阪和興業株式会社

Annual Report 2015

2015

http://www.hanwa.co.jp

Year ended March 31, 2015

2015.8 Printed in Japan

Coping with changing times and markets quickly,
Hanwa makes a great contribution to society
by satisfying various needs of customers as a
“distribution specialist”
Contents
To Our Stakeholders ...........................1
Business Model ....................................2
At a Glance...........................................4Interview with the President .............6
Topics ....................................................9

Success in today’s markets demands speed and the ability to meet a broad
range of needs. Change is occurring on an unprecedented scale. Only companies that can adapt quickly will survive. Hanwa has experience andaccomplishments in the field of “distribution” that span 68 years.
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

Review of Operations

make communities and the world a better place to live. This is why we prioritize◆ Steel ...............................................10compliance and other activities that enable us to fulfill our obligation to society.

◆ Metals and Alloys .........................12

Through such activities, Hanwa keeps nurturing a corporate culture that will

◆ Non-Ferrous Metals......................13enhance the value and reliability of our company. We aim to make greater◆ Food Products ...............................14

contributions by fulfilling our social responsibilities.

◆ Petroleum and Chemicals ............15◆ Other Business ..............................16
Corporate Governance .....................17
CSR Activities......................................20
Financial Section
Five-Year Summary ........................22
Management’s Discussion
and Analysis ..................................23
Consolidated
Financial Statements .....................26
Notes to Consolidated
Financial Statements ....................31

Stock Information

Japanese financial
institutions
31.0%

Foreigncorporations
21.5%

Individuals andothers31.2%

Japanese financial
institutions
31.0%

Foreign
Individuals andOther domestic
corporations
otherscorporations
Japanesebrokerage firms 12.3%
Treasury stock
21.5%
31.2%
1.9%
2.1%

Breakdown by Type of Shareholder

Fiscal Year-End

March 31Annual Meeting of Shareholders June
Independent Auditors

KPMG AZSA LLC

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

Japanese brokerage firms
1.9%

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

Authorized Shares

570,000,000 shares

Treasury stock
2.1%

Breakdown by Size of Holding

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

Other domestic
corporations
12.3%

12,120–1,00011.0%

1,000–50,000
86.3%

50,000–1,000,000
2.3%–1,00011.0%

1,000–50,000
86.3%

50,000–1,000,000
2.3%
1,000,000–
0.3%

Principal Shareholders

1,000,000–

Name of Shareholder

Number of Shares(thousands)

0.3%
Percentage of Total
Issued Share (%)

14,323
10,695
7,630
7,478
4,935
4,184
3,151
3,001
2,877
2,614

6.91
5.16
3.68
3.61
2.38
2.02
1.52
1.45
1.39
1.26

Japan Trustee Services Bank, Ltd. (Trust Account)...........................................................
The Master Trust Bank of Japan, Ltd. (Trust Account) .....................................................
Sumitomo Mitsui Banking Corporation..........................................................................
Hanwa Clients’ Stock Investment Association.................................................................
Hanwa Employees’ Stock Investment Association...........................................................
CBNY-GOVERNMENT OF NORWAY................................................................................
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO.............................................................
Nippon Steel & Sumitomo Metal Corporation................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 9)........................................................
The Dai-ichi Mutual Life Insurance Company .................................................................
Note: The Company holds 4,449,160 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

Independent Auditor’sReport............................................53

(¥)

(¥)

1,000

22,000Global Network .................................54800

18,000600

14,000400

10,000

Corporate Information .....................58

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.

Trading Volume(Millions of shares)

200

40
30
20
10

4
5
2013

6

7

8

9

10

11

12

1
2
2014

3

4

5

6

7

8

9

10

11

12

1
2
2015

3

0

| HANWA ANNUAL REPORT 2015 | 59

To Our Stakeholders

Shuji Kita

Hironari Furukawa

ChairmanPresident

Hanwa supplies a broad range of products, including steel, metals and alloys, non-ferrous metals,
food products, petroleum and chemicals, lumber, machinery and many other items, to an equally
diverse range of customers.
Since our inception, we have focused our operations on the mission of serving our customers
as “distribution specialists.” Each year, we have used our specialized expertise and an extensive
service network to meet customer needs with precisely the right solutions. This skill has earned
Hanwa a reputation as a trading company in which customers know they can place their trust,and from which they can receive outstanding products and services.
During the fiscal year ended March 31, 2015, global economic conditions in general weremixed. There were signs of modest improvement in the United States and Japan, while China
was in a transition phase to stable growth and weakness persisted in Europe. Hanwa completed
the second year of its Medium-term Business Plan, which covers the period from April 2013 toMarch 2016, and posted higher sales and profits for third consecutive year. We intend tocontinue to ensure that our final year of this plan progresses steadily, while monitoring carefully
any signs of change in the domestic and international markets in the long term and accurately
meeting demand in all business areas.
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 a trading company known foroutstanding footwork.

| HANWA ANNUAL REPORT 2015 | 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
The footwork required to act with speed and agility
FOOTWORK

Hanwa firmly believes in positioning markets at the center of its operations. Front-line activities are a source of information andlessons that are available nowhere else. Speed and agility are vital to being in the right place at the right time to gather thisknowledge. Recognizing the importance of spending time in the field, Hanwa business professionals use swift footwork tomove from one location to another. This constant focus on the essence of business activities allows Hanwa to supply customers
with solutions of the highest caliber.

The foundation for skills in information and sales
NETWORK

Hanwa has a powerful network that spans the globe. 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 critical component of our business operations. With
these capabilities, we can meet the expectations of every customer as “distribution specialists.”

A cohesive organization that thrives on teamwork
TEAMWORK

02 | HANWA ANNUAL REPORT 2015 |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 our organization. All available resources are used to meet our customers’ needs. Teamwork has one more
important benefit: the ability to build mutually beneficial (“win-win”) relationships by creating the best possible partnership with each customer.

Developing Globally While Expanding and Deepening Business Fields
Hanwa has built a solid position in the market as a trading company handling a board range of products, including
steel, metals and alloys, non-ferrous metals, food products, petroleum and chemicals, lumber, machinery and 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 theforefront of effective resource recycling.

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

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

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

Number of Overseas
Processing Plants

26

Number ofOverseas Bases

48

Number of Subsidiaries andAssociated Companies

30

Number of
Employees (consolidated)

2,772| HANWA ANNUAL REPORT 2015 | 03

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

Steel¥857,396 million

+8.2

%

Metals and Alloys¥125,768 million+33.6%
Non-Ferrous Metals¥81,978 million

+7.9

%

Fiscal 2014 Net Sales¥1,737,398
millionFood Products¥86,923 million

+12.4

%

Petroleum and Chemicals¥422,450 million

–14.0

%

Other Business¥162,883 million

+7.4

%

04 | HANWA ANNUAL REPORT 2015 |Principal Items

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

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

Thousands of
U.S. dollars (Note 1)

2015

2014

2015

¥1,737,398¥1,682,504$14,457,835

Operating income

19,107

16,253

159,000

Net income

9,086

7,897

75,610Comprehensive income

19,45014,648161,854

For the year:

Net sales

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

Cash and cash equivalents

24,515¥$

15,920204,003

Total assets

651,457

593,352

5,421,128

Total net assets

142,750

125,362

1,187,900

2,772

2,610

Number of employees

Yen

U.S. dollars (Note 1)

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

Net income

43.85

¥

$

38.11

0.365

Cash dividends

15.00

12.00

0.125

Net assets

682.46591.68

5.679%
Key financial ratios:
Prawns and shrimp, crab, salmon,
herring roe, horse mackerel, mackerel,
Capelin, octopus, eel, herring, flounder,
Matsubara’s red rockfish, fish paste,
processed goods

Return on assets (ROA)

1.5

1.4

Return on equity (ROE)

6.9

6.6

Net debt/equity ratio (Note 2)

180

190

Notes: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥120.17=$1.00.
2. Net debt/equity ratio = Net interest-bearing debt/equity.
Net interest-bearing debt = Interest-bearing debt – cash.

Net Sales

Operating Income

Net Income(Millions of yen)

(Millions of yen)

(Millions of yen)

Petroleum products in general, marineoil, petrochemicals, synthetic resin,
paper products

10,00020,0001,500,000

8,000
15,000

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

1,000,000

6,000
10,0004,000

500,000
5,000

2,000

Other
Environment-related business
0

0
11

12

13

14

15

0
11

12

13

14

15

11

12

13

14

15

| HANWA ANNUAL REPORT 2015 | 05

Interview with the President

Looking at the present and the future of the Hanwa Group

steady“ The
implementation ofstrategies propels
us toward
sustainable growth.

”

Hironari Furukawa, President

Q1

Please share your opinion about the economic environment of the fiscal
year ended March 31, 2015.

A

During the fiscal year under review, the conditions in the world economy in general were mixed. The U.S.
economy improved gradually, amid predictions about the timing of a reduction in monetary easing, while
the European economy remained sluggish due to concerns about sovereign risk. With China in a transition
phase to stable growth under its new economic policy, the pace of economic growth slowed as a result ofgreater restrictions on real estate trading and financial speculation. Other emerging countries also experienced economic fluctuations due to significant changes in their financial environments, together with anumber of political and geopolitical issues.
The Japanese economy continued to show signs of modest improvement, through government
measures taken in line with “Abenomics” and monetary easing by the Bank of Japan, but remained rather
subdued on the whole. This reflected sluggish construction investment at the execution phase due to alabor shortage and rises in labor costs, coupled with a reactional fall in demand following a rise in the
consumption tax rate and a subsequent prolonged slump in consumption.

06 | HANWA ANNUAL REPORT 2015 |Q2 Please summarize operating results of the fiscal year ended March 31, 2015.
A

The Group posted consolidated net sales of ¥1,737,398 million for the consolidated fiscal year ended
March 31, 2015, representing a year-on-year increase of 3.3%, due mainly to higher net sales in the steelbusiness and the metals and alloys business. Operating income rose 17.6%, to ¥19,107 million, mainlyreflecting growth in the metals and alloys business and other business. Net income also climbed to ¥9,086
million, representing a 15.1% increase, due mainly to a drop in income taxes reflecting a fall in taxable
income in line with the sale of real estate recorded as a valuation loss in previous fiscal years.

Q3 What is your outlook for the fiscal year ending March 31, 2016?
A

Although the U.S. economy is showing signs of slow recovery, its European counterpart still faces an uncertain future. China’s economic expansion is slowing, causing some to speculate that a counter-reaction in
the market will lead to a bursting of the real estate/financial bubble. As a result, the condition of uncertainty in the world economy is expected to remain unchanged.
The Japanese economy has been experiencing a long-term slump in consumer spending, lasting longer
than expected, due in part to the negative influence of a weaker yen. Furthermore, the constructionindustry is unlikely to see a significant increase in demand for the time being, due to a labor shortage.
In this operating environment, the 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 eachbusiness category. It will implement sales/inventory policies that address precisely the needs of its clientsand actively pursue the development of a new client base.
Based on the factors described above, in terms of consolidated operating results for the next fiscal
year, we expect net sales of ¥1,800,000 million (up 3.6% compared with the previous year), operating
income of ¥22,300 million (up16.7%), and net income attributable to owners of the parent of ¥12,000
million (up 32.1%).

| HANWA ANNUAL REPORT 2015 | 07

Interview with the President

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

The Hanwa Group formulated its Medium-term Business Plan for the period between April 2013 andMarch 2016. In line with our theme of establishing thriving businesses and reinforcing our base of operations to respond to medium and long-term changes in markets in Japan and overseas, we have set targetsof ¥1,800,000 million in consolidated net sales and ¥15,000 million in ordinary income for the fiscal year
ending March 31, 2016. Thus far, we have been achieving solid progress overall.
Our three strategic concepts are to ensure that user perspectives are accurately reflected, diversify
corporate activities, and pursue “resonant business management” to realize overall optimization within thevalue chain involving manufacturers, suppliers and users.

Q5 Please add some additional comments for shareholders and investors.
A

The Hanwa Group intends to enhance the corporate value of the entire Group, achieve sustainable corporate growth, and further raise customer satisfaction, while focusing on contributing to society, by continuing
to steadily implement its business strategies.
We would like to conclude by asking our shareholders and investors for their continued support in
the future.

08 | HANWA ANNUAL REPORT 2015 |Topics

Capital Participation in an Indonesian Nickel Pig
Iron Manufacturer
Hanwa acquired capital in nickel pig iron project in Sulawesi Island,
Indonesia, led by a major Chinese stainless manufacturer, Tsingshan
Holding Group. We will participate in the establishment of a new company
starting from the second phase of the project. The new company isscheduled to begin operation in January–March 2016 with annual
production of 60,000 tons.
Ceremony held on site

Investment in Singapore-Based COSMOSTEEL
Hanwa invested in Cosmosteel Holdings Limited, which is based in Singapore and distributes a range of steel products
in Southeast Asia region.
The company was established in 1984 and listed on the Singapore Stock Exchange in 2007. We subscribed
Cosmosteel’s third party allotment and purchased all the shares of the founder, which amounted to a 28.45% stakein Cosmosteel, to build a strategic partnership. With this capital participation, we will expand the steel business,aiming to gain a steppingstone to build “Another Hanwa in Asia.”

Maruhon Honma Suisan Co., Ltd.
Becomes a Subsidiary
Hanwa acquired a 97% stake in Maruhon Honma Suisan
Co., Ltd., a wholesale and processing company for marine
products in Sapporo, Hokkaido, and transformed it into a
subsidiary. The company was established in 1968 and has
been developing a marine products wholesale and processing
business. As a leading manufacturer of seasoning herring roe,the company posted net sales of ¥1,400 million for the fiscal
year ended January 31, 2014, and will continue operations
with the same company name, employees and head office
as before.

Maruhon Honma Suisan Co., Ltd.

Processing line

| HANWA ANNUAL REPORT 2015 | 09

Review of Operations

Steel (Domestic)
Fiscal 2014 Results
In fiscal 2014, domestic demand for steel products from the manufacturing industry
was healthy in general, but sluggish demand was slow to recover, reflecting abacklash from the rush demand ahead of the consumption tax hike in April 2014.
Demand from personal consumption including automobiles was stagnant. Although
we expected an increase in public as well as private investment in construction,
demand from the construction industry did not expand as much as we had hoped,
as a labor shortage slowed the progress of construction projects and some projects
were postponed because of higher construction costs. In this environment, inventory
adjustment was subdued amid the sluggish market for steel products and steel
product price was trending downward in the second half of fiscal 2014. At the sametime, steelmakers maintained their prices, which weighed on the earnings fromsales to distributors, including Hanwa.
While the operating environment was far from favorable, we continued topromote M&A and mutually beneficial alliances with our partners to enhance JIT/
small-lot orders/processing. We also bolstered our response to the needs of regionaland smaller customers, and centered sales efforts on a number of new customers
and construction projects. As a result, the sales volume of our domestic steelbusiness, especially that of steel plates and iron scrap, increased compared to theprevious fiscal year.

Net Sales(Millions of yen)

(Millions of yen)

(Millions of yen)

Looking Ahead and Key Strategies

800,000

600,000

400,000

200,000

0

11

12

13

14

15

Net Sales Composition

49.3%

10 | HANWA ANNUAL REPORT 2015 |We expect overall domestic demand for steel to remain more or less at the previous
80,000fiscal year’s
150,000level, as public investment is carried out as scheduled. Housing
investment, which fell sharply as a result of the consumption tax hike, is forecast
60,000
to bottom out, and non-housing construction and capital
expenditure are likely to
100,000
record solid
growth.
In this environment, the steel products market is40,000
expected to remain on a
downward trend due to inventory adjustment combined with slack demand during
the first 50,000
half of the year. The second half will see the end of the inventory
20,000adjustment, a recovery in construction demand, and a market upturn, leading toan upward phase.
0
During fiscal
2015, we will continue to promote activities0 to gain new customers
11
12
13
14
11
12
13
14
15
and boost the number of construction project orders. We will also maintain ourefforts to firmly implement strategies such as improving performance through M&A
and forming alliances with partner companies to expand mutually beneficialtransactions. In addition, we will establish satellite bases to explore increased
demand for steel, enhance JIT/small-lot orders/processing, and share information/
joint sales between departments.

15

Steel (Overseas)
Fiscal 2014 Results
In fiscal 2014, yen depreciation did not translate into larger exports, and steel
exports totaled 42.28 million tons, down 5% year on year. In China, growth ofdemand for steel slowed due to weaker growth of infrastructure and housing
construction. While demand in the ASEAN region remained firm in general, despite
variations among member countries, mills in China boosted their exports to ASEAN
countries to make up for sluggish domestic demand, causing market prices
overseas to drop. The intention to buy faltered in anticipation of lower prices, andanti-dumping measures were implemented against steel from China, resulting inunstable demand.
To respond to these challenges, we capitalized on the recovery in competitivenessof Japanese steel products supported by yen depreciation and higher sales of steel
sheets and steel plates, mainly to the Middle East. We also benefitted from larger
sales volume, as sales of stainless steel to Asian countries such as China grew.
However, price pressure from Chinese products continued to weigh on theinternational market throughout the year, with growth in export sales below thatof export volume.

Looking Ahead and Key Strategies
Because of sufficient supply capacity worldwide, steel production is expected toremain at a high level in fiscal 2015. At the same time, mills in China are likely tocontinue to promote exports, a potential factor behind market volatility. Following a
sharp drop in crude oil prices since the second half of 2014, we expect some energyrelated projects to be canceled or postponed, suppressing demand for steel.
Additionally, the intention to buy is faltering across all business areas, as the market
has continued to weaken. As a result, demand is unlikely to recover strongly in thefirst half of fiscal 2015.
We intend to bolster sales of steel products manufactured in Japan, which
compete little against Chinese products. We will strive to expand sales of Japanesematerials, which are known for their high quality and credibility, and focus on
products that require quality certification. We will advance proposals for steel
products in terms of their functions as well as packages of multiple products tousers, taking advantage of our own processing facilities and inventories as well as
those of our business partners.
As for general-purpose commodities, we will deal in Chinese and South Korean
products that enjoy price competitiveness, rather than focusing on products madein Japan, and strive to expand sales to overseas users through our network andbusiness functions.

| HANWA ANNUAL REPORT 2015 | 11

Review of Operations

Metals and Alloys
Fiscal 2014 Results
The primary special metal business dealing mainly with nickel cathode and otherchemicals saw solid growth in terms of sales volume to the battery industry, andexpanded its product lineup.
In contrast, the special metals recycling business, consisting mainly of stainless scrap,
was weak in terms of both sales volume and earnings due to the shrinking domestic
sales market. Business to our affiliate companies expanded, as we aimed to transform it
into a business focused on processing with higher profitability.
The ferroalloy business was brisk in terms of sales volume, earnings and margins in
the first half of fiscal 2014, thanks partly to the strength of the steelmaking industry ingeneral. Following the stagnation of the steelmaking industry in China and other partsof the world in the second half, the business saw a sharp drop in earnings, as retained
sales volume failed to offset appraisal losses of inventories due to price declines andlower commissions resulting from fierce competition.
The light metals business, such as silicone and magnesium, faced difficulties,
hindered by excessive competition in the general-purpose product market and losses
resulting from our withdrawal from some premium markets for photovoltaic cells.
We saw growth in sales volume of the metal raw materials business overall, thanks
to the introduction of new product types. However, it was a very difficult year, as we
incurred losses from trade payables due to yen depreciation.

Net Sales(Millions of yen)

(Millions of yen)

(Millions of yen)

Looking Ahead and Key Strategies

Regarding the primary special metals, we expect 100,000
a further rise in sales volume andearnings, as new products are starting to perform as planned, offsetting higher
investment costs.
80,00060,000In the special metals recycling business, we will continue to diversify our customer
60,000 cooperation with affiliatedbase both in Japan and overseas and strengthen
companies, a strategy that is likely to help revive profitability.
40,000obtaining a return from existing
In the ferroalloy segment, we expect to start 40,000
investments. We plan to carry out new upstream investments, while achieving
20,00020,000 sales volume.
profits from an expansion of sales regions and increased
In the light metals business, we intend to cut costs as much as possible, while00
focusing
efforts on retaining sales volume and our profit
margin, as we try to turn
11
12
13
14
15
11
12
13
14
15
the business around.
Both the special metals and ferroalloy segments entail higher costs in the shortterm with regard to upstream investments. However, following the sharp drop in
inflated prices of natural resources, costs related to holding interests in natural
resources have declined to reasonable levels, and we see opportunities to acquire
new interests. Accordingly, we will seek to establish new sources of future earnings
by undertaking investments carefully and proactively.
80,000150,000

100,000

50,000

0

11

12

13

14

15

Net Sales Composition

7.2%

12 | HANWA ANNUAL REPORT 2015 |Non-Ferrous Metals
Non-Ferrous Metals
Fiscal 2014 Results
After a solid performance in the first half, the copper and aluminum markets wereaffected by a slowdown in the Chinese economy and the outflow of speculative
money amid lower prices in crude oil and commodities in general in the second halfof fiscal 2014. The price of copper tumbled from a peak of more than $7,000 to the$5,000 range toward the fiscal year-end, while that of aluminum slid from $2,100
to the $1,700 range. White metals such as lead, zinc and tin followed a similarcourse, posting record lows at the fiscal year-end.
Meanwhile, the price of the CIF premium remained on an upward trend fromthe beginning until the end of the fiscal year, as traders earned a better margin fromholding metals in the LME warehousing system and playing the multiple roles of
warehouse, financial institution and metal broker.
Despite the slowdown in the Chinese and other markets, we managed toachieve our sales targets set at the beginning of the fiscal year by securing volume.
Our efforts were aided by the trading of precious metal scrap worldwide and a
gradual increase in the handling of products targeted by the Basel Convention.
We succeeded in posting higher profit than expected, supported by thecontinued rise in the price of the CIF premium, which cannot be hedged.

Looking Ahead and Key Strategies(Millions of yen)

800,000

600,000

400,000

200,0000

We do not expect prices of a range of metals
to fallmuch further from their current(Millionsof yen)levels, as they are virtually approaching their bottom. On the other hand, a steep risein the market is also unlikely, considering the limited growth in the real demand formetals, given growing signs of an economic150,000
slowdown in China and Europe. The
price of the CIF premium, which is now at a record level after a long period of
increase, is expected to start declining sharply, as lower contango fails to cover
warehousing and interest rate costs, forcing100,000
traders to start releasing ingots fromthe LME warehousing system. This drop in the price is difficult to hedge against at
LME, and we expect the movement of the premium, which helped push up profit for
50,000 to become a major factor behindaluminum raw material in the previous fiscal year,
a decline in profit. In cooperation with affiliated companies, we will seek to carry out
increased processing of products we handle in a bid to establish an earnings structure0that is less vulnerable to fluctuations in the market.
11
12
13
14
15
11
12
13
14
15
In the copper and precious metal raw materials business, we aim to expand
procurement and sales regions and boost the number of procurement and processing
bases to increase volume.
As for white metal raw materials and products targeted by the Basel Convention,
we will also expand the types of products we handle, and raise the number ofprocurement regions and the number of sales regions, to achieve sales volume andearnings that are higher than the previous fiscal year.

Net Sales(Millions of yen)

(Millions of ye

100,000

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

0

0

11

12

13

14

15

Net Sales Composition

4.7%| HANWA ANNUAL REPORT 2015 | 13

Review of Operations

Food Products
Fiscal 2014 Results
The prices of raw materials for marine products, which rose on a global scale during fiscal
2013, remained high during the first half of the fiscal year, despite disrupting factors
such as the ban on imports of food items by Russia. Price increases gradually spread
across the sector, with both raw materials and final products contributing to earnings.
On the other hand, higher prices started to suppress demand on a global scale, andthe domestic prices of our mainstay shrimp and salmon fell sharply in the second half offiscal 2014 due to an imbalance in supply and demand. Amid the worsening domestic
business environment, two of our customers discontinued their operations and wewere forced to sell the outstanding orders elsewhere, causing market prices and our
profit to drop further. Prices at overseas production bases ended fiscal 2014 at thelowest price range in 10 years, after a series of price adjustments in U.S. dollar terms.
Food safety was highlighted during fiscal 2014, as foreign objects were found infood products offered by McDonalds and other food manufacturers. We focused
our efforts to review and boost our food safety regime on unpacking and examining
all the shipments produced by the same overseas food manufacturer after foreign
objects were found in smelts imported by another Japanese food trading company.

Looking Ahead and Key Strategies
Net Sales(Millions of yen)

100,000

80,00060,00040,00020,000

0

15

11

12

13

14

15

Net Sales Composition

5.0%

14 | HANWA ANNUAL REPORT 2015 |We believe that some time is required before supply and demand for shrimp and salmon,our(Millions
mainstayanalyzeof yen) products, are adjusted globally. We plan to share and(Millionsof yen) information
with Seattle Shrimp & Seafood Company, a sales company conducting business in ourlargestcustomer base of North America, and with our overseas offices,500,000
150,000 in an effort toenhance the accuracy of predicted demand for purchasing and sales purposes.
Lower
and boost demand
400,000 prices in U.S. dollar terms stimulate consumption120,000
overseas, and offer the possibility of turning around prices at production bases. For
90,000fiscal300,000
2015, we expect overseas markets to have a larger impact on
prices, in contrast
to the Japanese market, which is weighed down by yen depreciation.
60,000 and approach
200,000We
will continue to sell raw materials and processed foods,
end-users in Japan. We plan to further establish our sales network, covering
100,000 all the way to end-users, through Hanwa Foods Co.,30,000
producers
Ltd. and Marumoto
Honma Suisan Co., Ltd., a herring roe processor that we acquired in July 2014.
0
To meetrising demand worldwide for marine products, we intend0 to expand sales
11
12
13
11
12
13
14
15
efforts at Seattle Shrimp & Seafood Company, Inc. in North America and to promotesales of imported food items by our branch offices in China and Southeast Asia, in abid to accelerate the establishment ofour global sales network. Reflecting
yen depreciation, we will focus efforts
on exports of marine products fromJapan, aiming at globalization and acomprehensive business structure.
As for the livestock (chicken meat)that we focus on, we aim to establish
a commercially viable business by
diversifying production locations andcarrying out more extensive processingin Thailand.

141

Petroleum and Chemicals
Fiscal 2014 Results

80,000

Crude oil prices fell sharply after July, reflecting an increased supply from shale oil
producers, concerns for lower demand due to stagnation of the world economy, and
OPEC’s decision not to cut its production to shore up prices. At the beginning of 2015,
the WTI crude oil price slid below $45/BBD.
In the domestic oil market, the price was relatively firm during the first half of fiscal
2014, due partly to wholesale companies’ policy to maintain their prices. However, theprices of oil products plunged in the second half, hit by the sharp decline in crude oil
prices and a supply glut caused by slumping sales. Crack spreads also decreased.
In the Petroleum Department, sales were favorable for imports during the regular
maintenance of wholesalers’ refineries and sales of C heavy oil to utility companies
and large direct users, and this contributed to earnings. Transfer of commercial
rights to our subsidiary Toyo Energy Corporation went smoothly as well, helping toboost our collaborative system.
In the bunker oil business, we succeeded in boosting sales mainly in Asia, bycapturing changing demand following the tightening of environmental regulations.
The chemicals business saw its profitability deteriorate, as prices of raw materials
for synthetic resins plummeted in the autumn. Earnings also fell in the imported
products segment, due to a failure to pass on higher costs from yen depreciation.
The paper business was sluggish, due to quality problems related to metal-joined
paper at some of our clients. Exports of old and wastepaper grew on the back of yen
depreciation, contributing to earnings.(Millions of yen)
We saw brisk procurement and sales of palm kernel shell (PKS), a new type ofenergy, and achieved our target volume100,000
as planned.

60,000

Looking Ahead and Key Strategies(Millions of yen)

80,00040,00020,000060,000The potential for upward movement in the
crude oil price is limited, as high levels of
crude inventories in the United States and the current abundant supply from OPEC
40,000fully counterbalance concerns over developmentsin the Middle East.
Domestic demand is expected to remain weak. Since demand for C heavy oil is
20,000likely to decline after the resumption ofoperations at nuclear power plants, we
believe that price competition will intensify.
The Petroleum Department will seek to0 establish an efficient sales structure,
11
12
13
14
15
11
12
13
14
15
while further developing cooperation with our subsidiary Toyo Energy Corporation.
We also plan to start full-fledged sales of PKS, as biomass boilers start operations inJapan, and work further on recycled fuel (RPF) from regenerated heavy oil and waste
tires, as well as on coal and oil coke. We will also direct efforts to setting up a system
to sell electricity amid expanding liberalization in the industry.
The bunker oil business will draw the attention of ship-owners in the European Unionand the United States to our advantage of supply in Asia, in an effort to increase volume.
The chemicals business willseek to expand raw materials andproducts, while closely monitoring
the synthetic resin market andforeign exchange movements.
The paper business will center
efforts on expanding our supplierbase both in Japan and theUnited States, to boost sales ofold and waste paper in ASEAN.

Net Sales(Millions of yen)(M

500,000

400,000
300,000

200,000
100,000

0

11

12

13

14

15

Net Sales Composition

24.3%| HANWA ANNUAL REPORT 2015 | 15

Review of Operations

Other Business (Lumber and Machinery)
Fiscal 2014 Results
LumberHousing starts totaled 890,000 units in fiscal 2014, down 9% year on year. Of thistotal, 360,000 units were conventional constructions (down 12%). The declines
reflected a backlash from the surge in rush demand before the consumption tax
increase went into effect in April 2014. Despite falling demand and a year-on-year
drop of about 8% in product prices, we benefited from a steady business with
end-users and higher exports of domestic lumber on the back of yen depreciation.
Our profitability fell, as demand dropped in the first half of the fiscal year andprices declined as a result of rising inventories at ports. Although the balance between
supply and demand improved in the second half, we reported low earnings.
The lumber business dealing with housing makers grew by expanding transactions
including those for steel parts. The Japanese lumber business saw higher sales of logs
and product exports, as well as Japanese plywood.
As for imported wood products, our mainstay European lumber continued to enjoy thelargest share despite a small margin, while Russian lumber gradually emerged as a stable business.
The surface material business is taking a long time for to reach the stage ofcommercialization, but we are continuing with product development.
MachineryIn the leisure facilities business, we delivered medium-sized amusement rides to Fuji-Q
Highland and Lake Sagami Pleasure Forest and delivered rollercoaster cars. We also
secured large orders scheduled for delivery in fiscal 2015 and 2016.
In the industrial machinery business, we launched sales activities of facilities for blastand electric furnaces and delivered large cranes to an electric furnace manufacturer. Our
efforts were centered on sales of large labor-saving and automated line equipment, suchas the equipment to manufacture temporary scaffolding. We actively carried out similar
sales activities in eastern Japan.
As part of our first sales efforts overseas, we started recommendation-based sales ofautomation and labor-saving equipment in China, where labor costs have risen significantly.

Net Sales(Millions of yen)

150,000
120,000
90,000

Looking Ahead and Key Strategies

60,00030,000
0

11

12

13

14

15

Net Sales Composition

9.4%

16 | HANWA ANNUAL REPORT 2015 |Lumber
While housing starts in fiscal 2015 are expected to continue to decline, we project
housing starts of 850,000 to 870,000 units in total, rather than a sharp decline. We
believe that “survival of the fittest” will continue to prevail across the industry.
Accordingly, we will seek to establish a stable earnings structure by strengthening our
relationship with end-users. Specifically, we will focus on (1) lumber and steel products
for housing and non-housing use, (2) exports of logs and wood products and domestic
sales of plywood and the establishment of the domestic lumber business, including
wood-chip sales for biomass power generation, and (3) rapid commercialization of thesurface material business through product development.
MachineryIn the leisure facilities business, we will increase sales personnel for amusement parks andbegin approaching amusement parks in a number of regions. We also plan to conduct sales
activities targeted at commercial facilities, in addition to conventional amusement parks.
The industrial machinery business will continue joint sales activities with thedomestic steel business, as part of our plan to boost the visibility of the business andexpand the number of customers. We will also focus on nurturing personnel capableof recommendation-based sales activities developed from customers’ perspectives(automation and labor-saving). As in the domestic market, the industry machinery
business will also conduct joint sales activities overseas with sales personnel in foreign
branch offices, to improve the visibility of the business among foreign customers.

Corporate Governance
Basic Corporate Governance Policy

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.
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 and reachdecisions. They also submit issues to the Board of Directors thatinvolve 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,
conducts an evaluation of the directors’ performance. The
Compensation Committee, which determines each director’scompensation, and the Selection Committee, which governs theselection of directors, both operate under the Evaluation Committee.
The Officers Evaluation Committee meets once a year to perform
a comprehensive evaluation of the directors’ performance. This
includes an assessment of the level of commitment and motivation ofeach director and a mutual evaluation process for all the directors.
The results of the evaluation provided by the Officers Evaluation
Committee are used by the Compensation Committee, which includes
outside directors, to determine each director’s compensation. The fixedmonthly compensation is then submitted as a regular salary plan to theBoard of Directors. In terms of the directors’ bonuses, we use a system thatawards a bonus directly linked to profits and clearly reflects each individual
director’s achievement level. The Board of Directors approves this profitbased calculation model after the Officers Evaluation Committee reviews
it. The corporate auditors have also approved this system.
To select directors, the Selection Committee, which includes
outside directors, reviews the coming year’s members based on their

We aim to fulfill our social responsibilities as a good corporate citizen
so that we can gain and retain the respect from stakeholders and berecognized as a valuable enterprise. We work to establish a highdegree of transparency in management systems to ensure full legal andregulatory compliance and respect for social norms.
In addition to participating in many corporate social responsibility(CSR) activities, we have established the CSR Committee and use acommitment to CSR management to make our corporate brand evenmore respected.

Corporate Governance Structure
The structure and the numbers associated with it are as of the date ofsubmission of this report.
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, and to monitor the performanceof duties by the Company’s administrative organizations operating
under the Management Committee. We then report our findings at
the General Shareholders’ Meeting after completing our own
reviewing process.
The Board of Directors, which comprises 15 directors, including
two outside directors, meets once a month as a rule to deliberate anddecide on important business plans and proposals concerning the
Hanwa Group, and to oversee business operations.

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

Recommendation

Officers Evaluation Committee
13 internal directors, 2 outside directors
Election
Committee

Compensation
Committee

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

Oversight/audit

Board of Auditors
2 standing corporate auditors
3 outside corporate auditors

Coordination

Independent Auditors

Recommendation
Election/supervision

Disclosure Committee
ReportInformation gathering/administration

Oversight/audit
Cooperation

President
Awareness/support

Recommendation

Human Resource
Development Committee

AdviceInvestment Examination
Committee

Operating bases(Japan/overseas)

Compliance Committee
Internal Reporting System

Recommendation

Application

Security Trade Control Committee

Examination/
administration

Administrative
divisionsExamination/
recommendation

External Attorneys

Internal Control Committee
AdviceInternal Audit Department

Internal audit

Overseas Audit Office

Guidance

Group Company Corporate
Auditors Conference

Cooperation

Evaluation/oversight
Document control

SupportGroup companies

Cooperation

Recommendation

Management Committee
Committee Chairman: President
23 executive officers

OperatingdivisionsElection/dismissal

Accounting audit/internal control audit

Operationalorganization

Election/dismissal| HANWA ANNUAL REPORT 2015 | 17

Corporate Governanceevaluation and their performance. A draft is then submitted to theBoard of Directors. A proposed list of candidates is then forwarded to
the Regular General Shareholders’ Meeting.
Explanation of why this system was adopted
We have expanded our business over the years across a wide rangeof business fields, while making optimal use of the high level ofexpertise we can offer as a distribution specialist. We are fully awareof the responsibility entrusted to us by our shareholders. Our daily
business decisions are therefore carefully made with the leadership ofour directors, who understand thoroughly the Company’s operations.
In addition, business matters of significance are put through theBoard of Directors for discussion. We believe that the model we haveadopted, in which a separate Board of Auditors (including outside
corporate auditors) is set up to perform an audit and inspection, isthe most appropriate for our company. In 1994, as part of our efforts
to remain accountable and improve the transparency of our businessdecisions for our stakeholders, including our shareholders, we began
hiring outside directors. They provide us with a more objective pointof view and act as a checking mechanism.
We also believe that we enable our corporate auditors to performtheir duties effectively by allowing them to attend important
meetings, including managers’ meetings, and to request advance
information before important plans are finalized. Moreover, we haveadopted a system in which preliminary reviews of management issues
are performed in various committees such as the Officers Evaluation
Committee, the Investment Examination Committee, and theCompliance Committee. Enhancement of these management systems
makes our corporate governance system highly effective.

Internal Audit and Auditing by Corporate Auditors
An internal audit is performed by the audit division in the Internal
Audit Department on the Company’s domestic bases as well as othernational group companies. The audit is centered mainly on monitoring
their accounting and compliance 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 the Board of
Directors on issues that are deemed relevant and important. The audit
division, which collaborates continually with the corporate auditors,
may also act as support staff for the auditors and prepare reports asrequested by the Board of Auditors. Overseas bases including overseas
companies are inspected by the Overseas Audit Office and monitored
mainly for their accounting practices, compliance, and internal systems.
The office submits reports to the director responsible, who then reportson the overseas bases to the Board of Directors. Furthermore, theOffice prepares reports when requested by the Board of Auditors.
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 and audit theexecution of duties by the management. With the participation of theoutside corporate auditors, who have ample knowledge andexperience in corporate activities, the Board of Auditors maintains its
independence from the top management to perform auditing duties
appropriately. It also exchanges views and opinions with the president
as well as managing officers and presents the findings provided by the
corporate auditors to the Board of Directors.
Corporate auditors, the Audit Division, and the Overseas Audit
Office file audit reports to independent auditors periodically while
continually exchanging information to keep abreast of progress.
Our goal is to improve the monitoring function by increasing thelevel of collaboration.

18 | HANWA ANNUAL REPORT 2015 |The Audit Division also collaborates with the Internal Control
Division, which is tasked with organizing and evaluating our internal
control systems to efficiently share information and optimize theexecution of duties.

Overview of Potential Conflict of Interests Due to
Personal/Financial Relationships or Business Dealings
between Outside Directors/Corporate Auditors andCompanies Hiring Them
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, ensures thatno conflict of interest arises with the general stockholders.
Outside directors and outside corporate auditors are expected to act
as representatives for stakeholders, including stockholders. They are
expected to evaluate and consider business decisions as well as theappropriateness of the execution of duties from an objective point ofview. Therefore, only candidates with competence and experiencesuitable for this demanding position are selected. We also make use ofarticles in the Enforcement Rules for Securities Listing Regulations andthe Guideline for the Listing Management, both established by the
Tokyo Stock Exchange, as a reference for determining the level of
independence necessary for outside 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 withlaws and regulations and that the duties are performed properly byother employees. Note that the basic policies below are as of the dateof submission of our financial report.

Systems to ensure that the performance of duties by the
directors and employees complies with laws and regulationsa) Establish standards for corporate ethics and ethical behavior inaccordance with the Company’s creed.
b) Create the Compliance Committee chaired by the president, which
distributes a compliance manual to all Hanwa executives and employees
and verifies that compliance programs are being used effectively.
c) Establish a consultation service (using the Compliance Committee
and external attorneys) where all Hanwa Group executives andemployees can obtain advice on compliance matters, providing ameans of directly reporting compliance problems.
d) Collaborate with authorities such as the police to take determinedaction against anti-social influences and block all contact withsuch entities.

Systems to store and control information related toduties performed by the directorsa) Information related to the duties performed by the directors isstored properly in written documents or electronically (henceforthreferred to as “documents”), and these records are stored andmanaged in accordance with laws, regulations and Hanwa’s
regulations for document management.
b) Personnel responsible for managing documents act proactively
against loss or damage to stored documents and have installed alocking mechanism (including restricted access by passwords andother codes) and manage the documents accordingly.

Regulations and systems related to management of therisk of lossa) Directors, executive officers, corporate officers and department
managers 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. They

have also established the Investment Examination Committee, which
manages investment risks by studying proposals for new businessventures and new investments.
b) Each business department cooperates with the General Affairs
Department, the Information Systems Department, the Legal & Credit
Department, the Administrative Affairs Office, and other units oncompliance, environmental management, emergency responses,
information security, trade management, and other matters inaccordance with internal rules, manuals, and other guidelines. The
Compliance Committee, the Security Trade Control Committee, andother applicable committees (henceforth referred to as “committees”)
assist the departments by providing advice and educational support.
Advice from external attorneys and other experts is used as required.
c) The Human Resources Department works in collaboration with otherrelevant departments to implement educational and informative
programs to grasp thoroughly and accurately how to manage risks.
d) To verify the effectiveness of risk management, the Internal Audit
Department monitors all domestic Hanwa business bases and groupcompanies based on a predetermined auditing plan. Their reports
are then submitted to the Management Committee as well as thepresident when appropriate. Overseas bases including overseas
companies are inspected by the Overseas Audit Office andmonitored when appropriate. The director responsible then submits
a report to the Board of Directors twice a year to keep others
informed of the status of our overseas bases.
e) The Disclosure Committee reaches decisions on the importance andsuitability of information to be disclosed to ensure that informationis released to the public in a fair, timely, and appropriate manner.

Systems to ensure efficient execution of directors’ dutiesa) As a rule, the directors meet once a month to reach decisions ongroup management matters of significance and to supervise theexecution of business operations. As a rule, the Management
Committee meets twice a month. Its members discuss matters ofsignificance concerning management and reach decisions. They also
submit issues to the Board of Directors that concern matters
involving the Group’s management.
b) We will establish a medium-term business plan as well as a businessplan for the fiscal year, to realize our medium- and long-termbusiness strategies. The president also communicates periodicallywith departments to inquire about assessment of duties performed
and check the progress of work (including a review of the plan andmodification of methods to achieve the plan target), which improves
the efficiency of operation.
c) The Officers Evaluation Committee, chaired by the president, meetsonce a year to perform a comprehensive evaluation of the directors’
performance. This includes an assessment of the level ofcommitment and a mutual evaluation process for all directors. The
results are used to determine the directors’ compensation and also
in the selection of directors.

Systems to ensure proper operations in the corporate groupa) Regulations for the oversight of affiliated companies are established.
Through collaboration with these companies, we ensure efficientmanagement of operations and plan for comprehensive businessdevelopment.
b) The department or personnel responsible must understandthoroughly the status of our domestic and overseas affiliatedcompanies in order to manage duties in a comprehensive manner.
Other relevant departments may provide support to ensure that
duties are performed properly.
c) Compliance, risk management and other systems apply tooperations across the entire Hanwa Group. Committees and othersupervisory units provide guidance and education on the use of
these systems.

d) The Group Company Corporate Auditors Conference, comprised offull-time corporate auditors, auditors of affiliated companies, andthe Internal Audit Department, holds meetings as needed. Thesemeetings provide an opportunity to exchange information related toaudits of Hanwa and affiliated companies.

Systems related to employees assigned to assist thecorporate auditors, and the independence of such
employees from the directors
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 relationship with thecorporate auditors. In addition, these employees receive no orders or
instructions from the directors or anyone else concerning the directives
and orders received from the corporate auditors.

Systems for the directors and employees to report to thecorporate auditors and systems otherwise pertaining toreporting to corporate auditorsa) In addition to submitting reports on issues of significanceconcerning compliance, the directors submit reports to thecorporate auditors on matters related to laws and regulations,infractions and reports made to the compliance consultation service.
They also 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 theManagement Committee meeting.
b) The directors, executive officers, and employees must respond quickly
and accurately to requests for reports by the corporate auditors.
c) The Internal Audit Department and Overseas Audit Office submit
reports based on the schedule predetermined by the Audit Plan to thecorporate auditors concerning internal audits. They also investigate
and report on issues as requested by the corporate auditors.

Systems to ensure effective auditing by the corporate auditorsa) The corporate auditors exchange opinions with the representative
directors as well as directors of relevant departments and announce
their findings and views at meetings of the Board of Directors asneeded. In addition, the corporate auditors collaborate and exchange
their views with the independent auditors on the financial audit.
b) A system is established that allows the corporate auditors to attend
meetings of the Board of Directors and other important meetings,
inspect important documents, and investigate major departments
and subsidiaries.

Systems to ensure the reliability of financial reportsa) In accordance with the Fundamental Policy concerning Internal
Controls for Financial Reports, the internal controls reporting systemis operated in an efficient and effective manner.
b) The Management Committee oversees the establishment and operation of the internal systems of the Group. The Internal Audit
Department and Overseas Audit Office are supervised directly by
the Management Committee. They check and evaluate the establishment and operation of internal controls and submit reports to
the Management Committee. The Management Committee makes
appropriate corrections and modifications as needed based onthese reports.
c) The Internal Control Committee studies issues involving internal
controls and submits reports on the results of these studies to theManagement Committee. In addition, the Inter nal Control
Committee provides advice and assistance for examinations on theeffectiveness of the internal control systems performed by theInternal Audit Department and Overseas Audit Office, and offers its
views in an Internal Control Report.

| HANWA ANNUAL REPORT 2015 | 19

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) maintenance of financial soundness; and(6) workplaces geared to employee self-realization.
To promote CSR management, the CSR Committee,
chaired by President Hironari Furukawa, incorporates organizations including the Compliance Committee, Environmental

Committee, and the Hanwa Scholarship Foundation andengages 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

Donations

NPO & NGO

Management Committee

CSR Committee

Hanwa Scholarship
ProgramChairmanPresident
Vice Chairman ISO Environmental Management Officer
Secretariat
General Affairs Department
CSR & Environment Section
Members
General Managers of the relevant departments

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

Activities to enhance employees’ awareness of CSR

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

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

Compliance manual distributed to all officers and employees

20 | HANWA ANNUAL REPORT 2015 |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 58th 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, 2015, the program had distributed a total of ¥581 million
in scholarships, and the accumulated number of scholarshipstudents had grown to 1,030.
The Hanwa Scholarship Program looks forward to using
political, economic and cultural insight to assist a growing numberof outstanding students around the world to realize their goals as
globalization continues to advance in the 21st century.

Accumulated Number of Scholarship Students(Persons)

High school

1,000

University

Graduate school
75

75

77

79

765

773

783

800

151

151

151

151

68
66

800

66
62
56

600
52
49

400

422

18

200
4

0

28

604

662

479

318

3
181

41
7

548

712

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 Year(1)(5)(10) (15) (20) (25) (30) (35) (40) (45) (50) (55) (56) (57) (58) (Times)| HANWA ANNUAL REPORT 2015 | 21

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

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

2015

2011

2015

¥ 1,396,103$14,457,835

		

2014

2013

2012

For the year:
Net sales				¥ 1,737,398 ¥ 1,682,504 ¥ 1,511,325 ¥ 1,564,251
Operating income 			16,253
19,107

12,491

14,977

13,854

159,000

Net income 			
7,897
9,086

4,721

4,633

5,794

75,610Comprehensive income 		
19,45014,648

6,600

6,214

6,104

161,854

Net cash provided by (used in) operating activities 			
343
1,791

19,381

11,970(46,949)

14,905

Net cash provided by (used in) investing activities		
(13,693)(5,107)(5,244) 		

(12,009)(7,611)(113,947)

Net cash provided by (used in) financing activities		
19,339(4,928)(16,364)

1,596

51,272160,929

20,586 $204,003At year-end:
Cash and cash equivalents 		
¥24,515 ¥15,920Total assets		
651,457

593,352

552,908

582,405

532,798

5,421,128

Total net assets 		
142,750

125,362

120,674

115,957

110,459

1,187,900

Number of employees 			
2,610
2,772

2,208

2,201

2,060

¥

				

				

		

2015

2014

23,198¥23,411

Yen

¥

		

2013

2012

U.S. dollars (Note 1)

2015

2011

Per share data:
$

0.365

Net income 			38.11 ¥¥
43.85 ¥

22.78

Cash dividends 			
12.00
15.00

12.00

12.00

12.00

0.125

Net assets 			591.68682.46570.50548.22529.65

5.679

				

		

2015

2014

¥

22.35

%

¥

27.95

		

2013

2012

2011

Key financial ratios:
0.8
1.4
1.5
Return on assets (ROA)				

0.8

1.2

6.6
6.9
Return on equity (ROE)			

4.1

4.1

5.4

190
180
Net debt/equity ratio (Note 2)			

180

190

200

Notes: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥120.17=$1.00.
2. Net debt/equity ratio = Net interest-bearing debt/equity.
Net interest-bearing debt = Interest-bearing debt – cash.

22 | HANWA ANNUAL REPORT 2015 |Management’s Discussion and Analysis
Operating Results
Operating Results for the Fiscal Year Ended March, 2015
During the fiscal year under review, the conditions in the world economy
in general were mixed. The U.S. economy improved gradually, amid
predictions about the timing of a reduction in monetary easing, while
the European economy remained sluggish due to concerns aboutsovereign risk.
With China in a transition phase to a stable growth under its new
economic policy, the pace of economic growth slowed as a result ofgreater restrictions on real estate trading and financial speculation.
Other emerging countries also experienced economic fluctuations
due to significant changes in their financial environments, together
with a number of political and geopolitical issues.
The Japanese economy continued to show signs of modest
improvement, through government measures taken in line with
“Abenomics” and monetary easing by the Bank of Japan, but
remained rather subdued on the whole. This reflected sluggish
construction investment at the execution phase due to a labor
shortage and rises in labor costs, coupled with a reactional fall indemand following a rise in the consumption tax rate and asubsequent prolonged slump in consumption.
In these circumstances, the Group posted consolidated net
sales of ¥1,737,398 million for the consolidated fiscal year ended
March 31, 2015, representing a year-on-year increase of 3.3%,
due mainly to higher net sales in the steel business and themetals and alloys business. Operating income rose 17.6%, to¥19,107 million, mainly reflecting growth in the metals andalloys business and the other business. Net income also climbed
to ¥9,086 million, representing a 15.1% increase, due mainly toa drop in income taxes reflecting a fall in taxable income in linewith the sale of real estate recorded as a valuation loss in previous
fiscal years.
Net Sales
Net sales increased 3.3% year on year to ¥1,737,398 million, due
mainly to higher net sales in the steel business and the metals andalloys business. Domestic sales were up 2.7% to ¥1,284,291 million,
while overseas sales were up 5.0%, to ¥453,107 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 expanded 3.1% to ¥1,681,668 million. This was due mainly
to a rise in prices of imported products accompanying the depreciation of
the yen and an increase in the purchase volume of steel products.
SG&A expenses rose 4.3% to ¥36,623 million, primarily reflecting
a rise in salaries and bonuses, and an increase in personnel expenses
due to the inclusion of newly consolidated subsidiaries.
Operating Income
Operating income for the consolidated fiscal year under review rose
17.6% to ¥19,107 million, from ¥16,253 million a year earlier, due
mainly to higher sales revenue in the metals and alloys business andthe other business. The result raised the ratio of operating income to
net sales by 0.1 percentage point from the previous consolidated fiscal
year, to 1.1%.
Other Income (Expenses)
Net other expenses amounted to ¥6,089 million. Expenses reflectedprimarily a foreign exchange loss on trade notes and accounts payablein foreign currencies, reflecting a rapidly weakening yen, loss from saleof investment in an affiliate, and a loss on disposal of property andequipment resulting from the relocation of the Tokyo head office.
These factors were partly offset by a gain on sales of property andequipment accompanying the sale of real estate for rent and a gainfrom inclusion of Tokyo Kohtetsu Co., Ltd. in the scope of equity
method application due to an additional acquisition of shares that
increased voting rights to 26.4%.
Income Taxes
Income taxes decreased 35.2% from the previous consolidated fiscal
year to ¥3,876 million, reflecting a drop in taxable income due to thesale of real estate for rent that was recognized as a revaluation loss
by applying the Land Revaluation Law in the previous fiscal years.
Net Income
Net income advanced 15.1% from the previous consolidated fiscal yearto ¥9,086 million. Accordingly, net income per share rose to ¥43.85,
from ¥38.11 in the prior year.

Net Sales and Operating Income

Net Income and ROE(Millions of yen)

(Millions of yen)(%)

(Millions of yen)

(Millions of yen)

Total Assets and ROA(%)

1,600,000

32,00012,00016

600,000

4

1,200,000

24,0009,000

12450,000

3

800,000

16,0006,000

8300,000

2

400,000

8,000

3,000

4

150,000

1

0

0

0

0

0

11

12

Net Sales (left scale)

13

14

15

Operating Income (right scale)11

12

ROE (right scale)

13

14

15

0

11

12

ROA (right scale)

13

14

15

| HANWA ANNUAL REPORT 2015 | 23

Sources of Capital and Cash Liquidity
Financial Condition
Total assets increased 9.8% to ¥651,457 million from the previous
consolidated fiscal year, reflecting higher inventories and tradereceivables resulting from higher sales.
Liabilities expanded 8.7% to ¥508,707 million as a result of
increases in commercial paper and long-term debt due after one
year, and interest-bearing debt grew 10.8% to ¥272,576 million.
The net debt/equity ratio (net interest-bearing debt as a percentageof equity) stood at 180% as of March 31, 2015.
Net assets grew 13.9% to ¥142,750 million. The expansion was
attributable mainly to the accumulation of retained earnings fromnet income and an increase in land revaluation difference. Accordingly,
the equity ratio at March 31, 2015 rose to 21.7% from 20.6% a
year ago.
Cash FlowsNet cash provided by operating activities totaled ¥1,791 million, up¥1,448 million from the previous consolidated fiscal year. This wasdue primarily to the curbing of expansion in working capitalrequirements, which mainly reflected a fall in prices of petroleum
products, and the recording of advances received that were related
mainly to contracted works.
Net cash used in investing activities increased by ¥8,449 million
from the previous consolidated fiscal year, to ¥13,693 million. Thiswas primarily attributable to an increase from the purchase ofinvestment securities, which resulted mostly from corporate acquisitions to strengthen the Company’s distribution function andinvestments to form alliances, and the recording of loans to an
investee.
Net cash provided by financing activities amounted to ¥19,339
million, in contrast to net cash used of ¥4,928 million in theprevious consolidated fiscal year. This resulted primarily from anincrease in commercial paper and a decrease in repayments oflong-term debt compared to the previous consolidated fiscal year.
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 ensurestable liquidity and agility in liquidity management, however, it may
fund its activities by issuing bonds and commercial paper in thecapital markets from time to time.
The Group meets its working capital requirements principally
through floating-rate long-term borrowings from banks to securestable funds, while short-term bank borrowings are used for day-today funding. Overseas subsidiaries borrow from their respective
local banks. Capital investments and other long-term funding needs
in Japan and abroad are, in principle, met by long-term borrowings
from Japanese sources. Short-term borrowings as at March 31,
2015 stood at ¥70,211 million, mostly denominated in yen. The
Group’s outstanding long-term loan was ¥134,297 million, including
the current portion of long-term loan of ¥11,944 million.
The Group issues bonds primarily to fund working capital. As of
March 31, 2015, bonds outstanding consisted of straight bonds
amounting to ¥40,000 million. To increase its flexibility to issue bonds
in a timely manner to take advantage of or to meet changing market
environments and internal financial requirements, the Company has
filed for shelf registration. As of March 31, 2015, the unused aggregate principal amount of the shelf registration for straight bonds forsubscription in Japan amounted to ¥20,000 million.
Advocating overall corporate value improvement and sustainable growth, the Group attempts to conduct efficient management
to secure funds needed for business growth and maintain a healthyfinancial balance.

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

Total Net Assets andEquity Ratio

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

BPS and EPS(Millions of yen)(%)

(Millions of yen)

(%)

(Yen)

(Yen)

125,00030

250,000

250

750

60

100,000

24

200,000

200

600

48

75,00018

150,000

150

450

36

50,00012

100,000

100

300

24

25,000

6

50,000

50

150

12

0

0

0

0

0

11

12

13

Equity Ratio (right scale)

24 | HANWA ANNUAL REPORT 2015 |

14

15

11

12

13

14

Net Debt/Equity Ratio (right scale)

15

0

11
BPS (left scale)

12

13

14

EPS (right scale)15

products. These are commodities whose prices are highly susceptible tofluctuations in supply and demand and movements in foreignexchange. The Group’s business performance and financial position
could be adversely affected in the event of the Group’s inability torespond adequately to price fluctuations of such commodities.
Foreign Exchange Fluctuations
The Group is engaged in worldwide procurement and sales of goods.
Foreign currency-denominated profits or loss, costs, assets, liabilities
and other accounting records associated with areas outside Japanare translated into Japanese yen amounts in the preparation offinancial statements. While the amounts reported in original currencies
remain unchanged, the post-translation amounts are subject to theconversion rate applied to them. Generally speaking, a stronger yen
relative to other currencies (especially against U.S. dollars, which
account for a substantial portion of the Group’s sales) adversely
affects the Group’s export transactions, while it favorably affects theGroup’s import transactions.
Interest Rate Fluctuations
The Group funds its operating, investing and financing activities byborrowing from financial institutions and by tapping into the bondand other capital markets. To hedge against interest rate fluctuations, the Group may execute interest rate swaps to cover certain
funds subject to floating interest rates. However, the Group’s business performance and financial position may be adversely affected if
interest rates change in a direction unfavorable to the Group.
Stock Price Fluctuations
The Group holds marketable securities at home and abroad mostly ofwhich are issued by its business counterparties that are subject toprice fluctuations. Price fluctuations of the securities it holds could
impact the business performance and financial position of the Group.
Counterparty Credit Risk
The majority of trade receivables held by the Group are based onprior granting of credit limits to its business counterparties. While theGroup has put in place stringent and skillful credit management,
there is no guarantee that all such receivables can be fully recovered.
In the event of unanticipated bankruptcy or commencement of thecivil rehabilitation proceedings filed on behalf of or against a businesscounterparty, the business performance and financial condition of
the Group could be adversely affected.
Business Investment Risk
The Group makes business investments to strengthen existing businesses and to expand the scope of its business. Such investments arecarried out upon completion of prescribed approval procedures
specific to investment characteristics and monetary amounts to beinvested, including scrutiny by the investment committee. However,if the value of any company in which the Group has invested deteriorates or profits generated are less than initially anticipated, theGroup’s business performance and financial condition could be
adversely affected.
Liquidity Risk Associated with Funding Activities
The Group funds its operating, investing and financing activities byborrowing funds from financial institutions and issuing bonds andother instruments in capital markets. For funding, the Group strives
to secure cash on hand based on estimated funding requirements.
However, factors such as disruptions in financial markets, regulatorychanges affecting the financial industry in Japan or elsewhere, thedowngrading of the Group’s credit ratings or changes in financial
institutions’ lending policies could significantly affect the Group’s
funding environment. These changes could restrict the Group’s
funding activities and result in higher funding costs, thus impacting
the business performance and financial condition of the Group.
Risks Associated with Global Activities and Entry toOverseas Markets
The Group has stepped up efforts recently to enter Chinese andother Asian markets as well as markets in the United States andEurope. The Group may face a number of risks inherent in overseas
business activities, such as the following:(1) Unanticipated changes in foreign trade regulations, especially interms of laws and customs duties.
(2) Political and/or economic changes and fluctuations in international currencies unfavorable to the Group.
(3) Difficulty in recruiting and retaining human resources.
(4) The possibility of immature infrastructure exerting negative impacts
on the Group’s activity or resulting in deteriorating customer satisfaction with respect to the Group’s products and services.
(5) Changes in taxation unfavorable to corporate activity.
(6) Acts of terrorism, war and social turmoil caused by other factors.
Legal and Regulatory Risks
The Group is subject to a variety of governmental regulations 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 individual safety. It also administers
anti-seismic measures and conducts disaster drills. However, due tothe dispersion of the business locations and areas where employees
conduct their business, the Group may not be able to avert all thenegative consequences of a natural disaster. If damages beyond theGroup’s projected level are inflicted, the business performance andfinancial condition of the Group could be impacted.
Retirement Benefit Obligations
Retirement benefit costs and obligations are calculated based on
actuarial assumptions on discount rates and 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 2015 | 25

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
As at March 31, 2015 and 2014							Thousands of						Millions of yen
U.S. dollars (Note 1)

2015
Assets				

2015

2014

Current assets:							204,003¥
24,515 ¥15,920 $Cash and cash equivalents (Note 3)							Receivables:						
		Trade notes and accounts (Note 3):									125,772
15,114
12,569Unconsolidated subsidiaries and affiliates 							2,550,786
306,528
305,277
			Other									Loans:										18,5152,225
2,893
Unconsolidated subsidiaries and affiliates 										Other
		

99

—

824

(7,614)(915)(925)
Allowance for doubtful receivables							21,7192,610
2,000
Securities (Notes 3 and 4)							1,107,231
133,056
114,694
Inventories (Note 6)							
9,287
1,116
2,048
Deferred tax assets—current (Note 10) 							216,610
26,03013,850
Other current assets (Note 7)							4,247,133
510,378
468,326
			Total current assets										Investments and noncurrent receivables:						43,782
41,488Investment securities (Notes 3, 4 and 7)						364,334

120,762
14,512
5,083
Investments in and advances to unconsolidated subsidiaries and affiliates (Note 3)					
3,003
103
Loans receivable (Note 3)						24,990133,086
15,99316,009Other investments and noncurrent receivables							(2,455)(295)(1,307)
Allowance for doubtful receivables 							
			640,717
76,99561,376
Total investments and noncurrent receivables																	Property and equipment (Note 7):					
263,593
31,67632,601
Land (Note 11)							287,817
34,58735,475
Buildings and structures							219,023
26,32023,062Other								(263,260)(31,636)(29,563)
Accumulated depreciation							
			507,173
60,947
61,575
Total property and equipment																
			Other assets:			
890
107
217
Deferred tax assets—noncurrent (Note 10)							Net defined benefit asset

1,011

—

8,413

16,8022,019
1,858Intangibles and other assets (Note 7)										26,105
3,137
2,075
Total other assets 							¥ 651,457 ¥ 593,352 $ 5,421,128
			Total						
See accompanying Notes to Consolidated Financial Statements.

26 | HANWA ANNUAL REPORT 2015 |							Thousands of						Millions of yen
U.S. dollars (Note 1)

2015
Liabilities and Net Assets				

2015

2014

Current liabilities:							Short-term loans payable (Notes 3, 7 and 8)						74,004¥70,211 ¥$584,264

224,682
Commercial paper (Notes 3 and 8)							5,00027,000182,608
Long-term debt due within one year (Notes 3, 7 and 8)							31,601
21,944
Trade notes and accounts payable (Note 3):						
		31,755
Unconsolidated subsidiaries and affiliates							
1,420
3,816

1,467,413
		Other 							178,943
176,339
17,067
Accrued bonuses to employees 							
2,213
2,051
10,252
Income taxes payable							
3,542
1,232
329,567
Other current liabilities 							22,63939,604
			

2,847,608
Total current liabilities 							319,362
342,197										Noncurrent liabilities:							Long-term debt due after one year (Notes 3, 7 and 8)							1,267,812
134,280
152,353
Net defined benefit liabilities (Note 9)							
3,428
4,483
412
Deferred tax liabilities—noncurrent (Note 10)							67,7374,558
8,140
Other noncurrent liabilities 							46,643
5,307
5,605
			

Total noncurrent liabilities 							1,385,620
148,628
166,510										Contingent liabilities (Note 12)																Net assets (Note 11)							Shareholders’ equity:							Common stock: 						
		Authorized: 570,000,000 shares 						

		Issued: 211,663,200 shares 							379,887
45,65145,651

Capital surplus							
4255Retained earnings							683,289
76,52082,111
Treasury stock, at cost: 4,449,160 shares in 2015 and 4,440,708 shares in 2014					(12,033)(1,442)(1,446)
			Total shareholders’ equity							1,051,185
120,734
126,321
Accumulated other comprehensive income:						96,721
Valuation difference on available-for-sale securities, net of taxes						7,48511,623
12,699Deferred gains or losses on hedges, net of taxes							
(361)
1,526
27,045Land revaluation difference, net of taxes							323,25019,606
Foreign currency translation adjustments							
304
2,356
(30,457)
Remeasurements of defined benefit plans (Note 9)							(5,585)(3,660)			

125,614
Total accumulated other comprehensive income							1,87515,095

11,101
Minority interests							
2,753
1,334
1,187,900
			Total net assets							125,362
142,750

			Total							¥ 651,457 ¥ 593,352 $ 5,421,128| HANWA ANNUAL REPORT 2015 | 27

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income
For the years ended March 31, 2015 and 2014							Thousands of						Millions of yen
U.S. dollars (Note 1)
				
2015

2015

2014

Net sales								¥ 1,737,398 ¥ 1,682,504 $ 14,457,835

13,994,075
Cost of sales 							1,631,139
1,681,668
		463,760
Gross profit 							51,36555,730304,760
Selling, general and administrative expenses 							35,112
36,623
159,000
		Operating income							16,253
19,107								Other income (expenses):						11,617
Interest and dividend income 							
1,409
1,396

(23,866)
Interest expense							(2,947)(2,868)450(23,983)

Gain on sales of property and equipment						
—
128

1,065

Foreign exchange gain (loss)(2,882)Gain on sales of investment securities—

187

Share of profit of entities accounted for using equity method

207

—

—

1,723

Loss on valuation of investment securities						
(760)
(477)

(3,969)Loss on valuation of investments in capital(47)(1,889)Loss on disposal of property and equipment (Note 14)						
(90)
(213)

(1,772)(227)(3,795)
Loss on business of subsidiaries and associates (Note 13)							—(456)(5,801)Other, net							
(466)
(697)
Income before income taxes and minority interests						
108,330
13,98913,018

Income taxes (Note 10):						Current								31,696
5,253
3,809

Deferred							
558
734
67
Income before minority interests

32,254
5,987
3,876
					
76,076
8,002
9,142

Minority interests in income of consolidated subsidiaries							
(466)
(105)
(56)

Net income							75,6107,897 $¥
9,086 ¥

Minority interests in income of consolidated subsidiaries							
(466)
(105)
(56)
Income before minority interests						
76,076
8,002
9,142
Other comprehensive income (Note 15):						Valuation difference on available-for-sale securities, net of taxes						34,426
4,820
4,137
Deferred gains or losses on hedges, net of taxes							15,703(481)
1,887
Land revaluation difference, net of taxes							
1,531
33
184
Foreign currency translation adjustment

2,274

18,099—1,925
Total other comprehensive income 						6,64610,30816,0192,175

Remeasurements of defined benefit plans, net of taxes
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests

85,778

			
161,854
14,648 $¥
19,450 ¥
					
			
¥
19,271 ¥			
179

14,332$

160,3641,490

316							U.S. dollars						
Yen
(Note 1)
					
2015

Net income per share 				¥43.85Cash dividends per share 				15.00See accompanying Notes to Consolidated Financial Statements.

28 | HANWA ANNUAL REPORT 2015 |

2015

2014

¥

38.11
12.00

$

0.365
0.125

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2015 and 2014
Millions of yen

Thousands

Number ofshares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Land
revaluationdifference,
net of taxes

Foreign
Remeasurements
currencyof definedtranslation
benefit plans,adjustments
net of taxes

¥

120
—
—
—
—
(481)

¥ 117
—
—
—
—
(85)

¥ (1,761) ¥— ¥ 2,442 ¥ 120,674———(2,901)———(1,461)
—
—
—
7,897
—
—
—
(7)
2,065
(5,585)311
1,160

Minority
interests

Total¥45,651 ¥
—
—
—
—
—

5
—
—
—
—
—

Balance at April 1, 2014..................... 211,663
Cumulative effects of changes inaccounting policies..............................
—

45,651

5

76,520(1,442)

7,485

(361)

32

304

(5,585)

2,753

125,362

—

—

1,924

—

—

—

—

—

—

—

1,924

45,651——

5——

78,444(2,797)412(1,442)
—
—

7,485
—
—

(361)
—
—

32
—
—

304
—
—

(5,585)
—
—

2,753
—
—

127,286(2,797)
412

—
—
—
—

—
—
—
—

(3,034)
9,086
—
—

—
—
(4)
—

—
—
—
4,138

—
—
—
1,887

—
—
—
3,218

—
—
—
2,052

—
—
—
1,925

—
—
—
(1,419)(3,034)9,086(4)11,801¥45,651 ¥5¥ 82,111¥ (1,446)¥ 11,623¥ 1,526¥ 3,250¥ 2,356

Balance at March 31, 2015................. 211,663¥ (3,660) ¥ 1,334 ¥ 142,750

Thousands of U.S. dollars (Note 1)

Thousands

Number ofshares ofcommon stock¥ 2,667
—
—
—
—
4,818

Deferred
gains or losses
on hedges,
net of taxes

Balance at April 1, 2013........................ 211,663
Cash dividends paid..........................
—
Change of scope of consolidation........
—Net income.......................................
—
Purchases of treasury stock...............
—
Other changes..................................
—

Balance at March 31, 2014 after
accounting policies changed............ 211,663
Cash dividends paid..........................
—
Change of scope of consolidation........
—
Reversal of revaluation reserve
for land...........................................
—Net income.......................................
—
Purchases of treasury stock...............
—
Other changes..................................
—¥ 72,868 ¥ (1,435)(2,901)—(1,461)
—
7,897
—
—
(7)
117
—

Valuationdifference on
available-for-salesecurities,
net of taxes

Commonstock

Balance at April 1, 2014..................... 211,663 $379,887
Cumulative effects of changes inaccounting policies..............................
——

Capitalsurplus$ 42

Retainedearnings

Treasurystock$636,765 $(12,000)

Valuationdifference on
available-for-salesecurities,
net of taxes

Deferred
gains or losses
on hedges,
net of taxes

Landrevaluationdifference,
net of taxes$62,287$ (3,004) $266$ 2,530

Foreign
Remeasurements
currencyof definedtranslation
benefit plans,adjustments
net of taxes

Minority
interests

Total$(46,476) $ 22,909 $1,043,206—

16,011

—

—

—

—

—

—

—

16,011

379,887
—
—

42
—
—

652,776 (12,000)(23,275)—
3,428—

62,287——(3,004)
—
—

266
—
—

2,530
—
—

(46,476)——

22,909——1,059,217(23,275)
3,428

—
—
—
—

—
—
—
—

(25,250)
75,610
—
—

—
—
(33)
—

—
—
—
34,434———
15,703———
26,779———17,076———
16,019———(11,808)(25,250)
75,610(33)
98,203

Balance at March 31, 2015................. 211,663 $379,887$ 42$683,289 $(12,033)$96,721$12,699$27,045$19,606

Balance at March 31, 2014 after
accounting policies changed............ 211,663
Cash dividends paid..........................
—
Change of scope of consolidation........
—
Reversal of revaluation reserve
for land...........................................
—Net income.......................................
—
Purchases of treasury stock...............
—
Other changes..................................
—$(30,457) $ 11,101 $1,187,900

See accompanying Notes to Consolidated Financial Statements.

| HANWA ANNUAL REPORT 2015 | 29

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2015 and 2014							Thousands of						Millions of yen
U.S. dollars (Note 1)
				
2015

2014

2015

Cash flows from operating activities:						Income before income taxes and minority interests						108,330
13,989 $¥13,018 ¥Adjustments to reconcile income before income taxes and minority interests						to net cash provided by operating activities:						32,379		Depreciation					
3,891
3,692
		 Amortization of goodwill					
187
1,556
105
		 Increase (decrease) in allowance for doubtful receivables						(1,050)(8,738)(1,791)
		 Increase (decrease) in net defined benefit liabilities						(5,109)(42,515)
4,164
		 Interest and dividend income					(1,396)(11,617)(1,409)
		Interest expense						2,86823,8662,947
		 Share of (profit) loss of entities accounted for using equity method(207)(1,723)—
		 Gain on sales of property and equipment(128)(1,065)—
		 Gain on sales of investment securities						
—
—
(187)
		 Loss on valuation of investment securities
477
3,969
760
		 Loss on valuation of investments in capital						
227
1,889
46
		 Loss on business of subsidiaries and associates
456
3,795
—
		 Loss on disposal of property and equipment							
213
1,772
90
		 Decrease (increase) in trade receivables						1,82415,178(14,574)
		 Decrease (increase) in inventories						(11,490)(95,615)(10,705)
		 Increase (decrease) in trade notes and accounts payable(5,589)(46,509)7,395
		 Increase (decrease) in advances received						13,261
110,352(787)
		Other, net					(2,359)(19,628)2,709
		Subtotal						9,09475,676
6,444
Cash flows during the year for:								 Interest and dividends received						1,41611,783
1,423
		Interest paid						(2,858)(23,783)(3,042)
		 Income taxes (paid) refund					(5,861)(48,771)(4,482)
Net cash provided by (used in) operating activities					1,79114,905343
Cash flows from investing activities:						Decrease in time deposits, net						60
4990Proceeds from redemption of securities—
2,000
16,643
Additions to property and equipment						(1,141)(3,807)(31,680)
Proceeds from sale of property and equipment						
184
1,646
13,697
Additions to investment securities						(4,432)(12,774)(106,299)
Proceeds from sale and redemption of investment securities					
329
3,069
25,539Purchase of shares of subsidiaries resulting in change in scope of consolidation(1,300)——Net decrease (increase) in short-term loans receivable						
554
(412)
(3,428)Additions to long-term loans receivable						
(6)(2,897)(24,108)
Proceeds from long-term loans receivable						
39
25
208
Other, net						
529
(603)
(5,018)Net cash provided by (used in) investing activities						(5,244)(13,693)(113,947)
Cash flows from financing activities:					
Net increase (decrease) in short-term loans payable						5,326(7,876)(65,540)
Net increase (decrease) in commercial paper						(6,000)22,000183,073
Proceeds from long-term debt, issuance of bonds						62,80445,015374,594
Repayments of long-term debt, redemption of bonds						(63,576)(36,649)(304,975)
Payment of cash dividends					(2,901)(2,797)(23,275)
Cash dividends paid to minority interests in consolidated subsidiaries						
(39)
(47)
(391)
Other, net						
(542)
(307)
(2,557)
Net cash provided by (used in) financing activities						(4,928)19,339160,929
Effect of exchange rate changes on cash and cash equivalents					
1,487
624
5,193
Net increase (decrease) in cash and cash equivalents						(8,342)
8,061
67,080Cash and cash equivalents at beginning of year						23,19815,920132,479
Effect of change in scope of consolidation
1,064
4,444
534
Cash and cash equivalents at end of year					15,920 $204,003¥
24,515 ¥See accompanying Notes to Consolidated Financial Statements.

30 | HANWA ANNUAL REPORT 2015 |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, 2015, whichwas ¥120.17 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 24 (21 in 2014) 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.
Equity method
As of March 31, 2015, the Company had 37 unconsolidated subsidiaries and 14 affiliates. The equity method has been applied to theinvestments in 1 of the affiliates. Investments in the remaining
unconsolidated subsidiaries and affiliates 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, oron the consolidated financial statement as the whole.
Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on
hand, readily available deposits and short-term highly liquid investments with maturities not exceeding three months at the time ofpurchase are considered to be cash and cash equivalents.
Allowance for doubtful receivables
The allowance for doubtful receivables is provided to cover possible losses oncollection. With respect to normal trade accounts receivable, it is stated at an
amount based on the actual rate of historical bad debts, and for certain
doubtful receivables, the uncollectible amount is individually estimated.
Securities
The Companies classify securities as (a) securities held for trading
purposes (hereafter, “trading securities”), (b) debt securities intended
to be held to maturity (hereafter, “held-to-maturity debt securities”),(c) equity securities issued by subsidiaries and affiliated companies, and(d) all other securities that are not classified in any of the above categories (hereafter, “available-for-sale securities”).
The Companies do not hold trading securities. Held-to-maturity
debt securities are stated at amortized cost. Equity securities issued
by subsidiaries and affiliated companies which are not consolidated
or accounted for using the equity method are stated at moving
average cost. Available-for-sale securities with available fair values arestated at fair value. Valuation difference on available-for-sale securities are reported, net of applicable income taxes, as a separate
component of accumulated other comprehensive income. Realized
gains on the sales of such securities are computed using moving

average cost. Other available-for-sale securities are stated at moving
average cost.
Inventories
Inventories are stated at the lower of cost (based, principally, on a movingaverage basis or a specific-identification basis) or net realizable value.
Property and equipment (except under lease)
Property and equipment are carried at cost. Recognized loss on impairment of long-lived assets has been deducted from acquisition costs.
Depreciation is principally provided on the straight-line method overthe estimated useful life of the asset. Major renewals and improvements are capitalized. Maintenance, repairs and minor renewals are
expensed as incurred.
Software costs
The Companies include software in “Intangibles and other assets”
and depreciate it using the straight-line method over the estimateduseful life, especially 5 years for computer software for internal use.
Bonuses
The Companies follow the Japanese practice of paying bonuses to
employees in June and December. At the balance sheet date, bonus
liabilities are estimated and accounted for on an accrual basis.
Income taxes
Income taxes comprise corporate tax, prefectural and municipal
inhabitants taxes and enterprise tax. The Companies recognize thetax effects of loss carryforwards and the temporary differences
between the carrying amounts of assets and liabilities for tax andfinancial reporting. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax
consequences of the temporary differences.
The Company and its wholly owned domestic subsidiaries fileconsolidated tax returns.
Retirement benefits
1. Attribution of estimated retirement benefits
To calculate benefit liabilities, the estimated amount of retirement
benefits is attributed to the consolidated fiscal year under review
based on the 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 (14 years) within the
average remaining service years of employees when costs accrue
from their service.
Actuarial differences are posted in expenses after the consolidated
fiscal year following their accrual based on the straight-line method for a| HANWA ANNUAL REPORT 2015 | 31

fixed period of years (14 years) within the average remaining service yearsof employees.
3. Adoption of simplified method by small companies
In calculating net defined benefit liability and retirement benefit
expenses, certain domestic subsidiaries adopt a simplified methodthat regards the benefits payable assuming the voluntary retirementof 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 gainor loss resulting from the changes in the fair value of the derivative
financial instruments until the related gain or loss on the hedged item
is recognized.
Also, if interest rate swap agreements are used as hedges andmeet certain hedging criteria, the net amount to be paid or received
under the interest rate swap agreements is added to or deducted fromthe interest on 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
32 | HANWA ANNUAL REPORT 2015 |dividends applicable to the respective years including dividends to be
paid after the end of the consolidated fiscal year.
Changes in accounting policies
The Company and its consolidated domestic subsidiaries adopted
article 35 of the “Accounting Standard for Retirement Benefits”[ASBJ Statement No.26, May 17, 2012 (hereinafter, “Statement
No.26”)] and article 67 of the “Guidance on Accounting Standard
for Retirement Benefits” [ASBJ Guidance No.25, March 26, 2015
(hereinafter, “Guidance No.25”)] from the current fiscal year, andhave changed the determination of retirement benefit obligations
and current service costs. In addition, the Company and its consolidated domestic subsidiaries have changed the method of attributing
expected benefit to periods from the straight-line basis to the benefit
formula basis and determining the discount rates.
In accordance with article 37 of Statement No.26, the effect ofchanging the determination of retirement benefit obligations andcurrent service costs has been recognized in retained earnings at the
beginning of the current fiscal year.
As a result of the application, net defined benefit liabilities
decreased by ¥2,989 million ($24,873 thousand) and retained earnings increased by ¥1,924 million ($16,011 thousand) at the beginningof the current fiscal year.
The effects of this change on operating income, income before income
taxes and minority interests, and per share information are negligible.
Accounting Standards Not Yet Applied•“Revised Accounting Standard for Business Combinations” (ASBJ Statement
No.21, September 13, 2013)•“Revised Accounting Standard for Consolidated Financial Statements”(ASBJ Statement No.22, September 13, 2013)•“Revised Accounting Standard for Business Divestitures” (ASBJ Statement
No.7, September 13, 2013)•“Revised Accounting Standard for Earnings Per Share” (ASBJ Statement
No.2, September 13, 2013)•“Revised Guidance on Accounting Standard for Business Combinations
and Accounting Standard for Business Divestitures” (ASBJ Guidance
No.10, September 13, 2013)•“Revised Guidance on Accounting Standard for Earnings Per Share”(ASBJ Guidance No.4, September 13, 2013)
1. Summary
The above standards and guidance have been revised primarily to
account for:(1) How the changes of the shares in subsidiaries, over which theCompany continues to control, should be treated by theCompany when additional stock of a subsidiary is acquired.
(2) Treatment of acquisition related costs(3) Presentation of current net income and the change of shareholder’s equity from minority interests to non-controllinginterests(4) Provisional application of accounting treatments
2. Effective date
Effective from the beginning of the fiscal year ending March 31, 2016.
Provisional application of the accounting standards is scheduled to
begin for business combinations effective after the beginning of the
fiscal year ending March 31, 2016.
3. Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are
currently in the process of determining the effects of these newstandards on the consolidated financial statements.

3. Financial instruments
At March 31, 2015 and 2014, information on financial instruments
was as follows.
(A) Qualitative information on financial instruments
Policy for financial instruments
The Group’s main business is the sales of various products ranging
from mainly steel, metals and alloys, non-ferrous metals to foodproducts, petroleum and chemicals, lumber, and machinery. The
Group also engages in other business activities such as steel material
processing, non-ferrous metal processing and amusement park
management and operations. While the Group depends primarily onbank borrowings to procure funds necessary for these operationaltransactions as well as investing and financing activities, the Groupseeks to diversify its financing instruments to ensure stable andflexible liquidity, funding these activities by issuing bonds andcommercial paper in the capital markets in some cases. Temporary
surplus funds are managed in low-risk financial assets.
It is the Companies’ policy to use derivatives only for the purposeof reducing market risks associated with assets and liabilities.
Components of financial instruments and risks
Trade notes and accounts receivable are exposed to credit risk ofcustomers. Some of them are denominated in foreign currencies andexposed to the foreign exchange rate fluctuation risk as well.
Securities consist mainly of listed stocks and are exposed to pricefluctuation risk. Some of them are denominated in foreign currencies,
which accompany foreign exchange rate fluctuation risk.
Long-term loans receivable are mainly for supplier of theCompany. The credit risk is managed in accordance with the Credit
Management Regulations.
Foreign currency denominated notes and accounts payable areexposed to foreign exchange rate fluctuation risk.
Short-term loans payable, commercial paper, bonds payable
and long-term loans payable are used for raising working capitaland investment funds, although they have liquidity risk related tochanges in financial market environments.
Foreign exchange future contracts and currency swap agreements
are used to hedge foreign exchange rate fluctuation risk associatedwith certain assets and liabilities denominated in foreign currencies.
Interest rate swap agreements are made use of for hedging fluctuations in future interest rates. Commodity forward contracts andcommodity swap agreements aim to hedge market risks associatedwith certain inventories and commitments.
Refer to No. 2, “Significant accounting policies — Derivatives andhedge accounting” for an explanation of the Companies’ hedging
instruments, hedged items, and evaluation of hedge effectiveness.
Risk management system for financial instruments
With regard to credit risk to which trade notes and accounts receivable are exposed, the Company sets a credit limit amount for eachbusiness partner and manages the outstanding balance in accordancewith the “Credit administrative provisions” while monitoring the credit
status on a regular basis. Furthermore, the Company is committed toreducing foreign exchange rate fluctuation risk to which trade notes
and accounts receivable and trade notes and accounts payable areexposed by means of derivatives trading.

Because price fluctuation risks associated with securities 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, 2015 and 2014 were as follows:| HANWA ANNUAL REPORT 2015 | 33

March31, 2015
					Book value

Millions of yen 			Fair value

DifferenceBook value

Thousands of U.S. dollars
Fair value

Difference(1) Cash and cash equivalents¥ 24,515¥ 24,515¥—$ 204,003$ 204,003$—(2) Trade notes and accounts receivable
321,642 			
2,676,558 		
Allowance for doubtful receivables(852) 			(7,090) 		
		Net		320,790
320,790—2,669,468
2,669,468—(3) Securities						a) Equity securities issued by affiliated companies
6,481
4,890
(1,591)53,932
40,692(13,240)b) Available-for-sale securities
36,47436,474—
303,520
303,520—(4) Long-term loans receivable
3,003 			24,990		
Allowance for doubtful receivables(9) 			
(75) 				Net		
2,994
2,994
—
24,91524,915—
Total assets¥ 391,254¥ 389,663¥ (1,591) $3,255,838$3,242,598$ (13,240)(1) Short-term loans payable¥ 70,211¥ 70,211¥$ 584,264$ 584,264$——
27,00027,000—224,682
224,682—(2) Commercial paper(3) Long-term debt due within one year
21,944
21,951(7)
182,608
182,666(58)(4) Trade notes and accounts payable
180,155
180,155—
1,499,168
1,499,168—(5) Long-term debt due after one year
152,353
152,540(187)
1,267,812
1,269,368(1,556)
Total liabilities¥ 451,663¥ 451,857¥(194) $3,758,534$3,760,148$(1,614)
Derivatives:						To which hedge accounting is not applied¥(2,046) ¥(2,046)¥—$ (17,026) $ (17,026) $—To which hedge accounting is applied
2,424
1,958
(466)
20,172
16,294(3,878)
Total derivatives
¥
378
¥
(88)
¥
(466) $
3,146$
(732) $
(3,878)March 31, 2014

					Book value

Millions of yen
Fair value

Difference(1) Cash and cash equivalents¥ 15,920¥ 15,920¥—(2) Trade notes and accounts receivable
317,846 		
Allowance for doubtful receivables(860) 				 Net		
316,986
316,986—(3) Securities						a) Held-to-maturity debt securities
5,006
5,010
4
b) Available-for-sale securities
29,89329,893—(4) Long-term loans receivable103			
Allowance for doubtful receivables—					 Net		103
103—
Total assets¥ 367,908¥ 367,912¥
4(1) Short-term loans payable¥ 74,004¥ 74,004¥—(2) Commercial paper
5,000
5,000
—
(3) Long-term debt due within one year
31,601
31,615(14)(4) Trade notes and accounts payable
180,363
180,363—(5) Long-term debt due after one year
134,280
134,443(163)
Total liabilities¥ 425,248¥ 425,425¥(177)
Derivatives:						To which hedge accounting is not applied
¥
(210)
¥
(210)
¥
—
To which hedge accounting is applied
(710)
(790)
(80)
Total derivatives
¥
(920)
¥
(1,000)¥(80)

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

34 | HANWA ANNUAL REPORT 2015 |Basis of determining the fair value of financial instruments is asfollows:
Cash and cash equivalents, Trade notes and accounts
receivable
The book values of cash and cash equivalents and trade notes
and accounts receivable approximate fair value due to their shortmaturities.
Securities
The fair value of securities is based on the quoted market price on thestock exchange. The fair value of bonds is based on the quoted priceprovided by financial institutions.
Long-term loans receivable
The book value of long-term loans receivable approximates fair value
due to their floating interest rates.

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

The following tables summarize book values of financial instruments whose fair values were hard to determine as of March 31, 2015 and 2014:							Thousands of					Millions of yen
U.S. dollars
					
2015

			

		

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

Book value

¥

8,031

2014

2015

Book value

Book value

¥

5,083

$

66,830(2) Available-for-sale securities:							Unlisted stocks				
¥
3,373
¥
4,213
$ 28,069
Unlisted foreign stocks				
3,935
2,109
32,745
Unlisted foreign convertible bonds				
2,577
2,207
21,445Investment in limited partnerships				
33
60
275
Total				
¥
9,918
¥
8,589
$ 82,534

The maturities of receivables and securities with maturities outstanding at March 31, 2015 were as follows:			Year ending March 31

		Millions of yen																2016

Cash and cash equivalents		
Trade notes and accounts receivable		
Held-to-maturity debt securities		Available-for-sale securities with maturity dates		Long-term loans receivable		Total						¥24,516
321,642—2,577
26¥ 348,761

From 2017 		
to 2020		

¥

¥

		

$ 204,011
2,676,558—
21,445216$2,902,230

¥

¥

—
—
—
—
685
685

Thereafter		

¥

¥

—
—
—
—
10
10

Thousands of U.S. dollars																2016

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

—
—
—
—
1,406
1,406

From 2021		
to 2025		

From 2017 		
to 2020		

$

$

—
—
—
—
11,70011,700From 2021		
to 2025		

$

$

—
—
—
—
5,700
5,700

Thereafter		

$

$

—
—
—
—
83
83

Long-term loans receivable of ¥901 million ($7,498 thousand) were excluded from the above table since due date for the redemption had not
yet been determined.

| HANWA ANNUAL REPORT 2015 | 35

4. Securities(A) The following tables summarize book values and fair values of held-to-maturity debt securities as of March 31, 2015 and 2014:
March 31, 2015
Not applicable.
March 31, 2014

					

Millions of yen 			Book value

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

Fair value

Difference

3,006

¥

3,013

¥

7

2,000

¥

1,998

¥

(2)

(B) The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available market
values as of March 31, 2015 and 2014:
March 31, 2015

					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¥

29,447¥

17,953$

95,648$245,045$ 149,397

8,508

¥

7,027

¥

(1,481)$70,800$58,475$ (12,325)

			Millions of yen

Acquisition cost

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

Difference

11,494

March 31, 2014
		Millions of yen 			Acquisition cost

Book value

Difference

10,016¥23,212¥

13,196

8,500

¥

6,681

¥

(1,819)(C)	The loss resulting from the valuation of the listed securities in the years ended March 31, 2015 and 2014 was as follows:							Thousands of					Millions of yen
U.S. dollars
					
2015

The loss resulting from the valuation of the listed securities				36 | HANWA ANNUAL REPORT 2015 |

¥

210

2015

2014

¥

76

$

1,748

5. Derivatives(A) The following tables summarize fair value information as of March 31, 2015 and 2014 for the derivatives to which hedge accounting
has not been applied:
March 31, 2015
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				 ¥ 57,967 ¥— ¥(606) ¥
(606) $ 482,375 $— $ (5,043) $ (5,043)
		Other currencies
		
590
—
15
15
4,910
—
125
125
Buying:					U.S. dollars				
11,57148
179
179
96,289
399
1,490
1,490
		Other currencies
		
2,572
288
(14)
(14)
21,403
2,397
(117)
(117)
Currency swap agreements:
Japanese yen received for U.S. dollars		
11,118—(2,114)(2,114)92,519—(17,592)(17,592)		Total 							¥ (2,540) 				 $ (21,137)

Commodity 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

Forwards:
Petroleum:						Selling		
		 ¥
1,850 ¥
— ¥
17 ¥
17 $
15,395 $— $141 $		Buying
			
964
—
(9)
(9)
8,022
—
(75)
Non-ferrous metals:					Selling				17,986—400
400
149,671—
3,330
		Buying
			
7,814
—
140
140
65,025—
1,165
Commodity swap agreements:
Petroleum:
		
550
—
(5)
(5)
4,577
—
(42)
		Selling		
			
1,065
—
(49)
(49)
8,862
—
(408)
Buying		
Total 							¥494 				 $March 31, 2014
Currency
related
			
				
				

Contract ornotional amount

141
(75)
3,330
1,165

(42)
(408)
4,111

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

Foreign exchange forward contracts:
Selling:		 				U.S. dollars				 ¥ 28,973 ¥— ¥(72) ¥(72)
		Other currencies			
366
—
(2)
(2)
Buying:				
		U.S. dollars				
12,038133
216
216
		Other currencies
		
3,641
312
85
85
Currency swap agreements:
Japanese yen received for U.S. dollars		
10,678
—
(654)
(654)
		
Total 							¥(427)| HANWA ANNUAL REPORT 2015 | 37

Commodity
related
			
				
				

Millions of yen

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

Forwards:
Petroleum:						Selling				 ¥1,591 ¥— ¥(16) ¥(16)
		Buying				
815
—
10
10
Non-ferrous metals:						Selling				15,030—403
403
		Buying
			
7,103
—
(174)
(174)
Commodity swap agreements:
Petroleum:40———		Selling						Buying
			
2,103
—
(6)
(6)
		
Total 							¥217(B) The following tables summarize fair value information as of March 31, 2015 and 2014 for the derivatives to which hedge accounting
has been applied:
March 31, 2015
Interest rate related

			
		
		

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

34,937

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

34,00819,328							Contract ornotional amountInterest rate swap for long-term loans:
Floating rate received for fixed rate

¥

5,853

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

38 | HANWA ANNUAL REPORT 2015 |Due after
one year¥

20,13010,870¥Due after
one year

¥

(466)

—
904

Fair value

¥

4,617
(2,193)

Millions of yen
Due after
one year¥

5,853

Fair value

¥

(80)

Millions of yen

Contract ornotional amount¥

34,437

Fair value

Due after
one year¥——

Fair value¥(1,225)
515

Thousands of U.S. dollars

Contract ornotional amountDue after
one year$ 290,730$ 286,569

Millions of yen 			Contract ornotional amountMarch 31, 2014
Interest rate related				Millions of yen 			$(3,878)

Thousands of U.S. dollars

Contract ornotional amount$ 282,999
160,839

Fair value

Due after
one year

$

—
7,523

Fair value$

38,421(18,249)

6. Inventories
Inventories at March 31, 2015 and 2014 consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2015

Merchandise and finished products				¥ 120,516
Work-in-process				2,234
Raw materials and supplies 				10,306
Total				¥ 133,056

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

2014

2015

¥ 106,083
167
8,444¥ 114,694$1,002,879
18,59085,762$1,107,231

loss were a net gain of ¥1,043 million (gain of $8,679 thousand)and a net gain of ¥441 million for the years ended March 31, 2015
and 2014, respectively.

7. Pledged assets
At March 31, 2015 and 2014, assets were pledged as collateral for loans payable in the amount of ¥3,197 million ($26,604 thousand) and¥1,848 million, respectively, and for guaranty deposits were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2015

For loans payable:				
Buildings and structures, net of accumulated depreciation 				¥
213Land 				
585Investment securities 				64Total				¥
862For guaranty deposits:				
Other current assets				¥13
Investment securities 				3,044Total				
¥
3,057

2015

2014

¥

¥
¥
¥

149
1,896
53
2,098

$

13
1,690
1,703

$

$

$

1,772
4,868
533
7,173
108
25,331
25,439| HANWA ANNUAL REPORT 2015 | 39

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, 2015 and 2014 was 0.99% and 1.18%,
respectively, regardless of borrowing currencies though the range ofthe interest rates varies by borrowing currency. There was an
outstanding balance of ¥70,211 million ($584,264 thousand) and¥74,004 million at March 31, 2015 and 2014, respectively.

The Company has entered into a yen denominated domestic
commercial paper program. There was an outstanding balance of¥27,000 million ($224,682 thousand) and ¥5,000 million at March
31, 2015 and 2014, respectively.

Bonds at March 31, 2015 and 2014, consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2015

Issued in 2011, 0.56% unsecured straight bonds, due 2014			
Issued in 2012, 0.54% unsecured straight bonds, due 2015			
Issued in 2013, 0.36% unsecured straight bonds, due 2016			
Issued in 2013, 0.74% unsecured straight bonds, due 2018			
Issued in 2014, 0.44% unsecured straight bonds, due 2019			
Total			

¥

¥

2015

2014

—
¥ 10,000
10,00010,00010,000		 10,000
10,000		10,000
10,000		 —
40,000¥ 40,000$—
83,215
83,215
83,215
83,215$ 332,860

Long-term loans payable at March 31, 2015 and 2014, consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2015

Loans from banks with weighted average interest rates of 0.76% and 0.84%
at March 31, 2015 and 2014, respectively, maturing serially through 2023		
Less amounts due within one year			
				

2015

2014

¥ 134,297
11,944¥ 122,353¥ 125,881$1,117,558
21,601 		
99,393¥ 104,280$1,018,165

The interest rates represent weighted average rates regardless of borrowing currencies, though the range of the interest rates varies byborrowing currencies.
The annual maturities of long-term debt outstanding at March 31, 2015 were as follows:
Years ending March 31											
		Thousands of					Millions of yen

2016
2017
2018
2019
2020
Thereafter
Total		¥

40 | HANWA ANNUAL REPORT 2015 |

11,944
9,534
37,74343,246
26,6885,142¥ 134,297

U.S. dollar$

99,393
79,338314,080
359,873
222,085
42,789$1,117,558

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

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

(B) Defined benefit plans(1) Movements in defined benefit obligations, except plans applying the simplified method							Thousands of					Millions of yen
U.S. dollars
					
2015

Balance at beginning of year			
Cumulative effects of changes in accounting policies						

¥27,601(2,990)

2014

¥

2015

27,671$ 229,683—		(24,881)

Balance at beginning of year after accounting policies changed				 24,611 		 27,671 		 204,802
Service cost				 1,133
1,147 		9,428Interest cost			
337
379 		
2,804
Actuarial gain		
(1,606)(832) 		 (13,364)
Benefits paid		
(825)(764) 		(6,865)
Balance at end of year		¥ 23,650¥ 27,601$ 196,805(2) Movements in plan assets, except plans applying the simplified method							Thousands of					Millions of yen
U.S. dollars
					
2015

Balance at beginning of year			
Expected return on plan assets			
Actuarial gain (loss)			
Contributions paid by the employer		
Benefits paid		
Balance at end of year		

¥¥

23,462¥704
373
947 		
(825) 		24,661
¥

2014

2015

22,214$ 195,240
666 		
5,858(60) 		3,1041,406		 7,881(764)		 (6,865)
23,462$ 205,218(3) Movements in liability for defined benefits for plans applying the simplified method							Thousands of					Millions of yen
U.S. dollars
					
2015

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

¥

¥

344
¥
88
(30)
(20) 		
30 		
412
¥

2014

2015

220
$
2,863
80 		
732
(34) 		
(250)(16)		 (167)94		 250
344
$
3,428

| HANWA ANNUAL REPORT 2015 | 41

(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
					
2015

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		

2014

2015

¥

23,902¥ 27,821$ 198,902(24,854)(23,640) 		 (206,824)(952)
4,181 		(7,922)353
302 		
2,937
(599)
4,483 		(4,985)412 		
4,483 		3,428(1,011) 		
—		 (8,413)
¥
(599)
¥
4,483
$
(4,985)(5) Retirement benefit costs							Thousands of					Millions of yen
U.S. dollars
					
2015

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		

¥

¥

2014

1,132
¥
337
(704)
1,196
81
89 		
5 		
2,136
¥

2015

1,147
$
9,420
379 		
2,804(666) 		(5,858)1,250 		
9,952
81 		
674
80		 741
13		
42
2,284
$ 17,775(6) Remeasurements of defined benefit plans as of March 31, 2015 and 2014 were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2015

2014

2015

Past service costs			
¥
81
¥
—
$
674
Actuarial gains and losses			
3,175
— 		
26,421
Total		
¥3,256¥—
$ 27,095(7) Accumulated other comprehensive income from defined benefit plans							Thousands of					Millions of yen
U.S. dollars
					
2015

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		42 | HANWA ANNUAL REPORT 2015 |

¥
¥

303
5,119
5,422

2014

¥
¥

384
$
8,294 		
8,678
$

2015

2,521
42,59845,119(8) Plan assets comprise:							
				

2015

Bonds
20.3%
Equity securities		
12.8
Cash and cash equivalents		
4.2
General account assets			
19.3
Other 			43.4Total			100.0%

2014

19.5%
8.0
31.0
19.7
21.8
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)
The principal actuarial assumptions at March 31, 2015 and 2014 were as follows:											

2015

Discount Rate
Long-term expected rate of return		

1.4%
3.0

(C) Defined contribution plans
Consolidated domestic subsidiaries were required to contribute ¥113
million ($940 thousand) and ¥89 million to the defined contribution plan(including corporate pension fund plans under the multi-employer

2014

1.4%
3.0

pension system in which accounting treatment is implemented in thesame way as the defined contribution plan) for the years ended March
31, 2015 and 2014, respectively.

(D) Multi-employer pension plans
Multi-employer pension plans under which required contributions were accounted for as retirement benefit expenses. Items relating to overall statusof pension plan reserves at March 31, 2014 and 2013 (as of the most recently available year-end date of the pension fund) were as follows:						

Millions of yen						
2014

Fair value of plan assets					¥ 78,199
Benefit obligation based on pension plan finance calculation						 97,285¥ (19,086)
Balance at end of year				

The principle factors relating to the balance were the prior service costsof ¥10,385 million and ¥17,203 million as at March 31, 2014 and 2013
respectively, based on pension plan finance calculations. Amortization of
unamortized prior service costs was conducted using the straight-line
method over a period of 20 years.		

2013¥ 101,911
		 128,178¥ (26,267)

Percentage of total pension plan accounted for by contributions of
the Group at March 31, 2014 and 2013 was 0.65% and 0.72%, respectively. The percentage does not match the actual amount contributed by
the Group.

| HANWA ANNUAL REPORT 2015 | 43

10. Income taxes
The Company is subject to a number of taxes based on income,which indicates an aggregate statutory income tax rate in Japan ofapproximately 35.6% and 38.0% for the years ended March 31,
2015 and 2014 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, 2015 and 2014.

					
2015

2014

35.6%
(0.3)
(9.2)
(1.1)
4.8
29.8%

Statutory tax rate:					Tax effect of permanent differences					Reversal of revaluation reserve for land				
Difference in tax rates for consolidated subsidiaries
				
Other
				
Effective tax rate					

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

The significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2015 and 2014 were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2015

2015

2014

Deferred tax assets:
Temporary differences resulting from the merger with consolidated subsidiaries		¥ 11,944¥ 13,164$ 99,393
Loss on impairment of long-lived assets				
1,955
2,243
16,269Net defined benefit liabilities				
—
1,592
—
Loss on sale-repurchase agreements of land				
1,367
1,506
11,376
Loss on valuation of investment securities, currently not deductible			
909
907
7,564
Accrued bonuses to employees				
682
788
5,675
Land revaluation difference, net of taxes unrealized loss				
239
1,460
1,989
Other				
4,256
3,967
35,416
Total deferred tax assets				
21,352
25,627
177,682
Valuation allowance				(17,410)(20,256)(144,878)
Net deferred tax assets				
3,942
5,371
32,804
Deferred tax liabilities:						Valuation difference on available-for-sale securities				
5,336
3,925
44,404
Land revaluation difference, net of taxes unrealized gain				
1,922
2,286
15,994
Net defined benefit assets				
210
—
1,748
Other				
3,393
1,453
28,235
Total deferred tax liabilities				
10,861
7,664
90,381
Net deferred tax liabilities			¥ (6,919)¥ (2,293)$ (57,577)

Deferred tax assets and deferred tax liabilities were included in the consolidated balance sheets at March 31, 2015 and 2014, respectively,
as follows:							Thousands of					Millions of yen
U.S. dollars
					
2015

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

Adjustment of deferred tax assets and liabilities for enactedchanges in tax laws and rates
On March 31, 2015, amendments to the Japanese tax regulations
were enacted into law. Based on the amendments, the statutory
income tax rates utilized for the measurement of deferred tax assets
and liabilities expected to be settled or realized from April 1, 2015 to

44 | HANWA ANNUAL REPORT 2015 |

¥

1,116
107
2
8,140

2015

2014

¥

2,048
217
—
4,558

$

9,287
890
17
67,737

March 31, 2016 and on or after April 1, 2016 are changed from
35.6% for the fiscal year ended March 31, 2015 to 33.1% and32.3%, respectively, as of March 31, 2015.
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 minority interests.
Under the Japanese Corporate Law (“the Law”), in cases in which
a dividend distribution of surplus is made, the smaller of an amountequal to 10% of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in capital and legal earnings
reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve and legal capital surplus areincluded in retained earnings and additional paid-in capital, respectively, in the accompanying consolidated balance sheets.
Under the Law, legal earnings reserve and additional paid-in
capital are able to eliminate or reduce a deficit by a resolution of theshareholders’ meeting.
Under the Law, all additional paid-in capital and all legal earnings
reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the nonconsolidated financial
statements of the Company in accordance with Japanese laws
and regulations.

At the annual shareholders’ meeting held on June 26, 2015, theshareholders approved cash dividends of ¥7.5 per share ($0.06)
amounting to ¥1,554 million ($12,932 thousand). This appropriation has not been accrued in the consolidated financial statements
as of March 31, 2015. Such appropriations are recognized in the
period in which they are approved by the shareholders.
Land revaluation difference
Pursuant to the Law Concerning Land Revaluation, the Company revaluated land used for business activities at March 31, 2002.
Unrealized gain (loss) on land revaluation is recorded as land 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, 2015, the carrying amount of the land after theabove one-time revaluation exceeded the market value by ¥1,591 million($13,240 thousand).

12. Contingent liabilities
At March 31, 2015 and 2014, the Companies were contingently liable as follows:							Thousands of					Millions of yen
U.S. dollars
					
2015

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

¥

7,436
3,345

2015

2014

¥

5,707
4,816

$

61,87927,836

13. Loss on business of subsidiaries and associates
Year ended March 31, 2015
Loss on business of subsidiaries and associates for the year ended March 31, 2015 was ¥456 million ($3,795 thousand). The loss consists of
estimated loss from the sale of investment in an affiliate.

| HANWA ANNUAL REPORT 2015 | 45

14. Loss on disposal of property and equipment
Year ended March 31, 2015
Loss on disposal of property and equipment for year ended March
31, 2015 was ¥213 million ($1,772 thousand). The loss consists ofexpenses for the relocation of the Tokyo Head Office.

Year ended March 31, 2014
Loss on disposal of property and equipment for year ended March
31, 2014 was ¥90 million. The loss consists mainly of estimatedexpense for the demolition of the former Osaka Head Office.		
		

15. Other comprehensive income
Years ended March 31, 2015 and 2014
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
					
2015

Valuation difference on available-for-sale securities, net of taxes:				
Increase (decrease) during the year			 ¥5,346Reclassification adjustments 			202
Sub-total, before tax				5,548
Tax expense (benefit)				
1,411
Sub-total, net of tax				
4,137
Deferred gains or losses on hedges, net of taxes:				
Increase (decrease) during the year			
3,362
Reclassification adjustments 			(521)
Sub-total, before tax				2,841
Tax expense (benefit)				
954
Sub-total, net of tax				
1,887Land revaluation difference, net of taxes:				
Increase (decrease) during the year			—
Reclassification adjustments 			—Sub-total, before tax				—Tax expense (benefit)				
(184)
Sub-total, net of tax				
184
Foreign currency translation adjustments:
Increase (decrease) during the year			
2,175
Reclassification adjustments 			—Sub-total, before tax				
2,175
Tax expense (benefit)				
—Sub-total, net of tax				
2,175
Remeasurements of defined benefit plans, net of taxes:
Increase (decrease) during the year			
1,980
Reclassification adjustments 			
1,276
Sub-total, before tax				
3,256
Tax expense (benefit)				
1,331
Sub-total, net of tax				
1,925
Total other comprehensive income			 ¥ 10,308

46 | HANWA ANNUAL REPORT 2015 |Thousands of
U.S. dollars
2015

2014

¥

¥

7,253
163
7,416
2,596
4,820

$

44,487
1,681
46,168
11,742
34,426

(192)
(559)
(751)
(270)
(481)

27,978(4,336)
23,642
7,939
15,703

—
—
—
(33)
33

—
—
—
(1,531)
1,531

2,274
—
2,274
—
2,274

18,099—18,099—18,099

—
—
—
—
—
6,646

16,477
10,61827,095
11,076
16,01985,778$

16. Investment and rental properties
Information about fair value of investment and rental properties is disclosed as follows:
The Company 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, 2015		
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, 2014
Millions of yen
Book value
Balance at beginning 		
of yearNet decrease

¥

7,662

¥

277

Balance at endof year¥

7,385

Fair value

¥

6,957

Book value is net of accumulated depreciation.
Fair values of these properties are measured mainly by the Company, based on “Standard for real-estate appraisal.”Rental profit from these properties was ¥337 million and was included in gross profit.

| HANWA ANNUAL REPORT 2015 | 47

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

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
The reportable segment income figures are based on operating
income coupled with interest and dividend income, interest expense,and foreign currency translation adjustments. Intersegment transactions are presented based on the current market prices at the time ofthis report.

Information about sales, profits, assets and others by reportable segment for the year ended March 31, 2015 was as follows:Year
ended March 31, 2015									 Metals		Steeland alloys

Net sales		¥ 857,396 ¥ 125,768
21,3195,403
Intersegment		
Total			¥ 878,715 ¥ 131,171¥ 14,737 ¥343
Segment income 		
Assets			¥ 354,475 ¥ 72,533
Depreciation		
3,024
105
154
33
Amortization of goodwill
Interest income		
199
170
2,201
652
Interest expense		
Share of profit of entities
accounted for using equity method
207—
Investment for entities
accounted for equity method
2,009—
Increase in property
3,140
79
and equipment		

48 | HANWA ANNUAL REPORT 2015 |Millions of yen

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

81,9781,387
83,365
1,146
23,270
38
—
—
160

¥

Adjustment

162,883 ¥ 1,737,398
79,508115,810242,391 ¥ 1,853,208
19,974684 ¥
61,710 ¥ 594,521
595
3,845
—
187
107
613
534
4,181

Consolidated

86,923723
87,646583
34,12717—0258¥ 422,450
7,470¥ 429,920¥
2,481¥ 48,406
66
—
137
376

—

—

—

207

—

207

—

207

—

—

—

2,009

—

2,009

—

2,009

34

40

64

3,357

470

3,827

106

3,933

¥
¥
¥

¥ 1,574,515 ¥
36,302¥ 1,610,817 ¥¥ 19,290 ¥¥ 532,811 ¥
3,250
187
506
3,647

Total

¥

— ¥ 1,737,398(115,810)—¥ (115,810) ¥ 1,737,398¥ (5,709) ¥14,265¥ 56,936 ¥ 651,457
46
3,891
—
187
251
864
(1,313)
2,868

Year
ended March 31, 2015									 Metals		Steeland alloys

Net sales		 $ 7,134,859
Intersegment
177,408
Total		
$ 7,312,267
Segment income$ 122,636
Assets		$ 2,949,779
Depreciation		
25,165
Amortization of goodwill		
1,281Interest income		
1,656Interest expense		
18,316
Share of profit of entities
accounted for using equity method
1,723
Investment for entities
accounted for equity method
16,718
Increase in property
26,129and equipment		

Thousands of U.S. dollars

Reportable segment
Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business

Total

Adjustment$ 1,046,584
44,961$ 1,091,545$
2,854$ 603,587
874
275
1,415
5,426

$ 682,184
11,542$ 693,726$
9,536$ 193,642
316
—
—
1,331

$ 723,334
6,016$ 729,350$
4,851$ 283,989
141
—
0
2,147

—

—

—

—

1,723

—

1,723

—

1,723

—

—

—

—

16,718—

16,718—

16,718

657

283

333

533

27,935

3,912

31,847882

32,729

1. “Other business” represents businesses such as lumber section,
machinery section and overseas sales subsidiaries which are notincluded in the above reportable segment.
2. Adjustments are as follows:(1) Adjustments of negative ¥5,709 million (negative $47,508
thousand) for segment income include intersegment elimination and Group costs that have not been allocated to reportablesegments. These Group costs consist mainly of expenses ofadministrative departments.
(2) Adjustments for segment assets amounting to ¥56,936 million($473,795 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.

$3,515,436 $13,102,397 $ 1,355,438 $ 14,457,835
62,162
302,089
661,629
963,718$3,577,598 $13,404,486 $ 2,017,067 $ 15,421,553$ 20,646 $ 160,523 $5,692 $ 166,215$ 402,813 $ 4,433,810 $ 513,523 $ 4,947,333
549
27,045
4,951
31,996
—
1,556
—
1,556
1,140
4,211
890
5,101
3,129
30,3494,443
34,792

Consolidated$— $14,457,835(963,718)—$ (963,718) $14,457,835$ (47,508) $ 118,707$ 473,795 $ 5,421,128
383
32,379
—
1,556
2,089
7,190
(10,926)
23,866(3) Adjustments for depreciation and amortization amounting to¥46 million ($383 thousand) include mainly depreciation andamortization expenses of Group assets.
(4) Adjustments for interest income and interest expense
amounting to ¥251 million ($2,089 thousand) and negative¥1,313 million (negative $10,926 thousand) include intersegment elimination, revenue and expense that have not been
allocated to reportable segments.
(5) Adjustments for increases in tangible fixed assets and intangible fixed assets amounting to ¥106 million ($882 thousand)are increases in Group assets.

| HANWA ANNUAL REPORT 2015 | 49

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

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

Millions of yen

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

¥
¥
¥
¥

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

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

75,947
1,564
77,511
836
16,212
36
—
—
148
25

¥
¥
¥
¥

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

10

14

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

50 | HANWA ANNUAL REPORT 2015 |¥ 1,530,866 ¥
33,450¥ 1,564,316 ¥¥ 19,987 ¥¥ 488,600 ¥
2,964
105
458
3,074
1,753

Total

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

2,381

Adjustment

Consolidated¥— ¥ 1,682,504(82,737)—¥ (82,737) ¥ 1,682,504¥ (5,027) ¥14,698¥ 51,534 ¥ 593,352
59
3,692
—
105
300
847
(705)
2,947
11

2,392

(3) Adjustments for depreciation and amortization amounting
to ¥59 million include mainly depreciation and amortization
expenses of Group assets.
(4) Adjustments for interest income and interest expense
amounting to ¥300 million and negative ¥705 million include
intersegment elimination, revenue and expense that have notbeen allocated to reportable segments.
(5) Adjustments for increases in tangible fixed assets and intangible fixed assets amounting to ¥11 million are increases inGroup assets.

(B) Related information
Product information
Net sales information by products for the years ended March 31, 2015 and 2014 was as follows:Year ended March 31, 2015
							 Metals		Steeland alloys

Net sales to external customers¥

885,756¥

127,140¥

114,898

Year ended March 31, 2015
							 Metals		Steeland alloys

Net sales to external customers$ 7,370,858$ 1,058,001

Millions of yen

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

¥

809,615¥

100,096437,392¥

72,520$956,129$

829,591$ 3,639,777$

603,479

98,838

Total$14,457,835

Millions of yen

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

¥

Total

¥ 1,737,398

Thousands of U.S. dollars

Year
ended March 31, 2014
				
¥

¥

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

			 Metals		Steeland alloys

Net sales to external customers

99,692¥89,732¥506,814¥

77,409Total¥ 1,682,504

Geographic information(1) Net sales in different countries for the years ended March 31, 2015 and 2014 were as follows:Year ended March 31, 2015

					Millions of yen

					
Japan

Net sales to external customers 				¥ 1,284,291

Asia

¥

Other

369,515¥

Year
ended March 31, 2015
					

Thousands of U.S. dollars

					
Japan

Asia

Net sales to external customers 				$ 10,687,285¥ 1,250,832

$

Total

695,614$14,457,835

Millions of yen

					
Japan

Net sales to external customers 				¥ 1,737,398

Other$ 3,074,936

Year ended March 31, 2014
					

Total

83,592

Asia

¥

Other

361,243¥

Total

70,429¥ 1,682,504(2) Property and equipment in different countries for the year ended March 31, 2015 and 2014 were as follows:Year ended March 31, 2015

					Millions of yen

					
Japan

Property and equipment				¥52,885

Asia

¥

Other

7,988

¥

Year ended March 31, 2015
					

Thousands of U.S. dollars

					
Japan

Asia

Property and equipment 				

$440,085$

Year ended March 31, 2014¥

53,966¥60,947$616$

507,173

Total

Millions of yen

					
Japan

Property and equipment				

74

Other

66,472

					

Total

Asia

¥

7,548

Other

¥

Total

61

¥

61,575| HANWA ANNUAL REPORT 2015 | 51

Outstanding balance of goodwill and amortization of goodwill in reportable segment
Outstanding balance of goodwill for the year ended March 31, 2015 and 2014 were as follows:Year ended March 31, 2015
						

Millions of yen

Reportable segment

			 Metals		Steeland alloys

Balance at end of year ¥

442 ¥

134

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business

¥

— ¥

—

¥

— ¥

576 ¥

Total

— ¥

Adjustment

576 ¥

— ¥

Consolidated

576

Year ended March 31, 2015									 Metals		Steeland alloys

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

Reportable segment

3,678 $

1,115

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business

$

— $

—

$

— $

4,793 $

Total

— $

Adjustment

4,793 $

— $Consolidated

4,793

The information of amortization of goodwill was omitted here because which has been noticed in the overview of the reportable segments.
Year ended March 31, 2014									 Metals		Steeland alloys

Balance at end of year ¥52 | HANWA ANNUAL REPORT 2015 |Millions of yen

Reportable segment

597 ¥

—

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business

¥

— ¥

—

¥

— ¥

597 ¥

Total

— ¥

Adjustment

597 ¥

— ¥

Consolidated

597

Independent Auditor’s Report| HANWA ANNUAL REPORT 2015 | 53

Global Network

ASIA

EUROPEMIDDLE EAST

AFRICA

LondonKuwaitJohannesburg

Amsterdam

RiyadhViennaJeddahDammamDubai
Istanbul

Seoul

Hong Kong

Busan

Taipei

Beijing

Kaohsiung

QingdaoBangkok

DalianChonburi

Tianjin

YangonShanghai

Kuala Lumpur

Chongqing

Singapore

FuzhouHo Chi Minh

Wuhan

Hanoi

Taicang

Jakarta

Jiangxi

Mumbai

Guangzhou

New Delhi

Dongguan

Chennai

Zhongshan
54 | HANWA ANNUAL REPORT 2015 |AMERICAS
New York
ChicagoHoustonSeattleLos Angeles
San Diego

BogotaVancouver

Guam

Mexico City

Santiago

Celaya

JAPAN
Osaka

Kitakanto

Tokyo

Mito

NagoyaIwaki

Hokkaido

Hokuriku

TohokuAtsugi

Hachinohe

Shizuoka

NiigataOkayama

ChugokuFukuyama

KyushuOkinawa| HANWA ANNUAL REPORT 2015 | 55

Global Network

JAPAN

AMERICASOSAKANEW YORKTOKYO

CHICAGONAGOYA

HOUSTON

4-3-9, Fushimi-machi, Chuo-ku, Osaka city, Osaka 541-8585, Japan
Tel: 81-6-7525-5000 Fax: 81-6-7525-5365
1-13-1, Tsukiji, Chuo-ku, Tokyo 104-8429, Japan
Tel: 81-3-3544-2171 Fax: 81-3-3544-2351
NHK Nagoya Broadcasting Center Bldg., 1-13-3, Higashisakura, Higashi-ku, Nagoya,
Aichi 461-8614, Japan
Tel: 81-52-952-8800 Fax: 81-52-952-9300

HOKKAIDO

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

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

HACHINOHE

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

NIIGATA

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

CHUGOKU

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

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

KITAKANTO

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

MITO

Okaba Mito Sannomaru Bldg., 1-3-35, Minami-machi, Mito, Ibaraki 310-0021, Japan
Tel: 81-29-300-0351 Fax: 81-29-226-8230

HOKURIKU

2-33-5, Ariso, Imizu, Toyama 933-0251, Japan
Tel: 81-766-54-5022 Fax: 81-766-54-5252

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

SEATTLE

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

LOS ANGELES

18100 Von Karman, Suite 480, Irvine, CA 92612, U.S.A.
Tel: 1-949-955-2780 Fax: 1-949-955-2785

SAN DIEGO

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

VANCOUVER

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

MEXICO CITY

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

CELAYA

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

BOGOTA

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

GUAM

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

SANTIAGO

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

ASIA

IWAKI

ZENSHO Shirogane Bldg., 5-7, Taira aza Shirogane-machi, Iwaki, Fukushima
970-8026, Japan
Tel: 81-246-35-6585 Fax: 81-246-35-6586

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

SHIZUOKA

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

OKAYAMA

Sumitomo life Insurance Bldg., 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

SEOUL

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

BUSAN

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

BEIJING

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

QINGDAO

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

DALIAN

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

56 | HANWA ANNUAL REPORT 2015 |TIANJIN

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

CHONGQING

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

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

NEW DELHIFUZHOUCHENNAI

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

203, Bestech Chambers, B Block, Sushant Lok 1, Gurgaon, Haryana 122002, India
Tel: 91-124-456-6100 Fax: 91-124-456-6111
5H-1/5K/5K-1, 5th Floor, Century Plaza, 560-562, Anna Salai, Teynampet, Chennai
600 018, India
Tel: 91-44-33539100 Fax: 91-44-33539104

WUHAN

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

EUROPETAICANG

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

JIANGXI

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

GUANGZHOU

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

DONGGUAN

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

LONDON

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

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

VIENNA

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

ZHONGSHAN

MIDDLE EAST

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

HONG KONG

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

TAIPEI

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

KAOHSIUNG

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

BANGKOK

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

CHONBURI

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

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

KUALA LUMPUR

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

SINGAPOREKUWAIT

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

RIYADH

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

JEDDAH

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

DAMMAM

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

DUBAI

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

ISTANBUL

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

AFRICA

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

HO CHI MINH

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

HANOI

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

JOHANNESBURG

2nd Floor, West Tower, Nelson Mandela Square, Maude Street, Sandton, Johannesburg
2196, South Africa
Tel: 27-11-881-5966 Fax: 27-11-881-5611| HANWA ANNUAL REPORT 2015 | 57

Corporate Information (As of March 31, 2015)
Corporate Data
Company Name

Hanwa Co., Ltd.

Established

April 1947

Capital¥45,651 million

Number of Employees

Consolidated: 2,772

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

Non-consolidated: 1,169

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

Address
Osaka Head Office

1-13-1, Tsukiji, Chuo-ku, Tokyo

4-3-9, Fushimi-machi, 			
Chuo-ku, Osaka 541-8585, Japan
Tel: +81-6-7525-5000

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

Fax: +81-6-7525-5365

Board of Directors, Corporate Auditors and Executive Officers (As of June 26, 2015)
EXECUTIVE OFFICERSBOARD OF DIRECTORS
Chairman*

Shuji Kita

President*

Hironari Furukawa

Directors, Executive Vice President andExecutive Officers

Hideo Kawanishi
Hiroshi Serizawa

Directors, Senior Managing Executive Officers Akihiko Ogasawara

Outside Directors
Directors, Managing Executive Officers
Directors, Executive Officers

Kozo Yamabe
Yasuharu Kurata
Chiro IderihaIsao Kimizu

Osamu Seki

Tsuneo Tsuiki

Ryuji Hori

Yoichi Sasayama

Yasumichi Kato

Hideo Kobayashi

Yoshiaki Matsuoka

Keiji Matsubara

Hiromasa Yamamoto

CORPORATE AUDITORS
Yoichi Ejima
Kazuhiko Okada
Yasuo Naide
Hiroshige Wagatsuma
Katsunori Okubo

58 | HANWA ANNUAL REPORT 2015 |Takatoshi Kuchiishi

Toshimi Terada

Yoichi Nakagawa*Representative Director

Executive Officers

Naoyuki Togawa

Hidemi Nagashima

Outside Corporate Auditors

Hiroshi Ebihara

Atsuhiro Moriguchi

Yasushi Hatanaka

Standing Corporate Auditors (Full-time)

Senior Managing Executive
OfficerCoping with changing times and markets quickly,
Hanwa makes a great contribution to society
by satisfying various needs of customers as a
“distribution specialist”
Contents
To Our Stakeholders ...........................1
Business Model ....................................2
At a Glance...........................................4Interview with the President .............6
Topics ....................................................9

Success in today’s markets demands speed and the ability to meet a broad
range of needs. Change is occurring on an unprecedented scale. Only companies that can adapt quickly will survive. Hanwa has experience andaccomplishments in the field of “distribution” that span 68 years.
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

Review of Operations

make communities and the world a better place to live. This is why we prioritize◆ Steel ...............................................10compliance and other activities that enable us to fulfill our obligation to society.

◆ Metals and Alloys .........................12

Through such activities, Hanwa keeps nurturing a corporate culture that will

◆ Non-Ferrous Metals......................13enhance the value and reliability of our company. We aim to make greater◆ Food Products ...............................14

contributions by fulfilling our social responsibilities.

◆ Petroleum and Chemicals ............15◆ Other Business ..............................16
Corporate Governance .....................17
CSR Activities......................................20
Financial Section
Five-Year Summary ........................22
Management’s Discussion
and Analysis ..................................23
Consolidated
Financial Statements .....................26
Notes to Consolidated
Financial Statements ....................31

Stock Information

Japanese financial
institutions
31.0%

Foreigncorporations
21.5%

Individuals andothers31.2%

Japanese financial
institutions
31.0%

Foreign
Individuals andOther domestic
corporations
otherscorporations
Japanesebrokerage firms 12.3%
Treasury stock
21.5%
31.2%
1.9%
2.1%

Breakdown by Type of Shareholder

Fiscal Year-End

March 31Annual Meeting of Shareholders June
Independent Auditors

KPMG AZSA LLC

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

Japanese brokerage firms
1.9%

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

Authorized Shares

570,000,000 shares

Treasury stock
2.1%

Breakdown by Size of Holding

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

Other domestic
corporations
12.3%

12,120–1,00011.0%

1,000–50,000
86.3%

50,000–1,000,000
2.3%–1,00011.0%

1,000–50,000
86.3%

50,000–1,000,000
2.3%
1,000,000–
0.3%

Principal Shareholders

1,000,000–

Name of Shareholder

Number of Shares(thousands)

0.3%
Percentage of Total
Issued Share (%)

14,323
10,695
7,630
7,478
4,935
4,184
3,151
3,001
2,877
2,614

6.91
5.16
3.68
3.61
2.38
2.02
1.52
1.45
1.39
1.26

Japan Trustee Services Bank, Ltd. (Trust Account)...........................................................
The Master Trust Bank of Japan, Ltd. (Trust Account) .....................................................
Sumitomo Mitsui Banking Corporation..........................................................................
Hanwa Clients’ Stock Investment Association.................................................................
Hanwa Employees’ Stock Investment Association...........................................................
CBNY-GOVERNMENT OF NORWAY................................................................................
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO.............................................................
Nippon Steel & Sumitomo Metal Corporation................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 9)........................................................
The Dai-ichi Mutual Life Insurance Company .................................................................
Note: The Company holds 4,449,160 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

Independent Auditor’sReport............................................53

(¥)

(¥)

1,000

22,000Global Network .................................54800

18,000600

14,000400

10,000

Corporate Information .....................58

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.

Trading Volume(Millions of shares)

200

40
30
20
10

4
5
2013

6

7

8

9

10

11

12

1
2
2014

3

4

5

6

7

8

9

10

11

12

1
2
2015

3

0

| HANWA ANNUAL REPORT 2015 | 59

阪和興業株式会社

Annual Report 2015

2015

http://www.hanwa.co.jp

Year ended March 31, 2015

2015.8 Printed in Japan