annual report 2014
Year ended March 31, 2014

Utilizing our strengths,
aiming at further growththe company

DAIDO STEEL CO., LTD. ranks among the world’s largest manufacturers of specialty steel. With a history
dating back to 1916, the Company has accumulated extensive skills in combining steel scrap with othermaterials to achieve the strength, workability and other characteristics to match exacting requirements.
Along with the manufacture of value-added steel, the Company offers many services that leverage its
technological resources. Most services target high-end market sectors that demand the highest levels of
quality and specialization. DAIDO STEEL is one of the leading players worldwide in the manufacture of
critical steel components where nothing less than absolute reliability is acceptable. These components
include automobile transmission and engine parts as well as components used in ships, aircraft and electric
generators. DAIDO STEEL shares are traded on the First Section of the Tokyo Stock Exchange under the
securities code 5471.

Contents
01

FINANCIAL HIGHLIGHTS

02

Message from management

04

At a Glance

06

Review of Operations

10

Research and Development

12

CSR and the environment

13

Corporate Governance

FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements
concerning DAIDO STEEL CO., LTD.’s and its Group
companies’ current plans, projections, strategies andperformance. These forward-looking statements are nothistorical facts. Rather, they represent the assumptions
and beliefs of DAIDO STEEL’s management based on
information currently available.
They should therefore not be relied upon as the solebasis for evaluating the Company. DAIDO STEEL also

14

Board of Directors and corporate auditors

15

Financial Section

materially from expectations, and that forward-looking

53

DAIDO Network

uncertainties.

wishes to caution readers that actual results may differ
statements are subject to a number of risks andFinancial Highlights
DAIDO STEEL CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31

Thousands of
U.S. Dollars

Millions of Yen
2014

2013

2012

2011

2010

2014

457,731440,428

489,155

472,063362,5074,443,990

For the Year:Net Sales
Operating Income (Loss)

18,977

15,426

31,53432,730(14,050)

184,243Net Income (Loss)

12,616

10,98322,71823,004(14,610)

122,485

R&D Expenses

5,160

4,560

4,360

4,254

3,909

50,097

Capital Expenditures

44,40425,40039,70018,9007,900

256,311

Depreciation and amortization

20,052

19,22920,46420,073

20,303

194,680

Total Assets

557,522

511,159

512,969

491,722464,629

5,412,835

Total Equity

232,152

211,921

198,654

178,348

159,301

2,253,902

Interest-bearing Debt

143,085

146,999

156,336

157,445

173,790

1,389,175

Number of Employees

10,70910,447

10,365

10,272

10,414

–

33

32

33

32

32

–

Basic Net Income

29.09

25.32

52.37

53.02

(33.68)0.28

Cash Dividends Applicable to the Year

5.00

4.50

7.50

7.00

2.00

0.05

ROA (%)

3.8

3.2

6.3

6.6

(2.9)

–

ROE (%)

5.7

5.4

12.1

13.6

(9.0)

–

Number of Consolidated Subsidiaries

FINANCIAL HIGHLIGHTSAt Year-end:

Per Share of Common Stock (Yen and U.S. Dollars):

Note:	The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at
the rate of ¥103 to $1, the approximate rate of exchange at March 31, 2014.

Net Sales

Operating Income (Loss)Net Income (Loss)

Years ended March 31

Years ended March 31

Years ended March 31(millions of yen)(millions of yen)(millions of yen)

500,000

40,00025,00020,00030,000400,000

15,00020,00010,000300,000

5,000

10,000200,000

00–5,000100,000–10,0000–10,000–20,000
02010 2011 2012 2013 2014

–15,000
02010 2011 2012 2013 20142010 2011 2012 2013 201401

M essage from M anagement

Message from Management

Overview of Results for Fiscal 2013

Outlook for Fiscal 2014

In fiscal 2013, the Japanese economy continued on a

The Japanese economy going forward is expected torecovery track due to firm personal consumption andrecover as various economic and financial stimulus mea-

signs of a pick-up in production in the mining and manu-

sures take effect and consumption rebounds. Overseas

facturing industries. Production by Japanese automakers

economies also are expected to gradually expand. How-remained firm, driven by favorable sales in Japan and theever, there is still the risk of downward pressure on busi-

U.S., although this was offset by slowdowns of demand

ness conditions from emerging economies experiencing a

in some emerging countries. At the same time, demand

downturn and geopolitical risks. Such changes in the man-related to industrial machinery moved to a recovery phaseagement environment will need to be closely monitored.

following the completion of inventory adjustments in thesecond half of the previous fiscal year.
As a result, the Group’s net sales in fiscal 2013

Demand for Japanese automobiles is projected tocontinue to expand against a backdrop of growth inoverseas markets, but the factors that cause structural

increased by ¥17,303 million year on year to ¥457,731

changes as regards specialty steel, such as shifting

million. This reflects the improved export environment

production overseas and the trend toward more com-

resulting from the recovery in domestic demand and thepact vehicles, will also need to be watched carefully.

weaker yen. Ordinary income rose ¥3,812 million to

At the same time, industrial machinery-related demand¥20,287 million due to the benefit of improved earnings

is expected to remain firm on improvement in thesuch as the increased sales of strategic products, andexport environment.

currency exchange gains generated by the weak yen,In this business environment, the Daido Group is

despite increased import costs of energy. Net income

endeavoring to secure profits by rigorously cutting costs.

was ¥12,616 million.

At the same time, we are working to realize the benefitsof our strategic investment in Chita Plant as soon as possible, and to expand our growth businesses of magnets,
turbo parts and powder metal products.

02

Given these conditions, our segment forecasts for the
coming fiscal year are as follows.

TRADING AND SERVICE
In the trading and service segment, demand should generally remainaround the same as that in the year under review.

SPECIALTY STEELIn specialty steel, automobile-related demand will be affected by theBased on this, forecasts for consolidated performancetrend toward utilizing local suppliers and the trend toward morein fiscal 2014 are net sales of ¥490.0 billion, operatingcompact vehicles, but continued mild growth is generally anticipatedincome of ¥24.0 billion, ordinary income of ¥25.0 billion

on increased Japanese auto production. We anticipate that otherand net income of ¥16.0 billion. Raw material prices are

areas of demand will profit strongly against the backdrop of the
improved export environment. We will grasp these growth opportunities and endeavor to vigorously expand sales in overseas markets.

expected to rise as are energy related costs, including forelectric power, but demand is expected to continue its

At the same time, the cost of electric power and other energy

upward trajectory in the automobile and industrial

sources will rise significantly due to increased import costs caused

machinery sectors, and sales of strategic products areby the weaker yen and to rises in electric power charges. We hope to

expected to increase.

gain the understanding of our customers as we reflect these cost­benefits of the large investments made in streamlining steelmaking
processes at the Chita Plant as soon as possible.

Medium- to Long-Term Management
Over the medium and long term, we believe that specialty steel demand will continue expanding, particularly

HIGH PERFORMANCE MATERIALS AND
MAGNETIC MATERIALS

in emerging countries, amid a further acceleration in

Stainless steel and high alloy products will probably also remain firm.

both change in demand and intensification of the com-

With magnetic products, we intend to vigorously make efforts to
expand demand for their applications in vehicles. Because demand
for titanium products is likely to expand into medical and IT applica-

market globalization. At the same time, we assume that
petitive environment will take place at an accelerated
pace. Key factors would include users shifting moretions, we will endeavor to expand sales in these fields. Powder metal

production offshore and increasing local procurement,

products are expected to see solid demand undergirded by the auto

as well as higher costs of electricity and other manufac-

industry, and we will focus on expanding sales of products derived

turing inputs. To address these changes in the operatingfrom the new alloyed powder line that we started operating last year.

environment, the Group instituted a three-year manage-

PARTS FOR AUTOMOBILE AND INDUSTRIAL EQUIPMENT
Demand for die forgings for trucks and construction machinery con-ment plan through fiscal 2014 and since then has beenworking to address a variety of management issues.

tinues to be weak, however we are receiving increased demand for

Trends in domestic and overseas demand and the cost

die forgings for passenger vehicles. At the same time, we are aiming

structure for energy and other elements will no doubt

to start operating a new forging machine and leveraging its dynamic

undergo various changes going forward. However, weforce as soon as possible. Moreover, we also expect a recovery inwill build a robust business infrastructure throughdemand for free forgings given an improved export environment
thanks to the yen’s depreciation and a turnaround in energy-related
investment. We will increase our production activities and capital

M essage from M anagement

increases in our sales prices, while working to realize the costactions that include construction to revamp processes
at the Chita Plant, sales promotion activities for global

expenditures in response to any expansion of demand. In turbo-

leading products, and enhancements to business

related products, a greater proportion of vehicles are expected to­continuity management.

include turbo systems, so we anticipate a growth in demand, and wewill endeavor to boost production of related products. We expect
sales of engine valves to be the same as the previous fiscal year on

September 2014

the whole.

ENGINEERING
Domestic demand is likely to remain soft, but in light of growth incapital investment in China and Southeast Asia, we intend to further
strengthen sales and expand to overseas markets. Regarding ourforecast for net sales for the coming fiscal year, we are expecting a

Tadashi Shimao
President

decline in net sales accompanying a reduction in projects.

03

AT A GLANCEHigh Performance Materials
and Magnetic Materials

PARTS FOR AUTOMOBILE and
INDUSTRIAL EQUIPMENT

Main Products

Main Products

Main Products

Specialty steel for automotive parts, industrial machinery parts, electrical machineryparts, construction, tool steel, etc.
Specialty steel products and materials
manufacturing, distribution, raw materials
sales, transportation and logistics

Stainless steel, nickel-based alloys, electrical and electronics parts, magnetic material
products (OA·FA motors, automotive meters,
sensors, measuring device components,etc.), Alloy powder (magnetic powder for
HEV), Titanium products (medical titanium
alloys, shape-memory alloys), welding wire

Die forging, precise hot forging, welded parts(automotive parts and bearing races) / Open die
forging (parts for boats and ships, industrial
machines, heavy electric machines, steel making
equipment, chemical equipment, oil drilling rigs,
and spacecraft and aircraft) / Casting (manganese railway rails, components for automobiles,
industrial machines, electric machines and­furnaces, advanced cast steel products, etc.) /Precision casting (automotive, industrial machines,
electric machines, telecommunications equipment,etc.) / Engine valves, compressors, hydraulicequipment, machine tool parts

Share of Net Sales

Share of Net Sales

Share of Net Sales

(%)

(%)

(%)

AT A GLANCE

SPECIALTY STEEL

40.2%

31.3%

21.2%

Net Sales Years ended March 31

Net Sales Years ended March 31

Net Sales Years ended March 31(millions of yen)(millions of yen)(millions of yen)

300,000

200,000

150,000

100,000

200,000
100,000

50,000100,000

0

0
2013

2014

0
2013

2014

2013

2014

Operating Income Years ended March 31

Operating Income Years ended March 31

Operating Income Years ended March 31(millions of yen)(millions of yen)(millions of yen)

5,000

12,000

5,000

8,000
2,500

2,500
4,000

0

0
2013

04

2014

0
2013

2014

2013

2014

ENGINEERING

TRADING and SERVICE

Main Products

Steel making equipment, industrial furnaces
and facilities, environmental equipment (fordrain, exhaust, waste disposal and treatment facilities), machine tools, machine
maintenanceSale of Group company products, welfare
services, real estate and insurance business
Golf course management, analysis business, outside software sales business

Share of Net Sales

Share of Net Sales

(%)

(%)

AT A GLANCE

Main Products

5.3%

2.0%

Net Sales Years ended March 31

Net Sales Years ended March 31(millions of yen)(millions of yen)

36,00020,00024,00010,00012,000

0

0
2013

2014

2013

2014

Operating Income Years ended March 31

Operating Income Years ended March 31(millions of yen)(millions of yen)

1,200

1,500

1,000
600
500

0

0
2013

2014

2013

2014

05

review of operations

SPECIA LT Y STEEL
Overview of BusinessResults of Operations

Specialty steel, the Company’s core business, generates

Sales volume increased year on year in the specialty steel seg-

approximately 40% of consolidated net sales. Specialty steel isment for the following reasons. Demand for structural steel inmade by combining steel with alloys to add value in the form of

the automobile industry and in the industrial equipment sector

properties such as resistance to heat, abrasions or rust.

turned around from the previous year’s inventory adjustment

Because a range of special properties can be achieved by vary-phase and was robust. Moreover, demand for tool steel also

ing the type and amount of alloy, one of the special features ofincreased due to firmness in domestic and overseas markets

the business is that products are developed to meet the specificand benefits from sales expansion at overseas bases.

applications required by the user. The automobile and industrial

Under these circumstances, the Company earnestly strove

machinery sectors are the primary users of specialty steel,to reduce production costs while responding flexibly to theaccounting for about 80% of sales in this business segment.

demand recovery. In addition, as regards the strategic investment in the Chita Plant, the main production base, we started
operating the new electric furnace in November last year, and

REVIEW OF OPERATIONS

are now in the mass production phase.
As a result, the specialty steel segment’s net sales
increased 8.7% year on year to ¥184,100 million. Operating
income fell ¥1,824 million to ¥1,691 million in fiscal 2013. The
main factors were the launch costs accompanying the newelectric furnace at the Chita Plant, and the impact of expanding
energy costs due to the depreciation of the yen.

HDD Spindle Motors
Daido Steel is the world’s leading supplierof stainless steel for HDD spindle motors.

06

H ig h Per fo r man ce M ateria ls a n d Magnetic M ateria l s
Overview of BusinessResults of Operations

This segment, which accounts for roughly 31% of consolidated

Net sales of stainless steel and high alloy products increased

net sales, manufactures and sells high performance materials

year on year due to firm demand for their use in industrial

and magnetic materials used chiefly in computers, automobiles,

machinery and HDD-related products, which recovered frommobile phones and consumer electronics. Notably, Daido Steelthe inventory adjustments of the previous year. Sales of mag-holds the world’s largest market share as a supplier of magnets

netic products increased year on year. In addition to the com-

for spindle motors* for hard disk drives (HDD).

pletion of inventory adjustments in magnets for servo motors

Key products include rare earth magnets (used in spindle

used in factory automation and in magnets for HDD, demand

motors* for HDD and other products), high alloys, titanium

expanded for magnets used in power steering systems installed

products and high performance powder metal products, andin vehicles.

electromagnetic materials.
* Spindle motor: The motor used to rotate hard disk drives installed in computers.

Sales of powder metal products rose due to robust
demand for vehicles, especially soft magnetic powder for
hybrid electric vehicles. At the same time, sales of high alloy
REVIEW OF OPERATIONS

products declined due to the Company’s withdrawal fromcold-rolled strip steel for lead-frames. Sales of titanium products
also decreased year on year due to demand adjustments forexport products and other factors.
As a result of this and driven by the recovery in demand forstainless steel and magnetic products, net sales for the highperformance materials and magnetic materials segment infiscal 2013 increased 4.8% year on year to ¥143,485 million.
Operating income also increased by ¥4,456 million to ¥11,104
million, due to higher sales volumes and reduction of fixed cost.

NEOQUENCH-P (NdFeB Polymer-bonded Magnets)
Magnets for precision, high-speed motors used in mobile phones, office automation (OA) equipment and otherproducts; currently the world’s most popular magnet for HDD spindle motors.

07

Part s fo r Aut om obile and In du strial Equipment
Overview of BusinessResults of Operations

This segment contributes around 21% of consolidated net

Sales of free forging products increased year on year due tosales. It manufactures die forged parts such as crankshaftsrising energy demand and an expansion in demand for heavyusing specialty steel, precision cast parts for use in gears andelectric machines and plant-related equipment as a result ofturbochargers (used in diesel engines to improve fuel efficiency

the stable Japanese yen. In castings and precision cast prod-

and reduce exhaust gases), engine valves, jet engine shafts

ucts, sales increased year on year due to robust demand forand parts for gas turbines. Most of the auto parts sold in thisturbo-related products in Europe and North America, despite

segment use materials that were developed through joint proj-

stagnating demand in castings for industrial machinery. At theects with automakers to meet their exacting requirements.

same time, sales of die forging products decreased year on

These parts can therefore lower processing expenses at cus-year due to the slump in demand for trucks as a result of dete-

tomers’ factories as well as contribute to reducing the weightriorating business conditions in the ASEAN market. Sales ofof finished products.

engine valves also decreased, due to reduced year-on-year

REVIEW OF OPERATIONS

Many products in this segment are leading products in their

As a result, net sales in the parts for automobile andand marine diesel engine valves. Daido Steel also has a high­industrial equipment segment for the fiscal year under review

market share in numerous other product categories, including

increased 4.0% to ¥97,002 million. Operating income rose ¥385

automobile engine valves and turbine disks. We will continue tomillion to ¥3,779 million.

develop and launch new products that differentiate us fromcompetitors and support our position as a provider ofadvanced products.
In addition to specialty steel supplied by the specialty steel
segment of the Group, some steel materials used in this segment are manufactured in-house.

Hot, High-speed Precision Forgings
Daido Steel is one of the largest manufacturers of hot,high-speed precision forgings.

08

sales volumes.

respective market categories, such as aircraft jet engine shafts

ENGINEERING
Overview of BusinessResults of Operations

This segment generates about 5% of consolidated net sales.

In the engineering segment, overseas projects, such as the

Major activities include the manufacture of steelmaking equip-

construction of industrial furnaces in the ASEAN region,

ment, industrial furnaces, and associated equipment. This seg-

expanded steadily. However, sales from large construction

ment also manufactures environmental equipment for the

projects, such as a facility for manufacturing magnetic materials

treatment of wastewater, gas emissions and waste materials

for related companies, had been concentrated in the previous(mainly to public-sector clients with incinerated ash melting

year and, consequently, net sales decreased year on year.

systems for urban waste) and machine tools.

Engineering segment sales for the fiscal year under review

With respect to environmental equipment in particular, thedecreased by 24.6% to ¥24,105

operation and engineering technologies we have fostered overmillion. However, operating income

the years support our cutting-edge engineering business, which

increased ¥362 million to ¥1,126

constantly has a grasp of current market needs. The many new

million, mainly due to the margin on

types of equipment and technologies that this segment has

projects improving.
REVIEW OF OPERATIONS

created contribute to environmental preservation and energy
reduction in a wide variety of settings. Operations also include
maintenance and management of this machinery and equipment.

Daido Arc Process (DAP)

T r a d ing a n d S er vice
Overview of BusinessResults of Operations

The major activities of this segment, which accounts for approx-

Net sales in the trading and service segment in the fiscal year

imately 2% of consolidated net sales, include the sale of prod-

under review increased 1.0% to ¥9,039 million, mainly due toucts made by Group companies, employee benefits services,

the impact of increased real estate-related contract-type

real estate and insurance services, golf course management,­construction projects. Operating income rose ¥171 million to

analytics, and sales of software to external customers.

¥1,280 million.

09

RESEARCH AND DEVELOPMENTThe Daido Steel Group’s basic management policy is to leverage its advanced technology capabilities in specialty steel to “foster a corporate culture of creativity andoriginality that contributes to the 21st century society.” Based on this policy, theGroup conducts a proactive program of research and development (R&D) to expand
new products and businesses and strengthen the foundations for existing businesses.
Currently, we are pursuing R&D for new products, materials and technologies,
primarily through the Daido Corporate Research & Development Center, whichhouses the Special Steel Research Lab, Electromagnetic Material Research Lab,and Process Technology Development Center. We employ a total of 276 researchers
throughout the Daido Steel Group.
R&D expenses for the Daido Steel Group during the fiscal year under review
amounted to ¥5,160 million. An explanation of our R&D efforts by segment, including
purpose, major achievements, and expenditures follows.

(1) Specialty SteelYears ended March 31(millions of yen)

6,000

4,000

2,000

0

2011 2012 2013 2014

such as automotive structural materials and tool steel, andMajor Achievements• Neodymium series hot-pressed magnet containing
no heavy rare-earth elements

process innovations ranging from steelmaking, refining and

The ND-40SHF hot-pressed magnet was developed as asolidification to quality assurance.

­neodymium-iron-boron (Nd-Fe-B) magnet without any heavy

In this segment, R&D includes basic material development,
Research and development

R&D Expenditures

R&D costs for the fiscal year under review in this segment
totaled ¥1,445 million.

rare-earth elements; specifically, dysprosium (Dy) and terbium(Te), which are both rare and expensive. This magnet incorporating a newly developed hot plastic forming process and magnetic

Major Achievements• DHW, a welding repair material exclusively fordie-casting dies

compositions has the highest magnetism and thermal resistance

Daido Steel has developed a new welding repair material, DHW,

the magnet since 2014 for motors in automobiles, in particular

to improve the life of repaired die casting dies. DHW is able tofor the growing electronic power steering (EPS) market,

delay the occurrence of cracks known as heat checking and­industrial machinery, office automation equipment andextend the repair interval of dies compared with conventional­consumer electronics.

welding materials. Moreover, DHW has no cobalt in compliance• Development of technology for mass production ofultra-high performance PLP magnets with low levelsof heavy rare-earth elementswith the Ordinance on the Prevention of Hazards Due to Specified
Chemical Substances that was revised in October 2012.

in the world for magnets without heavy rare-earth elements.
Daido Electronics has been conducting mass production of

The mass production technology for the pressless process(2) High Performance Materials and Magnetic Materials(PLP) magnets has been developed. PLP magnets provide bothIn this segment the Daido Steel Group conducts R&D focusing

high magnetism and ultra-high thermal resistance with sub­on developing materials that resist corrosion and heat, high-stantially reduced heavy rare-earth elements. The mass pro­

grade strip steel, welding materials, magnetic materials andduction of the magnets started last year at Intermetallics Japan

electronic devices. Magnet research is carried out principally by

Corporation, a joint venture established with Mitsubishi

the Company and its consolidated subsidiary, Daido Electronics­Corporation and Molycorp. Inc. of the U.S. The magnets areCo., Ltd.

used in electric vehicles, energy-saving air conditioners andR&D costs for the fiscal year under review in this segment
totaled ¥2,388 million. The following are some of our majorachievements in this area.

other applications.

• GIG magnetic sensors: Construction of mass
production line and sales launch
We have continued to undertake R&D activities in order tomarket GIG magnetic sensors, which offer higher output in
response to an external magnetic field than MR magnets. The
GIG magnetic sensor was invented by the Research Institute for10Electromagnetic Materials and has been developed in joint

flaw detection technology. Furthermore, for the inspection ofresearch using our thin film manufacturing technology and mass

non-magnetic black leather materials, we have been developing

production technology. The GIG magnetic sensors are expected

technology employing eddy current examinations to improve theto be applied to industrial uses that require high sensitivity andarticulation performance of scratches and noise.

low power consumption, such as magnetic identification sensors

As regards parts, we are developing an automated externaland current sensors.

inspection technology for forged parts and casting parts, which• Development of target material for touch panel
copper wiring barrier film

hitherto were inspected visually. CCD cameras and laser beams

NCT, a target material composed of nickel, copper and titanium,

design and software to detect external defects such as fractures,has been developed as a target for barrier film of copper wiringchips, foreign matter and scratches.

are used in the inspection equipment with our original hardwarein mainly touch panels. In touch panels for large screens, theneed for highly conductive wiring is increasing and copper(4) Engineering

wiring is preferred to ordinary aluminum wiring. In copper wiring,Engineering R&D focuses on the development of environmental

barrier materials are necessary to prevent copper diffusion toconservation and recycling equipment, and a variety of energy-

integrated circuits and improve adhesion on the substrate andsaving industrial furnaces.

the corrosion resistance of copper wiring.

• High nitrogen stainless steel

R&D expenditures in this segment during the fiscal year
under review amounted to ¥162 million.

atmospheric pressure dissolution. We have developed high-Major Achievements• Performance verification of ultra-small batch
vacuum carburizing furnace SyncroTherm

nitrogen martensite stainless steels that have hardness of over

ModulTherm®, a technology from the German firm ALD Vacuum

58 HRC and corrosion resistance equivalent to SUS 630. This

Technologies that Daido Steel introduced in advance in Japan,

newly developed steel can be used under highly corrosive con-has been steadily penetrating the market centered on domestic

ditions in which the use of conventional martensite stainlessautomobile makers with its application to vacuum carburizing

steels is difficult. We have found applications for this steel weequipment that strengthens the advanced functions and length-

have developed in cutting elements of machinery and so on.

ens the working life of automobile parts.

corrosion resistance of stainless steels. Daido Steel has been
trying to introduce as much nitrogen as possible in steel with

­Looking ahead, we expect it to find a wide range of applications
in components such as bearings and valves.

Research and development

Nitrogen is an effective element for improving both strength andRecently, we formed a technological alliance with the same
company as regards the new ultra-small batch vacuum carburizing furnace SyncroTherm®. Subsequently, a demonstration(3) Parts for Automobile and Industrial Equipment

furnace facility was installed inside our Takiharu Techno Center

R&D in this segment concentrates on development of engine

in Nagoya, and we are now demonstrating the superior heatvalves and other automotive parts and parts for various types oftreatment performance of the furnace while at the same timeindustrial machinery.

enabling our ­customers to try out their intended equipment

R&D costs for the fiscal year under review in this segment
totaled ¥1,164 million. The following are some of our majorachievements in this area.

and suchlike.
In the past, conventional carburizing furnaces could only
process large batches of several hundred components for treatment on multi-layered trays. SyncroTherm® has simplified the

Major Achievements• Development of technology for automating
inspections of internal defects and exteriors

treatment and can now process as few as 10 to 20 components

Daido Steel has developed various inspection technologies totain a large working inventory of components in between

improve production efficiency by strengthening its inspection­different treatment processes.

for treatment on one tray. SyncroTherm® enables “on-demand”
carburizing treatments of components without having to main-

capabilities of automobile materials and parts, and reducing the

Daido Steel’s SyncroTherm®, which we have developed in

number of human inspectors. As regards the materials, we useline with our new concept for furnaces, has already attracted

ultrasonic flaw detection for screening internal defects in round-many business inquiries from domestic automobile makers andbar steels. And to detect more minute defects and inclusions,components makers in the same manner as the introduction in

we have developed and made practical an array-type ultrasonicadvance of the ModulTherm® model.

11

CSR and the Environment

Basic Policy
The Daido Steel Group considers it extremely important forcontemporary corporations to take on a role that extends
beyond economic activities and to contribute to the sustainable development of society through environmentallyconscious activities and involvement in the resolution ofsocial issues.
The Daido Steel Group is playing a part in helping tocreate a recycling-oriented economy and society through its
primary business operations: the manufacture and sale ofspecialty steel largely created from recycled scrap steel.
Daido Steel is also engaged in a broad range of initiatives,
including developing a variety of environmental activities,
abiding firmly by our corporate ethics, striving for disclosure
to increase the transparency of management, and creating asafe and pleasant place for employees to work.

Major Initiatives
Preventing global warming

CSR

The first commitment period for the Kyoto Protocol ran from2008 to 2012. In that time frame, Daido Steel aimed toreduce its CO2 emissions volume by 10% compared to the1990 level in accordance with the guidelines of the Japan
Iron and Steel Federation. We worked to achieve this goalby expanding the use of exhaust heat recovery in heating
furnaces, shifting our fuel source from heavy oil to naturalgas, and improving the yield ratio through an increase in theratio of production by continuous casters. Due to the effectsof cumulative investments of ¥5.0 billion made from 2006 to
2012, operational improvements and changes in productionlevels, annual CO2 emissions from 2008 to 2012 and in2013 decreased by 24.7% on average and 25.8%, respectively, compared to 1990. Turning to fuel conversion, we
achieved a change in the natural gas percentage in fuel from35% (calorie basis) in 2005 to 81% at the end of fiscal 2013.
Going forward, we will implement further reform measures, such as reductions in the number of heat exchangers
and improving the yield ratios. Daido Steel did not purchasecarbon credits during the first commitment period.

Strengthening the CSR Promotion Framework
The Daido Steel Group has responded to the needs of ourvarious stakeholders by establishing the Human Resources
Labor Committee and various other committees as parent
organizations to support CSR activities, such as the­ nvironment and Energy Committee. With a view to furtherE
strengthening this framework, in fiscal 2007 the CSR­Committee was established to supervise general CSR­activities. Members of the CSR Committee formulateGroup-wide policies and action plans with the aim of unifying
and expanding CSR activities across all Group companies
and divisions.
Starting January 2013, the Environment and Energy
Committee was split into two independent committees(namely, the Environment Committee and the Energy Committee) to promote CSR activities in a more fulfilling way.
For details, please refer to the annually issued CSR Report.
URL: http://www.daido.co.jp/csr/data/report.html(Japanese only)

Energy consumption and Carbon Dioxide Emissions Volume
Kg of CO2/
ton of production

1,000 tons
CO2/year

800

1,500

600
–6.4%

–19.9%–25.8%–18.9%–20.4%–24.4%–25.9%
400–34.5%

1,000

500

0

200

90 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 140(forecast)

CO2 emissions volume (left)
CO2 emissions per ton of production (right)
CO2 emissions coefficient for electric power: 0.374 kg of CO2 / kWhFigures for 2014 are estimates

12

CO2 emissions per ton of production

CO2 emissions volume

2,000Basic Policy

Internal Control System

Daido Steel views corporate governance as one of the key
issues for management in today’s rapidly changing businessenvironment. We strive to increase management efficiency,
accelerate and improve decision-making, and ensure management transparency.
In addition, in order to clarify our responsibilities as acompany contributing to society, Daido Steel has established a Risk Management Committee. The Company has
also implemented the Daido Steel Corporate Code of
Ethics, and is working to improve its basic structure as acompany open to society. In order to ensure the reliability of
its financial reporting, the Company has set up an Internal
Control Committee.

Risk Management Initiatives
Daido Steel emphasizes risk management and legal compliance in its management. To this end, the Company has set
out basic points for risk management in the Risk Management Regulations. In addition, the Risk Management Committee, chaired by the president, discusses management ofprojected upcoming and latent risks within the Group,
reports to the Company’s Executive Directors and advises
the Company’s Board of Directors. The Company also
appoints a director who is responsible for the Company-wide
supervision of risk management and compliance.
In preparation for a major accident or other problem,
relevant information is shared with all concerned people,
and speedy and smooth countermeasures are formulated.
The Company has also formulated regulations for emergency countermeasures in the event of a major accident,
aimed at minimizing the impact of the accident or otherproblem on business activities, and disseminated the regulations to all employees and Group companies.
Furthermore, in response to any major share-purchaseactivity (for example, purchases of the Company’s shares
aimed at increasing the voting rights of a specific shareholders’ group to over 20%), Daido Steel will implement takeover
defense measures from the perspective of ensuring andimproving corporate value and, by extension, the sharedbeneficial interests of all shareholders.

Governance System
Daido Steel uses the corporate auditor system. The business execution of the 21 directors (including one external
director) is conducted according to a medium-term management plan, covering a period of three years in principle,
and one-year plans for each business segment that specify
steps to be taken under the medium-term plan, based oncommon Group goals shared with all employees.
The Board of Directors convenes a minimum of once amonth to decide important matters and report on the statusof the directors’ business execution. A Management Meeting attended by managing directors and above is held once
monthly in principle, as well as on an as-needed basis, inorder to increase the flexibility of decision-making on important matters and ensure more detailed dissemination of
information. In addition, the Executive Directors’ Meetingtakes place once a month to increase the efficiency of execution of duties by directors and review the progress on themedium-term management plan.
Three corporate auditors, including one external corporate
auditor, attend important meetings such as the Management
Meeting and Board of Directors’ meetings and conduct
visiting audits of all business divisions and consolidated
subsidiaries in order to audit and oversee the business­execution of directors.

Corporate GovernanceCorporate GovernanceEfforts to enhance compliance
Daido Steel has established the Daido Steel Corporate
Code of Ethics and the Daido Steel Code of Conduct, andworks to disseminate them to all employees and Group
companies. The Company also maintains a hotline for consultation and reporting by employees regarding compliance,
as well as directors in charge of compliance and risk management, divisions in charge and outside attorneys.
Efforts to ensure the reliability of financial reporting
In order to ensure the reliability of financial reporting andenhance the level of response of the Company and Group
companies to J-SOX, the Daido Steel Group prescribes thebasic points for system improvement and operation in theInternal Control Regulations and has established an Internal
Control Committee chaired by the president.

13Mechanism for Business Execution, Audit, Supervision and Internal Control(As of June 27, 2014)

Shareholders’ Meeting
Electionand dismissal

Electionand dismissal

Electionand dismissal

Accounting
Auditor(independent
auditor)

AuditsBoard of Auditors
3 auditors including
1 external auditor

Accounting audit

Risk Management Committee

Supervises
Representative
Directors

Mutualcollaboration

Reports

Board of Directors
20 directors including
1 external director(Ensures reliability offinancial reporting)Directors in charge

Internal Control Committee
Reports
Reports

Internal Auditing Department(internal audits)

Corporate Governance
Board of Directors and corporate auditors

AuditsAuditsAdvises andsupports

AuditsCompliance
Lawyers

Administrationof the Company
and each business division

Director in chargeof complianceand riskmanagement

HotlineManager

Reports

Group companies
Employees consultations/Reports
Compliance Consultation

Board of Directors and corporate auditors
CHAIRMAN AND
PRESIDENT AND
EXECUTIVE VICE PRESIDENTS AND
REPRESENTATIVE
REPRESENTATIVE
REPRESENTATIVE EXECUTIVEEXECUTIVE DIRECTOR EXECUTIVE DIRECTOR DIRECTORS

Tadashi Shimao

Michio Okabe

Motoshi Shinkai

Takeshi Ishiguro

Yasuhiro Itazuri

Hajime Takahashi

Kazuto Tachibana

Tsukasa Nishimura

STANDING CORPORATE AUDITORSCORPORATE AUDITOR

Yoshitsugu Sakamoto

Kazuhiko Hirabayashi

Toshinori Koike

Yukichi Ozawa

Susumu Shimura

Hajime Amano

Shigenobu Tokuoka

Shuji Matsubuchi

Yoshiaki Mori

Shinji Naruse

Hirotaka Yoshinaga

Takeshi Muto

Atsumi Hatano

Masatoshi Ozawa
MANAGING DIRECTORS

Akira Miyajima
DIRECTORS

14

Satoshi Tsujimoto

Financial Section

Contents
16

Management’s discussion and analysis of operations

20

Consolidated Balance Sheet

22

Consolidated Statement of Income

23

Consolidated Statement of Comprehensive Income

24

Consolidated Statement of Changes in equity

26

Consolidated Statement of Cash Flows

27

Notes to Consolidated Financial Statements

52

Independent Auditor’s Report15

Management’s Discussion and Analysis of Operations

OVERVIEW OF OPERATING ENVIRONMENTAND PERFORMANCE

BUSINESS SEGMENT PERFORMANCE

In fiscal 2013, ended March 31, 2014, the Japanese economy

Sales volume increased year on year in the specialty steel seg-continued on a recovery track due to firm personal consump-ment for the following reasons. Demand for structural steel intion and signs of a pick-up in production in the mining andthe automobile industry and in the industrial equipment sector

manufacturing industries. Production by Japanese automakers,

turned around from the previous year’s inventory adjustment

our key sources of demand for specialty steel, remained firm,phase and was robust. Moreover, demand for tool steel also

driven by favorable sales in Japan and the U.S., although thisincreased due to firmness in domestic and overseas markets

was offset by slowdowns of demand in some emerging coun-and benefits from sales expansion at overseas bases.

Specialty Steeltries. At the same time, demand related to industrial machinery

Under these circumstances, the Company earnestly strove

moved to a recovery phase following the completion of inven-to reduce production costs while responding flexibly to thetory adjustments in the second half of the previous fiscal year.

demand recovery. In addition, as regards the strategic invest-

As a result, the Group’s net sales in fiscal 2013 increased

ment in the Chita Plant, the main production base, we startedby ¥17,303 million year on year to ¥457,731 million. This

operating the new electric furnace in November last year, andreflects the improved export environment resulting from theare now in the mass production phase.

Financial section

recovery in domestic demand and the weaker yen. Ordinary

increased 8.7% year on year to ¥184,100 million. Operating­benefit of improved earnings such as the increased sales ofincome fell ¥1,824 million to ¥1,691 million in fiscal 2013. The

strategic products, and currency exchange gains generated bymain factors were the launch costs accompanying the new

the weak yen, despite increased import costs of energy. Net

electric furnace at the Chita Plant, and the impact of expanding

income was ¥12,616 million.

energy costs due to the depreciation of the yen.

Net Sales

Operating Income

Net Income

Years ended March 31

Years ended March 31

Years ended March 31(millions of yen)(millions of yen)(millions of yen)

600,000

40,00025,000450,000

30,000300,000

20,000150,000

10,0000

16

As a result, the specialty steel segment’s net sales

income rose ¥3,812 million to ¥20,287 million due to the

2012

2013

2014

0

20,00015,00010,000
5,000
2012

2013

2014

0

2012

2013

2014

High Performance Materials and Magnetic Materials

Parts for Automobile and Industrial Equipment

Net sales of stainless steel and high alloy products increased

Sales of free forging products increased year on year due toyear on year due to firm demand for their use in industrial

rising energy demand and an expansion in demand for heavymachinery and HDD-related products, which recovered fromelectric machines and plant-related equipment as a result of

the inventory adjustments of the previous year. Sales of mag-the stable Japanese yen. In castings and precision cast prod-

netic products increased year on year. In addition to the com-ucts, sales increased year on year due to robust demand forpletion of inventory adjustments in magnets for servo motors

turbo-related products in Europe and North America, despiteused in factory automation and in magnets for HDD, demandstagnating demand in castings for industrial machinery. At the

expanded for magnets used in power steering systems installedsame time, sales of die forging products decreased year onin vehicles.

year due to the slump in demand for trucks as a result of dete-

Sales of powder metal products rose due to robust demandriorating business conditions in the ASEAN market. Sales offor vehicles, especially soft magnetic powder for hybrid electricengine valves also decreased, due to reduced year-on-year

vehicles. At the same time, sales of high alloy products declined

sales volumes.

due to the Company’s withdrawal from cold-rolled strip steel

As a result, net sales in the parts for automobile and industrial

for lead-frames. Sales of titanium products also decreased year

equipment segment for the fiscal year under review increasedon year due to demand adjustments for export products and4.0% to ¥97,002 million. Operating income rose ¥385 million toother factors.

¥3,779 million, due to the contribution of the increased sales of

As a result of this and driven by the recovery in demand forfree forgings and turbo-related products.
Financial section

stainless steel and magnetic products, net sales for the highperformance materials and magnetic materials segment in fiscal
2013 increased 4.8% year on year to ¥143,485 million. Operating
income also increased by ¥4,456 million to ¥11,104 million, due
to higher sales volumes and reduction of fixed cost.

17Engineering

RESEARCH AND DEVELOPMENT

In the engineering segment, overseas projects, such as the

R&D costs for the entire Daido Steel Group during the fiscal

construction of industrial furnaces in the ASEAN region,year under review totaled ¥5,160 million. The research objectives,

expanded steadily. However, sales from large construction

main achievements and R&D costs in each business segment

projects, such as a facility for manufacturing magnetic materials

were as follows:

for related companies, had been concentrated in the previous(1) Specialty Steelyear and, consequently, net sales decreased year on year.
Engineering segment sales for the fiscal year under review

Daido Steel bears the principal responsibility for carrying out

decreased by 24.6% to ¥24,105 million. However, operating

specialty steel R&D. Research areas include basic material

income increased ¥362 million to ¥1,126 million, mainly due todevelopment, such as automotive structural steel and tool steel.

the margin on projects improving.

Other areas of emphasis are development of process innovations
ranging from steelmaking, refining and solidification to quality

Trading and Service

assurance for finished products.
Specialty steel R&D costs during the fiscal year under

Net sales in the trading and service segment in the fiscal year

review totaled ¥1,445 million.

under review increased 1.0% to ¥9,039 million, mainly due tothe impact of increased real estate-related contract-type(2) High Performance Materials and Magnetic
Materials­construction projects. Operating income rose ¥171 million to¥1,280 million.
Financial section

Development of materials that resist corrosion and heat, high-

CAPITAL EXPENDITURES

grade strip steel, welding materials, electromagnetic materials,

Capital expenditures by business segment during the fiscal year

and other basic materials, as well as R&D of electronic devices

under review are shown in the table below.

is conducted mainly by Daido Steel, while magnet R&D is conducted primarily by Daido Steel and consolidated subsidiary

Figures in the table include intangible fixed assets in addition

Daido Electronics Co., Ltd. R&D costs in this segment during

to property, plant and equipment.

the fiscal year under review amounted to ¥2,388 million.

Capital Expenditures
Capital Expenditures by Segment

Years ended March 31

Years ended March 31(millions of yen)

Millions of Yen

Specialty SteelHigh Performance Materials andMagnetic Materials
Parts for Automobile andIndustrial Equipment
Engineering
Trading and Service
Total

18

50,0002014

2013¥22,260¥ 9,923

124.3

11,490

9,439

21.7

9,439

6,302

49.8

230

484

–52.4

10,000

982

643

52.7

0

¥44,404¥26,791

65.7

Change (%)

40,00030,00020,000

2012

2013

2014

(3) Parts for Automobile and Industrial Equipment

FINANCIAL POSITION

Mainly the responsibility of Daido Steel, R&D in this segment

CASH FLOWS

concentrates on development of engine valves and other auto-

Cash and cash equivalents as of March 31, 2014, amounted tomotive parts and parts for various types of industrial machinery.

¥39,905 million, representing a decrease of ¥11,738 million, or

R&D costs for the fiscal year under review in this segment

22.7%, year on year.

totaled ¥1,164 million.
Cash Flows From Operating Activities(4) Engineering

Net cash provided by operating activities amounted to ¥28,567

Engineering R&D is carried out primarily by Daido Steel, focusedmillion, down ¥5,040 million from the previous fiscal year. The

on development of environmental conservation and recycling

main components of cash inflow were income before income

equipment and a variety of energy-saving industrial furnaces.

taxes and minority interests of ¥20,965 million and an increase

Engineering R&D costs during the fiscal year under review werein notes and accounts payable of ¥9,955 million. The main

¥162 million.

component of cash outflow was a ¥11,882 million increase innotes and accounts receivable.

(5) Trading and Service
Cash Flows From Investing Activities
Net cash used in investing activities totaled ¥34,313 million,
increasing by ¥5,842 million from the previous fiscal year. The
major cash outflows included ¥31,748 million in purchases ofFinancial section

There are no R&D activities in this segment.

property, plant, and equipment.
Cash Flows From Financing Activities
Net cash used in financing activities was ¥7,634 million, down
¥9,723 million from the previous year. The increase was chiefly
due to ¥25,513 million for the repayments of long-term debt.

Interest-bearing Debt
Years ended March 31(millions of yen)

200,000
150,000
100,000
50,000
0

2012

2013

2014

19

CONSOLIDATED BALANCE SHEETDAIDO STEEL CO., LTD. AND CONSOLIDATED SUBSIDIARIESMARCH 31, 2014

Thousands of
U.S. Dollars(Note 1)

Financial section

Millions of Yen

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 15)
Time deposits (Notes 7 and 15)
Notes and accounts receivable (Note 15)
Inventories (Note 4)
Deferred tax assets (Note 11)
Prepaid expenses and other current assets
Allowance for doubtful accounts
Total current assets

2014

2013

2014

¥   39,905
810
101,734
97,747
4,525
3,538
(197)
248,062¥   51,643
418
88,652
94,036
4,338
3,268
(271)
242,084$   387,427
7,864
987,709949,000
43,932
34,350(1,913)
2,408,369

PROPERTY, PLANT, AND EQUIPMENT:Land (Notes 5 and 7)
Buildings and structures (Notes 5 and 7)
Machinery and equipment (Note 7)
Construction in progress
Total
Accumulated depreciation
Net property, plant, and equipment

36,926
156,230
439,201
4,579
636,936(452,035)
184,901

37,008144,505
414,7215,889
602,123(440,203)
161,920

358,505
1,516,796
4,264,087
44,456
6,183,844(4,388,689)
1,795,155

64,97355,655630,806

19,58728,785866
10,348
124,559

18,98522,823
907
8,785
107,155

190,165
279,466
8,408
100,466
1,209,311¥ 557,522¥ 511,159$ 5,412,835

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3, 7, and 15)
Investments in non-consolidated subsidiaries andassociated companies (Notes 7 and 15)
Asset for retirement benefits (Note 8)
Deferred tax assets (Note 11)
Other investments and assets
Total investments and other assets
TOTAL

20

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term bank loans (Notes 6 and 15)
Current portion of long-term debt (Notes 6, 7, and 15)
Payables:Trade notes and accounts (Notes 7 and 15)
Acquisitions of property, plant, and equipment
Total payables
Income taxes payable (Note 15)
Accrued expenses
Other current liabilities (Note 7)
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Notes 6 and 15)
Liability for employees’ retirement benefits (Note 8)
Retirement allowance for directors and Audit & Supervisory Board members
Asset retirement obligations (Note 9)
Deferred tax liabilities (Note 11)
Other long-term liabilities
Total long-term liabilities

2014

2013

2014

¥ 23,104
18,991¥ 16,530
35,858$  224,311
184,379

76,895
15,99092,885
3,507
10,533
7,440
156,460

66,233
6,029
72,262
1,761
10,1577,434
144,002746,553
155,243
901,796
34,049102,262
72,233
1,519,030

100,991
7,313
934
426
20,065
3,709
133,438

93,850
6,865
942
426
14,666
4,668
121,417980,495
71,0009,068
4,136
194,806
36,0101,295,515

37,17228,542
146,079

37,17228,542
134,790360,893
277,107
1,418,243

(370)

(347)

(3,592)

16,642
1
1,654
1,229
1,203
232,152
35,472
267,624

10,512
1
1,654
(403)
–
211,92133,819245,740

161,573916,058
11,932
11,6792,253,902
344,388
2,598,290¥557,522¥511,159$5,412,835

Financial section

Thousands of
U.S. Dollars(Note 1)COMMITMENTS AND CONTINGENT LIABILITIES (Note 17)
EQUITY (Note 10):
Common stock:
Authorized: 1,160,000 thousand shares
Issued: 434,488 thousand shares in 2014 and 2013
Capital surplus
Retained earnings
Treasury stock, at cost
784 thousand shares in 2014 and 741 thousand shares in 2013
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Land revaluation surplus
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Minority interests
Total equity
TOTAL
See notes to consolidated financial statements.

21

CONSOLIDATED STATEMENT OF INCOMEDAIDO STEEL CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2014

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2014

2013

2014

¥457,731
390,387
67,344¥440,428
377,793
62,635$4,443,990
3,790,165
653,825

48,367

47,209469,582

18,977

15,426

184,243

1,867(1,839)630

1,694(2,056)547

18,126(17,854)
6,117

133
968
(48)
547

249
967
581
547

1,291
9,398
(466)
5,310

(81)
(108)
(81)
1,988

(403)
(56)
990
3,060

(786)
(1,049)(786)
19,301

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

20,96518,486

203,544

INCOME TAXES (Note 11):
Current
Deferred
Total income taxes

5,123
1,308
6,431

3,711
2,140
5,851

49,738
12,69962,437NET INCOME BEFORE MINORITY INTERESTS

14,534

12,635

141,107

MINORITY INTERESTS IN NET INCOME

1,918

1,652

18,622¥ 12,616¥ 10,983$  122,485

NET SALESCOST OF SALES (Note 13)
Gross profit
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES(Note 13)
Operating income

Financial section

OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Equity in earnings of associated companies
Gain on sales of investment securities and investments
in an associated company—net
Foreign exchange gain
(Loss) gain on sales and disposals of property, plant, and equipment—net
Investment rents received
Write-down of investment securities and investments
in a non-consolidated subsidiary (Note 3)
Impairment loss on long-lived assets
Other—net
Other income—net

NET INCOMEYen

PER SHARE OF COMMON STOCK (Note 2(t)):
Basic net income
Cash dividends applicable to the year¥  29.09
5.00

U.S. Dollars¥  25.32
4.50

Thousands

WEIGHTED-AVERAGE NUMBER OF OUTSTANDINGSHARES OF COMMON STOCK
See notes to consolidated financial statements.

22433,726

433,763$     0.28
0.05

CONSOLIDATED Statement OF COMPREHENSIVE INCOMEDAIDO STEEL CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2014

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2014

2013

2014

¥14,534¥12,635$141,107

6,146
(1)
1,845
85
8,075

4,098
10
1,394
29
5,531

59,670(10)
17,913825
78,398COMPREHENSIVE INCOME¥22,609¥18,166$219,505

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Minority interests¥20,431
2,178¥16,317
1,849$198,359
21,146NET INCOME BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME (Note 18):
Unrealized gain on available-for-sale securities
Deferred loss (gain) on derivatives under hedge accounting
Foreign currency translation adjustments
Share of other comprehensive income in associates
Total other comprehensive income

Financial section

See notes to consolidated financial statements.

23

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYDAIDO STEEL CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2014

Thousands

Millions of Yen
Accumulated Other
Comprehensive Income

Financial section

BALANCE AT APRIL 1, 2012
Net income
Cash dividends, ¥4.5 per share
Purchase of treasury stock
Disposal of treasury stock
Net change in the year
BALANCE AT MARCH 31, 2013
Adjustment of retained earnings for
newly consolidated subsidiary
Net income
Cash dividends,¥5 per share
Purchase of treasury stock
Disposal of treasury stock
Net change in the year
BALANCE AT MARCH 31, 2014

Outstanding
Number of
Shares ofCommon Stock

CommonStockCapitalSurplusRetained
Earnings

433,774
–
–
(31)
4
–
433,747¥37,172–––––
37,172¥28,543–––(0)–28,543¥126,844
10,983(3,037)–––
134,790¥(335)
–
–
(14)
2
–
(347)

¥ 6,456
–
–
–
–
4,056
10,512

¥(7)
–
–
–
–
8
1

–
–
–
(46)
3
–
433,704

–
–
–
–
–
–
¥37,172

–
–
–
–
0
(1)
¥28,542408
12,616(1,735)–––¥146,079

–
–
–
(25)
2
–
¥(370)

–
–
–
–
–
6,130
¥16,642

–
–
–
–
–
0
¥1

Treasury
Stock

Unrealized
Gain onAvailable-for-Sale
Securities

Deferred Gainon Derivatives
under Hedge
Accounting

Millions of Yen
Accumulated Other
Comprehensive Income
Land
Revaluation
Surplus

BALANCE AT APRIL 1, 2012
Net income
Cash dividends, ¥4.5 per share
Purchase of treasury stock
Disposal of treasury stock
Net change in the year
BALANCE AT MARCH 31, 2013
Adjustment of retained earnings for
newly consolidated subsidiary
Net income
Cash dividends,¥5 per share
Purchase of treasury stock
Disposal of treasury stock
Net change in the year
BALANCE AT MARCH 31, 201424

¥1,654
–
–
–
–
1,654
–
–
–
–
–
¥1,654Foreign
Currency
Translation
Adjustments

DefinedRetirement
Benefit Plans

Total

Minority
Interests

Total
Equity¥(1,673)
–
–
–
–
1,270
(403)

¥    –––––––¥198,654
10,983(3,037)
(14)
2
5,334
211,922¥32,859––––960
33,819¥231,513
10,983(3,037)
(14)
2
6,294
245,741

–
–
–
–
–
1,632
¥ 1,229

–
–
–
–
–
1,203
¥1,203408
12,616(1,735)
(25)
2
8,964
¥232,152

–
–
–
–
–
1,653
¥35,472408
12,616(1,735)(25)
2
10,617¥267,624

Thousands of U.S. Dollars (Note 1)
Accumulated Other
Comprehensive Income

BALANCE AT MARCH 31, 2013
Adjustment of retained earnings for
newly consolidated subsidiary
Net income
Cash dividends, $0.05 per share
Purchase of treasury stock
Disposal of treasury stock
Net change in the year
BALANCE AT MARCH 31, 2014

Treasury
Stock

Unrealized
Gain onAvailable-for-Sale
Securities

Deferred Gainon Derivatives
under Hedge
Accounting

CommonStockCapitalSurplusRetained
Earnings$360,893$277,108$1,308,642$(3,369)$102,058

$9

–
–
–
–
–
–
$360,893

–
–
–
–
0
(1)
$277,107

3,961
122,485(16,845)–––$1,418,243

–
–
–
(242)
19
–
$(3,592)–––––
59,515$161,573

–
–
–
–
–
0
$9

Thousands of U.S. Dollars (Note 1)

BALANCE AT MARCH 31, 2013
Adjustment of retained earnings for
newly consolidated subsidiary
Net income
Cash dividends, $0.05 per share
Purchase of treasury stock
Disposal of treasury stock
Net change in the year
BALANCE AT MARCH 31, 2014

Land
Revaluation
Surplus

Foreign
Currency
Translation
Adjustments

DefinedRetirement
Benefit Plans$16,058$ (3,913)

–
–
–
–
–
–
$16,058–––––
15,845$11,932

Total

Minority
Interests

Total
Equity$     –

$2,057,486$328,339$2,385,825

–
–
–
–
–
11,679$11,679

3,961
122,485(16,845)(242)
1987,038$2,253,902

–
–
–
–
–
16,049$344,388

3,961
122,485(16,845)(242)
19103,087$2,598,290

Financial section

Accumulated Other
Comprehensive Income

See notes to consolidated financial statements.

25

CONSOLIDATED Statement OF CASH FLOWSDAIDO STEEL CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2014

Thousands of
U.S. Dollars(Note 1)Millions of Yen

Financial section

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes paid
Depreciation and amortization
Loss (gain) on sales and disposals of property, plant, equipment,
and other—net
Gain on sales of investment securities and investments
in an associated company
Equity in earnings of associated companies
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable
Decrease in allowance for doubtful accounts
Increase in inventories
Increase (decrease) in notes and accounts payable
Increase in asset for retirement benefits
Decrease in liability for employees’ retirement benefits
Other—net
Total adjustments
Net cash provided by operating activities

2013

2014

¥ 20,965¥ 18,486$ 203,544(3,198)20,052(3,580)19,230(31,049)
194,680

139

(364)

1,350

(133)
(630)

(249)
(547)

(1,291)(6,117)(11,882)(69)(2,338)
9,955(3,973)
145
(466)
7,602
28,567

17,821(266)(659)(8,949)–15(7,331)
15,12133,607(115,359)(670)(22,699)
96,650(38,573)
1,408(4,524)73,806277,350(345)
24(31,748)
1,533

(541)
394
(24,201)
2,748(3,349)233(308,233)
14,883INVESTING ACTIVITIES:Payment for time deposits
Repayment from time deposits
Purchases of property, plant, and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities and investments ina non-consolidated subsidiary and associated companies
Proceeds from sales of investment securities andinvestments in an associated company
Disbursements for originating loans
Proceeds from collection of loans
Other—net
Net cash used in investing activities(1,626)(3,968)(15,786)

220
(178)
270
(2,463)(34,313)369(1,507)763(2,528)(28,471)

2,136(1,728)2,621(23,913)(333,136)

FINANCING ACTIVITIES:Net increase (decrease) in short-term bank loans
Proceeds from long-term borrowings
Repayments of long-term debt
Dividends paid, including payments to minority shareholders of subsidiaries
Other—net
Net cash used in financing activities

5,451
25,941(35,614)(2,265)(1,147)(7,634)(10,598)
22,648(25,759)(3,941)
293(17,357)

52,922
251,854(345,767)(21,990)(11,135)(74,116)610(12,770)

1,142(11,079)

5,922(123,980)

1,032

–

–

–
51,643¥ 39,905

766
61,956¥ 51,643

10,020501,388$ 387,428

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATEDSUBSIDIARY, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS INCREASEDBY MERGER OF SUBSIDIARIESCASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
See notes to consolidated financial statements.

26

2014

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DAIDO STEEL CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2014

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese­Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting principles generally
accepted in Japan (Japanese GAAP), which are different in certain respects as to the application and disclosure requirements of­International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition,certain reclassifications have been made in the 2013 consolidated financial statements to conform to the classifications used in 2014.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which DAIDO STEEL CO., LTD. (theCompany) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for theconvenience of readers outside Japan and have been made at the rate of ¥103 to $1, the approximate rate of exchange at March 31, 2014.
Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or
any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Consolidation
The Company had 57 (57 in 2013) majority-owned subsidiaries and 21 (23 in 2013) associated companies at March 31, 2014. The­consolidated financial statements as of March 31, 2014, include the accounts of the Company and 33 (32 in 2013) significant subsidiaries(together, the “Group”).
Financial section

Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise control over
operations are fully consolidated and those companies over which the Group has ability to exercise significant influence are accounted for by
the equity method.
Investments in six associated companies are accounted for by the equity method for the years ended March 31, 2014 and 2013.
­Investments in other non-consolidated subsidiaries and associated companies are stated at cost. If the equity method of accounting had
been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not havebeen material.
The fiscal years of the subsidiaries are not necessarily the same as those of the Company. Accounts of those subsidiaries, which havedifferent fiscal years, have been adjusted for significant transactions to properly reflect their financial position at March 31 of each year andthe results of operations for the year then ended.
The difference between the cost of acquisition and the fair value of the net assets of the acquired subsidiary at the date of acquisition is
being amortized on a straight-line basis over five years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in
assets resulting from transactions within the Group is also eliminated.

(b) Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements
In May 2006, the Accounting Standards Board of Japan (ASBJ) issued ASBJ Practical Issues Task Force (PITF) No. 18, “Practical Solution
on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements.” PITF No. 18 prescribes thatthe accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar
circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements
prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or the accounting principles generally
accepted in the U.S. tentatively may be used for the consolidation process, except for the following items which should be adjusted in the
consolidation process so that net income is accounted for in accordance with Japanese GAAP unless they are not material: a) amortizationof goodwill; b) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; c) expensing­capitalized development costs of R&D; d) cancellation of fair value model accounting for property, plant, and equipment and investment
properties and incorporation of cost model accounting; and e) exclusion of minority interests from net income, if contained in net income.

27

(c) Cash and Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes invalue. Cash equivalents include time deposits and short-term investments which mature or become due within three months of the dateof acquisition.

(d) Investment Securities
Investment securities are classified and accounted for, depending on management’s intent, as follows:
Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported as a separate
component of equity.
A limited partnership investment is accounted for by the equity method.
Non-marketable securities are stated at cost, determined by the moving-average method. For other-than-temporary declines in fairvalue, investment securities are reduced to net realizable value by a charge to income.

(e) Inventories
Inventories are stated at the lower of cost, mainly determined by the average method, or net selling value. Write-down (reversal of writedown) of inventories in the amounts of ¥154 million ($1,495 thousand) and ¥(9) million for the years ended March 31, 2014 and 2013,
respectively, were included in cost of sales.

(f) Allowance for Doubtful Accounts
Financial section

To provide for the loss from doubtful accounts, allowance for doubtful accounts is made using the historical rate of actual losses for normal
receivables and the estimated irrecoverable amount for specific doubtful receivables after considering the recoverability of each account.

(g) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost, less gains on grant receipts, etc. Under certain conditions, such as government grant
receipt, exchanges of fixed assets of similar kinds, and sales and purchases resulting from expropriation, Japanese tax laws permit companies to defer the profit arising from such transactions by reducing the cost of the assets acquired or by providing a special reserve in theequity section. The acquisition costs of property, plant and equipment were reduced in the amounts of ¥1,548 million ($15,029 thousand)and ¥1,638 million at March 31, 2014 and 2013, respectively.
Depreciation of certain plants of the Company and certain domestic and foreign subsidiaries is computed by the straight-line method.
Depreciation of other plants of the Company and other subsidiaries is computed by the declining-balance method, while the straight-line
method is applied to buildings acquired after April 1, 1998, for domestic companies.
Depreciation of leased assets is computed by the straight-line method over the lease period.
The range of useful lives is from five to 75 years for buildings and structures and from four to 17 years for machinery and equipment.

(h) Land Revaluation
Under the “Law of Land Revaluation,” Nippon Drop Forge Co., Ltd., a consolidated subsidiary, elected a one-time revaluation of its own-use
land to a value based on real estate appraisal information at March 31, 1999. The resulting land revaluation surplus represented unrealized
appreciation of land and was stated, net of income taxes, as a component of equity. There was no effect on the consolidated statement ofincome. Continuous readjustment is not permitted, unless the land value subsequently declines significantly such that the amount of thedecline in value should be removed from the land revaluation surplus account and related deferred tax liabilities. At March 31, 2014, the carrying amount of the land after the above one-time revaluation and impairment exceeded the market value by ¥927 million ($9,000 thousand).

(i) Long-Lived Assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of anasset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or
asset group. The impairment loss would be measured at the amount by which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling
price at disposition.

28

(j) Other Assets
Intangible assets are amortized by the straight-line method. Software costs are amortized over five years.

(k) Retirement and Pension Plans
The Company and its domestic consolidated subsidiaries have defined retirement benefit plans and unfunded pension plans. Certain consolidated subsidiaries have defined contribution pension plans, multiemployer contributory funded pension plans and smaller enterpriseretirement allowance mutual aid plans. The liability for employees’ retirement benefits is accounted for based on projected benefit obligations
and plan assets at the balance sheet date. The projected benefit obligations are attributed to periods on a straight-line basis. Actuarial gains
and losses are amortized on a straight-line basis over 10 years. Past service costs are amortized on a straight-line basis over 10 years.
Certain small consolidated subsidiaries apply the simplified method to state the liability based on the amount which would be paid if­employees retired at the consolidated balance sheet date.
In May 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25,“Guidance on Accounting Standard for Retirement Benefits,” which replaced the accounting standard for retirement benefits that had been
issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the other related practical guidance, andwere followed by partial amendments from time to time through 2009.
(a) Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss
are recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and any resulting deficit or surplus
is recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).
(b) The revised accounting standard does not change how to recognize actuarial gains and losses and past service costs in profit or loss.
Financial section

Those amounts are recognized in profit or loss over a certain period no longer than the expected average remaining working lives of theemployees. However, actuarial gains and losses and past service costs that arose in the current period and have not yet been recognizedin profit or loss are included in other comprehensive income and actuarial gains and losses and past service costs that were recognizedin other comprehensive income in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments.
This accounting standard and the guidance above are effective for the end of annual periods beginning on or after April 1, 2013.
­However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required.
The Group applied the revised accounting standard and guidance for retirement benefits above, effective March 31, 2014. As a result,asset for retirement benefits of ¥28,785 million ($279,466 thousand) and liability for retirement benefits of ¥7,313 million ($71,000 thousand)were recorded as of March 31, 2014, and accumulated other comprehensive income for the year ended March 31, 2014, increased by¥1,203 million ($11,680 thousand).
Retirement benefits to directors and Audit & Supervisory Board members of certain subsidiaries are provided at the amount that would
be required if all directors and Audit & Supervisory Board members retired at the consolidated balance sheet date.

(l) Asset Retirement Obligations
In March 2008, the ASBJ published ASBJ Statement No. 18, “Accounting Standard for Asset Retirement Obligations,” and ASBJ Guidance
No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development, and thenormal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligationis recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the
obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the
period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation
can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing thecarrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense
through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to thecarrying amount of the liability and the capitalized amount of the related asset retirement cost.

29

(m) Research and Development Cost
R&D costs are charged to income as incurred.

(n) Bonuses to Directors and Audit & Supervisory Board Members
Bonuses to directors and Audit & Supervisory Board members are accrued at the year-end to which such bonuses are attributable.

(o) Construction Contracts
In December 2007, the ASBJ issued ASBJ Statement No. 15, “Accounting Standard for Construction Contracts,” and ASBJ Guidance No.
18, “Guidance on Accounting Standard for Construction Contracts.” Under this accounting standard, construction revenue and construction
costs should be recognized by the percentage-of-completion method if the outcome of a construction contract can be estimated reliably.
When total construction revenue, total construction costs, and the stage of completion of the contract at the balance sheet date can bereliably measured, the outcome of a construction contract can be estimated reliably. If the outcome of a construction contract cannot be
reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs will exceed total
construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts.

(p) Income Taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset andliability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax
Financial section

laws to the temporary differences.

(q) Foreign Currency Transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at theexchange rates at the consolidated balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts.

(r) Foreign Currency Financial Statements
The consolidated balance sheet accounts, and revenue and expense accounts of the consolidated foreign subsidiaries are translated into
Japanese yen at the current exchange rate as of the consolidated balance sheet date except for equity, which is translated at the historicalrate. Differences arising from such translation are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate component of equity.

(s) Derivatives and Hedging Activities
The Group uses derivative financial instruments to manage its exposure to fluctuations in foreign exchange and interest rates. Foreignexchange forward contracts and interest rate swaps are utilized by the Group to reduce foreign currency exchange and interest rate risks.
The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: a) all derivatives are recognized as either assets or liabilities and measured at fair value, and, except for those derivatives which qualify for hedge accounting, gains orlosses are recognized in the consolidated statement of income, and b) for derivatives used for hedging purposes, if such derivatives qualify
for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses
are deferred until maturity of the hedged transactions.
Foreign exchange forward contracts are measured at fair value, and the unrealized gains (losses) are recognized in the consolidated
statement of income. Forward contracts used to hedge forecasted (or committed) transactions are also measured at fair value, but theunrealized gains (losses) are deferred until the underlying transactions are completed.
Long-term debt denominated in foreign currencies for which currency swaps are used to hedge the foreign currency fluctuations istranslated at the contracted rate if the forward contracts qualify for hedge accounting.
Interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but thedifferential paid or received under the swap agreements is recognized and included in interest expense.

30

(t) Per Share Information
Net income per share is computed by dividing net income available to common shareholders by the weighted-average number of commonshares outstanding for the period.
Diluted net income per share is not disclosed because the Group had no dilutive shares at March 31, 2014 and 2013.
Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective
years including dividends to be paid after the end of year.

(u) Accounting Changes and Error Corrections
In December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections” andASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under
this standard and the guidance are as follows: (1) Changes in Accounting Policies—When a new accounting policy is applied with a revisionof accounting standards, the new policy is applied retrospectively, unless the revised accounting standards include specific transitional
provisions. When the revised accounting standards include specific transitional provisions, an entity shall comply with the specific transitional
provisions. (2) Changes in Presentation—When the presentation of financial statements is changed, prior-period financial statements arereclassified in accordance with the new presentation. (3) Changes in Accounting Estimates—A change in an accounting estimate isaccounted for in the period of the change if the change affects that period only and is accounted for prospectively if the change affects boththe period of the change and future periods. (4) Corrections of Prior-Period Errors—When an error in prior-period financial statements is
discovered, those statements are restated.

Financial section(v) New Accounting Pronouncement
Accounting Standard for Retirement Benefits—On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for
Retirement Benefits,” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the
Accounting Standard for Retirement Benefits that had been issued by the Business Accounting Council in 1998 with effective date of April 1,
2000, and the other related practical guidances, being followed by partial amendments from time to time through 2009.
The major change is as follows:
Amendments relating to the method of attributing expected benefit to periods and relating to the discount rate and expected futuresalary increases
The revised accounting standard also made certain amendments relating to the method of attributing expected benefit to periods and relating to the discount rate and expected future salary increases.
This accounting standard and the guidance above are effective for the beginning of annual periods beginning on or after April 1, 2014,
or for the beginning of annual periods beginning on or after April 1, 2015, subject to certain disclosure in March 2015, with earlier application
being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of thisaccounting standard to consolidated financial statements in prior periods is required.
The Group applied the revised accounting standard above from the beginning of the annual period beginning on April 1, 2014. The
effect of applying the revised accounting standard will be to decrease retained earnings as of April 1, 2014, by approximately ¥2,448 million($23,767 thousand). The effect on the consolidated statement of income will be immaterial for the year ending March 31, 2015.

31

3. INVESTMENT SECURITIESInvestment securities at March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Non-current:
Equity securities
Total

2014

2013

2014

¥64,973¥64,973¥55,655¥55,655$630,806$630,806

The costs and aggregate fair values of investment securities at March 31, 2014 and 2013, were as follows:
Millions of Yen
March 31, 2014

Available-for-sale:
Equity securities

Cost

Unrealized
Gains

Unrealized
LossesFair Value¥35,068¥25,199¥271¥59,996

Cost

Unrealized
Gains

Unrealized
LossesFair Value¥35,111¥16,949¥1,463¥50,597

Cost

Unrealized
Gains

Unrealized
LossesFair Value$340,466$244,650$2,631$582,485

Millions of Yen
March 31, 2013

Financial section

Available-for-sale:
Equity securities

Thousands of U.S. Dollars
March 31, 2014

Available-for-sale:
Equity securities

Information for available-for-sale securities that were sold during the years ended March 31, 2014 and 2013, was as follows:
Millions of Yen
March 31, 2014

Available-for-sale:
Equity securities

Proceeds¥215

Realized
Gains

¥138

Thousands of U.S. Dollars
Realized
Losses¥6

Proceeds$2,087

Realized
Gains$1,340Realized
Losses$58

Millions of Yen
March 31, 2013

Available-for-sale:
Equity securities

Proceeds¥369

Realized
Gains

¥249

Realized
Losses¥0

Impairment losses on equity securities for the years ended March 31, 2014 and 2013, were ¥81 million ($786 thousand) and ¥403
million, respectively.

32

4. INVENTORIESInventories held by the Group at March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Merchandise
Finished products
Semifinished products
Work in process
Raw materials
Supplies
Total

2014

2013

2014

¥17,048
12,011
20,212
22,18017,5708,726¥97,747¥16,410
12,98021,631
19,461
14,995
8,559¥94,036$165,515
116,612196,233
215,340
170,583
84,717$949,000

5. INVESTMENT PROPERTYIn November 2008, the ASBJ issued ASBJ Statement No. 20, “Accounting Standard for Investment Property and Related Disclosures,” andissued ASBJ Guidance No. 23, “Guidance on Accounting Standard for Investment Property and Related Disclosures.”
The Company holds some rental properties, such as office buildings and land in Aichi Prefecture and other areas. The net amount ofrental income and operating expenses for those rental properties was ¥861 million ($8,359 thousand) and ¥938 million for the years ended
March 31, 2014 and 2013, respectively.
Financial section

In addition, the net gain on sales of those rental properties was ¥786 million ($7,631 thousand) and ¥415 million for the years ended
March 31, 2014 and 2013, respectively.
The carrying amounts, changes in such balances and market prices of such properties at March 31, 2014 and 2013, were as follows:
Millions of Yen

Thousands of U.S. Dollars

Carrying Amount
April 1, 2013

¥5,633

Increase

Fair Value
March 31, 2014

¥277

¥5,910Carrying AmountMarch 31, 2014

April 1, 2013¥25,502$54,690

Increase$2,689Fair Value
March 31, 2014

March 31, 2014

$57,379$247,592

Millions of Yen
Carrying Amount
April 1, 2012

Decrease¥5,095¥538

Fair Value
March 31, 2013

¥5,633

March 31, 2013

¥25,179

Notes:
1) The carrying amount recognized in the consolidated balance sheet was net of accumulated depreciation and accumulated impairment losses, if any.
2) The increase during the fiscal year ended March 31, 2014, primarily represents the acquisition of certain properties of ¥365 million ($3,544 thousand) and thereclassification of certain lands to rental properties of ¥441 million ($4,282 thousand). The increase during the fiscal year ended March 31, 2013, primarily
represents the acquisition of certain properties of ¥865 million and the reclassification of certain lands to rental properties of ¥342 million. The decrease during
the fiscal year ended March 31, 2014, was primarily due to sales of assets of ¥339 million ($3,291 thousand) and depreciation of ¥168 million ($1,631 thousand). The decrease during the fiscal year ended March 31, 2013, was primarily due to sales of idle assets of ¥452 million and depreciation of ¥152 million.
3) The fair value of properties was primarily measured by the Group in accordance with its Real-Estate Appraisal Standard.

33

6. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans consisted of notes to banks and bank overdrafts. The weighted-average rates of annual interest applicable to shortterm bank loans at March 31, 2014 and 2013, were 0.83% and 0.92%, respectively.
Long-term debt at March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2014

2013

2014

¥ 89,466–
20,00010,000¥ 88,907
10,00020,00010,000$  868,602–
194,175
97,087–516
119,982(18,991)¥100,991

100
701
129,708(35,858)¥ 93,850–
5,010
1,164,874(184,379)$  980,495

Year Ending March 31

Millions of Yen

Thousands of
U.S. Dollars

2015
2016
2017
2018
2019
2020 and thereafter
Total¥ 18,991
25,047
24,67614,157
24,963
12,148¥119,982$  184,379
243,175
239,573
137,447
242,359
117,941$1,164,874

Loans from banks and other financial institutions due serially to 2020 withweighted-average interest rates of 0.83% in 2014 and 1.02% in 2013
1.90% unsecured bonds due June 20, 2013
1.08% unsecured bonds due December 18, 2015
0.68% unsecured bonds due December 1, 2016
Unsecured bonds issued by a consolidated subsidiary due seriallyfrom February 28, 2013, to March 31, 2014
Obligations under finance leases
Total
Less: Portion due within one year
Total long-term debt

Financial section

Annual maturities of long-term debt at March 31, 2014, were as follows:

The Company and a consolidated subsidiary entered into line-of-credit agreements with 10 banks. The details of the agreements wereas follows:

Line-of-credit amount
Balance used at March 31, 2014

Millions of Yen

Thousands of
U.S. Dollars¥25,000–$242,718–

7. PLEDGED ASSETS
The carrying amounts of assets pledged as collateral for notes and accounts payable of ¥4 million ($39 thousand), current portion of longterm debt of ¥7 million ($68 thousand), and other current liabilities of ¥9 million ($87 thousand) at March 31, 2014, were as follows:

Time deposits
Land
Buildings and structures
Machinery and equipment
Investment securities
Total

34

Millions of Yen

Thousands of
U.S. Dollars¥   14
2,179
1,862
1,836
51
¥5,942$   136
21,155
18,07817,825495$57,689

8. RETIREMENT AND PENSION PLANS
The Company and its consolidated subsidiaries have defined retirement benefit plans and unfunded pension plans. Certain consolidated
subsidiaries have defined contribution pension plans, multiemployer contributory funded pension plans, and smaller enterprise retirement
allowance mutual aid plans.
The Group has employee retirement benefit trusts.
Furthermore, additional severance payments which are not included in liability for retirement benefit are paid in certain cases.
Certain small consolidated subsidiaries apply the simplified method to state the liability based on the amount which would be paid if
employees retired at the consolidated balance sheet date.
Some subsidiaries participate in multiemployer contributory funded plans, and the plans are accounted for as if the plans were defined
contribution plans in the case that the plan assets attributable to the contributions by the subsidiaries cannot be rationally determined.
Year Ended March 31, 2014
1. The changes in defined benefit obligation for the year ended March 31, 2014, were as follows:

2014

Balance at beginning of year
Current service cost
Interest cost
Actuarial gains and losses
Benefits paid
Past service cost
OthersBalance at end of year

Thousands of
U.S. Dollars
2014¥48,851
1,488
923
273
(3,869)50
23¥47,739$474,282
14,447
8,961
2,650(37,563)485
223$463,485

Millions of Yen

Thousands of
U.S. Dollars

Financial section

Millions of Yen

2. The changes in plan assets for the year ended March 31, 2014, were as follows:

2014

Balance at beginning of year
Expected return on plan assets
Actuarial gains and losses
Contributions from the employer
Benefits paid
OthersBalance at end of year

¥68,534
1,170
2,170
2,537
(2,974)13¥71,450

2014$665,379
11,35921,06824,631(28,874)126$693,689

3. The changes in liability for retirement benefits which applied the simplified method to record the liability for the year ended March
31, 2014, were as follows:

Millions of Yen

Balance at beginning of year
Pension costs
Benefits paid
Contributions to pension funds
OthersBalance at end of year

Thousands of
U.S. Dollars

2014

2014

¥2,243
635
(308)
(340)
9
¥2,239$21,777
6,165(2,990)(3,301)
87$21,73835

4. Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation andplan assets:

Millions of Yen

Funded defined benefit obligation
Plan assets
Unfunded defined benefit obligation
Net asset arising from defined benefit obligation

Thousands of
U.S. Dollars

2014

2014

¥ 48,219(73,946)(25,727)
4,255¥(21,472)$ 468,146(717,922)(249,776)
41,340$(208,466)

Millions of Yen

Thousands of
U.S. Dollars

5. The components of net periodic benefit costs for the year ended March 31, 2014, were as follows:

Financial section

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial gains and losses
Retirement benefits for which simplified method was applied
Additional severance payments
Net periodic benefit costs

2014

2014

¥ 1,488923(1,170)(157)(1,468)635
740¥   991$ 14,446
8,961(11,359)(1,524)(14,252)
6,165
7,184
$   9,621

6. Accumulated other comprehensive income on defined retirement benefit plans as of March 31, 2014, were as follows:

Millions of Yen

Unrecognized prior service cost
Unrecognized actuarial gains and losses
Total

Thousands of
U.S. Dollars

2014

2014

¥  6101,090¥1,700$ 5,922
10,583$16,505

7. Plan assets:(1) Components of plan assets
Plan assets consisted of the following:
2014

Debt investments
Equity investments
Assets in an insurer’s general account
Others
Total

15%
64
19
2
100%

(2) Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the
future from the various components of the plan assets.
8. Assumptions used for the year ended March 31, 2014, were set forth as follows:
2014

Discount rate
Expected rate of return on plan assets

36

1.9%
2.0

The amount of contributions paid by consolidated subsidiaries to multiemployer contributory funded pension plans, which was accounted
for as if it were defined contribution plans for the year ended March 31, 2014, was ¥326 million ($3,165 thousand).
The funded status of the multiemployer plan at March 31, 2014, to which contributions paid by certain domestic subsidiaries wererecorded as net periodic retirement benefit costs, was as follows:

Millions of Yen

Fair value of plan assets
Pension obligation recorded by pension fundDifference
The Group’s contribution percentage for contributory funded pension plans

Thousands of
U.S. Dollars

2014

2014

¥241,559
267,884¥ (26,325)
2.53%$2,345,233
2,600,816$ (255,583)

Year Ended March 31, 2013
The liability for employees’ retirement benefits at March 31, 2013, consisted of the following:
Millions of Yen
2013¥ 53,470(70,910)816
666
22,823¥   6,865

Financial section

Projected benefit obligation
Fair value of plan assets
Unrecognized prior service benefit
Unrecognized actuarial loss
Prepaid pension cost
Liability for retirement benefit

Certain domestic subsidiaries contribute to a multiemployer plan for which pension assets or obligations are not recorded as the Group’s
pension assets or obligations.
The funded status of the multiemployer plan at March 31, 2013, to which contributions paid by certain domestic subsidiaries wererecorded as net periodic retirement benefit costs, was as follows:
Millions of Yen
2013

Fair value of plan assets
Pension obligation recorded by pension fundDifference
The Group’s contribution percentage for contributory funded pension plans¥203,240
239,951¥ (36,711)
2.25%

The components of net periodic employees’ retirement benefit costs for the year ended March 31, 2013, were as follows:
Millions of Yen
2013

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial loss
Amortization of prior service benefit
Contribution to defined contribution plans
Contribution to multiemployer contributory funded pension plans
Additional severance payments
Net periodic employees’ retirement benefit cost

¥ 2,153956(1,090)
(341)
(162)
87
136
756
¥ 2,495

37

Assumptions used for the year ended March 31, 2013, were set forth as follows:
2013

Discount rate
Expected rate of return on plan assets
Recognition period of actuarial gain (loss)
Recognition period of prior service benefit

Primarily 1.9%
Mainly 2.0%
Mainly 10 years
Mainly 10 years

9. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2014

Balance at beginning of year
Reconciliation associated with passage of time
Balance at end of year

¥426
–
¥426

2013

¥426
–
¥426

2014

$4,136–$4,136

10. EQUITY
Japanese companies are subject to the Companies Act of Japan (the Companies Act). The significant provisions in the Companies Act that
Financial section

affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria, such as (1) having a Board of Directors, (2) having independent
auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of the directors is prescribed as one year rather than two years
of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during
the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company cannot do so because it does notmeet all the above criteria. The Companies Act permits companies to distribute dividends in kind (non-cash assets) to shareholders subject
to certain limitations and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of
the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury
stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must
be maintained at no less than ¥3 million.

(b) Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained
earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment ofsuch dividends until the total of the aggregate amount of the legal reserve and additional paid-in capital equals 25% of common stock.
Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies
Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus, and retained earnings can be transferredamong the accounts under certain conditions upon resolution of the shareholders.

(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Boardof Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which isdetermined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The
Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

38

11. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes that, in the aggregate, resulted in anormal effective statutory tax rate of approximately 38% for the years ended March 31, 2014, and 2013.
The tax effects of significant temporary differences and loss carryforwards, which resulted in deferred tax assets and liabilities at March
31, 2014 and 2013, were as follows:

Deferred tax assets:
Accrued bonuses
Liability for retirement benefits
Allowance for doubtful accounts
Write-down of securities and other assets
Elimination of unrealized gain on property, plant, and equipment
Net loss carryforwards
Elimination of unrealized gain on inventories
Enterprise tax
OtherLess valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Deferred gain on property, plant, and equipment
Land revaluation surplus
Unrealized gain on securities
Asset for retirement benefits
Unrealized gain on lands resulting from consolidation of a subsidiary
Other
Total deferred tax liabilities
Net deferred tax liabilities

2014

2013

2014

¥   2,120
2,539
94
657
655
1,312
937
365
2,940
(3,781)¥   7,838¥ 2,195
2,429
212
799
242
2,120
878
150
2,867
(4,202)¥ 7,690$   20,583
24,650
912
6,379
6,359
12,7389,097
3,544
28,544(36,709)$   76,097¥   2,193
1,397
8,709
8,144
1,223
846
¥ 22,512¥(14,674)¥ 2,324
1,397
5,487
6,171
1,185
568
¥17,132¥ (9,442)$   21,291
13,56384,55379,068
11,8748,214$ 218,563$(142,466)

Financial section

Thousands of
U.S. Dollars

Millions of Yen

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statement of income for the year ended March 31, 2014, with the corresponding figures for 2013 is as follows:

Normal effective statutory tax rates
Expenses not deductible for income tax purposes
Revenues not recognized for income tax purposes
Per capita tax
Net change in valuation allowance
Effects of elimination of dividends for consolidation purposes
Effect of accounting by the equity method
Lower income tax rates applicable to income in certain foreign countries
Tax credit
Effect of change in statutory tax rate
Other—net
Actual effective tax rates

2014

2013

38.0%
1.9
(4.4)
0.5
(1.7)
3.0
(1.1)
(0.9)
(3.5)
1.1
(2.2)
30.7%

38.0%
2.1
(5.3)
0.7
(5.4)
4.1
(1.1)
(1.1)
(0.6)
–
0.2
31.6%

New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after
April 1, 2014, from approximately 38% to 35%. The effect of this change was to decrease deferred tax assets in the consolidated balance
sheet as of March 31, 2014, by ¥234 million ($2,272 thousand) and to increase income taxes—deferred in the consolidated statement ofincome for the year then ended by ¥234 million ($2,272 thousand).

39

12. RESEARCH AND DEVELOPMENT COSTS
R&D costs charged to income were ¥5,160 million ($50,097 thousand) and ¥4,560 million for the years ended March 31, 2014 and2013, respectively.

13. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses for the years ended March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Freight expenses
Salaries and welfare expenses
Provision for bonuses to employees
Provision for bonuses to directors and Audit & Supervisory Board members
Net periodic retirement benefit costs
Depreciation
Other
Total

2014

2013

2014

¥12,922
20,966
2,133
257
813
1,216
10,060¥48,367¥12,328
20,633
2,015
216
1,314
1,160
9,543
¥47,209$125,456
203,553
20,7092,495
7,893
11,806
97,670$469,582

14. LEASES
Financial section(As lessor)
Expected revenues from operating leases at March 31, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Due within one year
Due after one year
Total

2014

2013

2014

¥  5194,013¥4,532¥  568
4,532¥5,100$ 5,039
38,961$44,000

15. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments, mainly short-term and long-term debt including bank loans and bonds, based on its capital financing
plan. Cash surpluses, if any, are invested in low-risk financial assets. Derivatives are used not for speculative purposes, but to manage exposure to financial risks as described in (2) below.

(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. Although receivables in foreign currencies are
exposed to the market risk of fluctuation in foreign currency exchange rates, those risks are netted against the balance of payables denominated in the same currency. In addition, foreign currency receivables of certain consolidated subsidiaries are hedged by using forward foreign
currency contracts. Investment securities, mainly equity instruments of customers and suppliers of the Group, are exposed to the risk ofmarket price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign currencies are
exposed to the risk of fluctuation in foreign currency exchange rates, those risks are netted against the balance of receivables denominatedin the same foreign currency as noted above. In addition, foreign currency trade payables in certain consolidated subsidiaries are exposed torisk resulting from fluctuations in foreign currency exchange rates. The risk is hedged by using forward foreign currency contracts.
Short-term bank loans and commercial paper are mainly used for general operating purposes, and long-term bank loans and bonds aremainly used for investment and strategy. Although a part of such bank loans and commercial paper, excluding bonds, is exposed to risk ofchanges in variable interest rates, that risk is mitigated by using interest rate swaps.
Derivatives mainly include forward foreign currency contracts, currency swaps, and interest rate swaps, which are used to manage
exposure to risks from changes in foreign currency exchange rates of receivables and payables and from changes in interest rates of bankloans. Please see Note 16 for more details about derivatives.

40

(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to the contractual terms. The
Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of payment terms and balancesof major customers by each business administration department to identify the default risk of customers at an early stage. Please see Note
16 for details about derivatives.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of March 31, 2014.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in foreign currency exchange rates.
Such foreign exchange risk is netted against the balance of receivables and payables. In addition, certain consolidated subsidiaries hedge
such risk principally by using forward foreign currency contracts.
Interest rate swaps and currency swaps are used to manage exposure to risks of changes in interest rates of loan payables.
Investment securities are managed by monitoring market values and the financial position of issuers on a regular basis.
Derivative transactions are undertaken by the finance and accounting department and the procurement center based on internal­regulations that prescribe the authority and maximum amount for each transaction.
Liquidity risk management

Financial section

The Group manages its liquidity risk by establishing a cash management plan according to reports from each department.

(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are not available, other rational valuation
techniques are used instead. Please see Note 16 for details of the fair value of derivatives.
(a) Fair value of financial instruments
Millions of Yen
Carrying
AmountCash and cash equivalents
Time deposits
Notes and accounts receivable
Investment securities
Investment in an associated company
Total
Short-term bank loans
Current portion of long-term debt
Payables: Trade notes and accounts
Income taxes payable
Long-term debt
Total

March 31, 2014

Thousands of U.S. Dollars

Fair Value

Unrealized
Gain/(Loss)

Carrying
AmountFair Value

Unrealized
Gain/(Loss)¥ 39,905
810
101,734
59,997
4,341¥206,787¥ 39,905
810
101,734
59,9972,890¥205,336––––¥(1,451)¥(1,451)$  387,427
7,864
987,709582,495
42,146$2,007,641$  387,427
7,864
987,709582,495
28,058$1,993,553––––$(14,088)$(14,088)¥ 23,104
18,991
76,895
3,507
100,991¥223,488¥ 23,104
18,991
76,895
3,507
101,320¥223,817––––¥  (329)¥  (329)$  224,311
184,379
746,553
34,049980,495$2,169,787$  224,311
184,379
746,553
34,049983,689$2,172,981––––$ (3,194)$ (3,194)

41

Millions of Yen
Carrying
AmountFair Value

Unrealized
Gain/(Loss)

Cash and cash equivalents
Time deposits
Notes and accounts receivable
Investment securities
Investment in an associated company
Total¥ 51,643
418
88,65250,597
4,143¥195,453¥ 51,643
418
88,65250,597
2,677¥193,987––––¥(1,466)¥(1,466)

Short-term bank loans
Current portion of long-term debt
Payables: Trade notes and accounts
Income taxes payable
Long-term debt
Total

¥ 16,530
35,85866,233
1,761
93,850¥214,232¥ 16,530
35,85866,233
1,761
94,566¥214,948––––¥  (716)¥  (716)

March 31, 2013

Cash and Cash Equivalents, Time Deposits, Notes and Accounts Receivable, Payables-Trade Notes and Accounts, Income Taxes Payable,
Short-Term Bank Loans, and Current Portion of Long-Term Debt with Variable Interest Rates
The carrying values of cash and cash equivalents, time deposits, notes and accounts receivables, payables-trade notes and accounts,
income taxes payable, short-term bank loans, and current portion of long-term debt with variable interest rates approximate fair value
Financial section

because of their short maturities. The fair values of notes and accounts receivables, and payables-trade notes and accounts include the fairvalues of foreign currency forward contracts and interest rate swaps.
Investment Securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for equity instruments and at thequoted price obtained from the financial institution for certain debt instruments. Fair value information for investment securities by classification is included in Note 3.
Long-Term Debt with Fixed Interest Rates
The fair values of long-term debt with fixed interest rates are determined by discounting the cash flows related to the debt at the risk-freerate plus credit spread or at the Group’s assumed corporate borrowing rate.
Derivatives
Fair value information for derivatives is included in Note 16.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

Securities that do not have a quoted market price in an active market
Investment securities
Investments in non-consolidated subsidiaries and associated companies

42

2014

2013

2014

¥ 4,976
15,273¥ 5,058
14,842$ 48,311
148,282

(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen
Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years through10 Years

Due after
10 Years¥ 39,905
810
101,734¥142,449

–
–
–
–

–
–
–
–

–
–
–
–

March 31, 2014

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years through10 Years

Due after
10 Years

Cash and cash equivalents
Time deposits
Notes and accounts receivable
Total$  387,427
7,864
987,709$1,383,000

–
–
–
–

–
–
–
–

–
–
–
–

March 31, 2014

Cash and cash equivalents
Time deposits
Notes and accounts receivable
Total

Thousands of U.S. Dollars

Please see Note 6 for annual maturities of long-term debt and the current portion of long-term debt.

Financial section

16. DERIVATIVESThe Group enters into foreign exchange forward contracts, interest rate swaps, and currency swaps. The Group does not hold or issue
derivatives for trading or speculative purposes. Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate hedging policy, authorization, credit limit, and reporting to management. Each derivative transaction is periodicallyreported to management, which evaluates and analyzes the derivatives.
Derivative transactions to which hedge accounting is not applied at March 31, 2014 and 2013, were as follows:
Millions of Yen

At March 31, 2014

Foreign currency forward contracts:
Buying:U.S. dollar
Euro
Yen
Thai Baht
H.K. dollar
Selling:
U.S. dollar
Euro
Thai Baht

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Unrealized
Gain/(Loss)¥  181
186
440
6
0

–
–
–
–
–

¥   1
2
(4)
0
0

¥   1
2
(4)
0
0

5,206
214
78

–
–
–

(21)
(2)
(1)

(21)
(2)
(1)

43

Millions of Yen

At March 31, 2013

Foreign currency forward contracts:
Buying:U.S. dollar
Euro
Yen
Selling:
U.S. dollar
EuroContract
AmountContract
AmountDue after
One Year

Fair
Value

Unrealized
Gain/(Loss)¥  308
235
421

–
–
–

¥ (1)
7
(30)

¥ (1)
7
(30)

3,210
107

–
–

4
1

4
1

Thousands of U.S. Dollars

At March 31, 2014

Financial section

Foreign currency forward contracts:
Buying:U.S. dollar
Euro
Yen
Thai Baht
H.K. dollar
Selling:
U.S. dollar
Euro
Thai Baht

44

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Unrealized
Gain/(Loss)$ 1,757
1,806
4,272
58
0

–
–
–
–
–

$   1019(39)
00$   1019(49)
0050,544
2,078
757

–
–
–

(204)
(19)
(10)

(204)
(19)
(10)

Derivative transactions to which hedge accounting is applied at March 31, 2014 and 2013, were as follows:
Millions of Yen

Foreign currency forward contracts:
Hedge accounting:
Buying:U.S. dollar
Euro
Pound Sterling
Selling
U.S. dollar
Qualified for hedge accounting not remeasured
at market value:
Buying:U.S. dollar
Pound Sterling
Singapore dollar
Yen
Selling
U.S. dollar
Currency swap:
Yen payment, U.S. dollar receipt
Interest rate swaps:
Floating rate payment, fixed rate receipt
Fixed rate payment, floating rate receipt

Hedged Item

Contract
AmountPayables—trade
Payables—trade
Payables—trade¥   522
40
13

–
–
–

¥9
1
1

Receivables—trade

729

–

(9)

Payables—trade
Payables—trade
Payables—trade
Payables—trade

314
16
7
31

–
–
–
–

Receivables—trade

82

–

2,000
37,200¥ 2,000
37,100

Short-term bank loans
and long-term debt

Fair
Value

See Noteon thefollowing
page

Financial section

At March 31, 2014

Contract
AmountDue after
One Year

Millions of Yen

At March 31, 2013

Foreign currency forward contracts:
Hedge accounting:
Buying:U.S. dollar
Pound Sterling
Selling:
U.S. dollar
Euro
Qualified for hedge accounting not remeasured
at market value:
Buying:U.S. dollar
Pound Sterling
Yen
Selling
U.S. dollar
Interest rate swaps:
Floating rate payment, fixed rate receipt
Fixed rate payment, floating rate receipt

Hedged Item

Contract
AmountContract
AmountDue after
One Year

Payables—trade
Payables—trade¥   137
34

–
–

¥6
3

Receivables—trade
Receivables—trade

78
10

–
–

(6)
0

Payables—trade
Payables—trade
Payables—trade

82
88
69

–
–
–

Receivables—trade

41

–

3,000
40,130¥ 2,000
26,500

Short-term bank loans
and long-term debt

Fair
Value

See Noteon thefollowingpage

45

Thousands of U.S. Dollars

At March 31, 2014

Financial section

Foreign currency forward contracts:
Hedge accounting:
Buying:U.S. dollar
Euro
Pound Sterling
Selling
U.S. dollar
Qualified for hedge accounting not remeasured
at market value:
Buying:U.S. dollar
Pound Sterling
Singapore dollar
Yen
Selling
U.S. dollar
Currency swap:
Yen payment, U.S. dollar receipt
Interest rate swaps:
Floating rate payment, fixed rate receipt
Fixed rate payment, floating rate receipt

Hedged Item

Contract
AmountContract
AmountDue after
One Year

Payables—trade
Payables—trade
Payables—trade$  5,068
388
126

–
–
–

$ 87
10
10

Receivables—trade

7,078

–

(87)

Payables—trade
Payables—trade
Payables—trade
Payables—trade

3,049
155
68
301

–
–
–
–

Receivables—trade796–

19,417361,165$ 19,417
360,194

Short-term bank loans
and long-term debt

Fair
Value

See Note
below

Note: F air values of derivatives qualified for hedge accounting, which are not remeasured at market value, are included in the fair values of hedged items in Note 15.

17. COMMITMENTS AND CONTINGENT LIABILITIESAt March 31, 2014, the Group had contingent liabilities for notes with recourse in the course of asset liquidation in the amount of ¥841
million ($8,165 thousand).
At March 31, 2014, the Group was contingently liable for ¥4,965 million ($48,204 thousand) for guarantees of loans and payables of
non-consolidated subsidiaries, associated and other companies and employees, including borrowings of ¥3,600 million ($34,951 thousand)by Yugen Kaisha Takakura Founding Corporation (Takakura).
The Company had an obligation to invest additionally in Takakura via an anonymous association contract with an upper limit of ¥524
million ($5,087 thousand) in the event that buildings owned by Takakura are destroyed or impaired by natural disaster.
The Company transferred all stocks of one of its consolidated subsidiaries, Tokuhatsu Co., Ltd., held by the Company, to NHK SpringCo., Ltd., in January 2006. Under the agreement with NHK Spring, the Company would owe a defect liability against NHK Spring at a maximum amount of ¥3,200 million for 10 years starting on the date of transfer. The Company agreed to owe the defect liability, which includes
product liability and remedy cost for land pollution, subject to events occurring prior to the date of transfer. As a result of the due diligenceprocess between the Company and NHK Spring, management of the Company believes that the possibility of exposure to losses is remote.

46

18. COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2014 and 2013, were as follows:

Unrealized gain on available-for-sale securities:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred loss (gain) on derivatives under hedge accounting:Losses (gains) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year
Total
Share of other comprehensive income in associates:
Gains arising during the year
Total
Total other comprehensive income

2014

2013

2014

¥ 9,588(133)
9,455(3,309)¥ 6,146¥ 5,937
154
6,091(1,993)¥ 4,098$ 93,087(1,291)
91,796(32,126)$ 59,670¥    (2)–(2)
1¥    (1)¥      8
816
(6)¥     10$    (19)–(19)
9$    (10)¥ 1,845¥ 1,845¥ 1,394¥ 1,394$ 17,913$ 17,913¥     85¥     85¥     29¥     29$    825$    825¥ 8,075¥ 5,531$ 78,398

Financial section

Thousands of
U.S. Dollars

Millions of Yen

19. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2014, was approved at the Company’s shareholders’ meeting held on June27, 2014:

Year-end cash dividends, ¥2.5 ($0.02) per share

Millions of Yen

Thousands of
U.S. Dollars¥1,085$10,53447

20. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures,” and ASBJ Guidance No. 20, “Guidance on
Accounting Standard for Segment Information Disclosures,” an entity is required to report financial and descriptive information about its
reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria.
Operating segments are components of an entity about which separate financial information is available and such information is evaluatedregularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment
information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding
how to allocate resources to operating segments.

1. Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Company’s
management is being performed in order to decide how resources are allocated among the Group.
The Group has business divisions based on the nature of its products and services. Each division draws up strategies and operates its
own business.
The Group consists of five industries: Specialty Steel, High Performance Materials and Magnetic Materials, Parts for Automobile andIndustrial Equipment, Engineering, and Trading and Service. Specialty Steel industry consists of manufacturing of specialty steel for­automotive and industrial machinery parts.
High Performance Materials and Magnetic Materials industry consists of manufacturing of stainless steel, high alloy and magnetic­materials, titanium products and powder metals for automotive and industrial machinery, and electrical and electronic parts.
Financial section

Parts for Automobile and Industrial Equipment industry consists of manufacturing of die-forged parts, forging products, and other­products for automotive and industrial machinery parts.
Engineering industry consists of manufacturing and maintenance of steelmaking and environmental equipment, industrial furnaces, andassociated equipment.
Trading and Service industry consists of real estate-related services and welfare and other services.

2. Methods of Measurement for the Amounts of Sales, Profit, Assets, and Other Items for each
­Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “SUMMARY OF SIGNIFICANTACCOUNTING POLICIES.”
Reportable segment profit represents operating income.

48

3. Information about Sales, Profit, Assets, and Other Items is as Follows:
Millions of Yen
Reportable Segment

Specialty
Steel

High
Performance
Materials andMagnetic
Materials

Parts for
Automobile
and Industrial
Equipment

Engineering

Trading andService

Total

Sales to external customers¥184,100¥143,485¥ 97,002¥24,105¥ 9,039

Intersegment sales or transfers

66,65015,883

26,774

7,875

9,818

Total

¥250,750¥159,368¥123,776¥31,980

Segment profit¥  1,691¥ 11,104¥  3,779

Segment assets

202,070

170,016

2014

Reconciliations

Consolidated¥457,731–¥457,731

127,000¥(127,000)–¥18,857¥584,731¥(127,000)¥457,731¥ 1,126¥ 1,280¥ 18,980¥      (3)¥ 18,977

111,852

17,32918,365

519,632

37,890557,522

Sales

Other:
Depreciation and amortization

6,728

6,727

5,428

233

936

20,052–

20,052

Investments in associated companies
accounted for by the equity method

4,087

4,724

372

89

–

9,272

297

9,569

Increase in property, plant, andequipment and intangible assets

22,261

11,491

9,439

230

983

44,404–

44,404

Reconciliations

Consolidated¥440,428

Financial section

Millions of Yen
Reportable Segment

Specialty
Steel

High
Performance
Materials andMagnetic
Materials

Parts for
Automobile
and Industrial
Equipment

Engineering

Trading andService

Total

Sales to external customers¥169,379¥136,852¥ 93,293¥31,958¥ 8,946¥440,428–

Intersegment sales or transfers

63,323

15,90828,575

1,794

10,275

119,875¥(119,875)

–

Total

¥232,702¥152,760¥121,868¥33,752¥19,221¥560,303¥(119,875)¥440,428

Segment profit¥  3,515¥  6,648¥  3,394¥   763¥ 1,109¥ 15,429¥      (3)¥ 15,426

Segment assets

180,717

162,412

105,029

15,473

18,777482,408

28,751

511,159

2013

Sales

Other:
Depreciation and amortization

6,141

6,267

5,575

290

957

19,230–19,230Investments in associated companies
accounted for by the equity method

3,771

4,498

330

79

–

8,678

261

8,939

Increase in property, plant, andequipment and intangible assets

9,923

9,439

6,302

484

643

26,791–

26,79149

Thousands of U.S. Dollars
Reportable Segment

Specialty
Steel

High
Performance
Materials andMagnetic
Materials

Parts for
Automobile
and Industrial
Equipment

Engineering

Trading andService

Total

Sales to external customers$1,787,379$1,393,058$  941,767$234,029$ 87,757

Intersegment sales or transfers

647,087

154,204

259,942

76,456

95,321

Total$2,434,466$1,547,262$1,201,709$310,485

Segment profit$   16,417$  107,806$   36,689

Segment assets

1,961,844

1,650,641

2014

Reconciliations

Consolidated$4,443,990–$4,443,990

1,233,010$(1,233,010)–$183,078$5,677,000$(1,233,010) $4,443,990$ 10,932$ 12,427$  184,272$       (29) $  184,243

1,085,942

168,243

178,301

5,044,971

367,864

5,412,835

Sales

Other:
Depreciation and amortization

65,32065,311

52,699

2,262

9,088

194,680–

194,680

Investments in associated companies
accounted for by the equity method

39,68045,864

3,612

864

–

90,0202,883

92,903

Increase in property, plant, andequipment and intangible assets

216,126

111,563

91,641

2,233

9,544

431,107–431,107

Financial section

Notes: 1. Reconciliations of segment profit consisted of elimination of intersegment transactions.
2. ‌Reconciliations of segment assets and investments in associated companies consisted of corporate assets that were not allocated to any reportable segments.
3. Segment profit was reconciled to operating income in the consolidated statement of income.

4. Associated Information(1) Information about geographical areas
Sales
Millions of Yen
2014

Japan

¥368,604

North America¥15,928

Asia¥66,977

Other¥6,222

Total¥457,731

Millions of Yen
2013

Japan

¥364,872

North America¥15,433

Asia¥54,556

Other¥5,567

Total¥440,428

Thousands of U.S. Dollars
2014

Japan

$3,578,679

50

North America$154,641

Asia

Other

$650,262$60,408

Total$4,443,990

(2) Information about impairment loss
Millions of Yen

2014

Impairment loss

Specialty
Steel

High
Performance
Materials andMagnetic
Materials

Parts for
Automobile
and Industrial
Equipment

Engineering

Trading andService

¥53

¥32

¥19

¥4

–

Specialty
Steel

High
Performance
Materials andMagnetic
Materials

Parts for
Automobile
and Industrial
Equipment

Engineering

Trading andService

–

¥56

–

–

Total

¥108

Millions of Yen

2013

Impairment loss

–

Total

¥56

Thousands of U.S. Dollars

Impairment loss

Specialty
SteelParts for
Automobile
and Industrial
Equipment

Engineering

Trading andService

$515

$311

$184

$39

–

Specialty
Steel

High
Performance
Materials andMagnetic
Materials

Parts for
Automobile
and Industrial
Equipment

Engineering

Trading andService

¥ 54
¥163

–
–

–
–

–
–

–
–

Specialty
Steel

High
Performance
Materials andMagnetic
Materials

Parts for
Automobile
and Industrial
Equipment

Engineering

Trading andService

¥ 45
¥211

¥4
–

¥(2)
–

–
–

–
–

Specialty
Steel

High
Performance
Materials andMagnetic
Materials

Parts for
Automobile
and Industrial
Equipment

Engineering

Trading andService$  523$1,588

–
–

–
–

–
–

–
–

Total

$1,049Financial section

2014

High
Performance
Materials andMagnetic
Materials(3) Information about goodwill
Millions of Yen

2014

Amortization of goodwill
Balance of goodwill

Total

¥ 54
¥163

Millions of Yen

2013

Amortization of goodwill (negative goodwill)
Balance of goodwill

Total

¥ 47
¥211

Thousands of U.S. Dollars

2014

Amortization of goodwill
Balance of goodwill

Total$  523$1,58851

Financial section

Independent Auditor’s Report52

Daido network

Offices & Branches

Specialty Steel
Address

Head Office

Phone (Facsimile)

Daido Die & Mold Solutions Co., Ltd.

Urbannet Nagoya Building,1-10,
Higashisakura 1-chome,
Higashi-ku, Nagoya, Aichi
461-8581, Japan

81-52-963-7501(81-52-963-4386)

Daido Shinagawa Building, 6-35,
Konan 1-chome, Minato-ku,
Tokyo 108-8478, Japan

81-3-5495-1253(81-3-5495-6733)

Kogin Building, 1-1, Koraibashi
4-chome, Chuo-ku, Osaka 5410043, Japan

81-6-6229-6530(81-6-6202-8663)

Niigata Sales Office1084, Kotaka, Tsubame, Niigata
959-1241, Japan

81-256-63-4405(81-256-62-2484)

Riken Seiko Co., Ltd.

Fukuoka Sales Office13-2, Tenjin 1-chome, Chuo-ku,
Fukuoka 810-0001, Japan

81-92-771-4481(81-92-771-9384)

Tohoku Steel Co., Ltd.

Tokyo Head OfficeOsaka Branch

Daido Tienwen Steel Co., Ltd.
DAIDO AMISTAR (S) PTE LTDDAIDO PDM (Thailand) CO., LTD.
DAIDO AMISTAR (M) SDN. BHD.
Daido Shizai Service Co., Ltd.
Daido EcoMet Co., Ltd.
Daido Technica Co., Ltd.
Maruta Transport Co., Ltd.
Sakurai Kosan Co., Ltd.
Izumi Denki Kogyo Co., Ltd.
Kawaichi Sangyo Co., Ltd.

High Performance Materials and Magnetic Materials
Nippon Seisen Co., Ltd.

Research Institute & Plants
81-52-611-2522(81-52-611-9004)

Shimomura Tokushu Seiko Co., Ltd.

Daido Corporate
Research &Development Center

30, Daido-cho 2-chome,
Minami-ku, Nagoya, Aichi
457-8545, Japan

Chita Plant

39, Motohama-machi, Tokai, Aichi 81-562-33-3101

Daido Electronics (Suzhou) Co., Ltd.

477-0035, Japan

Daido-Special Metals Ltd.

(81-562-33-1570)
81-562-33-7461(81-562-33-1550)

Chita Steel  Strip Plant

81-562-33-7465(81-562-33-1019)
30, Daido-cho 2-chome,
Minami-ku, Nagoya, Aichi
457-8545, Japan

81-52-611-2512(81-52-614-2492)

Shibukawa Plant

500, Ishihara, Shibukawa, Gunma 81-279-25-2000
377-0007, Japan(81-279-25-2040)

Kawasaki Techno
Center4-1, Yako 2-chome,
Kawasaki-ku, Kawasaki,
Kanagawa 210-0863, Japan

81-44-266-3760(81-44-266-3768)

Tsukiji Techno Center

10, Ryugu-cho, Minato-ku,
Nagoya, Aichi 455-0022, Japan

81-52-691-5181(81-52-691-5212) Metal Powder Plant

81-52-691-5186(81-52-691-5195)

Daido Network

Daido Electronics (Thailand) Co., Ltd.

Chita  Forging Plant

Hoshizaki Plant

Daido Electronics Co., Ltd.

Nissei Seiko Co., Ltd.
THAI SEISEN Co., Ltd.

Parts for Automobile and Industrial Equipment
Fuji OOZX Inc.
Daido Castings Co., Ltd.
Toyo Sangyo Co., Ltd.
Japan Drop Forge Co., Ltd.
Daido Star Techno Co., Ltd
Daido Precision Industries Ltd.
OHIO STAR FORGE CO.

Engineering
Daido Machinery Co., Ltd.
Daido Environment Engineering Co., Ltd.
Daido Plant Industries Co., Ltd.

Oji Plant

9-3, Kamiya 3-chome, Kita-ku,
Tokyo 115-0043, Japan

81-3-3901-4161(81-3-3901-8211)

Kimitsu Plant

1, Kimitsu, Kimitsu, Chiba
299-1141, Japan

81-439-52-1541(81-439-54-1280)

Daido Life Service Co., Ltd.

Takiharu Techno
Center9, Takiharu-cho, Minami-ku,
Nagoya, Aichi 457-8712, Japan

81-52-613-6801(81-52-613-6840)

Kisokoma Heights Co., Ltd.

Nakatsugawa Techno Center

1642-144, Nasubigawa,
Nakatsugawa, Gifu
509-9132, Japan

81-573-68-6171(81-573-68-6188)

Daido Steel (America) Inc.

Trading and Service
Daido Kogyo Co., Ltd.
Life Support Co., Ltd.
Daido Bunseki Research Inc.
Star Info Tech Co., Ltd.
(As of March 31, 2014)53

Daido Steel Co., LTD.

Corporate Data (As of March 31, 2014)
Daido Steel Co., Ltd.
August 19, 1916

Incorporated:

February 1, 1950

Office:(Head Office)Urbannet Nagoya Building, 1-10, Higashisakura 1-chome,
Higashi-ku, Nagoya, Aichi 461-8581, Japan
Phone: 81 (Japan) -52-963-7501
Facsimile: 81 (Japan) -52-963-4386(Tokyo Head Office)Daido Shinagawa Building, 6-35, Konan 1-chome,
Minato-ku, Tokyo 108-8478, Japan
Phone: 81-3-5495-1253
Facsimile: 81-3-5495-6733
http://www.daido.co.jp/en/index.html
3,159

Common Stock:¥37,172 million

Number of Authorized Shares:

1,160,000,000

Number of Issued Shares:

434,487,693

Number of Shareholders:

31,414

Independent Auditors:

Deloitte Touche Tohmatsu LLC

Stock Exchange Listings:

Tokyo, Nagoya

annual report 2014

Internet Address:
Number of Employees:

Utilizing our strengths, aiming at further growth

Corporate Name:Founded:Transfer Agent of Common Stock: The Chuo Mitsui Trust and Banking Company, Limited
Principal Shareholders:

For Further Information,
Please Contact:

This annual report is printed on recycled paper.

NIPPON STEEL CORPORATION
Meiji Yasuda Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account)
Mizuho Bank, Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
NHK Spring Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
HONDA MOTOR CO., LTD.
TOYOTA MOTOR CORPORATION
National Mutual Insurance Federation of Agricultural Cooperatives
Investor Relations(Head Office)Phone: 81-52-963-7516
Facsimile: 81-52-963-4386
Printed in Japan