Financial Section2017 ANNUAL REPORT
Year Ended March 31, 2017

CONTENTS
Eleven-Year Summary ············································ 1
Financial Review ·················································· 4Consolidated Statement of Financial Position ················· 16
Consolidated Statement of Income ······························ 17
Consolidated Statement of Comprehensive Income ·········· 18
Consolidated Statement of Changes in Equity ················· 19
Consolidated Statement of Cash Flows ························· 21
Notes to the Consolidated Financial Statements ·············· 23
Independent Auditor’s Report ···································· 67

Eleven-Year Summary
Hitachi Metals, Ltd. and Consolidated Subsidiaries
As of and for the Years Ended March 31

Millions of yen(except as otherwise noted)

Thousands of U.S.
dollars(except per shareamounts)

Thousands of
euros(except per shareamounts)

2017

2017

IFRS

2017

2016

2015

Results for the period:
Revenues ···················································¥ 910,486 ¥ 1,017,584 ¥ 1,004,373
Cost of sales ···············································(731,153)(819,433)(793,517)
Selling, general and administrative expenses ··(113,350)(122,090)(126,446)
Other income ··············································
14,07036,416
21,303
Other expenses ···········································(11,786)(12,523)(21,306)
Operating income ········································
68,267
99,954
84,407
Income (loss) before income taxes and non86,391
66,01696,233
controlling interests ·····································Net income (loss) attributable to shareholders
50,59369,05670,569of the parent company ·································Cash flows for the period:
Cash flows from operating activities ··············
89,391
115,742
108,983
Cash flows from investing activities ··············(35,864)(32,147)(113,750)
Free cash flows ···········································
53,527
83,595(4,767)Growth initiative costs:
Capital expenditures ····································
63,84359,60251,474
Depreciation and amortization ······················
43,03942,92739,917
Research and development ···························
17,971
19,121
20,903At the period-end:
Total assets ················································· ¥ 1,040,390 ¥ 1,033,311 ¥ 1,083,450
Interest-bearing debt ····································
194,457
220,376
255,350
Net assets ···················································
548,746504,675
476,176
Number of outstanding shares (thousands) ·····
427,577
427,580
427,601
Number of shareholders ·······························
25,30228,582
26,287
Number of employees ··································
28,75429,15730,278Per share of common stock (yen, U.S. dollars
and euros):
Net income (loss):
Basic ·····················································¥ 118.32¥ 161.50¥ 165.02
Cash dividends ·······································
26.00
26.00
23.00
Net assets ···················································
1,254.89
1,159.70
1,090.64
Key financial indicators:
Operating income margin (%) ·······················
7.5
9.8
8.4
Return on Sales (ROS) (%) ··························
5.6
6.8
7.0
Return on Assets (ROA) (%) ························
6.4
9.1
8.9
Return on Equity (ROE) (%) ························
9.8
14.4
16.8
Shareholders’ equity ratio (%) ······················
51.6
48.0
43.0
Debt/equity ratio (times) ······························
0.36
0.44
0.55
Notes:

2014¥ 807,794(637,081)(106,851)
5,844(16,278)
53,428$ 8,115,572 € 7,600,685(6,517,096) (6,103,623)(1,010,340)(946,239)
125,412
117,456(105,054)(98,389)
608,495
569,889

55,820588,430

551,098

48,133450,958

422,347

99,171(9,832)
89,339796,782(319,672)
477,110746,231(299,391)
446,840

31,98733,762
16,814

569,061
383,626
160,184

532,958
359,287
150,021¥ 848,772
177,195
382,840
427,657
29,30826,850$ 9,273,465
1,733,283
4,891,220———€ 8,685,116
1,623,316
4,580,900———¥ 116.79
17.00
870.36$ 1.050.23
11.19€ 0.99
0.22
10.48

6.6
6.0
8.0
15.6
43.9
0.48

—
—
—
—
—
—

—
—
—
—
—
—

1. The amounts are accounted for and presented in accordance with the International Financial Reporting Standards.
2. The translation of Japanese yen amounts into U.S. dollars and euros for the year ended March 31, 2017, is included in this annual report solely for the convenience of readers
outside Japan. The translation has been made at the rates of ¥112.19=$1 and ¥119.79=€1, the approximate exchange rates as of March 31, 2017.
3. Diluted net income per share is not provided as Hitachi Metals, Ltd. had no dilutive common stock outstanding during the fiscal year ended March 31, 2017.
4. Net income (loss) represents net income (loss) attributable to shareholders of the parent company. Net income (loss) per share is calculated by dividing net income (loss) by
the average number of outstanding shares for the period. Net assets per share are calculated by dividing net assets less non-controlling interests by the number of outstanding
shares as of the period-end.
5. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders’ equity and the average total accumulated comprehensive
income (the average of beginning and ending of the year).
6. Results for the year ended March 31, 2014 (FY2014) are presented in accordance with both J-GAAP and IFRS.

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

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

2014

2013

2012

2011

¥ 807,952(638,872)(109,544)
59,53650,796¥ 535,779(440,684)(74,016)
21,07917,230¥ 556,914(438,930)(73,117)44,86736,414¥ 520,186(406,282)(70,761)
43,14336,061

39,417

12,955

17,88622,204

100,557(30,906)
69,651

62,975(28,718)
34,257

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

42,688(24,607)
18,081

31,987
33,63916,814

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

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

7.4
4.9
7.4
12.9
43.2
0.48

3.9
2.4
3.1
5.5
46.2
0.58

8.1
3.2
6.6
8.3
38.0
0.77

8.3
4.3
6.9
11.0
39.3
0.72

1. The amounts are accounted for and presented in accordance with the generally accepted accounting principles in Japan.
2. Diluted net income per share is not provided as Hitachi Metals, Ltd. had no dilutive common stock outstanding during the fiscal year ended March 31, 2017.
3. Net income (loss) per share is calculated by dividing net income (loss) by the average number of outstanding shares for the period. Net assets per share are calculated by
dividing net assets less minority interests by the number of outstanding shares as of the period-end.
4. Hitachi Metals, Ltd. adopted the revised accounting standard for presentation of net assets in the consolidated balance sheet, effective from the year ended March 31, 2007.
5. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders’ equity and the average total accumulated comprehensive
income (the average of beginning and ending of the year).

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

2010

2009

2008

2007

¥ 431,683(352,382)(65,952)
13,3495,727¥ 590,704(495,948)(79,698)
15,058(200)¥701,075(552,459)(88,918)
59,69851,427¥ 646,311(504,089)(87,500)
54,722
46,562

1,937(3,016)27,03422,06257,012(21,495)
35,51732,699(37,347)(4,648)

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

16,48530,494
10,626

43,76831,81413,08349,327
29,385
13,28336,787
24,392
12,965¥ 517,984
170,664
212,783
352,472
13,88517,806¥ 530,191
190,119
214,576
352,498
14,17518,740¥ 619,466
190,427
235,507352,561
13,472
20,308¥ 629,590
218,716
222,626
345,118
14,176
20,826¥ 5.5012.00
548.76¥ (8.56)13.00
550.79¥ 76.4812.00
604.22¥ 63.8110.00
575.04

3.1
0.4
1.1
1.0
37.3
0.88

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

8.5
3.9
8.2
13.1
34.4
0.89

8.5
3.4
7.9
11.7
31.5
1.10

3

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

Market Environment
During the year ended March 31, 2017, the global economy remained on a modest recovery path primarily in advanced countries. The UnitedStates maintained stable economic growth, backed by an increase in individual consumption and a favorable employment situation. European
economies continued a moderate recovery despite a slowdown in improvements in some corporate sectors. The Chinese economy showed somesigns of a partial rally in the market due to the effects of the government’s various economic measures, and economic growth in emerging
countries also remained on a recovery track. Amid these situations, the Japanese economy showed some signs of a gradual recovery thanks to theimprovement in employment and income environments despite weak exports and production due to the impact of an economic slowdown inemerging countries.
Among the industries in which Hitachi Metals, Ltd. (the “Company”) and its consolidated subsidiaries (collectively, the “Group”) operate, sales
in the automobile industry have increased overall compared with the fiscal year ended March 31, 2016. This is mainly due to increased demand in
the Japanese market since the end of 2016 and steady demand in Europe and China, although the sales of new vehicles have reached their peaklevel in the United States. Supply and demand of steel showed positive signs in the construction sector in the Japanese market since the beginningof 2017, although demand for steel continued to experience challenges on a global basis affected by the economic slowdown in emerging
countries. The number of new housing starts increased both in the United States and Japan. In the electronics industry, mobile devices started toshow a recovery before the end of the fiscal year, and the demand for household appliances increased mainly in Japan during the latter half of the
fiscal year ended March 31, 2017.

Business Overview
Under the business circumstances described above, for the fiscal year ended March 31, 2017, revenues of the Group decreased by¥107,098 million or 10.5% to ¥910,486 million, adjusted operating income decreased by ¥10,078 million or 13.2% to ¥65,983 million, andoperating income decreased by ¥31,687 million or 31.7% to ¥68,267 million, compared with those for the fiscal year ended March 31, 2016.
These results were influenced mainly by a reduction in raw material prices (a sliding-scale raw material price system), the appreciation of the yen,
and a decline in demand. Further, operating income decreased mainly due to a decrease in gross profit and gains on business reorganization andothers of ¥30,232 million in other income arising from a transfer of shares equivalent to 51% of the issued shares of Hitachi Tool Engineering,
Ltd. (currently named Mitsubishi Hitachi Tool Engineering, Ltd.) to Mitsubishi Materials Corporation as of April 1, 2015, during the fiscal year
ended March 31, 2016. For the fiscal year ended March 31, 2017, income before income taxes decreased by ¥30,217 million or 31.4% to¥66,016 million and net income attributable to owners of the parent company decreased by ¥18,463 million or 26.7% to ¥50,593 million,
compared with the year ended March 31, 2016.

Business Results for the Year Ended March 31, 2017
Revenues
Revenues for the fiscal year ended March 31, 2017, decreased by¥107,098 million to ¥910,486 million, down 10.5% year-on-year.
Domestic sales accounting for 44.3% of total revenues decreased by¥47,506 million or 10.5% year-on-year to ¥403,610 million.
Overseas sales decreased globally in the fiscal year ended March 31,
2017, amounting to ¥506,876 million, down ¥59,592 million or 10.5%
from the previous year. In particular, sales in North America decreased to¥276,803 million, down ¥36,044 million or 11.5% year-on-year. Sales in
Asia were ¥174,227 million, down ¥18,546 million or 9.6% year-on-year,
and sales in Europe were ¥42,755 million, down ¥3,089 million or 6.7%
year-on-year.
Overseas sales accounted for 55.7% of total revenues in the year ended
March 31, 2017, which was the same rate as the previous year. The Groupaims to increase the percentage of overseas sales to 58.0% in the fiscal year
ending March 31, 2019.
Operating Income
Operating income dropped ¥31,687 million or 31.7% year-on-year to¥68,267 million. The operating income margin was 7.5%, a decrease of 2.3
percentage points year-on-year. The operating income decreased mainly
due to a decrease in gross profit and gains on business reorganization andothers of ¥30,232 million in other income arising from a transfer of sharesequivalent to 51% of the issued shares of Hitachi Tool Engineering, Ltd.
(currently named Mitsubishi Hitachi Tool Engineering, Ltd.) to Mitsubishi
Materials Corporation as of April 1, 2015, during the fiscal year ended
March 31, 2016.
Net Income and ROE
Interest income less interest charges for the year ended March 31, 2017, amounted to a net expense of ¥2,464 million, a decrease of¥381 million or 13.4% from ¥2,845 million year-on-year. Income before income taxes decreased by ¥30,217 million or 31.4% to ¥66,016 million
and net income attributable to owners of the parent company decreased by ¥18,463 million or 26.7% to ¥50,593 million, compared with the year
ended March 31, 2016. Net income for the year ended March 31, 2017, decreased by ¥18,288 million or 26.5% from the previous year to¥50,692 million. Net income per share was ¥118.32 while it was ¥161.50 for the previous year.

4Return on equity (ROE) declined to 9.8% for the year ended March 31, 2017, mainly due to a decrease in net income. Return on assets (ROA)
was 6.4%, return on sales (ROS) was 5.6%, and the financial leverage ratio was 2.0 times for the year ended March 31, 2017.

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

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

2017

2016

Percentage
Increase (decrease)¥ 234,725
99,756
333,509
241,392
2,963(1,859)¥ 910,486¥ 256,652
105,279
365,118
288,246
3,547(1,258)¥ 1,017,584(8.5)%(5.2)(8.7)(16.3)(16.5)(10.5)%

Operating Income by Business Segment
Millions of yen

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

5

Difference

2017

2016

¥ 21,277
9,301
15,92020,953331
485¥ 68,267¥ 53,070
7,027
23,60815,979143
127¥ 99,954¥ (31,793)
2,274(7,688)
4,974
188
358
¥ (31,687)

9.1%
9.3
4.8
8.7
7.5%

20.7%
6.7
6.5
5.5
9.8%

(11.6)%
2.6
(1.7)
3.1
(2.3)%

High-Grade Metal Products and Materials
Revenues
Revenues in the High-Grade Metal Products and Materials segment for the
fiscal year ended March 31, 2017, were ¥234,725 million, a decrease of¥21,927 million or 8.5%, and adjusted operating income decreased by¥3,525 million or 13.0% to ¥23,503 million, as compared with those for the
fiscal year ended March 31, 2016. Operating income of the segment decreasedby ¥31,793 million or 59.9% to ¥21,277 million for the same period due to theeffects of the decrease in revenues as well as gains on business reorganizationand others of ¥25,931 million arising from the transfer of shares of Hitachi
Tool Engineering, Ltd. (currently named Mitsubishi Hitachi Tool Engineering,Ltd.) during the three months ended June 30, 2015.
Specialty Steels: Sales of molds and tool steel fell below those for the fiscal
year ended March 31, 2016, due to inventory adjustments of molds and toolsteel affected by an economic slowdown, mainly in Asia during the threemonths ended June 30, 2016. In industrial equipment materials, demand forenvironment-friendly products related to automobiles increased, and sales ofother industrial components were strong. Sales of aircraft-related and energyrelated materials faced an in-between season of demand. In alloys forelectronic products, sales of display-related materials were stagnant.
Rolls: On September 1, 2016, the Group discontinued production at Baosteel
Hitachi Rolls (Nantong) Ltd. with the objective of concentrating management
resources in high value-added products. Additionally, sales of injection
molding machine parts were affected by a decline in demand for mobile devices. As a result, sales of rolls as a whole fell year on year.
Soft Magnetic Materials and Applied Products: Sales of soft magnetic materials and applied products as a whole fell below those for the fiscal
year ended March 31, 2016, due to a drop in demand in China, despite a gradual increase in demand for the mainstay Metglas® amorphous
metals in India.
Capital Expenditures, Depreciation and Amortization, and R&D expenses

Billions of yen

Years Ended March 31

2017

2016

Capital expenditures¥ 17.8¥ 23.8Depreciation and amortization

12.8

11.9

Research and development expenses

5.2

5.2

6

Magnetic Materials and Applications
Revenues
Revenues in the Magnetic Materials and Applications segment for the fiscal
year ended March 31, 2017, were ¥99,756 million, a decrease of ¥5,523 million
or 5.2%, and adjusted operating income increased by ¥2,392 million or 34.6%
to ¥9,314 million, as compared with those for the fiscal year ended March 31,
2016. Operating income of the segment increased by ¥2,274 million or 32.4% to¥9,301 million for the same period.
Magnets: In rare earth magnets, demand for industrial equipment and household
appliances increased as compared with that for the fiscal year ended March 31,
2016, supported by strong demand in automotive electronic components forelectric power steering and hybrid automobiles. In ferrite magnets, there wasstrong demand for automotive electronic components and household applianceparts. However, revenues in the segment fell below those for the fiscal year
ended March 31, 2016, overall due to the effects of the reduction in raw material
prices (a sliding-scale raw material price system) and the appreciation of the yen.

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

Billions of yen

Years Ended March 31

2017

2016

Capital expenditures¥ 13.7¥ 6.1

Depreciation and amortization

6.1

5.6

Research and development expenses

2.5

2.6

High-Grade Functional Components and Equipment
Revenues
Revenues in the High-Grade Functional Components and Equipment
segment for the fiscal year ended March 31, 2017, were ¥333,509 million, adecrease of ¥31,609 million or 8.7%, and adjusted operating income
decreased by ¥8,662 million or 33.2% to ¥17,453 million, as compared withthose for the fiscal year ended March 31, 2016. Operating income of thesegment decreased by ¥7,688 million or 32.6% to ¥15,920 million for thesame period.
Casting Components for Automobiles: Despite sustained high demand forcasting components for pickup trucks in North America, sales of casting
components for automobiles as a whole decreased compared with those forthe fiscal year ended March 31, 2016, due to a decrease in demand forcasting components for farming machinery and construction machinery
resulting from economic slowdown in emerging countries and sluggish grain
and crude oil prices. Sales of heat-resistant exhaust casting components
exceeded those for the prior fiscal year due to significant sales growth in the
United States and Asia. Sales of aluminum wheels fell below those for thesame period of the prior year due to a decrease in shipments as well as theappreciation of the yen.
Piping Components: Sales of pipe fittings as a whole fell below those for the
fiscal year ended March 31, 2016, due in part to the effects of the delay inlarge-scale constructions in Japan, despite a steady increase in demand for
housing-related supplies following an increased number of new housing starts both in Japan and overseas.

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

Billions of yen

Years Ended March 31

2017

2016

Capital expenditures¥ 22.6¥ 16.8Depreciation and amortization

14.7

15.0

Research and development expenses

2.7

2.2

7

Wires, Cables, and Related Products
Revenues
Revenues in the Wires, Cables, and Related Products segment for the fiscal
year ended March 31, 2017, were ¥241,392 million, a decrease of¥46,854 million or 16.3%, and adjusted operating income decreased by¥309 million or 2.1% to ¥14,715 million, as compared with those for the
fiscal year ended March 31, 2016. In the Wires, Cables, and Related Products
segment, the following measures were taken for the purpose of renewing thebusiness portfolio. The Information System Business, which is comprised of
the information network business and wireless antenna business together withall issued shares of Hitachi Cable Networks, Ltd. held by Hitachi Metals, Ltd.
(the “Company”), was transferred as of December 1, 2016. In addition, on
January 5, 2017, for the purpose of making prompt management decisions in
response to a rapidly changing market environment, the Company transferred
all of its interest in SH Materials Co., Ltd, which was a joint venture between
the Company and Sumitomo Metal Mining Co., Ltd. (“SMM”) and accounted
for using the equity-method to SMM. At the same time, the Company
obtained all of SMM’s interest in SH Copper Products Co., Ltd. (“SH Copper
Products”), which was a joint venture between the Company and SMM andwas accounted for using the equity-method, and SH Copper Products became
a wholly owned subsidiary of the Company. Due to these measures, theCompany recorded gains on business reorganization of ¥8,417 million for the
fiscal year ended March 31, 2017. As a result, operating income increased by¥4,974 million or 31.1% to ¥20,953 million as compared with the fiscal year
ended March 31, 2016.
Electric Wires and Cables: While revenues from magnet wires and electrical wires and cables for construction decreased, sales of wires and cables
for rolling stock, which is one of the focus areas of the Group, grew significantly, especially for China.
Functional Components: In automotive products, demand for both electronic components for automobiles and brake hoses was strong. Sales ofprobe cables for medical use fell below those for the prior year due to diminished demand in overseas countries.
Capital Expenditures, Depreciation and Amortization, and R&D expenses
Billions of yen

Years Ended March 31

2017

2016

Capital expenditures¥ 7.2¥ 11.5

Depreciation and amortization

8.2

9.2

Research and development expenses

7.5

9.1

Financial Conditions and Liquidity
Source of Funds and Liquidity Management
The Company endeavors to generate stable operating cash flows and maintain liquidity to secure sufficient funds for its business activities andbuild a solid financial position. In principal, the Company draws largely on cash and cash equivalents, and operating cash flows to fund working
capital and strategic investments to secure sustainable growth. At the same time, the Company harnesses interest-bearing debt, equity finance, anda wide range of other instruments for raising funds.
To enhance efficient fund management among the Group companies, the Company and subsidiaries located in Japan have set up a cash poolingsystem (CPS) that ensures financial flexibility and efficient management of centrally managed surplus funds within the Group. The Group
companies in North America manage their funds efficiently through a similar CPS.
As of March 31, 2017, the current ratio was 173%, the liquidity level that management considers adequate.
Rating Information
It is the Company’s top management priority to build and maintain a solid credit rating, and lower financing costs for an appropriate level ofliquidity, mobility, and flexibility of financial policy. Rating and Investment Information, Inc. (R&I), a major credit rating agency in Japan,
assigned a rating of “A+” for the Company’s long-term bonds for the year ended March 31, 2017. R&I has consistently rated the Company as “A”
or above since the year ended March 31, 2009.
Rating Information

R&I
RatingLong-term issue rating

2017
A+

2016
A+

Rating Symbols and Definitions:Rating “A+”: Very high creditworthiness supported by some excellent factors.

8

Financial Position
Total assets were ¥1,040,390 million as of March 31, 2017, an increase of¥7,079 million year-on-year.
Current assets were ¥491,895 million, an increase of ¥8,040 million year-onyear. This was mainly due to the net effect of an increase in cash and cash
equivalents of ¥19,111 million and a decrease in other current assets of¥14,950 million. Non-current assets were ¥548,495 million, a decrease of¥961 million year-on-year. This was mainly attributable to decreases ininvestments accounted for using the equity method, goodwill and intangible
assets, investments in securities and other financial assets, and other noncurrent assets of ¥10,198 million year-on-year, ¥7,720 million year-on-year,¥1,482 million year-on-year, and ¥1,035 million year-on-year, respectively,
despite of an increase in property, plant and equipment of ¥20,375 million
year-on-year.
ROA was recorded as 6.4% in the year ended March 31, 2017, comparedwith 9.1% in the year ended March 31, 2016 on the back of decreasing total
assets during the year.
Total liabilities as of March 31, 2017, were ¥491,644 million, a decrease of¥36,992 million year-on-year. This was mainly attributable to a decrease incurrent portion of long-term debt and long-term debt of ¥26,969 million yearon-year and a decrease in retirement and severance benefits of ¥ 6,521 million
year on year.
As a result, interest-bearing debt decreased by ¥25,919 million year-on-yearfrom the previous year-end to ¥194,457 million as of March 31, 2017, thedebt-to-equity ratio decreased to 0.36.
Total equity was ¥548,746 million, an increase of ¥44,071 million year-on-year. This was mainly attributable to an increase in retained earningsof ¥39,928 million year-on-year.
The equity ratio stood at 51.6%, 3.6 percentage points higher than that of the prior year, due to an increase in retained earnings of ¥39,928
million year-on-year. Return on invested capital was 6.5% during the year, 2.9 percentage points lower than that of the prior year, mainly due to adecrease in gross profit and gains on business reorganization and others of ¥30,232 million in other income arising from a transfer of sharesequivalent to 51% of the issued shares of Hitachi Tool Engineering, Ltd. (currently named Mitsubishi Hitachi Tool Engineering, Ltd.) to
Mitsubishi Materials Corporation.
For the year ending March 31, 2018, the management will continue to reinforce the Company’s consolidated financial position by constraining
interest-bearing debt further while improving realization of investment effects.

9Cash Flows
The Company’s operating cash flows are the primary source offunding for operating capital necessary for business activities andcapital expenditures. Repayments of interest-bearing debts and cash
dividends paid to shareholders are made mainly from free cash flows.
Cash and cash equivalents as of the end of the fiscal year ended
March 31, 2017 were ¥139,411 million, an increase of ¥19,111 million
from the end of the fiscal year ended March 31, 2016, as a result of net
cash provided by operating activities exceeding cash used in investing
activities and financing activities.
Net cash provided by operating activities was ¥89,391 million, adecrease of ¥26,351 million from the previous year, which was mainly
attributable to net income of ¥50,692 million and depreciation andamortization of intangible assets of ¥43,039 million for the fiscal year
ended March 31, 2017. Net cash provided by working capital was¥2,486 million in the fiscal year ended March 31, 2017 (i.e., a decreaseof ¥6,092 million in trade notes and accounts receivable, an increase of¥7,513 million in inventories, and an increase of ¥3,907 million in tradenotes and accounts payable).
The operating cash flow margin was 9.8% for the year ended March
31, 2017, down from 11.4% for the previous year.
The Company aims to reduce inventories to enhance the operating
cash flow margin and shorten the working capital turnover period. The
Company maintains a structure to manage appropriate inventory levels
considering future trends and to reduce inventory volume over medium
term to long term. Production bases and procurement units are
responsible for raw material inventories. Production bases and internal
companies are responsible for manufactured inventories, including
work in process and finished products. Domestic and overseas sales
divisions and subsidiaries, and internal companies are responsible for
distribution stocks. The Company will maintain such structure and continue to manage inventories proactively.
Net cash used in investing activities was ¥35,864 million, an increase of ¥3,717 million, which was mainly attributable to the net effect of
payment of ¥63,144 million for the purchase of property, plant and equipment, and proceeds of ¥27,903 million from the sale of investments insecurities and other financial assets.
Net cash used in financing activities was ¥34,192 million, a decrease of ¥3,680 million, which was mainly attributable to repayment of longterm debt of ¥26,782 million.

Capital Expenditures, Depreciation, and Amortization
The Group invests strategically to innovate its core business processes forenhancement of production capacity and streamlining. This is in line with
the Group’s goals of cultivating businesses that focus on products with low
environmental impacts and energy efficiency, growth opportunities, and costcompetitiveness of market-dominant products.
For the year ended March 31, 2017, capital expenditures were
¥63,843 million, a 7.1% increase from the previous year, mainly due tobolstering production capacities, developing production sites andstreamlining production efficiency in overseas, while enhancing production
capacities in Japan. The ratio of capital expenditures (CAPEX) to operating
cash flows was 0.71 times for the fiscal year ended March 31, 2017, and theentire expenditures were covered by operating cash flows.
Capital expenditures for individual business segments were as follows:¥17,812 million for High-Grade Metal Products and Materials to improveand streamline production capacities in Japan and to establish a production
structure for high-value added products; ¥13,659 million for Magnetic
Materials and Applications to bolster production capacities for magnet
products and develop production sites for rare-earth magnets in overseas;¥22,575 million for High-Grade Functional Components and Equipment toboost production capacities in Japan and to streamline production efficiency
in overseas; and ¥7,212 million for Wires, Cables, and Related Products to
upgrade and streamline large-scale facilities in Japan and to enhance
production capacities in overseas segments.
For the year ending March 31, 2018, management plans to allocate¥93,000 million (a 45.7% increase year-on-year) to capital expenditures(including new and additional expenditures). The Specialty Steel Products
segment will continue to improve and streamline production capacities andinvest towards a rationalization of manufacturing in Japan. The Magnetic Materials and Applications segment will enhance its management
production structure. The Functional Components and Equipment segment will strengthen its production structure of manufacturing in Japan, andenhance and streamline production capacities at production works overseas. The Wires, Cables, and Related Products segment will continue
upgrade and streamline large-scale facilities in Japan. General and administrative divisions plan to establish a new base for research anddevelopment in Japan.
For both existing and new initiatives, management will endeavor to improve returns on investment and accelerate realization of investment
effects.

10

Depreciation and amortization for the year ended March 31, 2017 were ¥43,039 million, which increased by 0.3% from the previous year.
Depreciation and amortization for the year ended March 31, 2017 for High-Grade Metal Products and Materials, Magnetic Materials andApplications, High-Grade Functional Components and Equipment, and Wires, Cables, and Related Products were ¥12,845 million, ¥6,106 million,¥14,650 million, and ¥8,223 million, respectively.
The Group forecasts depreciation and amortization expenses for the year ending March 31, 2018, to be ¥47,000 million.
Capital Expenditures by Business Segment
Millions of yen

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

2017¥ 17,812
13,65922,575
7,212
122
2,463
¥ 63,843¥ 89,391
0.71

2016¥ 23,849
6,106
16,81911,524
182
1,122¥ 59,602¥ 115,742
0.51

Depreciation and Amortization by Business Segment
Millions of yen

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

2017
¥ 12,845
6,106
14,650
8,223
390
825
¥ 43,039

Research and Development (R&D) Activities
The Group operates R&D activities through market-oriented divisional
laboratories. Each internal company pursues development activities at its
own R&D section in line with its own business strategies. In addition, newproducts and technologies, which will play a major role in the next
generation as well as fundamental technologies, are developed in thestrong alliance between the Group and laboratories of Hitachi, Ltd. The
Group also collaborates closely with other related divisions of the HitachiGroup to expand new applications of existing products. At the same time,
the Group actively conducts and utilizes joint research with external
domestic and foreign institutions, such as universities, to cultivate newmaterials and technologies, which leads to a development of new productsin the future. Top management is involved in the development activities, inparticular, for the products and technologies that are important to theGroup as a whole.
For the year ended March 31, 2017, the Group invested ¥17,971 million
in R&D, a 6.0% decrease from the previous year. R&D to revenues was
2.0% in the year ended March 31, 2017.
Breaking down R&D expenses by segment, the Group allocated¥5,210 million for the High-Grade Metal Products and Materials segment,¥2,523 million for the Magnetic Materials and Applications segment,¥2,731 million for the High-Grade Functional Components and Equipment
segment, and ¥7,507 million for the Wires, Cables, and Related Products
segment.
The Group forecasts R&D expenses for the year ending March 31, 2018
to be ¥20,000 million.

11

2016
¥ 11,935
5,588
14,958
9,203
453
790
¥ 42,927

R&D by Business Segment
Millions of yen

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

2017¥ 5,210
2,523
2,731
7,507
¥ 17,971¥ 910,486
2.0%

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

Outlook
Performance Outlook for the year ending March 31, 2018
The global economy is expected to continue on a recovery path, although the Group’s business environment is filled with uncertainties
stemming from political instability in certain countries, concerns about further economic slowdown in emerging countries such as China, andfluctuations in foreign exchange rates and resource prices.
In this business environment, the Group strives for sustainable growth by executing its global growth strategies and strengthening the businessbase in line with the Fiscal Year 2018 Medium-Term Management Plan (ending March 31, 2019) to position itself as one of the world's leading
high-performance materials company.

Management Strategies for the Future
Challenges
In order to achieve the Group’s goal of becoming the world’s leading high-performance materials company, with change and challenge as
keywords, the Group aims to “change to be a competitive business” and “challenge ourselves to meet new targets” under the Fiscal Year 2018
Medium-term Management Plan. Specific action plans are as follows:(a) Accelerate the creation and execution of growth strategies
The Group aims to promote new product development and growth strategy investment (including M&A) through proactive R&D based on aperspective that is attuned to what markets and customers are looking for. The Group will enhance speed from development to commercial release,mass production, and sales expansion and accelerate the creation and cultivation of what will become the next core products. Also, in addition tostrengthening the business base, the Group will invest strategically for growth to globally expand business and thereby increase profitability.
These efforts will make the Group more competitive, being able to develop global markets and expand the business domains in the industrial
infrastructure, energy, automotive, and electronics fields.
(b) Achieve a robust business structure and highly efficient business management
To build a robust business structure capable of responding flexibly to changes in the market environment, the Group will concentrate
management resources on fields where growth is expected, promoting efficient business operations, and increasing corporate value. By
continuously remodeling its business portfolio, the Group aims to further strengthen its business base and establish a business structure that cancompete and win on the global market level. Moreover, the Group will promote the “Corporate Monozukuri Innovation Project,” merging
GEMBA (workplace) improvement and technology development, and will further strengthen profitability to become the world’s leading highperformance materials company.
(c) Strive to establish a business base that is sustainable over the long-term
By achieving the “creation and execution of growth strategies” and a “robust business structure and highly efficient business management”–theaction plans in the Fiscal Year 2018 Medium-Term Management Plan–the Group will enhance management efficiency to maintain sound financial
strength and become a company that is sustainable over the long term.
In addition, the Group plans to build an innovative corporate culture and achieve sustained growth by practicing diversity management andempowering people of all types to play an active role.
The Company’s basic policy for management, which controls the Company’s decision making on financial and operational matters, prescribesthat the Company, as a development-driven entity, strives for providing new value for society through further sophistication of fundamental
technologies and creation of new products and businesses by challenging new technologies. In order to pursue such commitments, as a member ofthe Hitachi Group led by Hitachi, Ltd., the parent company, the Company secures a close relationship with Hitachi Group companies throughR&D activities, which enables the Company to utilize management resources and to offer high-quality products and services, while the Company
maintains its autonomy in its business operations and transactions with Hitachi, Ltd. Moreover, considering the expectations and evaluation fromshareholders, investors, and the stock market, the Company, as a listed entity, ensures timely and appropriate disclosure. Furthermore, theCompany focuses on rational and intense management through implementation of management strategies for sustainable growth as well as
enhancement of corporate governance. Through these measures, the Company strives to increase its corporate value while maximizing values tobe offered to stakeholders, including its shareholders and the parent company.

12Business Risk
The following risks may significantly influence investor’s decisions. The forward-looking statements stated below are based on certain
assumptions and predictions determined by the Group as of the issuance date of the Securities Report (available only in Japanese).
(1) Economic Conditions of Market and Product Demand
Demand for the Group’s products is subject to market trends in the following industries: the iron and steel industry; the home electronicsrelated industry, such as personal computers, smart phones, and semiconductors; the automotive industry; the aviation industry; and theconstruction industry. The Group sells its products in Japan, the United States of America, Asia such as China, and Europe. Accordingly,
economic conditions of those countries affect the sales of the Group’s products.
The Group endeavors to build a profitable structure that is less subjected to changes in the business climate, by raising productivity, reducing
fixed and variable costs and lowering the break-even point. However, declining demand in related industries or worsening economic conditions in
the countries in which the Group’s products are sold may affect the Group’s operating results.
(2) Fluctuation in Prices of Raw Materials
Raw materials for the Group’s metal products include scrap iron and copper, as well as cobalt, nickel, molybdenum, and rare metals, such as
rare earths, for which suppliers and production areas are limited. Prices for these raw materials may fluctuate dramatically depending on market
conditions. Trading volume of the raw materials may also be affected by resource policies and other factors in production countries.
The Group reflects the increase in raw material cost to selling prices of its products. Nonetheless, there is a time lag between the increase in
raw material cost and the revision of selling prices in response to higher costs, and not all of the increased costs will be reflected to selling prices.
Accordingly, increases in raw material cost, which are not reflected in selling prices, may affect the Group’s operating results.
(3) Funding
The Group raises its funds through borrowings from financial institutions, commercial paper, and capital markets, and is subjected tofluctuations in interest rate and credit risks.
(4) Fluctuations in Foreign Exchange Rates
The Group imports raw materials from overseas countries and exports products manufactured in Japan to overseas markets. Thus, fluctuations
in foreign exchange rates affect transactions, assets, and liabilities denominated in foreign currencies. The Group hedges the risks of fluctuations
in foreign exchange rates that affect import and export transactions denominated in foreign currencies through financial instruments, including
forward exchange contracts and currency options. Nonetheless, significant fluctuations in foreign exchange rates may affect the Group’s operating
results and financial position. The Group translates the financial statements of foreign consolidated subsidiaries into yen to prepare its
consolidated financial statements. Therefore, fluctuations in foreign exchange rates may affect the Group’s operating results and financial position.
(5) Fluctuations in Value of Marketable Securities
The Group holds marketable securities subject to impairment due to a downturn in securities markets or deteriorating financial position of
issuing companies, which may affect the Group’s operating results or consolidated financial position.
(6) Overseas Expansion
The Group is expanding its operations overseas, including the United States, Asia such as China, and Europe in response to maturing Japanesemarkets and the offshore shifts of customers.
When expanding its operations overseas, the Group is required to make large initial investments into manufacturing and other facilities and, inmany cases, the Group may require time to commence its operations. Overseas expansion entails three inherent risks that may interrupt businessactivities: (1) regulatory changes in legal and tax system, (2) underdeveloped social systems and infrastructures, and (3) economic, social, andpolitical conditions. If such risks materialize, they may adversely affect overseas operations and the Group’s operating results or financial position.
(7) Competitive Advantage and Development and Commercialization of New Technologies and Products
The Group’s competitors offer similar products in the businesses in which the Group operates. Products in the Magnetic Materials andApplications business segment are typically subjected to dramatic changes in technologies and customer needs, and the markets for existingproducts may shrink in a short period of time. Markets for products in other businesses may also shrink as those markets mature.
Accordingly, the Group is subjected to competition in terms of price, quality, and delivery, and is affected by ability to develop andcommercialize new technologies and products.
The Group endeavors to maintain its competitiveness by identifying customer needs and developing and commercializing new technologies
and products. However, if the Group is unable to respond properly to changes in technologies and customer needs or if lead times of development
and commercialization for new technologies or products are prolonged, the Group’s growth potential and profitability may deteriorate and theGroup’s operating results or financial position may be affected.
(8) Intellectual Property Rights
The Group owns and licenses numerous intellectual property rights and also exercises those rights based on its business strategy. In case where
deemed necessary or effective, the Group may obtain licenses to use the intellectual property rights of third parties. If those rights are notprotected, maintained or obtained as planned, the Group’s operations or competitiveness may be affected. In case where the Group becomes aparty to litigation regarding intellectual property rights, litigation-related costs would be incurred and may affect its operating results or financial
position.
(9) Environmental Regulations
The operations of customers with which the Group does business are subjected to extensive environmental and other regulations. Regulations
have and will become more stringent. The Group is required to ensure regulatory compliance with regard to the materials and parts for
manufacturing its products and may unavoidably incur expenditures to meet customers’ specifications.
The Group’s businesses are subjected to various environmental and occupational health and safety laws and regulations covering air and waterpollution, using and handling hazardous substances, rationalizing use of energy, disposing waste, and soil and groundwater contamination. The
Group is responsible for risks relating to environment, health, and safety associated with its past, present, and future business activities. As related
laws and regulations become more stringent and new ordinances are released, the costs related to such restrictions may affect the Group’s

13

operating results or financial position.
(10) Product Defects
Certain products of the Group, such as high-security parts, are required to be exceptionally reliable. The Group has built a rigorous quality
control system to prevent manufacturing and distribution of defective products.
However, in case defective products are distributed to the market, costs for relevant repairs, replacements, recalls, damage compensation claims,
and litigation may be incurred and, accordingly, such costs may affect the Group’s operating results or financial position.
(11) Laws and Regulations, and Official Restrictions
The Group is subject to economic laws and regulations for trade, foreign exchange and taxation, and other related regulations and official
restrictions in Japan and other countries in which it operates. The Group endeavors to comply with these laws and regulations, and official
restrictions by designing and improving internal controls. However, in case the Group is considered failing to comply with these requirements,
administrative punishment would be imposed, or in case these requirements are revised, such revision may increase related expenses. These
expenditures may affect the Group’s operating results or financial position.
(12) Earthquakes and Other Natural Disasters
The Group may experience turmoil in its logistics or supply chain in case of earthquakes, typhoons or other natural disasters that damage its
facilities, or even if such disasters do not directly damage its facilities, force it to halt operations. Epidemics of a new influenza virus or otherinfectious diseases may also cause turmoil in the Group’s business activities. In case natural disasters or other events lead to turmoil, the Group’s
operations may be disturbed and its operating results or financial position may be affected.
(13) Information Security
The Group recognizes the increasing importance of information systems for the Group business. In the case information systems are corrupted
due to computer viruses or other causes, the Group’s operations may be disturbed and its operating results or financial position may be affected.
The Group holds and manages personal information obtained from customers, and various confidential information on the Group, andcustomers’ technologies, research and development, manufacturing, sales, and marketing activities. The Group manages and protects theconfidential information; however, there is no guarantee that the Group’s information management is effective enough to protect the confidential
information. In case such information is disclosed without proper authority, the Group may be charged with compensation claims or filed alawsuit. Such events may negatively affect the Group’s operating results, financial position, reputation or credibility.
(14) Retirement and severance benefits
The Group owes a significant amount of retirement benefit costs and obligation derived from actuarial valuations. Inherent in these valuations
are key assumptions used in estimating the amount of pension plan assets, including mortality, withdrawal rate, retirement rate, changes in wages,
discount rates and expected return on plan assets. The Group is required to make judgments regarding these key assumptions by taking into
account various factors, including personnel demographics, current market conditions and expected trends in interest rates. Although we believethat the key assumptions are reasonable in light of the various underlying factors, there is no assurance that the key assumptions will align withactual results. A decrease in the discount rate may result in an actuarial increase in retirement benefit obligations. Changes in key assumptions
may affect the Group’s financial position or operating results.
(15) Business Relationship with the Parent Company
Hitachi, Ltd. is the Company’s parent company and holds 53.5% (including indirect ownership of 0.5%) of the voting rights of the Company asof March 31, 2017. Hitachi, Ltd. has a number of affiliates and engages in a broad range of business activities from product manufacturing tosales and services in segments, including Information & Telecommunication Systems, Social Infrastructure & Industrial Systems, Electronic
Systems & Equipment, Construction Machinery, High Functional Materials & Components, Automotive Systems, Life and Eco System, andOthers (Logistics and Other Services.). The Company partially engages in High Functional Materials & Components. As of the issuance date of
the Securities Report (available only in Japanese), one of eight directors of the Company concurrently serves as the director of Hitachi, Ltd.
Further, the Company has transactions with Hitachi, Ltd., including product supplies. While securing the Company’s independence, it actively
participates in the Hitachi Group management and intends to maximize the effective use of Hitachi Group’s research and development capabilities,
as well as brand and other management resources. Thus, the Company’s business may be affected by the management strategy of Hitachi, Ltd.
(16) M&A
The Group may be involved in transactions, including acquiring other entities, establishing joint ventures, and entering into strategic businessalliances aimed at developing new technologies and products, enhancing competitiveness in each of the Group’s business domains, and expanding
business areas. Executing these strategies may require time before the Group realizes synergy benefits for certain transactions, as it addresses
complex issues involving integration of businesses, technologies, products, and human resources, a process that entails both time and costs. When
strategy execution does not go according to plan, there is a possibility that initially expected benefits may not be realized. Furthermore, businesscollaborations might be adversely affected by factors that are beyond the Group’s control, such as decisions or capabilities of its strategic alliancepartners and market trends. Moreover, significant costs may be incurred owing to post-integration management issues, including restructuring ofacquired entities or businesses, which may impair the Group’s performance or financial position.
(17) Medium-Term Management Plan
The Group has prepared the Fiscal 2018 Medium-Term Management Plan ending March 31, 2019, under which the Group aims to “change to
be a competitive business” and “challenge to meet new targets.” With “change” and “challenge” as its keywords, the Group plans to build astronger business base and pursue a growth strategy to become the world’s leading high-performance materials company and grow sustainably
over the long term.
Although the Group strives to achieve the goals set in the Medium-Term Management Plan, unforeseen changes in the business climate or the
emergence of any of the risks above described in (1) through (16) may adversely affect the Group’s operating results or financial position.
Accordingly, the Medium-Term Management Plan may not be implemented as planned, or the Group may fail to reach its targeted management
benchmarks.

14

Table of contents

1
Consolidated Financial Statements and Notes .................................................................................................................... 16(1)
Consolidated Financial Statements ................................................................ 16
1)
Consolidated Statement of Financial Position ........................................................ 16
2)
Consolidated Statement of Income and Consolidated Statement of Comprehensive Income .................... 17
3)
Consolidated Statement of Changes in Equity ........................................................ 19
4)
Consolidated Statement of Cash Flows ............................................................. 21
Notes to the Consolidated Financial Statements .............................................................23
Note 1. Nature of the Reporting Company ............................................................... 23
Note 2. Basis of Presentation .......................................................................... 23
Note 3. Summary of Significant Accounting Policies ....................................................... 23
Note 4. Segment Information .......................................................................... 29
Note 5. Trade Receivables ............................................................................ 34
Note 6. Inventories .................................................................................. 34
Note 7. Investments Accounted for Using the Equity Method ............................................... 34
Note 8. Property, Plant and Equipment ................................................................. 35
Note 9. Goodwill and Intangible Assets .................................................................. 37
Note 10. Deferred Taxes and Income Taxes ............................................................... 39
Note 11. Trade Payables ............................................................................... 41
Note 12. Provisions ................................................................................... 41
Note 13. Employee Benefits ............................................................................ 42
Note 14. Equity ..................................................................................... 45
Note 15. Accumulated Other Comprehensive Income and Other Comprehensive Income ......................... 46
Note 16. Dividends ................................................................................... 50
Note 17. Other Income and Other Expenses............................................................... 51
Note 18. Other Financial Income and Expenses ............................................................ 51
Note 19. Earnings per Share ........................................................................... 51
Note 20. Financial Instruments and Other Related Information .............................................. 52
Note 21. Pledged Assets ............................................................................... 62
Note 22. Major Subsidiaries and Associates ............................................................... 63
Note 23. Transactions with Related Parties ............................................................... 65
Note 24. Commitments and Contingencies (Other Than Liabilities Recognized as Provisions) ..................... 65
Note 25. Subsequent Events ............................................................................ 66

15

1 Consolidated Financial Statements and Notes(1)1)

Consolidated Financial Statements
Consolidated Statement of Financial Position
As ofMarch 31, 2017

As ofMarch 31, 2016

Thousands of
U.S. dollars
As ofMarch 31, 20175
6
20

¥ 139,411
175,568
153,556
23,360491,895¥ 120,300
178,281
146,964
38,310483,855$ 1,242,633
1,564,917
1,368,714
208,218
4,384,482

7

26,23936,437

233,880

20, 218
9
10

20,964
324,667
151,195
11,651
13,779548,495¥ 1,040,390

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

186,862
2,893,903
1,347,669
103,851
122,818
4,888,983$ 9,273,465

20
20
20
11, 20¥ 26,301
35,462
26,360150,785
37,817858
6,002
283,585¥ 25,251
27,131
26,714
148,999
38,0672,426
8,126
276,714$ 234,433
316,089
234,959
1,344,015
337,080
7,648
53,4992,527,721

20
20
13
10
12

132,694
1,641
60,2998,758
4,667
208,059
491,644

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

1,182,761
14,627537,472
78,064
41,5991,854,524
4,382,244

14

26,284
115,806
376,069
19,555(1,151)

26,284
115,806
336,141
18,780(1,146)234,281
1,032,231
3,352,072
174,303(10,259)

536,563
12,183548,746¥ 1,040,390

495,8658,810
504,675¥ 1,033,311

4,782,628
108,593
4,891,220$ 9,273,465

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

12

15
14

See accompanying notes to the consolidated financial statements.

16

2)

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income

For the year ended
March 31, 2017
¥ 910,486(731,153)
179,333

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

Thousands of
U.S. dollars
For the year ended
March 31, 2017
$ 8,115,572(6,517,096)
1,598,476(113,350)
14,070(11,786)
68,267(122,090)
36,416(12,523)
99,954(1,010,340)
125,412(105,054)
608,495

346
248(2,810)(1,189)847
385(3,692)(1,689)

3,084
2,211
(25,047)(10,598)

1,154
66,016(15,324)
50,692428
96,233(27,253)
68,98010,286588,430(136,590)
451,841

50,59399¥ 50,692

69,056(76)¥ 68,980

450,958882$ 451,841

For the year ended
March 31, 2017

For the year ended
March 31, 2016

U.S. dollars
For the year ended
March 31, 2017

¥ 118.32‒¥ 161.50‒$ 1.05‒

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

17
17

18
18
7
10

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

Yen

Earnings per share attributable to shareholders of
the parent company
Basic
Diluted19

See accompanying notes to the consolidated financial statements.

17

Consolidated Statement of Comprehensive Income

For the year ended
March 31, 2017
¥ 50,692

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

Thousands of
U.S. dollars
For the year ended
March 31, 2017
$ 451,841

(38)
2,628

(1,166)(6,456)(339)
23,425

(477)

(119)

(4,252)

2,113(7,741)

18,834(1,590)
1,114(19,960)(233)(14,172)
9,930

7

(364)

(964)

(3,244)

15

(840)
1,273
¥ 51,965(21,157)(28,898)¥ 40,082(7,487)
11,347$ 463,187¥ 51,821
144¥ 51,965¥ 40,664(582)¥ 40,082$ 461,904
1,284$ 463,187

Note

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

Millions of yen

7

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

18

3)

Consolidated Statement of Changes in Equity
Millions of yen
Note Common
stockBalance at April 1, 2015
Changes in equity
Net income
Other comprehensive income
Dividends to shareholders of the16
parent company
Dividends to non-controllinginterests
Acquisition of treasury stock
14
14
Sales of treasury stock
Transactions with non-controllinginterests
Transfer to retained earnings
Total changes in equity
Balance at March 31, 2016
Changes in equity
Net income
Other comprehensive income
Dividends to shareholders of the16
parent company
Dividends to non-controllinginterests
Acquisition of treasury stock
14
Sales of treasury stock
14
Transactions with non-controllinginterests
Transfer to retained earnings
Total changes in equity
Balance at March 31, 2017

Capitalsurplus

AccumuTreasury
Retained lated otherstock, atearnings comprehencost
sive income¥ 26,284 ¥ 115,805 ¥ 277,856¥ 47,519¥ (1,105)

Total equity
attributable toNonshareholders controllingof the parent
interests
company¥ 466,359¥ 9,817

Total
equity¥ 476,176

‒
‒

‒
‒

69,056‒‒(28,392)‒‒

69,056(28,392)

(76)
(506)

68,980(28,898)‒‒(11,118)‒‒(11,118)‒(11,118)

‒
‒
‒

‒
‒
1

‒
‒
‒

‒
‒
‒

‒
(41)
0

‒
(41)
1

(425)
‒
‒

(425)
(41)
1

‒
‒
‒
26,284‒‒
1
115,806‒
347
58,285336,141‒(347)(28,739)
18,780‒‒(41)(1,146)‒‒
29,506495,865‒‒(1,007)8,810‒‒
28,499504,675‒‒‒‒

50,593
‒

‒
1,228

‒
‒

50,593
1,228

99
45

50,692
1,273‒‒(11,118)‒‒(11,118)‒(11,118)

‒
‒
‒

‒
‒
0

‒
‒
‒

‒
‒
‒

‒
(5)
0

‒
(5)
0

(190)
‒
‒

(190)
(5)
0

‒
‒
‒
453
0
39,928¥ 115,806 ¥ 376,069

‒
(453)
775
¥ 19,555‒‒(5)¥ (1,151)‒‒
40,698¥ 536,563

3,419
‒
3,373
¥ 12,183

3,419‒
44,071¥ 548,746‒‒‒¥ 26,284

See accompanying notes to the consolidated financial statements.

19

Thousands of U.S. dollars
Note

Commonstock

Total equity
Nonattributable to
Total
shareholders controlling
equityinterestsof the parent
company$ (10,215) $ 4,419,868$ 78,527 $ 4,498,396

Accumulated
Treasuryotherstock, atcomprehensive
cost
incomeCapitalsurplusRetainedearnings

Balance at March 31, 2016
$ 234,281 $ 1,032,231
Changes in equity
Net income‒‒
Other comprehensive
income‒‒Dividends to shareholders
16‒‒of the parent company
Dividends to noncontrolling interests‒‒
Acquisition of treasury
14
stock
‒
‒
Sales of treasury stock
14‒
0
Transactions with noncontrollinginterests‒‒
Transfer to retained
earnings‒‒
Total changes in equity‒
0
Balance at March 31, 2017
$ 234,281 $ 1,032,231$ 2,996,176$ 167,395

450,958‒‒

450,958882

451,841‒

10,946‒

10,946401

11,347(99,100)‒‒(99,100)‒(99,100)

‒

‒

‒

‒

(1,694)(1,694)

‒
‒

‒
‒

(45)
0

(45)
0

‒
‒

(45)
0

‒

‒

‒

‒

30,47530,475(4,038)
‒
6,908
(45)
$ 174,303 $ (10,259)‒
362,760$ 4,782,628

4,038
355,896$ 3,352,072

See accompanying notes to the consolidated financial statements.

20‒‒
30,065392,825$ 108,593 $ 4,891,220

4)Consolidated Statement of Cash Flows
For the year ended
March 31, 2017

For the year ended
March 31, 2016

Thousands of
U.S. dollars
For the year ended
March 31, 2017

¥ 50,692¥ 68,980$ 451,841

43,0391,063

42,927
1,372

383,626
9,475(1,154)
3,405
2,276
1,495
(7,657)
15,324
6,092(7,513)
1,257
3,907
670
(2,691)(4,882)
105,323
2,497(2,864)(762)(14,803)
89,391

(428)
4,149
1,377
3,250
(29,841)
27,25333,731
12,974
6,540(24,837)(1,291)(701)(9,407)136,048
1,641(3,780)(3,239)(14,928)
115,742(10,286)
30,35020,287
13,326(68,250)
136,590
54,301(66,967)
11,20434,825
5,972(23,986)(43,515)
938,791
22,257(25,528)(6,792)(131,946)
796,782(63,144)(2,074)(53,646)(4,112)(562,831)(18,486)

1,578

1,844

14,065(773)(12,940)(6,890)27,903‒‒646(35,864)

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

248,712‒‒5,758(319,672)

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

21

For the year ended
March 31, 2017

For the year ended
March 31, 2016

Thousands of
U.S. dollars
For the year ended
March 31, 2017484‒
(26,782)(2,255)6,000(30,034)

4,314‒(238,720)

3,419(11,118)
(190)
(5)
‒
(34,192)‒(11,118)
(425)
(41)
1
(37,872)

30,475(99,100)(1,694)(45)‒(304,769)

Effect of exchange rate changes on cash and cash
equivalents
Net increase in cash and cash equivalents(224)
19,111(4,452)
41,271(1,997)
170,345

Cash and cash equivalents at the beginning of theyear
Cash and cash equivalents at the end of the year

120,300¥ 139,411

79,029¥ 120,300

1,072,288$ 1,242,633

Millions of yen
Note
Cash flows from financing activities:
Net increase (decrease) in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from payments from non-controllinginterests
Dividends paid to shareholders
Dividends paid to non-controlling interests
Acquisition of common stock for treasury
Proceeds from sales of treasury stock
Net cash used in financing activities

16

See accompanying notes to the consolidated financial statements.

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

Note 2. Basis of Presentation
As the Company meets the qualification for a “Specified Company applying Designated IFRSs” pursuant to Article 1-2 of theOrdinance on Terminology, Forms and Preparation Method of Consolidated Financial Statements (Ordinance of Ministry of Finance ofJapan Regulation No. 28, 1976), the consolidated financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board, as permitted by theprovision of Article 93 of the above Ordinance.
The consolidated financial statements have been prepared on a historical cost basis except for derivative financial instruments
measured at fair value, financial instruments measured at fair value through profit or loss (FVTPL), financial instruments measured atfair value through other comprehensive income (FVTOCI), and assets and liabilities associated with defined benefit plans. The
consolidated financial statements are presented in millions of Japanese yen. Amounts are rounded to the nearest million yen forpresentation.
The accompanying consolidated financial statements were approved by Akitoshi Hiraki, president and chief executive officer, on June27, 2017.
Management of the Company is required to make a number of judgments, estimates, and assumptions related to the application of
accounting policies and reporting of revenues and expenses, and assets and liabilities to prepare the consolidated financial statementsin accordance with IFRS. Actual results may differ from those estimates.
Estimates and assumptions are continually reviewed. The effects of a change in accounting estimates, if any, are recognized in thereporting period in which the change was made and in future periods.
The translation of Japanese yen amounts into U.S. dollars as of and for the year ended March 31, 2017, is included in this annual reportsolely for the convenience of readers outside Japan. The translation has been made at the rates of ¥112.19=$1, the approximate
exchange rates as of March 31, 2017.
The following notes include information regarding judgments in applying accounting policies that could materially affect theCompany’s consolidated financial statements:• Note 3. (1) “Basis of Consolidation”• Note 3. (4) “Financial Instruments” and Note 20. “Financial Instruments and Other Related Information”
The following notes include information regarding uncertainties arising from assumptions and estimates that may materially affect theCompany’s consolidated financial statements in the following fiscal year:• Note 3. (9) “Impairment of Non-Financial Assets”• Note 3. (11) “Post-Employment Benefits” and Note 13. “Employee Benefits”• Note 3. (12) “Provisions,” Note 3. (13) “Contingencies,” Note. 12. “Provisions” and Note 24. “Commitments and Contingencies(Other Than Liabilities Recognized as Provisions)”• Note 3. (15) “Income Taxes” and Note 10. “Deferred Taxes and Income Taxes”

Note 3. Summary of Significant Accounting Policies(1)

Basis of Consolidation(a) Subsidiaries
Subsidiaries are entities controlled mainly by the Group through direct or indirect ownership of a majority voting rights.
The Company consolidates all subsidiaries from the date on which the Group acquired control until the date on which the Group loses
control.
The financial statements of the Company’s subsidiaries have been adjusted, if accounting policies applied by such subsidiaries differ
from those of the Group, if necessary.
Changes in ownership interest in subsidiaries without a loss of control are accounted for as equity transactions. On the other hand,changes in ownership interest in subsidiaries with a loss of control are accounted for by derecognizing assets and liabilities, noncontrolling interests, and accumulated other comprehensive income attributable to the subsidiary.

23

Financial statements of subsidiaries whose fiscal closing dates differ from the consolidated account closing date are included in the
consolidated financial statements on the basis of a provisional account closing as of the consolidated account closing date.
(b) Associates and joint ventures (accounted for using the equity method)
Associates are entities over which the Group has the ability to exercise significant influence over operational and financial policies
mainly by holding 20%-50% ownership directly or indirectly, but does not control such entities.
Joint ventures are entities jointly controlled by more than one party, including the Group, and decisions about operational and financial
policies require unanimous consent of all parties where the Group has a right to the net assets of the arrangement.
Investments in associates and joint ventures (“equity-method investees”) are accounted for using the equity method.
Consolidated financial statements include changes in net income and other comprehensive income of the equity method investees fromthe date on which the Group obtains significant influence or joint control over the investees to the date on which it loses significant
influence or joint control.
The financial statements of the Group’s equity-method investees have been adjusted, if necessary, when the accounting policies of such
equity-method investees differ from those of the Group.
(2)

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

(3)

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

(4)

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

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

25

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

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

(6)

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

(7)

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

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

(9)

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

26

(10) Assets Held for Sale
The Group classifies an asset or a disposal group of assets whose carrying amount will be recovered through a sales transaction, rather than
through continuing use, as an asset or assets held for sale, if its sale is highly probable and it is available for immediate sale in its present
condition. Assets held for sale are not depreciated or amortized, and measured at the lower of carrying amount or fair value, less costs tosell.
(11) Post-Employment Benefits
The Company and its subsidiaries have contributory defined benefit pension plans as well as funded and unfunded lump-sum payment
plans to provide retirement and severance benefits to employees. The present value of defined benefit obligations and retirement benefit
costs are measured based on the projected unit credit method.
The effects of remeasurements of the net defined benefit asset or liability are recognized in other comprehensive income when incurred.
Past service cost is immediately recognized in profit or loss.
The net amount of a defined benefit asset or liability is calculated as the present value of the defined benefit obligation, less the fair valueof the plan assets, and is recognized as an asset or liability in the consolidated statement of financial position.
Additionally, the Company and certain subsidiaries have defined contribution pension plans, recognizing the contributions to the plans as
expenses during the fiscal year when employees have rendered service.
(12) Provisions
The Group recognizes provisions when it has a present obligation (legal or constructive) as a result of a past event, when it is probable thatan outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of obligation can be reliably
estimated.
When the time to settle an obligation is expected to be long and the time value of money is material, the amount of a provision is measured
at the present value of the expenditures expected to be required to settle the obligation. The discount rate used in calculating the present
value is a pre-tax rate that reflects the time value of money and the risks specific to the liability.
The nature and the amount of the provisions that the Group recorded are described in Note 12. “Provisions.”(13) Contingencies
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the Group discloses contingent liabilities in Note 24.
“Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)” for outflows of resources embodying economic
benefits whose realization is uncertain at the end of the reporting period, if it cannot be determined as a present obligation as of the end of
the reporting period or if it does not meet the recognition criteria of provisions prescribed in (12) “Provisions,” unless the possibility of any
outflow in settlement is remote.
The Group has financial guarantee contracts that require the group to make specified payments to reimburse the creditor for a loss when
the debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are initiallymeasured at fair value adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initialrecognition, the Group accounts for liabilities related to the financial guarantee contracts at the higher of the best estimate of expenditures
required for settling the present obligation at the reporting date or the amount initially recognized, less cumulative amortization.
(14) Revenue Recognition
The Group recognizes revenue when persuasive evidence of an arrangement exists, it is probable that future economic benefits will flow to
the Group, and these benefits can be measured reliably.
Revenues from the sale of products are measured at the fair value of the consideration received or receivable. The fair value is the amountless discounts and rebates.
Revenue from sales of products is recognized when the significant risks and rewards of ownership of the products have been transferred tothe customer; the Group has no continuing involvement nor effective control over the products; the amount of revenue and the costs
incurred related to the transaction can be measured reliably; and it is probable that the economic benefits associated with the transaction
will flow to the Group. Primarily, the Group recognizes revenue from the sale of products upon delivery to the customer. The Group sells
products, such as high-grade specialty steel products, various mill rolls, injection molding machine parts, structural ceramic products,
steel-frame joints for construction, soft magnetic materials and related applied products, magnets, ceramic components, casting
components for automobiles, aluminum wheels, other aluminum components, forged components for automobiles, piping andinfrastructure components, electric wires and cables, functional products, and information systems.

27

(15) Income Taxes
Deferred tax assets and liabilities arising from temporary differences, unused tax losses and unused tax credits are recognized based on theasset and liability method. A deferred tax liability is not recognized on the temporary difference arising from goodwill, and the temporary
difference arising from the initial recognition of an asset or liability in a transaction which is not a business combination, and at the time oftransaction, affects neither accounting nor taxable profit or loss. It is also not recognized on outside-basis difference arising frominvestments in subsidiaries and associates when the Group is able to control the timing of the reversal of the temporary difference and it isprobable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured using
enacted tax rates expected to be applied to taxable income in the fiscal year when those temporary differences are expected to be recovered.
The effects of a change in tax rates on deferred tax assets and liabilities are recognized in profit or loss and other comprehensive income in
the fiscal year that includes the date of enactment of the change in the tax rate. Deferred tax assets are recognized to the extent that it isprobable that future taxable income will be available against which any unused tax losses, unused tax credits, and future deductible
temporary difference can be utilized.
(16) Consumption Tax
Consumption tax collected and remitted to taxing authorities is excluded from revenues, cost of sales, and expenses in the consolidated
statements of income.
(17) Earnings per Share
Basic earnings per share (“EPS”) attributable to shareholders of the parent company is calculated based on the weighted average ofordinary shares outstanding during the period.
(18) Business Combinations
Business combinations are accounted for using the acquisition method. Acquisition cost is determined as the total consideration transferred,measured at the acquisition date fair value and the non-controlling interests in the acquiree. For each business combination, the Groupchooses to measure any non-controlling interest in the acquiree at fair value or on the basis of its proportionate interest in the acquiree’s
identifiable net assets at fair value. Acquisition-related costs are recognized as incurred in profit or loss.
Business combinations under common control, in other words, business combinations in which all the combining entities or businesses areultimately controlled by the same party or parties both before and after the business combinations and when the control is not temporary,
are accounted for based on carrying amounts.
(19) Standards Issued but Not Yet Effective
The Group has not applied the following standards and interpretations that were issued, amended, or revised but not yet effective before
the approval date of the accompanying consolidated financial statements as of and for the year ended March 31, 2017. The potential
impacts of applying these standards or interpretations on the consolidated financial statements are under evaluation.

IFRSs

Title

IFRS 9Financial
Instruments

IFRS 15

Revenue fromContracts with
Customers

IFRS 16

LeasesMandatory
effective date(beginning on orafter)
January 1, 2018

Expected
application date by
the Group

Summary of new or amended standards
and interpretations

Effective from thefiscal year ending
March 31, 2019

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

January 1, 2018

Effective from thefiscal year ending
March 31, 2019

Revision of accounting treatments and disclosures forrevenue recognition

January 1, 2019

Effective from thefiscal year ending
March 31, 2020

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

28Note 4. Segment Information
Business Segments
The Group’s operating segments are components for which independent financial information is available and which are regularly reviewed by
the Board of Directors to assist the Board in making decisions about resources to be allocated to the segments and to assess performance.
The Group has adopted a company-based organizational structure and established seven business headquarters based on the type of products andservices. Each of the seven business units prepares a comprehensive strategy and engages in business activities related to their products andservices for both the domestic and overseas markets.
The High-Grade Metal Products and Materials segment comprises the Specialty Steel Business, Roll Business, and Soft Magnetic Materials
Business. The Magnetic Materials and Applications segment comprises the Magnet Business. The High-Grade Functional Components andEquipment segment comprises the Automotive Components Business and Piping Components Business. The Wire, Cables, and Related Products
segment comprises the Electric Wires and Cables Business.
The primary products and services included in each segment are as follows:
Reportable segment

High-Grade Metal Products
and Materials

Major products and services
YSSTM brand high-grade specialty steel products (molds and tool steel, alloys for electronic products[display-related materials, semiconductor and other package materials, and battery-related materials],materials for industrial equipment [automobile-related materials and razor and blade materials], aircraft- andenergy-related materials, and precision cast components); rolls for steel mills; injection molding machineparts; structural ceramic products; steel-frame joints for construction; soft magnetic materials (Metglas®
amorphous metals; FINEMET® nanocrystalline magnetic material; and soft ferrite) and applied products

Magnetic Materials andApplications

Magnets (NEOMAX® rare-earth magnets, ferrite magnets, and other magnets and applied products); andceramic components

High-Grade Functional
Components and Equipment

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

Wires, Cables, and Related
Products

Electric wires and cables (industrial cables, electronic wires, electric equipment materials, and industrial
rubber products); functional products (cable assemblies, electronic automotive components, and brake hoses,
and wireless systems); and information systems (APRESIA® information network products)

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

29

The following tables show business segment information for the years ended March 31, 2017 and 2016:
For the year ended March 31, 2017

Millions of yen
Reportable segment
High-Grade
High-Grade
Wires,
Magnetic
Functional
Metal
Cables, andMaterials
Components
Products
Relatedandand
and
Products
Applications
Equipment
Materials

Subtotal¥ 234,621¥ 99,754¥ 333,506¥ 241,219

104

2

3

234,725

99,756

21,277

Financial income
Financial expenses

Others

Total

Adjust- Consolidated
ments statement ofincome¥ 909,100¥ 1,386¥ 910,486¥‒¥ 910,486

173

282

1,577

1,859

(1,859)‒333,509

241,392

909,382

2,963

912,345(1,859)910,486

9,301

15,92020,95367,451

331

67,782

485

68,267

‒

‒

‒

‒

‒

‒

‒

‒

594

‒

‒

‒

‒

‒

‒

‒

‒

(3,999)

‒

‒

‒

‒

‒

‒

‒

‒

1,154

‒

‒

‒

‒

‒

‒

‒

‒

66,016324,645

117,927

334,241

252,415

1,029,228

5,485

1,034,713

5,677

1,040,390

Revenues
External customers
Intersegment
transactions
Total revenues
Segment profit

Share of profits ofinvestments accounted
for using the equity
methodIncome before income
taxes
Segment assets
Other items:
Depreciation andamortization

12,845

6,106

14,6508,223

41,824

390

42,214825

43,039

Capital expenditure

17,812

13,65922,575

7,212

61,258122

61,3802,463

63,843

Impairment losses

123

204

‒

730

1,057

‒

1,057

6

1,063

30

Thousands of U.S. dollars
Reportable segment
High-Grade
High-Grade
Magnetic
Wires,
Metal
Functional
Materials
Cables, andProducts
Components
andRelatedandandApplications
Products
Materials
Equipment

Subtotal

Others

Total

Adjust- Consolidated
ments statement ofincomeRevenues
External customers
Intersegment
transactions
Total revenues
Segment profit$ 2,091,283$ 889,152 $ 2,972,689 $ 2,150,094 $ 8,103,218 $ 12,354 $ 8,115,572$‒$ 8,115,572

927

18

27

1,542

2,514

14,057

16,570 (16,570)‒

2,092,210

889,170

2,972,716

2,151,636

8,105,731

26,4118,132,142 (16,570)

8,115,572

189,651

82,904

141,902

186,764

601,2212,950

604,171

4,323

608,495

Financial income

‒

‒

‒

‒

‒

‒

‒

‒

5,295

Financial expenses
Share of profits ofinvestments accounted
for using the equity
methodIncome before income
taxes

‒

‒

‒

‒

‒

‒

‒

‒

(35,645)

‒

‒

‒

‒

‒

‒

‒

‒

10,286

Segment assets

‒

‒

‒

‒

‒

‒

‒

‒

588,430

2,893,707

1,051,136

2,979,241

2,249,889

9,173,973

48,8909,222,863

50,602

9,273,465

Other items:
Depreciation andamortization
Capital expenditure

114,493

54,426

130,582

73,295

372,7963,476

376,272

7,354

383,626

158,766

121,749

201,22164,284

546,020

1,087

547,108

21,954

569,061

Impairment losses

1,096

1,818

‒

6,507

9,422

‒

9,422

53

9,475

Notes: 1. Segment profit is based on operating income.
2. Intersegment transactions are recorded at the same prices used in transactions with third parties. Adjustments represent mainly
allocation variances of general and administrative expenses for corporate assets, which are not allocated to each reportable segment.
3. Adjustments represent mainly cash and cash equivalents, investments in securities, and other financial assets allocated to corporate
assets and eliminations of intersegment transactions.
4. Capital expenditure represents increases in property, plant and equipment, intangible assets, and investment property.
Effective from the year ended March 31, 2017, the Group changed part of its internal managerial categories of businesses and consolidated
subsidiaries related to reportable segments, aiming for enhanced operational efficiency and further growth of the soft magnetic materials-related
businesses. Accordingly, the soft magnetic materials and applied products business, which was previously included in the Magnetic Materials
and Applications segment, has been aggregated into the High-Grade Metal Products and Materials segment.
In accordance with the change to the internal managerial categories, the Group also changed its accounting treatment for certain corporate
general and administrative expenses, including research expenses that were previously treated as adjustments, to allocate such expenses to theapplicable reporting segments based on the budget.
Year-on-year comparable segment information presented below reflects the above changes to the categories of the reportable segments andaccounting treatment for certain corporate general and administrative expenses.

31

For the year ended March 31, 2016
Millions of yen
Reportable segment
High-Grade
High-Grade
Magnetic
Wires,
Metal
Functional
Materials
Cables, andProducts
Components
andRelatedandandApplications
Products
Materials
Equipment

OthersSubtotal

Total

Adjust- Consolidated
ments statement ofincomeRevenues
External customers¥ 256,343¥ 105,257¥ 365,112¥‒¥ 1,017,584

309

22

6

30

367

891

1,258

(1,258)－

256,652

105,279

365,118

288,246

1,015,295

3,547

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

53,0707,027

23,60815,97999,684143

99,827

127

99,954

Financial income

‒

‒

‒

‒

‒

‒

‒

‒

1,232

Financial expenses

‒

‒

‒

‒

‒

‒

‒

‒

(5,381)

‒

‒

‒

‒

‒

‒

‒

‒

428

‒

‒

‒

‒

‒

‒

‒

‒

96,233314,724

105,961

326,600

269,031

1,016,316

15,262

1,031,578

1,733

1,033,311

Depreciation andamortization

11,935

5,588

14,9589,203

41,684453

42,137790

42,927

Capital expenditure

23,8496,106

16,81911,52458,298

182

58,4801,122

59,602

Impairment losses

25

16

1,187

‒

1,228

‒

1,228

144

1,372

Intersegment
transactions
Total revenues
Segment profit

Share of profits ofinvestments accounted
for using the equity
methodIncome before income
taxes
Segment assets¥ 288,216 ¥ 1,014,928¥ 2,656 ¥ 1,017,584

Other items:

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

32

Other Related Information
For the year ended March 31, 2017
1. Product and service information
Information is similar to that presented under Segment Information above and is therefore omitted.
2. Geographic information(1) Revenues
Millions of yen
Japan

North America

Asia

Europe¥ 403,610¥ 276,803¥ 174,227¥ 42,755

Other areas¥ 13,091

Total¥ 910,486

Thousands of U.S. dollars
Japan

North America

Asia

EuropeOther areas

Total$ 3,597,558$ 2,467,270$ 1,552,964$ 381,095$ 116,686$ 8,115,572
Note: Revenues are classified by country or region based on the customer’s location.
Revenues from external customers attributed to any individual country or region other than Japan, the United States, and China
were not material.
Revenues from external customers in the United States and China were ¥245,194 million (US $2,185,525 thousand) and¥62,743 million (US $559,257 thousand), respectively.
(2) Non-current assets (excluding financial instruments)
Millions of yen
Japan

North America¥ 279,130¥ 191,458

Asia

Europe¥ 42,504¥ 203

Other areas¥ 1,361

Total¥ 514,656

Thousands of U.S. dollars
Japan

North America

Asia

EuropeOther areas

Total$ 2,488,011$ 1,706,551$ 378,857$ 1,809$ 12,131$ 4,587,361
Note: Non-current assets (excluding financial instruments) attributed to any individual country or region other than Japan and the UnitedStates were not material.
Non-current assets (excluding financial instruments) attributable to the United States were ¥191,458 million(US $1,706,551 thousand).
3. Significant customer information
There was no concentration of revenues from a specific customer for the year ended March 31, 2017.
For the year ended March 31, 2016
1. Product and services information
Information is similar to that presented under Segment Information above and is therefore omitted.
2. Geographic information(1) Revenues
Millions of yen
Japan

North America

Asia

EuropeOther areas

Total¥ 451,116¥ 312,847¥ 192,773¥ 45,844¥ 15,004¥ 1,017,584
Note: Revenues are classified by country or region based on the customer’s location.
Revenues from external customers attributed to any individual country or region other than Japan, the United States, and China
were not material.
Revenues from external customers in the United States and China were ¥276,616 million and ¥73,988 million, respectively.
(2) Non-current assets (excluding financial instruments)
Millions of yen
Japan

North America

Asia

EuropeOther areas

Total¥ 276,691¥ 194,215¥ 40,597¥ 171¥ 1,311¥ 512,985
Note: Non-current assets (excluding financial instruments) attributed to any individual country or region other than Japan and the UnitedStates were not material.
Non-current assets (excluding financial instruments) attributable to the United States were ¥194,215 million.

33

3. Significant customer information
There was no concentration of revenues from a specific customer for the year ended March 31, 2016.

Note 5. Trade Receivables
Trade receivables as of March 31, 2017 and 2016, are summarized as follows:

March 31, 2017

March 31, 2016

Thousands of
U.S. dollars
March 31, 2017

¥ 157,564¥ 159,162$ 1,404,439

18,270(266)¥ 175,568

19,480(361)¥ 178,281

162,849(2,371)$ 1,564,917

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

For credit risk control and fair value of trade receivables, see Note 20. “Financial Instruments and Other Related Information.”

Note 6.

Inventories

Inventories as of March 31, 2017and 2016, are summarized as follows:
Millions of yen
Merchandise and finished products
Work in process
Raw materials and supplies
Total

March 31, 2017
¥ 54,767
59,141
39,648¥ 153,556

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

Thousands of
U.S. dollars
March 31, 2017
$ 488,163
527,150
353,400$ 1,368,714

The amount of inventories written down for the years ended March 31, 2017 and 2016, was ¥2,428 million (US $21,642 thousand) and¥4,070 million, respectively.

Note 7.

Investments Accounted for Using the Equity Method

The summarized financial information, in aggregate, for individually immaterial associates and joint ventures accounted for using the equity
method as of and for the years ended March 31, 2017 and 2016, is as follows:
These amounts represent the Group’s share of the associates and joint ventures per ownership percentage.
(1) Investments in associates
Millions of yen
Carrying amount of investments

March 31, 2017
¥ 26,239

March 31, 2016
¥ 31,312

2016
¥ 844
(1,032)¥ (188)

Thousands of
U.S. dollars
2017$ 10,045(5,330)$ 4,715

March 31, 2016
¥ 5,125

Thousands of
U.S. dollars
March 31, 2017$‒

Millions of yen
Net income
Other comprehensive income
Total comprehensive income

Thousands of
U.S. dollars
March 31, 2017
$ 233,880

2017¥ 1,127
(598)
¥ 529

(2) Investments in joint ventures
Millions of yen
Carrying amount of investments

March 31, 2017¥‒

Millions of yen
2017
Net income
Other comprehensive income
Total comprehensive income

¥ 27
(243)
¥ (216)34

2016¥ (416)(51)¥ (467)

Thousands of
U.S. dollars
2017
$ 241
(2,166)$ (1,925)

Note 8.

Property, Plant and Equipment

The following tables show the reconciliation of the carrying amount, acquisition costs, accumulated depreciation, and accumulated impairment
losses of property, plant and equipment as of and for the years ended March 31, 2017 and 2016:Land

Buildings
andstructures

Millions of yen
Tools,
Machineryfurnitureand vehicles
and fixtures

Other
tangible
assetsConstructionin progressTotal¥ 54,356¥ 83,351¥ 129,044¥ 16,666¥ 430¥ 15,822¥ 299,669

4
(159)
‒
(172)
(368)

331
(787)
(6,889)(203)(2,709)1,508(1,682)(22,675)(519)(5,547)

1,057
(331)
(6,786)
(10)
(603)

92
(10)
(114)
‒
(2)

52,498
(105)
‒
‒
(665)

55,490(3,074)(36,464)(904)(9,894)

‒
‒
2,258

7,326
(471)
111

30,419(86)(1,117)

7,299
(42)
(550)

‒
‒
5

(45,044)
21
(660)

‒
(578)
47

¥ 55,919¥ 80,060¥ 129,345¥ 16,700¥ 401¥ 21,867¥ 304,292

‒
(712)
‒
(182)
37

1,848
(796)
(6,816)
(660)
(404)

2,639
(1,062)(23,608)
(62)
(522)

1,354
(296)
(7,102)
(218)
(82)

‒
‒
(90)
‒
(2)

55,928
(44)
‒
(17)
(12)

61,769(2,910)(37,616)(1,139)
(985)

‒
(251)
638

5,217
953
384

38,260
844
208

7,064
(1,076)
2

‒
(85)
(9)

(50,541)
(131)
(221)

‒
254
1,002

¥ 55,449¥ 79,786¥ 146,042¥ 16,346¥ 215¥ 26,829¥ 324,667

Constructionin progress

Total$ 194,910$ 2,712,292

(802)
‒
(18)
‒
(758)
(80)

498,511
(392)
‒
(152)
(107)
(450,495)(1,168)(1,970)550,575(25,938)(335,288)(10,152)(8,780)
‒
2,264
8,931

$ 1,916$ 239,139$ 2,893,903

Carrying amountAt April 1, 2015
Additions
Disposals
Depreciation
Impairment losses
Effects of exchange rate changes
Transfer from construction in progress
Change in the scope of consolidation
Other
At March 31, 2016
Additions
Disposals
Depreciation
Impairment losses
Effects of exchange rate changes
Transfer from construction in progress
Change in the scope of consolidation
Other
At March 31, 2017

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

Land

Buildings
andstructures$ 498,431$ 713,611$ 1,152,910$ 148,855‒(6,346)‒(1,622)330‒(2,237)
5,687

16,472(7,095)(60,754)(5,883)(3,601)46,501
8,495
3,423

23,523(9,466)(210,429)(553)(4,653)341,029
7,523
1,854

12,069(2,638)(63,303)(1,943)(731)
62,965(9,591)
18

Carrying amountAt April 1, 2016
Additions
Disposals
Depreciation
Impairment losses
Effects of exchange rate changes
Transfer from construction in progress
Change in the scope of consolidation
Other

At March 31, 2017
$ 494,242$ 711,169$ 1,301,738$ 145,699
Note: Property, plant and equipment under construction are presented as construction in progress.

$ 3,574‒‒

Depreciation charges recognized for the years ended March 31, 2017 and 2016, are included in cost of sales and selling, general andadministrative expenses of the consolidated statement of income. Impairment losses are included in other expenses of the consolidated
statement of income.

35

Land

Buildings
andstructures

MachineryandvehiclesMillions of yen
Tools,
furnitureand fixtures

At April 1, 2015

¥ 55,228¥ 256,534¥ 606,660¥ 87,555¥ 1,180

At March 31, 2016

56,837250,953

580,858

88,4991,128

22,0471,000,322

At March 31, 2017
Accumulated depreciation andaccumulated impairment losses
At April 1, 2015

55,904259,939641,348

91,243944

26,847

1,076,225

Othertangible
assetsConstructionin progress

Total¥ 16,662¥ 1,023,819

Acquisition cost

¥ 872

¥ 173,183¥ 477,616¥ 70,889

¥ 750

¥ 840

¥ 724,150

At March 31, 2016

918

170,893451,51371,799727

180

696,030

At March 31, 2017

455

180,153495,306

74,897729

18751,558

Land

Buildings
andstructures

Thousands of U.S. dollars
Machinery
Tools,
Other
andfurnituretangible
vehiclesand fixtures
assets$ 498,298$ 2,316,953$ 5,716,624$ 813,290$ 4,056$ 1,605,785$ 4,414,885$ 667,591

Constructionin progressTotal$ 8,414$ 239,299$ 9,592,878$ 6,498$ 160$ 6,698,975

Acquisition cost
At March 31, 2017
Accumulated depreciation andaccumulated impairment losses
At March 31, 2017

Items of property, plant and equipment are grouped by the smallest identifiable group of assets that generate cash inflows and that are largely
independent of the cash inflows.
The Group recognized impairment losses of ¥1,139 million (US $10,152 thousand) and ¥904 million on property, plant and equipment for theyears ended March 31, 2017 and 2016, respectively.
Impairment losses were recognized for the year ended March 31, 2016, to reduce the carrying amounts of business-use assets (mainly machineryand buildings) due to a decline in profitability in part of the High-Grade Functional Components and Equipment business and idle assets (mainly
land and buildings) in the High-Grade Metal Products and Materials business, Magnetic Materials and Applications business, and High-Grade
Functional Components and Equipment business to their recoverable amounts.
Impairment losses were recognized for the year ended March 31, 2017, to reduce the carrying amounts of business-use assets (mainly buildings,
and tools, furniture, and fixtures) due to a decline in profitability in part of the High-Grade Metal Products and Materials business and idle assets(mainly land and buildings) in the High-Grade Metal Products and Materials business and Wires, Cables, and Related Products business to theirrecoverable amounts.

36

Note 9.

Goodwill and Intangible Assets

The following tables show the reconciliation of the carrying amounts, acquisition costs, and the accumulated amortization and accumulated
impairment losses of goodwill and intangible assets as of and for the years ended March 31, 2017 and 2016:
Software forinternal use

Millions of yen
Software forsale¥ 112,126‒‒¥ 2,406¥ 4,082¥ 41,655¥ 160,269

217(1,257)3(2,170)3,892(2,882)

4,112(6,309)

(468)

‒

‒

‒

(468)

‒
(5,622)
‒
7,422

(132)
(23)
2,572
(1)

‒
(43)
871
‒

(7)
(2,316)(3,443)
2,431

(139)
(8,004)
‒
9,852

(123)

155

‒

(430)

(398)

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

‒
‒
(369)
‒
‒

109
(1,259)
(32)
(13)
(9)
1,155
(110)

3
(1,459)
‒
‒
(11)
595
(1,877)

1,962(2,572)
(176)
(4)
(248)
(1,750)(1,507)

2,074(5,290)
(208)
(17)
(637)
‒
(3,494)

98

(465)

464

(245)

(148)

¥ 113,064¥ 3,313¥ 458¥ 34,360¥ 151,195

Goodwill

Other
intangible assets

Total

Carrying amountAt April 1, 2015
Purchases
Amortization
Impairment losses
Disposals
Effects of exchange rate changes
Transfer from software in progress
Change in the scope of consolidation
Other
At March 31, 2016
Purchases
Amortization
Impairment losses
Disposals
Effects of exchange rate changes
Transfer from software in progress
Change in the scope of consolidation
Other
At March 31, 2017

Goodwill

Software forinternal use

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

Total

Carrying amountAt April 1, 2016
Purchases
Amortization
Impairment losses
Disposals
Effects of exchange rate changes
Transfer from software in progress
Change in the scope of consolidation
Other
At March 31, 2017

$ 35,092$ 24,450$ 346,733$ 1,416,481

27(13,005)‒‒(3,289)‒‒972(11,222)
(285)
(116)
(80)
10,295
(980)

(98)
5,304
(16,731)

17,488(22,925)(1,569)(36)(2,211)(15,599)(13,433)

18,486(47,152)(1,854)(152)(5,678)‒(31,144)874(4,145)

4,136(2,184)(1,319)$ 1,007,790$ 29,530$ 4,082$ 306,266$ 1,347,669$ 1,010,206‒‒‒‒

Amortization recognized for the years ended March 31, 2017 and 2016, was included in the cost of sales and selling, general and administrative
expenses of the consolidated statement of income. Impairment losses are included in other expenses in the consolidated statement of income.

37

Goodwill

Software forinternal use

Millions of yen
Software for
sale

Other intangible
assets¥ 46,045

Total

Acquisition cost
At April 1, 2015

¥ 112,126¥ 15,527¥ 17,774

At March 31, 2016

113,830

16,14918,54245,408

193,929

At March 31, 2017
Accumulated amortization andaccumulated impairment losses
At April 1, 2015
At March 31, 2016

113,559

14,8601,530

44,051

174,000¥‒
495¥ 13,121
12,212¥ 13,692
15,799¥ 4,390
6,508¥ 31,203
35,014495

11,547

1,072

9,691

22,805At March 31, 2017

GoodwillThousands of U.S. dollars
Software forSoftware for
Other intangibleinternal use
saleassets¥ 191,472

Total

Acquisition cost
At March 31, 2017
Accumulated amortization andaccumulated impairment losses
At March 31, 2017

$ 1,012,203$ 132,454$ 13,638$ 392,646$ 1,550,940$ 4,412$ 102,924$ 9,555$ 86,380$ 203,271

For the years ended March 31, 2017 and 2016, there were no material intangible assets with indefinite useful lives.
The Group recorded impairment losses of ¥208 million (US $1,854 thousand) and ¥468 million on goodwill and intangible assets for the years
ended March 31, 2017, and 2016, respectively.
Impairment losses were recognized for the year ended March 31, 2016, to reduce the carrying amount of goodwill to its recoverable amount due
to a decline in profitability in part of the High-Grade Functional Components and Equipment business.
Impairment losses were recognized for the year ended March 31, 2017, to reduce the carrying amount of software for internal use and otherintangible assets to their recoverable amounts due to a decline in profitability in part of the Wires, Cables, and Related Products business.
The Group expenditures on R&D recognized as expenses for the years ended March 31, 2017 and 2016, are ¥17,971 million(US $160,184 thousand) and ¥19,121 million, respectively. R&D expenses are included in cost of sales and selling, general and administrative
expense in the consolidated statement of income.
The Group performs impairment testing for goodwill acquired through business combinations by comparing the carrying amount and therecoverable amount per CGU or group of CGUs.
Significant goodwill recognized in the consolidated statement of financial position is primarily goodwill related to the High-Grade Functional
Components and Equipment business arising from the acquisition of Waupaca in 2014 (¥69,399 million (US $618,585 thousand) and¥69,731 million as of March 31, 2017 and 2016, respectively) and that related to the Magnetic Materials and Applications business inconnection with the acquisition of additional shares in NEOMAX Co., Ltd. through a tender offer in 2006 (¥35,781 million(US $318,932 thousand) as of March 31, 2017 and 2016).
The Group measures the recoverable amount for each CGU or group of CGUs by the value in use. In assessing the value in use, estimated future
cash flows based on management-approved business plans are discounted to their present values using the discount rate based on the weightedaverage cost of capital. The business plan to be used is based on external information and reflects historical trends, generally with a maximum
period of five years. Since the Group is engaged in a wide range of business activities from development, production, and sale of diverse
products to providing various services, appropriate external information for each business activity is used for evaluating the value in use. In
addition, the estimated future cash flows subsequent to the business plan are calculated using the estimated growth rate not exceeding the longterm average growth rate of the market to which the CGU belongs.
The discount rate used for impairment testing of the significant goodwill is estimated based on prior years’ weighted average cost of capital(approximately 4.0% to 10.0%). For future cash flows, a permanent growth rate (maximum 2.0%) is applied. Such rate is determined not toexceed the growth rate of countries and regions making estimates, including budgets, and engaged in business activities. Furthermore, evenwhen primary assumptions used for the impairment test change within a reasonable and foreseeable range, the Group management considers
that any significant impairment losses will be unlikely to occur.

38

Note 10. Deferred Taxes and Income Taxes
The following table shows major components of income taxes:
Thousands of
U.S. dollars
2017

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

2017

2016

¥ 15,382¥ 22,851$ 137,107

1,803(1,861)¥ 15,324

7,323(2,921)¥ 27,253

16,071(16,588)$ 136,590

The Company is subject to a national corporate tax, inhabitant tax and deductible business tax, and those taxes resulted in combined statutory
income tax rates of 30.7% and 32.8% for the years ended March 31, 2017 and 2016, respectively.
The Company has elected to file a consolidated income tax return.
The reconciliation between the combined statutory income tax rate and the effective income tax rate as a percentage of income before income
taxes is as follows:
2017
Combined statutory income tax rate
Share of profits of investments accounted for using the equity method
Expenses not deductible for tax purposes
Special tax credit for corporate taxes
Adjustments to deferred tax assets and liabilities due to enacted tax laws and rates
Change in realizability of deferred tax assets
Other, net
Effective income tax rate

2016

30.7%
(0.5)
0.2
(2.9)
0.1
(2.8)
(1.6)

32.8%
(0.4)
0.2
(1.9)
1.6
(3.0)
(1.0)

23.2%

28.3%

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

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

April 1, 2016

Recognized in
profit or loss

¥ 21,881
3,930
5,769
904
15,722¥ 48,206¥ (307)(1,608)
(415)
(707)
922
¥ (2,115)(1,819)(2,176)(8,373)

31
(35)
(831)

(11,985)(19,234)¥ (43,587)¥ 4,619746
2,262¥ 2,173¥ 58

39

Millions of yen
Recognized inothercomprehensive
income¥ (1,166)

Changes in thescope ofconsolidation

March 31, 2017‒‒

¥ (308)
(47)
227

‒

‒

(489)
¥ (1,655)

242
¥ 114

¥ 20,100
2,275
5,581
197
16,397¥ 44,550‒‒‒‒(1,788)(2,198)(9,204)‒(11,239)(17,228)¥ (41,657)¥ 2,893

13
‒
‒
‒

¥ 13
¥ (1,642)(256)¥ (256)¥ (142)

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

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

Changes in thescope ofconsolidation

March 31, 2016

¥ 4,419‒‒‒152¥ 4,571

¥‒
‒
‒
‒
(749)
¥ (749)¥ 21,881
3,930
5,769
904
15,722¥ 48,206

110
(192)
(408)

‒
821
‒

‒
‒
‒

(1,819)(2,176)(8,373)

1,810(3,381)¥ (2,061)¥ (4,402)

‒
‒
¥ 821
¥ 5,392‒‒¥‒¥ (749)(11,985)(19,234)¥ (43,587)¥ 4,619

April 1, 2015

Recognized in
profit or loss

¥ 19,160
4,082
5,707
1,980
15,796¥ 46,725¥ (1,698)(152)
62(1,076)523¥ (2,341)(1,929)(2,805)(7,965)(13,795)(15,853)¥ (42,347)¥ 4,378

April 1, 2016

Millions of yen
Recognized inothercomprehensive
incomeThousands of U.S. dollars
Recognized in
Changes in the
Recognized inotherscope ofprofit or loss
comprehensive
consolidation
incomeMarch 31, 2017

$ 195,035
35,03051,422
8,058
140,137$ 429,682$ (2,736)(14,333)(3,699)(6,302)8,218$ (18,852)$ (10,393)‒‒‒(4,359)$ (14,752)$ (2,745)
(419)
2,023
‒
2,157
$1,016$ 179,160
20,27849,746
1,756
146,154$ 397,094(16,214)(19,396)(74,632)276(312)(7,407)

‒
116
‒

‒
‒
‒

(15,937)(19,592)(82,039)(106,828)(171,441)$ (388,511)$ 41,171

6,649
20,162$ 19,369
$ 517

‒
‒
$ 116
$ (14,636)‒(2,282)$ (2,282)$ (1,266)(100,178)(153,561)$ (371,308)$ 25,787

Deferred tax liabilities have not been recognized for excess amounts over the tax bases of investments in foreign subsidiaries and associates thatare considered to be reinvested indefinitely, because such differences will not reverse in the foreseeable future.
Total temporary differences related to undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognized as ofMarch 31, 2017 and 2016, were ¥143,620 million (US $1,280,150 thousand) and ¥135,285 million, respectively.
In assessing the realizability of deferred tax assets, the Group considers whether it is probable that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in specific tax
jurisdictions during periods in which these deductible temporary differences become deductible or unused tax credits can be used. Althoughrealization is not assured, the Group considers the scheduled reversals of deferred tax liabilities and projected future taxable income in making
the assessment. Based on these factors, the Group believes that it is probable that it will realize the recognized deferred tax assets as of March 31,
2017.

40

Deductible temporary differences, net operating loss carry-forwards, and unused tax credits carry-forwards for which no deferred tax asset isrecognized are as follows:
Millions of yen
Deductible temporary difference
Net operating loss carry-forwards
Unused tax credits carry-forwards
Total

March 31, 2017
¥ 49,145
6,931
646¥ 56,722

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

Thousands of
U.S. dollars
March 31, 2017
$ 438,052
61,7795,758$ 505,589

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

March 31, 2017

March 31, 2016

Thousands of
U.S. dollars
March 31, 2017

¥ 6,809122¥ 6,931¥ 6,751884¥ 7,635$ 60,692
1,087$ 61,779

¥ 646
‒
¥ 646

¥ 730
‒
¥ 730

$ 5,758‒$ 5,758

March 31, 2017

March 31, 2016

Thousands of
U.S. dollars
March 31, 2017

¥ 133,366¥ 136,347$ 1,188,751

Millions of yen
Net operating loss carry-forwards
Within 5 years
After 5 years but not more than 10 years
Total net operating loss carry-forwards
Unused tax credits carry-forwards
Within 5 years
After 5 years but not more than 10 years
Total unused tax credits carry-forwards

Note 11. Trade Payables
Trade payables as of March 31, 2017 and 2016, are summarized as follows:
Millions of yen

Accounts payable
Notes payable and electronically recorded obligations
Total

17,41912,652

155,263¥ 150,785¥ 148,999$ 1,344,015

Note 12. Provisions
Details and the reconciliation of provisions included in other current liabilities and other non-current liabilities as of and for the year ended
March 31, 2017, are as follows:

Balance at April 1, 2016

Millions of yen
Asset retirement
Provision for
obligations
environmental measures¥ 962¥ 1,563

AdditionsUtilized
Reversals
Effects of exchange rate changes
Changes in the scope of consolidation and others

3
(171)
(15)
1
(6)

185
(246)
(9)
‒
(1)

Balance at March 31, 2017

¥ 774

¥ 1,492

‒

436

¥ 774

¥ 1,056

Current
Non-current

41

Balance at April 1, 2016

Thousands of U.S. dollars
Asset retirement
Provision for
obligations
environmental measures$ 8,575$ 13,932

AdditionsUtilized
Reversals
Effects of exchange rate changes
Changes in the scope of consolidation and others

27(1,524)
(134)
9
(53)

1,649
(2,193)(80)‒(9)

Balance at March 31, 2017

$ 6,899$ 13,299

Current
Non-current

‒

3,886

$ 6,899$ 9,413

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

Note 13. Employee Benefits(1)

Post-Employment Benefits
The Company, its subsidiaries located in Japan, and certain overseas subsidiaries have contributory defined benefit pension plans andfunded and unfunded lump-sum payment plans to provide retirement and severance benefits to employees. An employee retirement benefit
trust is established for the pension plans and the lump-sum payment plans.
The Company and some of its subsidiaries have contract-type pension plans based on the pension rules. They also have established a postemployment benefits committee as an advisory body for significant matters related to the pension plans. The committee holds meetings toreport various matters, such as asset management performance, plan status, and accounting treatments, and to discuss agendas, such as plan
revisions and investment policy changes, as necessary.
Under the unfunded lump-sum payment plans, employees are entitled to receive lump-sum payments based on their earnings and thelength of service at retirement.
In addition, the Company and certain subsidiaries have defined contribution pension plans.
The multi-employer corporate pension fund plan, in which certain subsidiaries had previously participated, was wound up with thepermission of the Minister of Health, Labour and Welfare of Japan as of May 20, 2016.
Reconciliations of the beginning and ending balances of the benefit obligation and the fair value of the plan assets of the defined benefit
pension plans are as follows:
Millions of yen
2017¥ 202,730
6,806
1,962
(111)
250
(12,882)(5,257)(3,490)¥ 190,008

Defined benefit obligations at the beginning of the year
Service costs
Interest costs
Actuarial gains and losses
Past service cost
Benefits paid
Wind-up of some plans
Effects of exchange rate changes and others
Defined benefit obligation at the end of the year

42

2016
¥ 204,058
7,832
2,582
6,302
30
(14,407)‒(3,667)¥ 202,730

Thousands of
U.S. dollars
2017$ 1,807,024
60,665
17,488(989)
2,228(114,823)(46,858)(31,108)$ 1,693,627

Thousands of
U.S. dollars
2017
2017
2016
¥ 137,383¥ 145,977$ 1,224,557
Fair value of plan assets at the beginning of the year
1,047
2,258
9,332
Interest income
3,683(3,774)32,828Return on plan assets (excluding interest income)
3,477
3,461
30,992Contributions to defined benefit pension plans (Note)(7,978)(9,778)(71,112)
Benefits paid
(5,257)‒(46,858)
Wind-up of some plans(1,421)(761)(12,666)
Effects of exchange rate changes and others
Fair value of plan assets at the end of the year
¥ 130,934¥ 137,383$ 1,167,074
Note: As of March 31, 2017, the estimated contributions to the defined benefit pension plans for the year ending March 31, 2018, were
¥3,314 million (US $29,539 thousand).
Millions of yen

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

March 31, 2017
¥ (183,270)
130,934(52,336)(6,738)March 31, 2016
¥ (195,039)
137,383(57,656)(7,691)Thousands of
U.S. dollars
March 31, 2017
$ (1,633,568)
1,167,074(466,494)(60,059)¥ (59,074)¥ (65,347)$ (526,553)

2016¥ 4,440642
1,220

Thousands of
U.S. dollars
2017$ (13,620)
4,983
7,648

Millions of yen
Present value of defined benefit obligations (funded)
Fair value of plan assets
Funded status
Present value of defined benefit obligations (unfunded)
Net asset (liability) recognized in the consolidated
statement of financial position
Components of actuarial gains and losses are as follows:
Millions of yen
2017¥ (1,528)
559
858

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

The Company and all of its subsidiaries use their year-end as a measurement date. The primary assumptions used for actuarial valuation
are as follows:
Discount rate

March 31, 2017
1.1%

March 31, 2016
1.0%

If, as of March 31, 2017, the discount rate rose by 0.5%, the defined benefit obligations would decrease by ¥9,100 million(US $81,112 thousand), and the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥9,920 million(US $88,421 thousand). If, as of March 31, 2016, the discount rate rose by 0.5%, the defined benefit obligations would decrease by¥9,804 million, and the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥8,546 million.
Although sensitivity analysis is based on the assumption that all other variables are constant, in reality, changes in other assumptions may
affect the sensitivity analysis.
The weighted average duration (weighted average maturity) of defined benefit obligations is as follows:
Duration

March 31, 201710.8 years

March 31, 201611.1 years

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

43

The following tables show the fair value of the plan assets as of March 31, 2017 and 2016:

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

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

With a quoted market
price in an active market¥ 10,046
637
‒
27
6,202
‒
‒
107
¥ 17,019

Millions of yen
March 31, 2017
Without a quoted market
price in an active market
¥ 318
193
1,197
2,668
0
18,35490,364821¥ 113,915

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

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

Total¥ 10,364
830
1,197
2,695
6,202
18,35490,364928¥ 130,934

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

Thousands of U.S. dollars
March 31, 2017
With a quoted market
Without a quoted market
Total
price in an active market
price in an active market
Stocks$ 89,545$ 2,834$ 92,379
Government and municipal debt securities
5,678
1,720
7,398
Corporate and other debt securities‒
10,66910,669Securitized products
241
23,781
24,022
Cash and cash equivalents
55,281‒
55,281
Life insurance company general accounts‒
163,597
163,597
Commingled funds‒
805,455
805,455
Other
954
7,318
8,272
$ 151,698$ 1,015,376$ 1,167,074
Total
Commingled funds represent pooled institutional investments. Approximately 34% and 32% of commingled funds were invested in listed
stocks as of March 31, 2017 and 2016, respectively. Approximately 46% and 49% were invested in government and municipal debt
securities as of March 31, 2017 and 2016, respectively. Approximately 10% and 11% were invested in corporate and other debt securities
as of March 31, 2017 and 2016, respectively. Approximately 10% and 8% were invested in other assets as of March 31, 2017 and 2016,
respectively.
Expenses recognized in relation to the Company’s and certain subsidiaries’ contributions to the defined contribution plans amounted to¥3,295 million (US $29,370 thousand) and ¥3,501 million for the years ended March 31, 2017 and 2016, respectively.
Contributions to the multi-employer welfare pension fund plan, a corporate pension fund plan, accounted for as a defined contribution plan
are as follows:
The multi-employer corporate pension fund plan, in which certain subsidiaries had previously participated, was wound up with thepermission of the Minister of Health, Labour and Welfare of Japan as of May 20, 2016. There were no additional contributions due to thewind-up of the plans.

Contributions

Millions of yen
March 31, 2017
March 31, 2016
¥9
¥ 55

44

Thousands of U.S. dollars
March 31, 2017
$ 80

Funded status of the multi-employer corporate pension fund plan is as follows:

Plan assets
Retirement benefit obligations
Difference

Millions of yen
March 31, 2016
March 31, 2015
¥ ‒¥ 19,313‒
15,528‒
3,785

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

The proportion of the Group’s total contributions to the plan was 4.38% for the year ended March 31, 2016.
The amounts for the year ended March 31, 2017, are not disclosed due to the wind-up of the plans as stated above.
(2)

Employee Benefit Expense
The aggregated amounts of employee benefit expenses recognized in the consolidated statement of income for the years ended March 31,2017 and 2016, were ¥135,666 million (US $1,209,252 thousand) and ¥143,440 million, respectively.

Note 14. Equity(1)

Common Stock
Authorized issuance

March 31, 2017

March 31, 2016

500,000,000 shares

500,000,000 shares

Issued shares
Balance as of April 1, 2015
Changes during the year
Balance as of March 31, 2016
Changes during the year
Balance as of March 31, 2017428,904,352‒
428,904,352‒
428,904,352

Shares issued by the Company are non-par value common stock. The issued shares above include treasury stock. Changes in treasury stock
for the years ended March 31, 2017 and 2016, are as follows:
SharesBalance as of April 1, 2015
Acquisition of treasury stock
Sales of treasury stock
Balance as of March 31, 2016
Acquisition of treasury stock
Sales of treasury stock
Balance as of March 31, 2017

1,303,157
22,137(874)
1,324,420
3,750
(270)
1,327,900

Treasury stock held by the Company’s associates as of March 31, 2017 and 2016, was 71,885 shares and 71,885 shares, respectively.
(2)

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

45

Note 15. Accumulated Other Comprehensive Income and Other Comprehensive Income
Accumulated other comprehensive income, net of related tax effects, as presented in the consolidated statement of changes in equity is asfollows:
Millions of yen

Foreign currency translation adjustments on foreign operations:
Balance at the beginning of the year
Net other comprehensive income
Balance at the end of the year
Remeasurements of defined benefit pension plans:
Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income
Balance at the end of the year
Net change in fair value of financial assets measured at FVTOCI:
Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income
Balance at the end of the year
Net change in fair value of cash flow hedges:
Balance at the beginning of the year
Net other comprehensive income
Balance at the end of the year
Total accumulated other comprehensive income:Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income
Balance at the end of the year

46

Thousands of
U.S. dollars
2017

2017

2016

¥ 9,754(2,029)¥ 30,173(20,419)$ 86,942(18,085)

7,725

9,754

68,856

2,960
(86)
2,647

9,256
‒
(6,296)

26,384
(767)

5,521

2,960

23,594
49,211

7,603
(367)
(512)

9,220
(347)
(1,270)67,769(3,271)(4,564)

6,724

7,603

59,934(1,537)
1,122(1,130)(407)(13,700)
10,001(415)(1,537)(3,699)18,780(453)
1,228

47,519(347)(28,392)

167,395

19,55518,780(4,038)
10,946
174,303

The following is a summary of reclassification adjustments, by line item, made to other comprehensive income, including non-controllinginterests and related tax effects arising during the years ended March 31, 2017 and 2016:
Millions of yen
2017
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

47

¥ (620)3,794¥‒(1,166)¥ (620)
2,628

100
(608)

(138)
185

(38)
(423)

(375)
¥ 2,291(223)¥ (1,342)

(598)
¥ 949

¥ (970)
2,211

¥‒
(674)

¥ (970)
1,537

(243)
¥ 998

‒
¥ (674)

(243)
¥ 324

¥ (1,590)
3,794¥‒(1,166)¥ (1,590)
2,628

100
1,603

(138)
(489)

(38)
1,114

(618)
¥ 3,289(223)¥ (2,016)(841)¥ 1,273

¥ 75
(19)
(3)
(8)
¥ 45

¥ (1,665)
2,647
(35)
1,122
(841)
¥ 1,228

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

48

¥ (18,647)(10,076)

¥ ‒
3,620

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

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

¥ ‒
(442)

¥ (1,313)
1,130

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

¥ ‒
3,620

¥ (19,960)(6,456)(1,908)
(385)

742
152

(1,166)(233)(1,190)¥ (33,519)

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

Thousands of U.S. dollars
2017
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

49

$ (5,526)
33,818‒(10,393)$ (5,526)
23,425891(5,419)(1,230)
1,649

(339)
(3,770)(3,343)$ 20,421(1,988)$ (11,962)(5,330)$ 8,459$ (8,646)
19,708‒(6,008)$ (8,646)
13,700(2,166)$ 8,896‒$ (6,008)(2,166)$ 2,888$ (14,172)
33,818‒(10,393)$ (14,172)
23,425891
14,288(1,230)(4,359)

(339)
9,930

(5,509)$ 29,316(1,988)$ (17,970)(7,496)$ 11,347

$ 669
(169)
(27)
(71)
$ 401

$ (14,841)
23,594(312)
10,001(7,496)$ 10,946

Note 16. Dividends
Dividends paid for the years ended March 31, 2017 and 2016, are as follows:
Resolution adopted
Board of directors’
meeting on
May 28, 2015
Board of directors’
meeting on
October 27, 2015
Board of directors’
meeting on
May 30, 2016
Board of directors’
meeting on
October 27, 2016

Resolution adopted
Board of directors’
meeting on
May 30, 2016
Board of directors’
meeting on
October 27, 2016

Type ofsharesMillions of yen

Yen

Aggregate
amountAppropriation fromAmount per
share

Record date

Effective dateOrdinaryshares¥ 5,559Retained earnings¥ 13.0March 31, 2015

May 29, 2015

Ordinaryshares¥ 5,559Retained earnings¥ 13.0

September 30,
2015

November 30,
2015

Ordinaryshares¥ 5,559Retained earnings¥ 13.0March 31, 2016

May 31, 2016

Ordinaryshares¥ 5,559Retained earnings¥ 13.0

September 30,
2016

November 29,
2016

Type ofsharesThousands of
U.S. dollars
Aggregate
amountAppropriation from

Record date

Effective dateOrdinaryshares$ 49,550

Retained earnings$ 0.12

March 31, 2016

May 31, 2016

Ordinaryshares$ 49,550

Retained earnings$ 0.12September 30,
2016

November 29,
2016

U.S. dollars
Amount per
share

Dividends whose record date is during the year ended March 31, 2017, but whose effective date is in the following fiscal year are as follows:
Resolution adopted

Type ofsharesBoard of directors’
meeting on
May 30, 2017

Millions of yen

Yen

Aggregate
amountAppropriation fromAmount per
share

Record date

Effective dateOrdinaryshares¥ 5,559Retained earnings¥ 13.0March 31, 2017

May 31, 2017

Resolution adopted

Type ofsharesThousands of
U.S. dollars
Aggregate
amountAppropriation from

Record date

Effective date

Board of directors’
meeting on
May 30, 2017

Ordinaryshares$ 49,550

Retained earnings

March 31, 2017

May 31, 2017

U.S. dollars

50

Amount pershare$ 0.12

Note 17. Other Income and Other Expenses
Other income and other expenses consist of the following items for the years ended March 31, 2017 and 2016:
Millions of yen
Thousands of U.S. dollars
2017
2016
2017
Other income:Gain on reorganization (*)¥ 8,475¥ 30,232$ 75,541
Other
5,595
6,184
49,871
Total other income¥ 14,070¥ 36,416$ 125,412
Other expenses:
Structural reform expenses¥ 1,495¥ 3,250$ 13,326

Loss on disposal of property, plant andequipment

2,955
2,538
26,339
Other
7,336
6,735
65,389Total other expenses¥ 11,786¥ 12,523$ 105,054(*) Gain on reorganization for the years ended March 31, 2017 and 2016, includes ¥4,311 million (US $38,426 thousand) and¥29,079 million (before tax effects), respectively, as a result of the Group losing control of certain subsidiaries. Part of the gain includes¥6,740 million (before tax effects) resulting from the remeasurement at fair value of the investment retained in the former subsidiary forthe year ended March 31, 2016.There was no such gain for the year ended March 31, 2017.

Note 18. Other Financial Income and Expenses
Other financial income and expenses for the years ended March 31, 2017and 2016, are summarized as follows:
Millions of yen
Thousands of U.S. dollars(Other financial income)
Dividend income (*)
Other
Total
(Other financial expenses)
Exchange loss
Other
Total

2017

2016

2017

¥ 220
28
¥ 248

¥ 361
24
¥ 385

$ 1,961250$ 2,2111,150
39¥ 1,189

1,679
10¥ 1,689

10,250348$ 10,598(*) Dividend income is from financial assets measured at FVTOCI.

Note 19. Earnings per Share
The calculation of basic earnings per share (EPS) attributable to shareholders of the parent company is summarized as follows:
Thousands of shares
Weighted-average number of ordinary shares on which basic
EPS is calculated

2017

2016

427,578

427,583

Millions of yen
2017¥ 50,593

Net income attributable to shareholders of the parent company

2016¥ 69,056
Yen

2017¥ 118.32

Basic EPS attributable to shareholders of the parent company:

Millions of yen
2017

Thousands of
U.S. dollars
2017$ 450,958

U.S. dollars
2016¥ 161.50

2017$ 1.05
Thousands of
U.S. dollars
2017

2016
Euro-yen convertible
type bonds with stock
Potential ordinary shares without dilutive effects and not usedacquisition rights
in calculating diluted EPS attributable to shareholders of the‒‒subject to call at parparent company
due in 2019: ¥ ‒(outstanding issues)
Note that diluted EPS attributable to shareholders of the parent company is not presented because no potentially dilutive shares of common
stock were issued or outstanding for the years ended March 31, 2017 and 2016.

51

Note 20. Financial Instruments and Other Related Information(1)

Financial Risk
The Group is engaged in business activities worldwide, and therefore exposed to various risks, including interest rate risk, currency
exchange rate risk, and credit risk.
(a) Market risk
The Group’s major manufacturing bases are located in Japan and Asia, but its customers are geographically diversified. As a result, theGroup is exposed to market risks from fluctuations in foreign currency exchange rates.
(i) Interest rate risk
The Group is exposed to interest rate risks related principally to long-term liabilities. In order to minimize interest rate risks, theGroup enters into interest rate swap agreements to hedge future cash flow exposures to fluctuations in interest rates. Those interest
rate swaps are receive-floating, pay-fixed interest rate swaps. For interest rate swaps, the Group receives floating interest rate
payments on long-term liabilities, including borrowings, and pays fixed interest rate payments, thereby creating fixed interest rate
long-term liabilities.
Sensitivity analysis:
Sensitivity analysis for the interest rates shown below indicates the impact of assumed changes in interest rates on the income
before income taxes in the Company’s consolidated statement of income. If interest rates increase by 1% on financial instruments(floating-interest financial assets and liabilities measured at amortized cost, financial assets and liabilities measured at FVTPL, andderivatives), and all other variables were constant, the impact on the income before income taxes for the years ended March 31,2017 and 2016, would have been as follows:
Millions of yen
2017
¥ 986

Impact on income before income taxes

2016
¥ 743

Thousands of
U.S. dollars
2017$ 8,789(ii) Currency exchange risk
The Group holds assets and liabilities exposed to currency exchange risks. In order to hedge currency exchange risks, the Grouputilizes forward exchange contracts.
In order to stabilize future net cash flows from transactions denominated in foreign currencies for trade receivables and payables aswell as forecast transactions, each month the Group measures the net amount of future cash flows on the settlement date for eachcurrency and hedges fluctuation risk mainly using forward exchange contracts for a portion of these transactions. As per theGroup’s policy, these contracts generally expire in one year.
Hedge relationships between forward exchange contracts and hedged items are highly effective in offsetting effects on hedged
items (assets and liabilities denominated in foreign currencies) arising from changes in foreign currency exchange rates.
Sensitivity analysis:
Sensitivity analysis for the currency exchange rates shown below indicates the impact of increases or decreases in currency
exchange rates on income before income taxes in the Company’s consolidated statement of income. If the Japanese yen had
depreciated by 1% against foreign-currency denominated financial instruments held by the Group, and all other variables wereconstant, the impact on the income before income taxes for the years ended March 31, 2017 and 2016, would have been as follows:
Millions of yen

Currency

Impact on income before income taxes

2017
138
50
3

US Dollar
Euro
Other

2016
135
42
3

Thousands of
U.S. dollars
2017
1,230
446
27

(b) Credit risk
Credit risk refers to the risk that the Group will incur a financial loss because customers or counterparties fail to discharge theircontractual obligations related to a financial instrument or contract. The Group is exposed to credit risks because of its operating
activities (primarily trade receivables) and financing activities, including deposits at financial institutions, currency transactions, andother financial instruments. No significant concentration of credit risk is present, as the Group has a diverse group of trading parties
situated in many different regions.
The Group sets credit limits according to the credit risks of certain instruments or customers by periodically reviewing relevant factors,
such as financial conditions and ratings.
The Group’s maximum exposure to credit risk, without considering collateral held, is represented as the carrying amount of financial
assets (excluding contingent liabilities) net of impairment losses, if any, in the consolidated statement of financial positions. The
maximum exposure to credit risk from contingent liabilities is represented as the balance of contingent liabilities disclosed in Note 24.

52

“Commitments and Contingencies (Other Than Liabilities Recognized as Provisions).” Balances by contractual maturity of tradereceivables and other assets that are past due at the end of the reporting period but not impaired are omitted from disclosures becausesuch balances are not material.
Fluctuation of allowance for doubtful receivables is as follows:
Thousands of
U.S. dollars
March 31, 2017
$ 3,851
4,412(410)(5,562)321
2,612

Millions of yen
Balance at the beginning of the year
Additions (provision)
Utilized (write off)
Unused amount reversed (recovery)
Other
Balance at the end of the year

March 31, 2017
¥ 432
495
(46)
(624)
36
293

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

(c) Liquidity risk
The Group’s fundamental financial policy is to maintain an appropriate level of liquidity and secure adequate funds for current andfuture business operations. The Group works to optimize capital utilization for its business operations through the efficientmanagement of working capital. Further, the Group endeavors to improve group-wide capital management by centralizing thismanagement function of the Company.
The Group also raises funds from both capital markets and commercial banks. The Group finances its capital expenditures primarily bydrawing down internally generated funds and also through the issuance of debts and equity securities when necessary.
The Group also maintains commitment line agreements with a number of financial institutions to secure efficient funding as necessary.
The total unused commitment lines as of March 31, 2017, are disclosed in Note 24. “Commitments and Contingencies (Other Than
Liabilities Recognized as Provisions).”
The following tables present balances by maturity of non-derivative financial liabilities held by the Group as of the reporting dates:
Note that the carrying amounts of trade payables and contractual cash flows match, and their due dates are all within one year. Hencethey are not included in the tables below.

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

Carrying
amount¥ 26,301

Contractual
cash flows¥ 26,458

Millions of yen
March 31, 2017
Less than
one year¥ 26,458

15,227

15,334

15,334‒‒19,994241

20,224242

20,224
241

‒
‒

‒
‒

122,555
9,990
149

125,814
10,102
149

1,245
72
‒

123,671
10,030
149

898
‒
‒

53

Between one
and five years¥‒

Over five years¥‒

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

Carrying
amount¥ 25,251

Contractual
cash flows¥ 25,595

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

21,86822,03622,036

‒

‒

4,987
276

5,049
277

5,049
277

‒
‒

‒
‒

137,556
29,967471

142,477
30,782
475

1,665
456
‒

120,098
30,326475

20,714‒‒

Thousands of U.S. dollars
March 31, 2017
ContractualLess than
Between one
cash flows
one yearand five years$ 235,832$ 235,832$ ‒Over five years$ ‒Carrying
amount$ 234,433

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

Between one
and five years¥‒

Over five years¥‒

135,725

136,679

136,679‒‒

178,216
2,148

180,266
2,157

180,266
2,148

‒
‒

‒
‒

1,092,388
89,045
1,328

1,121,437
90,044
1,328

11,097642‒

1,102,335
89,402
1,328

8,004
‒
‒

The weighted average interest rates of short-term debt, the current portion of long-term debt, and long-term debt are 1.08%, 1.80% and0.99%, respectively. The maturities range from 2017 to 2026. The details of corporate bonds by issue are as follows:
Millions of yen
IssuerIssue

Issue dateThousands of
U.S. dollars

March 31,2017

March 31,2016

March 31,2017

Secured/UnsecuredInterest
rate(%)

Maturity

The
Company

The 29th unsecured
corporate bondOctober 29,
2007¥19,994¥ 19,984$ 178,216

Unsecured

1.97

October 27,
2017

The
Company

Hitachi Cable, Ltd.
the 5th unsecured
corporate bondMarch 16,
2010

¥ ‒

¥ 4,987$ ‒Unsecured

1.24

March 16,
2017

The
Company

The 30th unsecured
corporate bondSeptember 13,
2011¥ 9,990¥ 9,983$ 89,045

Unsecured

0.79

September 13,
2018

Total

‒

‒

¥ 29,984¥ 34,954$ 267,261‒‒‒

Contingent liabilities disclosed in Note 24. “Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)” arenot included in the above tables.

54

The following tables show the maturities of derivatives. Net settlement derivatives are also disclosed in gross amounts.

Forward exchange contracts
Interest rate swaps
Put options

Forward exchange contracts
Copper futures contracts
Interest rate swaps
Put options

Forward exchange contracts
Interest rate swaps
Put options

In
Out
In
Out
In
Out

In
Out
In
Out
In
Out
In
Out

In
Out
In
Out
In
Out

Within one year
¥ 148
202
‒
‒
‒
‒

Millions of yen
March 31, 2017
After one and but
not more than five
years
Over five years
¥ ‒
¥ ‒
‒
‒
167
‒
620
‒
6,061
‒
‒
‒

Total
¥ 148
202
167
620
6,061
‒

Within one year
¥ 179
16
1
4
‒
52
‒
‒

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

Total
¥ 180
44
1
4
‒
2,262
6,061
‒

Within one year
$ 1,319
1,801
‒
‒
‒
‒

Thousands of U.S. dollars
March 31, 2017
After one and but
not more than five
years
Over five years
$ ‒
$ ‒
‒
‒
1,489
‒
5,526
‒
54,024‒‒‒

Total$ 1,319
1,801
1,489
5,526
54,024‒(d) Capital management
The Group’s fundamental capital management policy is to maintain an appropriate level of assets, liabilities, and capital for current andfuture business operations and to optimize capital efficiency for its business operations.
The ratio of equity attributable to shareholders of the parent company is viewed as a significant indicator for the Group’s capitalmanagement. A specific ratio is targeted under the Group’s mid-term management plan and continuously monitored.
The Group is not subject to significant capital requirements except for general rules, such as the Companies Act of Japan.
Equity attributable to shareholders of the parent company at March 31, 2017, was ¥536,563 million (US $4,782,628 thousand), which
increased by ¥40,698 million (US $362,760 thousand) from the year ended March 31, 2016. As a result, the ratio of equity attributable
to shareholders of the parent company as of March 31, 2017, was 51.6%, an increase from 48.0% of previous year.
(e) Risk of stock price fluctuations
The Group pursues profit in its business and enhances corporate value through reinforcing relationships, particularly with customers
and suppliers, or by delivering proposals to its investees. As part of maintaining the relationship with customers, suppliers, or otherparties, the Group occasionally invests in marketable securities and therefore is exposed to the risk of stock price fluctuations. To
manage this risk, the Group regularly monitors the fair values of these instruments, financial conditions, and other factors of investees.
Further, holdings of stocks are reviewed by the relevant department as appropriate, considering relationships with its business partners.

55

(2)

Fair Value of Investments in Securities and Other Financial Assets and Liabilities(a) Methods and assumptions of fair value measurements
The following methods and assumptions are used to measure fair values of financial assets and liabilities:
Cash and cash equivalents, trade receivables, short-term debt, and trade payables:
Carrying amount of these assets and liabilities approximates their estimated fair value because of their short-term maturity.
Long-term debt:
Fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using market
interest rates under similar contractual terms.
Investments in securities and other financial assets and liabilities (excluding long-term loans receivable):
Refer to fair value hierarchy at (e) “Fair value hierarchy” below.
Long-term loans receivable:
Fair value of long-term loans receivable is estimated based on the present value of future cash flows using interest rates applicableto obtain an additional loan under similar contractual terms.
(b) Fair value of investments in securities and other financial assets
Carrying amounts and estimated fair values of financial assets for the years ended March 31, 2017 and 2016, are as follows:
Millions of yen
March 31, 2017
Carrying
Estimatedamounts
fair values
Financial assets measured at FVTPL
Current
Securities
Derivatives
Forward exchange contracts
Copper futures contracts
Non-current
Securities
Derivatives
Forward exchange contracts
Put options
Financial assets measured at FVTOCI
Non-current
Securities
Financial assets measured at amortized
cost
Current
Short-term loans receivable
Non-current
Securities
Long-term loans receivable

March 31, 2016
Carrying
Estimatedamounts
fair values

Thousands of
U.S. dollars
March 31, 2017
Carrying
Estimatedamounts
fair values

¥ 643

¥ 643

¥ 1,393¥ 1,393$ 5,731$ 5,731

148
‒

148
‒

179
1

179
1

1,319
‒

1,319
‒

1,843

1,843

2,220

2,220

16,427

16,427

‒
6,061

‒
6,061

1
6,061

1
6,061

‒
54,024‒54,024‒
91,194

10,231

10,231

11,799

11,799‒91,194

116

116

‒

‒

1,034

1,034

2,082
711

2,082
711

1,624
688

1,624
688

18,5586,337

18,5586,337

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

56

(c) Fair value of financial assets measured at FVTOCIThe following is a list of major equity instruments designated as FVTOCI and their fair values as of the reporting dates:
Millions of yen
March 31, 2017
Equity instruments
Riken Corporation
Kakimoto Co., Ltd.
Kowa Kogyosho Co., Ltd.
OSG Corporation
Konwa Kaikan
Owari Precise Products Co., Ltd.
Kojima Co., Ltd.
Santoku Corporation
Yamaichi Special Steel Co., Ltd.
Mikuni Shoji Co., Ltd.

Fair value¥ 1,750
1,274
1,154
833
827
434
324
266
246
207

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

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

Thousands of U.S. dollars
March 31, 2017
Equity instruments
Riken Corporation
Kakimoto Co., Ltd.
Kowa Kogyosho Co., Ltd.
OSG Corporation
Konwa Kaikan
Owari Precise Products Co., Ltd.
Kojima Co., Ltd.
Santoku Corporation
Yamaichi Special Steel Co., Ltd.
Mikuni Shoji Co., Ltd.

Fair value$ 15,599
11,356
10,286
7,425
7,371
3,868
2,888
2,371
2,193
1,845

57

(d) Fair value of financial liabilities
Carrying amounts and estimated fair value of financial liabilities as of the reporting dates are as follows:
The Group holds no financial liabilities designated at initial recognition as financial liabilities measured at FVTPL.
Millions of yen
March 31, 2017
Carrying Estimatedamounts fair values

March 31, 2016
Carrying
Estimatedamounts
fair values

Thousands of
U.S. dollars
March 31, 2017
Carrying
Estimatedamounts
fair values

Financial liabilities measured at FVTPL
Current
Derivatives
Interest rate swaps

¥‒

¥‒

¥ 52

¥ 52

$‒

$‒

Forward exchange contracts

202

202

16

16

1,801

1,801

‒

‒

4

4

‒

‒

453

453

2,210

2,210

4,038

4,038

‒

‒

28

28

‒

‒

26,301

26,30125,25125,251

234,433

234,433

15,227

15,33021,86822,010135,725

136,643

19,994

20,224

4,987

5,055

178,216

180,266

241

241

276

276

2,148

2,148

Long-term borrowings

122,555

125,311

137,556

141,852

1,092,388

1,116,953

Corporate bonds payable

9,990

10,11029,96730,77789,045

90,115

149

149

471

471

1,328

1,328

Copper futures contracts
Non-current
Derivatives
Interest rate swaps
Forward exchange contracts
Financial liabilities measured at amortized
cost
Current
Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease obligations
Non-current
Long-term debt

Lease obligations

Since the fair value of finance lease obligations is not material to the consolidated statement of financial position, it is measured as thepresent value of the minimum lease payments discounted by the interest rates used at the initial recognition of lease obligations.
Accordingly, the fair value is based on the relevant carrying amount.
(e) Fair value hierarchy
Financial instruments measured at fair value on a recurring basis after initial recognition are classified into three levels of a fair value
hierarchy based on observability and materiality of inputs used for fair value measurement. The three levels of the hierarchy are as
follows:
Level 1:
Fair value measured using quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2:
Fair value measured using direct or indirect observable inputs other than the quoted prices included in Level 1.
Level 3:
Fair value measured using unobservable inputs.
When several inputs are used for a fair value measurement, the measurement is categorized in its entirety in the same level of the fairvalue hierarchy as the lowest level input that is significant to the entire measurement. Transfers between levels are deemed to haveoccurred at the beginning of each quarter period.
Securities:
Securities that can be measured at fair value through quoted market prices are included in Level 1. Those securities include listed
stocks, government bonds or other debt securities, and exchange traded funds.

58

In the absence of an active market for securities, the following are used as inputs for fair value measurement: quoted prices for
similar securities; quoted prices for transactions that are not distressed for identical or similar securities; or other relevant
information, including observable interest rates and yield curves, credit spreads, and default rates. These inputs are included in
Level 2. Included in Level 2 are short-term investments and listed stocks traded over-the-counter.
Shares of non-listed companies and other instruments, whose significant inputs for fair value measurement are unobservable, areincluded in Level 3. The Group uses price information provided by financial institutions to evaluate these investments. The Group
corroborates the information using an income approach based on its own valuation model or a market approach, such as comparison
with prices of similar securities.
Derivatives:
Derivatives measured in a model using the following are included in Level 2: quoted prices under transactions that are not distressed,
quoted prices in markets that are not active, and observable interest rates and yield curves or forward and spot prices for currencies
and commodities. Level 2 derivatives mainly include interest rate swaps, forward foreign exchange contracts, and commodity
futures contracts.
Financial assets and liabilities measured at amortized cost:
Financial assets and liabilities measured at amortized cost are included primarily in Level 2 or Level 3.
The following tables present financial instruments that are measured at fair value on a recurring basis and the fair value hierarchyclassification as of March 31, 2017 and 2016:
Millions of yen
March 31, 2017
Level 2
Level 3

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

Total

¥ 643
‒

¥‒
148

¥‒
‒

¥ 643
148

‒
‒
3,341

1,007
‒
‒

836
6,061
6,890

1,843
6,061
10,231

‒
‒

202
453

‒
‒

202
453

59

Millions of yen
March 31, 2016
Level 2
Level 3

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
Derivatives
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)¥ 1,393
‒

¥‒
180

¥‒
‒

¥ 1,393
180

‒
‒
3,532

1,092
1
‒

1,128
6,061
8,267

2,220
6,062
11,799

‒
‒

72
2,238

‒
‒

72
2,238

Thousands of U.S. dollars
March 31, 2017
Level 2
Level 3

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

Total

Total

$ 5,731
‒

$ ‒
1,319

$ ‒
‒

$ 5,7311,319‒‒
29,780

8,976
‒
‒

7,452
54,024
61,414

16,42754,024
91,194

‒
‒

1,801
4,038

‒
‒

1,801
4,038

Financial liabilities (current and non-current) measured at FVTPL represent derivatives.
The following tables present the changes in Level 3 instruments whose fair value were measured on a recurring basis for the years
ended March 31, 2017 and 2016:
Millions of yen

At April 1, 2015
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2016
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2017

FVTPL

FVTOCI

Total¥ 2,185
91
‒
(805)
6,096
(378)
¥ 7,189
‒
‒
(346)
49
5
¥ 6,897¥ 7,938
‒
(16)
(353)
‒
698
¥ 8,267
‒
(476)
(906)
‒
5
¥ 6,890¥ 10,123
91(16)(1,158)6,096
320¥ 15,456‒(476)(1,252)49
10¥ 13,787

60

Thousands of U.S. dollars

At March 31, 2016
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2017

FVTPL

FVTOCI

Total$ 64,079‒‒(3,084)437
45$ 61,476$ 73,687‒(4,243)(8,076)‒45$ 61,414$ 137,766‒(4,243)(11,160)437
89$ 122,890

Changes in unrealized gains (losses) recognized in profit or loss relating to assets held as of March 31, 2016, were ¥ 91 million. There
were no such changes as of March 31, 2017.
Such gains (losses) in profit or loss are included in other financial income and other financial expenses in the consolidated statement ofincome.
(3)

Derivative Instruments and Hedging Activities
Cash flow hedge:
Foreign currency exposure:
Changes in the fair value of forward exchange contracts designated as cash flow hedges for forecasted foreign currency transactions
are reported in other comprehensive income. These amounts are reclassified into profit or loss in the same period as foreignexchange gains or losses on hedged items are recognized in profit or loss.
Interest rate exposure:
Changes in fair values of interest rate swaps designated as hedging instruments for fluctuation in cash flows associated with longterm debt obligations are reported in other comprehensive income. The amount in accumulated other comprehensive income issubsequently reclassified to other financial income and expenses over the period in which interest expenses are recognized in profit
or loss.
As of March 31, 2017, the expected period for cash flows arising from hedged items and affecting profit or loss is to be from April
2016 to June 2021.
The fair values of derivatives designated as hedging instruments as of March 31, 2017 and 2016, are as follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2017
March 31, 2016
March 31, 2017
Asset
Liability
Asset
Liability
Cash flow hedges$9
Forward exchange contracts
¥1
¥202
¥ 107
¥ 44
$ 1,8011,489
5,526Interest rate swaps
167
620
‒
2,262
‒
‒
Copper futures contracts
‒
‒
1
‒
Total

¥ 168

¥ 822

¥ 108

¥ 2,306$ 1,497$ 7,327

The fair values of derivative assets and liabilities to which hedge accounting is not applied were ¥6,208million (US $55,335 thousand)and ¥‒ million (US $‒ thousand), respectively, as of March 31, 2017, and ¥6,134 million and ¥4 million, respectively, as ofMarch 31, 2016.
The contract or notional amounts of derivatives as of March 31, 2017 and 2016, are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2017
March 31, 2016
March 31, 2017
Forward exchange contracts:
To sell foreign currencies¥ 7,622¥ 3,843$ 67,938
To buy foreign currencies
3,089
3,243
27,534
Interest rate swaps
105,986
127,474
944,701
Copper futures contracts
‒
4,231
‒

61

The following tables present the amounts in relation to cash flow hedges recognized in the consolidated statement of income for theyear ended March 31, 2017:
Gain or loss recognized in OCI
Effective portion of derivatives designated as hedging instruments

Forward exchange contracts
Interest rate swaps¥ (155)(453)

Thousands of
U.S. dollars$ (1,382)(4,038)Total¥ (608)$ (5,419)

Derivatives

Millions of yen

Gain or loss reclassified from OCI into profit or loss
Effective portion of derivatives designated as hedging instruments

Forward exchange contracts
Interest rate swaps

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

Copper futures contracts

Other financial income and expenses

Derivatives

Millions of yen¥ (50)
2,262

Total

Thousands of
U.S. dollars$ (446)
20,162(1)(9)¥ 2,211$ 19,708

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

Millions of yen

Forward exchange contracts
Interest rate swaps
Copper futures contracts¥ 70(2,028)1Total¥ (1,957)

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

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

Millions of yen

Total

¥ 281
1,291
¥ 1,572

Note 21. Pledged Assets
The following assets were pledged as collateral by certain subsidiaries for their accounts payables as of March 31, 2017 and 2016:
Millions of yen
Securities and other financial assets
Total

March 31, 2017
¥ 114
¥ 114

March 31, 2016
¥ 105
¥ 105

62

Thousands of
U.S. dollars
March 31, 2017
$ 1,016$ 1,016

Note 22. Major Subsidiaries and Associates
The Company’s parent company is Hitachi, Ltd., which is located in Japan. The Company’s consolidated financial statements include thefollowing subsidiaries:

Name

Location

Hitachi Metals Tool Steel, Ltd.

Minato-ku, Tokyo

High-Grade Metal Products and Materials

100.0

Hitachi Metals Neomaterial, Ltd.

Suita, Osaka

High-Grade Metal Products and Materials

100.0

Hitachi Metals Wakamatsu, Ltd.

Kita-kyushu, Fukuoka

High-Grade Metal Products and Materials

100.0

Hitachi Metals Precision, Ltd.

Minato-ku, Tokyo

High-Grade Metal Products and Materials

100.0

HMY, Ltd.

Yasugi, Shimane

High-Grade Metal Products and Materials

100.0

Hitachi Metals MMC Superalloy, Ltd.

Okegawa, Saitama

High-Grade Metal Products and Materials

51.0

NEOMAX KINKI Co., Ltd.

Yabu, Hyogo

Magnetic Materials and Applications

100.0

NEOMAX ENGINEERING Co., Ltd.

Takasaki, Gunma

Magnetic Materials and Applications

100.0

Hitachi Ferrite Electronics, Ltd.

Tottori, Tottori

Manufacturing and sales of products

100.0

NEOMAX KYUSHU Co., Ltd.

Takeo, Saga

Magnetic Materials and Applications

100.0

Hitachi Metals FineTech, Ltd.

Kuwana, Mie

Hitachi Valve, Ltd.

Mie, Mie

Alcast, Ltd.

Kumagaya, Saitama

Kyushu Technometal Co., Ltd.

Miyako, Fukuoka

Hitachi Metals Trading, Ltd.

Minato-ku, Tokyo

Sales of products

100.0

Hitachi Magnet Wire Corp.

Hitachi, Ibaraki

Manufacturing and sales of products

100.0

Tonichi Kyosan Cable, Ltd.

Ishioka, Ibaraki

Wires, Cables, and Related Products

100.0

Ibaraki Technos, Ltd.

Hitachi, Ibaraki

Wires, Cables, and Related Products

100.0

SH Copper Products Co., Ltd.

Tsuchiura, Ibaraki

Wires, Cables, and Related Products

100.0

Hitachi Metals Solutions, Ltd.

Chuo-ku, Tokyo

Real estate business and others

100.0

Metglas, Inc.

South Carolina, U.S.A.

High-Grade Metal Products and Materials

100.0

Hitachi Metals Korea Co., Ltd.

Gyeonggi-do, South
Korea

Sales of products

100.0

Baosteel Hitachi Rolls (Nantong) Co., Ltd.

Jiangsu, China

High-Grade Metal Products and Materials

70.0

San Technology, Inc.

Cavite, Philippines

Magnetic Materials and Applications

100.0

Pacific Metals Co., Ltd.

North Gyeongsang,South Korea

Magnetic Materials and Applications

100.0

PT. NX INDONESIA

Banten, Indonesia

Magnetic Materials and Applications

100.0

Hitachi Metals San Huan Magnetic Materials(Nantong) Co., Ltd.

Jiangsu, China

Magnetic Materials and Applications

51.0

Waupaca Foundry, Inc.

Wisconsin, U.S.A.

AAP St. Marys Corp.

Ohio, U.S.A.

63

Principal business

As of March 31, 2017
Ownership%

High-Grade Functional Components andEquipment
High-Grade Functional Components andEquipment
High-Grade Functional Components andEquipment
High-Grade Functional Components andEquipment

High-Grade Functional Components andEquipment
High-Grade Functional Components andEquipment

100.0
100.0
100.0
100.0

100.0
100.0

Name

Location

As of March 31, 2017
Ownership
Principal business%
High-Grade Functional Components and90.8
Equipment
High-Grade Functional Components and100.0
Equipment

Namyang Metals Co., Ltd.

Daegu, South Korea

Ward Manufacturing, LLC

Pennsylvania, U.S.A.

Hitachi Metals America, Ltd.

New York, U.S.A.

Sales of products

100.0

Hitachi Metals Hong Kong Ltd.

Hong Kong, China

Sales of products

100.0

Hitachi Metals Europe GmbH

Dusseldorf, Germany

Sales of products

100.0

Hitachi Metals Singapore Pte. Ltd.

Singapore

Sales of products

100.0

Hitachi Metals Taiwan, Ltd.

New Taipei, Taiwan

Manufacturing and sales of products

100.0

Hitachi Metals (Thailand) Ltd.

Ayutthaya, Thailand

Manufacturing and sales of products

100.0

Hitachi Metals (Suzhou) Technology, Ltd.

Jiangsu, China

Manufacturing and sales of products

100.0

Hitachi Metals (China), Ltd.

Shanghai, China

Regional headquarters and sales of products

100.0

Hitachi Cable America Inc.

New York, U.S.A.

Wires, Cables, and Related Products

100.0

Hitachi Cable (Suzhou) Co., Ltd.

Jiangsu, China

Wires, Cables, and Related Products

100.0

Hitachi Cable (Johor) Sdn. Bhd.

Johor, Malaysia

Wires, Cables, and Related Products

100.0

Hitachi Cable Vietnam Co., Ltd.

Hai Duong, Vietnam

Manufacturing and sales of products

100.0

Thai Hitachi Enamel Wire Co., Ltd.

Bangpakong
Wires, Cables, and Related Products
Chachoengsao, Thailand

49.4

HC Queretaro, S.A. de C.V.

Queretaro, Mexico

100.0

Others33 companies‒

64

Wires, Cables, and Related Products‒‒

Note 23. Transactions with Related Parties(1) Transactions with Related Parties
Transactions with the related parties are as follows:
For the year ended March 31, 2017:
Attribution

Name

Nature of transaction

Parentcompany

Hitachi, Ltd.

Deposits with HitachiGroup cash poolingsystem(*1) (*3)

Company
with thesame parent
company

Hitachi America Capital, Ltd.

Borrowings from acash pooling system(*2) (*3)

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

DepositDepositBorrowings¥ 18,315(*4)¥ 84,184$ 163,250(*4)$ 750,370

Borrowings

10,955
13,463$ 97,647$ 120,002(*4)(*4)*1 The Company participates in the Hitachi Group’s cash pooling system, an initiative intended to provide integrated management offunds. Balance at the end of the fiscal year indicates deposit balance as of the year-end.
*2 The Company participates in the Hitachi Group’s cash pooling system, where Hitachi America Capital Ltd. is a key participant, an
initiative intended to provide integrated management of funds. Balance at the end of the fiscal year indicates borrowings balance as of
the year-end.
*3 Interest rates on funding are reasonably determined based on market interest rates.
*4 As deposits and withdrawals are made on a daily basis, transaction amounts represent differences between the beginning and endingbalances for the year.
For the year ended March 31, 2016:
Attribution

Parentcompany

Name

Nature of transaction

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

Hitachi, Ltd.

Millions of yen
Transaction
Balance atamountyear-end
Deposit¥ 41,298(*3)¥ 65,869

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

(2) Compensation for Key Management Personnel
Compensation for key management personnel of the Group is as follows:

Short-term employee benefits

Millions of yen
For the year ended
For the year ended
March 31, 2017
March 31, 2016
¥ 608
¥ 620

Thousands of U.S. dollars
For the year ended
March 31, 2017
$ 5,419

Note 24. Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)(1)

Loan Commitments
The Group has lines of credit arrangements with banks in order to secure a financing source for business operations. The total unused linesof credit as of March 31, 2017 and 2016, were ¥40,000 million (US $356,538 thousand) and ¥40,000 million, respectively. The Group also
has overdraft facilities with banks. The unused facilities under these agreements as of March 31, 2017 and 2016, were ¥79,818 million(US $711,454 thousand) and ¥69,242 million, respectively.

65

(2)

Commitments for Acquisition of Assets
Outstanding commitments for the purchase of property, plant and equipment as of March 31, 2017 and 2016, were ¥41,751 million(US $372,145 thousand) and ¥25,284 million respectively.

(3)

Guarantee Obligations
The Group was contingently liable for loan guarantees and other guarantees to its associates and third parties in the amounts of¥4,126 million (US $36,777 thousand) and ¥8,868 million as of March 31, 2017 and 2016, respectively.

(4)

Other
The Company has identified defects in some of its products and is currently evaluating the potential impacts. At the time of issuance of thisreport, the Company is unable to reasonably estimate the timing or the amount of any losses to be incurred in the future. As such, theimpacts are not reflected in the consolidated financial statements as of and for the year ended March 31, 2017.

Note 25. Subsequent Events
There is no applicable item.

66

67