06.11.2014 Views

Annual Report 2004 [PDF/1.1MB]

Annual Report 2004 [PDF/1.1MB]

Annual Report 2004 [PDF/1.1MB]

SHOW MORE
SHOW LESS

Create successful ePaper yourself

Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.

KAWASHO CORPORATION<br />

ANNUAL REPORT <strong>2004</strong>


August <strong>2004</strong><br />

Regarding Establishment of JFE Shoji Holdings, Inc.<br />

On August 2, <strong>2004</strong>, Kawasho Corporation, through a stock transfer, established JFE Shoji Holdings, Inc.,<br />

and registered the company on the Tokyo Stock Exchange and Osaka Securities Exchange.<br />

The newly registered JFE Shoji Holdings, Inc., began operations under the umbrella<br />

of prearranged consolidated management with Kawasho Corporation and NKK Trading Inc.<br />

Further, on October 1, <strong>2004</strong>, the following four companies are to undergo consolidation<br />

and reorganization under the holding company umbrella:<br />

JFE Shoji Trade Corporation, a company involved in steel and steel peripheral businesses;<br />

Kawasho Foods Corporation, involved in foodstuffs,<br />

semiconductor-related Kawasho Semiconductor Corporation<br />

and real-estate related Kawasho Real Estate Corporation.<br />

The JFE Shoji Group, created by consolidation and reorganization,<br />

from now on under the new organization aims to conduct rapid decision-making<br />

and business management geared to the characteristics of each member company,<br />

clearly evaluate business results, refine its original functions in the distribution business,<br />

and bolster competitive strength, maximizing business value by promoting continued growth<br />

of the Group as a whole and increasing profits.<br />

CONTENTS<br />

FINANCIAL HIGHLIGHTS - 3<br />

PRESIDENT'S MESSAGE - 4<br />

REVIEWS OF OPERATIONS - 13<br />

ORGANIZATION CHART - 30<br />

CORPORATE OFFICER - 32<br />

FINANCIAL SECTION - 33<br />

WORLD NETWORK - 60<br />

MAJOR OVERSEAS GROUP COMPANIES - 62<br />

COMPANY DATA - 63


FINANCIAL HIGHLIGHTS<br />

Kawasho Corporation and Consolidated SubsidiariesFor the years ended March 31, <strong>2004</strong>, 2003 and 2002<br />

Millions of Yen<br />

<strong>2004</strong> 2003 2002<br />

Thousands of<br />

U.S. Dollars<br />

( Note 1 )<br />

<strong>2004</strong><br />

For the years ended March 31 :<br />

Net sales<br />

¥ 1,179,430<br />

¥ 1,156,796<br />

¥ 1,125,930<br />

$ 11,159,334<br />

Gross profit<br />

59,738<br />

59,066<br />

60,650<br />

565,219<br />

Operating income<br />

14,453<br />

12,396<br />

9,054<br />

136,749<br />

Net ( loss ) income<br />

( 5,002 )<br />

3,659<br />

( 11,871 )<br />

(47,327)<br />

As of March 31 :<br />

Total assets<br />

¥ 461,082<br />

¥ 509,573<br />

¥ 590,710<br />

$ 4,362,589<br />

Total shareholders' equity<br />

39,904<br />

10,748<br />

10,059<br />

377,558<br />

Yen<br />

U.S. Dollars<br />

( Note 1 )<br />

Amounts per share:<br />

Net ( loss ) income<br />

¥ (21.26 )<br />

¥ 15.55<br />

¥ ( 88.37 )<br />

$ (0.20)<br />

See the accompanying Notes to Consolidated Financial Statements.<br />

1,500,000<br />

Net sales<br />

( Millions of Yen )<br />

Gross profit<br />

( Millions of Yen )<br />

80,000 15,000<br />

Operating income<br />

( Millions of Yen )<br />

14,453<br />

5,000<br />

Net ( loss) income<br />

( Millions of Yen )<br />

3,659<br />

1,000,000<br />

1,125,930<br />

1,156,796<br />

1,179,430<br />

60,000<br />

60,650<br />

59,066<br />

59,738<br />

10,000<br />

9,054<br />

12,396<br />

0<br />

- 11,871<br />

-5,002<br />

40,000<br />

500,000<br />

5,000<br />

-5,000<br />

20,000<br />

- 10,000<br />

0<br />

0<br />

2002 2003 <strong>2004</strong> 2002 2003 <strong>2004</strong><br />

0<br />

2002 2003 <strong>2004</strong> 2002 2003 <strong>2004</strong><br />

800,000<br />

Total assets<br />

( Millions of Yen )<br />

Total shareholders' equity<br />

( Millions of Yen )<br />

40,000<br />

39,904<br />

600,000<br />

590,710<br />

30,000<br />

509,573<br />

461,082<br />

400,000<br />

20,000<br />

200,000<br />

10,000<br />

10,059<br />

10,748<br />

0<br />

0<br />

2002 2003 <strong>2004</strong> 2002 2003 <strong>2004</strong><br />

3


PRESIDENT'S<br />

MESSAGE<br />

BUSINESS ENVIRONMENT<br />

During the year ended March <strong>2004</strong>, a steady economic recovery<br />

continued in the United States. Stimulated by substantial<br />

tax cuts and the maintenance of loose monetary<br />

policy conditions, internal demand factors such as consumer<br />

spending and capital investment led growth. Asian countries,<br />

notably NIES economies, suffered a short-lived slowdown<br />

in the first half of the year due to the SARS outbreak,<br />

but later staged a general recovery as the expansion of the<br />

U.S. economy and other factors helped to drive up exports.<br />

Surging consumer spending and strong levels of investment,<br />

led by overseas investors, resulted in particularly strong expansion<br />

in China, which maintained high GDP growth.<br />

In Japan, although there were few signs of any pickup in<br />

growth in consumer spending, exports expanded briskly as<br />

other economies recovered and capital investment reversed<br />

course amid higher corporate profits. A gradual recovery became<br />

more entrenched.<br />

In the steel industry, which represents the major portion of<br />

Kawasho's business, growth in domestic steel demand was<br />

buoyant in the construction machinery, shipbuilding and automotive<br />

sectors, but remained sluggish elsewhere as a result<br />

of the impact of lower public-works spending on construction.<br />

Strong growth in exports to China and other parts<br />

of Asia helped to offset these trends. As in the previous<br />

year, prices continued to recover across many segments of<br />

the domestic steel market.<br />

RESULTS<br />

Hiroo Naruki<br />

President & CEO<br />

Kawasho Corporation<br />

Our consolidated net sales rose 2.0% to 1,179.4 billion. By<br />

operating segment, strong growth in exports to China and<br />

South Korea and the consolidation of construction materials<br />

subsidiaries contributed to a year-on-year increase in sales<br />

of 6.5% to 769.9 billion in the steel segment. Sales of raw<br />

materials, chemicals and fuels grew 4.2% to 198.5 billion<br />

amid increased revenues from steel raw materials as a result<br />

of higher demand. Sales of foodstuffs and general materials<br />

declined 4.0% to 84.8 billion as we continued to pursue<br />

our strategy of greater business selectivity in terms of<br />

products handled. In the machinery, aerospace and electronics<br />

business, lower revenues in the shipping and general<br />

machinery sectors offset higher trading volumes in the electronics<br />

sector, leading to a 12.1% drop in sales to 98.1 billion.<br />

Sales in the construction and other sector fell 35.3% to<br />

27.8 billion, due mainly to the disposal of auto leasing operations<br />

in the previous fiscal year and to a fall in construction<br />

project revenues.<br />

Gross profit increased by 672 million to 59,738 million.<br />

Operating income totaled 14,453 million, a year-on-year in-<br />

4


crease of 2,057 million. Recurring income increased by<br />

3,120 million to 13,227 million, due both to higher operating<br />

income and to improved non-operating profitability.<br />

We booked extraordinary gains of 2,551 million from the<br />

sale of investment securities. Extraordinary losses totaled<br />

23,985 million, mainly reflecting losses on the disposal of<br />

property and equipment and losses on the sale of investments<br />

in consolidated subsidiaries and affiliates. We recorded<br />

a net loss for the year of 5,002 million.<br />

Net cash provided by operating activities amounted to<br />

14,803 million. As the result of the sale of property and<br />

equipment and of investment securities, net cash provided<br />

by investing activities totaled 18,348 million. We used cash<br />

flow from these sources and from the proceeds of a preference<br />

share issue, and also used some of our cash-in-hand,<br />

to repay debt. As a result, net cash used in financing activities<br />

amounted to 43,234 million. Cash and cash equivalents<br />

at the end of the year totaled 26,425 million.<br />

BUSINESS POLICY<br />

On December 19, 2003, we announced a plan to merge<br />

with NKK Trading Inc. in October <strong>2004</strong>. Kawasho and NKK<br />

Trading have each adopted core functional roles within the<br />

JFE Group in the areas of product sales and global procurement<br />

since the merger of NKK Corporation and Kawasaki<br />

Steel Corporation to form the JFE Group. In the interests of<br />

business development, we have agreed to work toward a<br />

merger of our core operations with those of NKK Trading.<br />

This merger will encompass the distribution and sale of steel<br />

products, raw materials and related capital equipment and<br />

materials, together with peripheral steel operations (collectively<br />

referred to below as steel business and peripheral<br />

operations.")<br />

Prior to the merger, we first established on August 2, <strong>2004</strong><br />

through a transfer of equity a new holding company to be<br />

called Holdings company. In the second step, which is<br />

scheduled to take place in October <strong>2004</strong>, Kawasho will be<br />

split along operational lines, with the steel business and peripheral<br />

operations merging with NKK Trading under the umbrella<br />

of Holdings company.<br />

This corporate split will also create a number of other trading<br />

companies operating under the same umbrella. Once<br />

the merger is complete, Holdings company will be the holding<br />

company for JFE Trading (created by a merger of the<br />

steel business and peripheral operations of Kawasho with<br />

NKK Trading) and three other newly created trading companies<br />

containing the foodstuffs, semiconductor and real estate<br />

operations of Kawasho (to be called Kawasho Foods,<br />

Kawasho Semiconductors and Kawasho Real Estate, respectively).<br />

As we prepare for this merger and reorganization, we continue<br />

to press ahead to achieve three strategic policy goals<br />

aimed at fortifying our business base: enhanced business<br />

selectivity and accelerated asset disposals; significant shortterm<br />

improvements in returns on assets and equity; and<br />

higher earnings power through cost-reduction efforts. We<br />

also increased our capital in March <strong>2004</strong> through an issue<br />

of preference shares.<br />

(1) Enhanced business selectivity and accelerated asset<br />

disposals<br />

Steel operations<br />

As the core trading company within the JFE Group, we have<br />

taken a number of specific measures to increase the competitiveness<br />

of our steel business, which remains the core<br />

area of operations. In Japan, as part of moves to enhance<br />

our sales operations for steel plate products, we acquired<br />

management control of a Sharring company in Tochigi, a<br />

business partner, in May 2003. In the Tokyo metropolitan<br />

area and surrounding regions, we integrated four processing<br />

centers for steel coil in October 2003 under a new holding<br />

company, and November 2003 we reorganized our construction<br />

materials business in eastern Japan, merging it<br />

with three construction materials subsidiaries to form a new<br />

integrated firm. Finally, in February <strong>2004</strong>, we strengthened<br />

our presence in the blanking sector, where demand is forecast<br />

to grow from automakers and manufacturers of automotive<br />

components. In a capital partnership with Metal One<br />

Corporation, we established Mizushima Metal Products Corporation.<br />

Overall, these various moves served to optimize<br />

the structure of Kawasho Group steel distribution, processing<br />

and sales operations, thereby boosting business efficiency<br />

and improving our competitiveness in Japan.<br />

Overseas, we continued to invest aggressively in higher processing<br />

capacity for steel products. In China, where demand<br />

for steel continues to expand rapidly, we opened our fourth<br />

processing center in the country, in Jiangsu Province (Jiangsu<br />

Kawaden Steel Products Co., Ltd.) We also invested in<br />

increased capacity at the coil center that we had established<br />

a year previously (Zhejiang Kawaden Steel Products Co.,<br />

Ltd.) to respond to strong growth in demand.<br />

Non-steel operations<br />

In our non-steel businesses, we have initiated various<br />

moves to promote enhanced business selectivity, based on<br />

the sales potential and relative competitiveness of each<br />

area. In the raw materials sector, we have worked to expand<br />

trading volumes in coke and scrap iron in an attempt to stabilize<br />

supplies of steel raw materials to our parent, JFE<br />

5


Steel Corporation, and to affiliated electric furnace manufacturers.<br />

In the chemicals sector, in October 2003 we joined<br />

Iwatani International Corporation and two other companies<br />

in a joint investment to establish a new company, which will<br />

focus on the sale of gases manufactured within the area<br />

covered by JFE Steel's production operations in the Chiba<br />

district of eastern Japan.<br />

In the foodstuffs and general materials sector, with a view to<br />

improving our return on assets, we reviewed our continued<br />

presence in certain sectors of the foods business and implemented<br />

a number of organizational reforms. We also initiated<br />

development plans to expand into certain canned food<br />

sectors to increase profitability. In our machinery business,<br />

we worked to strengthen our presence in trading of capitalgoods<br />

materials for supply to JFE Steel by expanding overseas<br />

sources and reducing sales-related expenses.<br />

In the electronics sector, we forged closer links with JFE<br />

Group company Kawasaki Microelectronics Inc. to expand<br />

sales of its products, establishing a new sales operating<br />

base in Taiwan. We also focused on expanding imports into<br />

Japan of products made by overseas semiconductor manufacturers.<br />

non-operating earnings also improved as interest payments<br />

fell in line with the debt reductions achieved over the past<br />

few years.<br />

Consolidated recurring income rose by 3.1 billion compared<br />

with the previous year to another record high of 13.2<br />

billion. This figure represents the accumulation of several<br />

years of steady and ongoing efforts to raise profitability at<br />

the consolidated level.<br />

PROSPECTIVE CHALLENGES<br />

Our next major focus is to ensure the merger with NKK Trading<br />

Inc. proceeds quickly and smoothly to create the best<br />

business structure for the group.<br />

Our immediate aim is to realize merger benefits as quickly<br />

as possible from the creation of JFE Shoji Trading Corporations<br />

through the integration of our steel businesses and<br />

peripheral operations with NKK Trading. This means merging<br />

the sales, distribution and processing networks of both<br />

companies in Japan and overseas, and will involve various<br />

reorganizations within the group, together with the closure<br />

and integration of certain office facilities.<br />

6<br />

Finally, as part of ongoing efforts to promote greater selectivity,<br />

in March <strong>2004</strong> we concluded an agreement to sell our<br />

aerospace operations to Itochu Corporation.<br />

(2) Significant short-term improvements in returns on<br />

assets and equity<br />

In March <strong>2004</strong>, we signed agreements to establish new<br />

commitment lines with financial institutions. These new trading<br />

credit facilities enabled us to squeeze the cash-on-hand<br />

balance to repay debt. We also sold parts of our investment<br />

securities portfolio and made accelerated disposals of land,<br />

buildings and other real estate. Within the Kawasho Group,<br />

we made substantial progress in selling our general leasing<br />

and resort businesses. These moves helped to reduce consolidated<br />

debt and to raise our return on assets.<br />

Over the course of the year, the year-end consolidated interest-bearing<br />

debt balance fell by 75.3 billion, or 31.4%, to<br />

164.2 billion. This represented a significant short-term improvement<br />

in the financial position of the Kawasho Group.<br />

(3) Higher earnings power through cost-reduction efforts<br />

General costs were reduced as the relocation of our Osaka<br />

head office a year earlier generated savings in rental expenses.<br />

In addition, we squeezed labor costs further through<br />

personnel reductions. These moves resulted in greater savings<br />

in selling, general and administrative expenses. Our<br />

As the principal trading company within the JFE Group, JFE<br />

Shoji Trading will coordinate its strategy with that of the JFE<br />

Group while expanding its functional role within the group.<br />

Other major aims will be to optimize the use of management<br />

resources and to pursue further cost reductions to boost the<br />

competitiveness and profitability of the new firm. Separately,<br />

we are also looking at joint collaborative pre-merger measures<br />

with NKK Trading in the run-up to October <strong>2004</strong>.<br />

After the corporate split, the other non-steel operating companies<br />

created from Kawasho assets will assume separate<br />

responsibility for their various areas. Their goal will be to develop<br />

and expand within each respective industrial sector,<br />

depending on the strategic vision that each management<br />

decides at the time.<br />

The functions of Holdings company which will be responsible<br />

for managing four operating companies from October<br />

<strong>2004</strong>, will include strategic planning, risk management and<br />

media relations for the new JFE Shoji group. The main role<br />

of the holding company will be to guide the management<br />

and development of the overall group.<br />

Under the new structure, our aim will be to expand sales<br />

and profits, and to maximize the overall value of the JFE<br />

Shoji group.<br />

August <strong>2004</strong>


CORPORATE TOPICS<br />

August 2, <strong>2004</strong><br />

Establishment of Holding Company via Share Transfer and<br />

Agreement to Consolidate with NKK Trading<br />

On December 19, 2003, Kawasho Corporation and NKK<br />

Trading Inc. (President: Hajime Kizaki) announced the<br />

conclusion of a basic agreement to consolidate business<br />

operations with effect from October 1, <strong>2004</strong>. The<br />

purpose of the merger is to develop the core functional<br />

roles of both companies within the JFE Group in the<br />

areas of product sales and global procurement.<br />

Prior to consolidation, on August 2, <strong>2004</strong>, Kawasho established<br />

through a transfer of equity a new holding<br />

company, called JFE Shoji Holdings, Inc. Under the umbrella<br />

of this holding company, Kawasho will undergo a<br />

corporate split (scheduled for October 1, <strong>2004</strong>), in the<br />

process forming a steel trading company and a number<br />

of trading companies covering other operations.<br />

In addition to the consolidation and reorganization<br />

scheme, on May 20, <strong>2004</strong>, Kawasho and NKK Trading<br />

also concluded a basic agreement pertaining to matters<br />

concerning the various operating companies that<br />

will simultaneously be created under the holding company<br />

umbrella. These matters are also outlined below.<br />

Establishment of Holding Company via Share Transfer<br />

1. Purpose of establishment of holding company<br />

The consolidation and reorganization will serve to clarify<br />

management authority and responsibilities through<br />

the separation of management and oversight functions<br />

from policy execution functions, while at the same time<br />

shifting to a pure holding company structure that is capable<br />

of responding flexibly and precisely to changes in<br />

the business environment. The Group plans to focus on<br />

maximizing consolidated value through sustained expansion<br />

and profit growth. The reorganization promises<br />

to promote faster decision-making, proper management<br />

of individual businesses in line with the expertise and<br />

characteristics of each operating company, and clearer<br />

evaluation of business performance.<br />

2. Group roles and functions under holding company<br />

system<br />

(1) Role of JFE Shoji Holdings (holding company)<br />

Business strategy formulation and oversight func<br />

tions<br />

Formulation of overall business strategy to expand<br />

Group profits<br />

Optimal allocation of Group resources through busi<br />

ness selectivity and focus<br />

Group risk management and oversight functions<br />

Risk management for Group, including legal and reg<br />

ulatory compliance<br />

Risk management and oversight for major operating<br />

company policies<br />

External representation for Group companies<br />

Representation of Group to shareholders, investors<br />

and other outside parties to ensure high transparen<br />

cy (in capacity as the only listed firm in the Group)<br />

(2) Roles of operating companies under holding compa<br />

ny umbrella<br />

Based on the overall Group strategy, companies op<br />

erating under the holding company umbrella will<br />

each manage their respective operations to maxi<br />

mize value. Within the framework agreed with holding<br />

company JFE Shoji Holdings, each firm will have full<br />

authority and responsibility for the development of its<br />

own business.<br />

3. Share transfer<br />

(1) Share transfer progress:<br />

July 27, <strong>2004</strong>Delisting of Kawasho shares<br />

August 2, <strong>2004</strong>Date of share transfer, establish<br />

ment of holding company and list<br />

ing of holding company<br />

(2) Share transfer details:<br />

The purpose of the move was the establishment of a<br />

single wholly owning parent company via the sole<br />

transfer of shares of Kawasho in a manner that<br />

keeps the shareholder compositions of Kawasho and<br />

JFE Shoji Holdings identical at the time of the share<br />

transfer. In view of these provisions, the transfer<br />

involved the allotment of one ordinary share in JFE<br />

Shoji Holdings for every ordinary share of Kawasho,<br />

and one Class A preference share in JFE Shoji Holdi<br />

ngs for every Class A preference share of Kawasho.<br />

7


4. Outline of holding company<br />

Name: JFE SHOJI HOLDINGS, INC.<br />

Nature of business: formulation and management of<br />

Group business strategy, and associated operations<br />

Head office location: 2-7-1, Otemachi, Chiyoda-ku,<br />

Tokyo<br />

Directors and auditors :<br />

President (Representative Director) :<br />

Hiroo Naruki<br />

(currently President and CEO, Kawasho Corp.)<br />

Vice President (Representative Director) :<br />

Hajime Kizaki<br />

(currently President, NKK Trading Inc.)<br />

Senior Managing Director (Representative Director) :<br />

Yutaka Horiguchi<br />

(currently Representative Director (Senior Managing Executive<br />

Officer), Kawasho Corp.)<br />

Managing Director :<br />

Takahiro Goto<br />

(currently Managing Director, NKK Trading Inc.)<br />

Director :<br />

Toshio Matsumiya<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

Youichi Nishimaki<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

Yoshihiko Nakamura<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

Corporate Auditor :<br />

Tadaaki Kikuchi<br />

(currently Corporate Auditor, Kawasho Corp.)<br />

Yoshihiro Hosotani<br />

(currently Corporate Auditor, Kawasho Corp.)<br />

Kouichi Igarashi<br />

(currently Corporate Auditor, Kawasho Corp.)<br />

Kantaro Uryu<br />

(currently Corporate Auditor, Kawasho Corp.)<br />

Capital : ¥20 billion<br />

Issued shares at time of establishment : 295,365,187<br />

(size of minimum trading unit : 1,000 shares)<br />

Ordinary shares : 235,365,187<br />

Class A preference shares : 60,000,000<br />

Fiscal year-end : March 31<br />

Stock exchange listings : Tokyo, Osaka<br />

URL http://www.jfe-shoji-hd.co.jp<br />

Agreement to Consolidate with NKK Trading<br />

1. Outline of operating companies to be created under<br />

holding company umbrella<br />

The corporate split of Kawasho will create three new<br />

companies operating in the fields of foods, semiconductors<br />

and real estate. The remainder of Kawasho,<br />

consisting of steel trading and peripheral operations,<br />

will consolidate with NKK Trading to form a new steel<br />

trading company. Outlines of these four companies that<br />

will operate under the umbrella of the new holding company<br />

are provided below.<br />

(1) Outline of trading companies<br />

[Consolidated steel trading operations]<br />

Name: JFE SHOJI TRADE CORPORATION<br />

(Kawasho Corp. is the surviving entity in the consolidation and<br />

changes its name)<br />

Tokyo Head Office : 2-7-1, Otemachi, Chiyoda-ku, Tokyo<br />

Osaka Head Office : 1-6-20, Dojima, Kita-ku, Osaka<br />

Capital : 14,5billion(planned)<br />

Directors and auditors:<br />

President (Representative Director) :<br />

Hiroo Naruki<br />

(currently President and CEO, Kawasho Corp.)<br />

Vice President (Representative Director) :<br />

Hajime Kizaki<br />

(currently President, NKK Trading Inc.)<br />

Representative Director :<br />

Toshio Matsumiya<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

Youichi Nishimaki<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

Yoshihiko Nakamura<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

8


Director :<br />

Tsutomu Yajima<br />

(currently Director, Kawasho Corp.)<br />

Yutaka Horiguchi<br />

(currently Representative Director (Senior Managing Executive<br />

Officer), Kawasho Corp.)<br />

Corporate Auditor :<br />

Katsuyuki Sako<br />

(currently Auditor, NKK Trading Inc.)<br />

Tadaaki Kikuchi<br />

(currently Corporate Auditor, Kawasho Corp.)<br />

Yoshihiro Hosotani<br />

(currently Corporate Auditor, Kawasho Corp.)<br />

Kouichi Igarashi<br />

(currently Corporate Auditor Kawasho Corp.)<br />

Executive Officer (**Director)<br />

[ President and CEO ]<br />

Hiroo Naruki **<br />

(currently President and CEO, Kawasho Corp.)<br />

[ Executive Vice President ]<br />

Hajime Kizaki**<br />

(currently President, NKK Trading Inc.)<br />

[ Senior Managing Executive Officer ]<br />

Toshio Matsumiya**<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

Youichi Nishimaki**<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

Yoshihiko Nakamura**<br />

(currently Director (Senior Managing Executive Officer), Kawasho<br />

Corp.)<br />

[ Managing Executive Officer ]<br />

Tatsuji Togawa<br />

(currently Managing Executive Officer, Kawasho Corp.)<br />

Junichi Nakamura<br />

(currently Managing Executive Officer, Kawasho Corp.)<br />

Katsusuke Yabuta<br />

(currently Senior Managing Executive Officer, Kawasho Corp.)<br />

Akio Takahashi<br />

(currently Managing Director , NKK Trading Inc.)<br />

Minoru Kasetani<br />

(currently Managing Executive Officer, Kawasho Corp.)<br />

Sigeki Yamamoto<br />

(currently Managing Executive Officer, Kawasho Corp.)<br />

Hisao Oosato<br />

(currently Managing Executive Officer, Kawasho Corp.)<br />

Tsutomu Yajima **<br />

(currently Director (Managing Executive Officer), Kawasho Corp.)<br />

[Executive Officer ]<br />

Nobuo Yoshida<br />

(currently Executive Officer, Kawasho Corp.)<br />

Todomu Kobayashi<br />

(currently Executive Officer, Kawasho Corp.)<br />

Hiroto Kitadate<br />

(currently Director , NKK Trading Inc.)<br />

Tatsuo Iwasaki<br />

(currently Executive Officer, Kawasho Corp.)<br />

Kouhei Yoshioka<br />

(currently General Manager, JFE Steel Corp.)<br />

Keiichi Teramura<br />

(currently Executive Officer, Kawasho Corp.)<br />

Takato Furukawa<br />

(currently Director , NKK Trading Inc.)<br />

Hiromichi Ishibe<br />

(currently Director , NKK Trading Inc.)<br />

Masaru Saruwatari<br />

(currently Executive Officer, Kawasho Corp.)<br />

Katsuyoshi Takaya<br />

(currently Executive Officer, Kawasho Corp.)<br />

Nature of business: sale of steel products, raw materials and capital<br />

goods materials<br />

URL http://www.jfe-shoji.co.jp<br />

(Reference data)<br />

Sales : (parent) ¥1,200 billion (approx.)<br />

(consolidated) ¥1,500 billion (approx.)<br />

Employees : (parent) 1,000 (approx.)<br />

[Food operations]<br />

Name: KAWASHO FOODS CORPORATION<br />

Head office: Chiyoda-ku, Tokyo<br />

Capital: ¥1.0 billion (planned)<br />

Directors and auditors :<br />

President:<br />

Masanobu Takada<br />

(currently Managing Executive Officer, Kawasho Corp.)<br />

9


Directors :<br />

Kenichiro Yoshiki<br />

(currently General Manager, Kawasho Corp.)<br />

Kohei Yoneda<br />

(currently General Manager, Kawasho Corp.)<br />

Shinnosuke Hara<br />

(currently Vice President, Kawasho Int.(U.S.A.)Inc.)<br />

Takahiro Goto<br />

(currently Managing Director , NKK Trading Inc.)<br />

Corporate Auditor :<br />

Akihiko Makimura<br />

(currently General Manager, Kawasho Corp.)<br />

Tadaaki Kikuchi<br />

(currently Corporate Auditor Kawasho Corp.)<br />

Yoshihiro Hosotani<br />

(currently Corporate Auditor Kawasho Corp.)<br />

Corporate Auditor :<br />

Akihiko Makimura<br />

(currently General Manager, Kawasho Corp.)<br />

Tadaaki Kikuchi<br />

(currently Corporate Auditor Kawasho Corp.)<br />

Yoshihiro Hosotani<br />

(currently Corporate Auditor Kawasho Corp.)<br />

Nature of business: sale of ASIC manufactured by Kawasaki Microelectronics<br />

Inc. and imported high-performance HVA semiconductors<br />

URL http://www.kawasho-semicon.co.jp<br />

(Reference data)<br />

Sales : (parent) ¥17 billion (approx.)<br />

Employees : (parent) 30 (approx.)<br />

Nature of business: sale of canned and processed foods, cereals,<br />

dairy products and marine produce (processed and unprocessed)<br />

URL http://www.kawasho-foods.co.jp<br />

(Reference data)<br />

Sales : (parent) ¥27 billion (approx.)<br />

(consolidated) ¥43 billion (approx.)<br />

Employees : (parent) 40 (approx.)<br />

[Semiconductor operations]<br />

Name : KAWASHO SEMICONDUCTOR CORPORATION<br />

Head office : Chiyoda-ku, Tokyo<br />

Capital : ¥0.5 billion (planned)<br />

Directors and auditors :<br />

President :<br />

Toshio Tsukada<br />

(currently Managing Executive Officer, Kawasho Corp.)<br />

Directors :<br />

Satomi Imanishi<br />

(currently General Manager, Kawasho Corp.)<br />

Takahiro Goto<br />

(currently Managing Director , NKK Trading Inc.)<br />

Hideaki Kojima<br />

(currently General Manager, Kawasaki Microelectronics Inc.)<br />

[Real estate operations]<br />

Name: KAWASHO REAL ESTATE CORPORATION<br />

Head office : Chiyoda-ku, Tokyo<br />

Capital : ¥3.0 billion (planned)<br />

Directors and auditors:<br />

President :<br />

Minoru Kasetani<br />

(currently Managing Executive Officer, Kawasho Corp.)<br />

Directors :<br />

Shuuji Konomi<br />

(currently General Manager, Kawasho Corp.)<br />

Corporate Auditor :<br />

Akihiko Makimura<br />

(currently General Manager, Kawasho Corp.)<br />

Tadaaki Kikuchi<br />

(currently Corporate Auditor Kawasho Corp.)<br />

Yoshihiro Hosotani<br />

(currently Corporate Auditor Kawasho Corp.)<br />

Nature of business : sale of real estate<br />

URL http://www.kawasho-real.co.jp<br />

(Reference data)<br />

Sales : (parent) ¥1 billion (approx.)<br />

(consolidated) ¥2 billion (approx.)<br />

Employees : (parent) 15 (approx.)<br />

10


2. Consolidation and reorganization schedule<br />

Step 1 Establishment of holding company August–September <strong>2004</strong><br />

JFE SHOJI HOLDINGS, INC.<br />

Kawasho Corporation<br />

NKK Trading Inc.<br />

Step 2 Consolidation and reorganization under holding company umbrella<br />

From October <strong>2004</strong> onward<br />

JFE SHOJI HOLDINGS, INC.<br />

JFE SHOJI TRADE<br />

CORPORATION<br />

KAWASHO FOODS<br />

CORPORATION<br />

KAWASHO SEMICONDUCTOR<br />

CORPORATION<br />

KAWASHO REAL ESTATE<br />

CORPORATION<br />

( Consolidated steel trading<br />

operations)<br />

(Food operations ) ( semiconductor operations ) ( Real estate operations)<br />

NKK Trading Inc. Outlines As of March 31, <strong>2004</strong><br />

Established September 1989<br />

Financial Results<br />

Legal representative President Hajime Kizaki<br />

Paid-in capital<br />

¥2,260 million<br />

Consolidated<br />

No. of shares issued 21,200,000<br />

Shareholders’ equity ¥2,958 million<br />

Units<br />

Total assets<br />

¥96,183 million<br />

Sales ¥ billion<br />

Fiscal year-end March 31<br />

Operating profit ¥ million<br />

No. of employees 264 (consolidated: 512 ) Recurring profit ¥ million<br />

No. of consolidated subsidiaries 10<br />

Net income ¥ million<br />

Leading business partners JFE Steel Corporation<br />

Osaka Gas Co., Ltd.<br />

Samsung Heavy Industries Parent<br />

Co., Ltd.<br />

Leading shareholders JFE Steel Corporation<br />

Units<br />

Principal banks<br />

Mizuho Corporate Bank, Ltd.<br />

Sales ¥ billion<br />

The Bank of Tokyo-<br />

Operating profit ¥ million<br />

Mitsubishi, Ltd.<br />

Recurring profit ¥ million<br />

The Mitsubishi Trust and Net income ¥ million<br />

Banking Corporation<br />

Fiscal year<br />

ended March 2003<br />

416.7<br />

1,825<br />

1,304<br />

107<br />

Fiscal year<br />

ended March 2003<br />

385.2<br />

1,438<br />

1,274<br />

445<br />

Fiscal year<br />

ended March <strong>2004</strong><br />

446.3<br />

2,097<br />

2,022<br />

611<br />

Fiscal year<br />

ended March <strong>2004</strong><br />

401.9<br />

1,624<br />

1,715<br />

212<br />

11


Corporate Governance<br />

1. Basic Corporate Governance Policies<br />

Corporate governance reforms and other structural improvement<br />

measures aimed at establishing systems to<br />

make Kawasho more responsive to the fast-changing<br />

and highly competitive business environment were initiated<br />

after approval at the <strong>Annual</strong> Meeting of Shareholders<br />

on June 27, 2003. These reforms specifically entailed<br />

the introduction of an executive officer system in<br />

June 2003, which strengthened governance and management<br />

functions within the overall business structure<br />

by making a clear separation between business decision-making<br />

by the Board of Directors and management<br />

supervisory functions, and policy execution functions.<br />

This change served to clarify authority and responsibility<br />

within the new structure.<br />

In addition, recognizing the need for a more comprehensive<br />

approach to observance of laws and corporate<br />

ethics across the Kawasho Group, a Compliance Committee<br />

was established in May 2003.<br />

2. Corporate Governance System<br />

Kawasho has adopted the auditor-based system of corporate<br />

governance as specified in the Commercial<br />

Code of Japan. This system establishes the Meeting of<br />

Shareholders, the Board of Directors and the Board of<br />

Corporate Auditors as the principal governance structures.<br />

Kawasho has also introduced an executive officer<br />

system, under which executive officers are responsible<br />

for policy execution. Kawasho has not appointed<br />

any external directors. Of the four corporate auditors,<br />

three are external appointees, of whom two are parttime<br />

auditors.<br />

3. Internal Controls and Risk Management Status<br />

(1) Reforms to Board of Directors<br />

The decision-making and supervisory functions of<br />

the Board of Directors are separated from its role in operational<br />

execution through a clearer delineation of authority<br />

and responsibilities.<br />

With regard to corporate governance-related matters,<br />

the Board of Directors supervises operations by<br />

checking the legality and appropriateness of all operational<br />

moves and strategic decisions.<br />

The Board of Directors was reduced in size by an<br />

amendment to the Articles of Incorporation lowering<br />

the maximum number of directors from 35 to 15. This<br />

reform aimed to promote an increased volume of more<br />

dynamic debate while speeding up decision-making<br />

processes.<br />

(2) Introduction of executive officer system<br />

An executive officer system was introduced in June<br />

2003 to improve management functions. Appointed by<br />

the Board of Directors, executive officers have terms of<br />

1 year.<br />

Besides the President & CEO, the executive officers<br />

include appointees to positions at the levels of Senior<br />

Managing Executive Officer, Managing Executive Officer<br />

and Executive Officer.<br />

The Board of Directors has determined all executive<br />

officer roles and the division of responsibilities.<br />

A Board of Executive Officers has been established<br />

that reports directly to the President & CEO. This<br />

change aims to promote smooth communication channels<br />

between the directors and the executive officers,<br />

and between executive officers, thereby enabling better<br />

policy execution. This committee is composed of the<br />

President & CEO, all Senior Managing Executive Officers<br />

and Managing Executive Officers, and all Executive<br />

Officers.<br />

(3) Measures to strengthen compliance<br />

Establishment of Compliance Committee<br />

To raise company-wide awareness of compliance issues<br />

and to upgrade risk management capabilities, the<br />

Compliance Committee was established in May 2003.<br />

Its main tasks are to integrate management of compliance<br />

functions and to promote on a company-wide basis<br />

(including all affiliates) awareness of the importance<br />

of legal and regulatory compliance by executive<br />

officers and employees at every level of the organization.<br />

Chaired by the senior managing executive officer<br />

in charge of general and administrative affairs, the<br />

committee decides compliance-related policies and actions,<br />

and is responsible for overseeing a quick company-wide<br />

response in the event of any compliance violation.<br />

Compliance system<br />

In addition to the establishment of the Compliance<br />

Committee, a Compliance Officer (at director level) and<br />

compliance executives (at the levels of division heads,<br />

executive officers, and presidents of affiliated companies)<br />

were appointed to ensure the operation and maintenance<br />

of the compliance system.<br />

Institution of compliance violation reporting system<br />

Any Kawasho Group employee may report or discuss<br />

known compliance-related issues directly through a<br />

new system that facilitates reporting of any compliance<br />

violations through a mechanism independent of the operational<br />

chain of command. Part of the secretariat of<br />

the Compliance Committee, the Compliance Consultation<br />

Office provides this facility. The confidentiality of<br />

any information is strictly protected to ensure that informants’<br />

interests are not prejudiced by their actions.<br />

Compliance actions<br />

Led by the Compliance Committee, the following measures<br />

were taken during the year ended March <strong>2004</strong>:<br />

(a) Meetings were held to brief employees and presidents<br />

of affiliated companies on the establishment of<br />

the Compliance Committee.<br />

(b) Compliance manuals were distributed to all employees<br />

and executive officers of Kawasho and affiliated<br />

companies.<br />

(c) Employees and branch managers of Kawasho and<br />

presidents of affiliated companies received management<br />

level-specific training on compliance issues (including<br />

case studies of compliance violations).<br />

12


REVIEWS OF OPERATIONS<br />

DOMESTIC STEEL BUSINESS - 14<br />

OVERSEAS STEEL BUISINESS - 16<br />

TERRE ARMÉE CIVIL ENGINEERING BUSINESS - 18<br />

RAW MATERIALS BUSINESS - 20<br />

CHEMICALS & FUELS BUSINESS - 22<br />

FOODS & GENERAL MATERIALS BUSINESS - 24<br />

MACHINERY BUSINESS - 26<br />

ELECTRONICS BUSINESS - 28


Domestic Steel Business<br />

Steel is Building Our Dreams For The 21st Century<br />

Steel -- Giving Form To Ideas<br />

For A New Century<br />

Steel can take on a variety of forms, answering the<br />

needs of the times and supporting our everyday<br />

lives. Japan's economic revival after World War II<br />

and subsequent rise to advanced nation status<br />

would not have been possible without a<br />

sophisticated steel industry. Kawasho Corporation<br />

was established in 1954 as a trading company for<br />

JFE(formerly Kawasaki) Steel Corporation, a<br />

blast furnace product manufacturer and exemplary<br />

Japanese steel-maker. Since then, Kawasho has<br />

sold steel products manufactured by JFE Steel<br />

Corporation to heavy industry concerns including<br />

ship builders, as well as to the automobile,<br />

electrical and other industries. Over the years we<br />

have also seriously expanded our sales area to<br />

other countries while growing as a major<br />

professional in the steel business.<br />

More than fifty percent of Kawasho's business is<br />

with thick steel plate for ships and bridges, steel<br />

sheet for automobiles and home electrical<br />

appliances as well as galvanized sheet used to<br />

construct walls and roofs. In addition, we deal in<br />

special steel for automobile parts and industrial<br />

machinery, stainless steel, H-steel and steel rods<br />

for construction and civil engineering, and a wide<br />

range of steel pipes.<br />

Stainless steel sheets manufactured by the JFE Steel Corporation<br />

used as roofing material at Kansai International Airport<br />

Electrical steel sheet used in generators<br />

Flexible System of Operations and<br />

Extensive Network<br />

To maintain and increase the competitive strength<br />

of the steel industry, world-scale integration and<br />

capital tie-ups continues with steel makers.<br />

Large container ship<br />

Bridge over the Akashi Straight<br />

Kawasho, whose core business is steel, is<br />

addressing the circumstances with flexibility,<br />

moving ahead through diversification into a wide<br />

range of new businesses and services. We are<br />

developing operations in each region with timeproven<br />

regard for what is practical from the<br />

customer's standpoint. Our system of operations<br />

covers eight sectors of the country, namely<br />

Hokkaido, Tohoku, Tokyo, Niigata, Shizuoka,<br />

Nagoya, Osaka and Kyushu, and comprises a total<br />

of over 200 companies intricately linked in the<br />

"Kawasho-Kai" network.<br />

System kitchen<br />

Large oil-pressure<br />

shovel type excavator<br />

14


Domestic Steel<br />

Overseas Steel<br />

Terre Armée Civil Engineering<br />

Raw Materials<br />

Chemicals & Fuels<br />

Foods & General Materials<br />

Machinery<br />

Electronics<br />

Upstream & Downstream Development<br />

Of Regional Business<br />

Flexible steel pipes manufactured by<br />

JFE Steel Corporation<br />

Steel industry professional, Kawasho Corporation,<br />

exhibits its maximum competence in an operations<br />

system that provides localized steel processing<br />

centers and diverse customer services.<br />

From its inception, Kawasho has sold steel<br />

products in Japan for JFE Steel Corporation.<br />

Our steel processing centers also deal in various<br />

made-to-order steel products. The centers handle<br />

three main product categories: thick steel plate,<br />

steel sheet and construction/civil engineering<br />

materials. We shall continue to function to the full<br />

as a trading company, maintaining and expanding<br />

processing centers as sales bases with physical<br />

distribution and warehousing capabilities that<br />

assure timely response to a variety of customer<br />

requirements.<br />

Slitter line (steel processing center in Shizuoka Prefecture)<br />

Moving Towards Boosted Competitiveness<br />

Slitter line (steel processing center in Gunma Prefecture)<br />

Automobile bearings<br />

Escalator in the west terminal<br />

building at Tokyo International Airport (Haneda)<br />

Washing machine using<br />

stainless steel manufactured by<br />

JFE Steel Corporation<br />

To boost competitiveness in steel business, our<br />

core competence, Group companies are continuing<br />

to reorganize and integrate operations.<br />

Through the reorganization and unification of<br />

Kawasho’s construction material business in<br />

western Japan and a former affiliated company of<br />

Kawasaki Steel Corporation, we have established a<br />

specialist construction materials sales company<br />

that has already started sales. Unification has<br />

strengthened our business capabilities, enabling us<br />

to promptly meet customer needs. By reducing<br />

costs through improved and intensified production<br />

and systemization, we aim to boost sales<br />

competitiveness, thereby solidifying our position in<br />

the steel supply industry in western Japan. In<br />

October 2003, four steel processing centers was<br />

unified in the Kanto area to establish the new<br />

company. Focusing on reinforcing business<br />

operations in a particular region to create the<br />

optimum business and processing system will help<br />

improve efficiency while raising<br />

competitiveness. Furthermore, we aim to<br />

unify Kawasho’s corporate strategy to boost<br />

earnings, and improve sales of processed<br />

steel products in the Kanto area. The<br />

integration of Group companies dealing with<br />

building materials is also under review.<br />

In February <strong>2004</strong>, with the joint investment of<br />

Metal One Corporation, we established<br />

"Mizushima Metal Products Corporation," and<br />

is strengthening blanking operations with a<br />

view to expanding demand from the<br />

automakers and automotive parts<br />

manufacturers<br />

Highly efficient New NT<br />

construction method<br />

Steel stock center in Chiba Prefecture<br />

Steel stock center in Kumamoto Prefecture<br />

Blanking line (steel processing center<br />

in Okayama Prefecture)<br />

15


Overseas Steel Business<br />

An Expanding Steel Business From Asia To Worldwide<br />

Participating In A Range Of Projects<br />

Bangkok<br />

Kuala Lumpur<br />

Singapore<br />

Jakarta<br />

Dongguan<br />

Qingdao<br />

Jiangyin<br />

Pinghu<br />

Kaohsiung<br />

Manila<br />

SOUTHEAST ASIA<br />

Kawasho's overseas steel<br />

processing centers<br />

NORTH<br />

AMERICA<br />

Tijuana<br />

Mexico<br />

Kawasho's overseas steel business interests are<br />

chiefly in importing raw materials for steel<br />

production, exporting steel and processed steel<br />

products and participating in overseas business<br />

projects.<br />

We import iron ore, coal and other raw materials<br />

for steel making and export JFE (formerly Kawasaki)<br />

Steel Corporation's products: these include flat<br />

rolled steel sheet (hot-rolled steel sheet, coldrolled<br />

steel sheet and galvanized steel sheet ),<br />

electrical steel sheet, tin mill products for cans,<br />

steel plate for shipbuilding, stainless steel sheet,<br />

steel pipes, semi-finished products, as well as<br />

materials for construction and civil engineering.<br />

In addition, we are actively involved in various<br />

projects in Asian countries, and entering into<br />

alliances with local firms to aggressively improve<br />

local economic conditions and future prospects.<br />

[ Korea ]<br />

In 1999, as part of its overseas strategy, J FE<br />

Steel Corporation invested in Dongkok Steel Mill<br />

Co., Ltd., of Korea, and then in 2001 invested in<br />

Hyundai HYSCO, which is part of the Hyundai<br />

Motor Company Group. In line with these efforts,<br />

by offering cooperation in areas such as<br />

distribution, Kawasho has strengthened its<br />

relationship with both companies while at the<br />

same time contributing to their sales.<br />

[ Malaysia ]<br />

In Malaysia we invested in Perusahaan Sadur<br />

Timah Malaysia (Perstima) Bhd., the country's<br />

only tin plate manufacturer, which we provide<br />

with a stable supply of raw materials for<br />

manufacturing tin plate used for food cans. We<br />

joined forces with Kuroda Precision Industries<br />

Ltd., to establish Kuroda Precision Industries (M)<br />

Sdn. Bhd., a company that manufactures highprecision<br />

metal dies used for compact motors in<br />

VCRs, air conditioners and other equipment.<br />

Heat exchanger pipes exported by K & I Tubular Corporation<br />

[ Thailand ]<br />

Together with J FE Steel Corporation and others,<br />

we jointly invested in Thai Tin Plate<br />

Manufacturing Co., Ltd., promoting favorable<br />

relations in that country through the manufacture<br />

and sale of tin plate.<br />

Kuala Lumpur City Center, Malaysia<br />

[ Philippines ]<br />

In August 2000, we established Kawasho Tube<br />

Philippines, Inc., a steel tube manufacturing and<br />

sales company. The company is concentrating its<br />

efforts on the sale of steel furniture and smalldiameter<br />

tubes for bicycles.<br />

16


Domestic Steel<br />

Overseas Steel<br />

Terre Armée Civil Engineering<br />

Raw Materials<br />

Chemicals & Fuels<br />

Foods & General Materials<br />

Machinery<br />

Electronics<br />

Additional business ventures include an alliance<br />

with the trading company Itochu Corporation in<br />

March 2000. Together, we formed K & I Tubular<br />

Corporation with the aim of promoting export<br />

sales of special steel pipes.<br />

Overseas Steel Processing Centers<br />

Linked By A Network<br />

As in Japan, steel processing centers are a<br />

mainstay of our overseas operations. Our<br />

overseas steel processing center business began<br />

in 1975 with the establishment of Kawarin<br />

Enterprise Pte. Ltd., in Singapore. Presently,<br />

including Jiangsu Kawaden Steel Products Co.,<br />

Ltd. in Jiangsu, China, the company has 11<br />

overseas operations: four in China, Singapore,<br />

Thailand, Malaysia, Indonesia, the Philippines,<br />

Taiwan and Mexico.<br />

The main purpose of the steel processing centers<br />

is to supply Japanese electrical and automobile<br />

companies overseas with processed steel such<br />

as electrical steel sheet, flat rolled steel sheet,<br />

stainless steel and other essentials.<br />

In keeping with J FE Steel Corporation's overseas<br />

business strategies, we intend to link steel<br />

processing centers in the above countries via a<br />

network, promote sharing of steel inventory<br />

information and further boost efficiency of<br />

business development as we work towards<br />

building a sales organization that satisfies the<br />

require-ments of an expanding customer base.<br />

Zhejiang Kawaden Steel Products Co., Ltd.<br />

( Pinghu City Zhejiang Province, China)<br />

Dongguan Kawasho & Kawadenji Steel Products Co., Ltd.<br />

(Guangdong Province, China)<br />

Qingdao Samkyung Kawasho Precision Steel Products Co.,Ltd.<br />

(Shandong Province, China)<br />

Central Metals (Thailand) Ltd.<br />

Kawasho Steel Processing Centre Sdn. Bhd. (Malaysia)<br />

Kawarin Enterprise Pte. Ltd. (Singapore)<br />

Major Products Handled<br />

Shipbuilding steel, thick steel plate, processed<br />

steel for ships and bridges, hot-rolled steel sheet,<br />

cold-rolled steel sheet, electrical steel sheet,<br />

coated steel sheet, steel plate, stainless steel,<br />

special steel, galvanized sheet, tin plate, steel<br />

pipes, special steel pipes, treated steel pipes, iron<br />

powder, hot charge, steel piles, wire, H-beam,<br />

lightweight shaped steel plate, regular shaped steel<br />

plate, reinforced products, columns, semi-finished<br />

steel products (slabs etc.), civil engineering products,<br />

construction materials, housing materials, other<br />

products, civil engineering, construction<br />

Kuo Gee Industrial Co., Ltd. (Kaohsiung, Taiwan)<br />

P.T. Kawasho Steel Processing Center Indonesia<br />

Kawasho Steel Philippines, Inc.<br />

Kawasho Steel de Mexico, S.A. de C.V.<br />

17


Terre Armée Civil Engineering Business<br />

The Terre Armée Civil Engineering Method, Praised Worldwide<br />

Results That Are Proof Of Excellence<br />

Terre Armée method<br />

Terre Armée method used to create a bridge<br />

Terre Armée design wall<br />

The Terre Armée civil engineering method uses<br />

ribbed steel strips embedded in layers to grip soil<br />

strongly enough to enable the construction of high,<br />

vertical banking. In 1974, we acquired a patent<br />

license for sale of the method in Japan from the<br />

French company, Terre Armée International Inc. In<br />

French, the word terre means earth or soil, and<br />

Armée means reinforce.<br />

Up to now, the Terre Armée civil engineering method<br />

has been successfully employed at over 13,000<br />

locations in Japan, providing over 4.2 million square<br />

meters of banking. In a small country like Japan, the<br />

method is highly regarded for the contribution it<br />

makes to the efficient use of land and the improved<br />

safety it offers. The method is now used in over<br />

25,000 locations providing a total of over 16 million<br />

square meters of banking in 36 countries worldwide.<br />

Kawasho also offers Terravert, a Terre Armée<br />

method using concrete panels together with mesh<br />

panels for vegetation to provide a natural<br />

appearance, and the Techspan method for creating<br />

road and waterway culverts. Customers include<br />

government and public offices involved in public<br />

works.<br />

Outstanding Cost Performance<br />

The Terre Armée method enables construction of a<br />

wide range of roads and assures high-quality<br />

results at an exceptionally low cost. The construction<br />

of high vertical banking isn't the only advantage of<br />

the method. Because it uses prefabricated materials<br />

of uniform quality, it minimizes such processes as<br />

frame assembly, reinforcement and concreting while<br />

eliminating the need for special technology and<br />

heavy machinery to dramatically cut construction<br />

time. And since the method uses a thin, lightweight<br />

concrete skin with high-strength steel strips, it also<br />

dramatically reduces costs. The Techspan method is<br />

a 3-hinge arched culvert construction method using<br />

prefabricated concrete arches. As these arches are<br />

quick and easy to erect, traffic is obstructed for a<br />

much shorter time during construction.<br />

An Environment-Friendly<br />

Civil Engineering Method<br />

Diagram of Terre Armée<br />

method construction<br />

Another valuable feature of the Terre Armée method<br />

is that its flexibility enables the creation of wall and<br />

banking designs that blend with the surrounding<br />

natural environment.<br />

Terravert provides reinforcement for sloping banking.<br />

18


Domestic Steel<br />

Overseas Steel<br />

Terre Armée Civil Engineering<br />

Raw Materials<br />

Chemicals & Fuels<br />

Foods & General Materials<br />

Machinery<br />

Electronics<br />

It also features welded metal mesh and matting on<br />

the surface of the wall that enables greenery to take<br />

root for a natural appearance. Besides being<br />

extremely economical, this method is simple and<br />

does not require any heavy machinery, making it<br />

ideal for construction of temporary banking, as well<br />

as construction in locations of limited space where<br />

only manual work is possible.<br />

The Nihon Daira Athletic Park, Shizuoka Prefecture<br />

Terravert (a few months after construction)<br />

High Resistance To Earthquakes<br />

Terre Armée method walls and banking withstood<br />

the Hanshin Awaji Earthquake in January 1995.<br />

Even though the level of seismic intensity was<br />

around 6, the structures suffered just a few small<br />

cracks, ample proof of their resistance to<br />

earthquakes.<br />

Because we are the actual maker, we handle<br />

everything from R&D, design and production<br />

management to sales and maintenance.<br />

Orders are received via the Kawasho T.A. Sales<br />

Agents Group comprising over 100 makers<br />

nationwide. The Group company Kawasho Teratech<br />

Inc., handles design and construction management<br />

in western Japan, while working on improving<br />

engineering technology.<br />

In March 1998, our business possibilities were<br />

expanded when the Terre Armée method gained<br />

authorization from the Ministry of Construction in<br />

Japan for use in the construction of sites for<br />

housing. This is expected to increase the use of the<br />

method throughout Japan.<br />

Terravert (directly after construction)<br />

Example of the Techspan method<br />

Techspan method (The bamboo cut type)<br />

Techspan method<br />

Major Products Handled<br />

Terre Armée method,<br />

Techspan method,<br />

Terravert (Terre Armée method with vegetation)<br />

19


Raw Materials Business<br />

The need to make raw materials competitive through stable supply<br />

Developing steel business in Japan<br />

Iron ore and coal the chief materials for iron<br />

manufacturing. Kawasho has developed along<br />

with the expansion of Japan’s iron and steel<br />

industry and the import of raw materials for iron<br />

and steel manufacturing. We have entered into<br />

development projects aimed at meeting the<br />

demand for stable supply to make raw materials<br />

more competitive.<br />

[ Coal ]<br />

We import high-grade coal from Australia,<br />

Canada, China, Russia and Indonesia..<br />

In 1991, Kawasho acquired 2.5% of the shares in<br />

a major coal producer, Oakbridge Pty, Ltd., of<br />

Australia as well as dealership rights for JFE<br />

(formerly Kawasaki) Steel. In 1998, we joined the<br />

Coppabella coal mine development project in<br />

Queensland, Australia, and acquired rights and<br />

interests in coal exported to Japan. Thus, we are<br />

able to more rapidly predict the needs of iron and<br />

steelmakers, and respond faster to increase our<br />

market share.<br />

[ Iron Ore ]<br />

Approximately 50% of iron ore we import from<br />

Australia. The remainder is from Brazil, India and<br />

other countries. Kawasho is committed to<br />

reinforcing competitive strength by achieving a<br />

stable supply of high-grade iron ore from the Goa<br />

region of India.<br />

Our involvement in iron ore exports is not<br />

confined to Japan alone, but includes trade with<br />

other countries, too. Kawasho is involved in<br />

increasing iron ore transactions accompanying<br />

the growth of crude steel production in China.<br />

Observing the potential of the Chinese market,<br />

( Clockwise, from the top)<br />

Ferromanganese<br />

Ferrosilicon<br />

Ferrovanadium<br />

Scrap iron<br />

Reduced iron<br />

Silicon manganese<br />

Iron ore mine in Goa, India<br />

Dragline coal mine in Queensland, Australia<br />

20


Domestic Steel<br />

Overseas Steel<br />

Terre Armée Civil Engineering<br />

Raw Materials<br />

Chemicals & Fuels<br />

Foods & General Materials<br />

Machinery<br />

Electronics<br />

we are occupied with the sale of<br />

India’s iron ore to China.<br />

[ Carbon ]<br />

Kawasho is expanding this part of the<br />

business, mainly through a stable<br />

supply of the world’s premium-grade<br />

coke from China to the JFE Group.<br />

We are focusing on undersized cokes<br />

generated by JFE Steel, and<br />

conducting transactions with<br />

interested parties, including Japanese<br />

ferrous alloy manufacturers. While<br />

matching the needs for both volume<br />

and quality for electric furnace, nonferrous<br />

and coal users, we are<br />

developing a full range of services<br />

nationwide.<br />

Whale Back iron ore mine in Western Australia, Australia<br />

Expanding international trade in Asia<br />

[ Scrap Iron ]<br />

Kawasho’s efforts to expand the sale of scrap<br />

iron extends to the whole of East Asia. We handle<br />

the scrap iron generated by the JFE Group, and<br />

secure dedicated loading berths at JFE Steel<br />

(East Japan Work) in Chiba prefecture to improve<br />

the efficiency of ocean freight forwarding.<br />

We work at reinforcing collection of information<br />

on dismantling iron, improve shipping capability<br />

for scrap on the market and increase the number<br />

of new customers.<br />

[ Light Metals and Ferrous Alloys ]<br />

We have expanded the import of ferrous/nonferrous<br />

raw materials to assure stable supplies<br />

mainly to JFE Steel. We are also seeking to<br />

further expand by dealing with domestic and<br />

overseas electric furnaces, while conducting<br />

exports and intermediary transactions in East<br />

Asia.<br />

The Bulga coal mine in New South Wales, Australia<br />

Iron ore bound for Port Hedland<br />

on the Newman railway<br />

Major Products Handled<br />

Iron ore, sintering ore, coal for coke making,<br />

dolomite and other steel making materials, cokes<br />

and other coal products, nickel, chromium, zinc,<br />

alloy iron, scrap iron and other metal raw materials,<br />

aluminum, scrap aluminum, deoxidized aluminum,<br />

21


Chemicals & Fuels Business<br />

Expanding New Materials Business<br />

Delivering a wide range of products in<br />

Japan and overseas<br />

Kawasho’s chemical business began with the<br />

handling of coke oven gas, tars, ammonium<br />

sulfate, benzol and other by-products of the coke<br />

manufacturing process. We are also expanding<br />

into the field of new materials such as fine<br />

ceramics and plastics by furthering our<br />

technological capability and research and<br />

development in coal chemistry.<br />

Currently, we are involved in the import and<br />

export sales and local trading in industrial gases,<br />

tars and other coal chemical products, inorganic<br />

chemicals such as magnesium chloride, fine<br />

ceramics, ultra-fine nickel powder and other<br />

functional chemicals as well as raw materials for<br />

plastics, gasoline, liquefied petroleum gases<br />

(LPG), lubricating oil and a whole range of<br />

petrochemical products.<br />

[ Chemicals ]<br />

We sell coal chemical products, industrial gases<br />

and other chemicals manufactured by JFE<br />

Chemical Corporation, and the ultra-fine nickel<br />

powder manufactured by Kawatetsu Mining Co.,<br />

Ltd., which is in increasing demand for use as<br />

electrode material in laminated ceramic capacitors.<br />

We also sell, both domestically and overseas,<br />

fine ceramics, chemical fertilizers and fine<br />

chemicals among other chemical resources.<br />

[ Fuels ]<br />

Starting from supply of petroleum products to<br />

Group companies, now we are expanding<br />

domestic deal and intermediary trade to East<br />

Asia area. Aiming to stable supply, we make<br />

contracts with petroleum refiners in Japan and<br />

various countries.<br />

Coal tar pitch<br />

Optical fiber slots using high-performance plastic<br />

22


Domestic Steel<br />

Overseas Steel<br />

Terre Armée Civil Engineering<br />

Raw Materials<br />

Chemicals & Fuels<br />

Foods & General Materials<br />

Machinery<br />

Electronics<br />

Working towards market expansion<br />

Child seat<br />

[ Plastics ]<br />

Kawasho established an interest in synthetic<br />

resins in 1984, and until now has carried out<br />

domestic sales of raw materials for plastics<br />

manufacturing and handled an increasing<br />

volume of house building materials (partitions),<br />

automotive parts, optical fiber, child seats and<br />

other plastic parts. To encourage further growth<br />

in the import and export of raw materials, we are<br />

fully engaged in promoting Plastic World China,<br />

Ltd., a compound company located in<br />

Guangdong Province, China, K-Net Asia Ltd., a<br />

trading firm in Hong Kong, and K&K Molding,<br />

Inc., a molding company in the Philippines.<br />

Although K&K Molding has repeatedly reinforced<br />

its plant and equipment, to further boost<br />

competitiveness, the company is expanding its<br />

metal mold division, promoting unified<br />

operations from design through manufacturing to<br />

maintenance.<br />

K&K Molding Incorporated (PHILIPPINES)<br />

Plastic raw material pellets<br />

In an effort to extend its market reach in China,<br />

K-Net Asia has set up a domestic sales network<br />

in Guangdong Province and is stepping up<br />

operations primarily in household electrical and<br />

automotive products. Plastic World China is<br />

planning to bolster its production capacity and<br />

expand sales of stampable sheet composites.<br />

Stampable sheet produced by K-Plasheet<br />

Corporation (a subsidiary of JFE Chemical<br />

Corporation) facilitates the same kind of press<br />

working as steel sheet. Thus, it is in particular<br />

demand for automobile roof trim and as the<br />

forming material for lightweight, modular<br />

components. Kawasho has an approximately<br />

60% usage share in this section of the market.<br />

KP sheet<br />

(automobile interior material)<br />

Ferrite core and raw materials used in electronic parts<br />

JOMO Station (gas station)<br />

managed by our Group company<br />

Major Products Handled<br />

Coal tar, coal tar pitch, creosote oil and other<br />

chemical coal products, magnesium chloride, nitric<br />

acid and other inorganic chemicals, ferrite core,<br />

molding materials, iron oxide, fertilizers, general<br />

use plastic, engineering plastics and other plastic<br />

raw materials and compound products, fine<br />

ceramics, ultra-fine nickel powder and other<br />

functional chemical products, industrial gases,<br />

crude oil, gasoline, LP gas, lubricating oil and other<br />

petroleum products,<br />

http://www.k-netasia.com.hk<br />

23


Foods & General Materials<br />

Delivering Foods And Other Goods Worldwide<br />

Food Brands Popular In Japan And Overseas<br />

We offer canned products such as the well-known NOZAKI's<br />

brand corned beef, "Yamatoni Beef " offering the traditional<br />

taste of beef stewed with soy sauce and sugar, and wiener<br />

sausages, a favorite of young and old. Sold at leading<br />

department stores, supermarkets and convenience stores,<br />

these and other products have proved to be extremely<br />

popular. Overseas, GEISHA brand canned crab has been<br />

sold in the U.S. since 1911. In fact, GEISHA is one of the<br />

most popular brands of canned food in the world, and is<br />

highly appreciated not only in the U.S. but also in countries<br />

in Europe, the Middle East, Africa and Asia.<br />

A Variety Of Delicious Canned Foods<br />

Taking advantage of the know-how gained from years of<br />

experience in the foods business in China, we have<br />

introduced technology to affiliated factories producing<br />

canned tangerines, white asparagus, mushrooms and other<br />

products that have become very popular. In fact, we are one<br />

of the world's leading importers of canned tangerines. In<br />

1995, we established the joint venture Yingkou Bori<br />

Foodstuffs Co., Ltd., in Liaoning Province, China. The<br />

company produces processed foods, such as canned<br />

peaches, for not only Japan but also the U.S., where sales<br />

are handled by Kawasho International (U.S.A.) Inc. In<br />

Malaysia, the Group company Marushin Canneries (M) Sdn.<br />

Bhd. produces King Cup brand canned sardines, and holds<br />

the largest share in the Malaysian market. The company<br />

acquired ISO9002 certification in 1999. In the U.S., the<br />

Group company American Soy Products Inc. produces and<br />

sells EdenSoy® soymilk made from organically grown<br />

soybeans, and "Vruit", a blended vegetable juice. The<br />

company is the top maker in the U.S. with a share of over<br />

30% of the soymilk market. It was recognized by the OCIA<br />

(Organic Corp Improvement Association) as a qualified<br />

manufacturer of organic foods.<br />

*EdenSoy is a registered trademark of Eden Foods, Inc. of<br />

Clinton, Michigan, U.S.A.<br />

GEISHA brand products popular worldwide<br />

NOZAKI's corned beef<br />

KING CUP, the leading brand in Malaysia<br />

EdenSoy is a registered trademark of Eden Foods, Inc. of Clinton, Michigan, U.S.A.<br />

From Marine Products And Frozen Foods To<br />

Grains And Wine<br />

"Vruit" blended vegetable juice (left) and "Soy Fusion" (right) produced by American Soy Products Inc.<br />

With respect to marine products, we import farmed salmon<br />

from Europe and South America, handling everything from<br />

raw materials and processing to sales. Based on a thorough<br />

management system, our Thai processing plant produces<br />

everything from sushi ingredients to broiled and fried<br />

processed foods to meet a wide range of customer needs.<br />

We import to Japan sauced, charcoal-broiled chicken<br />

produced by affiliated companies in China and other Asian<br />

countries. In addition, we supply makers of processed foods<br />

"Luso" natural water imported from Portugal<br />

Wine imported from around the world<br />

24


Domestic Steel<br />

Overseas Steel<br />

Terre Armée Civil Engineering<br />

Raw Materials<br />

Chemicals & Fuels<br />

Foods & General Materials<br />

Machinery<br />

Electronics<br />

with frozen chicken and other products from<br />

affiliated plants in China, which feature quality<br />

control technologies. Regarding rice, we import<br />

from the U.S., Australia and Thailand for the Food<br />

Agency. And from the U.S. and Australia we<br />

import wheat, a product that Japan imports to<br />

satisfy over 90% of domestic demand, and pulses<br />

for use as raw materials. With regard to<br />

beverages, we import specially selected wines<br />

and other beverages from France, Italy and<br />

Germany.<br />

Sushi ingredients<br />

Stable woodchip supply<br />

We import and sell wood chips from North<br />

America and Australia for leading paper<br />

manufacturers, while handling domestic sales<br />

and the export and import of paper products. As<br />

a step towards developing new business, we also<br />

export used paper and corrugated cardboard<br />

packaging materials for computer makers. And<br />

with an aim to securing a stable supply of wood<br />

chips, we are participating in an afforestation<br />

project in Tasmania, Australia.<br />

The joint venture Yingkou Bori Foodstuffs Co., Ltd. in China<br />

Major Products Handled<br />

Canned marine products, corned beef, Japanese<br />

style stewed beef and other beef products,<br />

vegetables, canned fruit, fresh vegetables, tomato<br />

products, beef, pork, chicken and other processed<br />

meats, frozen foods, processed foods, grains, dairy<br />

products, alcoholic drinks, soft drinks, frozen<br />

seafood, fish roe, processed seafood and other<br />

products, wood chips, paper manufacturing<br />

products such as pigments, binders and<br />

strengtheners and other products<br />

Some of the processed products sold by Kawasho Foods Inc.<br />

Wood chips being loaded in Tasmania<br />

25


Machinery Business<br />

Creative Versatility Spanning Core Manufacturing Facilities, And Cogeneration Equipment<br />

Blast furnace at JFE Steel Corporation's<br />

West Japan Works<br />

Machinery business centering on supply<br />

to JFE Steel<br />

Our sale of machinery has grown mainly alongside the<br />

building and expansion of facilities of JFE Steel’s<br />

(formerly Kawasaki Steel’s) Chiba Steelworks, which<br />

was erected in 1951, and the Mizushima Steelworks,<br />

which was established in 1961. The business area<br />

extends beyond Japan to include procurement of<br />

machinery in other countries. We capitalize on the<br />

company’s expertise in trading and networking, and<br />

run a ship business that includes the sale of newly built<br />

vessels.<br />

[ Steelworks Machinery & Equipment ]<br />

Hot mill at JFE Steel Corporation's<br />

East Japan Works<br />

We deal with blast furnaces, coke ovens, electric<br />

furnaces, continuous slab casting machines, hot<br />

rolling mills, galvanizing equipment, various metal<br />

processing machines and other equipment. In<br />

addition, we supply design and manufacturing<br />

equipment to JFE Steel Corporation In Tokyo,<br />

Chiba, Osaka, Chita and Okayama, can<br />

manufacturing equipment, rolls for various rolling<br />

mills, and chemicals including imported products. At<br />

the same time, we also export materials and<br />

equipment to overseas steelworks.<br />

[ Ships ]<br />

In markets spanning Southeast Asia to Europe, we<br />

act as an intermediary in ship chartering and in the<br />

sale of both newly built and second-hand ships, with<br />

the focus on vessels for transporting automobiles<br />

and chemical tankers. In addition to the sale of<br />

mainly Japanese vessels for scrap to the Chinese<br />

market, our operations also extend to the marine<br />

transportation business, in which we own a fleet of<br />

charter ships.<br />

Galvanizing line<br />

Electric furnace<br />

[ Building Facilities ]<br />

We supply electric power generators and power<br />

distributors for buildings, factories and hospitals, as<br />

well as air conditioning, medical gas and other<br />

equipment. In light of the attention attracted by<br />

cogeneration plant equipment over recent years, we<br />

are also establishing the organization required to<br />

meet a wide range of customer needs.<br />

Work roll for hot strip mills<br />

26


Domestic Steel<br />

Overseas Steel<br />

Terre Armée Civil Engineering<br />

Raw Materials<br />

Chemicals & Fuels<br />

Foods & General Materials<br />

Machinery<br />

Electronics<br />

Also contributing to local development<br />

[ Official Development Assistance (ODA)]<br />

We are involved in the Japanese government's<br />

ODA (Official Development Assistance) initiative<br />

for developing countries. As a participant in the<br />

free capital investment cooperation and<br />

technological assistance program, we have been<br />

highly praised by the government and regional<br />

cooperatives for our positive efforts to supply<br />

materials such as steel bars, cement and asphalt,<br />

as well as machinery and other materials.<br />

[ Electric Power Business ]<br />

In a joint venture with Mitsui Engineering &<br />

Shipbuilding Co., Ltd., in 1999, we took our first<br />

step to becoming an independent power<br />

producer (IPP) for the Electric Power Agency of<br />

Sri-Lanka. This is Kawasho's first venture into the<br />

power generation business. In 2002, the power<br />

plant has been able to meet about 8% of Sri<br />

Lanka's electricity demand.<br />

Chemical tanker<br />

Control room at the facilities<br />

Barge-type power generating facilities started operating in Sri Lanka<br />

Cogeneration equipment<br />

Major Products Handled<br />

Blast furnaces, coke ovens, oxygen facilities,<br />

continuous slab casting machines, hot rolling mills,<br />

galvanizing equipment and steel manufacturing<br />

machinery, roll, lubricating oil, bearing,<br />

electric cable and steel manufacturing materials,<br />

metal processing machinery, boilers, turbines,<br />

electrical equipment, hospital facilities, building<br />

facilities, factory facilities, various new ship building,<br />

sale and purchase of used ships, scrapping ships,<br />

ship repairs, ship equipment and other products<br />

27


Electronics Business<br />

Supporting Future Society's Cutting-Edge Electronics<br />

For The Advanced Semiconductor Market<br />

LSIs now play an important role in every facet of our<br />

daily lives.<br />

Kawasho is currently expanding ASIC and ASSP<br />

(Application Specific Standard Products) sales of<br />

products manufactured by Kawasaki Microelectronics,<br />

Inc. ( a spin-off from the Kawasaki Steel Corporation<br />

LSI Division in 2001), with sales mainly to domestic OA<br />

equipment manufacturers.<br />

Kawasaki Microelectronics began operating in 1984 as<br />

a new business development division of Kawasaki<br />

Steel Corporation. Rather than standard products like<br />

DRAM and microprocessors, with an aim to be able to<br />

precisely meet future needs, the new division focused<br />

on ASIC. It led the way with the development of a<br />

unique cell-based array, and continued to rapidly<br />

develop business in the areas of standard cells,<br />

microcontrollers and ASSP for telecommunications,<br />

video, information and OA equipment applications.<br />

At present, in partnerships with reliable leading<br />

corporations, Kawasaki Microelectronics is focusing its<br />

advanced technological capabilities on becoming a<br />

world-class LSI maker in the area of ASIC handling<br />

everything from design and wafer manufacture to<br />

packaging, tests and quality control.<br />

Through the sale of Kawasaki Microelectronics'<br />

original, high-grade ASIC and ASSP, Kawasho<br />

accounts for about 20% of the company's<br />

semiconductor sales.<br />

Semiconductors made by Kawasaki Microelectronics, Inc.<br />

Fingerprint verification PC card<br />

[ Broadcast Equipment ]<br />

Kawasho sells semiconductor ICs manufactured by<br />

Gennum Corporation in Canada to major broadcast<br />

equipment manufacturers in Japan. The spread of<br />

digital broadcasting has generated demand for<br />

broadcast-related equipment that delivers high quality<br />

picture and sound with faster processing speeds. As a<br />

leading designer and supplier of a wide range of high<br />

quality ICs for special applications, Gennum is a wellknown<br />

company in the field of broadcasting worldwide.<br />

[ Fingerprint Verification Chip ]<br />

Recent rapid IT developments and increased use of<br />

networks have boosted the demand for measures to<br />

safeguard both corporate and individual information.<br />

Kawasho sells fingerprint verification unit featuring an<br />

advanced electrostatic capacitive fingerprint sensor<br />

chip.<br />

[ Audio CODEC ]<br />

With the fusion of PCs and home electrical appliances<br />

continuing apace, the call is for PCs that deliver the<br />

same sound quality as AV components.<br />

Fingerprint verification PC card<br />

SigmaTel Inc. Audio CODEC providing<br />

audio/video component level sound from a PC<br />

Serial digital interface chips by Gennum use for a<br />

wide range of TV broadcasting applications<br />

28


Domestic Steel<br />

Overseas Steel<br />

Terre Armée Civil Engineering<br />

Raw Materials<br />

Chemicals & Fuels<br />

Foods & General Materials<br />

Machinery<br />

Electronics<br />

As the agent in Japan for SigmaTel Inc. of the U.S.,<br />

Kawasho sells audio decoders, and other products. Since<br />

its establishment, SigmaTel quickly made its mark in the<br />

market as a leading IC supplier, and is a highly regarded<br />

company in the industry. In the global audio CODEC<br />

market, the high quality of its products and services has<br />

gained around a 30% share.<br />

[ RSA Encryption LSI ]<br />

Accompanying the ongoing expansion of electronic<br />

government and e-commerce transactions over the<br />

Internet, RSA is attracting attention as an encryption<br />

system that can conceal transaction details as well as<br />

authenticate the identities of those involved in<br />

transactions.<br />

The RSA encryption high-speed LSI chip we sell enables<br />

rapid encryption and decryption. Besides the applications<br />

mentioned above, the chip is scheduled to be used to<br />

keep the privacy of hospital patient medical charts.<br />

Total reflection fluorescent X-ray wafer<br />

surface analysis equipment<br />

Electron microscope<br />

Cleaning equipment<br />

Strengthened SMT Sales In Asia<br />

With a view to expanding business in the field of SMT<br />

(Surface Mounting Technology), Kawasho became the<br />

agent for Kyushu Matsushita Corporation in 1988. Since<br />

then we have continued to sell SMT equipment and COB<br />

(Chip On Board) equipment both in Japan and overseas.<br />

In 2002, Kawasho Electronics Corporation was<br />

established to strengthen both sales of SMT and<br />

peripheral equipment and our service capabilities. To<br />

meet the needs of domestic users with manufacturing<br />

centers overseas as well as overseas users, the company<br />

offers comprehensive support spanning sales to services<br />

in Malaysia, Thailand and China.<br />

Kawasho Electronics Corporation also handles sales of<br />

semiconductor evaluation equipment and cleaning<br />

equipment, and imports and sells measuring equipment,<br />

such as fluid particle measuring equipment, vacuum<br />

particle measuring instruments and oil particle counters,<br />

and analytical instruments<br />

Mold chip mounting system<br />

Major Products Handled<br />

Fluid particle measuring equipment<br />

Computer microprocessors, chip sets, memory, audio<br />

CODEC, system LSIs (ASIC with built-in IP macro)<br />

and other semiconductor products, semiconductor<br />

manufacturing equipment and related equipment,<br />

washing equipment, analytical instruments,<br />

measuring equipment, SMT (Surface Mounting<br />

Technology), COB (Chip On Board) and related<br />

equipment, analysis equipment, measuring devices,<br />

and fluid particle measuring instruments and vibration<br />

analysis instruments.<br />

29


ORGANIZATION CHART<br />

As of July 1, <strong>2004</strong><br />

President and CEO<br />

General Affairs Dept.<br />

Steel & Terre Armée Business Unit<br />

Raw Materials, Chemicals & Fuel Business Unit<br />

Personnel Dept.<br />

Career Development Dept.<br />

Environmental Auditing Dept.<br />

Internal Auditing Dept.<br />

Finance Dept.<br />

Corporate Accounting Dept.<br />

Business Accounting Dept.<br />

Credit Dept.<br />

Legal Dept.<br />

Corporate Planning & Coordination Dept.<br />

Affiliate Company Coordination Dept.<br />

Overseas Coordination Dept.<br />

Information Technology Planning Dept.<br />

Soga Waterfront Development Cooperation Team<br />

Seoul Branch<br />

Kawasho International (Korea) Ltd.<br />

Taipei Branch<br />

Beijing (Peking) Rep. Office<br />

Dalian Rep. Office<br />

Dalian F.T.Z. Kawasho Co., Ltd.<br />

Shanghai Rep. Office<br />

Kawasho (Shanghai) Co., Ltd.<br />

Kawasho International (Hong Kong) Ltd.<br />

Guangzhou Rep. Office<br />

Kawasho(Guangzhou) Co., Ltd.<br />

Manila Branch<br />

Kawasho Philippines, Inc.<br />

Kawasho Corporation (Thailand) Ltd.<br />

Ho Chi Minh Rep. Office<br />

Mumbai Rep. Office<br />

Kuala Lumpur Branch<br />

Singapore Branch<br />

Jakarta Rep. Office<br />

P.T. Kawasho Indonesia<br />

Kawasho International (U.S.A.) Inc.<br />

Nagoya<br />

Office<br />

Steel Division<br />

No.1<br />

Steel Division<br />

No.2<br />

Steel Overseas<br />

Division<br />

Central District<br />

Steel Division<br />

Western District<br />

Steel Division<br />

Terre Armée Division<br />

Steel Planning Dept.<br />

Eastern District Project Dept.<br />

Western District Project Dept.<br />

Kobe Branch<br />

Automotive Steel Business Planning Dept.<br />

Plate Dept.<br />

Automotive Steel Dept.<br />

Sheet & Strip Dept.<br />

Stainless & Special Steel Dept.<br />

Shizuoka Branch<br />

Structural Steel & Strip Dept.<br />

Construction Steel Materials Dept.<br />

Construction Dept.<br />

Pipe Dept.<br />

Sapporo Branch<br />

Tohoku Branch<br />

Niigata Branch<br />

Steel Overseas Dept. No.1<br />

Steel Overseas Dept. No.2<br />

Overseas Steel Market Development Dept.<br />

Kawasho International (Europe) GmbH<br />

Corporate Administration Group<br />

Sales Dept. No.1<br />

Sales Dept. No.2<br />

Osaka Plate Dept.<br />

Osaka Sheet & Strip Dept.<br />

Osaka Stainless & Special Steel Dept.<br />

Osaka Construction Materials Dept.<br />

Osaka Pipe Dept.<br />

Hokuriku Branch<br />

Okayama Branch<br />

Hiroshima Branch<br />

Shikoku Branch<br />

Kyushu Branch<br />

Terre Armée Administration Dept.<br />

Raw Materials<br />

Division<br />

Chemicals &<br />

Fuel Division<br />

Metallic Materials Dept.<br />

Ferrous Raw Materials Dept.<br />

Raw Materials Dept.<br />

Carbon Materials Dept.<br />

Goa Rep. Office<br />

Kawasho Internacional Comercio do Brasil Ltda.<br />

Kawasho International (Australia) Pty., Ltd.<br />

Fuel Dept.<br />

Chemicals Dept.<br />

Light MetalPlastics Dept.<br />

Foods & General Materials Business Unit<br />

Foods &<br />

General Materials<br />

Division<br />

Marine Products Dept.<br />

Food Products & Marketing Dept.<br />

Pulp & Paper Dept.<br />

Kawasho Foods (Thailand) Co., Ltd.<br />

Kawasho Corp. (U.K.) Ltd.<br />

Kawasho Foods (Gulf) FZE<br />

Machinery & Materials, Electronics Business Unit<br />

Machinery &<br />

Materials Division<br />

Electronics Division<br />

Real Estate Business<br />

Division<br />

Auditors<br />

Administration Dept. (Raw Materials, Chemicals & Fuel)<br />

Administration Dept. (Foods & General Materials)<br />

Administration Dept. (Machinery & Materials, Aerospace & Electronics)<br />

Machinery & Materials Dept.<br />

Chiba Machinery & Materials Dept.<br />

Okayama Machinery & Materials Dept.<br />

Ships Dept.<br />

Semiconductor Dept.<br />

Tsuchiura Business Development Dept.<br />

Real Estate Dept.<br />

Office of Auditors<br />

Terre Armée Sales Dept.<br />

Western District Terre Armée Sales Dept.<br />

30<br />

31


CORPORATE OFFICER (As of June 18, <strong>2004</strong>)<br />

Directors (* Representative Director)<br />

Hiroo Naruki * President and CEO<br />

Toshio Matsumiya *<br />

Youichi Nishimaki *<br />

Yutaka Horiguchi *<br />

Yoshihiko Nakamura *<br />

Tsutomu Yajima<br />

Hiroo Naruki<br />

Corporate Auditors<br />

Tadaaki Kikuchi<br />

Yoshihiro Hosotani<br />

Kouichi Igarashi<br />

Kantaro Uryu<br />

Toshio Matsumiya<br />

Executive Officers (**Director)<br />

President and CEO<br />

Hiroo Naruki **<br />

Senior Managing Executive Officer<br />

Toshio Matsumiya **<br />

Youichi Nishimaki **<br />

Yutaka Horiguchi **<br />

Yoshihiko Nakamura **<br />

Managing Executive Officer<br />

Tatsuji Togawa<br />

Masanobu Takada<br />

Toshio Tsukada<br />

Junichi Nakamura<br />

Katsusuke Yabuta<br />

Minoru Kasetani<br />

Shigeki Yamamoto<br />

Hisao Oosato<br />

Tsutomu Yajima **<br />

Executive Officer<br />

Nobuo Yoshida<br />

Hiroshi Shiratsuchi<br />

Todomu Kobayashi<br />

Tatsuo Iwasaki<br />

Keiichi Teramura<br />

Masaru Saruwatari<br />

Katsuyoshi Takaya<br />

Youichi Nishimaki<br />

Yutaka Horiguchi<br />

Yoshihiko Nakamura<br />

Tsutomu Yajima<br />

32


FINANCIAL SECTION<br />

CONSOLIDATED BALANCE SHEETS - 34<br />

CONSOLIDATED STATEMENTS OF OPERATIONS - 36<br />

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - 37<br />

CONSOLIDATED STATEMENTS OF CASH FLOWS - 38<br />

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - 40<br />

REPORT OF INDEPENDENT AUDITORS - 58


CONSOLIDATED BALANCE SHEETS<br />

Kawasho Corporation and Consolidated Subsidiaries<br />

As of March 31, <strong>2004</strong> and 2003<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of U.S.<br />

dollars (Note 1)<br />

<strong>2004</strong><br />

ASSETS<br />

Current assets:<br />

Cash and cash equivalents<br />

¥ 26,425<br />

40,757<br />

$ 250,024<br />

Trade notes and accounts receivable and advances (Note 5)<br />

248,669<br />

239,094<br />

2,352,815<br />

Allowance for doubtful receivables<br />

(2,239)<br />

(2,125)<br />

(21,185)<br />

Inventories<br />

63,962<br />

66,272<br />

605,185<br />

Deferred income taxes (Note 7)<br />

5,828<br />

3,806<br />

55,142<br />

Other current assets<br />

13,297<br />

11,485<br />

125,812<br />

Total current assets<br />

355,942<br />

359,289<br />

3,367,793<br />

Property and equipment:<br />

Land (Note 5)<br />

20,907<br />

37,691<br />

197,814<br />

Buildings and structures (Note 5)<br />

23,087<br />

32,643<br />

218,441<br />

Equipment for leasing<br />

674<br />

14,230<br />

6,377<br />

Other equipment and fixtures (Note 5)<br />

39,194<br />

42,205<br />

370,840<br />

Construction in progress<br />

57<br />

339<br />

539<br />

Other property and equipment<br />

<br />

6,325<br />

<br />

Accumulated depreciation<br />

(42,850)<br />

(54,589)<br />

(405,431)<br />

Property and equipment, net<br />

41,069<br />

78,844<br />

388,580<br />

Investments and other assets:<br />

Investments in securities (Notes 3 and 5)<br />

25,088<br />

21,820<br />

237,373<br />

Investments in unconsolidated subsidiaries and affiliates<br />

10,379<br />

14,024<br />

98,202<br />

Long-term loans<br />

4,309<br />

5,817<br />

40,770<br />

Deferred income taxes (Note 7)<br />

12,330<br />

10,861<br />

116,662<br />

Other<br />

37,214<br />

48,614<br />

352,106<br />

Allowance for doubtful receivables<br />

(25,249)<br />

(29,696)<br />

(238,897)<br />

Total investments and other assets<br />

64,071<br />

71,440<br />

606,216<br />

Total assets<br />

¥ 461,082<br />

¥ 509,573<br />

$ 4,362,589<br />

See the accompanying Notes to Consolidated Financial Statements.<br />

34


Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of U.S.<br />

dollars (Note 1)<br />

<strong>2004</strong><br />

LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY<br />

Current liabilities:<br />

Short-term borrowings (Notes 4 and 5)<br />

¥ 123,059<br />

¥ 190,380<br />

$ 1,164,339<br />

Current portion of long-term debt (Notes 4 and 5)<br />

14,251<br />

20,659<br />

134,838<br />

Trade notes and accounts payable<br />

230,145<br />

216,603<br />

2,177,548<br />

Accrued income taxes (Note 7)<br />

920<br />

903<br />

8,705<br />

Other current liabilities<br />

14,031<br />

15,793<br />

132,755<br />

Total current liabilities<br />

382,406<br />

444,338<br />

3,618,185<br />

Non-current liabilities:<br />

Long-term debt, less current portion (Notes 4 and 5)<br />

26,895<br />

28,471<br />

254,471<br />

Accrued retirement benefits (Note 6)<br />

5,260<br />

5,764<br />

49,768<br />

Deferred income taxes (Note 7)<br />

60<br />

26<br />

568<br />

Other non-current liabilities<br />

2,374<br />

16,436<br />

22,461<br />

Total non-current liabilities<br />

34,589<br />

50,697<br />

327,268<br />

Minority interests<br />

4,183<br />

3,790<br />

39,578<br />

Contingent liabilities (Note 8)<br />

Shareholders' equity (Notes 9 and 17):<br />

Share capital:<br />

Common stock:<br />

Authorized - 260,000,000 shares<br />

Issued - 235,365,187 shares in <strong>2004</strong> and 2003<br />

18,039<br />

18,039<br />

170,678<br />

Preferred stock:<br />

Authorized - 60,000,000 shares<br />

Issued - 60,000,000 shares in <strong>2004</strong><br />

15,000<br />

<br />

141,925<br />

Capital surplus<br />

22,022<br />

7,021<br />

208,364<br />

Net unrealized holding gain on land<br />

20<br />

36<br />

189<br />

Retained-earnings deficit<br />

(9,469)<br />

(4,467)<br />

(89,592)<br />

Net unrealized holding gain (loss) on securities<br />

1,526<br />

(3,565)<br />

14,439<br />

Translation adjustments<br />

(7,221)<br />

(6,308)<br />

(68,322)<br />

Treasury stock, at cost:<br />

123,000 shares in <strong>2004</strong> and 117,000 shares in 2003<br />

(13)<br />

(8)<br />

(123)<br />

Total shareholders' equity<br />

39,904<br />

10,748<br />

377,558<br />

Total liabilities, minority interests and shareholders' equity<br />

¥ 461,082<br />

¥ 509,573<br />

$ 4,362,589<br />

See the accompanying Notes to Consolidated Financial Statements.<br />

35


CONSOLIDATED STATEMENTS OF OPERATIONS<br />

Kawasho Corporation and Consolidated Subsidiaries<br />

For the years ended March 31, <strong>2004</strong> and 2003<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of U.S.<br />

dollars (Note 1)<br />

<strong>2004</strong><br />

Net sales<br />

¥ 1,179,430<br />

¥ 1,156,796<br />

$ 11,159,334<br />

Cost of sales<br />

1,119,692<br />

1,097,730<br />

10,594,115<br />

Gross profit<br />

59,738<br />

59,066<br />

565,219<br />

Selling, general and administrative expenses<br />

45,285<br />

46,670<br />

428,470<br />

Operating income<br />

14,453<br />

12,396<br />

136,749<br />

Other income (expenses):<br />

Interest and dividend income<br />

1,306<br />

1,449<br />

12,357<br />

Gain on reversal of allowance for doubtful receivables (Note 15)<br />

<br />

1,144<br />

<br />

Gain on sales of investments in securities (Note 3)<br />

1,747<br />

1,032<br />

16,529<br />

Equity in earnings of unconsolidated subsidiaries and affiliates<br />

760<br />

1,086<br />

7,191<br />

Gain on return of substitutional portion of welfare pension<br />

fund plans (Note 6)<br />

<br />

463<br />

<br />

Loss on devaluation of investments in securities<br />

<br />

(3,971)<br />

<br />

Allowance for doubtful receivables<br />

<br />

(3,061)<br />

<br />

Interest expense<br />

(4,294)<br />

(5,029)<br />

(40,628)<br />

Loss on sales of investments in consolidated subsidiaries and affiliates<br />

(7,990)<br />

<br />

(75,598)<br />

Loss on sales of property and equipment<br />

(12,465)<br />

<br />

(117,939)<br />

Loss on revaluation of real estate held for sale<br />

(1,987)<br />

<br />

(18,800)<br />

Other, net<br />

264<br />

111<br />

2,497<br />

(22,659)<br />

(6,776)<br />

(214,391)<br />

(Loss) income before income taxes and minority interests<br />

(8,206)<br />

5,620<br />

(77,642)<br />

Income taxes (Note 7):<br />

Current<br />

1,595<br />

1,454<br />

15,091<br />

Deferred<br />

(5,400)<br />

22<br />

(51,092)<br />

(3,805)<br />

1,476<br />

(36,001)<br />

(Loss) income before minority interests<br />

(4,401)<br />

4,144<br />

(41,641)<br />

Minority interests<br />

(601)<br />

(485)<br />

(5,686)<br />

Net (loss) income<br />

¥ (5,002)<br />

¥ 3,659<br />

$ (47,327)<br />

See the accompanying Notes to Consolidated Financial Statements.<br />

36


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY<br />

Kawasho Corporation and Consolidated Subsidiaries<br />

For the years ended March 31, <strong>2004</strong> and 2003<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of U.S.<br />

dollars (Note 1)<br />

<strong>2004</strong><br />

Common stock:<br />

Balance at beginning and end of year<br />

¥ 18,039<br />

¥ 18,039<br />

$ 170,678<br />

Preferred stock:<br />

Balance at beginning of year<br />

¥ <br />

¥ <br />

$ <br />

Issuance of new shares of preferred stock<br />

15,000<br />

<br />

141,925<br />

Balance at end of year<br />

¥ 15,000<br />

¥ <br />

$ 141,925<br />

Capital surplus:<br />

Balance at beginning of year<br />

¥ 7,021<br />

¥ 7,021<br />

$ 66,430<br />

Gain on sales of treasury stock<br />

1<br />

0<br />

9<br />

Issuance of new shares of preferred stock<br />

15,000<br />

<br />

141,925<br />

Balance at end of year<br />

¥ 22,022<br />

¥ 7,021<br />

$ 208,364<br />

Net unrealized holding gain on land:<br />

Balance at beginning of year<br />

¥ 36<br />

¥ 35<br />

$ 341<br />

Net change during the year<br />

(16)<br />

1<br />

(152)<br />

Balance at end of year<br />

¥ 20<br />

¥ 36<br />

$ 189<br />

Retained-earnings deficit:<br />

Balance at beginning of year<br />

¥ (4,467)<br />

¥ (8,179)<br />

$ (42,265)<br />

Net (loss) income<br />

(5,002)<br />

3,659<br />

(47,327)<br />

Increase resulting from exclusion of certain affiliates from equity<br />

method of accounting<br />

<br />

53<br />

<br />

Balance at end of year<br />

¥ (9,469)<br />

¥ (4,467)<br />

$ (89,592)<br />

Net unrealized holding gain (loss) on securities:<br />

Balance at beginning of year<br />

¥ (3,565)<br />

¥ (1,623)<br />

$ (33,730)<br />

Net change during the year<br />

5,091<br />

(1,942)<br />

48,169<br />

Balance at end of year<br />

¥ 1,526<br />

¥ (3,565)<br />

$ 14,439<br />

Translation adjustments:<br />

Balance at beginning of year<br />

¥ (6,308)<br />

¥ (5,232)<br />

$ (59,684)<br />

Net change during the year<br />

(913)<br />

(1,076)<br />

(8,638)<br />

Balance at end of year<br />

¥ (7,221)<br />

¥ (6,308)<br />

$ (68,322)<br />

See the accompanying Notes to Consolidated Financial Statements.<br />

37


CONSOLIDATED STATEMENTS OF CASH FLOWS<br />

Kawasho Corporation and Consolidated Subsidiaries<br />

For the years ended March 31, <strong>2004</strong> and 2003<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of U.S.<br />

dollars (Note 1)<br />

<strong>2004</strong><br />

Cash flows from operating activities:<br />

(Loss) income before income taxes and minority interests<br />

¥ (8,206)<br />

¥ 5,620<br />

$ (77,642)<br />

Adjustments for:<br />

Depreciation and amortization<br />

5,614<br />

10,415<br />

53,118<br />

Amortization of consolidation differences<br />

247<br />

94<br />

2,337<br />

(Decrease) increase in allowance for doubtful receivables<br />

(4,364)<br />

944<br />

(41,291)<br />

Decrease in other allowances<br />

(228)<br />

(387)<br />

(2,157)<br />

Interest and dividend income<br />

(1,306)<br />

(1,449)<br />

(12,357)<br />

Interest expense<br />

4,294<br />

5,029<br />

40,628<br />

Equity in earnings of unconsolidated subsidiaries and affiliates<br />

(760)<br />

(1,086)<br />

(7,191)<br />

Gain on sales of investments in securities<br />

(1,747)<br />

(1,032)<br />

(16,529)<br />

Gain on sales of automobile lease operations<br />

<br />

(783)<br />

<br />

Loss (gain) on sales of investments in consolidated subsidiaries and<br />

affiliates<br />

7,186<br />

(300)<br />

67,991<br />

Loss (gain) on sales of property and equipment<br />

12,465<br />

(265)<br />

117,939<br />

Loss on devaluation of investments in securities<br />

<br />

3,971<br />

<br />

Loss on sales of investments in securities<br />

522<br />

167<br />

4,939<br />

Loss on liquidation of consolidated subsidiaries and affiliates<br />

350<br />

<br />

3,312<br />

Additional retirement expenses<br />

669<br />

728<br />

6,330<br />

Relocation expenses for Osaka head office<br />

<br />

131<br />

<br />

(Increase) decrease in trade notes and accounts receivable<br />

(14,580)<br />

34,286<br />

(137,951)<br />

Decrease in inventories<br />

2,291<br />

487<br />

21,677<br />

Increase (decrease) in trade notes and accounts payable<br />

16,308<br />

(7,273)<br />

154,300<br />

Decrease in accrued consumption taxes<br />

(155)<br />

(777)<br />

(1,467)<br />

Other, net<br />

(891)<br />

3,547<br />

(8,430)<br />

Subtotal<br />

17,709<br />

52,067<br />

167,556<br />

Interest and dividend income received<br />

1,824<br />

1,950<br />

17,258<br />

Interest expense paid<br />

(4,522)<br />

(5,204)<br />

(42,786)<br />

Additional retirement expenses paid<br />

(670)<br />

(582)<br />

(6,339)<br />

Proceeds from settlement of litigation<br />

1,957<br />

5,182<br />

18,517<br />

Income taxes paid<br />

(1,495)<br />

(1,265)<br />

(14,145)<br />

Net cash provided by operating activities<br />

¥ 14,803<br />

¥ 52,148<br />

$ 140,061<br />

See the accompanying Notes to Consolidated Financial Statements.<br />

38


Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of U.S.<br />

dollars (Note 1)<br />

<strong>2004</strong><br />

Cash flows from investing activities:<br />

Purchases of property and equipment<br />

¥ (1,827)<br />

¥ (7,719)<br />

$ (17,286)<br />

Proceeds from sales of property and equipment<br />

12,347<br />

5,810<br />

116,823<br />

Purchases of investment securities<br />

(895)<br />

(412)<br />

(8,468)<br />

Proceeds from sales of investments in securities<br />

8,111<br />

6,086<br />

76,743<br />

Proceeds from sales of consolidated subsidiaries' shares<br />

728<br />

82<br />

6,888<br />

Increase in loans<br />

(788)<br />

(520)<br />

(7,456)<br />

Proceeds from sales of automobile lease operations<br />

<br />

462<br />

<br />

Collection of loans<br />

1,477<br />

2,111<br />

13,975<br />

Other, net<br />

(805)<br />

(529)<br />

(7,617)<br />

Net cash provided by investing activities<br />

18,348<br />

5,371<br />

173,602<br />

Cash flows from financing activities:<br />

Decrease in short-term borrowings<br />

(84,497)<br />

(49,466)<br />

(799,480)<br />

Proceeds from long-term debt<br />

12,272<br />

7,684<br />

116,113<br />

Repayment of long-term debt<br />

(1,079)<br />

(19,180)<br />

(10,209)<br />

Proceeds from issuance of new shares of preferred stock<br />

30,000<br />

<br />

283,849<br />

Proceeds from issuance of new shares of a subsidiary to minority<br />

140<br />

<br />

1,325<br />

shareholders<br />

Cash dividends paid to minority shareholders<br />

(67)<br />

(32)<br />

(634)<br />

Other, net<br />

(3)<br />

(4)<br />

(28)<br />

Net cash used in financing activities<br />

(43,234)<br />

(60,998)<br />

(409,064)<br />

Effect of exchange rate changes on cash and cash equivalents<br />

(216)<br />

78<br />

(2,044)<br />

Net decrease in cash and cash equivalents<br />

(10,299)<br />

(3,401)<br />

(97,445)<br />

Cash and cash equivalents at beginning of year<br />

40,757<br />

43,783<br />

385,628<br />

Increase resulting from initial consolidation of subsidiaries<br />

4<br />

888<br />

38<br />

Decrease resulting from exclusion of subsidiaries from consolidation<br />

(4,037)<br />

(513)<br />

(38,197)<br />

Cash and cash equivalents at end of year<br />

¥ 26,425<br />

¥ 40,757<br />

$ 250,024<br />

See the accompanying Notes to Consolidated Financial Statements.<br />

39


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br />

Kawasho Corporation and Consolidated Subsidiaries<br />

1. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS<br />

Kawasho Corporation (the "Company") and its domestic subsidiaries maintain their books of account in conformity with the<br />

financial accounting standards of Japan, and its overseas subsidiaries maintain their books of account in conformity with<br />

those of their countries of domicile.<br />

The accompanying consolidated financial statements of the Company and its consolidated subsidiaries (collectively, the<br />

"Companies") have been prepared on the basis of accounting principles generally accepted in Japan, which are different in<br />

certain respects as to the application and disclosure requirements of International Financial <strong>Report</strong>ing Standards, and are<br />

compiled from the consolidated financial statements prepared by the Company as required by the Securities and Exchange<br />

Law of Japan.<br />

In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been<br />

made to the consolidated financial statements issued domestically in order to present them in a form that is more familiar<br />

to readers outside Japan.<br />

The translation of yen amounts into U.S. dollar amounts is included solely for the convenience of the readers outside Japan<br />

and has been made at ¥105.69 = U.S.$1.00, the exchange rate prevailing on March 31, <strong>2004</strong>. This translation should not<br />

be construed as a representation that yen amounts have been, could have been, or could in the future be, converted into<br />

U.S. dollars at the above or any other rate.<br />

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES<br />

a. Principles of Consolidation<br />

The accompanying consolidated financial statements include the accounts of the companies over which substantial control<br />

is exerted, directly or indirectly, either through majority ownership of voting stock and/or by other means.<br />

All significant intercompany balances and transactions have been eliminated in consolidation.<br />

Investments in affiliates (companies over which the Company has the ability to exercise significant influence) are stated at<br />

cost plus equity in their undistributed earnings or losses. Consolidated net income or loss includes the Company's equity in<br />

the current net income or loss of such companies after the elimination of unrealized intercompany profits.<br />

All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if applicable, and any excess of cost<br />

over the underlying net assets at the dates of acquisition is amortized over a period of five years on a straight-line basis if<br />

the excess is material, or charged to income when incurred, if immaterial.<br />

The balance sheet dates of certain consolidated subsidiaries are December 31 and January 31. Any significant differences<br />

in intercompany accounts and transactions arising from intervening intercompany transactions during the periods from<br />

January 1 through March 31 and February 1 through March 31 have been adjusted, if necessary.<br />

At March 31, <strong>2004</strong> and 2003, the Company consolidated 100 and 119 subsidiaries, respectively, and excluded 23 and 4<br />

subsidiaries from consolidation due to liquidation and a decrease in ownership, respectively. At March 31, <strong>2004</strong> and 2003,<br />

the Company had 4 and 4 non-consolidated subsidiaries, and 26 and 29 affiliates, respectively, accounted for by the equity<br />

method.<br />

The assets and liabilities of the consolidated subsidiaries are revalued at fair value as of the date of acquisition of control<br />

by the full value method.<br />

b. Foreign Currency Translation<br />

All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate<br />

in effect on the respective balance sheet dates. The financial statements of the overseas subsidiaries are translated into<br />

Japanese yen at their historical rates for shareholders' equity, and at the year-end rates for other balance sheet accounts,<br />

net income, and revenue and expense accounts.<br />

40


c. Cash and Cash Equivalents<br />

For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash on hand,<br />

deposits with banks withdrawable on demand, net of overdrafts, and all highly liquid short-term investments which are readily<br />

convertible to cash subject to an insignificant risk of any changes in their value and which were purchased with an original<br />

maturity of three months or less.<br />

d. Investments in Securities<br />

The accounting standard for financial instruments requires that securities be classified into three categories: trading, held-to<br />

maturity or other securities. Under this standard, trading securities are carried at fair value and held-to maturity debt<br />

securities are carried at amortized cost. Marketable securities classified as other securities are carried at fair value with<br />

any changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in shareholders' equity.<br />

Non-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined principally<br />

by the moving average method.<br />

e. Inventories<br />

Inventories are stated principally at cost determined by the moving-average method.<br />

f. Derivatives<br />

Derivative financial instruments are stated at fair value.<br />

g. Property and Equipment<br />

Property and equipment are carried at cost, except that one affiliate has revalued its land pursuant to the laws on land<br />

revaluation.<br />

Depreciation is computed by the declining-balance method over the estimated useful lives of the assets except for those<br />

held by certain consolidated subsidiaries which apply the straight-line method. The straight-line method is applied to buildings<br />

acquired subsequent to April 1, 1998.<br />

h. Allowance for Doubtful Receivables<br />

The Company and its domestic consolidated subsidiaries provide an allowance for doubtful receivables at the estimated<br />

aggregate amount of probable bad debts plus an amount calculated based on their historical experience of bad debts.<br />

The overseas consolidated subsidiaries provide an allowance for doubtful receivables at the estimated aggregate amount of<br />

probable bad debts.<br />

i. Accrued Retirement Benefits<br />

Accrued retirement benefits for employees have been provided mainly at an amount calculated based on the retirement<br />

benefit obligation and the fair value of the pension plan assets as of balance sheet dates, as adjusted for the unrecognized<br />

net retirement benefit obligation at transition, unrecognized actuarial gain or loss, and unrecognized prior service cost. The<br />

retirement benefit obligation is attributed to each period by the straight-line method over the estimated years of service of<br />

the eligible employees. The net retirement benefit obligation at transition is being amortized principally over a period of 15<br />

years by the straight-line method.<br />

Actuarial gain and loss are amortized in the year following the year in which the gain or loss is recognized primarily by the<br />

straight-line method over the average remaining years of service of the employees. Prior service cost is being amortized<br />

as incurred by the straight-line method over the average remaining years of service of the employees.<br />

See Note 6 for the method of accounting for the separation of the substitutional portion from the corporate portion of the<br />

benefit obligation under Welfare Pension Fund Plan.<br />

41


j. Leases<br />

The Companies lease certain equipment and fixtures under noncancelable lease agreements referred to as finance leases.<br />

Finance leases other than those which transfer the ownership of the leased property to the lessees are accounted for as<br />

operating leases.<br />

k. Hedge Accounting<br />

The Companies apply deferral hedge accounting to interest-rate swaps in order to manage their exposure to the risk of fluctuation<br />

in interest rates based on the Company's internal regulations for risk management.<br />

l. Income Taxes<br />

The Companies recognize deferred income taxes arising from temporary differences between the tax bases of the assets<br />

and liabilities and the corresponding amounts reported in the financial statements.<br />

m. Unrealized Holding Gain on Land<br />

Under the law on land revaluation and the revised law on land revaluation, an affiliate accounted for by the equity method revalued<br />

land held for its own use during the year ended March 31, 2002. The unrealized gain on land holdings, net of the<br />

applicable income taxes, is reported as a separate component of shareholder's equity.<br />

n. Amounts per Share<br />

Net income or loss and net assets per share are computed excluding amounts not attributable to shareholders of common<br />

stock from net income and net assets divided by the weighted-average number of shares of common stock outstanding during<br />

the year and the number of shares of common stock at the year end, respectively.<br />

o. Consumption Taxes<br />

Consumption taxes are excluded from the amounts reflected in the accompanying consolidated financial statements.<br />

p. Appropriation of Retained Earnings<br />

Under the Commercial Code of Japan, the appropriation of retained earnings with respect to a given financial period is<br />

made by resolution of the shareholders at a general meeting held subsequent to the close of the financial period and the<br />

accounts for that period, therefore, do not reflect such appropriations.<br />

42


3. INVESTMENTS IN SECURITIES<br />

Investments in marketable securities at March 31, <strong>2004</strong> and 2003 were as follows:<br />

Millions of yen<br />

Acquisition<br />

cost<br />

<strong>2004</strong><br />

Carrying<br />

value<br />

Unrealized<br />

gain (loss)<br />

Acquisition<br />

cost<br />

2003<br />

Carrying<br />

value<br />

Unrealized<br />

gain (loss)<br />

Securities whose carrying<br />

value exceeds their<br />

acquisition cost:<br />

Equity securities<br />

¥ 11,142<br />

¥ 16,608<br />

¥ 5,466<br />

¥ 2,620<br />

¥ 3,669<br />

¥ 1,049<br />

Securities whose carrying<br />

value does not exceed their<br />

acquisition cost:<br />

Equity securities<br />

3,319<br />

2,413<br />

(906)<br />

14,838<br />

11,818<br />

(3,020)<br />

Total<br />

¥ 14,461<br />

¥ 19,021<br />

¥ 4,560<br />

¥ 17,458<br />

¥ 15,487<br />

¥ (1,971)<br />

Thousands of U.S. dollars<br />

Acquisition<br />

cost<br />

Securities whose carrying<br />

value exceeds their<br />

acquisition cost:<br />

Equity securities $ 105,422<br />

Securities whose carrying<br />

value does not exceed their<br />

acquisition cost:<br />

Equity securities<br />

31,403<br />

Total<br />

$ 136,825<br />

<strong>2004</strong><br />

Carrying<br />

value<br />

$ 157,139<br />

22,831<br />

$ 179,970<br />

Unrealized<br />

gain (loss)<br />

$ 51,717<br />

(8,572)<br />

$ 43,145<br />

Sales of investments in securities for the years ended March 31, <strong>2004</strong> and 2003 are summarized as follows:<br />

Sales<br />

Aggregate gain<br />

Aggregate loss<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

¥ 5,383 ¥ 4,615<br />

1,747<br />

1,032<br />

522<br />

167<br />

Thousands of<br />

U.S. dollars<br />

<strong>2004</strong><br />

$ 50,932<br />

16,529<br />

4,939<br />

The carrying value of investments in non-marketable securities at March 31, <strong>2004</strong> and 2003 was as follows:<br />

Unlisted equity securities<br />

Other<br />

Total<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

¥ 6,064 ¥ 6,328<br />

3<br />

3<br />

¥ 6,067 ¥ 6,331<br />

Thousands of<br />

U.S. dollars<br />

<strong>2004</strong><br />

$ 57,375<br />

28<br />

$ 57,403<br />

43


4. SHORT-TERM BORROWINGS AND LONG-TERM DEBT<br />

Short-tem borrowings principally represent notes due within one year. The average annual interest rates applicable to such borrowings<br />

at March 31, <strong>2004</strong> and 2003 were1.0% and 1.1%, respectively.<br />

To ensure efficient financing, the Company concluded line-of-credit agreements with thirteen banks. The status of these commitments<br />

at March 31, <strong>2004</strong> is summarized as follows:<br />

Millions of yen<br />

Thousands of<br />

U.S. dollars<br />

Lines of credit<br />

Credit used<br />

Credit available<br />

¥17,500<br />

<br />

¥17,500<br />

$165,579<br />

<br />

$165,579<br />

Long-term debt at March 31, <strong>2004</strong> and 2003 consisted of the following:<br />

Unsecured loans from banks, insurance companies, government<br />

agencies and other financial institutions due through 2010, at an<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of<br />

U.S dollars<br />

<strong>2004</strong><br />

average annual interest rate of 1.6%<br />

¥36,890<br />

¥44,492<br />

$349,040<br />

Secured loans from banks, insurance companies, government<br />

agencies and other financial institutions due through 2014, at an<br />

average annual interest rate of 2.5%<br />

4,256<br />

4,638<br />

40,269<br />

41,146<br />

49,130<br />

389,309<br />

Less current portion<br />

(14,251)<br />

(20,659)<br />

(134,838)<br />

¥26,895<br />

¥28,471<br />

$254,471<br />

The aggregate annual maturities of long-term debt subsequent to March 31, <strong>2004</strong> are summarized as follows:<br />

Year ending March 31,<br />

2005<br />

2006<br />

2007<br />

2008<br />

2009<br />

2010 and thereafter<br />

Total<br />

Millions of yen<br />

¥14,251<br />

6,432<br />

9,059<br />

2,537<br />

1,471<br />

7,396<br />

¥41,146<br />

Thousands of<br />

U.S. dollars<br />

$134,838<br />

60,857<br />

85,713<br />

24,004<br />

13,918<br />

69,979<br />

$389,309<br />

44


5. PLEDGED ASSETS<br />

The assets pledged as collateral for short-term borrowings, long-term debt and guarantees at March 31, <strong>2004</strong> were as follows:<br />

Investments in securities<br />

Trade notes receivable<br />

Land<br />

Others<br />

Millions of yen<br />

¥ 7,349<br />

2,344<br />

4,482<br />

4,144<br />

Thousands of<br />

U.S. dollars<br />

$ 69,534<br />

22,178<br />

42,407<br />

39,209<br />

Short-term borrowings, long-term loans and guarantees secured by such collateral at March 31, <strong>2004</strong> were as follows:<br />

Short-term borrowings<br />

Long-term loans<br />

Others<br />

Millions of yen<br />

¥ 9,637<br />

4,256<br />

85<br />

Thousands of<br />

U.S. dollars<br />

$ 91,182<br />

40,269<br />

804<br />

The above figures include the following assets pledged as a foundation mortgage at March 31, <strong>2004</strong>:<br />

Buildings and structures<br />

Other equipment and fixtures<br />

Others<br />

Millions of yen<br />

¥ 341<br />

401<br />

64<br />

Thousands of<br />

U.S. dollars<br />

$ 3,226<br />

3,794<br />

606<br />

The corresponding short-term borrowings, long-term loans and guarantees at March 31, <strong>2004</strong> were as follows:<br />

Short-term borrowings<br />

Long-term loans<br />

Others<br />

Millions of yen<br />

¥ 1,781<br />

500<br />

37<br />

Thousands of<br />

U.S. dollars<br />

$ 16,851<br />

4,731<br />

350<br />

45


6. ACCRUED RETIREMENT BENEFITS<br />

The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e., welfare pension fund plans, tax-qualified<br />

pension plans and lump-sum payment plans.<br />

The funded and accrued status of the retirement benefit plans of the Company and its domestic consolidated subsidiaries at<br />

March 31, <strong>2004</strong> and 2003 are summarized as follows:<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of<br />

U.S dollars<br />

<strong>2004</strong><br />

Retirement benefit obligation<br />

¥ (31,927)<br />

¥ (36,237)<br />

$ (302,082)<br />

Fair value of plan assets<br />

12,045<br />

10,090<br />

113,965<br />

Unfunded retirement benefit obligation<br />

(19,882)<br />

(26,147)<br />

(188,117)<br />

Unrecognized net retirement benefit obligation at transition<br />

8,744<br />

10,014<br />

82,733<br />

Unrecognized actuarial loss<br />

8,701<br />

10,369<br />

82,326<br />

Unrecognized prior service cost<br />

(2,823)<br />

<br />

(26,710)<br />

Accrued retirement benefits<br />

¥ (5,260)<br />

¥ (5,764)<br />

$ (49,768)<br />

The domestic consolidated subsidiaries have adopted simplified methods of calculating their accrued retirement benefits as<br />

permitted under the accounting standard for retirement benefits.<br />

Pursuant to the Defined Benefit Corporate Pension Plan Law, the Company obtained approval from the Minister of Health, Labour<br />

and Welfare on July 25, 2002 for an exemption from future retirement benefit obligation with respect to the substitutional<br />

portion of the employees' Welfare Pension Fund Plans which the Company operates on behalf of the Japanese government.<br />

The Company accounted for the separation of the substitutional portion from the corporate portion of the benefit obligation under<br />

its employees' Welfare Pension Fund Plans as of the date of approval of its exemption, assuming that the transfer to the<br />

Japanese government of the substitutional portion of the benefit obligation and the related pension plan assets had been completed<br />

as of that date. As a result, the Company recognized a gain of ¥463 million for the year ended March 31, 2003.<br />

On March 1, <strong>2004</strong> the Company changed its welfare pension fund plan to a type of defined benefit plan known as a "cash balance<br />

plan."<br />

Retirement benefit expenses of the Company and its domestic subsidiaries included the following components for the years<br />

ended March 31, <strong>2004</strong> and 2003:<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of<br />

U.S dollars<br />

<strong>2004</strong><br />

Service cost<br />

¥ 1,166<br />

¥ 1,421<br />

$ 11,032<br />

Interest cost<br />

768<br />

984<br />

7,267<br />

Expected return on plan assets<br />

(468)<br />

(864)<br />

(4,428)<br />

Amortization of net retirement benefit obligation at transition<br />

919<br />

992<br />

8,695<br />

Actuarial losses<br />

1,025<br />

908<br />

9,698<br />

Prior service cost<br />

(21)<br />

(19)<br />

(199)<br />

Net periodic retirement benefit expenses<br />

¥ 3,389<br />

¥ 3,422<br />

$ 32,065<br />

Gain on return of substitutional portion of Welfare Pension Fund Plans<br />

<br />

(463)<br />

<br />

Total<br />

¥ 3,389<br />

¥ 2,959<br />

$ 32,065<br />

46


The retirement benefit costs of the domestic consolidated subsidiaries calculated by simplified methods have been included in<br />

service cost in the above table.<br />

The assumptions used in accounting for the retirement benefit plans for the years ended March 31, <strong>2004</strong> and 2003 were as<br />

follows:<br />

Discount rate 2.4%<br />

Expected rate of return on plan assets 5.3%<br />

7. INCOME TAXES<br />

Income taxes applicable to the Company and its domestic subsidiaries comprise corporation tax, inhabitants' taxes and<br />

enterprise tax which, in the aggregate, resulted in an aggregate statutory tax rate of approximately 42.0% for the years<br />

ended March 31, <strong>2004</strong> and 2003.<br />

The significant components of deferred tax assets and liabilities at March 31, <strong>2004</strong> and 2003 were as follows:<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of<br />

U.S dollars<br />

<strong>2004</strong><br />

Deferred tax assets:<br />

Tax loss carryforwards<br />

¥ 11,753<br />

¥ 7,665<br />

$ 111,203<br />

Loss on devaluation of inventories<br />

5,918<br />

4,071<br />

55,994<br />

Allowance for doubtful receivables<br />

2,154<br />

2,151<br />

20,380<br />

Loss on devaluation of golf club memberships<br />

1,071<br />

<br />

10,133<br />

Net unrealized holding loss on securities<br />

<br />

1,674<br />

<br />

Unrealized intercompany profit on non-current assets<br />

1,429<br />

1,824<br />

13,521<br />

Accrued retirement benefits<br />

1,684<br />

1,549<br />

15,933<br />

Other<br />

3,871<br />

5,934<br />

36,626<br />

Total<br />

27,880<br />

24,868<br />

263,790<br />

Less valuation allowance<br />

(7,612)<br />

(10,061)<br />

(72,022)<br />

Deferred tax assets<br />

¥ 20,268<br />

¥ 14,807<br />

$ 191,768<br />

Deferred tax liabilities:<br />

Unrealized holding gain on securities<br />

2,051<br />

71<br />

19,406<br />

Other<br />

119<br />

95<br />

1,126<br />

Total<br />

2,170<br />

166<br />

20,532<br />

Net deferred tax assets<br />

¥ 18,098<br />

¥ 14,641<br />

$ 171,236<br />

47


The effective tax rate reflected in the consolidated statement of operations for the year ended March 31, 2003 differs from the<br />

statutory tax rate for the following reasons:<br />

Statutory tax rate<br />

Valuation allowance<br />

Elimination of dividend income<br />

Equity in earnings of unconsolidated subsidiaries and affiliates<br />

Permanently non-deductible expenses<br />

Other<br />

Effective tax rate<br />

2003<br />

42.0 %<br />

(21.4)<br />

10.3<br />

(8.1)<br />

6.9<br />

(3.4)<br />

26.3 %<br />

The corresponding information for the year ended March 31, <strong>2004</strong> has been omitted because a loss before income taxes and<br />

minority interests was recorded.<br />

In accordance with a law on amendments to local tax laws, etc. announced on March 31, 2003, the Company and its domestic<br />

consolidated subsidiaries applied a statutory tax rate of 41.0% to the calculation of deferred tax assets and liabilities at March<br />

31, 2003, which are expected to be reversed on April 1, <strong>2004</strong> and thereafter. The effect of this change in the statutory tax<br />

rate applied was to decrease deferred tax assets, net of deferred tax liabilities at March 31, 2003 by ¥241 million and to increase<br />

income taxes deferred for the year ended March 31, 2003 and unrealized holding gain on securities at March 31, 2003<br />

by ¥229 million and ¥11 million, respectively.<br />

48


8. CONTINGENT LIABILITIES<br />

Contingent liabilities at March 31, <strong>2004</strong> were as follows:<br />

Trade notes receivable discounted with banks and endorsed<br />

Guarantees of loans to an affiliate, third parties and employees<br />

Total<br />

Millions of yen<br />

¥ 3,286<br />

3,496<br />

¥ 6,782<br />

Thousands of<br />

U.S. dollars<br />

$ 31,091<br />

33,078<br />

$ 64,169<br />

9. SHAREHOLDERS' EQUITY<br />

The Commercial Code of Japan provides that an amount equivalent to at least 10% of cash dividends and bonuses paid to directors<br />

and statutory auditors, and exactly 10% of interim cash dividends paid be appropriated to the legal reserve until the sum of<br />

additional paid-in capital and the legal reserve equals 25% of share capital. The legal reserve and additional paid-in capital may<br />

be used to eliminate or reduce a deficit by resolution of the shareholders or may be capitalized by resolution of the Board of Directors.<br />

The Code also stipulates that, to the extent that the sum of the additional paid-in capital account and the legal reserve<br />

exceeds 25% of share capital, the amount of any such excess is available for appropriation by resolution of the shareholders.<br />

Additional paid-in capital is included in capital surplus in the accompanying consolidated balance sheets and statements of<br />

shareholders' equity. The Company's legal reserve amounted to nil as of March 31, <strong>2004</strong> and 2003.<br />

On March 19, <strong>2004</strong>, the Company issued 60,000,000 shares of preferred stock at a price of ¥500 per share, for gross proceeds<br />

of ¥30,000 million ($283,849 thousand), of which ¥15,000 million ($141,924 thousand) was recorded as additional<br />

paid-in capital. This preferred stock is noncumulative and nonparticipating for dividend payment. Shareholders of this preferred<br />

stock are not entitled to vote at a general meeting of the shareholders and cannot convert their preferred stock to common<br />

stock. The Company may purchase these and retire them out of earnings available for distribution to the shareholders.<br />

10. LEASE TRANSACTIONS<br />

Finance leases other than those which transfer ownership<br />

(1) As lessee<br />

Total lease payments under finance leases other than those which transfer ownership to the lessee were ¥657 million ($6,216<br />

thousand) and ¥228 million for the years ended March 31, <strong>2004</strong> and 2003, respectively.<br />

Pro forma information on leased property such as the acquisition cost and accumulated depreciation at March 31, <strong>2004</strong> and<br />

2003 and depreciation expense for the years then ended on an "as-if-capitalized" basis were as follows:<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of<br />

U.S. dollars<br />

<strong>2004</strong><br />

Acquisition cost<br />

Equipment and fixtures<br />

¥ 3,209<br />

¥ 2,768<br />

$ 30,363<br />

Others<br />

1,890<br />

224<br />

17,882<br />

Less accumulated depreciation<br />

(1,371)<br />

(669)<br />

(12,972)<br />

¥ 3,728<br />

¥ 2,323<br />

$ 35,273<br />

Depreciation expense<br />

¥ 657<br />

¥ 228<br />

$ 6,216<br />

49


Future minimum lease payments as of March 31, <strong>2004</strong> were as follows:<br />

Within one year<br />

More than one year<br />

Total<br />

Millions of yen<br />

¥ 698<br />

3,030<br />

¥ 3,728<br />

Thousands of<br />

U.S. dollars<br />

$ 6,604<br />

28,669<br />

$ 35,273<br />

The interest portion is included in acquisition costs and future minimum lease payments in the above tables.<br />

Depreciation expense is calculated by the straight-line method over the respective lease periods.<br />

(2) As lessor<br />

Total lease receipts under finance leases totaled ¥732 million ($6,926 thousand) and ¥3,158 million for the years ended March<br />

31, <strong>2004</strong> and 2003, respectively.<br />

Information on leased property such as acquisition costs and accumulated depreciation at March 31, <strong>2004</strong> and 2003 and depreciation<br />

expense for the year then ended was summarized as follows:<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

Thousands of<br />

U.S. dollars<br />

<strong>2004</strong><br />

Acquisition costs:<br />

Equipment and fixtures<br />

¥ <br />

¥ 3,933<br />

$ <br />

Others<br />

<br />

2,320<br />

<br />

Less accumulated depreciation<br />

<br />

(2,692)<br />

<br />

¥ <br />

¥ 3,561<br />

$ <br />

Depreciation expense<br />

¥ 639<br />

¥ 2,685<br />

$ 6,046<br />

The Company and its consolidated subsidiaries leased no property to lessees at March 31, <strong>2004</strong>.<br />

Operating leases<br />

(1) As lessee<br />

As lessee under non-cancelable operating leases, future minimum lease payments at March 31, <strong>2004</strong> were as follows:<br />

Within one year<br />

More than one year<br />

Total<br />

Millions of yen<br />

¥ 62<br />

106<br />

¥ 168<br />

Thousands of<br />

U.S. dollars<br />

$ 587<br />

1,003<br />

$ 1,590<br />

(2) As lessor<br />

As lessor under non-cancelable operating leases, future minimum lease receipts at March 31, <strong>2004</strong> were as follows:<br />

Within one year<br />

More than one year<br />

Total<br />

Millions of yen<br />

¥ 72<br />

170<br />

¥ 242<br />

Thousands of<br />

U.S. dollars<br />

$ 681<br />

1,608<br />

$ 2,289<br />

50


11. DERIVATIVE FINANCIAL INSTRUMENTS<br />

The Companies trade in derivatives based on currencies and commodities, primarily as a way of hedging the risk of future<br />

fluctuation in exchange rates, interest rates and commodity prices.<br />

The Companies have taken various steps, including the establishment of internal management rules, to ensure that all transactions<br />

are implemented, reported and monitored appropriately, and that each related risk is managed. The Companies do<br />

not hold or issue derivative financial instruments for speculative trading purposes.<br />

At March 31, <strong>2004</strong> and 2003, the outstanding derivatives positions were as follows:<br />

(1) Currencies<br />

Millions of yen<br />

<strong>2004</strong><br />

2003<br />

Notional<br />

amount<br />

Fair<br />

value<br />

Unrealized<br />

gain (loss)<br />

Notional<br />

amount<br />

Fair<br />

value<br />

Unrealized<br />

gain (loss)<br />

Forward foreign exchange<br />

contracts to sell:<br />

U.S. dollars<br />

¥ 9,132<br />

¥ 8,862<br />

¥ 270<br />

¥ 5,827<br />

¥ 5,813<br />

¥ 14<br />

Other<br />

39<br />

38<br />

1<br />

<br />

<br />

<br />

Forward foreign exchange<br />

contracts to buy:<br />

U.S. dollars<br />

¥ 6,177<br />

¥ 6,119<br />

¥ (58)<br />

¥ 4,442<br />

¥ 4,520<br />

¥ 78<br />

Other<br />

663<br />

657<br />

(6)<br />

147<br />

150<br />

3<br />

Currency call options to buy:<br />

Euro<br />

¥ 195<br />

¥ 0<br />

¥ (1)<br />

¥ 255<br />

¥ 0<br />

¥ (0)<br />

Total<br />

¥ 206<br />

¥ 95<br />

Forward foreign exchange<br />

contracts to sell:<br />

U.S. dollars<br />

Other<br />

Forward foreign exchange<br />

contracts to buy:<br />

U.S. dollars<br />

Other<br />

Currency call options to buy:<br />

Euro<br />

Total<br />

Notional<br />

amount<br />

$ 86,404<br />

369<br />

$ 58,445<br />

6,273<br />

$ 1,845<br />

Thousands of U.S. dollars<br />

<strong>2004</strong><br />

Fair<br />

value<br />

$ 83,849<br />

360<br />

$ 57,896<br />

6,216<br />

$ 0<br />

Unrealized<br />

gain (loss)<br />

$ 2,555<br />

9<br />

$ (549)<br />

(57)<br />

$ (9)<br />

$ 1,949<br />

Notes:<br />

1. The fair value of forward foreign exchange contracts is based on the quoted forward foreign exchange rates.<br />

2. The fair value of currency option contracts is based on the prices offered by the counterparty financial institutions.<br />

3. The above figures exclude outstanding derivatives positions to which hedge accounting has been applied.<br />

51


(2) Commodities<br />

Millions of yen<br />

2003<br />

Notional<br />

amount<br />

Fair<br />

value<br />

Unrealized<br />

gain (loss)<br />

Forward contracts:<br />

Food<br />

to buy<br />

¥ 8<br />

¥ 8<br />

¥ 0<br />

Futures contracts:<br />

Metals<br />

to sell<br />

¥ 77<br />

¥ 76<br />

¥ 1<br />

to buy<br />

77<br />

76<br />

(1)<br />

Total<br />

¥ (0)<br />

Notes:<br />

1. The fair value of the forward contracts for food is based on the quoted market prices.<br />

2. The fair value of the futures contracts for metals is based on the prices quoted by the counterparties.<br />

At March 31, <strong>2004</strong>, there were no outstanding commodities positions.<br />

12. AMOUNTS PER SHARE<br />

Amounts per share at March 31, <strong>2004</strong> and 2003 and for the years then ended were as follows:<br />

yen<br />

Amounts per share<br />

<strong>2004</strong> 2003<br />

Net assets<br />

¥ 42.10 ¥ 45.68<br />

Net (loss) income<br />

(21.26)<br />

15.55<br />

U.S. dollars<br />

<strong>2004</strong><br />

$ 0.40<br />

(0.20)<br />

Net (loss) income per share for the years ended March 31, <strong>2004</strong> and 2003 is based on the following factors:<br />

Net (loss) income<br />

Amounts not attributable to shareholders of common stock<br />

Net (loss) income attributable to shareholders of common stock<br />

Average number of shares of common stock<br />

Millions of yen<br />

<strong>2004</strong> 2003<br />

¥ (5,002) ¥ 3,659<br />

<br />

(5,002)<br />

3,659<br />

Thousands of shares<br />

235,257 235,293<br />

Thousands of<br />

U.S dollars<br />

<strong>2004</strong><br />

$ (47,327)<br />

<br />

(47,327)<br />

52


13. SEGMENT INFORMATION<br />

The Companies' activities include worldwide trading in various commodities and coordinating industrial projects on an international<br />

basis, as well as providing certain financial and other services.<br />

Business segment information is presented as follows:<br />

Millions of yen<br />

Steel<br />

Raw<br />

Materials,<br />

Fuels and<br />

Chemicals<br />

Foods and<br />

Commodities<br />

Machinery<br />

Construction<br />

and Other<br />

Eliminations<br />

or Corporate<br />

Consolidated<br />

Year ended<br />

March 31, <strong>2004</strong>:<br />

Net sales:<br />

Outside customers<br />

¥ 769,960<br />

¥ 198,574<br />

¥ 84,875<br />

¥ 98,126<br />

¥ 27,895<br />

¥ <br />

¥ 1,179,430<br />

Intersegment<br />

275<br />

37<br />

12<br />

8<br />

991<br />

(1,323)<br />

<br />

Total<br />

770,235<br />

198,611<br />

84,887<br />

98,134<br />

28,886<br />

(1,323)<br />

1,179,430<br />

Operating expenses<br />

760,287<br />

195,379<br />

84,401<br />

97,003<br />

29,230<br />

(1,323)<br />

1,164,977<br />

Operating income<br />

(loss)<br />

¥ 9,948<br />

¥ 3,232<br />

¥ 486<br />

¥ 1,131<br />

¥ (344)<br />

¥ <br />

¥ 14,453<br />

Total assets<br />

¥ 284,278<br />

¥ 34,010<br />

¥ 18,213<br />

¥ 59,665<br />

¥ 38,157<br />

¥ 26,759<br />

¥ 461,082<br />

Depreciation and<br />

amortization<br />

2,373<br />

89<br />

19<br />

398<br />

2,108<br />

627<br />

5,614<br />

Capital expenditures<br />

1,349<br />

453<br />

5<br />

752<br />

588<br />

1,490<br />

4,637<br />

Year ended<br />

March 31, 2003:<br />

Net sales:<br />

Outside customers<br />

¥ 723,101<br />

¥ 190,623<br />

¥ 88,381<br />

¥ 111,582<br />

¥ 43,109<br />

¥ <br />

¥ 1,156,796<br />

Intersegment<br />

237<br />

47<br />

43<br />

18<br />

601<br />

(946)<br />

<br />

Total<br />

723,338<br />

190,670<br />

88,424<br />

111,600<br />

43,710<br />

(946)<br />

1,156,796<br />

Operating expenses<br />

714,997<br />

188,299<br />

88,537<br />

110,360<br />

43,153<br />

(946)<br />

1,144,400<br />

Operating income<br />

(loss)<br />

¥ 8,341<br />

¥ 2,371<br />

¥ (113)<br />

¥ 1,240<br />

¥ 557<br />

¥ <br />

¥ 12,396<br />

Total assets<br />

¥ 280,135<br />

¥ 32,625<br />

¥ 26,045<br />

¥ 57,328<br />

¥ 69,851<br />

¥ 43,589<br />

¥ 509,573<br />

Depreciation and<br />

2,280<br />

63<br />

30<br />

762<br />

6,585<br />

695<br />

10,415<br />

amortization<br />

Capital expenditures<br />

2,193<br />

52<br />

8<br />

459<br />

5,114<br />

1,011<br />

8,837<br />

53


Thousands of U.S. dollars<br />

Steel<br />

Raw<br />

Materials,<br />

Fuels and<br />

Chemicals<br />

Food and<br />

Commodities<br />

Machinery<br />

Construction<br />

and Other<br />

Eliminations<br />

or Corporate<br />

Consolidated<br />

Year ended<br />

March 31, <strong>2004</strong>:<br />

Net sales:<br />

Outside customers<br />

$ 7,285,079<br />

$ 1,878,835<br />

$ 803,056<br />

$ 928,432<br />

$ 263,932<br />

$ $ 11,159,334<br />

Intersegment<br />

2,602<br />

350<br />

114<br />

76<br />

9,376<br />

(12,518)<br />

<br />

Total<br />

7,287,681<br />

1,879,185<br />

803,170<br />

928,508<br />

273,308<br />

(12,518)<br />

11,159,334<br />

Operating expenses<br />

7,193,557<br />

1,848,604<br />

798,571<br />

917,807<br />

276,564<br />

(12,518)<br />

11,022,585<br />

Operating income<br />

(loss)<br />

$94,124<br />

$30,581<br />

$4,599<br />

$10,701<br />

$ (3,256)<br />

$ <br />

$136,749<br />

Total assets<br />

$ 2,689,734<br />

$ 321,790<br />

$ 172,325<br />

$ 564,528<br />

$ 361,028<br />

$ 253,184<br />

$ 4,362,589<br />

Depreciation and<br />

amortization<br />

22,453<br />

842<br />

180<br />

3,766<br />

19,945<br />

5,932<br />

53,118<br />

Capital expenditures<br />

12,764<br />

4,286<br />

47<br />

7,115<br />

5,563<br />

14,098<br />

43,873<br />

Assets in the "Eliminations or Corporate" column consist primarily of cash and cash equivalents and investments in securities of<br />

the Company, which totaled ¥27,148 million ($256,864 thousand) and ¥44,692 million for the years ended March 31, <strong>2004</strong><br />

and 2003, respectively.<br />

Segment information presented by geographic area is as follows:<br />

Millions of yen<br />

Japan<br />

Other areas<br />

Eliminations<br />

or Corporate<br />

Consolidated<br />

Year ended March 31, <strong>2004</strong><br />

Net sales:<br />

Outside customers<br />

¥ 1,079,946<br />

¥ 99,484<br />

¥ <br />

¥ 1,179,430<br />

Intersegment<br />

33,671<br />

7,235<br />

(40,906)<br />

<br />

Total<br />

1,113,617<br />

106,719<br />

(40,906)<br />

1,179,430<br />

Operating expenses<br />

1,101,370<br />

104,558<br />

(40,951)<br />

1,164,977<br />

Operating income<br />

¥ 12,247<br />

¥ 2,161<br />

¥ 45<br />

¥ 14,453<br />

Total assets<br />

¥ 448,980<br />

¥ 52,408<br />

¥ (40,306)<br />

¥ 461,082<br />

Year ended March 31, 2003<br />

Net sales:<br />

Outside customers<br />

¥ 1,054,748<br />

¥ 102,048<br />

¥ <br />

¥ 1,156,796<br />

Intersegment<br />

27,067<br />

10,685<br />

(37,752)<br />

<br />

Total<br />

1,081,815<br />

112,733<br />

(37,752)<br />

1,156,796<br />

Operating expenses<br />

1,071,862<br />

110,465<br />

(37,927)<br />

1,144,400<br />

Operating income<br />

¥ 9,953<br />

¥ 2,268<br />

¥ 175<br />

¥ 12,396<br />

Total assets<br />

¥ 474,168<br />

¥ 78,330<br />

¥ (42,925)<br />

¥ 509,573<br />

54


Thousands of U.S. dollars<br />

Japan<br />

Other areas<br />

Eliminations<br />

or Corporate<br />

Consolidated<br />

Year ended March 31, <strong>2004</strong><br />

Net sales:<br />

Outside customers<br />

$ 10,218,053<br />

$ 941,281<br />

$ <br />

$ 11,159,334<br />

Intersegment<br />

318,583<br />

68,455<br />

(387,038)<br />

<br />

Total<br />

10,536,636<br />

1,009,736<br />

(387,038)<br />

11,159,334<br />

Operating expenses<br />

10,420,759<br />

989,289<br />

(387,463)<br />

11,022,585<br />

Operating income<br />

$ 115,877<br />

$ 20,447<br />

$ 425<br />

$ 136,749<br />

Total assets<br />

$ 4,248,084<br />

$ 495,866<br />

$ (381,361)<br />

$ 4,362,589<br />

The principal countries included in "Other areas" are the U.S.A., China, Thailand and Malaysia.<br />

14. OVERSEAS SALES<br />

Asia<br />

Millions of yen<br />

Others<br />

Total<br />

Year ended March 31, <strong>2004</strong><br />

Overseas sales<br />

¥ 246,885<br />

¥ 55,065<br />

¥ 301,950<br />

Consolidated net sales<br />

¥ 1,179,430<br />

Overseas sales as a percentage of consolidated net sales<br />

20.9%<br />

4.7%<br />

25.6%<br />

Year ended March 31, 2003:<br />

Overseas sales<br />

¥ 218,525<br />

¥ 65,505<br />

¥ 284,030<br />

Consolidated net sales<br />

¥ 1,156,796<br />

Overseas sales as a percentage of consolidated net sales<br />

18.9%<br />

5.7%<br />

24.6%<br />

Asia<br />

Thousands of U.S. dollars<br />

Others<br />

Total<br />

Year ended March 31, <strong>2004</strong>:<br />

Overseas sales<br />

$ 2,335,935<br />

$ 521,005<br />

$ 2,856,940<br />

Consolidated net sales<br />

$ 11,159,334<br />

Overseas sales as a percentage of consolidated net sales<br />

20.9%<br />

4.7%<br />

25.6%<br />

The principal countries included in "Asia" are Korea, China and Thailand, and those included in "Others" are the U.S.A, Liberia<br />

and Panama. Overseas sales include export sales of the Company and its domestic consolidated subsidiaries and sales<br />

(other than exports to Japan) of its overseas consolidated subsidiaries.<br />

55


15. LITIGATION<br />

The "Royal Palm Resort" in Guam, which was developed by Kawasho International (Guam), Inc. (hereinafter referred to as "KIG"),<br />

suffered extensive damage due to an earthquake on August 8, 1993. Since defects in design and construction were found<br />

after a thorough investigation of the cause of the collapse of the building, the Company, KIG and other unit owners initiated a<br />

lawsuit in Guam claiming damages (of more than $135 million) against the general constructors Mitsui Construction Co., Ltd.,<br />

Ssang Yong Engineering and Construction Company (Korea) and other parties concerned.<br />

On December 24, 2002 the Company settled with Mitsui Construction Co., Ltd. and Ssang Yong Engineering and Construction<br />

Company on the condition that they pay compensation of $59 million. Consequently, the Company has reversed the allowance<br />

for doubtful receivables of ¥1,070 million for the year ended March 31, 2003. This reversal has been reflected in the<br />

consolidated statement of operations for the year ended March 31, 2003 as a component of other income - gain on reversal of<br />

allowance for doubtful receivables of ¥1,144 million.<br />

16. SUBSEQUENT EVENTS<br />

(1) Sale of aerospace business<br />

Effective June 1, <strong>2004</strong>, the Company sold aerospace business operated by the Company and Kawasho International (U.S.A.)<br />

Inc. to Japan Aerospace Corporation, a wholly-owned subsidiary of ITOCHU Corporation. The Company decided on this sale as<br />

a step in choosing the type of business to be operated and concentrating the Company's resources on the businesses chosen<br />

in preparation for a future management integration and reorganization with NKK Trading Inc. The related assets and liabilities as<br />

of March 31, <strong>2004</strong> and sales for the year then ended were as follows:<br />

Assets<br />

Liabilities<br />

Sales<br />

Millions of yen<br />

¥ 17,858<br />

11,848<br />

21,177<br />

Thousands of<br />

U.S. dollars<br />

$ 168,966<br />

112,101<br />

200,369<br />

The Company anticipates gain on sale of aerospace business of approximately ¥1,600 million ($15,139 thousand) on a consolidated<br />

basis and approximately ¥2,000 million ($18,923 thousand) on a non-consolidated basis as a component of other<br />

income for the year ending March 31, 2005.<br />

(2) Disposition of retained-earnings deficit<br />

The following disposition of retained-earnings deficit of the Company, which has not been reflected in the accompanying consolidated<br />

financial statements for the year ended March 31, <strong>2004</strong>, was approved at a general meeting of the Company's shareholders<br />

held on June 18, <strong>2004</strong>:<br />

Undisposed retained-earnings deficit<br />

Reversal of additional paid-in capital<br />

Retained-earnings deficit to be carried forward<br />

Millions of yen<br />

¥ 17,905<br />

17,905<br />

¥ <br />

Thousands of<br />

U.S. dollars<br />

$ 169,411<br />

169,411<br />

$ <br />

56


(3) Establishment of parent company<br />

A general meeting of the Company's shareholders held on June 18, <strong>2004</strong> resolved that the Company will establish a parent<br />

company named "JFE Shoji Holdings Inc." effective August 2, <strong>2004</strong> through a transfer of shares and that the Company will become<br />

its wholly-owned subsidiary.<br />

Purpose<br />

In preparing for the future management integration and reorganization with NKK Trading Inc., the Company has decided to adopt<br />

the legal company form of pure holding company, which is suitable for clarifying the authority and responsibility of management<br />

and for responding rapidly and appropriately to changes in the business environment.<br />

Outline of the Resolution for Share Transfer<br />

An outline of the resolution for the share transfer is as follows:<br />

1 Date of share transfer<br />

August 2, <strong>2004</strong><br />

2 Number of shares of the parent company issued for the stock transfer<br />

Common stock<br />

Preferred stock<br />

235,365,187 shares<br />

60,000,000 shares<br />

3 Share transfer ratio<br />

Common stock<br />

Preferred stock<br />

Shares of the Company<br />

Shares of<br />

the parent company<br />

1 : 1<br />

1 : 1<br />

4 Share capital and additional paid-in capital of the parent company<br />

Share capital: ¥20,000 million ($189,233 thousand)<br />

Additional paid-in capital: The amount of net assets of the Company on the share transfer date reduced by the above amount<br />

of share capital.<br />

57


World Network WORLD NETWORK - 60<br />

MAJOR OVERSEAS GROUP COMPANY - 61<br />

COMPANY DATA - 62


WORLD NETWORK<br />

ASIA<br />

Korea<br />

SEOUL BRANCH<br />

Rm.No.1301, Dong-Hwa Bldg., 58-7<br />

Seosomum- Dong, Jung- ku, Seoul, R. of KOREA<br />

Tel 82-2-753-2713 Fax 82-2-752-2862<br />

KAWASHO INTERNATIONAL KOREA LTD.<br />

Rm.No.1301, Dong- Hwa Bldg., 58 -7<br />

Seosomum- Dong, Jung - ku, Seoul, R. of KOREA<br />

Tel 82-2-755-1040 Fax 82 -2-755 -1042<br />

BUSAN OFFICE<br />

Rm.No.706, Dong Yang Bldg. 2- 4<br />

Dong Kwang- dong, Jung- ku, Busan 600, R.of KOREA<br />

Tel 82-51-246-5048 Fax 82- 51-255 -3265<br />

China<br />

BEIJING REPRESENTATIVE OFFICE<br />

Beijing Fortune Building Room 2119,<br />

No.5 Dong San Huan Beilu,<br />

Chao Yang District, Beijing, 100004 P.R.of CHINA<br />

Tel 86-10 - 6590-8088 Fax 86-10- 6590- 8096<br />

DALIAN REPRESENTATIVE OFFICE<br />

Senmao Bldg.,12F No.147 Zhongshan Road<br />

Xigang District, Dalian, 116012, P. R. of CHINA<br />

Tel 86- 411- 83603006 Fax 86-411- 83603007<br />

DALIAN F.T.Z. KAWASHO CO., LTD.<br />

1209B Room Huineng Building,<br />

Free Trade Zone Dalian, P. R. of CHINA<br />

QINGDAO OFFICE<br />

Rm.610, Holiday Inn Hotel<br />

Xianggang Zhong Road Qingdao, P.R. of CHINA<br />

Tel 86- 532- 5777001 Fax 86-532- 5777002<br />

NINGBO OFFICE<br />

New Garden Hotel Office Building 10F, No.188,<br />

Jiefang South Road, Ningbo, Zhejiang, Sheng, 315000<br />

P. R. of CHINA<br />

Tel 86-574 - 8731-7700 Fax 86-574- 8730 - 0227<br />

SHANGHAI REPRESENTATIVE OFFICE<br />

KAWASHO (SHANGHAI ) CO., LTD.<br />

Rm A,D 25/F Jinling Hai Xin Building,666<br />

Fu Zhou Road Shanghai 200001, P.R. of CHINA<br />

Tel 86-21-6391-7766 Fax 86-21-6391-7898<br />

XIAMEN OFFICE<br />

The Bank Centre No.189, Xiahe Road,<br />

Xiamen, Fujian, P.R. of CHINA Unit 2303<br />

Tel 86 - 592- 2680111 Fax 86-592 - 2680222<br />

KAWASHO INTERNATIONAL ( HONG KONG ) LTD.<br />

15/F,88 Gloucester Road,Wanchai, HONG KONG<br />

Tel 852-2235 -9500 Fax 852-2529- 6834<br />

GUANGZHOU REPRESENTATIVE OFFICE<br />

KAWASHO (GUANGZHOU) CO., LTD.<br />

Room 3401 Metro Plaza, 183 Tian He Beu<br />

Road, Guangzhou, 510075, P. R. of CHINA<br />

Tel 86- 20- 8755 -3558 Fax 86-20- 8755 -3555<br />

Taiwan<br />

TAIPEI BRANCH<br />

Formosa Plastic Bldg., B-8F 201,<br />

Tung Hwa N. Road, Taipei, TAIWAN<br />

Tel 886 - 2- 2712- 9973 Fax 886 -2-2712- 9881<br />

Philippines<br />

MANILA BRANCH<br />

17 th Floor, 6788 Ayala Avenue Oledan Square,<br />

Makati City, Manila, 1229 PHILIPPINES<br />

Tel 63-2- 892-36-91 Fax 63 -2- 817- 26 -66<br />

KAWASHO PHILIPPINES, INC.<br />

17 th Floor, 6788 Ayala Avenue Oledan Square,<br />

Makati City, Manila, 1229 PHILIPPINES<br />

Tel 63 -2- 892- 94 -79 Fax 63 -2- 818 -12 -62<br />

Malaysia<br />

KUALA LUMPUR BRANCH<br />

Suite 24. 07- 09, 24th Floor, Wisma Cyclecarri,<br />

288, Jalan, Raja Laut, 50350,<br />

Kuala Lumpur, MALAYSIA<br />

Tel 60-3 -26910066 Fax 60 -3- 26928002<br />

KAWANDA CORPORATION<br />

Suite 24. 07- 09, 24th Floor, Wisma Cyclecarri,<br />

288, Jalan, Raja Laut, 50350,<br />

Kuala Lumpur, MALAYSIA<br />

Tel 60-3 -26982970 Fax 60 -3 - 26913360<br />

60


Singapore<br />

SINGAPORE BRANCH<br />

3 Shenton Way, #16 -07/ 08, Shenton House<br />

Singapore 068805, R. of SINGAPORE<br />

Tel 65 -6220 -9188 Fax 65 -6225 - 9679<br />

Indonesia<br />

JAKARTA REPRESENTATIVE OFFICE・<br />

P.T.KAWASHO INDONESIA<br />

8th Floor,SUMMITMAS 1,JL Jend.Sudirman Kav.61- 62<br />

Jakarta, 12190 INDONESIA<br />

(JAKARTA REPRESENTATIVE OFFICE)<br />

Tel 62- 21- 252- 2741 Fax 62-21- 252- 2742<br />

(PT. KAWASHO INDONESIA)<br />

Tel 62- 21- 252- 2743<br />

Thailand<br />

KAWASHO CORPORATION (THAILAND), INC.<br />

Ramaland Bldg., 18th Floor, 952 Rama IV Road,<br />

Bangrak, Bangkok, 10500 THAILAND<br />

Tel 66 -2- 632-9200 Fax 66-2-632-9720<br />

KAWASHO FOODS (THAILAND) CO., LTD.<br />

Ramaland Bldg., 18th Floor, 952 Rama IV Road,<br />

Bangrak, Bangkok, 10500 THAILAND<br />

Tel 66-2-632-9740 Fax 66-2-632-9724<br />

Vietnam<br />

HO CHI MINH REPRESENTATIVE OFFICE<br />

Saigon Trade Center, Unit No. 1112<br />

37 Ton Duc Thang St., Dist. 1 Ho Chi Minh City,<br />

VIETNAM<br />

Tel 84- 8 -910 -1002 Fax 84- 8 -910 -1020<br />

India<br />

MUMBAI REPRESENTATIVE OFFICE<br />

Maker Chambers -No.64,220, Nariman Point,<br />

Mumbai400021 INDIA<br />

Tel 91- 22- 5630-6900 Fax 91-22-5630-6950<br />

GOA REPRESENTATIVE OFFICE<br />

6th Floor Shiv Towers, Plot 14, Patto Plaza,<br />

Panaji, Goa 403001, INDIA<br />

Tel 91- 832-243-8061 Fax 91- 832-243-8064<br />

U.A.E<br />

KAWASHO FOODS (GULF) FZE<br />

Office No.LB 16201,Jebel Ali Free Zone,<br />

PO Box 261182,Dubai,U.A.E.<br />

Tel 971-4-887-3361 Fax 971-4-887-3362<br />

Oceania<br />

Australia<br />

KAWASHO INTERNATIONAL (AUSTRALIA)<br />

PTY., LTD.<br />

SYDNEY OFFICE<br />

Suite 501, Level 5, 225 Miller Street,<br />

North Sydney NSW 2060, AUSTRALIA<br />

Tel 61-2-9925- 0090 Fax 61-2- 9925 - 0744<br />

PERTH BRANCH<br />

Level 10,QV.1 Building, 250 St George's<br />

Terrace, Perth, W.A. 6000, AUSTRALIA<br />

Tel 61- 8 -9321-5252 Fax 61-8-9321-9281<br />

BRISBANE OFFICE<br />

Level 24, AMP Place 10 Eagle Street<br />

Brisbane QLD 4000, AUSTRALIA<br />

Tel 61-7-3303 - 8464 Fax 61-7-3303- 8503<br />

Europe<br />

England<br />

KAWASHO CORP. (U.K.) LTD.<br />

Kingsway House, 103 Kingsway, Holborn,<br />

London WC2B 6QX, U.K.<br />

Tel 44-20-7831-2066 Fax 44-20-7831-2067<br />

Germany<br />

KAWASHO INTERNATIONAL (EUROPE) GMBH<br />

Oststrabe.1, 40211 Düsseldolf, GERMANY<br />

Tel 49-211- 360660 Fax 49 -211-1649162<br />

North America<br />

U.S.A.<br />

KAWASHO INTERNATIONAL ( U.S.A.) INC.<br />

NEW YORK OFFICE<br />

45 Broadway, 18th Floor,<br />

NEW YORK, NY 10006, U.S.A.<br />

Tel 1- 212- 841-7400 Fax 1- 212- 841-7465<br />

HOUSTON BRANCH<br />

10333 Richmond, Suite 810, Houston,<br />

TX 77042, U.S.A.<br />

Tel 1-713 - 952-2591 Fax 1-713 - 952-2595<br />

LOS ANGELES BRANCH<br />

One World Trade Center Suite<br />

450 Long Beach, CA 90831 U.S.A.<br />

Tel 1-562-637-3500 Fax1-562-637-3501<br />

South America<br />

Brazil<br />

KAWASHO INTERNACIONAL COMERCIO DO<br />

BRASIL LTDA.<br />

RIO DE JANEIRO OFFICE<br />

c/o J FE Steel Comercio e Siderurgia<br />

Ltda. Praia de Botafogo 228/ No. 509-Sector" B"<br />

Botafogo, Rio de Janeiro CEP 22.359 -900,<br />

RJ BRASIL<br />

Tel 55-21-2554 -5655 Fax 55-21- 2552- 8143<br />

VITORIA BRANCH<br />

Rua Major Clarindo Fundao No.156,<br />

Bairro Praia de Canto, Vitoria, E.S. BRASIL<br />

Tel 55-27-3227-2142 Fax 55-27-3227- 5238<br />

SÃO PAULO BRANCH<br />

AvPaulista, 509 Conj301 Bela Vista<br />

Sao Paulo, SP BRASIL CEP01311- 910<br />

Tel 55-11-3284 -7855Fax 55-11-3266-8611<br />

61


MAJOR OVERSEAS GROUP COMPANIES<br />

Steel<br />

DONGGUAN KAWASHO KAWADENJI<br />

STEEL PRODUCTS CO., LTD.<br />

Wusha District, Changan Town, Dongguan,<br />

Guangdong Province, P. R. of CHINA<br />

Tel 86 -769-554-3072 Fax 86-769-554-3071<br />

Steel processing<br />

MERIDIAN CAPITAL LIMITED<br />

RM. A, 15/F,88 Gloucester Road,WANCHAI,<br />

HONG KONG<br />

Tel 852-2369-9057 Fax 852-2369 -8175<br />

Steel sales<br />

ZHEJIANG KAWADEN<br />

STEEL PRODUCTS CO., LTD.<br />

No.339, No.1 Xingping Road Economic<br />

Development Zone Pinghu City, P. R. of CHINA<br />

Tel 86-573- 5095111 Fax 86- 573- 5095388<br />

Steel processing and sales<br />

QINGDAO SAMKYUNG KAWASHO<br />

PRECISION STEEL PRODUCTS CO., LTD.<br />

Qianjin-Cun Xifu-Zhen Chengyang, Qingdao,<br />

P. R. of CHINA<br />

Tel 86-532-7881294 Fax 86-532-7881295<br />

Steel processing<br />

JIANGSU KAWADEN<br />

STEEL PRODUCTS CO., LTD.<br />

Jiangyin City, Jiangsu Province,<br />

P. R. of CHINA<br />

(The operation schedule until the end of <strong>2004</strong>.)<br />

Steel processing and sales<br />

KUO GEE INDUSTRIAL CO., LTD.<br />

39, Feng Ping 2nd. Road, Ta Liau Shiang,<br />

Kaohsiung Hsien, TAIWAN R.O.C.<br />

TEL 886-7-702-3621 FAX 886-7-701-1881<br />

Steel processing and sales<br />

KAWASHO STEEL PHlLlPPlNES, lNC.<br />

107 Trade Avenue Laguna Technopark<br />

Barangay Loma Binan, Laguna, PHlLlPPlNES<br />

Tel 63-49-541- 2410 Fax 63-49-541-2411<br />

Steel processing<br />

KOHWA PHILIPPINES,INC.<br />

#6 Mountain Drive<br />

Light Industry and Science Park <br />

Special Export Processing Zone,<br />

Brgy. La Mesa, Calamba, Laguna 4027, PHILIPPINES<br />

Tel 63- 49-545- 6211 Fax 63-49- 545-6216<br />

Metal press processing and sales<br />

KAWASHO STEEL PROCESSlNG CENTRE SDN.BHD.<br />

PT5021Jalan 27/90 Section 27, Hicom<br />

lndustrial Area, 40400 Shah Alam, Selangor<br />

Darul Ehsan, MALAYSlA<br />

Tel 60-3-5191-1125 Fax 60-3-5191-1035<br />

Steel processing<br />

KURODA PRECISION INDUSTRIES<br />

MALAYSIA<br />

Lot 31, Jalan Pendamar27/90, Section27,<br />

Hicom Industrial Area, 40000 Shah Alam.<br />

Selangor Darul Ehsar, MALAYSIA<br />

TEL 60-3-5192-5001 FAX 60-3-5192-4961<br />

Manufacturing of high-precision metal dies<br />

KAWARlN ENTERPRlSE PTE. LTD.<br />

144, Gul Circle, Jurong, SlNGAPORE 629603,<br />

R. of SlNGAPORE<br />

Tel 65-6861-5508 Fax 65-6861-3141<br />

Steel processing<br />

P.T.KAWASHO STEEL PROCESSlNG<br />

CENTER lNDONESlA<br />

Block B - 4- 2 MM2100 Industrial Town,<br />

Cibitung, Bekasi 17520 JAWA BARAT, lNDONESlA<br />

Tel 62-21-8980903 Fax 62-21- 8980904<br />

Steel processing<br />

CENTRAL METALS (THAILAND) LTD.<br />

639 Moo 4 Soi 5 Bangpoo Industrial Estate,<br />

Sukhumvit Road, Tambon Preaksa, Amphur<br />

Muang, Samutprakarn 10280, THAILAND<br />

Tel 66-2-324- 0721 Fax 66-2-324-0298<br />

Steel processing<br />

VEST INC.<br />

6023 Alcoa Ave., Los Angeles CA. 90058 U.S.A.<br />

Tel 1-323-581- 8823 Fax 1-323- 581-3465<br />

Welded steel pipe manufacturing<br />

KAWASHO STEEL ( U.S.A.) INC.<br />

One World Trade Center Suite 450<br />

Long Beach CA 90831 U.S.A.<br />

Tel 1-562- 637-3500 Fax 1-562-637-3501<br />

Steel sales<br />

KAWASHO STEEL de MEXICO, S.A.de C.V.<br />

Paseo Cucapah # 10515, Fracc.EI Lago<br />

Tijuana, B.C. MEXICO<br />

Tel 52-664-627-9091 Fax 52- 664 -627--9045<br />

Steel processing<br />

Raw materials, Fuels & Chemicals<br />

K&K MOLDING, INC.<br />

LIMA Technolongy Center, Lipa City, Batangas, PHlLlPPlNES<br />

Tel 63- 43-981-1000 Fax 63- 43- 981- 0914<br />

Engineering plastic molding and processing<br />

YOKOHAMA TIRE PHILIPPINES, INC.<br />

IE5, Csez, Clarkfield, Pampanga, PHILIPPINES<br />

Tel 63-45-599 -3603 Fax 63- 45-599-3613<br />

Yokohama brand passenger car tire manufacturing<br />

K-Net ASIA Ltd.<br />

Suite 1402, 14th Floor<br />

Chinachem Exchange Square,1 Hoi Wan Street,<br />

Quarry Bay, HONG KONG<br />

Tel 852-2811-1399 Fax 852-2811-1301<br />

Plastic Compound Sales<br />

Foods, General Products<br />

YINGKOU BORI FOODSTUFFS CO., LTD.<br />

Boluopu Town, Dashiqiao City, Liaoning, P. R. of CHINA<br />

Tel 86 - 417- 5877274 Fax 86- 417- 5877247<br />

Canned fruit and vegetable production<br />

MARUSHIN CANNERIES(M)SDN.BHD.<br />

Plo 213 Jalan Timah Satu, Kawasan Perindustrian,<br />

81700, Pasir Gudang, Johor Darul Takzim, MALAYSlA<br />

Tel 60-7- 251- 4802 Fax 60-7 - 251-3307<br />

Food manufacturing and sales<br />

FOOD AND DRINKS PUBLIC CO., LTD.<br />

22 Sukhumvit 35, Wattana,<br />

Bangkok 10110, THAILAND<br />

Tel 66-2- 260 - 9123 Fax 66-2- 260 -9131<br />

Food manufacturing and sales<br />

AMERICAN SOY PRODUCTS, INC.<br />

1474, North Woodland Drive, Saline, Michigan<br />

48176, U.S.A.<br />

Tel 1-734 - 429 -2310 Fax 1-734- 429-2112<br />

Food manufacturing and sales<br />

Machinery, Electronics<br />

NEW BANGPOO MANUFACTURING CO., LTD.<br />

635 Bangpoo Industrial Estate, Soi 6,<br />

Sukhumvit Road., Tambon Preaksa, Muang<br />

District, Samutprakarm 10280, THAILAND<br />

Tel 66-2- 324- 0062 Fax 66-2-324-0278<br />

Steel structure manufacturing<br />

KAWASHO ENGINEERING SERVICES SDN.BHD.<br />

No.2C-1, Jalan SS 6/6, Kelana Jaya 47301<br />

Petaling Jaya, Elangor Darul Ehsan MALAYSIA<br />

Tel 60-3-7880-4498 Fax 60-3-7803-4478<br />

Mounting machinery maintenance and parts sales<br />

KAWASHO ENGINEERING SERVICES<br />

(THAILAND) LTD.<br />

9th Glas Haus Ratchada Building<br />

(Krisda Plaza Building), 207/23 Ratchadapisek Road,<br />

Dindaeng Sub-District, BANGKOK 10400 THAILAND<br />

Tel 66-2-693-5722 Fax 66-2-693-5723<br />

Mounting machinery maintenance and parts sales<br />

KAWASHO ELECTRONICS SYSTEMS<br />

SHANGHAI CORPORATION<br />

13th floor Suntime Internaional Mansion,450<br />

Fushan Road Pudong, Shanghai, CHINA<br />

TEL 86-21- 68765765 FAX 86-21-68757042<br />

Mounting machinery and parts sales<br />

Construction and Other<br />

COLOMBO POWER (PRIVATE) LTD.<br />

103/8 Galle Road, Colombo 3, SRI LANKA<br />

TEL 94-74-721666 FAX 94-74 -721424<br />

Independent power vending business<br />

62


COMPANY DATA<br />

Name<br />

KAWASHO CORPORATION<br />

Established January 5, 1954<br />

Head Offices<br />

Tokyo<br />

2-7-1, Otemachi, Chiyoda-ku, Tokyo 100-8070<br />

Tel: 81-3-5203-5055 Fax: 81-3-5203-5290<br />

Osaka<br />

1-6-20, Dojima, Kita-ku, Osaka 530-8318<br />

Tel: 81-6- 4795-7011 Fax: 81-6-4795-7400<br />

Website<br />

http://www.kawasho.co.jp<br />

Capital<br />

33,039,919,350 yen<br />

Employees 1,277<br />

Branches & Offices*<br />

20 domestic, 38 overseas in 16 countries<br />

Shares<br />

Total issued shares Common Shares : 235,365,187<br />

Class-A Preferred Shares : 60,000,000<br />

Shareholders Common Shares : 10,918<br />

Class-A Preferred Shares : 1<br />

Principal shareholders<br />

: JFE Steel Corporation<br />

Kawasaki Heavy Industries, Ltd.<br />

Kawasaki Kisen Kaisha, Ltd.<br />

Mizuho Corporate Bank, Ltd.<br />

Tokyo Leasing Co, Ltd.<br />

Kawatetsu Life Corporation<br />

Bank References<br />

Mizuho Corporate Bank, Ltd.<br />

Sumitomo Mitsui Banking Corporation<br />

The Bank of Tokyo-Mitsubishi, Ltd.<br />

( As of March 31,<strong>2004</strong>,except * as of August 1,<strong>2004</strong> ) 63

Hooray! Your file is uploaded and ready to be published.

Saved successfully!

Ooh no, something went wrong!