阪和興業株式会社

http://www.hanwa.co.jp

2017
ANNUAL REPORT

Year ended March 31, 20172017.8 Printed in Japan

Coping with changing times and markets
quickly, Hanwa makes a great contribution
to society by satisfying various needs ofcustomers as a “distribution specialist”

Stock Information

Japanese financial
institutions
30.5%

Foreigncorporations
28.2%

Individuals and Other domestic
otherscorporations
22.9%
12.4%

Japanese financial
institutions
30.5%

Foreign
Individuals and Other domestic
corporations
otherscorporations
Japanesebrokerage firms12.4%
Treasury stock
28.2%
22.9%
2.0%
4.0%

Breakdown by Type of Shareholder

Fiscal Year-End

March 31Annual Meeting of Shareholders June
Independent Auditors

KPMG AZSA LLC

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

Success in today’s markets demands speed and the ability to meet a broad range

Date of Record for Dividend
PayoutInterim dividend: September 30
Year-end dividend: March 31

of needs. Change is occurring on an unprecedented scale. Only companies that

Authorized Shares

570,000,000 shares

can adapt quickly will survive. Hanwa has experience and accomplishments in

Issued and Outstanding Shares 211,663,200 sharesthe field of “distribution” that span more than 70 years.

Number of Shareholders

Japanese brokerage firms
2.0%

Breakdown by Size of Holding–1,00011.5%

1,000–50,000
84.9%

50,000–1,000,000
3.1%–1,00011.5%

1,000–50,000
84.9%

50,000–1,000,000
3.1%
1,000,000–
0.5%

8,084

We know how to build powerful businesses and move quickly in the pursuitof value creation and customer satisfaction.
Dedicated to corporate citizenship, we want our business operations to help
make communities and the world a better place to live. This is why we prioritize
compliance and other activities that enable 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.

Treasury stock
4.0%

Principal Shareholders

1,000,000–

Name of Shareholder

Number of Shares(thousands)

0.5%
Percentage of Total
Issued Share (%)

14,843
9,025
7,980
7,630
6,285
6,092
4,242
3,622
3,278
3,001

7.30
4.44
3.93
3.76
3.09
3.00
2.09
1.78
1.61
1.48

Japan Trustee Services Bank, Ltd. (Trust Account)...........................................................
The Master Trust Bank of Japan, Ltd. (Trust Account) .....................................................
Hanwa Clients’ Stock Investment Association.................................................................
Sumitomo Mitsui Banking Corporation..........................................................................
CBNY-GOVERNMENT OF NORWAY................................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 9)........................................................
Hanwa Employees’ Stock Investment Association...........................................................
Japan Trustee Service Bank, Ltd. (Trust Account 5)..........................................................
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO.............................................................
Nippon Steel & Sumitomo Metal Corporation................................................................
Note: The Company holds 8,464,473 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
(¥)

(¥)

1000

22,000800

18,000600

14,000400

10,000
Trading Volume(Millions of shares)

200

40
30
20
10

4
5
2015

6

7

8

9

10

11

12

1
2
2016

3

4

5

6

7

8

9

10

11

12

1
2
2017

3

0

| HANWA ANNUAL REPORT 2017 | 63

To Our Stakeholders

Contents
To Our Stakeholders .........................01
Business Model ..................................02
At a Glance.........................................04
Interview with the President ...........06
Topics ..................................................09
Review of Operations◆ Steel ...............................................10◆ Metals and Alloys .........................12◆ Non-Ferrous Metals......................13◆ Food Products ...............................14◆ Petroleum and Chemicals ............15◆ Overseas Sales Subsidiaries..........16

Shuji Kita
北 修爾
ChairmanHironari Furukawa
古川 弘成
President

Hanwa supplies a broad range of products, including steel, metals and alloys, nonferrous metals, food products, petroleum and chemicals, lumber, machinery and manyother items, to an equally diverse range of customers.
Since our inception, we have focused our operations on the mission of serving ourcustomers as “distribution specialists.” Each year, we have used our specialized expertise and an extensive service network to meet customer needs with precisely the rightsolutions. This skill has made Hanwa earn a reputation as a trading company in whichcustomers know they can place their trust, and from which they can receive outstanding
products and services.

◆ Other Business ..............................17
Corporate Governance .....................18
CSR Activities......................................22
Financial Section
Five-Year Summary ........................24
Management’s Discussion
and Analysis ..................................25
Consolidated
Financial Statements .....................28
Notes to Consolidated
Financial Statements ....................33

In the current fiscal year, Hanwa launched the Medium-Term Business Plan

Independent Auditor’sReport............................................57

centered on the “Three S” Commitment—STEADY, SPEEDY, STRATEGIC. Our goal is

Global Network .................................58

to build a profit structure that is sustainable in the medium to long term and a stronger

Corporate Information .....................62

foundation. Looking ahead through the next decade, this plan is designed to improve
our operations in three ways. First is the STEADY growth of Hanwa itself from earnings
generated by our current business domains. Second is the SPEEDY generation of
earnings from Hanwa Group companies and from strategic investments in Japan andoverseas. Third are additional earnings from continual STRATEGIC investments.
Another key goal is building a corporate infrastructure capable of supporting our
growing size and number of group companies. To accomplish this goal, we willtake steps to improve our financial soundness, oversight of group companies andcorporate governance.
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 and progress, we will retain our devotion
to contributing to society by performing functions unique to Hanwa, while serving as

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

a trading company known for outstanding footwork.
| HANWA ANNUAL REPORT 2017 | 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 by serving as
an intermediary for business transactions and investing mainly to boost relationships that generate such profits. We are dedicated to putting our customers first and prospering together with them. This is why we use horizontal collaboration that goes
far beyond conventional vertical organizational structures. Using this approach produces ideas and improvements that originate
from strong partnerships between Hanwa and its customers. Only this type of trading firm can function as a “true trading
company” that performs a valuable role in society.
To further solidify its relationships, Hanwa follows a business model innovation based on three strategic concepts in theactivities of all segments: (1) always stay close to the viewpoint 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 are diversifying the Group’s business domains within the supply chain to achieve thegreatest possible user satisfaction.

Past business areas

Upstream

Makers/suppliers

Trade

Temporary
distribution

Downstream

Manufacturing
process

Intermediate
distribution

Users

Three Strengths
FOOTWORKNETWORKTEAMWORK

The footwork required to act withspeed 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 are vitalto being in the right place at the right time togather this knowledge. Recognizing the importance of spending time in the field, Hanwa
business professionals use swift footwork tomove from one location to another. This constantfocus on the essence of business activities allows
Hanwa to supply customers with solutions of thehighest 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
that originate from this network are a criticalcomponent of our business operations. With
these capabilities, we can meet the expectations of 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 ANNUAL REPORT 2017 |Developing Globally While Expanding and Deepening Business Fields
Hanwa has built a solid position in the market as a trading company handling a broad range of products, including
steel, metals and alloys, non-ferrous metals, food products, petroleum and chemicals, lumber, machinery and manyother items. As a “trading company that makes a difference,” we are expanding our business fields in accordancewith 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 ofeffective 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.
●

Overseas Sales Subsidiaries

This segment includes trading of various goods and relevant business activities handled by overseas sales
subsidiaries in North America and Asia.
●

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

Number ofOverseas Bases

48

Number of Overseas
Processing Plants

Number of Subsidiaries
and AssociatedCompanies

50

30

Number of
Employees (consolidated)

3,155| HANWA ANNUAL REPORT 2017 | 03

At a Glance
Net Sales / Year-on-Year Change

Steel¥775,726 million

–0.4

%

Metals and Alloys¥131,414 million+2.9%
Non-Ferrous Metals¥77,674 million

–4.0

%

Food Products¥88,671 million

Fiscal 2016 Net Sales¥1,514,038–1.0

million%Petroleum and Chemicals¥257,165 million

–5.3

%

Overseas Sales Subsidiaries¥111,994 million

+14.9

%

Other Business¥71,394 million

+8.5

%

04 | HANWA ANNUAL REPORT 2017 |Principal Items
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
Steel Sheets
Steel plates, hot-rolled steel sheets, cold-rolled steel
sheets, surface-treated steel sheets, electrical steel sheets
Special steels and others
Special steels, cast steels, stainless steels, steel wires,
steel pipes, ferrous raw materials

Nickel, chromium, ferro-alloys, stainlesssteel scrap, titanium scrap, silicon

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

Thousands of
U.S. dollars (Note 1)

2017

2016

2017

¥1,514,038¥1,511,800$13,495,303

Operating income

23,426

18,178208,806

Net income attributable toowners of the parent

16,36425,470145,860

Comprehensive income

20,992

16,779187,111For the year:

Net sales

At year-end:¥

Cash and cash equivalents

27,206¥694,233

599,694

6,188,011

Total net assets

171,637

156,139

1,529,878

3,155

2,977

Yen

Petroleum products in general, bunker
oil, petrochemicals, synthetic resin,
paper products, biomass fuel, refuse
plastics and paper fuel (RPF)

U.S. dollars (Note 1)

Per share data:

Net income attributable toowners of the parent

Prawns and shrimp, crab, salmon,
herring roe, horse mackerel, mackerel,
capelin, octopus, eel, herring, flounder,
Matsubara’s red rockfish, fish paste,
processed goods

242,499

Total assets

Number of employees
Copper, aluminum, zinc, lead, e-scrap$

25,805

¥

80.18

¥

$

122.92

0.715

Cash dividends

19.00

18.00

0.169

Net assets attributable toowners of the parent

838.70747.40

7.476%
Key financial ratios:

Return on assets (ROA)

2.5

4.1

Return on equity (ROE)

10.1

17.2

Net debt/equity ratio (Note 2)

140

140

Notes: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥112.19=$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 Attributable to
Owners of the Parent(Millions of yen)

(Millions of yen)

(Millions of yen)

25,00020,0001,500,000

Wholesale trade, general merchandise

20,00015,0001,000,000

Lumber and Plywood
Structural lumber for housing, various
plywoods
Machinery
Various amusement facilities, steel-relatedindustrial machinery, environment-related
machinery
Other
Environment-related business

15,00010,00010,000500,000
5,000

0

5,000

0
13

14

15

16

17

0
13

14

15

16

17

13

14

15

16

17

| HANWA ANNUAL REPORT 2017 | 05

Interview with the President
Looking at the present and the future of the Hanwa Group`Three S’ Commitment“ The(STEADY, SPEEDY, STRATEGIC)
propels us towardsustainable growth.

”

Hironari Furukawa, President
代表取締役社長 古川 弘成

Please share your opinion about the economic environment during the fiscal
year ended March 31, 2017.

Q1
A

Q2

With regard to the world economy in the fiscal year under review, the U.S. economy maintained a gradual recovery
centered on personal consumption and housing investment, despite signs of slight stagnation in industrial production
and capital expenditures. The European economy remained firm on the whole, but showed political instability caused
by factors such as Brexit (the United Kingdom’s withdrawal from the European Union). In China, the trend towardslowing economic growth relaxed reflecting a recovery in infrastructure and other investment, and personal consumption due to the effects of economic stimulus measures. In the other emerging countries, Asian countries experienced
relatively stable growth, driven primarily by domestic demand. South American nations and Russia trended upwardreflecting a recovery in resource prices and other factors.
The Japanese economy saw sluggish growth in exports due to overseas economic conditions and exchange rate
fluctuations. However, it remained relatively stable reflecting a modest upward shift in housing investment, signs ofrecovery in the operating rate of manufacturing industries, and gradual improvement in personal consumption andcapital expenditures due to the effects of inbound tourism demand.

Please summarize operating results of the fiscal year ended March 31, 2017.

A

In these circumstances, the Group posted consolidated net sales of ¥1,514,038 million for the consolidated fiscal year
ended March 31, 2017, representing a year-on-year increase of 0.1%. This result was due mainly to higher sales
volume of metal raw materials and lumber, despite lower prices of petroleum and steel products compared with theprevious consolidated fiscal year. Operating income rose 28.9%, to ¥23,426 million, mainly reflecting higher profit in

06 | HANWA ANNUAL REPORT 2017 |the food products business and the steel business. Conversely, net income attributable to owners of the parent
decreased 35.8%, to ¥16,364 million, due to factors such as a decrease in extraordinary profits and the absence ofa reduction in income taxes paid reflecting a tax deduction recorded in the previous fiscal year.

Q3 What is your outlook for the fiscal year ending March 31, 2018?
A

The U.S. economy is likely to remain on a modest recovery track, although close attention should be paid to factors
such as the economic policies of the Trump administration. In Europe, despite a gradual economic recovery, thepolitical situation remains uncertain due mainly to Brexit. On the other hand, the Chinese economy is expected tocontinue its stable growth reflecting the effects of stimulus measures to counter the economic slowdown. In otheremerging countries, it is anticipated that the economic outlook will remain uncertain as a result of changes in the
global financial environment.
As the Japanese economy continues a gradual recovery trend, construction demand related to the Tokyo Olympic
Games is expected to increase gradually. In the manufacturing sector, production activity is likely to remain steadyreflecting solid growth in exports.
In this operating environment, the Hanwa Group aims to focus its efforts on maintaining and improving its business performance by gaining an accurate and thorough understanding of the demand trends in each businesscategory. It will implement sales/inventory policies that address precisely the needs of its clients and actively pursue
the development of a new customer base.
Based on the factors described above, in terms of consolidated operating results for the next fiscal year, we expect
net sales of ¥1,700,000 million (up 12.3% compared with the previous year), operating income of ¥25,500 million(up 8.9%), and net income attributable to owners of the parent of ¥16,000 million (down 2.2%).

Q4 Please share your vision for business management in the future.
A

In May 2016, the Group launched the Medium-Term Business Plan for the three-year period from April 2016 to March
2019 and has sought to realize the objectives of the plan. In the fiscal year under the review, due to the achievementof the final year’s target for ordinary income and foreseeable returns from existing strategic investments, such as
natural resources, we decided to revise the Medium-Term Business Plan and extended it by one year. Regarding
consolidated operating results for the fiscal year ending March 31, 2020, the final year of the Medium-Term Business
Plan, we expect net sales of ¥2,000,000 million and ordinary income of ¥35,000 million.

Q5 What is your message for Hanwa investors with regard to shareholder return?
A

The Company gives top priority to the payment of a higher and stable dividend to shareholders. As for the distributionof retained earnings for the fiscal year under review, we decided to pay a year-end dividend of ¥10 per share, bringing
the total dividend for the year to ¥19 per share, including an interim dividend of ¥9 per share. We made this decisionbecause our business earnings exceeded the initial forecast.
In all our activities, we ask sincerely for your continued understanding and support.

| HANWA ANNUAL REPORT 2017 | 07

Medium-Term Business Plan

Close
Up

An Overview : The Revised Medium-Term Business Plan (FY2016–FY2019)
For the next decade, this business plan sets the objectives of steady growth for Hanwa by earning profits in current business domains whileachieving speedy earnings growth driven by group companies and strategic investments. In addition, there will be more strategic mergers,
acquisitions and alliances to add more future sources of earnings.

Medium-Term Business Plan Theme

The “Three S” Commitment: STEADY, SPEEDY, STRATEGIC
Build a medium- to long-term sustainable profit structure and a stronger foundation

STRATEGIC
Establish future sources of additional earnings bycontinuing strategic investments

t
en
stm
e
inv

s

AB

TAIN

SUS

TH
ROW
LE G
ic
teg
stra
m
fro

SPEEDY

e
ts
enu
men
l rev
vest
a
n
n
i
o
i
s
ea
Addit
overs
ic anddomest
ies
m
o
r
f
e
u
n
e
v
Re
mpan
roup co
g
s
a
e
s
r
e
v
o
Revenue from domestic andSpeed up to produce benefits from investments in groupcompanies and strategic investments in Japan and overseas

STEADY
Maintain and increase earnings in well-established businesses

Revenue from Hanwa

Quantitative Objectives(Billions of yen)

Net sales
Ordinary income

1. STEADY
2. SPEEDY
3. STRATEGIC
Total

FY2016(Actual)

FY2017FY2018FY2019¥1,514.0¥ 19.1
3.1
0.7¥ 22.9¥1,700.0¥ 18.04.5
1.5¥ 24.0¥1,850.0¥ 19.05.0
8.0¥ 32.0¥2,000.0¥ 20.0
6.0
9.0¥ 35.0Growth Strategy: “Three S”
STRATEGIC
SPEEDY
Makers/suppliers

STEADY

Trading

SPEEDY
Primary
distribution

Maintain steady earnings

Processing

Intermediate
distribution

Users

Speed up to produce benefits
from investments

Establish future sources of additional earnings by continuing strategic investments• STEADY: Maintain and increase earnings in well-established business—
Use HKQC (quality assurance using the Hanwa Group’s collective
knowledge) to eliminate the risk of losses in all business processes.
—Increase cash flow generation by improving the efficiency of purchases,
inventories, sales and the receipt of payments• SPEEDY: Speed up to produce benefits from investments—Make group companies in Japan and overseas more profitable—Moving up to secure returns from current business investments thatare performing well or have excellent prospects

08 | HANWA ANNUAL REPORT 2017 |• STRATEGIC: Continuing strategic investments—Execute diversified mergers and acquisitions and flexible allianceinvestments in high-quality small and midsize companies.
—Create opportunities for strategic investments in the food products,
petroleum and chemicals, lumber and other business sectors.
—Make strategic investments in natural resource sectors with distinctive
characteristics.
—Make carefully targeted strategic investments in China, Southeast Asia
and North America.

TOPICS

Hanwa Opens a Manila Representative Office
In July 27, 2016, Hanwa opened a Manila representative office in Makati City, the Philippines.
Following the investment in SOHBI KOHGEI (PHILS.), INC. in 1999, we have been dispatching
personnel to the company. Going forward, based on the new Manila office, we will promote
development of new business partners and products by gathering information related to the
expansion of our business in the booming Philippines market.

Manila representative office

STAINLESS PIPE KOGYO Co., Ltd. Becomes a Subsidiary
Hanwa has moved forward with the procedure for regeneration of STAINLESSPIPE KOGYO Co., Ltd. following approval for support from the Regional Economy
Vitalization Corporation of Japan in May 13, 2016. In September 1, 2016, we
acquired 58.2% of the shares of STAINLESS PIPE KOGYO Co., Ltd., and turned it
into a subsidiary. Founded in May 1954, the pipe manufacturer has more than
60 years of experience and makes many sizes of stainless steel pipes, ranging
from small to large diameter. In cooperation with Hanwa, new business
opportunities are expected through sales expansion to chemical shipbuilding
and overseas projects.

Production of stainless steel pipe

Promotion of the HKQC
We have been implementing the principles of Hanwa
Knowledge Quality Control (HKQC) aimed at improving thequality of our operations by thoroughly evaluating the risks
and controlling processes in all of our departments.
Toward this end, from October 2016 to February 2017,
HKQC kick-off conferences were held for all employees of
the Company to deepen their awareness of HKQC. At theconferences, we announced the actual conditions of risk
occurrence, identification of problems and checking systems
in each department, and shared the information with all
domestic employees.
We will continue to work steadily to overcome thechallenges in each department and achieve reliable earnings
by preventing losses, reflecting improvement of the qualityof our operations through HKQC.
HKQC kick-off conference| HANWA ANNUAL REPORT 2017 | 09

Review of Operations

Steel (Domestic)
Fiscal 2016 Results
The domestic economy during fiscal 2016 remained solid as a whole despite somedifferences among industries. In the manufacturing sector, for example, domestic
automobile production increased 1.9% year on year in fiscal 2016, while the amountof construction machinery shipments decreased 2.2% year on year.
Domestic demand for steel products from the construction industry remainedsluggish due to construction delays, although it appeared to remain solid according
to construction start statistics.
Consumer spending and capital investment showed signs of recovery. As awhole, a gradual recovery track was seen.
As for steel market conditions, international steel market prices started toincrease in early 2016, and continued their upward trend until the third quarter. In
and after the second quarter in particular, these prices jumped significantly as
China’s steel exports decreased and coking coal prices soared. As a result, domestic
steel market prices increased in line with international prices, and conditional sales
prices charged to domestic customers also jumped significantly.
Although domestic demand for steel products did not rise considerably, theCompany was able to implement the fast delivery/small-lot/processing strategy andincrease its product handling volume. Profit margins for steel product transactions
improved due to increases in the prices of steel products in the second half of the
fiscal year, as well as the continuous recording of high-margin construction work
project contracts.

Net Sales(Millions of yen)

(Millions of yen)

(Millions of yen)

Looking Ahead and Key Strategies
130,000

800,000

600,000

400,000

200,000

0

13

14

15

16

17

Net Sales Composition

51.2%

10 | HANWA ANNUAL REPORT 2017 |

80,000In late 2016, Chinese steel market prices started to fall due to increased production
volumes and concerns over a slowdown in domestic demand in China, and East
90,000 prices also started to decline. Coking coal
60,000Asian market
prices that soared sharply
due to the effects of a hurricane in Australia also started to fall. As a result, there iscurrently 60,000
a growing sense of future uncertainty about steel
40,000market prices.
Due to the decline in market prices in China, low prices are currently offered toChinese mills that export products to Japan, and there are concerns over relevant
20,000effects on30,000
domestic market prices.
Steel demand for fiscal 2017 in the manufacturing sector is expected to remain
continuously0solid mainly in terms of automobiles and construction
machines. Such
0
15
16
13
14 industry
15
17
demand in the construction
is16also forecasted
to remain13
strong14as a whole,
supported by Olympics-related demand and urban redevelopment projects, and an
improvement in demand is expected in the second half of the fiscal year in particular.
In Japan, the Company will strive to continuously gain new customers amongsmall- to medium-sized enterprises, and further explore direct demand.
At the same time, we will implement the fast delivery/small-lot/processing
strategy, thus seeking to improve the Hanwa Group’s functions through M&A+A(Alliance) and alliances formed with partner companies. We will also strive to expandand strengthen regional facilities, aiming to meet further regional demand.

17

Steel (Overseas)
Fiscal 2016 Results
China’s economic growth slowed, but was underpinned by infrastructure, real estate,
and the automobile industries. After most of Chinese mills fell into the red in fiscal
2015, restructuring in the steel industry, such as the merger of Baoshan Iron and SteelCo., Ltd. and Wuhan Iron and Steel Corporation, as well as the movement towards
the elimination of excess capacity, started on a full-scale basis.
In the United States, despite strong consumer spending on automobiles, etc., steel
demand from the oil and gas sectors decreased markedly, pressured by crude oil prices
falling further early in the fiscal year. During the latter half of the fiscal year, crude oil
prices remained stable in the 40-50 dollar range, and were on a recovery trend mainlywith respect to pipes.
While demand in the ASEAN region remained firm in general, despite variations
among member countries, Vietnam and other countries prepared their plans successively
to increase steel production and started to actively suppress large inflows of China-madesteel products. The energy sector continued to experience weak growth due to crude oil
price declines.
During fiscal 2016, Japan’s steel exports decreased 1% year on year to 41 million
tons, representing four consecutive years of decreases. Due mainly to yen appreciation,
steel mills did not take an active stance towards receiving export orders. In thisenvironment, although the Company’s steel exports were continuously weak due todeclining steel plate trading in the shipbuilding and energy sectors in Asian countries
such as South Korea, the trading volume remained flat year on year due to expanded
exports to the Middle East and Europe, where demand was relatively strong, andincreased trading of stainless products, high-performance materials, and others.

Looking Ahead and Key Strategies
Reflecting violent fluctuations in main steel raw material prices from the beginning of
the year, purchasing activities tend to be suspended mainly in ASEAN countries.
International steel market prices are uncertain because Chinese mills are expected toactively increase their exports as China’s growth rate declines. According to Japanesemills, an increased portion of raw material costs should be passed on to customers,
but this idea is not readily accepted. As domestic demand for steel sheets and the likeis strong, the export ceiling has been set at a lower amount. Market prices of thicksteel plates and the like are expected to soften in and after the autumn due to a
decline in shipbuilding demand.
On the demand front, as countries are actively implementing their protection policies,
steel products may be subject to restrictions at certain destinations and distribution
channels may become complex. On the other hand, it is expected that positive effects ofgovernment-led infrastructure improvement and consumption stimulus measures forautomobiles and houses will be exerted. As crude oil prices have bottomed out, it
appears that energy-related projects are being launched in the U.S. and other nations.
We will focus on promoting package sales in line with customer needs throughendeavors that leverage the high quality and credibility of Japan-made products mainly inhigh-grade product market segments in which they compete little against Chinese
products, and also seek to expand trading by taking advantage of our own processing
facilities and inventories, among other resources, as well as those of our business partners.
As for general-purpose commodities, rather than adhering to products made inJapan, we will increasingly deal in Chinese, South Korean, and Indian steel productswith price competitiveness, and strengthen trading with overseas users.
In Asia, North and Central Americas, Europe, and the Middle East, we willcontinue to conduct sales activities that can enhance our presence, exploring thepossibility of starting business activities in emerging countries.
| HANWA ANNUAL REPORT 2017 | 11

Review of Operations

Metals and Alloys
Fiscal 2016 Results
Nickel prices that were at around the $8,500-per-ton level at the beginning of theyear started to rise due to a tight demand-supply situation caused by declined ore
production and an export reduction in connection with environmental problems in
the Philippines, and tentatively reached the $12,000-per-ton level in the second halfof the year. In 2017, these prices started to decline as Indonesia partially lifted its ore
export ban, and on rumors that the Philippines’ Environment Minister who vigorously
pushed forward the reduction of environmental burdens from mining would bedismissed, and they reached the $10,000-per-ton level at the end of the year.
As for ferroalloys, production was successively suspended or reduced in theprevious fiscal year because selling prices were below costs. However, these prices
bottomed out as a whole at the end of fiscal 2015, rose gradually in the first half offiscal 2016, increased sharply in the second half due to a tight demand-supply
situation, and remained at high levels until year-end.
Under a favorable environment for specialty metal products, the Company
expanded relevant business steadily by developing new products such as battery raw
materials and chemical products, and by increasing new transactions with companies
such as Tsingshan Iron & Steel Group.
The ferroalloy business also regained its profitability amid a favorable environment,
significantly increased ferrochromium trading, and took measures for new investment.
However, profit decreased as Showa Metal Co., Ltd., a consolidated subsidiary,(Millionsof yen) a loss on disposal of long-term inventories.
(Millions of yen)incurred

Net Sales(Millions of yen)

100,000

Looking Ahead and Key Strategies

130,000

80,00090,00060,000entering

60,00030,000

0

13

14

15

16

17

Net Sales Composition

8.7%

12 | HANWA ANNUAL REPORT 2017 |It appears that prices of specialty metals, chemical
80,000products and ferroalloys area downward phase tentatively in the first half as the demand-supply
60,000situation is easing.
40,000The Company will be facing a difficult pricing situation. However, the stainless
40,000steel raw material business will actively increase newcustomers and products, andthe chemical product business will also vigorously strive to develop new products
20,00020,000by increasing investment inand markets, aiming to expand the entire business
upstream business areas for new products through the expansion of businesses
00arisingfrom existing investment.
13
14
15
16
17
13
14
15
16
17
As for scrap raw materials, the Company will secure its profit rates by streamlining
and multi-functionalizing processing facilities, although domestic cargo collection
volume and sales are not expected to increase.
In ferroalloy markets, the Company will strive to expand sales volumes, producttypes and sales regions, increase investment in upstream business areas based on
careful examinations, secure sources of future earnings, and make existing investment
profitable. As for profit, the Company expects to receive equity investment income
from Samancor Chrome Limited, to which additional capital was contributed. In
addition, Showa Metal Co., Ltd. will post earnings, although it incurred a loss for theprevious fiscal year.

Non-Ferrous Metals
Fiscal 2016 Results
Aluminum prices that were at the mid-$1,500-per-ton level at the beginning of the
fiscal year fluctuated repeatedly within a small range, but were on an upward track
persistently, surpassing $1,900 per ton at year-end. Copper prices were in the $4,700to 4,900-per-ton range in the first half of the year and rose sharply after that,
surpassing $6,000 per ton in the latter half due to the effects of the Trump Rally. Thenthe prices remained at the $5,800-per-ton level until year-end. Prices of lead and zinccontinued to rise persistently from the beginning of the fiscal year as demand andsupply were kept in balance. Zinc prices almost reached $3,000 per ton tentatively.
Aluminum raw material prices remained strong without special factors such aslast year’s sharp decline in the premium on new aluminum ingots. This businessachieved a turnaround despite posting a loss last year.
As for copper products, the Company secured stable profit as new product sales
took off despite no expansion in demand. The movement of copper raw material
demand and supply did not improve significantly, but export and import transactions
generated more earnings. In addition, the Company increased transaction volumes
and earnings under the given market conditions.
As for metal raw materials and precious metals, the Company posted considerable
earnings thanks to new product development and diversification of suppliers andcustomers, started a new joint venture in Europe, and strengthened the cargocollection and inspection system.
(Millions of yen)

(Millions of yen)

Looking Ahead and Key Strategies
800,000

600,000

400,000

200,0000

130,000

As for nonferrous metals in general, last year is considered to be a year of recovery
from the bottom prices (i.e. prices below the break-even points), but these prices are
90,000thought to have peaked at the end of last year
after the effects of the Trump Rally.
Future price development is considered to be affected by actual demand
movement, mainly in China and the U.S. However,
60,000 as China’s economic adjustments
and Trump Rally rebound are thought to be inevitable, metal prices will enter a phaseof adjustment, after decreasing once in and after the first half of the current fiscal year.
30,000Overall demand movement is also anticipated to be slow, affected by bothmarkets that can exert large effects.
0 thanks to underpinning factors
In Japan, demand will not decline significantly
13
14
15
16
17
13
14
15
16
17
such as special demand driven by the Olympics and the progress of IoT.
In this environment, the Company aims to further streamline its processing
facilities to continuously create high added value, diversify its suppliers, customers
and products, and achieve globalization through investment in foreign countries,
although relevant investment has been mainly domestic so far.

Net Sales(Millions of yen)

(Millions of ye

100,000

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

0

0

13

14

15

16

17

Net Sales Composition

5.1%| HANWA ANNUAL REPORT 2017 | 13

Review of Operations

Food Products
Fiscal 2016 Results
Prices of Atlantic salmon rose due to growing global demand. In addition, asJapanese autumn salmon catches were poor, the prices of Chilean silver salmon, amain product sent to Japan, rose sharply from ¥650 per kilogram in summer to therecord high price of ¥920 per kilogram.
Crab prices also rose as the upper limit of catches was substantially lowered in
Alaska. Prices for both king crabs and snow crabs hit an all-time high.
Shrimp prices were relatively stable in comparison with other marine products.
However, the volume of cultured black tiger shrimp decreased significantly because
its feed efficiency is worse than vannamei shrimp’s. As a result, supply was tentatively inadequate across the globe.
As prices of marine products rose as a whole, the price spread of almost all products was positive, contributing to profit growth.
Hanwa Foods Co., Ltd. came to be gradually recognized in the industry, andachieved a turnaround because product unit purchase costs fell due to the effects of
yen appreciation.
Seattle Shrimp & Seafood Company also achieved a turnaround as southern
king crab sales contributed to profit growth considerably.

Looking Ahead and Key Strategies

Net Sales(Millions of yen)

100,000

80,00060,00040,00020,000

0

17

13

14

15

16

17

Net Sales Composition

5.9%

14 | HANWA ANNUAL REPORT 2017 |Pricesof ofmarine
products are anticipated to be continuously higha whole due to(Millionsyen)(Millionsasof yen)the effects of decreased natural fish supply caused by climate change, as well as
70,000increased
500,000 demand for marine products.
However, the domestic market is shrinking due to the effects60,000
of high prices, andthere400,000
is a strong possibility that prices will be adjusted in the short run. As for salmon
50,000in particular, the supply of Chilean silver salmon, a main product, is expected to300,000next year. Japanese autumn salmon catches are also 40,000
increase
expected to recover
this year. Accordingly, the current price ranges will not be maintained.
30,000200,000
As
for European mackerel, the upper limit of catches is expected to increase by
14% this year, and there is a high probability that prices will be 20,000
adjusted in line with
100,000increase.
the limit
10,000
There are concerns over worsened resource conditions regarding crabs. However,00
the current
price ranges will not decline considerably despite decreased
supply and
13
14
15
13
14
15
16
17
increased demand in the U.S. market.
The business performance of restaurants has been strong thanks to increased
consumption by foreign tourists. However, some online shopping companies are currentlyof yen)being forced to partially scale down their business plans due to the(Millions
inadequate
number ofhome delivery drivers, although such shopping has boosted domestic consumption so far.
100,000
Consumers have started shifting fromvolume sellers to online shopping, but
80,000this trend may reverse.
Due to increasing demand for
60,000marine products on a global basis, theneed to secure suppliers is higher. To
40,000increase sales and profit, the Company
will cooperate with Seattle Shrimp &20,000
Seafood Company in drawing up
action plans such as joint procurement,0and enhance its skills in negotiating
13
14
15
with suppliers.

16

1

16

1

Petroleum and Chemicals
Fiscal 2016 Results(Millions of yen)

80,00060,00040,000All commodity market prices stopped declining in early 2016, and crude oil prices
finally started to increase. The WTI crude oil price remained at around $50, butdomestic oil companies faced competition to gain customer shares, likely due to theneed to prepare for wholesale companies’ realignment in the country. In thisenvironment, it was continuously difficult to secure profit margins, and the Petroleum
Department’s consumer business faced challenging conditions. However, as a wintercold snap arrived in November, the kerosene oil sales environment improved after along interval, recovering enough to compensate for poor sales of other products.
The bunker oil business environment remains poor, and losses continued in the first
half. However, this business achieved a turnaround for the first time in one and a halfyears partly because purchasing conditions improved at long last in the second half.
The lubricant business grew in a stable manner by increasing new materials suchas inorganic materials, and by expanding existing product sales steadily.
The chemicals business continued to see its product sales increase, steadily
developed new products and customers, and achieved performance significantly
above target figures, contributing to the Company’s earnings.
The chemical raw material business was affected by cheap prices offered bydomestic makers due to decreased naphtha prices and struggled to sell imported
raw materials, but its performance remained almost unchanged thanks to continuous
sales to customers wishing to procure materials in a stable manner.
The paper business achieved a turnaround at long last in the second half thanks(Millions of yen)
to cheaper yen, sharply higher waste paper
prices affected by expanded demand in
China, and other factors. It also increased RPF sales gradually.
100,000 struggling to generate operating profit
The new energy business is continuously
because demand for PKS will not pick up on a full-scale basis until 2018. However,
80,000 capital transactions aiming to build
this business posted a profit by conducting
collaborative relationships with long-term suppliers. The Company also started the
60,000pellet business to fulfill PKS supply shortage,
establishing the foundation for
concluding long-term contracts, etc.
40,00020,0000

Looking Ahead and Key Strategies
20,000In the fuel business, challenging sales activities will continue as the effects of wholesalecompanies’ realignment are unforeseeable. 0To remain in business, the Company is
13 planning
14
16
17
13 needs
14 partly
15 because
1617
to15comprehensively
incorporate customer
there
is a
strong possibility that such realignment leads to distributor realignment. This businessalso aims to keep its performance on par with previous results by sharing information
with Toyo Energy Co., Ltd. so that stronger synergy can be created. The bunker oil andlubricant businesses are expected to be on par with the second half results.
The chemicals business has finished activities, for now, to develop large customers
buying conventional disposable plastic shopping bags, etc. This business will shift its focus
to the development of new products such as new high-performance plastic bags andoffice supplies offered to consumption-related companies, aiming to increase transactions.
The paper business has achieved certain domestic sales results, as well as export
performance, and developed its basic capability for generating stable profits. Thanks toincreased sales of RPF, etc., this business is expected
to generate stable profits that are on par with thesecond half.
The new energy business is expected to increase its
transaction volume month by month. To achieve stabledelivery, this business will accumulate its performance,
eliminate problems, and prepare for next year in which
full-scale demand is expected to arise.

Net Sales(Millions of yen)(M

500,000

400,000
300,000

200,000
100,000

0

13

14

15

16

17

Net Sales Composition

(M

17.0%

| HANWA ANNUAL REPORT 2017 | 15

Review of Operations

Overseas Sales Subsidiaries
Fiscal 2016 Results(Millions of yen)

70,00060,00050,00040,00030,00020,00010,000
0

13

14

15

16

17

Net Sales(Millions of yen)

100,000

During fiscal 2016, international commodity prices remained weak. However, unit
prices stopped declining, and prices of certain commodities bottomed out.
In North America, the steel business struggled to secure its procurement routes
due to the imposition of anti-dumping duties (ADD) on China-made steel products,
and the commencement of investigations on Vietnamese exports suspected to be ofChinese origin. In the food business, the volume of sales to a US sales subsidiarydecreased last year, but sales recovery stalled. In the metal raw materials business,rare earth shipments to chemical makers were strong, but costs were incurred prior
to shipment. The non-ferrous metals business maintained the volume of precious
metal scrap trading as leading US metal pickup service providers scaled back theirbusiness operations.
China experienced the lowest economic growth in 26 years, but the volume ofcrude steel production increased 1.2% year on year. Chinese steelmakers’ profitability improved as market prices recovered thanks to government-led capacity
reduction policies. In this environment, the Company actively pursued the restructuring and structural reform of each facility, and transformed its business from one
focusing on given instruction-based trading to the autonomous-based business.
Inland China areas (Wuhan, Chongqing, and Chengdu) have seen strong growth. In
these areas, the Company also expanded its business.
ASEAN economies experienced strong growth. However, the automobile
industry grew only slightly, affected by increased production in Mexico. Construction
demand was mostly steady in these countries. As a result, all local subsidiaries of theCompany in ASEAN countries posted profit.

80,000

Looking Ahead and Key Strategies

60,000In North America, the Company will find new steel mills to avoid ADD, narrow down
the customer base to select preferred customers, and also build country- and regionbased business operations. The food business will pursue collaboration with Group
companies in the U.S., Mexico and Canada, and expand sales in North and Latin
American markets. The metal raw materials business conducts the pure raw material/
scrap business, dealing with chemical, catalyst, battery, and related companies. The
non-ferrous metals business focuses on byproducts of non-ferrous metal refineries,
in addition to precious metal scraps. The waste paper business will expand areas ofprocurement and increase its business volume.
In China, the Company will increase transactions both inside and outside China
by expanding and enhancing its trading company functions, make relevant
investment if necessary, and promote growth strategies. The Company will also
implement a personnel system suitable for China’s actual conditions, revitalize local
staff, and localize its business. Each industry is clearly divided into two groups (i.e.
winners and losers). The Company’s business partners will deal with social changes
in China through cooperation with winning companies with distinct features.
The ASEAN region’s economic growth is anticipated to slow down slightly.
However, steady growth can be expected, particularly in Myanmar and thePhilippines. New business creation and additional capital investment will increase
more than ever so that local demand can be met. The Company will flexibly capturebusiness opportunities by forming a cooperation system or by other means.

40,00020,000
0

13

14

15

16

17

Net Sales Composition

7.4%

16 | HANWA ANNUAL REPORT 2017 |Other Business (Lumber and Machinery)
Fiscal 2016 Results
LumberHousing starts totaled 960,000 units in fiscal 2016 (a year on year increase of 6.4%),of which 408,000 units were conventional timber-based construction (a year on year
increase of 8.8%). These results were driven particularly by rental housing, condominiums, and detached housing. Non-residential properties also increased.
Since demand for housing, etc., increased more than expected, housing supply
always appeared tight. As a result, there were no considerable price changes.
In and after summer, prices were supported by various factors that arose successively, such as a fire broke out at a plywood maker, European laminated wood makers’
production adjustment caused by log shortages, and JAS problems.
A consumption tax hike was postponed during the fiscal year ended March
2016, but sales increased as special demand (for conventional housing in particular)
arose due to the effects of low interest rate levels. Transactions remained stable
despite poor profit, little price decline, and product shortages.
MachineryIn the leisure facilities business, we delivered Japan’s tallest Ferris wheel to the
EXPOCITY complex and Japan’s first medium-sized models to Fuji-Q Highland andSagamiko Resort Pleasure Forest. We also delivered a pool with running water toJapan Monkey Park (Inuyama City, Aichi Prefecture). In addition, we have built apost-delivery maintenance system by hiring experienced personnel from outside.
In the industrial machinery business, we won new contracts to deliver Japanmade slitter lines used for electricaland vacuum heat treating furnaces to(Millions ofsteelyen)China. In Japan, we also delivered whole production lines, including foundation
work such as shutter molding lines and continuous drawing machines, rather than
500,000
standalone facilities only.

of yen)000

400,000

000

Looking Ahead and Key Strategies

000

000

000

0

13

300,000
LumberAs demand and supply will be in balance, except for some products (flat square
200,000
redwood laminate), profit rates may
decline.
Despite continuous field worker shortages and soaring raw material prices, it will
be difficult to pass on increased costs
100,000with higher selling prices.
In the housing industry, requests for presentation of wood product cost reduction will become more demanding. However,since fewer companies are able to
0
to
such
requests,
oligopolywill
prevailfurther.
respond
13
14
15
16
17
14
15
16
17
Housing starts are anticipated to be around 900,000 to 920,000 units in fiscal
2017. A certain level of demand can be anticipated, but procurement worth theselling price will be difficult. We will face severe business conditions.
In this business, we will stabilize the main import transactions, develop products(building materials) that meet direct demand, and promote the steel ceiling joist
business and the fast delivery/small-lot/processing (e.g. delivery to worksites) ofwood products by boosting sales activities targeting housing makers and building
mutually beneficial relationships.

Machinery
The leisure facilities business has seen amusement parks gradually become eager tomake investments for the future with their customer traffic recovering. However,since a lot of construction work will be completed in or after fiscal 2018, contract
workloads are light in fiscal 2017.
The industrial machinery business will continue joint sales activities actively withthe domestic steel business and accelerate the acquisition of new customers.
This business needs to urgently develop products other than cranes and secure
new suppliers, striving to enhance its facility product lineups for steel makers.
Other issues are the expansion of Japan-made product sales in overseas markets,
including China, and the development of attractive foreign products.

Net Sales(Millions of yen)

70,00060,00050,00040,00030,00020,00010,000
0

13

14

15

16

17

Net Sales Composition(Millions of yen)

100,000
80,0004.7%

60,00040,00020,000
0

13

14

15

16

17

| HANWA ANNUAL REPORT 2017 | 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 from stakeholders
and be recognized as a valuable enterprise. We work to establish ahigh degree of transparency in management systems to ensure fulllegal and regulatory compliance and respect for social norms.
In addition to participating in many corporate social responsibility (CSR) activities, we have established the CSR Committee anduse a commitment to CSR management to make our corporate
brand even more respected.

Corporate Governance Structure
Basic overview of the corporate governance structure
We have adopted a corporate auditors’ system, which includes theBoard of Auditors that comprises five corporate auditors (of whomthree are outside corporate auditors) selected at the General
Shareholders’ Meeting. The system is used to audit and perform
oversight on the Board of Directors, the management decisionmaking and business supervisory body, and to monitor the
performance of duties by the Company’s administrative organizations operating under the Management Committee. We thenreport our findings at the General Shareholders’ Meeting after
completing our own reviewing process.
In April 2012, we introduced an executive officer system toestablish a system that enables more detail-oriented business operations and to promote more efficient and quicker decision-making.
The Board of Directors, which comprises 14 directors, including
two outside directors, meets once a month as a rule to deliberateand decide on important business plans and proposals concerning
the Group, and to oversee business operations.
As a rule, the Management Committee meets twice a month.
The members of this committee, all of whom are executive officers, discuss issues of significance concerning management andreach decisions. They also submit issues to the Board of Directorsthat involve the Group’s management and promote the efficientperformance of duties in accordance with the management policy
determined by the Board of Directors.
The Officers Evaluation Committee, chaired by the president
and attended by the outside directors, conducts an evaluation of
the officers’ performance, and meets at least twice a year to
perform a comprehensive evaluation of the officers’ performance.
This includes an assessment of the level of commitment that each
officer has set at the beginning of the fiscal year and a mutual evaluation process for all the officers. In addition, the Compensation
Committee, which determines each officer’s compensation, andthe Election Committee, which governs the nomination of officers,
both operate under the Evaluation Committee.
The results of the evaluation provided by the Officers Evaluation
Committee are used by the Compensation Committee, which
includes outside directors, to determine each officer’s compensation.
The fixed monthly compensation is then submitted as a regularsalary plan to the Board of Directors. In terms of the officers’
bonuses, we use a system that awards a bonus directly linked to
profits and clearly reflects each individual Officer’s achievementlevel. The Board of Directors approves this profit-based calculation
model after the Officers Evaluation Committee reviews it. The
corporate auditors have also approved this system.
To select Officers, the Selection Committee, which includes
outside directors, reviews the coming year’s members based on
18 | HANWA ANNUAL REPORT 2017 |their evaluation and their performance. A draft is then submitted
to the Board of Directors. A proposed list of candidates is thenforwarded to the Regular General Shareholders’ Meeting.
Advisory Committees
The Investment Examination Committee meets twice a month as arule. Its members conduct multilateral analyses of important investment projects proposed by business departments, divisions, andgroup companies, in terms of their consistency with the Company’s
management policy, profitability, risks, etc., and submit theCommittee’s opinions to the Management Committee.
The Disclosure Committee meets on an as-needed basis to
discuss the significance of information on decisions made by theGroup and facts and events occurring within the Group, and determines whether they should be disclosed to the public, as well as
looks into the appropriateness of details of such disclosures. It also
formulates rules and basic policies and develops corporate structures for legal disclosures and timely disclosures.
The Compliance Committee meets on an as-needed basis tocheck, investigate, and discuss measures to establish, maintain,
and manage the overall compliance structure of the Group, alongwith individual cases and issues where necessary, and develops
subsequent preventive measures.
The Security Trade Control Committee meets on an as-neededbasis to promote compliance with laws and regulations related to
the Group’s security trade, plan for export control reviewing systemand processes, and manages and supervises such reviews.
The Internal Control Committee meets on an as-needed basis.
Delegated by the Management Committee, the Committee
provides advice and assistance for examinations performed by theInternal Audit Department on the effectiveness of the internal
control systems of the Group, and offers its opinions in Internal
Control Reports. It also studies issues involving internal controls of
the Group, and submits the results of these studies to theManagement Committee.
Explanation of why this system was adopted
We have expanded its business over the years across a wide range ofbusiness fields, while making optimal use of the high level of expertise we can offer as a distribution specialist. We are fully aware of the
responsibility entrusted to us by our shareholders. Our daily businessdecisions are therefore carefully made with the leadership of ourdirectors, who understand thoroughly our operations. In addition,business matters of significance are put through the Board of
Directors for discussion. We believe that the model we have adopted,
in which a separate Board of Auditors (including outside corporate
auditors) is set up to perform an audit and inspection, is the mostappropriate for our company. In FY1994, as part of our efforts toremain accountable and improve the transparency of our businessdecisions for our stakeholders, including our shareholders, we began
hiring outside directors, and added an outside director in FY2011,
making a total of two outside directors. They provide us with a moreobjective point of view and act as a checking mechanism.
We also believe that we enable our corporate auditors to
perform their duties effectively by allowing them to attend important meetings, including managers’ meetings, and to request
advance information before important plans are finalized.
Moreover, we have adopted a system in which preliminary reviewsof management issues are performed in various committees suchas the Officers Evaluation Committee, the Investment Examination

Committee, and the Compliance Committee. Enhancement ofthese management systems makes our corporate governancesystem highly effective.

The audit performed by corporate auditors focuses on proactive auditing to prevent incidents. The process is mainly based onconversations regarding compliance, internal systems, and risk
management. Auditors also attend meetings of the Board of
Directors, the Management Committee, and others to monitor andaudit the execution of duties by the management. With the participation of the outside corporate auditors, who have ample
knowledge and experience in corporate activities, the Board ofAuditors maintains its independence from the top management toperform auditing duties appropriately. It also exchanges views andopinions with the president as well as managing officers and presents the findings provided by the corporate auditors to the Boardof Directors.
Corporate auditors and the Audit Division file audit reports to
independent auditors periodically while continually exchanging
information to keep abreast of progress. Our goal is to improve themonitoring function by increasing the level of collaboration.
The Audit Division also collaborates with the Internal Control
HKQC promotion division, which is tasked with organizing andevaluating our internal control systems to efficiently share information and optimize the execution of duties.

Internal Audit and Auditing by Corporate Auditors
An internal audit is performed by the audit division in the Internal
Audit Department and the Overseas Audit HKQC promotion division on the Company’s domestic and overseas bases as well asother national group companies and overseas subsidiaries. The
audit is centered mainly on monitoring their accounting, compliance, and internal control practices. The monthly internal audit
report is then directly submitted to the president, while theManagement Committee is also kept informed when appropriate.
The Management Committee may also choose to report to theBoard of Directors on issues that are deemed relevant and important. The audit division, which collaborates continually with thecorporate auditors, may also act as support staff for the auditors
and prepare reports as requested by the Board of Auditors. The
director responsible reports quarterly on the overseas bases to theBoard of Directors. Furthermore, the Office prepares reports whenrequested by the Board of Auditors.

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

Recommendation

Officers Evaluation Committee
9 internal officers, 2 outside directors
Election
Committee

Compensation
Committee

Election/dismissal

Board of Directors
Board Chairman: Chairman
12 internal directors
2 outside directors

Oversight/audit

Recommendation
Election/supervision

Operationalorganization

Independent Auditors

Oversight/audit

Cooperation

Information gathering/administration

Internal Reporting
SystemAdvicePresident

Human Resource
Development Committee

Compliance Committee
Security Trade Control
Committee

Recommendation

Investment Examination
Committee
Application

Operating bases(Japan/overseas)

Examination/
administration

Administrative
divisionsExamination/
recommendation

Evaluation/oversight
Document control
Internal audit

Internal Control
Committee
AdviceInternal Audit
Department
Cooperation

SupportGroup companies

Cooperation

Recommendation

Awareness/support
Recommendation

External Attorneys
Accounting audit/internal control audit

Management Committee
Committee Chairman: President
22 executive officers

Operatingdivisions

Coordination

ReportDisclosure Committee
ReportBoard of Auditors
2 corporate auditors
3 outside corporate auditors

Election/dismissal

Guidance

Group Company Corporate
Auditors Conference| HANWA ANNUAL REPORT 2017 | 19

Corporate Governance
Overview of Potential Conflict of Interests Due to Personal/
Financial Relationships or Business Dealings between
Outside Directors/Corporate Auditors and the Company
The Company has two outside directors and three outside corporate
auditors, none of whom at the time of the submission of this report
has any vested interest in the Company. This, we believe, ensuresthat no conflict of interest arises with the general stockholders.
Outside directors and outside corporate auditors are expectedto act as representatives for stakeholders, including stockholders.
They are expected to evaluate and consider business decisions aswell as the appropriateness of the execution of duties from an
objective point of view. Therefore, only candidates with competence and experience suitable for this demanding position are
selected. We also make use of articles in the Enforcement Rules for
Securities Listing Regulations and the Guideline for the ListingManagement, both established by the Tokyo Stock Exchange, as areference for determining the level of independence necessary foroutside executives.

Organization of Internal Control and the Risk
Management System
At our Board of Directors’ meeting on May 10, 2006, we resolved
on basic policies regarding the development of internal control
systems, to ensure that the execution of duties by the directors
complies with laws and regulations and that the duties are
performed properly by other employees. Note that the basic policies below are as of the date of submission of our financial report.
Systems to ensure that the performance of duties by the
directors, executive officers and employees of the Company
and its subsidiaries (henceforth referred to as “the Group”)
complies with laws and regulationsa) The standards for the Group’s corporate ethics and ethicalbehavior are established in accordance with the creed.
b) The Compliance Committee is created, which distributes acompliance manual in principle to all executives and employeesof the Group and verifies that compliance programs are being
used effectively.
c) The Company establishes a consultation service (using theCompliance Committee, outside directors and external attorneys)
where all executives and employees of the Group can obtainadvice on compliance matters, providing a means of directly
reporting compliance problems. The Company also stipulates
that whistleblowers will not suffer from any disadvantageous
treatment due to their submission of reports. In the event of
occurrence of such a situation, the Company engages in prompt
and accurate disclosure of the event to society with establishedaccountability, and strives to thoroughly determine the causes
and implement measures to prevent recurrence.
d) The Company collaborates with authorities such as the police totake determined action against anti-social influences and blockall contact with such entities.
Systems to store and control information related to duties
performed by the directors of the Companya) Information related to the duties performed by the directors isstored properly in written documents or electronically(henceforth referred to as “documents”), and these records are
stored and managed in accordance with laws, regulations andthe Hanwa’s regulations for document management.
b) Personnel responsible for managing documents act proactively
20 | HANWA ANNUAL REPORT 2017 |against loss or damage to stored documents and have installeda locking mechanism (including restricted access by passwords
and other codes) and manage the documents accordingly.
Regulations and systems related to management of the riskof loss in the Groupa) Directors, executive officers, senior general managers, anddepartment managers of the Company and presidents of theGroup work with the Legal & Credit Department to educate
employees thoroughly on regulations regarding credit management and business activities, so as to manage and reduce risks.
The Company has also established the Investment Examination
Committee, which manages investment risks by studying
proposals for new business ventures and new investments. The
committee reviews the investment risk for the Group andreports the results to those responsible for settling the matters.
b) Each business department of the Company cooperates with the
General Affairs Department, the Information Systems Department,
the Legal & Credit Department and the General Affaires
Department on compliance, environmental management, emergency responses, information security, trade management, andother matters in accordance with internal rules, manuals, andother guidelines. The Compliance Committee, the Security Trade
Control Committee, and other applicable committees assist the
departments by providing advice and educational support. Advice
from external attorneys and other experts is used as required.
c) The Personnel Department, Internal Audit Department andCorporate Planning Department of the Company work incollaboration with other relevant departments to implement
educational and informative programs to grasp thoroughly andaccurately how to manage risks for the Group.
d) To verify the effectiveness of risk management for the Group,
the Internal Audit Department monitors all the Company’s
domestic and overseas bases, domestic group companies andoverseas subsidiaries based on a predetermined auditing plan.
Their reports are then submitted to the Management Committee
as well as the president when appropriate. The director responsible also submits a report quarterly to the Board of Directors tokeep others informed of the status of the Group’s companies.
e) With the respect to the disclosure of corporate information, theCompany establishes the disclosure regulations, and the Disclosure
Committee reaches decisions on the importance and suitability of
information to be disclosed to ensure that information is released
to the public in a fair, timely, and appropriate manner.
f) In accordance with Group Company Management Rules andGroup Company Financial Management Rules, the Company
manages properly the risks related to its subsidiaries by
establishing the appropriate authority management system andreporting system.
g) Each business department and subsidiary of the Company
promotes the Hanwa Knowledge Quality Control (HKQC)
activities to properly control operational risks by identifying
risks inherent in operational procedures and organizing
countermeasures for them.
Systems to ensure efficient execution of directors’ duties in
the Groupa) As a rule, the directors of the Company meet once a month toreach decisions on group management matters of significanceand to supervise the execution of business operations. As a rule,
the Management Committee meets twice a month. Its members
discuss matters of significance concerning management andreach decisions. They also submit issues to the Board of Directorsthat concern matters involving the Group’s management basedon the Board’s regulations and agenda standards.
b) The Company has its subsidiaries submit reports monthly on thestatus of business operations, and holds a monthly businessbriefing at the Tokyo head office, Osaka head office and Nagoya
branch office to receive reports from each sales department
including some domestic subsidiaries, and verifies the businessdirection, operating efficiency and whether or not there is a risk
for the Group.
c) The Company has established a medium-term business plan aswell as a business plan for the fiscal year, to realize its mediumto long-term business strategies. Principally through theperiodical meetings to achieve targets with its departments andsubsidiaries, the Company inquires about assessment of duties
performed and checks the progress of work (including a reviewof the plan and modification of methods to achieve the plantarget), which improves the efficiency of operation.
d) The Officers Evaluation Committee, chaired by the president
and comprised of members including the outside directors toprovide advice, meets at least once a year to set forth issues ofsignificance concerning the execution of duties of each director
as well as to conduct a comprehensive evaluation for eachdirector after following peer evaluation between directors. The
results are used to determine each officer’s compensation in
the Compensation Committee and also in the selection of
officers in the Election Committee; both operate under the
Evaluation Committee.
Systems to ensure proper operations in the Groupa) Regulations for the oversight of subsidiaries are established.
Through collaboration with these companies, the Company
ensures efficient management of operations and plan forcomprehensive business development.
b) The department or officers responsible of the Company must
understand thoroughly the status of its domestic and overseas
subsidiaries in order to manage duties in a comprehensive
manner. Other relevant departments may provide support toensure that duties are performed properly.
c) The Group Company Corporate Auditors Conference, comprisedof full-time corporate auditors and auditors of the Internal Audit
Department and subsidiaries, holds meetings as needed. Thesemeetings provide an opportunity to exchange information related
to audits of the Company and its subsidiaries.
Systems related to employees assigned to assist the corporate
auditors, and the independence of such employees from thedirectors and ensuring the effectiveness of instruction tosuch personnel
A certain number of employees are assigned to assist the corporate
auditors. These employees receive requests from the corporate auditors to investigate, report, and maintain a collaborative relationshipwith the corporate auditors. In addition, these employees receive noorders or instructions from the directors or anyone else concerning thedirectives and orders received from the corporate auditors.
Systems for the Group’s directors, executive officers,
employees and the subsidiaries’ corporate auditors to reportto the corporate auditors and systems otherwise pertaining toreporting to the corporate auditorsa) In addition to submitting reports on issues of significanceconcerning compliance, the Group’s directors, executive officers,
employees and the subsidiaries’ corporate auditors submit

reports to the corporate auditors on occurrence of risks andmatters related to infractions of laws and regulations. The
Compliance Committee Chairperson also submits reports to thecorporate auditors on reports made to the compliance consultation service. In addition, the directors report to the corporate
auditors regarding important decisions and the status of business operations at important meetings such as the Board of
Directors’ meeting and the Management Committee meeting.
b) The Group’s directors, executive officers, employees and thesubsidiaries’ corporate auditors must respond quickly andaccurately to requests for reports by the corporate auditors.
c) The Internal Audit Department submits reports based on theschedule predetermined by the Audit Plan to the corporate
auditors concerning internal audits. They also conduct anadditional investigation and report on issues as requested by
the corporate auditors.
d) The Company explicitly prohibits disadvantageous treatment of
the Group’s directors, executive officers, employees and thesubsidiaries’ corporate auditors who have reported to thecorporate auditors and responded to the matter under theprovisions listed in the preceding three items.
Systems to ensure effective auditing by the corporate auditorsof the Companya) The corporate auditors exchange opinions with the directors,
executive officers as well as employees and announce theirfindings and views at meetings of the Board of Directors asneeded. In addition, the corporate auditors collaborate andexchange their views with the independent auditors on thefinancial audit.
b) A system is established that allows the corporate auditors toattend meetings of the Board of Directors and other important
meetings, inspect important documents, and investigate major
departments and subsidiaries.
c) When a corporate auditor claims advance payments or the
reimbursement of expenses incurred in relation to the performance of duties, the Company processes the relevant expense
promptly unless cases where the expenses pertaining to suchbilling are deemed to be unnecessary for the performance of
duties of the corporate auditor.
Systems to ensure the reliability of financial reportsa) In accordance with the Fundamental Policy concerning Internal
Controls for Financial Reports, the Group operates the internal
controls reporting system in an efficient and effective manner.
b) The Management Committee oversees the establishment andoperation of the internal systems of the Group. The Internal
Audit Department is supervised directly by the Management
Committee. They check and evaluate the establishment andoperation of internal controls and submit reports to theManagement Committee. The Management Committee makes
appropriate corrections and modifications as needed based onthese reports.
c) The Internal Control Committee studies the Group’s issues
involving internal controls and submits reports on the results ofthese studies to the Management Committee. In addition, theInternal Control Committee provides advice and assistance for
examinations on the effectiveness of the internal control
systems for the Group performed by the Internal Audit
Department, and offers its views in an Internal Control Report.

| HANWA ANNUAL REPORT 2017 | 21

5_0704828602802.indd

CSR Activities
Hanwa’s Basic Policy on Corporate Social Responsibility (CSR)
Hanwa’s corporate social responsibility (CSR) consists of six basic
policies that Hanwa considers an integral part of management:(1) thorough legal compliance; (2) environmental considerations;(3) good corporate citizenship; (4) transparent management andproactive disclosure; (5) maintaining of financial soundness; and(6) workplaces geared to employee self-realization.
To promote CSR management, the CSR Committee,
chaired by managing exsective officer of Management
Division, incorporates organizations including the Compliance

Committee, Environmental Committee, and the Hanwa
Scholarship Foundation and engages in organized operation.
Companies both within Japan and overseas are internationally finding it more necessary to become globalized
in terms of economic activity and to create sustainable
developments. Hanwa is going to continue making efforts
toward development as a single corporation existing
within the world society with a focus on the ISO26000
international standard.

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

DonationsManagement Committee

CSR Committee

Hanwa Scholarship
ProgramChairmanManaging exsective officer of Management Division
Vice Chairman Exsective Officer of Management Division
Secretariat
General Affairs Department
CSR & Environment Section
Members
General Managers of the relevant departments

Support of students
from overseas●Environmental Committee Secretariat●Security Trade Control●Compliance Committee●Safety and Health 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

To Everyone Working at the Hanwa Group

3. Contribution to industrial society

We promote awareness of compliance for everyone working at the
Hanwa Group. If any of the following is applicable, please
immediately contact the compliance consultation desks.

4. Diligent information disclosure

You may be violating laws or internal rules.
You may be acting in a manner that runs counter to the
Corporate Philosophy.

5. Consideration of environment

You may not be able to tell others about your actions
openly and honestly.
You may feel lost or doubtful about whether you aredoing the right thing.

COMPLIANCE MANUAL Version 4

6. Global harmony
7. Ensuring a free and generous workplace environment

Compliance Consultation DesksInternal Consultation Desk
Members of the Compliance Committee, Outside Directors
Please see page 7 of this Manual.

8. Promoting activities contributing to society as a“Good Corporate Citizen”

External Consultation Desk
MIDOSUJI LEGAL PROFESSION CORPORATION(Tokyo and Osaka)
Please see page 8 of this Manual.

9. Making people familiar with ethical standards
1-3

2016/02/16

15:27:15

Compliance manual distributed to all officers and employees

22 | HANWA ANNUAL REPORT 2017 |10. Appropriate corporate managements

Corporate Risk Management
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 toswiftly 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

Promoting Diversity by Realizing Various Working Styles
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 for assistance with work duties. There are several
employees from the entire Company in this team making
effective use of the short time they are at work assisting others
until they are ready and 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 amentor scheme especially for female employees in general positions with a chance of promotion and for new non-Japaneseemployees. An employee in a different section with a longer
work experience at the Company is assigned as a mentor toprovide intellectual and psychological support, to create a betterworking 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 60th 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, 2017, the program had distributed a total of ¥654 million
in scholarships, and the accumulated number of scholarshipstudents had grown to 1,082.
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

University

Studying abroad

Graduate school

1,000

6
81

15
82

75

75

77

79

773

783

800

817

834

765

151

151

151

151

151

151

68
66

800

66
62
56

600
52
49

400

422

18

200
4

0

604

662

712

479

318

3
181

41
7

548

28 96
64

87

98

115

130

144

151

151

151

1957 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2012 2013 2014 2015 2016 Year(1)(5) (10) (15) (20) (25) (30) (35) (40) (45) (50) (55) (56) (57) (58) (59) (60) (Times)| HANWA ANNUAL REPORT 2017 | 23

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Financial
SectionFive-Year Summary
For the years ended March 31

				Millions of yen, 			
				
except for number of employees
		

		

2017

2016

2015

2014

Thousands of
U.S. dollars (Note 1)

2017

2013

For the year:
Net sales				¥ 1,514,038 ¥ 1,511,800 ¥ 1,737,398 ¥ 1,682,504¥ 1,511,325 $13,495,303

Operating income 			18,17823,426

19,107

16,253

12,491

208,806

Net income attributable to owners of the parent 			25,47016,364

9,086

7,897

4,721

145,860

Comprehensive income 		
20,992

16,77919,45014,6486,600

187,111

Net cash provided by (used in) operating activities 			
53,099
3,959

1,791

343

19,38135,288Net cash provided by (used in) investing activities		
(18,428)(13,693)(10,447) 		

(5,244)(5,107)(164,257)

Net cash provided by (used in) financing activities		
15,448(41,752)

19,339(4,928)(16,364)

137,695

23,198 $242,499

At year-end:
Cash and cash equivalents 		
¥27,206 ¥25,805

Total assets		
694,233

599,694

651,457

593,352

552,908

6,188,011

Total net assets 		
171,637

156,139

142,750

125,362

120,674

1,529,878

Number of employees 			
2,977
3,155

2,772

2,610

2,208

¥

				

				

		

2017

2016

24,515¥

15,920

Yen

¥

		

2015

2014

U.S. dollars (Note 1)

2017

2013

Per share data:
Net income attributable to owners of the parent 			122.92¥80.18 ¥

¥

43.85

¥

38.11

¥

22.78

$

0.715

Cash dividends 			
18.00
19.00

15.00

12.00

12.00

0.169

Net assets attributable to owners of the parent 			
747.40838.70682.46591.68570.50

7.476

				

		

2017

2016

%

		

2015

2014

2013

Key financial ratios:
1.5
4.1
2.5
Return on assets (ROA)				

1.4

0.8

17.2
10.1
Return on equity (ROE)			

6.9

6.6

4.1

140
140
Net debt/equity ratio (Note 2)			

180

190

180

Notes: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥112.19=$1.00.
2. Net debt/equity ratio = Net interest-bearing debt/equity.
Net interest-bearing debt = Interest-bearing debt – cash.

24 | HANWA ANNUAL REPORT 2017 |Management’s Discussion and Analysis
Operating Results
Operating Results for the Fiscal Year Ended March 31, 2017
With regard to the world economy in the fiscal year under review, theU.S. economy maintained a gradual recovery centered on personal
consumption and housing investment, despite signs of slightstagnation in industrial production and capital expenditures. The
European economy remained firm on the whole, but showed politicalinstability caused by factors such as Brexit (the United Kingdom’s
withdrawal from the European Union), refugee issues and geopoliticalrisk. In China, the effects of over-production and excess debt continued,
but the trend toward slowing economic growth relaxed reflecting a
recovery in infrastructure and real estate investment, and personal
consumption, which had been sluggish under the new normal
economic policy, due to the effects of economic stimulus measures.
Other emerging countries were affected by factors such as economic
conditions in developed countries, changes in financial environments
and resource prices, together with political and geopolitical issues.
Asian countries experienced relatively stable growth, driven primarily
by domestic demand, with the situation varying by country. SouthAmerica and Russia, which had been stagnant, trended upwardreflecting a recovery in resource prices and other factors.
The Japanese economy saw sluggish growth in exports due tooverseas economic conditions and exchange rate fluctuations. However,it remained relatively stable, reflecting a modest upward shift in housing
investment, signs of recovery in the operating rate of manufacturingindustries, and gradual improvement in personal consumption andcapital expenditures due to the effects of inbound tourism demand.
In these circumstances, the Group posted consolidated net salesof ¥1,514,038 million for the consolidated fiscal year ended March
31, 2017, representing a year-on-year increase of 0.1%, due mainly
to higher sales volume of metal raw materials and lumber, despite
lower prices of petroleum and steel products compared with theprevious consolidated fiscal year. Operating income rose 28.9%, to¥23,426 million, mainly reflecting higher profit in the food products
business and the steel business. Conversely, net income attributableto owners of the parent decreased 35.8% to ¥16,364 million due tofactors such as a decrease in extraordinary profits and the absence of
reductions in income taxes paid reflecting a tax deduction recorded in
the previous fiscal years.
Net Sales
Net sales increased 0.1% year on year to ¥1,514,038 million, due
mainly to higher sales volume of ferro-alloys and lumber, eventhough many of the business segments saw decreased net sales,

reflecting lower sales prices accompanying declines in commodity
prices in the previous consolidated fiscal year. Domestic sales rose
0.6% to ¥1,136,629 million, while overseas sales fell 1.1%, to¥377,409 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 declined 0.4% to ¥1,449,523 million. This was due
mainly to a drop in purchase prices reflecting lower market prices anda decrease in loss on write-down of inventories.
SG&A expenses rose 7.1% to ¥41,089 million, primarily reflecting
increases in salaries and bonuses, rent, income taxes, and a rise in
expenses due to the inclusion of newly consolidated subsidiaries.
Operating Income
Operating income for the consolidated fiscal year under review
expanded 28.9% to ¥23,426 million from ¥18,178 million a year earlier
due mainly to an increase in earnings related to contracted works in thesteel business, higher profit in the overseas coil center, and a return toprofitability at Seattle Shrimp & Seafood Company, Inc., which hadrecorded an operating loss in the previous consolidated fiscal year. The
result raised the ratio of operating income to net sales by 0.3 percentage
point from the previous consolidated fiscal year, to 1.5%.
Other Income (Expenses)
Net other expenses amounted to ¥263 million, versus income of¥8,566 million in the previous consolidated fiscal year. This reflectedprimarily a decrease in gain on sales of property and equipment due
mainly to a sale of real estate in the distribution center located in
Chiba Prefecture a year earlier and a decrease in gain on bargain
purchase. These factors were partly offset by decreases in loss on
valuation of investment securities, loss on valuation of investments incapital, share of loss of entities accounted for using equity method,and foreign exchange loss.
Income Taxes
Income taxes increased 432.2% from the previous consolidated fiscal
year to ¥6,728 million, reflecting the absence of significant reductionsin income taxes paid a year earlier due to such factors as a tax
deduction for impairment loss of sold real estate that was recognizedin previous years.

Net Sales and Operating Income

Net Income Attributable to
Owners of the Parent and ROE

Total Assets and ROA(Millions of yen)

(Millions of yen)(%)

(Millions of yen)

25,00020

20,00016

15,00012

10,000

8

5,000

4

(Millions of yen)

1,600,000

32,0001,200,000

24,000800,000

16,000400,000

8,000

0

0

13

14

Net Sales (left scale)

15

16

17

Operating Income (right scale)

0

0

13

14

ROE (right scale)

15

16

17

(%)

600,000

4

450,000

3

300,0002

150,000

1

0

0

13

14

15

16

17

ROA (right scale)| HANWA ANNUAL REPORT 2017 | 25

Management’s Discussion and Analysis
Net Income Attributable to Owners of the Parent
Net income declined 35.5% to ¥16,435 million. Net income attributable to owners of the parent within net income decreased 35.8% to¥16,364 million. Accordingly, net income per share fell to ¥80.18,
from ¥122.92 in the prior year.

Sources of Capital and Cash Liquidity
Financial Condition
Total assets increased 15.8% to ¥694,233 million from the previous
consolidated fiscal year, reflecting higher trade receivables resulting
from gradual higher sales during the period.
Liabilities rose 17.8% to ¥522,596 million as a result of increases
in trade notes and accounts payable and bank borrowings reflecting a
gradual sales increase, and interest-bearing debt rose 9.3% to¥259,671 million. The net debt/equity ratio (net interest-bearing debt
as a percentage of equity) stood at 140% as of March 31, 2017.
Net assets grew 9.9% to ¥171,637 million. The expansion was
attributable mainly to the accumulation of retained earnings from net
income attributable to owners of the parent and an increase in thevaluation difference on available-for-sale securities, net of taxes.
Conversely, the equity ratio at March 31, 2017 fell to 24.5% from
25.8% a year ago, due to an increase in debt.
Cash FlowsNet cash provided by operating activities totaled ¥3,959 million, down
¥49,140 million from the previous consolidated fiscal year. This wasdue primarily to higher working capital requirements reflecting an
upturn in sales, compared with an improvement in working capitalturnover a year ago, which reflected decreases in trade notes andaccounts receivable and inventories accompanying lower sales affectedby a price decline in petroleum products.
Net cash used in investing activities amounted to ¥18,428 million,up ¥7,981 million from the previous consolidated fiscal year. This wasprimarily attributable to a decrease in proceeds from sale of property
and equipment, and loans to investment-related parties despite adecline in purchase of investment securities and property and equipment.
Net cash provided by financing activities amounted to ¥15,448
million, compared with net cash used of ¥41,752 million in theprevious consolidated fiscal year. This resulted primarily from netincreases in short-term loans payable and commercial paper due toan upturn in working capital requirements, compared to net
decreases in the items a year earlier.
Financial Policy
The Group depends primarily on bank borrowings to meet its working
capital requirements and to fund its investing and financing activities. As
part of its efforts to diversify funding sources to ensure stable liquidity
and agility in liquidity management, however, it may fund its activities by
issuing bonds and commercial paper in the capital markets from time totime. In addition, the Group has entered into a commitment line
agreement totaling ¥80,000 million with financial institutions.
The Group meets its working capital requirements principally
through long-term borrowings from banks to secure stable funds,
while short-term bank borrowings are used for day-to-day funding.
Short-term borrowings as at March 31, 2017 stood at ¥68,883 million,
mostly denominated in yen. The Group’s outstanding long-term loan
was ¥144,612 million, including the current portion of long-termloan of ¥38,380 million.
The Group issues bonds primarily to fund working capital. As of
March 31, 2017, bonds outstanding consisted of straight bonds
amounting to ¥40,098 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, 2017, 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 sustainablegrowth, the Group attempts to conduct efficient management tosecure 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,
Total Net Assets andEquity Ratio

including Japan, North America, Europe and Asia (especially East
Asia with China being the key market) with an accompanying
decrease in demand could have an adverse impact on the Group’sbusiness performance and financial condition.

Interest-Bearing Debt andNet Debt/Equity Ratio

BPS and EPS(Millions of yen)(%)

(Millions of yen)(%)

150,00030

250,000

250

120,000

24

200,000

200

90,00018

150,000

150

60,00012

100,000

100

30,000

6

50,000

50

0

0

0

13

14

15

Equity Ratio (right scale)

26 | HANWA ANNUAL REPORT 2017 |

16

17

0

13

14

15

16

Net Debt/Equity Ratio (right scale)

17

(Yen)

(Yen)

800

120

600

90

400

60

200

30

0

0

13
BPS (left scale)

14

15

16

EPS (right scale)17

Commodity Price Fluctuations
The Group holds inventories for distribution that include steel products,
metals and alloys, non-ferrous metals, foods and petroleum/chemical
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 of thefinancial 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, most 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 toOverseas Markets
The Group has stepped up efforts recently to enter Asian markets aswell as markets in the United States and Europe. The Group may
face a number of risks inherent in overseas business activities, suchas 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 imposedby the nations where it operates, including business and investment
approvals/licenses, export/import and sales restrictions on grounds ofnational security and otherwise, customs duties and other foreign trade
regulations. In addition, laws and regulations relevant to the Group’sbusiness activities, including those concerning trade, antimonopoly,
patent, taxation, foreign exchange control, food safety, environmentand recycling, must be fully observed. Such regulations may not only
limit the Group’s business activities but also entail a higher cost of doing
business as more funds may be needed to be disbursed to ensurecompliance. Therefore, the business performance 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 individuals’ 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 long-term expected
returns on plan assets, among others. If actual results differ fromsuch assumptions or if such assumptions are revised, the effect ofsuch difference or revision will be subsequently accrued andrecognized over a period of years, thus affecting costs and obligations to be recognized or posted over such years. Deteriorating
discount rates and poorer returns on plan assets resulting fromsuch changes could adversely affect the Group’s business performance and financial position.

| HANWA ANNUAL REPORT 2017 | 27

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
As at March 31, 2017 and 2016							Thousands of						Millions of yen
U.S. dollars (Note 1)

2017
Assets				

2016

2017

Current assets:							242,499¥
27,206 ¥25,805 $Cash and cash equivalents (Note 3)							Receivables:						
		Trade notes and accounts (Note 3):									87,281
9,792
8,733
Unconsolidated subsidiaries and affiliates 							2,656,761
298,062
251,419
			Other							
		274,026
30,743
16,141
Electronically recorded monetary claims (Note 3)									Loans:										32,142
3,606
2,409
Unconsolidated subsidiaries and affiliates 										Other		

13,691

196

122,034(2,977)(334)(287)
Allowance for doubtful receivables							

4,341
487
—
Securities (Notes 3 and 4)							989,750
111,040
106,051
Inventories (Note 6)							17,114
1,920
2,085
Deferred tax assets—current (Note 10) 							370,451
41,561
38,702Other current assets (Note 7)							4,793,422
537,774
451,254
			Total current assets											Investments and noncurrent receivables:						58,78645,062
Investment securities (Notes 3, 4 and 7)						523,986

122,453
13,73813,609Investments in and advances to unconsolidated subsidiaries and affiliates (Note 3)					Loans receivable (Note 3):						
		

5,000
561
—
Unconsolidated subsidiaries and affiliates 									Other

10,282

12,384

91,648105,063
11,787
14,107
Other investments and noncurrent receivables							(4,501)(505)(485)
Allowance for doubtful receivables 										843,649
94,64984,677
Total investments and noncurrent receivables																	Property and equipment (Note 7):					
264,195
29,64030,145Land (Note 11)							338,390
37,96438,829Buildings and structures							260,175
29,18928,555
Other								(332,472)(37,300)(35,966)
Accumulated depreciation							
			530,288
59,49361,563
Total property and equipment																
			Other assets:			
2,523
283
244
Deferred tax assets—noncurrent (Note 10)							18,1292,034
1,956
Intangibles and other assets 							
			20,6522,317
2,200
Total other assets 							¥ 694,233 ¥ 599,694 $ 6,188,011
			Total						
See accompanying Notes to Consolidated Financial Statements.

28 | HANWA ANNUAL REPORT 2017 |							Thousands of						Millions of yen
U.S. dollars (Note 1)

2017
Liabilities and Net Assets				

2017

2016

Current liabilities:							Short-term loans payable (Notes 3 and 8)						¥68,883 ¥56,412$

613,985

Commercial paper (Notes 3 and 8)							5,000—44,567Long-term debt due within one year (Notes 3, 7 and 8)							38,401
20,361
342,285
Trade notes and accounts payable (Note 3):						
		Unconsolidated subsidiaries and affiliates							
1,058
686
9,430

		Other 							190,932
149,172
1,701,863
Accrued bonuses to employees 							
2,306
2,193
20,554
Provision for product warranties 							
146
—
1,301
Provision for loss on business of subsidiaries and associates 							
512
512
4,564
Income taxes payable							
6,752
327
60,184
Other current liabilities 							45,06939,743401,721			Total current liabilities 							359,059
269,406
3,200,454										Noncurrent liabilities:							Long-term debt due after one year (Notes 3, 7 and 8)							146,309
159,518
1,304,118
Net defined benefit liabilities (Note 9)							
4,518
4,076
40,271
Deferred tax liabilities—noncurrent (Note 10)							
7,001
4,994
62,403
Other noncurrent liabilities 							
5,709
5,561
50,887
			Total noncurrent liabilities 							163,537
174,149
1,457,679										Contingent liabilities (Note 13)																Net assets (Note 11)							Shareholders’ equity:							Common stock: 						
		Authorized: 570,000,000 shares 								45,651
Issued: 211,663,200 shares 							45,651
406,908——
Capital surplus							51,049,808
117,778
Retained earnings							104,601(33,158)(3,720)Treasury stock, at cost: 8,464,473 shares in 2017 and 4,455,897 shares in 2016					(1,450)1,423,558
159,709
			Total shareholders’ equity							148,807
Accumulated other comprehensive income:						112,141
12,581
Valuation difference on available-for-sale securities, net of taxes						
8,026
1,266
142
Deferred gains or losses on hedges, net of taxes							(377)26,437
2,966
Land revaluation difference, net of taxes							
2,966
9,466
1,062
Foreign currency translation adjustments							1,843(53,811)(6,037)
Remeasurements of defined benefit plans (Note 9)							(6,398)
			

95,49910,714
Total accumulated other comprehensive income							6,06010,821
1,214
Non-controlling interests							1,2721,529,878
171,637
			Total net assets							156,139¥ 694,233 ¥ 599,694 $ 6,188,011
			Total							| HANWA ANNUAL REPORT 2017 | 29

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income
For the years ended March 31, 2017 and 2016							Thousands of						Millions of yen
U.S. dollars (Note 1)
				
2017

2017

2016

Net sales								¥ 1,514,038 ¥ 1,511,800 $ 13,495,303

Cost of sales 							12,920,252
1,455,240
1,449,523

Gross profit 							575,051
56,56064,515
Selling, general and administrative expenses 							366,245
38,382
41,089				Operating income							208,806
18,17823,426								Other income (expenses):						Interest and dividend income 							23,9332,080
2,685Interest expense							(22,756)(2,684)(2,553)(1,039)(2,540)(1,304)(88)
Gain on sales of property and equipment (Note 14)						13,075877

7,817

Foreign exchange loss

(285)

(784)

Share of profit (loss) of entities accounted for using equity method

Gain on bargain purchase						1,101—Gain on sales of investment securities

675

—

742

6,017

(261)
(227)
Loss on valuation of investment securities						(2,385)(815)(2,023)

Loss on sales of property and equipment (Note 15)(7,264)

Loss on valuation of investments in capital

(888)
—
—
Loss on liquidation of business (Note 16)							—(253)(2,255)
Loss on revision of retirement benefit plan							
(64)
—
—

Other, net							
193
(279)
(2,488)

Income before income taxes						
26,744
23,163
206,463
Income taxes (Note 10):						Current								
1,120
7,354
65,550
Deferred							
144
(626)
(5,580)

1,264
6,728
59,970Net income							25,480 $¥16,435 ¥146,493

Net income attributable to:							Owners of the parent
Non-controlling interests						
25,470 $¥16,364 ¥145,860						
10
71
633

Other comprehensive income (Note 17):						Valuation difference on available-for-sale securities, net of taxes						(3,597)
4,555
40,602
Deferred gains or losses on hedges, net of taxes							(1,903)519
4,626
Land revaluation difference, net of taxes							102
——Foreign currency translation adjustment

(724)

(675)

Remeasurements of defined benefit plans, net of taxes

361(2,738)

3,217

110
(154)
Total other comprehensive income 						(8,701)
4,557(1,374)(6,453)

Share of other comprehensive income of entities accounted for using equity method

40,618Comprehensive income			¥
20,992 ¥Comprehensive income attributable to:
Owners of the parent					¥21,018 ¥			
16,822 $187,343

Non-controlling interests

(26)
			

16,779$(43)

187,111(232)							U.S. dollars						
Yen
(Note 1)
					
2017

Net income per share 				¥80.18Cash dividends per share 				19.00See accompanying Notes to Consolidated Financial Statements.

30 | HANWA ANNUAL REPORT 2017 |

2017

2016

¥

122.92
18.00

$

0.715
0.169

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2017 and 2016
Thousands

Millions of yen

Number ofshares ofcommomstock

Commomstock

CapitalsurplusRetainedearnings

Valuationdifference on
Deferredavailable-for- gains or losses
sale securities, on hedges,
net of taxes
net of taxes

Landrevaluationdifference,
net of taxes

Foreign
Remeasurements
currencyof definedtranslation
benefit plans,adjustments
net of taxes

Balance at April 1, 2015..................... 211,663¥ 45,651¥

5 ¥

82,111 ¥ (1,446) ¥ 11,623 ¥ 1,526¥ 3,250¥ 2,356 ¥ (3,660) ¥ 1,334 ¥ 142,750

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

—

—

—

(3,212)

—

—

—

—

—

—

—

Change of scope of consolidation....

—

—

—

278

—

—

—

—

—

—

—

278

Change of scope of equity method...

—

—

—

(433)

—

—

—

—

—

—

—

(433)

Reversal of revaluation reserve
for land.......................................

—

—

—

387

—

—

—

—

—

—

—

387

Treasurystock

Noncontrollinginterests

Total(3,212)

Net income attributable to ownersof the parent...............................

—

—

—

25,470

—

—

—

—

—

—

—

25,470Purchases of treasury stock............

—

—

—

—

(4)

—

—

—

—

—

—

(4)

Purchase of shares of consolidated
subsidiaries..................................

—

—

—

—

—

—

—

—

—

—

—

—

Sales of shares of consolidated
subsidiaries..................................
Other changes...............................

—
—

—
—

—
—

—
—

—
—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity.....................

—

—

—

—

—

(3,597)(1,903)

(284)

(513)

(2,738)(62)(9,097)

Balance at March 31, 2016................ 211,663

45,651

5

104,601(1,450)

8,026

(377)

2,966

1,843

(6,398)1,272

156,139

Balance at April 1, 2016.................. 211,663

45,651

5

104,601(1,450)

8,026

(377)

2,966

1,843

(6,398)1,272

156,139

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

—

—

—

(3,901)

—

—

—

—

—

—

—

(3,901)

Change of scope of consolidation....

—

—

—

220

—

—

—

—

—

—

—

220

Change of scope of equity method...

—

—

—

701

—

—

—

—

—

—

—

701

Reversal of revaluation reserve
for land.......................................

—

—

—

—

—

—

—

—

—

—

—

—

Net income attributable to ownersof the parent...............................

—

—

—

16,364

—

—

—

—

—

—

—

16,364Purchases of treasury stock............

—

—

—

—

(2,270)

—

—

—

—

—

—

(2,270)Purchase of shares of consolidated
subsidiaries..................................

—

—

(5)

(202)

—

—

—

—

—

—

—

(207)

Sales of shares of consolidated
subsidiaries..................................

—

—

—

(0)

—

—

—

—

—

—

—

(0)

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

—

—

—

(5)

—

—

—

—

—

—

—

(5)

Net changes of items other thanshareholders’ equity.....................

—

—

—

—

—

4,555

(781)

361

(58)

4,596

Balance at March 31, 2017.............. 211,663¥ 45,651¥— ¥ 117,778 ¥ (3,720) ¥ 12,581 ¥Thousands
Number ofshares ofcommomstock

Balance at April 1, 2016..................

519

—

142

¥ 2,966¥ 1,062 ¥ (6,037) ¥ 1,214 ¥ 171,637

Thousands of U.S. dollars (Note 1)

Commomstock

211,663 $406,908

Land
revaluationdifference,
net of taxes

Foreign
Remeasurements
currencyof definedtranslation
benefit plans,adjustments
net of taxes

Noncontrollinginterests

45 $ 932,356 $(12,925) $ 71,539 $ (3,360) $26,437$16,427 $(57,028)$11,338 $1,391,737

Capitalsurplus$

Valuationdifference on
Deferredavailable-for- gains or losses
sale securities, on hedges,
net of taxes
net of taxes

Retainedearnings

Treasury
stock

Total

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

—

—

—

(34,771)

—

—

—

—

—

—

—

Change of scope of consolidation..

—

—

—

1,961

—

—

—

—

—

—

—

(34,771)
1,961

Change of scope of equity method.

—

—

—

6,248

—

—

—

—

—

—

—

6,248

Reversal of revaluation reserve
for land.......................................

—

—

—

—

—

—

—

—

—

—

—

—

Net income attributable to ownersof the parent...............................

—

—

—

145,860

—

—

—

—

—

—

—

145,860

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

—

—

—

—

(20,233)

—

—

—

—

—

—

(20,233)

Purchase of shares of consolidated
subsidiaries..................................

—

—

(45)

(1,801)

—

—

—

—

—

—

—

(1,846)

Sales of shares of consolidated
subsidiaries..................................
Other changes...............................

—
—

—
—

—
—

(0)
(45)

—
—

—
—

—
—

—
—

—
—

—
—

—
—

(0)
(45)

Net changes of items other thanshareholders’ equity.....................

—

—

—

—

—

40,602

4,626—(6,961)

3,217

(517)

40,967— $1,049,808 $(33,158) $112,141 $ 1,266$26,437

Balance at March 31, 2017..............

211,663 $406,908$$ 9,466 $(53,811) $10,821 $1,529,878

See accompanying Notes to Consolidated Financial Statements.

| HANWA ANNUAL REPORT 2017 | 31

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2017 and 2016							Thousands of						Millions of yen
U.S. dollars (Note 1)
				
2017

2016

Cash flows from operating activities:						Income before income taxes						¥23,163¥
26,744 $Adjustments to reconcile income before income taxes 						to net cash provided by (used in) operating activities:								Depreciation
3,971
4,344
		 Amortization of goodwill
218
232
		 Increase (decrease) in allowance for doubtful receivables
68(633)
		 Interest and dividend income(2,685)(2,080)		Interest expense
2,553
2,684
		 Share of (profit) loss of entities accounted for using equity method
88
1,304
		 Gain on sales of property and equipment(877)(13,075)
		 Gain on bargain purchase—(1,101)
		 Gain on sales of investment securities
(675)
(742)
		 Loss on sales of property and equipment
227
261
		 Loss on valuation of investment securities
815
2,385
		 Loss on valuation of investments in capital—
888
		 Loss on liquidation of business
253—
		 Loss on revision of retirement benefit plan—64
		 Decrease (increase) in trade receivables(60,932)
49,176
		 Decrease (increase) in inventories(3,992)
31,641
		 Increase (decrease) in trade notes and accounts payable		
39,538(38,116)
		 Increase (decrease) in net defined benefit liabilities						
959
4,603
		Other, net					
47(10,266)		Subtotal						2,73958,313
Cash flows during the year for:								 Interest and dividends received						
2,767
2,025
		Interest paid						(2,562)(2,703)
		 Income taxes (paid) refund					1,015(4,536)
Net cash provided by (used in) operating activities					3,95953,0992017

206,463

35,395
1,943
606(23,933)
22,756784(7,817)—(6,017)
2,023
7,264
—
2,255
—
(543,114)(35,582)
352,420
8,548
419
24,413
24,664(22,836)
9,047
35,288Cash flows from investing activities:						Payments into time deposits						(1,246)(1,547)(11,106)
Proceeds from withdrawal of time deposits
1,262
701
11,249Additions to property and equipment						(3,656)(6,360)(32,588)
Proceeds from sale of property and equipment						1,45420,682
12,960Additions to investment securities						(2,884)(13,392)(25,706)
Proceeds from sale and redemption of investment securities					
1,161
2,107
10,349Purchase of shares of subsidiaries resulting in change in scope of consolidation		—(2,165)—Net decrease (increase) in short-term loans receivable						(14,830)(430)(132,186)
Additions to long-term loans receivable						(808)(10,325)(7,202)
Proceeds from long-term loans receivable						
28
24
250
Other, net						
1,091
258
9,723
Net cash provided by (used in) investing activities						(18,428)(10,447)(164,257)
Cash flows from financing activities:				
Net increase (decrease) in short-term loans payable						12,344(14,065)
110,028
Net increase (decrease) in commercial paper						5,000(27,000)
44,567
Proceeds from long-term debt, issuance of bonds						25,29026,026
225,421
Repayments of long-term debt, redemption of bonds						(20,499)(23,160)(182,717)
Purchase of treasury shares						(2,271)(4)(20,242)
Payment of cash dividends					(3,899)(3,210)(34,754)
Dividends paid to non-controlling interests						
(29)
(35)
(258)
Payments from changes in ownership interests in subsidiaries that do not resultin change in scope of consolidation						(220)—(1,961)Other, net						
(268)
(304)
(2,389)Net cash provided by (used in) financing activities						15,448(41,752)
137,695
Effect of exchange rate changes on cash and cash equivalents					
(370)
(495)
(3,298)Net increase (decrease) in cash and cash equivalents						
609
405
5,428
Cash and cash equivalents at beginning of year						25,80524,515230,012
Increase in cash and cash equivalents from newly consolidated subsidiaries
792
885
7,059
Cash and cash equivalents at end of year					¥27,206¥25,805 $ 242,499
See accompanying Notes to Consolidated Financial Statements.

32 | HANWA ANNUAL REPORT 2017 |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, 2017, whichwas ¥112.19 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 30 (28 in 2016) significant subsidiaries (together, “theCompanies”). The accounts of certain consolidated subsidiaries havebeen included on the basis of fiscal periods that ended three months orless prior to March 31, and significant transactions after these year-ends
were appropriately adjusted in consolidation. Intercompany transactions
and accounts have been eliminated. All material unrealized profits
included in assets resulting from intercompany transactions are
eliminated.
Equity method
As of March 31, 2017, the Company had 42 unconsolidated subsidiaries and 17 affiliates. The equity method has been applied to theinvestments in 4 of the unconsolidated subsidiaries and 1 of the affiliates. Investments in the remaining unconsolidated subsidiaries andaffiliates are not accounted 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 the whole. Where the fiscal year-ends of the entities accounted
for by the equity method are different from that of the Company, theCompany mainly used their financial statements as of their fiscal yearends and for the years then ended for applying the equity method.
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 bysubsidiaries and affiliated companies which are not consolidated or
accounted for using the equity method are stated at moving averagecost. Available-for-sale securities with available fair values are stated atfair value. Valuation differences on available-for-sale securities arereported, net of applicable income taxes, as a separate component ofaccumulated other comprehensive income. Realized gains on the salesof 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 non-current 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. At the balance sheet date, bonus liabilities are estimated and accounted for on an accrual basis.
Provision for product warranties
Provision for product warranties is recorded to cover the payment of
product warranty costs with the potential to occur within a certain
period of time, based on the ratio of the warranty costs to sales in
the past.
Provision for loss on business of subsidiaries and associates
Provision for loss on business of subsidiaries and associates is recorded
to cover probable losses on business of subsidiaries and associates.
Income taxes
Income taxes comprise corporate tax, prefectural and municipal
inhabitants taxes and enterprise tax. The Companies recognize the| HANWA ANNUAL REPORT 2017 | 33

tax 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 benefit formula.
2. Treatment of unrecognized actuarial differences and past service costs
Past service costs are posted in expenses based on the straightline method for a fixed period of years within the averageremaining service years of employees when costs accrue fromtheir service.
Actuarial differences are posted in expenses mainly after the
consolidated fiscal year following their accrual based on the straightline method for a fixed period of 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 subsidiaries adopt a simplified method that regards
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 statementsof overseas consolidated subsidiaries are translated at average rates,
except for transactions with the Company, which are translated at
rates used by the Company.
The Companies report foreign currency translation adjustments inaccumulated 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.
Derivatives and hedge accounting
The Company states derivative financial instruments at fair value andrecognizes 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 meetcertain hedging criteria, the Company defers the recognition of gain

34 | HANWA ANNUAL REPORT 2017 |or loss resulting from the changes in the fair value of the derivative
financial instruments until the related gain or loss on the hedged
items are recognized. For certain overseas consolidated subsidiaries,
fair value hedge accounting is applied.
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 intereston the assets or liabilities for which the swap agreement was executed.
The following summarizes hedging derivative financial instruments
used by 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
cumulative changes in cash flows or changes in the fair value of thehedged items and the corresponding changes in the hedging derivative instruments.
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 based on
the weighted average number of shares outstanding during eachperiod. 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
Due to amendments to the Japanese Corporation Tax Act, theCompany and its domestic subsidiaries adopted “Practical Solution
on a change in depreciation method due to Tax Reform 2016” (Practice
Issue Task Force No.32, June 17, 2016) from the current fiscal year
and changed the depreciation method for buildings, facilities
attached to buildings and structures, which were acquired since April
1, 2016, from the declining balance method to the straight line
method.
The impact of this change on the consolidated financial statements has been immaterial.
Additional Information
The Company and its domestic subsidiaries adopted “Revised
Implementation Guidance on Recoverability of Deferred Tax Assets”(ASBJ Guidance No. 26, March 28, 2016) from the current fiscal year.

3. Financial instruments
At March 31, 2017 and 2016, 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 and electronically recordedmonetary claims are exposed to credit risk of customers. Some ofthem are denominated in foreign currencies and exposed to theforeign exchange rate fluctuation risk as well.
Securities mainly consist 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 suppliers of theCompany and are exposed to credit risk.
Foreign currency denominated trade notes and accounts payable
are exposed 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,
electronically recorded monetary claims and long-term loans receivable
are exposed, the Company sets a credit limit amount for each business
partner and manages the outstanding balance in accordance with the“Credit administrative provisions” while monitoring the credit status ona regular basis. Furthermore, the Company is committed to reducing
foreign exchange rate fluctuation risk to which trade notes and accounts
receivable, electronically recorded monetary claims and trade notes

and accounts payable are exposed by means of derivatives trading.
Because price fluctuation risks associated with securities mainly
affect 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, 2017 and 2016 were as follows:| HANWA ANNUAL REPORT 2017 | 35

March31, 2017
					Book value

Millions of yen 			Fair value

DifferenceBook value

Thousands of U.S. dollars
Fair value

Difference(1) Cash and cash equivalents¥ 27,206¥ 27,206¥—$ 242,499$ 242,499$—(2) Trade notes and accounts receivable
307,854 			
2,744,042
		Allowance for doubtful receivables(268) 			(2,389)
				Net		307,586
307,586—
2,741,653
2,741,653—(3) Electronically recorded monetary claims
30,743 			
274,026
		
Allowance for doubtful receivables(30) 			(267)				Net		30,71330,713—
273,759
273,759—(4) Securities						a) Equity securities issued by affiliated companies
2,671
1,051
(1,620)23,808
9,368(14,440)b) Available-for-sale securities
38,621
38,621—
344,246
344,246—
10,843
			
96,648		(5) Long-term loans receivable
Allowance for doubtful receivables(11) 			(98) 				Net		10,832
10,832—96,55096,550—Total assets¥ 417,629¥ 416,009¥ (1,620) $3,722,515$3,708,075$ (14,440)(1) Short-term loans payable——¥ 68,883¥ 68,883¥$ 613,985$ 613,985$(2) Commercial paper
5,000
5,000
—
44,56744,567—(3) Long-term debt due within one year
38,401
38,401—
342,285
342,285—
191,990
191,990—
1,711,293
1,711,293—(4) Trade notes and accounts payable(5) Long-term debt due after one year
146,309
146,588(279)
1,304,118
1,306,605(2,487)(279) $4,016,248
Total liabilities¥ 450,583¥ 450,862¥$4,018,735$(2,487)
Derivatives:						
——Hedge accounting not applied¥ 10,444¥ 10,444¥$ 93,092$ 93,092$
Hedge accounting applied
(49)
(640)
(591)
(437)
(5,705)(5,268)(591) $ 92,655
Total derivatives¥ 10,395¥
9,804¥$ 87,387$(5,268)March 31, 2016

					Book value

Millions of yen 			Fair value

Difference(1) Cash and cash equivalents¥ 25,805¥ 25,805¥—(2) Trade notes and accounts receivable
260,152
					
Allowance for doubtful receivables(243) 								 Net		259,909259,909—(3) Electronically recorded monetary claims
16,141					
Allowance for doubtful receivables(17) 								 Net		16,124
16,124—(4) Securities						a) Equity securities issued by affiliated companies
2,894
826
(2,068)b) Available-for-sale securities
31,66931,669—(5) Long-term loans receivable
12,384						
Allowance for doubtful receivables(12) 								 Net		12,372
12,372—
Total assets¥ 348,773¥ 346,705¥(2,068)(1) Short-term loans payable¥ 56,412¥ 56,412¥—(2) Long-term debt due within one year
20,361
20,372(11)(3) Trade notes and accounts payable
149,858
149,858—(4) Long-term debt due after one year
159,518
159,983(465)
Total liabilities¥ 386,149¥ 386,625¥(476)
Derivatives:						Hedge accounting not applied
¥
2,124
¥
2,124
¥
—
Hedge accounting applied(486)(1,329)(843)
Total derivatives
¥
1,638
¥
795
¥
(843)

Allowance for doubtful receivables recognized in trade notes and accounts receivable, electronically recorded monetary claims and long-term loans
receivable was offset.
Derivative assets and liabilities were on net basis.
36 | HANWA ANNUAL REPORT 2017 |Basis of determining the fair value of financial instruments is asfollows:
Cash and cash equivalents, Trade notes and accounts receivable,
and Electronically recorded monetary claims
The book values of cash and cash equivalents, trade notes and accounts
receivable, and electronically recorded monetary claims approximate
fair value due to their short maturities.
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, 2017 and 2016:							Thousands of					Millions of yen
U.S. dollars
					
2017

			

		

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

Book value¥

11,067

¥

2016

2017

Book value

Book value

10,715$98,645(2) Available-for-sale securities:							Unlisted stocks				
¥
4,190
¥
2,808
$ 37,347
Unlisted foreign stocks				
14,051
8,160
125,243
Unlisted foreign convertible bonds				
2,406
2,417
21,446
Investment in limited partnerships				5845
Total				¥ 20,652¥ 13,393$ 184,081

The maturities of receivables and securities with maturities outstanding at March 31, 2017 were as follows:			Year ending March 31

											2018							Cash and cash equivalents		 ¥ 27,206¥
Trade notes and accounts receivable		
307,854
Electronically recorded monetary claims		
30,743487
Available-for-sale securities with maturity dates		Long-term loans receivable		—Total			¥ 366,290
¥
			

		

																2018

Cash and cash equivalents		 $ 242,499$
Trade notes and accounts receivable		
2,744,042
Electronically recorded monetary claims		
274,026
Available-for-sale securities with maturity dates		
4,341Long-term loans receivable		—Total			$3,264,908$

Millions of yen
From 2019 		
to 2022		

—
—
—
1,925
8,560
10,485

From 2023		
to 2027		

¥

¥

—
—
—
—
1,439
1,439

Thereafter		

¥

¥

—
—
—
—
3
3

Thousands of U.S. dollars
From 2019 		
to 2022		

———
17,15876,29993,457

From 2023		
to 2027		

$

$

—
—
—
—
12,826
12,826

Thereafter		

$

$

—
—
—
—
27
27

Long-term loans receivable of ¥841 million ($7,496 thousand) were excluded from the above table since due date for the redemption had not
yet been determined.

| HANWA ANNUAL REPORT 2017 | 37

4. Securities(A) The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available market
values as of March 31, 2017 and 2016:
March 31, 2017					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¥

33,861¥

21,049$ 114,199$

301,818$ 187,619

6,884

¥

4,760

¥

(2,124)$$42,428$ (18,932)

			61,360Millions of yen

Acquisition cost

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

Difference

12,812

March 31, 2016
		Millions of yen 			Acquisition cost

Book value

Difference

11,518¥26,171¥

14,653

8,532

¥

5,498

¥

(3,034)(B) The following tables summarize sales of available-for-sale securities in the years ended March 31, 2017 and 2016:
March 31, 2017

			Millions of yen 					Proceeds from sales

Gains on sales

Equity securities

¥

¥

1,160

March 31, 2016

			

675

¥

—

Thousands of U.S. dollars

Proceeds from sales$

10,340Gains on sales

$

6,017

Losses on sales$—

Millions of yen

		Proceeds from sales

Gains on sales

Equity securities

¥

¥

706

Losses on sales

499

Losses on sales¥

5(C) The loss resulting from the valuation of the securities in the years ended March 31, 2017 and 2016 was as follows:							Thousands of					Millions of yen
U.S. dollars
					
2017

Securities in subsidiaries and affiliates				¥757
Other securities				
58
Total				¥81538 | HANWA ANNUAL REPORT 2017 |

2017

2016

¥
¥

644
1,741
2,385

$
$

6,747
517
7,264

5. Derivatives(A) The following tables summarize fair value information as of March 31, 2017 and 2016 for the derivatives to which hedge accounting
has not been applied:
March 31, 2017
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				 ¥ 71,334 ¥— ¥(348) ¥
(348) $ 635,832 $— $ (3,102) $		Other currencies
		
787
—
(2)
(2)
7,015
—
(18)
Buying:					U.S. dollars		
		
7,417
—
38
38
66,111—339
		Other currencies
		
1,011
—
(4)
(4)
9,011
—
(36)
Currency swap agreements:
Japanese yen received for U.S. dollars		
12,088
—
(312)
(312)
107,746—(2,781)		Total 							¥(628) 				 $Commodity related

			
				
				

Contract ornotional amount(3,102)
(18)
339
(36)
(2,781)(5,598)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				 ¥3,230 ¥
— ¥
67 ¥
67 $
28,790 $— $597 $		Buying
			
2,361
—
31
31
21,045—276
Non-ferrous metals:					Selling		
		
7,878
—
(193)
(193)
70,220—(1,720)		Buying
			
4,106
—
(37)
(37)
36,599—(330)
Commodity swap agreements:
Petroleum:
		
139
—
(2)
(2)
1,239
—
(18)
		Selling		
			
1,107
—
17
17
9,867
—
152
		Buying		
Total 							¥(117) 				 $

597276(1,720)
(330)

(18)
152
(1,043)

Derivatives in which valuation gains or losses are attributable to counterparties based on the contracts were as follows:
			
				
				

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

Forwards:
Non-ferrous metals:		 				Selling				 ¥ 112,677 ¥— ¥ 11,661 ¥ 11,661 $ 1,004,341 $— $ 103,940 $ 103,940
		Buying			23,336
—
(472)
(472)
208,004—(4,207)(4,207)
		Total 							¥ 11,189				$ 99,733

The derivatives above are included in “Derivatives: Hedge accounting not applied” in Note “3. Financial instruments”.

| HANWA ANNUAL REPORT 2017 | 39

March 31, 2016
Currency
related
			
				
				

Contract ornotional amountMillions of yen 		Due after		Net recognized
one year
Fair value
gain or loss

Foreign exchange forward contracts:
Selling:		 				U.S. dollars				 ¥ 49,271 ¥— ¥ 1,678 ¥1,678		Other currencies			
676
—
(9)
(9)
Buying:				
		U.S. dollars				
12,878
—
(453)
(453)
		Other currencies
		
1,172
—
(5)
(5)
Currency swap agreements:
Japanese yen received for U.S. dollars		
13,217—799
799
		Total 							¥2,010 		Commodity
related
			
				
				

Contract ornotional amountMillions of yen 		Due after		Net recognized
one year
Fair value
gain or loss

Forwards:
Petroleum:						Selling		
¥1,751 ¥— ¥43 ¥43
		Buying				
589
—
24
24
Non-ferrous metals:						Selling				
19,125
—
(139)
(139)
		Buying			
13,053—200
200
Commodity swap agreements:
Petroleum:
395
—
2
2
		
		Selling				
			
423
—
(17)
(17) 				Buying		
Total 							¥113 				(B) The following tables summarize fair value information as of March 31, 2017 and 2016 for the derivatives to which hedge accounting
was applied:
March 31, 2017
Interest rate related

			
		
		

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

40,337

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

40 | HANWA ANNUAL REPORT 2017 |Millions of yen 			Due after
one year¥

87,88150,929¥(591)

Due after
one year$ 359,542$ 318,540

Millions of yen 			Contract ornotional amount¥

35,737

Fair value

Due after
one year¥—
254

Fair value

¥

133
(182)

Thousands of U.S. dollars

Contract ornotional amount$(5,268)

Thousands of U.S. dollars

Contract ornotional amount$ 783,323
453,953

Fair value

Due after
one year

$

—
2,264

Fair value

$

1,185
(1,622)

March 31, 2016
Interest rate related

			
		
		

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

39,947

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

Millions of yen 			Due after
one year¥

16,27813,465¥(842)

Millions of yen 			Contract ornotional amount¥39,947

		Fair value

Due after
one year

¥

—
511

		
Fair value

¥

279
(765)

6. Inventories
Inventories at March 31, 2017 and 2016 consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2017

Merchandise and finished products				¥ 101,650
Work-in-process				
1,918
Raw materials and supplies 				7,472Total				¥ 111,040

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

2016

2017

96,0832,090
7,878¥ 106,051$ 906,053
17,096
66,601$ 989,750¥

loss were a net gain of ¥655 million (gain of $5,838 thousand) anda net gain of ¥439 million for the years ended March 31, 2017 and2016, respectively.

7. Pledged assets
At March 31, 2017 and 2016, assets pledged as collateral for loans payable in the amount of ¥932 million ($8,307 thousand) and ¥2,579
million, respectively, and for guaranty deposits, and for loans of third parties were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2017

For loans payable:				
Other current assets 				
¥50Buildings and structures, net of accumulated depreciation 				
280Land 				1,112Total				¥1,442For guaranty deposits:				
Other current assets				¥13
Investment securities 				5,299Total				¥5,312For loans of third parties:				Investment securities 				¥1,705Total				
¥
1,705

2017

2016

¥

¥

50
296
1,113
1,459

$

$

445
2,496
9,912
12,853

$

¥

13
2,489
2,502

$

116
47,232
47,348

¥
¥

—
—

$
$

15,197
15,197¥| HANWA ANNUAL REPORT 2017 | 41

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, 2017 and 2016 was 1.1% and 1.3%,
respectively, regardless of borrowing currencies though the range ofthe interest rates varies by borrowing currency. There was an
outstanding balance of ¥68,883 million ($613,985 thousand) and¥56,412 million at March 31, 2017 and 2016, respectively.

The Company has entered into a yen denominated domestic
commercial paper program. There was an outstanding balance of¥5,000 million ($44,567 thousand) and zero at March 31, 2017 and2016, respectively.

Bonds at March 31, 2017 and 2016, consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2017

2016

Issued in 2013, 0.74% unsecured straight bonds, due 2018			
¥Issued in 2013, 0.36% unsecured straight bonds, due 2016				
Issued in 2014, 0.44% unsecured straight bonds, due 2019				Issued in 2015, 0.43% unsecured straight bonds, due 2020				
Issued in 2016, 0.29% unsecured straight bonds, due 2021				Issued in 2011, 1.01% unsecured straight bonds, due 2016				
Issued in 2011, unsecured floating rate bonds, due 2016				
Issued in 2014, unsecured floating rate bonds, due 2021				
Total
		
¥

10,000$ 89,135
10,000 		—
10,000 		 89,135
10,000 		 89,135—		 89,135
8 		
—
10 		
—
119 		
871
40,137$ 357,411

10,000¥— 		
10,000 		
10,000 		
10,000 		
— 		
— 		
98 		
40,098¥2017

Long-term loans payable at March 31, 2017 and 2016, consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2017

Loans from banks with weighted average interest rates of 0.6% and 0.7%
at March 31, 2017 and 2016, respectively, maturing serially through 2024		
Less amounts due within one year							¥ 144,612
38,380¥ 106,232

2016

2017

¥ 139,743$1,288,992
10,322 		 342,098¥ 129,421$ 946,894

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 loans payable outstanding at March 31, 2017 were as follows:
Years ending March 31																			Thousands of							Millions of yen
U.S. dollar

2018					¥ 38,380$ 342,098
2019					43,858
390,9262020					27,089241,456
11,280100,5442021						2022					9,939
88,591
Thereafter						14,066125,377
Total					¥ 144,612$ 1,288,992

42 | HANWA ANNUAL REPORT 2017 |9. Employees’ severance and retirement benefits(A) Overview of retirement benefit system adopted
To provide retirement benefits for employees, the Company and its
consolidated subsidiaries have adopted funded and unfunded 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 of service.

In calculating pension benefits, the Company uses a life pension systemwith a guarantee period of 20 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 subsidiaries have, net defined
benefit liability and retirement benefit expenses are mainly calculated
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
					
2017

2016

2017

Balance at beginning of year			¥ 25,688¥ 23,650$ 228,969
Service cost				 1,150 		 1,062 		 10,250
Interest cost			
97
325
865
Actuarial loss (gain)				
277
4,788 		2,469Benefits paid				(786)(731) 		 (7,006)
Decrease by partial termination of defined benefit plans				—(3,415)		
—Other		
13 		
9		
116
Balance at end of year		¥ 26,439¥ 25,688$ 235,663(2) Movements in plan assets, except plans applying the simplified method							Thousands of					Millions of yen
U.S. dollars
					
2017

Balance at beginning of year			
Expected return on plan assets			
Actuarial gain (loss)			
Contributions paid by the employer		
Benefits paid		
Decrease by partial termination of defined benefit plans		
Balance at end of year		¥¥

22,099¥663(321)767 		
(785) 		
—22,423
¥

2016

2017

24,661$ 196,978740 		
5,910
(1,236) 		
(2,861)916		 6,837(730)		 (6,998)(2,252)		
—22,099$ 199,866(3) Movements in liability for defined benefits for plans applying the simplified method							Thousands of					Millions of yen
U.S. dollars
					
2017

Balance at beginning of year			
Defined benefit costs			
Benefits paid			
Contributions paid by the employer		
Other		Balance at end of year		

¥

¥

487
¥
104
(63)
(20) 		
(5) 		
503
¥

2016

2017

412
$
4,341
87 		
927
(55) 		
(562)(21)		 (178)
64		
(45)
487
$
4,483

| HANWA ANNUAL REPORT 2017 | 43

(4) Reconciliation from the balances of defined benefit obligations and plan assets and the liability (asset) for retirement benefits							Thousands of					Millions of yen
U.S. dollars
					
2017

Funded defined benefit obligations			
Plan assets							
Unfunded defined benefit obligations		
Total net liability (asset) for defined benefits at end of year		Net defined benefit liability		Net defined benefit asset		
Total net liability (asset) for defined benefits at end of year		

2017

2016

¥

26,680¥ 25,925$ 237,811(22,628)(22,293) 		 (201,694)
4,052
3,632 		36,117466444 		
4,154
4,518
4,076 		40,271
4,518 		4,076 		40,271
— 		
—		
—
¥
4,518
¥
4,076
$ 40,271(5) Retirement benefit costs							Thousands of					Millions of yen
U.S. dollars
					
2017

¥

2017

2016

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		

¥

1,150
¥
97
(663)
1,056
65
104 		
(5) 		
1,804¥

Loss on revision of retirement benefit plan		

¥

—

1,062
$ 10,250
325 		
865(740) 		(5,910)909 		
9,413
81 		
579
87		 927(16)		
(44)
1,708
$ 16,080

¥

64

$

—

(6) Remeasurements of defined benefit plans in other comprehensive income (before applicable tax effects)							Thousands of					Millions of yen
U.S. dollars
					
2017

Past service costs			
¥Actuarial gains and losses			
Total		 ¥

65
458
523

2016

¥
¥

107
$
(3,913) 		
(3,806) $

2017

579
4,083
4,662

(7) Remeasurements of defined benefit plans in accumulated other comprehensive income (before applicable tax effects)							Thousands of					Millions of yen
U.S. dollars
					
2017

Past service costs that are yet to be recognized			
Actuarial gains and losses that are yet to be recognized			
Total balance at end of year			

44 | HANWA ANNUAL REPORT 2017 |

¥
¥

131
8,574
8,705

2016

¥
¥

196
$
9,033 		
9,229
$

2017

1,168
76,424
77,592

(8) Breakdown of plan assets							
				

2017

2016

Bonds
15.7%
Equity securities		
12.0
Cash and cash equivalents		
4.6
General account assets			
24.0
Other 			43.7Total			100.0%

18.4%
11.2
5.6
29.4
35.4
100.0%“Other” consists of investments mainly in hedge funds investing in domestic and foreign equities and bonds,
foreign exchange, and various futures and derivatives.
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.
(9)
Principal actuarial assumptions											

2017

Discount rateLong-term expected rate of return		Expected salary increase rate		

0.4%
3.0
3.4

(C) Defined contribution plans
The Companies were required to contribute ¥239 million ($2,130
thousand) and ¥144 million to the defined contribution plan(including corporate pension fund plans under the multi-employer

2016

0.4%
3.0
3.4

pension system in which accounting treatment is implemented in
the same way as the defined contribution plan) for the years ended
March 31, 2017 and 2016, respectively.

(D) Multi-employer pension plans				Year ended March 31, 2017						Description is omitted because all the multi-employer pension plans, in which certain subsidiaries had participated, dissolved by the end of
March, 2017 with approval of the Minister of Health, Labour and Welfare. Additional expenses resulting from the dissolution of the pension
plans are not expected to accrue.																				Year ended March 31, 2016										Multi-employer pension plans under which required contributions were accounted for as retirement benefit expenses. Items relating to overall
status of pension plan reserves at March 31, 2015 (as of the most recently available year-end date of the pension fund) were as follows:
Millions of yen
2015

Fair value of plan assets
Benefit obligation based on pension plan finance calculation
Balance at end of year

The principle factors relating to the balance were the prior service costsof ¥9,871 million as at March 31, 2015, based on pension plan financecalculations. Amortization of unamortized prior service costs was
conducted using the straight-line method over a period of 20 years.

¥

88,297
101,987¥ (13,690)

Percentage of total pension plan accounted for by contributionsof the Group at March 31, 2015 was 0.90%. The percentage does
not match the actual amount contributed by the Group.

| HANWA ANNUAL REPORT 2017 | 45

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 30.9% and 33.1% for the years ended March 31,2017 and 2016 respectively.

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 years ended
March 31, 2017 and 2016.

					
2017

2016

30.9%
0.8
(2.3)
(0.5)
0.2
29.1%

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					

33.1%
(1.1)
(24.0)
0.1
(3.4)
4.7%

The significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2017 and 2016 were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2017

2017

2016

Deferred tax assets:
Temporary differences resulting from the merger with consolidated subsidiaries		
¥2,732¥ 3,764$ 24,352
Loss on valuation of investment securities, currently not deductible			
1,891
3,221
16,855Net defined benefit liabilities				
1,346
1,220
11,998Loss on sale-repurchase agreements of land				
1,294
1,294
11,534
Tax losses carried forward				
1,076
1,081
9,591
Loss on impairment of non-current assets				
796
877
7,095
Accrued bonuses to employees				
706
688
6,293
Land revaluation difference, net of taxes unrealized loss				
226
226
2,014
Other				
3,806
4,028
33,924
Total deferred tax assets				
13,873
16,399123,656
Valuation allowance				(8,840)(11,062)(78,795)
Net deferred tax assets				
5,033
5,337
44,861
Deferred tax liabilities:						Valuation difference on available-for-sale securities				
5,693
3,367
50,744
Land revaluation difference, net of taxes unrealized gain				
1,635
1,635
14,573
Other				
2,502
3,000
22,302
Total deferred tax liabilities				
9,830
8,002
87,619Net deferred tax liabilities			¥ (4,797)¥ (2,665)$ (42,758)

Deferred tax assets and deferred tax liabilities were included in the consolidated balance sheets at March 31, 2017 and 2016, respectively,
as follows:							Thousands of					Millions of yen
U.S. dollars
					
2017

Current assets: Deferred tax assets				
Other assets: Deferred tax assets				Current liabilities: Other current liabilities (Deferred tax liabilities)				
Noncurrent liabilities: Deferred tax liabilities				

Revisions to the amounts of deferred tax assets and liabilities
due to changes in the tax rates of the Japanese Corporation Tax
Since amendments to the Japanese tax regulations were enacted
into law on November 18, 2016, the statutory tax rate utilized for

46 | HANWA ANNUAL REPORT 2017 |

¥

1,920
283
0
7,001

2017

2016

¥

2,085
244
0
4,994

$

17,1142,523
062,403the measurement of deferred tax assets and liabilities in the current
fiscal year changed from the previous year.
The impact of this change on the financial statements has
been immaterial.

11. Net assets
Net assets comprise three subsections, which are shareholders’equity, accumulated other comprehensive income and noncontrolling interests.
Under the Japanese Companies Act (“the Act”), the entire
amount of the issue price of shares is required to be accounted for ascommon stock, although a company may, by resolution of its Boardof Directors, account for an amount not exceeding one-half of theissue price of the new shares as additional paid-in capital.
Under the Act, in cases in which a dividend distribution of surplus
is made, the smaller of an amount equal 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 asadditional paid-in capital or legal earnings reserve. Legal earnings
reserve and additional paid-in capital are included in retained earnings and legal capital surplus, respectively, in the accompanying
consolidated balance sheets.
Under the Act, legal earnings reserve and additional paid-in
capital are able to eliminate or reduce a deficit by a resolution of theshareholders’ meeting.
Under the Act, 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 statementsof the Company in accordance with Japanese laws and regulations.
At the annual shareholders’ meeting held on June 29, 2017, theshareholders approved cash dividends of ¥10.0 per share ($0.09)
amounting to ¥2,032 million ($18,112 thousand). This appropriation
had not been accrued in the consolidated financial statements as ofMarch 31, 2017. Such appropriations are recognized in the period inwhich 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 revaluationdifference in a separate component of accumulated other comprehensive
income in the consolidated balance sheets until realized. The amounts areshown 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, 2017, the carrying amount of the land after theabove one-time revaluation exceeded the market value by ¥954 million($8,503 thousand).

12. Leases
Operating leases 									As Lessee 									
Obligations under noncancelable operating leases as of March 31, 2017 and 2016 were as follows:												Thousands of
				
			
		
Millions of yen
U.S. dollars
					
2017

Due within one year
			
¥
530
Due after one year				
7,834
Total				
¥
8,364

2017

2016

¥
¥

528
8,342
8,870

$
$

4,724
69,82874,552

13. Contingent liabilities
At March 31, 2017 and 2016, the Companies were contingently liable as follows:							Thousands of					Millions of yen
U.S. dollars
					
2017

Export letters of credit and trade notes discounted
			Trade notes endorsed				
Guarantees of indebtedness				

¥

6,071
195
2,077

2017

2016

¥

4,320
258
4,231

$

54,114
1,738
18,513| HANWA ANNUAL REPORT 2017 | 47

14. Gain on sales of property and equipment
The following table summarizes gain on sales of property and equipment in the years ended March 31, 2017 and 2016:							Thousands of					Millions of yen
U.S. dollars
					
2017

2017

2016

Land				
¥870Other 				7Total				
¥
877

¥
¥

13,066
9
13,075

$

7,755
62
7,817

$

15. Loss on sales of property and equipment
The following table summarizes loss on sales of property and equipment in the years ended March 31, 2017 and 2016:							Thousands of					Millions of yen
U.S. dollars
					
2017

2017

2016

Buildings and structures				¥227
Other 				—Total				
¥
227

¥
¥

257
4
261

$

2,023
—
2,023

$

16. Loss on liquidation of businessYear ended March 31, 2017
Due to the closing of some business facilities, the Companies recordeda loss on liquidation of business of ¥253 million ($2,255 thousand).
The loss consisted of loss on impairment of non-current assetsof ¥111 million ($989 thousand), estimated removal cost of ¥110

million ($980 thousand), loss on disposal of property and equipmentof ¥20 million ($178 thousand), and other costs of ¥12 million($108 thousand).

Details of the loss on impairment of non-current assets were as follows:							Thousands of					Millions of yen
		
U.S. dollars
Location

Description		

Buildings and structures

Sodegaura, Chiba
Sodegaura yard			¥
Total			 ¥The Companies reduced the book value of the non-current assetsthat were impaired to the memorandum values.
For the purpose of recognition and measurement, the Companies
grouped the non-current assets based principally on the location of

48 | HANWA ANNUAL REPORT 2017 |

111
111

Other

¥
¥

Total

0
0

¥
¥

111
111

Total

$
$

989
989

the business entity to which the assets belonged, and each idle
asset was treated as a separate property.

17. Other comprehensive income
Years ended March 31, 2017 and 2016
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

					
2017

Valuation difference on available-for-sale securities, net of taxes:				
Increase (decrease) during the year			¥
7,542
Reclassification adjustments 			(663)
Sub-total, before tax				6,879
Tax expense (benefit)				
2,324
Sub-total, net of tax				
4,555
Deferred gains or losses on hedges, net of taxes:				
Increase (decrease) during the year			(287)
Reclassification adjustments 			
1,037
Sub-total, before tax				
750
Tax expense (benefit)				
231
Sub-total, net of tax				
519
Land revaluation difference, net of taxes:				
Increase (decrease) during the year			—
Reclassification adjustments 			—Sub-total, before tax				—Tax expense (benefit)				
—Sub-total, net of tax				—
Foreign currency translation adjustments:
Increase (decrease) during the year			
(724)
Reclassification adjustments 			—Sub-total, before tax				(724)
Tax expense (benefit)				
—Sub-total, net of tax				(724)
Remeasurements of defined benefit plans, net of taxes:
Increase (decrease) during the year			(602)
Reclassification adjustments 			
1,125
Sub-total, before tax				523
Tax expense (benefit)				
162
Sub-total, net of tax				
361
Share of other comprehensive income of entities accounted for using equity method:
Increase (decrease) during the year			
(154)
Total other comprehensive income			¥
4,557

Thousands of
U.S. dollars
2017

2016

¥

¥

(6,227)662(5,565)(1,968)(3,597)$67,226		
(5,910)61,316
20,71440,602592(3,417)(2,825)(922)(1,903)(2,558)
9,243
6,685
2,059
4,626

—
—
—
(102)
102

—
—
—
—
—

(675)
—
(675)
—
(675)

(6,453)—(6,453)—(6,453)(6,024)
2,218(3,806)(1,068)(2,738)(5,366)
10,028
4,662
1,445
3,217

110
(8,701)$(1,374)
40,61818. Cash flow information
Significant non-cash transactions in the years ended March 31, 2017 and 2016 were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2017

Conversion of long-term loans receivable to investment securities				¥
3,682
Total				
¥
3,682

2017

2016

¥
¥

—
—

$
$

32,81932,819| HANWA ANNUAL REPORT 2017 | 49

19. Investment and rental properties
Information about fair value of investment and rental properties is disclosed as follows:
The Group owns office buildings, logistics centers and other properties for rent in Tokyo and other cities.
Book value, annual net increase and decrease amount and fair value of investment and rental properties were as follows:Year ended March 31, 2017		
The description on the book value, annual net increase and decrease amount and fair value of investment and rental properties is omitted
because it is immaterial.
Year ended March 31, 2016
Millions of yen
Book value
Balance at beginning 		
of year
Net increase

¥

4,014

¥

3,295

Balance at endof year¥

7,309

Fair value

¥

7,099

Book value is net of accumulated depreciation and impairment loss.
Fair values of these properties are measured mainly by the Company, based on “Standard for real-estate appraisal.”Rental profit from these properties was ¥381 million and was included in gross profit.

20. 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 and assesses
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 6 reportablesegments are “steel business,” “metal and alloy business,” “non-ferrous
metal business,” “food business,” “petroleum and chemical business,”and “overseas sales subsidiaries.
The main products and services that fall under these reportablesegments are listed as follows. (Shown in parentheses are contentsof services.)50 | HANWA ANNUAL REPORT 2017 |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, silicon, manganese, steel alloys
Non-ferrous metals: Aluminum, copper, and zinc (recycling business)
Foods: Seafoods
Petroleum and chemicals: Petroleum products, industrial chemicals,
and chemicals
Overseas sales subsidiaries: (Trading of various goods and related
business activities)
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.

Net sales, profits, assets and others by reportable segment for the year ended March 31, 2017 were as follows:Year ended March 31, 2017

				
		

Millions of yen

Reportable segment

			
		
Steel

Metalsand alloys

Non-ferrous		
metalsFoods

Petroleum
Overseas		
and chemicals sales subsidiaries
Total

Other
business

Total

Adjustment

Consolidated

Net sales		Intersegment		
Total		

¥ 775,726 ¥ 131,414 ¥ 77,674
11,1663,211
1,533¥ 786,892 ¥ 134,625 ¥ 79,207¥ 88,671 ¥ 257,165 ¥ 111,994 ¥ 1,442,644
340
7,300
62,287
85,837¥ 89,011 ¥ 264,465 ¥ 174,281 ¥ 1,528,481¥ 71,394 ¥ 1,514,038 ¥— ¥ 1,514,038
1,661
87,498(87,498)—¥ 73,055 ¥ 1,601,536 ¥ (87,498) ¥ 1,514,038

Segment income (loss)

¥

¥

¥

Assets		
Depreciation
Amortization of goodwill
Interest income
Interest expense
Share of profit (loss) of entities
accounted for using equity method
Investment for entities
accounted for equity method
Increase in property
and equipment¥ 371,789 ¥ 114,436 ¥ 21,773
2,972
121
268
141
33
44
191
789
0
2,008
1,172
181

18,082 ¥

1,414 ¥

1,085

2,873 ¥

2,461 ¥

¥ 34,075 ¥
41
—
33
325

41,128 ¥
42
—
51
276

197 ¥

26,11232,305 ¥ 615,506
51
3,495
—
218
74
1,138
298
4,260

1,527 ¥

27,639 ¥(4,732) ¥22,907¥ 27,395 ¥ 642,901 ¥ 51,332 ¥ 694,233
362
3,857
114
3,971
—
218
—
218
10
1,148
91
1,239
167
4,427
(1,874)
2,553

(66)

—

—

—

—

(120)

(186)

98

(88)

—

(88)

2,671

—

—

—

—

49

2,720

778

3,498

—

3,498

3,480

69

310

59

36

84

4,038

345

4,383

52

4,435

Adjustment

Consolidated

Year ended March 31, 2017

				
		

Thousands of U.S. dollars

Reportable segment

			
		
Steel

Metalsand alloys

Non-ferrous		
metalsFoods

Petroleum
Overseas		
and chemicals sales subsidiaries
Total

Other
business

Total

Net sales		Intersegment		
Total		

$ 6,914,395 $ 1,171,352
99,52828,621$ 7,013,923 $ 1,199,973$ 692,344
13,664$ 706,008$ 790,364 $ 2,292,228 $ 998,253 $ 12,858,936 $ 636,367 $ 13,495,303 $— $ 13,495,303
3,031
65,068555,192
765,104
14,805779,909 (779,909)—$ 793,395 $ 2,357,296 $ 1,553,445 $ 13,624,040 $ 651,172 $ 14,275,212 $ (779,909) $ 13,495,303

Segment income (loss)$ 161,173 $$$ 25,608 $Assets		
Depreciation		
Amortization of goodwill
Interest income		Interest expense		
Share of profit (loss) of entities
accounted for using equity method
Investment for entities
accounted for equity method
Increase in property
and equipment		

$ 3,313,922 $ 1,020,020
26,491
1,079
1,257
294
1,702
7,033
17,89810,447

12,6049,671$ 194,073
2,389
392
0
1,613

21,936 $

1,756 $

232,748 $ 13,611 $

246,359 $ (42,179) $204,180$ 303,726 $ 366,592 $ 287,949 $ 5,486,282 $ 244,184 $ 5,730,466 $ 457,545 $ 6,188,011
365
374
455
31,1533,226
34,3791,016
35,395
—
—
—
1,943
—
1,943
—
1,943
294
455
660
10,14489
10,233811
11,044
2,897
2,460
2,656
37,971
1,489
39,460 (16,704)
22,756

(588)

—

—

—

—

(1,070)(1,658)

874

(784)

—

(784)

23,808

—

—

—

—

437

24,245

6,934

31,179—31,17931,019

615

2,763

526

321

749

35,993

3,075

39,068463

39,531

1. ”Other business” represents businesses such as lumber section
and machinery section which are not included in the above reportable segment.
2. Adjustments are as follows:(1) Adjustments of negative ¥4,732 million (negative $42,179
thousand) for segment income include intersegment elimination and Group costs that were not allocated to reportablesegments. These Group costs consist mainly of expenses ofadministrative departments.
(2) Adjustments for segment assets amounting to ¥51,332 million($457,545 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.

(3) Adjustments for depreciation and amortization amounting to¥114 million ($1,016 thousand) include mainly depreciation
and amortization expenses of Group assets.
(4) Adjustments for interest income and interest expense amounting
to ¥91 million ($811 thousand) and negative ¥1,874 million(negative $16,704 thousand) include intersegment elimination,
revenue and expense that were not allocated to reportablesegments.
(5) Adjustments for increases in tangible fixed assets and intangible fixed assets amounting to ¥52 million ($463 thousand)are increases in Group assets.

| HANWA ANNUAL REPORT 2017 | 51

Net sales, profits, assets and others by reportable segment for the year ended March 31, 2016 were as follows:Year
ended March 31, 2016
						

Millions of yen

Reportable segment

			
		
Steel

Metalsand alloys

Non-ferrous		
metalsFoods

Petroleum
Overseas		
and chemicals sales subsidiaries
Total

Other
business

Total

Adjustment

Consolidated

Net sales			Intersegment		
Total		

¥ 778,738 ¥ 127,759 ¥ 80,895
19,954
3,429
1,187¥ 798,692 ¥ 131,188 ¥ 82,082¥ 89,542 ¥ 271,602 ¥ 97,468 ¥ 1,446,004
1,130
4,848
80,149110,697¥ 90,672 ¥ 276,450 ¥ 177,617 ¥ 1,556,701¥ 65,796 ¥ 1,511,800 ¥— ¥ 1,511,800
1,459
112,156 (112,156)—¥ 67,255 ¥ 1,623,956 ¥ (112,156) ¥ 1,511,800

Segment income (loss)

¥

¥

¥

Assets			
Depreciation		
Amortization of goodwill
Interest income		Interest expense		
Share of profit (loss) of entities
accounted for using equity method
Investment for entities
accounted for equity method
Increase in property
and equipment		

¥ 332,394 ¥
3,248
155
204
2,213

14,829 ¥2,218 ¥

849

64,753 ¥ 17,527
108
281
33
44
526
0
765
212

75 ¥

¥ 33,776 ¥
30
—
0
224

(708) ¥

19,23838,054 ¥ 24,601 ¥ 511,105
68
62
3,797
—
—
232
53
70
853
283
265
3,962

1,376 ¥

20,614 ¥(5,189) ¥15,425¥ 32,103 ¥ 543,208 ¥ 56,486 ¥ 599,694
457
4,254
90
4,344
—
232
—
232
13
866
173
1,039
126
4,088
(1,404)2,684(1,031)

—

—

—

—

(273)

(1,304)—(1,304)—(1,304)

2,894

—

—

—

—

132

3,026

—

3,026

—

3,026

5,232

141

134

202

172

48

5,929

344

6,273

710

6,983

1. “Other business” represents businesses such as lumber section
and machinery section which are not included in the above
reportable segment.
2. Adjustments are as follows:(1) Adjustments of negative ¥5,189 million for segment income
include intersegment elimination and Group costs that were
not allocated to reportable segments. These Group costs
consist mainly of expenses of administrative departments.
(2) Adjustments for segment assets amounting to ¥56,486 million
include Group assets that were not allocated to reportablesegments. These Group assets consist mainly of cash and cash
equivalents, investment securities and assets of administrative
departments.

52 | HANWA ANNUAL REPORT 2017 |

1,975 ¥

(3) Adjustments for depreciation and amortization amounting to¥90 million include mainly depreciation and amortization
expenses of Group assets.
(4) Adjustments for interest income and interest expense
amounting to ¥173 million and negative ¥1,404 million include
intersegment elimination, revenue and expense that were notallocated to reportable segments.
(5) Adjustments for increases in tangible fixed assets and intangible fixed assets amounting to ¥710 million are increases inGroup assets.

(B) Related information
Product information
Net sales information by products for the years ended March 31, 2017 and 2016 were as follows:Year ended March 31, 2017							 Metals		Steeland alloys

Net sales to external customers¥

806,203¥

139,846¥

116,982

Year ended March 31, 2017							 Metals		Steeland alloys

Net sales to external customers$ 7,186,050$ 1,246,510

Millions of yen

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

¥

816,000¥

122,466

279,813¥82,426$ 1,042,713$

791,229$ 2,494,099$

734,702

119,668

Total$13,495,303

Millions of yen

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

¥

Total

¥ 1,514,038

Thousands of U.S. dollars

Year
ended March 31, 2016
				
¥

¥

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

			 Metals		Steeland alloys

Net sales to external customers

88,768¥90,418¥286,692¥

76,556

Total¥ 1,511,800

Geographic information(1) Net sales in different countries for the years ended March 31, 2017 and 2016 were as follows:Year ended March 31, 2017

					Millions of yen

					
Japan

Net sales to external customers 				¥ 1,136,629

Asia

¥

Other

300,439¥

Year
ended March 31, 2017					Thousands of U.S. dollars

					
Japan

Asia

Net sales to external customers 				$ 10,131,286¥ 1,130,114

$

Total

686,069$13,495,303

Millions of yen

					
Japan

Net sales to external customers 				¥ 1,514,038

Other$ 2,677,948

Year ended March 31, 2016
					

Total

76,970

Asia

¥

Other

308,943¥

Total

72,743¥ 1,511,800(2) Property and equipment in different countries for the years ended March 31, 2017 and 2016 were as follows:Year ended March 31, 2017

					Millions of yen

					
Japan

Property and equipment				¥53,141

Asia

¥

Other

6,251

¥

101

Year ended March 31, 2017					Thousands of U.S. dollars

					
Japan

Asia

Property and equipment 				

$473,670$

Year ended March 31, 2016¥

54,36559,493$$

530,288

Total

900

Millions of yen

					
Japan

Property and equipment				

¥

Other

55,718

					

Total

Asia

¥

7,123

Other

¥

Total

75

¥

61,563| HANWA ANNUAL REPORT 2017 | 53

Loss on impairment of non-current assets in reportable segment
Year ended March 31, 2017
Loss on impairment of non-current assets of ¥111 million ($989 thousand) was accrued from the assets in the metals and alloys segment andrecorded as part of loss on liquidation of business on the consolidated statements of income.
Year ended March 31, 2016
Loss on impairment of non-current assets in reportable segment is omitted because it is immaterial.

Outstanding balance of goodwill and amortization of goodwill in reportable segment
Outstanding balance of goodwill for the years ended March 31, 2017 and 2016 were as follows:Year ended March 31, 2017
		

		

		
			
		
Steel

Balance at end of year

Millions of yen

Reportable segment

¥

148 ¥

Metalsand alloys

67

Non-ferrous		
Petroleum
Overseas		
metalsFoods
and chemicals sales subsidiaries
Total

¥

111

¥

— ¥

—

¥

—

¥

326

Other
business

¥

Total

— ¥

326

Adjustment¥

Consolidated

— ¥

326

Year ended March 31, 2017
				
		
			
		
Steel

Balance at end of year

Thousands of U.S. dollars

Reportable segment$ 1,320 $Metalsand alloys

597

Non-ferrous		
Petroleum
Overseas		
metalsFoods
and chemicals sales subsidiaries
Total

$

989

$

— $

—

$

—

$ 2,906

Other
business

$

— $

Total

Adjustment

2,906

$

— $

Consolidated

2,906

The information of amortization of goodwill was omitted here because it has been noticed in the overview of the reportable segments.
Year ended March 31, 2016
		

		

		
			
		
Steel

Balance at end of year

Millions of yen

Reportable segment

¥

289 ¥

Metalsand alloys

100

Non-ferrous		
Petroleum
Overseas		
metalsFoods
and chemicals sales subsidiaries
Total

¥

155

¥

— ¥

—

¥

—

¥

544

Other
business

¥

Total

— ¥

544

Adjustment¥

Consolidated

— ¥

544

The information of amortization of goodwill was omitted here because it has been noticed in the overview of the reportable segments.
Gain on negative goodwill in reportable segment
Year ended March 31, 2017
There was no gain on negative goodwill for the year ended March 31, 2017.
Year ended March 31, 2016
The Company recorded gain on negative goodwill of ¥1,101 million due to acquisition of a 100% stake in Daisun Co., Ltd. in the steel segment,
which was made into a subsidiary. The gain on negative goodwill is not included in the segment income because it is recorded as an extraordinary
gain on the consolidated statements of income.

54 | HANWA ANNUAL REPORT 2017 |21. Significant subsequent events
Capital increase of subsidiary through third-party allotment
The Board of Directors meeting held on April 27, 2017 resolved tosubscribe for a capital increase of a subsidiary, Japan South Africa
Chrome Co., Ltd., through third party allotment of new shares issued
for the purpose of its fundraising to acquire stakes of Samancor
Chrome Holdings Proprietary Limited. The capital increase has been
completed on April 28, 2017.
1. Details of the subsidiary(1) Company name
Japan South Africa Chrome Co., Ltd.
(2) Representative
Takeshi Amano, President(3) Head office
1-13-1, Tsukiji, Chuo-ku, Tokyo, Japan(4) Date of establishment
April 3, 2017(5) PurposesInvestment and management of securities and business transactions executed through holding shares and/or equity of acompany of metal mining industry(6) Paid-in capital before capital increase¥5,000 ($44.57)(7) Ownership before capital increase
Hanwa Co., Ltd. 100%
2. Details of the capital increase(1) Amount of capital increase¥27,216 million ($242,588 thousand)(2) Amount of subscription
Hanwa Co., Ltd. ¥13,635 million ($121,535 thousand)Japan Oil, Gas and Metals National Corporation ¥13,581
million ($121,053 thousand)(3) Paid-in capital after capital increase¥13,608 million ($121,294 thousand)(4) Date of capital increase
April 28, 2017(5) Ownership after capital increase
Hanwa Co., Ltd. 50.1%
Japan Oil, Gas and Metals National Corporation 49.9%
New affiliate through share acquisition
On May 2, 2017, a subsidiary, Japan South Africa Chrome Co.,
Ltd. (“Japan South Africa Chrome”) acquired 20% share of
Samancor Chrome Holdings Proprietary Limited (“Samancor”).
Samancor is expected to become Hanwa’s equity-method affiliate
by this acquisition.
1. Details of the share acquisition(1) Name of the counterparty
Terris Chrome Limited(2) Main purpose of the share acquisition
To obtain the right to supply Ferro-Chromium produced by
Samancor for Japanese market(3) Date of the share acquisition
May 2, 2017(4) Voting share after the share acquisition
29% (Note: Hanwa has had a direct stake in Samancor since2005 and our share-holding ratio was 9% as of the end of
March, 2017. Considering the indirect stake acquisition
through Japan South Africa Chrome, Hanwa substantiallyholds 29% voting share of Samancor.)(5) Acquisition cost
¥26,854 million ($239,362 thousand)(6) Funding and method of payment
The Company paid by its own funds and loans.
Change in the number of shares constituting one unit of stock
and Reverse stock split
The Board of Directors meeting held on May 12, 2017 resolved tochange the number of shares constituting one unit of stock and topartially amend the Articles of Incorporation accordingly, andresolved to submit a proposal for a reverse stock split to the 70th
Ordinary General Shareholders Meeting held on June 29, 2017 (the“Ordinary General Shareholders Meeting”). The proposal wasapproved and adopted as proposed at the Ordinary General
Shareholders Meeting.
1. Change in the number of shares constituting one unit of stock(1) Reason for the change
Stock exchanges nationwide aim to unify the number of sharesconstituting one unit of stock, which is the trading unit ofshares of common stock of domestically listed companies,
to 100 shares by October 1, 2018 in accordance with the
Action Plan for Consolidating Trading Units. In keeping withthis aim, Hanwa, as a company listed on the Tokyo Stock
Exchange, has decided to change the number of its sharesconstituting one unit of stock from 1,000 shares to 100 shareseffective October 1, 2017.
(2) Details of the change
Hanwa will change the number of shares constituting one unit ofstock from 1,000 shares to 100 shares effective October 1, 2017.
(3) Conditions for the change
The change is subject to approval at the Ordinary General
Shareholders Meeting of a proposal concerning “2. Reverse
stock split” below.
2. Reverse stock split(1) Purpose of reverse stock split
When changing the number of shares constituting one unit ofstock from 1,000 shares to 100 shares as described in “1.

| HANWA ANNUAL REPORT 2017 | 55

Change in the number of shares constituting one unit ofstock” above, Hanwa has decided to implement a reverse
stock split (a one-for-five consolidation: the “Reverse Stock
Split”) for the purpose of adjusting the investment unit to thelevel desired by stock exchanges in Japan (50,000 yen or more
and less than 500,000 yen) while taking into consideration
factors such as medium- and long-term share price fluctuation,etc. In accordance with the consolidation ratio of the Reverse
Stock Split, Hanwa has decided to change the total number ofshares authorized to be issued from the current 570 million
shares to 114 million shares effective October 1, 2017.
(2) Details of the reverse stock split
1) Class of shares to be consolidated
Common stock2) Consolidation ratio
Effective October 1, 2017, Hanwa will consolidate the shares
held by shareholders recorded in the final shareholders
register as of September 30, 2017 at a ratio of one for five.
3) Total number of shares authorized to be issued after consolidation
114,000,000 shares (570,000,000 shares before consolidation)
Pursuant to the provisions of the Companies Act, the provision of the Articles of Incorporation that stipulates the total
number of shares authorized to be issued will be deemed tohave changed as described above on the effective date of
the Reverse Stock Split (October 1, 2017).

4) Number of shares reduced through consolidation
Number of outstanding shares before consolidation (March 31, 2017)
Number of shares reduced through consolidation
Number of outstanding shares after consolidation

211,663,200 shares
169,330,560 shares
42,332,640 shares

Note: “Number of shares reduced through consolidation” and “Number of outstanding shares after consolidation” are theoretical values calculated based on the numberof outstanding shares before consolidation and the share consolidation ratio.

5) Number of shareholders reduced through consolidation
Shareholder composition based on the shareholders register as of March 31, 2017 was as follows:
Number of shares held

Less than 5 shares
5 shares or more
Total

Number of shareholders (ratio)

Number of shares held (ratio)

206 (2.55%)
7,878 (97.45%)
8,084 (100.00%)

249 (0.00%)
211,662,951 (100.00%)
211,663,200 (100.00%)

If the Reverse Stock Split is implemented, the 206 shareholders who hold less than five shares (a total of 249 shares as of March 31,2017) will lose their status as shareholders.
6) Handling of fractional shares of less than one shareIf fractional shares of less than one share occur as a result of the Reverse Stock Split, pursuant to the provisions of the Companies Act,
Hanwa will sell all such fractional shares in bulk and distribute the proceeds to the shareholders holding the fractional shares in accordance with the proportion of fractional shares held.
(3) Effect on per share data
Assuming the Reverse Stock Split had been implemented at the beginning of the previous fiscal year, per share data for the previous fiscal
year and the current fiscal year would have been as follows:Yen

Net assets per share
Net income per share

56 | HANWA ANNUAL REPORT 2017 |U.S. dollars

2017

2016

¥ 4,193.50
400.89¥ 3,737.00
614.592017$37.3793.573

Independent Auditor’s Report| HANWA ANNUAL REPORT 2017 | 57

Global Network

ASIA

EUROPEMIDDLE
EAST

LondonKuwaitAmsterdam

JeddahViennaDammamDubai
Istanbul

58 | HANWA ANNUAL REPORT 2017 |AFRICA

Johannesburg

Seoul
Busan
Beijing
Qingdao
DalianTianjin
Shanghai
Chongqing
Fuzhou
Wuhan
Taicang
Jiangxi
Guangzhou
DongguanZhongshan

Hong Kong
Taipei
Kaohsiung
Bangkok
Chonburi
YangonKuala Lumpur
Singapore
Ho Chi Minh
Hanoi
Jakarta
ManilaMumbaiNew Delhi
ChennaiAMERICAS

New York
ChicagoHoustonSeattleLos Angeles
San Diego

VancouverMexico City
CelayaGuamSantiago
Bogota

JAPAN

Osaka
Tokyo
NagoyaHokkaido
TohokuKitakanto
Niigata
Chugoku
KyushuHachinohe

Mito
AtsugiShizuoka
Okayama
Fukuyama
Okinawa
Iwaki
Hokuriku
Wakayama| HANWA ANNUAL REPORT 2017 | 59

Global Network

JAPAN
HANWA CO., LTD.
OSAKA

HK Yodoyabashi Garden Avenue Bldg.,
4-3-9, Fushimi-machi, Chuo-ku, Osaka city, Osaka 541-8585, Japan
Tel: 81-6-7525-5000 Fax: 81-6-7525-5365

TOKYO

Ginza Shochiku Square Bldg., 1-13-1, Tsukiji, Chuo-ku, Tokyo 104-8429, Japan
Tel: 81-3-3544-2171 Fax: 81-3-3544-2351

NAGOYAJP Tower Nagoya Bldg., 1-1-1, Meieki, Nakamura-ku, Nagoya, Aichi 450-6335, Japan
Tel: 81-52-977-3600 Fax: 81-52-977-3630

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

TOHOKU

Sendai 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

KITAKANTO1059-3, Tanakamachi, Isesaki, Gunma 372-0814, Japan
Tel: 81-270-27-4510 Fax: 81-270-27-4550

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

KYUSHU

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

HACHINOHE

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

MITO

Okaba Mito Sannomaru Bldg., 1-3-35, 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

AMERICAS
HANWA AMERICAN CORP. HEAD OFFICE

Parker Plaza, 12th Floor, 400 Kelby Street, Fort Lee, NJ 07024, U.S.A.
Tel: 1-201-363-4500 Fax: 1-201-346-9890

HANWA AMERICAN CORP. CHICAGO BRANCH

425 North Martingale Road, Suite 1120, Schaumburg, Illinois 60173, U.S.A.
Tel: 1-847-278-7360 Fax: 1-847-285-7790

HANWA AMERICAN CORP. HOUSTON BRANCH
2925 Briarpark Drive, Suite 100, Houston, TX 77042, U.S.A.
Tel: 1-713-978-7904 Fax: 1-713-978-7790

HANWA AMERICAN CORP. SEATTLE BRANCH

801 South Fidalgo Street, Suite 110, Seattle, WA 98101, U.S.A.
Tel: 1-206-622-2102 Fax: 1-206-622-6464

HANWA AMERICAN CORP. LOS ANGELES BRANCH
18100 Von Karman, Suite 480, Irvine, CA 92612, U.S.A.
Tel: 1-949-955-2780 Fax: 1-949-955-2785

HANWA AMERICAN CORP. COLOMBIA BRANCH

Carrera 15 No. 93A-84, Edificio Business 93, Oficina 209, Bogota D.C., Colombia
Tel: 57-1-704-7651 Fax: 57-1-704-7710

SEATTLE SHRIMP & SEAFOOD COMPANY, INC.
801 S. Fidalgo Street, Suite 100, Seattle, WA 98108, U.S.A.
Tel: 1-206-812-2824 Fax: 1-206-812-2840

SAN DIEGO VISTA STEEL SERVICE CORP.
8753 Kerns Street, San Diego, CA 92154, U.S.A.
Tel: 1-619-671-9247 Fax: 1-619-671-9210

HANWA CANADA CORPORATION
Suite# 1601-1166 Albermi Street, Vancouver, B.C. V6E 3Z3, Canada
Tel: 1-604-876-1175 Fax: 1-604-876-1085

HANWA MEXICANA, S.A. DE C.V.

Paseo de la Reforma 255 Piso 11-A Col. Cuauhtemoc Cuauhtemoc, Ciudad de Mexico,
CP 06500, Mexico
Tel: 52-55-5525-9934 Fax: 52-55-5533-2774

HANWA STEEL SERVICE MEXICANA, S.A. DE C.V.

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

HANWA GUAM CORPORATION

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

HANWA CHILE LIMITADA

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

SHIZUOKA

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

ASIA

OKAYAMA

Kurashiki Ark Square, 2-4-6, Showa, Kurashiki, Okayama 710-0057, Japan
Tel: 81-86-435-7122 Fax: 81-86-422-5622

FUKUYAMA

Meiji-Yasuda Seimei Fukuyama-ekimae Bldg., 1-25, Nobehiro-cho, Fukuyama, Hiroshima
720-0064, Japan
Tel: 81-84-973-5701 Fax: 81-84-924-8707

OKINAWA

Kokuba Bldg., 3-21-1, Kumoji, Naha, Okinawa 900-8505, Japan
Tel: 81-98-860-9115 Fax: 81-98-861-5516

HANWA (KOREA) CO., LTD.

Room 1703, Korea World Trade Center, 511, Yeongdong-Daero, Gangnam-Gu, Seoul,06164, R.O. Korea
Tel: 82-2-551-5387 Fax: 82-2-551-5575

HANWA (KOREA) CO., LTD. BUSAN OFFICEIWAKIRoom 504, Industry Bldg., 37 Gwaegam-Ro, Sasang-Gu, Busan, 46977, R.O. Korea
Tel: 82-51-319-1006 Fax: 82-51-319-1545

HOKURIKU

Suite A101, 10/F, Twin Towers (East), B12 Jianguomenwai Ave. Chao Yang District,
Beijing, P.R. China
TEL:86-10-5123-5113 FAX:86-10-5123-5122

WAKAYAMA#17-DE Pingan Mansion, NO. 59 Machang Road, Hexi dist, Tianjin 300203, P.R. China
Tel: 86-22-6566-8618 Fax: 86-22-6566-8619

ZENSHO Shirogane Bldg., 5-7, Taira aza Shirogane-machi, Iwaki, Fukushima
970-8026, Japan
Tel: 81-246-35-6585 Fax: 81-246-35-6586
2-33-5, Ariso, Imizu, Toyama 933-0251, Japan
Tel: 81-766-54-5022 Fax: 81-766-54-5252
Shine Bldg. Fukushima, 36 Motobakurou-machi, Wakayama 640-8216, Japan
Tel: 81-73-428-7230 Fax: 81-73-428-7231

60 | HANWA ANNUAL REPORT 2017 |HANWA (BEIJING) CO., LTD.

HANWA (BEIJING) CO., LTD. TIANJIN BRANCHHANWA (QINGDAO) CO., LTD.

1401, 14F, Shangri-La Centre Office Tower, No. 9 Hong Kong Middle Road, Qingdao,
266071, P.R. China
Tel: 86-532-8-577-9990 Fax: 86-532-8-577-9630

HANWA (DALIAN) CO., LTD.

PT. HANWA INDONESIAHANWA TRADING (SHANGHAI) CO., LTD.

PT. HANWA STEEL SERVICE INDONESIAHANWA TRADING (SHANGHAI) CO., LTD. CHONGQING BRANCHHANWA CO., LTD. MANILA REPRESENTATIVE OFFICE

Senmao Bldg., 20F, 147 Zhongshan Street, Dalian City, Liaoning 116011, P.R. China
Tel: 86-411-8-368-6954 Fax: 86-411-8-368-6934
16F SMEG Plaza,1386 Hong Qiao Road, Chang Ning District, Shanghai 200336, P.R. China
Tel: 86-21-6237-5260 Fax: 86-21-6237-5282
Room 1711, Metropolitan Tower, 68 Zhou Rong Lu, Central District, Chongqing
400010, P.R. China
Tel: 86-23-6381-1101 Fax: 86-23-6381-7385

HANWA TRADING (SHANGHAI) CO., LTD. FUZHOU BRANCH

Room 1204, Shenglong Financial Center, No. 1 Guangming Road, Fuzhou, 350009,
P.R. China
Tel: 86-591-8-3354165 Fax: 86-591-8-3345202

HANWA TRADING (SHANGHAI) CO., LTD. WUHAN BRANCH

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

GUANGZHOU HANWA TRADING CO.,LTD.

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

GUANGZHOU HANWA TRADING CO.,LTD. ZHONGSHAN BRANCH
Unit 2313, Block 2, Lihe International Residence, No. 2, Yintong Road, Zhongshan,
Guangdong, P.R. China
Tel: 86-760-2332-0706 Fax: 86-760-2332-0696

Midplaza 1 Building, 9th Floor, Jl. Jend. Sudirman Kav, 10-11 Jakarta 10220, Indonesia
Tel: 62-21-5785-3033 Fax: 62-21-5785-3045
MM2100 Industrial Town, Block QQ-5, West Cikarang, Bekasi 17520, Indonesia
Tel: 62-21-8998-1791 Fax: 62-21-8998-1794
14th Floor, 6788 Ayala Avenue, Oledan Square, 1226, Makati City, Metro Manila, Philippines
Tel: 63-2-817-5624 Fax: 63-2-817-5956

HANWA INDIA PRIVATE LTD. MUMBAI HEAD OFFICE

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

HANWA INDIA PRIVATE LTD. NEW DELHI BRANCH OFFICE

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

HANWA INDIA PRIVATE LTD. CHENNAI BRANCH OFFICE

5H-1/5K/5K-1, 5th Floor, Century Plaza, 560-562, Anna Salai, Teynampet, Chennai
600 018, India
Tel: 91-44-3353-9100 Fax: 91-44-3353-9104

EUROPE

HANWA STEEL SERVICE (DONGGUAN) CO., LTD.

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

CHANG FU STAINLESS STEEL CENTER (SUZHOU) CO., LTD.

No. 7 Guangzhou East Road, Economic Development Area, Taicang City, Jiangsu 215400,
P.R. China
Tel: 86-512-5359-0800 Fax: 86-512-5358-8942

HANWA STEEL SERVICE (JIANGXI) CO., LTD.

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

HANWA CO., (HONG KONG) LTD.

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

HANWA CO.,LTD. LONDON BRANCH
7th Floor, 55 Strand, London, WC2N 5LS, U.K.
Tel: 44-20-7839-4448 Fax: 44-20-7839-3994

HANWA EUROPE B.V. HEAD OFFICEWTC Tower B-6F, Strawinskylaan 625, 1077XX, Amsterdam, The Netherlands
Tel: 31-20-575-2460 Fax: 31-20-575-2461

HANWA EUROPE B.V. VIENNA BRANCH
Wipplingerstrasse 34 Top 174, 1010 Wien, Austria
Tel: 43-1-532-01-65 Fax: 43-1-532-01-65-20

MIDDLE EASTTAIWAN HANWA KOGYO CO.,LTD.

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

TAIWAN HANWA KOGYO CO., LTD. KAOHSIUNG OFFICE
Room B, 17th Floor, No.7 Su-Wei 4th Road, Kaohsiung, Taiwan
Tel: 886-7-338-5508 Fax: 886-7-338-5433

HANWA THAILAND CO., LTD.

24th Floor, Unit 2401-2402, Q.House Lumpini Bldg., 1 South Sathorn Road,
Tungmahamek, Sathorn, Bangkok 10120, Thailand
Tel: 66-2-343-8877 Fax: 66-2-343-8878

HANWA STEEL SERVICE (THAILAND) CO.,LTD.

HANWA MIDDLE EAST FZE

Dubai Airport Free Zone, East Wing, Building, No.6E, B-Block, No.544,
P.O. BOX 293873, Dubai, U.A.E.
Tel: 971-4-609-1894 Fax: 971-4-609-1895

HANWA MIDDLE EAST FZE KUWAIT OFFICE

15th 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

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

HANWA MIDDLE EAST FZE JEDDAH SATELLITE OFFICEHANWA CO., LTD., MYANMAR REPRESENTATIVE OFFICE

Office No.1, 1st Floor, Al-Hammam Center for Trading King Fahad Bin Abdul Aziz
Road, Dammam, Saudi Arabia
Tel: 966-3842-0845 Fax: 966-3842-0847

Room No. 607, 6th Floor, LA Pyi Wun Plaza, No. 37, Alanpya Pagoda Road, Dagon
Township, Yangon, Myanmar
Tel: 95-1-373-635

HANWA (MALAYSIA) SDN. BHD.

Lot 19-5, Level 19, Menara Hap Seng 2, No.1, Jalan P. Ramlee, 50250 Kuala Lumpur,
Malaysia
Tel: 60-3-2022-2308 Fax: 60-3-2022-2164

HANWA SINGAPORE (PRIVATE) LTD.

8 Shenton Way, #29-01 AXA Tower, Singapore 068811
Tel: 65-6536-7822 Fax: 65-6536-7855

Tel: 966-55-118-4708

HANWA MIDDLE EAST FZE DAMMAM OFFICEHANWA MIDDLE EAST FZE ISTANBUL LIAISON OFFICE

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

AFRICA

HANWA VIETNAM CO., LTD. HO CHI MINH HEAD OFFICE

Unit 4-1, 19th Floor, A&B Tower, 76 Le Lai Street, Ben Thanh Ward, District 1, Ho Chi Minh
City, S.R. Vietnam
Tel: 84-28-3822-5715 Fax: 84-28-3822-5725

HANWA VIETNAM CO., LTD. HA NOI BRANCH OFFICE

14th Floor, Vit Tower, 519 Kim Ma Street, Ba Dinh, Hanoi, S.R. Vietnam
Tel: 84-24-2220-9155 Fax: 84-24-2220-9159

HANWA CO., LTD., JOHANNESBURG BRANCH

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 ANNUAL REPORT 2017 | 61

Corporate Information (As of March 31, 2017)
Corporate Data
Company Name

Hanwa Co., Ltd. 阪和興業株式会社

Established

April 1947

Capital¥45,651 million

Number of Employees

Consolidated: 3,155

Tokyo Head Office

1-13-1, Tsukiji, Chuo-ku, Tokyo
104-8429, Japan
Tel: +81-3-3544-2171
Fax: +81-3-3544-2351

Non-consolidated: 1,272

Nagoya Branch Office JP Tower Nagoya Bldg.,

Address
Osaka Head Office

Ginza Shochiku Square Bldg.,

1-1-1, Meieki, Nakamura-ku,

HK Yodoyabashi Garden Avenue Bldg.,

Nagoya, Aichi 450-6335, Japan

4-3-9, Fushimi-machi, 			

Tel: +81-52-977-3600

Chuo-ku, Osaka 541-8585, Japan

Fax: +81-52-977-3630

Tel: +81-6-7525-5000
Fax: +81-6-7525-5365

Board of Directors, Corporate Auditors and Executive Officers (As of June 29, 2017)
EXECUTIVE OFFICERSBOARD OF DIRECTORS
Chairman

Shuji Kita

北President*

Hironari Furukawa

古川 弘成

Director,*
Executive Vice President andExecutive Officer
Hiroshi Serizawa
Directors,
Senior Managing
Executive Officers

Outside Directors
Directors,
Managing Executive
Officers

Director,
Executive Officer

芹澤

修爾

浩

Akihiko Ogasawara

小笠原朗彦

Yasumichi Kato加藤 恭道

Hidemi Nagashima

長嶋 日出海Yoichi Nakagawa

中川 洋一

Yasuharu Kurata

倉田 泰晴

Osamu Seki関收Ryuji Hori

堀龍兒Hiromasa Yamamoto

山本 浩雅

Yasushi Hatanaka

畠中

Yoichi Sasayama

篠山 陽一

康司

Chiro Ideriha

出利葉知郎

Hideo Kawanishi

川西 英夫

Naoyuki Togawa

十川 直之

Yasuo Naide

名出 康雄

Katsunori Okubo

大久保克則

Mitsuo Hirakata

平形 光男

CORPORATE AUDITORS
Corporate Auditors(Full-time)
Outside Corporate
Auditors*Representative Director

62 | HANWA ANNUAL REPORT 2017 |Senior Managing
Executive Officer

Hiroshi Ebihara

海老原 弘Managing
Executive Officer

Takatoshi Kuchiishi

口石 隆敏

Executive Officers

Isao Kimizu

木水

Hideo Kobayashi

小林 秀雄

勲

Keiji Matsubara

松原 圭司

Tsuneo Tsuiki

立木 恒雄

Yoshimasa Ikeda

池田 佳正

Ryuichi Takaba

竹迫 隆一

Yoshifumi Miyano

宮野 好史

Toshihiro Kawaguchi

川口 敏弘

Hideki Kataoka

片岡 秀樹

Coping with changing times and markets
quickly, Hanwa makes a great contribution
to society by satisfying various needs ofcustomers as a “distribution specialist”

Stock Information

Japanese financial
institutions
30.5%

Foreigncorporations
28.2%

Individuals and Other domestic
otherscorporations
22.9%
12.4%

Japanese financial
institutions
30.5%

Foreign
Individuals and Other domestic
corporations
otherscorporations
Japanesebrokerage firms12.4%
Treasury stock
28.2%
22.9%
2.0%
4.0%

Breakdown by Type of Shareholder

Fiscal Year-End

March 31Annual Meeting of Shareholders June
Independent Auditors

KPMG AZSA LLC

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

Success in today’s markets demands speed and the ability to meet a broad range

Date of Record for Dividend
PayoutInterim dividend: September 30
Year-end dividend: March 31

of needs. Change is occurring on an unprecedented scale. Only companies that

Authorized Shares

570,000,000 shares

can adapt quickly will survive. Hanwa has experience and accomplishments in

Issued and Outstanding Shares 211,663,200 sharesthe field of “distribution” that span more than 70 years.

Number of Shareholders

Japanese brokerage firms
2.0%

Breakdown by Size of Holding–1,00011.5%

1,000–50,000
84.9%

50,000–1,000,000
3.1%–1,00011.5%

1,000–50,000
84.9%

50,000–1,000,000
3.1%
1,000,000–
0.5%

8,084

We know how to build powerful businesses and move quickly in the pursuitof value creation and customer satisfaction.
Dedicated to corporate citizenship, we want our business operations to help
make communities and the world a better place to live. This is why we prioritize
compliance and other activities that enable 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.

Treasury stock
4.0%

Principal Shareholders

1,000,000–

Name of Shareholder

Number of Shares(thousands)

0.5%
Percentage of Total
Issued Share (%)

14,843
9,025
7,980
7,630
6,285
6,092
4,242
3,622
3,278
3,001

7.30
4.44
3.93
3.76
3.09
3.00
2.09
1.78
1.61
1.48

Japan Trustee Services Bank, Ltd. (Trust Account)...........................................................
The Master Trust Bank of Japan, Ltd. (Trust Account) .....................................................
Hanwa Clients’ Stock Investment Association.................................................................
Sumitomo Mitsui Banking Corporation..........................................................................
CBNY-GOVERNMENT OF NORWAY................................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 9)........................................................
Hanwa Employees’ Stock Investment Association...........................................................
Japan Trustee Service Bank, Ltd. (Trust Account 5)..........................................................
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO.............................................................
Nippon Steel & Sumitomo Metal Corporation................................................................
Note: The Company holds 8,464,473 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
(¥)

(¥)

1000

22,000800

18,000600

14,000400

10,000
Trading Volume(Millions of shares)

200

40
30
20
10

4
5
2015

6

7

8

9

10

11

12

1
2
2016

3

4

5

6

7

8

9

10

11

12

1
2
2017

3

0

| HANWA ANNUAL REPORT 2017 | 63

阪和興業株式会社

http://www.hanwa.co.jp

2017
ANNUAL REPORT

Year ended March 31, 20172017.8 Printed in Japan