ANNUAL REPORT 2003
Year Ended March 31, 2003

Nippon Light Metal Company, Ltd.
NYK Tennoz Building,
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp

Printed in Japan

Corporate Data

ProfileSince its foundation in 1939, Nippon Light Metal Company, Ltd. has been constantly
involved with aluminum. Today, Nippon Light Metal is Japan’s sole fully integrated aluminum manufacturer with activities ranging from alumina smelting to fabrication ofvarious products.
Nippon Light Metal comprises four business segments: Aluminum Ingot andChemicals concerning the production of alumina and related chemicals and aluminum ingot; Aluminum Sheet and Extrusions involving the production of sheets andshapes; Fabricated Products and Others including the production of transportationrelated products, electronic materials, foil and powder; and Building Materials covering the production of residential and office building materials. Through thesesegments, Nippon Light Metal is actively engaged in a wide range of fields such as
automobiles and railroads, electric machinery and electronics, industrial products,
construction, and living necessities.
The NLM Group—the preeminent source of products and services combining
aluminum’s excellent characteristics with new functionality and added value that caterto pressing customer needs—delivers customer satisfaction and contributes to environmental protection.

Head Office

NYK Tennoz Building
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp
Phone: 03-5461-9333
Fax: 03-5461-9344
E-mail: nlmmaster@nikkeikin.co.jp
EstablishedMarch 30, 1939
Paid-In Capital¥39,085 million
Shares of Common Stock

Authorized: 1,600,000,000
Issued: 543,350,370

Consolidated Six-Year Summary................................................. 1
To Our Shareholders ................................................................. 2
Special Feature (President’s Interview) ....................................... 4
NLM Group Topics .................................................................... 7
Review of Operations ................................................................ 8
Financial Review ....................................................................... 10
Consolidated Balance Sheets ..................................................... 12
Consolidated Statements of Income ........................................... 14
Consolidated Statements of Shareholders’ Equity ...................... 15
Consolidated Statements of Cash Flows ..................................... 16
Notes to the Consolidated Financial Statements ......................... 17
Report of Independent Auditors ................................................ 28
Overseas Network ..................................................................... 29
Directors and Officers ............................................................... 30
Corporate Data ......................................................................... 31

Cautionary Statement
This annual report contains various projections and estimates. Important factors that could alter these projections and estimates include changes in the balance of aluminum supply and demand, fluctuations in the price of aluminum ingot andforeign exchange rates, as well as shifts in Japanese government policies and regulations. The Company cautions, therefore,that the projections and estimates contained herein involve risk and uncertainty, and that actual results could differ materially from those expressed or implied.
On the Cover:Top form left: “smelted aluminum” “crystal face of high-purity aluminum” “cleanroom” “etched circuit foil” “scene ofanalysis”, Middle: “slab”, Bottom: “melting furnace”

Nikkei Products Co., Ltd.
Household utensils(100%)

Namekawa Aluminum Co., Ltd.
(2.8%)

Nikkei Extrusions Co., Ltd.
Aluminum extruded products(100%)

Nikkei-Keiyu-Kai(2.4%)

Nikkei Aluminum Core Technology
Co., Ltd.
Aluminum extrusions and fabricatedproducts(100%)

UFJ Trust Bank, Ltd. (trust accounts)(2.3%)
Mizuho Bank, Ltd.
(2.3%)

Major Domestic AffiliatedCompanies

Shin Nikkei Company, Ltd.
Aluminum sashes, construction materials *Nikkei Panel System Co., Ltd.
Panel for pre-fabricated freezer/refrigerator and cleanroom(100%)

1

Number of Shareholders

54,705
Stock Exchange Listings

Contents

The Light Metal Educational
Foundation, Inc.
(2.9%)

Tokyo, Osaka and three otherdomestic stock exchanges
Transfer Agent of Common Stock

The Chuo Mitsui Trust & Banking Co., Ltd.
Last Shareholders’ Meeting

June 27, 2003

Major Shareholders(Percentage of Total Voting right)

Mizuho Corporate Bank, Ltd.
(5.2%)The Dai-ichi Mutual Life Insurance Co.
(5.2%)
Alcan Nikkei Asia Holdings Ltd.
(–%)

Nikkei ECAL Co., Ltd.
Housing for cellular and mobile
telecommunications base stations(100%)

Nippon Fruehauf Co., Ltd.
Aluminum vans, trucks, trailers,
containers(66%)

Aluminum Wire and Rod Co., Ltd.
Aluminum rough drawing wire
(58.3%)

Toyo Aluminium K.K
Aluminum foil, powder and paste(100%)
Riken Light Metal Industrial Co., Ltd.
Aluminum construction materials *Matsuo Industry Co., Ltd.
Aluminum castings and forgings *Nippon Electrode Co., Ltd.
Carbon for iron and steel blast furnaces
and for aluminum smelting, and othertypes of carbon(100%)*1 98%; Direct interest by NLM
2%; Interest held by Nikkei Sangyo Co., Ltd.

2

Nikkei Sangyo Co., Ltd.
Aluminum welding rods, various kindsof contract work
(98.6%)The Master Trust Bank of Japan, Ltd.
(trust accounts)(3.7%)

Nikkei Information System Co., Ltd.
Development, maintenance and operation of computer software(100%)

Asahi Mutual Life Insurance Co.
(2.9%)

Nikkei Logistics Co., Ltd.
Transport, warehousing *4*2 98.5%; Direct interest by NLM
1.5%; Interest held by Nikkei Logistics Co., Ltd.
*3 46%; Direct interest by NLM
44%; Interest held by Shin Nikkei Co., Ltd.
10%; Interest held by Nippon Fruehauf Co., Ltd.
*4 99.1%; Direct interest by NLM
0.1%; Interest held by Nikkei Sangyo Co., Ltd.

3

(As of March 31, 2003)31

Consolidated Six-Year Summary
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
Years ended March 31

Thousands of
U.S. dollars

Millions of yen
1998

1999

2000

2001

2002

2003

2003

For the year:
Net sales ..................................... ¥617,595 ¥569,036 ¥549,194 ¥565,223 ¥521,861 ¥514,042 $4,276,556
Operating profit (loss) ...............
(574) (4,153)
2,150
12,205 11,723 20,086
167,105
Net income (loss)....................... (11,846) (19,248) (14,096) (21,905) 1,518
7,116
59,201
At year-end:
Total assets .................................
Shareholders’ equity...................
Short-term borrowings andlong-term debt, includingcommercial paper ...................

716,753
131,836

640,989
93,481

605,346
100,509600,373 564,287 525,761 4,374,052
81,478 83,314 89,346
743,311333,052

340,445

310,891

298,256 289,872 254,759 2,119,459

Per share data (yen and dollars):
Net income (loss)....................... (¥ 22.07) (¥ 40.98) (¥ 31.01) (¥ 41.22) ¥ 2.79 ¥ 13.34 $Cash dividends............................
2.00
2.00
2.00
—
1.50
2.00
Shareholders’ equity...................
245.59232.18198.45149.96 153.36 167.01

0.11
0.02
1.39

Stock information (TSE) (yen and dollars):
Stock price:
High...................................... ¥480 ¥Low.......................................
133

1.05
0.60

199 ¥
112

199 ¥
66

116 ¥
69

147 ¥
59

126 $
72

Note: U.S. dollar amounts have been translated, for convenience only, at the exchange rate of ¥120.20 = U.S.$1.00. See Note 2 of the Notes to the Consolidated
Financial Statements.

Net Sales

Operating Profit (Loss)

Total Assets

750

20

750

600

15

600

450

10

450

300

5

300

150

0

150

0

1998 1999 2000 2001 2002 2003

Billions of yen

Years ended March 31-51998 1999 2000 2001 2002 2003

Billions of yen

Years ended March 31

01998 1999 2000 2001 2002 2003

Billions of yen

As of March 31

1

To Our Shareholders

Shigesato Sato President and CEO

I am pleased to report on the operating results for Nippon Light Metal Company, Ltd.
(NLM) and its consolidated group companies for fiscal 2002, the year from April 1, 2002,
to March 31, 2003, and explain the business issues facing the Group.
Operating Results
During the year under review, the aluminum industry saw total demand return to the four million ton level for the
first time in two years, fueled by recovery in IT-related demand and increased automobile production volumes inJapan that offset a continuing slump in demand for building materials. Although the Japanese economy continued toshow an underlying deflationary trend, and lackluster economic recovery in Japan and overseas brought an adverse
business environment, initiatives to develop demand for products that take advantage of the characteristics of aluminum bore fruit.
In these economic circumstances, the NLM Group delivered improved business performance. On a consolidated
basis, despite a decrease in net sales of 1.5% year on year to ¥514 billion owing to intensified competition in the
deflationary environment and lower metal trading volumes, new product introductions and other sales expansion
initiatives coupled with the implementation of groupwide cost cutting measures led to a ¥7.5 billion increase inordinary profit to ¥12.3 billion. Despite reporting substantial special losses in connection with various streamlining
measures, the Group posted a ¥5.6 billion increase in net income to ¥7.1 billion.
NLM declared a ¥0.5 per share increase in the dividend to ¥2.0. Management is aware that the dividend remains
at an insufficient level and will continue to work to improve the operating results and meet the expectations of ourshareholders.
Specifics of Improvements in Business Performance
The improved business performance during the year under review is proof that the Mid-Term Management Plan theGroup formulated and began implementing in November 2001 is steadily delivering results. The plan is aimed atfurther strengthening strong operations and boldly implementing structural improvements in poorly performing
operations to rapidly turn them into profitable businesses.
2

In fiscal 2002, earnings in the fabricated products category increased at the Group’s strong operations during atime of recovery in IT-related demand and increased automobile production volumes in Japan. In the materials category, we increased sales of both aluminum alloy ingots and sheet products in the growing markets such as theautomotive and electronics markets, contributing to the increase in earnings.
At the same time, we made great strides forward at problem operations. Rebuilding the Group’s building materials operation is an urgent task, and Shin Nikkei Company, Ltd. has moved into profit (on a non-consolidated basis)for the first time in six years on the strength of root-and-branch cost cutting, management streamlining, and profit
improvement efforts at its building materials operation.
Progress with Structural Reform
A review of structural reforms being implemented in line with the Mid-Term Management Plan indicates that, as
described above, tremendous results are being achieved at Shin Nikkei. In the aluminum extrusion operation as
well, during the first half of the year under review we disposed of two extrusion presses and related facilities, eliminating excess extrusion capacity and optimizing capacity for the Group as a whole.
As part of business rationalization measures, the Company spun off several operations and set them up as separate
companies. On October 1, 2002, the Company spun off its aluminum extrusion and fabricated products operation as
Nikkeikin Aluminum Core Technology Company, Ltd. and its panel systems operation as Nikkei Panel System
Company, Ltd. At the same time, we combined the Toyo Aluminum’s manufacturing and sales covering aluminum foil,
powder, and paste operations in a single business unit by transferring the manufacturing unit from NLM to Toyo
Aluminum K.K. The purpose of these moves was to create a business structure that enables each operation to compete more effectively in the marketplace, and the results are already reflected in business performance in fiscal 2002.
A typical example of how we are nurturing strong operations is the introduction of FLEXCAST technology, a continuous casting technology, which revolutionizes the aluminum sheet fabrication process.
A review of cash flows is useful in illustrating progress made with measures implemented to strengthen the Group’s
financial structure. An increase in cash flows from operating activities and the generation of own funds through thedisposal of assets made possible a ¥36.5 billion reduction in interest-bearing debt, resulting in a balance of ¥258.8
billion at fiscal year-end. This has put the Group ahead of schedule for achieving the target of reducing interest-bearing debt to under ¥200 billion at the end of fiscal 2006, the final year of the Mid-Term Management Plan.
Outlook for Fiscal 2003
The current forecast for the coming year is for consolidated net sales of ¥510 billion and consolidated ordinary
profit of ¥13 billion. Although management anticipates continuing uncertainty in the overall economic environmenton account of deflation and concerns about a global economic slowdown, we intend to increase profitability anddeliver higher profits by implementing various cost cutting measures and increasing sales of new products.
I look forward to the continuing support and understanding of our shareholders as we drive toward our goals.
June 2003

Shigesato Sato
President and CEO
3

Special Feature
President’s Interview
Nippon Light Metal Group Today and Tomorrow
President Shigesato Sato answers questions about Nippon Light Metal Group’s structuralreforms and progress made with the Mid-Term Management Plan.
The Mid-Term Management Plan was launched in fiscal 2002. Please describe the basic thinking
behind the plan and the measures implemented during the year.

First of all, I’d like to briefly explain the contents of the Mid-Term Management Plan. The purpose of theplan is to make the NLM Group a cluster of highly profitable businesses. To realize that objective, I believed
it was necessary to make strong businesses stronger, to implement structural reform in poorly performing
businesses, to reduce overall costs, to develop new products, and to improve the Group’s financial position.
We have established action plans and numerical targets to ensure the implementation of these measures.
One important management measure implemented in fiscal 2002 in keeping with these principles was tospin off the aluminum extrusion and fabricated products operation, the panel systems operation, and the
Toyo Aluminum’s aluminum foil, powder, and paste operations into subsidiaries. The thinking behind all
three corporate separations was that creating a structure that enables each operation to compete more
effectively in the marketplace, could be better achieved if they were repositioned as independent entities
instead of remaining part of NLM, the parent company. As a result, they will be able to take advantage of
their distinctive characteristics and fully demonstrate their earning potential.
What will change due to the corporate separations?

I’ll explain the plan for each operation. With regard to the aluminum extrusion and fabricated products
operation, in the stage prior to the spin off we disposed of two extrusion presses and related facilities,
resized the workforce, and reduced total costs. We then combined the extrusion and fabricated products
operations and established Nikkeikin Aluminum Core Technology Company, Ltd. At that time,
we sought to change the corporate culture through such means as the operation of business units corresponding to specific market sectors and the introduction of a performance-based human resources system.
Our panel systems operation is a business that engages in the design, manufacture, sale,and installation of panels for commercial freezers and refrigerators and panels forclean rooms. Although we already have secured a solid position as the industry
leader in this business, I thought that to prevail in competition against rivals thatare medium-sized enterprises we had to change to an organization adapted to therequirements of the market. For this reason, we decided to operate this businessthrough specialist company Nikkei Panel System Company, Ltd.
The primary objective in spinning off the Toyo Aluminum operation was toensure efficient operation of the business by combining manufacturing and sales.
Until the time of the corporate separation, the business was structured such thatthe manufacturing unit was a part of NLM and Toyo Aluminum K.K. was responsible for sales and product development. Over the years, this operation has brought
to market a succession of advanced aluminum foil, powder and paste materials.
To reinforce this strength, we combined product development, manufacturing
and sales in a single organization that responds to customer needs.
4What progress has been made with the first of the fiveaction plans: improving Shin Nikkei Company, Ltd.?

The three key points concerning the improvements Shin Nikkei
is currently implementing are thoroughgoing cost cutting,increasing customer satisfaction, and enhancement of productcompetitiveness.
First, let’s look at cost reductions. Shin Nikkei’s annual
sales are about ¥150 billion, and its purchases and outsourcing costs are the highest in the Group. In suchcircumstances, it is normal business practice to seek to implement sweeping cost cutting. That prompted us
to launch the V Project consisting of various cost cutting programs. The results of those programs have without question propped up Shin Nikkei’s business performance.
Next, we changed the organization to combine manufacturing and sales into a single business unit. We
had previously introduced the business unit operating structure, but the commercial building materials,
housing materials, and exterior materials business units were responsible only for sales, and the manufacturing unit was under separate management. While greater efficiency is one aim of the organizational
reform, the most important target is enhancement of customer satisfaction. In the market we are engaged in
an all-out battle involving product function, quality, delivery time, and cost. I thought that it is precisely theoperational and organizational capabilities attained through alignment of development, production, andsales that make it possible to strengthen front-line selling power and enhance customer satisfaction.
I think the importance of product competitiveness goes without saying. In our building materials operation we must compete against numerous rivals. In this business what is important is to introduce highly
competitive new products in a timely manner and earn the satisfaction of more customers than the competitors. In product development, Shin Nikkei has advanced technological capabilities in the area of building
materials, and we will also take advantage of the technical resources of the Group as a whole. We will utilize
these capabilities to create and introduce into the market products that will deliver customer satisfaction.
During the year under review Shin Nikkei moved into profit on a non-consolidated basis for the first timein six years. Although by no means at a satisfactory level, the profits are proof that steady improvement isbeing made at Shin Nikkei.
Are the action plans Making Strong Businesses Stronger and Developing Strong Businesses—
Creating New Products and Businesses progressing satisfactorily?

Yes, they are. Let’s consider areas other than the previously discussed Toyo Aluminum and Nikkei Panel
Systems initiatives. In the materials category, the Group is establishing solid positions in the industries inwhich we are active for the alumina and chemical products operation and the aluminum alloy operation. In
the processed products category, we are building strong positions for the van and truck outfitting operationof Nippon Fruehauf Company, Ltd. and the operation of anodized aluminum foil for electrolytic capacitors.
With regard to investments for business expansion, the Group decided to introduce FLEXCASTER, a continuous caster, to produce aluminum sheet product. FLEXCASTER is an innovative technology NLM jointly
developed with Alcan International of Canada for more than a decade. This strategic investment enables
NLM’s aluminum sheet business to enter new market segments, particularly that for automotive applications,which is expected to grow in coming years. This technology also makes it possible to make distinctive
5

products for markets other than the automotive sector. This caster is world-class, technologically superior
equipment, and I expect it to become a pillar to support future growth.
What is the situation with organizational initiatives and specific results in the areas of new productdevelopment and new business creation?

Since 1999 the NLM Group has engaged in lateral activities that enable business operation that cuts acrossdivisional or company boundaries and makes the market the central point of focus. To make these activities
organizational initiatives, in April 2001 we established the Strategic Committee for ProductCommercialization and Business Development. The purpose of this organization is to integrate the intellectual assets and information collected at various locations in the Group and to develop and commercialize“market-in products” (products to be developed through close and deep involvement in the market), an
area in which the Group had been deficient. The lateral activities are currently divided into several project
teams: the Automotive Group, the Rail & Road Group, the Architectural Structure Group, and the Electrical &Electronics Group.
In the automotive sector, commercialization of products, mainly suspensions and other underbody products, is progressing. Some products have already been incorporated in automobiles. Regarding aluminumbuilding construction materials, a sector in which we havepioneered the introduction of new products in line withrevisions to the law, we have received numerous inquiries
about aluminum interior stairways. This product does not
involve mere substitution of materials, but utilizes thetruss method to realize excellent design characteristics
and open interior space. In fiscal 2003 and beyond, weplan to step up the pace and aggressively introduce new
products onto the market based on the management policy of “No profit increase without new products.”

Five Action Plans
1) Revitalizing Revitalize the Building Materials Products Business (Shin Nikkei)2) Improving Improve the Structure of the Extrusion Business
3) Reducing Reduce Overall Costs
4) Making Make Strong Businesses Stronger
5) Developing Develop Strong Businesses (Creating New Products and Businesses)
Consolidated Financial Targets for Fiscal 2006
Net sales: ¥590 billion
Operating profit: ¥32 billion
Ordinary profit: ¥23 billion
ROCE (Return on capital employed): Greater than 8%
Interest-bearing debt: ¥200 billion (a reduction of ¥100 billion from September 30, 2001
6

NLM Group Topics
The Introduction of FLEXCAST Continuous Caster

NLM Enters the Market for Automotive Materials
To enter new market segments, primarily that for automotive applications, NLM has decided
to introduce a FLEXCASTER continuous casting line the Kambara Complex, Shizuoka prefecture. Capital investment for the project amounts to ¥3 billion.
FLEXCASTER, a technology jointly developed by NLM and Alcan International of Canada, isan extension of Alcan’s patented technology. This technology will enable NLM to produce
high-quality sheet with excellent characteristics and, moreover, lead to drastic energy savingin the sheet fabrication process. FLEXCASTER is also adaptable for aluminum alloys with highmagnesium and high iron content, an application no other continuous casting technology canemulate. NLM will be the only company in the world to possess this groundbreaking aluminum fabrication technology.
FLEXCASTER produces aluminum slab in coil form by pouring molten metal through a
gap between two metallic belts. After casting, the coil will be transported to NLM’s Nagoya
Works for cold mill operation to roll it down to the final gauge and then shipped to NLM’scustomers.
This project is expected to raise the sales volume of sheet produced at Nagoya Works to
10,000 tons per month in fiscal 2006. Installation of the equipment began in July 2003.
Production is scheduled to start in July 2004 by Nikkei Techno Cast Company, Ltd., a wholly
owned subsidiary of NLM.
It is forecast that the consumption of aluminum per car will increase in coming years. For
this to happen, the aluminum industry will need to find new applications for sheet and extrusion products, particularly for flat sheet. Since issuing a press release on FLEXCASTER in
March 2003, NLM has received numerous inquiries. All the indications are that business is
poised for expansion.

Pinch rolls

ShearsCoilerHolding furnace

casting equipment

Trimmer7

Review of Operations

Aluminum Ingot and Chemicals

Aluminum Sheet and Extrusions

Shipments of many
items of Alumina
and Chemicals
Operations were
firm: demand forgeneral-purpose
products such asalumina and aluminum hydroxide
for flame retardants
was particularlyrobust, and volumes of low-soda alumina used as a basematerial for electro-ceramics and white aluminum hydroxide used in artificial marble were also favorable.
Nevertheless, intensified competition brought sharp declines
in selling prices, and sales declined. Sales of chemicals
decreased. Although shipments of fluoride increased,
demand for coagulants and soda chloride used in the paperindustry and at water treatment plants fell. Sales oforganochloride also fell year on year affected by imports inthe agricultural chemicals, pharmaceuticals and resins sectors as well as fire at the dichlorobenzene plant. As a result,sales of alumina and chemicals operations declined 7.0%
year on year to ¥25.6 billion. In fiscal 2002, a sudden jumpin prices of heavy oil, the principal fuel of these operations,caused a marked increase in production costs. Despite allout implementation of cost cutting measures by means ofimprovements in transport and distribution and in productivity, the higher fuel costs greatly reduced profitability.
In Aluminum and Aluminum Alloy Operations, strong
exports of automobiles to North America fueled an increasein shipments to the mainstay automotive sector. However,shipments to Southeast Asia fell sharply due to the disposition of joint venture businesses in Thailand and Malaysia.
Consequently, sales fell 2.4% year on year to ¥55.9 billion.
As a result of these developments, sales in the Aluminum
Ingot and Chemicals Segment declined 3.9% year on year to¥81.5 billion, and operating profit fell 11.5% to ¥4.9 billion.

In Aluminum Sheet
Operations, a falloff
in shipments ofprinting plates wasoffset by a recovery
in demand from ITrelated industries
that fueled strong
shipments of aluminum foil stock
for capacitors andaluminum plate for liquid crystal manufacturing equipment
and a sharp year-on-year increase in sales in the transport
sector due to heightened needs for light-weight materials. As
a result, sales of aluminum sheets increased.
In Aluminum Extrusion Operations, slumping demand
led to lower sales of building materials, the largest source ofdemand. However, a recovery in IT-related demand brought
an increase in shipments of pipe stock. This, coupled withefforts to increase sales of highly processed truck and automobile components, led to an increase in sales.
As a result, sales in the Aluminum Sheet and Extrusions
Segment rose 7.6% year on year to ¥58.4 billion.
Profitability also improved, and an operating profit of ¥1.0
billion was posted.

8

Fabricated Products and Others
In Aluminum Foil,
Aluminum Powder
and Paste
Operations, arecovery in demand
from IT-relatedindustries during
the first quarter
brought about asharp increase insales of high-purity
aluminum foil for capacitors, and volumes of general-purpose foil also developed favorably centering on applications
for food products. Shipments of aluminum paste for automobile paints rose owing to increased demand for metallic
colors and higher sales of new colors, contributing to asales increase of aluminum powder and paste.
In Transportation-Related Operations, sales from the vanand trailer equipping business increased year on year, bene-fiting from a recovery in the number of medium-duty truck
registrations from the second half onward due to diesel
engine exhaust regulations in Tokyo and the three surrounding prefectures. Sales of automobile-related components roseyear on year, supported by buoyant shipments of air conditioner capacitors (Parallel from condensers with integrated
receivers) due to strong sales of compact cars. In the shaped
parts business, although focused effort to acquire new orders
led to an increase in sales of automotive products, shipmentsof mainstay brake calipers and scroll compressors for air
conditioners slumped and sales fell slightly from the prioryear level. Nevertheless, higher shipments of highly profitableparts for two-wheeled vehicles and reductions in fixed costs
resulted in a sharp improvement in profits.
Regarding Electronic Materials Operations, anodized aluminum foil for electrolytic capacitors is used as a principal
material in aluminum electrolytic capacitors, a multipurpose
component in electronics products. NLM manufactures
anodized aluminum foil at the Kambara Complex, which isequipped with hydroelectric power generation facilities.
During fiscal 2002, the product demand staged a rapid recovery as a result of the completion of the large-scale inventory
adjustment in the IT-related sector in the previous year that,
coupled with aggressive customer satisfaction enhancement
activities such as greater ability to meet delivery date requirements, led to a sharp increase in sales year on year.
Sales of Panel Systems Operations fell. Although sales ofpanels for commercial freezers and refrigerators for convenience stores developed favorably, a decline in capital investment propensity among users in a deflationary recession
brought lower overall shipments to other sectors. Also, continued lackluster demand coupled with the effect of overseas
relocation on the part of some users brought a sharp yearon-year decrease in sales of clean rooms.
Regarding other fabricated products and related businesses, sales of containers (aluminum mini-kegs for beer)increased year on year despite harsh business conditions
occasioned by the continuing increase in the sales ratio of
low-malt beer. During fiscal 2002 NLM introduced into themarket a new product that takes advantage of proprietary
technologies it nurtured over the years as the pioneer of aluminum mini-kegs for beer for people who want to drink
genuine draft beer at home. The beer mini-keg and dedicated server for Kirin Tarunama System an innovative productthat features a beer extraction and head formation structurecomparable to that of servers for commercial use. The introduction of this product contributed greatly to the increase incontainer sales.
Overall sales decreased in the temporary construction
and industrial materials category. Amid a continuing slump
in demand from the railway car and truck transport sector,
our marketing activities that responded to the social needfor low-weight materials to promote increased fuel efficiency
bore fruit and we achieved sales at the same level as the year
before. However, slumping demand in the civil engineeringand construction sector brought lower sales.
Sales of other products were sluggish overall owing toprice deterioration amid the business recession and deflationary trend.
As a result of these factors, sales in the FabricatedProducts and Others Segment fell 1.7% year on year to¥204.2 billion. Operating profit decreased by 16.2% year on
year to ¥11.1 billion.
Building Materials
In the Building
Materials Segment,
although new startsof rental housing
increased during
fiscal 2002, startsof owner-occupied
homes and condominiums declined.
Housing starts were
below 1.15 million,
down 2.4% at 1.146 million, the third consecutive year of
decline. In this operating environment, we bolstered our“market-in” business framework that combines manufacture and sales and implemented cost reduction measures.
Cost cutting was achieved by means of savings in the areas ofpurchasing and physical distribution and through quality
improvements. At the same time, in the housing construction
materials sector we worked to increase sales of differentiated products with competitive advantage. In the commercial
building construction materials sector we implemented
measures to boost profitability, such as aggressively engaging
in profit-oriented sales activities.
The impact of lower sales volumes and selling price deterioration in connection with slumping demand resulted in a
3.0% decrease year on year in sales in the building materials
segment to ¥170.0 billion. We achieved a dramatic improvement in operating profit, which increased 17.9 times overthe prior-year level to ¥5.9 billion.
9

Financial Review

Overview
During the first half of fiscal 2002, the year ended March 31,
2003, the Japanese economy exhibited a modest recovery
led by foreign demand thanks to robust exports to the UnitedStates and Asia. However, in the second half, the economic
outlook became increasingly uncertain due to weak stock
prices in Japan, concern about the slowing U.S. economy
and the rising tension over Iraq.
For the aluminum industry, although the businessenvironment remained challenging in the constructionrelated and certain other fields, total demand surpassed thelevel of the previous fiscal year, because greater use ofaluminum in automotive and other transport-related fields
together with a sharp recovery in IT-related demand pushed
shipments higher.

The cost of sales decreased 2.1% or ¥8.7 billion fromthe previous fiscal year to ¥410.4 billion ($3,415 million),and the cost of sales ratio decreased 0.5 percentage points
to 79.8%. Cutting of overall costs, including logistics costs
and labor costs, led to a 8.2% or ¥7.4 billion decline inselling, general and administrative expenses to ¥83.5 billion($695 million). As a result, operating profit surged 71.3%
or ¥8.4 billion from the previous fiscal year to ¥20.1 billion($167 million).
Non-operating income increased 7.1% or ¥591 million
to ¥8.9 billion ($74 million). Non-operating expenses rose
9.4% or ¥1.4 billion to ¥16.7 billion ($139 million) due to a
¥1.0 billion increase in the loss on disposal of inventories.
As a result, ordinary profit jumped 156.5% or ¥7.5
billion from the previous fiscal year to ¥12.3 billion ($103
million). The Company reported a gain on sale of fixed
assets amounting to ¥2.3 billion ($19 million), due to saleof the former Osaka Plant site, as a special gain. On theother hand, special losses amounted to ¥8.0 billion ($66
million), having increased by ¥7.5 billion from ¥463 million
recorded in the previous fiscal year. Special losses included
additional retirement allowance for early retirement
program amounting to ¥3.4 billion, as well as a ¥2.2 billion
loss on disposal of fixed assets, a ¥2.0 billion loss on

Earnings and Expenses
In these circumstances, consolidated net sales of the NLMGroup were ¥514.0 billion ($4,277million), having
decreased 1.5% or ¥7.8 billion from the previous fiscal year,
reflecting a decline in selling prices due to deflationarypressure and lower volumes. Please refer to the Review ofOperations (Pages 8 and 9) for an overview of the results ofoperations.

Net Sales By Segment

Total Shareholders’ Equity

750

150

20

600

120

16

450

90

12

300

60

8

150

30

4

0

1999

2000

2001

2002

2003

*including intersegment transactions
Billions of yen
Years ended March 31
Aluminum Ingot and Chemicals
Aluminum Sheet and Extrusions
Fabricated Products and Others
Building Materials

10

0

1999

Billions of yen

2000

2001

2002

2003

As of March 31

Equity Ratio

0

%

1999

2000

2001

2002

2003

As of March 31

devaluation of investment securities, and a ¥0.5 billion prioryear severance costs for directors and statutory auditors.
The total amount of current and deferred income taxes
decreased by ¥4.9 billion from the previous fiscal year. Thisdecrease was the result of lower income tax payments in linewith adoption of the Japanese consolidated taxation system
and increased deferred tax assets as a result of calculation of
lump-sum taxes for all the companies subject toconsolidated taxation. Consequently, consolidated net
income soared 368.8% or ¥5.6 billion ($47 million) fromthe previous fiscal year to ¥7.1 billion ($59 million). The
average number of shares outstanding during the fiscal year
decreased from 543,320,940 shares in fiscal 2001 to
530,380,188 shares in fiscal 2002. As a result, net income
per share of common stock was ¥13.34 ($0.11), having
increased 378.1% or ¥10.55 from the previous fiscal year.
Payment of cash dividends of ¥2.0 per share of common
stock, ¥0.5 higher than for the previous fiscal year, wasapproved by resolution of the general meeting ofshareholders of the Company held on June 27, 2003.
Assets, Liabilities and Shareholders’ Equity
Total assets were ¥525.8 billion ($4,374 million), 6.8% or¥38.5 billion less than at the end of the previous fiscal year.
The decline were mainly attributable to the fact that the last
day of the previous fiscal year fell on a holiday, which was
not so in the case of the fiscal year under review, and to
disposal of two extrusion presses and related facilities at
Kambara Complex.
Total liabilities were ¥433.3 billion ($3,604 million),
9.1% or ¥43.3 billion less than at the end of the previous
fiscal year. This decrease was also attributable to the factthat the last day of the previous fiscal year fell on a holiday
as mentioned above, and to a decrease in corporate bonds
due to redemption. As a result, interest-bearing debt
decreased 12.1% or ¥35.1billion to ¥254.8 billion ($2,119
million).
Minority interest in consolidated subsidiaries was ¥3.2
billion ($26 million), 27.8% or ¥1.2 billion lower than at
the end of the previous fiscal year. Shareholders’ equity rose
7.2% or ¥6.0 billion ($50 million) to ¥89.3 billion ($743

million). This rise was due to an increase in retained
earnings because the Company recorded net income.
Shareholders’ equity per share of common stock amounted
to ¥167.01 ($1.39), up ¥13.65 from the end of the previous
fiscal year. The equity ratio was 17.0%, an improvement of
2.2 percentage points.
Cash Flows
Cash and cash equivalents at the end of the fiscal year were
¥44.7 billion ($371 million), down 6.2% or ¥2.9 billion
from the end of the previous fiscal year.
Net cash provided by operating activities amounted to¥33.5 billion ($279 million), having increased by 25.6% or¥6.8 billion. Cash flows from investing activities experienced
a turnaround from the outflow in the previous fiscal year to
an inflow, and net cash provided by investing activities
totaled ¥224 million, compared with net cash used forinvesting activities amounting to ¥12.3 billion in the previous
fiscal year. This upturn was attributable to reporting ofproceeds from sale of fixed assets and from liquidation of anaffiliated company. Net cash used for financing activities
amounted to ¥36.5 billion ($304 million). This figure is287.7% or ¥27.1 billion greater than the figure for theprevious fiscal year. This was due to the fact that there was apositive net balance of ¥16.2 billion between the proceedsfrom long-term debt and payments of long-term debt as well
as redemption of corporate bonds amounting to ¥47.0
billion.
Prospects for Fiscal 2003
Adhering to our management policy of “No profit increase
without new products,” we are accelerating the introductionof new product and the development of new businesses
intended to become the driving force for sustainable growth.
We intend to pursue growth by bringing all our resources
into full play. For fiscal 2003, on a consolidated basis we
forecast net sales of ¥510.0 billion, ordinary profit of ¥13.0
billion and net income of ¥9.0 billion. Net income per shareof common stock is expected to be ¥16.83. We plan to pay
out year-end cash dividends of ¥2.5 per share of common
stock, ¥0.5 higher than for fiscal 2002.

11

Consolidated Balance Sheets
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
As of March 31, 2002 and 2003

Thousands of
U.S. dollars(Note 2)Millions of yen

ASSETS
2002
2003
Current assets:
Cash and deposits (Notes 3 and 6) .............................................................. ¥ 48,755 ¥ 45,227
Notes and accounts receivable—trade (Notes 6 and 14) ............................ 172,598
157,189
Inventories (Note 4) ...................................................................................
73,381
68,027
Deferred income taxes (Note 8) ..................................................................
4,324
5,472
Other current assets (Note 3) .....................................................................
10,644
13,653
Allowance for doubtful accounts .................................................................
(3,889)(2,485)
Total current assets ..................................................................... 305,813
287,083$ 376,265
1,307,729
565,948
45,524
113,586(20,674)
2,388,378

Fixed assets:
Property, plant and equipment (Note 6)—
Buildings and structures ........................................................................ 136,737
Machinery and equipment ..................................................................... 302,900
Land ......................................................................................................
64,784
Construction-in-progress .......................................................................
2,800
Accumulated depreciation ..................................................................... (310,540)
196,681

134,158
271,071
66,101
3,082(289,906)
184,506

1,116,123
2,255,166
549,925
25,641(2,411,863)
1,534,992

3,941

4,414

36,72238,515
8,237
19,143(8,043)57,852
258,474

32,153
9,495
12,782(4,672)49,758
238,678

267,496
78,993
106,339(38,868)
413,960
1,985,674

Total assets ................................................................................... ¥ 564,287¥ 525,761$4,374,052

Intangible fixed assets .................................................................................

Investments and other assets:
Investment securities (Notes 5 and 6) ...................................................
Deferred income taxes (Note 8) ............................................................
Other assets ...........................................................................................
Allowance for doubtful accounts ...........................................................
Total fixed assets .........................................................................

The accompanying notes are an integral part of these statements.

12

2003

LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
Millions of yen
SUBSIDIARIES AND SHAREHOLDERS’ EQUITY
2002
2003
Current liabilities:
Short-term borrowings (Note 6) ................................................................. ¥103,630 ¥ 99,403
Current portion of long-term debt (Note 6) ................................................
75,677
48,714
Notes and accounts payable—trade ............................................................ 112,569
97,953
Other current liabilities (Note 8) ................................................................
42,856
48,567
Total current liabilities .................................................................... 334,732
294,637
Long-term liabilities:
Long-term debt (Note 6) .............................................................................
Accrued pension and severance costs—
for Employees (Note 7) .........................................................................
for Directors and statutory auditors .......................................................
Negative goodwill ........................................................................................
Other long-term liabilities (Note 8) .............................................................
Total long-term liabilities ................................................................

Thousands of
U.S. dollars(Note 2)
2003

$ 826,980
405,274
814,917404,052
2,451,223

110,565

106,642887,205

20,042
—
5,240
6,023
141,870

23,897
1,444
1,314
5,326
138,623

198,810
12,013
10,932
44,3101,153,270

Minority interest in consolidated subsidiaries ........................................

4,371

3,155

26,248

Shareholders’ equity:
Common stock—
Authorized: 1,600,000,000 shares
Issued:543,350,370 shares .....................................................
Additional paid-in capital ............................................................................
Retained earnings (Note 9) .........................................................................
Revaluation surplus (Note 10) ....................................................................
Net unrealized gains on securities ...............................................................
Foreign currency translation adjustment .....................................................
Treasury stock, at cost
(82,000 shares in 2002 and 8,621,823 shares in 2003)..............................
Total shareholders’ equity ................................................................

39,08524,56919,428
493
324
(578)

39,085
24,68025,697
510
743
(505)

325,166
205,325
213,785
4,243
6,181(4,201)(7)
83,314(864)
89,346(7,188)743,311

Total liabilities, minority interest inconsolidated subsidiaries and shareholders’ equity ................... ¥564,287¥525,761$4,374,052

Contingent liabilities (Note 14)13

Consolidated Statements of Income
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2002 and 2003

Thousands of
U.S. dollars(Note 2)Millions of yen
2002

Net sales ......................................................................................................... ¥ 521,861
Cost of sales (Note 13) ................................................................................. 419,189
Gross profit .............................................................................................. 102,672
Selling, general and administrative expenses (Note 13) ........................
90,949Operating profit .......................................................................................
11,723Non-operating income:Interest income ...........................................................................................
156
Amortization of negative goodwill ................................................................
3,926
Equity in earnings of affiliated companies ...................................................
—
Other ..........................................................................................................
4,243
Total non-operating income
8,325
Non-operating expenses:
Interest expense ..........................................................................................
6,257
Equity in losses of affiliated companies .......................................................
141
Amortization of transition obligation for employees retirement benefits (Note 7) ....
2,797
Loss on disposal of inventories ....................................................................
—
Other ..........................................................................................................
6,048
Total non-operating expenses ...............................................................
15,243
Ordinary profit ........................................................................................
4,805
Special gains:
Gain on sale of fixed assets ..........................................................................
924
Gain on sale of investment securities ...........................................................
810
Total special gains ......................................................................................
1,734
Special losses:
Additional retirement allowance for early retirement program (Note 7) .....
—
Loss on disposal of fixed assets ...................................................................
—
Loss on devaluation of investment securities ...............................................
463
Prior year severance costs for directors and statutory auditors ....................
—
Total special losses .................................................................................
463
Income before income taxes and minority interest ...........................
6,076
Income taxes (Note 8)—current ...................................................................
2,916—deferred ..................................................................
1,163
4,079
Minority interest in income of consolidated subsidiaries ......................
479
Net income¥ 1,518
Per share of common stock:
Net income .................................................................................................. ¥Cash dividends ............................................................................................ ¥The accompanying notes are an integral part of these statements.

14

2003

2003

¥514,042
410,449
103,593
83,50720,086$4,276,556
3,414,717
861,839694,734
167,105

122
4,386
987
3,421
8,916

1,015
36,4898,211
28,461
74,176

6,157
—
2,187
1,706
6,627
16,677
12,32551,223—18,195
14,19355,133
138,744
102,537

2,287
—
2,287

19,027—19,027

3,364
2,158
1,966
482
7,970
6,642
2,350
(3,140)(790)
316¥ 7,116

27,987
17,953
16,356
4,010
66,30655,25819,551(26,123)(6,572)
2,629$ 59,201
U.S. dollars(Note 2)

Yen

2.79
1.50

¥ 13.34
¥
2.00

$
$

0.11
0.02

Consolidated Statements of Shareholders’ Equity
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2002 and 2003

Millions of yen

Number ofshares issued

Balance at March 31, 2001: .......................
Net income ...............................................
Directors’ and statutory auditors’ bonuses ...
Transfer from additional paid-in capital
to retained earnings ..........................
Inclusion in consolidation of
unconsolidated subsidiaries ..............
Net unrealized gains on securities (Note 5) ..
Foreign currency translation adjustment ..
Net increase in treasury stock ..................
Balance at March 31, 2002: .......................
Net income ...............................................
Cash dividends .........................................
Directors’ and statutory auditors’ bonuses ...
Equity on revaluation gain for land of anaffiliated company .............................
Net unrealized gains on securities (Note 5) ..
Foreign currency translation adjustment ..
Net increase in treasury stock ..................
Gain on sale of treasury stock ..................
Balance at March 31, 2003 ........................

Commonstock

Additional
paid-in capital

Retainedearnings

543,350,370 ¥39,085 ¥32,300 ¥10,032
1,518
(42)
(7,731)

Net unrealized
Revaluation
gains onsurplussecurities

¥493

¥—

Foreigncurrencytranslation
adjustment(¥432)

Treasury
stock

(¥ 0)

7,731
189
324
(146)

543,350,370

39,08524,56919,428
7,116
(815)
(29)

493

(3)

17

324

(7)
(7)

(578)

419
73
(857)
111
543,350,370 ¥39,085 ¥24,680 ¥25,697

¥510

¥743

(¥505)(¥864)

Thousands of U.S. dollars (Note 2)

Number ofshares issued

Balance at March 31, 2002: .......................
Net income ...............................................
Cash dividends .........................................
Directors’ and statutory auditors’ bonuses ...
Equity on revaluation gain for land of anaffiliated company .............................
Net unrealized gains on securities (Note 5) ..
Foreign currency translation adjustment ..
Net increase in treasury stock ..................
Gain on sale of treasury stock ..................
Balance at March 31, 2003 ........................

Commonstock

Additional
paid-in capital

Retainedearnings

Net unrealized
Revaluation
gains onsurplussecurities

543,350,370 $325,166 $204,401 $161,630 $4,102
59,201(6,780)(241)(25)

Foreigncurrencytranslation
adjustment$2,695 ($4,808)

Treasurystock($ 58)

141
3,486
607
(7,130)924
543,350,370 $325,166 $205,325 $213,785$4,243$6,181 ($4,201)($7,188)

The accompanying notes are an integral part of these statements.

15

Consolidated Statements of Cash Flows
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2002 and 2003

Thousands of
U.S. dollars(Note 2)Millions of yen
2002

Cash flows from operating activities:
Income before income taxes and minority interest ......................................
Depreciation and amortization ....................................................................
Amortization of negative goodwill ................................................................
Loss on disposal of fixed assets ...................................................................
Gain on sale of fixed assets, net ...................................................................
Gain on sale of investment securities ...........................................................
Loss on devaluation of investment securities ...............................................
Increase in accrued pension and severance costs .......................................
Interest and dividend income ......................................................................
Interest expense ..........................................................................................
Equity in (earnings) losses of affiliated companies ......................................
Decrease in notes and accounts receivable—trade .....................................
Decrease in inventories ...............................................................................
Decrease in notes and accounts payable—trade .........................................
Other ..........................................................................................................
Sub total ........................................................................................
Interest and dividend income received ........................................................
Interest paid ................................................................................................
Income taxes paid .......................................................................................
Net cash provided by operating activities ................................
Cash flows from investing activities:
Decrease in time deposits ...........................................................................
Payments for purchase of investment securities ...........................................
Proceeds from redemption of investment securities .....................................
Proceeds from sale of investment securities ................................................
Payments for purchase of fixed assets .........................................................
Proceeds from sale of fixed assets ...............................................................
(Increase) decrease in long-term loans receivable .....................................
Payments for purchase of securities of consolidated subsidiaries ................
Proceeds from liquidation of an affiliated company .....................................
Proceeds from capital reduction of affiliated companies .............................
Other ..........................................................................................................
Net cash provided by (used for) investing activities ..............
Cash flows from financing activities:
Decrease in short-term borrowings .............................................................
Proceeds from long-term debt ....................................................................
Payments of long-term debt .........................................................................
Proceeds from sale of treasury stock ...........................................................
Cash dividends paid by the Company ...........................................................
Cash dividends paid to minority interest ......................................................
Other ..........................................................................................................
Net cash used for financing activities .......................................
Effect of exchange rate changes on cash and cash equivalents .....................
Net increase (decrease) in cash and cash equivalents .................................
Cash and cash equivalents at beginning of year ...........................................
Cash and cash equivalents of newly consolidated subsidiaries .....................
Cash and cash equivalents at end of year (Note 3) ..................

The accompanying notes are an integral part of these statements.

16

2003

¥ 6,076 ¥ 6,642
18,542
17,128(3,926)(4,386)
—
2,158
(924)
(2,287)
(810)
—
463
1,966
1,376
3,919
(462)
(347)
6,257
6,157
141
(987)
24,811
21,517
4,842
5,318(22,479)(14,050)
1,454
(617)
35,361
42,131
661
892(6,389)(6,274)(2,948)(3,242)
26,68533,507
8
(611)
—
2,977
(15,235)
1,259
(289)
—
—
—
(359)
(12,250)

2003$

55,258142,496(36,489)
17,953(19,027)—
16,35632,604(2,887)51,223(8,211)
179,010
44,243(116,889)(5,133)
350,507
7,421(52,196)(26,972)
278,760389(2,156)
2,002
232(12,577)
9,526
201(1,187)
2,887
1,189
(282)
224

3,236
(17,937)
16,656
1,930(104,634)
79,251
1,672(9,875)24,0199,892(2,346)
1,864(2,724)(4,214)
41,67849,490(47,575)(80,310)
15
—
(2)
(813)
(395)
(471)
(413)
(186)
(9,416)(36,504)
156
(170)
5,175
(2,943)
41,68347,594736—¥47,594 ¥ 44,651(35,058)
411,730(668,136)—(6,764)(3,919)(1,547)(303,694)(1,414)(24,484)
395,957—$ 371,473

Notes to the Consolidated Financial Statements
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries

1. SIGNIFICANT ACCOUNTING POLICIES:(a) Basis of presenting financial statements —The accompanying consolidated financial statements of Nippon Light Metal Company, Ltd. (“the Company”) and its consolidated subsidiaries(together “the Companies”) are prepared in accordance with accounting principles generally accepted in Japan, which are different in certain
respects from the application and disclosure requirements of International Accounting Standards. The notes to the consolidated financial
statements include financial information which is not required under accounting principles generally accepted in Japan, but is presented herein as
additional information. In addition, the consolidated statements of shareholders’ equity are not required in Japan, but are presented herein as
additional information. The accompanying consolidated financial statements include certain reclassifications and modifications for the purpose ofpresenting them in a form more familiar to readers outside Japan.
(b) Consolidation and investments in affiliated companies —The consolidated financial statements include the accounts of the Company and, with minor exceptions, companies substantially controlled by theCompany. All significant intercompany transactions and accounts are eliminated.
Investments in significant companies where the Company has significant influence over management are stated at cost plus the Company’s
share of undistributed earnings.
The difference between the cost and the underlying net equity of investments in consolidated subsidiaries or affiliates accounted for by theequity method has been allocated to identifiable assets based on fair market value at the date of acquisition. Any unassigned residual amount isrecognized as goodwill and deferred or amortized on a straight-line basis over the effective period, with the exception of minor amounts which arecharged to income in the year of acquisition.
Negative goodwill, recognized on the integration of a subsidiary company, Shin Nikkei Company, Ltd. for the year ended March 31, 2001, isbeing amortized on a straight-line basis over a 3-year period.
(c) Translation of foreign currencies —All monetary assets and liabilities denominated in foreign currencies, whether long-term or short-term, are translated into Japanese yen at theexchange rates prevailing at the balance sheet date. Resulting gains and losses are included in the net profit or loss for the period.
Assets and liabilities of foreign subsidiaries and affiliates are translated into Japanese yen at the exchange rates prevailing at the balance sheet
date. Profit and loss accounts for the year are translated into Japanese yen using the average exchange rate during the year. The resulting
translation adjustments are accounted for as a component of “Shareholders’ equity”, except for the minority interest portion which is allocated to“Minority interest in consolidated subsidiaries”.
(d) Cash and cash equivalents —“Cash and cash equivalents” in the consolidated statements of cash flows comprise cash on hand, bank deposits available for withdrawal on
demand and short-term investments with an original maturity of three months or less and which represent a minor risk of fluctuation in value.
(e) Inventories —Inventories are principally stated at cost, determined by the moving-average method, except for costs related to construction-type-contracts which
are specifically identified.
(f) Financial Instruments —i) Derivatives:
All derivatives are stated at fair value with changes in fair value being included in the net profit or loss of the year in which they arise, except forderivatives designated as hedging instruments (see iii) Hedge accounting).
ii) Securities:
Securities held by the Companies are classified into ‘Held-to-maturity debt securities’, ‘Investments in equity securities issued by unconsolidated
subsidiaries and affiliates’ and ‘Other securities’.
‘Held-to-maturity debt securities’, that the Companies intend to hold to maturity are stated at cost, after accounting for any premium or
discount on acquisition which is amortized over the period to maturity.
‘Investments in equity securities issued by unconsolidated subsidiaries and affiliates’ are accounted for using the equity method. Exceptionally,
investments in certain unconsolidated subsidiaries and affiliates are stated at cost because the effect of application of the equity method would be
immaterial.
‘Other securities’ for which market quotations are available are stated at fair value as of the end of the year with net unrealized gains or losses
being included as a separate component of shareholders’ equity, net of related taxes. Realized gains and losses on sales are determined using the
average cost method and are included in the net profit or loss for the period.

17‘Other securities’ for which market quotations are not available are stated at cost, except as stated in the paragraph below.
In cases where the fair value of ‘Held-to-maturity debt securities’, ‘Investments in equity securities issued by unconsolidated subsidiaries andaffiliates’ or ‘Other securities’ has declined significantly and such impairment of value is not temporary, such securities are written-down to fairvalue and the resulting losses are included in the net profit or loss for the period.
iii) Hedge accounting:
The Companies use derivatives to reduce the Companies’ exposure to the risk of fluctuations in foreign exchange rates, interest rates, and the priceof aluminum ingot in the market. Derivatives designated as hedging instruments by the Companies are principally forward exchange contracts,
interest rate swap contracts and aluminum ingot forward contracts. The related hedged items are trade accounts receivable and payable, long-termbank loans, debt securities issued by the Companies, and sales or purchases of aluminum ingot. Thus, the Companies’ purchases of hedging
instruments are limited to, at maximum, the amounts of the hedged items.
Gains or losses arising from changes in the fair value of the derivatives designated as ‘hedging instruments’ are deferred as an asset or liability
and included in net profit or loss in the same period in which the gains and losses on the hedged items or transactions are recognized. The
Companies use interest rate swaps to hedge their interest rate risk exposure. The related interest differentials paid or received under the interest rate
swap agreements are recognized over the terms of the agreements in interest expense.
The Companies evaluate the effectiveness of their hedging activities by reference to the accumulated gains or losses on the hedging instruments and the related hedged items from the commencement of the hedges.
(g) Allowance for doubtful accounts —The allowance for doubtful accounts is estimated by applying the average percentage of actual bad debts in the past to the balance of receivables.
In addition, an amount deemed necessary to cover non-collectable receivables is provided on an individual account basis.
(h) Property, plant and equipment and depreciation —Property, plant and equipment are stated at cost. Depreciation is computed principally using the straight-line method at rates based on theestimated useful lives of the respective assets.
(i) Accrued pension and severance costs —“Accrued pension and severance costs for employees” represents the estimated present value of projected benefit obligations in excess of the fairvalue of the plan assets, except for the unrecognized transition amount and unrecognized actuarial differences. The unrecognized transition
amount is being amortized on a straight-line basis over 12 years and the unrecognized actuarial differences are being amortized on a decliningbalance basis over 12 years from the year following that in which they arise, except for these unrecognized costs in respect of retired employees towhom the early retirement program applied, which were fully amortized at the time of their retirement.
Until the year ended March 31, 2002, ‘severance costs for directors and statutory auditors’ were accounted for on a cash basis with the approvalof a general meeting of shareholders. Effective from the year ended March 31, 2003, the Company and some consolidated subsidiaries changed
their method of accounting for severance costs for directors and statutory auditors to an accrual basis, so that “Accrued pension and severance costs
for directors and statutory auditors” represents the estimated amount to be paid if all directors and statutory auditors retired at the balance sheet
date, based on the Company retirement rules, in order to more appropriately reflect their costs and liabilities. While the Company and someconsolidated subsidiaries have no legal obligation, it is a customary practice in Japan to make lump-sum payments to directors or statutory
auditors upon retirement with the approval of a general meeting of shareholders, and it is general in Japan to credit “Accrued pension andseverance costs for directors and statutory auditors”. The effects of this change for the year ended March 31, 2003, was to decrease “Ordinary profit”
by ¥94 million ($782 thousand) and to decrease “Income before income taxes and minority interest” by ¥576 million($4,792 thousand),compared with the amounts which would have been reported if the previous method had been applied consistently.
(j) Lease transactions —Under Japanese accounting practices, finance leases are capitalized in principle. However, finance leases without an option to transfer ownership ofthe leased assets to the lessee may be accounted for as operating leases subject to appropriate footnote disclosure. Therefore, the Companies charge
or credit periodic lease payments and receipts to income as incurred.
(k) Income taxes —Income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants taxes and enterprise taxes. Effectivefrom the year ended March 31, 2003, the Company and its wholly-owned domestic subsidiaries adopted the Japanese consolidated taxation system.
The Company and its subsidiaries adopt the deferred tax accounting method. Income taxes are determined using the asset and liability approach,whereby deferred tax assets and liabilities are recognized in respect of temporary differences between the tax basis of assets and liabilities and those
as reported in the financial statements.

18

(l) Research and development expenses and computer software —Research and development expenses are charged to income as incurred. Expenditure relating to computer software developed for internal use ischarged to income as incurred, except in cases where it contributes to the generation of income or to future cost savings. In these cases it iscapitalized and amortized using the straight-line method over its estimated useful life, which is no longer than 5 years.
(m) Appropriation of retained earnings —The Japanese Commercial Code provides that appropriations of retained earnings require the approval of shareholders at an ordinary general
meeting. Appropriations of retained earnings are, therefore, not reflected in the consolidated financial statements for the year to which they relate
but are recorded in the consolidated financial statements in the subsequent fiscal year after shareholders’ approval has been obtained.
(n) Accounting standard for ‘Treasury Stock and Reversal of Additional Paid-in Capital’ —Effective from the year ended March 31, 2003, the Company and its domestic subsidiaries adopted the Statement of Financial Accounting Standard
No. 1 “Accounting for Treasury Stock and Reversal of Additional Paid-in Capital” issued by the Accounting Standards Board of Japan. However, theeffect on net income for the period of adopting this new statement was immaterial.
(o) Net income and dividends per share —Net income per share of common stock, shown in the accompanying consolidated statements of income, is computed based on the weighted
average number of shares outstanding during the respective year. Effective from the year ended March 31, 2003, the Company and its domestic
subsidiaries adopted the Statement of Financial Accounting Standard No.2 “Earnings per Share” issued by the Accounting Standards Board ofJapan. Prior to adopting the new statement, earnings per share were calculated based on the “Net income” shown on the consolidated statements
of income. However, in calculation of earnings per share, the new statement requires that net income should be adjusted by deducting bonuses
paid to directors and statutory auditors to be recognized as an appropriation of retained earnings. Earnings per share for the year ended March 31,
2002 calculated using the previous method and under the new statement are ¥2.79 and ¥2.89, respectively.
Cash dividends per share, shown in the accompanying consolidated statements of income, represents dividends declared as applicable to therespective fiscal year.
(p) Reclassifications —Certain reclassifications of previously reported amounts have been made to conform with current classifications.
2. U.S. DOLLAR AMOUNTS:
The rate of ¥120.20 = U.S.$1, the approximate current rate prevailing on March 31, 2003, has been used for the purpose of presentation of the U.S.
dollar amounts in the accompanying consolidated financial statements. These amounts are included solely for convenience and should not be
construed as representations that the yen amounts actually represent, or have been or could be readily converted, realized or settled in U.S.dollars
at that rate or at any other rate. The amounts shown in U.S. dollars are not intended to be computed in accordance with generally acceptedtranslation procedures.
3. CASH AND CASH EQUIVALENTS:
A reconciliation of “Cash and cash equivalents” to the accounts disclosed on the balance sheets at March 31, 2002 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen
2002

Cash and deposits ..............................................................................................................................
Time deposits with maturity in excess of 3 months .........................................................................
Commercial paper included in “Other current assets” ...................................................................
Cash and cash equivalents ................................................................................................................

¥48,755(1,271)
110¥47,594

2003

2003

¥45,227(726)
150¥44,651$376,265(6,040)1,248$371,473

4. INVENTORIES:
Inventories at March 31, 2002 and 2003 comprised the following:Thousands of
U.S. dollars

Millions of yen
2002

Finished products ..............................................................................................................................
Work-in-process, including costs related to construction-type-contracts .......................................
Raw materials and supplies ..............................................................................................................
.............................................................................................................................................

¥25,340
36,001
12,040¥73,381

2003

2003

¥22,854
34,10011,073¥68,027$190,133
283,694
92,121$565,948

19

5. INVESTMENT SECURITIES:(a) ‘Held-to-maturity debt securities’ with available market value —The aggregate carrying amount, market value and gross unrealized gains and losses of ‘Held-to-maturity debt securities’ with available market
values at March 31, 2002 was as follows:
Millions of yen
2002
Carrying
amountCorporate bonds ...................................................................................................

¥2,000

Unrealized
gains

Unrealized
losses¥—¥62

Marketvalue¥1,938At March 31, 2003, there were no ‘Held-to-maturity debt securities’ with available market values.
(b) ‘Other securities’ with available market value —The aggregate cost, carrying amount and gross unrealized gains and losses of ‘Other securities’ with available market values at March 31, 2002
and 2003 were as follows:
Millions of yen
2002

Equity securities ....................................................................................
Other .....................................................................................................
...............................................................................................................

Cost

Unrealized
gains

Unrealized
losses¥6,848209¥7,057¥1,888—¥1,888¥1,01175¥1,086

Carrying
amount¥7,725134¥7,859Millions of yen
2003

Equity securities ....................................................................................
Other .....................................................................................................
...............................................................................................................

Cost

Unrealized
gains

Unrealized
losses¥4,950100¥5,050¥1,6880¥1,688

¥383
—
¥383

Carrying
amount¥6,255100¥6,355

Thousands of U.S. dollars
2003

Equity securities ....................................................................................
Other .....................................................................................................
...............................................................................................................

20

Cost

Unrealized
gains

Unrealized
lossesCarrying
amount$41,181832$42,013$14,0430$14,043$3,186—$3,186$52,038832$52,870

(c) Sale of ‘Other securities’ —The realized gains and losses on sale of ‘Other securities’ during the years ended March 31, 2002 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen
2002

Selling amount ................................................................................................................
Realized gains on sale .....................................................................................................
Realized losses on sale ....................................................................................................

2003

¥614
105
44

2003

¥232
70
23

$1,930582
191(d) ‘Held-to-maturity securities’ and ‘Other securities’ without available market values —The carrying amounts of ‘Held-to-maturity securities’ and ‘Other securities’ without available market values at March 31, 2002 and2003, were as follows:
Thousands of
U.S. dollars

Millions of yen
2002(1) ‘Held-to-maturity securities’
Domestic debt securities privately offered .......................................................................
(2) ‘Other securities’
Equity investments in non-public companies .................................................................
Other .........................................................................................................................
...................................................................................................................

2003

2003

¥ 135

¥

133

11,454
59¥11,648

13,21757¥13,407$

1,107

109,958474$111,539(e) Maturity of debt securities —The redemption schedules for maturity of debt securities at March 31, 2002 and 2003 were as follows:
Millions of yen
2002
Due within
one year

Debt securities:
Government and municipal bonds ..............................................................
Corporate debt securities ..............................................................................
Other .....................................................................................................................
.......................................................................................................................

Due after one year, but Due after five years, but
within five years
within ten years

¥110
—
—
¥110

¥ —
2,010
235
¥2,245¥——2¥ 2

Due after morethan ten years

¥125
—
—
¥125

Millions of yen
2003
Due within
one year

Debt securities:
Government and municipal bonds ..............................................................
Corporate debt securities ..............................................................................
Other .....................................................................................................................
............................................................................................

Due after one year, but Due after five years, but
within five years
within ten years

¥ 2
—
1
¥ 3

¥

7
10
127
¥144

¥ 9
—
—
¥ 9

Due after morethan ten years

¥105
—
—
¥105

Thousands of U.S. dollars
2003
Due within
one year

Debt securities:
Government and municipal bonds ..............................................................
Corporate debt securities ..............................................................................
Other .....................................................................................................................
............................................................................................

$17
—
8
$25

Due after one year, but Due after five years, but
within five years
within ten years

$

58
83
1,057
$1,198

$75
—
—
$75

Due after morethan ten years

$874
—
—
$874

21

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT:“Short-term borrowings” at March 31, 2003 bore interest at annual rates ranging from 0.580% to 3.944% and generally represented bank loans or
short-term notes maturing at various dates within one year.
“Long-term debt” at March 31 comprised the following:Thousands of
U.S. dollars

Millions of yen
2002

Loans, principally from banks and insurance companies due from 2002 to 2014
with interest rates ranging from 0.800% to 8.020%:
Secured .......................................................................................................................................
Unsecured ..................................................................................................................................
Loans, principally from banks and insurance companies due from 2003 to 2014
with interest rates ranging from 0.799% to 8.020%:
Secured .......................................................................................................................................
Unsecured ..................................................................................................................................
Unsecured 2.90% Bonds due November 7, 2002, redeemable before due date ...............................
Unsecured 2.75% Bonds due December 5, 2002, redeemable before due date ................................
Unsecured 2.65% Bonds due February 10, 2004, redeemable before due date ...............................
Unsecured 2.40% Bonds due February 10, 2003, redeemable before due date ...............................
Unsecured 2.45% Bonds due July 25, 2003, redeemable before due date ........................................
Unsecured 2.675% Bonds due August 20, 2004, redeemable before due date .................................
Unsecured 2.175% Bonds due September 11, 2002, redeemable before due date ...........................
Unsecured 2.40% Bonds due July 19, 2002, redeemable before due date ........................................
Unsecured 1.25% Bonds due July 20, 2006, redeemable before due date ........................................
.............................................................................................................................................
Less: portion due within one year .....................................................................................................
Total long-term debt .........................................................................................................................

2003

2003

¥ 40,648
59,594¥————10,00010,00010,00010,00010,00010,00010,0007,000
9,000
186,242(75,677)¥110,565

36,641
79,715——
10,000—10,00010,000——9,000
155,356(48,714)¥106,642$——

304,833
663,186——
83,195—83,19583,195——74,875
1,292,479(405,274)$ 887,205

Differences between the issue price and the principal amount are credited or charged to income at the time of issue.
A summary of assets pledged as collateral for “Short-term borrowings” and “Long-term debt” at March 31, 2003 is as follows:

Cash and deposits ...........................................................................................................................................................
Notes and accounts receivable—trade ..........................................................................................................................
Property, plant and equipment ......................................................................................................................................
Investment securities ......................................................................................................................................................

Millions of yen

Thousands of
U.S. dollars

¥

$

82
48
75,697432

682
399
629,759
3,594

The aggregate annual maturities of “Long-term debt” beyond March 31, 2003 are as follows:
Years ending March 31
2004 ................................................................................................................................................................................
2005 ................................................................................................................................................................................
2006 ................................................................................................................................................................................
2007 ................................................................................................................................................................................
2008 ................................................................................................................................................................................
Thereafter .......................................................................................................................................................................
.........................................................................................................................................................................................

22

Millions of yen

Thousands of
U.S. dollars¥ 48,714
40,87523,911
26,29012,9782,588¥155,356$ 405,274
340,058
198,927
218,719
107,970
21,531$1,292,479

7. RETIREMENT BENEFIT PLANS:The Company and its domestic subsidiaries have defined benefit tax qualified pension plans and a non-contributory plan covering substantially all
employees. Additional benefits may be granted to employees according to the conditions under which termination occurs. Certain foreignsubsidiaries have defined contribution plans.
“Accrued pension and severance costs” as of March 31, 2002 and 2003 can be analyzed as follows:
Thousands of
U.S. dollars

Millions of yen
2002

Projected benefit obligations ............................................................................................................
Fair value of plan assets ....................................................................................................................
............................................................................................................................................................
Unrecognized transition amount .....................................................................................................
Unrecognized actuarial differences ..................................................................................................
............................................................................................................................................................
Prepaid pension expenses .................................................................................................................
Accrued pension and severance costs ...............................................................................................

(¥70,936)
21,279(49,657)
22,308
7,343(20,006)
36(¥20,042)

2003

2003

(¥67,810)
16,863(50,947)
18,813
8,237(23,897)—(¥23,897)($564,143)
140,291(423,852)
156,514
68,528(198,810)—($198,810)

The net pension cost related to retirement benefits for the years ended March 31, 2002 and 2003 was as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost ........................................................................................................................................
Interest cost .......................................................................................................................................
Expected return on plan assets .........................................................................................................
Amortization of transition amount ..................................................................................................
Amortization of unrecognized actuarial differences ........................................................................
Net pension and severance cost ........................................................................................................
*1

*2

*3

*1
*2

2002

2003

¥4,141
1,748
(568)
2,797
455
¥8,573¥3,801
1,516
(468)
3,495
1,581
¥9,925

2003$31,622
12,612(3,893)29,077
13,153$82,571

The above figures include an amount of ¥546 million and ¥1,308 million ($10,882 thousand) for the years ended March 31, 2002
and 2003, respectively, in respect of employees who retired during the respective fiscal years under the early retirement program.
These amounts were fully amortized at the time of employees’ retirement.
The above figure includes an amount of ¥404 million ($3,361 thousand) for the years ended March 31, 2003 in respect of
employees who retired during the fiscal year under the early retirement program.
This amount was fully amortized at the time of employees’ retirement.
In addition to *1 and *2 above, additional benefits of ¥1,652 million ($13,744 thousand) under the early retirement program
were granted for the year ended March 31, 2003. The total amount of all these costs is disclosed within special losses as “Additional
retirement allowance for early retirement program” for the year ended March 31, 2003.
Assumptions used in calculation of the above information were as follows:
2002

Discount rate .....................................................................................................................................
Expected rate of return on plan assets ..............................................................................................
Method of attributing the projected benefits to periods of employee service ...................................
Amortization of unrecognized actuarial differences ........................................................................
Amortization of transition amount ..................................................................................................

2.5%
3.0%
Straight-line basis
Mainly 12 years
12 years

2003

2.5%
2.5%
Straight-line basis
Mainly 12 years
12 years23

8. INCOME TAXES:
The Company and its domestic subsidiaries are subject to a number of different taxes based on income which, in aggregate, indicate a statutory
effective tax rate of approximately 42% for the years ended March 31, 2002 and 2003.
Tax losses can be carried forward for a five-year period for offset against future taxable income.
Effective from the year ended March 31, 2003, the Company and its wholly-owned domestic subsidiaries adopted the Japanese consolidated
taxation system.
Significant components of deferred tax assets and liabilities at March 31, 2002 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen
2002

Deferred tax assets:
Tax loss carry forwards ..............................................................................................................
Accrued pension and severance costs ........................................................................................
Allowance for doubtful accounts ...............................................................................................
Loss on disposal of fixed assets ..................................................................................................
Accrued bonuses..........................................................................................................................
Loss on devaluation of investment securities ............................................................................
Others .........................................................................................................................................
Total gross deferred tax assets ............................................................................................
Valuation allowance ..................................................................................................................
Total deferred tax assets, net of valuation allowance ........................................................
Deferred tax liabilities:
Valuation gain on subsidiaries ..................................................................................................
Unrealized gains on securities ...................................................................................................
Depreciation ...............................................................................................................................
Others .........................................................................................................................................
Total gross deferred tax liabilities ......................................................................................
Net deferred tax assets .......................................................................................................................

2003

2003

¥26,890
6,472
2,895
1,731
—
1,849
7,056
46,893(34,043)
12,850¥21,710
8,678
1,997
1,851
1,649
—
8,418
44,303(28,068)
16,235$180,616
72,196
16,614
15,39913,719—70,033
368,577(233,511)
135,066

—
—
(80)
(516)
(596)
¥12,254

(545)
(524)
—
(296)
(1,365)¥14,870(4,534)(4,359)—(2,463)(11,356)$123,710

A reconciliation of the difference between the statutory tax rate and the effective income tax rate for the year ended March 31, 2002 and 2003 is
as follows:
2002

Statutory tax rate ...............................................................................................................................
Increase (decrease) in taxes resulting from:
Permanently non-deductible expenses .....................................................................................
Amortization of negative goodwill ............................................................................................
Equity in earnings of affiliated companies ...............................................................................
Equalization inhabitants taxes .................................................................................................
Increase(decrease) in valuation allowance ..............................................................................
Decrease in deferred income taxes with tax-rates change ........................................................
Other ..........................................................................................................................................
Effective income tax rate ..................................................................................................................

2003

42.0%

42.0%

7.3
(27.1)
—
9.4
37.2
—
(1.7)
67.1%

7.0
(27.7)(6.3)—(30.0)
4.7(1.6)(11.9%)On March 31, 2003, Japanese National Diet approved various changes to the calculation of the statutory local enterprise tax for companies
with capital in excess of ¥100 million, effective April 1, 2004. Under the basic enterprise tax rate for the income based component has decreased. As
a result of this amendment, the tax rate to be applied to temporary differences between the carrying amount and tax basis of assets and liabilities
that are expected to reverse in the years beginning April 1, 2004 decreased as at March 31, 2003. This resulted in a reduction in deferred tax assets
at March 31, 2003 by ¥297 million ($2,471 thousand), compared with the assets that would have been recognized had the previous tax rate been
fully applied to all temporary differences. Net income for the year ended March 31, 2003 decreased by ¥309 million ($2,571 thousand) as a resultof these changes in local enterprise tax regulations.

24

9. APPROPRIATIONS OF RETAINED EARNINGS:
The following appropriation was approved at the ordinary general meeting of shareholders of the Company held on June 27, 2003.

Cash dividends ................................................................................................................................................................

Millions of yen

Thousands of
U.S. dollars¥ 1,085$ 9,027

10. REVALUATION SURPLUS:
An equity affiliate of the Company revalued its land used for business purposes in accordance with the Land Revaluation Law. As a result of thisrevaluation, the Company recognized its portion of the affiliate’s revaluation surplus net of related taxes.
11. LEASE TRANSACTIONS:The Companies charge or credit to income periodic lease payments and receipts for finance leases that do not have options to transfer ownership ofthe leased assets to the lessee. Such periodic lease payments under finance lease contracts totaled ¥1,961 million and ¥1,830 million ($15,225
thousand), and receipts under finance lease contracts totaled ¥101 million and ¥101 million ($840 thousand), for the years ended March 31, 2002
and 2003, respectively. Future lease payments and receipts under the Companies’ finance leases and non-cancelable operating leases, including
amounts representing interest, at March 31, 2002 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen
2002

2003

2003

¥1,7572,134¥3,891¥1,797
4,917¥6,714$14,950
40,907$55,857

¥ 236
163
¥ 399

¥ 143
60
¥ 203

$ 1,190499$ 1,689

Lease payments:
Due within one year ...................................................................................................................
Due beyond one year .................................................................................................................
Lease receipts:
Due within one year ...................................................................................................................
Due beyond one year .................................................................................................................

Leased assets under the Companies’ finance leases, where lessors retain ownership of leased assets, are accounted for as operating leases by theCompanies. If such leases had been capitalized, then the cost of the assets and the related accumulated depreciation at March 31, 2002 and 2003
would have been as follows:
Millions of yen
2002
Cost

Buildings and structures ......................................................................................
Machinery and equipment ...................................................................................
Intangible fixed assets ..........................................................................................

Accumulated
depreciation

¥ 26
7,561
155
¥7,742Net
amount

¥ 13
4,504
86
¥4,603

¥ 13
3,057
69
¥3,139Thousands of
U.S. dollars

Millions of yen
2003
Cost

Buildings and structures ......................................................................................
Machinery and equipment ...................................................................................
Intangible fixed assets ..........................................................................................

¥

41
9,785
263
¥10,089

Accumulated
depreciation

¥

18
3,523
175
¥3,7162003
Net
amountNetamount

¥

$

23
6,262
88
¥6,373

191
52,097732$53,020

25

The depreciation amount for these leased assets computed on the straight-line method over the period of the leases would have been ¥1,961
million and ¥1,830 million ($15,225 thousand) for the years ended March 31, 2002 and 2003, respectively.
Fixed assets, excluding sub-leased assets, which are leased to other companies under finance leases without options to transfer ownership ofthe leased assets to the lessee at March 31, 2002 and 2003, were as follows:
Millions of yen
2002
Cost

Machinery and equipment ...................................................................................

¥147

Accumulated
depreciation

¥96

Net
amount¥51
Thousands of
U.S. dollars

Millions of yen
2003
Cost

Machinery and equipment ...................................................................................

¥140

Accumulated
depreciation

¥97

2003
Net
amount¥43

Net
amount$358

The depreciation amount for these leased assets computed on the straight-line method over the period of the leases would have been ¥90
million and ¥64 million ($532 thousand) for the years ended March 31, 2002 and 2003, respectively.
12. DERIVATIVES:
In the normal course of business, the Companies enter into various derivative financial instruments in order to manage the exposure resulting
from fluctuations in foreign currency exchange rates, interest rates and the prices of aluminum ingot in the market. The Companies do not holdor issue derivative financial instruments for trading purposes.
The following are the interest rate swap contracts at March 31, 2002 that have been recognized as a suspension of hedges. Accordingly, the net
unrealized gain was credited to income.
Millions of yen
2002
Contract
amountInterest rate swap agreements:
Variable-rate into fixed-rate obligations .......................................................
Fixed-rate into variable-rate obligations.......................................................

¥11,000*1
11,000*1

Estimated
fair value¥298*2(84)*2

Unrealized
gain/(loss)

¥141
(73)

*1 The “Contract amount” represents the nominal amount of the interest rate swap contracts.
*2 The fair values of the interest rate swap contracts were estimated using quotes from brokers, and represent the discounted amounts of net future cash flows.

Any derivatives to which hedge accounting is applied are excluded from the above table.
At March 31, 2003, there were no derivative financial instruments, except those instruments to which hedge accounting is applied.
13. RESEARCH AND DEVELOPMENT EXPENSES:
Research and development expenses charged to “Cost of sales” and “Selling, general and administrative expenses” for the years ended March 31,
2002 and 2003 were ¥4,686 million and ¥4,427 million ($36,830 thousand), respectively.
14. CONTINGENT LIABILITIES:Contingent liabilities at March 31, 2003 for loans guaranteed and other guarantees given in the ordinary course of business amounted to ¥23,734
million ($197,454 thousand), including ¥5,157 million ($42,903 thousand) shared by other joint guarantors, and ¥4,045 million ($33,652
thousand) for notes discounted and ¥27 million ($225 thousand) for notes endorsed.
15. SUBSEQUENT EVENT:On May 23, 2003, the board of directors of the Company decided to sell the former site of Osaka Plant to Ito-Yokado Company, Ltd. The sale amountis ¥3,659 million ($30,441 thousand) and “Gain on sale of fixed assets” is approximately ¥2,600 million ($21,631 thousand), which will be credited
as a special gain for the year ended March 31, 2004.
16. SEGMENT INFORMATION:
The Companies operate within four distinct industry segments, mainly in Japan: “Aluminum ingot and chemicals”, “Aluminum sheet andextrusions”, “Fabricated products and others” and “Building materials”.
The “Aluminum ingot and chemicals” segment supplies aluminum primary and remelted ingot used for various industrial materials, andproduces a wide spectrum of aluminas and alumina hydrates ranging from raw materials to basic materials for ceramic compounds.
The “Aluminum sheet and extrusions” segment produces sheet, coil, and extrusion products consisting primarily of shapes, tubes and rods.
The “Fabricated products and others” segment produces a variety of products which include, among others, aluminum foil, aluminum powder,
wing bodies for transport vehicles, automobile components and electronic materials.
26

The “Building materials” segment produces a wide range of materials including sashes, curtain walls, and doors and fences for commercial
and residential construction.
“Corporate items” includes general and administrative expenses and other expenses not specifically related to business segments.
Export sales and operations outside Japan are insignificant.
Information by industry segment for the years ended March 31, 2002 and 2003 is as follows:
Millions of yen
2002

Sales:
Customers ...........................................
Intersegment ......................................
Total ............................................
Operating expenses ....................................
Operating profit (loss) ...............................
Identifiable assets ......................................
Depreciation ..............................................
Capital expenditures ..................................
*1 Netting of corporate items ...¥3,063 million

Aluminumingot andchemicals

Aluminum
sheet andextrusions

Fabricatedproducts
and others

Building
materials¥ 84,775
44,795
129,570
123,981¥ 5,589¥ 95,847¥ 2,921¥ 2,984¥54,239
24,84979,08879,708(¥ 620)¥78,617¥ 3,007¥ 2,437¥207,652
18,713
226,365
216,841¥ 9,524¥201,230¥ 5,632¥ 5,610¥175,195
3,179
178,374
178,046¥ 328¥184,200¥ 6,901¥ 3,856

Eliminationor
corporate items¥ —(91,536)(91,536)(88,438)*1(¥ 3,098)¥ 4,393 *2
¥ 81
¥ 60

Consolidated¥521,861—
521,861
510,138¥ 11,723¥564,287¥ 18,542¥ 14,947*2 Netting of corporate items ...¥32,080 million
Millions of yen
2003
Aluminumingot andchemicals

Aluminum
sheet andextrusions

Fabricatedproducts
and others

Building
materials

Eliminationor
corporate items

Consolidated

Sales:
Customers ...........................................
Intersegment ......................................
Total ............................................
Operating expenses ....................................
Operating profit (loss) ...............................
Identifiable assets ......................................
Depreciation ..............................................
Capital expenditures ..................................

¥81,495
47,749129,244
124,298¥ 4,946¥ 97,424¥ 2,878¥ 3,303¥58,374
21,92280,296
79,269¥ 1,027¥68,997¥ 2,232¥ 1,714¥204,171
19,008223,179
212,110¥ 11,069¥188,840¥ 5,050¥ 4,300¥170,002
6,781
176,783
170,908¥ 5,875¥174,199¥ 6,881¥ 4,101¥—(95,460)(95,460)(92,629)*1(¥ 2,831)(¥ 3,699)*2
¥
87
¥
83

¥514,042—
514,042493,956¥ 20,086¥525,761¥ 17,128¥ 13,501*1 Netting of corporate items ...¥2,825 million*2 Netting of corporate items ...¥29,139 million

Eliminationor
corporate items

Consolidated$—(794,176)(794,176)(770,624)*1($ 23,552)($ 30,774)*2
$
724
$
690

$4,276,556—
4,276,556
4,109,451$ 167,105$4,374,052$ 142,496$ 112,321

Thousands of U.S. dollars
2003

Sales:
Customers ...........................................
Intersegment ......................................
Total ............................................
Operating expenses ....................................
Operating profit (loss) ...............................
Identifiable assets ......................................
Depreciation ..............................................
Capital expenditures ..................................
*1 Netting of corporate items ...$23,502 thousand

Aluminumingot andchemicals

Aluminum
sheet andextrusions

Fabricatedproducts
and others$ 677,995
397,246
1,075,241
1,034,093$ 41,148$ 810,516$ 23,944$ 27,479$485,641
182,379
668,020
659,476$ 8,544$574,019$ 18,569$ 14,260$1,698,594
158,136
1,856,730
1,764,642$ 92,088$1,571,048$ 42,013$ 35,774

Building
materials$1,414,326
56,415
1,470,741
1,421,864$ 48,877$1,449,243$ 57,246$ 34,118*2 Netting of corporate items ...$242,421 thousand

As discussed in Note 1 (i), effective from the year ended March 31, 2003, the Company and some consolidated subsidiaries changed their method of
accounting for severance costs for directors and statutory auditors.
The effect of this change for the year ended March 31, 2003 was to decrease “Operating profit” by ¥37 million ($308 thousand) in the “Building
materials” segment, and to increase “Operating loss” by ¥57 million ($474 thousand) in the “Elimination or corporate items” column.
27

Report of Independent Auditors

June 27, 2003
To the Board of Directors of
Nippon Light Metal Company, Ltd.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders’ equity
and of cash flows, expressed in Japanese yen, present fairly in all material respects the financial position of Nippon Light Metal Company,
Ltd. and its consolidated subsidiaries at March 31, 2002 and 2003, and the results of their operations and their cash flows for the years
then ended, in conformity with accounting principles generally accepted in Japan. These consolidated financial statements are theresponsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in Japan, which requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements, assessing the accounting principles used and significant estimates made by management, andevaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for the opinion
expressed above.
As described in Note 1(i) to the accompanying consolidated financial statements, effective from the year ended March 31, 2003, theCompany and some consolidated subsidiaries changed their method of accounting for severance costs for directors and statutory
auditors.
In addition, as described in Note 15 to the accompanying consolidated financial statements, on May 23, 2003, the board of directors of
the Company decided to sell the former site of Osaka Plant.
The U.S. dollar amounts shown in the accompanying consolidated financial statements have been translated solely for convenience. We
have reviewed this translation and, in our opinion, the consolidated financial statements expressed in Japanese yen have been translated
into U.S. dollars on the basis described in Note 2 to the consolidated financial statements.

Notice to Readers
The accompanying consolidated financial statements are not intended to present the financial position and the results of operations and of cash flows inaccordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan. Accordingly the accompanying consolidatedbalance sheets and the related consolidated statements of income, shareholders’ equity and of cash flows and their utilization are not designed for those who are notinformed about Japanese accounting principles, procedures and practices.
The standards, procedures and practices utilized in Japan to audit such financial statements may differ from those generally accepted in countries andjurisdictions other than Japan.

28

Overseas Network

Overseas Subsidiaries
and Affiliates
North America

Nikkei North America
Aluminum Inc.
Ohio, U.S.A.
Phone: 1-330-463-5565
Trading and marketing(100%)
Toyal America Inc.
Illinois, U.S.A.
Phone: 1-815-740-3037
Aluminum powder and paste(100%)
Alcan Nikkei Asia Holdings
Ltd.
BermudaPhone: 1-441-295-3550
Holding company for investment
with Alcan in Southeast Asia and
China
(40%)
EuropeToyal Europe Société Anonyme
Accous, France
Phone: 33-5-59-983535
Aluminum powder and paste(100%)

East Asia

Nonfemet International(China-Canada-Japan)
Aluminium Co., Ltd.
Shenzhen, China
Phone: 86-755-661-1569
Extrusion 1
Alcan Nikkei China Limited
Hong Kong, SAR, China
Phone: 852-2522-3001
Trading and marketing(51%)
Nippon Light Metal (HongKong) Limited
Hong Kong, SAR, China
Phone: 852-2541-5563
Building materials(100%)Southeast Asia

Alcan Nikkei Asia Company
LimitedMalaysia
Phone: 60-3-7954-5286
Management of invested companies
in Southeast Asia
(40%)
Alcan Nikkei Siam Limited
ThailandPhone: 66-2-529-0136
Aluminum sheet, foil 2

Alcom Nikkei Specialty
Coatings Sdn. Bhd.
Malaysia
Phone: 60-3-3342-2234
Pre-coated finstock 4
Amalgamated Aluminium
and Alloys Sdn. Bhd.
Malaysia
Phone: 60-3-341-9500
Aluminum alloys(35%)
Nikkei Singapore
Aluminium Pte. Ltd.
Singapore
Phone: 65-222-8991
Trading and marketing(100%)
Daiki Nikkei Thai Co., Ltd.
ThailandPhone: 66-3821-4631
Aluminum alloys(35%)

1 45%;

Interest held by Alcan Nikkei
Asia Holdings Limited (ANAH)
2 100%; Interest held by ANAH
3 59.15%; Interest held by ANAH
4 51%;
Interest held by Aluminium
Company of Malaysia Bhd.
49%; Interest held by ANAH

Aluminium Companyof Malaysia Bhd.
Malaysia
Phone: 60-3-3341-2311
Aluminum sheet, foil 3(As of March 31, 2003)

29

Directors and Officers

Directors

Officers

Shigesato Sato

Shigesato Sato

President
Representative Director

President
Chief Executive Officer

Yoshisato Hiratsuka
Akihiko Hayashi
Takashi Ishiyama
Shigeru Kohmura
Takamichi Sakai
Kazuyuki Hasegawa
Masao Imasu
Yasuo Noda
Glen R. Lucas

Yoshisato Hiratsuka

Auditors

Motoi Kobayashi

Hideaki Nagaoka
Hajime Hosokawa
Yasuyuki Wakahara
Seiichi Takeda

Executive Officer

Executive Vice President
Senior Executive Officer

Shigeru Kohmura

Teruo Miyashita
Koji Kawakami
Toshikazu Wasa
Mitsuru Ishihara
Yoshiaki Kurihara
Akira Kato
Tadakazu Miyauchi
Koji Ueno

Senior Executive Officer

Takashi Ishiyama
Senior Executive Officer

Yoshinobu Hiki
Executive Officer

Takamichi Sakai
Senior Executive Officer

Tsuyoshi Nakajima
Executive Officer(As of June 27, 2003)30

Corporate Data

ProfileSince its foundation in 1939, Nippon Light Metal Company, Ltd. has been constantly
involved with aluminum. Today, Nippon Light Metal is Japan’s sole fully integrated aluminum manufacturer with activities ranging from alumina smelting to fabrication ofvarious products.
Nippon Light Metal comprises four business segments: Aluminum Ingot andChemicals concerning the production of alumina and related chemicals and aluminum ingot; Aluminum Sheet and Extrusions involving the production of sheets andshapes; Fabricated Products and Others including the production of transportationrelated products, electronic materials, foil and powder; and Building Materials covering the production of residential and office building materials. Through thesesegments, Nippon Light Metal is actively engaged in a wide range of fields such as
automobiles and railroads, electric machinery and electronics, industrial products,
construction, and living necessities.
The NLM Group—the preeminent source of products and services combining
aluminum’s excellent characteristics with new functionality and added value that caterto pressing customer needs—delivers customer satisfaction and contributes to environmental protection.

Head Office

NYK Tennoz Building
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp
Phone: 03-5461-9333
Fax: 03-5461-9344
E-mail: nlmmaster@nikkeikin.co.jp
EstablishedMarch 30, 1939
Paid-In Capital¥39,085 million
Shares of Common Stock

Authorized: 1,600,000,000
Issued: 543,350,370

Consolidated Six-Year Summary................................................. 1
To Our Shareholders ................................................................. 2
Special Feature (President’s Interview) ....................................... 4
NLM Group Topics .................................................................... 7
Review of Operations ................................................................ 8
Financial Review ....................................................................... 10
Consolidated Balance Sheets ..................................................... 12
Consolidated Statements of Income ........................................... 14
Consolidated Statements of Shareholders’ Equity ...................... 15
Consolidated Statements of Cash Flows ..................................... 16
Notes to the Consolidated Financial Statements ......................... 17
Report of Independent Auditors ................................................ 28
Overseas Network ..................................................................... 29
Directors and Officers ............................................................... 30
Corporate Data ......................................................................... 31

Cautionary Statement
This annual report contains various projections and estimates. Important factors that could alter these projections and estimates include changes in the balance of aluminum supply and demand, fluctuations in the price of aluminum ingot andforeign exchange rates, as well as shifts in Japanese government policies and regulations. The Company cautions, therefore,that the projections and estimates contained herein involve risk and uncertainty, and that actual results could differ materially from those expressed or implied.
On the Cover:Top form left: “smelted aluminum” “crystal face of high-purity aluminum” “cleanroom” “etched circuit foil” “scene ofanalysis”, Middle: “slab”, Bottom: “melting furnace”

Nikkei Products Co., Ltd.
Household utensils(100%)

Namekawa Aluminum Co., Ltd.
(2.8%)

Nikkei Extrusions Co., Ltd.
Aluminum extruded products(100%)

Nikkei-Keiyu-Kai(2.4%)

Nikkei Aluminum Core Technology
Co., Ltd.
Aluminum extrusions and fabricatedproducts(100%)

UFJ Trust Bank, Ltd. (trust accounts)(2.3%)
Mizuho Bank, Ltd.
(2.3%)

Major Domestic AffiliatedCompanies

Shin Nikkei Company, Ltd.
Aluminum sashes, construction materials *Nikkei Panel System Co., Ltd.
Panel for pre-fabricated freezer/refrigerator and cleanroom(100%)

1

Number of Shareholders

54,705
Stock Exchange Listings

Contents

The Light Metal Educational
Foundation, Inc.
(2.9%)

Tokyo, Osaka and three otherdomestic stock exchanges
Transfer Agent of Common Stock

The Chuo Mitsui Trust & Banking Co., Ltd.
Last Shareholders’ Meeting

June 27, 2003

Major Shareholders(Percentage of Total Voting right)

Mizuho Corporate Bank, Ltd.
(5.2%)The Dai-ichi Mutual Life Insurance Co.
(5.2%)
Alcan Nikkei Asia Holdings Ltd.
(–%)

Nikkei ECAL Co., Ltd.
Housing for cellular and mobile
telecommunications base stations(100%)

Nippon Fruehauf Co., Ltd.
Aluminum vans, trucks, trailers,
containers(66%)

Aluminum Wire and Rod Co., Ltd.
Aluminum rough drawing wire
(58.3%)

Toyo Aluminium K.K
Aluminum foil, powder and paste(100%)
Riken Light Metal Industrial Co., Ltd.
Aluminum construction materials *Matsuo Industry Co., Ltd.
Aluminum castings and forgings *Nippon Electrode Co., Ltd.
Carbon for iron and steel blast furnaces
and for aluminum smelting, and othertypes of carbon(100%)*1 98%; Direct interest by NLM
2%; Interest held by Nikkei Sangyo Co., Ltd.

2

Nikkei Sangyo Co., Ltd.
Aluminum welding rods, various kindsof contract work
(98.6%)The Master Trust Bank of Japan, Ltd.
(trust accounts)(3.7%)

Nikkei Information System Co., Ltd.
Development, maintenance and operation of computer software(100%)

Asahi Mutual Life Insurance Co.
(2.9%)

Nikkei Logistics Co., Ltd.
Transport, warehousing *4*2 98.5%; Direct interest by NLM
1.5%; Interest held by Nikkei Logistics Co., Ltd.
*3 46%; Direct interest by NLM
44%; Interest held by Shin Nikkei Co., Ltd.
10%; Interest held by Nippon Fruehauf Co., Ltd.
*4 99.1%; Direct interest by NLM
0.1%; Interest held by Nikkei Sangyo Co., Ltd.

3

(As of March 31, 2003)
31

ANNUAL REPORT 2003
Year Ended March 31, 2003

Nippon Light Metal Company, Ltd.
NYK Tennoz Building,
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp

Printed in Japan