Shifting Gear
for Growth
Annual Report2013

In 2014, Kanematsu will commemorate 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 andcreative 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 and economic environment.

KANEMATSU CORPORATION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 establishmentof 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 ourcontributions 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 fairearnings 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 andflourishing business which fulfils its responsibilities toward the welfare of society andalso 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 amember of the organization abiding by company rules, carrying out duties with a senseof loyalty to the Company and a spirit of cooperation and understanding toward allother members of the organization.

Contents

3 Strategy
		 4
		  5

“S-Project” Overview
Interview with the President

11 Segments
		
		
		
		

12
15
18
21

Electronics & Devices
Foods & Grain
Steel, Materials & Plant
Motor Vehicles & Aerospace

24

CSR

27

Corporate Governance

		

29

30

Directors and Corporate Auditors

31

Financial Section

73

Corporate Data

A Message from an Outside Corporate Auditor

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.

Annual Report 20131

To Our Stakeholders

Kanematsu Corporation was founded on August 15, 1889 as one of the first Japanese companies to take part in direct trade between
Japan and Australia. Since this milestone, our business has continued to expand in response to evolving market needs over the years,
and today we have grown into an enterprise with a global network. Current business activities span the sectors of Electronics &Devices; Foods & Grain; Steel, Materials & Plant; and Motor Vehicles & Aerospace. While ensuring we can supply quality products andservices to our customers through our domestic and overseas business networks, we remain constantly committed to discovering
new business opportunities.
Fiscal 2013 was the final year of our “S-Project” medium-term business plan. Results for the year were consolidated ordinary incomeof ¥16.7 billion against our target of ¥14.0 billion, and net income of ¥9.6 billion, greatly exceeding our target of ¥6.5 billion. On thefinancial side, we achieved an equity ratio of 13.7% against our target of 10%, thereby steadily improving our financial standing. The“S-Project” also promoted future growth investments and took steps to raise enterprise value.
Our new medium-term business plan (April 2013 through to March 2016), holds the vision of “Jump to the next stage leading to the
future.” In 2014, we will establish a solid growth track for the future as we commemorate our 125th anniversary.
Fusajiro Kanematsu, the founder, always tried to foresee future needs and boldly embarked on the challenge of creating new businesses.
His pioneering spirit and belief in aggressive innovation are guiding us even today. From here onward, as well, we will further develop
professional organizations and personnel so that we continue to be a “Value Creator” like our founder. We will also grow and develop
together with our customers by providing products and services not only for our customers but also for the benefit of society as awhole, and will work constantly to further enhance the Group’s enterprise value.
We look forward to the continued understanding and support of all our stakeholders.
August 2013
Toshihiro Kashizawa, Chairman

Masayuki Shimojima, President

ChairmanToshihiro Kashizawa

2

KANEMATSU CORPORATION

President
Masayuki Shimojima

Strategy
The Kanematsu Group reviews its business strategy every
three years. Below, President Masayuki Shimojima provides
an overview of the results of “S-Project,” our previous
medium-term business plan (April 2010 to March 2013)
and explains our new medium-term business plan (April
2013 to March 2016).

4 “S-Project” Overview
5 Interview with the President

Annual Report 2013

3

“S-Project” Overview

The “S-Project,” our previous medium-term business plan, started
in April 2010 amid the financial crisis and global recession that
followed Lehman Brothers’ bankruptcy, when consolidated ordinary
income had dropped to ¥8.2 billion in the previous fiscal year.
In short, in the final fiscal year (ending March 31, 2013) of“S-Project” our targets were gross profit of ¥80.0 billion, operating
income of ¥19.0 billion, ordinary income of ¥14.0 billion, and net
income of ¥6.5 billion on a consolidated basis. We achieved or
exceeded those targets (except for operating income) with grossprofit of ¥80.0 billion, operating income of ¥18.3 billion, ordinary
income of ¥16.7 billion, and net income of ¥9.6 billion. We did notachieve our operating income target because selling, general andadministrative expenses increased due to investments for businessexpansion in the second half of the “S-Project.”On the financial side, in the final year of the plan, our targets
were to attain an equity ratio of more than 10% and a net debtequity ratio of around 2.0 times. We achieved both of these targets
with an equity ratio of 13.7% and a net debt-equity ratio of 1.6 times.
As a result of increased investments, net interest-bearing debt cameto ¥86.4 billion, slightly exceeding our final year’s target of ¥84.0
billion. However, we significantly improved our financial position bybuilding up shareholders’ equity, as well as the contribution from net
income, which exceeded our plan’s target.

Ordinary income/Net income
Ordinary income (¥ billion)
Net income (¥ billion)“S-Project” target for the final year

Year on year
74%

Year on year
24%

17.8

14.3

Compared with FY2010

Year on year
–6%

16.7

Initial target¥14.0 billion

9.6

9.2

8.2

104%

6.1

Initial target¥6.5 billion

3.5
FY2010FY2011

Shareholders’ equity and equity ratio
Shareholders’ equity (¥ billion)

7.3

33.1

28.9

FY2010/3

4FY2011/3

Equity ratio (%)

KANEMATSU CORPORATION

9.8
54.5
39.0

FY2012/3

FY2013

Net interest-bearing debt and net D/E ratio
Net interest-bearing debt (¥ billion)“S-Project”
13.7
target for the final year

8.5

FY2012

3.8
109.4
Initial target
more than 10%

Net D/E ratio (times)“S-Project”
target for the final year

104.6
3.2 90.0

2.3

Initial target¥45.0 billion

FY2013/3

86.4

1.6

FY2010/3

FY2011/3

FY2012/3

FY2013/3

Initial target¥84.0 billion
Initial target
around 2.0

Interview with the President

Medium-Term Business Plan
(April 2013 – March 2016)

Basic Concept andPriority Measures

Vision— Jump to the next stage to the future —Basic Concept• Take a positive stance to enable rapid progress and to establish
a solid growth track in preparation for the 125th anniversary.
• Continue to develop professional organizations and personnel
as a business creation group, aiming for coexistence andmutual development with our business partners.
• Endeavor to consistently increase corporate value to meetthe expectations of domestic and foreign stakeholders.

Q1▷ What approach does the new medium-termbusiness plan take?
▶ We will further leverage Kanematsu’s pioneering spirit, its DNA, andas a “Value Creator,” continue to develop new businesses.

President

Masayuki Shimojima

During the three years of the “S-Project” medium-term businessplan (April 2010 to March 2013), the Kanematsu Group achieved
positive results including increased earning power and improved
financial results (see P 4). In those three years, shifting to a moreaggressive management approach, we increased profits and madesignificant progress in new business developments including
several investment projects. We feel confident in our pursuit of thenext growth stage.
With a 124-year history, Kanematsu has inherited thepioneering spirit — the DNA — of its founder Fusajiro Kanematsu.
Underlying this is a philosophy of growing together with ourcustomers. This builds stronger relationships of trust, promotes
business creation with them, and through our work, helps customers and world economic development. By continuously creating
business with our customers, we can further grow and expand
the Kanematsu Group’s business base. As a result, enterprise value
increases. Our goal is to become a company that can fully meet the
expectations of its stakeholders.
The new medium-term business plan begun in April 2013 hasbeen formulated based on the approach I have just described. I will
explain the goals and strategies of the new medium-term business
plan.

Annual Report 20135

Interview with the President

Priority Measures

1. Strengthen the global value chain in anticipation of evolving needs	Swiftly and accurately grasp changing trends in developed and developing countries and make positive investments
to build and strengthen a solid value chain based on customers’ needs.

2.	Increase consolidated earnings strength through integration of the Group’s
capabilities, mutual collaboration and effective allocation of resources
To accelerate actions in our areas of strength, intensively allocate resources.
Reinforce cross-departmental collaboration in pursuit of higher consolidated revenues.

3. Build robust finances unaffected by economic circumstances	Strengthen our compliance structure and advance the risk management structure to accumulate sound assets andto maintain a good debt-capital balance.

4. Develop global professionals
	Step up efforts to increase personnel with the capacity to quickly respond to changes in global circumstances andwith the knowledge to meet diverse needs.

5. Resume dividend payments and achieve constant dividend payments
	Work to quickly ensure the stable and sustained payment of appropriate dividends.

Q2▷ What are the priority measures of
the new medium-term business plan?
▶ Because we will commemorate the 125th anniversary of
our founding during the new medium-term business plan,we will take a more aggressive management approach.
We will look at our future and take positive steps to achieve rapid
progress and solidify our growth track as we head to our 125th
anniversary in 2014. As a business creation group, we will continue
to train our people to maintain a professional organization aiming
for mutual development with our business partners. We will strive
to consistently increase corporate value to fully meet the expectations of domestic and foreign stakeholders.
As priority measures, we will primarily address five themes,
shown in the chart above. In particular, by accurately graspingchanging trends in developed and developing countries, we plan
to invest aggressively to further strengthen our global value chain.
In the second half of fiscal 2013, we undertook several initiatives in a
number of fields through aggressively investment in overseas businesses. In iron and steel, we invested in an oilfield tubing company
that specializes in deepwater and ultra-deepwater oil wells, as

6

KANEMATSU CORPORATION

well as shale gas and shale oil production wells, an area where theKanematsu Group has a strong business foundation (see P 20). In
the food and grain business, following the expansion of Japaneseconvenience stores and restaurant chains in Southeast Asia, weinvested in a joint-venture food-processing company with a local
partner (see P 17).
The United States market has recovered from the downturnand remains an important market for the Kanematsu Group. We
will further seek opportunities in the auto industry, where we havea significant customer base, as well as in the natural resources businesses with the expectation of further industry growth after “The
Shale Gas Revolution.”
To reinforce the strengths of the Kanematsu Group, we will
allocate Company resources in a selective and focused manner,collaborate more closely across divisions and subsidiaries, and seek
to raise earnings on a consolidated basis. Financially, while maintaining the soundness of assets using advanced risk management
methods, we will maintain an adequate balance of debt to equity.
Further, we will promptly resume dividend payments in anticipationof a continuous and stable dividend payout.

Targets◆ Final fiscal year of new medium-term business plan (FY2016)
Consolidated
Ordinary Income¥20

Consolidated
Net Income

billionOrdinary income(¥ billion)¥10

Net D/E Ratio

billion

Net income

16.7
9.6

10.0

level

Net D/E ratio(¥ billion)(times)

100.0

2.0

80.0

10.0

1.0

Net interest-bearing debt

20.0

20.0

Maintain at

86.4
1.6

71.0

60.0

1.0

40.0

1.0

20.0
0

0

FY2013

FY2016FY2013

FY20160.0

FY2013/3

FY2016/3

Q3▷ What are your quantitative targets?
▶ Our goal is to steadily increase net sales and gross profit
while investing for growth.
The targets for fiscal 2016, the final year of our plan, are grossprofit of ¥92.0 billion, operating income of ¥22.0 billion, and net
income of ¥10.0 billion (see P 10). While it may seem a little tooconservative, the plan still includes 5% growth in gross profit every
year. I believe our targets are optimistic, considering the expectedchanges in the economic environment and trends in China,
Europe, and other regions. Thus far, we have focused on improving
our financial position, such as by reducing our interest-bearing
debt, and keeping investments to the bare necessary minimum.
However, in our new medium-term business plan, we will aggressively distribute increased profits into growth investments to further
expand our business base. Needless to say, we intend to resume
dividend payments as soon as possible. While taking comprehensively into account the balance between growth investments andshareholder returns, we will raise enterprise value by continuing our
new business creation initiatives.

Q4▷ What initiatives will you take in your main areas of focus?
▶ In each of our four divisions, we have main areas of focus.
In the food and grain business, we will create a global value chain,rigorously carry out traceability management, speed up investment
in Asia, and expand multilateral trade. In addition to supplying foodand grain, feedstuff, and raw materials to the Japanese market,
where we are strong in this segment, we will build a global value
chain, particularly in Asia, a market in which people’s food preferences are changing significantly, and further accelerate investment

Annual Report 20137

Interview with the President

Main Areas of Focus

1. Global expansion of the food and grain business
2. Enlargement of the electronics, devices and ICT businesses
3. Strengthening of the automotive and mechanical parts business
4. New cultivation of the energy, materials and infrastructure markets

8

to develop our business model, which targets overseas consumers.

In the auto and mechanical parts field, the newly formed Motor

Specifically, we will focus on developing the ready-cooked foods
and deli products businesses and also on building a platform for the
expansion of meat and feedstuff sales to Asia. In addition, like lastyear’s investment in a U.S. soybean processing firm, we will secure
exclusive producers and expand production areas overseas for meatand marine products, grains, and feedstuff, and as a result, expand
multilateral trading and increase it volume (see P 15).
In the electronic, device and ICT fields, we will focus on the
global expansion of our system integration business, as well as ourmobile device sales business, building a global value chain for thedevice business, and collaboration from the development stage
with leading overseas companies. As for system integration, we
will build out infrastructure for customers who are increasingly
expanding business overseas, and firmly establish borderless cloudcomputing businesses. In the mobile device sales business, amid
industry reorganization, we will increase our market share throughaggressive M&A. In the device business, we will expand our supply
system, especially key components for smart devices, and upgrade
our value chain globally (see P 12).

Vehicles and Aerospace Division will focus on building a stronger
global supply chain in the motorcycle and automobile business,create synergies through information-sharing with the Aerospace
Department, as well as expanding the aircraft, helicopter, andsatellite-related businesses. Globally, the motorcycle and automobile markets are still undergoing remarkable growth with thediversification of demand. Fully leveraging the Kanematsu Group’s
overseas network, we will expand our business by strengthening
our sales force, sourcing, and technological development capabilities, along with our logistics functions. We plan to create new business opportunities by introducing advanced aerospace technology
into the motor vehicles segment (see P 21).
In the energy, materials, and infrastructure markets, we will
focus on expanding the steel business in North America and Asia,
developing new products for the new energy and new materials
fields, exploring more opportunities in emerging countries in themachinery and plant division, and promoting synergies between
raw materials and products. In the iron and steel division, we will
explore and conduct horizontal expansion in the oilfield tubing
business in energy-related fields in North America and Asia, thestainless steel business in environment-related fields, and in otherbusinesses as well. As new areas of focus, we will develop newmaterials products such as pharmaceuticals and their intermediates,
health food, photovoltaic modules, and lithium batteries. In themachinery and plant division, we will focus on the plant businessincluding the overseas expansion of machine tool and industrial
machinery sales, and in Asia we will focus on chemicals, the environment, infrastructure facilities, and renewable energy (see P 18).

KANEMATSU CORPORATIONQ5▷ What do you expect from the divisional restructuring?
▶ Making our priority measures more achievableby further unleashing our existing strengths.
The purpose of the reorganization into four divisions was to makethe priority measures and priority focuses in the new medium-termbusiness plan more achievable, to unleash the Kanematsu Group’s
strengths, and to aggressively accelerate business expansion.
Enlarging the size of a business division makes it easier for thedivision to promote new projects including investments. It will also
allow us to share resources such as personnel and overseas facilities
so they can be used for various types of business development.
Kanematsu integrated the automotive-related business, which
had been handled by the three divisions, Electronics and IT, Iron
and Steel, and Machinery and Plants, and then combined it with theaerospace business to form the new Motor Vehicles and Aerospace
Division. We will continue to aggressively expand business in theautomobile industry, where global growth is expected, and develop
it so that it becomes a new earnings driver for the Kanematsu Group.
In addition, we will explore more opportunities for horizontal

Organization

expansion of the customer base by promoting cross-divisional collaboration, such as sharing and utilizing more business information
throughout the organization.
In each division, we segment our business portfolio into the four
categories of “Fundamental Trading,” “Horizontal Expansion,” “Value
Exploration,” and “New Businesses” with the aim of maintaining
and increasing our profit opportunities. “Fundamental Trading” is amodel that provides traditional trading company functions and consists mainly of established, stable businesses. The key missions of thebusinesses in this segment include providing valuable supplemental
information that can become seeds for new businesses. “Value
Exploration” consists largely of profitable businesses with more
growth opportunities from providing additional services to customers and then leveraging those services as a competitive advantage.
In “New Businesses,” utilizing the expertise and know-how that theKanematsu Group has developed over many years, we will continue
to start up new businesses tailored to our customers’ strategies andneeds in new business domains, “Horizontal Expansion” seeks toexpand the already-successful business models of “Fundamental
Trading,” “Value Exploration,” and “New Businesses” and increase oursales volume with new customers and in new markets.

To increase the viability of the priority measures and display the strengths of the Kanematsu Group,
our divisions were reorganized in April 2013.

Before reorganization

After reorganization

Principal Subsidiaries and Affiliates• Kanematsu Shintoa Foods Corp.

Foods Division• Kanematsu Agritech Co., Ltd.

Foods & Grain• Kanematsu Soytech Corporation• P.T. Kanemory Food Service

Foodstuff Division• KG Agri Products• Kanematsu Electronics Ltd.

Devices Division

Electronics & Devices

Electronics & IT Division• Kanematsu Communications Ltd.
• Nippon Office Systems Ltd.
• Kanekoh Electronics (Shanghai) Co., Ltd.

Motorcycle and automobile parts
Aerospace Dept.

New

Motor Vehicles & Aerospace• Kanematsu Aerospace Corp.
• KG Aircraft Rotables Co., Ltd.
• Aries Motor Ltd.
• Aries Power Equipment Ltd.

Iron & Steel Division
Cast and forged steel parts• Kanematsu KGK Corp.

Steel, Materials & Plant• Kanematsu Trading Corp.
• Kanematsu Petroleum Corp.

Machinery & Plant Division• Kanematsu Chemicals Corp.

Parts for two- and four-wheel vehicles• Steel Service Oilfield Tubular Inc.

Construction machinery
Environment & Materials Division• Benoit Premium Threading, LLC• Shintoa Corporation• Overseas subsidiaries

Annual Report 20139

Interview with the President

Outlook for the Three-Year Period
Sales and Income(¥ billion)

FY2013

New Medium-Term Business Plan

From FY2013

FY2014FY2015FY2016

Change% Change

1,019.2

1,050.0

1,100.0

1,150.0

130.8

12.8%

Gross Trading Profit

80.0

84.0

88.0

92.0

12.0

15.0%

Operating Income

18.3

19.0

20.5

22.0

3.7

20.5%

Ordinary Income

16.7

17.0

19.0

20.0

3.3

19.7%

Net Income

9.6

6.0

8.0

10.0

0.4

4.6%

Net Sales

Financial Indicators

(¥ billion)

FY2013/3

New Medium-Term Business Plan
FY2014/3

FY2015/3

FY2016/3

Change% Change

Total Assets

399.2

419.0

427.0

444.0

44.8

11.2%

Shareholders’ Equity

54.5

60.3

67.0

74.9

20.4

37.4%

Equity Ratio (%)

13.7

14.4

15.7

16.9

up 3.2pt

—

146.9

146.9

146.9

146.9

0.0

0.0%

2.7

2.4

2.2

2.0

down 0.7pt

—

86.4

81.0

76.0

71.0

–15.4

–17.9%

1.6

1.3

1.1

1.0

down 0.6pt—

Gross Interest-Bearing Debt
Gross D/E Ratio
Net Interest-Bearing Debt
Net D/E Ratio

Q6▷ Finally, what is the outlook for the fiscal year ending
March 31, 2014?
▶ We will set ourselves on a steady course for another jump
to the future.
In the fiscal year ending March 31, 2014, while the United States is
expected to continue on a modest recovery path, Europe has only
just begun to take steps toward financial soundness. Therefore, theglobal economic slowdown is expected to continue over the longterm. Despite slower growth in China and emerging countries in
Asia, as consumer spending is increasing, we anticipate continued
growth. The Japanese economy is showing signs of a recovery led
by higher exports on the back of an economic rebound overseas
and the yen’s depreciation. Moreover, a consumption tax increaseis expected to trigger last-minute demand, so consumer spending
should be strong for a while.
Under the circumstances, in the fiscal year ending March

10

From FY2013/3

KANEMATSU CORPORATION

31, 2014, we are targeting net sales of ¥1,050.0 billion, operating
income of ¥19.0 billion, ordinary income of ¥17.0 billion, and net
income of ¥6.0 billion.
We are steadily executing our strategy and investing in each of
our business fields, thereby setting ourselves on a steady course for
growth to fulfill the expectations of our stakeholders.

Segments
The Kanematsu Group is developing global businesses as a
“Value Creator” that provides 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 and goals
and major policies under our new medium-term businessplan (April 2013 to March 2016) in four sales divisions:Electronics & Devices; Foods & Grain; Steel, Materials &Plant; and Motor Vehicles & Aerospace.

12 Electronics & Devices
15 Foods & Grain
18 Steel, Materials & Plant
21 Motor Vehicles & Aerospace

This section is an overview of our new business segmentation in theyear ending March 31, 2014. Please see pages 34 and 35 (Analysis offinancial position and business performance) for information about theold segments.

Annual Report 201311

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 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.

In the Electronics & Devices Division, we aim to createhigh value-added businesses by proposing value
chains that match customers’ needs from the development to mass-supply stages, based on our extensive
know-how gained from long experience.
Our goal is to become No. 1 globally in each of the
products we trade. We are determined to accurately
understand market needs and build up our businessbase while shifting resources to the expanding Asianand emerging country markets and the recovering
United States market. At the same time, we areconsidering capital or operating alliances and otherpartnerships to expand the scale and role of ourbusiness.
We will contribute to economic developmentin emerging countries and elsewhere, based on the
global procurement, marketing and value-added
creation capabilities of the Group.

Kaoru Tanigawa Director, Electronics & Devices Division

Strategies in
the medium-termbusiness plan

◆ Expand system integration business globally◆ Expand mobile system and terminal marketing business, and increase market share◆ Create integrated global business model (procurement, processing and marketing)in the device business◆ Increase cooperation with leading-edge companies in Asia, Europe and the US,from the product development stage

Targets(¥ billion)

FY2013 Results

Net Sales
Operating Income
Net Sales

250
200

New Medium-Term Business Plan

From FY2013

FY2014FY2015FY2016

Change% Change

229.6

230.0

245.0

252.0

22.4

9.8%

8.1

7.5

7.5

8.0

(0.1)

–1.2%

8

6

150
4
100
50
0

12

KANEMATSU CORPORATION

20Operating
IncomeProducts

Electronic Components andMaterials

Semiconductor and mechanical parts, LCD panels, Telecommunications equipment parts, Amusement-related products,
Audiovisual products, System boards, Photovoltaic parts, Mobile phone components, Printed circuit boards and substrate materials

Semiconductors and LCD
Manufacturing Equipment

Semiconductor manufacturing and testing equipment, LCD manufacturing and testing equipment

Semiconductor and LCD
Materials

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

Optical Device Materials

Display devices, Optical devices

OEM and ODM Solutions

Printers, Control modules for lithium-ion batteries

Retail Business

Sales of batteries, LEDs and other overseas products in Japan’s retail market

Mobile Solutions

Mobile phones, Mobile Internet services

ICT Solutions

IT and communications equipment and services

Four businesscategories

Function

Advanced
Traditional

Strategies that aim at maintaining and improving profitability

Main Business

Value Exploration

New Businesses▪ Development support (EMS, module processing and sales)▪ Overseas technical service(maintenance of semiconductor equipment, printers, etc.)▪ Expand digital imaging business(data security in Asia)▪ Web solutions (related to cloud computing, big data)▪ Global sourcing(search for new functional materials, mechanical parts)

Fundamental Trading

Horizontal Expansion▪ Expand distribution network(increase sales of general-purpose semiconductors)▪ Build an ICT solution(expand data infrastructure business)▪ Domestic sales of mobile terminals▪ Expand in Asia, India and China (enhance supply chain)▪ Grow solutions business (develop mobile content)

Existing

New

A strategy that mainly aims to expand transaction volume and scale

Customers

Fundamental
Trading• Expand the semiconductor business – broaden the base and stabilize operations – through business and capital alliances• Strengthen relationships with customers and win orders in ICT and system integration businesses• Build up the mobile phone marketing business aggressively using M&A, and consolidate our fundamentals as a key player

Horizontal
Expansion• Expand supply chain to meet customer needs by growing the semiconductor and electronic parts businesses across the Asian,
Indian and Chinese markets• Expand business base through global development of the system integration business• Expand distribution networks for electronic devices and supply products based on customer needs

Value Exploration• Add value by combining products we sell in new ways and improve organizational capabilities through stronger specialization• Create a technological service network overseas and develop value-added strategies• Grow our share of the digital imaging business and expand alliances with partners overseas

New Businesses• Become a key part of our customers’ infrastructure and develop businesses in anticipation of customers’ Cloud and Big Data needs• Identify manufacturers in emerging countries that have steadily improved technologically to create global supply chains

Annual Report 201313

Electronics & Devices

Focus areas

Expansion of the electronics, devices and ICT fields
Major policies
Semiconductor business

Seek out capital and operational alliances prior to semiconductor business expansion.

System integration business

Establish overseas affiliates to develop system integration business globally. Thus far, we have established anaffiliate in China and sent some Japanese staff to an affiliate in India. We are also examining the feasibility ofcapital alliances and other partnerships in Indonesia and the United States.

Mobile device sales business

Expand mobile phone marketing network through M&A and other means. Build business base in Japan byacquiring mobile phone retailers in Kyushu. Continue to seek out partners in other regions.

Electronic device marketing

Expand distribution network and increase market participation by launching more new products. Raiseawareness of Kanematsu brand by handling our own brand of goods. Increase value-added and customer
service standards by establishing a service support network. Enhance product lineups that build on existing
functionality and carry out multifaceted development of OEM and distribution business.

Business Scheme

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 business environment in electronics.
Our business partners with distinctive technologies backed by extensive experience proudly play their important roles in achieving a highlevel of value-added and differentiation in our businesses along with upstream products such as raw materials and components to downstream
products of those modules and assemblies.
We will promote integrated business in collaboration with our business alliance of Electron Manufacturing Services (EMS) and fablessmanufacturers (manufacturers that specialize in product development and marketing without owning plant) by exploiting low cost/highperformance materials as well as developing and sourcing world cutting-edge technologies.

Developing fabless manufacturingin Europe and America
EMS control

High-performancematerials

Japan• Developing new materials

Product development

US, EU• Sourcing new technologies

Components (EMS)

ASEAN
•C
 omponent manufacturers
countries

Product assembly (EMS)

Asia, etc. • Shipment of components

OutletCustomers

14

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 like grains,
raw materials for oils and fats, feedstuff, and meat and marine products, through an integrated supply system from raw material procurement tofinished product processing.

The Foods & Grain Division supplies a full range of goods
and services relating to food for human consumption,
spanning raw materials for feedstuff, meat and marine
products, other agricultural products, raw ingredients fordesserts, soft and alcoholic beverages, and frozen food.
We aim to go beyond the targets already achievedin the previous medium-term business plan. Whilefocusing on the four priorities of overseas business,domestic business, strengthening our positioning asa manufacturer, and improvement of productivity, we

aim to achieve innovative functional development
while adopting an international perspective andremaining firmly rooted in our operating localities andproduction areas.
In overseas operations, we plan to develop ourmarkets and boost trading involving multiple countries
by creating a business model based on local production for local consumption. We also aim to take on a
manufacturing role by encouraging a shift from thetrading-house-first to the manufacturer-first concept.

Morihiro Toida Director, Foods & Grain Division

Strategies in
the medium-termbusiness plan

◆ Based on a commitment to safe, secure and stable food supplies, create a solid value chain

from raw material procurement through processing and shipping that will ensure thoroughtraceability management◆ Step up business investment in Asia area where dietary preferences are likely

to grow more sophisticated◆ Diversify raw materials sourcing geographically, and ensure resilient supply channels

that respond to changing global market needs, and expand the volume of trading involving
multiple countries

Targets(¥ billion)

FY2013 Results

Net Sales
Operating Income
Net Sales

400

300

New Medium-Term Business Plan

From FY2013

FY2014FY2015FY2016

Change% Change

287.9

320.0

340.0

370.0

82.1

28.5%

3.2

4.0

4.5

5.0

1.8

56.3%

5

Operating
Income

4
3

200
2
100

0

1
0

Annual Report 201315

Foods & Grain
Products

Foods

Canned, frozen & dried fruits, Concentrated juices, Wine, Coffee, Cocoa, Sugar, Sesame seed, Peanuts, Pulses, Honey, Nuts,
Oils and fats, Dairy products, Processed foods, etc.

Meat and Marine Products

Meat products (beef, pork, chicken, horsemeat, mutton/lamb, poultry),
Marine products (shrimp, octopus, squid, frozen fish, seafood ingredients for sushi), Others

Grains, Oilseeds

Corn (for food), Soybean (for food, for oil), Rice, Wheat, Barley, Buckwheat, Rapeseed, Cottonseed, Linseed

Feedstuff

Corn (for feed), Milo, Soybean (for feed), Plant protein meal (Soybean meal, Rapeseed meal, etc.),
Animal protein meal (Fish meal, etc.), Other by-products, Baled hay, Roughage, Fish oil, Prebiotics, Fertilizer

Agricultural products

Dairy products (Skim milk, Whey powder), Wheat flour, Premix, Pasta and others, Defatted soya-flake (for soy sauce), Olive oil, OatsPet products & Groceries

Pet food & Snacks, Pet products, Groceries

Four businesscategories

Function

Advanced
Traditional

Strategies that aim at maintaining and improving profitability

Main Business

Value Exploration

New Businesses▪ Development and sorting business of edible soybean seeds
in the US▪ Comprehensive sales of tofu-related products such as
coagulation (Nigari)▪ Meat processing business for table meat
▪ Processing food products for volume sales▪ Domestic silo business▪ Manufacturing and sales of compound feedstuff▪ Cooked foods and deli products business in Asia
▪ Sales of meat products and feedstuff for Asia
▪ Development and sales of functional feedstuff

Fundamental Trading

Horizontal Expansion▪ Sales of functional cooked foods for convenience stores▪ Fruit-processing business▪ Sales of foods and foodstuff▪ Import and sales of meat products▪ Import and sales of feedstuff▪ Sales of pet products and groceries▪ Import and sales of processed marine products▪ Import and sell South American agricultural products▪ Import and sell African agricultural products▪ Expand sales of edible soybeans to outside of Japan

Existing

New

A strategy that mainly aims to expand transaction volume and scale

16

Customers

Fundamental
Trading

Centered on the import and marketing of overseas raw materials and semi-processed products for manufacturers in Japan,
engage in product development and transactions drawing on the traditional strengths of the Group business• Strengthen relations with suppliers and customers with whom we share values and have long-standing trading relations,and further consolidate the base
• Develop marketing of products covered by patents• Strengthen Food Safety Management Office to ensure safe, secure supplies

Horizontal
ExpansionDevelop new production areas and sources of supplies by making full use of the knowledge we have built up
in the business category of “Fundamental Trading”• Develop marketing by seeking out new customers in Japan and expanding markets outside Japan• Increase the number of employees deployed in overseas units and strengthen business development in Asia

Value Exploration

Further explore our engagement in fields, products and production areas that we are already strong in, promote monozukuri(good practice manufacturing), add value to products and transactions and consolidate the lead of the Kanematsu Group• Raise standards of business in each field we are deeply involved in, through upstream and downstream investment and development• Develop overseas assets strategy and launch new businesses

New Businesses

Create new products and create new business models in markets in Japan and overseas• Reorganize the product development teams• Launch new businesses in alliance with overseas partners

KANEMATSU CORPORATION

Focus areas

Global expansion of the foods & grain business
Major policies
Soybean business

Ensure supply chain management integration from upstream to downstream operations through acquisitionof Daizu Yuryo (soybeans wholesaler) and soybean processing businesses, and promote multi-country tradetargeting overseas markets.

Meat processing business

Step up partnerships with overseas meatpackers, and build direct relationships with food service companies
and volume retailers.

Feedstuff business

Diversify our supply sources and develop Asian markets by developing upstream business and a midstream
asset strategy that is represented by our Mojiko silo, and invest in Vietnam and China.

Ready-cooked foods

Develop product proposals through our product development teams in and develop solution-type products
by acquiring of patents, etc. for the production method for Okowa Onigiri. Conduct “Horizontal Expansion” byapplying business models developed in Japan globally and promote local-production for local-consumptiontype business models.

Business Scheme

Create a value chain from upstream to downstream businesses in the food service
business

To tap the growth of the food service industry in Indonesia, the Group teamed up with a foodstuff supplier under the CIMORY Group andestablished P.T. Kanemory Food Services, a joint venture that manages food-processing and central kitchen services.
P.T. Kanemory Food Services is positioned to supply research and development services and research proposals for food service sectors suchas restaurants, convenience stores and supermarkets. It enables supply of a wide range of central-kitchen-type product processing services.
Indonesia has a population of more than 240 million people and growth of Muslim middle-class consumers has been particularly striking.
In traditional Indonesian dietary habits as well, there has been a shift toward food enjoyment. Restaurants, convenience stores, supermarket
chains and other suppliers that cater to changing and more diversified dietary habits are increasing in number.
We aim to create demand and expand business volumes by combining research and development roles we have developed over many
years in the Japanese food-service market and expertise in simultaneous multi-category production for central-kitchen-type end-users with
CIMORY Group’s raw material supply networks for milk, eggs, soybeans and meat.

Annual Report 201317

Steel, Materials & Plant
The iron and steel division 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
and developing high value-added products through our highly specialized staff in all areas.

In April 2013, the Iron & Steel and Environmental &Materials and Machinery & Plant businesses became asingle division — a broad-based division that handles
transactions in iron and steel, energy, chemical
products, machine tools and industrial machinery.
Looking ahead, as our operations grow more complex
in nature, we aim to create businesses that cross theold divisional boundaries.

Centered on our environmental and energy
businesses, strengths of the Company, we will expand
promising overseas markets and conduct crossregional collaboration.
In parallel with this, we aim to expand businessdomains and grow earnings by deploying large
numbers of staff overseas and strengthening alliances
including drawing on personnel resources of affiliates.

Takashi Gunji Managing Director, Steel, Materials & Plant Division

Strategies in
the medium-termbusiness plan

◆ Expand the iron and steel business in the North American and Southeast Asian markets◆ Launch new developments in the fields of new energy and new materials◆ Develop markets in emerging countries for machine tools, industrial machinery and plants◆ Strengthen cooperative relationships and pursue synergies between the materials/raw

materials and products businesses

Targets(¥ billion)

FY2013 Results

Net Sales
Operating Income
Net Sales

500
400

New Medium-Term Business Plan

From FY2013

FY2014FY2015FY2016

Change% Change

438.0

438.0

450.0

460.0

22.0

5.0%

5.3

6.5

7.0

7.5

2.2

41.5%

8

6

300
4
200
100
0

18

KANEMATSU CORPORATION

20Operating
IncomeMain Business

Products

Steel

Export of various kinds of steel sheets, plates, bar products and pipe and tubing products, Export of porcelain enamel steel sheets
Export of stainless steel sheets and plates, Export of alloy steel wire and bar products
Import and tripartite trade of ferrous raw materials, Export and import of steel scrap and sub-materials

Materials

Plant

Overseas Trading of Iron and Steel
Overseas Trading of Specialty Steel
Domestic and Overseas Trading ofFull Range of Steel Products
Functional Chemicals
Healthcare, Life Science
Crude Oil, Petroleum Products, LPG
Development of Environment-relatedMaterials and New Technologies
Plant

Photovoltaic modules and materials, Materials for lithium batteries, Materials for fertilizers, Synthetic rubber, Petrochemical products
Functional food materials, Health supplements, Pharmaceuticals and pharmaceutical intermediates
Crude oil, Gasoline, Jet fuel, Kerosene, Diesel oil, Fuel oil, Lubricant oil, LPG (Propane, Butane, Autogas)
Heat reflective paint, New plant-derived materials, Carbon credit trading

Cargo Vessels
Machine Tools and Industrial Machinery
Electric Power Cable Projects
ODA

Function

Advanced
Traditional

Strategies that aim at maintaining and improving profitability

Four businesscategories

Chemical and petrochemical plants, Industrial plants, Utility and process systems for oil and gas plants, Infrastructure facilities,
Scrap-processing facilities, Environmental facilities
Shipbuilding, Used ships, Equipment package deals for new ships (including ship design and engineering)
Machine tools, Industrial machinery and peripheral equipment
Electric power and communication cable projects, Power generation plants (including design, engineering and installation)
ODA projects (educational, medical/pharmaceutical, water supply-related, agricultural and environmental)

Value Exploration

New Businesses▪ Oilfield tubing businesses▪ Cold-, hot-rolled and electromagnetic steel sheets▪ Wire and steel bar products for automobile parts▪ Infrastructure/ODA▪ Ships/ODA▪ Pharmaceuticals and pharmaceutical intermediates▪ Health food products▪ Solar cells, LIB, materials▪ Lignin black

Fundamental Trading

Horizontal Expansion▪ Domestic sales of machine tools▪ Domestic sales of steel & iron products▪ Domestic sales of industrial machinery▪ Domestic sales of petroleum products▪ Domestic sales of chemical products▪ Overseas sales of machine tools▪ Overseas sales of industrial machinery▪ Stainless steel sheets for worldwide sales▪ Enamel steel sheets for worldwide sales▪ Chemical- and environment-related facilities and technology

Existing

New

A strategy that mainly aims to expand transaction volume and scale

Customers

Fundamental
Trading

Domestic sales of iron and steel products, machine tools, industrial machinery, petroleum products, chemical products earmarked
as steady drivers of earnings• In petroleum products trading, strengthen the stable earnings base through supply and trading of power plant fuel, marine fuel andliquid petroleum gas, using Kanematsu-owned storage tanks and leveraging our know-how and track record

Horizontal
Expansion• In stainless steel sheet and plate and porcelain enamel steel sheets, we are forming alliances with specified manufacturers anddeveloping global markets for rare products• In machine tools and industrial machinery, Kanematsu KGK Corp., with a dominant share in Japan, is focusing on overseas development• In chemical- and environment-related technologies, develop marketing of facilities and plants in new projects for the emerging countries of Asia

Value Exploration

This is a sector in which the Group has strong commercial rights, and that can be expected to become a growth driver in years ahead due
to our competitive edge and differentiation• In our oilfield tubing business in North America and our coil center business in China, consider aggressive expansion policies and rollout of
the same models across different markets• In infrastructure and shipping-related ODA projects, supply developing countries with Japanese products and technologies
that contribute to more efficient energy use, in line with the Japanese government’s grant financing for global environmental protection

New Businesses

Aggressively develop products and businesses, in anticipation of increased overall demand for pharmaceuticals, new drugs for the mentally ill andother new needs, and the growing health-food market• In environment-related fields, focus on development of new products and domains in photovoltaic module and lithium battery materials trading• In the environmental sector, establish technologies for Lignin Black, which is expected to be a major new material, and develop intellectual
property rights and applications development for early commercialization

Annual Report 201319

Steel, Materials & Plant

Focus areas

New development of the energy, materials and infrastructure markets
Major policies
Iron and steel

In the North American and Southeast Asian markets, expand and search for growth areas across several fields.
Strengthen and expand oilfield tubing business (energy-related) and stainless steel business (environmentrelated), and increase the number of personnel working overseas, including through merger and acquisition.

Machine tools and industrial
machinery

Leverage our high share of the Japanese market and our long-standing expertise and track record in this field
to promote overseas expansion including support for Japanese manufacturers advancing into Asia and otheroverseas markets.

Overseas plant businessIn the overseas plant business, which includes chemical, environmental, and infrastructure facilities, undersea
cabling, renewable energy, and new shipbuilding, engage in new ODA projects for environmental protection
based on alliances.

Materials

Promote compound transactions and build up the value chain including materials/raw materials trading andproduct and facility transactions.
• Create collaborative frameworks between different transaction categories and seek out synergies• Construct and install machinery and facilities for delivering raw materials and fuel, promote compoundtransactions from finished product receipt to marketing, and create value chains

Business Scheme

Acquisition of pipe-threading company for oilfield tubing to meet rising oilfield
tubing demand

In recent years, much attention has been given to shale gas and oil, which are nonconventional energy sources. Kanematsu has
long traded oilfield tubing used in shale gas and oil extraction. In the oilfield tubing market, which is expected to expand, theCompany acquired Benoit Machine LLC, a US pipe-threading firm, in November 2012 with the aim of expanding of trading. This
company provides premium threading services under the mainstay Benoit Two-Step (BTS) brand, its own premium joint for oilfield
tubing. In collaboration with our consolidated subsidiary Steel Service Oilfield Tubular (SSOT), we have marketed equipment tomajor American oil companies.
One of the major blast furnace makers has also taken a stake in this acquisition. Together with SSOT, we developed a value
chain spanning production, processing and marketing, enabling us to respond to increased demand for shale gas and shale oil,and deepwater and ultra-deepwater oil well drilling.

20

KANEMATSU CORPORATION

Motor Vehicles & Aerospace
Specializing in transportation equipment, we globally operate motorcycle and automobile parts businesses, leveraging our high-level specialized
expertise and extensive of information. We also operate automobile, construction machinery, industrial vehicle, aircraft and satellite businesses.

The Motor Vehicles & Aerospace Division, started in April
2013, consolidated the automotive-related business
units, which had been operated under three separate
divisions, into a single unit and combined these with theaerospace business. While enhancing Group organizationand functions, we will share with customers and suppliers
the overseas networks that were established separatelyby the three different divisions with the aim of globally
expanding businesses so as to respond to the growing

and diversifying motorcycle and automobile markets.
In the aerospace business, we have taken steps
to expand the aircraft and aircraft parts businesses byeffectively utilizing the overseas networks establishedby the motorcycle and automobile parts businesses.
Seeking business opportunities with LCC (low-costcarriers) which are expected to increase their presence
in coming years, we have made great strides to a newstage of growth in the aircraft rotable parts business.

Yoshiya Miyabe Director, Motor Vehicles & Aerospace Division

Strategies in
the medium-termbusiness plan◆ Build a global supply chain in the constantly growing and diversifying motorcycle and automobile

markets of the world◆ Create new businesses by sharing leading-edge technology from the aerospace industry with theautomotive industry◆ Expand the aircraft, helicopter, satellite, and aircraft rotable parts businesses

Targets(¥ billion)

FY2013 Results

New Medium-Term Business Plan

From FY2013

FY2014FY2015FY2016

Change% Change

Net Sales

60.1

60.0

63.0

66.0

5.9

9.8%

Operating Income

1.4

1.0

1.5

1.5

0.1

7.1%

Net Sales70

1.5Operating
Income

60
50

1.0

40
30
20

0.5

10
0

0

Annual Report 201321

Motor Vehicles & Aerospace
Products

Motor Vehicles and Parts

Automobiles and Motorcycles (and related parts), Forklifts, Construction Machinery, Mining Machinery,
General-Purpose Equipment, Precision-Forged Cast Products (for Vehicles and Industrial Machinery)

Aerospace

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

Four businesscategories

Function

Advanced
Traditional

Strategies that aim at maintaining and improving profitability

Main Business

Value Exploration

New Businesses▪ Creating new projects, businesses by sharing leading-edge
technical information▪ Strengthening functions and abilities for development,
engineering, logistics and quality control▪ Expand line-up of new materials and anti-pollution products▪ Establish new business foundation through investments
in promising projects

Fundamental Trading

Horizontal Expansion▪ Motorcycle and automobile parts business▪ Cast and forged steel parts business▪ Automobile business▪ Automobile/general-purpose machinery dealer/agency business▪ Construction machinery, industrial vehicle business▪ Aircraft, helicopter and parts business▪ Satellites, satellite image, space equipment business▪ Expand businesses of motorcycle & automobile parts andcast & forged steel parts for Central & South America andother regions▪ Support entry/expansion of automobile parts manufacturers
into overseas▪ Expand aircraft rotable parts business

Existing

New

A strategy that mainly aims to expand transaction volume and scale

22

Customers

Fundamental
Trading• Expand established motor vehicle and aerospace businesses while improving know-how and expertise• Strengthen business foundation by constantly adding new value and functions

Horizontal
Expansion• Create new businesses based on cross-departmental collaboration through the sharing of established customer and supplier information• Seek new markets and suppliers to expand the foundation of our core businesses• Help the main suppliers in our core businesses to enter overseas markets and expand through investments and other means so as to further
strengthen our supply base
• Expand aircraft rotable parts business

Value Exploration• Expand organization globally as the market expands and improve customer base and supply chain• Enhance value and functions by developing new projects and businesses and strengthening logistics and quality management under the themeof “Environment & Safety.” Share leading-edge technology in the transportation equipment industry that has been passed down from the aircraft
industry to the automobile and motorcycle industries

New Businesses• Become a trading company with manufacturing functions that possesses product development and engineering capabilities in Japan and overseas• Expand as a trading company with a value proposition by exploring new projects and sharing the Group’s motor vehicle-related business information• Create new business through investments by forming alliances with companies that have new technologies, capabilities, and functions

KANEMATSU CORPORATION

Focus areas

Strengthening of automotive and mechanical parts business
Major actions
Motorcycle,
automobile OEM Parts

Further globalize the organization to cope with growing motorcycle and automobile markets worldwide. In
motorcycles and automobiles, product development, material procurement, and mass production are often
carried out in different countries. Kanematsu will carry these out in every country, thereby enhancing its value
and capability for providing the best solutions to its customers.
Collect and analyze a variety of information from customers and suppliers around the world and generate/
propose new ideas to explore new businesses.
* T aking the environment into consideration, Kanematsu proposed that automakers replace metal parts with resin parts to reduce
car weight. In cooperation with a resin material supplier, we developed a new lightweight resin material with strong heat
resistance that can be precision molded with no post-process. Supplied parts made of the new resin material to our customers as areplacement for metal parts.

Aircraft replacement parts
business

In the Aerospace Department, extend the know-how acquired through the operation of KG Aircraft Rotables
Co., Ltd. to other regions and strengthen aircraft rotable parts business seeking business opportunities with
low-cost carriers (LCC) where growth is expected.

Business Scheme

Overseas networks of the Motor
Vehicles & Aerospace Division
Started collaborative study regarding
the sharing of information withGroup companies to strengthen
human networks and supplier andcustomer bases in the Group and to
explore and develop new markets
and businesses.

Strengthen and expand businesses
along with expanding markets
by utilizing worldwide networks

Consolidation of motor vehicle andaerospace-related business units
Analyze transactions of automotiverelated businesses with different
business styles and cultures anddevelop new businesses with new
ideas by sharing know-how.

Integration of motor vehicle businesses
Materials
Assembly
Motor vehicles

Motor vehicle-related
business (formerly underElectronics & IT division)

Cast and forged steel parts
business (formerly underIron & Steel division)

Automobile,
construction machineryrelated business(formerly under
Machinery & Plant
division)

Sharing of leading-edge
technical information

Leading-edge
technologies inaerospace industry(formerly underElectronics & IT division)• Strengthen and expand supply chain and customer base
• New business resulting from sharing of leading-edge technical information

Annual Report 201323

CSR (Corporate Social Responsibility)

In addition to conducting business activities in the pioneering spirit as fostered by our predecessors and through the wisest use of
our creative imagination and ingenuity, the Company is committed to fulfilling its corporate social responsibility (CSR) by helping
to preserve the global environment and biological diversity, with the goal of working toward the creation of a sustainable society.
We have set up the CSR Committee, whose members are drawn from across the whole Company, and the CSR Promotion
Section, a unit dedicated to CSR activities within the Personnel & General Affairs Department. Through these bodies, and guided
by Kanematsu’s Code of Conduct, we address the various issues involved in CSR, including the Company’s social contributions,crisis management, compliance, and environmental preservation.

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

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

2. Fair transactions

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

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

4. Respect for human rights

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.

5. Consideration of
the global environment

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

6. Social contribution

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

Commemoration Projects
Among the main commemorative projects we have carried out
in accordance with the will of our founder Fusajiro Kanematsu,
and which contribute to the growth of Japanese industry and theinternational community, are the Research Institute for Economic
and Business Administration (Kanematsu Memorial Hall; completed
in 1921); a commerce research institute granted by Kanematsu to
Kobe University; the endowment of the Kanematsu Auditorium(completed in 1927) of Hitotsubashi University; and the endowment

Kanematsu Memorial Hall of Kobe University

24

KANEMATSU CORPORATIONof the Kanematsu Memorial Institute of Pathology (completed in1933) to Sydney Hospital in Australia, which was partially endowed
by Kanematsu with joint funding from the Australian Government.

Kanematsu Foundation for the Research of Foreign Trade
The Kanematsu Foundation for the Research of Foreign Trade,established in 1940, is a foundation with a more than 70-year history. Endowed by funds donated by Kanematsu to Kobe University,

The Kanematsu Auditorium of Hitotsubashi University

Kanematsu Memorial Institute of Pathology,
Sydney Hospitalits purpose is to promote research on trade and international economics and contribute to the economic development of Japan. The
foundation had been jointly operated by the Research Institute for
Economics and Business Administration and Kanematsu, but in lightof December 2008 revisions to the law concerning public-interest
corporations, it started anew as a public interest incorporated
foundation on October 1, 2012.
The Kanematsu Foundation for the Research of Foreign Tradeestablished the Kanematsu Fellowship in 1993 and each year solicits
prize essays and provides opportunities for graduate students
nationwide to earn fellowships and present papers in the fields of
economics, management, and accounting. In addition, the foundation holds open seminars for research on trade and international
economics.

●A cquisition of “Kurumin” certification of support
for nurturing of the next generation
In December 2010, Kanematsu received the “Kurumin” certificationfrom the Ministry of Health, Labour and Welfare. This is awarded tocompanies that are deemed by the Ministry to be making valuable
contributions to supporting the nurturing of
the next generation through such measures
as helping employees achieve a good worklife balance so that they can bring up children
while remaining active in the work force.
● Family Care Support
In addition to the conventional family care leave system, theCompany has recently expanded special paid holidays for family
care.
● Refreshment Day
Wednesday is prescribed as refreshment day, and all employees
are encouraged to leave the office as soon as possible after work toincrease work efficiency and improve work-life balance.

Social Contributions

Kanematsu Fellowship award ceremony

Work-Life Balance

Following the Great East Japan Earthquake of March 2011, theKanematsu Group provided support for the devastated region
through the donation of funds for recovery and reconstruction, andthe direct supply of goods to the region. In addition, we are making
our own plans for recovery support activities for the disasterstricken region. We also disburse transportation, accommodation,and other costs when employees participate in volunteer programsin disaster-stricken areas.

The Company has restricted the length of employees’ working
hours with the vision of creating a society where there exists
a comfortable work-life balance. We have been improving theworking environment so that employees can treasure the time they
spend with their families, as well as the time spent on hobbies andparticipating in social activities.
● Child Care Support
In addition to the conventional maternity leave and childcare leavesystem, the Company has revised its working regulations so that the
number of the days and the scope of the application of childcare
leave can be expanded in accordance with the revisions of theLabor Standards Act and the Child Care and Family Care Leave Act.

Delivering relief goods

Removing dirt from gutters

Annual Report 2013

25

CSR

In July and August 2011, we participated in volunteer programs
offered by Nippon Keidanren’s One Percent Club. Since September
2011, we have been active in the Kanematsu Group’s own volunteer
programs. Up to July 2013, we had participated in eight volunteer
programs and about 110 employees from Kanematsu and Group
companies took part in clearing debris, weeding fields, removing
dirt from gutters, and other activities.
Even now, there are nearly 300,000 disaster victims who havebeen forced to live the lives of evacuees. Now that volunteer
activities and other types of support have dwindled in number,
the Kanematsu Group believes it is important to ensure that suchvolunteer activities are not short-lived, and that the needs of thedisaster-hit communities are addressed through activities pursued
over a long period. We will continue to plan and promote volunteering in the disaster-hit region, and to assist the region’s recovery.
Kanematsu was asked by Chiba City to collaborate in a once-ayear helicopter landing practice for emergency transportation at a
Company-owned sports ground in Chiba City in Chiba Prefecture.
We have also opened up this sports ground to local high schools
for use of its tennis courts and baseball field as part of our emphasison good relations with local communities.

Cleaning of the floats for culture

Environmental Initiatives
Ever since the Company obtained ISO 14001 certification in March
2004, it has constantly improved its environment management
system.
By operating this system effectively, we have sought tocontribute to the reduction of CO2 emissions and fighting global
warming by lowering the consumption of electricity and paper andcomprehensively reducing and sorting waste. Our goal is to help
create a low-carbon and recycling-oriented society.
We have also helped to protect the global environment
through our business activities in Japan and overseas. We have
moved into wide-ranging environment-related businesses in eachdivision and are developing environment-friendly products.

ExamplesSekihan Okowa Kit
In December 2011,
we reduced the
production processes
in our patented Okowa
Production Methodfrom nine to five. As aresult, production time
was reduced, leading to lower energy and labor costs, whichallowed us to constrain overburden and waste, and thereby
perfect an environment-friendly production method from thestandpoint of CO2 reduction. The Sekihan Okowa Kit is highly
acclaimed and is being used and sold at convenience storesand other shops.

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.
The Company has established systems to promote CSR activities, including a CSR Action Guidelines for Supply Chains, to meet
the CSR procurement requirements of its business partners.

26

KANEMATSU CORPORATIONCorporate Governance

Our Basic Stance on Corporate Governance
The Company 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.

Board of Directors

Board of Corporate Auditors

In principle, the Company’s Board of Directors meets once a month,with extraordinary meetings held as necessary.
The Board of Directors decides on matters set out in laws andordinances as well as the Company’s Articles of Incorporation,
determines basic business policies, and draws up long-term andshort-term plans for the entire Company, in addition to reviewing
business results. The Board of Directors also takes decisions on thedivision of responsibilities among the directors, and on whether
or not to allow directors to serve concurrently as representative
directors of other companies.
To facilitate rapid decision-making and flexible management,
the Company holds an Executive Directors Council meeting every
week, in principle. The council consists of all directors and establishes basic policies for Company-wide general business execution inaccordance with basic policies determined by the Board of Directors
and provides instruction and guidance on the execution of business.
To discuss important projects to be proposed to the Executive
Directors Council, a Project Deliberation Committee meeting is held
every week. The Company introduced an executive officer system
in July 2008. To respond appropriately to changes in the businessenvironment, the term of office of directors is one year.

The Company has a Board of Corporate Auditors. Corporate
auditors and the Board of Corporate Auditors, as an independent
organ, audit the directors’ performance of their duties. Four
auditors receive reports from directors and employees on theperformance of their duties as required, attend meetings of theBoard of Directors, Executive Directors Council, Project Deliberation
Committee, Crisis Management and Compliance Committee,
Internal Control Committee, and other important meetings andcommittee meetings, and audit the performance of duties bydirectors.
The Company also conducts audits by outside auditors
provided for in Article 2-16 of the Companies Act of Japan. Threeout of the Company’s four Corporate Auditors are outside auditors.
The Company has adopted the current system because, based on
the suggestions and advice of the outside auditors founded on
their expertise and experience, the system is sufficiently monitoredby outside management and is properly supervised.

● Corporate Governance Structure
General Meeting of Shareholders
Appointment/
Dismissal

Appointment/
Dismissal

Appointment/
Dismissal

Board of Directors(10 directors)

Audit

Board of Corporate Auditors(four corporate auditors, of which three are outside corporate auditors)

Supervision

Collaboration

Audit

Management Committee

Collaboration

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

Internal Auditing
Department
Internal
controls

Accounting audit

Accounting
AuditorCollaboration

Business Divisions/Administrative Departments, Domestic and Overseas Offices(As of June 25, 2013)

Annual Report 201327

Corporate GovernanceInternal Auditing● Elimination of Antisocial Forces

The Internal Auditing Department (eight staff members as of June25, 2013) conducts internal audits of the Company and consolidated subsidiaries to ensure that proper accounting records are
kept, to evaluate and monitor improvements and control activities,
and help improve operational effectiveness and efficiency.
The Internal Auditing Department and corporate auditors holdregular meetings and work in close cooperation with one anotherby explaining audit plans, reporting the results of audits, and ensuring the effectiveness of internal audits. They also exchange opinionswith the accounting auditor through internal control assessments
and other related activities.

One of the Company’s compliance items with regard to theelimination of antisocial forces is its approach of taking a firm standagainst antisocial forces and shutting off all connections withthem. With the aim of eliminating antisocial forces, the Company
belongs to the Metropolitan Police Department’s Special ViolencePrevention Countermeasures Association and closely cooperates innormal circumstances through the sharing of information. In case
the Company is subject to unreasonable demands made by antisocial forces, the Personnel & General Affairs Department is positioned
as the Company’s central department for the handling of this issue
and gathering of information, as well as cooperating with outsideorganizations including the police and attorneys.

● Information Management System
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 a Crisis Management and Compliance Committee,
and have strengthened our internal compliance system.
We have compiled a Compliance Handbook detailing countermeasures with specific examples, which has been distributed to all
employees and also published on the intranet to raise awareness ofcompliance among directors and all employees. We also introduced
a hotline system for reporting directly to or consulting with the
Crisis Management and Compliance Committee or an outside lawyer. In addition to legal compliance, we conduct training courses tofoster sound judgment on ethical matters among our staff.

● Corporate Social Responsibility (CSR)
To further clarify the Company’s management approach, whichplaces great value on CSR, we have established the cross-sectoral
CSR Committee within the Company. When necessary, the committee drafts Companywide action policies for various problems
related to CSR, such as social contribution, compliance, andenvironmental protection, and rigorously implements the PDCA
cycle in its promotion of CSR.

28

KANEMATSU CORPORATIONWith regard to information management, we have establishedcriteria and standards for the custody, retention and disposal of
accounting records, balance sheets, agreements and contracts
concerning the basic rights and obligations of the Company, certificates related to properties and other similar documents. We havealso tightened rules on information security management, with theaim of preserving and managing information as an important assetof the Company, including the protection of personal data andother information security compliance requirements.

● Risk Management
With respect to business risks, the department that is in chargeof each risk based on specific remits has established internal
regulations and detailed enforcement regulations, and prepared
operational guidelines that have been thoroughly instilled in all
employees through training sessions and seminars. We have alsoestablished cross-functional committees to control risks as necessary.
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 anda manual of countermeasures, and have put in place a system
to ensure appropriate management of the Company in such acontingency.

● Diagram of the Kanematsu Group Compliance System
Board of Corporate
Auditors

Investigate, Audit

Internal Auditing Department

Corporate Planning Department
Board of Directors

Management
Committee

Instructions, Feedback
Reports, Consultation

Crisis Management
and Compliance
Committee
Chairperson: Chairman
Vice-chairperson: 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 of
the Company
Employeesof the Group
Companies

Hotline(Crisis Management and Compliance Committee line)

Hotline (Outside Lawyer Line)● Construction of Internal Control System
We have established an Internal Control Committee to build aninternal control system for the Group for effective and efficientfinancial reporting. In consideration of the internal control reporting
system stipulated in the Financial Instruments and Exchange Law,
we are developing, operating, assessing, and improving internal
controls relating to financial reporting.
The Company-wide internal controls and business processes at
key facilities are assessed by the Internal Auditing Department, an
independent department in charge of assessment.

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 throughour website, hold briefings twice a year for institutional investors
and analysts, and disclose information on a timely basis to stock
exchanges. We also hold briefings when necessary to explain business strategies such as our medium-term business plan.

A Message froman Outside Corporate Auditor

I bring an outside perspectivethat is completely professional.

Tsukasa Okamoto
Corporate Auditor

The most important role of a corporate auditor is to ensure
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, corporate auditors audit, based on
the audit plan, the performance of duties by directors byvisiting the Company 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 corporate auditors 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 201329

Directors and Corporate Auditors (As of June 25, 2013)

Toshihiro Kashizawa

Masayuki Shimojima

ChairmanPresident

Chief Officer, Internal Auditing

Tetsuro Murao

Takashi Gunji

Morihiro Toida

Hideo Kazusa

Managing Director

Managing Director

Director

Director

Assistant of President, Chief Officer, Personnel &General Affairs, General Manager for Osaka Branch,
Nagoya Branch

Chief Officer, Steel, Materials & Plant Division

Chief Officer, Foods & Grain Division

Chief Officer, Corporate Planning,
System Planning, Textiles, Realty

Tetsuya Kaneko

Yoshiya Miyabe

Nobuyoshi Sakuyama

Kaoru Tanigawa

Director

Director

Director

Director

Chief Officer, Credit Control Dept., Traffic &Insurance

Chief Officer, Motor Vehicles & Aerospace
Division

Chief Officer, Finance, Accounting,Business Accounting, Legal & Compliance,
General Manager of Accounting Dept.

Chief Officer, Electronics & Devices Division

Tsukasa Okamoto

Fumihiko Nashimoto

Yonosuke Yamada

Yutaka Hirai

Corporate Auditor

Corporate Auditor

Corporate Auditor

Corporate Auditor* Messrs. Tsukasa Okamoto, Yonosuke Yamada and Yutaka Hirai are external corporate auditors.
* Messrs. Yonosuke Yamada and Yutaka Hirai are independent auditors as defined in the Securities Listing Regulations of the Tokyo Stock Exchange.

30

KANEMATSU CORPORATION

Financial
Section32	Ten-Year Summary ofConsolidated Financial Statements
34

Management’s Discussion and Analysis

36

Business Risks

38

Consolidated Balance Sheets

40

Consolidated Statements of Income

41	Consolidated Statements ofComprehensive Income
42	Consolidated Statements of
Changes in Net Assets
44

Consolidated Statements of Cash Flows45

Notes to Consolidated Financial Statements

72

Independent Auditor’s Report

Presentation of fiscal year and amount (Japanese yen and U.S. dollars)on p.32–33, 38–71- “Fiscal 2013” refers to the Company’s consolidated fiscal year ended March
31, 2013 and other fiscal years are referred to in the corresponding manner.
- “JPY” means millions of yen and “USD” means thousands of U.S. dollars.

Annual Report 201331

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

Kanematsu Corporation and Consolidated Subsidiaries

2004

2005

2006

2007

2008

2009

818,473
62,20813,554

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
19,027

5,057

4,836

(16,728)

14,61528,975

77

3,247

2,469

(21,686)

7,507

19,016(12,787)

23,283507,991—
287,245

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

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

10.13
68.77
—

6.52
93.74
—

(52.43)
62.12
—

17.94
78.75
—

45.44
108.95—(30.56)
59.61—

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

19.08
4.6
12.3

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

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 ¥94.05 to U.S.$1.00, the exchange rate prevailing on March 31, 2013.

Net sales

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

1,244,020

22,605

1,138,755

1,096,409

818,473

21,713936,891

886,876

19,027

17,982

1,006,365 1,019,232
15,762

861,277

13,554
1.7

1.8

1.6

21,426

1.7

1.8

18,0292.1

1.9

18,262
1.8

1.7
12,186
1.4

04

05

06

Net sales (¥ million)

32

KANEMATSU CORPORATION

07

08

09

10

11

12

13

04

05

06

07

08

Operating income (¥ million)

09

10

11

12

13

Operating income to net sales (%)

2010

2011

2013

2012
Millions of yen

Thousands of
U.S. dollars

861,277
74,104
12,186

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

1,019,232
80,021
18,262

10,837,130
850,843
194,183

8,407

13,03013,52916,781

178,433

3,528

9,175

6,110

9,564

101,692

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

807,155
4,244,405
579,685
919,080

At year-end:
Net assets
Total assets
Shareholders’ equity
Net interest-bearing debt

45,804
398,629
28,916109,350

49,576388,676
33,101
104,61275,912
399,186
54,51986,43955,992399,753
39,00890,012

8.44
69.15
—

21.93
79.07
—

14.60
93.16
—

22.80
129.82
—

13.10
7.3
3.8

29.59
8.5
3.2

16.95
9.8
2.3

20.45
13.7
1.6

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

0.24
1.38
—

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

Net interest-bearing debt and Net debt-equity ratio
287,245

19,016

12.3

45.44

10.13

3,528

17.94

2,469
6.52

21.93

261,560

6,110

246,317
9.5

9,564

9,175

7,507
3,247

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

22.80

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)

1.6(21,686)
04

05

06

07

08

Net income (loss) (¥ million)

09

10

11

12

13

Net income (loss) per share (¥)

04

05

06

07

08

09

Net interest-bearing debt (¥ million)

10

11

12

13

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 201333

Management’s Discussion and Analysis

Business Results
For the fiscal year ended March 31, 2013, consolidated net sales
increased by ¥12,867 million year-on-year to ¥1,019,232 million, on
increased volume of trade in our Electronics and Environment &Materials segments. However, gross profit decreased ¥879 million
to ¥80,021 million, and operating income dropped ¥3,164 million to¥18,262 million, on an increase in selling, general and administrative
expenses due to anticipatory investments in business expansion.
We posted an improvement of ¥2,116 million in non-operating loss
due partly to a narrowing of foreign currency translation losses andimprovement in the interest paid and received account.
As a result, ordinary income decreased by ¥1,047 million to ¥16,705
million. We posted an extraordinary gain of ¥76 million due to recording of a gain on sale of investments in securities and other positives.
Income before income taxes and minority interests increased by ¥3,252
million to ¥16,781 million, while net income jumped ¥3,454 million to¥9,564 million.

Segment Information
Electronics
Steady sales growth was again the keynote in the ICT solutions andmobile solutions businesses, on the back of expanded sales of mobile
devices and cloud-based services. At the same time, the electronic
devices business also had a good year, with onboard parts sales rising inline with increased production in the motorcycle and automobile parts
business, against a background of economic recovery in the UnitedStates. However, it was an sluggish year overall for semiconductor
components and semiconductor manufacturing equipment, apart fromstrong demand from manufacturers of smart devices.

Net assets and Net assets per share

As a result, net sales in the Electronics Segment increased by¥20,518 million year-on-year to ¥273,662 million, while operating
income increased by ¥917 million to ¥9,943 million.

Foods & Foodstuff
Overall, the segment was hard hit by the rapid weakening of the Japaneseyen, which undermined profitability. In particular, livestock businesses
had a poor year due to confusion in the market following the easing of
age-based inspection requirements for imported beef. The foodstuff business also had a difficult year, as it was unable to pass on to the customers
higher sales prices resulting from prices soared in the U.S. grain market.
As a result, net sales in the Foods & Foodstuff Segment fell ¥4,176
million year-on-year to ¥287,936 million and operating income dropped¥2,021 million to ¥3,165 million.

Iron & SteelTransactions for exports of steel pipes to North America were robust,
but shipments of steel sheet and iron ore to Asia had a lackluster year.
As a result, net sales in the Iron & Steel Segment fell ¥7,843 million
year-on-year to ¥91,288 million, while operating income dropped¥1,045 million to ¥2,567 million.

Machinery & Plant
Sales of machine tools and industrial machinery put in a robust
performance on the back of capital expenditure and facility upgraderelated demand at our customers. However, exports to Asia in terms oftransportation machinery and plant construction orders were lackluster.
As a result, net sales in the Machinery & Plant Segment declined¥14,969 million year-on-year to ¥55,426 million. Operating income fell
¥1,021 million to ¥426 million.

Shareholders’ equity and equity ratio
75,912129.82

48,76738,02968.77

42,03578.75

23,28355,99245,80459.61

32,95993.16
23,200

69.15

7.3

05

06

07

Net assets (¥ million)

08

09

10

Net assets per share (¥)

11

12

13

04

33,101

9.1

26,00028,91624,936
7.3

4.7

05

06

07

08

Shareholders’ equity (¥ million)

09

10

KANEMATSU CORPORATION

11

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

34

9.8
8.5

6.0

5.9
4.6

04

39,00838,00049,576
79.07

62.12
26,004

13.7

45,587

62,239108.9593.74

54,51912

13

Environment & Materials

Fundraising and interest-bearing debt

In the energy business, sales of heavy oil to electric power companies
remained buoyant. In chemicals, transactions for imports of raw materials for pharmaceuticals and health foods held up well, but transactions
for exports of raw materials for vehicle batteries had an sluggish year.
As a result, net sales in the Environment & Materials Segment
increased by ¥19,851 million year-on-year to ¥293,533 million, while
operating income fell ¥46 million to ¥1,926 million.

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 also maintainsufficient 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.
Interest-bearing debt on a consolidated accounts basis at the endof the reporting fiscal year amounted to ¥146,861 million, down ¥13,987
million from the end of the previous fiscal year. The balance of cash andbank deposits was down ¥10,414 million from the end of the previous
fiscal year, at ¥60,421 million. Net interest-bearing debt (consolidated
basis) at the end of the fiscal year came to ¥86,439 million, a decrease of¥3,573 million from the end of the previous fiscal year. Long-term debt
(which includes long-term loans falling due within one year) as a percentage of interest-bearing debt was 74% (88% on a non-consolidated
basis), confirming the high level of stability of our fundraising.

Other
Net sales in other businesses fell ¥514 million year-on-year to ¥17,384
million. However, operating income rose ¥63 million to ¥223 million.

Financial Status
Cash flows
Net cash provided by operating activities came to ¥1,355 million,
with accumulated operating income more than offsetting negatives
including an increase in inventories and decreased accounts payable.
Net cash provided by investing activities came to ¥1,466 million, withpositives such as proceeds of investment securities and collection ofloans receivable more than offsetting expenses including costs of business transfer. Net cash used in financing activities amounted to ¥15,721
million, due in part to repayment of loans.
As a result, the balance of cash and cash equivalents at the end of
fiscal 2013, came to ¥60,032 million, for a decrease of ¥10,561 million
over the previous term-end.

Net assets
Net assets increased by ¥19,920 million over the end of the previous
fiscal year to ¥75,912 million, due largely to an accumulation of retained
earnings and improvement in foreign currency translation adjustments
due to exchange rate variation. As a result, the equity ratio improved
by 3.9 percentage points compared with the end of the previous fiscal
year, to 13.7% and as a result of the fall in interest-bearing debt, the net
debt-to-equity ratio also decreased from 2.3 times to 1.6 times compared with the previous fiscal year-end, indicating steady improvementin our financial position.

Annual Report 201335

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 25, 2013.
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 and Communication Technology (ICT) products.
Grains and petroleum products will be influenced by market conditions,while electronic parts and ICT products are exposed to the risk of frequent price erosion caused by competition and obsolescence resulting
from technological innovation. If our positions with these commodities
increase, we could suffer an unexpected loss from fluctuations in commodities prices and reduced from purchasers, etc.

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 business
partners in accordance with transaction terms but also participates inderivatives transactions such as forward contracts to reduce the risk.
The Company also has local subsidiaries and business corporations
overseas. Account balances at these companies are converted into
yen at the exchange rates prevailing at the time of account closing, forthe purposes of preparing consolidated financial statements. For thisreason, net assets may change through translation adjustments associated with exchange rate fluctuations.

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

Price fluctuation risk of marketable securities, etc.
The Group may hold shares in trade partners as a means of strengthening
its relationship with them. There is a risk of price fluctuation inherent inthese shares, which could have an effect on the financial position of theGroup resulting from the total of valuation differences in other securities.

36

KANEMATSU CORPORATION

Since stocks and other securities are included in the portfolio of thepension assets of the Group for the purpose of making medium- andlong-term investments, differences from the required investment yield
could have an effect on the financial position of the Group, given thatthe investment yield will fall if the prices of the stocks, etc. fall.

Default risk and credit risk
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 we have set aside an allowance for these losses in our
accounting procedures using certain estimates, an additional loss could
arise if the loss exceeds the scope of the allowance.

Business 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 of market changes tends to be particularly wide inoverseas businesses. Local laws and relationships with partners may
also prevent the Group from executing its policy for operating orwithdrawing 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 tolegal proceedings, including lawsuits, and other disputes, in various
ways through the course of the business activities undertaken by theGroup in Japan and overseas. These lawsuits and disputes are difficult
to foresee. In addition, resolving disputes and lawsuits often takes aconsiderable time. Predicting outcomes involves uncertainties. Lawsuits
and disputes may affect the financial position and business results of
the Group when they emerge and produce unexpected results.

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 financial position and business results of theGroup, depending on the scale of damages.

Product and facility deterioration risk and business interruption
risk due to natural disasters and accidents
The Group owns facilities, including business offices, warehouses andmanufacturing plants, in Japan and overseas. Cargo movements takeplace not only in Japan but also between foreign countries when theGroup engages in transactions. For these reasons, assets held by theGroup may be damaged or deteriorate as a result of disasters, accidents
and other developments in the course of transportation. In addition, thebusinesses of the Group may be suspended due to developments suchas earthquakes, fire, floods and riots, which could have a major impact
on the Kanematsu Group’s financial position and business performance
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.

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,

Annual Report 201337

Consolidated Balance Sheets
March 31, 2013 and 2012

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2013
JPY

Fiscal 2012
JPY

Fiscal 2013
USD (Note 3)

1. Cash and bank deposits (Note 5-3)

60,421

70,835642,444

2. Notes and accounts receivable (Notes 5-3, 5-8)

165,378

163,782

1,758,409

3. Lease investment assets

608

666

6,470

4. Short-term investments (Note 5-3)

16

—

173

65,246

57,113

693,742

352

974

3,747

7. Deferred tax assets

1,669

3,322

17,7488. Other

23,134

22,180245,985

(273)

(294)

(2,913)

316,554

318,5813,365,807

1) Leased properties, net (Note 5-3)

1,345

1,989

14,302

2) Buildings and structures, net (Note 5-3)

5,391

4,987

57,3233) Machinery, equipment, vehicle, tools and fixtures, net

4,963

4,537

52,7774) Land (Note 5-3)

14,05014,192

149,3975) Lease assets, net

1,075

1,310

11,439

163

10

1,741

Total tangible fixed assets (Note 5-2)

26,99027,028286,979

2. Intangible fixed assets

7,226

1,905

76,836

1) Investments in securities (Notes 5-3, 5-4)

30,24829,867

321,6202) Long-term loans receivable

2,435

5,790

25,893

3) Doubtful accounts

1,895

1,886

20,151

4) Deferred tax assets

11,127

10,842

118,3115) Other

6,441

7,585

68,487(3,731)(3,734)(39,678)

Total investments and other assets

48,41552,238514,784

Total long-term assets

82,632

81,172878,599

399,186

399,753

4,244,405

AssetsI. Current assets

5. Inventories (Note 5-1)
6. Short-term loans receivable

Allowance for doubtful accounts
Total current assets
II. Long-term assets
1. Tangible fixed assets

6) Construction in progress

3. Investments and other assets

Allowance for doubtful accounts

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

38

KANEMATSU CORPORATIONFiscal 2013
JPY

Fiscal 2012
JPY

Fiscal 2013
USD (Note 3)

1. Notes and accounts payable (Note 5-8)

104,372

108,956

1,109,759

2. Import bills payable

27,98429,670297,545

3. Short-term borrowings (Note 5-3)

81,57078,444

867,313

733

726

7,796

5. Accrued income taxes

1,663

1,863

17,685

6. Deferred tax liabilities

95

1

1,014

Liabilities
I. Current liabilities

4. Lease obligations

118

35

1,260

8. Other

28,23827,138300,255

Total current liabilities

244,776

246,837

2,602,626

1. Long-term borrowings (Note 5-3)

65,29082,403

694,211

2. Lease obligations

1,099

1,394

11,692

45

160

486

7. Asset retirement obligations

II. Non-current liabilities

3. Deferred tax liabilities

4,296

2,736

45,688

5. Provision for loss on lawsuits

—

910

—

6. Provision for retirement benefits for directors and statutory auditors

385

537

4,096

7. Asset retirement obligations

741

821

7,889

4. Provision for employees’ retirement and severance benefits

8. Other (Note 5-3)

6,636

7,958

70,562

Total non-current liabilities

78,49696,922

834,624

323,273343,760

3,437,250

1. Common stock

27,781

27,781

295,387

2. Capital surplus

27,526

27,597

292,683

3. Retained earnings (Deficit)

24,567

15,003

261,215

Total liabilities
Net assets
I. Shareholders’ equity

(357)

(550)

(3,804)79,517

69,830845,480

1,048

137

11,1502. Net gains on deferred hedges, net of tax

298

492

3,170

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

66

66

706

4. Foreign currency translation adjustments(26,411)(31,519)(280,820)

Total accumulated other comprehensive income(24,997)(30,822)(265,795)

III. Minority interests in consolidated subsidiaries

21,393

16,984

227,469

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

Total net assets

75,912

55,992807,155

Total liabilities and net assets

399,186

399,753

4,244,405

Annual Report 201339

Consolidated Statements of Income
For the years ended March 31, 2013 and 2012

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2013
JPY

I. Net sales
II. Cost of sales (Note 6-1)
Gross profit
III. Selling, general and administrative expenses (Note 6-2)
1. Salaries and bonuses
2. Retirement benefit expenses
3. Outsourcing service charges
4. Provision of allowance for doubtful accounts
5. OtherOperating income
IV. Non-operating income
1. Interest income
2. Dividend income
3. Equity in earnings of affiliates
4. Foreign exchange gains
5. OtherV. Non-operating expenses
1. Interest expenses
2. Foreign exchange losses
3. OtherOrdinary income
VI. Extraordinary gains
1. Gain on sale of tangible fixed assets (Note 6-3)
2. Gain on sale of investments in securities
3. Gain on liquidation of subsidiaries and affiliates
4. Gain on step acquisitions
5. Gain on bargain purchaseVII. Extraordinary losses
1. Loss on disposal of fixed assets (Note 6-4)
2. Impairment loss on fixed assets (Note 6-6)
3. Loss on sale of investments in securities
4. Impairment loss on investments in securities
5. Loss on closure of business (Note 6-5)
6. Provision for loss on lawsuits (Note 6-7)
7. Loss on withdrawing from employees’ pension fund
8. Loss on lawsuits
Income before income taxes and minority interests
Income taxes – current
Income taxes – deferred
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

1,019,232
939,21080,021
24,566
1,903
7,626
227
27,435

503
814
197
937
1,097
3,502
—
1,605

431
2,694
—
81
69
1,271
750
636
376
—
—
94
71
4,082
1,490

Fiscal 2013
USD (Note 3)

Fiscal 2012
JPY

61,75818,262

3,549

5,107
16,705

3,276

3,200
16,781
5,573
11,2081,644
9,564

10,837,130
9,986,287
850,843

1,006,365
925,464
80,90023,352
1,765
7,494
112
26,748

472
780
266
—
951
4,093
562
1,488

38
264
10
—
—
100
440
545
660
1,185
910
693
—
3,907
2,115

59,473
21,426

2,470

6,144
17,752314

4,537
13,529
6,023
7,506
1,395
6,110

261,201
20,23781,086
2,423
291,712

5,354
8,659
2,101
9,963
11,66837,236—
17,073

4,586
28,647—869
739
13,524
7,981
6,764
3,999
—
—
1,001
757
43,40815,850656,660
194,183

37,74654,309177,619

34,84034,026
178,433
59,258
119,175
17,483
101,692

Consolidated Statements of Comprehensive Income
For the years ended March 31, 2013 and 2012

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2013
JPY

Fiscal 2012
JPY

Fiscal 2013
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 7-1)
Comprehensive income

11,208

7,506

119,175

927
(215)
5,067
416
6,196
17,404303
597(1,221)
(12)
(332)
7,173

9,860
(2,295)53,883
4,433
65,881
185,056

Comprehensive income attributable to the shareholders of the Company
Comprehensive income attributable to minority interests

15,388
2,015

5,918
1,254

163,624
21,433

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

Annual Report 201341

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2013 and 2012

Kanematsu Corporation and Consolidated Subsidiaries

I. Shareholders’ equity
1. Common stock
Balance at the beginning of the fiscal year
Changes during the fiscal year
Total changes during the fiscal year
Balance at the end of the fiscal year
2. Capital surplus
Balance at the beginning of the fiscal year
Changes during the fiscal year
Disposition of treasury stock
Total changes during the fiscal year
Balance at the end of the fiscal year
3. Retained earnings (Deficit)
Balance at the beginning of the fiscal year
Changes during the fiscal year
Net income
Changes of scope of equity-method
Total changes during the fiscal year
Balance at the end of the fiscal year
4. Treasury stock
Balance at the beginning of the fiscal year
Changes during the fiscal year
Acquisition of treasury stock
Disposition of treasury stock
Effect of changes in the shares of equity-method affiliates
Total changes during the fiscal year
Balance at the end of the fiscal year
5. Total shareholders’ equity
Balance at the beginning of the fiscal year
Changes during the fiscal year
Net income
Acquisition of treasury stock
Disposition of treasury stock
Effect of changes in the shares of equity-method affiliates
Changes of scope of equity-method
Total changes during the fiscal year
Balance at the end of the fiscal year

42

KANEMATSU CORPORATION

Fiscal 2013
JPY

Fiscal 2012
JPY

Fiscal 2013
USD (Note 3)

27,781

27,781

295,387—
27,781—
27,781—
295,387

27,597

27,606

293,432(70)(70)
27,526(8)(8)
27,597(749)(749)
292,683

15,003

8,914

159,525

9,564
(0)
9,563
24,567

6,110
(21)
6,089
15,003

101,692(2)
101,690
261,215

(550)

(569)

(5,857)

(8)
197
3
193
(357)

(6)
24
—
18
(550)

(85)
2,097
42
2,053
(3,804)

69,83063,732

742,486

9,564
(8)
126
3
(0)
9,686
79,517

6,110
(6)
15
—
(21)
6,098
69,830101,692
(85)
1,348
42
(2)
102,994
845,480

II. Accumulated other comprehensive income
1. Net unrealized gains (losses) on securities, net of tax
Balance at the beginning of the fiscal year
Changes during the fiscal year
Net changes of items other than shareholders’ equity during the fiscal year
Total changes during the fiscal year
Balance at the end of the fiscal year
2. Net gains (losses) on deferred hedges, net of tax
Balance at the beginning of the year
Changes during the fiscal year
Net changes of items other than shareholders’ equity during the fiscal year
Total changes during the fiscal year
Balance at the end of the fiscal year
3. Revaluation reserves for land
Balance at the beginning of the fiscal year
Changes during the fiscal year
Net changes of items other than shareholders’ equity during the fiscal year
Total changes during the fiscal year
Balance at the end of the fiscal year
4. Foreign currency translation adjustments
Balance at the beginning of the fiscal year
Changes during the fiscal year
Net changes of items other than shareholders’ equity during the fiscal year
Total changes during the fiscal year
Balance at the end of the fiscal year
5. Total accumulated other comprehensive income
Balance at the beginning of the fiscal year
Changes during the fiscal year
Net changes of items other than shareholders’ equity during the fiscal year
Total changes during the fiscal year
Balance at the end of the fiscal year
III. Minority interests in consolidated subsidiaries
Balance at the beginning of the fiscal year
Changes during the fiscal year
Net changes of items other than shareholders’ equity during the fiscal year
Total changes during the fiscal year
Balance at the end of the fiscal year
IV. Total net assets
Balance at the beginning of the fiscal year
Changes during the fiscal year
Net income
Acquisition of treasury stock
Disposition of treasury stock
Effect of changes in the shares of equity-method affiliates
Changes of scope of equity-method
Net changes of items other than shareholders’ equity during the fiscal year
Total changes during the fiscal year
Balance at the end of the fiscal year

Fiscal 2013
JPY

Fiscal 2012
JPY

Fiscal 2013
USD (Note 3)

137

(166)

1,466

910
910
1,048

304
304
137

9,684
9,684
11,150

492

(143)

5,238

(194)
(194)
298

636
636
492

(2,068)(2,068)
3,170

66

58

706

—
—
66

8
8
66

—
—
706

(31,519)(30,379)(335,136)

5,108
5,108
(26,411)(1,140)(1,140)(31,519)54,31554,315(280,820)(30,822)(30,631)(327,726)

5,824
5,824
(24,997)

(191)
(191)
(30,822)61,931
61,931(265,795)

16,984

16,475

180,589

4,409
4,409
21,393508
508
16,98446,881
46,881
227,469

55,992

49,576595,349

9,564
(8)
126
3
(0)
10,23319,92075,912

6,110
(6)
15
—
(21)
317
6,415
55,992

101,692
(85)
1,348
42
(2)
108,812211,806
807,155

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

Annual Report 201343

Consolidated Statements of Cash Flows
For the years ended March 31, 2013 and 2012

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2013
JPY

Fiscal 2012
JPY

Fiscal 2013
USD (Note 3)

16,7812,680
69358(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

13,529
2,561
(247)
233
(1,253)
4,093
(266)
62
440
281
660
1,185
910
—
—
693
(16,251)(646)
19,843(1,699)24,132
1,141(4,105)(3,818)
—
(833)
(693)
15,822

178,433
28,506738
3,812(14,014)
37,236(2,101)
8,939
7,981(21,883)
3,999
—
—
757
(869)
1,001
18,814(40,816)(96,894)(17,378)
96,262
16,113(37,738)(48,791)(10,432)—(1,001)
14,412(79)(1,664)
1,589(1,286)
(247)
3,573
(5)
18

1,340
(2,175)
658
(579)
(121)
1,331
(0)
—

(843)
(17,698)
16,898(13,675)(2,629)38,000
(57)
201

804
(6,493)
(163)
4,492
926
1,466

—
—
(1,979)
2,605
212
1,291

8,550
(69,040)(1,738)47,767
9,856
15,591

III. Cash flows from financing activities
Increase (Decrease) in short-term borrowings, net
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds on issuance of common stock
Other
Net cash used in financing activities(244)
25,930(40,073)—(1,333)(15,721)788
49,968(63,296)38(909)(13,411)(2,600)275,707(426,088)—(14,184)(167,165)

IV. Effect of exchange rate changes on cash and cash equivalents
V. Net increase in cash and cash equivalents
VI. Cash and cash equivalents at beginning of year
VII. Cash and cash equivalents at end of year (Note 9-1)

2,338
(10,561)
70,59460,032(533)
3,168
67,42670,594

24,861(112,301)
750,608
638,308

I. Cash flows from operating activities
Income before income taxes and minority interests
Depreciation and amortization
Increase (Decrease) in allowance for doubtful accounts
Increase in provision for employees’ retirement and severance benefits
Interest and dividends income
Interest expenses
Equity in gains of affiliates
Loss on disposal of fixed assets
Impairment loss on fixed assets(Gain) Loss on sale of investments in securities, net
Impairment loss on investments in securities
Loss on closure of business
Provision for loss on lawsuits
Loss on lawsuits
Gain on step acquisitions
Loss on withdrawing from employees’ pension fundDecrease (Increase) in notes and accounts receivable
Increase in inventories(Decrease) Increase in notes and accounts payableOther
Sub totalInterest and dividends received
Interest paid
Income taxes paid
Payments for loss on lawsuits
Payments for cancellation of leases
Payments for withdrawing from employees’ pension fundNet cash provided by operating activities
II. Cash flows from investing activities
Decrease 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
Proceeds from purchase of investments in subsidiaries resulting in change
in scope of consolidation (Note 9-2)
Payments for transfer of business (Note 9-3)
Increase in loans receivable
Proceeds from collection of loans receivable
Other
Net cash provided by investing activities

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

44

KANEMATSU CORPORATION

Notes to Consolidated Financial Statements
For the years ended March 31, 2013 and 2012

Kanematsu Corporation and Consolidated Subsidiaries

1. Basis 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 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 Law 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 AmountAmounts 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
In the current fiscal year, Nippon Office Systems was added to the scopeof consolidation from affiliated company to which the equity method
is applied due to additional acquisition of shares and Benoit Premium
Threading, KG Agri Products and 3 other companies were added to thescope of consolidation due to new establishment, while 2 companies were
excluded from the scope of consolidation due to merger or liquidation.
(2) Unconsolidated subsidiaries:
5 companies are not included in the scope of consolidation.
(3) Reason that certain subsidiaries are excluded from the scope of
consolidation:
5 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.

(b) Application of Equity Method(1) Number of unconsolidated subsidiaries to which the equity method
is applied: 44 subsidiaries out of 5 unconsolidated subsidiaries are accounted for by theequity method.
(2) Number of affiliated companies to which the equity method isapplied: 21
Among 26 affiliated companies, the equity method is applied to investments in 21 companies.
In the current fiscal year, Fung Japan Development and NEOS were
excluded from accounting via the equity method due to sale of shares and2 companies were excluded from accounting via the equity method due toadding to the scope of consolidation by additional acquisition of shares, anddecrease 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
30 other companies

Year-end date
December 31
December 31

In preparing the consolidated financial statements, the financial statementsof 32 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, Kanematsu Taiwan, Kanematsu Europe,
Kanematsu GmbH, Kanematsu Australia and Kanematsu Semiconductor
Singapore have changed their fiscal year-end to March 31 from December
31. As a result of this change, the accounting period ended March 31, 2013
for these 5 consolidated subsidiaries spanned the 15 months from January 1,
2012.

(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.

(e) Derivatives
Derivatives are stated at fair value method.

(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).

Annual Report 201345

Notes to Consolidated Financial Statements(g) Property and Equipment(l) Hedge Accounting(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 – 25 years(Change in accounting policy)
With the revision of the corporation tax law, from the current fiscal year,
certain domestic consolidated subsidiaries changed the depreciation
method based on the revised corporation tax law.
The impact of this change on net income for the current fiscal year isimmaterial.

(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) 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
an allowance for doubtful accounts to cover credit losses, based on
estimates of collectability of individual accounts and past bad debt loss
experiences.

(i) Provision for Employees’ Retirement and Severance Benefits
The Company and certain of its subsidiaries provide for retirement provisions based on the present value of projected benefit obligations and thefair value of the plan assets at year-end.
Except for certain domestic consolidated subsidiaries who recognize
service costs as expenses upon their occurrence, prior service costs areamortized as expenses using the straight-line method over five years, apredetermined number of years, within the average expected remaining
service period of the employees.
Actuarial gains and losses are amortized by the straight-line method over
five to ten years, within the average expected remaining service period of
the employees, and are recorded as expenses in the subsequent years inwhich the gains or losses are recognized.

(j) 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.

(k) Translation of Foreign Currencies
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.”

46

KANEMATSU CORPORATION(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.

(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. Notes to Consolidated Balance Sheets*1. Details of inventories are as follows:2013
Merchandise and finished goods
Real estate for sale
Raw materials and supplies
Work in progress

JPY
63,143
61
1,486
555

USD
671,378649
15,805
5,910

2012
JPY
54,626
714
1,034
738

*2. The amount of accumulated depreciation of tangible fixed
assets

3. United States Dollar Amounts

2013
JPY
29,288USD
311,4152012
JPY
32,077

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 ¥94.05 to U.S.$1.00, the exchange rate prevailing on
March 31, 2013. 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.

*3. Pledged assets and associated secured obligations

4. Unapplied Accounting Standards

Cash and bank deposits
Notes and accounts receivable
Leased properties
Buildings and structures
Land
Investments in securities
Total“Accounting Standard for Retirement Benefits” (Accounting Standards
Board of Japan Statement No.26, issued May 17, 2012) and “Guidance on
Accounting Standard for Retirement Benefits” (Accounting Standards Boardof Japan Guidance No.25, issued May 17, 2012)(1) Overview
Actuarial gains and losses and past service costs are required to be recognized in the net assets after adjusting for tax effects and funded status is fullyrecognized as a liability or asset in the balance sheet. With respect to themethod of attributing the expected benefit to periods, the benefit formulabasis is newly allowed as an option, in addition to the straight-line basis. In
addition, the method for determining the discount rate is amended.
(2) Date of application
The Company and its consolidated subsidiaries will apply these accounting
standards from the fiscal year ending March 31, 2014. But the method of
attributing the expected benefit to periods will be applied from the fiscal
year ending March 31, 2015. These standards will not be applied retrospectively to financial statements for the prior periods.
(3) Impact of the application of these accounting standards
The impact on the consolidated financial statements of the application ofthese accounting standards is currently being evaluated.

Details of pledged assets are as follows:
2013
USD
64
6,614
12,508390729—
20,304

2012
JPY
16
1,490
1,786
39
84
139
3,555

Details of associated secured obligations are as follows:
2013
JPY
USD
Short-term borrowings
1,265
13,450Long-term borrowings
200
2,127
Non-current liabilities and others
910
9,678
Guaranteed obligations
3
41

2012
JPY
4,468
200
1,172
4

JPY
6
622
1,176
36
68
—
1,909

In addition to the foregoing pledged assets, the following items aretendered as security deposit or substitution for trading.
2013
2012
JPY
USD
JPY
Cash and bank deposits
332
3
Short-term investments
14
158—
Investments in securities
2,023
21,512
1,640
Total
2,041
21,7031,643*4. Investments in securities for unconsolidated subsidiaries
and affiliated companies are as follows:
2013
Investments in securities(Share stocks)(Equity investments)

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

USD
52,653(47,225)(5,428)

2012
JPY
6,070
(5,554)(515)

Annual Report 201347

Notes to Consolidated Financial Statements*5. Revaluation reserves for land
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 on revaluation, net of tax, as valuation and translation adjustment under the Laws. The
Company’s investments in these affiliates increased by an amount equal tothe unrealized gains on revaluation of land.

6. Liability for guarantee
Guarantees are provided to unconsolidated subsidiaries on their borrowings
from third-party financial institutions.
2013
2012
JPY
USD
JPY
Century Textile Industry
904
9,614
759
True Corporation Public
407
4,335
407
Mojiko Silo
250
2,658
200
Others
1,051
11,182
1,540
Total
2,613
27,7882,906
Keep-well or agreements similar to guarantees are included in the above
accounts.

7. The amount of discounted notes receivable and endorsed
notes receivable
2013
Discounted notes receivable(Discounted export bills)
Endorsed notes receivable

JPY
2,121
1,944
78

USD
22,554
20,675
836

2012
JPY
5,722
5,177
109

*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.
2013
2012
JPY
USD
JPY
Notes receivable
1,861
19,7902,167
Notes payable
948
10,086
1,454

48

KANEMATSU CORPORATION

6. Notes to Consolidated Statements of Income*1. Loss on devaluation of inventories
Inventories are carried at the lower of cost or market value in the balance
sheet. A loss on devaluation of inventories is included in cost of sales.
2013
2012
JPY
USD
JPY
671
7,143
515

*2. The amount of research and development expenses
2013
JPY
432

USD
4,598

2012
JPY
445

*3. Gain on sale of tangible fixed assets
Details of gain on sale of tangible fixed assets are as follows:
2013
JPY
USD
Buildings and structures
109
1,166
Machinery, equipment, vehicle,
tools and fixtures
15
161
Land
305
3,244
Other
1
14
Total
431
4,586

2012
JPY
—
35
—
2
38

*4. Loss on disposal of fixed assets
Details of loss on disposal of fixed assets are as follows:
2013
JPY
USD
Buildings and structures
208
2,215
Machinery, equipment, vehicle,
tools and fixtures
42
454
Land
943
10,032Intangible fixed assets
76
811
Other
1
13
Total
1,271
13,524

2012
JPY
42
27
—
20
10
100

*5. Loss on closure of business
Fiscal 2013
Not applicable.
Fiscal 2012
Loss on closure of business is recorded in a consolidated subsidiary on
silicon wafer processing business for photovoltaic power generation system.
Details of the loss are as follows:
JPY
Loss on cancellation of lease contract
833
Impairment loss on fixed assets
345
Loss on disposal of inventories
6
Total
1,185

*6. Impairment loss on fixed assets
The Company recorded impairment loss on fixed assets, which are summarized in the following table.
Fiscal 2013
Use
Location
Type
JPY
USD
Business assets
Aichi, Japan,
Buildings, Land,others
etc.
673
7,157
Idle assets
Hyogo, Japan,
Buildings, Land,others
etc.
77
823
Total
750
7,981
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($7,981 thousand) were recorded as an extraordinary loss by reducing theircarrying amounts to their recoverable amounts. Out of ¥750 million ($7,981
thousand) of the impairment losses, ¥356 million ($3,789 thousand) was forbuildings and structures, ¥110 million ($1,171 thousand) was for machinery,equipment, vehicle, tools and fixtures, ¥206 million ($2,195 thousand) was
for land and ¥77 million ($826 thousand) was for others.
The recoverable amount is the net selling value. The net selling value isestimated mainly based on the amounts agreed in contracts.
Fiscal 2012
Use
LocationType
JPY
Leased properties Shiga, Japan
Leased properties
416
Idle assets
Fukuoka, Japan Land
24
Idle assets
Shiga, Japan
Machinery, etc.
345
Total
786
The Company assesses impairment losses for leased properties and idle
assets individually.
For the leased properties to be sold and idle assets which the Company
has no plan to use in the future, their carrying amounts were reduced totheir recoverable amounts.
¥440 million out of ¥786 million of the impairment losses were recorded
in extraordinary loss as impairment loss on fixed assets. Out of ¥440 millionof the impairment losses, ¥416 million and ¥24 million were for leased
property and land, respectively.
¥345 million out of ¥786 million of the impairment losses were recorded
in extraordinary loss as loss on closure of business. Out of ¥345 million, ¥339
million was for machinery, equipment, vehicle, tools and fixtures, ¥6 million
was for buildings and structures, and ¥0 million was for software.
The recoverable amount is the net selling value. The net selling value isestimated mainly based on the amounts agreed in contracts.

7. Notes to Consolidated Statements ofComprehensive Income*1. Reclassification adjustments and deferred tax related toother comprehensive income
2013
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

2012
JPY

1,052
308
1,360
(433)

11,1883,283
14,471(4,610)

(591)
832
241
62

927

9,860

303

152
(482)
(329)
113

1,624
(5,128)(3,505)
1,209

847
(140)
707
(109)

(215)

(2,295)

597

5,067
—

53,883—(1,299)78

5,067

53,883(1,221)

661
(244)

7,037
(2,604)

0
(12)

416
6,196

4,433
65,881(12)(332)*7. Provision for loss on lawsuits
Fiscal 2013
Not applicable.
Fiscal 2012
Provision for loss on lawsuits is mainly based on the settlement amountproposed by the court for the lawsuit the Company has been filed forcompensation based upon representations and warranties.

Annual Report 201349

Notes to Consolidated Financial Statements

8. Notes to Consolidated Statements of Changes in Net Assets
Fiscal 2013
Class and number of shares issued and treasury stock:
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 theCompany: 47 thousand sharesFiscal 2012
Class and number of shares issued and treasury stock:
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)
3,878
Total
3,878

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

78
78

160
160

3,796
3,796

(Notes) 1. The breakdown of the increase of 78 thousand common shares during the term is as follows:
Increase as a result of fractional share repurchases: 78 thousand shares
2. The breakdown of the decrease of 160 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: 154 thousand shares

50

KANEMATSU CORPORATION

9. Notes to Consolidated Statements of Cash Flows

10. Lease Transactions*1. Cash and cash equivalents as of March 31, 2013, consist of
the following:<Leases as Lessee>

2013
Cash and bank deposits
Time deposits which deposit terms
exceed three months
Cash and cash equivalents

JPY
60,421

USD
642,4442012
JPY
70,835(389)
60,032(4,137)638,308(240)
70,594*2. Details of assets and liabilities of subsidiary newly
consolidated by acquisition of sharesFiscal 2013
Relations between details of assets and liabilities of Nippon Office Systems
which is new consolidated subsidiary by additional acquisition of shares andacquisition cost and proceeds from purchase are as follows:
JPY
USD
Current assets
3,558
37,837Long-term assets
2,322
24,699Goodwill
288
3,070
Current liabilities(1,846)(19,633)
Non-current liabilities(1,603)(17,044)
Minority interests
in consolidated subsidiaries(1,191)(12,671)
Subtotal
1,529
16,258Acquisition cost before
obtaining control(648)(6,895)Gain on step acquisitions
(81)
(869)
Additional acquisition cost
798
8,494
Cash and cash equivalents(1,603)(17,044)
Net: Proceeds from purchase ofinvestments in subsidiaries resulting
in change in scope of consolidation(804)(8,550)Fiscal 2012
Not applicable.

*3. Details of assets and liabilities of transfer of business
Fiscal 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
USD
Current assets
2,344
24,924Long-term assets
3,941
41,914
Goodwill
1,930
20,522Current liabilities
(36)
(388)
Purchase value of transfer of business
8,179
86,972
The accrued purchase value oftransfer of business
(48)
(514)
Proceeds from stock issuanceto minority shareholders(2,147)(22,830)
Cash and cash equivalents(432)(4,603)
Net: Payments for transfer of business
5,551
59,025(Note) The amount of difference from Consolidated Statements of Cash Flows was forother transfer of business.

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, the machinery for Iron & Steel business (Machinery, equipment,
vehicle, 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
2013
Acquisition
Accumulated Balance at the end
cost
depreciationof the fiscal year
JPY
USD
JPY
USD
JPY
USD
Machinery, equipment,
vehicle, tools andfixtures
376
4,005
241
2,570
134
1,435
Other
—
—
—
—
—
—
Total
376
4,005
241
2,570
134
1,435

Machinery, equipment,
vehicle, tools
and fixtures
Others
Total

Acquisition
cost
JPY

2012
Accumulated
depreciation
JPY

Balance at the endof the fiscal year
JPY

687
4
691

489
3
493

197
0
197

(2) Future minimum lease payments outstanding at the balance sheet
date, etc.
2013
2012
JPY
USD
JPY
Future minimum lease payments
outstanding at the balance sheet date
Due within one year
46
492
85
Due after one year
136
1,456
199
Total
183
1,948
285
(3) Payments to lessors, depreciation and interest expenses
2013
JPY
USD
Payments to lessors
61
658
Depreciation
60
646Interest expenses
5
62

2012
JPY
155
143
8

(4) Computation of depreciation
Depreciation is computed using the straight-line method over the leaseterm assuming a residual value of zero.

Fiscal 2012
Not applicable.

Annual Report 201351

Notes to Consolidated Financial Statements(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.

(1) Acquisition cost, accumulated depreciation and balance at the end of
the fiscal year of leased properties
Fiscal 2013
Not applicable.

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

Fiscal 2012

2. Operating leases
Future lease payments outstanding at the balance sheet date
2013
JPY
USD
Due within one year
16
174
Due after one year
17
182
Total
33
356

2012
JPY
19
35
55

<Leases as Lessor>

1. Finance leases[1] Detail of the lease investment assets
Current assets
2013
Lease payments receivables
Interest income
Lease investment assets

JPY
619
(12)
606

USD
6,588
(134)
6,454

2012
JPY
680
(13)
666

[2] Future lease receivables and lease investment assets outstanding at
the balance sheet dateCurrent assets
2013
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
23
2
23
2
23
Lease investment assets 348
3,703
208
2,214
62
662
2013
Over three years and Over four years andwithin four years
within five years
JPY
USD
JPY
USD
Lease receivables
2
23
2
23
Lease investment assets
0801Lease receivables
Lease investment assets

Due within
one year
JPY—
362

Over five years
JPY
USD
10
107
—
—

2012
Over one year and Over two years andwithin two years within three years
JPY
JPY
—
—
229
82

2012
Over three years and Over four years andwithin four years
within five years
JPY
JPY
Lease receivables——
Lease investment assets
50Over five years
JPY——

The finance lease transactions commenced on or before March 31, 2008
which are accounted for as operating leases, are as follows:

KANEMATSU CORPORATION

Accumulated
depreciation
JPY

Balance at the endof the fiscal year
JPY

11
11

11
11

0
0

Machinery, equipment,
vehicle, tools
and fixtures
Total(2) Future minimum lease payments receivable outstanding at thebalance sheet date
2013
2012
JPY
USD
JPY
Due within one year340
39
Due after one year
40
435
44
Total
44
475
84
(Note) R elated sub-lease payments against the above receivable are ¥44 million ($475
thousand) (including ¥3 million ($40 thousand) for due within one year) in thefiscal 2013, and ¥78 million (including ¥33 million for due within one year) in thefiscal 2012.
The sub-lease payments against the above receivable approximate the future
minimum lease payments as the sub-lease transactions arranged by the companies are intended to pass-through these costs in almost identical terms.

(3) Lease payments received, depreciation and interest income
2013
JPY
USD
Lease payments received26
287
Depreciation
0
1
Interest income
—
—

2012
JPY
88
3
0

(4) Computation of interest
The accumulated interest income is allocated to each period based on theinterest method.

2. Operating leases
Future lease payments receivable outstanding at the balance sheet date
2013
2012
JPY
USD
JPY
Due within one year
154
1,641
158
Due after one year
188
2,002
528
Total
342
3,644
687

3. B
 alance of sub-lease in the consolidated balance sheets
without deducting the interest(1) Lease investment assets
2013
Current assets

JPY
37

USD
397

2012
JPY
75

USD
216
181

2012
JPY
39
35

(2) Lease obligations
2013
Current liabilities
Non-current liabilities

52

Acquisition
cost
JPY

JPY
20
16

11. 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 six years from the fiscal year-end. Certain borrowings are exposed tointerest 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 13. 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,• Liability accounts are shown with “( ).”• 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.

Annual Report 201353

Notes to Consolidated Financial Statements

Fiscal 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
USD
60,421
642,444
165,378
1,758,409(273)(2,913)
165,104
1,755,497
16
173
352
3,747
10,178108,220
2,435
25,893(1,745)(18,564)
689
7,328
1,895
20,151(1,763)(18,752)131
1,400
236,8942,518,810(104,372)(1,109,759)(27,984)(297,545)(81,570)(867,313)(1,663)(17,685)(65,290)(694,211)(280,881)(2,986,513)
2,108
22,422

Fair value

Difference

JPY
60,421

USD
642,444

JPY
—

USD
—

165,104
16352
12,133

1,755,497
174
3,747
129,014

—
0
—
1,955

—
1
—
20,794

689

7,328

—

—

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

1,400
2,539,605(1,109,759)(297,545)(867,313)(17,685)(695,704)(2,988,005)
22,422

—
1,955
—
—
—
—
(140)
(140)
—

—
20,795————(1,492)(1,492)—

Fiscal 2012

(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
70,835
163,782(294)
163,488
—
974
9,983
5,790
(1,842)
3,947
1,886(1,672)
213
249,443(108,956)(29,670)(78,444)(1,863)(82,403)(301,339)
1,592

Fair value
JPY
70,835Difference
JPY—

163,488—974
12,474

—
—
—
2,491

3,957

9

213
251,944(108,956)(29,670)(78,444)(1,863)(82,697)(301,633)
1,592

—
2,500
—
—
—
—
(293)
(293)
—

(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 12. 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.

54

KANEMATSU CORPORATION

(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 13. Derivatives.
2. Financial instruments with difficulty in estimating fair value
2013
Book value
Classification
JPY
USD
Unlisted investments in securities
18,068
192,111Equity investments
2,002
21,2902012
Book value
JPY
17,939
1,945

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 2013
Over one year
Within one year
and within five years
JPY
USD
JPY
USD
Cash and bank deposits
60,421
642,444——
Notes and accounts receivable (Note 3-1)
165,104
1,755,497——
Short-term investments
Held-to-maturity bonds
16
173
—
—
Short-term loans receivable
352
3,747
—
—
Long-term loans receivable (Note 3-2)
—
—
310
3,306
Doubtful accounts (Note 3-3)
—
—
131
1,400
Total
225,895
2,401,862
442
4,705

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

Over ten years
JPY
USD
—
—
—
—

—
—
245
—
245

—
—
132
—
132

—
—
2,610
—
2,610

—
—
1,412
—
1,412

(Notes) 3-1. Allowance for doubtful accounts of ¥273 million ($2,913 thousand) is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥1,745 million ($18,564 thousand) is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥1,763 million ($18,752 thousand) is not included in doubtful accounts.

Fiscal 2012

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

Within one year
JPY
70,835
163,488
974

Over one year
and within five years
JPY
—
—
—

Over five years
and within ten years
JPY
—
—
—

Over ten years
JPY
—
—
—

—
—
—
235,298

14
3,538
213
3,767

—
402
—
402

—
6
—
6

(Notes) 3-1. Allowance for doubtful accounts of ¥294 million is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥1,842 million is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥1,672 million is not included in doubtful accounts.

Annual Report 201355

Notes to Consolidated Financial Statements

4. Borrowings repayment schedule
Fiscal 2013

Short-term borrowings
Long-term borrowings
Total

Within one year
JPY
USD
81,570 867,313——
81,570 867,313

Over one year andwithin two years
JPY
USD
—
—
37,650 400,327
37,650 400,327

2013
Over two years and Over three years andwithin three years
within four years
JPY
USD
JPY
USD
—
—
—
—
14,093 149,848
8,651
91,98914,093 149,848
8,651
91,989Over four years andwithin five years
JPY
USD
—
—
4,845
51,515
4,845
51,515

Over five years
JPY
USD
—
—
50
532
50
532

Within one year
JPY
78,444—78,444

Over one year andwithin two years
JPY—
37,35637,356

2012
Over two years and Over three years andwithin three years
within four years
JPY
JPY
—
—
31,773
6,024
31,773
6,024

Over four years andwithin five years
JPY
—
7,250
7,250

Over five years
JPY
—
—
—

Fiscal 2012

Short-term borrowings
Long-term borrowings
Total

12. Short-term Investments and Investments in Securities
1. “Held to maturity debt securities” with fair value
Fiscal 2013

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

Category
Japanese government bonds
Philippine government bonds

Balance sheet amount
JPY
USD

JPY

Fair value
USD

JPY

Difference
USD

14

158

14

159

0

1

1
16

15
173

1
16

15
174

(0)
0

(0)
1

Fiscal 2012

Securities with market value
exceeding their book value

Category
Japanese government bonds

Balance sheet amount
JPY

Fair value
JPY

Difference
JPY

14

14

0

Balance sheet amount
JPY
USD

Acquisition cost
JPY
USD

JPY

6,620

70,391

4,634

49,281

1,985

21,110

1,323
7,943

14,07484,465

1,611
6,246

17,13766,418

(288)
1,697

(3,063)18,047

2. “Other securities” with fair value
Fiscal 2013

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 ¥15,860 million ($168,640 thousand)) and equity investments (book value of ¥1,491 million ($15,861 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 2012

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

3,625

2,383

1,242

3,568
7,193

4,326
6,709

(757)
484

(Note) Unlisted investments in securities (book value of ¥15,159 million) and equity investments (book value of ¥1,429 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.

56

KANEMATSU CORPORATION

3. Sold “Other securities”
Fiscal 2013
Category
Equity securities

Sales proceeds
JPY
USD
661
7,031

Gains on sales
JPY
USD
235
2,505

Losses on sales
JPY
USD
81
867

Sales proceeds
JPY
1,036

Gains on sales
JPY
229

Losses on sales
JPY
335

Fiscal 2012
Category
Equity securities

4. Securities recognized impairment loss
The total impairment loss amount recognized of investments in securities is ¥376 million ($3,999 thousand) in the current fiscal 2013, and ¥656 million in theprevious fiscal 2012.
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.

13. Derivatives
1. Derivative transactions to which hedge accounting is not applied(1) Currencies
Fiscal 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
USD

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

Unrealized gain or (loss)
JPY
USD

9,533
604
69
1
10,209101,365
6,432
742
19
108,559

—
—
—
—
—

—
—
—
—
—

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

(6,596)
(259)
(85)
0
(6,940)

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

(6,596)
(259)
(85)
0
(6,940)24,778
536
160
30
76
25,582—

263,465
5,704
1,704
322
815
272,010
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

2,277
39
12
1
1
2,331
—

24,218
416
134
13
14
24,795
—

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

24,218
416
134
13
14
24,795
17,855(Note) Basis of fair value calculation
Fair value is calculated based on the quoted price by financial institutions.

Annual Report 201357

Notes to Consolidated Financial Statements

Fiscal 2012

Classification

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

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

Unrealized gain or (loss)
JPY

7,447
463
69
4
54
8,040

—
—
—
—
—
—

(225)
(5)
0
0
5
(224)

(225)
(5)
0
0
5
(224)

21,939
316
30
21
1
17
22,326
—

—
—
—
—
—
—
—
—

1,105
20
3
(0)
0
0
1,129
—

1,105
20
3
(0)
0
0
1,129
904

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

(2) Interest rate
Fiscal 2013
Not applicable.
Fiscal 2012
Not applicable.
(3) Commodities
Fiscal 2013

Classification

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

Notional amount ofcontracts
JPY
USD

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

Unrealized gain or (loss)
JPY
USD

5,640
5,330

59,971
56,677

42
—

453
—

217
(210)

2,316
(2,235)

217
(210)

2,316
(2,235)

1,744
1,183
—

18,548
12,579
—

—
—
—

—
—
—

(3)
12
—

(41)
132
—

(3)
12
16

(41)
132
171

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

Fiscal 2012

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

2,503
3,105

—
757

(11)
(2)

(11)
(2)

3,703
2,795
—

—
—
—

(10)
(1)
—

(10)
(1)
(26)

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

58

KANEMATSU CORPORATION

2. Derivative transactions to which hedge accounting is applied(1) Currencies
Fiscal 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

Forecasted foreign
currency transactions

Forecasted foreign
currency transactions

Accounts receivable

Accounts payable

Notional amount ofcontracts
JPY
USD

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

5,507
433
8
243
6,194

58,564
4,612
93
2,590
65,859

—
—
—
—
—

—
—
—
—
—

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

(5,271)
(69)
(9)
(734)
(6,083)

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

225,197
16,702
1,732
745
35
5,387
249,798

177
—
—
—
—
—
177

1,886
—
—
—
—
—
1,886

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

13,954
1,531
77
53
(1)
367
15,980

131
4
136

1,398
51
1,449

—
—
—

—
—
—

—
—
—

—
—
—

62
37
79
179

666
400
843
1,909

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(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.

Annual Report 201359

Notes to Consolidated Financial Statements

Fiscal 2012
Hedge
accounting
methodPrinciple
hedge
accounting

Specific
matching
criteria

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

Main hedged items

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

1,647
108
42
19
1,817

218
—
—
—
218

(36)
(0)
(3)
0
(39)

16,112
1,705
127
79
38
18,063

121
230
—
—
—
351

595
73
6
9
(0)
684

1
0
2

—
—
—

—
—
—

39
39
84
163

—
—
—
—

—
—
—
—

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 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
USD

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

15,000159,490

15,000159,490(503)(5,356)

31,100330,675

19,360205,848——(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.

Fiscal 2012
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

Amount of over-one-year
contracts
JPY

Fair value
JPY

48,64043,100—(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.

60

KANEMATSU CORPORATION

(3) Commodities
Fiscal 2013
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

515
991

5,486
10,546

Amount of over-one-year
contracts
JPY
USD

—
—

Fair value

—
—

JPY

USD

4
(17)

44
(189)

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

Fiscal 2012
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

741
1,257

—
—

18
50

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

14. Retirement Benefits
1. Summary of pension plans
The Company and its certain consolidated subsidiaries have established defined-benefit employees’ pension plans, retirement lump sum plans, and other pension plans. Certain consolidated subsidiaries have defined contribution pension plans. In addition, some additional retirements benefits are paid under certain
conditions when employees retire.

2. Schedule of retirement benefits
2013
a. Projected benefit obligation at end of year
b. Fair value of plan assets at end of yearc. Projected benefit obligation in excess of plan assets (a + b)
d. Unrecognized actuarial loss
e. Unrecognized prior service costf. Accrued retirement benefit obligation recognized in the consolidated balance sheets (c + d + e)g. Prepaid pension costh. Provision for employees’ retirement and severance benefits (f – g)JPY
(16,698)
12,068(4,629)332—(4,296)—(4,296)USD(177,547)
128,320(49,227)3,539—(45,688)—(45,688)

2012
JPY(15,566)
11,515(4,050)1,314—(2,736)—(2,736)USD
15,0552,180(2,314)
6,218—
727
21,865

2012
JPY
1,235
229
(199)
435
73
77
1,851

(Note) Certain subsidiaries adopt simplified method for calculating accrued retirement benefits for their employees.

3. Schedule of retirement benefits expenses
2013
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. Employees’ contributions to the employees’ pension fund are not included in the retirement benefit expenses.
2. The 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.

Annual Report 201361

Notes to Consolidated Financial Statements

4. Schedule of assumptions used in accounting for accrued retirement benefit
2013
Straight-line basis
1.1% – 2.0%
1.5% – 2.3%
Principally 5 years
5 – 10 years

a. Method of attributing projected benefits to period of service
b. Discount rates
c. Expected long-term rates of return on plan assets
d. Amortization period for actuarial loss or gaine. Amortization period for unrecognized prior service cost

2012
Straight-line basis
1.1% – 2.0%
1.5% – 2.1%
Principally 5 years
5 – 10 years

15. Stock Options
Fiscal 2013
Not applicable.
Fiscal 2012
Not applicable.

16. Deferred Taxes

2. Major reconciliation items between the statutory effective tax rate

1. Major components of deferred tax assets and deferred tax
liabilities
2013
JPY
Deferred tax assets
Provision for employees’ retirement
and severance benefits
1,441
Allowance for doubtful accounts
5,897
Inventories
1,948
Impairment loss on fixed assets
1,079
Investments in securities
3,040
Golf club memberships492
Tax loss carried forward
17,103
Other
3,702
Deferred tax assets subtotal
34,706
Valuation allowance(19,956)
Total deferred tax assets
14,750
Deferred tax liabilities
Retained earnings in subsidiaries(293)
Net gains on deferred hedges(366)
Net unrealized gains on securities
(499)
Other
(935)
Total deferred tax liabilities(2,094)
Net deferred tax assets
12,655

USD

2012
JPY

15,32762,70520,718
11,48232,325
5,242
181,860
39,369369,027(212,194)
156,833

912
5,929
2,797
1,123
3,034
505
17,636
4,493
36,433(21,305)
15,128(3,118)(3,895)(5,316)(9,945)(22,274)
134,559

(200)
(299)
(93)
(531)
(1,125)14,003(Note) Net deferred tax assets recorded in the consolidated balance sheets
2013
2012
JPY
USD
JPY
Current assets – deferred tax assets
1,669
17,7483,322Long-term assets – deferred tax assets
11,127
118,311
10,842Current liabilities –deferred tax liabilities(95)(1,014)(1)
Non-current liabilities –deferred tax liabilities
(45)
(486)
(160)
Net deferred tax assets
12,655
134,559
14,00362

KANEMATSU CORPORATION

and the effective income tax rate after the application of deferred tax
accounting.
2013
2012
(%)
(%)
Statutory effective tax rate
38.0
40.7
(Reconciliation)
Permanent differences –additions such as entertainment expenses
2.9
4.2
Change in valuation allowance(2.7)(16.0)
Effect of tax rate differences
(4.1)
(1.0)
Tax reform—
18.7
Others(0.9)(2.2)
Effective income tax rate
33.2
44.5

17. Business Combinations
Acquisition of premium threading business by a subsidiary
Kanematsu USA Inc. (“Kanematsu USA”) acquired the premium threadingof oilfield tubing business and the related assets of Benoit Machine, L.L.C.
(“Benoit”) located in the United States through a holding company jointly
established with JFE Steel Corporation (“JFE Steel”).
1. Outline of the business combination(1) Name of the acquiring company: Benoit Premium Threading, LLC
Content of business: Premium threading of oilfield tubing, manufacture andsale of downhole accessories
Name of the acquired company: Benoit Machine, L.L.C.
Content of business: Premium threading of oilfield tubing

(2) Purpose of the business combination
In the United States, the exploration and production of energy resources is
expected to grow over the medium- to long-term. As a result of the continued development of shale oil and shale gas as well as deepwater productionin the Gulf of Mexico, we expect the demand for oilfield tubing to be robust.
Benoit is a Louisiana-based company that provides premium threading
services for oilfield tubing as well as a full line of downhole accessories.
Benoit’s proprietary premium connection, the Benoit Two-Step (BTS), hasbeen relied upon by major oil companies for over 30 years and has helped
Benoit maintain a large market share.
Through this acquisition, Kanematsu and JFE Steel will establish acomplete supply chain in the manufacturing, threading, and distribution ofoilfield tubing and downhole accessories. This will enable Kanematsu andJFE Steel to meet the diversified needs of the oil and gas industry and thefuture growth of oilfield tubing demand.

(2) Purpose of the acquisition
To aim at reinforcements of the business base, the expansion of the business domain and security of stable revenue base.
(3) Date of the business combination
28 November 2012 (Date of the acquisition of shares)
31 December 2012 (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 acquisition
Nippon Office Systems Ltd.

(3) Date of the business combination
16 November 2012(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(4) Legal form of the business combination
Transfer of business(7) Basis for deciding the acquiring company
It is because KEL acquired the shares of NOS for cash consideration.

(5) Company name after the combination
Benoit Premium Threading, LLC

2. Period of the performance of the acquired company in the consolidated financial statements
The performance of the acquired company is included in the consolidated
statement of income through equity in earnings of affiliates because theacquired company had been applied the equity method until the acquisition.

2. Period of the performance of the acquired company in the consolidated financial statements
From 16 November 2012 to 31 December 201225.87 percent
25.13 percent
51.00 percent

3. Acquisition costs and those details
3. Acquisition costs and those details
Cash paid for the acquisition: ¥8,179 million ($86,972 thousand)Total costs: ¥8,179 million ($86,972 thousand)4. Amount, cause and method and period of amortization of goodwill(1) Amount of goodwill¥1,930 million ($20,522 thousand)(2) Cause of goodwill
Anticipated future profitability in excess of net asset value(3) Method and period of amortization of goodwill
Straight line method over 15 years
5. Assets and liabilities on the day of the business combination
JPY
USD
Current assets
2,344
24,924
Property, plant and equipment
3,941
41,914
Total assets
6,286
66,838Current liabilities
36
388
Total liabilities
36
388

Acquisition of shares by a subsidiary
1. Outline of the business combination(1) Name of the acquiring company: Kanematsu Electronics Ltd. (“KEL”)
Content of business: KEL designs and implements information systems
and provides operation and consulting services forbusinesses based on KEL’s expertise in information
technologies. KEL retails, leases, maintains, develops
IT system products and software, and also send loan
engineers.
Name of the acquired company: Nippon Office Systems Ltd. (“NOS”)
Content of business: Information service business and System sales business

Acquisition costs
Fair value of shares of NOS granted
before the date of the business combination
Fair value of shares of NOS granted
at the date of the business combination
Other acquisition costs
Total costs

JPY

USD

730

7,764

709
89
1,529

7,543
951
16,258

4. Gain on step acquisitions¥81 million ($869 thousand)
5. Amount, cause and method and period of amortization of goodwill(1) Amount of goodwill¥288 million ($3,070 thousand)(2) Cause of goodwill
The excess of acquisition costs over the net of the assets and liabilities on
the day of the business combination(3) Method and period of amortization of goodwill
Straight line method over 5 years
6. Assets and liabilities on the day of the business combination
JPY
Current assets
3,558
Property, plant and equipment
2,322
Total assets
5,881
Current liabilities
1,846
Non-current liabilities
1,603
Total liabilities
3,449

USD
37,837
24,69962,536
19,633
17,04436,677

Annual Report 201363

Notes to Consolidated Financial Statements

18. 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 and shops based on the contracts of rental estate.

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

3. Changes in asset retirement obligations
2013
Balance at the beginning of the fiscal year
Acquisition of tangible fixed assets
Adjustment due to passage of time
Fulfillment of asset retirement obligations
Other
Balance at the end of the fiscal year

JPY
857
34
16
(39)
(8)
860

USD
9,114
363
179
(416)
(91)
9,149

2012
JPY
854
28
17
(43)
—
857

19. Investment and Rental Properties
Fiscal 2013
As the amount of investment and rental properties is immaterial, the description is not disclosed.
Fiscal 2012
As the amount of investment and rental properties is immaterial, the description is not disclosed.

20. Segment Information
Segment information
1. Overview of reportable segments
Reportable segments of the Company are components of an entity about which separate financial information is available and such information is evaluatedregularly by the managements in deciding how to allocate resources and in assessing performance.
The Company expands its business of providing the products and services in Japan and overseas by integrating domestic and global networks, specialties
cultivated in each business segments, and various functions including general trading, information-gathering, market cultivation, business incubation and“project-forming,” risk management and logistics in each business segment.
Accordingly, the Company’s segments are separated based on the products and services provided by business units, and five segments “Electronics,””Foods & Foodstuff,” ”Iron & Steel,” ”Machinery & Plant,” and ”Environment & Materials,” are treated as reportable segments.
The main products and services of each reportable segment are as follows.
(Electronics)
This segment offers a broad array of products such as electronic components and materials, semiconductor and LCD equipment, mechanical parts, electronicsrelated materials and sub-materials, aircraft and aircraft parts with services including development and proposals. The segment also expands its business ofproviding products and services such as batteries or LED etc. for retail sale, mobile phones, mobile systems and communication equipment.
(Foods & Foodstuff)
This segment ensures the stable acquisition of materials and provides a broad array of food products including high value-added items such as cooked foods,
processed fruits, processed agricultural products, beverage materials, meat and marine products, wheat, rice, soybeans, feedstuff and pet food.
(Iron & Steel)This segment is involved in the foreign trade of various iron and steel products such as various steel sheets, bar products, wire, pipes, stainless products, cast andforged products, and also offers the general steel products in Japan and raw materials supply overseas.
(Machinery & Plant)This segment works on projects of various plants and infrastructure facilities overseas, trades ships, marine equipment, automobiles, automobile parts, industrial
automobiles, construction machinery, and sells machine tools and industrial machinery.
(Environment & Materials)
This segment trades overseas and in Japan such as raw materials for photovoltaic modules and lithium batteries, functional chemicals such as raw materials
for fertilizer, functional food materials, health supplements, pharmaceuticals and pharmaceutical intermediates, crude oil, petroleum products and gas. The
segment also works on the development of environment-related materials and new technologies such as heat reflective paint and expands business such ascarbon credit trading.

64

KANEMATSU CORPORATIONIn accordance with the reorganization in the current fiscal year, the name of the “Electronics & IT” segment was changed to “Electronics.” The segment information for the previous fiscal year is stated with the name after the change.

2. Method of calculating net sales, segment income or loss, segment assets and other amounts 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 is based on operating income for the segments.
The amounts for inter-segment transactions are based on market prices or third-party transaction prices.
(Change in accounting policy)
With the revision of the corporation tax law, from the current fiscal year, certain domestic consolidated subsidiaries changed the depreciation method based on
the revised corporation tax law.
The impact of this change on net income for the current fiscal year is immaterial.

3. Information on net sales, profits or losses, assets and other amounts of reportable segments
Fiscal 2013 (JPY)Net sales
Customers
Inter-segment
Total
Segment income
Segment assets
Other
Depreciation and amortization
Investments in equity method
affiliates
Increases in tangible fixed assets
and intangible fixed assets

Electronics

Foods&
Foodstuff

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Environment&
Materials

Subtotal

Other(Note 1)

Total

273,66220
273,682
9,943
129,858

287,9365
287,942
3,165
86,45891,288176
91,464
2,567
42,03755,426
4
55,431426
23,300293,53318
293,551
1,926
52,3721,001,847
225
1,002,072
18,029334,027

17,38456
17,441
223
13,9791,019,232
281
1,019,513
18,253
348,006

—
(281)
(281)
9
51,1791,019,232—
1,019,232
18,262
399,186

1,378

464

235

96

260

2,435

246

2,682

(1)

2,680

1,454

467

2

—

114

2,038

2,708

4,746

96

4,843

1,522

426

63

265

40

2,318

81

2,400

535

2,936

Electronics

Foods&
Foodstuff

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Environment&
Materials

Subtotal

Other(Note 1)

Total

3,061,529
57
3,061,586
33,659919,281970,634
1,873
972,507
27,299446,973

589,33252
589,384
4,531
247,747

3,121,035 10,652,282
198
2,393
3,121,232 10,654,675
20,485
191,698
556,857 3,551,596

184,848
601
185,449
2,382
148,636

10,837,130
2,995
10,840,125
194,080
3,700,232—(2,995)(2,995)104544,173

10,837,130—
10,837,130
194,183
4,244,405

4,941

2,507

1,024

2,769

25,8942,624

28,517(11)

28,506

4,970

23

—

1,217

21,67528,79650,472

1,029

51,501

4,534

673

2,822

434

24,655864

25,5195,698

31,217

Amount inconsolidated
Adjustment statements(Note 2)
(Note 3)Fiscal 2013 (USD)

Net sales
Customers
2,909,752
Inter-segment
213
Total
2,909,965
Segment income
105,724
Segment assets
1,380,739
Other
Depreciation and amortization
14,652
Investments in equity method
affiliates
15,465
Increases in tangible fixed assets
and intangible fixed assets
16,191

Amount inconsolidated
Adjustment statements(Note 2)
(Note 3)(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 ($104 thousand) includes inter-segment elimination of ¥9 million ($104 thousand).
(2) Adjustment for segment assets of ¥51,179 million ($544,173 thousand) includes inter-segment elimination of (¥7,954) million (($84,573) thousand) and corporate assetsof ¥59,133 million ($628,746 thousand) that is 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 (¥1) million (($11) thousand) includes inter-segment elimination of (¥1) million (($11) thousand).
(4) Adjustment for investments in equity method affiliates of ¥96 million ($1,029 thousand) includes inter-segment elimination of ¥6 million ($68 thousand) and corporate
assets of ¥90 million ($961 thousand) that are not allocated to any reportable segment.
(5) Adjustment for increases in tangible fixed assets and intangible fixed assets of ¥535 million ($5,698 thousand) includes corporate assets of ¥535 million ($5,698 thousand)that is not allocated to any reportable segment.
3. Segment income is adjusted for operating income in the consolidated statements of income.

Annual Report 201365

Notes to Consolidated Financial Statements

Fiscal 2012 (JPY)Net sales
Customers
Inter-segment
Total
Segment income
Segment assets
Other
Depreciation and amortization
Investments in equity method
affiliates
Increases in tangible fixed assets
and intangible fixed assets

Electronics

Foods&
Foodstuff

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Environment&
Materials

Subtotal

Other(Note 1)

Total

253,14460
253,205
9,026
118,698

292,1126
292,118
5,186
87,61899,131
96
99,227
3,612
33,06570,39520
70,415
1,447
27,098273,68234
273,716
1,972
53,257

988,466
217
988,684
21,246
319,737

17,89855
17,954160
22,744

1,006,365
273
1,006,638
21,406342,482

—
(273)
(273)
20
57,2701,006,365—
1,006,365
21,426
399,753

1,231

406

155

124

341

2,259

303

2,563

(1)

2,561

2,333

396

2

—

115

2,847

3,215

6,062

34

6,097

1,915

114

110

476

149

2,766

70

2,836

678

3,514

Amount inconsolidated
Adjustment statements(Note 2)
(Note 3)(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 ¥20 million includes inter-segment elimination of ¥20 million.
(2) Adjustment for segment assets of ¥57,270 million includes inter-segment elimination of (¥4,707) million and corporate assets of ¥61,978 million that is 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 ¥34 million includes inter-segment elimination of ¥6 million and corporate assets of ¥27 million that are notallocated to any reportable segment.
(5) Adjustment for increases in tangible fixed assets and intangible fixed assets of ¥678 million includes corporate assets of ¥678 million that is not allocated to any reportable segment.
3. Segment income is adjusted for operating income in the consolidated statements of income.

Related information
Fiscal 2013

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

2. Information by geographical area
(1) Net sales
Japan
JPY
USD
861,875
9,164,011

Asia
JPY
91,042

USD
968,018

North America
JPY
USD
41,481
441,063

EuropeJPY
USD
17,313
184,088

Other Areas
JPY
USD
7,519
79,950

Total
JPY
USD
1,019,232 10,837,130

EuropeOther Areas
JPY
USD
12
135

JPY
26,990(Note) Net sales are classified into countries and areas based on locations of customers.

(2) Tangible fixed assets
Japan
JPY
USD
22,133
235,334

Asia
JPY
791

USD
8,418

North America
JPY
USD
1,446
15,381

JPY
2,606

USD
27,710Total
USD
286,979

3. Information by major customer
Not applicable.
Fiscal 2012

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

2. Information by geographical area
(1) Net sales
Japan
JPY
839,476

Asia
JPY
91,989North America
JPY37,759(Note) Net sales are classified into countries and areas based on locations of customers.

66

KANEMATSU CORPORATION

EuropeJPY
13,818Other Areas
JPY
23,320

Total
JPY
1,006,365

(2) Tangible fixed assets
Japan
JPY
23,710

Asia
JPY
911

North America
JPY
105

EuropeJPY
2,281

Other Areas
JPY
18

Total
JPY
27,028

3. Information by major customer
Not applicable.

Information of impairment loss on fixed assets of reportable segments
Fiscal 2013 (JPY)

Impairment loss

Electronics
108

Foods
&
Foodstuff—

Reportable segments
Iron
Machinery
&
&
Steel
Plant
—
—

Environment&
Materials
77

Subtotal185

Other(Notes 1, 2)
565

Total
750

Adjustment
—

Total
750

Electronics
1,149

Foods
&
Foodstuff—

Reportable segments
Iron
Machinery
&
&
Steel
Plant
—
—

Environment&
Materials
823

Subtotal
1,972

Other
(Notes 1, 2)
6,009

Total
7,981

Adjustment
—

Total
7,981

Fiscal 2013 (USD)

Impairment loss

(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.

Fiscal 2012 (JPY)

Impairment loss

Electronics
—

Foods
&
Foodstuff—

Reportable segments
Machinery
Iron
&
&
Plant
Steel
(Note 3)—345

Environment&
Materials
24

Subtotal369

Other(Notes 1, 2)
416

Total
786

Adjustment—

Total(Note 3)786

(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 rental property business.
3. The amount of ¥345 million out of total amount of ¥786 million is included in loss on closure of business in the consolidated statements of income.

Information of amortization of goodwill and balance of goodwill of reportable segments
Fiscal 2013 (JPY)

Amortization of goodwill
for fiscal year
Balance of goodwill
at end of fiscal year
Amortization ofnegative goodwill for fiscal year
Balance of negative goodwill
at end of fiscal year

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Electronics

Foods&
Foodstuff

Environment&
Materials

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

18

16

16

—

5

56

2

58

(58)

—

319

37

1,914

—

—

2,270

0

2,270

(148)

2,122

—

—

—

0

0

0

4

5

21

26

—

—

—

—

—

—

8

8

(8)

—

Annual Report 201367

Notes to Consolidated Financial Statements

Fiscal 2013 (USD)

Amortization of goodwill
for fiscal year
Balance of goodwill
at end of fiscal year
Amortization ofnegative goodwill for fiscal year
Balance of negative goodwill
at end of fiscal year

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Electronics

Foods&
Foodstuff

Environment&
Materials

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

192

175

171

—

59

597

24

620

(620)

—

3,394

395

20,351——

24,140

4

24,144(1,579)22,565

—

—

—

0

9

9

49

59

225

284

—

—

—

—

—

—

86

86

(86)

—

Total

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes aluminum recycling business and 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 fiscal year of (¥58) million (($620) thousand) includes inter-segment elimination of (¥2) million (($24) thousand) and offset
amount of (¥56) million (($597) thousand).
(2) Adjustment for balance of goodwill at end of fiscal year of (¥148) million (($1,579) thousand) includes inter-segment elimination of (¥0) million (($4) thousand), corporate
assets of ¥0 million ($1 thousand) that are not allocated to any reportable segment and offset amount of (¥148) million (($1,576) thousand).
(3) Adjustment for amortization of negative goodwill for fiscal year of ¥21 million ($225 thousand) includes corporate assets of ¥77 million ($822 thousand) that are notallocated to any reportable segment and offset amount of (¥56) million (($597) thousand).
(4) Adjustment for balance of negative goodwill at end of fiscal year of (¥8) million (($86) thousand) includes corporate liabilities of ¥140 million ($1,490 thousand) that are
not allocated to any reportable segment and offset amount of (¥148) million (($1,576) thousand).

Fiscal 2012 (JPY)

Amortization of goodwill
for fiscal year
Balance of goodwill
at end of fiscal year
Amortization ofnegative goodwill for fiscal year
Balance of negative goodwill
at end of fiscal year

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Electronics

Foods&
Foodstuff

Environment&
Materials

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

47

16

—

—

12

76

2

78

(78)

—

261

53

—

—

5

320

2

323

(233)

89

—

—

—

0

0

0

4

5

0

6

—

—

—

0

0

0

12

13

(13)

—

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes aluminum recycling business and 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 fiscal year of (¥78) million includes inter-segment elimination of (¥2) million and offset amount of (¥76) million.
(2) Adjustment for balance of goodwill at end of fiscal year of (¥233) million includes inter-segment elimination of (¥2) million, corporate assets of ¥0 million that are notallocated to any reportable segment and offset amount of (¥231) million.
(3) Adjustment for amortization of negative goodwill for fiscal year of ¥0 million includes corporate assets of ¥77 million that are not allocated to any reportable segment andoffset amount of (¥76) million.
(4) Adjustment for balance of negative goodwill at end of fiscal year of (¥13) million includes corporate liabilities of ¥217 million that are not allocated to any reportablesegment and offset amount of (¥231) million.

Information of gain on negative goodwill by reportable segments
Fiscal 2013
Not applicable.
Fiscal 2012
Not applicable.

68

KANEMATSU CORPORATION

21. Disclosure of Related Party Transactions
Fiscal 2013

Related party transactions
Not applicable.
Fiscal 2012

Related party transactions
Not applicable.

22. Information per Share2013
Net assets per share
Net income per share

JPY
129.82
22.80

USD
1.38
0.24

2012
JPY
93.16
14.60

(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:
2013
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)

JPY
75,912
21,393(21,393)
54,519422,501
2,539
419,961

USD
807,155
227,469(227,469)
579,686

2012
JPY
55,992
16,984(16,984)
39,008422,501
3,796
418,704

3. The supplemental information for the computation of net income per share is as follows:2013
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)

JPY
9,564
—
9,564
419,486

USD
101,692—
101,692

2012
JPY
6,110
—
6,110
418,616

Annual Report 201369

Notes to Consolidated Financial Statements

23. Subsequent Events
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 co Ltd. and its mobile phone dealers shops.

1. Outline of the business combination(1) Name of the acquiring company: KCS Holdings LLC. (“KCSI”)
Content of business: Holding company to hold shares of BD Holdings co Ltd.
Name of the acquired company: BD Holdings co Ltd. (“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, the companies strengthen its sales force in the Kyushu area and expand its sales force
on a national scale.
(3) Date of the acquisition
1 May 2013(4) Legal form of the business combination
Acquisition of shares for cash consideration.
(5) Company name after the business combination
BD Holdings co Ltd.
(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

0 percent
100 percent
100 percent(7) Basis for deciding the acquiring company
It is because KCSI acquired all of the shares of BDH for cash consideration.
2. Acquisition costs and those details
Cash paid for the acquisition: ¥3,000 million ($31,898 thousand)Total costs: ¥3,000 million ($31,898 thousand)
3. Amount, cause and method and period of amortization of goodwill
These have not been determined at this time.

70

KANEMATSU CORPORATION

24. Consolidated Supplementary Schedules(1) Schedule of bonds payableNot 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
38,723471,148
39,720483,281726
8,842
82,403
1,394
162,969

1,002,603
16,9691,982,842

Balance at the end of
the fiscal year
JPY
USD
38,430408,620
43,140458,693
733
7,796
65,2901,099
148,694694,211
11,692
1,581,012

Composite
interest rate
%
1.6
1.7
—

Due
Month, year
—
—
—

2.0
—
—

April 2014 – March 2018
April 2014 – March 2019—

(Notes) 1. The composite interest rate is a weighted average interest rate for those outstanding at 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
37,650400,327565
6,011Over two years
and within three years
JPY
USD
14,093
149,848372
3,958Over three years
and within four years
JPY
USD
8,651
91,989127
1,355Over four years
and within five years
JPY
USD
4,845
51,51527296(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 abbreviated, as theamount of “asset retirement obligations” is less than the 1 percent of total amount of liabilities and net assets.

Annual Report 2013

71

72

KANEMATSU CORPORATIONCorporate
Data
74

Global Network

76
78

Network
Major Consolidated Subsidiaries and Affiliates

80

Organization Chart

81

History82

Investor Information

Annual Report 201373

Global Network (As of April 1, 2013)
The Company supplies products and services from a large network of business bases in Japan and overseas.
87 subsidiaries and 26 affiliates ensure global reach into the markets of all regions.

2.
1.

5.

3.

Moscow
Duesseldorf

LondonMunchen

cow

4.

6.

Budapest

MilanoOverseas subsidiaries
and their branches

1. ASIA & THE MIDDLE EAST

DalianBeijing
Seoul
Tianjin

Representative offices
Branches

TehranDalianBeijing
Seoul
Tianjin
DELHI NCR
Wuxi
ShanghaiSuzhouPalmasTehranDELHI NCR

r

Hanoi

onakryShenzhen Taipei

Wuxi
ShanghaiSuzhouHanoi

YangonHong Kong
Haiphong

YangonManilaBangkok
Hochiminh City

Shenzhen Taipei

Hong Kong
Haiphong
ManilaBangkok
Hochiminh City
Singapore
Jakarta

Singapore
Jakarta

2. EUROPE

3. OCEANIA
Moscow

LondonDuesseldorf
Munchen
MilanoSydneyBudapest

SydneyAucklandDali
Beijing
Tianjin

TehranLas Palmas

Wuxi
Sh
SuzhouDELHI NCR
Hanoi

74

KANEMATSU CORPORATION

Dakar

YangonShenzhen Ta

Hong Kong
Haiphong
BangkokMHouston

4. NORTH AMERICA

5. SOUTH AMERICA

VancouverPortland
ChicagoSilicon Valley
San Diego

New York
Sao Paulo

Somerset

Houstond

6. JAPAN
Hokkaido Branch

Nagoya Branch

Tohoku Branch

Sao Paulo

Kyushu Branch
Tsukiji Office
Tokyo Head OfficeOsaka Branch
Osaka Midosuji Office

Segment information:
Number of employees and number of group companies (As of March 31, 2013)
Electronics
Foods & Foodstuff
Iron & Steel
Machinery & Plant
Environment & Materials
OthersCompany-wide (common)
Total

Number of employees(consolidated basis)
3,244
506
605
326
319
167
355
5,522

Number of affiliated companies
31 (Japan: 15, Overseas: 16)
17 (Japan: 10, Overseas: 7)
12 (Japan: 5, Overseas: 7)
12 (Japan: 3, Overseas: 9)
7 (Japan: 7)
18 (Japan: 12, Overseas: 6)
Overseas subsidiaries 16
113

Notes: 1. Number of employees on a non-consolidated basis is 782 (including employees seconded from Kanematsu, excluding
employees seconded from companies other than Kanematsu).
2. Of affiliated companies, 82 are consolidated subsidiaries and 25 are equity-method affiliates.

Annual Report 201375

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

Tsukiji Office
Tsukiji Daiichi Nagaoka Building, 3-4, Tsukiji
2-chome, Chuo-ku, Tokyo 104-0045, Japan
TEL: 81-3-3544-6531
FAX: 81-3-5565-0093

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

76

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
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
Kanematsu (Guangdong) Trading Co., Ltd.
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
Kanematsu Semiconductor Taiwan Ltd.
11th Floor, No. 61, Chung Shan N.Rd., Sec. 2,
Taipei 104, Taiwan, R.O.C.
TEL: 886-2-2562-2025
FAX: 886-2-2562-2026
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: 84-8-910-5532, 5534, 5535, 5536, 5537
FAX: 84-8-910-5538, 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
Kanematsu Semiconductor Singapore Pte., Ltd.
100 Tras Street, #12-03 100 AM, Singapore 079027
TEL: 65-6438-4440
FAX: 65-6438-4441
PHILIPPINES
Kanematsu Corporation Manila Branch
17th Floor Tower 2, The Enterprise Center 6766,
Ayala Avenue, Makati City, Metro Manila,
Philippines
TEL: 63-2-889-1701, 845-2017
FAX: 63-2-887-0030

MYANMARThe Representative of Kanematsu Corporation
56(A) Kanbawza Road, Bahan Township, Yangon,
Myanmar
TEL: 95-1-2304198, 99
FAX: 95-1-510435
INDONESIA
PT. 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

ITALY
The Representative of Kanematsu G.m.b.H.
Piazza Duca d’Aosta 8, Milano, Italy
TEL: 39-02-6749-3538
FAX: 39-02-6707-7364
HUNGARY
The Representative of Kanematsu G.m.b.H.
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
Tverskaya 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
Calle Eduardo Benot 51, Edificio Atlansea, 4-izqda,
35008 Las Palmas de Gran Canaria, Spain
TEL: 34-928-275634, 275680
FAX: 34-928-275632

OCEANIAEUROPEUNITED KINGDOM
Kanematsu Europe PLC.
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.
Duesseldorf Head Office
Oststrasse 34, D-40211 Duesseldorf, Germany
TEL: 49-211-36890
FAX: 49-211-3689-111
Munich BranchFrankfurter Ring 193a, 2.OG. Raum 203 80807
Muenchen, Germany
TEL: 49-89-3074-817-13
FAX: 49-89-3074-817-29

AUSTRALIA
Kanematsu Australia Ltd.
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.
9th Floor, Ballantyne House, 101 Customs Street,
East 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
75 Rockefeller Plaza, 22nd Floor, New York,
NY10019, 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 Branch
1615 Wyatt Drive, Santa Clara
California 95054, 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
205-8988 Fraserton Court Burnaby, B.C.
V5J 5H8, Canada
TEL: 1-604-689-0550
FAX: 1-604-689-0655

SOUTH AMERICABRAZIL
Kanematsu America do Sul Importacao e
Exportacao Ltda.
Alameda Campinas No. 728, Cjto 34 Jardim
Paulista, Sao Paulo, S.P. CEP 01404-001 Brasil
TEL: 55-11-3285-3311
FAX: 55-11-3285-3318

Annual Report 201377

Global Network

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

China

Kanematsu Electronics Ltd.*Sales of computers, peripheral equipment, communications equipment, etc.

Nippon Office Systems Ltd.*Sales and maintenance of computers, communications equipment, etc.

Kanematsu Communications Ltd.

Sales of mobile communications, related equipment and services, ASP services for mobile phones

Kanematsu Granks, Corp.

Mobile content provider service business, mobile commerce business,
mobile media representative business, mobile solutions business

Kantatsu Co., Ltd.

Manufacture of lens units, camera modules and other optical equipment and parts

Kanekoh Electronics (Shanghai) Co., Ltd.

Development and manufacture of battery modules

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 and grains, and development and marketing of products for food processors

Heisei Feed Manufacturing Co.

Manufacture and processing of mixed feeds

Mojiko Silo Co., Ltd.

Operation of grain silo for animal feed-use, land/marine transport, customs clearance operations

Dalian Tiantianli Food Co., Ltd.

Manufacture of dim sum and deli products

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 and sales of deli products and processed foodKai Enterprises, Inc.

Sales of dried feed

KG Agri Products, Inc.

Seed development for soybean-based food ingredients, contract farming, sorting and sales

Steel, Materials & Plant
Japan

78

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

ChinaThailandCzech Republic
U.S.A.

Kanematsu Hoplee Co., Ltd.

Processing and marketing of steel products

Kanematsu KGK (Shanghai) Co., Ltd.

Sales of machine tools and industrial machinery

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

Sales of machine tools and industrial machinery

KGK Engineering (Thai) Co., Ltd.

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

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 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

Higashi Kibi 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 logistics 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 201379

Organization Chart (As of April 1, 2013)

Business Area

Electronics & Devices Division

Shareholder’s Meeting
Board of Corporate Auditors
Board of Directors

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

Foods & Grain Division

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

Steel, Materials & Plant Division

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

Motor Vehicles & Aerospace Division

Motor Vehicles & Parts Department No.1
Motor Vehicles & Parts Department No.2
Aerospace Department
Motor Vehicles & Aerospace Planning Office

Management Committee

Supporting Area

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

80

KANEMATSU CORPORATIONHistory

1880’s1890’s1900’s1910’s1920’s1930’s1940’s1889• Fusajiro Kanematsu founds Fusajiro Kanematsu Shoten of Australian Trading in Kobe

1890

• Sets up a branch in Sydney, and begins direct import of Australian wool

1891

• Yohei Kitagawa founds Kitagawa Shoten, which is a predecessor of The Gosho Company

1900• Starts import of Australian wheat

1913• Fusajiro Kanematsu passes away

1918

• Reorganizes into Kanematsu Shoten Company. Stated capital ¥2 million

1922• Reorganizes Sydney branch into an affiliate company incorporated abroad

1934• Establishment of Kanematsu Wool Research Institute (the current Kaneyo Co., Ltd.)1936• Sets up branches in New York and Seattle

1937• Establishes an overseas affiliated company in New Zealand1943• Changes trade name to Kanematsu and Company

1949• Resumption of foreign tours for employees. The first group departs for America• Diversification of business begins, moving toward an integrated general trading company

1950’s1951• Establishes an overseas affiliated company in New York, as the first Japanese trading company inpostwar era• Establishes an overseas affiliated company in Brazil

1960’s1957• Establishes an overseas affiliated company in West Germany

1961• Abolishes the system in which workers hold all the stock, and goes public on the Second Section of
the Osaka Securities Exchange• Establishes an overseas affiliated company in Iran1970’s1980’s1963• Lists stock on the First Section of the Osaka Securities Exchange

1966• Establishes an overseas affiliated company in Thailand

1967• Merges with The Gosho Company to form Kanematsu-Gosho, Ltd.

1970

• Establishes its Head Office at the Tokyo Branch Office

1973• Lists stock on the First Sections of the Tokyo and Nagoya Stock Exchanges

1975• Establishes an overseas affiliated company in Hong Kong

1979

• Establishes a representative office in Beijing, China following restoration of diplomatic relations

1989• 100th anniversary of the founding of the Company• Establishes an overseas affiliated company in the United Kingdom

1990’s1990• Changes trade name to Kanematsu Corporation

1991• Moves Tokyo headquarters from Kyobashi to Shibaura• Establishes Kanematsu Europe PLC in the United Kingdom having general control over Europe

2000’s2008• Trade name of Kanematsu (Shanghai) Co., Ltd. is changed to Kanematsu (China) Co., Ltd. establishes
Beijing, Dalian and Tianjin branches

2010’s2011• Kanematsu Europe PLC merged with Kanematsu G.m.b.H

2012• Establishes an overseas affiliated company in India

2014• Kanematsu Corporation will celebrate its 125th anniversary in 2014

Annual Report 201381

Investor Information

Composition of Shareholders (As of March 31, 2013)(As of April 1, 2013)

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 999,872 treasury shares)
Minimum Trading Unit 1,000
Number of Shareholders 32,520■ Individuals and others(including treasury shares)�����42.73%■ Financial institutions������������������27.76%■ Other corporations����������������������� 8.33%■ Foreign institutions
and individuals������������������������������17.67%■ Securities firms�������������������������������� 3.51%

Principal Shareholders (As of March 31, 2013)
Number of shares
held (thousands)

Percentage ofvoting rights (%)

13,29812,4603.15
2.95

12,283
11,613

2.91
2.75

11,612

2.75

8,208
4,739
4,510

1.94
1.12
1.06

3,927
3,827

0.93
0.90

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
The Norinchukin BankJapan Trustee Services Bank, Ltd.
(trust account)
Mitsui Sumitomo Insurance Co., Ltd.
Tokio Marine & Nichido Fire InsuranceCo., Ltd.
The Master Trust Bank of Japan, Ltd.
(trust account)
State Street Bank and Trust Company
Daio Paper Corporation
Japan Trustee Services Bank, Ltd.
(trust account 1)
Mellon Bank Treaty Clients Omnibus

Shareholder Distribution by Number of Shares Held(As of March 31, 2013)■ More than 1 million shares����45.39%■ 50,000 shares and more(including treasury shares)�����25.38%■ 10,000 shares and more�����������16.41%■ 1,000 shares and more�������������12.35%■ Less than 1,000 shares���������������� 0.47%

Note: Calculated after deduction of treasury shares (999,872 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. 2002

Apr. 2003

Apr. 2004

Apr. 2005

Apr. 2006

Apr. 2007

Apr. 2008

Apr. 2009

Apr. 2010

Apr. 2011

Apr. 2012

Apr. 2003

Apr. 2004

Apr. 2005

Apr. 2006

Apr. 2007

Apr. 2008

Apr. 2009

Apr. 2010

Apr. 2011

Apr. 2012

Trading Volume(thousand shares)

600,000
500,000
400,000
300,000
200,000
100,000
082

Apr. 2002

KANEMATSU CORPORATION

0Tokyo Head Office

Corporate Profile
Company Name

KANEMATSU CORPORATIONFoundation

August 15, 1889

EstablishedMarch 18, 1918

President

Masayuki Shimojima

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

Paid-in Capital¥27,781 million

Fiscal Year

April 1 to March 31

General Meeting of
Shareholders

June

Number of Offices

Domestic: Head office 1 and branches 7
Overseas: 41

Number of Employees 782 (Consolidated: 5,522)(As of March 31, 2013)

For more information on this Annual Report, or to obtain
additional copies, please contact:
Public Relations Section, Corporate Planning Department,
Kanematsu Corporation
2-1, Shibaura 1-chome, Minato-ku, Tokyo 105-8005, Japan
Tel: 81-3-5440-8000
Fax: 81-3-5440-6505
URL: http://www.kanematsu.co.jp

http://www.kanematsu.co.jp

Printed in Japan