阪和興業株式会社

Annual Report 2011
For the year ended March 31, 2011

http://www.hanwa.co.jp

2011.8 Printed in Japan

Profile

Principal Shareholders
Name of Shareholder

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

Number of Shares(thousands)

Percentage of Total
Issued Share (%)

19,921
10,438
7,630
4,818
4,816
4,702
4,466
3,500
2,631
2,614

9.6
5.0
3.7
2.3
2.3
2.3
2.2
1.7
1.3
1.3

demonstrated new capabilities as a trading company by handling seafood products, rides forJapan Trustee Services Bank, Ltd. (Trust Account) ..................................................
The Master Trust Bank of Japan, Ltd. (Trust Account).............................................
Sumitomo Mitsui Banking Corporation....................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 9)................................................
Hanwa Clients' Stock Investment Association .........................................................
Trust & Custody Services Bank, Ltd. (Investment Trust Account)...........................
Hanwa Employees' Stock Investment Association...................................................
BBH FOR FIDELITY LOW-PRICED STOCK FUND..........................................................
MELLON BANK, N.A. AS AGENT FOR ITS CLIENT MELLON OMNIBUS US PENSION.....
The Dai-ichi Mutual Life Insurance Company...........................................................

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

Note: The Company holds 4,391,507 shares of treasury stock, which is excluded from the major shareholders listed above.

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

Breakdown by Type of Shareholder

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

Contents
01

To Our Shareholders

02

Interview with the President

04

At a Glance

06

Review of Operations

13

Topics14

Corporate Governance

16

CSR Activities

18

Financial Section

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

Consolidated Financial Highlights
For the years ended March 31, 2011 and 2010.

22		 Financial Statements &

2011

2010

2011

¥ 1,396,103
13,854
5,794
6,104¥ 1,116,629
11,42011,57914,537$16,790,174
166,615
69,681
73,410¥¥$ 6,407,673
1,328,431

532,798
110,459

46

Corporate Information

443,445
106,855

Yen

Notes

Global Network

Per share data:
Net income
Cash dividends

¥

27.95
12.00

Net Sales

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

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

¥

$

55.46
12.00

Stock Price Range and Trading Volume (Common Stock)should be noted that there is a possibility
for actual results to differ significantly
owing to such factors as changing socialand economic conditions.

Nikkei Stock Average (closing)

Stock Price

(¥)

(¥)

0.336
0.144

800

15,000600

10,000

400

5,000

200

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

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

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

5,000 5,0005,000

3,000 3,0003,000

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

ForeignForeign
corporations
corporations
16.4% 16.4%

U.S. dollars (Note)(Millions of yen)
(Millions(Millions
of Yen)of Yen)(Millionsof Yen)this annual report reflect the assumptions
currently available information. However, it

Operating Income

50,000–1,000,000
50,000–1,000,000
26.3% 26.3%

Individuals
Individuals
and andothers others
31.0% 31.0%

Note: The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥83.15 = $1.00.

and beliefs of management based on

1,000,000–
1,000,000–
49.1% 49.1%

1,000–50,000
1,000–50,000
24.5% 24.5%

Thousands of
U.S. dollars (Note)

Millions of yen

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

and Analysis

45–1,000–1,000
0.1% 0.1%

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

19		 Management’s Discussion

		JapaneseJapanesefinancialfinancial
institutions
institutions
33.6% 33.6%

Other domestic
Other domestic
corporations
corporations
15.0% 15.0%

new unique businesses.

18		 Five-Year Summary		stock 2.1%
TreasuryTreasury
stock 2.1%
Japanesebrokerage
Japanesebrokerage
firms firms
1.9% 1.9%

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

Trading
Volume(Millions of shares)

0

40
30
20
10

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

0
07 0 07
08 0708
09 0809
10 0910
11 1011 11

0

0
07

007
08 0708
09 0809
10 0910
11 1011

11

0

0
07

007
08

4
5
2009
08
09
07

09
10
08

10
11
09

11
10

6

7

8

9

10

11

12

1
2
2010

3

4

5

6

7

8

9

10

11

12

1
2
2011

3

0

11

| HANWA AR 2011 | 47

To Our Shareholders

Hanwa supplies a broad range of products, including steel, metals andalloys, non-ferrous metals, food products, petroleum and chemicals, lumber,machinery and many other items, to an equally diverse of customers.
Since our inception, we have based operations on the mission of serving
our customers as “distribution specialists.” Year after year, we have used
specialized skills and an extensive service network to meet customers’ needs
with precisely the right solutions. This skill has earned Hanwa a reputation
as a trading company in which customers know they can place their trust,
receiving outstanding products and services in return.
In the fiscal year ended March 31, 2011, Hanwa’s operating results
Left: Shuji Kita, Chairman
Right: Hironari Furukawa, President

improved in terms of sales, thanks to the recovery of the overall economy toa certain level. The success was also attributable to Hanwa’s commitment tooffering to customers through the delivery of value-added products andservices as well as ideas anchored on our expertise, all in an effort tofunction as each customer’s “best partner,” capable of solving theirchallenges by working closely with them.
On April 1, 2011, a new management team was instituted with Shuji
Kita serving as Chairman, and Hironari Furukawa as President. The new,stronger management team will allow Hanwa to successfully cope withtoday’s difficult economic environment and boost profitability so that thetrust accorded to us by our shareholders will be rewarded.		
The sincere advice and support of all stakeholders forms the basis for all
our activities. We place great value on every customer relationship together
with the accompanying opportunities. As we pursue further growth andprogress, we will retain our devotion to contributing to society by
performing functions that are unique to Hanwa, while serving as “a trading
company known for outstanding footwork.”

Shuji Kita
ChairmanHironari Furukawa
President| HANWA AR 2011 | 01

Interview with the President

Looking at the Present and the Future of the Hanwa GroupFirst of all, I would like to thank you
for your continued support. It is mypleasure to provide this overview ofoperating results for fiscal 2010, thefiscal year ended March 31, 2011.

share your opinion about the economic environment of the fiscal year
Q 1 Please
ended March 31, 2011.
The world economy during the period was underscored by thegeneral firmness of demand, especially from emerging nations;however, recovery momentums diminished somewhat, as
negative factors began to surface, including sovereign risk inEurope and the slowdown in the U.S. economic recovery. Evenin China, which has been a key driver behind the global
economic recovery, the government tightened the fiscal reins ina move to correct its partially overheated economy.
In Japan, demand for construction and capital goods
remained at a low level, and the export-led sectors that were in
the recovery mode began to experience sluggishness due to achange in the underlying tone of external demand and thestronger yen. The Great East Japan Earthquake of March 2011
further clouded the visibility of Japan’s outlook.

Q 2 Please summarize operating results of the fiscal year ended March 31, 2011.
The Group posted consolidated net sales of¥1,396,103 million, representing an increase of
25.0 % fro m th e p rev io u s fi s c al y ear. Thi s
expansion was due to improvements in the general economic
picture compared with the previous fiscal year, although thepace of recovery slowed somewhat at the midpoint of the
fiscal year. Operating income rose 21.3%, to ¥13,854 million,A

on the back of a rebound in earnings derived from sales. Net
income amounted to ¥5,794 million, which represented adrop of 50.0% from the previous fiscal year, in which theCompany had enjoyed a reduction in income taxes paid andthus higher earnings as a result of the recording of deferred
tax assets in conjunction with real estate transfers.

Q 3 What is your outlook for the fiscal year ending March 31, 2012?
A
02 | HANWA AR 2011 |For the world economy, the slowdown in the
U.S. and European economic recovery has adestabilizing effect on the financial markets andforeign exchange movements. China’s economy is still
supported by real demand, but its government is rolling out anincreasing number of financial regulations and other moves

with corrective undertones to curb inflation.
Japan’s economy is plagued by a low level of domestic
demand for capital goods and construction, among others.
Concerns about shrinking demand have been mounting,especially since the government’s incentives designed to boost
consumption came to an end. Japan’s manufacturing sector is
supported by exter nal demand to a large extent, withperformance resting heavily on fluctuating external demandand foreign exchange movements. Moreover, if little progress
is made in the restoration of procurement and distribution
systems for raw materials and components, damaged by theearthquake and short fall of the power supply, the economic

Q4

How do you plan to cope withbusiness challenges?

In May 2010, the Group launched its Sixth
Medium-Term Business Plan for the three-year
period from April 2010 to March 2013. It calls forthe actions needed to adapt to rapid changes in the businessenvironment and build a highly unique and powerfuloperational base and profit structure. We are rolling out actions
in line with the growth strategies mapped out in the plan.
Now in the second year of the plan, the Group is
working aggressively to build a solid profit structure byproperly addressing the saturated market of Japan on one
hand and growing markets elsewhere on the other, continually
responding precisely and rapidly to meet users’ requirements,
and actively seeking new business opportunities.

A

sluggishness could be exacerbated both in Japan and abroad.
Uncertainty looms on the economic horizon.
Despite the difficult business environment, the Group is
striving to maintain and even improve its business performance,by accurately assessing demand trends for each businesssegment, implementing appropriate sales and inventory
strategies that reflect customers’ needs, and proactively seeking
new clients to expands its customer base. For the fiscal year
ending March 31, 2012, we project ¥1,485 billion in net sales(up 6.4%), ¥17.4 billion in operating income (up 25.6%), ¥15
billion in ordinary income (up 11.2%) and ¥9 billion in net
income (up 55.3%).

Q5

Please share some additional
thoughts with yourshareholders and investors.

We offer our deepest sympathy to ourshareholders and their families affected by theGreat East Japan Earthquake and sincerely hopefor the earliest possible recovery of the affected areas.
Deeper uncertainty now looms over the Japanese
economy in the aftermath of the March 2011 earthquake;nevertheless, the Hanwa Group remains committed to raising its
comprehensive corporate value even further and achieving
sustainable corporate growth to boost customer satisfaction. To
do so, we are acting vigorously to put into practice the businessstrategies that allow optimal execution of the Sixth MediumTerm Business Plan.
In this regard, in all our efforts, we greatly appreciate ourshareholders’ continued support, guidance and encouragement.

A

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

Strategies for growth
1) Strengthen capabilities in our core business as a trading company withstrong ties to end users
2) Grow rapidly in overseas markets by enlarging the businessnetwork and workforce
3) Reinforce and expand the scope of recycling operations
4) Increase business activities involving the environment and energy5) Make business investments and build partnerships aggressively6) Establish a team of professionals with outstanding skills| HANWA AR 2011 | 03

At a Glance
SectionOverview

Steel

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

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

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

Food
PRODUCTS

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

Petroleumandchemicals

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

Other
business

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

04 | HANWA AR 2011 |Main Items• Steel bars
• Steel shapes• Steel sheets• Wire rods
• Special steel• Steel scrap• Nickel• Chromium• Silicon• Manganese• Solar cell materials

Net Sales(Millions(Millionsof yen)of yen)
Net sales
Net sales
1,000,000
1,000,000
800,000
800,000

400,000
400,000
200,000
200,000

8.7%8.7%

200,000
200,000

13.2%
13.2%

150,000
150,000
100,000
100,000
50,00050,000• Petroleum: gasoline, kerosene,
heavy oil, LPG, bunker oil• Chemical: PE, PP, householdproducts, interleaving paper,
used paper02007200720082008200920092010201020112011(Millions(Millionsof yen)of yen)
Net sales
Net sales
80,00080,000

4.1%4.1%

40,00040,000
20,00020,000
02007 20072008 20082009 20092010 20102011 2011

Net Sales
Net Sales
Composition
Composition
Segment
IncomeSegment
IncomeComposition
Composition(Millions(Millionsof yen)of yen)
Net sales
Net sales
100,000
100,000

5.7%5.7%

80,00080,000

10.4%
10.4%

60,00060,000
40,00040,000
20,00020,000
002007 20072008 20082009 20092010 20102011 2011

Net Sales
Net Sales
Composition
Composition
Segment
IncomeSegment
IncomeComposition
Composition(Millions(Millionsof yen)of yen)
Net sales
Net sales
400,000
400,000

26.5%
26.5%

300,000
300,000

12.8%
12.8%

200,000
200,000
100,000
100,000
002007 20072008 20082009 20092010 20102011 2011

(Millions(Millionsof yen)of yen)
Net sales
Net sales
120,000
120,000• Lumber & Plywood• Leisure facilities• Industrial machinery

Net Sales
Net Sales
Composition
Composition
Segment
IncomeSegment
IncomeComposition
Composition

4.1%4.1%

60,00060,0000• Prawns and shrimp• Crab• Salmon• Horse mackerel• Mackerel• Capelin2007200720082008200920092010201020112011

Net Sales
Net Sales
Composition
Composition
Segment
IncomeSegment
IncomeComposition
Composition(Millions(Millionsof yen)of yen)
Net sales
Net sales
250,000
250,000

0• Copper• Aluminum• Zinc• Lead
• Tin

0

48.3%
48.3%
55.0%
55.0%

600,000
600,000

0Composition of
Net Sales/Segment Income

100,000
100,000

Net Sales
Net Sales
Composition
Composition
Segment
IncomeSegment
IncomeComposition
Composition

6.7%6.7%
4.5%4.5%

80,00080,00060,00060,00040,00040,00020,00020,000002007200720082008200920092010201020112011

Net Sales
Net Sales
Composition
Composition
Segment
IncomeSegment
IncomeComposition
Composition

Note: Effective from the year ended March 31, 2011, in line with the application of the “Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Statement No. 17, revised March 27, 2009), the Company
changed its classification of consolidated business segments from one based on product similarities to one based on a “management approach.” Segment data for prior years have not been adjusted retroactively to match the new classification.

| HANWA AR 2011 | 05

Review of Operations

Steel (Domestic)

Fiscal 2010 Results
Japan’s steel industry experienced drasticchanges in the external environment infiscal 2010. First of all, under the new
system of determining prices of raw
materials, prices are now revised every
three months, instead of the yearly
contracts used previously. Second, Nippon
Steel Corporation and Sumitomo Metal
Industries, Ltd. announced a merger infiscal 2011, which has acted to accelerate
the business consolidation of steelmakers.
Third, the Great East Japan Earthquake
near the end of fiscal 2010 caused thelargest damage in Japan since WorldWar II.

Net Sales Composition

48.3%

06 | HANWA AR 2011 |In this environment, Hanwa moreor less achieved its projected levels ofsales and operating income. Demand
recovered to 80% of the level prior to
the global financial crisis triggered by thecollapse of Lehman Brothers. In particular,
the nation’s manufacturing industry
remained robust, aided by the government
subsidy program for eco-cars and theeco-point system for energy-efficient
products, while the housing industry
performed well.
Reflecting blast furnace steelmakers’
move to raise prices in line with surging
prices of raw materials in the first halfof fiscal 2010, the market price rose in
the April–June quarter, followed by aslight decline in the July–September
quarter due to changes in supply anddemand overseas.
In the second half, falling demand
after the end of the government subsidy
program for eco-cars forced steelmakers
to suspend price hikes continued fromthe first half. As a result, the market
price declined further in the October–
December quarter. In the January–March
quarter, the market price rose on speculative demand in anticipation of higher
steel prices after prices of raw materials
resumed their upward trend. However,
the earthquake caused extensive damage
to manufacturing industries, which
discouraged the price to go up.

Looking Ahead and Key
Strategies
The major concern for the first half offiscal 2011 is how the Great East Japan
Earthquake in March will affect the steelbusiness. The construction industry is
expected to benefit from reconstruction
efforts in the second half. In particular,
the rebuilding of infrastructure, such as
riverbanks, roads, railways and telecommunications networks, is a challengethat must be addressed urgently.
Concurrently, the auto and other manufacturing industries are expected to
expand production sharply to make up
for the disruption in the first half.

Steel prices are expected to drop, as
manufacturing industries have been
forced to cut operations sharply due to theearthquake in the first half. In addition,
price gaps between ordinary steel products
manufactured by electric furnace steelmakers and blast furnace steelmakers arelikely to widen, and low prices of products
manufactured by electric furnace steelmakers and imported steels will dominate
the market. We project that prices will
start to rise in the second half, backed byrecovery of manufacturing industries anddemand related to reconstruction efforts.
Meanwhile, it is necessary to closely
monitor the development of the Chinese
market and pricing policies of electric
furnace steelmakers.
Amid the impact of the earthquake
and the acceleration of industry reorganization in the run-up to the merger of
Nippon Steel and Sumitomo Metal
Industries, Hanwa will enter the second
year of its Sixth Medium-Term Business
Plan. The domestic steel business has set
up specific project teams to pursue
measures in the following areas: (1)expansion of domestic sales bases to tap
niche demand in provincial markets; (2)focused efforts to conduct business withsmall and medium-sized companies witha healthy business outlook; (3) bolsteringof sales initiatives for urban redevelopment and other projects; and (4)strengthening of environment andenergy-related businesses.

Steel (Overseas)
Fiscal 2010 Results
Hanwa’s steel exports totaled 1.45
million tons in fiscal 2010, up 2.3%
from the previous year. The world’s
crude steel output totaled 1.4 billion
tons on a calendar-year basis, up 15.2%
year on year, reflecting economic
recovery around the world, supported
by demand in emerging countries.
Japan’s total steel exports amounted
to 43.64 million tons in fiscal 2010,
representing a year-on-year increase of
11.9%, while exports of ordinary steels
also rose 13% from the previous year to29.16 million tons.
Export prices of steel remained on
an upward trend throughout the year,
buoyed by sharp price hikes in iron ores
and coking coals. Reflecting theincreased oligopoly of raw material
producers mainly in Australia and Brazil,
the ability of steelmakers to negotiate
on prices declined in comparison. Now
that contract prices of raw materials forsteel are determined every threemonths, it is becoming more difficult toconclude long-term sales contracts forsteel with clients.

China, which influences the supply
and demand of raw materials for steel,reported a high crude steel output of
630 million tons, up 9.2% year on year.
In anticipation of higher prices of main
raw materials, China’s steel prices havegenerally trended upward since thesecond half.
As a result, we saw price fluctuationin fiscal 2010, dominated by the movement on the spot price of Indian ironores purchased by Chinese buyers.

Looking Ahead and Key
Strategies
Going forward, we plan to carry out
aggressive investments overseas, especially in the field of steel sheets andconstruction materials. We will proactively consider our investments, such as
in Nippon EGalv Steel Sdn. Bhd. in
Malaysia, which will enable us to supply
mother coils for the project.
In overseas steel markets, prices arelikely to remain high in general, as longas raw materials are dominated by ahandful of suppliers. On the demandside, demand related to building

infrastructure is accelerating mainly inemerging countries; demand for carsand other consumer goods is expected
to continue to grow especially in China
and India, the two countries in the world
with very large populations.
Concurrently, excess supply may
occur, as steel output in China exceeded
600 million tons in the fiscal year andfurther growth is likely in the current
fiscal year. With China increasing its
influence on the demand side as well,monetary tightening by the Chinese
government may affect demand. If
housing and car industries become
slump, steel prices are certain to fall,
which may lead to an adjustment phaseduring the summer.
We intend to direct more efforts thanever in the Hanwa Group’s target
markets, in addition to China. Specifically,
we opened an office in Chennai, ourthird base in India. We will adopt a longterm perspective and are focusing efforts
in the emerging markets.

| HANWA AR 2011 | 07

Review of Operations

Metals and Alloys
long-term import contracts with polysilicon
manufacturers in Germany and South
Korea. We also concluded contracts toexport wafers to Taiwan, South Korea,
China and India.

Looking Ahead and Key
Strategies

Fiscal 2010 Results
In the context of high demand for raw
materials and a tight supply in themetals and alloys business in general,
we increased the number of trading
partners, expanded our product line-up
and combined products in response tobusiness changes and the necessity for
rapid responses.
In the recycling business, we established Osaka-Nanko Branch Office witha collection and sorting yard. Showa
Metal Co., Ltd., a processing company
for titanium and special metal scrap,
became a Hanwa subsidiary. Stronger
business relationships with major

Net Sales Composition

8.7%

08 | HANWA AR 2011 |wholesalers in Thailand and South Korea
also led to the expansion of import business into Japan, contributing to sales
and profit.
The nickel business reported a highlevel of LME inventory, but prices fluctuated sharply at a higher level. We
successfully concluded long-term virgin
metal contracts in China and increased
the handling volume of chemical products for the battery industry.
In the ferroalloy business, we flexibly captured market fluctuations as aresult of constraint power outage in
China, and boosted our share of sales
to electric furnace steelmakers with a
50% utilization rate, while secured
yearly contracts with blast furnacesteelmakers that were enjoying strong
results. In the ferrochrome market,
where the price increased due to higher
costs in South Africa, we started to sell
chrome ores from the Middle East to
India and China, to compensate for the
decline in sales in Japan with brisk
demand overseas. In addition, we
began selling ferroalloy produced inSouth Africa in the ASEAN region.
The silicon business reported arecovery in sales and profit, as theprice rose and sales of chemical grade
silicons expanded.
In the solar cell business, we concluded

We aim to expand the number of
trading partners and boost the range of
products for trade on a global scale, inan effort to build reliable partnerships in
key areas in future.
In the recycling business, we will
focus on specialization in logistics, stockpiling, sorting and processing functions.
We will seek to build trading opportunities by maximizing synergy effects withShowa Metal and the Osaka-Nanko
Branch Office. In the nickel business, we
aim to tap new clients in South Korea,
Taiwan and Thailand for raw materials
for chemical products for the chemicaland battery industries. We will also
center efforts on sales of nickel ores
from the Philippines to Japan and China.
In the ferroalloy business, we plan tofurther diversify our suppliers. By
bolstering relationships with producers
that own ore mines, we aim to increase
sales to blast furnace steelmakers,
special steelmakers and electric furnacesteelmakers. In the chrome business,
we seek to expand trading mainly of
products and ores from Samancor
Chrome Holdings (Proprietary) Ltd. inSouth Africa. We will also consider
taking part in projects to be carried out
by the Ruukki Group plc.
In the solar cell business, we intend
to be more selective of partners in
respective countries, so that we canfocus on and enhance the raw material,
wafer and panel businesses.
In the metal silicon business,following the full-fledged operation of
Dalian Solar Valley Silicon Industry Co.,
Ltd., we plan to build stable sales channels in South Korea, Japan and Taiwan
and thereby put more efforts on highpurity products.

Non-Ferrous Metals
Fiscal 2010 Results
The copper price fell to $6,000 per ton
and aluminum slid to $1,900 per ton on
the London Metal Exchange due toconcerns at the beginning of the fiscal
year when Greece faced the risk ofdefault. Lead, zinc and tin followed suit,
but subsequently rose on the back ofrobust demand in emerging countries aswell as the inflow of capital into commodities futures market amid easy monetary
policies around the world. The copper
price hit an all-time high in February 2011,
while aluminum rose above $2,600 per
ton at the end of the fiscal year.
Against this background, in thedomestic aluminum recycling business,
demand for raw materials for secondary
alloy remained firm, partly due to afalling volume of scraps as the construction and manufacturing industries
slumped in Japan, and partly because ofhealthy performance in the manufacturing of complete cars for exports ando f kno ck-dow n c omp on en ts fo r
assembly overseas. Of special note is thefact that the price of secondary alloy
exceeded that of primary aluminum
between the early and middle periods ofthe fiscal year. Amid stiff competition for
procurement in the aluminum industry
in general, high-quality scraps, which
are an alternative to primary aluminum,
suffered a steep decline in profit margin,
pushing down our operating income.

Net Sales Composition

4.1%

For copper, lead, zinc and tin, we
benefited from a positive combinationof domestic, import, export and trilateral
trading, and pushed ahead with newcommodities. In particular, trilateral
trading with offices in Southeast Asia asbases expanded sharply, contributing tosales and profit.

Looking Ahead and Key
Strategies
The Great East Japan Earthquake seriously impacted the non-ferrous metals
industry, as outlined below:(1) Auto production both in Japan andabroad suffered disruption, due todamage sustained by the components industry.
(2) The operation rate at manufacturing
plants in eastern Japan fell due tothe power shortage.
(3) The earthquake disrupted the collection cycle of materials for recycling.
(4) The release of radiation resulting
from the accident at the Fukushima
Dai-ichi Nuclear Power Plant requireda revision of collection, shipment andexport systems.
We think that resolving these problems will require at least six months,
which may act to curb profitability in thefirst half of the current fiscal year.
The market is expected to fluctuate
at a higher level, as China is likely totighten its monetary policy while robust
demand is forecasted to continue inother emerging countries.
In the current fiscal year, we will aim
to boost profitability further bycontinuing to implement the following
programs.
(1) We will add value to products by
expanding collection and processing
bases in Japan and stabilizing the
supply of products to domestic users
in terms of quality and price.
(2) We will expand the sales network
overseas, mainly in Southeast Asia,
China and India.
(3) We will optimize logistics and savelabor by expanding collection andprocessing bases overseas.
(4) We will explore new commodities
and make our product line-up evenmore comprehensive.
In the non-ferrous metals segment,
we will draw on our sales strength in theinternational market and draw on effective hedging strategies and our ability tomaintain a stable supply, to strengthen
the global recycling network.

| HANWA AR 2011 | 09

Review of Operations

Food Products

Fiscal 2010 Results
Reflecting the spread of fish consumption around the world, prices in suppliercountries soared, and this in turn pushed
up domestic prices. Import prices led the
movement of the prices in the Japanesemarket, while the yen’s appreciation
against the U.S. dollar benefited thefood products industry.
Seattle Shrimp & Seafood Company,
Inc., a seafood sales subsidiary in the
United States, steadily expanded its
operations on the back of brisk demandin that country and an improved

Net Sales Composition

5.7%

organizational structure. The company
reported the best business results since
its foundation, pointing to the type ofstrategy we should adopt overseas.
Although the prices rose for all
seafood products that we handle,
except for shrimp and herring roe,demand held firm, as the yen’s appreciation against the dollar helped domestic
prices remain at reasonable levels. Given
the low level of stockpiles, the supply
and demand balance was relatively
stable. On the other hand, crabs, octopus
and eels experienced short supply andtheir prices surged in Japan, contributing
significantly to profit. Fillets of salmon
and mackerel, as well as other common
fish sold well, contributing to growth interms of volume.
As part of the food products
segment’s basic policy, sales to overseas
markets expanded, with the Thai market
taking the lead, while sales to China
improved gradually.

Looking Ahead and Key
Strategies
Prices of the items that enjoyed highprofitability during the previous fiscal
year have soared to such a high level

10 | HANWA AR 2011 |that caution is required going forward.
Given the projected shortage in the
supply of food products produced inJapan in the wake of the earthquake, it
is important for us to procure in a flexible manner, depending on the types offish and food items.
We plan to continue to center
efforts on the United States in particular,
as in the fiscal year under review. We
will consider expanding overseas bases
and adopting other concrete measures
to increase sales in Asia, including China
and Thailand.
In view of the damage caused by
the earthquake, domestic supply ofmackerel, saury and salmon is expected
to fall. Already, overseas producers aredemanding higher prices. We willprocure common fish such as salmon
and mackerel in large volume in principle, while dealing steadily in higherpriced premium seafood, such as crabs
and prawns, by maintaining close
contact with clients. The mood of selfrestraint surrounding Japan’s consumer
spending is likely to be dispelled in due
course. The environments for common
fish and overseas processing are expected
to greatly affect future supply anddemand, in light of the decline indomestic supply and the lower production capacity of seafood processing
companies in Japan’s Tohoku region.

Petroleum and Chemicals
Fiscal 2010 Results
The world’s crude oil market traded at ahigh level, contrary to the expectationsof many at the beginning of the fiscal
year. Furthermore, when democratization movements in several Middle East
countries caused a historic change inpolitical regimes, concerns emerged
about a shortage of oil supply, with theprice of WTI crude oil shooting above$100 per barrel.
Concurrently, Japanese oil producers
sharply reduced their refining capacities
in preparation for the implementation of
the Law for Sophisticated Methods ofEnergy Supply Structures as well as theNon-Fossil Energy Act. Accordingly, thenumber of oil tanks and gas stations was
also reduced. The number of gas stationsin Japan fell below 40,000 for the firsttime in 43 years and continues to decline.
Sales volume of bunker oil rose 12%
year on year, thanks to increased sales toshipping companies that were enjoying
strong results on the back of growing
demand in Asia.
The chemicals business suffered
greatly reduced profit on much lower
sales, due to a decline in the supply ofimported synthetic resin and a slump in
the Chinese market. We recorded theirlargest monthly sales for March as salesof imported synthetic resin rose after theGreat East Japan Earthquake to coverfor Japanese manufacturers.
The paper business enjoyed greatly

Net Sales Composition

26.5%

increased profit on much higher sales, as
the three key areas of used paper, refuse
paper and plastic fuel (RPF) and paper
products reported strong results.

Looking Ahead and Key
Strategies
Global demand for oil, led by emerging
countries, is forecast to rise 37% over the
next 20 years. In particular, oil consumption in China is expected to double fromits current level in 2030, with China overtaking the United States as the world’s
largest user of oil. We expect the crude
oil price to remain at a high level for theforeseeable future, as demand in theemerging countries continues to expand
and the U.S. economy recovers, while
geopolitical risk spreads in parts of the
Middle East.
On the other hand, petroleum
consumption in Japan is predicted tocontinue to shrink 3% annually. Given
the current widespread concern over thesafety of nuclear power generation,
however, it is certain that we will see atemporary shift to fossil fuel and gas asan alternative energy source for power
generation. We plan to increase ourcapacity to expand sales of fuel oil rapidly.
In the petroleum products business,
we aim to establish a system designed toachieve large sales and profit, in cooperation with Toyo Energy Co., Ltd., whichbecame a subsidiary last year.
In the chemicals business, wheresynthetic resin is the core product, we
will work to expand sales of imported
synthetic resin, as production by Japan’s
comprehensive chemical companies
remains disrupted. With demand forsynthetic resin for use in gas and water
pipes in China growing 20% annually,
we will seek to tap new clients, while
monitoring the price movements closely.
In the paper business, we will focus
efforts to expand sales of used paper inSoutheast Asia and diversify our client basefor RPF to boost both sales and profit.
In the lubricants and daily sundries
business, we will strengthen exploringnew markets and overseas businesses inline with the current policies.

| HANWA AR 2011 | 11

Review of Operations

Other Business (Lumber and Machinery)

Fiscal 2010 Results
LumberHousing starts in fiscal 2010 totaled
810,000, up 2.5% from the previous
year. Reflecting the recovery in housing
starts, we reported stable transactions ofimported lumber and plywood. Together
with growing sales to new builders, thevolume handled totaled some 650,000
cubic meters for the year. Overseas sales
also grew steadily to some 350,000 cubic
meters. Overall, we handled approximately 1 million cubic meters. Sales also
expanded 36% from the previous year,
the first year-on-year growth since theglobal financial crisis triggered by thecollapse of Lehman Brothers.

Net Sales Composition

6.7%

12 | HANWA AR 2011 |MachineryIn the leisure facilities business, we
completed renewal work for a swimming pool at the Enakyo Wonderland.
Although we concluded a contract for
an indoor rollercoaster at the Tokyo
Joypolis amusement park, which is to
be manufactured by Gerstlauer ofGermany, the environment for contracts
slumped in the wake of the Great East
Japan Earthquake.
In the industrial machinery business, the number of concluded sales
contracts for hoist cranes rose thanks toclose cooperation between different
segments, and we concluded a sales
contract for a magnetic steel sheet
beveled cutter manufactured by Yutani
Co., Ltd. with a Chinese company. We
also expanded marketing activities in thetransformer industry in Thailand.
Furthermore, we sold aluminum melting
furnaces manufactured by Hokuriku
Techno Co., Ltd. in Indonesia, Thailand
and China and secured additional
contracts for steel fabrication businessfor factories, and both of these achievements contributed to profit.

Looking Ahead and Key
Strategies
LumberThe current fiscal year began amid theconfusion in the wake of the Great East
Japan Earthquake that occurred on March
11, 2011. Some 35% of the manufacturing capability for softwood plywood
in Japan has been damaged. As Japan
still faces a great number of unresolved
problems, including the accident at the
Fukushima Dai-ichi Nuclear Power Plant
and the power shortage, we expect
demand for housing to decrease for theforeseeable future, except for that for
temporary housing. From the second
half of the fiscal year onward, demand
related to full-fledged reconstruction
efforts is likely to emerge. We set up
International Wood Sales Department
during the current fiscal year, as we havesecured a purchase contract of lumber

to fill an entire ship from a new supplierin the United States. We have assigned
two sections to tap demand in China
and explore business opportunities inIndia, in addiction to the Middle East,
South Korea and Taiwan. In the current
fiscal year, we are targeting 700,000
cubic meters in overseas sales. Together
with our key domestic lumber segment,
we aim to achieve sales of 1.4 million
cubic meters this fiscal year.
MachineryIn the leisure facilities business, we will
step up our sales efforts, as demand forlarge rides is recovering. We plan tocontinue to develop new attractions forchildren and swimming pool-related
facilities. In our joint venture with Halos
Co., Ltd., we will develop game machinesand commence full-scale external sales.
We will also explore business opportunities in the Middle East, India and China
in collaboration with Sega Corporation.
In the industrial machinery business, we will conduct aggressive sales
activities, targeting the capital spending
projects of our trading partners, andformulate comprehensive businessproposals that encompass sales of
cranes and system architecture. We also
intend to bolster efforts on steel
processing lines, and steel fabrication
business at factories and export projects,
to expand away from the broking business of single machines.

Topics
Capital Participation in Showa Metal Co., Ltd.
In April 2010, Hanwa acquired a 51%
stake in Showa Metal Co., Ltd., theleader in rare metal recycling businessin Asia, and completed the integrationof Hanwa’s titanium material businessand special metal scrap business into
Showa Metal. In today’s recycling ofspecial metals, for which businessgrowth increasingly requires global
orientation, the integration allows the Group to seamlessly handle all recycling steps byitself, from the procurement of materials to the delivery to users, for greater
managerial efficiency and capability to select and process scrap.

Head office of Showa Metal

Toyo Energy Becomes a New Subsidiary of Hanwa
In October 2010, Hanwa acquired a
100% stake in Toyo Energy Co., Ltd.
and transformed it into a wholly
owned subsidiary. A wholesaler ofpetroleum products and authorized
importer/wholesaler of diesel oil,Toyo Energy distributes petroleum
products and liquefied petroleum gas(LPG) extensively from the Kanto region to Kyushu. Under its umbrella are acompany with an oil tank accommodating 27,000 kiloliters of oil and an operatorof gas stations, which are expected to create synergies with Hanwa’s Petroleum
Department for further business growth.

Oil tanks and oil station operated by Toyo Energy

Expansion of Our Domestic Office Network
The Sixth Medium-Term Business Plan calls for steppedup efforts to reach deep into the regional user base inJapan by expanding and strengthening regional offices.
In October 2009, the Kitakanto Branch Office opened
its doors, followed by the Okinawa Branch Office (April2010) and the Osaka-Nanko Branch Office (September2010). In April 2011, we strengthened our operations in
the Kanto region with two additional branch offices in
Mito and Atsugi. In addition, we established an officeaffiliated with the Tohoku Branch Office in Hachinohe.
The locally oriented sales structure enables the Group to exchange local
information in a more timely manner with customers, respond more quickly totheir needs, and boost the service quality we offer. Through these efforts, we hope
to boost even further our contribution to local economies.
Hanwa’s domestic sales network now has 14 locations throughout Japan,
consisting of two head offices, 12 branch offices.

Mito OfficeAppearance of branch office| HANWA AR 2011 | 13

Corporate Governance
Basic corporate governance policy

Internal control and risk management system

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

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

Corporate governance structures
We have adopted a corporate auditors’ system. Our Board of
Directors, which comprises 21 directors, including two outside
directors, meets as a rule once a month to deliberate and decide
important business plans and proposals concerning the Hanwa
Group, and to oversee business operation. There are five auditors
in total, including three outside auditors. Each auditor follows
auditing policies and auditing plans in carrying out stringent audits.
In addition, the corporate auditors attend the Board of Directors,
the Management Committee and other important meetings,
monitor and verify the execution of the management.
We have also adopted a system to perform preliminary review
of management issues in various committees such as the Directors
Evaluation Committee, the Investment Examination Committee,
and the Compliance Committee. By enhancing these management
systems, our corporate governance system will be established togood purpose. ￼● Systems to ensure that performance of duties by the

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

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

Board of Directors

election/dismissal

oversight/audit

coordination

Board of Auditors
oversight/audit

election/supervison

Disclosure Committee

Operational organization

Directors Evaluation Committee
examination/reportCompliance Committee

Management Committee

Catch All Controls Committee

Senior/managing directors

Investment Examination Committee

Internal Control Committee
adviceQuality Control Committee
Directors

examination/
administration/report

evaluation/oversight

Affiliatedcompanies

Administrative
divisionsguidance

adviceInternal Audit Dept.
External Attorneys
Group Company Corporate
Auditors Conference

cooperation

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

Operatingdivisionscooperation

Executive
vice president

accounting audit/internal control audit

Chairman/President

14 | HANWA AR 2011 |Independent Auditors

cooperation

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

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

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

| HANWA AR 2011 | 15

CSR Activities

Hanwa’s Framework for Promoting Corporate Social Responsibility (CSR)
As a trading company, Hanwa’s broad spectrum of
stakeholders and operations spans the globe. We
place CSR at the center of our management andcontinually reinforce our CSR activities. We believe
this stance will lead to even more growth in ourenterprise value.

We already have several CSR units in place at Hanwa,
notably the Compliance Committee, Environmental
Committee and Hanwa Scholarship Program. The CSR
Committee oversees the activities of these and otherorganizations associated with CSR to ensure that all
activities are performed efficiently and seamlessly.

Positioning of the CSR Committee
Board of Directors

Hanwa's basic policy on CSRManagement
Committee

IR and PR activities

CSR Committee

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

Donations●Security Trade Control Committee

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

Activities to make employees
more aware of CSR

NPO/NGO

2) Consideration of theenvironment

Support for Overseas
Exchange Students

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

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

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

Corporate Policy

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

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

Steel manufacturers• Promote corporate business and build happy homes

Hanwa Co., Ltd.

Collection
and transport
Separation/

Volumereduction
The Hanwa Ethical Standards for Employee
Behavior

Reuse
16 | HANWA AR 2011 |Purchase/Resale/
Donation

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

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

Transport
Disposal

Measures for Crisis Management
Hanwa has compiled a list of grave risk scenarios that mightcause serious damage to the safety of its employees, officers
and their families, in addition to its assets and business operations. Should such a risk scenario materialize, we will seek tominimize any resultant damage and put priority on ensuring
the safety of our employees and officers and their families.
We have established the measures necessary to maintain andresume our core operations in such an eventuality.

an emergency headquarters immediately after the earthquake andconfirmed the safety of its employees and officers and theirfamilies via Mobile i-Call, an emergency communication systemprovided by Docomo Mobile Tokai Inc. At the same time, respective
departments and sections swiftly confirmed the safety of theirstaff, using the emergency “telephone tree.” Hanwa’s Tohoku
branch, which was initially thought to have sustained damage,confirmed two hours after the earthquake that all of its employees
were safe. We are currently reviewing countermeasures against
earthquakes. Specific measures include stepping up disasterprevention drills, checking emergency supplies, introducing
satellite telephones, adopting measures to prevent OA equipmentfrom falling off desks and increasing reserve stock.

New Revision of Crisis Management Manual
Hanwa began reviewing the content of its manual for disasterprevention in Japan, which had previously been revised in September
2007, and in May 2011 created an updated manual for crisis
management that applies to the entire Hanwa Group, including
affiliate companies and offices overseas. The move is part of ourefforts to ensure crisis management for employees posted overseas
and local staff, given Hanwa’s increasing globalization of operations.

Compilation of a Manual to Combat a New Outbreak of
Influenza
In its efforts to contain the spread of new influenza in Japan andabroad, Hanwa is drawing up a business continuity plan to ensure
the safety of its employees and officers, and keep potential
damage to a minimum.

Revision of Measures against Earthquakes
The Great East Japan Earthquake on March 11 caused massive
damage mainly in the northeastern part of Japan. Hanwa set up

Diverse Work Style and Promote Diversity
The Diversity Promotion Office is responsible for taking
measures related to diversity. We define diversity as anenvironment in which individual employees acknowledge
various backgrounds and points of view, and in which avariety of work styles can be pursued. We consider diversity
as a business challenge in which all employees should playtheir part. We have introduced a mentor scheme especiallyfor female employees in general positions with a chance ofpromotion and for new non-Japanese employees. An
employee in a different section with a longer work experience at the Company is assigned as a mentor to provide
intellectual and psychological support, to create a betterworking environment.

Helping Employees Balance Work and Family
As part of our efforts to help employees balance family andwork more easily, we have introduced a child care system andshorter working hours for employees with small children, bothof which are more generous than those required underJapanese law. In September 2010, a male employee took childcare leave for the first time in Hanwa’s history. We also actively
assist those who return to work after child care leave.
Employment of the Handicapped
In staffing handicapped employees, we take care that they are
assigned to a section where they can perform to the best of
their abilities. As of March 2011, handicapped employees
accounted for 1.8% of the employee total.

Social Contribution
Hanwa Scholarship Program
The Hanwa Scholarship Foundation was established in 1957
as part of activities to commemorate the 10th anniversary of
Hanwa’s establishment, and marked its 54th anniversary. Jiro
Kita, the first president of Hanwa, decided to establish thefoundation based on the philosophy of “contributing tosociety based on an awareness of a company’s social
responsibilities.” The foundation began with a contributionof ¥10 million, at a time when Hanwa’s own capital was¥100 million. As of 2009, the program had distributed a totalof ¥542 million in scholarships, and the accumulated numberof scholarship students had grown to more than 980.
The Hanwa Scholarship Program looks forward to using
political, economic and cultural insight to assist a growing numberof outstanding students around the world to realize their goals as
globalization continues to advance in the 21st century.

Accumulated Number of Scholarship Students(Persons)

High school

1,000

University

Graduate school
68

69

71

72

72

66

800

66
62
56

600
52
49

400
18

200

0

7

728 748 757
712 721

479

181

41
28

662

318

3
4

548
422

604

96
64

87

98

115 130 144 151 151 151 151 151 151 151

1957 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2007 2008 2009 2010 Year(1)(5) (10) (15) (20) (25) (30) (35) (40) (45) (50) (51) (52) (53) (54) (Times)| HANWA AR 2011 | 17

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Financial
SectionFive-Year Summary
For the years ended March 31

				
				

		

2011

Millions of yen, 			
except for number of employees
		

2010

2009

Thousands of
U.S. dollars

2011

2008

2007

¥ 1,507,509¥ 1,320,022$16,790,174

For the year:
Net sales			¥ 1,396,103 ¥ 1,116,629 ¥ 1,539,282
Operating income 			11,42013,854

17,451

23,705

20,865

166,615

Net income 			11,579
5,794

5,997

13,118

11,423

69,681

14,537———73,410Net cash provided by (used in) operating activities 			
46,250(46,949)(5,742)

21,430(36,192)(564,630)

Net cash used in investing activities			
(12,992)(7,611)(19,536)(8,443)(5,956) 		
(91,533)

Net cash provided by (used in) financing activities			
(43,669)
51,272

46,592(9,144)34,325

616,621

10,229 $247,577

Comprehensive income 		
6,104

At year-end:
Cash and cash equivalents 			
24,515 ¥¥20,586 ¥35,046

Total assets			
443,445532,798479,379

482,014476,179

6,407,673

Total net assets 			106,855
110,459

94,913

100,926

98,254

1,328,431

Number of employees (persons) 			
1,952
2,060

1,818

1,715

1,637

				

				

		

2011

2010

¥

14,179

Yen

¥

		

2009

2008

U.S. dollars

2011

2007

Per share data:
$

0.336

Net income 			55.46 ¥¥
27.95 ¥

28.47

Cash dividends 			
12.00
12.00

12.00

12.00

12.00

0.144

Net assets 			512.16529.65450.05473.70461.21

6.370

				

		

2011

2010

¥

62.07

%

¥

54.03

		

2009

2008

2007

Key financial ratios:
2.5
1.2
Return on assets (ROA)			

1.2

2.7

2.6

11.6
5.4
Return on equity (ROE)			

6.2

13.3

12.4

140
200
Net debt/equity ratio 			

190

150

170

Notes: 1. The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥83.15=$1.00.
2. Net debt/equity ratio = Net interest-bearing debt/equity.
Net interest-bearing debt = Interest-bearing debt – cash.
3. The cash dividends per share for the year ended March 31, 2007 included a ¥2 commemorative dividend in celebration of the 60th anniversary of the Company's establishment.
4. Effective from the year ended March 31, 2011, the Companies adopted "Accounting Standard for Presentation of Comprehensive income" (ASBJ Statement No. 25 issued
on June 30, 2010). As a result of the adoption of these standards, the Company has represented comprehensive income for the year ended March 31, 2011 and 2010.

18 | HANWA AR 2011 |Management’s Discussion and Analysis
Operating Results
Operating Results for the Fiscal Year Ended March 2011
During the consolidated fiscal year under review, the world economy
was generally underscored by solid demand primarily from emerging
economies, but at the same time it was overshadowed by signs of decelerating economic recovery, including concerns over certain European
countries’ sovereign risk and the slowdown in the U.S. economic
recovery. Even China—a key driver pulling the world economy outof the recession—showed signs of economic overheating, and thisprompted the Chinese government to take an increasing number ofmeasures aimed at fiscal tightening. Japan’s economy also remained
lackluster, as demand for construction and capital investments stayed
at a low level. In addition, the export-led sectors and others that wereon a recovery trajectory began to experience sluggishness, as demand
from overseas changed its tone and the yen appreciated in value. The
visibility of Japan’s economic outlook was clouded further by the Great
East Japan Earthquake that struck in March 2011.
In this operating environment, the Group posted consolidated
net sales of ¥1,396,103 million for the consolidated fiscal year ended
March 31, 2011, representing a year-on-year increase of 25.0%.
Operating income grew 21.3%, to ¥13,854 million, reflecting a rise inearnings derived from sales. Net income amounted to ¥5,794 million,
representing a 50.0% drop from the previous fiscal year. In the fiscal
year ended March 31, 2010, income taxes had been reduced, andthus higher earnings had been recorded as a result of the recording ofdeferred tax assets in conjunction with real estate transfers. The decrease
was also attributable to a loss on valuation on investment securities forwhich a transfer agreement had been executed recorded in the period
under review.

was due to higher prices of procured goods combined with higher
quantities procured in line with the increase in quantities sold.
SG&A expenses increased 2.5%, to ¥29,890 million, due to therent connected to the Tokyo head office relocation and an increasein personnel expenses.
Operating Income
Operating income rose 21.3% from the previous consolidated fiscal
year’s total of ¥11,420 million, to ¥13,854 million. This was attributable to the relatively slight increase in SG&A expenses and higher
sales revenues. The ratio of operating income to net sales was 1.0%,
the same level as the previous consolidated fiscal year.
Other Income (Expenses)
Other expenses net of other income decreased 27.1% year on year,to ¥3,848 million. Other income increased 11.4%, to ¥2,724 million,
reflecting mainly higher interest and dividend income.
Other expenses totaled ¥6,572 million, representing a decreaseof 14.9% from the previous consolidated fiscal year. They included
loss on valuation of investment securities amounting to ¥2,791
million for an impairment loss claimed for investment securities,
for which a transfer agreement was executed but for which thehandover would take place only in the following fiscal year, and forwhich the price of listed stocks fell. They also reflected loss on impairment of long-lived assets amounting to ¥430 million in conjunction
with the steel sheet processing plant at a logistics center and loss on
disaster amounting to ¥264 million, which represented the valuation
loss with respect to the Group’s inventories damaged by the Great
East Japan Earthquake.

Net Sales
Net sales rose 25.0% year on year, to ¥1,396,103 million. The increasereflected a rise in sales volume in addition to the economy’s recovery toa certain level, although the speed of the recovery slowed somewhat
at the midpoint of the period under review. Domestic sales were up
26.3%, to ¥1,054,082 million, while overseas sales were up 21.2%,
to ¥342,021 million.
For a discussion of sales by segment, see “Review of Operations”(pages 6 through 12) and “Segment Information” (pages 40 and 41).

Income Taxes
Income taxes paid amounted to ¥4,154 million in the consolidated
fiscal year under review, in contrast to ¥5,404 million in reversal ofincome taxes in the previous fiscal year, during which a tax deduction
had been obtained as the impairment losses posted in prior years forland and properties sold were recognized for deductible expenses inthe said fiscal year.
Net Income
Net income decreased 50.0% from the previous consolidated fiscal
year, to ¥5,794 million. Accordingly, net income per share decreasedto ¥27.95, from ¥55.46.

Cost of Sales, and Selling, General and Administrative (SG&A)
Expenses
Cost of sales increased 25.7%, to ¥1,352,359 million. The increase
Net Sales

Operating Income/Operating Income Ratio(Millions of yen)

(Millions of yen)(%)

25,0002.0

20,0001.6

15,0001.2

10,000

0.8

5,000

0.4

1,600,000

Net Income

1,200,000(Millions of yen)

12,0009,000

800,000

6,000

400,000

0

07

08

09

10

11

0

0

07

08

09

10

11

3,000

0

07

08

09

10

11

Operating Income Ratio| HANWA AR 2011 | 19

Sources of Capital and Cash Liquidity
Financial Condition
Total assets increased 20.1%, to ¥532,798 million, from the previous
consolidated fiscal year, reflecting higher trade receivables and inventories accompanying higher sales.
Liabilities expanded 25.5%, to ¥422,339 million, as a result of arise in borrowings and commercial paper to meet growing needs forworking capital and an increase in trade payables attributable to arebound in sales. Interest-bearing liabilities grew 34.0%, to ¥235,204
million. The net debt/equity ratio (net interest-bearing debt as apercentage of equity) stood at 200% as of March 31, 2011.
Net assets increased 3.4%, to ¥110,459 million. The increase
was attributable mainly to higher retained earnings. Owing to the
proportionately greater rise in liabilities, the equity ratio at March 31,
2011 fell to 20.7%, from 24.0% a year ago.
Cash FlowsNet cash used in operating activities amounted to ¥46,949 million
during the consolidated fiscal year under review, in contrast to net
cash provided of ¥46,250 million recorded in the previous consolidated fiscal year. Major factors that contributed to net cash outflow
included an increase in trade receivables and inventories (combined
increase of ¥85,121 million) accompanying a rebound in sales, witha year-on-year net increase amounting to ¥122,073 million.
Net cash used in investing activities totaled ¥7,611 million,
representing a net decrease of ¥5,381 million. This was primarily
attributable to smaller cash disbursements related to the acquisitionof tangible fixed assets and investment securities (¥6,283 million),
representing a year-on-year net reduction of ¥8,172 million.
Net cash provided by financing activities amounted to ¥51,272
million, compared to net cash used of ¥43,669 million in the previous
consolidated fiscal year. This was largely attributable to a higher levelof funding through borrowings and issuance of commercial paper in
response to higher sales.
Financial Policy
The Group depends primarily on bank borrowings to meet its working
capital requirements and to fund its investing and financing activities. Yet,as part of its efforts to diversify funding sources to ensure stable liquidity
and agility in liquidity management, it may fund its activities by issuingbonds and commercial paper in the capital markets from time to time.
The Group meets its working capital requirements principallyby floating-rate long-term borrowings from banks to secure stable
funds, while short-term bank borrowings are used for day-to-day
funding. Overseas subsidiaries borrow from their respective local
banks. Capital investments and other long-term funding needs inJapan and abroad are, in principle, met by long-term borrowings
from Japanese sources. Short-term borrowings as at March 31 2011
stood at ¥79,609 million, mostly denominated in Japanese yen. The
Group’s outstanding long-term debt was ¥136,658 million, including
the current portion of long-term debt of ¥11,583 million.
The Group issues straight bonds primarily to fund working capital.
As of March 31, 2011, bonds outstanding consisted of straight bonds
amounting to ¥10,250 million. To increase its flexibility in issuing bonds
in a timely manner to take advantage of or to meet changing market
environments and internal financial requirements, the Company has
filed for shelf registration. As of March 31, 2011, the unused aggregate principal amount of the shelf registration for straight bonds forsubscription in Japan amounted to ¥20,000 million.
Advocating overall corporate value improvement and sustainable growth, the Group attempts to conduct efficient management
to secure funds needed for business growth and maintain a healthyfinancial balance.

Business and Other Risks
Changes in the Macroeconomic Environment
The Hanwa Group’s worldwide operating revenue is subject tomacroeconomic conditions of the countries and regions where it sells
its products. An economic slowdown in any of the primary markets,
including Japan, North America, Europe and Asia (especially East Asiawith China being the key market) with an accompanying decreasein demand could have an adverse impact on the Group’s businessperformance and financial condition.
Total Assets/
ROA

Commodity Price Fluctuations
The Group holds inventories for distribution that include steel products,
metals and alloys, non-ferrous metals, foods, and petroleum/chemical
products. These are commodities whose prices are highly susceptible
to fluctuations in supply and demand and movements in foreignexchange. The Group’s business performance and financial position
could be adversely affected, in the event of the Group’s inability torespond adequately to price fluctuations of such commodities.

Total Net Assets/
ROE

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

(Millions of yen)

(%)

(%)

500,000

3.0

100,000

15

400,000

2.6

80,00012

300,000

2.2

60,0009200,000

1.8

40,0006

100,000

1.4

20,000

3

50

0

0

0

0

200

150

100

0
ROA

20 | HANWA AR 2011 |

07

08

09

10

11

07
ROE

08

09

10

11

07

08

09

10

11

Foreign Exchange Fluctuations
The Group is engaged in worldwide procurement and sales of goods.
Foreign currency-denominated profits or loss, costs, assets, liabilities
and other accounting records associated with areas outside Japanare translated into Japanese yen amounts in the preparation offinancial statements. While the amounts reported in original currencies remain unchanged, the post-translation amounts are subject tothe conversion rate applied to them. Generally speaking, a stronger
yen relative to other currencies (especially against U.S. dollars, which
account for a substantial portion of the Group’s sales) adversely
affects the Group’s export transactions, while it favorably affects theGroup’s import transactions.
Interest Rate Fluctuations
The Group funds its operating, investing and financing activities byborrowing from financial institutions and by tapping into the bondand other capital markets. To hedge against interest rate fluctuations, the Group may execute interest rate swaps to cover certain
funds subject to floating interest rates. However, the Group’s business performance and financial position may be adversely affected if
interest rates change in a direction unfavorable to the Group.
Stock Price Fluctuations
The Group holds marketable securities mostly of which are issued
by its business counterparties that are subject to price fluctuations.
Price fluctuations of the securities it holds could impact the businessperformance and financial position of the Group.
Counterparty Credit Risk
The majority of trade receivables held by the Group are based onprior granting of credit limits to its business counterparties. While
the Group has put in place stringent and skillful credit management,
there is no guarantee that all such receivables can be fully recovered.
In the event of unanticipated bankruptcy or commencement of thecivil rehabilitation proceedings filed on behalf of or against a businesscounterparty, the business performance and financial condition of
the Group could be adversely affected.
Business Investment Risk
The Group makes business investments to strengthen existing businesses and to expand the scope of its business. Such investments
are carried out upon completion of prescribed approval procedures
specific to investment characteristics and monetary amounts to beinvested, including scrutiny by the investment committee. However,if the value of any company in which the Group has invested
deteriorates or profits generated are less than initially anticipated,
the Group’s business performance and financial condition could be
adversely affected.
Liquidity Risk Associated with Funding Activities
The Group funds its operating, investing and financing activities byborrowing funds from financial institutions and issuing bonds andother instruments in capital markets. For funding, the Group strives
to secure cash on hand based on estimated funding requirements.
However, factors such as disruptions in financial markets, regulatorychanges affecting the financial industry in Japan or elsewhere, thedowngrading of the Group’s credit ratings or changes in financial
institutions’ lending policies could significantly affect the Group’s

funding environment. These changes could restrict the Group’s
funding activities and result in higher funding costs, thus impacting
the business performance and financial condition of the Group.
Risks Associated with Global Activities and Entry to Overseas
Markets
The Group has stepped up efforts recently to enter Chinese and other
Asian markets as well as markets in the United States and Europe.
The Group may face a number of risks inherent in overseas businessactivities, as the following:(1) Unanticipated changes in foreign trade regulations, especially interms of laws and customs duties.
(2) Political and/or economic changes and fluctuations in international currencies unfavorable to the Group.
(3) Difficulty in recruiting and retaining human resources.
(4) The possibility of immature infrastructure exerting negative impacts
on the Group’s activity or resulting in deteriorating customer satisfaction with respect to the Group’s products and services.
(5) Changes in taxation unfavorable to corporate activity.
(6) Acts of terrorism, war and social turmoil caused by other factors.
Legal and Regulatory Risks
The Group is subject to a variety of governmental regulations
imposed by the nations where it operates, including business andinvestment approvals/licenses, export/import and sales restrictions
on grounds of national security and otherwise, customs duties andother foreign trade regulations. In addition, laws and regulations
relevant to the Group’s business activity, including those concerning
trade, antimonopoly, patent, taxation, foreign exchange control,
food safety, environment and recycling, must be fully observed. Suchregulations may not only limit the Group’s business activities but alsoentail a higher cost of doing business, as more funds may be needed
to be disbursed to ensure compliance. Therefore, the businessperformance and financial condition of the Group may be impacted
by such regulations.
Risks Associated with Natural Disasters
To prepare for natural disasters such as an earthquake or the outbreakof pandemic diseases such as influenza, the Group has formulated
crisis management manuals and business continuity plans and set
in place a system for confirming individual safety. It also administers
anti-seismic measures and conducts disaster drills. However, due tothe dispersion of the business locations and areas where employees
conduct their business, the Group may not be able to avert all thenegative consequences of a natural disaster. If damages beyond theGroup’s projected level are inflicted, the business performance andfinancial condition of the Group could be impacted.
Retirement Benefit Obligations
Retirement benefit costs and obligations are calculated based on
actuarial assumptions on discount rates and expected returns on plan
assets, among others. If actual results differ from such assumptions or
if such assumptions are revised, the effect of such difference or revision
will be subsequently accrued and recognized over a period of years on
a periodic basis, thus affecting costs and obligations to be recognizedor posted over such years. Deteriorating discount rates and poorer
returns on plan assets resulting from such changes could adversely
affect the Group’s business performance and financial position.

| HANWA AR 2011 | 21

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
As at March 31, 2011 and 2010							Thousands of						Millions of yen
U.S. dollars (Note 1)

2011
Assets				

2010

2011

Current Assets:							$ 247,577¥
20,586 ¥24,515
Cash and cash equivalents							Receivables:						
		Trade notes and accounts:									88,9607,397
5,266
Unconsolidated subsidiaries and affiliates 							3,210,487
266,952
209,150
			Other									Loans:							
			42,7543,555
2,086
Unconsolidated subsidiaries and affiliates 							

8,502
707
240
			Other									(12,892)(1,072)(892)
Allowance for doubtful receivables							1,218,894
101,351
72,352Inventories (Note 6)							37,943
3,155
3,357
Deferred tax assets—current (Note 10) 							247,420
20,57317,092Other current assets (Note 7)							5,089,645
423,204
333,166
			Total current assets																	Investments and noncurrent receivables:						35,512
37,162
Investment securities (Notes 4 and 7):						427,084

72,4236,022
3,240
Investments in and advances to unconsolidated subsidiaries and affiliates 						
2,261
188
257
Loans receivable:						273,373
22,731
22,889Other investments and noncurrent receivables							(32,195)(2,677)(2,975)
Allowance for doubtful receivables 										742,946
61,776
60,573
Total investments and noncurrent receivables																	Property and equipment (Note 7):						351,762
29,24928,294
Land (Note 11)							278,822
23,18423,459Buildings and structures							180,000
14,967
14,348Other								(244,835)(20,358)(19,801)
Accumulated depreciation										565,749
47,042
46,300Total property and equipment																	Other assets:							
1,095
91
2,653
Deferred tax assets—noncurrent (Note 10)							
8,238
685
753
Intangibles and other assets (Note 7)							
			

9,333
776
3,406
Total other assets 							$ 6,407,673¥ 532,798 ¥ 443,445
			Total						
See accompanying Notes to Consolidated Financial Statements.

22 | HANWA AR 2011 |							Thousands of						Millions of yen
U.S. dollars (Note 1)

2011
Liabilities and Net Assets				

2011

2010

Current liabilities:							Short-term loans payable (Note 8)						¥ 25,623¥
79,609$957,414

216,476
Commercial paper (Note 8)							1,00018,000139,302
Long-term debt due within one year (Note 8)							34,103
11,583
Trade notes and accounts payable:						
		42,538Unconsolidated subsidiaries and affiliates							
1,388
3,537

1,840,168
		Other 							133,412
153,010
21,251
Accrued bonuses to employees 							
1,856
1,767
5,316
Income taxes payable							
233
442242,033
Other current liabilities 							17,475
20,125
			

3,464,498
Total current liabilities 							215,090
288,073										Noncurrent liabilities:							1,504,209
Long-term debt due after one year (Note 8)							114,355
125,075
1,611
Employees’ severance and retirement benefits (Note 9)							19
13453,975
Deferred tax liabilities—noncurrent (Note 10)							
2,684
4,488
54,949Other noncurrent liabilities 							
4,442
4,569
			

1,614,744
Total noncurrent liabilities 							121,500
134,266										Contingent liabilities (Note 13)																Net assets (Note 11)							Shareholders’ equity:							Common stock 						
		Authorized: 570,000,000 shares 						

		549,020
Issued: 211,663,200 shares 							45,65145,65160
Capital surplus							55813,085
Retained earnings							64,302
67,608(17,126)
Treasury stock, at cost: 4,391,507 shares in 2011 and 4,367,348 shares in 2010					(1,415)(1,424)
1,345,039
			Total shareholders’ equity							108,543
111,840
Accumulated other comprehensive income:						11,449Unrealized gains on securities, net of taxes							
889
952
1,287
Unrealized gains on hedging derivatives, net of taxes							
(772)
107
(2,201)
Land revaluation difference, net of taxes							
(183)
(183)
(35,297)
Foreign currency translation adjustments							(2,308)(2,935)
			(24,762)
Total accumulated other comprehensive income							(2,374)(2,059)8,154
Minority interests							
686
678
		

1,328,431
Total net assets							106,855
110,459$ 6,407,673
		Total							¥ 443,445¥ 532,798| HANWA AR 2011 | 23

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income
For the years ended March 31, 2011 and 2010							Thousands of						Millions of yen
U.S. dollars (Note 1)
				
2011

2011

2010

$16,790,174
Net sales								¥ 1,396,103 ¥ 1,116,629

16,264,089
Cost of sales 							1,076,039
1,352,359
		526,085
Gross profit 							40,59043,744359,470
Selling, general and administrative expenses 							29,17029,890166,615
		Operating income							11,42013,854								Other income (expenses):						14,396
Interest and dividend income 							
995
1,197

(33,927)
Interest expense							(3,215)(2,821)
18,352Foreign exchange gain							
1,451
1,526
(33,566)
Loss on valuation of investment securities							—(2,791)
Loss on impairment of long-lived assets (Note 14)				

(5,171)(3,271)(430)		

(3,175)
Loss on disaster							—(264)(3,199)Other, net							(1,238)(266)
Income before income taxes and minority interests

120,325						
6,142
10,005

Income taxes (Note 10):						4,895Current								390
40745,063
Deferred							(5,794)
3,747
4,154
Income before minority interests

49,958(5,404)70,367
					
11,546
5,851(686)
Minority interests in income of consolidated subsidiaries							
33(57)69,681
Net income							11,5795,794(686)
Minority interests in income of consolidated subsidiaries							
33
(57)Income before minority interests

70,367						
11,546
5,851

Other comprehensive income						
758Valuation difference on available-for-sale securities							4,1036310,571
Deferred gains or losses on hedges							
(523)
879
(8,286)

Foreign currency translation adjustments

(689)

(589)

Total other comprehensive income

253

2,991

3,043

14,53773,410Comprehensive income

			
6,104

Comprehensive income attributable to:					Owners of the parent

			
6,109

14,56173,470Minority interests

			
(5)

(24)

(60)

							U.S. dollars						
Yen
(Note 1)
					
2011

Net income per share 				¥27.95Cash dividends per share 				12.00See accompanying Notes to Consolidated Financial Statements.

24 | HANWA AR 2011 |

2011

2010

¥

55.46
12.00

$

0.336
0.144

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2011 and 2010

					Numbers of shares in thousands/						Millions of yen
				
2011

Number of shares of common stock
Balance at beginning of year
Balance at end of year

Thousands of
U.S. dollars (Note 1)

2011

2010

211,663
211,663

211,663
211,663

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

45,65145,651¥¥45,65145,651$$

549,020
549,020

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

¥
¥

5
5

¥
¥

5
5

$
$

60
60

¥

64,302(2,488)——5,794
67,608¥54,651(2,512)582
211,57964,302$

773,326(29,922)——
69,681
813,085(1,415)(9)—(1,424)
111,840

¥

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

$

889
63
952

¥

(3,213)
4,102
889

$

(772)
879
107

¥

(249)
(523)
(772)

$

(183)
—
(183)

¥

(180)
(3)
(183)

$

(2,308)(627)(2,935)(2,059)¥(1,711)(597)(2,308)(2,374)

$

715
(29)
686
106,855$

Retained earnings
Balance at beginning of year
Cash dividends paid
Increase resulting from increase in consolidated subsidiaries
Other changes
Net income
Balance at end of year
Treasury stock, at cost
Balance at beginning of year
Purchases of treasury stock
Disposal of treasury stock
Balance at end of year
Total shareholders’ equity at end of year
Accumulated other comprehensive income:Unrealized gains on securities, net of taxes
Balance at beginning of year
Net changes of items other than shareholders’ equity
Balance at end of year
Unrealized gains on hedging derivatives, net of taxes
Balance at beginning of year
Net changes of items other than shareholders’ equity
Balance at end of year
Land revaluation difference, net of taxes
Balance at beginning of year
Net changes of items other than shareholders’ equity
Balance at end of year
Foreign currency translation adjustments
Balance at beginning of year
Net changes of items other than shareholders’ equity
Balance at end of year
Total accumulated other comprehensive income at end of year

¥
¥

¥
¥

¥
¥
¥
¥
¥
¥
¥
¥
¥

Minority interests
Balance at beginning of year¥686
Net changes of items other than shareholders’ equity(8)
Balance at end of year¥
678
Total net assets at end of year					¥ 110,459

¥

¥
¥

¥

¥

¥

¥
¥
¥
¥
¥

$

(17,018)(108)—$(17,126)$ 1,345,039

$

$

$

$
$

10,691758
11,449(9,284)
10,571
1,287(2,201)—(2,201)(27,757)(7,540)(35,297)(24,762)

8,250
(96)
$
8,154
$ 1,328,431

See accompanying Notes to Consolidated Financial Statements.

| HANWA AR 2011 | 25

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2011 and 2010							Thousands of						Millions of yen
U.S. dollars (Note 1)
				
2011

2010

2011

Cash flows from operating activities:						6,142Income before income taxes and minority interests						$ 120,325¥
10,005 ¥Adjustments to reconcile income before income taxes and minority interests						to net cash provided by (used in) operating activities						2,560		Depreciation					32,531
2,705
3,271
		 Loss on impairment of long-lived assets					
5,171
430
(89)
		 Decrease in allowance for doubtful receivables						(1,600)(133)(995)
		 Interest and dividend income					(14,396)(1,197)
3,215
		Interest expense						33,9272,821—
		 Gain on sales of investment securities						
(265)
(22)
—
		 Loss on disaster						
3,175
264
—
		 Loss on valuation of investment securities						33,566
2,791
13,942
		 Decrease (increase) in trade receivables						(671,305)(55,819)
23,010		 Decrease (increase) in inventories						(352,399)(29,302)4,394
		 Increase in trade notes and accounts payable						231,678
19,264(5,201)		Other, net					11,173929
50,249
		Subtotal						(568,419)(47,264)
Cash flows during the year for:						
995		 Interest and dividends received						1,199(3,346)
		Interest paid						(2,837)(1,648)
		 Income taxes paid					1,95346,250Net cash provided by (used in) operating activities					(46,949)

14,420(34,119)
23,488(564,630)

Cash flows from investing activities:						—		 Decrease in time deposits, net						
313
26(7,735)
		 Additions to property and equipment						(38,809)(3,227)3,596
		 Proceeds from sale of property and equipment						
313
26(6,720)		 Additions to investment securities						(36,753)(3,056)186
		 Proceeds from sale and redemption of investment securities					
1,864
155
—
		Increases from purchase of consolidated subsidiaries resulting in change in scope of consolidation				
15,442
1,284(1,297)
		 Increase in short-term loans receivable, net						(18,352)(1,526)(13)
		 Additions to long-term loans receivable						
(84)
(7)
61
		 Proceeds from long-term loans receivable						1,094
91(1,070)		Other, net						(16,561)(1,377)(12,992)
Net cash used in investing activities						(91,533)(7,611)
Cash flows from financing activities:					(40,991)
		 Increase (decrease) in short-term loans payable, net						611,32950,832
1,000
		 Increase in commercial paper, net						204,450
17,00016,063
		 Proceeds from long-term debt, issuance of bonds						249,850
20,775(16,420)
		 Repayments of long-term debt, redemption of bonds						(415,610)(34,558)(2,512)
		 Payment of cash dividends					(29,946)(2,490)(4)
		 Cash dividends paid to minority interests in consolidated subsidiaries					
(48)
(4)
(805)
		Other, net						(3,404)(283)(43,669)
Net cash provided by (used in) financing activities						616,62151,272(263)
Effect of exchange rate changes on cash and cash equivalents					(7,710)(641)(10,674)
Net decrease in cash and cash equivalents						(47,252)(3,929)35,046
Cash and cash equivalents at beginning of year						294,829
24,515143
Effect of change in scope of consolidation 						
——24,515
Cash and cash equivalents at end of year					$ 247,577¥
20,586 ¥See accompanying Notes to Consolidated Financial Statements.

26 | HANWA AR 2011 |HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements
1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements of Hanwa Co.,
Ltd. (the “Company”) and its consolidated subsidiaries have been
prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Act of Japan and its related accounting
regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements ofInternational Financial Reporting Standards.
The accounts of overseas subsidiaries are based on their accounting
records maintained in conformity with Japanese GAAP. The accompanying consolidated financial statements have been restructured
and translated into English with some expanded descriptions fromthe consolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as required by the Financial
Instruments and Exchange Act of Japan. Some supplementary information included in the statutory Japanese language consolidated
financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside
Japan, using the prevailing exchange rate at March 31, 2011, whichwas ¥83.15 to U.S.$1.00. The translations should not be construed
as representations that the Japanese yen amounts have been, could
have been or could in the future be converted into U.S. dollars at thisor any other rate of exchange.

2. Significant accounting policies
Consolidation—The consolidated financial statements include theaccounts of the Company and its 15 (14 in 2010) significant subsidiaries(together “the Companies”). The accounts of certain consolidated
subsidiaries have been included on the basis of fiscal periods that ended
three months or less prior to March 31, and significant transactions after
these year-ends were appropriately adjusted in consolidation.
Intercompany transactions and accounts have been eliminated.
Investments in unconsolidated subsidiaries and affiliates are not accounted
for by the equity method, as the application of the equity method would
not have a material effect on net income and retained earnings, or on the
consolidated financial statement as the whole.
Cash and cash equivalents—In preparing the consolidated statements of cash flows, cash on hand, readily available deposits andshort-term highly liquid investments with maturities not exceeding
three months at the time of purchase are considered to be cash andcash equivalents.
Allowance for doubtful receivables—The allowance for doubtfulreceivables is provided to cover possible losses on collection. With
respect to normal trade accounts receivable, it is stated at an amountbased on the actual rate of historical bad debts, and for certain doubtfulreceivables, the uncollectible amount is individually estimated.
Securities—The Companies classify securities as (a) securities held
for trading purposes (hereafter, “trading securities”), (b) debt securities intended to be held to maturity (hereafter, “held-to-maturity debt
securities”), (c) equity securities issued by subsidiaries and affiliatedcompanies, and (d) all other securities that are not classified in any of
the above categories (hereafter, “available-for-sale securities”).
The Companies do not hold trading securities. Held-to-maturity
debt securities are stated at amortized cost. Equity securities issued
by subsidiaries and affiliated companies which are not consolidated
or accounted for using the equity method are stated at moving
average cost. Available-for-sale securities with available fair values
are stated at fair value. Unrealized gains and unrealized losses onthese securities are reported, net of applicable income taxes, as aseparate component of accumulated other comprehensive income.
Realized gains on the sale of such securities are computed using
moving average cost. Other available-for-sale securities are stated atmoving average cost.
Inventories—Inventories are stated at the lower of cost (based,principally, on a moving-average basis or a specific-identificationbasis) or net realizable value.
Property and equipment (except under lease)—Property andequipment are carried at cost. Recognized loss on impairmentof long-lived assets has been deducted from acquisition costs.
Depreciation is principally provided on the declining-balancemethod over the estimated useful life of the asset. Major renewals
and improvements are capitalized. Maintenance, repairs and minor
renewals are expensed as incurred.
Software costs—The Companies include software in “Intangibles
and other assets” and depreciate it using the straight-line method
over the estimated useful especially 5 years for computer software
for internal use.
Bonuses—The Companies follow the Japanese practice of paying
bonuses to employees in June and December. At the balance
sheet date, bonus liabilities are estimated and accounted for on an
accrual basis.
Income taxes—Income taxes comprise corporate tax, prefecturaland municipal inhabitants taxes and enterprise tax. The Companies
recognize the tax effects of loss carryforwards and the temporary
differences between the carrying amounts of assets and liabilities for
tax and financial reporting. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the expected future
tax consequences of the temporary differences.
The Company and its wholly owned domestic subsidiaries fileconsolidated tax returns.
Retirement benefits—Substantially all employees of the Company
and its domestic consolidated subsidiaries are covered by qualified
funded pension plans. The amount of the retirement benefit is, ingeneral, based on length of service, base salary at the time of retirement, and cause of retirement. Annual contributions, which consistof normal cost and the amortization of prior service cost, are charged
to income.
Liabilities and expenses for severance and retirement benefits
are determined based on the amounts actuarially calculated using
certain assumptions.
Because pension assets exceeded the deduction for unrecognized actuarial differences and unrecognized prior service cost fromprojected benefit obligation in the Company, the excess amount
was included in “Other investments and noncurrent receivables” at
March 31, 2011 and 2010.
| HANWA AR 2011 | 27

As discussed in Note 2, “Changes in accounting policies,” theCompany and its domestic consolidated subsidiaries adopted “Partial
Amendments to Accounting Standard For Retirement Benefits (Part3).” (Accounting Standards Board of Japan (“ASBJ”) Statement
No.19 issued on July 31, 2008) from the year ended March 31, 2010.
Translation of foreign currencies—Receivables and payables
denominated in foreign currencies are translated into Japanese yen
at year-end rates.
Balance sheets of overseas consolidated subsidiaries are translated into Japanese yen at year-end rates, except for shareholders’equity accounts, which are translated at historical rates. Income
statements of overseas consolidated subsidiaries are translated ataverage rates, except for transactions with the Company, which aretranslated at rates used by the Company.
The Companies report foreign currency translation adjustmentsin accumulated other comprehensive income.
Finance leases—Finance leases that do not transfer ownership of theleased property to the lessee at the end of the lease period are depreciated using the straight-line method over the period of the lease with aresidual value assumed to be zero. Finance lease transactions in which
the ownership of the leased assets was not transferred to lessee andcontracted before April 1, 2008 are accounted for as operating leasetransactions and “as if capitalized” information is disclosed in the note
11 to the Company’s consolidated financial statements.
Derivatives and hedge accounting—The Company states derivative financial instruments at fair value and recognizes changes in thefair value as gain or loss unless the derivative financial instruments
are used for hedging purposes.
If derivative financial instruments are used as hedges and meetcertain hedging criteria, the Company defers the recognition of gainor loss resulting from the changes in the fair value of the derivative
financial instruments until the related gain or loss on the hedged
item is recognized.
Also, if interest rate swap agreements are used as hedges andmeet certain hedging criteria, the net amount to be paid or received
under the interest rate swap agreements is added to or deductedfrom 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 forwards contracts
Hedged items:
		 Interest expense on borrowings
		 Inventories and commitments
The Company evaluates hedge effectiveness by comparing the
cumulative changes in cash flows or changes in the fair value ofthe hedged items and the corresponding changes in the hedging
derivative instruments.
Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation.
Amounts per share—Computations of net income per share ofcommon stock are based on the weighted average number of shares
outstanding during each period. Diluted net income per share is notdisclosed because potentially dilutive securities are not issued. Cashdividends per share in the consolidated statements of income and28 | HANWA AR 2011 |comprehensive income are dividends applicable to the respective
years including dividends to be paid after the end of the fiscal year.
Changes in accounting policies—
Partial amendments to accounting standard for retirement
benefits
Effective from the year ended March 31, 2010, the Company andits domestic consolidated subsidiaries adopted “Partial Amendments
to Accounting Standard for Retirement Benefits (Part 3)” (ASBJ
Statement No.19 issued on July, 2008). The change had no impact
on net income and projected benefit obligation.
Accounting policies in revenues and cost of construction
Effective from the year ended March 31, 2010, the Company and its
domestic consolidated subsidiaries adopted “Accounting Standard
for Construction Contracts” (ASBJ Statement No.15 issued on
December 27, 2007) and “Guidance on Accounting Standard forConstruction Contracts” (ASBJ Guidance No.18 issued on December
27, 2007). The change had no impact on net income.
Accounting standard for asset retirement obligations
Effective from the year ended March 31, 2011, the Company and its
domestic consolidated subsidiaries adopted “Accounting Standard
for Asset Retirement Obligations” (ASBJ Statement No.18 issued on
March 31, 2008) and “Guidance on Accounting Standard for Asset
Retirement Obligations” (ASBJ Guidance No.21 issued on March
31, 2008). The adoption of this standard had no material impact on
consolidated financial statements for the year ended March 31, 2011.
Accounting standards for business combinations and related
matters
The Company and its domestic consolidated subsidiaries adopted“Accounting Standard for Business Combinations” (ASBJ Statement
No.21 issued on December 26, 2008), “Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No.22 issued on
December 26, 2008), “Partial Amendments to Accounting Standard
for Research and Development Costs” (ASBJ Statement No.23 issued
on December 26, 2008), “Revised Accounting Standard for Business
Divestitures” (ASBJ Statement No.7 (Revised 2008) issued on December
26, 2008), “Revised Accounting Standard for Equity Method of
Accounting for Investments” (ASBJ Statement No.16 (Revised 2008)
released on December 26, 2008) and “Revised Guidance on AccountingStandard for Business Combinations and Accounting Standard forBusiness Divestitures” (ASBJ Guidance No.10 (Revised 2008) issued on
December 26, 2008), as business combinations occurred during the year
ended March 31, 2011.
(Additional Information)
Effective from the year ended March 31, 2011, the Companies
adopted “Accounting Standard for Presentation of Comprehensive
Income” (ASBJ Statement No.25 issued on June 30, 2010).
The amounts of “accumulated other comprehensive income”
and “total accumulated other comprehensive income” as at March 31,
2010, included in the consolidated balance sheets and statementsof changes in net assets, correspond to “valuation and translation
adjustments” and “total valuation and translation adjustments,”
respectively, included in the consolidated balance sheets of theprevious year’s annual report.
As a result of the adoption of these standards, the Company haspresented the consolidated statement of income and comprehensive
income in the consolidated financial statements for the fiscal year
ended March 31, 2011 and 2010.

3. Financial instruments
At March 31, 2011 and 2010, information on financial instruments
was as follows.
(A) Qualitative information on financial instruments
Policy for financial instruments
The Group’s main business is the sales of various products, ranging
from mainly steel, metals and alloys, non-ferrous metals to foodproducts, petroleum and chemicals, lumber, and machinery. The
Group also engages in other business activities such as steel material processing, non-ferrous metal processing and amusement park
management and operations. While the Group depends primarily
on bank borrowings to procure funds necessary for these operational transactions as well as investing and financing activities, theGroup seeks to diversify its financing instruments to ensure stableand flexible liquidity, funding these activities by issuing bonds andcommercial paper in the capital markets in some cases. Temporary
surplus funds are managed in low-risk financial assets.
It is the Companies’ policy to use derivatives only for the purposeof reducing market risks associated with assets and liabilities.
Components of financial instruments and risks
Trade notes and accounts receivable are exposed to credit risk ofcustomers. Some of them are denominated in foreign currencies andexposed to the foreign exchange rate fluctuation risk as well.
Investment securities mainly consist of listed stocks and are exposed
to price fluctuation risk. Some of them are denominated in foreign
currencies, which accompany foreign exchange rate fluctuation risk.
Long-term loans receivable are mainly for the employees of
the Company.
Foreign currency denominated notes and accounts payable areexposed to foreign exchange rate fluctuation risk.
Short-term loans payable, commercial paper, bonds payable
and long-term loans payable are used for raising working capitaland investment funds, although they have liquidity risk related tochanges in financial market environments.
Foreign exchange future contracts and currency swap agreements
are used to hedge foreign exchange rate fluctuation risk associatedwith certain assets and liabilities denominated in foreign currencies.
Interest rate swap agreements are made use of for hedging fluctuations in future interest rates. Commodity forward contracts andcommodity swap agreements aim to hedge market risks associatedwith certain inventories and commitments.
Refer to No. 2, “Significant accounting policies — Derivatives
and hedge accounting” (page 28) for an explanation of theCompanies’ hedging instruments, hedged items, and evaluation ofhedge effectiveness.
Risk management system for financial instruments
With regard to credit risk to which trade notes and accounts receivable are exposed, the Company sets a credit limit amount for eachbusiness partner and manages the outstanding balance in accordance with the “credit administrative provisions” while monitoring
the credit status on a regular basis. Furthermore, the Company iscommitted to reducing foreign exchange rate fluctuation risk towhich trade notes and accounts receivable and trade notes andaccounts payable are exposed by means of derivatives trading.

Because price fluctuation risks associated with investment securities mainly affect listed stocks of the Company’s business partners,
the Company reports the regularly assessed market values to theBoard of Directors. In regard to foreign exchange rate fluctuation
risk, the Company is committed to reducing it by means of derivatives trading.
In regard to business investments, in compliance with the“Rules for the Review and Approval of New Businesses, Loans andInvestments,” the Company decides whether or not to invest after
following the prescribed procedures. The Company continuously
monitors the financial status and trading conditions of the issuing
company and reviews its policies for the holding of stocks.
To deal with liquidity risk associated with procuring funds for
short-term loans payable, commercial paper, bonds and long-term
debt, the Company creates a fund procurement plan based on
the outlook of the Group’s financial requirements. Taking financial
market trends into consideration as well, the Company works todiversify the funds procurement to ensure liquidity. In addition, withregard to interest rate risk and foreign exchange rate fluctuation risk,
the Company seeks to reduce such risks through derivatives trading
and other means.
The Company practices and manages trading of derivatives
related to currencies and products in compliance with the “Business
Department Operating Rules,” and each department receives theapproval of a supervising director to engage in such trading. In addition, the trading authority and trading limit are clearly stated in the“Regulations for Administrative Authority” and the bylaws.
With respect to derivatives trading related to interest rates associated with loans, the Company receives approval from a director in
charge of supervising financial affairs before engaging in such trading.
In order to reduce credit risk to which derivatives trading partners are exposed, the Company trades only with highly rated
financial institutions.
In regard to the contract balance of derivatives trading, the
Accounting Department directly checks the balance with thecontractor on a regular basis and reports it to the supervising directorof each department. At the same time, internal auditing is regularly
implemented by the Audit Department.
Supplementary explanation for items concerning fair valuesof financial instruments
The fair value of financial instruments is based on the market price, but
in cases in which market prices are not available, the fair value is reasonably estimated. As variable factors are incorporated into the estimationof values, values may vary depending on the assumptions used.
The contract amount related to derivative transactions in Note 5,“Derivatives” does not express the market risk related to the derivative transactions themselves.
(B) Fair values of financial instruments
Book values and fair values of the financial instruments (excluding
those whose fair values were hard to determine) on the consolidatedbalance sheets at March 31, 2011 and 2010 were as follows:| HANWA AR 2011 | 29

March31, 2011
					Book value

Millions of yen 			Fair value

DifferenceBook value

Thousands of U.S. dollars
Fair value

Difference(1) Cash and cash equivalents¥ 20,586¥ 20,586¥—$ 247,577$ 247,577$—(2) Trade notes and accounts receivable274,349			
3,299,447 		
Allowance for doubtful receivables(1,030)			
(12,387) 		
			Net
273,319
273,319—
3,287,060
3,287,060—(3) Investment securities						a) Held-to-maturity debt securities
5,009
5,085
76
60,241
61,155914b) Available-for-sale securities
27,01727,017—
324,917324,917—(4) Long-term loans receivable
188			
2,261 		Allowance for doubtful receivables(1)			
(12)		
			
Net
187
187
—
2,249
2,249
—
Total assets¥ 326,118¥ 326,194¥
76$3,922,044$3,922,958$
914(1) Short-term loans payable¥ 79,609¥ 79,609¥$ 957,414$ 957,414$——
18,00018,000—216,476
216,476—(2) Commercial paper(3) Long-term debt due within one year
11,583
11,583—
139,302139,302—(4) Trade notes and accounts payable
156,547
156,547—
1,882,706
1,882,706—(5) Long-term debt due after one year
125,075
125,105(30)
1,504,209
1,504,571(362)
Total liabilities¥ 390,814¥ 390,844¥(30) $4,700,107$4,700,469$(362)
Derivatives						To which hedge accounting is not applied
¥
560
¥
560
¥
—
$
6,735
$
6,735
$
—
To which hedge accounting is applied
253
88
(165)
3,043
1,058
(1,985)
Total derivatives
¥
813
¥
648
¥
(165) $
9,778
$
7,793
$
(1,985)March
31, 2010
					Book value

Millions of yen
Fair value

Difference(1) Cash and cash equivalents¥ 24,515¥ 24,515¥—(2) Trade notes and accounts receivable
214,416		
Allowance for doubtful receivables(802)						Net213,614
213,614—(3) Investment securities						a) Held-to-maturity debt securities
5,010
5,033
23
b) Available-for-sale securities
28,422
28,422—(4) Trade notes and accounts payable257			
Allowance for doubtful receivables(1)			
			
Net
256
256
—
Total assets¥ 271,817¥ 271,840¥
23(1) Short-term loans payable¥ 25,623¥ 25,623¥—(2) Commercial paper
1,000
1,000
—
(3) Long-term debt due within one year
34,10334,131(28)(4) Trade notes and accounts payable
134,800
134,800—(5) Long-term debt due after one year
114,355
114,355—
Total liabilities¥ 309,881¥ 309,909¥(28)
Derivatives						To which hedge accounting is not applied
¥
187
¥
187
¥
—
To which hedge accounting is applied(1,579)(1,801)(222)
Total derivatives¥(1,392)¥(1,614)¥(222)

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

30 | HANWA AR 2011 |Basis of determining the fair value of financial instruments is asfollows:
Cash and cash equivalents, Trade notes and accounts
receivable
The book values of cash and cash equivalents and trade notes
and accounts receivable approximate fair value due to their shortmaturities.
Investment securities
The fair value of securities is based on the quoted market price on thestock exchange. The fair value of bonds is based on the quoted priceprovided by financial institutions.
Long-term loans receivable
The book value of long-term loans receivable approximates fair value
due to their floating interest rates.

Short-term loans payable, Commercial paper, and Trade notes
and accounts payable
The book values of short-term loans payable, commercial paper andtrade notes and accounts payable approximate fair value due to theirshort maturities.
Long-term debt
The book value of long-term loans payable approximates fair value
due to their floating interest rates. The fair value of corporate bonds
is based on the quoted price provided by Japan Securities Dealers
Association.
Derivatives
The fair value of derivatives is based on the quoted price provided
mainly by financial institutions and exchange members.

The following tables summarize book values of financial instruments whose fair values were hard to determine as of March 31, 2011 and 2010:							Thousands of					Millions of yen
U.S. dollars
					
2011
		
			
Equitysecurities
issuedbyunconsolidated
subsidiaries
andaffiliatedcompanies		
(a)Book value

¥

6,022

2010

2011

Book value

Book value

¥

3,240

$

72,423(b) Available-for-sale securities							Unlisted stocks				
¥
2,121
¥
2,217
$ 25,508
Unlisted foreign stocks				
1,270
1,399
15,274
Investment in limited partnerships				
95
114
1,143
Total				
¥
3,486
¥
3,730
$ 41,925

The maturities of receivables and securities with maturities outstanding at March 31, 2011 were as follows:			Year ending March 31

		Millions of yen																2012

Cash and cash equivalents		 ¥ 20,586
Trade notes and accounts receivable		
274,349
Held-to-maturity debt securities		
—Long-term loans receivable		47
Total			 ¥ 294,982
			From 2013 		
to 2016		

¥

¥

		

¥

¥

—
—
3,010
40
3,050

Thereafter		

¥

¥

—
—
—
39
39

Thousands of U.S. dollars																2012

Cash and cash equivalents		 $ 247,577
Trade notes and accounts receivable		
3,299,447
Held-to-maturity debt securities		
—Long-term loans receivable		565Total			 $3,547,589

—
—
2,000
109
2,109

From 2017		
to 2021		

From 2013 		
to 2016		

$

$

—
—
24,053
1,311
25,364

From 2017		
to 2021		

$

$

—
—
36,200481
36,681

Thereafter		

$

$

—
—
—
469
469

| HANWA AR 2011 | 31

4. Securities(A) The following table summarizes book values and fair values of held-to-maturity debt securities as of March 31, 2011 and 2010:
March 31, 2011					

Corporate bonds

¥

5,009

March 31, 2010					Corporate bonds

Millions of yen 			Book value

Fair value

¥

5,010

¥

76

Thousands of U.S. dollars

Book value$

60,241

Fair value$

61,155Difference$

914

Millions of yen

Book value

¥

5,085

Difference

Fair value

¥

5,033

Difference¥

23(B) The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available market
values as of March 31, 2011 and 2010:
March 31, 2011					Securities with book values exceeding acquisition costs:
Equity securities¥
Securities with book values not exceeding acquisition costs:
Equity securities¥

Book value

Difference

Thousands of U.S. dollars

Acquisition cost

Book value

Difference

6,080

¥

12,076

¥

5,996

$

73,121$ 145,232$

19,412¥

14,941¥(4,471)$ 233,457$ 179,687$ (53,770)

March 31, 2010

					Millions of yen 			Acquisition cost

Millions of yen

Acquisition cost

Securities with book values exceeding acquisition costs:
Equity securities¥
5,337
Securities with book values not exceeding acquisition costs:
Equity securities¥ 21,914

72,111

Book value

Difference¥

12,476

¥

7,139

¥

15,946¥(5,968)(C)	Total sales of available-for-sale securities in the year ended March 31, 2011 amounted to ¥46 million ($553 thousand), and resulted in a net gainof ¥22 million ($265 thousand). The loss resulting from the valuation of the listed securities in the year ended March 31, 2011 was ¥2,791
million ($33,566 thousand).

5. Derivatives(A) The following tables summarize fair value information as of March 31, 2011 and 2010 for the derivatives to which hedge accounting
has not been applied:
March 31, 2011
Currency
related							Millions of yen 			Contract or		
notional amount
Fair value

Foreign exchange forward contracts:
Selling		 U.S. dollars¥ 33,669¥(250)
		Other currencies
10,61420
Buying		 U.S. dollars
9,281
77		 Other currencies
2,399
57
Currency swap agreements:
Japanese yen received for U.S. dollars
10,1461,014
		Total 			32 | HANWA AR 2011 |Thousands of U.S. dollars

Net recognizedgain or loss

Contract ornotional amount

¥

(250)
20

$ 404,919
127,649

77
57

111,618
28,851

926
685

1,014
918

122,020

12,195
		¥Fair value$(3,007)
241

Net recognizedgain or loss$

(3,007)
241
926
685

$

12,195
11,040Commodity related

			
		
		

Millions of yen 			Contract or		
notional amount
Fair value

Forwards:
Petroleum
		Selling
¥
8,288
¥
(237)
		Buying
8,115
261
Non-ferrous metals
		Selling
19,467(719)
		Buying
6,965
240
Commodity swap agreements:
Petroleum
		Selling
1,206
(89)
		Buying
2,756
186
		Total 			

March 31, 2010
Currency
related							Contract ornotional amount				Contract ornotional amountContract ornotional amount

¥

$

(237)
261
(719)
240

¥

99,67597,595
234,119
83,764

Thousands of U.S. dollars
Fair value$(2,850)3,139

Net recognizedgain or loss$

(2,850)3,139(8,647)2,886(8,647)2,886(89)
14,504(1,070)186
33,1452,237(358)			

(1,070)2,237(4,305)$

Millions of yen
Fair value

Foreign exchange forward contracts:
Selling		 U.S. dollars¥ 20,268¥(406)
		 Other currencies
10,772678
Buying		 U.S. dollars
7,634
115
		 Other currencies
4,167
(35)
Currency swap agreements:
Japanese yen received for U.S. dollars
10,744499
		 Total 			Commodity
related			

Net recognizedgain or loss

Net recognizedgain or loss

¥

(406)
678
115
(35)

¥

499
851

Millions of yen
Fair value

Forwards:
Petroleum
		 Selling¥ 10,175¥(327)
		Buying
9,517
445
Non-ferrous metals
		Selling
14,535(1,318)
		Buying
7,538
599
Commodity swap agreements:
Petroleum
		Selling
4,495
(222)
		Buying
5,904
159
		 Total 			Net recognizedgain or loss

¥

(327)
445
(1,318)
599

¥

(222)
159
(664)

| HANWA AR 2011 | 33

(B) The following tables summarize fair value information as of March 31, 2011 for the derivatives to which hedge accounting has been applied:
March 31, 2011
Interest rate related

			
		
		

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

11,200Commodity related

			
		
		

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

22,522
14,085				Contract ornotional amountInterest rate swap for long-term loans
Floating rate received for fixed rate¥

10,900Commodity related			

Forwards for inventories and commitments
Non-ferrous metals
		 Selling		Buying

Due after
one year¥

14,6188,254¥

Due after
one year¥(165)$ 134,696——

Fair value

¥

582
(329)

Due after
one year$$(1,984)

Thousands of U.S. dollars

Contract ornotional amount$ 270,860
169,393

60,132

Fair value

Due after
one year$——

Fair value

$

6,999
(3,957)

Millions of yen
Due after
one year¥

10,900Fair value

¥

(222)

Millions of yen

Contract ornotional amount

¥

5,000

Fair value

Thousands of U.S. dollars

Contract ornotional amountMillions of yen 			Contract ornotional amountMarch 31, 2010
Interest
rate related
			

		
		

Millions of yen 			Due after
one year¥——

Fair value¥

17,7979,854

6. Inventories
Inventories at March 31, 2011 and 2010 consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2011

Merchandise and finished products				¥ 95,790
Work-in-process				
620
4,941
Raw materials and supplies 				Total				¥ 101,351

2011

2010

¥

¥

68,797338
3,217
72,352$1,152,015
7,456
59,423$1,218,894

7. Pledged assets
At March 31, 2011 and 2010, assets were pledged as collateral for short-term loans payable in the amount of ¥1,578 million ($18,978
thousand) and ¥1 million, respectively, and as guaranty as follows:							Thousands of					Millions of yen
U.S. dollars
					
2011

Other current assets				¥13
Investment securities				
1,493
Property and equipment, net of accumulated depreciation 				
686Intangibles 				
112Total				¥2,30434 | HANWA AR 2011 |

2011

2010

¥

¥

13
1,531
789
125
2,458

$

$

156
17,9568,250
1,347
27,709

8. Short-term loans payable, commercial paper and long-term debt
The weighted average interest rate applicable to short-term loans
outstanding at March 31, 2011 and 2010 was 1.21% and 1.61%,
respectively.

The Company has entered into a yen denominated domestic
commercial paper program. There was an outstanding balance of¥18,000 million ($216,476 thousand) and ¥1,000 million at March
31, 2011 and 2010, respectively.

Long-term debt at March 31, 2011 and 2010 consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2011

Issued in 2007, 1.53% unsecured straight bonds, due 2010			
Issued in 2008, unsecured straight bonds, due 2011 (*1)			
Issued in 2009, unsecured straight bonds, due 2011 (*2)			
Issued in 2010, 0.79% unsecured straight bonds, due 2013			
Loans from banks with weighted average interest rates of 1.00% and1.18% at March 31, 2011 and 2010, respectively, maturing seriallythrough 2016			
Less amounts due within one year				
				

2010

2011

—
200
50
10,000¥ 10,000
¥
—
¥
—
¥
—

$
—
$
2,405
$
601
$ 120,265¥ 126,408
11,583¥ 125,075¥ 138,458
34,103¥ 114,355$1,520,240
139,302$1,504,209

¥
¥
¥
¥

(*1) Issued by Toyo-Energy Co., Ltd., at interest rates of TIBOR 6 months plus 0.3% (04/01/2009 - 09/30/2011).
(*2) Issued by Toyo-Energy Co., Ltd., at interest rates of 0.71% (10/01/2009 - 03/31/2010) and TIBOR 6 months (04/01/2010 - 09/30/2011).
The annual maturities of long-term debt outstanding at March 31, 2011 were as follows:
Years ending March 31

					Millions of yen

2012
2013
2014
2015
2016 and thereafter
Total

¥

11,333
10,13371,567
17,755
15,620¥ 126,408

Thousands of
U.S. dollars$ 136,296
121,864
860,698
213,530
187,853$1,520,241

9. Employees’ severance and retirement benefits
The liability for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2011 and2010, consisted of the following:							Thousands of					Millions of yen
U.S. dollars
					
2011

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				¥

23,843(21,547)(7,949)
(626)
6,413
¥
134

2010

2011

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

$ 286,747(259,134)(95,598)(7,529)77,125$1,611¥| HANWA AR 2011 | 35

Included in the consolidated statements of income and comprehensive income for the years ended March 31, 2011 and 2010, severance andretirement benefits expenses comprised the following:							Thousands of					Millions of yen
U.S. dollars
					
2011

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

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

¥

¥

963
455
(630)
843
81
4
1,716

2011

2010

¥

¥

$

873
433
(490)
949
81
19
1,865

$

11,582
5,472(7,577)
10,138974
48
20,637

remaining service period of active employees expected to receive
benefits under the plan.

Assumptions used for the years ended March 31, 2011 and 2010 were as follows:						
2011

2010

Discount rate					
2.0%Expected rate of return on plan assets					
3.0%Amortization period of prior service costs				
14 years
Amortization period of actuarial differences					14 years

2.0%
3.0%
14 years
14 years

10. Income taxes
The significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2011 and 2010 were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2011

Deferred tax assets:
Temporary differences resulting from the merger with consolidated subsidiaries		¥ 14,642
Loss on impairment of long-lived assets				
2,699
Net operating loss carryforwards				
1,775
Loss on sale-repurchase agreements of land 				1,719Land revaluation difference, net of taxes unrealized loss				
1,667
Accrued bonuses to employees				
718
Other				5,846Total deferred tax assets				
29,066
Valuation allowance				(23,009)
Net deferred tax assets				
6,057
Deferred tax liabilities:
Land revaluation difference, net of taxes unrealized gain				2,684Prepaid pension costs				
2,610
Other				2,005Total deferred tax liabilities				
7,299
Net deferred tax assets (liabilities)				
¥ (1,242)

36 | HANWA AR 2011 |

2010

2011

¥ 14,651
2,543
6,979
1,719
1,667
755
5,380
33,694(22,868)
10,826$ 176,091
32,45921,347
20,67420,048
8,635
70,307
349,561(276,717)
72,844

2,684
2,687
2,129
7,500
(3,326)32,27931,38924,11387,781$ (14,937)¥

Deferred tax assets and deferred tax liabilities were included in the consolidated balance sheets at March 31, 2011 and 2010, respectively,
as follows:							Thousands of					Millions of yen
U.S. dollars
					
2011

Current assets: Deferred tax assets				
Other assets: Deferred tax assets				Current liabilities: Deferred tax liabilities				Noncurrent liabilities: Deferred tax liabilities 				The Note concerning differences between the aggregate statutory
income tax rate and the Company’s effective tax rate for financial

¥

3,155
91
—
4,488

2011

2010

¥

3,357
2,653
—
2,684

$

37,943
1,095—
53,975statement purposes is omitted because the difference was less than
5 percent of the aggregate statutory income tax rate.

11. Net assets
Net assets comprise three subsections, which are shareholders’ equity,
accumulated other comprehensive income and minority interests.
Under the Japanese Corporate Law (“the Law”), in cases wherea dividend distribution of surplus is made, the smaller of an amountequal to 10% of the dividend or the excess, if any, of 25% ofcommon stock over the total of additional paid-in capital and legal
earnings reserve must be set aside as additional paid-in capital or
legal earnings reserve. Legal earnings reserve is included in retained
earnings in the accompanying consolidated balance sheets.
Under the Law, legal earnings reserve and additional paid-in
capital are able to eliminate or reduce a deficit by a resolution of theshareholders’ meeting.
Under the Law, all additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the nonconsolidated financial
statements of the Company in accordance with Japanese laws
and regulations.
At the annual shareholders’ meeting held on June 29, 2011, theshareholders approved cash dividends of ¥6 per share ($0.07)
amounting to ¥1,244 million ($14,961 thousand). This appropriation has not been accrued in the consolidated financial statements
as of March 31, 2011. Such appropriations are recognized in the
period in which they are approved by the shareholders.
Land revaluation difference—Pursuant to the Law Concerning
Land Revaluation, the Company revaluated land used for businessactivities at March 31, 2002.
Unrealized gain (loss) on land revaluation is recorded as land
revaluation difference in a separate component of accumulated
other comprehensive income in the consolidated balance sheets
until realized. The amounts are shown net of applicable income tax.
The revaluation of land was determined based on a declared
land value, with certain necessary adjustments, in accordance with
Article 2, Paragraph 1 of the Enforcement Ordinance Concerning
Land Revaluation.
As of March 31, 2011, the carrying amount of the land after theabove one-time revaluation exceeded the market value by ¥1,370
million ($16,476 thousand).

| HANWA AR 2011 | 37

12. Leases
Finance leases
As lessee
Finance leases that do not transfer ownership of the leased property to the lessee at the end of lease periods are as follows:[1] Details of lease assets
		 Tangible assets, mainly amusement facilities and computer system.
[2] Depreciation method for lease assets
		 The straight-line method over the period of the finance leases, assuming no residual value.
Lease transactions entered into before April 1, 2008 continue to be accounted for as operating lease transactions with “as if capitalized”
information as follows:
As of March 31, 2011
			

Millions of yen 							Accumulated
depreciation

Other property and equipment
Other assets
Total

Acquisition
cost

¥
¥

685
13
698

As
of March 31, 2010
		

¥

541
11
552

¥
¥

144
1
145

Acquisition
cost

$
$

8,238
156
8,394

Thousands of U.S. dollars
Accumulated
depreciation

$
$

6,507
132
6,639

Net leased
property

$

1,732
12
1,744

$

Millions of yen				

Other property and equipment
Other assets
Total

¥

Net leased
property

Acquisition
cost

¥
¥

995
13
1,008

Total lease payments, including financing charges, under financeleases that do not transfer ownership of the leased property to theCompanies for the years ended March 31, 2011 and 2010 were¥179 million ($2,153 thousand) and ¥297 million, respectively.
Depreciation expense and interest expense for finance leases
that do not transfer ownership of the leased property are notreflected in the accompanying consolidated statements of income

Accumulated
depreciation

¥
¥

665
9
674

Net leased
property

¥
¥

330
4
334

and comprehensive income. Depreciation expense, computed by
the straight-line method, was ¥164 million ($1,972 thousand) and¥275 million for the years ended March 31, 2011 and 2010,
respectively. Interest expense, computed by the interest method,was ¥7 million ($84 thousand) and ¥15 million for the years ended
March 31, 2011 and 2010, respectively.

Obligations, excluding financing charges, under such non-capitalized finance leases as of March 31, 2011 and 2010, were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2011

Due within one year				¥108
Due after one year				49
Total				
¥
157

2011

2010

¥
¥

195
160
355

$
$

1,299
589
1,888

Operating leases
As Lessee
Obligations under noncancelable operating leases as of March 31, 2011 and 2010 were as follows:							Thousands of					Millions of yen
U.S. dollars
					
2011

Due within one year			¥44
Due after one year				90
Total				¥13438 | HANWA AR 2011 |

2011

2010

¥
¥

32
80
112

$
$

529
1,083
1,612

13. Contingent liabilities
At March 31, 2011 and 2010, the Companies were contingently liable as follows:							Thousands of					Millions of yen
U.S. dollars
					
2011

As endorsers of export letters of credit and notes discounted			As guarantors of indebtedness				¥12,282
3,197

2011

2010

¥

5,807
2,509

$ 147,709
38,44914. Impairment of long-lived assets
Year ended March 31, 2011
(A) Logistics center in Chiba
Due to a continuing loss from steel sheet processing operations
at logistics center in Chiba, the book value of these assets werereduced to the recoverable amounts and the reduced amounts
were recorded as loss on impairment of long-lived assets inother income (expenses). The recoverable amounts of theseassets were measured according to the estimated net salevalue, which was based on the fair values reasonably estimatedby the Company.
For the purpose of recognition and measurement, theCompanies grouped the long-lived assets, based principally on
the location of the business entity to which the assets belonged.
As a result of these procedures, a loss on impairment oflong-lived assets of ¥430 million ($5,171 thousand) for the year
ended March 31, 2011 was recognized in other expenses in the
consolidated statements of income and comprehensive income.

The following tables summarize the losses on impairment of long-lived assets in the year ended March 31, 2011.
						Thousands ofYear
ended March 31, 2011						
Millions of yen
U.S. dollars											Machinery and		Machinery and		
Location
Purpose								equipment		
equipment		¥¥Narashino, Chiba
Logistics center			Total				

430
430

$
$

5,171
5,171

Year ended March 31, 2010
(A) Real estate for rent in Osaka
Due to a decline in profitability in real estate for rent in Osaka,
the Company reduced the book value of the long-lived assetsthat were impaired to the recoverable amount.
To assess the recoverable amount of the long-lived assets, theappraised value was used as the basis for the measurement.
(B) Logistics center in Osaka
Due to a contract for sale of the assets of logistics center inOsaka, the Company reduced the book value of the long-lived

assets that were impaired to the recoverable amount.
To assess the recoverable amount of the long-lived assets, the sales
value in the contract was used as the basis for the measurement.
(C) Employee dormitory in Aichi
Due to a decision to dispose of the assets in an employee dormitory
in Aichi Prefecture, the Company reduced the book value of thelong-lived assets that were impaired to the recoverable amount.
To assess the recoverable amount of the long-lived assets, theappraised value was used as the basis for the measurement.

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

Year ended March 31, 2010						 Millions of yen											Buildings and 				Location
Purpose							
Landstructures		
Total		

Chuo, Osaka
Real estate for rent			
Suminoe, Osaka
Logistics center			Kasugai, Aichi
Employee dormitory			
Total				

¥

¥

2,125
730
161
3,016

¥

¥

—
201
54
255

¥

¥

2,125
931
215
3,271

| HANWA AR 2011 | 39

15. Investment and rental properties
Information about fair value of investment and rental properties isdisclosed as follows:
The Company owns office buildings, logistics centers and otherproperties for rent in Tokyo and other cities.
Rental profit from these properties was ¥308 million ($3,704

thousand) and ¥116 million for the years ended March 31, 2011
and 2010, respectively, and were included in gross profit.
Book value, annual net increase amount and fair value, ofinvestment and rental properties, were as follows:Year ended March 31, 2011
Millions of yen							Thousands of U.S. dollars
Book value
Balance at beginning 		
of year
Net increase

¥

8,384

¥

280

Book value
Balance at end 		of yearFair value

¥

8,644

¥

8,498

Balance at beginning 		
of year
Net increase$

100,830$

3,367

Balance at endof yearFair value$ 104,197$ 102,201

Book value is net of accumulated depreciation.
Fair values of these properties are measured mainly by the Company, based on “Standard for real-estate appraisal.”Year ended March 31, 2010
Millions of yen
Book value
Balance at beginning 		
of year
Net increase

¥

4,542

¥

3,842

Balance at endof year¥

8,384

Fair value

¥

9,244

Regarding net increase during the fiscal year ended March 31, 2010,a main factor of increase was the increase of ¥6,073 million resulting
from the change in holding purpose for certain property fromoperating purpose to rental purpose, and main factor of decrease
was the decrease of ¥2,124 resulting from impairment loss.

16. Segment information(Additional information)
Effective from the fiscal year ended March 31, 2011, the Company
adopted the “Accounting Standard for Disclosures about Segmentsof an Enterprise and Related Information” (ASBJ Statement No. 17,
revised March 27, 2009) and the “Guidance on the AccountingStandard for Disclosures about Segments of an Enterprise and RelatedInformation” (ASBJ Guidance No. 20, March 21, 2008).
(A) Overview of the Reportable Segments
The Group’s reportable segments are determined on the basis that
separate financial information for such segments is available andexamined periodically by the Board of Directors, which makes decisions regarding the allocation of management resources andassesses the business performances of such segments.
The Group’s main business is buying and selling of various products with a focus on steel, and the business department, which is
divided according to products handled or service contents, mainly
carries out business activities. For this reason, the Group consists ofbusiness segments with the business department as the basis. The 5
reportable segments are “steel business,” “metal and alloy business,”40 | HANWA AR 2011 |“non-ferrous metal business,” “food business,” and “petroleum
and chemical business.”
The main products and services that fall under these reportablesegments are listed below.
Steel: Steel bars and shapes, steel plates and sheets, special steels,
wire products, steel pipes, and steelmaking raw materials(steel processing and storage)
Metals and alloys: Nickel, chromium, steel alloys, and solar cellrelated materials and products
Non-ferrous metals: Aluminum, copper, and zinc (recycling business)
Foods: Sea foods
Petroleum and chemicals: Petroleum products, industrial chemicals,
and chemicals
The reportable segment income figures are based on operating income
coupled with interest and dividend income, interest expense, andforeign currency translation adjustments. Intersegment transactions arepresented based on the current market prices at the time of this report.

Information about sales, profits, assets and others by reportable segment, for the years ended March 31, 2011 was as follows:Year
ended March 31, 2011									 Metals		Steeland alloys

Net sales		 ¥ 674,300
Intersegment		
18,748
Total			¥ 693,048
Segment income		 ¥
9,423
Assets			¥ 261,693
Depreciation		
1,632Interest income		216Interest expense		
1,413
Increase in property
2,481
and equipment		

¥ 121,785
2,252¥ 124,037¥
2,265¥ 62,325
46
2
593
225

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

57,942
2,085
60,027715
20,869
30
1
161

¥
¥
¥
¥

79,585482
80,067
1,778
31,28727—
77¥ 369,423
613¥ 370,036¥
2,198¥ 69,845
60
108
315

18

205

63

Year
ended March 31, 2011						

¥ 1,303,035 ¥
24,180¥ 1,327,215 ¥¥ 16,379 ¥¥ 446,019 ¥
1,795
327
2,559
2,992

93,06831,333
124,401
763
41,060
853
48
395
760

Total

¥ 1,396,103 ¥
55,513¥ 1,451,616 ¥¥ 17,142 ¥¥ 487,079 ¥
2,648
375
2,954
3,752

Adjustment

Consolidated— ¥ 1,396,103(55,513)—(55,513) ¥ 1,396,103(3,651) ¥ 13,491
45,719 ¥ 532,798
57
2,705
298
673
(133)
2,821
94

3,846

Thousands of U.S. dollars

Reportable segment

			 Metals		Steeland alloys

Net sales		 $ 8,109,441
Intersegment		
225,472
Total			$ 8,334,913
Segment income		 $ 113,325
Assets			$ 3,147,240
Depreciation		
19,6272,598Interest income		Interest expense		
16,994
Increase in property
and equipment		
29,838Millions of yen

Reportable segment

Non-ferrous		Petroleum		 Other
metalsFoods
and chemicals
Total
business$ 1,464,642
27,084$ 1,491,726$ 27,240$ 749,549
553
24
7,132

$ 696,837
25,075$ 721,912$
8,599$ 250,980
361
12
1,936

$ 957,126
5,797$ 962,923$ 21,383$ 376,272
325
—
926

2,706

758

216

1. “Other business” represents businesses such as lumber section,
machinery section and overseas sales subsidiaries, which are notincluded in the above reportable segment.
2. Adjustments are as follows:(1) Adjustments of negative ¥3,651 million (negative $43,909
thousand) for segment income include intersegment
elimination and Group costs that have not been distributed
to reportable segments. These group costs consist mainly of
expenses of administrative departments.
(2) Adjustments for segment assets amounting to ¥45,719
million ($549,838 thousand) include Group assets that havenot been distributed to reportable segments. These groupassets consist mainly of cash and cash equivalents, investment
securities and assets of administrative departments.
(3) Adjustments for depreciation and amortization amounting to$ 4,442,850 $15,670,896 $ 1,119,278
7,372
290,800
376,825$ 4,450,222 $15,961,696 $ 1,496,103$ 26,434 $ 196,981 $9,177$ 839,988 $ 5,364,029 $ 493,806
721
21,587
10,258
1,299
3,933
577
3,788
30,7764,750
2,465

35,983

9,140

Total

Adjustment

Consolidated$16,790,174 $— $16,790,174
667,625(667,625)—$17,457,799 $ (667,625) $16,790,174$ 206,158 $ (43,909) $ 162,249$ 5,857,835 $ 549,838 $ 6,407,673
31,845686
32,531
4,510
3,584
8,094
35,526(1,599)33,92745,123

1,131

46,254¥57 million ($686 thousand) include mainly depreciation andamortization expenses of group assets.
(4) Adjustments for interest income and interest expense amounting
to ¥298 million ($3,584 thousand) and negative ¥133 million(negative $1,599 thousand) include intersegment elimination,
revenue and expense that have not been distributed to reportable segments.
(5) Adjustments for increases in tangible fixed assets and intangible fixed assets amounting to ¥94 million ($1,131 thousand)are increases in Group assets.
3. Due to the impracticability of applying a new accounting policy
retrospectively to segment information, the Company shows thecomparable segment information for the year ended March 31,
2011 created based on the previous approach of presentation ofsegment information for the year ended March 31, 2010, as below.

| HANWA AR 2011 | 41

Year ended March 31, 2011				 Millions of yen
			
		
Steel

Metalsand alloys

Net sales		 ¥ 684,077 ¥ 128,362
Costs and expenses		
674,190
126,152
Operating income		 ¥9,887 ¥
2,210
Assets			¥ 260,533 ¥
51,673
Depreciation		
1,644
47
Loss on impairment of		
long-lived assets		
430—
Capital expenditure		
2,463
226

Non-ferrous		
metals
Foods

¥
¥
¥

79,664 ¥78,685979 ¥
24,437 ¥
32
—
103

Year
ended March 31, 2011
				
			
		
Steel

Metalsand alloys

Net sales		 $ 8,227,022 $ 1,543,740
Costs and expenses		 8,108,117
1,517,162
Operating income		 $ 118,905 $
26,578Assets			$ 3,133,289 $ 621,443
Depreciation		
19,771
565
Loss on impairment of		
long-lived assets		
5,171—
Capital expenditure		
29,621
2,718

Petroleumand chemicals

85,928 ¥ 367,369 ¥
83,641
365,3282,287 ¥
2,041 ¥
36,868 ¥68,052 ¥
31
61
—
26

—
206

Other
business

Total

50,703 ¥ 1,396,103 ¥
48,564
1,376,560
2,139 ¥
19,543 ¥15,941 ¥ 457,504 ¥
827
2,642
—
715

430
3,739

Consolidated— ¥ 1,396,103
5,689
1,382,249(5,689) ¥13,85475,294 ¥ 532,798
63
2,705
—
107

430
3,846

Thousands of U.S. dollars

Non-ferrous		
metalsFoods

Petroleumand chemicals

Otherbusiness

Total$

958,076 $ 1,033,410 $ 4,418,148 $ 609,778 $16,790,174 $946,302
1,005,905
4,393,602
584,053 16,555,141$
11,774 $27,505 $24,546 $25,725 $ 235,033 $$ 293,891 $ 443,391 $ 818,425 $ 191,714 $ 5,502,153 $
385
373
734
9,946
31,774—
1,239

Corporate

—
313

—
2,477

—
8,599

5,171
44,967

Corporate

Consolidated— $16,790,174
68,419 16,623,560(68,419) $ 166,614
905,520 $ 6,407,673
757
32,531
—
1,287

5,171
46,254Year
ended March 31, 2010				 Millions of yen
			
		
Steel

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

Metalsand alloys

86,081
83,5262,555
34,81530—
67

Non-ferrous		
metals
Foods

¥
¥
¥

52,824 ¥52,007817 ¥
15,164 ¥95
2850

1. The industry segments are determined in accordance with thosemajor products
2. Major products(1) Steel: Steel bars and shapes, steel plates and sheets, special
steels, wire products, steel pipes, and steelmaking raw materials(2) Metals and alloys: Nickel, chromium, steel alloys, and solar
cell-related materials and products(3) Non-ferrous metals: Aluminium, copper, and zinc

42 | HANWA AR 2011 |Petroleumand chemicals

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

113
126

Other
business

Total

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

2,860
8,157

Corporate

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

3,271
8,245

(4) Foods: Seafoods and meat products(5) Petroleum and chemicals: Petroleum products, chemical
products, and cement(6) Other business: Lumber, machinery, and other3. Corporate costs and expenses consist mainly of expenses ofadministrative departments.
4. Corporate assets consist mainly of cash and equivalents, investment securities and assets of administrative departments.

(B) Related information in 2011 only
Product information
Net sales information by products for the year ended March 31, 2011 was as follows:Year ended March 31, 2011							 Metals		Steeland alloys

Net sales to external customers¥

684,077¥

128,362¥

79,664

Year ended March 31, 2011							 Metals		Steeland alloys

Net sales to external customers$ 8,227,023$ 1,543,740

Millions of yen

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

¥

85,928¥367,369¥

50,703Thousands of U.S. dollars

Non-ferrous		Petroleum		metalsFoods
and chemicals
Other

$

Total

¥ 1,396,103

958,076$ 1,033,409$ 4,418,148$

609,778

Total$16,790,174

Geographic information
Net sales in different countries for the year ended March 31, 2011 was as follows:Year
ended March 31, 2011
					

Millions of yen

					
Japan

Net sales to external customers 				 ¥ 1,054,082

Asia

¥

306,084

Other¥

35,937

					Year ended March 31, 2011

Thousands of U.S. dollars

					
Japan

Asia

Net sales to external customers 				 $12,676,873$ 3,681,106

Other

$

432,195

Total¥ 1,396,103

Total$16,790,174(C) Impairment loss of long-lived assets in reportable segments
Impairment loss of long-lived assets by segment for the year ended March 31, 2011 was ¥430 million ($5,171 thousand) in Steel segment.

| HANWA AR 2011 | 43

Independent Auditors’ Report
To the Board of Directors of
Hanwa Co., Ltd.:We have audited the accompanying consolidated balance sheets of Hanwa Co., Ltd. (theCompany) and consolidated subsidiaries as of March 31, 2011 and 2010, and the related
consolidated statements of income and comprehensive income, changes in net assets andcash flows for the years then ended, expressed in Japanese yen. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is toindependently 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, 2011 and 2010, 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
to the year ended March 31, 2011 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, 201144 | HANWA AR 2011 |Global Network
Domestic Offices
Office	Address
Hanwa Bldg., 4-3-9 Fushimi-machi, Chuo-ku, Osaka 541-8585, JapanTokyo	
6-18-2 Ginza, Chuo-ku, Tokyo 104-8429, Japan
Nagoya	NHK Nagoya Broadcasting Center Bldg., 1-13-3, Higashisakura, Higashi-ku, Nagoya, Aichi 461-8614, Japan
Hokkaido	
NREG Kita-sanjo Bldg., 3-1-25, Kita-sanjo Nishi, Chuo-ku, Sapporo, Hokkaido 060-0003, Japan
TohokuSendai Dai-ichi Seimei Tower Bldg., 4-6-1 Ichiban-cho, Aoba-ku, Sendai, Miyagi 980-0811, JapanHACHINOHE
Kyoei Hachinohe Bancho Bldg., 9-5, Bancho, Hachinohe, Aomori 031-0031, Japan
Niigata
Hokuetsu-daiichi Bldg., 1-2-25, Higashi Oodouri, Chuo-ku, Niigata 950-0087, Japan
Chugoku
Hiroshima-fukuromachi Bldg., 5-25, Fukuro-machi, Naka-ku, Hiroshima 730-0036, Japan
KyushuTaihaku Center Bldg., 2-19-24 Hakata-ekimae, Hakata-ku, Fukuoka 812-0011, JapanKITAKANTO
Takasaki East Center Bldg., 14-1 Sakae-cho, Takasaki, Gunma 370-0841, JapanMITO
Mito Minami-machi, Dai-ichi Seimei Bldg., Minami-machi, Mito, Ibaraki 310-0021, Japan
ATSUGI
Nihonseimei Hon-Atsugi Bldg., 1-2-1, Asahi-cho, Atsugi, Kanagawa 243-0014, JapanOSAKA-NANKO Nanko Center Bldg., 2-3-44, Nanko-Minami, Suminoe-ku, Osaka 559-0032, Japan
OKINAWA
Mitsui Life Insurance Naha Bldg., 2-4-16, Kume, Naha, Okinawa 900-0033, Japan
Osaka	

Telephone
81-6-6206-3000
81-3-3544-2171
81-52-952-8800
81-11-219-7375
81-22-227-7981
81-178-73-1170
81-25-255-1777
81-82-543-2570
81-92-471-7121
81-27-310-6390
81-29-300-0351
81-46-226-9005
81-6-4703-4172
81-98-860-9115

Fax
81-6-6206-3365
81-3-3544-2351
81-52-952-9300
81-11-219-7376
81-22-227-7969
81-178-22-2211
81-25-255-1776
81-82-543-2561
81-92-471-7060
81-27-321-0952
81-29-226-8230
81-46-227-0121
81-6-4703-4174
81-98-861-5516

Telephone

Fax

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

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

Overseas Offices
Office	Address

Americas
Parker Plaza, 12th Floor, 400 Kelby Street, Fort Lee, NJ 07024, U.S.A.
601 Union Street, Suite 626, Seattle, WA 98101, U.S.A.
HoustonSuite 515, 9800 Richmond Avenue, Houston, TX 77042, U.S.A.
Los Angeles	 18100 Von Karman, Suite 320, Irvine, CA 92612, U.S.A.
Vancouver	 Suite 303, 1001 West Broadway Vancouver, B.C., V6H 4B1, Canada
BogotaCalle 97, No. 21-50, Edif: La Fontana Di Tivoli Oficina: 309 Bogota, D.C. Colombia
GUAM428, Chalan Antonio Suite, 102, Tamuning, 96913, Guam
New York	
SeattleAsia
Room 1703, Korea World Trade Center, 159-1, Samsung-Dong, Kangnam-ku, Seoul, 135-729, R.O. Korea
82-2-551-5387
Room 504, Industry Bldg., 578, Gwaebeop-Dong, Sasang-gu, Busan, 617-726, R.O. Korea
82-51-319-1006
Beijing	Room 1201, Beijing Fortune Bldg., 5 Dong San Huan Bei-lu, Chaoyang District, Beijing 100004, P.R. China
86-10-6590-8333
Qingdao
Crowne Plaza Qingdao, Room No.601, Hongkong Middle Road 76, Qingdao City, Shandong 266071, P.R. China
86-532-8-577-9990
Dalian	Senmao Bldg., 20F, 147 Zhongshan Street, Dalian City, Liaoning 116011, P.R. China
86-411-8-368-6954
ShanghaiRoom 902/904-907, Aetna Tower, No.107 Zhunyi Road, Shanghai 200051, P.R. China
86-21-6237-5260
Chongqing Room 1711, Metropolitan Tower, 68 Zhou Rong Lu, Central District, Chongqing 400010, P.R. China
86-23-6381-1101
FuzhouRoom 2501, Lippo Tianma Plaza, No.1 Wu Yi Road, Fuzhou City, Fujian 350003, P.R. China
86-591-8-3354165
Wuhan
Room 1009, New World Center, Tower A, No. 634, Jiefang Avenue, Wuhan 430032, P.R. China
86-27-8549-7132
Guangzhou Unit 3701-3704, Profit Plaza, No. 76 Westhuangpu Road, Guangzhou City, Guangdong 510623, P.R. China
86-20-8732-0451
DONGGUAN D Block, Chashan Industrial Park, Chashan Town, Dongguan City, Guangdong 523380, P.R. China
86-769-8182-1800
Zhongshan Unit 1909-1910, 19th Floor, Bank Of China Tower, 18 Zhongshan 3rd Road, Zhongshan City, Guangdong, P.R. China 86-760-2332-0706
Hong Kong	 Suites 2301-02 & 16, 23F, Cityplaza One, 1111 King’s Road, Tai Koo Shing Island East, Hong Kong852-2545-0110
TAIPEI
Room A, 9th Floor, No. 132, Minsheng East Road Sec. 3, Taipei 10596, Taiwan
886-2-2545-7151
Kaohsiung Room B, 17th Floor, No.7 Su-Wei 4th Road, Kaohsiung, Taiwan
886-7-338-5508
Bangkok
16th Floor, Unit 1602, Q.House Lumpini Bldg., 1 South Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120, Thailand 66-2-343-8877
Kuala Lumpur Suite 8-12B-3, Level 14 (12B), Menara Olympia 8, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia
60-3-2078-2311
Singapore
20 Cecil Street, #20-05/06/07, Equity Plaza, Singapore, 049705
65-6536-7822
Tawau
P.O. Box 1231 91037 Tawau, Sabah, Malaysia
60-89-750016
HO CHI MINH	 Unit 4, 19th Floor, A&B Tower, 76 Le Lai Street, District 1, Ho Chi Minh City, S.R. Vietnam
84-8-3822-5715
HANoI
14th Floor, Vit Tower, 519 Kim Ma Street, Ba Dinh, Hanoi, S.R. Vietnam
84-4-2220-9155
Jakarta
Menara Cakrawala 5th Floor, Jalan M.H. Thamrin No. 9, Jakarta 10340, Indonesia
62-21-3983-3211
Mumbai
Unit No.208, 2nd Floor, B-Wing, Dynasty Business Park, 58, Andheri Kurla Road, Andheri (E), Mumbai 400 059, India 91-22-2826-0884
New Delhi
203, Bestech Chambers, B Block, Sushant Lok 1, Gurgaon, Haryana 122002, India
91-124-456-6100
CHENNAI
Regus Citi Centre, Level 6, Chennai Citi Centre, 10/11, Dr. Radhakrishnan Salai, Chennai 600 004, India
91-44-4221-8259
Seoul

BUSAN

Europe, Middle East and Africa
2nd Floor, Finland House, 56 Haymarket, London, SW1Y 4RN U.K.
Amsterdam WTC Tower A-11F, Strawinskylaan 1111, 1077XX, Amsterdam, The Netherlands
ViennaLandstrasser Hauptstrasse 71/2 A1030, Wien, Austria
KuwaitC/O AI-Sabih Engineering & Trading Co., P.O. Box No. 1114 Dasman, 15462 Dasman, Kuwait
Room 24, 6th Floor, Danat Trading Center, Abdulla Al-Ahmad Street, Sharq, Kuwait
RiyadhP.O. Box 68974, Riyadh 11537, Saudi Arabia
JeddahOffice No. 219, Kaki Center, P.O. Box 1224, Jeddah 21431, Saudi Arabia
DammamOffice No.1, 1st Floor, Al-Hammam Center for Trading, King Fahad Bin Abdul Aziz Road, Dammam, Saudi Arabia
Dubai
Dubai Airport Free Zone, East Wing Bldg., No. 6E, B-Block, Room No. 544, P.O. Box 293873 Dubai, U.A.E.
Johannesburg 2nd Floor, West Tower, Nelson Mandela Square, Maude Street, Sandton, 2196, South Africa
London82-2-551-5575
82-51-319-1545
86-10-6590-8340
86-532-8-577-9630
86-411-8-368-6934
86-21-6237-5268
86-23-6381-7385
86-591-8-3345202
86-27-8578-7196
86-20-8732-0402
86-769-8182-1801
86-760-2332-0696
852-2542-2544
886-2-2545-7112
886-7-338-5433
66-2-343-8878
60-3-2078-2380
65-6536-7855
60-89-750019
84-8-3822-5725
84-4-2220-9159
62-21-3983-3212
91-22-2826-1097
91-124-456-6111
91-44-4221-8222

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

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

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

966-1-473-5624
966-2-669-0648
966-3-8467937
971-4-609-1895
27-11-881-5611| HANWA AR 2011 | 45

Corporate Information (As of March 31, 2011)
Corporate Data

Stock Information

Company Name

Hanwa Co., Ltd.

Fiscal Year-End

Established

April 1947

Annual Meeting of Shareholders June

Capital¥45,651 million

Independent Auditors

KPMG AZSA & Co.

Number of Employees

Consolidated: 2,060

Domestic Stock Exchange
Listings

The First Section of the Tokyo
Stock Exchange

Non-consolidated: 1,154

The First Section of the Osaka
Securities Exchange

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

Fax: +81-6-6206-3365

Authorized Shares

570,000,000 shares

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

Shares Issued and Outstanding 211,663,200 shares

104-8429, Japan

Number of Shareholders

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

March 31

13,871

Tel: +81-3-3544-2171
Fax: +81-3-3544-2351
Nagoya Branch Office NHK Nagoya Broadcasting Center Bldg.,
1-13-3, Higashisakura, Higashi-ku,
Nagoya, Aichi 461-8614, Japan
Tel: +81-52-952-8800
Fax: +81-52-952-9300
Number of Subsidiaries

Subsidiaries: 44(20 in Japan, 24 overseas)
Affiliated companies: 9(0 in Japan, 9 overseas)

Board of Directors (As of June 29, 2011)

Corporate Auditors (As of June 29, 2011)

ChairmanStanding Auditors

Shuji Kita
President
Hironari Furukawa
Senior Managing Director
Tetsuro Akimoto

Outside Directors

Toshiaki Shirakawa

Toshiaki Taguchi

Shiro Yabushita

Teruo Asai

Hajime Yosano

Directors
Kazuhisa Majime
Masataka Toyoda
Hiroaki Tsujinaka

Managing Directors

Yoshiaki Matsuoka

Yoshifumi Nishi

Atsuhiro Moriguchi

Takuji Kita

Tadahiko Kaida

Hideo Kawanishi

Youichi Ejima

Hiroshi Serizawa

Naoyuki Togawa

Hiroshi Ebihara

Yasumichi Kato

Akihiko Ogasawara

Takatoshi Kuchiishi

46 | HANWA AR 2011 |Outside Auditors

Osamu Seki

Masanori Kobayashi

Profile

Principal Shareholders
Name of Shareholder

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

Number of Shares(thousands)

Percentage of Total
Issued Share (%)

19,921
10,438
7,630
4,818
4,816
4,702
4,466
3,500
2,631
2,614

9.6
5.0
3.7
2.3
2.3
2.3
2.2
1.7
1.3
1.3

demonstrated new capabilities as a trading company by handling seafood products, rides forJapan Trustee Services Bank, Ltd. (Trust Account) ..................................................
The Master Trust Bank of Japan, Ltd. (Trust Account).............................................
Sumitomo Mitsui Banking Corporation....................................................................
Japan Trustee Services Bank, Ltd. (Trust Account 9)................................................
Hanwa Clients' Stock Investment Association .........................................................
Trust & Custody Services Bank, Ltd. (Investment Trust Account)...........................
Hanwa Employees' Stock Investment Association...................................................
BBH FOR FIDELITY LOW-PRICED STOCK FUND..........................................................
MELLON BANK, N.A. AS AGENT FOR ITS CLIENT MELLON OMNIBUS US PENSION.....
The Dai-ichi Mutual Life Insurance Company...........................................................

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

Note: The Company holds 4,391,507 shares of treasury stock, which is excluded from the major shareholders listed above.

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

Breakdown by Type of Shareholder

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

Contents
01

To Our Shareholders

02

Interview with the President

04

At a Glance

06

Review of Operations

13

Topics14

Corporate Governance

16

CSR Activities

18

Financial Section

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

Consolidated Financial Highlights
For the years ended March 31, 2011 and 2010.

22		 Financial Statements &

2011

2010

2011

¥ 1,396,103
13,854
5,794
6,104¥ 1,116,629
11,42011,57914,537$16,790,174
166,615
69,681
73,410¥¥$ 6,407,673
1,328,431

532,798
110,459

46

Corporate Information

443,445
106,855

Yen

Notes

Global Network

Per share data:
Net income
Cash dividends

¥

27.95
12.00

Net Sales

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

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

¥

$

55.46
12.00

Stock Price Range and Trading Volume (Common Stock)should be noted that there is a possibility
for actual results to differ significantly
owing to such factors as changing socialand economic conditions.

Nikkei Stock Average (closing)

Stock Price

(¥)

(¥)

0.336
0.144

800

15,000600

10,000

400

5,000

200

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

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

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

5,000 5,0005,000

3,000 3,0003,000

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

ForeignForeign
corporations
corporations
16.4% 16.4%

U.S. dollars (Note)(Millions of yen)
(Millions(Millions
of Yen)of Yen)(Millionsof Yen)this annual report reflect the assumptions
currently available information. However, it

Operating Income

50,000–1,000,000
50,000–1,000,000
26.3% 26.3%

Individuals
Individuals
and andothers others
31.0% 31.0%

Note: The U.S. dollar amounts represent translations, for convenience only, of yen amounts at the rate of ¥83.15 = $1.00.

and beliefs of management based on

1,000,000–
1,000,000–
49.1% 49.1%

1,000–50,000
1,000–50,000
24.5% 24.5%

Thousands of
U.S. dollars (Note)

Millions of yen

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

and Analysis

45–1,000–1,000
0.1% 0.1%

HANWA CO., LTD. AND CONSOLIDATED SUBSIDIARIES

19		 Management’s Discussion

		JapaneseJapanesefinancialfinancial
institutions
institutions
33.6% 33.6%

Other domestic
Other domestic
corporations
corporations
15.0% 15.0%

new unique businesses.

18		 Five-Year Summary		stock 2.1%
TreasuryTreasury
stock 2.1%
Japanesebrokerage
Japanesebrokerage
firms firms
1.9% 1.9%

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

Trading
Volume(Millions of shares)

0

40
30
20
10

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

0
07 0 07
08 0708
09 0809
10 0910
11 1011 11

0

0
07

007
08 0708
09 0809
10 0910
11 1011

11

0

0
07

007
08

4
5
2009
08
09
07

09
10
08

10
11
09

11
10

6

7

8

9

10

11

12

1
2
2010

3

4

5

6

7

8

9

10

11

12

1
2
2011

3

0

11

| HANWA AR 2011 | 47

阪和興業株式会社

Annual Report 2011
For the year ended March 31, 2011

http://www.hanwa.co.jp

2011.8 Printed in Japan