ANNUALREPORT 2015

Kanematsu’s Progress and Strengths

CREATING SUSTAINABLE
With the resumption of dividend payments in fiscal 2014, the Kanematsu Group reached an important milestone in term of
restructuring to strengthen its earnings base and improve its financial position. In April 2014, we launched the VISION-130
medium-term vision aimed at “being a ‘Value Creator’ by continuing to build new businesses.” While striving to embody the
Kanematsu Group’s traditional entrepreneurial spirit,
we have embarked on a new era for the Group.

Building strong businessfoundations

Kanematsu’s post-restructuring
medium-term business plans• April 2010 – March 2013
Medium-Term Business Plan: “S-Project”• April 2013 – March 2016
Medium-Term Business Plan
—Jump to the next stage—• April 2004 – March 2007 Medium-Term Business Plan: “New KG200”• April 2007 – March 2010 Medium-Term Business Plan: “team KG120”

2010
2007

S-Project

New KG 200

team KG120

FY2010Progress in Reinforcing the Financial BaseNet sales¥861.3 billion

FY2000Operatingincome¥12.2 billion

Net sales¥1,407.9 billion

Equity ratio

7.3 %Operatingincome¥14.5 billion

Net D/E ratio

3.8 times

Equity ratio

1.3 %Net D/E ratio

47.1 times

Business Areas

Electronics &Devices
Motor Vehicles &Aerospace

5.3%

Other 0.5%

s Motor Vehicles and Partss Aerospaces Semiconductor Equipments Industrial Electronics
s Semiconductorss Electronic Components andMaterialss ICT/Mobile Solutions

Net sales

Steel, Materials &
41.9%
Plant
s Steels Materialss Plant¥1,117.1 billion(FY 2015)

24.8%

Foods & Grain

27.5%

s Foodss Meat and Marine Productss Grain, Food Soybeans, Oilseedss Feedstuffs Processed Agricultural Productss Pet Products and Groceries

VALUE
Shifting to an aggressive
management stance• VISION-130 medium-term vision unveiled in April 2014
• As a result of restructuring, we enhanced our businessfoundations and achieved a net D/E ratio of
0.9 times, improved the equity ratio to 16.7%, and paid
dividends for the first time in 15 years in fiscal 2014
• We further strengthened our financial position in
fiscal 2015
2014
2015

• Aiming for further growth leading up to fiscal 2019,
the Company’s 130th anniversary• Establishment of a clear edge in highly specialized fields
Reinforcing market competitiveness in six focus areas• New investment in business expansion and M&As
Investment capacity of up to ¥100 billion over five years
2019

VISION-130: Kanematsu takes on new challenges
for further growth
2016

2013

—Jump to the next stage—

FY2016FY2015Net sales¥1,200.0 billion¥24.0 billion

Net sales¥1,117.1 billion

OperatingincomeOperatingincome¥22.1 billion

Equity ratio

Over 20%

Equity ratio

19.6 %Net D/E ratio

1.0 level

Net D/E ratio

0.8 times

VISION-130 Aspiration

Maintain financial soundness
s 3HAREHOLDERS %QUITY /VER c BILLION
s .ET $% RATIO  LEVEL

Expand the earnings bases "UILDING ON EXISTING TRADING OPERATIONS TO EXPAND THE EARNINGS BASE THROUGH
COOPERATION AND MUTUAL DEVELOPMENT WITH OUR BUSINESS PARTNERS
s &URTHER DEVELOPING AREAS OF STRENGTH AND MAKING NEW INVESTMENTS FOR BUSINESS CREATION

Being a “Value Creator” and continuing to build new businesses

KANEMATSU ANNUAL REPORT 2015

1

Financial and ESG Highlights(As of June 24, 2015)

2005

2006

2007

2008

2009

Net sales¥886,876¥1,096,409¥1,281,331¥1,244,020¥1,138,755

Gross profit

68,142

81,732

103,711

90,32786,292

Operating income

15,762

17,982

21,71322,60519,027

Ordinary income

11,72015,70917,25518,747

13,127

Income (loss) before income taxes
and minority interests

4,836(16,728)

14,61528,97577

Net income (loss)

2,469(21,686)

7,507

19,016(12,787)

Cash flows from operating activities

10,122

19,72020,87414,30817,177

Cash flows from investing activities

5,382

7,822

23,14938,799(370)

Free cash flow

15,50427,54244,023

53,107

16,807

Net assets

38,029 2

26,004 2

48,767

62,23942,035

Total assets

520,118

556,046

563,176

503,456

414,928——

32,95945,587

24,936

261,560

246,317

204,900

148,944

134,582

Net income (loss)¥ 6.52¥(52.43)¥17.94¥ 45.44¥(30.56)

Net assets

93.74

62.12

78.75

108.95

59.61

—

—

—

—

—

Return on equity (ROE) (%)

8.06(67.73)

25.46

48.42

(36.26)Equity ratio (%)

7.3

4.7

5.9

9.1

6.0

Net D/E ratio (times)

6.9

9.5

6.2

3.3

5.4

For the year:

At year-end:

Shareholders’ equity
Net interest-bearing debt

Per share (yen):

Cash dividends

Financial indicators:

ESG* (Non-Financial) Data: *ESG: Short for environmental, social, and corporate governance.
Employees—consolidated
Employees—non-consolidated (Women)
Percentage of women among employees—
non-consolidated
CO2 emissions (t-CO2)
Directors (Outside directors) 4
Audit & Supervisory Board Members(Outside Audit & Supervisory Board Members)

3,218

4,449

4,545

4,543

4,874

879 (238)

847 (232)

859 (234)872 (251)

890 (262)

27%

27%

27%

29%

29%

559.38527.40823.59577.95450.2912(0)12 (0)11(0)11 (0)

10 (0)

4 (2)

4 (2)

5(3)

4 (3)

4 (3)

4

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

2

KANEMATSU ANNUAL REPORT 2015

Millions of yen 1

Thousands of
U.S. dollars 3

2010

2011

2012

2013

2014

2015

2015

¥861,277¥936,891¥1,006,365¥1,019,232¥1,114,539¥1,117,096$9,295,967

74,10476,90580,90080,021

86,40291,441

760,933

12,18618,02921,426

18,262

19,77622,125

184,122

8,238

14,257

17,752

16,705

20,16022,895

190,523

8,407

13,03013,52916,781

19,07523,294

193,849

3,528

9,175

6,110

9,564

11,79911,47095,452

26,441

7,827

15,822

1,355

22,384

10,11584,180(19,149)

17,322

1,291

1,466

(1,111)(8,903)(74,094)

7,292

25,14917,113

2,821

21,273

1,212

10,08645,80449,57655,99275,912

96,204

118,731

988,032

398,629

388,676

399,753

399,186

428,459

459,0113,819,682

28,916

33,10139,00854,51971,657

90,101

749,785

109,350

104,61290,01286,43968,03867,646562,926¥ 8.44¥21.93¥14.60¥ 22.80¥ 28.09¥ 27.30

$0.23

69.15

79.07

93.16

129.82170.54214.10

1.78

—

—

—

—

3.00

4.00

0.03

13.10

29.59

16.95

20.45

18.70

14.18

7.3

8.5

9.8

13.7

16.7

19.6

3.8

3.2

2.3

1.6

0.9

0.8

4,871

4,770

4,770

5,522

5,747

6,002

850 (264)

832 (250)

795 (238)

782 (242)

800 (246)

813 (253)

31%

30%

30%

31%

31%

31%

368.25482.36376.92365.37414.58387.8010 (0)

10 (0)

10 (0)

10 (0)

6 (1)

7 (2)

4 (3)

4 (3)

4 (3)

4 (3)

4 (2)

4 (3)

KANEMATSU ANNUAL REPORT 2015

3

Contents

P1

Kanematsu’s Progress andStrengths
12
5
6Kanematsu’s Progress and Strengths

P20 Review of Operations
20 Review of Operations

Financial and ESG Highlights

22
24
26
28

To Our Stakeholders
Top Message

Feature:P12 Special
Realizing VISION-130
12 In Step with Developments in Society

VISION-130:
Kanematsu Pushes
Global Connections
14
15
16
17

Electronics & Devices Division
Foods & Grain Division
Steel, Materials & Plant Division
Motor Vehicles & Aerospace
DivisionandP30 CSR
Corporate Governance
30 CSR (Corporate Social Responsibility)
34 Corporate Governance
37 Corporate Officers

ICT Solutions
MobileAsian Food Markets

North American Shale Oil and
Gas Markets
18 Global Motorization
19 Overseas Expansion by JapaneseCompanies

Section and
P38 Financial
Company Information
38
40
42
48

Management’s Discussion and Analysis
Business Risks
Consolidated Financial Statements

Notes to Consolidated Financial
Statements
77 Independent Auditor’s Report
78 Global Network

79 Major Group Companies
80 Network
82 Corporate Profile

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

4

KANEMATSU ANNUAL REPORT 2015

To Our Stakeholders

Kanematsu’s Progress andStrengths

Creating Value Unique to the Kanematsu GroupThe Kanematsu Group celebrated the 125th anniversary of its founding on August 15, 2014.
It is by the grace of the tremendous support and cooperation of our stakeholders, includingSpecial Feature:
Realizing VISION-130

shareholders, business partners, and employees, that we have been able to reach this milestone.
In April 2014, aiming for further growth, we announced and launched initiatives under
VISION-130, our medium-term vision, which lays out the aspiration of “being a ‘Value
Creator’ by continuing to build new businesses” for 2019, the Company’s 130th anniversary.
At Kanematsu, we have codified the entrepreneurial spirit of the Company’s founder,
Fusajiro Kanematsu, in our Corporate Principles. In accordance with these principles, we seek

Review of Operations

to maintain a pioneering spirit and foster creative imagination and ingenuity in order tocontribute to ongoing economic development.
Rather than chasing after high-risk business in finance or investment in natural resources,
we strive to create value unique to the Kanematsu Group by honing our core functions as a
trading company. By doing so, we are moving closer to our aspiration for Kanematsu in its
130th year and increasing the value of Kanematsu as a company that grows together withits business partners.

CSR and Corporate GovernanceJuly, 2015
Masayuki Shimojima
President & CEO

Corporate Principle

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

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

KANEMATSU ANNUAL REPORT 2015

5

Top Message

Fiscal 2016, ending March 31, 2016, is the final year of the Kanematsu Group’s current mediumterm management plan, which it is carrying out under the banner “Jump to the next stage.”
Looking to take the next step forward, we have also established VISION-130, a five-year mediumterm vision that lays out our aspirations for 2019—the 130th anniversary of the Company’s
founding—and have now completed its first year. Having resumed dividend payments, a priority measure under the medium-term business plan, we are now shifting to an aggressive management stance. We are concentrating on our focus areas and endeavoring to create new
businesses to achieve further growth.
President & CEO

Masayuki Shimojima

6

KANEMATSU ANNUAL REPORT 2015

Kanematsu’s Progress andStrengths

Creating New Businesses
business partners, with whom it has steadily built relationships of trust through trading operations over theCompany’s nearly 130-year history. Dealing in goodfaith with these business partners, that is, indentifying
their needs and the challenges they face and offeringsolutions to pioneer new value as a business partnerthat grows with them, is the true essence of theKanematsu Group’s business creation.

Special Feature:
Realizing VISION-130

The Kanematsu Group has clearly defined “being a‘Value Creator’ by continuing to build new businesses” as its vision. By sharing this aspiration across theentire Group and by achieving it, we hope to further
enhance Kanematsu’s enterprise value.
For the Kanematsu Group, business creationmeans aiming for more than simple expansion ofscale. The Group’s greatest asset is its many valuable

Fiscal 2015 Results
beginning of the fiscal year.
In particular, factors behind these firm results
included continued growth in the ICT solutions business of the Electronics & Devices Division; income
contributed by Kanematsu-NNK Corp., which wasmade a consolidated subsidiary in December 2014;
and the overall strong performance of the Motor
Vehicles & Aerospace Division, especially in components trading.

Review of Operations

We achieved the income targets of our medium-term
management plan two years ahead of schedule infiscal 2014, the first year of the plan. In fiscal 2015,
ended March 31, 2015, it became clear that our consolidated earnings power is continuing to increase.
Consolidated ordinary income reached a record highof ¥22.9 billion, and although net income decreased
2.8% as a result of a temporary increase in tax
expenses due to tax system changes, at ¥11.5 billion
it was still 4.3% higher than the forecast made at the

CSR and Corporate Governance

Outline of the VISION-130 Medium-Term Vision and Review of its First Year
is to both maintain financial soundness and expand theearnings base. Accordingly, we are further developing
businesses in our areas of expertise and investing in
new business creation. We have defined six focus areas
where we have expertise: 1) ICT solutions, 2) Mobile
solutions, 3) Asian food markets, 4) North American
shale oil and gas markets, 5) Global motorization, and6) Overseas expansion by Japanese companies.
Focusing on these business areas, we have establishedthe following quantitative targets.

VISION-130 Medium-Term Vision Targets

Financial Section andCompany Information

Under the Group’s medium-term vision, VISION-130,
we have clearly defined our aspiration for the Group as“being a ‘Value Creator’ by continuing to build new
businesses” and are striving to adjust mindsets accordingly in the course of our daily operations. Throughthese efforts in fiscal 2015, as we sought to create ashared awareness and ambition throughout the Group,
I feel that we made progress in that we began to consider a greater range of possibilities than we had
before. Our management objective under VISION-130

FY2019Consolidated ordinary income
Consolidated net income
Shareholders’ equity
Net D/E ratio¥25 to ¥30 billion¥15 billion (ROE: 15%)Over ¥100 billion
1.0 level

KANEMATSU ANNUAL REPORT 2015

7

Main Developments in Focus Areas

Looking at the six focus areas mentioned above, first,
we have made great progress in Asian food markets.
In the past, we were mainly focused on procurementin these markets. Through initiatives in recent years,
however, our business in this area has evolved into an
infrastructure consisting of a value chain that encompasses proposals, manufacturing, and supply, allowing
one-stop business. In April 2015, we began fullfledged operations of a food service company tailoredto the halal system of Indonesia, the country with theworld’s largest Muslim population. This accomplishment is an example of business development in Asia
that draws on know-how cultivated in Japan, including in our R&D and manufacturing operations, as wellas the Group network. Going forward, we aim forhorizontal development in Vietnam and other ASEAN
countries.
Next, in the area of global motorization, we arefocusing on providing such functions as sourcing,technological development, and logistics as part of
the global supply chains of automakers and otherbusiness partners. We have established overseas affiliates in Europe and the Americas as well as India and
Mexico, and, in 2015, an office in Detroit, thus
expanding our network to meet customer needs withjust-in-time capabilities. At the same time, this business is linked with the automobile equipment business unit of the Electronics & Devices Division, one of
the Group’s mainstay businesses, to identify and suggest high-value-added performance materials andproducts. Success on this front has led to trading
involving a wider range of OEM automobile components and the establishment of a value chain that is areal strength within this business area.
In the ICT solutions area, the key to success lies
in becoming deeply involved with business partners’ IT
infrastructure. To that end, the Kanematsu Group hasleveraged its advanced expertise, unparalleled knowhow, and network strength to create one-stop IT
infrastructure services that can completely satisfy customers. These services encompass everything fromdesign, construction, and installation to operation andmaintenance. Furthermore, as a vendor of multifaceted solutions, we suggest the best system devices foreach customer. In fiscal 2015, Kanematsu Electronics
Ltd. made Nippon Office Systems Ltd. a wholly owned
subsidiary. Building on this, going forward, we will
work to spur human resource exchange within theGroup as well as the provision of total IT services. I am
confident that our efforts in the ICT solutions area
will, by increasing our competitiveness and further
developing our businesses, help us increase our enterprise value and contribute significantly to the stabilityof the Group’s earnings base.

New Tasks as We Take the Next Step
While our results in fiscal 2015 were satisfactory, wemust now look to our medium- and long-term growthstrategies and identify the new management issues
arising in the course of everyday operations in order tobalance risk control and ambitious action.
Our first task is to make our areas of strength
even stronger. Our business model is different fromthat of other companies in the same industry in that
we do not invest in resource development. In the latter

8

KANEMATSU ANNUAL REPORT 2015

half of 2014, changes in natural resource markets
prompted our competitors to shift their focus awayfrom natural resources and toward our mainstay areas.
As such, the Kanematsu Group now needs to build on
its accumulated know-how and track record and accelerate business development to further increase its
advantages and competitiveness.
Our second task is to add two new focus areas tothe abovementioned six in response to changes in theKanematsu’s Progress andStrengths

New Initiatives under VISION-130
The Group in pursuing horizontal and vertical expansion
by focusing on business areas in which it excels.
Key strategic 6 business area+innovation
MobileFood market in Asia

North American
shale market

Global motorization

Overseas expansion ofJapanese manufacturers, etc.

Innovation
4ECHNOLOGICAL SUPPORT IN THE IN CAR PRODUCT
AND %-3 AREAS CAMERA BUSINESSTPP Response/
Pet products

3TRENGTHEN 400 RELATED FUNCTIONS AND RESPOND
TO INDUSTRY REORGANIZATION IN THE FOODS AREAVERTICAL BUSINESS DEVELOPMENT IN PET PRODUCTS
AND GROCERIES

s +ANEMATSU !DVANCED -ATERIALS #ORPORATIONESTABLISHED
s #APITAL AND BUSINESS ALLIANCE WITH .IPPON-ANUFACTURING 3ERVICE #ORPORATION
s +ANEMATSU ..+ #ORP BECAME CONSOLIDATEDSUBSIDIARY COMPANY
s -ICRO LENS UNIT BUSINESS +ANTATSU #O ,TDEXPANDED
s 2EINFORCE ANIMAL FEEDSTUFF AND MEAT PRODUCTBUSINESSES AND RESPOND TO INDUSTRY REORGANIZATIONs !CQUISITION OF A PET FOOD PRODUCER
s !DDITIONAL ACQUISITION OF SHARES OF A PET FOOD
WHOLESALER

devices. In addition, we are focusing efforts on meeting growing demand for security cameras, reflecting
rising security consciousness, as well as the design andmanufacture of micro-lens units for smartphones andautomobiles. In terms of TPP response, in the meatproducts and feedstuff businesses, areas of strength,
we are enhancing functions in anticipation of changes
in trade structure and intensifying competition while
preparing for rapid industry reorganization.

CSR and Corporate Governancebusiness environment. These are technological support, including the electronics manufacturing services(EMS) and camera businesses, and responding to theTrans-Pacific Partnership (TPP response), mainly withregard to the Foods & Grain Division’s operations. In
the technological support area, we are working tomore nimbly respond to the diverse needs of our business partners in automobile-related businesses and areconsidering reinforcing the EMS business, which
entails the contracted manufacturing of electronic

Fiscal 2015 Initiatives

Review of Operations

TechnologicalsupportSpecial Feature:
Realizing VISION-130

ICT solution

Financial Section andCompany Information

Considering the Business Environment
Looking at medium-term prospects for the Group’sbusiness environment, including such factors as thegrowing global population, the firmness of the U.S.
economy, and rising consumption in ASEAN nations, I
believe that we will be able to steadily execute our
medium-term business plan. Furthermore, theKanematsu Group’s business model is based mainly
on providing added value and fulfilling roles that are
relatively insulated from fluctuations in the global

economy. Major opportunities are also expected in thenear future in the Group’s mainstay business areas,
including motorization, electronic devices, and foods.
Given these factors, I believe that the quantitative targets of the VISION-130 medium-term vision are
attainable.

KANEMATSU ANNUAL REPORT 20159

Growth-Oriented Investment Strategies
New investments using funds provided by operating activities

Improve financial stability through diversification of funding vehicles
Build a system to ensure the flexibility needed to fund future growth
Shelf registration of ¥30 billion in straight corporate bonds

Formulation of investment standards
Newly establish Companywide investment standards
Formulate standards for market entry and exit
Standards forentry

Qualitative standards:

Invest in the areas where the Company excels based on knowledge
and experience; Do not invest in resource development or the realestate sector.

Quantitative standards: Companywide minimum standards:s )22  INCLUDING PERIPHERAL TRANSACTIONS ON A CONSOLIDATED BASIS
s 0AYBACK PERIOD 7ITHIN SEVEN YEARS AS A RULE
Standards for
exit

Formulate Companywide minimum standards
In addition, as before, specific standards will be established for each individual caseAt the same time, establish a system of following up on cases
Investments shall be monitored at the management level

Growth-oriented investment strategies
The key to Kanematsu’s strategy is to make investments rooted in businesses in our areas of strength. In
principle, we limit investment to the amount of cash
provided by operating activities. Over the five-year
period of our medium-term vision, VISION-130, we
estimate that we will have the capacity to invest up to¥100 billion. However, at certain times, we may needto make major investments, such as large corporate
acquisitions. To ensure the flexibility to meet such capital needs, in March 2015 we filed a shelf registrationof ¥30 billion in straight corporate bonds. This move
was aimed at diversifying our means of capital procurement.
Furthermore, to facilitate good investment decisions, we have adopted a more sophisticated risk
management approach, formulating investment standards that consider both entry and exit strategies. We

10

KANEMATSU ANNUAL REPORT 2015

have also taken measures to ensure that investments
are backed by the strength of the entire Company,
including the formation of a task force charged withmaking quick management decisions. We furthermore
established a follow-up system to monitor the status
of investments that have been executed and thus prevent the recurrence of problems that have arisen in
the past. These measures allow us to rapidly adjust
course as necessary, even to call a temporary halt tobusiness expansion, in markets that have high growthpotential but also high volatility, such as the fiscal
2015 North American shale oil and gas market.
While we are thus able to respond nimbly torisks, we are now also beginning to transition to astage in which we can more precisely grasp business
opportunities. I firmly believe that we are right on theverge of the next big step forward for Kanematsu.

Special Feature:
Realizing VISION-130
Review of Operations
CSR and Corporate GovernanceAt the June 2015 General Meeting of Shareholders,
we took steps to further strengthen the Group’s corporate governance.
Specifically, we increased the number of Outside
Directors and Outside Audit & Supervisory Board
Members as well as the number of each that are
Independent Officers as defined by the Tokyo Stock
Exchange, thus reinforcing management oversightand supervision functions. Going forward, we willcontinue to work toward greater transparency tomaintain the trust of all stakeholders.
As expressed in the Company’s Corporate
Principles, “Our beliefs: Kanematsu’s Guiding
Principles,” we believe that the foundation of ourbusiness as a trading company lies in continually asking ourselves what we can do to best serve our business partners and then doing it. We seek to develop

more human resources who can seriously engage withthat foundation and look to create a brighter future
while constantly thinking about how to provide added
value. In terms of global human resource development, in addition to ordinary on-the-job training, wesend young employees abroad early in their careers toexperience overseas workplaces, the very front line of
our operations as a trading company. Using suchmethods, made possible by the Group’s firm grounding in front-line business, we aim to nurture a senseof immediacy and connection with other parts of theGroup. These methods not only benefit the trainees,
but are also stimulating for the employees at overseas
sites, helping them to take a fresh look at their own
roles. We are also creating opportunities for overseas
employees to participate in long-term training inJapan, seeking to foster a shared sense of purpose
and corporate culture.
As for our corporate social responsibility (CSR),
our basic approach is to conduct all business activities
in line with our Corporate Principles and Code of
Conduct. We have furthermore established a CSR
Committee with a Companywide mandate to formulate and execute policy on Groupwide CSR initiatives
as necessary. In particular, to address CSR issues related to supply and procurement for our business partners’ supply chains, we have created a practicalframework that includes the CSR Action Guidelines
for Supply Chains.

Kanematsu’s Progress andStrengths

Strengthening Our Business Foundations

Fiscal 2016 Outlook
The Kanematsu Group regards providing returns
to shareholders as one of its most important tasks andaims to pay stable, ongoing dividends at levels appropriate to the Group’s results.
Going forward, seeking to live up to the trust of
our stakeholders, we will continue to do our utmost
to increase Kanematsu’s enterprise value, remainingtrue to our Corporate Principles and striving ambitiously toward growth.

KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information

By taking an aggressive management stance toward
the achievement of the goals outlined in our mediumterm vision, VISION-130, we are working to build a
new era for the Kanematsu Group.
In fiscal 2016, ending March 31, 2016, we
expect consolidated net sales of ¥1,200.0 billion, up
7.4% year on year, operating income of ¥24.0 billion,
up 8.5%, consolidated ordinary income of ¥23.0 billion, up 0.5%, and net income attributable toKanematsu Corporation of ¥12.5 billion, up 9.0%.
We thus forecast increases in both sales and profits,
including a second consecutive year of record-highconsolidated ordinary income.

11Special Feature: Realizing VISION-130
In Step with Developments in Society

Kanematsu Pushes Global ConVISION-130
Management
Expand theMaintain financial

Electronics & Devices

page 14

ICT Solutions
Expand the systems business and improve efficiencies in the services and support businesspage 15

MobileIncrease business scale through M&A

page 16

Asian Food Markets
Develop business as a one-stop shop for concept development, manufacturing,and supplies, and build value-chain infrastructure

New
Foods & Grain

Establish global value chain
Business investment and

12

KANEMATSU ANNUAL REPORT 2015

nections

The Kanematsu Group is strongly aware of its mission as a trading company to create
new value by forging business connections in this increasingly globalized world. We
have established “Being a ‘Value Creator’ and continuing to build new businesses” as
our key aspiration under our medium-term vision, VISION-130: Kanematsu takes on
new challenges for further growth. In line with this vision, we are striving to both
ensure business stability by prioritizing the maintenance of financial soundness andexpand the earnings base by steadily capturing business opportunities. To establish asolid growth trajectory, we are adopting an aggressive management stance, aiming
to raise corporate value to new levels.

objectives
Special Feature:
Realizing VISION-130

earnings basesoundness

Steel, Materials & Plant

North American Shale Oil
and Gas Markets
Further growth in the manufacturing, processing, and sales value-chain for oilfield tubing

Review of Operations

page 17

page 18

CSR and Corporate Governance

Global Motorization
Sourcing, technology development, and improved logistics in the global auto market

page 19

Overseas Expansion
by Japanese Companies

Financial Section andCompany Information

Support and collaborate with Japanese makers moving into overseas markets

initiatives
Develop new technologies, new products

Motor Vehicles & Aerospacedevelopment through M&A

KANEMATSU ANNUAL REPORT 201513

Special Feature: Realizing VISION-130

1

VISION-130 Focus areas

ICT Solutions

KEY REGIONSKEY BUSINESS COMPANIESJapan, Asia (China and Southeast Asia)

Kanematsu Electronics Ltd., Nippon Office Systems Ltd.

Market Background and Overview
As a vendor of multifaceted solutions withstrengths in handling a wide variety of devices,
the Kanematsu Group provides one-stop IT infrastructure services, from design, construction, andinstallation to operation and maintenance.
Anticipating market trends, we work to identify
and verify cutting-edge technologies in andoutside Japan and further develop our areas ofunique strength to achieve differentiation fromcompetitors. We are providing infrastructure platforms tailored to customers’ business environments, expanding services for big data systems,
promoting the establishment of borderless cloudcomputing, and expanding supply systems for key
components of smart devices. Furthermore, while
streamlining our organization to make optimaluse of our human resources and know-how, we
are aggressively working toward business expansion in global markets, targeting China andSoutheast Asia as well as leading-edge companies
in Europe and the Americas and Japanese companies operating in emerging nations.

14

KANEMATSU ANNUAL REPORT 2015

Providing IT Infrastructure with One-Stop Services• Strengthening system integration functions throughM&As• Strengths in infrastructure development and virtualization businesses• Competitive advantage as a vendor of multifaceted
solutions

Consultation

Proposal

Development/
Construction

Operational
support andMaintenanceservice

Replacement
proposal

Timeline and Measures Taken to Strengthen Business2012 Nippon Office Systems Ltd. became a consolidated
subsidiary of Kanematsu Electronics Ltd.
2013 Established Growth D Ltd., a joint venture company
in the IT distribution business2015 Kanematsu Electronics Ltd. acquired Nippon Office
Systems Ltd. as fully owned consolidated subsidiaryKanematsu’s Progress andStrengths

2

VISION-130 Focus areas

MobileSpecial Feature:
Realizing VISION-130
Review of Operations

KEY REGIONKEY BUSINESS COMPANY

Japan

Kanematsu Communications Ltd.

Capturing Domestic Market Share and Pursuing New Growth• Developing a comprehensive mobile & communications business based on mobile devices• Nationwide sales locations• Providing ASP services for corporations

Services for corporations

Overseas services
Content

Financial Section andCompany Information

Domestic stores

CSR and Corporate GovernanceMarket Background and Overview
As a primary distributor for telecommunications
carriers in Japan, Kanematsu sells smartphones
and other mobile communication devices nationwide. In the mobile solutions business, we areworking to sell bundle service packages that
include fiber optic internet contracts for customers
replacing their mobile phones and are accelerating
our roll out of prepaid communications cards thatcan be used overseas. At the same time, we arereinforcing content services through the development of software for mobile applications with aneye to providing services related to corporate
information systems and aggressively promoting
joint operations with businesses in other sectors.
As industry reorganization progresses and competition between carriers intensifies, Kanematsu will
focus on promoting efficiency while expanding its
market share by conducting aggressive M&As andestablishing new stores.

Timeline and Measures Taken to Strengthen Business2013 Acquired all shares of BD Holdings, Inc., a mobile
phone sales company based in the Kyushu region
2014 Concluded a distribution agreement with NetComm
Wireless Limited, an Australia-based supplier of global
wireless M2M devices

KANEMATSU ANNUAL REPORT 201515

Special Feature: Realizing VISION-130

3

VISION-130 Focus areas

Asian Food Markets

KEY REGIONSKEY BUSINESS COMPANIES

Asia

Kanematsu Corporation, PT. Kanemory Food Service,
PT. Aeternit Prima Mandiri

Market Background and Overview
Food culture is developing rapidly alongside economic growth in emerging Asian nations. In thesecountries, Kanematsu is building a value chain
encompassing everything from upstream areas,such as animal feedstuff and feedstuff materials,
to one-stop business development in the mid- anddownstream areas of processed food product proposal, manufacture, and supply.
First, in the animal feedstuff area, leveraging
know-how it has developed in the dairy cow feedmarket, Kanematsu has established and begun
operations at a dairy cow TMR (total mixed ration)
production center. Furthermore, in the area ofprocessed foods, using the Group’s R&D and content provision functions developed in the domestic
food service sector, we have established a company
to run a central kitchen in Indonesia, where theMuslim middle class is growing rapidly. Using ourthorough knowledge of the halal standards of
MUI, a major halal certification body in Indonesia,
we are now considering entry into and expansion
in markets in other parts of the Muslim world.
Going forward, we aim to use this expertise toexpand horizontally in Asia and bring Japanesequality foods to the tables of the region’s fourbillion residents.
16

KANEMATSU ANNUAL REPORT 2015

Building Value Chain Infrastructure• Entering animal feedstuff/feedstuff materials andother upstream areas• One-stop proposal, manufacturing, and supply• Rigorous traceability management• Know-how in Japan and Group strengths
4HREE 3TRENGTHS IN THE #OOKED &OODS "USINES
s &ROM DEVELOPMENT
TO FOOD ITEMPROPOSALS&OOD SOLUTIONSBUSINESSs #HINAs )NDONESIA/VERSEAS PRODUCTION
LOCATIONS

s 0ROCESS PATENTS
s +NOW HOW ETC$IFFERENTIATIONSTRATEGIES

Timeline and Measures Taken to Strengthen Business2012 Established PT. Kanemory Food Service, a food processing joint venture company
2013 Invested in a dairy producer in Vietnam and entered
the dairy cow feed business via a business tie-up
2014 Established subsidiary in Vietnam
Established confectionery and baking ingredients
wholesaling joint venture company in Shanghai
2015 Invested in the first company to manufacture and sellfruit jelly in Indonesia

North American Shale Oil and Gas Markets

Kanematsu’s Progress andStrengths

4

VISION-130 Focus areas

Special Feature:
Realizing VISION-130
Review of Operations

KEY REGIONKEY BUSINESS COMPANIESNorth America

Kanematsu Corporation, Benoit Premium Threading, LLC,
Steel Service Oilfield Tubular, Inc.

Steady Investment Targeting Demand• Constructing a value chain in North America• Medium- and long-term expansion of the oilfield
tubing market• Preparing a framework to increase production in
anticipation of recovery in oil prices

Manufacturing

Processing

Sales

Financial Section andCompany Information

Constructing a Value Chain in North America

CSR and Corporate GovernanceMarket Background and Overview
The Kanematsu Group is building an oilfield tubing
value chain that encompasses manufacturing,processing, and sales and is supplying such tubing
to major North American oil companies. We arealso advancing preparations to ensure that we will
be ready to quickly expand production to meetdemand as necessary. Kanematsu’s oilfield tubing
has a solid reputation for being high-performanceand high-quality. Our products are well-suited forshale oil and gas drilling and can also accommodate increasing demand related to deep water/
ultra-deep water oil drilling.
The plunge in crude oil prices in the latter halfof 2014 has caused stagnation in shale oil andgas and other resource development. This has
weakened demand for oilfield tubing, and, in
response, Kanematsu has temporarily suspended
construction of a second oilfield tubing factory
being built for Benoit Premium Threading, LLC.
Nevertheless, shale oil and gas demand is expected
to grow over the medium to long term and, inturn, generate demand for further technologicalinnovation. Kanematsu will therefore continue towork to expand the oilfield business while keeping
a close eye on market trends.

Timeline and Measures Taken to Strengthen Business2013 Acquired a North American oilfield tubing processing
company
2014 Finalized plans for the construction of a second factoryfor Benoit Premium Threading, LLC to expand theNorth American oilfield tubing business (temporarilysuspended in light of current oil prices)

KANEMATSU ANNUAL REPORT 201517

Special Feature: Realizing VISION-130

5

VISION-130 Focus areas

Global Motorization

KEY REGIONSThe Americas, Europe, Asia

Market Background and Overview
Drawing on a network of more than 20 overseas
locations, the Kanematsu Group is building supply
chains that combine its longstanding strengths insales and sourcing with reinforced technologicaldevelopment, quality management, and logistics
functions. In 2012, Kanematsu established a subsidiary in the National Capital Region (NCR) aroundDelhi, India, and a Kanematsu subsidiary based inGermany established a branch office in Munich. In
2014, the Group established a subsidiary in Silao,
Mexico, and a liaison office in Chongqing, China.
Then, in 2015, it established an office in Detroit,
aiming to build a support framework that boasts
specialized technology to offer just-in-time supply
capable of rapidly responding to the needs of customers in the region, where automobile and motorcycle demand is strong. The Group has also long
been active in Poland, operating dealerships forJapanese automakers and importing and distributing
general-purpose machinery. We aim to work as aGroup to nimbly respond to customer needs andprovide even greater added value through wideranging automotive supply chains handling operations ranging from automobile component supply toautomobile sales, as a partner forcustomers’ global operations.
18

KANEMATSU ANNUAL REPORT 2015

KEY BUSINESS COMPANIES

Kanematsu Corporation, ANOVA Corporation, Aries Motor Ltd.,
Aries Power Equipment Ltd., Kanematsu Advanced Materials Corporation

Making New Proposals to Meet Partners’ Needs• Technological support and quality management
capabilities for OEM automobile component trading• Global sales and sourcing capabilities and logistics
network• Indentifying/suggesting high-value-added
performance materials and products
Unified Support System
MarketingGlobalsourcing

Planning
andproposal

Development

Mass
production
and logistics

Timeline and Measures Taken to Strengthen Business2012 Established subsidiary in India
Opened branch in Munich, Germany
2013 Expanded dealerships for Japanese automakers
2014 Established subsidiary in Mexico
Established liaison office in Chongqing, China
2015 Opened Detroit officeOverseas Expansion by Japanese Companies

Kanematsu’s Progress andStrengths

6

VISION-130 Focus areas

Special Feature:
Realizing VISION-130
Review of Operations

KEY REGIONSKEY BUSINESS COMPANY

North America, Emerging countries

Kanematsu Corporation

Support Based On Know-How in Main Fields

Electronics &devices
Foods

Support for JapaneseCompanies in Diverse Fields

Automobiles

ICT

Financial Section andCompany Information• Further expanding overseas network from around 40
cities currently and bolstering overseas staff• Providing backup in the areas of machine tools andindustrial machinery for Japanese manufacturers
expanding into emerging countries• Supporting customers that seek growth opportunities in
Asia through the new fund

CSR and Corporate GovernanceMarket Background and Overview
Kanematsu boasts locations in around 40 cities
overseas, mainly in Asia. Thanks to this network
and its information capabilities, we are able toquickly and precisely grasp trends in countries
around the world and are building robust value
chains. To support the accelerating overseas
expansion of Japanese companies, we are establishing additional locations and building support
systems overseas.
Kanematsu has a solid track record of achievements in building support systems for automobile
component manufacturers entering Indonesia,
with services that include securing land for factories and advising on legal and labor issues related
to establishing a local company.
Furthermore, in April 2015, Kanematsu joinedwith Aozora Bank, Ltd., and ES Networks Co., Ltd.,to establish a company to operate a corporate
investment fund supporting Japanese businessexpansion into Asia by customers seeking growth
opportunities. The fund made its first investment
in June of the same year.

Machine tools/
industrial machinery

Timeline and Measures Taken to Strengthen Business2012 Reopened representative office in Myanmar
Established subsidiary in India
2013 Entered business tie-up with Aozora Bank, Ltd. tosupport corporate expansion into Asia
2014 Established subsidiary in Mexico
2015 Established a company to operate a corporate investment fund supporting business expansion into Asia
KANEMATSU ANNUAL REPORT 201519

Review of Operations

Electronics & Devices
Main Business

Products

Semiconductors

Semiconductors

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

Electronic
Components
and Materials

Electronic
Components

Amusement related products; Vehicle
equipment; AV related products; Systemboards; Printed circuit boards andmaterials; RFID substrates; LED lighting
devices

Semiconductors/
LCD Materials

LED components; Solar cell components;
Battery components; Metal materials forelectronic and functional components;
Surface treatment agents

Optical Device
Materials

Components for display devices andoptical devices

Industrial
Electronics

Industrial Printers Industrial printers and related
consumables
Livingwares

Batteries; Household supplies

Semiconductor
Equipment

Semiconductor/
LCD
Manufacturing
Equipment

Semiconductor manufacturing andtesting equipment; LCD manufacturing
and testing equipment

ICT/
Mobile Solutions

ICT Solutions

ICT and communications equipment anddevices; ICT and communication services;
System integration

Mobile Solutions

Mobile communication terminals;
Mobile internet system and services

Foods & Grain
Main Business

Products

Foods

Processed fruits (frozen/canned); Concentrated fruit/vegetablejuices; Confectionary ingredients (couverture chocolate, cocoa
powder, nuts, dry fruits, dairy products, etc.); Coffee; Teas;
Alcoholic beverages (wine, etc.); Sugar; Honey; Sesame seeds;
Peanuts; Pulses and peas; Nuts and seeds; Cooked foods; Others

Meat andMarine Products

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

Grain, Food
Rice; Wheat; Barley; Corn; Soybeans (for food, for oil); Defatted
Soybeans, Oilseeds soya-flake for soy sauce production; Buckwheat; Corn grits; Cornstarch; High-fructose corn syrup; Rapeseed; Cottonseed; Others

20

Feedstuff

Feed grain (corn, milo, soybeans, etc.); Plant protein meal
(soybean meal, rapeseed meal, etc.); Animal protein meal (Fishmeal, etc.); Other by-products; Dairy products for feed (skim milk,
whey powder); Roughage (baled hay, beet pulp pellets, etc.); Fishoil; Prebiotics (Laxel Force); Fertilizer; Others

Processed
Agricultural
Products

Processed wheat (wheat flour, pasta, frozen bread dough, etc.);
Cereal ingredients; Vegetable oil; Olive oil; Others

Pet Products andGroceries

Pet food and snacks; Pet products; Tropical fish; Raw ingredientsfor pet food and snacks; Products wholesaled to DIY stores(home improvement retailers)

KANEMATSU ANNUAL REPORT 2015

SteelExport of various kinds of steel sheets, plates,
bar products, and pipe and tubing products;
Export of porcelain enamel steel sheets
Export of stainless steel sheets and plates;
Export of alloy steel wire and bar products
Import and third country trade of ferrous raw
materials; Export and import of steel
materials and sub-materials
Incense materials; Lubricant-relatedmaterials; Fertilizer materials; Papermaking
chemicals; Synthetic rubber; Petrochemical
products
Functional food materials; Healthsupplements
Pharmaceuticals and pharmaceutical andagrichemical intermediates; Pharmaceuticalingredients
Crude oil; Jet fuel oil; Gasoline; Kerosene;
Diesel oil; Fuel oil (bunker A and C);
Lubricant oil and additives for industrial andautomobile use
LPG (propane, butane, autogas)
Heat reflective paint; Carbon credit trading

Materials

Overseas Trading of Iron
and SteelOverseas Trading ofSpecialty Steel
Domestic and Overseas
Trading of Full Range ofSteel Products
Functional Chemicals

Healthcare
Life Science

Crude Oil, Petroleum
Products

Plant

LPG
Development of EnvironmentRelated Materials and New
Technologies
PlantsCargo Vessels

ODA

Main Business

Products

Motor Vehicles
and Parts

Motorcycle and automobile parts; Construction machinery;
Power products (general purpose engines, etc.); Industrial
vehicles; Completed four-wheel automobiles

Aerospace

Aircraft; Helicopters; Aircraft components and parts; Aircraft
rotable parts; Small satellites; Space products; Night vision
goggles

KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information

Motor Vehicles & Aerospace
M

CSR and Corporate Governance

Machine Tools and Industrial
Machinery
Electric Power Cable
Projects

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

Review of Operations

Products

Special Feature:
Realizing VISION-130

Main Business

Kanematsu’s Progress andStrengths

Steel, Materials & Plant

21

Electronics & Devices Division
Net Sales/Operating Income(¥ billion)
12.0

400.0

9.9
300.0

200.0

10.5
300.0

8.3

7.8

236.8

277.3

6.0

3.0

100.0

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

Division Composition
The Electronics & Devices Division can be broadly divided
into three business areas: 1. electronic devices and materials, 2. semiconductor components and equipment, and 3.
ICT and mobile solutions. We are building robust sales networks for these business areas in and outside Japan. In
addition to our longstanding business in the procurement
and sale of hardware components related to electronic
devices, mainly for consumer use, we provide services
meeting a wide range of customer needs through our network solutions and mobile solutions businesses, which havebeen growing in recent years.

Division Initiatives and Policy under
VISION-130 Based on Market Analysis
As the functionality of mobile phones and other mobile
devices rises, the development of systems for embedding
data transmission and inter-device control functions in avariety of items is also moving forward. In addition to the
expanding transmission capabilities of such devices as PCs
and smartphones, we believe that the growing use ofcloud-based big data presents new business opportunities.
To take advantage of such opportunities, the Electronics &Devices Division has assumed a policy of pursuing businesstie-ups, capital alliances, business acquisitions, and R&D
investment in order to achieve the goals of 1. securing
added value, 2. scale expansion, and 3. improving quality.

Evaluation of Progress in the First Year of
VISION-130
In December 2014, we made Kanematsu-NNK Corp. a consolidated subsidiary and began joint operations in the security systems field, including the security camera business.
Building on core camera technologies, Kanematsu is focus-

22

KANEMATSU ANNUAL REPORT 2015

9.0

276.5

0

0

FY2013
Net Sales (left scale)

FY2014FY2015FY2016(Forecast)

Operating Income (right scale)ing on image processing devices, components and materials, and information processing. To augment its existing
business in the area of high-resolution micro-lens units for
portable devices, the company has set its sights on marketing security cameras and systems as well as services, including image and information processing, with an eye toexpanding the camera market. Aiming to sustainably maintain and develop the enterprise value of the Group, inMarch 2015 Kanematsu Electronics Ltd. made Nippon
Office Systems Ltd. a wholly owned subsidiary. In addition,
we entered a capital and business alliance with Nippon
Manufacturing Service Corporation, which operates anelectronics manufacturing service (EMS) business as well as
contracting and human resource dispatch businesses forthe manufacturing industry. Together, we have launched ajoint business leveraging Nippon Manufacturing Service’s
EMS functions, including design and production. To augment our existing businesses involved in sales of electronics
components and modules, we are using the added value of
EMS services, which include production and quality management, to meet customers’ various needs related to
product development.

Strategies to Realize VISION-130
In addition to visible changes, such as those evidenced bystatistics, we are seeing changes at deeper, less visible levels, such as in design concepts. We are approaching thesechanges as business opportunities and working to turnthem into new businesses. For example, until now machinery and tools were designed for human operators, but weare now seeing a rise in designs for sensor-driven machines
capable of autonomous decision making and operation.
We are working hard to develop the sensing devices andmodules that are indispensible to such systems.

Kanematsu Advanced Materials
Established

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

Special Feature:
Realizing VISION-130

Electronic Components and Materials
We offer a wide array of electronic components and electronic materials. We
provide total support for materials of the key components of semiconductors, LCDs, cameras, and batteries that areused in PCs, smartphones, tablets, and otherproducts. In addition, we provide solutions
such as LEDs and photovoltaic modules forenvironment-related, automotive, and amusement businesses.

Review of Operations

Kanematsu Advanced Materials Corp. was establishedin April 2014 by spinning off a part of the Electronics &Devices Division. The company offers the just-in-time
supply of components and materials for electronics,
mainly vehicle equipment. Services include the usual
procurement, storage, and delivery of components
along with the capability to process parts and materials, helping to increase added value for customers. As
an independent company, Kanematsu Advanced
Materials is now better set up to accumulate technologies and expertise while developing organizations,human resources, technologies, and infrastructure thatare streamlined and optimized for the vehicle equipment business.
Furthermore, the Group has established locations in
China and the United States as subsidiaries. It is working to expand automotive-related businesses in the
United States, Mexico, and, going forward, Europe aswell as Central and South America.

Kanematsu’s Progress andStrengths

TopicsThis segment handles a broad array of products, ranging fromelectronics-related materials to parts and equipment. It also
operates mobile solutions, ICT solutions and other businesses.
In addition, this segment focuses on original equipment manufacturing (OEM) and original design manufacturing (ODM)
businesses, supporting customers undertaking global expansion with extensive electronics technologies and know-how.

Industrial Electronics

Semiconductor Equipment

Financial Section andCompany Information

This segment mainly deals in semiconductors and LCD manufacturing equipment and has a wide range of product lines as well as domestic and overseas support structures. Kanematsu discovers promising cutting-edge
technologies developed by Japanese and overseas manufacturers. In partnership with these manufacturers, we commercialize these technologies as
unique products and develop them into defacto industry standards that meet the needsof customers. Our system, which is capable ofresponding to large numbers of requests, iscreating stronger relationships of trust withcustomers.

CSR and Corporate Governance

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

ICT/Mobile Solutions
As ICT solutions, we provide one-stop delivery and consulting services
that extend to the design, construction, installation, maintenance, andoperation of clients’ information systems. As for mobile solutions, we sellmobile communication devices, including smartphones, nationwide as a
primary distributor for communications carriers. We also provide services for clients’
information systems.

KANEMATSU ANNUAL REPORT 201523

Foods & Grain Division
Net Sales/Operating Income(¥ billion)
400.0

4.0

3.5
3.2
300.0

309.0

307.7
340.0

3.0

287.9
2.1
200.0

1.9

2.0

100.0

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

Division Composition
In April 2013, to facilitate the achievement of global development in the area of foods and grain, a priority measure,and to optimize the use of its strengths, the Group merged
the Feedstuff Division, which handled such products as
grain and animal feedstuff, and the Foods Division, whichhandled such products as processed foods and edible animal products. Today, the Foods & Grain Division created bythis reorganization provides a wide range of goods and services related to food for human and pet consumption,
spanning everything from grain, agricultural products, meatand marine products, ingredients for desserts, alcoholic andnon-alcoholic beverages, frozen foods, and processed foods
to animal feedstuff and fertilizer.

Division Initiatives and Policy under
VISION-130 Based on Market Analysis
In the food segment, we are reinforcing the supply andsales systems of existing Group businesses that deal withmass retailers and the restaurant and food service industries. We are also working to increase our trading volume
both in and outside Japan, particularly in emerging Asian
countries where economic growth is driving rapid changes
in food culture. To this end, we are developing one-stop
services encompassing proposals, manufacturing, and supply while building value chain infrastructure. In the foodstuff and grain business, we are particularly focused on
reinforcing upstream frameworks in our areas of strength,
including feedstuff materials and non-genetically modified
soybeans. At the same time, we are striving to ensure thestable supply of animal feedstuff and grains, expand overseas sales channels, and build business platforms in linewith the evolving food culture of Asia.

24

KANEMATSU ANNUAL REPORT 2015

1.0

0

0

FY2013
Net Sales (left scale)

FY2014FY2015FY2016(Forecast)

Operating Income (right scale)

Evaluation of Progress in the First Year of
VISION-130
Indonesia, a nation with a population of over 250 million,
boasts a rapidly growing economy, and its middle class is
expected to see continued growth. Although the country’s foodculture remains relatively traditional, it has begun to shift towardeating for enjoyment. In response to this shift and in light ofgrowing social diversity, we have partially financed the firstJapanese-Indonesian joint venture to manufacture fruit jelly.
In Japan, to further reinforce the value chains serving our
pet-related businesses, we have acquired stakes in wholesalers, seeking synergies with the pet food manufacturing businesses run by our subsidiaries. By building an integrated
operational framework extending from material procurement
to manufacturing and sales and combining this frameworkwith our accumulated experience, we will meet needs not justin Japan, but overseas as well, particularly in Southeast Asia.

Strategies to Realize VISION-130
We are working to maximize the comprehensive strengths of theFoods & Grain Division group and become more deeply involvedin markets. In and outside Japan, we seek to build “glocal” value
chains, that is, we seek to operate from a global perspective while
promoting locally oriented, hands-on approaches that meet theneeds of producers and suppliers and maintaining sales channels
spanning upstream to downstream operations. Through our continuous evolution, business creation-oriented business model, andwith a commitment to manufacturing based on the development
and proposal of high-value-added products, we aim to realize thejoy of connecting the producer with the consumer, always putting the customer first.
Furthermore, by strengthening our Food Safety
Management System and delivering even safer, more secure
products, we hope to contribute to local communities
around the world by enriching dietary habits and raising
the quality of life.

Topics

Enriching Dietary Habits in Asia:
Eating for Enjoyment

Meat and Marine Products

Grain, Food Soybeans, Oilseeds

Feedstuff

Processed Agricultural Products
Italian-made pasta and olive oil are used in the foodservice industry, such as in restaurants, processed into frozen pasta, and used as ingredients for ready-made meals, such asdeli products for use in bagged and boxed lunches. We also
sell French frozen bread dough and pie dough to such foodservice providers as bakeries and pastry shops. Oats and barleyare also products of focus as ingredients for cereals.

Financial Section andCompany Information

As an industry pioneer, we have built an integrated business, from the import of raw
materials to mixed feed production and sales. With the establishment of a costadvantage through rigorous cost management, we have developed high-value-addedand differentiated products that meet customers’ needs. In response to the increasing
move toward dairy mega farms, we have formed alliances with agricultural corporations and through our own efforts thus created demand formixed feed and feed crops. Further, as a leading company
in this field, we are boosting the development of affiliatedplants overseas and promoting the vertical integration of
the feedstuff business.

CSR and Corporate GovernanceIn the grain business, we sell an assortment of grain, including rice, wheat, and corn,
primarily in Japan and Asia. Notably, we handle one of the industry’s largest tradevolumes of corn for grits. Kanematsu contributes to stable food supply in Japanthrough its ownership of grain silos in Kashima and Moji.
The food soybean business operates a soybean sorting plant in the U.S. state of
Ohio and has achieved integrated traceability, from agricultural fields to the customer, through seed development and direct farming contracts with farms. Kanematsumeets the various needs for edible soybeans through its
supply of safe and secure non-genetically modified (nonGMO) soybean brands in Japan and overseas.
Kanematsu also sells oilseeds that are subject to integrated traceability management starting at the farm.

Review of Operations

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

Special Feature:
Realizing VISION-130

To shift our thinking from the perspective of a trading company to that of a manufacturer, better integrate with the local culture, and meet the needs ofIndonesia’s growing food service sector, we launched
P.T. Kanemory Food Service, a joint venture withIndonesia’s Cimory Group that is engaged in foodprocessing and central kitchen operations.
Kanemory Food Service proposes and develops
products in line with the needs of the food service
sector and is capable of simultaneously producing
and supplying a wide variety of products through its
central kitchen system. The company is rolling out
delicatessen items, boxed lunches, sweets, and otherproducts. This company can also accommodate halalrequirements, a crucial consideration for Muslim customers.
Using operational and other know-how cultivated in Japan’s food service market, Kanematsu provides support for Japanese companies operating inIndonesia and strives to contribute to the development of food culture there and throughout Asia bybringing Japanese-quality foods to the tables of theregion’s four billion residents.

Foods
In the areas of processed fruits and prepared foods, with sales centered on imported
foodstuff for restaurants, ready-made meals, and retail markets, we established at an
early stage a joint-venture plant for sorting and processing, built an integrated production management system covering everything from procurement to manufacturing, and provided high-quality, safe food. For food and beverages, such asconfectionery ingredients, coffee, and wine, we inspect the farms and factory conditions of production areas throughout the world to selectour business partners, and for agricultural products wehave also developed new production areas. For readycooked foods, we have set up plants equipped with central
kitchens at overseas locations.

Kanematsu’s Progress andStrengths

Committed to safe, secure food, this segment works to ensure stable supplies of a wide range of foods, including high value-added
items, like grains, raw oil and fat materials, feedstuffs, and marine
products, through an integrated supply system spanning raw material procurement through finished product processing.

Pet Products and Groceries
As an all-rounder in the pet business, we develop, import, and sell private- and storebrand pet food, snacks, and other products not only for cats and dogs, but also birds,
fish, and small animals. We also provide domestic pet food
manufacturers with pet products and raw materials.
Furthermore, we are globally expanding our business,
including by exporting major Japanese pet food manufacturer’s goods to Asian countries and through third-country
trading.
KANEMATSU ANNUAL REPORT 201525

Steel, Materials & Plant Division
Net Sales/Operating Income(¥ billion)
500.0

468.8
434.2

400.0

467.8

480.0

8.1

10.0

8.0

7.3

7.0
6.0

300.0

5.1

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

Division Composition
The Steel, Materials & Plant Division was launched in April
2013, integrating three divisions that, until then, had operated independently. By gathering experts in the fields ofsteel, materials (centered mainly on functional chemicals
and energy), and plant to share information and insight, we
believe that we can generate substantial synergies.
The iron and steel business, for example, is particularly
focused on the key areas of automobiles, the environment,
and energy, and includes the oilfield tubing business andthe specialty steel business for petrochemical plants, which
supplies chimney desulfurization facilities and other products. These businesses are closely linked to the materials
and plant businesses.

Division Initiatives and Policy under
VISION-130 Based on Market Analysis
As mentioned above, in the iron and steel business, we arefocusing on the three key areas of automobiles, the environment, and energy, as these areas constitute growthbusinesses that support global industry and are fields inwhich Kanematsu has longstanding strengths. In our business approach, rather than toil in areas we are not strong injust for the sake of broadening our scope, we choose tofocus on deeply developing areas of strength. Thus, in thefunctional chemicals business, we are continuing to focus
on certain niche markets in addition to concentrating
efforts on the pharmaceutical business, targeting the growing needs presented by Japan’s low birth rate and aging
population. In the energy business, we are working to optimize high-value-added transactions that make use ofGroup-owned tank facilities and to reinforce the distribution sales business. In the plant business, we are steadilybuilding a track record in wind-power generation and otheraspects of the renewable energy business, an area of
26

KANEMATSU ANNUAL REPORT 2015

200.0

4.0

100.0

2.0

0

0

FY2013
Net Sales (left scale)

FY2014FY2015FY2016(Forecast)

Operating Income (right scale)strength, as well as the Official Development Assistance(ODA) business, including that involving grants and yenloans from the Japanese government.

Evaluation of Progress in the First Year of
VISION-130
A year has passed since the announcement of VISION-130. In
fiscal 2015, crude oil prices dropped, somewhat impacting ourpetroleum product and oilfield tubing businesses. However,steel material exports to Asia expanded, and the steel businessas a whole, including sales of specialty steel for automobiles
and petrochemical facilities, was firm. In the materials business, the pharmaceutical and agricultural intermediate business saw solid growth. The plant business, meanwhile,
received a significant order for a wind-power generation project in the Philippines. As a result, I think the segment as awhole got off to a solid start.

Strategies to Realize VISION-130
To achieve the goals of VISION-130, we must deepen coordination with subsidiaries that possess high levels of expertise in their respective fields of steel, materials, and plant toraise the comprehensive strength of the division higher
than ever.
We are therefore aiming to maximize division profit,
continuing to focus on the division’s policies of: 1. Further
development and horizontal expansion in our areas ofstrength, 2. Aggressively shifting management resources
overseas, 3. Creating high-value-added businesses, and 4.
Pursuing synergies with Group companies.

New Initiatives in Businesses Related to
the Global Environment

Steel
Kanematsu is expanding its efforts in growth markets, including North
America, Asia, and China. We are developing business in cooperation withJapan’s steel industry through the export of steel products and the import ofsteel raw materials. We seek to further open up new markets and build highvalue-added businesses.

KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information

Plant
We are pursuing project-forming businesses, full-package petrochemicalplants that cover everything from raw material procurement to productsales, and the growing renewable energy-related businesses while focusing
on direct marketing-related businesses and on our business and geographic
areas of expertise.

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

Review of Operations

Functional Chemicals and Energy

Special Feature:
Realizing VISION-130

In fiscal 2015, the Steel, Materials & Plant Division
established a Global Environmental Business Team.
The new team mainly works to put together andcoordinate various projects for developing and emerging
nations based on the Japanese government’s joint crediting mechanism (JCM). These include providing highvalue-added energy saving technologies and equipment
to help reduce and absorb greenhouse gases, and, inthe future, possibly carbon credit trading.
Previously, departments in charge of energy, plant,
and ships worked separately. The Global Environmental
Business Team was established to facilitate communication among these disparate departments and thereby
help to transform their individual projects into
Groupwide initiatives.
In fiscal 2014, the Plant & Ships Department
received an order from a Filipino independent power
supplier for the construction of a wind-power plant in
San Lorenzo and the laying and covering of submarine
cables. These projects represent exactly the type ofbusiness model that the Global Environmental Business
Team aims for. Going forward, through various
environment-related businesses in and outside Japan,
the team will do its utmost to contribute to society
while building a stable earnings base.

Kanematsu’s Progress andStrengths

TopicsThis segment engages in domestic and export transactions
covering the full range of iron and steel products, energy solutions, functional chemicals trading, and industrial plant andinfrastructure facilities. While this segment handles a wide
variety of operations, in each business area we boast highly
specialized staff who uphold our commitment to supplying
and developing high-value-added products.

27

Motor Vehicles & Aerospace Division
Net Sales/Operating Income(¥ billion)
4.0

80.0

65.0
59.7

60.0

50.7

54.5

3.0

3.0
2.8
2.0

40.0

1.4

1.5
1.0

20.0

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

Division Composition
The Motor Vehicles & Aerospace Division was formed in
April 2013 as a combination of the existing Electronics & IT,
Iron & Steel, and Machinery & Plant divisions’ business units
related to automobiles and aerospace, areas of strength for
the Group. By integrating and concentrating the Group’s
automobile-related businesses, for which global demand is
expected to grow, and adding to these the aerospace business, we aim to share information related to cutting-edge
technologies in the field of transport vehicles and thus further
enhance sales capabilities. In motorcycle- and automobilerelated businesses, we are working to strengthen andexpand our supply chains and customer base. At the sametime, we aim to facilitate the sharing of cutting-edge aerospace technologies with operations in the motorcycle andautomotive fields to create new businesses in such areas as
new materials and environmentally friendly products. Since
the launch of this division, we have been improving ourglobal framework for advancing businesses around theworld targeting global motorization. We will continue toreinforce our roles and functions to better serve our customers and business partners.

Division Initiatives and Policy under
VISION-130 Based on Market Analysis
Our basic policies consist of: 1. Maximize synergies resulting from reorganization, 2. Improve and strengthen our
global business structure, 3. Maximize the role of logistics
transactions, 4. Build businesses outside of brokerage.
Under these policies, in the automobile part business,
we are building a global support framework to meet ourcustomers’ needs, as global production of automobiles is
projected to grow from 88 million vehicles in 2014 to 112
million in 2020. In the aerospace business, the rotable parts
market is expected to remain firm, and we will horizontally
28

KANEMATSU ANNUAL REPORT 2015

00

FY2013
Net Sales (left scale)

FY2014FY2015FY2016(Forecast)

Operating Income (right scale)

expand our existing operations in this market. At the sametime, we will reinforce businesses in the area of space,which is expected to grow going forward.

Evaluation of Progress in the First Year of
VISION-130
We have expanded the global framework of our motorcycle
and automobile businesses. Specifically, in April 2014, weestablished locations in Silao, Mexico, and Chongqing, China,
and are working to build a framework to support precise
responsiveness at the local level and thus develop and realize
new projects. To reinforce the aircraft rotable part business, atoverseas business company KG Aircraft Rotables, in addition
to components for the Boeing B737, we have begun handling
Airbus A320 components.

Strategies to Realize VISION-130
In motor vehicle and parts-related businesses, we are continuing to promote the longstanding initiatives of building
and enhancing our global framework, improving our technological adaptability, and strengthening logistics, quality
management, and testing functions. At the same time, we
are working to develop new projects related to safety, theenvironment, and comfort, enter manufacturing businesses, and build new, joint businesses with our key business
partners. Furthermore, we are considering investment in
new business models related to connected cars in anticipation of the arrival of the age of networked automobiles. In
the aerospace businesses, we are focusing on sales ofBombardier Aerospace’s new C Series airliners and expanding the range of aircraft covered by our aircraft rotable partbusinesses with an eye toward expansion outside ofEurope. We are also now focusing on the space business,
which is expected to see major growth going forward.

Entering the Growing Aircraft Rotable
Parts Market

Motor Vehicles and Parts
Strengthening its sales force as well as sourcing and technical development
capabilities, Kanematsu is expanding its businesses handling OEM components for vehicles. We operate global businesses through our worldwide networks. Focusing on motorcycle and automobile parts, Kanematsu willcontinuously explore and propose new high-value-added materials and products for which future demand is expected while establishing new businessfoundations through aggressive business investment.

Special Feature:
Realizing VISION-130
Review of Operations

KG Aircraft Rotables operates aircraft rotable partexchange and repair as well as component sales businesses in Europe. In 2014, this company began dealingin Airbus A320 components in addition to its existing
business in Boeing B737 components. The aircraft market is expected to see global growth going forward,
with the number of aircraft in operation roughly doubling over the next 20 years. Alongside this growth,exchange demand for rotable parts used in aircraft
maintenance is also expected to increase. KG Aircraft
Rotables will draw on its accumulated know-how toprovide 24-hour year-round supply support to meetcustomers’ wide-ranging needs while considering
expansion from Europe into the North American andAsian markets. KG Aircraft Rotables is furthermore
considering entry into the maintenance, repair andoverhaul (MRO) business, which is expected to generate synergies with the aircraft rotable parts business.

Kanematsu’s Progress andStrengths

TopicsSpecializing in transportation equipment, this segment operates global motorcycle and automobile parts businesses, leveraging the Group’s superb expertise and extensive information
resources. The segment also handles vehicles and fuselages forthe automobile, construction machinery, industrial vehicle, aircraft, and satellite industries.

CSR and Corporate Governance

Aerospace
Kanematsu is working to expand its businesses in the areas of aircraft, helicopters, and related equipment and parts for government agencies. Also
Kanematsu is focusing on sales to commercial airlines as the sales representative of Bombardier Aerospace for its new C Series commercial aircraft. In
addition, we are working to expand the aircraft rotable parts business, possibly through investment. In the space business, Kanematsu will focus onsales of small satellites and peripheral equipment.

Financial Section andCompany Information

KANEMATSU ANNUAL REPORT 2015

29

CSR (Corporate Social Responsibility)
Kanematsu’s Approach to CSR
The Kanematsu Group defines the pioneering spirit as fostered by our predecessors along with the wisest use of our creative imagination and ingenuity, conduct abiding by the rules of the organization, and fulfilling our corporate social
responsibilities by engaging in sound, flourishing businesses as its Corporate Principles. The Group conducts its business inaccordance with these principles and the Company’s Code of Conduct. Based on the Company’s Corporate Principles,
Kanematsu’s Code of Conduct serves as a set of standards for all of Kanematsu’s corporate activities.
The Kanematsu Group offers a wide range of products and services in Japan and around the world. The Group thus
regards creating shared value while meeting the needs and expectations of its many stakeholders, including shareholders,investors, business partners, local communities, and employees, as its corporate social responsibility.
Kanematsu’s Code of Conduct
1. Origin of corporate
activities
2. Fair transactions

We became involved in corporate activities to serve our various stakeholders by providing socially valuable goods andservices in accordance with the aim of our founder to realize a sustainable society.
Our corporate activities are conducted in compliance with laws and ordinances in Japan and abroad, international rules
and practices, and internal rules, as well as with social common sense.
3. Information manageInformation is properly managed to protect personal information, customer information and intellectual property, and isdisclosed in a timely and proper manner to establish mutual trust between Kanematsu and the community and mainment & disclosure
tain 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 theWe exercise sufficient consideration in our corporate activities to maintain a sound global environment for sustainablegrowth.
global environment
6. Social contribution
We are aware of the importance of our social responsibility as good corporate citizens, and proactively undertake social
contribution activities. Employee activities to contribute to community development and to comfortable and safe living
are supported.

CSR Framework
Kanematsu has established a CSR Promotion Office within its Personnel & General Affairs Department as well as a
Companywide CSR Committee. These bodies formulate policies and reinforce initiatives for the Group as necessary toaddress various CSR-related issues, including social contribution and environmental preservation.

CSR through Our Business Activities
The Kanematsu Group engages in CSR initiatives in the course of its ordinary business activities. In and outside Japan, we
focus on expanding businesses that make best use of our capabilities as a trading company to sustain and improve theenvironment. We also strive to conduct business with due consideration given to biodiversity.

CSR Procurement• Does the supplier conduct its business activities with due
consideration given to the environment?
• Does it conduct its business activities with due consideration
given to human rights? (Respecting bans on child labor andforced labor, etc.)• What is its compliance record like?
• Does it meet the latest quality standards? (Usage restrictions
on harmful substances that go beyond legal requirements)

30

KANEMATSU ANNUAL REPORT 2015

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

Procurement of raw materials
by Kanematsu

Supply chain

CSR procurement refers to the practice of a company requiring
its suppliers of materials, parts, and products to implement
CSR initiatives in addition to meeting such everyday requirements as consistently high quality and speed. CSR procurement
is growing in importance year by year as awareness of CSR
increases among companies and the general public.
We have established systems to promote CSR activities,
including CSR Action Guidelines for Supply Chains, to meet the
CSR procurement requirements of our business partners. The
requests made by business partners as part of CSR procurement activities touch on a wide variety of concerns, including
employee relations, health and safety, environmental activities,
CSR management, and corporate ethics. Areas of concern
include the following.

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

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

Sales by customers

End users

CSR procurement
required ofKanematsu bycustomers(CSR practices)Environmental Businesses
Kanematsu is committed to the trading of sustainable coffee.
“Sustainable coffee” refers broadly to coffee produced and distributed in ways that are sustainable in terms of their effect on
the natural environment and people’s livelihoods, thus helping tomeet the responsibility of the current generation to future generations. Kanematsu was among the first to focus its attention
on this field and strives to support producers and protect theenvironment by importing and marketing coffee beans that havereceived accreditation from the Rainforest Alliance, an international environmental body that focuses on tropical rainforest
protection.

Review of Operations

Human Resource Initiatives

Training in Business Plan Formulation

Overseas Dispatch Training System

Kanematsu aims to improve corporate value by further developing areas of strength, making new investments for businesscreation, and taking on other new challenges. To this end, we
have created training courses covering business plan formulation to impart the skills necessary for drafting roadmaps to thecreation and successful launch of new businesses.

Kanematsu operates an overseas training system for employees
in their first five years with the Company. Participants are dispatched to overseas subsidiaries, representative offices, andbusiness corporations to experience local work- and lifestyles foraround six months. This system exposes employees to diverse
values and provides the experiences, insights, and knowledge
that members of a globally operating trading company need.

Keigo Suzuki

Hanae Terui

Currently stationed at AZ-Star Co., Ltd.

Electronic Components & Semiconductor
Department No. 1 Division 2

Through this training, I learned basic
skills important for creating new businesses. These included the ability to formulate a business plan, including theperspective and methodology to makethat plan strong, as well as ways of presenting plans so that they
resonate with an audience, particularly decision makers. The training
also provided valuable opportunities to expand my outlook throughdiscussions and debates with employees of different backgrounds
and levels of experience. This training has been very useful in mycurrent position working with business investment funds.

Financial Section andCompany Information

Overseas Dispatch Training System
Trainee’s Perspective

CSR and Corporate Governance

Human resources are a vital asset for Kanematsu, and retaining and training human resources is important for theCompany’s growth. Kanematsu maintains systems to promote work-life balance, including child care support and familycare support systems, seeking to create workplaces that are comfortable and rewarding for employees. Furthermore, we
focus considerable effort on human resource development, an indispensible part of Kanematsu’s growth.

Training in Business Plan Formulation
Trainee’s Perspective

Special Feature:
Realizing VISION-130

Sustainable Coffee

Kanematsu’s renewable energy businesses consist of the construction of and supply of facilities for geothermal, solar, andwind-power generation plants. The Company is steadily building
a strong track record in these businesses, mainly in Indonesia
and the Philippines. Compared with fossil fuels, renewable energy sources produce much less CO2, a major cause of global
warming, and therefore have the significant merit of being better for the global environment. At the same time, renewableenergy sources help to meet emerging needs to reduce dependence on imported energy. Going forward, Kanematsu will continue to contribute to the development of clean energy bysupplying renewable energy generation facilities.

Kanematsu’s Progress andStrengths

Renewable Energy

During my overseas training in Singapore,
I learned a great deal, more than justknowledge and know-how, from mybosses and more senior employees who
were stationed there. I think that coming to understand the importance of thinking about things from a comprehensive, objective perspective was particularly valuable. Being in a new environment
helped me view myself objectively, too, and I realized shortcomings
and weaknesses that I wasn’t aware of before. I hope to continue toimprove myself as a trading company employee and thus express mygratitude for the support and help I have received through my work.

KANEMATSU ANNUAL REPORT 201531

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

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

Refreshment Day
Child Care Support
In addition to comprehensive maternity and childcare leave
arrangements, we allow mothers to work short hours and flexitime after taking leave for pregnancy or care reasons, so they
can continue to care for growing children after rejoining theworkforce.
Many mothers take childcare leave, and when they return
to work, they generally go to the same divisions in which they
worked before. These measures have been taken to create apleasant working environment.

Number of Employees Taking Childcare Leave
FY2008FY2009FY2010FY2011

6

4

10

9

FY2012FY2013

FY2014FY2015

3

4

14

10

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

General Employer Action Plan
In December 2010, Kanematsu was awarded the “Kurumin” certification of support
for nurturing of the next generation by the
Ministry of Health, Labour and Welfare’s
Tokyo Labor Bureau.
In October 2013, we formulated ourthird General Employer Action Plan. Based on this plan, we aretaking measures to fully harness employee potential by encouraging a better balance between work and childcare duties andby creating a more pleasant workplace for all.

Environmental Initiatives
Kanematsu is engaged in environmental businesses in Japan and overseas that help protect and improve the global environment. The global Group also continuously works to improve its ISO 14001-based environmental management system.
By effectively operating this system, the Group is reducing electricity and paper consumption, promoting comprehensive
waste sorting and reduction, and helping to reduce CO2 emissions. Through these efforts, the Group strives to contributeto the creation of a low-carbon, recycling-oriented society.
Kanematsu Corporation: Certified Since 2004
Tokyo Head Office and All Domestic Branches (Osaka Branch, Midosuji Office,Hokkaido Branch, Nagoya Branch, Kobe Main Office, Kyushu Branch, Sendai Office)ISO 14001
Certification in the
Kanematsu GroupElectronics & Devices
Kanematsu-NNKCorp.

Certified since 2006

Kanematsu
Electronics Ltd.

Certified since 2007

Kanematsu
Communications Ltd.
Tokyo Head Office

Certified since 2015

Expanding
ISO 14001-based
environmental
management systems

Foods & Grain
Kanematsu
Agritec Co., Ltd.

Steel, Materials & Plant
Kanematsu
Petroleum Corp.

Certified since 2005

Kanematsu
Wellness Corp.

Certified since 2005

Kanematsu
Chemicals Corp.

Certified since 2005

Kanematsu Yuso Co., Ltd.

Certified since 2005

Kanematsu KGK Corp.

Certified since 2005

Certified since 2013

Other
Hokushin Co., Ltd.

32

KANEMATSU ANNUAL REPORT 2015

Certified since 2005

The Kanematsu Foundation for the Research of Foreign Trade
In 1993, the Kanematsu Fellowship—a Kanematsu postgraduate research scholarship—was jointly established by the
Research Institute for Economics and Business Administration of
Kobe University, the Kanematsu Foundation for the Research of
Foreign Trade, and Kanematsu Corporation. Every year, graduate
students are invited to submit their dissertations to apply for the
fellowship. The Kanematsu Fellowship thus provides graduate
students in the fields of economics, management, and accounting
across Japan with opportunities to win a research fellowship and topresent their research.

Reconstruction Support Activities

Caring for a sacred laurel tree on the grounds of a local shrine

Mobile library Yamabiko-go donated to Rikuzentakata City

CSR and Corporate Governancelibrary vehicle christened Yamabiko-go to the city of Rikuzentakata
to contribute to the development of the city’s children. The interior of Yamabiko-go is brightly illuminated by LED lamps, and its
shelves hold approximately 900 books. The mobile library is also
equipped with a retractable awning to provide shade or shelter
from rain to facilitate its use in all weather conditions.
The Kanematsu Group is committed to volunteer activities indisaster-affected areas that address both immediate needs andlong-term issues and will continue to offer support in response to
the needs of the affected areas and their residents.

Review of Operations

After the March 2011 Great East Japan Earthquake, theKanematsu Group donated money and supplies to affected areas.
Since September of the same year, the Group has provided ongoing support for Rikuzentakata city in, Iwate, through its own volunteer program. In addition to the Company’s volunteer leavesystem, Kanematsu has a system to support employees volunteering in disaster-affected areas that includes reimbursement oftransportation and accommodation expenses for employees participating in the Company’s volunteer program.
Furthermore, in February 2015, Kanematsu donated a mobile

Special Feature:
Realizing VISION-130

The Kanematsu Foundation for the Research of Foreign Trade wasestablished in 1940 with the purpose of contributing to economic
development through support and funding for research into tradeand international economics. The Foundation is jointly operated by
the Research Institute for Economics and Business Administration of
Kobe University and Kanematsu. In the more than 70 years since its
founding, the Foundation has earned an international reputation asa top-level research institute focusing on international economics
and management and has won high acclaim in Japan and overseas
for its long list of research achievements.

Kanematsu’s Progress andStrengths

Social Contribution

Commemorative Projects Carrying on the Wishes of Our Founder

Kanematsu Memorial Hall at Kobe University

School (now Kobe University); the endowment of theKanematsu Auditorium at Hitotsubashi University; and theendowment of the Kanematsu Memorial Institute of Pathology
at Sydney Hospital in Australia (a partial endowment by
Kanematsu that is jointly funded by the Australian Government).

The Kanematsu Auditorium at Hitotsubashi
University

Financial Section andCompany Information

Among the main commemorative projects we have carried out
in accordance with the wishes of our founder Fusajiro
Kanematsu are the endowment of the Research Institute for
Economic and Business Administration (Kanematsu MemorialHall), a commerce research institute at Kobe Higher Commercial

Kanematsu Memorial Institute of Pathology,
Sydney Hospital
KANEMATSU ANNUAL REPORT 201533

Corporate Governance
Our Basic Stance on Corporate Governance
Kanematsu strives to strengthen corporate governance to increase the transparency of management and to createa more equitable, efficient, and sound company. We work to improve corporate governance with the aim of winning the support of all our stakeholders, including shareholders, customers, business partners, and employees, andincreasing our enterprise value.

System of Corporate Governance
Kanematsu is a company with an Audit & Supervisory Board. The Audit & Supervisory Board and its members act
independently to audit the performance of directors’ duties.
Of the four Audit & Supervisory Board members, three are outside members. The outside Audit & Supervisory
Board members draw on their insight and experience to offer recommendations and advice from an objective
standpoint, thus providing due outside management oversight and supervision. Furthermore, Kanematsu has
appointed multiple highly independent outside directors to strengthen and improve the effectiveness of management supervision and the transparency of decision making by the Board. The inclusion of these outside Audit &Supervisory Board members and directors is aimed at increasing the transparency of Kanematsu’s management
and creating a more equitable, efficient, and sound company.
Kanematsu is expanding its executive officer system to improve the flexibility of business execution, speed up
management decision making, and further clarify roles and responsibilities through the separation of supervisoryand executive functions.
Corporate Governance Structure
General Meeting of Shareholders
Appointment/Dismissal

Board of Directors

Appointment/
Dismissal

Appointment/Dismissal

Audit & Supervisory Board

Audit

Seven directors(including two outside directors)

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

Appointment/Dismissal/Supervision

Collaboration

Audit

President & CEO

Collaboration

Management Committee
Project Deliberation Committee
Internal Control and Compliance Committee

Internal Auditing
Department
Internal
controls

Accounting audit

Accounting Auditor

Collaboration

CSR Committee
Business Divisions/Administrative Departments, Domestic and Overseas Offices(As of June 24, 2015)

Board of Directors
The Board of Directors is made up of seven directors. The
Board decides on matters required of it as set out in law andKanematsu’s Articles of Incorporation as well as business policies
and other important matters, and oversees business execution
by directors. Two of the seven directors are outside directors toensure that the Board conducts appropriate decision making

and to further reinforce the supervision of business execution.
In principle, the Board of Directors meets once a month, withadditional meetings held as necessary. Directors are appointed
to the Board for one-year terms to allow the Board to respond
appropriately to changes in the business environment.

Management Committee
To facilitate rapid decision making and flexible management,
Kanematsu has set up a Management Committee composedof certain executive officers, including the President. The
Committee meets at least twice a month in principle. The

34

KANEMATSU ANNUAL REPORT 2015

Committee establishes basic policies for Companywide generalbusiness execution in accordance with basic policies determinedby the Board of Directors and provides instruction and guidanceon the execution of business.

Project Deliberation Committee
perspective and submits recommendations to the designated decision makers for each item before the decision must be made. In
principle, the Committee meets at least twice a month.

Audit & Supervisory Board
The Audit & Supervisory Board acts as an independent organ
to audit directors’ performance of their duties. Specifically, thefour Audit & Supervisory Board members, including three outside members, receive reports from directors and employees on

the performance of their duties as required, and attend meetings of the Board of Directors, Management Committee,
Project Deliberation Committee, Internal Control andCompliance Committee, and other important meetings.

To ensure that proper accounting records are kept and to monitor appropriate business execution, Kanematsu has
established auditing rules, in accordance with which the Internal Auditing Department conducts internal audits ofall divisions and consolidated subsidiaries.

Special Feature:
Realizing VISION-130

Internal Auditing

Kanematsu’s Progress andStrengths

The Project Deliberation Committee was established to enhance
debate and speed up decision making on important projects. The
Committee considers and discusses matters from a Companywide

Internal Control System and Risk Management System

Maintaining the Internal Control System
To comprehensively assess risks facing the Kanematsu Group,
to comply with laws and regulations relating to operational
effectiveness and efficiency and business activities, to protect
its assets, and to ensure the reliability of its financial reporting,the Kanematsu Group has built an internal control system. To
operate this system effectively and efficiently, we have alsoestablished the Internal Control and Compliance Committee. We
develop, operate, assess, and improve internal controls related
to financial reporting to ensure the correctness of the Group’sreporting in line with the internal control reporting systems
defined in the Financial Instruments and Exchange Law.

In light of the importance of corporate legal compliance, wehave set up internal control systems for the Company and theGroup as well as an Internal Control and Compliance Committee
to implement said systems, seeking to strengthen our internal
compliance system. In addition to preparing a ComplianceHandbook that covers all Group companies, we work toenhance awareness of and training on sensible behavioral
ethics. The Group also maintains a hotline system that allows
employees to directly report to or consult with the Internal
Control and Compliance Committee or an outside lawyer.

Diagram of the Kanematsu Group Compliance System
Management Committee

Reports, Consultation

Audit & Supervisory Board

Internal Control and Compliance Committee
Internal Control and Compliance Committee Members
Promotion Office: Legal & Compliance Department

Financial Section andCompany Information

Board of Directors

Instructions, Feedback

CSR and Corporate GovernanceCompliance

Review of Operations

To comprehensively assess risks facing the Kanematsu Group, to comply with laws and regulations relating tooperational effectiveness and efficiency and business activities, to protect Group assets, and to ensure the reliability of its financial reporting, the Kanematsu Group has built an internal control system, as described below.

(For items that do not have a controlling division at Kanematsu Corporation)

Business Divisions/Administrative Departments

Group Companies

Departmental Compliance Officers

Compliance Officer(Chief officers of business divisions and administrative departments)(President of Head of Location)

Directors of Kanematsu Corporation

Directors of Group companies*Sub-subsidiaries report through their immediate parent companies(As of June 24, 2015)
KANEMATSU ANNUAL REPORT 201535

Elimination of Antisocial Forces
One of Kanematsu’s compliance commitments is to take a firm
stand against and eschew all relationships with antisocial forces.
To promote the elimination of antisocial forces, Kanematsu
belongs to the Tokyo Metropolitan Police Department’s Special
Violence Prevention Countermeasures Association, cooperatingclosely on a regular basis by sharing information. The Personnel& General Affairs Department is designated to coordinate
Companywide response and information gathering to address
any unreasonable demands from antisocial forces, and theCompany maintains a framework for responding in coordination
with outside organizations, including the police and attorneys.

Information Management System
With regard to information management, we have establishedstandards for the custody, retention and disposal of accounting
records, balance sheets, agreements and contracts concerning
the basic rights and obligations of Kanematsu, certificates
related to properties, and other similar documents. As information is a valuable corporate asset, we have also formulated,
and work to reinforce, rules on information security management with the aim of protecting and managing personal dataand other information in line with compliance requirements.

With regard to the security of information systems, theGroup has established information security management rules
aimed at preventing leaks and losses of important informationand established standardized rules covering the use of PCs,
networks, and e-mail to protect corporate and personal information. Furthermore, the Group continually reviews its systems
framework aimed at enhancing security and operates andmaintains said framework to ensure that security is maintained
at necessary and appropriate levels.

Risk Management
With respect to business risks that may affect our operations,such as market risk, credit risk, investment risk, or country risk,
Kanematsu has designated departments responsible for eachtype of risk, established internal regulations and detailed
enforcement regulations, and prepared operational guidelines.
We furthermore use training and other means to ensure thorough awareness of risk management. The Company also sets up
cross-departmental committees as necessary to control risks.
To comprehensively assess risks facing the KanematsuGroup, promote operational effectiveness and efficiency, andensure the reliability of financial reporting, we have establishedthe Internal Control and Compliance Committee as aGroupwide organization. We have established an approval
request system based on designated levels of authority tominimize business risks. The Project Deliberation Committee
considers important investments and loans by comprehensively
examining relevant risks.
To address the risk of crises related to the occurrence ofmajor events, such as natural disasters, we have put in place asystem, including specific rules and policies of action, to ensure
the appropriate management of the Group at such extraordinary times.

Groupwide Activities
Group company presidents meet twice a year and at other times as necessary to share information on Groupwide
business activities. These meetings are aimed at ensuring mutual understanding and awareness with regard to corporate governance issues.

Disclosure
We promote proper and transparent management by promptly and accurately disclosing important corporate
information about management to shareholders and all other stakeholders, institutional investors, analysts, andthe media. In addition to timely disclosure to financial instruments exchanges, we disclose information throughour website and engage actively in IR activities, including regular briefings for institutional investors and analysts
and meetings.

36

KANEMATSU ANNUAL REPORT 2015

Corporate Officers(As of June 24, 2015)

Masao Hasegawa

President & CEO

Executive Vice President

Special Feature:
Realizing VISION-130

Masayuki Shimojima

Kanematsu’s Progress andStrengths

Directors and Audit & Supervisory Board Members

Nobuyoshi Sakuyama

Yutaka Hirai

Seiichi Katayama

Director

Director

Director

Director

Fumihiko Nashimoto

Sohei Ogawa

Yonosuke Yamada

Tsukasa Miyachi

Audit & Supervisory
Board Member (full-time)

Audit & Supervisory
Board Member (full-time)

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member

1. Mr. Yutaka Hirai and Mr. Seiichi Katayama are Outside Directors.
2. Mr. Sohei Ogawa, Mr. Yonosuke Yamada and Mr. Tsukasa Miyachi are Outside Audit & Supervisory Board Members.
3. Mr. Yutaka Hirai, Mr. Seiichi Katayama, Mr. Yonosuke Yamada and Tsukasa Miyachi are Independent Officers, as defined in the Securities Listing Regulations.

CSR and Corporate GovernanceKaoru Tanigawa

Director

Review of Operations

Takashi Gunji

Executive Officers
Masayuki Shimojima

Executive Vice President

Masao Hasegawa

Chief Officer, Supporting Area; Chief Officer, Internal Auditing

Senior Managing
Executive Officers

Takashi Gunji

Chief Officer, Steel, Materials & Plant Division, Chief Officer, Personnel and General Affairs,
General Manager, Osaka Branch; General Manager, Nagoya Branch

Kaoru Tanigawa

Chief Officer, Electronics & Devices Division, Corporate Planning

Morihiro Toida

Chief Officer, Foods & Grain Division

Tetsuya Kaneko

Chief Officer, System Planning, Traffic and Insurance

Yoshiya Miyabe

Chief Officer, Motor Vehicles & Aerospace DivisionNobuyoshi Sakuyama

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

Kazuo Shibata

Chief Officer, Credit Control

Keiichi Inaba

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

Eiji Kan

Deputy Chief Officer, Steel, Materials & Plant Division

Katsumi Morita

President, Kanematsu USA Inc.

Masayuki Hamasaki

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

Hiroyasu Hirasawa

Deputy Chief Officer, Foods & Grain Division

Managing Executive
Officers

Executive Officers

KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information

President & CEO

37

Management’s Discussion and Analysis
business also performed strongly. Furthermore, in the fiscal
year under review, Kanematsu-NNK Corp. was made a
consolidated subsidiary, expanding the division’s businessbase, mainly with its security camera business, and thus
contributing to income during the fourth quarter.
As a result, although net sales in the Electronics & Devices
Division fell ¥847 million year on year to ¥276,501 million,
operating income increased ¥2,152 million to ¥9,907 million.

Business Results
For the fiscal year ended March 31, 2015, consolidated net
sales edged up ¥2,557 million (0.2%) from the previous fiscal
year to ¥1,117,096 million. Gross profit increased ¥5,039
million (5.8%) from the previous fiscal year to ¥91,441 million.
Consolidated operating income climbed ¥2,349 million(11.9%) from the previous fiscal year to ¥22,125 million. Net
non-operating income improved ¥385 million from theprevious fiscal year, thanks primarily to an increase in equity
in earnings of affiliates and an improvement in the balanceof interest income and expenses. As a result, consolidated
ordinary income increased ¥2,735 million (13.6%) from theprevious fiscal year to ¥22,895 million. Net extraordinary
gains and losses amounted to a gain of ¥400 million, due inpart to extraordinary gains recorded as a result of making
Kanematsu-NNK Corp. a consolidated subsidiary.
As a result, income before income taxes and minority
interests climbed ¥4,219 million (22.1%) from the previous
fiscal year to ¥23,294 million. Consolidated net income
edged down ¥329 million (2.8%) from the previous fiscal
year to ¥11,470 million, due in part to an increase in tax
expenses as a result of a reversal of deferred tax assets,reflecting changes to the tax system during the fiscal year.

Foods & Grain
The meat product business was firm, supported by increasing
demand. In the foodstuff business, both grain and animal
feedstuff trading were solid. However, the food business faceddifficult conditions, including depressed individual consumption
since the 2014 consumption tax hike and the rising cost ofimports to Japan due to the depreciation of the yen.
As a result, in the Foods & Grain Division, net sales
decreased ¥1,292 million year on year to ¥307,732 million.
Operating income fell ¥166 million to ¥1,933 million.

Steel, Materials & Plant
The plant and infrastructure business received major orders
for wind power generation plants in Southeast Asia and saw
strong domestic trading in machine tools and industrial
machinery. In the iron and steel business, while sales of
specialty steel for automobiles were firm in the Americas andEurope, the mainstay oilfield tubing business was impacted
by weak demand. The energy business faced challenging
conditions, including decreased summer demand and a fallin crude oil prices.
As a result, net sales in the Steel, Materials & Plant Division
decreased ¥982 million year on year to ¥467,849 million.
Operating income decreased ¥846 million to ¥7,283 million.

Segment Information
Results for each business segment are described below.

Electronics & Devices
The electronic components and materials business as well as
the semiconductor components business performed favorably
overall. In particular, businesses related to automobiles grew
supported by expanding demand in and outside Japan. The
ICT solutions business was firm thanks to strong corporate
capital expenditure on infrastructure, and the mobile

Motor Vehicles & Aerospace
In the aerospace business, aircraft part trading was strong. The

Net Sales

Operating Income /Operating Income Ratio(Millions of yen)

(Millions of yen)(%)

(Millions of yen)

1,200,000

24,000

4.0

12,0001,114,539 1,117,096

900,000

1,006,365
936,891(%)

11,47019,77618,00018,262

18,02940

11,79922,125

21,426

1,019,232

Net Income /Net Income per Share

3.0

9,000

9,564

9,175

28.09 27.30

30

22.80
21.93

2.1
600,000

12,000300,000

6,000

1.9

2.0
1.8

1.8

2.0

6,000

1.0

3,000

0

0

6,110

20

14.60

0

0

11

12

13

14

Net sales

38

KANEMATSU ANNUAL REPORT 2015

15

11

12

Operating income

13

14

15

Operating income ratio

10

0

11
Net income

12

13

14

15

Net income per share

OtherNet sales rose ¥455 million year on year to ¥5,338 million.
Operating income fell ¥55 million to ¥169 million.

Assets, liabilities and net assets

Fundraising

Cash flows
Net cash provided by operating activities totaled ¥10,115
million (versus ¥22,384 million provided in the previous fiscal

Net Interest-Bearing Debt /Net D/E Ratio(Times)120,000

4.0

Shareholders’ Equity / Equity Ratio(Millions of yen)

(Millions of yen)(Yen)

140,000

300

40

90,101

104,612

118,73190,01290,000(%)

100,000

3.2

3.0

86,43910,500214.10225

75,000150

50,00030

71,657

96,204

Financial Section andCompany Information(Millions of yen)

Net Assets / Net Assets per Share

CSR and Corporate Governance

The Group raises funds primarily through indirect financing
based on good relations with its main banks, regional banks,
life and non-life insurers, and other financial institutions. To
secure liquidity on hand, the Group maintains ample cash
and cash equivalents and has established commitment lines
with major financial institutions. Surplus funds are flexibly
managed in highly secure short-term financial products in
response to the Company’s funding needs and financial
circumstances.
During the fiscal year under review, the Group filed ashelf registration of corporate bonds, aiming to ensure that it
can flexibly respond to funding requirements arising frombusiness development going forward and to increase its
financial stability by diversifying its available means of capitalprocurement.
To facilitate capital procurement, the Company receives
ratings from Japan Credit Rating Agency, Ltd. (JCR) and
Rating and Investment Information, Inc. (R&I). The Company’s
long-term ratings as of the end of the fiscal year underreview are BBB+ (stable) from JCR and BBB (stable) from R&I.

Review of Operations

Total assets at the end of the fiscal year under review
increased ¥30,552 million from the end of the previous fiscal
year to ¥459,011 million.
Interest-bearing debt declined ¥5,791 million from theend of the previous fiscal year to ¥136,114 million. Net
interest-bearing debt, which is interest-bearing debt minus
cash and bank deposits, decreased ¥392 million from theend of the previous fiscal year to ¥67,646 million. Net assets
stood at ¥118,731 million, up ¥22,527 million from the endof the previous fiscal year, thanks to an increase in retained
earnings as a result of the posting of net income andimprovements in foreign currency translation adjustmentsthat reflected exchange rate fluctuations. Shareholders’equity, obtained by subtracting minority interests from net
assets, increased ¥18,444 million from the end of theprevious fiscal year to ¥90,101 million.
As a result, the equity ratio improved 2.9 percentage
points from the end of the previous fiscal year to 19.6%. The
net D/E ratio stood at 0.8.

Special Feature:
Realizing VISION-130

Analysis of Financial Status

Kanematsu’s Progress andStrengthsyear), chiefly reflecting the increase in operating income
recorded. Net cash used in investing activities amounted to¥8,903 million (versus ¥1,111 million used in the previous
fiscal year), reflecting the Group’s making Kanematsu-NKK
Corp. a consolidated subsidiary and the acquisition of
additional shares of Nippon Office Systems Ltd. aimed atmaking that company a wholly owned subsidiary. Net cashused in financing activities amounted to ¥9,895 million(versus ¥9,351 million used in the previous fiscal year),reflecting the repayment of debt, among other factors.
As a result, after the effect of exchange rate changes,
cash and cash equivalents at the end of the fiscal year underreview stood at ¥67,377 million, down ¥6,171 million fromthe end of the previous fiscal year.

motor vehicles and parts business saw firm performanceoverall, particularly in motorcycle and automobile parts trading.
As a result, net sales in the Motor Vehicles & Aerospace
Division increased ¥5,224 million year on year to ¥59,675.
Operating income rose ¥1,261 million to ¥2,755 million.

170.54
68,038 67,646
60,0002.0

2.3

70,0001.6

30,0000.8

1.035,00001213

Net interest-bearing debt

14

20

39,008129.82

33,10193.16

75

25,000

0

0

8.5

13.7

9.8

10

79.07

0.9

0

19.6
16.7

55,992
49,576

11

54,51975,912

15

Net D/E ratio* Net interest-bearing debt = Interest-bearing debt –Cash and bank deposits* Net D/E ratio = Net interest-bearing debt /Shareholders’ equity

011
Net assets

12

13

14

15

Net assets per share

0

11

12

Shareholders’ equity

13

14

15

Equity ratio* Shareholders’ equity = Net assets – Minority interests* Equity ratio = Shareholders’ equity / Total assets
KANEMATSU ANNUAL REPORT 201539

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, 2015.
The Group takes all risk that it faces on a daily basis in the course of its business very seriously. Risk control
is undertaken 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

Price Fluctuation Risk of Marketable
Securities, etc.

In its mainstay commodity trading business in Japan andoverseas, the Group deals with grains and petroleum
products as well as electronic parts and information,communications and technology (ICT) products. Grains andpetroleum products will be influenced by the market conditions, while electronic parts and ICT products are exposed to
the risk of frequent price erosion caused by competition andobsolescence resulting from technological innovation. An
unexpected loss may result from causes such as rapid
movements in commodities prices or a decline in demand,when our positions in these commodities increase.

The Group may hold shares in trade partners as means ofstrengthening its relationship with them. There is a risk ofprice fluctuation inherent in these shares, which could havean effect on the financial position of the Group throughunrealized loss on available-for-sale securities.
Since stocks and other securities are included in theportfolio of the pension assets of the Group for the purposeof making medium-and long-term investments, differencesfrom the required investment yield could have an effect on
the financial position of the Group, given that the investment
yield will fall if the prices of the stocks, etc. fall.

Foreign Currency Risk

Default Risk and Credit Risk

The Group is engaged in foreign currency transactions in a
number of currencies and terms incidental to its export andimport trading. The Group not only transfers the risk ofcurrency fluctuations to customers in accordance withtransaction terms but also participates in derivatives
transactions such as forward contracts to reduce the risk.
The Group also has local subsidiaries and businesscorporations overseas. Account balances at these companies
are converted into yen at the exchange rates prevailing at thetime of account closing, for the purposes of preparing
consolidated financial statements. For this reason, net assets
may change through translation adjustments associated withexchange rate fluctuations.

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

Interest Rate Risk
The Group raises most funds needed for operating andfinancing activities in the form of borrowings from financial
institutions at variable interest rates, with the exception ofcertain loans. Since these borrowings and fund management
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 the estimation of the Group if
the discount rate used for the calculation of the retirement
benefit obligation falls.

40

KANEMATSU ANNUAL REPORT 2015

Business Investment Risk
The Group makes business investments to achieve objectives,
including deep mining of existing businesses and expansionof business areas. The Group decides whether to make suchinvestments through procedures established according totheir 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. Aftermaking an investment, the Group regularly reevaluates andThe Group builds and operates information systems forsharing information and streamlining its operations. The
Group has adopted information security control rules, and istaking steps to ensure that all members of the Group arefamiliar with crisis control responses, to meet the safety
requirements for operating its information systems. However,information systems cannot be made entirely invulnerable tothe unauthorized disclosure of business sensitive informationor personal information through unauthorized access,computer viruses and other means, as well as inoperability
due to factors such as natural disasters, destruction of
information system facilities attributable to accidents andother causes, and communication line troubles. Inoperability
may reduce the efficiency of operations that depend on thesystems, and seriously affect the future business results of
the Group, depending on the scale of damages.

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

Legal Risk Related to Changes in Laws

Business operations by the Group, and its assets and liabilities
associated with the business operations may become subject
to legal proceedings, including lawsuits, and other disputes,
in various ways through the course of the business activities
undertaken by the Group in Japan and overseas. Suchlawsuits and disputes are generally unpredictable, and

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

Compliance and Fraud Risk
The Group operates businesses to buy, sell and provide a
broad array of products and services in Japan and overseas
and carefully monitors laws and regulations, including thoserelated to exports and imports that are established andenforced for these products and services in Japan and othercountries. However, it is difficult to execute all procedures at
all times across all of the trading operations we conduct with
the involvement of multiple parties. Although we take anumber of 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 is material, the financial position andoperating results of the Group could be affected.

KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information

Legal Risk Related to Lawsuits and Disputes

Product and Facility Deterioration Risk due to
Natural Disasters and Accidents

CSR and Corporate GovernanceThe business activities undertaken by the Group in Japan andoverseas are subject to a wide range of legal regulations inJapan and other countries. The Group may become unable
to continue certain transactions because of factors such as
unexpected changes in laws, changes in export and importregulations, including a punitive tariff that could be
introduced unilaterally following changes in the international
political environment, and changes in regulations such as
permits and licenses related to the sales and handling ofproducts. An unexpected expense for the Group may also
arise from a lawsuit or from an order issued by authorities.
This risk also includes the risk that a tax rate or tax
arrangements imposed by authorities or between countries
under international taxation arrangements may change.
Changes in these legal systems could influence the financial
position and operating results of the Group.

Review of Operations

Country Risk

Security Risk Related to Information Systems
and Information Security

Special Feature:
Realizing VISION-130

resolving them is often very time-consuming when they occur.
Any prediction of the results therefore involves uncertainties.
Any occurrence of such lawsuits or disputes and unexpected
outcomes may affect the Group’s financial position andoperating results.

Kanematsu’s Progress andStrengths

reviews business potential and investment value to minimize
any potential loss. The value of the business investments may
fluctuate according to the financial conditions of investment
targets and their business success or failure.
The range of market changes tends to be particularly
wide in overseas businesses. Local laws and relationships
with partners may also prevent the Group from executing its
policy for operating or withdrawing from a business.

41

Consolidated Balance Sheets
March 31, 2015 and 2014
JPY

2015

USD (Note 3)

2014

2015

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

68,46873,867569,762

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

180,319

178,984

1,500,533

227

541

1,892

3

16

33

87,254

66,256

726,095

297

825

2,472

7. Deferred tax assets

3,250

2,660

27,0538. Other

27,14822,364225,915

(158)

(149)

(1,321)

366,811345,366

3,052,435

3. Lease investment assets
4. Short-term investments (Note 5-3)
5. Inventories (Note 5-1)
6. Short-term loans receivable

Allowance for doubtful accounts
Total current assets

II. Long-term assets
1. Tangible fixed assets
1) Leased properties, net
2) Buildings and structures, net (Note 5-3)

183

172

1,526

6,469

5,949

53,8363) Machinery, equipment, vehicles, tools and fixtures, net

6,139

4,930

51,0944) Land (Note 5-3)

13,755

11,917

114,463

5) Lease assets, net

1,504

1,074

12,519

879

174

7,320

28,931

24,218240,758

1) Goodwill

6,063

3,175

50,4602) Other

8,661

8,531

72,077

Total intangible fixed assets

14,725

11,706

122,537

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

38,37232,198319,3182) Long-term loans receivable

2,134

1,798

17,765

765

902

6,373

6) Construction in progress
Total tangible fixed assets (Note 5-2)
2. Intangible fixed assets

3. Investments and other assets

3) Doubtful accounts
4) Net defined benefit assets5) Deferred tax assets

199

—

1,658

3,643

8,782

30,3176) Other

6,098

6,236

50,751

Allowance for doubtful accounts(2,671)(2,750)(22,228)

Total investments and other assets

48,54347,167

403,953

Total long-term assets
Total assets

92,20083,093

767,248

459,011

428,459

3,819,682(Notes) Presentation of fiscal year and amount (Japanese Yen and U.S. dollars)
1. “JPY” means millions of Yen and “USD” means thousands of U.S. dollars.
2. “2015” refers to the Company’s consolidated fiscal year ended March 31, 2015 and other fiscal years are referred to in the corresponding manner.

42

KANEMATSU ANNUAL REPORT 2015

JPY

USD (Note 3)

2015

1. Notes and accounts payable

116,567

115,210970,019

2. Import bills payable

32,53027,610270,705

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

61,68880,792

513,344

638

760

5,310

5. Accrued income taxes

2,492

1,951

20,742

6. Deferred tax liabilities

1

1

10

107

6

892

Liabilities
I. Current liabilities

4. Lease obligations

7. Asset retirement obligations
8. Other

38,32232,302

318,904

Total current liabilities

252,347

258,635

2,099,925

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

74,426

61,113

619,344

2. Lease obligations

1,286

1,033

10,708

488

368

4,063

II. Non-current liabilities

3. Deferred tax liabilities
4. Net defined benefit liability

42,751387

3,059

6. Asset retirement obligations

810

804

6,741

7. Other

5,414

5,281

45,059Total non-current liabilities

87,931

73,620731,726

340,279

332,255

2,831,651

1. Common stock

27,781

27,781

231,182

2. Capital surplus

27,502

27,493228,864

3. Retained earnings

44,84535,737373,183

(222)

(321)

(1,852)99,906

90,690831,378

Total liabilities
Net assets
I. Shareholders’ equity

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

1,743

33,459

559

(18)

4,654

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

104

104

865

4. Foreign currency translation adjustments(14,687)(20,758)(122,221)

198

(104)

1,648

(9,805)(19,033)(81,594)

III. Minority interests in consolidated subsidiaries

28,63024,547238,247

Total net assets

118,731

96,204

988,032

Total liabilities and net assets

459,011

428,459

3,819,682

5. Remeasurements of defined benefit plans, net of tax
Total accumulated other comprehensive income

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

KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information

4,020

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

CSR and Corporate Governance

4,630

367

Review of Operations

5,137

5. Provision for retirement benefits for directors and statutory auditors

Special Feature:
Realizing VISION-130

2014

Kanematsu’s Progress andStrengths

2015

43

Consolidated Statements of Income
For the years ended March 31, 2015 and 2014
JPY

USD (Note 3)

2015

2014

2015

I. Net sales

1,117,096

1,114,539

9,295,967

II. Cost of sales (Note 6-1)

1,025,655

1,028,136

8,535,034

91,441

86,402760,933

1. Salaries and bonuses

29,424

28,340244,858

2. Retirement benefit expenses

1,166

1,491

9,708

3. Outsourcing service charges

6,468

6,145

53,828

51

76

426

5. Other

32,20330,573267,991

Total

69,31566,626

576,811

22,125

19,776

184,122

1. Interest income

414

382

3,446

2. Dividend income

1,118

814

9,305

3. Equity in earnings of affiliates

1,145

739

9,536

4. Foreign exchange gains

1,835

2,389

15,277

5. Other

1,358

935

11,307

Total

5,872

5,260

48,871

1. Interest expenses

2,949

3,255

24,548

2. Other

2,153

1,620

17,922

Total

5,103

4,876

42,47022,895

20,160190,523

1. Gain on sale of tangible fixed assets (Note 6-3)

70

2,114

588

2. Gain on sale of investments in securities

106

230

888

3. Gain on liquidation of subsidiaries and affiliates

84

—

702

4. Gain on step acquisitions

1,123

—

9,351

5. Gain on bargain purchase

—

46

—

1,385

2,390

11,529Gross profit
III. Selling, general and administrative expenses (Note 6-2)

4. Provision of allowance for doubtful accounts

Operating income
IV. Non-operating income

V. Non-operating expenses

Ordinary income
VI. Extraordinary gains

TotalVII. Extraordinary losses
1. Loss on disposal of fixed assets (Note 6-4)

138

381

1,150

2. Impairment loss on fixed assets (Note 6-5)

580

2,196

4,834

3. Loss on sale of investments in securities

62

34

522

4. Impairment loss on investments in securities

29

55

249

5. Loss on liquidation of subsidiaries and affiliates

—

276

—

6. Provision of allowance for doubtful accounts for subsidiaries and affiliates

174

—

1,448

7. Business structure improvement expenses (Note 6-6)

—

530

—

985

3,476

8,203

Income before income taxes and minority interests

Total

23,294

19,075

193,849

Income taxes – current

5,378

4,500

44,757

Income taxes – deferred

3,547

453

29,519

8,925

4,953

74,275

Income before minority interests

14,36914,121

119,574

Minority interests in consolidated subsidiaries

2,898

2,321

24,122

Net income

11,47011,79995,452Total

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

44

KANEMATSU ANNUAL REPORT 2015

Consolidated Statements of Comprehensive Income
For the years ended March 31, 2015 and 2014
JPY

USD (Note 3)

2015

14,36914,121

119,574

2,236

715

18,613

569

(293)

4,737

7,092

6,552

59,020

4. Remeasurements of defined benefit plans, net of tax

316

—

2,635

5. Share of other comprehensive income of associates accounted forequity method

124

178

1,034

10,3397,153

86,039Comprehensive income

24,70821,274

205,612Comprehensive income attributable to the shareholders of the Company

20,69817,869172,243

Comprehensive income attributable to minority interests

4,009

3,405

33,369I. Income before minority interests
II. Other comprehensive income
1. Net unrealized gains on securities, net of tax
2. Net gains (losses) on deferred hedges, net of tax
3. Foreign currency translation adjustments

Total other comprehensive income (Note 7-1)

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

Special Feature:
Realizing VISION-130

2014

Kanematsu’s Progress andStrengths

2015

Review of Operations
CSR and Corporate Governance
Financial Section andCompany Information

KANEMATSU ANNUAL REPORT 201545

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2015 and 2014
Fiscal 2015 (From April 1, 2014 to March 31, 2015)
JPY
Shareholders’ equity

Balance at the beginningof the fiscal year
Cumulative effects of changes
in accounting policies
Restated balance
Changes during the fiscal year
Dividends
Net income
Acquisition of treasury stock
Disposition of treasury stock
Effect of changes in the sharesof equity-method affiliates
Changes of scopeof consolidation
Net changes of items otherthan shareholders’ equity
during the fiscal year
Total changes during
the fiscal year
Balance at the end of
the fiscal year

Accumulated other comprehensive income
Net unrealized
gains (losses)
on securities,
net of tax

Net gains(losses) on
deferredhedges,net of tax

Total
net assets(19,033)

24,547

96,204(19,033)(155)
24,391(837)
95,367

CapitalsurplusRetainedearnings

Treasurystock

27,781

27,49335,737(321)

90,690

1,743

(18)

104

(20,758)(104)

27,781

27,493(681)
35,055

(321)

(681)
90,008

1,743

(18)

104

(20,758)

(104)

(13)
155

(1,680)11,470(13)
164(1,680)11,470
(13)
164

—

—

(42)

(42)

8

(42)

Foreign currencytranslation
adjustments

Minority
interests inconsolidated
subsidiaries

Commonstock(1,680)11,470

Revaluation
reserves
for land

Total
Remeasurements accumulatedof definedotherbenefit plans, comprehensive
net of tax
incomeTotal
shareholders’equity

2,277

577

(0)

6,071

302

9,228

4,238

13,466

—

8

9,789

99

9,897

2,277

577

(0)

6,071

302

9,228

4,238

23,36427,781

27,502

44,845(222)

99,906

4,020

559

104

(14,687)

198(9,805)28,630118,731

Total
Remeasurements accumulatedof definedotherbenefit plans, comprehensive
net of tax
incomeMinority
interests inconsolidated
subsidiaries

Total
net assets

Fiscal 2014 (From April 1, 2013 to March 31, 2014)
JPY
Shareholders’ equity

Balance at the beginningof the fiscal year
Cumulative effects of changes
in accounting policies
Restated balance
Changes during the fiscal year
Dividends
Net income
Acquisition of treasury stock
Disposition of treasury stock
Effect of changes in the sharesof equity-method affiliates
Changes of scopeof consolidation
Net changes of items otherthan shareholders’ equity
during the fiscal year
Total changes during
the fiscal year
Balance at the end of
the fiscal year

Accumulated other comprehensive income
Net unrealized
gains (losses)
on securities,
net of tax

Net gains(losses) on
deferredhedges,net of tax

Revaluation
reserves
for landForeign currencytranslation
adjustments

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity27,781

27,526

24,567(357)

79,517

1,048

298

66

(26,411)—(24,997)

21,39375,912

27,781

27,526

24,567(357)—
79,517

1,048

298

66

(26,411)—(24,997)

21,393—75,912

(13)
49

(630)
11,799
(13)
16

(630)
11,799
(13)
16

(0)

(0)

(0)

—

—

(630)
11,799
(32)

694

(316)

38

5,652

(104)

5,964

3,153

9,118

—

(32)

11,16935

11,172

694

(316)

38

5,652

(104)

5,964

3,153

20,291

27,781

27,49335,737(321)

90,690

1,743

(18)

104

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

24,547

96,204

Total
Remeasurements accumulatedof definedotherbenefit plans, comprehensive
net of tax
incomeMinority
interests inconsolidated
subsidiaries

Total
net assets

Fiscal 2015 (From April 1, 2014 to March 31, 2015)
USD (Note 3)
Shareholders’ equity

Balance at the beginningof the fiscal year
Cumulative effects of changes
in accounting policies
Restated balance
Changes during the fiscal year
Dividends
Net income
Acquisition of treasury stock
Disposition of treasury stock
Effect of changes in the sharesof equity-method affiliates
Changes of scopeof consolidation
Net changes of items otherthan shareholders’ equity
during the fiscal year
Total changes during
the fiscal year
Balance at the end of
the fiscal year

Accumulated other comprehensive income
Net gains(losses) on
deferredhedges,net of tax

Revaluation
reserves
for landForeign currencytranslation
adjustments

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity231,182

228,792

297,388(2,678)754,684

14,508(151)

872(172,743)(871)(158,385)

204,271

800,570

231,182

228,792(5,672)291,716(2,678)(5,672)
749,012

14,508(151)

872(172,743)(871)(158,385)(1,295)
202,976(6,967)
793,603

(111)
1,293

(13,985)
95,452(111)
1,366(13,985)
95,452
(111)
1,366

—

—

(356)

(356)

(13,985)
95,452
73(356)

18,9514,805(6)50,522

2,519

76,79135,271

112,062—73

81,467827

82,366

18,9514,805(6)50,522

2,519

76,79135,271

194,428

231,182

228,864

373,183(1,852)

831,378

33,4594,654

865(122,221)

1,648(81,594)

238,247

988,032

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

46

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

KANEMATSU ANNUAL REPORT 2015

Consolidated Statements of Cash Flows
For the years ended March 31, 2015 and 2014
JPY

193,849
27,005544(5,444)(12,751)
24,548(9,536)
562
4,834
(366)
249
(702)
—
(9,351)—
52,122(142,072)
8,114
10,607142,212
10,832(24,586)(4,417)(39,861)
84,180(743)(3,807)914(656)(2,053)50(2,030)—105(2,305)
3,422
(435)
(271)
551
(96)
826

(6,191)(31,687)
7,608(5,465)(17,087)421(16,894)—(171)(2,761)(1,428)

(87)
(437)
629
(509)
(8,903)

—
(69)
265
(342)
(1,111)(728)(3,638)5,238(4,243)(74,094)

2,245
38,511(47,756)—(1,675)355(1,574)(9,895)2,511(6,171)73,54867,377(4,237)41,548(44,781)
157
(625)
—
(1,412)(9,351)
1,593
13,51660,03273,54818,682
320,471(397,407)—(13,943)2,960(13,105)(82,343)
20,903(51,355)
612,041
560,686

Financial Section andCompany Information

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

CSR and Corporate Governance

23,294
3,245
65
(654)
(1,532)
2,949(1,145)
67
580
(44)
29
(84)
—
(1,123)—
6,263(17,072)
975
1,274
17,0891,301(2,954)(530)(4,790)
10,115

Review of Operations

2015

Special Feature:
Realizing VISION-130

2014

Kanematsu’s Progress andStrengths

I. Cash flows from operating activities
Income before income taxes and minority interests
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts(Decrease) increase in net defined benefit liability
Interest and dividends income
Interest expenses
Equity in gains of affiliates
Loss (gain) 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 liquidation of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Gain on step acquisitions
Business structure improvement expenses
Decrease (increase) in notes and accounts receivable(Increase) decrease in inventories
Increase in notes and accounts payableOther
Sub totalInterest and dividends received
Interest paid
Payments for business structure improvement expenses
Income taxes paid
Net cash provided by operating activities
II. Cash flows from investing activities(Increase) decrease in time deposits, net
Payments for tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for intangible fixed assets
Payments for investments in securities
Proceeds from sales of investments in securities
Payments for purchase of investments in subsidiaries
Proceeds from sales of investments in subsidiaries
Payments for purchase of investments in subsidiaries resulting in change
in scope of consolidation (Note 9-2)
Payments for transfer of business
Increase in loans receivable
Proceeds from collection of loans receivable
Other
Net cash used in investing activities
III. Cash flows from financing activities
Increase (decrease) in short-term borrowings, net
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds on issuance of common stock
Cash dividends paid
Proceeds from sales of shares of parent held by subsidiaries
Other
Net cash used in financing activities
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. Cash and cash equivalents at end of year (Note 9-1)

USD (Note 3)

2015

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

KANEMATSU ANNUAL REPORT 201547

Notes to Consolidated Financial Statements
For the years ended March 31, 2015 and 2014

1. Basis of Preparing Consolidated Financial Statements(1) The Method of Producing the Consolidated Financial
Statements:
The consolidated financial statements of Kanematsu Corporation(the “Company”) are prepared in accordance with the“Regulations Concerning Terminology, Forms, and Preparation
Methods of Consolidated Financial Statements” (Ministry of
Finance Ordinance No.28, 1976; hereinafter, the “Regulations”).
The Company and its domestic consolidated subsidiaries maintain their accounts and records in accordance with the provisions
set forth in the Companies Act of Japan and the Financial
Instruments and Exchange Act of Japan, and in conformity withaccounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.

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

2. Summary of Significant Accounting Policies(a) Scope of Consolidation:(1) Number of consolidated subsidiaries: 89(Major consolidated subsidiaries)
Kanematsu Electronics
Kanematsu Communications
Kanematsu-NNK
Kanematsu Trading
Kanematsu KGK
Kanematsu Petroleum
Shintoa
Kanematsu USA
Kanematsu (Hong Kong)
In the current fiscal year, Kanematsu-NNK, which was an affiliate
under equity-method until the previous fiscal year, and 3 othercompanies were added to the scope of consolidation due to additional acquisition of shares, North Pet and 5 other companies wereadded to the scope of consolidation due to new establishment, 1company was added to the scope of consolidation due to new
acquisition of shares, and 4 companies were excluded from thescope of consolidation due to merger or liquidation.
(2) Unconsolidated subsidiaries:(Major unconsolidated subsidiaries)
KANEMATSU AMERICA DO SUL IMPORTACAO E EXPORTACAO(Reason for excluding from the scope of consolidation)
The companies are small sized and immaterial to the Company interms of their total assets, net sales, net income and retained earnings individually and in the aggregate.

(2) Unconsolidated subsidiaries and affiliated companies towhich the equity method is not applied:(Major unconsolidated subsidiaries)
Kanematsu Iran
Memorex Lease(Reason for not applying the equity method)
The companies are immaterial to the Company’s consolidated net
income and retained earnings, individually and in the aggregate.

(c) Fiscal Year-ends of Consolidated Subsidiaries:
Consolidated subsidiaries that have different fiscal year-end dates
from the consolidated balance sheet date are as follows:
Name of consolidated subsidiaryYear-end dateKanematsu USA

December 31

25 other companies
In preparing the consolidated financial statements, the financial
statements of 26 companies with fiscal year-end dates within threemonths of the consolidated balance sheet date of March 31, areused. However, material differences in transactions and accounts
arising from the use of these fiscal year-end dates are appropriately
adjusted for in consolidation.
In the current fiscal year, KG Aircraft Rotables and 2 other companies have changed their fiscal year-end to March 31 from
December 31. As a result of this change, the accounting period
ended March 31, 2015 for these 3 consolidated subsidiaries
spanned 15 months from January 1, 2014.

(d) Short-term Investments and Investments in Securities:(b) Application of Equity Method:(1) Unconsolidated subsidiaries and affiliated companies towhich the equity method is applied:
Number of unconsolidated subsidiaries: 2(Major unconsolidated subsidiaries)
KANEMATSU AMERICA DO SUL IMPORTACAO E EXPORTACAO
Number of affiliated companies: 26(Major affiliated companies)
Hokushin
KaneyoKantatsu
In the current fiscal year, 5 companies were added to accounting
via the equity method due to new establishment, additional acquisition of shares and new acquisition of shares and 2 companies
were excluded from accounting via the equity method due tochanging to the scope of consolidation by additional acquisition ofshares and sale of shares.

48

KANEMATSU ANNUAL REPORT 2015

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

(k) Translation of Foreign Currencies:

Derivatives are stated at fair value method.

All monetary assets and liabilities denominated in foreign currencies are translated into yen at spot exchange rates prevailing at thebalance sheet date. Resulting translation gains and losses areincluded in determination of net income for the period.
The financial statements of overseas subsidiaries are translated atcurrent exchange rates on the closing date except for shareholders’equity which is translated at historical acquisition date exchange
rates. Differences in yen amounts arising from this translation are
shown as “Foreign currency translation adjustments” and “Minority
interests in consolidated subsidiaries” recorded in “Net assets”.

(f) Inventories:
Inventories are stated at cost method principally determined by themoving average method (carried at the lower of cost or market
value on the balance sheet).

(g) Property and Equipment:(2) Lease assets:
Depreciation on lease assets is recorded using the straight-line
method over the lease term, assuming a residual value of zero.
Finance lease transactions that commenced on or before March
31, 2008 are accounted for as operating leases.

(h) Allowance for Doubtful Accounts:(i) Provision for Retirement Benefits for Directors andStatutory Auditors:
The Company and certain of its subsidiaries provide a provision 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.

(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 haveinternal policies to utilize the above hedging instruments for the
purpose of reducing their exposures to the risk of fluctuations incommodity prices, foreign currencies and interest rates for theiroperating and financing activities.
(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 withthose of the hedging instruments and examined the degree of
their correlation.

Financial Section andCompany Information

The Company and certain of its subsidiaries provide for the payment of employee retirement benefits and recognize net defined
benefit liability which deducts the value of plan assets from retirement benefit obligations based on projections at the end of thecurrent fiscal year.
In calculating retirement benefit obligation, the benefit formulabasis is used to attribute projected benefits to the period up to theend of fiscal year.
Except for certain consolidated subsidiaries which recognize past
service costs as expenses upon their occurrence, past service costs
are amortized as expenses on a straight-line basis over five years, apredetermined number of years, within the average expected
remaining service period of the employees.
Actuarial gains and losses are amortized on a straight-line basis
over five to ten years, within the average expected remaining service period of the employees, and are recorded as expenses in thesubsequent years in which the gains or losses are recognized.
Actuarial gains and losses and past service costs that are yet to berecognized in profit or loss are recognized within the net asset section as remeasurements of defined benefit plans of accumulated
other comprehensive income after adjusting for tax effects.
For certain calculations of defined net benefit liability and retirement benefit expenses, simplified method is applied, which recognizes retirement benefit obligations with the value of benefits
payable assuming the voluntary retirement of all employees at theend of the fiscal year.

(2) Hedging instruments and hedged items:(Hedging instruments)* Commodity-related: Commodity futures contracts / Commodity
forward contracts* Foreign exchange-related: Forward exchange contracts / Foreign
currency swaps / Foreign currency options* Interest rate-related: Interest rate swaps / Interest rate options

CSR and Corporate Governance(j) Retirement Benefits:(1) Hedge accounting method:
The Company and certain of its consolidated subsidiaries apply
hedge accounting whereby gains and losses on hedged transactions are deferred and recognized over future periods. For certain
interest rate swaps designated as hedging instruments that meet
specific matching criteria, the amounts received or paid under suchinterest rate swap agreements are added to or deducted from theinterest on the hedged assets or liabilities when paid. For certain
forward exchange contracts designated as hedging instrumentsthat meet specific matching criteria, the hedged assets or liabilities
are measured by contract rate.

Review of Operations

The Company and its consolidated subsidiaries (The “Companies”)
provide an allowance for doubtful accounts to cover credit losses,
based on estimates of collectability of individual accounts and past
bad debt loss experiences.

(l) Hedge Accounting:Special Feature:
Realizing VISION-130(1) Tangible fixed assets (excluding lease assets):
The straight-line method is used.
The ranges of principal estimated useful lives are as follows.
Buildings and structures
3 – 50 years
Machinery, equipment, vehicles, tools and fixtures 2 – 20 years

Kanematsu’s Progress andStrengths(e) Derivatives:(5) Other:
Risk management is performed by the management division, whichis independent of the trading section. Also, reporting to management is performed in accordance with the internal rules of theCompany on a regular basis.

KANEMATSU ANNUAL REPORT 201549

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

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.

(o) Consumption Taxes:
Consumption tax and local consumption tax on goods and services
are not included in the revenue and expense amounts subject tosuch taxes in the accompanying consolidated statements of income.

(p) Consolidated Tax Return:(n) Scope of Cash and Cash Equivalents in
the Consolidated Statements of Cash Flows:
Cash and cash equivalents in the consolidated statements of cash
flows are comprised of cash on hand, bank deposits on demand,

The Company and its wholly owned domestic subsidiaries haveadopted the consolidated tax regime, and as such file a consolidated corporate-tax return.

3. United States Dollar Amounts
The U.S. dollar amounts appearing in the consolidated financial
statements and the notes thereto represent the arithmetical resultsof translating yen to dollars at the rate of ¥120.17 to U.S.$1.00,
the exchange rate prevailing on March 31, 2015. The translation ofsuch dollar amounts is solely for convenience of the readers

outside Japan and does not imply those yen amounts have been or
could be readily converted, realized or settled in dollars at theabove, or any other rate.

4. Changes in Accounting Policies(Application of accounting standard for retirement benefits)
The main clause of Article 35 of the “Accounting Standard for
Retirement Benefits” (ASBJ Statement No. 26 released May 17,
2012, hereinafter “Accounting Standard”) and the main clause of
Article 67 of the “Guidance on Accounting Standard for
Retirement Benefits” (ASBJ Guidance No. 25 released March 26,
2015, hereinafter “Guidance”) were adopted for the current fiscal
year. As a result, the methods used for calculation of the retirement benefit obligation and service costs changed. Specifically, themethod used for determining the portion of projected benefit obligation to be attributed to individual periods changed from thestraight-line method to the benefit formula basis. In addition, themethod for determining the discount rates to be applied in calculating the retirement benefit obligation changed from the methodof using a period approximating employees’ average remaining
years of service to a single weighted-average discount rate thatreflects the estimated amounts and periods over which the benefit
will be paid.
The Accounting Standard and Guidance were adopted according
to the transitional treatment set forth in Article 37 of the
Accounting Standard, and the effects of the change in calculation
methods of the retirement benefit obligation and service costs
were adjusted against retained earnings as at the beginning of thecurrent fiscal year.
As a result, net defined benefit liability increased by ¥797 million($6,638 thousand), retained earnings decreased by ¥681 million($5,672 thousand), and minority interests decreased by ¥155 million ($1,295 thousand). Operating income, ordinary income, andincome before income taxes and minority interests increased by¥85 million ($710 thousand), respectively.
The effects of the changes on net assets per share, net income
per share and diluted net income per share for the current fiscal
year are immaterial.
(Change in depreciation method for tangible fixed assets)
Although the Company and certain domestic consolidated subsidiaries had mainly used the declining-balance method as the depreciation method for tangible fixed assets, the companies changed touse the straight-line method from the beginning of the current fiscal year.
As a result of domestic and foreign business acquisitions madeby the group, the portion of companies using the straight-line
method became material to the group. Based on the Company’s
detailed analysis of the use of their tangible fixed assets, the economic benefits associated with these assets are expected to be
consumed evenly over their useful lives and therefore the Company
changed the depreciation method to the straight-line method.
This change has no material impact on income for the current
fiscal year.

5. Notes to Consolidated Balance Sheets*1. Details of inventories are as follows:
JPY

2015

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

50

KANEMATSU ANNUAL REPORT 2015

USD

2014

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

2015

84,24063,693701,007

61

61

508

2,125

1,824

17,688

828

677

6,892

USD

2015

2014

2015

30,44328,305

253,334

*5. Revaluation reserves for land

Details of pledged assets are as follows:

KANEYO Co., Ltd., an equity-method affiliate of the Company,
revalued land held for business in accordance with the “Law
Concerning Revaluation of Land” (Law No. 34 enacted on March
31, 1998) and the “Law to Partially Modify the Law Concerning
Revaluation of Land” (Law No. 24 enacted on March 31, 1999 and
Law No. 19 enacted on March 31, 2001). This equity-method affiliate recorded unrealized gains on revaluation, net of tax, as valuation and translation adjustment under the Laws. The Company’s
investments in this affiliate increased by an amount equal to theunrealized gains on revaluation of land.

JPY

USD

2015

2014

3

6

25

Notes and accounts receivable

303

229

2,524

Buildings and structures

383

381

3,192

Land

525

525

4,377

1,215

1,143

10,118Cash and bank deposits

Total

2015

Kanematsu’s Progress andStrengths*3. Pledged assets and associated secured obligations

Details of associated secured obligations are as follows:
USD

2014

2015

Short-term borrowings

1,150

750

9,570

Long-term borrowings

—

500

—

Guaranteed obligations

1

3

13

6. Liability for guarantees
Guarantees are provided to unconsolidated subsidiaries on theirborrowings from third-party financial institutions.
JPY

Century Textile Industry
Growth D

In addition to the foregoing pledged assets, the following items aretendered as security deposit or substitution for trading.
JPY

2014

3

3

2015

25

Short-term investments

—

15

—

Investments in securities

3,140

2,134

26,136

3,143

2,152

26,161

Total

2014

1,082

795

9,010

470

191

3,919

Mojiko Silo

212

231

1,770

Other

950

1,061

7,908

2,716

2,279

22,607

Total

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

7. The amount of discounted notes receivable andendorsed notes receivable
JPY*4. Investments in securities for unconsolidated
subsidiaries and affiliated companies are as follows:
JPY(Share stocks)

USD

2015

2014

2015

Discounted notes receivable

3,229

2,155

26,875USD(Discounted export bills)

3,063

1,909

25,490Endorsed notes receivable

128

108

1,072

2015

2014

2015

6,540

5,758

54,430(41,368)(4,971)(5,306)(Equity investments)

(569)

(452)

(4,740)(Corporate bonds)(1,000)(—)(8,322)

CSR and Corporate Governance

Investments in securities

2015

6. Notes to Consolidated Statements of Income*1. Loss on devaluation of inventories*3. Gain on sale of tangible fixed assets

Inventories are carried at the lower of cost or market value in thebalance sheet. A loss (reversal) on devaluation of inventories is
included in cost of sales.

Details of gain on sale of tangible fixed assets are as follows:

USD

USD

2014

2015

2015

2014

2015

Machinery, equipment,
vehicles, tools and fixtures

62

12

519

252

(311)

2,104

Land

7

1,799

59

Leased properties

0

273

8

Other

0

28

3

70

2,114

588

*2. The amount of research and development expenses
JPY

USD

2015

2014

2015

614

577

5,117

Total

Financial Section andCompany Information

JPY

JPY

2015

Review of Operations

Cash and bank deposits

USD

2015

USD

2015

Special Feature:
Realizing VISION-130

JPY

2015

*4. Loss on disposal of fixed assets
Details of loss on disposal of fixed assets are as follows:
JPY

USD

2015

2014

2015

Buildings and structures

45

146

375

Machinery, equipment,
vehicles, tools and fixtures

42

212

355

Intangible fixed assets

45

14

380

Other

4

8

40

138

381

1,150

Total

KANEMATSU ANNUAL REPORT 201551

*5. Impairment loss on fixed assets
The Company recorded impairment loss on fixed assets, which are summarized in the following table.
Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)
JPY

USD

Business assets

Use

Shizuoka, Japan, others

Location

Land

Type

387

3,225

Business assets

Tokyo, Japan, others

Buildings, etc.

193

1,608

580

4,834

Total

The Company assesses impairment losses on business assets by grouping the assets for each business operating unit, on the managerial
accounting basis.
For the business assets with lower profitability, impairment losses of ¥580 million ($4,834 thousand) were recorded as an extraordinary loss
by reducing their carrying amounts to their recoverable amounts. Out of ¥580 million ($4,834 thousand) of the impairment losses, ¥48 million ($407 thousand) was for buildings and structures, ¥6 million ($56 thousand) was for machinery, equipment, vehicles, tools and fixtures,¥387 million ($3,225 thousand) was for land and ¥137 million ($1,146 thousand) was for others.
The recoverable amount is the net selling value. The net selling value is estimated mainly based on the real estate appraisal, or as zero for
assets which the Company does not expect to sell.
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Use

Location

Type

Business assets

Chiba, Japan, others

Land, etc.

Idle assets

Hyogo, Japan

Land

Total

JPY

2,016
180
2,196

The Company assesses impairment losses on business assets by grouping the assets for each business operating unit, on the managerial
accounting basis. For idle assets, impairment is assessed individually.
For the business assets with lower profitability and idle assets which the Company has no plan to use in the future, impairment losses of¥2,196 million were recorded as an extraordinary loss by reducing their carrying amounts to their recoverable amounts. Out of ¥2,196 millionof the impairment losses, ¥11 million was for buildings and structures, ¥2 million was for machinery, equipment, vehicles, tools and fixtures,¥2,066 million was for land and ¥116 million was for others.
The recoverable amount is the net selling value. The net selling value is estimated mainly based on the real estate appraisal.

*6. Business structure improvement expenses
Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)
Not applicable.
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Business structure improvement expenses occurred in a consolidated subsidiary. Details of the expenses are as follows:
JPY

Termination benefits for voluntary retirements

52

491

Other

39

Total

530

KANEMATSU ANNUAL REPORT 2015

7. Notes to Consolidated Statements of Comprehensive Income

JPY

USD

2015

2014

2015

26,410Net unrealized gains (losses) on securities, net of tax
Net unrealized gains (losses) during the year

3,173

1,215

Reclassification adjustments

12

(101)

107

Total before deferred tax

3,186

1,113

26,517

Deferred tax

(949)

(398)

(7,905)

Total net unrealized gains (losses) on securities, net of tax

2,236

715

18,613Net unrealized gains (losses) during the year

1,181

414

9,834

Reclassification adjustments

(325)

(905)

(2,706)

Total before deferred tax

856

(491)

7,127

Deferred tax

(287)

198

(2,391)

Total net gains (losses) on deferred hedges, net of tax

569

(293)

4,737

Translation adjustments during the year

7,224

6,552

60,120Reclassification adjustments

(132)

—

(1,100)

7,092

6,552

59,020Remeasurements during the year

312

—

2,601

Reclassification adjustments

(14)

—

(123)

Total before deferred tax

297

—

2,478

Special Feature:
Realizing VISION-130

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

Kanematsu’s Progress andStrengths*1. Reclassification adjustments and deferred tax related to other comprehensive income

Foreign currency translation adjustments

Total foreign currency translation adjustments

Deferred tax

18

—

157

Total remeasurements of defined benefit plans, net of tax

316

—

2,635

122

276

1,017

2

(97)

17

Review of Operations

Remeasurements of defined benefit plans, net of tax

Share of other comprehensive income of investments accounted for using the equity method
Net unrealized gains (losses) during the year
Reclassification adjustments

Total

124

178

1,034

10,3397,153

86,0398. Notes to Consolidated Statements of Changes in Net Assets
Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)

1. Class and number of shares issued and treasury stock:
Increase in shares during
the fiscal year
(thousand shares)

Decrease in shares during
the fiscal year
(thousand shares)

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

Common shares

422,501——

422,501

Total

422,501——

422,501

2,323

451

1,112

1,663

2,323

451

1,112

1,663

Shares issued

Treasury stock
Common shares (Notes 1, 2)
Total

Financial Section andCompany Information

Number of shares atthe beginning of the fiscal
year (thousand shares)

CSR and Corporate GovernanceTotal share of other comprehensive income of investments accounted forusing the equity method(Notes) 1. The breakdown of the increase of 451 thousand common shares during the term is as follows:
Increase as a result of fractional share repurchases:
75 thousand shares
The Company’s portion of treasury stock (the Company’s stock) increased due to changes of scope of consolidation that attributes to the Company:
375 thousand shares
2. The breakdown of the decrease of 1,112 thousand common shares during the term is as follows:
Decrease as a result of the disposition of fractional shares:
5 thousand shares
The Company’s portion of treasury stock (the Company’s stock) disposed by consolidated subsidiary and company applied equity method that attributes to
the Company:
1,106 thousand shares

KANEMATSU ANNUAL REPORT 201553

2. Dividends(1) Amount of dividend payments
Total amount of dividends

Dividends per share

JPY(Millions of yen)

USD
(Thousands of
U.S. dollars)

JPY
(Yen)

USD
(U.S. dollar)

Board of directors meeting Common
on May 26, 2014
shares

632

5,260

1.50

0.012

March 31,2014

Board of directors meeting Common
on October 31, 2014
shares

1,053

8,766

2.50

0.021

September 30, December 2,
2014
2014

Resolution

Type of shares

Record date

Effective dateJune 5,2014(Note) The dividend of 2.50 yen per share in the resolution of board of directors meeting on October 31, 2014 includes a commemorative dividend of 1 yen per share for
the Company’s 125th anniversary.

(2) Dividends whose record date is in the current fiscal year but effective date is in the following fiscal year
Total amount of dividends

Resolution

Type of shares

Board of directors meeting Common
on May 25, 2015
sharesJPY(Millions of
yen)

632

Dividends per share

USD(Thousands of
U.S. dollars)

Retainedearnings

5,259

JPY
(Yen)

Source ofdividends

1.50

USD
(U.S. dollar)

Record date

March 31,
2015

0.012

Effective dateJune 4,2015

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

1. Class and number of shares issued and treasury stock:
Number of shares atthe beginning of the fiscal
year (thousand shares)

Decrease in shares during
the fiscal year
(thousand shares)

Increase in shares during
the fiscal year
(thousand shares)

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

Shares issued
Common shares

422,501——

422,501

Total

422,501——

422,501

Treasury stock
Common shares (Notes 1, 2)
Total

2,539

92

308

2,323

2,539

92

308

2,323

(Notes) 1. The breakdown of the increase of 92 thousand common shares during the term is as follows:
Increase as a result of fractional share repurchases:
92 thousand shares
The Company’s portion of treasury stock (the Company’s stock) increased due to changes in the shares of companies applied equity method that attributes to
the Company:
0 thousand shares
2. The breakdown of the decrease of 308 thousand common shares during the term is as follows:
Decrease as a result of the disposition of fractional shares:
5 thousand shares
The Company’s portion of treasury stock (the Company’s stock) disposed by a company applied equity method that attributes to the Company: 302 thousand shares

2. Dividends(1) Amount of dividend payments

Resolution

Board of directors meeting on
November 1, 2013

Type of shares

CommonsharesTotal amount ofdividends

Dividends per share

JPY(Millions of yen)

JPY
(Yen)

Record date

1.50

September 30,
2013

632

Effective date

December 3,
2013(2) Dividends whose record date is in the current fiscal year but effective date is in the following fiscal year
Dividends per
share

Total amount ofdividends
Resolution

Board of directors meeting on
May 26, 2014

54

KANEMATSU ANNUAL REPORT 2015

Type of shares

CommonsharesJPY(Millions of yen)

632

Source ofdividends

Retainedearnings

JPY
(Yen)

1.50

Record date

March 31,2014

Effective dateJune 5,2014

9. Notes to Consolidated Statements of Cash Flows

JPY

Cash and bank deposits

Fiscal year ended March 31, 2014 (April 1, 2013 toMarch 31, 2014)
Relations between details of assets and liabilities of BD Holdings(Presently Kanematsu BD Communications), which is a newly consolidated subsidiary by acquisition of shares, and acquisition cost,and payments for purchase are as follows:

USD

2015

2014

2015

68,46873,867569,762

Time deposits which deposit
terms exceed three months(1,090)(318)(9,077)

Cash and cash equivalents

67,37773,548580,686

JPY

Fiscal year ended March 31, 2015 (April 1, 2014 toMarch 31, 2015)
Relations between details of assets and liabilities of KanematsuNNK, which is a newly consolidated subsidiary by additional acquisition of shares, and acquisition cost, and payments for purchaseare as follows:
USD

Current assets

4,891

40,703Long-term assets

3,260

27,1301,644

13,683Current liabilities(2,427)(20,199)

Non-current liabilities(511)(4,256)

Minority interests in consolidated
subsidiaries(2,554)(21,256)

Subtotal

4,302

35,806

Acquisition cost before obtaining control(1,537)(12,795)

Gain on step acquisitions(1,123)(9,351)

1,641

13,661

Cash and cash equivalents(1,469)(12,232)

171

1,428

Net: Payments for purchase of investments
in subsidiaries resulting in change inscope of consolidation

3,503

Goodwill

817

Current liabilities(575)

Non-current liabilities(1,338)Acquisition cost

3,000

Cash and cash equivalents(238)

Net: Payments for purchase of investments
in subsidiaries resulting in change inscope of consolidation

2,761

CSR and Corporate Governance

Additional acquisition cost592

Long-term assets

Review of Operations

Goodwill

Current assets

Special Feature:
Realizing VISION-130*2. Details of assets and liabilities of subsidiary newly
consolidated by acquisition of shares

JPY

Kanematsu’s Progress andStrengths*1. Cash and cash equivalents consist of the following:

10. Lease Transactions<Leases as lessee>

1. Finance leases
Finance lease transactions that do not transfer ownership of the leased property

Financial Section andCompany Information[1] Detail of lease assets
Tangible fixed assets
Mainly, computer and computer-related devices for the core critical system (Tools and fixtures).
[2] Depreciation method of lease assets
Described in Note 2. Summary of Significant Accounting Policies, (g) Property and Equipment.
The finance lease transactions commenced on or before March 31, 2008 which are accounted for as operating leases, are as follows:(1) Acquisition cost, accumulated depreciation and balance at the end of the fiscal year of leased properties
2015
Acquisition cost

Machinery, equipment, vehicles, tools and fixtures

Accumulated depreciation

Balance at the end of
the fiscal year

JPY

USD

JPY

USD

JPY

USD

253

2,107

202

1,684

50

423

2014
Accumulated depreciation

Balance at the end of
the fiscal year

JPY

JPY

JPY

303

229

73

Acquisition cost

Machinery, equipment, vehicles, tools and fixtures

KANEMATSU ANNUAL REPORT 201555

(2) Future minimum lease payments outstanding at
the balance sheet date, etc.
Future minimum lease payments outstanding at the balance
sheet date2015

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

2. Operating leases

Future minimum lease payments
outstanding at the balance sheet date

JPY

USD

JPY

Due within one year

22

189

27

Due after one year

65

543

87

87

731

115

Total

Future lease payments outstanding at the balance sheet date

2014

2015

2014

JPY

USD

JPY

Due within one year

10

91

13

Due after one year

31

259

39

42

351

53

Total
(3) Payments to lessors, depreciation and interest expenses
2015<Leases as lessor>

2014

JPY

USD

JPY

Payments to lessors

23

193

32

Depreciation

22

191

32

Interest expenses

3

30

4

1. Finance leases[1] Detail of the lease investment assets
Current assets
2015

Lease payments receivables(4) Computation of depreciation
Depreciation is computed using the straight-line method over thelease term assuming a residual value of zero.

Interest income
Lease investment assets

2014

JPY

USD

JPY

251

2,096

577

(4)

(37)

(11)

247

2,059

566

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

[2] Future lease receivables and lease investment assets outstanding at the balance sheet dateCurrent assets
2015
Due within one year

Over two years andwithin three years

Over three years andwithin four years

Over four years andwithin five years

Over five years

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

1

14

1

14

1

14

1

14

1

14

4

38

190

1,588

43

362

4

37

4

36

4

36

4

36

Lease receivables
Lease investment assets

Over one year andwithin two years

2014
Due within one year

Over one year andwithin two years

Over two years andwithin three years

Over three years andwithin four years

Over four years andwithin five years

Over five years

JPY

JPY

JPY

JPY

JPY

JPY

2

2

2

2

2

6

328

189

42

4

4

8

Lease receivables
Lease investment assets

11. Financial Instruments
1. Summary of financial instruments(1) Policies of financial instruments:
The Companies design cash-flow plans to carry out operations,which are buying and selling of merchandise, investment and lending. The Companies’ fund raising 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 theglobal business operations.
The Companies have investments in securities in order to maintain relationships with their customers and suppliers. Short-term
investments and investments in securities are exposed to price

56

KANEMATSU ANNUAL REPORT 2015

risks. The Companies also issue loans to certain customers andsuppliers.
Maturity dates of notes and accounts payable and import bills
payable are mainly within one year. Foreign currency liabilities are
exposed to risk of exchange rate fluctuation.
The longest maturity date of borrowings from banks and insurance companies is within seven years from the fiscal year-end.
Certain borrowings are exposed to interest rate risk.
The Companies utilize derivative transactions such as foreignexchange contracts to avert currency risk, interest rate swaps toavert interest rate risk, commodity future contracts to avert commodity price risk.
Hedging instruments, hedged items, hedging policy and methodof evaluating the effectiveness of hedging activities are describedin Note 2. Summary of Significant Accounting Policies, (l) Hedge
Accounting.

[3] Liquidity risk management
The Finance Department performs cash management and maintains the level of cash and bank deposits balance by preparing andrevising cash-flow-plan to suit current financial situation.

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

Review of Operations[2] Market risk management
The Companies utilize foreign exchange contracts for foreign currency assets and liabilities or forecasted foreign currency transactions to avert currency risk. The Companies also utilize interest rate
swaps to avert interest rate risk.
For short-term investments and investments in securities, theCompanies 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 are recorded and thebalances are managed by the Finance Department, Accounting
Department and Business Accounting Department and actual
results of transactions are reported monthly to management.

Special Feature:
Realizing VISION-130(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 byvariable 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.

Kanematsu’s Progress andStrengths

Certain of the Company’s consolidated subsidiaries utilize derivative transactions in accordance with their own internal rules, which
are prepared based on the Company’s risk management policies.

(3) Financial risk management policies:[1] Credit risk management
The Company employs its own credit scoring model based on customers’ financial statements and other information. The Company
determines the credit limit for customers based on their credit scoring and control credit risk by managing customer’s balances
against these limits. To reduce credit risks, the Company regularly
monitors the collectability of and age of receivables to take preservation measures.
Since derivative transactions are executed with highly rated
banks, the Company reviews the limit of volume of derivativetransactions according to the internal rule.

Fiscal year ended March 31, 2015
Book value

Fair value

Difference

JPY

USD

JPY

USD

(1) Cash and bank deposits

68,468569,762

68,468569,762——(2) Notes and accounts receivable

180,319

1,500,533(158)(1,321)

180,160

1,499,212

180,160

1,499,212

—

—

3

33

3

33

(0)

(0)

(4) Short-term loans receivable

297

2,472

297

2,472

—

—

(5) Investments in securities

15,650130,239

16,071

133,742

420

3,503

(6) Long-term loans receivable

2,134

17,765(1,733)(14,429)

400

3,336

400

3,336

—

—

765

6,373

(751)

(6,256)

Allowance for doubtful accounts(3) Short-term investments

Allowance for doubtful accounts(7) Doubtful accounts
Allowance for doubtful accounts

14

117

14

117

—

—

264,995

2,205,171

265,416

2,208,673

420

3,503

(8) Notes and accounts payable(116,567)(970,019)(116,567)(970,019)——(9) Import bills payable(32,530)(270,705)(32,530)(270,705)——(10) Short-term borrowings(61,688)(513,344)(61,688)(513,344)——(11) Accrued income taxes(2,492)(20,742)(2,492)(20,742)——

Total assets(12) Long-term borrowings(74,426)(619,344)(74,636)(621,095)(210)(1,750)Total liabilities(287,705)(2,394,154)(287,915)(2,395,904)(210)(1,750)Derivatives

2,407

20,035

2,407

20,035——KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information

USD

CSR and Corporate Governance

JPY

57

Fiscal year ended March 31, 2014
Book value

Fair value

Difference

JPY

JPY

JPY

(1) Cash and bank deposits

73,86773,867—(2) Notes and accounts receivable

178,984
178,835

178,835—(3) Short-term investments

16

16

(0)

(4) Short-term loans receivable

825

825

—

(5) Investments in securities

11,777

12,682904(6) Long-term loans receivable

1,798
144

—

Allowance for doubtful accounts

Allowance for doubtful accounts(149)(1,653)144(7) Doubtful accounts
Allowance for doubtful accounts

902
(878)
24

24

—

Total assets

265,490

266,395

904(8) Notes and accounts payable(115,210)(115,210)—(9) Import bills payable(27,610)(27,610)—(10) Short-term borrowings(80,792)(80,792)—(11) Accrued income taxes(1,951)(1,951)—(12) Long-term borrowings(61,113)(61,222)(108)

Total liabilities(286,678)(286,787)

(108)

497

497

—

Derivatives(Notes)1. Fair value measurements of financial instruments and investment securities and derivative transaction
Assets(1) Cash and bank deposits, (2) Notes and accounts receivable and (4) Short-term loans receivable
The carrying amounts are used as the fair values since these instruments are short-term maturities and the fair values approximate their carrying amount.
(3) Short-term investments and (5) Investments in securities
Fair value of marketable shares is estimated using quoted market price. Fair value of bonds is estimated using quoted market price or quoted price by financial institutions.
Further information about investments in securities is described in Note 12. Short-term Investments and Investments in Securities.
(6) Long-term loans receivable
Fair value of long-term loans receivable with variable interest rates is thought to approximate the carrying amount and is thus stated at that carrying amount. Fair value of long termloans corresponding to doubtful accounts is stated at the balances after deducting an allowance for doubtful accounts. Because the Companies provide an allowance for doubtful
accounts based on estimates of collectability, fair value approximates the balances after deducting an allowance for doubtful accounts.
(7) Doubtful accounts
Fair value of net doubtful accounts (offsetting doubtful accounts against allowance) approximates the carrying amount because the Companies provide an allowance for
doubtful accounts based on estimates of collectability by utilizing securities, guarantees and insurance or discounted cash flow analysis.
Liabilities(8) Notes and accounts payable, (9) Import bills payable, (10) Short-term borrowings and (11) Accrued income taxes
Fair value of these instruments approximates the book value because of their short-term maturities.
(12) Long-term borrowings
Fair value of long-term borrowings is estimated based on discounted cash flow analysis, using assumed rates currently available for similar types of borrowings with similarterm 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. Fair value of long-term borrowings in which theseinterest rate swaps are embedded is also estimated based on discounted cash flow analysis, using assumed rates currently available for similar types of borrowings withsimilar term and remaining maturity.
Derivatives
Described in Note 13. Derivatives.

58

KANEMATSU ANNUAL REPORT 2015

2. Financial instruments with difficulty in estimating fair value

2014
Book value

JPY

USD

JPY

Unlisted investments in securities

20,560171,093

18,454Equity investments

2,161

17,985

1,965Classification

The above financial instruments are not included in “(5) Investments in securities” because it is not practicable to estimate the fair value due to difficulty in estimating fairvalue as market price is not available.

Kanematsu’s Progress andStrengths

2015
Book value

3. Maturity schedule of monetary assets and investments in securities having maturity
Fiscal year ended March 31, 2015
Over one year andwithin five years

Over five years andwithin ten years

JPY

USD

JPY

JPY

USD

JPY

Cash and bank deposits

68,468569,762

—

—

—

—

—

—

Notes and accounts receivable (Note 3-1)

180,160

1,499,212

—

—

—

—

—

—

USD

Over ten years
USD

Short-term investments
Held-to-maturity bonds

3

33

—

—

—

—

—

—

Short-term loans receivable

297

2,472

—

—

—

—

—

—

Held-to-maturity bonds

—

—

14

124

—

—

—

—

Other Securities

—

—

1,000

8,322

—

—

—

—

—

—

71

592

23

199

305

2,546

Special Feature:
Realizing VISION-130

Within one year

Investments in securities

Doubtful accounts (Note 3-3)
Total

—

—

14

117

—

—

—

—

248,929

2,071,479

1,100

9,154

23

199

305

2,546

(Notes) 3-1. Allowance for doubtful accounts of ¥158 million ($1,321 thousand) is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥1,733 million ($14,429 thousand) is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥751 million ($6,256 thousand) is not included in doubtful accounts.

Review of Operations

Long-term loans receivable (Note 3-2)

Fiscal year ended March 31, 2014
Over one year andwithin five years

Over five years andwithin ten years

Over ten years

JPY

JPY

JPY

JPY

Cash and bank deposits

73,867———

Notes and accounts receivable (Note 3-1)

178,835———

Held-to-maturity bonds

16

—

—

—

Short-term loans receivable

825

—

—

Short-term investments

Investments in securities
—

14

—

Long-term loans receivable (Note 3-2)

Held-to-maturity bonds

—

106

38

—

Doubtful accounts (Note 3-3)

—

24

—

—

253,544

145

38

Total

—

CSR and Corporate GovernanceWithin one year—
Financial Section andCompany Information(Notes) 3-1. Allowance for doubtful accounts of ¥149 million is not included in notes and accounts receivable.
3-2. Allowance for doubtful accounts of ¥1,653 million is not included in long-term loans receivable.
3-3. Allowance for doubtful accounts of ¥878 million is not included in doubtful accounts.
4. Borrowings repayment schedule

KANEMATSU ANNUAL REPORT 201559

Fiscal year ended March 31, 2015

Short-termborrowings
Long-term
borrowings
Total

Within one year

Over one year andwithin two years

Over two years andwithin three years

JPY

USD

JPY

JPY

61,688513,344

—

—

—

—

—

—

27,277226,989

21,89961,688513,344

27,277226,989

21,899USD

Over three years andwithin four years

USD

JPY

Over four years andwithin five years

USD

JPY

Over five years

USD

JPY

USD

—

—

—

—

—

—

182,235

4,580

38,120

11,25393,6459,416

78,356

182,235

4,580

38,120

11,25393,6459,416

78,356

Fiscal year ended March 31, 2014

Short-termborrowings
Long-term
borrowings
Total

Within one year

Over one year andwithin two years

Over two years andwithin three years

Over three years andwithin four years

Over four years andwithin five years

Over five years

JPY

JPY

JPY

JPY

JPY

JPY

80,792

—

—

—

—

—

—

20,922

25,137

6,864

4,007

4,182

80,792

20,922

25,137

6,864

4,007

4,182

12. Short-term Investments and Investments in Securities
1. “Held to maturity debt securities” with fair value
Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)
Balance sheet amount
Category

Securities with market value
exceeding their book value

Government bonds

Securities with market value notexceeding their book value

Government bonds

Total

Fair value

Difference

JPY

USD

JPY

USD

JPY

USD

14

124

14

124

0

0

3

33

3

33

(0)

(0)

18

157

18

157

0

0

Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Balance sheet amount

Fair value

Difference

JPY

JPY

JPY

31

31

(0)

Category

Securities with market value notexceeding their book value

Government bonds

2. “Other securities” with fair value
Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)
Balance sheet amount

Securities with book value
exceeding their acquisition cost

Total

Difference

JPY

USD

JPY

USD

JPY

USD

(1) Equity securities

13,262

110,361

7,379

61,408

5,882

48,953(2) Corporate bonds
Subtotal

Securities with book value notexceeding their acquisition cost

Acquisition cost

Category

—

—

—

—

—

—

13,262

110,361

7,379

61,408

5,882

48,953(240)(1) Equity securities

79

660

108

900

(28)

(2) Corporate bonds

1,000

8,322

1,000

8,322

—

—

Subtotal

1,079

8,981

1,108

9,221

(28)

(240)

14,341

119,342

8,487

70,6295,853

48,713(Note) Unlisted investments in securities (book value of ¥16,883 million ($140,497 thousand)) and equity investments (book value of ¥1,591 million ($13,245 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 notavailable.

60

KANEMATSU ANNUAL REPORT 2015

Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Acquisition cost

Difference

JPY

JPY

Securities with book value
exceeding their acquisition cost

Equity securities

JPY

Securities with book value notexceeding their acquisition cost

Equity securities

8,729

5,941

2,788

Total

290

336

(46)

9,020

6,278

2,741

Kanematsu’s Progress andStrengths

Balance sheet amount
Category(Note) Unlisted investments in securities (book value of ¥15,890 million) and equity investments (book value of ¥1,513 million) are not included in “Other securities” above
because they are not practicable to estimate the fair value due to difficulty in estimating fair value as market price is not available.

3. Sold “Other securities”
Special Feature:
Realizing VISION-130

Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)
Sales proceeds
Category

Equity securities

Gains on sales

Losses on sales

JPY

USD

JPY

USD

JPY

USD

20

172

10

86

0

(0)

Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)
Sales proceeds

Gains on sales

Losses on sales

JPY

JPY

JPY

580

230

12

Category

Equity securities

The total impairment loss amount recognized of investments in securities is ¥29 million ($249 thousand) in the current fiscal year (from April
1, 2014 to March 31, 2015), and ¥55 million in the previous fiscal year (from April 1, 2013 to March 31, 2014).
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 pricerecovery or financial position. For those determinations, fair value is primarily based on average of daily market price for one-month before
the balance sheet date.

Review of Operations

4. Securities on which impairment loss was recognized

13. Derivatives(1) Currencies:
Fiscal year ended March 31, 2015
Notional amount ofcontracts
Classification

Transaction type

JPY

USD

Amount of over-one-year
contracts
JPY

Fair value

USD

JPY

Unrealized gain or (loss)
USD

JPY

USD

Foreign exchange contracts
Selling
U.S. dollar (USD)

52,725

—

—

(119)

(990)

(119)

(990)

333

2,773

—

—

6

50

6

50

Australian dollar (AUD)

133

1,110

—

—

4

33

4

33

Other currencies

126

1,056

—

—

(10)

(90)

(10)

(90)

6,929

57,665

—

—

(119)

(996)

(119)

(996)

28,446

236,715

—

—

1,550

12,902

1,550

12,902

462

3,848

—

—

(12)

(104)

(12)

(104)

2

24

—

—

0

0

0

0

109

912

—

—

0

2

0

2

29,021

241,500

—

—

1,538

12,801

1,538

12,801

—

—

—

—

—

—

1,418

11,805

Subtotal
BuyingU.S. dollar (USD)
Euro (EUR)
Pound sterling (GBP)
Other currencies
Subtotal
Total

Financial Section andCompany Information

Off market
transactions

6,335

Euro (EUR)

CSR and Corporate Governance

1. Derivative transactions to which hedge accounting is not applied(Note) Basis of fair value calculation
Fair value is calculated based on the quoted price by financial institutions.

KANEMATSU ANNUAL REPORT 2015

61

Fiscal year ended March 31, 2014

Classification

Notional amount ofcontracts

Amount of over-one-year
contracts

Fair value

Unrealized gain or (loss)

JPY

JPY

JPY

JPY

Transaction type

Foreign exchange contracts
Selling
10,240—5151Euro (EUR)

U.S. dollar (USD)

497

—

(4)

(4)

Australian dollar (AUD)

116

—

(1)

(1)

Other currencies

79

—

4

4

10,933—49

49

Subtotal
BuyingU.S. dollar (USD)

Off market
transactions

28,127

—

505

505

Euro (EUR)

190

—

9

9

Australian dollar (AUD)

36

—

0

0

Pound sterling (GBP)

6

—

0

0

105

—

(4)

(4)

28,465

—

511

511

14

—

0

0

14

—

0

0

14

—

(0)

(0)

14

—

(0)

(0)

—

—

—

560

Other currencies
Subtotal
Currency option contracts
Selling
Call
U.S. dollar (USD)
Subtotal
BuyingPut
U.S. dollar (USD)
Subtotal
Total(Note) Basis of fair value calculation
Fair value is calculated based on the quoted price by financial institutions.

(2) Interest rate:
Fiscal year ended March 31, 2015
Notional amount ofcontracts
Classification

Off market
transactions

Transaction type

Amount of over-one-year
contracts

Fair value

Unrealized gain or (loss)

JPY

USD

JPY

USD

JPY

USD

JPY

USD

2,000

16,643

—

—

(9)

(79)

(9)

(79)

2,000

16,643

—

—

(9)

(79)

(9)

(79)

Interest rate swap contracts
Pay-fixed, receive-variableinterest rate swap
Total

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

Fiscal year ended March 31, 2014

Classification

Off market
transactions

Transaction type

Notional amount ofcontracts

Amount of over-one-year
contracts

Fair value

Unrealized gain or (loss)

JPY

JPY

JPY

JPY

15,00013,000

(375)

(375)

15,00013,000

(375)

(375)

Interest rate swap contracts
Pay-fixed, receive-variableinterest rate swap
Total

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

62

KANEMATSU ANNUAL REPORT 2015

Notional amount ofcontracts
Classification

Amount of over-one-year
contracts

Fair value
JPY

Unrealized gain or (loss)

JPY

USD

JPY

USD

Selling

1,611

13,409

12

101

54

451

54

451

Buying

1,947

16,207

49

412

(39)

(330)

(39)

(330)

Selling

1,860

15,481

—

—

91

764

91

764

Buying

1,051

8,750

—

—

(16)

(136)

(16)

(136)

—

—

—

—

—

—

89

749

Transaction type

USD

JPY

USD

Commodity future contracts
Foods & Foodstuff
Markettransactions

Kanematsu’s Progress andStrengths(3) Commodities:
Fiscal year ended March 31, 2015

EnergyFiscal year ended March 31, 2014

Classification

Notional amount ofcontracts

Amount of over-one-year
contracts

Fair value

Unrealized gain or (loss)

JPY

JPY

JPY

JPY

Selling

5,364

11

(175)

(175)

Buying

3,989

—

147

147
(4)

Transaction typeSpecial Feature:
Realizing VISION-130

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

Commodity future contracts
Foods & Foodstuff

EnergySelling

643

—

(4)

Buying

739

—

3

3

Total

—

—

—

(29)

Review of Operations

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

CSR and Corporate Governance
Financial Section andCompany Information

KANEMATSU ANNUAL REPORT 201563

2. Derivative transactions to which hedge accounting is applied(1) Currencies:
Fiscal year ended March 31, 2015
Hedge
accounting
methodNotional amount ofcontracts

Amount of over-one-year
contracts

USD

2,012

16,749

—

332

2,770

—

Pound sterling (GBP)

22

189

—

—

0

0

Australian dollar (AUD)

12

104

—

—

(0)

(2)

Main hedged items

JPY

USD

Fair value

JPY

Transaction type

JPY

USD

—

(198)

(1,650)

—

24

206

Foreign exchange contracts
Selling
U.S. dollar (USD)
Euro (EUR)

Forecasted foreign
currency transactions

Other currencies
Principle
hedge
Accounting

Subtotal

1,255

—

—

(8)

(73)

21,068

—

—

(182)

(1,519)26,661

221,866

901

7,501

1,195

9,945

BuyingU.S. dollar (USD)
Australian dollar (AUD)

1,093

9,102

—

—

(32)

(267)

811

6,750

—

—

(30)

(257)

Pound sterling (GBP)

35

298

—

—

(0)

(3)

Canadian dollar (CAD)

28

240

—

—

(0)

(3)

Other currencies

348

2,897

—

—

(2)

(21)

28,979241,152

901

7,501

1,128

9,394

331

2,759

—

—

—

—

137

1,146

—

—

—

—

Euro (EUR)

Forecasted foreign
currency transactions

SubtotalSpecific
matching
criteria

150
2,531

Selling
U.S. dollar (USD)
Euro (EUR)

Accounts receivable

Other currencies
Subtotal

17

146

—

—

—

—

486

4,050

—

—

—

—

83

697

—

—

—

—

44

368

—

—

—

—

1

9

—

—

—

—

308

2,565

—

—

—

—

437

3,639

—

—

—

—

BuyingEuro (EUR)
U.S. dollar (USD)
Pound sterling (GBP)
Other currencies
Subtotal

Accounts payable(Note) Basis of fair value calculation
Fair value is calculated based on quoted price by financial institutions for principle hedge accounting. For certain contracts designated as hedging instruments that meet specificmatching 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.

64

KANEMATSU ANNUAL REPORT 2015

Fiscal year ended March 31, 2014

Transaction type

Notional amount ofcontracts

Amount of over-one-year
contracts

Fair value

JPY

JPY

JPY

Main hedged items

Kanematsu’s Progress andStrengths

Hedge
accounting
methodForeign exchange contracts
Selling
U.S. dollar (USD)
Euro (EUR)

Forecasted foreign
currency transactions

Pound sterling (GBP)

9

509

—

(29)
(7)

60

—

(0)

Australian dollar (AUD)

44

—

(1)

Other currencies

149

—

(4)

4,205

9

(45)

21,484

1,468

239

927

—

128

SubtotalSpecial Feature:
Realizing VISION-130

Principle
hedge
Accounting

3,441

BuyingU.S. dollar (USD)
Euro (EUR)
Australian dollar (AUD)

Forecasted foreign
currency transactions

323

—

24

Canadian dollar (CAD)

28

—

(0)

Pound sterling (GBP)

3

—

0

432

—

1

23,1991,468

393

Other currencies
Subtotal
SellingEuro (EUR)

Accounts receivable

Other currencies
Specific
matching
criteria

Subtotal

129

—

—

3

—

—

44

—

—

176

—

—

65

—

—

33

—

—

19

—

—

117

—

—

Review of Operations

U.S. dollar (USD)

BuyingU.S. dollar (USD)
Euro (EUR)

Accounts payable

Other currencies
Subtotal(2) Interest rate:
Fiscal year ended March 31, 2015
Hedge
accounting
methodSpecific
matching
criteria

Notional amount ofcontracts
Transaction typeInterest rate swap contracts
Pay-fixed, receive-variableinterest rate swap

Main hedged items

Long-term
borrowings

Amount of over-one-year
contracts

Fair value

JPY

USD

JPY

USD

JPY

USD

26,454

220,145

24,276

202,014——

Fiscal year ended March 31, 2014
Hedge
accounting
methodSpecific
matching
criteria

Transaction typeInterest rate swap contracts
Pay-fixed, receive-variableinterest rate swap

Main hedged items

Long-term
borrowings

Notional amount ofcontracts

Amount of over-one-year
contracts

Fair value

JPY

JPY

JPY

28,531

9,778—

Financial Section andCompany Information(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 areadded 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.

CSR and Corporate Governance(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 specificmatching 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.

(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 areadded 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.

KANEMATSU ANNUAL REPORT 201565

(3) Commodities:
Fiscal year ended March 31, 2015
Notional amount ofcontracts

Hedge
accounting
methodAmount of over-one-year
contracts

Fair value

Main hedged items

JPY

USD

JPY

USD

Forecasted
transactions oncommodity trading

169

1,409

—

—

16

140

223

1,857

—

—

(54)

(455)

Transaction type

JPY

USD

Commodity future contracts
Principle
hedge
accounting

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

Fiscal year ended March 31, 2014
Hedge
accounting
methodNotional amount ofcontracts

Amount of over-one-year
contracts

Fair value

Main hedged items

JPY

JPY

JPY

Forecasted
transactions oncommodity trading

618

—

(66)

327

—

59

Transaction type

Commodity future contracts
Principle
hedge
accounting

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

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

JPY

Beginning balance of plan assets

Beginning balance ofretirement benefit obligations
Cumulative effects ofchanges in accounting
policies

USD

14,811

14,013

123,252

797

—

6,638

Restated balance

15,60814,013

129,890

Service cost

920

851

7,661

Interest cost

143

242

1,196

Actuarial gains and losses

(16)

409

(137)

(1,466)(759)(12,205)

Benefit payments
Transfers regarding a change
in calculation from
simplified method toprinciple method

272

—

2,265

Other

65

54

542

15,527

14,811

129,212Ending balance of retirement
benefit obligations

KANEMATSU ANNUAL REPORT 2015

12,44911,562

103,601

257

237

2,145

222

2,479

Employer contributions

913

1,084

7,603

(1,195)(697)(9,947)

33

40

279

12,757

12,449106,158

Benefit payments
Ending balance of plan assets

2015

2015

297

(1) Reconciliation of beginning and ending balances ofretirement benefit obligations
2014

2014

Actuarial gains and losses

2. Defined benefit plans

2015

USD

2015

Expected return onplan assets

Other

JPY

66

(2) Reconciliation of beginning and ending balances ofplan assets(3) Reconciliation of beginning and ending balances ofnet defined benefit liability for the plans applying
the simplified method
JPY

Beginning balance of net
defined benefit liability

USD

2015

2014

2015

18,885

2,269

2,228

Retirement benefit expenses

326

266

2,719

Benefit payments

(206)

(197)

(1,717)

Contribution to plans

(68)

(28)

(571)

Changes of scope of
consolidation

118

—

989

Transfers regarding a change
in calculation from
simplified method toprinciple method

(272)

—

(2,265)Ending balance of net defined
benefit liability

2,167

2,269

18,039

JPY

USD

2015

2014

14,284

123,177(13,422)(12,841)(111,695)

1,379

1,442

11,482Retirement benefit obligationsof unfunded plan

3,558

3,188

29,611

Net of liability and asset on
consolidated balance sheet

4,938

4,630

41,093Net defined benefit liability

5,137

4,630

42,751

Net defined benefit assets

(199)

—

(1,658)

4,630

41,093(5) Details of retirement benefit expenses
JPY

USD

2014

2015

920

851

7,661

Interest cost

143

242

1,196

Expected return on plan assets

(257)

(237)

(2,145)

Amortization of actuarial gains
and losses

(14)

268

(123)

Retirement benefit expenses
calculated with simplified
method

326

266

2,719

Other

71

—

598

1,190

1,391

9,906

Retirement benefit expenses ofdefined benefit plans

JPY

Actuarial gains and losses
Total

2015

4

301

35

4

301

35

(8) Plan assets[1] Major categories of plan assets
Percentages of the major categories for total of plan assets are
as follows:
%

2015

2014

Debt securities

38.7

39.1

Equity securities

10.5

10.9

Life insurance company general accounts

43.5

43.2

Other

7.3

6.9

100.0

100.0

Total

[2] Method of setting expected long-term rates of return
Current and expected allocations of plan assets and long-term
rates of return from variety of assets comprise plan assets are considered to determine the expected long-term rates of return onplan assets.
(9) Assumptions used in actuarial valuations
Principal assumptions used in actuarial valuations (by weighted
average) are as follows:
%

2015

2014

Discount rates

0.7

1.6

Expected long-term rates of return onplan assets

2.2

1.9

USD

2015

2014

2015

(297)

—

(2,478)(297)—(2,478)

3. Defined contribution plans
Contributions charged for the defined contribution plans of theCompany and its certain consolidated subsidiaries were ¥202 million ($1,685 thousand) in the current fiscal year, and ¥243 million
in the previous fiscal year.

Fiscal year ended March 31, 2015 (April 1, 2014 toMarch 31, 2015)
Not applicable.

Fiscal year ended March 31, 2014 (April 1, 2013 toMarch 31, 2014)
Not applicable.

KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information

15. Stock Options

CSR and Corporate Governance(6) Remeasurements of defined benefit plans
Details of remeasurements of defined benefit plans (before adjusting for tax effects) are as follows:

Total

2014

Review of Operations

2015

Service cost

Unrecognized actuarial gains
and losses

USD

2015

Special Feature:
Realizing VISION-130

14,802

Plan assets

4,938

JPY

2015

Retirement benefit obligationsof funded plan

Net of liability and asset on
consolidated balance sheet(7) Accumulated remeasurements of defined benefit plans
Details of accumulated remeasurements of defined benefit plans(before adjusting for tax effects) are as follows:

Kanematsu’s Progress andStrengths(4) Reconciliation of ending balances of retirement benefit
obligations / plan assets and net defined benefit liability/ asset on consolidated balance sheet

67

16. Deferred Taxes
1. Major components of deferred tax assets and deferred
tax liabilities
JPY

2015

USD

2014

2. Major reconciliation items between the statutory
effective tax rate and the effective income tax rate
after the application of deferred tax accounting.
%2015

Deferred tax assets
Net defined benefit liability

1,614

1,542

13,435

Statutory effective tax rate

2015

2014

35.6

38.0

(Reconciliation)

Allowance for doubtful
accounts

3,747

4,140

31,182Inventories

1,759

1,821

14,645

Permanent differences—additions
such as entertainment expenses

2.1

1.9

Change in valuation allowance

0.8(19.1)

Impairment loss on
fixed assets

1,673

1,554

13,927

Effect of tax rate differences

1.7

1.0

Investments in securities

2,403

2,632

20,005

Tax reform

5.5

1.5

Golf club memberships

447

480

3,724

Other

(7.3)

2.7

Tax loss carried forward

9,264

13,35877,09838.3

26.0

Net gains (losses) on
deferred hedges
Other

—

11

—

3,593

3,522

29,905

Deferred tax assets subtotal

24,50529,065203,920

Valuation allowance(14,003)(15,058)(116,532)

Total deferred tax assets

10,501

14,00687,388Retained earnings
in subsidiaries

(252)

(258)

(2,100)Net gains (losses) on
deferred hedges

(275)

—

(2,291)

Net unrealized gains on
securities(1,892)(956)(15,745)

Other

Deferred tax liabilities(1,676)(1,719)(13,955)

Total deferred tax liabilities(4,096)(2,933)(34,091)

Net deferred tax assets

6,404

11,07253,297(Note) Net deferred tax assets recorded in the consolidated balance sheets
JPY

USD

2015

2014

2015

Current assets—deferred tax assets

3,250

2,660

27,053Long-term assets—deferred tax assets

3,643

8,782

30,317

(1)

(1)

(10)

Current liabilities—
deferred tax liabilities
Non-current liabilities—
deferred tax liabilities

(488)

(368)

(4,063)Net deferred tax assets

6,404

11,07253,297

Effective income tax rate

3. Adjustment of deferred tax assets and liabilities inconnection with changes in the rates of corporate
income tax:
On March 31, 2015, “Partial Revision of Income Tax Act, etc.” (ActNo.9 of 2015) and “Partial Revision of Local Tax Act, etc.” (ActNo.2 of 2015 ) were enacted. Under these Acts, the reduction in
the corporate tax rate will become effective from the fiscal year
beginning on or after April 1, 2015. As a result of this change, thestatutory effective tax rate being applied in the deferred tax calculation reduced from 35.6% to 33.1% for the temporary differences which will be deducted during the fiscal year beginning on April
1, 2015, and 32.3% for those which will be deducted during andafter the fiscal year beginning on April 1, 2016.
As a result, deferred tax assets (net of deferred tax liabilities)
decreased by ¥569 million ($4,742 thousand), and deferredincome tax, net unrealized gains on securities and net gains ondeferred hedges increased by ¥785 million ($6,532 thousand),¥194 million ($1,620 thousand) and ¥20 million ($170 thousand),
respectively.
In addition, utilization of tax loss carried forward is limited to 65%
of taxable income in the fiscal year beginning on April 1, 2015 and
50% in the fiscal year beginning on April 1, 2017. Due to thechange, deferred tax assets decreased by ¥489 million ($4,069 thousand) and deferred income tax increased by the same amount.

17. Business Combinations
Business combination by means of acquisition
1. Outline of the business combination(1) Name of the acquired company: Kanematsu-NNK
Corporation (“KNN”)
Content of business: Security equipment business, Geo-tech(Ground improvement) business, wood processing business andpetroleum product business(2) Purpose of the business combination
The Company judged that through strengthening the capital relationship between KNN and the Company, it would accelerate decision-making and strategy execution and collaboration of security

68

KANEMATSU ANNUAL REPORT 2015

camera business of KNN and Electronics & Device Division of theCompany, thus the business combination would contribute tostrengthening the business base further and enhancing the corporate value of KNN and the Companies.
(3) Date of the business combination
December 24, 2014 (Date of the acquisition of shares )December 31, 2014 (Date regarded as date of the acquisition)(4) Legal form of the business combination
Acquisition of shares for cash consideration (Tender offer)

(5) Company name after the combination
Kanematsu-NNK Corporation

Transaction under common control, etc.

32.1 percent
18.9 percent
51.0 percent

2. Period of the performance of the acquired company in the
consolidated financial statements
The performance of the KNN from January 1, 2015 to March 31,
2015 is included in the consolidated financial statements. The performance of the KNN from April 1, 2014 to December 31, 2014 isincluded in the consolidated statement of income through equity
in earnings of affiliates.

Total costs($35,809 thousand)($13,042 thousand)($619 thousand)

5. Amount, cause and method and period of amortization of
goodwill(1) Amount of goodwill¥1,644 million ($13,683 thousand)(2) Cause of goodwill
The excess of acquisition costs over the net of the assets andliabilities on the day of the business combination

3. Items regarding additional acquisition of shares ofthe subsidiary(1) Acquisition costs and those details
Cash paid for the acquisition ¥1,839 million ($15,306 thousand)
Other acquisition costs¥107 million($892 thousand)Total costs¥1,946 million($16,199 thousand)

6. Assets and liabilities on the day of the business combination
JPY

USD

Current assets

4,891

40,703Long-term assets

3,260

27,130Total assets

8,151

67,834Current liabilities

2,427

20,199

511

4,256

2,938

24,455(3) Cause of goodwill
Due to the difference between the additional acquisition costs ofshares of the subsidiary and the amount of decreases in minority
interests with the transaction.

Financial Section andCompany Information(2) Amount of goodwill¥981 million ($8,171 thousand)(3) Method and period of amortization of goodwill
Straight line method over 10 years

Total liabilities

2. Outline of accounting treatment
Based on the Accounting Standard for Business Combinations (ASBJ
Statement No. 21, released December 26, 2008) and the Guidanceon Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures (ASBJ Guidance No. 10, released
December 26, 2008), it was treated as a transaction with minority
shareholders of transaction under common control, etc.

CSR and Corporate Governance

4. Gain on step acquisitions ¥1,123 million ($9,351 thousand)(5) Other outlines of the transaction
KEL additionally acquired the shares of NOS through tender offer inorder to make NOS a wholly owned subsidiary.

Review of Operations($22,149 thousand)Non-current liabilities(3) Legal form of the business combination
Acquisition of shares from minority shareholders(4) Company name after the acquisition
Nippon Office Systems Ltd.

3. Acquisition costs and those details
Consideration for acquisition
Fair value of shares of KNN
granted before the date of
the business combination ¥2,661 million
Fair value of shares of KNN
granted at the date of
the business combination ¥1,567 million
Other acquisition costs¥74 million¥4,302 million(2) Date of the business combination
March 26, 2015 (Date of the acquisition of shares)
March 31, 2015 (Date regarded as date of the acquisition)

Special Feature:
Realizing VISION-130(7) Basis for deciding the acquiring company
It is because the Company acquired the shares of KNN for
cash consideration.

Kanematsu’s Progress andStrengths(6) Percentage of the voting rights
Percentage of the voting rights before
the acquisition
Percentage of the additional acquisition of
the voting rights
Percentage of the voting rights after
the acquisition(Additional acquisition of shares by a subsidiary)
1. Outline of the transaction(1) Name of the acquiring company: Kanematsu Electronics
Ltd. (“KEL”)
Content of business: KEL designs and implements information systems and provides operation and consulting services for businesses
based on KEL’s expertise in information technologies. KEL retails,
leases, maintains, develops IT system products and software, andalso send loan engineers.
Name of the acquired company: Nippon Office Systems Ltd.
(“NOS”, a consolidated subsidiary of KEL)
Content of business: Information service business and Systemsales business(4) Method and period of amortization of goodwill
Straight line method over 5 years

KANEMATSU ANNUAL REPORT 201569

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

3. Changes in asset retirement obligations
JPY

1. Overview of asset retirement obligations

USD

2015

2014

2015

Asset retirement obligations are the obligations of restoring offices
and shops based on the contracts of rental estate.

Balance at the beginning of
the fiscal year

811

860

6,749

2. Method of calculating asset retirement obligations

Acquisition of tangible
fixed assets

62

116

524

Asset retirement obligations are calculated using the estimateduseful lives of 4–50 years and the discount rates of 0.021–2.301%.

Adjustment due to passageof time

15

15

129

Fulfillment of asset retirement
obligations

(22)

(75)

(183)

Other

49

(105)

414

Balance at the end of
the fiscal year

917

811

7,633

19. Investment and Rental Properties
Fiscal year ended March 31, 2015 (April 1, 2014 toMarch 31, 2015)
As the amount of investment and rental properties is immaterial,
the description is not disclosed.

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

20. Segment Information
Segment Information
1. Overview of reportable segments
The reportable segments of the Companies are components of theCompanies for which discrete financial information is available andare regularly reviewed by the management to make decisions
about management resources to be allocated and assess its business performance.
The Companies operate its businesses by offering a broad arrayof products and services based on an organic combination ofexpertise that has been cultivated through networks in Japan andin other countries and in each business field, and trading functions
such as commercial trade, information gathering, market development, business development and arrangement, risk management,
and logistics.
The Companies therefore consists of products and service segments based on its business units: “Electronics & Devices”, “Foods& Grain”, “Steel, Materials & Plant”, and “Motor Vehicles &Aerospace”.
The principal products and services handled by each segment are
as follows:(Electronics & Devices)
This segment provides a wide range of products including electronic parts and components, semiconductor and LCD manufacturing
equipment, materials and indirect materials related to electronics,
together with services including development and proposals. This
segment also conducts sales of batteries, LED, etc. to retailers anddeals with mobile communications terminals, mobile internet systems, and information, telecommunication, and security equipment and services.
(Foods & Grain)This segment integrates the handling of a broad array of food andfoodstuffs, with operations ranging from reliably sourcing raw
materials to providing food and foodstuffs, including high70

KANEMATSU ANNUAL REPORT 2015

value-added products. Products in this segment includes cooked
foods, processed fruits, processed agricultural products, beverage
ingredients, animal and fishery products, wheat, rice, soybeans,
feedstuff and pet foods.
(Steel, Materials & Plant)This segment operates the domestic and international trade ofgeneral steel products including steel plates, bars and wire rods,
pipes, and stainless products, carries out overseas projects such as
plant and infrastructure development, and sells machine tools andindustrial machinery. Additionally, this segment operates thedomestic and international trade of crude oil, petroleum products,
LPG, functional chemicals and food products, pharmaceuticals andpharmaceutical intermediates, and other products. It also develops
environmental materials such as heat shield paints and new technologies, and operates businesses related to emissions rights.
(Motor Vehicles & Aerospace)
This segment primarily operates international trade of aircrafts andaircraft parts, satellite- and aerospace-related products, automobiles, motorcycles and related parts, industrial vehicles, construction machinery, etc., and also provides products with added value
based on demand or use.

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

3. Information on net sales, profits or losses, assets and other amounts of reportable segments(JPY)

Reportable segments
Adjustment(Note 2)

Amount inconsolidated
statements(Note 3)

1,117,096—

1,117,096

530

(530)

—

1,117,627(530)

1,117,096

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Electronics &Devices

Foods &
Grain

Steel,
Materials &Plant

276,501

307,732

467,849

59,675

1,111,758

5,338

353

5

111

0

471

59

276,854

307,738

467,960

59,675

1,112,229

5,397

Net sales
Customers
Inter-segment
Total

9,907

1,933

7,283

2,755

21,880169

22,05075

22,125

Segment assets

133,002105,375

121,010

29,966389,355

11,642400,998

58,013459,011

Depreciation andamortization

1,257

577

912

422

3,170

79

3,250

(4)

3,245

Investments in equity
method affiliates

2,146

837

50

300

3,335

1,910

5,246

174

5,420

Increases in tangible fixed
assets and intangible
fixed assets

1,704

1,018

1,610

906

5,240

61

5,302

732

6,035

Other

Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)

(USD)

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

2,300,917 2,560,808 3,893,228 496,592

Electronics &Devices

Foods &
Grain

Adjustment(Note 2)

Amount inconsolidated
statements(Note 3)

9,295,967

Net sales
Customers
Inter-segment
Total

9,251,545

44,422

9,295,967

—

4

3,921

495

4,416

(4,416)—2,303,860 2,560,856 3,894,155 496,596

9,255,466

44,9179,300,383(4,416)

9,295,967

2,943

Segment income

82,445

Segment assets

1,106,788

48
16,092926

22,933

182,083

1,414

183,497625

184,122876,890 1,006,993 249,367

60,6123,240,039

96,885

3,336,923

482,759

3,819,682

Review of Operations

Reportable segments
Steel,
Materials &Plant

Special Feature:
Realizing VISION-130

Segment income

Kanematsu’s Progress andStrengths

Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)

Other
10,468

4,802

7,596

3,519

26,384661

27,045(40)

27,005Investments in equity
method affiliates

17,861

6,973

421

2,501

27,756

15,901

43,657

1,451

45,109

Increases in tangible fixed
assets and intangible
fixed assets

14,182

8,479

13,4037,547

43,611

513

44,124

6,097

50,221KANEMATSU ANNUAL REPORT 2015

Financial Section andCompany Information(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the logistics and insurance service business and the Geo-techbusiness, etc.
2. Adjustments are as follows.
(1) Adjustment for segment income of ¥75 million ($625 thousand) includes offset amount of goodwill of ¥62 million ($523 thousand) and inter-segment
elimination of 12 million ($102 thousand).
(2) Adjustment for segment assets of ¥58,013 million ($482,759 thousand) includes inter-segment elimination of (¥8,530) million (($70,986) thousand) andcorporate assets of ¥66,543 million ($553,745 thousand) that are not allocated to any reportable segment. The corporate assets consist mainly of cash and bankdeposits and investments in securities related to financing activities.
(3) Adjustment for depreciation and amortization of (¥4) million (($40) thousand) includes inter-segment elimination of (¥4) million (($40) thousand).
(4) Adjustment for investments in equity method affiliates of ¥174 million ($1,451 thousand) includes inter-segment elimination of (¥0) million (($3) thousand) andcorporate assets of ¥174 million ($1,455 thousand) that are not allocated to any reportable segment.
(5) Adjustment for increases in tangible fixed assets and intangible fixed assets of ¥732 million ($6,097 thousand) includes inter-segment elimination of (¥32)
million (($271) thousand) and corporate assets of ¥765 million ($6,368 thousand) that are not allocated to any reportable segment.
3. Segment income is adjusted for operating income in the consolidated statements of income.

CSR and Corporate Governance

Depreciation andamortization

71

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

Reportable segments
Electronics &Devices

Foods &
Grain

Steel,
Materials &Plant

277,348

309,024

468,83154,451

1,109,656

4,883

292

6

9

2

311

59

277,640

309,030

468,841

54,453

1,109,967

4,942

Adjustment(Note 2)

Amount inconsolidated
statements(Note 3)

1,114,539—

1,114,539

370

(370)

—

1,114,910(370)

1,114,539

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)Total

Net sales
Customers
Inter-segment
Total
Segment income

7,755

2,099

8,129

1,494

19,477224

19,70273

19,776

Segment assets

131,200

88,937

122,428

26,089368,655

7,956

376,61251,847428,459

Depreciation andamortization

1,276

525

883

392

3,079

94

3,173

(3)

3,170

Investments in equity
method affiliates

1,404

560

133

235

2,334

3,186

5,520

129

5,650

Increases in tangible fixed
assets and intangible
fixed assets

1,323

520

842

409

3,095

27

3,123

412

3,535

Other

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service
business, etc.
2. Adjustments are as follows.
(1) Adjustment for segment income of ¥73 million includes offset amount of goodwill of ¥77 million and inter-segment elimination of (¥3) million.
(2) Adjustment for segment assets of ¥51,847 million includes inter-segment elimination of (¥9,846) million and corporate assets of ¥61,693 million that are notallocated to any reportable segment. The corporate assets consist mainly of cash and bank deposits and investments in securities related to financing activities.
(3) Adjustment for depreciation and amortization of (¥3) million includes inter-segment elimination of (¥3) million.
(4) Adjustment for investments in equity method affiliates of ¥129 million includes inter-segment elimination of (¥0) million and corporate assets of ¥130 million
that are not allocated to any reportable segment.
(5) Adjustment for increases in tangible fixed assets and intangible fixed assets of ¥412 million includes inter-segment elimination of (¥20) million and corporate
assets of ¥432 million that are not allocated to any reportable segment.
3. Segment income is adjusted for operating income in the consolidated statements of income.

Related Information
Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)

1. Information by product and service
The classification of product and service is not disclosed because it is same as the classification of reportable segments.

2. Information by geographical area
(1) Net sales
Japan

Asia

North America

EuropeOther Areas

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

926,262

7,707,938

105,829880,661

56,280468,341

19,654

163,555

9,069

75,473

Total
JPY

USD

1,117,096 9,295,967(Note) Net sales are classified into countries and areas based on locations of customers.

(2) Tangible fixed assets
Japan

United States

Asia

EuropeOther Areas

Total

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

22,177

184,549

3,094

25,7491,223

10,182

2,422

20,15914119

28,931

240,758(Note) In the current fiscal year, the amount of tangible fixed assets of “United States” has been more than 10% of the amount of tangible fixed assets on the consolidatedbalance sheets and are therefore separated from “North America”. The information of the previous fiscal year has been reclassified to reflect this change in presentation.

3. Information by major customer
Not applicable.
Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)

1. Information by product and service
The classification of product and service is not disclosed because it is same as the classification of reportable segments.

72

KANEMATSU ANNUAL REPORT 2015

2. Information by geographical area
Kanematsu’s Progress andStrengths(1) Net sales
Japan

Asia

North America

EuropeOther Areas

JPY

JPY

JPY

JPY

JPY

Total
JPY

943,498

97,30451,947

14,954

6,833

1,114,539

Total(Note) Net sales are classified into countries and areas based on locations of customers.

(2) Tangible fixed assets
Japan

United States

Asia

EuropeOther Areas

JPY

JPY

JPY

JPY

JPY

JPY

18,951

2,087

877

2,292

9

24,218

Not applicable.

Information of impairment loss on fixed assets of reportable segments
Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)(JPY)

Special Feature:
Realizing VISION-130

3. Information by major customer

Reportable segments

Impairment loss

Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

137

0

437

0

574

—

574

6

580

(USD)

Reportable segments

Impairment loss

Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

1,145

0

3,637

0

4,783

—

4,783

51

4,834

Review of Operations

Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the logistics and insurance service business and the Geo-tech business, etc.
2. Adjustment for impairment loss of ¥6 million ($51 thousand) is a corporate loss that is not allocated to any reportable segment.

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

Impairment loss

Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

115

0

278

0

394

—

394

1,802

2,196

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the aluminum recycling business and the logistics and insurance service
business, etc.
2. Adjustment for impairment loss of ¥1,802 million is a corporate loss that is not allocated to any reportable segment.

Information of amortization of goodwill and balance of goodwill of reportable segments
Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)(Goodwill)(JPY)

Balance at the end of
the fiscal year

Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

198

50

179

9

437

—

437

(62)

374

3,493

261

2,306

1

6,063

—

6,063

0

6,063

(Negative goodwill)

Financial Section andCompany Information

Reportable segments

Amortization for the fiscal year

CSR and Corporate Governance

Reportable segments(JPY)
Reportable segments
Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

Amortization for the fiscal year

—

—

—

—

—

—

—

—

—

Balance at the end of
the fiscal year

—

—

—

—

—

—

—

—

—

KANEMATSU ANNUAL REPORT 201573

Fiscal year ended March 31, 2015 (April 1, 2014 to March 31, 2015)(Goodwill)(USD)
Reportable segments
Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

Amortization for the fiscal year

1,649

420

1,491

78

3,638

—

3,638

(523)

3,115

Balance at the end of
the fiscal year

29,073

2,175

19,19516

50,459—50,4591

50,460(Negative goodwill)(USD)
Reportable segments
Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

Amortization for the fiscal year

—

—

—

—

—

—

—

—

—

Balance at the end of
the fiscal year

—

—

—

—

—

—

—

—

—

(Notes) 1. “Other” is a business segment that is not included in the reportable segments and includes the logistics and insurance service business and the Geo-tech business, etc.
2. Negative goodwill recognized due to the combinations before April 1, 2010. The amounts of amortization of goodwill and negative goodwill are offset inconsolidated financial statements.
In addition, adjustments are as follows(1) Adjustment for amortization of goodwill for the fiscal year of (¥62) million (($523) thousand) includes offset amount of (¥62) million (($523) thousand).
(2) Adjustment for balance of goodwill at the end of the fiscal year of ¥0 million ($1 thousand) includes corporate assets of ¥0 million ($1 thousand) that are notallocated to any reportable segment.
(3) Adjustment for amortization of negative goodwill for the fiscal year includes corporate profits of ¥62 million ($523 thousand) that are not allocated to any
reportable segment and offset amount of (¥62) million (($523) thousand).

Fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)(Goodwill)(JPY)

Reportable segments

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

Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

132

16

156

6

312

0

312

(77)

235

1,034

20

2,173

9

3,238

—

3,238

(62)

3,175

(Negative goodwill)(JPY)
Reportable segments
Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Total

Amortization for the fiscal year

—

—

—

—

—

—

—

—

—

Balance at the end of
the fiscal year

—

—

—

—

—

—

—

—

—

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

74

KANEMATSU ANNUAL REPORT 2015

21. Disclosure of Related Party Transactions
Kanematsu’s Progress andStrengths

Fiscal year ended March 31, 2015 (April 1, 2014 toMarch 31, 2015)
Related party transactions:Not applicable.

Fiscal year ended March 31, 2014 (April 1, 2013 toMarch 31, 2014)
Related party transactions:Not applicable.

22. Information per Share
JPY

USD

2014

2015

Net assets per share

214.10170.54

1.78

Net income per share

27.30

28.09

0.23

2014

2015

(Notes) 1. Diluted net income per share for the term is not reported since there is no outstanding security with dilutive effect.
2. The supplemental information for the computation of net assets per share is as follows:
JPY

2015

USD

Total net assets

118,73196,20

988,032

Amount deducted from total net assets

28,63024,547238,247(minority interest in consolidated subsidiaries)(24,547)(238,247)

90,101

71,657

749,785

Number of common stock issued (thousand shares)

422,501

422,501

1,663

2,323

420,837

420,177

Number of treasury stock (thousand shares)
Number of common stock used for the calculation of net assets
per share (thousand shares)
3. The supplemental information for the computation of net income per share is as follows:

JPY

USD

2015

2014

2015

11,47011,79995,452———

Net income corresponding to common stock

11,47011,79995,452Average number of common stock for the term (thousand shares)

420,211420,060

Net income
Amount that does not belong to common shareholders

Review of Operations(28,630)

Net assets corresponding to common stock at the end of the fiscal year

Special Feature:
Realizing VISION-130

2015

CSR and Corporate Governance

23. Subsequent Events
Not applicable.

Financial Section andCompany Information

KANEMATSU ANNUAL REPORT 201575

24. Consolidated Supplementary Schedules(1) Schedule of bonds payable:
Not applicable.
(2) Schedule of borrowings:
Balance at the beginning of
the fiscal year

Balance at the end of
the fiscal year

Composite
interest rate

Due

JPY

USD

JPY

USD

%

Month, year

Short-term borrowings

36,387

302,797

39,841

331,545

0.9—

Current portion of long-term borrowings

44,405369,522

21,846

181,799

1.5

—

760

6,330

638

5,310

—

—

61,113

508,557

74,426619,344

1.5

April 2016-March 2022

Classification

Current portion oflease obligations
Long-term borrowings(excluding current portion)
Lease obligations(excluding current portion)
Total

1,033

8,597

1,286

10,708—

April 2016-January 2022

143,699

1,195,803

138,040

1,148,706——(Notes) 1. The composite interest rate is a weighted average interest rate for those outstanding at the end of the year.
2. The composite interest rate of lease obligations is not presented as lease obligations of the Company and certain of its subsidiaries comprise interest expenses
portion of total lease payments.
3. The long-term borrowings and lease obligations repayment schedule for next five years (excluding current portion) is as follows:

Over one year andwithin two years

Long-term borrowings
Lease obligations

Over two years andwithin three years

Over three years andwithin four years

Over four years andwithin five years

JPY

USD

JPY

USD

JPY

USD

JPY

USD

27,277226,989

21,899182,235

4,580

38,120

11,25393,645

401

3,344

303

2,527

252

2,103

212

1,769

(3) Schedule of asset retirement obligations:
According to the Article 92-2 of the “Regulations for Consolidated Financial Statements”, schedule of asset retirement obligations are notdisclosed, as the amount of “asset retirement obligations” is less than 1 percent of total amount of liabilities and net assets.

76

KANEMATSU ANNUAL REPORT 2015

To the Board of Directors of Kanematsu Corporation

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatements, whether due to fraud or error.

Financial Section andCompany Information

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31,
2015 are presented solely for convenience. Our audit also included the translation of Japanese yen amounts into U.S.
dollar amounts and, in our opinion, such translation has been made on the basis described in Note 3 to the consolidated
financial statements.

CSR and Corporate GovernanceOpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of theCompany and its consolidated subsidiaries as at March 31, 2015, and their financial performance and cash flows for theyear then ended accordance with accounting principles generally accepted in Japan.

Review of Operations

Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while thepurpose of the financial statements audit is not to express an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Special Feature:
Realizing VISION-130

We have audited the accompanying consolidated financial statements of Kanematsu Corporation (“the Company”) and its
consolidated subsidiaries, which comprise the consolidated balance sheets as at March 31, 2015, and the consolidated
statements of income, consolidated statements of comprehensive income, consolidated statements of changes in net
assets and consolidated statements of cash flows for the year then ended, and a summary of significant accounting
policies and other explanatory information.

Kanematsu’s Progress andStrengths

Independent Auditor’s Report

June 24, 2015

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

KANEMATSU ANNUAL REPORT 201577

Global Network(As of March 31, 2015)

Kanematsu supplies products and services through its large network of business bases in Japan and overseas. 92 subsidiaries and 30
affiliates ensure the Group’s global market reach.

6
1

2

3
4

39
5

38
13
28

12

27

7

19
25

20

15

14

34 31
33 32

37
35

8

11
9
16 10
17 18

36
40

22
21 21

24

NORTH AMERICA

23

31 New York26

EUROPE

32 Somerset

1 London

33 Chicago

2 Dusseldorf

34 Detroit
29

3 Munich

ASIA & THE MIDDLE EAST

4 Milan

8 Seoul19 Hanoi

5 Budapest

9 Shanghai

20 Haiphong

6 Moscow

10 Suzhou

21 21 Ho Chi Minh City

7 Las Palmas

11 Wuxi

22 Bangkok

30

Overseas subsidiaries
and their branches
Representative offices
Branches

24 Manila

14 Dalian

25 Yangon

15 Tianjin

26 Jakarta

16 Shenzhen

27 New Delhi

35 San Diego

CENTRAL &SOUTH AMERICA

36 Houston
37 Silicon Valley

OCEANIA
29 Sydney

12 Chongqing 23 Singapore
13 Beijing

41

38 Portland

40 Silao

39 Vancouver

41 Sao Paulo

30 Auckland

DOMESTIC OFFICES
4

1 Tokyo Head Office
2 Osaka

Midosuji Office

17 Hong Kong 28 Tehran

6

18 Taipei
2

3

1

5

3 Nagoya
4 Hokkaido
5 Kyushu
6 SendaiOrganization Chart(As of April 1, 2015)
Shareholder’s Meeting
Board of Directors

Audit & Supervisory Board

Management Committee

Marketing Area

Support Area
Steel, Materials & Plant Division

Motor Vehicles & Aerospace Division

Industrial Electronics Dept.

Electronics & Devices Division

Food Dept. No. 1

Iron & Steel Foreign Trade Dept.

Motor Vehicles & Parts Dept. No. 1

Personnel & General Affairs Dept.

Semiconductor Equipment Dept.

Food Dept. No. 2

Specialty Steel Foreign Trade Dept.

Motor Vehicles & Parts Dept. No. 2

Finance Dept.

Components & Material Dept.

Food Dept. No. 3

Functional Chemicals Dept.

Aerospace Dept.

Accounting Dept.

Electronic Components &Semiconductor Dept. No. 1

Meat Dept.

Energy Dept.

Business Accounting Dept.

Grain Dept.

Plant & Ships Dept.

Motor Vehicles &Aerospace Planning OfficeFeedstuff Dept.

Steel, Materials & Plant Planning Office

Credit Control Dept.

Agricultural Products & Oilseeds Dept.

Food Safety Management Office

Traffic & Insurance Dept.

Electronic Components &Semiconductor Dept. No. 2
Electronic Components &Semiconductor Marketing Dept.

78

Foods & Grain Division

Legal & Compliance Dept.

Domestic Sections

System Planning Dept.

System & Module Dept.

Foods & Grain Planning OfficeInternal Auditing Dept.

Electronics Planning Office

Food Safety Management System Office

Corporate Planning Dept.

KANEMATSU ANNUAL REPORT 2015

Major Group Companies(As of March 31, 2015)* Companies with shares listed on a stock exchange
Japan
Kanematsu Electronics Ltd.*
Nippon Office Systems Ltd.*
Kanematsu-NNK Corp.*
Kanematsu Communications Ltd.
Kanematsu Advanced Materials Corp.
Kanematsu PWS LTD.
Kantatsu Co., Ltd.
China
Kanekoh Electronics (Shanghai) Co., Ltd.

Foods & Grain

Kanematsu Soytech Corp.

Steel, Materials & Plants

Food wholesaling and cold storage
Manufacture and sales of feed and fertilizer
Sales of soybeans, pulses & peas, and grain; Development and marketing of tofu and other ingredientsfor processed foods
Manufacture and processing of mixed feeds
Operation of grain silos; Land/marine transport
Manufacture of pet snacks (jerky, dried meat, biscuits)
Sales of pet food and other products
Manufacture of dim sum and delicatessens
Production of processed vegetables and fruits
Production and sales of rice crackers
Processing and sales of aloe vera
Manufacture of processed foods; Management of central kitchen
Sales of hay and roughage
Seed development; Contract farming; Sorting, processing, and sales of food soybeans

Kanematsu Aerospace Corp.
Ireland
KG Aircraft Rotables Co., Ltd.
PolandAries Motor Sp. zo.o.
Aries Power Equipment Sp. zo.o.

OthersJapan
Kaneyo Co., Ltd.*
Hokushin Co., Ltd.*Aso Kanko Kaihatsu Co., Ltd.
Shintoa Corp.
Kanematsu Logistics & Insurance Ltd.
Japan Logistics Co., Ltd.
VietnamVietnam-Japan International Transport Co., Ltd.
Indonesia
P.T. Dunia Express Transindo

Sales of aircraft, defense, and aerospace-related products

Financial Section andCompany Information

Motor Vehicles & Aerospace Japan

CSR and Corporate GovernanceJapan
Kanematsu Trading Corp.
Sales of steel and construction materials
Kyowa Steel Co., Ltd.
Cutting and processing of steel sheet; Sales of construction materials
Eiwa Metal Co., Ltd.
Processing and sales of stainless steel, titanium, and high-alloy steels
Kanematsu Petroleum Corp.
Sales of petroleum products and LPG
Kanematsu Yuso Co., Ltd.
Delivery and storage of petroleum products
Kanematsu Chemicals Corp.
Sales of petrochemicals, automobile-related chemicals, health food ingredients, and pharmaceuticals
Kanematsu Wellness Corp.
Sales of health foods and provision of medical information
Miracool Co., Ltd.
Sales of heat reflective paintKanematsu KGK Corp.
Sales of machine tools and industrial machinery
KGK Engineering Corp.
Repair and sales of machine tools; Sales of paper-manufacturing machinery
China
Kanematsu Hoplee Co., Ltd.
Processing and marketing of steel sheets and plates
Kanematsu KGK Trade & Sales (Shanghai) Co., Ltd. Sales of machine tools and industrial machinery
ThailandKGK Engineering (Thai) Co., Ltd.
Sales of machine tools and industrial machinery
VietnamKanematsu KGK Vietnam Company Limited
Sales of machine tools and industrial machinery
Indonesia
PT. Kanematsu KGK Indonesia
Sales of machine tools and industrial machinery
Czech Republic
KGK Czech s.r.o.
Sales of machine tools and industrial machinery
U.S.A.
Steel Service Oilfield Tubular, Inc.
Sales of steel materials for oil excavation
Benoit Premium Threading, LLC
Oil well casing fabrication; Manufacture and sales of oil well-related parts
KGK International Corp.
Sales of machine tools

Review of Operations

Heisei Feed Manufacturing Co.
Mojiko Silo Co., Ltd.
North Pet Co., Ltd.
GPC Holdings Co., Ltd.
China
Dalian Tiantianli Food Co., Ltd.
Shangdong Lufeng Foods Co., Ltd.
ThailandSummit Food Industries Co., Ltd.
Siam Aloe Vera (2005) Co., Ltd.
Indonesia
PT. Kanemory Food Service
U.S.A.
KAI Enterprises, Inc.
KG Agri Products, Inc.

Development, manufacture, and sales of control modules for lithium ion batteriesSpecial Feature:
Realizing VISION-130

Japan
Kanematsu Shintoa Foods Corp.
Kanematsu Agritec Co., Ltd.

System integration of ICT and communications equipment
Development of software for and sales and maintenance of computers and computer peripherals, etc.
Manufacture and sales of home-construction materials; Ground inspection services and improvement
work; Sales of security systems
Sales of mobile communications devices; Mobile internet systems and services
Import, export, storage, sales, and processing of materials and components for vehicle equipment,
industrial electronics, and communication devices
Manufacture of semiconductors; Design, development, manufacture, and sales of testing equipment
Development, manufacture, and sales of lens units, camera modules, and other optical equipment and parts

Kanematsu’s Progress andStrengths

Electronics & Devices

Replacement and maintenance of aircraft rotable components; Leasing
Sales of automobiles
Sales of engines, generators, water pumps, and other general-purpose machinery
Sales of bedding materials and products, general merchandise, and interior goods
Manufacture and sales of medium-density fiberboard
Golf course management
Beverage-vending machine operations; Imports, exports, and sales of aircraft engines
Insurance agency and forwarding business; Consigned freight forwarding business
Warehouse and self-storage operation
Total logistics services
Total logistics services
KANEMATSU ANNUAL REPORT 201579Network(As of March 31, 2015)

Japan

Overseas

Tokyo Head Office

ASIA & THE MIDDLE EAST

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

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

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

Nagoya9-3, Sakae 2-chome, Naka-ku,
Nagoya 460-0008, Japan
TEL: 81-52-202-5111
Fax: 81-52-202-4605

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

KOREA
Kanematsu Devices Korea Corporation

Koreana Bldg., 6F, 61-1-Ka Tae Pyung Ro,
Chung-Ku, Seoul, Republic of Korea
TEL: 82-2-737-5795
FAX: 82-2-737-5799
CHINA
Kanematsu (China) Co., Ltd.
Shanghai Head Office
Shanghai Branch

18th Floor Raffles City (Office Tower) 268 Xi Zang
Middle Road, Shanghai 200001, P.R. China
TEL: 86-21-6340-3456
FAX: 86-21-6340-4290
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 401, Rong Zhi Building E, No. 2 Long Shan Rd.,
Wuxi New District, Wuxi Province 214028 , P.R. China
TEL: 86-510-8522-6426, 6425
FAX: 86-510-8522-6430
Chongqing Liaison Office

Room 6-B-2, Wanyou Conifer Hotel, 77
Changjiang 2nd Road, Daping, Yuzhong District,
Chongqing, P.R. China 400042
TEL: 86-23-6800-7771
FAX: 86-23-6800-7772
Beijing Branch

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

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

Beijing Lufthansa Center C315, 50 Liangma Qiao
Road, Chaoyang District, Beijing 100125, P.R. China
TEL: 86-10-8591-1031
FAX: 86-10-8591-1535
Dalian Branch

Room 602, Furama Hotel, 60 Renmin Road,
Dalian 116001, P.R. China
TEL: 86-411-8263-9105, 7481
FAX: 86-411-8280-5534
Tianjin Branch

29F-A, Kai Xuan Men Building A, 66 Nanjing Road,
Hexi-Qu, Tianjin, 300042, P.R. China
TEL: 86-22-2331-2405, 2330-5886
FAX: 86-22-2331-6873
Shenzhen Branch

Room B-C, 33/F, Bldg B, Hong Long Century Plaza,
4002 Shen Nan Dong Road Luohu District,
Shenzhen 518001, 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

80

KANEMATSU ANNUAL REPORT 2015

TAIWAN
Kanematsu Taiwan Corporation

11th Floor, No. 61 Chung Shan N.Rd., Sec. 2,
Taipei 104, Taiwan, R.O.C.
TEL: 886-2-2511-7007
FAX: 886-2-2511-2947, 2951, 3554
VIETNAMThe Representative of Kanematsu
Corporation
Hanoi

Room No. 1205-1206-1207, 12th floor, Daeha
Business Center, 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 609 Saigon Tower, 29 Le Duan St,
District 1, Hochiminh City, S.R. Vietnam
TEL: 84-8-3910-5532, 5534, 5535
FAX: 84-8-3910-5538
Kanematsu Vietnam Company Limited

Unit 608 Saigon Tower, 29 Le Duan St,
District 1, Hochiminh City, S.R. Vietnam
TEL: 84-8-3910-5536, 5537
FAX: 84-8-3910-5539
THAILAND
Kanematsu (Thailand) Ltd.
Watana Inter-Trade Co., Ltd.

25F Thaniya Plaza Building, 52 Silom Road,
Bangkok 10500, Thailand
TEL: 66-2-632-8060
FAX: 66-2-632-8083, 8084
SINGAPORE
Kanematsu (Singapore) Pte. Ltd.

100 Tras Street, #12-01 100 AM, Singapore 079027
TEL: 65-6320-6000
FAX: 65-6320-6041
PHILIPPINES
Kanematsu Corporation Manila Branch

17th Floor Tower 2, The Enterprise Center 6766,
Ayala Avenue, cor. Paseo de Roxas, Makati City,
Philippines
TEL: 63-2-889-1701, 845-2017
FAX: 63-2-887-0030
MYANMAR
Kanematsu Corporation Yangon Office

Union Business Center (UBC) Suite 03-08, Nat
Mauk Road, Bo Cho Quarter, Bahan Township,
Yangon, Myanmar
TEL: 95-1-860-4370
FAX: 95-1-860-4380
INDONESIA

Kanematsu (Hong Kong) Ltd.

P.T. Kanematsu Trading Indonesia

Rooms 1806-1807, 18th Floor, Hopewell Centre,
183 Queen’s Road East, Hong Kong
TEL: 852-2821-6200
FAX: 852-2527-0465, 2865-6649

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

Kanematsu India Private Limited

Tower 1, Block-A, Unit No. 2, DLF Corporate Park,
Gurgaon, Haryana - 122 022, India
TEL: 91-124-4001461, 4001462, 4001362
FAX: 91-124-4001371
IRAN
Kanematsu Iran Ltd.

Houston Branch1800 Augusta, Suite 390, Houston,
Texas 77057, U.S.A.
TEL: 1-713-975-7200
FAX: 1-713-975-7966

AUSTRALIA
Kanematsu Australia Ltd.
Sydney Head Office

Suite 1 Level 9, 15 Castlereagh Street,
Sydney NSW, Australia
TEL: 61-2-8278-7004, 9993-0748,
9283-3347
FAX: 61-2-9283-3095

Silicon Valley Branch2043 Zanker Road, San Jose CA 95131, U.S.A.
TEL: 1-408-501-1400
FAX: 1-408-501-1499
Portland Branch

NEW ZEALAND
Kanematsu New Zealand Ltd.

UNITED KINGDOM

Level 2, No. 5 Broadway Newmarket, Auckland,
New Zealand
TEL: 64-9-302-5660
FAX: 64-9-309-3877

Kanematsu Europe PLC.
London Head Office

NORTH AMERICAEUROPEGERMANY
Kanematsu G.m.b.H.
Duesseldorf Head Office

Oststrasse 34, D-40211 Duesseldorf, Germany
TEL: 49-211-36890
FAX: 49-211-3689-111
Munchen Office

ITALY
Kanematsu G.m.b.H.
Milano Liaison Office

Piazza Duca d’Aosta 8, Milano, Italy
TEL: 39-02-6749-3538
FAX: 39-02-6707-7364
HUNGARY
Kanematsu G.m.b.H.
Budapest Office205-8988 Fraserton Court, Burnaby, B.C.
V5J 5H8, Canada
TEL: 1-604-689-0550
FAX: 1-604-689-0655

Kanematsu USA Inc.
New York Head Office

500 Fifth Avenue, 29th Floor,
New York City, New York 10110, U.S.A.
TEL: 1-212-704-9400
FAX: 1-212-704-9401

CENTRAL & SOUTH AMERICAMEXICO

Somerset Office

Kanematsu Mexico S. de R.L. de C.V.

100 Randolph Road, Somerset,
New Jersey 08873, U.S.A.
TEL: 1-732-271-7300
FAX: 1-732-271-7370

Suite C, Multitenant III, Av. Mineral de Valencia
No. 202 Col. Parque Santa Fe, C.P. 36275,
Guanajuato Puerto Interior Silao, Mexico
TEL: 52-472-748-9187, 9327, 9329
FAX: 52-472-748-9221

Chicago Branch

543 West Algonquin Road, Arlington Heights,
Illinois 60005, U.S.A.
TEL: 1-847-981-5600
FAX: 1-847-981-6760

BRAZIL
Kanematsu America do Sul Importacao e
Exportacao Ltda.

Detroit Office41700 Gardenbrook Rd. Novi, Garden Office B,
Suite 140 Novi, MI 48375, U.S.A.
TEL: 1-248-347-3216
FAX: 1-248-347-3219

Alameda Campinas No. 728, Cjto 302 e 304
Jardim Paulista, Sao Paulo, S.P. CEP 01404-001
Brasil
TEL: 55-11-3285-3311
FAX: 55-11-3285-3318

San Diego Office

900 Lane Avenue, Suite 150, Chula Vista,
California 91914, U.S.A.
TEL: 1-619-656-2385
FAX: 1-619-656-2386

RUSSIAN FEDERATIONThe Representative of Kanematsu
Corporation
MoscowTverskaya 16/2, Building 1, Business Centre,
125009, Moscow, Russian Federation
TEL: 7-495-935-89-40, 42, 43
FAX: 7-495-935-8948

Segment information:
Number of employees and number of group companies (As of March 31, 2015)
Number of employees(consolidated basis)

Electronics & Devices
Foods & Grain

Number of affiliated companies

3,339

28 (Japan:18, Overseas:10)582

23 (Japan:12, Overseas:11)
28 (Japan:12, Overseas:16)

Steel, Materials & Plant

1,212

SPAIN

Motor Vehicles & Aerospace

205

8 (Japan:1, Overseas:7)

The Representative of Kanematsu
Corporation
Las Palmas

Others299

17 (Japan:12, Overseas:5)

Companywide (common)

365

Calle Eduardo Benot 51, Edificio Atlansea,
4-izqda, 35008 Las Palmas de Gran Canaria,
Spain
TEL: 34-928-275634, 275680
FAX: 34-928-275632

Overseas subsidiaries
Total

Financial Section andCompany Information

H-1034 Budapest Becsi ut 126-128.I.103. Hungary
TEL: 36-1-329-3412, 320-4952
FAX: 36-1-320-4953

The Representative of Kanematsu
Corporation
Vancouver

CSR and Corporate GovernanceFrankfurter Ring 193a, D-80807 Munchen,
Germany
TEL: 49-89-3074-817-12
FAX: 49-89-3074-817-29

U.S.A.

CANADA

Review of Operations

Ground Floor Genesis House, 17 Godliman Street,
London, EC4V 5BD, United Kingdom
TEL: 44-20-7246-2900
FAX: 44-20-7248-8986

4380 SW Macadam Avenue, Suite 170, Portland,
Oregon 97239, U.S.A.
TEL: 1-503-224-7755
FAX: 1-503-228-5067

Special Feature:
Realizing VISION-130

Elahiyeh Commercial Complex, Unit 1201,
12th Floor, No. 244, Africa Ave., Tehran, Iran
TEL: 98-21-2621-2812
FAX: 98-21-2621-3106

OCEANIA

Kanematsu’s Progress andStrengths

INDIA

18
6,002

122

Notes:
1. Number of employees on a non-consolidated basis is 813 (including employees seconded from
Kanematsu, excluding employees seconded from companies other than Kanematsu).
2. Of affiliated companies, 89 are consolidated subsidiaries and 28 are equity-method affiliates.

KANEMATSU ANNUAL REPORT 201581

Corporate Profile(As of March 31, 2015)

Corporate Profile
Company Name

KANEMATSU CORPORATION

Paid-in Capital¥27,781 million

Established

August 15, 1889

Fiscal Year

April 1 to March 31

Foundation

March 18, 1918

June

President & CEO

Masayuki Shimojima

General Meeting of
Shareholders

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

Number of Offices

Domestic: Head office 1 and branches 6
Overseas: 43

Number of Employees

813 (Consolidated: 6,002)

Investor Information
Principal Shareholders

Number of Percentage ofshares held voting rights(thousands)(%)

Japan Trustee Services Bank, Ltd. (trust account)

16,770Stock Exchange Listings

Tokyo

Stock Code8020

Transfer Agentfor Common Stock

Sumitomo Mitsui Trust Bank, Limited

The Master Trust Bank of Japan, Ltd. (trust account)

14,256

3.38

Shares Authorized

1,016,653,604

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

13,298

3.15

Shares Outstanding

422,501,010(including 1,157,263 treasury shares)

The Norinchukin Bank

12,4602.95

Mitsui Sumitomo Insurance Co., Ltd.

11,613

2.75

1,000

Tokio Marine & Nichido Fire Insurance Co., Ltd.

11,612

2.75

Hayat

5,435

1.28

Japan Trustee Services Bank, Ltd. (trust account 9)

5,285

1.25

Japan Trustee Services Bank, Ltd. (trust account 1)

4,334

1.02

Japan Trustee Services Bank, Ltd. (trust account 2)

4,329

1.02

Minimum Trading Unit

Number of Shareholders 27,174

3.98

Note: Calculated after deduction of treasury shares (1,157,263 shares)

Composition of Shareholders

Shareholder Distribution by Number of Shares Held

Individuals and others(including treasury shares 34.28%

More than 1 million shares(including treasury shares) 53.66%

Financial institutions

33.40%

50,000 shares and more

22.86%

Foreign institutions
and individuals

21.25%

10,000 shares and more

13.06%

Other corporations

7.71%

1,000 shares and more

10.02%

Securities firms

3.36%

Less than 1,000 shares

0.40%

Stock Price/Trading Volume
Stock price

Trading Volume(¥)(thousand shares)

200

350,000

150

300,000

100

250,000

50

200,0000

150,000

100,000

50,000

0
10/4

82

6

8

10

12 11/2

KANEMATSU ANNUAL REPORT 2015

4

6

8

10

12 12/2

4

6

8

10

12 13/2

4

6

8

10

12 14/2

4

6

8

10

12 15/2

Our Website
Detailed additional information about the Kanematsu Group isavailable on our website in English, Japanese and Chinese.
Content includes information about the Company and its businesses, press releases, investor relations materials (for shareholders
and investors), and details on its environmental and CSR activities,
employment opportunities and other topics are available.

English: http://www.kanematsu.co.jp/en/

KANEMATSU ANNUAL REPORT 201583For more information on this Annual Report, or to obtain
additional copies, please contact:
Public & Investor Relations Section, Finance Department,
Kanematsu Corporation
2-1, Shibaura 1-chome, Minato-ku, Tokyo 105-8005, Japan
Tel: 81-3-5440-8000
Fax: 81-3-5440-6503
Printed in Japan