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Contents Consolidated Financial Highlights 1 To Our Shareholders and Investors 2 Management’s Discussion and Analysis 6 Consolidated Seven-Year Summary 8 Consolidated Balance Sheets 10 Consolidated Statements of Income 12 Consolidated Statements of Comprehensive Income 13 Consolidated Statements of Changes in Net Assets 14 Consolidated Statements of Cash Flows 16 Notes to Consolidated Financial Statements 17 Independent Auditor’s Report 39 Investor Information 40 Consolidated Financial Highlights Consolidated Financial Nisshin Steel Co., Ltd. and its consolidated subsidiaries Highlights Years ended March 31, 2012, 2011 and 2010 Nisshin Steel Co., Ltd. and its consolidated subsidiaries Years ended March 31, 2012, 2011 and 2010 Millions of yen (except per share amounts) Net sales Net (loss) income Total assets Total net assets 2012 ¥557,864 (4,868) 627,428 193,485 2011 ¥545,353 12,049 663,867 205,095 2010 ¥441,486 (61,717) 670,350 205,301 ¥(5.39) 1.50 ¥13.33 2.00 ¥(68.28) 1.00 Net (loss) income per share2 Cash dividends per share2 Thousands of U.S. dollars 1 (except per share amounts) Percent change (2012/2011) 2.3 (5.5) (5.7) 2012 $6,787,492 (59,229) 7,633,873 2,354,119 (25.0) $(0.07) 0.02 Notes: 1. Unless indicated otherwise, all dollar figures herein refer to U.S. currency. Yen amounts have been translated into U.S. dollars, for convenience only, at \82.19=US$1, the effective rate of exchange at March 31, 2012. 2. Per share figures are in yen and U.S. dollars. Net Sales Net Income (Loss) (Billions of yen) (Years ended March 31) (Billions of yen) (Years ended March 31) 40 37.2 720 641.2 649.5 600 32.2 617.4 30 545.4 480 557.9 20 441.5 12.0 10 360 0 ’09 ’07 ’10 ’08 ’12 ’11 240 120 0 -4.9 -25.5 ’07 ’08 ’09 ’10 ’11 ’12 -61.7 Total Net Assets Net Income (Loss) per Share (Billions of yen) (March 31) 400 385.7 361.5 (Yen) (Years ended March 31) 39.86 40 35.37 30 320 20 260.6 240 205.3 205.1 13.33 10 193.5 160 0 ’09 ’07 ’10 ’08 80 0 ’07 ’08 ’09 ’10 ’11 ’12 -28.15 -68.28 1 ’12 ’11 -5.39 To Our Shareholders and Investors In the stainless steel field, the Company began investigating a business merger with Nippon Metal Industry Co., Ltd. in order to growing ourselves into a top global stainless steel producer by strengthening our business base. The companies have agreed on establishing a holding company via a joint share transfer. Regarding developments in overseas markets, the Company is making steady progress on building and strengthening stainless steel production bases in Asia, as Bahru Stainless SDN. BHD., which was established in Malaysia in cooperation with the Spanish firm Acerinox, S.A., has begun commercial production, and the Chinese firm Ningbo Baoxin Stainless Steel Co., Ltd., which has completed expansion and reinforcement of its facilities in order to improve productivity and quality competitiveness. In the surface treatment field, as part of the Company’ s plan to secure monthly production of 100,000 tons of highly corrosion-resistant hot-dipped steel sheet (ZAM®), the Ichikawa Works has begun commercial production of ZAM®after the modification of one of its existing coating lines. This means that the Company now has three production centers for ZAM ®-- Toyo, Sakai, and Ichikawa. In addition to improving its productive capacity, the Company has created a product supply system that can meet customer needs in a more timely fashion, and will work to further sales of ZAM®. Also, in an effort to create an optimum company-wide production system for building materials, coated steel sheet production of the group company Nisshin A&C Co., Ltd. has been consolidated at the Ishikawa Works. In the steel roof and wall market, the Company is working to create new demand by, for example, introducing new functional products and jointly developing new products with customers on a group-wide basis. In the special steel field, a ladle furnace will be built at the Kure Works to enable the production of highly clean steel for stronger competitiveness both in domestic and foreign markets with upgraded product quality. Consolidated results for this period show that despite our continuing efforts to secure income, the effects of Overview of the Fiscal Year Ended March 31, 2012 Early in this period Japan suffered from sluggish economic activity due to the effects of the Great East Japan Earthquake and shortages of electricity. However, domestic demand, especially in the automotive sector, gradually recovered. Other negative factors, such as record high yen rates and economic downturn in developing countries caused by flooding in Thailand and the European financial crisis, have had an adverse effect on the economy. In addition, though the appreciation of the yen began to calm down toward end of current fiscal year, new concerns arose, such as rising oil prices due to tensions in the Middle East. For the iron and steel industry, as the prices of raw materials such as iron ore and coal remained high, domestic demand fell into a slump resulting from the Great East Japan Earthquake at the beginning of the period. Difficulties in the export sector persisted, as profit deteriorated due to the rising yen and economic sluggishness in Asia. Subsequently automotive production and domestic demand recovered, but the overall economic difficulties mounted with an oversupply of steel in Asia caused higher steel imports from China and South Korea and a general weakening of the steel market. Against this operating environment, the Nisshin Group put more efforts into promoting detailed efficiency and general cost-cutting measures currently in place, such as augmenting the use of low-cost raw materials, improving production efficiency, and reducing logistics costs. Cost increases that could not be absorbed with our own efforts had to be reflected in sales prices after the situation was diligently explained to customers for their understanding. In addition to improving the on-time delivery rate and working to reduce lead time, the Company is aggressively going forward with projects that will lead to the realization of the management themes listed in the No. 22 Mid-term Consolidated Business Plan. These include developing a company-wide integrated production system that will lead to inventory reduction. 2 will as a whole make further efforts to streamline and cut overall costs and in addition will work to improve performance and to increase every division’s income. In particular, we intend to improve quality, cost, and competitiveness with stable operation of the hotrolling line that was revamped last year at the Kure Works. Also, in order to deal with the electricity supply problem, which is likely to become a long-term agenda, the Company is making its operations more efficient to save electricity while at the same time working to keep the effect of these factors on production to a minimum by increasing energy efficiency and introducing onsite power generators. The Company, via its business activities, will continue to fulfill its social responsibility and maintain a stable and swift supply of the products needed by the customers. In terms of sales, cost increases that could not be absorbed by our own efforts will have to be reflected in sales prices following diligent explanation of the situation to customers for their understanding. In order to be an absolutely essential presence to customers, in addition to its popular F-Tech. Plaza, the Nisshin Group will use tools such as the new community development proposal site to further strengthen its distinctive proposal-based sales activities, one of the Company’s specialties. In particular, regarding growth fields such as alternative energy (solar power, etc.), which are expected to become increasingly popular in the future, the Nisshin Group is utilizing its total abilities with, for example, aggressive market developments through a fusion of its materials development prowess and processing technology so that it will be able to steadily respond to new demand in this field. The Company is also speeding up its continuing efforts to realize the management themes of the No. 22 Mid-term Consolidated Business Plan. Regarding the business merger with Nippon Metal Industry Co., Ltd., for which a share transfer agreement was signed in April of this year, assuming that approval is granted from the concerned authorities (including those abroad) as well as the approval of both companies’ shareholders at the Thai flood and the Asian economic downturn on the foreign market as well as the negative effect of the strong yen on export profitability and the sluggishness of the domestic market due to high steel imports have been enormous. Consolidated sales were 557,864 million yen (up 12,511 million yen from previous fiscal year), consolidated income before special items was 4,689 million yen (down 13,847 million yen from the previous fiscal year), and consolidated net loss was 4,868 million yen (down in income 16,917 million yen from the previous fiscal year). The Company’s non-consolidated results showed sales of 447,730 million yen, loss before special items of 3,163 million yen, and net loss of 10,312 million yen. Outlook for the Fiscal Year Ending March 31, 2013 The future of the Japanese economy looks promising, led by improving automotive production due to increased sales related to recovery from the Great East Japan Earthquake and supportive government policies including the subsidy system. This should lead to recovery of domestic activities as demand for reconstruction starts taking full effect. On the other hand, uncertainty will likely persist due to continued financial anxiety caused by the European economic crisis, the consistently high value of the yen, worries about economic stagnation in developing countries, and uneasiness about whether the nationwide demand for electricity in Japan can be met. In the iron and steel industry, there is raised hope for recovery of domestic demand, but there are also worries that shortages of electricity and higher electric and petroleum prices will have a negative effect on production and lead to higher costs. Besides, the Asian situation will remain unpredictable as oversupply is expected to continue for the time being and fear of a negative effect on the steel market will persist with the combination of stagnation in the emerging economies and the high yen keeping the export environment from turning for the better. Under these economic conditions, the Nisshin Group 3 Ningbo Baoxin Stainless Steel Co., Ltd. in China. In India the Company has begun producing both carbon and stainless steel tubes at the joint venture ANS Steel Tubes Limited with its local partner. The Company will launch a full-scale approach for developing demand from Japanese automobile manufacturers. The Nisshin Group will continue to work with customers to develop new markets in overseas growth fields by strengthening overseas business development. As a company engaged in the steel business that supports the social foundation, the Nisshin Group believes that continuously working to provide a steady supply of products, technologies, and services beneficial to both customers and society is the origin of its corporate value and it believes that this will lead to contributions to society, including earthquake disaster reconstruction. Therefore, the Nisshin Group intends to carry out proactive business undertakings as a company that creates new markets with customers in order to realize the concepts of its management philosophy: “A company chosen by all present and future customers, shareholders, and employees” and “A company in harmony with stakeholders and society.” We would appreciate our shareholders’ continued support. shareholders meetings, the companies will aim to secure overwhelming competitiveness in the stainless steel field in terms of cost, quality, delivery time, and all other aspects by maximizing the effects of the merger through the concentration of the superior tangible and intangible management resources that the companies have developed and by creating efficient production and sales systems. Furthermore, the companies will provide new added value to customers through the integrated sales of both companies’ stainless steel and the Company’s ordinary and special steel. By aggressively expanding sales abroad through both companies’ foreign offices, we will work to receive high praise from customers both at home and abroad. In order to consolidate the stainless steel production processes to be achieved through this merger, the Company has also decided to overhaul the steelmaking facilities at the Shunan Works for increased productive capacity and improved cost and quality competitiveness and work to create a powerful production base with state-of-the-art equipment. As a new strategy to expand ZAM®sales, investments will be made in order to start manufacturing at the Company’s U.S. subsidiary Wheeling-Nisshin, Inc. and improve the North American supply system. This will improve the development of ZAM ®not only in the Japanese domestic market but also in foreign markets. The idea behind the decision to implement these new initiatives is they are essential for the continued future growth of Nisshin Group, and in order to reap the benefits of and derive profits from these initiatives as soon as possible we intend to realize them without delay while maintaining the business operation levels. In terms of growing overseas markets, the Company is continuing to utilize to the fullest extent the business networks it has created and is establishing our unique corporate presence in local markets via reinforcing linkups with overseas branch and representative offices that it has been incorporating there. Thus the Company is aggressively developing a new business model through cooperation with Bahru Stainless in Malaysia, which is working to further raise its capacity by 2013, and Outlook for the next fiscal year The Company has decided against announcing its performance forecast for the next period since reasonable estimations are difficult to make at this point of time. Ongoing negotiations of selling prices with customers are complicated with highly volatile prices of raw materials and fuels, which can also necessitate changes in inventory valuations. Even in the current circumstances, the Company is committed to securing profits through achieving appropriate sales prices and thoroughly implementing rationalization and cost reduction programs. The performance forecast will be released as soon as it is made available. Further information will be provided 4 ensure sustainable growth and for strengthening competitiveness to improve corporate value, as well as to enhance the Group’s financial position. We decided that dividends from retained earnings for this year would be ¥1.50 per share for the yearend, based on the business results and forecasts, and in overall consideration of the economic outlook and plans for the Group’s business development. As we forwent the payment of mid-term dividends, the full-year dividends are set at ¥1.50 per share. at the time of announcement of the first-quarter financial results. In addition, the Company and Nippon Metal Industry Co., Ltd. are set to execute business integration effective as of October 1, 2012 through establishing a holding company via a joint share transfer. The announcement of performance forecast of the holding company to be established will be scheduled at a later date. Basic Policy on Returns to Shareholders I wou ld like to of fer my appreciation to all shareholders and investors for their continued support. Regarding the distribution of earnings, we plan to ensure stable returns to our shareholders, with the payment of appropriate dividends from retained earnings depending on the consolidated business results, while securing internal reserves necessary for future business development to enhance corporate value, and in consideration of the future business outlook. Internal reserves will be used for investments to June 2012 Toshinori Miki President and Chief Executive Officer 5 Management’s Discussion and Analysis Financial Position Cash Flows Consolidated total assets at the close of the year ended March 31, 2012 stood at ¥627,428 million, down ¥36,439 million from the end of the previous year. This was due mainly to decreases in property, plant and equipment (down ¥16,106 million) and notes and accounts receivable (down ¥10,274 million). Total liabilities declined by ¥24,829 million to ¥433,943 million. This was due mainly to decreases in interest-bearing debt (down ¥14,856 million) and notes and accounts payable (down ¥4,990 million). Total net assets declined ¥11,610 million to ¥193,485 million. This was mostly the result of net loss (¥4,868 million). Net cash provided by operating activities totaled ¥42,076 million. This was due mainly to ¥1,104 million in income before provision for income taxes, ¥36,688 million from depreciation and amortization, and decrease of ¥10,190 million in notes and accounts receivable. Net cash used in investing activities totaled ¥25,102 million, with ¥20,258 million spent on acquisition of property, plant and equipment. Free cash flow amounted to ¥16,974 million. Net cash used in financing activities totaled ¥16,894 million. This mainly reflected a ¥14,844 million decrease in interest-bearing debt. As a result of these developments, and with the addition of foreign currency translation adjustment of cash and cash equivalents, the consolidated balance of cash and cash equivalents at the end of the fiscal year amounted to ¥18,236 million, down ¥147 million from the end of the previous year. 6 Operating Income (Loss) Total Current Assets Total Assets (Billions of yen) (Billions of yen) (Billions of yen) 80 900 350 63.3 60 300 293.7 315.4 296.0 58.5 246.8 250 265.3 826.5 818.3 722.3 750 670.4 663.9 627.4 248.6 600 200 40 450 150 23.9 7.1 0 ’09 ’07 ’10 ’08 ’11 300 100 20 ’12 150 50 0 ’07 ’08 ’09 ’10 ’11 ’12 -7.3 -43.2 Interest-Bearing Debt Net Cash Provided by Operating Activities (Billions of yen) (Billions of yen) 286.3 297.9 300 282.9 268.0 250 60 52.3 50 218.6 200 42.1 40 173.8 150 30 100 20 50 10 0 ’07 ’08 ’09 ’10 ’11 ’12 0 26.5 25.8 25.8 24.4 ’07 ’08 ’09 7 ’10 ’11 ’12 0 ’07 ’08 ’09 ’10 ’11 ’12 Consolidated Seven-Year Summary Consolidated Seven-Year Summary Nisshin Steel Co., Ltd. and its consolidated subsidiaries Nisshin Steel Co., Ltd. and its consolidated subsidiaries Millions of yen (except per share amounts and weighted average number of shares issued and outstanding) Years ended March 31 Results for the year: Net sales Gross profit (loss) Operating income (loss) Income (loss) before special items Income (loss) before provision for income taxes Net (loss) income ¥557,864 51,535 7,068 4,689 1,104 (4,868) ¥545,353 67,931 23,944 18,536 14,864 12,049 ¥441,486 (319) (43,228) (53,775) (62,339) (61,717) ¥617,400 39,781 (7,317) (12,383) (17,946) (25,484) ¥649,495 108,510 58,457 54,546 53,304 32,192 ¥641,246 112,677 63,270 62,131 61,074 37,214 ¥556,057 117,506 70,199 63,153 47,498 24,464 Year-end financial position: Total current assets Total property, plant and equipment Total assets Total current liabilities Long-term debt Total net assets1 ¥248,580 224,562 627,428 213,740 172,185 193,485 ¥265,328 240,668 663,867 202,672 206,697 205,095 ¥246,771 256,590 670,350 162,770 253,813 205,301 ¥295,992 264,983 722,271 237,214 175,778 260,641 ¥315,374 265,790 818,310 284,583 90,266 361,463 ¥293,727 267,923 826,540 250,659 92,983 385,695 ¥259,466 268,438 718,237 239,008 72,615 315,595 Cash flows: Net cash provided by operating activities Net cash used in investing activities Net cash (used in) provided by financing activities ¥ 42,076 (25,102) (16,894) ¥ 24,426 (30,118) (16,076) ¥ 25,757 (29,987) 7,397 ¥ 25,810 (62,252) 58,534 ¥ 26,545 (49,182) 26,969 ¥ 52,250 (48,041) (7,338) ¥ 42,411 (22,877) (27,651) ¥13.33 2.00 ¥(68.28) 1.00 ¥(28.15) 7.00 ¥35.37 10.00 ¥39.86 7.00 ¥25.98 6.00 903,806 903,854 905,269 910,210 933,499 941,658 2012 2011 2010 2009 2008 2007 2006 2 Per share amounts : Net (loss) income per share Cash dividends per share ¥(5.39) 1.50 Weighted average number of shares issued and outstanding (thousands) 903,762 1. The amount of total net assets at March 31, 2006 represents the value of conventional total shareholders' equity. 2. Per share figures are in yen. 8 9 Consolidated Balance Sheets Nisshin Steel Co., Ltd. and its consolidated subsidiaries March 31, 2012 and 2011 Consolidated Balance Sheets Nisshin Steel Co., Ltd. and its consolidated subsidiaries March 31, 2012 and 2011 Millions of yen 2012 ASSETS Current assets: Cash on hand and in banks (Notes 18, 21) Notes and accounts receivable (Notes 11, 21) Marketable securities (Notes 18, 21 and 22) Inventories (Note 5) Deferred income taxes (Note 8) Other current assets Allowance for doubtful accounts Total current assets ¥ Investments and long-term receivables: Investments in securities (Notes 6, 14, 21 and 22) Deferred income taxes (Note 8) Other (Note 6) Allowance for doubtful accounts Total investments and long-term receivables 2011 18,241 ¥ 18,388 80,323 90,597 12 127 132,383 133,628 1,772 4,191 16,546 19,047 (697) (650) 248,580 265,328 Thousands of U.S. dollars (Note 4) 2012 $ 221,937 977,284 146 1,610,695 21,560 201,314 (8,480) 3,024,456 103,768 6,949 35,204 (545) 145,376 104,706 6,599 37,465 (570) 148,200 1,262,537 84,548 428,325 (6,631) 1,768,779 246,504 861,688 1,108,192 (943,796) 164,396 57,199 2,967 224,562 244,864 856,564 1,101,428 (920,338) 181,090 56,938 2,640 240,668 2,999,197 10,484,098 13,483,295 (11,483,100) 2,000,195 695,936 36,099 2,732,230 8,248 8,745 100,353 Deferred assets 662 926 8,055 Total assets ¥ 627,428 ¥ 663,867 $ 7,633,873 Property, plant and equipment, at cost: Buildings and structures Machinery, equipment and vessels Accumulated depreciation Land Construction in progress Total property, plant and equipment Other assets The accompanying notes are an integral part of these financial statements. 10 Millions of yen LIABILITIES Current liabilities: Notes and accounts payable (Notes 11, 21) Short-term loans (Notes 7, 21) Current portion of long-term debt (Notes 7, 21) Commercial paper (Note 21) Provision for environmental remediation Provision for loss on disaster Provision for business structure improvement Other current liabilities Total current liabilities Long-term debt (Notes 7, 21) Deferred income taxes (Note 8) Employees' retirement benefits (Note 9) Allowance for retirement benefits for directors and corporate auditors Reserve for rebuilding furnaces Provision for environmental remediation Other liabilities Total liabilities NET ASSETS Shareholders' equity: Common stock, no par value at March 31, 2012 and 2011 Authorized: 3,977,964 thousand shares at March 31, 2012 and 2011 Issued: 994,500 thousand shares at March 31, 2012 and 2011 (Note 16) Additional paid-in capital Retained earnings Treasury stock, at cost (Note 16) Total shareholders' equity Accumulated other comprehensive income: Unrealized gain or loss on available-for-sale securities Deferred gain or loss on hedges Adjustment on revaluation of land (Note 15) Foreign currency translation adjustment Total accumulated other comprehensive income Minority interests in consolidated subsidiaries Total net assets Total liabilities and net assets 11 2012 2011 Thousands of U.S. dollars (Note 4) 2012 ¥ 80,523 51,054 34,809 10,000 317 312 36,725 213,740 172,185 949 30,378 446 12,701 517 3,027 433,943 ¥ 85,513 26,606 49,601 13 1,170 319 39,450 202,672 206,697 1,064 31,549 407 12,152 828 3,403 458,772 $979,718 621,170 423,519 121,669 3,857 3,796 446,831 2,600,560 2,094,963 11,547 369,607 5,426 154,532 6,290 36,829 5,279,754 79,913 49,893 88,577 (26,445) 191,938 79,913 49,893 95,711 (26,440) 199,077 972,296 607,045 1,077,710 (321,754) 2,335,297 6,718 320 360 (12,485) (5,087) 6,634 193,485 8,115 51 315 (8,785) (304) 6,322 205,095 81,737 3,893 4,380 (151,904) (61,894) 80,716 2,354,119 ¥627,428 ¥663,867 $7,633,873 Consolidated Statements of Income Nisshin Steel Co., Ltd. and its consolidated subsidiaries Consolidated Statements of Income Years ended March 31, 2012 and 2011 Nisshin Steel Co., Ltd. and its consolidated subsidiaries Years ended March 31, 2012 and 2011 Millions of yen Net sales Cost of sales (Note 5) Gross profit Selling, general and administrative expenses (Notes 12 and 13) Operating income Other (income) expenses: Interest and dividend income Interest expense Equity in earnings of unconsolidated subsidiaries and affiliates Retirement benefit expense Service cost of temporarily transferred employees Foreign exchange loss Other, net Income before special items Special items: Gain on sale of properties Gain on sale of investments in securities Special items, income and gain Loss on sale and disposition of properties Loss on sale of other investments Loss on devaluation of other investments Loss on disaster Loss on devaluation of investment in securities Business structure improvement expense Special items, expense and loss Income before provision for income taxes Provision for income taxes (Note 8): Current Deferred Total provision for income taxes (Loss) income before minority interests Minority interests in earnings of consolidated subsidiaries Net (loss) income 2012 ¥557,864 506,329 51,535 44,467 7,068 2011 ¥ 545,353 477,422 67,931 43,987 23,944 (1,657) 5,632 (6,349) 1,814 1,763 241 935 4,689 (1,335) 6,437 (5,928) 1,553 1,704 1,459 1,518 18,536 (20,161) 68,524 (77,248) 22,071 21,450 2,932 11,376 57,051 86 789 875 879 649 2,397 535 4,460 1,104 910 1,230 1,054 478 3,672 14,864 1,046 9,600 10,646 10,695 7,896 29,164 6,510 54,265 13,432 1,806 3,830 5,636 (4,532) 336 ¥ (4,868) 2,134 232 2,366 12,498 449 ¥ 12,049 21,973 46,600 68,573 (55,141) 4,088 $ (59,229) Yen Net (loss) income per share Cash dividends per share Weighted average number of shares issued and outstanding (thousands) The accompanying notes are an integral part of these financial statements. 12 Thousands of U.S. dollars (Note 4) ¥ (5.39) 1.50 ¥ 13.33 2.00 903,762 903,806 2012 $6,787,492 6,160,470 627,022 541,027 85,995 U.S. dollars (Note 4) $(0.07) 0.02 Consolidated Statements of Comprehensive Income Nisshin Steel Co., Ltd. and its consolidated subsidiaries Years ended March 31, 2012 and 2011 Consolidated Statements of Comprehensive Income Nisshin Steel Co., Ltd. and its consolidated subsidiaries Years ended March 31, 2012 and 2011 Millions of yen (Loss) income before minority interests Other comprehensive income (Note 20) : Unrealized gain or loss on available-for-sale securities Deferred gain or loss on hedges Foreign currency translation adjustment Share of other comprehensive income of companies accounted for by the equity method Other, net Total other comprehensive income Comprehensive (loss) income Total comprehensive income attributable to : Shareholders of Nisshin steel Co., Ltd. Minority interests The accompanying notes are an integral part of this financial statement. 13 Thousands of U.S. dollars (Note 4) 2012 ¥(4,532) 2011 ¥ 12,498 2012 $ (55,141) (1,478) 547 (390) (5,121) (55) (1,372) (17,983) 6,655 (4,745) (3,446) 33 (4,734) ¥(9,266) (5,155) (11,703) ¥ 795 (41,927) 402 (57,598) $(112,739) ¥(9,617) 351 ¥387 408 $(117,009) 4,270 Consolidated Statements of Changes in Net Assets Nisshin Steel Co., Ltd. and its consolidated subsidiaries Consolidated Statements Years ended March 31, 2012 and 2011of Changes in Net Assets Nisshin Steel Co., Ltd. and its consolidated subsidiaries Years ended March 31, 2012 and 2011 Millions of yen Shareholders' equity Common stock Additional paid-in capital ¥79,913 ¥49,893 ¥95,711 ¥(26,440) ¥199,077 Accumulated other comprehensive income Foreign Total Minority Deferred Adjustment on currency accumulated interests in gain or loss revaluation translation other consolidated on hedges of land adjustment comprehensive subsidiaries income ¥ 8,115 ¥ 51 ¥315 ¥ (8,785) ¥ (304) ¥6,322 ¥79,913 ¥49,893 (1,811) (4,868) (351) 1 (105) (7,134) ¥88,577 (5) (5) ¥(26,445) (1,811) (4,868) (5) (351) 1 (105) (7,139) ¥191,938 (1,397) (1,397) ¥ 6,718 269 269 ¥320 45 45 ¥360 (3,700) (3,700) ¥(12,485) (4,783) (4,783) ¥ (5,087) 312 312 ¥6,634 (1,811) (4,868) (5) (351) 1 (105) (4,471) (11,610) ¥193,485 ¥79,913 ¥49,893 ¥84,638 ¥(26,432) ¥188,012 ¥13,202 ¥182 ¥291 ¥(2,341) ¥11,334 ¥5,955 ¥205,301 ¥79,913 ¥49,893 (905) 12,049 (24) (47) 11,073 ¥95,711 (8) (8) ¥(26,440) (905) 12,049 (8) (24) (47) 11,065 ¥199,077 (5,087) (5,087) ¥ 8,115 (131) (131) ¥ 51 24 24 ¥315 (6,444) (6,444) ¥(8,785) (11,638) (11,638) ¥ (304) 367 367 ¥6,322 (905) 12,049 (8) (24) (47) (11,271) (206) ¥205,095 Balance at April 1, 2011 Changes of items during the year Cash dividends (Note 17) Net loss Acquisition of treasury stock Change in scope of equity method Increase due to adjustment on revaluation of land Other, net Items other than changes in shareholders' equity Total changes of items during the year Balance at March 31, 2012 Balance at April 1, 2010 Changes of items during the year Cash dividends (Note 17) Net income Acquisition of treasury stock Decrease due to adjustment on revaluation of land Other, net Items other than changes in shareholders' equity Total changes of items during the year Balance at March 31, 2011 Retained earnings Treasury stock, at cost Total shareholders' equity Shareholders' equity Balance at April 1, 2011 Changes of items during the year Cash dividends (Note 17) Net loss Acquisition of treasury stock Change in scope of equity method Increase due to adjustment on revaluation of land Other, net Items other than changes in shareholders' equity Total changes of items during the year Balance at March 31, 2012 Common stock Additional paid-in capital Retained earnings $972,296 $607,045 $1,164,509 $972,296 $607,045 Treasury stock, at cost Total shareholders' equity $(321,694) $2,422,156 (22,034) (22,034) (59,229) (59,229) (60) (60) (4,271) (4,271) 12 12 (1,277) (1,277) (86,799) (60) (86,859) $1,077,710 $(321,754) $2,335,297 Unrealized gain or loss on available-for-sale securities ¥205,095 Thousands of U.S. dollars (Note 4) Accumulated other comprehensive income Foreign Total Minority Deferred Adjustment on currency accumulated interests in gain or loss revaluation translation other consolidated Total net on hedges of land adjustment comprehensive subsidiaries assets income $98,735 $ 621 $3,833 $(106,886) $ (3,697) $76,919 $2,495,378 Unrealized gain or loss on available-for-sale securities (16,998) (16,998) $81,737 3,272 3,272 $3,893 547 547 $4,380 (45,018) (45,018) $(151,904) The accompanying notes are an integral part of these financial statements. 14 Total net assets 15 (58,197) (58,197) $(61,894) 3,797 3,797 $80,716 (22,034) (59,229) (60) (4,271) 12 (1,277) (54,400) (141,259) $2,354,119 Consolidated Statements of Cash Flows Nisshin Steel Co., Ltd. and its consolidated subsidiaries Consolidated Statements of Cash Flows Years ended March 31, 2012 and 2011 Nisshin Steel Co., Ltd. and its consolidated subsidiaries Years ended March 31, 2012 and 2011 Millions of yen Cash flows from operating activities: Income before provision for income taxes Depreciation and amortization Decrease in employees' retirement benefits account Increase in prepaid pension cost Increase in reserve for rebuilding furnaces Equity in earnings of unconsolidated subsidiaries and affiliates Interest and dividend income Interest expense Loss on sale and disposition of properties Decrease (increase) in notes and accounts receivable Decrease (increase) in inventories (Decrease) increase in notes and accounts payable Other, net 2012 2011 Thousands of U.S. dollars (Note 4) 2012 ¥ 1,104 36,688 (1,171) (743) 549 (6,349) (1,657) 5,632 790 10,190 1,156 (5,259) 6,368 47,298 3,702 (5,944) (2,980) 42,076 ¥ 14,864 38,480 (81) (1,132) 503 (5,928) (1,335) 6,437 910 (19,155) (14,325) 9,687 (1,670) 27,255 4,460 (6,403) (886) 24,426 $ 13,432 446,380 (14,247) (9,040) 6,680 (77,248) (20,161) 68,524 9,612 123,981 14,065 (63,986) 77,479 575,471 45,042 (72,320) (36,257) 511,936 Cash flows from investing activities: Acquisition of investments in securities Proceeds from sale of investments in securities Acquisition of shares of subsidiaries and affiliates Proceeds from sale of shares of subsidiaries and affiliates Acquisition of property, plant and equipment Proceeds from sale of property, plant and equipment Other, net Net cash used in investing activities (73) 755 (3,560) (20,258) 357 (2,323) (25,102) (1,092) 198 (1,335) 1 (25,145) 146 (2,891) (30,118) (888) 9,186 (43,314) (246,478) 4,344 (28,264) (305,414) Cash flows from financing activities: Increase (decrease) in short-term loans, net Increase in commercial paper, net Proceeds from long-term debt Repayment and redemption of long-term debt Acquisition of treasury stock Cash dividends Other, net Net cash used in financing activities 24,456 10,000 300 (49,600) (4) (1,836) (210) (16,894) (711) 2,500 (16,738) (9) (935) (183) (16,076) 297,554 121,669 3,650 (603,480) (49) (22,338) (2,554) (205,548) (227) (147) 18,383 ¥ 18,236 (1,608) (23,376) 41,759 ¥ 18,383 (2,763) (1,789) 223,665 $ 221,876 Receipt of interest and dividends Payment of interest Payment of income taxes Net cash provided by operating activities Foreign currency translation adjustment of cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (Note 18) The accompanying notes are an integral part of these financial statements. 16 Notes to ConsolidatedNotes Financial StatementsFinancial Statements to Consolidated Nisshin Steel Co., Ltd. and its consolidated subsidiaries Nisshin Steel Years ended March 31, 2012 and 2011 Co., Ltd. and its consolidated subsidiaries Years ended March 31, 2012 and 2011 1. Basis of Presenting the Financial Statements The accompanying consolidated financial statements have been prepared from the accounts maintained by Nisshin Steel Co., Ltd. (the “Company”) and its subsidiaries in conformity with accounting principles generally accepted in Japan, which are different in certain respects in so far as the application and disclosure requirements of International Financial Reporting Standards. Certain items presented in the consolidated financial statements submitted to the Director of the Kanto Finance Bureau in Japan have been reclassified for the convenience of readers outside Japan. 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its 10 consolidated subsidiaries, listed below (together, the “Companies”): Nisshin A&C Co., Ltd. Nisshin Kokan Co., Ltd. Nisshin Koki Co., Ltd. Shinwa Kigyo Co., Ltd. Tsukiboshi Logistics Co., Ltd. Tsukiboshi Shoji Co., Ltd. Nisshin Holding, Inc. Nisshin Steel USA, LLC Wheeling-Nisshin, Inc. Nisshin Automotive Tubing LLC The fiscal year periods and the closing dates thereof for the financial statements of consolidated subsidiaries are in agreement with those of the Company, except for the four foreign consolidated subsidiaries: Nisshin Holding, Nisshin Steel USA, Wheeling-Nisshin and Nisshin Automotive Tubing (with fiscal years ending on December 31). In consolidating the four foreign subsidiaries, the Company makes adjustments for any material transactions subsequent to December 31. Regarding the elimination of investments in the stock of consolidated subsidiaries, together with the underlying equity in the net assets of such subsidiaries, the Company follows the step-by-step acquisition approach to include equity in the net income (loss) of subsidiaries, subsequent to the date of acquisition, in the Consolidated Statements of Income and the Consolidated Statements of Changes in Net Assets. Valuation of the assets and liabilities of consolidated subsidiaries is made at their fair values in proportion to the parent company’s equity in the subsidiaries upon each acquisition. The difference between the cost of an investment in a subsidiary and the amount of underlying equity in the net assets of the subsidiary is deferred as an asset or a liability as the case may be and amortized over a period of five years on a straight-line basis. Investments in unconsolidated subsidiaries and affiliates are accounted for using the equity method, except for those valued at cost due to the lack of materiality. The number of unconsolidated subsidiaries accounted for using the equity method was 10 at March 31, 2012 and included: Tsukiboshi Art Co., Ltd. Osaka Stainless Center Co., Ltd. 17 Nisshin Steel Asia PTE. LTD. became an unconsolidated subsidiary accounted for using the equity method in the year ended March 31, 2012 due to the establishment by the Company. The number of affiliates accounted for using the equity method was 20 at March 31, 2012 and included: Nihon Teppan Co., Ltd. Sun Wave Corporation Canox Corporation Sanko Metal Industrial Co., Ltd. Ningbo Baoxin Stainless Steel Co., Ltd. Acerinox, S. A. Bahru Stainless Sdn. Bhd. became an affiliate accounted for using the equity method in the year ended March 31, 2012 due to the increase of the materiality with the beginning of commercial production. Foreign Currency Translation Foreign currency transactions are generally translated using foreign exchange rates prevailing at the respective transaction dates. Receivables and payables in foreign currencies are translated at the foreign exchange rates prevailing at the respective balance sheet dates. The assets and liabilities of overseas subsidiaries are translated into yen at the foreign exchange rates prevailing at the respective balance sheet dates, whereas net assets are translated at historical rates. Cash and Cash Equivalents Cash and cash equivalents include in the Consolidated Statements of Cash Flows comprise cash on hand and in banks, deposits that can be withdrawn upon demand and easily cashable short-term investments with a three-month or shorter redemption term that carry a negligible risk of fluctuation in value. Inventory Valuation Inventories are valued at cost using the weighted average method (the amounts on the Consolidated Balance Sheet reflect the decrease in their value due to their decrease in profitability, if any), except for supplies which are valued at the moving-average cost (the amounts on the Consolidated Balance Sheets reflect the decrease in their value due to their decrease in profitability, if any). Allowance for Doubtful Accounts The allowance for doubtful accounts is evaluated based on the actual bad debt rate in the past. For doubtful receivables etc., the likelihood of collection is evaluated in accounting for the allowance. Investments in Securities Investments in securities are classified into four categories: (1)Trading securities are valued at their fair values on the balance sheet date, and any unrealized gain or loss is charged to income. The Companies had no trading securities at March 31, 2012 and 2011. (2)Held-to-maturity securities are stated at cost after the amortization of premiums or discounts on acquisition, which are amortized over the period to maturity. The Companies had no held-to-maturity securities at March 31, 2012. (3)Investments in unconsolidated subsidiaries and major affiliates are accounted for using the equity method, except for those valued at cost due to their lack of materiality. (4)Available-for-sale securities are valued at their fair values except for those valued at cost due to a lack of fair value information. Applicable unrealized net-of-tax gains and losses are included in accumulated other comprehensive income. Property, Plant and Equipment Depreciation is computed using the declining-balance method except buildings which are accounted for using the straight-line method. 18 The cost of maintenance, repairs and minor renewals is charged to operating income as incurred. Major renewals and improvements are capitalized. The cost of property, plant and equipment retired or otherwise disposed of and the corresponding accumulated depreciation are eliminated from the related accounts, and the resulting profit or loss is reflected in income. Leased Assets Finance leases which do not involve the transfer of ownership rights are accounted for with the method for regular purchase and sale transactions, whereas such finance lease transactions with initial lease dates beginning before March 31, 2008 are accounted for with the methods for rental transactions and periodic capital lease payments are charged to expenses when paid. Lease assets are depreciated with the straight-line method, adopting the lease period as the useful life and assuming a residual value of zero. Deferred Assets Significant bond issue costs, except for those that are not material are deferred and amortized over a reasonable period of time through bond redemption. Other Assets Amortization of intangible assets including software is computed using the straight-line method. Software is amortized over the internally estimated useful life, i.e., five years. Provision for Environmental Remediation The provision for environmental remediation is estimated and recorded to provide for future potential costs, such as waste management costs for stored PCB (polychlorinated biphenyl). Provision for Loss on Disaster The provision for loss on disaster is estimated and recorded to provide for future potential costs, such as restoration costs to repair the machinery and equipment damaged in the Great East Japan Earthquake in march, 2011. Employees’ Retirement Benefits The lump-sum severance benefit payments and the defined benefit pension plans are accounted for using the actuarial calculation of projected benefit obligation for each employee. Allowance for Retirement Benefits for Directors and Corporate Auditors The allowance for retirement benefits for directors and corporate auditors is calculated based on internal rules. The Company decided to abolish the lump-sum severance benefit payments for directors and corporate auditors at the Annual Shareholders’ Meeting held on June 26, 2003. The Company posted the amount for payments of the lump-sum severance benefit payments for their duties performed until June 26, 2003. Reserve for Rebuilding Furnaces Blast furnaces, including related machines, periodically require substantial component replacements and repairs. Such work occurs normally every 10 years after blast furnaces are put into operation. The estimated future costs of such work are provided for and charged to income on a straight-line basis over the periods to the date of the anticipated replacements and repairs. The difference between such estimated costs and the actual costs is charged or credited to income at the time the work takes place. In estimating such future costs for a specific furnace, the general price level increase and other economic factors are taken into consideration. Sales Recognition Sales of finished goods are generally recognized when goods are shipped to the customers. Net Income and Cash Dividends per Share The computation of net income per share is based on the weighted average number of common shares issued and outstanding 19 during each year. Cash dividends per share shown for each year in the accompanying Consolidated Statements of Income are based on cash dividends applicable to the net income of each year. Income Taxes The asset and liability 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 basis of assets and liabilities. Consumption Tax In Japan, consumption tax is imposed on domestic consumption of goods and services at the rate of 5%. The consumption tax imposed on the Companies’ sales to customers is withheld by the Companies at the time of sale and paid to the national government. The consumption tax withheld upon sale is not included in the amount of “Net sales” in the accompanying Consolidated Statements of Income but is recorded as a liability. The balances of consumption tax withheld and consumption tax paid (an asset item), which are paid by the Companies on the purchases of products, merchandise and services from vendors, are offset, and the net balance is included in “Other current liabilities” in the Consolidated Balance Sheets. 3. Accounting Changes (Additional Information) Accounting Changes and Error Corrections “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ statement No. 24 issued on December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ guidance No. 24 issued on December 4, 2009) have been applied effective from the year ended March 31, 2012. 4. U.S. Dollar Amounts U.S. dollar amounts included in the consolidated financial statements and notes thereto represent the arithmetical results of translating yen into dollars on the basis of ¥82.19 = US$1, the effective rate of exchange at March 31, 2012. The inclusion of such dollar amounts is solely for convenience and is not intended to imply that the yen amounts have been or could be readily converted, realized or settled in dollars at ¥82.19 = US$1 or at any other rate. 5. Inventories Details of “Inventories” in the Consolidated Balance Sheet at March 31, 2012 and 2011 are as follows: Thousands of Millions of yen 2012 Finished goods \ 61,904 U.S. dollars 2011 \ 61,562 2012 $ 753,182 Work in process 27,106 29,787 329,797 Raw materials and other supplies 43,373 42,279 527,716 \132,383 \133,628 $1,610,695 Total The amounts of inventories on the Consolidated Balance Sheet at March 31, 2012 reflect the decrease in their value due to their decrease in profitability (after setting off the reversal amount of reducing the book value at the end of the previous consolidated fiscal year). “Cost of sales” in the Consolidated Statement of Income for the year ended March 31, 2012 includes ¥3,013 million (US$36,659 thousand) of such unrealized net loss of inventories. The amounts of inventories on the Consolidated Balance Sheet at March 31, 2011 reflect the decrease in their value due to their decrease in profitability. “Cost of sales” in the Consolidated Statement of Income for the year ended March 31, 2011 includes ¥7,250 million of such unrealized net gain of inventories. 20 6. Investments in Unconsolidated Subsidiaries and Affiliates “Investments in securities” in the Consolidated Balance Sheets at March 31, 2012 and 2011 include investments in unconsolidated subsidiaries and affiliates as follows: Thousands of Millions of yen Stocks of unconsolidated subsidiaries and affiliates U.S. dollars 2012 2011 2012 \48,977 \45,596 $595,900 “Other” in “Investments and long-term receivables” in the Consolidated Balance Sheets at March 31, 2012 and 2011 include investments in unconsolidated subsidiaries and affiliates as follows: Thousands of Millions of yen Equity in unconsolidated subsidiaries and affiliates U.S. dollars 2012 2011 2012 \8,192 \7,612 $99,671 7. Short-term Loans and Long-term Debt Short-term loans at March 31, 2012 and 2011 consisted of the following: Thousands of Millions of yen Bank loans 2012 2011 \ 51,054 \ 26,606 U.S. dollars 2012 $ 621,170 It is a normal business custom in Japan for short-term borrowings to be rolled over. Long-term debt at March 31, 2012 and 2011 consisted of the following: Thousands of Millions of yen 2012 Loans from banks and other financial institutions 2011 U.S. dollars 2012 \106,994 \146,298 $1,301,789 16th 1.68% unsecured bond of the Company due Jul. 2011 - 10,000 - 17th 1.37% unsecured bond of the Company due Nov. 2012 10,000 10,000 121,669 18th 1.66% unsecured bond of the Company due May. 2013 10,000 10,000 121,669 19th 2.20% unsecured bond of the Company due Jun. 2018 10,000 10,000 121,669 20th 1.64% unsecured bond of the Company due May. 2014 20,000 20,000 243,339 1st series unsecured, interest deferrable and early redeemable 50,000 50,000 608,347 subordinated bonds solely for qualified institutional investors*1 Total long-term debt 206,994 256,298 2,518,482 “Current portion of long-term debt” in the Consolidated Balance Sheets (34,809) (49,601) “Long-term debt” in the Consolidated Balance Sheets \172,185 \206,697 (423,519) $2,094,963 *1. (1) From the day after October 9, 2009 – October 31, 2014: Annual rate 4.612 % (fixed rate) (2) From the day after October 31, 2014: 6-Month Yen London Interbank Offered Rate + 4.75% (floating rate) 8. Income Taxes The Company and its domestic subsidiaries are subject to a number of different taxes based on income. Income taxes consist of corporate income tax, inhabitants’ taxes and enterprise taxes. The “Act for Partial Revision of the Income Tax Act etc. for the Purpose of Creating Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and the “Act for Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No.117 of 2011) were promulgated on December 2, 2011 and the staged reduction of the national corporate tax rate and a special reconstruction corporate tax will apply to corporate taxes effective for fiscal years beginning on or after April 1, 2012. 21 As a result, the effective statutory tax rate used to measure the Company’s deferred tax assets and liabilities was changed from 40.4% to 37.8% for the temporary differences expected to be realized or settled in the period from April 1, 2012 to March 31, 2015 and from 40.4% to 35.5% for temporary differences expected to be realized or settled from fiscal years beginning April 1, 2015. The effect of the announced reduction of the effective statutory tax rate was to decrease deferred tax assets, net by ¥518million (US$6,302 thousand) and income taxes-deferred, unrealized gain or loss on available-for-sale securities and deferred gain or loss on hedges increased by ¥1,097 million(US$13,347 thousand), ¥551 million(U.S.$6,704 thousand) and ¥28 million(US$341 thousand) respectively, as of and for the year ended March 31, 2012. Components of the Companies’ deferred income tax assets and liabilities at March 31, 2012 and 2011 are as follows: Thousands of Millions of yen U.S. dollars 2012 2011 2012 Deferred income tax assets: Tax loss carry forwards \32,445 \32,652 $394,756 Non-deductible portion of employees’ retirement benefits Non-deductible portion of reserve for rebuilding furnaces 6,674 3,512 8,137 3,910 81,202 42,730 Loss on impairment of fixed assets 2,070 1,683 25,186 Non-deductible portion of accrued bonus expense 1,599 1,720 19,455 Other Preliminary deferred income tax assets Valuation allowance 7,056 8,152 85,850 53,356 56,254 649,179 (38,516) (37,091) Total deferred income tax assets (468,621) 14,840 19,163 180,558 Unrealized gain or loss on available-for-sale securities 4,011 6,313 48,802 Reserve for postponement of taxation on capital gains from property 2,088 2,500 25,405 969 625 11,790 Deferred income tax liabilities: Other Total deferred income tax liabilities Net deferred income tax assets 7,068 9,438 85,997 \ 7,772 \ 9,725 $ 94,561 The reconciliation of the statutory tax rate to the income tax rate reflected in the consolidated statements of income for the years ended March 31, 2012 and 2011 are as follows: Statutory tax rate 2012 2011 40.4% 40.4% Reconciliation: Valuation allowance 633.8 (21.0) Effect of tax rate reduction 99.4 - Dividends 41.5 5.7 Equity in earnings of unconsolidated subsidiaries and affiliates Other Effective rate of income tax expense 22 (232.3) (16.1) (72.4) 6.9 510.4% 15.9% 9. Employees’ Retirement Benefits Analysis of the reserve account for “Employees’ retirement benefits” at March 31, 2012 and 2011 are as follows: Thousands of Millions of yen Projected benefit obligations Plan assets 2012 2011 2012 \102,620 \106,576 $1,248,571 (70,797) (71,521) (861,382) 31,823 35,055 387,189 (25,661) (28,201) (312,216) 5,645 6,867 68,682 11,807 13,721 143,655 Funded status Unrecognized actuarial differences Unrecognized prior-service costs Total employees' retirement benefits Prepaid pension cost “Employees' retirement benefits” in the Consolidated Balance Sheets U.S. dollars 18,571 17,828 \ 30,378 \ 31,549 225,952 $ 369,607 Components of retirement benefit expense for the years ended March 31, 2012 and 2011 are as follows: Thousands of Millions of yen U.S. dollars 2012 2011 2012 Service costs \2,231 \2,299 $27,144 Interest cost 2,116 2,196 25,745 (1,430) (1,567) (17,399) 2,802 2,492 34,092 Expected return on plan assets Amortization of unrecognized actuarial differences Amortization of unrecognized prior-service costs (1,249) Retirement benefit expense \4,470 (890) \4,530 (15,196) $54,386 Assumptions made in the calculation of the above information are as follows: 2012 2011 Discount rate: 2.0% 2.0% Expected rate of return on plan assets: 2.0% 2.0% Method of attributing the projected benefits Straight-line basis Straight-line basis Amortization of unrecognized actuarial differences: to periods of services: Primarily 17 years Primarily 17 years Amortization of unrecognized prior-service costs: Primarily 14 years Primarily 14 years 10. Contingent Liabilities Contingent liabilities at March 31, 2012 and 2011 are as follows: Thousands of Millions of yen 2012 2011 U.S. dollars 2012 Contingent liabilities arising from: Guarantee of bank loans for employees \ Guarantee of loans for others in the ordinary course of business 775 7,201 \ 971 $ 9,429 7,274 87,614 In addition, the Companies issued letters of guarantee for the future for others in the ordinary course of business. The aggregate amount was ¥16 million (US$195 thousand) and ¥16 million at March 31, 2012 and 2011, respectively. 23 11. Notes Receivable and Payable with Due Dates at the Balance Sheet Dates Financial institutions were closed on March 31, 2012 in Japan. Notes receivable and payable with due dates of March 31, 2012 were accounted for as if they had been settled on March 31, 2012. These balances at March 31, 2012 are as follows: Thousands of Millions of yen U.S. dollars 2012 Notes receivable with due date at March 31 Notes payable with due date at March 31 2012 \1,514 $18,421 2,727 33,179 12. Research and Development Expenses Research and development expenses for the years ended March 31, 2012 and 2011 totaled ¥4,405 million (US$53,595 thousand) and ¥4,501 million, respectively. They were included in selling, general and administrative expenses. 13. Selling, General and Administrative Expenses Principal selling, general and administrative expenses for the years ended March 31, 2012 and 2011 are as follows: Thousands of Millions of yen Freight out U.S. dollars 2012 2011 2012 \15,617 \15,415 $190,011 Salaries, bonuses and allowances 9,084 8,648 110,524 Research and development expenses 4,405 4,501 53,595 14. Mortgaged Properties Breakdown of properties pledged as collateral at March 31, 2012 and 2011 are as follows: Thousands of Millions of yen U.S. dollars 2012 2011 2012 Investments in securities \16 \16 $195 Total \16 \16 $195 Properties pledged as collateral: 15. Adjustment on Revaluation of Land At March 31, 2002, some of the affiliates accounted for using the equity method revalued land in accordance with the Law concerning Revaluation of Land. The Company’s share of a net-of-tax unrealized gain at March 31, 2012 and 2011 has been recorded as a separate component of accumulated other comprehensive income. 16. Net Assets Number and types of stock at March 31, 2012 and 2011 are as follows: Thousands of shares Number of common stocks, issued March 31, 2011 994,500 Increase during the year March 31, 2012 24 Number of treasury stocks 90,722 - 27 994,500 90,749 17. Cash Dividends Cash dividends declared are as follows: Cash dividends payment in the year ending March 31, 2013 Amount of dividends paid May 11, 2012 Board of Directors’ Meeting \1,358 million US$16,523 thousand Cash dividends Books closing per share Effective date \1.5 date Mar. 31, 2012 Jun. 5, 2012 US$0.02 Cash dividends payment in the year ended March 31, 2012 Amount of dividends paid May 13, 2011 Board of Directors’ Meeting \1,811 million Cash dividends per share \2.0 Books closing Effective date date Mar. 31, 2011 Jun. 3, 2011 Cash dividends payment in the year ended March 31, 2011 Amount of dividends paid May 14, 2010 Board of Directors’ Meeting \ 905 million Cash dividends Books closing per share \1.0 Effective date date Mar. 31, 2010 Jun. 4, 2010 18. Reconciliation of Cash on Hand and in Banks to Cash and Cash Equivalents at End of Year The reconciliation of “Cash on hand and in banks” in the Consolidated Balance Sheets at March 31, 2012 and 2011 to “Cash and cash equivalents at end of year” in the Consolidated Statements of Cash Flows for the years then ended are as follows: Thousands of Millions of yen U.S. dollars 2012 2011 \18,241 \18,388 $221,937 12 127 146 18,253 18,515 222,083 maturity periods exceeding three months (17) (132) Cash and cash equivalents at end of year \18,236 \18,383 Cash on hand and in banks Marketable securities Total 2012 Time deposits and short-term investments with deposit terms or (207) $221,876 19. Leases Finance leases which do not involve the transfer of ownership rights with initial lease dates beginning on and after April 1, 2008 are accounted for with the method for regular purchase and sale transactions. Such lease assets are mainly equipment. Finance lease transactions with initial lease dates beginning on and before March 31, 2008 are accounted for with the methods for rental transactions. Details of such finance leases are as follows: (1) Pro forma information regarding leased property at March 31, 2012 and 2011 are as follows: Thousands of Millions of yen 2012 2011 Amount equivalent to leased article acquisition costs \941 \1,491 Amount equivalent to the accumulated depreciation (685) (1,028) Amount equivalent to the year-end balance \256 25 \ 463 U.S. dollars 2012 $11,449 (8,334) $ 3,115 (2) The amount of outstanding future lease payments at March 31, 2012 and 2011, which includes the portion of interest thereon, is as follows: Thousands of Millions of yen 2012 U.S. dollars 2011 2012 \113 \204 $1,375 143 259 1,740 \256 \463 $3,115 Future lease payments: Due within one year Due over one year Total (3) Lease payments and amounts equivalent to depreciation expenses for the years ended March 31, 2012 and 2011 are as follows: Thousands of Millions of yen 2012 Lease payments Amount equivalent to depreciation expenses 2011 U.S. dollars 2012 \203 \287 $2,470 203 287 2,470 Note: The amount equivalent to depreciation expenses is calculated using the straight-line method, which designates the residual value as zero, over the years equivalent to the contracted lease periods. 26 20. Other Comprehensive Income The following table presents reclassifications adjustments and tax effects allocated to each component of other comprehensive income for the year ended March 31, 2012: Thousands of Millions of yen U.S. dollars 2012 2012 \(3,549) $(43,180) (168) (2,044) (3,717) (45,224) 2,239 27,241 (1,478) (17,983) (510) (6,205) (15) (183) Unrealized gain or loss on available-for-sale securities: Amount arising during the year Reclassification adjustments for gains and losses included in net income Amount before tax effect Tax effect Unrealized gain or loss on available-for-sale securities Deferred gain or loss on hedges: Amount arising during the year Reclassification adjustments for gains and losses included in net income Acquisition adjustment Amount before tax effect Tax effect Deferred gain or loss on hedges 1,395 16,973 870 10,585 (323) (3,930) 547 6,655 (390) (4,745) Foreign currency translation adjustment: Amount arising during the year Reclassification adjustments for gains and losses included in net income - Amount before tax effect (390) Tax effect - Foreign currency translation adjustment (390) (4,745) (4,745) Other, net: Amount arising during the year 53 645 Reclassification adjustments for gains and losses included in net income Amount before tax effect Tax effect Other, net - - 53 645 (20) (243) 33 402 Share of other comprehensive income of companies accounted for by the equity method: Amount arising during the year (3,443) (41,891) (3) (36) (3,446) (41,927) \(4,734) $(57,598) Reclassification adjustments for gains and losses included in net income Share of other comprehensive income of companies accounted for by the equity method Total other comprehensive income 27 21. Financial Instruments 1. Status of financial instruments (1) Policy regarding financial instruments The Companies’ cash is put mainly into short-term deposits, and temporary surplus is invested in highly secure financial assets. The Company obtains funds, which are deemed necessary according to its loan and investment plan, mainly from bank loans and bond issue. It also obtains short-term operating funds from bank loans and commercial paper. A group cash management system has been implemented among the Company and major subsidiaries, which enables lending and borrowing of funds in both directions in a recurrent and continuous manner. Derivatives are used to avoid interest rate risk for loans and foreign exchange risk for transactions in foreign currency. The policy on derivatives of the Company and its consolidated subsidiaries restricts the use of derivative transactions to those related to actual demands and forbids their use for the purpose of speculation. (2) Types of financial instruments, their risk and risk management system The Company is exposed to credit risk of customers arising from notes and accounts receivable. In order to manage such risk, due dates and account balances of customers are controlled in accordance with the corporate management rules. The credit status of major customers is also monitored in necessity. Marketable securities and investment in securities are exposed to market value risk. Such securities are mainly those of the corporations with which the Company has business relationship. The Company monitors their market value as well as financial situations of the issuing companies on a regular basis. As loans and bonds have interest rate risk, the Company uses interest rate swap transactions for some loans, which meet the exceptional requirements defined in Japanese generally accepted accounting principles for financial instruments. Derivative transactions are made in accordance with the corporate management rules. The Company makes transactions only with financial institutions with high ratings in order to reduce credit risk. Liquidity risk of operating credits and loans is managed according to a method in which each group company prepares its own cash-flow projections on a timely basis, etc. 2. Estimated fair value of financial instruments Book value, estimated fair value and unrealized gains (losses) of financial instruments on the Consolidated Balance Sheets at March 31, 2012 and 2011 are as follows. The table below does not include financial instruments for which it is extremely difficult to determine the fair value. (Year ended March 31, 2012) Millions of yen (1) Cash on hand and in banks (2) Notes and accounts receivable Book Estimated Unrealized value fair value gain (loss) \ 18,241 \ 18,241 80,323 80,323 - \ - (3) Marketable securities and investments in securities Stocks of subsidiaries and affiliates 21,343 42,958 21,615 Available-for-sale securities 48,655 48,655 - (4) Notes and accounts payable (80,523) (80,523) - (5) Short-term loans (51,054) (51,054) - (6) Commercial paper (7) Bonds (10,000) (10,000) (100,000) (106,472) (6,472) - (106,994) (109,749) (2,755) (8) Long-term loans Loans from banks and other financial institutions 1,092 (9) Derivative transactions 28 1,092 - (Year ended March 31, 2012) Thousands of U.S. dollars Book Estimated Unrealized value (1) Cash on hand and in banks $ (2) Notes and accounts receivable 221,937 fair Value $ 221,937 gain (loss) $ - 977,284 977,284 - Stocks of subsidiaries and affiliates 259,679 522,667 262,988 Available-for-sale securities 591,982 591,982 - (4) Notes and accounts payable (979,718) (979,718) - (5) Short-term loans (621,170) (621,170) - (3) Marketable securities and investments in securities (6) Commercial paper (7) Bonds (121,669) (121,669) - (1,216,693) (1,295,437) (78,744) (1,301,789) (1,335,308) (33,519) (8) Long-term loans Loans from banks and other financial institutions (9) Derivative transactions 13,286 13,286 - Notes: 1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions (1) Cash on hand and in banks and (2) notes and accounts receivable Since these are settled in a short period of time and their fair value is almost equal to the book value, they are based on the book value. (3) Marketable securities and investments in securities Fair value of stocks is based on the price presented by stock exchanges, while bonds are based on the price presented by stock exchanges or financial institutions. (4) Notes and accounts payables, (5) short-term loans and (6) commercial paper Since these are settled in a short period of time and their fair value is almost equal to the book value, they are based on the book value. (7) Bonds Fair value of bonds is based on the market price. The fair value of the 1st Series Unsecured, Interest Deferrable and Early Redeemable Subordinated Bonds Solely for Qualified Institutional Investors is calculated by discounting the principal and interest payments by the assumed discount rate for bonds of the same rating. (8) Long-term loans Fair value of long-term loans is calculated by discounting the principal and interest payments by the assumed discount rates for similar new loans. (9) Derivative transactions Please refer to Note “23. Derivative transactions”. 29 (Year ended March 31, 2011) Millions of yen Estimated Unrealized Book (1) Cash on hand and in banks (2) Notes and accounts receivable value fair value \ 18,389 \ 18,389 90,597 90,597 gain (loss) \ - (3) Marketable securities and investments in securities Held-to-maturity securities Stocks of subsidiaries and affiliates Available-for-sale securities (4) Notes and accounts payable (5) Short-term loans (6) Bonds 127 127 - 20,131 64,894 44,763 52,968 52,968 - (85,513) (85,513) - (26,606) (26,606) (110,000) (118,874) (8,874) - (146,297) (149,536) (3,239) (7) Long-term loans Loans from banks and other financial institutions (8) Derivative transactions 222 222 - 2. Financial instruments for which it is extremely difficult to determine the fair value In “(3) Marketable securities and investments in securities: Stocks of subsidiaries and affiliates”, the fair value for unlisted stocks (¥27,635 million (US$336,233 thousand) and ¥25,465 million in the Consolidated Balance Sheets at March 31, 2012 and 2011, respectively.) does not have to be disclosed because there is no market price for them, their future cash flow cannot be estimated, and because it is deemed very difficult to determine their fair value. In “(3) Marketable securities and investments in securities: Available-for-sale securities”, the fair value for unlisted stocks (¥6,147 million (US$74,790 thousand) and ¥6,142 million in the Consolidated Balance Sheets at March 31, 2012 and 2011 respectively.) and others (¥0 million (US$0 thousand) and ¥1 million in the Consolidated Balance Sheets at March 31, 2012 and 2011, respectively.) does not have to be disclosed because there is no market price for them, their future cash flow cannot be estimated, and because it is deemed very difficult to determine the fair value. Redemption schedule for receivables and marketable securities with maturities at March 31, 2012 and 2011 are as follows: (Year ended March 31, 2012) Millions of yen Over Over Cash on hand and in banks Notes and accounts receivable one year five year Within and within and within one year five years ten years \ 18,104 \ - \- \- 80,323 - - - Over ten years Marketable securities and investments in securities National and local governmental bonds, etc Total 30 12 - 4 - \ 98,439 \ - \4 \- (Year ended March 31, 2012) Thousands of U.S. dollars Cash on hand and in banks $ Over Over one year five year Within and within and within one year five years ten years Notes and accounts receivable 220,270 $ 977,284 Over ten years - $ - $- - - - Marketable securities and investments in securities National and local governmental bonds, etc 146 Total $1,197,700 $ (Year ended March 31, 2011) - 49 - - $49 $- Millions of yen Cash on hand and in banks Over Over one year five year Within and within and within one year five years ten years \ 18,269 \ - \- \- 90,597 - - - Notes and accounts receivable Over ten years Marketable securities and investments in securities Held-to-maturity securities 127 - - - - 12 4 - \108,993 \ 12 \4 \- National and local governmental bonds, etc Total 22. Securities Available-for-sale securities (Year ended March 31, 2012) Thousands of Millions of yen Book Acquisition value cost U.S. dollars Unrealized gain(loss) Book Acquisition value cost Unrealized gain(loss) Securities whose book value exceeds their acquisition cost: Stocks \35,468 \19,913 \15,555 $431,537 $242,280 $189,257 Bonds National and local governmental bonds, etc 16 16 - 195 195 - Subtotal \35,484 \19,929 \15,555 $431,732 $242,475 $189,257 \12,233 \17,094 \(4,861) $148,837 $207,981 $(59,144) Securities whose book value does not exceed their acquisition cost: Stocks Bonds Other Subtotal Total 938 1,156 (218) 11,413 14,065 (2,652) \13,171 \18,250 \(5,079) $160,250 $222,046 $(61,796) \48,655 \38,179 \10,476 $591,982 $464,521 $127,461 Regarding available-for-sale securities for which fair value information was not available, their aggregate book value on the Consolidated Balance Sheets was ¥6,147 million (US$74,790thousand) at March 31, 2012, up from ¥6,142 million at March 31, 2011. 31 (Year ended March 31, 2011) Millions of yen Book Acquisition value cost Unrealized gain(loss) Securities whose book value exceeds their acquisition cost: Stocks \37,010 \18,270 \18,740 Bonds National and local governmental bonds, etc 16 16 - Subtotal \37,026 \18,286 \18,740 \14,620 \18,834 \(4,214) 1,321 1,675 (354) \15,941 \20,509 \(4,568) \52,967 \38,795 \14,172 Securities whose book value does not exceeds their acquisition cost: Stocks Bonds Other Subtotal Total Sale of securities classified as available-for-sale securities and the aggregate gain and loss for the year ended March 31, 2012 and 2011 are as follows: (Year ended March 31, 2012) Thousands of Millions of yen Sale proceeds U.S. dollars \1,389 $16,900 Aggregate gain 789 9,600 Aggregate loss - - (Year ended March 31, 2011) Millions of yen Sale proceeds \198 Aggregate gain - Aggregate loss 12 23. Derivative Transactions The policy on derivatives of the Company and its consolidated subsidiaries restricts the use of derivative transactions to those related to actual demands and forbids their use for the purpose of speculation. The Company and its consolidated subsidiaries use derivative transactions for the purpose of reducing the impact on earnings caused by future market fluctuations, hedging losses, reducing procurement costs and fixing costs. In the years ended March 31, 2012 and 2011, the Company and its consolidated subsidiaries used interest rate swaps, forward exchange contracts and currency options to hedge the risk against rate fluctuations or reduce the interest rates of bank loans, bonds and other means of financing. Under the hedge accounting method, hedging instruments and hedged items for the years ended March 31, 2012 and 2011 are as follows: ・The deferral hedge accounting method is adopted for hedging transactions. As for interest swaps, when the amounts, index and period meet the conditions for hedged items, the exceptional method defined in Japanese generally accepted accounting principles for financial instruments is applied. 32 ・Hedging instruments are interest rate swaps, forward exchange contracts, currency options and currency swaps. ・Hedged items are the interest of bank loans, bonds and other means of financing and foreign currency transactions. 24. Segment Information The Companies operate solely in the steel business segment, the disclosure of business segment information has been omitted. Products and services information (Year ended March 31, 2012) Millions of yen Steel Products Sales to third parties \526,562 Other Total \31,302 \557,864 (Year ended March 31, 2012) Thousands of U.S. dollars Steel Products Other Sales to third parties $6,406,643 $380,849 Total $6,787,492 (Year ended March 31, 2011) Millions of yen Steel products Sales to third parties \515,677 Other Total \29,676 \545,353 Geographical information (Year ended March 31, 2012) Millions of yen Japan Sales to third parties \455,168 North America \40,979 East Asia \38,794 Other \22,923 Total \557,864 (Year ended March 31, 2012) Japan Sales to third parties $5,537,996 Thousands of U.S. dollars North America East Asia Other $498,589 $472,004 North America East Asia $278,903 Total $6,787,492 Notes: Net sales information above is based on customer location. (Year ended March 31, 2011) Millions of yen Japan Sales to third parties \439,035 33 \40,469 \41,523 Other \24,326 Total \545,353 The following tables present the amortization and balance of goodwill as of and for the year ended March 31, 2012 and 2011 by reportable segment. (Year ended March 31, 2012) Millions of yen Steel Amortization \604 Balance as of March 31 604 (Year ended March 31, 2012) Thousands of U.S. dollars Steel Amortization $7,349 Balance as of March 31 7,349 (Year ended March 31, 2011) Millions of yen Steel Amortization \ Balance as of March 31 604 1,208 25. Related Party Transactions Material transactions of the Company with related companies and individuals, excluding transactions with consolidated subsidiaries which are eliminated in the consolidated financial statements and other than those disclosed elsewhere in these financial statements, for the years ended March 31, 2012 and 2011 are as follows: (Year ended March 31, 2012) Millions of yen/Thousands of U.S. dollars Transaction Equity ownership percentage by the Company as of Mar.31,2012 50.0% Description of the Company’s transactions Sale of the Name of related company Nihon Paid-in capital \1,300 Principal business Sale of Teppan million coated Company’s coated Co., Ltd. $15,817 steel steel products thousand Resulting accounting balance 2012 \60,946 $741,526 Account Accounts receivable 2012 \11,556 $140,601 to the related party by the Company Canox \2,310 Sale of Corporation million coated Company’s coated $28,106 steel steel products thousand 15.9% Sale of the to the related party by the Company 34 \43,382 $527,826 Accounts receivable \7,789 $94,768 (Year ended March 31, 2011) Millions of yen Transaction Equity ownership percentage by the Company as of Mar.31,2011 50.0% Description of the Company’s transactions Sale of the Name of related company Nihon Paid-in capital \1,300 Principal business Sale of Teppan million coated Company’s coated steel steel products Co., Ltd. Resulting accounting balance 2011 \60,211 Account Accounts 2011 \11,207 receivable to the related party by the Company Canox \2,310 Sale of Corporation million coated 15.9% Company’s coated Sale of the steel steel products \40,206 Accounts \ 6,770 receivable to the related party by the Company Material transactions of the consolidated subsidiaries with the Company’s related companies and individuals, excluding transactions between consolidated subsidiaries which are eliminated in the consolidated financial statements and other than those disclosed elsewhere in these financial statements, for the years ended March 31, 2012 and 2011 are as follows: (Year ended March 31, 2012) Millions of yen/Thousands of U.S. dollars Transaction Name of related company Nihon Paid-in capital \1,300 Principal business Sale of Teppan million Co., Ltd. $15,817 Equity ownership percentage by the Company as of Mar.31,2012 50.0% Resulting accounting balance Description of the transactions Purchase of the 2012 \20,549 Account Accounts 2012 \7,517 coated steel products by $250,018 payable $91,459 steel Tsukiboshi Shoji thousand Co., Ltd. (Year ended March 31, 2011) Millions of yen Transaction Equity ownership percentage by the Company as of Mar.31,2011 50.0% Name of related company Nihon Paid-in capital \1,300 Principal business Sale of Teppan million coated steel products by steel Tsukiboshi Shoji Co., Ltd. Description of the transactions Purchase of the Co., Ltd. 35 Resulting accounting balance 2011 \19,525 Account Accounts payable 2011 \7,463 Material related company in the years ended March 31, 2012 and 2011 are Acerinox, S. A. Summary of consolidated financial conditions and results of Acerinox, S. A. for the years ended December 31, 2011 and 2010 are as follows: Millions of Euros 2011 2010 €1,819 €2,005 Total non-current assets 2,251 2,235 Total current liabilities 1,201 1,324 Total current assets Total non-current liabilities 988 992 Total net assets 1,881 1,924 Net Sales 4,672 4,500 132 193 73 123 Profit on ordinary activities Profit attributable to the group 26. Other (1) Information on the consolidated cumulative and quarterly results for the year ended March 31, 2012 is as follows: Millions of yen (except per share) 1Q 2Q 3Q 4Q Cumulative results Net sales \136,973 \280,376 \421,529 \557,864 2,820 5,206 5,885 1,104 Income before provision for income taxes 2,143 Net income (loss) 3,925 2,291 (4,868) Net income (loss) per share*1 Quarterly results \ 2.37 \ 4.34 \ 2.53 \ (5.39) Net income (loss) per share*1 \ 2.37 \ 1.97 \ (1.81) \ (7.92) Thousands of U.S. dollars (except per share) 1Q 2Q 3Q 4Q Cumulative results Net sales $1,666,541 $3,411,315 34,311 63,341 Income before provision for income taxes 26,074 Net income (loss) Net income (loss) per share*1 Quarterly results Net income (loss) per share*1 *1. Per share figures are in yen and U.S. dollars. 36 $5,128,714 $6,787,492 47,755 71,602 13,432 27,874 (59,229) $ 0.03 $ 0.05 $ 0.03 $ (0.07) $ 0.03 $ 0.02 $ (0.02) $ (0.10) (2) Significant lawsuits and claims, etc. The Company received ceases and desist orders and surcharge payment orders from the Japan Fair Trade Commission on August 27, 2009 for violation of the antimonopoly law in connection to hot dip zinc coated steel sheets and steel bands (including prepainted and non-prepainted products). Among the said orders, we are dissatisfied with a cease and desist order and surcharge payment order issued in connection to the sale of prepainted hot dip zinc coated steel sheets and steel bands for building material manufacturers and requested for hearings to the Commission on October 1, 2009. After responding to the hearing procedures, on June 13, 2012, we were served with the transcript of the written decision by the Japan Fair Trade Commission that dismissing our hearing request. The Company will respond to the notice appropriately after careful examination of the decision. 27. Major Subsequent Events 1.《Execution of Agreement on the Establishment of Holding Company between Nisshin Steel Co., Ltd. and Nippon Metal Industry Co., Ltd. and Preparation of the Share Transfer Plan》 On March 19, 2012, the Company and Nippon Metal Industry Co., Ltd. (“Nikkinko”) have agreed to establish a holding company (the “Holding Company”) by means of joint transfer of their respective shares (the “Share Transfer”) and have entered into a master business integration agreement (the “Master Business Integration Agreement”) on the same date. Pursuant to the Master Business Integration Agreement, the both companies have entered into a share transfer agreement (the “Share Transfer Agreement”) and have jointly prepared a share transfer plan (the “Share Transfer Plan”) as provided below after respectively obtaining the resolution of the board of directors in the meeting held on April 27, 2012. (1) Objectives of Business Integration through the Share Transfer, etc. Through the business integration, the both companies will not only establish itself as the No. 1 manufacturer in stainless steel business in Japan overall (i.e., technology, development, marketing and earnings), but also develop a firmer business platform in order to make a leap to become one of the top stainless steel manufacturers in the world by consolidating and taking full advantage of their business resources. (2) Outline of the Share Transfer ①Schedule for the Share Transfer ・Execution of Share Transfer Agreement and preparation of Share Transfer Plan (both companies) ・Annual shareholders’ meetings at which approval for the Share Transfer Plan was obtained (both companies) ・Date of delisting from the Tokyo Stock Exchange (both companies) ・Effective date of the Share Transfer ・Date of registration of the incorporation of the Holding Company ・Listing date of shares in the Holding Company April 27, 2012 June 26, 2012 September 26, 2012(scheduled) October 1, 2012(scheduled) October 1, 2012(scheduled) October 1, 2012(scheduled) The Share Transfer is subject to the both companies obtaining the approval such of the relevant authorities (including approvals required under the applicable competition laws overseas) and approval from their shareholders at their respective shareholders’ meetings. The above schedule is subject to change upon discussion between the two companies if such change is necessary in the course of the business integration process or for any other reason. ②Allocation of Shares upon the Share Transfer Name of Company Nisshin Steel Nikkinko Share Transfer Ratio 1.00 0.56 37 (3) Overview of the Holding Company to be Established as a result of the Share Transfer Trade Name Nisshin Seiko Holdings Kabushiki Kaisha (“Nisshin Steel Holdings Co., Ltd.” in English) (2) Business Description Management and administration of subsidiaries, etc. which engage in the business of, among others, manufacturing, processing and sales of steel products and non-steel products and other business incidental thereto (3) Location 4-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo (4) Representative President & Chief Toshinori Executive Officer and Miki Representative Director (5) Paid-in Capital 30 billion yen (6) Net Assets To be determined (7) Total Assets To be determined (8) Date of Fiscal Year End March 31 Name of Shareholder Mitsubishi UFJ Trust and Banking Corporation Registry Administrator (1) (9) (Current President & Chief Executive Officer and Representative Director of the Company) 2.The Company decided to issue a domestic unsecured bond at the Board of Directors Meeting held on May 11, 2012. The bond was issued on June 4, 2012. Details of the bond are as follows: Total amount: ¥20,000 million (US$243,339 thousand) Interest rate: 0.618% Due date: June 2, 2017 38 39 Investor Information (As of March 31, 2012) Nisshin Steel Co., Ltd. Registered Head Office Shin Kokusai Building, 4-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo l00-8366, Japan Telephone: (81)-3 3216-5566 Facsimile: (81)-3 3216−5546 Year of Establishment 1928 Year of Incorporation 1959 Common Stock Authorized: 3,977,964 thousand shares Issued: 994,500 thousand shares Capital: ¥79,913,126 thousand Common Stock Price Range (Tokyo Stock Exchange) First Quarter 2012 2011 2010 High Low High Low High Low ¥181 ¥141 ¥207 ¥140 ¥267 ¥163 Second Quarter 164 133 167 135 223 153 Third Quarter 138 100 189 140 169 122 Fourth Quarter 149 112 188 117 197 147 Note: Years ended March 31. Number of Shareholders 44,400 Independent Certified Public Accountants Ernst & Young ShinNihon LLC For further information or additional copies of our corporate brochure or annual report, please contact the Public & Investor Relations Term. Public & Investor Relations Term General Administration & Risk Management Department Nisshin Steel Co., Ltd. Shin Kokusai Building, 4-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo l00-8366, Japan Telephone: (81)-3 3216-5566 Facsimile: (81)-3 3216-5546 40 (As of June 26, 2012) Managing Executive Officers Kenji Minami Kazuhisa Obama Yoshikazu Tsuda Yukio Uchida Koji Mizumoto Hiroshi Takahashi Hideyuki Moriya Katsuhisa Miyakusu Junya Hayakawa Junichi Higurashi Kiyoshi Yasui Takashi Nakao Nobuhiro Miyoshi Tetsuo Kaharu Executive Officers Makoto Haya Takayuki Nakanori Hiroyuki Aihara Takayuki Kondo Shigeru Matsunaga Naoto Hiramatsu Toshiaki Naganuma Atsushi Tsuchiya Akira Ichii Hideo Tanaka Printed in Japan