Annual Report 2002 [PDF/1.6MB]

COMPANY PROFILEOriginally founded in 1954, Kawasho Corporation has since expanded withiron and steel products at the center of its business.Today, its trading operations span not only steel, but also a diverse range of sectorssuch as energy, machinery, shipping, raw materials, timber, foods and electronics.With the increasing spread of global standards, the world of business isundergoing major transformation. To succeed in the 21st century,Kawasho recognizes that it cannot simply rely on past methods and experience.Instead, it is responding by showing the flexibility required to confront suchchanges and seize new opportunities for growth. Through the creation ofbusiness functionalities and values befitting the new century,the Kawasho Group is united in taking further strides forward so that it can makea valid contribution to the betterment of society.CONTENTSFINANCIAL HIGHLIGHTS 3PRESIDENT'S MESSAGE 4REVIEWS OF OPERATIONS 9BOARD OF DIRECTORS 26ORGANIZATION CHART 26FINANCIAL SECTION 29WORLD NETWORK 52MAJOR OVERSEAS GROUP COMPANIES 54COMPANY DATA 55

FINANCIAL HIGHLIGHTSKawasho Corporation and Consolidated SubsidiariesFor the years ended March 31, 2002, 2001 and 2000For the years ended March 31 :Millions of Yen2002 2001 2000Thousands ofU.S. Dollars( Note 1 )2002Net sales¥ 1,125,930¥ 1,280,937¥ 1,279,162$ 8,449,756Gross profit60,65076,14872,839455,159Operating income9,0548,9787,53067,947Net loss11,87115,1602,35389,089As of March 31 :Total assets¥ 590,710¥ 727,143¥ 874,635$ 4,433,096Total shareholders' equity10,05911,64634,59675,489YenU.S. Dollars( Note 1 )Amounts per share:Net loss¥ 88.37¥ 115.63¥ 17.94$ 0.66See the accompanying Notes to Consolidated Financial Statements.1,500,000Net sales( Millions of Yen )1,279,162 1,280,93780,000Gross profit( Millions of Yen )72,83976,14810,000Operating income( Millions of Yen )8,9789,05415,000Net loss( Millions of Yen )15,1601,125,93060,00060,6508,0007,53011,8711,000,0006,00010,00040,0004,000500,00020,0002,0005,0002,353002000 2001 2002 2000 2001 2002002000 2001 2002 2000 2001 20021,000,000Total assets( Millions of Yen )874,63540,000Total shareholders' equity( Millions of Yen )34,596800,000727,14330,000600,000590,71020,000400,000200,00010,00011,64610,059002000 2001 2002 2000 2001 20023

BUSINESS ENVIRONMENTDuring the year ended March 2002, following aprolonged period of solid expansion, real annualeconomic growth in the United States slumped to the1% level as the effects of a sharp downturn inIT-related demand and falling share prices werecompounded by the terrorist attacks that occurred inSeptember 2001. The knock-on effects of the U.S.slowdown were particularly severe in newlyindustrialized and ASEAN economies such as Taiwanand Malaysia, which are highly reliant on exports toAmerica. Economic conditions across many parts ofAsia entered a downward trend as levels of exportsand production fell. China bucked this trend - althoughexpansion tapered off slightly, the country maintaineda high rate of economic growth (around 7%) as aresult of stimuli that included WTO entry and asignificant rise in public spending.Japan failed to shake off the malaise that has strickenits economy over the past decade. Due to theslowdown in the U.S. and other factors, economicactivity fell further, impacting levels of exports,investment and industrial production. A governmentledstructural reform program and progress in theresolution of bad debts within the corporate sectorcontributed to higher numbers of bankruptcies andrising unemployment. As the grip of deflationaryforces tightened, Japan remained mired in recession.In the steel industry, which represents the majorportion of Kawasho's business, growth in domesticsteel demand declined within the construction andmanufacturing industries as a result of lower capitalinvestment and a decline in public-works spending.Buoyant growth in exports to Asia helped to offsetthese trends. Annual Japanese crude steel outputsurpassed the trillion-ton mark for the secondconsecutive year. Although there were signs of arevival in prices in certain construction materialrelatedsegments as steel makers cut backproduction, downward pressure on prices persistedoverall.RESULTSThe effects of the harsh business environment had anegative impact on our consolidated net sales, whichfell 12.1% to ¥1,125.9 billion. By operating segment,although exports performed well, poor domesticmarket conditions and a drop in sales volumescontributed to lower sales of steel products.There was also an additional effect from consolidatedsubsidiary Kawasho Gecoss Corporation becoming anequity-method affiliate. Overall, net sales at our steelbusinesses decreased by 14.5%, to ¥687.7 billion.Sales of raw materials, chemicals and fuels declinedslightly amid lower revenues from steel raw materialsand fuels, dropping 2.1% to ¥172.1 billion. Due toreduced sales of lumber and pulp chips, together withthe adverse effects on food sales of a Japanese

PRESIDENT'S MESSAGEoutbreak of BSE (bovine spongiform encephalitis),sales of foodstuffs and general products fell 8.8% to¥108.6 billion. Within our machinery, aerospace andelectronics business, lower demand for industrialmachinery and electronic devices contributed to anoverall decline in sales in this segment of 15.2% to¥110.6 billion. Due to lower spending on public-worksprojects, which resulted in lower sales of Terre Arméeproducts and reduced civil engineering revenues,sales in the construction and other sector slipped7.7% to ¥46.6 billion.Due to the fall in sales, gross profit decreased by¥15.5 billion, to ¥60.6 billion. Our efforts to reduceselling, general and administrative expenses bore fruit,however, and operating income rose by ¥77 million, to¥9.0 billion. Recurring income increased by ¥1.8 billion,to ¥6.4 billion.Extraordinary losses totaled ¥51.9 billion. This amountincluded charges for revaluation losses on productsand on land holdings, a loss on the disposal of sharesin affiliated companies, and a revaluation loss relatedto property and equipment. These losses were offsetto a significant extent by our receipt of ¥34.8 billionfrom Kawasaki Steel Corporation, to support ourrestructuring efforts. We recorded a net after-tax lossof ¥11.8 billion for the year.Partly due to the generous financial support ofKawasaki Steel Corporation, net cash provided byoperating activities amounted to ¥57.4 billion. As theresult of the sale of investment securities, net cashprovided by investing activities totaled ¥13.3 billion. Areduction in interest-bearing debt and other factorsincreased net cash used in financing activities, whichamounted to ¥59.5 billion. Cash and cash equivalentsat the end of the year increased to ¥43.7 billion.BUSINESS POLICY & MID-TERM STRATEGYIn the fiscal year ended March 2001, we introducednew accounting standards that committed us toaccount for off-balance-sheet losses of affiliates enbloc. In April 2001, we also embarked on a new threeyearbusiness plan, dubbed the "Second Step Plan."This focused on implementing structural reforms toboth our earnings and financial base. As a result ofthese efforts, in the year ended March 2002, despitea harsh business environment, we achieved anincrease in consolidated recurring income, which rose¥1.8 billion to ¥6.4 billion. These results reflected agradual strengthening of profitability within our coreoperations, notably steel.In April 2001, our leading shareholder, Kawasaki SteelCorporation, entered into an agreement to merge itsoperations with those of NKK Corporation. FromSeptember 2002, these two leading steelmanufacturers will merge to form the new JFE Group.Based on our sales expertise and highly competitive6

position as a leading steel trader, we will become thecore trading firm in the JFE Group, the principal salesagent for the products of the new company. Thismove will enhance our market position considerably,and we look forward to making our contribution to thedevelopment of the group.Prior to the inception of the JFE Group, our main taskhas been to fortify our financial position so that wehave a more solid business base from which to buildfollowing the merger. We have accelerated thedisposal of assets such as our real estate businessthat threaten to depress earnings from our healthybusinesses in the current straitened commercialenvironment. Our main aim has been to achievesignificant overall reductions in interest-bearingliabilities.Kawasaki Heavy Industries, Ltd., Kawasaki KisenKaisha, Ltd., and The Dai-Ichi Kangyo Bank, Ltd.*We will continue to work to boost our competitivenessat Kawasho. We have set fresh business performancetargets that represent a commitment to step up andaccelerate the Second Step Plan. Based on thesehigher goals, we will continue to strive to boostearnings and engineer further improvements in ourfinancial position. By achieving the New PerformanceTargets indicated on page 8, the Kawasho Group willbecome a much greater force, boasting a strongfinancial base and superior earnings power based onhigh-level trading capabilities within its steel business.In line with these moves, we evaluated assets atrealistic levels based on the premise of an early sale.We decided to write off any valuation and futurelosses against these businesses as a single chargefor the fiscal year ended March 2002. Extraordinarylosses amounted to ¥51.9 billion, and were offset bya total of ¥34.5 billion by the donation from KawasakiSteel Corporation.Separately, we decided to issue new equity totaling¥10 billion via a third-party allotment to boost ourequity capital. The principal subscribers to this issuewere, among others, Kawasaki Steel Corporation,*The Dai-ichi Kangyo Bank, Ltd., The Industrial Bank of Japan, Ltd. andThe Fuji Bank, Ltd. implemented a corporate split and merged to becomeMizuho Bank, Ltd. and Mizuho Corporate Bank, Ltd. as of April 1, 2002.7

Fundamental Business Policies1. Enhanced business selectivity /acceleration of asset disposals(1) Steel businessThis remains Kawasho's core area of operations. Our aim is tolead the industry in terms of sales competitiveness as theleading sales agent for the products of the JFE Group.1. Amid significant change within the steel distribution industry,we are leveraging our superior expertise in customer servicesand sales to boost our competitiveness and adopt anincreasingly localized sales response to user requirements.2. We are working to strengthen our domestic and overseasaffiliates to boost our capabilities in terms of sales, localproduct processing and distribution; with this aim in mind,we are reviewing the intra-group distribution of roles in orderto reorganize and consolidate these operations.consolidated liabilities by ¥74.6 billion, to ¥307.8 billion.Since our original target was to achieve a figure of ¥320billion by the end of March 2004, this represented aconsiderable acceleration of the debt-reduction program.We have set a new target figure for outstanding consolidatedinterest-bearing debt of ¥200 billion at the end of March2005. The increased pace of the debt-reduction program willderive principally from a greater drive on the asset-disposalfront, notably with our real estate business, together with agreater focus on enhancing business selectivity andaccelerating disposals.3. Boosted earnings power through cost reductionsWithin a business environment in which sales growth isdifficult to achieve, our focus has switched towardstrengthening cost-reduction efforts in a bid to boostearnings flow and thus help to raise shareholders' equity.(2) Non-steel businessesWe are reviewing these areas in terms of sales potential andrelative competitiveness with a view to promoting enhancedbusiness selectivity. We intend to complete this aspect of ourbusiness restructuring by the end of March 2003.1. We are strengthening the capabilities of our raw materialsbusiness to better support steel trading operations, with anaim to expand JFE Group trading operations.2. In our foods, commodities, machinery, aerospace andelectronics businesses, we are promoting the re-evaluationof individual sectors in terms of their profitability and returnon assets; as well as boosting efficiency and streamliningthese businesses to improve cost-competitiveness, we areconstructing an optimized divisional structure that alsoaccommodates Kawasho Group subsidiaries and affiliates.New Performance Targets( for year ending March 2005)400300Recurring income(consolidated) ¥10.0 billion(parent) ¥6.5 billionInterest-bearing debt(consolidated) ¥200 billion(parent) ¥130 billionbillion yen¥382.4 billionINTEREST-BEARING DEBT (CONSOLIDATED)¥307.8 billionORIGINAL TARGET¥320 billionNEW TARGET2. Significant short-term improvements in RoA and RoEAchieving reductions in our consolidated interest-bearing debtburden is the major goal of the Second Step Plan. In the year2000March 2001 March 2002 March 2004¥200 billionMarch 2005ended March 2002, we succeeded in reducing total8

REVIEWS OF OPERATIONSDOMESTIC STEEL BUSINESS 10OVERSEAS STEEL BUISINESS 12TERRE ARMÉE CIVIL ENGINEERING BUSINESS 14RAW MATERIALS, FUELS & CHEMICALS BUSINESS 16FOODS BUSINESS 18MACHINERY BUSINESS 20ELECTRONICS BUSINESS 22AEROSPACE BUSINESS 24

Domestic Steel BusinessSteel is Building Our Dreams For The 21st CenturySteel -- Giving Form To IdeasFor A New CenturySteel can take on a variety of forms, answering theneeds of the times and supporting our everydaylives. Japan's economic revival after World War IIand subsequent rise to advanced nation statuswould not have been possible without asophisticated steel industry. Kawasho Corporationwas established in 1954 as a trading company forKawasaki Steel Corporation, a blast furnace productmanufacturer and exemplary Japanese steel-maker.Since then, Kawasho has sold steel productsmanufactured by Kawasaki Steel Corporation toheavy industry concerns including ship builders, aswell as to the automobile, electrical and otherindustries. Over the years we have also seriouslyexpanded our sales area to other countries whilegrowing as a major professional in the steel business.More than fifty percent of Kawasho's business iswith thick steel plate for ships and bridges, steelsheet for automobiles and home electricalappliances as well as galvanized sheet used toconstruct walls and roofs. In addition, we deal inspecial steel for automobile parts and industrialmachinery, stainless steel, H-steel and steel rods forconstruction and civil engineering, and a wide rangeof steel pipes.Stainless steel sheets manufactured by the Kawasaki Steel Corporationused as roofing material at Kansai International AirportElectrical steel sheet used in generatorsFlexible System of Operations andExtensive NetworkAt one time, Japan used to produce 120 million tonsof steel annually. Now, steel production in thecountry is down to about 100 million tons per year.As a result, companies in the steel industry,particularly blast furnace and electric furnaceoperations, are being forced to integrateenterprises according to product type in an attemptto restructure their businesses. Automakers andconsumer electronics manufacturers are alsobecoming increasingly selective, while tradingcompanies are reassessing and revising theirtraditional roles in light of the current business climate.Kawasho, whose core business is steel, isaddressing the circumstances with flexibility, movingahead through diversification into a wide range ofnew businesses and services. We are developingoperations in each region with time-proven regardfor what is practical from the customer'sstandpoint. Our system of operationscovers eight sectors of the country, namelyHokkaido, Tohoku, Tokyo, Niigata, Shizuoka,Nagoya, Osaka and Kyushu, and comprisesa total of over 200 companies intricatelylinked in the " Kawasho-Kai" network.Large container shipLarge oil-pressureshovel type excavatorSystem kitchenBridge over the Akashi Straight10

Domestic SteelOverseas SteelTerre Armée Civil EngineeringRaw Materials, Fuels & ChemicalsFoodsMachineryElectronicsAerospaceUpstream & DownstreamDevelopment Of Regional BusinessFlexible steel pipes manufactured byKawasaki Steel CorporationSteel industry professional, Kawasho Corporation,exhibits its maximum competence in an operationssystem that provides localized steel processingcenters and diverse customer services.From its inception, Kawasho has sold steel productsin Japan for Kawasaki Steel Corporation. Our steelprocessing centers also deal in various made-toordersteel products. The centers handle three mainproduct categories: thick steel plate, steel sheetand construction/civil engineering materials. Weshall continue to function to the full as a tradingcompany, maintaining and expanding processingcenters as sales bases with physical distribution andwarehousing capabilities that assure timelyresponse to a variety of customer requirements.Slitter line (steel processing center in Shizuoka Prefecture)Automobile bearingsEDI (Electronic Data Interchange)System Enabling Just-In-Time DeliveryWe set up an EDI (Electronic Data Interchange)system that links Kawasaki Steel Corporation withnationwide steel processing centers and servicecenters. This 24-hour information systemincorporates information ranging from transactionsto order receiving, inventory conditions, shippingconditions and distribution procedures, assuringjust-in-time delivery to customers.Drawing on this information network enables us tomake rapid searches of product standards,dimensions and other details, in a system thatperfectly matches customer requirements.Slitter line (steel processing center in Gunma Prefecture)Steel stock center in Chiba PrefectureDynamic, Highly Specialized Sales StaffEscalator in the west terminalbuilding at Tokyo International Airport (Haneda)Thanks to a dynamic, specialized sales staff,Kawasho has gained enormous trust and respectfrom customers, giving us a competitive edge insuch a severe business environment.In line with the same business strategy as KawasakiSteel Corporation, our sales people are workingaround the clock to promote closer communicationwith customers in areas ranging from automobilesand electrical equipment to ship building. Everyeffort is also being made to provide customers withinformation on building materials, while bettermeeting customer needs through activities such assmall lot sales and sales in stores.Steel stock center in Kumamoto PrefectureWashing machine usingstainless steel manufactured byKawasaki Steel CorporationHighly efficient New NTconstruction methodBlanking line (steel processing centerin Okayama Prefecture)11

Overseas Steel BusinessAn Expanding Steel Business From Asia To WorldwideParticipating In A Range Of ProjectsKawasho's overseas steel business interests arechiefly in importing raw materials for steel production,exporting steel and processed steel products andparticipating in overseas business projects.We import iron ore, coal and other raw materials forsteel making and export Kawasaki SteelCorporation's products: these include flat rolledsteel sheet (hot-rolled steel sheet, cold-rolled steelsheet and galvanized steel sheet ), electrical steelsheet, tin mill products for cans, steel plate forshipbuilding, stainless steel sheet, steel pipes, semifinishedproducts, as well as materials forconstruction and civil engineering. In addition, weare actively involved in various projects in Asiancountries, and entering into alliances with local firmsto aggressively improve local economic conditionsand future prospects.[ Korea ]In 1999, as part of its overseas strategy, KawasakiSteel Corporation invested in Dongkok Steel MillCo., Ltd., of Korea, and then in 2001 invested inHyundai HYSCO, which is part of the Hyundai MotorCompany Group. In line with these efforts, byoffering cooperation in areas such as distribution,Kawasho has strengthened its relationship with bothcompanies while at the same time contributing totheir sales.BangkokKuala LumpurSingaporeJakartangdaoKaohsiungManilaSOUTHEAST ASIAKawasho's overseas steelprocessing centersNORTHAMERICATijuanaMexico[ Malaysia ]In Malaysia we invested in Perusahaan Sadur TimahMalaysia (Perstima) Bhd., the country's only tin platemanufacturer, which we provide with a stable supplyof raw materials for manufacturing tin plate used forfood cans. We joined forces with Kuroda PrecisionIndustries Ltd., to establish Kuroda PrecisionIndustries (M) Sdn. Bhd., a company thatmanufactures high-precision metal dies used forcompact motors in VCRs, air conditioners and otherequipment.Tubarao steel works (CST)[ Thailand ]Together with Kawasaki Steel Corporation and others,we jointly invested in Thai Tin Plate ManufacturingCo., Ltd., promoting favorable relations in thatcountry through the manufacture and sale of tin plate.[ Philippines ]In August 2000, we established Kawasho TubePhilippines, Inc., a steel tube manufacturing andsales company. The company is concentrating itsefforts on the sale of steel furniture and smalldiametertubes for bicycles.Heat exchanger pipes exported by K & I Tubular CorporationKuala Lumpur City Center, Malaysia12

Domestic SteelOverseas SteelTerre Armée Civil EngineeringRaw Materials, Fuels & ChemicalsFoodsMachineryElectronicsAerospaceAdditional business ventures include an alliance withthe trading company Itochu Corporation in March2000. Together, we formed K & I TubularCorporation with the aim of promoting export salesof special steel pipes.Overseas Steel Processing CentersLinked By A NetworkAs in Japan, steel processing centers are amainstay of our overseas operations. Our overseassteel processing center business began in 1975with the establishment of Kawarin Enterprise Pte.Ltd., in Singapore. Thereafter, we went on toestablish nine companies in seven Asian nations.The addition of Kawasho Steel de Mexico, S.A. deC.V., in 1999 brings the total to ten companies ineight countries.The main purpose of the steel processing centers isto supply Japanese electrical and automobilecompanies overseas with processed steel such aselectrical steel sheet, flat rolled steel sheet,stainless steel and other essentials.In keeping with Kawasaki Steel Corporation'soverseas business strategies, we intend to link steelprocessing centers in the above countries via anetwork, promote sharing of steel inventoryinformation and further boost efficiency of businessdevelopment as we work towards building a salesorganization that satisfies the require-ments of anexpanding customer base.Zhejiang Kawaden Steel Products Co., Ltd.( Pinghu City Zhejiang Province, China)Dongguan Kawasho & Kawadenji Steel Products Co., Ltd.(Guangdong Province, China)Qingdao Samkyung Kawasho Precision Steel Products Co.,Ltd.(Shandong Province, China)Central Metals (Thailand) Ltd.Kawasho Steel Processing Centre Sdn. Bhd. (Malaysia)Kawarin Enterprise Pte. Ltd. (Singapore)Major Products HandledShipbuilding steel, thick steel plate, processed steelfor ships and bridges, hot-rolled steel sheet, coldrolledsteel sheet, electrical steel sheet, coated steelsheet, steel plate, stainless steel, special steel,galvanized sheet, tin plate, steel pipes, special steelpipes, treated steel pipes, iron powder, hot charge,steel piles, wire, H-beam, lightweight shaped steelplate, regular shaped steel plate, reinforced products,columns, semi-finished steel products (slabs etc.),civil engineering products, construction materials,housing materials, other products, civil engineering,constructionKuo Gee Industrial Co., Ltd. (Kaohsiung, Taiwan)P.T. Kawasho Steel Processing Center IndonesiaKawasho Steel Philippines, Inc.Kawasho Steel de Mexico, S.A. de C.V.13

Terre Armée Civil Engineering BusinessThe Terre Armée Civil Engineering Method, Praised WorldwideResults That Are Proof Of ExcellenceThe Terre Armée civil engineering method usesribbed steel strips embedded in layers to grip soilstrongly enough to enable the construction of high,vertical banking. In 1974, we acquired a patentlicense for sale of the method in Japan from theFrench company, Terre Armée International Inc. InFrench, the word terre means earth or soil, andArmée means reinforce.Up to now, the Terre Armée civil engineering methodhas been successfully employed at over 13,000locations in Japan, providing over 4.2 million squaremeters of banking. In a small country like Japan, themethod is highly regarded for the contribution itmakes to the efficient use of land and the improvedsafety it offers. The method is now used in over25,000 locations providing a total of over 16 millionsquare meters of banking in 36 countriesworldwide.Kawasho also offers Terravert, a Terre Arméemethod using concrete panels together with meshpanels for vegetation to provide a naturalappearance, and the Techspan method for creatingroad and waterway culverts. Customers includegovernment and public offices involved in public works.Terre Armée methodOutstanding Cost PerformanceThe Terre Armée method enables construction of awide range of roads and assures high-quality resultsat an exceptionally low cost. The construction ofhigh vertical banking isn't the only advantage of themethod. Because it uses prefabricated materials ofuniform quality, it minimizes such processes asframe assembly, reinforcement and concreting whileeliminating the need for special technology andheavy machinery to dramatically cut constructiontime. And since the method uses a thin, lightweightconcrete skin with high-strength steel strips, it alsodramatically reduces costs. The Techspan methodis a 3-hinge arched culvert construction methodusing prefabricated concrete arches. As thesearches are quick and easy to erect, traffic isobstructed for a much shorter time duringconstruction.Terre Armée method used to create a bridgeTerre Armée design wallAn Environment-FriendlyCivil Engineering MethodAnother valuable feature of the Terre Armée methodis that its flexibility enables the creation of wall andbanking designs that blend with the surroundingnatural environment.Diagram of Terre Arméemethod construction

Domestic SteelOverseas SteelTerre Armée Civil EngineeringRaw Materials, Fuels & ChemicalsFoodsMachineryElectronicsAerospaceTerravert provides reinforcement for slopingbanking. It also features welded metal mesh andmatting on the surface of the wall that enablesgreenery to take root for a natural appearance.Besides being extremely economical, this method issimple and does not require any heavy machinery,making it ideal for construction of temporarybanking, as well as construction in locations oflimited space where only manual work is possible.High Resistance To EarthquakesTerre Armée method walls and banking withstoodthe Hanshin Awaji Earthquake in January 1995. Eventhough the level of seismic intensity was around 6,the structures suffered just a few small cracks,ample proof of their resistance to earthquakes.Because we are the actual maker, we handleeverything from R&D, design and productionmanagement to sales and maintenance.Orders are received via the Kawasho T.A. SalesAgents Group comprising 112 makers nationwide.The Group company Kawasho Teratech Inc., handlesdesign and construction management in westernJapan, while working on improving engineeringtechnology.In March 1998, our business possibilities wereexpanded when the Terre Armée method gainedauthorization from the Ministry of Construction inJapan for use in the construction of sites forhousing. This is expected to increase the use of themethod throughout Japan.The Nihon Daira Athletic Park, Shizuoka PrefectureTechspan method (The bamboo cut type)Terravert (directly after construction)Techspan methodExample of the Techspan methodTerravert (a few months after construction)Major Products HandledTerre Armée method,Techspan method,Terravert (Terre Armée method with vegetation)

Raw Materials, Fuels & Chemicals BusinessBoosting CompetitivenessToso Assure StableSupplyOf ResourcesPromoting Resource DevelopmentProjectsAround the world, resources are being developedto stabilize supply.In 1998, we began participating in the Coppabellacoal mine development project in QueenslandState, Australia, acquired rights and interest, andbegan exporting coal to Japan. As a further steptowards strengthening competitiveness by assuringstable supply of resources, we are also developinga high quality iron ore mine in Goa, India.( Clockwise, from the top)FerromanganeseFerrosiliconFerrovanadiumScrap ironReduced ironSilicon manganeseWe currently import, sell and handle local tradingfor a huge range of products, most of which arefor Kawasaki Steel Corporation. Major productsinclude iron ore, coal, coke and other raw materialsfor steel production, scrap iron and oth oys andother non-ferrous metals, raw materials for plasticproduction, inorganic chemicals such asmagnesium chloride, and petroleum products.Expanding Trading Of ProcessedFerrous Materials Throughout AsiaThe Odamol iron ore mine in Goa, India[ Ferrous/ Non-Ferrous Materials ] We havebeen expanding import of ferrous / non-ferrous materialsfor stable supply mainly to Kawasaki Steel Corporation,and now trying to further expansion such as deal withdomestic/overseas electric furnaces, export andintermediary trade in East Asia area.[ Chemicals ] With the cooperation of KawasakiSteel Corporation, we are expanding sales ofchemicals, industrial gases and other products aswell as developing business, such as fine ceramics,agrichemicals, fine chemicals, and so on.Iron ore bound for Port Hedlandon the Newman railwayThe Bulga coal mine inNew South Wales, Australia[ Fuels ] Starting from supply of petroleumproducts to Group companies, now we are expandingdomestic deal and intermediary trade to East Asiaarea. Aiming to stable supply, we make contractswith petroleum refiners in Japan and various countries.Iron ore for Japanbeing loaded from the"Sunrise" onto a tankerWood chips being loaded in TasmaniaWood chips being loaded in TasmaniaWhale Back iron ore mine in Western Australia, Australia16

Domestic SteelOverseas SteelTerre Armée Civil EngineeringRaw Materials, Fuels & ChemicalsFoodsMachineryElectronicsAerospaceDevelopment Of Raw MaterialsBusiness[ Plastics ] Addition to the domestic raw materialbusiness, we are trying to expand kind ofmerchandise, such as partition parts for housing,parts of automobiles, optic fiber, child seats, andso on, and further expanding by setting upoverseas group companies such as Plastic WorldChina Ltd., a compound company in GuandongProvince, China, K-Net Asia Ltd., a trading firm inHong Kong, and K&K Molding, Inc. a moldingcompany in the Philippines.[ Timber ] We import logs and lumbers from NorthAmerica, Europe, New Zealand, and we actuallyhold top share as an importer of American logs inJapan. And we are trying to expand business ofprocessed wooden products such as glue-lam.Optical fiber slots using high-performance plasticCoal tar pitchChild seat[ Pulp ] Our main business is to import wood chipfrom North America and Australia, to import ofchemicals for paper manufacturing from East Asia.Nowadays, we start other type of action, such asexport of used paper, export of processed paperfor computer manufacturers, and so on. Andaiming to secure stable supply of wood chip, wejoined in eucalyptus-plantation project in Tasmania,Australia.K&K Molding Incorporated (PHILIPPINES)Plastic raw material pelletsMajor Products HandledIron ore, sintering ore, coal for coke making, dolomiteand other steel making materials, cokes and othercoal products, nickel, chromium, zinc, alloy iron,scrap iron and other metal raw materials, coal tar,cola tar pitch, creosote oil and other chemical coalproducts, magnesium chloride, nitric acid and otherinorganic chemicals, ferrite core, molding materials,iron oxide, fertilizers, general use plastic, engineeringplastics and other plastic raw materials andcompound products, fine ceramics, ultra-fine nickelpowder and other functional chemical products,industrial gases, crude oil, gasoline, LP gas,lubricating oil and other petroleum products,aluminum, scrap aluminum, deoxidized aluminum,aluminum products, logs, glue-lam, woodchips, paper manufacturing products such aspigments, binders and strengtheners and otherproductsKP sheet(automobile interior material)JOMO Station (gas station) managed by our Group companyFerrite core and raw materials used in electronic parts17

Foods Business"Delicious Taste On A Global Scale"For Happy Faces At Tables Around The WorldFood Brands Popular In Japan AndOverseasWorking from the catch phrase "Delicious taste on aglobal scale", we have developed cooking methodsand processing technologies that let people aroundthe world experience the unique tastes of food fromdifferent countries. This has been made possible bya variety of factors, including extensive experiencein the procurement of raw materials and thedevelopment of products, the creation of a salessystem, and product sales know-how. In addition,we have a business strategy that takes fulladvantage of strong domestic and overseas salesnetworks, and processing plants worldwide boastingexceptional technological capabilities.We offer canned products such as the well-knownNOZAKI's brand corned beef, "Yamatoni Beef "offering the traditional taste of beef stewed with soysauce and sugar, and wiener sausages, a favorite ofyoung and old. Sold at leading department stores,supermarkets and convenience stores, these andother products have proved to be extremely popular.Overseas, GEISHA brand canned crab has beensold in the U.S. since 1911. In fact, GEISHA is oneof the most popular brands of canned food in theworld, and is highly appreciated not only in the U.S.but also in countries in Europe, the Middle East,Africa and Asia.GEISHA brand products popular worldwideNOZAKI's corned beefA Variety Of Delicious Canned FoodsAs consumer life styles continue to diversify, we aredeveloping new products to provide an even widerrange of canned fruit, agricultural and marine products.Taking advantage of the know-how gained fromyears of experience in the foods business in China,we have introduced technology to affiliated factoriesproducing canned tangerines, white and yellow peaches,asparagus, mushrooms and other products thathave become very popular. In fact, we are one ofthe world's leading importers of canned tangerines.In 1995, we established the joint venture YingkouBori Foodstuffs Co., Ltd., in Liaoning Province,China. The company produces processed foods,such as canned peaches, for not only Japan butalso the U.S., where sales are handled by KawashoInternational (U.S.A.) Inc.In Malaysia, the Group company Marushin Canneries(M) Sdn. Bhd. produces King Cup brand cannedsardines, and holds the largest share in theMalaysian market. The company acquired ISO9002certification in 1999.In the U.S., the Group company American SoyKING CUP, the leading brand in Malaysia"Vruit" blended vegetable juice (left) and "Soy Fusion" (right) produced by American Soy Products Inc.Wine imported from around the world18

Domestic SteelOverseas SteelTerre Armée Civil EngineeringRaw Materials, Fuels & ChemicalsFoodsMachineryElectronicsAerospaceProducts Inc. produces and sells EdenSoy® soymilkmade from organically grown soybeans, and "Vruit",a blended vegetable juice. The company is the topmaker in the U.S. with a share of over 30% of thesoymilk market. It was recognized by the OCIA(Organic Corp Improvement Association) as aqualified manufacturer of organic foods.Sushi ingredientsEdenSoy is a registered trademark of Eden Foods, Inc. of Clinton, Michigan, U.S.A.From Marine Products And FrozenFoods To Grains And WineWith respect to marine products, we import farmedsalmon from Europe and South America, handlingeverything from raw materials and processing tosales.Based on a thorough management system, our Thaiprocessing plant produces everything from sushiingredients to broiled and fried processed foods tomeet a wide range of customer needs.We import to Japan sauced, charcoal-broiledchicken produced by affiliated companies in Chinaand other Asian countries. In addition, we supplymakers of processed foods with frozen chicken andother products from affiliated plants in China, whichfeature quality control technologies.Regarding rice, we import from the U.S., Australiaand Thailand for the Food Agency. And from theU.S. and Australia we import wheat, a product thatJapan imports to satisfy over 90% of domesticdemand, and pulses for use as raw materials.From Cuba, Thailand and Brazil, we import highqualityraw sugar for domestic refined sugar makersand also sell it to overseas users. We are also anagent for refined sugar makers' products which wesell in Japan.From Australia, the U.S., Thailand, China and Brazilwe import a variety of livestock raw materials.With regard to beverages, we import speciallyselected wines and other beverages from France,Italy and Germany.The joint venture Yingkou Bori Foodstuffs Co., Ltd. in China" Luso" natural water imported from PortugalCrabsSugarJapanese green teaMajor Products HandledCanned marine products, corned beef, Japanese stylestewed beef and other beef products, vegetables,canned fruit, fresh vegetables, tomato products, beef,pork, chicken and other processed meats, frozenfoods, processed foods, grains, dairy products,sugar, alcoholic drinks, soft drinks, frozen seafood,fish roe, processed seafood and other productsSome of the processed products sold by Kawasho Processed Foods Inc.19

Machinery BusinessCreative Versatility Spanning Core Manufacturing Facilities,Cogeneration Equipment And The EnvironmentFrom Large-Scale Plants To Large-Scale Roller CoastersMachinery is an integral part of our everyday lives aswell as the driving force behind all industrialdevelopments. We sell a wide range of machinery inJapan and elsewhere, dealing in large-scale machineryfor steelworks and electric power plants, generalmanufacturing machinery, ships, and even rollercoasters for amusement parks. Our machine productscover a broad spectrum of sizes and applications.[ Steelworks Plants ] We handle import and exportof blast furnaces, coke ovens, electric furnaces,continuous slab casting machines, hot rolling mills,galvanizing equipment, various steel processingmachines and related equipment. In joint ventures withKawasaki Steel Corporation, we have participated inoverseas projects such as the construction of asintering plant in the Philippines, steelworks in Brazil,and a galvanizing line in Korea.[ Power Plants ] We are participating in an electricpower substation construction project in Iran. We alsohave interests in supplying collector plants to thePhilippines and Thailand as well gas turbine electricgenerators to Malaysia.No.3 hot mill at the Kawasaki Steel Corporation's Chiba Steelworks[ Steelworks Equipment and Materials ] Weprovide design and manufacturing equipment toKawasaki Steel Corporation in Tokyo, Chiba, Osaka,Chita and Okayama, can manufacturing equipment,rolls for various rolling mills and chemicals includingimported products. At the same time, we also exportmaterials and equipment to overseas steelworks.[ Industrial Machinery ] We supply the domesticmarket with general manufacturing machinery, andalso export it. Recently, we have been focusing on theexport of glass processing equipment.[ Utilities ] We supply electric power generators andpower distributors for buildings, factories andhospitals, as well as air conditioning equipment andmedical gas equipment. Recently, we have also beenconcentrating on cogeneration plant equipment forlocal heating and air-conditioning in Japan, and havethe organization to provide sufficient supplies to othercountries with high energy demands.[ Ships ] We have interests in shipbuilding, act as anintermediary in ship chartering, and provide financingfor shipbuilding. At the same time, our operationsextend to the marine transportation business, in whichwe own a fleet of charter ships.[ Amusement Park Rides ] With respect to rollercoasters, we hold the top position in the industry. Sofar we have supplied well- known amusement andtheme parks nationwide with over 200 of the latestrides from European and American manufacturers.Galvanizing line in KoreaElectric furnaceWork roll for hot strip millsCogeneration equipmentGlass processing machines20

Domestic SteelOverseas SteelTerre Armée Civil EngineeringRaw Materials, Fuels & ChemicalsFoodsMachineryElectronicsAerospaceLending A Hand With The Modern"Silk Road"We are involved in the Japanese government's ODA(Official Development Assistance) initiative fordeveloping countries. As a participant in the freecapital investment cooperation and technologicalassistance program, we have been highly praisedby the government and regional cooperatives forsupplying precision equipment and measuringinstruments as well as automobile equipment andmaterials.In 2001, in a joint development venture withKawasaki Steel Corporation and other concerns, wecompleted a four-year railroad improvement projectin the Republic of Kazakhstan without any accidentsor problems, thereby contributing to theadvancement of the modern "Silk Road".A Serious Commitment To Electric PowerVending and Environmental ProjectsIn a joint venture with Mitsui Engineering &Shipbuilding Co., Ltd., in 1999, we took our firststep to becoming an independent power producer(IPP) for the Electric Power Agency of Sri-Lanka.This is Kawasho's first venture into the powergeneration business. In 2002, the power plant hasbeen able to meet about 8% of Sri Lanka'selectricity demand.In the environmental field, as concern mounts overthe problem of dioxins, Kawasho is promoting thesale of a next-generation garbage incinerationsystem, known as the Thermo-Select System,which is manufactured by Thermo-Select S.A., aSwiss company that has a technical tie-up withKawasaki Steel Corporation.Control room at the facilitiesProject to improve the railway systemin the Republic of KazakhstanChemical tankerMajor Products Handled"Steel Dragon 2000" (Nagashima Spaland),the world's largest roller coaster, as certifiedby the Guinness Book of Records 2000Barge-type power generating facilities started operating in Sri LankaThermo-Select System at Kawasaki Steel Corporation's Chiba SteelworksSteel manufacturing machinery, steel manufacturingmaterials, metal processing machinery, constructionmachinery, boilers, turbines, industrial vehicles,haulage equipment, food processing equipment,environmental equipment, electrical equipment,amusement park equipment, ropeway equipment,steel plants, heavy electricity plants, environmentprotection equipment, hospital facilities, distributionsystems, water supply and sewage systems, portfacilities and similar plants, ship building, sale andpurchase of used ships, dismantling ships, shiprepairs, ship equipment and other products21

Electronics BusinessSupporting Future Society's Cutting-Edge ElectronicsFor The Advanced Semiconductor MarketLSIs now play an important role in every facet of ourdaily lives.Kawasho is currently expanding ASIC and ASSP(Application Specific Standard Products) sales ofproducts manufactured by KawasakiMicroelectronics, Inc. ( a spin-off from the KawasakiSteel Corporation LSI Division in 2001), with salesmainly to domestic OA equipment manufacturers.Kawasaki Microelectronics began operating in 1984as a new business development division ofKawasaki Steel Corporation. Rather than standardproducts like DRAM and microprocessors, with anaim to be able to precisely meet future needs, thenew division focused on ASIC. It led the way with thedevelopment of a unique cell-based array, andcontinued to rapidly develop business in the areasof standard cells, microcontrollers and ASSP fortelecommunications, video, information and OAequipment applications.At present, in partnerships with reliable leadingcorporations, Kawasaki Microelectronics is focusingits advanced technological capabilities on becominga world-class LSI maker in the area of ASIC handlingeverything from design and wafer manufacture topackaging, tests and quality control.Through the sale of Kawasaki Microelectronics'original, high-grade ASIC and ASSP, Kawashoaccounts for about 20% of the company'ssemiconductor sales.Semiconductors made by Kawasaki Microelectronics, Inc.Fingerprint verification PC card[ Broadcast Equipment ]Kawasho sells semiconductor ICs manufactured byGennum Corporation in Canada to major broadcastequipment manufacturers in Japan. The spread ofdigital broadcasting has generated demand forbroadcast-related equipment that delivers highquality picture and sound with faster processingspeeds. As a leading designer and supplier of awide range of high quality ICs for specialapplications, Gennum is a well-known company inthe field of broadcasting worldwide.Fingerprint verification PC cardSigmaTel Inc. Audio CODEC providingaudio/video component level sound from a PCSerial digital interface chips by Gennum use for awide range of TV broadcasting applications[ Fingerprint Verification Chip ]Recent rapid IT developments and increased use ofnetworks have boosted the demand for measures tosafeguard both corporate and individual information.Kawasho sells fingerprint verification unit featuringan advanced electrostatic capacitive fingerprintsensor chip.[ Audio CODEC ]With the fusion of PCs and home electricalappliances continuing apace, the call is for PCs thatdeliver the same sound quality as AV components.22

Domestic SteelOverseas SteelTerre Armée Civil EngineeringRaw Materials, Fuels & ChemicalsFoodsMachineryElectronicsAerospaceAs the agent in Japan for SigmaTel Inc. of the U.S.,Kawasho sells audio decoders, and other products.Since its establishment, SigmaTel quickly made itsmark in the market as a leading IC supplier, and is ahighly regarded company in the industry. In theglobal audio CODEC market, the high quality of itsproducts and services has gained around a 30%share.[ CMOS Imager ]As the agent in Japan for the Institute forMicroelectronics Stuttgart (IMS) since 1998,Kawasho sells a Logarithmic Compression CMOSImager. The high-performance imager has an imageluminance (dynamic range) 10,000 times that of aconventional CCD camera, making it ideal forindustrial applications.[ RSA Encryption LSI ]Accompanying the ongoing expansion of electronicgovernment and e-commerce transactions over theInternet, RSA is attracting attention as an encryptionsystem that can conceal transaction details as wellas authenticate the identities of those involved intransactions.The RSA encryption high-speed LSI chip we sellenables rapid encryption and decryption. Besidesthe applications mentioned above, the chip isscheduled to be used to keep the privacy of hospitalpatient medical charts.Total reflection fluorescent X-ray wafersurface analysis equipmentCleaning equipment[ Electronic Devices ]To establish a firm profit-earning base, we areclosely concerned with high-growth products suchas semiconductor evaluation equipment, cleaningequipment and other devices.Mold chip mounting systemStrengthened SMT Sales In AsiaWith a view to expanding business in the field ofSMT (Surface Mounting Technology ), Kawashobecame the agent for Kyushu MatsushitaCorporation in 1988. Since then we have continuedto sell SMT equipment and COB (Chip On Board)equipment both in Japan and overseas. In 2002,Kawasho Electronics Corporation was establishedas a specialist sales and service company tostrengthen both sales of SMT and peripheralequipment and our service capabilities.To meet the needs of domestic users withmanufacturing centers overseas as well asoverseas users, Kawasho Electronics offerscomprehensive support spanning sales to servicesin Malaysia, Thailand and China.Electron microscopeMajor Products HandledComputer microprocessors, chip sets, memory, audioCODEC, image sensors, system LSIs (ASIC with builtinIP macro ) and other semiconductor products,semiconductor manufacturing equipment and relatedequipment, washing equipment, analysis and evaluationequipment, SMT (Surface Mounting Technology), COB(Chip On Board ) and related equipment.23

Aerospace BusinessExtending Into The Field of AerospaceBest-Selling High-FlyerAs a step towards expanding into other areas ofbusiness, we became the exclusive agent forCessna Aircraft Company of the U.S. in 1952. Sincethen we have continued to strengthen our position inthe field of aerospace in Japan, and now hold a 50%share of the single-engine light aircraft market.Our extensive lineup of products includes the 172R(Sky Hawk), a best-seller worldwide, the Cessna206, an incredibly versatile six-seater, and theCaravan, a single-engine turbo-propeller modelcapable of carrying loads weighing up to 1.5 tons.We also deal with eight kinds of business jetsmanufactured by Cessna Aircraft Company, theworld's leading maker of small and medium sizejets. These range from the smallest, the CitationCJ1 and CJ2, to the Citation X (10), which has a topspeed of 0.92 Mach, making it the fastest businessjet in the world.Besides fixed wing aircraft, we also sell helicopterengines manufactured by Turbomeca of France andprovide after service. Since these engines are usedby Japanese, American, Italian and other helicoptermakers as well as by Eurocopter, this has enabledus to provide other companies' customers withservices, a fact that has further boosted our reputation.A Rich Lineup Of HelicoptersThe Citation X, the world's fastest business jetInside the cabin of the Citation XWe have sold many helicopters since we becamethe sales agent for Aerospatiale of France (nowEurocopter) in 1960. To further strengthen our salescapabilities and improve customer services, wejoined forces with another sales agent, Sony TradingInternational Corporation (a subsidiary company ofSony Corporation), and established EuroHeliCorporation in April 2001. The new company boastsover a 43% share of the domestic civil helicoptermarket, and focuses on boosting sales ofEurocopter helicopters to government and publicoffices (including local governments) for crisismanagement, fire fighting, disaster prevention andother applications. At the same time the company isconcentrating on securing a share of the up-andcomingmarket for helicopters for "doctor-heli" anddigital broadcast news gathering applications.Sky HawkCaravanCitation ExcelA sales agent for over 40 Europeanand American companiesWe have the agency rights to sell on-board devicesas well as aircraft and engines for over 40 of theworld's leading aircraft and aerospace companies.ARRIUS 2B helicopter engineEC15524

Domestic SteelOverseas SteelTerre Armée Civil EngineeringRaw Materials, Fuels & ChemicalsFoodsMachineryElectronicsAerospace[ Traffic Advisory System ]The Ministry of Public Management, Home Affairs,Posts and Telecommunications has revised theministerial ordinance concerning WirelessEquipment Regulations based on the WirelessTelegraphy Act standards such as that relating tominimum reception sensitivity. As a result, the useof simple collision warning systems is nowallowed, This has opened the door for Kawasho tostart sales of "Skywatch", a collision warningsystem for light aircraft and helicopters. Thesystem is manufactured by Goodrich of the U.S.,which holds a 90% share of the market in the U.S..[ Aviation Devices ]Working from the key words of "Saving People'sLives", we are making every effort to developsales of equipment related to aircraft safety. Wesell the flight control system used in many Air Self-Defense Force aircraft, and we have a license tomanufacture the system in Japan. We also sell anFDR ( Flight Data Recorder) which improvesaircraft maintenance efficiency while playing a vitalrole in detecting malfunctions and accidentanalysis. Other products we deal with include theengine for a light, pilotless aircraft used by theDefense Agency in Japan, aircraft devices andterrestrial support equipment.[ Aerospace Devices ]Kawasho has been involved for over 20 years inthe provision of equipment and technical supportfor rocket sensors and other satellite equipment.We also deal in various fuel tank valves for jetpropulsion systems, drive equipment for rotatingsolar battery panels as well as antenna pointingmechanisms.[ Flight Simulators ]We provide research institutes, training centers,and particularly the Japanese Defense Agency,with flight simulators for pilot training and devicedevelopment assessment.[ Hold Baggage Screening Devices ]We deal in the X-ray automatic bomb detectionsystem developed by L-3 CommunicationsSecurity and Detection Systems of the U.S., asystem that is used in airports across Europe,including the U.K., and in some airports in Asia.[ Measuring And Analytical Equipment ]We import and sell a wide range of contaminationmeasuring equipment such as fluid particlemeasuring instruments, vacuum particlemeasuring instruments and oil particle counters.These instruments are widely used in theSkywatchFlight GPS deviceFlight data recorderFluid particle measuring equipmentX-ray automatic bomb detection system developed byL-3 Communications Security and Detection SystemsFlight simulatormanufacture of electrical home appliances andfilters, and in such fields as hydraulics forconstruction equipment, water purification, thepetroleum industry, aviation devices andsemiconductor manufacturing, and by the JapaneseDefense Agency.Aircraft Safety SupportThe Group company Kanto Instruments Co., Ltd.sells an FDR ( Flight Data Recorder) that monitors anaircraft's operating conditions while providing datarequired for accident analysis. Other cutting-edgeproducts we deal with include precision instruments,flight instruments and stabilizers.We are also involved in the development andmaintenance of electronic instruments such astactical air navigation for high- performancetelecommunications applications, quartzgyroscopes, control devices, measuring devicesand precision machines. In addition, we are workingon product development related to missiles,torpedoes and space flight, as well as developingnon-defense related products.Major Products HandledSingle-engine light aircraft, business jets, jethelicopters, helicopter jet engines, GPS navigationdevices, flight control systems, flight data recordersand other flight safety equipment, a wide range ofsatellite and rocket parts, terrestrial supportequipment, pilot training simulators, space flightdevices, analysis equipment, measuring devices, andfluid particle measuring instruments and vibrationanalysis instruments.25

ORGANIZATION CHARTAs of July 1, 2002PresidentGeneral Affairs Dept.Steel, Terre Armée SectionRaw Materials, Foodstuffs SectionFront, from the leftRear, from the leftYouichi Nishimaki / Hiroo Naruki / Toshio MatsumiyaYoshiyasu Kashihara / Keizo Yamazaki / Yutaka HoriguchiPersonnel Dept.Career Development Dept.Environmental Auditing Dept.Internal Auditing Dept.Finance Dept.Corporate Accounting Dept.Business Accounting Dept.Credit Dept.Legal Dept.Corporate Planning & Coordination Dept.Affiliate Company Coordination Dept.Overseas Coordination Dept.Information Technology Planning Dept.Chiba & Hanshin Land Use Cooperation TeamGuam Administration Dept.Asian Business Development Dept.Seoul BranchKawasho International (Korea) Ltd.Manila BranchKawasho Philippines, Inc.Moscow Rep. OfficeTaipei BranchBeijing (Peking) Rep. OfficeDalian Rep. OfficeDalian F.T.Z. Kawasho Co., Ltd.Shanghai Rep. OfficeKawasho (Shanghai) Co., Ltd.Kawasho International (Hong Kong) Ltd.Bangkok BranchKawasho Corporation (Thailand) Ltd.Ho Chi Minh Rep. OfficeYangon BranchMumbai Rep. OfficeKuala Lumpur BranchSingapore BranchJakarta Rep. OfficeP.T. Kawasho IndonesiaKawasho International (U.S.A.) Inc.NagoyaOfficeSteel DivisionNo.1Steel DivisionNo.2Steel OverseasDivisionCentral DistrictSteel DivisionWestern DistrictSteel DivisionTerre Armée DivisionAdministration Dept. (Steel and Terre Armée)Eastern District Project Dept.Western District Project Dept.Kobe BranchAutomotive Steel Business Planning Dept.Plate Dept.Automotive Steel, Sheet & Strip Dept.Electrical Machinery Steel & Tinplate Dept.Stainless & Special Steel Dept.Shizuoka BranchStructural Steel & Strip Dept.Construction Steel Materials Dept.Construction Dept.Pipe Dept.Sapporo BranchTohoku BranchNiigata BranchSteel Overseas Dept. No.1Steel Overseas Dept. No.2Overseas Steel Market Development Dept.Corporate Administration GroupSales Dept. No.1Sales Dept. No.2Osaka Plate Dept.Osaka Sheet & Strip Dept.Osaka Stainless & Special Steel Dept.Osaka Construction Materials Dept.Osaka Pipe Dept.Hokuriku BranchOkayama BranchHiroshima BranchShikoku BranchKyushu BranchTerre Armée Administration GroupTerre Armée Sales Dept.Western District Terre Armée Sales Dept.Terre Armée Civil Engineering Dept.Raw Materials,Fuels & ChemicalsDivisionFood DivisionAdministration Dept. (Raw Materials & Foods)Light Metals Dept.Metallic Materials Depts.Raw Materials Dept.Carbon Materials Dept.Fuel Dept.Chemicals Dept.Plastics Dept.Log & Lumber Dept.Pulp & Paper Dept.Goa Rep. OfficeKawasho Internacional Comercio do Brasil Ltda.Kawasho International (Australia) Pty., Ltd.Marine Products Dept.Processed Foods Dept.Food Products & Marketing Dept.Sugar Dept.Agri. & Dairy Products Dept.Kawasho Foods (Thailand) Co., Ltd.Kawasho Corp. (U.K.) Ltd.Machinery, Aerospace & Electronics SectionMachinery DivisionElectronics DivisionAerospace DivisionReal Estate BusinessDevelopment DivisionAuditorsAdministration Dept. (Machinery Aerospace & Electronics)Machinery & Materials Dept.Chiba Machinery & Materials Dept.Okayama Machinery & Materials Dept.Machinery Dept.Ships Dept.Tehran BranchKawasho International (Europe) GmbHSemiconductor Dept.Aircraft Dept.Aerospace Systems Dept.Tsuchiura Business Development Dept.Real Estate Dept.Office of AuditorsBOARD OF DIRECTORSAs of June 27, 2002PRESIDENTMANAGING DIRECTORSDIRECTORSAUDITORSHiroo NarukiSENIOR MANAGING DIRECTORSKeizo YamazakiYoshiyasu KashiharaToshio MatsumiyaYouichi NishimakiYutaka HoriguchiHirotoshi TakasakiTakehisa MatsuoTatsuji TogawaYoshihiko NakamuraAkira TamadaTatsuro IshiokaMasanobu TakadaToshio TsukadaJunichi NakamuraKatsusuke YabutaMasahiko UmemotoMinoru KasetaniShigeki YamamotoKenichiro FurusawaIwao YamauchiTakeshi IokiYousuke KishidaHiroshi ShiratsuchiToshikazu Takatsugi27

All Domestic Kawasho Offices Acquire Environmental Management System ISO14001On December 27, 2001, through the expansion of efforts related to the EnvironmentalManagement System (EMS) ISO14001 international standard, all of Kawasho's offices inJapan acquired certification. Inspections and registration were performed by the JapanAudit and Certification Organization for Environment and Quality (JACO). The certificatesreflect the effectiveness of environmental protection measures, such as reduced powerconsumption and reduced use of resources, implemented by all of Kawasho's offices.By the end of December 2000, the Tokyo head office, Osaka head office, Nagoya branch,and the Group companies Kawasho Personal Agency, Ltd., and K&I Tubular Corporation hadall been certified.Kawasho is developing a wide range of businesses centering around the steel business.We promote environmental protection measures to a wide range of our business partners,including our procurement sources and our clients. We also promote energy saving andrecycling in our offices.At present we are implementing a number of environmental measures related to corporateactivities. For example, to assure more effective use of resources we are promoting thereuse of scrap iron and scrap aluminum. To help prevent global warming, we are involved inreforestation of Australia's Tasmania Island. We also develop environment-friendly businessand sales practices, while continuing our environment-reviewing activities to raise ourclients' awareness of environmental protection.With regard to office-related environmental protection measures, we promote thefollowing: 1) Reducing the amount of electricity used, 2) Separating the garbagecompletely for easy recycling, and reducing the volume of overall waste, 3) Reducing theamount of paper used, and reusing paper when possible.Based on our mottos of "Have global perspectives, Develop dynamic trading companyactivities, and Contribute to societal wellbeing", Kawasho continues energy-saving andrecycling both with our business partners and in our offices. All Group companies areplanning to acquire Environmental Management System ISO14001 certification so that theGroup as a whole can make a positive contribution to environmental protection and thedevelopment of a recycling society.28

CONSOLIDATED BALANCE SHEETS 30CONSOLIDATED STATEMENTS OF OPERATIONS 32CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 33CONSOLIDATED STATEMENTS OF CASH FLOWS 34NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 36INDEPENDENT AUDITORS' REPORT 51

CONSOLIDATED BALANCE SHEETSKawasho Corporation and Consolidated SubsidiariesAs of March 31, 2002 and 2001Millions of Yen2002 2001Thousands of U.S.Dollars (Note 1)2002ASSETSCurrent assets:Cash and cash equivalents¥ 43,783¥ 32,664$ 328,578Receivables:Trade notes, accounts and advances"279,279356,6432,095,902Allowance for doubtful receivables(2,141)(1,982)(16,068)Inventories65,80386,107493,831Deferred income taxes (Note 7)6,5142,19348,886Other current assets13,43514,620100,826Total current assets406,673490,2453,051,955Property and equipment:Land (Notes 5 and 14)38,31354,533287,527Buildings and structures (Note 4)33,62843,801252,368Equipment for leasing40,82245,166306,357Other equipment and fixtures46,89248,430351,910Construction in progress7290540Other property and equipment6,32522,28947,467Accumulated depreciation(71,877)(73,543)(539,415)Property and equipment, net94,175140,766706,754Investments and other assets:Investments in securities (Notes 3 and 5)32,73939,302245,696Investments in unconsolidated subsidiaries and affiliates13,45913,382101,006Long-term loans8,48810,50063,700Deferred income taxes (Note 7)7,89212,02659,227Other (Note 13)56,10057,638421,013Allowance for doubtful receivables(28,816)(36,716)(216,255)Total investments and other assets89,86296,132674,387Total assets¥ 590,710¥ 727,143$ 4,433,096See the accompanying Notes to Consolidated Financial Statements.30

Millions of Yen2002 2001Thousands of U.S.Dollars (Note 1)2002LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:Short-term borrowings and current portion oflong-term debt (Notes 4 and 5)¥ 248,500¥ 291,350$ 1,864,916Payables:Trade notes and accounts222,513270,7541,669,891Accrued income taxes7246675,433Deferred income taxes (Note 7)45338Other current liabilities20,15724,014151,272Total current liabilities491,939586,7853,691,850Non-current liabilities:Long-term debt, less current portion (Notes 4 and 5)59,39891,092445,764Accrued retirement benefits (Note 6)6,4445,43348,360Deferred income taxes (Note 7)4969368Other non-current liabilities19,49727,620146,319Total non-current liabilities85,388124,214640,811Minority interests3,3244,49824,946Contingent liabilities (Note 8)Shareholders’ equity (Notes 9 and 15):Common stock:Authorized: 320,000,000sharesIssued: 235,365,187 shares in 200218,039135,377131,195,187 shares in 200113,039Additional paid-in capital7,0218,89452,690Net unrealized holding gain on land35263Retained earnings deficit(8,179)(3,181)(61,381)Net unrealized holding loss on securities(1,623)(12,180)Translation adjustments(5,232)(7,103)(39,265)Treasury stock, at cost121,000 shares in 2002 and 108,000 shares in 2001(2)(3)(15)Total shareholders’ equity10,05911,64675,489Total liabilities and shareholders’ equity¥ 590,710¥ 727,143$ 4,433,096See the accompanying Notes to Consolidated Financial Statements.31

CONSOLIDATED STATEMENTS OF OPERATIONSKawasho Corporation and Consolidated SubsidiariesFor the years ended March 31, 2002 and 2001Millions of Yen2002 2001Thousands of U.S.Dollars (Note 1)2002Net sales¥ 1,125,930¥ 1,280,937$ 8,449,756Cost of sales1,065,2801,204,7897,994,597Gross profit60,65076,148455,159Selling, general and administrative expenses51,59667,170387,212Operating income9,0548,97867,947Other income (expenses):Interest and dividend income1,9132,97114,356Interest expense(6,089)(8,430)(45,696)Gain on donation34,500258,912Gain on sales of investment securities3949,1612,957Loss on devaluation of land held for sale(19,138)(2,148)(143,625)Loss on sales of investments in a consolidatedsubsidiary and an affiliate(13,284)(99,692)Loss on devaluation of tangible assets(11,483)(86,176)Loss on devaluation of investments in securities(4,702)(2,786)(35,287)Provision for doubtful receivables(1,696)(18,630)(12,728)Loss on devaluation of golf memberships(1,545)(2,306)(11,595)Loss on sales of investments in securities(107)(7,731)(803)Lump-sum amortization of consolidation difference(2,561)Expenses on special retirement payments(2,249)Loss on dissolution of a subsidiary(327)Equity in earnings of unconsolidated subsidiariesand affiliates1832021,373Other, net1,39693610,477(19,658)(33,898)(147,527)Loss before income taxes and minority interests(10,604)(24,920)(79,580)Income taxes (Note 7):Current1,4121,50510,597Deferred(270)(10,427)(2,026)1,142(8,922)8,571Loss before minority interests(11,746)(15,998)(88,151)Minority interests(125)838(938)Net loss¥ (11,871)¥ (15,160)$ (89,089)Amounts per shareYenU.S. Dollars (Note 1)Net loss¥ (88.37)¥ (115.63)$ (0.66)See the accompanying Notes to Consolidated Financial Statements.32

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYKawasho Corporation and Consolidated SubsidiariesFor the years ended March 31, 2002 and 2001Millions of Yen2002 2001Thousands of U.S.Dollars (Note 1)2002Common stock:Balance at beginning of year¥ 13,039¥ 13,039$ 97,854Issuance of common stock5,00037,523Balance at end of year¥ 18,039¥ 13,039$ 135,377Additional paid-in capital:Balance at beginning of year¥ 8,894¥ 8,894$ 66,747Transfer to retained earnings(6,873)(51,580)Issuance of common stock5,00037,523Balance at end of year¥ 7,021¥ 8,894$ 52,690Net unrealized holding gain on land:Balance at beginning of year¥ ¥ $ Net change during the year35263Balance at end of year¥ 35¥ $ 263Retained earnings (deficit):Balance at beginning of year¥ (3,181)¥ 12,719$ (23,872)Net loss(11,871)(15,160)(89,089)Transfer from additional paid-in capital6,87351,580Bonuses to directors(17)Decrease resulting from merger ofconsolidated subsidiaries(8)Decrease resulting from elimination ofsubsidiaries from consolidation(597)Decrease resulting from discontinuing the equity methodof accounting for certain affiliates(118)Balance at end of year¥ (8,179)¥ (3,181)$ (61,381)Net unrealized holding loss on investment securities:Balance at beginning of year¥ ¥ $ Net change during the year(1,623)(12,180)Balance at end of year¥ (1,623)¥ $ (12,180)Translation adjustments:Balance at beginning of year¥ (7,103)¥ $ (53,306)Net change during the year1,871(7,103)14,041Balance at end of year¥ (5,232)¥ (7,103)$ (39,265)Treasury stock:Balance at beginning of year¥ (3)¥ (56)$ (23)Net change during the year1538Balance at end of year¥ (2)¥ (3)$ (15)See the accompanying Notes to Consolidated Financial Statements.33

CONSOLIDATED STATEMENTS OF CASH FLOWSKawasho Corporation and Consolidated SubsidiariesFor the years ended March 31, 2002 and 2001Millions of Yen2002 2001Thousands of U.S.Dollars (Note 1)2002Cash flows from operating activities:Loss before income taxes and minority interests¥ (10,604)¥ (24,920)$ (79,580)Adjustments for:Depreciation and amortization11,63015,52987,280Amortization of consolidation difference128(34)961(Decrease) increase in allowance for doubtful receivables(7,973)19,737(59,835)Increase in other allowances1,0782,3568,090Interest and dividend income(1,913)(2,971)(14,356)Interest expense6,0898,43045,696Equity in earnings of unconsolidated subsidiaries and affiliates(183)(202)(1,373)Gain on donation(34,500)(258,912)Gain on sales of investment securities(394)(9,161)(2,957)Loss on sales of investment securities1077,731803Loss on sales of investments in a consolidatedsubsidiary and an affiliate13,28499,692Loss on devaluation of investment securities4,7022,78635,287Loss on devaluation of tangible assets11,48386,176Loss on devaluation of golf memberships1,5452,30611,595Lump-sum amortization of consolidation differences2,561Decrease in trade notes and accounts receivable54,74838,708410,867Decrease in inventories21,8441,717163,933Decrease in trade notes and accounts payable(50,036)(1,567)(375,505)(Decrease) increase in accrued consumption tax(40)1,262(300)Other, net7,132(13,557)53,523Subtotal28,12750,711211,085Interest and dividend income received2,4833,15518,634Interest expense paid(6,344)(8,073)(47,610)Donation received34,500258,912Income taxes paid(1,359)(819)(10,199)Net cash provided by operating activities57,40744,974430,822Cash flows from investing activities:Purchase of property and equipment(6,823)(10,618)(51,205)Proceeds from sales of property and equipment1,3711,96910,289Purchases of investment securities(1,316)(9,386)(9,876)Proceeds from sales of investment securities16,52312,282124,000Proceeds from sales of consolidated subsidiaries’ shares2,74620,608Increase in loans(2,453)(1,230)(18,409)Collection of loans3,9253,74229,456Other, net(608)(980)(4,563)Net cash provided by (used in) investing activities¥ 13,365¥ (4,221)$ 100,300See the accompanying Notes to Consolidated Financial Statements.34

Millions of Yen2002 2001Thousands of U.S.Dollars (Note 1)2002Cash flows from financing activities:Decrease in short-term borrowings¥ (78,629)¥ (63,886)$ (590,086)Proceeds from long-term debt13,09125,01398,244Repayment of long-term debt(4,171)(13,729)(31,302)Issuance of common stock10,00075,047Issuance of common stock to minority interests2161,621Cash dividends paid to minority interests(59)(146)(443)Other, net(1)(8)(8)Net cash used in financing activities(59,553)(52,756)(446,927)Effect of exchange rate changes on cash and cash equivalents179(64)1,344Net increase (decrease) in cash and cash equivalents11,398(12,067)85,539Cash and cash equivalents at beginning of year32,66446,923245,133Increase resulting from initial consolidation of subsidiaries1,172Decrease resulting from exclusion of subsidiaries from consolidation(279)(3,364)(2,094)Cash and cash equivalents at end of year¥ 43,783¥ 32,664$ 328,578See the accompanying Notes to Consolidated Financial Statements.35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSKawasho Corporation and Consolidated Subsidiaries1. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTSKawasho Corporation (the “Company”) and its domestic subsidiaries maintain their books of account in conformity with thefinancial accounting standards of Japan, and its foreign subsidiaries maintain their books of account in conformity with thoseof their countries of domicile.The accompanying consolidated financial statements of the Company and its consolidated subsidiaries (together the“Companies”) have been prepared in accordance with accounting principles and practices generally accepted and applied inJapan, which may differ in certain material respects from accounting principles and practices generally accepted in countriesand jurisdictions other than Japan, and are compiled from the consolidated financial statements prepared by the Company asrequired by the Securities and Exchange Law of Japan.The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of the readers, using theapproximate exchange rate at March 31, 2002, which was ¥133.25 to U.S. $1.00. These translations of convenience shouldnot be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, convertedinto U.S. dollars at this or any other rate of exchange.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of companies over which substantial control is exerteddirectly or indirectly either through majority ownership of voting stock and/or by other means. All significant intercompanybalances and transactions have been eliminated in consolidation.Investments in affiliates (companies over which the Company has the ability to exercise significant influence) are stated at costplus equity in their undistributed earnings or losses. Consolidated net income or loss includes the Company’s equity in thecurrent net income or loss of such companies after the elimination of unrealized intercompany profits.All assets and liabilities of the consolidated subsidiaries are revaluated on acquisition, if applicable, and any excess of costover the underlying net assets at the dates of acquisition is amortized over a period of five years on a straight-line basis if theexcess is material, or charged to income as incurred, if immaterial.b. Foreign Currency TranslationEffective April 1, 2000, the Company and its domestic subsidiaries adopted a revised accounting standard for foreign currencytranslation. Under the revised standard, all monetary assets and liabilities denominated in foreign currencies are translated intoJapanese yen at the exchange rate in effect on the respective balance sheet dates. Financial statements of foreign subsidiariesare translated into Japanese yen at historical rates for shareholders’ equity, and at the year-end rates for other balance sheetaccounts, net income and revenue and expense accounts. This change in accounting principle resulted in a decrease in lossbefore income taxes and minority interests of ¥80 million for the year ended March 31, 2001.Due to a change effective the year ended March 31, 2001 in the regulations relating to the presentation of translation adjustments,the Company has presented translation adjustments as a component of shareholders’ equity and minority interests inthe consolidated subsidiaries (instead of as a component of assets or liabilities) in the accompanying consolidated financialstatements for the year ended March 31, 2001.Since the accounting standard for foreign currency translation specified for trading companies was abolished effective April 1,2001, the Company recorded foreign exchange gains and losses for the year ended March 31, 2002 arising from transactionsinvolving goods bought and sold as a component of “Other” in “Other income and expenses” rather than as a componentof gross profit. The effect of this change was to decrease gross profits and operating income for the year ended March 31,2002 by ¥374 million ($2,807 thousand).36

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)c. Cash and Cash EquivalentsFor the purposes of the Cash Flow Statements, cash and cash equivalents comprise cash on hand, deposits with bankswithdrawable on demand, net of overdrafts, and all highly liquid short-term investments which are readily convertible to cashsubject to an insignificant risk of any changes in their value and which were purchased with an original maturity of threemonths or less.d. Investments in SecuritiesInvestments in securities are mainly stated at cost as determined by the moving-average method. Effective April 1, 2000, theCompany and its consolidated subsidiaries adopted a new accounting standard for financial instruments. The effect of theadoption of this new standard was to increase loss before income taxes and minority interests by ¥2,508 million for the yearended March 31, 2001.Under the new standard, trading securities are carried at fair value, and gain and loss, both realized and unrealized, arecharged to income. Held-to-maturity debt securities are carried at amortized cost. Marketable securities classified as othersecurities are carried at fair value with changes in unrealized gain or loss, net of the applicable income taxes, reported as aseparate component of shareholders’ equity. Non-marketable securities classified as other securities are carried at cost.As allowed under the new standard, the Company and its consolidated subsidiaries have postponed recording marketablesecurities classified as other securities at fair value until the year ending March 31, 2002. The effect on the consolidatedbalance sheet at March 31, 2002 of adopting this new standard was to increase net unrealized loss by ¥1,623 million($12,180 thousand), deferred tax assets by ¥2 million ($15 thousand), deferred tax liabilities by ¥89 million ($668 thousand),and minority interests by ¥6 million ($45 thousand) for the year ended March 31, 2002.e. InventoriesInventories are mainly stated at cost determined by the moving average method.f. DerivativesDerivative financial instruments are stated at fair value.g. Property and EquipmentProperty and equipment are carried at cost, except that one affiliate revalued its land pursuant to laws on land revaluation.Depreciation is provided by the declining-balance method over the estimated useful lives of the assets except for those heldby certain subsidiaries which apply the straight-line method. The straight-line method is applied to buildings acquiredsubsequent to April 1, 1998.h. Allowance for Doubtful ReceivablesUp to the year ended March 31, 2000, the Company and its domestic consolidated subsidiaries provided an allowance fordoubtful receivables principally at the estimated aggregate amount of probable bad debts plus the maximum amount permittedto be charged to income under the Corporation Tax Law of Japan.Effective April 1, 2000, the Company and its domestic consolidated subsidiaries adopted a new accounting standard for financialinstruments. Under this new accounting standard, the Company and its domestic consolidated subsidiaries have provided anallowance for doubtful receivables at the estimated aggregate amount of probable bad debts plus an amount calculated basedon their historical experience of bad debts. The effect of the adoption of this standard for financial instruments is disclosed ind. “Investments in Securities” on an aggregate basis.The foreign consolidated subsidiaries provide an allowance for doubtful receivables at the estimated aggregate amount ofprobable bad debts.37

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)i. Accrued Retirement BenefitsEffective April 1, 2000, the Company and its domestic subsidiaries adopted a new accounting standard for retirement benefits.In accordance with the new standard, accrued retirement benefits are provided based on the amount of projected benefitobligation reduced by pension plan assets at fair value at the end of the annual period.j. LeasesThe Companies lease certain equipment and fixtures under non-cancelable lease agreements referred to finance leases.Finance leases other than those which transfer the ownership of the leased property to the lessees are accounted for asoperating leases.k. Hedge AccountingThe Companies apply deferred hedge accounting to interest rate swaps to manage interest rate fluctuation risks based onthe Company's internal management rule.l. Interest CostThe Company capitalizes interest cost as a component of the acquisition costs of projects and land under development heldfor sale, if estimated acquisition costs are ¥500 million or more and development periods exceed one year.m. Income TaxesThe Companies recognize deferred income taxes arising from temporary differences between the tax basis of assets andliabilities and their reported amounts in the financial statements.n. Unrealized holding gains on landUnder the law on land revaluation and revised law on land revaluation, an affiliate company, which is accounted for by the equitymethod revaluated land held for its own use during the year ended March 31, 2002. The unrealized gain on land holdings, netof the applicable income taxes, is reported as a separate component of shareholders’ equity.o. Amounts Per ShareThe computation of basic net loss per share is based on the weighted average number of shares of common stock outstandingduring each year. The average number of shares used in the computation was 134,330 and 131,111 thousands for the yearsended March 31, 2002 and 2001, respectively.38

3. INVESTMENTS IN SECURITIESInformation regarding investments in marketable securities at March 31, 2002 is as follows:Millions of YenThousands of U.S. DollarsAcquisitioncostCarryingvalueUnrealizedgain (loss)AcquisitioncostCarryingvalueUnrealizedgain (loss)Securities whose carryingvalue exceeds their ofacquisition cost:Equity securities¥ 10,213¥ 13,219¥ 3,006$ 76,645$ 99,204$ 22,559Securities with a carryingvalue dosn't exceed theiracquisition cost:Equity securities13,74310,115(3,628)103,13775,910(27,227)Total¥ 23,956¥ 23,334¥ (622)$ 179,782$ 175,114$ (4,668)Information with respect to sales of investments in securities for the years ended March 31, 2002 and 2001 is summarizedas follows:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Sales¥ 1,656¥ 28,914$ 12,427Aggregate gain3949,1612,957Aggregate loss¥ 107¥ 7,730$ 803The carrying value of investments in non-marketable securities at March 31, 2002 and 2001 was as follows:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Unlisted equity securities¥ 9,385¥ 11,429$ 70,432Other18217135¥ 9,403¥ 11,646$ 70,56739

4. SHORT-TERM BORROWINGS AND LONG-TERM DEBTShort-term borrowings at March 31, 2002 and 2001 consisted of the following:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Short-term borrowings principally from banks at March 31, 2002¥ 212,211¥ 248,503$ 1,592,578and 2001 represent short-term notes with interest on the principalat average rates of 1.3% and 1.4% per annum, respectivelyCurrent portion of long-term debt36,28942,847272,338¥ 248,500¥ 291,350$ 1,864,916Long-term debt at March 31, 2002 and 2001 consisted of the following:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Unsecured loans from banks, insurance companies, government¥ 75,544¥ 106,863$ 566,935agencies and other financial institutions due through 2010, ataverage rates of 1.9% per annumSecured loans20,14327,076151,16795,687133,939718,102Less current portion(36,289)(42,847)(272,338)¥ 59,398¥ 91,092$ 445,764The aggregate annual maturities of long-term debt subsequent to March 31, 2002 are summarized as follows:Year ending March 31,200320042005200620072008 and thereafterMillions of Yen¥ 36,28919,4095,1062,29510,89521,693¥ 95,687Thousands ofU.S. Dollars$ 272,338145,65938,31917,22381,764162,799$ 718,10240

5. PLEDGED ASSETSThe assets pledged as collateral for long-term debt and guarantees at March 31, 2002 were as follows:Investments in securitiesLand, buildings and structuresOthersMillions of Yen¥ 11,88926,4666,008Thousands ofU.S. Dollars$ 89,223198,61945,088Short-term borrowings and long-term debt secured by such collateral at March 31, 2002 were as follows:Short-term borrowingsLong-term debtMillions of Yen¥ 7,60020,143Thousands ofU.S. Dollars$ 57,036151,16741

6. ACCRUED RETIREMENT BENEFITSThe funded and accrued status of the retirement benefit plans of the Company and its domestic subsidiaries at March 31,2002 and 2001 are summarized as follows:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Retirement benefit obligation¥ (60,779)¥ (52,913)$ (456,128)Fair value of plan assets25,54326,314191,693Unfunded retirement benefit obligation(35,236)(26,599)(264,435)Unrecognized net retirement benefit obligation at transition15,09816,385113,306Unrecognized actuarial gain or loss13,6944,807102,769Net retirement benefit obligation(6,444)(5,407)(48,360)Prepaid pension costs(26)Accrued retirement benefits reflected in the consolidatedbalance sheets¥ (6,444)¥ (5,433)$ (48,360)Note: Domestic subsidiaries have adopted a allowed alternative treatment of the accounting standards for retirementbenefits for small business entities.Retirement benefit costs of the Company and its domestic subsidiaries included the following components for the years endedMarch 31, 2002 and 2001.Millions of Yen2002 2001Thousands ofU.S. Dollars2002Service cost¥ 1,653¥ 2,125$ 12,405Interest cost1,7071,90912,811Expected return on plan assets(1,339)(1,646)(10,049)Amortization of net retirement benefit obligation at transition1,1813,4718,863Actuarial losses4453,340Net periodic benefit costs3,647¥ 5,859$ 27,370Assumption used in the accounting for the retirement benefit plans for the years ended March 31, 2002 and 2001 were asfollows:Method of attributing benefit to periods of serviceDiscount rateExpected rate of return on plan assetsAmortization period for net retirement benefitAmortization period for actuarial gain or lossStraight-line method2.4% for 2002 and 3.5% for 20015.3%Principally 15 years (some domestic subsidiariescharged to income in the year ended March 31,2001)Average remaining years of service perriod of theeligible employees from the following year42

7. INCOME TAXESIncome taxes applicable to the Company and its domestic subsidiaries comprise corporation tax, inhabitants’ taxes and enterprisetax which, in the aggregate, resulted in an aggregate statutory tax rate of approximately 42% for the years ended March31, 2002 and 2001.The significant components of deferred tax assets and liabilities at March 31, 2002 and 2001 were summarized as follows:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Deferred tax assets:Tax loss carryforward¥ 8,823¥ 5,271$ 66,214Loss on devaluation of inventories4,85336,420Loss on devaluation of investments in securities3,8033,93628,540Loss on devaluation of property and equipment2,08715,662Allowance for doubtful receivables2,0465,72815,355Unrealized inter-company profit on non-current assets1,7551,87913,171Others5,3283,53939,985Total28,69520,353215,347Less valuation allowance(14,211)(6,131)(106,649)Deferred tax assets¥ 14,484¥ 14,222$ 108,698Deferred tax liabilities:Unrealized holding gain on investments in securities89668Depreciation46Others8326623Total172721,291Net deferred tax assets¥ 14,312¥ 14,150$ 107,4078. CONTINGENT LIABILITIESContingent liabilities as of March 31, 2002 were as follows:Millions of YenThousands ofU.S. DollarsTrade notes discounted with banks and endorsed¥ 8,137$ 61,066Guarantees of loans to affiliates, third parties and employees5,19438,979Total¥ 13,331$ 100,0459. SHAREHOLDERS’ EQUITYThe Commercial Code of Japan provides that an amount equivalent to at least 10% of cash dividends and bonuses paid to directorsand statutory auditors, and exactly 10% of interim cash dividends paid be appropriated to the legal reserve until the sum ofadditional paid-in capital and the legal reserve equals 25% of common stock. The Code also provides that neither additionalpaid-in capital nor the legal reserve is available for dividends but both may be used to reduce or eliminate a deficit by resolutionof the shareholders or may be transferred to common stock by resolution of the Board of Directors. The Company’s legal reserve,which is included in retained earnings, amounted to nil and ¥1,610 million as of March 31, 2002 and 2001, respectively.43

10. LEASE TRANSACTIONSFinance leases other than those that transfer ownership(1) As lesseeTotal lease payments under finance leases other than those which transfer ownership were ¥626 million ($4,698 thousand)and ¥578 million for the years ended March 31, 2002 and 2001, respectively.Pro forma information on leased property such as acquisition cost and accumulated depreciation as of March 31, 2002 and2001 and depreciation expenses for the years then ended on an “as-if-capitalized” basis were as follows:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Acquisition costEquipment and fixtures¥ 2,807¥ 423$ 21,066Others1,4562,38710,927Less accumulated depreciation(1,391)(1,811)(10,439)2,87299921,554Depreciation expenses¥ 626578$ 4,698Future minimum lease payments as of March 31, 2002 were as follows:Millions of YenThousands ofU.S. DollarsWithin one year¥ 473$ 3,550More than one year2,39918,004Total¥ 2,872$ 21,55444

10. LEASE TRANSACTIONS (continued)(2) As lessorTotal lease receipts under finance leases were ¥3,864 million ($28,998 thousand) and ¥7,771 million for the years ended March31, 2002 and 2001, respectively.Information on leased property such as acquisition cost and accumulated depreciation as of March 31, 2002 and 2001 anddepreciation expenses for the years ended were as follows:Millions of Yen2002 2001Thousands ofU.S. Dollars2002Acquisition costEquipment and fixtures¥ 16,733¥ 32,407$ 125,576Others2,7682,19520,773Less accumulated depreciation(10,236)(22,130)(76,818)9,26512,47269,531Depreciation expenses¥ 3,716¥ 5,445$ 27,887Future minimum lease receipts as of March 31, 2002 were as follows:Millions of YenThousands ofU.S. DollarsWithin one year¥ 3,704$ 27,797More than one year6,37347,827Total¥ 10,077$ 75,624Operating leasesAs lessees under noncancelable operating leases, future minimum lease payments at March 31, 2002 were ¥197 million($1,478 thousand), of which ¥44 million ($330 thousand) were due within one year.As a lessor under noncancelable operating leases, future minimum lease receipts at March 31, 2002 were ¥115 million ($863thousand), of which ¥46 million ($345 thousand) were due within one year.11. DERIVATIVE FINANCIAL INSTRUMENTSThe Companies trade in derivatives based on currencies, interest rates, and commodities, primarily as a way of hedging therisk of future fluctuations in exchange rates, interest rates and commodity prices.The Companies have taken various steps, including the establishment of internal management rules, to ensure that transactionsare implemented, reported and monitored appropriately, and that risk is managed. The Companies do not hold and issue derivativefinancial instruments for trading purposes.45

11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)At March 31, 2002 and 2001, outstanding derivative transactions were as follows:(1) CurrenciesMillions of Yen20022001NotionalamountFairvalueUnrealizedgain (loss)NotionalamountFairvalueUnrealizedgain (loss)Forward exchangecontracts to sellU.S. Dollars¥ 2,373¥ 2,429¥ (56)¥ 1,348¥ 1,435¥ (87)Others2525078(1)Forward exchangecontracts to buyU.S. Dollars¥ 4,864¥ 5,055¥ 191¥ 4,399¥ 4,865¥ 466Others56757691,0951,219124Currency call optioncontract to buyFrench francs¥ ¥ ¥ ¥ 112¥ 1¥ 0Euro1420(1)NotionalamountThousands of U.S. Dollars (Note 1)2002FairvalueUnrealizedgain (loss)Forward exchangecontracts to sellU.S. Dollars$ 17,809$ 18,229$ (420)Others1881880Forward exchangecontracts to buyU.S. Dollars$ 36,503$ 37,936$ 1,433Others4,2554,32368Currency call optionto buyFrench francs$ $ $ Euro1,0660(8)Note: 1. Fair value of forward exchange contracts is based on quoted forward exchange rates.2. Fair value of currency option contracts is based on the price that is presented by counterparty financial institutions.3. The above figures exclude amounts of outstanding derivative transactions to which hedge accounting has been applied.46

11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)(2) Interest-rateMillions of Yen20022001NotionalamountFairvalueUnrealizedgain (loss)NotionalamountFairvalueUnrealizedgain (loss)Interest-rate capcontracts:Interest-rate capcontracts:Notionalamount¥ ¥ ¥ Thousands of U.S. Dollars (Note 1)2002FairvalueUnrealizedgain (loss)$ $ $ ¥ 5,000 ¥ (12)¥ (12)Note: The above figures exclude amounts of outstanding derivative transactions to which hedge accounting has been applied.(3) CommoditiesMillions of Yen20022001NotionalamountFairvalueUnrealizedgain (loss)NotionalamountFairvalueUnrealizedgain (loss)Forward contract:Foodsto sell¥ ¥ ¥ ¥ 24¥ 21¥ 3to buy4743(4)Future contract:Metalsto sell¥ 34¥ 34¥ (0)¥ 133¥ 138¥ (5)to buy3434(0)NotionalamountThousands of U.S. Dollars (Note 1)2002FairvalueUnrealizedgain (loss)Forward contract:Foodsto sell$ $ $ to buyFuture contract:Metalsto sell$ 255$ 255¥ (0)to buy255255(0)Note: 1. Fair value of forward contracts for foods is based on quoted market prices.2. Fair value of future contracts for metals is based on prices quoted by counterparties.3. The above figures exclude amounts of outstanding derivative transactions to which hedge accounting has been applied.47

12. SEGMENT INFORMATIONThe Companies’ activities include worldwide trading in various commodities and coordinating industrial projects on aninternational basis, along with finance and other services.Segment information by operation was as follows:Millions of YenSteelRaw Materials,Fuels andChemicalsFoods andCommoditiesMachineryConstructionand OtherEliminationsor CorporateConsolidatedYear endedMarch 31, 2002:Net sales:Outside customers¥ 687,789¥ 172,198¥ 108,668¥ 110,642¥ 46,633¥ ¥1,125,930Intersegment160188607071,430(2,545)Total687,949172,386108,728111,34948,063(2,545)1,125,930Operatingexpenses681,880170,161108,756111,38847,236(2,545)1,116,876Operating income(loss)¥ 6,069¥ 2,225¥ (28)¥ (39)¥ 827¥ ¥ 9,054Total assets¥ 279,019¥ 31,793¥ 29,342¥ 86,020¥ 114,652¥ 49,884¥ 590,710Depreciation andamortization2,29670638097,80758511,630Capitalexpenditures1,21647533464,8748077,343Year endedMarch 31, 2001:Net sales:Outside customers¥ 804,814¥ 175,924¥ 119,193¥ 130,473¥ 50,533¥ ¥ 1,280,937Intersegment3,04673838351,457(6,079)Total807,860176,662119,196131,30851,990(6,079)1,280,937Operatingexpenses800,893174,082120,871130,58351,609(6,079)1,271,959Operating income(loss)¥ 6,967¥ 2,580¥ (1,675)¥ 725¥ 381¥ ¥ 8,978Total assets¥ 320,243¥ 44,439¥ 36,167¥ 94,338¥ 175,552¥ 56,404¥ 727,143Depreciation andamortization5,32170748048,73262115,622Capitalexpenditures2,54560185198,1403,77615,05848

Thousands of U.S. DollarsSteelRaw Materials,Fuels andChemicalsFoods andCommoditiesMachineryConstructionand OtherEliminationsor CorporateConsolidatedYear endedMarch 31, 2002:Net sales:Outside customers$ 5,161,644$ 1,292,292$ 815,520$830,334$ 349,966$ $ 8,449,756Intersegment1,2001,4114505,30610,732(19,099)Total5,162,8441,293,703815,970835,640360,698(19,099)8,449,756Operatingexpenses5,117,2981,277,006816,180835,932354,492(19,099)8,381,809Operating income(loss)$ 45,546$ 16,697$ (210)$ (292)$ 6,206$ $ 67,947Total assets$ 2,093,951$ 238,597$ 220,203$ 645,553$ 860,428$ 374,364$ 4,433,096Depreciation andamortization17,2315264736,07158,5894,39087,280Capitalexpenditures9,1263533982,59736,5786,05655,108Assets in the “Eliminations or Corporate” column consist primarily of cash and cash equivalents and investments in securities ofthe Company. The amounts were ¥51,190 million ($384,165 thousand) and ¥59,936 million for the years ended March 31,2002 and 2001, respectively.Segment information by geographic area was as follows:JapanOther areasMillions of YenEliminationsor CorporateConsolidatedYear ended March 31, 2002Net sales:Outside customers¥ 1,008,190¥ 117,740¥ ¥ 1,125,930Intersegment28,97310,293(39,266)Total1,037,163128,033(39,266)1,125,930Operating expenses1,030,384125,875(39,383)1,116,876Operating income¥ 6,779¥ 2,158¥ 117¥ 9,054Total assets¥ 546,488¥ 88,584¥ (44,362)¥ 590,710Year ended March 31, 2001Net sales:Outside customers¥ 1,173,232¥ 107,705¥ ¥ 1,280,937Intersegment41,18410,376(51,560)Total1,214,416118,081(51,560)1,280,937Operating expenses1,207,125116,352(51,518)1,271,959Operating income (loss)¥ 7,291¥ 1,729¥ (42)¥ 8,978Total assets¥ 686,115¥ 91,026¥ (49,998)¥ 727,14349

JapanThousands of U.S. DollarsOther areasEliminationsor CorporateConsolidatedYear ended March 31, 2002:Net sales:Outside customers$ 7,566,154$ 883,602$ $ 8,449,756Intersegment217,43377,246(294,679)Total7,783,587960,848(294,679)8,449,756Operating expenses7,732,713944,653(295,557)8,381,809Operating income (loss)$ 50,874$ 16,195$ 878$ 67,947Total assets$ 4,101,223$ 664,796$ (332,923)$ 4,433,096The principal countries included in “Other areas” are U.S.A., China, Malaysia and Thailand.13. OVERSEAS SALESOverseas sales which include export sales of the Company and its domestic consolidated subsidiaries and sales (other thanexports to Japan) of its foreign consolidated subsidiaries, totaled ¥229,920 million ($1,725,478 thousand) and ¥251,856million, or 20.4% and 19.7% of consolidated net sales for the years ended March 31, 2002 and 2001, respectively.14. LITIGATION“Royal Palm Resort” in Guam, which was developed by Kawasho International (Guam), Inc. (hereinafter referred to as “KIG”),suffered extensive damage due to an earthquake on August 8, 1993. Since defects in design and construction were found afterthorough investigation of the cause of the collapse of the building, the Company, KIG and other unit owners brought a suit inGuam claiming damages (of more than $135 million) against general constructors, Mitsui Construction Co., Ltd., Ssang YongEngineering and Construction Company (Korea) and other parties concerned.The acquisition cost of land of $19 million (¥2,590 million at March 31, 2002 and ¥2,253 million at March 31, 2001) at “RoyalPalm Resort” was recorded as a component of “Land” in property and equipment presented on the consolidated balance sheetsas of March 31, 2002 and 2001. The Companies also recorded damage compensation receivable of $180 million (¥23,804million) and $175 million (¥20,176 million) at March 31, 2002 and 2001, respectively, as a component of “Others” in investmentsand other assets on the consolidated balance sheets as of those dates.On December 14, 2001, it is related with claim for damages among these lawsuit, jurors awarded against Mitsui ConstructionCo., Ltd. and Ssang Yong Engineering and Construction Company $73 million for faulty construction that led to the collapse ofthe building. Jurors awarded against Ssang Yong Engineering and Construction Company $73 million (same as claim fordamages) for exemplay damages at April 16, 2002.15. SUBSEQUENT EVENTSThe disposition of the Company’s retained earnings deficit of ¥13,472 million ($101,103 thousand) as of March 31, 2002being carried forward to the year ending March 31, 2003 was approved at a meeting of the shareholders of the Company heldon June 27, 2002.50

WORLD NETWORKASIAKoreaSEOUL BRANCHRm.No.1301, Dong-Hwa Bldg., 58-7Seosomum- Dong, Jung- ku, Seoul, R. of KOREATel 82-2-753-2713 Fax 82-2-752- 2862KAWASHO INTERNATIONAL KOREA LTD.Rm.No.1301, Dong- Hwa Bldg., 58 -7Seosomum- Dong, Jung - ku, Seoul, R. of KOREATel 82-2-755-1040 Fax 82 -2-755 -1042BUSAN OFFICERm.No.706, Dong Yang Bldg. 2- 4Dong Kwang- dong, Jung- ku, Busan 600, R.of KOREATel 82-51-246-5048 Fax 82- 51-255 -3265ChinaBEIJING REPRESENTATIVE OFFICEBeijing Fortune Building Room 2119,No.5 Dong San Huan Beilu,Chao Yang District, Beijing, 100004 P.R.of CHINATel 86-10 - 6590-8088 Fax 86-10- 6597- 8096DALIAN REPRESENTATIVE OFFICESenmao Bldg.,12F No.147 Zhongshan RoadXigang District, Dalian, 116012, P. R. of CHINATel 86- 411- 3603006 Fax 86-411-3603007DALIAN F.T.Z. KAWASHO CO., LTD.1209B Room Huineng Building,Free Trade Zone Dalian, P. R. of CHINAQINGDAO OFFICERm. 6A, Holiday Inn Hotel Xianggang Zhong Road,Qingdao City, P. R. of CHINATel 86- 532- 5777001 Fax 86-532- 5777002NINGBO OFFICENew Garden Hotel Office Building 10F, No.188,Jiefang South Road, Ningbo, Zhejiang, Sheng, 315000P. R. of CHINATel 86-574 - 8731-7700 Fax 86-574- 8730 - 0227SHANGHAI REPRESENTATIVE OFFICE14th Floor, Shanghai Senmao International Building,101 Yin Cheng East Road, Pudong New Area,Shanghai, 200120 P. R. of CHINATel 86-21- 6841-1100 Fax 86-21- 6841- 4112KAWASHO (SHANGHAI ) CO., LTD.Room No.902 Wai Gao Qiao Building,6 Jilong Rd., Wai Gao Qiao Free Trade Zone,Shanghai, P. R. of CHINAXIAMEN OFFICEUnit 2510, The Bank Centre No.189, Xiahe Road,Xiamen, Fujian, 361003, P. R. of CHINATel 86 - 592- 2680111 Fax 86-592 - 2680222KAWASHO INTERNATIONAL ( HONG KONG ) LTD.15/ F,88 Gloucester Road, Wanchai,Hong Kong, P. R. of CHINATel 852-2235 -9500 Fax 852-2529- 6834KAWASHO INTERNATIONAL ( HONG KONG ) LTD.GUANGZHOU REPRESENTATIVE OFFICERoom 3401 Metro Plaza, 183 Tian He BeuRoad, Guangzhou, 510075, P. R. of CHINATel 86- 20- 8755 -3558 Fax 86-20- 8755 -3555TaiwanTAIPEI BRANCHFormosa Plastic Bldg., B-8F 201,Tung Hwa N. Road, Taipei, TAIWANTel 886 - 2- 2712- 9973 Fax 886 -2-2712- 9881PhilippinesMANILA BRANCH20th Floor, Metrobank Plaza Sen. Gil J.Puyat Avenue Ext. Makati City, PHILIPPINESTel 63-2- 892-36-91 Fax 63 -2- 817- 26 -66KAWASHO PHILIPPINES, INC.20th Floor, Metrobank Plaza Sen. Gil J. Puyat AvenueExt. Makati City, PHILIPPINESTel 63 -2- 892- 94 -79 Fax 63 -2- 818 -12 -62MalaysiaKUALA LUMPUR BRANCHSuite 24. 07-12, 24th Floor, Wisma Cyclecarri,288, Jalan, Raja Laut, 50350,Kuala Lumpur, MALAYSIATel 60-3 -26910066 Fax 60 -3- 26928002KAWANDA CORPORATIONSuite 24. 07-12, 24th Floor, Wisma Cyclecarri,288, Jalan, Raja Laut, 50350,Kuala Lumpur, MALAYSIATel 60-3 -26982970 Fax 60 -3 - 26913360SingaporeSINGAPORE BRANCH3 Shenton Way, #16 -07/ 08, Shenton HouseSingapore 068805, R. of SINGAPORETel 65 -6220 -9188 Fax 65 -6225 - 967952

IndonesiaMiddle EastNorth AmericaJAKARTA REPRESENTATIVE OFFICEP.T.KAWASHO INDONESIA8th Floor,SUMMITMAS 1,JL Jend.Sudirman Kav.61- 62Jakarta, 12190 INDONESIA(JAKARTA REPRESENTATIVE OFFICE)Tel 62- 21- 252- 2741 (5lines) Fax 62-21- 252- 2742(PT.KAWASHO INDONESIA)Tel 62- 21- 252- 2743 (5lines)ThailandBANGKOK BRANCHKAWASHO CORPORATION (THAILAND), INC.Ramaland Bldg., 18th Floor, 952 Rama IV Road,Bangrak, Bangkok, 10500 THAILANDTel 66 -2- 632-9200 Fax 66-2- 632- 9720KAWASHO FOODS (THAILAND) CO., LTD.Ramaland Bldg., 18th Floor, 952 Rama IV Road,Bangrak, Bangkok, 10500 THAILANDTel 66-2- 632- 9740 Fax 66-2- 632- 9724VietnamHO CHI MINH REPRESENTATIVE OFFICESaigon Trade Center, Unit No. 111237 Ton Duc Thang St., Dist. 1 Ho Chi Minh City,VIETNAMTel 84- 8 -910 -1002 Fax 84- 8 -910 -1020MyanmarYANGON BRANCHRoom No.U-8 FORUM Business Centre 1A, Pyay Road,5-1/2 mile, Hlaing Township,Yangon, MYANMARTel 95 -1- 514406 Fax 95- 1- 514398IndiaMUMBAI REPRESENTATIVE OFFICEGITC 18 - B Nariman Bhavan, Nariman PointMumbai 400021, INDIATel 91- 22 -284 -3555 Fax 91-22- 283 -5580GOA REPRESENTATIVE OFFICE6th Floor Shiv Towers, Plot 14, Patto Plaza,Panaji, Goa 403001, INDIATel 91- 832-43-8061 Fax 91- 832-43-8064IranTEHRAN BRANCHNo. 149, Ostad Motahari Avenue, Tehran, 15766, IRANTel 98 - 21- 8743608 Fax 98 -21- 8744573CISRussiaMOSCOW REPRESENTATIVE OFFICEFlat 32A, Dom1, Mytnaya Ul., Moscow 117049RUSSIAN FEDERATIONTel 7-095 -230 - 0176 Fax 7-095 - 230 -2112OceaniaAustraliaKAWASHO INTERNATIONAL (AUSTRALIA)PTY., LTD.SYDNEY OFFICESuite 501, Level 5, 225 Miller Street,North Sydney NSW 2060, AUSTRALIATel 61-2- 9925- 0090 Fax 61-2- 9925 - 0744PERTH BRANCHLevel 10,QV.1 Building, 250 St George'sTerrace, Perth, W.A. 6000, AUSTRALIATel 61- 8 -9321-5252 Fax 61- 8 - 9321-9281BRISBANE OFFICELevel 24, AMP Place 10 Eagle StreetBrisbane QLD 4000, AUSTRALIATel 61-7-3303 - 8464 Fax 61-7-3303- 8503EuropeEnglandKAWASHO CORP. (U.K.) LTD.21 Garlick Hill, London EC4 2AU, U.K.Tel 44-20-7248 -4355 Fax 44-20-7248 -2045GermanyAmericaKAWASHO INTERNATIONAL ( U.S.A.) INC.NEW YORK OFFICE45 Broadway Atrium, 18th Floor,NEW YORK, NY 10006, U.S.A.Tel 1- 212- 841-7400 Fax 1- 212- 841-7465HOUSTON BRANCH10333 Richmond, Suite 810, Houston,TX 77042, U.S.A.Tel 1-713 - 952-2591 Fax 1-713 - 952-2595LOS ANGELES BRANCHOne World Trade Center Suite450 Long Beach, CA 90831 U.S.A.Tel 1-562-637-3500 Fax1-562-637-3501SEATTLE BRANCHSuite 411 Denny Bldg., 2200 6th Avenue,Seattle, WA 98121, U.S.A.Tel 1-206- 448 - 0488 Fax 1-206- 441- 6428South AmericaBrazilKAWASHO INTERNACIONAL COMERCIO DOBRASIL LTDA.RIO DE JANEIRO OFFICEc/o Kawasaki Steel Comercio e SiderurgiaLtda. Praia de Botafogo 228/ No. 509-Sector" B"Botafogo, Rio de Janeiro CEP 22.359 -900,RJ BRASILTel 55-21-2554 -5655 Fax 55-21- 2552- 8143VITORIA BRANCHRua Major Clarindo Fundao No.156,Bairro Praia de Canto, Vitoria, E.S. BRASILTel 55-27-3227-2142 Fax 55-27-3227- 5238SÃO PAULO BRANCHRua Bela Cintra 746 Conj. 31CEP 01415- 000 São Paulo SP BRASILTel 55 -11-3257- 0423 Fax 55 -11-3257- 4038KAWASHO INTERNATIONAL (EUROPE) GMBHOststrabe.1, 40211 Düsseldolf, GERMANYTel 49-211- 360660 Fax 49 -211-164916253

MAJOR OVERSEAS GROUP COMPANIESSteelDONGGUAN KAWASHO & KAWADENJISTEEL PRODUCTS CO., LTD.Wusha District, Changan Town, Dongguan,Guangdong Province, P. R. of CHINATel 86 -769-554-3072 Fax 86-769-554-3071Steel processingMERIDIAN CAPITAL LIMITEDRM. A, 15/F,88 Gloucester Road,WANCHAI,HONG KONGTel 852-2369-9057 Fax 852-2369 -8175Steel salesZHEJIANG KAWADENSTEEL PRODUCTS CO., LTD.86, Chengbei Road, Chengguan Town,Pinghu City, Zhejiang, P. R. of CHINATel 86-573-5015752 Fax 86-573 -5015905Steel processingQINGDAO SAMKYUNG KAWASHOPRECISION STEEL PRODUCTS CO., LTD.Qianjin-Cun Xifu-Zhen Chengyang, Qingdao,P. R. of CHINATel 86-532-7881294 Fax 86-532-7881295Steel processingKUO GEE INDUSTRIAL CO., LTD.39, Feng Ping 2nd. Road, Ta Liau Shiang,Kaohsiung Hsien, TAIWAN R.O.C.TEL 886-7-702-3621 FAX 886-7-701-1881Steel processingKAWASHO STEEL PHlLlPPlNES, lNC.107 Trade Avenue Laguna TechnoparkBarangay Loma Binan, Laguna, PHlLlPPlNESTel 63-49-541- 2404 Fax 63-49-541-2411Steel processingKAWASHO TUBE PHILIPPINES, INC.Lot3, Block5, First Cavite Industrial EstateBo. Langkaan, Dasmarinas, Cavite, PHILIPPINESTEL 63-46- 402-1341 FAX 63- 46 -402-1342Steel processingKOHWA PHILIPPINES,INC.6 Mountain DriveLight Industry and Science Park(LISP2)Special Export Processing Zone,Bgy. La Mesa, Calamba, Laguna, PHILIPPINESTel 63- 49-545- 6211 Fax 63-49- 545-6216Metal press processing and salesKAWASHO STEEL PROCESSlNG CENTRE SDN.BHD.PT5021Jalan 27/90 Section 27, Hicomlndustrial Area, 40400 Shah Alam, SelangorDarul Ehsan, MALAYSlATel 60-3-5191-1125 Fax 60-3-5191-1035Steel processingKURODA PRECISION INDUSTRIESMALAYSIA SDN.BHD.Lot 31, Jalan Pendamar27/90, Section27,Hicom Industrial Area, 40000 Shah Alam.Selangor Darul Ehsar, MALAYSIATEL 60-3-5192-5001 FAX 60-3-5192-4961Manufacturing of high-precision metal diesKAWARlN ENTERPRlSE PTE. LTD.144, Gul Circle, Jurong, SlNGAPORE 629603,R. of SlNGAPORETel 65-6861-5508 Fax 65-6861-3141Steel processingP.T.KAWASHO STEEL PROCESSlNGCENTER lNDONESlAMM2100 Industrial Town, Block B-4-2Cibitung, Bekasi 17520 JAWA BARAT, lNDONESlATel 62-21-8980903 Fax 62-21- 8980904Steel processingCENTRAL METALS (THAILAND) LTD.639 Moo 4 Soi 5 Bangpoo Industrial Estate,Sukhumvit Road, Tambon Preaksa, AmphurMuang, Samutprakarn 10280, THAILANDTel 66-2-324- 0721 Fax 66-2-324-0298Steel processingVEST INC.6023 Alcoa Ave., Los Angeles CA. 90058 U.S.A.Tel 1-323-581- 8823 Fax 1-323- 581-3465Welded steel pipe manufacturingKAWASHO STEEL ( U.S.A.) INC.One World Trade Center Suite 450Long Beach CA 90831 U.S.A.Tel 1-562- 637-3500 Fax 1-562-637-3501Steel salesKAWASHO STEEL de MEXICO, S.A.de C.V.Paseo Cucapah # 10515, Fracc.EI LagoTijuana, B.C. MEXICOTel 52-664-627-9091 Fax 52- 664 -627--9045Steel processingRaw materials, Fuels & ChemicalsK&K MOLDING, INC.LIMA Technolongy Center, Lipa City, Batangas, PHlLlPPlNESTel 63- 43-981-1000 Fax 63- 43- 981- 0914Engineering plastic molding and processingYOKOHAMA TIRE PHILIPPINES, INC.IE5, Csez, Clarkfield, Pampanga, PHILIPPINESTel 63-45-599 -3610 Fax 63- 45-599-3613Yokohama brand passenger car tire manufacturingFoods, General ProductsYINGKOU BORI FOODSTUFFS CO., LTD.Boluopu Town, Dashiqiao City, Liaoning, P. R. of CHINATel 86 - 417- 5377247 Fax 86- 417- 5377900Canned fruit and vegetable productionMARUSHIN CANNERIES(M)SDN.BHD.Plo 213 Jalan Timah Satu, Kawasan Perindustrian,81700, Pasir Gudang, Johor Darul Takzim, MALAYSlATel 60-7- 251- 4802 Fax 60-7 - 251-3307Food manufacturing and salesFOOD AND DRINKS PUBLIC CO., LTD.22 Sukhumvit 35, Wattana,Bangkok 10110, THAILANDTel 66-2- 260 - 9123 Fax 66-2- 260 -9131Food manufacturing and salesAMERICAN SOY PRODUCTS, INC.1474, North Woodland Drive, Saline, Michigan48176, U.S.A.Tel 1-734 - 429 -2310 Fax 1-734- 429-2112Food manufacturing and salesDALIAN VIKINGS FOOTWEAR CORP.Golden Stone Beach Dalian, 116116 P. R. of CHINATel 86 -411-790 - 0300 Fax 86-411-790-0400Shoes manufacturingANTHONY L., L.L.C.55 Mayfield Avenue, Edison, New Jersey 08837, U.S.A.Tel 1-732 -225 -3120 Fax 1-732-225-5407Men's business shoes salesMachinery, ElectronicsNEW BANGPOO MANUFACTURING CO., LTD.635 Bangpoo Industrial Estate, Soi 6,Sukhumvit Road., Tambon Preaksa, MuangDistrict, Samutprakarm 10280, THAILANDTel 66-2- 324- 0062 Fax 66-2-324-0278Steel structure manufacturingKAWASHO ENGINEERING SERVICES SDN.BHD.Suite 24. 07-12, 24th Floor, Wisma Cyclecarri, 288,Jalan Raja Laut, 50350 Kuala Lumpur, MALAYSIATel 60-3-2692-3921 Fax 60-3-2691-2546Mounting machinery maintenance and parts salesKAWASHO ENGINEERING SERVICES(THAILAND) LTD.Ramaland Building 18th Floor,952 Rama IV Road,Bangrak, Bangkok 10500, THAILANDTel 66-2- 632- 9731 Fax 66-2- 632 -9732Mounting machinery maintenance and parts salesKAWASHO ELECTRONICS SYSTEMSSHANGHAI CORPORATION13th floor Suntime Internaional Mansion,450Fushan Road Pudong, Shanghai, CHINATEL 86-21- 68765765 FAX 86-21-68757042Mounting machinery and parts salesConstruction and OtherCOLOMBO POWER (PRIVATE) LTD.103/8 Galle Road, Colombo 3, Sri LankaTEL 94-74-721666 FAX 94-74 -721666Independent power vending business54

COMPANY DATANameKAWASHO CORPORATIONEstablished January 5, 1954Head OfficesTokyo2-7-1, Otemachi, Chiyoda-ku, Tokyo 100-8070Tel: 81-3-5203-5055 Fax: 81-3-5203-5290Osaka2-4, Komatsubara-cho, Kita-ku, Osaka 530-8318Tel: 81-6-6315-4111 Fax: 81-6-6315-4359Websitehttp://www.kawasho.co.jpCapital18,039,919,350 yenEmployees 1,618Branches & Offices*22 domestic, 40 overseas in 18 countriesShares Total number of shares : 320,000,000Total number of shares issued : 235,365,187Number of shareholders : 11,450Principal shareholders* : Kawasaki Steel CorporationKawasaki Heavy Industries, Ltd.Mizuho Corporate Bank, Ltd.Kawasaki Kisen Kaisha, Ltd.Sumitomo Mitsui Banking CorporationThe Bank of Tokyo-Mitsubishi, Ltd.Tokyo Leasing Co., Ltd.Kawatetsu Life CorporationBank References*Mizuho Corporate Bank, Ltd.Sumitomo Mitsui Banking CorporationThe Bank of Tokyo-Mitsubishi, Ltd.The Daiwa Bank, LimitedShinsei Bank, Limited( As of March 31,2002,except as of April 1,2002 )*55

http://www.kawasho.co.jpThis annual report was produced from recycled paper.Printed in Japan