Annual Report 2010

The Kanematsu Group aims tobecome a group of business creators,
or a “Value Creator,” constantly
creating new businesses together
with its business partners
while providing highly specialized
and useful business functions,and pursuing true business value.

In 1889, over 90% of Japan’s overseas trade was carried on by foreign companies. In the convictionthat these trading rights would have to be returned to Japanese hands for the nation to regain

Corporate Principle

its vigor, Fusajiro Kanematsu, then aged 44, hung out a “Kanematsu” sign in Kobe and launcheddirect trading with Australia.

“Let us sow and nurture the seeds of prosperity for Japan”

In the 120 years that have passed since then, the Company has continued to develop, overcoming“If we sow a seed, we can expect it to develop into a seedling that generates content
and prosperity for Japan. Let us sow that seed now.” So spoke our founder Fusajiro
Kanematsu at the establishment of the Company. Furthering the “public interest”
of Japan was the guiding mission of all leading Japanese of the late nineteenth
century (Meiji period) in developing the national economy. Today, our founder’sideal underlies all our company’s public benefit and community activities and ourcontributions to nations and peoples generally.
On the occasion of the merger in 1967 with The Gosho Company, the Company
enshrined its founder’s ideals in a document titled Our Beliefs: Kanematsu’s Guiding
Principles.

many difficulties and trials, while continuing to uphold the ideals of its founders. All employees of
the Group draw inspiration from the spirit and commitment of Fusajiro Kanematsu, who always
anticipated the needs of his time and took on the challenge of establishing new businesses.

(Translated from Japanese)

OUR BELIEFS

1889

Kanematsu’s Guiding Principles

Fusajiro Kanematsufounds Fusajiro Kanematsu
Shoten of Australian Trading in Kobe

1890

1. We believe that we should achieve prosperity of our business through justand fair earnings in the pioneering spirit as fostered by our predecessors
with the wisest use of our creative imagination and ingenuity.
2. We believe that our Company should justify its existence by promoting asound and flourishing business which fulfils its responsibilities toward thewelfare of society and also contributes to the security and well-being of us all.

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

1951

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.

Establishes an overseas affiliated company in New York,as the first Japanese trading company in postwar era
Establishes an overseas affiliated company in Sao Paulo, Brazil

1957

Establishes an overseas affiliated company
in Hamburg, West Germany

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

KANEMATSU CORPORATION

1970

Establishes its Head Officeat the Tokyo Branch Office

1973

Lists stock on
the First Section of
the Tokyo Stock Exchange

1989
100th anniversary of
the founding of the Company

1990

Trade name is changed
to Kanematsu Corporation

2009

120th anniversary of
the founding of the Company

Businesses Domains
By leveraging of our business networks in Japan and overseas as well as our years of experience in general trading, andby integrating various functions including information-gathering, market cultivation, business incubation and “projectforming,” 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 andbecoming a “Value Creator” in partnership with them, through supply of varied products and services in a wide range ofbusinesses (Electronics & IT, Foods & Foodstuff, Iron & Steel / Machinery & Plant and Environment & Materials).

Electronics & IT

Foods & Foodstuff

Electronics-related materials and sub-materials

Cooked foods

Semiconductors

Processed fruits

Electronic components

Processed agricultural products

Modules

Beverage materials
IT

Mobile solutionsoMeat and marine productss & Foodst
u
od

ff

Ele

F

Aircraftctronics &Wheat, rice and soybeans, etc.

ICT solutions

Feedstuff

OEM businessPet foodEnvient & Manm
tero

Crude oil,
Petroleum products, Gas

ls

Iron &

y

ria

Wire

l / Machiner

lant

Pipes

e
te

&P

S

Various steel sheets

LPG
Development ofenvironment-related materials
and new technologies

Stainless productsCast and forged products

Functional chemicals

Petrochemical andpapermaking plants

Functional food materials

Ships, automobiles and construction machinery
Electric power and communication cables

Iron & Steel / Machinery & Plant

2010

Health supplements
Pharmaceuticals and pharmaceutical intermediates

Environment & Materials

New Medium-Term Business Plan
“S-Project” started
Annual Report 20101

Financial Highlights
Kanematsu Corporation and Consolidated Subsidiaries
Years ended March 31

2000

2001

2002

Three-year Structural Reform Plan

2003

2004

2005

Medium-Term Management Plan

“Two years of rebuilding” “Three years of bolstering the Group’s business base”

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

1,407,921
92,29914,507

1,112,920
87,996
21,608902,477
73,54015,779838,975
67,207
15,716

818,473
62,20813,554

886,876
68,142
15,762(9,877)(12,446)(6,579)17,252

7,211
4,024

4,995
2,233

5,057
3,247

4,836
2,469

11,542884,504—
543,843

14,387
772,555—
433,037

15,734605,717—362,425

10,762
527,340—319,284

23,283507,991—
287,245

38,029520,118—
261,559

Per share (yen):
Net income (loss)
Net assets
Cash dividends(47.61)
44.16
—

62.62
47.39
—

13.26
51.84
—

7.56
36.38
—

10.13
68.77
—

6.52
93.74
—

Financial indicators:
Return on equity (ROE) (%)
Equity ratio (%)
Net debt-equity ratio (times)(201.55)1.3
47.1

133.07
1.9
30.1

26.72
2.6
23.0

16.86
2.0
29.7

19.08
4.6
12.3

8.06
7.3
6.9

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 ¥93.04 to U.S.$1.00, the exchange rate prevailing on March 31, 2010.

Net sales and operating income

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

Net sales

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

(¥)
100

1,000

20

10

50

500

10

0

0

0

-30

0
00

01

02

03

04

Three-year
Medium-Term
Structural Management Plan
Reform Plan

2

KANEMATSU CORPORATION

05

06

07

“New KG200”

08

09

10

“teamKG120”

Net income (loss)

Net income (loss) per share

-100
00

01

02

03

04

Three-year
Medium-Term
Structural Management Plan
Reform Plan

05

06

07

“New KG200”

08

09

10

“teamKG120”

2006

2007

2008

2009

2010

Medium-Term Business Plan: New KG200

Medium-Term Business Plan: teamKG120“Complete recovery” — finishingthe “second founding” of the Company“Balanced expansion with a sense of urgency”
Thousands of
U.S. dollars

Millions of yen

1,096,409
81,732
17,982

1,281,331
103,71121,713

1,244,020
90,32722,605

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

9,257,069
796,482
130,981(16,728)(21,686)

14,615
7,507

28,97519,016

77(12,787)

8,407
3,528

90,36237,92226,004
556,046—
246,317

48,767563,176
32,959204,900

62,239503,456
45,587
148,944

42,035414,928
24,936
134,582

45,804
398,629
28,916109,350492,310
4,284,493
310,798
1,175,311(52.43)
62.12
—

17.94
78.75
—

(67.73)
4.7
9.5

45.44
108.95
—

25.46
5.9
6.2

(30.56)
59.61
—

48.42
9.1
3.3

8.44
69.15
—

(36.26)6.0
5.4

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

0.09
0.74
—

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

13.10
7.3
3.8

Shareholders’ equity and equity ratio

Net interest-bearing debt and net debt-equity ratio

Shareholders’ equity

Equity ratio(¥ billion)
100

(%)
10

80

8

60

6

40

4

20

Net interest-bearing debt

Net debt-equity ratio(¥ billion)
600(times)
60

400

40

200

20

2

0

0
00

01

02

03

04

Three-year
Medium-Term
Structural Management Plan
Reform Plan

05

06

07

“New KG200”* Shareholders’ equity = net assets – minority interests* Equity ratio = shareholders’ equity / total assets

08

09

10

“teamKG120”

0

0
00

01

02

03

04

Three-year
Medium-Term
Structural Management Plan
Reform Plan

05

06

07

“New KG200”

08

09

10

“teamKG120”* Net interest-bearing debt = interest-bearing debt – cash and bank deposits* Net debt-equity ratio = net interest-bearing debt / shareholers’ equity

Annual Report 20103

To Our Stakeholders
We aim to become a “Value Creator”
that creates businesses together
with our partners.

ChairmanPresident

Masaharu Hamakawa

Masayuki Shimojima

Please let us take this opportunity to express our gratitude to
you for your loyal support.
While the global economy during the year ended MarchIn April this year, we introduced a new three-year MediumTerm Business Plan called “S-Project.” This new plan calls fora strengthening of our revenue and business base to enable

31, 2010 began to see a slow recovery in the second half ofsustainable growth despite rapid changes in the domestic andthe year, Japan was unable to achieve any real economic

international economic environments. As in the past, we aim

turnaround, given the severe employment situation, reduced

to become a “Value Creator” that constantly creates newcapital expenditure, rapid appreciation of the yen, and concerns

businesses, while providing highly specialized and usefulover deflation. In this environment, Kanematsu sought to createbusiness functions, and pursuing true business value.

added value by providing the products and services at which

Finally, we would like to inform you that Masayuki Shimojima

it excels while reducing costs and taking steps to improve

was appointed president on April 1 this year. The new

profitability. As a consequence, the Company was able to post

management team is committed to continuing the evolution

a net profit, as special factors including the extraordinary lossesof Kanematsu into a company that satisfies the needs of its

recognized in the first half of the year were eliminated, offsetting

shareholders and all other stakeholders, by rapidly executing its

reduced revenues and operating income.

initiatives and building a more solid business foundation. We

Dividends for the year ended March 31, 2010 will not be

hope that we can continue to count on your support.

paid because of the continuing accumulated deficit (negative

August 2010

retained earnings), even after achieving a net profit. We willcontinue to strive to improve profitability and achieve theearliest possible resumption of dividends.

4

KANEMATSU CORPORATION

Masaharu Hamakawa, Chairman

Masayuki Shimojima, President

Contents

6

Interview with the President
President Masayuki Shimojima newly appointed on April 1, 2010, discussed the year ended March 31, 2010, the previous
Medium-Term Business Plan “teamKG120,” the blueprint for achieving the new plan, the concept of distinctive characteristic ofKanematsu and future management policies of the Group.

11 Step Forward — Steps after Structural Reform and Future Prospects —Business plans in the 11 years that have passed since the Three-year Structural Reform Plan launched in 1999 are looked back on.
An overview of the new Medium-Term Business Plan, “S-Project” launched in April 2010 is briefly discussed, highlighting
progress by segment.

17 Overview by Business Segment
18
20
22
24
26
29
32

Electronics & IT
Foods & Foodstuff
Iron & Steel / Machinery & Plant
Environment & Materials

CSR
Corporate GovernanceDirectors and Corporate Auditors

33 Financial Section
34
36
38
40
41
43
44
70

Management’s Discussion and Analysis
Business Risks
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors

71 Corporate Data
72

Global Network

74
76

Network
Major Consolidated Subsidiaries and Affiliates

78
79
80

Organization Chart
History
Investor Information

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

Annual Report 20105

Interview with the President

We are committed to returning to growththrough steady execution of
our business plan and becoming a “Value Creator.”

Q1. You became President at a time when
the outlook for the global economy was highly
uncertain. What resolutions do you have?
First of all, I would like to say to our stakeholders that I am
committed to reinvigorating Kanematsu. I promise to instill
vibrancy throughout the Company by animating each andevery employee. We will create a dynamic company thatconsistently generates new business.
I believe that being a dynamic company is one of thekeys to strengthening our relationships with our business
partners and enabling us to create new business with them.
This in turn helps us to contribute to the development of ourpartners as well as to the development of society and theeconomy. This is the reason for Kanematsu’s existence andthe basis of our aim to become the “Value Creator,” as set out
in our new Medium-Term Business Plan. New proposals andbusinesses created in rapid succession will result in income
growth and a more solid financial foundation. Naturally, ourhighest priority is to establish the basis for resuming the6

KANEMATSU CORPORATION

payment of dividends at the earliest possible opportunity. At
present, signs of an economic recovery are starting to appear
in a number of sectors, and I am confident that we will beable to take good advantage of this opportunity.

Q2. Looking back, how do you assess
the businesses environment and the results of
the year ended March 31, 2010?
During the first half of fiscal 2010, Japan’s economic recovery
lagged behind the recovery of the global economy, and theconstruction sector in particular suffered a severe downturn.
Corporate capital expenditure was low and the domestic
market remained sluggish amid a rising yen and concerns
about deflation. Our own operating environment wasmarked by weak domestic capital spending, and particularly
by the decline of the machine tool industry and lower
demand for iron and steel in North America.
In response to the business contraction and the decline incommodity prices as a result of lower demand, consolidated

net sales were down 24% from the previous year, to ¥861.3
billion. Gross profit meanwhile declined 14%, to ¥74.1 billion,
in fiscal 2010. Operating income was down 36% from a year
earlier, to ¥12.2 billion, despite aggressive reductions in costs
and SG&A expenses. In contrast, we successfully moved froma net loss of ¥12.8 billion in the previous year to net incomeof ¥3.5 billion, thanks to the elimination of extraordinary
losses as a special item recognized in the previous year.
While the environment remained severe, I believe that
we deserve credit for our sustained cost cutting and otherinitiatives. These efforts helped us achieve a net profit andsteadily improved our financial position, such as by lowering
the amount of interest-bearing debt.

Q3. In reviewing the previous Medium-TermBusiness Plan “teamKG120,” can you sum up
the results ?
During the fiscal year ended March 31, 2008, the first yearof the plan, our revenues remained strong, thanks to thegrowth of the Asian economy. In the second year of theplan that ended March 31, 2009, however, numerous

businesses in the manufacturing and other sectors were hit
by the global economic turmoil that followed in the wakeof the bankruptcy of Lehman Brothers in the fall of 2008.
Our earnings also fell sharply, and impairment losses on realestate and other assets, along with a reversal of deferred tax
assets, resulted in a net loss of ¥12.8 billion. Although the net
loss was turned into net profit in the final fiscal year, as noted
earlier, the result was well short of our initial target, and wewere unable to resume dividend payments, our chief goal.
In financial terms, the equity ratio and net debt-equity
ratio fell short of targets given a considerable reduction ofequity associated with the net loss. Net interest-bearing debt
nonetheless decreased to ¥109.4 billion, outperforming our
initial target of ¥160 billion planned for the end of March
2010, a favorable turn of events.
Despite the decline in our financial performance in
response to the weakening market during the period of theplan, we are certain that we now have a clear vision of thetasks in front of us, such as meeting the growing demand in
Asia led by China and establishing new business models toincrease net sales and gross profit and to return to growth.

Review of the previous Medium-Term Business Plan “teamKG120”
Operating Results
Initial targets

Financial Position
Results

Consolidated
ordinary income¥25 billion
Consolidated
net income¥12.5 billion
Resumption of dividend
payments as soon as possible

Consolidated
ordinary income
Consolidated
net income
No resumption ofdividend payments¥8.2 billion¥3.5 billion(¥ billion)
30

Net interest-bearingdebt¥160 billion
Net D/E ratio
2.5 times
Equity ratio
Approx. 11.5%

Net interest-bearing
debt¥109.4 billion
Net D/E ratio
3.8 times
Equity ratio
7.3%(times · %)15
Net interest-bearing debt
Shareholders’ equity

25.0

Net D/E ratio
Equity ratio
11.5

18.7 19.0

17.3

13.1
10

Results(¥ billion)
300
Consolidated ordinary income
Consolidated net income (loss)

20

Initial targets

12.5

200

204.9

10
9.1

8.2

7.5

148.9

3.5
0
100

6.0

5.9

5.4

3.3
-10
33.0

-12.8

7.3

134.6

6.2

160.0

109.4
5
3.8

62.5

45.6
24.9

28.9

2.5
0

0

-20
2007

2008

2009
Results

2010

2010
Initial projection(ref.)

2007

2008

2009
Results

2010

2010
Initial projection(ref.)

Annual Report 20107

Interview with the President

New Medium-Term Business Plan “S-Project”¥

Targets (Fiscal 2013)

Management Initiatives (Main Points)

Operating results (Consolidated)

Strengthening the revenue base

Gross profit

Operating income●

80 billion

19 billion●¥

Financial targets
Equity ratio

More than

10 %Bolstering the business base

Net D/E ratio

Approx.

2.0 times

Aiming to resume dividend payment as soon as possible

Q4. The new three-year Medium-Term Business
Plan, “S-Project,” got underway in April 2010.
What are the concepts and goals of this plan?
We recognize that “strengthening the revenue base” and“bolstering the business base,” which will facilitate sustainablegrowth, even during rapid global economic changes, are thetasks set for us in this plan. Recognizing such, it is our vision tofurther promote the business model that we have been working
on — which is providing highly specialized and useful business
functions while pursuing true business value — and become a“Value Creator” that consistently creates new businesses.
We have been privileged to deal with excellent partners
for many years, and we aspire to create new business models
with the new ideas using the strong relationships we havebuilt. For example, a number of our partners are planningto target emerging economies, mainly in Asia, and meetingoverseas demand by locating their manufacturing bases near

8

KANEMATSU CORPORATION

Continuing to refine our business focus
Promoting growth strategies

Improving our financial position● Promoting efficient management● Enhancing and deepening our consolidated
management system● Cultivating human resources for global operations●

these consumer markets, rather than the saturated Japanesemarket, where capital investment is difficult. We hope to study
in detail the needs of these partners and create businesses
together with them. Meanwhile, we also believe that finding
new roles for Kanematsu to play in connection with its
existing commercial rights, providing added value, reforming
the earnings structure of the business and increasing thesignificance of our presence constitute a part of businesscreation. Becoming a “Value Creator” is to continue to create
new businesses in each project in this way.
Our numerical targets include ¥80 billion in consolidated
gross profit and ¥19 billion in consolidated operating
income, an equity ratio exceeding 10% financially, and a net
debt-equity ratio of approximately 2.0 times, by the end of
March 2013, which is the closing of the final fiscal year under
the current plan. Most of all, we are committed to achievinga resumption of dividend payments at the earliest possible
opportunity. The plan this time is quite conservative in comparison to the targets of the previous Medium-Term Business
Plan. The reason is that we wanted to ensure that this plan
was achievable no matter what happened, since numerous
concerns such as the limited growth of domestic demand,the collapse of the Chinese real estate bubble, financial
problems in the euro zone, and the situation in the Middle
East are making a V-shaped recovery difficult. Still, orders for
products in the LCD and semiconductor sector and in theautomotive sector have been increasing since the spring of
this year, giving us confidence that the targets for the firstyear of the plan are likely to be achieved. We hope, therefore,
to exceed the targets of “S-Project” by a large margin.

Q5. What is the specific growth strategy

In the Foodstuff business, we will develop a diverse arrayof businesses, ranging from those in upstream to downstream industries with the aim of building value chains. Morespecifically, we will build a stable supply system by forging
stronger ties with suppliers through the diversification of
production centers, such as by securing sources of nongenetically modified grains — an area in which we excel.
Not only will we work on the infrastructure side of farmland
acquisition, but also on the seed side of the business. We alsoplan to extend sales to the downstream market in cooperation with domestic compound feed manufacturers. We alsoseek to expand our market in Asia, including China.
Kanematsu considers the Environment business an area
in which it, as a trading company, should actively work toachieve a low-carbon society. In this connection, we intend
to build businesses in the fields of photovoltaic power
generation, electric vehicles (EV), and environment-relatedmaterials. We have already begun work on projects that arelikely to contribute to future earnings, such as the supply ofelectric vehicle facilities necessary for realizing the eco-town
concept being promoted by regional governments and thedevelopment of tire materials that are lighter, carbon-neutral
and environmentally friendly.

scenario foreseen in the plan?
For future development, we will implement growth strategies
in each business while maintaining our focus on Information
and Communication Technology (ICT) & Electronics, Foodstuff,
the Environment, and the Iron, Steel & Plant businesses thatcomprise the major part of our business portfolio.
In the ICT and Electronics area, we will expand the baseof our solution business and step up projects in China andother parts of Asia. A major example is the cloud computing
business that has developed and grown noticeably in recent
years, and which will be a focus for us moving forward. The
Japanese market appears to be lagging in this area in comparison to the growing use of this technology in the global
market. By making effective use of the superior resources of
our Group companies including Kanematsu Electronics Ltd.,
one of our subsidiaries, we will actively develop businessin this area. The electronics component industry will also
continue to advance, and we will work to develop new
businesses through alliances with producers of digital home
appliances such as televisions and DVD players, or producersof higher-speed, next-generation memories used in automotive navigation systems.

VOLTA, an infrastructure project for electric vehicle charging
Rapid charger

Image of Project VOLTA development

Links with mobile terminals• Charging spot search• Display availability and waiting time
• Booking on a cell phone, etc.

Communications control box• User authentication function• Obtain information on charger on/off status• Send control orders such as reservations

Charging information
control system

Joint developmentwith battery charger
manufacturers

3G network• Management of operating status• Management of fee requirement
information• Reservation management, etc.

IC cardOrdinary charger

3G network

Connection with other systems
IC card

Joint developmentwith battery charger
manufacturers• Send information on position, availability, etc.
to other systems (API)• Develop shared applications with battery
charging networks of other companies in
the future and settle intercompany payments(The details of development are subject to change)

Annual Report 20109

Interview with the President

In the Iron, Steel & Plant sector, we seek to increase
our revenue base by expanding our business for functional
iron and steel products that are used for energy and inautomobiles and strengthening our auto parts business, forwhich demand is expected to grow in China and other partsof Asia.

Q6. What is your approach to building businessportfolio and risk management?
We hold a number of commercial rights. However, eventhose that are profitable become obsolete as the times
and society change. For this reason, we think that we needto constantly review our commercial rights and more
frequently refine our focus.
Consequently, we have decided to implement fund andmanagement efficiency analysis and manage each individualcommercial right and trading unit, in addition to the analyses
traditionally performed by each organization, including
departments and sections, or in each project company. Bychoosing where to focus based on this approach, we areconfident that we will be able to respond more quickly andflexibly to the diversifying needs of our customers and tochanging markets.

Q7. What do you consider to be the distinctive
characteristic of Kanematsu?
If I were to choose one word to express the distinctive
characteristic of Kanematsu, it would be “high-mindedness.”
Although this may sound somewhat ambiguous in a business sense, we have a corporate culture that encourages
us to constantly consider the position of our partners, but
discourages profit-seeking only for ourselves, we are encouraged to contribute to society through our business, andalso to make a profit. This has been preserved as part of ourcorporate DNA since the time Fusajiro Kanematsu founded
the Company, and I consider it a feature and strength ofKanematsu.
We are often complimented by our partners, who say
they are glad to have chosen Kanematsu as their partner.
We believe that building profound trust with our partners
and exchanging ideas with them to create new businesses
in which each individual plays a role is the very origin of theconcept of “Value Creator” introduced in the new MediumTerm Business Plan.

10

KANEMATSU CORPORATION

Masayuki Shimojima
Apr. 1974: Joined the Company. Worked at Foreign Exchange Section,
Finance Dept., Osaka Office
Apr. 1981: Steel Pipe Section, Iron & Steel Foreign Trade Dept. II,
Tokyo Head OfficeJun. 1982: Houston Branch, Kanematsu-Gosho (USA) Inc.
Jul. 1988: Iron & Steel Foreign Trade Dept. I, Tokyo Head Office
Jul. 1995: Vice President and Houston branch manager,
Kanematsu USA Inc.
Aug. 1998: Corporate Planning Dept., Tokyo Head Office
Jul. 2000: General Manager, IT Administration OfficeJun. 2002: President, Kanematsu USA Inc.
Jun. 2006: Director, Chief Officer for Plant DivisionJun. 2009: Managing Director, Chief Officer for Iron & Steel Division,
Personnel & General Affairs Dept., Traffic & Insurance Dept.,
General Manager at Osaka Office
Apr. 2010: President

Q8. Finally, what are your financial strategies
for increasing corporate value and returning
profits to shareholders?
Improving our financial standing is an urgent task for the
Kanematsu Group. Our equity is still vulnerable despite thesteady decrease in interest-bearing debt, and so we willcontinue to reduce debt and review our asset portfolio. In
the final fiscal year of the new Medium-Term Business Plan,
we aim to reduce net interest-bearing debt to ¥84 billion. We
will also emphasize management efficiency, for instance, bystreamlining the Administrative Departments and relocating
personnel in these divisions to the Business Divisions of theGroup in order to strengthen our revenue base. We will build
a solid cost structure that can generate stable income by, forinstance, reducing SG&A expenses to ¥60 billion by the endof fiscal 2011, compared with ¥61.9 billion in fiscal 2010.
At present, opportunities to acquire commercial rights
are increasing, particularly outside Japan. With our partners
expanding their overseas presence in China, Thailand,
Indonesia, Vietnam, and other parts of Asia where economies
are developing, we can anticipate the development of anumber of businesses using the Kanematsu network. We will
execute the new Medium-Term Business Plan with speed
and certainty, and resume dividend payments at the earliest
opportunity to meet the expectations of our stakeholders.

Step Forward— Steps after Structural Reform and Future Prospects —Embodying the pioneering spirit and creativity of founder Fusajiro Kanematsu, who always anticipated the future andboldly undertook new businesses, the Kanematsu Group has overcome many challenges and steadily built its operations
over its 120-year history.
In the postwar era, the Group accelerated its transformation from a specialist in textiles trading into a general trading
company to achieve growth. In the second half of the 1990s, however, the collapse of the bubble economy in Japan andthe globalization of the world economy forced the Group to execute a substantial change in direction. Subsequently,
in 1999, the Three-year Structural Reform Plan was developed and the “second founding” of the company began.
In the 11 years since then, the Group has continued to offer added value rooted in industry in a rapidly changing
environment, and has steadily progressed through the stages of refining its business focus, strengthening its financialbase, and undertaking other initiatives in its four medium-term business plans. In April 2010, the Group launched its new
three-year Medium-Term Business Plan, “S-Project,” and began making new efforts to bolster its earnings strength andfunction as a “Value Creator.”

Progress in reform and growth over the past 11 years
Medium-Term Business Plan Medium-Term Business PlanThree-year
Structural Reform Plan

Medium-Term
Management Plan

“New KG200”“teamKG120”(May 1999 – March 2001)(April 2001 – March 2004)(April 2004 – March 2007)(April 2007 – March 2010)

The Group made radical cuts tounprofitable businesses and built
a robust cost structure by refining
its business focus and completing
comprehensive streamlining andcost-cutting. The initial goal forthree years was achieved in two
years.

Seeking to bolster its business base,the Group organized and integrated
companies within the scope of
consolidation to create a more
integrated structure and thoroughly
reviewed costs. The Group eliminated its accumulated deficit andslashed interest-bearing debt.

The Group shifted its focus fromcost-cutting to boosting revenue,
and achieved sales of ¥1 trillion
by building a profitable operationbase and solidifying its earnings
capabilities. The operating
foundations are steadily expanding
and earnings strength has beensignificantly increased.

The Group was active than everin expanding its businesses andstrengthening its functions as atrue business creator to achieve
added value. It also expanded its
overseas presence, developed new
businesses, and began planning
new growth.

Net interest-bearing debt and net debt-equity ratio
Net interest-bearing debt

Net debt-equity ratio(¥ billion)
600

Leveraging Group synergy,
added-value creation(times)
60

400

40

Improving profitability
by strengthening the revenue base
200

20

0

0
00

01

02

03

04

05

06

07

08

09

10

Developing a stable financial base

Annual Report 201011

Step Forward — Steps after Structural Reform and Future Prospects —Net interest-bearing debt (¥ billion)“Two years of rebuilding”

Number of employees (non-consolidated)
791.0

Reduced to

1,938

543.8

1

2 that prior to
the structuralreform433.0 1
3

785

In the second half of the 1990s, the Company carried a large amount of interest-bearing debt andneeded to undertake a corporate rehabilitation through a major shift in direction. Consequently,
in May 1999, the Three-year Structural Reform Plan was developed with the slogan “second
founding of the Company,” based on which the Company worked aggressively to withdraw from
unprofitable businesses, downsize its workforce and reduce its assets. As a result, the goal of theinitial three-year plan was achieved in two years and the basis of the current business infrastructure
was successfully built.

669

Basic policies
1999

2000

◆ A more refined business focus◆ Adjustments to capital and financial support

2001(¥ billion)

1999
results

2001
results

Ordinary income
Net interest-bearing debt
Total assets

(7.5)
791.0
1,244.2

11.4
433.0
772.6

* Because the structural reform was achieved a year earlier thaninitially planned, the comparison uses the results of two years.

◆ Comprehensive streamlining and cost-cutting◆ Improved earnings strength and reinforced financial structure

Major achievements◆ A narrower business focus allowed the Company to close unprofitable divisions and conduct a major
reorganization of its affiliates, and a management system based on four core departments was established.
◆ The number of employees at the parent company was reduced to approximately a third, from 1,938 to 669,
and SG&A expenses were slashed.
◆ The incidence of new bad debts fell substantially with improved risk management.
◆ Drastic action has been taken for unrealized loss and the costs of structural reform.
◆ Net interest-bearing debt was reduced to approximately half the level of two years previously.

Three-year Structural Reform Plan (May 1999 – March 2001)
1999

2000

2001

2002

2003

Medium-Term Management Plan (April 2001 – March 2004)“Three years of bolstering the Group’s business base”
The Three-year Structural Reform Plan resulted in a significant improvement in core businessfocus and corporate culture. However, the business base was still weak, as was the operating
and financial underpinnings of the Group as a whole, and so in April 2001, a three-year plan
was developed to improve these areas. As a result, steps were taken to continuously reduce
interest-bearing debt and eliminate the accumulated deficit, and adjustment of the scope of
consolidation was undertaken over five years, incorporating the period prior to the plan.

Basic policies◆ Earnings growth through establishment of a robust base of operations and expansion of sales◆ Major cuts in interest-bearing debt and related business burdens◆ Elimination of accumulated deficit

Initial projection

2004
results

Ordinary income
20.0
Net interest-bearing debt
300.0
ROE
30% or higher

10.7
287.2
13.9%

(¥ billion)

Number of companies within
the scope of consolidation

1

230

2 in five years
from the start ofstructural reform

163

Major achievements

116◆ Eliminated the accumulated deficit, and substantially reduced interest-bearing debt
(from ¥433 billion to ¥287.2 billion).
◆ Exhaustive reconsideration of costs and expenses incurred mostly by consolidated subsidiaries.
◆ Organization and integration of companies within the scope of consolidation(from 163 to 116 companies).
1999

12

KANEMATSU CORPORATION

2001

2004

“Complete recovery” — finishing the “second founding” of the Company

Seek higher profitability

The Company’s business base was stabilized with thorough streamlining and cost reductions
over a period of five years. Subsequently, in April 2004, we developed “New KG200” to finish
the “second founding” of the Company, positioning the subsequent period as a turning pointfrom acting defensively by saving costs to going on the offensive and expanding earnings.
Under the Plan, we stepped up our sales promotion power and firmly established our financial
position. As a consequence, in three consecutive years we achieved our highest ordinary
income in ten years, and significantly enhanced our earnings strength.

Develop business based on one of the four factors below or on a
combination of factors for maintaining and increasing profitability.

Market/Products
Gain high market share in niche markets and products

RegionInvest business resources in regions where we are strong
such as Asia and North America

Business scheme
Promote high value-added development andproposal-based sales

Basic policies◆ Bolster sales promotion power (Pursue high value-added transactions and enhance earnings power)◆ Establish a solid financial position (Constantly reduce net interest-bearing debt and double
shareholders’ equity)◆ Advance the Group’s management reform (Streamline management and advance management reform)

Function/Business structure
Diversify trading company functions by adding
fabless manufacturing capability

Initial projection(¥ billion)

Ordinary income
Net interest-bearing debt
Net D/E ratio (times)

20.0
250.0
6

2007
results

Major achievements◆ Net sales of ¥1,281.3 billion were achieved, surpassing the initial plan of ¥1,000 billion.
◆ The sales basis was steadily expanded, and ordinary income increased by ¥6.5 billion (60%)
over the three years.
◆ Net interest-bearing debt was reduced to ¥204.9 billion, significantly surpassing the initial plan.
Net D/E ratio improved to 6.2 times.

17.3
204.9
6.2

Medium-Term Business Plan “New KG200” (April 2004 – March 2007)
2004

2005

2006

2007

2008

2009

Medium-Term Business Plan “teamKG120” (April 2007 – March 2010)“Balanced expansion with a sense of urgency”(¥ billion)◆ Although the targets could not be achieved due to the deterioration of the business environment,interest-bearing debt was reduced.
◆ Overseas bases were expanded, including the establishment of a management company in China
and the upgrading of a local subsidiary in Brazil.
◆ The photovoltaic cell business and other environment-related businesses were launched in earnest.

Traditional

Major achievements

Function

Basic policies◆ Develop the management system (Enhance internal control, strengthen corporate governance,
and thoroughly implement compliance)◆ Sales promotion (Advance development of new businesses, bolster support, and expand overseas bases)◆ Group management (Reform organization, speed up decision-making process, and manage risks)

Initial projection

Ordinary income
Net interest-bearing debt
Net D/E ratio (times)

AdvancedIn April 2007, “teamKG120” was launched to accelerate aggressive management, enhance our standing as aTrue Business Creator that provides highly specialized and useful business functions, and create additional
value ahead of the 120th anniversary of our foundation to be commemorated in 2009. Unfortunately, wewere unable to achieve our targets, because of the radical change in the business environment causedby the global recession that took place from 2008 onward. We were, however, able to implement M&A
strategies and cross-sectional collaboration in areas where growth has been facilitated. We also moved
forward with the development of overseas bases and the operation of new businesses. Meanwhile, net
interest-bearing debt, which we had planned to slash to ¥160 billion in the initial plan, was reduced to¥109.4 billion. Based on these measures, we have established a basis for growth as a “Value Creator.”

25.0
160.0
2.5

2010
results

8.2
109.4
3.8

Value Exploration

New Businesses

Explore increased value
added by providing
integrated functions

Take an aggressive
approach by allocating
more resource on
training and teaming

Fundamental Trading

Horizontal Expansion

Increase market share,promote efficiency,
and capture new
business seeds

Capture opportunities
to apply our successful
business models to
new markets(customers and regions)

Existing

Customers

New

Annual Report 201013

Step Forward — Steps after Structural Reform and Future Prospects —New Mediu
Medium-T
m-Te
-T
Term
erm Busin
iness Plan
Pl
13

20
2

1
20
11

20

April 2010 – March 2013

0

1
20

The new Medium-Term Business Plan “S-Project” is another step towards the goal of becoming
a “Value Creator” that can satisfy all stakeholders. It seeks to facilitate the strengthening of therevenue base and management base that enable sustainable growth, even in drastically changing
global circumstances.
We are aiming to be a vigorous “Value Creator” that enables each employee to make the mostof his/her originality and ingenuity for the constant creation of new businesses. We are dedicatedto providing highly specialized and useful business functions while pursuing true business value.

New Medium-Term Business Plan

“S-Project”

Speedy × Stronger = Satisfaction
With speed

14

Building a stronger baseSatisfying all stakeholders

VisionWithin 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 Japan and abroad to strengthen the revenue base.
· Bolster efficiency and soundness to strengthen the foothold and management base.
· Deepen mutual confidence with business partners and jointly pursue the creation ofbusinesses.

KANEMATSU CORPORATION

Numerical Targets
Performance plan(¥ billion)

2010 results

2011 plan2012 plan2013 plan

861.3
74.1
61.9
12.2
8.2
3.5

850.0
75.0
60.0
15.0
10.0
4.5

950.0
77.5
60.5
17.0
12.0
5.5

1,050.0
80.0
61.0
19.0
14.0
6.5

Net sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income

Financial plan

“S-Project”

teamKG120“S-Project”

teamKG120(¥ billion)

2010 results

2011 plan2012 plan2013 plan

398.6
28.9
7.3%
193.1
6.7
83.7
109.4
3.8

400.0
33.0
8.3%
185.0
5.6
85.0
100.0
3.0

404.0
38.5
9.5%
177.0
4.6
85.0
92.0
2.4

410.0
45.0
More than 10%
169.0
3.8
85.0
84.0
Approx. 2.0

Total assets
Shareholders’ equity
Equity ratio
Gross interest-bearing debt
Gross D/E ratio (times)
Cash and bank deposits
Net interest-bearing debt
Net D/E ratio (times)

Aiming to resume dividend payment as soon as possible

Management Initiatives
Strengthening the revenue base

Bolstering the business baseContinuing to refine our business focus
Promoting growth strategies

Improving the financial position

In the “ICT & Electronics,” “Foodstuff,” “Environment” and “Iron,
Steel & Plant” categories, allocate management resources,
primarily to businesses whose growth can be expected going
forward, to strategically restructure the business portfolio.

Increase revenues in the ICT and electronics businesses.
a Expand the base of the solutions business; step up our efforts in
China and Asia.

Reduce net interest-bearing debt and change the asset portfolio.

Pursuing management efficiency
Review the cost structure and streamline the Administrative
Departments.

Enhancing and deepening the consolidated
management system
Introduce a new business management system, develop internal
control, and enhance compliance.

Expand the operating base and bolster profitability in thefood field.

Cultivating human resources for global operations

a Expand sales channels and bolster the system for supplying foodas a resource in China and Asia.

Cultivate human resources for consolidated management andincrease the number of employees working overseas.

Expand the operating base and launch new businesses
in the environmental sector, including the photovoltaic
battery business.
a Focus on photovoltaic power and battery businesses and enter
the electric vehicle (EV) business.

Expand the revenue base in the iron & steel and plant field.
a Step up our efforts in the automotive business in Asia.

Annual Report 201015

Step Forward — Steps after Structural Reform and Future Prospects —Business plan by segment set forth in “S-Project”
Electronics & IT
Focus

Specific strategies

ICT solutions●

Enhancing functions in response to the diversification ofcustomer needs, thereby strengthening the revenue baseMechanical parts●

Expanding core businesses in Europe and the United Stateshorizontally to China and Asian markets

Electronic components●

Operating income results and plans(¥ billion)

7.0

Developing new operations through development support

7.5

8.0

2012
Plan

2013
Plan

5.4

2010
Results

2011
Plan

Foods & Foodstuff
Focus

Specific strategies

Operating income results and plans

Overseas transactions●

Expanding the workforce and building sales systems in
China and Asia
● Expanding tripartite trade in food and feed materials(¥ billion)

Non-geneticallymodified food ingredients(soybeans and corn)●●

Bolstering the supply system in cooperation with suppliers
Expanding sales in Japan and overseas markets(Asia and Europe)

3.6

2010
Results

4.0

2011
Plan

4.5

2012
Plan

5.0

2013
Plan

Iron & Steel / Machinery & Plant
Focus

Specific strategies

Operating income results and plans

Highly functional materials●

Expanding transactions in the energy and automotive sectors● Selling electric vehicle parts(¥ billion)

Automobile parts●

Expanding exports of auto parts to markets in Asia,
especially China● Creating new trade rights by helping Japanese auto
manufacturers enter overseas markets

2.5

3.2

3.9

1.5
2010
Results

2011
Plan

2012
Plan

2013
Plan

Environment & Materials
Focus

Specific strategies

Photovoltaic power
generation●

Electric vehicles (EV)●●

Expanding sales of conductive adhesives overseas
Importing and selling thin film photovoltaic module

Establishing a system for increasing sales of anode materials
for lithium batteries● Building EV charging infrastructure systems● Commercializing VOC (Volatile Organic Compounds)
Development ofenvironment-related materials recovery/purge technology
and new technologies● Developing new materials for tires●

16

KANEMATSU CORPORATION

Expanding transactions regarding heat reflective paint overseas

Operating income results and plans(¥ billion)

0.9

0.9

2010
Results

2011
Plan

1.2

2012
Plan

1.5

2013
Plan

Overview by Business Segment
Electronics & IT

The Kanematsu Group is developing global businesses as a
“Value Creator” that provides diverse products and services basedon 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 is building strong relationships as it works to create businesses together with customers.

Foods & Foodstuff

27%

30%
Sales bysegment

Iron & Steel /Machinery & Plant

Environment &Materials

17%

23%

3%

* Kanematsu has an “Other” segment that encompasses its textile business,insurance agent/intermediary business, real estate management andleasing business, construction materials business and other operations.

ctronics & IT

This segment offers a variety of products ranging
from electronics-related materials, parts and equipment to aircraft. It also operates mobile solution and
ICT solution businesses. In addition, the segment
focuses on OEM and ODM businesses and provides
added value such as design and manufacturing.

P18

oo

ds &

Foods
tu
ff

Ele

Foods & Foodstuff
F

Electronics & IT

To maintain food safety and security, this segment
secures foodstuffs such as feed, grains, meat andmarine products through a consistent supply system.
It also provides an extensive range of food products,
including high-value added products.

P20

Net sales

Operating income

Net sales

Operating income(¥ billion)
400(¥ billion)
10(¥ billion)350(¥ billion)
5

321.6

356.1
8

300

300

8.1

276.6

6.9
232.7

6

283.6

4.3
264.2

3.9

4

250

5.4

200

3

150

2

3.6

200
4

100

100

2

0

0

2008

2009

2010

0

2008

2009

2010

ls

Iron &

ent & Ma
nm
te
ro

ria

lant

P22

In our iron & steel business, we carry out domestic
and international trade in various iron and steel
products. The machinery & plant business comprises
chemical and paper manufacturing plants andtransactions related to ODA projects, ships andmotorcycles and automobiles.

2010

2008

2009

P24

Operating income

Net sales

Operating income(¥ billion)300(¥ billion)
8(¥ billion)350(¥ billion)
2.5

7.5

251.9

7.0

2.1

284.7

2.0

6

1.7

250

200

5.3

142.2
135.4

150

149.2

4

100

88.0

2

61.2

0

1.5
2.2

109.7

90.9

0.9

2.4

2009

2010

(0.9)

-1

0

2008

2009

2010

2008

198.1

200

6.1

150

50

316.4

300

226.3

2010

Under the keywords of “environment,” “healthcare”
and “medicine” this segment strengthens productdevelopment and production capabilities. It also
engages in the import of crude oil, the import andexport and domestic trading of petroleum products
and new energy business.

Net sales

250

Iron & Steel
Machinery & Plant

2009

Environment & Materials
Env
i

y

&P

S

l / Machiner

0

2008

Iron & Steel / Machinery & Plant
e
te

1

50

285.5

1.6
255.0

* Previous segmentation

1.6

0.4

0.5

50
0

0.9

1.0

174.3

100

Energy*Life Science*

1.5

30.9

29.7

23.8

2008

2009

2010

0

0.5

0.5

2009

2010

0.1

2008

Annual Report 2010

17

Ele

ctronics & IT

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 and provides added value such as
design and manufacturing.

Results for Fiscal 2010(¥ billion)

2009

2010

Net sales

276.6

232.7

Gross profit

41.7

38.5

Operating income

6.9

5.4

The volume of electronic component- and aircraft-related businesses
declined during this period. The mobile phone businesses achieved
increased profit, despite a drop in the number of products sold.
Meanwhile, the solution business posted a loss as a result of sluggish
capital expenditure.
Consequently, net sales in the Electronics & IT division decreased by

Hirokazu Tamura

Fumihiko Nashimoto¥43.9 billion from the previous year, to ¥232.7 billion, while the operat-

Director

Directoring income declined by ¥1.5 billion, to ¥5.4 billion. The semiconductor

Chief Officer,
Electronics & IT Division

President, Devices Company

equipment and electronic component businesses have been showing
signs of recovering as a result of cost cutting and an increase in thenumber of contracts signed after the fourth quarter, and further

Main Businesses
Semiconductor Parts
and Equipment

Semiconductor and electronic components,
Electronic modules and materials,
Semiconductor and LCD equipment

Mechanical Parts

Onboard parts, Printer-related equipment,
Electronic modules

ICT and Mobiles

System solutions,
Communication equipment and parts,
Mobile phones, Mobile content,
Mobile advertising

Aerospace

Aircraft, Aircraft parts

recovery is expected.

Kanematsu’s Strengths● Customization and provision of products and services withvalue-added functionality tailored to customer needs● Development of products that meet customer needs throughcollaboration with manufacturers from the development stage● Wide-ranging technology and expertise in the electronics field

TOPICS

Operating Environment■ In the ICT solution industry, new areas such as cloud computing havebeen growing despite continuing constraints on corporate IT spending.
■ The mobile solution industry is confronting a slowdown in salesof mobile phones due to both an increase in mobile phone prices
attributable to changes in how the devices are sold, and to market
saturation.
■ In the electronic component industry, demand for digital home
appliance components is growing, particularly in emerging markets.

18

KANEMATSU CORPORATION

Next-generation flash memory
The mobile computing industry, represented by smartphones
continues to improve product functionality, so that today’s mobile
devices have the same functionality of recent desktop PCs. With
mobile devices reduced to pocket size, the world of ubiquitous
computing is now at hand.
These mobile devices require high-capacity, high-speed and low
power consuming nonvolatile memory (which retains recorded data
even without a power supply). While NAND type flash memory is
widely used today, performance is still not quite adequate to meet theneeds for greater reliability, capacity and speed.

Outlook and Strategies for Fiscal 2011 and Medium-Term Business Plan(¥ billion)

2011

2012

2013

Net sales

230.0

245.0

260.0

Gross profit

39.0

39.8

40.5

Operating income

7.0

7.5

8.0

Medium-Term Business Plan “S-Project”
In the Electronics & IT Division, we will emphasize the ICT
solutions, mechanical parts, and electronic components sectors.
ICT solutions
While corporate investments in systems are currently restricted by the

Outlook for Fiscal 2011

sluggish economy, there is a strong potential investment need in future

In the semiconductor equipment and electronic component businesses,

areas, such as the introduction of new accounting standards and thea recovery in volumes led by rising demand in emerging countries,

improvement of legal compliance. In addition to meeting these diversi-

primarily in Asia, is expected. We will continue to support our Japan-

fying customer needs and providing traditional hardware and software,

based customers who are transferring businesses overseas and provide

we will take steps to improve customer satisfaction by proposing

SCM system development services. In the onboard parts for motorcycles

information systems built using cloud computing and other services.

and automobiles and printer-related businesses, we will focus on thedevelopment of business in Europe, Southeast Asia, China, and India

Mechanical parts

through the “horizontal development” of the expertise acquired in the

We will develop the foundation for onboard and printer-related

North American market.

businesses already established in the United States and Europe, in

In the solutions business, despite a slow recovery in demand for

China and Asia. The onboard-related business in particular has been

investments in systems Kanematsu will generate income by concentrat-

improving thanks to subsidies for automobile products in each country.

ing on high value-added businesses, including the development of

We will seek to build new businesses by keeping pace with technicalinfrastructure and maintenance service systems that meet customer

innovation based on environmental and safety concerns.

needs, such as the implementation of new accounting systems orenhancement of legal compliance. The mobile phone business will

Electronic components

ensure profitability by focusing on the development of corporate

In addition to sales of electronic components for the existing consumer

business.

digital products and onboard and communication products, we haveset our sights on creating new businesses through strategic allianceswith companies that offer new technologies.

In this regard, we have been pursuing a number of initiatives tocontribute to the further development of the mobile computing
world. For instance, we have established partnerships based oninvestments and exclusive dealerships in specific markets with venturecompanies that offer innovative solutions to the problems inherent toconventional flash memory. Through these partnerships, Kanematsu isdeveloping the next-generation flash memory.
We will ensure that new technologies will enable mobile phones,
digital cameras, electronic books and other products that ourcustomers use to become more convenient and user-friendly.

Annual Report 201019

F

s & Foodst

u
ff

d
oo

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

Results for Fiscal 2010(¥ billion)

2009

2010

Net sales

321.6

264.2

Gross profit

13.1

12.6

Operating income

3.9

3.6

Despite a substantial drop in net sales in the foods business, resulting
from a fall in product prices and a rising yen, sales of products thatlowered prices in response to deflation remained strong. Highly processed food in the marine products trade was profitable, which helped
improve the overall profitability of the foods business.
Meanwhile, in the foodstuff business, sales struggled in a harsh

Tatsuo Suzuki

Morihiro Toida

environment that included a decline in the grain market and lower

Managing Director

Executive Officer

feedstuff prices caused by a fall in end prices of farm products in the

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

Vice Chief Officer,
Foods Division

feedstuff trade. The volume of business nonetheless remained stable,
thereby limiting the net loss.
Consequently, net sales in the Foods & Foodstuff Division

Main Businesses
Food

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

Meat and Marine
Products

Meat products, Marine products, Others

Grain & Oilseed,
Feedstuff and Dairy
Products

Wheat, Barley, Rice, Soybean,
Processed foods, Feedstuff, Fertilizer,
Pet food, Pet products, etc.

decreased by ¥57.4 billion from the previous year, to ¥264.2 billion, andoperating income declined by ¥0.3 billion, to ¥3.6 billion.

Kanematsu’s Strengths● Supply of distinctive, high value-added products

TOPICS● Stable sourcing ensures reliability of supplies● Traceability and rigorous hygiene and quality management

Stable acquisition and supply of non-geneticallymodified soybeans

Operating Environment

While demand for improved food safety is higher than ever, and theglobal soybean production is shifting markedly to genetically modified
organisms (GMO), non-genetically modified soybeans are used fornearly 100% of edible soybeans in Japan. The same trend is evident in
the European Union and Asia, and demand for non-genetically modified soybeans has been increasing despite falling production volume.
We consequently began full-scale cultivation of non-geneticallymodified soybeans on Prince Edward Island in Canada in the springof 2009.
We hope to further stabilize
our non-genetically modified
soybean production throughsoybean cultivation not only
on this island, but also inAustralia and other regions in
the future.

■ Japanese consumers remain price sensitive due to persistent deflation■ The grain market contracted the last year due to intense volatility andhave gradually stabilized at lower mid range■ Rising demand in emerging countries persists

20

KANEMATSU CORPORATION

Outlook and Strategies for Fiscal 2011 and Medium-Term Business Plan(¥ billion)

2011

2012

2013

Net sales

270.0

300.0

330.0

Gross profit

13.0

13.8

14.5

Operating income

4.0

4.5

5.0

Medium-Term Business Plan “S-Project”
In the Foods & Foodstuff Division, we are planning to concentrate on overseas trade and non-genetically modified foodingredients.
Overseas trade

Outlook for Fiscal 2011

In the foods and foodstuff business, we are currently building solid

In the foods business, mass retailers and the home meal replacement

experience in tripartite trade, such as soybeans and feedstuff imported

business have shown steady progress, as has the food service industry,

primarily from the United States for export to China and other Asianan area of particular focus for Kanematsu. Moving forward, we plan tocountries, and processed fruits and other processed food imported

improve efficiency by cooperating with and assigning tasks among ourfrom Asia for the export to the United States and Europe. In the future,

Group companies in the business flow from upstream to downstream

we hope to focus more on this tripartite trade, in addition to imports

industries. We will also enhance alliances with our partners toand exports through Japan, to make it a primary source of stronger

strengthen the supply and sales systems and expand our businesses.

profitability.

In the foodstuff business, we intend to fortify our relationships with

Moreover, we will seek to accelerate the development of the

suppliers and expand both domestic and overseas markets. In par-market by increasing the number of staff in China and Southeast Asia.

ticular, to respond to rising awareness of food safety and security, theTo ensure the acquisition of businesses to serve demand in China andsystem for the stable supply of non-genetically modified soybeans will

Southeast Asia and increase the business volume, we are considering

be enhanced to increase business volume. In the pet products business,a system of deploying 10 – 20% of the sales staff of the Foods anda recent area of focus, Kanematsu will seek to further expand businessFoodstuff Division to overseas locations in the medium to long run.

by focusing on private brand and premium brand pet products.
Meanwhile, in both the Foods and Foodstuff business, we will

Non-genetically modified food ingredientsstrengthen our overseas sales system primarily in China and other Asian

To continuously respond to growing awareness of food safety andcountries, including in the area of staffing.

security, we consider the supply of non-genetically modified foodingredients to be an important issue. By strengthening our partnershipwith suppliers, a system of stable supply will be built and new customer
bases will be developed both inside and outside Japan to expand ourmarket.

Sustainable supply of raw materials
We consider that helping to improve the lives of farmers andagricultural workers in developing countries and protecting fertile soil
and natural resources is part of our mission. International organizationand certification groups working in these areas include the Rainforest
Alliance certification*1 and Fairtrade Labeling*2.
We trade coffee beans certified by the Rainforest
Alliance and orange juice and coffee beans certified
by Fairtrade Labelling Organizations Internationaland contribute to sustainable growth, support
producers, and protect the environment throughthe import and sale of these products.
*1 Rainforest Alliance certification: The Sustainable Agriculture Program of thisorganization has established a number of standards for the purpose of prohibiting
deforestation, protecting biodiversity, and improving the welfare of agricultural
workers. Farms that meet certain standards are eligible to receive certification.
*2 Fairtrade Labelling: This is a system of supporting the life of producers in developing countries who produce much of the imported products facilitating our daily life
by guaranteeing appropriate prices with stable and sustainable businesses.

Annual Report 201021

l / Machiner

y

lant

Iron &

&P

S

e
te

Iron & Steel / Machinery & Plant

In the Iron & Steel business, the Company is involvedin the domestic and foreign trade of various iron andsteel products. In the Machinery & Plant business,
operations include chemical and papermaking plant
and ODA projects, ships, and transactions related to
motorcycles and automobiles.

Results for Fiscal 2010(¥ billion)

2009

2010

Net sales

226.3

149.2

Gross profit

19.6

11.8

Operating income

7.0

1.5

In the iron & steel business, overseas transactions with customers inAsia and the Middle East held firm and automobile parts and materials
also showed signs of recovery from the second half, but transactions
with customers in North America slowed considerably. Transactions on
the domestic market remained sluggish due to a continued slump in
domestic demand amidst a decline in the construction sector.

Takashi Gunji

Tetsuro Murao

Director

Director

Chief Officer, Iron & Steel Division

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

In the plant business, transactions related to automobile parts withcustomers in China, fuelled by the expansion of China’s auto market, andtransactions related to petrochemical plants with customers in the Middle
East remained strong, but, aside from these, transactions were lackluster,affected by slow market conditions and the strong yen, amongst other

Main Businesses
Iron & Steel Trading

Surface-treated steel sheet, Seamless pipe

Specialty Steel Trading

Stainless steel, Specialty steel pipe,
Tubing products, Bar productsCast and
Forged Steel Products

Precision forged parts

Domestic Trade and
Raw Materials Supply

General steel products, Iron ore, Cokes

factors. In the machine tools business, companies continued to scale backcapital investment and orders remained at a low level.
As a result, net sales in the Iron & Steel / Machinery & Plant Divisionwere down ¥77.1 billion year on year, to ¥149.2 billion, and operating
income decreased ¥5.5 billion year on year, to ¥1.5 billion.

TOPICSTransportation Machinery Automobiles, Ships, Marine equipment
Plant Infrastructure
Projects

Various plants, Telecommunications projects,
ODA projects, Optical fiber,
Electric power projects

Machine Tools andIndustrial Machinery

Machine tools, Industrial machinery

Kanematsu’s Strengths● Supply of highly functional materials and distinctive products
including oil country tubular goods

Porcelain Enamel Steel Sheet
Sales to companies all over the world for making markerboard,
chalkboard and projection screen which would be installed in schoolclass rooms, audio-visual rooms and conference rooms.
Enhanced durability and certified
by Scientific Certification Systems for
low-emitting materials, meeting thestringent Indoor AdvantageTM Gold
Certification.*● Meeting diverse customer needs through the lineups of major
machine-tool manufacturers in Japan● “Project-forming” businesses which contribute to regional economic
development

Operating Environment■ Crude steel production has been trending upward since the middleof the fiscal year due to sustained demand from emerging nations,despite sluggish domestic demand.
■ Automobile production is also improving after hitting bottom in the
April – June quarter of 2009 due to the effect of government subsidies
and other stimulus measures worldwide.
■ Orders for machine tools and industrial machinery began improving
gradually in the second half of the fiscal year.

22

KANEMATSU CORPORATION* Indoor AdvantageTM Gold certification isadministered by Scientific Certification Systems(SCS), a global leader in independent certificationand verification of environmental, sustainability,
stewardship, food quality, food safety and foodpurity claims.
The SCS Indoor Advantage Gold certification
relies on data collected through small chamber
testing, which allows manufacturers to examine
the individual VOCs, to identify and address
the sources of chemical contaminants in their
manufacturing process.
SCS Indoor Advantage Gold certification
conforms to both the California 01350 specification
and Collaborative for High Performance Schools.

Outlook and Strategies for Fiscal 2011 and Medium-Term Business Plan(¥ billion)

2011

2012

2013

Net sales

145.0

165.0

185.0

Gross profit

12.2

12.9

13.6

Operating income

2.5

3.2

3.9

Medium-Term Business Plan “S-Project”
In the Iron & Steel / Machinery & Plant Division, we willconcentrate on highly functional materials business andautomobile parts.
Highly functional materials business

Outlook for Fiscal 2011

Firstly in the energy market, we are aiming for recovery of turnover in

For the iron & steel business, we will launch high added value products

oil country tubular goods, are launching high added value products,

for energy and environment-related businesses and aim to increase

and intend to increase revenues by expanding sales of strong, corrosion

revenues by expanding sales of strong corrosion-resistant products that

resistant products that can be used in poor conditions. Also, in the auto-

can be used in poor conditions. In the automobile and specialty steel

mobile business, as a result of a recovery in the automotive sector andbusiness, besides improvement in revenues resulting from recovery of

the consumption of inventory by customers, in both the Americas anddemand in North America, we aim to develop existing trade rights by

Europe, sales began picking up in the second half of the fiscal year and,expanding sales channels.

due to the accompanying increase in demand for wire products and cast

For the plant business, we intend to expand transactions in the corearea of automobile parts and also aim to increase revenues throughand forged parts, we expect revenues to improve in the medium-term.
As new initiatives, we aim to expand the market by launching andtransactions related to petrochemical plants with customers in thedeveloping high tensile strength wire products and aim to sell highMiddle East, which were brisk the previous fiscal year. In the machine

added value products by combining cast and forged parts.

tools business, we expect revenues to recover with improvement in thelevel of orders, albeit at a modest pace.

We are also starting corporate sales of the electric vehicle Raiku
manufactured by Mitsuoka Motor Co., Ltd. and intend to supply
automobile parts in connection with this.
Automobile parts
Among transactions relating to automobile parts, a core business inthe machinery and plants segment, export transactions with China

Sales and installation of photovoltaic power generation
systems
Aries Power Equipment Sp. z o.o., an affiliate company in Poland selling
power generators, pumps and other power equipment, has also begun
selling and installing photovoltaic power generation systems locally as
part of efforts to reduce global warming and CO2 emissions.
Harnessing the sales experience we havebuilt up in the local market, we will also
work on gaining entry to the market for such
renewable types of energy.

were particularly strong the previous fiscal year owing to the expansionof China’s auto market. Given the Chinese auto market’s enormous
growth potential, with Japanese auto manufacturers also planning to
expand their production capacity, this fiscal year the Company set up
an Automobile & Parts Section and will step up its efforts to improve theoperating structure and other aspects of its China operations.
In view of the increasing need for Japanese automobile parts
manufacturers to move their operations to key overseas markets suchas China and India, we intend to strengthen cooperation with overseas

Processing of silicon wafers for photovoltaic cells
In August 2008, affiliated machine tools and industrial equipment
trading company Kanematsu KGK Corp. and a partner company jointly
established KGK SolTech Corp. to produce silicon wafers for photovoltaic
cells. The JV will slice silicon ingots supplied by cell ingot manufacturers
to produce wafers. Monthly production capacity is 2.3 million wafers(which equates to annual production of 105MW). Against the backdropof expansion in the global market for photovoltaic cells, which, it is said,
will grow to more than 10 times its current size
(80GW) by 2020, orders are increasing and the
JV is undertaking processing contracts frommanufacturers in the United States, Europe,
Korea, India and other key markets.

bases and pursue collaboration with parts manufacturers by offering
multi-faceted support.

Annual Report 2010

23

ls

Env
i

ria

ent & Manm
tero

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

Results for Fiscal 2010(¥ billion)

2009

2010

Net sales

284.7

198.1

Gross profit

10.3

8.5

Operating income

2.1

0.9

In the life science business, pharmaceutical export transactions weresluggish due to the emergence of generic pharmaceuticals. On theother hand, export transactions relating to photovoltaic module andmaterials for lithium ion batteries and transactions relating to functional
food materials remained solid.
In the energy business, transactions struggled, as turnover declined

Hitomi Sato

as a result of weak demand amidst the recession and profit margins also

Managing Director

narrowed.

Chief Officer, Environment & Materials Division,
Business Innovation Department

As a result, net sales in the Environment & Materials Division sank¥86.6 billion year on year, to ¥198.1 billion, and operating income in the
Division dropped ¥1.2 billion to ¥0.9 billion.

Main Businesses
EnergyCrude oil, Petroleum products, LPG,
Carbon credit trading

Functional Chemicals

Materials for lithium batteries,
Photovoltaic module,
Petrochemical productsLife Science

Pharmaceuticals,
Pharmaceutical intermediates,
Functional food materials,
Health supplements

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

Operating Environment■ Oil demand has remained solid in emerging nations but has been
dampened by recession in advanced nations including Japan.
■ Environment-related materials are maintaining high growth due toincreased awareness of global environmental protection issues.

TOPICS
Full-scale entry to overseas market for heat reflective paintIn response to rising of social environmental awareness, we have made“environment-related products” an important theme and is exploringa wide range of business avenues, including business related to heatreflective paint, which has demonstrated effectiveness in preventing
urban heat islands.

■ In the pharmaceuticals field, the overseas market for low-cost genericpharmaceuticals is growing.

Lamp irradiation experiment
Halogen lamp irradiation
experiment. Following lamp
irradiation for ten minutes, a difference in surface temperatureof more than 20 degrees isobserved. The roof on the left iscoated with regular paint while
the roof on the right is coatedwith heat reflective paint.
Roof coated in regular paint

24

KANEMATSU CORPORATION

Roof after application of
Miracool S100

Outlook and Strategies for Fiscal 2011 and Medium-Term Business Plan(¥ billion)

2011

2012

2013

Net sales

190.0

225.0

260.0

Gross profit

8.5

8.8

9.1

Operating income

0.9

1.2

1.5

Medium-Term Business Plan “S-Project”
In the Environment & Materials Division, we intend to pursue
photovoltaic power generation business, electric vehicle (EV)business and the development of environment-relatedmaterials and new technologies.

Outlook for Fiscal 2011

Photovoltaic power generation businessWe intend to take advantage of favorable business conditions in Japan

We will continue concentrating our efforts on photovoltaic moduleand overseas to further strengthen transactions related to photovoltaic

business, especially exports of conductive adhesive paste and imports ofpower. We aim to extend the range of our business operations, expand-flexible photovoltaic module.

ing exports and imports of related products and becoming actively
involved in new projects. We also intend to concentrate on other

Electric vehicle (EV) businessenvironment-related business such as overseas transactions related toWith the popularization of electric vehicles in the future, demand forheat reflective paint and the development of a supply system for anodelithium ion batteries is expected to increase and we intend to expand

materials used in lithium ion batteries.

transactions related to anode materials. At the same time, we aim toAlso, with healthcare and medicine as keywords, we intend to open
up new sales channels for health food and pursue the joint develop-

secure the resources to create a stable supply system.
Highly promising EV business is the focus not just of efforts in thement of generic pharmaceuticals to meet the growth in social demand

Environment & Materials segment, but of company-wide efforts.

resulting from Japan’s aging society.

As part of this, we have begun working on the development of an EV

In energy-related business, we aim to increase the profitability ofcharging infrastructure system in Kyoto Prefecture. Over the period ofdomestic petroleum product transactions by improving the efficiency

the new Medium-Term Business Plan we aim to expand the number ofof tank operations, and we will also work to expand businesses such as

regions in which we establish systems and operate in collaboration withcarbon credit trading with rising interest in environmental issues.

diverse industries. We also intend to become actively involved in related
projects expected to have a high affinity with EV in the future, such as
the development of tourism packages using EV.
Development of environment-related materials and new technologies
We are working on a number of promising projects backed by strongsocial demand such as VOC (Volatile Organic Compounds) recovery/

Heat reflective paint reflects the near infrared rays in sunlight thatcause heat buildup and, when applied to the roof or outside walls ofbuildings and roads, it prevents temperature increases in sunlight. Whenapplied to the roof or outside walls of factories or other buildings, heatreflective paint prevents the temperature inside from increasing and is
extremely effective in reducing air conditioning expenses.
In November 2009, on the premises of the Zero Energy Buildingin Singapore, we used the heat reflective paint “Perfect Cool A” which
can mitigate the heat island effect, which is
becoming an increasing problem in urban
areas. This prompted us to focus more on
overseas sales especially in regions such as
Southeast Asia.

purge technology, the research and development of new materials
for tires, and biogas, and we are planning to turn these projects into
actual businesses over the period of the new Medium-Term Business
Plan. Given the steady rise in the number of contracts concluded inheat reflective paint business since its launch in 2009, we will continue
to work on expanding sales channels, especially in South East Asia andother overseas markets.

Zero Energy Building
The Singapore Building and Construction Authority’s
Zero Energy Building, constructed as an environmental friendly building, used Perfect Cool A.

Annual Report 2010

25

CSR
The Company’s Corporate Social Responsibility (CSR) activities have been extended into a number of fields so that we candevelop together with our stakeholders, including shareholders, investors, business partners, and people in the local communities, thereby contributing to the realization of a sustainable society.
Specifically, we established the CSR Committee in May 2008. We also set up the CSR Promotion Section in July 2009 as
a division exclusively in charge of CSR activities. Under Kanematsu’s Code of Conduct, activities have been strengthened inrelation to CSR-related issues including social contributions, compliance and environmental conservation.

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

We become involved in corporate activities to serve our various stakeholders by providing sociallyvaluable 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 andabroad, international rules 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 andintellectual property, and is disclosed in a timely and proper manner to establish mutual trust
disclosure
between the Kanematsu and the community and 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 for sustainable growth.

6. Social contribution

We are aware of the importance of our social responsibility as good corporate citizens, andproactively undertake social 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 in accordance 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 Auditorium of 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 from the AustralianGovernment.

The Research Institute for Economic & Business
Administration (Kanematsu Memorial Hall)

26

KANEMATSU CORPORATIONThe Kanematsu Auditorium of Hitotsubashi
University

Kanematsu Memorial Institute of
Pathology, Sydney HospitalSocial Contribution
The Company has made its Chiba athletic field in Chiba City, Chiba
Prefecture available for the use of neighboring schools and town
community clubs. Also, in response to requests from the Fire Stationin Chiba City, we provide assistance through our annual takeoff andlanding training of helicopters for emergency transportation.
To support countries and regions suffering from natural
disasters, the Company has provided relief money along with
contributions collected from employees. The active participationof employees in charity events hosted by municipalities and othercommunities is encouraged. We have been involved in grass-rootssocial contributions activities through our participation in anniversary events such as World Water Day and World Environment Day.

ColumnEcocap Movement
The Company has participatedin Ecocap Movement activities.
With the small caps of used PET
bottles, we have contributed tothe support of children’s lives
and the future environment of
the earth, effectively used limited
resources, and reduced CO2.

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.
At present, many employees are taking this leave, and when
they return to work, they return to the same divisions in which they
worked before. These considerations have been made to create apleasant working environment.

■ Family Care Support
In addition to the conventional family care leave system, theCompany has recently expanded special paid holidays for family
care.
■ Refreshment Day
Wednesday is prescribed as refreshment day, and all employees
are encouraged to leave the office as soon as possible after work toincrease work efficiency and improve work-life balance.

Environmental Initiatives▲

Ever since the Company obtained ISO14001 certification in March 2004, it has constantly improved its
environment management system.
By operating this system effectively, we have sought to contribute to the reduction of CO2 emissions
and fighting global warming by lowering the consumption of electricity and paper and comprehensively
reducing and sorting waste. Our goal is to help create a low-carbon and recycling-oriented society.
We have also helped to protect the global environment through our business activities in Japan andoverseas. We have moved into numerous
Examples of environment-related businesses
environment-related businesses, mainly
EV charging infrastructure see p.9 (Interview with the President)
in the Environment & Materials Divisionand the Business Innovation Department.
Sustainable coffee see p.21 (Foods & Foodstuff TOPICS)▲▲

Heat reflective paintsee p.24 (Environment & Materials TOPICS)

Annual Report 2010

27

CSR

ColumnCarbon Credit Trading Measures: Carbon Offsetting, Japan’s Voluntary Emissions Trading Scheme(JVETS) and Emission Trading Pilot Project

Since fiscal 2005, as part of the expanded energy solution business,
the Company has participated in Japan’s Voluntary Emissions Trading
Scheme (JVETS) of the Ministry of the Environment to obtain knowhow and knowledge of the emissions trading market that is expected
to develop in the future.
As a participant in the program since the first term, the KanematsuGroup has built up a strong track record in this area, and our involvement has been expanding. For example, Kanematsu Petroleum
Corporation, a Group company, has proposed a CO2 reduction
business through the use of this system. The scope of operations

has been expanded to include the development of a trial emission
transaction system, which is mainly being promoted by the Cabinet,and emissions transactions based on the Tokyo Metropolitan
Ordinance on Environmental Preservation.
In addition, the Company has provided support for emission
transactions required by customers, including a proposal to reduce CO2
using the domestic credit system of the Ministry of Economy, Tradeand Industry, and the sale of mobile phones with carbon offsetting forcorporations carried out by Kanematsu Communications Ltd., a Group
company.

Scheme regarding mobile phones with carbon offsetting
Procurement of CO2 emission rights
Tricorona AB, Sweden
TASMA, India
Wind-power generation,
CDM business

Kanematsu

Companies thatpurchase themobile phones

Kanematsu
Communications Ltd.

CO2 emission rights
Sale of mobile phones equipped with rights *equivalent to CO2 emission reductions* CO2 emission rights equivalent to 5kg are granted when a customer purchases the mobile phones, and CO2 emission rights equivalent
to 15kg are granted if a customer allows us to collect their used mobile phones. The emission rights are transferred by Kanematsu
Communications Ltd. on behalf of the customer companies to the Government’s redemption account.

CSR Procurement*Example of CSR Commitment• Suppliers conduct environment-friendly corporate activities.
• Suppliers conduct corporate activities with due consideration ofhuman rights (prohibiting child labor, forced labor, etc.)• Suppliers are committed to legal compliance.
• Suppliers clear new product quality standards (restrictions aboveand beyond legislation on the use of harmful substances.)

28

KANEMATSU CORPORATION

Flow of CSR Procurement

Suppliers of raw materials/business partners(suppliers of each manufacturer, producer, etc.)
Procurement of raw materials
by the Company

Supply chain

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.

CSR procurement
required of customers
by the Company(business with companies practicing CSR)

Added value such as manufacturing,processing, and customization by the Company

Sale of products by the Company

Buyers of products (sales offices, retailers,manufacturers, government offices, etc.)

Sale by customers

End users

CSR procurement
required of theCompany by customers(CSR practices)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.
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 is held every
week. The Company introduced an executive officer system in July
2008. To respond appropriately to changes in the business environment, 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 the performanceof their duties as required, attend meetings of the Board of Directors,
Executive Directors Council, Project Deliberation Committee,
Crisis Management and Compliance Committee, Internal Control
Committee, and other important meetings and committee meetings, and audit the performance of duties by directors.
The Company also conducts audits by outside auditors
provided for in Article 2-16 of Japan’s Company Law. Three out of
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

Appointment /Dismissal
Audit

Board of Directors

Appointment /Dismissal

Board of Corporate Auditors(internal corporate auditors andoutside corporate auditors)

Supervision

Audit

Management Committee
Internal Auditing
Department

Project Deliberation Committee
Crisis Management and Compliance Committee

Accounting audit

Accounting Auditor

Internal Control Committee
CSR Committee
Business Divisions / Administrative Departments, Domestic and Overseas Offices(As of June 24, 2010)

Annual Report 201029

Corporate GovernanceInternal Auditing

Action Items for the Corporate GroupThe Internal Auditing Department (eight staff members as of June24, 2010) 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 the previous fiscal year, we aredeveloping, operating, assessing, and improving internal controls
to ensure reliable financial reporting under the Group’s policy forinternal 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.

30

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 to important investments,
and whether to continue or withdraw from those investments andloans by comprehensively examining relevant risks.
*For more information about the main risks that could affect the Group’s businessresults and financial status, see pages 36 and 37.

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
have also tightened rules on the use of our internal online networks
with the aim of preserving and managing information as an important asset of the Company, including the protection of personal
data and other information security compliance requirements.
To tighten the security of information systems, we haveestablished information security management regulations with aview to preventing leaks and outflows of important information
and we have defined uniform standards on the use of computers,
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 level of security
and carry out maintenance operations to ensure the necessary andappropriate 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 awareness ofcompliance among directors and all employees. We also introduced
a hotline system for reporting directly to or consulting with the
Crisis Management and Compliance Committee or an outside
lawyer, 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

Subsidiary Administration Department
Management
Committee

Board of Directors

Crisis Management
and Compliance
Committee

Presidents of the Group Companies
Compliance Officers

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]

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 disclosure 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 in 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 201031

Directors and Corporate Auditors (As of June 24, 2010)

Masaharu Hamakawa

Masayuki Shimojima

ChairmanPresident

Chief Officer, Internal Auditing Department

Kazuo Shigemoto

Toshihiro Kashizawa

Hitomi Sato

Tatsuo Suzuki

Senior Managing Director

Senior Managing Director

Managing Director

Managing Director

Assistant of President, Chief Officer, Supporting
Area, Textiles, Subsidiary Administration, System
Planning, Credit Control & Legal, Realty Department

Chief Officer, Corporate Planning, Finance,
Accounting, Business Accounting, Traffic &Insurance Department

Chief Officer, Environment & Materials Division,
Business Innovation Department

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

Fumihiko Nashimoto

Tetsuro Murao

Hirokazu Tamura

Takashi Gunji

Director

Director

Director

Director

President, Devices Company

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

Chief Officer, Electronics & IT Division

Chief Officer, Iron & Steel Division

Yoshiro Niiro

Kenji Irie

Yonosuke Yamada

Haruyoshi Amakusa

Corporate Auditor

Corporate Auditor

Corporate Auditor

Corporate Auditor* Messrs. Yoshiro Niiro, Yonosuke Yamada and Haruyoshi Amakusa are external corporate auditors.
* Mr. Haruyoshi Amakusa is an independent auditor as defined in Article 436-2 of the Securities Listing Regulations of the Tokyo Stock Exchange Group, Inc.

32

KANEMATSU CORPORATION

Financial Section

Contents
34

Management’s Discussion and Analysis

36

Business Risks

38

Consolidated Balance Sheets

40

Consolidated Statements of Income

41

Consolidated Statements of Changes in Net Assets

43

Consolidated Statements of Cash Flows

44

Notes to Consolidated Financial Statements

70

Report of Independent Auditors

Presentation of fiscal year and amount (Japanese yen and U.S. dollars) on p.38-70- “Fiscal 2010” refers to the Company’s consolidated fiscal year ended March 31, 2010 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 201033

Management’s Discussion and Analysis

Business Results

manufacturing systems business is gradually improving, overall,turnover in electronic parts, aircraft and solutions business declined.
As a result, net sales in the Electronics & IT Division fell ¥43,931 million, to ¥232,702 million, and operating income declined ¥1,526 million,to ¥5,394 million.

In the fiscal year ended March 31, 2010, consolidated net sales declined¥277,478 million year on year, to ¥861,277 million, and gross profit fell
¥12,188 million year on year, to ¥74,104 million, reflecting the impact of
reduced turnover amidst a general slump in demand, despite efforts to
reduce costs and improve profits from the outset.
Although the decline in gross profit was offset through lower SG&A
expenses, operating income amounted to ¥12,186 million, sinking¥6,841 million. An analysis of segment results shows that all segments
except for the other segments posted decreased profit, but the primarycauses of the overall decline were lackluster performances in Iron & Steelbusiness, which was hit by a slowdown in transactions with customers
in the United States and the slump in the domestic construction market,
and Machinery & Plant business, where orders remained at a low level ascompanies scaled back capital investment.
In non-operating items, due to a decrease in interest expenses
resulting from the curtailment of interest-bearing debt and improvement in Other, which includes foreign currency transaction gain/
loss, the Company posted a non-operating loss of ¥3,947 million, an
improvement of ¥1,952 million.
As a result, ordinary income slipped ¥4,889 million, to ¥8,238
million. In extraordinary items, an extraordinary gain of ¥168 million
yen was posted for items that included a gain on reversal of allowancefor doubtful accounts and a gain on sale of investments in securities.
Income before income taxes and minority interests was ¥8,407 million,up ¥8,330 million.
At the final profit stage, the Company returned to profitability,
posting net income after adjustments for tax expenses and minority
interests of 3,528 million yen. Net income per share was ¥8.44.

Foods & Foodstuff
In the food business, although net sales decreased due to falling
product prices and the effect of the strong yen, profit margins generally
improved, product sales were solid in the face of deflation, and marine
products transactions especially for processed marine products, generated steady profits. Meanwhile, in the foodstuff business, due to suchfactors as decline in net sales caused by falling grain prices and low
selling prices for feed, general market conditions remained harsh.
As a consequence, net sales in the Foods & Foodstuff Division
sank ¥57,372 million, to ¥264,240 million, and operating income in the
Division dropped ¥301 million, to ¥3,622 million.

Iron & Steel / Machinery & Plant
In the iron & steel business, overseas transactions with customers in Asiaand the Middle East held firm and automobile parts and materials also
showed signs of recovery from the second half, but business in North
America slowed considerably. Business in Japan remained sluggish
due to a continued slump in domestic demand amid a decline in theconstruction sector.
In the industrial plants business, sales of automobile parts in
China, fuelled by the expansion of China’s auto market, and sales of
petrochemical plants in the Middle East remained strong, but, aside
from these, sales were lackluster, affected by slow market conditions
and the strong yen, amongst other factors. In the machine tools business, companies continued to scale back capital investment and orders
remained at a low level.
As a result, net sales in the Iron & Steel / Machinery & Plant Division

Segment Information
Electronics & IT (Previously IT)
Although the level of orders in electronic materials and semiconductor

Net sales

Operating income andoperating income to net sales
21,713

1,281,331 1,244,020
1,138,755

1,096,409

Net income (loss) andnet income (loss) per share
19,01645.44

22,60519,027

17,982

7,507
3,528
8.44

17.94

861,277
1.6

1.7

1.8

1.7

12,186(21,686)

1.4(30.56)(12,787)(52.43)

2006

2007

2008

■ Net sales (¥ million)

34

KANEMATSU CORPORATION

2009

2010

2006

2007

2008

2009

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

2010

2006

2007

2008

■ Net income (loss) (¥ million)
Net income (loss) per share (¥)

2009

2010

were down ¥77,103 million year on year, to ¥149,239 million, and operating income decreased ¥5,485 million year on year, to ¥1,510 million.

fiscal 2010 reached ¥64,479 million, down ¥14,176 million from theirbalance at the end of the previous fiscal year.

Environment & Materials (Previously Life Science & Energy)

Fundraising and interest-bearing debt

In the life science business, pharmaceutical export transactions weresluggish due to the emergence of generic pharmaceuticals. On the other
hand, export transactions relating to photovoltaic battery parts and materials and transactions relating to functional food ingredients remained solid.
In energy business, transactions struggled, as turnover declined as a resultof weak demand amidst the recession and profit margins also narrowed.
As a result, net sales in the Environment & Materials Division sank¥86,587 million year on year, to ¥198,144 million, and operating incomein the Division dropped ¥1,194 million to ¥893 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 invest in highly secure
short-term financial products, allowing us to respond flexibly to ourfunding needs and the financial situation.
Interest-bearing debt amounted to ¥193,103 million at the end of
fiscal 2010, down ¥20,504 million from the end of the previous fiscal year.
This was ¥6,897 million yen below our ¥200,000 million target under the
Medium-Term Business plan “teamKG120,” of which fiscal year 2010 was
the end year. Since cash and bank deposits amounted to ¥83,752 million
at the end of the fiscal 2010, up ¥4,727 million from the end of the previous fiscal year, net interest-bearing debt totaled ¥109,350 million at theend of fiscal 2010, down ¥25,232 million from the end of the previous fiscal
year. This was below the “teamKG120” target figure of ¥160,000 million.
Also, long-term debt (includes long-term loans falling due within
one year) as a percentage of interest-bearing debt was 75% on aconsolidated base (83% on a nonconsolidated basis) at the end of fiscal
year 2010, indicating the high level of stability of our fundraising.

Other
Turnover decreased largely as a result of the downscaling of aluminum
recycling business, but profitability improved. Net sales in otherbusinesses slipped ¥12,483 million year on year, to ¥16,951 million, andoperating income in the Division rose ¥1,892 million year on year, to¥327 million.
* Some segments were renamed with effect from April 2010.

Financial Status
Cash flows
Net cash provided by operating activities came to ¥26,441 million. Thiswas because a reduction in receipts from funds was more than offset bysales revenues. Net cash used in investing activities totaled ¥19,149 million, due primarily to term deposits with a maturity of more than threemonths. Net cash used in financing activities amounted to ¥21,572
million, reflecting the reduction of interest-bearing debt through thecontinued repayment of loans.
As a result, the balance of cash and cash equivalents at the end of

Net interest-bearing debt andnet debt-equity ratio

Net assets totaled ¥45,804 million at the end of fiscal 2010, up ¥3,769
million from the end of the previous fiscal year, reflecting improvement
in retained earnings as a result of the accumulation of net income,which outweighed the posting of a large extraordinary loss. As a result,the equity ratio improved 1.3 percentage points from the end of theprevious fiscal year, to 7.3%.

Net assets and net assets per share

246,317
9.5

Net assets

9.1

62,239204,900

7.3

48,767108.95
148,944

6.2

2007

5.4

2008

42,03545,804

134,582

3.3

2006

Equity ratio

2009

6.0

5.9
4.7

109,350

26,004

3.8

62.12

2010

2006

78.75
59.61

2007

2008

2009

69.15

2010

■ Net interest-bearing debt (¥ million)
Net debt-equity ratio (times)■ Net assets (¥ million)* Net interest-bearing debt = Interest-bearing debt – Cash and bank deposits* Net debt-equity ratio = Net interest-bearing debt / Shareholders’ equity* Net assets as of March 31, 2006 is the Shareholders’ Equity
amount which used to be shown.

Net assets per share (¥)

2006

2007

2008

2009

2010

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

Annual Report 201035

Business Risks

Below are details of the risks that could affect the business performance and financial position of the Group.
The forward-looking statements below are based on information available as of June 24, 2010.
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 means of strengthening
its relationship with them. There is a risk of price fluctuation inherent in

36

KANEMATSU CORPORATION

these shares, which could have an effect on the financial position of theGroup through valuation differences in securities.
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 tend 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.

the 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.

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 meet

Annual Report 201037

Consolidated Balance Sheets
March 31, 2010 and 2009

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2010
JPY

Fiscal 2009
JPY

Fiscal 2010
USD (Note 3)

1. Cash and bank deposits (Note 6-3)

83,752

79,025

900,180

2. Notes and accounts receivable (Note 6-3)

133,153

144,470

1,431,147

3. Lease investment assets

552

301

5,936

4. Short-term investments (Note 6-3)

—

15

—

5. Inventories (Note 6-1)

55,82760,241600,033

6. Short-term loans receivable

2,267

2,772

24,375

AssetsI. Current assets

7. Deferred tax assets

1,774

2,021

19,0688. Other

27,11628,221

291,451

(416)

(772)

(4,482)304,027

316,296

3,267,709

1)Leased property, net (Notes 5, 6-3)

2,722

2,938

29,2602) Buildings and structures, net (Notes 5, 6-3)

5,118

5,390

55,0173) Machinery, equipment, vehicle, tools and fixtures, net (Note 5)

5,557

6,883

59,7354) Land (Note 6-3)

14,524

14,714

156,105

5) Lease assets, net

291

168

3,136

3

—

42

Total tangible fixed assets (Note 6-2)

28,21830,094

303,295

2. Intangible fixed assets

1,843

2,054

19,815

1) Investments in securities (Notes 6-3, 6-4)

36,42437,893

391,498

2) Long-term loans receivable

13,03913,448140,154

3) Doubtful accounts

15,125

19,409162,566

4) Deferred tax assets

13,961

14,837150,0615) Other

9,175

9,115

98,618(23,187)(28,221)(249,221)

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 investments and other assets

64,53966,482

693,675

Total long-term assets

94,601

98,631

1,016,784

398,629

414,9284,284,493

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

38

KANEMATSU CORPORATIONFiscal 2010
JPY

Fiscal 2009
JPY

Fiscal 2010
USD (Note 3)

1. Notes and accounts payable

90,55992,211

973,334

2. Import bills payable

23,591

14,257

253,563

3. Short-term borrowings (Note 6-3)

Liabilities
I. Current liabilities

104,133

103,534

1,119,237

4. Lease obligations

328

152

3,535

5. Accrued income taxes

870

2,282

9,357

6. Deferred tax liabilities

—

1

—

7. Other

31,58636,906

339,493

Total current liabilities

251,070249,3442,698,519

88,969110,073956,254

557

345

5,997

II. Non-current liabilities
1. Long-term borrowings (Note 6-3)
2. Lease obligations
3. Deferred tax liabilities

388

283

4,180

4. Allowance for employees’ retirement and severance benefits

2,648

2,860

28,4695. Allowance for loss on lawsuits

—

610

—

6. Allowance for retirement benefits for directors and statutory auditors

655

681

7,041

7. Negative goodwill

132

92

1,421

8. Other (Note 6-3)

8,401

8,601

90,303

101,754

123,548

1,093,664

352,824

372,892

3,792,184

1. Common stock

27,781

27,781

298,594

2. Capital surplus

27,644

27,644

297,125

3. Retained earnings (Deficit)(261)(3,786)(2,806)

4. Treasury stock

(639)

(632)

(6,876)54,52451,006

586,036

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

57

(891)

622

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

262

173

2,817

Total non-current liabilities
Total liabilities
Net assets
I. Shareholders’ equity

Total shareholders’ equity
II. Valuation and translation adjustments

3. Revaluation reserves for land (Note 6-5)

58

58

623

4. Foreign currency translation adjustments(25,986)(25,409)(279,300)

Total valuation and translation adjustments(25,608)(26,070)(275,238)

III. Minority interests in consolidated subsidiaries

16,887

17,099181,512

Total net assets

45,80442,035492,310

Total liabilities and net assets

398,629

414,9284,284,493

Annual Report 201039

Consolidated Statements of Income
For the years ended March 31, 2010 and 2009

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2010
JPY

I. Net sales
II. Cost of sales (Note 7-1)
Gross profit
III. Selling, general and administrative expenses (Note 7-2)
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 (Note 5)
4. OtherV. Non-operating expenses
1. Interest expenses
2. Equity in losses of affiliates
3. OtherOrdinary income
VI. Extraordinary gains
1. Gain on sale of fixed assets (Note 7-3)
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
VII. Extraordinary losses
1. Loss on disposal of fixed assets (Note 7-4)
2. Impairment loss on fixed assets (Note 7-5)
3. Loss on sale of investments in securities
4. Impairment loss on investments in securities
5. Loss on devaluation of inventories
6. Loss on closure of business
7. Loss on liquidation of business
8. Loss on devaluation of assets relating
to discontinued business (Note 7-6)
9. Provision for loss on affiliated business
10. Provision for allowance for doubtful accounts
11. Provision for loss on impaired loans related
to discontinued business
12. Provision for loss on lawsuits
13. Special retirement expenses
14. Loss on lawsuits
Income before income taxes and minority interests
Income taxes – current
Income taxes – deferred
Minority interests in consolidated subsidiaries
Net income (loss)
The accompanying notes are an integral part of these financial statements.

40

KANEMATSU CORPORATION

Fiscal 2009
JPY

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

Fiscal 2010
USD (Note 3)

1,138,755
1,052,463
86,292
26,069
1,579
8,314
391
30,909

1,063
762
—
1,408
5,464
773
2,895

67
1,017
—
481

67,26419,027

3,234

9,134
13,127

1,566

9,257,069
8,460,587
796,482
253,949
24,46384,856
1,176
301,057

7,556
7,434
6,116
13,91646,822
9,438
21,195

2,415
6,569
2,458
10,602

158
142
207
434
—
109
300

303
5,416
146
687
558
35
—

1,708
1,535
2,226
4,668
—
1,173
3,224

—
—
—

4,622
9
80

—
—
—

—
—
—
529

2,557
57
142
—

—
—
—
5,695

2,606
1,008

1,882
8,407
3,614
1,264
3,528

4,507
6,737

14,61677
11,244
1,619(12,787)

28,01010,844

665,502130,98135,02277,45488,54822,044

20,23090,36238,854
13,58637,922

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2010 and 2009

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
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
Effect of changes in accounting policies applied to foreign subsidiaries
Changes during the fiscal year
Net income (loss)
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
Effect of changes in accounting policies applied to foreign subsidiaries
Changes during the fiscal year
Net income (loss)
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

Fiscal 2010
JPY

Fiscal 2009
JPY

Fiscal 2010
USD (Note 3)

27,781

27,781

298,594—
27,781—
27,781—
298,594

27,644

27,644

297,125—
27,644—
27,644—
297,125(3,786)
—

9,556
(527)

(40,702)
—

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

(12,787)(29)(12,816)(3,786)37,922(27)
37,895(2,806)

(632)

(645)

(6,795)

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

(53)
66
0
13
(632)

(140)
61
(1)
(81)
(6,876)51,006—64,336(527)

548,221
—

3,528
(13)
3
(0)
3,518
54,524(12,787)(53)
37
0(12,803)
51,00637,922(140)34(1)
37,815586,036

Annual Report 201041

Consolidated Statements of Changes in Net Assets

II. Valuation and translation adjustments
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 valuation and 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
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
Effect of changes in accounting policies applied to foreign subsidiaries
Changes during the fiscal year
Net income (loss)
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
The accompanying notes are an integral part of these financial statements.

42

KANEMATSU CORPORATION

Fiscal 2010
JPY

Fiscal 2009
JPY

Fiscal 2010
USD (Note 3)

(891)

1,576

(9,587)

949
949
57

(2,468)(2,468)(891)

10,20910,209
622

173

(912)

1,865

88
88
262

1,086
1,086
173

952
952
2,817

58

58

623

—
58

—
58

—
623

(25,409)(19,470)(273,104)

(576)
(576)
(25,986)(5,938)(5,938)(25,409)(6,196)(6,196)(279,300)(26,070)(18,749)(280,202)

461
461(25,608)(7,320)(7,320)(26,070)

4,964
4,964
(275,238)

17,09916,651

183,782

(211)
(211)
16,887447
447
17,099(2,270)(2,270)181,51242,035—62,239(527)

451,802
—

3,528
(13)
3
(0)
250
3,768
45,804(12,787)(53)
37
0(6,873)(19,676)
42,03537,922
(140)
34
(1)
2,693
40,508492,310

Consolidated Statements of Cash Flows
For the years ended March 31, 2010 and 2009

Kanematsu Corporation and Consolidated Subsidiaries

Fiscal 2010
JPY

Fiscal 2009
JPY

Fiscal 2010
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
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 devaluation of assets relating to discontinued business
Provision for loss on affiliated business
Provision for loss on impaired loans related to discontinued business
Provision for loss on lawsuits
Loss on lawsuits
Decrease in notes and accounts receivable
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
Net cash provided by operating activities

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

77
3,232
537
(1,343)(1,825)
5,464
773
236
5,416
(871)
687
(481)
35
4,622
9
2,557
57
—
43,975
6,306(49,045)
4,987
25,4101,767(5,471)(4,528)—17,17790,36233,0181,699(2,766)(14,989)
46,822
9,438
(708)
1,535
(4,343)
4,668(10,602)
1,173
—
—
—
—
5,695
115,42550,085
103,146(57,961)
371,696
14,773(47,028)(42,993)(12,253)
284,196

II. Cash flows from investing activities
Increase in time deposits, net
Payments for tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for intangible 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(18,907)(1,167)
1,111(999)(1,094)946(237)(2,052)
2,947
306(19,149)(75)(3,121)
624
(490)
(179)
1,997
—
(2,543)
3,362
56
(370)

(203,223)(12,551)
11,945(10,748)(11,761)
10,171(2,556)(22,061)
31,6773,290(205,818)

III. Cash flows from financing activities(Decrease) increase 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(16,661)
36,614(40,640)60(944)(21,572)

3,321
14,905(28,281)100(659)(10,613)(179,078)
393,530(436,808)
645(10,153)(231,864)

IV. Effect of exchange rate changes on cash and cash equivalents
V. Net (decrease) increase 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 9-1)

104
(14,176)
78,655064,479(2,667)
3,525
74,437692
78,655

1,119(152,367)
845,395
2
693,030

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

Annual Report 201043

Notes to Consolidated Financial Statements
For the years ended March 31, 2010 and 2009

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, 2009 are prepared in accordance with the Regulations prior to the revision, while the consolidated
financial statements for the fiscal year ended March 31, 2010 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 2010

Fiscal 2009

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

(1) Number of consolidated subsidiaries: 89
In the current fiscal year, 13 companies were added to the scope of consolidation due
to incorporation or increase in significance, while 4 companies were excluded from thescope of consolidation due to merger, liquidation or sale of shares.

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

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

(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.

(3) Reason that certain subsidiaries were excluded from the scope of consolidation
13 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 2010

44

Fiscal 2009

(1) Number 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 increase in significance and was consolidated.

(1) Number of unconsolidated subsidiaries to which the equity method wasapplied: 7
7 subsidiaries out of 13 unconsolidated subsidiaries were accounted for by the equity
method.
In the current fiscal year, 13 companies were excluded from accounting via the equity
method due to increase in significance or liquidation.

(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.

(2) Number of affiliated companies to which the equity method was applied: 28
Among 35 affiliated companies, the equity method was applied to investments in 28
companies.
In the current fiscal year, the equity method was newly applied to investment in 1
company due to acquisition.

(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.

(3) Reason that the equity method was not applied to certain affiliated companies
The 6 unconsolidated subsidiaries and 7 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.

KANEMATSU CORPORATION

(c) Fiscal Year-ends of Consolidated Subsidiaries
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.

Fiscal 2009
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
33 other companies

In preparing the consolidated financial statements, the financial statements of 38
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 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.

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

Fiscal 2009(1) Held-to-maturity bonds
Same as fiscal 2010.

(2) Other securities (Non-trading purpose)(2) Other securities (Non-trading purpose)* Marketable securities* Marketable securities
Marketable securities are stated at fair value.
Same as fiscal 2010.
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 for the
one-month prior to the fiscal year-end.
* Non-marketable securities
The non-marketable securities are stated at cost using the moving average method.

* Non-marketable securities
Same as fiscal 2010.

(e) Derivatives
Fiscal 2010
Fair value method.

Fiscal 2009Same as fiscal 2010.

(f) Inventories
Fiscal 2010
Cost method principally determined by the moving average method(carried at the lower of cost or market value on the balance sheet).

Fiscal 2009
Cost method principally determined by the moving average method(carried at the lower of cost or market value on the balance sheet).
(Changes in accounting policies)
The Company has applied the “Accounting Standard for Measurement of Inventories”(Accounting Standards Board of Japan (ASBJ) Statement No.9 dated on July 5, 2006) from
April 1, 2008.
Inventories are now recorded at the lower of acquisition cost or net selling value inthe balance sheet. Previously, inventories were carried at acquisition cost.
As a result of the change, operating income and ordinary income decreased by ¥1,029
million and income before income taxes and minority interests decreased by ¥1,587
million.
The effect to the industrial segment due to this change is described in the related
notes.

Annual Report 201045

Notes to Consolidated Financial Statements(g) Property and Equipment
Fiscal 2010
(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 2009
(1) Tangible fixed assets
Same as fiscal 2010.

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.

(2) Lease assets
Same as fiscal 2010.

(h) Allowance for Doubtful Accounts
Fiscal 2010
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 2009Same as fiscal 2010.

(i) Allowance for Employees’ Retirement and Severance Benefits
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.

Fiscal 2009
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 is ¥377 million ($4,057
thousand).

(j) Allowance for Loss on Guarantees
Fiscal 2010
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 2009Same as fiscal 2010.

(k) Allowance for Loss on Lawsuits
Fiscal 2010
The Companies provide an allowance for potential losses on lawsuits.

Fiscal 2009Same as fiscal 2010.

(l) Allowance for Retirement Benefits for Directors and Statutory Auditors
Fiscal 2010
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.

46

KANEMATSU CORPORATION

Fiscal 2009Same as fiscal 2010.

(m) Translation of Foreign Currencies
Fiscal 2010
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 2009Same as fiscal 2010.

(n) Hedge Accounting
Fiscal 2010

Fiscal 2009(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 2010.

(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 2010.

(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 2010.

(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 2010.

(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 2010.

(o) Consumption Taxes
Fiscal 2010
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 2009Same as fiscal 2010.

Annual Report 201047

Notes to Consolidated Financial Statements(p) Consolidated Tax ReturnFiscal 2010
The Company and its wholly owned domestic subsidiaries have adopted the consolidated tax regime, and as such file a consolidated corporate-tax return.

Fiscal 2009Same as fiscal 2010.

(q) Valuation of Assets and Liabilities of Consolidated Subsidiaries
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.

Fiscal 2009Same as fiscal 2010.

(r) Goodwill
Fiscal 2010
Goodwill and negative goodwill which 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.

Fiscal 2009Same as fiscal 2010.

(s) Cash and Cash Equivalents
Fiscal 2010
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.

Fiscal 2009Same as fiscal 2010.

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 ¥93.04 to U.S.$1.00, the exchange rate prevailing on March 31, 2010. 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 201048

Fiscal 2009

Not applicable.

[Accounting standard for lease transactions]
Finance leases in which the ownership of the leased property is not transferred to thelessees, were previously accounted for as operating leases.
However, from the current fiscal year, the Companies applied the “AccountingStandard for Lease Transactions” (ASBJ Statement No.13 dated on June 17, 1993 (theFirst Committee of Business Accounting Council); revised on March 30, 2007) and the“Guidance on Accounting Standards for Lease Transactions” (ASBJ Implementation
Guidance No.16 dated on January 18, 1994 (the Japanese Institute of Certified Public
Accountants, Accounting Standards Committee); revised on March 30, 2007). For financeleases in which the ownership of the leased property is not transferred to the lessee aretreated as ordinary sales transactions.
For finance leases in which the ownership of the leased property is not transferred to
the lessees, and for which transaction commencement dates were on before March 31,
2008, the Companies applied previous method of accounting as operating lease.
The adoption had a minor effect on net income and Segment Information in thecurrent fiscal year.

Not applicable.

[Practical solution on unification of accounting policies applied to foreign subsidiaries
for consolidated financial statements]
The Company applied the Practical Solution on Unification of Accounting Policies
Applied to Foreign Subsidiaries for Consolidated Financial Statements (ASBJ Practical
Issues Task Force (PITF) No.18 dated on May 17, 2006) and adjusted the consolidationaccounting applied in Japan from April 1, 2008.
The adoption had a minor impact on net income in the current fiscal year.
Also, the impact on operating income to each industrial and geographic segment in
the current fiscal year is described in the respective notes.

KANEMATSU CORPORATION

5. Changes to Presentation Methods
Fiscal 2010

Fiscal 2009

Not applicable.

(Consolidated balance sheet)
Tangible fixed assets have been presented in the consolidated balance sheet using thegross carrying amount method in the previous fiscal years. From the current fiscal year,
tangible fixed assets have been presented in the consolidated balance sheet using thenet carrying amount method.
The gross carrying amounts of tangible fixed assets as of March 31, 2009 are included
below:JPY
1) Leased property
7,232
Accumulated depreciation(4,293)
Leased property, net
2,9382) Buildings and structures
14,739
Accumulated depreciation(9,349)Buildings and structures, net
5,3903) Machinery, equipment, vehicle,
tools and fixtures
24,089
Accumulated depreciation(17,206)
Machinery, equipment, vehicle,
tools and fixtures, net
6,883(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.

Not applicable.

6. Notes to Consolidated Balance Sheets
Fiscal 2010

Fiscal 2009
1. Details of inventories are follows

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

JPY
52,783
947
1,056
1,038
55,827USD
567,324
10,187
11,359
11,162600,033

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

JPY
57,102
978
1,278
882
60,241

2. The amount of accumulated depreciation of tangible fixed assets is ¥30,192 million($324,514 thousand).

2. The amount of accumulated depreciation of tangible fixed assets is ¥31,001 million.

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

USD
318
20,09527,563
3,473
2,555
1,499
55,504

3. Pledged assets and associated secured obligations
Details of pledged assets are as follows:
JPY
Bank deposits
29
Notes receivable
2,056
Fixed assets for lease
2,722
Buildings and structures
338
Land
237
Investments in securities
601
Total
5,985

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

USD
52,262
12,772
14,573
142

Details of associated secured obligations are as follows:
JPY
Short-term borrowings
5,613
Long-term borrowings
2,160
Non-current liabilities and others
921
Guaranteed obligations
13

Annual Report 201049

Notes to Consolidated Financial Statements

Fiscal 2010

Fiscal 2009

In addition to the foregoing pledged assets, the following items are tendered as security
deposit or substitution for trading.
JPY
USDBank deposits
332
Investments in securities
2,023
21,749Total
2,026
21,781

In addition to the foregoing pledged assets, the following items are tendered as security
deposit or substitution for trading.
JPY
Bank deposits
3
Short-term investments
15
Investments in securities
1,666
Total
1,684

4. Investments in securities included the following accounts of unconsolidated subsidiaries and affiliated companies.
JPY
USD
Investments in securities
6,703
72,050(Share stocks)(6,255)(67,238)(Equity interest)(447)(4,813)

4. Investments in securities included the following accounts of unconsolidated subsidiaries and affiliated companies.
JPY
Investments in securities
7,804(Share stocks)(7,248)(Equity interest)(555)

5. Revaluation reserves for land
5. Revaluation reserves for landSame as fiscal 2010.
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
1,052
11,311
True Corporation Public
407
4,382
Watana Inter-trade
163
1,757
Others2,884
30,999Total
4,507
48,450

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
1,222
True Corporation Public
407Japan Logistics
168
Other
2,909
Total
4,708

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. The amount of discounted notes receivable is ¥7,272 million ($78,162 thousand),of which ¥6,335 million ($68,099 thousand) was for discounted export bills, and theamount of endorsed notes receivable is ¥99 million ($1,066 thousand).

7. The amount of discounted notes receivable is ¥16,446 million, of which ¥14,393 million
was for discounted export bills, and the amount of endorsed notes receivable is ¥177
million.

7. Notes to Consolidated Statements of Income
Fiscal 2010

Fiscal 2009

1. Loss on devaluation of inventories
1. Loss on devaluation of inventories
Inventories are carried at the lower of cost or market value in the balance sheet. As a result Inventories are carried at the lower of cost or market value in the balance sheet. A loss onof offsetting a loss on devaluation of inventories in the current fiscal year against a reversal devaluation of inventories of ¥1,029 million was included in cost of sales.
of loss on devaluation of inventories in the previous fiscal year, a net ¥395 million ($4,248
thousand) of 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: ¥364 million ($3,918 thousand).

2. Research and development expenses
Research and development expenses are included in general and administrative
expenses: ¥524 million.

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

3. Not applicable.

Machinery, equipment, vehicle,
tools and fixtures
Others
Total

50

KANEMATSU CORPORATION

JPY

USD

222
2
224

2,393
22
2,415

Fiscal 2010

Fiscal 2009

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

4. Not applicable.
USD
599
532
413
164
1,708

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, land, etc.
142
1,535
Total
142
1,535
The Company assesses impairment losses for business assets by grouping the assets
for each 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 ($1,535 thousand) were recorded as extraordinary loss
from reducing their carrying amounts to their recoverable amounts. The breakdownof the impairment losses is as follows: ¥80 million ($861 thousand) for land, ¥47 million($511 thousand) for buildings and structures, ¥13 million ($142 thousand) for machinery,equipment, vehicle, tools and fixtures, and ¥2 million ($22 thousand) 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, the use value is calculated by discounted future cash flows using an interest
rate of 3.0%.

6. Not applicable.

5. Loss on impairment of fixed assets
The Companies recorded losses on the impairment of fixed assets in the current fiscal
year, which are summarized in the following table.
Use
LocationType
JPY
Leased properties Shiga, Japan
Leased property, etc.
2,061
Business assets
Ibaraki, Japan
Buildings, land, etc.
3,355
Total
5,416
The Company assesses impairment losses for leased properties individually. For business assets, impairment is assessed by grouping the assets for each business operating
unit, on the managerial accounting basis.
For the leased properties and 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 ¥5,416 million were recorded as extraordinary
loss from reducing their carrying amounts to their recoverable amounts. The breakdownof the impairment losses is as follows: ¥2,629 million for land, ¥2,003 million for leased
property, ¥627 million for buildings and structures, ¥6 million for machinery, equipment,
vehicle, tools and fixtures, and ¥149 million for others.
The greater of net selling or use value is used as the recoverable value as for leased
properties in use, while net selling value is used as the recoverable value for leased
properties to be sold. The greater of net selling or use value is used for business assets.
The net selling value is based on appraisal provided by professional real estate appraisers,
the use value is calculated by discounted future cash flows using an interest rate of 4.0%.
6. Loss on devaluation of assets relating to discontinued businessIn view of the changes of the circumstances of the economic and real estate businesses,
the Company devaluated the carrying value of the particular real estate for sale. The loss
includes ¥4,259 million of loss on devaluation of the real estates for sale.

8. Notes to Consolidated Statements of Changes in Net Assets
Fiscal 2010
Class and number of shares issued and treasury stock

Shares issued
Common shares
Total
Treasury stock
Common shares (Notes 1, 2)
Total

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

(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

Annual Report 201051

Notes to Consolidated Financial Statements

Fiscal 2009Class 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

4,072
4,072

493
493

391
391

4,173
4,173

Shares issued
Common shares
Total
Treasury stock
Common shares (Notes 1, 2)
Total(Notes) 1. The breakdown of the increase of 493 thousand common shares during the term is as follows:
Increase as a result of fractional share repurchases: 492 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 391 thousand common shares during the term is as follows:
Decrease as a result of the disposition of fractional shares: 388 thousand shares
The Company’s portion of treasury stock (the Company’s stock) disposed of by equity method affiliates: 3 thousand shares

9. Notes to Consolidated Statements of Cash Flows
Fiscal 2010

Fiscal 2009

1. Cash and cash equivalents as of March 31, 2010, consist of the following:
JPY
USD
Cash and bank deposits
83,752
900,180
Time deposits which deposit terms
exceed three months(19,273)(207,150)
Cash and cash equivalents
64,479693,030

1. Cash and cash equivalents as of March 31, 2009, consist of the following:
JPY
Cash and bank deposits
79,025Time deposits which deposit terms
exceed three months(370)
Cash and cash equivalents
78,655

10. Lease Transactions
Fiscal 2010

Fiscal 2009

<Leases as Lessee>
1. Finance leases
Finance leases are leases for which the ownership of the leased property is not transferredto the lessees.

<Leases as Lessee>
1. Finance leases
Finance leases are leases for which the ownership of the leased property is not transferredto 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 2010.

[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 2010.

(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

52

1,548
4
1,552

KANEMATSU CORPORATION

16,64446
16,691

Accumulated
depreciation
JPY
USD

1,019
2
1,022

10,961
24
10,985Same as fiscal 2010.

Balance at
end of term
JPY
USD

528
2
530

5,683
22
5,705

Machinery, equipment,
vehicle, tools
and fixtures
Others
Total

Acquisition
cost
JPY

Accumulated
depreciation
JPY

Balance at
end of term
JPY

3,483
4
3,487

2,185
1
2,187

1,297
2
1,300

Fiscal 2010

Fiscal 2009

(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
549
5,901
Due within one year
1,145
Due after one year
484
5,203
Due after one year
1,122
Total
1,033
11,104
Total
2,267(3) Payments to lessors, depreciation and interest expenses are as follows:
JPY
USD
Payments to lessors
431
4,640
Depreciation
415
4,468
Interest expenses
24262(3) Payments to lessors, depreciation and interest expenses are as follows:
JPY
Payments to lessors
1,117
Depreciation
1,017
Interest expenses
80(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 2010.

(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 2010.

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

<Impairment Loss>
Same as fiscal 2010.

2. Operating leases
Future lease payments outstanding at the balance sheet date are as follows:
JPY
USD
Due within one year
379
4,084
Due after one year
1,258
13,530Total
1,638
17,614

2. Operating leases
Future lease payments outstanding at the balance sheet date are as follows:
JPY
Due within one year13
Due after one year
19
Total
32

<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

Lease payments received
Interest income
Lease investment assets

JPY
563
(11)
552

USD
6,062
(126)
5,936

Lease payments received
Interest income
Lease investment assets

JPY
318
(17)
301

[2] Future lease receivables outstanding at the balance sheet date are as follows:
Current assets
JPY
USD
Due within one year
232
2,502
Over one year and within two years
194
2,091
Over two years and within three years
103
1,112
Over three years and within four years
17
187
Over four years and within five years
342Over five years00[2] Future lease receivables outstanding at the balance sheet date are as follows:
Current assets
JPY
Due within one year
111
Over one year and within two years
110Over two years and within three years
60
Over three years and within four years
27
Over four years and within five years
8Over 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 2010.

Annual Report 201053

Notes to Consolidated Financial Statements

Fiscal 2010

Fiscal 2009

(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
Total

200
200

15
15

Balance at
end of term
JPY
USD

168
168

2
2

32
32

Machinery, equipment,
vehicle, tools
and fixtures
Total

Acquisition
cost
JPY

Accumulated
depreciation
JPY

Balance at
end of term
JPY

18
18

13
13

5
5

(2) Future minimum lease payments receivable outstanding at the balance sheet dateare as follows:
JPY
USD
Due within one year
348
3,744
Due after one year
205
2,211
Total
554
5,955

(2) Future minimum lease payments receivable outstanding at the balance sheet dateare as follows:
JPY
Due within one year774
Due after one year
573
Total
1,347

(Note) Related sub-lease payments against the above receivable are ¥549 million ($5,905 thousand)(including ¥344 million ($3,701 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 ¥1,337 million (including ¥769
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
451
Depreciation
2
26
Interest income
02(3) Lease payments received, depreciation and interest income are as follows:
JPY
Lease payments received
8
Depreciation
3
Interest income0(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 2010.

2. Operating leases
Future lease payments receivable outstanding at the balance sheet date are as follows:
JPY
USD
Due within one year
193
2,078
Due after one year
753
8,095
Total
946
10,174

2. Operating leases
Future lease payments receivable outstanding at the balance sheet date are as follows:
JPY
Due within one year148
Due after one year
24
Total
172

3. Balance of sub-lease in the consolidated balance sheets without deducting theinterest(1) Lease investments
JPY
USD
Current assets
130
1,406

3. Balance of sub-lease in the consolidated balance sheets without deducting theinterest(1) Lease investments
JPY
Current assets
104(2) Lease obligations(2) Lease obligations

Current liabilities
Non-Current liabilities

54

18
18

Accumulated
depreciation
JPY
USD(1) Acquisition cost, accumulated depreciation and balance at the end of the term ofleased property, if owned are as follows:

KANEMATSU CORPORATION

JPY
43
86

USD
473
934

Current liabilities
Non-Current liabilities

JPY
28
76

11. Financial Instruments
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 different assumption is applied. The notional amount of contracts
described in Note 13. Derivatives do not directly indicate the market risks.

2. Fair value of financial instruments
A summary of book value and fair value of financial instruments, and difference between them 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 201055

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
USD
83,752
900,180
133,153
1,431,147(416)(4,482)
132,736
1,426,666
2,267
24,375
11,595
124,632
13,039140,154(8,681)(93,311)
4,358
46,843
15,125
162,566(14,222)(152,860)
903
9,706
235,6142,532,402(90,559)(973,334)(23,591)(253,563)(104,133)(1,119,237)(870)(9,357)(88,969)(956,254)(308,124)(3,311,746)
954
10,261

Fair value

Difference

JPY
83,752

USD
900,180

JPY
—

USD
—

132,736
2,267
12,676

1,426,666
24,375
136,249

—
—
1,080

—
—
11,617

4,372

46,994

14

151

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

9,706
2,544,170(973,334)(253,563)(1,119,237)(9,357)(965,186)(3,320,678)
10,261

—
1,094
—
—
—
—
(831)
(831)
—

—
11,767————(8,932)(8,932)—(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 12. 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 13. Derivatives.
2. Financial instruments with difficulty in estimating fair value
Book value
Classification
JPY
USD
Unlisted investments in securities
22,954
246,719
Equity investments
1,874
20,146
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.

56

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
USD
JPY
USD
Cash and bank deposits
83,752
900,180——
Notes and accounts receivable (Note 3-1)
132,736
1,426,666——
Short-term loans receivable
2,267
24,375——Investments in securities
Held-to-maturity bonds
—
—
14
157
Long-term loans receivable (Note 3-2)
—
—
3,869
41,590
Doubtful accounts (Note 3-3)
—
—
903
9,706
Total
218,757
2,351,221
4,787
51,453

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

Over ten years
JPY
USD
—
—
—
—
—
—

—
324
—
324

—
163
—
163

—
3,492
—
3,492

—
1,761
—
1,761

(Notes) 3-1. Allowance for doubtful accounts of ¥416 million ($4,482 thousand) is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥8,681 million ($93,311 thousand) is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥14,222 million ($152,860 thousand) is not included in doubtful accounts.

4. Long-term borrowings repayment schedule
Described in Note 22. 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).

12. Short-term Investments and Investments in Securities
Fiscal 2010
1. “Held to maturity debt securities” with fair value (as of March 31, 2010)

Securities with market value
exceeding their book value

Category
Japanese government bonds

Book value
JPY
USD

JPY

USD

JPY

Difference
USD

14

14

159

0

2

Book value
JPY
USD

Acquisition cost
JPY
USD

JPY

Difference
USD

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

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

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

157

Fair value

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

Securities with book value exceeding
their acquisition cost
Securities with book value notexceeding their acquisition cost

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

Total

66,302
28,836108
28,944
95,24549,724
34,979
121
35,101
84,825

16,578(6,143)(14)(6,157)
10,421(Note) Unlisted investments in securities (book value of ¥19,418 million ($208,712 thousand)) and equity investment (book value of ¥1,426 million ($15,334 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 (from April 1, 2009 to March 31, 2010)
Category
Equity securities

Sales proceeds
JPY
USD
501
5,386

JPY
131

Gains on sales
USD
1,409

Losses on sales
JPY
USD
181
1,954

4. Securities recognized impairment loss
The total impairment loss amount recognized of investments in securities is ¥430 million ($4,627 thousand) (including “Other securities” of ¥416 million ($4,480
thousand) and shares of affiliates of ¥13 million ($147 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 201057

Notes to Consolidated Financial Statements

Fiscal 2009
1. “Held to maturity debt securities” with fair value not exceeding their book value (as of March 31, 2009)
Category
Japanese government bonds

Securities with market value notexceeding their book value

Book value
JPY

Fair value
JPY

Difference
JPY

15

15

—

Acquisition cost
JPY

Book value
JPY

Difference
JPY

2,559
7,639
15
7,654
10,214

3,673
6,295
15
6,311
9,984

1,113
(1,343)—(1,343)(229)

2. “Other securities” with fair value (as of March 31, 2009)

Securities with book value exceeding
their acquisition cost
Securities with book value notexceeding their acquisition cost

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

Total(Note) For recognition of impairment, securities which fair value declines 50% or more against their carrying book value are subject to devaluation. For securities that decline 30% ormore in fair value, devaluation losses are recognized after considering 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.

3. “Other securities” sold during the current fiscal year (from April 1, 2008 to March 31, 2009)
Sales proceeds
JPY
1,171

Gains on sales
JPY
740

Losses on sales
JPY43

4. Book value of securities without fair value consisted of the following (as of March 31, 2009)
Unlisted equity securities

JPY
18,3705. “Other securities” with maturity dates and their redemption schedule (as of March 31, 2009)
Bond
Japanese government bonds

58

KANEMATSU CORPORATION

Within one year
JPY
15

From one year to five years
JPY—13. Derivatives
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
USD

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

Unrealized gain or (loss)
JPY
USD

11,131298
38
8
11,477

119,647
3,210
410
95
123,363

—
—
—
—
—

—
—
—
—
—

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

(2,253)(7)(5)
5(2,260)

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

(2,253)(7)(5)
5(2,260)21,828221
50
048
22,150—234,613
2,386
547
8
523
238,076
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

651
(0)
2
0
0
654
—

7,006
(7)
23
0
7
7,030
—

651
(0)
2
0
0
654
443

7,006
(7)
23
0
7
7,030
4,770

(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

Notional amount ofcontracts
JPY
USD

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

Unrealized gain or (loss)
JPY
USD

4,423
2,360

47,54525,371

13
—

142
—

162
(54)

1,744
(588)

162
(54)

1,744
(588)

55
98
—

600
1,057
—

—
—
—

—
—
—

0
(4)
—

1
(53)
—

0
(4)
102

1
(53)
1,104

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

Annual Report 201059

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
USD

Amount of over-one-year
contracts
JPY
USD

Fair value
JPY

USD

4,938
241
435
5,615

53,082
2,596
4,676
60,354

—
—
—
—

—
—
—
—

(3)
6
(11)
(8)

(39)
68
(125)
(96)

13,673611
4312
26
14,367

146,966
6,572
464
138
282
154,423

539
—
—
—
—
539

5,800
—
—
—
—
5,800

417
3
4
0
0
426

4,490
42
50
5
0
4,587

62
18
80

672
195
867

—
—
—

—
—
—

—
—
—

—
—
—

94
42
8
2
148

1,018
459
88
29
1,594

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

(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

65,070699,377

Amount of over-one-year
contracts
JPY
USD

45,020483,878

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
Foodstuffs
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.

60

KANEMATSU CORPORATION

Notional amount ofcontracts
JPY
USD

503
180

5,414
1,937

Amount of over-one-year
contracts
JPY
USD

—
—

—
—

Fair value
JPY

USD

(5)
(4)

(54)
(49)

Fiscal 2009
1. Summary of derivative transactions
Fiscal 2009
(1) Nature, policies and purposes of derivative transactions
The Company and certain of its consolidated subsidiaries use commodity futures and commodity forward contracts primarily for minimizing exposures attributable to price volatility
on commodities such as food and fuel. These transactions are carried out systematically under transaction rules designed for each type of transaction with the ceiling based on
forecasted transaction volume and the profitability of each business division.
With respect to financial instruments, foreign exchange forward contracts, currency swaps, and currency options are used to avert exposure arising from exchange rate fluctuations in relation to foreign-currency monetary assets and liabilities and existing contracts for future transactions at the balance sheet date. Interest rate swaps and interest options onloans payable are used primarily for mitigating exposures arising from interest-rate fluctuations in relation to financial liabilities. The transactions are carried out systematically undertransaction rules set out for each type of transaction based on past transaction volume and expected volume in the future.
The Company also uses derivative transactions to gain short-term margins for trading purposes within a certain transaction volume, but the transaction volume is minimal.
(2) Risks of derivative transactions
The commodity futures and commodity forward contracts that the Company and certain of its consolidated subsidiaries use involve risks associated with fair value fluctuations.
Foreign exchange forward contracts, currency swaps, and currency options have exchange rate fluctuation risks. Interest rate swaps and interest options have interest rate fluctuation risks.
Most of the derivative transactions used by the Company and certain of its consolidated subsidiaries are for hedging against market risks in operating and financing activities.
Market risks associated with derivatives are intended to offset equal and opposite movement of the values of hedged transactions.
Since derivative transactions are carried out only with major financial institutions or major brokers with high credit ratings, the Company considers the exposure to credit risk onderivatives to be minimal.
The Company and its consolidated subsidiaries do not use structured derivatives with high volatility of market values to their underlying transactions’ price changes, such as
leveraged derivative transactions.
(3) Risk management policies
The Company’s risk management is focused on assessing the following:(i) Whether derivative transactions are used effectively to minimize risks associated with the assets and liabilities exposed to fair value fluctuation risks and to circumvent significant
losses in operations(ii) Whether there are any derivative transactions exceeding the transaction limit set for each transaction(iii) Whether there are any derivative transactions where losses exceed the loss limit set for each transaction(a) Transaction rules
With respect to commodities, the Company comprehensively manages merchandise positions consisting of trade contract balances and inventories in derivatives and normal transactions. At the beginning of the fiscal year, each business division sets a ceiling on its commodity open position, taking into consideration its transaction volume and profitability.
Each business division head is responsible for conducting these transactions. With respect to derivative transactions, each business division prescribes its own transaction rules andloss limit rules by commodity and transaction purpose for hedging or trading.
The Finance Department makes transaction plans for financial instruments in accordance with internal rules for each type of transaction, including derivative transactions, at the
beginning of the fiscal year. The head of the Finance Department is responsible for controlling these derivative transactions under its own transaction rules that prescribe authorization over derivative operations, transaction limits, and loss limits.
(b) Risk management and reporting
Commodities positions are monitored by the Business Accounting Department and Accounting Department. Commodity positions are assessed daily, weekly, or monthly inaccordance with each commodity’s transaction volume and characteristics and the risk assessment result are reported to management as stipulated in internal rules.
Financial products are monitored by the Internal Inspecting Section, which is independent from the trading divisions. The Internal Inspecting Section performs daily assessment
and reports the results as set out in internal rules.
Certain of Company’s consolidated subsidiaries (including major overseas subsidiaries) use derivative transactions in accordance with their own internal rules, which are based on
the Company’s risk management policies.

2. Matters relating to fair value in relation to derivative transactions(1) Currencies
Not applicable because hedge accounting is adopted.
(2) Interest Rate
Not applicable because hedge accounting is adopted.

Annual Report 201061

Notes to Consolidated Financial Statements(3) Commodities

Classification

Transaction type
Commodity futures
Foodstuffs
Transactions
Sellingin future
BuyingmarketEnergySelling
Total

Notional amount ofcontracts
JPY

Amount of over-one-year
contracts
JPY

Fair value
JPY

Unrealized
gain or (loss)
JPY

1,556
2,686

—
—

1,579
2,578

(23)
(108)

8
—

—
—

8
—

(0)
(132)

(Notes) 1. Basis of fair value calculation of commodity futures
Fair value is calculated based on market closing price at end of the fiscal year.
2. Transactions to which hedge accounting is applied are excluded from the table.

14. 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 (gain)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 2010
(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 2010
JPY
USD
(14,837)(159,478)
11,179120,161(3,658)(39,317)
1,139
12,252146
1,578(2,371)(25,487)277
2,980(2,648)(28,469)

Fiscal 2009
JPY
(15,250)
9,652(5,597)2,516
220(2,860)—(2,860)Fiscal 2009
(Notes) 1. Same as fiscal 2010.

2. Same as fiscal 2010.
3. Same as fiscal 2010.

3. Schedule of retirement benefits expenses
Fiscal 2010
JPY
1,534
286
(163)
543
73
79
2,353

a. Service costb. Interest costc. Expected return on plan assets
d. Amortization of actuarial loss (gain)e. Amortization of prior service cost
f. Otherg. Net periodic retirement benefit expenses (a + b + c + d + e + f )Fiscal 2010
(Notes) 1. Employees’ contributions to the employees’ pension fund are not included in
the retirement benefit expenses.
2. The retirement benefit expenses of consolidated subsidiaries which adopt
simplified method are included in “service cost” in the table above.
3. “Other” represents contributions to the defined contribution pension plans.

62

KANEMATSU CORPORATION

Fiscal 2009
(Notes) 1. Same as fiscal 2010.
2. Same as fiscal 2010.
3. Same as fiscal 2010.

USD
16,4983,082(1,760)
5,838
789
855
25,301

Fiscal 2009
JPY
1,285
284
(224)
94
73
87
1,600

4. Schedule of assumptions used in accounting for accrued retirement benefit
Fiscal 2010
Straight-line basis
1.5% to 2.0%
1.5% to 2.5%
Principally 5 years
5 – 10 years

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

Fiscal 2009
Straight-line basis
2.0% to 2.5%
1.5% to 2.5%
Principally 5 years
5 – 10 years

15. Stock Options
Fiscal 2010
Not applicable.

Fiscal 2009
Not applicable.

16. Deferred Taxes
Fiscal 2010

Fiscal 2009

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
983
10,567
Allowance for doubtful accounts
15,845
170,308
Inventories
3,786
40,702
Loss on impairment of fixed assets
2,047
22,002
Investments in securities
3,240
34,831
Golf club memberships
644
6,923
Tax loss carried forward
16,606
178,493
Other
3,291
35,381
Deferred tax assets subtotal
46,446499,208
Valuation allowance(29,302)(314,947)
Total deferred tax assets
17,143
184,261
Deferred tax liabilities
Retained earnings in subsidiaries(120)(1,298)Net unrealized losses on securities(381)(4,100)Net gains (losses) on deferred hedges(174)(1,877)
Other(1,120)(12,038)
Total deferred tax liabilities(1,796)(19,313)Net deferred tax assets
15,346
164,948

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
981
Allowance for doubtful accounts
19,165Inventories
3,853
Loss on impairment of fixed assets
2,387
Investments in securities
4,153
Golf club memberships
530
Tax loss carried forward
21,157Net unrealized gains on securities
161
Other
4,942
Deferred tax assets subtotal
57,333
Valuation allowance(39,374)
Total deferred tax assets
17,958Deferred tax liabilities
Retained earnings in subsidiaries(143)
Net gains (losses) on deferred hedges
(939)
Other
(301)
Total deferred tax liabilities(1,384)
Net deferred tax assets
16,574(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
1,774
13,961—(388)

USD
19,068151,061—(4,180)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

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

JPY
2,021
14,837(1)(283)

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
327.2
Change in valuation allowance
14,229.8
Statutory tax rate differences in subsidiaries(467.6)
Others378.5
Effective income tax rate
14,508.7

Annual Report 201063

Notes to Consolidated Financial Statements

17. Investment and Rental Properties
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).

18. 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. Assets, 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

IT

Foodstuffs

Iron & Steel /Machinery &Plant

Life Science&
EnergyOthersTotal

276,63348
276,681269,760
6,920

321,61246
321,658
317,735
3,923

226,342
1,116
227,459
220,463
6,995

284,73163
284,795
282,707
2,087

29,43464
29,49931,064(1,565)

1,138,755
1,339
1,140,095
1,121,732
18,362—(1,339)(1,339)(2,004)664

1,138,755—
1,138,755
1,119,728
19,027

129,935
1,673
122
2,333

79,437435—
121

70,868327—
315

34,130296
289
467

35,080
500
5,004
85

349,451
3,232
5,416
3,322

65,476——275

414,928
3,232
5,416
3,598

Fiscal 2009 (JPY)I. Net sales and operating income
Net sales(1) Outside customers(2) Inter-segment
Total
Operating expenses
Operating income (loss)
II. Assets, Depreciation andamortization, Impairment of
fixed assets and Capital expenditure
AssetsDepreciation and amortization
Impairment of fixed assets
Capital expenditure

64

KANEMATSU CORPORATION

Adjustments&
Eliminations Consolidated

Fiscal 2010 (USD)

I. Net sales and operating income
Net sales(1) Outside customers(2) Inter-segment
Total
Operating expenses
Operating income
II. Assets, 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

2,501,097
288
2,501,385
2,443,408
57,9772,840,070
95
2,840,164
2,801,234
38,931

1,604,039
2,071
1,606,110
1,589,880
16,2302,129,670
474
2,130,144
2,120,539
9,605

182,194405
182,599
179,074
3,525

9,257,069
3,333
9,260,402
9,134,134
126,268—(3,333)(3,333)(8,045)
4,712

9,257,069—
9,257,069
9,126,089
130,981

1,364,527
15,947597
12,270839,325
5,371
77
1,783

674,719
3,881
—
878

421,138
4,200
861
4,827

300,659
3,632
—
748

3,600,369
33,032
1,535
20,506684,124
(14)
—
3,954

4,284,493
33,018
1,535
24,460(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 ($691,328 thousand) and ¥66,312 million for the fiscal year ended
March 31, 2010 and March 31, 2009 respectively. Most of the assets are cash and deposits and investments in securities related to financing activities.
3. Accounting changes(Fiscal 2009)(1) Accounting Standard for Measurement of Inventories:
As described in Note 2. Summary of Significant Accounting Policies, (f) Inventories, the Companies apply the Accounting Standard for Measurement of Inventory (ASBJ
Statement No.9 dated on July 5, 2006) from the current fiscal year. As a result of the change, compared with the conventional method, operating income for the current
fiscal year were decreased by ¥117 million in “IT,” ¥459 million in “Foodstuffs,” ¥120 million in “Iron & Steel and Machinery & Plant,” ¥22 million in “Life Science & Energy”
and ¥309 million in “Others.”(2) Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements:
As described in Note 4. Significant Accounting Changes, the Company applied the Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries
for Consolidated Financial Statements (ASBJ Practical Issues Task Force (PITF) No.18 dated on May 17, 2006) and made some adjustments to the consolidation accounting
applied in Japan from April 1, 2008. As a result of the application, compared with the historical method, operating income for the current fiscal year was decreased by ¥42
million in “Iron & Steel and Machinery & Plant.”

Annual Report 201065

Notes to Consolidated Financial Statements

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
27,660

Japan

Asia

North
America

EuropeOther Areas

Total

1,039,340
47,736
1,087,077
1,071,999
15,077411,223

43,833
6,117
49,95149,655295
34,07444,95871,762
116,721
113,4273,293
36,812

10,5683,761
14,32914,183145
11,757

55
1,329
1,385
1,384
0
774

1,138,755
130,708
1,269,463
1,250,650
18,813494,643

Japan

Asia

North
America

EuropeOther Areas

Total

8,459,375
353,528
8,812,903
8,692,478
120,425
4,381,658

349,940
61,724
411,664
408,8342,830
345,218

361,163515,008
876,171867,0399,132
297,297

86,31136,755123,067
122,068
999
96,920280
10,386
10,666
10,883(217)
9,711

9,257,069
977,401
10,234,471
10,101,303
133,168
5,130,803

EuropeOther 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

Fiscal 2009 (JPY)I. Net sales and operating income
Net sales(1) Outside customers(2) Inter-segment
Total
Operating expenses
Operating income
II. Assets

Adjustments&
Eliminations Consolidated—(130,708)(130,708)(130,922)
213(79,714)

1,138,755—
1,138,755
1,119,728
19,027414,928

Fiscal 2010 (USD)

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

Adjustments&
Eliminations Consolidated—(977,401)(977,401)(975,214)(2,188)(846,310)

9,257,069—
9,257,069
9,126,089
130,981
4,284,493(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
3. Accounting changes(Fiscal 2009)(1) Accounting Standard for Measurement of Inventories:
As described in Note 2. Summary of Significant Accounting Policies, (f) Inventories, the Companies apply the Accounting Standard for Measurement of Inventory (ASBJ
Statement No.9 dated on July 5, 2006) from the current fiscal year. As a result of the change, compared with the conventional method, operating income for the current
fiscal year was decreased by ¥976 million in “Japan,” ¥21 million in “Asia” and ¥30 million in “North America.”(2) Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements:
As described in Note 4. Significant Accounting Changes, the Company applied the Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries
for Consolidated Financial Statements (ASBJ Practical Issues Task Force (PITF) No.18 dated on May 17, 2006) and made some adjustments to the consolidation accounting
applied in Japan from April 1, 2008. As a result of the application, compared with the historical method, operating income for the current fiscal year was decreased by ¥42
million in “North America.”

66

KANEMATSU CORPORATION

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

Other Areas
22,732
2.6

Total
196,192
861,277
22.8

Fiscal 2009 (JPY)
I. Overseas sales
II. Consolidated sales
III. Ratio of overseas sales to consolidated sales (%)

Asia
195,997
17.2

North America
49,283
4.3

Europe16,692
1.5

Other Areas
29,367
2.6

Total
291,341
1,138,755
25.6

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

Asia
1,381,228
14.9

North America
338,015
3.7

Europe145,115
1.6

Other Areas
244,332
2.6

Total
2,108,690
9,257,069
22.8(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.

Annual Report 201067

Notes to Consolidated Financial Statements

19. Disclosure of Related Party Transactions
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

—

USD

Occupation—

Statutory auditor of Shintoa
Corporation, lawyer

Ownership ofvoting rights of
the Company
(%)

—

Other
relationshipwith the
Revenues
Company and expenses

Attorney

Attorney fee(Note)

Transaction

BalanceDuring the year

Year end

JPY

USD

Account
name

JPY

USD

21

234

—

—

—

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

Fiscal 2009
(Supplementary information)
The Company applied the “Accounting Standard for Related Party Disclosures” (ASBJ Statement No.11 dated on October 17, 2006) and the “Guidance on
Accounting Standard for Related Party Disclosures” (ASBJ Guidance No.13 dated on October 17, 2006).
The scope of disclosures is unchanged by the application.
Related party transactions
Not applicable.

20. Information per Share
Fiscal 2010

Fiscal 2009

Net assets per share¥69.15$0.74
Net income per share
¥8.44
$0.09
Diluted net income per share for the term is not reported since there is no outstanding security with dilutive effect.

Net assets per share¥59.61
Net loss per share¥30.56
Diluted net income per share for the term is not reported since earnings per share are
net loss and there is no outstanding security with dilutive effect.

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

Fiscal 2009
JPY
42,03517,099(17,099)
24,936
422,501
4,173
418,327

Fiscal 2010
USD
492,310
181,512(181,512)
310,798

Fiscal 2010
JPY
3,528
—
3,528
418,277

Fiscal 2009
JPY
(12,787)—(12,787)
418,373

Fiscal 2010
USD
37,922—37,922(2) Net income (loss) per share

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

68

KANEMATSU CORPORATION

21. Subsequent Events
Fiscal 2010
Not applicable.

Fiscal 2009
Not applicable.

22. 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
63,978651,31339,555
402,685
152
1,550

JPY
47,50056,632328

110,073345
214,105

88,969557
193,990

1,120,571
3,513
2,179,632

USD
510,542
608,695
3,535

Composite
interest rate
% p.a.
1.4
1.9
—

Due
Month, year———

956,254
5,997
2,085,023

2.4——

April 2011 – December 2014
May 2011 – January 2017—

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
54,905590,133282
3,040

Over two years
and within three years
JPY
USD
24,581
264,207175
1,883

Over three years
and within four years
JPY
USD
7,082
76,11966
710

Over four years
and within five years
JPY
USD
2,400
25,79530
331

Annual Report 2010

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 201071

Global Network
The Company supplies products and services
from a large network of business bases in Japanand overseas. A further 120 subsidiaries andaffiliates ensure global reach into the markets of
all regions.

1. ASIA

Overseas subsidiaries and their branches
Representative offices
Branches

2. EUROPE

2.
7.
3.

1.

4.

3. THE MIDDLE EAST& AFRICA

72

KANEMATSU CORPORATION

4. OCEANIA

5. NORTH AMERICA

6. SOUTH AMERICA

7. JAPAN

5.

6.

Segment information:
Number of employees and number of consolidated companies (As of March 31, 2010)
Electronics & IT
Foods & Foodstuff
Iron & Steel / Machinery & Plant
Environment & Materials
OthersCompany-wide (common)
Total

Number of employees(consolidated basis)
2,597
452
867
345
227
383
4,871

Number of consolidated companies
32 (Japan: 14, Overseas: 18)
18 (Japan: 11, Overseas: 7)
24 (Japan: 9, Overseas: 15)
9 (Japan: 9)26 (Japan: 18, Overseas: 8)
Overseas branches 14
123

Notes: 1. Number of employees on a non-consolidated basis is 850 (excluding seconded employees and temporary employees).
2. Of consolidated companies, 81 are consolidated subsidiaries and 34 are equity-method affiliates.

Annual Report 201073

Global Network

Network
JAPAN

ASIA

Tokyo 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: 81-2-737-5799

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

Devices Company
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
UD Midosuji Building, 2-15, Awaji-machi
4-chome, Chuo-ku, Osaka 541-8560, Japan
TEL: 81-6-6205-3111
FAX: 81-6-6205-3322

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

KyushuFukuoka Building,11-17, Tenjin 1-chome,
Chuo-ku, Fukuoka 810-0001, Japan
TEL: 81-92-715-7820
FAX: 81-92-715-7830

Devices Company
Tohoku Branch
163 Shibue, Wakuya-cho, Toda-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, 12th floor, Daeha BusinessCentre, 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 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

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

THE MIDDLE EAST & AFRICA

IRAN
Kanematsu Iran Ltd.
Elahiyeh Commercial Complex, Unit 1201,
12th Floor, No. 244, Africa Ave., Tehran, Iran
TEL: 0098-21-2621-2812
FAX: 0098-21-2621-3106
SENEGAL
Kanematsu Corporation, Representation de Dakar
Immeuble S.D.I.H., 2, Place de l’Independance,
B.P.2030 Dakar, Senegal
TEL: 221-849-49-10
FAX: 221-849-49-15

EUROPEUNITED 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
ITALY
Kanematsu Europe PLC.
Milano Liaison Office
Piazza Duca d’Aosta 8, Milano, Italy
TEL: 39-02-6749-3538
FAX: 39-02-6707-7364
GERMANY
Kanematsu G.m.b.H.
Duesseldorf Head Office
Oststrasse 34, D-40211 Duesseldorf, Germany
TEL: 49-211-36890
FAX: 49-211-3689-111
HUNGARY
The Representative of 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

GUINEAThe Representative of Kanematsu Corporation
B.P.1933, Conakry, Republique de Guinee
TEL: 224-30-01-17-16

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

NORTH AMERICA

U.S.A.
Kanematsu USA Inc.
New York Head Office
75 Rockefeller Plaza, 22nd Floor, New York,
NY10019, U.S.A.
TEL: 1-212-704-9400
FAX: 1-212-704-9483
Somerset Branch
100 Randolph Road, Somerset,
New Jersey 08873, U.S.A.
TEL: 1-732-271-7300
FAX: 1-732-271-7357
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, 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
CANADAThe Representative of Kanematsu Corporation
205-8988 Fraserton Court Burnaby, B.C.
V5J 5H8, Canada
TEL: 1-604-689-0550
FAX: 1-604-689-0655

SOUTH AMERICABRAZIL
Kanematsu America do sul 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 201075

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 ingredients for tofu and tofu products

Heisei Feed Manufacturing Co.

Feed-manufacturing plants

Dalian Tiantianli Food Co., Ltd.

Manufacture of tea and dim sum-related 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 & Steel / Machinery & Plant
Japan

Kanematsu Trading Corp.

Sales of steel and construction materials

Kyowa Steel Co., Ltd.

Cutting and processing of steel sheet and sales of construction materials

Eiwa Metal Co., Ltd.

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

Kanematsu 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

Hong Kong Kanematsu Hoplee Co., Ltd.

Processing and marketing of steel products

China

Sales of machine tools

Kanematsu KGK (Shanghai) Co., Ltd.

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

76

KANEMATSU CORPORATION

Thailand

KGK Engineering (Thai) Co., Ltd.

Sales of machine tools

U.S.A.

Steel Service Oilfield Tubular, Inc.

Sales of premium tubing for oil excavationKGK International Corp.

Sales of machine tools

Czech Republic KGK Czech s.r.o.

Sales of machine tools

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

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 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 andinterior goods

Kanematsu-NNK Corp.*

Manufacture and sales of home-construction materials

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 offoodstuff and aircraft engines

Kanematsu Logistics & Insurance Ltd.

Insurance agency, freight forwarding and transportation services

Japan Logistics Co., Ltd.

Warehouse and trunk room operation

OthersJapan

Indonesia PT. Century Textile Industry

Manufacture of polyester blend fabricPT. Dunia Express Transindo

Total logistics services

China

Dalian Shunda Logistic Services Co., Ltd.

Total logistics services

VietnamVietnam-Japan International Transport Co., Ltd.

Total logistics services

Annual Report 201077

Organization Chart (As of April 1, 2010)

Devices Company

Electronics & IT Division
General Meeting of
Shareholders

Board ofCorporate Auditors

Board of Directors

Foods & Foodstuff Division

Information & Electronics Department
Aerospace Department
Semiconductor Equipment Department
Industrial Electronics Department
Electronics & IT Administration Office
Produce Department No. 1
Produce Department No. 2
Meat & Marine Products Department
Osaka Foods Department
Foods Administration Office
Food Safety Management System OfficeGrain & Oilseed Department
Feedstuff Department
Domestic Sections
Foodstuff Administration Office
Food Safety Management System Office

Management Committee

Iron & Steel, Machinery &Plant Division

Iron & Steel Foreign Trade Department
Specialty Steel Foreign Trade Department
Automotive Materials Department
Iron & Steel Administration OfficePlant & Infrastructure Projects Department
Transportation Machinery Department
Machinery & Plant Administration OfficeEnvironment & Materials
Division

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

Personnel & General Affairs Department— Secretariat
Finance Department
Accounting Department
Business Accounting Department
Credit Control and Legal Department
Subsidiary Administration Department
Traffic & Insurance Department
System Planning Department
Business Innovation Department
Realty Department
Internal Auditing Department
Corporate Planning Department— Public Relations Section

78

KANEMATSU CORPORATION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

1891

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

1900• Starts import of Australian wheat

1913• Fusajiro Kanematsu passes away

1918

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

1922• Reorganizes Sydney branch into an affiliate company incorporated abroad

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

1937• Establishes 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

1976

• Completes the Nagoya Branch Office Building in commemorationof its 85th anniversary (in 1974)• Issues $12 million worth of foreign bonds in Brussels

1977• Commencement of consolidated financial statements

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

1981• Establishes an overseas affiliated company in Mexico

1983• Initiation of the three year plan, Treasure Strategy

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

1989• 100th anniversary of the founding of the Company• 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

• Establishes an overseas affiliated company in New York, as thefirst Japanese trading company in postwar era• 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• Head Office in Osaka reverts to Osaka Branch Office status (April)• 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

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 201079

Investor Information (As of March 31, 2010)

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■ Other corporations ....................... 9.97%

Shares Outstanding

422,501,010(including 1,278,878 treasury shares)■ Foreign institutions
and individuals ................................ 8.16%

Minimum Trading Unit

1,000

■ Securities firms................................. 3.88%■ Individuals and others(including treasury shares) .....52.93%■ Financial institutions ..................25.06%

Number of Shareholders 40,930
Principal Shareholders
Number of shares
held (thousands)

Percentage ofvoting rights (%)

13,29812,4603.15
2.95

11,612

2.75

7,724

1.83

6,849
6,239
5,150
4,827
4,510
3,713

1.62
1.48
1.22
1.14
1.07
0.88

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
The Norinchukin Bank
Tokio Marine & Nichido Fire InsuranceCo., Ltd.
The Master Trust Bank of Japan, Ltd.
(trust account)
Japan Trustee Services Bank, Ltd.
(trust account)
Kanematsu-NNK Corp.
Takashi Kotegawa
Japan Securities Finance Co., Ltd.
Daio Paper Corporation
Mitsui Sumitomo Insurance Co., Ltd.

Shareholder Distribution by Number of Shares Held

■ More than 1 million shares(including treasury shares) .....38.00%■ 50,000 shares and more...........24.06%■ 10,000 shares and more...........21.34%■ 1,000 shares and more .............16.04%■ Less than 1,000 shares ................ 0.56%

Note: Calculated after deduction of treasury shares (1,278,878 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. 1999

Apr. 2000

Apr. 2001

Apr. 2002

Apr. 2003

Apr. 2004

Apr. 2005

Apr. 2006

Apr. 2007

Apr. 2008

Apr. 2009

Apr. 2000

Apr. 2001

Apr. 2002

Apr. 2003

Apr. 2004

Apr. 2005

Apr. 2006

Apr. 2007

Apr. 2008

Apr. 2009

Trading Volume(thousand shares)

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

Apr. 1999

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 6
Overseas: 43

Number of Employees 850 (Consolidated: 4,871)(As of March 31, 2010)

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