Notice of the Annual General Shareholders Meeting for the 85th Period

Transcription

1 Notice of the Annual General Shareholders Meeting for the 85th Period to be held in Osaka, Japan on June 19, 2008 Editor s notes: Sumitomo Metal Industries, Ltd. Osaka, Japan 1. Please note that the official text of this document has been prepared in Japanese. The information herein stated is provided only for reference purposes. The company is not responsible for the accuracy of the information. To the extent these is any discrepancy between the English translation and original Japanese version, please refer to the Japanese version. 2. The financial statements included in this Notice of the Annual General Shareholders Meeting are prepared in accordance with the accounting principles and practices generally accepted in Japan. 3. Shareholders who live in countries outside Japan should exercise their voting rights through the custodians of their shares. Please communicate with your custodian regarding the appropriate procedures to exercise your voting rights.

2 (Securities Code: 5405) May 29, 2008 To our Shareholders From Hiroshi Tomono Representative Director & President Sumitomo Metal Industries, Ltd. 5-33, Kitahama 4-chome, Chuo-ku, Osaka, Japan Notice of the Annual General Shareholders Meeting for the 85th Period Sumitomo Metal Industries, Ltd. (hereinafter SMI or the Company ) invites you to attend its Annual General Shareholders Meeting to be held at the date and venue listed below. If you are unable to attend the Annual General Shareholders Meeting, you may exercise your right to vote by mail or electronically (via the Internet, etc.). Please read the reference materials below before you vote. Shareholders Meeting Information 1. Date June 19, 2008 (Thur.) 10:00 a.m. 2. Venue Tower Wing 3rd floor, RIHGA Royal Hotel Osaka 3-68, Nakanoshima 5-chome, Kita-ku, Osaka, Japan 3. Purposes of the meeting Matters to be reported 1. The Business Report, Consolidated Financial Statements and Financial Statements for the 85th Period (from April 1, 2007 to March 31, 2008) 2. The Independent Auditors Report and Audit Report of the Board of Corporate Auditors for the 85th Period Matters to be voted upon Proposal No. 1 Election of ten (10) Directors Proposal No. 2 Election of three (3) Corporate Auditors The business report, consolidated financial statements, financial statements and certified copies of the independent auditors reports and Audit Report of the Board of Corporate Auditors are included in the appended Reports for the 85th Period

3 Exercising voting rights (Exercising voting rights by mail) Shareholders are requested to vote on the proposals using the enclosed proxy card and ballot, and return it to us so that it arrives no later than 6:00 p.m. (Japan time) on 18 June, 2008 (Wednesday). (Exercising voting rights electronically) [Exercising voting rights via the Internet] Shareholders are requested to follow the instructions on page 10 and vote on the proposals by 6:00 p.m. (Japan Time) on 18 June, 2008 (Wednesday). If you vote multiple times, the final vote will be deemed to be valid. If a vote is duplicated by being exercised both via mail and the Internet, the vote received via the Internet shall be deemed to be valid. [Electronic voting platforms] Custodian trust banks and other nominee shareholders (including Standing Proxies) who have applied in advance to use the voting platform operated by Investor Communications Japan Inc. (a joint-venture company established by the Tokyo Stock Exchange Inc. and others) may use this platform rather than voting via the Internet, to exercise their vote electronically. Shareholders attending the meeting are requested to hand in the enclosed proxy card and ballot to the reception desk at the meeting venue. -2-

4 Reference documents for the General Shareholders Meeting The proposals and reference materials Proposal No. 1: Election of ten (10) Directors The terms of all ten (10) Directors will expire as of the conclusion of this Annual General Shareholders Meeting. The Shareholders are requested to elect ten (10) Directors to fill these vacancies. The Director candidates are listed below. Name (Date of birth) 1 Hiroshi Shimozuma (Jan. 13, 1937) Personal history, positions, responsibilities and directorship in other companies and organizations Apr Jun Jun Jun Jun Jun Jun Jun to present Entered SMI Director Managing Director Senior Managing Director Executive Vice President Director, Executive Vice President Director, President Director, Chairman of the Board of Directors Directorship in other companies and organizations: Chairman of the Kansai Economic Federation, Chairman of Keihanna Interaction Plaza Incorporated Ownership of SMI shares 437,907 2 Hiroshi Tomono (Jul. 13, 1945) Apr Jun Jun Apr Jun Apr Jun to present Entered SMI Director Managing Executive Officer Senior Managing Executive Officer Director, Senior Managing Executive Officer Director, Executive Vice President Director, President 140,664 Directorship in other companies and organizations: Chairman of the Iron & Steel Institute of Japan -3-

5 Name (Date of birth) 3 Tsutomu Ando (Mar. 31, 1945) Personal history, positions, responsibilities and directorship in other companies and organizations Apr Jun Jun Jun Apr Apr Jun Apr Apr Jun to present Entered SMI Director, General Manager of Tubular Products Division Managing Executive Officer, General Manager of Tubular Products Division Managing Executive Officer, General Manager of Speciality Tubular Products Division Senior Managing Executive Officer, President of Pipe & Tube Company, General Manager of Wakayama Steel Works Senior Managing Executive Officer, President of Pipe & Tube Company Director, Senior Managing Executive Officer, President of Pipe & Tube Company Director, Executive Vice President, President of Pipe & Tube Company Director, Executive Vice President Director, Executive Vice President, General Manager of Osaka Head Office Responsibilities: Steel Sales & Production Administration and Project Development Departments, Domestic and Overseas Offices, Sales of all Internal Companies, General Manager of Osaka Head Office Ownership of SMI shares 156,370 4 Fumio Hombe (Nov. 29, 1946) Apr Jun Apr Jun Jun to present Entered SMI Managing Executive Officer Senior Managing Executive Officer Director, Senior Managing Executive Officer Director, Executive Vice President 143,598 Responsibilities: Corporate Planning, Internal Auditing, Treasury, Public Relations & Investor Relations, General Affairs, Legal, Personnel & Industrial Relations and Safety & Health Departments, Internal Control Project Team Directorship in other companies and organizations: President of East Asia United Steel Corporation -4-

6 Name (Date of birth) 5 Yasuyuki Tozaki (Jul. 25, 1946) Personal history, positions, responsibilities and directorship in other companies and organizations Apr Oct Jun Apr Apr Jun to present Entered SMI Managing Executive Officer, General Manager of Corporate Research & Development Laboratories Managing Executive Officer, General Manager of Corporate Research & Development Laboratories, General Manager of Center of Application Technology for Customers Senior Managing Executive Officer, General Manager of Corporate Research & Development Laboratories, General Manager of Center of Application Technology for Customers Executive Vice President Director, Executive Vice President Responsibilities: Environment, Technology & Quality Administration, Blast Furnace Project and Intellectual Property Departments, Corporate Research & Development Laboratories, Center of Application Technology for Customers, Technology of all Internal Companies Ownership of SMI shares 110,762 6 Yasuo Imai (Oct. 22, 1948) Jul Jul Jul Jun Jul Jul Apr Jun Apr to present Entered Ministry of International Trade and Industry (MITI) Director - General of Manufacturing Industries Bureau, MITI Commissioner of Japan Patent Office Retired from MITI Adviser of Japan Industrial Policy Research Institute (JIPRI) Senior Managing Executive Officer, Executive Vice President of Pipe & Tube Company, SMI Senior Managing Executive Officer, President of Pipe & Tube Company, SMI Director, Senior Managing Executive Officer, President of Pipe & Tube Company, SMI Director, Executive Vice President, President of Pipe & Tube Company, SMI 72,260 Responsibilities: Pipe & Tube Company -5-

7 Name (Date of birth) 7 Syuichiro Kozuka (Nov. 13, 1948) Personal history, positions, responsibilities and directorship in other companies and organizations Apr Apr Oct Apr Jun Apr to present Entered SMI Managing Executive Officer, General Manager of General Affairs Department, General Manager of Personnel & Industrial Relations Department Managing Executive Officer, General Manager of General Affairs Department Managing Executive Officer Director, Managing Executive Officer Director, Senior Managing Executive Officer Responsibilities: General Affairs, Legal, Personnel & Industrial Relations and Safety & Health Departments Ownership of SMI shares 80,029 8 Yoshinari Ishizuka (Jan. 21, 1949) Apr Apr Jun Apr Apr to present Entered SMI Managing Executive Officer, General Manager of Corporate Planning Department, General Manager of Wakayama CTR Project Team Director, Managing Executive Officer Director, Senior Managing Executive Officer, General Manager of Treasury Department Director, Senior Managing Executive Officer 78,631 Responsibilities: Internal Control Project Team, Treasury and Public Relations & Investor Relations Departments Directorship in other companies and organizations: President of Sumikin Financial Service Co., Ltd. -6-

8 Name (Date of birth) 9 Kouji Morita (Jan. 6, 1947) Personal history, positions, responsibilities and directorship in other companies and organizations Apr Entered SMI Jun Assistant General Manager of Kansai Steel Division, SMI Jan Managing Director of Sumitomo Metal (SMI) Electronics Devices Inc. Sept President of Sumitomo Metal (SMI) Electronics Devices Inc. Jun Senior Managing Executive Officer, Executive Vice President of Railway, Automotive & Machinery Parts Company, SMI Apr Senior Managing Executive Officer, President of Railway, Automotive & Machinery Parts Company, SMI Jun Director, Senior Managing Executive Officer, President of Railway, Automotive & Machinery Parts Company, SMI Apr Director, Senior Managing Executive Officer, President of Railway, Automotive & Machinery Parts Company, SMI, Assistant General Manager of Titanium Division to present Responsibilities: Railway, Automotive & Machinery Parts Company Directorship in other companies and organizations: Chairman of Huizhou Sumikin Forging Co., Ltd., President of SMI Crankshaft Management, Inc., President of SMI Retarder Management, GmbH Ownership of SMI shares 26, Ichiro Miyasaka (Nov. 10, 1948) Apr Apr Apr Apr Apr to present Entered SMI Managing Executive Officer Managing Executive Officer, General Manager of Nagoya Sales Office Senior Managing Executive Officer, General Manager of Nagoya Sales Office Senior Managing Executive Officer 62,186 Responsibilities: Automotive Steel Sheet Sales, Steel Sheet Sales and Osaka Steel Sheet Sales Departments Directorship in other companies and organizations: President of SSC CO., LTD., President of SSC Kyushu CO., LTD. Notes: 1. There are no special relationships between the candidates and SMI. 2. On June 1999, SMI introduced an executive officer system. -7-

9 Proposal No. 2: Election of three (3) Corporate Auditors As of the conclusion of this Annual General Shareholders Meeting, Corporate Auditor Kunihiko Suemitsu will resign, and the terms of office of both Shigeru Sakurai and Eiji Asada as Corporate Auditors will expire. This proposal calls on the Shareholders to elect three (3) Corporate Auditors, and has the approval of the Board of Corporate Auditors. The Corporate Auditor candidates are listed below. The Corporate Auditor candidate Eiji Asada is an Outside Corporate Auditor candidate as stipulated in Article 2, Paragraph 3, Item 8 of the Enforcement Regulations of the Company Act. Name (Date of birth) 1 Shigeru Sakurai (Mar. 2, 1948) 2 Kitaro Yoshida (Jan. 16, 1949) 3 Eiji Asada (Jan. 29, 1939) Personal history, positions, responsibilities and directorship in other companies and organizations Apr Jun Jun Oct Apr Jun to present Jul Aug Apr Apr Apr to present Jun Oct Jun Jan May Jun Jun May Jun Jul to present Entered SMI General Manager of Legal Department General Manager of General Affairs Department General Manager of General Affairs Department General Affairs Department Standing Corporate Auditor (full-time) Entered SMI Assistant General Manager of Kokura Steel Works, SMI Director, General Manager of Business Division, Sumitomo Metals (Kokura), Ltd. President of Sumitomo Metals (Kokura), Ltd. Internal Auditing Department, SMI Entered Price, Waterhouse & Co. Registered as a Certified Public Accountant Entered Tohmatsu Awoki & Co. (now Deloitte Touche Tohmatsu) Partner of Deloitte Touche Tohmatsu Representative Partner of Deloitte Touche Tohmatsu Senior Executive partner, Office Representative Partner (Tokyo) of Deloitte Touche Tohmatsu Representative Partner, Chairman of Deloitte Touche Tohmatsu Representative Partner of Deloitte Touche Tohmatsu Retired from Deloitte Touche Tohmatsu Corporate Auditor, SMI Ownership of SMI shares 68,379 20,000 11,499 Notes: 1. There are no special relationships between the candidates and SMI. 2. Information concerning Outside Corporate Auditor candidate Eiji Asada is as follows. a. The candidate has met the Company s expectations as a certified public accountant conversant with Japanese corporate accounting issues in his capacity as an Outside Corporate Auditor in the three years and eleven months since his appointment as a Corporate Auditor to SMI in July The Company believes that if reelected, the candidate will continue to perform his duties as a Corporate Auditor in an appropriate manner. b. In the past, the candidate has not participated in company business apart from his role as an Outside Director or Outside Corporate Auditor, and the Company believes that the candidate, for the reasons given in a. above, will perform his duties as a Corporate Auditor in an appropriate manner. -8-

10 c. In November 2005 the Fair Trade Commission of Japan concluded that the Company s participation in the bidding for steel bridge construction projects had violated the Antimonopoly Act. In December 2007, the Commission issued a Surcharge Payment Order to the Company for violation of the Antimonopoly Act in participation in bidding for medium-pressure gas pipe related works ordered by Osaka Gas Co., Ltd. Furthermore, since July 2007, the Commission investigated the Company on suspicion of violating the Antimonopoly Act in relation to the sales of sheet piles and steel pipe piles. In June 2008, the Commission found that the Company violated certain provisions of the Act. We are not subject to any penalty fines nor any administrative sanctions. From his position as an Outside Corporate Auditor, the candidate is proposing ways to improve systems that will ensure that the Company strictly abides by the Antimonopoly Act, and is working to ensure that the business activities of the Company s directors and employees comply with the requirements of laws and regulations. d. The candidate has been an Outside Corporate Auditor of Fudo Construction Co., Ltd. (presently Fudo Tetra Corporation) since June In March 2006, former employees of Fudo Construction Co., Ltd. were found guilty of collusion in connection with the work ordered by the Tokyo Metropolitan Government. In June 2007 the Commission issued a Cease and Desist Order and a Surcharge Order to the company for violation of the Antimonopoly Act concerning specific civil engineering and construction projects ordered by the Defense Facilities Administration Agency. In August 2007 the Commission concluded that the company s participation in bidding for construction projects ordered by Niigata City had violated the Antimonopoly Act. In response, the candidate is proposing ways to improve compliance systems within Fudo Tetra Corporation to prevent reoccurrence. -End- -9-

11 Directions for voting via the Internet 1. Access the Company s voting site ( Follow the instructions on the screen and enter the voting code and password (that you received with your proxy card and ballot) then exercise your vote. Other than using a personal computer, you may access the site via mobile phone and vote (provided that your mobile phone is capable of supporting 128-bit SSL encryption). 2. The voting code and password (including a modification to the password by the shareholder) are valid for this General Shareholders Meeting. The password is important information that verifies the identity of the shareholder; please take good care of your password until the end of the Shareholders Meeting. 3. The shareholder will bear the cost imposed by the service provider for any connection fees to access the voting site as well as any telecommunications costs imposed by telecommunication service providers. 4. Any personal computer to be used in voting must have Internet browsing software Microsoft Internet Explorer 5.5 SP2 or later versions, or Netscape 6.2 or later versions installed. (Note) Microsoft is a trademark of U.S. Microsoft Corporation, registered in the U.S. and worldwide. Netscape is a trademark of Netscape Corporation, registered in the U.S. and worldwide. For enquiries concerning how to vote via the Internet, please contact the Stock Transfer Agency Department, The Sumitomo Trust and Banking Co., Ltd. (The Company s Registrar of Shareholders) Service available 24 hours per day on If there are any matters that require these Reference Documents for the General Shareholders Meeting or the attached Business Report, Consolidated Financial Statements and Financial Statements to be revised up until the day before the General Shareholders Meeting, then revisions will be published on the Company s homepage ( -10-

12 (Appendix to Notice of the Annual General Shareholders Meeting for the 85th Period) Report of the 85th Period (from April 1, 2007 to March 31, 2008) Business Report Consolidated Financial Statements - Consolidated Balance Sheet - Consolidated Statement of Income - Consolidated Statement of Changes in Net Assets (Reference) Summary of the Consolidated Statement of Cash Flows Summary of Segment Information Financial Statements - Balance Sheet - Statement of Income - Statement of Changes in Net Assets Independent Auditors Report for the Consolidated Financial Statements (certified copy) Independent Auditors Report (certified copy) Audit Report of the Board of Corporate Auditors (certified copy) Sumitomo Metal Industries, Ltd.

13 Business Report (from April 1, 2007 to March 31, 2008) 1. Business overview of the SMI Group (1) Business results for the fiscal year ended March 31, ) Business environment in the 85th period ended March 31, 2008 During the reporting period, domestic and international demand for steel was firm. Demand for steel products in the automotive and energy sectors - where the Sumitomo Metals Group is focusing its efforts - was favourable in markets globally. Given these conditions, Group production has continued at high levels, despite a decline in domestic demand for steel products used in construction sector, due to the revision of the Building Standards Law. Raw material costs have escalated drastically due to price increases for shipping freight, non-ferrous metals and other inputs. In the fourth quarter there were unforeseen events which had a considerable influence on coal prices, such as the flooding of some Australian coal mines by heavy rain which limited the supply of coal. 2) Sumitomo Metals Group business The Group conducted business in line with the Medium-Term Business Plan (FY2006 to FY2008) announced in April The fundamental policy of the Plan is to maximize corporate value through continuous growth in which there is a balance between quality and scale. Our Group s greatest strength has been its ability to supply the solutions and distinctive products its customers want to be manufactured by Sumitomo Metals. The current reporting period is the second year of the 3-year Medium-Term Business Plan announced in April 2006, and business results have progressed steadily. As shown in Tables 1 and 2 below, recurring profit was 29.4 billion yen less than the same period in the previous year, which includes the increase in depreciation of approximately 16.0 billion yen as a result of a tax reform, 9.0 billion yen arising from a tax effect by its affiliated company, SUMCO Corporation, in FY2006, as well as 5.0 billion yen impact resulted from a replacement of blast furnace. Excluding these impacts of regulatory and governmental changes as well as temporary factors, we have achieved almost the same level of profit as in the previous period. Table 1. Consolidated business results FY2006 FY2007 (billion yen) Increase/(decrease) Amount Percentage Net sales 1, , % Operating profit (29.3) (9.7%) Recurring profit (29.4) (9.0%) Net income (46.1) (20.4%) - 1 -

14 Table 2. Segment performance in the reporting period (billion yen) Net sales (*) Increase/ Operating (*) Increase/ (decrease) profit (decrease) Steel 1, % (9.7%) Pipe & Tube Company % Steel Sheet, Plate & Structural Steel % Company Railway Automotive & Machinery % Parts Company Sumitomo Metals (Kokura), Ltd % Sumitomo Metals (Naoetsu), Ltd % Other % Engineering % Electronics % (0.2) - Other % % Corporate or eliminations - - (0.3) - Total 1, % (9.7%) Note: (*) Percentage compared with the previous period. 3) Reporting period management projects The Sumitomo Metals Group has been conducting its business with the objectives of accelerating the distinctiveness between itself and its competitors, and achieving continuous growth with a balance between quality and scale. At Kashima Steel Works, the new No. 3 Blast Furnace began operations in May We decided to make an investment in Wakayama Steel Works to boost annual production capacity to 5 million tons of crude steel. Our Group s crude steel production in FY2012 after the completion of investments in Wakayama Steel Works is expected to exceed 15 million tons per year - up more than 1 million tons from our production capacity in FY2007. The Pipe & Tube Company is aiming to further enhance its presence as one of the world s most competitive pipe and tube manufacturers. In the reporting period, construction began at an integrated seamless pipe manufacturing joint venture project with Vallourec Group. At Kashima Steel Works, construction is underway to increase the capacity to produce ultra-high-strength large-diameter welded steel pipe. The Steel Tube Works in Amagasaki boosted its capacity to produce Super High-end boiler tubes for boilers that will have high energy efficiency that will help keep CO 2 emission at a low level. In the reporting period, the Steel Sheet, Plate & Structural Steel Company collaborated with its business partners to expand its steel sheet business in the growing foreign market. The Company decided to participate in an integrated steel works construction project of Bhushan Steel Limited in India, and agreed to provide technical assistances to its Indian partner. In Vietnam, the Company has been working with China Steel Corporation of Taiwan to promote a steel sheet manufacturing and selling business, which is scheduled to begin operation in At Kashima Steel Works in Japan, a new pickling line, in addition to the continuous galvanizing line, was completed and started operation to create a manufacturing system for high-grade steel sheet for automotive use. Investment in the plate mill of Kashima Steel Works to expand capacity to produce high-end steel plate for the energy development sector was also completed. At the Railway, Automotive & Machinery Parts Company, the Osaka Steel Works completed an investment project designed to expand its capacity to produce railway wheels by 20 percent to 240 thousand units per annum, and began operations in April, to meet increased demand led by the North American market. Forged crankshaft are critical automotive engine components, and the Company is promoting its Global 10 strategy that aims to achieve a 10% share of the global market for forged crankshafts, by running three - 2 -

15 manufacturing hubs located in Japan (Osaka), United States (Kentucky) and China (Guangdong). In China, the No.2 forging press line started operation in November In the United States, the No.3 forging press line is under construction, and is scheduled to start operation in January Sumitomo Metals (Kokura), Ltd., our Group s manufacturer of specialty steel bars and wire rods, is currently implementing a project to introduce new equipment that includes a refining furnace and continuous casting mill, to innovate its steel-making process to accelerate its distinctiveness from its competitors. Our engineering business, and electronics business and other entities focused their resources on their core competencies, to enhance their corporate value. Table 3 below summarizes these major business projects

16 Table 3. Major business projects in the reporting period Segment Target Detail Investment Amount Enable annual capacity of Renovation of No.3 Blast 8 million tons at Kashima Furnace Steel Works (volume expansion) Iron & Steelmaking process Pipe & Tube Steel Sheet Plate & Structural Steel Railway, Automotive & Machinery Parts Other Enable annual capacity of 5 million tons at Wakayama Steel Works Expand production capacity of super highend boiler tubes Expand production capacity of super highend seamless pipe products Establish a manufacturing hub for seamless pipe in Brazil Expand production capacity of ultra-highstrength line pipes Establish a manufacturing system of high-grade steel sheet for automotive use Enable 2-million-ton annual capacity of highend steel plate Strengthen relationship with a partner in the steel sheet sector in India Establish manufacturing hub of steel sheet in Vietnam Expand forged crankshaft business in China. Expand capacity to produce railway wheels Expand forged crankshaft business in North America Achieve steel-making process innovation at Sumitomo Metals (Kokura), Ltd. Note: (*) Total Investment by joint venture 1 st step: Construction of new No.1 Blast Furnace, etc. 2 nd step: Construction of new No.2 Blast Furnace, Reinforcement of steel making facilities, etc. Introduction of new pipeproduction mill and others facilities Capacity improvement of new pipe-production mill and secondary line Establishment of a joint venture with Vallourec Group for integrated seamless pipe mill Equipment improve at the plate mill and large-diameter (UOE) pipe mill Introduction of new continuous galvanizing line and pickling line Renovation of heat furnace and cut-off line (end-shear) Participation in an integrated steel works project of Bhushan Steel Limited in India Establishment of a steel sheet manufacturing joint venture with China Steel Corporation Introduction of a 2 nd forging line at Huizhou Sumikin Forging Co., Ltd. Renovation of heat treatment furnace (Increase in production capacity from 200 thousand to 240 thousand units per year) Introduction of 3 rd forging line at International Crankshaft Inc. Introduction of new refining furnace, continuous casting mill and other facilities (billion yen) Timeline 29.0 Started operation in May, Scheduled to begin operation in June, Scheduled to begin operation in Oct., Started operation in Oct., Scheduled to begin operation in July, 2008 (*) Scheduled to begin operation in Scheduled to begin operation in Mar., Started operation in Sept., Started operation in Nov., 2007 (Technical - Assistance) (*) Scheduled to begin operation in Started operation in Nov., Started operation in April, Scheduled to begin operation in Jan., Scheduled to begin operation in Mar.,

17 In the reporting period our Group strengthened its alliances with its business partners. We increased the amount of cross-shareholdings with Nippon Steel Corporation and Kobe Steel Ltd to deepen and expand a range of cooperative relationships. We are working closely with Sumitomo Corporation to implement an integrated steel plant to manufacture seamless pipe at Brazil, which is scheduled for completion in In line with this development, we increased the cross-shareholding arrangement with Sumitomo Corporation to deepen the cooperative relationship between our two companies in sales and raw-material procurement. To raise the level of corporate value of the Sumitomo Metals Group, we need to enhance our intangible assets in addition to improving the competitiveness of our steel works and our financial state. Examples of these intangible assets are the Sumitomo business philosophy: Steadiness and reliability are of the greatest importance ; our own technology that we believe is highly differentiated from our competitors; our relationships of trust built up through business with our customers; and the pride and commitment of our employees to their work. Our reputation in the minds of our customers and the trust that they place in us are some of our Group s most valuable assets. In the reporting period, Shell Exploration & Production Asia Pacific named us as their Supplier of the Year on account of the quality of our seamless pipes. As a manufacturer, technical development is a core issue in our management. Based on our Group s technical development policy that places great importance on the development of utility technology that aims to increase our value in our customers eyes, we have carefully selected the fields to which we devote our resources, and have actively collaborated with industry, government and academia. Our technical achievements have been recognized outside our industry. For example, we won the Prime Minister s Prize at the second Monodzukuri Nippon Grand Awards for our method of manufacturing high-quality steel plates for structural uses by utilizing nano-sized fine particles. In December 2007 the Fair Trade Commission issued a Surcharge Payment Order to the Company for violation of the Antimonopoly Act in participation in bidding for mediumpressure gas pipe related works ordered by Osaka Gas Co., Ltd. Furthermore, since July 2007, the Commission investigated the Company on suspicion of violating the Antimonopoly Act in relation to the sales of sheet piles and steel pipe piles. In June 2008, the Commission found that the Company violated certain provisions of the Act. We are not subject to any penalty fines nor any administrative sanctions. The Company is working to strengthen systems to ensure that the Antimonopoly Act is strictly observed, and will further increase levels of compliance. 4) Approaches to investment, fund procurement and the return of profits to shareholders The Sumitomo Metals Group intends to maximize its corporate value through sustainable growth with the optimum balance between quality and scale. Cash generated by our business will be used in investments aimed to increase corporate value. Our investment strategy calls for investment to help accelerate distinctiveness and bring cash returns in excess of the cost of capital to contribute to our corporate value. We then pass on the appropriate amount of returns to our shareholders. Our dividends are generally paid under a stable dividend policy. In terms of our financial portfolio, we are aiming to maintain a D/E ratio of 1.0 or less. In the reporting period, Group investment in plant and equipment totaled billion yen, of which billion yen was invested in Steel, 3.6 billion yen in Electronics and 3.4 billion yen in other business sectors. As a result of the cash demand for this and other investment, outstanding debt as of the end of the reporting period was billion yen - 5 -

18 with an increase of billion yen from the previous period. We expect to make a year-end dividend of 5 yen per share, bringing the total cash dividend for the full fiscal year, including the earlier interim dividend payment, to 10 yen per share. (*) D/E ratio = Debt Equity Ratio (debt / shareholder s equity) (2) Issues facing the SMI Group A major issue for FY2008 will be the unprecedented surge in raw material prices. Compared to the current reporting period, the average cost of our products is expected to rise by more than 30,000 yen per ton. Our Company is making every effort to reduce costs, including the establishment of the Cost Reducing Team at the end of March Nevertheless, the current round of increase in raw materials cost cannot be fully off-set by internal efforts and we will have to obtain better pricing for our products while we seek kind understandings from our customers. The global environment is also a crucial issue. The contributions that we make to protect the global environment are directly linked to the growth in the value of the Sumitomo Metals Group. Among the world s blast furnace steel makers, our Group s CO 2 emission per ton of steel is at one of the lowest levels. In addition to reducing the amount of CO 2 generated during the manufacturing process, it is also important to contribute to emission reductions through our products that enable the manufacture of lighter cars and the development of energy sources that will place lower burdens on the environment. At our Brazilian blast furnaceintegrated seamless steel pipe plant, we are planning to build a blast furnace that will be fired with charcoal that enables us to greatly control CO 2 emission. Going forward, we will continue to contribute to society through management that gives careful consideration to the global environment, thereby making efforts to enhance our corporate value. The Sumitomo Metals Group, adhering to the Sumitomo business philosophy which has been refined over 400 years and epitomized by the words Steadiness and reliability are of the greatest importance, and over a century of Sumitomo Metals manufacturing history, is making efforts to build a corporate structure that can ensure steady, high levels of profit, and maximize corporate value through continuous growth. Based on this approach, the Sumitomo Metals Group will seek to become a company trusted by its shareholders and all stakeholders alike

19 (3) Trends in business results, and assets and liabilities of SMI Group and the Company in the reporting period and the previous three fiscal years 1) Business results and assets and liabilities of SMI Group Summary FY2004 ended March 31, 2005 FY2005 ended March 31, 2006 FY2006 ended March 31, 2007 Sales Steel Engineering Electronics Other yen bil. 1, yen bil. 1, yen bil. 1, Reporting period (FY2007 ended March 31, 2008) yen bil. 1, Total 1, , , ,744.5 Recurring profit Net income Net income per share Total assets Net assets yen 1, yen 2, yen 2, yen 2, Note: Net income per share is calculated based on the average number of outstanding shares throughout the fiscal year. The number of shares outstanding excludes treasury stock. 2) Business results and assets and liabilities of the Company Summary FY2004 ended March 31, 2005 FY2005 ended March 31, 2006 FY2006 ended March 31, 2007 Productio mil. tons n volume Sales volume Sales (yen bil.) Reporting period (FY2007 ended March 31, 2008) Crude steel mil. tons Steel materials Steel Engineering , , Total , ,141.4 Exports yen yen yen yen 1, , , , Recurring profit (yen bil.) Net income (yen bil.) Net income per share Total assets (yen bil.) Net assets (yen bil.) Note: Net income per share is calculated based on the average number of outstanding shares throughout the fiscal year. The number of shares outstanding excludes treasury stock

20 (4) Main businesses of SMI Group (as of March 31, 2008) Main business areas Steel Engineering Electronics Others Steel sheets and plates Construction materials Steel tubes and pipe Steel bars and wire rods Railway, automotive, and machinery parts Steel castings and forgings Semi-finished iron products Others Steel plates for structural uses, steel plates for low-temperature service, steel plates for line pipe, high-tensile-strength steel plates and sheets, hot strip, cold strip, electro-magnetic steel sheets, hot-dip galvanized steel sheets, electrolytic galvanized steel sheets, pre-painted steel sheets, precoated steel sheets, stainless steel precision rolled strips, Pure Nickel, etc. H-shapes, fixed outer dimension H-shapes, lightweight welded beams, sheet piles, steel pipe piles, etc. Seamless steel tubes and pipes, electric resistance welded tubes and pipes, large-diameter arc-welded pipes, hot ERW, specially shaped tubes, various coated tubes and pipes, stainless steel tubes and pipes, etc. Special quality bars, cold heading quality wire rods, spring quality bars, machining steel, bearing steel, stainless bars and wire rods, etc. Wheels, axles, bogie trucks, gear units for electric cars, couplers, etc. Die forged crankshafts, materials for molds, aluminum wheels, flange for transmission tower, crane wheels, rolls, etc. Steel billets, pig iron for steel making, etc. Titanium products, steel making technology, electricity supply, land and sea transport of steel materials, maintenance of machinery and facilities, pipelines, thermal plant and pipeline engineering, sale of limestone, etc. Steel bridge, steel structure for civil engineering, etc. IC packages, electronic modules, etc. Lease and sale of real estate, research and testing specializing in materials analysis and evaluation, etc

21 (5) Principal offices of SMI Group (as of March 31, 2008) Names SMI Head offices Osaka (registered head office), Tokyo Consolidated subsidiaries Domestic works Domestic offices Overseas offices Laboratories Domestic works Overseas works Steel Sheet, Plate & Structural Steel Company Kashima Steel Works (Kashima), Pipe & Tube Company Wakayama Steel Works (Wakayama and Kainan), Steel Tube Works (Amagasaki) Railway Automotive & Machinery Parts Company Osaka Steel Works (Osaka) Branch offices Kyushu (Fukuoka), Chugoku (Hiroshima), Shikoku (Takamatsu), Nagoya, Hokuriku (Toyama), Niigata, Kitakanto (Mito), Tohoku (Sendai), Hokkaido (Sapporo) Sales offices Kagoshima, Okinawa (Naha), Wakayama, Hamamatsu, Shizuoka, Aomori Chicago, Houston, ASEAN (Bangkok, Singapore), Shanghai, Guangzhou Corporate Research & Development Laboratories (Amagasaki and Kamisu) Center of Application Technology for Customers (Amagasaki) Sumitomo Metals (Kokura), Ltd. (Kitakyushu) Sumikin Iron & Steel Corporation (Wakayama) Sumitomo Metals (Naoetsu), Ltd. (Joetsu) Sumitomo Pipe & Tube Co., Ltd. (Kashima, etc.) Sumikin Steel & Shapes, Inc. (Wakayama, etc.) Sumitomo Metal (SMI) Electronics Devices Inc. (Mine) Western Tube & Conduit Corp. (United States) Seymour Tubing, Inc. (United States) International Crankshaft Inc. (United States) Huizhou Sumikin Forging Co., Ltd. (China) (6) Employment by SMI Group (as of March 31, 2008) Segment No. of employees Steel 19,382 Engineering 130 Electronics 3,583 Others 1,831 Total 24,926 Notes: 1. The number of employees decreased by 56 compared with the figure at the end of the previous fiscal year. 2. Of this number, 6,950 are SMI employees (excluding personnel on loan to other companies), an increase of 98 compared with the figure at the end of the previous fiscal year

22 (7) Principal subsidiaries 1) Principal consolidated subsidiaries (as of March 31, 2008) Company name Sumitomo Metals (Kokura), Ltd. East Asia United Steel Corporation Sumikin Iron & Steel Corporation Sumitomo Metals (Naoetsu), Ltd. Sumitomo Pipe & Tube Co., Ltd. Sumikin Steel & Shapes, Inc. Sumitomo Metal Logistics Service Co., Ltd. Sumitomo Metal (SMI) Electronics Devices Inc. Western Tube & Conduit Corp. Capital (yen bil.) Segment Ownership as a % of total issued shares Main business 27.0 Steel Manufacture and sale of steel bars and wire rods 17.2 Steel 54.6 Holding company of Sumikin Iron & Steel Corporation 17.2 Steel * 54.6 Manufacture and sale of semi-finished iron products 5.5 Steel Manufacture and sale of stainless precision rolling products and stainless shaped products 4.8 Steel * 57.1 Manufacture and sale of steel pipes for use as electrical cable conduits, piping, structural members, drawn steel pipe 3.0 Steel Manufacture and sale of steel H-shapes $US,000 17,000 Seymour Tubing, Inc. $US,000 10,000 International Crankshaft $US,000 Inc. 22 Huizhou Sumikin Forging yuan mil. Co., Ltd Steel * Land and sea transport of steel materials, etc. and incidental business 3.4 Electronics Manufacture and sale of IC packages Steel * 96.7 Manufacture and sales of power cable conduits, fence pipes and other welded steel tubes Steel * 80.0 Manufacture and sales of steel tubing for automotive use Steel 80.0 Manufacture and sales of small forged crankshafts for automotive use Steel 51.0 Manufacture and sales of small forged crankshafts for automotive use Note: *: Includes shares held by subsidiaries

23 2) Principal companies accounted for using the equity method (as of March 31, 2008) Company name Capital (yen bil.) Segment Ownership as a % of total issued shares Main business SUMCO Corporation Electronics 28.2 Manufacture and sale of semiconductor silicon wafers Kashima Kyodo Electric 22.0 Steel 50.0 Thermal power generation Power Co. Kyoei Steel, Ltd Steel 25.8 Manufacture and sale of steel billets, steel bars, shaped steel, flat steel, etc. Processing and sale of steel materials Daiichi Chuo Kisen Kaisha 13.2 Steel * Marine transport and incidental business Sumikin Bussan Corporation Nippon Steel & Sumikin Coated Sheet Corporation Sumitomo Precision Products Co., Ltd. *2 OSAKA Titanium technologies Co., Ltd. Nippon Steel & Sumikin Metal Products Co., Ltd. Nippon Steel & Sumikin Stainless Steel Corporation Chuo Denki Kogyo Co., Ltd. Nippon Steel & Sumikin Welding Co., Ltd. *3 Vallourec & Sumitomo Tubos do Brasil Ltda Steel * Sale and export/import of iron and steel products, textiles and foodstuffs, etc Steel 25.0 Manufacture and sale of coated steel sheets, surface-treated steel sheet, coldrolled steel sheets and construction materials 10.3 Other * Manufacture and sale of aerospace hydraulics, heat exchangers, industrial environmental equipment, etc. 8.7 Steel 23.9 Manufacture and sale of titanium, polycrystalline silicon, processed products of silicon and titanium 5.9 Steel 15.0 Manufacture and sale of construction and civil engineering materials, PVC-coated steel and powder for steel making 5.0 Steel 20.0 Manufacture and sale of stainless steel 3.6 Steel 29.3 Manufacture and sale of manganese ferroalloys, alloys that absorb and store hydrogen, etc. 2.1 Steel * Manufacture and sale of welding materials and equipment real mil. 244 Steel 39.0 Manufacture of seamless pipes Notes: 1. *1: Includes shares held by subsidiaries 2. *2: OSAKA Titanium technologies Co., Ltd. is the new name of the former Sumitomo Titanium Corporation 3. *3: From this reporting period, Vallourec & Sumitomo Tubos do Brasil Ltda. is listed as a principal company accounted for using the equity method. (8) Principal SMI Group creditors and loans outstanding (as of March 31, 2008) Name of creditors Loans outstanding SMI Consolidate subsidiaries Total (yen. bil.) (yen. bil.) (yen. bil.) Sumitomo Mitsui Banking Corporation The Sumitomo Trust and Banking Co., Ltd Development Bank of Japan Sumitomo Life Insurance Company Meiji Yasuda Life Insurance Company

24 2. Stock information (as of March 31, 2008) (1) Number of shares Number of shares authorized to be issued Number of shares issued (Number of treasury stock) 10,000,000,000 shares 4,805,974,238 shares (166,779,467 shares) (2) Number of shareholders 287,629 (3) Principal Shareholders Name Investment in SMI No. of shares owned (thou.) Ownership as a % of total issued shares Sumitomo Corporation 458, Nippon Steel Corporation 451, Japan Trustee Services Bank, Ltd. (account in trust) 199, The Master Trust Bank of Japan, Ltd. (account in trust) 155, Kobe Steel, Ltd. 112, Japan Trustee Services Bank, Ltd. 90, Nippon Life Insurance Company 88, Mitsui Sumitomo Insurance Company, Limited 68, The Sumitomo Trust and Banking Co., Ltd. 60, Sumitomo Life Insurance Company 51, Total 1,737, Notes: 1. Ownership as a % of total issued shares is calculated with treasury stock being subtracted from the total number of issued shares. 2. The 90,315 thousand shares registered in the name of Japan Trustee Services Bank, Ltd. (Sumitomo Mitsui Banking Corporation retirement benefit trust account re-entrusted by The Sumitomo Trust and Banking Co., Ltd.) are owned beneficially by Sumitomo Mitsui Banking Corporation and held as a retirement benefit trust by Japan Trustee Services Bank, Ltd. Sumitomo Mitsui Banking Corporation holds the right to direct the voting of these shares. 3. Sumitomo Mitsui Banking Corporation holds 28,090 thousand shares (0.61% of total issued shares) in addition to those described above. (4) Distribution ownership by shareholder group Group Japanese Foreign Total Financial institutions Securities companies Other corporations Private individuals, etc. % ownership Note: The distribution in the table above is calculated with treasury stock being subtracted from the total number of issued shares

25 3. Directors and Corporate Auditors (1) Names, positions, responsibilities and directorship in other companies and organizations (as of March 31, 2008) (* denotes a Representative Directors) Position Name Responsibilities and directorship in other companies and organizations * Chairman of the Board of Directors Hiroshi Shimozuma Chairman of the Kansai Economic Federation Chairman of Keihanna Interaction Plaza Incorporated * Director and President Hiroshi Tomono Chairman of the Iron & Steel Institute of Japan * Director Tsutomu Ando Steel Sales & Production Administration and Project Development Departments, Domestic and Overseas Offices, Sales of all Internal Companies, General Manager of Osaka Head Office * Director Fumio Hombe Corporate Planning, Internal Auditing, Treasury, Public Relations & Investor Relations, General Affairs, Legal, Personnel & Industrial Relations and Safety & Health Departments, Internal Control Project Team, President of East Asia United Steel Corporation Director Yasuyuki Tozaki Environment, Technology & Quality Administration, Blast Furnace Project and Intellectual Property Departments, Corporate Research & Development Laboratories, Center of Application Technology for Customers, Technology of all Internal Companies Director Shozo Nishizawa President of Steel Sheet, Plate & Structural Steel Company Director Syuichiro Kozuka General Affairs, Legal, Personnel & Industrial Relations and Safety & Health Departments Director Yoshinari Ishizuka Internal Control Project Team, Treasury and Public Relations & Investor Relations Departments, President of Sumikin Financial Service Co., Ltd. Director Kouji Morita President of Railway, Automotive & Machinery Parts Company, Chairman of Huizhou Sumikin Forging Co., Ltd., President of SMI Crankshaft Management, Inc., President of SMI Retarder Management, GmbH Director Yasuo Imai President of Pipe & Tube Company Standing Corporate Kunihiko Suemitsu Auditor (full-time) Standing Corporate Shigeru Sakurai Auditor (full-time) Corporate Auditor Shogo Takai Lawyer Corporate Auditor Eiji Asada Certified Public Accountant Corporate Auditor Keiichi Murakami Lawyer, Distinguished visiting professor of Doshisha University law School Notes: 1. Shogo Takai, Eiji Asada and Keiichi Murakami are the outside corporate auditors as stipulated in Article 2, Paragraph 1, Item 16 of the Companies Act. 2. Corporate auditor Eiji Asada is a Certified Public Accountant, and has considerable knowledge of finance and accounting

26 (2) Total of fees and other remuneration paid to Directors and Corporate Auditors No. of persons Payments in the Remarks at the end of the reporting period period Directors 10 (yen mil.) 705 Corporate Auditors The shareholders meeting adopted a resolution to limit directors fees to 80 million yen per month for Directors and 15 million yen per month for Corporate Auditors. Total (Outside Corporate Auditors) 15 ( 3) 852 ( 41) (3) An Outside Corporate Auditors to two companies Outside Corporate Auditor Eiji Asada is an outside corporate auditor of Fudo Tetra Corporation. (4) Principal activities of Outside Corporate Auditors in the reporting period Each Outside Corporate Auditor attends meetings of the Board of Directors, receives reports from the Directors on the business operations, checks the Board s decision-making process and details, and gives opinions to the Board as necessary. The Outside Corporate Auditors hold regular meetings with Representative Directors, Directors of accounting and Independent Auditors, and conduct inspections and other auditing activities in the offices of the Company and its affiliates. The Board of Corporate Auditors receives necessary reports from the Standing Corporate Auditors, Directors, employees and Independent Auditors and exchanges opinions amongst its members. The Board of Corporate Auditors checks and reviews the state of the Company s internal control systems as well as the appropriateness of the audits conducted by the Independent Auditors, to make sure that the Company has adequate auditing functions required by the Companies Act. In the reporting period, there were 19 Board of Directors meetings and 32 Board of Corporate Auditors meetings. Attendance of each the Outside Corporate Auditors is as follows: Name Attendance Board of Directors meeting Board of Corporate Auditors meeting Shogo Takai 19 meetings 31 meetings Eiji Asada 18 meetings 31 meetings Keiichi Murakami 18 meetings 32 meetings In December 2007 the Fair Trade Commission issued a Surcharge Payment Order to the Company for violation of the Antimonopoly Act, for participation in bidding for mediumpressure gas pipe related works ordered by Osaka Gas Co., Ltd. most recently between April 2003 and September Furthermore, since July 2007, the Commission investigated the Company on suspicion of violating the Antimonopoly Act in relation to the sales of sheet piles and steel pipe piles. In June 2008, the Commission found that the Company violated certain provisions of the Act. We are not subject to any penalty fines nor any administrative sanctions. Each Outside Corporate Auditor, as an Outside Corporate Auditor, is proposing ways to improve systems that aim to ensure that the Company strictly abides by the Antimonopoly Act, and is working to ensure that the business activities of the Company s directors and employees comply with the requirements of laws and regulations