ANNUAL REPORT 2006
For the year ended March 31, 2006

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 ...................................................... 12
Topics ................................................................................... 14
Management 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, 2006 and 2005

Thousands of
U.S. dollars

Millions of yen

2006

For the year:
Net sales
Operating income
Net income
At year-end:
Total assets
Total stockholders’ equity

2005

2006

2005

¥ 1,097,707 ¥
19,69010,504

933,956 $ 9,344,573 $ 7,950,592
22,091
167,617
188,057
13,704
89,419116,660¥

376,521 $ 3,515,962 $ 3,205,252
72,875733,336620,371

413,020 ¥86,145

Yen

U.S. dollars

2006

Per share data:
Net income
Cash dividends

¥

2005

48.96 ¥
10.00

2006

64.03 $
9.00

2005

0.417 $
0.085

0.545
0.077

Note: The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥117.47=$1.00.

Net sales

Operating income

Net income(Millions of yen)

(Millions of yen)

(Millions of yen)

1,097,707
1,100,000

22,091

23,00013,70414,00019,690933,956
20,00010,504751,964

10,00012,666

5,662

10,000

0

0

’04

’05

’06

0

’04

’05

1

’06

’04

’05

’06

Letter to Stakeholders

Dear Stakeholders,
I am pleased to report that Hanwa Co., Ltd. and its
consolidated subsidiaries achieved strong sales andearnings in fiscal 2005, the fiscal year that ended in
March 2006. Consolidated net sales increased 17.5% to¥1,097.7 billion, a record high. Earnings were affectedby weakness in market conditions for certain types ofgeneral-purpose steel sheets due to growth in inventories
in the market. Operating income decreased 10.9% to¥19.7 billion and net income was down 23.4% to ¥10.5
billion. As a result, the return on equity declined 7.8
points to 13.2%. However, we did achieve a 30 point
improvement in the net debt-to-equity ratio 140%.

Management Policy
Hanwa’s corporate philosophy is based on the desire toearn the admiration and support of all the stakeholders
as a “company with value.” We are dedicated tomaking contributions to society on both the global andregional levels.
In accordance with this philosophy, we always put thecustomer first. To reinforce our win-win relationships
with customers and business partners, we aim to become
a “trading company with a presence.” We willaccomplish this goal by emphasizing the distribution ofmerchandise with more added value and a marketingstyle that uses proposals to increase business
opportunities. “Speedy management” will be an integral
element of all our activities, enabling us to adapt swiftly
to changes in society and our markets.
Fulfilling our responsibilities as a corporate citizen is ahigh priority of ours. Our CSR programs are overseen by
the CSR Committee with the goal of reinforcing the
Hanwa corporate brand.

dividend 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.

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.

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 and

2

Targeted Management Index

FY2006 (ending March 31, 2007)

ROA

2.1%

ROE

10.0%

D/E Ratio (Net basis)120%• Promotion of the waste paper recycling business andinternational expansion of resin raw materials• Expansion of general merchandise and reinforcement of
the logistics function

Medium- and Long-term Strategy, andManagement Issues
In May 2004, we established a Mid-term Business Plan
that covers 3-year period from FY2004 through FY2006. It
sets a number of management goals and describes theinitiatives that will be taken to achieve them.

(B) Strengthening of the international business,investment of resources in China and ASEAN
markets(A) Strengthening of the core business andcustomer-oriented, proposal-driven marketing
Steel business• Strengthening of the engineering and processing
functions in the construction and housing fields,
promotion of proposal-driven marketing• Strengthening of sales channels in the field ofautomotive, household appliances, industrial andconstruction equipment, development of new
merchandise• Strengthening of the coil center’s function and allianceswith leading processors• Investment, acquisitions and partnerships to expand thetrade right• Strengthening of functions of distribution centers andalliances with other companies for physical distribution• Development of business with automotive industries in
China and ASEAN countries centering on theInternational Automotive Team
• Setting up of coil centers in Thailand and South China
and expansion of the network of processing functions• Strengthening of operations in Vietnam, India, Russia
and Eastern Europe• Strengthening of international procurement functions
and establishment of control systems such as securing
quality• Establishment of risk management systems for sales indomestic Chinese market• Seizing of business opportunities in light of theaccelerating trend toward FTA and identification ofpromising merchandise

Non-ferrous metal business• Exploitation of new sources of resources, entry to ore
resources business• Focus on ferroalloys, light metals and raw materials forsolar batteries• Expansion of exporting raw materials to China(C) Strengthening of the recycling business andnew development• Collection of resources from the viewpoint of “urban
mining” and sales to the optimum consumption area
• Expansion of items handled in terms of variety andquantity and establishment of an efficient purchasenetwork• Strengthening of handling of merchandise covered by
the Basel Convention and recycling of industrial waste

Food products business• Strengthening of the processed food business overseas
and establishment and fostering of product sales
operations• Strengthening of handling Japanese domesticallycaught seafood(D) Fostering of new businesses and expansion of
peripheral businesses• Fostering new businesses by a business incubation team(BIT)
• Cultivation of new fields through industry-academiagovernment cooperation• Downstream approach capitalizing on the credit
function of hanwa-steel.com and expansion ofmerchandise• Expansion of sales of timber products throughenhancement of hanwa-lumber.com

Petroleum and chemicals business• Development of business for practical application of
new energy, such as cogeneration business and fuel cellbusiness• Strengthening of trading of petroleum products trade inAsia

3

Corporate Governance(E) Improvement of productivity of sales &marketing• Seeking for rational business processing led by the
Operation IT Promotion Committee andimplementation• Enrichment of IT platform for greater flexibility• information sharing through cooperation crossing overdepartments and establishment of an information
network for higher profitability• Promotion of empowerment with the aim of vitalizing
marketing and improving profitability

Basic corporate governance policy
We aim to fulfill its social responsibilities as a good
corporate citizen so that it can earn and retain therespect of 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 Commercial Code of Japan. The Board
of Auditors is responsible for overseeing and auditing theperformance of the Board of Directors, whose members
are elected by the General Shareholder’s Meeting, as
well as the Managing Directors Committee, which is themain body responsible for execution of policy bysubordinate company structures. The Board of Auditors
reports to the General Shareholder’s Meeting.
The Board of Directors meets as a rule once a month
to oversee important business plans and proposals
concerning the Hanwa Group, and to deliberate anddecide all key business policies.
The Managing Directors Committee, which iscomposed of the president, senior managing directors
and managing directors, reports to the Board of
Directors on all matters related to significant businessdecisions affecting the Hanwa Group. As the seniorpolicy execution body in the company, this committee ischarged with carrying out policies in line with thebusiness strategy determined by the Board of Directors.
The Managing Directors Committee meets as a rule
twice a month.
Chaired by the president, the Director Evaluation
Committee meets three 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.

(F) Human resources (HR) policy and flexible
investment policy to underpin the growthstrategy
Human resources policy• Fostering of human resources and recruitment forsustainable growth
1) Enrichment of the training system and program(training for specific objectives and fostering
executives, training of selected human resources
and local employees of overseas subsidiaries)2) Diversification of recruitment• Promotion of performance-based remuneration andestablishment of a rational evaluation system
Investment policy• Setting ¥10 billion of appropriation budget for priority
investment• Pursuit of a system enabling swift judgment of risks andspeedy investment

4

The following diagram illustrates the corporate
governance structures and internal control systems for
the Hanwa Group.

General Shareholders’ Meeting
election/dismissal

proposals

Board ofDirectors

Investment
ReviewCommittee

coordination

Board ofAuditors

oversight/
audit

guidance

cooperation

Senior/managing
directors

Disclosure
Committee

Compliance
Committee

Internal Audit
Dept.

Directors

Managing directors

Internal
control
Operatingdivisions

Independent
auditors

accounting audit

Operationalorganization
remuneration
evaluation

reportPresident
Senior managing
directors

oversight/audit

Director
Evaluation
Committee

President

Managing
Directors
Committee

election/dismissal

Operating bases(Japan/overseas)

Administrative
divisions

Catch All
Controls
Committee
Internal
ControlCommittee
counsel/advice

Legal firms

5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. Aninternal audit report is submitted directly to the president
every month and reports are submitted as required to theManaging Directors Committee. Internal Audit
Department also functions as the staff for the corporate
auditors. The staff members submit reports as requestedby the Board of Auditors and remain in constant contact
with the corporate 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 todetermine the status of legal compliance, internal
control, risk management and other items. Additionally,
the auditors attend meetings of the Board of Directors,
Managing Directors 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 Commercial Code of Japan and
the Securities and Exchange Law.

Internal control system
Hanwa’s internal control system includes an Internal Audit
Department that is overseen directly by the Managing
Directors Committee. Furthermore, the Accounting
Department, Legal and Credit Department and otheradministrative divisions also function as an element ofinternal control for accounting and legal matters.
Hanwa has established disclosure regulations and a
Disclosure Committee to strengthen internal control withregard to the timely disclosure of corporate information.
This committee determines rules and basic policies for
Hanwa Group legal disclosures and timely information
disclosures. The committee also makes decisions andjudgments concerning the importance and suitability of
information that is disclosed.
Risk management system
In Hanwa’s risk management system, the Compliance
Committee, Catch All Controls Committee, Internal
Control Committee and other units serve as advisory
bodies to management units and business execution
units with regard to all matters concerning management
and business execution. External attorneys are available
for consultations to provide an external advisory unit.
Regarding internal control, the Legal and Credit
Department is responsible for supervising credit risk andrisks involving legal restrictions.
Regarding the compliance framework, Hanwa hasestablished “Corporate Ethical Standards” and“Corporate Ethical Standards of Behavior”. All employees
receive a “Compliance Manual” that serves as thestandard for their behavior. Additionally, the Compliance
Committee oversees internal activities to make everyone
aware of compliance matters.

6

Actions during past year to improve
corporate governanceInternal Control Committee
Hanwa believes that it is important to establish andoperate an internal control system in order to ensure thatbusiness activities are performed properly and efficiently.
This system is essential to the effective functioning ofcorporate governance, the reduction of risks associatedwith the achievement of business objectives, and thesustained growth and development of the Hanwa Group.
Therefore, we have established a fundamental policy forinternal control and formed an Internal Control
Committee. The committee is responsible for establishingand maintaining internal control system and verifying theeffectiveness of this system.
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 2006

Shuji Kita
President
Hanwa Co., Ltd.
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, 2006

Net sales by Product (Billions of yen)
Lumber, machinery, and other ¥47 (4.3%)
Petroleum and chemicals ¥210 (19.1%)

Steel bars and shapes ¥240 (21.9%)

Net sales¥1,098(100.0%)Foods ¥88 (8.0%)

Steel plates and sheets ¥244 (22.2%)
Special steels,
wire products, steel pipes, andsteelmaking raw materials ¥130 (11.8%)

Non-ferrous metals ¥139 (12.7%)

Steel related products ¥614 (55.9%)¥1,09847
21

Lumber, machinery, and other

0

¥934

Petroleum and chemicals

48
15

6
88

Foods

¥752
43
13

5

82

10
85
12

16

21

13

0

24

4

Special steels,
wire products, steel pipes, andsteelmaking raw materials

4
Steel plates and sheets

2

24

0

0

’04

8

Non-ferrous metals

5

9
20
15

9

0

80

97

13

Steel bars and shapes

’05

’06

Steel (Domestic)
Review
Demand for steel in Japan remained solid infiscal 2005 due to continued strength in the
manufacturing sector, particularly theautomotive, shipbuilding and construction
machinery industries. With regard toconstruction activity, weakness in the civilengineering and bridge category was offset
by strength in the architectural construction
category. There were many projects for a highlevel of capital spending by manufacturers,
large retail facilities and for condominiums. As
a result, market conditions were generally
favorable, although a scandal concerning
fraudulent earthquake-resistant constructionin the second half of the fiscal year delayedsome projects. In contrast to the tight supplies
of fiscal 2004, the past fiscal year saw a
global increase in inventories as excessive
steel production in China rapidly raised the
supply of steel. The result was a drop in pricesof steel sheets.
Due to these conditions, Hanwa’s
domestic steel operations achieved growth insales, a reflection of strong demand and theacquisition of new customers, but earnings
declined along with steel prices.
Outlook
The pace of change is rapid in the steel
industry and the magnitude of changes is
growing. Growth in steel output in China
shows no signs of slowing, a trend that is
having a significant impact on supply-anddemand dynamics. In Japan, demand for steel
from manufacturers and the constructionindustry is expected to remain strong.
However, there is a possibility of a significant
change with regard to the supply of steel dueto the large impact of steel production in
China. Due to this outlook, Hanwa is
adopting a cautious stance regarding the
procurement of steel inventories while closely
monitoring market trends. Regarding sales
activities, Hanwa will continue to upgrade its
storage, distribution, processing and ecommerce capabilities and work on steadily
expanding sales to more market categories.

Steel (Overseas)
Review
Fiscal 2005 was characterized by an excess
supply of general-purpose steel worldwide.
Prices for general-purpose steel continued tofall through first to third quarters of the fiscal
year. Japanese steelmakers were forced toreduce output as their export volumes
declined. However, steel sales were strong tothe overseas factories of Japanese companies.
One notable trend of fiscal 2005 was the shiftof automotive production to China. Japanese
steel makers were active in China. A milljointly owned by Nippon Steel and Bao SteelGroup that produces cold-rolled steel sheetsand galvanized steel sheets started operationsin 2005. Additionally, a jointly owned mill of
JFE Steel and Guangzhou Steel and Iron
Enterprises Group started producing steel
early in 2006. The steel market began
showing signs of a recovery in December
2005. In fact, prices for exported steel began
to rise, starting with contracts for the second
quarter of 2006.
Hanwa’s overseas steel operations
recorded higher sales, but there was a large
decline in sales in China that was mainly
attributable to a reduction in steel production.
South Korea and the Middle East accounted
for most of the sales growth.

9

Outlook
There are two main goals for fiscal 2006. Firstis preserving Hanwa’s strong presence in
China, where the company has acomparatively high market share. Second isincreasing sales in India, the Middle East andother markets and generating sales throughoverseas bases. Another theme for overseas
steel operations is raising sales in theautomotive and energy industries. Overseas
steel operations will also work on conducting
its own sales activities that target building
materials, based on closer ties with domestic
sales divisions, and on increasing the volumeof offshore transactions.
To accomplish these goals, Hanwa has
been enlarging its network. Office
S have been opened in Ho Chi Minh, Vietnam
and in Wien, Austria in April 2005. Anotheroffice was opened in Mumbai, India in
September 2005 and an office was officiallyopened in Dubai, in April 2006. To increase thesteel processing network, Hanwa Steel Service(Thailand) began operations in July 2005.
Furthermore, Hanwa Steel Service (Dongguan)began operations in China in July 2006.

climbed. Sales of nickel increased as growth insales to China and South Korea outweighed adecline in demand in Japan. In ferroalloys,
Hanwa continued to strengthen its sales
operations targeting blast furnaces and special
metal mills. In June 2005, Hanwa acquired
exclusive rights to sell the ferrochrome of
Samancor Ltd. in Japan. Ferroalloy sales thusincreased due to the contribution of thisbusiness beginning in the fiscal year’s second
half. In the rapidly growing market for solar
cell-related products, Hanwa posted a large
increase in the volume of outsourced siliconwafer processing.

Non-Ferrous Metals & Metal Alloys
ReviewPrices of aluminum, copper, zinc and othernon-ferrous metals remained high during thefirst half of fiscal 2005, but began to climb
again in the second half. Demand fueled bycontinuing economic growth, mainly in China,
was the primary reason. Metals attracted
massive amounts of speculative fundinvestments due to perceived shortages ofenergy and natural resources. Copper and zinc
supplies became tighter still, causing prices ofother metals to rise, too. Overall, prices roseby about 140% during the second half of the
fiscal year. Price increases were even greater inJapan because of the steady decline in the
yen’s value during the fiscal year.
A global downturn in stainless steel
production that began in the summer of2005 caused demand for nickel, chrome andother stainless steel materials to remain weak
until the end of the year. However, prices ofthese materials climbed rapidly following the
Chinese new year along with the prices ofcopper and aluminum.
Sales of non-ferrous metals and metalalloys were up substantially. This was
attributable to measures to increase sales,
accurate decisions concerning market trends
and higher prices of metals. In recycled
aluminum operations, sales rose along withactivities involving value-added products. In
copper and brass scrap, earnings climbed
significantly due to growth in import, export
and offshore transactions amid a global
shortage of these materials. Earnings werealso backed by favorable market trends. Dueto the sharp increase in the price ofmolybdenum, there was a large increase inimports of SUS316 stainless steel scrap.
Volumes of special metal scrap also increased
as U.S. and European imports and exports

Outlook
Demand for raw materials is growing
worldwide and shortages of non-ferrous
metals are persisting. Although there aremany ongoing projects involving minedevelopments, smelter expansions and otheractivities, these investments are unlikely toraise output in the short-term. Inflows ofcapital from investment funds will probably
keep market prices volatile at the current highlevel. Furthermore, market prices may
plummet if funds change their positions.
The non-ferrous metals and metal alloys
business will work even more closely with
Hanwa’s overseas offices to increase thevolume of international metals trading.
Hanwa is aiming for growth not only in China
and the ASEAN region, but also in Russia,
Kazakhstan, South Africa, Brazil and India. In
the recycled aluminum, copper, stainless steel
and special metals business, one priority isbuilding an efficient system for collecting
materials. Another goal is investing inprocessing facilities and forming alliances withcustomers in order to offer distinctive
products that are not vulnerable to market
fluctuations as well as to further raise thevolume of value-added products. In addition,
Hanwa will rebuild its distribution system in
Asia, including India, and expand overseas
operations. Regarding nickel, the goals are tobuild even closer ties with producers andreinforce risk management to cope withmarket volatility. In ferroalloys, Hanwa isconstantly working on raising sales tomanufacturers of blast furnaces, special metal
mills and electric arc furnaces. Additionally,
activities will be focused on sales in Japan and
China of ferrochrome and chromium ore
supplied by Samancor Ltd. In the metal silicon
sector, plans call for raising sales to aluminumand chemical companies while developing themarket for sales of metal silicon to solar cellmanufacturers. Regarding products for solar
cells, Hanwa plans to increase exports andimports associated with outsourced
processing services.

10

Food ProductsReview
There was a big increase in trading volumesof red fish, halibut, sole and flounder. Alongwith a substantial rise in prices of all types offish, the result was higher sales in fiscal 2005,
bringing to an end a period of declining
sales. However, market conditions remained
weak because prices of higher-priced
products, chiefly crabs and shrimp, remained
at a law level. On the other hand, earnings
benefited from steady growth in trading
volumes of processed food products, mainly
products using shrimp and common fish
catches. One highlight was growth in sales ofprocessed products, particularly processed
shrimp products.
OutlookGrowing demand for marine products in
Europe, due in part to fears concerning BSE
and bird flu, along with the strength of theeuro are likely to make Japan less competitive.
As in the past year, companies will probably
have difficulty incorporating the higher costof marine products in sales prices. Based on
this outlook, Hanwa expects to face difficult
market conditions in fiscal 2006. In response,
Hanwa will concentrate on preserving or
increasing market share for each fish
category, further raising its stature in foodproducts industry, and increasing sales ofprocessed food products and of raw materials
to third countries. Through these activities,
Hanwa intends to achieve another increase insales and generate solid earnings.

Petroleum and Chemicals

LumberMachinery

ReviewPrices for petroleum products continued toclimb in the United States due to the chronic
shortage of domestic crude oil production
and hurricane damage. Prices were high inJapan as well. Hanwa experienced difficulties
selling products to end users as a shift to lessinexpensive energy sources and other trends
brought down demand. However, sales weremuch higher because of the increase in unit
prices. Furthermore, there was a severe
shortage of kerosene in Japan because ofrecord-setting snowfalls and low
temperatures. Hanwa’s kerosene trading
volume increased as a result. Sales of bunker
oil remained strong in Asia.
There was growth in imports and offshore
trading of resins. Additionally, lubricating oil
sales increased due to higher sales of PAO
and base oils. In paper products, there was adecrease in protective interleaving paper for
steel sheets surfaces. Hanwa began exportingused paper to Vietnam during the fiscal year.

Review
There was steady growth in the volume offorest products imported from Scandinavia,
Russia, China and Chile. However, imports
from the United States and Canada declined
as coastal lumber plants in Canada becameless competitive. Direct trading with large
Japanese makers of pre-cut beams climbed
and the trading volume with do-it-yourself
home centers grew. Exports to the UnitedStates increased and there was also growth inexports to the Middle East and other regions.

Review
Leisure facilities: One highlight of the fiscal
year was the import to Japan and installationof a merry-go-round from a U.S.
manufacturer that Hanwa worked with forthe first time. In the Shanghai area of China,
Hanwa supplied a tea-cup ride from Italy andthree types of attractions that were made in
China. In addition, indoor family
entertainment facilities were supplied to 11
locations throughout Japan.
Industrial machinery: Hanwa supplied steel
fabrication equipment to coil centers inShanghai, Thailand and Japan. A steelmakerin the Nagoya area of Japan purchased
environmental equipment from Hanwa. Sales
also include the export of marine engines to
Iran and the import of steel processing
equipment from Italy.

Outlook
Demand for petroleum products in Japan is
expected to continue lowering as the price of
crude oil remains high. In response, Hanwa
will concentrate on increasing sales to current
customers and establishing relationships withnew ones. In Asia, where demand for crude
oil continues to climb, the goals are toincrease sales of bunker oil and expand theexport business. Plans also include supplying
alternative fuels that have a lower
environmental impact and offering ideas forenergy saving systems.
In chemicals, Hanwa is focusing on raising
import and offshore trading volumes of resins
and selling more household products to large
retailers. Other goals are increasing sales of
lubricating oil, such as base oil, additives andlubrication products. In paper products,
Hanwa will continue to work on raisingexports of used paper to Vietnam.

OutlookHanwa is working on increasing sales in Japanof timber products from Romania and Russia.
Other goals are raising sales of raw materials
and logs and building a platform for higher
sales in the United States. Regarding
plywood, the goals are to continue raisingsales of products from Malaysia and raise thetrading volume of special grades of plywood.
Hanwa also plans to begin handling Japanese
forest products. The market for imported
plywood has rebounded from the previous
year’s bottom. Demand is strong in markets
other than Japan. Furthermore, a steep dropin the supply of plywood is foreseen due tochanges in the global climate and aclampdown on illegal logging. These trends
are expected to trigger a steep increase inplywood prices.

11

Outlook
Leisure facilities: This market is becoming
less competitive in Japan as companies exit
this business. However, the prolonged slump
in demand for large outdoor entertainment
attractions shows no sign of ending. Hanwa
will concentrate on the development and saleof amusement equipment for families and thebusiness of creating indoor amusement
facilities. In addition, Hanwa is seeking
opportunities in China and other overseas
markets.
Industrial machinery: Hanwa is targeting
opportunities to increase sales of steel
fabrication equipment created by the highvolume of capital expenditures in the steel,automobile and home appliance industries,
where earnings are strong. Plans also call forincreasing exports of marine engines andother products to the Middle East, which isbenefiting from the high price of crude oil.

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.

12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.

13Topics

1. Establishment of Hokkaido Branch

2. Establishment of Hanwa Steel Service(Dongguan) Co.,Ltd.

In April 2006, Hanwa opened Hokkaido Branch in Sapporo aftermonths of preparation.
The business activities in Hokkaido area has been carried out
by Distributor Sales Departments in Tokyo and Osaka Head
Offices. By establishing this Hokkaido Branch Hanwa will provide
unified service to all the customers located in this area, making
closer ties with its customers and providing rational proposals.

In September 2005, Hanwa established a new coil center in
Chashan Industrial Park, Dongguan City, Guangdong, China.
This coil center has 14,000 square meters of plant on 66,000
square meters site. The plant is furnished with slitter, minilevelers, square-shear to process steel sheets.

3. Conclusion of a Cooperation Agreementwith Mie Prefecture
On March 24th, 2006, Hanwa entered a support cooperationagreement with Mie Prefecture, for supporting medium andsmall companies in the Prefecture jointly.
According to this agreement, Hanwa will support medium
and small companies with promising technique and eagerness.
Business incubation team(BIT), which has founded in accordancewith the Mid-term Business Plan established in 2004, holds
business matching gathering to provide those companies anopportunity to create new business and cultivate a market.

14

4. Introduction of New Merchandise
New Medium for Floor Space Advertising
Hanwa started in earnest selling new floor space advertising“POP STEP” as the sole agency. Hanwa researched anddeveloped “POP STEP” jointly with Lonseal Corp. and Ojitac
Co.,Ltd.. This product is less slippery, high durability, easy to
stick and peel, and it is superior to existent media for floor
space advertising in all aspects of physical performance,
installation, ecology and cost performance.
Hanwa will actively expand this business, expecting to gain a
30% of Japanese market share in three years.

Basalt Continuous Filament Fiber
Hanwa started importing basalt fiber produced abroad andsupplying samples of products to automotive industry,
construction industry and textile industry.
Basalt fiber is made from 100% natural basalt rock, smelted
in a furnace and spinned to fiber yarn. It is superior to glass
fiber in thermal protection, tensile strength, and chemical
resistance. What’s more basalt fiber attracted attention as anenvironment-friendly than that of glass. Basalt does notdamage incinerators when it is burned, while glass fiber liquefy
and stick inside incinerators.
Hanwa will treat various products of basalt fiber including
roving, fabrics and chopped strands to meet diverse needs ofusers.

15

Management Discussion and Analysis

Economic overview
The global economy remained healthy during the fiscal year
ended March 2006 as inflation was generally under control inmost countries. Instability in the Middle East and other factors
were sources of concern. Hurricane damage in the UnitedStates and the steep rise in the price of crude oil backed byinflows of capital from investment funds were other negative
developments. In Japan, corporate earnings continued to
improve and private-sector capital expenditures and consumer
spending remained strong. The result was a solid economic
recovery fueled mainly by domestic demand.

Sales by Business Segment
Steel: There was an increase in exports to companies in theautomotive and home appliance industries in China andSoutheast Asia. In Japan, the fiscal year began with high steel
prices because of the improvement in the steel market in priorfiscal year. Prices began to decline in the summer of 2005 asthere was ample steel to meet demand. However, Hanwa
conducted aggressive sales activities that mainly targeted theautomotive, industrial and construction machinery, andarchitectural construction (a major use of steel bars) industries,
all sectors where earnings are strong. The result was a 12.0%
increase in sales to ¥614.0 billion.
Non-Ferrous Metals: Prices of non-ferrous metals oninternational markets rose to record highs due to speculative
investments by funds and other sources. The performance of
this business reflected contributions by sales from two key
sources: ferrochrome produced by Samancor Ltd. of South
Africa and silicon wafers used to make solar cells. The result
was a 39.8% increase in sales to ¥139.1 billion.
Foods: Although there was weakness in the market for marine
products, including cultured prawn, a major product for
Hanwa, the company was successful at raising sales ofprocessed food products in China and common fish catches.
The result was a 6.6% increase in sales to ¥87.6 billion.
Petroleum and Chemicals: The price of crude oil rosesignificantly during the fiscal year. One reason was strong
demand in China and other BRICs nations. U.S. hurricane
damage and the inflow of investment fund capital also kept
prices high. In this environment, Hanwa’s sales increased
35.0% to ¥210.3 billion mainly because of a higher trading
volume of bunker oil and an increase in the price of kerosene
due to a cold winter in Japan.
Other businesses: As for other businesses including lumber
business, sales decreased 3.5% to ¥46.7 billion because of thesluggish plywood market in Japan.

Earnings
Hanwa’s performance in the environment reflected aggressive
measures to expand business operations along with thebenefits of high prices of steel and other materials at the startof the fiscal year. Consolidated net sales increased 17.5% to¥1,097.7 billion. Sales growth and much high prices generated
increases in the non-ferrous metals and petroleum andchemicals businesses. In the other hand steel earnings werelower because prices weakened due to growth in inventories ofgeneral-purpose steel sheets as the supply of these sheets was
no longer tight. Consolidated operating income, thus,
decreased 10.9% to ¥19.7 billion and net income decreased
23.4% to ¥10.5 billion.

16

Cash FlowsNet cash provided by operating activities was ¥22.3 billion
compared with a negative cash flow of ¥13.3 billion one year
earlier. The main reason was an increase in trade receivables of
only ¥3.2 billion, ¥52.7 billion less than the increase in the priorfiscal year, because of the relatively stable receivable collection
cycle made possible while the growth in sales.
Net cash used in investing activities increased ¥13.3 billion
to ¥14.1 billion. One reason was a net investment of ¥7.9
billion in property and equipment, including the repurchase ofland that Hanwa sold to the Organization for Promoting Urban
Development. In addition, purchases of investment securities,
including the investment in Samancor Ltd. of South Africa,
totaled ¥5.3 billion.
Net cash used in financing activities was ¥7.5 billion
compared with that of previous year’s net cash provided ¥23.5
billion. This change was attributable to a decrease in the use ofbank loans to fund business operations due to theimprovement in operating cash flows.

OutlookThe direction of the global economy will depend mainly on the
U.S. economy and events in the Middle East and on trends inmarkets for basic materials, where the Chinese economy
continues to be the primary source of growth in demand. In
Japan, which is staging a solid economic recovery, changes ininterest rates and foreign exchange rates due to changes inmonetary policy are a major point of interest. These and otherevents will continue to alter the operating environment fortrading companies at a fast pace, creating an uncertain
outlook.
The Hanwa Group will continue to position steel, nonferrous metals, foods, and petroleum and chemicals as its corebusinesses. 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. Throughthese activities, Hanwa plans to take the final steps needed toreach the goals of the current Mid-term Business Plan, which
ends in March 2007.

17

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Five-Year Summary
For the years ended March 31

Millions of yen
except number of employees

2006

For the year:
Net sales
Operating income
Net income

2005

2004

2003

2002

¥ 1,097,707 ¥
19,69010,504

933,956 ¥
22,091
13,704751,964 ¥
12,666
5,662

682,964 ¥10,257
5,907

625,614 $ 9,344,573
6,517
167,617
3,587
89,41922,299(13,341)(6,850)3,269

19,327

189,827(14,079)(731)(1,004)

836

1,352

(119,852)(7,497)

23,523(10,873)(10,115)(14,630)(63,820)

18,986 ¥413,020
86,145

17,658 ¥376,52172,8758,390 ¥
293,52857,75727,808 ¥281,557
52,74835,183 $ 161,624
284,515
3,515,962
49,188733,336

1,519

1,424

1,285

1,239

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

Thousands of
U.S. dollars¥

Number of employees

2006

1,136

Yen

2006

Per share data:
Net income
Cash dividends
Stockholders’ equity¥

48.96 ¥
10.00
406.682005

64.03 ¥
9.00
343.82

U.S. dollars

2004

2003

26.43 ¥
6.00
272.6727.91 ¥
5.00
249.302002

2006

16.95 $
5.00
232.40%2006

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

2005

2.7
13.2
140

4.1
21.0
170

2004

2003

2.0
10.2
180

Note: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥117.47=$1.00.
2. Net debt/equity ratio=Net interest-bearing debt / equity.
Net interest-bearing debt=Interest-bearing debt – cash.

18

2.1
11.6
180

2002

1.3
9.6
200

0.417
0.085
3.462

Financial Section

Contents
Consolidated Balance Sheets ........................................................................................... 20
Consolidated Statements of Income ............................................................................. 22
Consolidated Statements of Stockholders’ Equity ................................................... 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, 2006 and 2005

Thousands of
U.S. dollars (Note 1)

Millions of yen

Assets2006

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

¥

2005

2006

2005

161,624 $

150,319

18,986 ¥17,658 $4,941
203,2853,864
200,22142,062
1,730,527

32,894
1,704,444

2,555
7
(737)
76,054
1,355
20,900327,346

3,019
7
(721)
63,527
1,855
21,883311,31321,75060(6,274)647,433
11,535
177,918
2,786,635

25,70060(6,138)
540,793
15,791
186,286
2,650,149

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

1,279
32,527

1,239
16,25010,888276,896

10,547
138,33330
408
12,657(1,118)45,783

195
545
10,316(1,430)27,115

255
3,473
107,747(9,517)389,742

1,660
4,640
87,818(12,173)
230,825

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

24,451
20,6898,624(14,564)
39,20022,68720,0807,536(12,925)
37,378208,147
176,122
73,414(123,981)
333,702

193,130
170,937
64,153(110,028)
318,192

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

42
649
691
413,020 ¥

20
358
170
695
5,525
5,916
715
5,883
6,086
376,521 $ 3,515,962 $ 3,205,252¥

See accompanying Notes to Consolidated Financial Statements.

20

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities, Minority Interest and Stockholders’ Equity

2006

Current liabilities:
Short-term loans (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¥

Non-current liabilities:
Long-term debt due after one year (Note 6)
Employees’ severance and retirement benefits (Note 7)
Directors’ retirement benefits
Reserve for loss on sale-repurchase agreement of landDeferred tax liabilities – noncurrent (Note 8)
Other non-current liabilities
Total non-current liabilities

2005

2006

2005

209,373 $
225,164

431,617
145,143

24,595 ¥26,45050,702 $17,050788
139,290
1,666
3,709
30,826
227,324769
117,225
1,653
5,873
27,138220,410

6,708
1,185,750
14,182
31,574262,416
1,935,167

6,546
997,914
14,072
49,996
231,021
1,876,309

84,900
103
—
—
9,778
3,961
98,742

71,880
88
494
4,012
3,343
2,721
82,538722,738
877——
83,23833,719840,572

611,901
749
4,205
34,15428,45823,163702,630

809

698

6,887

5,942

Contingent liabilities (Note 12)
Minority interest
Stockholders’ equity (Note 9):
Common stock,
Authorized: 570,000,000 shares
Issued: 211,663,200 shares
Capital surplus
Retained earnings
Land revaluation difference
Net unrealized holding gains on securities
Foreign currency translation adjustments
Treasury stock, at cost: 206,306 shares (170,060 in 2005)
Total stockholders’ equity
Total

¥

21

45,651
3
31,288(17)
10,446(1,159)(67)
86,145413,020 ¥

45,651
388,618
388,618
1
25
923,912
266,349
203,558
1,653(145)
14,072
3,871
88,92532,953(2,164)(9,866)(18,422)
(49)
(570)
(417)
72,875733,336620,371376,521 $ 3,515,962 $ 3,205,252

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income
For the years ended March 31, 2006 and 2005

Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

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

2005¥ 1,097,707 ¥
1,053,920
43,78724,097
19,690

Other income (expenses):
Interest and dividend income
Interest expense
Foreign exchange gain
Gain on transfer of substitutional portion of employees’ pension fund
(Note 2)Gain on sale of investment securities of unconsolidated subsidiaries
Loss on impairment of long-lived assets (Note 14)
Provision for loss on sale-repurchase agreement of land
Foreign exchange loss on common stock reduction of consolidated subsidiary
Other, net
Income before income taxes and minority interest
Income taxes (Note 8):
Current
Deferred

Minority interest in income of consolidated subsidiaries
Net income¥

933,956 $ 9,344,573 $ 7,950,592
888,767
8,971,823
7,565,906
45,189372,750
384,686
23,098205,133
196,629
22,091
167,617
188,057
1,825(2,174)331

15,544(21,639)
196

15,536(18,507)
2,818

—
—
(451)
—
—
(725)

1,912
360
(1,175)(1,193)(1,558)(551)——(3,839)——(6,172)

16,277
3,065(10,003)(10,156)(13,263)(4,691)

17,821

19,868

151,707

169,133

6,530
736
7,266

5,877
104
5,981

55,5896,265
61,85450,030885
50,915(51)
10,504 ¥(183)
13,704 $(434)
89,419 $(1,558)116,660

Yen¥

See accompanying Notes to Consolidated Financial Statements.

22

2005

1,826
(2,542)
23

2006

Net income per share
Cash dividends per share2006

48.96 ¥
10.00

U.S. dollars (Note 1)

2005

64.03 $
9.00

2006

0.417 $
0.085

2005

0.545
0.077

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity
For the years ended March 31, 2006 and 2005

Thousands

Millions of yen

Number of sharesof common stock

Land revaluationdifference

Common stock

Capital surplus

Balance at March 31, 2004
Surplus from sale oftreasury stock
Net income
Increase arising from
inclusion in consolidation
Cash dividends
Bonuses to directors
Transfer of land revaluationdifference (Note 9)
Unrealized holding gains
on securities
Adjustments from translationof foreign currency
financial statements
Treasury stock

211,663 ¥ 45,651 ¥Balance at March 31, 2005
Surplus from sale oftreasury stock
Net income
Cash dividends
Bonuses to directors
Staff and workers’
bonuses and welfare fundTransfer of land revaluationdifference (Note 9)
Unrealized holding gains
on securities
Adjustments from translationof foreign currency
financial statements
Treasury stock
Balance at March 31, 2006

Retained earnings— ¥ 11,451 ¥Unrealized
holding gains
on securities

Foreign currencytranslation
adjustments

Treasury stock

1,616 ¥

2,282 ¥

(3,225) ¥

(18)

—
—

—
—

1
—

—
13,704

—
—

—
—

—
—

—
—

—
—
—

—
—
—

—
—
—

133
(1,269)
(70)

—
—
—

—
—
—

—
—
—

—
—
—

—

—

—

(37)

37

—

—

—

—

—

—

—

—

1,589

—

—

—
—

—
—

—
—

—
—

—
—

—
—

1,061
—

—
(31)

211,663

45,651

1

23,912

1,653

3,871

(2,164)

(49)

—
—
—
—

—
—
—
—

2
—
—
—

—
10,504(2,961)
(160)

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—

—

—

(10)

—

—

—

—

—

—

—

3

(1,670)

—

—

—

—

—

—

—

—

6,575

—

—

1,005
—
(1,159) ¥

—
(18)
(67)

—
—
—
—
211,663 ¥ 45,651 ¥————3 ¥ 31,288 ¥

23

—
—
—
—
(17) ¥ 10,446 ¥Thousands of U.S. dollars (Note 1)

Common stock

Balance at March 31, 2004
Surplus from sale oftreasury stock
Net income
Increase arising from
inclusion in consolidation
Cash dividends
Bonuses to directors
Transfer of land revaluationdifference (Note 9)
Unrealized holding gains on securities
Adjustments from translation offoreign currency financial statements
Treasury stock
Balance at March 31, 2005
Surplus from sale oftreasury stock
Net income
Cash dividends
Bonuses to directors
Staff and workers’
bonuses and welfare fundTransfer of land revaluationdifference (Note 9)
Unrealized holding gains on securities
Adjustments from translation offoreign currency financial statements
Treasury stock
Balance at March 31, 2006

Capital surplus$ 388,618 $Retained earnings

Land revaluationdifference

Unrealized
holding gains
on securities

Foreign currencytranslation
adjustments

Treasury stock— $ 97,480 $ 13,757 $ 19,426 $ (27,454) $

(153)

—
—

9
—

—
116,660

—
—

—
—

—
—

—
—

—
—
—

—
—
—

1,132
(10,803)
(596)

—
—
—

—
—
—

—
—
—

—
—
—

—
—

—
—

(315)
—

315
—

—
13,527

—
—

—
—

—
—

—
—

—
—

—
—

—
—

9,032
—

—
(264)

388,6189

203,558

14,072

32,953(18,422)

(417)

—
—
—
—

16
—
—
—

—
89,419(25,206)(1,362)

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—

—

(85)

—

—

—

—

—
—

—
—

25
—

(14,217)——55,972

—
—

—
—

8,556
—
(9,866) $

—
(153)
(570)

—
—
$ 388,618 $————25 $ 266,349 $See accompanying Notes to Consolidated Financial Statements.

24

—
—
—
—
(145) $ 88,925 $HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2006 and 2005

Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

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
Loss on impairment of long-lived assets
Decrease in allowance for doubtful receivables
Interest and dividend income
Interest expense
Gain on transfer of substitutional portion of employees’ pension fundGain on sale of investment securities of unconsolidated subsidiaries
Provision for loss on sale-repurchase agreement of land
Foreign exchange loss on common stock reduction of
consolidated subsidiary
Increase in trade receivables
Increase in inventories
Increase in trade notes and accounts payable
Increase in deposits received
Other, net
Sub total
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 sale of investment securities
Additions to loans receivable
Repayment of loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Decrease in short-term loans, net
Proceeds from long-term debt
Repayments of long-term debt
Payment of cash dividends
Cash dividends paid to minority interest 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
Increase arising from inclusion in consolidation
Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.

25

¥

¥

2005

2006

2005

17,821 ¥19,868 $

151,707 $169,133

1,969
451
(298)
(1,826)
2,542
—
—
—

2,023
1,175
(729)
(1,825)
2,174(1,912)
(360)
1,193

16,762
3,839(2,537)(15,544)
21,639———17,221
10,003(6,206)(15,536)
18,507(16,277)(3,065)
10,156—(3,185)(11,779)
21,239552
4,402
31,888

1,558(55,919)(13,005)
25,1185,599
2,154(12,888)—(27,113)(100,272)
180,804
4,699
37,473
271,457

13,263(476,028)(110,709)
213,825
47,663
18,337(109,713)

1,661(2,477)(8,773)22,2991,802(2,112)(143)(13,341)

14,140(21,087)(74,683)
189,827

15,340(17,979)(1,217)(113,569)(310)(7,900)40(5,278)
89
(724)
1,555
(1,551)(14,079)

1,618(1,438)509(1,522)552(1,195)
935
(190)
(731)

(2,639)(67,251)340(44,931)758(6,163)
13,237(13,203)(119,852)

13,774(12,241)
4,333(12,957)
4,699(10,173)
7,959(1,617)(6,223)(26,846)
39,420(17,050)(2,955)(50)(16)(7,497)605
1,328
17,658—18,986 ¥(14,397)
40,255(1,050)(1,262)—(23)
23,523
(378)
9,073
8,390
195
17,658 $(228,535)
335,575(145,143)(25,155)
(426)
(136)
(63,820)
5,150
11,305150,319—
161,624 $(122,559)
342,683(8,938)(10,743)—(196)
200,247(3,218)77,23771,422
1,660
150,319

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 Securities 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 of International Financial Reporting Standards.
The accounts of overseas subsidiaries are based on theiraccounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective
countries of domicile. The accompanying consolidated financial
statements have been restructured and translated into English(with some expanded descriptions and the inclusion of
consolidated statements of stockholders’ equity) from theconsolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate
Local Finance Bureau of the Ministry of Finance as required by
the Securities and Exchange Law. Some supplementary
information included in the statutory Japanese language
consolidated financial statements, but not required for fairpresentation, is not presented in the accompanying consolidated
financial statements.
The translation of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2006, whichwas ¥117.47 to U.S.$1.00. The convenience translations should
not be construed as representations that the Japanese yenamounts have been, could have been, or could in the future be,converted into U.S. dollars at this or any other rate of exchange.

2. Significant accounting policies
Consolidation — The consolidated financial statements include
the accounts of the Company and its eleven significant
subsidiaries (together “the Companies”). The accounts of certain
consolidated subsidiaries have been included on the basis of
fiscal periods ended three months or less prior to March 31, andsignificant transactions after their year-ends are appropriately
adjusted in consolidation.
Intercompany transactions and accounts have been
eliminated. The Company doesn’t apply the equity method,
because non-consolidated 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 has been individually estimated.
The allowance for doubtful receivables of overseas
consolidated subsidiaries is determined by estimates ofmanagement.
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 movingaverage 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 ofstockholders’ equity. Realized gains on sale of such securities arecomputed using moving-average cost. Other available-for-salesecurities are stated at moving average cost.

Inventories — Inventories are principally stated at the lower ofcost or market value. Cost is determined by the moving average
cost method or the specific identification cost method.
Property and equipment — Property and equipment are
carried at cost. Recognized loss on impairment of long-lived
assets have been deducted from acquisition costs. Depreciation
is principally provided on the declining balance method overestimated useful lives. Major renewals and improvements arecapitalized. Maintenance, repairs and minor renewals are
expensed as incurred.
Software costs — The Companies include software inintangible 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 Company and its domestic consolidated
subsidiaries follow the Japanese practice of paying bonuses to
employees in June and December. As at the balance sheet date,the bonus liabilities are estimated and accounted for on an
accrual basis.
Bonuses to directors, which are subject to approval at thestockholders’ meeting, are accounted for as an appropriation ofretained earnings.
Income taxes — The Companies recognize tax effects of loss
carry forwards and temporary differences between the carrying
amounts of assets and liabilities for tax and financial reporting.
The asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes.
The Company and its wholly owned domestic subsidiaries fileconsolidated tax returns.
With the promulgation of the “Revision of the Local Tax Law”
(Legislation No.9, 2003) on March 31, 2003, the tax bases forassessing enterprise taxes comprise “amount of income”,“amount of added value” and “amount of capital” commencing
April 1, 2004. Enterprise taxes based on “amount of added
value” and “amount of capital” are ¥277 million ($2,358
thousand) and, are included in “Selling, general andadministrative expenses” commencing for the year ended March
31, 2005, pursuant to “Practical Solutions on Presentation for
Size-Based Components of Corporate Enterprise Tax on the
Income Statement” (Accounting Standards Board, Practical
Solution Report No.12 issued on February 13, 2004).
26

Translation of foreign currencies — Receivables and payables
denominated in foreign currencies are translated into Japanese
yen at the year-end rates.
Balance sheets of consolidated overseas subsidiaries aretranslated into Japanese yen at the year-end rates except for
stockholders’ equity accounts, which are translated at thehistorical rates. Income statements of consolidated overseas
subsidiaries are translated at average rates except fortransactions with the Company, which are translated at the rates
used by the Company.
The Companies report foreign currency translation
adjustments in stockholders’ equity.
Finance leases — Finance leases which do not transfer
ownership and do not have bargain purchase provisions areaccounted for in the same manner as operating leases inaccordance with Japanese GAAP.
Derivatives and hedge accounting — The Company states
derivative financial instruments at fair value and recognizeschanges in the fair value as gains or losses unless derivative
financial instruments are used for hedging purposes.
If derivative financial instruments are used as hedges andmeet certain hedging criteria, the Company defers recognitionof gains or losses resulting from changes in fair value ofderivative financial instruments until the related losses or gains
on the hedged items are 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 agreement 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 the changes in fair value ofhedged items and the corresponding changes in the hedging
derivative instruments.
Reclassifications — Certain reclassifications have been made toprior-year amounts 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 Commercial Code of Japan requires that thedeclaration of dividends be approved at the general meeting ofstockholders 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.

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 amortization ofprior service cost are charged to income when paid.
The liabilities and expenses for severance and retirement
benefits are determined based on the amounts actuariallycalculated using certain assumptions.
As the pension assets exceed the deduction of unrecognizedactuarial differences and unrecognized prior service cost fromprojected benefit obligation in the Company, such excess
amount is included in “other investments and non-current
receivables” in the years ended March 31, 2006 and 2005.
Through the year ended March 31, 2005, the liability for
retirement benefits of directors and statutory auditors
represented management’s estimate of the amounts payable tothem at the balance sheet date if they retired at that date.
In this fiscal year, the retirement benefits plan for directors
and statutory auditors was abolished. The amounts of benefits
accrued at the date of abolishment were approved at theordinary general meeting of stockholders, on June 29, 2005.
Then, the estimated amounts payable to them were eliminated,
and the outstanding payments are recorded as “Other noncurrent liabilities”.
Employees of Japanese companies are compulsorily includedin the Welfare Pension Insurance Scheme operated by thegovernment. Employers are legally required to deduct
employees’ welfare pension insurance contributions from their
payroll and to pay them to the government together with
employers’ own contributions. For companies that haveestablished their own Employees’ Pension Fund, which meets
certain legal requirements, it is possible to transfer a part of theirwelfare pension insurance contributions (referred to as the“substitutional portion” of the government’s Welfare Pension
Insurance Scheme) to their own Employees’ Pension Fund under
the government’s permission and supervision.
Based on the newly enacted Defined Benefit Corporate
Pension Law, the Company decided to restructure their
Employees’ Pension Fund and were permitted by the Minister of
Health, Labor and Welfare on September 25, 2003 to bereleased from their future obligation for payments for thesubstitutional portion of the Welfare Pension Insurance Scheme.
On January 1, 2005, the Company obtained approval from the
Minister of Health, Labor and Welfare with respect to applicationof the transfer to the Japanese government of the substitutional
portion of benefit obligation for employee services provided inprior years and related pension plan assets. Pension assets forthe substitutional portion maintained by the Employees’ Pension
Fund were transferred back to the government’s scheme. The
effects of the transfer are disclosed in the Note 7. Employees’
severance and retirement benefits.
Reserve for loss on sale-repurchase agreement of land —Reserve for loss on sale-repurchase of land reflects an estimateof possible losses based on an exercise of a sale-repurchaseagreement under which the Company sold land to theOrganization for Promoting Urban Development.
In accordance with the exercise of the agreement from theOrganization for Promoting Urban Development, on September
20, 2005, the entire amount of “Reserve for loss on salerepurchase agreement of land” was reversed.

27

3. Securities(A) The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available fairvalues as of March 31, 2006 and 2005:

March 31, 2006

Millions of yen
Acquisition cost

Securities with book values exceeding acquisition costs:
Equity securities¥
Other securities:
Equity securities¥

Difference

Acquisition cost

17,292 $51,349 $198,553 $

147,204

46 ¥

36 ¥

(10) $

391 $

306 $

(85)

Millions of yen¥

Difference

23,324 ¥Acquisition cost

Securities with book values exceeding acquisition costs:
Equity securities¥

Book value

6,032 ¥March 31, 2005

Other securities:
Equity securities

Thousands of U.S. dollars

Book value

Thousands of U.S. dollars

Book value

Difference

Acquisition cost

Book value

Difference

5,004 ¥

11,560 ¥6,556 $

42,598 $98,408 $55,810

395 ¥

367 ¥

(28) $

3,362 $

3,124 $

(238)

(B) The following tables summarize book values of securities whose fair values are not determinable as of March 31, 2006 and 2005:(a) Equity securities issued by unconsolidated subsidiaries and affiliated companies
Millions of yen
2006
Book value

Equity securities issued by unconsolidated subsidiaries and affiliated companies

Thousands of U.S. dollars

2005Book value

2006
Book value

2005
Book value¥

1,279 ¥

1,239 $

10,888 $

10,547¥2,739 ¥
4,229
2,000
199
9,167 ¥

2,323 $—
2,000—
4,323 $

23,316 $36,001
17,026
1,694
78,037 $

19,775—17,026—36,801(b) Available-for-sale securities
Unlisted stocks
Unlisted foreign stocks
Preferred fund certificate
Investment in limited partnership
Total

¥

(C) Total sales of available-for-sale securities in the years ended March 31, 2006 and 2005 amounted to ¥89 million ($758 thousand)and ¥121 million ($1,030 thousand), which resulted in net gains of ¥36 million ($306 thousand) and net losses of ¥13 million($111 thousand), respectively.

28

4. Derivatives
purpose of using derivatives is to reduce market risks associatedwith assets, liabilities and interest rates, 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 the management, where
evaluation and analysis of derivatives are made.
The contracts or notional amounts of derivatives which are
shown in the following table do not represent the amounts
exchanged by the parties and do not measure the Company’s
exposure to credit or market risks.

The Company enters into foreign exchange forward contracts
and currency option agreements, in its normal business, tohedge foreign exchange risk associated with certain assets andliabilities denominated in foreign currencies. The Company
enters into foreign exchange forward contracts, currency swap
agreements and interest rate swap agreements as hedges
against bonds and loans denominated in foreign currencies. 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 the

The following tables summarize market value information as of March 31, 2006 and 2005, of derivatives for which hedge accounting
has not been applied:

March 31, 2006
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

¥

Fair value

Contract ornotional amount

9,105 ¥
285

(121) $
(1)

76,479 $2,418

77,509 $2,426(1,030)(8)

10,283543

10,506555

223
1287,537
4,623

89,435
4,725

1,898
102

14,164(1,303)(1,303)(1,190)120,575(11,092)¥

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

Fair value(11,092)(10,130)$

Millions of yen
Contract ornotional amount¥

Net recognized
gains (losses)

Fair value

8,984 ¥
284

Commodity related
Futures:Petroleum
Selling
BuyingFrozen seafoods
Selling
BuyingNon-ferrous metals
Selling
BuyingCommodity swaps
Petroleum
Selling
BuyingTotal

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

Contract ornotional amount

Fair value

Net recognized
gains (losses)

10,766 ¥
1,618

10,730 ¥
1,684

36 $
66

91,649 $
13,774

91,343 $14,336

306
562

23
—

24
—

(1)
—

196
—

205
—

(9)
—

5,579
1,779

5,575
1,757

4
(22)

47,493
15,14447,45914,957

34
(187)

2,558
13,857

(71)
89

(71)
89
101

21,776
117,962

(604)
758

(604)
758
860

¥

29

$

March 31, 2005
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

¥

Fair value

Contract ornotional amount

7,482 ¥
664

(176) $
(11)

62,195 $5,559

63,693 $5,653(1,498)(94)

10,642
1,235

10,893
1,256

251
21

90,593
10,51392,73010,692

2,137
179

13,389

427

427
512

113,978

3,635¥

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

Fair value

3,635
4,359

$

Millions of yen
Contract ornotional amount¥

Net recognized
gains (losses)

Fair value

7,306 ¥
653

Commodity related
Futures:Petroleum
Selling
BuyingFrozen seafoods
Selling
BuyingNon-ferrous metals
Selling
BuyingCommodity swaps
Petroleum
Selling
BuyingTotal

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

Contract ornotional amount

Net recognized
gains (losses)

Fair value

6,141 ¥
5,082

6,231 ¥
5,796

(90) $
714

52,277 $43,26253,043 $49,340

(766)
6,078

13
7

12
7

1
—

110
60

102
60

8
—

5,938
3,464

6,199
3,602

(261)
138

50,54929,48852,771
30,663(2,222)
1,175

668
3,032

(63)
216

(63)
216
655

5,687
25,811

(536)
1,839

(536)
1,839
5,576

¥

$

5. Pledged assets
At March 31, 2006 and 2005, assets pledged as collateral for short-term loans of ¥378 million ($3,218 thousand) and ¥292 million($2,486 thousand), respectively, and guarantees were as follows:
Thousands of
U.S. dollars

Millions of yen

2006

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

¥

¥

30

10 ¥
4,548
491
64
5,113 ¥

2005

10 $
2,729
436
57
3,232 $

2006

85 $
38,7164,180
545
43,526 $2005

85
23,231
3,712
485
27,513

6. Short-term loans and long-term debt
Weighted average interest rates applicable to short-term loans
outstanding at March 31, 2006 and 2005 were 2.40% and1.36%, respectively.
Long-term debt at March 31, 2006 and 2005, consisted of the following:Thousands of
U.S. dollars

Millions of yen

2006

Issued in 2005, 0.96% unsecured straight bonds, due 2008
Loans from banks, with weighted average interest rates of 0.93% and0.90% at March 31, 2006 and 2005, respectively, maturing seriallythrough 2012
Less amounts due within one year

2005

2006

2005

¥

10,000 ¥— $85,128 $—¥101,350
26,45084,900 ¥88,93017,05071,880 $862,774
225,164
722,738 $

757,044
145,143
611,901

The annual maturities of long-term debt outstanding at March 31,
2006, were as follows:

Years ending March 31,
Millions of yen

2007
2008
2009
2010
2011
Thereafter
Total

¥

¥

26,450 $50
32,62523,67523,5505,000
111,350 $Thousands of
U.S. dollars

225,164426
277,730
201,541
200,477
42,564
947,902

7. Employees’ severance and retirement benefits
The liabilities for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31,
2006 and 2005, 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

¥

¥

31

2006

2005

2006

2005

18,532 ¥(14,739)(4,192)(1,030)
1,532
103 ¥

20,622 $(14,556)(5,388)(1,111)521
88 $

157,759 $(125,470)(35,686)(8,768)13,042877 $

175,551(123,912)(45,867)(9,458)4,435
749

Included in the consolidated statements of income for the years ended March 31, 2006 and 2005, are severance and retirement
benefit expenses comprised of the following:Thousands of
U.S. dollars

Millions of yen

2006

Service costs -benefits earned during the year
Interest costs on projected benefit obligation
Expected return on plan assets
Amortization of actuarial differences
Amortization of prior service costs
Additional retirement benefits
Severance and retirement benefit expenses
Gain on transfer of substitutional portion of employees’ pension fund
Total

¥

¥

Prior service costs and actuarial differences are amortized orrecognized over stated years that do not exceed the average

523 ¥
319
(299)
475
81
37
1,136
(39)
1,097 ¥

2005

469 $
445
(396)
648
(25)
28
1,169
(1,912)(743) $

2006

4,452 $
2,716
(2,545)
4,043
690
315
9,671
(332)
9,339 $

2005

3,993
3,788
(3,371)
5,516
(213)
239
9,952
(16,277)(6,325)remaining service period of active employees expected to receive
benefits under the plan.

Assumptions used for the years ended March 31, 2006 and 2005, are as follows:

Discount rate
Expected rate of return on plan assets
Amortization period of prior service costs
Amortization period of actuarial differences
As explained in Note 2, on January 1, 2005, the Company
obtained approval from the Minister of Health, Labor andWelfare to transfer to the Japanese government of thesubstitutional portion of benefit obligation for employee services
provided in prior years and related pension plan assets.

2006

2005

2.0%
3.0%
14 years
14 years

2.0%
3.0%
14 years
14 years

As a result, the Company recognized a gain of ¥1,912 million($16,277 thousand) for the year ended March 31, 2005.
On May 25, 2005, pension assets for the substitutional portion
maintained by the Employee’ Pension Fund were transferred backto the government’s scheme.

8. Income taxes
The Company is subject to a number of taxes based on income,which, in the aggregate, indicate aggregate statutory income

tax rates in Japan of approximately 40.7% for the years ended
March 31, 2006 and 2005.

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, 2005:
2006

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

—%
—
—
—
—
—
—%

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

2005

40.7%
(0.4)
(9.7)
—
(0.4)
(0.1)
30.1%

2006 has not been disclosed because such difference was lessthan 5%.

32

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2006 and 2005 are as follows:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Temporary differences pertaining to a consolidated subsidiary
Loss on impairment of long-lived assets
Reserve for loss on sale-repurchase agreement of land
Loss on sale-repurchase agreement of land
Land revaluation difference
Accrued bonuses to employees
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Net unrealized holding gains on securities
Land revaluation difference
Other
Total deferred tax liabilities
Net deferred tax liabilities

¥

¥

2006

2005

2006

2005

23,944 ¥
2,404
—
1,719
1,667
675
3,721
34,130(31,425)
2,705

23,961 $
2,258
1,632
—
—
672
4,106
32,629(29,678)
2,951

203,831 $
20,465—
14,633
14,191
5,746
31,676
290,542(267,515)
23,027

203,975
19,222
13,893——
5,721
34,953
277,764(252,643)
25,121

7,166
2,799
1,121
11,086(8,381) ¥

2,656
1,134
629
4,419
(1,468) $61,00323,827
9,542
94,372(71,345) $22,6109,654
5,354
37,618(12,497)

Deferred tax assets and deferred tax liabilities are included in the consolidated balance sheets at March 31, 2006 and 2005,
respectively, as follows:
Thousands of
U.S. dollars

Millions of yen

2006

Current assets: Deferred tax assets
Non-current assets: Deferred tax assets
Current liabilities: Deferred tax liabilities
Non- current liabilities: Deferred tax liabilities¥

1,355 ¥
42
—
9,778

2005

1,855 $
20
—
3,343

2006

11,535 $358—
83,238

2005

15,791
170—
28,458

9. Stockholders’ equity
The maximum amount that the Company can distribute as
dividends is calculated based on the non-consolidated financial
statements of the Company in accordance with the Commercial
Code.

Under the Commercial Code of Japan, the entire amount of theissue price of shares is required to be accounted for as capital,
although a company may, by resolution of its Board of Directors,
account for an amount not exceeding one-half of the issue priceof the new shares as additional paid-in capital, which is included
in capital surplus.
The Commercial Code provides that an amount equal to atleast 10% of cash dividends and other cash appropriations shallbe appropriated and set aside as a legal earnings reserve until
the total amount of legal earnings reserve and additional paid-in
capital equals 25% of common stock. The legal earnings reserve
and additional paid-in capital may be used to eliminate or reducea deficit by resolution of the stockholders’ meeting or may becapitalized by resolution of the Board of Directors. On condition
that the total amount of legal earnings reserve and additional
paid-in capital remains being equal to or exceeding 25% ofcommon stock, they are available for distribution by the
resolution of stockholders’ meeting. Legal earnings reserve is
included in retained earnings in the accompanying financial
statements.

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 stockholders’equity of the accompanying consolidated balance sheets until
realized. The amounts are shown net of applicable income tax.
The revaluation of the land was determined based on adeclared land value in accordance with Article 2, Paragraph 1, of
the Enforcement Ordinance Concerning Land Revaluation withcertain necessary adjustments.
As of March 31, 2006, the carrying amount of the land after
the above one-time revaluation exceeded the market value by¥2,123 million ($18,073 thousand).

33

10. Leases
Finance leases
As lessee
Total lease payments, including financing charges, under financeleases that do not transfer ownership of the leased property to

the Company and its consolidated subsidiaries for the years
ended March 31, 2006 and 2005, were ¥437 million ($3,720
thousand) and ¥348 million ($2,962 thousand), respectively.

Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligations under finance leases,
depreciation expense and interest expense of finance leases that do not transfer ownership of the leased property to the lessee on an“as if capitalized” basis as of and for the years ended March 31, 2006 and 2005, were as follows:

As of March 31, 2006
Acquisition
cost

Other property and equipment
Other assets
Total

¥
¥

Millions of yen
Accumulated
depreciation

1,862 ¥
150
2,012 ¥

As of March 31, 2005

802 ¥
79
881 ¥

Acquisition
cost

1,060 $
71
1,131 $¥¥Net leased
property

602 ¥
52
654 ¥

Depreciation expense and interest expense of finance leases that
do not transfer ownership of the leased property are notreflected in the accompanying consolidated statements ofincome. Depreciation expense, computed by the straight-line
method, was ¥409 million ($3,482 thousand) and ¥323 million

Net leased
property

6,827 $
673
7,500 $

9,024
604
9,628

Thousands of U.S. dollars

Accumulated
depreciation

1,309 ¥
151
1,460 ¥

Thousands of U.S. dollars
Accumulated
depreciation

15,851 $
1,277
17,128 $Millions of yen
Acquisition
cost

Other property and equipment
Other assets
Total

Net leased
property

Acquisition
cost

707 $
99
806 $

11,144 $
1,285
12,429 $Accumulated
depreciation

Net leased
property

5,125 $
443
5,568 $

6,019
842
6,861

($2,750 thousand) for the years ended March 31, 2006 and2005, respectively. Interest expense, computed by the interest
method, was ¥30 million ($255 thousand) and ¥21 million ($179
thousand) for the years ended March 31, 2006 and 2005,
respectively.

Obligations, excluding financing charges, under such non-capitalized finance leases as of March 31, 2006 and 2005, were as follows:
Thousands of
U.S. dollars

Millions of yen

2006

Due within one year
Due after one year
Total

¥

2005

444 ¥
709
1,153 ¥

¥

2006

300 $
521
821 $

2005

3,780 $
6,035
9,815 $

2,554
4,435
6,989

Operating leases
As Lessee
Obligations under operating leases as of March 31, 2006 and 2005, were as follows:
Thousands of
U.S. dollars

Millions of yen

2006

Due within one year
Due after one year
Total

¥
¥

34

2005

50 ¥
25
75 ¥

2006

40 $
51
91 $

2005

425 $
213
638 $

341
434
775

11. Segment information
Industry segment information
The Companies’ operations are classified into five industry
segments as follows:
Steel: Steel bars and shapes, steel plates and sheets, special
steels, wire products, steel pipes, and steelmaking raw
materials

Non-ferrous metals: Nickel, copper, aluminium, lead, zinc, tin,
antimony, other metals, and solar cellrelated materials and products
Foods: Frozen seafoods and meat products
Petroleum and chemicals: Petroleum products, chemical
products, and cement
Other business: Lumber, machinery, and other

Segment information by business category for the years ended March 31, 2006 and 2005, is as follows:Year ended March 31, 2006
Steel

Net sales
Costs and expenses
Operating income
AssetsDepreciation
Loss on impairment oflong-lived assets
Capital expenditure¥¥¥

Non-ferrous
metalsMillions of yen
Petroleum
Other
and chemicals
business

Foods

614,046 ¥599,575
14,471 ¥217,013 ¥1,334

139,109 ¥133,750
5,359 ¥
39,471 ¥75

87,624 ¥86,875749 ¥
37,441 ¥33

210,255 ¥
207,746
2,509 ¥
36,042 ¥
19

434
3,131

10
58

—
32

—
231

Year ended March 31, 2006
Steel

Net sales
Costs and expenses
Operating income
AssetsDepreciation
Loss on impairment oflong-lived assets
Capital expenditure

Non-ferrous
metals$ 5,227,258 $ 1,184,209 $
5,104,069
1,138,589$ 123,189 $
45,620 $$ 1,847,391 $ 336,009 $11,356638
3,695
26,65485
494

46,673 ¥ 1,097,707 ¥
44,906
1,072,852
1,767 ¥
24,855 ¥13,092 ¥ 343,059 ¥
421
1,882
—
587

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

Foods

Total

Corporate— ¥ 1,097,707
5,165
1,078,017(5,165) ¥ 19,690
69,961 ¥ 413,020
87
1,969

444
4,039

Total

Consolidated

7
68

Corporate

451
4,107

Consolidated

745,927 $ 1,789,861 $ 397,318 $ 9,344,573 $— $ 9,344,573
739,550
1,768,503
382,276
9,132,987
43,9699,176,956
6,377 $ 21,358 $ 15,042 $ 211,586 $ (43,969) $ 167,617
318,728 $ 306,819 $ 111,450 $ 2,920,397 $ 595,565 $ 3,515,962
281
162
3,584
16,021741
16,762
—
272

—
1,966

Corporate costs and expenses mainly consist of expenses ofadministrative departments.

—
4,997

3,780
34,383

59
579

3,839
34,962

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

35

Year ended March 31, 2005
Steel

Net sales
Costs and expenses
Operating income
AssetsDepreciation
Loss on impairment oflong-lived assets
Capital expenditure¥¥¥

Non-ferrous
metalsMillions of yen
Petroleum
Other
and chemicals
business

Foods

Corporate

99,507 ¥96,524
2,983 ¥
27,950 ¥90

82,187 ¥80,755
1,432 ¥
30,998 ¥36

155,727 ¥
153,518
2,209 ¥
26,797 ¥20

48,385 ¥46,9101,475 ¥
12,075 ¥489

933,956 ¥
906,974
26,982 ¥324,109 ¥
1,958

1,129
866

30
41

—
13

—
8

—
455

1,159
1,383

Year ended March 31, 2005
Steel

Net sales
Costs and expenses
Operating income
AssetsDepreciation
Loss on impairment oflong-lived assets
Capital expenditure

Total

548,150 ¥529,267
18,883 ¥
226,289 ¥1,323

Non-ferrous
metalsThousands of U.S. dollars
Petroleum
Other
and chemicals
businessFoods$ 4,666,298 $4,505,550$ 160,748 $$ 1,926,356 $
11,263

847,085 $821,691
25,394 $237,933 $
766

9,611
7,372

256
349

Total

Consolidated— ¥ 933,956
4,891
911,865(4,891) ¥ 22,091
52,412 ¥ 376,521
65
2,023
16
155

Corporate

1,175
1,538

Consolidated

699,642 $ 1,325,675 $ 411,892 $ 7,950,592 $— $ 7,950,592
687,452
1,306,870
399,336
7,720,899
41,636
7,762,535
12,190 $ 18,805 $ 12,556 $ 229,693 $ (41,636) $ 188,057
263,880 $ 228,118 $ 102,792 $ 2,759,079 $ 446,173 $ 3,205,252
306
170
4,163
16,668553
17,221—
111—
68

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

—
3,873

9,867
11,773136
1,319

10,00313,092

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, 2006 and 2005, were as follows:Year ended March 31, 2006

Millions of yen
Asia

Overseas net sales
Percentage of consolidated net sales¥

164,594 ¥
15.0%

Other
areas

22,760 ¥2.1%

Thousands of U.S. dollars
Total

Other
areas

Asia

187,354 $ 1,401,158 $
17.1%

Total

193,751 $ 1,594,909“Asia” consists principally of sales to China, South Korea, Thailand and Singapore.
“Other areas” consist principally of sales to the U.S.A. and Germany.
Year ended March 31, 2005

Millions of yen
Asia

Overseas net sales
Percentage of consolidated net sales¥

129,483 ¥
13.9%

Other
areas

13,124 ¥1.4%

Thousands of U.S. dollars
Total

142,607 $ 1,102,265 $15.3%“Asia” consists principally of sales to China, South Korea, Thailand and Singapore.
“Other areas” consist principally of sales to the U.S.A. and Germany.

36

Asia

Other
areas

Total

111,722 $ 1,213,987

12. Contingent liabilities
At March 31, 2006 and 2005, the Companies were contingently liable as follows:
Thousands of
U.S. dollars

Millions of yen

2006

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

¥

2005

5,903 ¥
1,455

2006

3,765 $
1,493

2005

50,251 $
12,38632,051
12,71013. Related party transactions
Transactions with a close relative of directors of the Company for the years ended March 31, 2006 and 2005, were as follows:
Thousands of
U.S. dollars

Millions of yen

Type of transaction

2006

Real-estate
Rents received

¥

2005

6 ¥

2006

6 $

2005

51 $

51

14. Impairment of long-lived assetsof the business entity to which the assets belong. As a result of
these procedures, loss on impairment of long-lived assets of¥451 million ($3,839 thousand) and ¥1,175 million ($10,003
thousand) for the years ended March 31, 2006 and 2005,
respectively, were recognized, in other expenses in the
consolidated statements of income.

Due to the continuous decline in land prices in Japan, theCompanies reduced the carrying amount of the long-lived assetsthat were impaired to the recoverable amount. To assess therecoverable amount of the long-lived assets, appraised prices are
principally used as the basis for the measurement. For the
purpose of recognition and measurement, the Companies
grouped the long-lived assets, principally based on the location

The following tables summarize the losses on impairment of long-lived assets in the years ended March 31, 2006 and 2005, respectively.

Year ended March 31, 2006
Location

PurposeNarashino, Chiba
Suminoe, OsakaAma, Aichi
Shima, Mie
Total

Logistics center
Logistics center
Logistics center
Idle assets

Location

PurposeNarashino, Chiba
Suminoe, OsakaAma, Aichi
Shima, Mie
Total

Logistics center
Logistics center
Logistics center
Idle assets

Millions of yen
Land

¥

Total

258 ¥
155
31
7
451 ¥

¥

258
155
31
7
451

Thousand of U.S. dollars
Land

$

$

37

2,196 $
1,319
264
60
3,839 $

Total

2,196
1,319
264
60
3,839

Year ended March 31, 2005
Location

PurposeNarashino, Chiba
Suminoe, OsakaAma, Aichi
Kurokawa, Miyagi
Shima, Mie
Total

Logistics center
Logistics center
Logistics center
Logistics center
Idle assets

Location

PurposeNarashino, Chiba
Suminoe, OsakaAma, Aichi
Kurokawa, Miyagi
Shima, Mie
Total

Logistics center
Logistics center
Logistics center
Logistics center
Idle assets

Millions of yen
Land

¥

¥

674 ¥
359
119
8
15
1,175 ¥

Total

674
359
119
8
15
1,175

Thousand of U.S. dollars
Land

$

$

15. Subsequent events
At the ordinary general meeting of stockholders of the Company
held on June 29, 2006, the following appropriation of retained
earnings was approved:
Millions of yen

Cash dividends (¥5 per share)
Bonuses to directors
Transfer to legal reserve¥

1,057 $
150
121

Thousands of
U.S. dollars

8,998
1,277
1,030

38

5,738 $
3,056
1,013
68
128
10,003 $

Total

5,738
3,056
1,013
68
128
10,003

Independent Auditors’ Report

To the Stockholders and Board of Directors of
Hanwa Co., Ltd.:We have audited the accompanying consolidated balance sheets of Hanwa Co., Ltd.
(a Japanese corporation) and consolidated subsidiaries as of March 31, 2006 and 2005, and therelated consolidated statements of income, stockholders’ equity and cash flows for the years
then ended, expressed in Japanese yen. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to independently express an
opinion on these 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, 2006 and 2005, 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, 2006 and 2005 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 29, 2006

39

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 461-8614, Japan
Tel: 81-52-952-8800 Fax: 81-52-952-9300
Employee: 922 (consolidated: 1,519)
Independent Auditor: KPMG AZSA & Co.
Domestic Offices
OFFICE
Hokkaido
TohokuKyushuADDRESS
Kita-sanjo Bldg., 3-1-25, Kita-sanjo Nishi, Chuo-ku, Sapporo 060-0003, Japan
Sendai Daiichi Seimei Tower Bldg., 4-6-1 Ichiban-cho, Aoba-ku, Sendai 980-0811, Japan
Takeyama Hakata Bldg., 1-13-6, Hakataeki Higashi, Hakata-ku, Fukuoka 812-0013, JapanTELEPHONE
81-011-219-7375
81-022-227-7981
81-092-471-7121

FAX
81-011-219-7376
81-022-227-7969
81-092-471-7060

Overseas Offices
TELEPHONE

FAXNorth and South America
New York
Parker Plaza, 6th Floor, 400 Kelby Street, Fort Lee, New Jersey 07024, U.S.A.
Seattle900 4th Avenue, Suite 1640, Seattle, Washington 98164, U.S.A.
HoustonSuite 515, 9800 Richmond Avenue, Houston, Texas 77042, U.S.A.
Los Angeles
1920 Main Street, Suite 1020, Irvine, California 92614, U.S.A.
VancouverSuite 502, 1001 West Broadway Vancouver, British Columbia, V6H 4B1, Canada
BogotaCarrera 9A No. 99-02, Oficina 804, Edificio CITIBANK Bogota, D.C. Colombia

OFFICE

1-201-363-4500
1-206-622-2102
1-713-978-7904
1-949-955-2780/2781
1-604-876-1175
57-1-618-2059

1-201-346-9890
1-206-622-6464
1-713-978-7790
1-949-955-2785
1-604-876-1085
57-1-618-2056

Asia
Seoul
Beijing
Qingdao
DalianShanghai
Chongqing
Fuzhou82-2-551-5387
86-10-6590-8333
86-532-8-577-9990
86-411-8368-6954
86-21-6237-5260/5265~7
86-23-6381-1101
86-591-83354165

82-2-551-5575
86-10-6590-8340
86-532-8-577-9630
86-411-8368-6934
86-21-6237-5268/5269
86-23-6381-7385
86-591-83345202

Guangzhou
Wuhan
DongguanZhongshan
Hong Kong
Taipei
Kaohsiung
Bangkok
Kuala Lumpur
Singapore
Tawau
Ho Chi Minh
Jakarta
Mumbai

ADDRESS

Room 1705, Korea World Trade Center Bldg., 159-1, Samsung-Dong, Kangnam-ku, Seoul, 135-729, R.O.Korea
Room 512-516, Beijing Fortune Building, 5 Dong San Huan Bei-lu, Chaoyang District, Beijing 100004, P.R.China
Crowne Plaza Qingdao, Room No.601, Hongkong Middle Road 76, Qingdao City, Shangdon Province 266071, P.R.China
Senmao Bldg., 20F, 147 Zhongshan Street, Dalian, Liaoning Province 116011, P.R.China
Room 902/904-907, Aetna Tower,No.107 Zhunyi Road, Shanghai 200051, P.R.China
Room 2203, Metropolitan Tower, 68 Zhon Rong Lu, Central District, Chongqing 400010 P.R.China
Room 2501, Lippo Tianma Plaza, No.1 Wu Yi Road, Fuzhou City, Fujian Province 350003, P.R. China
Unit 2005-2007, 20th Floor, Dong Shan Plaza, 69 Xian Lie Zhong Road, Guangzhou City,
Guangdong Province 510095, P.R. China
Room 18H, Credit Cooperative Building, No. 618 Jianshe Road, Wuhan 430015, P.R.China
Longxi Industrial Zone, Zhouxi Management Area, Nan Cheng District, Dongguan, Guangdong Province 511715 P.R.China
Unit 1909-1910, 19th Floor, Bank Of China Tower, 18 Zhongshan 3rd Road, Zhongshan, Guangdong Province P.R.China
Unit 3201-3 32nd Floor, Vicwood Plaza, 199 Des Voeux Road Central, Hong Kong
Room 303 3rd Floor. No. 79, Chung Shan North Road Sec.2, Taipei, Taiwan, R.O.C.
Room B, 17th Floor, No.7 Su-Wei 4th Road, Kaohsiung, Taiwan, R.O.C.
17th Floor, Vorawat Bldg., 849 Silom Road, Bangrak, Bangkok, 10500 Thailand
Suite 8-12B-3, Level 14 (12B), Menara Olympia 8, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia
20 Cecil Street, #20-06/07 Equity Plaza, Singapore, 049705
P.O. Box 1231 91037 Tawau, Sabah, Malaysia
7/C Office Service International Centre, No. 8 Nguyen Hue Street, District 1, Ho Chi Minh City, Vietnam
Menara Cakrawala 5th Floor Jalan M.H. Thamrin 9, Jakarta, 10340 Indonesia
803, Embassy center, Nariman point, Mumbai 400-021, India

Europe, Africa and Middle East
London2nd Floor, Finland House, 56 Haymarket, London, SW1Y 4RN. U.K.
Wien
Landstrasser Hauptstrasse 71/2 A1030 Wien, Austria
Tehran6th Floor, Building, No.10 8th Street, Mirzaye-Shirazi Avenue, Tehran 15967, Iran
Kuwaitc/o Al-Sabih Engineering & Trading Co. P.O. Box No. 1366, Safat 13014, Kuwait
RiyadhP.O. Box 68974, Riyadh 11537, Saudi Arabia
Jeddahc/o Office No. 219, Kaki Center P.O. Box 1224, Jeddah 21431, Saudi Arabia
Dubai
Dubai Airport Free zone, 3rd East Wing, 4th Fl., Room#444 P.O.Box 54620, Dubai, U.A.E.

40

86-20-8732-0451

86-20-8732-0402

86-27-8549-7132
86-769-2240-6418
86-760-332-0706
852-25450110
886-2-2560-2214~17886-7-338-5508~10
66-2-635-1230
60-3-2070-4634
65-6536-7822
60-89-750016~7
84-8-8225715/29/36
62-21-3983-3211
91-22-2283-1222

86-27-8578-7196
86-769-2240-6448
86-760-332-0696
852-25422544
886-2-2571-0693
886-7-338-5433
66-2-635-1220/1221
60-3-2078-2380
65-6536-7855
60-89-750019
84-8-8225725
62-21-3983-3212
91-22-2282-2060

44-20-7839-4448
43-1-717-28-200
98-21-8890-3537
965-243-7259
966-1-478-3022
966-2-661-0796
971-4-214-9527

44-20-7839-3994
43-1-717-28-110
98-21-8889-9853
965-243-7263
966-1-479-2459
966-2-661-0796
971-4-214-9726

Board of Directors

Investor Information(As of July 1, 2006)(As of March 31, 2006)

Date of Establishment
April 1947

President

Shuji Kita

北修爾

Stated Capital¥45,651 million ($388,618 thousand)Senior Managing Directors

Takashi Kyui
Hironari Furukawa
Noriyuki Hanafusa

休井

匡

古川

弘成

花房

伯行

Number of Shares of Common Stock Issued
211,663,200 shares
Number of Stockholders
19,946

Managing Directors

Tetsuro Akimoto
Yoshifumi Nishi

秋元

哲郎

西

吉史

東田

和四

横田

和夫

大本

博

北

卓治

多田

孝治

馬締

和久

川西

英夫

豊田

雅孝

芹澤

浩

辻仲

弘明

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

Directors

Kazushi HigashidaKazuo Yokota
Hiroshi Omoto
Takuji Kita
Takaharu Tada
Kazuhisa Majime
Hideo Kawanishi
Masataka Toyoda
Hiroshi Serizawa
Hiroaki Tsujinaka
Hiroshi Ebihara
Yukio Saito
Akihiko Ogasawara
Yoshiaki Matsuoka
Tadahiko Kaida

海老原

Transfer Agent
The Sumitomo Trust and Banking Co., Ltd.

齋藤

弘
幸雄

小笠原朗彦
松岡

良明

貝田

忠彦

Corporate Auditors

Shosaburo Bando
Hironari Masago
Toshiaki Taguchi
Hajime Yosano

坂東祥三郎
真砂

博成

田口

敏明

与謝野

肇

41

Printed in Japan