to property, plantand equipment acquired on and after April 1, 2012. As a result of this change, segment loss of "Specialty Steel" have decreased by ¥428 million ($4,548
thousand) from the corresponding amounts under the previous depreciation method. This change does not have a material effect on the segment income ofreportable segments except " Specialty Steel. "(a) Sales and operating income:Net sales
Outside customers
Intersegment transactions
Total
Segment income (loss)(b) Other:
Depreciation¥¥

Special Materials

Formed & FabricatedMaterials¥¥

16,051

5,971¥

116,178 ¥
9,124 ¥
125,303(277) ¥

5,971
657

¥

16,051
1,335¥

10,711

304

¥

513

—

¥

—

Other

Total

¥
(10,386) ¥(10,386)(244) ¥

138,306¥

138,306 ¥10,386 ¥148,692
1,761 ¥¥

11,537 ¥(24) ¥

11,513

¥
¥

¥

106
1,261
1,367
46

¥

9

¥
¥

Consolidated
total

Adjustments——

138,306
1,517

Thousands of U.S. dollars
Reportable segment
Specialty SteelSpecial Materials

Formed & FabricatedMaterials

Other

Total

(a) Sales and operating income:Net sales
Outside customers
Intersegment transactions
Total
Segment income (loss)$ 1,235,806 $$
97,063 $1,332,869$(2,948) $63,51763,517
6,994$

170,738
14,198$

1,127
13,418
14,544496(b) Other:
Depreciation

$

3,227

$

5,461

$

95

113,934$—$$

170,738—$$

Adjustments$ 1,471,188$
110,481
1,581,669$
18,739$$$$122,717$

Consolidated
total—$ 1,471,188—(110,481) $(110,481)
1,471,188(2,603) $16,136(253) $

122,464

1. The "Other" category is the information service segment not included in reportable segments.
2. Segment income (loss) adjustments of ¥245 million ($2,603 thousand) are adjustments for inventories of ¥283 million ($3,008 thousand) and intersegment elimination of¥38 million ($405 thousand).
3. Segment income (loss) is adjusted with operating income in the consolidated statements of operations.
4. As information about segment assets and liabilities is not used to determine the distribution of management resources and evaluate business results, the Companies are notrequired to disclose information about segment assets and liabilities.

30

31

FINANCIAL FIGURES
Related Information
Segment related information for the year ended March 31, 2012 was as follows:(1) Information about products and services –As described in “General information about reportable segments,” the Companies are not required to disclose information about products and services.

Independent Auditor’s Report

To the Board of Directors of Sanyo Special Steel Co., Ltd.:(2) Information about geographic areas –1. Net sales
For the year ended March 31, 2012
Millions of yen
Japan

Net sales¥

North
AmericaAsia

138,068¥

28,146¥

3,311

Europe¥1,904

Others

¥

371

Total

¥

171,800

2. Property, plant and equipment
As Japan, which consists of Sanyo Special Steel Co., Ltd. and its domestic consolidated subsidiaries, represents more than 90% of the amount of property,
plant and equipment on the consolidated balance sheet as of March 31, 2012, the Companies are not required to disclose information about property, plantand equipment.
(3) Information about major customers –For the year ended March 31, 2012
Net sales
Millions of yen

Marubeni-Itochu Steel Inc.
Mitsui & Co., Ltd.

¥¥

Related segment

Thousands of U.S. dollars

38,65221,095$$

471,614
256,843

Specialty SteelSpecialty SteelWe have audited the accompanying consolidated financial statements of Sanyo Special Steel Co., Ltd. and its
consolidated subsidiaries, which comprise the consolidated balance sheets as at March 31, 2013 and 2012, andthe consolidated statements of operations, statements of comprehensive income, statements of changes in net
assets and statements of cash flows for the years then ended, and a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the assessment of
the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriatenessof accounting policies used and reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient appropriate to provided a basis our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Sanyo Special Steel Co., Ltd. and its consolidated subsidiaries as at March 31, 2013 and 2012, and their financial
performance and cash flows for the years then ended in accordance with accounting principles generally acceptedin Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
March 31, 2013 are presented solely for convenience. Our audit also included the translation of yen amounts into
U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 3 to theconsolidated financial statements.

August 12, 2013
Osaka, Japan

32

33

CORPORATE DATA

(As of March 31,2013)

Corporate Data

Consolidated Subsidiaries and Equity-Method Affiliates
Specialty SteelCorporate NameSanyo Special Steel Co., Ltd.

Head Office/Works

3007, Nakashima, Shikama-ku, Himeji, Hyogo 672-8677 Japan
phone (+81) 79-235-6003

Consolidated Subsidiaries① Yohkoh Bussan Co., Ltd.

Established

January 11, 1935

② Santoku Seiken Co., Ltd.

Paid-in Capital¥20,183 million

Number of Employees

2,829 (consolidated basis) 1,396 (non-consolidated basis)

Register of Shareholders

The Chuo Mitsui Trust & Banking Co., Ltd.

Stock Listings

Tokyo Stock Exchange (1st Section)

Book Closing

March 31

Branches and Offices

Tokyo Regional Office, Osaka Branch, Nagoya Branch, Hiroshima Branch, Kyusyu Sales Office⑥ P.T. SANYO SPECIAL STEEL INDONESIA

Homepage Address

http://www.sanyo-steel.co.jp/english/index.html⑦ SANYO SPECIAL STEEL TRADING (SHANGHAI) CO., LTD.

Formed and Fabricated Materials
Consolidated Subsidiaries⑩ Santoku Tech Co., Ltd.

Trading of special steel products, steelmaking raw materials and other materials

Manufacturing of special steel products (formed and fabricated materials)⑪ SANYO SPECIAL STEEL U.S.A., Inc.

Manufacturing and marketing of special steel products

Trading of special steel products③ Santoku Kogyo Co., Ltd.

⑫ Ningbo Sanyo Special Steel Products Co., Ltd.

Processing of special steel, machinery maintenance

Manufacturing and marketing of special steel products(formed and fabricated materials)④ Santoku Technos Co., Ltd.
Processing of special steel

Equity-method Affiliates⑬ Advanced Green Components, LLC⑤ SKJ Metal Industries Co., Ltd.

Manufacturing of special steel products (formed and fabricated materials)

Manufacturing and marketing of special steel products
Manufacturing and marketing of special steel products

Other

Involved in business and sales of special steel products in China⑧ Sanyo Special Steel India Pvt. Ltd.

Consolidated Subsidiaries⑭ Santoku Computer Service Co., Ltd.

Involved in business and sales of special steel products in India

Construction and operation of, and consulting services for, information systems

Equity-method Affiliates⑨ Mahindra Sanyo Special Steel Pvt. Ltd.

Stock Information⑮ Santoku Security Service Co., Ltd.

Manufacturing and marketing of special steel products

Total Number of Shares Authorized to be Issued

474,392,000

Total Number of Shares Issued

167,124,036

Number of Shareholders

16,786

Principal Shareholders
Name of Shareholder

Shareholder Composition (thousands of shares)
Treasury stocks
5,787 3.5％

Securities firms
1,323 0.8％

Foreign investors

Financial institutions

20,497 12.3％

51,197 30.6％

37,173 22.2％

Percentage of
Voting Rights (%)

China

Nippon Steel Corporation

15.14

Company’s Kyoeikai Association

6.08

The Master Trust Bank of Japan, Ltd. (trust account)

4.96

NSK Ltd.

4.66

India

Japan Trustee Services Bank, Ltd. (trust account)

4.40

Sumitomo Mitsui Banking Corporation

3.55

8 Sanyo Special Steel India Pvt. Ltd.
●
9 Mahindra Sanyo Special Steel Pvt. Ltd.
●NORTHERN TRUST CO AVFC RE NORTHERN

2.63

12 Ningbo Sanyo Special Steel Products Co., Ltd.
●
7 SANYO SPECIAL STEEL TRADING (SHANGHAI) CO., LTD.
●

America
11 SANYO SPECIAL STEEL U.S.A., INC.
●
13 Advanced Green Components, LLC●

JAPAN
Sanyo Special Steel Co., Ltd.

1 Yohkoh Bussan Co., Ltd.
●
2 Santoku Seiken Co., Ltd.
●
3 Santoku Kogyo Co., Ltd.
●
4 Santoku Technos Co., Ltd.
●
10 Santoku Tech Co., Ltd.
●
14 Santoku Computer Service Co., Ltd.
●
15 Santoku Security Service Co., Ltd.
●TRUST GUERNSEY IRISH CLIENTS

Total numberof shares issued
Individuals and others

Security and facilities maintenance services

Japan Trustee Services Bank, Ltd. (trust account9)

2.47

ThailandMizuho Corporate Bank, Ltd.

2.27

5 SKJ Metal Industries Co., Ltd.
●Marubeni-Itochu Steel Inc.

1.94

Note: The Company holds 5,770 thousand shares of its own stock in treasury, but is excluded
from the above list of major shareholders.

167,124
100％

INDONESIA
6 P.T. SANYO SPECIAL STEEL INDONESIA●

Other domestic corporations
51,144 30.6％

3435