Corporate Profile

Mission Statement
1. We will strive to make a positive contribution tosociety with safe, appealing and useful technology
and products.
2. We will nurture a corporate culture based on trust,reliability and the pursuit of excellence.
3. We will be a good corporate citizen, ever mindful of
our environment responsibilities.

[Establishment] March 8, 1940
[Capital] 25,016 million yen (as of March 31, 2010)[Representative] Shokichi Yasukawa, President[Employees] 2,330 (as of March 31, 2010)[Business Description] Production and sale of specialty steel
products, forgings and electromagnetic products[Offices] Head Office: Tokai-shi, Aichi, Japan
Sales Offices: Tokyo/Osaka/Fukuoka
Overseas Offices: Shanghai/Seoul
Plants: Chita/Kariya/Forging/Higashiura/Gifu/Seki[Customers and Suppliers]
Major Customers: Toyota Tsusho Corporation/Toyota Motor
Corporation/Aisin AW Co., Ltd.
Major Suppliers: Toyota Tsusho Corporation/Mitsui & Co., Ltd.

Major Products
Please refer to our Website.

http://www.aichi-steel.co.jp/ENGLISH/pro̲info/index.html

CSR Policy
We will contribute to the sustainable progress of society
and the Earth through our sound corporate activities.

CSR Vision 2015
– We will gain the trust and confidence of andgive satisfaction to our customers and all otherstakeholders.
– We will develop employees who are open and fair,developing a corporate culture characterized by achallenging spirit.

Specialty steel
Specialty steel is manufactured by adding alloys and metallic
elements to iron to improve material properties such as
strength, hardness, toughness, wear resistance, heat
resistance and corrosion resistance.

Forgings
Forgings, produced by pressing and forging specialty
steel, are used in automobiles, construction machines andmanufacturing machines that require strength and durability.

Stainless steel
Tough and corrosion-resistant, stainless steel is used inapplications relating to water, such as dams, sluices andships. It is also used in chemical and nuclear power plants, aswell as in construction materials and everyday utensils.

Electromagnetic products /TetsuRiki-AgriUsing our know-how in specialty steel manufacturing,
we develop electronic parts, magnets and sensors.
In addition, “TetsuRiki-Agri,” which promotes plant
through the latent power of iron, has also beendeveloped.

Sales Mix (in amount, non-consolidated basis)

Results for Fiscal 2009

Aichi Steel Group
Please refer to our Website.

http://www.aichi-steel.co.jp/ENGLISH/com̲info/a̲group.html

C o n t e n t s
Business Update
Message from the President

2〜5

Subsidiaries in Japan (9 subsidiaries)- Aiko Corporation- Aichi Ceratec Corporation- Omi Mining Co., Ltd.
- Aichi Techno Metal Fukaumi Company- Aichi Steel Logistics Co., Ltd.
- Aichi Information System Company- Aiko Service Co., Ltd.
- Aichi Micro Intelligent Corporation- Asdex Corporation

Affiliates

Feature Story
Marking the 70th anniversary of
Aichi Steel’s founding

6〜9

Aichi Steel and Biological Diversity

10〜11

CSR Management
CSR Policy

12〜13- Tokai Special Steel Co., Ltd.

Overseas subsidiaries (8 subsidiaries)- Aichi Forging Company of Asia, Inc. (AFC)- Aichi Forge USA, Inc. (AFU)- Aichi Europe GmbH (Ae)- Aichi International (Thailand) Co., Ltd. (AIT)- Shanghai Aichi Forging Co., Ltd. (SAFC)- PT. Aichi Forging Indonesia (AFI)- Aichi Magfine Czech s.r.o. (AMC)- AMIT, Inc.

ABOUT AICHI STEEL REPORT 2010

Social Relations Section
Corporate Governance

14

Compliance

15

Risk Management

16

With Our Customers

17〜18With Our SuppliersWith Shareholders/Investors

19

With Employees

20〜23With Community and Society

24〜25■ Editorial Policy
Aichi Steel Report 2010 focuses on disclosing as much as
possible concerning the activities of Aichi Steel and the Aichi
Steel Group during fiscal 2009, including specific examples. As
regards unattained objectives, contributory factors are analyzed
and measures to be taken are reported. To enhance stakeholder
understanding of and confidence in our business and social
activities, the Company activity report is divided into Social
Relations, Environmental and Financial sections (including theAnnual Report).

Environmental Section
Environmental Activity Policy

26〜27

Environmental Management

28〜29

Global Warming Prevention

30〜31

Environmental Material Flows32

By-products

33■ Wording/Mark

Environmental Data

34〜35

Following revision of the Company’s job classification system, theterm “leaders,” used until the previous year, has been changed
to “managers.”
To render new and ongoing activities easily recognizable, newactivities are marked with .

Third-Person View

36

■ ReadersManagement’s Discussion, Analysis of Financial
Conditions and Results of Operations

This Report is intended for our customers, suppliers, otherbusiness partners, shareholders and investors, residents
in neighboring communities, affiliated companies and our
employees.

Five-year Summary(Consolidated & Non-Consolidated)■ Report Period and Scope

Consolidated Statements of Income

This Report covers activities conducted by the Aichi SteelGroup during fiscal 2009 (April 2009 to March 2010). However,some activities conducted before or after fiscal 2009 are also
explained, as necessary.

Consolidated Statements of Changes in
Net Assets

45〜46

Consolidated Statements of Cash Flows

47

Notes to Consolidated Financial Statements

48〜66

NEW

■ Release
October 2010

Financial Section

Consolidated Balance Sheets

38〜40

41
42〜43

Report of Independent Auditors

44

67

AICHI STEEL REPORT 20101

Message from the President

We aim to be No. 1 in our core business,and one-and-only in our new business.

Shokichi Yasukawa,
President

Successful in returning to profitability by viewing difficulties asopportunities for rebuilding ourselves
Was the Company able to shed the influence of the global financial crisis that occurred in theautumn of 2008?
The sharp decline in demand for our products inearly 2009, soon after the outbreak of the global
financial crisis, forced us to drastically decrease
our production volume. Consequently, we reported
red ink for fiscal 2008. In April 2009, however, thedownward trend of our production volume began
to reverse; in September of the same year weturned a single-month profit. Since then we havesucceeded in meeting the in-house challenging
target of returning the Company to profitability forthe full year of fiscal 2009. There are two major
external factors behind our return to profitability:
the first was a slightly higher recovery of demandthan initially expected; the second was the relatively
stable prices of raw materials. Internal factors were
our employees’ improvement efforts, including cost

2

AICHI STEEL REPORT 2010

reduction.
Fiscal 2009 was expected to be a tough year.
Viewing difficulty as opportunity, however, I cameup with the slogan “It’s time to rebuild ourselves.”
It means that now is a good time to return to thevery starting point of the Company and thoroughly
review its business and financial structures, toget it back on a growth track. Under this slogan,
all the employees have concerted their efforts topromote cost reduction by improving efficiency
and eliminating unnecessary processes andexpenditures that had been overlooked during theprevious busy period. The achievement of such an
early recovery of our business is due entirely to ouremployees’ diligent efforts.

Business Update

Work on developing next-generation products and new markets,with the target year set at 2015
Could you give us some examples of the Company’s efforts and results during fiscal 2009?
quality-related losses and improving yield rate.
Furthermore, we exerted various efforts to reduce
production costs, from the perspective of both
operational and product failure. As a result, in thepast year we have already gotten halfway to the goalof Project Z100. Under the project, I have given a
directive to set targets and assess attainment levels
by viewing each quarter (three months) as if it werea full year. During fiscal 2009, every employee met
our expectations and performed tasks in a briskly
efficient manner. Our challenge in fiscal 2010 is tofurther reduce waste and enhance productivity. On
the production line, the first phase of loss reduction
has been completed. Our efforts now should befocused on the next phase of loss reduction andproductivity improvement.

Feature Story
CSR Management

What is most fundamental for improving a corporate
structure is to eliminate waste. We launched
Project Z100 (*) last year, with the goal of reducing
production costs by 10 billion yen in two years. As
the important first step in achieving this goal, we
worked on changing our perception of costs. The
new perception is that the real fixed costs are basic
salaries paid to workers, and depreciation costs;
all other costs are variable costs. Viewing thingsfrom this perspective, we can make an enormous
difference in power consumption by promoting
power saving in the workplace, because we areengaged in business in the process industry, inwhich large equipment and machinery are operated.
We focused our efforts on minimizing energy waste
and enhancing energy efficiency in facility operation
and, in terms of the production line, reducing*Project Z100: “Z100” stands for three Japanese keywords starting with “Z”: “Zikkou-suru” (execute),“Zitsugen-suru” (realize) , and “Zettai-yarinuku” (follow through with mission). It is also derived from theJapanese expression “Z Flag” (meaning to fight with all our effort and with our backs against the wall.)Social Relations Section

What do you think are the strengths and weaknesses of Aichi Steel? How will you overcome
its weaknesses?
of Project Z100. By 2015 (7th year of thestrategy), we will have reformed our production
process and rebuilt our global sites.
Other positive news we can report is that theelectromagnetic product business, a new
business of the Company, achieved its firstsingle-month profit in March. We are currently
making every effort to report profits for thefull year of fiscal 2010 in our electromagnetic
product business, and I want to make thebusiness a de-facto standard for the industry
and the “one and only” in the world by 2015.
I understand that both the core and new
businesses of the Company will reach aturning point in a few years, undergoing drasticchanges called a “new industrial revolution.”
To flexibly respond to such changes wewill make strenuous efforts, armed with the
project launched this year, to develop nextgeneration products and new markets, taking
full advantage of our strengths.

Financial Section

AICHI STEEL REPORT 2010

Environmental Section

Major strengths of the core business of Aichi
Steel are that we are the world’s leading
integrated manufacturer of steel and forgings
through quality and technology, and that asa member of the Toyota Group, we can work
closely with other manufacturers to develop
products. In the development of businessactivities, moreover, we can share the visionand objectives of the Toyota Group. At thesame time, however, we rely heavily on theautomobile industry, which is a weak point forus.
To overcome this weakness, I have come up
with “Doctrine 1-3-7,” a corporate strategy
toward sustainable growth. The idea is thatin our core business, we create a financial
structure that enables us to generate profits
at the factory-operating rate of 70% by 2011
(3rd year of the strategy), with 2009 as thestarting point (1st year of the strategy). This
strategy aims to lower our break-even point, aneffort that is also consistent with the objectives

3Message from the President

Toward business development that enables
sustainable growth.

Grow as a small but globally valued company, under the slogan“Rebuild our business by changing ourselves”
What kinds of managerial efforts will you make in fiscal 2010?
I consider fiscal 2010 to be an important year tocommence reengineering. As the representativeof the management that supports reforms, I havechanged the Company’s slogan from “It’s the time
to rebuild ourselves” to “Rebuild our business bychanging ourselves.” Under this new slogan, theCompany and its employees will make efforts tochange themselves in order to rebuild themselves.
It means to enhance individuals’ ability to learn
and think for themselves, express their ideas inwords, and live up to their own words. By repeating
this cycle, they will develop the ability to think forthemselves and act on their own initiative. The
Company needs individual employees’ thoughtful
initiative. I also have high expectations of all theemployees’ initiatives.

A concrete example of our efforts is the drastic
reform of the organization carried out in January2010 to enhance our workplace skill in designing,planning, decision-making and effective problem
solving. This is an attempt to consolidate theCompany’s foundation so as to ensure a wellbalanced business structure in preparation for
the future. In our core business, moreover, theconstruction of continuous casting machine No. 3 isgoing smoothly, with completion expected by next
spring. In our new business, Seki Plant (Gifu Pref.),a new production site for “MAGFINE” for automobile
use, was brought into operation in May 2010. So I
want to make fiscal 2010 a year of preparation for
the next stage of growth.

What vision of the future do you have for Aichi Steel?
I want to make Aichi Steel a company thatcan grow sustainably. Under our long-term
Vision 2015, we aim to become the world’s
number-one integrated manufacturer of steel
and forgings, through quality and technology;
contribute to global environmental protection
and automobile evolution through thedevelopment of cutting-edge materials; and4

AICHI STEEL REPORT 2010

become symbolic of the local community bycreating strong brand awareness. As the firststep toward achieving our vision, we must build
robust corporate and business structures thatallow us to make steady profits. In the annual
management plan for fiscal 2010, we will focus
our efforts on establishing a solid revenue baseto serve as the groundwork for such a robust
corporate structure.
What we learned from the global financial
crisis of 2008 is that with people’s sense ofvalues drastically changing and more emphasis
placed on “a society friendly to humans and theearth,” we are now standing at a turning point
in history. In this era of a major paradigm shift,
it is important to get ahead of the times andtake on challenges so as to achieve sustainablegrowth in business. At the same time, I believe
it is important to live up to the expectations of
all stakeholders by fulfilling our corporate social
responsibility.

Business Update

Promote corporate culture “1S” with top priority on “Shojiki” (Sincerity),“Seisou” (Cleanliness) and “Safety ”
How do you think Aichi Steel should promote CSR?
I believe that “Sincerity” is the most importantelement in all actions taken by an enterprise intackling environmental, social and economic
issues. Incorporating this concept of sincerity, Aichi
Steel has promoted “1S” as its corporate culture.
“1S” represents our message that our first (1st)priority should be on the three Ss, that is, “Shojiki”(Sincerity), “Seisou” (Cleanliness) and “Safety.”

Feature Story
CSR Management
Social Relations Section

The most important corporate social responsibility(CSR) to be fulfilled by an enterprise is thepermanent continuance of its business. Although
it is engaged in the large-scale process industry,
Aichi Steel itself is not large in terms of size.
However, we aim to become a small but globallyvalued company. To accomplish our aim, weneed to satisfy the expectations of our customers,
employees, local communities, shareholders and all
stakeholders in a totally balanced manner. From thisperspective, this Report provides comprehensive
information on our activities from the three aspectsof social relations, environmental conservation andfinance. As a nation founded on the principles ofenvironmental protection, Japan seeks to form a
recycling-oriented society. Aichi Steel is a recyclingoriented enterprise, whose main business is toreproduce high value-added specialty steel fromuseless scrap iron. To actively contribute to theprevention of global warming in response to social
needs, we are planning to raise our CO2 emissions
reduction targets.

Could you tell us what the relationship is between the “1S” corporate culture and CSR?
common among the all the principles I hold up: “1S,”“Rebuild our business by changing ourselves” and“thoughtful initiative.” Fulfilling CSR and pursuing agood job is the same in that better results can bebrought about through better process. I also believethat these principles are essential in promoting
human resources development.
In March 2010, Aichi Steel celebrated the 70th
anniversary of its founding. I understand that when
it was established, the Company experienced many
hardships. Looking back on the difficulties overcome
by our predecessors and returning to the starting
point, I will renew my determination and make a
fresh start, with the 70th anniversary as the “second
founding of Aichi Steel.” We are also committed
to striving to become a long-trusted enterprise, nomatter how times and society change.

Financial Section

AICHI STEEL REPORT 2010

Environmental Section

The “1S” slogan conveys our message that our top
priority should be the three Ss: “Shojiki” (Sincerity),“Seisou” (Cleanliness) and “Safety.” “Sincerity” helps
prevent serious mistakes or accidents in the future,“Seisou” or cleanliness is the basis for improving
quality and productivity, and “Safety ” will ensure risk
detection and strict compliance with rules. This “1S”
corporate culture should be promoted not only by
individual employees, but also by the organization
as a whole. For Aichi Steel, “Sincerity” is the basis
for compliance with laws and regulations, “Seisou”
or cleanliness represents being clean and open,and “Safety” ensures risk management, all essential
elements for building sound corporate structure.
On the basis of this belief, I decided to design
a logotype for “1S” and create a flag to makesure that the slogan is disseminated and firmly
established within the Company. Literally, I will be
the chief flag waver and take a leadership role infostering the “1S” corporate culture within Aichi
Steel, its group companies and suppliers.
On a very fundamental level, there is something

5

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あああああ
あああああ

FeatureStory

Marking the 70th
anniversary of
Aichi Steel’s founding
1940-2010

Contributing to Motorization
The birth of Aichi SteelToward motorization after overcoming difficulties

In 1926, Sakichi Toyoda, recognized today as one of Japan’s
foremost inventors, founded Toyoda Automatic Loom Works,
Ltd. (currently Toyota Industries Corporation). His eldest
son, Kiichiro Toyoda, saw the need to promote Japan’s
automobile industry, and in Toyoda Automatic Loom Works,
Ltd. set up the Steel Production Division in 1934, to develop
specialty steel for automobiles. This was the starting point ofAichi Steel.
In 1940, the Division developed into Toyota Steel Works, Ltd.
(the name was changed to Aichi Steel Works, Ltd. in 1945)(Kariya City). Realizing the necessity of supplying high-quality
materials that were right for the job, Kiichiro came up with the
R&D principle, “Great cars are made of great steel.”

Since its founding, Aichi Steel has faced many difficulties,
including wartime shortages, and each time it has overcome
those difficulties by modernizing its steel making process,rationalizing its equipment and other efforts at aggressive
technological development. The birth of many brands ofsteel – such as “plate springs” and “angle-shaped stainless”
is a testament to the Company’s bold challenges tomanufacturing, against all odds and risks.
When Japan entered the era of high economic growth, theCompany reached a turning point. As income levels rose,
people began to seek a better life, accelerating motorization.
The Company made massive investments in new plants andequipment, including the introduction of large-scale electricarc furnaces, to establish a steel supply system. In 1964,
the Forging Plant constructed in the Head Office area (Tokai

Rolling mill (1942)
the No.1 Forging Plant (1964)

The History of Aichi Steel ①1941 Pacific War
1945 War end

Timebackground1966 Private-car boom
1950 Korean War
1955 Rapid economic growth begins (Toyota “Corolla” & Nissan

1973 1st oil crisis
1979 2nd oil crisis“Sunny” released)

A.D

Company
milestones

1930
1934
Steel Production
Div. established in
Toyoda Automatic
Loom Works, Ltd.

Products &technology

6

AICHI STEEL REPORT 2010

1940

1950

1940 Toyota Steel Works,
Ltd. founded1943 Chita Plant opened
1945 Renamed Aichi SteelWorks, Ltd.

1960

1970

1964 Forging Plant opened

1951 Steelmaking processmodernized; rolling facility
improved1958 Angle-shaped
stainless Commercialized

1975 Stainless Channel
commercialized
1978 6,000-ton forging press
introducedEvolving technology

Feature Story

In 1982, Aichi Steel succeeded in developing the world’s
first multi-stage steelmaking process. Key driving forces
behind this development were increased automobile
production volumes, increasing demand for lightweight andhigh-strength materials resulting from the oil shocks, andgrowing need for quick delivery. Taking full advantage of
our accumulated technologies, we remarkably enhanced
steel quality and productivity, contributing significantly
to shortening delivery times. In the forging business, theintroduction of an innovative 6,000-ton pressing machine
enabled the manufacturing of the large forgings. With
our hot-cold complex forging technology, moreover, wecreated and commercially introduced a number of highstrength forgings. We have stubbornly pursued our aim ofoffering high-quality, highly reliable materials that support theevolution of automobiles.

Business Update

forgings, we developed high-intensity, high-quality, stable cold
forgings and Lightweight Connecting Rod while enhancing
productivity.
In our quest for materials of more enhanced value, we haveentered into newfields of business with unique products of
our own, such as “MAGFINE,” “MI Sensors” and “TetsuRiki
Agri,” taking full advantage of our accumulated steelmaking
technology. The superb bonded magnet “MAGFINE” isused for automobile power seat motors to help ensure a
comfortable ride.

City) commenced operation to strengthen the Kariya Citybased forging business of the Company, by which means
the Company established the world’s leading integrated
production system from steelmaking to forging, to meetcustomer needs more quickly and smoothly.

MI Sensor (left) and MAGFINE magnet powder (right)

Bolstering global automobile industry bypromoting our globalization

Social Relations Section

80-ton electric arc furnace (left), Vacuum degassing unit (right)

CSR Management

In the 21st century, motorization has been accelerated,
especially in emerging countries. Aichi Steel has promoted its
globalization in step with foreign market entry by Japanese
auto manufacturers. After founding our overseas affiliatedcompany in the Philippines in 1995, we established our
production systems in the US and Asia. Under the Japan-USAsia trilateral framework, we have been supplying steel andforgings that support the basic vehicle performance of “run,turn and stop,” throughout the world.
With the business environment surrounding us currently
undergoing unprecedentedly drastic changes, we willcontinue to support motorization “in an enthusiastic,
strong and straightforward manner,” by proposing andproviding materials for a new era.

Increasingly value-added products and our
new business1985 G5 Plaza Accord

Commemorating the production of 1 million units of forged parts in2007 in Indonesia (AFI ) (left)
ISO/TS16949 accredited in 2009 in the US (AFU) (right)

1995 Great Hanshin-Awaji Earthquake

1980
1982 the No.2 Melting Plant opened
1989 the No.2 Bar and Wire Rod Mill opened

1990
1993 Higashiura Plant opened
1995 AFC founded
1997 A-USA & LFG founded1998 Shanghai & Seoul representative offices
opened1992 Dental magnetic attachments “MAGFIT 600”
commercialized
1993 Short-time Carburizing Steel developed
1994 Cold forged products/High Strength and Tough
Bainitic Micro-alloyed Steel developed
1995 Lightweight Connecting Rod developed
1998 Titanium patter “APTY” commercialized
ISO 9000 Series acquired by Chita, Kariya, Forging
and Higashiura plants

2001 Series of terrorist attacks in US
2008 Lehman’s fall
2000
2000 Ae founded2002 AIT and SAFC founded2003 AFI founded and Gifu Plant opened
2008 AMIT and AMC founded2009 AFU founded as a result of merger between
A-USA and LFG
2010 Seki Plant opened

Financial Section

1980 Micro-alloyed Steel/Combined hot and cold
forgings developed
1982 Multi-stage Steelmaking Process technology
developed
1985 Billet continuous-casting machine commenced operation
1986 Stainless steel H beam commercialized
1988 Free Cutting Tri-composite Micro-alloyed Steel/titanium shapes commercialized

Environmental Section

In the 1990s, the production trend shifted from mass
production and consumption to manufacturing of diversified
products in small quantities. In response to accelerated
demand for quality products of highly enhanced value, wedeveloped speciality steel like Short-time Carburizing Steeland High Strength and Tough Bainitic Micro-alloyed Steel. In

2001 Stainless steel bars for “SUSCON” commercialized
2002 Stainless steel shapes “Screen Bar” commercialized
2003 New titanium alloy “ASTA” developed/“TetsuRiki
Agri & Aqua” commercialized
2005 “G 2 Motion Sensor” commercialized
4-Pole MAGFINE motor for automobile seatcommercialized2009 3-axis electronic compass for handsets
commercialized

AICHI STEEL REPORT 2010

7

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あああああ
ああああ
Featureあ
Story
あああああ
あ
ああああ

Marking the 70th
anniversary of
Aichi Steel’s founding
1940-2010

Environmentally Friendly
ISO 14001 certification. To enhance public awareness of ourenvironmental conservation activities, we have published anannual “Environmental Report” (currently “Aichi Steel Report”)
since 1999.

Establishment of an environmental
management system
In the 1970s, in line with our development during the years ofJapan’s rapid economic growth, we accelerated our efforts
to take countermeasures against air, water, noise and othertypes of pollution. In 1971 we established an environmental
management system by setting up an environmental committee
and deciding on pollution control policy and measures.
In response to increasing awareness of environmental issues,
we launched our Environment Month campaign in 1973. In thefirst round of the campaign, various events were held, including
tree planting at our plants,
a commemorative lecture, aslogan and poster contest,
and a plant tour by theCompany president.

As a long-established recycling-oriented
enterprise, we take on the challenge ofdeveloping environmental technology
Since our founding in 1940, from useless scrap iron we havebeen reproducing specialty steel in electric arc furnaces. The
scraps include iron scraps generated in the city and steel
remnants from auto manufacturers and our manufacturing
process. We have been promoting the recycling of suchbyproducts.
Recently, we have also been recycling byproducts otherthan scraps of iron and promoting the development of newtechnology. Our efforts include the recycling of automobile
shredder residues (debris generated from shredding of scrapcars), valuable metals other than iron (nickel, aluminum etc.),
residues generated by dissolution of scrap iron in electric arc
furnaces. As a member of society, we will continue to take on
difficult challenges.

Electric are furnace dust collector
in Chita Plant (1970)

Multiple environment management
With the advance of global development, environmental
problems such as acid rain, ozone depletion and global
warming have become increasingly complex global issues.
In 1996, we placed environmental preservation activities
among the most important issues for us, and establishedthe Aichi Steel Environmental Charter. In 1998, our Chita,
Kariya, Forging, andHigashiura plants acquired

Briquettes made fromwaste nickel
Lecture for obtaining
ISO 14001 certification(1997)The History of Aichi Steel ②
Timebackground1967 Basic Law for Environmental Pollution Control

A.D

Environmental
and social
contribution
activities

8

AICHI STEEL REPORT 20101960

1973 1st oil crisis
1979 2nd oil crisis
1970
1971 Environmental Task Force/Environmental
Division established1973 1st Environmental Management Month1977 Excellent Heat Management Plant Award by
Nagoya Bureau of Economy, Trade and Industry(Chita Plant, Forging Division)
1978 Excellent Heat Management Plant Award by
Nagoya Bureau of Economy, Trade and Industry(Kariya Plant)
Prize of the Director-General of the Agency of
Natural Resources and Energy (Chita Plant, Forging
Division)

1980
1986 Excellent Energy Management Plant Prize of
Ministry of International Trade and Industry (MITI)(Chita Plant, Forging Division)
1989 Aichi Steel Gymnasium ASCOM opens

Business Update

For local communities and society

The Aichi Steel Volunteer Fund

D o n a t i o n t h ro u g h l o c a lauthorities*1: By fiscal 2009, a total of 73 million yen worth of goods had been
donated.

Giving children the pleasures ofmanufacturing
As a manufacturing enterprise, Aichi Steel gives children an
opportunity to experience manufacturing.
Our employees and trainees in the Aichi Steel Technical Training
Institute, participate as instructors in workshops held by TokaiCity’s Invention Club for School Children to show children
how pleasant it is to make something. Moreover, Aichi Steel’s“Forging Technology Museum” receives visitors interested in
manufacturing.
In 2010, the Company celebrates its 70th anniversary inbusiness. Taking this opportunity, we are planning to visit local
schools to give a “lesson about iron.” The aim is to teach children
more about the superior raw material “iron” and convey thepleasure and importance of manufacturing to future generations.

1990
1991 Recycling of used paper commences
1992 Resource Recycling Promotion Dept. established1993 Aichi Steel Volunteer Fund established/Environmental action plan developed
1996 Aichi Steel Environmental Charter established1997 Nishi-Chita Industrial Road cleanup campaign launched1998 ISO 14001 certificate acquired at Chita, Kariya, Forging and Higashiura plants

Invention Club for SchoolChildren2010 COP 10 to be held in Nagoya

Financial Section

1992 Rio Declaration on Environment and Development
1993 Basic Environment Law
1997 Kyoto Protocol adopted

Environmental Section

In the early 1990s, a fund-raising scheme - the forerunner ofthe Aichi Steel Volunteer Fund (1993) - was launched in which
employees donated money to be spent for courtesy gifts(e.g. gifts given in return for funeral offerings or Valentine’s
chocolate given at the workplace out of a sense of social
obligation). At present, employees who support the purposeof our volunteer fund have donated money to the Fund to
be used for gifts relating to ceremonial occasions, and theSocial Relations Section

Salt-making (left) Employees working to relieve severe foodshortages after the war (right)

raised money by the Fund has been contributed in the form ofgoods*1 to welfare organizations and other local facilities.

CSR Management

Aichi Steel has a long history of corporate philanthropy. Since
its founding in 1940, the Company has extended assistanceto the local community.
In 1945, to local communities we donated salt and charcoal
briquettes we made, to help alleviate severe food and fuelshortages. Whenever a typhoon or other disaster strikes,
we cooperate in relief activities, in addition to providing relief
supplies and monetary donations. When a severe typhoon
hit Ise Bay in 1959, we helped with local rescue efforts bysearching for missing people by boat throughout the flooded
area amid the floating driftwood.
As a corporate citizen, we are determined to pursue the spiritof “helping others.”

Feature Story

The spirit of “helping others”

2000
2000 Forging Technology Museum opens
2001 Pb-free, ultra free cutting steel “ECOSCUT-Steel” developed
2003 “TetsuRiki Agri & Aqua” commercialized
2005 Slag recycling technology “ANRP” developed
2006 Tree-cutting activity participation commenced for forestation improvement in
Kiso Village
2007 Nickel recycling briquette facility installed/ Grinding material “AS Shot”
commercialized2008 Global Warming Prevention Committee launched

AICHI STEEL REPORT 2010

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FeatureStory

Aichi Steel andBiological Diversity
In October 2010, the 10th meeting of the Conference of the Parties (COP 10) to theConvention on Biological Diversity (CBD) will be held in Nagoya, Aichi Prefecture.
How should Aichi Steel address the issue of conservation and sustainability as tobiological diversity? Regarding this issue, we had an interview with Dr. Ryo Kohsaka,
associate professor at the Graduate School of Economics at Nagoya City University.

Engage in activities that make full use of regional characteristics and thatappeal to people’s senses
You gave us a lecture in June 2009. Could you tell us what impression you had at the time?
Kohsaka I had the impression that your employees’
environmental awareness is very high. They seriously
considered and discussed what they can do when theconcept of biodiversity is applied to their workplaces.
What was most impressive to me was your company’s
product “TetsuRiki Agri.” I found it interesting to learn that,taking full advantage of your deep knowledge of steel,you had developed a product that is not easily associatedwith steel. In addition to your contribution to environmental
protection via your products, it is also necessary to expand
the scope of your activities to cover land use and regional
contribution.

In June 2009, a lecture entitled “Challenges to be Addressed byCompanies and Individuals to Protect Biodiversity” was given before
approx. 100 employees.

From the perspective of corporate social responsibility, what kinds of activities do you think arenecessary for Aichi Steel?
Kohsaka One such activity would be a tree-planting
campaign, which is relatively easy for a company to conduct.
What is important here is to consider where and how to plant
trees so as to achieve synergetic effects, rather than justplanting trees around your plants. Biodiversity has a lot to dowith how the land is used.
If you are going to take your environmental activities one stepfurther, you can engage in positive efforts that make people
aware that a company’s know-how and byproducts can beeffectively used for society and living things.
Aichi Steel is based in the Tokai Region, where manufacturing
and agriculture are key industries. Making full use of local
characteristics, you might carry out activities that bring
benefits to both manufacturing and agricultural industries. For

example, you can work together with local people to growcrops using TetsuRiki Agri, so as to promote local production
for local consumption. Your activities will appeal to local
people’s sensitivity via food. If those involved in such activities
can directly benefit
from them, it may beeasier to continue
them.

Biodiversity： a concept that encompasses variety within species, rich ecosystem comprising species, and genetic diversity.
・Recycling-oriented enterprise
We manufacture products by recycling discarded materials(scrap iron) generated in auto and parts manufacture.
(See p. 32)

Efforts toward
・Recycled nickel(Reducing mine development)
protecting
We promote the recovery and recycling of nickel, a rare
biodiversity metal, from byproducts generated from our stainless steel
manufacturing process.
Nickel recycling briquette facility

10

AICHI STEEL REPORT 2010

Dr. Ryo Kohsaka
Associate Professor
Graduate School of Economics, Nagoya City University

From the standpoint of environmental preservation, the conservation of biodiversity will be an
important issue in conducting business activities. What do you think is expected of Aichi Steel?
unrelated to biodiversity – including energy- and resourcesaving – can contribute to the protection of biodiversity. The
development and manufacture of new products with lower
consumption of resources and energy can reduce resource
development pressure on other countries, eventually leading
to protection of the ecosystem.

Is there anything we should consider in conducting business activities as the Aichi Steel Group,
including overseas bases?
Kohsaka

In light of the fact that you are supplying yourproducts to various areas, including foreign countries, I think
it is important for you to consider what impact your products
might have on the environments of the areas in which they areused. Moreover, if you are planning to expand your businessAs a company that procures resources from around the world, manufactures products and markets
them worldwide, we must engage in the development, manufacture and sale of products from a
global perspective, while paying due consideration to ecological preservation. We have so far beencommitted to the preservation of biodiversity in the capacity of a recycling-oriented enterprise. In
the future, however, we will develop more positive and voluntary approaches to this issue fromthe perspectives of manufacturing and CSR, taking full advantage of our environmentally friendly
products and technology.

Financial Section

・Signing the partnership for promoting the Declaration of Nippon Keidanren (Japan
Business Federation) on Nature Conservation.
・Participation in Chubu Economic Federation’s project for COP10 (“TetsuRiki Agri”
appears in the leaflet.)・Addition of the preservation of biodiversity to the list of our initiatives forenvironmental conservation. (See p. 26)
・Participation in tree-cutting activities for forestation improvement in Kiso Village,
Nagano Prefecture (Green Challenger, NPO)・Cooperation in Tokai Forestation for the 21st Century Campaign
・Support of environmental activities by NPO, Workshop of Iron Nutrition
Enhancement in Plants (WINEP*)

Environmental Section

After theinterview

into developing and emerging countries, it is necessary toseek a new business model for a sustainable relationship withthe ecosystem.

Social Relations Section

Seek a new business model that enables a sustainable relationship with theecosystem

CSR Management

Kohsaka I want you to be a front-runner in ecologicalpreservation by yourself, or by working with the industry.
It is not easy to make a quick decision on what specificmeasures to take. However,some factors affecting theecosystem are the same as those that contribute to climatechange. You don’t have to draw a clear line between thetwo issues. Your efforts to reduce CO2 emissions can leadto preserving biodiversity. Efforts that seem to be considered

Feature Story

Preserve the ecosystem by promoting energy- and resource-saving efforts

Business Update

After graduating from the Agricultural Faculty, University of Tokyo, he joined the Regional
Environmental Center for Central and Eastern Europe in Hungary. He earned a master’s
degree in the U.K. and a PhD at the Faculty of Forest and Environmental Sciences,
University of Freiburg, Germany. He worked for the UNEP CBD Secretariat (Montreal,
Canada) in 2006. In April 2008, he assumed his current position as associate professor.
He also serves as advisor to the Aichi-Nagoya COP10 CBD Promotion Committee and as
a visiting researcher at United Nations University IAS.

Employees participating in the Tokai Forestation
for the 21st Century Campaign* A nonprofit organization that aims to provide accurate and up-to-date information concerning improvement of the global environment by iron nutrition,and to improve the environment and the quality of life.

AICHI STEEL REPORT 201011

CSR Policy
We practice CSR management to gain trust from all our stakeholders.

CSR Enhancement Month
To disseminate and enhance CSR consciousness among
employees, we set October as the Aichi Steel Group CSR
Enhancement Month. In fiscal 2009, the second year since
the establishment of the Month, workshops were held at
all worksites to confirm our CSR philosophy, Medium-Term
Plan and achievements, using Aichi Steel Report 2009 as a
textbook. The “1S” campaign was promoted at all departments
and a community cleaning program “Clean Aichi Day” (see p.24)
was also implemented, in which employees from the entire
Aichi Steel Group participated.

Cultivation of the “1S” culture
The “1S” slogan conveys our message that our first priority
should be placed on the three Ss, that is, “Shojiki” (sincerity),“Seisou” (cleanliness) and “Safety.”
We will actively promote the “1S” until it is established as partof our corporate culture through various activities, including
featuring 1S in every issue of our company newsletter anddisplaying the 1S banner.

Workshop using Aichi Steel Report 2009

Aichi Steel Group’s CSR Concept*1 J-SOX: The Japanese version of the U.S. SOX (Sarbanes-Oxley Act). This Act was created using the SOX as a model and designed to improve the accounting auditing system
and internal control of companies in Japan.
*2 Internal control: Activities and systems to control, monitor and secure the soundness and efficiency of operations, as part of corporate governance, by following standards andprocedures established for individual operations.
In particular, standards and systems to prevent improper financial accounting should be established, and auditing should be conducted to verify that they are operated properly.
*3 AICHI Sprit: A slogan presenting, in an easy-to-understand manner, the management philosophy, sense of value and other basic ideas upheld by Aichi Steel as its corporate “genes”
inherited from predecessors (established in July 2006).
*4 Aichi Steel Group Action Guidelines: Practical guidelines that must be followed during business activities (revised in January 2007)

Please refer to our Website

12

AICHI STEEL REPORT 2010

http://www.aichi-steel.co.jp/ENGLISH/com̲info/index.html（Aichi Steel Group Action Guidelines）

○: Target or significant result achieved△: Target not achieved or poor activity result
×: Serious problem or improvement suggested

Category
Ⅰ Activity
management

1 Diffusion of and strict adherence to
CSR Policy among all relevant parties
including suppliers• Promoted CSR Enhancement
Month.
• Prepared CSR guidelines for
entire supply chain.

△• Enhance activities to promote
dissemination of “1S.”• Enhance communications withstakeholders.
• Promote CSR throughout the
supply chain.

Ⅱ Contribution
through businessactivities

2 Development and provision of
products/technologies that can satisfy
eco-minded customers• Increased orders for hybridexclusive parts.
• Proposed products that matchcustomer needs.

○• Develop materials/parts withadvanced functions ahead of
automobile evolution.

3 Innovation for environment-conscious
manufacturing and contribution
through resources recycling• Reduced slag treatment andimproved yield rate throughProject Z100 activities.

○• Evolve into a recyclingoriented enterprise by pursuingthe 3R (Reduce, Reuse,
Recycle) technologies.

4 Community activities resulting inenvironmental/social contribution• Implemented the “Extended
Clean Aichi Day” program.
• Participated in a forestation
program in Tokai City.
→ A total of 1,637 employees
participated.

○• Support employees’ participationin volunteer activities.
• Support community contribution
activities by overseas subsidiaries.

5 Prevention of risks pertaining toenvironmental changes• Promoted “1S” campaign.
• Reviewed risks for the entire
Company.

○• Make the risk prevention
activities visible.

6 Enhancement of internal control
systems and improvement ofcompliance consciousness• Reviewed organizations andjob ladders to improve internal
control.

△• Establish a self-auditing tool anddeploy it to overseas subsidiaries.

7 Activities to preserve local and global
environments• Improved heat efficiency throughProject Z100.
• Overseas subsidiaries acquired
environmental ISO.

○

• Reduce CO2 throughimprovement of heat efficiency.
• Support ISO acquisition bysubsidiaries.

8 Human resources development andcreation of motivating worksites toimprove job quality• Improved work efficiency byusing general-purpose tools.
• Established an index based on aworksite management survey.

△• Conduct a survey on the status ofhuman resources development
and determine the development
vision.

9 Creation of a safe/comfortableworkplace environment• Promoted cultivation of a “1S”
culture.
• Implemented the “Place a handon the handrail” campaign.
• Expanded risk assessment.
• Improved the operations
assessed as comprising high risk.

△• Promote advanced safety
activities and enhance mental
health improvement activities.
• Promote operation of OSHMS(Occupational Safety and HealthManagement System).

Ⅲ Sound corporate
management

IV Employees/
corporate culture
supporting
growthEnvironmental Section

Future plan

Social Relations Section

Assessment

CSR Management

Priority activities in fiscal 2009

Feature Story

Priority items

Business Update

Medium-Term CSR Plan Priority Issues and Major
Activities in Fiscal 2009

■ CSR System

Financial Section

AICHI STEEL REPORT 201013

Corporate GovernanceWe aim at efficient and transparent corporate governance.
NEW

Appointment of “independent officer”
In response to a revision of the securities listing rules of theTokyo Stock Exchange and Nagoya Stock Exchange (Dec.
2009 and Feb. 2010, respectively), an outside auditor was
appointed as an “independent officer,” an highly independent
officer, and notification of the appointment was made to thetwo stock exchanges in March 2010.

Meetings of the Board of Directors andthe Board of Corporate Auditors
The regular meeting of the Board of Directors is held every
month, and a special meeting is called as needed. Important
decisions are made and the operating status of the Company
is reported at the Board meeting.
■Attendance rates in fiscal 2009

Meetings

Director
attendancerate

Board ofDirectors

16 times

Board ofAuditors

11 times

Corporate auditor
attendance rate
Standing
corporate
auditors

Outsidecorporate
auditors

96%

100%

63%

−

100%

85%

■Our corporate governance system

14

AICHI STEEL REPORT 2010

Compliance with the Financial
Instruments and Exchange Act
In 2009, the second year since the enactment of the Act,
the Company and its consolidated subsidiaries continued
to strengthen their control environment. As a result, theCompany was able to implement internal control over financial
reporting (J-SOX) with no “critical defects.”

Internal control system
The Basic Policy for the Internal Control System is reviewed
every year, and the status of the operation system isreported to the Board of Directors. The system with regard
to compliance, risk management and operation efficiency
improvement efforts in 2009 was confirmed to be maintained/
improved with no problems, and it was judged that norevision of the Policy was necessary in response to changes
in laws or regulations (revision of the listing rules, etc.).

Complianceand compliance with laws and regulations, and by respecting public decency.
NEW“Compliance Close Call” activities

To enhance the compliance consciousness of employees, we
provide educational programs for each job level of employees.
The “Legal Affairs News” was also issued to deliver information
about compliance and laws to all employees by e-mail.
Training sessions for each job ladder: eight ladders (targetingfrom freshman employees to major executives)
Themed sessions: Twice

Entire Company members were encouraged to report theirexperiences close to compliance violation and predicted risks,
and a total of 188 cases were reported. These cases were
presented at the Compliance liaison meetings (four times ayear) to discuss specific advice for each case.

Session title

Study session on
Anti-Monopoly Act(Jan.–Mar.)

PurposePurchasing staff
To ensure(including participants
compliance with thefrom Group
Subcontractors Act
companies)

Sales staff

Information security control

85

Traffic safety

33

Purchasing

20

Labor

5

Other

45

Total

188

To ensure compliancewith Anti-Monopoly
Act

Aichi Steel “Hotto” Line is a hotline system to encourageinternal reporting of improper actions. During fiscal 2009, the“Hotto” Line received nine internal reports. Reported facts
were investigated and measures to correct the improper
actions were taken. A notice was distributed throughout theCompany to prevent recurrence.
Rules for operation of the Line and protection of privacy of thecallers are provided in the Corporate Ethics Rules, and arealso put on bulletin boards placed at employees’ restaurants,
etc., to be known by all employees.
■Calls to “Hotto” Line
Fiscal year

2005

2006

2007

2008

2009

No. of calls

2

11

5

5

9

Environmental Section

Study session on Subcontractors Act

Operation status of the “Hotto” Line

Social Relations Section

Issuance of Legal Affairs News
Nine times for employees (Anti-Monopoly Act, Subcontractors Act,labor issues, sexual harassment, power harassment, information
security control, etc.)
Twice for officers (explanation on other companies’ cases, generalknowledge on compliance)

CSR Management

Study session on
Subcontractors
Act(Jan.)

Target■Classification of the cases

Feature Story

Compliance education program

Business Update

We always strive to be a reliable enterprise through protection of human rights■Compliance Promotion System

Financial Section

AICHI STEEL REPORT 201015

Risk Management
We make efforts to develop a complete system to avoid risks pertaining to ourbusinesses.
Progress status

Information Security

At the meeting of the CSR Committee in November 2009,
the progress of the risk management efforts was reported
and necessary follow-up actions were discussed. The risk
map for the entire Company was revised in response to
the changes in the management environment.

■Management system and roles of each department

NEW

Introduction of a Safety Confirmation System
In August 2009, the “Safety
Confirmation System” was introduced
to avoid panic in communication when
an earthquake occurs, and to quickly
provide information on the status of ouremployees and their family members.

NEW

Emergency drill in cooperation with Fire
Department
In September 2009, a companywide emergency drill was heldin collaboration with the Tokai Fire Department to minimize
the damage from disasters.

■Information Security Control

Fire fighting drill

AED operation demonstration

NEW

Actions against the new influenza
In reaction to the outbreak of the new influenza in Mexico in April
2009, we took the actions listed below to secure the safety of
our employees/their family members and avoid the suspension/
slowdown of our businesses. As a result, the influenza had no
impact on our businesses nor on the health of our employees.
• Distributed a manual for actions against the new influenza. (May)• Clarified the rules for attendance of employees who are infected
or in close contact with those infected. (May)• Prepared/stored “preventive goods.” (May)• Released information about infection status inside the Company
and raised an alert. (May – Mar.)• Had employees check their temperatures every morning.
(Sep. – Mar.)*The same actions were taken for our consolidated subsidiaries both
inside and outside Japan.

16

AICHI STEEL REPORT 2010

We have set May and October each year as “Information
Security Control Enhancement Months,” during which
intensive educational activities to enhance employees’
awareness are conducted.
• “Clear Desk, Clear Screen” campaign• Information security control educational
programs for each job level• Baggage inspection• Auditing of e-mails sent outside of theInspecting baggage
Company

Protection of personal information
We experienced no incidents of personal information leak infiscal 2009.
Please refer to our Website

http://www.aichi-steel.co.jp/ENGLISH/p̲pol/index.html

With Our Customers
striving to maintain and improve a reliable quality assurance system.

Business Update

Placing the highest priority on securing the trust of our customers, we are

Quality
Quality Management System (QMS)
In accordance with our policy of “Quality First,” we strive toestablish a business structure trusted by customers on thebasis of our ISO 9001 certification, and deliver attractive
products that meet customers expectations and needs.
Under our Medium-Term Global Quality Plan 2012, we will
establish a quality assurance system that enables us to leadother companies in quality competition.

Kariya Plant

I S O 9 0 0 1

Apr. 1993

Chita Plant

I S O 9 0 0 1

Dec. 1995

Forging Plant

I S O 9 0 0 1

Nov. 1997

Electromagnetic products

I S O 9 0 0 1

Mar. 1998

Dental materials

ISO13485

Jul. 1999

Dental materials

EC Directive (93/42/EEC)

Jul. 1999

Technical Development Div.

ISO17025

Sep. 2007■Consolidated subsidiaries
Omi Mining

I S O 9 0 0 1

May. 2002

Aiko Corp.

I S O 9 0 0 1

Apr. 2005Asdex

I S O 9 0 0 1

Jun. 2008AFCI S O 9 0 0 1

Apr. 2003

SAFC

ISO/TS16949

Aug. 2006

AIT

ISO/TS16949

Mar. 2008AFII S O 9 0 0 1

Nov. 2008

AFU

ISO/TS16949

Sep. 2009

AMC

ISO/TS16949

Expected to acquire

ISO/TS16949 is a quality management system standard for automobile
businesses.

Raising quality awarenessQuality education

Environmental Section

Aiming to develop human resources with sufficient knowledgeof quality management from the viewpoint of customers,
educational programs on quality management, quality-related
losses and complaints are provided for each job level (sixladders from freshmen to executives) based on the MediumTerm Quality Plan.

ISO audit

NEW

President’s commendation for“Quality” achievements

Third-party labeling• New JIS mark• Marks issued by shipping classification societies• Marks issued by TÜV (Technical Inspection Association in Germany)

AICHI STEEL REPORT 2010

Financial Section

Awards for quality-related achievements were established to
be given in the annual president’s commendation ceremonyin March every year, with the aim of raising motivations for
quality improvement activities.
In fiscal 2009, six cases were honored by the Excellent
Performance Award and the Good Performance Award (onecase each in the customer satisfaction category and twocases each in the good product manufacturing category.)

Social Relations Section

In fiscal 2009, we experienced no serious problems related
to quality defects, etc. Based on the review on the results ofquality activities and the Medium-Term Quality Plan policies,
we will promote the actions listed below as our priority items
for fiscal 2010.
• Reinforce shipping quality assurance to completely prevent
outﬂow of serious complaints• Review (reinforce) quality assurance basis• Complete and disseminate the activities to establish
necessary conditions (Z100 quality losses reduction)■ISO certification acquisition

CSR Management

Quality assurance activities

Consolidated subsidiaries in Japan and overseas have striven
to acquire ISO (ISO9001) certifications.

Feature Story

Basic Quality Policy

ISO9001

17

With Our Customers

Enhancement of customer
satisfaction (CS)NEW

Technical Service Section transferred
to Sales Head Office
In January 2010, the Technical Service Section that had beenplaced inside the Quality Assurance Division was transferredto the Sales Head Office, with the aim of hearing the voicesof wider variety of customers. This transfer enabled quick andproper response to customers’ technical and quality needs.

Gathering opinions of major
customers
A survey to gather our major customers’ opinions andevaluations is conducted on a regular basis regarding thequality of our specialty steel, forgings and stainless steel
products. Based on this survey, we determine the quality
issues that require improvement and take actions, so as tofurther improve customer satisfaction. The results of thisprogram were also reported at the ISO Review Committee
meeting held in March. We will make continuous efforts topursue spiraling enhancement of customer satisfaction.

Technical exchange meetings
To figure out the needs of users, technical exchange
meetings are held about 20 times every year mainly for major
customers. The meetings serve as useful opportunities tointroduce our new technologies, collect information regarding
the latest customer needs, and provide information on ourdevelopment seeds for customers, greatly contributing to
improved customer satisfaction.
NEW

Developing new uses of stainless steel
restoring a historical structure
For restoration work of the five-story pagoda of Kuonji Templeof Mt. Minobu completed in May 2009, our stainless steel
was used as an aseismic reinforcement material. It was thefirst case in Japan in which stainless steel was used for the
restoration of a wooden historic building.

Study seminars for freshmen of theJapan Specialty Steel Distributors’
Association member companies
In April 2009, a study seminar was held for 45 freshmen
employees of the Japan Specialty Steel Distributors’
Association member companies. The purpose of this seminar
was to provide necessary basic knowledge for freshman sales
representatives of trading firms and wholesalers dealing withspecialty steel. Lectures on basic technical knowledge were
given, and participants were also taken on a plant tour todeepen their understanding.

Stainless steel intermediary posts
and tie-rod clasps

Five-story pagoda of Kuonji Temple

Plant tours during fiscal 2009
A total of 1446 people from our major customers visited ourplants in 209 tours.

VOICE

Imagining the happy faces of patients“MAGFIT,” dental magnetic attachment, being used by 2 million patients
Yoshinobu Sugiura
Customer Service Desk, Dental Business Dept.
We respond to various inquiries from dentists, the practical users of our products,
at a free-dial service desk every day. Our service includes relaying questions
concerning specific dental treatment to professional advisors, which is highly
appreciated by the users. I feel particularly happy and fulfilled when I hear that our
product has enabled patients to bite easily. In this aging society, all of our staff
members hope that this system will help patients having troubles with their teeth
regain comfortable eating habits.

18

AICHI STEEL REPORT 2010

MAGFIT (magnet)

Keeper (magnetic metal)

With Shareholders/Investors

We procure raw materials,
materials, facilities, etc., from allover the world, in compliance withlaws and regulations.

To help shareholders/investors
correctly understand the Aichi SteelGroup, we try to ensure timely andfair information disclosure.

■Aichi Steel Purchasing Policy• Sound corporate activities• Selection of suppliers based on the open-door policy*• Co-existence and co-prosperity based on mutual trust• Creation of environmentally friendly products throughpromotion of “Green Purchasing”*Fair and just attitude of selecting suppliersNEW

Supply Chain CSR“CSR Seminar”

M r. E i i c h i r oAdachi of theJapan ResearchInstitute spoke on“What is CSR?”

Timely and proper disclosure
We strive to ensure timely and proper disclosure of ourcorporate information for investors and to enhance the internal
system related to correct and fair information disclosure.
In fiscal 2009, to help deepen understanding of ourmanagement and business strategies, we actively
disclosed timely information, taking the opportunities ofthe shareholders’ meetings, financial results briefing, press
release of the financial results. Independent meetings withanalysts and institutional investors were also held.

Social Relations Section

To help our major suppliers deepen their understanding of CSR,
a “CSR Seminar” was held in October 2009, in which officersof the Aichi Steel Group and representatives of our suppliers
participated.

CSR Management

We believe that one of the most important actions in businessis to return profits to shareholders.
To respond to the trust and expectations of shareholders,we will make efforts to create attractive corporate values forinvestors through establishing a high profit-earning foundation
for key businesses and promoting a business structure reform
focusing on one-of-a-kind products. We believe it is important
to conduct business activities in accordance with our Mission
Statement and CSR policies, and to meet the expectations of
all stakeholders.

Feature Story

Returning profits to shareholders
and creation of corporate values

Business Update

With Our Suppliers

Shareholders’ meeting (Jun.)

In November 2009, the CSR Guideline for Aichi Steel
Suppliers was established. Based on this guideline, we asked
our suppliers for cooperation and held workshops.

Financial results briefing (May, Nov. in Tokyo)
Press release of financial results (Jul., Oct., Feb., Apr. in Nagoya, Tokyo)

Supplier diagnosis sheet
In November 2009, we asked our customers to evaluate theirown CSR promotion status using the “supplier diagnosis
sheet” prepared by Aichi Steel, and analyzed the strengths
and weaknesses of each company.

Disclosure

Environmental Section

Preparation of a guideline and request forcooperation

Information disclosure are handled under the system below,
to ensure timely, complete and correct disclosure.

NEW

Internal purchasing audit
An internal audit was held in November 2009 to determine
the compliance status of the purchasing-related rules onsite.
Instructions to correct the problems found as a result of theaudit were given.

AICHI STEEL REPORT 2010

Financial Section■Information Disclosure Preliminary Review Committee

19With Employees
We promote the creation of safe/healthy and lively workplaces where all
employees feel motivated and work actively.

Labor safety and health■ Basic labor safety/health concept

Establishment of safe operation
procedure manuals
Advance abstracting dangers(1) Strengthening of “heart, mind and body”
Heart: Strong belief and tension to pursue safety
Mind: Careful observation and thorough investigation of true causes
Body: Powerful actions, dedicated efforts(2) Visualization
Visualization of problems (bad matters, bad conditions)
Visualization of good points (improvement cases, knowledge,
experiences)
Visualization of standards, changed points or other status■ Basis of activities
Focusing on comprehensive safety and health management,
make straightforward efforts for improvement.
Aiming to achieve “no accidents in all workplaces throughout
Aichi”Development of safety-conscious
human resources
Everyone should protect themselves of their own initiative (bynoticing risks).
Bosses should protect their subordinates (by foreseeing risks).

Small group activities
In small group activities, with the aim of creating workplaces
where all members are able to actively participate in safety
activities, the development of human resources capableof thinking seriously about safety and taking proper
actions (as safety-conscious human resources) has beenpromoted based on the “1S” policy. About 300 small
groups are engaged for a specified period in the activities
on their registered themes, such as risk prediction training
and correction of dangerous points. At the year end, theimplementation status was evaluated for five aspects.The
evaluation in fiscal 2009 revealed an improvement of 0.4
points from 2008.

NEW

Thorough implementation of basic
safety actions
As the number of accidents in simple
operations/actions is increasing, the basic
rule to “place a hand on the handrail when
you walk on stairs” was established, withthe aim of raising safety consciousness.
During the annual safety emphasis monthof January, executives and managers
took the initiative to show good examples,hoping to improve the safety awareness of
employees.

NEW

Drawing up of operation manuals
focusing on the movement lines of eyes,
hands and legs.
For each operation, the movement lines of the eyes, hands
and legs of the operator are reflected in the operation manual.
Establishment of an operation manual that enables anyone
to perform safe operation just by glancing at the manual was
included in the Quality Medium-Term Quality Plan.

Creation of safe worksites
Visualization of danger levels

Worksite improvement through risk
assessment
The common targets for the entire Company, such as“reducing non-stop operations” and “separation of people
and vehicles” and the targets for each department such as
the “improvement of facilities that stop frequently” and the“improvement of operations that the operators feel are difficult
or dangerous” are both pursued. These targets are all set
based on past accidents, and improvement actions are taken
according to the annual plan to reduce dangerous positions.
After improvement is made, risk assessment is conducted tovisualize the remaining danger (residual risk).

Participation by all
Worksite improvement is promoted by all members. The
headquarters departments notify their registered themes to theirstaff members every term, while associated business operatorsand consolidated subsidiaries disseminate information about
accidents and work time losses.
■ Frequency of accidents and work time loss

We see a decreasing trend in the long run. We will strive to achieve andmaintain “zero” accidents.

20

AICHI STEEL REPORT 2010

Business Update

NEW

NEW

AED operation training

From October 12 to 23, 2009, the “Healthy Menu Week”
event was held at our employee restaurant during the Aichi
Steel CSR Enhancement Month. The restaurant offereddifferent menus every day that were low calorie or allowed theeasy burning of fat.

Feature Story

Our consolidated subsidiaries are increasingly providing
training programs for AED operation, aiming to contribute to
the safety of employees and members of the local community.
The Aichi Information System and the AFU (USA) voluntarily
offered the AED operation training program to prepare
employees for emergencies.
Aichi Information System Corporation: September, 11participants
AFU (USA): March, 9 participants

Healthy Menu Week

Mental health activities in fiscal 2009

■Rate of work time loss resulting from mental healthproblems

Training at Aichi Information System

Social Relations Section

Efforts for improvement of traffic
safetyCSR Management

Thanks to the steady and careful activities of our specialized
mental health nurses and advisor doctor, the mental health of
our employees improved slightly in fiscal 2009.

We promote educational activities for prevention of traffic
accidents.
• Stand guard on 10th, 20th and 30th every month.
• Traffic safety ladies’ activities (four times annually)NEW

Environmental Section

Lifestyle-related diseases prevention
seminarIn December 2009, the “Lifestyle-related diseases prevention
seminar” was held with the aim of preventing lifestyle-relateddiseases, in which 70 people participated.

VOICE
Hisakazu Nakazawa, Forging Sect.No.3, Forging plantIf you get injured, it distresses you and your family members. To prevent our employees from experiencing
such distress, I have promoted the creation of safe worksites and the development of safety-conscious
human resources, maintaining high safety awareness.
It is extremely difficult (though seemingly easy) to keep the safety awareness of all members. I madevarious efforts to keep their motivations; I prepared a sheet for gratituding safety, held risk prediction
trainings in small groups, and visualized the results of these activities.
For four years since the beginning of our activity, our team has had no accidents. I will continue to havehigh safety awareness to help all members work in good health.

AICHI STEEL REPORT 2010

Financial Section

Safety is what makes you work actively

21

With Employees

Human resource development /employment

Work-life balance (WLB)

Communication events
Various events are held to promote communication among
employees and their family members.

To support the balancing of work and private life, a survey
for child-raising assistance was conducted in October
2009 targeting our employees, to figure out the problems
in the current situation. Based on the results of the survey,
the applicable period of the short-hour work system wasprolonged to each child’s completion of the third year of
primary school, one year longer than the current system.
■Ongoing m aj or W L B pr ogr am s
Happy Life Seminar (June, attended by 89 employees at the age of 55,
and their spouses)

Futsal competition (Apr.)“Money Plan for Employees in Their 40s” Seminar (Nov., attended by
31 employees in their 40s and their spouses)

Mini-mini sport festival (Aug.)“Money Plan for Employees in Their 40s” Seminar

NEW

Saiban-in System (lay judge system)
In response to the commencement of the Saiban-in (lay judge)
system in May 2009, we reviewed our Office Regulations. To
enable our employees to fulfill this national obligation, “special
holidays (paid)” are granted to employees who attend thecourt as the lay judges.

NEW

Establishment of the “supervisor”position
In January 2010, for the purpose of enhancing manufacturinglines in plants,“supervisor” was newly established under the“assistant manager”.

Enhancement of collaboration between
the Company and the workers’ union
Aichi Steel adopts the union shop system, under which
periodical meetings are held in June, September andDecember to facilitate smooth communication between
the Company and the workers’ union. In fiscal 2009, in
response to rapid changes in the economic environment, an
extraordinary meeting between the Company and the union
was held in November. The current situation and problemsof the Company were explained so as to be shared between
both sides.

Actions to prevent child labor and forcedlabor in foreign subsidiaries
We investigate our subsidiaries in Indonesia and Thailand
every year to confirm that there are no child labor or forcedlabor cases. In fiscal 2009, no problems were found in theinvestigation. In the future, we will conduct onsite investigation
through a wider range of our foreign subsidiaries.

22

AICHI STEEL REPORT 2010

Business Update

NEW

Workplace management survey
In April 2009, to clarify the current management capacity andthe problems of each workplace, a questionnaire survey on
workplace management was conducted. The results of thesurvey were reflected in each workplace to be used for future
improvement activities.

Labor Data
■ Labor composition
FY2007

FY2008FY2009

2,340

2,327

2,328

2,331

2,330

238

241

247

253

263

2,245

2,233

2,224

2,227

2,221

95

94

104

104

109

Average age(years)

39.2

39.2

39.3

39.4

39.5

Average service(years)

19.6

19.7

19.3

19.8

20.0

Tur no ver rate (%)

0.5

0.4

0.8

0.8

0.3

Vo l u n t a r yre s i g n a t i o n f o r
p e r s o n a l re a s o n(persons)

13

10

18

17

10

Managers(persons)
Male (persons)Female (persons)NEW

Promoting educational programs for
AVI-21
Amid the severe business environment, we promoted
educational programs (Toyota process improvement, etc.)
for implementation of the AVI-21 (Aichi Value Innovation;
operation efficiency improvement initiative). After registering
their promoters and target issues, each department was given
lectures and practice exercises, and then addressed actual
operational issues.
The results of this initiative were presented for the entire
Company at the AVI-21 case exhibition (Nov.).

■Users of the Nice Family System
FY2005

FY2006

FY2007

FY2008FY2009Child care leave(persons)

6

9

8

8

11

Shorter work
hours (persons)

1

7

13

7

6

CSR Management

FY2006

Feature Story

FY2005
To t a l w o r k e r s(persons)■Registrants to the Nice Senior* System
FY2005

FY2006

FY2007

FY2008FY2009

15

25

50

69

55

*Those who are re-employed between the ages of 60 and 64.
The figures above are the number of registrants in the Nice Senior
System as of the end of each fiscal year.

Study session (with 128 participants) AVI-21 case exhibition■Employment of persons with disabilities

NEW

Discussion meetings with President for
section managers

FY2006

FY2007

FY2008FY2009

26

31

30

29

34

Employment rate (%)

1.3

1.6

1.6

1.5

1.8

Achievement
status ofthe legal
employment rate
(%)

81.3

91.2

88.2

85.3

100

■Usage rate of annual paid vacations

Usage rate (%)

FY2005

FY2006

FY2007

FY2008FY2009

50.0

50.5

48.0

69.0

54.0

Environmental Section

For enhancement of leadership, discussion meetings with
President were held in small groups two or three times amonth for all of the targeted section managers. By having
direct dialogues with President, participants were expected tounderstand the leader’s viewpoint.

FY2005
Employees withdisabilities(persons)

Social Relations Section

Nice Seniors(persons)

Usage rate against 20 days granted

I want to work on various projects, learn many things
deeply and improve myself.
Masahiro Waseda

Development&Engineering Dept., Tetsuriki-Agri Business Div.

I am currently engaged in test cultivation and analysis of plants using TetsuRiki-Agri. Every finding in
my work gives me great inspiration. Instead of giving up anything because I am in a wheelchair, I will try
as many types of work as possible and learn many things deeply, hoping to become a trusted person
responsible to take on any job. Though I am new in this workplace and currently learning my job, I hopethat I will be of some help to the other members and be able to propose new products, etc., in the future.

AICHI STEEL REPORT 2010

Financial Section

VOICE

23

With Community and Society
As a corporate citizen, we participate in social contribution activities to achieve
mutual support and mutual growth of the Company and the community.
PolicySetting the four keywords of “Clean,” “Green,”“ C r e a t i v e ” a n d “ Vo l u n t e e r ” a s o u r f o c u s e s
f o r s o c i a l c o n t r i b u t i o n a c t i v i t i e s , w e p ro m o t ecommunity-oriented social activities.
■ Number of persons who participated in volunteer
activities (cumulative total)

Clean
Nishi-Chita Industrial Road Clean-up
Campaigns

Green
NEW

Support for the growth and maintenance of lawns
in the gardens of Tokai City nursery schools
TetsuRiki-Agri has been used for the lawns of four nurseryschools in Tokai City since November 2009. To help school
teachers understand how to manage the lawns, we held aworkshop inviting Prof. Akashi of Miyazaki University andother experts to provide information on the growth andmaintenance of lawns.
Growing lawns in the gardens of nursery schools allows
children to run around the gardens actively, and is expected
to bring some environmentally friendly effects such as
lowering the temperature due to reduced sunlight reflection
and prevention of a cloud of dust.

• Planting flowers in front of Meitetsu Shurakuen Station(June, Nov., Mar.)• Participation in Tokai Forestation for the 21st Century
Campaign (Nov., Feb.)• Tree planting activities by foreign subsidiaries

A cumulative total of 400 participants cleaned the area aroundthe Arao Interchange of Nishi-Chita Industrial Road in April,June, August, October and February.

AFC (Philippines; July)

Clean Aichi Day
In October 2009, a total of 519 employees participated in
the event at 10 sites: the Head Office, and the Chita, Kariya,
Forging, Higashiura, Gifu, Tokyo, Osaka, Hiroshima andFukuoka blocks.

24

AICHI STEEL REPORT 2010

Business Update

Creative
NEW

In March 2010, the number of visitors to the Forging
Technology Museum, reached 20,000.

Donations by foreign subsidiaries
AFC(Philippine)

AFI(Indonesia)

20,000 pesos for victims of Typhoon No. 16,
via TSC and PEZA (Oct.)
5 million rupiahs via TMMIN and 910,000
rupiahs collected from employees, for victimsof the great earthquake off Padang(Oct.)

CSR Management• Dispatched instructors to Tokai City “Invention Club for Boys and Girls.” (Aug.)• Dispatched instructors of Monozukuri for the Momiji Festival in Shurakuen. (Nov.)• Accepted a junior high school student for job experience training. (Aug.)

Volunteer activities
Awarded a Health Minister prize forblood donation activity
AFU
(US)

Scholarships worth 4.08 million rupiahs for
local primary school and junior high school
students (Oct., Feb.)$5,000 for victims of the Haiti Earthquake via
the Red Cross (Jan.)

Community meeting (Apr. 2010*)*Postponed from autumn to April for prevention of the spread of flu.

Environmental Section

Other activities

Social Relations Section

Meat equivalent to a whole cow (12.5 million
rupiahs) for local residents for ’Id al-Adha (Nov.)

NEW

We hold a blood donation campaign in September andMarch every year. In July 2009, we were awarded a Health
Minister prize for our over 30 years of commitment to thisactivity.

Feature Story

Over 20,000 people visited theForging Technology Museum

Donations to Haiti and Chile

Activities of the Aichi Steel Volunteer FundIn fiscal 2009, the Fund donated charity gifts worth about¥3.03 million, including those contributed through ourMatching Gifts Program*.
*Under this program, we donate an amount equal to the amount donatedby you to the Volunteer Fund.

Kariya Area Community Meeting (Dec.)
Ongoing activities

Financial Section

We donated 500,000 yen to the victims of the greatearthquakes in Haiti (Jan.) and Chile (Feb.) through theJapanese Red Cross.

• Support for a Nagoya Philharmonic Orchestra welfare concert (Sep.)• Support for a blind tennis tournament (Nov.)• Support for the Tokai City Marathon (Dec.)• Support for the Tokai Junior School Indoor Tennis Tournament (Feb.)

AICHI STEEL REPORT 201025

Environmental Activity Policy
The Aichi Steel Group promotes conservation of the global environment in orderto realize a sustainable society.
NEW

Aichi Steel Environmental Charter(established in June 1996)“Biodiversity” to be added toEnvironmental Action Plan 2010

[Mission]
Aichi Steel is committed to environmental preservation in allphases of its business operations based on the recognition that
preserving the global environment is essential for the survival of
mankind, as well as for the sustainable development of business.

[Basic Policy]
All divisions will cooperate to voluntarily establish action plans,clarify objectives, and work to continuously improve theirenvironmental protection activities.
1. All divisions will work together to keep our environmental
management system up-to-date, and implement
environmental protection activities.
2. We will strictly conform to environmental regulations andimplement voluntary management and auditing to improve
the level of environmental management in all of our businessactivities.
3. We will take environmental protection into account from theplanning, development, and design stages of our products
and facilities.
4. We will work to conserve resources and energy, increase
recycling, and reduce industrial waste in all of our businessactivities.
5. We will contribute to society and to local communities by
supporting environmental protection and participating incooperative activities.
6. We will raise awareness of environmental protection in allof our employees through educational and publicity-related
activities.
7. We will contribute to environmental preservation by publicly
releasing information on policies related to our environmental
efforts and on technologies and methods we develop.

After announcing its participation of the “Declaration of
Biodiversity by Nippon Keidanren” Promotion Partners in
December 2009, the Company decided in March 2010 toconsider biodiversity as one of its important environmental
action items, and to add it to the Social Contribution sectionof its Environmental Action Plan 2010. From 2010 onward,
the Company will actively take part in the environmental
protection measures of the local communities, as well as
enhancing efforts in coordination with NPOs and local
governments.

The Environmental Action Plan 2015
Mitsuaki Iwai, Safety and Environmental Division
We have reached the final year of Environmental Action Plan 2010, and with a few exceptions, we
expect to achieve most of our goals. Efforts to promote activities for environmental improvement will be
continued.
Moreover, upon newly drafting Environmental Action Plan 2015 (Fifth Plan) at the end of fiscal 2010, we
as a recycling-oriented enterprise hope to set even higher goals in order to realize a sustainable society.
Companywide efforts will be made with increased environmental awareness for “setting goals more
stringent than legal standards for all emissions,” “clear visualization of individual measures to reduce
CO2,” and the like.

26

AICHI STEEL REPORT 2010

Item

2010 target

Environmental
Management

Results

Assessment

Renewal screening passed(Material non-conformance;None,
Minor non-conformance; One
incident/site or less)

Spiraling enhancement of environmental activities
Implement internal audit, setting
priority issues.
Prepare for SAFC certificationacquisition

Passed the audit.
Material non-conformance:
None
Minor non-conformance: One
SAFC certification acquisition(Dec.09)○

Complaints from outside theCompany (Problems pointed
out, administrative guidance,and complaints: No incidents/
year)

Promotion of environmental conservation No complaints
Make proactive efforts by anticipating the One incident of
future development of environment-related “Environment Close
laws and regulations.
Call”
Promote activities for compliance with
(See P28)
environment-related laws.
- Implement strict management andactions to achieve a target of 80% of thelimit values regulated by environmentrelated laws.
- Improve high-risk facilities.
- Practice “Environmental Close Call”
activities.

△

CO2 emissions: 540,000 tons/ Promotion of CO 2 emissions
reduction by energy-saving efforts
year- Change to, or concentrate processes on,energy-efficient facilities and furnaces.
- Identification of issues and reduction of loss
through heat balancing- Deliberate introduction of high-efficiency
facilities

514,000 tons/yearr○

Reduce per-unit CO 2 emissions Per-unit CO 2 emissions for
Promotion of CO 2 emissions reduction Reduce by 2%
at logistics department by(=> See P30)
outbound logistics:Reduce by by improving logistics efficiency
average of 1% per year from 2%
Improvement of cargo loading rate,
2006 level.
direct delivery

Reduction ofenvironmental
burdenDrafting ofevaluation index
ideas to be used forDR3/DR5

Green purchasing program
Deployment of new
guidelines

Systemization of green procurement Promote idea
proposals 10 cases/
program ideas
month
Adoption of CO2 reduction ideas

Disclose environmental
information to stakeholders

Publication of Aichi Steel Report
CSR community meetings

Timely disclosure

Implement environment
conservation activities

Employee volunteers’
participation in NPO tree
cutting activity for forestation
improvement
Employee volunteers’
participation in treeplanting
ceremony of Tokai Forestation
for the 21st Century Campaign

Three events

×

○

○

○

○

AICHI STEEL REPORT 2010

Financial Section

Socialcontribution

Direct: 44,345 tons/
year
Indirect: 2,432 tons/
year(=> See P33)

Environmental Section

Recycling

Landfill volume: 2% or less of Direct landfill: 28,800 tons/year Company-wide efforts, focusing on
Indirect landfill: 1,260 tons/year activities to promote Zero Emission
1990 level(1990: 58,000 tons/year)- Reduction of landfill volume by returning
Total landfill volume: 1,160
fluorine-containing slag into the electric furnace
tons/year or less
- Collection of valuable metals from neutralized
acidic sludge
Development of environmental Drafting of evaluation index ideas
burden evaluation indexing○

Social Relations Section

Global warming
prevention

Major efforts

CSR Management

Reduce CO2 emissions frommanufacturing departmentsby 10% from 1990 level.

2009 target

Feature Story

All consolidated
manufacturing companies
acquire ISO14001
certification○: Target achieved△: Target achieved but improvement still incomplete
×: Target not achieved

Business Update

The Environmental Action Plan 2010:
Results of efforts and their evaluation

27

Environmental Management
An environmental management structure has been developedin order to conduct environmental conservation activities
based on the Aichi Steel Environmental Charter.
System for environmental
management promotion

Acquisition of Environmental ISO

The Environmental Working Group strongly promotes allenvironmental preservation activities in an organized andsystematic manner.

Aichi Steel aims for 100% acquisition of ISO14001 certificationof its consolidated subsidiaries that operate production sites.
SAFC acquired certification in fiscal 2009.

■ Environmental management promotion organizations

ISO certification acquisition
Aichi SteelISO14001

Jan. 1997

Consolidated subsidiaries
Aichi Ceratec

ISO14001

Mar.

2003

Aiko Corp.

ISO14001

Jan.

2004

Omi Mining

ISO14001

Oct.

2004

Aiko Service

ISO14001

Jan.

2005

Aichi Steel Logistics

ISO14001

Mar.

2005

A

x

ISO14001

M a y. 2 0 0 7

Aichi Techno Metal Fukaumi

ISO14001(Expected to acquire in 2010)

A

F

U

ISO14001

A p r.

2003

A

I

T

ISO14001

Nov.

2006

Dec.

2009

S

s

d

A

e

C

ISO14001

A

F

F

I

ISO14001(Expected to acquire in 2010)

A

F

C

ISO14001(Expected to acquire in 2010)

Practicing “Environmental CloseCall” activities
During fiscal 2009, we received no complaints from outside
the Company. However, there was one inquiry from aneighboring company. Although the involvement of theCompany was unknown, we handled the inquiry as a “material
environmental close call,” and worked on taking improvement
measures regarding management.
Aichi Steel Group Environmental Committee(Nov.)■ Environmental conservation costs

Unit: millions of yen

Classification

Major efforts

1 Environmental conservation costs necessary for controlling
environmental burdens arising within our operational areas fromproduction or service activities (operational area cost)

AmountPower for dust collectors/repair costs for dust collectors, wastewater
treatment costs, investment and maintenance of energy-saving
facilities, costs of disposal and recycling of industrial waste andgeneral waste discharged from business operations

1,985

Simplified packaging
2 Costs necessary for controlling environmental burdens arising
upstream or downstream of our operational areas in connection with (reducing packing materials and reducing packing time)
production or service activities (Upstream/downstream cost)0

3 Environmental conservation costs arising from our administrative
activities (Administrative costs)

Costs for employee environmental education, and costs necessary toacquire and maintain ISO certification
Labor costs and related costs of environmental action organizations318

ds of use

4 Environmental conservation costs arising from our R&D activities (R&D costs) Research costs for environmental conservation
5 Environmental conservation costs arising from our social-relation activities (Social-relation costs)

Site greening and industrial road cleaning activities

35
26
Total 2,364

28

AICHI STEEL REPORT 2010

Business Update

Environmental training

The results of the fiscal 2009 internal audit and thesurveillance audit of the environmental management systemwere as follows. There were no material non-conformances.
■ Results of internal audits
Classification

NEW

Environmental technology andstandard education

NEW

Material non-conformance (incidents)

2

0

0

0

0

Minor non-conformance(incidents/department)

1

0.9

0.7

0.7

0.7

■ Results of audits by independent auditors
Classification

Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009

Minor non-conformance (incidents)

1

1

1

1

1

Opportunity for
improvement and otherobservances(incidents/department)

18

21

12

20

31

(1.0)

(0.5)

(0.3)

(1.0)

(0.8)

Promotion of Eco Test certification
Internal environmental auditors
A training program for internal environmental auditors washeld during “Environment Month” (June). 20 auditors were
newly certified. This brings the total number of auditors in the
Company to 162.

Social Relations Section

The Eco Life Subcommittee played a central role in promoting
acquisition of Eco Test certification by employees in order toincrease environmental awareness.
Employees were encouraged through the intranet, in-housenewsletter, etc., and the goal for certification was 100 employees
by fiscal 2009. 126 employees acquired certification.
Also, 12 Eco Life Members have been appointed forenvironmentally friendly activities to promote energy conservationin the office.

CSR Management

Starting in June 2009 targeting in particular the Production
Engineering Department, this education has been conducted inorder to foster human resources with thorough knowledge of theenvironment.
11 times: Approx. 250 participants

Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009

Feature Story

Environmental training was held three times targeting
freshmen assigned to administrative departments (August:
20 freshmen), newly promoted Assistant Managers (June: 30
Assistant Managers), and newly-promoted Foremen (March:
17 Foremen).

Results of audits

Environmental Section

VOICE

Michihiro Tanaka, Eco Life Member, Analysis & Testing Dept.
“The questions are all about everyday things; I should invite others to take this test too,” was my firstthought when I saw the exercise book of the Eco Test. I took the test with three colleagues from work,
so starting from two weeks before the test, we used our lunch hour to quiz each other on the material.
Now that I am certified, I support colleagues who are planning to take the test.
Eco Test questions are all about everyday things, and studying for it greatly helps to increase ecoawareness. I will continue to support those who would like to take the test, and hope the number of
eco-people will increase.

AICHI STEEL REPORT 2010

Financial Section

Increase eco-awareness for more eco-people

29

Global Warming Prevention
The Company makes various efforts to achieve its reduction goals for CO2
emissions.

Targets and results of fiscal 2009
In fiscal 2009, improvements were made in energy efficiency,
etc., and the annual target was achieved.

Item2009 target

2009 results

CO2 emissions

540,000 tons/year

514,000 tons/year

Participated in the lights-down
campaign
As part of the Team Minus 6% national campaign led by the
Ministry of the Environment, the Company participated in theCO2 reduction/lights-down campaign.
- June 21: Black Illumination- July 7: Tanabata (Star Festival) Lights Down

Energy conservation in officeNEW

Automatic lighting control in the stairwell of
the Technology Center
Automatic lighting control was installed in the central stairwellof Technology Center No. 1. Lights go on and off automaticallywith the sensor that detects passersby in the stairwell in order
to conserve energy. This system will be installed in all stairwell
lights in the Technology Center.

Conserving Energy in Logistics
Operations
In fiscal 2009, the total freightage of the Company reachedapproximately 110 million ton-kilometers.* To reducetransportation losses caused by rapid change in demand, we
held detailed discussions with our customers and improved
our loading ratio as well as shortening the transportation
distance. As a result, we achieved a 2% reduction rate
per production unit of CO2 year on year. We will continue
to cooperate with our customers in energy conservation
activities for logistics operations.
NEW

Warm Biz (December to March)
Information posters were posted in each department, andheater thermostats were set at 20 degrees Celsius.

- Cool Biz (June to September)- Close laptops when leaving the desk
- Turn off lights whenever possible- Reduce waste (recycle)

30

AICHI STEEL REPORT 2010

* Ton-kilometers (freightage volume) = Shipped quantities (tons) x
Transportation distance (kilometers)

Business Update

NEW

Residual heat from compressor used
to heat bathrooms in SAFC (China)

Change in CO2 emissions

Feature Story

The Aichi Steel Group also conducts unique efforts. SAFC
installed a heat exchanger to the compressor that sends
compressed air to manufacturing equipment in October
2009 in order to use the residual heat from the compressor
to heat bathrooms (four) in the company. This is expected toconserve approximately 300 tons of coal per year.

■Breakdown of CO2 emissions during fiscal 2009

Green purchasing

Social Relations Section

The Company actively exercises green purchasing by
employing its own Green Purchasing Guideline to purchaseenvironmentally friendly products and services from suppliers
who are conscious about global environmental protection.
Please refer to our Website

http://www.aichi-steel.co.jp/ENGLISH/over̲proc/index.html

NEW

In July 2009, one motorcoach and two minibuses of theCompany were certified as TMG compliant vehicles inaccordance with the Tokyo Metropolitan Ordinance on
Environmental Preservation, and a certification sticker was affixed
to each vehicle.
This sticker may be affixed to vehicles with low environmental
burden that meet emission standards for nitrogen compounds,
particulate matters, etc.

CO2 balance
CO2 emissions in fiscal 2008

544,000 tons – CO2/year

CO2 emissions in fiscal 2009

514,000 tons – CO2/year

Difference

30,000 tons – CO2/year

Breakdown
Reduction due to decrease in production volume

29,000 tons – CO2/year

Improvements (A) – Aggravations (B)1,000 tons – CO2/year

Total

30,000 tons – CO2/year

Environmental Section

Certification of TMG compliant vehicle
for motorcoach and minibuses

CSR Management

Breakdown of energy consumption

Improvements (A)1,000 tons – CO2/year(2) Improved energy efficiency

4,000 tons – CO2/year(3) Loss reduction during suspension of operations

2,000 tons – CO2/year

Total

7,000 tons – CO2/year

Aggravations (B)(1) Changes in steel manufacturing process

6,000 tons – CO2/year

Total

6,000 tons – CO2/year

AICHI STEEL REPORT 2010

Financial Section(1) Production system changed to match reduced production

31

Environmental Material Flows
We make diligent efforts both in the market and in our manufacturing processes
to promote complete recycling and waste reduction.

32

AICHI STEEL REPORT 2010

By-products

make efficient use of by-products as resources.

Targets and results of fiscal 2009

■Recycled nickel

2009 target

2009 results

Direct landfilling

28,800 tons/year

44,345 tons/year

Indirect landfilling

1,260 tons/year

2,432 tons/year

Feature Story

We have been promoting recycling activities in compliancewith the Guideline for the Proper Use of Recyclable Resources(published by Aichi Prefecture) which came into effect in 2008,
but could not meet the targets due to technological difficulties
and production line adjustments required by drastic changes
in production volume.
Item

Business Update

As a law-abiding member of society, the Company promotes the 3R activities to■Change in direct landfilled waste

CSR Management

Efforts to reduce landfilling

Recycling with Toyota Group■Change in indirect landfilled waste

Recycling technologies

Financial Section- Production of abrasive (AS Shot)- Recycling of electric arc furnace reducing slag, “ANRP
method*1”- Recycling of nickel from byproducts

Environmental Section

The current 3R activities are promoted in coordination withcompanies of the Toyota Group.
We already make efforts such as the reuse of automobile
shredder residue including iron scraps, and in addition to such
existing activities, we are developing recycling technology
for nonferrous metals, glass, etc. Also, we are deliberating
methods to exchange information within the group to promote
recycling as well as the reuse of byproducts as resources.

There is an increase because landfilling for fiscal 2008 was eightmonths’ worth from August 2008 to March 2009, and for fiscal 2009
was for one whole year, in order to adhere to the Guideline for Proper
Use of Recyclable Resources.

Social Relations Section

We make efforts towards 3R activities, cutting deep into
conventional production processes, while maintaining thequality expected of specialty steel. Slag, which contains alarge volume of direct landfill (approx. 95%), is a byproductgenerated during the steel refining process, which largely
affects the quality of specialty steels. This matter requires
careful handling and unconventional ideas. A crossdepartmental in-house project has been launched in order torealize zero landfilling.

*1 ANRP: Aichi New Hot Slag Recycling Process

AICHI STEEL REPORT 201033

Environmental Data
We employ strict management systems to aim for zero impact on the naturalenvironment as well as risk reduction.

PRTR Data(Unit: tons)
Discharged
ChemicalTransferred

Amount handled
Air

Water

Outside of premises (as waste, etc.)

Chita and Forging Plants

Ethyl benzene

1.0

0.0

-

-

Xylene

5

0.1

-

-

Chromium and trivalent chromium compounds

20,0000.0

0.0

2,100.0

Cobalt and cobalt compounds

120

-

0.0

2.4

Dioxins

100

100

-

-

Toluene

7

0.5

-

-

Lead and lead compounds

270

0.0

0.0

120.0

Nickel

5,000

-

-

-

Nickel compounds

700

0.0

0.1

58.0

Hydrogen fluoride and its water-soluble salts

5

0.0

5.0

0.2

Benzene

0.6

0.0

-

-

Kariya Plant

Boron and boron compounds

54

-

0.1

16.0

Manganese and manganese compounds

9,400

0.0

0.8

1,400.0

Molybdenum and molybdenum compounds

6,300

-

0.5

0.6

Chromium and trivalent chromium compounds

910

-

0.0

39.0

Nickel compounds

440

-

0.0

21.0

Hydrogen fluoride and its water-soluble salts

110

0.0

0.9

77.0

Molybdenum and molybdenum compounds

15

-

0.2

1.4

Higashiura and Gifu Plants: No chemicals requiring reporting were handled by these plants.
A hyphen (“-”) indicates a quantity of “0” (zero). The volumes were calculated according to the PRTR system.
The unit is tons/year (however, the unit for Dioxins is mg-TEQ/year).

■Material balance of PRTR substances in the entire organization of the Company

34

AICHI STEEL REPORT 2010

■Breakdown of discharged PRTR substances

Business Update

Atmospheric Quality Data

Water Quality Data
Regulated by the Water Quality Pollution Control Act
and the Prefectural Ordinance■ Chita and Forging Plants■ Chita and Forging Plants

Substance

Facility

NOx

BoilerMin.

Average

pH

5~9

7.8

6.4

7.0

COD

25(20)

7.4

0.4

4.8

SS

40(30)

3.5

Less than 0.1

1.2

Nitrogen120(60)

2.8

1.3

2.0

16(8)

0.1

Less than 0.1

0.07

Item

Limit

Max.

Min.

AveragepH

5.8~8.6

7.1

6.3

6.7

BOD

25(20)

3.8

1.2

1.9

150

25.5

250

26.8

130

65.3

150

43.3

Phosphorus

170

56.5

180

61.7

200

44.3

Boiler

0.30

0.001

Heating furnace

0.08

0.003

0.10

0.003

0.20

0.003

0.25

0.002

0.30

0.005

0.05

0.001

0.08

0.001

0.10

0.002

Soot

Electric arc furnace(Total limit)

34.35

4.003

■Kariya Plant

Item■ Kariya Plant

SS

40(30)

20.5

0.5

6.5

Nitrogen120(60)

13.7

2.0

7.6

Phosphorus

16(8)

1.2

0.1

0.40

■ Higashiura Plant
Item

Limit

Max.

Min.

AveragepH

5.8~8.6

7.2

6.7

6.9

BOD

25(20)

5.1

5.1

5.1

SS

40(30)

18.5

Less than 0.1

2.1

Nitrogen120(60)

3.5

1.1

2.1

Phosphorus

16(8)

0.4

0.1

0.22

Facility

Limit

Actual level (max)NOx

Boiler

180

67.6

Heating furnace

130

52.0

150

44.8

■ Gifu Plant

170

63.0

Item

Limit

Max.

Min.

Average

Soot

SOx

200

54.7

pH

5.8~8.6

7.9

6.5

6.9

Boiler

0.30

0.002

BOD

30(20)

4.9

2.2

3.6

Heating furnace

0.20

0.003

SS

60(50)

4.0

Less than 0.1

1.1

0.25

0.003

Nitrogen120(60)

8.3

1.2

3.9

11.622

7.333

Phosphorus

16(8)

0.8

0.1

0.18

(Total limit)■Gifu Plant
Substance

Facility

Limit

Actual level (max)NOx

Boiler150

85.0

Unit: mg/liter (except for pH)
These tables show only major regulated substances. However, the levelsof other regulated substances not shown in these tables were all below
the regulation limits or below the minimum measurable amounts (or notdetected at all).
Figures in parentheses ( ) are daily averages.
○ pH: Hydrogen-ion density ○ COD: Chemical oxygen demand○ BOD: Biochemical oxygen demand○ SS: Suspended solids in water

Financial Section■Higashiura Plant
No regulated facilities were operated in this plant

Environmental Section

Substance

Social Relations Section

130

72.0

CSR Management

Max.

Actual level (max)Heating furnace

SOx

Limit

Limit

Feature Story

Regulated by the Air Pollution Control Act
and the Prefectural Ordinance

The actual levels of NOx and soot indicate the maximum values actually
measured for each regulated facility.
Units are as follows: NOx (ppm); Soot (g/m3 N ); SOx (m3N /h) (Total limits
set out in the Air Pollution Control Act)AICHI STEEL REPORT 201035

Third-Person View
Mr. Satoshi Chikami
Professor, Faculty of International Welfare Development, Nihon Fukushi University
Ad-hoc member, General Policy Planning Panel, Central Environmental Council
Nagoya Environmental Council member
Advisor, Tokai Basic Environment Plan Promotion Committee, etc.

Mr. Chikami conducts research on the ideal state for creating an ecological community,
environmental learning, regional development and environmental management in semimountainous regions, environmental conservation in reservoir areas, creating comfortable
cities, forming independent actors for regional development, etc., within Japan. Outside
Japan, he conducts empirical investigation and research to realize the forestry regeneration,watershed management, improvement of the living environment, creation of small-scaleindustry, and integration of social development in the swidden farming region of Laos.

The Report for this fiscal year stresses that amidst the difficult business environment persisting since two years
ago, continuous corporate activities comprise one of a company’s responsibilities to society. At the same time,
it provides CSR activities and environmental preservation efforts based on clear visions in a balanced manner.

Mission Statement and CSR Policy
is clearly stated (back of cover)At the beginning of this report, readers will find the Mission
Statement, CSR Policy, and CSR Vision 2015. Also, the report
includes the Financial Section, in addition to the Environmental
Section and the Social Relations Section. In other words, thisreport clearly shows the resolve of the corporate management
to maintain the healthy business activities of the Company
while taking responsibility and making contributions towards
society and the community. This is an extremely important
point in promoting comprehensive and innovative efforts as wellas broad social contribution activities.

Focus placed on biodiversity(P10-11, P26)
Triggered by the COP 10 to be held in Nagoya in October
2010, the Company engages in activities to conserve
biodiversity, such as adding biodiversity to its Environmental
Action Plan 2010. Cooperation for forestry in the community
where the head office is located is already underway as partof the Company’s social contribution efforts. In the future,
I look forward to seeing further active involvement in theconservation of biodiversity through projects and new productdevelopments.

Byproducts (P27, P33)
The corporate culture “1S” permeates
all processes, including production,
environmental preservation and CSR(P5, P12, etc.)
The corporate culture of making “Shojiki (Sincelity), Seisou(cleanliness), and Safety” its top priorities is an importantphilosophy in all areas, such as an efficient and quality
production system, environmental risk management, the work
motivation of each employee, and how to engage with thelocal society. The entire Report conveys this message, andthe reader can feel reassurance and trust though this “1S”
culture that permeates all company activities.

The amount of direct landfilling has shown rapid increasesince 2008, but it can be commended that the company isclear and honest about its data. There is a reason behind thisincrease; steel slag, which had conventionally been recycled,must now be disposed of by direct landfilling in accordance
to the amendment of administrative guideline. Since thisbyproduct is directly related to the manufacturing process of
specialty steels, the main product of the Company, it will not
be easy to reduce amount generated. However, the 2010 goal
firmly maintains a “2% decrease compared to fiscal 1990,”
and therefore, I am expecting to see technological efforts at acompanywide level.

In conclusion
A recycling-oriented enterprise bybirth (P8, P32)

To make this Report even better in the future, I would like tomake the following suggestions on its content:- Regarding the Medium-Term CSR Plan, attainment level
As an electric arc furnace manufacturer using iron scraps asassessment should provide reasons why some items wereits main raw material, the Company plays a role in Japan’s
unattained, and how this can be remedied (P13);
iron material recycling. However, in the Feature Story, it is- Promotion and support for environmental management
simply mentioned as a recycling-oriented enterprise by birth.
and CSR activities including the supply chain should beThis can be easily deduced from the material flow. I hopegiven(P19);
that in the future, the Company will deliberate and include- More detailed explanation of the calculation basis and scopein its Report support for venous industries* involved in ironof CO2 emissions should be provided (P30);
recycling, a significant part of material recycling.
- An introduction of environmental preservation and CSR*Industry that collects and reuses/recycles waste and byproducts
efforts by overseas subsidiaries should be given.
This view is based on interviews with relative parties, observation of production sites, etc.

36

AICHI STEEL REPORT 2010

Financial Section
Management’s Discussion, Analysis of Financial
Conditions and Results of Operations
Five-year Summary(Consolidated & Non-Consolidated)

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Auditors

AICHI
愛知製鋼レポート
STEEL REPORT 201037

Financial Section

Management’s Discussion, Analysis of Financial Conditions and Results of Operations
Any fractional sum of less than one million yen is disregarded.
A delta symbol in the table represents negative figures.
Sales by business segment represent sales to outside customers.
Summary38

During the consolidated accounting period under review,
the Japanese economy remained in prolonged recession
triggered by the global financial crisis. There were some signsof improvement in corporate profits and consumer spending,mainly due to the effects of economic stimulus measurestaken by governments around the world and an increase inJapan’s exports mainly to Asian countries. However, with thenation’s continuing severe employment situation and income
environment, the prospects for a self-sustaining recovery of
the Japanese economy remains grim.
In the fourth quarter of the previous fiscal year (January
to March 2009), hit by a sudden and significant drop in
demand in the wake of the devastating global recession,
the Aichi Steel Group was forced to cut back production
to an unprecedented level. Then each quarter afterward,
production and sales volumes of our mainstay products—
specialty steel and forgings, particularly for automobiles—
steadily picked up. However, sales volume in the full fiscal
year under review declined from the previous fiscal year.
Facing the severest recession in a hundred years, the Aichi
Steel Group has striven to create a production systemthat will minimize operational losses despite production
curtailment, reduce fixed costs proportionately to production
volumes, and promote drastic cost reductions, mainly invariable expenses.

We also implemented the Z100 Project, a new full-scale,Group-wide reform of our profit structure, in a bid to generate
profits by reducing quality loss, improving yield ratio, andrevamping procurement and physical distribution systems.
The Group’s consolidated net sales for the fiscal year underreview totaled 174,279 million yen, down 21.5% from theprevious fiscal year (222,060 million yen).
The Aichi Steel Group posted an operating income of
4,314 million yen and ordinary income of 3,906 million
yen, compared to an operating loss of 483 million yen andordinary loss of 1,804 million yen in the previous fiscal year.
This was primarily attributable to the effect of drastic costcutting efforts launched at the beginning of the fiscal year
under review, which helped improve profits each quarter,
despite decreased sales volume.
Taking into consideration the future business outlook, Aichi
Steel reassessed recoverability of deferred tax assets, which
was reversed in full in the previous fiscal year, and recorded a
portion of the deferred income taxes, or 3,372 million yen, atthe end of the fiscal year under review. As result, the Group
posted a net income of 6,625 million yen, compared to a net
loss of 14,105 million yen in the previous fiscal year.

■Sales volume (non-consolidated basis)■Net sales

AICHI STEEL REPORT 2010

Financial Section

Management’s Discussion, Analysis of Financial Conditions and Results of Operations
Business Update

Operating Income and Net Income

Specialty steel is a mainstay product of the Aichi Steel Group.
Net sales in this segment dropped 30.5% to 89,706 million yen
from 129,006 million yen in the previous fiscal year, due to pricedecline and decreased sales volume.

Forgings
Closed-die forgings for automobiles account for a major partof this segment. Net sales in this segment fell 11.8% to 75,754
million yen from 85,896 million yen in the previous fiscal year,
due to price decline and decreased sales volume.

Electromagnetic components

Other businesses
Aichi Steel’s subsidiary companies provide various services andengage in software development or other businesses. Net sales
in this segment decreased 15.4% to 3,196 million yen from 3,778
million yen in the previous fiscal year.

Environmental Section■Operating income or Operating loss (△)

Social Relations Section

Aiming to turn this segment into the Company’s core businessin the future, Aichi Steel has been nurturing and promoting new
industrial fields for its sensors and magnetic products. Net sales
in this segment rose 66.3% to 5,623 million yen from 3,380
million yen in the previous fiscal year, due to an increase in sales
volume of MI Sensors, MAGFINE magnets, and electronic parts.

CSR Management

Consequently, the Group posted an operating income of 4,314
million yen and net income of 6,625 million yen for the fiscal
year under review. Return on equity (ROE) was 6.4%.

Specialty steel
Feature Story

Net sales for the fiscal year under review fell 21.5% from theprevious fiscal year to 174,279 million yen. Cost of sales was
152,793 million yen. The cost-to-sales ratio stood at 87.7%,
improving from 91.0% in the previous fiscal year. Selling,
general and administrative expenses totaled 17,172 million
yen, which accounted for 9.9% of net sales (compared to
9.2% in the previous fiscal year).

Sales by Business Segment■Net income or Net loss (△)

Financial Section

AICHI STEEL REPORT 201039

Financial Section

Management’s Discussion, Analysis of Financial Conditions and Results of Operations

Financial Position
The Aichi Steel Group’s financial position as of the end of
March 2010 is as follows.
Total assets were 242,350 million yen, an increase of 22,333
million yen from the end of the previous fiscal year. Current
assets increased by 25,676 million yen to 129,216 million
yen. This increase is mainly attributable to an increase of
15,327 million yen in notes and accounts receivable-trade
led by sales increase, and an increase in deposits by making
borrowings.
Property, plant and equipment decreased by 5,890 million
yen from the previous fiscal year. In the fiscal year underreview, a total of 8,163 million yen was invested. Depreciation
and amortization totaled 13,370 million yen.
Current liabilities increased by 33,983 million yen from theprevious fiscal year, mainly due to the inclusion of a current
portion of convertible bond with stock acquisition rights of
30,000 million yen.
Non-current liabilities decreased by 19,631 million yen fromthe previous fiscal year, mainly due to a transfer of a current
portion of convertible bond with stock acquisition rights of
30,000 million yen to current liabilities and an increase inlong-term debt.
Net assets at the end of March 2010 totaled 112,377 million
yen, an increase of 7,981 million yen from the end of theprevious fiscal year. Net assets per share stood at 547.85
yen, compared to 508.16 yen in the previous fiscal year. The
capital adequacy ratio was 44.4%, compared to 45.3% in
the previous fiscal year.

■ROE

40

AICHI STEEL REPORT 2010

Consolidated Cash FlowsNet cash provided by operating activities amounted to19,427 million yen, mainly due to net income before income
tax of 3,730 million yen, depreciation and amortizationof 13,370 million yen, an increase in notes and accounts
payable-trade of 9,415 million yen, and a decline ininventories of 6,562 million yen, despite an increase in notes
and accounts receivable-trade of 15,185 million yen.
Net cash used in investment activities was 8,288 million yen,mainly due to property, plant and equipment purchases of
8,157 million yen.
Net cash provided by financing activities amounted to 3,717
million yen, mainly due to proceeds from long-term debt of
10,000 million yen and repayment of long-term debt of 5,131
million yen.
Consequently, cash and cash equivalents as of the end of
March 2010 amounted to 52,350 million yen, an increase of
14,954 yen from the end of March 2009 (37,396 million yen).

Available-for-Sales Securities
Of the total available-for-sales securities owned by theCompany and its consolidated subsidiaries, the historicalcost of those reported on the consolidated balance sheet
at fair market value amounted to 2,359 million yen (the fairmarket value of these securities was 9,831 million yen).

■Net assets, Capital adequacy ratio

Financial Section

Five– year Summary(Consolidated & Non-Consolidated)Thousandsof U.S. Dollars

Millions of Yen

2010

2009

2008

2007

¥ 174,279¥ 222,060¥ 253,462¥ 235,637

2006

2010

4,314

(483)

10,884

10,611

16,051

3,730(2,618)

9,055

9,037

13,784

40,105

6,625(14,105)

5,693

4,922

8,152

71,241¥ 224,954 $ 1,873,964
46,38482,906

88,796

93,092

96,07680,301

891,464

242,350

220,017

264,048274,608

269,606

2,605,916

112,377

104,396

128,155

127,329

119,784

Yen

1,208,352
U.S. Dollars¥ 33.77¥ (71.89)¥ 29.00¥ 24.97¥40.23

$ 0.4

30.54

-

26.23

22.56

39.49

0.3

4,282

4,467

4,539

4,637

4,724

Thousandsof U.S. Dollars

Millions of Yen

2010

2009

2008

2007

¥ 141,093¥ 181,317¥ 202,860¥ 187,076

Operating income (loss)

3,153(3,209)

6,559

7,012

15,051

Income (loss) before income taxes

2,351(3,877)

5,811

6,929

11,53225,285

Net income (loss)

5,967(14,573)

3,838

4,017

5,478

64,160Net sales

2006

2010

¥ 178,621 $ 1,517,133
33,90969,80975,25077,53979,57564,779750,635

Total assets

222,210200,006

236,098

250,844

246,287

2,389,360

Net assets

102,593

95,919115,615

117,709

116,770

Yen

1,103,148
U.S. Dollars

Net income (loss):
Basic¥ 30.41¥ (74.28)¥ 19.55¥ 20.38¥ 27.08

$ 0.3

27.51

-

17.68

18.42

26.59

0.3

8.50

7.50

10.00

10.00

9.00

0.1

Number of employees (persons)

2,330

2,331

2,328

2,327

2,340

Notes:
1. Net sales are presented exclusive of consumption taxes.
2. Effective from the year ended March 31, 2007, the Company adopted Financial Accounting Standard No.5 ‘Accounting Standards
for Presentation of Net Assets in the Balance Sheets’ and its Implementation Guidance No.8 ‘Guidance on Accounting Standards for
Presentation of Net Assets in the Balance Sheets’ issued on December 9, 2005 by the Accounting Standards Board of Japan.
3. Net income per share is computed by dividing income available to shareholders of common stock by the weighted-average number ofshares of common stock outstanding during the respective years.
4. Due to net loss, diluted net income per share of the fiscal year ended March 31, 2009 has not been presented.
5. Each fiscal year end date is March 31.
6. The U.S. dollar amounts above represent translations of yen, for convenience only, at the rate of ¥93=U.S.$1.

AICHI STEEL REPORT 2010

Financial Section

DilutedCash dividends

Environmental Section

Property, plant and equipment

Per share data

Social Relations Section

Five–year Summary(Non-Consolidated)

CSR Management

Notes:
1. Net sales are presented exclusive of consumption taxes.
2. Scope of Consolidation:
All subsidiaries are consolidated. Names of subsidiaries at March 31, 2010 are as follows:
Aiko Corporation, Aichi Ceratec Corporation, Omi Mining Co., Ltd., Aichi Techno Metal Fukaumi Company, Aichi Steel Logistics Co., Ltd., Aichi
Information System Company, Aiko Service Co., Ltd., Aichi Micro Intelligent Corporation, Asdex Corporation, Aichi Forging Company of Asia, Inc.,
Aichi Forge USA, Inc., Aichi Europe GmbH, Aichi International (Thailand) Co., LTD., Shanghai Aichi Forging Co., Ltd., PT. Aichi Forging Indonesia, Aichi
Magfine Czech s.r.o., and AMIT, Inc.
3. Effective from the year ended March 31, 2007, the Company adopted Financial Accounting Standard No.5 ‘Accounting Standards for Presentation of
Net Assets in the Balance Sheets’ and its Implementation Guidance No.8 ‘Guidance on Accounting Standards for Presentation of Net Assets in the
Balance Sheets’ issued on December 9, 2005 by the Accounting Standards Board of Japan.
4. Net income per share is computed by dividing income available to shareholders of common stock by the weighted-average number of sharesof common stock outstanding during the respective years.
5. Due to net loss, diluted net income per share of the fiscal year ended March 31, 2009 has not been presented.
6. Each fiscal year end date is March 31.
7. The U.S. dollar amounts above represent translations of yen, for convenience only, at the rate of ¥93=U.S.$1.

Feature Story

Net sales
Operating income (loss)
Income (loss) before income taxes and minority interests
Net income (loss)
Property, plant and equipment
Total assets
Net assets
Per share data
Net income (loss):
Basic
DilutedNumber of employees (persons)Business Update

Five – year Summary (Consolidated)

41

Financial Section

Consolidated Balance Sheets
As at March 31, 2010 and 2009
Thousandsof U.S. Dollars

Millions of Yen
2010

2009

2010

AssetsCurrent assets:
Cash and deposit (Note 4)
Notes and accounts receivable (Notes 4,18)
Short-term investments (Note 5)¥ 51,863¥37,312$ 557,664

42,211

26,884453,888

659

245

7,082

Finished goods

5,723

6,364

61,540Work in process

15,25917,518164,071

Raw materials and supplies

7,811

11,28383,991

Deferred tax assets (Note 17)

3,439

454

36,974

Other assets

2,386

3,653

25,660Less: allowance for doubtful receivables

Total current assets

(135)

(173)

(1,450)129,216

103,540

1,389,420

57,10856,643614,069

Fixed assets:
Property, plant and equipment: (Note 6)
Building and structures
Less: accumulated depreciation(37,854)(36,615)(407,034)

Machinery, equipment and vehicles

243,396

243,1732,617,161(201,314)(195,792)(2,164,668)

11,974

12,725

128,752(10,520)(10,801)(113,121)

14,242

14,204

153,138

Lease assets

97

42

1,047

Less: accumulated depreciation

(19)

(4)

(200)

Less: accumulated depreciation
Equipment
Less: accumulated depreciation
Land

Construction in progress

Net property, plant and equipment

5,796

5,221

62,32082,906

88,796

891,464

Intangible fixed assets:
Telephone rights

12

12

126

Other assets

230

240

2,477

242

252

2,603

Investment securities (Notes 4,5)

13,582

10,862

146,046

Long-term loans

1,146

1,020

12,324

Prepaid pension cost (Note 15)

14,255

14,360153,276

Deferred tax assets (Note 17)

191

272

2,056

Other assets

887

940

9,536

Less: allowance for doubtful receivables

(75)

(25)

(809)

29,98627,429322,429

Total intangible fixed assets
Investments and other assets:

Total investments and other assets
Total fixed assets
Total assets

42

AICHI STEEL REPORT 2010

113,134

116,477

1,216,496¥ 242,350¥ 220,017$ 2,605,916

Financial Section

Consolidated Balance Sheets
Business Update

As at March 31, 2010 and 2009
Thousandsof U.S. Dollars

Millions of Yen
2010

2009

2010

Liabilities and net assets
Liabilities
Current liabilities:¥ 21,301¥ 13,154$ 229,047

Short-term borrowings (Notes 4,6)

2,393

2,497

25,726

683

5,647

7,344

Current portion of long-term debt (Notes 4,6)
Current portion of convertible bond with stock acquisition rights(Note4,6)

30,000-322,581

Lease obligations (Note 6)

21

8

226

Income taxes payable

311

244

3,349

Accrued bonuses for directors and corporate auditors

186

-

1,997

Deferred tax liabilities (Note 17)167-

10,749124,234

66,44932,466

714,504-

30,000-Long-term debt (Notes 4,6)

45,64735,801490,829

Lease obligations (Note 6)

63

33

678

Total current liabilities
Long-term liabilities:
Convertible bond with stock acquisition rights

Long-term payables

992

6,808

6,070

73,784

Employees’ retirement benefit liabilities (Note 15)

9,200

9,164

98,926Retirement benefit obligation for directors and corporate auditors

1,026

974

11,033

Other liabilities

121

1,002

63,524

83,155683,060

Total liabilities

129,973

115,621

1,397,564

Common stock, no par value:
Authorized: 476,000,000 shares;
Issued: 198,866,751 shares in 2010 and 2009

25,01725,017

268,997

Capital surplus

27,89927,899299,987

Retained earnings

52,73847,093567,071

Less, treasury stock, at cost

(1,611)(1,610)(17,317)

104,043

98,3991,118,738

Net assets
Shareholders’ equity:

2,668,238 shares in 2010 and 2,665,366 shares in 2009

Total shareholders’ equity
Valuation and translation adjustments

4,607

2,950

49,538Foreign currency translation adjustments(1,162)(1,648)(12,492)

3,445

1,302

37,046

180

149

1,930

Total valuation and translation adjustments
Subscription rights to shares (Note 16)

Minority interests in subsidiaries
Total net assets

4,709

4,546

50,638112,377

104,396

1,208,352¥ 242,350¥ 220,017$ 2,605,916

Commitments and contingent liabilities (Note 8)

Total liabilities and net assets

Financial Section

Net unrealized gains on available-for-sale securities, net of taxes

Environmental Section

93

Total long-term liabilities

Social Relations Section

633
6,862

Deferred tax liabilities (Note 17)

CSR Management

11,554

Other liabilities

Feature Story

Notes and accounts payable (Note 4)

The accompanying notes are an integral part of these financial statements.

AICHI STEEL REPORT 201043

Financial Section

Consolidated Statements of Income
For the Years Ended March 31, 2010 and 2009
Thousandsof U.S. Dollars

Millions of Yen
2010

2009

2010

¥ 174,279¥ 222,060$ 1,873,964

Cost of sales

152,793

202,009

1,642,930

Gross profit
Selling, general and administrative expenses:

21,486

20,051

231,034

Freight expenses

2,390

3,582

25,693

Sales commission

853

1,024

9,175

6,051

7,143

65,075Retirement benefit expenses

658

429

7,074

Provision of allowance for directors’ bonuses

186

-

1,996

Provision of allowance for directors’ retirement benefits

245

238

2,635

8

32

90

662

658

7,119

Research and development expenses (Note 9)

2,532

2,829

27,224

Others

3,587

4,599

38,569Total selling, general and administrative expenses

17,172

20,534

184,650

4,314

(483)

46,384

Interest income

120

250

1,294

Dividend income

136

313

1,458

Rent income

-

70

-

Gain on sales of goods

-

260

-

Foreign exchange gain

132

-

1,414

Earnings of subsidies

235

-

2,526

Others

618

402

6,650

1,241

1,295

13,342

Interest expenses

727

840

7,822

Loss on disposal of property, plant and equipment, net

515

436

5,533

-

683

-

115

141

1,234

Net sales (Notes 18 and 19)

Salaries and allowances and welfare expenses

Provision of allowance for doubtful receivables
Depreciation

Operating income (loss) (Note 19)
Non-operating income:

Total non-operating income

Non-operating expenses:

Foreign exchange loss
Loss on valuation of derivatives

292

516

3,137

Total non-operating expenses

1,649

2,616

17,725

Ordinary income (loss)
Extraordinary income:

3,906(1,804)42,001Compensation for transference

744

-

7,999

Impairment loss on fixed assets (Note 10)

230

814

2,474

Loss on valuation of subscription

60

-

647

Removal cost of overseas subsidiary’s factory

630

-

6,775

OthersExtraordinary expenses:

920

814

9,896

3,730

(2,618)40,105Current

416

525

4,472

For prior periods

(63)

212

(679)

Deferred(3,372)

11,040(36,255)

Total income taxes
Minority interests in net income (loss) of subsidiaries
Net income (loss)(3,019)

11,777(32,461)

124

(290)

1,325

¥ 6,625¥ (14,105)$ 71,241

Total extraordinary expenses

Income (loss) before income taxes and minority interests
Income taxes:

Yen

Per share (Note 20)
Net income (loss):

2010

2010

Basic

¥ 33.77¥ (71.89)$ 0.4

Diluted

30.54

-

0.3

Cash dividends

8.50

7.50

0.1

The accompanying notes are an integral part of these financial statements.

44

U.S. Dollars
2009

AICHI STEEL REPORT 2010

Financial Section

Consolidated Statements of Changes in Net Assets
Business Update

For the Years Ended March 31, 2010 and 2009
Thousandsof U.S. Dollars

Millions of Yen
2010

2009

2010

Shareholders’ equity
Common stock¥ 25,017¥ 25,017$ 268,997

Balance at the end of year

25,01725,017

268,997

Balance at the beginning of year

27,89927,899299,987

Balance at the end of year

27,89927,899299,987

47,09363,162506,378

Capital surplus

Retained earnings
Balance at the beginning of year

Feature Story

Balance at the beginning of year

Change of items during the period
Cash dividends (Note 11)(981)(1,962)(10,548)

Net income (loss) for the year

6,625

(14,105)

71,241

Disposal of treasury stock due to exercise of stock options

(2)

-

5,645

(16,069)

60,693

Balance at the end of year

52,73847,093567,071(1,610)(1,612)(17,305)

(1)

(3)

(12)

-

5

-

Treasury stock
Balance at the beginning of year
Change of items during the period
Purchase of treasury stock and fractional shares
Disposal of treasury stock due to exercise of stock options
Total changes of items during the period

(1)

2

(12)

(1,611)(1,610)(17,317)

98,399114,466

1,058,057

Total shareholders’ equity
Balance at the beginning of year
Change of items during the period
Cash dividends (Note 11)(981)(1,962)(10,548)

Net income (loss) for the year

6,625

(14,105)

71,241

(1)

(3)

(12)

Purchase of treasury stock and fractional shares
Disposal of treasury stock due to exercise of stock options
Total changes of items during the period
Balance at the end of year

-

3

-

5,644

(16,067)

60,681¥ 104,043¥ 98,399$ 1,118,738

Social Relations Section

Balance at the end of year

CSR Management-

Total changes of items during the period

Environmental Section
Financial Section

AICHI STEEL REPORT 201045

Financial Section

Consolidated Statements of Changes in Net Assets
For the Years Ended March 31, 2010 and 2009
Thousandsof U.S. Dollars

Millions of Yen
2010

2009

2010

Valuation and translation adjustments
Net unrealized gains on available-for-sale securities, net of taxes
Balance at the beginning of year

¥ 2,950¥6,171$ 31,719

Net changes of items other than shareholders’ equity

1,657(3,221)

17,819Total changes of items during the period

1,657(3,221)

17,819Balance at the end of year

4,607

2,950

49,538(1,648)

1,889(17,723)

Net changes of items other than shareholders’ equity

486(3,537)

5,231

Total changes of items during the period

486(3,537)

5,231(1,162)(1,648)(12,492)

1,302

8,060

13,995

Net changes of items other than shareholders’ equity

2,143(6,758)23,050Total changes of items during the period

2,143(6,758)23,050

Balance at the end of year

3,445

1,302

37,045

149

99

1,598

31

50

332

Change of items during the period

Foreign currency translation adjustments
Balance at the beginning of year
Change of items during the period

Balance at the end of year
Total valuation and translation adjustments
Balance at the beginning of year
Change of items during the period

Subscription rights to shares
Balance at the beginning of year
Change of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period

31

50

332

Balance at the end of year

180

149

1,930

4,546

5,530

48,885

Net changes of items other than shareholders’ equity

163

(984)

1,754

Total changes of items during the period

163

(984)

1,754

4,709

4,546

50,639104,396

128,155

1,122,535

Minority interests in subsidiaries
Balance at the beginning of year
Change of items during the period

Balance at the end of year
Total net assets
Balance at the beginning of year
Change of items during the period
Cash dividends (Note 11)(981)(1,962)(10,548)

Net income (loss) for the year

6,625

(14,105)

71,241

(1)

(3)

(12)

Purchase of treasury stock and fractional shares
Disposal of treasury stock due to exercise of stock options
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of year
The accompanying notes are an integral part of these financial statements.

46

AICHI STEEL REPORT 2010

-

3

-

2,337

(7,692)

25,136

7,981(23,759)

85,817¥ 112,377¥104,396$ 1,208,352

Financial Section

Consolidated Statements of Cash Flows

Thousandsof U.S. Dollars

Millions of Yen
2010

2009

2010

Business Update

For the Years Ended March 31, 2010 and 2009

Cash flows from operating activities:

25,814
5,197(13,507)(1,875)28,846565(740)(2,351)
26,320(163,281)
70,561
101,233
15,927
217,451
2,775(7,882)(3,447)
208,897(10)(8,157)
32
(1)
(300)
159
(11)
(8,288)(0)(15,952)
37
(1)
(47)
(115)
294
(65)
(15,849)(108)(87,716)348(15)(3,226)1,710(116)(89,123)(149)
10,000(5,131)
(14)
20
(1)
(983)
(25)
-

1,172
20,000(20,934)
(4)
1
(3)
2
(1,962)
(72)
3

3,717

(1,797)(1,597)
107,527(55,177)
(153)
215
(12)
(10,566)(268)
39,96998(1,770)1,054

14,954

6,904

160,797

Cash flows from investing activities:
Net increase in time deposits
Payments for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchase of investment securities
Payments for acquisition of subsidiary’s shares
Payments for subscriptions
Payments for loans
Collections of loans
Other, net
Net cash used in investing activities

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Payments for refund of lease obligations
Proceeds from minority shareholders of subsidiary
Proceeds from disposal of treasury stock
Payments for acquisitions of treasury stock
Proceeds from exercise of stock options
Cash dividends paid
Cash dividends paid to minority shareholders
OthersNet cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

37,39630,492

402,109¥ 52,350¥ 37,396$ 562,906

Financial Section(15,185)
6,562
9,415
1,481
20,223
258
(733)
(321)
19,427

Environmental Section$ 40,105
143,768
2,473
647
1,106
358
(4,091)122(2,752)
7,821(1,151)(22)
4,627

Social Relations Section¥ (2,618)
14,795
814
(437)
192
(358)
26
(563)
840
233
(5)
298

CSR Management

SubtotalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities¥ 3,730
13,370
230
60
103
33
(380)
11
(256)
728
(107)
(2)
430

Feature Story

Income (loss) before income taxes and minority interests
Adjustments for depreciation
Adjustments for impairment loss on fixed assets
Loss on valuation of subscription
Decrease (increase) of prepaid pension cost
Increase of employees’ retirement benefit obligation
Decrease in defined contribution pension payable
Increase of allowance for doubtful receivables
Interest and dividend income
Interest expense
Foreign exchange (gain) loss
Gain on sale of property, plant and equipment, net
Loss on disposal of property, plant and equipment
Increase/ Decrease in operating assets and liabilities:
Notes and accounts receivable
Inventories
Notes and accounts payable
Other, net

The accompanying notes are an integral part of these financial statements.

AICHI STEEL REPORT 201047

Financial Section

Notes to Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial

Shanghai Aichi Forging Co., Ltd.

Statements

PT. Aichi Forging Indonesia(a) Basis of presenting the consolidated financial statements

The accompanying consolidated financial statements of AICHI STEELCORPORATION ("the Company") and its subsidiaries are preparedon the basis of accounting principles generally accepted in Japan,
which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards. These
consolidated financial statements are compiled from the original
consolidated financial statements in Japanese prepared by theCompany as required by the Financial Instruments and Exchange
Law and submitted to the Director of Kanto Finance Bureau in Japan.
On the accompanying consolidated financial statements, amounts
less than ¥1 million are rounded to the nearest million yen; therefore,
some accounts and notes are not consistent with those on the
consolidated financial statements submitted to the Director of Kanto
Finance Bureau in Japan, on which amounts less than ¥1 million are
omitted.
(b) U.S. dollar amounts

The U.S. dollar amounts included in the accompanying consolidated
financial statements and notes thereto represent the arithmetic
results of translating Japanese Yen into U.S. dollars at the rate of¥93 to $1, the approximate rate of exchange at March 31, 2010.
The inclusion of such dollar amounts is solely for the convenience ofthe readers and is not intended to imply that the assets and liabilities
originating in Yen have been or could be readily converted, realized
or settled in U.S. dollars at ¥93 to $1 or at any other rates. Amounts
are rounded to the nearest US$ 1 thousand.
(c) Reclassification

In preparing the accompanying consolidated financial statement,
certain comparative figures have been reclassified to conform to thecurrent year’s presentations.

2. Summary of Significant Accounting Policies(a) Principles of consolidation

The accompanying consolidated financial statements include theaccounts of the Company and all of its subsidiaries (17 and 18
companies in 2010 and 2009, respectively). Investments in affiliates (3companies in 2010 and 2009) are carried at cost, since the equity inretained earnings and net income of affiliates is not material. Significant
intercompany transactions and accounts have been eliminated.
Assets and liabilities of subsidiaries are revalued at their fair value as ofthe date of acquisition of control based on the full fair value method.
(a-i) Scope of consolidation
Subsidiaries at March 31, 2010 are as follows:
Domestic subsidiaries (9 companies):
Aiko Corporation
Aichi Ceratec Corporation
Omi Mining Co., Ltd.
Aichi Techno Metal Fukaumi Company
Aichi Steel Logistics Co., Ltd.
Aichi Information System Company
Aiko Service Co., Ltd.
Aichi Micro Intelligent Corporation
Asdex Corporation
Overseas subsidiaries (8 companies):
Aichi Forging Company of Asia, Inc.
Aichi Forge USA, Inc.
Aichi Europe GmbH
Aichi International (Thailand) Co., Ltd.

48

AICHI STEEL REPORT 2010

Aichi Magfine Czech s.r.o.
AMIT, Inc.
(a-ii) Fiscal year of subsidiaries

The Company's overseas subsidiaries use the fiscal year ending
December 31, three months earlier than the Company. The Company
consolidates such subsidiaries' financial statements as at December 31.
Significant transactions for the period between subsidiaries' year-end
and the Company's year-end are adjusted on consolidation.
(b) Cash and cash equivalents

The Company and its subsidiaries consider short-term highly liquid
investments with maturities of three months or less when purchased tobe cash equivalents.
(c) Valuation of securities

The accounting standard for financial instruments requires that securities to
be classified into three categories: trading, held-to-maturity or available-forsale, whose classification determines the respective accounting method.
According to the Company’s investment policies, the securities portfolioof the Company and its subsidiaries are classified as available-for-salesecurities. The accounting standard requires that available-for-sale securities
with available market quotations are valued at fair value, and net unrealized
gains or losses on such securities are reported as a separate component of
net assets, net of applicable income taxes. Gains and losses on dispositionof marketable securities are computed by the moving average method.
Non-marketable available-for-sale securities without marketable quotations
are carried at cost determined by the moving average method. Adjustments
in carrying values of individual investment securities are charged to income
through write-downs, when a significant decline in value is deemed otherthan temporary.
(d) Derivatives and Hedge Accounting

Derivatives are valued at fair value where hedge accounting is not
appropriate or where there is no hedging designation, and gains orlosses on derivatives are recognized in current earnings. In addition,
when interest rate swaps that meet certain required conditions havecritical terms matching exactly with those of financial assets or liabilities
that are being hedged, such interest rate swaps are not recognized in
the balance sheet, and net interest paid or received on the swaps isrecognized as an adjustment to the interest income or expense on thefinancial assets or liabilities that are being hedged.
The Company uses the interest rate swap contract for the borrowing
from a bank to reduce its own exposure to fluctuations in interest rates.
The Company does not perform the evaluation of effectiveness ofthe hedging items because the interest rate swap contract meets therequired condition above.
(e) Inventories

Finished goods and work in process are mainly stated at cost
determined by the periodic average method. The amount carried on thebalance sheet is evaluated by devaluation method based on decline ofprofit. Raw materials and supplies are mainly stated at cost determinedby the moving average method, and the amount on balance sheet isevaluated by the devaluation method based on decline of profit, except
for rolls and molds included in supplies, which are depreciated overuseful life and recorded after depreciation value.
For the year ended March 31, 2010
The inventory amount on the balance sheet of is stated after devaluation
based on decline of profit and evaluation loss of inventory of ¥544 million

The Company and its domestic subsidiaries pay severance indemnities todirectors and corporate auditors, which are subject to the approval of theshareholders. The Company and its domestic subsidiaries have provided
for the full amount of the liabilities of directors' and corporate auditors'
retirement benefits which would be required for payments of retirement
benefits for directors and corporate auditors in accordance with internal
regulations at the respective balance sheet dates.
(l) Income taxes(g) Goodwill and Negative Goodwill(m) Consumption taxes

The difference between the cost of investments in subsidiaries and theunderlying equity in their net assets is recorded as goodwill or negative
goodwill in the consolidated balance sheets and amortized using the straight–line method over a period of 20 years. If the amount is immaterial, it is fullyrecognized as an expense or an income when incurred.

Consumption taxes are excluded from the revenue and expense accounts
which are subject to such taxes.

An allowance for doubtful receivables is provided based on the historicalloss expense during a certain reference period, plus the estimated noncollectable amount based on the analysis of certain specific accounts inaccordance with the accounting standard.
(i) Allowance for bonuses to directors and corporate auditors

Bonuses to directors and corporate auditors are recorded on an accrualbasis with a related charge to income.

All monetary assets and liabilities denominated in foreign currencies,
whether long-term or short-term, are translated into Japanese yen at
the exchange rates prevailing at the respective balance sheet dates. The
resulting unrealized gain or loss is charged to income each year.
Assets and liabilities of overseas subsidiaries are translated into Japanese
yen at the exchange rates prevailing at the balance sheet dates. The
shareholders' equity in Net Assets is translated into Japanese yen at thehistorical rates. Profit and loss accounts for the year are translated into
Japanese yen using the average exchange rates during the respective
years. Differences in yen amounts arising from use of different rates havebeen presented as "Foreign currency translation adjustments" in Net Assets
or included in "Minority interests in subsidiaries" in Net Assets.

Environmental Section(h) Allowance for doubtful receivables(n) Accounting for foreign currency translation

Social Relations Section

For the year ended March 31, 2009
(Additional information)
The Company and its domestic subsidiaries have changed the depreciable
period for a part of property, plant and equipment using the opportunity
provided by the 2008 tax reform. As a result, operating losses, ordinary
losses and losses before income taxes and minority interest increased by¥1,013 million.

Income taxes are accounted for in accordance with the accounting
standard for income taxes, which requires recognition of deferred taxes
using the asset and liability method. Under the accounting standard,
deferred tax assets and liabilities are recognized to account for the future
tax consequences of differences between the carrying amounts of existing
assets and liabilities and their respective tax bases, and are measured
using the enacted tax rates expected to apply to taxable income in theyears in which those temporary differences are expected to be recoveredor settled. The effect on deferred tax assets and liabilities of a change intax rates is recognized in the period that includes the enactment date.

CSR Management

Property, plant and equipment are stated at cost, and have been
depreciated by the declining balance method. The exceptions to this are theNo.2 Bar and Wire Rod Mill Shop of the Company as well as lease assets
which have been depreciated by the straight-line method.
Where financing leases do not transfer ownership of the leased property
to the lessee during the term of the lease contract began before April 1,
2008, the leased property of the Company and its domestic subsidiaries are
not capitalized and the relating rental and lease expenses are charged toincome as incurred.

(k)Retirement benefit obligation for directors and corporate auditors

Feature Story(f) Property, plant and equipment

benefits of executive officers calculated based on the method similar tothat used for to determine the retirement benefit obligation for directors
and corporate auditors.
(Accounting Change)
Effective from the year ended March 31, 2010, the Company and its
domestic subsidiaries have adopted Financial Accounting Standard
No.19 ‘Amendment of ‘Accounting Standard for Retirement Benefit’’issued on July 31, 2008.
This change does not influence operating income, ordinary income andincome before income taxes and minority interest.

Business Update($5,844 thousand) as included in ‘Cost of goods sold’ on income statement.
For the year ended March 31, 2009
The inventory amount on the balance sheet of is stated after devaluation
based on decline of profit and evaluation loss of inventory of ¥2,790 million
as included in ‘Cost of goods sold’ on income statement.
(Accounting Change)
Effective from the year ended March 31, 2009, the Company and its
domestic subsidiaries have adopted Financial Accounting Standard No.9
‘Accounting Standard for Evaluation of Inventory’ issued on July 5, 2006.
As a result of the adoption, operating losses increased by ¥2,652 million,
and ordinary losses and losses before income taxes and minority interests
increased by ¥1,333 million.

(j) Employees’ retirement benefit obligation

Employees’ retirement benefit obligation includes reserve for retirement(o) Per share data

Basic net income per share of common stock is computed by dividing
income available to shareholders of common stock by the weightedaverage number of shares of common stock outstanding for the period.
Diluted net income per share of common stock is calculated based on
the assumption for the possible dilution that could occur if securities orother contracts to issue common stock were exercised or converted into
common stock, or result in the issuance of common stock.
As described in Note 16, the Company granted the stock option to its
directors, executive officers and selected employees for purchase of its
common stock. In addition, the Company issued a \30-billion convertiblebond-type bond with stock acquisition rights during the year ended March
31, 2006. Diluted net income per share of common stock for the year
AICHI STEEL REPORT 2010

Financial Section

The Company and its subsidiaries have recognized the retirement benefit
obligation including pension costs and related liabilities based on theactuarial present value of the projected benefit obligation using actuarial
appraisal approach and the pension plan assets available for benefits at
the respective year-ends. Unrecognized actuarial differences from changes
in the projected benefit obligation or pension plan assets resulting fromdifferences in actual experiences from those assumed or from changes
in assumptions, are amortized straight-line method over 15 years. The
period is intended to reflect the expected average remaining service life of
employees, and amortization commences in the year following that in which
they arise. Prior service costs are amortized straight-line over 15 or 16 years.

49

Financial Section

Notes to Consolidated Financial Statements
ended March 31, 2010 reflects possible dilution of the stock option and theconvertible bond-type bond with stock acquisition rights to shares.
Cash dividends per share shown for each fiscal year in the accompanying
consolidated statements of income represent dividends declared as
applicable to the respective years.

3. Accounting Changes(a) Accounting standard for construction contract

Effective from the year ended March 31, 2010, the Company and its
domestic subsidiaries have adopted Financial Accounting Standard
No.15 ‘Accounting Standard for Construction Contract’ issued on
December 27, 2007 and Implementation Guidance of Financial
Accounting Standard No.18 ‘Guidance on Accounting Standard forConstruction Contract’ issued on December 27, 2007.
The effect of this change was not material for sales and profit and loss.
(b) Accounting standard for lease transaction

The Company and its domestic subsidiaries did not capitalize financeleases which do not transfer ownership of the leased property to the lessee
during the term of the lease contract and charged the related rental andlease expenses to income as incurred until the year ended March 31,
2008. Effective from the year ended March 31, 2009, the Company andits domestic subsidiaries adopted Financial Accounting Standard No. 13‘Accounting Standard for Lease Transaction’ issued on June 17, 1993 andrevised on March 30, 2007 by Accounting Standards Board of Japan and its
Implementation Guidance No.16 issued on January 18, 1994 and revised on
March 30, 2007 by Accounting Standards Board of Japan. In accordancewith the Standard and the Guidance, finance leases other than thosedeemed to transfer the ownership of leased properties to lessees areaccounted for mainly by a method similar to that applicable to ordinary
sales transactions, instead by the former method, a method similar tothat applicable to ordinary operating leases.
This change does not influence operating loss, ordinary loss and loss
before income taxes and minority interest.
(c) Accounting policies applied to overseas subsidiaries

Effective from the year ended March 31, 2009, the Company and its
subsidiaries have adopted Practical Issue Task Force No.18 ‘Practical
Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements’ issued on May
17, 2006 by the Accounting Standards Board of Japan, and makes
the necessary adjustments for its consolidated financial statements.
This adoption does not influence operating loss, ordinary loss andloss before income taxes and minority interest.
(d)Classification change in Consolidated Statement of Income

Earnings of subsidies is listed as a separate component of non-operating
income because the amount became more than 10% of the total amount of
non-operating income. Earnings of subsidies in fiscal 2009 was ¥84 million.
At the previous fiscal year, Rent income ¥63 million ($679 thousand) andGain on sales of goods ¥123 million ($1,321 thousand) which were listed asa separate component of non-operating income, are included in others of
non-operating income because the amount became less than 10% of thetotal amount of non-operating income.

4. Financial Instruments(1) Status of financial instruments(a) Policies concerning financial instruments
Our Group’s asset management is focused primarily on short-term deposits, etc. and funds are mainly procured by means of loans from banks andissuance of corporate bonds. We use derivatives in order to avoid the risks described below and we do not get involved in any speculative transactions.
(b) Type of financial instruments, their risks, and risk management
Notes and accounts receivable, which are operating receivables, are exposed to customer credit risk. To reduce this risk, we have established asystem to control due dates and balances for each client and to determine the credit status of the clients every six months in accordance with credit
administration regulations.
Investment securities mostly comprise shares of the companies having business relationships with the Company and are exposed to the risk offluctuations of market prices. To reduce this risk, we periodically check their fair values and the financial status of their issuers (client companies).
Notes and accounts payable, which are operating liabilities, are mostly due within three months.
Among borrowings, short-term borrowings is mainly for procurement of operating funds while convertible bond with stock acquisition rights and longterm debt are mainly for procurement of funds for investment in plants and equipment. Because operating liabilities and debts are exposed to liquidity
risk, the Company and its consolidated subsidiaries make/update financial plans on a timely basis based on reports from each department while
maintaining liquidity in hand, so as to control liquidity risk.
As for derivatives, the Company uses foreign currency swap contracts for its foreign-currency-denominated loans to overseas subsidiaries, to hedge
risks from fluctuations in exchange rates in the future. Each derivative transaction is required to obtain approval in accordance with our approval
standards, and once a derivative contract is concluded, our Accounting Division investigates the credit status, etc. of the derivative provider and reports
to the officer in charge of accounting on a regular basis. Since the Company’s use of derivatives is limited to instruments provided by highly rated
financial institutions, we believe there is virtually no associated risk.
(c) Supplementary explanation concerning fair value, etc. of financial instruments
The fair value of a financial instrument represents the value based on its market price or the reasonably calculated value if the instrument has no market
price. Since calculation of fair value involves several variable factors, the value may fluctuate depending on the preconditions, etc. adopted. The values ofderivative contracts, etc. stated in Note “Derivative Transactions” do not necessarily indicate the market risks associated with the derivative transactions.
(2) Fair value, etc. of financial instruments
The amounts presented on the consolidated balance sheet, fair values and their differences as of March 31, 2010 are as follows. Financial
instruments whose fair values are extremely difficult to calculate are not included. (See Note 2 “Financial instruments whose fair value is extremely
difficult to determine”)

50

AICHI STEEL REPORT 2010

Fair value

Difference

At March 31, 2010:(1) Cash and deposit(2) Notes and accounts receivable
Allowance for doubtful receivables (*1)
(3) Investment securities
Total(1) Notes and accounts payable(3) Current portion of long-term debt
(4) Current portion of convertible bond with stock-

42,07742,077

-

9,831

9,831

-

¥ 103,771¥ 103,771-¥ 21,301¥ 21,301

-

2,393

2,393

-

683

683

(0)

30,00029,715(285)

42,211(135)

acquisition rights(5) Long-term debt
Total
Derivatives (*2)

45,64745,72679¥ 100,024¥ 99,818¥ (206)

¥ 301

¥ 301

-

Feature Story(2) Short-term borrowings¥ 51,863¥ 51,863

Business Update

Millions of Yen
Book carrying amountThousands of U.S. Dollars
Acquisition cost

Difference

At March 31, 2010:(1) Cash and deposit(2) Notes and accounts receivable
Allowance for doubtful receivables (*1)

$ 557,664$ 557,664

453,888(1,450)452,438-

105,715

105,715-$ 1,115,817$ 1,115,817-$ 229,047$ 229,047(2) Short-term borrowings

25,72625,726(3) Current portion of long-term debt

7,344

7,344

(0)

322,581319,516(3,065)(3) Investment securities
Total(1) Notes and accounts payable(4) Current portion of convertible bond with stockacquisition rights(5) Long-term debt
Total
Derivatives (*2)

490,829

491,680851$ 1,075,527$ 1,073,313$ (2,214)$ 3,234$ 3,234-(*1) The amount of Allowance for doubtful receivables included in Notes and accounts receivable is deducted.
(*2) Receivables and payables resulting from derivative transactions are presented in net amounts, and items that resulted in net losses are stated in parentheses.

Assets(1) Cash and deposit (2) Notes and accounts receivable
Because these assets are settled on a short-term basis, their fair value is approximately equal to their book value; therefore, their fair value
is calculated according to their applicable book value.
(3) Investment securities
These are shares of the companies having business relationships with the Company and their fair value is determined according to theirquoted market price and investment securities by classification is included in Note “5. Investments (a) Investments securities”

Financial Section

Liabilities(1) Notes and accounts payable (2) Short-term borrowings
Because these liabilities are settled on a short-term basis, their fair value is approximately equal to their book value; therefore, their fair value
is calculated according to their applicable book value.
(3) Current portion of long-term debt (5) Long-term debt
The fair value of these debt items is calculated by applying the interest rates currently available for similar loans to the total of principal andinterest.
(4) Current portion of convertible bond with stock acquisition rights
The fair value of these bonds is determined according to their quoted market price.

Environmental Section(Notes)
1. Calculation of the fair value of financial instruments, and matters pertaining to marketable securities and derivative transactions

Social Relations Section

452,438

CSR Management

Book carrying amount

Derivatives
In Note “14. Derivative Financial Instruments”
AICHI STEEL REPORT 201051

Financial Section

Notes to Consolidated Financial Statements

2. Financial instruments whose fair value is extremely difficult to determine
Millions of Yen

Thousands of U.S. Dollars

Book carrying amountBook carrying amount¥ 3,751$ 40,331

Non-marketable securities

These shares do not have a market price, so it is therefore extremely difficult to determine the fair value. For this reason, these instruments
are not included in “(3) Investment securities.”

3. Scheduled redemption after the consolidated settlement date of financial instruments and marketable securities with maturity
Millions of Yen
Within 1 year

1 year to within 5 years

5 years to within 10 years

Over 10 years

Cash and deposit¥51,863---

Notes and accounts receivable

42,077

-

-

-

Total

¥ 93,940

Thousands of U.S. Dollars
Within 1 year
Cash and deposit
Notes and accounts receivableTotal

1 year to within 5 years

5 years to within 10 years$ 557,664--

Over 10 years-

452,438---$ 1,010,102

We have no investment securities with maturity.
4. Scheduled repayment after the consolidated settlement date of long-term debt
See the accompanying financial statement schedule, “Schedule on Borrowings, etc.”(Additional information)
Effective from the year ended March 31, 2010, the Company and its subsidiaries have adopted Financial Accounting Standard No.10‘Accounting Standards for Financial Instruments’ issued on March 10, 2008 and Implementation Guidance of Financial AccountingStandard No.19 ‘Guidance on Accounting Standard for Financial Instruments and Related Disclosures’ issued on March 10, 2008.

5. Investments(a) Investments securities

All marketable securities are classified as available-for-sale and are valued at fair value with unrealized gains and losses exclude from thecurrent earnings and reported as a net amount within net assets until realized. At March 31,2010 and 2009, gross unrealized gains andlosses for marketable securities are summarized as follows:
Millions of Yen
Book carrying amount

Acquisition cost

Difference

At March 31, 2010:
Securities with fair value exceeding acquisition costMarketable securities:
Equity securities¥ 9,767¥ 2,282¥ 7,485

Bonds

-

-

-

Others---¥ 9,767¥ 2,282¥ 7,485

Subtotal
Securities with fair value not exceeding acquisition costMarketable securities:
Equity securities

¥ 64

¥ 77

¥ (13)

Bonds

-

-

-

Others---Subtotal

¥ 64

¥ 77

¥ (13)¥ 9,831¥ 2,359¥ 7,472

Total

52

AICHI STEEL REPORT 2010

Business Update

Thousands of U.S. Dollars
Book carrying amount

Acquisition cost

Difference

At March 31, 2010:
Securities with fair value exceeding acquisition costMarketable securities:
Equity securities$ 24,534$ 80,491---

Others---$ 105,025$ 24,534$ 80,491

Subtotal
Securities with fair value not exceeding acquisition costMarketable securities:
Equity securities

$ 690

$ 832

$ (142)

Bonds

-

-

-

Others---Subtotal

$ 690

$ 832

$ (142)$ 105,715$ 25,366$ 80,349

Total

Book carrying amount

Difference

At March 31, 2009:
Securities with fair value exceeding acquisition costMarketable securities:¥ 6,929¥ 4,762---

Others---¥ 2,167¥ 6,929¥ 4,762

Subtotal
Securities with fair value not exceeding acquisition costMarketable securities:

¥ 190

¥ 155

¥ (35)

Bonds

-

-

-

Others---Subtotal

¥ 190

¥ 155

¥ (35)¥ 2,357¥ 7,084¥ 4,727

Equity securities

Total

Non-listed stocks (total amount is ¥3,602 million in the Consolidated Balance Sheets) are not included in the above because there are nomarket prices and ascertaining fair value is extremely difficult.

Environmental Section

Book value of investment securities carried at cost at March 31, 2009 are as follows:
Millions of Yen
2009
Non-marketable securities¥ 3,630

Securities investment trusts

245

Social Relations Section¥ 2,167

Bonds

Equity securities

CSR Management

Millions of Yen
Acquisition costFeature Story$ 105,025

Bonds(Included in Cash and cash equivalents)

The Company and its subsidiaries do not have any held-to-maturity bonds or available-for-sale debt securities.
(b) Investments in affiliates

Investments in affiliates at March 31, 2010 and 2009 are as follows:

Investments in affiliates stated at costThousands of U.S. Dollars
2009

¥ 148

2010
¥ 147

$ 1,589

6. Short-term Borrowing and Long-term Debt
Short-term borrowing at March 31, 2010 and 2009 are as follows:
Millions of Yen
2010

Thousands of U.S. Dollars
2009

Unsecured bank loans¥ 2,393

Average interest rate

3.17%

Financial Section

Millions of Yen
2010

2010
¥ 2,497$ 25,726

AICHI STEEL REPORT 201053

Financial Section

Notes to Consolidated Financial Statements

Long-term debt at March 31, 2010 and 2009 are as follows:
Millions of Yen
2010

Thousands of U.S. Dollars
2009

2010

Unsecured convertible bond with stock acquisition rights
due March 2011 with no interest¥ 30,000¥ 30,000$ 322,581

Unsecured bank loans due through 2016 at March 31, 2010

46,33041,448498,173

Average interest rate

1.43%

Subtotal

76,33071,448820,754(683)(5,647)(7,344)¥ 75,647¥ 65,801$ 813,410

Less, current portion
Total

The current conversion price of convertible bond with stock acquisition rights due March 2011 is ¥1,440 per share and is subject toadjustment in certain circumstances, including in the event of a stock split.

The aggregate annual maturities of long-term debt at March 31, 2010 are as follows:
Years ending March 31,

Millions of Yen

Thousands of U.S. Dollars

2011¥ 30,683$ 329,925

2012

71

768

2013

15,576

167,480

2015

10,000107,527

Total¥ 56,330$ 605,700

The aggregate annual maturities of lease obligations at March 31, 2010 are as follows:
Years ending March 31,

Thousands of U.S. Dollars

Millions of Yen

2011

¥ 21

$ 224

2012

18

199

2013

14

147

2014

5

55

Total

¥ 58

$ 625

7. Advanced depreciation of Fixed Assets
The amount of advances depreciation of fixed assets with government subsidies at March 31, 2010 and 2009 are as follows:
Millions of Yen
2010
Advances depreciation of fixed assets with government subsidies

Thousands of U.S. Dollars
2009

¥ 681

2010
¥ 681

$ 7,325

8. Contingent Liabilities
Amounts guaranteed against bank loans of an affiliate and other company at March 31, 2010 and 2009 are as follows:
Millions of Yen
2010
Kentucky Advanced Forge, LLC

Thousands of U.S. Dollars
2009

¥-

2010
¥ 5

$-

9. Research and Development Expenses
Expenses related to research and development activities are charged to income as incurred. Research and development expenses were
included in general and administrative expenses, and manufacturing costs amounted to ¥2,532 million ($27,224 thousand) and ¥2,829
million for the years ended March 31, 2010 and 2009,respectively.

54

AICHI STEEL REPORT 2010

Impairment of Fixed Assets“Impairment loss on fixed assets” recorded in the consolidated statements of income for the year ended March 31, 2010 was as follows:
Item

Location

Idle assets

Tokai-shi, Aichi prefecture

Millions of Yen

Thousands of U.S. Dollars¥ 170$ 1,831

Machinery and equipment

Idle assets

Kagamihara-shi, Gifu prefecture

32

345

Buildings and structures and other assets

Idle assets

Tokai-shi, Aichi prefecture

3

35

Buildings and structures and other assets

Idle assets

Kagamihara-shi, Gifu prefecture

23

245

Land

Idle assets

Takayama-shi, Gifu prefecture01Intangible fixed assets

Idle assets

Maibara-shi, Shiga prefecture

2

16

¥ 230

$ 2,474“Impairment loss on fixed assets” recorded in the consolidated statements of income for the year ended March 31, 2009 was as follows:
Item

Location

Idle assets

Tokai-shi, Aichi prefecture

Millions of Yen¥ 249

Machinery and equipment

Idle assets

Handa-shi, Aichi prefecture

15

Machinery and equipment

Idle assets

Kagamihara-shi, Gifu prefecture

57

Machinery and equipment and other assets

Idle assets

Higashiura-cho, Aichi prefecture27

Machinery and equipment and other assets

Forging parts Product

Shanghai, China

394
58

equipment
Construction in progress

Idle assets

Tokai-shi, Aichi prefecture

Land

Idle assets

Takayama-shi, Gifu prefecture0

Buildings and structures and other assets

Idle assets

Tokai-shi, Aichi prefecture

14
¥ 814

Fiscal year ended March 31, 2010(a) Type and number of shares outstanding and treasury stockThousands of Unit
Type
Number of shares at the end of the previous fiscal year
Number of increase during the year ended March 31, 2010
Number of shares at the end of the fiscal year

Shares outstanding

Treasury stock

Common stock

Common stock

198,867

2,665

-

3

198,867

2,668

Financial Section

11. Consolidated Statements of Changes in Net Assets

Environmental Section

Fixed assets are principally grouped into cash-generating units based on units of production, other than assets for rent and idle assets.
An impairment loss on idle assets is calculated using the expected net selling price as the recoverable value. An impairment loss wasrecognized for the year ended March 31, 2009 because the forecast of future cash flow had changed due to: the renewal plan of themachinery and equipment; the fair value of the land diminishing significantly due to recent decline in land prices; and the business asset
value diminishing because the change of business environment. The machinery, equipment, construction in progress and other assets
is written down to ¥1 because net selling prices of the machinery, equipment, construction in progress and other assets are expected
to be nil. The land is written down to the expected net selling price of the land based on the valuations carried out to determine theproperty tax bases for land, and the salvage values for tax purposes for other properties.
The impairment loss for the assets for forging production was recognized for the year ended March 31, 2009 because of the changeof business condition. Assets for forging production are written down to the estimated collectable amount based on future cash flow
discounted at 11%.

Social Relations Section

Description

Machinery and equipment

CSR Management

Fixed assets are principally grouped into cash-generating units based on units of production, other than assets for rent and idle assets.
An impairment loss on idle assets is calculated using the expected net selling price as the recoverable value. An impairment loss wasrecognized for the year ended March 31, 2010 because the forecast of future cash flow had changed due to: the renewal plan of themachinery and equipment; the fair value of the land diminishing significantly due to recent decline in land prices; and the businessasset value diminishing because the change of business environment. The machinery, equipment, buildings, structures, constructionin progress and other assets is written down to ¥1 because net selling prices of the machinery, equipment, buildings, structures,construction in progress and other assets are expected to be nil. The land is written down to the expected net selling price of the land
based on the valuations carried out to determine the property tax bases for land, and the salvage values for tax purposes for otherproperties.

Feature Story

Description

Machinery and equipment

Business Update

10. Impairment

Increase in the number of shares was due to purchase of 3 thousand less-than-one-unit shares.

AICHI STEEL REPORT 201055

Financial Section

Notes to Consolidated Financial Statements(b) Matters related to the subscription rights to shares
Millions of Yen
Class

Details

Balancethe Company

Stock option¥ 180

Thousands of U.S. Dollars$ 1,930

As of March 31, 2010 these rights are not yet exercisable.

(c) Matters related to dividends(1) Dividend payment
Approved at ordinary general meeting of shareholders held on June 19, 2009 as follows:
Dividends on common stock
Total amount of dividends¥ 491 million$ 5,274 thousand¥ 2.50$ 0.03

Dividends per share
Record date

March 31, 2009

Effective dateJune 22, 2009

Approved at the Board of Directors at meeting held on October 30, 2009 as follows:
Dividends on common stock
Total amount of dividends¥ 490 million$ 5,274 thousand¥ 2.50$ 0.03

Dividends per share
Record date

September 30, 2009

Effective dateNovember 20, 2009

(2) Dividend whose record date is attributable to the year ended March 31, 2010 but to be effective after the said fiscal year.
Approved by the Company at the general meeting of shareholders held on June 23, 2010 as follows:
Dividends on common stock
Total amount of dividends¥ 1,177 million$ 12,658 thousand¥ 6.00$ 0.06

Dividends per share
Record date

March 31, 2010

Effective dateJune 24, 2010

Dividends are paid out of retained earnings.
Commemorative dividends (¥1.00) included in the above.
Fiscal year ended March 31, 2009(a) Type and number of shares outstanding and treasury stockThousands of Unit
Shares outstanding

Treasury stock

Common stock

Common stock

198,867

2,666

Number of increase during the year ended March 31, 2009-

7

Number of decrease during the year ended March 31, 2009-8

198,867

2,665

Type
Number of shares at the end of the previous fiscal year

Number of shares at the end of the fiscal year

Increase in the number of shares was due to purchase of 7 thousand less-than-one-unit shares. Decrease in the number of shares was
sales of 4 thousand shares by exercises of stock options and sales of 4 thousand less-than-one-unit shares.
(b) Matters related to the subscription rights to shares
Millions of Yen
Class

Details

Balancethe Company

Stock option¥ 148

As of March 31, 2009 these rights are not yet exercisable.
(c) Matters related to dividends(1) Dividend payment
Approved at ordinary general meeting of shareholders held on June 20, 2008 as follows:
Dividends on common stock
Total amount of dividends
Dividends per share56¥ 981 million¥ 5.00Record date

March 31, 2008

Effective dateJune 23, 2008

AICHI STEEL REPORT 2010

Business Update

Approved at the Board of Directors at meeting held on October 30, 2008 as follows:
Dividends on common stock¥ 981 million

Total amount of dividends¥ 5.00

Dividends per share
Record date

September 30, 2008

Effective dateNovember 20, 2008

(2) Dividend whose record date is attributable to the year ended March 31, 2009 but to be effective after the said fiscal year.
Approved by the Company at the general meeting of shareholders held on June 19, 2009 as follows:

Feature Story

Dividends on common stock¥ 491 million

Total amount of dividends¥ 2.50

Dividends per share
Record date

March 31, 2009

Effective dateJune 22, 2009

Dividends are paid out of retained earnings.

Fiscal year ended March 31, 2010 and 2009

Reconciliation between ‘Cash and deposit’ on the Consolidated Balance Sheets and ‘Cash and cash equivalents’ on the Consolidated
Statements of Cash Flows is as follows:
Millions of Yen
Cash and Deposit
Short-term investment
Total
Cash and cash equivalents

2009

2010

¥ 51,863¥ 37,312$ 557,664

658

245

7,082

52,521

37,557564,746

(171)

(161)

(1,839)¥ 52,350¥ 37,396$ 562,906

13. Lease Transactions(a)Finance lease contracts

The company and its subsidiaries use certain machinery and equipment obtained via finance lease contracts.
Pro forma information regarding the leased property such as acquisition cost, accumulated depreciation and future minimum lease
payments under finance leases that do not transfer the ownership of the leased property to the lessee at March 31, 2010 and 2009 are
as follows:
Accumulated Depreciation

Balance

At March 31, 2010:¥ 127

Machinery

¥510

¥ 383

Equipment

236

189

47

Total

¥746

¥ 572

¥ 174

Machinery

¥ 641

¥ 381

¥ 260

Equipment

372

263

109

¥ 1,013

¥ 644

¥ 369

At March 31, 2009:

Total

Accumulated Depreciation

Balance

At March 31, 2010:$ 1,371

Machinery$ 5,486$ 4,115

Equipment

2,539

2,034

504

$ 8,025$ 6,149$ 1,875

Total

Financial Section

Thousands of U.S. Dollars
Acquisition Cost

Environmental Section

Millions of Yen
Acquisition Cost

Social Relations Section

Time deposit more than 3 months

Thousands of U.S. Dollars

2010

CSR Management

12. Consolidated Statements of Cash flows

Acquisition costs include the imputed interest expense portion because the percentage which is computed by dividing future minimum
lease payments by total balance of machinery and equipment at year-end is immaterial.

AICHI STEEL REPORT 201057

Financial Section

Notes to Consolidated Financial Statements
Aggregate minimum future lease obligations at March 31, 2010 and 2009 and lease expenses for the year then ended are as follows:
Millions of Yen
2010

Thousands of U.S. Dollars
2009

2010
$ 1,181

Due within one year

¥ 110

¥ 166

Due over one year

64

203

694

174

369

1,875

¥ 150

¥ 196

$ 1,609

Total
Lease expenses for the year

Pro forma amounts of acquisition costs and future minimum lease payments under finance leases include the imputed interest expense
portion. Pro forma depreciation expenses, which are not reflected in the accompanying consolidated statements of income, computedby the straight line method, would be ¥ 150 million ($ 1,609 thousand) and ¥196 million for the years ended March 31, 2010 and 2009,
respectively.
(b) Operating lease contracts

Aggregate minimum future lease obligations for non cancelable operating lease contracts at March 31, 2010 and 2009 are as follows:
Millions of Yen
2010

Thousands of U.S. Dollars
2009

2010
$ 730

Due within one year

¥ 68

¥ 67

Due over one year

153

180

1,644

Total

¥221

¥ 247

$ 2,374

14. Derivative Financial Instruments(a) Derivative instruments for which hedge accounting is not applied

The Company and its subsidiaries have entered into foreign currency swap contracts and foreign exchange forward contracts. The
Company uses foreign currency swap contracts to reduce its own exposure to fluctuations in exchange rate principally for hedge
purposes in respect of its long-term loan to one overseas subsidiary denominated in U.S. Dollars. The Company’s subsidiaries use
foreign exchange forward contracts to manage their exposure to foreign currency exchange rate fluctuations in respect of their importing
activities.
A summary of foreign currency swap contracts and foreign exchange forward contracts outstanding, excluding those for a hedge ofassets recognized on accompanying consolidated balance sheets, at March 31, 2010 and 2009 are as follows:
Millions of Yen
Contract amounts

Fair value

Net unrealized gain

At March 31, 2010:
Receiving Japanese Yen, paying U.S. Dollar¥1,564

¥ 301

¥ 301

¥ 2,583

¥ 415

¥ 415

182

182

(0)

¥2,765

¥ 597

¥ 415

At March 31, 2009:
Receiving Japanese Yen, paying U.S. Dollar
Foreign exchange forward contracts
Total

Thousands of U.S. Dollars
Contract amounts

Fair value

Net unrealized gain

At March 31, 2010:
Receiving Japanese Yen, paying U.S. Dollar$ 16,817$ 3,234$ 3,234

Note:
Fair value of foreign currency swap contracts is calculated based on the market price. Fair value of foreign exchange forward contracts
is calculated based on the price provided by a bank.
(b) Derivative instruments for which hedge accounting is applied

There is not the pertinence matter.

15. Employees’ retirement benefit liabilities(a) Overview of retirement benefit plans

The Company operates two non-contributory defined benefit retirement plans and a defined contribution pension plan. Defined benefit
retirement plans consist of a lump-sum retirement plan and an enterprise pension plan. The Company established an employee
retirement benefit trust for defined benefit retirement plans.
The enterprise pension benefits are payable as pension payment or lump-sum payment at the option of terminated employees.
Domestic subsidiaries and an overseas subsidiary operate a non-contributory tax qualified pension plan and a lump-sum retirement
plan.

58

AICHI STEEL REPORT 2010

Millions of Yen
2010

Thousands of U.S. Dollars
2009

2010
¥ (28,077)$ (292,164)(2) Fair value of pension plan assets (including retirement benefit trust)

29,20926,127314,077(3) Subtotal [(1)+(2)]2,038(1,950)21,913(4) Unrecognized actuarial (gains) losses

4,164

8,430

44,776(5) Unrecognized prior service cost

(1,147)(1,283)(12,340)(6) Prepaid pension cost

14,255

14,361

153,276¥ (9,200)¥ (9,164)$ (98,926)

Employees’ retirement benefit liabilities [(3)+(4)+(5)-(6)]Note:Certain subsidiaries have adopted the simplified method in calculation of the projected benefit obligations, based on the amount which
would be required if all eligible employees voluntarily terminated their employment, less pension plan assets as of the year-end.

Feature Story¥ (27,171)(1) Projected benefit obligation

Business Update(b) Projected benefit obligation at March 31, 2010 and 2009 are as follows:(c) The components of retirement benefit expense for the years ended March 31, 2010 and 2009 are as follows:
Millions of Yen
2010

Thousands of U.S. Dollars
2009

2010
$ 8,996¥ 980(2) Interest cost

539

570

5,797

(3) Expected return on pension plan assets

(243)

(294)

(2,611)(4) Amortization of unrecognized actuarial losses

604

75

6,500

(5) Amortization of unrecognized prior service cost

(135)

(135)

(1,457)(6) Retirement benefit expense [(1)+(2)+(3)+(4)+(5)]

1,602

1,196

17,225

211

207

2,266

¥ 1,813¥ 1,403$ 19,491(7) Contribution payments to the defined contribution retirement benefit plans(8) Total [(6)+(7)]Social Relations Section

Notes:
1. The retirement benefit expense of subsidiaries which have adopted the simplified method is included in “(1) Service cost”.
2. Retirement benefit expense for executive officers is included in “(1) Service cost”.

(d) Major assumptions used in calculation of above information for the years ended March 31, 2010 and 2009 are as follows:
2009

2010
Discount rate

2.0 %

2.0 %

Expected rate of return on pension plan assets

2.0 %

2.0 %

Period allocation method for estimated retirement benefits

Straight-line method

Straight-line method

Amortization period of prior service cost

15 years

15 years

Amortization period of unrecognized actuarial gains or losses

15-16 years (Expenses from next fiscal year)

15-16 years (Expenses from next fiscal year)(a) Stock option expenses for the years ended March 31, 2010 and 2009 are as follows:
Millions of Yen
Salaries and allowances and welfare expenses
Other selling, general and administrative expenses
Personnel expenses

Thousands of U.S. Dollars
2009

2010

¥ 26

¥ 31

16

20

$ 281
174

¥ 42

¥51

$ 455

Financial Section(b) Stock option profits for the year ended March 31, 2010 are as follows:
Millions of Yen

Thousands of U.S. Dollars

2010
Profit effect due to not exercise

2010
¥ 11

Environmental Section

16. Share-based Payment

2010

CSR Management¥ 837(1) Service cost (Notes)¥123

AICHI STEEL REPORT 201059

Financial Section

Notes to Consolidated Financial Statements(c) Details, number and state of fluctuation of stock options(1) Details of stock option
For the year ended March 31, 2010
2009

2008

2007

2006

2005

Position and

Directors: 14

Directors: 15

Directors: 15

Directors: 15

Directors: 15

Directors: 15

number of grantees

Executive officers: 10

Executive officers: 13

Executive officers: 12

Executive officers: 12

Executive officers: 11

Executive officers: 10

Class and number

Selected employees: 25 Selected employees: 25 Selected employees: 29 Selected employees: 29 Selected employees: 26 Selected employees: 25
Common stock:
Common stock:
Common stock:
Common stock:
Common stock:
Common stock:of stock

Year of issue

2010

410,000

455,000

470,000

490,000

450,000

870,000

Date of issue

August 3, 2009

August 1, 2008

August 1, 2007

August 1, 2006

August 1, 2005

August 2, 2004

Condition of

Grantee must be aSame as left

Same as left

Same as left

Same as left

Same as leftsettlement of thedirector, executive

stock options

officer or employeeof the Company atthe time of exerciseof the stock options.
However, grantee can
exercise the stock
options for 12 months
after retirement or
resignation from theCompany.

Periods that grantees

From August 3, 2009

From August 1, 2008

From August 1, 2007 From August 1, 2006 From August 1, 2005 From August 2, 2004

must provide service

to July 31, 2011

to July 31, 2010

to July 31, 2009

Exercise period of

From August 1, 2011

From August 1, 2010

From August 1, 2009 From August 1, 2008 From August 1, 2007 From August 1, 2006

the stock options

to July 31, 2016

to July 31, 2015

to July 31, 2014

to July 31, 2008

to July 31, 2007

to July 31, 2006

in return for the stock
options
to July 31, 2013

to July 31, 2012

to July 31, 2011

For the year ended March 31, 2009
Year of issue

2009

2008

2007

2006

2005

Position and number

Directors: 15

Directors: 15

Directors: 15

Directors: 15

Directors: 15

of grantees

Executive officers: 13

Executive officers: 12

Executive officers: 12

Executive officers: 11

Executive officers: 10

Selected employees: 25

Selected employees: 29

Selected employees: 29

Selected employees: 26

Selected employees: 25

Class and number ofCommon stock:

Common stock:

Common stock:

Common stock:

Common stock:stock

455,000

470,000

490,000

450,000

870,000

Date of issue

August 1, 2008

August 1, 2007

August 1, 2006

August 1, 2005

August 2, 2004

Condition of settlement

Grantee must be aSame as left

Same as left

Same as left

Same as leftof the stock options

director, executive
officer or employeeof the Company atthe time of exerciseof the stock options.
However, grantee can
exercise the stock
options for 12 months
after retirement or
resignation from theCompany.

Periods that grantees

From August 1, 2008 to

From August 1, 2007 to

From August 1, 2006 to

From August 1, 2005 to

From August 2, 2004 to

must provide service

July 31, 2010

July 31, 2009

July 31, 2008

July 31, 2007

July 31, 2006

Exercise period of the

From August 1, 2010 to

From August 1, 2009 to

From August 1, 2008 to

From August 1, 2007 to

From August 1, 2006 to

stock options

July 31, 2015

July 31, 2014

July 31, 2013

July 31, 2012

July 31, 2011

in return for the stock
options

60

AICHI STEEL REPORT 2010

Business Update(2) Number of stock options and state of fluctuation
Stock options outstanding at the end of the year are listed as the number of shares.
① Number of stock options
For the year ended March 31, 20102010

Year of issue

2009

2008

2007

2006

2005

Non-exercisable stock options
455,000

460,000

-

-

-

-

-

-

-

-

Forfeitures--

60,000---Conversion to exercisable stock options--

400,000---

410,000

455,000

-

-

-

-

Stock options outstanding at the end of the previous fiscal year

-

-

-

405,000

402,000

306,000

Conversion from non-exercisable stock options--

400,000---

Stock options exercised

-

-

-

-

-

-

Forfeitures

-

-

-

60,000--Stock options outstanding at the end of the fiscal year--

400,000

345,000

402,000

306,000

Stock options granted

Stock options outstanding at the end of the fiscal year

Feature Story

410,000

Stock options outstanding at the end of the previous fiscal year

Exercisable stock options

For the year ended March 31, 2009
2008

2007

2006

CSR Management

2009Year of issue

2005

Non-exercisable stock options-

470,000

485,000--

455,000

-

-

-

-

Forfeitures-

10,00070,000--Conversion to exercisable stock options--

415,000--

455,000

460,000---

Stock options outstanding at the end of the previous fiscal year

-

-

-

402,000

310,000

Conversion from non-exercisable stock options--

415,000--

Stock options exercised

-

-

-

-

4,000

Forfeitures--

10,000--Stock options outstanding at the end of the fiscal year--

405,000

402,000

306,000

2007

2006

2005

Stock options outstanding at the end of the previous fiscal year
Stock options granted

Stock options outstanding at the end of the fiscal year
Exercisable stock options

Year of issue

Yen
2010

2009

2008

¥ 367

¥ 482

¥698

¥800

¥630

¥ 503

Average market price of the stock at the time of exercise

-

-

-

-

-

-

Fair value of stock options on the grant date

109

109

143

189

-

-

Exercise priceYear of issue

Yen
2009

2008

2007

2006

2005

¥ 482

¥698

¥ 800

¥630

¥503

Average market price of the stock at the time of exercise

-

-

-

-

496

Fair value of stock options on the grant date

109

143

189

-

-

Exercise price(d) Method for estimating fair value of stock options

Environmental Section

For the year ended March 31, 2009

Social Relations Section② Unit price of options
For the year ended March 31, 2010

The method and assumptions for estimating fair value of stock options during the years ended March 31, 2010 and 2009 aresummarized as follows:Year of issue

Black-Scholes model
2010

2009

(Note 1)42.49 %

34.20 %

Projected remaining period (Note 2)

4 years 6 month

4 years 6 month

Projected dividend(Note 3)¥7.5 per share¥10 per share

Risk-free interest rate

(Note 4)0.691 %

1.254 %

Share price fluctuations

AICHI STEEL REPORT 2010

Financial Section① Valuation method used
② Principal basic values and estimation methods

61Financial Section

Notes to Consolidated Financial Statements
Notes:
1. Computed based on actual share prices during a four-year and six-month period (from February 2005 to July 2009 for the year ended March 31,
2010 and from February 2004 to July 2008 for the year ended March 31,2009).
2. Because of a lack of accumulated data and difficulty in making supportable estimates, it is assumed the stock options are exercisedat the midpoint of the exercise period.
3. Based on the estimated dividend for the years ended March 31, 2010 and 2009 on the grant date.
4. Yields on government bonds for the period corresponding to the projected remaining period.

(e) Method for estimating the number of confirmed stock options
A method that reflects actual past expirations has been basically adopted, because it is difficult to rationally estimate the number of
expired rights in the future.

17. Deferred Tax
The significant components of deferred tax assets and liabilities at March 31, 2010 and 2009 are as follows:
Millions of Yen
2010

Thousands of U.S. Dollars
2009

2010

Deferred tax assets:
Employees’ retirement benefit liabilities¥ 4,047¥4,103$ 43,518

Tax losses carried forward in subsidiaries

3,023

3,763

32,499Supplies adjustments

2,346

2,545

25,221

Accrued bonuses

1,088

1,159

11,702

Software and other assets

864

706

9,284

Impairment loss on fixed assets

518

551

5,573

Inventories

493

674

5,303

Retirement benefit obligation for directors and corporate auditors

410

391

4,410

Goodwill

357

437

3,839

Depreciation

350

348

3,764

Write-down of investment securities

338

307

3,636

-

111

-

765

627

8,231

Loss on disposal of property, plant and equipment
Other

14,59915,722

156,980(10,087)(14,525)(108,464)

4,512

1,197

48,516

Prepaid pension cost

(4,093)(4,219)(44,013)

Unrealized gains on available-for-sale securities(2,855)(1,762)(30,698)

Depreciation of property, in overseas subsidiaries

(562)

(445)

(6,044)

Reserve for advanced depreciation

(96)

(97)

(1,036)

Reserve for special depreciation

-

(0)

-

(138)

(186)

(1,478)Change of, valuation allowance
Deferred tax assets
Deferred tax liabilities:

Other
Deferred tax liabilities(7,744)(6,709)(83,269)

Net deferred tax (liability) / asset¥ (3,232)¥ (5,512)$ (34,753)

The differences between the Japanese statutory tax rate and the actual effective income tax rate in pretax income for the year ended
March 31, 2010 are as follows:Year of issue
Japanese statutory tax rate

2008
2010
40.0 %

Increase(decrease) due to:Entertainment expenses and others

6.4

Income taxes for prior periods(3.0)

Less, valuation allowance(122.8)Others(1.5)

Actual effective income tax rate

(80.9)The differences between the Japanese statutory tax rate and the actual effective income tax rate in pretax income for the year ended
March 31, 2009 are not described because a loss before income taxes and minority interests was reported.

62

AICHI STEEL REPORT 2010

Transactions with Toyota Motor Corporation for the years ended March 31, 2010 and 2009, and balances outstanding as at those dates
are as follows:
Thousands of U.S. Dollars

Millions of Yen
2010

2009

For the year: Sales of goods¥ 21,869¥ 23,237

2010$ 235,154

At the year-end: Accounts receivable¥ 3,087¥ 1,839$ 33,192

Feature Story

Notes:
1. Toyota Motor Corporation held 24.1% of the Company’s equity interests directly, and indirectly held a further 0.5% at March 31,
2010. The above transactions were conducted using normal commercial terms and conditions.
2. Every year, the Company present their favorable sales price and negotiate it with Toyota Motor Corporation. The procedure is thesame as other common transactions.
3. Sales of goods are presented exclusive of consumption taxes, and the balance of Accounts receivable include consumption taxes.

Business Update

18. Related Party Transactions

19. Segment Information(1)Business segment information

The table below summarizes the business segment information for the years ended March 31, 2010 and 2009 are as follows:

CSR Management

The Company and its subsidiaries operations primarily consist of the manufacture and sale of specialty steel business, forging
business, electro-magnetic components business and other miscellaneous businesses. The specialty steel segment consists ofspecialty iron steel, stainless steel and tool steel. Forging segment includes closed die forging for automobile parts and free forging
products. A portion of the materials used by the forging segment are goods produced by the specialty steel segment. Electromagnetic components segment comprises sale off materials for electronics parts, dental-use magnetic attachments, magnetic
powder and magneto-impedance sensors. Other segment is consists of information processing service, nursing care service andother service businesses.

Millions of Yen
Other

Total

Corporate or
elimination

Consolidated¥ 89,706¥75,754¥ 5,623¥ 3,196¥ 174,279¥-

Inter-segment sales

26,092

-

-

2,542

28,634(28,634)-

Total net sales

115,798

75,754

5,623

5,738

202,913(28,634)

174,279

Operating costs and expenses

109,81376,223

6,723

5,862

198,621(28,656)

169,965

Operating income (loss)¥ 5,985¥ (469)¥ (1,100)¥ (124)¥ 4,292¥ 22¥ 4,314

Total assets¥ 105,751¥ 64,884¥ 12,988¥ 3,609¥ 187,232¥ 55,118¥ 242,350

Depreciation

6,248

5,979

1,052

91

13,370-13,370

80

18

132

-

230

0

230

4,391

2,316

1,416

40

8,163

-

8,163

External customers¥ 129,006¥ 85,896¥ 3,380¥ 3,778¥ 222,060¥-¥222,060

Inter-segment sales

28,480

-

-

3,127

31,607(31,607)-

Total net sales

157,486

85,896

3,380

6,905

253,667(31,607)

222,060

Operating costs and expenses

154,838

86,743

5,871

6,888

254,340(31,797)

222,543

Operating income (loss)¥ 2,648¥ (847)¥ (2,491)¥ 17¥ (673)¥ 190¥ (483)

Total assets¥ 102,249¥64,367¥10,566¥ 3,486¥ 180,668¥ 39,349¥ 220,017

Depreciation

6,568

7,063

1,083

81

14,795-

14,795

118

525

171

-

814

-

814

7,004

4,018

3,129

317

14,468-

14,468$ 1,873,964

Net sales:

Impairment loss on fixed assets
Capital expenditures¥ 174,279

For the year 2009:
Net sales:

Impairment loss on fixed assets
Capital expenditures

Thousands of U.S. Dollars

For the year 2010:
Net sales:
External customers$ 964,580$ 814,560$ 60,455$ 34,369$ 1,873,964$-

Inter-segment sales

280,562--

27,335

307,897(307,897)-

Total net sales

1,245,142

814,560

60,45561,7042,181,861(307,897)

1,873,964
1,827,580

Operating costs and expenses

1,180,786

819,601

72,291

63,0352,135,713(308,133)

Operating income (loss)$ 64,356$ (5,041)$ (11,836)$ (1,331)$ 46,148$ 236$ 46,384

Total assets$ 1,137,108$ 697,673$ 139,654$ 38,809$ 2,013,244$ 592,672$ 2,605,916

Depreciation

67,18964,291

11,311

977

143,768-

143,768

862

197

1,415

-

2,474

1

2,474

47,22024,901

15,227427

87,775-87,775

Impairment loss on fixed assets
Capital expenditures

AICHI STEEL REPORT 2010

Financial Section

External customers

For the year 2010:

Environmental Section

Forgings

Social Relations Section

Electro-magnetic
components

Specialty steel

63

Financial Section

Notes to Consolidated Financial Statements
Notes:
1.Corporate assets included in corporate or elimination consist mainly of cash and deposit and investment securities held by theCompany. Corporate assets are ¥57,356 million ($616,735 thousand) and ¥40,530 million at March 31, 2010 and 2009, respectively.
2.As described in Note 3(a) (Accounting change), effective from the year ended March 31, 2010, the Company and its domestic
subsidiaries have adopted Financial Accounting Standard No.15 ‘Accounting Standard for Construction Contract’ issued on
December 27, 2007 and Implementation Guidance of Financial Accounting Standard No.18 ‘Guidance on Accounting Standard forConstruction Contract’ issued on December 27, 2007. The effect of this change was not material for sales and profit and loss.
As described in Note 2(j) (Accounting change), effective from the year ended March 31, 2010, the Company and its domestic
subsidiaries adopted Financial Accounting Standard No.19 ‘Amendment of ‘Accounting Standard for Retirement Benefit’’ issued
on July 31, 2008. This change does not influence operating income, ordinary income and income before income taxes and minority
interest.
3.As described in Note 2(e) (Accounting change), effective from the year ended March 31,2009, the Company and its domestic
subsidiaries have adopted Financial Accounting Standard No.9 ‘Accounting Standard for Evaluation of Inventory’ issued on July 5,
2006. As a result of the adoption, operating income of specialty steel business segment and other business segment decreasedby ¥2,063 million and by ¥41 million, and operating loss of forging business segment and electro-magnetic components businesssegment increased by ¥339 million and by ¥209 million, respectively, as compared with the previous accounting method.
As described in Note 2(f) (Additional information), effective from the year ended Mar 31, 2009, the Company and its domestic
subsidiaries have changed depreciation year for a part of property, plant and equipment by chance of tax reform in 2008. As a resultof the change, operating income of specialty steel business segment and other business segment decreased by ¥68 million and by¥0 million, and operating loss of forging business segment and electro-magnetic components business segment increased by ¥907
million and by ¥38 million, respectively, as compared with the previous accounting method.

(2)Geographic segment information

The table below summarizes the geographic segment information for the years ended March 31, 2010 and 2009 are as follows:
Millions of Yen
Japan

North America

Europe

Asia

Total

Corporate or
elimination

Consolidated

For the year 2010:
Net sales:
External customers¥ 151,758¥ 6,804¥ 1,276¥ 14,441¥174,279¥-Inter-segment sales

6,187

-

16

251

6,454

(6,454)-

Total net sales

157,945

6,804

1,292

14,692

180,733(6,454)

174,279

Operating costs and expenses

154,424

6,473

1,325

14,192

176,414(6,449)169,965

Operating income (loss)¥ 3,521¥ 331¥ (33)¥ 500¥ 4,319¥ (5)¥ 4,314¥ 177,515¥ 7,202¥ 849¥ 15,532¥ 201,098¥41,252¥ 242,350

External customers¥ 193,107¥9,280¥ 1,552¥ 18,121¥ 222,060¥-¥ 222,060

Inter-segment sales

7,557

-

-

100

7,657

(7,657)-

Total net sales

200,664

9,280

1,552

18,221

229,717(7,657)222,060

Operating costs and expenses

203,037

8,883

1,650

16,827230,397(7,854)

222,543

Operating income (loss)¥ (2,373)¥397¥ (98)¥ 1,394¥(680)¥ 197¥ (483)¥171,073¥8,548¥ 956¥ 15,000

195,577¥ 24,440¥ 220,017$ 1,873,964

Total assets¥174,279

For the year 2009:
Net sales:

Total assets

Thousands of U.S. Dollars

For the year 2010:
Net sales:
External customers$ 1,631,802$ 73,163$ 13,717$ 155,282$ 1,873,964$-

Inter-segment sales

66,527

-

169

2,704

69,400(69,400)-

Total net sales

1,698,329

73,163

13,886

157,986

1,943,364(69,400)

1,873,964
1,827,580

Operating costs and expenses

1,660,473

69,601

14,241

152,610

1,896,925(69,345)

Operating income (loss)$ 37,856$ 3,562$ (354)$ 5,375$ 46,439$ (55)$ 46,384$ 1,908,760$ 77,438$ 9,130$ 167,012$ 2,162,340$ 443,576$ 2,605,916

Total assets

Notes:
1. Geographical segments are divided into categories based on their geographical proximity.
2. Corporate assets included in corporate or elimination consist mainly of cash and deposit and investment securities held by theCompany. Corporate assets are ¥57,356 million ($616,735 thousand) and ¥40,530 million at March 31, 2010 and 2009, respectively.
3. Countries or areas belonging to each segment are as follows:2010 and 2009

64

North America

U.S.A.

EuropeGermany, Czech Republic

Asia

Philippine, Thailand, China, Indonesia, Taiwan

AICHI STEEL REPORT 2010

Business Update
Feature Story

4.As described in Note 3(a) (Accounting change), effective from the year ended March 31, 2010, the Company and its domestic
subsidiaries have adopted Financial Accounting Standard No.15 ‘Accounting Standard for Construction Contract’ issued on
December 27, 2007 and Implementation Guidance of Financial Accounting Standard No.18 ‘Guidance on Accounting Standard forConstruction Contract’ issued on December 27, 2007. The effect of this change was not material for sales and profit and loss.
As described in Note 2(j) (Accounting change), effective from the year ended March 31, 2010, the Company and its domestic
subsidiaries adopted Financial Accounting Standard No.19 ‘Amendment of ‘Accounting Standard for Retirement Benefit’’ issued
on July 31, 2008. This change does not influence operating income, ordinary income and income before income taxes and minority
interest.
5.As described in Note 2(e) (Accounting change), effective from the year ended March 31, 2009, the Company and its domestic
subsidiaries have adopted Financial Accounting Standard No.9 ‘Accounting Standard for evaluation of inventory’ issued on July 5,
2006. As a result of the change, operating loss of Japan region increased by ¥2,652 million as compared with the previous accounting
method.
As described in Note 2(f) (Additional information), effective from the year ended March 31, 2009, the Company and its domestic
subsidiaries depreciate have changed depreciation year for a part of property, plant and equipment by change of tax reform in 2008.
As a result of the change, operating loss of Japan region increased by ¥1,013 million as compared with the previous accounting
method.
(3) Sales to overseas customers

Millions of Yen
2010

Thousands of U.S. Dollars
2009

2010
$ 79,944¥ 7,435¥ 10,220

Europe

1,281

1,677

13,772

Asia

18,95026,292

203,770

North America

581

1,050

¥ 38,770$ 298,536

Total consolidated net sales
Percentage of overseas sales to total consolidated net sales¥ 174,279¥ 222,060$ 1,873,964

15.9%

17.5%

15.9%

Note:
1. Sales to overseas customers are divided into categories based on their geographical proximity.
2. Significant countries or areas belonging to each segment are as follows:2010 and 2009
North America

U.S.A.

EuropeGermany, Netherlands, Switzerland

Asia

Thailand, China, Indonesia

Others

Oceania

Per share data for the years ended March 31, 2010 and 2009 are as follows:
Yen
2010

U.S. Dollars
2009

2010

¥ 547.85¥508.16$ 5.9

Basic net income (loss) per share

33.77(71.89)0.4

Diluted net income per share

30.54

-

0.3

Net assets per share

Environmental Section

20. Per Share Data

Social Relations Section

98¥ 27,764

Other areas

CSR Management

For the years ended March 31, 2010 and 2009, overseas sales which included export sales from Japan and net sales of overseas
consolidated subsidiaries other than Japan are summarized as follows:

Due to net loss, diluted net income per share of the fiscal year ended March 31, 2009 has not been presented.

(a) Net assets per share
Millions of Yen
2010
Net assets
Deduction from net assets
Subscription rights to shares
Minority interests

Thousands of U.S. Dollars
2009

2010

¥ 112,377¥ 104,396$ 1,208,352

4,889

4,695

52,568

180

149

1,930

4,709

4,546

50,6381,155,784

Net assets attributable to common stock

107,488

99,701

Number of common stock at the end of the fiscal year used for

196,199

196,201

Financial Section

Basic used in calculation

the calculation of net assets per share (Thousands of shares)

AICHI STEEL REPORT 201065

Financial Section

Notes to Consolidated Financial Statements(b) Basic net income per share and diluted net income per share
Millions of Yen
2010

Thousands of U.S. Dollars
2009

2010

Basic net income per share$ 71,241¥6,625¥ (14,105)

-

-

-

6,625

(14,105)

71,241

196,200

196,202

Adjustment for net income (After tax deduction)

4

-

39

Management fee for convertible bonds

4

-

39

Effect of dilutive Securities (Thousands of shares)

20,849-Convertible bonds with subscription rights to shares (Thousands of shares)

20,833-15-

Net income
Net income not attributable to common stock
Net income attributable to common stock
Average number of common stock shares in issue during
the fiscal year (Thousands of shares)
Diluted net income per share

Stock option (Thousands of shares)
Outline of dilutive Securities not included in
the calculation of diluted net income per sharebecause they do not have any dilutive effect66

AICHI STEEL REPORT 2010

Stock option issued on

Stock option issued on

August 1 ,2005, 2006, 2007 August 1, 2005, 2006 andand 2008 : 2,028 units

2007 : 2,122 units

AICHI STEEL REPORT 201067