N I S S H I N B O

A N N U A L

R E P O R T

2 0 0 2Y e a re n d e d

M a r c h

3 1 ,2 0 0 2

Annual Report 2002
(Year ended March 31, 2002)an

C O N T E N T S
Profile1

Business Lineup

2Creating a Profitable Structure
in a Time of Rapid ChangeInterview with the Management

4

Special Feature

8

Swift Commercializationof New Products
Global Business Development
Review of Operations

12

Six-year Summary

16

Financial Review

17

Financial Section

18

Nisshinbo History

30

Nisshinbo Group

31

Board of Directors/Corporate Data 32
Organization Chart

33

The paper used for this Annual Report is fromNisshinbo’s VENT NOUVEAU series of fine papers.
In this annual report, statements other thanhistorical facts are forward-looking statements thatreflect our plans and expectations. These forwardlooking statements involve risks, uncertainties andother factors that may cause our actual results andachievements to differ materially from thoseanticipated in these statements.

F INANCIAL H IGHLIGHTS( Y e a r s

e n d e d

3 1 s tM a r c h )Consolidated:(millions of yen)

2001

Net Sales
Net Income
Shareholders’ Equity¥ 233,535
517
192,3312002¥ 225,836-2,649213,665(millions of
US dollars)

2002$ 1,737-20
1,644

Per Share:(yen)

Net Income
Shareholders’ Equity
Cash Dividends¥

2.32
868.497.00¥ -12.03
988.027.00

Note: The United States dollar amounts in this report are given for convenience only and represent translations of Japanese yen at the rate of ¥130=US$1.

(US dollars)$ -0.09
7.60
0.05

N

ISSHINBO Industries, Inc. (the “Company”) was
founded in 1907 as a manufacturer of cotton yarns

and threads, and quickly assumed a position ofleadership in the industry. Our history has beencharacterized by strategic moves taken in advance ofcompetitors and designed to raise productivity, improve
quality and add value. Today, we are a total textiles
manufacturer, controlling operations from spinning tofinishing. This, together with our accumulated high levelsof technology, gives us an advantage in the developmentof truly distinctive products and in quality control.
Through the application in other fields of technologies
and expertise originally developed in the textiles area, wehave diversified our operations into the manufacture ofautomobile brakes, papers, machine tools, chemical
products, and others. These non-textile lines have grownsteadily, and now account for over 65% of consolidated
net sales. We offer a truly diverse range of products
Net Sales

Net Income(billions of yen)(billions of yen)

Shareholders’Equity(billions of yen)

5

250

processing and products in the textiles segment,
including SUPER SOFT (SS) and SUPER SOFT
PEACHPHASE (SSP), new-generation electronic braking

250

systems, high heat-insulation panels, fuel cell separators

4200(bipolar plates), and filters for plasma display panels.

200
3

The Company and its consolidated subsidiaries and2

150

tailored to customer needs: High value-added finishing150

affiliates (together, “Nisshinbo”) are fully focused on

1100

enhancing their collective strengths across their entire

1000business range. As a genuinely 21st century manufacturer-150

backed by advanced production systems and a wide

50
-2

range of high value-added products, we will capitalize on-3

0’98 ’99 ’00 ’01 ’02

0’98 ’99 ’00 ’01 ’02’98 ’99 ’00 ’01 ’02

these strengths to promote highly profitable businessareas that will form the basis of our future growth.

B USINESS L INEUP

TextilesTextile products have been the mainstay of our business since our foundation. We lead the Japanese textiles industry with
our high-quality products, backed up by our accumulated technology, and have gained the trust of customers. We havethe top share in the domestic markets for shirt materials, denim, and polyester and cotton blended uniform materials.
We undertake comprehensive operations, including finishing, and by integrating manufacturing and sales activities,
we have established a flexible system to supply original products that overseas makers cannot match for quality. An
ability to respond quickly to the precise needs of customers is our particular strength.
We offer a variety of unique, high value-added textile finishing processing and products, including SS, SSP, CELTOPIA
cotton/wool blended fabrics, Nisshinbo Mobilon spandex, and OIKOS non-woven cotton fabrics.
We are taking aggressive measures to expand our overseas operations, targeting both domestic and overseas markets.
To sharpen our competitiveness on a global basis, we have been enhancing production facilities in China and Indonesia,
and have established a joint venture to be engaged in spinning processing in China. We have also established Nisshinbo(Shanghai) Co., Ltd. to serve as a sales base in China. To provide maximum support to our overseas operations, we have
set up a Global Operation Promotion Office at our Osaka Branch.

N o n- textiles
A UTOMOBILE B RAKESWe are one of Japan’s leading makers of friction materials and automobile brakes, and this sector has an important role inour drive toward diversification. Our product development emphasis is on “green” pads using environment-friendly
materials, new concept drum brakes, Anti-lock Brake Systems (ABS) and Stability Control Systems. In the ABS sector,
our original, compact, lightweight, low-cost NT series is targeted at markets worldwide. Stability Control Systems
enhance safety by supporting the driver in controlling directional movement of the vehicle.
In parallel with the development of our own technologies, we engage in technology exchange and collaborate withmajor overseas brake manufacturers. We have also set up production bases for friction materials and automobile brakes
in the U.S., Thailand and South Korea, in order to strengthen our presence in those markets.

Consolidated Sales
Composition

Sales by Segment
in Fiscal 2002

(%)

(%)

■ Textiles

34.6■ Automobile Brakes 23.0

’98



’99

’00

’01

’02

■ Papers

11.3■ Other Products

29.1■ Real Estate Leasing

2.0

P APERS
We manufacture a wide range of paper and paper-related products. These include household papers, such as tissue paper,
toilet paper and kitchen-use paper towels, fine papers used for quality printing, publications and packaging, synthetic
papers, and labels. Our value-added products include COTTON FEEL, a household paper made using our spinningtechnologies, VENT NOUVEAU and MILT GA natural-feel fine papers for high-quality printing, and synthetic papers forfine digital printing.

O THER P RODUCTS
Ma c h i n e To o l s
We are an acknowledged specialist in the manufacture and sale of customized machine tools and CNC turret punchpresses, laser cutting machines and press brakes. We develop and manufacture modular units for FMS and CNC
hardware/software systems for the automotive, electronics and aerospace industries. We also manufacture environmentrelated products, including a photovoltaic module manufacturing system and a kitchen waste disposal unit forcommercial use.

Chemical Products
We produce rigid-type polyurethane foams for application as heat-insulation material, flexible types used as cushion
material, and glass fiber-reinforced polyurethane foam, a lightweight, high-strength, corrosion-resistant material widelyused in the water treatment and construction industries. We are also a pioneer in the introduction of environmentfriendly, non-fluorocarbon polyurethane foam for application as heat-insulation material in the construction field. We are
expanding the applications of our original polyurethane elastomer Nisshinbo Mobilon, which has excellent elasticity andwater-resistance characteristics. Nisshinbo Mobilon is used in a number of industrial products and consumer goods
fields. In addition, we offer new carbon products applied to semiconductor production and other electronics sectors.
Other materials include APG® (Aqua Porous Gel), BCN® (Bio Contact N) and Vacuum Insulation Panel produced andmarketed by Nisshinbo.
We also produce molded plastic cross-flow fans for air conditioners for electric appliances markets, mainly in China
and Southeast Asia.
Others
We manufacture medical-use electronics equipment, including ultrasonic-scanning diagnosis devices and surgicalequipment, applied electronic equipment, including “handy” terminals and CRT graphic displays, and radio
communications equipment, including mobile telephones and PHS.
We also develop and supply the production systems which integrate the Choshoku-Senka fuzzy logic computer color
matching (CCM) system, manufacturing process support system and automatic inspection system. All are based on
original technologies.
We have concluded the R&D phase and have been carrying out the commercialization of fuel cell separators (bipolar
plates) and filters for plasma display panels. We expanded production facilities for fuel cell separators (bipolar plates)
after transferring them from the Research and Development Center to our Miai Plant. We also began mass-production offilters for plasma display panels at a pilot plant within the Research and Development Center.

R E A L E S TAT E L E A S I N G
We are engaged in the real estate leasing business for the purpose of efficient utilization of unused land. We lease office
and residential buildings in Tokyo, and lease land previously occupied by factory facilities for use as shopping centers andmodel homes.

I NTERVIEWW I T H

Q1. What were Nisshinbo Industries, Inc.’s
consolidated results for fiscal 2002, ended
March 31, 2002?
Consolidated net sales totaled ¥225,836 million (US$1,737 million),a decrease of 3.3% from fiscal 2001, ended March 31, 2001.
A decline in operating income was held to 31.0%, amounting to¥3,968 million (US$31 million) for the fiscal term, and we posted a
net loss of ¥2,649 million (US$20 million). This loss was
attributable mainly to the poor performance of affiliates, accounted
for by the equity method, engaged in sales of electronic parts,
which were badly affected by the severe slump in the global
information technology (IT) industry.
By business segment, sales of textiles decreased 3.7% to ¥78,203
million (US$602 million), and sales of non-textiles declined 3.1%
to ¥147,633 million (US$1,136 million). The ratio of non-textiles

T H E

M ANAGEMENT

sales to total sales increased 0.2 percentage point to 65.4%, while
the ratio of textile sales to total sales decreased 0.2 percentage point
to 34.6%.
However, these figures should also be viewed against thecontinued deterioration of the Japanese economy. There was no letup in the strong deflationary trend, and GDP growth was negative.
With the exception of the automobile industry and some others,
corporate earnings declined. Unemployment reached a record level.
We pressed ahead with the restructuring of our business operations
by aggressively channeling management resources into selectedbusiness areas with potential for significant growth, and by
withdrawing from unprofitable business sectors.

Q2. Fiscal 2002 was the second year of
Nisshinbo’s three-year management plan.
Would you summarize your achievements so
far and outline your proposed actions forfiscal 2003, ending March 31, 2003?
Each division adopted specific themes to promote reform of its
business systems so as to be able to respond faster to rapid changes
in the operating environment. At the same time, each division
stepped up its efforts to lay a foundation for future growth.
The result was that we established amomentum in the desired direction.
For example, the Textile Division
forged ahead with changing thedivision of work between domestic

Akihiro Mochizuki, Chairman

and overseas bases, entailing a considerable reinforcement of ouroverseas business structure. We also took various measures torevitalize business efficiency in general, including measuresdesigned to improve the skills and business awareness of
employees. Specifically, we launched a “Program of Overseas
English Training (POET)” and an internal staff recruitment systemusing our intranet called “New Challenge System.” In addition, we
revised our “decision-making rules” to push decision-making
authority downwards. Also, we previously adopted a bonus systemtied to operating income that is firmly taking root.
We do not expect any sustained improvement in the Japanese
economy in fiscal 2003, but we do expect the ongoing reforms that
we have outlined to allow us to demonstrate our combined
strengths that are backed by solid global expansion, superior
development, quality, and strong confidence in our financial
capabilities. For fiscal 2003, we forecast consolidated net sales of¥232 billion and operating income of ¥5.4 billion.

Q3. What is your perspective regarding
Nisshinbo's future direction based on thecurrent management plan?
Important as short-term numerical targets are, we are not overly
focused on achieving these results in terms of sacrificing future
growth. We take a balanced management approach that involves
actions designed to expand profit in the long term. Hence, thetheme of this annual report, “Creating a Profitable Structure
in a Time of Rapid Change.”

Yoshikazu Sashida, President

One could characterize our management style in the past as“solid,” based on large accumulated reserves entrusted to us by ourpredecessors and shareholders. But the world has changed, andnow we have to break out of our “shell” and seek an increase inprofitability. That is the rationale of our three-year management
plan. To become a genuinely 21st century manufacturer with thepotential for growth, we have to take calculated risks while hedging
those risks through rigorous risk management.
Nisshinbo is essentially a manufacturer of intermediatematerials, parts, and equipment that support industrial operations.
This will not change, but we intend to perform our role better bycapitalizing on our corporate strengths in order to differentiate our
products in various business fields. The “Nisshinbo brand”
represents “quality,” encompassing development, production,marketing and management as well as product quality. It is thisquality that serves as the driving force behind our overseas
business development; irrespective of where a product is made, thequality is assured. This translates into higher added value andultimately higher profits. Our goal as a 21st century manufacturer
is to harness Nisshinbo quality as a means of responding to thechanging business environment. To raise quality and value, wemust strengthen our development activities and our overseas
operations. These are the two main tasks that our strategy
addresses.

Q4. Can you give more detail on how you
intend to reinforce development activities
and overseas operations?
Nisshinbo’s business fields are wide and our R&D themes extend
from basic necessities to leading-edge, high-tech materials andequipment. It is not enough to boast of superior R&D capabilities.
We must convert this advantage into profits by speeding up
commercialization of products derived from our R&D efforts. That
requires a careful identification of the needs of end users, which inturn depends on feedback of information gathered through sales
and marketing activities and on concurrent engineering
techniques.
Why do we want to strengthen overseas operations? Simply
because it is extremely difficult to make profits if all businessprocesses are carried out at home. By globalizing our operations,
we can reduce costs and expand markets. For Nisshinbo,
globalization will be multi-faceted. It will include the establishmentof new companies, the formation of alliances through joint
ventures, capital participation, and technology transfer.
Globalization requires an appreciation of how we are positioned in
the world market with regard to the business environment andgrowth potential of each division.



Q5. What are you doing to improve
profitability?
In the textile segment, the emphasis is on rapid structural reform
through an international division of work. At home, we are shifting
our focus away from unprofitable sectors to more specialized, highvalue-added areas. Japan also serves as the center for new productand technology development. The manufacture of low-margin,
general-purpose products will be moved to our overseas
production bases, where we can combine Nisshinbo quality withlower costs and highly motivated labor forces.
In the automobile brake sector, we are faced with intensifying
competition at home, global consolidation of the automobile
industry, and increasing demand for modular units. Our response
is to enhance our competitiveness in terms of cost and quality,
expand overseas production, and promote system development andsales. With respect to paper products, we are concentrating on highvalue-added products for niche markets for fine papers andhousehold papers. In the chemical products sector, we are looking
to strengthen our marketing capability so as to increase sales ofsuch profitable products as N’s VIP vacuum insulation panels andglass carbon. Turning to machine tools, we see signs of a recovery
in demand and are preparing to meet it. Environment-related

products is an area where we see good growth potential. We are
therefore planning to increase our production capacity forphotovoltaic module manufacturing systems and other products,
and further develop OEM business.
Following the establishment of a Fuel Cell Department, we have
set up an Optical Department within the Research andDevelopment Division, and intend to launch full-scale production
and sales of filters for plasma display panels. Other examples ofseed businesses include a condenser device and various
biotechnology-related products.
(Further details with regard to enhancing the profitability of theabove business segments are covered in the Special Featuresection.)Finally, in the real estate leasing sector, we are continuing topromote more efficient use of our real estate assets.

Q6. What other important tasks need to beundertaken?
We must reinforce group management operations. As we havealready mentioned, the net loss for fiscal 2002 was a result of thedisappointing performance of our affiliates, accounted for by theequity method. In April 2002, we revised our “Affiliate
Management Standards” with a view to ensuring that all Group
companies carry out appropriate, necessary structural reforms.
The revised standards require each affiliated company to takeresponsibility for its own business management and forcontributing to the overall performance of the Nisshinbo Group.
We must also generate greater benefits of synergy within the
Nisshinbo Group. In March 2002, Nisshinbo acquired all shares of
Iwao & Co., Ltd. (Iwao), a trader in chemical raw materials, fromTomen Corporation, and made it a subsidiary. This acquisition willallow us to market a range of excellent products developed by our
Research and Development Division, including polycarbodiimide,
through Iwao’s established distribution channels. At the same time,
Iwao can expand its product lineup.

Finally, we are aiming to attain market superiority bystrengthening our business through alliances within and outside
the Nisshinbo Group. We have successfully used technological/sales
tie-ups and M&A to expand our business domain, but we must do
more along these lines.

Q7. What is your policy regarding dividends?
Our policy is to return profits to shareholders, ideally in line withearnings, while keeping retained earnings at the level required tosustain future growth. Despite our disappointing results for fiscal
2002, the dividend is ¥7.00 (US$0.05) per common share, the same
as for fiscal 2001.
During fiscal 2002, as one way of improving shareholder value,
we purchased and cancelled a total of 5,163,000 shares of theCompany at a cost of ¥2,602 million (US$20 million).
We are making every effort to build a profitable businessstructure by maximizing the efficiency with which we use theassets entrusted to us by shareholders and investors. This may takesome time, but we intend to emerge from our restructuring as anenterprise that is relatively immune to fluctuations in the businessenvironment. In pursuit of this goal, we will carry out our
corporate activities in compliance with regulations and corporate
ethics, as well as in harmony with society. Meanwhile, we take thisopportunity to thank our shareholders, customers and friends fortheir continued support.

Akihiro Mochizuki
Chairman

Yoshikazu Sashida
PresidentS PECIAL F EATURE

To improve our ability to make profits and secure future growth, weneed to enhance our research and product development activities,
and promote global business operations that can give us acompetitive advantage.

Swift Commercializationof New Products
From Research and Development to Commercialization
ur Research and Development Center conducts basic research
activities by designating research themes where our technologicalsuperiority can provide some value to society. Currently, we emphasize thecreation of seed businesses in three areas: Electronics/IT, Energy/Ecology,
and Life Sciences. We focus on step-by-step commercialization, startingwith the establishment of a business department within the Research andDevelopment Division. This
department carries out test
production and gathers
information on customer
responses and market trends toimprove product quality. Only
then do we launch full-scale
production. The Fuel Cell
Research and Development Center
Department is a good example.
Fuel cells are widely seen as theproviders of next-generation,“clean” energy. We applied ourpolymer technology to this fieldand developed a molded carbon
separator (bipolar plate) having

O

Carbon molded separator (bipolar plate)

excellent material properties andR&D Expenditureproductivity. Production and market(billions of yen)
shipments were originally carried out
at a pilot plant within the Research and8Development Center. In response to the7
product’s popularity among customers
6
and a rise in shipment volume forhousehold and portable fuel cell
5applications, we expanded production
4
facilities after transferring them to our
Miai Plant. We also succeeded in3
developing a thinner, lighter and2stronger separator (bipolar plate).
Since the establishment of the Fuel Cell
1
Department in September 2000, the0fuel cell separator (bipolar plate)’98 ’99 ’00 ’01 ’02
business has shown steady growth.
In November 2001, we established an Optical Department to carry out
development, manufacture and sales of filters for plasma display panels.
The application of large-size, thin plasma display panels is being
expanded in wall-type televisions. Nisshinbo’s filter for plasma display
panels blocks harmful electromagnetic waves and near and far infrared
radiation that could trigger malfunction of remote controllers. It also
serves to improve the quality ofthe screen image. For fiscal 2003,
we are targeting sales of ¥3 billion.
To achieve this goal, we arechanneling management resources
into this segment andimplementing a low-cost
DNA kit for food inspection

Development of Next-generation Condenser Device
The Research and Development
Division succeeded in developing anext-generation condenser device byapplying our original “ionic liquid” asthe electrolyte in a capacitor (largesized condenser). The use of ionicliquid allows instant heavy-current
charge and discharge, which has
Next-generation Condenser Device
proven difficult in conventional
automobile batteries. The condenser device shows stable performance attemperature extremes, and production costs are similar to those of existingproducts. We plan to start supplying this product to automobile
manufacturers in 2003 for application in environment-friendly hybrid andelectric cars. We also plan to expand its application to lithium ion batteries.

production method to provide high value-added products.
One example of promising products in the Life Sciences field is
OligoArray®, a DNA micro array kit. We are now developing new
applications for this product in the clinical testing and foodinspection sectors.
For fiscal 2002, R&D expenditure totaled ¥6,090 million (US$47
million), a decrease of 18.4% from fiscal 2001. The decrease wasattributable to the launch of full-scale business operations for some of our
newly developed products, testimony that our development activities are
directly linked to commercial operations. As of March 31, 2002, thenumber of domestic and overseas patents held by Nisshinbo was 815,
while patent applications outstanding totaled 1,864.
Product Development Aimed at Providing Higher Valueach division carries out product development in order to provide
higher value. Higher value, in Nisshinbo, means not only excellent
product quality; it encompasses our vision of higher efficiency in terms of
production, quality control, cost performance, marketing and planning.
One of the most important factors in achieving efficient productdevelopment is the formation of close ties between the production andmarketing divisions.
In the Textiles segment, the basic product development concept is toprovide useful, attractive products while pursuing comfort, functionality
and environment-friendliness. Examples include “healthy” products
having antimicrobial and deodorizing functions, materials that feel cool
during summer and warm during winter, lightweight stretch textiles, andhigh-function materials providing wrinkle-free performance, flame
retardance and dirt release capability. The Textile Research andDevelopment Center assumes a major role in carrying out actual
development activities in cooperation with the sales, marketing andEproduction divisions. For example, we have increased the number ofmarketing staff of the Tokyo Textiles Department. In addition, theduration of development activities varies with each project, but the major
focus is on creating unique products that integrate Nisshinbo’s
technological superiorities, such as a liquid ammonia processing
technique and differentiated materials. Nisshinbo boasts the world’s
highest level in manufacturing capacity using a liquid ammonia
processing technique, which allows us to expand business in a wide rangeof fields, including shirts, denim, bedding and knitted products. Nisshinbo
Mobilon is another promising product among our developed products.
Newly developed minus ion generating material is gaining a good
reputation in the panty hose, socks, and underwear markets, among
others. In addition, promotion of seasonal projects across divisional
borders is another important task. Starting from the 2002 spring/summer
season, we are promoting a “COOLCOTT” project to offer products thatemphasize coolness by providing absorbency, quick drying andbreathability, utilizing various specialized materials, including textiles andknitted products. The formation of alliances is also essential in gaining a
superior position in the marketplace. An example is the “Triangle Project,”an alliance with Teijin Ltd. and Nippon Keori Kaisha Ltd. In October 2001,
we launched the “Triangle Recycling
System,” the third project to have emerged
from this alliance, to collect and recycle
used uniforms. We also opened a joint
website (in Japanese), “Triangle Plaza”(http://www.triangle-plaza.com).
In the Automobile Brakes and ABS
sectors, we are concentrating on thedevelopment of modular units andenhancement of cost competitiveness.
Triangle Recycling System to collectand recycle used uniformsAutomobile manufacturers favor full-service suppliers (FSS) who can
respond to their demand for modular system units. Continental Teves
Corporation (CTC), a joint venture with Continental Teves AG & Co. oHG(CT) of Germany, is now promoting development and sales of electronic
brake systems, such as ABS and disc brakes, with the aim of becoming a
FSS in this field. Demand for our Electronic Stability Program (ESP) is
particularly strong, showing good growth potential. In the future, we
intend to place more weight on the development of low-cost products. For
existing ABS and disc brakes, we are focusing on reduction of size, weightand cost as early as the development stage to improve competitiveness. In
the friction materials and brake-related products sector, we offer products
matched to the needs of Japanese, U.S. and European manufacturers,
quickly responding to the integration of car models and the increased useof common parts triggered by the ongoing restructuring of the global
automobile industry. We are also promoting development of environmentfriendly friction materials.
Nisshinbo’s paper products are developed based on our originaltechnologies and unique development concepts. One example of ourrecent successful developments is a toilet paper specially designed for use
with a toilet equipped with a bidet. We are also promoting development of
unique printing papers and digital output papers.
In the Chemical Products sector, we provide a range of unique, highfunction materials. Development of new applications is a key to future
profit expansion. One of the mostpromising products is N’s VIP,
which has excellent insulating,energy-saving, and environmentfriendly properties. Its application
is expanding into the commercial
refrigerator/freezer-related fields.
BCN® (Bio Contact N) has a high waterabsorbing capacity

In addition, glass carbon is expanding its application in the electronicmaterials field. APG® (Aqua Porous Gel) and BCN® (Bio Contact N) usedin water treatment are also promising.
In the Machine Tools sector, our development activities are centered on
environment-related facilities, for which we expect strong demand in
the future.
In the CCM Systems sector, we are developing systems for various
manufacturers, designed to provide support in terms of technology,
quality control and business processes.

Global Business Development
International Division of Work in the Textiles Segment
lobalization plays an essential role in our business system reform of
the Textiles segment. For the purpose of revitalizing our textile
operations, we are rapidly promoting an international division of
production operations between our domestic and overseas bases. The
basic policy is to add to our domestic production bases the role oforiginator of new technologies and high value-added products while
promoting a balanced strengthening of competitiveness overseas. This
competitiveness means not only pursuing lower costs by increasing
production volume at our overseas bases, but also enhancing our overseas
production bases to promote quicker access to global markets and adding
high value to the products by manufacturing them in specialized bases fortheir respective sectors.
We have expanded production facilities at P.T. Nikawa Textile Industry(Nikawa Tex) and P.T. Gistex Nisshinbo Indonesia (G&N) in Indonesia
and Mingly Textiles (Changzhou) Ltd. (Mingly Textile) in China. As aresult, Nikawa Tex and G&N now operate a comprehensive productionGsystem from spinning and weaving
to processing. We also installedfacilities to manufacture andprocess knitted products at
Hangzhou Yimian Limited in
China. In order to maintain
Nisshinbo quality at our overseas
bases, we will transfer detailed
technology and know-how tothese companies.
In China, we have established
two joint ventures to expand
production. Ningbo Veken Textile
Co., Ltd. (est. February 2002) will
Mingly Textile (Changzhou) Ltd.
engage in cotton and synthetic
spinning, while Ningbo Sunrise Textile Dyeing and Finishing Co., Ltd.
(est. December 2001) will carry out weaving and dyeing. Itochu
Corporation is a partner in both companies, together with different major
local companies. These two joint ventures bring the total of our
production companies in China in the spinning, weaving and processing
field to four.
With the aim of promoting domestic and overseas businessdevelopment in the shirt materials field, we also established P.T. Naigai
Shirts Indonesia, a joint venture with Naigai Shirts Co., Ltd., to produce
dress shirts in Indonesia.
In China, following the establishment of our Shanghai Representative
Office in September 2001, we set up Nisshinbo (Shanghai) Co., Ltd. in
February 2002. We now have a system geared to the supply of products
manufactured in our production bases in China to local and global
markets with high growth potential.

Overseas Network

To ensure that the ongoing rapid separation of work between ourdomestic and overseas bases proceeds smoothly, we set up a Global
Operation Promotion Office in April 2002. Its main roles are to encourage
efficient business operations at each base and make strategic moves toenhance Nisshinbo’s business in Japan, the U.S., Europe, and Asia.
Securing Competitiveness in the Automobile Brakes Business throughGlobalization
he Automobile Brakes sector regards the current global megacompetition as a chance to expand its business. It is promoting
globalization through development of competitive products, enhancementof overseas bases, and formation of business alliances.
In the friction materials and automobile brakes segments, ourproduction bases in the U.S., Thailand and South Korea are showing
steady growth. Those in Thailand and South Korea have already made apositive contribution to our overall business performance. Our base in the
U.S. is receiving increased orders from the “Big Three” auto
manufacturers and is expected to achieve a large increase in operatingrate. We plan to implement various measures to increase profit, including
enhancement of production facilities.
In the ABS sector, CT and CTC, a joint venture with CT, operate
production bases in Japan, the U.S., Europe, South America and China,
forming a world-class production network. This provides a considerable
advantage in relation to theintegration of car models and useof common parts in global
markets. We intend to strengthen
this partnership, acquire business
opportunities on a world basis,and secure a superior position in
global markets.
Our brake parts

T

International Technical Agreements
As licensee:● Meritor Heavy Vehicle Braking Systems (UK) Ltd. for commercial vehicle disc braketechnology● Continental Teves AG & Co. oHG of Germany for MK60 ABS and ESP TCS technology
As licensor:● Rane Brake Linings Limited of India for friction materials technology● Heng Tong Auto Parts Inc. of Taiwan for friction materials and passenger car discbrake technologies
As cross-licensing partners:● TMD Friction Beteiligungs GmbH & Co KG of Germany for friction materials technology● TRW Inc. of the U.K. for drum brake technology● Meritor Heavy Vehicle Braking Systems (UK) Ltd. for drum brake technology● Continental Teves AG & Co. oHG of Germany for passenger car disc brake technology● Continental Teves AG & Co. oHG of Germany for NT20/MK20 ABS and TCS
technologiesR EVIEWO F

TextilesIn fiscal 2002, ended March 31, 2002, the Japanese textile industry
endured an extremely difficult business environment, with consumer
spending continuing to be weak and credit confidence declining further.
In the textiles segment, we have been promoting cost reduction throughthe reorganization of domestic plants, while strengthening our overseas
business operations. At the same time, we have been making efforts tofacilitate product development, boost sales capabilities, and reduce sales
and administrative costs. Although these efforts have begun to bear fruit,
they were not sufficient to cover a drop in income caused by continued
stagnation of the market and an increase in imports. Consolidated net
sales of the Textiles segment amounted to ¥78,203 million (US$602
million), a decrease of 3.7% from fiscal 2001 and accounting for 34.6% of
total consolidated net sales, down 0.2 percentage point. Operating income
decreased 82.3% to ¥222 million (US$1.7 million).
Sales of yarns for textiles and knitted products decreased, due to a shiftof production overseas by client companies and lower sales prices.
However, our efforts to concentrate on sales of special and originallydeveloped yarns and discontinue the marketing of unprofitable products
allowed us to post an increase in overall sales.
Although there was a sign of recovery in sales of value-added knitted
products to department stores, sales of knitted products for casual wear
and inner wear targeting mass-sales outlets were adversely affected by anincrease in low-priced imports. As a result, overall sales declined.
Despite an increase in exports of high value-added products, such as SS
products, sales and operating income of shirt materials decreased owing

O PERATIONS

to sluggish domestic demand, afall in sales prices, and a slump in
the U.S. market.
Sales of bedding, our mainstay
product in the household textiles
sector, decreased due to anincrease in low-priced imports.
We concentrated on sales of
products manufactured at ouroverseas bases, and operating
income increased.
Domestic sales of denim, our
Our COMFORT PROPOSAL direct
main product, were weak, butmarketing business offers high value-addedexports to the U.S. and European
products, such as those in our prestigious
SUPER SOFT line
markets increased. Operating
income was at approximately the same level as fiscal 2001. Sales andoperating income of uniform materials decreased due to a sharp drop in
demand in the second half of fiscal 2002, attributable mainly to a decline
in demand from corporations. Efforts to expand sales of casual wear
through new marketing routes contributed to an increase in sales, but theincreased popularity of low-priced products led to lower sales prices, andoperating income decreased.
Domestic demand for spandex for panty hose remained weak, and areduction in shipment volume caused by users’ production adjustments
and an expansion of production facilities by competitors resulted in an
imbalance between supply and demand. Consequently, export prices
declined, and sales and operating income decreased sharply.
Our OIKOS non-woven fabrics gained increased popularity among

Sales of Textiles(billions of yen)

100

80

60

40
Our denim products appeal to a wide range ofconsumers

20

0’98 ’99’00’01 ’02consumers, in turn leading to a rise in production volume together withan increase in sales throughout fiscal 2002. To respond to higher demandand promote new product development, we expanded production
facilities at our Fujieda Plant.
In our direct marketing business, COMFORT PROPOSAL, products
using stretch materials, sold well during the spring and summer seasons
for women’s wear. However, sales edged downward in the second half due
to an unusually warm winter.
Overseas, we boosted our total production system by strengthening thetie between Nikawa Tex and G&N in Indonesia. In China, we expanded
spinning facilities at Mingly Textile and installed facilities to manufacture
knitted products at Hangzhou Yimian Limited. In partnership with Itochu
Corp. and major local companies, we established Ningbo Veken Textile
Co., Ltd. to produce cotton and synthetic fiber yarns and Ningbo Sunrise
Textile Dyeing and Finishing Co., Ltd. to carry out bleaching and dyeing
processing of textiles for shirts
and pants. Following theestablishment of our Shanghai
Representative Office in 2001, we
set up Nisshinbo (Shanghai) Co.,
Ltd. to secure interoperability
between our overseas anddomestic business operations andreinforce our overseas sales
capabilities.

No n- textiles
Despite efforts to reorganize our business and promote new businessdevelopment, the non-textiles segment was badly hit by stagnant
economic conditions. As a result, consolidated net sales decreased 3.1%
from fiscal 2001 to ¥147,633 million (US$1,136 million). The ratio of nontextile sales to total sales was up 0.2 percentage point to 65.4%. Operating
income was down 18.7% to ¥3,683 million (US$28 million).
A u t o m o b i l e
B r a k e s
Sales of automobile brakes
decreased 1.5% from fiscal 2001 to¥51,926 million (US$399 million).
Operating income was up 4.3% to¥2,357 million (US$18 million).
Domestic sales of automobile
Our brake parts
brakes were low due to a decreasein domestic automobile production and a drop in exports to the U.S. andEurope. Good performances by our overseas subsidiaries contributed to
an increase in overall sales. However, these positive results could not covera fall in operating income at home, and overall operating income
decreased.
Despite an increase in ABS usage, sales of ABS products decreased due
to a move toward low-priced models. However, our efforts to reduce
manufacturing costs allowed us to increase operating income.
In the friction materials sector, we completed the transfer of production

An entry at the Annual Nisshinbo Fashion
ContestSales of Automobile
Brakes(billions of yen)
60

50

40

30

20

10

0

’98 ’99’00’01 ’02Our ABS is fitted in the Honda FIT© Honda Motors Co., Ltd.

facilities from our former Tokyo
Plant to our Tatebayashi Plant. The
latter now plays a key role inpromoting the globalization of thefriction materials business.
We completed the transfer ofdevelopment and sales operationsof ABS and disc brakes to CTC,
which will be the center of futurebusiness development inthis sector.

P a p e r s
Sales of paper products decreased 10.3% from fiscal 2001 to ¥25,497
million (US$196 million), while operating income was up 32.2% to ¥1,104
million (US$8 million), reflecting lower pulp prices.
In the household papers sector, we responded to lower sales prices
caused by intensified competition by concentrating on sales ofdifferentiated products and trying to maintain price levels. Lower pulp
prices also worked in our favor, and we posted a small increase in sales
and a large increase in operating
income.
Sales of fine papers decreasedslightly as the market stagnated in
the second half of fiscal 2002.
Operating income was up, thanks
to lower pulp prices and areduction in manufacturing costs.

In the fabricated products sector, we continued efforts to gain neworders and established Shanghai Sun-Rich Arts & Crafts Co., Ltd. in China
with the aim of setting up a solid production base. In relation, we incurredconsiderable costs and posted a decrease in operating income despite anincrease in sales.
Sales and operating income of label printing decreased due to a dropin orders.
O t h e r P r o d u c t s
Sales of other products totaled ¥65,807 million (US$506 million),a decrease of 2.2% from fiscal 2001. Operating loss was ¥2,025 million(US$16 million).

● Machine Tools
Sluggish economic conditions and continued deindustrialization at home
as well as weak capital investment in plant and equipment caused by aslowdown in the U.S. economy resulted in large decreases in sales andoperating income.
Sales of environment-related products, including a photovoltaic module
manufacturing system, continued to expand, forming a promisingmarket. During fiscal 2002, westarted marketing Do Jyo Riki, acommercial-use biodegradationtype kitchen waste disposal unit.
We are allocating increased
management resources topromising business areas tofacilitate reorganization of our

Our fine paper products used in printing,publications and packagings

Our solar simulator to test the electricalperformance of photovoltaic modules

Sales of Papers

Sales of Other Products(billions of yen)(billions of yen)

30

80
70

25
60
20
50
15

40
30

10
20
5
10
0



’98 ’99’00’01 ’02

0’98 ’99’00’01 ’02

business structure. To improve operational efficiency, we transferred the
goodwill of Nisshinbo Mechatronics Inc., a consolidated subsidiary, to the
Kyoto Seisakusho Group.

● Chemical Products
Sales and operating income ofchemical products decreased due
to sluggish economic conditions
and a serious recession in the
IT industry.
Sales of rigid-type polyurethane
foams, our major product, were
adversely affected by stagnation in
N’s VIP, our vacuum insulation panel
the construction and plant
industries throughout fiscal 2002. We focused on increasing sales andrationalizing production of N’s VIP, a vacuum heat insulation panel,
panels for LNG plants, and products used in water-treatment plants, but
sales and operating income decreased due to a drastic drop in sales ofseats used in railway cars.
Sales of polyurethane elastomers were adversely affected by a slowdown
in the U.S. economy following the terrorist attacks of September 11, whilecarbon products suffered from the IT recession. Thus, sales and operating
income of both products decreased sharply. However, the market showedsigns of an improvement from spring 2002.

We are promoting sales of CCM systems, mainly for the ink and paintindustries. We lead the domestic market with our renowned ChoshokuSenka series. To make the most of our strength in this sector, we arepromoting joint marketing projects with clients and development ofoverseas business operations in Southeast Asia and China.
We have concluded the R&D stage of fuel cell separators (bipolar plates)
and filters for plasma display panels, and started business operations forboth. We completed the expansion of production facilities for fuel cell
separators (bipolar plates) after transferring them to our Miai Plant.
R e a l E s t a t e L e a s i n g
Sales of the real estate leasing business increased 13.9% over fiscal 2001 to¥4,403 million (US$34 million), and operating income was up 32.5% to¥2,247 million (US$17 million).
The Gran Fuji Kitajima Shopping Center on the site of our former
company housing complex at the Tokushima Plant, leased to threecompanies, including Kashima Leasing Corporation, opened in November
2001. The APITA Hamakita Store, a shopping center on the site of ourformer company housing complex and women’s dormitory at theHamamatsu Plant, now leased to UNY Co., Ltd., opened in March 2002.
We will continue theredevelopment of unused orunder-used land as part of ourbusiness restructuring.

● Others
Sales of electronic communications equipment increased, but lower sales
prices resulted in a decrease in operating income.
APITA Shimada Shopping Center

Sales of Real Estate Leasing(billions of yen)

54Hyper “Choshoku-Senka” metallic Sp.
computer color matching system

3

2

1

0

’98 ’99’00’01 ’02S IX-YEAR S UMMARY(millions of yen)

Net Sales
Operating Income
Net Income
Shareholders’ Equity
Total Assets
Shareholders’ Equity Ratio (%)
Return on Equity (%)
Capital Investment
Depreciation and Amortization

1997
234,268
4,541
2,359
198,758
328,42760.5
1.2
12,697
13,266

1998
240,249
3,989
1,087
199,373
329,10260.6
0.5
13,385
13,634

1999
226,800
373
4,161
200,779
359,390
55.9
2.1
23,002
13,411

2000
227,452
4,140
2,648
194,685
339,373
57.4
1.3
23,232
14,228

2001
233,535
5,751
517
192,331
334,460
57.5
0.3
17,093
13,134

2002
225,836
3,968-2,649213,665
364,16158.7-1.3
13,243
13,422Per Share (in yen):
Net Income
Shareholders’ Equity
Cash Dividends

9.98
840.627.00

4.60
843.21
7.00

17.60
843.177.00

11.36
857.057.00

2.32
868.497.00-12.03988.02
7.00

Number of Employees

8,067

8,452

8,452

8,235

8,104

8,456

Operating Income

Total Assets(billions of yen)(billions of yen)

Shareholders’Equity Ratio

Return on Equity
(%)

(%)
6

400

80

300

60

3.0

4

1.5
200

40

100

20

2

0.0

0

0

0
’97

’98

’99

’00

’01

’02

Capital Investment

’97

’98

’99

’00

’01

Depreciation andAmortization(billions of yen)

-1.5
’97

’02

’98

’99

’00

’01

Net Income per Share

’98

’99

’00

’01

’02

’00

’01

’02

Shareholders’Equity perShare(Yen)(billions of yen)

(Yen)

20

30

’97

’02

1,000

20
15

15

750

10

20
5
10

500
0

10

-5

5

250

-10
0

0
’97



’98

’99

’00

’01

’02

0

-15
’97

’98

’99

’00

’01

’02

’97

’98

’99

’00

’01

’02

’97

’98

’99

F INANCIAL R EVIEW

Operating Results
On a consolidated basis, net sales for fiscal 2002, ended March 31, 2002,
totaled ¥225,836 million (US$1,737 million), a decrease of 3.3% fromfiscal 2001.
In the Textiles segment, we reorganized our domestic plants andstrengthened overseas operations as a means of reducing costs while
stepping up efforts to develop new products, boost sales capabilities andreduce selling, general and administrative expenses. However, these initiatives proved insufficient to offset such factors as the prolonged market
slump and mounting pressure from cheap foreign imports. Consequently,
net sales decreased 3.7% from fiscal 2001 to ¥78,203 million (US$602 million), and operating income dropped sharply. The ratio of textile sales tototal sales was 34.6%, down 0.2 percentage point.
In the Non-textiles segment, we continued to promote business restructuring and development of new business areas against a background ofdifficult operating conditions. Net sales totaled ¥147,633 million(US$1,136 million), down 3.1% from fiscal 2001. Operating income also
decreased. The ratio of non-textile sales to total sales was 65.4%, up
0.2 percentage point.*
Cost of sales decreased 2.4% from fiscal 2001 to ¥195,917 million(US$1,507 million), while the ratio of cost of sales to net sales was up 0.9
percentage point to 86.8%. Selling, general and administrative expenses
decreased 4.1% to ¥25,951 million (US$200 million). Costs and expenses
amounted to ¥221,868 million (US$1,707 million), down 2.6%. As a result,operating income decreased 31.0% to ¥3,968 million (US$31 million).
Equity in losses of affiliates increased ¥4,943 million to ¥5,157 million(US$40 million). Gain on sale of property, plant and equipment was ¥1,751
million (US$13 million). Gain on sale of securities was ¥3,061 million(US$24 million), an increase of ¥1,191 million. Write-down of securitieswas ¥1,343 million (US$10 million). Consequently, other expenses
decreased ¥534 million to ¥3,922 million (US$30 million). Income before
income taxes and minority interests decreased ¥1,249 million to¥46 million (US$0.4 million).
After deduction of income taxes of ¥2,664 million (US$20 million) andminority interests in net income of ¥31 million (US$0.2 million), we
recorded a net loss for fiscal 2002 of ¥2,649 million (US$20 million).
Net loss per share was ¥12.03 (US$0.09), compared with net income pershare of ¥2.32 for fiscal 2001. ROE decreased 1.6 percentage points tominus 1.3%.
Total cash dividends per share for fiscal 2002 were maintained at ¥7.00(US$0.05). Cash dividends paid totaled ¥1,550 million (US$12 million).
Taking a long-term point of view, we will continue to follow our basic
policy of maintaining dividends at a stable level.
* For details of divisional results, see “Review of Operations.”to ¥110,601 million (US$851 million). Investments and other assets
increased 40.1% to ¥113,587 million (US$874 million) due to a valuation
gain following the application of mark-to-market accounting, which
resulted in an increase in investment securities.
Decreases in payables resulted in a 5.4% decrease in total current liabilities to ¥86,963 million (US$669 million). In spite of a decrease in otherlong-term liabilities arising from the method used to account for the proceeds from the sale of the land of the Tokyo Plant, long-term liabilities
increased 23.6% to ¥58,136 million (US$447 million), chiefly as a result of
an increase in deferred tax liabilities. Total current and long-term
liabilities amounted to ¥145,099 million (US$1,116 million), up 4.4% overfiscal 2001.
Shareholders’ equity increased 11.1% to ¥213,665 million (US$1,644
million), due mainly to a net unrealized gain on available-for-salesecurities.
In fiscal 2002, the Company repurchased and cancelled a total of
5,163,000 of its shares at a cost of ¥2,602 million (US$20 million).
Shareholders’ equity ratio was up 1.2 percentage points to 58.7%, andshareholders’ equity per share increased ¥119.53 to ¥988.02 (US$7.60).
Cash FlowsNet cash provided by operating activities was ¥3,484 million (US$27
million) greater than net cash used in investing activities, owing toinvestments being lower than depreciation and amortization expenses.
Net cash used in financing activities amounted to ¥8,184 million (US$63
million) due to an increase in the repayment of debt.
As a result of the above, cash and cash equivalents at end of year
decreased ¥4,305 million to ¥13,419 million (US$103 million).
Cash Flows from Operating Activities

Net cash provided by operating activities was ¥13,298 million (US$102
million), reflecting income before income taxes and minority interestsof ¥46 million (US$0.35 million) being offset by adjustment for
depreciation and amortization of ¥13,422 million (US$103 million) andequity in losses of affiliates of ¥5,157 million (US$40 million).
Cash Flows from Investing Activities

Net cash used in investing activities was ¥9,814 million (US$75 million).
This was mainly due to proceeds from sale of property, plant andequipment of ¥4,448 million (US$34 million), and proceeds from sale ofinvestment securities and investments in and advances to unconsolidated
subsidiaries and affiliates of ¥4,869 million (US$37 million), offset bypayment for purchase of property, plant and equipment of ¥12,397
million (US$95 million) and investment securities and investments inand advances to unconsolidated subsidiaries and affiliates of¥4,494 million (US$35 million).
Cash Flows from Financing Activities

Financial Position
Total assets stood at ¥364,161 million (US$2,801 million), an increase of
8.9% over fiscal 2001. Among total current assets, time deposits and othercurrent assets increased, while cash and cash equivalents and receivables
decreased. As a result, total current assets decreased 3.2% to ¥139,973
million (US$1,077 million). Property, plant and equipment increased 1.6%

Net cash used in financing activities was ¥8,184 million (US$63 million).
Significant items were a net decrease in long-term debt and short-termbank loans totaling ¥4,005 million (US$31 million), and payment forpurchase of treasury stock of ¥2,620 million (US$20 million).

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Balance Sheets
31st March, 2002 and 2001

(millions of yen)
2002
2001

(thousands of
US dollars)(Note 1)
2002

13,4195,794

17,724
4,436$ 103,223
44,56912,90137,001
10,531
13,27573,708(742)
72,96643,3801,528
2,886
139,973

17,98942,1908,645
8,217
77,041(860)
76,181
43,424
1,527
1,250
144,542

99,239284,623
81,008102,115566,985(5,708)561,277
333,692
11,754
22,2001,076,715

16,236
96,621
202,136
2,941
317,934(207,333)
110,601

16,443
95,944
202,818
2,912
318,117(209,276)
108,841

124,892
743,239
1,554,892
22,6232,445,646(1,594,869)
850,777

87,72343,174

674,793

23,500532
1,832
113,587¥ 364,161

26,6004,678
6,625
81,077¥ 334,460

180,769
4,092
14,092873,746$ 2,801,238

ASSETS
Current assets:
Cash and cash equivalents..................................................................................
Time deposits......................................................................................................
Receivables
Notes receivable, trade...................................................................................
Accounts receivable, trade .............................................................................
Unconsolidated subsidiaries and affiliates....................................................
Other...............................................................................................................
Less allowance for doubtful accounts ...........................................................
Inventories (Note 3)...........................................................................................
Deferred tax assets (Note 7)...............................................................................
Other current assets............................................................................................
Total current assets....................................................................................

Property, plant and equipment:
Land.....................................................................................................................
Buildings and structures ....................................................................................
Machinery, equipment and tools.......................................................................
Construction in progress ...................................................................................
Less accumulated depreciation ..........................................................................

Investments and other assets:
Investment securities (Note 4)...........................................................................
Investments in and advances to unconsolidated
subsidiaries and affiliates (Notes 4 and 13) ..................................................
Deferred tax assets (Note 7)...............................................................................
Other ...................................................................................................................

See Notes to Consolidated Financial Statements.



¥

¥

(millions of yen)
2002
2001

(thousands of
US dollars)(Note 1)
2002

48,415 ¥2,185

49,404
1,064$ 372,423
16,80819,236
1,023
4,274
24,533
4,165
3,690
422
3,553
86,96322,3884,452
3,856
30,696
4,599
3,931
930
1,273
91,897

147,969
7,869
32,877
188,715
32,03828,385
3,246
27,331
668,946

11,02922,893
16,042
8,172
58,136

9,570
23,012
213
14,24447,03984,838176,100
123,400
62,862447,200

5,397

3,193

41,51527,58827,58820,401
20,401
170—
141,022
148,21425,715—(1,151)(3,809)(80)(63)
213,665
192,331¥ 364,161 ¥ 334,460

212,215
156,9311,308
1,084,785
197,807(8,854)(615)
1,643,577$ 2,801,238

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term bank loans (Note 5).......................................................................
Current portion of long-term debt (Note 5) ...................................................
PayablesNotes and accounts payable, trade ..............................................................
Unconsolidated subsidiaries and affiliates ..................................................
Other .............................................................................................................
Employees’ savings deposits .............................................................................
Accrued expenses ..............................................................................................
Accrued income taxes .......................................................................................
Other current liabilities.....................................................................................
Total current liabilities ............................................................................
Long-term liabilities:
Long-term debt (Note 5) ..................................................................................
Accrued severance benefits (Note 6)................................................................
Deferred tax liabilities (Note 7)........................................................................
Other long-term liabilities ................................................................................

Minority interests in consolidated subsidiaries...............................................................................

¥

Commitments and contingencies (Note 12)
Shareholders’ equity (Notes 10 and 13):
Common stock:
Authorised
2002 — 380,137,000 shares
2001 — 385,300,000 shares
Issued2002 — 216,580,939 shares
2001 — 221,743,939 shares.....................................................................
Additional paid-in capital.................................................................................
Revaluation surplus...........................................................................................
Retained earnings .............................................................................................
Net unrealized gain on available-for-sale securities ........................................
Foreign currency translation adjustments .......................................................
Less shares in treasury.......................................................................................



Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Income
Years ended 31st March, 2002 and 2001

(thousands of
US dollars)(Note 1)
2002

(millions of yen)
2002
2001

Net sales .......................................................................................................................................

¥ 225,836¥ 233,535$ 1,737,200

Cost of sales .......................................................................................................
Selling, general and administrative expenses ..................................................

195,917
25,951
221,868

200,72127,063
227,784

1,507,054
199,623
1,706,677

Operating income ...............................................................................................................................

3,968

5,751

30,523

2,073(1,767)(5,157)929(3,922)

2,289(1,646)(214)(4,885)(4,456)

15,946(13,592)(39,669)7,146(30,169)

46

1,295

354

1,426
1,238
2,664

2,816
(1,922)894

10,9699,523
20,492(2,618)(31)
2,649)

401
116
517

(20,138)(239)($ 20,377)

Costs and expenses:

Other income (expenses):
Interest and dividend income ..........................................................................
Interest expenses ...............................................................................................
Equity in losses of affiliates ...............................................................................
Other, net (Note 11) .........................................................................................

Income before income taxes and minority interests .......................................................................
Income taxes (Note 7)
Current ..............................................................................................................
Deferred .............................................................................................................

Income (loss) before minority interests ...........................................................................................
Minority interests in net income (loss).............................................................................................
Net income (loss) ................................................................................................................................

(¥

¥

(yen)

(US dollars)

Per share:
Net income (loss) ..............................................................................................
Cash dividends ..................................................................................................

See Notes to Consolidated Financial Statements.

(¥

12.03)
7.00

¥

2.32
7.00

($

0.09)
0.05

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Shareholders’ Equity
Years ended 31st March, 2002 and 2001

(thousands of
US dollars)(Note 1)
2002

(millions of yen)
2002
2001

Common stock:
Balance at beginning of year
(2002 — 221,743,939 shares; 2001 — 227,443,939 shares)........................
Balance at end of year
(2002 — 216,580,939 shares; 2001 — 221,743,939 shares)........................

¥

27,588¥27,588$ 212,215¥

27,588¥27,588$ 212,215

Additional paid-in capital:
Balance at beginning of year .............................................................................

¥

20,401¥

20,401$ 156,931

Balance at end of year .......................................................................................

¥

20,401¥

20,401$ 156,931

¥

—
170
170

¥

—
—
—

Revaluation surplus:
Balance at beginning of year .............................................................................
Net changes........................................................................................................
Balance at end of year .......................................................................................

¥

¥

$
$

—
1,308
1,308

Retained earnings:
Balance at beginning of year .............................................................................
Adjustments due to increase/decrease in consolidated subsidiaries ..............
Adjustments due to decrease in 20%~50% owned affiliates ..........................
Adjustments due to increase/decrease in ownership interest in
20%~50% owned affiliates...........................................................................
Net income (loss) ..............................................................................................
Cash dividends ..................................................................................................
Directors’ and statutory auditors’ bonuses......................................................
Retirement of treasury stock.............................................................................

Net unrealized gain on available-for-sale securities:
Balance at beginning of year .............................................................................
Net changes........................................................................................................
Balance at end of year .......................................................................................
Foreign currency translation adjustments:
Balance at beginning of year .............................................................................
Net changes........................................................................................................
Balance at end of year .......................................................................................
Treasury stock at cost:
Balance at beginning of year .............................................................................
Add: acquired ....................................................................................................
Balance at end of year .......................................................................................
See Notes to Consolidated Financial Statements.

¥ 148,214
79(39)¥ 152,198(98)—$ 1,140,108
607
(300)

(354)
(2,649)(1,550)(77)(2,602)¥ 141,022

161
517(1,570)(80)(2,914)¥ 148,214(2,723)(20,377)(11,923)(592)(20,015)$ 1,084,785

¥

¥

$

¥

(¥
(¥

(¥
(¥

—
25,71525,715¥————
197,807$ 197,807

3,809) (¥2,658
1,151) (¥5,441) ($1,632
3,809) ($29,300)20,446
8,854)63) (¥(17)80) (¥61) ($( 2)63) ($

484)
(131)
615)



Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
Years ended 31st March, 2002 and 2001
(thousands of
US dollars)(Note 1)
2002

(millions of yen)
2002
2001

Cash flows from operating activities:
Income before income taxes and minority interests ...................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Income taxes-paid.................................................................................................
Depreciation and amortization............................................................................
Equity in losses of affiliates ..................................................................................
Provision for doubtful receivables .......................................................................
Provision for accrued pension and severance benefits ......................................
Payment of accrued pension and severance benefits .........................................
Directors’ and statutory auditors’ bonuses paid .................................................
(Gain) loss on sale of property, plant and equipment ........................................
Gain on sale of investment securities and investments inand advances to unconsolidated subsidiaries and affiliates ...........................
Write-down of investment securities...................................................................
Loss on plant closures...........................................................................................
Other .....................................................................................................................
Changes in operating assets and liabilities:
Receivables ...........................................................................................................
Inventories ............................................................................................................
Payables .................................................................................................................
Other......................................................................................................................
Net cash provided by operating activities .........................................

¥

46

¥

1,295

$

354

(1,947)
13,422
5,157
(122)
3,453
(3,572)(84)(1,751)(4,023)
13,134
214
459
6,653
(4,006)(88)277(14,977)
103,246
39,669(939)
26,562(27,477)(646)(13,469)(3,061)
1,343
775
112

(1,870)—429(81)(23,546)
10,331
5,962
861

8,323
884
(7,067)(2,613)
13,298(5,687)1,036
3,029(2,503)
8,268

64,023
6,800(54,362)(20,100)
102,292

4,448

499

34,215

4,869(12,397)

3,373(17,367)

37,454(95,362)(4,494)386(1,002)(1,624)(9,814)(2,610)
(570)
(175)
(703)
(17,553)(34,569)
2,969(7,707)(12,492)(75,492)

Cash flows from financing activities:
Proceeds from issuance of long-term debt...................................................................
Repayment of long-term debt.......................................................................................
Decrease in short-term bank loans ...............................................................................
Cash dividends paid ......................................................................................................
Payment for purchase of treasury stock .......................................................................
Other ..............................................................................................................................
Net cash used in financing activities ..................................................

714(1,998)(2,721)(1,550)(2,620)(9)(8,184)817(1,295)(1,372)(1,570)(2,914)(9)(6,343)

5,492(15,369)(20,931)(11,923)(20,154)(69)(62,954)

Effect of exchange rate changes on cash ...........................................................................................
Net decrease in cash and cash equivalents........................................................................................
Cash and cash equivalents of newly consolidated subsidiaries at beginning of year...................
Cash and cash equivalents of decreased consolidated subsidiaries at beginning of year............
Cash and cash equivalents at beginning of year...............................................................................

220(4,480)208(33)
17,724

83(15,545)104—
33,165

1,692(34,462)
1,600
(254)
136,339

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment ................................................
Proceeds from sale of investment securities and investments
in and advances to unconsolidated subsidiaries and affiliates................................
Payment for purchase of property, plant and equipment ...........................................
Payment for purchase of investment securities andinvestments in and advances to unconsolidated subsidiaries and affiliates ..........
(Increase) decrease in loans receivable.........................................................................
Increase in time deposits ...............................................................................................
Other, net .......................................................................................................................
Net cash used in investing activities ...................................................

Cash and cash equivalents at end of year..........................................................................................

¥

13,419¥17,724$ 103,223

Noncash investing and financing activities :Assets acquired by incurring accounts payable ...........................................................

¥

2,056

¥

1,506

$

See Notes to Consolidated Financial Statements.



15,815

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

1. BASIS OF PRESENTING FINANCIAL STATEMENTS:
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese
Securities and Exchange Law and its related accounting regulations, and in conformity with accounting principles and practices generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International AccountingStandards. The consolidated financial statements are not intended to present the financial position, results of operations and cash
flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.
In addition, the accompanying footnotes include information which is not required under generally accepted accounting principles and practices in Japan but is presented herein as additional information.
The United States dollar ($) amounts included herein are given solely for convenience and are stated, as a matter of arithmeticalcomputation only, at the rate of ¥130 = $1, the approximate exchange rate at 31st March, 2002. The translations should not be
construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into
United States dollars.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:(a) Consolidation
The consolidated financial statements include the accounts of Nisshinbo Industries, Inc. (the “Company”) and its significant
subsidiaries (together, the “Group”).
Under the control or influence concept, those companies in which the Parent, directly or indirectly, is able to exercise control
over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence
are accounted for by the equity method.
Investments in unconsolidated subsidiaries and associated companies are accounted for by the equity method.
Investments in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of
accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial
statements would not be material.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included
in assets resulting from transactions within the Group is eliminated.
(b) Foreign currency transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese
yen at the exchange rates at the balance sheet dates. The foreign exchange gains and losses from translation are recognized in theincome statement to the extent that they are not hedged by forward exchange contracts.
Investments in and advances to unconsolidated subsidiaries and affiliates in foreign currencies are translated at the historical rates
effective at the dates of transaction from which such accounts were originated.
(c) Foreign currency financial statements
The balance sheet accounts, revenue and expense accounts of the consolidated foreign subsidiaries are translated into Japanese
yen at the current exchange rate as of the balance sheet date except for shareholders’ equity, which is translated at the historical rate.
(d) Cash equivalents
Cash equivalents include time deposits which mature or become due within six months of the date of acquisition.
(e) Investment securities
Effective 1st April, 2000, the Group adopted a new accounting standard for financial instruments. Under this standard, all
securities are classified as available-for-sale securities and are stated at cost. And effective 1st April, 2001, under this standard all
securities are stated at fair value, with unrealized gain and losses, net of applicable taxes, stated in a separate component ofshareholders’ equity.
(f) Inventories
Inventories are stated principally at the lower of cost or market, cost being substantially determined by the average cost method.
(g) Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed principally on the declining balance method over theirestimated useful lives.
(h) Retirement and pension plans
Under the employees’ retirement plans for the Company and certain consolidated subsidiaries, the annual provision for retirement benefits is calculated to state the liability for retirement benefits based on the projected benefit obligations and plan assets atthe balance sheet date.

Retirement benefits to directors and corporate auditors are provided at the amount which would be required if all directors andcorporate auditors retired at the balance sheet date.
(i) Income taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The
asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying
currently enacted tax laws to the temporary differences.
(j) Derivative financial instruments
The Group uses a variety of derivative financial instruments, including foreign currency forward contracts and interest rate swaps
as a means of hedging exposure to foreign currency and interest rate risks. The Group does not enter into derivatives for trading or
speculative purposes.
The foreign currency forward contracts are utilized to hedge foreign currency exposures in procurement of raw materials fromoverseas suppliers. Trade payables denominated in foreign currencies are translated at the contracted rates if the forward contracts
qualify for hedge accounting.
Interest rate swaps are utilized to hedge interest rate exposures of long-term debt. These swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements are recognized and included in interest expense or income.
3. INVENTORIES:
Inventories at 31st March, 2002 and 2001 were as follows:

Finished products ..............................................................................................................
Work in process.................................................................................................................
Materials and supplies.......................................................................................................

(millions of yen)
2002
2001

(thousands of
US dollars)
2002

25,5438,343
9,494
43,380$ 196,484
64,17773,031$ 333,692

¥

¥

¥

¥

26,0458,538
8,841
43,424

4. MARKETABLE SECURITIES:The aggregate cost and market value of non-current portfolios of marketable securities included in investment securities and investments in unconsolidated subsidiaries and affiliates at 31st March, 2001 were as follows:(millions of yen)

Cost and carrying amount ............................................................................................
Market value ..................................................................................................................

¥

43,023151,085(thousands of US dollars)$ 330,946
1,162,192

The carrying amounts and aggregate fair value of securities available-for-sale included in investment securities at 31st March 2002
were as follows:(millions of yen)

Investment securities as available-for-sale:
Cost ................................................................................................................................
Unrealized gains ............................................................................................................
Unrealized losses ...........................................................................................................
Fair value........................................................................................................................

¥¥

33,65245,285(768)
78,169(thousands of US dollars)$ 258,862
348,346(5,908)$ 601,300

5. SHORT-TERM BANK LOANS AND LONG-TERM DEBT:
Short-term bank loans at 31st March, 2002 and 2001 were principally represented by 180 to 365 days notes issued by Nisshinbo
and its consolidated subsidiaries to banks. The annual interest rates applicable to the short-term bank loans at 31st March, 2002 and2001 were 0.6% to 8.8% and 0.9% to 8.8%, respectively.

Long-term debt at 31st March, 2002 and 2001 consisted of the following:(thousands of
US dollars)
2002(millions of yen)
2002
2001

Long-term debt with collateral:
Loans from banks maturing serially to 2007, ranging from 1.6% to 6.0% ................

¥

1,061

Long-term debt without collateral:
Loans from banks maturing serially to 2008, ranging from 1.4% to 7.0% ................
Capital lease obligations, due through 2010 ................................................................
Less current portion ..........................................................................................................
¥

¥

1,423

$

8,161

5,356

2,924

41,2006,797
13,214(2,185)
11,0296,287
10,634(1,064)
9,570

52,285
101,646(16,808)$ 84,838¥

Annual maturities of long-term debt were as follows:Year ending 31st March,
2003............................................................................................................................
2004 .........................................................................................................................................
2005............................................................................................................................
2006............................................................................................................................
2007 and thereafter ...................................................................................................

(millions of yen)¥¥(thousands of US dollars)

2,185
3,633
1,643
978
4,775
13,214$

16,80827,946
12,638
7,523
36,731$ 101,646

At 31st March, 2002 and 2001, net book value of assets pledged as collateral for short-term bank loans and long-term debt wereas follows:(millions of yen)
2002
2001

Property, plant and equipment ........................................................................................
Notes receivable, trade ......................................................................................................

¥
¥

6,743
200
6,943

¥
¥

6,851
340
7,191

(thousands of
US dollars)
2002

$
$

51,8691,539
53,408

6. RETIREMENT AND PENSION PLANS:
Under most circumstances, employees terminating their employment are entitled to lump-sum severance payments based on therate of pay at termination, years of service and certain other factors.
The liability for retirement benefits for directors and corporate auditors at 31st March, 2002 and 2001 were ¥862 million ($6,631
thousand) and ¥939 million. The retirement benefits for directors and corporate auditors are paid subject to the approval of theshareholders.
The liability for employees’ retirement benefits at 31st March, 2002 and 2001 consisted of the following:(millions of yen)
2002
2001

Projected benefit obligation .....................................................................................
Fair value of plan assets.......................................................................................................
Unrecognized actuarial loss......................................................................................
Net liability............................................................................................................

¥

61,849(32,222)
29,627(7,596)¥ 22,031¥

62,137(36,655)
25,482(3,409)¥ 22,073(thousands of
US dollars)2002$ 475,762(247,862)
227,900(58,431)$ 169,469

The components of net periodic benefit costs for the years ended 31st March, 2002 and 2001 are as follows:(thousands of
US dollars)
2002(millions of yen)
2002
2001

Service cost ................................................................................................................
Interest cost............................................................................................................................
Expected return on plan assets .................................................................................
Amortization of transitional obligation...................................................................
Recognized actuarial loss ..........................................................................................
Net periodic benefit costs .....................................................................................

¥

¥

2,513
1,841
(1,300)
—
279
3,333

¥

2,597
1,849
(1,393)
16,049—19,102¥$

19,331
14,161(10,000)—
2,146$ 25,638

Assumptions used for the years ended 31st March, 2002 and 2001 are set forth as follows:
2002
3.0%
3.5~4.0%
15 years—

Discount rate .............................................................................................................
Expected rate of return on plan assets .............................................................................
Recognition period of actuarial gain / loss ..............................................................
Amortization period of transitional obligation.......................................................

2001
3.0~3.5%
3.5~4.0%
15 years
1 year

7. INCOME TAXES:
The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at
31st March, 2002 and 2001 are as follows:(millions of yen)
2002
2001

Deferred tax assets:
Property, plant and equipment ................................................................................
Tax loss carryforwards ..............................................................................................
Allowance for doubtful accounts .............................................................................
Accrued employees’ bonuses....................................................................................
Accrued severance benefits.......................................................................................
Other..........................................................................................................................
Less valuation allowance...........................................................................................

¥¥
Deferred tax liabilities:
Unrealized gain on available-for-sale securities ......................................................
Deferred gains on sale of property ...........................................................................
Other..........................................................................................................................

Net deferred tax assets (liabilities)....................................................................................

(¥

149
1,824
343
722
8,470
1,206
(2,740)
9,974

¥

¥

562
2,624
617
618
8,142
1,323
(3,287)
10,599(thousands of
US dollars)
2002

$

1,146
14,031
2,638
5,554
65,154
9,277(21,077)$ 76,723(¥

18,758) ¥(5,110)(88)
23,956) (¥— ($ 144,292)(4,510)(39,308)(97)(677)
4,607) ($ 184,277)(¥

13,982)

5,992¥($ 107,554)

A reconciliation between the normal effective statutory tax rate for the years ended 31st March, 2002 and 2001 and the actual
effective tax rates reflected in the accompanying consolidated statement of income is as follows:

Normal effective statutory tax rate............................................................................................................
Dividend income not taxable ............................................................................................................
Expenses not deductible for income tax purposes ...........................................................................
Tax benefits not recognized on operating losses of subsidiaries .....................................................
Equity in losses of affiliates................................................................................................................
Lower income tax rates applicable to income in certain foreign countries ....................................
Other...................................................................................................................................................
Actual effective tax rate ..............................................................................................................................



2002
42.0%
(46.9)
226.7
1,102.5
4,736.3(279.8)10.5
5,791.3%

2001
42.0%
(13.4)
6.7
52.9
6.9(29.5)
3.4
69.0%

8. LEASES:
The Group leases certain machinery, computer equipment and other assets.
Total rental expenses for the years ended 31st March, 2002 and 2001 were ¥565 million ($4,346 thousand) and ¥659 million,
respectively, including ¥530 million ($4,077 thousand) and ¥624 million of lease payments under finance leases.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligation under finance lease, depreciation expense of finance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis forthe years ended 31st March, 2002 and 2001 was as follows:(thousands of
US dollars)
2002(millions of yen)
2002
2001

Acquisition cost.........................................................................................................
Accumulated depreciation........................................................................................
Net leased property ...................................................................................................

¥
¥

2,809
(1,887)
922

¥
¥

3,194
(2,036)
1,158$

21,607(14,515)$
7,092

Obligations under finance leases:(thousands of
US dollars)
2002(millions of yen)
2002
2001

Due within one year..................................................................................................
Due after one year .....................................................................................................
Total...........................................................................................................................

¥
¥

432
490
922

¥
¥

521
637
1,158

$
$

3,323
3,769
7,092

Depreciation expense under finance leases:(thousands of
US dollars)
2002(millions of yen)
2002
2001

Depreciation expense................................................................................................

¥

530

¥

624

$

4,077

Depreciation expense, which is not reflected in the accompanying statements of income, is computed by the straight-line method.
9. DERIVATIVES:The Group enters into foreign currency forward contracts to hedge exchange risk associated with certain assets and liabilities denominated in foreign currencies. Foreign currency forward contracts which qualify for hedge accounting for the years ended 31st March,
2002 and 2001 and such amounts which are assigned to the associated assets and liabilities and are recorded on the balance sheetsat 31st March, 2002 and 2001, are excluded from disclosure of market value information.
The Group also enters into interest rate swap contracts to manage its interest rate exposures on certain liabilities. Such contracts
outstanding at 31st March, 2002 (no contracts outstanding at 31st March, 2001) are as follows:
Contract
amountInterest rate swaps:
Fixed rate payments, floating rate receipt................................................................
Fixed rate receipt, floating rate payment .................................................................

¥
¥

413
1,057
1,470

(millions of yen)
2002
Fair
value

(¥
¥

Unrealized
gain (loss)

11) (¥
36
25 ¥

11)
36
25



10. SHAREHOLDERS’ EQUITY:The Japanese Commercial Code provides that an amount equal to at least 10% of all cash payments which are made as an appropriation of retained earnings be appropriated as a legal reserve until such reserve and additional paid-in capital equal 25% of statedvalue of capital stock. This reserve is not available for dividends but may be used to reduce a deficit by resolution of the shareholders or may be capitalized by resolution of the Board of Directors.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividend is applicable.
In addition, a semi-annual interim dividend may be paid upon resolution of the Board of Directors, subject to limitations imposedby the Code.
The computation of net income per share is based on the weighted average number of shares of common stock outstanding
during each fiscal year.
11. OTHER INCOME (EXPENSES) — OTHER, NET:
Other income (expenses) — Other, net consisted of the following:(thousands of
US dollars)
2002(millions of yen)
2002
2001

Gain (loss) on sale of property, plant and equipment ...................................................
Gain on sale of securities...................................................................................................
Write-down of securities ..................................................................................................
Write-off of inventories ...................................................................................................
Loss on plant closures ......................................................................................................
Transitional obligation for retirement benefits ..............................................................
Gain on securities contributed to retirement benefit trust .............................................
Retirement benefits paid due to restructuring of business operations...........................
Other, net ..........................................................................................................................

1,751 (¥
277)
3,061
1,870
(1,343)
—
(825)
(749)
(775)
(429)
—
(16,049)—
12,642(752)(1,276)(188)(617)
929 (¥
4,885)¥¥$

13,46923,546(10,331)(6,346)(5,962)——(5,784)(1,446)$7,146

12. COMMITMENTS AND CONTINGENCIES:
Contingent liabilities at 31st March, 2002 and 2001 for trade notes discounted with banks and trade notes delivered with endorsementsfor payments amounted to ¥403 million ($3,100 thousand) and ¥610 million, respectively. Contingent liabilities at 31st March, 2002 and2001 for loans guaranteed amounted to ¥2,477 million ($19,054 thousand) and ¥4,395 million, respectively.
Commitments for capital expenditures outstanding at 31st March, 2002 and 2001 were in the approximate amounts of ¥3,655 million($28,115 thousand) and ¥2,578 million, respectively.
13. SUBSEQUENT EVENTS:(a) Sale of an affiliated company’s stock
On 13th June, 2002, the Company sold 4,800,000 shares of the stock of Japan Radio Co., Ltd. which was accounted for by theequity method for the years ended 31st March, 2002 and 2001. The consideration received by the Company is ¥1,733million ($13,331
thousand). The loss on this sale in the amount of ¥843 million ($6,485 thousand) will be reflected in income statement for the year
ending 31st March, 2003. As a result of this sale, the company’s ownership interest decreased to 19.4%.
(b) Appropriation of retained earnings
On 27th June, 2002, Nisshinbo’s shareholders authorised the appropriation of retained earnings as follows:(millions of yen)

Cash dividends (¥3.50 per share) .....................................................................................
Directors’ bonuses.............................................................................................................



¥

758
50

(thousands of US dollars)

$

5,831
385

Independent Auditors’ Report
To the Board of Directors of
Nisshinbo Industries, Inc.
We have audited the consolidated balance sheets of Nisshinbo Industries, Inc. and consolidated subsidiaries as of
31st March, 2002 and 2001, and the related consolidated statements of income, shareholders’ equity, and cash flows
for the years then ended, all expressed in Japanese yen. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally accepted andapplied in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Nisshinbo Industries, Inc. and consolidated subsidiaries as of 31st March, 2002 and 2001, and theresults of their operations and their cash flows for the years then ended, in conformity with accounting principles andpractices generally accepted in Japan.
The United States dollar amounts shown in the consolidated financial statements have been translated solely forconvenience. We have reviewed this translation and, in our opinion, the consolidated financial statements expressedin Japanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba

Etsuko Nagashima

Certified Public Accountant

Certified Public Accountant

27th June, 2002
Tokyo, JapanNISSHINB O HISTORY

1907
1908
1920

1921
1924
1925

1926
1933
1937
1938
1940
1945
1947

1949

1950
1952
1958

1961
1962
1966
1972
1978
1981
1984


Nisshin Cotton Spinning Co., Ltd.
established.
The former Kameido Head OfficePlant began operations.
Office opened in Nihonbashi, andthereafter became the head officeof Nisshin Cotton Spinning.
Nisshin Cotton Spinning mergedwith Okazaki Boseki Co., Ltd. (thepresent Harisaki Plant).
Nagoya Plant began operations (completely burnt
down in 1945 due to the war, restored in 1951).
Nisshin Cotton Spinning merged with Tokyo BosekiCo., Ltd. (the present Tokyo Plant).
Branch office opened in Nagoya (the present Nagoya
Branch).
Branch office opened in Osaka (the present Osaka
Branch).
Hamamatsu Plant began operations.
Toyama Plant began operations.
Nisshin Cotton Spinning acquired Kawagoe BosekiCo., Ltd. (the present Kawagoe Plant).
Nisshin Cotton Spinning merged with Nisshin
Rayon Co., Ltd. (the present Miai Plant).
Toa Jitsugyo Co., Ltd. established (the company
name changed to Nissin Toa Inc. in 1990).
Nisshin Cotton Spinning acquired the Meiji Plant ofNanshin Seiki Co., Ltd. (the present Fuji Plant).
Non-textiles Division set up and thereafter expanded
operations to include automobile brakes, chemical
products, papers, and machine tools.
Nihon Postal Franker Co., Ltd. established.
Nisshin Cotton Spinning listed on the Tokyo Stock
Exchange.
Nitto Asbestos Co., Ltd. established (the company
name changed to Nisshinbo Brake Sales Co., Ltd. in1987).
Ueda Japan Radio Co., Ltd. established.
Shimada Plant began operations.
Tokushima Plant began operations.
Nippon Kohbunshikan Co., Ltd. established (thecompany name changed to Nippon Kohbunshi Co.,
Ltd. in 1986).
Nisshin Cotton Spinning listed on the first section of
the Tokyo Stock Exchange.
Nisshin Cotton Spinning's English company namechanged to Nisshin Spinning Co., Ltd.
Fujieda Plant began operations.
Nisshinbo do Brasil Industria Textil Ltda. (Brazil)
established.
Nisshin Spinning acquired Tokai Seishi Kougyou
Co., Ltd.
Tatebayashi Chemical Plant (the present Tatebayashi
Plant) began operations.
Nisshin Spinning's English company name changed
to Nisshinbo Industries, Inc.

1985
1986

1987
1989
1992
1993

1995

1996
1997

1998
1999

2000

2001
2002

Nisshinbo Industries acquired Nisshin Denim Inc.
The Machine Tools Department of the Miai Plant
spun off to create the Miai Mechatronics Plant.
Anti-skid Brake System (now ABS) Division set up.
Hamakita Plant began operations.
Kohbunshi (Thailand) Ltd.
established.
Chiba Plant began operations.
The head office relocated to its
present location in Ningyo-cho,
Nihonbashi, Chuo-ku, Tokyo.
Pudong Kohbunshi (Shanghai) Co.,
Ltd. (China) established.
Nisshinbo Automotive Corporation(U.S.A.) established.
Nisshinbo Urban Development Co., Ltd. established.
Nisshinbo Somboon Automotive Co., Ltd.
(Thailand) established.
Nisshinbo Automotive Manufacturing Inc. (U.S.A.)
established through complete financing from thesubsidiary Nisshinbo Automotive Corporation.
P.T. Gistex Nisshinbo Indonesia established as a
joint venture.
Saeron Automotive
Corporation (South
Korea) established.
Research & Development
Center established.
P.T. Nikawa Textile
Industry (Indonesia)
established as a
subsidiary through the additional acquisition ofstocks.
Continental Teves Corporation established as a joint
venture.

Ningbo Sunrise Textile Dyeing and Finishing Co.,
Ltd. (China) established as a joint venture.
Ningbo Veken Textile Co., Ltd. (China) established
as a joint venture.
Nisshinbo Industries
acquired all shares of
Iwao & Co., Ltd.
Nisshinbo (Shanghai)Co., Ltd. (China) began
operations.

NISSHINB O GROUP
The Nisshinbo Group consists of Nisshinbo Industries, Inc., its 38 subsidiaries, and 10 affiliates.

Main Group Companies (As of March 31, 2002)
Consolidated Subsidiaries
Company
Nisshin Toa Inc.
Ebisu Syokuhu Co., Ltd.
Nisshinbo Mobix Co., Ltd.
Nisshinbo Yarn Dyed Co., Ltd.
Nisshin Denim Inc.
Nisshin Tex Co., Ltd.
Nisshinbo do Brasil Industria Textil Ltda.
P.T. Gistex Nisshinbo Indonesia
P.T. Nikawa Textile Industry
Nisshinbo Brake Sales Co., Ltd.
Nisshinbo Techno Vehicle Inc.
Nisshinbo Automotive Corporation
Nisshinbo Automotive Manufacturing Inc.
Nisshinbo Somboon Automotive Co., Ltd.
Saeron Automotive Corporation
Tokai Seishi Kougyou Co., Ltd.
Nihon Postal Franker Co., Ltd.
Nisshinbo Urban Development Co., Ltd.
Kansai Nisshinbo Urban Development Co., Ltd.
Nisshinbo Europe B.V.
Ueda Japan Radio Co., Ltd.
Nippon Kohbunshi Co., Ltd.
Nisshinbo Kikai Hanbai Co., Ltd.
Nisshinbo Engineering Co., Ltd.
Nisshinbo Mechatronics Inc.
Kohbunshi (Thailand) Ltd.
Pudong Kohbunshi (Shanghai) Co., Ltd.

Location
Tokyo, Japan
Shizuoka, Japan
Wakayama, Japan
Nagoya, Japan
Tokushima, Japan
Osaka, Japan
BrazilIndonesia
Indonesia
Tokyo, Japan
Yokohama, Japan
U.S.A.
U.S.A.
ThailandSouth Korea
Shizuoka, JapanTokyo, JapanTokyo, Japan
Osaka, JapanThe Netherlands
Nagano, JapanTokyo, JapanTokyo, JapanTokyo, Japan
Oita, Japan
Thailand
China

Capital¥450 million¥50 million¥80 millon¥80 millon¥200 million¥10 million
R$20.075 million
US$10 million
US$75 million¥150 million¥50 million
US$84 million
US$15.44 million
BAHT732.6 million
WON20,400 million¥300 million¥310 million¥480 million¥30 million
EUR2.165 million¥700 million¥310 million¥30 million¥10 million¥95 million
BAHT100 million
US$7 million

Business
Textiles, Food Ingredients, Papers
TextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesAutomobile Brakes
Automobile Brakes
Automobile Brakes
Automobile Brakes
Automobile Brakes
Automobile Brakes
PapersPapers, Chemical Products
Real Estate Leasing
Real Estate Leasing
Real Estate Leasing
Electronics
Plastic Molded Products
Machine Tools
Chemical Products
Machine Tools
Plastic Molded Products
Plastic Molded Products

Capital¥14,704.353 million¥3,154.22 million¥90 million¥1,390 million

Business
Electronics
Electronics
TextilesAutomobile Brakes

Subsidiary and Affiliates Accounted for by the Equity Method
Company
Japan Radio Co., Ltd.
Nagano Japan Radio Co., Ltd.
Naigai Shirts Co., Ltd.
Continental Teves Corporation

Location
Tokyo, Japan
Nagano, Japan
Osaka, JapanTokyo, JapanB OARDOF

D IRECTORSANDS TATUTORY A UDITORS

Chairman

Executive Director

DirectorStanding Statutory Auditor

Akihiro Mochizuki

Akira Baba

Masao Kinoshita

Hisayoshi Arata

Executive Director

Director

Statutory Auditor

Kenji Tasaki

Hajime Takagiwa

Shinsuke Takahashi

President

Executive Director

Director

Statutory Auditor

Yoshikazu Sashida

Takashi Iwashita

Hideyuki Tanaka

Tetsuo Furuya

Executive Director

Director

Statutory Auditor

Kunihiro Toda

Takeo Shimura

Shigenari Ishida

Senior Executive Director

Executive Director

Director

Kohshi Fujino

Yasuo Takeuchi

Shizuka Uzawa

Senior Executive Director

Director

Tadashi Nakai

Masashi Shinagawa
Director

Yoshihito Onda

C ORPORATE D ATA
( A s

o f

M a r c h

3 1 ,2 0 0 2 )Founded:February 5, 1907

Head Office:2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo 103-8650, Japan
Tel: 03-5695-8833 Fax: 03-5695-8970
URL: http://www.nisshinbo.co.jp/

Osaka Branch:

2-4-2, Kitakyuhoji-machi, Chuo-ku, Osaka 541-0057, Japan
Tel: 06-6267-5501 Fax: 06-6267-5679

Nagoya Branch:

5-2-38, Sakae, Naka-ku, Nagoya 460-0008, Japan
Tel: 052-261-6151 Fax: 052-263-9480

Employees:

Parent Company
Subsidiaries
Total

3,690
4,766
8,456

Common Stock:

Authorized:

380,137,000 shares

Issued:216,580,939 shares¥27,588 million — US$212 million

Shareholders:

14,121

Listings:

Tokyo, Osaka, Nagoya, Fukuoka and Sapporo

Transfer Agent:

UFJ Trust Bank Limited
1-4-3, Marunouchi, Chiyoda-ku, Tokyo 100-0005, JapanO RGANIZATION C HART

General Affairs Division

General Affairs Dept.
Secretary Dept.
Purchasing Dept.

Accounting and Finance Division

Finance Dept.
Accounting Dept.

Personnel Division

Personnel Dept.
Labor Administration Dept.
Health and Medicine Dept.

Engineering Administration Division

Utilities, Construction andEnvironmental Affairs Dept.

Research and Development Division

Research Planning Dept.
Research Administration Dept.
Market Development Dept.
Intellectual Property Dept.
Fuel Cell Dept.
Optical Dept.

Board of Directors

ChairmanPresident

Trademark Committee

Research and Development Center
Policy Board
Textile Division

Board of
Statutory Auditors

Statutory
Auditors

First Group

Raw Materials Dept.
Yarns Dept.
Spandex Dept.
Industrial Materials Dept.

Second Group

Knits Dept.
Shirt Fabrics Dept.
Home Textiles Dept.
Outer-Wear Fabrics Dept.

Third GroupTokyo Textiles Dept.

Fourth Group

Textiles Control Dept.
Engineering Dept.
Textile Research and Development Center
Direct Marketing Dept.
Marketing Dept.
Global Operation Promotion Office
Shanghai Representative Office

Mechatronics DivisionMarketing Dept.
Engineering Dept.

Brake DivisionMarketing Dept.
Engineering Dept.
Friction Material R&D Dept.

ABS Division

Business Dept.
Engineering Dept.

Chemical Products DivisionMarketing Dept.
Engineering Dept.
New Carbon Dept.

Paper Products Division

Household Paper Sales Dept.
Specialty Paper Sales Dept.
Engineering Dept.
Color Systems Dept.
Administration Dept.

Osaka Branch

Nagoya BranchBusiness Planning OfficeInformation Systems OfficeEnvironmental Affairs Committee
Advertising Committee
Product Safety Committee
Human Rights Committee

Information Dissemination
Committee

Hamamatsu Plant
Shimada Plant
Fujieda Plant
Toyama Plant
Nagoya Plant
Harisaki Plant
Kawagoe Plant
Miai Plant

Miai Mechatronics Plant
Hamakita Plant
Tokushima Plant
Tokyo Plant
Tatebayashi Plant
Chiba Plant
Fuji PlantN I S S H I N B O
A N N U A L

2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo 103-8650, Japan
Tel: 03-5695-8833 / Fax: 03-5695-8970
URL: http://www.nisshinbo. co.jp/

R E P O R T
2 0 0 2Y e a re n d e d
M a r c h
3 1 ,2 0 0 2Printed in Japan