Taking the

Next Step

Annual Report 2011
For the year ended March 31, 2011

Over 120 years have passed since the founding of the Company by Fusajiro Kanematsu in 1889
as one of the first enterprises to engage in trading between Japan and Australia.
Our founder always anticipated the needs of his time and took on the challenge of establishing new businesses.
The Kanematsu Group has taken his dynamic pioneering spirit and creative ingenuity as its guiding principles,and has expanded its fields of operation to meet the needs of each succeeding generation,
to become the global company it is today. From here on, too, we aim to become a “Value Creator” by continuing
to build new businesses together with our customers while constantly adapting to social and economic changes.

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 andprosperity for Japan. Let us sow that seed now.” So spoke our founder Fusajiro Kanematsu at
the establishment of the Company. Furthering the “public interest” of Japan was the guiding
mission of all leading Japanese of the late nineteenth century (Meiji period) in developing thenational economy. Today, our founder’s ideal underlies all our Company’s public benefit andcommunity activities and our contributions to nations and peoples generally.
On the occasion of the merger in 1967 with The Gosho Company, the Company enshrined
its founder’s ideals in a document titled Our Beliefs: Kanematsu’s Guiding Principles.
(Translated from Japanese)

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

KANEMATSU CORPORATION

Businesses Domains
By leveraging of our business networks in Japan and overseas as well as our years of experiencein general trading, and by integrating various functions including information-gathering,market cultivation, business incubation and “project-forming,” risk management and logistics,
we are expanding our business globally.
We are committed to growth and making a contribution to society,by winning ever deeper customer trust and becoming a “Value Creator” in partnership with them,through supply of varied products and services in a wide range of businesses(Electronics & IT, Foods & Foodstuff, Iron & Steel, Machinery & Plant and Environment & Materials).

Electronics & IT
Electronic Components and Materials
Semiconductors and
LCD Manufacturing Equipment
OEM and ODM Solutions
Mobile Solutions
ICT Solutions
Aerospace
Devices Company

Foods & Foodstuff

Environment & Materials

Foods
Meat andMarine Products
GrainsFeedstuff andFertilizers
Pet Products

Crude Oil, Petroleum Products
LPG
Development ofEnvironment-related Materials
and New Technologies
Functional Chemicals
Healthcare
Life Science

Iron & Steel

Machinery & Plant

Iron and Steel Trading
Specialty Steel Trading
Cast and
Forged Steel Products
Domestic Trade and
Raw Materials Supply

Plant Infrastructure Projects
Transportation Machinery
Machine Tools and Industrial Machinery

Annual Report 20111

Financial Highlights
Kanematsu Corporation and Consolidated Subsidiaries
Years ended March 31

2002

2003

2004

2005

2006

2007

902,477
73,54015,779838,975
67,207
15,716

818,473
62,20813,554

886,876
68,142
15,762

1,096,409
81,732
17,982

1,281,331
103,71121,713

7,211

4,995

5,057

4,836

(16,728)

14,615

4,024

2,233

3,247

2,469

(21,686)

7,507

15,734605,717—362,425

10,762
527,340—319,284

23,283507,991—
287,245

38,029520,118—
261,560

26,004
556,046—
246,317

48,767563,176
32,959204,900

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

13.26
51.84
—

7.56
36.38
—

10.13
68.77
—

6.52
93.74
—

(52.43)
62.12
—

17.94
78.75
—

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

26.72
2.6
23.0

16.86
2.0
29.7

19.08
4.6
12.3

8.06
7.3
6.9

(67.73)
4.7
9.5

25.46
5.9
6.2

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 ¥83.15 to U.S.$1.00, the exchange rate prevailing on March 31, 2011.

Net sales and operating income
Net sales

Operating income(¥ billion)
1,500(¥ billion)30(¥ billion)
20

(¥)
100

1,000

20

10

50

500

10

0

0

0

(30)

0

2

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

02

03

04

KANEMATSU CORPORATION

05

06

07

08

09

10

11

Net income (loss)

02

Net income (loss) per share

03

04

05

06

07

08

09

10

11

(100)

2008

2009

2011

2010

Thousands of
U.S. dollars

Millions of yen

1,244,020
90,32722,605

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

936,891
76,90518,02911,267,492
924,895
216,827

28,97577

8,407

13,030156,716

19,016(12,787)

3,528

9,175

110,348

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

62,239503,456
45,587
148,944

42,035414,928
24,936
134,582

45,804
398,629
28,916109,350

49,576388,676
33,101
104,612596,236
4,674,400
398,093
1,260,386

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

45.44
108.95—(30.56)
59.61
—

8.44
69.15
—

21.93
79.07
—

0.26
0.95
—

48.42
9.1
3.3

(36.26)6.0
5.4

Net interest-bearing debt and net debt-equity ratio

Shareholders’ equity

Equity ratio(¥ billion)
50

(%)
10

40

8

30

6

20

4

10

2

02

03

04

05

06

07

08

* Shareholders’ equity = net assets – minority interests* Equity ratio = shareholders’ equity / total assets

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

29.59
8.5
3.2

13.10
7.3
3.8

Shareholders’ equity and equity ratio

0

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

09

10

11

0

Net interest-bearing debt

Net debt-equity ratio(¥ billion)
400(times)
40

300

30

200

20

100

10

0

02

03

04

05

06

07

08

09

10

11

0

* Net interest-bearing debt = interest-bearing debt – cash and bank deposits* Net debt-equity ratio = net interest-bearing debt / shareholers’ equity

Annual Report 20113

To Our Stakeholders
Making our Group a “Value Creator”
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 & IT, Foods & Foodstuff, Iron & Steel, Machinery & Plant, andEnvironment & Materials. While ensuring we can supply quality products and services to our customers through our domestic
and overseas business networks, we remain constantly committed to discovering new business opportunities.
In the 120 years that have passed since our founding, times have changed enormously. While adapting our business modelaccordingly, we have continued to progress. The spirit of Fusajiro Kanematsu — our founder, who always anticipated the needsof his time and boldly took on the challenge of establishing new businesses — still guides the business policy of the entire
Group. In partnership with our customers, we will aim to become a “Value Creator” that innovates new businesses while adapting to social and economic change.
By providing the products and services needed by the customer and society at large, we will continue to show unstinting commitment and a willingness to take on challenges as we prosper and grow with our customers while providing value to society.
We trust we can continue to count on the understanding and support of all our stakeholders.
August 2011
Toshihiro Kashizawa, Chairman

Masayuki Shimojima, President

ChairmanToshihiro Kashizawa

4

KANEMATSU CORPORATION

President
Masayuki Shimojima

Contents
6

Interview with the President	Providing “Value” to all stakeholders is
our commitment.
	In this section, we interview President Masayuki Shimojima regarding Kanematsu’s businessperformance for fiscal 2011 — the first year under the “S-Project” Medium-Term Business Plan,
whereby the Company aims to maintain the ongoing improvement of its business portfolio
while aiming to become a “Value Creator” — as well as measures planned for the near future.

11

Special Feature:

Helping provide the infrastructure needed
for the eco-friendly society of the future— Creating an electric vehicle business model —	We have commenced activities aimed at becoming a “Value Creator,”
while continuing to refine our business focus under the Medium-Term Business Plan.

15 Overview by Business Segment
16 Electronics & IT 17 Foods & Foodstuff 18 Iron & Steel 19 Machinery & Plant 20 Environment & Materials

21

CSR

23

Corporate Governance26

Directors and Corporate Auditors

27

Financial Section
28
30
32
34
35

71

Management’s Discussion and Analysis
Business Risks
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income

36
38
39
70

Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors

78
79
80

Organization Chart
History
Investor Information

Corporate Data
72

Global Network

74

Network

76

Major Consolidated Subsidiaries and Affiliates

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 20115

Interview with the President

Providing “Value” toall stakeholders is
our commitment.
— Toward the attainment of our targets under the “S-Project”
Medium-Term Business Plan (April 2010 – March 2013) —Masayuki Shimojima, President

6

KANEMATSU CORPORATION

“S-Project” Medium-Term Business Plan (April 2010 – March 2013)
Speedy × Stronger = Satisfaction

VisionWith speed

Within the upheaval of the global economy,
grow as a “Value Creator” and contribute to society.

Basic Concepts• Advance the constant refining of business focus
and swiftly take business chances in Japanand abroad to strengthen the revenue base.

Continuing to refine
our business focus

Q.01
Was Kanematsu affectedby the Great East Japan
Earthquake?

Q.02
Please tell us something
about the Group’s businessperformance for fiscal 2011.

Promotinggrowth strategies

Satisfying all stakeholders

Improving the financial position

Strengthening Bolstering
the revenue the business
base
base

• Bolster efficiency and soundness
to strengthen the foothold and management base.
• Deepen mutual confidence with business partners
and jointly pursue the creation of businesses.

Building a stronger
base

Pursuing management efficiency
Deepening the consolidated
management system
Cultivating human resources

A.01 Firstly, I must express my deepest sympathy for the victims of this terrible disaster, and myhopes for the early reconstruction of the devastated areas.
Fortunately, the employees of the Kanematsu Group and their immediate families were spared
the direct impact of the earthquake and tsunami, however we did suffer material damage toinventories, and to buildings and other facilities. The occurrence of this disaster has caused us once
again to strongly feel our responsibility to protect the lives of our employees and their families,
totaling about 20,000 persons.
Based on the Company’s response at the time of the earthquake and tsunami, we have been
taking steps to strengthen our disaster-response system, and have also been reexamining ourassistance for the reconstruction of the affected region, our measures to conserve electricity, andour business continuity plan. Hopefully, our efforts will raise the day-to-day level of awareness ofeach individual with regard to emergency responses and crisis management, so that, in the eventthat they are actually faced with a crisis, they will be able to promptly take appropriate action.

A.02 The Japanese economy showed signs of a fully fledged recovery in fiscal 2011, thanks torising exports on the back of external demand, but the unparalleled damage inflicted by the earthquake and tsunami of March 11 has seriously impacted the country’s economic activity. Outside
Japan, meanwhile, a number of factors threaten the stability of the world economy, including theEuropean sovereign debt crisis and the growing political tension in the Middle East and North
Africa. Nevertheless, strong economic growth continues in the Asian economies, notably China, as
well as in other emerging markets.
Under these circumstances, the Company’s Electronics & IT Division recorded improved transactions in the field of semiconductor manufacturing equipment, thanks to the recovery in demand
for semiconductors, which, in turn was driven by strong sales of advanced mobile phones anddigital home appliances. Our other divisions also enjoyed a steady improvement in performance,
notably the Iron & Steel and Machinery & Plant divisions, thanks to a firm level of transactions
fueled by the resurgence of the automotive industry. As a result, we posted net sales of ¥936.9
billion and a gross profit of ¥76.9 billion, both improvements over the preceding business term.

Annual Report 20117

Interview with the President

We were able to reduce SG&A expenses by ¥3 billion from the previous year through sustained
cost-cutting, thanks partly to which operating income rose 48% year-on-year, to ¥18 billion. In
extraordinary items, we registered extraordinary losses on sales of investments in securities, losseson the valuation of investments in securities, and the application of accounting standards for
asset retirement obligations, as well as extraordinary losses resulting from the Great East Japan
Earthquake, but income before income taxes and minority interests posted an improvement. As
a result, net income came to ¥9.2 billion, up 160% over the previous fiscal year. All these results
exceeded our initial targets.

Q. 03
You project a decline inearnings for fiscal 2012.
Why is this?

A.03 As we posted increases in both revenues and earnings for fiscal 2011, surpassing our initial
targets, it is only natural that market investors will expect further growth in revenues and earnings
for the current business term, and our projections may thus seem rather unsatisfactory.
However, the outlook for the Japanese economy in fiscal 2012 has become still more unclear.
In particular, the aftermath of the Great East Japan Earthquake is having a major impact on all
aspects of economic activity, including raw materials procurement, production, distribution of
goods, electric power supply, and consumer spending.
We have investigated the impact of the disaster on the Group’s individual operational units,
and estimate that the business results of approximately 40% of the Group’s units will be impacted.
Although there will also be some positive impact from one-time demand related to the reconstruction of the affected region, the principal effects will be negative, involving delays in shipments due
to damage sustained by our suppliers’ factories as well as a decline in consumer spending as aresult of the nationwide trend toward voluntary restraint. Taking these known factors into account,
we estimate we will be able to reach our initial targets for fiscal 2012 — the second business term
under our “S-Project” Medium-Term Business Plan — of ¥950 billion in net sales, ¥17 billion in
operating income, ¥12 billion in ordinary income, and ¥5.5 billion in net income.
Amid the present situation, in which it is impossible to make accurate forecasts, we aredetermined, first of all, to achieve our targets for the second year under the “S-Project.”● Results and Plan (FY2010 – FY2012)

(¥ billion)

FY2011FY2010Results

8

KANEMATSU CORPORATION

Results

Plan

FY2012
Change (%)

Plan

Net sales

861.3

850.0

936.9

+10%

950.0

Gross profit

74.1

75.0

76.9

+3%

77.5

Operating income

12.2

15.0

18.0

+20%

17.0

Ordinary income

8.2

10.0

14.3

+43%

12.0

Net income

3.5

4.5

9.2

+104%

5.5

Q. 04Your goal for the first yearof the “S-Project” was“strengthening the revenue
base.” What sort of successhave you had with this?

A.04 During the first year under the plan, with the aim of strengthening our revenue base we
set up new businesses to raise the overall quality of our business portfolio, restructured all ouroperational units, and began focusing on certain specific business areas.
In particular, we made progress in expanding our business base in the field of environmental
equipment and services, which is expected to show strong growth from here onward. To provide
concrete examples, we developed and tested systems that would be used in infrastructure operations for the recharging of electric vehicles, and we also began importing the lightweight andflexible UNI-SOLAR photovoltaic modules from the United States.
We are also taking steps to strengthen our transactions in China and other Asian countries,
where markets are recording strong growth. To this end we have established an office in Shanghaithat will take overall control of our Chinese operations. This will organically link our operations in
China and Hong Kong, and give us an overall grasp of the Chinese market, enabling us to expand
our business scale. Among various new initiatives in China, we have set up a joint venture with aJapanese company for the development and sale of image sensors.

UNI-SOLAR photovoltaic modules
Conventional solar panels made from crystalline silicon present problems
in terms of weight and flexibility, but UNI-SOLAR photovoltaic modules arelightweight, flexible solar panels that can be bent to conform to roof surfaces
for easier installation. These panels can generate electricity efficiently even in
the early morning and at dusk, when the sun is low on the horizon, as well as incloudy conditions.

Q. 05
What measures are you
taking in pursuit of yourgoal of “bolstering thebusiness base?”

A.05 To enhance our business base, we have introduced methods of managing each of our individual commercial rights, as well as related business performance evaluation systems. This enables
us to more easily and accurately grasp the state of progress of our commercial rights portfolio as
well as our business performance trends. We expect the use of these systems to produce greater
efficiency on a range of fronts, including facilitating fast decision-making. The use of the businessperformance evaluation system will help motivate the Group’s employees and make it easier toplace the right staff in the right positions.
In addition, we carried out continual reviews of the Group’s cost structure and made steadyprogress in reducing interest-bearing debt with the aim of building a firm and healthy financial
position. As a result of our efforts, we reduced SG&A expenses for fiscal 2011 by ¥3.0 billion
compared with the previous year, and net interest-bearing debt as of March 31, 2011 stood at¥104.6 billion, with the net debt-to-equity (D/E) ratio at 3.2 and an improvement of the equity ratio
to 8.5%. These figures were all roughly in line with our plans.

Annual Report 20119

Interview with the President

Q. 06
Would you say that theresults of your efforts underthe “S-Project” will
become more visible in thenear future?

Q. 07
In conclusion, do you
have a message for yourstakeholders?

10

KANEMATSU CORPORATION

A.06 We are confident that the measures we took during the first year of the current plan — boththose aimed at strengthening the revenue base and those aimed at bolstering the business base —have helped to create an environment in which new business creation is easier, have laid thefoundations for such creation, and will lead to future growth. Getting this new system up and running took a great deal of time and effort, but by enabling us to reexamine our business operations
from a variety of angles, it will give birth to solutions to the problems facing us. We also feel that
we have rediscovered many of our strengths, such as our existing commercial rights, our humanresources — which are the greatest assets of a trading company — and the possibilities that lie
open to us for the creation of new businesses in growth fields. All in all, I believe we have received
valuable feedback that will set us on the road to growth.
My aim is to stabilize our financial position and realize the resumption of dividend payments tomake Kanematsu into a company that is attractive to all its stakeholders — investors, our business
partners, our correspondent financial institutions, and our employees. We will reassure all our
stakeholders by raising our earning power and building a strong financial position. Our ultimate
goal is to become a “Value Creator” that takes on the challenge of creating new businesses, acompany with the ability to continually develop and open up new fields of business.
However, before that we must make sure of attaining our goals under the “S-Project.” That
will be the first step to repaying our stakeholders for the support they have provided to Kanematsu
over the years.

A.07 The global economy has seen a succession of major changes over the past few years, andcompanies unable to adapt effectively to such changes have been weeded out. Japan’s economy
has suffered from deflation for a number of years, and then in March 2011 the country was hit byan earthquake and tsunami of unprecedented magnitude, and production came to a stop at manyof the factories that have underpinned the economy.
The disaster has had an immeasurable impact not only on the production, distribution, andexport activities of Japan, but also on supply chains worldwide, and there is no room for optimism
regarding future prospects. This is a huge problem for Japan as a whole, and the coming year will
be a critical period for Kanematsu.
All the more because of this, we must not let up in our efforts to realize our goal of becoming
a “Value Creator.” The Company is blessed with wonderful customers and excellent commercial
rights, and we must acquaint ourselves fully withour customers’ needs so that we can live up to their
expectations. Further, we should join hands with ourcustomers to create new businesses and thereby
offer added value. I believe that the Company’s
mission lies in the conduct of such activities.
The management and employees of Kanematsu
will make even greater efforts than hitherto to
expand the scale of the Company’s business. In thisway, we will support the Japanese economy andcontribute to the reconstruction of the earthquakehit region and the revitalization of the entire nation.

Special
FeatureHelping provide the infrastructure needed
for the eco-friendly society of the future— Creating an electric vehicle business model —In the near future, the electric vehicle (EV) may succeed inoverturning the accepted idea that a motor vehicle runs on
gasoline. But for this to become reality, an infrastructure
must be constructed to support such vehicles. Althoughmany issues remain to be resolved, electric vehicles havenumerous potential benefits, not limited solely to helping
combat global warming. Renewable energy is likely to play
an important part in society’s future energy needs, andelectric vehicles are sure to become an essential element in
the social infrastructure of future generations.
In the belief that electric vehicles have a bright future,in 2009 Kanematsu set up an electric vehicle (EV) businessproject team, which is working to develop what we believe
will be an important part of society’s infrastructure in thenext generation.

Promotion of next-generation electric vehicles gets fully underway
Moves are currently afoot in Japan to lay the groundwork for the popularization of low-cost, eco-friendly electric vehicles (EVs) and plug-in hybrid
vehicles (PHVs)* over the next 10 – 15 years, as a promising way to help
reduce CO2 emissions.
In line with the “EV-PHV Town Concept” promulgated by the Ministryof Economy, Trade and Industry, local governments all over Japan arecarrying out various test demonstration projects aimed at paving the way
to the popularization of next-generation electric vehicles: these involvethe creation of initial demand, preparation of the required infrastructure,and education of the public regarding EVs and PHVs. Since April 2010,
Kanematsu has been conducting a test demonstration tourism package
project using EVs in Kyoto Prefecture, which has been selected for the location of the Phase I Model Town. In addition, since November 2010 we havebeen conducting a project in Osaka Prefecture (selected for the location of
the Phase II Model Town) to popularize EV taxis.
These test demonstration projects are receiving the participation of alarge number of companies from different business fields, and many of the
projects are moving forward through collaboration between enterprises
involved in differing industries. In addition to taking charge of the development of services for the operation of recharging facilities for electric vehicles,
Kanematsu is creating a business model centered around next-generation
automobiles that will allow participating companies to fully display their
specialist know-how.
*A plug-in hybrid vehicle (PHV) is a hybrid vehicle (possessing both an electric motor
and an internal combustion engine) that can run solely on electricity if required, andwhose batteries can be recharged simply by plugging in to an ordinary wall socket.

Targets for passenger car ownership ratios(gov’t targets)
Conventional cars
Next-generation cars
Hybrid cars
Electric cars, Plug-in hybrid cars
Fuel-cell cars
“Green diesel” cars

2020

2030

50 – 80%
20 – 50%
20 – 30%
15 – 20%
Up to 1%Up to 5%30 – 50%
50 – 70%
30 – 40%
20 – 30%
Up to 3%
5 – 10%

Ceremony to mark the start of a project in Osaka
to popularize EV taxis

Annual Report 201111

Helping provide the infrastructure needed for the eco-friendly society of the future— Creating an electric vehicle business model —Proposal for test demonstration projects that give full play
to the advantages of electric vehicles
The greatest advantage of electric vehicles is that the power source is electricity rather than gasoline, enabling a dramatic reduction in running costs.
The cost of the electric power required to run an electric vehicle is said tobe approximately one-tenth that of the gasoline required for a conventional
vehicle. (This figure is a rough estimate, and the precise comparison differs
depending on the type of electric vehicle.) Moreover, unlike gasoline-engine
vehicles, an electric vehicle can be “refueled,” i.e., recharged, at home.
On the negative side are the questions of the time taken to recharge
the vehicle’s batteries and their “range” (the maximum distance that thevehicle can travel without recharging). With 200-volt recharging equipment,
it currently requires 7-8 hours to recharge an electric car from zero to fully
charged. The range differs from one type of EV to another, but EVs currently
sold by Japanese makers typically achieve between 160 and 200 kilometers,
and this would be further reduced if the vehicle’s air-conditioning wereoperated simultaneously. At the moment such rapid recharging devices
are available at only a very few locations. Clearly, if there were a number of
rapid rechargers within each urban district, drivers would be able to use EVs
without any worries.
In view of these considerations, at Kanematsu we looked into thequestion of what segment of the community would extract the maximum
advantage from EVs’ low running costs. At the same time, given the fact thatEVs are the ideal form of vehicle for short-distance trips, we searched for
applications for these vehicles where the disadvantages examined above
would not be crucial.
We looked for viable business models that would best take advantageof the unique features of EVs, and came up with taxi services and tourism.
Among many local governments we examined, Kyoto Prefecture was notablefor its focus on tourism and for its environmental protection efforts. For the
purpose of creating a business model that went beyond merely installing EV
recharging devices, and to clarify what sort of companies we would have tocollaborate with, we proposed to the Kyoto Prefectural Government a test

Dedicated EV taxi stand operated in Osaka Prefecture as part of a projectto raise public awareness of the potential of electric vehicles

12

KANEMATSU CORPORATION

demonstration project on the operation of the recharging system developedby Kanematsu to verify the business model we had in mind.
This proposal became a project carried out in cooperation with the“Kyoto Ecological Tourism” project conducted by Kyoto Prefecture andinvolving the participation of 21 companies including taxi service companies,
car rental companies, hotels, travel agencies, and enterprises engaged in thedevelopment of communications equipment and recharging equipment.
The project entailed sightseeing tours using EV taxis, and package tours inwhich the tourists use rental EV cars for their sightseeing, with the necessary
recharging equipment being installed at the hotels where they stay.
Leveraging the excellent reputation our activities in Kyoto had acquired,
we formed a consortium with five other companies in Osaka Prefecture,and under the “Osaka EV Action Program” we conducted a campaign for
approximately three weeks from the middle of February 2011 in which
we offered free “sightseeing taxi” and “on-demand taxi” services. We also
publicized EV taxis via the Internet, including various blogs, as well as via
Twitter, radio commercials, and advertisements in magazines, to raise publicawareness about electric vehicles.
Due to the range limitations of EVs, they are not suited to cruisingaround looking for fares, as conventional taxis often do. For this reason, we
provided near major train stations nine taxi stands exclusively for EV taxis,
and supplied the vehicles with tablet PC terminals equipped with GPS
systems through which EV taxis can receive calls from passengers waitingat the taxi stands. We limited the free service range of the campaign EV
taxi up to five kilometers and tried to publicize the fact that EV taxis are
particularly suited to short-distance journeys, taking into consideration thata five-kilometer drive is sufficient to cover commercial districts in an urban
area like Osaka.
We carried out a street survey of almost 3,000 citizens of Osaka
Prefecture, asking respondents whether they were aware that 50 EV taxis
were operated in Osaka Prefecture. The percentage of respondents answering that they were “well aware of that,” or that they “had heard something
about it,” rose from 13% prior to the project to 42% after the project wasover. In this project, we operated 478 EV taxis for a period of 23 days, racking
up a total of over 11,000 kilometers and 2,800 passengers. The project wasvery successful in raising public awareness of electric vehicles, and had the
additional merit of enabling the Company’s staff to acquire a considerable
amount of knowledge and know-how relating to EV taxis.

Website of the Osaka Prefecture EV taxi
public education project

A leaflet given out as part of
the EV awareness-raising campaign

● Trend of World CO2 Emissions Transport Sector● Breakdown of World CO2 Emissions
by Sector(billion tons CO2)

76Household
11%

5
4
3

Trend of CO2 emissions by road vehicles
2007: 73%

2

Transport
23%

1

Total world CO2
emissions in 2007
29.0 billion tonsPowergeneration
46%

Industry
20%

0
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 (year)■ Road vehicles ■ Railways ■ Coastal marine transport■ Int’l marine transport ■ Int’l air transport■ Domestic air transport

The “Whole Product” Marketing Strategy
The electric vehicle business is a new field for Kanematsu. At the inceptionof the EV/PHV project in 2009, we began with considering what kind ofcontributions Kanematsu could make to EV/PHV projects in general. We
considered a large number of approaches, such as manufacturing andimports, but during our investigation of the EV and PHV field, we cameup against a basic problem: the infrastructure that would allow the use ofelectric vehicles to spread more widely was simply non-existent.
Meanwhile, the automobile market was clearly waiting for EV ownershipto begin growing. Not only do these vehicles contribute to the reduction of
CO2 emissions, which is essential to combat global warming, but in addition,a movement has been gaining ground in Japan to lower the country’s
dependence on oil in view of the high level of crude oil prices. Moreover,
the automakers themselves have begun to compete for the position ofleading maker of eco-friendly vehicles. It seems clear that EVs and PHVs will
become the most common types of automobile in the future.
However, EVs face the challenges of their limited range and the time
taken to recharge the batteries. One possible marketing strategy is the“whole product” concept, in which other products or services are offeredthat supplement the original product. These supplementary products orservices allow the original product to fully display its capabilities and enable
users to enjoy its benefits.
In the case of electric vehicles, the driver needs to know where battery
chargers are installed and whether one of the chargers is available for use.
For effective use of EVs, a network of recharging facilities is required, andthe facilities must be integrated into a system that can provide drivers with
the necessary information. Chargers must also be compact enough for easy
installation in the parking lots of convenience stores or similar locations. By
installing chargers in such places, drivers could more effectively spend the 20
minutes or so required to recharge the batteries. Such a system would raiseuser satisfaction levels, which is the objective of the “whole product” strategy.

■ Others

Source: Material released by the Ministry of
Economy, Trade and Industry, compiledon the basis of the International Energy
Agency’s CO2 Emissions from Fuel
Combustion (2009 Edition)

At the moment, electric vehicles are available, but the necessary
infrastructure has not yet been built, and the business model has not been
fully worked out. In the face of this situation, we at Kanematsu decided to
become involved in the EV business by providing what was missing.

Team VOLTA — a Groupwide Project
Our Team VOLTA, which handles recharging services, is a project teamformed by many business units across the Kanematsu Group, including ourElectronics & IT Division and the Environment & Materials Division, as wellas our affiliated companies Kanematsu Communications Ltd. and Motion Co.
Kanematsu Communications and Motion had previously jointly
developed and sold a billing management system for mobile phones, andthey adapted this system as the “VOLTA System (electric vehicle charging
infrastructure described in the chart on page 14)” for use in billing for EV
recharging services.
The VOLTA System involves the installation of a communications device
within the charger. This device connects the users with the charger operating company via a 3G telecommunications network, allowing managementof data relating to the use of the chargers. By linking smart phones to thecharger network, the user is able to easily locate the nearest recharging
station, complete with information on whether a charger is available.
A reservation for a charger can then be made, and the charger operatingcompany can confirm the user’s ID and conduct billing procedures.
The system also allows the company to monitor and control the chargers
remotely. To provide for users wishing to make use of chargers over a widearea, the system includes an interface that links different charger operatingcompanies, enabling the user to easily switch from one company to anotherand creating a wide-area total network for greater user convenience.

Annual Report 201113

Helping provide the infrastructure needed for the eco-friendly society of the future— Creating an electric vehicle business model —● Electric vehicle charging
infrastructure “VOLTA”

The VOLTA ProjectCharging
device users➝● Location data
● Availability● Waiting times● Charger
reservation

Rival
infrastructureprovisioncompany

Transmission of mobile application data
Receive information➝

Use of charger

Network linkage

Rapidcharger
Database

Use of charger

Ordinary
charger● ID management● Status management● Customer usage data
● Mobile reservation management

Infrastructureprovisioncompany● Billing system● CO2-reduction data
3G wireless network

Creating Win-Win Business Models for a Wide Range ofIndustry Sectors
The sale of the VOLTA system, on its own, will not help expand ownership ofEVs. It is also necessary to involve companies in a wide variety of industrial
sectors and create environments in each market that will favor the spreadof EVs.
Many of the companies that participated in the test demonstration projects described above initially believed there was no relationship between
their businesses and electric vehicles. However, after we had explained tothem the EV business model designed for their own particular industry, theyrealized that they possessed possibilities for EV-related businesses. In otherwords, it was vital for the success of the projects that we could offer win-win
business models whereby each participating company could be assured ofrecovering its investments and making a healthy profit.
In both the Kyoto and Osaka projects, Kanematsu mapped out blueprints for each partner company that encouraged them to play unique rolesin their respective fields, while Kanematsu played the role of coordinator.
We were extremely pleased when these companies reported to us that they
were confident of success in the project, as well as afterwards, when theysaid that participation in the project had been a valuable experience.
When most people hear the term “general trading company,” they thinkof moving materials, in bulk, from one place to another. But these days,
trading companies are being required to focus more on creating businessmodels, and these business models have more to do with motivating personnel and providing information and communication than moving goods.
We expect this kind of business operation to become one of the preferredmodels for trading companies in the future.

example, because renewable energy sources such as solar power depend
heavily on the weather or seasons, if the proportion of electric power in thenational power grid that comes from renewable energy sources were to be
increased, this could lead to instability in voltage and power frequencies.
The construction of a next-generation smart grid has been proposed
as a way to avoid such an eventuality. Such a grid would be able to control
demand to achieve a leveling-out of the supply-demand balance. We
believe that the use of electric vehicles would act as a sort of shock-absorber
to soften the impact of this demand-leveling. EVs would serve as a sort ofpower storage device, as they can accumulate electricity during off-peakperiods such as at night, for use during high-demand periods. The operationof EVs on the power they have accumulated in their batteries means thatelectric power can be directed to other applications. EVs should, in this way,show their worth as a part of the overall infrastructure of society.
Business models involving electric vehicles have just begun to becreated. We believe it is of great significance that Kanematsu was able totake part in the creation of such business models at this juncture. Once EV
ownership has expanded substantially, in the not-too-distant future, we
expect Kanematsu’s name to have already become closely associated with
the EV recharging infrastructure. At Kanematsu, we will continue to create
new EV-related business models with the goal of playing an invaluable rolein building the essential infrastructure for the society of tomorrow.

Section Two,
Information & Electronics Department,
Electronics & IT Division

Kanematsu Plays a Part in Building the Next-Generation
Social Infrastructure
EV-related businesses have enormous future potential. While electricvehicles themselves are still expensive, future technological innovations
should pull prices down and enable EVs to be price-competitive withgasoline-fueled vehicles.
Apart from the transportation infrastructure, another precondition for
the growth of EV ownership will be the nation’s energy infrastructure. For

14

KANEMATSU CORPORATION

Assistant Managers Ryosuke Gonotsubo and Toshiaki Aota

Electronics & IT

P16

Foods & Foodstuff

P17

Overview by
Business Segment
Iron & Steel

P18

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. The Group’s
focus is on Electronics & IT, Foods & Foodstuff, Iron & Steel,
Machinery & Plant, and the Environment & Materials, and it isbuilding strong relationships as it works to create businesses
together with customers.
Foods &
Foodstuff

Electronics & IT

27.1%

29.0%

Machinery & Plant

P19

Iron & SteelSales bysegment(FY2011)

10.5%

Environment &Materials

Machinery & Plant

7.2%
Environment & Materials

P20

24.3%
Other

1.9%
* “Other” segment: Includes the non-reportable segments encompassing
textile business, insurance agent/intermediary business, real estate management and leasing business,
construction materials business and other operations.

Annual Report 201115

Electronics & IT
This segment offers a broad array of products, ranging from electronics-related materials,
parts and equipment to aircraft. It also operates mobile solution and ICT solution businesses.
The segment also focuses on OEM and ODM businesses andprovides added value such as design and manufacturing.

Results for Fiscal 2011

Hirokazu Tamura

Fumihiko Nashimoto

Director

Director

Chief Officer,
Electronics & IT Division

President, Devices Company

Kanematsu’s Strengths●C ustomization and provision of products and services with valueadded functionality tailored to customer needs●D evelopment of products that meet customer needs throughcollaboration with manufacturers from the development stage● Wide-ranging technology and expertise in the electronics field

Main Businesses
Electronic Components Semiconductors, LCD panels,
and Materials
Telecommunications equipment parts
Semiconductors and
LCD Manufacturing
Equipment

Semiconductor manufacturing and testing
equipment, LCD manufacturing and testing
equipment

OEM and ODM Solutions Motorcycle and automobile parts, Analog
radio equipment, Printers and Printer heads

16

Mobile Solutions

Mobile phones, Mobile internet services

ICT Solutions

IT and communications equipment andservices

Aerospace

Aircraft (Fixed Wing, Rotary Wing), Satellites,
and Satellite components and parts

Devices Company

Semiconductor and mechanical parts,
Telecommunications equipment parts,
System boards, Photovoltaic parts, LED partsand materials, Others

KANEMATSU CORPORATION(¥ billion)

2010 Results

2011 Results2012 Plan

Net sales

232.7

253.9

255.0

Gross profit

38.5

41.1

40.5

Operating income

5.8

9.5

8.9

The Company’s Electronics & IT Division registered increased revenues andearnings in almost all fields, particularly in the semiconductor equipment
and components business, contributing strongly to the Company’s overallbusiness performance.
Demand for semiconductors recovered against the backdrop of thesurging popularity of state-of-the-art mobile phones and digital home appliances, as a result of which the Company’s semiconductor manufacturingbusiness enjoyed a major year-on-year improvement in transaction volume,and the mechanical device business and mobile solutions business bothposted good results.
Cost reductions in the ICT solutions business also made a valuable
contribution, and the business recorded a steady increase in profits.
As a result, sales of the Electronics & IT Division posted a year-on-yearincrease of ¥21.2 billion, to ¥253.9 billion, while operating income rose ¥3.7
billion to ¥9.5 billion.

Plans for Fiscal 2012
In the semiconductor equipment and electronic component businesses,
strong demand is expected from emerging nations, primarily in Asia. We willcontinue to support our Japan-based customers who are transferring businesses overseas and provide SCM system development services. In onboard
parts for motorcycles and automobiles and printer-related businesses, wewill focus on leveraging the expertise we have acquired in the European andNorth American markets to develop business operations in Southeast Asia,
China, and India.
In the ICT solutions business, we aim to secure adequate profits by focusing on the creation of high value-added businesses such as infrastructurebuilding and maintenance systems to meet customers’ diversifying needs,
including cloud computing and business continuity plan services. In themobile services business, we will continue to secure profitability by meetingthe needs of the expanding market for sophisticated mobile phones, andwill press on further with expansion in the field of corporate business andoverseas operations.

Foods & Foodstuff
To supply a safe and secure food supply,
we ensure the stable acquisition of grains, feedstuff,
as well as meat and marine products,
and also provide a broad array of food products,
including high value-added items.

Results for Fiscal 2011

Morihiro Toida
Director
Chief Officer, Foods & Foodstuff Division

Kanematsu’s Strengths● Supply of distinctive, high value-added products● Stable sourcing ensures reliability of supplies● Traceability and rigorous hygiene and quality management

Main Businesses
Foods

Canned, frozen & dried fruits, Concentrated
juices, Wine, Coffee, Cocoa, Sugar, Sesame
seed, Peanuts, Miscellaneous beans, Others

Meat and Marine
Products

Meat products, Marine products, Others

GrainsWheat, Barley, Rice, Soybean, Processed
foods, Others

Feedstuff and Fertilizers Feedstuff, Fertilizer, Others
Pet Products

Pet food, Pet products(¥ billion)

2010 Results

2011 Results2012 Plan

Net sales

264.2

271.9

280.0

Gross profit

12.6

11.5

13.0

Operating income

3.6

2.8

3.1

In the Foods & Foodstuff Division, in our food and meat and marine
products businesses, we posted good business results in general, thanks to acomparatively steady balance of supply and demand.
In the foodstuff business, a rise in grain prices on overseas markets
pushed up sales, but profitability deteriorated due to low market prices inJapan, among other factors.
The operating environment in the feedstuff business was difficult, withanimal feed prices in Japan weak, and profit margins declining. Nevertheless,
we maintained a solid level in transaction volume, and the business as awhole held firm.
As a result, sales of the Foods & Foodstuff Division rose ¥7.6 billion yearon-year, to ¥271.9 billion, but operating income declined by ¥0.8 billion to¥2.8 billion.

Plans for Fiscal 2012
In the foods business, we saw a steady improvement in our results in themass retailers business, on which we have focused up to now, as well as
the meal takeout and restaurant businesses. From here onward, we plan topursue greater operational efficiency through collaboration and allocationof roles among Group companies throughout the business flow, fromupstream to downstream operations. At the same time, we will focus on
expanding sales by strengthening our collaborative relationships with ourbusiness partners to build a robust supply and marketing structure.
In the foodstuff business, we intend to reinforce our relationships with
suppliers and expand our marketing channels both in Japan and overseas.
In particular, in response to rising concern over food safety, we will further
enhance our system for the stable supply of non-genetically modified soybeans to increase business volume. In the pet products business, a recent
area of focus, Kanematsu will seek to further expand business by focusing
on private brand and premium brand pet products through strengthened
relationships with our business partners.
Meanwhile, in both the foods and foodstuff businesses, we will
strengthen our overseas sales system, primarily in China and other Asian
countries.

Annual Report 201117

Iron & SteelIn the Iron & Steel Division, we leverage our advanced specialist expertise towork with our users in the development of products with high value-added.
In addition to transactions in the Japanese market for a wide variety ofsteel products — including steel sheets, specialty products such as stainlesssteel, and steel wire for automobiles — we also engage in overseas tradingwith Europe, the United States, and Asian countries.

Results for Fiscal 2011

Takashi Gunji
Director
Chief Officer, Iron & Steel Division

Kanematsu’s Strengths● S upplier of oil country tubular goods and other high-strength,
corrosion-resistant products that perform under the toughest
conditions● S upplier of specialty steel wires, and cast and forged products, forthe automotive industry

Iron and Steel Trading

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

Specialty Steel Trading

Export of stainless steel sheets and plates,
Export of alloy steel wire and bar productsCast and Forged Steel
Products

Import and sales of cast and forged steel
products, Export of automotive parts, Exportof porcelain enamel steel sheets

Domestic Trade and
Raw Materials Supply

Domestic sales of general steel products,
Imports and tripartite trade of ferrous raw
materials, Export and import of steel scrap
and sub-materials

KANEMATSU CORPORATION

2010 Results

2011 Results2012 Plan

Net sales

88.0

98.8

105.0

Gross profit

6.4

7.0

7.0

Operating income

2.4

3.4

3.3

In the iron & steel business, against the backdrop of a business recovery
by the automotive industry, we recorded a firm level of transactions in
automobile-use products including steel wire for customers in Europe andthe United States.
We also enjoyed steady exports to North America and Asia of specialty
steel products, including stainless steel.
Trading in iron ore and cokes was brisk against the background of highprices on raw materials markets, making a solid contribution to our overall
earnings.
As a result, sales for the Iron & Steel Division posted a year-on-year rise of¥10.9 billion to ¥98.8 billion, while operating income was up ¥1.0 billion, at¥3.4 billion.

Plans for Fiscal 2012

Main Businesses

18(¥ billion)

We intend to invest time and resources in the development of high valueadded products such as high-strength, corrosion-resistant steel that can beused in severe working conditions, for marketing to users in the energy andenvironment fields where continued good growth is projected.
We will be making additional efforts to expand exports of steel pipes to
North America for use in drilling for shale gas, which is currently a field of
focus, as well as high value-added stainless steel.
In the specialty steel business, which centers on products for the
automotive industry, we will be taking steps to raise our earnings fromoperations in Asia as well as our mainstay markets of Europe and the UnitedStates.
Regarding our trading in iron and steel in Japan, domestic demandremains weak, and we will continue to take a cautious stance on this market.

Machinery & Plant
In the Machinery & Plant Division, we will direct our efforts
principally into project-forming businesses that contribute toregional development, notably in the field of infrastructure,including chemical plants, papermaking plants, and ODA projects.
We are also conducting transactions involving ships,
and both four-wheeled and two-wheeled vehicles.

Results for Fiscal 2011

Tetsuro Murao
Managing Director
Chief Officer, Machinery & Plant Division

Kanematsu’s Strengths● “Project-forming” businesses which contribute to regional economic
development, and offshore investment programs that support globalized production by Japanese manufacturers● Engaged not only in exporting from Japan, but also in marketingfrom overseas local bases, linked into our worldwide networks● Meeting diverse customer needs by marketing the lineups of major
machine-tool manufacturers in Japan

Main Businesses
Plant Infrastructure
Projects

Chemical and petrochemical plants,
Industrial plants, Utility and process systems
for oil and gas plants, Infrastructure facilities,
Scrap-processing facilities, Environmental
facilities, ODA projects, Electric power andcommunication cable projects, Powergeneration plants

Transportation
Machinery

Shipbuilding, Used ships, Equipment
package deals for new ships, Automobiles
and components, Forklifts, Construction
machinery, General-purpose machinery

Machine Tools andIndustrial Machinery

Machine tools, Industrial machinery andperipheral equipment(¥ billion)

2010 Results

2011 Results2012 Plan

Net sales

61.3

67.3

68.5

Gross profit

5.4

6.5

6.5

Operating income

(0.9)

1.1

0.8

Within the Machinery & Plant Division, transactions involving plants andautomotive components followed a firm trend.
In the machine tools business, we focused on cutting costs, and also
benefited from a recovery in orders, which increased turnover and enabled arecovery in our business performance.
Our processing operations on silicon wafers for solar cells, which are carried out by a subsidiary, posted firm results on the back of strong demand.
As a result, net sales of the Machinery & Plant Division rose ¥6.0 billion
year-on-year, to ¥67.3 billion, while operating income was up by ¥2.0 billionat ¥1.1 billion, marking a return to the black ink following the operating loss
recorded for the previous fiscal year.

Plans for Fiscal 2012
We plan to continue focusing our efforts on our mainstay business areas ofautomotive components and plants.
Regarding machine tools and industrial machinery — our other main
business segment — orders are following a recovery trend, but as capital
investment may record a decline from the previous year due to the impactof the March 11 disaster on the Japanese economy, we will take our customers’ capital spending trends carefully into account while aiming to realize asteady increase in earnings.
In our processing of silicon wafers for use in solar cells, we expect
demand to remain firm in fiscal 2012, and plan to boost our production
capacity to meet demand growth.

Annual Report 201119

Environment & Materials
With the environment, healthcare and medicine as keywords, we arestrengthening our product development and production capabilities.
We are also working on new energy-related business in addition
to the import of crude oil, and the import, export and domestic
trade of petroleum products.

Results for Fiscal 2011

Takashi Gunji
Director
Chief Officer, Environment & Materials Division

Kanematsu’s Strengths● S upply of a wide range of environmental products and services
including fabless manufacturing● Supply of total energy solutions (upstream to downstream)(¥ billion)

2010 Results

2011 Results2012 Plan

Net sales

198.1

227.5

225.0

Gross profit

8.5

8.4

8.0

Operating income

0.9

1.0

0.7

In the Environment & Materials Division, in the functional chemicals business
we registered growth in exports of materials for vehicle-use batteries, whiletransactions in lubricant oil and raw materials for resin followed a firm trend.
In the life sciences business, we posted favorable performance in the saleof colostrum (immunized milk) products, and in the import and sale of bulk
powder pharmaceuticals.
In the energy business the operating environment was severe. Crude
oil prices remained at a high level, but demand in the Japanese market was
sluggish and our profit margin on sales declined.
As a result, net sales of the Environment & Materials Division increased by¥29.3 billion year-on-year, to ¥227.5 billion, while operating income was up¥0.1 billion over the previous fiscal year, at ¥1.0 billion.

Main Businesses

20

Crude Oil, Petroleum
Products

Crude oil, Gasoline, Jet fuel, Kerosene, Diesel
oil, Fuel oil, Lubricant oil

LPG

LPG (Propane, Butane, Autogas)

Development ofEnvironment-relatedMaterials and New
Technologies

Heat reflective paint, New materials forautomotive tires, VOC (Volatile Organic
Compounds) recovery/purge, Carbon credit
tradingFunctional Chemicals

Photovoltaic modules and materials,
Materials for lithium batteries, Materials for
fertilizers, Synthetic rubber, Petrochemical
products

Healthcare

Functional food materials, Healthsupplements

Life Science

Pharmaceuticals and pharmaceuticalintermediates

KANEMATSU CORPORATION

Plans for Fiscal 2012
In the functional chemicals business, we will be taking steps to strengthen
our transactions in environment-related fields such as solar cells and materials for the negative terminals of lithium batteries.
We plan to transfer our operations in the life sciences business to anaffiliated company with the aim of improving efficiency and expandingtransaction volume.
In the energy business, we hope to increase our transactions inpetroleum products in both the Japanese and overseas markets. In addition
to seeking improved earning power, we will also be actively developing thecarbon credit trading business.

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 become 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 Japanese)

Advocate Social Contribution Activities
Commemoration Projects
Among the main commemorative projects we have carried out inaccordance with the will of our founder Fusajiro Kanematsu are the
Research Institute for Economic & Business Administration (Kanematsu
Memorial Hall), a commerce research institute granted by Kanematsu
to Kobe University, the endowment of the Kanematsu Auditoriumof Hitotsubashi University, and the endowment of the Kanematsu

Memorial Institute of Pathology to Sydney Hospital in Australia,
which was partially endowed by Kanematsu with joint funding fromthe Australian Government. At Kobe University, we engage in nonprofit-making activities such as establishing the Kanematsu Foundation
for the Research of Foreign Trade, offering the Kanematsu Fellowshipto graduate students who win our essay prize, and conducting theKanematsu Seminar, a study group on international economics andmanagement. In May of 2011 we held an awards ceremony for winnersof our Fellowship Prize for the year ended March 31, 2011.

Kanematsu Memorial Hall ofKobe University

Awards ceremony for winners ofKanematsu Fellowship Prize for fiscal 2011

The Kanematsu Auditorium ofHitotsubashi University

Kanematsu Memorial Institute of
Pathology, Sydney Hospital
Annual Report 2011

21

CSR

Social Contributions
We would like to take this opportunity to express our deepest sympathy for the victims of the Great East Japan Earthquake, and ourhopes for the early recovery and reconstruction of the devastatedareas.
The Company and all other Group companies, including overseas companies, have donated corporate funds for the assistanceof the victims of this disaster and to support the recovery of theaffected areas. We have also organized the collection of donations
from individual executives and employees of the Company andemployees at our companies overseas. In April of this year we

introduced a system of special vacations for employees wishing toserve as volunteers to assist in the recovery of the disaster-hit areas,
and are encouraging our employees to utilize this system.
We will continue to actively promote support for these reconstruction efforts.
As part of our emphasis on maintaining a close and harmonious
relationship with local communities, in response to requests fromthe government of Chiba City we cooperate in the staging of training sessions for emergency helicopter landings and takeoffs oncea year at the Chiba Athletic Field, which we own. We also make ourtennis courts available for use by local high schools.

Work-Life Balance
The Company has restricted the length of employees’ working hours with the vision of creating a society where there exists a comfortablework-life balance. We have been improving the working environment so that employees can treasure the time they spend with their families,
as well as the time spent on hobbies and participating in social activities.
● Child Care Support
In addition to 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.
●A cquisition of “Kurumin” certification of support
for nurturing of the next generation
In December 2010, Kanematsu received the“Kurumin” certification from the Ministry of22

to supporting the nurturing of the next generation through suchmeasures as helping employees achieve a good work-life balanceso that they can bring up children while remaining active in thework force.
● Family Care Support
In addition to the conventional family care leave system, theCompany has recently expanded special paid holidays for family
care.

Health, Labour and Welfare. This is awarded
to companies that are deemed by the
Ministry to be making valuable contributions● 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.

Environmental Initiatives

CSR Procurement

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 throughour business activities in Japan and overseas. We have moved into
numerous environment-related businesses, mainly in the Environment& Materials Division and the Business Innovation Department.

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.

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 Companies Act of Japan. Three outof the Company’s four Corporate Auditors are outside auditors. The
Company has adopted the current system because, based on thesuggestions and advice of the outside auditors founded on theirexpertise and experience, the system is sufficiently monitored byoutside management and is properly supervised.

● Corporate Governance Structure

General Meeting of Shareholders
Appointment/
Dismissal

Board of Directors

Appointment/
Dismissal
Audit

Appointment/
Dismissal

Board of Corporate Auditors(internal and outside corporate auditors)

Audit

Supervision

Management Committee
Internal Auditing
Department

Project Deliberation Committee
Crisis Management and Compliance Committee
Internal Control Committee

Accounting audit

Accounting Auditor

CSR Committee
Business Divisions/Administrative Departments, Domestic and Overseas Offices(As of June 23, 2011)

Annual Report 201123

Corporate GovernanceInternal Auditing

Action Items for the Corporate GroupThe Internal Auditing Department (eight staff members as of June23, 2011) 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.

In the Kanematsu Group, the senior management of Group
companies meets twice each year and at other additional meetings
as required, and share information about the management of theGroup to facilitate a mutual understanding and common awarenessof corporate governance.

Internal Control (Financial Reporting)
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,
which we began to apply in FY2009, we are developing, operating,assessing, and improving internal controls to ensure reliablefinancial reporting under the Group’s policy for internal controls(the J-SOX plan), which was instituted in April 2007.
The Company-wide internal controls and business processes
at key facilities have been assessed by the Internal Auditing
Department, an independent department in charge of assessment.
The department has concluded that the Group’s internal controls
relating to financial reporting have no significant flaws and are
effective.

24

KANEMATSU CORPORATION

Risk Management
The Company has established policies, systems and procedures forthe management of various types of risk associated with the execution of business, including foreign currency risk, credit risk, market
risk and business investment risk.
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.
* F or more information about the main risks that could affect the Group’s businessresults and financial status, see pages 30 and 31.

Information Management System
With 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 the use of our internal online networks withthe aim of preserving and managing information as an important
asset of the Company, including the protection of personal dataand other information security compliance requirements.
To tighten the security of information systems for risk management, we have established information security management regulations with a view to preventing leaks and outflows of important
information and we have defined uniform standards on the use ofcomputers, networks, e-mails and other means of communication
to protect corporate information and personal data. We are also
constantly reviewing our system infrastructure to increase the levelof security and carry out maintenance operations to ensure thenecessary and appropriate level of security.

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 awarenessof compliance among directors and all employees. In addition
to legal compliance, we are also conducting training courses tofoster sound judgment on ethical matters among our staff. We also
introduced a hotline system for reporting directly to or consultingwith the Crisis Management and Compliance Committee or an
outside lawyer, and established hotline operation regulations.

Compliance Handbook

Compliance Hotline Card

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

Investigate, Audit

Internal Auditing Department

Corporate Planning Department
Management
Committee

Board of Directors

Crisis Management
and Compliance
Committee
Chairperson: Chairman
Vice-chairperson: President

Department Chief Officers

Instructions, Feedback
Reports, Consultation

Superior

Departmental
Compliance Officers

Promotion Office:
CSR Promotion Section[Hotline][For reporting/consultation]

Presidents of the Group Companies
Compliance Officers

Credit Control and Legal Department

Employees of
the Company
Employeesof the Group
Companies

Hotline(Crisis Management and Compliance Committee line)

Hotline (Outside Lawyer Line)IR Activities
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. In
addition, we are eager to participate in meetings with institutional
investors and road shows held by securities companies to provide
explanations and answer questions.

Our website includes an Investor Relations section featuring
financial results, securities reports, briefing materials used by briefing
analysts and investors, and annual reports. We also publish financial
disclosure documents and press releases in a timely manner. The
website also features financial highlights for the last five years, an
IR calendar and stock price information, as well as notices about
general meetings of shareholders and notices and contact details
regarding share handling procedures.
Departments responsible for IR:
We appointed Investor Relations Officers to the Public Relations Section of the
Corporate Planning Department, who are responsible for conducting IR activities
in collaboration with the Accounting Department, Finance Department and otherrelevant departments.

Annual Report 201125

Directors and Corporate Auditors (As of June 23, 2011)

Toshihiro Kashizawa

Masayuki Shimojima

ChairmanPresident

Chief Officer, Internal Auditing

Kazuo Shigemoto

Tetsuro Murao

Fumihiko Nashimoto

Hirokazu Tamura

Senior Managing Director

Managing Director

Director

Director

Chief Officer, Supporting Area, Textiles, Realty,
Finance, Accounting, Business Accounting

Chief Officer, Machinery & Plant Division,
Personnel & General Affairs

President, Devices Company

Chief Officer, Electronics & IT Division

Takashi Gunji

Morihiro Toida

Hideo Kazusa

Tetsuya Kaneko

Director

Director

Director

Director

Chief Officer, Iron & Steel Division,
Environment & Materials Division

Chief Officer, Foods & Foodstuff Division,
General Manager for Osaka Branch

Chief Officer, Corporate Planning,
System Planning

Chief Officer, Credit Control & Legal,
Traffic & Insurance

Yoshiro Niiro

Kenji Irie

Yonosuke Yamada

Yutaka Hirai

Corporate Auditor

Corporate Auditor

Corporate Auditor

Corporate Auditor* Messrs. Yoshiro Niiro, 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.

26

KANEMATSU CORPORATION

Financial Section

Contents
28

Management’s Discussion and Analysis

30

Business Risks

32

Consolidated Balance Sheets

34

Consolidated Statements of Income

35

Consolidated Statements of Comprehensive Income

36

Consolidated Statements of Changes in Net Assets

38

Consolidated Statements of Cash Flows

39

Notes to Consolidated Financial Statements

70

Report of Independent Auditors

Presentation of fiscal year and amount (Japanese yen and U.S. dollars) on p.32–70- “Fiscal 2011” refers to the Company’s consolidated fiscal year ended March 31, 2011 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 201127

Management’s Discussion and Analysis

Business Results

solutions business also enjoyed good results in line with our expectations. The ICT solutions business also recorded a steady improvement inearnings, thanks partly to success in cutting costs.
As a result, net sales in the Electronics & IT Division rose ¥21,152
million to ¥253,854 million, while operating income rose ¥3,705 million
to ¥9,488 million.

In the fiscal year ended March 31, 2011, consolidated net sales
increased by ¥75,614 million year-on-year to ¥936,891 million, whilegross profit rose by ¥2,801 million to ¥76,905 million. This performanceis attributable to increased turnover against the background of brisk
demand from emerging markets in Asia and elsewhere.
Thanks partly to the effect of our continued efforts to reduce selling,
general and administrative expenses, operating income posted a yearon-year increase of ¥5,843 million, to ¥18,029 million. In non-operating
items, despite recording losses on foreign currency transactions, weposted an improvement of ¥176 million in non-operating loss, thanks toincreased dividend income and a reduction in losses on equity-method
investments.
As a result, ordinary income increased by ¥6,019 million to ¥14,257
million. In extraordinary items, an extraordinary loss of ¥1,226 million
was recorded as result of losses on sales of investments in securities,
losses on the valuation of investments in securities, and the applicationof accounting standards for asset retirement obligations, as well as
extraordinary losses resulting from the Great East Japan Earthquake.
Income before income taxes and minority interests came to ¥13,030
million, up ¥4,623 million over the previous fiscal year.
The Company posted net income after adjustments for tax
expenses and minority interests of ¥9,175 million yen, an increase of¥5,647 million over the previous fiscal year, enabling us to attain ourtarget for the first year under our medium-term management plan.

Foods & Foodstuff
Supply and demand were roughly balanced in the foods business andthe livestock and marine products businesses. As a result, sales andearnings were favorable across the board. In the foodstuffs business,sales increased as the prices of cereals rose sharply on overseas markets,
but profits worsened due to low market prices in Japan. Amid a difficult
operating environment, our animal feed business saw a steady increasein volume handled, with solid business results.
As a result, net sales in the Foods & Foodstuff Division posted anincrease of ¥7,620 million, to ¥271,860 million, but operating income
declined by ¥787 million to ¥2,835 million.

Iron & Steel
Exports to Europe and the United States of wire rods for automotive
use held firm, as did exports of special and stainless steel products to
the United States and Asia. Against the backdrop of high raw material
prices, transactions were active in raw materials for iron and steel
production, making a good contribution to this division’s profits.
As a result, net sales by the Iron & Steel Division rose by ¥10,854
million to ¥98,832 million, while operating income increased by ¥975
million to ¥3,410 million.

Segment Information
Electronics & IT
The Company’s semiconductor manufacturing systems businessrecorded greatly improved business compared with the previous
year, thanks to a recovery in demand for semiconductors against the
backdrop of brisk demand for advanced cell phones and digital home
appliances. In addition, the mechanical device business and the mobile

Net sales

Machinery & Plant
Transaction activity maintained a firm trend in automobile parts and inindustrial plants. In the machine tools business, where we continued
to take cost-cutting measures, we registered an increase in transaction

Operating income andoperating income to net sales

1,281,331 1,244,020

21,71319,016

22,60519,027

1,138,755
861,277

Net income (loss) andnet income (loss) per share

18,029936,891
1.7

1.8

1.7

12,186

1.9

45.44
7,507

9,175

17.94

3,528
21.93
8.44

1.4

2007

2008

2009

■ Net sales (¥ million)

28

KANEMATSU CORPORATION

2010

2011

2007

2008

2009

2010

■ Operating income (¥ million)
Operating income to net sales (%)

2011

2007

2008

(30.56)(12,787)
2009
2010■ Net income (loss) (¥ million)
Net income (loss) per share (¥)

2011

value against the background of a recovering trend in orders received.
As a result, net sales in the Machinery & Plant Division were up¥6,040 million at ¥67,300 million, while operating income rose ¥1,987
million to ¥1,062 million.

As a result, the balance of cash and cash equivalents at the endof fiscal 2011, adjusted for the effect of exchange rate changes, cameto ¥67,426 million, for an increase of ¥2,947 million over the previous
term-end.

Environment & Materials

Fundraising and interest-bearing debt

In the functional chemicals business, exports of raw materials for vehicle
batteries increased, while transactions in lubricant oil and raw materials
for resin also held firm. In the life science business, we continued toenjoy favorable sales of colostrum (immunized milk) products as wellas the import and sale of bulk powder pharmaceuticals. In the energy
business, high crude oil prices pushed up turnover, but profit margins
declined, due partly to a fall in demand in the Japanese market.
As a result, net sales in the Environment & Materials Division
increased by ¥29,322 million to ¥227,466 million, while operating
income rose ¥60 million to ¥977 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 the 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 the financial situation.
Interest-bearing debt on a consolidated accounts basis at the endof the reporting fiscal year amounted to ¥173,627 million, down ¥19,476
million from the end of the previous fiscal year. The balance of cash
and cash equivalents was down ¥14,738 million from the end of theprevious fiscal year, at ¥69,014 million, and net interest-bearing debt
came to ¥104,612 million, for a decrease of ¥4,738 million from the endof 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 78% on a consolidated basis (88% on a nonconsolidated basis) at the end of the reporting
fiscal year, indicating the high level of stability of our fundraising.

Other
Net sales in other businesses increased by ¥626 million to ¥17,577 million, while operating income posted a decrease of ¥97 million, to ¥235
million, owing to a deterioration in the profitability of the aluminum
recycling business.

Financial Status
Cash flows
Despite an increase in expenditures relating to transaction funds, net
cash provided by operating activities came to ¥7,827 million as a resultof an inflow of funds, thanks to good business results. Net cash provided
by investing activities amounted to ¥17,322 million, due primarily tothe receipt of payments from time deposits with a maturity of morethan three months. Net cash used in financing activities amounted
to ¥20,664 million, reflecting the reduction of interest-bearing debt
through the continued repayment of loans.

Net interest-bearing debt andnet debt-equity ratio

Equity ratio
9.1

62,239148,944

48,767

2009

42,03545,804

2010

78.75

2011

■ Net interest-bearing debt (¥ million)
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

7.3
6.0

5.9
59.61

3.2

2007

2008

2009

■ Net assets (¥ million)

69.15

2010

8.5

49,576109,350 104,612
3.8

3.3

2008

108.95

134,582
5.4

2007

Despite a deterioration in accumulated comprehensive income as aresult of changes in exchange rates, an increase in retained earnings
from net income led to an increase in net assets of ¥3,772 million overthe end of the previous fiscal year, to ¥49,576 million. As a result, theequity ratio improved by 1.2 percentage points compared with the endof the previous fiscal year, to 8.5%.

Net assets and net assets per share

204,900
6.2

Net assets

79.07

2011

Net assets per share (¥)

2007

2008

2009

2010

2011

Equity ratio(%)* Equity ratio = Shareholders’ equity / Total assets* Shareholders’ equity = Net assets – Minority interests

Annual Report 201129

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 23, 2011.
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
in these shares, which could have an effect on the financial position of
the Group through valuation differences in securities.

30

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.

Security risk related to information systems andinformation security
The Group builds and operates information systems for sharing
information and streamlining its operations. The Group has adopted
information security control rules, and is taking steps to ensure that all
members of the Group are familiar with crisis control responses, to meetthe safety requirements for operating its information systems. However,information systems cannot be made entirely invulnerable to theunauthorized disclosure of business-sensitive information or personal
information through unauthorized access, computer viruses and othermeans, as well as inoperability due to factors such as natural disasters,

destruction of information system facilities attributable to accidents
and other causes, and communication line troubles. Inoperability may
reduce the efficiency of operations that depend on the systems, andseriously affect the future financial position and business results of theGroup, depending on the scale of damages.

Product and facility deterioration risk due tonatural 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.

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.

Business Continuity Plan
Recognizing the necessity of addressing the risk that the continuation of the Company’s business activities may be impededby the occurrence of a major natural disaster, a serious accident,
or an epidemic of an infectious disease, we had drawn up abusiness continuity plan (BCP), but in consideration of the damage suffered by the Company as a result of the Great East Japan
Earthquake of March 11, 2011, we have come to the conclusionthat this BCP requires further improvement. We believe we mustdraw up a plan that enables us not only to ensure the safety of
the Company’s employees and their families in the event of amajor disaster, but also to limit financial damage to a minimum
and facilitate the continuity of the Company’s business operations, for the benefit both of the Company itself and of ourcustomers. We will continue to study and implement ways ofenhancing the effectiveness of our business continuity plan.

Annual Report 201131

Consolidated Balance Sheets
March 31, 2011 and 2010

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2011
JPY

Fiscal 2010
JPY

Fiscal 2011
USD (Note 3)

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

69,01483,752830,002

2. Notes and accounts receivable (Note 7-3)

146,546

133,153

1,762,431

3. Lease investment assets

606

552

7,292

4. Inventories (Note 7-1)

57,08955,827

686,590

5. Short-term loans receivable

1,740

2,267

20,938

6. Deferred tax assets

3,581

1,774

43,077

7. Other

21,058

27,116253,264

(355)

(416)

(4,274)299,283

304,027

3,599,320

1) Leased property, net (Note 7-3)

2,563

2,722

30,833

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

5,149

5,118

61,9263) Machinery, equipment, vehicle, tools and fixtures, net

4,781

5,557

57,5074) Land (Note 7-3)

14,291

14,524

171,880

5) Lease assets, net

1,092

291

13,141

5

3

66

Total tangible fixed assets (Note 7-2)

27,88428,218335,353

2. Intangible fixed assets

1,859

1,843

22,366

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

31,97736,424

384,5762) Long-term loans receivable

12,67913,039152,491

3) Doubtful accounts

14,00615,125

168,454

4) Deferred tax assets

13,325

13,961

160,2645) Other

9,894

9,175

118,998(22,236)(23,187)(267,421)

Total investments and other assets

59,64864,539717,362

Total long-term assets

89,392

94,601

1,075,080

388,676

398,629

4,674,400

AssetsI. Current assets

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.

32

KANEMATSU CORPORATIONFiscal 2011
JPY

Fiscal 2010
JPY

Fiscal 2011
USD (Note 3)

Liabilities
I. Current liabilities
1. Notes and accounts payable

96,13790,5591,156,195

2. Import bills payable

27,11923,591

326,153

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

100,488

104,133

1,208,521

4. Lease obligations

572

328

6,888

5. Accrued income taxes

1,562

870

18,791

6. Deferred tax liabilities

1

—

13

7. Asset retirement obligations

6

—

79

8. Other

26,231

31,586315,477

Total current liabilities

252,120251,070

3,032,117

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

73,13888,969879,601

II. Non-current liabilities
2. Lease obligations

1,248

557

15,013

3. Deferred tax liabilities

364

388

4,387

4. Allowance for employees’ retirement and severance benefits

2,516

2,648

30,261

5. Allowance for retirement benefits for directors and statutory auditors

617

655

7,427

6. Asset retirement obligations

847—

10,197

7. Negative goodwill

—

132

—

8. Other (Note 7-3)

8,245

8,401

99,161

Total non-current liabilities

86,978

101,754

1,046,047

339,099352,824

4,078,165

1. Common stock

27,781

27,781

334,109

2. Capital surplus

27,606

27,644

332,005

3. Retained earnings (Deficit)

8,914

(261)

107,208

Total liabilities
Net assets
I. Shareholders’ equity

4. Treasury stock

(569)

(639)

(6,844)63,73254,524

766,476

1. Net unrealized gains (losses) on securities, net of tax

(166)

57

(2,003)

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

(143)

262

(1,725)

58

58

698

4. Foreign currency translation adjustments(30,379)(25,986)(365,353)

Total accumulated other comprehensive income(30,631)(25,608)(368,383)

III. Minority interests in consolidated subsidiaries

16,475

16,887

198,142

Total shareholders’ equity
II. Accumulated other comprehensive income

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

Total net assets

49,57645,804596,236

Total liabilities and net assets

388,676

398,629

4,674,400

Annual Report 201133

Consolidated Statements of Income
For the years ended March 31, 2011 and 2010

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2011
JPY

I. Net sales
II. Cost of sales (Note 8-1)
Gross profit
III. Selling, general and administrative expenses (Note 8-2)
1. Salaries and bonuses
2. Retirement benefit expenses
3. Outsourcing service charges
4. Provision for doubtful accounts
5. OtherOperating income
IV. Non-operating income
1. Interest income
2. Dividend income
3. Foreign exchange gains
4. OtherV. Non-operating expenses
1. Interest expenses
2. Equity in losses of affiliates
3. Foreign exchange losses
4. OtherOrdinary income
VI. Extraordinary gains
1. Gain on sale of fixed assets (Note 8-3)
2. Gain on sale of investments in securities
3. Gain on liquidation of subsidiaries and affiliates
4. Gain on reversal of allowance for doubtful accounts
5. Gain on negative goodwill
VII. Extraordinary losses
1. Loss on disposal of fixed assets (Note 8-4)
2. Impairment loss on fixed assets (Note 8-5)
3. Loss on sale of investments in securities
4. Impairment loss on investments in securities
5. Loss on closure of business
6. Loss on liquidation of business
7. Loss on adjustment for changes of accounting standard
for asset retirement obligations
8. Loss on disaster (Note 8-6)
9. 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.

34

KANEMATSU CORPORATION

Fiscal 2010
JPY

936,891
859,986
76,905
23,104
1,573
7,659
88
26,449

574
1,188
—
1,331
4,346
374
415
1,728

52
495
4
487
103

58,87518,029

3,093

6,864
14,257

1,143

Fiscal 2011
USD (Note 3)

861,277
787,173
74,104
23,627
2,276
7,895
109
28,010

702
691
569
1,294
4,356
878
—
1,971

224
611
228
986
—

61,91812,186

3,258

7,206
8,238

2,050

11,267,492
10,342,597
924,895
277,860
18,92992,121
1,063
318,095

6,903
14,290—16,00852,271
4,507
4,991
20,789

627
5,959
57
5,865
1,249

92
252
464
560
—
—

158
142
207
434
109
300

1,117
3,041
5,586
6,738
—
—

436
563
—

—
—
529

5,254
6,775
—

3,244
(800)

2,370
13,0302,443
10,587
1,412
9,175

2,606
1,008

1,882
8,407
3,614
—
1,264
3,528

39,014(9,628)708,068
216,827

37,20282,558
171,472

13,75628,512
156,716
29,386
127,329
16,982
110,348

Consolidated Statements of Comprehensive Income
For the years ended March 31, 2011 and 2010

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2011
JPY

Fiscal 2010
JPY

Fiscal 2011
USD (Note 3)

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

10,587—

127,329

(272)
(390)
(4,703)(79)(5,445)
5,141

—
—
—
—
—
—

(3,280)(4,695)(56,561)(958)(65,493)
61,836Comprehensive income attributable to the shareholders of the Company
Comprehensive income attributable to minority interests

4,152
989

—
—

49,94011,896

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

Annual Report 201135

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2011 and 2010

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
Disposition of treasury stock
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
Total changes during the fiscal year
Balance at the end of the fiscal year

36

KANEMATSU CORPORATION

Fiscal 2011
JPY

Fiscal 2010
JPY

Fiscal 2011
USD (Note 3)

27,781

27,781

334,109—27,781—
27,781—
334,109

27,644

27,644332,465(38)(38)
27,606——
27,644(461)(461)
332,005(261)(3,786)(3,140)

9,175
—
9,175
8,914

3,528
(2)
3,525
(261)

110,348—
110,348
107,208

(639)

(632)

(7,694)

(11)
81
(0)
70
(569)

(13)
5
(0)
(7)
(639)

(133)
983
(1)
850
(6,844)54,52451,006

655,740

9,175
(11)
43
(0)
9,207
63,732

3,528
(13)
3
(0)
3,518
54,524

110,348
(133)
522
(1)
110,736
766,476

Fiscal 2011
JPY

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
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
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 2010
JPY

Fiscal 2011
USD (Note 3)

57

(891)

696

(224)
(224)
(166)

949
949
57

(2,699)(2,699)(2,003)

262

173

3,152

(405)
(405)
(143)

88
88
262

(4,877)(4,877)(1,725)

58

58

698

—
58

—
58

—
698

(25,986)(25,409)(312,521)(4,393)(4,393)(30,379)

(576)
(576)
(25,986)(52,832)(52,832)(365,353)(25,608)(26,070)(307,976)(5,022)(5,022)(30,631)461
461(25,608)(60,408)(60,408)(368,383)

16,887

17,099203,101

(412)
(412)
16, 475

(211)
(211)
16,887(4,959)(4,959)198,142

45,80442,035550,866

9,175
(11)
43
(0)
(5,435)
3,772
49,576

3,528
(13)
3
(0)
250
3,768
45,804

110,348
(133)
522
(1)
(65,366)
45,370596,236

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

Annual Report 201137

Consolidated Statements of Cash Flows
For the years ended March 31, 2011 and 2010

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2011
JPY

Fiscal 2010
JPY

Fiscal 2011
USD (Note 3)

I. Cash flows from operating activities
Income before income taxes and minority interests
Depreciation and amortization
Increase in allowance for doubtful accounts
Decrease in allowance for employees’ retirement and severance benefits
Interest and dividends income
Interest expenses
Equity in losses of affiliates(Gain) loss on disposal of fixed assets
Impairment loss on fixed assets
Loss on adjustment for changes of accounting standard for asset retirement obligations
Loss on disaster
Gain on sale of investments in securities, net
Impairment loss on investments in securities
Gain on reversal of allowance for doubtful accounts
Loss on closure of business
Loss on lawsuits(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in notes and accounts payableOther
Sub totalInterest and dividends received
Interest paid
Income taxes paid
Payments for loss on lawsuits
Payments for loss on disasterNet cash provided by operating activities

13,030
2,555
60
(119)
(1,762)
4,346
374
40
252
436
563
(30)
560
(487)
—
—
(21,167)(3,103)
13,9503,424
12,924
1,698(4,390)(2,339)
—
(64)
7,827

8,407
3,071
158
(257)
(1,394)
4,356
878
(65)
142
—
—
(404)
434
(986)
109
529
10,7394,659
9,596(5,392)
34,582
1,374(4,375)(4,000)(1,140)—26,441

156,716
30,731731(1,436)(21,194)
52,271
4,507
490
3,041
5,254
6,775
(372)
6,738
(5,865)——(254,573)(37,325)
167,772
41,180155,440
20,421(52,807)(28,131)—(782)
94,142

II. Cash flows from investing activities(Increase) 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
Increase in loans receivable
Proceeds from collection of loans receivable
Other
Net cash used in investing activities

17,652(1,210)
419
(670)
(450)
1,274
(217)
(2,786)
3,496(184)
17,322(18,907)(1,167)
1,111(999)(1,094)946(237)(2,052)
2,947
306(19,149)

212,302(14,562)
5,051(8,067)(5,424)
15,332(2,617)(33,517)42,048(2,214)
208,333

III. Cash flows from financing activities
Decrease in short-term borrowings, net
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds on issuance of common stock
Other
Net cash used in financing activities(9,192)
48,531(58,680)—(1,323)(20,664)(16,661)
36,614(40,640)60(944)(21,572)(110,549)
583,656(705,715)—(15,914)(248,523)

IV. Effect of exchange rate changes on cash and cash equivalents
V. Net increase (decrease) in cash and cash equivalents
VI. Cash and cash equivalents at beginning of year
VII. Effect of the change in scope of consolidated subsidiaries
VIII. Cash and cash equivalents at end of year (Note 11-1)(1,677)2,808
64,479137
67,426104(14,176)
78,655064,479(20,170)
33,782775,461
1,655
810,897

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

38

KANEMATSU CORPORATION

Notes to Consolidated Financial Statements
For the years ended March 31, 2011 and 2010

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 consolidated financial statements for the fiscal year ended March 31, 2010 are prepared in accordance with the Regulations prior to the revision, while the consolidated
financial statements for the fiscal year ended March 31, 2011 are prepared in accordance with the Regulations after the revision.
The Company and its domestic consolidated subsidiaries maintain their accounts and records in accordance with the provisions set forth in the Companies
Act of Japan and the Financial Instruments and Exchange Law of Japan, and in conformity with accounting principles generally accepted in Japan, 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 the Regulations 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 account balances or breakdowns.

2. Summary of Significant Accounting Policies(a) Scope of Consolidation
Fiscal 2011

Fiscal 2010

(1) Number of consolidated subsidiaries: 79
In the current fiscal year, 3 companies were added to the scope of consolidation due to
new establishment and the increase in significance, while 5 companies were excluded
from the scope of consolidation due to merger or liquidation.

(1) Number of consolidated subsidiaries: 81
In the current fiscal year, 1 company was added to the scope of consolidation due to theincrease in significance, while 9 companies were excluded from the scope of consolidation due to merger, liquidation or sale of shares.

(2) Unconsolidated subsidiaries
5 companies were not included in the scope of consolidation.

(2) Unconsolidated subsidiaries
9 companies were not included in the scope of consolidation.

(3) Reason that certain subsidiaries were excluded from the scope of consolidation
5 unconsolidated subsidiaries were excluded from consolidation as they were immaterial
to the Company in terms of their total assets, net sales, net income and retained earnings,
individually and in the aggregate.

(3) Reason that certain subsidiaries were excluded from the scope of consolidation
9 unconsolidated subsidiaries were excluded from consolidation as they were 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
Fiscal 2011

Fiscal 2010(1) Number of unconsolidated subsidiaries to which the equity method wasapplied: 44 subsidiaries out of 5 unconsolidated subsidiaries were accounted for by the equity
method.
In the current fiscal year, 2 companies were excluded from accounting via the equity
method due to being consolidated for the increase in significance and liquidation.

(1) N umber of unconsolidated subsidiaries to which the equity method wasapplied: 6
6 subsidiaries out of 9 unconsolidated subsidiaries were accounted for by the equity
method.
In the current fiscal year, 1 company was excluded from accounting via the equity
method due to the increase in significance and was consolidated.

(2) Number of affiliated companies to which the equity method was applied: 28
Among 33 affiliated companies, the equity method was applied to investments in 28
companies.
In the current fiscal year, 1 company was added to the scope of consolidation due toincorporation and 1 company was excluded from accounting via the equity method due
to sale of shares.

(2) Number of affiliated companies to which the equity method was applied: 28
Among 33 affiliated companies, the equity method was applied to investments in 28
companies.

(3) Reason that the equity method was not applied to certain affiliated companies
The 1 unconsolidated subsidiary and 5 affiliated companies to which the equity method
was not applied were immaterial to the Company’s consolidated net income andretained earnings, individually and in the aggregate.

(3) Reason that the equity method was not applied to certain affiliated companies
The 3 unconsolidated subsidiaries and 5 affiliated companies to which the equity method
was not applied were immaterial to the Company’s consolidated net income andretained earnings, individually and in the aggregate.

(Changes in accounting policies)
Effective from the current fiscal year, the Company applied the “Accounting Standard for
Equity Method of Accounting for Investments” (Accounting Standards Board of Japan(ASBJ) Statement No.16 dated March 10, 2008) and the “Practical Solution on Unificationof Accounting Policies Applied to Associates Accounted for Using the Equity Method”(ASBJ Practical Issues Task Force (PITF) No.24 dated on March 10, 2008).
There was no impact on net income for the current fiscal year.

Annual Report 201139

Notes to Consolidated Financial Statements(c) Fiscal Year-ends of Consolidated Subsidiaries
Fiscal 2011
Consolidated subsidiaries that have different fiscal year-end dates from the consolidatedbalance sheet date were as follows:
Name of consolidated subsidiary
Kanematsu USA
Kanematsu GmbH
Kanematsu Australia
Kanematsu Europe
KG Aircraft Leasing
30 other companies

Year-end date
December 31
December 31
December 31
December 31
December 31

In preparing the consolidated financial statements, the financial statements of 35
companies with fiscal year-end dates within three months of the consolidated balance
sheet date of March 31, were used. However, material differences in transactions andaccounts arising from the use of these fiscal year-end dates were appropriately adjusted
for in consolidation.

Fiscal 2010
Consolidated subsidiaries that have different fiscal year-end dates from the consolidatedbalance sheet date were as follows:
Name of consolidated subsidiary
Kanematsu USA
Kanematsu GmbH
Kanematsu Australia
Kanematsu Europe
KG Aircraft Leasing
31 other companies

Year-end date
December 31
December 31
December 31
December 31
December 31

In preparing the consolidated financial statements, the financial statements of 36
companies with fiscal year-end dates within three months of the consolidated balance
sheet date of March 31, were used. However, material differences in transactions andaccounts arising from the use of these fiscal year-end dates were appropriately adjusted
for in consolidation.

(d) Short-term Investments and Investments in Securities
Fiscal 2011

Fiscal 2010

(1) Held-to-maturity bonds
Debt securities were stated at cost less the amortization of any premium or discounts,
which are amortized over the period to maturities.

(1) Held-to-maturity bonds
Same as fiscal 2011.

(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” are net of tax
amounts. The cost for marketable securities that have been sold is determined using themoving average method.
The fair value is determined primary based on the average of daily market price forone-month prior to the fiscal year-end.

(2) Other securities (Non-trading purpose)* Marketable securities
Same as fiscal 2011.

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

* Non-marketable securities
Same as fiscal 2011.

(e) Derivatives
Fiscal 2011
Fair value method.

Fiscal 2010Same as fiscal 2011.

(f) Inventories
Fiscal 2011
Cost method principally determined by the moving average method(carried at the lower of cost or market value on the balance sheet).

Fiscal 2010Same as fiscal 2011.

(g) Property and Equipment
Fiscal 2011
(1) Tangible fixed assets (excluding lease assets)
The declining balance method is used for tangible fixed assets other than buildings(excluding auxiliary equipment) and leased property.
The straight-line method is used for buildings (excluding auxiliary equipment) and forleased property.
The ranges of principal estimated useful lives are as follows.

Fiscal 2010
(1) Tangible fixed assets
Same as fiscal 2011.

Buildings and structures
3 – 50 years
Machinery, equipment, vehicle, tools and fixtures 2 – 25 years(2) Lease assets
Depreciation on lease assets is recorded using the straight-line method over the leaseterm, assuming a residual value of zero.
Finance lease transactions that commenced on or before March 31, 2008 are
accounted for as operating leases.

40

KANEMATSU CORPORATION(2) Lease assets
Same as fiscal 2011.

(h) Allowance for Doubtful Accounts
Fiscal 2011
The Company and its consolidated subsidiaries (The “Companies”) provide an allowancefor doubtful accounts to cover credit losses, based on estimates of collectibility of
individual accounts and past bad debt loss experiences.

Fiscal 2010Same as fiscal 2011.

(i) Allowance for Employees’ Retirement and Severance Benefits
Fiscal 2011
The Company and certain of its subsidiaries provide for retirement allowances based on
the present value of projected benefit obligations and the fair 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 are amortized as expenses using
the straight-line method over five years, a predetermined 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 toten years, within the average expected remaining service period of the employees,
and are recorded as expenses in the subsequent years in which the gains or losses arerecognized.

Fiscal 2010
The Company and certain of its subsidiaries provide for retirement allowances based on
the present value of projected benefit obligations and the fair 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 are amortized as expenses using
the straight-line method over five years, a predetermined 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 toten years, within the average expected remaining service period of the employees,
and are recorded as expenses in the subsequent years in which the gains or losses arerecognized.
(Changes in accounting policies)
The Company and certain of its subsidiaries have applied the “Accounting Standard for
Retirement Benefits (Part 3)” (Accounting Standards Board of Japan (ASBJ) Statement
No.19 dated on July 31, 2008) from April 1, 2009.
As actuarial gains and losses are amortized from the following fiscal year, this change
has no effects to operating income, ordinary income and income before income taxes
and minority interests.
Unamortized net actuarial losses caused by this change are ¥377 million.

(j) Allowance for Loss on Guarantees
Fiscal 2011
The Companies provide an allowance for potential loss on guarantees provided by theCompanies on unconsolidated subsidiaries, affiliated companies or others considering
their financial conditions.

Fiscal 2010Same as fiscal 2011.

(k) Allowance for Loss on Lawsuits
Fiscal 2011
The Companies provide an allowance for potential losses on lawsuits.

Fiscal 2010Same as fiscal 2011.

(l) Allowance for Retirement Benefits for Directors and Statutory Auditors
Fiscal 2011
The Company and certain of its subsidiaries provide an allowance for retirement benefits
for directors and statutory auditors, which is calculated by estimating the required payable as of the balance sheet date in accordance with the internal rules.

Fiscal 2010Same as fiscal 2011.

(m) Translation of Foreign Currencies
Fiscal 2011
All monetary assets and liabilities denominated in foreign currencies are translated 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 historicalacquisition date exchange rates. Differences in yen amounts arising from this translation
are shown as “Foreign currency translation adjustments” and “Minority interests inconsolidated subsidiaries” recorded in “Net assets.”

Fiscal 2010Same as fiscal 2011.

Annual Report 201141

Notes to Consolidated Financial Statements(n) Hedge Accounting
Fiscal 2011

Fiscal 2010

(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 overfuture periods. For certain interest rate swaps designated as hedging instruments thatmeet specific matching criteria, the amounts received or paid under such interest rate
swap agreements are added 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 aremeasured by contract rate.

(1) Hedge accounting method
Same as fiscal 2011.

(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-relatedInterest rate swaps / Interest rate options(2) Hedging instruments and hedged items
Same as fiscal 2011.

(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 offluctuations in commodity prices, foreign currencies and interest rates for their operating
and financing activities.

(3) Hedging policy
Same as fiscal 2011.

(4) Method of evaluating the effectiveness of hedging activities
The Company and certain of its consolidated subsidiaries evaluate the effectiveness 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.

(4) Method of evaluating the effectiveness of hedging activities
Same as fiscal 2011.

(5) Other
Risk management is performed by the management division, which is independent of
the trading section. Also, reporting to management is performed in accordance with theinternal rules of the Company on a regular basis.

(5) OtherSame as fiscal 2011.

(o) Amortization of Goodwill
Fiscal 2011

Fiscal 2010

Goodwill whose amortization period can be reasonably estimated is amortized over theestimated 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 overthe estimated period. Otherwise negative goodwill is amortized over 5 years using thestraight-line method.

Goodwill and negative goodwill whose amortization period can be reasonably estimatedare amortized over the estimated period. Otherwise goodwill and negative goodwill areamortized over five years using the straight-line method.

(p) Scope of Cash and Cash Equivalents in the Consolidated Statements of Cash Flows
Fiscal 2011
Cash and cash equivalents in the consolidated statements of cash flows are comprisedof 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 tocash for which the risk of changes in value is insignificant.

42

KANEMATSU CORPORATION

Same as fiscal 2011.

Fiscal 2010

(q) Consumption Taxes
Fiscal 2011
Consumption tax and local consumption tax on goods and services are not includedin the revenue and expense amounts subject to such taxes in the accompanying
consolidated statements of income.

Fiscal 2010Same as fiscal 2011.

(r) Consolidated Tax ReturnFiscal 2011
The Company and its wholly owned domestic subsidiaries have adopted the consolidated tax regime, and as such file a consolidated corporate-tax return.

Fiscal 2010Same as fiscal 2011.

(s) Valuation of Assets and Liabilities of Consolidated Subsidiaries
Fiscal 2011
Not applicable.

Fiscal 2010
The Company applies the full mark-to-market method for the valuation of assets andliabilities of consolidated subsidiaries at the time of their acquisition.

3. United States Dollar Amounts
The U.S. dollar amounts appearing in the consolidated financial statements and notes thereto represent the arithmetical results of translating yen to dollars at
the rate of ¥83.15 to U.S.$1.00, the exchange rate prevailing on March 31, 2011. 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 the above, or any other rate.

4. Significant Accounting Changes
Fiscal 2011

Fiscal 2010

(Accounting Standard for Asset Retirement Obligations)
Effective from the current fiscal year, the Company applied the “Accounting Standard for
Asset Retirement Obligations” (ASBJ Statement No.18 dated on March 31, 2008) and the“Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance
No.21 dated on March 31, 2008). As a result of the change, operating income, ordinary
income and income before income taxes and minority interests for the fiscal year ended
March 31, 2011 decreased by ¥56 million ($676 thousand) and ¥493 million ($5,930
thousand), respectively.

Not applicable.

(Accounting Standard for Business Combinations)
Effective from the current fiscal year, the Company applied the “Accounting Standard
for Business Combinations” (ASBJ Statement No.21 dated on December 26, 2008), the“Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No.22
dated on December 26, 2008), the “Partial amendments to Accounting Standard for
Research and Development Costs” (ASBJ Statement No.23 dated on December 26,2008), the “Accounting Standard for Business Divestitures” (ASBJ statement No.7 datedon December 26, 2008), the “Accounting Standard for Equity Method of Accounting forInvestments“ (ASBJ Statement No.16 issued on December 26, 2008), and the “Guidanceon Accounting Standard for Business Combinations and Accounting Standard forBusiness Divestitures” (ASBJ Guidance No.10 dated on December 26, 2008).

Not applicable.

5. Changes to Presentation Methods
Fiscal 2011

Fiscal 2010

(Consolidated statements of income)Due to the application of the “Cabinet Office Ordinance of Partial Revision to theRegulation for Terminology, Forms and Preparation of Financial Statements” (Cabinet
Office Ordinance No.5, dated on March 24, 2009) based on the “Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No.22 dated on December 26, 2008),“Income before minority interests” is presented in the consolidated statements of income
from the current fiscal year.

(Consolidated statements of income)“Foreign exchange gains” is separately disclosed for the current fiscal year, as it has
exceeded the 10 percent of “Non-operating income” amount. The amount of “Foreignexchange losses” that is included in “Other” in “Non-operating expenses” in the previous
fiscal year is ¥719 million.

Annual Report 201143

Notes to Consolidated Financial Statements

6. Supplementary Information
Fiscal 2011

Fiscal 2010

Effective from the current fiscal year, the Company applied the “Accounting Standard
for Presentation of Comprehensive Income” (ASBJ Statement No.25, dated on June 30,2010). However, the amounts for “accumulated other comprehensive income” and “total
accumulated other comprehensive income” for the previous fiscal year are the amountsof “valuation and translation adjustments” and “total valuation and translation adjustments” in the consolidated financial statements of the previous fiscal year.

Not applicable.

7. Notes to Consolidated Balance Sheets
Fiscal 2011

Fiscal 2010
1. Details of inventories are as follows

1. Details of inventories are as follows
Merchandise and finished goods
Real estate for sale
Raw materials and supplies
Work in progress
Total

44

JPY
54,597
921
1,043
527
57,089USD
656,613
11,082
12,554
6,342
686,590

Merchandise and finished goods
Real estate for sale
Raw materials and supplies
Work in progress
Total

JPY
52,783
947
1,056
1,038
55,827

2. The amount of accumulated depreciation of tangible fixed assets is ¥31,115 million($374,215 thousand).

2. The amount of accumulated depreciation of tangible fixed assets is ¥30,192 million.

3. Pledged assets and associated secured obligations
Details of pledged assets are as follows:
JPY
Bank deposits
16
Notes receivable
1,867
Fixed assets for lease
2,338
Buildings and structures
42
Land
84
Investments in securities
139
Total
4,488

USD
192
22,46528,120
508
1,012
1,677
53,975

3. Pledged assets and associated secured obligations
Details of pledged assets are as follows:
JPY
Bank deposits
29
Notes receivable
1,869
Fixed assets for lease
2,564
Buildings and structures
323
Land
237
Investments in securities
139
Total
5,164

Details of associated secured obligations are as follows:
JPY
Short-term borrowings
3,774
Long-term borrowings
1,603
Non-current liabilities and others
1,289
Guaranteed obligations
4

USD
45,40019,282
15,50451

Details of associated secured obligations are as follows:
JPY
Short-term borrowings
4,862
Long-term borrowings
1,188
Non-current liabilities and others
1,355
Guaranteed obligations
13

In addition to the foregoing pledged assets, the following items are tendered as security
deposit or substitution for trading.
JPY
USDBank deposits
336
Investments in securities
1,827
21,974
Total
1,830
22,011

In addition to the foregoing pledged assets, the following items are tendered as security
deposit or substitution for trading.
JPY
Bank deposits
3
Investments in securities
2,023
Total
2,026

4. Investments in securities included the following accounts of unconsolidated subsidiaries and affiliated companies.
JPY
USD
Investments in securities
6,077
73,090(Share stocks)(5,634)(67,767)(Equity interest)(442)(5,323)

4. Investments in securities included the following accounts of unconsolidated subsidiaries and affiliated companies.
JPY
Investments in securities
6,703(Share stocks)(6,255)(Equity interest)(447)

KANEMATSU CORPORATIONFiscal 2011

Fiscal 2010

5. Revaluation reserves for land
5. Revaluation reserves for landSame as fiscal 2011.
Hokushin Co., Ltd. and KANEYO Co., Ltd., equity-method affiliates of the Company,
revalued land held for business in accordance with the “Law Concerning Revaluation ofLand” (Law No.34 enacted on March 31, 1998) and the “Law to Partially Modify the Law
Concerning Revaluation of Land” (Law No.24 enacted on March 31, 1999 and Law No.19
enacted on March 31, 2001). 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 to the unrealized
gains on revaluation of land.
6. Liability for guarantee
Guarantees are provided to unconsolidated subsidiaries on their borrowings from thirdparty financial institutions as follows:
Name of obligor
JPY
USD
Century Textile Industry
877
10,556
True Corporation Public
407
4,903
Japan Logistics
118
1,425
Others
1,957
23,544
Total
3,361
40,428

6. Liability for guarantee
Guarantees are provided to unconsolidated subsidiaries on their borrowings from thirdparty financial institutions as follows:
Name of obligor
JPY
Century Textile Industry
1,052
True Corporation Public
407
Watana Inter-trade163
Others
2,884
Total
4,507

Keep-well or agreements similar to guarantees are included in the above accounts.

Keep-well or agreements similar to guarantees are included in the above accounts.

7. T he amount of discounted notes receivable is ¥11,736 million ($141,144 thousand),of which ¥11,138 million ($133,955 thousand) was for discounted export bills, and theamount of endorsed notes receivable is ¥92 million ($1,118 thousand).

7. T he amount of discounted notes receivable is ¥7,272 million, of which ¥6,335 million
was for discounted export bills, and the amount of endorsed notes receivable is ¥99
million.

8. Notes to Consolidated Statements of Income
Fiscal 2011

Fiscal 2010

1. Loss on devaluation of inventories
Inventories are carried at the lower of cost or market value in the balance sheet. A loss ondevaluation of inventories of ¥217 million ($2,614 thousand) was included in cost of sales.

1. Loss on devaluation of inventories
Inventories are carried at the lower of cost or market value in the balance sheet. As aresult of offsetting a loss on devaluation of inventories in the current fiscal year against areversal of loss on devaluation of inventories in the previous fiscal year, a net ¥395 millionof reversal of loss on devaluation of inventories was included in cost of sales.

2. Research and development expenses
Research and development expenses are included in general and administrative
expenses: ¥397 million ($4,783 thousand).

2. Research and development expenses
Research and development expenses are included in general and administrative
expenses: ¥364 million.

3. Gain on sale of fixed assets
Details of gain on sale of fixed assets are as follows:

3. Gain on sale of fixed assets
Details of gain on sale of fixed assets are as follows:
JPY

Machinery, equipment, vehicle,
tools and fixtures
Land
Others
Total

25
18
7
52

4. Loss on disposal of fixed assets
Details of loss on disposal of fixed assets are as follows:
JPY
Buildings and structures
25
Machinery, equipment, vehicle,
tools and fixtures
21
Land
19
Intangible fixed assets
11
Others
15
Total
92

USD
307
224
96
627

USD
309
255
231
135
187
1,117

JPY
Machinery, equipment, vehicle,
tools and fixtures
Others
Total

222
2
224

4. Loss on disposal of fixed assets
Details of loss on disposal of fixed assets are as follows:
JPY
Machinery, equipment, vehicle,
tools and fixtures
55
Land
49
Buildings and structures
38
Others
15
Total
158

Annual Report 201145

Notes to Consolidated Financial Statements

Fiscal 2011

Fiscal 2010

5. Impairment loss on fixed assets
The Companies recorded impairment loss on fixed assets in the current fiscal year, which
are summarized in the following table.
Use
Location
Type
JPY
USD
Business assets
Fukuoka, Japan
Buildings, etc.
9118
Idle assets
Hyogo, Japan
Buildings, land, etc.
185
2,228
Idle assets
Tokyo, Japan
Telephone57
696
subscription rights
Total
252
3,041

5. Impairment loss on fixed assets
The Companies recorded impairment loss on fixed assets in the current fiscal year, which
are summarized in the following table.
Use
LocationType
JPY
Business assets
Fukuoka, Japan
Buildings, land, etc.
142
Total
142

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, impairment losses of ¥9 million ($118
thousand) were recorded as an extraordinary loss by reducing their carrying amounts
to their recoverable amounts. Out of ¥9 million ($118 thousand) of the impairment
losses, ¥8 million ($103 thousand) was for buildings and structures and ¥1 million ($15
thousand) was for others.
For the idle assets which the Company has no plan to use in the future, ¥243 million($2,924 thousand) of impairment losses were recorded as an extraordinary loss by reducing their carrying amounts to memorandum value. Out of ¥243 million ($2,924 thousand)of the impairment losses, ¥33 million ($403 thousand) was for buildings and structures, ¥0
million ($3 thousand) was for machinery, equipment, vehicle, tools and fixtures, ¥151 million ($1,821 thousand) was for land and ¥57 million ($696 thousand) was for telephone
subscription rights.
The recoverable value is whichever greater, net selling value or value in use. Net selling
value is estimated based on the appraisal of professional real estate appraisers, and value
in use is calculated using discounted future cash flows with the discount rate of 2.89 %.
6. Loss on disaster was recorded in connection with the Great East Japan Earthquake ofMarch 11, 2011. The detail of loss on disaster is as follows:
JPY
USD
Loss on damage of inventories
454
5,471
Relief and recovery support money
57
692
Cost of restoration of fixed assets
40
481
Loss on damage of fixed assets
678
Others
4
52
Total
563
6,775

The Company assesses impairment losses for business assets by grouping the assets foreach business operating unit, on the managerial accounting basis.
For the business assets with lower profitability due to recent declining market prices
and performance in real estate and overall deterioration of economic environment,
impairment losses of ¥142 million were recorded as extraordinary loss from reducing
their carrying amounts to their recoverable amounts. The breakdown of the impairment
losses is as follows: ¥80 million for land, ¥47 million for buildings and structures, ¥13
million for machinery, equipment, vehicle, tools and fixtures, and ¥2 million for others.
The greater of net selling or use value is used as the recoverable value for businessassets. The net selling value is based on appraisal provided by professional real estateappraisers, and the use value is calculated by discounted future cash flows using aninterest rate of 3.0%.

6. Not applicable.

9. Notes to Consolidated Statements of Comprehensive Income
Fiscal 2011
1. Comprehensive income of previous fiscal year
Comprehensive income attributable to the shareholders of the Company
Comprehensive income attributable to minority interests
Total

JPY
3,990
1,322
5,312

USD
47,987
15,902
63,889

JPY
979
52
(554)
43
520

USD
11,774630(6,671)521
6,254

2. Other comprehensive income of previous fiscal year
Net unrealized gains on securities, net of tax
Net gains on deferred hedges, net of tax
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for equity method
Total

46

KANEMATSU CORPORATION

10. Notes to Consolidated Statements of Changes in Net Assets
Fiscal 2011
Class and number of shares issued and treasury stock
Number of sharesat end of previous term(thousand shares)

Increase in shares
during the term(thousand shares)

Decrease in shares
during the term(thousand shares)

Number of sharesat end of term(thousand shares)

422,501
422,501————

422,501
422,501

4,303
4,303

145
145

570
570

3,878
3,878

Shares issued
Common shares
Total
Treasury stock
Common shares (Notes 1, 2)
Total(Notes) 1. The breakdown of the increase of 145 thousand common shares during the term is as follows:
Increase as a result of fractional share repurchases: 145 thousand shares
The Company’s portion of treasury stock (the Company’s stock) added due to changes in shares to companies applied equity method that attributes to the Company:
0 thousand shares
2. The breakdown of the decrease of 570 thousand common shares during the term is as follows:
Decrease as a result of the disposition of fractional shares: 570 thousand sharesFiscal 2010
Class and number of shares issued and treasury stock
Number of sharesat end of previous term(thousand shares)

Increase in shares
during the term(thousand shares)

Decrease in shares
during the term(thousand shares)

Number of sharesat end of term(thousand shares)

422,501
422,501————

422,501
422,501

4,173
4,173

166
166

36
36

4,303
4,303

Shares issued
Common shares
Total
Treasury stock
Common shares (Notes 1, 2)
Total(Notes) 1. The breakdown of the increase of 166 thousand common shares during the term is as follows:
Increase as a result of fractional share repurchases: 165 thousand shares
The Company’s portion of treasury stock (the Company’s stock) added due to changes in shares to companies applied equity method that attributes to the Company:
0 thousand shares
2. The breakdown of the decrease of 36 thousand common shares during the term is as follows:
Decrease as a result of the disposition of fractional shares: 36 thousand shares

11. Notes to Consolidated Statements of Cash Flows
Fiscal 2011
1. Cash and cash equivalents as of March 31, 2011, consist of the following:
JPY
USD
Cash and bank deposits
69,014830,002
Time deposits which deposit terms
exceed three months(1,588)(19,105)
Cash and cash equivalents
67,426810,897

Fiscal 2010
1. Cash and cash equivalents as of March 31, 2010, consist of the following:
JPY
Cash and bank deposits
83,752Time deposits which deposit terms
exceed three months(19,273)
Cash and cash equivalents
64,479Annual Report 201147

Notes to Consolidated Financial Statements

12. Lease Transactions
Fiscal 2011

Fiscal 2010

<Leases as Lessee><Leases as Lessee>
1. Finance leases
1. Finance leases
Finance leases are leases for which the ownership of the leased property is not transferred Same as fiscal 2011.
to the lessees.
[1] Detail of lease assets
Tangible fixed assets
Principally the machinery for food business (Machinery, equipment, vehicle, tools andfixtures).

[1] Detail of lease assets
Tangible fixed assets
Same as fiscal 2011.

[2] Depreciation method of lease assets
Described in Note 2. Summary of Significant Accounting Policies, (g) Property andEquipment.
The finance lease transactions commenced on or before March 31, 2008 which areaccounted for as operating leases, are as follows:[2] Depreciation method of lease assets
Same as fiscal 2011.

(1) Acquisition cost, accumulated depreciation and balance at the end of the term ofleased property:(1) Acquisition cost, accumulated depreciation and balance at the end of the term ofleased property:

Acquisition
cost
JPY
USD
Machinery, equipment,
vehicle, tools
and fixtures
Others
Total

1,068
4
1,072

12,84652
12,898

Accumulated
depreciation
JPY
USD
776
3
780

9,344
37
9,381

Same as fiscal 2011.

Balance at
end of term
JPY
USD
291
1
292

3,502
15
3,517

Machinery, equipment,
vehicle, tools
and fixtures
Others
Total

Acquisition
cost
JPY

Accumulated
depreciation
JPY

Balance at
end of term
JPY

1,548
4
1,552

1,019
2
1,022

528
2
530

(2) Future minimum lease payments outstanding at the balance sheet date are as follows: (2) Future minimum lease payments outstanding at the balance sheet date are as follows:
JPY
USD
JPY
Due within one year
236
2,842
Due within one year549
Due after one year
254
3,064
Due after one year
484
Total
491
5,906
Total
1,033

48

(3) Payments to lessors, depreciation and interest expenses are as follows:
JPY
USD
Payments to lessors
284
3,416
Depreciation
266
3,208
Interest expenses
15
188(3) Payments to lessors, depreciation and interest expenses are as follows:
JPY
Payments to lessors
431
Depreciation
415
Interest expenses
24(4) Computation of depreciation
Depreciation is computed using the straight-line method over the lease term assuming a
residual value of zero.

(4) Computation of depreciation
Same as fiscal 2011.

(5) Computation of interest expenses
The excess amount of the sum of minimum lease payment over the acquisition cost isregarded as accumulated interest expenses, and is allocated to each period based on theinterest method.

(5) Computation of interest expenses
Same as fiscal 2011.

<Impairment Loss>
No impairment loss is recorded nor allocated to leased assets.

<Impairment Loss>
Same as fiscal 2011.

KANEMATSU CORPORATIONFiscal 2011

Fiscal 2010

2. Operating leases
Future lease payments outstanding at the balance sheet date are as follows:
JPY
USD
Due within one year
394
4,739
Due after one year880
10,588
Total
1,274
15,327

2. Operating leases
Future lease payments outstanding at the balance sheet date are as follows:
JPY
Due within one year379
Due after one year
1,258
Total
1,638

<Leases as Lessor>
1. Finance leases[1] Detail of the lease investment assets
Current assets<Leases as Lessor>
1. Finance leases[1] Detail of the lease investment assets
Current assets
JPY
618
(12)
606

Lease payments received
Interest income
Lease investment assets

USD
7,440
(148)
7,292

Lease payments received
Interest income
Lease investment assets

JPY
563
(11)
552

[2] Future lease receivables outstanding at the balance sheet date are as follows:
Current assets
JPY
USD
Due within one year
305
3,679
Over one year and within two years
220
2,656
Over two years and within three years
76920
Over three years and within four years
11142
Over four years and within five years
343Over five years——[2] Future lease receivables outstanding at the balance sheet date are as follows:
Current assets
JPY
Due within one year
232
Over one year and within two years
194
Over two years and within three years
103
Over three years and within four years
17Over four years and within five years
3
Over five years
0

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

Same as fiscal 2011.

(1) Acquisition cost, accumulated depreciation and balance at the end of the term ofleased property:(1) A cquisition cost, accumulated depreciation and balance at the end of the term ofleased property:

Acquisition
cost
JPY
USD
Machinery, equipment,
vehicle, tools
and fixtures
Total

18
18

223
223

Accumulated
depreciation
JPY
USD
17
17

209
209

Balance at
end of term
JPY
USD
1
1

14
14

Machinery, equipment,
vehicle, tools
and fixtures
Total

Acquisition
cost
JPY

Accumulated
depreciation
JPY

Balance at
end of term
JPY

18
18

15
15

2
2

(2) Future minimum lease payments receivable outstanding at the balance sheet dateare as follows:
JPY
USD
Due within one year
120
1,444
Due after one year
84
1,018
Total
204
2,462

(2) Future minimum lease payments receivable outstanding at the balance sheet dateare as follows:
JPY
Due within one year348
Due after one year
205
Total
554

(Note) Related sub-lease payments against the above receivable are ¥204 million ($2,454 thousand)(including ¥119 million ($1,436 thousand) for due within one year).
The sub-lease payments against the above receivables approximate the future minimum
lease payments as the sub-lease transactions arranged by the companies are intended to passthrough these costs in almost identical terms.

(Note) Related sub-lease payments against the above receivable are ¥549 million (including ¥344 million
for due within one year).
The sub-lease payments against the above receivables approximate the future minimum
lease payments as the sub-lease transactions arranged by the companies are intended to passthrough these costs in almost identical terms.

(3) Lease payments received, depreciation and interest income are as follows:
JPY
USD
Lease payments received
448
Depreciation
1
21
Interest income
01(3) Lease payments received, depreciation and interest income are as follows:
JPY
Lease payments received
4
Depreciation
2
Interest income0Annual Report 201149

Notes to Consolidated Financial Statements

Fiscal 2011

Fiscal 2010

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

(4) Computation of interest
Same as fiscal 2011.

2. Operating leases
Future lease payments receivable outstanding at the balance sheet date are as follows:
JPY
USD
Due within one year
167
2,018
Due after one year
552
6,644
Total
720
8,662

2. Operating leases
Future lease payments receivable outstanding at the balance sheet date are as follows:
JPY
Due within one year193
Due after one year
753
Total
946

3. Balance of sub-lease in the consolidated balance sheets without deducting theinterest(1) Lease investments
JPY
USD
Current assets
118
1,425

3. B
 alance of sub-lease in the consolidated balance sheets without deducting theinterest(1) Lease investments
JPY
Current assets
130(2) Lease obligations(2) Lease obligations

Current liabilities
Non-Current liabilities

JPY
49
68

USD
599
826

Current liabilities
Non-Current liabilities

JPY
43
86

13. Financial Instruments
Fiscal 2011
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. Investments in securities are exposed toprice 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 five years from the fiscal year-end. Certain borrowings are exposed
to interest rate risk.
The Companies utilize derivative transactions such as foreign exchange contracts to avert currency risk, interest rate swaps to avert interest rate risk, commodity future contracts to avert commodity price risk.
Hedging instruments, hedged items, hedging policy and method of evaluating the effectiveness of hedging activities are described in Note 2. Summary of
Significant Accounting Policies, (n) 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 collectibility 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 investments in securities, the Companies periodically examine fair values and the financial conditions of the issuers and regularly revise the portfolio.

50

KANEMATSU CORPORATION

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 a different assumption is applied. The notional amount of contracts
described in Note 15. Derivatives does not directly indicate the market risks.

2. Fair value of financial instruments
A summary of book value and fair value of financial instruments, and the difference between them as of March 31, 2011 is disclosed in the following table. The
financial instruments for which 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.

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

Book value
JPY
USD
69,014830,002
146,546
1,762,431(355)(4,274)
146,190
1,758,157
1,740
20,93810,432
125,471
12,679152,491(8,633)(103,828)
4,046
48,66314,006
168,454(13,343)(160,477)
663
7,976
232,088
2,791,206(96,137)(1,156,195)(27,119)(326,153)(100,488)(1,208,521)(1,562)(18,791)(73,138)(879,601)(298,447)(3,589,260)
313
3,773

Fair value

Difference

JPY
69,014USD
830,002

JPY
—

USD
—

146,190
1,740
12,808

1,758,157
20,938154,041

—
—
2,375

—
—
28,570

4,055

48,7769113

663
234,473(96,137)(27,119)(100,488)(1,562)(73,361)(298,669)
313

7,976
2,819,890(1,156,195)(326,153)(1,208,521)(18,791)(882,278)(3,591,938)
3,773

—
2,385
—
—
—
—
(222)
(222)
—

—
28,683————(2,677)(2,677)—(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 (3) Short-term loans receivable
Fair value of these instruments approximates the book value because of their short-term maturities.
(4) Investments in securities
Fair value of marketable shares is estimated using quoted market price. Fair value of bonds is estimated using quoted market price or quoted price byfinancial institutions. Further information about investments in securities is described in Note 14. Short-term Investments and Investments in Securities.
(5) 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.
(6) 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 collectibility by utilizing securities, guarantees and insurance or discounted cash flow analysis.

Annual Report 201151

Notes to Consolidated Financial Statements

Liabilities(7) Notes and accounts payable, (8) Import bills payable, (9) Short-term borrowings and (10) Accrued income taxes
Fair value of these instruments approximates the book value because of their short-term maturities.
(11) Long-term borrowings
Fair value of long-term borrowings is estimated based on discounted cash flow analysis, using assumed rates currently available for similar types of borrowings with similar term and remaining maturity. Hedge accounting is applied to certain long-term borrowings with variable interest rates. The amounts
received or paid under the interest rate swap agreements are added to or deducted from the interest on the hedged long-term borrowings when paid. Fairvalue of long-term borrowings in which these interest rate swaps are embedded is also estimated based on discounted cash flow analysis, using assumed
rates currently available for similar types of borrowings with similar term and remaining maturity.
Derivatives
Described in Note 15. Derivatives.
2. Financial instruments with difficulty in estimating fair value
Book value
Classification
JPY
USD
Unlisted investments in securities
19,689236,795
Equity investments
1,855
22,310
The above financial instruments are not included in “(4) 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
Over one year
Within one year
and within five years
JPY
USD
JPY
USD
Cash and bank deposits
69,014830,002——
Notes and accounts receivable (Note 3-1)
146,190
1,758,157——
Short-term loans receivable
1,740
20,938——Investments in securities
Held-to-maturity bonds
—
—
14
177
Long-term loans receivable (Note 3-2)
—
—
3,574
42,994
Doubtful accounts (Note 3-3)
—
—
663
7,976
Total
216,946
2,609,097
4,252
51,147

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

Over ten years
JPY
USD
—
—
—
—
—
—

—
440
—
440

—
30
—
30

(Notes) 3-1. Allowance for doubtful accounts of ¥355 million ($4,274 thousand) is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥8,633 million ($103,828 thousand) is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥13,343 million ($160,477 thousand) is not included in doubtful accounts.

4. Long-term borrowings repayment schedule
Described in Note 25. Consolidated Supplementary Schedules, (2) Schedule of borrowings.

52

KANEMATSU CORPORATION

—
5,301
—
5,301

—
368
—
368

Fiscal 2010
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. Investments in securities are exposed toprice 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 five years from the fiscal year-end. Certain borrowings are exposed
to interest rate risk.
The Companies utilize derivative transactions such as foreign exchange contracts to avert currency risk, interest rate swaps to avert interest rate risk, commodity future contracts to avert commodity price risk.
Hedging instruments, hedged items, hedging policy and method of evaluating the effectiveness of hedging activities are described in Note 2. Summary of
Significant Accounting Policies, (n) 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 collectibility 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 investments in securities, the Companies periodically examine fair values and the financial conditions of the issuers and regularly 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 a different assumption is applied. The notional amount of contracts
described in Note 15. Derivatives does not directly indicate the market risks.

2. Fair value of financial instruments
A summary of book value and fair value of financial instruments, and the difference between them as of March 31, 2010 is disclosed in the following table. The
financial instruments for which 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 201153

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

Book value
JPY
83,752
133,153(416)
132,736
2,267
11,595
13,039(8,681)
4,358
15,125(14,222)903
235,614(90,559)(23,591)(104,133)(870)(88,969)(308,124)
954

Fair value
JPY
83,752Difference
JPY—132,736
2,267
12,676

—
—
1,080

4,372

14

903
236,709(90,559)(23,591)(104,133)(870)(89,800)(308,955)
954

—
1,094
—
—
—
—
(831)
(831)
—

(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 (3) Short-term loans receivable
Fair value of these instruments approximates the book value because of their short-term maturities.
(4) Investments in securities
Fair value of marketable shares is estimated using quoted market price. Fair value of bonds is estimated using quoted market price or quoted price byfinancial institutions. Further information about investments in securities is described in Note 14. Short-term Investments and Investments in Securities.
(5) 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.
(6) 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 collectibility by utilizing securities, guarantees and insurance or discounted cash flow analysis.
Liabilities(7) Notes and accounts payable, (8) Import bills payable, (9) Short-term borrowings and (10) Accrued income taxes
Fair value of these instruments approximates the book value because of their short-term maturities.
(11) Long-term borrowings
Fair value of long-term borrowings is estimated based on discounted cash flow analysis, using assumed rates currently available for similar types of borrowings with similar term and remaining maturity. Hedge accounting is applied to certain long-term borrowings with variable interest rates. The amounts
received or paid under the interest rate swap agreements are added to or deducted from the interest on the hedged long-term borrowings when paid. Fairvalue of long-term borrowings in which these interest rate swaps are embedded is also estimated based on discounted cash flow analysis, using assumed
rates currently available for similar types of borrowings with similar term and remaining maturity.
Derivatives
Described in Note 15. Derivatives.
2. Financial instruments with difficulty in estimating fair value
Book value
Classification
JPY
Unlisted investments in securities
22,954Equity investments
1,874
The above financial instruments are not included in “(4) 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.

54

KANEMATSU CORPORATION

3. Maturity schedule of monetary assets and investments in securities having maturity
Over one year
Within one year
and within five years
JPY
JPY
Cash and bank deposits
83,752—
Notes and accounts receivable (Note 3-1)
132,736—
Short-term loans receivable
2,267—
Investments in securities
Held-to-maturity bonds—
14Long-term loans receivable (Note 3-2)—
3,869
Doubtful accounts (Note 3-3)
—
903
Total
218,757
4,787

Over five years
and within ten years
JPY
—
—
—

Over ten years
JPY
—
—
—

—
324
—
324

—
163
—
163

(Notes) 3-1. Allowance for doubtful accounts of ¥416 million is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥8,681 million is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥14,222 million is not included in doubtful accounts.

4. Long-term borrowings repayment schedule
Described in Note 25. Consolidated Supplementary Schedules, (2) Schedule of borrowings.
(Supplementary information)
The Companies have applied the “Accounting Standard for Financial Instruments” (Accounting Standards Board of Japan (ASBJ) Statement No.10 dated on
March 10, 2008) and the “Guidance on Disclosures about Fair Value of Financial Instruments” (Accounting Standards Board of Japan (ASBJ) Guidance No.19
dated on March 10, 2008).

14. Short-term Investments and Investments in Securities
Fiscal 2011
1. “Held to maturity debt securities” with fair value (as of March 31, 2011)

Securities with market value
exceeding their book value

Category
Japanese government bonds

Balance sheet amount
JPY
USD

JPY

USD

JPY

Difference
USD

14

179

0

2

Balance sheet amount
JPY
USD

Acquisition cost
JPY
USD

JPY

Difference
USD

5,657
2,199
3
2,203
7,861

4,424
2,723
7
2,730
7,155

1,233
(524)
(3)
(527)
705

14

177

Fair value

2. “Other securities” with fair value (as of March 31, 2011)

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

Category(1) Equity securities(1) Equity securities(2) Others
Subtotal

Total

68,044
26,44948
26,497
94,54153,20932,75785
32,842
86,051

14,835(6,308)(37)(6,345)8,490(Note) Unlisted investments in securities (book value of ¥16,611 million ($199,782 thousand)) and equity investment (book value of ¥1,412 million ($16,987 thousand)) 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.

3. “Other securities” sold during the current fiscal year (April 1, 2010 to March 31, 2011)
Category
Equity securities

Sales proceeds
JPY
USD
1,109
13,344

JPY
404

Gains on sales
USD
4,870

Losses on sales
JPY
USD
427
5,146

4. Securities recognized impairment loss
The total impairment loss amount recognized of investments in securities is ¥555 million ($6,678 thousand) (including “Other securities” of ¥534 million ($6,428
thousand) and shares of affiliates of ¥20 million ($249 thousand)) in the current fiscal year.
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.

Annual Report 201155

Notes to Consolidated Financial Statements

Fiscal 2010
1. “Held to maturity debt securities” with fair value not exceeding their book value (as of March 31, 2010)
Category
Japanese government bonds

Securities with market value
not exceeding their book value

Balance sheet amount
JPY

Fair value
JPY

Difference
JPY

14

14

0

Balance sheet amount
JPY

Acquisition cost
JPY

Difference
JPY

6,168
2,682
10
2,692
8,861

4,626
3,254
11
3,265
7,892

1,542
(571)
(1)
(572)
969

2. “Other securities” with fair value (as of March 31, 2010)

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

Category(1) Equity securities(1) Equity securities(2) Others
Subtotal

Total(Note) Unlisted investments in securities (book value of ¥19,418 million) and equity investment (book value of ¥1,426 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.

3. “Other securities” sold during the current fiscal year (from April 1, 2009 to March 31, 2010)
Category
Equity securities

Sales proceeds
JPY
501

Gains on sales
JPY
131

Losses on sales
JPY
181

4. Impaired securities
The total impairment amount of investments in securities was ¥430 million (including “Other securities” of ¥416 million and shares of affiliates of ¥13 million in
the current fiscal year).
For the recognition of impairment, securities whose fair value declined 50% or more against their carrying book value were subject to revaluation. For
securities that declined 30% or more in fair value, revaluation losses were recorded after considering the likelihood of future price recovery or financial position.
For those determinations, fair value is primarily based on average of daily market price for one-month before balance sheet date.

56

KANEMATSU CORPORATION

15. Derivatives
Fiscal 2011
1. Derivative transactions to which hedge accounting is not applied(1) Currencies

Classification

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

6,040
353
11
7
51
6,465

72,644
4,254
141
96
624
77,760

—
—
—
—
—
—

—
—
—
—
—
—

(45)
(7)
(0)
(0)
1
(52)

(547)
(88)
(4)
(6)
12
(633)

(45)
(7)
(0)
(0)
1
(52)

(547)
(88)
(4)
(6)
12
(633)

24,512451
5
2
112
25,084—

294,794
5,430
63
34
1,358
301,677
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

60
24
0
(0)
0
85
—

725
291
8
(0)
9
1,032
—

60
24
0
(0)
0
85
33

725
291
8
(0)
9
1,032
400

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

(2) Interest Rate
Not applicable.
(3) Commodities

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

4,539
7,095

54,59285,337

23
368

287
4,430

(86)
253

(1,040)
3,043

(86)
253

(1,040)
3,043

337
129
—

4,061
1,559
—

—
—
—

—
—
—

(7)
4
—

(95)
50
—

(7)
4
162

(95)
50
1,958

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

Annual Report 201157

Notes to Consolidated Financial Statements

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

Specific
matching
criteria

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

Main hedged items

Forecasted foreign
currency transactions

Forecasted foreign
currency transactions

Accounts receivable

Accounts payable

Notional amount ofcontracts
JPY
USD

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

5,369
267
122
40
130
5,931

64,576
3,221
1,476
490
1,569
71,332

—
3
—
—
—
3

—
38
—
—
—
38

(15)
4
(8)
(2)
0
(20)

(187)
59
(104)
(25)
6
(251)

20,043
1,035
355
149
26
246
21,857241,049
12,457
4,273
1,802
320
2,964
262,865

119
43
—
—
—
—
162

1,434
525
—
—
—
—
1,959

254
51
18
12
0
4
341

3,057
624
217
148
2
59
4,106

95
95

1,145
1,145

—
—

—
—

—
—

—
—

131
161
104
397

1,577
1,940
1,257
4,775

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(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
Hedge
accounting
methodTransaction typeInterest rate swap contracts
Specific
matching
Pay-fixed, receive-variable
criteria
interest rate swap

Main hedged items
Long-term borrowings

Notional amount ofcontracts
JPY
USD

61,750742,634

Amount of over-one-year
contracts
JPY
USD

21,290

256,043

Fair value
JPY

USD

—

—

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

(3) Commodities
Hedge
accounting
methodPrinciple
hedge
accounting

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

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

58

KANEMATSU CORPORATION

Notional amount ofcontracts
JPY
USD

3,588
619

43,1587,451

Amount of over-one-year
contracts
JPY
USD

—
—

—
—

Fair value
JPY

USD

(201)
(1)

(2,424)(17)

Fiscal 2010
1. Derivative transactions to which hedge accounting is not applied(1) Currencies

Classification

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

11,131298
38
8
11,477

—
—
—
—
—

(209)
(0)
(0)
0
(210)

(209)
(0)
(0)
0
(210)

21,828221
50
048
22,150
—

—
—
—
—
—
—
—

651
(0)
2
0
0
654
—

651
(0)
2
0
0
654
443

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

Unrealized gain or (loss)
JPY

4,423
2,360

13
—

162
(54)

162
(54)

55
98
—

—
—
—

0
(4)
—

0
(4)
102

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

(2) Interest Rate
Not applicable.
(3) Commodities

Classification

Transaction type
Commodity future contracts
Foodstuffs
Selling
MarketBuyingtransactions
EnergySelling
Buying
Total(Note) Basis of fair value calculation
Fair value is calculated based on market closing price at end of the fiscal year.

Annual Report 201159

Notes to Consolidated Financial Statements

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

Specific
matching
criteria

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

Main hedged items

Forecasted foreign
currency transactions

Forecasted foreign
currency transactions

Accounts receivable

Accounts payable

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

4,938
241
435
5,615

—
—
—
—

(3)
6
(11)
(8)

13,673611
4312
26
14,367

539
—
—
—
—
539

417
3
4
0
0
426

62
18
80

—
—
—

—
—
—

94
42
8
2
148

—
—
—
—
—

—
—
—
—
—

(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
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

65,07045,020—(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.

(3) Commodities
Hedge
accounting
methodPrinciple
hedge
accounting

Transaction type
Commodity future contracts
Foodstuffs
Selling
BuyingMain hedged items

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

Forecasted transactions
on commodity trading

503
180

—
—

(5)
(4)

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

60

KANEMATSU CORPORATION

16. Retirement Benefits
1. Summary of pension plans
The Company and its certain consolidated subsidiaries have established an employees’ pension fund, defined-benefit pension plans, tax-qualified retirement
pension plans, unfunded retirement 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

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. Allowance for employees’ retirement and severance benefits (f – g)
Fiscal 2011
(Notes) 1. A substitutional portion of employees’ pension fund, which is the government’s social security pension program contracted out to employer, isincorporated in the table above.
2. Certain subsidiaries adopt simplified method for calculating accrued retirement benefits for their employees.
3. Unrecognized prior service cost was incurred for the year ended March 31,
2008, since the Company converted a tax qualified retirement pension plan
into a cash balance pension plan on April 1, 2007.

Fiscal 2011
JPY
USD
(15,042)(180,903)
11,195
134,638(3,846)(46,265)
1,257
15,12273883(2,516)(30,261)——(2,516)(30,261)

Fiscal 2010
JPY
(14,837)
11,179(3,658)1,139
146(2,371)277(2,648)

Fiscal 2010
(Notes) 1. Same as fiscal 2011.

2. Same as fiscal 2011.
3. Same as fiscal 2011.

3. Schedule of retirement benefits expenses
Fiscal 2011
JPY
1,323
225
(173)
318
73
(114)
1,653

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 )Fiscal 2011
(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 losses (gains) due to changes to the defined-benefit
pension plans in consolidated subsidiaries and contributions to the defined
contribution pension plans.

USD
15,9202,710(2,086)
3,835
883(1,374)
19,888

Fiscal 2010
JPY
1,534
286
(163)
543
73
79
2,353

Fiscal 2010
(Notes) 1. Same as fiscal 2011.
2. Same as fiscal 2011.
3. “Other” represents contributions to the defined contribution pension plans.

4. Schedule of assumptions used in accounting for accrued retirement benefit
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

Fiscal 2011
Straight-line basis
1.5% – 2.0%
1.5% – 2.0%
Principally 5 years
5 – 10 years

Fiscal 2010
Straight-line basis
1.5% – 2.0%
1.5% – 2.5%
Principally 5 years
5 – 10 years

Annual Report 201161

Notes to Consolidated Financial Statements

17. Stock Options
Fiscal 2011
Not applicable.

Fiscal 2010
Not applicable.

18. Deferred Taxes
Fiscal 2011

Fiscal 2010

1. Major components of deferred tax assets and deferred tax liabilities are as follows.
JPY
USD
Deferred tax assets
Allowance for employees’ retirement
and severance benefits
918
11,041
Allowance for doubtful accounts
14,017
168,575
Inventories
3,718
44,719Impairment loss on fixed assets
1,261
15,173
Investments in securities
3,329
40,036
Golf club memberships
628
7,562
Tax loss carried forward
14,863
178,750
Net gains (losses) on deferred hedges
94
1,133
Other
4,062
48,852
Deferred tax assets subtotal
42,892515,841
Valuation allowance(25,203)(303,104)
Total deferred tax assets
17,689212,737
Deferred tax liabilities
Retained earnings in subsidiaries(209)(2,519)Net unrealized losses on securities
(68)
(829)
Other
(868)
(10,449)
Total deferred tax liabilities(1,147)(13,796)
Net deferred tax assets
16,541
198,941

1. Major components of deferred tax assets and deferred tax liabilities are as follows.
JPY
Deferred tax assets
Allowance for employees’ retirement
and severance benefits
983
Allowance for doubtful accounts
15,845Inventories
3,786
Impairment loss on fixed assets
2,047
Investments in securities
3,240
Golf club memberships
644
Tax loss carried forward
16,606
Other
3,291
Deferred tax assets subtotal
46,446
Valuation allowance(29,302)
Total deferred tax assets
17,143
Deferred tax liabilities
Retained earnings in subsidiaries(120)
Net unrealized losses on securities(381)
Net gains (losses) on deferred hedges
(174)
Other
(1,120)Total deferred tax liabilities(1,796)
Net deferred tax assets
15,346(Note) Net deferred tax assets recorded in the consolidated balance sheets are as follows:(Note) Net deferred tax assets recorded in the consolidated balance sheets are as follows:

Current assets – deferred tax assets
Long-term assets – deferred tax assets
Current liabilities – deferred tax liabilities
Non-current liabilities – deferred tax liabilities

JPY
3,581
13,325
(1)
(364)

USD
43,077160,264(13)(4,387)

2. Major reconciliation items between the statutory effective tax rate and the effective
income tax rate after the application of deferred tax accounting.
(%)
Statutory effective tax rate
40.7
(Reconciliation)
Permanent differences – additions such as entertainment expenses
6.2
Change in valuation allowance(24.9)
Effect of tax rate differences(1.5)
Others(1.8)
Effective income tax rate
18.8

62

KANEMATSU CORPORATION

Current assets – deferred tax assets
Long-term assets – deferred tax assets
Current liabilities – deferred tax liabilities
Non-current liabilities – deferred tax liabilities

JPY
1,774
13,961—(388)

2. Major reconciliation items between the statutory effective tax rate and the effective
income tax rate after the application of deferred tax accounting.
(%)
Statutory effective tax rate
40.7
(Reconciliation)
Permanent differences – additions such as entertainment expenses
4.9
Change in valuation allowance(3.3)
Others0.7
Effective income tax rate
43.0

19. Asset Retirement Obligations
Fiscal 2011
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 10 – 50 years and the discount rates of 1.374 – 2.302%.

3. Changes in asset retirement obligation during the fiscal year ended March 31, 2011
Balance at the beginning of the fiscal year
Acquisition of tangible fixed assets
Adjustment due to passage of time
Fulfillment of asset retirement obligations
OthersBalance at the end of the fiscal year

JPY
811
41
17
(18)
2
854

USD
9,761
497
206
(221)
32
10,276(Note) The balance of asset retirement obligation was initially recognized at the beginning of the fiscal year ended March 31, 2011 due to the application of the “Accounting Standard
for Asset Retirement Obligations” (ASBJ Statement No.18 dated on March 31, 2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ
Guidance No.21 dated on March 31, 2008) from April 1, 2010.

20. Investment and Rental Properties
Fiscal 2011
As the amount of investment and rental properties is immaterial, the description is not disclosed.

Fiscal 2010
As the amount of investment and rental properties is immaterial, the description is not disclosed.
(Supplementary information)
The Company has applied the “Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (ASBJ Statement No.20 dated on
November 28, 2008) and the “Guidance on Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (ASBJ Guidance No.23
dated on November 28, 2008).

Annual Report 201163

Notes to Consolidated Financial Statements

21. Segment Information
Industry segment information
Fiscal 2010 (JPY)I. Net sales and operating income
Net sales(1) Outside customers(2) Inter-segment
Total
Operating expenses
Operating income
II. A
 ssets, Depreciation andamortization, Impairment of
fixed assets and Capital expenditure
AssetsDepreciation and amortization
Impairment of fixed assets
Capital expenditure

IT

Foodstuffs

Iron & Steel /Machinery &Plant

Life Science&
EnergyOthers

Total

Adjustments&
Eliminations Consolidated

232,70226
232,728
227,334
5,394

264,2408
264,248
260,626
3,622

149,239
192
149,432
147,922
1,510

198,14444
198,188
197,294
893

16,951
37
16,98916,661
327

861,277310
861,587
849,839
11,747

—
(310)
(310)
(748)
438

861,277—
861,277
849,091
12,186

126,955
1,483
55
1,141

78,090499
7
165

62,775361—
81

39,182390
80
449

27,973337—
69334,978
3,073
142
1,907

63,650(1)—
367

398,629
3,071
142
2,275

(Notes) 1. 	Segments are determined in accordance with business management units of the relevant products and services (if the business of a consolidated subsidiary belongs toseveral business segments, those are attributed to each business segment).
2. 	The amount of the Company’s assets that are included in “Adjustments & Eliminations” is ¥64,321 million for the fiscal year ended March 31, 2010. Most of the assets are cash
and deposits and investments in securities related to financing activities.

Geographic segment information
Fiscal 2010 (JPY)I. Net sales and operating income
Net sales(1) Outside customers(2) Inter-segment
Total
Operating expenses
Operating income (loss)
II. Assets

Japan

Asia

North
America

787,060
32,892819,952
808,748
11,204
407,669

32,558
5,742
38,301
38,037263
32,11933,602
47,916
81,51880,669849
27,660EuropeOther Areas

Total

8,030
3,419
11,45011,357
92
9,017

26
966
992
1,012
(20)
903

861,277
90,937952,215
939,825
12,389477,369

Adjustments&
Eliminations Consolidated—(90,937)(90,937)(90,733)(203)(78,740)

861,277—
861,277
849,091
12,186398,629(Notes) 1. Categories of countries and areas are classified based on the geographical adjacencies.
2. Major countries or areas belonging to the geographic segments except for Japan.
(1) Asia..................................China and Singapore(2) North America..........U.S.A.
(3) Europe...........................U.K. and Germany(4) Other Areas.................Oceania

Overseas sales information
Fiscal 2010 (JPY)
I. Overseas sales
II. Consolidated sales
III. Ratio of overseas sales to consolidated sales (%)

Asia
128,509
14.9

North America
31,4483.7

Europe13,501
1.6(Notes) 1. Categories of countries and areas are determined in accordance with the geographic adjacencies.
2. Major countries or areas belonging to each geographical segment except for Japan.
(1) Asia..................................China, Taiwan and Singapore(2) North America..........U.S.A. and Canada(3) Europe...........................U.K. and Germany(4) Other Areas.................Oceania, the Middle East and Latin America
3. Overseas sales are net sales of the Company and consolidated subsidiaries performed in countries or areas other than Japan.

64

KANEMATSU CORPORATIONOther Areas
22,732
2.6

Total
196,192
861,27722.8

Segment information

Fiscal 2011
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 assigns business segments in accordance with the products and services and expands its business of providing the products and services
in Japan and overseas by integrating various functions including general trading, information-gathering, market cultivation, business incubation and “projectforming,” 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 “Electronic & IT,”
”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 & IT)
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 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.

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.

3. Information on net sales, profits or losses, assets and other amounts of reportable segments
Fiscal 2011 (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
&
IT

Foods
&
Foodstuff

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Environment&
Materials

Subtotal

Others(Note 1)

Total

253,85425
253,879
9,488
115,953

271,8607
271,867
2,835
81,226

98,832
460
99,2933,410
34,80567,30016
67,316
1,062
27,627

227,466
46
227,512977
44,532

919,314556
919,870
17,775304,146

17,57741
17,619235
24,042936,891598
937,490
18,010328,188

—
(598)
(598)
18
60,487

936,891—
936,891
18,029388,676

1,260

387

142

118

341

2,251

304

2,556

(0)

2,555

2,346

649

2

—

102

3,100

2,972

6,073

34

6,108

1,587

196

126

76

113

2,100

144

2,244

1,291

3,536

Amount inconsolidated
Adjustment statements(Note 2)
(Note 3)

Annual Report 201165

Notes to Consolidated Financial Statements

Fiscal 2011 (USD)
Electronics&
IT
Net sales
Customers
3,052,976
Inter-segment
301
Total
3,053,276
Segment income
114,111
Segment assets
1,394,512
Other
Depreciation and amortization
15,159Investments in equity method
affiliates
28,226
Increases in tangible fixed assets
and intangible fixed assets
19,089Foods&
Foodstuff

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Environment&
Materials

Subtotal

Others(Note 1)

Total

3,269,518
86
3,269,604
34,105
976,872

1,188,608
5,543
1,194,151
41,021
418,585

809,385198
809,583
12,781
332,267

2,735,614 11,056,100
561
6,689
2,736,175 11,062,789
11,754
213,772
535,570 3,657,806

211,392504
211,895
2,836
289,144

11,267,492
7,193
11,274,685
216,6073,946,950—(7,193)(7,193)
220
727,450

11,267,492—
11,267,492
216,827
4,674,400

4,666

1,712

1,431

4,107

27,075

3,666

30,741(10)

30,731

7,806

34

—

1,228

37,29435,74773,041

419

73,459

2,364

1,525

922

1,366

25,267

1,732

26,99815,531

42,530

Amount inconsolidated
Adjustment statements(Note 2)
(Note 3)(Notes) 1. “Others” 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 ¥18 million ($220 thousand) includes inter-segment elimination of ¥18 million ($220 thousand).
(2) Adjustment for segment assets of ¥60,487 million ($727,450 thousand) includes inter-segment elimination of (¥5,869) million (($70,592) thousand) and corporate assets of¥66,357 ($798,041 thousand) 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 (¥0) million (($10) thousand) includes inter-segment elimination of (¥0) million (($10) thousand).
(4) Adjustment for investments in equity method affiliates of ¥34 million ($419 thousand) includes inter-segment elimination of ¥6 million ($78 thousand) and corporate
assets of ¥28 million ($341 thousand) that are not allocated to any reportable segment.
(5) Adjustment for increases in tangible fixed assets and intangible fixed assets of ¥1,291 million ($15,531 thousand) includes corporate assets of ¥1,291 million ($15,531
thousand) that is not allocated to any reportable segment.
3. Segment income is adjusted for operating income in the consolidated statements of income.

Fiscal 2010 (JPY)Net sales
Customers
Inter-segment
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Investments in equity method
affiliates
Increases in tangible fixed assets
and intangible fixed assets

Electronics
&
IT

Foods
&
Foodstuff

Reportable segments
Iron
Machinery
&
&
Steel
Plant

Environment&
Materials

Subtotal

Others(Note 1)

Total

232,70226
232,728
5,783
126,921264,2408
264,248
3,622
78,16487,978
199
88,1782,435
31,774

61,26017
61,278(925)
31,012

198,14444
198,188917
39,182

844,326
296
844,622
11,834
307,055

16,951
37
16,989332
24,867861,277334
861,611
12,166331,922

—
(334)
(334)
19
66,706861,277—
861,277
12,186398,629

1,483

499

178

182

390

2,735

337

3,073

(1)

3,071

2,249

1,071

8

—

101

3,431

3,050

6,482

92

6,574

1,141

165

59

22

449

1,838

69

1,907

367

2,275

Amount inconsolidated
Adjustment statements(Note 2)
(Note 3)(Notes) 1. “Others” 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 (loss) of ¥19 million includes inter-segment elimination of ¥19 million.
(2) Adjustment for segment assets of ¥66,706 million includes inter-segment elimination of (¥4,857) million and corporate assets of ¥71,563 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 ¥92 million includes inter-segment elimination of ¥6 million and corporate assets of ¥85 million are allocated to
any reportable segment.
(5) Adjustment for increases in tangible fixed assets and intangible fixed assets of ¥367 million includes corporate assets of ¥367 million that is not allocated to any reportable segment.
3. Segment income (loss) is adjusted for operating income in the consolidated statements of income.

66

KANEMATSU CORPORATION

Related information
Fiscal 2011

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
765,900
9,211,071

Asia
JPY
96,269North America
JPY
USD
30,381
365,378

USD
1,157,782

EuropeJPY
USD
15,468186,034

Other Areas
JPY
USD
28,871
347,227

JPY
936,891

Total

EuropeOther Areas
JPY
USD
10
121

JPY
27,884USD
335,353

USD
11,267,492(Note) Net sales are classified into countries and areas based on locations of customers.

(2) Tangible fixed assets
Japan
JPY
USD
24,607295,941

Asia
JPY
877

North America
JPY
USD
125
1,505

USD
10,557

JPY
2,264

USD
27,228Total

3. Information by major customer
Not applicable.

Information of impairment loss on fixed assets of reportable segments
Fiscal 2011 (JPY)

Impairment loss

Electronics
&
IT
16

Foods
&
Foodstuff
10

Reportable segments
Iron
Machinery
&
&
Steel
Plant
3
12

Environment&
Materials
189

Subtotal
231

Others(Note 1)
2

Total
234

Adjustment(Note 2)
17

Total
252

Electronics
&
IT
196

Foods
&
Foodstuff
126

Reportable segments
Iron
Machinery
&
&
Steel
Plant
43
151

Environment&
Materials
2,275

Subtotal
2,790

Others(Note 1)
36

Total
2,826

Adjustment(Note 2)
216

Total
3,041

Fiscal 2011 (USD)

Impairment loss

(Notes) 1. “Others” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service
business, etc.
2. Adjustment for impairment loss of ¥17 million ($216 thousand) is corporate loss that is not allocated to any reportable segment.

Information of amortization of goodwill and balance of goodwill of reportable segments
Fiscal 2011 (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
&
IT

Foods
&
Foodstuff

Environment&
Materials

Subtotal

Others(Note 1)

Total

Adjustment(Note 2)

Total

174

12

—

—

21

208

2

211

(211)

—

283

70

—

—

31

384

4

389

(318)

71

—

—

—

0

0

0

4

5

123

128

—

—

—

0

1

1

17

18

(18)

—

Annual Report 201167

Notes to Consolidated Financial Statements

Fiscal 2011 (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
&
IT

Foods
&
Foodstuff

Environment&
Materials

Subtotal

Others(Note 1)

Total

Adjustment(Note 2)

Total

2,102

149

—

—

260

2,510

28

2,538

(2,538)

—

3,404

843

—

—

381

4,628

58

4,687

(3,828)

859

—

—

—

0

6

6

56

62

1,481

1,543

—

—

—

0

17

17

209

226

(226)

—

(Notes) 1. “Others” 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) A djustment for amortization of goodwill for fiscal year of (¥211) million (($2,538) thousand) includes inter-segment elimination of (¥2) million (($27) thousand) and offset
amount of (¥208) million (($2,511) thousand).
(2) A djustment for balance of goodwill at end of fiscal year of (¥318) million (($3,828) thousand) includes inter-segment elimination of (¥4) million (($58) thousand), corporate
assets of ¥0 million ($1 thousand) that are not allocated to any reportable segment and offset amount of (¥313) million (($3,771) thousand).
(3) A djustment for amortization of negative goodwill for fiscal year of ¥123 million ($1,481 thousand) includes corporate assets of ¥331 ($3,992 thousand) million that are notallocated to any reportable segment and offset amount of (¥208) million (($2,511) thousand).
(4) A djustment for balance of negative goodwill at end of fiscal year of (¥18) million (($226) thousand) includes corporate liabilities of ¥294 million ($3,545 thousand) that are
not allocated to any reportable segment and offset amount of (¥313) million (($3,771) thousand).

Information of gain on negative goodwill by reportable segments
Fiscal 2011 (JPY)Not applicable.
(Supplemental Information)
Fiscal 2011
Effective from the current fiscal year, the Company applied the “Accounting Standard for Disclosures about Segment Information” (ASBJ Statement No.17 datedon March 27, 2009) and the “Guidance on Accounting Standard for Disclosures about Segment Information” (ASBJ Guidance No.20 dated on March 21, 2008).

22. Disclosure of Related Party Transactions
Fiscal 2011
Related party transactions
Not applicable.

Fiscal 2010
(1) Related party transactions (the Company)
Not applicable.

(2) Related party transactions (consolidated subsidiaries)

Category

Name ofpersonOfficer ofSubsidiary

ShuichiSuzukiPaid-up capital
Address—

JPY

Occupation—

Statutory auditor of Shintoa
Corporation, lawyer

Ownership of voting
rights of the Company(%)—

Transaction

Balance

Other relationshipwith the Company

Revenues andexpensesAttorney

Attorney fee(Note)

During the year

Year end

JPY

Account name

JPY

21

—

—

(Note) Terms and conditions on business and politics thereto:
Attorney fees are decided based on the common attorney compensation schedule.

23. Information per Share68

Fiscal 2011

Fiscal 2010

Net assets per share¥79.07$0.95
Net income per share¥21.93$0.26
Diluted net income per share for the term is not reported since there is no outstanding
security with dilutive effect.

Net assets per share¥69.15
Net income per share¥8.44
Diluted net income per share for the term is not reported since there is no outstanding
security with dilutive effect.

KANEMATSU CORPORATIONSupplemental information for per share computation(1) Net assets per share

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)

Fiscal 2011
JPY
49,576
16,475(16,475)
33,101
422,501
3,878
418,622

Fiscal 2011
USD
596,236
198,142(198,142)
398,093

Fiscal 2010
JPY
45,804
16,887(16,887)
28,916
422,501
4,303
418,197

Fiscal 2011
JPY
9,175
—
9,175
418,393

Fiscal 2011
USD
110,348—
110,348

Fiscal 2010
JPY
3,528
—
3,528
418,277(2) Net income per share

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)

24. Subsequent Events
Fiscal 2011
Not applicable.

Fiscal 2010
Not applicable.

25. 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

Beginning of year
JPY
USD
47,500510,542
56,632608,695
328
3,535

JPY
38,17362,314572

88,969557
193,990

73,138
1,248
175,448956,254
5,997
2,085,023

USD
459,094
749,427
6,888

Composite
interest rate
%
1.5
2.4
—

Due
Month, year———

879,601
15,013
2,110,023

1.9——

May 2012 – March 2016
March 2013 – February 2018—

End of year

(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
33,040397,359479
5,768Over two years
and within three years
JPY
USD
30,275364,111316
3,806Over three years
and within four years
JPY
USD
5,872
70,625225
2,708Over four years
and within five years
JPY
USD
3,950
47,5051732,085(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 2011

69

70

KANEMATSU CORPORATIONCorporate Data

Contents
72

Global Network

74

Network

76

Major Consolidated Subsidiaries and Affiliates

78

Organization Chart

79

History80

Investor Information

Annual Report 201171

Global Network (As of March 31, 2011)
The Company supplies products and services
from a large network of business basesin Japan and overseas.
84 subsidiaries and 33 affiliates
ensure global reach into
the markets of all regions.

2.

4.

6.
1.

5.
3.

Overseas subsidiaries
and their branches

1. ASIA & THE MIDDLE EAST

DalianBeijing
Seoul
Tianjin

Representative offices
Branches

TehranWuxi
ShanghaiSuzhouNew Dehli

Shenzhen Taipei
HsinchuHong Kong
Haiphong
Hanoi

ManilaBangkok
Hochiminh City
Petaling Jaya
Singapore
Jakarta

2. EUROPE

3. OCEANIA
Moscow

LondonDuesseldorf
Budapest
MilanoSydneyLas Palmas

72

KANEMATSU CORPORATION

Auckland4. NORTH AMERICA

5. SOUTH AMERICA

VancouverPortlandNew York
Silicon Valley
San Diego

ChicagoSomerset

Sao Paulo

Houston

6. JAPAN
Hokkaido

NagoyaTohokuKyushuTsukiji Office
Tokyo Head Office
Osaka
Midosuji Office

Segment information:
Number of employees and number of affiliated companies (As of March 31, 2011)
Electronics & IT
Foods & Foodstuff
Iron & Steel
Machinery & Plant
Environment & Materials
OthersCompany-wide (common)
Total

Number of employees(consolidated basis)
2,532
477
426
382
341
233
379
4,770

Number of affiliated companies
31 (Japan: 15, Overseas: 16)
18 (Japan: 12, Overseas: 6)
10 (Japan: 5, Overseas: 5)
14 (Japan: 4, Overseas: 10)
8 (Japan: 8)
22 (Japan: 14, Overseas: 8)
Overseas branches 14
117

Notes: 1. Number of employees on a non-consolidated basis is 832 (including employees seconded from Kanematsu, excluding
employees seconded from companies other than Kanematsu).
2. Of affiliated companies, 79 are consolidated subsidiaries and 32 are equity-method affiliates.
Annual Report 201173

Global Network

Network
JAPAN

ASIA & THE MIDDLE EASTTokyo Head Office

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

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: 81-3-5565-0080

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

74

KANEMATSU CORPORATION

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
Room 2201 Full Tower No. 9 Dong San Huan
Mid Road, Chao Yang District, Beijing 100020,
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 5609-5610, 56th 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.
Taipei Office
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
Hsinchu Office
3F-1, No. 29, Pu-Ding Rd., Hsin-Chu 300,
Taiwan, R.O.C.
TEL: 886-3-564-2013
FAX: 886-3-564-2014
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 1809, 18th Floor, Saigon Trade Center, 37
Ton Duc Thang Street, District 1, Hochiminh City,
S.R.Vietnam
TEL: 84-8-3910-5532
FAX: 84-8-3910-5538
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
MALAYSIA
KET Electronics (Malaysia) Sdn. Bhd.
A-3A-32, Suite A, IOI Boulevard Jalan Kenari 5
Bandar Puchong Jaya, 47170 Puchong,Selangor Darul Ehsan, Malaysia
TEL: 60-3-8076-8392

SINGAPORE
Kanematsu Corporation Singapore Branch
100 Tras Street, #12-01 Amara Corporate Tower,
Singapore 079027
TEL: 65-6320-6000
FAX: 65-6320-6071
Kanematsu Semiconductor Singapore Pte., Ltd.
100 Tras Street, #12-03 Amara Corporate Tower,
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,
Phillipines
TEL: 63-2-889-1701, 63-2-845-2017
FAX: 63-2-887-0030
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
The Representative of Kanematsu Corporation
1610-1611-1612, Narain Manzil 23, Barakhamba
Road, New Delhi 110001, India
TEL: 91-11-4362-3050, 3051, 3052
FAX: 91-11-4362-3053
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

EUROPENORTH AMERICAUNITED KINGDOM
Kanematsu Europe PLC.
London Head Office
5th Floor Genesis House, 17 Godliman Street,
London EC4V 5BD, United Kingdom
TEL: 44-20-7246-2900
FAX: 44-20-7248-8986

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 Branch
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 Branch
One S.W.Columbia Street, Suite 350 Portland,
Oregon 97258, U.S.A.
TEL: 1-503-224-7755
FAX: 1-503-228-5067

GERMANY
Kanematsu G.m.b.H.
Duesseldorf Head Office
Oststrasse 34, D-40211 Duesseldorf, Germany
TEL: 49-211-36890
FAX: 49-211-3689-111
ITALY
Kanematsu G.m.b.H.
Milano Liaison Office
Piazza Duca d’Aosta 8, Milano, Italy
TEL: 39-02-6749-3538
FAX: 39-02-6707-7364
HUNGARY
Kanematsu G.m.b.H.
Budapest Office
H-1034 Budapest Becsi ut 126-128.I.103. Hungary
TEL: 36-1-329-3412, 320-4952
FAX: 36-1-320-4953
RUSSIAN FEDERATIONThe Representative of Kanematsu Corporation
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

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

OCEANIA

AUSTRALIA
Kanematsu Australia Ltd.
Sydney Head Office
Level 20 St Martins Tower, 31 Market Street,
Sydney NSW 2000, Australia
TEL: 61-2-9283-3347
FAX: 61-2-9283-3095
NEW ZEALAND
Kanematsu New Zealand Ltd.
9th Floor, Ballantyne House, 101 Customs Street,
East Auckland, New Zealand
TEL: 64-9-302-5660
FAX: 64-9-309-3877

SOUTH AMERICABRAZIL
Kanematsu America do sul Representacao
Comercial de Produtos Automotivos 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 201175

Global Network

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

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

Kanematsu Aerospace Corp.

Sales of aircraft, defense and aerospace-related products

Kantatsu Co., Ltd.

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

China

Kanekoh Electronics (Shanghai) Co., Ltd.

Development and manufacture of battery modules

Ireland

KG Aircraft Rotables Co., Ltd.

Replacement and maintenance of aircraft components, leasing

Foods & Foodstuff
Japan

China

Thailand

U.S.A.

Kanematsu Food 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

Dalian Tiantianli Food Co., Ltd.

Manufacture of dim sum and deli products

Shangdong Lu Feng 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

Kai Enterprises, Inc.

Sales of dried feed

Iron & SteelJapan

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

China

Kanematsu Hoplee Co., Ltd.

Processing and marketing of steel products

U.S.A.

Steel Service Oilfield Tubular, Inc.

Sales of premium tubing for oil excavation

Machinery & Plant
Japan

76

Kanematsu KGK Corp.

Sales of machine tools and industrial machinery

KGK Engineering Corp.

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

KGK SolTech Corp.

Processing of silicon wafers for photovoltaic power generation systems

Aasted Mikroverk Japan Ltd.

Import and marketing in Japan of industrial machinery

KANEMATSU CORPORATION

ChinaKanematsu 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
ThailandKGK Engineering (Thai) Co., Ltd.

Sales of machine tools and industrial machinery

Czech Republic KGK Czech s.r.o.

Sales of machine tools and industrial machinery

PolandAries Motor Sp. z o.o.

Sales of automobiles

Aries Power Equipment Sp. z o.o.

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

KGK International Corp.

Sales of machine tools

U.S.A.

Environment & Materials
Japan

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 Textile Corp.

Sales of textile materials and products

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 foodstuff and aircraft engines

Kanematsu Logistics & Insurance Ltd.

Insurance agency and logistics businessJapan Logistics Co., Ltd.

Warehouse and trunk room operation

China

Dalian Shunda Logistic Services Co., Ltd.

Total logistics services

VietnamVietnam-Japan International Transport Co., Ltd.

Total logistics services

OthersJapan

Indonesia PT. Century Textile Industry
PT. Dunia Express Transindo

Manufacture of polyester blend fabric
Total logistics services

Annual Report 201177

Organization Chart (As of April 1, 2011)Marketing Area

General Meeting of
Shareholders

Electronics & IT Division

Board ofCorporate Auditors

Devices Company
Information & Electronics Department
Aerospace Department
Semiconductor Equipment Department
Industrial Electronics Department
Electronics & IT Administration Office
Produce Department No. 1
Produce Department No. 2
Meat Products Department
Produce Department No. 3
Foods Administration Office
Food Safety Management System Office

Board of Directors
Foods & Foodstuff Division

Grain Department
Feedstuff Department
Agricultural Products and Oilseeds Department
Domestic Sections
Foodstuff Administration Office
Food Safety Management System Office

Management
Committee

Iron & Steel Division

Iron & Steel Foreign Trade Department
Specialty Steel Foreign Trade Department
Automotive Materials Department
Iron & Steel Administration Office

Machinery & Plant Division

Plant & Infrastructure Projects Department
Transportation Machinery Department
Machinery & Plant Administration OfficeEnvironment & Materials
Division

Energy Department
Functional Chemicals Department
LNG Business Department
Environment & Materials Administration Office
Food Safety Management System Office

Supporting Area

78

KANEMATSU CORPORATION

Personnel & General Affairs Department
Finance Department
Accounting Department
Business Accounting Department
Credit Control and Legal Department
Traffic & Insurance Department
System Planning Department
Realty Department
Internal Auditing Department
Corporate Planning Department

History

1889• Fusajiro Kanematsu founds Fusajiro Kanematsu Shoten ofAustralian Trading in Kobe

1890

• Sets up a branch in Sydney, and begins direct import ofAustralian wool

1977

• Commencement of consolidated financial statements

1891• Yohei Kitagawa founds Kitagawa Shoten, which is a predecessorof The Gosho Company

1979• Establishes a representative office in Beijing, China following
restoration of diplomatic relations

1900• Starts import of Australian wheat

1981• Establishes an overseas affiliated company in Mexico

1913• Fusajiro Kanematsu passes away

1983

• Initiation of the three year plan, Treasure Strategy

1918• Reorganizes into Kanematsu Shoten Company. Stated capital¥2 million

1986• Initiation of KG-100 as a new three year plan aiming at the 100th
anniversary commemoration of the company’s foundation

1922• Reorganizes Sydney branch into an affiliate company incorporated abroad

1989• 100th anniversary of the founding of the Company

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

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

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

1951• Establishes an overseas affiliated company in New York, as thefirst Japanese trading company in postwar era

1976• Completes the Nagoya Branch Office Building in commemorationof its 85th anniversary (in 1974)• Issues $12 million worth of foreign bonds in Brussels• Initiation of JUMP KG-103 as a new three year plan
• Establishes an overseas affiliated company in the United Kingdom

1990• Trade name is changed to Kanematsu Corporation• Establishes an overseas affiliated company in Spain

1991• Moves Tokyo headquarters from Kyobashi to Shibaura• Establishes Kanematsu (Europe) Corporation in the United
Kingdom having general control over Europe• Establishes an overseas affiliated company in Italy

1992• Inaugurates the long-term management plan, Network-KG 21, totake the company into the 21st century• Initiates a new three year plan with PHASE-1 of the long-range plan
• Osaka Branch Office becomes the new Head Office• Establishes an overseas affiliated company in Brazil

1995• Initiates a two-year plan with PHASE-2 of the long-term plan

1957

• Establishes an overseas affiliated company in West Germany

1997• New 3-year medium-term management plan started from April 2

1961• Abolishes the system in which workers hold all the stock, and goespublic on the Second Section of the Osaka Securities Exchange• Establishes an overseas affiliated company in Iran

1963

• 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.

1969

• Establishes the Nagoya Branch Office• Celebrates its 80th anniversary

1970• Establishes its Head Office at the Tokyo Branch Office1972• Establishes an overseas affiliated company in Canada

1973• Lists stock on the First Sections of the Tokyo and Nagoya Stock
Exchanges• Head Office in Osaka reverts to Osaka Branch Office status (April)

1999• Three-year structural reform plan started

2001• Medium-Term Management Plan started

2004• Medium-Term Business Plan “New KG200” started

2007• Medium-Term Business Plan “teamKG120” started

2009• 120th anniversary of the founding of the Company

2010• Medium-Term Business Plan “S-Project” started• Establishes an overseas affiliated company in France

1975• Establishes an overseas affiliated company in Hong Kong

Annual Report 201179

Investor Information (As of March 31, 2011)

Stock Exchange Listings Tokyo

Composition of Shareholders* The Company’s stocks were delisted from the
Osaka Securities Exchange with effect July 1, 2010.

Stock Code8020

Transfer Agentfor Common Stock

The Chuo Mitsui Trust & Banking Co., Ltd.

Shares Authorized

1,016,653,604■ Individuals and others(including treasury shares)�����48.75%■ Financial institutions������������������27.73%■ Other corporations����������������������� 9.92%

Shares Outstanding	422,501,010(including 854,219 treasury shares)■ F oreign institutions
and individuals������������������������������10.61%

Minimum Trading Unit

■ Securities firms�������������������������������� 2.99%

1,000

Number of Shareholders 37,658
Principal Shareholders

Shareholder Distribution by Number of Shares Held

Number of shares
held (thousands)

Percentage ofvoting rights (%)

13,29812,46011,613

3.15
2.95
2.75

■ More than 1 million shares����39.76%

11,6122.75■ 5 0,000 shares and more(including treasury shares)�����25.08%

11,278

2.67

8,202
6,239
4,510
3,687
3,604

1.94
1.47
1.06
0.87
0.85

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
The Norinchukin Bank
Mitsui Sumitomo Insurance Co., Ltd.
Tokio Marine & Nichido Fire InsuranceCo., Ltd.
Japan Trustee Services Bank, Ltd.
(trust account)
The Master Trust Bank of Japan, Ltd.
(trust account)
Kanematsu-NNK Corp.
Daio Paper Corporation
Japan Securities Finance Co., Ltd.
State Street Bank and Trust Company 505223■ 10,000 shares and more�����������20.01%■ 1,000 shares and more�������������14.63%■ Less than 1,000 shares���������������� 0.52%

Note: Calculated after deduction of treasury shares (854,219 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. 2000

Apr. 2001

Apr. 2002

Apr. 2003

Apr. 2004

Apr. 2005

Apr. 2006

Apr. 2007

Apr. 2008

Apr. 2009

Apr. 2010

Apr. 2001

Apr. 2002

Apr. 2003

Apr. 2004

Apr. 2005

Apr. 2006

Apr. 2007

Apr. 2008

Apr. 2009

Apr. 2010

Trading Volume(thousand shares)

600,000
500,000
400,000
300,000
200,000
100,000
080

Apr. 2000

KANEMATSU CORPORATION

0Tokyo Head Office

Corporate Profile
Company Name

KANEMATSU CORPORATION

Established

August 15, 1889

Foundation

March 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 5
Overseas: 38

Number of Employees 832 (Consolidated: 4,770)(As of March 31, 2011)

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