TOYO KANETSU K.K.

Profile
Toyo Kanetsu K.K. (TKK) was established in the year of 1941. Since that time, TKK has continued to meet the requirementsof the industry through our policy of “Customers First.”
The Plant & Machinery Division was established in 1950 when in-house welding technology was developed for weldedstorage tanks. Since then, our expertise has expanded to provide customers various kinds of storage tanks consisting of morethan 5,000 units varying from crude oil storage tanks to LNG storage tanks. Particularly, we are proud of our outstanding trackrecord of LNG Storage Tank construction, with 25 tanks in Japan and 50 tanks in overseas sites in Asia, Africa, Middle East,
Oceania and the Western Hemisphere. Our technical expertise and our outstanding record of Safety, Quality & Delivery havebeen recognized and appreciated by the major clients throughout the world.
The Building Construction Division was started in 1989 for construction of apartment houses with application of modular steel
frame structures. The Division has expanded its activities to shop and office buildings with use of prefabricated construction
methods as well as conventional construction methods.
The Material Handling Systems Division was begun in 1953 for manufacture and installation of highly standardized conveyors
systems. Since that time, the Division has continued to develop the technology to meet the needs of our clients. The Division
supplied one of the largest Airport Baggage Handling Systems in the world in 1998 at Kuala Lumpur International Airport in
Malaysia. Also, as a leading provider company of Logistics Solutions in Japan, the Division has successfully completed
numerous projects such as Distribution Center System, Truck Terminal System, Food Distribution Processing Center andPostal Sorting System. The Division became a subsidiary company of TKK under the name of Toyo Kanetsu Solutions K.K. in2002 in order to maximize the efficiency and also to vitalize TKK Group companies.
TKK will continue to provide the advanced technology to answer the needs of its clients for today and tomorrow.

Contents

Financial Highlights ････････････････････････････ 2
Message from the President ･････････････････････ 3
Board of Directors and Corporate Auditors ･････････ 4Line of Business･･･････････････････････････････ 4
Qualifications ･････････････････････････････････ 4
Subsidiaries and Affiliated Companies ･････････････ 5
Consolidated Balance Sheets ････････････････････ 6
Consolidated Statements of Operations ････････････ 8
Consolidated Statements of Shareholders' Equity ････ 9
Consolidated Statements of Cash Flows ･･････････ 10
Notes to the Consolidated Financial Statements ････ 11
Report of Certified Public Accountants ････････････ 23
Corporate Data･･･････････････････････････････ 24

1Toyo Kanetsu K.K. and Consolidated Subsidiaries

Financial Highlights

For the Years Ended 31st March:
Net Sales
Material Handling Systems Division
Plant & Machinery Division
Building Construction Division
OthersOperating Income (Loss)Net Income (Loss)
Cash dividends
At 31st March:
Current Assets
Net Property, Plant and Equipment
Investments and Advances
Intangibles and Deferred Charges
Total Assets
Current Liabilities
Long-Term Liabilities
Minority Interests in Consolidated Subsidiaries

Shareholders' Equity
Total Liabilities, Minority Interests andShareholder ’s Equity
Order Backlog

2005

2004

¥ 39,734
13,595
15,217
7,533
3,389
1,349
1,011

¥ 43,914
17,55010,386
9,280
6,698
923
1,042
-

Thousands of
U.S. dollars

Millions of yen
2003

2002

2001

2005

¥ 36,662
15,487
7,543
9,499
4,133
372
(2,333)-¥ 39,729
15,338
7,342
10,8086,241(1,639)(15,997)-¥ 37,502
22,697
6,286
5,814
2,705
179
(712)
-

$370,240
126,681
141,790
70,19531,574
12,565
9,418--

22,796
16,54416,300317
55,95721,024
17,052
16,103280
54,45918,643
17,966
11,525295
48,42921,36920,68013,402
191
55,642

28,52815,03023,276
213
67,047

212,411
154,155
151,886
2,956
521,408

20,42011,50725
24,00555,957

16,893
13,53419
24,01354,45918,864
10,01420
19,531
48,42922,625
12,71620
20,28155,642

24,5396,669
37
35,802
67,047

190,268
107,221236
223,683
521,408

34,232

34,701

40,26635,767

34,841

318,976

Yen
Per Share:
Net Income (Loss)
Cash dividends
Shareholders' Equity
Number of Shareholders
Number of Employees

U.S. dollars¥ 7.31173.57¥ 7.53173.55¥ (16.85)
141.18¥ (115.32)
146.21¥ (5.14)258.07

16,418525

16,078564

17,102573

17,705588

17,653755$ 0.07$ 1.62; The U.S. dollar amounts in this annual report represent translations of Japanese yen at the rate of ￥107.32=$1.00, solely for the reader's convenience.

2

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Message from the President
Over View
The domestic economy during this fiscal year saw a steady recovery in the first half due to increases in exports andmanufacturing as well as high-level capital expenditure. However, downward market conditions from the latter half
onwards, such as exports turning sluggish and commodity prices increasing, have caused the market to remain stagnant.
Under such macro economic conditions and with full recovery in consumer spending expected to take a considerable
amount of time, large-scaled capital expenditure was held in check on the one hand while on the other, outsourcing of
distribution progressed and the call for cost reduction heightened. These factors caused The Material Handling Systems
Business to face an environment difficult for securing new orders. The Plant & Machinery Business managed to conclude
ongoing domestic federal transactions, but against a backdrop of surging demand for natural gas as a clean energy source,
they continued to receive overseas inquiries frequently for low temperature and ultra-low temperature tanks to act as LPG
and LNG storage facilities. The Building Construction Business faced tough competition for orders in addition tosuffering skyrocketing costs of architectural material and continued to endure a harsh environment.
Our corporate group as a whole managed to secure a considerable increase in operating income and income before special
items despite a decrease in income as a result of brisk business results of the Plant & Machinery Business along withefforts to improve profitability across all businesses.
Net sales for the fiscal year were JPY 39.7 billion (US$370 million), down 9.5% from the previous fiscal year, operating income was JPY1.3 billion (US$13
million), up 46.1%, and income before special items was JPY1.7 billion (US$16 million), up 20.6% from the previous year. However, as a result of security
write-offs and write-downs of fixed assets, etc. in order to keep assets strong, net income for this fiscal year was JPY1.0 billion (US$9 million), down 3.0%
from the previous year. Again, the amount of orders received was JPY35.9 billion (US$334 million), up 13.4% from the previous year.
A brief summary of each business follows:
The Material Handling Systems BusinessWe have been concentrating on IT-based material handling systems such as our prominent Picking System and Warehouse Management System (WMS),
and as a result of energetic sales activity we have received a greater amount of orders compared to the previous year. Sales to Co-ops, mass retailers andsubcontracted transport services grew steadily in addition to completion as scheduled of large construction projects such as the Central Japan International
Airport and Haneda Airport, which contributed to net sales. However, a large project currently in progress is scheduled to be completed during the first halfof the next fiscal year, causing the net sales figure to decrease compared with the previous year. Nevertheless, cost reduction efforts have led to an increasein operating profit compared with the previous fiscal year.
As a result, our net sales figure was JPY13.6 billion (US$127 million), down 22.5% from the previous fiscal year and orders received were JPY15.9 billion(US$148 million), up 12.7% from the previous fiscal year.
The Plant & Machinery BusinessWe have been making use of our vast experience and technological expertise as a specialist manufacturer to carry out brisk sales activity in the Middle Eastand Southeast Asia. This has resulted in a large volume of orders being received for materials of various tanks as well as for large construction projects
during the first half of the year for large-scaled gas projects which are continuously being planned and implemented in Iran and Qatar. Also, during thelatter half of the fiscal year, our overseas processing base was successful in Indonesia, to where many tanks have been supplied in the past, in contracting 2of the world’s largest volume LNG tanks. On the domestic front, we actively participated in the reconstruction and improvement of existing oil tanks inaccordance with revisions to laws concerning preventive measures against earthquake disasters, and concentrated efforts on receiving orders for related
maintenance work. Sales increased due to favorable progression of construction work for LPG and LNG tanks in both domestic and worldwide markets.
Despite factors such as cost increases due to the sharp rise in material costs, we are striving to impose strict cost management in order to firmly increase
earnings.
As a result, net sales for our business were JPY15.2 billion (US$142 million), up 46.5% from the previous year and orders received totaled JPY14.0 billion(US$130 million), up 58.4% from the previous year.
The Building Construction Business
Due to focusing sales activity on profitability for our core business, leased apartment complexes, the volume of orders received and sales have both
declined; however, we have been successful in improving our gains.
As a result, net sales for our business were JPY7.5 billion (US$70 million), down 18.8% from the previous year and orders received totaled JPY6.0 billion(US$56 million), down 31.3% from the previous fiscal year.
Other Businesses
Subsidiaries and affiliates handling business other than those mentioned above have each been making efforts to expand and develop, but with theelimination of unprofitable businesses, the sales figure was JPY3.4 billion (US$32 million), down 49.4% from the previous year.
Future Issues for the Corporate GroupThe motto of our group is the creation of a sound, strong, and dynamic corporate group. We are striving to further increase corporate value by assigning andimplementing 4 management tasks to the entire group.
1.
2.

3.
4.

Changing the profit structure and increasing profitability
We will work to strengthen and improve core businesses, increase labor efficiency,
and reduce the incurrence of costs, etc.
Encourage vitality among personnel and make full use of our human resources
We will aim to strengthen aggregate employee competence as well as performanceby the entire group by going back to the basics and reexamining the entire personnel
organization.
Establish corporate governance and compliance management
We will attempt to enhance and strengthen the function of the board of directors andboard of auditors as well as adjust the internal control and compliance structures.
Strengthen group management
We will work to heighten the consolidated strength of the group by unifying basic
operation policies of the group and encouraging mutual understanding and sharingof management information.

3

June 2005

Shigeaki Kiyota
President & Representative Director

Board of Directors and Corporate Auditors
Board of Directors
President & Representative Director.............................Shigeaki Kiyota
Managing & Representative Director............................Takeshi Mizukami
Director ....................................................................Sadao Arita...................................................................Shinji Shimazaki...................................................................Toru Yanagawa
Auditors ...................................................................Teruo Nojo.....................................................................Masaharu Hino.....................................................................Yoshihumi Murashige.....................................................................Koichi EndoLine of Business
Plant & Machinery Business:
Design & Engineering, Procurement,
Shop-Fabrication and Construction of:
Floating Roof Tank
Cone Roof Tank
Dome Roof Tank
−LNG/Ethylene Storage Tank, etc.
−LPG Storage Tank, etc.
Spherical Tank

Building Construction Business:
Design and Construction of:Apartment House
Shop Building
Office and Warehouse Buildings

Real Estate Business:
Sale, Brokerage and Leasing of:Office Building
Apartment House
Distribution Center
Real estate

Material Handling Systems Business:
Planning, Design, Manufacture, Construction and Marketing of:Distribution Center System
Truck Terminal System
Production Line System
Airport Baggage Handling System
Postal Sorting System
Food Processing Center System
Apparel Center System
Warehouse Management System
Engineering, Manufacturing and Installation of System’s Facilities,
their relative Civil Works and Architectural Works

Qualification- Listed in primary stock exchanges (Tokyo).
- Quality Management System to ISO 9001 certified by Bureau Veritas Quality International (BVQI) for flat bottomed vertical cylindricalstorage tank for low temperature service.
- Quality Management System to ISO 9001 certified by Bureau Veritas Quality International (BVQI) for Baggage Handling System, Slide
Shoe Type Sorting Conveyor and Wheel Up Sorting Conveyor.

4Subsidiaries, Affiliated Companies and Line of BusinessSubsidiaries which are consolidated, and affiliated companies which are accounted for by the equity method, are as follows.
Consolidated Subsidiaries

Toyo Kanetsu Solutions K.K.
Share Capital: 100.0%
Line of Business: Logistics Solution Provider
K-Techno Inc.
Share CapitalLine of Business
TKL Co., Ltd.
Share CapitalLine of Business100.0%
Consulting & Maintenance of Material Handling System: 100.0%: Rental/Leasing, Insurance & Travel Agent

Toyo Service System K.K.
Share Capital: 100.0%
Line of Business: Real Estate Management, Welfare Facilities Management, Gardening/
Floriculture Business Property, Plant & Equipment Maintenance.
Global Eight Co.
Share CapitalLine of Business: 84.0%: Commodity & Foodstuffs Trading

P.T. Toyo Kanetsu Indonesia
Share Capital: 92.9%Line of Business: Storage Tanks/ Pressure Vessels/ Onshore & Offshore Steel Structures
Al Ghallilah Engineering & Construction L.L.C.
Share Capital: 65.0%Line of Business: Storage Tanks/ Pressure Vessels / Onshore & Offshore Steel StructuresTKK Engineering Pty. Ltd.
Share Capital: 100.0%
Line of Business: Storage Tanks/ Pressure Vessels/ Onshore & Offshore Steel Structures,
Ranch Management, Tourism

Affiliated Companies(Equity Method)

TKK-USA,INC
Share CapitalLine of Business: 100.0%: Storage Tanks/ Pressure Vessels / Onshore & Offshore Steel Structures

Toyo Koken K.K.
Share CapitalLine of Business: 39.3%: Electric-driven winches, Conveyors, Balancer & Robots

Toyo Miyama Co., Ltd.
Share Capital: 50.0%Line of Business: Prefabrication of Unit House
Katayama Co.
Share CapitalLine of Business: 22.0%: Architectural Management

Manavis Co., Ltd.
Share CapitalLine of Business: 20.6%: Cosmetics, Cleaning Products

Toyo Kanetsu (Malaysia) Sdn. Bhd.
Share Capital: 49.0%Line of Business: Material Handling Systems, Storage Tanks/ Pressure Vessels / Onshore& Offshore Steel Structures5

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Balance Sheets
As at March 31, 2005 and 2004ASSETS
2005

2004

Thousands of
U.S. dollars(Note 3)2005

Inventories (Note 6)
Other current assets
Total current assets¥6,605
9,764
(92)
9,672
5,823
696
22,796¥6,728
5
9,359
(593)
8,766
3,734
1,791
21,024$61,549
90,984(859)
90,12554,256
6,481
212,411

Property, Plant and Equipment (Note 8):
Buildings and structures
Machinery and equipment
Land (Note 2(8))
Leased assets (Note 13)
Less: Accumulated depreciation
Total property, plant and equipment

11,089
4,520
9,822
4,972
(13,859)
16,544

11,767
4,882
9,976
4,501
(14,074)
17,052

103,32142,12091,51946,331(129,136)
154,155

Investments and Advances:
Investments in securities (Notes 7 and 8)
Long-term loans receivable
Other investments
Less: Allowance for doubtful accounts
Total investments and advances

12,4281,959
2,955(1,042)
16,30012,051
1,755
2,949
(652)
16,103

115,804
18,251
27,537(9,706)
151,886317
317¥55,957

280
280¥54,459

2,956
2,956
$521,408

Millions of yen

Current Assets:
Cash in hand and at bank (Note 4)
Marketable securities (Notes 4 and 5)
Notes and accounts receivable
Less: Allowance for doubtful accounts

Intangibles and Deferred Charges:
Intangible fixed assets
Total intangibles and deferred charges

The accompanying notes are an integral part of the financial statements.

6

LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS'EQUITY
2005

2004

Thousands of
U.S. dollars(Note 3)2005

Current Liabilities:
Short-term debt (Note 8)
Notes and accounts payable
Accrued income taxes (Note 10)
Accrued liabilities
Advances from customers
Reserve for losses on work in progress
Other current liabilities
Total current liabilities¥9,497
1,964
172
3,567
4,521
157
542
20,420¥9,106
2,082
100
3,176
1,897
532
16,893$88,495
18,298
1,603
33,23842,122
1,466
5,046
190,268

Long-Term Liabilities:
Long-term debt (Note 8)
Deferred tax liabilities on revaluation of land (Note 2(8))
Deferred tax liabilities
Accrued retirement benefits for employees (Note 9)
Accrued retirement benefits for directors and corporate auditors
Other long-term liabilities
Total long-term liabilities

2,844
2,409
2,429
3,687
133
5
11,507

5,135
1,111
2,140
5,141
7
13,534

26,49822,45022,63134,352
1,237
53
107,221

25

19

236

18,580
1,104
980
331
3,720
(657)
24,058(53)
24,005¥55,957

18,5803,064(1,985)
1,619
3,418
(639)
24,057(44)
24,013¥54,459

173,128
10,287
9,127
3,088
34,666(6,119)224,177(494)
223,683$521,408

Minority Interests in Consolidated Subsidiaries

Millions of yen

Contingent Liabilities (Note 15)
Shareholders' Equity:
Common stock:
Authorized: 297,000,000 shares
Issued: 138,730,741 shares
Additional paid-in capital
Accumulated earnings (deficit)
Unrealized gains on revaluation of land (Note 2(8))
Net unrealized holding gains on investment securities
Foreign currency translation adjustments
Less: Treasury stock, at cost
Total shareholders’ equity

The accompanying notes are an integral part of the financial statements7Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Operations
For the years ended March 31, 2005 and 2004

2005

2004

Thousands of
U.S. dollars(Note 3)
2005

¥39,734
35,1854,549
3,200¥43,91439,9783,936
3,013$370,240
327,857
42,38329,818

1,349

923

12,565

216
(341)
47
469
1
392
1,741

194
(340)
(80)
673
73
520
1,443

2,008
(3,178)
442
4,369
13
3,654
16,219

(192)
(24)
(100)

(192)
(53)
(211)
-

(1,786)
(224)
(935)

(264)
(136)
328
(161)
(106)
(655)
1,086

(4)
(3)
(8)
360
(215)
(326)
1,117

(2,459)(1,270)3,056(1,501)(981)(6,100)
10,119

87
(12)
75

90
(15)
75

812
(106)
706

(0)

(0)

(5)

¥1,011¥1,042$9,418Millions of yen

Net Sales
Cost of Sales (Note 12)
Gross profit
Selling, General and Administrative Expenses (Notes 11 and 12)
Operating Income (Loss)
Other Income (Expenses):
Interest and dividend income
Interest expense
Exchange gain (loss)
Equity in income of unconsolidated subsidiaries and affiliates
Other, net
Income (Loss) before special items
Special Profit (Loss):
Loss on sale or disposal of property, plant andequipment, net
Provision for bad debts
Employees’ retirement benefit expenses (Note 2 (12))
Provision for retirement benefits for directors and corporate auditors
for prior periods
Loss on write-down of investment securities
Loss on write-down of investments in golf club memberships
Loss on sale of investment securities
Gain on sale of investment securities
Extraordinary retirement benefits
Other, net
Income (Loss) before income taxes and minority interests
Income Taxes (Note 11):
Current
Deferred

Minority Interests in Loss of Consolidated Subsidiaries
Net Income (Loss)

U.S. dollars(Note 3)yen
Per Share (Note 2 (16))
Net income (loss)¥7.31

The accompanying notes are an integral part of the financial statements

8

¥7.53

$0.07

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Shareholders' Equity
For the years ended March 31, 2005 and 2004
Millions o f yen
Number ofshares ofcommonstock

Balance at March 31, 2003
Net income for the year

Net unrealized
Unrealized holding gains Foreign
Additional Accumulated gains on
currency(losses) on
paid-inearnings
revaluation investment translation
capital(deficit)of landsecurities adjustments

Commonstock

138,730,741 ¥18,580¥3,062--

Realized gains on revaluation of land--

Gain on disposal of treasury stock--

Foreign currency translation adjustments

-

-

-

-

Net unrealized holding gains
investments
Balance at March 31, 2004

on¥(3,049)
-

1,042

-

22

¥(3)

¥(656)

¥(44)

-

-

-

-

(22)

-

-

-

-

-

-

-

-

-

-

-

-

-

2

138,730,741 ¥18,580¥1,641¥3,064¥(1,985)

0

17

-

3,421

-

-

¥3,418¥(639)

¥(44)

-

-

-

-

¥1,619Net income for the year

-

-

-

Transfer to deferred tax liabilities onrevaluation of land
Realized losses on revaluation of land

-

-

-

-

(1,288)

-

-

-

-

-

-

(7)

-

-

-

-

Transfer from additional paid-in
capital to accumulated deficit-- (1,960)

1,961

-

-

-

-

Foreign currency translation adjustments

-

-

-

-

-

(18)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(9)

¥(657)¥(53)

Net unrealized holding gains
investments
Purchase of treasury stock
Balance at March 31, 2005

on

138,730,741 ¥18,580

Number ofshares ofcommon stock

Balance at March 31, 2004

¥1,104

¥980

¥331

302
¥3,720Thousands of U.S. dollars (Note 3)
Net unrealized
Unrealized holding gains Foreign
currency
Additional Accumulated gains on(losses) onrevaluation investment translation Treasury
paid-inearningsof landcapital(deficit)
securities adjustments stock

Commonstock

138,730,741 $173,128-

Net income for the year

1,011

Treasurystock$28,554-$(18,498)
9,418$15,085-$31,849-$(5,960)-$(406)-

Transfer to deferred tax liabilities onrevaluation of land
Realized losses on revaluation of land

-

-

-

-

(11,997)

-

-

-

-

-

-

(62)

-

-

-

-

Transfer from additional paid-in
capital to accumulated deficit-- (18,267)

18,269

-

-

-

-

-

-

-

-

-

-

(159)

-

-

-

-

-

-

2,817

-

-

-

-

-

-

-

-

-

(88)

138,730,741$173,128$10,287$9,127$3,088$34,666$(6,119)$(494)

Foreign currency translation adjustments

Net unrealized holding gains
investments
Purchase of treasury stock
Balance at March 31, 2005

on

The accompanying notes are an integral part of the financial statements.

9

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
For the years ended March 31, 2005 and 2004

2005

2004

Thousands of
U.S. dollars(Note 3)2005

¥1,086¥1,117$10,119

1,240
(112)
(1,455)
133

1,149
(132)
(38)
-

11,551(1,041)(13,553)
1,237

157
(216)
341
(469)
264
(328)
220
(406)
(2,088)
326
2,624
191
1,508
224
(333)
(129)
1,270

(194)
340
(673)
4
(352)
106
(2,556)
1,808
749(1,708)
811
431
202
(321)
(105)
207

1,466
(2,008)3,179(4,369)2,459(3,057)2,047(3,781)(19,458)
3,038
24,4491,779
14,057
2,084(3,100)(1,204)
11,8374(1,302)
335
(3)
758
1,048
(92)
(206)
542

(134)
(530)
23
(245)
1,134
(206)
3
45

38
(12,136)
3,121
(32)
7,065
9,766
(857)
(1,917)
5,048

(592)
2,180
(3,491)(9)(1,912)
(24)
(124)
6,599
¥6,475(2,065)4,810(2,242)
(6)
497
(106)
643
5,956
¥6,599(5,512)
20,313(32,526)(88)(17,813)(223)(1,151)
61,489$60,338

Millions of yen

Cash Flows from Operating Activities:
Income (Loss) before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Decrease in provision for allowance for doubtful accounts
Decrease in provision for employees’ retirement benefits
Increase in provision for retirement benefit for directors andcorporate auditors
Increase in provision for losses on work in progress
Interest and dividend income
Interest expense
Equity in income of unconsolidated subsidiaries and affiliates
Loss on write-down of investment securities
Net gain on sale of investment securities
Loss on disposal of property, plant and equipment(Increase) decrease in notes and accounts receivables(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in advances from customers
Other
Sub totalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by operating activities
Cash Flows from Investing Activities:
Increase in time deposits (over 3-month term)
Payments for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchase of investment securities
Proceeds from sales of investment securities(Increase) decrease in long-term loans receivable
Payment for purchase of goodwill of affiliate
Other
Net cash provided by investing activities
Cash Flows from Financing Activities:
Decrease in short-term debt, net
Proceeds from long-term debt
Repayment of long-term debt
Other
Net cash provided by (used in) 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 at End of Year (Note 4)
The accompanying notes are an integral part of the financial statements.

10

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Notes to the Consolidated Financial Statements
For the years ended March 31, 2005 and 2004

1. Basis of Presenting the Consolidated Financial Statements
The accompanying consolidated financial statements of Toyo Kanetsu Kabushiki Kaisha (the "Company") and its subsidiaries(collectively, the "Companies") are prepared on the basis of accounting principles generally accepted in Japan, which are
different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, andare compiled from the consolidated financial statements prepared by the Company as required by the Securities and Exchange
Law of Japan. The accounts of overseas consolidated subsidiaries are based on their financial statements prepared inconformity with generally accepted accounting principles and practices prevailing in the respective countries in which thesubsidiaries are incorporated.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau in Japan
have been reclassified in these accounts for the convenience of readers outside Japan.

2. Summary of Significant Accounting Policies(1) Principles of Consolidation and Investments in Affiliated Companies
The consolidated financial statements include the accounts of the Company and those of its subsidiaries in which it has control.
The consolidated financial statements include, with exceptions that are not material, the accounts of its ten subsidiaries (tensubsidiaries in 2004). All significant inter-company transactions and accounts and unrealized inter-company profits are
eliminated on consolidation.
Investments in unconsolidated subsidiaries and affiliated companies in which the Company has significant influence areaccounted for under the equity method. These unconsolidated subsidiaries and affiliated companies to which the equity method
is applied total five at March 31, 2005 and five at March31,2004. Consolidated net income includes the Company’s equity inthe current earnings of those companies after elimination of unrealized inter-company profits.
The excess of the cost over the underlying net equity of investments in consolidated subsidiaries as well as companies
accounted for on an equity basis, is deferred and amortized on a straight-line basis over a period of five years from the date ofacquisition.
Five subsidiaries were consolidated on the basis of their fiscal years ended at both December 31, 2004 and 2003. Material
differences in inter-company transactions and accounts arising from the use of the different fiscal year-end are appropriately
adjusted in consolidation.
(2) Re-valuation of Assets and Liabilities of the Subsidiaries
Full portion of the assets and liabilities of the subsidiaries is marked to fair value as of the acquisition of control.
(3) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash in hand, bank deposits able to bewithdrawn on demand and short-term investments with an original maturity of three months or less and which represent a
minor risk of fluctuations in value.
(4) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided at an amount for receivables other than doubtful receivables calculated using
historical write-off experience from certain prior periods plus the amount of possible losses from un-collectible receivables
based on the management’s estimate.
(5) Inventories
Inventories are valued at cost as determined by the following methods:
Raw materials……………………….Moving average method
Work in process and supplies ……… Accumulated materials and production cost11(6) Financial Instruments(a) Derivatives
All derivatives are stated at fair value except for certain derivatives that are designated as "hedging instruments" (see (c) Hedge
Accounting below).
(b) Securities
Securities held by the Company and its subsidiaries are classified into two categories;“Investments of the Company in equity securities issued by unconsolidated subsidiaries and affiliates” are accounted for by theequity method.
Other investments in debt and equity securities are classified as “Other securities”. The adoption of mark-to-market accounting
for “Other securities” with market quotations becomes effective for the year ended March 31, 2005. As a result of this change,“Other securities” with market quotations are stated at fair value with any unrealized holding gains and losses, net of tax, being
reported in Shareholders’ equity as “Net unrealized holding losses on investment securities”. “Other securities” without market
quotation are stated at cost. “Other securities” which have the characteristics of cash equivalents are presented as Marketable
Securities (current) while the remainder of “Other securities” are presented as Investments in Securities (non-current). The
costs of “Other securities” sold are determined by the moving average method.
(c) Hedge Accounting
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 during which the gains and losses on the hedged items ortransactions are recognized. However, in cases where forward exchange contracts used as hedges meet certain hedging criteria,
the existing foreign currency receivables or payables are translated at their contract rates. In addition, if interest-rate swap
contracts meet certain hedging criteria, the net amount to be paid or received under these swap contracts is added to or
deducted from the interest on the liabilities for which the swap contract was executed.
The deferred hedge procedure is not applied to that part of interest rate-swaps to which do not meet have the requirements for
applying the hedge accounting.
Derivatives designated as hedging instruments by the Company are principally interest swaps and forward exchange contracts.
The related hedged items are trade accounts receivable and payable, and long-term bank loans.
The Company has a policy of utilizing the above hedging instruments in order to reduce the Company's exposure to the risk offoreign exchange and interest rate fluctuations. Thus, the Company's purchases of hedging instruments are limited to, at
maximum, the amounts of the hedged items.
The Company evaluates the effectiveness of its hedging activities by reference to the accumulated gains or losses on thehedging instruments and the related hedged items from the commencement of the hedges.
(7) Property, Plant and Equipment
Property, plant and equipment are stated at cost. The cost of maintenance, repairs and minor renewals is charged to current
operations; major renewals and betterments are capitalized. Depreciation is mainly computed using the declining-balancemethod, except for buildings acquired after April 1, 1998, to which the straight-line method is applied for the Company and its
domestic subsidiaries. The principal estimated useful lives range from 3 to 50 years for buildings and from 10 to 15 years formachinery and equipment. Depreciation of overseas subsidiaries is computed using the straight-line method.
(8) Revaluation of Land
In accordance with the “Law on Land Revaluation” issued on March 31, 1998 and the “Law Related to the Revision of the
Law of Land Revaluation” issued on March 31, 2001, the Company revalued its business-purpose land. Of the revaluationdifference, the amount related to tax is recognized as a deferred taxes liability and the revaluation difference, net of tax, is
recognized as a component of shareholder’s equity.
Method of the revaluation
The revaluation was performed based on the fixed asset tax revaluation amount set in the “Law on Land Revaluation” No.2
article 3, and is calculated based on land prices set in the “Law on Land Revaluation” No.2 article 4, with certain reasonableadjustments as follows:
Date of the revaluation:
Land before revaluation:
Land after revaluation:

March 31, 2002
¥7,189 million¥ 10,844 million
12Upon sales of the land revalued as above, the corresponding unrealized gains on the revaluation of such land was transferred
directly to accumulated deficit. The excess of the book value over the current market value of such revalued land held at March
31, 2005 amounted to ¥3,360 million ($31,305 thousand).
(9) Intangible Assets
Amortization of intangible assets is computed using the straight-line method. Software for internal-use is amortized over its
expected useful life (5 years), on a straight-line basis.
(10) Reserve for losses on work in progress
A reserve for losses on work in progress is provided based on an estimate of the total losses which can be anticipated for the
next fiscal year and beyond in respect of construction projects on which eventual losses are deemed inevitable and amounts
thereof can reasonably be estimated.
(11) Income Taxes
The income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants’ taxes andenterprise taxes.
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 consolidated
financial statements.
(12) Accrued Retirement Benefits for Employees
Accrued retirement benefits to employees of the Company and its major consolidated subsidiaries are provided based on theestimated present value of projected benefit obligations and fair value of funded plan assets. For other insignificant
consolidated subsidiaries, accrued retirement benefits to employees are calculated using the simple method. Actuarial gains(losses) are charged as deductions from expenses or expenses in the year of occurrence.
In 2004, Employees’ retirement benefit expenses reported as special loss [¥211 million ($1,996 thousand)] was the amount of thecontractual obligation. Depletion of plan assets was caused by many voluntary retirements at one of the subsidiaries.

In the Company and its consolidated subsidiary, TKSL, a part of the approved retirement annuity system was shifted to adefined contribution annuity plan.
(13) Accrued Retirement Benefits for Directors and Corporate Auditors
Accrued retirement benefits for directors and corporate auditors of the Company and its subsidiaries are provided for inaccordance with the companies’ established rules on the accrual basis, with provisions being made at the end of period.
(Reason for changes to accounting method for the above item)
The retirement benefits for directors and corporate auditors, which used to be recognized as an expense only when paid out,
have been changed to an accrual basis, with provisions being made at the end of the period.
This serves not only to prevent distortions to the results of operations owing to incidental claims, but also provides for earlier
recognition of costs for the past year in a bid to ensure the overall health of the company’s financial statements. Due to thischange, operating income and ordinary income decreased by ¥32 million, while net income before taxes and net income for theyear were down by ¥133 million.
(14) Accounting for Finance Leases
Leases that transfer substantially all the risks and rewards of ownership of the assets are accounted for as capital leases.Leases
not transferring ownership of the assets at the end of the lease term are accounted for as operating leases, in accordance withaccounting principles and practices generally accepted in Japan.
(15) Sales Recognition Basis
The Company uses the percentage-of-completion method for the recognition of sales and gross profit in respect of certain
contracts that take more than one year to complete. In all other cases, sales and gross profit are recorded when the relevant
items are completed or delivered.

13(16) Earnings Per Share
The computation of net income per common share is based on the weighted average number of outstanding shares of common
stock.
(17) Accounting standard for impairment of fixed assets
On August 9, 2002, the Business Accounting Council in Japan issued "Accounting Standard for Impairment of Fixed Assets".
The standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate thatthe carrying amount of an asset may not be recoverable. An impairment loss shall be recognized in the income statement by
reducing the carrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher ofnet selling price and value in use.
The standard shall be effective for fiscal years beginning April 1, 2005. However, earlier adoption is permitted for the years
beginning April 1, 2004 and for fiscal years ending between March 31, 2004 and March 30, 2005.
The Company did not apply the earlier adoption for the year ended March 31, 2005. The effect of adopting “AccountingStandard for Impairment of Fixed Assets” is not clear at present, because the Company has not estimated it.

3. United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥107.32=U.S. $1.00, theapproximate rate of exchange prevailing at March 31, 2005, has been used in translation. The inclusion of such amounts are
not intended to imply that Japanese yen have been or could be readily converted, realized or settled in U.S. dollars at this rateor any other rates.

4. Cash and Cash Equivalents
Cash and Cash Equivalents as at March 31, 2005 and 2004 consisted of:Thousands of
U.S. dollars

Millions of yen

March 31

2005

2004

2005

Cash in hand and at bankTime deposits, over 3-month term
Short-term investments included in marketable securities
Cash and cash equivalents¥6,605(130)¥6,475¥6,728(134)
5¥6,599$61,549(1,211)$60,338

5. Marketable Securities
Marketable securities as at March 31, 2005 and 2004 were as follows:
Millions of yen

March 31
Bonds and others

2005

2004

-

¥5

Thousands of
U.S. dollars
2005-

6. Inventories
Inventories as at March 31, 2005 and 2004 were as follows:
Millions of yen

March 31Work in process
Other

14

2005

2004

¥ 5,280543¥5,823¥ 3,156578¥3,734

Thousands of
U.S. dollars
2005$49,201
5,055$54,256

7. Investments in Securities
Investments in securities as at March 31, 2005 and 2004 were as follows:
Millions of yen
2005
2004

March 31
Listed equity securities and bonds
Unlisted equity securities and bonds

Investments in unconsolidated subsidiaries and affiliates included ininvestments in securities

Thousands of
U.S. dollars
2005¥9,535
2,893¥12,428¥9,213
2,838¥12,051$88,846
26,958$115,804¥1,094¥737$10,193

The aggregate acquisition cost, gross unrealized gains and losses and carrying amount on the balance sheet, which wererevalued to the related fair value, of other securities with market quotations at March 31, 2005 and 2004 were as follows:
At March 31, 2005
Millions of yen
Unrealized
Unrealized
gains
losses
5,986
¥(11)
(5)
5,986
¥(16)

Acquisition cost
Equity securities
Bonds
OthersTotal¥3,53431¥3,565At March 31, 2004
Millions of yen
Unrealized
Unrealized
gains
losses
5,314
¥(50)
(6)
5,314
¥(56)

Acquisition cost
Equity securities
Bonds
OthersTotal¥3,92431¥3,955At March 31, 2005
Thousands of U.S. dollars
Unrealized
Unrealized
gains
losses$55,779$(98)(51)
55,779$(149)

Acquisition cost
Equity securities
Bonds
OthersTotal$32,932284$33,216

Carrying amount¥9,50926¥9,535Carrying amount¥9,18825¥9,213Carrying amount$88,613233$88,846

The Company writes down the book value of other securities when the market value declines by more than 50%, or themarket value declines by than 30% but less than 50% and the Company management determines the decline to be otherthan temporary.
Proceeds from sale of other securities were ¥756 million ($7,047 thousand) and ¥1,127 million for the years ended
March 31, 2005 and 2004, respectively. On those sales, gross realized gains were ¥328 million ($3,056 thousand) and¥360 million, and gross realized losses were ¥0 million ($0 thousand) and ¥8 million, respectively.
8. Short-Term Debt and Long-Term Debt
Short-term debt consists principally of bank overdrafts, bearing interest at a weighted average annual rate of 2.4% and 2.1% at
March 31, 2005 and 2004, respectively.

15

Short-term debt as at March 31, 2005 and 2004 was as follows:
Millions of yen

March 31
Bank over draft
SecuredUnsecured
Current portion of long-term debt

2005

2004

¥2,333
2,435
4,729¥9,497¥2,0993,139
3,868¥9,106

Thousands of
U.S. dollars
2005$21,742
22,68944,064$88,495

Long-term debt as at March 31, 2005 and 2004 was as follows:
Millions of yen

March 31
Payable to domestic banks, insurance companies and others,with interest rates shown below (* 1)SecuredUnsecured
Less: Current portion of long-term debt

March 31(*1) Interest rates

2005

2004

¥3,451
4,122
7,573(4,729)¥2,844¥4,487
4,516
9,003（3,868）¥5,1352005
1.4% to 3.4%

Thousands of
U.S. dollars
2005$32,154
38,40870,562(44,064)$26,4982004
1.6 % to 3.4 %Annual maturities of long-term debt at March 31, 2005 are as follows:Year ending on March 31,
2006
2007
2008
2009
2010 and thereafterThousands of
U.S. dollars

Millions of yen¥4,729
1,324
573
307
640
¥7,573$44,064
12,333
5,340
2,857
5,968
$70,562

Assets pledged as collateral for short-term debt and long-term debt as at March 31, 2005 and 2004 were as follows:
2005

2004

Thousands of
U.S. dollars
2005¥3,613
1,588
33
7,208
¥12,442¥3,601
1,711
56
7,383
¥12,751$33,663
14,796
312
67,167$115,938

Millions of yen

March 31
Investments in securities
Buildings (at net book value)
Machinery (at net book value)Land

9. Retirement Benefit Plan
Employees whose service with the Company and certain domestic subsidiaries is terminated are, in most circumstances,
entitled to lump-sum severance payments determined by reference to current basic rate of pay, length of service and thecircumstances in which the termination occurs.
The company and its domestic subsidiaries have a funded non-contributory and contributory pension plan for employees.
Under the plan, employees are entitled to receive a pension for 10 years from their retirement date, determined by reference tocurrent basic rates of pay at the time of termination, length of service and the conditions under which the termination occurred.
In the Company and its consolidated subsidiary, TKSL, a part of the approved retirement annuity system was shifted to adefined contribution annuity plan.

16

The accrued retirement benefits as of March 31, 2005 and 2004 are analyzed as follows:
Thousands of
U.S. dollars
2005$(50,708)
16,356(34,352)$(34,352)

Millions of yen
2005
2004
¥(5,442)¥(5,616)
1,755
475(3,687)(5,141)¥(3,687)¥(5,141)

Projected benefit obligations
Plan assets
Net unreserved projected benefit obligations
Accrued retirement benefits recognized in balance sheets

Net pension and severance costs related to the retirement benefit plans for the year ended March 31, 2005 and 2004 were as
follows:
Thousands of
U.S. dollars
2005$2,337
787
(40)
(731)
27
$2,380Millions of yen
2005
2004
¥251
¥265
84
84
(4)
(79)
(78)
3
¥255
¥271

Service costs
Interest costs
Expected return on plan assets
Net amortization
Amortization of prior service costs
Net pension and severance costs

Assumptions used in calculation of the above information were as follows:
As of March 31
Discount rate
Expected rate of return on plan assets
Method of attributing the projected benefit
obligations to periods of service
Amortization of unrecognized actuarial differences

2005
1.5 %
1.0 %

2004
1.5 %
0.0 %

Straight- line basis

Straight- line basis

Expensed in the year ofoccurrence

Expensed in the year ofoccurrence

10. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on income, which in the aggregate resulted in thestatutory tax rate of approximately 40.69% for the years ended March 31, 2005 and 2004. Foreign subsidiaries are subject toincome taxes of the countries in which they operate.
The reconciliation of the statutory tax rate to the effective income tax rate for the years ended March 31, 2005 is as follows:
2005
40.69%

Statutory tax rate
Reconciliation
Valuation allowance
Nondeductible expenses
Tax loss carryforwards
Other
Effective income tax rate

(35.69)4.71(3.53)
0.80
6.98%

17

At March 31, 2005 and 2004, significant components of deferred tax assets and liabilities were as follows:
Thousands of
U.S. dollars

Millions of yen
2005

2004

2005

Tax loss carryforwards¥4,861¥6,480$45,295

Accrued enterprise tax

46

-

427

1,498
65
1,144
64

988
25
507
-

13,958604
10,657
597

54
372
16
186
8,306

124
14
10
19
8,167

503
3,467
152
1,738
77,398Less: valuation allowance(8,286)(8,162)(77,208)

Gross deferred tax assets

20

5

190

2,409
2,429
¥ 4,838

1,111
2,140
¥ 3,251

22,45022,631$45,081Deferred tax assets

Accrued severance and pension costs for employees
Accrued bonuses
Allowance for doubtful accounts
Reserve for losses on work in progress
Accrued severance and pension costs for directors andcorporate auditors
Loss on write-down of investments
Loss on write-down of inventories
Write-offs
Other

Deferred tax liabilities
Deferred tax liabilities on revaluation of land
Net unrealized gains on investments in securities
Gross deferred tax liabilities

11. Selling, General and Administrative Expenses
Selling, General and Administrative expenses for the years ended March 31, 2005 and 2004 comprised the following:
Millions of yen
2005
2004
¥1,189¥1,247
59
65
152
149
1,800
1,552
¥3,200¥3,013

Year ended March 31
Salaries and remuneration
Accrued bonuses
Pension and severance costs
OthersThousands of
U.S. dollars
2005$11,080548
1,416
16,774$29,818

12. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years
ended March 31, 2005 and 2004 were ¥84 million ($779 thousand) and ¥82 million, respectively.
13. Leases
A. Lessee
Leases that transfer substantially all the risks and rewards of ownership of the assets are accounted for as capital leases.
Leases not transferring ownership of the assets at the end of the lease term are accounted for as operating leases, in accordancewith accounting principles and practices generally accepted in Japan.
Leased assets under finance leases that do not transfer ownership of the leased assets at the end of the lease term, if capitalized,
comprise the following:18

Machinery, equipment and delivery equipment
Tools, furniture and fixtures
Total

Machinery, equipment and delivery equipment
Tools, furniture and fixtures
Total

Machinery, equipment and delivery equipment
Tools, furniture and fixtures
Total

Acquisitioncost¥1,4982,255¥3,753At March 31, 2005
Millions of yen
Accumulated
depreciation¥741
881¥1,622Net book value
¥757
1,374
¥2,131

Acquisitioncost¥1,544
2,248¥3,792At March 31, 2004
Millions of yen
Accumulated
depreciation
¥550
429
¥979

Net book value
¥994
1,819
¥2,813Acquisition
cost$13,962
21,011$34,973

At March 31, 2005
Thousands of U.S. dollars
Accumulated
depreciation$6,903
8,210$15,113

Net book value$7,05912,801$19,860

The amounts of outstanding future lease payments due at March 31 including the portion of interest thereon are summarized asfollows:
Thousands of
U.S. dollars
Millions of yen
2005
March 31
2005
2004
Future lease payment$6,491
Within one year
¥697
¥685
14,270Over one year
1,531
2,217
$20,761¥2,228¥2,902
Lease rental expenses on such finance lease contracts for the years ended March 31, 2005 and 2004 are as follows:
Thousands ofMillions of yen
U.S. dollars
2005Year ended March 31
2004
2005
$6,970
Lease rental expenses
¥748
¥658
6,392
Depreciation
686
600
742
Interest expense
80
87

B. Lessor
Finance leases that do not transfer ownership of the leased property to lessor are accounted for as rental transactions.
Leased assets under financial leases comprise the following:

Buildings and structures
Machinery, equipment and delivery equipment
Tools, furniture and fixtures
Total

Acquisition
cost¥2,082
1,365
1,525¥4,97219At March 31, 2005
Millions of yen
Accumulated
depreciation¥1,000705
912¥2,617

Net book value¥1,082660
613¥2,355

Buildings and structures
Machinery, equipment and delivery equipment
Tools, furniture and fixtures
Total

Acquisition
cost¥2,071
1,286
1,144¥4,501At March 31, 2004
Millions of yen
Accumulated
depreciation
¥741
945
703
¥2,389Net book value¥1,330341
441¥2,112At March 31, 2005
Thousands of U.S. dollars

Buildings and structures
Machinery, equipment and delivery equipment
Tools, furniture and fixtures
Total

Acquisition
cost$19,403
12,718
14,210$46,331

Accumulated
depreciation$9,322
6,567
8,494$24,383

Net book value$10,081
6,151
5,716$21,948

The amounts of outstanding future lease revenue due at March 31 including the portion of interest thereon are summarized asfollows:
Thousands ofMillions of yen
U.S. dollars
March 31
2005
2005
2004
Future lease revenue$19,925
Within one year
¥2,139¥1,722
39,483
Over one year
4,237
4,753
59,408¥6,376¥6,475

Lease rental revenue, depreciation and interest income equivalent on such finance lease contracts for the years ended March 31,
2005 and 2004 are as follows:
Thousands ofMillions of yen
U.S. dollars
2005
2004
Year ended March 31
2005$8,941
Lease rental revenue
¥960
¥955
6,268
Depreciation
673
526
2,673
Interest income
287
429

14. Derivative and Hedging Activities
The Companies use forward currency exchange contracts to hedge against the exchange rate risk associated with monetary
receivables and payables denominated in foreign currencies. Interest rate swap transactions are used in order to minimize therisk of fluctuation in interest rates on borrowings.
The Companies have established a control environment that includes policies and procedures for risk assessment and for theapproval, reporting and monitoring of transactions involving derivative financial instruments. The Companies do not hold or
issue derivative financial instruments for trading purposes.
The Companies are exposed to certain market risks arising from their forward exchange contracts and swap agreements. The
Companies are also exposed to the risk of credit loss in the event of non-performance by the counterparties to the currency andinterest; however, the Companies do not anticipate nonperformance by any of these counterparties, all of whom are financial
institutions with high credit ratings.
15. Contingent Liabilities
As at March 31, 2005, the Companies are contingently liable for notes receivable discounted and endorsed and guarantees ofloans made to unconsolidated subsidiaries and affiliates as follows:
Thousands ofMarch 31, 2005
Millions of yen
U.S. dollars$9,735
Guarantees of loans from banks¥ 1,045
219
Notes receivable discounted and endorsed
23
20

16. Segment Information(1) Industry Segment Information
The operations of the Company and its consolidated subsidiaries for the years ended March 31, 2005 and 2004 are summarized
by product group as follows:
Millions of yen
Material
Handling
Systems
Division

Plant &
Machinery
Division

Building
Construction
Division

OthersSub Total¥13,595
6
13,601¥15,21729
15,246¥7,533628
8,161¥3,389919
4,308

Operating costs and expenses
Operating income

13,266335

14,233
1,013

8,010
151

AssetsDepreciation
Capital expenditure

15,195
222
78

12,261
135
75

7,032
20
10

Year ended March 31, 2005
Sales
Sales to external customers
Inter-segment sales
Total

EliminationorCorporate
Assets*Consolidated
Total¥39,734
1,582
41,316¥ (1,582)(1,582)¥ 39,734
39,734

4,121
187

39,6301,686(1,245)(337)

38,385
1,349

9,490
826
1,112

43,9781,203
1,275

11,97937(3)55,9571,240
1,272

Consolidated
Total

Millions of yen
Material
Handling
Systems
Division

Plant &
Machinery
Division

Building
Construction
Division

OthersSub Total

Elimination
or Corporate
Assets*¥17,550
17,550¥10,386
10,386¥9,2803
9,283¥6,6981,164
7,862¥43,9141,167
45,081¥ (1,167)(1,167)¥ 43,914
43,914

Operating costs and expenses
Operating income (loss)

17,364
186

9,819
567

9,152
131

7,572
290

43,907
1,174

(916)
(251)

42,991
923

AssetsDepreciation
Capital expenditure

15,315
242
113

9,208
143
79

8,000
22
7

10,011701
368

42,534
1,108
567

11,92541
1354,4591,149
580

Year ended March 31, 2004
Sales
Sales to external customers
Inter-segment sales
Total* Corporate assets consist of cash in hand and at banks, investments in securities and the assets belonging to the administration department of the Company.
Corporate assets at March 31, 2005 and 2004 were ¥14,171 million ($ 132,048 thousand) and ¥14,442 million, respectively.

Thousands of U.S. dollars
Material
Handling
Systems
Division

Plant &
Machinery
Division

Building
Construction
Division

Others$126,681
55
126,736$141,790
269
142,059$70,195
5,853$76,048

Operating costs and expenses
Operating income

123,612
3,124

132,620
9,439

AssetsDepreciation
Capital expenditure

141,5902,069
724

114,246
1,255
697

Year ended March 31, 2005
Sales
Sales to external customers
Inter-segment sales
Total

Sub Total

Elimination
or Corporate
AssetsConsolidated
Total$31,574
8,562
40,136$370,240
14,739384,979$ (14,739)(14,739)$370,240
370,240

74,6381,410

38,404
1,732

369,274
15,705(11,599)(3,140)357,675
12,56565,520184
9388,433
7,702
10,366

409,789
11,21011,880111,619341(27)

521,408
11,551
11,853(2) Geographic Segment Information
Segment information classified by geographic area was omitted because a majority of the Companies’ operations were
performed in Japan.

21

(3) Export sales and sales by overseas subsidiaries
Millions of yen
Year ended March 31, 2005
Overseas sales
Consolidated Sales
Ratio

South-east
Asia
¥636
1.6%

Year ended March 31, 2004
Overseas sales
Consolidated sales
Ratio

South-east
Asia
¥676
1.5%

Year ended March 31, 2005
Overseas sales
Consolidated sales
Ratio

South -east
Asia$5,927
1.6%

Middle East
¥4,11210.4%

Other¥2,232
5.6%

Total¥6,980¥39,734
17.6%

Millions of yen
Middle East
¥1,793
4.1%

Other¥2,225
5.1%

Total¥4,694¥43,914
10.7%

Thousand of U.S. dollars
Middle East
$38,317
10.4%

Other
$20,799
5.6%

Total$65,043$370,240
17.6%* Major countries included in the above geographic areas are as follows:
South-east Asia:…..Thailand, Malaysia
Middle East:……….Iran, Qatar
Other: ……………..Trinidad and Tobago, Australia

17. Related Party Transactions
Material transactions of the Company with its related companies and individuals, excluding transactions with consolidated
subsidiaries which are eliminated in the consolidated financial statements and other than those disclosed elsewhere in thesefinancial statements, for the years ended March 31, 2005 and 2004 were as follows:

Name of Related
Company

Paid-in
CapitalPrincipal
Business

Toyo Koken K.K.

¥897
million

Produce and saleof electric-driven
winches

Toyo Miyama Co.,
Ltd.

¥100
millionArchitecturalbusiness

Millions of yen/Thousands of U.S. dollars
Transactions
Resulting Accounting BalanceYear ended March 31
At March 31,

EquityOwnership
Percentage
by theCompany

Description oftheCompany’s
Transactions

39%

Loans made

2005

2004

Account

2005

2004

$(-)

¥803

Short-term
loans

¥113
$(1,051)¥1,392¥1,182$(11,009)¥490

Long-term
loans¥1,633$(15,217)¥451

Long-term
loans

50%
Guarantee
obligation¥1,009$(9,404)

The terms and conditions of the above transactions are on an arm's-length basis.

22¥1,025¥1,000

23

Corporate Data
Head Office
19-20, Higashisuna 8-Chome, Koto-ku,
Tokyo 136-8666, Japan
Tel: (03) 5857-3333
Fax: (03) 5657-3170
URL: http://www.toyokanetsu.co.jp
Date of Establishment
16th May, 1941
Common StockPar Value
Authorized
Issued: ¥50: 297,000,000: 138,730,741

Security Traded
Tokyo Stock Exchange Market, 1st Section
Transfer Agent and Registrar
The Mitsubishi Trust and Banking Corporation
4-5, Marunouchi 1-Chome, Chiyoda-ku,
Tokyo 100-8212, Japan
Annual Meeting
The annual Meeting of Shareholders is normally held in June inTokyo, Japan

Offices, Subsidiaries and Affiliates
Domestic Offices
Toyo Kanetsu K.K. Osaka Sales Office
1-9-2, Senrioka-Higashi, Settsu, Osaka 566-0011, Japan
Tel: (072) 645-2520 Fax: (072) 645-2532
Toyo Kanetsu K.K. Chiba Plant
2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: (0438) 36-7161 Fax: (0438) 36-8211

Domestic Subsidiaries & Affiliates
Toyo Kanetsu Solutions K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: (03) 5857-3126 Fax: (03) 5857-3180
K-Techno Inc.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: (03) 5857-3155 Fax: (03) 5857-7248
TKL Co., Ltd.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: (03) 3640-5164 Fax: (03) 3644-1399
Toyo Service System K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: (03) 5690-7778 Fax: (03) 5690-7775
Global Eight Co.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: (03) 3699-1601 Fax: (03) 3699-4330
Toyo Koken K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: (03) 5857-3161 Fax: (03) 5857-3198

Manavis Co., Ltd.
15-9, Chidori, Urayasu-shi, Chiba 279-0032, Japan
Tel: (047) 380-5800 Fax: (047) 380-1166
Katayama Co.
22-13, Shinjuku 6-chome, Shinjuku-ku, Tokyo 160-0022, Japan
Tel: (03) 3352-0611 Fax: (03) 3352-0674
Toyo Miyama Co., Ltd.
2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: (0438) 37-2233 Fax: (0438) 37-2201

Overseas Subsidiaries & Affiliates
P.T. Toyo Kanetsu Indonesia(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62 (21) 570-7805 / 7739 Fax: +62 (21) 570-3950(Batam Fabrication Plant)
Jl. Tenggiri, Batu Ampar, Batam, Indonesia
Tel: +62 (778) 412158 / 412159 Fax: +62 (778) 412157
TKK Engineering Pty. Ltd.
34 Windarra Drive, City Beach, W.A. 6015, Australia
Tel: +61 (8) 9385-8682 Fax: +61 (8) 9385-7356
Toyo Kanetsu (Malaysia) Sdn. Bhd.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60 (86) 338122 Fax: +60 (86) 338123
Al Ghallilah Engineering & Construction L.L.C.
P.O. Box 121, Postal Code 118, Al Harthy Complex, Sultanate ofOman
TKK-USA,INC.
8955 Katy Freeway Suite 202 Houston TX 77024,USA

TOYO KANETSU K.K.
http://www.toyokanetsu.co.jp