阪和興業株式会社

Annual Report 20142014

http://www.hanwa.co.jp

Year ended March 31, 20142014.8 Printed in Japan

Coping with changing times and markets quickly, we makea great contribution to society by satisfying various needsof customers as a “distribution specialist”
Success in today’s markets demands speed and theability to meet a broad range of needs. Change isoccurring on an unprecedented scale. Only companies that can adapt quickly will survive. Hanwa has
experience and accomplishments in the field of“distribution” that span 65 years.
We know how to build powerful businesses andmove quickly in the pursuit of value creation andcustomer satisfaction.

Dedicated to corporate citizenship, we want ourbusiness operations to help make communities andthe world a better place to live. This is why weprioritize compliance and other activities thatenable us to fulfill our obligation to society.
Through such activities, Hanwa keeps nurturing a
corporate culture that will enhance the value and reliability of our company. We aim to make greater
contributions by fulfilling our social responsibilities.

Stock Information

Japanese financial
institutions
31.0%

Foreigncorporations
25.2%

Individuals andothers28.2%

Japanese financial
institutions
31.0%

Foreign
Individuals andOther domestic
corporations
otherscorporations
Japanesebrokerage firms 11.9%
Treasury stock
25.2%
28.2%
1.7%
2.1%

Breakdown by Type of Shareholder

Fiscal Year-End

March 31Annual Meeting of Shareholders June
Independent Auditors

KPMG AZSA LLC

The First Section of the Tokyo
Domestic Stock Exchange
Listings		 Stock Exchange

Japanese brokerage firms
1.7%

The First Section of the Osaka
		 Securities Exchange
Date of Record for Dividend
PayoutInterim dividend: September 30
Year-end dividend: March 31

Authorized Shares

570,000,000 shares

Treasury stock
2.1%

Breakdown by Size of Holding

Issued and Outstanding Shares 211,663,200 shares
Number of Shareholders

Other domestic
corporations
11.9%

11,228–1,00012.0%

1,000–50,000
85.2%

50,000–1,000,000
2.5%–1,00012.0%

1,000–50,000
85.2%

50,000–1,000,000
2.5%
1,000,000–
0.4%

Principal Shareholders

1,000,000–

Name of Shareholder

0.4%
Percentage of Total
Issued Share (%)

Number of Shares(thousands)

Japan Trustee Services Bank, Ltd. (Trust Account)...........................................................
The Master Trust Bank of Japan, Ltd. (Trust Account)......................................................
Sumitomo Mitsui Banking Corporation..........................................................................
Hanwa Clients’ Stock Investment Association ................................................................
The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account........
Hanwa Employees’ Stock Investment Association...........................................................
THE BANK OF NEW YORK 133522.................................................................................
Nippon Steel & Sumitomo Metal Corporation................................................................
The Dai-ichi Mutual Life Insurance Company..................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 1)........................................................
0.000000

16.666667

33.333333

0.000000

16.666667

33.333333

0

20

40

0

20

40

16,075
9,876
7,630
7,103
5,287
4,442
3,477
3,001
2,614
2,533

7.76
4.77
3.68
3.43
2.55
2.14
1.68
1.45
1.26
1.22

50.000000

66.666667

83.333333

100.000000

50.000000

66.666667

83.333333

100.000000

60

80

100

120

60

80

100

120

Note: The Company holds 4,440,708 shares of treasury stock, which is excluded from the principal shareholders listed above.

Stock Price Range and Trading Volume (Common Stock)
Nikkei Stock Average (closing)

Stock Price

(¥)

(¥)

800

18,000600

12,000

400

6,000

200

0

Trading
Volume(Millions of shares)

0

40
30
20

Forward-Looking Statements
The plans, strategies and other statements related to the outlook of future results in this annual report reflect the assumptions and beliefs ofmanagement based on currently available information. However, it should be noted that there is a possibility for actual results to differ significantly
owing to such factors as changing social and economic conditions.

10
4
5
2012

6

7

8

9

10

11

12

1
2
2013

3

4

5

6

7

8

9

10

11

12

1
2
2014

3

0

| HANWA AR 2014 | 59

To Our Stakeholders

Hanwa supplies a broad range of products, including steel, metals and alloys,
non-ferrous metals, food products, petroleum and chemicals, lumber,machinery and many other items, to an equally diverse range of customers.
Since our inception, we have focused our operations on the mission ofserving our customers as “distribution specialists.” Each year, we have used
our specialized expertise and an extensive service network to meet customer
needs with precisely the right solutions. This skill has earned Hanwa a reputation as a trading company in which customers know they can place theirtrust, and from which they can receive outstanding products and services.
During the fiscal year ended March 31, 2014, economic conditions
turned upward both in Japan and abroad, especially among developed countries. Hanwa introduced its new medium-term business plan, which has beenachieving solid progress overall. We recorded significantly higher profit onmuch larger revenue compared with the previous fiscal year. We intend tocontinue to ensure that our plan is carried out steadily, while monitoring
carefully any signs of change in the domestic and international markets in thelong term and accurately meeting demand in all business areas. We also aim
to further bolster our business foundation and management bases, as we help
business partners prosper.
The sincere advice and support of all stakeholders forms the basis of all
our activities. We place great value on each customer relationship, together
with the accompanying opportunities. As we pursue further growth andprogress, we will retain our devotion to contributing to society by performing
functions unique to Hanwa, while serving as a trading company known foroutstanding footwork.

Contents
To Our Stakeholders ....................................... 1
Business Model ................................................ 2
At a Glance....................................................... 4
Interview with the President ......................... 6
Review of Operations◆ Steel ........................................................... 10◆ Metals and Alloys ..................................... 12◆ Non-Ferrous Metals.................................. 13◆ Food Products ........................................... 14◆ Petroleum and Chemicals........................ 15◆ Other Business .......................................... 16
Topics .............................................................. 17
Corporate Governance ................................. 18
CSR Activities.................................................. 20
Financial Section
Five-Year Summary .................................... 22
Management’s Discussion and Analysis... 23
Financial Statements and Notes toConsolidated Financial Statements ........ 26
Independent Auditor’s Report.................. 53
Global Network ............................................. 54
Corporate Information ................................. 58

Shuji Kita

Hironari Furukawa

ChairmanPresident| HANWA AR 2014 | 01

Business Model

Distribution Specialist“Customers first” is Hanwa’s core business policy.
Our business calls for growing with our customers.
Since its inception in 1947, Hanwa has continuously pursued
growth in its corporate value. The Group has achieved steady
growth in its core steel business as well as metals and alloys,
non-ferrous metals, food products, petroleum and chemicals,
lumber, machinery and other business.
Hanwa aims to be a different type of trading company,
using a vertically aligned organization to earn profits byserving as an intermediary for business transactions andinvesting mainly to boost relationships that generate suchprofits. We are dedicated to putting our customers first andprospering together with them. This is why we use horizontal
collaboration that goes far beyond conventional vertical organizational structures. Using this approach produces ideas andPast business areas

Upstream

Makers/suppliers

improvements that originate from strong partnerships between
Hanwa and its customers. Only this type of trading firm canfunction as a “true trading company” that performs a valuablerole in society.
To further solidify its relationships, Hanwa follows abusiness model innovation based on three strategic concepts
in the activities of all segments: (1) always stay close to theviewpoint of users, (2) diversify business activities, and (3)manage activities for the Group as a whole. Targeting efficiency and optimization across the value chain, extending
from manufacturers and other suppliers to users, we arediversifying the Group’s business domains within the supply
chain to achieve the greatest possible user satisfaction.

Trade

Temporary
distribution

Downstream

Manufacturing
process

Intermediate
distribution

Users

Three Strengths
Footwork

Network

Teamwork

The footwork required to act with speed
and agility

The foundation for skills in informationand sales

A cohesive organization that thrives on
teamwork

Hanwa firmly believes in positioning markets atthe center of its operations. Front-line activities
are a source of information and lessons that areavailable nowhere else. Speed and agility arevital to being in the right place at the right time
to gather this knowledge. Recognizing theimportance of spending time in the field,
Hanwa business professionals use swift footwork to move from one location to another.
This constant focus on the essence of businessactivities allows Hanwa to supply customers
with solutions of the highest caliber.

Hanwa has a powerful network that spans theglobe. In Japan, Hanwa offices and distribution centers work closely together to serve
customers. Overseas, we have an extensive
network of offices and subsidiaries, particularly
in Asia. Skills in information and sales thatoriginate from this network are a criticalcomponent of our business operations. With
these capabilities, we can meet the expectationsof every customer as “distribution specialists.”

Conventional general trading companies
operate by making each business a largely
autonomous unit. Hanwa’s operations go
beyond this vertical structure. Our business
operations benefit from powerful teamwork
among all departments and people in ourorganization. All available resources are used
to meet our customers’ needs. Teamwork has
one more important benefit: the ability tobuild mutually beneficial (“win-win”) relationships by creating the best possible partnershipwith each customer.

02 | HANWA AR 2014 |Developing Globally While Expanding and Deepening Business Fields
Hanwa has built a solid position in the market as a trading company handling a board range of products,
including steel, metals and alloys, non-ferrous metals, food products, petroleum and chemicals, lumber,machinery and many other items. As a “trading company that makes a difference,” we are expanding ourbusiness fields in accordance with the changing times and society to satisfy customers’ diverse requirements.

Steel
Dedicated to meeting the needs of customers in a broad spectrum of industries, the Steel Division
handles everything from steel plates, sheets and bars to construction materials.

Metals and Alloys
Metals and alloys Division fulfills an important social responsibility as a supplier of many metals
resources such as chromium, manganese, silicon ore and ferroalloys of primary products.

Non-Ferrous Metals
One of the first companies to recycle aluminum, copper, nickel and chromium, Hanwa is at
the forefront of effective resource recycling.

Food Products
Handling prawns, crab and other seafood, and enjoying the top market shares in several
product categories, we bring fine food products from around the world to tables
throughout Japan.

Petroleum and Chemicals
As a trader in petroleum products, chemical products and paper materials, we cultivate
durable relationships with customers by providing accurate information and responding
swiftly to market needs.

Other BusinessThis segment mainly comprises the Lumber and Plywood Division, which imports quality forest
products around the world, and the Machinery Division, which handles a variety of amusement
facilities and industrial machinery.

Number of Overseas
Processing Plants

Number ofOverseas Bases

44

24

Number of Subsidiaries andAssociated Companies

26

Number of
Employees (consolidated)

2,610| HANWA AR 2014 | 03

At a Glance
Net Sales and Net Sales Composition by Segment

Steel¥792,155 million

47.1

%

Metals and Alloys¥94,129 million

5.6%
Non-Ferrous Metals¥75,947 million

4.5%

Fiscal 2013 Net Sales¥1,682,504

Food Products¥77,347 million

million

4.6%

Petroleum and Chemicals¥491,288 million

29.2

%

Other business¥151,638 million

9.0%

04 | HANWA AR 2014 |Principal Items

Consolidated Financial Highlights
Millions of yen,
except for number of employees

Steel Bars
Steel bars of various shapes, screw-type reinforcementsteels, steel pipe piles, H-beam, flat bars, square steel,light gauge sections, cement, various construction works

2014

Steel Sheets
Steel plates, hot-rolled steel sheets, cold-rolled steel
sheets, surface-treated steel sheets, electrical steel sheets

For the year:

Special steels and others
Special steels, cast steels, stainless steels, steel wires,
steel pipes, ferrous raw material

Operating income

Thousands of
U.S. dollars (Note 1)

2014

2013

¥1,682,504

1,511,325$16,347,688

16,253

12,491

157,919

Net income

7,897

4,721

76,729Comprehensive income

14,6486,600

142,324

Net sales¥

At year-end:
Nickel, chromium, ferro-alloys, stainlesssteel scrap, titanium scrap, silicon, solar
cell materials¥

Cash and cash equivalents

15,920¥$23,198

154,683

Total assets

593,352

552,908

5,765,177

Total net assets

125,362

120,674

1,218,053

2,610

2,208

Number of employees

Yen

U.S. dollars (Note 1)

Per share data:
Copper, aluminum, zinc, lead¥

Net income

38.11

¥

$

22.78

0.370

Cash dividends

12.00

12.00

0.117

Net assets

591.68570.505.749%
Key financial ratios:
Prawns and shrimp, crab, salmon,
herring roe, horse mackerel, mackerel,
Capelin, octopus, eel, herring, flounder,
Matsubara’s red rockfish, fish paste,
processed goods

Return on assets (ROA)

1.4

0.8

Return on equity (ROE)

6.6

4.1

Net debt/equity ratio (Note 2)

190

180

Notes: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥102.92=$1.00.
2. Net debt/equity ratio = Net interest-bearing debt/equity.
Net interest-bearing debt = Interest-bearing debt – cash.

Net Sales

Operating Income

Net Income(Millions of yen)

(Millions of yen)

(Millions of yen)

20,00012,00015,0009,000

10,000

6,000

5,000

3,000

Petroleum products in general, marineoil, petrochemicals, synthetic resin,
paper products
1,500,000

Lumber and Plywood
Structural lumber for housing, various
plywood
Machinery
Various amusement facilities, steel-relatedindustrial machinery, environment-related
machinery

1,000,000

500,000

Other
Environment-related business
0

0
10

11

12

13

14

0
10

11

12

13

14

10

11

12

13

14

| HANWA AR 2014 | 05

Interview with the President

Looking at the present and the future of
the Hanwa Group“ We aim to enhance Hanwa’s corporate value

and achieve sustainable growth by ensuringthat the Medium-term Business Plan is
carried out in a steady manner.

”

Hironari Furukawa, President

06 | HANWA AR 2014 |1Please share your opinion about the economic environmentof the fiscal year ended March 31, 2014.
During the fiscal year under review, the U.S. economy saw a general improvement
after the Obama administration and the Congress managed to avert the debt ceilingproblem, while Europe saw the sovereign debt crisis contained within the troubled
countries. On the other hand, China was unable to implement effective stimulus
measures to shore up the economy due to fiscal constraints and the other emerging
countries, which had enjoyed strong growth on the back of a large inflow of speculative funds, saw their economies slow due to capital flight in anticipation of thetapering of quantitative easing by the U.S. Federal Reserve. Overall, the outlook of
the global economy was mixed.
In Japan, Prime Minister Shinzo Abe implemented a policy package (“Abenomics”)
designed to lift the country out of decade-long deflation, and the Bank of Japan
introduced aggressive monetary easing policies. After these moves helped the equity
market to gain ground and the yen to depreciate against the U.S. dollar, consumer
spending and capital expenditure also turned upward. Public works spending andinvestment in private-sector construction also began a full-fledged recovery, whilelast-minute buying before the consumption tax hike on April 1, 2014 also pushed
up demand. The Japanese economy was brisk overall, despite some problems,
including the rising costs of raw materials and energy due to yen depreciation against
the dollar, the resulting worsening of Japan’s trade balance, and an acute shortage oflabor in many parts of the nation due to a sharp increase in construction investment.

| HANWA AR 2014 | 07

Interview with the President

2

Please summarize operating results of the fiscal year
ended March 31, 2014.
In these circumstances, the Group posted consolidated net sales of ¥1,682,504
million for the consolidated fiscal year ended March 31, 2014, representing a yearon-year increase of 11.3%, due mainly to higher net sales in the steel business andthe petroleum and chemicals business. Operating income jumped 30.1%, to ¥16,253
million, reflecting an improvement in the profitability of stock items due mainly torecovery in the steel market from the second quarter of the fiscal year under review.
Net income also climbed to ¥7,897 million, representing a 67.3% increase, due
mainly to a drop in other expenses.

3

What is your outlook for the fiscal year ending March 31, 2015?
The U.S. economy is recovering, albeit at a moderate pace, and the European economy seems to beabout to turn upward, as uncertainty over the sovereign debt crisis has faded. In China, although
there are some lingering concerns about the consequences of measures introduced to prevent a
property bubble, we expect the Chinese economy, controlled by the central government, to continue
to achieve moderate growth. In contrast, other emerging economies are likely to remain weak,affected by the changes in the conditions of the global financial sector.
Although Abenomics and the Bank of Japan’s aggressive monetary easing are expected tocontinue to have a positive impact on the Japanese economy, there is concern with regard to a sharp
decline in demand, especially for consumer goods, in reaction to the last-minute buying before theconsumption tax was raised on April 1. On the other hand, the construction sector is likely toreport a strong performance, thanks to increasing infrastructure projects, including reconstruction
efforts following the Great East Japan Earthquake, buoyant construction investment activities in theprivate sector, and ripple effects from Tokyo’s hosting the Summer Olympic Games in 2020.
Based on the factors described above, in terms of consolidated operating results for the next
fiscal year, we expect net sales of ¥1,750 billion (up 4.0% compared with the previous year), operating income of ¥19.8 billion (up 21.8%), and net income of ¥10.6 billion (up 34.2%).

08 | HANWA AR 2014 |4Please share your vision for business management in the future.
The Hanwa Group formulated its Medium-term Business Plan for the period between April 2013
and March 2016. Under the theme of establishing thriving businesses and reinforcing the base ofoperations that envisage medium and long-term changes in markets in Japan and overseas, we have
set targets of ¥1,800 billion in consolidated net sales and ¥15 billion in ordinary income for the
fiscal year ending March 31, 2016. The basic concept for each segment is to ensure that user
perspectives are accurately reflected, diversify corporate activities, and promote a type of management that brings group companies together. Within the value chain involving manufacturers,
suppliers and users, we aim to maximize user satisfaction, while improving efficiency and optimizing the entire value chain.

5

Please add some additional comments for shareholders
and investors.
The Hanwa Group intends to enhance the corporate value of the entire Group, achievesustainable corporate growth, and further raise customer satisfaction, while contributing to society, by continuing to steadily implement its business strategies.
We would like to conclude by asking our shareholders and investors for theircontinued support in the future.

| HANWA AR 2014 | 09

Review of Operations

Steel (Domestic)
Fiscal 2013 Results
In fiscal 2013, domestic demand for steel products showed a full-fledged recovery trend
due to factors such as the revitalization of capital investment, an increase in private aswell as public investment in construction, and higher earnings in the manufacturingindustry. On the other hand, a labor shortage and logistic scarcity caused by the rapid
rise of investment in the construction sector exposed lagging steel consumption.
However, economic development was favorable throughout the year.
Although the steel product market moved sluggishly in the first quarter because of
the backlash from the upturn experienced in the previous quarter, it nevertheless saw
healthy progress thereafter. Improved profitability in our distribution sales contributed
to the higher earnings. While construction demand moved into full swing with steadyprogress in the manufacturing industry, the production of steel manufacturers tightened,
and this in turn caused the market to experience a significant upturn.
We expanded the volume of orders by reinforcing its promotion to developers in
the fields of civil engineering and construction as well as strengthening internal cooperation between the undertaking department and the product sales department.
Furthermore, both sales and profits from the binding contractual business increased
due to rising prices. By promoting M&A and mutually beneficial alliances with ourpartners, and enhancing JIT/small-lot orders/processing, we succeeded in gaining alarge number of new customers.
Our domestic steel business during the fiscal year, as stated above, contributed
significantly to overall sales and profits throughout the year.

Net Sales(Millions of yen)

(Millions of yen)

(Millions of yen)

LookingAhead and Key Strategies 80,000
150,000

800,000

600,000

400,000

200,000

0

10

11

12

13

14

Net Sales Composition

47.1%

In fiscal 2014 a backlash is expected from the rush demand before the sales tax
increase. However, we anticipate that the market will see60,000
solid growth from a rise inexports on
the back of yen depreciation and a mild recovery in overseas economies.
100,000
Another positive factor is the effect of the support provided by economic measures
40,000
totaling approximately ¥5 trillion.
The demand
for steel in both manufacturing and construction is expected to see
50,000solid growth in common with the last fiscal year, since the20,000
negative effect of the sales
tax increase is limited. Construction projects are being revitalized, as seen especiallyduring the second
half of the current fiscal year, and this will result in a more stable
00steel market. Furthermore,
10 its international
11
12
13
10
11 the manufacturing
12
13
14industry has recovered
competitiveness on the back of the yen depreciation and is expected to make solid
progress. However, some factors for concern also exist, such as a delay in deliveries
due to the labor shortage, insufficient processing capacity, logistic scarcity and politicalinstability in Southeast Asia.
Taking such elements into account, during fiscal 2014 we will continue topromote activities to gain new customers and boost the number of construction
project orders. We will also continue to firmly implement strategies such as improving
performance through M&A, and establishing satellite bases to explore more demand
for steel, enhancing delivery times/small lot orders/processing, promoting demand forconstruction projects, and sharing information/joint sales between departments.

Note: Effective from the year ended March 31, 2011, in line with the application of the “Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Statement No. 17, revised March 27, 2009), the Company
changed its classification of consolidated business segments from one based on product similarities to one based on a “management approach.” Segment data for prior years have not been adjusted retroactively to match the new classification.

10 | HANWA AR 2014 |14

Steel (Overseas)
Fiscal 2013 Results
In fiscal 2013, many factors encouraged the recovery of domestic demand and rising
prices. These included the government’s economic policy known as “Abenomics,”
demand associated with recovery efforts in the Kanto/Tohoku area following theGreat East Japan Earthquake of March 2011, and the effect of the award to Tokyoof the Summer Olympic Games. In these circumstances, Japanese mills stood firm toaccommodate export orders by limiting quantity and declining orders with low
prices. On the other hand, the steel markets in China, Southeast Asia, Europe andthe Middle East were unclear and continuously sluggish. Unlike in Japan, mills in
China and South Korea in particular pushed their exports aggressively.
Amid these challenges, our steel exports dropped sharply, by approximately
28%. This phenomenon was due in part to diminishing exports to China and thewidening gap in prices between Japanese and overseas mills as a result of a recovery
in domestic demand. Since we do not have a large number of manufacturing subsidiaries and affiliates, we often faced difficult negotiations in the spot market.
It might be erroneously assumed that the effects of yen depreciation enable
exporters to operate more aggressively. However, the reality is that exporting has
grown increasingly difficult due to protectionist regulations of ASEAN countries inparticular and to import exclusion policies such as anti-dumping measures.

Looking Ahead and Key Strategies
The new political administration in China has set a target of continued growth, but
demand for steel products appears to be losing momentum. Demand in ASEAN
countries continues to rise gradually, but domestic production is declining. In Europe,
the economy still does not appear to have bottomed out. The United States has
sustained a gradual recovery, but its growth rate remains low.
The international market in fiscal 2014 is thus expected to remain weak. Although
raw material prices continue to be low, overseas mills will be unable to sustain lower
prices and maintain profitability, which indicates that prices will remain near theircurrent level. It appears that the uptrend in China’s crude steel production/exports is
continuing, and for us this is a source of serious concern.
We must put effort into selling products manufactured by mills in China and otheremerging countries, while increasing exports from Japan.
Furthermore, we will continue to grasp overseas customers’ needs, offer a wider
variety of products, and promptly establish new systems that can deal with logistics
and processing according to customer needs.
We will strive to expand sales of Japanese materials, which are known for their highquality and credibility, by distinguishing them from general-purpose commodities.
Our target region, ASEAN countries, including Myanmar, remains strategically an
important area for us. We will further explore the market in Mexico, where we openeda branch office two years ago, together with the U.S. market. Turkey, where thevolume we handled decreased in fiscal 2013, will also be included as a target region.
In the global market, where change occurs continuously—as seen in each country’s
policies to protect its own economy, customs-related issues and problems related totechnical regulations—we will strive to increase volume and achieve growth in earnings
by implementing measures promptly.

| HANWA AR 2014 | 11

Review of Operations

Metals and Alloys
Fiscal 2013 Results
Sales volume in the special metals recycling business remained sluggish, due to theeffect of mergers within the domestic stainless industry. Weak global demand led topoor export volume to China, South Korea, Taiwan, and India.
The primary special metals business dealing with nickel cathode and other chemicals,
however, saw solid growth as a result of the recovery in the battery industry and specialtransactions secured in China. It should be noted, on the other hand, that the special
metals industry itself suffered from the withdrawal of investment in the mining business,and thus its business situation remained difficult in terms of earnings.
Recovered demand for steel brought volume growth, but fierce competition among
domestic distributors yielded poor earnings.
The light metals business experienced steady sales volume, but we were unable to
make this segment profitable as the market environment remained very competitive.
Special metals, metal raw materials, and light metals all saw stunted growth involume and less profitability due to the restructuring of the industry, together with
amalgamations/mergers among our customers. The fiscal year was also difficult in termsof overseas sales in developing countries including China, as their economies slowed
and our orders remained stagnant.

Looking Ahead and Key Strategies

Net Sales

Regardingthe special metals recycling, sales volume
in the domestic market will
(Millionsof yen)(Millions of yen)

(Millions of yen)

150,000

100,000

50,000

0

10

11

12

13

14

Net Sales Composition

grow moderately with fierce competition in the limited market. Accordingly, it will
also be difficult to achieve profitability. Relating securementfor domestic scrap, to100,000
80,000maintain an appropriate amount we will organize our suppliers and reinforce
cooperation with scrap dealers. As for exports, to selloversupplied scrap aggressively,
80,000we will expand our overseas sales bases. We will also further promote the
60,000diversification of products by strengthening cooperation
60,000 with affiliated companies.
We will continue to promote the diversification of chemicals and achieve an
40,000increase in volume in the primary material business,
including nickel cathode and40,000other chemicals. We plan to take advantage of opportunities created by factors
20,000affecting the upstream segment of the nickel business,such as an embargo in
20,000Indonesia and political developments in Ukraine and Russia, by actively seeking joint
ventures and takeovers.
00
Fierceferroalloy market10is expectedtocontinue.
10competition
11
12within
13the domestic
14
11
12
13
14
Using as a foundation the start of production at a Malaysian facility in which werecently invested, we will aim to expand our sales volume by supplying competitive
products to the domestic market as well as Asian and other overseas markets.
Since we do not foresee much growth in domestic demand for light metals, wewill seek to increase the efficiency of the purchasing/sales system and improve ourability to fulfill contracts in terms of quality, volume and prices. In Dalian, we aim toput our silicon grinding business on track and build a sales network for it that
extends beyond Japan.

5.6%

Note: Effective from the year ended March 31, 2011, in line with the application of the “Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Statement No. 17, revised March 27, 2009), the Company
changed its classification of consolidated business segments from one based on product similarities to one based on a “management approach.” Segment data for prior years have not been adjusted retroactively to match the new classification.

12 | HANWA AR 2014 |Non-Ferrous Metals
Fiscal 2013 Results
The price of copper fell below $8,000 in early 2013 and hovered around $7,500–$6,500 throughout the year, reflecting the economic slowdown in China as well as
in other developing countries. The price then temporarily fell below $6,500 in March
2014. As a result of this severe situation, some newly developed mines turned
unprofitable. The price of aluminum fell below $1,900 at the beginning of the fiscal
year and continued to decline gradually until reaching the $1,700 range, where itstabilized. Conditions in the aluminum market were somewhat artificial, as the CIF
premium was driven up because traders earned a better margin from selling metals
forward while holding them for a long time in the LME warehousing system andcontrolling shipment accordingly.
We succeeded in recording sales volume on a par with that of the previous year
amid unstable actual demand. However, the aluminum raw material processing
business, where competition is intensifying over cargo bookings, saw a sharp dropin its earning ability. Other issues, such as a decline in the quality of copper raw
materials and reduced earnings due to chronic high prices for raw materials, also
contributed to poor profitability.
Although volume grew for strategic products such as precious metals, products
targeted by Basel Convention and white metals, we did not succeed in overcoming
the decline in aluminum and copper raw materials in terms of earnings.

(Millions of yen)

800,000

600,000

400,000

200,000

0

Looking Ahead and Key Strategies(Millions of yen)
While the consumption of both copper and aluminum raw material has been
increasing steadily in developing countries, prices are expected to remain more orless unchanged due to global economic trends,
excessive investment in the resource
150,000
sector, and technical factors in trading. However, the prices of these metals are
expected to fluctuate between 90 and –120 percentage points as they have fallen
nearly to the average production cost level. 100,000
Accordingly, we will secure competitiveness in copper by varying and diversifying
international sales. In terms of purchasing, we will expand the procurement region,
streamline our inventory and processing bases,
and stabilize quality and volume to
50,000fulfill our responsibility as a supplier, while generating satisfactory earnings.
In the aluminum business, we will accelerate investment to boost efficiency in theprocessing business and restore the earnings of the entire Group. Further0
also contribute10diversification
11
12 of the13 types
14 of products we handle will 10
1112 to stabilizing
13
14
the earning base. We will further diversify our sales regions as well as purchasing
regions and continue to secure bases.
We will also take advantage of each opportunity to invest and participate in joint
ventures, to increase the volume of strategic products such as precious metals, white
raw materials, and products targeted by the Basel Convention.

Net Sales(Millions of yen)

(Millions of ye

100,000

80,00080,00060,00060,00040,00040,00020,00020,000

0

0

10

11

12

13

14

Net Sales Composition

4.5%| HANWA AR 2014 | 13

Review of Operations

Food Products
Fiscal 2013 Results
Aquaculture production rose to address the increased global demand for marine
products, a supply shortage emerged due to a failure of shrimp farming in Thailand
and China, a slump in salmon farming in Chile and a worldwide downturn in fishing.
Reflecting these conditions, coupled with yen depreciation, the prices of raw materials continued to increase. These high prices may have also led to a decline in
consumption during the fourth quarter.
Aided by yen depreciation, exports from Japan improved, especially scallops,
whose exports rose significantly in both total value and volume.
Given this background, the raw materials business of salmon and shrimp madea rapid recovery in terms of earnings until the third quarter. Marine products,
however, faced a difficult earning environment as the rise in product prices did notcover the increase in raw material prices.
In the United States, Seattle Shrimp & Seafood Company, Inc. recorded recordhigh profit thanks to increased sales and profits caused by higher demand.
Hanwa Foods Co., Ltd., which handles processed marine products in Japan,
boosted the number of customers steadily and saw strong sales despite the difficult
business environment for marine products and the time required to organize operations in its first year.

Looking Ahead and Key Strategies

Net Sales(Millions of yen)

100,000

80,00060,00040,00020,000

0

14

10

11

12

13

14

Net Sales Composition

4.6%

Priceswerephase, and are(Millionsof yen)high in fiscal 2013 but subsequently entered a correction(Millions of yen)
expected to stabilize based on the level of demand.
The
supply of salmon is projected to remain tight, and supply
and demand will
500,000
150,000
not attain balance anytime soon. The demand for shrimp is expected to reboundthanksto a recovery in aquaculture production and price correction.
120,000 It is projected
400,000
that fish such as mackerel, herring and sardines will yield a large catch, and demandis expected
90,000300,000 to increase accordingly.
The supply of crab is likely to remain stagnant or to decrease, as the outcome ofis still uncertain.
the dispute
200,000 over fishing quotas prompted by poaching in Russia60,000
We will continue to pay close attention to the increasing global demand formarineproducts. We will add a branch office in Chile as part of 30,000
our North American
100,000
operations, expand our business in the Americas, and strengthen our upstream
resource 0strategies.
0
In addition,
1011
12
10 we will
11 target
12 ASEAN
13
14
countries where population is expected
to increase as important marine
product consumer regions andstrengthen our local sales together
with exports and offshore trading.
Domestically, we are considering
setting a base in Hokkaido, whichcontains vast fisheries resources, as apart of our plan to expand our domestic
business. We will also strengthen thesales of Hanwa Foods Co., Ltd. toboost earnings.

Note: Effective from the year ended March 31, 2011, in line with the application of the “Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Statement No. 17, revised March 27, 2009), the Company
changed its classification of consolidated business segments from one based on product similarities to one based on a “management approach.” Segment data for prior years have not been adjusted retroactively to match the new classification.

14 | HANWA AR 2014 |13

1

Petroleum and Chemicals
Fiscal 2013 Results(Millions of yen)

80,000

Crude oil prices increased due to issues in the Middle East, such as Iran’s nuclear
development and concern over the civil war in Syria, and then fell slightly, stabilizing
around the higher end of $100–$110, while demand remained healthy.
In the domestic oil market, prices surged due to the continually high crude oil
price and yen depreciation, which eventually resulted in further contraction ofdemand and a pullback in purchases. The market continued its sluggish progress, as
the major oil companies operated based on a sales policy emphasizing themaintenance of market share as a measure to address the effect of the Facility
Enhancement Law a year before it comes into effect.
In the Petroleum Department, although sales of C heavy oil were favorable
during the first half of the year, conditions were tough because of a decrease in sales
volume, lower price and a sales slump reflecting the higher kerosene price for
end-users in the second half of the year.
In the bunker oil business, sales grew as Japanese ship-owners’ business began
to recover. By setting up foreign sales networks in Russia and South Korea, we
succeeded in securing stable orders and earnings in East Asia.
The performance of the chemicals business did not surpass that of the previous
year, due to declining competitiveness in both imported synthetic resins and productsbrought on by increasing raw material prices and yen depreciation.
The paper business succeeded in expanding the sales of waste paper in the
ASEAN countries and increased both its sales and profits, aided also by yen(Millionsfuelof yen)(RPF) also recorded an increase indepreciation. Refuse paper and plastic
earnings as a result of the effort to develop new business.
We also began import/sales of palm 100,000
kernel shell (PKS) as environmentally friendly
new energy and invested in a company that uses it.
80,00060,00040,00020,0000

Looking Ahead and Key Strategies
60,000The price of crude oil is expected to trend downward due to the perception of a surplus
created during the low-demand months. 40,000
The downturn trend should also continue inJapan, and the resumption of nuclear power plant will diminish the demand for C heavyoil. A price war targeting the general public/consumers
may intensify.
20,000
The goal of the Petroleum Department will be to establish an efficient sales structure
while further developing cooperation with our0subsidiary, Toyo Energy. We will also seektheas well
as workfurther
on14recycled
10 to expand
11
12 sales13of PKS
14and locate new suppliers,
10
11
12
13
fuel (RPF and regenerated heavy oil and waste tires), coal and oil coke.
The bunker oil business will continue to boost sales in East Asia while working tocultivate new customers in Europe as well as discover new markets.
As the synthetic resin market and exchange rates are stabilizing, the chemicals
business will attempt to cover increased costs while cultivating new domestic customers
and selling imported products.
The paper business will concentrateefforts on sales in Southeast Asia as well
as offshore business. In the area of
lubricants, we will continue ouroverseas operations centered on
Southeast Asia through new businessdevelopment.
The new energy business will focus
on cultivating new customers for PKS in
Japan as well as abroad.

Net Sales(Millions of yen)(M

500,000

400,000
300,000

200,000

100,000

0

10

11

12

13

14

Net Sales Composition

29.2%| HANWA AR 2014 | 15

Review of Operations

Other Business (Lumber and Machinery)
Fiscal 2013 Results
LumberDuring fiscal 2013, the demand for lumber rose reflecting the rush before the consumption tax increase went into effect in April 2014. The number of housing starts fromJanuary–December 2013 was 980,000, of which 410,000 units were conventional
constructions, indicating a rise in demand that we had not seen in recent years. We
recorded record-high sales, aided by yen depreciation, as the sales to end-users also
grew significantly. However, higher prices resulted in more product orders, which in turncreated large shipments of products after the summer. Consequently, prices fell sharply
thereafter and profitability suffered. It should be noted, nevertheless, that direct demand
along with the domestic business grew considerably, and the raw material businesstargeting manufacturers and the export of Japanese cedars gradually increased. The top
surface material business is undergoing a careful rebuilding process to achieve stability
in business with manufacturers. More time is required, however, before we can see
tangible results. We will organize more specialized user sales system while rebuilding theoperation to increase sales from end-users.
Machinery
The leisure facilities business delivered a two-tier merry-go-round manufactured in Italy to Fuji-Q
Highland and also completed other major repair works. For fiscal 2014 and fiscal 2015, wehave already recorded several large to medium-sized orders.
The industrial machinery business completed major line equipment, such as the rebar
painter and the carrier correction system for welding bridge piers. The business also completed
a labor-saving automatic measuring/packing integrated line for zipper products. Orders for
crane equipment rose thanks to interdepartmental cooperation. We also delivered machineryand accessories for marine product processing in the Tohoku region.

Net Sales(Millions of yen)

150,000
120,000

Looking Ahead and Key Strategies

90,00060,00030,000
0

10

11

12

13

14

Net Sales Composition

9.0%

LumberDemand during Fiscal 2013 was high, but it is not expected to remain so because of the tax
increase that went into effect in fiscal 2014. The number of housing starts is expected to bearound 70%–80% of the previous year’s total. We will maintain/expand our share by increasing
business with end-users and competitive suppliers.
We hope to begin operation of the face material business in some form during the fiscal
year. Potential issues for the future include exporting Japanese cedar and log sales for plywood
manufacturers. Wood-chip sales for biomass power generation are expected to be solid in the
run-up to 2016 as we focus on businesses where we can generate stable profits.
Machinery
As for the leisure facilities business, an increase in individual consumption is anticipated inthis sector as the economy recovers. We are following our customers’ investment plan inamusement parks, mainly in eastern Japan, and will also strengthen recommendationbased sales activities that make optimal use of our powers of originality. Furthermore, in
addition to our strategy concentrating on the sales of imported products, we will work todevelop/sell our original Japan-made small to medium-sized products made in Japan.
The industrial machinery business began joint sales activities with the domestic steelbusiness, as part of our plan to improve the visibility of the business and boost the numberof customers. We will also focus on recommendation-based sales activities developed
from the customers’ perspective. We will set ourselves apart from our competitors as we
generate recommendation-based sales for our exclusive (customized) equipment andcomposite machinery that boosts efficiency and saves labor.

Note: Effective from the year ended March 31, 2011, in line with the application of the “Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Statement No. 17, revised March 27, 2009), the Company
changed its classification of consolidated business segments from one based on product similarities to one based on a “management approach.” Segment data for prior years have not been adjusted retroactively to match the new classification.

16 | HANWA AR 2014 |TOPICSSan Ei Metal Co., Ltd. Becomes a Subsidiary
We acquired 97% of the shares of San Ei Metal Co., Ltd., a steel sales company
based in Osaka, and turned it into a subsidiary. Founded in 1939, the company
conducts sales activities mainly in western Japan. By making it a subsidiary, we
expect to gain a number of advantages, including economies of scale inprocurement, lowering of costs through shared inventories, and boosting ofprompt delivery/small lot orders/processing. Going forward, we intend to boost
collaboration in sales and logistics to enhance customer satisfaction.
San Ei Metal Co., Ltd.

Distribution center

Hanwa Establishes a Subsidiary in Chile
Hanwa established Hanwa Chile Ltda. in Santiago, Chile, in January
2014, and the company launched sales activities in March. This is thefirst local subsidiary of Hanwa’s in Latin America. The company plansto engage primarily in salmon operations, while exploring thepotential for businesses such as other marine products, nonferrous
metals, timber and steel. The economy of Chile, its base of operations,is expected to develop further in the years ahead.

Staffs of Hanwa Chile Ltda.

Office building

U.S. Subsidiary Opens an Office in Chicago
Hanwa American Corp. set up its fifth U.S. office in Chicago in
February 2014, and sales activities were launched in March. Previously,
the New York office was in charge of operations in the U.S. Midwest.
By establishing a base in the Midwest, the hub of the automotive andother manufacturing industries in the United States, Hanwa aims totap markets and expand sales mainly of steel products.

Office building

Staffs of Hanwa American Corp.

| HANWA AR 2014 | 17

Corporate Governance
Basic Corporate Governance Policy
We aim to fulfill our social responsibilities as a good corporate
citizen so that we can gain and retain the respect fromstakeholders and be recognized as a valuable enterprise. We workto establish a high degree of transparency in management systems
to ensure full legal and regulatory compliance and respect forsocial norms. In addition to participating in many corporate social
responsibility (CSR) activities, we have established a CSR
Committee and use a commitment to CSR management to makeour corporate brand even more respected.

Corporate Governance Structures
We have adopted a corporate auditors’ system, under which weare focusing efforts to improve our corporate governance system
to achieve efficient and sound business management. Our Boardof Directors, which comprises 13 directors, including two outside
directors, meets as a rule once a month to deliberate and decide
important business plans and proposals concerning the Hanwa
Group, and to oversee business operation. There are five auditors
in total, including three outside auditors. Each auditor follows
auditing policies and auditing plans in carrying out stringent audits.
Moreover, the corporate auditors attend the Board of Directors, theManagement Committee and other important meetings, monitor
and verify the execution of the management.
In addition, aiming both to build a system to execute thebusiness operations carefully and to promote sped up andstreamlined decision-making, we have introduced an executive
officer system since April 2012. We have also adopted a system toperform preliminary review of management issues in various

committees such as the Officers Evaluation Committee, theInvestment Examination Committee, and the Compliance
Committee. By enhancing these management systems, ourcorporate governance system will be established to good purpose.
￼Internal Control and Risk Management System
We have resolved on basic policies regarding the development ofinternal control systems at our Board of Directors’ meetings andare currently developing internal control systems, including theestablishment of frameworks for risk management and taking theconditions of internal audit into consideration.
The overview of the basic policies is as follows.
● Systems to ensure that performance of duties by the

directors and employees complies with laws andregulations and the articles of incorporation• Hanwa has established standards for corporate ethics and ethicalbehavior in accordance with the Company’s creed. The
Compliance Committee, chaired by Hanwa’s president,
distributes a compliance manual to all Hanwa executives andemployees as well as verifies that compliance programs are being
used effectively. In addition, we take determined action against
anti-social influences and block all contact with such entities.
• Hanwa has established a consultation service (using theCompliance Committee and external attorneys) where all
Hanwa Group executives and employees can obtain advice
concerning compliance matters, providing a means of
directly reporting compliance problems.

The Corporate Governance Structures and Internal Control Systems for the Hanwa Group.
General Shareholders’ Meeting
election/dismissal

Board of Directors
Board of Chairman: Chairman
election/supervison

election/dismissal

oversight/audit

coordination

Board of Auditors

Independent Auditors

cooperation

oversight/audit

Disclosure Committee
examination/report

Operational organization
Officers Evaluation Committee
examination/report

Catch All Controls Committee

Management Committee

Investment Examination Committee
examination/
administration/report

evaluation/oversight

Affiliatedcompanies

18 | HANWA AR 2014 |Administrative
divisionsguidance

adviceInternal Audit Department
Overseas Audit Office

External Attorneys
Group Company Corporate
Auditors Conference

cooperation

Operating bases(Japan/overseas)Internal Control Committee
adviceinternal audit

Operatingdivisionscooperation

examination/report

Executive officers

Compliance Committee

accounting audit/internal control audit

President

● Systems to store and control information related toduties performed by the directors• Information related to duties performed by the directors is
properly stored in written document or electronically, and theserecords are stored and managed in accordance with laws,
regulations and Hanwa’s regulations for document management.
● Regulations and systems related to management ofrisk of loss
• Directors, executive officers, corporate officers and department
managers work with the Legal & Credit Department tomanage and reduce risks associated with business activities. In
addition, there is the Investment Examination Committee,
which manages investment risks by studying proposals for
new business ventures and new investments.
• Each business department cooperates with the General Affairs
Department, the Information Systems Department, the Legal &Credit Department, Administrative Affairs Office and otherunits concerning compliance, environmental management,
emergency responses, information security, trade management
and other matters. These risks are managed in accordancewith internal rules, manuals and other guidelines. The
Compliance Committee, the Catch All Controls Committee
and other applicable committees assist the departments byproviding advice and educational support. Advice fromexternal attorneys and other experts is used as required.
• To verify the effectiveness of risk management, the Internal Audit
Department and the Overseas Administrative Department
monitor all Hanwa business sites and group companies based ona pre-determined auditing plan, and their reports are submitted
mainly to the Management Committee and the president.
• The Disclosure Committee reaches decisions concerning theimportance and suitability of information to be disclosed toensure that information is released to the public in a fair,timely and appropriate manner.
● Systems to ensure efficient execution of directors’ duties• As a rule, the directors meet once each month to reachdecisions concerning important group management mattersand to supervise the execution of business operations. As arule, the Management Committee meets twice each month.
The members of this committee discuss important mattersconcerning management and reach decisions. They also
submit issues to the Board of Directors that concern importantmatters involving the Group’s management.
• The Officers Evaluation Committee chaired by the president
meets once each year to perform a comprehensive
evaluation of the directors’ performance. This includes anassessment of the commitments and performance of eachdirector and a mutual evaluation process for all directors. The
results are used to determine directors’ compensation andfor the selection of directors.
● Systems to ensure proper operations in the corporategroup• Hanwa has established regulations for the oversight ofaffiliated companies. Based on the regulations, each businessdepartment in charge is responsible for support andmanagement activities concerning affiliated companies toensure efficient management of operations.

• Compliance, risk management and other systems apply tooperations across the entire Hanwa Group. Committees andother supervisory units provide guidance and education
concerning the use of these systems.
• The Group Company Corporate Auditors Conference holds
meetings as necessary. The meetings provide for exchanges of
information involving audits of Hanwa and affiliatedcompanies to provide for the sharing of information.
● Systems relating to employees assigned to assist thecorporate auditors, and the independence of such
employees from the directors• There are a few employees assigned to assist the corporate
auditors. In addition, these employees receive no orders or
instructions from the directors or anyone else concerning thedirectives and orders received from the corporate auditors.
● Systems for the directors and employees to report to thecorporate auditors and systems otherwise pertaining toreporting to corporate auditors• In addition to submitting reports on important items
concerning compliance, the directors submit reports to thecorporate auditors on the execution of business operations
and important decisions.
• The directors, executive officers and employees must quickly
and accurately respond to requests for reports by the
corporate auditors.
• The Internal Audit Department and Overseas Audit Officesubmits reports as required to the corporate auditors
concerning internal audits.
● Other systems to ensure effective auditing by the

corporate auditors• The corporate auditors announce opinions at meetings of theBoard of Directors as necessary. In addition, the corporate
auditors collaborate with the independent auditor concerning
the financial audit.
• Hanwa has a system that allows the corporate auditors toattend meetings of the Board of Directors and otherimportant meetings, inspect important documents, performstudies of important departments and subsidiaries, andperform other tasks.
● Systems to ensure the reliability of financial reports• In accordance with the Fundamental Policy concerning
Internal Controls for Financial Reports, the Hanwa Group
operates the internal controls reporting system in an efficientand effective manner. The Internal Audit Department andO v e r s e a s A u d i t O ff i c e s u p e r v i s e d d i re c t l y b y t h eManagement Committee checks and evaluates theestablishment and operation of internal controls and submits
reports to the Management Committee.
• The Internal Control Committee studies issues involving
internal controls and submits reports on the results of thesestudies to the Management Committee. In addition, theInternal Control Committee provides advice and assistance forthe examinations performed by the Internal Audit Department
and Overseas Audit Office and describes its opinions in an
Internal Control Report.
| HANWA AR 2014 | 19

CSR Activities
Hanwa’s Basic Policy on Corporate Social Responsibility (CSR)
Hanwa’s corporate social responsibility (CSR) consists ofsix basic policies that Hanwa considers an integral part ofmanagement: (1) thorough legal compliance; (2) environmental considerations; (3) good corporate citizenship;(4) transparent management and proactive disclosure; (5)maintenance of financial soundness; and (6) workplaces
geared to employee self-realization.
To promote CSR management, the CSR Committee,
chaired by President Hironari Furukawa, incorporates

organizations including the Compliance Committee,
Environmental Committee, and the Hanwa ScholarshipFoundation and engages in organized operation.
Domestic and overseas companies face increasing
demand worldwide in terms of the globalization of
economic activities and sustainable development. Hanwa willcontinue working to develop as a company within global
society with a focus on the ISO 26000 international standard.

Positioning of the CSR Committee
Board of Directors
IR and PR activities

Management Committee
Hanwa Scholarship
Program

CSR Committee
Donations●Environmental Committee Secretariat●Security Trade Control Committee●Compliance Committee

Support of students
from overseas●Office SOS Consultation Committee

NPO & NGO

Activities to enhance employees’ awareness of CSR

ComplianceHanwa has in place a Compliance Committee that promotes
compliance with the Company’s ethical principles and corporate
ethical standards. The committee has drawn up a compliancemanual for employee behavior, and has distributed the booklet toall officers and employees as part of its CSR efforts. Fully
understanding the significance of compliance, Hanwa strives topractice CSR as a corporation by being both socially responsible
and complying fully with all legal requirements.
The Company promotes openness and visibility to prevent
any occurrence of misconduct.

Corporate Ethical Standards
1. Compliance with laws and social norms
2. Fair business activities
3. Contribution to industrial society
4. Proactive information disclosure
5. Concern for the environment
6. Global harmony
7. Ensuring a free and open workplace environment
8. Promoting good corporate citizenship throughactive social contribution activities
9. Ensuring people’s familiarity with ethical standards
and developing the in-house compliance program
10. Preventing the recurrence of misconduct andproviding appropriate information disclosure

Compliance manual distributed to all officers and employees

20 | HANWA AR 2014 |Measures for Crisis Management
swiftly ensure their continued safety and provide assistanceas necessary.
Using the information gained from these experiences,
Hanwa will continue to conduct complete reviews of its disasterprevention practices and maintain management of emergency
equipment, implementation of a satellite phone service,
distribution of high-capacity storage batteries, use of measuresdesigned to prevent office equipment from tipping over, andmanagement of stockpiled disaster relief supplies. In addition,
the Tokyo Head Office is working to increase its stockpile ofdisaster relief supplies in accordance with the disaster prevention
policy released by the Tokyo metropolitan government.

The Company has simulated major potential risks that might
threaten the safety of our employees and their families, as wellas the Company’s assets or the ability to continue business
operations. We have established the necessary measures tominimize the damage in case such risks arise, including means
to continue and restart the core business while ensuring thesafety of employees and their families as a priority.
When the Great East Japan Earthquake took place inMarch 2011, Hanwa established an emergency response
headquarters immediately and began checking on the safetyof employees using the Mobile i-Call service*, sending
emergency supplies to stricken areas, and conducting otheractivities to assist with relief efforts in accordance with the
Hanwa Disaster Prevention Manual in use at the time. In May
2011, we issued the Crisis Management Manual applicable for
Hanwa Co., Ltd. and its affiliates. As for overseas efforts,
when flooding occurred in Thailand in 2011, Hanwa remainedin close contact with employees in the affected area to

Formulation of the Pandemic Influenza Prevention Manual
In order to prepare for the spread of Pandemic Influenza viruses inJapan and other countries, the Company is working on establishinga Business Continuity Plan (BCP) to secure the officers’ andemployees’ safety, and to minimize any expected damage.

Diverse Work Style and Promote Diversity
providing nursing care. We have placed employees who are
currently working part-time on a child-care track in the Personnel
department to form a business support team whose members
work to support other departments by fulfilling requests forassistance with work duties. There are currently seven employees
from the entire Company in this team making effective use of theshort time they are at work assisting others until they are readyand able to return to their regular duties full time.

The Diversity Promotion Office is responsible for taking measuresrelated to diversity. We define diversity as an environment inwhich individual employees acknowledge various backgrounds
and points of view, and in which a variety of work styles can be
pursued. We consider diversity as a business challenge in which all
employees should play their part. We have introduced a mentor
scheme especially for female employees in general positions witha chance of promotion and for new non-Japanese employees. An
employee in a different section with a longer work experience at
the Company is assigned as a mentor to provide intellectual andpsychological support, to create a better working environment.

Hiring Disable Persons
Hanwa makes an effort to provide a workplace where disable
persons can fully utilize their talents and is involved in
employment activities in order to observe the employment rate
for persons with disabilities.

Support Child Rearing and Nursing Working
Hanwa makes an effort to make it easier for employees who
encounter important events in life, such as raising children orSocial Contribution
Hanwa Scholarship Program
The Hanwa Scholarship Foundation was established in 1957 aspart of activities to commemorate the 10th anniversary of
Hanwa’s establishment, and marked its 56th anniversary. Jiro
Kita, the first president of Hanwa, decided to establish thefoundation based on the philosophy of “contributing to society
based on an awareness of a company’s social responsibilities.”
The foundation began with a contribution of ¥10 million, at atime when Hanwa’s own capital was ¥100 million. As of March
31, 2014, the program had distributed a total of ¥553 million
in scholarships, and the accumulated number of scholarshipstudents had grown to 1,011.
The Hanwa Scholarship Program looks forward to using
political, economic and cultural insight to assist a growing numberof outstanding students around the world to realize their goals as
globalization continues to advance in the 21st century.

Accumulated Number of Scholarship Students(Persons)

High school

1,000

University

Graduate school
75

75

77

765

773

783

68
66

800

66
62
56

600
52
49

400

422

18

200

0

662

479

181

28

96
64

87

98

115

130

144

151

151

151

151

151

151

1961
(5)

1966
(10)

1971
(15)

1976
(20)

1981
(25)

1986
(30)

1991
(35)

1996
(40)

2001
(45)

2006
(50)

2011
(55)

2012
(56)

2013 Year(57) (Times)

7
1957
(1)

604

318

3
41
4

548

712

| HANWA AR 2014 | 21

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Financial
SectionFive-Year Summary
For the years ended March 31
				Millions of yen, 			
				
except for number of employees		Thousands of
U.S. dollars (Note 1)

2014

2014

		

2013

2012

2011

2010

For the year:
Net sales				¥ 1,682,504 ¥ 1,511,325 ¥ 1,564,251 ¥ 1,396,103¥ 1,116,629 $16,347,688

Operating income 			12,491
16,253

14,977

13,854

11,420157,919

Net income 			
4,721
7,897

4,633

5,794

11,57976,729Comprehensive income 		
14,648

6,600

6,214

6,104

14,537

142,324

Net cash provided by (used in) operating activities 			
19,381
343

11,970(46,949)

46,2503,333

Net cash provided by (used in) investing activities		
(5,244)(12,009)(5,107) 		

(7,611)(12,992)(50,952)

Net cash provided by (used in) financing activities		
(4,928)(16,364)

1,596

51,272(43,669)(47,882)

24,515 $154,683

At year-end:
Cash and cash equivalents 		
¥15,920 ¥23,198

Total assets		
593,352

552,908

582,405

532,798

443,445

5,765,177

Total net assets 		
125,362

120,674

115,957

110,459

106,855

1,218,053

Number of employees 			
2,208
2,610

2,201

2,060

1,952

¥

				

				

		

2014

2013

23,411¥

20,586

Yen

¥

		

2012

2011

U.S. dollars (Note 1)

2014

2010

Per share data:
$

0.370

Net income 			22.78 ¥¥
38.11 ¥

22.35

Cash dividends 			
12.00
12.00

12.00

12.00

12.00

0.117

Net assets 			
570.50591.68548.22529.65512.16

5.749

				

		

2014

2013

¥

27.95

%

¥

55.46

		

2012

2011

2010

Key financial ratios:
0.8
0.8
1.4
Return on assets (ROA)				

1.2

2.5

4.1
6.6
Return on equity (ROE)			

4.1

5.4

11.6

180
190
Net debt/equity ratio (Note 2)			

190

200

140

Notes: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥102.92=$1.00.
2. Net debt/equity ratio = Net interest-bearing debt/equity.
Net interest-bearing debt = Interest-bearing debt – cash.

22 | HANWA AR 2014 |Management’s Discussion and Analysis
Operating Results
Operating Results for the Fiscal Year Ended March, 2014
During the fiscal year under review, the U.S. economy saw a general
improvement after the Obama administration and the Congress
managed to avert the debt ceiling problem, while Europe saw thesovereign debt crisis contained within the troubled countries. On
the other hand, China was unable to implement effective stimulus
measures to shore up the economy due to fiscal constraints and theother emerging countries, which had enjoyed strong growth on theback of a large inflow of speculative funds, saw their economies
slow due to capital flight in anticipation of the tapering of quantitative easing by the U.S. Federal Reserve. Overall, the outlook of the
global economy was mixed.
In Japan, Prime Minister Shinzo Abe implemented a policy
package (“Abenomics”) designed to lift the country out of decadelong deflation, and the Bank of Japan introduced aggressive
monetary easing policies. After these moves helped the equity
market to gain ground and the yen to depreciate against the U.S.
dollar, consumer spending and capital expenditure also turned
upward. Public works spending and investment in private-sector
construction also began a full-fledged recovery, while last-minutebuying before the consumption tax hike on April 1, 2014 also pushed
up demand. The Japanese economy was brisk overall, despite someproblems, including the rising costs of raw materials and energy due
to yen depreciation against the dollar, the resulting worsening ofJapan’s trade balance, and an acute shortage of labor in many partsof the nation due to a sharp increase in construction investment.
In these circumstances, the Group posted consolidated net
sales of ¥1,682,504 million for the consolidated fiscal year ended
March 31, 2014, representing a year-on-year increase of 11.3%,
due mainly to higher net sales in the steel business and thepetroleum and chemicals business. Operating income jumped
30.1%, to ¥16,253 million, reflecting an improvement in the profitability of stock items due mainly to recovery in the steel market
from the second quarter of the fiscal year under review. Net income
also climbed to ¥7,897 million, representing a 67.3% increase, due
mainly to a drop in other expenses.
Net Sales
Net sales increased 11.3% year on year to ¥1,682,504 million, due
mainly to higher sales in the steel business and the petroleum andchemicals business. Domestic sales were up 10.4% to ¥1,250,832
million, while overseas sales were up 14.1%, to ¥431,672 million.
For a discussion of sales by segment, see “Review of Operations”
and “Segment Information.”
Cost of Sales and Selling, General and Administrative (SG&A)
Expenses
Cost of sales increased 11.2% to ¥1,631,139 million. The increase
was due mainly to a rise in purchase prices accompanying the priceincreases of commodities.
SG&A expenses rose 8.8% to ¥35,112 million, due mainly to arise in salaries and bonuses, and an increase in personnel expenses
due to the inclusion of newly consolidated subsidiaries.
Operating Income
Operating income for the consolidated fiscal year under review jumped
30.1% to ¥16,253 million from ¥12,491 million a year earlier, due
mainly to higher sales revenue in the steel business. The result raised
the ratio of operating income to net sales by 0.2 percentage pointfrom the previous consolidated fiscal year to 1.0%.
Other Income (Expenses)
Net other expenses amounted to ¥2,264 million. Expenses reflected
mainly a loss of ¥760 million on valuation of investment securities
and a loss of ¥90 million on disposal of property and equipment inline with the reconstruction of the Osaka Head Office building, whichwere partially offset by a foreign exchange gain compared to aforeign exchange loss in the previous consolidated fiscal year, owing
to correction of the rapid depreciation of the yen as well as a gain of¥187 million on sale of investment securities due mainly to a sale ofshares of a subsidiary.
Income Taxes
Income taxes increased 194.3% from the previous consolidated
fiscal year to ¥5,987 million, reflecting an increase in income before
income taxes and minority interests.
Net Income
Net income jumped 67.3% from the previous consolidated fiscal
year to ¥7,897 million. Accordingly, net income per share amounted
to ¥38.11, compared to ¥22.78 for the prior year.

Net Sales and Operating Income

Net Income and ROE(Millions of yen)

(Millions of yen)(%)

(Millions of yen)

(Millions of yen)

Total Assets and ROA(%)

1,600,000

32,00012,00016

600,000

4

1,200,000

24,0009,000

12450,000

3

800,000

16,0006,000

8300,000

2

400,000

8,000

3,000

4

150,000

1

0

0

0

0

0

10

11

Net Sales (left scale)

12

13

14

Operating Income (right scale)1011

ROE (right scale)

12

13

14

0

10

11

ROA (right scale)

12

13

14

| HANWA AR 2014 | 23

Sources of Capital and Cash Liquidity
Financial Condition
Total assets increased 7.3% to ¥593,352 million from the previous
consolidated fiscal year, reflecting higher trade receivables andinventories resulting from higher sales and a rise in the prices of
exchange-traded securities held.
Liabilities increased 8.3% to ¥467,990 million as a result ofhigher trade payables in line with the upturn in sales and increases inborrowings and bonds payable to meet a growing need for working
capital, and interest-bearing debt grew 4.1% to ¥245,906 million.
The net debt/equity ratio (net interest-bearing debt as a percentageof equity) stood at 190% as of March 31, 2014.
Net assets increased 3.9% to ¥125,362 million. The expansion
was attributable mainly to the accumulation of retained earnings fromnet income, an increase in Valuation difference on available-for-salesecurities, net of taxes, and an increase in foreign currency translation
adjustments. Owing to the proportionately greater rise in liabilities, theequity ratio at March 31, 2014 fell to 20.6% from 21.4% a year ago.
Cash FlowsNet cash provided by operating activities was ¥343 million, adecrease of ¥19,038 million from the previous consolidated fiscal
year. This was due mainly to a greater need for working capitalreflecting increases in trade receivables and inventories in the linewith the recovery of sales.
Net cash used in investing activities increased ¥137 million from theprevious consolidated fiscal year, to ¥5,244 million. This was primarily
attributable to an increase from purchase of investment securities
including shares of consolidated subsidiaries and the absence of cash
inflows from sales of investment securities in the previous consolidated
fiscal year, despite a decrease in additions to property and equipment.
Net cash used in financing activities amounted to ¥4,928 million,a decrease of ¥11,436 million from the previous consolidated fiscal
year. This resulted primarily from a net increase in short-term loans

payable reflecting a greater need for working capital compared to a
net decrease in the same period of the previous fiscal consolidated
year despite an increase in repayment of long-term debt.
Financial Policy
The Group depends primarily on bank borrowings to meet its
working capital requirements and to fund its investing and financing
activities. Yet, as part of its efforts to diversify funding sources toensure stable liquidity and agility in liquidity management, it may
fund its activities by issuing bonds and commercial paper in thecapital markets from time to time.
The Group meets its working capital requirements principally
through floating-rate long-term borrowings from banks to securestable funds, while short-term bank borrowings are used for day-today funding. Overseas subsidiaries borrow from their respective
local banks. Capital investments and other long-term funding needs
in Japan and abroad are, in principle, met by long-term borrowings
from Japanese sources. Short-term borrowings as at March 31,
2014 stood at ¥74,004 million, mostly denominated in yen. The
Group’s outstanding long-term debt was ¥125,881 million,
including the current portion of long-term debt of ¥21,601 million.
The Group issues bonds primarily to fund working capital. As of
March 31, 2014, bonds outstanding consisted of straight bonds
amounting to ¥40,000 million. To increase its flexibility to issue bonds
in a timely manner to take advantage of or to meet changing market
environments and internal financial requirements, the Company has
filed for shelf registration. As of March 31, 2014, the unused aggregate principal amount of the shelf registration for straight bonds forsubscription in Japan amounted to ¥30,000 million.
Advocating overall corporate value improvement and sustainable growth, the Group attempts to conduct efficient management
to secure funds needed for business growth and maintain a healthyfinancial balance.

Business and Other Risks
Changes in the Macroeconomic Environment
Hanwa Group’s worldwide operating revenue is subject to macroeconomic conditions of the countries and regions where it sells its
products. An economic slowdown in any of the primary markets,
including Japan, North America, Europe and Asia (especially East
Asia with China being the key market) with an accompanying
Total Net Assets andEquity Ratio

decrease in demand could have an adverse impact on the Group’sbusiness performance and financial condition.
Commodity Price Fluctuations
The Group holds inventories for distribution that include steel products,
metals and alloys, non-ferrous metals, foods and petroleum/chemicalInterest-Bearing Debt andNet Debt/Equity Ratio

BPS and EPS(Millions of yen)(%)

(Millions of yen)

(%)

(Yen)

(Yen)

125,00030

250,000

250

500

60

100,000

24

200,000

200

400

48

75,00018

150,000

150

300

36

50,00012

100,000

100

200

24

25,000

6

50,000

50

100

12

0

0

0

0

0

10

11

12

Equity Ratio (right scale)

24 | HANWA AR 2014 |

13

14

10

11

12

13

Net Debt/Equity Ratio (right scale)

14

0

10
BPS (left scale)

11

12

13

EPS (right scale)14

products. These are commodities whose prices are highly susceptible tofluctuations in supply and demand and movements in foreignexchange. The Group’s business performance and financial position
could be adversely affected in the event of the Group’s inability torespond adequately to price fluctuations of such commodities.
Foreign Exchange Fluctuations
The Group is engaged in worldwide procurement and sales of goods.
Foreign currency-denominated profits or loss, costs, assets, liabilities
and other accounting records associated with areas outside Japanare translated into Japanese yen amounts in the preparation offinancial statements. While the amounts reported in original currencies
remain unchanged, the post-translation amounts are subject to theconversion rate applied to them. Generally speaking, a stronger yen
relative to other currencies (especially against U.S. dollars, which
account for a substantial portion of the Group’s sales) adversely
affects the Group’s export transactions, while it favorably affects theGroup’s import transactions.
Interest Rate Fluctuations
The Group funds its operating, investing and financing activities byborrowing from financial institutions and by tapping into the bondand other capital markets. To hedge against interest rate fluctuations, the Group may execute interest rate swaps to cover certain
funds subject to floating interest rates. However, the Group’s business performance and financial position may be adversely affected if
interest rates change in a direction unfavorable to the Group.
Stock Price Fluctuations
The Group holds marketable securities at home and abroad mostly ofwhich are issued by its business counterparties that are subject toprice fluctuations. Price fluctuations of the securities it holds could
impact the business performance and financial position of the Group.
Counterparty Credit Risk
The majority of trade receivables held by the Group are based onprior granting of credit limits to its business counterparties. While theGroup has put in place stringent and skillful credit management,
there is no guarantee that all such receivables can be fully recovered.
In the event of unanticipated bankruptcy or commencement of thecivil rehabilitation proceedings filed on behalf of or against a businesscounterparty, the business performance and financial condition of
the Group could be adversely affected.
Business Investment Risk
The Group makes business investments to strengthen existing businesses and to expand the scope of its business. Such investments arecarried out upon completion of prescribed approval procedures
specific to investment characteristics and monetary amounts to beinvested, including scrutiny by the investment committee. However,if the value of any company in which the Group has invested deteriorates or profits generated are less than initially anticipated, theGroup’s business performance and financial condition could be
adversely affected.
Liquidity Risk Associated with Funding Activities
The Group funds its operating, investing and financing activities byborrowing funds from financial institutions and issuing bonds andother instruments in capital markets. For funding, the Group strives
to secure cash on hand based on estimated funding requirements.
However, factors such as disruptions in financial markets, regulatorychanges affecting the financial industry in Japan or elsewhere, thedowngrading of the Group’s credit ratings or changes in financial
institutions’ lending policies could significantly affect the Group’s
funding environment. These changes could restrict the Group’s
funding activities and result in higher funding costs, thus impacting
the business performance and financial condition of the Group.
Risks Associated with Global Activities and Entry to Overseas
Markets
The Group has stepped up efforts recently to enter Chinese andother Asian markets as well as markets in the United States andEurope. The Group may face a number of risks inherent in overseas
business activities, as the following:(1) Unanticipated changes in foreign trade regulations, especially interms of laws and customs duties.
(2) Political and/or economic changes and fluctuations in international currencies unfavorable to the Group.
(3) Difficulty in recruiting and retaining human resources.
(4) The possibility of immature infrastructure exerting negative impacts
on the Group’s activity or resulting in deteriorating customer satisfaction with respect to the Group’s products and services.
(5) Changes in taxation unfavorable to corporate activity.
(6) Acts of terrorism, war and social turmoil caused by other factors.
Legal and Regulatory Risks
The Group is subject to a variety of governmental regulations
imposed by the nations where it operates, including business andinvestment approvals/licenses, export/import and sales restrictions on
grounds of national security and otherwise, customs duties andother foreign trade regulations. In addition, laws and regulations
relevant to the Group’s business activities, including those concerning
trade, antimonopoly, patent, taxation, foreign exchange control,
food safety, environment and recycling, must be fully observed. Suchregulations may not only limit the Group’s business activities but alsoentail a higher cost of doing business as more funds may be needed
to be disbursed to ensure compliance. Therefore, the businessperformance and financial condition of the Group may be impacted
by such regulations.
Risks Associated with Natural Disasters
To prepare for natural disasters such as an earthquake or an outbreakof pandemic diseases such as influenza, the Group has formulated
crisis management manuals and business continuity plans and set inplace a system for confirming individual safety. It also administers
anti-seismic measures and conducts disaster drills. However, due tothe dispersion of the business locations and areas where employees
conduct their business, the Group may not be able to avert all thenegative consequences of a natural disaster. If damages beyond theGroup’s projected level are inflicted, the business performance andfinancial condition of the Group could be impacted.
Retirement Benefit Obligations
Retirement benefit costs and obligations are calculated based on
actuarial assumptions on discount rates and expected returns on plan
assets, among others. If actual results differ from such assumptions or
if such assumptions are revised, the effect of such difference or revision
will be subsequently accrued and recognized over a period of years,
thus affecting costs and obligations to be recognized or posted oversuch years. Deteriorating discount rates and poorer returns on plan
assets resulting from such changes could adversely affect the Group’sbusiness performance and financial position.
| HANWA AR 2014 | 25

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
As at March 31, 2014 and 2013							Thousands of						Millions of yen
U.S. dollars (Note 1)

2014
Assets				

2013

2014

Current assets:							154,683¥
15,920 ¥23,198 $Cash and cash equivalents (Note 3)							Receivables:						
		Trade notes and accounts (Note 3):									122,124
12,56912,664
Unconsolidated subsidiaries and affiliates 							2,966,158
305,277
281,088
			Other									Loans:												28,1092,893
5,910
Unconsolidated subsidiaries and affiliates 							(8,988)(925)(852)
Allowance for doubtful receivables							19,4332,000—
Securities (Notes 3 and 4)							1,114,400
114,694
96,610Inventories (Note 6)							19,8992,048
2,165
Deferred tax assets—current (Note 10) 							134,571
13,85014,518Other current assets (Note 7)							4,550,389
468,326
435,301
			Total current assets																	Investments and noncurrent receivables:						41,48832,040Investment securities (Notes 3, 4 and 7)						403,109

49,3885,083
7,277
Investments in and advances to unconsolidated subsidiaries and affiliates (Note 3)					
103
129Loans receivable (Note 3)						1,001155,548
16,00925,136
Other investments and noncurrent receivables							(12,699)(1,307)(3,080)Allowance for doubtful receivables 							
			596,347
61,376
61,502
Total investments and noncurrent receivables																	Property and equipment (Note 7):						316,761
32,601
29,582Land (Note 12)							344,685
35,47532,256
Buildings and structures							224,077
23,062
18,312Other								(287,243)(29,563)(25,082)
Accumulated depreciation							
			598,280
61,57555,068
Total property and equipment																	Other assets:							
2,108
217
300
Deferred tax assets—noncurrent (Note 10)							18,0531,858
737
Intangibles and other assets (Note 7)							
			20,161
2,075
1,037
Total other assets 							¥ 593,352 ¥ 552,908 $ 5,765,177
			Total						
See accompanying Notes to Consolidated Financial Statements.

26 | HANWA AR 2014 |							Thousands of						Millions of yen
U.S. dollars (Note 1)

2014
Liabilities and Net Assets				

2014

2013

Current liabilities:							Short-term loans payable (Notes 3, 7 and 8)						60,600¥74,004 ¥$719,044

48,582
Commercial paper (Notes 3 and 8)							11,0005,000
307,044
Long-term debt due within one year (Notes 3, 7 and 8)							62,95031,601
Trade notes and accounts payable (Note 3):						
		13,797
Unconsolidated subsidiaries and affiliates							
1,370
1,420

1,738,661
		Other 							162,932
178,943
21,502
Accrued bonuses to employees 							
1,892
2,213
34,415
Income taxes payable							
2,972
3,542
219,967
Other current liabilities 							18,247
22,639			

3,103,012
Total current liabilities 							321,963319,362										Noncurrent liabilities:							1,304,703
Long-term debt due after one year (Notes 3, 7 and 8)							100,625
134,280—
Employees’ severance and retirement benefits (Note 9)							220—43,558Net defined benefit liabilities (Note 9)							—4,48344,287
Deferred tax liabilities—noncurrent (Note 10)							
4,564
4,558
51,564
Other noncurrent liabilities 							
4,862
5,307
			

1,444,112
Total noncurrent liabilities 							110,271
148,628										Contingent liabilities (Note 13)																Net assets (Note 12)							Shareholders’ equity:							Common stock: 						
		Authorized: 570,000,000 shares 								443,558
Issued: 211,663,200 shares 							45,65145,651

49
Capital surplus							
55743,490
Retained earnings							72,86876,520(14,011)
Treasury stock, at cost: 4,440,708 shares in 2014 and 4,421,912 shares in 2013					(1,435)(1,442)
1,173,086
			Total shareholders’ equity							117,089
120,734
Accumulated other comprehensive income:						72,726
Valuation difference on available-for-sale securities, net of taxes						
2,667
7,485
(3,508)Deferred gains or losses on hedges, net of taxes							
120
(361)
311
Land revaluation difference, net of taxes							
117
32
2,954
Foreign currency translation adjustments							(1,761)
304(54,265)
Remeasurements of defined benefit plans (Note 9)							—(5,585)
			

18,218
Total accumulated other comprehensive income							
1,143
1,875

26,749Minority interests							
2,442
2,753
1,218,053
			Total net assets							120,674
125,362

			Total							¥ 593,352 ¥ 552,908 $ 5,765,177| HANWA AR 2014 | 27

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income
For the years ended March 31, 2014 and 2013							Thousands of						Millions of yen
U.S. dollars (Note 1)
				
2014

2014

2013

Net sales								¥ 1,682,504 ¥ 1,511,325 $ 16,347,688

15,848,611
Cost of sales 							1,466,563
1,631,139
		

499,077
Gross profit 							44,76251,365341,158
Selling, general and administrative expenses 							32,27135,112
157,919
		Operating income							12,491
16,253								Other income (expenses):						13,690Interest and dividend income 							
1,342
1,409

(28,634)
Interest expense							(2,908)(2,947)(1,240)4,372

Gain on sale of investment securities						
—
187

1,817

Loss on impairment of long-lived assets (Note 14)						
(256)
—

—

Foreign exchange gain (loss)

450(1,296)(7,384)

Loss on valuation of investments in capital						
(127)
(47)

(457)

Loss on valuation of investment securities

(760)

(874)
Loss on disposal of property and equipment (Note 15)							
(375)
(90)

(4,528)Other, net							
(813)
(466)
Income before income taxes and minority interests

135,921						
6,818
13,989

Income taxes (Note 10):						51,039Current								
3,684
5,253

7,132
Deferred							(1,650)734
5,987
Income before minority interests

58,171

2,034

77,750
					
4,784
8,002

(1,021)
Minority interests in income of consolidated subsidiaries							
(63)
(105)

76,729Net income							4,721 $¥
7,897 ¥

(1,021)
Minority interests in income of consolidated subsidiaries							
(63)
(105)
Income before minority interests

77,750						
4,784
8,002

Other comprehensive income (Note 16):						46,832
Valuation difference on available-for-sale securities, net of taxes						
582
4,820
(4,674)
Deferred losses on hedges, net of taxes							
(233)
(481)
321
Land revaluation difference, net of taxes							
(33)33Foreign currency translation adjustments

2,274

1,500

22,095

Total other comprehensive income

6,646

1,816

64,574$

142,324Comprehensive income			¥
14,648 ¥Comprehensive income attributable to:

					

6,600

Owners of the parent			¥14,332 ¥6,444

Minority interests

			
316

156

$

139,2543,070							U.S. dollars						
Yen
(Note 1)
					
2014

Net income per share 				¥38.11Cash dividends per share 				12.00See accompanying Notes to Consolidated Financial Statements.

28 | HANWA AR 2014 |

2014

2013

¥

22.78
12.00

$

0.370
0.117

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

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

Thousands

Number ofshares ofcommon stock

Balance at April 1, 2012........................ 211,663

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Valuationdifference on
available-for-salesecurities,
net of taxes

Deferred
gains or losses
on hedges,
net of taxes

Landrevaluationdifference,
net of taxes

Foreign
Remeasurements
currencyof definedtranslation
benefit plans,adjustments
net of taxes¥

Minority
interests

Total¥45,651 ¥5¥ 69,979¥ (1,425)¥ 2,085

353

¥ 150

¥ (3,168) ¥—Cash dividends paid..........................

—

—

—

(2,073)

—

—

—

—

—

—

¥ 2,327 ¥ 115,957—

Change of scope of consolidation........

—

—

—

241

—

—

—

—

—

—

—

241

Net income.......................................

—

—

—

4,721

—

—

—

—

—

—

—

4,721

Purchases of treasury stock...............

—

—

—

—

(10)

—

—

—

—

—

—

(10)

Other changes..................................

—

—

—

—

—

582

(233)

(33)

1,407

—

115

1,838

(2,073)

Balance at March 31, 2013................... 211,663

45,651

5

72,868(1,435)

2,667

120

117

(1,761)—

2,442

120,674

Balance at April 1, 2013..................... 211,663

45,651

5

72,868(1,435)

2,667

120

117

(1,761)—

2,442

120,674

Cash dividends paid..........................

—

—

—

(2,901)

—

—

—

—

—

—

—

(2,901)

Change of scope of consolidation........

—

—

—

(1,461)

—

—

—

—

—

—

—

(1,461)

Net income.......................................

—

—

—

7,897

—

—

—

—

—

—

—

7,897

Purchases of treasury stock...............

—

—

—

—

(7)

—

—

—

—

—

—

(7)

Other changes..................................

—

—

—

117

—

4,818

(481)

(85)

2,065

(5,585)

311

1,160

¥45,651 ¥5¥ 76,520¥ (1,442)¥ 7,485¥ (361)

Balance at March 31, 2014................. 211,663

32

¥

304

¥ (5,585) ¥ 2,753 ¥ 125,362

Thousands of U.S. dollars (Note 1)

Thousands

Number ofshares ofcommon stock¥

Commonstock

Capitalsurplus

Balance at April 1, 2013..................... 211,663 $443,558 $49

Retainedearnings

Treasurystock$708,006 $(13,943)

Valuationdifference on
available-for-salesecurities,
net of taxes

Deferred
gains or losses
on hedges,
net of taxes

Landrevaluationdifference,
net of taxes

Foreign
Remeasurements
currencyof definedtranslation
benefit plans,adjustments
net of taxes

Minority
interests

Total$25,913$ 1,166$1,137$(17,110) $—Cash dividends paid..........................

—

—

—

(28,187)

—

—

—

—

—

—

$23,727 $1,172,503—(28,187)

Change of scope of consolidation........

—

—

—

(14,195)

—

—

—

—

—

—

—

(14,195)
76,729Net income.......................................

—

—

—

76,729

—

—

—

—

—

—

—

Purchases of treasury stock...............

—

—

—

—

(68)

—

—

—

—

—

—

(68)

Other changes..................................

—

—

—

1,137

—

46,813(4,674)(826)

20,064(54,265)

3,022

11,271$743,490 $(14,011)$72,726$(3,508)$ 311$ 2,954

Balance at March 31, 2014................. 211,663 $443,558 $

49$(54,265) $26,749 $1,218,053

See accompanying Notes to Consolidated Financial Statements.

| HANWA AR 2014 | 29

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2014 and 2013							Thousands of						Millions of yen
U.S. dollars (Note 1)
				
2014

2013

2014

Cash flows from operating activities:						Income before income taxes and minority interests						¥13,989 ¥6,818 $
135,921
Adjustments to reconcile income before income taxes and minority interests						to net cash provided by operating activities:								Depreciation					
3,692
3,305
35,873
		 Loss on impairment of long-lived assets					—256—		 Increase (decrease) in allowance for doubtful receivables						(1,791)
472(17,402)
		 Increase (decrease) in net defined benefit liabilities						4,164—40,459
		 Interest and dividend income					(1,409)(1,342)(13,690)
		Interest expense						
2,947
2,908
28,634
		 Gain on sales of investment securities						(187)—(1,817)
		 Loss on valuation of investment securities
760
1,296
7,384
		 Loss on valuation of investments in capital						
46
127
447
		 Loss on disposal of noncurrent assets							
90
375
874
		 Decrease (increase) in trade receivables						(14,574)
14,387(141,605)
		 Decrease (increase) in inventories						(10,705)
18,094(104,013)
		 Increase (decrease) in trade notes and accounts payable						7,395(25,966)
71,852
		Other, net					
2,027
2,354
19,695
		Subtotal						6,44423,08462,612
Cash flows during the year for:								 Interest and dividends received						
1,423
1,351
13,826
		Interest paid						(3,042)(2,916)(29,557)
		 Income taxes (paid) refund					(4,482)(2,138)(43,548)
Net cash provided by (used in) operating activities					
34319,381
3,333
Cash flows from investing activities:						Decrease in time deposits, net						—
55—Additions to property and equipment						(1,141)(4,028)(11,086)
Proceeds from sale of property and equipment						
184
924
1,788
Additions to investment securities						(4,432)(2,831)(43,063)
Proceeds from sale and redemption of investment securities					
329
2,517
3,197
Purchase of shares of subsidiaries resulting in change in scope of consolidation(1,300)—(12,631)
Net decrease (increase) in short-term loans receivable						
554
(567)
5,383
Additions to long-term loans receivable						
(6)
(8)
(59)
Proceeds from long-term loans receivable						
39
36
379
Other, net						
529(1,205)5,140
Net cash provided by (used in) investing activities						(5,244)(5,107)(50,952)
Cash flows from financing activities:					
Net increase (decrease) in short-term loans payable						5,326(26,360)
51,749Net increase (decrease) in commercial paper						(6,000)(4,000)(58,299)
Proceeds from long-term debt, issuance of bonds						62,80445,456610,222
Repayments of long-term debt, redemption of bonds						(63,576)(28,932)(617,722)
Payment of cash dividends					(2,901)(2,075)(28,187)
Cash dividends paid to minority interests in consolidated subsidiaries						
(39)
(41)
(379)
Other, net						
(542)
(412)
(5,266)
Net cash provided by (used in) financing activities						(4,928)(16,364)(47,882)
Effect of exchange rate changes on cash and cash equivalents					
1,487
1,428
14,448Net increase (decrease) in cash and cash equivalents						(8,342)(662)(81,053)
Cash and cash equivalents at beginning of year						23,19823,411
225,398
Effect of change in scope of consolidation
1,064
421
10,338
Increase in cash and cash equivalents resulting frommerger with unconsolidated subsidiaries
				
—
28
—
Cash and cash equivalents at end of year					¥15,920 ¥23,198 $154,683
See accompanying Notes to Consolidated Financial Statements.

30 | HANWA AR 2014 |HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements
1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements of Hanwa Co.,
Ltd. (the “Company”) and its consolidated subsidiaries have been
prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Act of Japan and its related accounting
regulations and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements of International
Financial Reporting Standards.
The accounts of overseas subsidiaries are based on their accounting
records maintained in conformity with Japanese GAAP. The accompanying consolidated financial statements have been restructured andtranslated into English with some expanded descriptions from theconsolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as required by the Financial
Instruments and Exchange Act of Japan. Some supplementary information included in the statutory Japanese language consolidated
financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside
Japan, using the prevailing exchange rate at March 31, 2014, whichwas ¥102.92 to U.S.$1.00. The translations should not be construed
as representations that the Japanese yen amounts have been, could
have been or could in the future be converted into U.S. dollars at thisor any other rate of exchange.

2. Significant accounting policies
Consolidation
The consolidated financial statements include the accounts of theCompany and its 21 (17 in 2013) significant subsidiaries (together, “theCompanies”). The accounts of certain consolidated subsidiaries havebeen included on the basis of fiscal periods that ended three months
or less prior to March 31, and significant transactions after theseyear-ends were appropriately adjusted in consolidation.
Intercompany transactions and accounts have been eliminated.
Investments in unconsolidated subsidiaries and affiliates are notaccounted for by the equity method, as the application of the equity
method would not have a material effect on net income and retained
earnings, or on the consolidated financial statement as a whole.
Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on
hand, readily available deposits and short-term highly liquid investments with maturities not exceeding three months at the time ofpurchase are considered to be cash and cash equivalents.
Allowance for doubtful receivables
The allowance for doubtful receivables is provided to cover possible losses oncollection. With respect to normal trade accounts receivable, it is stated at an
amount based on the actual rate of historical bad debts, and for certain
doubtful receivables, the uncollectible amount is individually estimated.
Securities
The Companies classify securities as (a) securities held for trading
purposes (hereafter, “trading securities”), (b) debt securities intended
to be held to maturity (hereafter, “held-to-maturity debt securities”),(c) equity securities issued by subsidiaries and affiliated companies, and(d) all other securities that are not classified in any of the above categories (hereafter, “available-for-sale securities”).
The Companies do not hold trading securities. Held-to-maturity
debt securities are stated at amortized cost. Equity securities issued
by subsidiaries and affiliated companies which are not consolidated
or accounted for using the equity method are stated at moving
average cost. Available-for-sale securities with available fair values arestated at fair value. Valuation difference on available-for-sale securities are reported, net of applicable income taxes, as a separate
component of accumulated other comprehensive income. Realized

gains on the sales of such securities are computed using moving
average cost. Other available-for-sale securities are stated at moving
average cost.
Inventories
Inventories are stated at the lower of cost (based, principally, on a movingaverage basis or a specific-identification basis) or net realizable value.
Property and equipment (except under lease)
Property and equipment are carried at cost. Recognized loss on impairment of long-lived assets has been deducted from acquisition costs.
Depreciation is principally provided on the straight-line method overthe estimated useful life of the asset. Major renewals and improvements are capitalized. Maintenance, repairs and minor renewals are
expensed as incurred.
Software costs
The Companies include software in “Intangibles and other assets”
and depreciate it using the straight-line method over the estimateduseful life, especially 5 years for computer software for internal use.
Bonuses
The Companies follow the Japanese practice of paying bonuses to
employees in June and December. At the balance sheet date, bonus
liabilities are estimated and accounted for on an accrual basis.
Income taxes
Income taxes comprise corporate tax, prefectural and municipal
inhabitants taxes and enterprise tax. The Companies recognize thetax effects of loss carryforwards and the temporary differences
between the carrying amounts of assets and liabilities for tax andfinancial reporting. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax
consequences of the temporary differences.
The Company and its wholly owned domestic subsidiaries fileconsolidated tax returns.
Retirement benefits
1. Attribution of estimated retirement benefits
To calculate benefit liabilities, the estimated amount of retirement
benefits is attributed to the consolidated fiscal year under review
based on the straight-line attribution method.
| HANWA AR 2014 | 31

2. Treatment of unrecognized actuarial differences and past service costs
Past service costs are posted in expenses based on the straight-line
method for a fixed period of years (14 years) within the average remaining
service years of employees when costs accrue from their service.
Actuarial differences are posted in expenses after the consolidated fiscal
year following their accrual based on the straight-line method for a fixed periodof years (14 years) within the average remaining service years of employees.
3. Adoption of simplified method by small companies
In calculating net defined benefit liability and retirement benefit
expenses, certain domestic subsidiaries adopt a simplified method thatregards the benefits payable assuming the voluntary retirement of all
employees at the fiscal year-end as retirement benefit obligations.
Translation of foreign currencies
Receivables and payables denominated in foreign currencies are translated
into Japanese yen at year-end rates.
Balance sheets of overseas consolidated subsidiaries are translated into Japanese yen at year-end rates, except for shareholders’equity accounts, which are translated at historical rates. Income
statements of overseas consolidated subsidiaries are translated ataverage rates, except for transactions with the Company, which aretranslated at rates used by the Company.
The Companies report foreign currency translation adjustmentsin accumulated other comprehensive income.
Finance leases
Finance leases that do not transfer ownership of the leased property to
the lessee at the end of the lease period are depreciated using thestraight-line method over the period of the lease with a residual value
assumed to be zero. Finance lease transactions in which the ownershipof the leased assets was not transferred to lessee and contracted
before April 1, 2008 are accounted for as operating lease transactions.
Derivatives and hedge accounting
The Company states derivative financial instruments at fair value and recognizes changes in the fair value as gain or loss unless the derivative financial
instruments are used for hedging purposes.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Company defers the recognition of gain or loss resulting
from the changes in the fair value of the derivative financial instruments until
the related gain or loss on the hedged item is recognized.
Also, if interest rate swap agreements are used as hedges and meetcertain hedging criteria, the net amount to be paid or received under theinterest rate swap agreements is added to or deducted from the interest on
the assets or liabilities for which the swap agreement was executed.
The following summarizes hedging derivative financial instruments usedby the Company and items hedged:
Hedging instruments:
		 Interest rate swap agreements
		 Commodity forwards contracts
Hedged items:
		 Interest expense on borrowings
		 Inventories and commitments
The Company evaluates hedge effectiveness by comparing the cumulativechanges in cash flows or changes in the fair value of the hedged items andthe corresponding changes in the hedging derivative instruments.
32 | HANWA AR 2014 |Goodwill
Goodwill is amortized by the straight-line method over 5 years.
Reclassifications
Certain prior year amounts have been reclassified to conform to thecurrent year presentation.
Amounts per share
Computations of net income per share of common stock are basedon the weighted average number of shares outstanding during
each period. Diluted net income per share is not disclosed because
potentially dilutive securities are not issued. Cash dividends per
share in the consolidated statements of income and comprehensive
income are dividends applicable to the respective years including
dividends to be paid after the end of the consolidated fiscal year.
Changes in accounting policies
Effective from the year ended March 31, 2014, the Company and its
consolidated domestic subsidiaries have applied the Accounting Standard
for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012 (hereinafter, the “Statement No. 26”) and Guidance on Accounting Standard
for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012 (hereinafter, the “Guidance No. 25”) except the article 35 of the Statement No.
26 and the article 67 of the Guidance No. 25 and actuarial gains andlosses and past service costs that are yet to be recognized have beenrecognized and the difference between retirement benefit obligations
and plan assets has been recognized as net defined benefit liabilities.
In accordance with the article 37 of the Statement No. 26, the effectof the change in accounting policies arising from initial application has
been recognized in remeasurements of defined benefit plans in accumulated
other comprehensive income.
As a result of the application, net defined benefit liabilities in theamount of ¥4,483 million ($43,558 thousand) have been recognized,
and accumulated other comprehensive income has decreased by ¥5,585
million ($54,265 thousand) at the end of the consolidated fiscal year.
Accounting Standards Not Yet Applied
On May 17, 2012, the ASBJ issued ASBJ Statement No. 26,“Accounting Standard for Retirement Benefits” and ASBJ Guidance
No. 25, “Guidance on Accounting Standard for Retirement Benefits.
(Please also refer to the ASBJ homepage, which has a summary inEnglish of the accounting standard.)
1. Outline
The accounting standard and guidance for retirement benefits wererevised in view of improvements to financial reporting and international trends, with the focus mainly on (1) how to account for
actuarial gains and losses and past service costs yet to be recognizedas profit and loss, (2) how to determine retirement benefit obligations and service costs and (3) how to enhance disclosure.
2. Effective date
The accounting standard and guidance are scheduled to go into
effect on March 31, 2014. However, revisions to the determination of retirement benefit obligations and service costs arescheduled to go into effect on April 1, 2014.
3. Impact of the accounting standard and guidance’s application
The impact will be evaluated in the course of formulating theCompany’s consolidated financial statements going forward.

3. Financial instruments
At March 31, 2014 and 2013, information on financial instruments
was as follows.
(A) Qualitative information on financial instruments
Policy for financial instruments
The Group’s main business is the sales of various products ranging
from mainly steel, metals and alloys, non-ferrous metals to foodproducts, petroleum and chemicals, lumber, and machinery. The
Group also engages in other business activities such as steel material
processing, non-ferrous metal processing and amusement park
management and operations. While the Group depends primarily onbank borrowings to procure funds necessary for these operationaltransactions as well as investing and financing activities, the Groupseeks to diversify its financing instruments to ensure stable andflexible liquidity, funding these activities by issuing bonds andcommercial paper in the capital markets in some cases. Temporary
surplus funds are managed in low-risk financial assets.
It is the Companies’ policy to use derivatives only for the purposeof reducing market risks associated with assets and liabilities.
Components of financial instruments and risks
Trade notes and accounts receivable are exposed to credit risk ofcustomers. Some of them are denominated in foreign currencies andexposed to the foreign exchange rate fluctuation risk as well.
Securities consist mainly of listed stocks and are exposed to pricefluctuation risk. Some of them are denominated in foreign currencies,
which accompany foreign exchange rate fluctuation risk.
Long-term loans receivable are mainly for the employees of
the Company.
Foreign currency denominated notes and accounts payable areexposed to foreign exchange rate fluctuation risk.
Short-term loans payable, commercial paper, bonds payable
and long-term loans payable are used for raising working capitaland investment funds, although they have liquidity risk related tochanges in financial market environments.
Foreign exchange future contracts and currency swap agreements
are used to hedge foreign exchange rate fluctuation risk associatedwith certain assets and liabilities denominated in foreign currencies.
Interest rate swap agreements are made use of for hedging fluctuations in future interest rates. Commodity forward contracts andcommodity swap agreements aim to hedge market risks associatedwith certain inventories and commitments.
Refer to No. 2, “Significant accounting policies — Derivatives andhedge accounting” for an explanation of the Companies’ hedging
instruments, hedged items, and evaluation of hedge effectiveness.
Risk management system for financial instruments
With regard to credit risk to which trade notes and accounts receivable are exposed, the Company sets a credit limit amount for eachbusiness partner and manages the outstanding balance in accordancewith the “Credit administrative provisions” while monitoring the credit
status on a regular basis. Furthermore, the Company is committed toreducing foreign exchange rate fluctuation risk to which trade notes
and accounts receivable and trade notes and accounts payable areexposed by means of derivatives trading.

Because price fluctuation risks associated with securities affectmainly listed stocks of the Company’s business partners, the Company
reports the regularly assessed market values to the Board of Directors.
In regard to foreign exchange rate fluctuation risk, the Company iscommitted to reducing it by means of derivatives trading.
In regard to business investments, in compliance with the“Rules for the Review and Approval of New Businesses, Loans andInvestments,” the Company decides whether or not to invest after
following the prescribed procedures. The Company continuously
monitors the financial status and trading conditions of the issuing
company and reviews its policies for the holding of stocks.
To deal with liquidity risk associated with procuring funds for
short-term loans payable, commercial paper, and long-term debt, theCompany creates a fund procurement plan based on the outlook of
the Group’s financial requirements. Taking financial market trends
into consideration as well, the Company works to diversify the funds
procurement to ensure liquidity. In addition, with regard to interest
rate risk and foreign exchange rate fluctuation risk, the Company
seeks to reduce such risks through derivatives trading and other means.
The Company practices and manages the trading of derivatives
related to currencies and products in compliance with the “Business
Department Operating Rules,” and each department receives theapproval of a supervising director to engage in such trading. In addition, the trading authority and trading limit are clearly stated in the“Regulations for Administrative Authority” and the bylaws.
With respect to derivatives trading related to interest rates associatedwith loans, the Company receives approval from a director in charge ofsupervising financial affairs before engaging in such trading.
In order to reduce credit risk to which derivatives trading partners are exposed, the Company trades only with highly rated
financial institutions.
With regard to the contract balances of derivatives trading related
to products, the trading department reports it to the supervising
director of each department and to the Internal Audit Department.
The Hedging Administration Office checks the balance confirmations
from the contractors and reports them to the supervising director ofeach department and the internal Audit Department. At the sametime, the Accounting Department checks the balance directly withthe contractors. When necessary, internal auditing is implemented
by the Internal Audit Department.
Supplementary explanation for items concerning fair valuesof financial instruments
The fair value of financial instruments is based on the market price, but
in cases in which market prices are not available, the fair value is reasonably estimated. As variable factors are incorporated into the estimationof values, values may vary depending on the assumptions used.
The contract amount related to derivative transactions in Note 5,“Derivatives” does not express the market risk related to the derivative transactions themselves.
(B) Fair values of financial instruments
Book values and fair values of the financial instruments (excluding
those whose fair values were hard to determine) on the consolidatedbalance sheets at March 31, 2014 and 2013 were as follows:| HANWA AR 2014 | 33

March31, 2014
					Book value

Millions of yen 			Fair value

DifferenceBook value

Thousands of U.S. dollars
Fair value

Difference(1) Cash and cash equivalents¥ 15,920¥ 15,920¥—$ 154,683$ 154,683$—(2) Trade notes and accounts receivable
317,846			
3,088,282		
Allowance for doubtful receivables(860) 			(8,356) 		
		Net		316,986
316,986—
3,079,926
3,079,926—(3) Securities						a) Held-to-maturity debt securities
5,006
5,010
4
48,64048,67939b) Available-for-sale securities
29,89329,893—
290,449
290,449—(4) Long-term loans receivable103 			1,001 		Allowance for doubtful receivables—			—				Net		
103
103
—
1,001
1,001
—
Total assets¥ 367,908¥ 367,912¥
4$3,574,699$3,574,738$
39(1) Short-term loans payable¥ 74,004¥ 74,004¥$ 719,044$ 719,044
$
—
—
5,000
5,000
—
48,582
48,582—(2) Commercial paper(3) Long-term debt due within one year
31,601
31,615(14)
307,044
307,180(136)(4) Trade notes and accounts payable
180,363
180,363—
1,752,458
1,752,458—(5) Long-term debt due after one year
134,280
134,443(163)
1,304,703
1,306,286(1,583)
Total liabilities¥ 425,248¥ 425,425¥(177) $4,131,831$4,133,550$(1,719)Derivatives:						To which hedge accounting is not applied¥(210) ¥
(210) ¥—$
(2,040) $(2,040) $—To which hedge accounting is applied
(710)
(790)
(80)
(6,899)(7,676)(777)
Total derivatives¥(920) ¥
(1,000) ¥(80) $(8,939) $(9,716) $(777)

March 31, 2013

					Book value

Millions of yen
Fair value

Difference(1) Cash and cash equivalents¥ 23,198¥ 23,198¥—(2) Trade notes and accounts receivable
293,752 		
Allowance for doubtful receivables(788) 				 Net		292,964
292,964—(3) Securities						a) Held-to-maturity debt securities
5,007
5,041
34
b) Available-for-sale securities
19,941
19,941—(4) Long-term loans receivable
129			
Allowance for doubtful receivables—					Net		129129
—Total assets¥ 341,239¥ 341,273¥
34(1) Short-term loans payable¥ 60,600¥ 60,600¥—(2) Commercial paper
11,00011,000—(3) Long-term debt due within one year
62,95062,971(21)(4) Trade notes and accounts payable
164,302164,302—(5) Long-term debt due after one year
100,625
100,680(55)
Total liabilities¥ 399,477¥ 399,553¥(76)
Derivatives:						To which hedge accounting is not applied¥(2,813)¥(2,813)¥—
To which hedge accounting is applied
270
227
(43)
Total derivatives¥(2,543)¥(2,586)¥(43)

Allowance for doubtful receivables recognized in trade notes and accounts receivable and long-term loans receivable was offset.
Derivative assets and liabilities were on net basis.

34 | HANWA AR 2014 |Basis of determining the fair value of financial instruments is asfollows:
Cash and cash equivalents, Trade notes and accounts
receivable
The book values of cash and cash equivalents and trade notes
and accounts receivable approximate fair value due to their shortmaturities.
Securities
The fair value of securities is based on the quoted market price on thestock exchange. The fair value of bonds is based on the quoted priceprovided by financial institutions.
Long-term loans receivable
The book value of long-term loans receivable approximates fair value
due to their floating interest rates.

Short-term loans payable, Commercial paper, and Trade notes
and accounts payable
The book values of short-term loans payable, commercial paper andtrade notes and accounts payable approximate fair value due to theirshort maturities.
Long-term debt
The book value of long-term loans payable with floating interest rates
approximates fair value. The fair value of long-term loans payable with
fixed interest rates is estimated by discounted cash flow analysis, using
rates currently available for similar types of borrowings with similar terms
and remaining maturities. The fair value of straight bonds is based on
the quoted price provided mainly by Japan Securities Dealers Association.
Derivatives
The fair value of derivatives is based on the quoted price provided
mainly by financial institutions and exchange members.

The following tables summarize book values of financial instruments whose fair values were hard to determine as of March 31, 2014 and2013:							Thousands of					Millions of yen
U.S. dollars
					
2014

			

		

(1) Equity securities issued by unconsolidated subsidiaries and affiliated companies		

Book value

¥

5,083

2013

2014

Book value

Book value

¥

7,277

$

49,388(2) Available-for-sale securities:							Unlisted stocks				
¥
4,213
¥
3,300
$ 40,935
Unlisted foreign stocks				
2,109
1,711
20,491
Unlisted foreign convertible bonds				
2,207
2,017
21,444
Investment in limited partnerships				
60
64
583
Total				
¥
8,589
¥
7,092
$ 83,453

The maturities of receivables and securities with maturities outstanding at March 31, 2014 were as follows:			Year ending March 31

		Millions of yen																2015

Cash and cash equivalents		
Trade notes and accounts receivable		
Held-to-maturity debt securities		Available-for-sale securities with maturity dates		Long-term loans receivable		Total						

¥15,920317,8462,000—
25¥ 335,791

From 2016 		
to 2019		

¥

¥

		

$ 154,683
3,088,282
19,433—243$3,262,641

¥

¥

—
—
3,006
—
21
3,027

Thereafter		

¥

¥

—
—
—
—
11
11

Thousands of U.S. dollars																2015

Cash and cash equivalents		
Trade notes and accounts receivable		
Held-to-maturity debt securities		Available-for-sale securities with maturity dates		Long-term loans receivable		Total			

—
—
—
2,207
71
2,278

From 2020		
to 2024		

From 2016 		
to 2019		

$

$

—
—
—
21,444690
22,134

From 2020		
to 2024		

$

$

—
—
29,207—
204
29,411

Thereafter		

$

$

—
—
—
—
107
107

| HANWA AR 2014 | 35

4. Securities(A) The following tables summarize book values and fair values of held-to-maturity debt securities as of March 31, 2014 and 2013:
March 31, 2014

					

Millions of yen 			Book value

Corporate bonds with fair values exceeding book values:
Corporate bonds¥
Corporate bonds with fair values not exceeding book values:
Corporate bonds¥

Thousands of U.S. dollars

Book value

Fair value

Difference

¥

3,013

¥

7

$

29,207$29,275

$

68

2,000

¥

1,998

¥

(2)

$

19,433$

19,413$(20)

March 31, 2013

Millions of yen 			Book value

Corporate bonds with fair values exceeding book values:
Corporate bonds¥
Corporate bonds with fair values not exceeding book values:
Corporate bonds¥

Difference

3,006

			
		

Fair value

Fair value

Difference

3,007

¥

3,050

¥

43

2,000

¥

1,991

¥

(9)

(B) The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available market
values as of March 31, 2014 and 2013:
March 31, 2014					Securities with book values exceeding acquisition costs:
Equity securities¥
Securities with book values not exceeding acquisition costs:
Equity securities¥

Book value

Thousands of U.S. dollars

Acquisition cost

Book value

Difference¥

23,212¥

13,196$

97,318$225,534$ 128,216

8,500

¥

6,681

¥

(1,819)$82,588$64,914$ (17,674)

			Millions of yen

Acquisition cost

Securities with book values exceeding acquisition costs:
Equity securities¥
Securities with book values not exceeding acquisition costs:
Equity securities¥

Difference

10,016

March 31, 2013
		

Millions of yen 			Acquisition cost

Book value

Difference

4,907

¥

11,636¥

6,729

10,968

¥

8,305

¥

(2,663)(C)	The loss resulting from the valuation of the listed securities in the years ended March 31, 2014 and 2013 was as follows:							Thousands of					Millions of yen
U.S. dollars
					
2014

The loss resulting from the valuation of the listed securities				36 | HANWA AR 2014 |

¥

2014

2013

76

¥

798

$

738

5. Derivatives(A) The following tables summarize fair value information as of March 31, 2014 and 2013 for the derivatives to which hedge accounting
has not been applied:
March 31, 2014
Currency related

			
				
				

Contract ornotional amountMillions of yen 			Thousands of U.S. dollars
Due after		Net recognized
one year
Fair value
gain or loss

Contract ornotional amountDue after		
one year
Fair value

Net recognizedgain or loss

Foreign exchange forward contracts:
Selling:		 				U.S. dollars				 ¥ 28,973 ¥— ¥(72) ¥(72) $ 281,510 $— $(700) $
		Other currencies
		
366
—
(2)
(2)
3,556
—
(19)
Buying:					U.S. dollars				12,038133
216
216
116,965
1,292
2,099
		Other currencies
		
3,641
312
85
85
35,377
3,031
826
Currency swap agreements:
Japanese yen received for U.S. dollars		
10,678
—
(654)
(654)
103,750—(6,355)
		Total 							¥(427) 				 $Commodity related

			
				
				

Contract ornotional amount

				
				

Contract ornotional amount

2,099
826
(6,355)(4,149)Millions of yen 			Thousands of U.S. dollars
Due after		Net recognized
one year
Fair value
gain or loss

Contract ornotional amountDue after		
one year
Fair value

Net recognizedgain or loss

Forwards:
Petroleum:						Selling				 ¥
1,591 ¥— ¥(16) ¥(16) $
15,459 $— $(155) $
		Buying
			
815
—
10
10
7,919
—
97
Non-ferrous metals:					Selling				15,030—403
403
146,036—
3,916
		Buying
			
7,103
—
(174)
(174)
69,015—(1,691)
Commodity swap agreements:
Petroleum:
		
40
—
—
—
389
—
—
		Selling				Buying
			
2,103
—
(6)
(6)
20,433—(58)
		
Total 							¥217 				 $March 31, 2013
Currency
related
			

(700)
(19)

(155)
97
3,916
(1,691)

—
(58)
2,109

Millions of yen 			Due after		Net recognized
one year
Fair value
gain or loss

Foreign exchange forward contracts:
Selling:		 				U.S. dollars				 ¥ 34,964 ¥— ¥ (1,258) ¥ (1,258)
		Other currencies			
415
—
(3)
(3)
Buying:				
		U.S. dollars				
9,503
329
131
131
		Other currencies
		
5,069
—
(8)
(8)
Currency swap agreements:
Japanese yen received for U.S. dollars		
8,752—(1,610)(1,610)		
Total 							¥ (2,748)| HANWA AR 2014 | 37

Commodity
related
			
				
				

Millions of yen

Contract ornotional amountDue after		Net recognized
one year
Fair value
gain or loss

Forwards:
Petroleum:						Selling				 ¥5,294 ¥— ¥(59) ¥(59)
		Buying				
3,061
—
7
7
Non-ferrous metals:						Selling				
22,694—259
259
		Buying
			11,649
—
(276)
(276)
Commodity swap agreements:
Petroleum:
217
—
(2)
(2)
		Selling						Buying
			
1,478
—
6
6
		
Total 							¥(65)(B) The following tables summarize fair value information as of March 31, 2014 and 2013 for the derivatives to which hedge accounting has been applied:
March 31, 2014
Interest rate related

			
		
		

Contract ornotional amountInterest rate swap for long-term loans:
Floating rate received for fixed rate

¥

5,853

Commodity
related							Forwards for inventories and commitments:
Non-ferrous metals
		Selling		Buying¥

20,13010,870							Contract ornotional amountInterest rate swap for long-term loans:
Floating rate received for fixed rate

¥

5,500

Commodity
related			
Forwards for inventories and commitments:
Non-ferrous metals
		 Selling		Buying

38 | HANWA AR 2014 |Due after
one year¥

20,721
15,166¥

Due after
one year

¥

(80)

—
—

Fair value¥(1,225)515

Millions of yen
Due after
one year¥

500

Fair value

¥

(43)

Millions of yen

Contract ornotional amount

¥

5,853

Fair value

Due after
one year¥——

Fair value

¥

803
(533)

Thousands of U.S. dollars

Contract ornotional amount$56,869Millions of yen 			Contract ornotional amountMarch 31, 2013
Interest rate related				Millions of yen 			Due after
one year

$

$

(777)

Thousands of U.S. dollars

Contract ornotional amount$ 195,589
105,616

56,869Fair value

Due after
one year$——

Fair value$(11,902)5,004

6. Inventories
Inventories at March 31, 2014 and 2013 consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2014

Merchandise and finished products				¥ 106,083
Work-in-process				
167
Raw materials and supplies 				8,444Total				¥ 114,694

The provisions made or reversed in the year were determined
after considering the realizable value of the inventories due to thedecline in profitability. Such provisions recognized in the profit and

2014

2013

¥

¥

91,920132
4,558
96,610$1,030,733
1,623
82,044$1,114,400

loss were a net gain of ¥441 million (gain of $4,285 thousand) anda net gain of ¥242 million for the years ended March 31, 2014 and2013, respectively.

7. Pledged assets
At March 31, 2014 and 2013, assets were pledged as collateral for loans payable in the amount of ¥1,848 million ($17,956 thousand) and¥800 million, respectively, and for guaranty deposits were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2014

For loans payable:				
Buildings and structures, net of accumulated depreciation 				¥
149Land 				1,896Investment securities 				53Total				¥2,098For guaranty deposits:				
Other current assets				¥13
Investment securities 				1,690Total				
¥
1,703

2014

2013

—
—
60
60

$

13
1,260
1,273

$

¥

¥
¥
¥

$

$

1,448
18,422515
20,385126
16,421
16,547

8. Short-term loans payable, commercial paper and long-term debt
The weighted average interest rate applicable to short-term loans
outstanding at March 31, 2014 and 2013 was 1.18% and 1.28%,
respectively, regardless of borrowing currencies though the range ofthe interest rates varies by borrowing currency. There was an
outstanding balance of ¥74,004 million ($719,044 thousand) and¥60,600 million at March 31, 2014 and 2013, respectively.
The Company has entered into a yen denominated domestic
commercial paper program. There was an outstanding balance of¥5,000 million ($48,582 thousand) and ¥11,000 million at March
31, 2014 and 2013, respectively.

Bonds at March 31, 2014 and 2013, consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2014

Issued in 2009, 1.34% unsecured straight bonds, due 2014			
Issued in 2010, 0.79% unsecured straight bonds, due 2013			Issued in 2011, 0.56% unsecured straight bonds, due 2014			
Issued in 2012, 0.54% unsecured straight bonds, due 2015			
Issued in 2013, 0.36% unsecured straight bonds, due 2016			
Issued in 2013, 0.74% unsecured straight bonds, due 2018			
Total			

¥

¥

2013

—
¥
50
—
10,00010,000		 10,000
10,000		10,000
10,000		 —
10,000		—
40,000¥ 30,050

2014

$

—
—
97,163
97,163
97,163
97,163$ 388,652| HANWA AR 2014 | 39

Long-term loans payable at March 31, 2014 and 2013, consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2014

Loans from banks with weighted average interest rates of 0.84% and 1.02%
at March 31, 2014 and 2013, respectively, maturing serially through 2021		
Less amounts due within one year							¥ 125,881
21,601¥ 104,280

2013

2014

¥ 133,525$1,223,096
52,900 		 209,881¥ 80,625$1,013,215

The interest rates represent weighted average rates regardless of borrowing currencies, though the range of the interest rates varies byborrowing currencies.
The annual maturities of long-term debt outstanding at March 31,
2014 were as follows:
Years ending March 31

					Millions of yen

2015
2016
2017
2018
2019
Thereafter
Total

¥

21,601
16,754
9,317
35,13142,815263¥ 125,881

Thousands of
U.S. dollars$ 209,881
162,787
90,527341,343
416,003
2,555$1,223,096

9. Employees’ severance and retirement benefits(A) Overview of retirement benefit system adopted
To provide retirement benefits for employees, the Company and its
consolidated domestic subsidiaries have adopted funded andunfunded defined benefit plans and defined contribution plans.
These Companies may also pay extra retirement allowances to
employees at retirement.
Under its defined benefit corporate pension plan, the Company
provides employees with lump-sum or pension benefits after

determining the amount of benefits based on their salary and years ofservice. In calculating pension benefits, the Company uses a life
pension system with a guarantee period of 15 years in which pension
conversion rates vary according to market interest rates.
In the defined benefit corporate pension plan and lump-sum
retirement payment plan which certain domestic subsidiaries have,net defined benefit liability and retirement benefit expenses arecalculated based on the simplified method.

(B) Defined benefit plans(1) Movements in defined benefit obligations, except plans applying the simplified method							Thousands of					Millions of yen
U.S. dollars

Balance at April 1, 2013				¥Service cost			Interest cost			
Actuarial gain			
Benefits paid			
Balance at March 31, 2014			
¥40 | HANWA AR 2014 |

27,671$ 268,859
1,147 		11,145379 		
3,682(832) 		(8,084)(764) 		(7,423)27,601$ 268,179

(2) Movements in plan assets, except plans applying the simplified method							Thousands of					Millions of yen
U.S. dollars

Balance at April 1, 2013			
¥Expected return on plan assets				
Actuarial gain				Contributions paid by the employer				Benefits paid				Balance at March 31, 2014			
¥

22,214$ 215,837
666 		
6,471
(60) 		
(583)1,406 		13,661(764) 		(7,423)
23,462$ 227,963(3) Movements in liability for defined benefits for plans applying the simplified method							Thousands of					Millions of yen
U.S. dollars

Balance at April 1, 2013			
¥Defined benefit costs				
Benefits paid				Contributions paid by the employer				
Other				Balance at March 31, 2014			
¥

220
$
80 		
(34) 		
(16) 		
94 		
344
$

2,137
777
(330)
(155)
913
3,342

(4) Reconciliation from the balances of defined benefit obligations and plan assets and the liability for retirement benefits							Thousands of					Millions of yen
U.S. dollars

Funded defined benefit obligations			
¥ 27,821$ 270,317
Plan assets				 (23,640) 		 (229,693)
					
4,181 		40,624
Unfunded defined benefit obligations				302 		
2,934
4,483 		43,558
Total net liability for defined benefits at March 31, 2014				
Net defined benefit liabilities				Total net liability for defined benefits at March 31, 2014			
¥

4,483 		4,483
$43,55843,558(5) Retirement benefit costs							Thousands of					Millions of yen
U.S. dollars

Service cost			¥Interest cost				Expected return on plan assets				Net actuarial loss amortization				
Past service costs amortization				Retirement benefit costs based on the simplified method				
Other				¥Total retirement benefit costs for the fiscal year ended March 31, 2014			

1,147$379 		
(666) 		1,250 		
81 		
80 		
13 		
2,284
$

11,145
3,682(6,471)
12,146787
777
126
22,192| HANWA AR 2014 | 41

(6) Accumulated other comprehensive income from defined benefit plans as of March 31, 2014 was as follows:							Thousands of					Millions of yen
U.S. dollars

Past service costs that are yet to be recognized			¥
Actuarial gains and losses that are yet to be recognized				Total balance at March 31, 2014 			
¥384$
8,294 		
8,678
$

3,731
80,58784,318(7) Plan assets comprise:
Bonds				19.5%Equity securities			
8.0
Cash and cash equivalents			
31.0
General account assets				
19.7
Other 				
21.8Total				100.0%

2. Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets havebeen considered in determining the long-term expected rate of return.
(8) The principal actuarial assumptions at March 31, 2014 were as follows:
Discount Rate				
1.4%
3.0%
Long-term expected rate of return				(C) Defined contribution plans
Consolidated domestic subsidiaries are required to contribute ¥89
million($865 thousand) to the defined contribution plan (including

corporate pension fund plans under the multi-employer pension
system in which accounting treatment is implemented in the same
way as the defined contribution plan).

(D) Multi-employer pension plans
Multi-employer pension plans under which required contributions were accounted for as retirement benefit expenses. Items relating to overall statusof pension plan reserves at March 31, 2013 (as of the most recently available year-end date of the pension fund) were as follows:							Thousands of					Millions of yen
U.S. dollars

Fair value of plan assets			
¥ 101,911$ 990,196
Benefit obligation based on pension plan finance calculation				 128,178 		 1,245,414
Balance at end of year			¥ (26,267)$ (255,218)

The principle factors relating to the balance were the prior service costsof ¥17,203 million ($167,149 thousand) based on pension plan financecalculations. Amortization of unamortized prior service costs was
conducted using the straight-line method over a period of 20 years.

42 | HANWA AR 2014 |Percentage of total pension plan accounted for by contributions of
the Group at March 31, 2013 was 0.72%. The percentage does notmatch the actual amount contributed by the Group.

Year Ended March 31, 2013				
The liability for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March
31, 2013 consisted of the following:					Millions of yen						
2013

Projected benefit obligation			¥ 28,073
Less fair value of pension assets				 (22,395) 		
Unrecognized actuarial differences				 (10,317) 		
Unrecognized prior service costs				(464)
Prepaid pension costs				
5,323 		Liability for severance and retirement benefits			
¥
220

Included in the consolidated statements of income and comprehensive income for the year ended March 31, 2013, severance
and retirement benefits expenses comprised the following:					Millions of yen						
2013

Service costs -benefits earned during the year			¥
Interest costs on projected benefit obligation 				Expected return on plan assets				Amortization of actuarial differences				Amortization of prior service costs				Additional retirement benefits				
Severance and retirement benefit expenses			
¥

1,215
374
(631)
1,271 		
81 		
2 		
2,312

Prior service costs and actuarial differences are amortized or recognized over a stated number of years that does not exceed theaverage remaining service period of active employees expected to receive benefits under the plan.
Assumptions used for the year ended March 31, 2013 were as follows:											
2013

Discount rate 			Expected rate of return on plan assets 			Amortization period of prior service costs			
Amortization period of actuarial differences			

1.4%
3.0%
14 years
14 years| HANWA AR 2014 | 43

10. Income taxes
The Company is subject to a number of taxes based on income,which indicates an aggregate statutory income tax rate in Japan ofapproximately 38.0% for the years ended March 31, 2014 and 2013.
The following table summarizes the significant differences between

the aggregate statutory income tax rate and the Company’s effective
tax rate for financial statement purposes for the year ended March
31, 2014 and 2013.

					
2014

2013

38.0%
(0.1)
(0.1)
0.6
4.4
42.8%

Statutory tax rate:					Tax effect of permanent differences					Valuation allowance recognized for deferred tax assets				
Difference in tax rates for consolidated subsidiaries
				
Other
				
Effective tax rate					

38.0%
1.1
(13.0)
(1.2)
4.9
29.8%

The significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2014 and 2013 were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2014

2014

2013

Deferred tax assets:
Temporary differences resulting from the merger with consolidated subsidiaries		¥ 13,164¥ 13,170$ 127,905
Loss on impairment of long-lived assets				
2,243
2,281
21,794
Net defined benefit liabilities				
1,592—
15,468Loss on sale-repurchase agreements of land				
1,506
1,506
14,633
Land revaluation difference, net of taxes unrealized loss				
1,460
1,460
14,186
Loss on valuation of investment securities, currently not deductible			
907
902
8,813
Accrued bonuses to employees				
788
719
7,656
Other				
3,967
4,517
38,544
Total deferred tax assets				
25,62724,555248,999
Valuation allowance				(20,256)(19,727)(196,813)
Net deferred tax assets				
5,371
4,828
52,186
Deferred tax liabilities:						Land revaluation difference, net of taxes unrealized gain				
2,286
2,385
22,211
Prepaid pension costs				
—
2,000
—
Valuation difference on available-for-sale securities				
3,925
1,338
38,136
Other				
1,453
1,204
14,118
Total deferred tax liabilities				
7,664
6,927
74,465Net deferred tax liabilities			¥ (2,293)¥ (2,099)$ (22,279)

Deferred tax assets and deferred tax liabilities were included in the consolidated balance sheets at March 31, 2014 and 2013, respectively,
as follows:							Thousands of					Millions of yen
U.S. dollars
					
2014

Current assets: Deferred tax assets				
Other assets: Deferred tax assets				Current liabilities: Deferred tax liabilities				Noncurrent liabilities: Deferred tax liabilities				

Adjustment of deferred tax assets and liabilities for enactedchanges in tax laws and rates
On March 31, 2014 amendments to the Japanese tax regulations
were enacted into law, which will reduce the corporation tax rate.

44 | HANWA AR 2014 |

¥

2,048
217
—
4,558

2014

2013

¥

2,165
300
—
4,564

$

19,8992,108—44,287

Consequently, the effective statutory tax rate used to measure deferred
tax assets and liabilities has been reduced from 38.0% to 35.6%.
The impact of this change on the financial statements has been
immaterial.

11. Business Combination
Year ended March 31, 2014
(A) Outline of business combination(1) Name and business of the company acquired
		 San Ei Metal Co., Ltd.
		 Wholesale steel distributor(2) Major reasons for the business combination
The business combination has made it possible for the Company
to enhance its position as a trading company with a strong presence in the industry by making use of the logistics and processing
function possessed by San Ei Metal Co., Ltd. and strengthening
the sales force.
(3) Business combination date		 October 1, 2013(4) Legal form for the business combination
		 Cash purchase of shares(5) Name of the company after the business combination
		 San Ei Metal Co., Ltd.
(6) Voting rights acquired
		97.0%(7) Reason for decision on the acquiring company
		 The Company acquired San Ei Metal’s shares with cash.
(B) Period of the acquired company’s fiscal year included in the consolidated financial statements
From October 1, 2013 to March 31, 2014(C) D etails of the acquisition cost of the acquired company were as follows:							Thousands of					Millions of yen
U.S. dollars

Acquisition consideration (Cash)				
¥Costs directly related to the acquisition (Due diligence costs, etc.)				
Acquisition cost 				¥(D) Amount of goodwill, reasons for goodwill, method and period 		of amortization(1) Amount of goodwill¥494 million ($4,780 thousand)(2) Reason for recognition of goodwill 		

1,601
$
13 		
1,614
$

15,556
126
15,682As an acquisition cost exceeds the net assets at fair value ofthe acquired company, the excess amount has been recognized as goodwill.
(3) Method and period of amortization		
Amortized by the straight-line method over 5 years.

(E) Amounts of assets and liabilities acquired on the business combination date were as follows:							Thousands of					Millions of yen
U.S. dollars

Current assets				¥Fixed assets					Total assets					Current liabilities					Long-term liabilities					Total liabilities				¥

4,871$ 47,328
3,984 		38,7108,855		86,038
5,260		51,108
1,556		15,118
6,816$ 66,226| HANWA AR 2014 | 45

12. Net assets
Net assets comprise three subsections, which are shareholders’ equity,
accumulated other comprehensive income and minority interests.
Under the Japanese Corporate Law (“the Law”), in cases in which
a dividend distribution of surplus is made, the smaller of an amountequal to 10% of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in capital and legal earnings
reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve and legal capital surplus areincluded in retained earnings and additional paid-in capital, respectively, in the accompanying consolidated balance sheets.
Under the Law, legal earnings reserve and additional paid-in
capital are able to eliminate or reduce a deficit by a resolution of theshareholders’ meeting.
Under the Law, all additional paid-in capital and all legal earnings
reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the nonconsolidated financial
statements of the Company in accordance with Japanese laws
and regulations.

At the annual shareholders’ meeting held on June 27, 2014, theshareholders approved cash dividends of ¥6 per share ($0.06)
amounting to ¥1,243 million ($12,077 thousand). This appropriation has not been accrued in the consolidated financial statements
as of March 31, 2014. Such appropriations are recognized in the
period in which they are approved by the shareholders.
Land revaluation difference
Pursuant to the Law Concerning Land Revaluation, the Company revaluated land used for business activities at March 31, 2002.
Unrealized gain (loss) on land revaluation is recorded as land revaluation difference in a separate component of accumulated othercomprehensive income in the consolidated balance sheets until realized.
The amounts are shown net of applicable income tax.
The revaluation of land was determined based on a declared land
value with certain necessary adjustments in accordance with Article 2,
Paragraph 1 of the Enforcement Ordinance Concerning Land Revaluation.
As of March 31, 2014, the carrying amount of the land after theabove one-time revaluation exceeded the market value by ¥1,922 million($18,675 thousand).

13. Contingent liabilities
At March 31, 2014 and 2013, the Companies were contingently liable as follows:							Thousands of					Millions of yen
U.S. dollars
					
2014

As endorsers of export letters of credit and notes discounted			As guarantors of indebtedness				

¥

2014

2013

5,707
4,816

¥

5,469
4,952

$

55,451
46,794

14. Loss on impairment of long-lived assets
As a result of this procedure, a loss on impairment of long-lived
Year ended March 31, 2013
assets of ¥256 million for the year ended March 31, 2013 was
Due to the relocating of the Osaka Head Office, the Companies
recognized in other expense in the consolidated statements ofreduced the book value of long-lived assets that were impaired toincome and comprehensive income.
the memorandum values.
For the purpose of recognition and measurement, the Companies
grouped the long-lived assets based principally on the location of thebusiness
entity to which the assets belonged.
										

		Millions of yen				Building and			
Location
Description			
Structure
Other
Total		

Chuo, Osaka
Idle assets
Total			46 | HANWA AR 2014 |

¥
¥

252
252

¥
¥

4
4

¥
¥

256		
256

15. Loss on disposal of property and equipment
Year Ended March 31, 2014
Loss on disposal of property and equipment for year ended March 31,
2014 was ¥90 million ($874 thousand). The loss consists mainly of
estimated expense for the demolition of the former Osaka Head Office.

Year Ended March 31, 2013
Loss on disposal of property and equipment for year ended March
31, 2013 was ¥375 million. The loss consists of estimated expense
for the demolition of the former Osaka Head Office.			

16. Other comprehensive income
Years ended March 31, 2014 and 2013
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous
periods and tax effects for each component of other comprehensive income were as follows:
			
			
					
Millions of yen
					
2014

Valuation difference on available-for-sale securities, net of taxes:				
Increase (decrease) during the year			 ¥7,253Reclassification adjustments 			
163
Sub-total, before tax				7,416
Tax expense (benefit)				
2,596
Sub-total, net of tax				
4,820
Deferred gains or losses on hedges, net of taxes:				
Increase (decrease) during the year			(192)
Reclassification adjustments 			(559)
Sub-total, before tax				
(751)
Tax expense (benefit)				
(270)
Sub-total, net of tax				(481)
Land revaluation difference, net of taxes:				
Increase (decrease) during the year			—
Reclassification adjustments 			—Sub-total, before tax				—Tax expense (benefit)				
(33)
Sub-total, net of tax				33
Foreign currency translation adjustments:
Increase (decrease) during the year			
2,274
Reclassification adjustments 			—Sub-total, before tax				2,274
Tax expense (benefit)				
—Sub-total, net of tax				
2,274
Total other comprehensive income			 ¥6,646Thousands of
U.S. dollars
2014

2013

¥

¥

101
799
900
318
582

$

70,472
1,584
72,05625,224
46,832(1,345)
966
(379)
(146)
(233)

(1,866)(5,431)(7,297)(2,623)(4,674)

—
—
—
33
(33)

—
—
—
(321)
321

1,500
—
1,500
—
1,500
1,816

22,095—22,095—22,09564,574$| HANWA AR 2014 | 47

17. Investment and rental properties
Information about fair value of investment and rental properties isdisclosed as follows:
The Company owns office buildings, logistics centers and otherproperties for rent in Tokyo and other cities.
Rental profit from these properties was ¥337 million ($3,274

thousand) and ¥341 million for the years ended March 31, 2014
and 2013, respectively, and were included in gross profit.
Book value, annual net increase and decrease amount and fairvalue of investment and rental properties were as follows:Year ended March 31, 2014
Millions of yen							Thousands of U.S. dollars
Book value
Balance at beginning 		
of yearNet decrease

¥

7,662

¥

277

Book value
Balance at end 		of yearFair value

Balance at beginning 		
of yearNet decrease

Balance at endof year

¥

$

$

7,385

¥

6,957

74,446$

2,691

71,755

Fair value$

67,596

Year ended March 31, 2013
Millions of yen
Book value
Balance at beginning 		
of yearNet decrease

¥

8,322

¥

660

Balance at endof year¥

7,662

Fair value

¥

6,864

Book value is net of accumulated depreciation.
Fair values of these properties are measured mainly by the Company, based on “Standard for real-estate appraisal.”

18. Segment information(A) Overview of the Reportable Segments
The Group’s reportable segments are determined on the basis that
separate financial information for such segments is available andexamined periodically by the Board of Directors, which makes decisions regarding the allocation of management resources andassesses the business performances of such segments.
The Group’s main business is buying and selling of various productswith a focus on steel, and the business department, which is divided
according to products handled or service contents, mainly carries out
business activities. For this reason, the Group consists of businesssegments with the business department as the basis. The 5 reportablesegments are “steel business,” “metal and alloy business,” “nonferrous metal business,” “food business,” and “petroleum andchemical business.”
The main products and services that fall under these reportablesegments are listed below.

48 | HANWA AR 2014 |Steel: Steel bars and shapes, steel plates and sheets, special steels,
wire products, steel pipes, and steelmaking raw materials(steel processing and storage)
Metals and alloys: Nickel, chromium, steel alloys, and solar cellrelated materials and products
Non-ferrous metals: Aluminum, copper, and zinc (recycling business)
Foods: Seafoods
Petroleum and chemicals: Petroleum products, industrial chemicals,
and chemicals
The reportable segment income figures are based on operating
income coupled with interest and dividend income, interest expense,and foreign currency translation adjustments. Intersegment transactions are presented based on the current market prices at the time ofthis report.

Information about sales, profits, assets and others by reportable segment for the year ended March 31, 2014 was as follows:Year
ended March 31, 2014									 Metals		Steeland alloys

Net sales		Intersegment		
Total			Segment income (loss)
Assets			
Depreciation		
Amortization of goodwill
Interest income		Interest expense		
Increase in property
and equipment		

Millions of yen

Reportable segment¥ 792,155
18,942¥ 811,097¥ 13,880¥ 317,021
2,713
105
194
1,865
1,668

¥
¥
¥
¥

94,1293,866
97,995
1,756
49,253
119
—
117
461
36

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business¥¥¥¥

75,947
1,564
77,511
836
16,212
36
—
—
148

¥
¥
¥
¥

77,347
1,322
78,6691,590
34,47622—
1183¥ 491,288
7,756¥ 499,044¥
1,925¥ 71,638
74
—
146
417

10

14

25

Year
ended March 31, 2014
				
		

1,753

Total

151,638 ¥ 1,682,504
49,287
82,737200,925 ¥ 1,765,241(262) ¥
19,72553,218 ¥ 541,818
669
3,633
—
105
89
547
578
3,652
628

Adjustment

Consolidated¥— ¥ 1,682,504(82,737)—¥ (82,737) ¥ 1,682,504¥ (5,027) ¥14,698¥ 51,534 ¥ 593,352
59
3,692
—
105
300
847
(705)
2,947

2,381

11

2,392

Adjustment

Consolidated

Thousands of U.S. dollars

Reportable segment

			 Metals		Steeland alloys

Net sales		 $ 7,696,803
184,046
Intersegment
Total		
$ 7,880,849
Segment income (loss)$ 134,862
Assets		$ 3,080,266
Depreciation		
26,3601,020
Amortization of goodwill		Interest income		
1,885Interest expense
18,121
Increase in property
and equipment		
16,207¥ 1,530,866 ¥
33,450¥ 1,564,316 ¥¥ 19,987 ¥¥ 488,600 ¥
2,964
105
458
3,074

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business$ 914,584
37,563$ 952,147$ 17,061$ 478,556
1,156
—
1,137
4,479

$ 737,923
15,196$ 753,119$
8,123$ 157,521
350
—
—
1,438

$ 751,525
12,845$ 764,370$ 15,449$ 334,979
214
—
10
1,778

$4,773,494
75,360$4,848,854$ 18,704$ 696,055
719
—
1,418
4,052

350

243

97

136

1. “Other business” represents businesses such as lumber section,
machinery section and overseas sales subsidiaries which are notincluded in the above reportable segment.
2. Adjustments are as follows:(1) Adjustments of negative ¥5,027 million (negative $48,844
thousand) for segment income (loss) include intersegment
elimination and Group costs that have not been allocatedto reportable segments. These Group costs consist mainly of
expenses of administrative departments.
(2) Adjustments for segment assets amounting to ¥51,534 million($500,719 thousand) include Group assets that have not been
allocated to reportable segments. These Group assets consist
mainly of cash and cash equivalents, investment securities andassets of administrative departments.

Total$14,874,329 $ 1,473,359 $ 16,347,688
325,010478,886
803,896$15,199,339 $ 1,952,245 $ 17,151,584$ 194,199 $ (2,545) $ 191,654$ 4,747,377 $ 517,081 $ 5,264,458
28,7996,500
35,299
1,020
—
1,020
4,450
865
5,315
29,8685,616
35,484
17,033

6,101

23,134$— $16,347,688(803,896)—$ (803,896) $16,347,688$ (48,844) $ 142,810$ 500,719 $ 5,765,177
574
35,873
—
1,020
2,915
8,230
(6,850)28,634
107

23,241(3) Adjustments for depreciation and amortization amounting to¥59 million ($574 thousand) include mainly depreciation andamortization expenses of Group assets.
(4) Adjustments for interest income and interest expense
amounting to ¥300 million ($2,915 thousand) and negative¥705 million (negative $6,850 thousand) include intersegment
elimination, revenue and expense that have not been allocatedto reportable segments.
(5) Adjustments for increases in tangible fixed assets and intangible fixed assets amounting to ¥11 million ($107 thousand)are increases in Group assets.

| HANWA AR 2014 | 49

Information about sales, profits, assets and others by reportable segment for the year ended March 31, 2013 was as follows:Year
ended March 31, 2013									 Metals		Steeland alloys

Net sales		Intersegment		
Total			Segment income (loss)
Assets			
Depreciation		Interest income		Interest expense		
Increase in property
and equipment		

¥ 701,500
16,671¥ 718,171¥
9,599¥ 289,773
2,238
209
1,769
2,389

¥
¥
¥
¥

91,8982,868
94,766320
48,920
167
102
533
35

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business¥¥¥¥

71,516
1,758
73,274686
19,305
36
1
156
29

¥
¥
¥
¥

83,098703
83,801
747
30,66930
0158¥ 438,111
6,169¥ 444,280¥
1,674¥ 68,870
90
135
406

45

51

1. “Other business” represents businesses such as lumber section,
machinery section and overseas sales subsidiaries, which are notincluded in the above reportable segment.
2. Adjustments are as follows:(1) Adjustments of negative ¥5,378 million for segment income
include intersegment elimination and Group costs that havenot been allocated to reportable segments. These Group costs
consist mainly of expenses of administrative departments.
(2) Adjustments for segment assets amounting to ¥42,876
million include Group assets that have not been allocated toreportable segments. These Group assets consist mainly ofcash and cash equivalents, investment securities and assets ofadministrative departments.

50 | HANWA AR 2014 |Millions of yen

Reportable segment¥ 1,386,123 ¥28,169¥ 1,414,292 ¥¥ 13,026 ¥¥ 457,537 ¥
2,561
447
3,022
2,549

Total

125,202 ¥ 1,511,325
42,292
70,461
167,494 ¥ 1,581,786
1,223 ¥
14,24952,495 ¥ 510,032
676
3,237
78
525
495
3,517
708

3,257

Adjustment

Consolidated¥— ¥ 1,511,325(70,461)—¥ (70,461) ¥ 1,511,325¥ (5,378) ¥8,871¥ 42,876 ¥ 552,908
68
3,305
252
777
(609)
2,908
64

3,321

(3) Adjustments for depreciation and amortization amounting
to ¥68 million include mainly depreciation and amortization
expenses of Group assets.
(4) Adjustments for interest income and interest expense
amounting to ¥252 million and negative ¥609 million include
intersegment elimination, revenue and expense that have notbeen allocated to reportable segments.
(5) Adjustments for increases in tangible fixed assets and intangible fixed assets amounting to ¥64 million are increases inGroup assets.

(B) Related information
Product information
Net sales information by products for the years ended March 31, 2014 and 2013 was as follows:Year ended March 31, 2014							 Metals		Steeland alloys

Net sales to external customers¥

809,615¥

100,096¥

98,838Year ended March 31, 2014							 Metals		Steeland alloys

Net sales to external customers$ 7,866,450$

972,561

Millions of yen

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

¥

707,044¥

101,525

506,814¥

77,409$960,338$

871,862$ 4,924,349$

752,128

105,131

Total$16,347,688

Millions of yen

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

¥

Total

¥ 1,682,504

Thousands of U.S. dollars

Year
ended March 31, 2013
				
¥

¥

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

			 Metals		Steeland alloys

Net sales to external customers

89,732¥90,023¥451,031¥

56,571

Total¥ 1,511,325

Geographic information(1) Net sales in different countries for the years ended March 31, 2014 and 2013 were as follows:Year ended March 31, 2014

					Millions of yen

					
Japan

Net sales to external customers 				¥ 1,250,832

Asia

¥

Other

361,243¥

Year
ended March 31, 2014
					Thousands of U.S. dollars

					
Japan

Asia

Net sales to external customers 				$12,153,440¥ 1,133,080

$

Total

684,308$16,347,688

Millions of yen

					
Japan

Net sales to external customers 				¥ 1,682,504

Other$ 3,509,940

Year ended March 31, 2013
					

Total

70,429

Asia

¥

Other

326,898¥

Total

51,347¥ 1,511,325(2) Property and equipment in different countries for the year ended March 31, 2014 and 2013 were as follows:Year ended March 31, 2014

					Millions of yen

					
Japan

Property and equipment				¥53,966

Asia

¥

Other

7,548

¥

Year ended March 31, 2014
					Thousands of U.S. dollars

					
Japan

Asia

Property and equipment 				

$524,349

$

					

¥

51,457¥

61,575$593$

598,280

Total

Millions of yen

					
Japan

Property and equipment				

61

Other

73,338Year ended March 31, 2013

Total

Asia

¥

3,587

Other

¥

Total

24

¥

55,068| HANWA AR 2014 | 51

Loss on impairment of long-lived assets in reportable segment
Year ended March 31, 2013
Loss on impairment of long-lived assets that has not been allocated to reportable segments for year ended March 31, 2013 was ¥256 million.
Outstanding balance of goodwill and amortization of goodwill in reportable segment
Outstanding balance of goodwill for the year ended March 31, 2014 was as follows:Year ended March 31, 2014									 Metals		Steeland alloys

Balance at end of year ¥Millions of yen

Reportable segment

597 ¥

—

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business

¥

— ¥

—

¥

— ¥

597 ¥

Total

— ¥

Adjustment

597 ¥

— ¥

Consolidated

597

Year ended March 31, 2014									 Metals		Steeland alloys

Balance at end of year $Thousands of U.S. dollars

Reportable segment

5,801 $—

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business

$

— $

—

$

— $

5,801 $

Total

— $

Adjustment

5,801 $

— $Consolidated

5,801

The information of amortization of goodwill was omitted here because which has been noticed in the overview of the reportable segments.

52 | HANWA AR 2014 |Independent Auditor’s Report| HANWA AR 2014 | 53

Global Network

ASIA

Europe	Middle East

AfricaLondonKuwaitJohannesburg

Amsterdam

RiyadhViennaJeddahDammamDubai
Istanbul

Seoul

Hong Kong

Busan

Taipei

Beijing

Kaohsiung

QingdaoBangkok

DalianChonburi

Tianjin

YangonShanghai

Kuala Lumpur

Chongqing

Singapore

FuzhouHo Chi Minh

Wuhan

Hanoi

Taicang

Jakarta

Jiangxi

Mumbai

Guangzhou

New Delhi

Dongguan

Chennai

Zhongshan
54 | HANWA AR 2014 |Americas
New York
ChicagoHoustonSeattleLos Angeles
San Diego

BogotaVancouver

Guam

Mexico City

Santiago

Celaya

Japan
Osaka

KyushuTokyo

Kitakanto

NagoyaMito

Hokkaido

AtsugiTohokuShizuoka

Hachinohe

Okayama

Niigata

Okinawa

Chugoku| HANWA AR 2014 | 55

Global Network

Japan

AmericasOsaka

New York

Tokyo

CHICAGO

NagoyaHouston

3-6-1, Kita Kyuhoji-machi, Chuo-ku, Osaka city, Osaka 541-8585, Japan
Tel: 81-6-7525-5000 Fax: 81-6-7525-5365
6-18-2 Ginza, Chuo-ku, Tokyo 104-8429, Japan
Tel: 81-3-3544-2171 Fax: 81-3-3544-2351
NHK Nagoya Broadcasting Center Bldg., 1-13-3, Higashisakura, Higashi-ku, Nagoya,
Aichi 461-8614, Japan
Tel: 81-52-952-8800 Fax: 81-52-952-9300

Hokkaido

NREG Kita-sanjo Bldg., 3-1-25, Kita-sanjo Nishi, Chuo-ku, Sapporo, Hokkaido
060-0003, Japan
Tel: 81-11-219-7375 Fax: 81-11-219-7376

TohokuSendai Dai-ichi Seimei Tower Bldg., 4-6-1 Ichiban-cho, Aoba-ku, Sendai, Miyagi
980-0811, Japan
Tel: 81-22-227-7981 Fax: 81-22-227-7969

HACHINOHE

Kyoei Hachinohe Bancho Bldg., 9-5, Bancho, Hachinohe, Aomori 031-0031, Japan
Tel: 81-178-73-1170 Fax: 81-178-22-2211

Niigata

Hokuetsu-daiichi Bldg., 1-2-25, Higashi Oodouri, Chuo-ku, Niigata 950-0087, Japan
Tel: 81-25-255-1777 Fax: 81-25-255-1776

Chugoku

Hiroshima-fukuromachi Bldg., 5-25, Fukuro-machi, Naka-ku, Hiroshima 730-0036, Japan
Tel: 81-82-543-2570 Fax: 81-82-543-2561

KyushuTaihaku Center Bldg., 2-19-24 Hakata-ekimae, Hakata-ku, Fukuoka 812-0011, Japan
Tel: 81-92-471-7121 Fax: 81-92-471-7060

KITAKANTO

Takasaki East Center Bldg., 14-1 Sakae-cho, Takasaki, Gunma 370-0841, Japan
Tel: 81-27-310-6390 Fax: 81-27-321-0952

MITO

Mito Minami-machi, Dai-ichi Seimei Bldg., Minami-machi, Mito, Ibaraki 310-0021, Japan
Tel: 81-29-300-0351 Fax: 81-29-226-8230

ATSUGI

Nihonseimei Hon-Atsugi Bldg., 1-2-1, Asahi-cho, Atsugi, Kanagawa 243-0014, Japan
Tel: 81-46-226-9005 Fax: 81-46-227-0121

Parker Plaza, 12th Floor, 400 Kelby Street, Fort Lee, NJ 07024, U.S.A.
Tel: 1-201-363-4500 Fax: 1-201-346-9890
425 North Martingale Road, Suite 1120, Schaumburg, Illinois 60173, U.S.A.
Tel: 1-847-278-7360 Fax: 1-847-285-1369
2925 Briarpark Drive, Suite 100, Houston, TX 77042, U.S.A.
Tel: 1-713-978-7904 Fax: 1-713-978-7790

Seattle601 Union Street, Suite 626, Seattle, WA 98101, U.S.A.
Tel: 1-206-622-2102 Fax: 1-206-622-6464

Los Angeles

18100 Von Karman, Suite 320, Irvine, CA 92612, U.S.A.
Tel: 1-949-955-2780 Fax: 1-949-955-2785

SAN DIEGO

8753 Kerns Street, San Diego, CA 92154, U.S.A.
Tel: 1-619-671-9247 Fax: 1-619-671-9210

VancouverSuite 502, 1001 West Broadway Vancouver, B.C., V6H 4B1, Canada
Tel: 1-604-876-1175 Fax: 1-604-876-1085

MEXICO CITY

Hamburgo No.206, Interior 101, Colonia. Juarez, C.P. 06600, Mexico D.F., Mexico
Tel: 52-55-5525-9934 Fax: 52-55-5533-2774

CELAYA

Autopista Queretaro-Irapuato, KM 35+500, AV. Celaya No.105, Parque Industrial
Amistad Bajio, C.P. 38160, Apaseo El Grande, Guanajuato, Mexico
Tel: 52-413-158-6600 Fax: 52-413-158-6601

BogotaCalle 97, No. 21-50, Edif: La Fontana Di Tivoli Oficina: 309 Bogota, D.C. Colombia
Tel: 57-1-473-4758 Fax: 57-1-473-4754

GUAM

428, Chalan Antonio Suite, 102, Tamuning, 96913, Guam
Tel: 1-671-647-0133 Fax: 1-671-647-0135

SANTIAGO

Apoquindo 5583, oficina 92, Las Condes, Santiago, R.O. Chile
Tel: 56-2-2247-5125 Fax: 56-2-2954-1803

Asia

SHIZUOKA

Mizunomori Bldg. 9F, 14-1, Minami-machi, Suruga-ku, Shizuoka city, Shizuoka,
422-8067, Japan
Tel: 81-54-654-7080 Fax: 81-54-654-7082

OKAYAMA

2F Sumitomo life Insurance Bldg., 2-4-6, Showa, Kurashiki, Okayama, 710-0057, Japan
Tel: 81-86-435-7122 Fax: 81-86-422-5622

OKINAWA

Mitsui Life Insurance Naha Bldg., 2-4-16, Kume, Naha, Okinawa 900-0033, Japan
Tel: 81-98-860-9115 Fax: 81-98-861-5516

Seoul

Room 1703, Korea World Trade Center, 511, Yeongdong-Daero, Gangnam-Gu, Seoul,
135-729, R.O. Korea
Tel: 82-2-551-5387 Fax: 82-2-551-5575

BUSAN

Room 504, Industry Bldg., 37 Gwaegam-Ro, Sasang-Gu, Busan, 617-726, R.O. Korea
Tel: 82-51-319-1006 Fax: 82-51-319-1545

Beijing

Room 1220-1221, Beijing Fortune Bldg., 5 Dong San Huan Bei-lu, Chaoyang District,
Beijing 100004, P.R. China
Tel: 86-10-6590-8333 Fax: 86-10-6590-8340

Qingdao

Crowne Plaza Qingdao, Room No.602-603, Hongkong Middle Road 76, Qingdao
City, Shandong 266071, P.R. China
Tel: 86-532-8-577-9990 Fax: 86-532-8-577-9630

DalianSenmao Bldg., 20F, 147 Zhongshan Street, Dalian City, Liaoning 116011, P.R. China
Tel: 86-411-8-368-6954 Fax: 86-411-8-368-6934

56 | HANWA AR 2014 |Tianjin# 1108 Block A, Kuangshi Int’l Bldg., Xiangluo Bay Business Center, New Area, Tianjin
300452, P.R. China
Tel: 86-22-6566-8618 Fax: 86-22-6566-8619

Jakarta

Midplaza 1 Building, 16th Floor, Jl. Jend. Sudirman Kav, 10-11 Jakarta 10220, Indonesia
Tel: 62-21-5785-3033 Fax: 62-21-5785-3045

Mumbai

16F SMEG Plaza,1386 Hong Qiao Road, Chang Ning District, Shanghai 200336, P.R. China
Tel: 86-21-6237-5260 Fax: 86-21-6237-5268

Unit No.208, 2nd Floor, B-Wing, Dynasty Business Park, 58, Andheri Kurla Road,
Andheri (E), Mumbai 400 059, India
Tel: 91-22-2826-0884 Fax: 91-22-2826-1097

Chongqing

New Delhi

ShanghaiRoom 1711, Metropolitan Tower, 68 Zhou Rong Lu, Central District, Chongqing
400010, P.R. China
Tel: 86-23-6381-1101 Fax: 86-23-6381-7385

FuzhouRoom 2501, Lippo Tianma Plaza, No.1 Wu Yi Road, Fuzhou City, Fujian 350003, P.R. China
Tel: 86-591-8-3354165 Fax: 86-591-8-3345202

203, Bestech Chambers, B Block, Sushant Lok 1, Gurgaon, Haryana 122002, India
Tel: 91-124-456-6100 Fax: 91-124-456-6111

CHENNAI

5H-1/5K/5K-1, 5th Floor, Century Plaza, 560-562, Anna Salai, Teynampet, Chennai
600 018, India
Tel: 91-44-33539100 Fax: 91-44-33539104

Wuhan

Room 1009, New World Center, Tower A, No. 634, Jiefang Avenue, Wuhan 430032,
P.R. China
Tel: 86-27-8549-7132 Fax: 86-27-8578-7196

EuropeTAICANG

No. 7 Guangzhou East Road, Economic Development Area, Taicang City, Jiangsu, P.R. China
Tel: 86-512-5359-0800 Fax: 86-512-5358-8942

JIANGXI

Jinlong Road Ganzhou Development Zone, Ganzhou City, Jiangxi 341000, P. R. China
Tel: 86-797-555-8892 Fax: 86-797-555-8890

Guangzhou

Unit 3701-3704, Profit Plaza, No. 76 Westhuangpu Road, Guangzhou City,
Guangdong 510623, P.R. China
Tel: 86-20-8732-0451 Fax: 86-20-8732-0402

DONGGUAN

D Block, Chashan Industrial Park, Chashan Town, Dongguan City, Guangdong
523391, P.R. China
Tel: 86-769-8182-1000 Fax: 86-769-8182-1001

London7th Floor, 55 Strand, London, WC2N 5LS, U.K.
Tel: 44-20-7839-4448 Fax: 44-20-7839-3994

Amsterdam

WTC Tower C-14F, Strawinskylaan 1447, 1077XX, Amsterdam, The Netherlands
Tel: 31-20575-2460 Fax: 31-20575-2461

ViennaWipplingerstrasse 34 Top 174, 1010 Wien, Austria
Tel: 43-1-532-01-65 Fax: 43-1-532-01-65-20

Zhongshan

Middle East

Unit 1909-1910, 19th Floor, Bank Of China Tower, 18 Zhongshan 3rd Road,
Zhongshan City, Guangdong, P.R. China
Tel: 86-760-2332-0706 Fax: 86-760-2332-0696

Hong Kong

Suite 1504, 15/F., Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing Island East,
Hong Kong
Tel: 852-2545-0110 Fax: 852-2542-2544

TAIPEI

Room A, 9th Floor, No. 132, Minsheng East Road Sec. 3, Taipei 10596, Taiwan
Tel: 886-2-2545-7151 Fax: 886-2-2545-7112

Kaohsiung

Room B, 17th Floor, No.7 Su-Wei 4th Road, Kaohsiung, Taiwan
Tel: 886-7-338-5508 Fax: 886-7-338-5433

Bangkok

16th Floor, Unit 1602, Q.House Lumpini Bldg., 1 South Sathorn Road, Tungmahamek,
Sathorn, Bangkok 10120, Thailand
Tel: 66-2-343-8877 Fax: 66-2-343-8878

CHONBURI

700/625 Moo 4, 700/630 Moo 5, Tambol Baankao, Amphur Panthong, Chonburi
20160, Thailand
Tel: 66-38-21-0200 Fax: 66-38-21-0085

YANGONNo. (22/24), Room (5-B), Nawaratt Condominium, Samone Street, Dagon Township,
Yangon, Myanmar
Tel: 95-1377-753

Kuala Lumpur

Suite 8-12B-3, Level 14 (12B), Menara Olympia 8, Jalan Raja Chulan, 50200 Kuala
Lumpur, Malaysia
Tel: 60-3-2078-2311 Fax: 60-3-2078-2380

Singapore

Kuwait15th Floor, Al Nema Tower, Jaber Al Mubarak St., Block No.4 Plot No.2, Sharq, Kuwait
Tel: 965-2-243-7259 Fax: 965-2-243-7263

RiyadhP.O. Box 68974, Riyadh 11537, Saudi Arabia
Tel: 966-1-473-1563 Fax: 966-1-473-5624

JeddahOffice No. 219, Kaki Center, P.O. Box 1224, Jeddah 21431, Saudi Arabia
Tel: 966-2-669-0648 Fax: 966-2-669-0648

DammamOffice No.1, 1st Floor, Al-Hammam Center for Trading King Fahad Bin Abdul Aziz
Road, Dammam, Saudi Arabia
Tel: 966-3-8420845 Fax: 966-3-8420847

Dubai

Dubai Airport Free Zone, East Wing Bldg., No. 6E, B-Block, Room No. 544, P.O. Box
293873 Dubai, U.A.E.
Tel: 971-4-609-1893 Fax: 971-4-609-1895

ISTANBUL

Levent Loft Residence, Buyukdere CD, No. 201 A Blok K.4, D.76 34394 Sisli, Istanbul, Turkey
Tel: 90-212-325-0046 Fax: 90-212-325-0051

Africa20 Cecil Street, #20-04/05/06/07/08, Equity Plaza, Singapore, 049705
Tel: 65-6536-7822 Fax: 65-6536-7855

HO CHI MINH

Unit 4, 19th Floor, A&B Tower, 76 Le Lai Street, District 1, Ho Chi Minh City, S.R. Vietnam
Tel: 84-8-3822-5715 Fax: 84-8-3822-5725

Hanoi

14th Floor, Vit Tower, 519 Kim Ma Street, Ba Dinh, Hanoi, S.R. Vietnam
Tel: 84-4-2220-9155 Fax: 84-4-2220-9159

Johannesburg

2nd Floor, West Tower, Nelson Mandela Square, Maude Street, Sandton, Johannesburg
2196, South Africa
Tel: 27-11-881-5966 Fax: 27-11-881-5611| HANWA AR 2014 | 57

Corporate Information (As of March 31, 2014)
Corporate Data
Company Name

Hanwa Co., Ltd.

Established

April 1947

Capital¥45,651 million

Number of Employees

Consolidated: 2,610

Tokyo Head Office104-8429, Japan
Tel: +81-3-3544-2171
Fax: +81-3-3544-2351
Nagoya Branch Office NHK Nagoya Broadcasting Center Bldg.,

Non-consolidated: 1,161

1-13-3, Higashisakura, Higashi-ku,

Address
Osaka Head Office

6-18-2 Ginza, Chuo-ku, Tokyo

3-6-1 Kita Kyuhoji-machi, 			
Chuo-ku, Osaka 541-8585, Japan
Tel: +81-6-7525-5000

Nagoya, Aichi 461-8614, Japan
Tel: +81-52-952-8800
Fax: +81-52-952-9300

Fax: +81-6-7525-5365

Board of Directors, Corporate Auditors and Executive Officers (As of June 27, 2014)
Board of Directors

Executive Officers

Chairman*

Shuji Kita

President*

Hironari Furukawa

Directors, Executive Vice President andExecutive Officers

Hideo Kawanishi

Directors, Managing Executive Officers

Directors, Executive Officers

Hidemi Nagashima

Osamu Seki

Chiro Ideriha

Ryuji Hori

Toshimi Terada

Yasumichi Kato

Isao Kimizu

Yoshiaki Matsuoka

Tsuneo Tsuiki

Naoyuki Togawa

Yoichi Sasayama

Hiromasa Yamamoto

Yoichi Nakagawa

Teruo Asai
Yasuo Naide
Hiroshige Wagatsuma
Katsunori Okubo

58 | HANWA AR 2014 |Kazuhiko Okada
Yasuharu Kurata

Yoichi Ejima*Representative Director

Takatoshi Kuchiishi

Atsuhiro Moriguchi

Corporate Auditors

Outside Corporate Auditors

Executive Officers

Akihiko Ogasawara

Yasushi Hatanaka

Standing Corporate Auditors (Full-time)

Hiroshi Ebihara

Kozo Yamabe

Directors, Senior Managing Executive Officers Hiroshi Serizawa

Outside Directors

Senior Managing Executive
OfficerCoping with changing times and markets quickly, we makea great contribution to society by satisfying various needsof customers as a “distribution specialist”
Success in today’s markets demands speed and theability to meet a broad range of needs. Change isoccurring on an unprecedented scale. Only companies that can adapt quickly will survive. Hanwa has
experience and accomplishments in the field of“distribution” that span 65 years.
We know how to build powerful businesses andmove quickly in the pursuit of value creation andcustomer satisfaction.

Dedicated to corporate citizenship, we want ourbusiness operations to help make communities andthe world a better place to live. This is why weprioritize compliance and other activities thatenable us to fulfill our obligation to society.
Through such activities, Hanwa keeps nurturing a
corporate culture that will enhance the value and reliability of our company. We aim to make greater
contributions by fulfilling our social responsibilities.

Stock Information

Japanese financial
institutions
31.0%

Foreigncorporations
25.2%

Individuals andothers28.2%

Japanese financial
institutions
31.0%

Foreign
Individuals andOther domestic
corporations
otherscorporations
Japanesebrokerage firms 11.9%
Treasury stock
25.2%
28.2%
1.7%
2.1%

Breakdown by Type of Shareholder

Fiscal Year-End

March 31Annual Meeting of Shareholders June
Independent Auditors

KPMG AZSA LLC

The First Section of the Tokyo
Domestic Stock Exchange
Listings		 Stock Exchange

Japanese brokerage firms
1.7%

The First Section of the Osaka
		 Securities Exchange
Date of Record for Dividend
PayoutInterim dividend: September 30
Year-end dividend: March 31

Authorized Shares

570,000,000 shares

Treasury stock
2.1%

Breakdown by Size of Holding

Issued and Outstanding Shares 211,663,200 shares
Number of Shareholders

Other domestic
corporations
11.9%

11,228–1,00012.0%

1,000–50,000
85.2%

50,000–1,000,000
2.5%–1,00012.0%

1,000–50,000
85.2%

50,000–1,000,000
2.5%
1,000,000–
0.4%

Principal Shareholders

1,000,000–

Name of Shareholder

0.4%
Percentage of Total
Issued Share (%)

Number of Shares(thousands)

Japan Trustee Services Bank, Ltd. (Trust Account)...........................................................
The Master Trust Bank of Japan, Ltd. (Trust Account)......................................................
Sumitomo Mitsui Banking Corporation..........................................................................
Hanwa Clients’ Stock Investment Association ................................................................
The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account........
Hanwa Employees’ Stock Investment Association...........................................................
THE BANK OF NEW YORK 133522.................................................................................
Nippon Steel & Sumitomo Metal Corporation................................................................
The Dai-ichi Mutual Life Insurance Company..................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 1)........................................................
0.000000

16.666667

33.333333

0.000000

16.666667

33.333333

0

20

40

0

20

40

16,075
9,876
7,630
7,103
5,287
4,442
3,477
3,001
2,614
2,533

7.76
4.77
3.68
3.43
2.55
2.14
1.68
1.45
1.26
1.22

50.000000

66.666667

83.333333

100.000000

50.000000

66.666667

83.333333

100.000000

60

80

100

120

60

80

100

120

Note: The Company holds 4,440,708 shares of treasury stock, which is excluded from the principal shareholders listed above.

Stock Price Range and Trading Volume (Common Stock)
Nikkei Stock Average (closing)

Stock Price

(¥)

(¥)

800

18,000600

12,000

400

6,000

200

0

Trading
Volume(Millions of shares)

0

40
30
20

Forward-Looking Statements
The plans, strategies and other statements related to the outlook of future results in this annual report reflect the assumptions and beliefs ofmanagement based on currently available information. However, it should be noted that there is a possibility for actual results to differ significantly
owing to such factors as changing social and economic conditions.

10
4
5
2012

6

7

8

9

10

11

12

1
2
2013

3

4

5

6

7

8

9

10

11

12

1
2
2014

3

0

| HANWA AR 2014 | 59

阪和興業株式会社

Annual Report 20142014

http://www.hanwa.co.jp

Year ended March 31, 20142014.8 Printed in Japan