Annual Report 2004 [PDF/1.1MB]
Annual Report 2004 [PDF/1.1MB]
Annual Report 2004 [PDF/1.1MB]
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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