130

100

120
110

140 1
50

Vision, Challenge,& The Future
160

17
0
0
18

190
210 220200

Annual Report 2014

230 2
40

250
26
0
0
27

280

300 310
290

320 3
30

340

In 2014, Kanematsu commemorated its 125th anniversary since its founding in 1889 as one of the pioneers in trading between
Japan and Australia. Always looking ahead to the future, Fusajiro Kanematsu, the founder, kept trying to create new businesses.
Kanematsu, with his dynamic pioneering spirit and creative ingenuity as its guiding principles, has expanded its fields of operation
to meet the needs of each succeeding generation, to become the global company that it is today. From here on, as well, we aim
to become a “Value Creator” by continuing to build new businesses together with our customers in this ever-changing social andeconomic environment.

JAPAN

Fusajiro Kanematsu (1845~1913)
Born in Osaka, Fusajiro Kanematsu overcame many hardships as a child,working as an apprentice merchant in Osaka and Kyoto and also serving
the local samurai. After he had grown up, he worked in the banking,marine transport, and newspaper industries, helping to develop Japaneseindustry. At 44, he abandoned his social standing and position as one of
the leaders in Osaka business, and became involved in trade between
Japan and Australia. This marked the beginning of the trading operationsof Kanematsu. Fusajiro Kanematsu played a major role in the developmentof the Australian market and in beginning direct imports of wool from thatcountry, earning his reputation as a pioneer in Japan-Australia trade.

125

Company
history

AUSTRALIA

Year History of1889 Fusajiro Kanematsu Shotenof Australian Trading in Kobe
founded1890 Sets up a branch in Sydney andbegins import of Australian wool

1900 Starts import of Australian wheat
1918 Reorganizes into Kanematsu

1936 Sets up branches in New York andSeattle1937 Establishes overseas affiliatedcompany in New Zealand1943 Changes trade name to

Kanematsu and Company

Shoten Company. Stated capital¥2 million

Events in Japanand the world

1889
1923
1928
1941
1945

KANEMATSU CORPORATION

Promulgation of Meiji Constitution
Great Kanto Earthquake
Universal suffrage establishedStart of the Pacific War
Joined the World War II
Potsdam Declaration

1946
1953
1960
1964
1968

Promulgation of the Constitutionof JapanTV broadcasts begin
Started colorcast using Tokyo Tower
Tokyo Olympics
Japan ranks no. 2 globally in GNP

1911
Former Kobe Head office‘Nichigo-kan,’ which wascompleted
Still popularly used as acommercial building

1889
Fusajiro Kanematsu in
the year of Kanematsu’s
foundation130

New challenge
for the next stage

1940
A commemorative party for the50th anniversary of Kanematsu
Australia in Sydney

1991
Relocation of the Tokyo Head office(to Seavans N Building)90

140 15
0

120
110
0
0
1

160

17
0

80

0
18

30 40 50 60
20
70
0
36
35
0

1966 Establishes an overseas affiliated1970 Establishes its Head Office at theTokyo Branch Office

1973 Lists stock on the First Sections of
the Tokyo Stock Exchanges

1979 Establishes a representative officein Beijing, China following restoration of diplomatic relations

1989 100th anniversary of the founding 2012 Establishes an overseas affiliatedof Kanematsu

company in Thailand

Trade name is changed to1967 Merges with The Gosho Company 1990 Kanematsu Corporationcompany in India

2014 125th anniversary of the foundingof Kanematsu

to form Kanematsu-Gosho, Ltd

1970
1973
1976
1978
1979

Osaka ExpoFirst oil crisis
Lockheed bribery scandal
Narita Airport opens
Second oil crisis

310 3
2
0
3
3
0 3
40

company in West Germany

300
290
280

1957 Establishes an overseas affiliated027

company in New York as the firstJapanese trading company in the
postwar era
Establishes an overseas affiliatedcompany in Brazil

26
01951 Establishes an overseas affiliated10

Kanematsu

220 2
3
0
2
4
0 2
50

1951
Building tenanted by the
U.S. affiliated company
in New York

210
200
190

1890
The first shipping invoice
for wool shipped from
Australia

1986
1989
1991
1995

Privatization of Japanese National
Railways
Japan ODA tops global ranking
Consumption tax introduced
Burst of the economic bubble
Great Hanshin Earthquake

1997
2008
2011
2012

Asian currency crisis
Collapse of Lehman Bros.
Great East Japan Earthquake
Tokyo Skytree opens

Annual Report 2014

1

Contents

3

To our stakeholders

9

Segments		Taking on new challenges
to enter a new growth phase

Corporate Officers

31

Financial Section and Corporate Data

32

I Financial Section

72

II Corporate Data

80

30

0
36

Corporate Governance

30 40 50 60
20
70

27

17
0

10

CSR (Corporate Social Responsibility)

35
0

22

340

Motor Vehicles & Aerospace

310 320 3
30

19

300
290
280

Steel, Materials & Plant

130 140 1
50
160

0
27

16

90

120
110
100

26
0

Foods & Grain

220 230 2
40 2
50

13

210
200
190

Electronics & Devices
0
18

10

Forward-Looking Statements
This annual report contains statements regarding Kanematsu Group’s plans, strategies, and expectations for future performance.
Such statements are inherently subject to risk and uncertainty. Actual results could diverge materially from the Group’s projections due to changes
in the economic and market environment surrounding the Group’s business areas, such as exchange rate fluctuation.

2

KANEMATSU CORPORATIONTo our stakeholders

Taking on new challenges
to enter a new growth phase
As we approach the 130th anniversary of Kanematsu’s founding, in five years’ time, we have defined our
medium-term vision, called VISION-130, and determined what type of company Kanematsu should be.
We are working to improve enterprise value by taking on new challenges in order to achieve this vision.

Masayuki Shimojima
President & CEO

Restructuring plans and resumption ofdividend payments
Fiscal 2014 (the fiscal year ended March 31, 2014) was a pivotal
year for Kanematsu. Since announcing plans to restructure in May
1999, we have streamlined our operations to focus on businessareas where we have particular expertise, strengthened our business foundations, and expanded our earnings base. These efforts
have resulted in significant improvements in our financial position over the past 15 years, such that we are now in a position to
maximize our strengths in core areas and achieve stable earnings
growth. One of the priority measures in our medium-term business plan (April 2013–March 2016), announced in May 2013, wasto resume dividend payments and achieve a constant dividend.

We resumed dividend payments in the second quarter of fiscal
2014 and have been able to complete the rebuilding efforts
made since the restructuring was announced in both name andreality. We recognize the enormous support and cooperation we
have received throughout this process from our shareholders,business partners, and employees, and all other stakeholders.
As well as being a pivotal year for Kanematsu, fiscal 2014
was also the starting point for renewed efforts to achieve further
growth and increase enterprise value. At Kanematsu, executives
and employees alike agree that the resumption of dividend
payments is not the goal, but simply the starting point for the
next phase of progress.

Annual Report 20143

To our stakeholders

Looking back on fiscal 2014
Looking first at earnings in fiscal 2014, we achieved the priority
measure of strengthening our global value chain and grewboth sales and profits, driven by the economic upturn fromexternal factors such as Abenomics and Tokyo winning the 2020
Olympics. We reported ordinary income of ¥20.2 billion, reaching the ¥20 billion mark for the first time in 23 years, and net
income of ¥11.8 billion, a ¥2.2 billion increase over fiscal 2013.
The medium-term business plan targeted ¥20 billion ordinary
income and ¥10 billion net income by fiscal 2016, the final yearof the plan, but we have achieved these targets in the first yearof the plan. We believe that these results are due to the steady
improvement made in our consolidated earning power.
In terms of finances, we continued to work on maintaining
and improving a healthy financial position. Shareholders’ equity
built up due to the earnings growth and yen depreciation, andwe reduced debt to maintain a good debt-capital balance. We
therefore achieved a net debt-equity (D/E) ratio of 0.9 times andan equity ratio of 16.7%, meeting the financial targets in the final
year of the medium-term plan in both cases.
In fiscal 2014, we worked to develop our overseas foodbusiness in Asia, investing in a local dairy producer in Vietnam
and agreeing an operational tie-up in the dairy cow feedbusiness and starting up a Chinese joint-venture wholesalerof confectionary and bakery ingredients. In the mobile

solutions business, our consolidated subsidiary Kanematsu
Communications acquired a mobile phone sales company
in Kyushu to boost our sales capabilities through a broader
business base. Our plant business won orders to lay submarine
cables for electricity supplies and develop wind-power
generation facilities in the Philippines. Our aircraft business was
selected as the sales representative in Japan for the CSeries
Airliner manufactured by Canadian firm Bombardier Aerospace,
the third-largest aircraft manufacturer in the world.
Over the course of this year, we have achieved good resultsoverall and our focus areas that are key to further growth haveflourished. At the same time, a number of issues have arisenthat need to be dealt with as we move into a period of earnings
growth.

● Progress in the Medium-Term Business Plan (April 2013–March 2016)
Priority measures
Expanding the business through global development,group-wide synergies
e.g.: Kanemory project, Acquisition of North American
oilfield tubing business and Mobile phone sales company(1) S trengthen the global value chain in anticipation of
evolving needs(2) I ncrease consolidated earnings strength throughintegration of the Group’s capabilities, mutual
collaboration and effective allocation of resources(3) B uild robust finances unaffectedby economic circumstances(4) Develop global professionals(5) R esume dividend payments andachieve constant dividend payments

4

KANEMATSU CORPORATION

Realizationof thesepriority
measures

Steady improvement in financial position (achieved
quantitative targets in medium-term business plan)
Equity ratio: 16.7%
Net D/E ratio: 0.9 times
Utilize overseas human resources, e.g. national staff
members of overseas branches at Tokyo head offices
Increase the number of trainees and employees deployedin overseas units

Resumed payments from interim dividend in fiscal 2014

VISION-130: Kanematsu takes off for another challenge for further growth
April 2014–March 2019

VISION-130 Basic Concept● As we approach the 130th anniversary of the foundingof Kanematsu, we are returning to our beginnings as a
trading company and to our corporate vision. Our management objectives are to “Maintain a healthy financial
position” and to “Expand our earnings base” throughcoexistence and mutual development with our business
partners based on the long history of our trading business.
● We aim to increase our enterprise value by furthering
our business in areas of expertise and investing in new
challenges to create value, while bolstering our management base
Management Objective

Maintain basic
concept

Focus on tradingbusiness

Pursuemanagement
efficiency

Coexistence,
mutualdevelopment withpartners

Bolstermanagement
base

Sophistication of
investment risk
management

Strengthen
corporate
governance

Develop global
professionals

Develop newtechnologies,
new products

Aggressive
business
investment andM&A/financing
through capital
markets

New initiatives

Establish global
value chain“Maintain a healthy financial position” and “Expand the earnings base”

VISION -130 medium-term vision

Main priority fields

It was necessary for us to define our vision for our company (ouraspirations) when we were standing on a new starting line andshifting to the next stage. VISION-130 describes what we must
do to achieve our vision for Kanematsu in five years’ time when
Kanematsu celebrates its 130th anniversary.
VISION-130 furthers the strategies in the current mediumterm business plan, so there is no fundamental change indirection. In developing VISION-130, we have returned to ourbeginnings as a trading company and to our corporate vision.
We aim to maintain a healthy financial position and also expand
our earnings base, through collaborative efforts and businessdevelopment with our partners that are at the heart of our trading operations. We will also continue taking on the challenge of
new business creation.
We need to pursue aggressive investment and M&A in areasof expertise to expand our earnings base, but we recognize
the need for global staff development, stronger corporate
governance, and high-level management of investment risks toensure Kanematsu has the capabilities necessary to achieve thisgoal. We plan to achieve the aspirations described in our visionby maintaining a good balance between an aggressive businessapproach and appropriate business foundations.

We have defined the following businesses as focus areas where
we have expertise: 1) ICT solutions, 2) Mobile solutions, 3) Asianfood markets, 4) North American shale markets, 5) Global motorization, and 6) Overseas expansion by Japanese companies.
Leveraging our capabilities as a general trading company with adiverse business portfolio, we will take an aggressive approachparticularly in areas where the group as a whole has expertise.

ICT solutions
In the ICT solutions business, we are a one-stop shop for all
services, from IT infrastructure design, construction, and installation to operation and maintenance. One of our key strengths is
our access to a wide range of products in our role as a vendor of
multifaceted solutions.
We will focus on areas of strength, such as infrastructuredevelopment and virtualization, and differentiate ourselves fromthe competition by developing unique business segments.
We will also move aggressively into global markets, in China
and Southeast Asia for example, in order to build up our trading
rights.

Annual Report 20145

To our stakeholders

VISION-130 focus areas

North American shale markets(North America)● We have defined the following businesses
as focus areas where we have expertise.
Asian food markets(Asia)Develop business as a one-stop shop forconcept development, manufacturing, andsupplies, and build value-chain infrastructure

Further growth in the manufacturing, processing,and sales value-chain for oilfield tubing
Mobile solutions(Japan)Global motorization(North America, developing countries)

Increase business scale through M&A

Sourcing, technology development, andimproved logistics in the global auto market

ICT solutions(Japan, Asia)
Expand the systems business andimprove efficiencies in the services andsupport business

Mobile solutions
In the mobile phone sales business, the distributor industry
continues to restructure and carriers are engaged in everincreasing competition. Our goals are to improve our industry
presence, capture a greater market share, and bolster our sales
force through aggressive investment, in new sales agent rights
or M&A, while eliminating waste and improving efficiencies.
We also aim to generate earnings in the market for smart
devices such as smartphones and tablets, and develop businesswith corporate customers and in Asia and other overseas
markets.

Asian food markets
In the food and grain segment, we will continue to expand
our operations by building up supply and sales systems for our
existing business with mass retailers and the restaurant/foodservice industry. We plan to increase our business volume in
Asian emerging countries where economic growth is driving
rapid changes in food culture.
One example is our food processing business in Indonesia.
We already provide product development/concept andpartnering solutions to Japanese convenience store businessesor restaurant chains which have already moved into theIndonesian market, and have received enquiries from numerous
potential customers. We plan to start operating a new plant infall 2014 and aim to build capacity to target growing demand
for these services.
We are also developing systems and platforms in more
upstream areas of the food industry, including animal feedstuff
and feedstuff materials.

6

KANEMATSU CORPORATION

Overseas expansion by Japanese companies(North America, developing countries)
Support and collaborate with Japanese makers
moving into overseas markets

North American shale markets
Our oilfield tubing business now includes a value chain thatruns from manufacturing and processing to sales following theacquisition of a North American company that provides threading services for oilfield tubing in October 2012. This value chain
has made a significant contribution to earnings.
We expect a significant increase in demand for oilfield tubing as shale gas and shale oil production increases and deep-sea
oilfield exploration recovers. Our group aims to expand facilities
to meet such demand and increase the volume of business inthis area.

Global motorization
Automobile use has increased around the world in recent years
and we have built up a network of sites in countries where
automakers are setting up operations, including India andCentral and South America. We aim to build a more robust
global supply chain and bolster our logistics functions, as well
as develop our capabilities in quality management, technology
development, and global sales and sourcing to make full use of
our overseas network.

Overseas expansion by Japanese companies etc.
Our group has offices in approximately 40 cities around theworld, particularly across Asia. We have created a strong value
chain by leveraging this business network and our information
capabilities to quickly gain an accurate understanding of changing trends worldwide.
We plan to develop systems to follow local trends andincrease the number of group offices overseas to meet partner
needs and support Japanese companies entering foreign markets.

Investment based on core competences

Quantitative targets in VISION-130

As described above, we intend to pursue aggressive investments and M&A in core areas to expand our earnings base,but it is important to stress that any new investment will bebased on core competences. Put another way, our strategy is tomainly work together with our partners, in fields where we haveexpertise, and where we can expand current trading rights. We
will not invest in areas where past experience suggests we haveinadequate knowledge or capabilities.
Investment will, in principal, be funded by operating cash
flows, but we may consider financing if we are presented withan excellent opportunity to make a major acquisition. In linewith this policy, we have set a total investment limit of ¥100 billion over the next five years. However, such investments are onlya means to increase our earnings base, so we need to carefully
examine each proposal before execution. We have therefore
established a new investment department to analyze risk before
any investment is made and follow up after implementation.
We also need to rigorously manage investment risk to makeshrewd and appropriate go or no-go decisions on proposed
investments. We are addressing these issues now so that we will
be in a position to take an aggressive approach.

The quantitative targets set out in VISION-130 includes consolidated ordinary income of ¥25–30 billion, consolidated net
income of ¥15 billion, and shareholders’ equity in excess of ¥100
billion. We aim to expand our earnings base and are targeting
a 1.5-fold increase in our group earning power over the next
five years, compared with the current level. We aim to maintainROE at 15% and the net D/E ratio at around 1.0 times. Even if weneed to use capital for a major investment, we plan to maintainan appropriate debt-capital balance, keeping the net D/E ratio
at around 1.0 times.
We expect to increase the scale of our assets throughaggressive business investment, but investments will only bemade to expand our earnings base, so we plan to keep ROA at
the current level of around 3% and aim for a capital adequacy
ratio in excess of 20%.
We look to maintain stable dividend payments, while taking
into consideration the balance of shareholder returns andhigher enterprise value.

Being a “Value Creator” and continuing to build new businesses
Consolidated ordinary income: ¥25–30 billion
Aspiration

Quantitative
targets

Consolidated net income: ¥15 billion (ROE 15%)
Shareholders’ Equity: Over ¥100 billion(Net D/E ratio: Within the range of 1.0 to 2.0)

Qualitative targets

Dividends at an appropriate level to reflect net income● VISION -130 income targets
Ordinary Income

Net Income(¥ billion)

25.0–30.0

30.0
20.0

20.2

20.5

22.0

(¥ billion)

12.5

10.0

15.0

15.0

11.8

11.0

12.0

10.0

0

0
FY2014
Results

FY2015FY2016
Medium-term business plan

FY2019VISION-130

FY2014
Results

FY2015FY2016
Medium-term business plan

FY2019VISION-130

Annual Report 20147

To our stakeholders“Be a Value Creator”
Since my appointment as President in April 2010, I have worked
to spread the idea that “Be a Value Creator.” This is just my way
of expressing the thinking behind our company beliefs in our“pioneering spirit” and “creative imagination and ingenuity.”
I have a particular interest in value creation and would like toshare one of my experiences with you.
My first experience of residence in the US was when I was
31 years old. I was in charge of the sale of steel pipe used
to reinforce the walls of oil and gas fields or for pipelines totransport oil and natural gas. Our business was to sell steel
pipe manufactured in Japan to local wholesalers. There was acommodity market for steel pipe and it could take up to fivemonths between order placement and delivery, so market
prices had often changed by the time the product arrived. The
wholesalers were happy to take on the product if prices had
improved, but I would get complaints if prices had worsened. It
was not a very efficient way of doing business. We then decided
to accumulate inventories to sell, rather than trying to shift
our product the minute it arrived, but we could not build up
enough stock to meet the diverse demand for different types
and sizes, regardless of how much we invested. We continued
to conduct researches into value-added oilfield tubing that wasof a high-grade and consistent quality and that could be used indeep-water environments and were finally able to bring to market a leak-proof, unbreakable, high-grade oilfield tubing productfitted with special screws. The product had patent protection
and a few companies were making enormous profits from thisbusiness. We then brought in high-grade oilfield tubing that
had been developed by Japanese manufacturers in order tobreak down this monopoly. Naturally, we faced opposition
and the story took various twists and turns, including lawsuits
over anti-dumping practices, but we ultimately achieved great
success when junior employees similarly motivated to do big
deals with this product continued to develop the business.
Obviously, collaboration with the manufacturers played a bigrole in our success, but I think another major factor was thestrong relationships of trust we had built. Our customers could
sense Kanematsu’s honest and sincere corporate culture. As luck
would have it, our rivals in this business at that time are now
important partners supporting this business. This experience
brought home to me how important personal relationships arein the business world.
I believe that our company’s mission is to contribute to thedevelopment of our business partners and the global economy
by deepening our relationships of trust with our partners and

8

KANEMATSU CORPORATION

working together to create new businesses. Ultimately, I thinkthat Kanematsu’s enterprise value will increase if the many
entrepreneurs in this company work to form a business creation
as “Value creates.” I am confident that this will enable us toachieve the goals set out in VISION-130.

Outlook for fiscal 2015
In fiscal 2015, although we expect the Japanese economy torecover due to continued economic expansion in the US andeconomic recovery in Europe, we anticipate ongoing uncertainties due to slowing economic growth in China and developing
countries in Asia.
Accordingly, in fiscal 2015, we are targeting consolidated
net sales of ¥1.15 trillion, operating income of ¥22 billion,
ordinary income of ¥20.5 billion, and net income of ¥11 billion.
For dividend payments, we plan an interim dividend per shareof ¥1, to thank all our shareholders on the 125th anniversary of
Kanematsu, and an annual dividend per share of ¥4.
Our goal is to meet the expectations of our stakeholders
and set Kanematsu on course for solid growth by developing
our business further, particularly in the priority areas outlined
in VISION-130, and making new investments to generate new
business opportunities.
August 2014
President & CEO

Segments

120 130 140 150
110
160
100
17
0
90

80

0
18

26
0

0
36

10

220 230 240 250

30 40 50 60
20
70

210
200
190

The Kanematsu Group is developing global businesses as a
“Value Creator” by continuing to build new businesses thatprovides diverse products and services based on industries
in a wide range of fields. It is building strong relationships
as it works to create businesses together with customers.
In this section, we will explain the strategies andgoals and Focus areas in four sales divisions: Electronics &Devices; Foods & Grain; Steel, Materials & Plant; and Motor
Vehicles & Aerospace.

10 Electronics & Devices
13 Foods & Grain
16 Steel, Materials & Plant
19 Motor Vehicles & Aerospace

Annual Report 2014

9

0
27

300
290
280

310 320 3
30 3
40

35
0

Electronics & Devices
This segment handles a broad array of products, ranging from electronics-related materials to parts and equipment. It also operates mobile solution, ICT solution and other businesses, as well as focusing on original equipment manufacturing (OEM) and original design manufacturing (ODM)
businesses. This segment supports customers undertaking global expansion through its extensive electronics technologies and know-how.

Fiscal 2014 results and future focus

Kaoru Tanigawa
Managing Executive Officer,
Chief Officer,
Electronics & Devices Division

In Electronics & Devices Division, utilizing the know-howthat we have accumulated through our extensive experience, we propose a value chain from the development
stage to the supply of commercial products that meetthe needs of our customers, aiming to build businesswith high added value.
For each product that we offer, we aim to be a world
leader. Shifting our resource focus to expanding markets
in Asia and emerging countries and the recovering U.S.
market, we accurately identify local needs and takesteps to expand our base. In the meantime, to expand
our business and improve our functions, we aim to form
capital and business alliances.
Centered on the Kanematsu Group’s global purchasing power, selling power, and high added-value functions, we continue to contribute to economic growtharound the world, including emerging countries.

The electronic components and materials business performed well, mainly
in export transactions. In the semiconductor-related businesses, domestic
demand for components increased significantly, partly due to the government’s economic stimulus measures.
The system integration business remained strong thanks to companies’ capital expenditure on their infrastructure.
Meanwhile, operating income decreased in the mobile solution businessas a result of intensifying competition among mobile phone carriers, despite
the last-minute surge in demand ahead of the consumption tax hike.
As a result, net sales in the Electronics & Devices Division rose ¥40,574
million year on year, to ¥277,348 million. Operating income declined ¥584
million, to ¥7,755 million.
In the ICT solutions business, our goal is to differentiate Kanematsu fromthe competition by focusing on business areas where we have expertiseand can offer unique solutions, such as in infrastructure construction
and concept development. We are also moving into business areas withgrowth potential and strengthening our business in China, Southeast Asia,and other global markets.
In the mobile business, we aim to secure earnings from smart devices
and are focusing on business development with corporate customers andon overseas markets, particularly in Asia.
In the semiconductor parts and equipment business, we aim to
expand sales by stepping up our activities in cutting-edge technologies
from the development stages, as we expect demand in Asia and otheremerging countries.
(¥ billion)

Net Sales
Operating
Income300.0
250.0

Results
FY2013
FY2014
236.8
277.3
8.3

7.8

Forecast
FY2015
290.0
8.2
10.0
8.0
6.0

150.0
4.0
100.0
50.0
0

10

KANEMATSU CORPORATION

2.00

Operating Income

Net Sales

200.0

Main Business

Products

Semiconductor
Equipment

Semiconductor/LCD
Manufacturing Equipment

Semiconductor manufacturing and testing equipment, LCD manufacturing and testing equipment

Industrial Electronics

Industrial Printers

Industrial printers and related consumables

Livingwares

Batteries, Facility lighting, LED lamps

Semiconductors

Semiconductor devices, Sensor devices, LCD panels, Components for smartphones and tablets,
Control modules for lithium ion batteries

Semiconductors

Electronic Components Electronic Components
and Materials

ICT/Mobile Solutions

Amusement related products, Vehicle equipment, AV related products, System boards,
Printed circuit boards and materials

Semiconductors/LCD Materials

LED components, Solar cell components, Battery components,
Metal materials for electronic and functional components, Surface treatment agents

Optical Device Materials

Components for display devices and optical devices

ICT Solutions

ICT and communications equipment and devices, ICT and communication service, System integration

Mobile Solutions

Mobile communication terminals, Mobile internet system and services

Semiconductor Equipment

Industrial Electronics

This segment mainly deals in semiconductors and LCD manufacturing equipment and has a wide
range of product lines as well as domestic and overseas support structures. Kanematsu has discovered
promising cutting-edge technologies from Japanese and overseas manufacturers and is uniquelycommercializing them in partnership and developing them into de-facto industry standards that meetthe needs of customers. Our system, which is capable of responding to large numbers of requests, iscreating a stronger relationship of trust with customers.

We primarily offer commercial printers and their consumables with overseas sales channels and a services system. We are expanding our business, including OEM and ODM, in a wide range of countries.
In household supplies, we handle various daily-use products such as primary and secondary batteries,
their related products, and LED lamps.

Semiconductors

We supply semiconductors made by domestic and overseas manufacturers and offering a wide arrayof products, from generic power ICs and memories to cutting-edge technologies such as ASICs andhigh-precision sensors. Moreover, we provide optimal solutions by supplying electronic components,
primarily semiconductor products, and various modules to a wide range of applications including
mobile devices, intelligent home appliances, vehicle equipment, industrial machinery.

Electronic Components and Materials

We offer a wide array of electronic components and electronic materials. We provide total support
for materials of the key components of semiconductors, LCDs, cameras, and batteries which are usedin PCs, smartphones, tablets and other products. In addition, we provide solutions such as LEDs andphotovoltaic modules for environment-related, automotive and amusement businesses. We also
own a coil centers in Japan and overseas and provide slit processing and one-stop delivery tailored tocustomers’ needs.

ICT/Mobile Solutions

As ICT solutions, we provide one-stop delivery and consulting services which extend to the design,
construction, installation, maintenance, and operation of clients’ IT-based information systems. As
for mobile solutions, we sell mobile communication devices including smartphones nationwide asa primary distributor for communications carriers. We also provide services for clients’ information
systems.

Annual Report 201411

Electronics & Devices✓ Focus areas
Product support utilizing overseas network – Printer for business use
Kanematsu has a worldwide business network, providing finely tuned service
from our base in each of the major countries. In sales of printers for business
use, we take full advantage of this characteristic and establish a systemthat can respond rapidly not only to sales, but to daily service including
maintenance.
Since printers for business use are essential to operations today,
downtime caused by breakdowns and other problems must be minimized.
Kanematsu responds swiftly to these situations, utilizing its overseas
networks and earning high marks from its customers.
Kanematsu sells printers primarily in the following two ways.
1. Sales of our own brand product
Sales of our own brand product, SwiftColor, through overseas agencies
2. OEM business
Development/sales of product under the customer’s brand
Each has a different form of business, but we think it is important toprovide finely tuned support to respond to the demands of customers.
SwiftColor: http://www.swiftcolor.com/

Supply Chain Management Support for Manufacturers
A business model for electronic device operations, and supply chain management support for manufacturers
It is essential to implement worldwide Supply Chain Management Systems (SCMS) in today’s competitive and globalized businessenvironment in electronics.
Our business partners with distinctive technologies backed by extensive experience proudly play their important roles inachieving a high level of value-added and differentiation in our businesses along with upstream products such as raw materials andcomponents to downstream products of those modules and assemblies.
We will promote integrated business in collaboration with our business alliance of Electron Manufacturing Services (EMS) andfabless manufacturers (manufacturers that specialize in product development and marketing without owning plant) by exploiting
low cost/high performance materials as well as developing and sourcing world cutting-edge technologies.

High-performancematerials

Japan• Developing new materials

Developing fabless manufacturingin Europe and America

Product development

US, EU• Sourcing new technologies

EMS control

Components (EMS)ASEAN• Component manufacturers
countries

Product assembly (EMS)

Asia, etc. • Shipment of components

OutletCustomers

12

KANEMATSU CORPORATION

Foods & Grain
Based on a commitment to safe, secure food, we ensure stable supplies of a wide range of foods, including high value-added items, likegrains, raw materials for oils and fats, feedstuff, and marine products, through an integrated supply system from raw material procurement
to finished product processing.

Fiscal 2014 results and future focus

Morihiro Toida
Managing Executive Officer,
Chief Officer,
Foods & Grain Division

In the food business, we will continue to focus on expanding our businessand building up supply and sales systems for customers in the food service
industry and for volume retailers, which has long been an area of focus forthis segment. Asia is a focus area where we are bolstering sales systems
and expanding trading volumes.
In the foodstuff business, we are focusing on areas where we haveparticular expertise, for example feed materials and non-genetically modified soybeans. We are strengthening our systems in businesses further
up the supply chain, ensuring a stable supply of feedstuff and grains, andfocusing on platform development to expand overseas sales channels andsatisfy changing dietary habits in Asia.

(¥ billion)

Net Sales
Operating
Income
400.0

300.0

Results
FY2013
FY2014
287.9
309.0
3.2

2.1

Forecast
FY2015
325.0
4.3
5.0
4.0

Net Sales

3.0
200.0
2.0
100.0

0

Operating Income

Foods & Grain Division supplies goods and services relating to food for human consumption and for pets who livewith humans, spanning everything from grain, agricultural products, meat and marine products, ingredients fordesserts, alcoholic and non-alcoholic beverages, frozen
foods and processed foods, to feedstuff and fertilizer.
Our philosophy is to “contribute to the dietary habits ofpeople around the world and raise the quality of the livesof people in local communities through our efforts toprovide safe and secure foods.”
We launch a new business overseas from the global
perspective as “GLOCAL”, a global company committing
to a local perspective in the region where the business isbased. In domestic market, we maximize overall strengthof the Group in Japan, and see the market needs moredeeply to improve the quality of and expand the scope of
its business.
We develop and propose a value creation-type business model and promote a “maker and supplier-based
approach”. Under this philosophy, we seek “the joy of
connecting the producer with the consumer” throughbusiness creation, a hands-on approach, and a commitment to manufacturing.
With its Food Safety Management System Office,
we strive to ensure product traceability and stringent
hygiene and quality management to provide additionalsafety and security.

Operating income for the entire food business segment was reduced,
primarily as a result of exchange rate fluctuations. The meat productbusiness remained stable based on increased imports in response to a risein domestic market prices. The foodstuff business was also consistently
strong based on stable procurement and the increased business volume.
Meanwhile, the food business suffered a decline in operating income dueto the time taken for sales prices to reflect the increased costs causedby the weaker yen. As a result, in the Foods & Grain Division, net sales
increased ¥21,088 million year on year, to ¥309,024 million. Operating
income fell ¥1,066 million, to ¥2,099 million.

1.0
0Annual Report 201413

Foods & Grain

Main Business

Products

Foods

Processed fruits (frozen/canned), Concentrated fruit/vegetable juices, Confectionary ingredients (Couverture chocolate,
Cocoa powder, Nuts, Dry fruits, Dairy products, etc.), Coffee, Teas, Alcoholic beverages (Wine, etc.), Sugar, Honey, Sesame seeds,
Peanuts, Pulses and peas, Nuts and seeds, Cooked foods, Others

Meat and Marine Products

Meat products: Beef, Pork, Chicken, Mutton/Lamb, Special poultry such as turkey and duck, Horsemeat, etc.
Marine products: Cephalopod (octopus, squid, etc.), Crustacean (shrimp, etc.), Frozen fish, Seafood ingredients for sushi, Others

Grain, Food Soybean, Oilseeds

Rice, Wheat, Barley, Corn, Soybean (for food, for oil), Defatted soya-flake for soy sauce production, Buckwheat, Corn grits,
Corn starch, High-fructose corn syrup, Rapeseed, Cottonseed, Others

Feedstuff

Feed grain (Corn, Milo, Soybeans, etc.), Plant protein meal (Soybean meal, Rapeseed meal, etc.), Animal protein meal (Fish meal,etc.), Other by-products, Dairy products for feeding (Skim milk, Whey powder), Roughage (Baled hay, Beet pulp pellets, etc.),
Fish oil, Prebiotics (Laxel Force), Fertilizer, Others

Processed Agricultural Products

Processed wheat (Wheat flour, Pasta, Frozen bread dough, etc.), Cereal ingredients, Vegetable oil, Olive oil, Others

Pet Products & Groceries

Pet food & snacks, Pet products, Tropical fish, Raw ingredients for pet food & snacks, Products wholesaled to DIY stores(home improvement retailers)

Foods

Meat and Marine Products

In the areas of processed fruits and prepared foods,
with sales centered on imported foodstuff for therestaurant, ready-made-meal, and retail markets,
we established at an early stage a joint-venture plant for sorting and processing, built an integrated production management system covering everythingfrom procurement to manufacturing, and provided high-quality safe food. For
food and beverages such as confectionary ingredients, coffee and wine, we
inspect the farms and factory conditions of production areas throughout theworld to select our business partners, and for agricultural products we havealso developed new production areas. For ready-cooked foods, we have set up
plants equipped with central kitchens at overseas locations.

In the meat processing business, we have been
diversifying raw materials sourcing geographically and have secured multiple raw material
procurement sources, thereby reducing supply risks. We have fortified ourpartnerships with overseas packers and created a stable supply system
for high-level products that meet diverse customer needs in Japan. In
marine products, we have established cephalopoda, crustacean, andprocessed marine products (which are consumed raw, cooked, and used
as flavoring) as our three core product areas. Centered on our processing
facility in Vietnam, we have developed delicious and distinctive products
by connecting the production area with the dining table.

Grain, Food Soybean, Oilseeds

Feedstuff

In the grain business, we sell an assortment ofgrain including rice, wheat, and corn primarilyin Japan and Asia. Notably, we have one of thelargest trade volumes of corn for grits. Kanematsu contributes to stable
food supply in Japan through its ownership of grain silos in Kashima andMoji. The Soybean business operates a soybean sorting plant in the U.S.
state of Ohio and has achieved integrated traceability, from agricultural
fields to the customer, through seed development and direct farming
contracts with farms. Kanematsu meets the various needs for edible
soybeans by selling safe and secure non-genetically-modified (non-GMO)
soybeans brands in Japan and overseas. Kanematsu also sells oilseeds thathave undergone integrated traceability management starting at the farm.

As an industry pioneer, we have built an integrated
business, from the import of raw materials to mixed
feed production and sales. With the establishmentof a cost advantage through rigorous costmanagement, we have developed high value-added and differentiatedproducts that meet customers’ needs. To meet the increasing movetoward dairy mega farms, we have formed alliances with agricultural
corporations, and through our own efforts we have created demand
for mixed feed and feed crops. Further, as a leading company in thisfield, we are boosting development of affiliated plants overseas andpromoting vertical integration of the feedstuff business.

Processed Agricultural Products
Italian-made pasta and olive oil are being used in
the eating out industry such as in restaurants, processed into frozen pasta, and used as ingredientsfor ready-made-meals, such as deli products for use
in bagged and boxed lunches. We also sell French frozen bread doughand pie dough to food services such as bakeries and pastry shops. Oats
and barley are also products of focus as ingredients to cereals.

14

KANEMATSU CORPORATIONPet Products & Groceries
As an all-rounder in the pet business, wedevelop, import and sell private and store
brand’s pet food, snack and products not only
for cats and dogs, but also birds, fish and small
animals. We also provide domestic pet food manufacturers with pet
products and raw materials. Furthermore, we are globally expanding
our business, including exporting Japanese major pet food manufacturer’s goods to Asia countries, tripartite trading, to name a few.

✓ Focus areas
Creating a Platform for the Food Services Sector in Indonesia
In the Republic of Indonesia, which has a population of more than 240 million people, middle-class Muslim consumers are growing
particularly rapidly, and traditional Indonesian dietary habits are changing toward “foods to enjoy.” In response to this change anddiversity, businesses such as restaurants, convenience stores, and supermarkets are expanding.
In 2012, we established of PT. Kanemory Food Service, a joint venture company that will run a central food production kitchen alongwith PT. Kanematsu Trading Indonesia (“KTI”), a local subsidiary of Kanematsu in Indonesia, and PT. Macroprima Panganutama (“MP”),
one of the Cimory Group’s core companies in Indonesia, in response to the growth of the food services sector in the Republic of Indonesia.
The new company will sequentially develop, manufacture, and supply products including fast foods, deli and prepared foods, lunchboxes, and sweets to the food services sector.
Through this new company Kanematsu will create a business platform for food services in Indonesia, leveraging its R&D expertise andcentral kitchen-type production capabilities
Conceptional drawing of Kanemory
for manufacturing various kinds of foods atthe same time, which the company has been
fostering in the food services sector in Japan.
Kanematsu will focus on further developing
the food services sector in Indonesia, making
use of the human network it has beencultivating in Indonesia for many years andthe expertise it has acquired, such as foodprocessing know-how and product provision.

Making Inroads into Dairy Cow Feed Business in Vietnam
Kanematsu contributed funds to Dalat Milk Joint Stock Company (Dalat Milk, “DM”), a Vietnamese dairy producer, and to enter into abusiness tie-up with DM for the supply of dairy cow feed. Kanematsu and DM will jointly establish and manage a factory for TMR dairy cow
feed (the TMR Center) and undertake the production of corn silage and other feed products to expand both sales in Vietnam and exports.
It is expected that the consumption of dairy products in Vietnam will expand owing to an increase in demand for them as the diversification of foods advances while eagerness for consumption is seen among the younger generations and the Vietnamese economy grows.
Kanematsu has maintained the top share in sales of dairy cow feed in Japan for many years and has always made efforts to supply
safe and secure high-performance feed in a stable manner. Through the business tie-up described above, we will supply forage, corn,soybean meal and other feedstuff with DM.
Kanematsu will contribute to the development of the dairy feed business in Vietnam
through the improvement of milk production and quality by providing Japan’s leading-edge
dairy technology and also increase sales of dairy cow feed and the production bases forfeedstuff in the growth market in Vietnam.

Annual Report 201415

Steel, Materials & Plant
This segment engages in domestic and export transactions covering the full range of iron and steel products, energy solutions, functional
chemicals trading, industrial plant and infrastructure facilities. Despite the diversity of these operations, we are committed to supplying anddeveloping high value-added products through our highly specialized staff in all areas.

Fiscal 2014 results and future focus

Takashi Gunji
Director
Senior Managing Executive Officer,
Chief Officer,
Steel, Materials & Plant Division

In the Steel, Materials & Plant Division, we cover a wide
range of areas including trading in steel products ingeneral and energy solutions including petroleum
products, trading in functional chemicals, machinery,
and the plant/infrastructure business. In each area, ouremployees use their high level of expertise to provide
products with high added value and develop new
products.
The Kanematsu Group brings together its comprehensive strength in the pursuit of integrated business
operations beyond boundaries, and will also focus on
investment in overseas business centered on our areaof specialty, environment/energy.

In the iron and steel business, transactions of specialty steel for automobiles for Europe and the United States and the oilfield tubing businessin North America acquired in the previous fiscal year were solid. Sales of
petroleum products were strong in the energy business. The plant andinfrastructure business remained generally stable, which is partly attributable to the last-minute surge in demand ahead of the consumption tax
hike in transactions of machine tool and industrial machinery. As a result,net sales in the Steel, Materials & Plant Division increased ¥34,601 million
year on year, to ¥468,831 million. Operating income increased ¥3,035
million, to ¥8,129 million.
In the iron and steel business, we will expand sales of products, particularly
high-strength, corrosion-resistant products that provide added value, forenvironmental and energy businesses in North America, Asia, and othermarkets where we have a strong track record.
In the energy business, we will continue to provide total solutions,from upstream to downstream segments, with a focus on petroleum
product trading in Japan.
In the chemical products business, we are building up our business in
new materials development and environment-related fields, and tradingin materials for lithium-ion batteries.
In the machine tools and industrial machinery business, we continue
to focus on growing sales in Asia as well as Japan. In the plant business,
we are working aggressively to win orders for ODA projects and are focusing on wind power generation and other renewable energy projects.

(¥ billion)

Net Sales
Operating
IncomeKANEMATSU CORPORATION

5.1

8.1

Forecast
FY2015
470.0
8.0

500.0

10.0

400.0

8.0

300.0

6.0

200.0

4.0

100.0

2.0

0

0

Operating Income

Net Sales

16

Results
FY2013
FY2014434.2
468.8

Main Business

Products

Steel

Overseas Trading of Iron and Steel

Export of various kinds of steel sheets, plates, bar products and pipe and tubing products, Export of porcelain enamel steel sheets

Overseas Trading of Specialty Steel

Export of stainless steel sheets and plates, Export of alloy steel wire and bar products

Domestic and Overseas Trading ofFull Range of Steel Products

Import and tripartite trade of ferrous raw materials, Export and import of steel materials and sub-materials

Materials Functional Chemicals

Materials for lithium batteries, Incense materials, Lubricant-related materials, Materials for fertilizers, Papermaking
chemicals, Synthetic rubber, Petrochemical products

Healthcare

Functional food materials, Health supplements

Life Science

Pharmaceuticals and pharmaceutical intermediates, Pharmaceutical ingredients

Crude Oil, Petroleum Products

Crude oil, Jet fuel oil, Gasoline, Kerosene, Diesel oil, Fuel oil (bunker A and C), Lubricant oil and additives for industrial
and automobile use

LPG

LPG (Propane, Butane, Autogas)

Development of Environment-related Heat reflective paint, Carbon credit trading
Materials and New Technologies
Plant

Plant

Chemical and petrochemical plants, Industrial plants (Papermaking plants, Auto-manufacturing plants and Other plants),
Utility and process systems for oil and gas plants, Infrastructure facilities, Scrap-processing facilities, Environmental facilities

Cargo Vessels

Shipbuilding, Used ships, Equipment package deals for new ships (including ship design and engineering)

Machine Tools and Industrial Machinery Machine tools, Industrial machinery and peripheral equipment
Electric Power Cable Projects

Electric power and communication cable projects, Power generation plants (including design, engineering and installation)

ODA

ODA projects (educational, medical/pharmaceutical, water supply-related, agricultural and environmental)

Steel

In functional chemicals, we are focusing on market niches in which
we are strong and on development and value-proposition businesses. We are also building supply chains with Japanese and overseas suppliers and customers. We are taking an active role in helping
society deal with increasingly low birth rates and an aging population
by supplying pharmaceuticals and functional food materials.
In the energy business, we are engaging in new business opportunities in a changed environment caused by electricity and gas
deregulation. We are developing value-added businesses by putting
our customer-oriented know-how and services to use and leveraging
our tank facilities and reinforcing our existing distribution sales
business. We have also developed new businesses including electric
power and carbon credit trading.

Plant

Kanematsu is expanding its efforts in growthmarkets including North America, Asia, andChina. We are developing business in cooperation with Japan’s steel industry through theexport of steel products and the import of steel
raw materials. We seek to further open up newmarkets and build high value-added businesses.

Functional Chemicals and Energy

We are pursuing project forming businesses
and the growing renewable energy-related
businesses, and have set up direct marketingrelated businesses that specialize in our areasof expertise.

Annual Report 201417

Steel, Materials & Plant✓ Focus areas
Efforts to Expand Demand for Oilfield Tubing
Kanematsu previously sold oilfield tubing through Steel Service
Oilfield Tubular (SSOT), a group company for sales of oilfield
tubing, to U.S.-based major oil companies. In 2012, it acquired
Benoit Machine LLC (Benoit), an oilfield tubing businesscompany in North America, jointly with a leading Japan-based
steel manufacturer, and has constructed a value chain for the
manufacture, processing and sales of the oilfield tubing business.
In recent years, attention has been paid to non-conventional
resources such as shale gas and shale oil, and the oilfield tubing
market is expected to expand further.
The Kanematsu Group intends to enhance its value chain
to respond to the growing demand for shale gas, shale oil, anddeep-water/ultra-deep water oil drilling.

Wind-power plant and submarine-cable laying orders in the Philippines
In October 2013, Kanematsu won an order for new construction of awind-power plant at San Lorenzo, and an order for submarine-cable laying
and covering, from a Philippines independent power supplier. The Group's
constructions of renewable energy generation facilities, including both
geothermal and solar power generation, and its track record of successful
deliveries to the Philippines, have been widely commended.
Given that the Philippines is encouraging the adoption of domestic
renewable energy, we expect expansion of this business over the longterm. Wind power, which gives off no carbon dioxide, has enormous
advantages in terms of global environmental protection, and facilities
can also be installed and running in a very short space of time. Having
designated wind power as a core renewable energy field, the KanematsuGroup will contribute to global environmental protection by expanding
its environmental businesses in the years ahead.

LUZON

ManilaMINDOROMASBATECebu

ILOILOPALAWANNEGROS

Davao

MINDANAO

NEGROSOCCIDENTAL
MALAYSIA

Panay Gulf

18

KANEMATSU CORPORATION

LEYTE

BOHOL

Guimaras
Strait

SAN LORENZOGUIMARAS

SAMAR

PANAY

Motor Vehicles & Aerospace
Specializing in transportation equipment, we globally operate motorcycle and automobile parts businesses, leveraging our highly
specialized expertise and extensive information. We also do business in vehicles and fuselage for the automobile, construction machinery,industrial vehicle, aircraft and satellite industries.

Fiscal 2014 results and future focus

Yoshiya Miyabe
Managing Executive Officer,
Chief Officer,
Motor Vehicles & Aerospace Division

In the Motor Vehicles and Aerospace Division, develop
business on a global scale by utilizing our domestic
and overseas networks.
In Motor Vehicles and Parts business, we have been
expanding business utilizing our sales force, sourcing
ability and logistics network to reply to motorcycle
and automobile markets expanding globally. We
are proactively seeking new business in the rapidlychanging markets effectively using our establishedrelationships with customers, suppliers and business
partners.
In Aerospace business, we try to expand businessof aircraft parts, such as aircraft rotable parts, as wellas the existing business of aircraft sales. We are also
engaged in space business such as small satellite towhich demand is increasing in new applications.

Transactions of aircraft parts were strong, and transactions involving
motorcycle and motor vehicle parts for North America remained stable.
In contrast, construction machinery-related transactions for Asia showedweakness. As a result, in the Motor Vehicles & Aerospace Division, net salesrose ¥3,732 million year on year, to ¥54,451 million. Operating income
climbed ¥47 million, to ¥1,494 million.
In the motor vehicle and aircraft business, we are constructing a supply
chain for motorcycle and automobile markets where we expect global
growth. In the aerospace business, we were selected in fiscal 2014 as
the Japanese sales representative for the CSeries Airliner from Canadiancompany Bombardier Aerospace and are focusing our sales activities on
this product. We are also working to create new businesses by sharing
information on cutting-edge technologies that affect both the aerospace
and automotive fields.

(¥ billion)

Net Sales
Operating
Income70.0

Results
FY2013
FY2014
50.7
54.5
1.4

1.5

Forecast
FY2015
63.0
1.5
2.0

60.0
1.5

Net Sales

40.0
1.0
30.0
20.0

Operating Income

50.0

0.5

10.0
0

0

Annual Report 201419

Motor Vehicles & Aerospace

Main Business

Products

Motor Vehicles and Parts

Motorcycle & Automobile Parts, Construction Machineries, Power Products (General Purpose Engines etc.), Industrial Vehicles,
Motorcycles, Automobiles

Aerospace

Aircrafts, Helicopters, Components and Parts, Aircraft Rotable Parts, Small Satellites, Space Products, Night Vision Goggles

Motor Vehicles and Parts
Strengthening its sales force, sourcing ability and technical development ability,
Kanematsu is expanding OEM components for vehicles. It is globally establishingbusiness through its worldwide networks. Focusing on motorcycle and automobile
parts, Kanematsu will continuously explore and propose new high value-added
materials and products to which future demand is expected and at the same time,
will try to establish new business foundations by aggressively making business
investments.

Aerospace
Kanematsu is trying to expand businesses of aircrafts, helicopters andthose equipment and parts for government agencies. Further, being
the sales representative of Bombardier Aerospace for its new CSeriespassenger aircraft, Kanematsu is focusing on sales of it to commercial
airlines. As for Aircraft Rotable Parts business, Kanematsu will try to
expand it taking investments into the account. In Space business,
Kanematsu will focus on sales of Small Satellites and peripheral
equipment.

© Lockheed Martin Corporation

20

KANEMATSU CORPORATION✓ Focus areas
Independent initiatives in the motorcycle and automobile parts businessIn recent years, there has been global growth in the motorcycle and automobile markets as demand increases in newly emerging
markets, and Japanese and European automakers set up production bases in Asia, Central and Latin America and other markets. In
the motorcycle and automobile sectors, development, procurement and production may happen separately in different countries. In
light of this, the Kanematsu Group considers it important to have a presence in all these markets, and to raise its corporate value andprofile to offer optimized services to customers. We are developing a network of bases all over the world.
In addition to existing bases chiefly in Europe, ● Providing unique, integrated support from marketing,to development, mass production, and logistics
the U.S.A. and Asia, we established an overseas
Development
subsidiary in Mexico in April 2014, a country where
Global Sourcing
Support for development communications
Marketinga wide range of automotive manufacturers are
Establishing an optimal supply chain
Collection of information for development
Extensive
experiencethat utilizes Kanematsu’s global networkvying to build new plants.
and familiarity
with the industry
Looking ahead, we will collect and analyze
a wide range of information gathered from our
Mass Production/Logistics
customers and partners around the world in the
Planning/Proposal
Optimized arrangement of import
Customer’s Needs
motorcycle and automobile markets, which are
and export/transportation cost
Introduction, planning,
Development of
Response to just-in-time/warehouseand proposal of the latest
expected to see further growth. This will be usedtechnologies/products that meet
management, inventory management
products/technologies
to develop a more robust, globalized supply chain.
the needs of the customer

Civil aerospace business
Kanematsu has been selected by Bombardier Aerospace as the sales representative for the all-new
Bombardier CSeries airliner in Japan. Bombardier Aerospace is the world’s third largest civil aircraft
manufacturer. While Kanematsu has been marketing helicopters and business jets, with this agreement with Bombardier, it will now assist with the marketing and sale of the Bombardier CSeriespassenger aircraft in Japan. Bombardier aims to revolutionize the 100- to 149-seat market segmentwith the CSeries aircraft family, which includes the 110- to 125-seat CS100 airliner and the larger
CS300 airliner that can seat up to 160 passengers in its optional extra capacity configuration. The
CSeries family of aircraft features an optimal combination of cutting-edge technologies, such as
Pratt & Whitney Pure PowerTM PW1500G geared turbofan engines, carbon fiber wing and fly-by-wiresystem, and delivers a 20% fuel burn advantage, as well as a 15% cash operating cost advantage. In
addition, the CSeries aircraft will emit 20% fewer CO2 and 50% fewer NOx emissions, and will offer agreatly reduced noise footprint. Kanematsu is looking forward to proactively introducing Bombardier’s game-changing CSeries aircraft
to Japanese operators. Kanematsu already markets helicopters and business jets. Similarly, we will now assist with the marketing andsale of the Bombardier CSeries passenger aircraft with this agreement with Bombardier.
KG Aircraft Rotables Co., Ltd. (KGAR), Kanematsu’s group company, with its headquarters in Dublin Ireland and storage facilities in
the UK and USA specialized in the supply and repair of aircraft rotable components including component sales, exchange, leasing andpower by the hour support. KGAR sales and support staff are available 24 hours a
Unserviceable
Unserviceable
day 7 days a week to offer immediate support and assistance to a wide range of
units
units
customers worldwide. The company is a specialist in Boeing 737 and Airbus A320
KGAR
RepairRepaired/
Repaired/
Inventory
Customer
aircraft families. KGAR can help to reduce the burden of holding inventory bycompany serviceable
serviceable
operation
units
units
customers including airlines and aircraft maintenance companies. With an invenSale/leasing, etc.
tory of over 250,000 rotable and consumable Boeing 737 and Airbus A320 family
parts KGAR can provide a cost effective and reliable solution to their customers’
Customercomponent requirements. All components are fully traceable and certified.

Annual Report 201421

CSR (Corporate Social Responsibility)
Kanematsu Corporation pursues its corporate activities in the pioneering spirit as fostered by our predecessors and through thewisest use of our creative imagination and ingenuity. We fulfil our corporate social responsibilities by engaging in sound, flourishingbusinesses, based on our Corporate Principles and in line with Kanematsu’s Code of Conduct.
Having established a CSR Committee, with members drawn from the whole Company, Kanematsu has prepared Groupwide
activities and policies to meet various issues arising in connection with CSR including our social contribution and environmental
protection. We are committed to strengthening CSR.

Corporate Principle“Let us sow and nurture the seeds of prosperity for Japan”“If we sow a seed, we can expect it to develop into a seedling that generates content and prosperity for Japan. Let us sow that seed now.” So spoke
our founder Fusajiro Kanematsu at the establishment of the Company. Furthering the “public interest” of Japan was the guiding mission of all leading
Japanese of the late nineteenth century (Meiji period) in developing the national economy. Today, our founder’s ideal underlies all our Company’s
public benefit and community activities and our contributions to nations and peoples generally.
On the occasion of the merger in 1967 with The Gosho Company, the Company enshrined its founder’s ideals in a document titled Our Beliefs:
Kanematsu’s Guiding Principles.
(Translated from the Japanese)

OUR BELIEFS (Kanematsu’s Guiding Principles)
1. We believe that we should achieve prosperity of our business through just and fair earnings in the pioneering spirit as
fostered by our predecessors with the wisest use of our creative imagination and ingenuity.
2. We believe that our Company should justify its existence by promoting a sound and flourishing business which fulfils its
responsibilities toward the welfare of society and also contributes to the security and well-being of us all.
3. We believe that each one of us should attend to business not as an individual but as a member of the organization
abiding by company rules, carrying out duties with a sense of loyalty to the Company and a spirit of cooperation andunderstanding toward all other members of the organization.

Kanematsu’s Code of Conduct
1. Origin of
corporate activities
2. Fair transactions

We became involved in corporate activities to serve our various stakeholders by providing socially valuable goods and services inaccordance with the aim of our founder to realize a sustainable society.

3. Information management& disclosure
4. Respect for human rights

Information is properly managed to protect personal information, customer information and intellectual property, and is disclosed in atimely and proper manner to establish mutual trust between Kanematsu and the community and maintain a high level of transparency.

5. Consideration of
the global environment
6. Social contribution

We exercise sufficient consideration in our corporate activities to maintain a sound global environment for sustainable growth.

Our corporate activities are conducted in compliance with laws and ordinances in Japan and abroad, international rules andpractices, and internal rules, as well as with social common sense.

We respect human rights and do not discriminate. Employee career development and capability development are actively supported.
Diversity, personality and character are respected so as to create a dynamic corporate culture.

We are aware of the importance of our social responsibility as good corporate citizens, and proactively undertake social contribution
activities. Employee activities to contribute to community development and to comfortable and safe living are supported.
(Translated from the Japanese)

Social Contribution Activities
Kanematsu is aware of the importance of its responsibilities as a corporate citizen, as laid down in our Code of Conduct, and is committed toproactive social contribution activities. We also support activities by employees that help bring greater comfort and security to the community
on a day-to-day basis.

Reconstruction Support Activities
Kanematsu Group has a program of ongoing volunteer activities
in the disaster-affected areas following the Great East Japan
Earthquake of March 2011. These include donation of funds for

22

KANEMATSU CORPORATION

recovery and reconstruction, and the direct supply of provisions
to the region. In addition to our volunteer leave system, we havein place backup systems for employees offering their services indisaster-hit areas, including disbursement of transportation andaccommodation costs.

The Group will continue to support long-term—not justprovisional or one-time—initiatives by employee volunteers thatmeet the needs of areas and people affected by the disaster.

● Volunteer activities in Rikuzentakata
Since September 2011, the Kanematsu Group has been involved
in relief activities through its own volunteer program in the city of
Rikuzentakata. November 2013 was the tenth time the program wasorganized, bringing participation to around 150 employees of theGroup in total. They took part in rubble clearance and searching forvictims’ belongings, and helped the local fishing industry get backon its feet. We will carry out further support activities in future years.

Ninth program: Sifting through the sandinstitute focusing on international economy and management has
won high acclaim in Japan and overseas for its long list of researchachievements.
In 1993, the Kanematsu Fellowship—a Kanematsu postgraduate research scholarship—was jointly established by the ResearchInstitute for Economics and Business Administration of Kobe
University, the Kanematsu Foundation for Research of Foreign Tradeand Kanematsu Corporation. Every year, graduate students areinvited to submit candidate dissertations. Research fellowship andpublication opportunities are made available to graduates acrossJapan, in the fields of economics, management and accountancy.

Tenth program: Seeding oysters● Fukushima-Chiba Kids’ Soccer Tournament
In August 2011, the Kanematsu Group organized the “FukushimaChiba Kids’ Soccer Tournament” for elementary school children
in the Fukushima Football Association “Elite Kids” program, at its
athletic field in Chiba City, Chiba Prefecture, enabling the children
to enjoy playing soccer in a relaxed atmosphere. This was one of
our initiatives for children whose outdoor activities have been
curtailed by the nuclear disaster at Fukushima. A third such event isplanned for August 2014.

Kanematsu Fellowship award ceremony in May 2014

Commemorative Projects
Among the main commemorative projects we have carried out
in accordance with the will of our founder Fusajiro Kanematsu are
the Research Institute for Economic and Business Administration(Kanematsu Memorial Hall), a commerce research institute granted
by Kanematsu to Kobe Higher Commercial School (now Kobe
University); the endowment of the Kanematsu Auditorium ofHitotsubashi University; and the endowment of the Kanematsu
Memorial Institute of Pathology to Sydney Hospital in Australia,
which was partiallyendowed by Kanematsuwith joint funding
from the AustralianGovernment.

Kanematsu Foundation for the Research of Foreign Trade
The Kanematsu Foundation for the Research of Foreign Trade wasestablished in 1940, endowed by funds donated to Kobe Higher
Commercial School (now Kobe University), with the purpose of contributing to the economic development of Japan through scholarships and grants for research into trade and international economy.
The Foundation had been jointly operated by the Research Institutefor Economics and Business Administration of Kobe University and
Kanematsu, but in light of December 2008 revisions to the law
concerning public-interest corporations, it started anew as a public
interest incorporated foundation on October 1, 2012. In the over
70 years since its founding, the Foundation as a top-level research

Kanematsu Memorial Hall ofKobe University

The Kanematsu Auditorium ofHitotsubashi University

Kanematsu Memorial Institute of
Pathology, Sydney Hospital

Annual Report 2014

23

CSR

Environmental Initiatives
Ever since the Kanematsu Group acquired ISO14001 certification in March 2004, it has continually upgraded its environmental management
systems. By bringing these systems effectively to bear, we have worked to reduce CO2 emissions and fight global warming by cutting backconsumption of electricity and paper and comprehensively sorting and reducing waste. By contributing to the reduction of carbon dioxideand global warming, we are committed to the creation of a low-carbon and recycling-oriented society.
Through our business activities in Japan and overseas, we are engaged in environmental businesses that protect and improve the global
environment.
FY2012–FY2014: Consumption of power and paper
FY2012FY2013

FY2014

Electricity consumption (kWh)910,376

828,514805,015

Area (m2)

12,050.46

12,102.36

11,459.42

Paper consumption (thousand sheets)

6,979

6,874

6,648

Employees

756

771

785

Waste emissions (tons)

47

49

44

CO2 emissions (thousand tons- CO2)
(conversion coefficient: 3.35)

305

278

270

Offices for which data was collectedElectricity, paper, CO2 emissions: All
Waste: Tokyo Head Office (Seavans North building), Osaka Branch, Tsukiji Office)
Other:
Waste: General waste (not including industrial waste)
Volume of waste generated from the Seavans North building was calculated as follows:[Volume of waste generated from the entire building] × 15.2%
Area: Increase due to relocation of Tsukiji Office to Seavans North building(October 2013)
Coefficient for carbon dioxide emissions volume:
Calculation based on coefficient used for inspection at time of trial emissions
scheme rollout in fiscal 2009 (in-house standards)

Human Resource Measures
Human resources are a vital asset for Kanematsu, and retaining and training human resources is important for our future growth. We havevarious systems in place to ensure strong motivation among employees and a rewarding workplace for them.

Work-Life BalanceKanematsu is proactively committed to ensuring a good work-lifebalance, with discouragement of long working hours, to foster ahealthy workforce. We have been improving the working environment so that employees can treasure the time they spend with
their families, as well as the time spent on hobbies and participating
in social activities.

● Child Care Support
In addition to comprehensive maternity and childcare leave
arrangements, we allow mothers to work short hours and flexitime
after taking leave for pregnancy or care reasons, so they cancontinue to care for growing children after rejoining the workforce.
Many mothers take childcare leave, and when they return towork, basically they go to the same divisions in which they worked
before. These measures have been taken to create a pleasant working environment.

24

KANEMATSU CORPORATION

Number of employees taking childcare leave
FY2007

FY2008FY2009FY2010

2

6

4

10

FY2011FY2012FY2013

FY2014

9

3

4

14

● Family Care Support
In addition to the conventional family care leave system, Kanematsu
has recently enabled special paid holidays for family care. We also
have in place a child-raising and care consultation office for one-toone consultation on these matters.

● Refreshment Day
By urging employees across Kanematsu to do no overtime on
Wednesdays, we aim to improve working efficiency and encourage
a better work-life balance. We have also set aside one day every
month as a special “Refreshment Day” during which we monitor
hours worked, to bring down overtime.

● General Employer Action Plan

Training in Formulation ofBusiness Plans

In December 2010, Kanematsu wasawarded the “Kurumin” certification of
support for nurturing of the next generation, by the Ministry of Health, Labour andWelfare’s Tokyo Labor Bureau.
In October 2013, we formulated its
third General Employer Action Plan. Basedon the plan, we are taking measures to fully harness employee
potential, by encouraging a better balance between work andchildcare duties, and by creating a more pleasant workplace for all.

Trainees’ Voices
Manabu Saito
Manager, Section No. 5, Iron & Steel
Foreign Trade Department

In the training course that I
attended, we began by studying
theoretical approaches andmanagement strategies, as well asbasics of marketing. Then, through group work, we improved
our ability to find ways of creating business models andto organize presentations for management. I was able toparticipate in exchanges of views with a wide range of members of other departments of the group, and I learned theimportance, in the process of creating a business model, ofrepeated research and clear documentation after thoroughly
mastering theoretical aspects as a member of a team. Theseexperiences were extremely useful to me later in projects
for acquisition of oilfield tubing processing companies andexpansion of steel tube businesses.

Employee Training and Deployment
Training of human resources is essential for the growth ofKanematsu. We offer training in formulation of business plans, inaddition to practical courses intended to impart basic businessskills, from introductory courses for new hires upward, andlanguage training. Local employees at Kanematsu overseas bases
are likewise given the opportunity to study our business throughpractical experience at the Tokyo Head Office.

● Training in Formulation of Business Plans
Kanematsu aims to improve corporate value by deepening its
core competencies, making new investments in business creationand taking on other new challenges. The specific aim is to create
new businesses from existing businesses. We have created theseplanning courses for the purpose of imparting the skills necessary
for drafting new business plans.

Kazuhisa Harada
Business Development &Investment Innovation Office,Corporate Planning Department

It was quite tough training, but it
really did have positive benefits
for me. In particular, I was able tothoroughly familiarize myself with
common approaches to all businessdevelopment, in terms of questions you have to ask: Should
something be done (market scale and growth)? Can it be doneat all (can it be created, can it be sold)? I really learned a lot.
At the moment, my mission is supporting business development. I am currently handling a range of projects. What I
learned has been very helpful to me in grasping key aspects
beyond sectors and products.

Employees and hiring terms
All employees (at March 31, 2014)

New hires FY2014

Mid-career hires FY2014

Male

Female

Total

Male

Female

Total

Male

FemaleTotal

Career-track employees

553

55

608

21

4

25

21

0

21

Non-career employees

1

191

192

0

14

14

0

1

1

554

246

800

21

18

39

21

1

22

Total

Annual Report 2014

25

CSR

CSR through Our Business Activities
We are pursuing CSR through our business activities● Renewable Energy

CSR Procurement
CSR procurement means that a company procuring necessary
materials, parts and products requires its suppliers not only toswiftly provide products of consistently high quality but also tomake a CSR commitment. CSR procurement efforts are also growing in importance year by year as companies and the general public
start to take notice of CSR.
We have established systems to promote CSR activities, including a CSR Action Guidelines for Supply Chains, to meet the CSR
procurement requirements of our business partners.
The conditions surrounding CSR procurement touch on awide variety of spheres, including employees, health and safety,
environmental activities, CSR management and corporate ethics.
• Does the supplier conduct its business activities with due consideration to the environment?
• Does it conduct its business activities with due consideration tohuman rights? (Respecting bans on child labor and forced labor)• What is its compliance record like?
• Does it meet the latest quality standards? (Usage restrictions on
harmful substances not to exceed legal thresholds)

Flow of CSR Procurement
Suppliers of raw materials/business partners(suppliers of each manufacturer, producer, etc.)
Procurement of raw materials by Kanematsu

CSR procurement required ofcustomers by Kanematsu(business with companies
practicing CSR)

Supply chain

Added value such as manufacturing, processing,and customization by Kanematsu
Sales of products by Kanematsu
Buyer of products (sales offices, retailers,manufactures, government offices, etc.)

CSR procurement required ofKanematsu by customers(CSR practices)

Sales by customers
End users

Environmental Businesses
Kanematsu contributes to the soundness and improvement of
the global environment through business activities in Japan andoverseas—purchase, marketing, etc.—that foster a better environment. We are also engaged in business activities that promotebiodiversity.

26

KANEMATSU CORPORATION

Kanematsu is proactively engaged
in renewable energy businesses.
We have handled 10 projects inthe area of geothermal and solar
power generation facilities, witha total output of approximately
530 MW. Deliveries have been made to the Philippines, Indonesia
and Costa Rica. In October 2013, the Kanematsu Group won a full
package order for new construction of a 54MW wind-power plant
at San Lorenzo, Western Visayas, and an order for submarine-cablelaying and covering, from a Philippine’s independent power
supplier, Trans Asia Renewable Energy Corporation (TAREC). Works
completion is scheduled for the end of 2014.
Electricity generated by wind power has a smaller carbon footprint (by emissions volume) than energy based on fossil fuels, andhas major advantages in terms of global environmental protection.
What’s more, plant construction is rapid, and commercial operation
can start quickly. It is also a source of power that satisfies current
demands for lower dependence on imported energy.
Kanematsu regards wind power generation as an importantbusiness in its renewable energy portfolio, and plans to continue toexpand this business in countries with favorable wind conditions.
Through such activities, we will contribute to the long-term protection of the global environment.

● Sustainable Coffee
Kanematsu is committed to the
trading of sustainable coffee.
“Sustainable coffee” is a general term
for coffee produced and distributed
in a way that keeps natural environment sustainable and ensures that people can continue sustainable
lifestyles, so meeting the obligations of the current generation to
future generations. Kanematsu was among the first to be interested
in this field, and is committed to supporting producers andhelping the environment through importation and marketing ofcoffee beans that have received accreditation from the Rainforest
Alliance*, an international environmental body that focuses on
tropical rainforest protection. We plan to expand further our tradingof sustainable coffee to improve environmental protection anddevelop people’s livelihoods in years ahead.
*R ainforest Alliance accreditation is given to companies that meet tough conditions
including protection of biodiversity, prevention of illegal and excessive timber fellingin forests and improvement of livelihoods for agricultural workers.

Corporate Governance
Our Basic Stance on Corporate Governance
Kanematsu has strengthened corporate governance to increase the transparency of management and to create a more
equitable, efficient and sound company. We will improve corporate governance with the aim of winning the support of all
our stakeholders, including shareholders, customers and employees, and increasing our enterprise value.
are appointed to the Board for one-year terms to allow the Board to
respond appropriately to changes in the business environment.

System of Corporate Governance
Kanematsu has an Audit & Supervisory Board. The auditors andAudit & Supervisory Board act independently to audit the directors’
performance of their duties.
At the 120th General Meeting of Shareholders, held on June 24,
2014, an outside director was elected to the Board of Directors to
support appropriate decision-making by the Board of Directors andmore rigorous auditing of the duties performed by the directors.
The Board of Directors is now made up of six directors, including
the newly appointed outside director. The executive officer system
has been expanded to improve flexibility in business execution,
speed up management decision-making, and further clarify roles
and responsibilities through the separation of the auditing andexecutive functions.

● Board of Directors
The Board is made up of six directors, including one outside
director. The Board of Directors decides on matters set out in laws
and ordinances as well as our Articles of Incorporation, determines
key business policies, and oversees business management by the
Executive Directors. In principle, our Board of Directors meets oncea month, with extraordinary meetings held as necessary. Directors● Management Committee
To facilitate rapid decision-making and flexible management,
Kanematsu has set up a Management Committee that includes
the President. The Committee meets every week, in principle. The
Committee establishes basic policies for Company-wide generalbusiness execution in accordance with basic policies determinedby the Board of Directors and provides instruction and guidance on
the execution of business.

● Project Deliberation Committee
The Project Deliberation Committee was established to enablehigher-level debate and speed up decision-making on important
projects. The Committee’s decisions take precedence over those bymanagers with decision-making powers based on specific remits.
The Committee meets every week to review and discuss projects
from a company-wide perspective.

● Audit & Supervisory Board
The Audit & Supervisory Board acts as an independent organ
to audit the directors’ performance of their duties. Four Audit &◆ Corporate Governance Structure
General Meeting of Shareholders
Appointment/Dismissal

Board of Directors

Appointment/
Dismissal

Appointment/Dismissal

Audit & Supervisory Board

Audit

Six directors (including one outside director)

Four Audit & Supervisory Board Members (including two outside members)

Appointment/Dismissal/Supervision

Collaboration

Audit

President & CEO

Collaboration

Management Committee
Project Deliberation Committee
Internal Control and Compliance Committee
CSR Committee

Internal Auditing
Department
Internal
controls

Accounting audit

Accounting Auditor

Collaboration

Business Divisions/Administrative Departments, Domestic and Overseas Offices(As of June 24, 2014)

Annual Report 201427

Corporate GovernanceSupervisory Board Members, including two outside members,receive reports from directors and employees on the performanceof their duties as required, attend meetings of the Board of Directors,
Management Committee, Project Deliberation Committee, Internal
Control and Compliance Committee, and other important meetingsand committee meetings, and audit the performance of duties bydirectors.

Internal Auditing
The Internal Auditing Department (eight staff members as of June24, 2014) conducts internal audits of Kanematsu and consolidated
subsidiaries to ensure that proper accounting records are kept, toevaluate and monitor improvements and control activities, andhelp improve operational effectiveness and efficiency.
The Internal Auditing Department and Audit & Supervisory
Board hold regular meetings and work in close cooperation with
one another by explaining audit plans, reporting the results ofaudits, and ensuring the effectiveness of internal audits. They also
exchange opinions with the accounting auditor through internal
control assessments and other related activities.

Internal Control System and Risk Management System
To comprehensively assess risks inherent in the Kanematsu Groupand to comply with laws and regulations relating to operational
effectiveness and efficiency and its business activities, to preserve
assets, and ensure the reliability of financial reporting, theKanematsu Group has built the following internal control system.

● Compliance
In light of the importance of complying with laws and ordinances,
we have set up an Internal Control and Compliance Committee,
and have strengthened our internal compliance system. We havecompiled a Compliance Handbook detailing countermeasures withspecific examples, which has been distributed to all employees andalso published on the intranet to raise awareness of complianceamong directors and all employees. We also introduced a hotline
system for reporting directly to or consulting with the Internal
Control and Compliance Committee or an outside lawyer. In
addition to legal compliance, we conduct training courses to foster
sound judgment on ethical matters among our staff.

● Corporate Social Responsibility (CSR)
To further clarify our management approach, which places greatvalue on CSR, we have established a cross-sector CSR Committee
within Kanematsu. When necessary, the committee drafts
Company-wide action policies for various problems related to CSR,
such as social contributions or environmental protection, andrigorously implements the PDCA cycle in its promotion of CSR.

28

KANEMATSU CORPORATION● Elimination of Antisocial Forces
One of our compliance items with regard to the elimination ofantisocial forces is its approach of taking a firm stand against
antisocial forces and shutting off all connections with them. With
the aim of eliminating antisocial forces, Kanematsu belongs to
the Metropolitan Police Department’s Special Violence Prevention
Countermeasures Association and closely cooperates in normal circumstances through the sharing of information. In case Kanematsu
is subject to unreasonable demands made by antisocial forces, thePersonnel & General Affairs Department is positioned as our central
department for the handling of this issue and gathering of information, as well as cooperating with outside organizations including
the police and attorneys.

● Information Management System
With regard to information management, we have establishedstandards for the custody, retention and disposal of accounting
records, balance sheets, agreements and contracts concerning thebasic rights and obligations of Kanematsu, certificates related toproperties and other similar documents. We have also tightenedrules on information security management, with the aim of preserving and managing information as an important asset of Kanematsu,
including the protection of personal data and other information
security compliance requirements.

● Risk Management
With respect to business risks that may affect our operations, suchas market risk, credit risk, investment risk, or country risk, the departments in charge of each risk based on specific remits have established internal regulations and detailed enforcement regulations,and prepared operational guidelines that have been thoroughly
instilled in all employees through training sessions. We also set up
cross-functional committees as necessary to control risks.
We have established a system to make judgments and decisions
about business risks based on those remits. The Project Deliberation
Committee considers whether to make important investments, andwhether to continue or withdraw from those investments and loans
by comprehensively examining relevant risks.
Regarding the risks posed by the occurrence of serious events
such as major natural disasters, we have drawn up plans to maintainbusiness operations and a manual of countermeasures, and have
put in place a system to ensure appropriate management ofKanematsu in such a contingency.

● Construction of Internal Control System
We have established an Internal Control and Compliance
Committee to build a more effective and efficient internal control
system for the Group. We are developing, operating, assessing, andimproving internal controls relating to financial reporting in linewith the internal control reporting systems defined in the Financial

◆ Diagram of the Kanematsu Group Compliance System
Audit & Supervisory
Board

Investigate, Audit

Internal Auditing Department

Corporate Planning Department
Board of Directors

Management
Committee

Instructions, Feedback
Reports, Consultation

Internal Control
and Compliance
Committee
Chairperson:
Executive Vice President

Promotion Office:Legal & ComplianceDepartment[Hotline][For reporting/consultation]

Superior

Departmental
Compliance Officers

Department Chief Officers

Presidents of the Group Companies
Compliance Officers

Legal & Compliance Department

Employees ofKanematsu
Employeesof the Group
Companies

Hotline(Crisis Management and Compliance Committee line)

Hotline (Outside Lawyer Line)(As of June 24, 2014)

Instruments and Exchange Law. Company-wide internal controls
and business processes at key facilities are assessed by the Internal
Auditing Department, an independent department in charge ofassessment.

A Message from an Outside
Audit & Supervisory Board Member

I bring an outside perspectivethat is completely professional.

Group-wide Activities
Group Company Presidents meet twice a year, and at other times
as necessary, to share information on business activities across theGroup as a whole. The goal is to build a mutual understanding of,and build a common view on, corporate governance.

Disclosure
We intend to promote equitable and transparent management bydisclosing important management information to shareholders
and all other stakeholders, institutional investors, analysts, and the
media in a prompt and appropriate manner. We disclose information to shareholders and investors through our website, holdbriefings twice a year for institutional investors and analysts, anddisclose information on a timely basis to stock exchanges.

Tsukasa Okamoto
Audit & Supervisory Board Member

The most important role of Audit & Supervisory Board is toensure the soundness of a company by auditing the performance of duties by directors and establishing corporate
governance.
In order for us to “take a positive management stance andestablish a solid growth track” and “endeavor to consistently
increase corporate value to meet the expectations of domestic and foreign stakeholders,” as outlined in the medium-termbusiness plan, along with improving our earning power, it
is essential that we strengthen corporate governance by
maintaining compliance and risk management systems.
Recognizing this, Audit & Supervisory Board audit, basedon the audit plan, the performance of duties by directors byvisiting Kanematsu and subsidiaries in Japan and abroad,attending Board of Directors’ meetings and other important
meetings, meeting with executive management, and collaborating with accounting auditors and the internal audit. Above
all, Outside Audit & Supervisory Board make appropriate andreasonable decisions on the performance of directors’ duties
by incorporating outside and professional perspectives, andreview operations from the standpoint of their legality.

Annual Report 201429

Corporate Officers (As of June 24, 2014)
Directors and Audit & Supervisory Board Members

Masayuki Shimojima

Masao Hasegawa

President & CEO

Executive Vice President

Tetsuro Murao

Takashi Gunji

Nobuyoshi Sakuyama

Yutaka Hirai

Tsukasa Okamoto

Fumihiko Nashimoto

Yonosuke Yamada

Michishiro Ito

Director

Director

Audit & Supervisory Board Member(full-time)

Director

Audit & Supervisory Board Member(full-time)

Audit & Supervisory Board Member

Director

Audit & Supervisory Board Member* 1.	Mr. Yutaka Hirai is an Outside Director.
2.	Mr. Tsukasa Okamoto and Mr. Yonosuke Yamada are Outside Audit & Supervisory Board Members.
3.	Mr. Yutaka Hirai and Mr. Yonosuke Yamada are Independent Officers, as defined in the Securities Listing Regulations.

Executive Officers
President & CEO

Masayuki Shimojima

Executive Vice President

Masao Hasegawa

Chief Officer, Supporting Area; Chief Officer, Internal Auditing

Senior Managing Executive Officers

Tetsuro Murao

Chief Officer, Business Area; Chief Officer, Personnel and General Affairs, Corporate Planning;
General Manager, Osaka Branch; General Manager, Nagoya Branch

Takashi Gunji

Chief Officer, Steel, Materials and Plant Division

Morihiro Toida

Chief Officer, Foods and Grain Division

Tetsuya Kaneko

Chief Officer, System Planning, Traffic and Insurance

Yoshiya Miyabe

Chief Officer, Motor Vehicles and Aerospace DivisionNobuyoshi Sakuyama

Chief Officer, Finance, Accounting, Business Accounting, Legal and Compliance

Kaoru Tanigawa

Chief Officer, Electronics and Devices Division

Kazuo Shibata

Chief Officer, Credit Control

Keiichi Inaba

President, Kanematsu (China) Co., Ltd.; President, Kanematsu (Hong Kong) Ltd.

Eiji Kan

Deputy Chief Officer, Steel, Materials and Plant Division

Katsumi Morita

President, Kanematsu USA Inc.

Masayuki Hamasaki

Deputy Chief Officer, Foods and Grain Division; General Manager, Grain Dept.

Hiroyasu Hirasawa

Deputy Chief Officer, Corporate Planning; General Manager, Corporate Planning Dept.

Managing Executive Officers

Executive Officers

30

KANEMATSU CORPORATION

120 130 140 150
110
160
100
17
0
90

80

0
18

Financial Section
and Corporate Data

26
0

0
36

10

220 230 240 250

30 40 50 60
20
70

210
200
190

I Financial Section
32 Ten-Year Summary of Consolidated Financial Statements
34 Management’s Discussion and Analysis
36 Business Risks
38 Consolidated Balance Sheets
40 Consolidated Statements of Income
41 Consolidated Statements of Comprehensive Income
42 Consolidated Statements of Changes in Net Assets
45 Consolidated Statements of Cash Flows
46 Notes to Consolidated Financial Statements
71 Independent Auditor’s Report

II Corporate Data
72 Global Network
74
76

Network
Major Consolidated Subsidiaries and Affiliates

78 Corporate Profile
79 Investor Information

Annual Report 2014

31

0
27

300
290
280

310 320 3
30 3
40

35
0

Ten-Year Summary of Consolidated Financial Statements
Years ended March 31

Kanematsu Corporation and Consolidated Subsidiaries

2005

2006

2007

2008

2009

2010

886,876
68,142
15,762

1,096,409
81,732
17,982

1,281,331
103,71121,713

1,244,020
90,32722,605

1,138,755
86,292
19,027861,277
74,104
12,186

4,836(16,728)

14,61528,975

77

8,407

2,469

(21,686)

7,507

19,016(12,787)

3,528

38,029520,118—
261,560

26,004
556,046—
246,317

48,767563,176
32,959204,900

62,239503,456
45,587
148,944

42,035414,928
24,936
134,582

45,804
398,629
28,916109,350

Per share (yen):
Net income (loss)
Net assets
Cash dividends

6.52
93.74
—

(52.43)
62.12
—

17.94
78.75
—

45.44
108.95—(30.56)
59.61
—

8.44
69.15
—

Financial indicators:
Return on equity (ROE) (%)
Equity ratio (%)
Net debt-equity ratio (times)

8.06
7.3
6.9

(67.73)
4.7
9.5

25.46
5.9
6.2

48.42
9.1
3.3

(36.26)
6.0
5.4

13.10
7.3
3.8

For the year:
Net sales
Gross profit
Operating income
Income (loss) before income taxes
and minority interests
Net income (loss)
At year-end:
Net assets
Total assets
Shareholders’ equity
Net interest-bearing debt

Notes 1. Figures are rounded down to the nearest million yen. Percentages have been rounded off.
2. The amount of net assets until the year ended March 31, 2006, is the amount presented under shareholders’ equity, which has conventionally been presented.
3. The U.S. dollar amounts represent the arithmetical results of translating yen to dollars at the rate of ¥102.92 to U.S.$1.00, the exchange rate prevailing on March 31, 2014

Net sales

Operating income and Operating income to net sales
1,281,331

1,244,020

21,713
1,138,755

1,096,409

1,114,539
936,891

886,876

22,605

15,762

861,277

1.8

1.6

19,776

19,027

17,982

1,006,365 1,019,232

21,426

1.7

1.8

18,029

2.1

1.9
1.7

18,262
1.8

1.8

13

14

12,186
1.4

05

06

07

Net sales (¥ million)

32

KANEMATSU CORPORATION

08

09

10

11

12

13

14

05

06

07

08

09

Operating income (¥ million)

10

11

12

Operating income to net sales (%)

2011

2012

2014

2013

Millions of yen

Thousands of
U.S. dollars

936,891
76,90518,0291,006,365
80,90021,426

1,019,232
80,021
18,262

1,114,539
86,402
19,776

10,829,183
839,514
192,152

13,03013,52916,781

19,075

185,338

9,175

6,110

9,564

11,799114,651

49,576388,676
33,101
104,61255,992399,753
39,00890,012

96,204428,459
71,65768,03875,912
399,186
54,51986,439At year-end:
Net assets
Total assets
Shareholders’ equity
Net interest-bearing debt

934,750
4,163,039
696,242661,083

21.93
79.07
—

14.60
93.16
—

22.80
129.82—28.09
170.54
3.00

0.27
1.66
0.03

29.59
8.5
3.2

16.95
9.8
2.3

20.45
13.7
1.6

18.70
16.7
0.9

—
—
—

Net income (loss) and Net income (loss) per share

For the year:
Net sales
Gross profit
Operating income
Income (loss) before income taxes
and minority interests
Net income (loss)

Per share (yen):
Net income (loss)
Net assets
Cash dividends
Financial indicators:
Return on equity (ROE) (%)
Equity ratio (%)
Net debt-equity ratio (times)

Net interest-bearing debt and Net debt-equity ratio

19,016
261,560
11,799
45.44
7,507
3,528

17.94

2,469
6.52

21.93

9.5

9,564

9,175
6,110

22.80

246,31728.09

148,944

6.9
6.2

14.60

8.44

204,900(30.56)

134,582
5.4

109,350 104,612
3.8

3.3

3.2

90,012 86,439
2.3(12,787)(52.43)68,038
1.6(21,686)
05

06

07

08

09

Net income (loss) (¥ million)

10

11

12

13

14

Net income (loss) per share (¥)

05

06

07

08

09

10

Net interest-bearing debt (¥ million)

11

12

13

0.9
14

Net debt-equity ratio (times)* Net interest-bearing debt = Interest-bearing debt – Cash and bank deposits* Net debt-equity ratio = Net interest-bearing debt / Shareholders’ equity

Annual Report 201433

Management’s Discussion and Analysis

Business Results
For the fiscal year ended March 31, 2014, In this environment, theresults of the Group in the fiscal year under review are as shown below.
Consolidated net sales rose ¥95,307 million (9.4%) from the previous
fiscal year, to ¥1,114,539 million. With the increase in net sales, consolidated gross trading profit increased ¥6,381 million (8.0%) from theprevious fiscal year, to ¥86,402 million. Consolidated operating income
climbed ¥1,514 million (8.3%) from the previous fiscal year, to ¥19,776
million. Non - operating income rose ¥1,941 million from the previous
fiscal year, thanks primarily to an increase in foreign exchange gains andan improvement in equity in the earnings of affiliated companies. As aresult, consolidated ordinary income increased ¥3,455 million (20.7%)
from the previous fiscal year, to ¥20,160 million. In extraordinary items,
the Group posted a consolidated extraordinary loss of ¥1,085 million,
primarily reflecting a loss on impairment, which offset a gain on salesof tangible fixed assets. Income before income taxes and minority
interests climbed ¥2,294 million (13.7%) from the previous fiscal year, to¥19,075 million. Consolidated net income rose ¥2,235 million (23.4%)
from the previous fiscal year, to ¥11,799 million.

aerospace business, which were included in the Electronics, Iron & Steel,and Machinery & Plant segments. Starting the first nine month sunderreview, the Group, consequently, has four reportable segments —Electronics & Devices, Foods & Grain, Steel, Materials & Plant, and Motor
Vehicles & Aerospace —instead of the five reportable segments it had
until the previous fiscal year: Electronics, Foods & Foodstuff, Iron & Steel,
Machinery & Plant, and Environment & Materials.

Electronics & Devices
The electronic components and materials business performed well,mainly in export transactions. In the semiconductor-related businesses,
domestic demand for components increased significantly, partly due tothe government’s economic stimulus measures.
The system integration business remained strong thanks tocompanies’ capital expenditure on their infrastructure.
Meanwhile, operating income decreased in the mobile solution
business as a result of intensifying competition among mobile phone
carriers, despite the last-minute surge in demand ahead of theconsumption tax hike.
As a result, net sales in the Electronics and Devices Division rose
¥40,574 million year on year, to ¥277,348 million. Operating income
declined ¥584 million, to ¥7,755 million.

Foods & Grain

Segment Information
Results for each business segment are described below. The Group hasreorganized its business units and has changed its reportable segments
as follows: The Group has created a Motor Vehicles & Aerospace segment consisting of the motorcycle and automobile parts business andNet assets and Net assets per share

Operating income for the entire food business segment was reduced,
primarily as a result of exchange rate fluctuations. The meat productbusiness remained stable based on increased imports in response to arise in domestic market prices. The foodstuff business was also consistently strong based on stable procurement and the increased businessvolume. Meanwhile, the food business suffered a decline in operating

Shareholders’ equity and equity ratio
71,65716.7

96,204170.5454,51913.7

75,912

93.74
38,029129.82

62,239108.95
48,76762.12

42,03578.75

26,00459.61

45,58755,99245,80469.15

38,00049,576
93.16

7.3

79.07

32,959

05

06

07

08

Net assets (¥ million)

09

10

11

Net assets per share (¥)

12

13

14

05

06

33,101
24,93626,0004.7

39,008

9.1

6.0

5.9

07

08

09

Shareholders’ equity (¥ million)

28,916
7.3

10

11

KANEMATSU CORPORATION

12Equity ratio (%)* Shareholders’ equity = net assets – minority interests* Equity ratio = Shareholders’ equity / total assets

34

9.8

8.5

13

14

income due to the time taken for sales prices to reflect the increased
costs caused by the weaker yen. As a result, in the Foods &Grain
Division, net sales increased ¥21,088 million year on year, to ¥309,024
million. Operating income fell ¥1,066 million, to ¥2,099 million.

Steel, Materials & Plant
In the iron and steel business, transactions of specialty steel for
automobiles for Europe and the United States and the oilfield tubing
business in North America acquired in the previous fiscal year were
solid. Sales of petroleum products were strong in the energy business.
The plant and infrastructure business remained generally stable, whichis partly attributable to the last-minute surge in demand ahead of theconsumption tax hike in transactions of machine tool and industrial
machinery. As a result, net sales in the Steel, Materials & Plant Division
increased ¥34,601 million year on year, to ¥468,831 million. Operating
income increased ¥3,035 million, to ¥8,129 million.

Motor Vehicles & Aerospace
Transactions of aircraft parts were strong, and transactions involving
motorcycle and motor vehicle parts for North America remained
stable. In contrast, construction machinery–related transactions for
Asia showed weakness. As a result, in the Motor Vehicles & Aerospace
Division, net sales rose ¥3,732 million year on year, to ¥54,451 million.
Operating income climbed ¥47 million, to ¥1,494 million.

Other
Net sales declined ¥4,687 million year on year, to ¥4,883 million.
Operating income rose ¥19 million, to ¥224 million.

Analysis of financial status
Assets, liabilities and net assets
Total assets at the end of the fiscal year under review increased ¥29,273
million from the end of the previous fiscal year, to ¥428,459 million.
Interest-bearing debt declined ¥4,956 million from the end of the previous fiscal year, to ¥141,905 million. Net interest-bearing debt, which isinterest bearing debt minus cash and bank deposits, decreased ¥18,401
million from the end of the previous fiscal year, to ¥68,038 million.
Net assets stood at ¥96,204 million, up ¥20,292 million from the endof the previous fiscal year, thanks to an increase in retained earnings
as a result of the posting of net income, and improvements in foreign
currency translation adjustments, reflecting exchange rate fluctuations.
Shareholders’ equity, obtained by subtracting minority interests fromnet assets, increased ¥17,138 million from the end of the previous
fiscal year, to ¥71,657 million. As a result, the equity ratio improved 3.0
percentage points from the end of the previous fiscal year, to 16.7%.
The net debt-equity ratio (“net DER”) improved to 0.9, up from 1.6 at theend of the previous fiscal year.

Cash flows
Net cash provided by operating activities stood at ¥22,384 million (versus ¥1,355 million provided in the previous fiscal year), chiefly reflecting
an increase in operating income. Net cash used by investing activities
amounted to ¥1,111 million (versus ¥1,466 million provided in theprevious fiscal year), reflecting payments for the acquisition of a mobile
phone sales company and purchase of tangible fixed assets, etc. despite
proceeds from sale of tangible fixed assets. Net cash used in financing
activities amounted to ¥9,351 million (versus ¥15,721 million used in
the previous fiscal year), reflecting the repayment of debt, among otherfactors. As a result, cash and cash equivalents at the end of the fiscal
year under review stood at ¥73,548 million, down ¥13,516 million fromthe end of the previous fiscal year.

Fundraising
The Group raises funds primarily through indirect finance based ongood relations with our main banks, regional banks, life and non-life
insurers and other financial institutions. Also, to respond flexibly tofunding requirements for business expansion and to guard against
unforeseen deterioration in our financial situation, we maintain sufficient levels of cash and bank deposits, and conduct flexible investment
operations in highly secure short-term financial products in response to
our funding needs and financial circumstances.

Annual Report 201435

Business Risks

Below are details of the risks that could affect the business performance and financial position of the Group.
The forward-looking statements below are based on information available as of June 24, 2014.
The Group takes all risk that it faces on a daily basis in the course of its business very seriously. Risk control isundertaken through management mechanisms and methods tailored to the nature of each category of risk.

Market risk related to supply and demand andprices of goods traded
In its mainstay commodity trading business in Japan and overseas, theGroup deals with grains and petroleum products as well as electronicparts and information, communications and technology (ICT) products.
Grains and petroleum products will be influenced by the market conditions, while electronic parts and ICT products are exposed to the risk offrequent price erosion caused by competition and obsolescence resulting from technological innovation. An unexpected loss may result fromcauses such as rapid movements in commodities prices or a decline indemand, when our positions in these commodities increase.

Price fluctuation risk of marketable securities, etc.
The Group may hold shares in trade partners as means of strengthening
its relationship with them. There is a risk of price fluctuation inherent
in these shares, which could have an effect on the financial position of
the Group through unrealized loss on available-for-sale securities. Since
stocks and other securities are included in the portfolio of the pension
assets of the Group for the purpose of making medium-and long-term
investments, differences from the required investment yield could havean effect on the financial position of the Group, given that the investment yield will fall if the prices of the stocks, etc. fall.

Default risk and credit risk
Foreign currency risk
The Group is engaged in foreign currency transactions in a number ofcurrencies and terms incidental to its export and import trading. The
Group not only transfers the risk of currency fluctuations to customers
in accordance with transaction terms but also participates in derivatives
transactions such as forward contracts to reduce the risk. The Groupalso has local subsidiaries and business corporations overseas. Accountbalances at these companies are converted into yen at the exchange
rates prevailing at the time of account closing, for the purposes ofpreparing consolidated financial statements. For this reason, net assets
may change through translation adjustments associated with exchange
rate fluctuations.

The Group extends credit in a number of forms, including accounts
receivable, advance payments, loans and guarantees in diverse business
transactions with its trading partners in Japan and abroad. For thisreason, late repayments and defaults may occur with developments
such as a deterioration in the financial strength of its trading partners.
The Group could also be forced to perform obligations that could beaccompanied by a monetary loss in association with the conclusion andperformance of a commodity supply agreement, a contract agreement,
and subcontract agreement, or other agreements, irrespective of reasons, if the trade partner defaults on its obligation or contract. Although
the Group has set aside an allowance for these losses in our accounting
procedures using certain estimates, an additional loss could arise if theloss exceeds the scope of the allowance.

Interest rate risk
The Group raises most funds needed for operating and financing
activities in the form of borrowings from financial institutions at variableinterest rates, with the exception of certain loans. Since these borrowings and fund management are exposed to an interest rate risk, interest
paid by the Group may increase with a rise in interest rates. Also, sincecertain companies in the Group adopt a defined benefit pension plan,
the retirement benefit obligation could increase in the estimation of
the Group if the discount rate used for the calculation of the retirement
benefit obligation falls.

36

KANEMATSU CORPORATIONBusiness investment risk
The Group makes business investments to achieve objectives, including
deep mining of existing businesses and expansion of business areas.
The Group decides whether to make such investments through procedures established according to their details and amounts. When making
investment decisions, the Group evaluates and analyzes risk factors andthe profitability of the business based on cash flows, taking the criteria
for business withdrawal into account. After making an investment, theGroup regularly reevaluates and reviews business potential and investment value to minimize any potential loss. The value of the business
investments may fluctuate according to the financial conditions ofinvestment targets and their business success or failure. The range ofmarket changes tend to be particularly wide in overseas businesses.
Local laws and relationships with partners may also prevent the Group
from executing its policy for operating or withdrawing from a business.

Country risk
The Group engages in transactions, loans and investments in othercountries. The collection of receivables may be delayed or impossible
as a result of political or economic developments in each of thesecountries. To minimize losses that could arise should these country risks
become reality, the Group regularly sets a limit based on ratings given
to each country and region according to the scale of their respective
country risk, and operates its businesses in such a way that prevents
overexposure to certain countries and regions. The Group takes steps
such as enrolling in trade insurance programs, according to the ratingsand project details in an attempt to minimize recovery risks. However,continuing transactions may become difficult if these risks actualize
in certain countries and regions, and this development may affect the
future business results of the Group.

Legal risk related to changes in laws
The business activities undertaken by the Group in Japan and overseas
are subject to a wide range of legal regulations in Japan and othercountries. The Group may become unable to continue certain transactions because of factors such as unexpected changes in laws, changes
in export and import regulations, including a punitive tariff that could
be introduced unilaterally following changes in the international
political environment, and changes in regulations such as permits andlicenses related to the sales and handling of products. An unexpected
expense for the Group may also arise from a lawsuit or from an orderissued by authorities. This risk also includes the risk that a tax rate ortax arrangements imposed by authorities or between countries underinternational taxation arrangements may change. Changes in these
legal systems could influence the financial position and operating
results of the Group.

Legal risk related to lawsuits and disputes
Business operations by the Group, and its assets and liabilities
associated with the business operations may become subject to legal
proceedings, including lawsuits, and other disputes, in various ways
through the course of the business activities undertaken by the Groupin Japan and overseas. Such lawsuits and disputes are generally unpredictable, and resolving them is often very time-consuming when theyoccur. Any prediction of the results therefore involves uncertainties. Any
occurrence of such lawsuits or disputes and unexpected outcomes may
affect the Group’s financial position and operating results.

Security risk related to information systems andinformation security
The Group builds and operates information systems for sharing
information and streamlining its operations. The Group has adopted
information security control rules, and is taking steps to ensure that all
members of the Group are familiar with crisis control responses, to meetthe safety requirements for operating its information systems. However,information systems cannot be made entirely invulnerable to theunauthorized disclosure of business sensitive information or personal
information through unauthorized access, computer viruses and othermeans, as well as inoperability due to factors such as natural disasters,
destruction of information system facilities attributable to accidents
and other causes, and communication line troubles. Inoperability may
reduce the efficiency of operations that depend on the systems, andseriously affect the future business results of the Group, depending on
the scale of damages.

Product and facility deterioration risk due to natural disasters
and accidents
The Group owns facilities and equipment, including business offices,
warehouses and manufacturing plants, in Japan and overseas. It also
owns cargo being stored or transported in and outside Japan forbusiness transactions. Such assets may be damaged or deteriorate asa result of natural disasters, accidents and other developments, andthe businesses of the Group may be suspended due to developments
such as earthquakes, fires, floods, and riots. Such incidents may seriously
affect the future financial position and operating results of the Group,
depending on the extent of the damage.

Compliance and fraud risk
The Group operates businesses to buy, sell and provide a broad arrayof products and services in Japan and overseas and carefully monitors
laws and regulations, including those related to exports and importsthat are established and enforced for these products and services
in Japan and other countries. However, it is difficult to execute allprocedures at all times across all of the trading operations we conduct
with the involvement of multiple parties. Although we take a numberof actions to prevent violations, there is a risk that we may overlook
a violation of a law or an instance of fraud. If the violation or fraud ismaterial, the financial position and operating results of the Group could
be affected.

Annual Report 201437

Consolidated Balance Sheets
March 31, 2014 and 2013

Fiscal 2014
JPY

Fiscal 2013
JPY

Fiscal 2014
USD (Note 3)

1. Cash and bank deposits (Note 7-3)

73,86760,421

717,715

2. Notes and accounts receivable (Notes 7-3, 7-8)

178,984

165,378

1,739,069

3. Lease investment assets

541

608

5,265

4. Short-term investments (Note 7-3)

16

16

159

66,256

65,246

643,762

AssetsI. Current assets

5. Inventories (Note 7-1)

825

352

8,017

7. Deferred tax assets

2,660

1,669

25,851

8. Other

22,364

23,134217,296

(149)

(273)

(1,453)345,366

316,554

3,355,682

172

1,345

1,680

2) Buildings and structures, net (Note 7-3)

5,949

5,391

57,8073) Machinery, equipment, vehicle, tools and fixtures, net

4,930

4,963

47,9054) Land (Note 7-3)

11,917

14,050115,795

5) Lease assets, net

1,074

1,075

10,436

174

163

1,691

24,21826,990235,316

6. Short-term loans receivable

Allowance for doubtful accounts
Total current assets
II. Long-term assets
1. Tangible fixed assets
1) Leased properties, net (Note 7-3)

6) Construction in progress
Total tangible fixed assets (Note 7-2)
2. Intangible fixed assets
1) Goodwill

3,175

2,122

30,8522) Other

8,531

5,104

82,896

Total intangible fixed assets

11,706

7,226

113,748

1) Investments in securities (Notes 7-3, 7-4)

32,19830,248

312,8462) Long-term loans receivable

1,798

2,435

17,4743) Doubtful accounts

902

1,895

8,772

4) Deferred tax assets

8,782

11,127

85,3305) Other

6,236

6,441

60,597

Allowance for doubtful accounts(2,750)(3,731)(26,728)

Total investments and other assets

47,167

48,415458,292

83,093

82,632807,357

428,459

399,186

4,163,039

3. Investments and other assets

Total long-term assets
Total assets(Notes) Presentation of fiscal year and amount (Japanese Yen and U.S. dollars)
1. “2014” refers to the Company’s consolidated fiscal year ended March 31, 2014 and other fiscal years are referred to in the corresponding manner.
2. “JPY” means millions of Yen and “USD” means thousands of U.S. dollars.

38

KANEMATSU CORPORATIONFiscal 2014
JPY

Fiscal 2013
JPY

Fiscal 2014
USD (Note 3)

1. Notes and accounts payable (Note 7-8)

115,210

104,372

1,119,422

2. Import bills payable

27,61027,984

268,273

3. Short-term borrowings (Note 7-3)

80,792

81,570785,004

760

733

7,390

5. Accrued income taxes

1,951

1,663

18,958

6. Deferred tax liabilities

1

95

11

Liabilities
I. Current liabilities

4. Lease obligations

6

118

60

8. Other

32,302

28,238313,856

Total current liabilities

258,635

244,776

2,512,975

1. Long-term borrowings (Note 7-3)

61,11365,290593,795

2. Lease obligations

1,033

1,099

10,038

368

45

3,582

7. Asset retirement obligations

II. Non-current liabilities

3. Deferred tax liabilities

—

4,296

—

4,630

—

44,995

6. Provision for retirement benefits for directors and statutory auditors

387

385

3,766

7. Asset retirement obligations

804

741

7,820

4. Provision for employees’ retirement and severance benefits
5. Net defined benefit liability

8. Other (Note 7-3)

5,281

6,636

51,318

Total non-current liabilities

73,62078,496715,314332,255

323,273

3,228,289

1. Common stock

27,781

27,781

269,929

2. Capital surplus

27,49327,526

267,139

3. Retained earnings

35,737

24,567347,232

Total liabilities
Net assets
I. Shareholders’ equity

(321)

(357)

(3,127)

90,69079,517881,173

1,743

1,048

16,9402. Net gains (losses) on deferred hedges, net of tax

(18)

298

(176)

3. Revaluation reserves for land (Note 7-5)

104

66

1,018

4. Foreign currency translation adjustments(20,758)(26,411)(201,696)

5. Remeasurements of defined benefit plans

(104)

—

(1,017)(19,033)(24,997)(184,931)

III. Minority interests in consolidated subsidiaries

24,547

21,393

238,508

Total net assets

96,20475,912934,750

Total liabilities and net assets

428,459

399,186

4,163,039

4. Treasury stock
Total shareholders’ equity
II. Accumulated other comprehensive income
1. Net unrealized gains on securities, net of tax

Total accumulated other comprehensive income

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

Annual Report 201439

Consolidated Statements of Income
For the years ended March 31, 2014 and 2013

I. Net sales
II. Cost of sales (Note 8-1)
Gross profit
III. Selling, general and administrative expenses (Note 8-2)
1. Salaries and bonuses
2. Retirement benefit expenses
3. Outsourcing service charges
4. Provision of allowance for doubtful accounts
5. Other
Total
Operating income
IV. Non-operating income
1. Interest income
2. Dividend income
3. Equity in earnings of affiliates
4. Foreign exchange gains
5. OtherTotal
V. Non-operating expenses
1. Interest expenses
2. Other
Total
Ordinary income
VI. Extraordinary gains
1. Gain on sale of tangible fixed assets (Note 8-3)
2. Gain on sale of investments in securities
3. Gain on step acquisitions
4. Gain on bargain purchaseTotal
VII. Extraordinary losses
1. Loss on disposal of fixed assets (Note 8-4)
2. Impairment loss on fixed assets (Note 8-5)
3. Loss on sale of investments in securities
4. Impairment loss on investments in securities
5. Loss on closure of business
6. Loss on withdrawing from employees’ pension fund
7. Loss on lawsuits
8. Business structure improvement expenses (Note 8-6)
Total
Income before income taxes and minority interests
Income taxes – current
Income taxes – deferred
Total
Income before minority interests
Minority interests in consolidated subsidiaries
Net income
The accompanying notes are an integral part of these financial statements.

40

KANEMATSU CORPORATION

Fiscal 2014
JPY

Fiscal 2013
JPY

Fiscal 2014
USD (Note 3)

1,114,539
1,028,136
86,402

1,019,232
939,21080,021

10,829,183
9,989,669
839,514

28,340
1,491
6,145
76
30,573
66,626
19,776

24,566
1,903
7,626
227
27,43561,75818,262

275,361
14,48859,710747
297,056
647,362
192,152

382
814
739
2,389
935
5,260

503
814
197
937
1,097
3,549

3,718
7,911
7,186
23,214
9,086
51,115

3,255
1,620
4,876
20,160

3,502
1,605
5,107
16,70531,633
15,74647,379
195,888

2,114
230
—
46
2,390

431
2,694
81
69
3,276

20,541
2,237—
449
23,227

381
2,196
34
55
276
—
—
530
3,476
19,075
4,500
453
4,953
14,121
2,321
11,799

1,271
750
636
376
—
94
71
—
3,200
16,781
4,082
1,490
5,573
11,208
1,644
9,564

3,710
21,343
338
540
2,689
—
—
5,157
33,777
185,338
43,726
4,406
48,132
137,207
22,555
114,651

Consolidated Statements of Comprehensive Income
For the years ended March 31, 2014 and 2013

Fiscal 2014
JPY

Fiscal 2013
JPY

Fiscal 2014
USD (Note 3)

I. Income before minority interests
II. Other comprehensive income
1. Net unrealized gains on securities, net of tax
2. Net gains (losses) on deferred hedges, net of tax
3. Foreign currency translation adjustments
4. Share of other comprehensive income of associates accounted for equity method
Total other comprehensive income (Note 9-1)
Comprehensive income

14,121

11,208137,207

715
(293)
6,552
178
7,153
21,274

927
(215)
5,067
416
6,196
17,404

6,951(2,854)
63,671
1,739
69,506
206,713Comprehensive income attributable to the shareholders of the Company
Comprehensive income attributable to minority interests

17,8693,405

15,388
2,015

173,625
33,088The accompanying notes are an integral part of these financial statements.

Annual Report 201441

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2014 and 2013

JPY
Shareholders’ equity
Fiscal 2014

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’ equity

Balance at the beginning of the fiscal year

27,781

27,526

24,567(357)

79,517

Changes during the fiscal year
Dividends(630)

Net income

11,799(630)
11,799Acquisition of treasury stock(32)

Disposition of treasury stock
Effect of changes in the shares of
equity-method affiliates

(13)

(13)

49

16

(0)

(0)
—

Changes of scope of equity-method
Net changes of items other thanshareholders’ equity during the fiscal year
Total changes during the fiscal year

—

(32)

11,16935

11,172

Balance at the end of the fiscal year

27,781

27,49335,737(321)

90,690JPY
Accumulated other comprehensive income

Fiscal 2014

Balance at the beginning of the fiscal yearNet
Net unrealized gains (losses)
gains (losses)
on deferredon securities,
hedges,net of tax
net of tax

1,048

298

Revaluation
reserves
for land66

Total
Foreignaccumulated
Minority
currency
Remeasurements
otherinterests intranslationof definedcomprehensive consolidated
adjustments
benefit plansincomesubsidiaries

Total
net assets(26,411)75,912—(24,997)

21,393

Changes during the fiscal year
Dividends(630)

Net income

11,799Acquisition of treasury stock(13)

Disposition of treasury stock16

Effect of changes in the shares of
equity-method affiliates(0)

Changes of scope of equity-method—

Net changes of items other thanshareholders’ equity during the fiscal year

42

694

(316)

38

5,652

(104)

5,964

3,153

9,118

Total changes during the fiscal year

694

(316)

38

5,652

(104)

5,964

3,153

20,291

Balance at the end of the fiscal year

1,743

(18)

104

(20,758)(104)(19,033)

24,547

96,204KANEMATSU CORPORATIONJPY
Shareholders’ equity
Fiscal 2013

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’ equity

Balance at the beginning of the fiscal year

27,781

27,597

15,003(550)

69,830Changes during the fiscal year
Dividends—

Net income

9,564

9,564

Acquisition of treasury stock
Disposition of treasury stock(70)

Effect of changes in the shares of
equity-method affiliates

(8)

(8)

197

126

3

Changes of scope of equity-method

3

(0)

(0)

Net changes of items other thanshareholders’ equity during the fiscal year
Total changes during the fiscal year

—

(70)

9,563

193

9,686

Balance at the end of the fiscal year

27,781

27,526

24,567(357)

79,517JPY
Accumulated other comprehensive income

Fiscal 2013

Balance at the beginning of the fiscal yearNet
Net unrealized gains (losses)
gains (losses)
on deferredon securities,
hedges,net of tax
net of tax

137

492

Revaluation
reserves
for land66

Total
Foreignaccumulated
Minority
currency
Remeasurements
otherinterests intranslationof definedcomprehensive consolidated
adjustments
benefit plansincomesubsidiaries(31,519)—(30,822)

16,984Total
net assets

55,992

Changes during the fiscal year
Dividends—

Net income

9,564

Acquisition of treasury stock(8)

Disposition of treasury stock126

Effect of changes in the shares of
equity-method affiliates

3

Changes of scope of equity-method(0)

Net changes of items other thanshareholders’ equity during the fiscal year

910

(194)

—

5,108

—

5,824

4,409

10,233

Total changes during the fiscal year

910

(194)

—

5,108

—

5,824

4,409

19,920

Balance at the end of the fiscal year

1,048

298

66

(26,411)—(24,997)

21,39375,912

Annual Report 201443

Consolidated Statements of Changes in Net Assets

USD (Note 3)
Shareholders’ equity
Fiscal 2014

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’ equity

Balance at the beginning of the fiscal year

269,929

267,459

238,702(3,476)772,614

Changes during the fiscal year
Dividends(6,121)

Net income

114,651(6,121)
114,651

Acquisition of treasury stock(320)

Disposition of treasury stock
Effect of changes in the shares of
equity-method affiliates

(127)

(127)

476

157

(0)

(0)

Changes of scope of equity-method
Net changes of items other thanshareholders’ equity during the fiscal year
Total changes during the fiscal year

—

(320)

108,530

349

108,559

Balance at the end of the fiscal year

269,929

267,139

347,232(3,127)881,173

USD (Note 3)
Accumulated other comprehensive income

Fiscal 2014

Balance at the beginning of the fiscal yearNet
Net unrealized gains (losses)
gains (losses)
on deferredon securities,
hedges,net of tax
net of tax

10,1892,897

Revaluation
reserves
for land

645

Total
Foreignaccumulated
Minority
currency
Remeasurements
otherinterests intranslationof definedcomprehensive consolidated
adjustments
benefit plansincomesubsidiaries

Total
net assets(256,618)

737,592—(242,887)

207,865

Changes during the fiscal year
Dividends(6,121)

Net income

114,651

Acquisition of treasury stock(127)

Disposition of treasury stock157

Effect of changes in the shares of
equity-method affiliates(0)

Changes of scope of equity-method—

Net changes of items other thanshareholders’ equity during the fiscal year

6,751

(3,073)373

54,923(1,017)

57,95630,64388,599Total changes during the fiscal year

6,751

(3,073)373

54,923(1,017)

57,95630,643

197,158

Balance at the end of the fiscal year

16,940

(176)

1,018

(201,696)(1,017)(184,931)

238,508

934,750

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

44

KANEMATSU CORPORATION

Consolidated Statements of Cash Flows
For the years ended March 31, 2014 and 2013

I. Cash flows from operating activities
Income before income taxes and minority interests
Depreciation and amortization(Decrease) Increase in allowance for doubtful accounts
Increase in provision for employees’ retirement and severance benefits
Increase in net defined benefit liability
Interest and dividends income
Interest expenses
Equity in gains of affiliates(Gain) Loss on disposal of fixed assets
Impairment loss on fixed assets
Gain on sale of investments in securities, net
Impairment loss on investments in securities
Loss on closure of business
Loss on lawsuits
Gain on step acquisitions
Loss on withdrawing from employees’ pension fundBusiness structure improvement expenses(Increase) Decrease in notes and accounts receivable
Decrease (Increase) in inventories
Increase (Decrease) in notes and accounts payableOther
Sub totalInterest and dividends received
Interest paid
Income taxes paid
Payments for loss on lawsuits
Payments for withdrawing from employees’ pension fundNet cash provided by operating activities
II. Cash flows from investing activities
Decrease (Increase) in time deposits, net
Payments for tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for intangible fixed assets
Payments for investments in securities
Proceeds from sales of investments in securities
Payments for purchase of investments in subsidiaries
Proceeds from sales of investments in subsidiaries
Payments for purchase of investments in subsidiaries resulting in change
in scope of consolidation (Note 11-2)
Proceeds from purchase of investments in subsidiaries resulting in change
in scope of consolidation (Note 11-2)
Payments for transfer of business (Note 11-3)
Increase in loans receivable
Proceeds from collection of loans receivable
Other
Net cash (used in) provided by investing activities
III. Cash flows from financing activities
Decrease in short-term borrowings, net
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds on issuance of common stock
Cash dividends paid
Other
Net cash used in financing activities
IV. Effect of exchange rate changes on cash and cash equivalents
V. Net increase (decrease) in cash and cash equivalents
VI. Cash and cash equivalents at beginning of year
VII. Cash and cash equivalents at end of year (Note 11-1)

Fiscal 2014
JPY

Fiscal 2013
JPY

Fiscal 2014
USD (Note 3)

19,075
3,170
(198)
—
302
(1,196)
3,255(739)(1,732)
2,196
(195)
55
276
—
—
—
530
(6,395)
2,964
5,617
1,409
28,396
1,338(3,276)(4,074)——
22,384

16,781
2,680
69
358
—
(1,317)
3,502
(197)
840
750
(2,058)
376
—
71
(81)
94
—
1,769
(3,838)(9,112)(1,634)
9,053
1,515(3,549)(4,588)
(981)
(94)
1,355

185,338
30,808(1,933)—
2,942(11,629)
31,633(7,186)(16,831)
21,343(1,899)
540
2,689
—
—
—
5,157
(62,145)
28,801
54,585
13,695275,908
13,005(31,831)(39,585)——
217,496105(2,305)
3,422
(435)
(271)
551
(96)
826

(79)
(1,664)
1,589(1,286)
(247)
3,573
(5)
18

1,025
(22,405)
33,251(4,236)(2,639)
5,361
(934)
8,033

(2,761)—(26,829)

—
—
(69)
265
(342)
(1,111)804(6,493)
(163)
4,492
926
1,466

—
—
(680)
2,579
(3,324)(10,798)(4,237)41,548(44,781)157(625)(1,412)(9,351)
1,593
13,51660,03273,548(244)
25,930(40,073)——(1,333)(15,721)
2,338(10,561)
70,59460,032(41,174)
403,700(435,111)
1,531(6,078)(13,727)(90,858)
15,486
131,327
583,296714,623

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

Annual Report 201445

Notes to Consolidated Financial Statements
For the years ended March 31, 2014 and 2013

1. B
 asis of Preparing Consolidated Financial
Statements
1. The Method of Producing the Consolidated Financial
Statements:
The consolidated financial statements of Kanematsu Corporation (the“Company”) are prepared in accordance with the “Regulations Concerning
Terminology, Forms and Preparation Methods of Consolidated Financial
Statements” (Ministry of Finance Ordinance No. 28, 1976; hereinafter, the“Regulations”).
The comparative information included in the consolidated financial
statements for the fiscal year ended March 31, 2014 is prepared inaccordance with the Regulations prior to the revision pursuant to Article
3, Paragraph (2) of the Supplementary Provisions of the “Cabinet Office
Ordinance for Partial Revision of the Regulations Concerning Terminology,
Forms, and Preparation Methods of Financial Statements, etc.” (Cabinet
Office Ordinance No. 61, September 21, 2012).
The Company and its domestic consolidated subsidiaries maintain theiraccounts and records in accordance with the provisions set forth in the
Companies Act of Japan and the Financial Instruments and Exchange Act ofJapan, and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to application and disclosure
requirements from International Financial Reporting Standards.

2. Japanese Yen Amount:
Amounts less than one million yen have been omitted, since theRegulations require such amounts to be rounded down for presentation. As
a result, the totals shown in the consolidated financial statements and notes
thereto do not necessarily agree with the sum of the individual accountbalances or breakdowns.

2. Summary of Significant Accounting Policies(a) Scope of Consolidation:(1) Number of consolidated subsidiaries: 82
Our major subsidiaries are as follows.
Name of company:
Kanematsu Electronics
Kanematsu Communications
Kanematsu Trading
Kanematsu KGK
Kanematsu Petroleum
SHINTOA
Kanematsu USA
Kanematsu (Hong Kong)
In the current fiscal year, BD Holdings (Presently Kanematsu BD
Communications) was added to the scope of consolidation due to acquisitionof shares and Kanemory Food Services and 3 other companies were added
to the scope of consolidation due to new establishment, while 5 companies
were excluded from the scope of consolidation due to merger or liquidation.
(2) Unconsolidated subsidiaries:
3 companies are not included in the scope of consolidation.
(3) Reason that certain subsidiaries are excluded from the scope of
consolidation:
3 unconsolidated subsidiaries are excluded from consolidation as they
are immaterial to the Company in terms of their total assets, net sales, net
income and retained earnings, individually and in the aggregate.
46

KANEMATSU CORPORATION(b) Application of Equity Method:(1) Number of unconsolidated subsidiaries to which the equity method
is applied: 2
2 subsidiaries out of 3 unconsolidated subsidiaries are accounted for by theequity method.
In the current fiscal year, 2 companies were excluded from accounting
via the equity method due to liquidation.
(2) Number of affiliated companies to which the equity method isapplied: 23
Among 28 affiliated companies, the equity method is applied to investments in 23 companies.
Major companies to which the equity method is applied are as follows.
Name of company:
Kanematsu-NNK
Hokushin
KaneyoCentury Textile Industry
In the current fiscal year, 4 companies were added to accounting via theequity method due to new establishment and 2 companies were excluded
from accounting via the equity method due to liquidation or sale of shares.
(3) Reason that the equity method is not applied to certain affiliatedcompanies:
The 1 unconsolidated subsidiary and 5 affiliated companies to which theequity method is not applied are immaterial to the Company’s consolidated
net income and retained earnings, individually and in the aggregate.

(c) Fiscal Year-ends of Consolidated Subsidiaries:
Consolidated subsidiaries that have different fiscal year-end dates from theconsolidated balance sheet date are as follows:
Name of consolidated subsidiary
Kanematsu USA
KG Aircraft Leasing
27 other companies

Year-end date
December 31
December 31

In preparing the consolidated financial statements, the financial statementsof 29 companies with fiscal year-end dates within three months of theconsolidated balance sheet date of March 31, are used. However, material
differences in transactions and accounts arising from the use of these fiscal
year-end dates are appropriately adjusted for in consolidation.
In the current fiscal year, Nippon Office Systems, Kanematsu
Semiconductor (Taiwan) and Kanematsu Devices Korea have changed theirfiscal year-end to March 31 from December 31. As a result of this change,
the accounting period ended March 31, 2014 for these 3 consolidated
subsidiaries spanned the 15 months from January 1, 2013.

(d) Short-term Investments and Investments in Securities:(1) Held-to-maturity bonds:
Debt securities are stated at cost less the amortization of any premium or
discounts, which are amortized over the period to maturities.
(2) Other securities (Non-trading purpose):* Marketable Securities
Marketable securities are stated at fair value.
Net unrealized gains or losses on securities recorded in “Net assets” arenet of tax amounts. The cost for marketable securities that have been sold isdetermined using the moving average method.
The fair value is determined primary based on the average of daily
market price for one-month prior to the fiscal year-end.

* Non-marketable securities
The non-marketable securities are stated at cost using the moving averagemethod.

benefit expenses, simplified method is applied, which recognizes retirement benefit obligations with the value of benefits payable assuming thevoluntary retirement of all employees at the end of the fiscal year.

(e) Derivatives:(k) Translation of Foreign Currencies:

Derivatives are stated at fair value method.

All monetary assets and liabilities denominated in foreign currencies aretranslated into yen at spot exchange rates prevailing at the balance sheet
date. Resulting translation gains and losses are included in determination of
net income for the period.
The financial statements of overseas subsidiaries are translated at current
exchange rates on the closing date except for shareholders’ equity which
is translated at historical acquisition date exchange rates. Differences inyen amounts arising from this translation are shown as “Foreign currencytranslation adjustments” and “Minority interests in consolidated subsidiaries”
recorded in “Net assets.”(f) Inventories:
Inventories are stated at cost method principally determined by the moving
average method (carried at the lower of cost or market value on the balance
sheet).

(g) Property and Equipment:(1) Tangible fixed assets (excluding lease assets):
The declining balance method is used for tangible fixed assets other thanbuildings (excluding auxiliary equipment) and leased property.
The straight-line method is used for buildings (excluding auxiliary equipment) and for leased properties.
The ranges of principal estimated useful lives are as follows.
Buildings and structures
3 – 50 years
Machinery, equipment, vehicle, tools and fixtures 2 – 20 years(2) Lease assets:
Depreciation on lease assets is recorded using the straight-line method overthe lease term, assuming a residual value of zero.
Finance lease transactions that commenced on or before March 31, 2008
are accounted for as operating leases.

(h) Allowance for Doubtful Accounts:
The Company and its consolidated subsidiaries (The “Companies”) provide anallowance for doubtful accounts to cover credit losses, based on estimates ofcollectability of individual accounts and past bad debt loss experiences.

(i) Provision for Retirement Benefits for Directors and Statutory
Auditors:
The Company and certain of its subsidiaries provide a provision for retirement benefits for directors and statutory auditors, which is calculated byestimating the required payable as of the balance sheet date in accordancewith the internal rules.

(j) Retirement Benefits:
The Company and certain of its subsidiaries provide for the payment of
employee retirement benefits and recognize net defined benefit liability
which deducts the value of plan assets from retirement benefit obligations
based on projections at the end of the current fiscal year.
In the calculation of retirement benefit obligations, straight-line basis
is used to attribute projected benefits to the period up to the end of thecurrent fiscal year.
Except for certain consolidated subsidiaries which recognize past service
costs as expenses upon their occurrence, past service costs are amortized as
expenses on a straight-line basis over five years, a predetermined numberof years, within the average expected remaining service period of theemployees.
Actuarial gains and losses are amortized on a straight-line basis over fiveto ten years, within the average expected remaining service period of theemployees, and are recorded as expenses in the subsequent years in which
the gains or losses are recognized.
Actuarial gains and losses and past service costs that are yet to berecognized in profit or loss are recognized within the net asset section asremeasurements of defined benefit plans of accumulated other comprehensive income after adjusting for tax effects.
For certain calculations of defined net benefit liability and retirement(l) Hedge Accounting:(1) Hedge accounting method:
The Company and certain of its consolidated subsidiaries apply hedge
accounting whereby gains and losses on hedged transactions are deferred
and recognized over future periods. For certain interest rate swaps
designated as hedging instruments that meet specific matching criteria, theamounts received or paid under such interest rate swap agreements areadded to or deducted from the interest on the hedged assets or liabilities
when paid. For certain forward exchange contracts designated as hedging
instruments that meet specific matching criteria, the hedged assets or
liabilities are measured by contract rate.
(2) Hedging instruments and hedged items:(Hedging instruments)* Commodity-related:
Commodity futures contracts / Commodity forward contracts* Foreign exchange-related:
Forward exchange contracts / Foreign currency swaps / Foreign currency options* Interest rate-related:
Interest rate swaps / Interest rate options(Hedged items)* Commodity-related:
Forecasted transactions on commodity trading* Foreign exchange-related:
Foreign currency-denominated monetary assets and liabilities /Forecasted foreign currency transactions* Interest-related:
Borrowings(3) Hedging policy:
The Company and certain of its consolidated subsidiaries have internal
policies to utilize the above hedging instruments for the purpose of reducing their exposures to the risk of fluctuations in commodity prices, foreign
currencies and interest rates for their operating and financing activities.
(4) Method of evaluating the effectiveness of hedging activities:
The Company and certain of its consolidated subsidiaries evaluate theeffectiveness of their hedging activities by comparing accumulated fluctuations in prices or cash flows of the hedged items with those of the hedging
instruments and examined the degree of their correlation.
(5) Other:
Risk management is performed by the management division, which is independent of the trading section. Also, reporting to management is performedin accordance with the internal rules of the Company on a regular basis.

Annual Report 201447

Notes to Consolidated Financial Statements(m) Amortization of Goodwill and Negative Goodwill:
Goodwill whose amortization period can be reasonably estimated isamortized over the estimated period. Otherwise goodwill is amortized over
5 years using the straight-line method.
Negative goodwill which was recognized by business combinations
before April 1, 2010 and whose amortization period can be reasonably
estimated is amortized over the estimated period. Otherwise negative
goodwill is amortized over 5 years using the straight-line method.

(n) S cope of Cash and Cash Equivalents in the Consolidated
Statements of Cash Flows:
Cash and cash equivalents in the consolidated statements of cash flows arecomprised of cash on hand, bank deposits on demand, and highly liquid
short-term investments, generally with original maturities of three months or
less, that are readily convertible to cash for which the risk of changes in value
is insignificant.

(o) Consumption Taxes:
Consumption tax and local consumption tax on goods and services are notincluded in the revenue and expense amounts subject to such taxes in theaccompanying consolidated statements of income.

(p) Consolidated Tax Return:
The Company and its wholly owned domestic subsidiaries have adopted
the consolidated tax regime, and as such file a consolidated corporate-tax
return.

5. Unapplied Accounting Standards“Accounting Standard for Retirement Benefits” (Accounting Standards
Board of Japan Statement No. 26, released May 17, 2012) and “Guidance on
Accounting Standard for Retirement Benefits” (Accounting Standards Boardof Japan Guidance No. 25, released May 17, 2012)(1) Overview
Treatments of unrecognized actuarial gains and losses and past service
costs, determination of retirement benefit obligations and current service
costs, and enhanced disclosures are amended.
(2) Date of application
Amendments relating to determination of retirement benefit obligations
and current service costs will be applied at the beginning of fiscal year
ending March 31, 2015. These standards require no retrospective application
to financial statements in prior periods.
(3) Effects of the application of these accounting standards
By applying these standards, the opening balance of retained earnings in
the consolidated balance sheet is expected to decrease by ¥681 million($6,622 thousand).
Operating income, ordinary income and income before income taxes
and minority interests in the following consolidated fiscal year are expected
to increase by ¥79 million ($770 thousand).

6. Changes in Presentation Methods
3. United States Dollar Amounts
The U.S. dollar amounts appearing in the consolidated financial statements
and notes thereto represent the arithmetical results of translating yen to
dollars at the rate of ¥102.92 to U.S.$1.00, the exchange rate prevailing on
March 31, 2014. The translation of such dollar amounts is solely for convenience of the readers outside Japan and does not imply those yen amounts
have been or could be readily converted, realized or settled in dollars at theabove, or any other rate.

(Consolidated balance sheets)“Goodwill” that was included in “Intangible fixed assets” in the previous fiscal
year is separately presented for the current fiscal year due to the increase of
its quantitative significance. The consolidated financial statements for theprevious fiscal year have been reclassified to reflect this change in presentation method.
As a result, ¥7,226 million ($70,214 thousand) of “Intangible fixed assets”
in the consolidated balance sheets for the previous fiscal year has been
reclassified to ¥2,122 million ($20,620 thousand) of “Goodwill” and ¥5,104($49,593 thousand) million of “Other.”

4. Changes in Accounting Policies(Application of accounting standard for retirement benefits)“Accounting Standard for Retirement Benefits” (Accounting Standards
Board of Japan Statement No. 26, released May 17, 2012) and “Guidance on
Accounting Standard for Retirement Benefits” (Accounting Standards Boardof Japan Guidance No. 25, released May 17, 2012) were applied at the end of
the current fiscal year, and retirement benefit obligations after subtracting
the value of plan assets were recognized as net defined benefit liability, andthe unrecognized actuarial gains and losses and past service costs wererecognized in net defined benefit liability.
These accounting standards are applied with transitional treatments in
Article 37 of the standard, and the effects of these changes at the end ofcurrent fiscal year were recognized with remeasurements of defined benefit
plans in accumulated other comprehensive income.
As a result, net defined benefit liability of ¥4,630 million ($44,995 thousand) was recognized at the end of the current fiscal year, with decreasesof accumulated other comprehensive income of ¥104 million ($1,017
thousand) and minority interests in consolidated subsidiaries of ¥90 million($877 thousand).

48

KANEMATSU CORPORATION

7. Notes to Consolidated Balance Sheets*1. Details of inventories are as follows:
2014
Merchandise and finished goods
Real estate for sale
Raw materials and supplies
Work in progress

JPY
63,693
61
1,824
677

USD
618,860593
17,724
6,585

2013
JPY
63,143
61
1,486
555

*2. The amount of accumulated depreciation of tangible fixed
assets2014
JPY
28,305USD
275,028

2013
JPY
29,288

*3. Pledged assets and associated secured obligations

6. Liability for guarantee

Details of pledged assets are as follows:
2014
USD
58
2,233
—
3,709
5,111
11,110

2013
JPY
6
622
1,176
36
68
1,909

Details of associated secured obligations are as follows:
2014
JPY
USD
Short-term borrowings
750
7,287
Long-term borrowings
500
4,858
Non-current liabilities and others——
Guaranteed obligations
3
35

2013
JPY
1,265
200
910
3

Cash and bank deposits
Notes and accounts receivable
Leased properties
Buildings and structures
Land
Total

JPY
6
229
—
381
525
1,143

In addition to the foregoing pledged assets, the following items aretendered as security deposit or substitution for trading.
2014
2013
JPY
USD
JPY
Cash and bank deposits
329
3Short-term investments
15
146
14
Investments in securities
2,134
20,741
2,023
Total
2,152
20,9162,041*4. Investments in securities for unconsolidated subsidiaries
and affiliated companies are as follows:
2014
Investments in securities(Share stocks)(Equity investments)

JPY
5,758
(5,306)(452)

USD
55,955(51,559)(4,396)

2013
JPY
4,952
(4,441)(510)

Guarantees are provided to unconsolidated subsidiaries on their borrowings
from third-party financial institutions.
2014
2013
JPY
USD
JPY
Century Textile Industry
795
7,728
904
True Corporation Public——
407
Mojiko Silo
231
2,248
250
Growth D
191
1,858
—
Other
1,061
10,318
1,051
Total
2,279
22,152
2,613
Keep-well or agreements similar to guarantees are included in the above
accounts.

7. T he amount of discounted notes receivable and endorsed
notes receivable
2014
JPY
2,155
1,909
108

Discounted notes receivable(Discounted export bills)
Endorsed notes receivable

USD
20,943
18,553
1,054

2013
JPY
2,121
1,944
78

*8. The Company and its domestic consolidated subsidiaries record actual
cash settlement of the notes on the date of clearance. Since the closing
date on March 31, 2013 was not a business day of financial institutions,the following notes due on closing date are included in the year-end
balances.
2014
2013
JPY
USD
JPY
Notes receivable
—
—
1,861
Notes payable——948

8. Notes to Consolidated Statements of Income*1. Loss on devaluation of inventories*5. Revaluation reserves for land
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
KANEYO Co., Ltd., an equity-method affiliate of the Company, revalued land
held for business in accordance with the “Law Concerning Revaluation ofLand” (Law No. 34 enacted on March 31, 1998) and the “Law to Partially
Modify the Law Concerning Revaluation of Land” (Law No. 24 enacted
on March 31, 1999 and Law No. 19 enacted on March 31, 2001). Thisequity-method affiliate recorded unrealized gains on revaluation, net of tax,
as valuation and translation adjustment under the Laws. The Company’s
investments in this affiliate increased by an amount equal to the unrealized
gains on revaluation of land.
Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Hokushin Co., Ltd. and KANEYO Co., Ltd., equity-method affiliates of theCompany, revalued land held for business in accordance with the “Law
Concerning Revaluation of Land” (Law No. 34 enacted on March 31, 1998)
and the “Law to Partially Modify the Law Concerning Revaluation of Land”(Law No. 24 enacted on March 31, 1999 and Law No. 19 enacted on March
31, 2001). These equity-method affiliates recorded unrealized gains onrevaluation, net of tax, as valuation and translation adjustment under theLaws. The Company’s investments in these affiliates increased by an amountequal to the unrealized gains on revaluation of land.

Inventories are carried at the lower of cost or market value in the balance
sheet. Loss (Reversal) on devaluation of inventories is included in cost of sales.
2014
2013
JPY
USD
JPY
(311)
(3,023)671*2. The amount of research and development expenses
2014
JPY
577

USD
5,614

2013
JPY
432

*3. Gain on sale of tangible fixed assets
Details of gain on sale of tangible fixed assets are as follows:
2014
JPY
USD
Buildings and structures——
Machinery, equipment, vehicle,
tools and fixtures
12
126
Land
1,799
17,483
Leased properties
273
2,659
Other
28
272
Total
2,114
20,541

2013
JPY
109
15
305
—
1
431

Annual Report 201449

Notes to Consolidated Financial Statements*4. Loss on disposal of fixed assets
Details of loss on disposal of fixed assets are as follows:
2014
JPY
USD
Buildings and structures
146
1,420
Machinery, equipment, vehicle,
tools and fixtures
212
2,069
Land
—
—
Intangible fixed assets
14
142
Other
8
79
Total
381
3,710

*6. Business structure improvement expenses
2013
JPY
208
42
943
76
1
1,271

Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Business structure improvement expenses occurred in a consolidated
subsidiary. Details of the expenses are as follows:
JPY
USD
Termination benefits for voluntary retirements
491
4,774
Other
39
383
Total
530
5,157
Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Not applicable.

*5. Impairment loss on fixed assets
The Company recorded impairment loss on fixed assets, which are summarized in the following table.
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Use
Location
Type
JPY
USD
Business assets
Chiba, Japan,
Land, etc.
others
2,016
19,594
Idle assets
Hyogo, Japan
Land
180
1,749
Total
2,196
21,343
The Company assesses impairment losses on business assets by grouping
the assets for each business operating unit, on the managerial accounting
basis. For idle assets, impairment is assessed individually.
For the business assets with lower profitability and idle assets which
the Company has no plan to use in the future, impairment losses of ¥2,196
million ($21,343 thousand) were recorded as an extraordinary loss by
reducing their carrying amounts to their recoverable amounts. Out of ¥2,196
million ($21,343 thousand) of the impairment losses, ¥11 million ($113
thousand) was on buildings and structures, ¥2 million ($28 thousand) was
for machinery, equipment, vehicle, tools and fixtures, ¥2,066 million ($20,074
thousand) was for land and ¥116 million ($1,128 thousand) was for others.
The recoverable amount is the net selling value. The net selling value isestimated mainly based on the real estate appraisal.
Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Use
LocationType
JPY
Business assets
Aichi, Japan,
Buildings, Land,othersetc.
673
Idle assets
Hyogo, Japan,
Buildings, Land,others
etc.
77
Total
750
The Company assesses impairment losses for business assets by grouping
the assets for each business operating unit, on the managerial accounting
basis. For idle assets, impairment is assessed individually.
For the business assets with lower profitability and idle assets which theCompany has no plan to use in the future, impairment losses of ¥750 million
were recorded as an extraordinary loss by reducing their carrying amounts
to their recoverable amounts. Out of ¥750 million of the impairment
losses, ¥356 million was for buildings and structures, ¥110 million was formachinery, equipment, vehicle, tools and fixtures, ¥206 million was for landand ¥77 million was for others.
The recoverable amount is the net selling value. The net selling value isestimated mainly based on the amounts in contracts.

50

KANEMATSU CORPORATION

9. Notes to Consolidated Statements ofComprehensive Income*1. Reclassification adjustments and deferred tax related toother comprehensive income
2014
Net unrealized gains (losses)
on securities, net of tax
Net unrealized gains (losses)
during the year
Reclassification adjustments
Total before deferred tax
Deferred tax
Total net unrealized gains(losses) on securities, net of tax
Net gains (losses) on deferred hedges,
net of tax
Net unrealized gains (losses)
during the year
Reclassification adjustments
Total before deferred tax
Deferred tax
Total net gains (losses)
on deferred hedges, net of tax
Foreign currencytranslation adjustments
Translation adjustments
during the year
Reclassification adjustments
Total foreign currencytranslation adjustments
Share of other comprehensive incomeof investments accounted for using
the equity method
Net unrealized gains (losses)
during the year
Reclassification adjustments
Total share of othercomprehensive income ofinvestments accounted forusing the equity method
Total

JPY

USD

2013
JPY

1,215
(101)
1,113
(398)

11,807(986)
10,820(3,870)

1,052
308
1,360
(433)

715

6,951

927

414
(905)
(491)
198

4,024
(8,803)(4,778)
1,924

152
(482)
(329)
113

(293)

(2,854)

(215)

6,552
—

63,671
—

5,067
—

6,552

63,671

5,067

276
(97)

2,689
(950)

661
(244)

178
7,153

1,739
69,506416
6,196

10. Notes to Consolidated Statements of Changes in Net Assets
1. Class and number of shares issued and treasury stock:
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Number of shares at the
beginning of the fiscal year
(thousand shares)
Shares issued
Common shares
422,501
Total
422,501
Treasury stock
Common shares (Notes 1, 2)
2,539
Total
2,539

Increase in shares
during the fiscal year
(thousand shares)

Decrease in shares
during the fiscal year
(thousand shares)

Number of sharesat the end of the fiscal year
(thousand shares)

—
—

—
—

422,501
422,501

92
92

308
308

2,323
2,323

(Notes) 1. The breakdown of the increase of 92 thousand common shares during the term is as follows:
Increase as a result of fractional share repurchases: 92 thousand shares
The Company’s portion of treasury stock (the Company’s stock) increased due to changes in the shares of companies applied equity method that attributes to the Company:
0 thousand shares
2. The breakdown of the decrease of 308 thousand common shares during the term is as follows:
Decrease as a result of the disposition of fractional shares: 5 thousand shares
The Company’s portion of treasury stock (the Company’s stock) disposed by a company applied equity method that attributes to the Company: 302 thousand sharesFiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Number of shares at the
beginning of the fiscal year
(thousand shares)
Shares issued
Common shares
422,501
Total
422,501
Treasury stock
Common shares (Notes 1, 2)
3,796
Total
3,796

Increase in shares
during the fiscal year
(thousand shares)

Decrease in shares
during the fiscal year
(thousand shares)

Number of sharesat the end of the fiscal year
(thousand shares)

—
—

—
—

422,501
422,501

76
76

1,334
1,334

2,539
2,539

(Notes) 1. The breakdown of the increase of 76 thousand common shares during the term is as follows:
Increase as a result of fractional share repurchases: 76 thousand shares
2. The breakdown of the decrease of 1,334 thousand common shares during the term is as follows:
Decrease as a result of the disposition of fractional shares: 3 thousand shares
The Company’s portion of treasury stock (the Company’s stock) disposed by a company applied equity method that attributes to the Company: 1,283 thousand shares
The Company’s portion of treasury stock (the Company’s stock) decreased due to changes in the shares of companies applied equity method that attributes to the Company:
47 thousand shares

2. Dividends(1) Amount of dividend payments

Resolution
Board of directors meeting on
1 November, 2013

Type ofsharesCommonsharesTotal amount of dividends
USD
JPY(Thousands of(Millions of yen)
U.S. dollars)
632

6,143

Dividends per share
JPY
(Yen)

USD
(U.S. dollar)

1.50

0.015

(2) Dividends whose record date is in the current fiscal year but effective date is in the following fiscal year
Total amount of dividends
Dividends per share
JPY
USD
Type of(Millions of (Thousands ofSource of
USD
Resolution
sharesyen)
U.S. dollars)
dividends
JPY (Yen)(U.S. dollar)
Board of directors meeting on
CommonRetained
26 May, 2014
shares632
6,143
earnings
1.50
0.015

Record date
30 September,
2013

Effective date
3 December,
2013

Record date
31 March,
2014

Effective date
5 June,2014

Annual Report 201451

Notes to Consolidated Financial Statements

11. Notes to Consolidated Statements of Cash Flows*1. Cash and cash equivalents as of March 31, 2014, consist of
the following:
2014
Cash and bank deposits
Time deposits which deposit terms
exceed three months
Cash and cash equivalents

JPY
73,867USD
717,7152013
JPY
60,421(318)
73,548(3,092)
714,623(389)
60,032*2. Details of assets and liabilities of subsidiary newly
consolidated by acquisition of sharesFiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Relations between details of assets and liabilities of BD Holdings (Presently
Kanematsu BD Communications), which is a newly consolidated subsidiaryby acquisition of shares, and acquisition cost, and payments for purchase areas follows:
JPY
USD
Current assets
592
5,761
Long-term assets
3,503
34,043
Goodwill
817
7,943
Current liabilities(575)(5,591)
Non-current liabilities(1,338)(13,008)
Acquisition cost
3,000
29,149Cash and cash equivalents(238)(2,320)
Net: Payments for purchase ofinvestments in subsidiaries resulting
in change in scope of consolidation
2,761
26,829Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Relations between details of assets and liabilities of Nippon Office Systems,
which is a newly consolidated subsidiary by additional acquisition of shares,
and acquisition cost and proceeds from purchase are as follows:
JPY
Current assets
3,558
Long-term assets
2,322
Goodwill
288
Current liabilities(1,846)
Non-current liabilities(1,603)
Minority interests
in consolidated subsidiaries(1,191)
Subtotal
1,529
Acquisition cost before
obtaining control(648)
Gain on step acquisitions(81)
Additional acquisition cost
798
Cash and cash equivalents(1,603)
Net: Proceeds from purchase ofinvestments in subsidiaries resulting
in change in scope of consolidation
(804)

52

KANEMATSU CORPORATION*3. Details of assets and liabilities of transfer of business
Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Relations between details of assets and liabilities of Benoit Premium
Threading which is consolidated subsidiary by transfer of the premium
threading business and the related assets, and payments for transfer ofbusiness are as follows:
JPY
Current assets
2,344
Long-term assets
3,941
Goodwill
1,930
Current liabilities(36)
Purchase value of transfer of business
8,179
The accrued purchase value oftransfer of business(48)
Proceeds from stock issuanceto minority shareholders(2,147)
Cash and cash equivalents(432)
Net: Payments for transfer of business
5,551(Note) T he amount of difference from Consolidated Statements of Cash Flows was forother transfer of business.

12. Lease Transactions

2. Operating leases<Leases as lessee>

1. Finance leases
Finance leases are leases for which the ownership of the leased property is
not transferred to the lessees.
[1] Detail of lease assets
Tangible fixed assets
Mainly, computer and computer-related devices for the core critical system(Tools and fixtures).
[2] Depreciation method of lease assets
Described in Note 2. Summary of Significant Accounting Policies,(g) Property and Equipment.
The finance lease transactions commenced on or before March 31, 2008
which are accounted for as operating leases, are as follows:(1) Acquisition cost, accumulated depreciation and balance at the end of
the fiscal year of leased properties
2014
Acquisition
Accumulated Balance at the end
cost
depreciationof the fiscal year
JPY
USD
JPY
USD
JPY
USD
Machinery, equipment,
vehicle, tools andfixtures
303
2,947
229
2,229
73
718

Machinery, equipment,
vehicle, tools
and fixtures

Acquisition
cost
JPY

2013
Accumulated
depreciation
JPY

Balance at the endof the fiscal year
JPY

376

241

134

(2) Future minimum lease payments outstanding at the balance sheet
date, etc.
2014
2013
Future minimum lease payments
outstanding at the balance sheet date
JPY
USD
JPY
Due within one year
27
264
46
Due after one year
87
854
136
Total
115
1,118
183
(3) Payments to lessors, depreciation and interest expenses
2014
JPY
USD
Payments to lessors
32
313
Depreciation
32
311
Interest expenses
4
44

2013
JPY
61
60
5

(4) Computation of depreciation
Depreciation is computed using the straight-line method over the leaseterm assuming a residual value of zero.
(5) Computation of interest expenses
The excess amount of the sum of minimum lease payment over the acquisition cost is regarded as accumulated interest expenses, and is allocated toeach period based on the interest method.

Future lease payments outstanding at the balance sheet date
2014
JPY
USD
Due within one year
13135
Due after one year
39
381
Total
53
516

2013
JPY
16
17
33

<Leases as lessor>

1. Finance leases[1] Detail of the lease investment assets
Current assets
2014
Lease payments receivables
Interest income
Lease investment assets

JPY
577
(11)
566

USD
5,609
(108)
5,501

2013
JPY
619
(12)
606

[2] Future lease receivables and lease investment assets outstanding at
the balance sheet dateCurrent assets
2014
Due within
Over one year and Over two years andone yearwithin two years within three years
JPY
USD
JPY
USD
JPY
USD
Lease receivables
2
24
2
24
2
24
Lease investment assets 328
3,189
189
1,838
42
415
2014
Over three years and Over four years andwithin four years
within five years
JPY
USD
JPY
USD
Lease receivables
2
24
2
24
Lease investment assets
4
42
4
42

Lease receivables
Lease investment assets

Due within
one year
JPY
2
348

Over five years
JPY
USD
6
61
8
84

2013
Over one year and Over two years andwithin two years within three years
JPY
JPY
2
2
208
62

2013
Over three years and Over four years andwithin four years
within five years
JPY
JPY
Lease receivables
22
Lease investment assets
00Over five years
JPY
10
—

2. Operating leases
Future lease payments receivable outstanding at the balance sheet date
2014
2013
JPY
USD
JPY
Due within one year——154
Due after one year
—
—
188
Total
—
—
342

(Impairment loss)
No impairment loss is recorded nor allocated to leased assets.

Annual Report 201453

Notes to Consolidated Financial Statements

13. Financial Instruments
1. Summary of financial instruments(1) Policies of financial instruments:
The Companies design cash-flow plans to carry out operations, which are buying and selling of merchandise, investment and lending. The Companies’ fundraising activities are mainly borrowings from banks and insurance companies. The Companies manage temporary surplus funds by funding highly secured
financial assets and also use derivative transactions for minimizing financial risks.
(2) Nature and risks of financial instruments:
Notes and accounts receivable are exposed to credit risks of customers. In addition, receivables denominated in foreign currency are also exposed to risk of
exchange rate fluctuation due to the global business operations.
The Companies have investments in securities in order to maintain relationships with their customers and suppliers. Short-term investments and investments in securities are exposed to price risks. The Companies also issue loans to certain customers and suppliers.
Maturity dates of notes and accounts payable and import bills payable are mainly within one year. Foreign currency liabilities are exposed to risk of exchange
rate fluctuation.
The longest maturity date of borrowings from banks and insurance companies is within seven years from the fiscal year-end. Certain borrowings are exposed
to interest rate risk.
The Companies utilize derivative transactions such as foreign exchange contracts to avert currency risk, interest rate swaps to avert interest rate risk, commodity future contracts to avert commodity price risk.
Hedging instruments, hedged items, hedging policy and method of evaluating the effectiveness of hedging activities are described in Note 2. Summary of
Significant Accounting Policies, (l) Hedge Accounting.
(3) Financial risk management policies:[1] Credit risk management
The Company employs its own credit scoring model based on customers’ financial statements and other information. The Company determines the credit limit
for customers based on their credit scoring and control credit risk by managing customer’s balances against these limits. To reduce credit risks, the Company
regularly monitors the collectability of and age of receivables to take preservation measures.
Since derivative transactions are executed with highly rated banks, the Company reviews the limit of volume of derivative transactions according to theinternal rule.
[2] Market risk management
The Companies utilize foreign exchange contracts for foreign currency assets and liabilities or forecasted foreign currency transactions to avert currency risk. The
Companies also utilize interest rate swaps to avert interest rate risk.
For short-term investments and investments in securities, the Companies periodically examine fair values and the financial conditions of the issuers andregularly revise the portfolio.
With respect to derivative transactions, each business division undertakes transactions in accordance with internal rules determined in the management
meeting at the beginning of the fiscal year based on rule and operating policy for authorization of transaction and limitation. Derivative transactions arerecorded and the balances are managed by the Finance Department, Accounting Department and Business Accounting Department and actual results oftransactions are reported monthly to management. Certain of the Company’s consolidated subsidiaries utilize derivative transactions in accordance with theirown internal rules, which are prepared based on the Company’s risk management policies.
[3] Liquidity risk management
The Finance Department performs cash management and maintains the level of cash and bank deposits balance by preparing and revising cash-flow-plan tosuit current financial situation.
(4) Additional information on fair value measurements:
Fair value measurements are based on market prices or on rational assumptions when market prices are not available. The fair values which are measured
based on rational assumptions are affected by variable factors and might be changed when different assumption is applied. The notional amount of contracts
described in Note 15. Derivatives do not directly indicate the market risks.

2. Fair value of financial instruments
A summary of book value and fair value of financial instruments, and difference between them is disclosed in the following table. The financial instruments forwhich the Company had difficulty in estimating fair value are not included in the following table (See Note 2).
In this table below,• Amounts in parentheses represent liabilities.
• Notes and accounts receivable, long-term loans receivable and doubtful accounts are offset by each allowance for doubtful accounts.
• Derivative assets and liabilities are disclosed on a net basis.

54

KANEMATSU CORPORATIONFiscal year ended March 31, 2014

(1) Cash and bank deposits(2) Notes and accounts receivable
Allowance for doubtful accounts(3) Short-term investments(4) Short-term loans receivable(5) Investments in securities(6) Long-term loans receivable
Allowance for doubtful accounts(7) Doubtful accounts
Allowance for doubtful accounts
Total assets(8) Notes and accounts payable(9) Import bills payable(10) Short-term borrowings(11) Accrued income taxes(12) Long-term borrowings
Total liabilities
Derivatives

Book value
JPY
USD
73,867
717,715
178,984
1,739,069(149)(1,453)
178,835
1,737,616
16
159
825
8,017
11,777
114,433
1,798
17,474(1,653)(16,069)
144
1,405
902
8,772
(878)
(8,538)24
234
265,4902,579,581(115,210)(1,119,422)(27,610)(268,273)(80,792)(785,004)(1,951)(18,958)(61,113)(593,795)(286,678)(2,785,452)
497
4,835

Fair value

Difference

JPY
73,867USD
717,715

JPY
—

USD
—

178,835
16
825
12,682

1,737,616
159
8,017
123,224

—
(0)
—
904

—
(0)
—
8,791

144

1,405

—

—

24
266,395(115,210)(27,610)(80,792)(1,951)(61,222)(286,787)
497

234
2,588,371(1,119,422)(268,273)(785,004)(18,958)(594,852)(2,786,510)
4,835

—
904
—
—
—
—
(108)
(108)
—

—
8,791
—
—
—
—
(1,058)(1,058)—

Fiscal year ended March 31, 2013

(1) Cash and bank deposits(2) Notes and accounts receivable
Allowance for doubtful accounts(3) Short-term investments(4) Short-term loans receivable(5) Investments in securities(6) Long-term loans receivable
Allowance for doubtful accounts(7) Doubtful accounts
Allowance for doubtful accounts
Total assets(8) Notes and accounts payable(9) Import bills payable(10) Short-term borrowings(11) Accrued income taxes(12) Long-term borrowings
Total liabilities
Derivatives

Book value
JPY
60,421
165,378(273)
165,104
16
352
10,1782,435(1,745)689
1,895(1,763)
131
236,894(104,372)(27,984)(81,570)(1,663)(65,290)(280,881)
2,108Fair value
JPY
60,421

Difference
JPY—

165,104
16352
12,133

—
0
—
1,955

689

—

131
238,849(104,372)(27,984)(81,570)(1,663)(65,430)(281,021)
2,108

—
1,955
—
—
—
—
(140)
(140)
—

(Notes)1. Fair value measurements of financial instruments and investment securities and derivative transaction
Assets(1) Cash and bank deposits, (2) Notes and accounts receivable and (4) Short-term loans receivable
Fair value of these instruments approximates the book value because of their short-term maturities.
(3) Short-term investments and (5) Investments in securities
Fair value of marketable shares is estimated using quoted market price. Fair value of bonds is estimated using quoted market price or quoted price byfinancial institutions. Further information about investments in securities is described in Note 14. Short-term Investments and Investments in Securities.
(6) Long-term loans receivable
Fair value of long-term loans receivable is estimated based on discounted cash flow analysis, using assumed rates currently available for similar types of loans
with similar term and remaining maturity.

Annual Report 201455

Notes to Consolidated Financial Statements(7) Doubtful accounts
Fair value of net doubtful accounts (offsetting doubtful accounts against allowance) approximates the book value because the Companies provide an allowance for doubtful accounts based on estimates of collectability by utilizing securities, guarantees and insurance or discounted cash flow analysis.
Liabilities(8) Notes and accounts payable, (9) Import bills payable, (10) Short-term borrowings and (11) Accrued income taxes
Fair value of these instruments approximates the book value because of their short-term maturities.
(12) Long-term borrowings
Fair value of long-term borrowings is estimated based on discounted cash flow analysis, using assumed rates currently available for similar types of borrowings with similar term and remaining maturity. Hedge accounting is applied to certain long-term borrowings with variable interest rates. The amounts
received or paid under the interest rate swap agreements are added to or deducted from the interest on the hedged long-term borrowings when paid. Fairvalue of long-term borrowings in which these interest rate swaps are embedded is also estimated based on discounted cash flow analysis, using assumed
rates currently available for similar types of borrowings with similar term and remaining maturity.
Derivatives
Described in Note 15. Derivatives.
2. Financial instruments with difficulty in estimating fair value
2014
Book value
Classification
JPY
USD
Unlisted investments in securities
18,454
179,312Equity investments
1,965
19,101

2013
Book value
JPY
18,0682,002

The above financial instruments are not included in “(5) Investments in securities” because it is not practicable to estimate the fair value due to difficulty inestimating fair value as market price is not available.
3. Maturity schedule of monetary assets and investments in securities having maturity
Fiscal year ended March 31, 2014
Over one year
Within one year
and within five years
JPY
USD
JPY
USD
Cash and bank deposits
73,867
717,715——
Notes and accounts receivable (Note 3-1)
178,835
1,737,616——
Short-term investments
Held-to-maturity bonds
16
159
—
—
Short-term loans receivable
825
8,017
—
—
Investments in securities
Held-to-maturity bonds
—
—
14
145
Long-term loans receivable (Note 3-2)
—
—
106
1,032
Doubtful accounts (Note 3-3)
—
—
24
234
Total
253,5442,463,508
145
1,412

Over five years
and within ten years
JPY
USD
—
—
—
—

Over ten years
JPY
USD
—
—
—
—

—
—

—
—

—
—

—
—

—
38
—
38

—
373
—
373

—
—
—
—

—
—
—
—

(Notes) 3-1. Allowance for doubtful accounts of ¥149 million ($1,453 thousand) is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥1,653 million ($16,069 thousand) is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥878 million ($8,538 thousand) is not included in doubtful accounts.

Fiscal year ended March 31, 2013

Cash and bank deposits
Notes and accounts receivable (Note 3-1)
Short-term investments
Held-to-maturity bonds
Short-term loans receivable
Long-term loans receivable (Note 3-2)
Doubtful accounts (Note 3-3)
Total

Within one year
JPY
60,421
165,104

Over one year
and within five years
JPY——

Over five years
and within ten years
JPY——

Over ten years
JPY
—
—

16
352
—
—
225,895

—
—
310
131
442

—
—
245
—
245

—
—
132
—
132

(Notes) 3-1. Allowance for doubtful accounts of ¥273 million is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥1,745 million is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥1,763 million is not included in doubtful accounts.

56

KANEMATSU CORPORATION

4. Borrowings repayment schedule
Fiscal year ended March 31, 2014

Short-term borrowings
Long-term borrowings
Total

Within one year
JPY
USD
80,792 785,004——
80,792 785,004

Over one year andwithin two years
JPY
USD
—
—
20,922 203,292
20,922 203,292

Over two years andwithin three years
JPY
USD
—
—
25,137 244,241
25,137 244,241

Over three years andwithin four years
JPY
USD
—
—
6,864
66,695
6,864
66,695

Over four years andwithin five years
JPY
USD
—
—
4,007
38,933
4,007
38,933

Over five years
JPY
USD
—
—
4,182
40,634
4,182
40,634

Within one year
JPY
81,570—81,570Over one year andwithin two years
JPY—
37,65037,650Over two years andwithin three years
JPY—
14,09314,093

Over three years andwithin four years
JPY
—
8,651
8,651

Over four years andwithin five years
JPY
—
4,845
4,845

Over five years
JPY
—
50
50

Fiscal year ended March 31, 2013

Short-term borrowings
Long-term borrowings
Total

14. Short-term Investments and Investments in Securities
1. “Held to maturity debt securities” with fair value
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)

Securities with market value
not exceeding their book value

Category
Government bonds

Balance sheet amount
JPY
USD
31

304

JPY

Fair value
USD

JPY

Difference
USD

31

304

(0)

(0)

Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)

Securities with market value
exceeding their book value
Securities with market value
not exceeding their book value
Total

Category
Government bonds

Balance sheet amount
JPY

Fair value
JPY

Difference
JPY

14

14

0

1
16

1
16

(0)
0

Balance sheet amount
JPY
USD

Acquisition cost
JPY
USD

JPY

8,729

84,823

5,941

57,7302,788

27,093

290
9,020

2,819
87,642

336
6,278

3,270
61,001

(46)
2,741

(451)
26,642Government bonds

2. “Other securities” with fair value
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)

Securities with book value
exceeding their acquisition cost
Securities with book value
not exceeding their acquisition cost
Total

Category
Equity securities
Equity securities

Difference
USD(Note) Unlisted investments in securities (book value of ¥15,890 million ($154,400 thousand)) and equity investments (book value of ¥1,513 million ($14,705 thousand)) are notincluded in “Other securities” above because they are not practicable to estimate the fair value due to difficulty in estimating fair value as market price is not available.

Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)

Securities with book value
exceeding their acquisition cost
Securities with book value
not exceeding their acquisition cost
Total

Category
Equity securities
Equity securities

Balance sheet amount
JPY

Acquisition cost
JPY

Difference
JPY

6,620

4,634

1,985

1,323
7,943

1,611
6,246

(288)
1,697

(Note) Unlisted investments in securities (book value of ¥15,860 million) and equity investments (book value of ¥1,491 million) are not included in “Other securities” above because
they are not practicable to estimate the fair value due to difficulty in estimating fair value as market price is not available.

Annual Report 201457

Notes to Consolidated Financial Statements

3. Sold “Other securities”
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Sales proceeds
Category
JPY
USD
Equity securities
580
5,644

Gains on sales
JPY
USD
230
2,237

Losses on sales
JPY
USD
12
121

Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Sales proceeds
Category
JPY
Equity securities
661

Gains on sales
JPY
235

Losses on sales
JPY81

4. Securities on which impairment loss was recognized
The total impairment loss amount recognized of investments in securities is ¥55 million ($540 thousand) in the current fiscal year (from April 1, 2013 to March 31,2014), and ¥376 million in the previous fiscal year (from April 1, 2012 to March 31, 2013).
For recognition of impairment loss, securities which fair value declines 50% or more against their carrying book value are subject to devaluation. For securities that decline 30% or more in fair value, devaluation losses are recognized after considering likelihood of future price recovery or financial position. For thosedeterminations, fair value is primarily based on average of daily market price for one-month before the balance sheet date.

15. Derivatives
1. Derivative transactions to which hedge accounting is not applied(1) Currencies:
Fiscal year ended March 31, 2014

Classification

Transaction type
Foreign exchange contracts
Selling
U.S. dollar (USD)
Euro (EUR)
Australian dollar (AUD)
Other currencies
Subtotal
BuyingU.S. dollar (USD)
Euro (EUR)
Australian dollar (AUD)
Off market
Pound sterling (GBP)
transactions
Other currencies
Subtotal
Currency option contracts
Selling
Call
U.S. dollar (USD)
Subtotal
BuyingPut
U.S. dollar (USD)
Subtotal
Total

Notional amount ofcontracts
JPY
USD

KANEMATSU CORPORATION

Fair value
JPY

USD

Unrealized gain or (loss)
JPY
USD

10,240497
116
79
10,93399,502
4,833
1,129
770
106,234

—
—
—
—
—

—
—
—
—
—

51
(4)
(1)
4
49

501
(46)
(15)
40
480

51
(4)
(1)
4
49

501
(46)
(15)
40
480

28,127190
36
6105
28,465273,293
1,848
350
65
1,027
276,583

—
—
—
—
—
—

—
—
—
—
—
—

505
9
0
0
(4)
511

4,910
96
2
1
(43)
4,967

505
9
0
0
(4)
511

4,910
96
2
1
(43)
4,967

14
14

145
145

—
—

—
—

0
0

2
2

0
0

2
2

14
14
—

141
141
—

—
—
—

—
—
—

(0)
(0)
—

(4)
(4)
—

(0)
(0)
560

(4)
(4)
5,444

(Note) Basis of fair value calculation
Fair value is calculated based on the quoted price by financial institutions.

58

Amount of over-one-year
contracts
JPY
USD

Fiscal year ended March 31, 2013

Classification

Transaction type
Foreign exchange contracts
Selling
U.S. dollar (USD)
Euro (EUR)
Australian dollar (AUD)
Other currencies
Subtotal
Off market
transactions
BuyingU.S. dollar (USD)
Euro (EUR)
Australian dollar (AUD)
Canadian dollar (CAD)
Other currencies
Subtotal
Total

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

Unrealized gain or (loss)
JPY

9,533
604
69
1
10,209

—
—
—
—
—

(620)
(24)
(8)
0
(652)

(620)
(24)
(8)
0
(652)

24,778
536
160
30
76
25,582
—

—
—
—
—
—
—
—

2,277
39
12
1
1
2,331
—

2,277
39
12
1
1
2,331
1,679

(Note) Basis of fair value calculation
Fair value is calculated based on the quoted price by financial institutions.

(2) Interest rate:
Fiscal year ended March 31, 2014

Classification

Transaction typeInterest rate swap contracts
Off market
transactions Pay-fixed, receive-variableinterest rate swap
Total

Notional amount ofcontracts
JPY
USD

15,00015,000145,744
145,744

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

126,312
126,312

(375)
(375)

(3,650)(3,650)

Amount of over-one-year
contracts
JPY
USD

JPY

USD

13,00013,000

Unrealized gain or (loss)
JPY
USD

(375)
(375)

(3,650)(3,650)(Note) Basis of fair value calculation
Fair value is calculated based on the quoted price by financial institutions.

Fiscal year ended March 31, 2013
Not applicable.
(3) Commodities:
Fiscal year ended March 31, 2014

Classification

Transaction type
Commodity future contracts
Foods & Foodstuff
Selling
MarketBuyingtransactions
EnergySelling
Buying
Total

Notional amount ofcontracts
JPY
USD

Fair value

Unrealized gain or (loss)
JPY
USD

5,364
3,989

52,12438,763

11
—

117
—

(175)
147

(1,704)
1,431

(175)
147

(1,704)
1,431

643
739
—

6,249
7,182
—

—
—
—

—
—
—

(4)
3
—

(41)
29
—

(4)
3
(29)

(41)
29
(285)

(Note) Basis of fair value calculation
Fair value is calculated based on market closing price at end of the fiscal year.

Annual Report 201459

Notes to Consolidated Financial Statements

Fiscal year ended March 31, 2013

Classification

Transaction type
Commodity future contracts
Foods & Foodstuff
Selling
MarketBuyingtransactions
EnergySelling
Buying
Total

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

Unrealized gain or (loss)
JPY

5,640
5,330

42
—

217
(210)

217
(210)

1,744
1,183
—

—
—
—

(3)
12
—

(3)
12
16

Notional amount ofcontracts
JPY
USD

Amount of over-one-year
contracts
JPY
USD(Note) Basis of fair value calculation
Fair value is calculated based on market closing price at end of the fiscal year.

2. Derivative transactions to which hedge accounting is applied(1) Currencies:
Fiscal year ended March 31, 2014
Hedge
accounting
methodPrinciple
hedge
accounting

Specific
matching
criteria

Transaction type
Foreign exchange contracts
Selling
U.S. dollar (USD)
Euro (EUR)
Pound sterling (GBP)
Australian dollar (AUD)
Other currencies
Subtotal
BuyingU.S. dollar (USD)
Euro (EUR)
Australian dollar (AUD)
Canadian dollar (CAD)
Pound sterling (GBP)
Other currencies
Subtotal
Selling
U.S. dollar (USD)
Euro (EUR)
Other currencies
Subtotal
BuyingU.S. dollar (USD)
Euro (EUR)
Other currencies
Subtotal

Main hedged items

Forecasted foreign
currency transactions

Forecasted foreign
currency transactions

Accounts receivable

Accounts payable

Fair value
JPY

USD

3,441
509
60
44
149
4,205

33,441
4,951
590
428
1,451
40,862

9
—
—
—
—
9

92
—
—
—
—
92

(29)
(7)
(0)
(1)
(4)
(45)

(291)
(76)
(8)
(16)
(47)
(438)

21,484
927
323
28
3
432
23,199208,748
9,010
3,144
273
34
4,199
225,409

1,468
—
—
—
—
—
1,468

14,264—————
14,264

239
128
24
(0)
0
1
393

2,323
1,249
239
(1)
0
18
3,827

129
3
44
176

1,256
32
429
1,717

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

65
33
19
117

632
322
188
1,143

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(Note) Basis of fair value calculation
Fair value is calculated based on quoted price by financial institutions for principle hedge accounting. For certain contracts designated as hedging instruments that meet
specific matching criteria, hedged assets or liabilities are measured by contract rate. Fair value of these contracts is included in fair value of the corresponding assets or liabilities.

60

KANEMATSU CORPORATIONFiscal year ended March 31, 2013
Hedge
accounting
methodPrinciple
hedge
accounting

Specific
matching
criteria

Transaction type
Foreign exchange contracts
Selling
U.S. dollar (USD)
Euro (EUR)
Australian dollar (AUD)
Other currencies
Subtotal
BuyingU.S. dollar (USD)
Euro (EUR)
Australian dollar (AUD)
Canadian dollar (CAD)
Pound sterling (GBP)
Other currencies
Subtotal
Selling
U.S. dollar (USD)
Other currencies
Subtotal
BuyingEuro (EUR)
U.S. dollar (USD)
Other currencies
Subtotal

Main hedged items

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

5,507
433
8
243
6,194

—
—
—
—
—

(495)
(6)
(0)
(69)
(572)

21,179
1,570
162
70
3
506
23,493

177
—
—
—
—
—
177

1,312
143
7
4
(0)
34
1,502

131
4
136

—
—
—

—
—
—

62
37
79
179

—
—
—
—

—
—
—
—

Forecasted foreign
currency transactions

Forecasted foreign
currency transactions

Accounts receivable

Accounts payable(Note) Basis of fair value calculation
Fair value is calculated based on quoted price by financial institutions for principle hedge accounting. For certain contracts designated as hedging instruments that meet
specific matching criteria, hedged assets or liabilities are measured by contract rate. Fair value of these contracts is included in fair value of the corresponding assets or liabilities.

(2) Interest rate:
Fiscal year ended March 31, 2014
Hedge
accounting
methodTransaction typeInterest rate swap contracts
Specific
matching
Pay-fixed, receive-variable
criteria
interest rate swap

Main hedged items
Long-term borrowings

Notional amount ofcontracts
JPY
USD

28,531

277,221

Amount of over-one-year
contracts
JPY
USD

9,778

95,014

Fair value
JPY

USD

—

—

(Note) Basis of fair value calculation
For certain interest rate contracts designated as hedging instruments that meet specific matching criteria, amounts received or paid under the interest rate swap agreements
are added to or deducted from the interest on the hedged borrowings when paid. Fair value of these contracts is included in fair value of the corresponding borrowings.

Fiscal year ended March 31, 2013
Hedge
accounting
methodTransaction typeInterest rate swap contracts
Principle
hedge
Pay-fixed, receive-variableaccounting
interest rate swap
Interest rate swap contracts
Specific
matching
Pay-fixed, receive-variable
criteria
interest rate swap

Main hedged items
Long-term borrowings

Long-term borrowings

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

15,00015,000(503)

31,10019,360—(Note) Basis of fair value calculation
Fair value is calculated based on quoted price by financial institutions for principle hedge accounting. For certain interest rate contracts designated as hedging instruments thatmeet specific matching criteria, amounts received or paid under the interest rate swap agreements are added to or deducted from the interest on the hedged borrowings when
paid. Fair value of these contracts is included in fair value of the corresponding borrowings.

Annual Report 201461

Notes to Consolidated Financial Statements(3) Commodities:
Fiscal year ended March 31, 2014
Hedge
accounting
methodPrinciple
hedge
accounting

Transaction type
Commodity future contracts
Foods & Foodstuff
Selling
BuyingMain hedged items

Forecasted transactions
on commodity trading

Notional amount ofcontracts
JPY
USD

618
327

6,012
3,184

Amount of over-one-year
contracts
JPY
USD

—
—

—
—

Fair value
JPY

USD

(66)
59

(644)
581

(Note) Basis of fair value calculation
Fair value is calculated based on market closing price at end of the fiscal year.

Fiscal year ended March 31, 2013
Hedge
accounting
methodPrinciple
hedge
accounting

Transaction type
Commodity future contracts
Foods & Foodstuff
Selling
BuyingMain hedged items

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

Forecasted transactions
on commodity trading

515
991

—
—

4
(17)

(Note) Basis of fair value calculation
Fair value is calculated based on market closing price at end of the fiscal year.

16. Retirement Benefits
Fiscal year ended March 31, 2014

1. Summary of pension plans
The Company and its certain consolidated subsidiaries have establisheddefined-benefit employees’ pension plans, retirement lump sum plans, andother pension plans. Certain consolidated subsidiaries have defined contribution pension plans. In addition, some additional retirements benefits arepaid under certain conditions when employees retire.
Simplified method is applied to certain defined-benefit employees’ pension plans and retirement lump sum plans in order to calculate net defined
benefit liability and retirement benefit expenses.

2. Defined benefit plans(1) Reconciliation of beginning and ending balances of retirement benefit
obligations
JPY
USD
Beginning balance of retirement benefit obligations
14,013
136,155
Service cost
851
8,276
Interest cost
242
2,355
Actuarial gains and losses
409
3,976
Benefit payments(759)(7,380)
Other
54
528
Ending balance of retirement benefit obligations
14,811
143,910(2) Reconciliation of beginning and ending balances of plan assets
JPY
USD
Beginning balance of plan assets
11,562
112,348
Expected return on plan assets
237
2,304
Actuarial gains and losses
222
2,162
Employer contributions
1,084
10,534
Benefit payments(697)(6,775)
Other
40
392
Ending balance of plan assets
12,449120,965

62

KANEMATSU CORPORATION(3) Reconciliation of beginning and ending balances of net defined benefit
liability for the plans applying the simplified method
JPY
USD
Beginning balance of net defined benefit liability
2,228
21,651Retirement benefit expenses
266
2,592
Benefit payments(197)(1,918)Contribution to plans
(28)
(274)
Ending balance of net defined benefit liability
2,269
22,050(4) Reconciliation of ending balances of retirement benefit obligations /plan assets and net defined benefit liability / asset on consolidatedbalance sheet
JPY
USD
Retirement benefit obligations of funded plan
14,284
138,788
Plan assets(12,841)(124,775)
1,442
14,012Retirement benefit obligations of unfunded plan
3,188
30,982
Net of liability and asset on consolidated balance sheet
4,630
44,995Net defined benefit liability
Net of liability and asset on consolidated balance sheet

4,630
4,630

44,99544,995

JPY
851
242
(237)
268

USD
8,276
2,355
(2,304)
2,606

266
1,391

2,592
13,524(5) Details of retirement benefit expenses
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
Retirement benefit expenses calculatedwith simplified method
Retirement benefit expenses

(6) Remeasurements of defined benefit plans
Details of remeasurements of defined benefit plans (after adjusting for tax
effects) are as follows:
JPY
USD
Unrecognized actuarial gains and losses
301
2,934
Total
301
2,934
(7) Plan assets[1] Major categories of plan assets
Percentages of the major categories for total of plan assets are as follows:%
Debt securities
39.1
Equity securities
10.9
Life insurance company general accounts
43.2
Other
6.9
Total
100.0
[2] Method of setting expected long-term rates of return
Current and expected allocations of plan assets and long-term rates
of return from variety of assets comprise plan assets are considered todetermine the expected long-term rates of return on plan assets.
(8) Assumptions used in actuarial valuations
Principal assumptions used in actuarial valuations at the end of the current
fiscal year (by weighted average) are as follows:
Discount rates
1.6%
Expected long-term rates of return on plan assets 1.9%

3. Defined contribution plans
Contributions charged for the defined contribution plans of the Company
and its certain consolidated subsidiaries were ¥243 million ($2,367 thousand).
Fiscal year ended March 31, 2013

1. Summary of pension plans
The Company and its certain consolidated subsidiaries have establisheddefined-benefit employees’ pension plans, retirement lump sum plans, andother pension plans. Certain consolidated subsidiaries have defined contribution pension plans. In addition, some additional retirements benefits arepaid under certain conditions when employees retire.

3. Schedule of retirement benefits expenses
a. Service costb. Interest costc. Expected return on plan assets
d. Amortization of actuarial loss
e. Amortization of prior service cost
f. Otherg. Net periodic retirement benefit expenses (a + b + c + d + e + f )

JPY
1,415
205
(217)
584
—
68
2,056

(Notes) 1. E mployees’ contributions to the employees’ pension fund are not includedin the retirement benefit expenses.
2. T he retirement benefit expenses of consolidated subsidiaries which adopt
simplified method are included in “service cost” in the table above.
3. “Other” represents contributions to the defined contribution pension plans.

4. A ssumptions used in accounting for accrued retirement
benefita. Method of attributing projected benefits to period of service
Straight-line basis
b. Discount rates
1.1% – 2.0%
c. Expected long-term rates of return on pension assets
1.5% – 2.3%
d. Amortization period for actuarial loss or gain
Principally 5 years
e. Amortization period for unrecognized prior service cost
5 – 10 years

17. Stock Options
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Not applicable.
Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Not applicable.

2. Schedule of retirement benefits
JPY
a. Ending balance of projected benefit obligation(16,698)b. Ending balance of fair value for pension assets
12,068c. Projected benefit obligation in excess of plan assets (a + b)
(4,629)d. Unrecognized actuarial loss
332
e. Unrecognized prior service cost—f.	Accrued retirement benefit obligation recognizedin the consolidated balance sheets (c + d + e)
(4,296)
g. Prepaid pension cost—h. Provision for employees’ retirement and severance benefits (f – g) (4,296)(Note) Certain subsidiaries adopt simplified method for calculating accrued retirement
benefits for their employees.

Annual Report 201463

Notes to Consolidated Financial Statements

18. Deferred Taxes
1. Major components of deferred tax assets and deferred tax
liabilities
2014
Deferred tax assets
Provision for employees’ retirement
and severance benefits
Net defined benefit liability
Allowance for doubtful accounts
Inventories
Impairment loss on fixed assets
Investments in securities
Golf club memberships
Tax loss carried forward
Net gains (losses) on deferred hedges
Other
Deferred tax assets subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Retained earnings in subsidiaries
Net gains (losses) on deferred hedges
Net unrealized gains on securities
Other
Total deferred tax liabilities
Net deferred tax assets

JPY

USD

2013
JPY

—
1,542
4,140
1,821
1,554
2,632
480
13,35811
3,522
29,065(15,058)
14,006—14,99040,233
17,697
15,10225,581
4,666
129,791
116
34,320282,407(146,311)
136,095

1,441
—
5,897
1,948
1,079
3,040
492
17,103—
3,702
34,706(19,956)
14,750

(258)
—
(956)
(1,719)(2,933)
11,072(2,512)—(9,290)(16,705)(28,507)
107,588

(293)
(366)
(499)
(935)
(2,094)
12,655(Note) Net deferred tax assets recorded in the consolidated balance sheets
2014
2013
JPY
USD
JPY
Current assets – deferred tax assets
2,660
25,851
1,669
Long-term assets – deferred tax assets
8,782
85,33011,127
Current liabilities –deferred tax liabilities
(1)
(11)
(95)
Non-current liabilities –deferred tax liabilities(368)(3,582)(45)
Net deferred tax assets
11,072
107,588
12,655

2. Major reconciliation items between the statutory effective tax rate
and the effective income tax rate after the application of deferred tax
accounting.
2014
2013
%
%
Statutory effective tax rate
38.0
38.0
(Reconciliation)
Permanent differences –additions such as entertainment expenses
1.9
2.9
Change in valuation allowance(19.1)(2.7)
Effect of tax rate differences
1.0
(4.1)
Tax reform
1.5
—
Other
2.7
(0.9)
Effective income tax rate
26.0
33.2

3. Adjustment of deferred tax assets and liabilities in connection
with changes in the rates of corporate income tax:
On March 31, 2014, “Partial Revision of Income Tax Act, etc.” (Act No. 10
of 2014) was promulgated, and in this Act, Special Corporate Tax for
Reconstruction will not be applied from the fiscal year beginning on andafter April 1, 2014. Due to this change, the statutory effective tax rate being
applied for deferred tax calculation is reduced from 38.0% to 35.6% for the
temporary differences which will be deducted during the fiscal year beginning on April 1, 2014.
Accordingly, deferred tax assets (net of deferred tax liabilities) decreasedby ¥279 million ($2,713 thousand), and deferred income tax and net gains
on deferred hedges increased by ¥287 million ($2,789 thousand) and ¥7
million ($75 thousand), respectively.

19. Business Combinations
Acquisition of shares by a subsidiary
Kanematsu Communications Ltd. (“KCS”) and Kanematsu Electronics Ltd.
(“KEL”), which are subsidiaries of the Company, established a holding
company jointly (KCS90%, KEL10%) and the holding company acquired all of
the shares of BD Holdings, Inc.
1. Outline of the business combination(1) Name of the acquiring company: KCS Investment LLC (“KCSI”)
Content of business: Holding company to hold shares of BD Holdings, Inc.
Name of the acquired company: BD Holdings, Inc. (“BDH”)
Content of business: Mobile phone sales business(2) Purpose of the business combination
By acquiring all of the shares of BDH, a leading sales company of its area, thecompanies strengthen its sales force in the Kyushu area and expand its sales
force on a national scale.
(3) Date of the business combination
1 May 2013 (Date of the acquisition of shares)
30 June 2013 (Date regarded as date of the acquisition)(4) Legal form of the business combination
Acquisition of shares for cash consideration(5) Company name after the combination
BD Holdings, Inc.
(6) Percentage of the voting rights
Percentage of the voting rights before the acquisition
Percentage of the additional acquisition of the voting rights
Percentage of the voting rights after the acquisition(7) Basis for deciding the acquiring company
It is because KCSI acquired the shares of BDH for cash consideration.
2. Period of the performance of the acquired company in the consolidated financial statements
From 1 July 2013 to 31 March 2014
3. Acquisition costs and those details
Cash paid for the acquisition: ¥3,000 million ($29,149 thousand)Total costs: ¥3,000 million ($29,149 thousand)64

KANEMATSU CORPORATION

0 percent
100 percent
100 percent

4. Amount, cause and method and period of amortization of goodwill(1) Amount of goodwill¥817 million ($7,943 thousand)(2) Cause of goodwill
Anticipated future profitability in excess of net asset value

USD
5,761
34,04339,804
5,591
13,00818,598

6. Amount allocated to intangible fixed assets other than goodwill,
breakdown by major type, and weighted-average amortization period
in total and by major type
Breakdown by major type:
Right of career shop operations: ¥3,291 million ($31,984 thousand)
Weighted-average amortization period in total and by major type
Right of career shop operations: 20 years

20. Asset Retirement Obligations
Asset retirement obligations in consolidated financial statements

1. Overview of asset retirement obligations
Asset retirement obligations are the obligations of restoring offices andshops based on the contracts of rental estate.

2. Method of calculating asset retirement obligations
Asset retirement obligations are calculated using the estimated useful livesof 2 – 50 years and the discount rates of 0.170 – 2.301%.

3. Changes in asset retirement obligations
2014
Balance at the beginning of
the fiscal year
Acquisition of tangible fixed assets
Adjustment due to passage of time
Fulfillment ofasset retirement obligations
Other
Balance at the end of the fiscal year

Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
As the amount of investment and rental properties is immaterial, thedescription is not disclosed.
Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
As the amount of investment and rental properties is immaterial, thedescription is not disclosed.

(3) Method and period of amortization of goodwill
Straight line method over 10 years
5. Assets and liabilities on the day of the business combination
JPY
Current assets
592
Property, plant and equipment
3,503
Total assets
4,096
Current liabilities
575
Non-current liabilities
1,338
Total liabilities
1,914

21. Investment and Rental Properties

JPY

USD

2013
JPY

860
116
15

8,361
1,128
151

857
34
16

(75)
(105)
811

(731)
(1,029)
7,881

(39)
(8)
860

22. Segment Information
Segment Information
1. Overview of reportable segments
The reportable segments of the Companies are components of theCompanies for which discrete financial information is available and are regularly reviewed by the management to make decisions about management
resources to be allocated and assess its business performance.
The Companies operate its businesses by offering a broad array of
products and services based on an organic combination of expertise thathas been cultivated through networks in Japan and in other countries andin each business field, and trading functions such as commercial trade,
information gathering, market development, business development andarrangement, risk management, and logistics.
The Companies therefore consists of products and service segments
based on its business units: “Electronics & Devices,” “Foods & Grain,” “Steel,Materials & Plant,” and “Motor Vehicles & Aerospace.”
The principal products and services handled by each segment are as
follows:(Electronics & Devices)
This segment provides a wide range of products including electronic partsand components, semiconductor and LCD manufacturing equipment,materials and indirect materials related to electronics, together with services
including development and proposals. This segment also conducts salesof batteries, LED, etc. to retailers and deals with mobile communications
terminals, mobile internet systems, and information and telecommunicationequipment and services.
(Foods & Grain)This segment integrates the handling of a broad array of food andfoodstuffs, with operations ranging from reliably sourcing raw materials
to providing food and foodstuffs, including high value-added products.
Products in this segment includes cooked foods, processed fruits, processed
agricultural products, beverage ingredients, animal and fishery products,
wheat, rice, soybeans, feedstuff and pet foods.
(Steel, Materials & Plant)This segment operates the domestic and international trade of generalsteel products including steel plates, bars and wire rods, pipes, andstainless products, carries out overseas projects such as plant and infrastructure development, and sells machine tools and industrial machinery.
Additionally, this segment operates the domestic and international trade of
crude oil, petroleum products, LPG, functional chemicals and food products,
pharmaceuticals and pharmaceutical intermediates, and other products. It
also develops environmental materials such as heat shield paints and newtechnologies, and operates businesses related to emissions rights.

Annual Report 201465

Notes to Consolidated Financial Statements(Motor Vehicles & Aerospace)
This segment primarily operates international trade of aircrafts and aircraft parts, satellite- and aerospace-related products, automobiles, motorcycles and relatedparts, industrial vehicles, construction machinery, etc., and also provides products with added value based on demand or use.
Due to the reorganization of the business units in the current fiscal year, the Company changed the reportable segments as below.
The motorcycle and motor vehicle parts business and aerospace business included in the conventional “Electronics,” “Iron & Steel,” and “Machinery & Plant”
segments were combined and newly established as the “Motor Vehicles & Aerospace” segment. Consequently, the reportable segments changed from thefive conventional segments of “Electronics,” “Foods & Foodstuff,” “Iron & Steel,” “Machinery & Plant,” and “Environment & Materials” to the four new segments of“Electronics & Devices,” “Foods & Grain,” “Steel, Materials & Plant,” and “Motor Vehicles & Aerospace.”
The segment information of the previous fiscal year has been prepared based on the reportable segments after the change.

2. Methods for calculating net sales, profits or losses, assets, and amounts for other items of reportable segments
The Company’s accounting policies for its reportable business segments are almost the same as described in “Summary of Significant Accounting Policies.”
Segment income for reportable segments are based on operating income for the segments.
Inter-segment revenue and transfers are based on prevailing market prices or third-party transaction prices.

3. Information on net sales, profits or losses, assets and other amounts of reportable segments
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)(JPY)
Reportable segments
Amount inElectronics
Foods
Steel,
Motor
consolidated&&Materials
Vehicles
Other
Adjustment statements
DevicesGrain& Plant& Aerospace
Subtotal(Note 1)
Total
(Note 2)
(Note 3)
Net sales
Customers
277,348
309,024
468,83154,451
1,109,656
4,883
1,114,539—
1,114,539
Inter-segment
292
6
9
2
311
59
370
(370)
—
Total
277,640
309,030
468,841
54,453
1,109,967
4,942
1,114,910(370)
1,114,539
Segment income
7,755
2,099
8,129
1,494
19,477224
19,70273
19,776
Segment assets
131,200
88,937
122,428
26,089368,655
7,956
376,61251,847428,459
Other
Depreciation and amortization
1,276
525
883
392
3,079
94
3,173
(3)
3,170
Investments in equity method
affiliates
1,404
560
133
235
2,334
3,186
5,520
129
5,650
Increases in tangible fixed assets
and intangible fixed assets
1,323
520
842
409
3,095
27
3,123
412
3,535
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)(USD)
Reportable segments
Amount inElectronics
Foods
Steel,
Motor
consolidated&&Materials
Vehicles
Other
Adjustment statements
DevicesGrain& Plant& Aerospace
Subtotal(Note 1)
Total
(Note 2)
(Note 3)
Net sales
Customers
2,694,798
3,002,570
4,555,305
529,062
10,781,734
47,448
10,829,183—
10,829,183
Inter-segment
2,841
62
97
26
3,025
579
3,604
(3,604)—
Total
2,697,639
3,002,632
4,555,401
529,088
10,784,759
48,027
10,832,787(3,604)
10,829,183
Segment income
75,352
20,39578,984
14,521
189,252
2,184
191,436716
192,152
Segment assets
1,274,781
864,144
1,189,551
253,490
3,581,966
77,3073,659,273
503,766
4,163,039
Other
Depreciation and amortization
12,405
5,111
8,584
3,818
29,917920
30,838(30)
30,808Investments in equity method
affiliates
13,644
5,446
1,300
2,288
22,67830,96253,6401,262
54,902
Increases in tangible fixed assets
and intangible fixed assets
12,861
5,058
8,182
3,980
30,081
270
30,3504,004
34,355(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service business, etc.
2. Adjustments are as follows.
(1) Adjustment for segment income of ¥73 million ($716 thousand) includes offset amount of goodwill of ¥77 million ($751 thousand) and inter-segment elimination of (¥3)
million (($35) thousand).
(2) Adjustment for segment assets of ¥51,847 million ($503,766 thousand) includes inter-segment elimination of (¥9,846) million (($95,668) thousand) and corporate assets of¥61,693 million ($599,434 thousand) that are not allocated to any reportable segment. The corporate assets consist mainly of cash and bank deposits and investments insecurities related to financing activities.
(3) Adjustment for depreciation and amortization of (¥3) million (($30) thousand) includes inter-segment elimination of (¥3) million (($30) thousand).
(4) Adjustment for investments in equity method affiliates of ¥129 million ($1,262 thousand) includes inter-segment elimination of (¥0) million (($8) thousand) and corporate
assets of ¥130 million ($1,270 thousand) that are not allocated to any reportable segment.
(5) Adjustment for increases in tangible fixed assets and intangible fixed assets of ¥412 million ($4,004 thousand) includes inter-segment elimination of (¥20) million (($195)
thousand) and corporate assets of ¥432 million ($4,200 thousand) that are not allocated to any reportable segment.
3. Segment income is adjusted for operating income in the consolidated statements of income.

66

KANEMATSU CORPORATIONFiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Reportable segments
Electronics
Foods
Steel,
Motor&&
Materials
VehiclesDevicesGrain& Plant& Aerospace
Net sales
Customers
236,774
287,936434,230
50,719Inter-segment
19
5
14
11
Total
236,794
287,942434,245
50,731
Segment income
8,339
3,165
5,094
1,447
Segment assets
110,750
86,458115,373
24,127
Other
Depreciation and amortization
1,092
464
594
317
Investments in equity method
affiliates
1,272
467
116
181
Increases in tangible fixed assets
and intangible fixed assets
1,156
426
112
622

(JPY)

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Amount inconsolidated
statements(Note 3)

1,009,661
50
1,009,712
18,047
336,708

9,570
50
9,620
205
11,242

1,019,232
100
1,019,332
18,252347,951

—
(100)
(100)
9
51,234

1,019,232—
1,019,232
18,262
399,186

2,468

213

2,682

(1)

2,680

2,038

2,708

4,746

96

4,843

2,318

81

2,400

535

2,936

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service business, etc.
2. Adjustments are as follows.
(1) Adjustment for segment income of ¥9 million includes inter-segment elimination of ¥9 million.
(2) Adjustment for segment assets of ¥51,234 million includes inter-segment elimination of (¥7,899) million and corporate assets of ¥59,133 million that are not allocated to
any reportable segment. The corporate assets consist mainly of cash and bank deposits and investments in securities related to financing activities.
(3) Adjustment for depreciation and amortization of (¥1) million includes inter-segment elimination of (¥1) million.
(4) Adjustment for investments in equity method affiliates of ¥96 million includes inter-segment elimination of ¥6 million and corporate assets of ¥90 million that are notallocated to any reportable segment.
(5) Adjustment for increases in tangible fixed assets and intangible fixed assets of ¥535 million includes corporate assets of ¥535 million that are not allocated to any reportable segment.
3. Segment income is adjusted for operating income in the consolidated statements of income.

Related Information
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)

1. Information by product and service
The classification of product and service is omitted because it is same as the classification of reportable segments.

2. Information by geographical area
(1) Net sales
Japan
JPY
USD
943,498
9,167,303

Asia
JPY
97,304USD
945,436

North America
JPY
USD
51,947504,738

EuropeJPY
USD
14,954145,305

Other Areas
JPY
USD
6,833
66,400

Total
JPY
USD
1,114,539 10,829,183

EuropeOther Areas
JPY
USD
9
90

JPY
24,218(Note) Net sales are classified into countries and areas based on locations of customers.

(2) Tangible fixed assets
Japan
JPY
USD
18,951
184,137

Asia
JPY
877

USD
8,527

North America
JPY
USD
2,087
20,283

JPY
2,292

USD
22,279Total
USD
235,316

3. Information by major customer
Not applicable.
Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)

1. Information by product and service
The classification of product and service is omitted because it is same as the classification of reportable segments.

2. Information by geographical area
(1) Net sales
Japan
JPY
861,875

Asia
JPY
91,042

North America
JPY41,481

EuropeJPY
17,313

Other Areas
JPY
7,519

Total
JPY
1,019,232(Note) Net sales are classified into countries and areas based on locations of customers.

Annual Report 201467

Notes to Consolidated Financial Statements(2) Tangible fixed assets
Japan
JPY
22,133

Asia
JPY
791

North America
JPY
1,446

EuropeJPY
2,606

Other Areas
JPY
12

Total
JPY
26,9903. Information by major customer
Not applicable.

Information of impairment loss on fixed assets of reportable segments
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)(JPY)
Reportable segments
Electronics
Foods
Steel,
Motor&&
Materials
Vehicles
Other
Adjustment
DevicesGrain& Plant& Aerospace
Subtotal(Note 1)
Total
(Note 2)
Total
Impairment loss
115
0
278
0
394
—
394
1,802
2,196
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)(USD)
Reportable segments
Electronics
Foods
Steel,
Motor
Other
Adjustment&&
Materials
Vehicles(Note 1)
Total
(Note 2)
Total
DevicesGrain& Plant& Aerospace
Subtotal
Impairment loss
1,126
0
2,707
1
3,834
—
3,834
17,50921,343(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service business,
etc.
2. Adjustment for impairment loss of ¥1,802 million ($17,509 thousand) is a corporate loss that is not allocated to any reportable segment.

Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)
Reportable segments

Impairment loss

Electronics&
Devices
108

Foods
&
Grain
—

Steel,
Materials& Plant
77

Motor
Vehicles& Aerospace
—

(JPY)

Subtotal185

Other(Notes 1, 2)
565

Total
750

Adjustment
—

Total
750

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service business,
etc.
2. Amount of “Other” is a loss on the aluminum recycling business.

Information of amortization of goodwill and balance of goodwill of reportable segments
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)(Goodwill)(JPY)
Reportable segments
Electronics
Foods
Steel,
Motor&&
Materials
Vehicles
Other
Adjustment
DevicesGrain& Plant& Aerospace
Subtotal(Note 1)
Total
(Note 2)
Total
Amortization for the fiscal year
132
16
156
6
312
0
312
(77)
235
Balance at the end of the fiscal year
1,034
20
2,173
9
3,238
—
3,238
(62)
3,175
(Negative goodwill)

Amortization for the fiscal year
Balance at the end of the fiscal year

68

KANEMATSU CORPORATION(JPY)Electronics&
Devices——

Reportable segments
Foods
Steel,
Motor&
Materials
VehiclesGrain& Plant& Aerospace
—
—
—
—
—
—

Subtotal——

Other(Note 1)
—
—

Total
—
—

Adjustment(Note 2)
—
—

Total
—
—

(Goodwill)(USD)
Reportable segments
Electronics
Foods
Steel,
Motor&&
Materials
Vehicles
Other
Adjustment
DevicesGrain& Plant& Aerospace
Subtotal(Note 1)
Total
(Note 2)
Total
Amortization for the fiscal year
1,291
160
1,522
64
3,037
4
3,041
(755)
2,286
Balance at the end of the fiscal year
10,049200
21,116
96
31,461—
31,461(609)
30,852(Negative goodwill)

Amortization for the fiscal year
Balance at the end of the fiscal year

(USD)
Electronics&
Devices——

Reportable segments
Foods
Steel,
Motor&
Materials
VehiclesGrain& Plant& Aerospace
—
—
—
—
—
—

Subtotal——

Other(Note 1)
—
—

Total
—
—

Adjustment(Note 2)
—
—

Total
—
—

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service business, etc.
2. Negative goodwill recognized due to the combinations before April 1, 2010. The amounts of amortization and balance of goodwill and negative goodwill are offset inconsolidated financial statements.
In addition, adjustments are as follows(1) Adjustment for amortization of goodwill for the fiscal year of (¥77) million (($755) thousand) includes inter-segment elimination of (¥0) million (($4) thousand) and offset
amount of (¥77) million (($751) thousand).
(2) Adjustment for balance of goodwill at the end of the fiscal year of (¥62) million (($609) thousand) includes corporate assets of ¥0 million ($1 thousand) that are notallocated to any reportable segment and offset amount of (¥62) million (($610) thousand).
(3) Adjustment for amortization of negative goodwill for the fiscal year includes corporate profits of ¥77 million ($751 thousand) that are not allocated to any reportablesegment and offset amount of (¥77) million (($751) thousand).
(4) Adjustment for balance of negative goodwill at the end of the fiscal year includes corporate liabilities of ¥62 million ($610 thousand) that are not allocated to any reportable segment and offset amount of (¥62) million (($610) thousand).

Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)(Goodwill)(JPY)
Reportable segments
Electronics
Foods
Steel,
Motor&&
Materials
Vehicles
Other
Adjustment
DevicesGrain& Plant& Aerospace
Subtotal(Note 1)
Total
(Note 2)
Total
Amortization for the fiscal year
12
16
21
5
56
2
58
(58)
—
Balance at the end of the fiscal year
305
37
1,914
13
2,270
0
2,270
(148)
2,122
(Negative goodwill)

Amortization for the fiscal year
Balance at the end of the fiscal year

(JPY)
Electronics&
Devices——

Reportable segments
Foods
Steel,
Motor&
Materials
VehiclesGrain& Plant& Aerospace
—
0
—
—
—
—

Subtotal0—

Other(Note 1)
4
8

Total
5
8

Adjustment(Note 2)
21
(8)

Total
26
—

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service business, etc.
2. Negative goodwill recognized due to the combinations before April 1, 2010. The amounts of amortization and balance of goodwill and negative goodwill are offset inconsolidated financial statements.
In addition, adjustments are as follows(1) Adjustment for amortization of goodwill for the fiscal year of (¥58) million includes inter-segment elimination of (¥2) million and offset amount of (¥56) million.
(2) Adjustment for balance of goodwill at the end of the fiscal year of (¥148) million includes inter-segment elimination of (¥0) million, corporate assets of ¥0 million that are
not allocated to any reportable segment and offset amount of (¥148) million.
(3) Adjustment for amortization of negative goodwill for the fiscal year of ¥21 million includes corporate profits of ¥77 million that are not allocated to any reportablesegment and offset amount of (¥56) million.
(4) Adjustment for balance of negative goodwill at the end of the fiscal year of (¥8) million includes corporate liabilities of ¥140 million that are not allocated to any reportable segment and offset amount of (¥148) million.

23. Disclosure of Related Party Transactions
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)

Related party transactions:Not applicable.
Fiscal year ended March 31, 2013 (April 1, 2012 to March 31, 2013)

Related party transactions:Not applicable.
Annual Report 201469

Notes to Consolidated Financial Statements

24. Information per Share
2014
JPY
(Yen)
170.5428.09

Net assets per share
Net income per share

USD(U.S. dollar)
1.66
0.27

2013
JPY
(Yen)
129.8222.80(Notes) 1. Diluted net income per share for the term is not reported since there is no outstanding security with dilutive effect.
2. The supplemental information for the computation of net assets per share is as follows:
2014
JPY
96,20424,547(24,547)
71,657422,501
2,323
420,177

Total net assets
Amount deducted from total net assets(minority interest in consolidated subsidiaries)
Net assets corresponding to common stock at the end of the fiscal year
Number of common stock issued (thousand shares)
Number of treasury stock (thousand shares)
Number of common stock used for the calculation of net assets per share (thousand shares)

USD
934,750
238,508(238,508)
696,2422013
JPY
75,912
21,393(21,393)
54,519422,501
2,539
419,961

3. The supplemental information for the computation of net income per share is as follows:
2014
JPY
11,799—
11,799420,060

Net income
Amount that does not belong to common shareholders
Net income corresponding to common stock
Average number of common stock for the term (thousand shares)

USD
114,651—
114,651

2013
JPY
9,564
—
9,564
419,486

25. Subsequent Events
Not applicable.

26. Consolidated Supplementary Schedules(1) Schedule of bonds payable:
Not applicable.

(2) Schedule of borrowings:
Classification
Short-term borrowings
Current portion of long-term borrowings
Current portion of lease obligations
Long-term borrowings(excluding current portion)
Lease obligations (excluding current portion)
Total

Balance at the beginning of
the fiscal year
JPY
USD
38,430373,404
43,140419,161
733
7,124
65,2901,099
148,694

634,382
10,684
1,444,755

Balance at the end of
the fiscal year
JPY
USD
36,387353,548
44,405
431,456
760
7,390
61,113
1,033
143,699593,795
10,0381,396,227

Composite
interest rate
%
1.3
1.9
—

Due
Month, year
—
—
—

1.8
—
—

April 2015 – March 2021
April 2015 – January 2021—

(Notes) 1. The composite interest rate is a weighted average interest rate for those outstanding at the end of the year.
2. The composite interest rate of lease obligations is not presented as lease obligations of the Company and certain of its subsidiaries comprise interest expenses portion of
total lease payments.
3. The long-term borrowings and lease obligations repayment schedule for next five years (excluding current portion) is as follows:

Long-term borrowings
Lease obligations

Over one year
and within two years
JPY
USD
20,922203,292577
5,609

Over two years
and within three years
JPY
USD
25,137244,241245
2,390Over three years
and within four years
JPY
USD
6,864
66,695114
1,115

Over four years
and within five years
JPY
USD
4,007
38,93372703(3) Schedule of asset retirement obligations:
According to the Article 92-2 of the “Regulations for Consolidated Financial Statements,” schedule of asset retirement obligations are omitted, as the amount of“asset retirement obligations” is less than 1 percent of total amount of liabilities and net assets.

70

KANEMATSU CORPORATION

Independent Auditor’s Report
To the Board of Directors of Kanematsu Corporation
We have audited the accompanying consolidated financial statements of Kanematsu Corporation (“the Company”) and its
consolidated subsidiaries, which comprise the consolidated balance sheets as at March 31, 2014 and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in net assets andconsolidated statements of cash flows for the year then ended, and a summary of significant accounting policies and otherexplanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, while the purpose of
the financial statements audit is not to express an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates madeby management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of theCompany and its consolidated subsidiaries as at March 31, 2014 and their financial performance and cash flows for the year
then ended accordance with accounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2014
are presented solely for convenience. Our audit also included the translation of Japanese yen amounts into U.S. dollar amounts
and, in our opinion, such translation has been made on the basis described in Note 3 to the consolidated financial statements.

June 24, 2014

PricewaterhouseCoopers Arata
Sumitomo Fudosan Shiodome Hamarikyu Bldg., 8-21-1 Ginza, Chuo-ku, Tokyo 104-0061, Japan
T: +81 (3) 3546 8450, F: +81 (3) 3546 8451, www.pwc.com/jp/assurance

Annual Report 201471

Global Network (As of March 31, 2014)
Kanematsu supplies products and services from a large network of business bases in Japan and overseas.
85 subsidiaries and 28 affiliates ensure global reach into the markets of all regions.

2.

4.

6.

1.

5.
3.

Moscow

Londonscow

Dusseldorf
Munchen
MilanoBudapest

Overseas subsidiaries
and their branches

1. ASIA & THE MIDDLE EAST

Representative offices

DalianBeijing
TehranSeoul
TianjinBranches

PalmasTehranDelhi NCR
Hanoi

Hong Kong
Haiphongr
YangononakryShenzhen Taipei

Wuxi
ShanghaiSuzhouChongqing

Wuxi
Delhi NCR
ShanghaiSuzhouChongqing

DalianBeijing
Seoul
Tianjin

Hanoi

YangonManilaBangkok
Hochiminh City

Shenzhen Taipei

Hong Kong
Haiphong
ManilaBangkok
Hochiminh City
Singapore

Singapore

JakartaJakarta

2. EUROPE

3. OCEANIA
Moscow

LondonDusseldorf
Munchen
MilanoBudapest
SydneySydneyDal
Beijing
Tianjin

Auckland

TehranLas Palmas

Chongqing
Delhi NCR
Hanoi

72

Dakar
KANEMATSU CORPORATION
Conakry

YangonWuxi
Sh
SuzhouShenzhen Ta

Hong Kong
Haiphong

M
Bangkok
Hochiminh City

cklandPortland
ChicagoSilicon Valley
San Diego

4. NORTH AMERICANew York
Somerset

Houston

5. CENTRAL & SOUTH AMERICA
Silao

VancouverPortland
Silicon Valley
San Diego

ChicagoNew York
Somerset

HoustonSilao

Sao Paulo

6. JAPAN
Hokkaido Branch

Nagoya Branch
Kyushu Branch

Tohoku Branch
Sendai Office

Sao PauloTokyo Head OfficeOsaka Branch
Osaka Midosuji Office

Segment information:
Number of employees and number of group companies (As of March 31, 2014)
Number of employees(consolidated basis)
Electronics & Devices

Number of affiliated companies

3,343

27 (Japan: 17, Overseas: 10)512

18 (Japan: 10, Overseas: 8)

1,202

30 (Japan: 13, Overseas: 17)

Motor Vehicles & Aerospace201

8 (Japan: 1, Overseas: 7)

Others127

14 (Japan: 9, Overseas: 5)

Company-wide (common)

362

Foods & Grain
Steel, Materials & Plant

Overseas subsidiaries 16
Total

5,747

113

Notes:
1. Number of employees on a non-consolidated
basis is 800 (including employees seconded from
Kanematsu, excluding employees seconded
from companies other than Kanematsu).
2. Of affiliated companies, 85 are consolidated
subsidiaries and 28 are equity-method affiliates.

Annual Report 201473

Global Network

Network
JAPAN

Overseas

Tokyo Head Office

ASIA & THE MIDDLE EAST

2-1, Shibaura 1-chome, Minato-ku,
Tokyo 105-8005, Japan
TEL: 81-3-5440-8111
FAX: 81-3-5440-6500

Osaka
Awaji-machi Dai Building, 1-9, Awaji-machi
3-chome, Chuo-ku, Osaka 541-8560, Japan
TEL: 81-6-6205-3111
FAX: 81-6-6205-3322

Midosuji Office
Midosuji Daiwa Building, 6-8, Kyutaro-machi
3-chome, Chuo-ku, Osaka 541-0056, Japan
TEL: 81-6-6251-7700
FAX: 81-6-6251-7770

Nagoya9-3, Sakae 2-chome, Naka-ku,
Nagoya 460-0008, Japan
TEL: 81-52-202-5111

Hokkaido
Sapporo-Kokusai Building, 4-1, Kitashijou-nishi,
Chuo-ku, Sapporo 060-0004, Japan
TEL: 81-11-261-5631
FAX: 81-11-261-5630

KyushuTenjin Twin Building, 6-8, Tenjin 1-chome,
Chuo-ku, Fukuoka 810-0001, Japan
TEL: 81-92-715-7820
FAX: 81-92-715-7830

Tohoku163 Shibue, Wakuya-cho, Tohda-gun,
Miyagi 987-0113, Japan
TEL: 81-229-43-2195
FAX: 81-229-43-5650

Sendai Office
Verza Sendai Room#405, 7-17, Chuou
4-chome, Aoba-ku, Sendai-shi,
Miyagi 980-0021, Japan
TEL: 81-22-722-2675
FAX: 81-22-267-7351

74

KANEMATSU CORPORATION

KOREA
Kanematsu Devices Korea Corporation
Koreana Bldg., 6F, 61-1-Ka Tae Pyung Ro,
Chung-Ku, Seoul, Republic of Korea
TEL: 82-2-737-5795
FAX: 82-2-737-5799
CHINA
Kanematsu (China) Co., Ltd.
Shanghai Head Office
Shanghai Branch
39th Floor Raffles City (Office Tower) 268 Xi Zang
Middle Road, Shanghai 200001, P.R. China
TEL: 86-21-6340-3456
FAX: 86-21-6840-4290
Suzhou Office
12F09, Gold River Tower, No. 35 Shishan Road,
Suzhou New District, Jiansu Province, P.R. China
TEL: 86-512-6809-7379
FAX: 86-512-6803-2295
Wuxi Office
Room 608 Bai Shi Da Building, Chagjiag North Rd.,
Wuxi New District, Wuxi 214110, Jiansu Province,
P.R. China
TEL: 86-510-8522-6426
FAX: 86-510-8522-6430
Chongqing Liaison Office
Room 6-B-2, Wanyou Conifer Hotel, 77
Changjiang 2nd Road, Daping, Yuzhong District,
Chongqing, P.R. China 400042
TEL: 86-23-6800-7771
FAX: 86-23-6800-7772
Beijing Branch
Beijing Lufthansa Center C315, 50 Liangma Qiao
Road, Chaoyang District, Beijing 100125, P.R. China
TEL: 86-10-8591-1031
FAX: 86-10-8591-1535
Dalian BranchRooms 602, Furama Hotel, 60 Renmin Road,
Dalian 116001, P.R. China
TEL: 86-411-8263-9105, 7481
FAX: 86-411-8280-5534
Tianjin Branch
29F-A, Kai Xuan Men Building A, 66 Nanjing Road,
Hexi-Qu, Tianjin, 300042, P.R. China
TEL: 86-22-2331-2405, 2330-5886
FAX: 86-22-2331-6873
Shenzhen Branch
Room13-15, 15/F, Office Tower, Shun Hing Square
Di Wang Commercial Centre, 5002 Shen Nan
Dong Road, Shenzhen 518008, P.R. China
TEL: 86-755-8235-4891
FAX: 86-755-8223-8980
Kanematsu Industrial and Trading(Dalian Free Trade Zone) Co., Ltd.
Aulan Industrial Land, ID-32 Free Trade Zone
Dalian, P.R. China
TEL: 86-411-8732-3090, 3091, 3092
FAX: 86-411-8732-3093

Kanematsu (Hong Kong) Ltd.
Rooms 1806-1807, 18th Floor, Hopewell Centre,
183 Queen’s Road East, Hong Kong
TEL: 852-2821-6200
FAX: 852-2527-0465, 2865-6649
TAIWAN
Kanematsu Taiwan Corporation
11th Floor, No. 61 Chung Shan N.Rd., Sec. 2,
Taipei 104, Taiwan, R.O.C.
TEL: 886-2-2511-7007
FAX: 886-2-2511-2947, 2951, 3554
VIETNAMThe Representative of Kanematsu Corporation
Hanoi
Room No. 1205-1206-1207, 12th floor, Daeha
Business Centre, 360 Kim Ma St., Ba Dinh Dist.,
Hanoi, S.R. Vietnam
TEL: 84-4-3771-5642
FAX: 84-4-3771-5641, 3771-5648
Haiphong
H-Tower 3rd Floor, 195 Van Cao Street, Haiphong,
S.R. Vietnam
TEL: 84-31-368-6371
FAX: 84-31-368-6373
Hochiminh City
Unit 608-609 Saigon Tower, 29 Le Duan St,
District 1, Hochiminh City, S.R. Vietnam
TEL: 84-8-3910-5532, 5534, 5535, 5536, 5537
FAX: 84-8-3910-5538, 5539
THAILAND
Kanematsu (Thailand) Ltd.
Watana Inter-Trade Co., Ltd.
25F Thaniya Plaza Building, 52 Silom Road,
Bangkok 10500, Thailand
TEL: 66-2-632-8060
FAX: 66-2-632-8083, 8084
SINGAPORE
Kanematsu (Singapore) Pte. Ltd.
100 Tras Street, #12-01 100 AM, Singapore 079027
TEL: 65-6320-6000
FAX: 65-6320-6071
PHILIPPINES
Kanematsu Corporation Manila Branch
17th Floor Tower 2, The Enterprise Center 6766,
Ayala Avenue, cor. Paseo de Roxas, Makati City,
Philippines
TEL: 63-2-889-1701, 845-2017
FAX: 63-2-887-0030
MYANMAR
Kanematsu Corporation Yangon Office
Union Business Center (UBC) Suite 03-08, Nat
Mauk Road, Bo Cho Quarter, Bahan Township,
Yangon, Myanmar
TEL: 95-1-860-4370
FAX: 95-1-860-4380

INDONESIA
P.T. Kanematsu Trading Indonesia
ANZ Tower 15th Floor, Jalan Jend. Sudirman Kav.
33A Jakarta 10220, Indonesia
TEL: 62-21-572-1220, 1225, 1228, 1230, 1238
FAX: 62-21-572-1188, 1237
INDIA
Kanematsu India Private Limited
Tower 1, Block-A, Unit No. 2, DLF Corporate Park,
Gurgaon, Haryana - 122 022, India
TEL: 91-124-4001461, 4001462, 4001362
FAX: 91-124-4001371
IRAN
Kanematsu Iran Ltd.
Elahiyeh Commercial Complex, Unit 1201,
12th Floor, No. 244, Africa Ave., Tehran, Iran
TEL: 98-21-2621-2812
FAX: 98-21-2621-3106

EUROPEUNITED KINGDOM
Kanematsu Europe PLC.
London Head Office
Ground Floor Genesis House, 17 Godliman Street,
London, EC4V 5BD, United Kingdom
TEL: 44-20-7246-2900
FAX: 44-20-7248-8986
GERMANY
Kanematsu G.m.b.H.
Dusseldorf Head Office
Oststrasse 34, D-40211 Dusseldorf, Germany
TEL: 49-211-36890
FAX: 49-211-3689-111
Munchen OfficeFrankfurter Ring 193a, D-80807 Munchen,
Germany
TEL: 49-89-3074-817-12
FAX: 49-89-3074-817-29
ITALY
Kanematsu G.m.b.H.
Milano Liaison Office
Piazza Duca d’Aosta 8, Milano, Italy
TEL: 39-02-6749-3538
FAX: 39-02-6707-7364
HUNGARY
Kanematsu G.m.b.H.
Budapest Office
H-1034 Budapest Becsi ut 126-128.I.103. Hungary
TEL: 36-1-329-3412, 320-4952
FAX: 36-1-320-4953

RUSSIAN FEDERATIONThe Representative of Kanematsu Corporation
MoscowTverskaya 16/2, Building 1, Business Centre,
125009, Moscow, Russian Federation
TEL: 7-495-935-89-40, 42, 43
FAX: 7-495-935-8948
SPAIN
The Representative of Kanematsu Corporation
Las Palmas
Calle Eduardo Benot 51, Edificio Atlansea, 4-izqda,
35008 Las Palmas de Gran Canaria, Spain
TEL: 34-928-275634, 275680
FAX: 34-928-275632

OCEANIA

AUSTRALIA
Kanematsu Australia Ltd.
Sydney Head Office
Level 20 St Martins Tower, 31 Market Street,
Sydney NSW 2000, Australia
TEL: 61-2-9283-3347
FAX: 61-2-9283-3095
NEW ZEALAND
Kanematsu New Zealand Ltd.
Level 2, No. 5 Broadway Newmarket, Auckland,
New Zealand
TEL: 64-9-302-5660
FAX: 64-9-309-3877

NORTH AMERICA

U.S.A.
Kanematsu USA Inc.
New York Head Office
500 Fifth Avenue, 29th Floor, New York City,
New York 10110, U.S.A.
TEL: 1-212-704-9400
FAX: 1-212-704-9483
Somerset Office
100 Randolph Road, Somerset,
New Jersey 08873, U.S.A.
TEL: 1-732-271-7300
FAX: 1-732-271-7370
Chicago Branch
543 West Algonquin Road, Arlington Heights,
Illinois 60005, U.S.A.
TEL: 1-847-981-5600
FAX: 1-847-981-6760
San Diego Office
900 Lane Avenue, Suite 150, Chula Vista,
California 91914, U.S.A.
TEL: 1-619-656-2385
FAX: 1-619-656-2386

Houston Branch1800 Augusta, Suite 390, Houston,
Texas 77057, U.S.A.
TEL: 1-713-975-7200
FAX: 1-713-975-7966
Silicon Valley Branch2043 Zanker Road, San Jose CA 95131, U.S.A.
TEL: 1-408-501-1400
FAX: 1-408-501-1499
Portland Branch4380 SW Macadam Avenue, Suite 170, Portland,
Oregon 97239, U.S.A.
TEL: 1-503-224-7755
FAX: 1-503-228-5067
CANADAThe Representative of Kanematsu Corporation
Vancouver
205-8988 Fraserton Court Burnaby, B.C.
V5J 5H8, Canada
TEL: 1-604-689-0550
FAX: 1-604-689-0655

CENTRAL & SOUTH AMERICAMEXICO
Kanematsu Mexico S. de R.L. de C.V.
Paseo Camelias No. 106-203 Fracc. Club de Golf
Tabachines 62498 Cuernavaca, Morelos, Mexico
TEL: 52-777-310-6473
FAX: 52-777-310-6432* Scheduled to transfer in October 2014

BRAZIL
Kanematsu America do Sul Importacao e
Exportacao Ltda.
Alameda Campinas No. 728, Cjtos 302 e 304
Jardim Paulista, Sao Paulo, S.P. CEP 01404-001
Brasil
TEL: 55-11-3285-3311
FAX: 55-11-3285-3318

Annual Report 201475

Global Network

Major Consolidated Subsidiaries and Affiliates* Companies with shares listed on a stock exchangeElectronics & Devices
Japan

China

Kanematsu Electronics Ltd.*

System integration of ICT and communications equipment

Nippon Office Systems Ltd.*

Development of soft, sales and maintenance of computers and computer peripherals, etc.

Kanematsu Communications Ltd.

Sales of mobile communications devices, mobile internet system and services

Kanematsu Granks, Corp.

Providing mobile contents, mobile solutions business

Kanematsu PWS LTD.

Manufacture of semiconductors, design, development, manufacture and sales of testing equipment

Kantatsu Co., Ltd.

Development, manufacture and sales of lens units, camera modules and other optical equipment
and parts

Kanekoh Electronics (Shanghai) Co., Ltd.

Development, manufacture and sales of control modules for lithium ion batteries

Foods & Grain
Japan

China

ThailandIndonesia
U.S.A.

Kanematsu Shintoa Foods Corp.

Food wholesaling and cold storage

Kanematsu Agritec Co., Ltd.

Manufacture and sales of feed and fertilizer

Kanematsu Soytech Corp.

Sales of soybean, pulses & peas and grain, and development and marketing of products for foodprocessors such as tofu

Heisei Feed Manufacturing Co.

Manufacture and processing of mixed feeds

Mojiko Silo Co., Ltd.

Operation of grain silo, land/marine transport

Dalian Tiantianli Food Co., Ltd.

Manufacture of dim sum and delicatessens

Shangdong Lufeng Foods Co., Ltd.

Production of processed vegetables and fruits

Summit Food Industries Co., Ltd.

Production and sales of rice crackers

Siam Aloe Vera (2005) Co., Ltd.

Processing and sales of Aloe Vera

P.T. Kanemory Food Service

Manufacture of processed foods, management of central kitchen

KAI Enterprises, Inc.

Sales of hay and roughage

KG Agri Products, Inc.

Seed development, contract farming, sorting, processing and sales of food soybeans

Steel, Materials & Plant
Japan

76

Kanematsu Trading Corp.

Sales of steel and construction materials

Kyowa Steel Co., Ltd.

Cutting and processing of steel sheet and sales of construction materials

Eiwa Metal Co., Ltd.

Processing and sales of stainless steel, titanium and high-alloy steels

Kanematsu Petroleum Corp.

Sales of petroleum products and LPG

Kanematsu Yuso Co., Ltd.

Delivery and storage of petroleum products

Kanematsu Chemicals Corp.

Sales of petrochemicals, automobile-related chemicals, health food ingredients and pharmaceuticals

Kanematsu Wellness Corp.

Sales of health food and provision of medical information

Miracool Co., Ltd.

Sales of heat reflective paintKanematsu KGK Corp.

Sales of machine tools and industrial machinery

KGK Engineering Corp.

Repair and sales of machine tools, sales of paper-manufacturing machinery

KANEMATSU CORPORATION

ChinaKanematsu Hoplee Co., Ltd.

Processing and marketing of steel sheets and plates

Kanematsu KGK Trade & Sales (Shanghai)Co., Ltd.

Sales of machine tools and industrial machinery

ThailandKGK Engineering (Thai) Co., Ltd.

Sales of machine tools and industrial machinery

VietnamKanematsu KGK Vietnam Company Limited Sales of machine tools and industrial machinery

Indonesia

P.T. Kanematsu KGK Indonesia

Sales of machine tools and industrial machineryKGK Czech s.r.o.

Sales of machine tools and industrial machinery

Steel Service Oilfield Tubular, Inc.

Sales of premium tubing for oil excavation

Benoit Premium Threading, LLC.

Oil well casing fabrication, manufacture and sales of oil well-related parts

KGK International Corp.

Sales of machine tools

Czech Republic
U.S.A.

Motor Vehicles & AerospaceJapan

Kanematsu Aerospace Corp.

Sales of aircraft, defense and aerospace-related products

Ireland

KG Aircraft Rotables Co., Ltd.

Replacement and maintenance of aircraft rotable components, leasing

PolandAries Motor Sp. zo.o.

Sales of automobiles

Aries Power Equipment Sp. zo.o.

Sales of engines, generators, water pumps and other general-purpose machinery

Kaneyo Co., Ltd.*Sales of bedding materials and products, general merchandise and interior goods

Kanematsu-NNK Corp.*

Manufacture and sales of home-construction materials;
ground inspection services and improvement works

Hokushin Co., Ltd.*

Manufacture and sales of medium-density fiberboard

Aso Kanko Kaihatsu Co., Ltd.

Golf course management

Shintoa Corp.

Beverage-vending machine operations; imports, exports and sales of aircraft engines

Kanematsu Logistics & Insurance Ltd.

Insurance agency and forwarding business, consigned freight forwarding businessJapan Logistics Co., Ltd.

Warehouse and trunk room operation

VietnamVietnam-Japan International Transport
Co., Ltd.

Total logistics services

Indonesia

P.T. Century Textile Industry

Manufacture of polyester blend fabric

P.T. Dunia Express Transindo

Total logistics services

OthersJapan

Annual Report 201477

Corporate Profile(As of April 1, 2014)

Company Name

KANEMATSU CORPORATION

Paid-in Capital¥27,781 million

Established

August 15, 1889

Fiscal Year

April 1 to March 31

Foundation

March 18, 1918

President & CEO

Masayuki Shimojima

General Meeting of
Shareholders

June

Head Office2-1, Shibaura 1-chome, Minato-ku,
Tokyo 105-8005, Japan

Number of Offices

Domestic: Head office 1 and branches 7
Overseas: 39

Number of Employees 800 (Consolidated: 5,747)(As of March 31, 2014)

Organization Chart (As of April 1, 2014)
Business area

Electronics & Devices
Division

Shareholder’s Meeting

Board of Directors

Audit & Supervisory Board

Management Committee

Foods & Grain
Division

Steel, Materials & Plant
Division

Motor Vehicles & Aerospace
Division

Corporate area

78

KANEMATSU CORPORATION

Industrial Electronics Department
Semiconductor Equipment Department
Components & Material Department
Semiconductor Department No.1
Semiconductor Department No.2
Semiconductor Marketing Department
System & Module Department
Electronics Planning Office
Food Department No.1
Food Department No.2
Food Department No.3
Meat Department
Grain Department
Feedstuff Department
Agricultural Products & Oilseeds Department
Domestic Sections
Foods & Grain Planning Office
Food Safety Management System Office
Iron & Steel Foreign Trade Department
Specialty Steel Foreign Trade Department
Functional Chemicals Department
Energy Department
Plant & Ships Department
Steel, Materials & Plant Planning Office
Food Safety Management Office
Aerospace Department
Motor Vehicles & Parts Department No.1
Motor Vehicles & Parts Department No.2
Motor Vehicles & Aerospace Planning Office
Personnel & General Affairs Department
Finance Department
Accounting Department
Business Accounting Department
Legal & Compliance Department
Credit Control Department
Traffic & Insurance Department
System Planning Department
Internal Auditing Department
Corporate Planning Department

Investor Information(As of April 1, 2014)

Composition of Shareholders

Stock Exchange Listings Tokyo
Stock Code8020
Transfer Agentfor Common Stock
Sumitomo Mitsui Trust Bank, Limited
Shares Authorized
1,016,653,604
Shares Outstanding	422,501,010(including 1,086,487 treasury shares)
Minimum Trading Unit 1,000
Number of Shareholders 30,339(As of March 31, 2014)■ Individuals and others(including treasury shares)�����39.86%■ Financial institutions������������������32.64%■ Foreign institutions
and individuals������������������������������16.46%■ Other corporations����������������������� 7.52%■ Securities firms�������������������������������� 3.52%

Principal Shareholders (As of March 31, 2014)

Japan Trustee Services Bank, Ltd. (trust account)
The Master Trust Bank of Japan, Ltd. (trust account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
The Norinchukin Bank
Mitsui Sumitomo Insurance Co., Ltd.
Tokio Marine & Nichido Fire Insurance Co., Ltd.
Hayat
Japan Trustee Services Bank, Ltd. (trust account 6)
Japan Trustee Services Bank, Ltd. (trust account 5)
Japan Trustee Services Bank, Ltd. (trust account 3)

Number ofshares held
(thousands)

Percentage ofvoting rights(%)

19,59318,642
13,29812,46011,613
11,612
5,886
4,376
4,360
4,299

4.64
4.42
3.15
2.95
2.75
2.75
1.39
1.03
1.03
1.02

Shareholder Distribution by Number of Shares Held(As of March 31, 2014)■ More than 1 million shares(including treasury shares)�����48.58%■ 50,000 shares and more�����������24.35%■ 10,000 shares and more�����������15.15%■ 1,000 shares and more�������������11.49%■ Less than 1,000 shares���������������� 0.43%

Note: Calculated after deduction of treasury shares (1,086,487 shares)

Stock Price
Stock price (left axis)(¥)

TOPIX (right axis)

TOPIX

600

1,800

500

1,500

400

1,200

300

900

200

600

100

300

0

Apr. 2003

Apr. 2004

Apr. 2005

Apr. 2006

Apr. 2007

Apr. 2008

Apr. 2009

Apr. 2010

Apr. 2011

Apr. 2012

Apr. 2013

Apr. 2004

Apr. 2005

Apr. 2006

Apr. 2007

Apr. 2008

Apr. 2009

Apr. 2010

Apr. 2011

Apr. 2012

Apr. 20130

Trading Volume(thousand shares)

600,000
500,000
400,000
300,000
200,000
100,000
0

Apr. 2003

Annual Report 2014

79

90

0
36

Public & Investor Relations Section, Finance Department,
Kanematsu Corporation

35
0

For more information on this Annual Report, or to obtain
additional copies, please contact:

10

20

30

40

50

60

70

80

http://www.kanematsu.co.jp

2-1, Shibaura 1-chome, Minato-ku, Tokyo 105-8005, Japan
Tel: 81-3-5440-8000
Fax: 81-3-5440-6503
URL: http://www.kanematsu.co.jp

Printed in Japan