ANNUALREPORT2009
For the year ended March 31, 2009

阪和興業 株式会社

Corporate Profile

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

About the CoverContents

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

Financial Highlights ......................................................... 1
Letter to Stakeholders .................................................... 2
Review of Operations ..................................................... 8
Our Ethical Principles ...................................................... 13
Topics ................................................................................... 15
Management’s Discussion and Analysis .................. 16
Five-Year Summary .......................................................... 18
Financial Section ............................................................... 19
Corporate Data ................................................................. 40
Board of Directors and Investor Information ......... 41

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Financial Highlights
For the years ended March 31, 2009 and 2008

Thousands of
U.S. dollars

Millions of yen

2009

For the year:
Net sales
Operating income
Net income
At year-end:
Total assets
Total net assets

2008

2009

2008

¥ 1,539,282 ¥ 1,507,509 $15,670,182 $15,346,727
17,451
23,705
177,654
241,321
5,997
13,11861,051
133,544¥479,379 ¥
94,913

482,014 $ 4,880,169 $ 4,906,994
100,926
966,232
1,027,446

Yen

U.S. dollars

2009

Per share data:
Net income
Cash dividends

¥

2008

28.47 ¥
12.00

2009

62.07 $
12.00

2008

0.290 $
0.122

0.632
0.122

Note: The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥98.23 = $1.00.

Net sales

Operating income

Net income(Millions of yen)

(Millions of yen)

(Millions of yen)

1,600,000

1,507,509

1,539,282

23,70514,00023,00013,11820,865
1,320,022

11,42320,00017,451
10,000

5,997
10,000

0

0

’07

’08

’09

0

’07

’08

1

’09

’07

’08

’09

Letter to Stakeholders

Dear Stakeholders,
I am pleased to report that Hanwa Co., Ltd. and its
consolidated subsidiaries achieved strong sales andearnings in fiscal 2008, the fiscal year that ended in
March 2009. Consolidated net sales increased 2.1% to¥1,539.2 billion, a record high. On profit side, bydecrease sales revenue, revaluation losses on inventories,
operating income decreased 26.4% to ¥17.4 billion andnet income decreased 54.3% to ¥6.0 billion. As a result,
the return on equity was 6.2%, a down of 7.1 points
over the previous year. The net debt-to-equity ratio
increased 20 points to 190%, because interest-bearing
debt increased.

Management Policy
HANWA’s corporate Philosophy is “Coping with changesof times and the market quickly, we make a greater
contribution to the society by satisfying various needs ofcustomers as ‘a distribution specialist.’”Based on this philosophy, our priority is to put
customers first as we distribute products that have more
added value and build a business model that provides
customers with ideas that match their needs. Our overall
goal is to provide trading company-style distribution
services that make a difference for our customers.
Furthermore, we want to increase our corporate value ina manner that gains the support and appreciation fromall stakeholders. Compliance is another priority. We arecommitted to being a responsible corporate citizen,
functioning as an organization that uses businessactivities to make social contributions on both a local andglobal scale.

Management Targets
Hanwa places importance on performance indicators that
contribute to improving corporate value and financial
soundness. Accordingly, targets have been established
for the return on assets, return on equity and net debtto-equity ratio. For fiscal year ending March 31, 2010
based on the New Mid-term Business Plan are as follows:
Targeted Management Index

FY2009 (ending March 31, 2010)

ROA

2.4%

ROE

11.0%

D/E Ratio (Net basis)150.0%

Medium- and Long-term Strategy, andManagement Issues

Dividend Policy
Returning earnings to shareholders is an extremely
important element of our management goals. Our basic
policy is to pay a dividend that reflects operating resultsin each fiscal year, based on the return on equity anddividend payout ratio. Dividends also reflect the need toretain sufficient earnings to fund future business activities
and our base of operations.
Retained earnings are used to bolster our base ofoperations and make substantial investments in growing
businesses and new businesses. In all cases, our goal is toraise Hanwa’s corporate value.

In May 2007, we established a Mid-term Business Plan
that covers 3-year period from FY2007 through FY2009.
The focus of this plan is “We aim to be a value creatorwith a remarkable identity and advantage bystrengthening the function and differentiation.” It sets a
number of management goals and describes theinitiatives that will be taken to achieve them.
(A) Strengthening the core business
Steel business• Enhancement of processing functions for construction,
proposal-driven marketing and steel service business• Further development in various fields through proposaldriven marketing and interdivisional cooperation• Enhancement of business in the field of structural steel
sheets by differentiated products and reciprocity
2• Reinforcement of supporting Japanese customers
raising production overseas, in the fields of providing
materials and processing.
• Expanding bunker oil sales in the shipping industry,
especially in Asia
• Reinforcement of lumber business in the areas withgood market for construction, such as North America,
China, and the Middle East

• Meeting real demand in each community completely
through branch offices• Reinforcement of meeting the demand of processing
on the basis of coil centers in China and ASEAN• Focus on exportation of steel products for high quality,
special and niche specs
Non-ferrous metals business• Expansion of global network to strengthen businessdevelopment in oligopolistic market of resources• Enhancement of procuring capability and expansion ofbusiness by diversifying supply source of ferroalloys andlight metals• Expansion of ore business such as nickel and chromium(C) Promotion of ecology and recycling business• Establishment of the channels of collecting recycling
resources retired from use due to customers’
reorganization of business and facilities• Reinforcement of purchasing scrap metals overseas.
Expansion of exportation to Asia and Europe• Development of selling recycled fuels such as RPF andwood pellet at home and overseas• Establishment of network for purchasing scrap paper,
responding to expansion of exportation to Asia
• Creation to get in operation for new technology suchas solar energy and fuel battery• Expansion of the recycling system of scrap resin

Food products business• Expanding the processing business of seafood andincreasing own processing products• Establishment of a system for selling processed seafoodin China, Europe and US. Enhancement of exporting
raw material of seafood to China for domestic
consumption• Keeping up customers’ reliance and increasing it by
securing higher level of food safety(D) Creation of new approach and new business to
expand business domains• Aggressive approach to medium-sized and small
companies• Expansion of material sales through over all coordinationfor each construction and development project• Expansion of the business on interior and exterior
construction materials• Offering to trading partners with various materials• Development of exporting domestic seafood• Development of business on new energy such as
biomass fuel and energy-saving• Expansion of cooperative business in new distributionstyle• Development of new businesses by utilizing information
network and industry-academia-government
cooperation

Petroleum and chemicals business• Reinforcement of domestic sales for gasoline, kerosene
and light oil. Expansion of exporting petroleum products• Expanding importation and tripartite trade of versatile
resin and exportation of domestic special resin• Strengthening retail of convenience goods and oilbased products. Establishment of a delivery system
Other businesses• Increasing our share of imported lumber by improving
power to purchase from supplying countries• Strengthening marketing industrial machinery meetinginvestment demand from our trading partners
Integrated development to China• Business development in various fields, by utilizing ample
business footholds and interdivisional cooperation(E) Vigorous management by aggressive investments
on projects and establishment of partnership• Promoting business alliance with companies, whichstrengthen our function and supplement each other.
Development of M&A. Support for business succession• Strengthening and expansion of distribution businessby cooperation between Hanwa Logistics and other
distribution companies• Cooperative development of new business schemewith customers in each area(B) Proactive development to overseas markets insuch as North America, EU, Middle East, India,
ASEAN, and Russia• Strengthening of development to meet the growing
demand for construction in abroad such as Middle
East, by interdivisional cooperation

3

Chaired by the president, the Directors Evaluation
Committee meets two times a year, which is charged
with assessing commitments made by directors andmaking overall performance evaluations on a mutual
basis. Director remuneration and assignments reflect thelevel of evaluation, in line with meritocratic principles. In
addition, we defined each director’s responsibilities forbusiness results and introduced the profit-related
remuneration system.

• Cooperative scheme with processors to support
Japanese manufacturers in overseas• Strengthening the field of food processing bycooperation with food processors• Supposed total investment from FY2007 throughFY2009 ... 20 billion yen — “strategic business
investment” besides “investment aiming ofstrengthening business functions”
With regard to corporate systems, we will makecompliance activities a central element of our business
operations. This will enable us to conduct CSR
management in order to fulfill our social responsibilities
as a company. We are also committed to meeting the
expectations of shareholders. For this purpose, we willfurther reinforce our corporate governance systems andmaintain a framework of internal controls designed toensure the effectiveness of these systems.

Internal control and risk management system
The Board of Director defined for the establishments ofthe system for ensuring the Directors’ execution ofoperations comply with Laws, Regulations and Articles ofIncorporation.
1. Systems to ensure that performance of duties by its
directors and employees complies with laws andregulations and its articles of incorporationa) Hanwa has established standards for corporate
ethics and ethical behavior in accordance with thecompany creed, guidelines and other elements ofthe Hanwa’s corporate philosophy.
b) Hanwa has established a Compliance Committee
chaired by Hanwa’s president to prepare acompliance manual for distribution to all Hanwa
executives and employees. In addition, thecommittee will verify that compliance programs arebeing used effectively.
c) Hanwa has established a consultation service (using
the Compliance Committee and external attorneys)
where all Hanwa Group executives and employees
can obtain advice concerning compliance matters,
providing a means of directly reporting complianceproblems.
d) Hanwa cooperates with the police and otherauthorities to retain a firm stance against forming
any relationships with anti-social elements thatthreaten social order and public safety.

Corporate Governance
Basic corporate governance policy
We aim to fulfill our social responsibilities as a good
corporate citizen so that we can gain and retain therespect from stakeholders and be recognized as a valuable
enterprise. We work to establish a high degree oftransparency in management systems to ensure full legal
and regulatory compliance and respect for social norms.
Corporate governance structures
We have adopted the system of corporate auditors as
stipulated in the Corporate Law of Japan. Auditors areelected at the General Shareholders’ Meeting, and are
responsible for overseeing and auditing the performanceof the Board of Directors, as well as the Management
Committee, which is the main body responsible for
execution of policy by subordinate company structures.
The Board of Auditors reports to the General
Shareholders’ Meeting.
The Board of Directors, which is composed of directors
whose are elected at the General Shareholders’ Meeting,meets as a rule once a month to oversee important businessplans and proposals concerning the Hanwa Group, and todeliberate and decide all key business policies.
The Management Committee, which is composed ofthe president, executive vice president, senior managing
directors, managing directors and a few directors, reports
to the Board of Directors on all matters related tosignificant business decisions affecting the Hanwa Group.
As the senior policy execution body in the company, thiscommittee is charged with carrying out policies in linewith the business strategy determined by the Board of
Directors. The Management Committee meets as a rule
twice a month.

2. Systems to store and control information related toduties performed by the directorsa) Information related to duties performed by the
directors is properly stored in written document orelectronically, and these records are stored andmanaged in accordance with laws, regulations andHanwa’s regulations for document management.
b) The individual in charge of document management
exercises care to prevent the loss, destruction orother harm to the written or electronic records.
These materials are stored using security measuresphysically and logically (including passwords andother restrictions to access) as necessary.
4The corporate governance structures andinternal control systems for the Hanwa Group.

General Shareholders’ Meeting

election / dismissal

election / dismissal

oversight / audit

coordination

Board of Directors

Board of Auditors

Independent Auditors
cooperation

oversight /audit

election /supervison

Disclosure Committee

Operational organization

Directors Evaluation Committee
Compliance Committee

Executive
vice presidentManagement Committee

Catch All Controls Committee

Senior/managing directors

Investment Examination Committee

Internal Control Committee
adviceQuality Control Committee
Directors

evaluation / oversightInternal Control Officeexamination /administration/ report

Document Control Officeinternal audit
Operating bases(Japan/overseas)

Administrative
divisionsInternal Audit Dept.

adviceExternal Attorneys

Hanwa Group

guidance

cooperation

Operatingdivisionsaccounting audit / internal control audit

examination / reportcooperation

PresidentGroup Company Corporate
Auditors Conferencec) The Personnel Department works with related
departments to conduct the training and othereducational activities needed to make employees
more aware of the importance of risk management.
d) To verify the effectiveness of risk management, theInternal Audit Department monitors all Hanwa
business sites and group companies in Japan basedon a pre-determined auditing plan. Internal audit
reports are submitted directly to the Management
Committee and the company president. The
Overseas Administrative Department and theInternal Audit Department monitor overseas groupcompanies and other overseas business sites. All
Hanwa directors receive a written audit report
every month. In addition, the Board of Directors
receive reports on the status of overseas operations
twice a year.
e) For the disclosure of corporate information, Hanwa
has established disclosure regulations and uses a
Disclosure Committee to reach decisions concerning
the importance and suitability of information to bedisclosed in order to ensure that information isreleased to the public in a fair, timely andappropriate manner.

3. Regulations and systems related to management ofrisk of lossa) Directors and department managers work with theLegal & Credit Department to manage and reducerisks associated with business activities. This involves
making all business units aware of regulations for
credit management and business operations, andensuring compliance with these regulations. In
addition, there is an Investment Examination
Committee that manages investment risks bystudying proposals for new business ventures andnew investments.
b) Each business department will cooperate with the
General Affairs Department, Information Systems
Department, Legal & Credit Department and otherunits concerning compliance, environmental
management, emergency responses, information
security, export management and other matters.
These risks will be managed in accordance withinternal rules, manuals and other guidelines. The
Compliance Committee, Catch All Controls
Committee and other applicable committees willassist the departments by providing advice andeducational support. Advice from external attorneys
and other experts will be used as required.
5

4. Systems to ensure efficient execution of directors’ dutiesa) As a rule, the directors meet once each month toreach decisions concerning important groupmanagement matters and to supervise theexecution of business operations. As a rule, theManagement Committee meets twice each month.
The members of this committee discuss importantmatters concerning management and reachdecisions. They also submit issues to the Board of
Directors that concern important matters involving
the group’s management.
b) The Board of Directors established mid-termbusiness plans and annual management plans forthe purpose of achieving mid-term and long-term
strategic objectives. The directors also monitor the
execution of these plans. The president, executive
vice president, senior managing directors, managing
directors and full-time corporate auditors receive
periodic presentations from directors and othermanagers in charge of business units. This allows
the directors to evaluate the status of operations,check progress toward achieving goals and checkother items (including revisions to plans andrevisions to methods for achieving goals). The goal is
to make business operations even more efficient.
c) The Directors Evaluation Committee chaired by thecompany president meets twice each year to
perform a comprehensive evaluation of the directors’
performance. This includes an assessment of thecommitments and performance of each director anda mutual evaluation process for all directors. The
results are used to determine directors’compensation and for the selection of directors.

c) Compliance, risk management and other systems
apply to operations across the entire Hanwa Group.
Committees and other supervisory units provide
guidance and education concerning the use of
these systems.
d) The Group Company Corporate Auditors
Conference holds meetings as necessary. Thisconference is made up of Hanwa’s full-time
corporate auditors, the corporate auditors ofaffiliated companies, the Internal Audit Department
and other departments. The meetings provide forexchanges of information involving audits of Hanwa
and affiliated companies to provide for the sharing
of information.
6. Systems relating to employees assigned to assist thecorporate auditors, and the independence of such
employees from the directorsa) There are a few employees assigned to assist thecorporate auditors. The employees conduct studies,
submit reports and perform other duties asrequested by the corporate auditors, always working
closely with the auditors. In addition, this employees
receive no orders or instructions from the directors
or anyone else concerning the directives and orders
received from the corporate auditors.
7. Systems for the directors and employees to report tothe corporate auditors and systems otherwise
pertaining to reporting to corporate auditorsa) In addition to submitting reports on legally mandated
items, the directors submit reports to the corporate
auditors on important items concerning compliance.
This includes items such as major violations of laws,
regulations and the articles of incorporation andreports received by the compliance reporting andconsulting service. In addition, the directors submit
reports to the corporate auditors at meetings of theBoard of Directors, the Management Committee
and other important meetings with regard to the
execution of business operations and important
decisions.
b) The directors and employees must quickly andaccurately respond to requests for reports by the
corporate auditors.
c) The Internal Audit Department will submit reports
as required to the corporate auditors concerninginternal audits performed under the pre-determined
auditing plan. If necessary, this office will conduct
studies and prepare reports as requested by the
corporate auditors.

5. Systems to ensure proper operations in the corporate
groupa) Hanwa has established regulations for the oversightof affiliated companies and is dedicated topromoting business activities in a comprehensive
manner through the efficient management ofoperations based on mutual collaboration between
Hanwa and its affiliated companies.
b) The Affiliated Enterprises Department monitors
business operations at affiliated companies inJapan, providing support for the proper executionof business operations. The department also
conducts oversight of these operations. The
Overseas Administrative Department is responsible
for similar support and management activities
concerning overseas affiliated companies and otheroperations outside Japan.
6

8. Other systems to ensure effective auditing by the
corporate auditorsa) The corporate auditors exchange opinions with therepresentative directors and the directors in chargeof business units as required. If necessary, these
opinions are announced at meetings of the Boardof Directors. In addition, the corporate auditors
receive explanations of the financial audit from theindependent auditor and exchange information andcollaborate in other ways with this auditor.
b) Hanwa has a system that allows the corporate
auditors to attend meetings of the Board of
Directors and other important meetings, inspect
important documents, perform studies ofimportant departments and subsidiaries, andperform other tasks.

internal audit report is submitted directly to the president
every month and reports are submitted as required to theManagement Committee. Internal Audit Department alsofunctions as the staff for the corporate auditors. The staff
members submit reports as requested by the Board ofAuditors and remain in constant contact with thecorporate auditors. The Overseas Administrative
Department monitors overseas subsidiaries and otheroverseas business sites primarily with respect toaccounting and compliance. A report is submitted to all
directors every month and a report on the status ofoverseas bases is submitted to the Board of Directors
twice each year. Other reports are given as required in
response to requests by the Board of Auditors.
Audits by the corporate auditors place priority on
audits designed to prevent the occurrence of misconduct.
The auditors perform dialog-style audits to determine thestatus of legal compliance, internal control, risk
management and other items. Additionally, the auditors
attend meetings of the Board of Directors, theManagement Committee and other important
conferences to supervise and audit the performance ofsenior management. Hanwa’s corporate auditors include
individuals from outside the group who have richknowledge concerning corporate activities. These
auditors perform the required business audits while
maintaining their autonomy from senior management.
Furthermore, the auditors exchange opinions with thepresident and directors in charge of business units toclearly state corporate auditor opinions concerning theBoard of Directors.
Concerning the independent accountant, Hanwa has
an auditing contract with KPMG AZSA & Co. to perform
audits required by the Corporate Law and the Financial
Instruments and Exchange Law.

9. Systems to ensure the reliability of financial reportsa) The Hanwa Group evaluates internal controls
concerning financial reports and submits reports onthese internal controls in accordance with theFundamental Policy concerning Internal Controls for
Financial Reports. The aim is to operate an internal
controls reporting system in an efficient andeffective manner.
b) The Management Committee is responsible for theestablishment and operation of internal controls forthe entire group. The Internal Control Office issupervised directly by the Management Committee.
This department checks and evaluates theestablishment and operation of internal controls
and submits reports to the Management
Committee. The committee uses this information to
make improvements as required.
c) The Internal Control Committee studies issues
involving internal controls that are assigned to thecommittee by the Management Committee andsubmits reports on the results of these studies tothis committee. In addition, the Internal Control
Committee provides advice and assistance for theexaminations performed by the Internal Control
Office for the purpose of evaluating theeffectiveness of internal controls at the Hanwa
Group. This committee describes its opinions in an
Internal Controls Report.

Hanwa’s senior management will continue to take thelead in reinforcing the management and administration
framework and taking other steps to further strengthen
corporate governance.

August 2009

Shuji Kita
President
Hanwa Co., Ltd.

Internal audits, corporate auditor audits andfinancial audits
Regarding internal audits, Internal Audit Department
monitors all business sites and group companies in Japan
primarily with respect to accounting and compliance. An

北 修爾
取締役社長
阪和興業株式会社

7

Review of Operations
For the year ended March 31, 2009

Steel (Domestic)

Net sales by Product (Billions of yen)
Lumber, machinery, and other ¥50 (3.2%)
Petroleum and chemicals ¥321 (20.9%)

Steel bars and shapes ¥354 (23.0%)

Net sales¥1,539(100.0%)Foods ¥82 (5.3%)

Steel plates and sheets ¥327 (21.3%)

Non-ferrous metals ¥52 (3.4%)

Special steels,
wire products, steel pipes, andsteelmaking raw materials ¥197 (12.8%)

Metals and alloys ¥156 (10.1%)

Steel related products ¥878 (57.1%)¥1,539¥1,508
54
31

2

50
32

Lumber, machinery, and other1

Petroleum and chemicals

85
65
20

1

2

1

82

Foods

52

Non-ferrous metals

56
Metals and alloys

19

7

32

7

Special steels, wire products, steel pipes,
and steelmaking raw materials

87

29

6
Steel plates and sheets

35
3

4

07
Steel bars and shapes

’08

’09

8

Review
Performance of domestic steel business wasquite different in the first and second halves ofthe fiscal year. During the first half, market
conditions were relatively good in theconstruction and civil engineering sector as
projects delayed in the prior fiscal year werestarted. In addition, output at Japanesemanufacturers reached an all-time high due tostrong exports to emerging economies. Steelmarket price rose by ¥30,000 to ¥35,000 per
ton because of the higher cost of raw materials,
which were in short supply in some cases.
Hanwa was able to increase prices to reflect thehigher cost of purchasing steel and posted
strong earnings from sales of products ininventories as well. Market conditions began tochange in July. First was a downturn inautomobile exports from Japan to Europe andNorth America as inventories of finished vehicles
increased. Next, the failure of Lehman Brothers
sparked an abrupt economic downturn.
Consumer spending cooled and manufacturers
cut output while postponing or canceling capital
expenditures. Plummeting demand for steel
scrap caused the price to collapse from ¥75,000
per ton to less than ¥10,000. Inventories rose tounprecedented levels at both steelmakers andsteel users. As a result, steel market priceplunged and Hanwa’s sales volume declined andinventory valuation loss of about ¥11.9 billion
was posted.

Outlook
By the spring of 2009, demand and prices had
stopped falling and companies in someindustries had completed their inventory
reductions. Most steel users will probably
achieve suitable inventory levels by the end ofJune 2009. Despite these positive trends,
prospects for a market rebound are poor due tothe extremely uncertain outlook for demand. In
the construction and civil engineering sector,
public-works investments and redevelopment
projects are the only possible sources of growth
because of the consistently low level of privatesector capital expenditures. Furthermore,consumer spending is falling along withpersonal income. This makes a significant
recovery in manufacturing unlikely for sometime. Japanese economy is expected to recover
during the current fiscal year’s first half, but thepace will be very slow. Pressure on sales andearnings will therefore continue. In the second
half of this fiscal year, Japanese economy willprobably benefit from the government’s
economic stimulus initiatives, economic
recoveries in China, India and other emerging
countries, and earthquake reconstruction
demand in China. However, a recovery inJapanese consumer spending is not expected in
the near future. Japanese companies in allindustries are certain to move even faster tofocus resources only on strategic activities. As
this process unfolds, some companies willprobably have to shut down. In thisenvironment, Hanwa’s domestic steel business isdeepening relationships with current customers
while continuing to pursue a regional strategy
aimed at targeting demand in niche sectors of
the steel market.

Steel (Overseas)
Review
Steel prices were extremely volatile during the
fiscal year. Prices increased rapidly in the firsthalf but then plummeted in the second half as
the financial crisis dramatically altered market
conditions.
Crude steel production in China in calendar
2008 was 500 million tons, about the same as
in 2007, and China’s steel exports were down
only about 5% to 59.27 million tons. But
record-high monthly exports of steel in July andAugust demonstrated that China continues tobe a major global player in the steel market.
Steel exports from Japan were 33.81 million
tons during the fiscal year. This was down about
11% from the previous fiscal year, the firstdecline in three years, because of the downturnin demand in the fiscal year’s second half.
Demand for steel products was strong in thefirst half because of very strong demand forsteel construction materials. Emerging
economies in Asia, the Middle East, Eastern
Europe and Africa accounted for much of thisdemand. However, the financial crisis triggereda steep drop in orders as demand for steel fell
worldwide. For entire fiscal year, there was a
6% increase in the volume of steel handled by
Hanwa’s overseas steel operations and a 13%
increase in sales amount.
To enlarge the overseas network inanticipation of an economic recovery, Hanwa
opened an office in Hanoi, started operating acoil center in Indonesia and began inventory
sales in Dubai.

9

Outlook
Although the outlook for the steel industry is
uncertain, there are some positive signs likeemerging benefits of China’s economic stimulus
program. A recovery in the steel market will
depend most of all on demand in China, India
and other emerging economies. But China’s
enormous annual crude steel output capacity of
660 million tons is a source of concern about
the outlook for the global steel market.
Steel exports from Japan will probably
decline because of the worldwide recession. As
a result, the operating environment will remaindifficult for Hanwa’s sales to companies inexport industries such as automobiles and home
appliances, the primary buyers of steel sheets.
To offset this decline, Hanwa plans to increase
sales associated with domestic demand in China
and other emerging economies. Another goal isusing coil centers to establish relationships withnew customers. For construction materials, thecentral goal is increasing the volume of products
handled along with growth in demand, mainlyin Asia. In the Middle East, Hanwa is expanding
its presence by using the Dubai office toconduct sales activities throughout the region.
Hanwa is also working hard on capturing orders
in the energy sector.
One more objective for overseas steelbusiness is further increasing the breadth ofsales activities. While monitoring the output ofsteel mills around the world, Hanwa aims to
expand both exports from Japan and offshore
trading that uses its overseas bases.

Metals and Alloys
Review
After reaching a peak of $30,000 per ton in
April 2008, the price of nickel plunged to lessthan $9,000 in October and remained weak at
about $10,000 for the remainder of the fiscal
year. Sales of metals used to produce stainlesssteel were strong during the fiscal year’s first
half. Stainless steel makers operated at full
capacity as the market for this steel remained
healthy. Following the Lehman Shock, however,production volumes of stainless and special steel
dropped by 20% to 50% from their peaks.
Hanwa offset the impact of falling prices
somewhat by using the hedging function of theLME. In addition, in response to falling demand,
Hanwa reduced its reliance on Japanese steel
mills by increasing sales to steel mills in Korea
and China. Due to these actions, stainless steel
and nickel operations recorded sales andearnings that exceeded initial forecasts for the
fiscal year.
Prices of ferroalloys climbed to record highs
in the first half of the fiscal year as supplies
became tight due mainly to a shortage ofelectricity in South Africa and disruptions on theflow of goods following the Sichuan earthquake
in China. Hanwa earned profits by moving up
the purchase of materials before prices climbed.
However, a sharp drop in prices of metals in thefiscal year’s second half severely impacted
performance of the ferroalloys business. The
Samancor ferrochrome business in South Africa,
now in its fourth year, is a consistent source of
earnings. To further expand this business,
Hanwa made a large investment in Finlandbased Ruukki Group PLC in May 2008
In the silicon business, prices dropped rapidly
in the fiscal year’s second half, but the businessachieved its performance targets because of
growth in sales of high-purity silicon metal forsolar cells and chemicals.
The solar cell business performed wellthroughout the fiscal year because of long-term
contracts with overseas customers as market
conditions remained strong.

Non-Ferrous Metals
OutlookIn the stainless steel and special metals recycling
business, Hanwa is focusing on the goals of
upgrading functions and differentiation. This
involves going beyond the existing logistics andinventory operations to perform sorting andprocessing as well. In response to anticipatedshortages of metal resources, Hanwa plans tomove quickly to expand operations. Plans
include investing in nickel mining operations andtargeting opportunities created by therealignment of the mining industry.
In the ferroalloys business, primary goals are
conducting transactions with producers thathave their own supplies of ore; increasing sales
to blast furnace and electric arc furnace steel
makers and manufacturers of special steel; andincreasing offshore transactions for the supplyof materials to customers in Asia. In thechromium business, Hanwa is concentrating on
selling products mainly produced by Samancor
and products from India. In addition, Hanwa is
promoting the upcoming projects of the Ruukki
Group.
Benefiting from the recently announced
Global New Green Deal Policy, the solar cellindustry is expected to return to high growth
rates. However, it will not be before this springthat it will pull out of the current slump in sales.
In response, Hanwa will focus also on thedownstream processes in order to strengthen its
presence in this promising sector.
In the silicon metal business, Hanwa plans tofurther increase its stature in the global market
for high-purity products by using its position asa prominent supplier with capabilities that
include silicon ore processing.
Hanwa recently opened an office in South
Africa and plans to continue enlarging its
overseas network for metals and alloys. This
growth will make it possible to increase overseas
transactions from a global perspective.

10

Review
Non-ferrous metals business performed well in
the fiscal year’s first half as strong demand in all
market sectors steadily pushed up prices. Afterreaching the highest levels in several years,
prices of metals started falling in June and July.
The downturn was sparked by LME sales ofcopper and aluminum by funds to lock in
profits. In the second half, the financial crisis
caused an unprecedented drop in commodity
prices. Real demand for non-ferrous metals
decreased as manufacturers using thesematerials cut production by about 30%. As aresult, it became impossible to sell metals forrecycling. In the forth quarter of FY2008, nonferrous metals demand in Japan has weakened
even more. But prices of these metals recovered
somewhat due to demand created by shortages
caused by China’s policy of stockpiling various
metals. Overall, Hanwa’s non-ferrous metal sales
in the second half were about 60% less than in
the first half. Despite this steep decline, nonferrous metals business remained profitable forthe fiscal year because of the effective use ofhedges and exports to China and othercountries.
Outlook
There are signs that the global recession iseasing, including an upturn in some production
activity, chiefly for exports to China. However,much more time will be required for a complete
recovery. Demand for metals for recycling has
returned to only about half of the pre-recession
level. Furthermore, LME prices have rebounded
only 20% to 30% from the recent lows.
Concerns persist about the sustainability ofdemand in China and the possibility ofrecurrence of financial instability. As a result, theoutlook for non-ferrous metals is still uncertain.
Prices of these metals will most likely holdsteady at the current low levels for some time.
But the outlook for metal scrap for recycling
is positive. One reason is that recycled metals
contribute directly to lowering expenses. In
addition, the current volume of scrap isextremely low. Consequently, a very strong
upswing in demand for recycled metals willprobably occur in the near future.
Hanwa’s non-ferrous metals business plansto overcome current challenges by using sales
capabilities in global markets and reliable
procurement channels to enlarge the recycling
network, particularly in Asia.

Food Products

Petroleum and Chemicals

Review
The global financial crisis that began in
September 2008 has severely impacted themarine products industry. Sea food demand in
the United States and Europe had been strong,but the crisis triggered a quick downturn. Global
sea food prices plunged as a result. The price offrozen shrimp, a widely traded internationalcommodity, declined steadily following the crisis,
eventually reaching a low that was far less thanthe previous record-low in Japan.
Sales of food products decreased 2.9% to¥82.2 billion. In the fiscal year’s first half,earnings were steady due in large part to astrong market for frozen fish, chiefly salmon.
But the price of frozen shrimp has dropped
steadily for 18 months, setting a new all-time
low price following Japan’s deregulation of
shrimp imports. Frozen fish did not contributeto earnings either. The main reason was weaksales of overseas processed food products using
frozen fish, due in part to the lingering effects
in Japan of an incident involving intentionallycontaminated food from China.

Review
The past fiscal year was a period of
unprecedented volatility in the crude oil market.
In the year’s first half, inflation accelerated as
excessive liquidity pushed up prices ofcommodity. At one point, the price of WTI crude
oil reached $147 / barrel. The price was obviously
far too high in relation to actual demand. Hanwa
increased petroleum sales and earnings in thefirst half as the price of crude oil rose to record
highs. In the second half, however, the price of
crude oil declined by about $100. Consumptionof petroleum products plunged because of a
sharp decline in demand and prices. Despite
these challenges, Hanwa maintained its sales
volumes by shifting emphasis to gasoline,
kerosene and other light oil products. In themarket for bunker fuel, price-based competition
intensified as a big decline in cargo ship voyages
cut demand for this fuel. Hanwa was able tooffset lower demand through sales activities that
include consulting and the addition of new
customers. Overall, petroleum earnings increased
as the lower cost of heavy oil brought down
expenses in this business.
The chemical business faced challenges in thefiscal year’s first half as the yen weakened andthe price of naphtha increased rapidly.
Profitability recovered in the second half due as
the yen started appreciating and the cost ofnaphtha fell. During the fiscal year, Hanwa
succeeded in forming relationships with anumber of new customers with much potential
for growth. In the paper products sector,
earnings declined as the yen’s strength in thesecond half hurt profit margins and Asian paper
manufacturers reduced output and suspended
operations.

Outlook
The operating environment will remainchallenging in the current fiscal year. Preserving
an appropriate profit margin will be difficult
because of customers’ demands for lower prices.
Hanwa’s priority is to adapt to rapid changes inmarket conditions by focusing on food safety,
overseas strategic goals and collaboration withcustomers. From a long-term perspective, Hanwa
plans to develop the new Amsterdam office intoa strategic base for selling sea food in Europe. In
April 2009, Hanwa participated in the European
Seafood Exposition in Belgium. This raised
awareness of Hanwa’s ability to work withcustomers to supply food products, chiefly
processed items made in Japan and China.
In Vietnam, which is the largest source of
products for Hanwa’s food products business, a
staff member of this business from Japan was
assigned to the Ho Chi Minh Office starting in
April 2009. This will deepen relationships with
suppliers, especially companies that
manufacture frozen shrimp products. Hanwa
hopes to continue increasing its presence inVietnam’s food industry.
Consumer demands regarding food safetycontinue to increase in Japan. To upgrade thecapabilities of the Food Quality Control Office,which was established in 2008, Hanwa isincreasing the full-time staff of this department.
Hanwa will deal with global trend concerning
food safety as well as environmental protection.

11

Outlook
Although the economic outlook has been
consistently negative, some encouraging signs
began to appear in May 2009. But even if thefinancial system stabilizes, more time will beneeded to achieve an improvement in supplydemand dynamics.
A large decline is foreseen in demand for
petroleum products compared with the pastfiscal year. The primary causes are declining
consumer spending due to the global recession,
cuts in production volumes, and lower cargovolumes in both marine and land transportation.
Furthermore, a long-term downturn in demandfor petroleum products is likely as fewer young
people buy automobiles and the world shifts to
new energy sources like solar power.
Japan’s markets for petroleum products andchemicals are in a long-term decline. The current
recession is only accelerating the pace of thiscontraction. Oil exploration activity will drop if
the price of crude oil remains low. Companies
will probably stop deep sea drilling, oil sanddevelopment and other projects in high-cost oilfields. On the other hand, refining and transportcapacity in industrialized nations may limit the
supply of oil unless investments are made to
upgrade aging facilities. However, there is muchpotential for higher demand for petroleum
products in emerging economies. Once theglobal economy recovers, internal demand linked
to emerging economies may once again fuelstrong growth in consumption of petroleum
products.
Hanwa is determined to increase sales of
petroleum products and chemicals by upgrading
skills in combining sales and consulting and byidentifying the needs of current customers.
Additionally, Hanwa aims to strengthen
capabilities and expand outside Japan in order tocreate new sources of demand. The objective in2009 is to use aggressive sales activities to create
new markets and build a foundation for growthin the coming years.

Lumber

Machinery

Review
In the first half of FY2008, prices of U.S. lumber
fell steadily because of declining U.S. housing
starts due to the subprime loan problem. An
increasing number of American lumber suppliers
became unprofitable, resulting in weak sales ofimported lumber and logs in Japan. Demand forlumber weakened even more in the fiscal year’s
second half as the number of housing starts fell
after the Lehman shock. This further depressedsales of imported lumber products in Japan. The
global recession exerted more pressure on
lumber prices and the yen’s strength also had anegative impact on demand for North Americanand European lumber. In addition, lumber from
China became less competitive and Russia
harvested fewer trees due to a new export tariffon logs and other issues. The result was a decline
in the volume of lumber produced in these twocountries.
In the fiscal year that ended in March 2008,
Hanwa started working on raising sales oflumber products in the Middle East, India andChina. Growth resulting from these activities
allowed Hanwa to achieve an increase in thevolume of lumber handled for the fiscal year asa whole. Furthermore, profitability improved as
the yen appreciated.

Review
Leisure facilities : In Japan, Hanwa completed
installation of its first large ride in 12 years:
German-made water ride that was sold to Fuji-Q
High Land. In addition, a children’s attractionthat was made in Hong Kong was sold to acustomer in Okinawa. Hanwa received an orderfrom Tokyo Dome City for a MagiQuest live
action role-playing game facility. The order
includes interior design and the sale of items
used by individuals who play this game. For
SEGA Republic, an indoor theme park that will
open in 2009 at the Dubai Mall in Dubai, UAE,
Hanwa installed three rides imported from
Germany: a family roller coaster, family towerride and half pipe.
Industrial machinery : In the metal processing
machine sector, Hanwa delivered a broad rangeof levelers and slitters for coil centers operated
by Hanwa Group Companies. Sales also
included slitters, hot forging presses, bevelingmachines, band saws and other equipment for
metal processors. In other product sectors, 13
hoist cranes were installed and contracts werereceived for a complete roll forming line. In theenvironment facility, Hanwa concentrated on
deodorizer, water treatment equipment andother types of machinery.
Orders were weak for the fiscal year as awhole because orders associated with capital
expenditures plunged in the second half. Hanwa
is responding by forming cooperative sales
relationships with specialist machinery trading
companies and increasing its machinery staff.
This provides a sound base for expanding the
product lineup and capturing export orders.

OutlookIn anticipation of the benefits of Japan’s economic
stimulus measures, Hanwa has purchased lumber
and established a sales system to target demand
expected to emerge in the summer of 2009.
Hanwa is making progress in developing
products for markets other than homebuilding.
Hanwa also plans to make exports of Japanesecedar lumber to China and Korea a consistently
profitable business.
Orders to major Japanese producers of precut beams are down and there are no prospects
for a significant recovery in the near future.
However, a moderate upturn in this business is
expected because of the decline in inventories ofcompleted houses for sale.
Although sales of lumber products in the
United States are consistently weak with no end
in sight, Hanwa is restructuring its salesorganization to prepare for the eventual
rebound in demand for lumber.
Sales in China are expected to increase
because of the large number of business
opportunities in this country. In the Middle Eastand India, more time will be needed to achievea balance between supply and demand forlumber. Hanwa plans to increase sales in these
two markets in the first half of 2009 andcontinue to meet demand for lumber in otheremerging economies.

12

Outlook
Leisure facilities : Declining popularity ofamusement facilities in Japan is prompting an
increasing number of companies to withdraw
from this market. On the positive side, there isless competition. However, demand for large
outdoor attractions has been weak for many
years. Capturing orders in this environment will
require the development of indoor attractions
that target families. Hanwa plans to develop
and sell new games through collaboration with
innovative attraction developers in Europe andthe United States. Role-playing games andvirtual reality attractions are the highest
priorities. Sales activities will not be limited toconventional amusement parks. Throughcollaboration with group member Halos
Corporation, Hanwa also plans to increase salesof amusement facilities for creating highly
distinctive shopping centers, a market sector
where competition is intense.
Industrial machinery: Capital expenditures inJapan are expected to remain sluggish in thecurrent fiscal year. Hanwa will deepen
cooperation among its business units in order to
conduct sales activities targeting the capital
investments of current Hanwa customers. The
goal is to sell more cranes, steel processing
machines and other types of industrial
machinery. Hanwa plans to enforce our function
through alliance with cooperative companies
and increase of export and import transaction.
Another goal is doing more than merely sellingmachinery. Hanwa plans to provide engineering
services as well in order to increase sales ofentire production lines, such as roll forming lines
and forming lines for steel furniture.

Our Ethical Principles

In accordance with the policy of the company incorporated
into Corporate Creed and the “Charter of Corporate
Behavior” established by Nippon Keidanren, Hanwa Co., Ltd.
draws up, under the Corporate Policy, the Corporate EthicalStandards and the Ethical Standards of Behavior as guidelines
for employee behaviors in order to promote legal, fair andsensible corporate conducts.

Corporate Ethical Standards
Hanwa Co., Ltd. hereby draws up the following ethicalstandards as basic concept for constantly recognizing its
required social role and responsibility and establishing highcorporate ethical framework under its policy of the company.
Its all directors, officers and employees shall comply with andperform these standards in its daily business activities.

Corporate Creed

1. Compliance with regulations and social rules

Confidence

Hanwa Co., Ltd. complies with laws, regulations, internationalrules and other social rules, and promotes corporate activities
in accordance with social common sense.

Each director, officer and employee should recognize that
confidence is the foundation of company existence, observe
correct business practices and build up confidence of our
stakeholders and society through everyday business.

2. Fair corporate activities
Hanwa Co., Ltd. does business activities realizing that a fairand free competition is the basic rule of the market economy,
and maintains sound and highly transparent relationship withthe government and public administration.

Honesty
Always be aware that honesty is the basis of earning
confidence, and try to act with fair and high openness, andcomplete its own assignments with honesty and responsibility.

3. Contribution to the industry society
Hanwa Co., Ltd. develops its business activities based on both
short and long term perspectives while balancing three aspectsof society, economy and environment, and makes efforts torealize the sustainable society through its business activities.

Originality
Originality is the basis of progress and improvements. Under
the current diversified circumstance, constantly absorb new
information, improve efficiency, and fulfill its responsibility withcourage, not being obsessed with traditional ideas.

4. Active information disclosure
Hanwa Co., Ltd. fully recognizes high interests of society incorporate activities, widely communicates with not only its
shareholders but also society, and maintains its corporatetransparency with fair and active information disclosures.

Cooperation
Always respect other person’s position with a heart ofcooperation in local communities and international societies.
Try to keep in harmony with society through decent businessconducts and make an open and vigorous work place.

5. Consideration for environment
Hanwa Co., Ltd. constantly acknowledges that considerationfor environment is a part of its social responsibilities and deals
with environmental issues from the worldwide point of view
voluntarily and actively.

Contribution
Widely contribute to society through business under soundcompany activities, and try to promote environmental
conservation as a part of its social responsibility.

6. Global harmonization
Hanwa Co., Ltd. as an international entity respects local
cultures and customs abroad, and promotes its managements
to contribute to developments of local areas.

Corporate Policy

7. Establishment of free and vigorous work
environment• Earn confidence with honesty and efforts.
• Be a specialist in the field with its vigor and guts.
• Improve efficiency with its originality and cooperation• Promote corporate business and build happy homes• Recognize its responsibility and contribute to society

Hanwa Co., Ltd. respects its employees’ individual charactersand personalities, ensures prosperous work environments bygiving its employees positive assistance for building up of
career and development of ability, recognizes team works as
the foundation of corporate activities, and achieves free,vigorous and creative corporate culture.

13

8. Promotion of active social actions as “a good
corporate entity”.

8. Observe the Regulation of Money for Political Activities Act.
and do not make illegal political donation.

Hanwa Co., Ltd. integrates corporate and public benefits,
widely returns its achievements gained through corporate
activities and makes social contributions voluntarily andactively in every aspect.

9. Manage information carefully and maintain soundinformation network.
10. Give consideration to human rights and exclude unjust
discriminations, abuses, harassments, etc.

9. Thorough familiarization of ethical standards anddevelopment of in-house framework

11. Observe traffic law and other laws, regulations and rules ofsocial common ideas with which we shall comply as social
citizens.

Hanwa Co., Ltd. thoroughly familiarizes the persons concernedwith these standards to effectively implement the rule by its
managements’ active involvement and develop its in-houseframework for more efficient and effective operations.

12. Comply with laws, regulations, international rules, social
customs and in-house rules in accordance with the
management policy, and maintain high ethics.

10. Prevention of recurrence of misconducts andappropriate information disclosure

13. Cooperate with social developments and positively
promote contribution to society.

Hanwa Co., Ltd. always checks its effectiveness in
implementation of these standards. In the event any
misconduct against these standards happens, Hanwa Co., Ltd.
discloses relevant information, explains the circumstancepromptly and properly to society and prevent recurrence ofsuch misconducts by investigating cause of such misconducts.

14. Maintain sound and transparent management by positively
disclosing information.
15. Cope resolutely with antisocial forces and refrain from any
profit-offering, etc.
16. Emphasize in-house education and develop expertise andcreativity.

Corporate ethical standards of behavior
Under the spirits of the Corporate Ethical Standards, Hanwa
Co., Ltd. hereby draws up the following ethical standards of
behavior as concrete guidelines to ensure high corporate ethics
through everyday business. Its all directors, officers andemployees shall comply with these standards in their activities.

17. Maintain vigorous work environment with fair personnel
evaluation.
18. Encourage employees to report, contact and consult, andpromote open and highly transparent business activities.
19. Do not make transactions contradicting company’s profit,
maintain sound relationship with its customers, and draw aline between public and private affairs.

1. Observe Antitrust Law and other laws and regulations, andoperate its business fairly and appropriately.

20. With respect to entertainment and gift offered by theCompany, comply with laws and regulations concernedand stay within the extent socially permitted.

2. Observe Unfair Competition Prevention Law and maintainsound market environment based on free competition.
3. Fully understand and appropriately manage the qualificationand permission necessary for performing its business.

21. Follow accounting related regulations and make fair,appropriate and proper accounting books and records.

4. Observe treaties, laws and regulations of various countries inrelation to import and export business, and appropriately
operate its import and export transaction.

22. Follow credit management regulations and put proper
credit control in practice.
23. Always check and understand contents of contracts andactual conditions of dealings with clients.

5. Respect Intellectual Property Rights and keep intellectual
property under strict control and do not infringe third
party’s ones.

24. Draft both external documents such as contracts and inhouse memorandums properly and keep such documentsin accordance with company regulations.

6. Observe laws and regulations with respect to theenvironment and operate its business considering global
environment.

25. Give due consideration for issues of safety and hygiene inmanaging business activities and labor services.

7. Do not conduct unjust dealings of shares and othersecurities such as insider trading.

14Topics

Hanwa Europe B.V. Starts Operations in
Amsterdam
Hanwa established Hanwa Europe B.V. in June 2008. Based in
Amsterdam, the new subsidiary handles mainly marine
products. The company purchases mackerel, smelt and redfish
caught in the North Atlantic Ocean and North Sea for export toJapan and China. Hanwa’s London Branch handled sea foodprior to the establishment of this company. The decision wasmade to create a separate company because of the excellent
growth prospects for this business. Having an operating base in
Amsterdam is also extremely useful for participating in theEuropean Seafood Exposition, which takes place every year in
Brussels, Belgium. In the future, this subsidiary may also importsea food from Japan and other Asian countries for sale inEurope.
In July 2009, a Vienna Branch joined the new subsidiary’s
network and start exporting lumber products from Eastern andNorthern Europe to Japan and the Middle East. As one of ourprincipal bases in Europe region, the Vienna Branch willcontribute to business expansion by broadening the line-up ofsteel and other products.

Opened Hanwa India Private Ltd.
In April 2008, Hanwa established Hanwa India Private Ltd. in
Mumbai and opened a New Delhi office in Gurgaon, Haryana
as a second base of operations in this country. Both locations
are engaged mainly in activities involving automobiles,
shipbuilding, gas and petroleum, and energy. The New Delhi
office will be particularly valuable for business operations
involving the automobile industry. Many of India’s automakers
have operations in Gurgaon. Although the India’s population
exceeds one billion, the economy is still centered on the service
sector, chiefly IT services. Due to the structure of businessactivities in India, Hanwa plans to increase sales of its current
products while adopting a flexible approach to growth in thiscountry.

15

Management’s Discussion and Analysis

Economic overview
During the fiscal year that ended on March 31, 2009, theglobal economy was healthy during the first half but there wasan unprecedented downturn in the real economy in the second
half. The recession was caused by the increasing severity of thefinancial crisis and credit crunch, which both originated withthe subprime loan problem, following the September 2008
failure of Lehman Brothers. Global economic problems affected
the economies of China, Middle East and other countries withemerging economies, which had been the primary source ofgrowth for the global economy. Export-dependent industries inthese countries were impacted as demand for their products
plunged in North America and Europe. Furthermore,
infrastructure investments in these countries fell due to theinability to procure funds because of credit concerns. As aresult, economic growth in emerging economies came to a
standstill. At the same time, demand for crude oil, metals andother resources plummeted as speculators stopped buying andthe real economy weakened. The result was a turning point inresource inflation as prices that had been climbing steadily
instead fell sharply.
In Japan, these events triggered a severe economic
downturn. Construction demand fell, particularly for
condominiums, and consumer spending weakened. The
performance of the manufacturing sector, which had
underpinned economic growth, deteriorated rapidly as demand
for Japanese products in North America and Europe fell sharply,
the growth of emerging economies slowed and the yen
strengthened.

Sales by business segment
Steel: Sales increased in the fiscal year’s first half as steel prices
climbed rapidly due to the higher cost of steel raw materials andgrowing demand for steel in China and other emerging
economies. Although there was a steep decline in steel demandin the second half, the high prices for all steel products
throughout the fiscal year resulted in an 11.1% increase in sales
to ¥877.8 billion.

Earnings

Petroleum and Chemicals: After climbing to a record high,the price of crude oil retreated quickly in the second half of the
fiscal year. However, higher sales of bunker fuel sold overseas
resulted in a 3.0% increase in sales to ¥320.8 billion.

Metals and Alloys: Poor stainless steel market conditions thatbegan in the previous fiscal year continued in FY2008. Demand
for stainless steel raw materials fell even more because of afurther decline in stainless steel production in the second half ofthe fiscal year. The result was even more pressure on prices andsales of nickel, chromium and stainless steel scrap. Overall, sales
fell 22.9% to ¥155.8 billion.
Non-Ferrous Metals: Prices of copper, zinc and other metals
were low. Demand for aluminum products used in automobiles
and construction materials plummeted in the fiscal year’s
second half. As a result, sales of aluminum scrap decreased.
These factors combined to reduce sales by 20.6% to ¥51.9
billion.
Foods: Demand for shrimp, eel and other sea food was sluggish
in Japan and overseas demand was weak as well. Due to theseunfavorable market conditions, sales decreased 2.9% to ¥82.2
billion.

Consolidated net sales increased 2.1% to ¥1,539.3 billion. High
prices for steel products during the fiscal year’s first halfbecause of strength in the global steel market offset thenegative impact of the economic downturn that started in thesecond half. However, the rapid decline in the global economy
caused earnings to fall as the volume of products handled
decreased and prices of products fell. In addition, the cost of
sales includes an inventory valuation loss of ¥11.9 billion.
Operating income decreased 26.4% to ¥17.5 billion and net
income was down 54.3% to ¥6.0 billion.

Other businesses: Sales decreased 5.3% to ¥50.8 billion mainly
because of lower prices for lumber products caused by theconsistently low level of housing starts in Japan.

16Cash FlowsNet cash used in operating activities was ¥5.7 billion comparedwith a positive cash flow of ¥21.4 billion in the previous fiscal
year. One reason was the decrease in income before income
taxes. In addition, there was a decrease in trade notes andaccounts payable of ¥36.5 billion, a net decrease of ¥44.9
billion compared with the increase in the previous fiscal year,
because of a decline in purchases of merchandise associatedwith lower sales in the fiscal year's second half and inventory
reductions.
Cash used in investing activities increased ¥11.1 billion to¥19.5 billion. This increase was attributable mainly to increases
in additions to investment securities, including an investment inRuukki Group PLC, and in additions to property andequipment.
Cash provided by financing activities was ¥46.6 billion
compared with a negative cash flow of ¥9.1 billion in theprevious fiscal year. Hanwa temporarily increased the volume ofbank loans because of the uncertain outlook for the fundprocurement environment due to the global financial crisis.

Outlook
There is still no end in sight to the global financial crisis thatoriginated with the subprime loan problem. The deep economic
recessions in the United States and other industrialized nations
has caused emerging economies to weaken as well. Countries
worldwide are enacting various economic and financial
programs in response to the severe downturn in the real
economy. Although these actions are likely to produce benefits,
the outlook for the global economy is still uncertain.
The Japanese economy will probably continue to be heldback by a number of factors. Most significant is the rapid
decline in the manufacturing sector, which has been a key
contributor to economic growth for many years. Furthermore, aquick recovery in external demand is unlikely because of themagnitude of the global economic recession. Consistently
sluggish domestic demand also makes the economic outlook
challenging in Japan.
All business units of the Hanwa Group are feeling theeffects of the current weakness in real demand and market
prices. In response, all group companies are concentrating on
remaining profitable by accurately monitoring changes indemand, maintaining proper inventories and conducting sales
activities that match market conditions.
The Hanwa Group will continue to position steel, metals &alloys, non-ferrous metals, foods, and petroleum & chemicals as
its core businesses. Based on this stance, the group aims to
expand its business operations by executing a strategy based on
the adoption of an offensive stance. The development of new
businesses and extension of operations to peripheral fields are
two other goals. The aim is to start businesses that can becentral elements of Hanwa’s operations in the future.

17

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Five-Year Summary
For the years ended March 31

Millions of yen,
except for number of employees

2009

For the year:
Net sales
Operating income
Net income

2007

2006

¥ 1,539,282 ¥ 1,507,509 ¥ 1,320,022 ¥ 1,097,707 ¥
17,451
23,705
20,865
19,690
5,997
13,118
11,423
10,504

Net cash provided by (used in)operating activities
Net cash used in investing
activities
Net cash provided by (used in)financing activities
At year-end:
Cash and cash equivalents
Total assets
Total net assets

2008

Thousands of
U.S. dollars¥

Number of employees

2005

933,956 $15,670,182
22,091
177,654
13,70461,051(5,742)

21,430(36,192)

22,299(13,341)(58,454)(19,536)(8,443)(5,956)(14,079)(731)(198,880)

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

23,523474,31535,046 ¥479,379
94,913

14,179 ¥482,014100,926

10,229 ¥476,179
98,254

18,986 ¥413,020
86,954

1,818

1,715

1,637

1,519

17,658 $ 356,775
376,5214,880,169
73,574966,232
1,424

Yen

2009

Per share data:
Net income
Cash dividends
Net assets

¥

2009

2008

28.47 ¥
12.00
450.0562.07 ¥
12.00
473.70U.S. dollars

2007

54.03 ¥
12.00
461.21

2006

48.96 ¥
10.00
406.682005

2009

64.03 $
9.00
343.82%2009

Key financial ratios:
Return on assets
Return on equity
Net debt/equity ratio

2008

1.2
6.2
190

2.7
13.3
150

2007

2.6
12.4
170

2006

2.7
13.2
140

2005

4.1
21.0
170

Note: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥98.23 = $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 ($0.020) commemorative dividend in celebration of the 60th anniversary of
the Company’s establishment.

18

0.290
0.122
4.582

Financial Section

Contents
Consolidated Balance Sheets ........................................................................................... 20
Consolidated Statements of Income ............................................................................. 22
Consolidated Statements of Changes in Net Assets ............................................... 23
Consolidated Statements of Cash Flows ..................................................................... 25
Notes to Consolidated Financial Statements ............................................................. 26
Independent Auditors’ Report ......................................................................................... 39
19

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
As at March 31, 2009 and 2008

Thousands of
U.S. dollars (Note 1)

Millions of yen

Assets2009

Current assets:
Cash and cash equivalents
Receivables:
Trade notes and accounts:
Unconsolidated subsidiaries and affiliates
Other
Loans:
Unconsolidated subsidiaries and affiliates
Other
Allowance for doubtful receivables
Inventories
Deferred tax assets - current (Note 8)
Other current assets (Note 5)
Total current assets

¥

2008

2009

2008

356,775 $

144,345

35,046 ¥14,179 $7,427
225,856

6,886
256,30775,6082,299,257

70,101
2,609,254

796
7
(781)
90,766
1,561
24,875385,553

695
177
(892)
92,982
1,823
18,615
390,772

8,104
71(7,951)
924,015
15,892
253,232
3,925,003

7,075
1,802
(9,081)
946,574
18,559189,504
3,978,133

Investments and noncurrent receivables:
Investment securities (Notes 3 and 5):
Unconsolidated subsidiaries and affiliates
Other
Loans receivable:
Other
Other investments and noncurrent receivables
Allowance for doubtful receivables
Total investments and noncurrent receivables

3,413
24,6102,343
29,10034,745250,534

23,852296,244220
20,747(3,187)45,803262
16,674(756)
47,6232,240
211,208(32,444)466,283

2,667
169,744(7,696)484,811

Property and equipment (Note 5):
Land (Note 9)
Buildings and structures
Other
Accumulated depreciation
Total property and equipment

27,96623,657
13,692(18,908)
46,40724,45322,47913,437(17,628)
42,741

284,699
240,833
139,387(192,487)
472,432

248,936
228,841
136,791(179,456)
435,112

Other assets:
Deferred tax assets – noncurrent (Note 8)
Intangibles and other assets (Note 5)
Total other assets
Total

883
733
1,616
479,379 ¥

69
8,989
702
809
7,462
8,236
878
16,451
8,938
482,014 $ 4,880,169 $ 4,906,994¥

See accompanying Notes to Consolidated Financial Statements.

20

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and Net Assets

2009

Current liabilities:
Short-term loans payable (Note 6)
Commercial paper (Note 6)Long-term debt due within one year (Note 6)
Trade notes and accounts payable:
Unconsolidated subsidiaries and affiliates
Other
Accrued bonuses to employees
Income taxes payable
Other current liabilities
Total current liabilities

¥

2008

2009

2008

668,716 $—
241,016

276,026
173,063
332,129

65,688 ¥—23,675

27,114 $17,00032,625802
129,918
1,789
189
30,427
252,488660
167,628
1,763
4,813
29,416
281,0198,165
1,322,590
18,212
1,924
309,753
2,570,376

6,719
1,706,485
17,94848,997
299,460
2,860,827

125,150
26
2,686
4,116
131,978

89,325
9
6,801
3,934
100,069

1,274,051
264
27,344
41,902
1,343,561

909,34592
69,23540,0491,018,721

Net assets (Note 9)
Shareholders’ equity:
Common stock,
Authorized: 570,000,000 shares
Issued: 211,663,200 shares
Capital surplus
Retained earnings
Treasury stock, at cost: 2,358,475 shares (324,332 in 2008)
Total shareholders’ equity

45,651
5
54,651(756)
99,55145,651
5
51,028(130)
96,554

464,73651
556,357(7,696)
1,013,448

464,73651
519,475(1,324)
982,938

Valuation and translation adjustments:
Unrealized gains on securities, net of taxes
Unrealized gains on hedging derivatives, net of taxes
Land revaluation difference, net of taxes
Foreign currency translation adjustments
Total valuation and translation adjustments
Minority interests
Total net assets
Total(3,213)(249)(180)(1,711)(5,353)715
94,913479,379 ¥5,397(32,709)54,942144(2,535)1,466(17)(1,833)(173)(1,967)(17,418)(20,024)
3,557(54,495)
36,211
815
7,279
8,297
100,926
966,232
1,027,446
482,014 $ 4,880,169 $ 4,906,994

Noncurrent liabilities:
Long-term debt due after one year (Note 6)
Employees’ severance and retirement benefits (Note 7)
Deferred tax liabilities – noncurrent (Note 8)
Other noncurrent liabilities
Total noncurrent liabilities
Contingent liabilities (Note 12)¥21

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income
For the years ended March 31, 2009 and 2008

Thousands of
U.S. dollars (Note 1)

Millions of yen

2009

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

2008

2009

2008

¥ 1,539,282 ¥ 1,507,509 $ 15,670,182 $ 15,346,727
1,491,570
1,456,627 15,184,465
14,828,739
47,71250,882
485,717517,988
30,261
27,177
308,063276,667
17,451
23,705
177,654
241,321

Other income (expenses):
Interest and dividend income
Interest expense
Foreign exchange gain
Gain on sale of investment securities
Loss on valuation of investment securities
Foreign exchange loss resulting from reduction of common stock ofconsolidated subsidiary
Loss on sales of noncurrent assets
Other, net
Income before income taxes and minority interests
Income taxes (Note 8):
Current
Deferred

Minority interests in income of consolidated subsidiaries
Net income

¥

1,990
(4,337)
1,748—(2,506)

1,920(4,164)507
528—

20,259(44,151)
17,795—(25,512)

19,546(42,390)
5,161
5,375
—

(908)
(212)
(1,845)——(701)(9,244)(2,158)(18,782)——(7,136)

11,381

21,795

115,861

221,877

3,998
1,357
5,355

8,633
5
8,638

40,70013,81554,51587,88551
87,936(29)
5,997 ¥

(39)
13,118 $(295)
61,051 $(397)
133,544

Yen

2009

Net income per share
Cash dividends per share¥

See accompanying Notes to Consolidated Financial Statements.

2228.47 ¥
12.00

U.S. dollars (Note 1)

2008

62.07 $
12.00

2009

0.290 $
0.122

2008

0.632
0.122

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2009 and 2008

Thousands
Number of sharesof common stock

Millions of yen
Common stock

Capital surplus

Retained earnings

Treasury stock

Balance at March 31, 2007
Net income
Cash dividends paid
Purchases of treasury stock
Retirement of treasury stock
Other changes

211,663 ¥
—
—
—
—
—

45,651 ¥
—
—
—
—
—

3 ¥
—
—
—
2
—

40,661 ¥13,118(2,748)
—
—
(3)

(109)
—
—
(26)
5
—

Balance at March 31, 2008
Net income
Cash dividends paid
Purchases of treasury stock
Retirement of treasury stock
Other changes
Balance at March 31, 2009

211,663—————
211,663 ¥

45,651—————45,651 ¥

5
—
—
—
—
—
5 ¥

51,0285,997(2,536)——
162
54,651 ¥

(130)
—
—
(632)
6
—
(756)

Millions of yen
Unrealized gains
on securities,
net of taxes

Balance at March 31, 2007
Net income
Cash dividends paid
Purchases of treasury stock
Retirement of treasury stock
Other changes
Balance at March 31, 2008
Net income
Cash dividends paid
Purchases of treasury stock
Retirement of treasury stock
Other changes
Balance at March 31, 2009¥¥

Unrealized gains
on hedging
derivatives,
net of taxes

Land revaluationdifference,
net of taxes

Foreign currencytranslation
adjustments

Minority interests

Total

11,406 ¥————(6,009)

838 ¥
—
—
—
—
(694)

(17) ¥—————(947) ¥————
(1,020)

768 ¥
—
—
—
—
47

98,254
13,118(2,748)(26)
7(7,679)

5,397
—
—
—
—
(8,610)(3,213) ¥

144
—
—
—
—
(393)
(249) ¥

(17)
—
—
—
—
(163)
(180) ¥

(1,967)————256(1,711) ¥

815
—
—
—
—
(100)
715 ¥

100,926
5,997(2,536)(632)
6(8,848)94,913

See accompanying Notes to Consolidated Financial Statements.

23

Common stock

Balance at March 31, 2007
Net income
Cash dividends paid
Purchases of treasury stock
Retirement of treasury stock
Other changes
Balance at March 31, 2008
Net income
Cash dividends paid
Purchases of treasury stock
Retirement of treasury stock
Other changes
Balance at March 31, 2009$$

Thousands of U.S. dollars (Note1)
Capital surplus
Retained earnings

Treasury stock464,736 $
—
—
—
—
—

31 $
—
—
—
20
—

413,937 $
133,544(27,975)——(31)(1,110)
—
—
(265)
51
—

464,736—————
464,736 $

51
—
—
—
—
—
51 $

519,475
61,051(25,817)——
1,648
556,357 $(1,324)——(6,433)
61—(7,696)

Thousands of U.S. dollars (Note1)
Unrealized gains
on securities,
net of taxes

Balance at March 31, 2007
Net income
Cash dividends paid
Purchases of treasury stock
Retirement of treasury stock
Other changes
Balance at March 31, 2008
Net income
Cash dividends paid
Purchases of treasury stock
Retirement of treasury stock
Other changes
Balance at March 31, 2009$$

Unrealized gains
on hedging
derivatives,
net of taxes

Land revaluationdifference,
net of taxes

Foreign currencytranslation
adjustments

Minority interests

Total

116,115 $————(61,173)

8,531 $————
(7,065)(173) $—————

(9,641) $————(10,383)

7,818 $ 1,000,244—
133,544—(27,975)
—
(265)
—
71
479
(78,173)

54,942————(87,651)(32,709) $

1,466
—
—
—
—
(4,001)(2,535) $

(173)
—
—
—
—
(1,660)(1,833) $(20,024)
—
—
—
—
2,606
(17,418) $8,297
1,027,446—
61,051—(25,817)—(6,433)—61(1,018)(90,076)
7,279 $ 966,232

See accompanying Notes to Consolidated Financial Statements.

24

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2009 and 2008

Thousands of
U.S. dollars (Note 1)

Millions of yen

2009

Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile income before income taxes to net cash
provided by (used in) operating activities
Depreciation
Increase (decrease) in allowance for doubtful receivables
Interest and dividend income
Interest expense
Gain on sales of investment securities
Loss on valuation of investment securities
Foreign exchange loss resulting from reduction ofcommon stock of consolidated subsidiary
Loss on sales of noncurrent assets
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Increase (decrease) in deposits received
Other, net
Subtotal
Cash flows during the year for:
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Decrease (increase) in time deposits, net
Additions to property and equipment
Proceeds from sale of property and equipment
Additions to investment securities
Proceeds from sales and redemption of investment securities
Decrease (increase) in short-term loans receivable, net
Additions to long-term loans receivable
Proceeds from long-term loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term loans payable, net
Decrease in commercial paper, net
Proceeds from long-term debt
Repayments of long-term debt
Payment of cash dividends
Cash dividends paid to minority interests in consolidated subsidiaries
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.

25

¥

¥

2008

2009

2008

11,381 ¥21,795 $115,861 $

221,877

2,358
2,322
(1,990)
4,337
—
2,506

2,055
(10)
(1,920)
4,164
(528)
—

24,00523,639(20,259)
44,151—
25,512

20,920(102)(19,546)
42,390(5,375)—908
212
28,537
1,164(36,465)(8,361)(1,269)5,640——(4,642)(5,030)8,392
9,417(2,203)31,4909,244
2,158
290,512
11,850(371,221)(85,117)(12,919)
57,416——(47,256)(51,206)
85,432
95,867(22,427)
320,574

1,959(4,176)(9,165)(5,742)

1,915(4,106)(7,869)21,43019,943(42,512)(93,301)(58,454)

19,495(41,800)(80,108)
218,161(141)(6,513)509(15,556)
2,131
118
(31)
80
(133)
(19,536)

4(3,992)
34(5,118)
1,812
(247)
(15)
205
(1,126)(8,443)(1,434)(66,304)
5,182(158,363)
21,694
1,201
(316)
814
(1,354)(198,880)

41(40,639)346(52,102)18,447(2,515)(153)
2,087(11,463)(85,951)

39,934(17,000)
60,675(33,800)(2,541)(5)(671)
46,592(447)
20,867
14,17935,046 ¥(15,761)
(500)
9,950
(50)
(2,747)(17)(19)(9,144)107
3,950
10,22914,179 $406,535(173,063)
617,683(344,090)(25,868)(51)(6,831)
474,315(4,551)
212,430
144,345356,775 $(160,450)(5,090)101,293(509)(27,965)
(173)
(193)
(93,087)
1,089
40,212
104,133
144,345

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 havebeen prepared in accordance with the provisions set forth in theJapanese 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 application and disclosure
requirements from International Financial Reporting Standards.
The accounts of overseas subsidiaries are based on theiraccounting records maintained in conformity with Japanese
GAAP. The accompanying consolidated financial statements havebeen restructured and translated into English with some
expanded descriptions from the consolidated financial statementsof the Company prepared in accordance with Japanese GAAP

and filed with the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Financial Instruments andExchange Law. Some supplementary information included in thestatutory Japanese language consolidated financial statements,
but not required for fair presentation, is not presented in theaccompanying 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,
2009, which was ¥98.23 to U.S. $1.00. The translations should
not be construed as representations that the Japanese yenamounts have been, could have been or could in the future beconverted into U.S. dollars at this or any other rate of exchange.

2. Significant accounting policies
Consolidation — The consolidated financial statements include
the accounts of the Company and its twelve 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 wereappropriately adjusted in consolidation.
Intercompany transactions and accounts have been
eliminated. The Company doesn’t apply the equity method
because nonconsolidated subsidiaries and affiliated companies
are immaterial.
Cash and cash equivalents — In preparing the consolidated
statements of cash flows, cash on hand, readily available
deposits and short-term highly liquid investments with maturities
not exceeding three months at the time of purchase areconsidered to be cash and cash equivalents.
Allowance for doubtful receivables — The allowance for
doubtful receivables is provided to cover possible losses oncollection. With respect to normal trade accounts receivable, it isstated at an amount based on the actual rate of historical bad
debts, and for certain doubtful receivables, the uncollectible
amount is individually estimated.
Securities — The Companies classify securities as (a) securities
held for trading purposes (hereafter, “trading securities”), (b)debt securities intended to be held to maturity (hereafter, “heldto-maturity debt securities”), (c) equity securities issued bysubsidiaries and affiliated companies, and (d) all other securities
that are not classified in any of the above categories (hereafter,“available-for-sale securities”).
The Companies do not hold trading securities and held-tomaturity debt securities. 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 fairmarket values are stated at fair market value. Unrealized gains
and unrealized losses on these securities 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-sale securities arestated 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
method or the specific identification cost method) or market. As
discussed in Note 2, “Changes in accounting policies,” theCompanies adopted a new accounting standard for measurementof inventories and stated the inventories at the lower of moving
average cost or net realizable value at March 31, 2009.

Property and equipment (except under lease) — Property
and equipment are carried at cost. Recognized loss on impairmentof long-lived assets has been deducted from acquisition costs.
Depreciation is principally provided on the declining balancemethod over the estimated useful life of the asset. Major renewals
and improvements are capitalized. Maintenance, repairs andminor renewals are expensed as incurred.
Software costs — The Companies include software inintangibles and other assets and depreciate it using the straightline method over the estimated useful life of five years.
Bond issue costs — Bond issue costs are charged to income as
incurred.
Bonuses — The Companies follow the Japanese practice of
paying bonuses to employees in June and December. At thebalance sheet date, bonus liabilities are estimated andaccounted for on an accrual basis.
Income taxes — Income taxes comprise corporate tax,
prefectural and municipal inhabitants taxes and enterprise tax.
The Companies recognize the tax effects of loss carryforwards
and the temporary differences between the carrying amounts ofassets and liabilities for tax and financial reporting. The asset andliability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of thetemporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes.
The Company and its wholly owned domestic subsidiaries fileconsolidated tax returns.
Retirement benefits — Substantially all employees of theCompany and its consolidated domestic subsidiaries are coveredby qualified funded pension plans. The amount of the retirement
benefit is, in general, based on length of service, base salary at
the time of retirement, and cause of retirement. Annual
contributions, which consist of normal cost and the amortizationof prior service cost, are charged to income.
Liabilities and expenses for severance and retirement benefits
are determined based on the amounts actuarially calculatedusing certain assumptions.
Because pension assets exceeded the deduction for
unrecognized actuarial differences and unrecognized prior service
cost from projected benefit obligation in the Company, the excess
amount was included in “other investments and noncurrent
receivables” in the years ended March 31, 2009 and 2008.
Translation of foreign currencies — Receivables and payables
denominated in foreign currencies are translated into Japanese
yen at year-end rates.
26

Changes in accounting policies —Accounting standard for measurement of inventories
Effective from the year ended March 31, 2009, theCompanies have adopted “Accounting Standard for
Measurement of Inventories” (ASBJ Statement No. 9, issued on
July 5, 2006). Prior to April 1, 2008, inventories of theCompanies 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
requires that inventories held for sale in the ordinary course ofbusiness be measured at the lower of cost or net realizablevalue. Replacement cost may be used in lieu of the net realizablevalue, 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 to Foreign Subsidiaries for Consolidated Financial
Statements” (ASBJ Practical Solution No. 18 issued on May 17,2006). The impact of this change on profit or loss has been
insignificant.
Change in depreciation method
Starting from the prior period, pursuant to an amendment to
the Corporate Tax Law, the Company and its domestic
consolidated subsidiaries have depreciated tangible assets
acquired on and after April 1, 2007 in accordance with themethod stipulated in the amended Corporation Tax Law. The
impact of this change on profit or loss was insignificant.
(Additional Information)
Pursuant to an amendment to the Corporate Tax Law, after
having fully depreciated tangible assets acquired on and before
March 31, 2007 up to 5% of the acquisition cost, based on theprior Corporate Tax Law, the Company and its domestic
subsidiaries depreciate the difference between 5% of theacquisition cost and the memorandum price, using the straightline method over 5 years and expensed it as “Depreciation andamortization.” The straight-line depreciation starts from the next
year following the year, when the book value of the asset
reaches 5% of the acquisition cost. The impact of this change on
profit or loss has been insignificant.
Effective from the year ended March 31, 2009, the Company
and its domestic consolidated subsidiaries reviewed and revised
the useful life of certain tangible assets, mainly machinery andequipment, taking advantage of 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.

Balance sheets of consolidated overseas subsidiaries aretranslated into Japanese yen at year-end rates, except forshareholders’ equity accounts, which are translated at historicalrates. Income statements of consolidated overseas subsidiaries
are translated at average rates, except for transactions with theCompany, 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 transfer ownership of the leased property to the lessee werepermitted to be accounted for as operating lease transactions.
“Accounting Standard for Lease Transactions” (ASBJ Statement
No. 13 issued on June 17, 1993 and revised on March 30, 2007)
and “the Guidance on Accounting Standard for Lease
Transactions” (ASBJ Guidance No. 16 issued on January 18,
1994, and revised on March 30, 2007) were adopted from thefiscal year beginning on April 1, 2008. Finance leases that do nottransfer ownership of the leased property to the lessee at theend of the lease period are computed using the straight-line
method over the period of the lease. Finance lease transactions
in which the ownership of the leased assets was not transferred
to lessee and contracted before April 1, 2008 are accounted for
as operating lease transactions and “as if capitalized”
information is disclosed in the notes to the Company’s
consolidated financial statements.
Derivatives and hedge accounting — The Company states
derivative financial instruments at fair value and recognizeschanges in the fair value as gain or loss unless the derivative
financial instruments are used for hedging purposes.
If derivative financial instruments are used as hedges andmeet certain hedging criteria, the Company defers therecognition of gain or loss resulting from the changes in the fairvalue of the derivative financial instruments until the related gainor loss on the hedged item is recognized.
Also, if interest rate swap agreements are used as hedges andmeet certain hedging criteria, the net amount to be paid or
received under the interest rate swap agreements is added to or
deducted from the interest on the assets or liabilities for which
the swap agreement was executed.
The following summarizes hedging derivative financial
instruments used by the Company and items hedged:
Hedging instruments:
Interest rate swap agreements
Commodity 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 shareof common stock are based on the weighted average numberof shares outstanding during each period. Diluted net income
per share is not disclosed because potentially dilutive securities
are not issued. The Japanese Corporate Law requires that adeclaration of dividends be approved at the general meeting ofshareholders held after the end of the fiscal year. Therefore,
cash dividends per share shown in the consolidated statements
of income reflect the dividends approved after the end of the
fiscal year.

27

3. Securities(A) The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available fairmarket values as of March 31, 2009 and 2008:

March 31, 2009

Millions of yen
Acquisition cost

Securities with book values exceeding acquisition costs:
Equity securities¥

Thousands of U.S. dollars

Book value

Difference

Acquisition cost

Book value

Difference

3,436 ¥

7,806 ¥

4,370 $

34,979 $79,467 $44,488

Securities with book values not exceeding acquisition costs:
Equity securities¥
23,585 ¥13,709 ¥(9,876) $240,100 $139,560 $(100,540)

March 31, 2008

Millions of yen
Acquisition costThousands of U.S. dollars

Book value

Difference

Acquisition cost

Book value

Difference

Securities with book values exceeding acquisition costs:
Equity securities¥
10,068 ¥

19,444 ¥9,376 $

102,494 $

197,944 $

95,450

Securities with book values not exceeding acquisition costs:
Equity securities¥
5,088 ¥

4,534 ¥

(554) $

51,797 $46,157 $(5,640)(B) The following tables summarize book values of securities whose fair values were not determinable as of March 31, 2009 and 2008:(a) Equity securities issued by unconsolidated subsidiaries and affiliated companies
Millions of yen
2009Book value

Equity securities issued by unconsolidated subsidiaries and affiliated companies

Thousands of U.S. dollars

2008Book value

2009Book value

2008
Book value¥

3,413 ¥

2,343 $

34,745 $23,852¥

1,775 ¥
1,179—
141
3,095 ¥

1,742 $
1,202
2,000
178
5,122 $

18,070 $12,002—
1,436
31,508 $

17,734
12,237
20,3601,812
52,143(b) Available-for-sale securities
Unlisted stocks
Unlisted foreign stocks
Preferred fund certificates
Investment in limited partnerships
Total

¥

(C) Total sales of available-for-sale securities in the years ended March 31, 2009 and 2008 amounted to ¥128 million ($1,303 thousand)and ¥1,338 million ($13,621 thousand), respectively, and resulted in net gains of ¥103 million ($1,049 thousand) and ¥212 million($2,158 thousand), respectively.
The loss resulting from the valutation of the listed securities in the years ended March 31, 2009 and 2008 was ¥2,506 million($25,512) and nil, respectively.

28

4. Derivatives
with assets, liabilities and interest rates, the market risks of thederivatives are effectively offset. As the counterparties toderivatives are limited to major financial institutions, theCompany does not anticipate any losses arising from credit risk.
Derivatives entered into by the Company have been inaccordance with internal policies which regulate theauthorization and credit limit amount. Each derivativetransaction is periodically reported to management, where an
evaluation and analysis of the derivatives are made.
The contract or notional amounts of the derivatives, which
are shown in the following table, do not represent the amounts
exchanged by the parties and do not measure the Company’s
exposure to credit or market risks.

The Company enters into foreign exchange forward contracts,
currency swap agreements and currency option agreements in
its normal business 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 Company also enters into commodity futures contracts andcommodity swaps as a means of hedging risks associated withcertain inventories and commitments.
It is the Company’s policy to use derivatives only for the
purpose of reducing market risks associated with assets andliabilities.
Derivatives are subject to market risk and credit risk. Since thepurpose of using derivatives is to reduce market risks associated

The following tables summarize market value information as of March 31, 2009 and 2008, for the derivatives to which hedge
accounting has not been applied:

March 31, 2009
Currency related

Millions of yen
Contract ornotional amountForeign exchange forward contracts:
Selling
U.S. dollars
Other currencies
BuyingU.S. dollars
Other currencies
Currency swap agreements:
Japanese yen received for U.S. dollars
Total

¥

Contract ornotional amount

26,150 ¥11,426(1,006) $607

255,971 $
122,498

266,212 $
116,319(10,241)
6,179

4,022
2,370

4,099
2,333

77
(37)

40,94524,127

41,72923,750784(377)

10,547

636

636
277

107,370

6,475¥

Fair value

6,475
2,820

$

Millions of yen
Contract ornotional amount¥

Net recognizedgain or loss

Fair value

25,144 ¥12,033

Commodity related
Futures:Petroleum
Selling
BuyingNon-ferrous metals
Selling
BuyingCommodity swaps
Petroleum
Selling
Buying
Total

Fair value

Thousands of U.S. dollars
Net recognizedgain or loss

Thousands of U.S. dollars
Net recognizedgain or loss

Contract ornotional amount

Fair value

Net recognizedgain or loss

3,839 ¥
3,403

4,259 ¥
3,279

(420) $
(124)

39,082 $34,64343,358 $33,381(4,276)(1,262)

4,019
1,793

4,010
1,938

9
145

40,914
18,25340,823
19,729

91
1,476

5,950
5,318

548
148

548
148
306

60,572
54,138

5,579
1,507

5,579
1,507
3,115

¥

29

$

March 31, 2008
Currency related

Millions of yen
Contract ornotional amountForeign exchange forward contracts:
Selling
U.S. dollars
Other currencies
BuyingU.S. dollars
Other currencies
Currency swap agreements:
Japanese yen received for U.S. dollars
Total

¥

12,670 ¥1,348

12,663 ¥1,295

19,132
1,444

18,792
1,384

15,4642,260¥

Commodity related

Contract ornotional amount

7 $
53

¥

Fair value

Net recognizedgain or loss

Fair value

128,983 $
13,723

128,912 $13,183

71
540

(340)
(60)

194,767
14,700191,306
14,089(3,461)
(611)

2,260
1,920

157,426

23,00723,007
19,546$

Millions of yen
Contract ornotional amount

Futures:Petroleum
Selling
BuyingNon-ferrous metals
Selling
BuyingCommodity swaps
Petroleum
Selling
Buying
Total

Fair value

Thousands of U.S. dollars
Net recognizedgain or loss

Thousands of U.S. dollars
Net recognizedgain or loss

Contract ornotional amount

Fair value

Net recognizedgain or loss

6,259 ¥
4,206

6,276 ¥
4,298

(17) $
92

63,718 $42,81863,891 $
43,754

14,647
10,647

14,744
10,470(97)(177)

149,109108,388

150,097
106,587(988)(1,801)

2,563
5,802

(216)
167

(216)
167
(248)

26,09259,065(2,199)1,700(2,199)1,700(2,525)

¥

30

$

(173)
936

5. Pledged assets
At March 31, 2009 and 2008, assets pledged as collateral for short-term loans payable in the amount of ¥358 million ($3,645
thousand) and nil, respectively, and guarantees were as follows:
Thousands of
U.S. dollars

Millions of yen

2009

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

¥

¥

2008

13 ¥
1,083
817
126
2,039 ¥

13 $
1,963
—
—
1,976 $

2009

2008

132 $
11,0258,317
1,283
20,757 $132
19,984——
20,116

6. Short-term loans payable, commercial paper
and long-term debt
The Company has entered into a yen denominated domestic
commercial paper program. There was an outstanding balanceof nil and ¥17,000 million ($173,063 thousand) at March 31,
2009 and 2008, respectively.

The weighted average interest rate applicable to short-termloans outstanding at March 31, 2009 and 2008 was 1.65% and2.86%, respectively.

Long-term debt at March 31, 2009 and 2008 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2009

Issued in 2005, 0.96% unsecured straight bonds, due 2008
Issued in 2007, 1.53% unsecured straight bonds, due 2010
Loans from banks with weighted average interest rates of 1.47% and1.67% at March 31, 2009 and 2008, respectively, maturing seriallythrough 2015
Less amounts due within one year¥¥
The annual maturities of long-term debt outstanding at March 31,
2009 were as follows:

Years ending March 31,
Millions of yen

2010
2011
2012
2013
2014
Thereafter
Total

¥

¥

Thousands of
U.S. dollars

23,675 $ 241,016
33,550341,545
11,200114,018——
70,400716,685
10,000101,802148,825 $ 1,515,066

31

2008

2009

2008

— $
101,802

101,802
101,802— ¥10,00010,000 $10,000138,825
23,675125,150 ¥101,950
1,413,265
1,037,870
32,625241,016
332,129
89,325 $ 1,274,051 $ 909,345

7. 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,
2009 and 2008, consisted of the following:Thousands of
U.S. dollars

Millions of yen

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

¥

¥

2009

2008

2009

2008

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

19,723 $(17,333)(5,721)
(868)
4,208
9 $

222,101 $(168,136)(102,515)(8,012)56,826264 $

200,784(176,453)(58,241)(8,836)
42,83892

Included in the consolidated statements of income for the years ended March 31, 2009 and 2008, severance and retirement benefits
expenses comprised the following:Thousands of
U.S. dollars

Millions of yen

2009Service 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 orrecognized over a stated number of years that does not exceed

765 ¥
391
(515)
595
81
19
1,336 ¥

2008

660 $
379
(504)
441
81
28
1,085 $

2009

2008

7,788 $
3,981
(5,243)
6,057
825
193
13,601 $

6,719
3,858
(5,131)
4,490
825
285
11,046the average remaining service period of active employees
expected to receive benefits under the plan.

Assumptions used for the years ended March 31, 2009 and 2008, were as follows:

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

32

2009

2008

2.0%
3.0%
14 years
14 years

2.0%
3.0%
14 years
14 years8. 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, 2009 and 2008.

The following table summarizes the significant differences between the aggregate statutory income tax rate and the Company’s
effective tax rate for financial statement purposes for the year ended March 31, 2009:
2009

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

40.7%
2.8
2.6
(0.4)
1.4
47.1%

The reconciliation of the difference between the statutory tax
rate and the effective tax rate for the year ended March 31,

2008 has not been disclosed because such difference was lessthan 5%.

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Temporary differences pertaining to a consolidated subsidiary
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:
Unrealized gains on securities, net of taxes
Land revaluation difference, net of taxes
Prepaid pension costs
Other
Total deferred tax liabilities
Net deferred tax liabilities

¥

¥

2009

2008

2009

2008

23,833 ¥
2,422
2,396
1,719
1,667
728
4,460
37,225(31,332)
5,893

23,864 $
—
2,390
1,719
1,667
715
3,739
34,094(30,890)
3,204

242,625 $
24,656
24,392
17,50016,9707,411
45,404
378,958(318,966)
59,992242,940—
24,33017,50016,9707,279
38,064
347,083(314,466)
32,617

—
2,686
2,271
1,178
6,135
(242) ¥

3,332
2,799
1,712
270
8,113
(4,909) $—27,344
23,11911,99262,455(2,463) $33,92028,494
17,4282,749
82,591(49,974)

Deferred tax assets and deferred tax liabilities were included in the consolidated balance sheets at March 31, 2009 and 2008,
respectively, as follows:
Thousands of
U.S. dollars

Millions of yen

2009

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

33

1,561 ¥
883
—
2,686

2008

1,823 $
69
—
6,801

2009

15,892 $8,989—
27,344

2008

18,559702—
69,235

9. Net assets
At the annual shareholders’ meeting held on June 26, 2009,
the shareholders approved cash dividends amounting to ¥1,256
million ($12,786 thousand). This appropriation has not been
accrued in the consolidated financial statements as of March 31,
2009. Such appropriations are recognized in the period in which
they are approved by the shareholders.

Net assets comprises three subsections, which are owners’
equity, accumulated gains (losses) from valuation and translation
adjustments and minority interests.
Under the Japanese Corporate Law (“the Law”), in cases
where a dividend distribution of surplus is made, the smaller ofan amount equal to 10% of the dividend or the excess, if any, of
25% of common stock over the total of additional paid-in
capital and legal earnings reserve must be set aside as additional
paid-in capital or legal earnings reserve. Legal earnings reserve is
included in retained earnings in the accompanying consolidatedbalance sheets.
Under the Law, legal earnings reserve and additional paid-in
capital are able to eliminate or reduce a deficit or be capitalized
by a resolution of the shareholders’ meeting.
Under the Law, all additional paid-in capital and all legal
earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the nonconsolidated financial
statements of the Company in accordance with Japanese laws
and regulations.

Land revaluation difference — Pursuant to the Law
Concerning Land Revaluation, the Company revaluated land
used for business activities at March 31, 2002.
Unrealized gain (loss) on land revaluation is recorded as land
revaluation difference in a separate component of net assets inthe consolidated balance sheets until realized. The amounts areshown net of applicable income tax.
The revaluation of land was determined based on a declared
land value, with certain necessary adjustments, in accordancewith Article 2, Paragraph 1 of the Enforcement OrdinanceConcerning Land Revaluation.
As of March 31, 2009, the carrying amount of the land after
the above one-time revaluation exceeded the market value by¥17 million ($173 thousand).

34

10. Leases“Accounting Standard for Lease Transactions” (ASBJ Statement
No.13) and “the Guidance on Accounting Standard for Lease

Transactions” (ASBJ Guidance No.16) were adopted from thefiscal year beginning on April 1, 2008.

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 is over the period of the finance leases, assuming no residual value.
Lease transactions entered into before April 1, 2008 are continue to be accounted for as operating lease transactions with “as if
capitalized” information as follows:

As of March 31, 2009

Millions of yen
Acquisition
cost

Other property and equipment
Other assets
Total

¥
¥

1,387 ¥
46
1,433 ¥

As of March 31, 2008

Net leased
property

738 ¥
36
774 ¥

Acquisition
cost

649 $
10
659 $

¥
¥

Net leased
property

7,513 $
366
7,879 $

6,607
102
6,709

Thousands of U.S. dollars

Accumulated
depreciation

1,929 ¥
95
2,024 ¥

Accumulated
depreciation

14,120 $468
14,588 $Millions of yen
Acquisition
cost

Other property and equipment
Other assets
Total

Thousands of U.S. dollars

Accumulated
depreciation

Net leased
property

903 ¥
64
967 ¥

Acquisition
cost

1,026 $
31
1,057 $

19,638 $967
20,605 $Accumulated
depreciation

Net leased
property

9,193 $
652
9,845 $

10,445315
10,760income. Depreciation expense, computed by the straight-line
method, was ¥391 million ($3,980 thousand) and ¥516 million($5,253 thousand) for the years ended March 31, 2009 and2008, respectively. Interest expense, computed by the interest
method, was ¥26 million ($265 thousand) and ¥35 million ($356
thousand) for the years ended March 31, 2009 and 2008,
respectively.

Total lease payments, including financing charges, under financeleases that do not transfer ownership of the leased property to
the Company and its consolidated subsidiaries for the years
ended March 31, 2009 and 2008 were ¥422 million ($4,296
thousand) and ¥572 million ($5,823 thousand), 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

Obligations, excluding financing charges, under such non-capitalized finance leases as of March 31, 2009 and 2008, were as follows:
Thousands of
U.S. dollars

Millions of yen

2009

Due within one year
Due after one year
Total

¥

2008

306 ¥
380
686 ¥

¥

2009

420 $
659
1,079 $

2008

3,115 $
3,869
6,984 $

4,275
6,709
10,984

Operating leases
As Lessee
Obligations under operating leases as of March 31, 2009 and 2008, were as follows:
Thousands of
U.S. dollars

Millions of yen

2009

Due within one year
Due after one year
Total

¥
¥

35

2008

35 ¥
96
131 ¥

2009

35 $
136
171 $

356 $
978
1,334 $

2008

356
1,385
1,741

11. Segment information
Industry segment information
The Companies’ operations are classified into six industry segments
for the year ended March 31, 2009 and 2008 as follows:
Non-ferrous metals: Aluminium, copper, zinc
Foods: Frozen 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: Nickel, chromium, steel alloys, and solar cellrelated materials and products

Segment information by business category for the years ended March 31, 2009 and 2008, was as follows:Year ended March 31, 2009
Steel

Net sales
Costs and expenses
Operating income
AssetsDepreciation
Capital expenditure

Metalsand alloys¥ 877,756 ¥ 155,841 ¥
867,522
153,749¥ 10,234 ¥2,092 ¥
¥ 289,945 ¥ 34,628 ¥
1,649
30
4,740
111

Non-ferrous
metals51,860 ¥50,791
1,069 ¥
6,094 ¥
72
354

Foods

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

Year ended March 31, 2009
Steel

Net sales
Costs and expenses
Operating income
AssetsDepreciation
Capital expenditure

Metalsand alloys$ 8,935,722 $ 1,586,491 $
8,831,538
1,565,194$ 104,184 $21,297 $$ 2,951,695 $ 352,520 $
16,787305
48,254
1,130

Non-ferrous
metals527,945 $
517,062
10,883 $62,038 $733
3,604

Millions of yen
Petroleumand chemicals

Foods

Thousands of U.S. dollars
Petroleumand chemicals

837,005 $ 3,265,978 $820,248
3,217,093
16,757 $48,885 $285,524 $ 240,252 $
265
367
3,095
2,474

Corporate costs and expenses consist mainly of expenses ofadministrative departments.

Otherbusiness

Total

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

Other
business

Total

517,041 $15,670,182 $
482,612 15,433,747
34,429 $ 236,435 $
155,523 $ 4,047,552 $
4,642
23,0997,655
66,212

Corporate

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

Corporate

Consolidated— $15,670,182
58,781 15,492,528(58,781) $ 177,654
832,617 $ 4,880,169
906
24,005
7,900
74,112

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

36

Year ended March 31, 2008
Steel

Net sales
Costs and expenses
Operating income
AssetsDepreciation
Capital expenditure

Metalsand alloys

Non-ferrous
metals¥ 790,341 ¥ 202,019 ¥
774,466
195,399¥ 15,875 ¥
6,620 ¥
¥ 274,802 ¥ 47,867 ¥
1,408
24
3,795
48

65,345 ¥63,3302,015 ¥
14,762 ¥51
44

Millions of yen
Petroleumand chemicals

Foods

84,671 ¥ 311,481 ¥
83,894308,935
777 ¥2,546 ¥
31,166 ¥ 35,381 ¥
28
31
31
36

Year ended March 31, 2008
Steel

Net sales
Costs and expenses
Operating income
AssetsDepreciation
Capital expenditure

Metalsand alloys

Non-ferrous
metals$ 8,045,821 $ 2,056,592 $
7,884,211
1,989,199$ 161,610 $
67,393 $$ 2,797,537 $ 487,295 $
14,334244
38,634489

665,224 $644,711
20,513 $150,280 $519
448

Thousands of U.S. dollars
Petroleumand chemicals

Foods

861,967 $ 3,170,935 $
854,057
3,145,016
7,910 $
25,919 $317,276 $ 360,185 $
285
315
316
366

Corporate costs and expenses consist mainly of expenses ofadministrative departments.
Corporate assets consist mainly of cash and equivalents,
investment securities and other assets of administrative
departments.

Otherbusiness

Total

Corporate

53,652 ¥ 1,507,509 ¥52,228 1,478,252
1,424 ¥ 29,257 ¥
12,759 ¥ 416,737 ¥
432
1,974
375
4,329

Other
businessTotal— ¥ 1,507,509
5,552 1,483,804(5,552) ¥ 23,705
65,277 ¥ 482,014
81
2,055
68
4,397

Corporate

546,188 $15,346,727 $
531,691 15,048,885
14,497 $ 297,842 $
129,889 $ 4,242,462 $
4,398
20,095
3,817
44,070Consolidated

Consolidated— $15,346,727
56,521 15,105,406(56,521) $ 241,321
664,532 $ 4,906,994
825
20,920692
44,762

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

Overseas net sales
Overseas net sales include exports and offshore sales by theCompany and its consolidated subsidiaries, excluding sales byforeign subsidiaries to Japan.
Overseas net sales of the Companies for the years ended March 31, 2009 and 2008 were as follows:Year ended March 31, 2009
Asia

Overseas net sales
Percentage of consolidated net sales¥

288,224 ¥18.7%

Millions of yen
Other
areas

51,816 ¥
3.4%

Total

Asia

Thousands of U.S. dollars
Other
areas

340,040 $ 2,934,175 $
22.1%

Total

527,497 $ 3,461,672“Asia” sales consist principally of sales to China, South Korea, Singapore and Thailand.
“Other areas” sales consist principally of sales to the U.S.A. and Germany.
Year ended March 31, 2008

Millions of yen
Asia

Overseas net sales
Percentage of consolidated net sales¥

280,217 ¥
18.6%

Other
areas

44,088 ¥2.9%Thousands of U.S. dollars
Total

324,305 $ 2,852,662 $21.5%“Asia” sales consist principally of sales to China, South Korea, Singapore and Thailand.
“Other areas” sales consist principally of sales to Germany and the U.S.A..

37

Asia

Other
areas

Total

448,824 $ 3,301,486

12. Contingent liabilities
At March 31, 2009 and 2008, the Companies were contingently liable as follows:
Thousands of
U.S. dollars

Millions of yen

2009

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

¥

2008

4,227 ¥
4,894

2009

4,594 $
2,691

13. Subsequent events

43,032 $49,822Millions of yen

At the ordinary general meeting of shareholders of the Company
held on June 26, 2009, the following appropriation of retained
earnings was approved:

Cash dividends (¥6 per share)38¥

1,256 $

2008

46,76827,395

Thousands of
U.S. dollars

12,786

Independent Auditors’ Report
To the Board of Directors of
Hanwa Co., Ltd.:We have audited the accompanying consolidated balance sheets of Hanwa Co., Ltd.
(the Company) and consolidated subsidiaries as of March 31, 2009 and 2008, and the related
consolidated statements of income, changes in net assets and cash flows for the years thenended, expressed in Japanese yen. These consolidated financial statements are the responsibilityof the Company’s management. Our responsibility is to independently express an opinion onthese consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Hanwa Co., Ltd. and subsidiaries as ofMarch 31, 2009 and 2008, and the consolidated results of their operations and their cash flows
for the years then ended, in conformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe years ended March 31, 2009 and 2008 are presented solely for convenience. Our audit also
included the translation of yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 1 to the consolidated financial
statements.

Osaka, Japan
June 26, 200939

Corporate Data

Company Name: Hanwa Co., Ltd. 阪和興業株式会社
Address: Osaka Head OfficeHanwa Bldg., 4-3-9 Fushimi-machi, Chuo-ku, Osaka 541-8585, Japan
Tel: 81-6-6206-3000 Fax: 81-6-6206-3365
Tokyo Head Office
New Hanwa Bldg., 1-13-10 Tsukiji, Chuo-ku, Tokyo 104-8429, Japan
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
Employee: 1,088 (consolidated: 1,818)
Independent Auditor: KPMG AZSA & Co.
Domestic Offices
OFFICE
Hokkaido
TohokuNiigata
Chugoku
KyushuADDRESS
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, JapanTELEPHONE
81-11-219-7375
81-22-227-7981
81-25-255-1777
81-82-543-2570
81-92-471-7121

FAX
81-11-219-7376
81-22-227-7969
81-25-255-1776
81-82-543-2561
81-92-471-7060

Overseas Offices
OFFICEADDRESS
North and Latin America
New York
Parker Plaza, 12th Floor, 400 Kelby Street, Fort Lee, NJ 07024, U.S.A.
Seattle601 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.
VancouverSuite 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
Asia
Seoul
Room 1705, Korea World Trade Center, 159-1, Samsung-Dong, Kangnam-ku, Seoul, 135-729, R.O.Korea
Beijing
Room 1201, Beijing Fortune Bldg., 5 Dong San Huan Bei-lu, Chaoyang District, Beijing 100004, P.R.China
Qingdao
Crowne Plaza Qingdao, Room No.601, Hongkong Middle Road 76, Qingdao City, Shandong 266071, P.R.China
DalianSenmao Bldg., 20F, 147 Zhongshan Street, Dalian City, Liaoning 116011, P.R.China
ShanghaiRoom 902/904-907, Aetna Tower, No.107 Zhunyi Road, Shanghai 200051, P.R.China
Chongqing
Room 2203, Metropolitan Tower, 68 Zhou Rong Lu, Central District, Chongqing 400010, P.R.China
FuzhouRoom 2501, Lippo Tianma Plaza, No.1 Wu Yi Road, Fuzhou City, Fujian 350003, P.R. China
Wuhan
Room 1009, New World Center, Tower A, No. 634, Jiefang Avenue, Wuhan 430032, P.R.China
Guangzhou
Unit 3701-3704, Profit Plaza, No. 76 Westhuangpu Road, Guangzhou City, Guangdong 510623, P.R.China
Dongguan
Suites1504-1505, 15F, Huicheng Build., 102 Hong Fu Road, Nan Cheng District, Dongguan City, Guangdong 523000, P.R.China
Zhongshan
Unit 1909-1910, 19th Floor, Bank Of China Tower, 18 Zhongshan 3rd Road, Zhongshan City, Guangdong, P.R.China
Hong Kong
Suites 2301-02 & 16, 23F, Cityplaza One 1111 King’s Road, Tai Koo Shing Island East, Hong Kong
TaipeiRoom 303, 3rd Floor, No. 79, Chung Shan North Road Sec.2, Taipei, Taiwan
Kaohsiung
Room B, 17th Floor, No.7 Su-Wei 4th Road, Kaohsiung, Taiwan
12th Floor, Unit 1204, Q.House Lumpini Bldg., 1 South Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120, Thailand
Bangkok
Kuala Lumpur Suite 8-12B-3, Level 14 (12B), Menara Olympia 8, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia
Singapore
20 Cecil Street, #20-06/07 Equity Plaza, Singapore, 049705
Tawau
P.O. Box 1231 91037 Tawau, Sabah, Malaysia
Ho Chi Minh
7/C Office Service International Centre, No. 8 Nguyen Hue Street, District 1, Ho Chi Minh City, S.R. Vietnam
Hanoi
Thanglong Bldg., 501A, 105 Lang Ha, Dong Da, Hanoi, S.R. Vietnam
Jakarta
Menara Cakrawala 5th Floor, Jalan M.H. Thamrin No. 9, Jakarta 10340, Indonesia
Mumbai
Unit No.208, 2nd Floor, B-Wing, Dynasty Business Park, 58, Andheri Kurla Road, Andheri (E), Mumbai 400 069, India
New Delhi
203, Bestech Chambers, B Block, Sushant Lok 1, Gurgaon, Haryana 122002, India
Europe, Middle East and Africa
London2nd Floor, Finland House, 56 Haymarket, London, SW1Y 4RN U.K.
C/O Al-Sabih Engineering & Trading Co., P.O. Box No. 1114 Dasman, 15462 Dasman, Kuwait
KuwaitRoom 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
Johannesburg 2nd Floor West Tower, Nelson Mandela Square, Maude Street, Sandton, 2196, South Africa
Amsterdam
WTC Tower A-11F, Strawinskylaan 1111, 1077XX, Amsterdam, The Netherlands
ViennaLandstrasser Hauptstrasse 71/2 A1030, Wien, Austria
Dubai
Dubai Airport Free zone, No. 6EA, Room No. 506 P.O.Box 293873 Dubai, U.A.E.

40

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

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

82-2-551-5387
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
86-760-2-332-0706
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
62-21-39833211
91-22-2826-0884
91-124-456-6100

82-2-551-5575
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
86-760-2-332-0696
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
62-21-39833212
91-22-2826-1097
91-124-456-6111

44-20-7839-4448

44-20-7839-3994

965-2-243-7259

965-2-243-7263

966-1-473-1563
966-2-669-0648
966-3-8411745
27-11-881-5966
31-20575-2460
43-1-717-28-200
971-4-609-1893

966-1-473-5624
966-2-669-0648
966-3-8467937
27-11-881-5611
31-20575-2461
43-1-717-28-110
971-4-609-1895

Board of Directors

Investor Information(As of June 26, 2009)(As of March 31, 2009)

Date of Establishment
April 1947

President

Shuji Kita

北修爾

Stated Capital¥45,651 million ($464,736 thousand)Executive Vice President

Hironari Furukawa

古川弘成

Number of Shares of Common Stock Issued
211,663,200 shares

Senior Managing Director

Tetsuro Akimoto

秋元哲郎

Number of Stockholders
15,110Managing Directors

Yoshifumi Nishi
Takuji Kita
Hideo Kawanishi

西

吉史

北

卓治

川西

英夫

Stock Exchange Listings
The First Section of the Tokyo Stock Exchange
The First Section of the Osaka Securities Exchange
Transfer Agent
The Sumitomo Trust and Banking Co., Ltd.

Directors

Osamu Seki
Kazuhisa Majime
Masataka Toyoda
Hiroshi Serizawa
Hiroaki Tsujinaka
Hiroshi Ebihara
Yukio Saito
Akihiko Ogasawara
Yoshiaki Matsuoka
Teruo Asai
Atsuhiro Moriguchi
Tadahiko Kaida
Youichi Ejima
Naoyuki Togawa

関

收

馬締

和久

豊田

雅孝

芹澤

浩

辻仲

弘明

海老原

弘

齋藤

幸雄

小笠原朗彦
松岡

良明

浅井

照夫

森口

淳宏

貝田

忠彦

江島

洋一

十川

直之

花房

伯行

白川

敏昭

田口

敏明

Corporate Auditors

Noriyuki Hanafusa
Toshiaki Shirakawa
Toshiaki Taguchi
Hajime Yosano
Masanori Kobayashi

与謝野
小林

肇
正典

41

2009.8.Printed in Japan