阪和興業株式会社

Annual Report 2010
For the year ended March 31, 2010

http://www.hanwa.co.jp

2010.8 Printed in Japan

Profile

Principal Shareholders
Name of Shareholder

Since its establishment in 1947, Hanwa has contributed to the development of theJapanese economy as a trading company handling industrial materials, such as steel—the

Number of Shares(thousands)

Percentage of Total
Issued Share (%)

23,724
13,654
7,630
4,087
3,884
2,614
2,406
2,390
2,041
2,001

11.4
6.6
3.7
2.0
1.9
1.3
1.2
1.2
1.0
1.0

demonstrated new capabilities as a trading company by handling seafood products, rides forJapan Trustee Services Bank, Ltd. (Trust Account) . .................................................
The Master Trust Bank of Japan, Ltd. (Trust Account)..............................................
Sumitomo Mitsui Banking Corporation....................................................................
Hanwa Employees' Stock Investment Association...................................................
Hanwa Clients' Stock Investment Association ........................................................
The Dai-ichi Mutual Life Insurance Company...........................................................
The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account .........
Nippon Metal Industry Co., Ltd..................................................................................
Trust & Custody Services Bank, Ltd. (Investment Trust Account)............................
Sumitomo Metal Industries, Ltd................................................................................

amusement parks, and non-ferrous metal recycling. We have created numerous businesses in

Note: The Company holds 4,367,348 shares of treasury stock, which is excluded from the major shareholders listed above.

company’s leading product—and metals and alloys, non-ferrous metals, food products,
lumber, machinery, petroleum and chemicals, and cement. Our steel division in particular isequipped with quay and warehouse transportation facilities as well as complete processing
sites that enable us to both handle large quantities purchased from major steel
manufacturers and to cater to the special needs of our customers. This is why we have long
been known in Japan as a “steel trading company.”
Recently, with the changes and diversification in the domestic market, we havethese fields that command the top market share. The basic strategies underlying such successare internationalization, business diversification, and value enhancement.

Breakdown by Type of Shareholder

Hanwa’s ideal function as a trading company is to be more than just a distributor. Based

Contents
01

To Our Shareholders

02

Interview with the President

04

At a Glance

06

Review of Operations

13

Topics14

Corporate Governance

16

CSR Activities

18

Financial Section

aim to develop new products, as well as coordinate ventures among businesses. As a
trading company with such operating skills at our disposal, we will continue to develop

Consolidated Financial Highlights
For the years ended March 31, 2010 and 2009.

2010

2009

2010

¥ 1,116,629¥ 1,539,282$12,001,601

Operating income

11,42017,451

122,743

Net income

11,5795,997

124,452

479,379$ 4,766,176

94,913

1,148,485

Net sales¥

Total assets

443,445

Yen

Notes

44

Corporate Information¥

106,855

Total net assets

¥

55.46
12.00

Cash dividends

$

28.47

Net Sales

The plans, strategies and other statements(Millions of yen)
(Millions(Millionsof (Millions
Yen) of Yen)of Yen)related to the outlook of future results in

2,000,000
2,000,000
2,000,000

0.596

currently available information. However, it
should be noted that there is a possibility
for actual results to differ significantly
owing to such factors as changing socialand economic conditions.

15,000600

10,000

400

5,000

200

Net Income(Millions of yen)
(Millions(Millions
of Yen)of Yen)of Yen)
(Millions

25,000 25,000
25,00015,000 15,000
15,00020,000 20,000
20,00012,000 12,000
12,00015,000 15,000
15,0009,000 9,0009,000

10,000 10,000
10,0006,000 6,0006,000

5,000 5,0005,000

3,000 3,0003,000

1,500,000
1,500,000
1,500,000

800

0.129

12.00

(Millions of yen)
(Millions(Millions
of Yen)of Yen)(Millionsof Yen)this annual report reflect the assumptions
and beliefs of management based on

Operating Income

(¥)

(¥)

Note: The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥93.04 = $1.00.

Forward-Looking Statements

Nikkei Stock Average (closing)

Stock Price

U.S. dollars (Note)¥

ForeignForeign
corporations
corporations
15.4% 15.4%

Stock Price Range and Trading Volume (Common Stock)

Per share data:
Net income

50,000–1,000,000
50,000–1,000,000
24.5% 24.5%

Individuals
Individuals
and andothers others
31.7% 31.7%

At year-end:

22		 Financial Statements &Global Network

1,000,000–
1,000,000–
50.1% 50.1%

1,000–50,000
1,000–50,000
25.3% 25.3%

Thousands of
U.S. dollars (Note)

Millions of yen

For the year:

and Analysis

43–1,000–1,000
0.1% 0.1%

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

19		 Management’s Discussion

		JapaneseJapanesefinancialfinancial
institutions
institutions
34.9% 34.9%

Other domestic
Other domestic
corporations
corporations
14.3% 14.3%

new unique businesses.

18		 Five-Year Summary		TreasuryTreasury
stock 2.1%
stock 2.1%
JapaneseJapanesebrokerage
brokerage
firms firms
1.6% 1.6%

on our insight into the international market and our information-gathering capabilities, weBreakdown by Size of Holding0

Trading
Volume(Millions of shares)

0

80
60
40
20

1,000,000
1,000,000
1,000,000
500,000500,000
500,0000

0
06 0 06
07 0607
08 0708
09 0809
10 0910 10

0

0
06

006
07 0607
08 0708
09 0809
10 0910

10

0

0
06

006
07

4
5
2008
07
08
06

08
09
07

09
10
08

10
09

6

7

8

9

10

11

12

1
2
2009

3

4

5

6

7

8

9

10

11

12

1
2
2010

3

0

10

| HANWA AR 2010 | 45

To Our Shareholders

Hanwa supplies a broad spectrum of products, including steel, metals andalloys, 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 based operations on the mission of serving
our customers as “distribution specialists.” Year after year, we have used
specialized skills and an extensive service network to meet customers’ 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,in return receiving outstanding products and services.
Based on the booming global economy, in recent years, our net sales
developed, due to a rise in quantities sold and an expansion in market
prices. In fiscal 2009, the fiscal year ended March 31, 2010, net sales
decreased owing to a reduction in demand since the second half of theprevious year. Net income increased due to income taxes reduction because
impairment losses and other losses that we had posted in previous years ontransferred assets in fiscal 2009 were included in deductible expenses.
Companies in all industries are facing increasingly heated competition in
Japan and around the world. The more rapid the pace of change, the morediverse and complex the needs of our customers have become. We areresponding to these demands with value-added products and services,highly specialized ideas, and other forms of support. This allows us tofunction as each customer’s “best partner” in creating solutions for specificissues. Adhering to this approach is why we can offer trading company
logistics with a difference.
The sincere advice and support of all stakeholders forms the basis for all
our activities. We place great value on every customer relationship together
with the accompanying opportunities. As we pursue more growth andprogress, we will retain our devotion to contributing to society by
performing functions that are unique to Hanwa, while serving as “a trading
company known for outstanding footwork.”

Shuji Kita
President| HANWA AR 2010 | 01

Interview with the President

Looking at the Present and the Future of the Hanwa GroupFirst of all, I would like to thank you
for your continued support. It is mypleasure to provide this overview ofoperating results for fiscal 2009, thefiscal year ended March 31, 2010.

lease share your opinion about the economic environment of the fiscal year
Q 1 Pended
March 31, 2010.
The global economy, which plunged into a deep recession inregion.

the second half of the previous fiscal year, has already bottomed

In Japan, we saw some signs of recovery in theout and is now on its way to recovery. Although the pace of

manufacturing sector in general, such as rising production

recovery is slow in advanced nations, we are seeing a strong

toward the normal level, but business sentiments—industry byrecovery in China, where large-scale investments in publicindustry—were mixed. Domestic demand in connection withworks and purchase incentives for consumers are driving thecapital investments and construction in particular was weakeconomic upturn and the economic recovery of the entire Asianthroughout the period.

Q 2 Please summarize operating results of the fiscal year that ended March 31, 2010.
The Group posted consolidated net sales ofvolume. Operating income decreased 34.6%, to ¥11,420¥1,116,629 million for the fiscal year ended

million. Net income, in contrast, rose 93.1%, to ¥11,579

March 31, 2010, representing a year-on-year

million. This was primarily attributable to reduced income taxes

decrease of 27.5%. The decline was due principally to a low

paid and other factors, which more than offset land andlevel of demand and market prices seen throughout the fiscal

property-related impairment losses claimed as an extraordinary

year under review, despite the overall tone of an improving

loss. The reduction in income taxes paid was a result of a tax

economic picture, in contrast to the previous consolidated fiscal

deduction realized in connection with certain land andyear in which robust earnings achieved in the first half of thatproperties sold during the consolidated fiscal year under review.

year, backed by higher demand and higher market prices,

Impairment losses for such land and properties posted in priorcontributed to full-year sales. Profits also fell due tofiscal years were recognized for tax purposes in the consolidated

deteriorating earnings from sales caused by lower prices offiscal year under review in which sales were made.

A

petroleum and other products, in addition to the declining sales
02 | HANWA AR 2010 |Q 3 What is your outlook for the fiscal year ending March 31, 2011?
The worst phase of the economic recession
appears to have nearly ended for the world
economy in general, but some uncertainties
remain including the uncertain outlook regarding the European
economy, movements in foreign exchange and interest rates,and bad debt problems. As for the real economy, the recovery
in advanced nations including the United States still lacks power
and is drawing its strength mainly from rising demand from
China and other emerging economies.
Likewise, Japan’s recovery of its manufacturing sector
owes much to growing Chinese demand and economic
stimulus measures in place around the world, and this recovery

AQ4

 ow do you plan to cope withH
business challenges?

The Group has launched a new Medium-TermBusiness Plan for the three-year period from
April 2010 through March 2013, which essentiallycalls for actions needed to adapt to rapid changes in theoperating environment and for building a highly original andpowerful base of operations and profit structure, which is thecentral theme of the plan. We have defined three areas offundamental challenges, which we will address by taking
actions in line with our six growth strategies. For moredetailed information, please refer to the following “NewMedium-Term Business Plan: An Overview.”A

may lose momentum since it is vulnerable to unfavorable
foreign exchange movements or a change in overseas demand.
With capital investments and construction demand remaining at
a low level, it is premature for us to change the tone of ouroutlook to an overly optimistic one.
In this operating environment, we at the Group will attempt
to secure profits by implementing appropriate sales and inventory
policies for each business segment based on an accurate
assessment of trends in demand. We project ¥1,319,000 million
in net sales (an increase of 18.1% year on year), ¥16,000 million
in operating income (an increase of 40.1%), and ¥8,400 million
in net income (a decrease of 27.5%).

Q5

 lease share some additionalP
thoughts with yourshareholders and investors.

The Hanwa Group strives to enhance its comprehensive corporate value and achieve sustainablecorporate growth by putting into action thebusiness strategies mapped out in the Medium-Term Business
Plan, in an effort to further boost customer satisfaction andmake a greater contribution to society.
In this regard, in all our efforts, we greatly appreciate ourshareholders’ continued support, guidance and encouragement.

A

The New Medium-Term Business Plan: An Overview
The Group formulated a new Medium-term Business Plan, whose main objective is to adapt to rapid changes in the operating
environment and build a highly original and powerful base of operations and profit structure. To establish a powerful businessbase, the Group targets business operations to both the saturated market of Japan and emerging economies abroad whererobust expansion is expected to continue and delivers Hanwa’s promise of consistently providing solutions in a timely manner
to meet users’ needs. To build a solid profit structure, new business opportunities are actively sought.
Central themes
1) Become even more competitive in Japan
2) Expand operations involving the environment and recycling3) Continue to grow outside JapanKey Initiatives
1) Reinforce and differentiate capabilities
2) Enhance capabilities to do business on a global scale
3) Adopt the perspective of users and target directly end users
4) Effectively utilize a diverse range of human resources

Strategies for growth
1) Strengthen capabilities in our core business as a trading company withstrong ties to end users
2) Grow rapidly in overseas markets by enlarging the businessnetwork and workforce
3) Reinforce and expand the scope of recycling operations
4) Increase business activities involving the environment and energy5) Make business investments and build partnerships aggressively6) Establish a team of professionals with outstanding skills| HANWA AR 2010 | 03

AT a Glance
SectionOverview

Steel

Steel is Hanwa's major product, accounting for about half of total
sales. We sells steel bars, building materials, sheets, pipes, wires,and many other steel products. With this broad lineup, we can meetthe requirements of customers in almost any industry. With some ofJapan's largest steel distribution centers and a network of overseas
coil centers, Hanwa ranks among the leaders in terms of inventories
and steel processing volume. In recent years, offshore trading has
become another source of growth in the steel business.

MetalsandalloysHanwa fulfills an important social responsibility as a supplier of many
metals for which there are no resources in Japan, such as nickel,
chromium, manganese, silicon and ferroalloys of primary products. We
procure these metals directory from procedures in China, South Africa,
Kazakhstan, India, Turkey, Germany, Russia, Brazil and other countries.
Using our own global network as well as relationships with strategic
partners, we are constantly seeking to increase supplies of metal
resources through various measures that include investment.

Nonferrous
metalsHanwa was one of the first companies in Japan to establish a nonferrous metals and specialty metals recycling business. Operations involve
mainly aluminum, copper, zinc, lead and other metals where demandis substantial in Japan. We have solid positions in there market sectors,
backed by expertise in organizing business activities on a global scale,an advantage that only a trading company can offer. In our recycling
business of aluminum cans, we fully utilize expertise in collection,
inventory and supply activities to aluminum rolling plants.

Food
PRODUCTS

Hanwa's food business is Japan's largest importer of seafood, handling adiverse selection of products. Developing products with a higher degreeof processing has been a central theme in recent years. We have tie-ups
with many seafood processing plants in China, Thailand, Vietnam andother countries. All these facilities are highly competitive in terms of cost,quality and hygiene. Furthermore, Hanwa also uses its own purchasing
method for processed food products. We send special staffs to plants sothey can monitor quality assurance programs.

Petroleumandchemicals

In the petroleum business, Hanwa supplies fuel, lubricants and otherproducts to companies in the steel, chemicals, papermaking andother industries. Overseas, we sell fuel for shipping companies andare involved in the import and export of petroleum products. In thechemicals business, Hanwa’s primary export is synthetic resin raw
materials. Major imports include synthetic resin raw materials andpolyethylene products. In paper category, we have a recycling business
and we expert recycled paper to Southeast Asian countries.

Other
business

Hanwa that imports lumber, plywood and other wood products
are selling to building material trading companies, building material
manufactures, sales agents, wholesalers, home builders and many othercompanies. We are supplying to the thriving construction market in
the Middle East and other regions by focusing on offshore trade. The
machinery business has two components: amusement facilities, mainly
amusement park rides and other facilities; and industrial machinery,
mainly steel processing machinery.

04 | HANWA AR 2010 |Main Items

Net Sales/Operating Income• Steel bars
• Steel shapes• Steel sheets• Wire rods
• Special steel• Steel scrap

Net sales
1,000,000• Nickel• Chromium• Silicon• Manganese• Solar cell materials• Petroleum: gasoline, kerosene,
heavy oil, LPG, bunker oil• Chemical: PE, PP, householdproducts, interleaving paper,
used paper

30,000600,000
400,000
10,000200,000
0

2006

2007

2008

2009

2010

0

(Millions of yen)
Operating income
12,000Net sales
250,000
200,000

56.6%

9,000

Net Sales
Composition
Operating Income
Composition

7.7%
14.8%

150,000
6,000
100,000
3,000

50,000
2006

2007

2008

2009

2010

0

(Millions of yen)
Operating income
4,000

Net sales
80,00060,0003,000

40,0002,000

20,000

1,000

2006

2007

2008

2009

Net sales
100,000

2010

0

Net Sales
Composition
Operating Income
Composition

4.7%
4.7%

Net Sales
Composition
Operating Income
Composition(Millions of yen)
Operating income
2,000

6.5%

1,500

5.5%

80,00060,0001,000
40,000500

20,000
0

2006

2007

2008

2009

2010

0

(Millions of yen)
Operating income
7,500

Net sales
350,000
300,000

6,000

250,000
200,000

4,500

150,000

3,000

100,000

1,500

50,000
0

2006

2007

2008

2009

Net sales
60,000• Lumber & Plywood• Leisure facilities• Industrial machinery

54.3%

20,0000• Prawns and shrimp• Crab• Salmon• Horse mackerel• Mackerel• Capelin(Millions of yen)
Operating income
40,000800,000

0• Copper• Aluminum• Zinc• Lead• Tin

Composition of
Net Sales/Operating Income

2010

22.9%
9.2%

Net Sales
Composition
Operating Income
Composition(Millions of yen)
Operating income
6,000

3.9%

4,500

9.1%

50,00040,00030,0003,000

20,0001,500

10,0000

0

Net Sales
Composition
Operating Income
Composition

2006

2007

2008

2009

2010

0

Net Sales
Composition
Operating Income
Composition| HANWA AR 2010 | 05

Review of Operations

Steel (Domestic)
are attempting to expand to achievedifferentiation. These measures helped
lay the foundation for the next fiscal year
ending March 31, 2011.

Looking Ahead and Key
Strategies

Fiscal 2009 Results
Fiscal 2009 marked a year of recovery
amid drastic changes in the businessenvironment following the global
financial crisis triggered by the collapse of
Lehman Brothers.
In the first half of fiscal 2009, theCompany’s business experienced
weakness due to inventory adjustment inresponse to shrinking demand and the

Net Sales Composition

54.3%

06 | HANWA AR 2010 |slumping market. In contrast, the steel
industry recovered in the second half,buoyed by the recovery of exports to
China and other emerging countries in
Asia and the upturn in manufacturingindustries, particularly automobiles andhome electronics. Meanwhile, theJapanese construction industry remained
subdued, unable to match the recovery
in other parts of the world and regaining
only 70% or so of the level recorded
before the Lehman crisis. The industrial
markets appeared to be polarized, as
recovery in manufacturing industries andexports contrasted starkly with the slump
in the construction industry.
In these circumstances, the domestic
steel sales business posted weak results interms of both sales and ordinary income.
In response, we carried out sales efforts
aimed at real estate developers andgeneral contractors, directed marketing
efforts through local branches and sales
offices to tap niche demand, bolsteredrelationships with small and mediumsized companies, and developed newuses for products whose sales steelmakers

The external environment remains
uncertain due to the financial turmoil
chiefly in Europe and excess inventories
in China. Now that prices of raw
materials for steel are determined every
three months, blast furnace steelmakers
are likely to find themselves in a newsituation in which sales costs change
every quarter. Exports are expected toremain strong, while automakers andhome electronics companies are likely tocontinue to enjoy strong sales. In
contrast, the construction industry is
forecast to remain sluggish. Demand forconstruction materials has fallen sharply,
particularly in rural areas, which might
accelerate the shakeout among construction material companies.
The domestic steel business plans to
set up specific project teams, to pursue
measures in the following areas: (1)expansion of domestic sales bases to tap
niche demand in provincial markets; (2)centering efforts to conduct businesswith small and medium-sized companies
with a healthy business outlook; (3)bolstering sales initiatives for urban
redevelopment and other projects; and(4) strengthening environment andenergy-related businesses.

Steel (Overseas)
Fiscal 2009 Results
Demand for steel materials has slumped
as a result of the slowdown in the global
economy since the financial crisis thatbegan in 2008. With signs of economic
recovery nowhere in sight, the fiscal year
ended March 31, 2010 began under
especially adverse conditions.
However, the environment began tobrighten after the Chinese market turned
upward, supported by the government’s
economic stimulus package, including
construction of infrastructure. Emerging
countries mainly in Asia began to recover
one after another in the middle of the
fiscal year under review; this wasfollowed by an improvement in the
demand/supply situation around theworld in the second half of the year, after
developed countries more or less completed inventory adjustment.
Order intake of flat rolled steel plates
and sheets and mild steel bars andshapes increased in the first half, as
Hanwa succeeded in capturing demandfor construction materials chiefly in China
which was the first to recover and theother emerging countries. In the second
half, demand for consumer goods, suchas cars and home electronics, rebounded
thanks to government subsidies andother measures, resulting in brisk orderintake mainly of steel sheets.

We acquired a stake in a coil centerin San Diego in the United States tocapture demand for steel from homeelectronics and solar power generationcompanies. In addition, we opened asales office in South Africa, in an effort totap new demand. In Malaysia, weinvested in an electro-galvanized steel
sheet manufacturing firm to lay thefoundation for stable supply of steel
sheets in the future.

Looking Ahead and Key
Strategies
Demand in China and other emerging
countries remains strong. As the worst
appears to be over also for the European
countries and the United States, theglobal economy is recovering gradually.
Against this background, demand forsteel is generally robust, with steel prices
on an upward trend. However, the current
recovery is supported by government
intervention to a considerable degree andis far from self-sustained. In addition,
the Chinese government may move totighten its monetary policy, as an economic bubble is brewing in its real estate
sector. While soaring prices of iron ore
and coking coal since the beginning of
the year are driving steelmakers to raise
product prices, manufacturers of final
products are finding it difficult to passhigher costs on to consumers.
For steel sheets, we plan to make useof the existing coil centers mainly in Asia
to secure demand from home electronics
and car manufacturers, which areenjoying solid sales. By region, we plan toexpand business in the Middle East,
Turkey and North Africa with Dubai as abase and to enter Latin America via theUnited States. We intend to accelerate
our sales activities to capture demand in
emerging countries through these measures. In the energy sector, we will target
demand for petroleum-related infrastructure and engage actively in newenergy businesses such as wind powerand solar power generation. We will also
conduct necessary investments such as
construction of processing plants overseas
and obtaining of stakes in new businesses. As for procurement, we plan toboost our ties with steel mills overseas
and expand trilateral trade, in addition todomestic trade. By doing so, we aim todiversify our supply sources and advanceour trading house function overseas.

| HANWA AR 2010 | 07

Review of Operations

Metals and Alloys
immediate use because of large stockpiles,
despite recovery in their production.
The solar cell business posted losses
for the first time. This was due to a
sharp decline in the volume of themainstay wafer exports and outsourced
processing amid intensifying competition,
as well as lower price competitivenessreflecting the yen’s appreciation.

Looking Ahead and Key
Strategies

Fiscal 2009 Results
The nickel business reported higher
profitability, as we secured supply earlyin cooperation with major producers
and succeeded in concluding large
contracts for China, while conducting
business steadily with small users inJapan. In the stainless steel business,
early procurement through increased
collaboration with major wholesalers inSouth Korea and Thailand helped us
conclude large import contracts amid
the shrinking supply of stainless steel

Net Sales Composition

7.7%

08 | HANWA AR 2010 |scrap, contributing to profit.
The ferroalloy market declined until
April. As the balance between demandand supply turned around after July,
however, it remained on an upward
trend with a growing sense of a supply
shortage. By the end of the fiscal
year under review, a blast furnacesteelmaker, one of our key partners,
recovered fully, and we concluded
yearly contracts. Together with electric
furnace steelmakers, this provided astable revenue base. The business with
Samancor Chrome in South Africa,
which was in the fifth year of ourinvestment, saw sales volume decline
sharply due to a slump in the stainlesssteel industry in the second half of the
fiscal year under review.
The Ruukki Group (RG) business inwhich we invested in May 2008
enjoyed an expansion in sales to electric
furnace steelmakers, thanks to thestable supply of ferroalloys from South
Africa’s Mogale Alloys, a company
acquired in June 2009, which contributed
significantly to profit.
The silicon business was faced with adifficult business environment, as users
purchased only a small amount for

For the stainless steel and special
metal recycling business, we plan to
conduct sorting and processing, inaddition to the existing logistics andwarehousing operations, in an effort
to advance and differentiate ouroperations. We intend to build a tradingmechanism with Showa Metal Co. Ltd.,
which became a Hanwa subsidiary in
April, by maximizing the synergy effects
between the two companies.
In the ferroalloy business, we will
promote trading with manufacturers witha stable supply of ore, continue toexpand sales to blast furnace steelmakers,
special steelmakers and electric furnacesteelmakers, and aim to expand trilateral
trading with Asia as the sales destination.
In the chrome business, we will center
our efforts on the material produced
mainly by Samancor and in India, as wellas on the projects to be initiated by RG in
the future to expand sales.
The solar cell business is expected to
grow rapidly. As is the case with any
growth industry, competition is intensifying, with more and more players
entering the business. We will also direct
efforts toward the downstream industries to strengthen our operations.
In the metal silicon business, we aim
to start operations at the grinding millproject in Dalian in August to build
stable sales channels for polysiliconchemical industries in Japan, China,
South Korea and Taiwan. We aim tobecome a functional company withpresence that can offer products of highpurity to the world.

Non-Ferrous Metals
Fiscal 2009 Results
As the world economy appeared to have
hit bottom and concern over financial
crisis was dispelled, money continued
to flow into the commodities market,
pushing the non-ferrous price higher
virtually uninterruptedly on the London
Metal Exchange. However, as uncertainty
over the economic outlook and profittaking by funds spread from the
beginning of 2010, the market enteredan adjustment phase. The market
fluctuated sharply, falling more than 10%
in a month before staging recovery to thelevel recorded a month earlier.
User demand for raw materials
recovered gradually quarter after quarter,
reviving the market activities. However, it
was very difficult to post a profit, as theamount of non-ferrous scraps available
remained low in Japan. On the other
hand, since the Chinese market was
relatively quiet throughout the fiscal year
under review, we managed to record
a profit by securing supply throughhedging in a flexible manner. In thedomestic aluminum processing business,the material for cans performed well,while the material for window sash
remained less profitable due to difficultyin collecting materials because of asmaller number of demolition works
and increased competition for securing
supply. We expanded tie-ups withlocal processing partners in the trading

Net Sales Composition

4.7%

business of copper and aluminum in
the ASEAN region, an area in which
we have centered our efforts. Exports
to Japan and trilateral trading within
the region grew steadily, contributing
to revenue. Trading of precious metal
scraps, a commodity on which weare focusing, benefited from imports
from the United States. We also began
trading such scraps from Europe, which
has the potential to double in volume in
the future.

Looking Ahead and Key
Strategies
We expect funds to move in a
confused manner, as concern over acredit crisis in Europe persists while
a tighter monetary policy by the
Chinese government will keep themarket in an adjustment phase. Pricesof raw materials are also forecast to
remain high, as international resource
majors dominate the market. As
buyers stayed on the sidelines due toconcern over the European economy
triggered by Greece’s debt crisis andpossible monetary tightening to reinin overheating in China, the copper
price fell by more than $1,000 in
May. In view of possible fluctuationsof the market, players are required torespond flexibly.
Despite the continued scarcity ofmaterials for recycling, user demand
for raw materials has risen sharply intandem with production recovery. In
Japan, we plan to expand collection
bases, improve warehousing functions
and boost exports, while we intend tocooperate more closely with overseas
offices, establish processing plants andbolster the sales system abroad. With
regard to raw materials for precious
metal scrap, a commodity on which
we are centering our efforts, we will
strive to increase imports, sorting andprocessing, and marketing functions,based on tie-ups with users.
We will draw on our sales strength
in the international market and makeuse of effective hedging strategies andability to maintain a stable supply, toexpand the recycling network mainlyin Asia.

| HANWA AR 2010 | 09

Review of Operations

Food Products
Looking Ahead and Key
Strategies

Fiscal 2009 Results
The food products segment reported
lower profit on lower sales, reflecting
the worsening domestic environment.
Despite higher prices of foodstuff
produced overseas, domestic productprices and the Japanese market
remained slumped. Demand was
weak, and the food products segment
was gravely affected by the economic
trends throughout the year. To makematters worse, there was concern
a b o u t t h e c re d i t r i s k o f s e v e r a lindustry players and the collapse of amajor company dampened alreadyweak sentiment in the industry. Sales

Net Sales Composition

6.5%

10 | HANWA AR 2010 |of higher-priced premium fish were
especially subdued. For example,
consumers opted increasingly forsmaller and cheaper frozen prawns,
rather than larger and consequently
higher-priced ones. This consumer
attitude resulted in higher sales of
price-oriented products, instead of
quality-oriented ones. Meanwhile,
demand for seafood in Southeast
Asia, the United States and China isbelieved to have recovered to the level
observed before the Lehman crisis. This
prompted our food products segment
to seek to expand overseas sales, as
one of its basic business policies.

We aim to provide stable distribution
linked directly to demand and expand
marketing channels in Japan. Japanese
consumers pay great attention to theissue of food safety. The food quality
control office will be regarded more
important, due to these consumers’
attention will heighten further during thecurrent fiscal year, and plans to address
the safety issue as the top priority in thefood products segment. In the UnitedStates, we will center our efforts on
Seattle Shrimp & Seafood Company,
INC., one of our joint ventures, and plan
to bolster its operations as the pillar of
our food products segment overseas, bymeans such as increasing the work force
and capital. In addition to the UnitedStates, during the current fiscal year we
aim to conduct exports to China andSoutheast Asian countries and tap the
European market, using our Amsterdam
office as a base.
For the Japanese market, we expectthat time is required for prices of bothproducts and raw ingredients to recoverand that the trend of high ingredientprices and low product prices willcontinue during the current fiscal year.
To ensure steady business, we will
exercise care in the procurement of
raw ingredients and cooperate closelywith clients.

Petroleum and Chemicals
Fiscal 2009 Results
The petroleum products business suffered
lower profit on lower sales in fiscal 2009,
while the chemicals business reported
higher profit. Affected by the financial
crisis that began in 2008, domestic
demand for petroleum products remainedsluggish. As a result, the petroleum
products business fell sharply comparedto the previous fiscal year, despite atemporary boost in demand for kerosene
due to a cold spell.
The price of WTI crude oil, whichstarted to inch up after hitting bottom atthe beginning of 2009, hovered around$80 per barrel in the middle of the year.
The price level did not reflect the supply
and demand situation; instead, as a major
product in the futures market, the crude
oil price appreciated by absorbing excess
liquidity that existed around the world.
Accordingly, sales of petroleum
products slumped sharply in Japan despite
the rising crude oil price. Against thisbackground, oil distributors braced
themselves against shrinking demand for
petroleum products in Japan. Measures
included the announced businessintegration of Nippon Oil Corporation
and Japan Energy Corporation and afurther reduction in output.
Demand for chemical products was
also weak in Japan. The market was led
by emerging countries, especiallyChina, which recorded brisk demand.
Major chemical companies began to

Net Sales Composition

22.9%

e x p l o re w a y s t o re o r g a n i z e t h e i rbusiness in an effort to diversify frompetrochemical products.
Paper manufacturers were forced toslash output drastically, as demand for
paper and paperboard fell sharply.
Ironically, falling prices of raw materials
helped boost their profitability.

Looking Ahead and Key
Strategies
The petroleum products business plans
to establish a marketing mechanism inwhich we can stress comprehensive
proposal marketing designed to cut
costs in accordance withthe sales strategies of oil
distributors. We also plan
to make proactive proposals not only fortraditional oil products
but also for new energy
to satisfy users’ needs.
The chemicals businesswill promote trilateral tradeof materials for resin, tocapture demand in
emerging countries, anddevelop the potential of
life-style products.

The paper business plans to export usedpaper and carry out exports and imports ofpaper products between emerging nations
and Japan amid the paradigm shift taking
place on a global scale.
Last year, China overtook the UnitedStates as the world’s largest producer of
paper and paperboard. This is one of thereasons we believe that the supply anddemand situation of all the products
will change drastically in the current
fiscal year. By taking advantage of thisshift as a business opportunity, we will
push ahead with sales activities tonarrow the gap between supply anddemand around the world.

| HANWA AR 2010 | 11

Review of Operations

Other Businessmeasures such as closures of factories
and reductions in work shifts. The market
began to show signs of an upturn in theJanuary–March 2010 quarter, but pricesof all products declined as a whole forthe year under review.

Fiscal 2009 Results
LumberHousing starts totaled 790,000 units infiscal 2009, down 28% compared tothe previous year. Business remained
weak throughout the year, as bothlumber and plywood suffered a decline
in price and we were unable to securesufficient margins amid intensifying sales
competition. Although growth in sales
to new customers and sales overseas
pushed up trading volume by 5% year
on year, sales fell because of a sharp
decrease in prices.
Suppliers in various regions steppedup efforts to improve the balance
between supply and demand throughNet Sales Composition

3.9%

12 | HANWA AR 2010 |MachineryIn the leisure facilities business, we
completed the construction of U.S.made Dark Ride and MagiQuest, alive action role-playing game, at theTokyo Dome amusement park. For
MagiQuest, we also sell items for use
by game players on a continual basis.
We also completed the constructionof Laser Athletic, a new attraction
developed in-house, at the Yomiuriland
amusement park. In addition, we alsocommenced joint development of fourgame machines for Halos Co., Ltd.
In the industrial machinery business,
we completed the manufacturingof a rebar processing machine for
Hanwa Logistics Tokyo Co., Ltd. andthe construction of a forming lineof scaffolding boards for a building
material leasing company and a slitter/leveler line for PT. Hanwa Steel Service
Indonesia, among other activities.
However, the business slumped due
to a sharp drop in demand related tocapital spending in the aftermath of thefinancial crisis triggered by the collapseof Lehman Brothers.

Looking Ahead and Key
Strategies
LumberAlthough a sharp increase in housing
starts is unlikely, demand for houses ispredicted to expand compared to lastyear, as the number of new condominium units is falling steeply. Demand
for lumber is also forecast to be larger
than last year. A higher price is expected
for most products in view of increasing
demand in China and other emerging
countries in the Middle East and North
Africa. There is concern regarding ashortage of supply for some products,

such as gluelam products and lamina.
In Japan, we aim to expand sales to
end-users by adding domestic plywood
to our sales line-up and strengthening
our ties with the end-users. In theinternational sales section, we aim togenerate profit through the sale oflogs to China, the sale of Japanese
lumber to South Korea and Taiwan,
and expanded business with the
Middle East.
MachineryIn the leisure facilities business, we planto center efforts on the development ofsmall indoor amusement facilities andthe space design business, as market
needs are shifting from large rides toattractions for children and swimmingp o o l - re l a t e d f a c i l i t i e s i n J a p a n .
Overseas, we plan to explore business
opportunities in the markets in the
Middle East, India and China, where
the leisure industry is growing.
In the industrial machinery business,
capital spending is expected to remain
weak in Japan, although it has begun
to pick up somewhat. We plan to step
up collecting information on capital
expenditure at our existing business
partners and direct efforts in the areaof line equipment and export projects.
The move is aimed to make us lessdependent on the broking business of
single equipment. We intend to partnerwith trading companies specializing
in machinery and increase staff tostrengthen the business function.

Topics
Coil Center Established in San Diego
Hanwa opened the coil center San
Diego Vista Steel Service Corporation,
a wholly owned subsidiary of theGroup, in August 2009 in San Diego,
U.S.A. The company has 24 employees
and carries one slitter processing line,
one mini-leveler processing line andone shearing machine, with an annual
Exterior of the coil center
processing capacity of 84,000 tons.
The company plans to engage in processing and sales of steel sheets forJapanese manufacturers of home appliances in California and Mexico. The operationis slated to begin with an annual processing amount of 33,000 tons in its first year.
With the establishment of this center, the number of our steel sheet processing
base overseas has reached 10.

Coil center staff

Coil Center in Indonesia Starts Operation
PT. Hanwa Steel Service Indonesia(HSSI), a coil center in the suburbof Jakarta, commenced full-scale
production in October 2009 one year
after its construction with an annual
processing capacity of 84,000 tons
and site area of about 30,000m 2(total floor area : 7,470m2)
The construction project for HSSI was funded entirely by Hanwa. We anticipate
strong growth in Indonesia, compared to the neighboring ASEAN countries.
Aiming to contribute to local development and to become an integral part of thelocal community, HSSI will employ the latest processing technologies, ensure safety
management and efficient operations under the principle of “customers first.”

Panoramic and in-house view of the new factory

Investment in a Malaysian Electro-Galvanized Steel
Sheet Manufacturing Firm
In December 2009, Hanwa acquired a stake in E-Galv Steel Industry Sdn. Bhd.,
a Malaysian electro-galvanized steel sheet manufacturing firm, in cooperation
with Nippon Steel Corporation. We expect stable growth in demand for electrogalvanized steel sheets in Malaysia, as some Japanese consumer electronics
manufacturers have deployed production bases in the country in recent years.
With this investment, we intend to secure a stable supply of cold-rolled steel
coils to E-Galv Steel Industry, as well as offer technical assistance to the company asneeded to establish a supply system of electro-galvanized steel sheets that satisfy thequality requirements of local customers such as consumer electronics companies.
E-Galv Steel Industry changed its name to Nippon EGalv Steel Industry Sdn.
Bhd. after completion of the investment.

Appearance of the exterior| HANWA AR 2010 | 13

Corporate Governance
Basic corporate governance policy

Internal control and risk management system

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

We have resolved on basic policies regarding the development ofinternal control systems at our Board of Directors’ meetings andare currently developing internal control systems, including theestablishment of frameworks for risk management and taking theconditions of internal audit into consideration.
The overview of the basic policies is as follows.

Corporate governance structures
We have adopted a corporate auditors’ system. Our Board of
Directors, which comprises 20 directors, including one outside
director, meets as a rule once a month to deliberate and decide
important business plans and proposals concerning the Hanwa
Group, and to oversee business operation. There are five auditors
in total, including three outside auditors. Each auditor follows
auditing policies and auditing plans in carrying out stringent audits.
In addition, the corporate auditors attend the Board of Directors,
the Management Committee and other important meetings,
monitor and verify the execution of the management.
We have also adopted a system to perform preliminary review
of management issues in various committees such as the Directors
Evaluation Committee, the Investment Examination Committee,
and the Compliance Committee. By enhancing these management
systems, our corporate governance system will be established togood purpose. ￼● Systems to ensure that performance of duties by the

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

The corporate governance structures and internal control systems for the Hanwa Group.
General Shareholders’ Meeting
election/dismissal

Board of Directors

election/dismissal

oversight/audit

coordination

Board of Auditors
oversight/audit

election/supervison

Disclosure Committee

Operational organization

Directors Evaluation Committee
examination/reportCompliance Committee

Management Committee

Catch All Controls Committee

Senior/managing directors

Investment Examination Committee

Internal Control Committee
adviceQuality Control Committee
Directors

examination/
administration/report

evaluation/oversight

Affiliatedcompanies

Administrative
divisionsguidance

adviceInternal Audit Dept.
External Attorneys
Group Company Corporate
Auditors Conference

cooperation

Operating bases(Japan/overseas)Internal Control Office
Document Control Officeinternal audit

Operatingdivisionscooperation

Executive
vice president

accounting audit/internal control audit

President

14 | HANWA AR 2010 |Independent Auditors

cooperation

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

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

corporate auditors• The corporate auditors announce opinions at meetings of theBoard of Directors as necessary. In addition, the corporate
auditors collaborate with the independent auditor concerning
the financial audit.
• Hanwa has a system that allows the corporate auditors toattend meetings of the Board of Directors and otherimportant meetings, inspect important documents, performstudies of important departments and subsidiaries, andperform other tasks.
● Systems to ensure the reliability of financial reports• In accordance with the Fundamental Policy concerning Internal
Controls for Financial Reports, the Hanwa Group operates theinternal controls reporting system in an efficient and effective
manner. The Internal Control Office supervised directly by theManagement Committee checks and evaluates theestablishment and operation of internal controls and submits
reports to the Management Committee.
• The Internal Control Committee studies issues involving
internal controls and submits reports on the results of thesestudies to the Management Committee. In addition, theInternal Control Committee provides advice and assistance forthe examinations performed by the Internal Control Office anddescribes its opinions in an Internal Control Report.

| HANWA AR 2010 | 15

CSR Activities

Hanwa’s Framework for Promoting Corporate Social Responsibility (CSR)
As a trading company, Hanwa’s broad spectrum of

We already have several CSR units in place at Hanwa,

stakeholders and operations spans the globe. We

notably the Compliance Committee, Environmental

place CSR at the center of our management andCommittee and Hanwa Scholarship Program. The CSR

continually reinforce our CSR activities. We believe

Committee oversees the activities of these and otherthis stance will lead to even more growth in ourorganizations associated with CSR to ensure that allenterprise value.

activities are performed efficiently and seamlessly.

Positioning of the CSR Committee
Board of Directors

Hanwa's basic policy on CSRManagement
Committee

IR and PR activities

CSR Committee

1) Thorough legal complianceHanwa Scholarship
Program3) Good corporate citizenship●Environmental Committee Secretariat

Donations●Catch All Controls Committee

4) Transparent management,
proactive disclosure●Internship System●Compliance Committee●Harassment Consultation Office●Voluntary Activity Support System

Activities to make employees
more aware of CSR

NPO/NGO

2) Consideration of theenvironment

Support for Overseas
Exchange Students

5) Maintaining of financial
soundness
6) Workplaces geared to
employee self-realization

Ethical Principle
Hanwa has established the Compliance Committee with a viewto making all the employees at the Hanwa Group, including
those at affiliated companies and overseas subsidiaries, fully
aware of the importance of corporate compliance and ethics. It
has set up consultation counters both on-site and off-site. In

addition, the Company has drawn up, under the Corporate
Policy, the Corporate Ethical Standards (composed of 10 items)
and the Ethical Standards of Behavior (composed of 25 items)
as guidelines for employee behavior to promote legal, fair andsensible corporate conduct.

Corporate Policy

Owners of OA equipment,
office equipment and fixtures and fittings• Earn confidence with honesty and effort

Steel• Act as a specialist in the field with vigor and initiative• Boost efficiency with originality and cooperation

Steel manufacturers• Promote corporate business and build happy homes

Hanwa Co., Ltd.

Collection
and transport
Separation/

Volumereduction
The Hanwa Ethical Standards for Employee
Behavior

Reuse
16 | HANWA AR 2010 |Purchase/Resale/

Network of
waste disposal
companies• Recognize responsibility and contribute to society

Non-ferrous
metals, Copper,
AluminumNon-ferrous
metal refining

Transport
Disposal

Board of Directors
Management
Committee

IR and PR activities

CSR Committee

Hanwa Scholarship
Program●Environmental Committee Secretariat

Donations●Catch All Controls Committee●Internship System●Compliance Committee
Environmental Activities●Harassment Consultation Office●Voluntary
Activity Support
System Hanwa
In line with the characteristics
of a trading
company,
places a special emphasis on engaging
in environmentally
Activities to makeemployees
NPO/NGO
moreBusinessaware of CSR
friendly businessactivities. The Ecology
Development
Department has established an environmental businesscapable of providing highly effective system solutions far into
the future.
The Ecology Business Development Department engages
in resale and recycling of used office automation equipment
and other office equipment as well as resale and recycling of
fixtures and fittings that are retired from use due toSupport for Overseas
Exchange Students

relocation, closure or refurbishment of shopping centers,
hotels or offices. We have established the Heart Reuse andRecycling System, Hanwa’s nationwide network designed toreduce environmental impacts. We are contributing toachieving a recycling-based society through reduction, reuse
and recycling of waste.
For waste plastics, the Ecology and Recycling Business
Department is putting in place an efficient recycling systemwith minimal environmental impacts.

Heart Reuse and Recycling System
Owners of OA equipment,
office equipment and fixtures and fittings

Steel
Steel manufacturers

Hanwa Co., Ltd.
Reuse

Collection
and transport

Network of
waste disposal
companies

Separation/
Volume reduction

Non-ferrous
metals, Copper,
AluminumNon-ferrous
metal refining

Transport
Disposal

Purchase/Resale/
Donation

Social 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 53rd 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 2009,
the program had distributed a total of ¥544 million inscholarships, and the accumulated number of scholarshipstudents had grown to more than 970.
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

1000

University

Graduate school
68

69

71

72

66

800

66
62
56

600
52
49

400
18

200
7

28

728 748712 721

479

181

41

0

662

318

3
4

548
422

604

96
64

87

98

115 130 144 151 151 151 151 151 151

1957 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2007 2008 2009 Year(1)(5) (10) (15) (20) (25) (30) (35) (40) (45) (50) (51) (52) (53) (Times)| HANWA AR 2010 | 17

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Financial
SectionFive-Year Summary
For the years ended March 31

				
				

		

2010

Millions of yen, 			
except for number of employees
		

2009

Thousands of
U.S. dollars

2010

2008

2007

2006

¥ 1,507,509¥ 1,320,022¥ 1,097,707$12,001,601

For the year:
Net sales		¥ 1,116,629 ¥ 1,539,282
Operating income 		
11,42017,451

23,705

20,865

19,690122,743

Net income 		
11,5795,997

13,118

11,423

10,504

124,452

Net cash provided by (used in) operating activities 		
46,250(5,742)

21,430(36,192)

22,299497,098

Net cash used in investing activities		
(12,992)(19,536)(8,443)(5,956)(14,079) 		
(139,639)

Net cash provided by (used in) financing activities		
(43,669)

46,592(9,144)34,325(7,497)(469,357)

At year-end:$

263,489

Cash and cash equivalents 		
¥24,515 ¥35,046

Total assets		
443,445479,379

482,014476,179

413,020

4,766,176

Total net assets 		
106,855

94,913

100,926

98,254

86,954

1,148,485

Number of employees (persons) 		
1,952

1,818

1,715

1,637

1,519

¥

				

				

		

2010

14,179¥10,229

Yen

2009

¥

18,986

		

2008

2007

U.S. dollars

2010

2006

Per share data:
$

0.596

Net income 		¥55.46 ¥

28.47

Cash dividends 		
12.00

12.00

12.00

12.00

10.00

0.129

Net assets 		
512.16450.05473.70461.21406.68

5.505

				

		

2010

¥

62.07

¥

54.03

%

2009

¥

48.96

		

2008

2007

2006

Key financial ratios:
2.5
Return on assets (ROA)		

1.2

2.7

2.6

2.7

11.6
Return on equity (ROE)		

6.2

13.3

12.4

13.2

140
Net debt/equity ratio 		

190

150

170

140

Notes: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥93.04 = $1.00.
2. Net debt/equity ratio = Net interest-bearing debt / equity.
Net interest-bearing debt = Interest-bearing debt – cash.
3. The cash dividends per share for the year ended March 31, 2007 included a ¥2 commemorative dividend in celebration of the 60th anniversary of the Company’s
establishment.

18 | HANWA AR 2010 |Management’s Discussion and Analysis
Operating Results
Operating Results for the Fiscal Year Ended March 2010
During the consolidated fiscal year under review, the global economy,
buoyed by monetary easing and economic stimulus packages ofgovernments around the world, made a turnaround from the sharp
decline it experienced in the second half of the previous fiscal year,
and it is now on its way to recovery. Although the pace of recovery
is slow in advanced economies, China led the economic recovery of
the entire Asian region with its large-scale public investments anddemand-boosting purchase incentives given to consumers. In Japan,
a recovery seen in overseas demand prompted the manufacturingsector in general to begin its rebound and its production capacity
was rising, albeit to varying degrees reflecting mixed industry-byindustry business sentiments. Domestic demand related to capital
investments and construction in particular remained lackluster.
In this operating environment, the Group posted consolidated
net sales of ¥1,116,629 million for the consolidated fiscal year
ended March 31, 2010, representing a year-on-year decrease of
27.5%. The decline was due principally to a low level of demand andmarket prices seen throughout the fiscal year under review, despite
the overall improving economic picture, in contrast to the previous
consolidated fiscal year in which robust earnings achieved in the firsthalf of that year backed by higher demand and higher market prices
contributed to full-year sales. Operating income also fell 34.6%, to¥11,420 million, reflecting a decrease in revenues caused by lower
prices of petroleum and other products in addition to the declining
sales volume. Net income, in contrast, rose 93.1% to ¥11,579 million.
This was attributable primarily to reduced income taxes paid and otherfactors, which more than offset land and property-related impairment
losses claimed as extraordinary loss. The reduction in income taxes
paid was a result of a tax deduction realized in connection with certain
land and properties sold during the consolidated fiscal year underreview. Impairment losses for such land and properties posted in priorfiscal years and other factors were recognized for tax purposes in the
consolidated fiscal year under review in which sales were made.

Cost of Sales, and Selling, General and Administrative (SG&A)
Expenses
Cost of sales decreased 27.9% to ¥1,076,039 million. The decrease
was due to lower prices of procured goods combined with lower
quantities procured in line with lower quantities sold.
SG&A expenses decreased 3.6% to ¥29,170 million in theabsence of significant bad debts, which resulted in a reduction inprovision for credit losses.

Net Sales
Net sales decreased 27.5% year on year, to ¥1,116,629 million,
composed of ¥834,408 million in net sales in Japan (down 30.4%)
and ¥282,221 million in overseas net sales (down 17.0%).
For discussion of sales by segment, please go to “Review ofOperations” (pages 6 through 12) and “Segment Information”(pages 38 and 39).

Income Taxes
Although income before income taxes and minority interests forthe consolidated fiscal year under review was ¥6,142 million, theCompany obtained a tax deduction for the land and properties soldduring the consolidated fiscal year under review. The impairment
losses for these properties claimed in prior years and other factors
were recognized for tax purposes in the consolidated fiscal year

Operating Income
Operating income was down 34.6% from the previous consolidated
fiscal year’s total of ¥17,451 million to ¥11,420 million. This waslargely attributable to rising SG&A expenses relative to net sales,in addition to lower sales revenues. The result lowered the ratio of
operating income to net sales by 0.1 percentage point from theprevious consolidated fiscal year to 1.0%.
For discussion of operating income by segment, please go
to “Review of Operations” (pages 6 through 12) and “Segment
Information” (pages 38 and 39).
Other Income (Expenses)
Other expenses net of other income decreased 13.0% year on year
to ¥5,278 million.
Other income decreased 34.6% to ¥2,446 million, reflecting
lower interest and dividend income.
Other expenses declined 21.2% to ¥7,724 million, mainly becauseof lower interest expense and lower charges paid. The Company
posted an extraordinary loss in the form of loss on impairment oflong-lived assets in connection with land and others sold during theconsolidated fiscal year under review amounting to ¥3,271 million.
The loss reflected impairment losses in connection with the devaluation of book values of the land and properties sold to net sales values
at the time of signing sales agreements, in addition to impairment
losses for rental properties whose market value declined.

Net Income

Net Sales

Operating Income/Operating Income Ratio(Millions of Yen)

(Millions of Yen)(%)

25,0002.0

20,0001.6

15,0001.2

10,000

0.8

5,000

0.4

1,600,000

1,200,000(Millions of Yen)

12,0009,000

800,000

6,000

400,000

0

06

07

08

09

10

0

0

06

07

08

09

10

3,000

0

06

07

08

09

10

Operating Income Ratio| HANWA AR 2010 | 19

under review. As a result, the Company recognized reversal of income
taxes, net of income taxes paid of ¥5,404 million, in contrast to
income taxes paid of ¥5,355 million in the previous consolidated
fiscal year.

Net Income
Net income rose 93.1% from the previous consolidated fiscal year,to ¥11,579 million. Accordingly, net income per share rose to ¥55.46
from ¥28.47.

Sources of Capital and Cash Liquidity
Financial Condition
Total assets decreased 7.5%, to ¥443,445 million from the previous
consolidated fiscal year, reflecting lower trade receivables brought bylower sales in addition to inventory reductions.
Liabilities decreased 12.5%, to ¥336,590 million as a result of
shrinking needs for working capital, which was translated into a decreasein borrowings. Interest-bearing liabilities fell 18.2% to ¥175,578 million.
The net debt-equity ratio stood at 140% as of March 31, 2010.
Net assets increased 12.6%, to ¥106,855 million. The increase
was attributable mainly to higher retained earnings and improvements in unrealized gains on securities. As a result, the equity ratio at
March 31, 2010 rose to 24.0% from 19.7% a year ago.
Cash FlowsNet cash provided by operating activities totaled ¥46,250 million
during the consolidated fiscal year under review, in contrast to net
cash used of ¥5,742 million recorded in the previous consolidated
fiscal year. Major factors that contributed to net cash inflow included
a significant reduction in inventories accompanying lower sales andan increase in trade payables (¥4,394 million), in sharp contrast to asignificant decrease in trade payables in the previous fiscal year due
to curtailed procurement activities, with the year-on-year net increaseamounting to ¥40,859 million.
Net cash used in investing activities totaled ¥12,992 million,
compared to net cash used of ¥19,536 million the previous consolidated fiscal year, for a net decrease of ¥6,544 million. This wasprimarily attributable to smaller cash disbursements in connection withthe acquisition of investing securities (¥6,720 million), compared withthe previous consolidated fiscal year in which ¥15,556 million was
disbursed for investing activities including the acquisition of the equity
stake in Ruukki Group PLC, representing a year-on-year net reductionof ¥8,836 million in cash disbursed for investment securities.
Net cash used in financing activities totaled ¥43,669 million, in
contrast to net cash provided of ¥46,592 million during the previous
consolidated fiscal year. The net cash outflow reflected the improving
funding climate during the consolidated fiscal year under review in

Total Assets/
ROA

the wake of the credit squeeze triggered by the financial crises in theprevious consolidated fiscal year, in addition to the Company’s partial
repayment of bank borrowings for working capital in line with theGroup’s declining funding needs.
Financial Policy
The Group primarily depends on bank borrowings to meet its working
capital requirements and to fund its investing and financing activities. Yet,as part of its efforts to diversify funding sources to ensure stable liquidity
and agility in liquidity management, it may fund its activities by issuingbonds and commercial paper in the capital markets from time to time.
The Group meets its working capital requirements principallyby floating-rate long-term borrowings from banks to secure stable
funds, while short-term bank borrowings with maturities of one
year or less are used for day-to-day funding. Overseas subsidiaries
borrow from their respective local banks. Capital investments andother long-term funding needs in Japan and abroad are, in principle,
met by long-term borrowings from Japanese sources. Short-termborrowings as at March 31 2010 stood at ¥25,623 million, whichwere mostly denominated in Japanese yen. The Group’s outstanding
long-term borrowings were ¥138,458 million, including the current
portion of long-term borrowings of ¥24,103 million.
The Group issues bonds primarily to fund working capital andto repay debts. As of March 31, 2010, bonds outstanding consistedof straight bonds (issued in August 2007, due 2010) amounting to¥10,000 million. To increase its flexibility in issuing 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, 2010, the unused aggregate
principal amount of the shelf registration for straight bonds forsubscription in Japan amounted to ¥30,000 million.
Adhering to a growth strategy advocating aggressive business
operations, the Group attempts to conduct efficient funding tosecure funds needed for business growth, while keeping an eye on
the size of its external debt by monitoring the net debt/equity ratio, a
key management indicator, to maintain a healthy financial balance.

Total Net Assets/
ROE

Net Debt/Equity Ratio(Millions of Yen)(%)

(Millions of Yen)(%)

500,000

3.0

100,000

15

400,000

2.6

80,00012

300,000

2.2

60,0009200,000

1.8

40,0006

100,000

1.4

20,000

3

0

0

(%)

200

150

100

0
ROA

20 | HANWA AR 2010 |

06

07

08

09

10

06
ROE

07

08

09

10

0

50

0

06

07

08

09

10

Business and Other Risks
Changes in the Macroeconomic Environment
The Hanwa Group’s worldwide operating revenue is subject tomacroeconomic conditions of the countries or regions where it sells
its products. An economic slowdown in any of the primary marketsof the Group including Japan, North America, Europe and Asia (especially East Asia with China being the key market) with a subsequent
decrease in demand could exert an adverse impact on the Group’sbusiness performance and financial condition.
Commodity Price Fluctuations
The Group holds inventories for distribution, which include steel
products, metals and alloys, non-ferrous metals, foods and petroleum/chemical products. These are commodities whose prices are highly
susceptible to fluctuations in supply and demand and movements inforeign exchange. The Group’s business performance and financial
position could be adversely affected, in the event of the Group’s
inability to respond adequately to price fluctuations of suchcommodities.
Foreign Exchange Fluctuations
The Group is engaged in worldwide procurement and sales of goods.
Foreign currency-denominated profits, costs, assets, liabilities andother accounting records associated with areas outside Japan aretranslated into Japanese yen amounts in the preparation of financial
statements. While the amounts reported in original currencies remainunchanged, the post-translation amounts are subject to the conversion rate applied to them. Generally speaking, a stronger yen relative
to other currencies (especially against the U.S. dollars, which accountfor a substantial portion of the Group’s sales) adversely affects theGroup’s export transactions, while it favorably affects the Group’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 swaps to cover certain funds
subject to floating interest rates. However, the Group’s businessperformance 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 mostly of its business counterparties that are subject to price fluctuations. Price fluctuations of
the securities it holds, including the shares of Ruukki Group PLC of
Finland, which it acquired in May 2008, and the listed Japaneseshares it holds could impact the business performance and financial
position of the Group.
Credit Risk
The majority of trade receivables held by the Group are based onprior granting of credit limits to its business counterparties. While
the Group 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
are carried 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,
the Group’s business performance and financial condition could be
adversely affected.
The Group has made investments in the area of resources
with a view to securing participation in and commercial rights toferrochrome and chromium mining projects. The Group will keep
track of the progress made in turning plans into full-fledged businessprojects, as well as income-generating environments surrounding
these businesses.
Risks Associated with Global Activities and Entry to Overseas
Markets
The Group has stepped up efforts recently to enter Chinese and other
Asian markets as well as markets in the United States and Europe.
The Group may face a number of risks inherent in overseas businessactivities, as the following:(1) Unanticipated change in export/import regulations especially interms of laws and customs duties.
(2) Political and/or economic change 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 andservices.
(5) Change in taxation unfavorable to corporate activity.
(6) An act of terrorism, war and social turmoil caused by otherfactors.
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 or sales restrictions on grounds ofnational security and otherwise, customs duties and other export/
import regulations. In addition, laws and regulations relevant to
the Group’s business activity, such as those concerning trade, antimonopoly, patent, taxation, foreign exchange control, food safety,
environment and recycling, must be fully observed. These regulations
may not only limit the Group’s business activities but also entail ahigher cost of doing business, as more funds need to be disbursed toensure compliance. Therefore, the business performance and financial condition of the Group may be impacted by such regulations.
Retirement Benefit Obligations
Retirement benefit costs and obligations are calculated based on
actuarial assumptions on discount rates and expected returns on plan
assets, among others. If actual results differ from such assumptions
or if such assumptions are revised, the effect of such difference orrevision will be subsequently accrued and recognized over years on aperiodic basis, thus affecting costs and obligations to be recognizedor posted over such years. Therefore, deteriorating discount rates
and poorer returns on plan assets could adversely affect the Group’sbusiness performance and financial position.
| HANWA AR 2010 | 21

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
As at March 31, 2010 and 2009													Millions of yen

Assets				2010

Thousands of
U.S. dollars (Note 1)

2010

2009

Current Assets:							¥24,515
Cash and cash equivalents					

¥$ 263,489
35,046		

Receivables:						
		Trade notes and accounts:						

			

5,266
Unconsolidated subsidiaries and affiliates 					56,5997,427		

			

209,150
Other					2,247,958
225,856		

		

Loans:							

			

2,086
Unconsolidated subsidiaries and affiliates 					22,420
796		

			

240
Other					

2,580
7		

(892)
Allowance for doubtful receivables					(9,587)(781)		

72,352Inventories 					777,644
90,766		

3,357
Deferred tax assets—current (Note 9) 					36,082
1,561		

17,092Other current assets (Note 6)					183,705
24,875		

333,166
Total current assets					3,580,890
385,553																	Investments and noncurrent receivables:						Investment securities (Notes 4 and 6):						
		

3,240
Unconsolidated subsidiaries and affiliates 					34,824
3,413		

		37,162Other 					399,420
24,610		

Loans receivable:						
257Other 					

2,762
220		

22,889Other investments and noncurrent receivables					246,012
20,747		

(2,975)
Allowance for doubtful receivables 					(31,975)(3,187)		

60,573
Total investments and noncurrent receivables					651,043
45,803																	Property and equipment (Note 6):						28,294
Land (Note 10)					304,106
27,966		

23,459Buildings and structures					252,139
23,657		

14,348Other						154,213
13,692		

(19,801)
Accumulated depreciation					(212,822)(18,908)		

46,300Total property and equipment					497,636
46,407															Other assets:							2,653Deferred tax assets—noncurrent (Note 9)					28,514883		

753
Intangibles and other assets (Note 6)					

8,093
733		

			

3,406
Total other assets 					36,607
1,616		

			

Total		

See accompanying Notes to Consolidated Financial Statements.

22 | HANWA AR 2010 |¥ 443,445
			

¥479,379$ 4,766,176													Millions of yen

Liabilities and Net Assets				2010

Thousands of
U.S. dollars (Note 1)

2010

2009

Current liabilities:							Short-term loans payable (Note 7) 					¥25,623¥65,688$275,398

Commercial paper (Note 7)					1,00010,748—		Long-term debt due within one year (Note 7) 					34,103366,541
23,675		Trade notes and accounts payable:						
		Unconsolidated subsidiaries and affiliates					1,38814,918802		

		

Other 					133,4121,433,921
129,918		

Accrued bonuses to employees 					1,85619,948
1,789		

Income taxes payable 					
233

2,504
189		

Other current liabilities 					17,475

187,823
30,427		

Total current liabilities 					215,0902,311,801
252,488															Noncurrent liabilities:							Long-term debt due after one year (Note 7) 					114,355

1,229,095
125,150		

Employees’ severance and retirement benefits (Note 8) 					
19

204
26		

Deferred tax liabilities—noncurrent (Note 9) 					2,68428,8482,686		

Other noncurrent liabilities 					4,44247,743
4,116		

Total noncurrent liabilities 					121,500

1,305,890
131,978															Contingent liabilities (Note 13)																Net assets (Note 10)							Shareholders’ equity:							Common stock, 						
		Authorized: 570,000,000 shares 						

		Issued: 211,663,200 shares 					45,651490,660
45,651		

Capital surplus					5

545		Retained earnings					64,302

691,12254,651		Treasury stock, at cost: 4,367,348 shares (2,358,475 in 2009)					(1,415)(15,209)(756)		

Total shareholders’ equity					108,543

1,166,627
99,551					

Valuation and translation adjustments:						Unrealized gains on securities, net of taxes					
889

9,555
(3,213)		

Unrealized gains on hedging derivatives, net of taxes					(772)(8,297)(249)		

Land revaluation difference, net of taxes					(183)(1,967)(180)		

Foreign currency translation adjustments					(2,308)(24,807)(1,711)		

Total valuation and translation adjustments					(2,374)(25,516)(5,353)		

Minority interests					
686

7,374
715		

		

Total net assets					106,855

1,148,485
94,913				Total					¥ 443,445$ 4,766,176¥ 479,379		

			| HANWA AR 2010 | 23

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income
For the years ended March 31, 2010 and 2009													Millions of yen
				

2010

Thousands of
U.S. dollars (Note 1)

2010

2009

Net sales						¥ 1,116,629$12,001,601¥ 1,539,282		

Cost of sales 					1,076,039

11,565,337
1,491,570		

Gross profit 					40,590436,264
47,712		

Selling, general and administrative expenses 					29,170313,52130,261		

		

122,743
17,451		

		

Operating income					11,420								Other income (expenses):						Interest and dividend income 					
99510,694
1,990		

Interest expense					(3,215)(34,555)(4,337)		

Foreign exchange gain					1,45115,596
1,748		

Loss on valuation of investment securities					—

—(2,506)		

Foreign exchange loss resulting from reduction of common stock of consolidated subsidiary			——(908)		

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

(35,157)—(3,271)

Loss on sales of noncurrent assets					—

—(212)		

Other, net					(1,238)(13,306)(1,845)		

Income before income taxes and minority interests

66,015
11,381		

				
6,142

Income taxes (Note 9):						Current						
390

4,192
3,998		

Deferred					(5,794)(62,274)
1,357		

								(5,404)(58,082)
5,355		

Minority interests in income of consolidated subsidiaries					33355(29)		Net income					¥11,579¥$ 124,452
5,997		

													
Yen
					

2010

Net income per share 				¥55.46Cash dividends per share 				12.00See accompanying Notes to Consolidated Financial Statements.

24 | HANWA AR 2010 |U.S. dollars(Note 1)

2010

2009

¥

28.47
12.00

$

0.596
0.129

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2010 and 2009					Numbers of shares in thousands/

Thousands of						Millions of yen
				Number of shares of common stock
Balance at beginning of year
Balance at end of year

U.S. dollars (Note 1)

2010

2009

2010

211,663
211,663

211,663
211,663

Shareholders’ equity:
Common stock
Balance at beginning of year
Balance at end of year¥¥

45,65145,651¥¥45,65145,651$$490,660
490,660

Capital surplus
Balance at beginning of year
Balance at end of year

¥
¥

5
5

¥
¥

5
5

$
$

54
54

¥

54,651(2,512)582
211,57964,302¥51,028(2,536)—
162
5,997
54,651$

587,393(26,999)
6,255
21
124,452
691,122

(756)
(660)
1
(1,415)
108,543

¥

(130)
(632)
6
(756)
99,551$(3,213)
4,102
889

¥

5,397
(8,610)(3,213)

$

(249)
(523)
(772)

¥

144
(393)
(249)

$

(180)
(3)
(183)

¥

(17)
(163)
(180)

$

(1,711)(597)(2,308)(2,374)¥(1,967)256(1,711)(5,353)

$

815
(100)
715
94,913$Retained earnings
Balance at beginning of year
Cash dividends paid
Increase resulting from increase in consolidated subsidiaries
Other changes
Net income
Balance at end of year
Treasury stock, at cost
Balance at beginning of year
Purchases of treasury stock
Retirement of treasury stock
Balance at end of year
Total shareholders’ equity at end of year
Valuation and translation adjustment:
Unrealized gains on securities, net of taxes
Balance at beginning of year
Changes in unrealized holding gains on securities
Balance at end of year
Unrealized gains on hedging derivatives, net of taxes
Balance at beginning of year
Changes in unrealized gains on hedging derivatives
Balance at end of year
Land revaluation difference, net of taxes
Balance at beginning of year
Land revaluation difference, net of taxes
Balance at end of year
Foreign currency translation adjustments
Balance at beginning of year
Adjustments from translation of foreign currency financial statements
Balance at end of year
Total valuation and translation adjustment at end of year

¥

¥

¥
¥

¥
¥

¥
¥

¥
¥

¥
¥
¥

Minority interests
Balance at beginning of year¥
715
Increase in minority interest(29)
Balance at end of year¥
686
Total net assets at end of year					¥ 106,855
See accompanying Notes to Consolidated Financial Statements.

¥

¥
¥

¥

¥

¥

¥
¥

¥
¥
¥

$

(8,126)(7,094)
11$(15,209)$ 1,166,627

$

$

$

$
$

(34,534)
44,0899,555(2,676)(5,621)(8,297)(1,935)(32)(1,967)(18,390)(6,417)(24,807)(25,516)

7,685
(311)
$
7,374
$ 1,148,485| HANWA AR 2010 | 25

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2010 and 2009													Millions of yen
				

2010

Thousands of
U.S. dollars (Note 1)

2010

2009

Cash flows from operating activities:						Income before income taxes					11,381¥
6,142 ¥
Adjustments to reconcile income before income taxes						to net cash provided by (used in) operating activities								 Depreciation					
2,358
2,560
		 Loss on impairment of long-lived assets					—3,271		 Increase (decrease) in allowance for doubtful receivables					
2,322
(89)
		 Interest and dividend income					(1,990)(995)
		 Interest expense					
4,337
3,215
		 Loss on valuation of investment securities					2,506—		 Foreign exchange loss resulting from reduction of common stock of consolidated subsidiary 			908—
		 Loss on sales of noncurrent assets					212—		 Decrease in trade receivables					28,537
13,942
		 Decrease in inventories					1,16423,010		 Increase (decrease) in trade notes and accounts payable					(36,465)4,394
		 Other, net					(9,630)(5,201)
		 Subtotal					5,64050,249Cash flows during the year for:								 Interest and dividends received					
1,959
995
		 Interest paid					(4,176)(3,346)
		 Income taxes paid					(9,165)(1,648)Net cash provided by (used in) operating activities					(5,742)
46,250$66,01527,51535,157(957)(10,694)
34,555———
149,850
247,31347,227(55,901)
540,080
10,694(35,963)(17,713)497,098

Cash flows from investing activities:								 Additions to property and equipment					(6,513)(7,735)
		 Proceeds from sale of property and equipment					
509
3,596
		 Additions to investment securities					(15,556)(6,720)		 Proceeds from sale and redemption of investment securities				
2,131
186
		 Decrease (increase) in short-term loans receivable, net					
118(1,297)
		 Additions to long-term loans receivable					
(31)
(13)
		 Proceeds from long-term loans receivable					8061		 Other, net					(274)(1,070)Net cash used in investing activities					(19,536)(12,992)(83,136)
38,650(72,227)
1,999(13,940)(140)
655(11,500)(139,639)

Cash flows from financing activities:							 Increase (decrease) in short-term loans payable, net					39,934(40,991)
		 Increase (decrease) in commercial paper, net					(17,000)
1,000
		 Proceeds from long-term debt					60,675
16,063
		 Repayments of long-term debt					(33,800)(16,420)(2,541)
		 Payment of cash dividends					(2,512)
		 Cash dividends paid to minority interests in consolidated subsidiaries				(5)(4)
		 Other, net					
(671)
(805)
Net cash provided by (used in) financing activities					46,592(43,669)
Effect of exchange rate changes on cash and cash equivalents				
(447)
(263)
Net increase (decrease) in cash and cash equivalents					20,867(10,674)
Cash and cash equivalents at beginning of year					14,17935,046
Increase arising from inclusion in consolidation					—
143Cash and cash equivalents at end of year					35,046¥
24,515 ¥(440,574)
10,748
172,646(176,483)(26,999)(43)(8,652)(469,357)(2,827)(114,725)
376,677
1,537
263,489

See accompanying Notes to Consolidated Financial Statements.

26 | HANWA AR 2010 |$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 preparedin accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Law 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 applicationand 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
and translated into English with some expanded descriptions fromthe consolidated 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 Law. Some supplementary information
included in the statutory Japanese language consolidated financial
statements, but not required for fair presentation, is not presented 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, 2010, which was ¥93.04 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 this or any other rate of exchange.

2. Significant accounting policies
Consolidation—The consolidated financial statements include theaccounts of the Company and its 14 (12 in 2009) significant subsidiaries(together “the Companies”). The accounts of certain consolidated
subsidiaries have been included on the basis of fiscal periods that ended
three months or less prior to March 31, and significant transactions after
these year-ends were appropriately adjusted in consolidation.
Intercompany transactions and accounts have been eliminated.
The Company does not apply the equity method because nonconsolidated subsidiaries and affiliated companies are immaterial.
Cash and cash equivalents—In preparing the consolidated statementsof cash flows, cash on hand, readily available deposits and short-term
highly liquid investments with maturities not exceeding three months
at the time of purchase are considered to be cash and cash equivalents.
Allowance for doubtful receivables—The allowance for doubtfulreceivables is provided to cover possible losses on collection. With
respect to normal trade accounts receivable, it is stated at an amountbased on the actual rate of historical bad debts, and for certain doubtfulreceivables, 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 affiliatedcompanies, 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. Unrealized gains and unrealized losses on thesesecurities are reported, net of applicable income taxes, as a separate
component of net assets. Realized gains on the sale of such securities
are computed using moving average cost. Other available-for-salesecurities are stated at moving average cost.
Inventories—Prior to April1, 2008, inventories of the Companies
were stated at the lower of cost (on the moving average cost methodor the specific identification cost method) or market. As discussed in
Note 2, “Changes in accounting policies,” the Companies adopted a
new accounting standard for measurement of inventories and statedat the lower of moving average cost or net realizable value at March
31, 2010 and 2009.
Property and equipment (except under lease)—Property andequipment are carried at cost. Recognized loss on impairment of longlived assets has been deducted from acquisition costs. Depreciation isprincipally provided on the declining-balance method over the estimateduseful 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 estimated useful life of five years.
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, prefecturaland municipal inhabitants taxes and enterprise tax. The Companies
recognize the tax effects of loss carryforwards and the temporary
differences between the carrying amounts of assets and liabilities for
tax and financial reporting. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the expected future
tax consequences of the temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes andthe amounts used for income tax purposes.
The Company and its wholly owned domestic subsidiaries fileconsolidated tax returns.
Retirement benefits—Substantially all employees of the Company andits domestic consolidated subsidiaries are covered by qualified fundedpension plans. The amount of the retirement benefit is, in general, basedon length of service, base salary at the time of retirement, and cause ofretirement. Annual contributions, which consist of normal cost and theamortization of prior service cost, are charged to income.
Liabilities and expenses for severance and retirement benefits
are determined based on the amounts actuarially calculated using
certain assumptions.
Because pension assets exceeded the deduction for unrecognized actuarial differences and unrecognized prior service cost fromprojected benefit obligation in the Company, the excess amount was
included in “Other investments and noncurrent receivables” in theyears ended March 31, 2010 and 2009.
As discussed in Note 2, “Changes in accounting policies,” the Company
and its domestic consolidated subsidiaries adopted “Partial Amendments
to Accounting Standard For Retirement Benefits (Part 3).” (ASBJ Statement
No.19 issued on July 31, 2008) from the year ended March 31, 2010.
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
in net assets.
Finance leases—Prior to April 1, 2008, finance leases that do not| HANWA AR 2010 | 27

transfer ownership of the leased property to the lessee were permitted
to be accounted for as operating lease transactions. “AccountingStandard for Lease Transactions” (ASBJ Statement No. 13 issued onJune 17, 1993 and revised on March 30, 2007) and “the Guidanceon Accounting Standard for Lease Transactions” (ASBJ Guidance No.
16 issued on January 18, 1994, and revised on March 30, 2007) wereadopted from the fiscal year beginning on April 1, 2008. Finance leases
that do not transfer ownership of the leased property to the lessee atthe end of the lease period continue to be computed using the straightline method over the period of the lease. Finance lease transactions inwhich the ownership of the leased assets was not transferred to lessee
and contracted before April 1, 2008 are accounted for as operatinglease transactions and “as if capitalized” information is disclosed in thenotes to the Company’s consolidated financial statements.
Derivatives and hedge accounting—The Company states derivative financial instruments at fair value and recognizes changes in thefair value as gain or loss unless the derivative financial instruments
are used for hedging purposes.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Company defers the recognition of gain or loss
resulting from the changes in the fair value of the derivative financial instruments until the related gain or loss on the hedged item is recognized.
Also, if interest rate swap agreements are used as hedges and meetcertain hedging criteria, the net amount to be paid or received under theinterest rate swap agreements is added to or deducted from the intereston the assets or liabilities for which the swap agreement was executed.
The following summarizes hedging derivative financial instruments
used by the Company and items hedged:
Hedging instruments:
		 Interest rate swap agreements
		 Commodity futures 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 ofthe hedged items and the corresponding changes in the hedging
derivative instruments.
Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation.
Amounts per share—Computations of net income per share ofcommon stock are based on the weighted average number of shares
outstanding during each period. Diluted net income per share is notdisclosed because potentially dilutive securities are not issued. Cashdividends per share in the consolidated statements of income are
dividends applicable to the respective years including dividends to be
paid after the end of the fiscal year.
Changes in accounting policies—
Accounting standard for measurement of inventories
Effective from the year ended March 31, 2009, the Companies haveadopted “Accounting Standard for Measurement of Inventories”(ASBJ Statement No. 9, issued on July 5, 2006). Prior to April 1, 2008,
inventories of the Companies were stated at the lower of market or
cost determined by the moving average cost method or the specificidentification cost method. The new accounting standard requiresthat inventories held for sale in the ordinary course of business bemeasured at the lower of cost or net realizable value. Replacement
cost may be used in lieu of the net realizable value, if appropriate.
The impact of this change on profit or loss has been insignificant.
Practical solution on unification of accounting policies applied
to foreign subsidiaries for consolidated financial statements
Effective from the year ended March 31, 2009, the Company adopted“Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for Consolidated Financial Statements” (ASBJ
Practical Solution No. 18 issued on May 17, 2006). The impact of thischange on profit or loss has been insignificant.
Partial amendments to accounting standard for retirement
benefits
Effective from the year ended March 31, 2010, the Company andits domestic consolidated subsidiaries adopted “Partial Amendments
to Accounting Standard for Retirement Benefits (Part 3)”(ASBJ
Statement No.19 issued on July 31, 2008). The change had no impact
on net income and projected benefit obligation.
Accounting policies in revenues and cost of construction
Effective from the year ended March 31, 2010, the Company and its
domestic consolidated subsidiaries adopted “Accounting Standard
for Construction Contracts” (ASBJ Statement No.15 issued on
December 27, 2007) and “Guidance on Accounting Standard forConstruction Contracts” (ASBJ Guidance No.18 issued on December
27, 2007). The change had no impact on net income.
(Additional Information)
Effective from the year ended March 31, 2009, the Company and its
domestic consolidated subsidiaries reviewed and revised the useful life ofcertain tangible assets, mainly machinery and equipment, taking advantageof the change in the Corporate Tax Law (Ministerial Ordinance to Partially
Amend the Ministerial Ordinance with Regard to Useful Life of Depreciated
Assets: April 30, 2008, Ordinance of the Ministry of Finance, No. 32).
The impact of this change on profit or loss has been insignificant.

3. Financial instruments(Additional Information)
Effective from the year ended March 31, 2010, the Companies
adopted the revised accounting standard, “Accounting Standard for
Financial Instruments” (ASBJ Statement No.10 revised on March 10,2008) and the “Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No.19 revised on March 10, 2008).
Information on financial instruments for the year ended March 31,
2010 required pursuant to the revised accounting standards is asfollows.
(A) Qualitative information on financial instruments
The Companies raise cash for their operational transactions, investment and loans by means of bank loans and issues of bonds andcommercial paper. Temporary surplus funds are managed in low-risk
financial products.
Trade notes and accounts receivable are exposed to credit risk
and are in accordance with internal policies that regulate the autho28 | HANWA AR 2010 |rization and credit limit amount.
Investment securities mainly consist of listed stocks, and their fairvalues are periodically reported to management.
The Companies enter into foreign exchange forward contracts andcurrency swap agreements to hedge foreign exchange risk associatedwith certain assets and liabilities denominated in foreign currencies.
The Company enters into interest rate swap agreements to hedge
against fluctuations in future interest rates. The Companies also enter
into commodity futures contracts and commodity swap agreements tohedge risks associated with certain inventories and commitments. It is
the Companies’ policy to use derivatives only for the purpose of
reducing market risks associated with assets and liabilities.
(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, 2010 were as follows:March 31, 2010

					Book value

Millions of yen 			Fair value

Difference

Thousands of U.S. dollars

Book value

Fair value

Cash and cash equivalents¥ 24,515¥ 24,515¥—$ 263,489$ 263,489
Trade notes and accounts receivable
214,416			
2,304,557		
Allowance for doubtful receivables(802)			(8,620)		
Net		
213,614
213,614—
2,295,937
2,295,937
Investment securities						Held-to-maturity debt securities
5,010
5,033
23
53,84854,095
Available-for-sale securities
28,422
28,422—
305,482
305,482Long-term loans receivable257			
2,762		Allowance for doubtful receivables(1)			
(11)		
Net		
256
256
—
2,751
2,751
Total assets¥ 271,817¥ 271,840¥
23$2,921,507$2,921,754
Short-term loans payable¥ 25,623¥ 25,623¥—$ 275,398$ 275,398
Commercial paper
1,000
1,000
—
10,748
10,748Long-term debt due within one year
34,10334,131(28)
366,541
366,842
Trade notes and accounts payable
134,800
134,800—
1,448,839
1,448,839
Long-term debt due after one year
114,355
114,355—
1,229,095
1,229,095
Total liabilities¥ 309,881¥ 309,909¥(28) $3,330,621$3,330,422
Derivatives						To which hedge accounting is not applied
¥
187
¥
187
¥
—
$
2,010
$
2,010
To which hedge accounting is applied(1,579)(1,801)(222)(16,971)(19,357)
Total derivatives¥(1,392) ¥(1,614) ¥(222) $ (14,961) $ (17,347)

Difference

$

—

—
247
—

$
$

$
$
$

—
247
—
—
(301)
—
—
(301)
—
(2,386)(2,386)

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

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 approximates fair value
due to their floating interest rate. The fair value of corporate bonds
is based on the quoted price provided 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, 2010:										
		Millions of yen
					

			
(a) Equity securities issued by unconsolidated subsidiaries and affiliated companies						¥

Thousands of
U.S. dollars

2010

2010

Book value

Book value

3,240

$

34,824(b) Available-for-sale securities							Unlisted stocks					¥2,217$ 23,828
Unlisted foreign stocks					1,39915,037
Investment in limited partnerships					
114
1,225
Total					¥3,730$ 40,090| HANWA AR 2010 | 29

The maturities of receivables and securities with maturities outstanding at March 31, 2010 were as follows:

Years ending March 31

			

		

Millions of yen																2011

Cash and cash equivalents		
Trade notes and accounts receivable		
Held-to-maturity debt securities		
Long-term loans receivable		Total						¥24,515
214,416—63¥ 238,994

From 2012 		
to 2015		

¥

¥

—
—
2,000
143
2,143

		

¥

¥

—
—
3,010
35
3,045

Thereafter		

¥

¥

—
—
—
79
79

Thousands of U.S. dollars																2011

$ 263,489
2,304,557—
677$2,568,723

Cash and cash equivalents
Trade notes and accounts receivable
Held-to-maturity debt securities
Long-term loans receivable
Total		

From 2016		
to 2020		

From 2012 		
to 2015		

$

$

—
—
21,496
1,537
23,033

From 2016		
to 2020		

$

$

—
—
32,352376
32,728Thereafter		

$

$

—
—
—
849
849

4. Securities(A) The following table summarizes book values and fair values of held-to-maturity debt securities as of March 31, 2010:

March 31, 2010					Corporate bonds

Millions of yen 			Book value

¥

5,010

Fair value

¥

5,033

Difference¥

23

Thousands of U.S. dollars

Book value$

53,848Fair value$

54,095Difference$

247(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, 2010 and 2009:

March 31, 2010					Securities with book values exceeding acquisition costs:
Equity securities¥
Securities with book values not exceeding acquisition costs:
Equity securities¥

March 31, 2009

Millions of yen 			Acquisition cost

Book value

DifferenceBook value

Difference

5,337

¥

12,476

¥

7,139

$

57,363$ 134,093$

21,914¥

15,946¥(5,968)$ 235,533$ 171,389$ (64,144)

			

			

					

Securities with book values exceeding acquisition costs:
Equity securities 				Securities with book values not exceeding acquisition costs:
Equity securities 				30 | HANWA AR 2010 |Thousands of U.S. dollars

Acquisition cost

76,730Millions of yen

Acquisition cost

Book value

Difference

¥

3,436

¥

7,806

¥

4,370

¥

23,585¥

13,709¥(9,876)

(C) The following tables summarize book values of securities whose fair values were not determinable as of March 31, 2009:												

		Millions of yen

		

					

2009

				

Book value(a) Equity securities issued by unconsolidated subsidiaries and affiliated companies				

¥

3,413

¥

1,775
1,179
141
3,095

(b) Available-for-sale securities
Unlisted stocks 						Unlisted foreign stocks 						Investment in limited partnerships 						Total						¥(D) Total sales of available-for-sale securities in the year ended March 31, 2009 amounted to ¥128 million, and resulted in a net gain of¥103 million.
		 The loss resulting from the valuation of the listed securities in the year ended March 31, 2009 was ¥2,506 million.

5. Derivatives(A) The following tables summarize fair value information as of March 31, 2010 and 2009, for the derivatives to which hedge accounting
has not been applied:

March 31, 2010
Currency
related							Millions of yen 			Contract or		
notional amount
Fair value

Foreign exchange forward contracts:
Selling		 U.S. dollars¥ 20,268¥ 20,674
		 Other currencies
10,772
10,094
Buying		 U.S. dollars
7,634
7,749
		 Other currencies
4,167
4,132
Currency swap agreements:
Japanese yen received for U.S. dollars
10,744499
		 Total 			Commodity related

			
		
		

Contract ornotional amount

Fair value

¥

(406)
678

$ 217,842
115,778$ 222,206
108,491115(35)

82,05144,787

83,28744,411

499
851

115,477

5,363
		

¥

Millions of yen 			Contract or		
notional amount
Fair value

Futures:Petroleum
		 Selling¥ 10,175¥ 10,502
		 Buying
9,517
9,962
Non-ferrous metals
		 Selling
14,53515,853
		 Buying
7,538
8,137
Commodity swap agreements:
Petroleum
		 Selling
4,495
(222)
		 Buying
5,904
159
		 Total 			

Thousands of U.S. dollars

Net recognizedgain or loss

Net recognizedgain or loss$

(4,364)
7,287
1,236
(376)

$

5,363
9,146

Thousands of U.S. dollars

Net recognizedgain or loss

Contract ornotional amount

Fair value

¥

(327)
445

$ 109,361
102,289$ 112,876
107,072(1,318)599

156,223
81,019170,389
87,457(14,166)
6,438

(222)
48,313(2,386)
159
63,4571,709(664)			

(2,386)
1,709(7,137)¥

Net recognizedgain or loss$$

(3,515)4,783| HANWA AR 2010 | 31

March 31, 2009
Currency
related
				

		

					
					

Millions of yen

Contract ornotional amount

Fair value

Foreign exchange forward contracts:
Selling		 U.S. dollars 				¥ 25,144¥ 26,150
		 Other currencies 				12,033
11,426
Buying		 U.S. dollars 				
4,022
4,099
		 Other currencies 				
2,370
2,333
Currency swap agreements:
Japanese yen received for U.S. dollars				
10,547636
		 Total 						Commodity related

				

		

					
					

Net recognizedgain or loss¥

(1,006)
607
77
(37)

¥

636
277

Millions of yen

Contract ornotional amount

Fair value

Futures:Petroleum
		 Selling 				
¥
3,839
¥
4,259
		 Buying				
3,403
3,279
Non-ferrous metals
		 Selling 				
4,019
4,010
		 Buying 				
1,793
1,938
Commodity swap agreements:
Petroleum
		 Selling 				
5,950
548
		 Buying				
5,318
148
		 Total 						Net recognizedgain or loss

¥

(420)
(124)
9
145

¥

548
148
306

(B) The following tables summarize fair value information as of March 31, 2010, for the derivatives to which hedge accounting has been applied:

March 31, 2010
Interest rate related

			
		
		

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

10,900Commodity related

			
		
		

Futures for inventories and commitments
Non-ferrous metals
		 Selling		 Buying

32 | HANWA AR 2010 |Millions of yen 			Due after
one year¥

14,618
8,254

¥

(222)

Due after
one year$ 117,154$ 117,154

Millions of yen 			Contract ornotional amount¥

10,900Fair value

Due after
one year¥——

Fair value¥

17,797
9,854

Thousands of U.S. dollars

Contract ornotional amount$(2,386)

Thousands of U.S. dollars

Contract ornotional amount$ 157,115
88,715

Fair value

Due after
one year$——

Fair value$ 191,283
105,911

6. Pledged assets
At March 31, 2010 and 2009, assets pledged as collateral for short-term loans payable in the amount of ¥1 million ($11 thousand) and ¥358
million, respectively, and guarantees were as follows:										
		Millions of yen
2010

					

Other current assets				Investment securities				Property and equipment, net of accumulated depreciation 				Intangibles 				Total				

¥

¥

13
1,531
789
125
2,458

Thousands of
U.S. dollars
2010

2009

¥

¥

13
1,083
817
126
2,039

$

$

140
16,4558,480
1,344
26,419

7. Short-term loans payable, commercial paper and long-term debt
The weighted average interest rate applicable to short-term loans
outstanding at March 31, 2010 and 2009 was 1.61% and 1.65%,
respectively.

The Company has entered into a yen denominated domestic
commercial paper program. There was an outstanding balance of¥1,000 million ($10,748 thousand) and nil at March 31, 2010 and2009, respectively.

Long-term debt at March 31, 2010 and 2009 consisted of the following:										
		Millions of yen
2010

					

Issued in 2007, 1.53% unsecured straight bonds, due 2010				
Loans from banks with weighted average interest rates of 1.18% and1.47% at March 31, 2010 and 2009, respectively, maturing seriallythrough 2016				
Less amounts due within one year				
					

¥

10,000¥ 138,458
34,103¥ 114,355

2009

Thousands of
U.S. dollars
2010

10,000$ 107,481¥ 138,825
23,675¥ 125,150$1,488,155
366,541$1,229,095¥

The annual maturities of long-term debt outstanding at March 31, 2010 were as follows:
Years ending March 31

					Millions of yen

2011
2012
2013
2014
2015
Thereafter
Total

¥

34,103
11,20010,00070,40017,7555,000¥ 148,458

Thousands of
U.S. dollars$ 366,541
120,378
107,481756,664
190,832
53,740$1,595,636| HANWA AR 2010 | 33

8. Employees’ severance and retirement benefits
The liability for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2010 and2009 consisted of the following:										
		Millions of yen
2010

					

Projected benefit obligation				Less fair value of pension assets				
Unrecognized actuarial differences				
Unrecognized prior service costs 				Prepaid pension costs				Liability for severance and retirement benefits				¥

22,910(21,153)(7,636)
(706)
6,604
¥
19

Thousands of
U.S. dollars

2009

2010

21,817(16,516)(10,070)
(787)
5,582
¥
26

$ 246,238(227,354)(82,072)(7,588)70,980$204¥

Included in the consolidated statements of income for the years ended March 31, 2010 and 2009, severance and retirement benefits expenses
comprised the following:										
		Millions of yen
2010

					

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

Prior service costs and actuarial differences are amortized or recognized over a stated number of years that does not exceed the average

¥

¥

873
433
(490)
949
81
19
1,865

2010

2009

¥

¥

765
391
(515)
595
81
19
1,336

$

$

9,383
4,654
(5,267)
10,200871
204
20,045remaining service period of active employees expected to receive
benefits under the plan.

Assumptions used for the years ended March 31, 2010 and 2009, were as follows:						

Discount rate					Expected rate of return on plan assets					Amortization period of prior service costs				
Amortization period of actuarial differences					34 | HANWA AR 2010 |Thousands of
U.S. dollars

2010

2009

2.0%
3.0%
14 years
14 years

2.0%
3.0%
14 years
14 years9. Income taxes
The Company is subject to a number of taxes based on income,which, in the aggregate, indicate an aggregate statutory income tax

rate in Japan of approximately 40.7% for the years ended March 31,
2010 and 2009.

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, 2010 and 2009:2010						

2009

40.7%
4.0
(140.6)
2.9
2.8
(0.2)
2.4
(88.0)%

Statutory tax rate					Tax effect of permanent differences					Valuation allowance recognized for deferred tax assets					Tax effect of unrealized intercompany profit					Estimated income taxes pertaining to retained earnings of an overseas consolidated subsidiary			
Difference in tax rates for consolidated subsidiaries					Other					Effective tax rate					

40.7%
2.2
2.6
—
—
(0.4)
2.0
47.1%

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2010 and 2009 were as follows:										
		Millions of yen
2010

					

Deferred tax assets:
Temporary differences pertaining to consolidated subsidiaries 			Net operating loss carryforwards				
Unrealized loss on securities, net of taxes				
Loss on impairment of long-lived assets				
Loss on sale-repurchase agreement of land 				Land revaluation difference, net of taxes				Accrued bonuses to employees				
Other				Total deferred tax assets				
Valuation allowance				Net deferred tax assets				Deferred tax liabilities:
Prepaid pension costs				Land revaluation difference, net of taxes				
Other				Total deferred tax liabilities				Net deferred tax assets (liabilities)				

¥¥Thousands of
U.S. dollars

2009

2010

14,651
6,979
—
2,543
1,719
1,667
755
5,380
33,694(22,868)
10,826¥ 23,833
—
2,422
2,396
1,719
1,667
728
4,460
37,225(31,332)
5,893$ 157,470
75,011—
27,332
18,476
17,917
8,115
57,825362,146(245,787)
116,359

2,687
2,684
2,129
7,500
3,326

2,271
2,686
1,178
6,135
(242)

28,88028,84822,88380,61135,748¥$Deferred tax assets and deferred tax liabilities were included in the consolidated balance sheets at March 31, 2010 and 2009, respectively, as
follows:										
		Millions of yen
2010

					

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

¥

3,357
2,653
—
2,684

Thousands of
U.S. dollars
2010

2009

¥

1,561
883
—
2,686

$

36,08228,514—
28,848| HANWA AR 2010 | 35

10. Net assets
Net assets comprise three subsections, which are shareholders’equity, accumulated gains (losses) from valuation and translation
adjustments and minority interests.
Under the Japanese Corporate Law (“the Law”), in cases wherea dividend distribution of surplus is made, the smaller of an amountequal to 10% of the dividend or the excess, if any, of 25% ofcommon 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 is included in retained
earnings 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 andregulations.

36 | HANWA AR 2010 |At the annual shareholders’ meeting held on June 29, 2010, theshareholders approved cash dividends amounting to ¥1,244 million($13,371 thousand). This appropriation has not been accrued in the
consolidated financial statements as of March 31, 2010. Suchappropriations are recognized in the period in which they areapproved by the shareholders.
Land revaluation difference—Pursuant to the Law Concerning
Land Revaluation, the Company revaluated land used for businessactivities at March 31, 2002.
Unrealized gain (loss) on land revaluation is recorded as land
revaluation difference in a separate component of net assets in the
consolidated balance sheets until realized. The amounts are shown
net of applicable income tax.
The revaluation of land was determined based on a declared
land value, with certain necessary adjustments, in accordance with
Article 2, Paragraph 1 of the Enforcement Ordinance Concerning
Land Revaluation.
As of March 31, 2010, the carrying amount of the land after theabove one-time revaluation exceeded the market value by ¥260
million ($2,794 thousand).

11. Leases
Finance leases
As lessee
Finance leases that do not transfer ownership of the leased property to the lessee at the end of lease periods[1] Details of lease assets are as follows:		 Tangible assets, mainly amusement facilities and computer system.
[2] Depreciation method for lease assets
		 The straight-line method over the period of the finance leases, assuming no residual value.
Lease transactions entered into before April 1, 2008 continue to be accounted for as operating lease transactions with “as if capitalized”
information as follows:Asof March 31, 2010
			Millions of yen 							Accumulated
depreciation

Other property and equipment
Other assets
Total

Acquisition
cost

¥
¥

995
13
1,008

As
of March 31, 2009
			

¥
¥

665
9
674

Net leased
property

¥
¥

330
4
334

$
$

10,694140
10,834

			

				
					

Other property and equipment 				Other assets				Total				Total lease payments, including financing charges, under financeleases that do not transfer ownership of the leased property to theCompanies for the years ended March 31, 2010 and 2009 were¥297 million ($3,192 thousand) and ¥422 million, respectively.
Depreciation expense and interest expense for finance leases
that do not transfer ownership of the leased property are notreflected in the accompanying consolidated statements of income.

Thousands of U.S. dollars

Acquisition
cost

¥

$
$

7,147
97
7,244

Net leased
property

$

3,547
43
3,590

$

Millions of yen

Acquisition
cost¥

Accumulated
depreciation

1,387
46
1,433

Accumulated
depreciation

¥

738
36
774

¥

Net leased
property

¥

649
10
659

¥

Depreciation expense, computed by the straight-line method, was¥275 million ($2,956 thousand) and ¥391 million for the years
ended March 31, 2010 and 2009, respectively. Interest expense,
computed by the interest method, was ¥15 million ($161 thousand) and ¥26 million for the years ended March 31, 2010 and2009, respectively.

Obligations, excluding financing charges, under such non-capitalized finance leases as of March 31, 2010 and 2009, were as follows:										
		Millions of yen
2010

					

Due within one year				Due after one year				
Total				

¥
¥

195
160
355

Thousands of
U.S. dollars

¥

306
380
686

¥

Operating leases
As Lessee
Obligations under operating leases as of March 31, 2010 and 2009, were as follows:										
		Millions of yen
2010

					

Due within one year			
Due after one year				Total				

¥
¥

32
80
112

2010

2009

$
$

Thousands of
U.S. dollars
2010

2009

¥
¥

2,096
1,720
3,816

35
96
131

$
$

344
860
1,204

| HANWA AR 2010 | 37

12. Segment information
Industry segment information
The Companies’ operations were classified into six industry segments
for the year ended March 31, 2010 and 2009 as follows:
Foods: Seafoods and meat products
Petroleum and chemicals: Petroleum products, chemical products,
and cement
Other business: Lumber, machinery, and other

Steel: Steel bars and shapes, steel plates and sheets, special steels,
wire products, steel pipes, and steelmaking raw materials
Metals and alloys: N ickel, chromium, steel alloys, and solar cell-relatedmaterials and products
Non-ferrous metals: Aluminum, copper, and zinc

Segment information by business category for the years ended March 31, 2010 and 2009 was as follows:Year ended March 31, 2010

				Millions of yen

			
		
Steel

Petroleumand chemicals

Net sales		 ¥ 606,206 ¥Costs and expenses		
596,437
Operating income		 ¥9,769 ¥
Assets			 ¥ 223,894 ¥Depreciation		
1,873
Loss on impairment of		
long-lived assets		
2,438
Capital expenditure		
7,301

Metalsand alloys

86,081
83,5262,555
34,81530

Non-ferrous		
metals
Foods

¥
¥
¥

—
67

52,824 ¥52,007817 ¥
15,164 ¥95
28
50

72,557 ¥ 255,868 ¥
71,609254,278948 ¥
1,590 ¥
29,094 ¥32,855 ¥
28
36
141
42

113
126

Other
business

Total

43,093 ¥ 1,116,629 ¥
41,516
1,099,373
1,577 ¥
17,256 ¥16,128 ¥ 351,950 ¥
413
2,475
140
571

2,860
8,157

Corporate

Consolidated— ¥ 1,116,629
5,836
1,105,209(5,836) ¥11,42091,495 ¥ 443,445
85
2,560
411
88

3,271
8,245

Year ended March 31, 2010

				Thousands of U.S. dollars
			
		
Steel

Metalsand alloys

Net sales		 $ 6,515,542 $ 925,204
Costs and expenses		 6,410,544
897,742
Operating income		 $ 104,998 $
27,462
Assets			 $ 2,406,427 $ 374,194
Depreciation		
20,131
322
Loss on impairment of		
26,204—long-lived assets
Capital expenditure		
78,472
720

Non-ferrous		
metalsFoods

Otherbusiness

Total$

567,756 $ 779,847 $ 2,750,086 $ 463,166 $12,001,601 $
558,975
769,658
2,732,997
446,216 11,816,132$
8,781 $
10,189 $17,089 $16,950 $ 185,469 $$ 162,984 $ 312,704 $ 353,128 $ 173,345 $ 3,782,782 $
1,021
301
387
4,439
26,601
301
1,515
1,215
1,505
30,740537

Corporate costs and expenses consisted mainly of expenses of administrative departments. Corporate assets consisted mainly of cash and

38 | HANWA AR 2010 |Petroleumand chemicals

452

1,354

6,137

87,672

Corporate

Consolidated— $12,001,601
62,726 11,878,858(62,726) $ 122,743
983,394 $ 4,766,176
914
27,515
4,417
35,157946

88,618equivalents, investment securities and assets of administrative
departments.

Year ended March 31, 2009

				Millions of yen

			
		
Steel

Petroleumand chemicals

Metalsand alloys

Net sales 		 ¥ 877,756 ¥ 155,841
Costs and expenses		
867,522
153,749
Operating income		 ¥10,234 ¥2,092
Assets 		 ¥ 289,945 ¥
34,628Depreciation		
1,64930
Capital expenditure		
4,740
111

Non-ferrous		
metals
Foods

¥
¥
¥

51,860 ¥50,791
1,069 ¥
6,094 ¥
72
354

Other
business

82,219 ¥ 320,817 ¥
80,573
316,015
1,646 ¥
4,802 ¥
28,047 ¥23,600 ¥
26
36
304
243

Total

Corporate

50,789 ¥ 1,539,282 ¥
47,407
1,516,057
3,382 ¥
23,225 ¥15,277 ¥ 397,591 ¥
456
2,269
752
6,504

Consolidated— ¥ 1,539,282
5,774
1,521,831(5,774) ¥17,451
81,788 ¥ 479,379
89
2,358
776
7,280

Regional segment information
The Companies operated mainly within Japan, so regional segment
information is not disclosed.

Corporate costs and expenses consisted mainly of expenses ofadministrative departments.
Corporate assets consisted mainly of cash and equivalents,
investment securities and assets of administrative departments.
Overseas net sales
Overseas net sales included exports and offshore sales by theCompanies, excluding sales by foreign subsidiaries to Japan.

Overseas net sales of the Companies for the years ended March 31, 2010 and 2009 were as follows:Year ended March 31, 2010

			Millions of yen 			

			
		
Asia

Overseas net sales
Percentage of consolidated net sales¥ 253,827
22.7%

Other
areas

¥

28,394
2.6%

		
Total
Asia

¥ 282,221
25.3%$2,728,149

Thousands of U.S. dollars
Other
areas

Total

$ 305,181$3,033,330“Asia” sales consisted principally of sales to China, South Korea, Singapore and Thailand.
“Other areas” sales consisted principally of sales to the U.S.A., UAE and Germany.

Year ended March 31, 2009

			Millions of yen 			

			
		
Asia

Overseas net sales
Percentage of consolidated net sales¥ 288,224
18.7%

Other
areas

¥

51,816
3.4%

		
Total

¥ 340,040
22.1%“Asia” sales consisted principally of sales to China, South Korea, Singapore and Thailand.
“Other areas” sales consisted principally of sales to the U.S.A. and Germany.

| HANWA AR 2010 | 39

13. Contingent liabilities
At March 31, 2010 and 2009, the Companies were contingently liable as follows:										
		Millions of yen
2010

					

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

¥

5,807
2,509

Thousands of
U.S. dollars
2010

2009

¥

4,227
4,894

$

62,41426,967

14. Impairment of long-lived assets(A) Real estate for rent in Osaka
Due to a decline in profitability in real estate for rent in Osaka,
the Company reduced the book value of the long-lived assetsthat were impaired to the recoverable amount.
		 To assess the recoverable amount of the long-lived assets,
the appraised value was used as the basis for the measurement.
(B) Logistics center in Osaka
Due to a contract for sale of the assets of logistics center inOsaka, the Company reduced the book value of the long-lived
assets that were impaired to the recoverable amount.
		 To assess the recoverable amount of the long-lived assets,
the sales value in the contract was used as the basis for themeasurement.

(C) Employee dormitory in Aichi
Due to a decision to dispose of the assets in an employee
dormitory in Aichi Prefecture, the Company reduced the bookvalue of the long-lived assets that were impaired to the recoverable amount.
		 To assess the recoverable amount of the long-lived assets,
the appraised value was used as the basis for the measurement.
		 For the purpose of recognition and measurement, theCompanies grouped the long-lived assets, based principally on
the location of the business entity to which the assets
belonged.
		 As a result of these procedures, a loss on impairment oflong-lived assets of ¥3,271 million ($35,157 thousand) for theyear ended March 31, 2010 was recognized in other expenses
in the consolidated statements of income.

The following tables summarize the losses on impairment of long-lived assets in the year ended March 31, 2010.

Year ended March 31, 2010						 Millions of yen											Location
Purpose							LandChuo, Osaka
Real estate for rent			
Suminoe, Osaka
Logistics center			Kasugai, Aichi
Employee dormitory			
Total				
			

¥

¥

2,125
730
161
3,016

		

40 | HANWA AR 2010 |

¥

¥

—
201
54
255

¥

¥

2,125
931
215
3,271

Thousands of U.S. dollars											Location
Purpose							LandChuo, Osaka
Real estate for rent			
Suminoe, Osaka
Logistics center			Kasugai, Aichi
Employee dormitory			
Total				Buildings and 				structures		
Total		$$

22,8407,846
1,731
32,417

Buildings and 				structures		
Total		

$

$

—
2,160
580
2,740

$

$

22,84010,0062,311
35,157

15. Investment and rental properties(Additional Information)
Effective from the year ended March 31, 2010, the Companies
adopted the “Accounting Standard for Disclosures about Fair Valueof Investment and Rental Property” (ASBJ Statement No.20 issued
on November 28, 2008) and the “Guidance on Accounting Standard
for Disclosures about Fair Value of Investment and Rental Property”(ASBJ Guidance No.23 issued on November 28, 2008).
Information about fair value of investment and rental properties

is disclosed as follows:
The Company owns office buildings, logistics centers and otherproperties for rent in Tokyo and other cities.
Rental profit from these properties were ¥116 million ($1,247
thousand) included in gross profit. Impairment loss from these properties were ¥2,124 million ($22,829 thousand) in other expenses.
Book value, annual net increase amount and fair value, ofinvestment and rental properties, were as follows:Year ended March 31, 2010
Millions of yen							Thousands of U.S. dollars

Book value
Balance at beginning 		
of year
Net increase

¥

4,542

¥

3,842

Book value
Balance at end 		of yearFair value

¥

8,384

¥

9,244

Book value is net of accumulated depreciation.
In the net increase during the fiscal year ended march 31, 2010,a main factor of increase was the increase of ¥6,073 million ($65,273
thousand) resulting from the change in holding purpose for certain
property from operating purpose to rental purpose, and main factor

Balance at beginning 		
of year
Net increase$

48,818$41,294

Balance at endof year$Fair value

90,112$

99,355of decrease was the decrease of ¥2,124 million ($22,829 thousand)resulting from impairment loss.
Fair values of these properties are measured mainly by theCompany, based on “Standard for real-estate appraisal.”

16. Subsequent events
At the ordinary general meeting of shareholders of the Company
held on June 29, 2010, the following appropriation of retained
earnings was approved:					Millions of yen

Cash dividends (¥6 per share)

¥

1,244

Thousands of
U.S. dollars$

13,371| HANWA AR 2010 | 41

Independent Auditors’ Report42 | HANWA AR 2010 |Global Network
Domestic Offices
Office	Osaka	
Tokyo	
Nagoya	
Hokkaido	
TohokuNiigata
Chugoku
KyushuKITAKANTOOKINAWA

Address
Hanwa Bldg., 4-3-9 Fushimi-machi, Chuo-ku, Osaka 541-8585, Japan
6-18-2 Ginza, Chuo-ku, Tokyo 104-8429, JapanNHK Nagoya Broadcasting Center Bldg., 1-13-3, Higashisakura, Higashi-ku, Nagoya, Aichi 461-8614, Japan
Kita-sanjo Bldg., 3-1-25, Kita-sanjo Nishi, Chuo-ku, Sapporo, Hokkaido 060-0003, Japan
Sendai Dai-ichi Seimei Tower Bldg., 4-6-1 Ichiban-cho, Aoba-ku, Sendai, Miyagi 980-0811, Japan
Hokuetsu-daiichi Bldg., 1-2-25, Higashi Oodouri, Chuo-ku, Niigata 950-0087, Japan
Hiroshima-fukuromachi Bldg., 5-25, Fukuro-machi, Naka-ku, Hiroshima 730-0036, Japan
Taihaku Center Bldg., 2-19-24 Hakata-ekimae, Hakata-ku, Fukuoka 812-0011, Japan
Takasaki East Center Bldg., 14-1 Sakae-cho, Takasaki, Gunma 370-0841, Japan
Mitsui Life Insurance Naha Bldg., 2-4-16, Kume, Naha, Okinawa 900-0033, Japan

Telephone
81-6-6206-3000
81-3-3544-2171
81-52-952-8800
81-11-219-7375
81-22-227-7981
81-25-255-1777
81-82-543-2570
81-92-471-7121
81-27-310-6390
81-98-860-9115

Fax
81-6-6206-3365
81-3-3544-2351
81-52-952-9300
81-11-219-7376
81-22-227-7969
81-25-255-1776
81-82-543-2561
81-92-471-7060
81-27-321-0952
81-98-861-5516

Telephone

Fax

1-201-363-4500
1-206-622-2102
1-713-978-7904
1-949-955-2780
1-604-876-1175
57-1-473-4758
1-671-647-0133

1-201-346-9890
1-206-622-6464
1-713-978-7790
1-949-955-2785
1-604-876-1085
57-1-473-4754
1-671-647-0135

82-2-551-5387
82-51-319-1006
86-10-6590-8333
86-532-8-577-9990
86-411-8-368-6954
86-21-6237-5260
86-23-6381-1101
86-591-8-3354165
86-27-8549-7132
86-20-8732-0451
86-769-2240-6418
86-760-2332-0706
852-2545-0110
886-2-2560-2214
886-7-338-5508
66-2-343-8877
60-3-2078-2311
65-6536-7822
60-89-750016
84-8-3822-5715
84-4-3562-5414
62-21-3983-3211
91-22-2826-0884
91-124-456-6100

82-2-551-5575
82-51-319-1545
86-10-6590-8340
86-532-8-577-9630
86-411-8-368-6934
86-21-6237-5268
86-23-6381-7385
86-591-8-3345202
86-27-8578-7196
86-20-8732-0402
86-769-2240-6448
86-760-2332-0696
852-2542-2544
886-2-2571-0693
886-7-338-5433
66-2-343-8878
60-3-2078-2380
65-6536-7855
60-89-750019
84-8-3822-5725
84-4-3562-5412
62-21-3983-3212
91-22-2826-1097
91-124-456-6111

44-20-7839-4448
31-20575-2460
43-1-717-28-200
965-2-243-7259

44-20-7839-3994
31-20575-2461
43-1-717-28-110
965-2-243-7263

966-1-473-1563
966-2-669-0648
966-3-8411745
971-4-609-1893
27-11-881-5966

966-1-473-5624
966-2-669-0648
966-3-8467937
971-4-609-1895
27-11-881-5611

Overseas Offices
Office	Address

Americas
Parker Plaza, 12th Floor, 400 Kelby Street, Fort Lee, NJ 07024, U.S.A.
601 Union Street, Suite 626, Seattle, WA 98101, U.S.A.
HoustonSuite 515, 9800 Richmond Avenue, Houston, TX 77042, U.S.A.
Los Angeles	 18100 Von Karman, Suite 320, Irvine, CA 92612, U.S.A.
Vancouver	 Suite 502, 1001 West Broadway Vancouver, B.C., V6H 4B1, Canada
BogotaCalle 97, No. 21-50 Edif: La Fontana Di Tivoli Oficina: 309 Bogota, D.C. Colombia
GUAM428, Chalan Antonio Suite, 102, Tamuning, 96913, Guam
New York	
Seattle

Asia
Seoul
BUSAN
Beijing	
Qingdao
Dalian	Shanghai
Chongqing
FuzhouWuhan
Guangzhou
DongguanZhongshan
Hong Kong	
Taipei
Kaohsiung
Bangkok
Kuala Lumpur
Singapore
Tawau
Ho Chi Minh
Hanoi
Jakarta
MumbaiNew Delhi

Room 1705, Korea World Trade Center, 159-1, Samsung-Dong, Kangnam-ku, Seoul, 135-729, R.O. Korea
Room 504, Industry Bldg., 578, Gwaebeop-Dong, Sasang-gu, Busan, 617-726, R.O.Korea
Room 1201, Beijing Fortune Bldg., 5 Dong San Huan Bei-lu, Chaoyang District, Beijing 100004, P.R. China
Crowne Plaza Qingdao, Room No.601, Hongkong Middle Road 76, Qingdao City, Shandong 266071, P.R. China
Senmao Bldg., 20F, 147 Zhongshan Street, Dalian City, Liaoning 116011, P.R. China
Room 902/904-907, Aetna Tower, No.107 Zhunyi Road, Shanghai 200051, P.R. China
Room 2203, Metropolitan Tower, 68 Zhou Rong Lu, Central District, Chongqing 400010, P.R. China
Room 2501, Lippo Tianma Plaza, No.1 Wu Yi Road, Fuzhou City, Fujian 350003, P.R. China
Room 1009, New World Center, Tower A, No. 634, Jiefang Avenue, Wuhan 430032, P.R. China
Unit 3701-3704, Profit Plaza, No. 76 Westhuangpu Road, Guangzhou City, Guangdong 510623, P.R. China
Suites1504-1505, 15F, Huicheng Bldg., 102 Hong Fu Road, Nan Cheng District, Dongguan City, Guangdong 523000, P.R. China
Unit 1909-1910, 19th Floor, Bank Of China Tower, 18 Zhongshan 3rd Road, Zhongshan City, Guangdong, P.R. China
Suites 2301-02 & 16, 23F, Cityplaza One, 1111 King’s Road, Tai Koo Shing Island East, Hong Kong
Room 303, 3rd Floor, No. 79, Chung Shan North Road Sec.2, Taipei, Taiwan
Room B, 17th Floor, No.7 Su-Wei 4th Road, Kaohsiung, Taiwan
16th Floor, Unit 1602, Q.House Lumpini Bldg., 1 South Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120, Thailand
Suite 8-12B-3, Level 14 (12B), Menara Olympia 8, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia
20 Cecil Street, #20-05/06/07 Equity Plaza, Singapore, 049705
P.O. Box 1231 91037 Tawau, Sabah, Malaysia
7/C, Office Service International Centre, No. 8 Nguyen Hue Street, District 1, Ho Chi Minh City, S.R. Vietnam
Thanglong Bldg., 501A, 105 Lang Ha, Dong Da, Hanoi, S.R. Vietnam
Menara Cakrawala 5th Floor, Jalan M.H. Thamrin No. 9, Jakarta 10340, Indonesia
Unit No.208, 2nd Floor, B-Wing, Dynasty Business Park, 58, Andheri Kurla Road, Andheri (E), Mumbai 400 069, India
203, Bestech Chambers, B Block, Sushant Lok 1, Gurgaon, Haryana 122002, India

Europe, Middle East and Africa
2nd Floor, Finland House, 56 Haymarket, London, SW1Y 4RN U.K.
Amsterdam WTC Tower A-11F, Strawinskylaan 1111, 1077XX, Amsterdam, The Netherlands
ViennaLandstrasser Hauptstrasse 71/2 A1030, Wien, Austria
KuwaitC/O AI-Sabih Engineering & Trading Co., P.O. Box No. 1114 Dasman, 15462 Dasman, Kuwait
Room 24, 6th Floor, Danat Trading Center, Abdulla Al-Ahmad Street, Sharq, Kuwait
RiyadhP.O. Box 68974, Riyadh 11537, Saudi Arabia
JeddahOffice No. 219, Kaki Center, P.O. Box 1224, Jeddah 21431, Saudi Arabia
DammamOffice No.1, 1st Floor, Al-Hammam Center for Trading, King Fahad Bin Abdul Aziz Road, Dammam, Saudi Arabia
Dubai
Dubai Airport Free zone, No. 6EB, Room No. 544 P.O. Box 293873 Dubai, U.A.E.
Johannesburg 2nd Floor West Tower, Nelson Mandela Square, Maude Street, Sandton, 2196, South Africa
London| HANWA AR 2010 | 43

Corporate Information (As of March 31, 2010)
Corporate Data

Stock Information

Company Name

Hanwa Co., Ltd.

Fiscal Year-End

Established

April 1947

Annual Meeting of Shareholders June

Capital¥45,651 million

Independent Auditors

KPMG AZSA & Co.

Number of Employees

Consolidated: 1,952

Domestic Stock Exchange
Listings

The First Section of the Tokyo
Stock Exchange

Non-consolidated: 1,147

The First Section of the Osaka
Securities Exchange

Address
Osaka Head OfficeHanwa Bldg., 4-3-9 Fushimi-machi, 		Date of Record for Dividend
PayoutInterim dividend: September 30
Year-end dividend: March 31

Fax: +81-6-6206-3365

Authorized Shares

570,000,000 shares

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

Shares Issued and Outstanding 211,663,200 shares

104-8429, Japan

Number of Shareholders

Chuo-ku, Osaka 541-8585, Japan
Tel: +81-6-6206-3000
Tokyo Head Office

March 31

14,351

Tel: +81-3-3544-2171
Fax: +81-3-3544-2351
Nagoya Branch Office 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
Number of Subsidiaries

Subsidiaries: 38(13 in Japan, 25 overseas)
Affiliated companies: 11(1 in Japan, 10 overseas)

Board of Directors (As of June 29, 2010)

Corporate Auditors (As of June 29, 2010)

President

Standing Auditors

Shuji Kita
Executive Vice President
Hironari Furukawa
Senior Managing Director
Tetsuro Akimoto

Outside Director
Osamu Seki
Directors
Kazuhisa Majime
Masataka Toyoda
Hiroaki Tsujinaka
Akihiko Ogasawara

Managing Directors

Yoshiaki Matsuoka

Yoshifumi Nishi

Atsuhiro Moriguchi

Takuji Kita

Tadahiko Kaida

Hideo Kawanishi

Youichi Ejima

Hiroshi Serizawa

Naoyuki Togawa

Hiroshi Ebihara

Yasumichi Kato
Takatoshi Kuchiishi

44 | HANWA AR 2010 |Outside Auditors

Toshiaki Shirakawa

Toshiaki Taguchi

Teruo Asai

Hajime Yosano
Masanori Kobayashi

Profile

Principal Shareholders
Name of Shareholder

Since its establishment in 1947, Hanwa has contributed to the development of theJapanese economy as a trading company handling industrial materials, such as steel—the

Number of Shares(thousands)

Percentage of Total
Issued Share (%)

23,724
13,654
7,630
4,087
3,884
2,614
2,406
2,390
2,041
2,001

11.4
6.6
3.7
2.0
1.9
1.3
1.2
1.2
1.0
1.0

demonstrated new capabilities as a trading company by handling seafood products, rides forJapan Trustee Services Bank, Ltd. (Trust Account) . .................................................
The Master Trust Bank of Japan, Ltd. (Trust Account)..............................................
Sumitomo Mitsui Banking Corporation....................................................................
Hanwa Employees' Stock Investment Association...................................................
Hanwa Clients' Stock Investment Association ........................................................
The Dai-ichi Mutual Life Insurance Company...........................................................
The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account .........
Nippon Metal Industry Co., Ltd..................................................................................
Trust & Custody Services Bank, Ltd. (Investment Trust Account)............................
Sumitomo Metal Industries, Ltd................................................................................

amusement parks, and non-ferrous metal recycling. We have created numerous businesses in

Note: The Company holds 4,367,348 shares of treasury stock, which is excluded from the major shareholders listed above.

company’s leading product—and metals and alloys, non-ferrous metals, food products,
lumber, machinery, petroleum and chemicals, and cement. Our steel division in particular isequipped with quay and warehouse transportation facilities as well as complete processing
sites that enable us to both handle large quantities purchased from major steel
manufacturers and to cater to the special needs of our customers. This is why we have long
been known in Japan as a “steel trading company.”
Recently, with the changes and diversification in the domestic market, we havethese fields that command the top market share. The basic strategies underlying such successare internationalization, business diversification, and value enhancement.

Breakdown by Type of Shareholder

Hanwa’s ideal function as a trading company is to be more than just a distributor. Based

Contents
01

To Our Shareholders

02

Interview with the President

04

At a Glance

06

Review of Operations

13

Topics14

Corporate Governance

16

CSR Activities

18

Financial Section

aim to develop new products, as well as coordinate ventures among businesses. As a
trading company with such operating skills at our disposal, we will continue to develop

Consolidated Financial Highlights
For the years ended March 31, 2010 and 2009.

2010

2009

2010

¥ 1,116,629¥ 1,539,282$12,001,601

Operating income

11,42017,451

122,743

Net income

11,5795,997

124,452

479,379$ 4,766,176

94,913

1,148,485

Net sales¥

Total assets

443,445

Yen

Notes

44

Corporate Information¥

106,855

Total net assets

¥

55.46
12.00

Cash dividends

$

28.47

Net Sales

The plans, strategies and other statements(Millions of yen)
(Millions(Millionsof (Millions
Yen) of Yen)of Yen)related to the outlook of future results in

2,000,000
2,000,000
2,000,000

0.596

currently available information. However, it
should be noted that there is a possibility
for actual results to differ significantly
owing to such factors as changing socialand economic conditions.

15,000600

10,000

400

5,000

200

Net Income(Millions of yen)
(Millions(Millions
of Yen)of Yen)of Yen)
(Millions

25,000 25,000
25,00015,000 15,000
15,00020,000 20,000
20,00012,000 12,000
12,00015,000 15,000
15,0009,000 9,0009,000

10,000 10,000
10,0006,000 6,0006,000

5,000 5,0005,000

3,000 3,0003,000

1,500,000
1,500,000
1,500,000

800

0.129

12.00

(Millions of yen)
(Millions(Millions
of Yen)of Yen)(Millionsof Yen)this annual report reflect the assumptions
and beliefs of management based on

Operating Income

(¥)

(¥)

Note: The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥93.04 = $1.00.

Forward-Looking Statements

Nikkei Stock Average (closing)

Stock Price

U.S. dollars (Note)¥

ForeignForeign
corporations
corporations
15.4% 15.4%

Stock Price Range and Trading Volume (Common Stock)

Per share data:
Net income

50,000–1,000,000
50,000–1,000,000
24.5% 24.5%

Individuals
Individuals
and andothers others
31.7% 31.7%

At year-end:

22		 Financial Statements &Global Network

1,000,000–
1,000,000–
50.1% 50.1%

1,000–50,000
1,000–50,000
25.3% 25.3%

Thousands of
U.S. dollars (Note)

Millions of yen

For the year:

and Analysis

43–1,000–1,000
0.1% 0.1%

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

19		 Management’s Discussion

		JapaneseJapanesefinancialfinancial
institutions
institutions
34.9% 34.9%

Other domestic
Other domestic
corporations
corporations
14.3% 14.3%

new unique businesses.

18		 Five-Year Summary		TreasuryTreasury
stock 2.1%
stock 2.1%
JapaneseJapanesebrokerage
brokerage
firms firms
1.6% 1.6%

on our insight into the international market and our information-gathering capabilities, weBreakdown by Size of Holding0

Trading
Volume(Millions of shares)

0

80
60
40
20

1,000,000
1,000,000
1,000,000
500,000500,000
500,0000

0
06 0 06
07 0607
08 0708
09 0809
10 0910 10

0

0
06

006
07 0607
08 0708
09 0809
10 0910

10

0

0
06

006
07

4
5
2008
07
08
06

08
09
07

09
10
08

10
09

6

7

8

9

10

11

12

1
2
2009

3

4

5

6

7

8

9

10

11

12

1
2
2010

3

0

10

| HANWA AR 2010 | 45

阪和興業株式会社

Annual Report 2010
For the year ended March 31, 2010

http://www.hanwa.co.jp

2010.8 Printed in Japan