P E ACEJAPAN

HA RMO N Y

ANNUAL REPORT 2000
For the year ended March 31, 2000

S UM

阪和興業 株式会社

About the CoverContents

The Chinese character for the syllable wa ofHanwa’s name has four meanings inJapanese: Japan, harmony, sum (as inaddition) and peace.
These key words capture the essence ofHanwa’s ideals: to trade products that meetthe needs of customers through a business
relationship with the countries of the world,
incorporating new ideas into the products tobring peace and harmony to people’s lives.

Corporate Profile & Financial Highlights .................. 1
President’s Message ........................................................ 2
Review of Operations ..................................................... 4
Topics ................................................................................... 8
Financial Section ............................................................... 9
Network of Hanwa Co., Ltd. ....................................... 27
Directors and Statutory Auditors ................................ 28

Corporate Profile

Since its establishment in 1947, Hanwa has contributed to the development of theJapanese economy as a trading company handling industrial materials, such as steel— the company’s leading product — and nonferrous metals, food products, lumber,machinery, petroleum, chemical products, and cement. Our steel division in particular
is equipped with quay and warehouse transportation facilities as well as complete
processing sites that enable us to both handle large quantities purchased from major
steel manufacturers and to cater to the special needs of our customers. This is why
we have long been known in Japan as a “steel trading company.”
Recently, with the changes and diversification of the domestic market, we havedemonstrated new capabilities as a trading company by handling seafood products,
rides for amusement parks, and nonferrous metal recycling. We have creatednumerous businesses in these fields that command the top market share. The basic
strategies underlying such success are internationalization, business diversification,and value enhancement.
Hanwa’s ideal function as a trading company is to be more than just a distributor.
Based on our insight of the international market and information-gathering
capabilities, we aim to develop new products, as well as coordinate ventures among
businesses. As a trading company with such operating skills at our disposal, we willcontinue to develop new unique businesses.

HANWA CO., LTD., AND CONSOLIDATED SUBSIDIARIES

Financial Highlights
For the years ended March 31

Thousands of
U.S. dollars

Millions of yen

2000

Net sales
Operating income
Net income (loss)

1999¥ 629,717
8,727
595

2000

¥ 598,568 $5,932,332 $5,638,888
5,325
82,21450,165(435)
5,605(4,098)

Note: The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥106.15=$1.00.

1

1999

President’s Message

Japan’s economy improved in some areas duringaccounted in loss: ¥1,748 million as the loss on

the consolidated fiscal year, thanks to economic

write-down of securities, ¥2,632 million as ameasures such as the fiscal and monetary policies,

supplementary allowance with respect to long-the favorable export record owing to the growthterm suspended claims for the transfer of bad-of the U.S. economy, and the recovery of the Asiandebt reserves, and ¥1,639 million as an appraisal

economy. Yet, due to the continued difficulties

loss from golf club memberships. Therefore,

regarding to employment and income levels, there

income before income tax was ¥1,383 million, andwas no significant improvement in personal

net income for the term was ¥595 million.
The following is the performance in eachconsumption. Capital investment remained low insegment of our business.

general, mirroring the harshness of the economic

The steel division’s sales were ¥359,444 million,

environment.

a drop of 5.5% from the previous term. In spite of

Accordingly, our Group companies (including
consolidated subsidiaries) made aggressive strides

the enforcement of emergency economic mea-

in expanding a range of business activities. Thissures, public investments have been held in check,was evident in our effort to strengthen client

the domestic demand for electronics and cars has

relationships and develop new and peripheral

continued to be sluggish, and the market recovery

businesses. Moreover, we did this with total

has been less than vigorous.
In the non-ferrous division, thanks to theattention to credit control. Consequently, sales forthe consolidated fiscal year amounted topromotion of our recycling business for materials¥629,717 million, a 5.2% increase over the

including aluminum cans, sales increased bypreceding term.

17.3% over the previous term to ¥51,616 million.
In the food division, although the handlingWith regard to profit and loss, we reexamined
our transactions and endeavored to maximize

volume increased, sales decreased 6.0% from theprofit margins and cost reductions. As a result —previous term to ¥104,229 million. This was

thanks as well to an increase in the volume we

influenced by decreased prices owing to weakhandled — operating income rose to ¥8,727

consumption and appreciation of the yen.
Sales for other divisions was ¥114,428, amillion (an increase of 63.9% over the previousterm). The following amounts were also added to

substantial 80.3% increase over the previous term.

the gain: ¥1,542 million as a profit on bad debt

Higher oil prices, along with the development ofrecovered due to a victory in a securities litigation,

relationships with new clients in the oil division,

along with a portion of the retirement-allowance

the increase of European lumber, and newly tradedreserve for officers in the amount of ¥871 million

Indonesian plywood in the lumber division,

when that amount for retiring directors wascontributed to increase.

returned. However, the following amounts were2

Given the increasing trend toward a global andborderless economy, our Group companies wish totake action appropriate to our status as a major
influence in the distribution sector. We are doing
this, for example, by strengthening our force in
offices as well as system of distribution and processing, and developing new and peripheral ventures.
To strengthen our competitiveness, we will
accelerate the decision-making process andcorporate activities, and will establish a corporate
structure that makes use of “checks-andbalances.” Moreover, we will operate the businesswith an emphasis on maximized profit, improving
the return on equity.
At the same time, we are also determined toBased on the aforementioned strategies, ouroperate our business with respect for environmen-

Group companies will see us through this difficult

tal preservation. In April 2000, we obtained certifi-

time. We will continue our energetic promotion of

cation under ISO 14001, the international stan-rationalization and efficiency in overall businessdard for environmental management.

operations, and will pay the utmost attention to

We will employ a unique system of electronic

credit control. We will also strive to strengthen ourcommerce known as “hanwa-steel.com.” Withinclient relationships, expand our customer base,the next three years, we expect to transact 1.3

and create new value-added products. Finally, wemillion tons per year, or ¥60,000 million, by meansare determined to improve the company’s financialof the e-commerce system. In the future, we will

strength in order to resume the payment of

employ this system in the food and lumber markets.

dividends in the near future and eliminate

Japan’s economy has at last begun to reboundconsolidated deficits.

from ‘rock bottom’ and is showing signs of a slow
recovery, but personal consumption remains low.
Furthermore, housing and public investments are
slowing down, and the economic situation remains
Shuji Kita
President & C.E.O.
Hanwa Co., Ltd.

a difficult one.

3

Review of Operations

Net Sales by Product (Billions of Yen)
Machinery, lumber, and other¥39 (6.2%)

Petroleum and chemicals ¥75 (12.0%)
Steel bars and shapes

Foods

Net sales¥630(100%)¥104 (16.5%)

Non-ferrous metals

Steel plates and sheets ¥162 (25.7%)
Special steels,
wire products, steel pipes, andsteelmaking raw materials ¥68 (10.8%)¥52 (8.2%)

Steel related products

Year ended March 31, 2000

Machinery, lumber, and other¥130 (20.6%)¥360 (57.1%)¥29 (4.8%)

Petroleum and chemicals ¥35 (5.8%)
Foods

Steel bars and shapes¥111 (18.5%)
Net sales¥599(100%)

Non-ferrous metals¥44 (7.4%)

Year ended March 31, 1999

4¥148 (24.8%)

Steel plates and sheets ¥173 (28.8%)
Special steels,
wire products, steel pipes, andsteelmaking raw materials ¥59 (9.9%)

Steel related products¥380 (63.5%)

Steel (Domestic)
In fiscal 2000, the total quantity produced in Japan increased by approximately 2%, and our handling volume
was 8% more than the previous year.
However, our sales was less than theprevious year due to a fall in unit prices.
Steel Bars and Shapes
Public works projects supported themarket activities, but construction
business in the private sector was inert
because of poor capital investment. As awhole, we had a difficult time sellingbar products.
Sheet Products and Special SteelThe automobile industry and electric
appliance industry remained firm. Our
sales to end users expanded, thanks tomutually profitable relationships.
Despite such severe economic
conditions, we were able to achieve
considerable results.
In fiscal 2001, we expect that sales tobe slightly more than last year. Prices ofsteel bars will go up, but sheet products
other than steel plates will see a declineof prices. Although it is still in a limitedarea, we can foresee capital investment.
The automobile industry is doing fine.
We hope the Japanese economy is on
the way to recovery.
Logistics based on our distribution
center network and processing capability
are our stronghold. We must utilize
them more efficiently. As a new scheme,
we will start e-commerce, “hanwasteel.com.” Maintaining mutually beneficial relationships with our customers andsuppliers is our unchanged policy,
together with aggressive pursuit of new
items and new customers. Steel houses,
steel pallets, leasing steel products, andcement are our targeted areas.

Steel (Overseas)
In fiscal 2000, we exported 764,000
tons (a 6% decrease), and sales was¥48,900 million (a 5% decrease). During
this year, export prices gradually
improved, but both quantity and sales
decreased.One major factor was that oursales of steel shapes to the U.S.A.
dropped by more than 80% comparedwith the previous year due to the “antidumping” case. A strong yen (13%stronger than the previous year) was also
against us. On the other hand, Asianmarkets recovered from recession, andexports of steel sheets and coils, andstainless steel products increased. In
China, where huge potential demand forsteel products is foreseen, we haveopened new offices in Dalian, Qingdao,
Fuzhou, and Zhongshan.

5

In fiscal 2001, we will focus on China
and ASEAN countries. We will sell ourcustomers products. Then, we will have achance to supply them raw materials by
utilizing our worldwide procurement
networks including China, Taiwan, andKorea. Thus, we hope to expand ourbusiness opportunities. We will increasestaff at our overseas offices in order topromote our sales. Our goal for the new
fiscal year is 800,000 tons (a 5% increase)and ¥56,000 million (a 15% increase).

Non-ferrous Metals
In fiscal 2000, the non-ferrous metals
market showed favorable trends
throughout the year, backed up withfirm demand in both the U.S.A. andEurope, as well as the rapid recovery of
Asian economies.
As a result, we achieved 409,000
tons in handling volume (a 14%
increase), and ¥51,615 million (a 17%
increase). In particular, there was aremarkable increase in sales ofaluminum scraps, thanks to our vigorous
recycling of aluminum cans. Sales ofcopper scraps, stainless scraps, andnickel metals expanded.
For fiscal 2001, we are projecting
total sales of ¥53,000 million, with particular emphasis on recycling businesses
aiming for conservation of the environment and recycling of energy.
Particularly, in the scrap business of aluminum, copper, nickel, and stainlesssteel, we will utilize our nationwide andworldwide collection networks thoroughly to maintion our position as aleader in the recycling industry. We are
actively expanding our new business tosalvage precious metals from industrial
waste and also to handle silicon materials for solar battery industry.

Food Products
In fiscal 2000, because of a strong yen
and economic crises in Russia and Asian
countries, imports of seafood products toJapan increased to 3.42 million tons (a10% increase), but the amount totaled¥1,739.2 billion (a 0.1% decrease).
Likewise, we sold 182,487 tons (a 11%
increase) or ¥104 billion (a 6% decrease).
Because of a drop in prices, the quantity
was up, but the amount was down.
Items of increased sales include horsemackerel, salmon, red fish, and otherprocessed products, whereas sales ofcrab and surimi dwindled.
In fiscal 2001, personal consumption
will remain depressed, and we cannot
expect improvement of the market. As
with salmon, prices of some items may
go down due to excess supply caused byincrease of culture. In addition to sales ofraw materials to processors andwholesalers, we will try to expand
business with retailers. Our processed
products made in Thailand or China may
be best suited for them. As a new type ofbusiness, we will start e-commerce inaddition to mail order. We hope tomaintain the same level of quantity andsales as the previous year.

6

MachinerySales of amusement rides showed aremarkable achievement of ¥2,500
million. This was due to Twin Mercury inSpace World, Inc., and the export ofthirty rides from a closed park. As awhole, the market was dull, because
purse strings were still tightened andnew competition from different types ofleisure was still fierce.
Sales of industrial machinesdecreased to ¥1,700 million (a 15%
decrease) due to postponement of
capital investment by many industries.
Major items sold were pipe cutting
machines, forming lines, diesel marine
engines, and steel processing
equipment.
In the new fiscal year, we expect a
new sale of our Ferriswheel to SpaceWorld, Inc., and will do our best to findnew customers for amusement rides.
Sales of industrial machines will be¥1,800 million, consisting of a highpower CO2 laser, pipe cutting machines,
and others.

Petroleum and Chemicals
In this fiscal year, the price of crude oilrose to over U.S.$30 per barrel and pricesof all oil products were continuously
raised by producers, but there was a lotof resistance from users. Therefore, forus, it has been a very severe year for
securing profit. Fortunately, we increased
sales by 15% to 3,640,000 kl and sales
income by 113.4% to ¥75,269 million,
which constitutes the highest record in
our history.
In the new fiscal year, we will strive tosell 4.2 million kl, with an income of¥87,000 million. Our policy is “profitfirst”
and “taking bold challenges.”

Lumber
The total quantity sold during this fiscal
year was 598,000 m3, a significant 42%
increase over the previous year, theincome from which was ¥24,500 million(a 40% increase). Sales of U.S. lumber
amounted to 219,000m3, (a 20% increase).
Scandinavian lumber sales reached
182,000 m3, (a major jump of 72%), andplywood and veneer sales rose to197,000 m3 (another increase of 50%).
The reasons for such a leap were:
A. Sales of Scandinavian lumber wereaccelerated because of our aggressive
sales drive over recent years. Increased
sales brought in good profit as well.
B. The Indonesian veneer businessexpanded in its second year fasterthan expectated.
C. Because of less competition in themarket due to decreased sales forcesin other trading firms, our sales of
U.S. lumber and Scandinavian lumber
increased by about 40%, although
our selling unit prices were loweredby 10%.
D. Again, we were not subjected to any
customer bankruptcies.

7

In fiscal 2001, housing starts will be
1.05 – 1.1 million, a 10 – 15% decrease.
However, we aim to attain ¥30,000
million, a 22% increase of sales basedon the aggressive purchase and sales
policy thanks to our positive position as asurvivor in the market.

Topics“hanwa-steel.com”
Beginning this August, we are employing a unique system of electronic commerce known as “hanwa-steel.com.”
This Internet website will handle every
aspect of sales, from receipt of orders
to distribution by means of e-commerce using our abundant inventory
and superlative distribution system. The
new website will offer such functions
as one-stop shopping for steel materials, 24-hour order acceptance, andnext-day delivery. We will also provide
a variety of information services relat-

ISO14001
In April, we achieved ISO14001 certificate. This certificate covers all five of
our offices at Tokyo, Osaka, Nagoya,
Kyushu, and Tohoku in Japan. We willencourage each one of employees torecognize the importance of environmental preservation and make aneffort to continually improve the environmental management system.

8

ing to steel and other related topics.
Within the next three years, we expect
to transact 1.3 million tons per year, or¥60,000 million, by means of the ecommerce system. That amount willcomprise 20% of our total steel sales.
In the future, we will adopt this system
in transactions of steel among corporations, as well as between corporations
and individuals. Moreover, we will
employ this system in the food andlumber markets.

The Environmental Policy of
Hanwa Co., Ltd.
Fundamental Concept
Hanwa Co., Ltd., as a sociallyrecognized trading company, with themotto of “Footwork, Teamwork, andNetwork,” will do its best to reduce
adverse environmental stress and allow
successive generations to inherit a richglobal environment through its
business activities.

Financial Section

Contents
10. Consolidated Balance Sheets
12. Consolidated Statements of Operations
13. Consolidated Statements of Stockholders’ Equity
14. Consolidated Statements of Cash Flows
15. Notes to Consolidated Financial Statements
26. Report of Independent Public Accountants
9

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
March 31, 2000 and 1999

Thousands of
U.S. dollars (Note 1)

Millions of yen

Assets2000

Current assets:
Cash and cash equivalents
Marketable securities (Notes 4 and 6)
Receivables:
Trade notes and accounts:
Unconsolidated subsidiaries and affiliates
Other
Loans:
Unconsolidated subsidiaries and affiliates
Other
Allowance for doubtful receivables
Inventories (Note 3)
Deferred income taxes (Note 8)
Other current assets (Note 6)
Total current assets
Investments and non-current receivables:
Investment securities (Note 4):
Unconsolidated subsidiaries and affiliates
Other
Loans receivable:
Unconsolidated subsidiaries and affiliates
Other
Other investments and non-current receivables
Allowance for doubtful receivables
Total investments and non-current receivables
Property and equipment (Note 6):Land
Buildings and structures
Other
Accumulated depreciation
Total property and equipment
Deferred income taxes — noncurrent (Note 8)
Intangibles and other assets
Foreign exchange adjustments
Total

10

2000

1999

¥ 34,435
41,350¥ 42,898 $ 324,399 $ 404,126
7,805
389,543
73,528

1,715
136,661947
129,378

16,156
1,287,433

8,921
1,218,823

1,950
75
(511)
34,54637
17,162
267,420

3,497
146
(484)
31,427—23,015
238,629

18,370707(4,814)
325,445
349
161,677
2,519,265

32,944
1,376(4,560)296,062—
216,816
2,248,036

1,697
10,922809
63,144

15,987
102,892

7,621
594,856

866
5,546
15,511(4,306)30,236

1,428
7,359
17,799(1,511)89,028

8,158
52,247
146,123(40,565)284,842

13,45369,326167,678(14,234)
838,700

13,97722,743
8,502(15,547)
29,675

13,18622,351
8,555(14,348)
29,744

131,672
214,253
80,094(146,462)
279,557

124,220
210,561
80,593(135,167)
280,207

50
139
4,652
¥ 332,172

See accompanying Notes to Consolidated Financial Statements.

1999

—
471
—
107
1,309
1,008
3,036
43,82528,601¥ 360,544 $3,129,269 $3,396,552

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and Stockholders’ Equity

2000

Current liabilities:
Bank loans (Note 7)Long-term debt due within one year (Note 7)
Trade notes and accounts payable:
Unconsolidated subsidiaries and affiliates
Other
Accrued bonuses to employees
Income taxes payable
Deferred income taxes (Note 8)
Other current liabilities
Total current liabilities
Non-current liabilities:
Long-term debt due after one year (Note 7)
Retirement benefits
Other non-current liabilities
Total non-current liabilities
Minority interest

1999

2000

1999

¥ 120,749
75,178¥ 118,908 $1,137,532 $1,120,188
2,472
708,224
23,288221
95,353
1,174
834
28
6,677
300,214161
102,882
1,097——
10,591
236,111

2,082
898,285
11,0607,857
26462,9012,828,205

1,517
969,213
10,335——
99,7742,224,315

3,792
276
799
4,867

81,0591,184
771
83,01435,7232,600
7,527
45,850763,627
11,154
7,263
782,044

55

—

518

—

Contingent liabilities (Note 12)
Stockholders’ equity (Note 9):
Common stock, par value ¥50 per share
Authorized: 570,000,000 shares (650,000,000 in 1999)
Issued: 211,663,200 shares (291,663,200 in 1999)
Additional paid-in capital
Undisposed deficit
Less treasury stock, at cost: 434 shares (1,941 in 1999)
Total stockholders’ equity
Total

82,646
19,227(74,837)—
27,036¥ 332,172

11

113,883
778,578 1,072,850
3,590
181,130
33,820(76,054)(705,012)(716,477)———
41,419254,696
390,193¥ 360,544 $3,129,269 $3,396,552

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Operations
For the years ended March 31, 2000 and 1999

Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income

1999¥ 629,717
601,590
28,127
19,4008,727

Other income (expenses):
Interest and dividend income
Interest expense
Gain on sale of securities
Gain on sale of property and equipment
Reversal of allowance for doubtful receivables
Bad debts recovered
Reversal of allowance for retirement benefits
Loss on write-down of securities
Loss on discontinued operations of foreign subsidiary
Loss on write-down of golf club memberships
Loss on sale of investment securities
Provision for doubtful receivables
Other, net
Income (loss) before income taxes
Income taxes (Note 8)
Current
Deferred

Minority interest in loss of consolidated subsidiaries
Net income (loss)

¥

3,694
(6,948)
653
—
—
1,542
871
(1,748)—(1,639)(157)(2,632)
(980)
1,383

8,662
(12,540)
828
101
246
—
—
(1,936)
(389)
—
—
—
(374)
(77)

34,800(65,455)
6,151——
14,527
8,205(16,467)—(15,440)(1,479)(24,795)(9,232)
13,02981,602(118,135)
7,800
951
2,317
—
—
(18,238)(3,665)———(3,522)
(725)

661
139
800

358
—
358

6,227
1,310
7,537

3,373
—
3,373

12
595

—
(435) $

113
5,605 $—
(4,098)¥Yen¥

See accompanying Notes to Consolidated Financial Statements.

12

1999

¥ 598,568 $ 5,932,332 $ 5,638,888
573,717 5,667,358
5,404,776
24,851
264,974
234,112
19,526
182,760
183,947
5,325
82,21450,165

U.S. dollars (Note 1)

2000

Net income (loss) per share

2000

2.48

1999

¥

(1.49) $2000

0.023 $

1999

(0.014)

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity
For the years ended March 31, 2000 and 1999

Millions of yen

2000

Common stock:
Opening balance
Shares purchased and retired (Note 9)
Closing balance

1999

Thousands of
U.S. dollars (Note 1)

2000

1999

¥ 113,883(31,237)¥ 82,646¥ 113,883 $1,072,850 $1,072,850—(294,272)—¥ 113,883 $ 778,578 $1,072,850¥

Additional paid-in capital:
Opening balance
Gain on shares purchased and retired (Note 9)
Transfer to undisposed deficit
Closing balance

¥

3,590
15,637—¥ 19,227

9,571 $ 33,820 $—
147,310(5,981)—¥ 3,590 $ 181,130 $Undisposed deficit:
Opening balance
Cumulative effect of adopting deferred income tax accounting
Transfer from additional paid-in capital
Effect of subsidiaries newly consolidated
Net income (loss)
Closing balance¥ (76,054)
197
—
425
595
¥ (74,837)¥ (81,600) $ (716,477) $ (768,724)
—
1,856
—
5,981
—
56,345
—
4,004
—
(435)
5,605
(4,098)¥ (76,054) $ (705,012) $ (716,477)

Number of shares of common stock issued (thousands):
Opening balance
Shares purchased and retired
Closing balance

291,663(80,000)
211,663291,663—291,663

See accompanying Notes to Consolidated Financial Statements.

13

90,165—(56,345)
33,820HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2000 and 1999

Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

Cash flows from operating activities:
Income (loss) before income taxes
Adjustments to reconcile income (loss) before income taxes to net cash
provided by operating activities
Depreciation
Increase (decrease) in allowance for doubtful receivables
Reversal of allowance for retirement benefits
Interest and dividend income
Interest expense
Loss on write-down of securities
Gain on sale of securities
Loss on sale of investment securities
Bad debts recovered
Loss on write-down of golf culb memberships
Gain on sale of property and equipment
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease in trade notes and accounts payable
Other, net
Sub total
Cash flows during the year for:
Interest and dividend received
Interest paid
Income taxes refunded (paid)
Net cash provided (used in) by operating activities

¥

1,383

1999

¥

2000

(77) $

13,029

1999

$

(725)

1,514
2,819
(871)
(3,694)
6,948
1,748
(653)
157
(1,542)
1,639—(7,560)(3,052)(7,751)
2,377(6,538)

1,443
(320)
—
(8,662)
12,540
1,936
(828)
—
—
—
(101)
13,947
5,370(15,321)209
10,136

14,26326,557(8,205)(34,800)
65,455
16,467(6,151)
1,479(14,527)
15,440—(71,220)(28,752)(73,019)
22,392(61,592)

13,594(3,015)—(81,602)118,135
18,238(7,800)———(951)
131,390
50,589(144,333)
1,968
95,488

4,069(6,935)(311)(9,715)

9,829(12,682)691
7,974

38,333(65,332)(2,930)(91,521)

92,595(119,472)
6,509
75,120Cash flows from investing activities:
Additions to securities
Proceeds from sale of securities
Additions to property and equipment
Proceeds from sale of property and equipment
Additions to investment securities
Proceeds from sale of investment securities
Additions to loans receivable
Repayment of loans receivable
Other, net
Net cash provided by investing activities(1,023)
1,996
(747)
606
(1,016)
16,461
(637)
4,633
2,516
22,789

(104)
5,844
(994)
272
(1,835)
16,877(4,438)4,358
1,026
21,006(9,637)18,804(7,037)
5,709(9,571)
155,073(6,001)
43,646
23,700214,686(980)
55,054(9,364)
2,562(17,287)
158,992(41,809)
41,055
9,667
197,890

Cash flows from financing activities:
Increase (decrease) in bank loans, net
Proceeds from long-term debt
Repayments of long-term debt
Common stock purchased and retired
Net cash used in financing activities

385
598(5,765)(15,600)(20,382)(10,881)
47,968(54,216)—(17,129)

3,627
5,634
(54,310)(146,962)(192,011)(102,506)
451,889(510,749)—(161,366)(1,386)(8,694)(1,305)
10,546(13,057)(81,903)(12,294)
99,35042,898231
43,129¥ 34,435

32,352—32,352¥ 42,898

404,126
2,176
406,302$ 324,399

304,776—
304,776$ 404,126

Effect of foreign exchange adjustments
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at beginning of year
Effect of subsidiaries newly consolidated
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.

14

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Basis of financial statements
Hanwa Co., Ltd. (the “Company”) and its consolidated
domestic subsidiaries maintain their accounts and records inaccordance with the provisions set forth in the JapaneseCommercial Code and the Securities and Exchange Law and in
conformity with accounting principles and practices generally
accepted in Japan, which are different from the accounting anddisclosure requirements of International Accounting Standards.
The accounts of overseas consolidated subsidiaries are based on
their accounting records maintained in conformity withgenerally accepted accounting principles and practices
prevailing in the respective countries of domicile.
The accompanying consolidated financial statements are atranslation of the audited consolidated financial statements of
the Company which were prepared in accordance withaccounting principles and practices generally accepted in Japan
from the accounts and records maintained by the Company
and its consolidated subsidiaries and were filed with the
Minister of Finance (“MOF”) as required by the Securities andExchange Law.

In preparing the accompanying consolidated financial
statemetns, certain reclassifications have been made in the
consolidated financial statements issued domestically in orderto present them in a form which is more familiar to readers
outside Japan. The consolidated statements of cash flows for1999 has been prepared for the purpose of inclusion in the
consolidated financial statements, although such statement
was not customarily prepared in Japan and not required to be
filed with MOF prior to 2000.
The translation of the Japanese yen amounts into U.S.
dollars are included solely for the convenience of the readers,using the prevailing exchange rate at March 31, 2000, whichwas ¥106.15 to U.S.$1.00. The convenience translations should
not be construed as representations that the Japanese yenamounts have been, could have been, or could in the future be,converted into U.S. dollars at this or any other rate ofexchange.

2. Significant accounting policies
Consolidation — The Company prepared the consolidated
financial statements for the year ended March 31, 2000 inaccordance with the revised Accounting Principles for
Consolidated Financial Statements effective from the year
ended March 31, 2000. The consolidated financial statements
include the accounts of the Company and its six (four in 1999)
significant subsidiaries. The accounts of three foreignsubsidiaries are included at their respective fiscal years ending
the last day of February. Necessary adjustments for significant
transactions occurring between the last day of February andMarch 31 have been made in the preparation of theconsolidated financial statements.
Intercompany transactions and accounts have been
eliminated. The Company doesn’t apply the equity method,
because non-consolidated subsidiaries and affiliated companies
are immaterial.
Consolidated Statements of Cash Flows — In preparing theconsolidated statements of cash flows, cash on hand, readilyavailable deposits and short-term highly liquid investments withmaturities of not exceeding three months at the time ofpurchase are considered to be cash and cash equivalents. In
accordance with the “Standards of Preparation of Consolidated
Cash Flow Statements, etc.” (the “New Standards”), effectivefrom the year ended March 31, 2000, the Company is required
to prepare consolidated cash flow statements. The prior year’s
consolidated cash flow statement, which was prepared forreaders outside Japan although such statement was not
required, has been restated to conform to the 2000
presentation.

Allowance for doubtful receivables — The allowance for
doubtful receivables of the Company and its domestic
consolidated subsidiaries is provided in amounts sufficient tocover possible losses on collection by estimating individuallyuncollectible amounts and applying a percentage based oncollection experience to the remaining accounts. The allowancefor doubtful receivables of foreign consolidated subsidiaries isdetermined based upon estimates of management in amounts
sufficient to cover possible collection losses.
Securities — Marketable equity securities in both current
assets and investments are stated at the lower of moving
average cost or market value. Recoveries of write-downs arerecorded in subsequent periods. Cost and market value arecompared on an item-by-item basis. Other securities, including
investments in unconsolidated subsidiaries and affiliates, arestated at moving average cost. If the value of any such security
declines below carrying value and the decline is judged to bematerial and other than temporary, the book value of suchsecurity is written down.
Dividend income is recognized when declared. Interest
income is recognized on an accrual basis.
Property and equipment — Property and equipment are
carried at cost. Depreciation is principally provided on the
declining balance method over estimated useful lives. Major
renewals and improvements are capitalized. Maintenance,
repairs and minor renewals are expensed as incurred.

15

Software costs — In accordance with the provisional rule of
the JICPA’s Accounting Committee Report No.12 “Practical
Guidance for Accounting for Research and Development Costs,
etc.” (the “Report”), the Company accounts for software
which was included in other investments and non-current
receivables in the same manner in 2000 as in 1999. Pursuant to
the Report, however, the Company included software inintangible and other assets in 2000 and depreciated it using thestraight-line method over the estimated useful lives (five years).
The amount for 1999 has been reclassified to conform to the2000 presentation.
Bonuses — The Company and its domestic consolidated
subsidiaries follow the Japanese practice of paying bonuses to
employees in June and December. As at the balance sheet date,the bonus liabilities are estimated and accounted for on an
accrual basis.
Bonuses to directors and statutory auditors, which are
subject to approval at the stockholders’ meeting, are accounted
for as an appropriation of retained earnings.
Income taxes — The Company and its subsidiaries provided
income taxes at the amounts currently payable for the years
ended March 31, 1999. Effective April 1, 1999, the Company
and its subsidiaries adopted the new accounting standard,
which recognizes tax effects of temporary differences between
the carrying amounts of assets and liabilities for tax and financial reporting. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The amount of deferred income taxes attributable to the
net tax effects of the temporary differences at April 1, 1999, isreflected as an adjustment to the retained earnings brought
forward from the previous year. Prior years’ financial statemetns
have not been restated.
The cumulative effect of adopting the new accounting
standard is ¥197 million ($1,856 thousand), which is directly
subtracted from the undisposed deficit brought forward fromMarch 31, 1999. The effect for the year ended March 31, 2000,
was to decrease net income by ¥139 million ($1,310 thousand).

Retirement benefits — Substantially all employees of theCompany and its domestic consolidated subsidiaries are covered by qualified funded pension plans. The amount of theretirement benefit is, in general, based on length of service,base salary at the time of retirement, and cause of retirement.
Annual contributions, which consist of normal cost and amortization of prior service cost are charged to income when paid.
Directors and statutory auditors are not covered by theseplans. However, the liability for retirement benefits represents
management’s estimate of the amounts payable to them at thebalance sheet date if they retired at that date. Amounts payable
to directors and statutory auditors upon retirement are subject
to the approval of stockholders.
Foreign consolidated subsidiaries of the Company havefunded pension plans providing basically lump-sum payments.
Translation of foreign currencies — Cash and cash
equivalents, current receivables, and current payables,
denominated in foreign currencies, are translated at year-end
rates except for those covered by forward exchange contracts
and those for which the Company has a firm intention tocontinue to use to offset the effect of foreign currency
fluctuations on non-current items.
If non-current receivables and payables denominated inforeign currencies had been translated at the current rate on
March 31, 2000, a loss of ¥265 million ($2,496 thousand)would have been recognized.
Foreign currency financial statements are translated at yearend rates, except for certain intercompany accounts for which
the rate used by the Company is applied. Resulting translation
adjustments are reflected in the consolidated financial
statements as “Foreign exchange adjustments.”
Finance leases — Finance leases which do not transfer ownership and do not have bargain purchase provisions are accounted for in the same manner as operating leases in accordancewith generally accepted accounting principles in Japan.
Net income (loss) per share — Computations of net income(loss) per share of common stock are based on the weighted
average number of shares outstanding during each period.

16

3. Change in accounting policy
Inventories
Inventories are principally stated at the lower of cost or market
value. Effective April 1, 1999, the Company changed themethod of accounting for inventories from the last-in, first-out
cost method to the moving average cost method or the specificidentification cost method. This change was made to more

appropriately state current costs of inventory of steel on themoving average cost method and foods, lumber and scrap, etc.,
on the identification cost method. The effect of this change wasto increase inventories, operating income, and income before
income taxes by ¥642 million ($6,048 thousand).

4. Marketable and investment securities
Marketable and investment securities at March 31, 2000, were as follows:

Millions of yen

Thousands of
U.S. dollars

Marketable securities

2000

2000

Carrying value
Aggregate market value
Net unrealized losses¥ 41,350
38,556¥ 2,794$ 389,543
363,222$ 26,321

Millions of yen

Thousands of
U.S. dollars

Investment securities

2000

2000

Carrying value
Aggregate market value
Net unrealized losses¥ 9,148
8,032¥ 1,116

The differences between the above costs and the amounts
shown in the consolidated balance sheets represent nonmarketable securities of ¥3,471 million ($32,699 thousand), for$ 86,180
75,667$ 10,513

which there is readily available market from which to obtain or
calculate the market values thereof.

17

5. Derivatives
The Company enters into foreign exchange forward contracts,
in its normal business, to hedge foreign exchange risk
associated with certain assets and liabilities denominated inforeign currencies. The Company enters into foreign exchange
forward contracts, foreign currency swap agreements, andinterest rate swap agreements as hedges against bonds andloans denominated in foreign currencies. And the Company
enters into commodity futures contracts as a means of hedging
risks associated with certain inventories and commitments.
It is the Company’s policy to use derivatives only for the
purpose of reducing market risks associated with assets andliabilities.
Derivatives are subject to market risk and credit risk. Since
the purpose of using derivatives is to reduce market risks
associated with assets and liabilities, market risks of thederivatives are effectively offset. And, as the counterparties tothose derivatives are limited to major financial institutions, theCompany does not anticipate any losses arising from credit risk.
Derivatives transactions entered into by the Company havebeen made in accordance with internal policies which regulate
the authorization and credit limit amount. Each derivativetransaction is periodically reported to the management, where
evaluation and analysis of derivatives are made.
The contracts or notional amounts of derivatives which are
shown in the following table do not represent the amounts
exchanged by the parties and do not measure the Company’s
exposure to credit or market risks.
Fair value and net unrealized gains (losses) are required tobe disclosed beginning in the fiscal year ended March 31,
2000, so such figures for the fiscal year ended March 31, 1999,
are not disclosed.
The Company had the following derivative contracts
outstanding at March 31, 2000.

18

Currency

Millions of yen
Contract ornotional amount

Forward exchange contracts:
Selling
U.S. dollars
Other currencies
BuyingU.S. dollars
Other currencies
Currency swap agreements:
Selling
U.S. dollars
Total

Fair value

Fair value

Net unrealized
gains (losses)¥ 24,684
14¥ 1,206(1)$ 243,900
122$ 232,539
131$ 11,361(9)49,757
1,671

49,857
1,609

100
(62)

468,742
15,742

469,684
15,158

942
(584)

8,500
—

7,903
—

597
¥ 1,840

80,075—74,451—

5,624$ 17,334

Interest rate

end rates are not disclosed above.

Millions of yen
Contract ornotional amount¥ 60,406

Fair value¥

Thousands of U.S. dollars
Net unrealized
gains (losses)

(817)

¥

Contract ornotional amountNet unrealized
gains (losses)

Fair value(817)$ 569,063$ (7,697)$ (7,697)

2,395

(296)

(296)

22,562(2,788)(2,788)

9,300

(60)

(60)

87,612

(565)

(565)

4,000
67
—

1
—

(66)
¥ (1,239)

37,683
631
—

9
—

(622)
$ (11,672)

Commodity

Millions of yen
Contract ornotional amount

Futures:Non-ferrous Metals
Selling
BuyingPetroleum
Selling
Buying
Total

Contract ornotional amount¥ 25,890
13

Foreign currency contracts which are used to hedge associatedassets and liabilities and reflected on the balance sheet at year-

Interest rate swaps:
Floating rate received for
floating rate
Fixed rate received for
floating rate
Floating rate received for
fixed rate
Swaption:
BuyingFloating rate received for
fixed rate
Option premium
Total

Thousands of U.S. dollars
Net unrealized
gains (losses)

Fair value¥ 4,157249¥ 4,271
249

33
408
—

33
422
—

19

Thousands of U.S. dollars
Net unrealized
gains (losses)¥¥

Contract ornotional amount

Fair value

Net unrealized
gains (losses)

(114)
(0)

$ 39,162
2,346$ 40,236
2,346$ (1,074)
(0)

(0)
14
(100)

311
3,844
—

311
3,976
—

(0)
132
(942)

$

6. Assets pledged as collateraland ¥41,600 million ($391,898 thousand) respectively, andguarantees were as follows:

At March 31, 2000 and 1999, assets pledged as collateral for
long-term bank loans of ¥38,637 million ($363,985 thousand)Thousands of
U.S. dollars

Millions of yen

Marketable securities
Other current assets
Property and equipment, net of accumulated depreciation

2000

1999

¥ 4,818
10
13,196¥ 18,024¥ 5,283—
13,824¥ 19,107

2000

1999

$ 45,389
94
124,314$ 169,797$ 49,769—
130,231$ 180,000

7. Bank loans and long-term debt
0.64% to 6.94% and from 0.68% to 6.19%, respectively.

Bank loans at March 31, 2000 and 1999, were represented
principally by short-term notes bearing interest at rates from

Long-term debt at March 31, 2000 and 1999, consisted of the following:Thousands of
U.S. dollars

Millions of yen

SFr. floating rate bonds due 2000
Loans from banks and insurance companies, bearing interest,
at March 31, 2000 and 1999, from 0.75% to 7.65% andfrom 0.80% to 7.65%, respectively,
maturing serially through 2004
Less amounts due within one year

The SFr. floating rate bonds due 2000 bear interest at 1/8%
over the six-month Swiss Franc LIBOR determined semi-annuallyand payable semi-annually in arrears. The rate of interest of thebonds at March 31, 2000, is 3% per annum. In no event shallthe rate of interest be less than 3% or more than 8% perannum. The bonds are redeemable, commencing on September
12, 1990, at the option of the Company at prices ranging from
101% to 100% of the principal amount.

2000

1999

2000

1999

¥ 13,112¥ 12,806$ 123,523$ 120,641

65,85878,97075,178¥ 3,792

70,72583,531
2,472¥ 81,059

620,424
743,947
708,224$ 35,723

666,274
786,915
23,288$ 763,627

The annual maturities of long-term debt outstanding at
March 31, 2000, were as follows:

Years ending March 31
Millions of yen

2001
2002
2003
2004

20

¥ 75,178
2,152
1,120
520
¥ 78,970

Thousands of
U.S. dollars$ 708,224
20,273
10,551
4,899$ 743,947

8. Income taxes
2000

The Company is subject to a number of taxes based on income,which, in the aggregate, indicate statutory rates in Japan ofapproximately 42.1% for the year ended March 31, 2000.
The following table summarizes the significant differences
between the statutory tax rate and the Company’s and its
subsidiaries’ effective tax rate for financial statement purposes
for the year ended March 31, 2000:

Statutory tax rate
Tax effect of permanent differences
Valuation allowance recognized fordeferred tax assets
Tax effect of unrealized intercompany profit
Difference of tax rates forconsolidated subsidiaries
Other
Effective tax rate

42.1%
12.5
14.4
(8.0)
(4.4)
1.3
57.9%

Significant components of the Company’s and its subsidiaries’ deferred tax assets and liabilities as of March 31, 2000, are as follows:
Millions of yen

Thousands of
U.S. dollars

2000

2000

Deferred tax assets:
Net operating loss carryforwards
Loss on loans receivable
Temporary differences pertaining to investments in consolidated companies
Loss on write-down of golf club memberships
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets¥ 64,897 $ 611,371
8,769
82,6091,133
10,674
691
6,510
859
8,092
76,349719,256(76,212)(717,965)
137
1,291

Deferred tax liabilities
Net deferred tax assets

¥

78
59

$

735
556

9. Stockholders’ equity
Common stock — The Company reduced its capital by¥31,237 million ($294,272 thousand) by purchasing andretiring 80 million shares of common stock of the Company on
August 7, 1999 for ¥15,600 million ($146,962 thousand). The
difference between the capital reduction amount and cost wascredited to additional paid-in capital. The capital reduction wasapproved at an ordinary general meeting of shareholders of theCompany held on June 29, 1999.

Additional paid-in capital — The Commercial Code of Japan
provides that the entire issue price of shares must be credited
to common stock, provided that, by resolution of the Board of
Directors, up to one-half of such issue price may be credited toadditional paid-in capital so long as the common stock is equal
to at least the aggregate par value of the shares issued. The
additional paid-in capital may be used to reduce a deficit byresolution of the stockholders or may be transferred tocommon stock by resolution of the Board of Directors, but is
not available for distribution as dividends.

21

10. Leases
Finance leases
As lessee
Total lease payments, including financing charges, under financeleases that do not transfer ownership of the leased property to
the Company for the years ended March 31, 2000 and 1999,

were ¥666 million ($6,274 thousand) and ¥628 million ($5,916
thousand), respectively.

Pro forma information of leased property such as acquisition cost,
accumulated depreciation, obligations under finance leases,
depreciation expense and interest expense of finance leases that

Acquisition
cost

Other property and equipment
Other investments
Total¥ 3,17396¥ 3,269

do not transfer ownership of the leased property to the leasee on
an “as if capitalized” basis for the year ended March 31, 2000,
were as follows:
Millions of yen
Accumulated
depreciation¥ 1,76442¥ 1,806

Depreciation expense, which is not reflected in the accompanying
statements of operations, computed by the straight-line methodwas ¥575 million ($5,417 thousand) and ¥563 million ($5,304

Net leased
property¥ 1,40954¥ 1,463

Acquisitioncost$ 29,892
904$ 30,796

Thousands of U.S. dollars
Accumulated
depreciation$ 16,618
396$ 17,014

Net leased
property$ 13,274508$ 13,782

thousand) for the years ended of March 31, 2000 and 1999,
respectively.

Obligations, excluding financing charges, under such non-capitalized finance leases as of March 31, 2000 and 1999, were as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total

2000

1999

2000

1999

¥

¥

$ 4,993
9,458$ 14,451$ 4,842
11,644$ 16,486

530
1,004¥ 1,534514
1,236¥ 1,750

As lessor
Lease payments, excluding financing charges, to be received under finance leases as of March 31, 2000 and 1999, were as follows:
Thousands of
U.S. dollars

Millions of yen

2000

Due within one year
Due after one year
Total

¥
¥

1999

39
120
159

¥
¥

37
159
196

2000

1999

$

$

367
1,131
$ 1,498348
1,498$ 1,846

Operating leases (As Lessee)
Obligations under operating leases as of March 31, 2000 and 1999, were as follows:
Thousands of
U.S. dollars

Millions of yen

2000

Due within one year
Due after one year
Total

¥
¥

22

1999

36
137
173

¥
¥

35
188
223

2000

1999

$

$

339
1,291
$ 1,630330
1,771$ 2,10111. Segment information
Industry segment information
The Company’s and its subsidiaries’ operations are classified
into five industry segments as follows:
Steel: Steel bars and shapes, steel plates and sheets, special
steels, wire products, steel pipes, and steelmaking raw
materials

Non-ferrous metals: Nickel, copper, aluminium, lead, zinc, tin,
antimony, and other alloys
Foods: Frozen seafoods and meat products
Petroleum and chemicals: Petroleum products, chemical
products, and other
Other business: Machinery, lumber, and other

Segment information by business category for the years ended March 31, 2000 and 1999, is as follows:Year ended March 31, 2000
Steel

Non-ferrous
metalsFoods

Millions of yen
Petroleum
Other
and chemicals
business

Total

Corporate

Consolidated

Net sales
Costs and expenses
Operating income¥ 359,444
353,573¥ 5,871¥ 51,616
50,137¥ 1,479¥ 104,229
102,253¥ 1,976¥ 75,269
74,651¥ 618¥ 39,159
36,563¥ 2,596¥ 629,717
617,177¥ 12,540

¥

—
3,813
¥ (3,813)¥ 629,717
620,990¥ 8,727

AssetsDepreciation
Capital expenditure¥ 139,746
1,115
219

¥ 16,005
71
50¥ 26,804
34
13¥ 13,773
20
5¥ 13,931
199
472¥ 210,259
1,439
759

¥ 121,913
75
41¥ 332,172
1,514
800

Total

Corporate

Consolidated

Year ended March 31, 2000

Thousands of U.S. dollars
Petroleum
Other
and chemicals
business

Steel

Non-ferrous
metalsFoods

Net sales
Costs and expenses
Operating income$ 3,386,189
3,330,881$ 55,308$ 486,255
472,322$ 13,933$ 981,903
963,288$ 18,615$ 709,082
703,260$ 5,822$ 368,903 $ 5,932,332 $
344,446
5,814,197$ 24,457 $ 118,135 $AssetsDepreciation
Capital expenditure$ 1,316,496
10,5042,063$ 150,777
669
471$ 252,511
320
122$ 129,750
188
47$ 131,238 $ 1,980,772 $ 1,148,497 $ 3,129,269
1,875
13,556707
14,263
4,448
7,151
386
7,537

23

— $ 5,932,332
35,9215,850,118(35,921) $ 82,214

Year ended March 31, 1999
Steel

Non-ferrous
metalsFoods

Millions of yen
Petroleum
Other
and chemicals
business

Total

Corporate

Consolidated

Net sales
Costs and expenses
Operating income¥ 380,178
374,316¥ 5,862¥ 43,999
43,145¥854¥ 110,910
109,819¥ 1,091¥ 35,276
34,827¥ 449¥ 28,205
27,062¥ 1,143¥ 598,568
589,169¥ 9,399¥—
4,074¥ (4,074)¥ 598,568
593,243¥ 5,325

AssetsDepreciation
Capital expenditure¥ 142,815
1,217
847

¥ 10,661
46
44¥ 29,782
37
32¥ 5,324
16
16¥ 11,414
29
23¥ 199,996
1,345
962

¥ 160,548
98
82¥ 360,544
1,443
1,044

Total

Corporate

Consolidated

Year ended March 31, 1999
Steel

Non-ferrous
metalsFoods

Thousands of U.S. dollars
Petroleum
Other
and chemicals
business

Net sales
Costs and expenses
Operating income$ 3,581,517
3,526,293$ 55,224$ 414,498 $ 1,044,842
406,453
1,034,564$ 8,045 $ 10,278$ 332,322
328,092$ 4,230$ 265,709 $ 5,638,888 $
254,9415,550,343$ 10,768 $ 88,545 $AssetsDepreciation
Capital expenditure$ 1,345,408
11,4657,979$ 100,433 $ 280,565
433
349
415
302

$ 50,155
151
151$ 107,528 $ 1,884,089 $ 1,512,463 $ 3,396,552
273
12,671923
13,594
216
9,063
772
9,835

Corporate costs and expenses mainly consist of expenses ofadministrative departments.

— $ 5,638,888
38,3805,588,723(38,380) $ 50,165

Corporate assets mainly consist of marketable securities,
investment securities and assets of administrative departments.

Overseas net sales
Overseas net sales include exports and offshore sales by the Company and its consolidated subsidiaries, excluding sales by foreignsubsidiaries to Japan.
Overseas net sales of the Companies are as follows:Year ended March 31, 2000
Asia

Overseas net sales
Percentage of consolidated net sales¥ 67,215
10.7%

Millions of yen
Other
areas

¥ 11,170
1.8%

Total

¥ 78,385
12.5%

Asia

Thousands of U.S. dollars
Other
areas

Total

$ 633,208$ 105,228$ 738,436

Asia

Thousands of U.S. dollars
Other
areas

Total

$ 469,844$ 343,731$ 813,575“Asia” consists principally of sales to China, South Korea and Thailand.
“Other areas” consist principally of sales to U.S.A. and Saudi Arabia.

Year ended March 31, 1999
Asia

Overseas net sales
Percentage of consolidated net sales¥ 49,874
8.3%

Millions of yen
Other
areas

¥ 36,487
6.1%“Asia” consists principally of sales to China and Thailand.
“Other areas” consist principally of sales to U.S.A. and Saudi Arabia.

24

Total

¥ 86,361
14.4%

12. Contingent liabilities
At March 31, 2000 and 1999, the Company and its consolidated subsidiaries were contingently liable as follows:
Thousands of
U.S. dollars

Millions of yen

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

25

2000

1999

2000

1999

¥ 4,079
1,497¥ 2,710
4,081$ 38,427
14,103$ 25,530
38,446

Report of Independent Public Accountants

To the Stockholders and the Board of Directors of
Hanwa Co., Ltd.:We have audited the accompanying consolidated balance sheets of Hanwa Co., Ltd. (aJapanese corporation) and subsidiaries as of March 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders’ equity and cash flows for the years
then ended, expressed in Japanese yen. Our audits were made in accordance with generally
accepted auditing standards in Japan and, accordingly, included such tests of the accounting
records and such other auditing procedures as we considered necessary in thecircumstances.
In our opinion, the consolidated financial statements referred to above present fairly the
consolidated financial position of Hanwa Co., Ltd. and subsidiaries as of March 31, 2000
and 1999, and the consolidated results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in Japan applied ona consistent basis during the periods, except for the new accounting policies and change inaccounting policy, with which we concur, in the following paragraph.
As explained in Notes 2, in the year ended March 31, 2000, Hanwa Co., Ltd., andsubsidiaries prospectively adopted new Japanese accounting standards for consolidation
and, income taxes and software costs. Also, Hanwa Co., Ltd. changed the method of
accounting for inventories, effective April 1, 1999, as referred to in Note 3.
Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial
statements have been translated from Japanese yen on the basis set forth in Note 1.

Osaka, Japan
June 29, 2000
(Member Firm of Andersen Worldwide SC)

Statement on Accounting Principles and Auditing Standards
This statement is to remind users that accounting principles and auditing standards andtheir application in practice may vary among nations and therefore could affect, possibly
materially, the reported financial position and results of operations. The accompanying
financial statements are prepared based on accounting principles generally accepted inJapan, and the auditing standards and their application in practice are those generally
accepted in Japan. Accordingly, the accompanying consolidated financial statements andthe auditors’ report presented above are for users familiar with Japanese accounting
principles, auditing standards and their application in practice.

26

Network of Hanwa Co., Ltd.

Domestic Offices
OFFICE
Osaka
Tokyo
NagoyaTohokuKyushuADDRESS
Hanwa Bldg., 4-3-9 Fushimi-machi, Chuo-ku, Osaka 541-8585, Japan
New Hanwa Bldg., 1-13-10 Tsukiji, Chuo-ku, Tokyo 104-8429, Japan
Chunichi Bldg., 4-1-1 Sakae, Naka-ku, Nagoya 460-8441, Japan
Sendai Daiichi Seimei Tower Bldg., 4-6-1 Ichiban-cho, Aoba-ku, Sendai 980-0811, Japan
Nihon Seimei Hakataekimae 2nd Bldg., 4-1-1, Hakataekimae, Hakata-ku, Fukuoka 812-0011, JapanTELEPHONE
06-6206-3270
03-3544-2171
052-262-2371
022-227-7981
092-471-7121

FAX
06-6206-3371
03-3544-2351
052-262-8819
022-227-7969
092-471-7060

Overseas Offices
OFFICENew York
SeattleHoustonCalifornia
Vancouver
BogotaSeoul
Beijing
Qingdao
DalianShanghaiFuzhouGuangzhou
DongguanZhongshan
Hong Kong
Taipei
Kaohsiung
Bangkok
Kuala Lumpur
Singapore
Tawau
Jakarta
Mumbai
TehranKuwaitRiyadhJeddahLas Palmas
LondonADDRESSTELEPHONE
FAX
Parker Plaza, 6th Floor, 400 Kelby Street, Fort Lee, New Jersey 07024, U.S.A.
1-201-363-4500
1-201-346-9890
900 4th Avenue, Suite 1640, Seattle, Washington 98164, U.S.A.
1-206-622-2102
1-206-622-6464
Suite 515, 9800 Richmond Avenue, Houston, Texas 77042, U.S.A.
1-713-978-7904
1-713-978-7790
18300 Vonkarman, Suite 405, Irvine, California 92612, U.S.A.
1-949-955-2780/2781
1-949-955-2785
Suite 502, 1001 West Broadway Vancouver, British Columbia, V6H 4B1, Canada
1-604-876-1175
1-604-876-1085
Carrera 11 No. 86-32, Oficina 604 Apartado Aereo No. 093260 Bogota, D.E. Colombia
57-1-218-3814/8406
57-1-256-0064
Room 2501-1, Korea World Trade Center Bldg., 159-1, Samsung-Dong, Kangnam-ku, Seoul, 135-729, R.O.Korea
82-2-551-5387
82-2-551-5575
Room 801, Beijing Fortune Building, 5 Dong San Huan Bei-lu, Chaoyang District, Beijing 100004, P.R.China 86-10-6590-8331~33
86-10-6590-8340
Room B309, Full Hope Plaza, 12 HongKong Central Road, Qingdao, Shangdon Province 266071, P.R.China 86-532-5026141~45
86-532-5026013
Senmao Bldg., 13F, 147 Zhongshan Street, Dalian, Liaoning Province 116011, P.R.China
86-411-368-6954
86-411-368-6934
Room 905/906, Aetna Tower,No.107 Zhunyi Road, Shanghai 200335, P.R.China
86-21-6237-5260/5265~7 86-21-6237-5268/5269
Room 2501, Lippo Tianma Plaza, No.1 Wu Yi Road, Fuzhou City, Fujian Province, P.R. China
86-591-3354165
86-591-3345202
Unit 1207,12th Floor, Peace World Plaza, 362-366 Huan Shi Road East, Guangzhou,510060,P.R. China
86-20-8384-3885
86-20-8384-8875
Longxi Industrial Zone,Zhouxi Management Area,Huangcun District,Dongguan,Guangdong Province P.R.China 511715
86-769-240-6428
86-769-240-6448
Unit 1909-1910, 19th Floor, Bank Of China Tower, 18 Zhongshan 3rd Road, Zhongshan, Guangdong Province P.R.China
86-760-332-0706
86-760-332-0696
Unit 3201-3 32nd Floor, Vicwood Plaza, 199 Des Voeux Road Central, Hong Kong852-25450110
852-25422544
Room 303 3rd Floor. No. 79, Chung Shan North Road Sec.2, Taipei Taiwan, R.O.C.
886-2-2560-2214~17886-2-2571-0693
Room B, 15th Floor, No.7 Su-Wei 4th Road, Kaohsiung, Taiwan, R.O.C.
886-7-338-5508~10
886-7-338-5433
19th Floor, Vorawat Bldg., 849 Silom Road, Bangrak, Bangkok, 10500 Thailand
66-2-635-1230
66-2-635-1220/1221
Suite 8-12B-3, Level 14 (12B), Menara Olympia 8, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia
60-3-238-2311
60-3-238-2380
20 Cecil Street, #11-02 SINGAPORE EXCHANGE, Singapore, 049705
65-536-7822
65-536-7855
P.O. Box 1231 91037 Tawau, Sabah, Malaysia
60-89-750016~7
60-89-750019
Menara Cakrawala 5th Floor Jalan M.H. Thamrin 9, Jakarta, 10340 Indonesia
62-21-3902293
62-21-3902294
c/o M.D. Jagat A/5 Kamdar Building, Gokhale Road South, Dadar, Mumbai 400 028, India
91-22-4305083
91-22-4308531
6th Floor, Building, No.10 8th Street, Mirzaye-Shirazi Avenue, Tehran 15967, Iran
98-21-890-3537
98-21-890-4723
c/o Al-Sabih Engineering & Trading Co. P.O. Box No. 1366, Safat 13014, Kuwait
965-243-7259
965-243-7263
Room 24, 6th Floor, Danat Trading Center, Abdullah Al-Ahmad Street, Sharq, Kuwait
P.O. Box 68974, Riyadh 11537, Saudi Arabia
966-1-478-3022
966-1-479-2459
c/o Office No. 219, Kaki Center P.O. Box 1224, Jeddah 21431, Saudi Arabia
966-2-661-0796
966-2-661-0796
C/Luis Morote, NO.6-3F , Edf. Catalunia 35007-Las Palmas De Gran Canaria, Spain
34-928-270894
34-928-275735
5th Floor, Finland House, 56 Haymarket, London, SW1Y 4RN. U.K.
44-20-7839-4448
44-20-7839-3994●LondonDalianBeijing●Teheran●Las Palmas●Kuwait●Riyadh●Jeddah●Vancouver
Seattle ●●New York● Seoul●●Qingdao●●Shanghai
Guangzhou
FuzhouDongguan● ●●Taipei
Zhongshan●● ●Kaohsiung●●MumbaiHong Kong●Bangkok

Kuala Lumpur ●Singapore ●●TawauCalifornia●●Houston●Bogota●Jakarta27

Directors and Statutory Auditors

President

Shuji Kita

北

修爾

新谷

洋

中林

満之

嘉本

隆行

休井

匡

Senior Managing Director

Hiroshi Shintani
Managing Directors

Mitsuyuki Nakabayashi
Takayuki Kamoto
Takashi Kyui
Shozaburo Bando
Kunio Matsuda

坂東祥三郎
松田

邦雄

Directors

Minoru Masuda
Katsutoshi Kumagai
Kazumichi Kaji
Kazuo Yokota
Masaomi Amao
Tatsuyuki Yamasaki
Hiroshi Omoto
Noriyuki Hanafusa
Hironari Furukawa
Shinsuke Kitamura

増田

実

熊谷

勝年

加地

一道

横田

和夫

天尾

正臣

山崎

達之

大本

博

花房

伯行

古川

弘成

北村

信輔

喜福

稔

Statutory Auditors

Minoru Kifuku
Tomotaro Kaneko
Kazushi Higashida
Takao Ikematsu

金子知太郎
東田

和四

池松

孝雄

28

Investor Information(As of March 31, 2000)

Company Name
Hanwa Co., Ltd.

阪和興業株式会社

Date of Establishment
April 1947
Stated Capital¥82,646 million ($778,578 thousand)Number of Shares of Common Stock Issued
211,663,200 shares
Number of Shareholders
27,689Stock Exchange Listings
The First Section of the Tokyo Stock Exchange
The First Section of the Osaka Stock Exchange
Transfer Agent
The Sumitomo Trust and Banking Co., Ltd.
AuditorAsahi & Co.
Number of Employees
910

http://www.hanwa.co.jp

Printed in Japan