Strategic Investments for Enduring Growth
Annual Report 2003
For The Year Ended March 31, 2003

Corporate Philosophy
In this drastically changing global business environment, Sumitomo Metal Mining Co., Ltd. (SMM) constantly reflects back on its beginnings as the first
Sumitomo group company and intends to reaffirm
Sumitomo Business Principles, which have been in existence for over 300 years. Backed by Sumitomo Metal
Mining Group’s Mission, we will apply all of ouremployees’ efforts for elevating and strengthening ourbusiness structure.

Sumitomo Business Principles
Article 1. Sumitomo shall conduct its business withintegrity and sound management, placing
prime importance on trust and reliability as
the means toward pursuing the sure flourishing of its business operations.

Article 2. Sumitomo shall manage its business operations with positive foresight and flexibility tocope effectively with changing times. At notime shall the company pursue easy gains or
act imprudently.
Contents

Sumitomo Metal Mining Group’s Mission
Having Sumitomo Business Principles as its businessbasics and environmental preservation and safety assurance as its operating basics, SMM shall aim to maximize
its corporate value by establishing a global network andproviding high-quality materials such as non-ferrous
metals and electronics materials.

Unless specifically stated otherwise, information in this annual report
is as of September, 2003.

Forward-looking Statements
Statements made in this annual report with respect to plans, strategies
and future performance that are not historical facts are forward-looking statements. SMM cautions that a number of factors could cause
actual results to differ materially from those discussed in the forwardlooking statements.

1 Consolidated Financial Highlights
2 To Our Shareholders
6
8
9
10
15
19
21
26
28
30
31
32
33
48
49
50
51

Special Feature
Progress of the Mid-term Management Plan
(Fiscal Years 2002-2003)
Revitalizing Research and Development
Review of Operations
At a Glance
Mineral Resources and Metallurgy
Electronics Materials and Advanced Materials
Environmental Business
Financial Section
Management’s Discussion and Analysis
Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
SMM Group
Corporate Data/Investor Information
Corporate Officers

Consolidated Financial Highlights
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIES% year-on-yearchangeYears ended March 31, 2003, 2002 and 2001

Millions of yen(unless otherwise specified)

2003/2002

For the Year :Net sales ....................................................................................
Mineral resources ...................................................................
Metallurgy ..............................................................................
Electronics & advanced materials ..........................................
Construction materials & housing ..........................................
Others ......................................................................................
Operating income ......................................................................
Mineral resources ...................................................................
Metallurgy ..............................................................................
Electronics & advanced materials ..........................................
Construction materials & housing ..........................................
Others ......................................................................................
Net income (loss) ......................................................................
Net income (loss) per share (¥, $) .............................................
Return on assets (%) .................................................................
Return on average shareholders’ equity (%) .............................
Free cash flows .........................................................................
Net cash provided by (used in) operating activities ..................
Capital expenditures ..................................................................

7.6
5.9
14.8
19.1
-22.6
-38.1
1,346.6
220.0
135.7
—
—
-65.2
—
—
—
—
-10.2
-21.8
-25.4

At Year End :Total assets ................................................................................
Shareholders’ equity .................................................................
Total debt ..................................................................................
Equity ratio (%) .........................................................................
Debt to equity ratio ...................................................................
Interest coverage ratio ...............................................................

-9.2
-5.5
-7.3
—
—
—

2002

Thousands of U.S. dollars(unless otherwise specified)

2001

2003

¥ 355,242 ¥ 330,194 ¥ 375,352
24,672
23,61323,292
226,343
204,827
197,183
132,923
146,333
110,985
16,741
24,88021,616
12,375
15,074
19,986
16,59326,930
1,147
2,682
2,360
838
8,326
15,421
3,533
4,118
9,959
(4,388)
(352)
(304)
(266)
635
334
1,826
(1,172)
15,103(6,611)(2.05)
26.41(11.56)
—
2.81
—
—
6.39
—
7,178
(4,739)7,991
26,10523,33933,37018,92728,07825,379$ 2,955,424
205,258
1,883,053
1,105,849
139,276
102,953
138,045
22,313
69,26834,260(2,928)5,283(9,750)(0.017)530,080
237,470
176,998
44.8
0.75
5.2

3,916,589
1,858,078
1,287,845

2003

470,774
223,341
154,799
47.4
0.69
9.9

518,756
236,313167,077
45.6
0.71
9.1

59,717217,180
157,463

Notes: 1. U.S. dollar figures are translated, for convenience only, at the rate of ¥120.20=U.S. $1, the effective rate of exchange prevailing on March 31, 2003.
2. Net sales and operating income figures in each segment include inter-segment transactions.
3. The computation of net income (loss) per share is based on the weighted average number of shares of common stock issued during each fiscal year.

Net Sales before Adjusting
Inter-segment Transactions

Operating Income before Adjusting
Inter-segment Transactions

Net Income (Loss)

Billions of yen

Billions of yen

Billions of yen

500

30

20
15

400

10

15
300

5
0

200
0

-5
100
-10
0

'99

'00

Mineral resources

'01

'02

Metallurgy

'03

-15

'99

Electronics & advanced materials

'00

'01

'02

'03

Construction materials & housing

-15

'99

'00

'01

'02

'03

OthersConsolidated Financial Highlights

1

To Our Shareholders

Koichi Fukushima, President

SMM is currently promoting its “Mid-term Management Plan,”aiming to improve profitability by building a strong and soundcorporate structure for the SMM Group. By fiscal year 2003,
the final year of the plan, we aim to achieve consolidated ROA(Return On Assets) of 3% or better while maintaining an equity ratio of at least 40% by promoting Business Structure
Reform and Cost Structure Reform and through efficient management of assets.

Consolidated Results for Fiscal Year 2002
In fiscal year 2002 (April 2002 – March 2003), business confidence improved due to anincrease in exports and a recovery in production from the beginning of the year and capital
investment showed signs of bottoming out, resulting in a partial economic recovery in thefirst half. From the summer, however, economic slowdown in the U.S. and heightened tensions over Iraq raised concerns over the global economy. As a result, exports, which had
been driving the improvement, became flat and domestic deflation resumed, weakening therecovery trend in production. On top of this, a bleaker employment situation and further
declines in share prices contributed to a gradual worsening of the economic slump including
deterioration in individual consumption.
In the non-ferrous metal industry, both demand and prices for nickel and gold were favor-

2

To Our Shareholders

able. As for copper, however, despite signs of a recovery in domestic demand, prices continued to be sluggish. The yen maintained relative strength in foreign exchange markets due tothe U.S. economic slowdown. Although the electronics-related industries perked up temporarily in the first half, they did not achieve a full-fledged recovery.
In this environment, SMM Group achieved growth in revenue and operating income aswell as a sharp recovery in ordinary income on a consolidated basis. Owing to the writedown of investment securities, however, the SMM Group posted a net loss.
Net sales were ¥355.2 billion, an increase of 7.6% (¥25.0 billion) over the previous term.
In addition to higher nickel prices and increased sales in the Metallurgy and Metal
Processing segment, this is attributable to growth in sales of mainstay products in theElectronics Materials and Advanced Materials segment.
Due to improvement in all segments, operating income surged from ¥1.1 billion in the previous term to ¥16.6 billion. Due to profit growth in equity in earnings of non-consolidated
subsidiaries and affiliated companies such as SMMA Candelaria Inc. and P.T. International
Nickel Indonesia, ordinary income also improved from a ¥1.5 billion loss in the previous
term to ¥14.6 billion in fiscal year 2002.
Due to a ¥17.2 billion write-down of investment securities, however, income before
income taxes improved by only ¥5.1 billion compared with the previous term for a ¥7.5 billion loss. A net loss of ¥1.2 billion was posted despite a ¥5.4 billion improvement comparedwith the previous term due to the posting of a ¥6.8 billion income tax deferral.
By segment, in the Mineral Resources segment, net sales grew 5.9% (¥1.4 billion) over theprevious term to ¥24.7 billion, supported by higher gold prices and sales growth at
Sumitomo Metal Mining Arizona Inc. Operating income improved sharply, increasing by
220.0% (¥1.8 billion) over the previous term to ¥2.7 billion, due to cost-cutting and sales
growth at Sumitomo Metal Mining Arizona Inc.
In the Metallurgy and Metal Processing segment, net sales rose 14.8% (¥29.2 billion) overthe previous term to ¥226.3 billion. Operating income increased 135.7% (¥47.9 billion) overthe previous term to ¥8.3 billion due to higher nickel prices in overseas markets and expanded sales and to profit growth resulting from revenue growth and cost-cutting at Sumitomo
Metal Mining Brass & Copper Co., Ltd.
In the Electronics Materials and Advanced Materials segment, net sales increased 19.8%(¥21.9 billion) over the previous term to ¥132.9 billion. In addition to overall sales growth inmainstay products, this is attributable to overall revenue growth in SMM subsidiaries’ packaging materials-related businesses and electronic component-related businesses. Operating
income improved sharply from a ¥4.4 billion loss in the previous term to a ¥4.1 billion profit
in 2002, supported by the large increases in profit at SMM and most of its subsidiaries due tosales recovery.

Progress of the “Mid-term Management Plan”
We are promoting a “Mid-term Management Plan” whose main objectives are building astronger and sounder corporate structure and enhancing profitability. By fiscal year 2003,
the final year of the plan, we aim to achieve consolidated ROA (Return On Assets) of 3% orbetter while maintaining an equity ratio of at least 40%.

To Our Shareholders

3

Business Structure Reform
We are concentrating our management resources in areas where we can make the most of
our strengths by further promotion of the “select and focus” strategy in our core businesses:
the Mineral Resources and Metallurgy segments and the Electronics Materials and Advanced
Materials segment.
In the Mineral Resources and Metallurgy segments, we are reinforcing three businesses ascore: nickel, where we aim to take the initiative in the industry by establishing low-grade
nickel oxide ore refining technology; copper, demand for which is expected to grow steadily,
particularly in the Chinese market; and precious metals, where we have overseas mine development projects and are promoting introduction of a new refining process. Specifically, thelarge-scale projects we are emphasizing include the Coral Bay Project, which is constructing
a low-grade nickel oxide ore processing plant in the Philippines, establishment of a copper
production system with annual capacity of 450,000 tonnes at the Toyo Smelter & Refinery,
and the Pogo Gold Mine Project that we are promoting in Alaska, the U.S. At the same time,
we are reorganizing our zinc and sulfuric acid businesses by enhancing efficiency throughalliances with other companies in the same businesses.
In the Electronics Materials and Advanced Materials segment, we are concentrating onmaterials areas where we have expertise such as paste, bonding wire, copper-clad polyimide
film, and metal powders. Based on the rapid growth in IT-related markets in China, we arepromoting China strategies for each of our businesses.
In the Environmental segment, we are focusing on two businesses where we leverage thetechnology that we have developed over many years through our Mineral Resources andMetallurgy businesses: the recycling business, which recovers valuable metals, and the environmental improvement business, which assesses and remediates soil and groundwater contamination.
At the same time, we are withdrawing from and selling businesses with a limited futureand less synergies with core businesses. In order to further enhance group profitability,
we will continue to promote withdrawal from unprofitable businesses and reduction ofaffiliated companies.

Cost Structure Reform
For the immediate enhancement of profitability, we are promoting measures such as theCost Reduction Project, the Procurement Innovation Project, and personnel reduction.
The effects of these are steadily increasing. In fiscal year 2003, we will continue to
implement these projects to achieve further cost reduction effects.
In addition, we aim to improve administrative and supporting department efficiency
and reduce administrative costs by introducing ERP (Enterprise Resource Planning) andconverting to SSC (Shared Service Center) under our Management Information System
and Administrative and Supporting Department Efficiency Project.

Research and Development System Reform
In order to bring forth the next mainstay of earnings efficiently, we are engaged in reforming
our research and development system.

4

To Our Shareholders

Management is actively involved from the stage of selecting research and development
themes, so that development is closely linked to business strategy. We aim to accelerate ourresearch and development activities by promoting a “select and focus” strategy in project
themes and closely monitoring the progress. We will concentrate on core basic technologies
in which we have outstanding expertise such as fine powder technology, surface treatment
technology, organic resin technology, separation/refining/crystallization technology.
Also, we aim to revitalize research and development by heightening researchers’ motivation by promoting young researchers who are capable of leading research and development
and by revising the patent reward system.

Enhancing Risk Management
In the aftermath of the critical accident that occurred in 1999 at the Tokai Plant of JCO Co.,
Ltd., a subsidiary of SMM located in Ibaraki Prefecture, we have decided not to restart theuranium conversion business, concentrating instead on managing facility maintenance, managing low-level radioactive waste storage, and handling compensation. SMM is providing
JCO with support to effectively address these issues. Since the accident, we have endeavored to assure safety management and compliance with rules throughout the Group by reconfirming and thoroughly implementing our corporate philosophy. We are committed toenhancing our risk management and compliance systems and elevating employees’ awareness of their importance, based on the serious lessons from the JCO accident.

Despite signs of recovery in the U.S. economy and domestic share prices, recent appreciationof the yen and severe employment conditions are likely to cause the outlook for the Japanese
economy to achieve a self-sustaining recovery to remain uncertain. In the non-ferrous metalindustry, however, inventories are generally decreasing and metal prices are advancing. Also,in electronics-related industries, semiconductor demand is turning around supported by
growth in sales of digital appliances and mobile phones.
In these environments, by steadily implementing our “Mid-term Management Plan,” weare devoting all of our efforts to achieve our management goals by the final year of the plan.
Currently, we are developing our next Mid-term Management Plan (fiscal years 2004 –2006), which aims to achieve higher management goals. We deeply appreciate your understanding of and support for our management policies.

September 2003

Koichi Fukushima
President

To Our Shareholders

5Special Feature:

Progress of the Mid-term Management Plan
(Fiscal Years 2002-2003)
SMM is promoting its “Mid-term Management Plan,” aiming to improve profitability by building a strong and soundcorporate structure for the SMM Group. By fiscal year
2003, the final year of the plan, we aim to achieve consolidated ROA (Return On Assets) of 3% or better while
maintaining an equity ratio of at least 40% by promoting
Business Structure Reform and Cost Structure Reform.

Business Structure Reform
Under Business Structure Reform, in addition to promoting the“select and focus” strategy in the Mineral Resources andMetallurgy segments and the Electronics Materials andAdvanced Materials segment, which are our core businesses, weare reinforcing our Environmental segment, a growth area, by
focusing on areas where we can make the most of our strengths.
In the Mineral Resources and Metallurgy segments, we areemphasizing the promotion of large-scale mineral resource
development projects in order to secure profitability in the medium to long term. In the Electronics Materials and Advanced
Materials segment, we are concentrating management resourcesin areas such as paste and copper-clad polyimide film that use
the materials technology in which we are strong.
At the same time, we are withdrawing from and selling businesses with a limited future and less synergies with core businesses. In fact, in two years through the end of fiscal year 2002,
we have shut down and sold off 25 affiliated companies out of
94 as of April 2000. In order to further enhance profitability of
the Group, we will continue to promote withdrawal from unprofitable businesses and reduction of affiliated companies.

Investment Plan: Five Main Projects
Under this plan, which includes five main projects in the Mineral
Resources and Metallurgy segments, SMM is engaged in thehighest level of large-scale investment in its history. Due in partto revision of the New Nickel Oxide Ore Project, actual capital
investment in fiscal year 2002 totaled ¥22.8 billion, comparedwith ¥35.5 billion in the initial plan. As ¥56.7 billion is planned
for fiscal year 2003, total investment for the two-year period is
expected to be ¥79.5 billion.
Pogo Gold ProjectThis is a gold mine development project that we are promotingin the Pogo area of Alaska, the U.S. It is currently in the review
process for obtaining permission to develop the mine. We
expect to get permission within fiscal year 2003. If this is thecase, we will be able to begin operations in fiscal year 2005 asconstruction requires approximately two years. Fiscal year 2003
investment is estimated at ¥2.0 billion.
Expanding Toyo Smelter Refinery’s Annual Copper
Production to 450,000 Tonnes
At the Toyo Smelter & Refinery, our domestic copper production site, we are expanding production facilities to gradually
boost annual capacity to 450,000 tonnes. Expansion in fiscal
year 2003 completed an increase in annual capacity from
270,000 tonnes to 300,000 tonnes. Fiscal year 2003 investment
is estimated at ¥14 billion.
New Mine Development
In order to ensure a stable supply of raw materials and meet
annual copper production capacity of 450,000 tonnes, we areendeavoring to secure our own resources through direct investment in overseas mines. We will further enhance and speed up
new mine developments, in addition to our efforts of these years
to participate in mine development plans.
Coral Bay Project
In order to secure new nickel resources, we are constructing aplant on Palawan Island, the Philippines, to produce an intermediate product of the nickel refining process from laterite lowgrade nickel oxide ore. The start of operations is targeted forfiscal year 2004. Fiscal year 2003 investment is estimated at¥5.5 billion.

Plan and Result of Investment in Fiscal Year 2002 and 2003

6

Plan in FY2002(as of November 2001)

Result in FY2002

Plan in FY2003

Total of
FY2002 and 2003

Mineral resources

7.7

1.4

8.0

9.4

Metallurgy

17.2

8.9

34.9

43.8

Electronics &advanced materials

7.4

9.5

11.2

20.7

Others

3.2

3.0

2.6

5.6

Total

35.5

22.8

56.7

79.5

Special Feature

New Nickel Oxide Ore Project
We are considering participation in the large-scale hydro-metallurgical nickel refining process project that Inco Ltd. (Canada)
is advancing in New Caledonia. Inco is currently fundamentally revising plans with the goal of reducing the amount of investment in the project. When its revision of plans has been completed, we will consider if participation is possible.

Center) under our Management Information System and
Administrative and Supporting Department Efficiency Project.

Cost Structure Reform
Under Cost Structure Reform, we are steadily implementing thefollowing measures.
Cost Reduction Project
Aims to reduce costs by approximately ¥1.0 billion annually
through a major revision of systems and practices including thebenefits system.
Procurement Innovation Project
Aims to cut costs by approximately ¥5.0 billion annually
through a thorough reform of procurement that is not limited toa review of procured materials and procurement methods, but
includes modification of product and equipment specifications
and of manufacturing processes.
Personnel Reduction
Approximately 250 employees (7% of the total) accepted theearly retirement package that we offered in June 2002. Thiswas more than initially expected and represents progress toward
our transformation into a corporate structure with less vulnerability to changes in environments.
As a result of the above, we achieved our fiscal year 2002 Cost
Structure Reform target of ¥4.0 billion. In addition, we aim to
improve administrative and supporting department efficiency
and reduce administrative costs by introducing ERP (Enterprise
Resource Planning) and converting to SSC (Shared Service
Operating Income, Net Income and ROA

Total Assets, Shareholders’ Equity and Equity Ratio

Billions of yen%

Billions of yen

%

30

6

600

60

20

4
400

40

10

2

0

0
200

20

-10

-20

-2

'99

'00

'01

'02

Years ended March 31
Operating income

Net income

ROA (right)

'03

-4

0

'99
Years ended March 31
Total assets'01

Shareholders’ equity'030

Equity ratio (right)

Special Feature

7

Special Feature:

Revitalizing Research and Development
Research and Development Basic Strategy
SMM is endeavoring to restructure its R&D system for the mostefficient development of the next generation of new products.
We aim to revitalize R&D by building a system whose highest
priority is customer needs and by enhancing researchers’ motivation. We are also applying the “select and focus” strategy to
R&D by focusing development themes on core basic technologies in which we have outstanding expertise.

Objectives of Research and Development Reform
1. Active Involvement of Management
We are linking R&D to business strategy through close communication between management and research laboratories. We
are managing progress by having our management, businesssegments, and research laboratories work in unison to choose
research themes that have the needs of customers and markets astheir highest priority.
2. Accelerating Research and Development
Products in the Electronics Materials and Advanced Materials
segment are quickly replaced by newer ones, making it crucial todevelop products that meet customer needs rapidly enough tomake them available in a timely manner. To that end, we arecommitted to meeting customers’ delivery requirements throughpainstaking schedule management and flexible personnel deployment. We also actively promote the use of external resources
such as joint research with academic research institutes and outsourcing when starting new businesses.
3. Enhancing Researchers’ Motivation
The revitalization of R&D largely depends on the motivation ofindividual researchers. In order to enhance researchers’ motivation,
we are promoting younger researchers who are capable of leading
R&D, transferring to them the authority to execute budgets for thethemes they direct and the responsibility for promoting them. We
have also revised our patent reward system by abolishing the ceiling on patent reward amounts and paying rewards as a percentage
of profits based on a review of contribution to business results.

Four Core Basic Technologies
1. Fine Powder Technology
This is a nanotechnology for manufacturing functional powders
whose importance is increasing as IT-related components
become smaller and lighter. Related SMM products include theAdvanced Materials segment’s metal powders, magnetic materials, and functional inks. We are currently conducting joint R&D
with Institute of Multidisciplinary Research for Advanced
Materials of Tohoku University on the theme of “Functional
Particle Creation and Applications.”
2. Surface Treatment Technology
For many years we have worked hard on improving our surface
8

Special Feature

treatment technology, which includes processes for plating on
semiconductor packaging materials such as lead frames. The
superiority of our technology has been recognized worldwide, as
exemplified by the reputation for quality and global shareexceeding 90% in the market for COF copper-clad polyimide
film used in LCD driver IC of large TFTs.
3. Organic Resin Technology
Organic resin is the general term for the plastics and synthetic
rubbers that are synthesized from petroleum. Related SMM
products include semiconductor substrates and compounds usedin magnetic materials. Development of this technology is considered crucial to the electronics field going forward.
4. Separation, Refining, Crystallization Technology
Separation and refining technology is a basic technology formetal refining in which we have a high degree of expertise andwhich is the source of our refining segment’s high level of competitiveness. It will be used in the Coral Bay Project we are currently building and in precious metal refining processes. We use
crystallization technology for the electronics materials such as
GaP (gallium phosphide) and telecommunications device components. Our GaP has been particularly well received by themarket, winning a share of approximately 50% worldwide.
■ Start of Comprehensive Joint R&D with Academic

Research Institute
In July 2003, SMM entered a comprehensive joint R&D agreement on the theme of “Functional Particle Creation andApplications” with Institute of Multidisciplinary Research for
Advanced Materials of Tohoku University. Comprehensive joint
research is not simply joint research conducted by individual
research laboratories and a corporation. Rather, it seeks superior
R&D results in a shorter time by organically integrating the total
power of multiple research laboratories and the technology ownedby the Company. While development results achieved in the contracted three-year period will be jointly owned, SMM will be incharge of any commercialization. Going forward we will continue
to increase the efficiency with which we develop new products bystrengthening alliances with academic research institutes.

Review of Operations:

At a Glance
Net Sales by Segment (Consolidated)
4.4%

2.5%
4.6%

Mineral resources
Metallurgy
Electronics & advanced materials
Construction materials & housing
Others

FY 2002
Net Sales: ¥355 Billion

36.0%

52.5%

Note: Proportion is calculated by net sales of each segment
which does not include inter- segment transactions.

Operating Income and Net Cash Provided by Operating Activities
Billions of yen

Billions of yen

30

60

20

40

10

20

Capital Expenditures (left) and Depreciation (right)
Billions of yen

35
30
25
20
15

0

0

10
5

-10

'99

'00

'01

'02

'03

0

-20

Years ended March 31

'99

'00

'01

'02

'03

Years ended March 31

Electronics & advanced materials
Mineral resources
Metallurgy
Net cash provided by operating activities (right)

Construction materials & housing

OthersNote: Operating income, capital expenditures and depreciation of Advanced Materials segment in fiscal year ended March 1999 were included in Metallurgy.

Business Profile
Segment
Mineral Resources

Business Content• Exploration, development, production, and sales of non-ferrous metal
resources, domestically and overseas

Main ProductsGold and silver ores, Copper concentrates• Geological consulting utilizing mineral resource developing techniques
Metallurgy

Electronics Materials

Advanced Materials• Refining and sales of base metals such as copper, nickel,
and precious metals

Copper, Nickel, Zinc, Lead, Precious metals such as gold,
silver, platinum, etc.

• Manufacturing, processing and sales of IC packaging materials,
electronics materials, crystal materials, etc.

Lead frame, Tape material, Bonding wire, Paste, Crystal material(GaP: Gallium Phosphide, LN: Lithium Niobate, LT: Lithium Tantalate),
Printed Wiring Board (PWB), Optical components(Faraday Rotator, Optical Isolator and High frequency device).

• Manufacturing and sales of optical communication materials andcomponents, devices, connectors, switches, photo conductive cells,
silicon photodiode, TV frames, etc.
• Manufacturing, processing, and sales of metal powders (nickel, palladium),
circuit board materials, battery materials, magnet materials, etc.

Nickel powder, Copper-clad polyimide film,
Materials for rechargeable batteries (nickel hydroxide, lithium cobaltate),
Rare earth metal bonded magnets

Review of Operations

9Review of Operations:

Mineral Resources and Metallurgy
Production Capacity Expansion Plan (annual basis)
Product

Current level

Goal

Nickel

36,000 tonnes

Gradually expand to
60,000 tonnes

Ferro-nickel

21,000 tonnes

Gradually expand to
24,000 tonnes

Copper(Toyo Smelter & Refinary)

300,000 tonnes

Gradually expand to450,000 tonnes

Copper(Jinlong Copper Co., Ltd.)

150,000 tonnes

Gradually expand to
300,000 tonnes

Gold

36 tonnes

Expand to 60 tonnes
in FY2003

Silver

300 tonnes

Expand to 360 tonnes
in FY2004

Results for Fiscal Year 2002

Basic Business Strategy

The Mineral Resources segment posted net sales of ¥24.7 billion, a
5.9% increase from the previous term. Operating income increased
220.0% (¥1.8 billion) compared with the previous term to ¥2.7 billion, recovering to fiscal year 2000’s level. This is attributable to
growth in sales and profit at the Hishikari Mine supported by higher gold prices and to the increase in sales accompanying the complete switchover in fiscal year 2002 by Sumitomo Metal Mining
Arizona, Inc. to sales of copper metal produced by the SX-EW
method (solvent extraction/electrowinning, a low-cost hydro-metallurgical method for producing copper at the mine site).
The Metallurgy and Metal Processing segment posted net sales of¥226.3 billion, a 14.8% increase from the previous term. Operating
income grew 135.7% to ¥8.3 billion, sharply recovering from theprevious term’s slump. Major factors behind this were the rise of
LME nickel prices, the continued strength of nickel demand forstainless and other special steels, and increased sales due to therecovery in nickel for semiconductor-related electronics materials.

Having long been core businesses of SMM, the Mineral
Resources and Metallurgy segments account for approximately
60% of overall sales. Under our “Mid-Term Management
Plan,” we position three businesses as core: nickel, where we
aim to take the initiative in the industry by establishing lowgrade nickel oxide ore refining technology; copper, demand forwhich is expected to grow steadily, particularly in the Chinese
market; and precious metals, including gold from the Hishikari
Mine, which is one of the world’s few high-grade mines.
In order to provide cost-competitive products on a stable basis
amid the ongoing global reorganization of mining companies
and increasing oligopolization of markets, it is vital for us tosecure our own resources through direct investment in overseas
mines. To that end, we are aiming for an integrated production
system that handles everything from mineral resources development to refining for the three core businesses by globally developing mineral resources, improving refining technology, andendeavoring to expand production capacity.

Annual Production Volume by Product (Non-consolidated)

Net Sales by Product (Non-consolidated)Thousands of tonne

tonne

300

300

Billions of yen

250

200
200

200

150

100
100

100

50

0

'99

'00

'01

'02

Years ended March 31(Left)
CopperNickelZinc(Right)Gold
SilverNotes: 1.Production volume includes outsourced production
2.Nickel includes ferro-nickel

10 Review of Operations

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Mineral Resources
Metallurgy

Gold and silver ores
NickelCopperGold

Zinc

OthersSMM’s Worldwide Mines and Refineries
Mine/ SMM's interest (%)
Refinery / Production capacity per year (tonne)* Please see Production Capacity Expansion Plan in page 10
Pogo (Gold – under exploration)/ 51% (currently 85%)

Morenci (Copper) / 12%

Jinglong Copper Co., Ltd. / Copper: 150,000ｔonnes*
Coral Bay (Nickel/Cobalt mixed sulfide – under construction)
Soroako(Nickel) / 20.1%
Batu Hijau (Copper, Gold) / 5%

La Candelaria(Copper) / 16%

Figesbal (Nickel) / 25.5%
Northparks (Copper) / 13.3%

Harima Smelter / Zinc: 90,000 tonnes, Lead: 30,000 tonnes
Toyo Smelter & Refinery / Copper: 300,000 tonnes*/ Gold: 36 tonnes*, Silver: 300 tonnes*
Niihama Nickel Refinery / Nickel: 36,000ｔonnes*
Shisaka Plant / Zinc oxide: 120,000 tonnes (processing capacity)
Hyuga Smelting Co., Ltd. / Ferro-nickel: 21,000 tonnes*
Hishikari Mine Dept. (Gold) / 100%

SMM’s Metal Share and Value by Mine

SMM’s Metal Share and Value by Metal

Thousands of tonne

Millions of U.S. Dollars

Thousands of tonne

Millions of U.S.Dollars

1,000

4,000

2,000

8,000

750

3,000

1,500

6,000

500

2,000

1,000

4,000

250

1,000

500

2,000

1
0

Morenci

Northparks

La Candelaria
SMM's Metal Share (left)
Estimated Value (right)

CopperFigesbal
SoroakoGold

Pogo
Batu Hijau

NickelCoral Bay
Hishikari

CobaltNotes : 1. Only the Company’s own mines are covered.
2. SMM's metal share = Ore reserves (tonne) x Metal grade x SMM's interest of mine (%)
3. Estimated value = SMM's metal share (tonne) x Standard metal price
4. Standard metal price = Gold: 320$/toz, Nickel: 3.5$/lb, Copper: 75¢/lb, Cobalt: 6.5$/lb

0

0

G ld
Gold

SMM’s Metal Share

NickelCopper0

Estimated Value (right)

Notes : 1. Only the Company’s own mines are covered.
2. SMM's metal share = Ore reserves (tonne)
x Metal grade x SMM's interest of mine (%)
3. Estimated value = SMM's metal share (tonne)x Standard metal price
4. Standard metal price = Gold: 320$/toz,
Nickel: 3.5$/lb, Copper: 75¢/lb, Cobalt: 6.5$/lb

Review of Operations 11

Strategy for Metal Business

NickelDemand for nickel, which is used in stainless steel and electronic materials, is expected to steadily grow over the medium tolong term. SMM offers a variety of nickel products, including
electrolytic nickel and ferro-nickel, and is the only domestic
producer of electrolytic nickel.
Under our “Mid-term Management Plan,” we seek to establish
stable overseas supplies of raw materials in order to expand
annual production capacity of electrolytic nickel from 36,000
tonnes to 60,000 tonnes and of ferro-nickel from 21,000 tonnes
to 24,000 tonnes over the long term. For assuring stable procurement of raw materials, in addition to our capital participation in vendor P.T. Inco (Indonesia) and FIGESBAL (NewCaledonia), we are promoting the Coral Bay Project.
Coral Bay Project

Coral Bay Project
The Coral Bay Project (formerly the Rio Tuba Project) is the
project to establish a low-grade nickel oxide ore processing
plant at Rio Tuba in the southern part of Palawan Island, thePhilippines, and to produce nickel/cobalt mixed sulfide, anintermediary product in the nickel refining process (nickel:
10,000 tonnes per year; cobalt: 700 tonnes per year). To
advance the project, in July 2002, SMM established Coral Bay
Nickel Corporation in the Philippines in conjunction with Mitsui& Co., Ltd., Nissho Iwai Corporation, and Rio Tuba Nickel
Mining Corporation (the Philippines).
Total investment in the project, which is expected to operate
for approximately 20 years, is estimated at US$180 million. A
stock of approximately 16 million tonnes of raw material has
already been mined locally and the use of existing infrastructureof harbors, roads, and other facilities will enable low-cost development. The project is progressing smoothly and is scheduled
to start operations in fiscal year 2004. This is an overseas project in which SMM holds a majority interest. By establishing
low-grade oxide ore refining technology, we aim to take the iniNickel Price (LME)$/lb

5tiative in the global nickel refining business.
Establishment of the HPAL Method
Previously, the global development of nickel resources has
mainly focused on nickel sulfide ore and garnierite, the highgrade nickel oxide ore. The recent development, however, ofthe HPAL (high pressure acid leach) method has made possible
the low-cost recovery of nickel from laterite, the low-grade
oxide ore. Laterite ore exists in large quantities in many regions
including the Philippines, Indonesia, Australia, Central
America, South America, and Africa and establishing lateriteore processing technology is of great significance from thestandpoint of securing a stable nickel supply for the future. It isalso the beginning of the strategy for the challenge of yet larger
nickel refining projects going forward.
Reinforcing Domestic Nickel Plant Facilities
SMM will purchase all of the intermediary product produced by
the Coral Bay Project and transform it into the final electrolytic
nickel product at its own nickel plant. This plant is highly costcompetitive as it uses the MCLE (matte chlorine leach electrowinning) process, a high-quality, high-productivity hydrometallurgical refining process. In line with this project’s
progress and demand growth, we will gradually expand annual
electrolytic nickel production capacity from 36,000 tonnes to60,000.

4

Copper
3

2

0

4

7

10

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In China, Taiwan, South Korea and other parts of Asia where
economic development is ongoing, demand for copper is strong.
In particular, in China, which will host the Beijing Olympics in2008 and the Shanghai International Expo in 2010, the infrastructure is being improved at a fever pitch and demand for copper for wire, electronics materials, and construction materials is
growing rapidly. Chinese demand for copper is expected toreach 5.0 million tonnes in fiscal year 2010, compared with thecurrent 2.5 million tonnes. However, the production capacity oflocal smelters in China cannot handle the growth in demand sothat the supply and demand gap will continue to expand. It isestimated that by fiscal year 2010, more than half of Chinesedemand will have to be fulfilled with imports.
Securing 50% of our copper from our own mines stabilizes
our supply and we have extensive business experience in China.
For these reasons, we are confident of being able to establish adominant position in the Chinese market.
In order to respond to trends like this in Asian markets, inaddition to advancing plans to increase copper production, weare endeavoring to secure our own resources.
With regard to the Tropico Copper-Platinum Group Metal
Project in Sinaloa, Mexico in which we have been engaged in
exploration since 2001, we decided in March 2003 to withdraw
from the entire project based on exploration results that showedthat copper content did not meet our initial expectations.
Nevertheless, our proactive stance toward mine development
remains unchanged. That said, however, we are fully aware that
we need to reduce the risks associated with the mine developmentby speeding up the development projects as mach as possible.
Expansion Plans
At the Toyo Smelter & Refinery, our domestic copper production site, we are expanding production facilities to boost annual
capacity to 450,000 tonnes. In July 2003, we completed anincrease in annual capacity from 270,000 tonnes to 300,000
tonnes. This plant is located on a site which is large enough tocarry out the expansion in capacity in an efficient manner.
Going forward we will gradually expand capacity in line withmarket growth. Total investment in this capacity expansion
plan is estimated at ¥28.0 billion.
In addition, last year we established a system for annual electrolytic copper production capacity of 150,000 tonnes at Jinlong
Copper Co., Ltd., our joint venture in Anhui Province, China.
We are targeting annual capacity of 300,000 tonnes down theroad in order to respond to vigorous demand.

Expansion of production facilities at the Toyo Smelter & Refinery

Reinforcing the Sulfuric Acid Business
The copper refining process yields a large amount of sulfuric
acid as a by-product. The Toyo Smelter & Refinery currently
produces approximately 700,000 tonnes of sulfuric acid annually. As the profitability of sulfuric acid sales has an impact on
the competitiveness of the copper business, the sulfuric acidbusiness becomes a vital issue when copper production is
expanded.
SMM formed an alliance with Dowa Mining Co., Ltd. in thesulfuric acid business and in February 2003 established the sulfuric acid manufacturing and sales company Acids Co., Ltd. as a
joint venture. Through this alliance, we aim to cut more than
one billion yen in annual costs at both companies in total byenhancing transportation efficiency, cutting sales, general andadministrative expenses, and enhancing productivity.
In addition, we have secured a purchaser within the Group as
the Coral Bay Project’s nickel oxide ore processing plant plans
to use 260,000 tonnes of sulfuric acid annually.

Precious Metals
Copper Price (LME)

In addition to maintaining annual gold production of 7 to 8
tonnes thanks to the stable operations of the Hishikari Mine, oneof the world’s few high-grade gold mines, we are involved in
the Pogo Gold Project in Alaska, the U.S. Furthermore, we areenhancing the efficiency of precious metal recovery and refining
with the introduction of a new process for precious metals refining that we developed in-house.

¢/lb

80

70

60

0

4

7

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The Superiority of the Hishikari Mine
While the average grade of the world’s gold mines is approximately 5g of gold per tonne of ore, the average grade of theHishikari Mine is 45g to 50g, making it one of the world’s few
high-grade mines. We are using the mining technology that we
cultivated at this mine in mine development projects that we are
currently promoting overseas. Having begun operations in
1985, the Hishikari Mine’s total gold production reached 100
tonnes in 1999. With estimated gold reserves of 150 tonnes (asReview of Operations 13

of December 2002), stable operations will continue going forward.
Pogo Gold ProjectThis is a gold mine development project in Alaska and is a joint
venture with Teck Cominco (Canada) and SC Minerals (a U.S.
subsidiary of Sumitomo Corporation) in which we hold a majority
interest. The Liese deposit, which is the Pogo region’s principal
ore deposit, is promising, with estimated ore reserves of 9.7 million tonnes, average gold grade of 18.0g per tonne, gold reservesof 174 tonnes, and annual gold production of 12.5 tonnes.
This project is currently in the review process for obtaining
permission to develop the mine. We expect to get permission
within fiscal year 2003. If this is the case, we will be able tobegin operations in fiscal year 2005 as construction requires
approximately two years.
Introduction of New Process for Precious Metals Refining
After being separated and recovered in the copper refining
process, precious metals – gold, silver, and platinum – arerefined. In order to increase precious metal refining capacityand efficiency in conjunction with the copper production expansion at the Toyo Smelter & Refinery, we are introducing a newprocess for precious metals refining during the period from fiscal year 2003 to 2004. Total investment of ¥3.6 billion is
expected to expand annual refining capacity from 36 tonnes to
60 tonnes for gold and from 300 tonnes to 360 tonnes for silver.
Unlike conventional processes, the new process enables recovery of greater value metals first. This shortens the gold recovery
time from one month to eight days, which should have the effectof lowering costs by lightening the interest burden. In addition
to gold, silver, platinum, palladium, and rhodium, other platinum-group metals such as iridium and ruthenium are also
recovered, which was difficult with conventional processes.
Introduction of the new process is expected to add ¥700 million
to profit per year.
Gold Price (COMEX)

Zinc
Zinc Business Joint Venture
The domestic zinc business is under severe pressure fromimports from neighboring countries such as China and South
Korea. In July 2002, SMM established MS Zinc Co., Ltd. as a
joint venture with Mitsui Mining & Smelting Co., Ltd. The
joint venture is expected to contribute to integration effects of¥1.5 billion annually at both companies by implementing abroad range of business cooperation from materials procurement
to product distribution, sales, and technology development. As
part of this cooperation, in July 2003 we integrated productionof zinc alloy for galvanizing.
Recycling from Iron Scrap
As zinc is used as a surface treatment material on steel sheets toprevent rust, large amounts of zinc are contained in the electricarc furnace (EAF) dust produced when iron scraps are recycled
to make steel. At our Shisaka plant, we process this EAF dust
from steel production to recover and recycle the zinc. As part ofour business cooperation, we aim to enhance the operating rateof the Shisaka Plant by promoting the transfer of a portion of theEAF dust from Mitsui Mining & Smelting.

Zinc Price (LME)

$/toz

$/t

400

1,000

350
800
300

600
250

0

4

7

10

14 Review of Operations

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Review of Operations:Electronics Materials and Advanced Materials
Results for Fiscal Year 2002
In the first half of fiscal year 2002, there was temporary briskness in the global semiconductor markets, particularly in Asia,and net sales in this business segment increased 19.8% (¥21.9
billion) over the previous term, to ¥132.9 billion.
Electronics materials sales increased, supported by increased
exports of bonding wire and electric paste to Taiwan and by therecovery in demand for crystal materials. Advanced Materials
sales also increased overall, driven by completion of user inventory adjustments and by recovery in electronic device-related
demand for metal powders and copper-clad polyimide films. Net
sales at subsidiaries also increased overall, as the domestic andAsian package material-related business and electronic partrelated business similarly saw a revival in sales.
On the back of the recovery in net sales, operating income
recovered sharply to ¥4.1 billion, from a ¥4.4 billion loss in theprevious term.

Basic Business Strategy
1) Executing the Mid-term Management Plan
Under our Mid-term Management Plan we aim to further reinforce our business structure by positioning the Electronics
Materials and Advanced Materials segment as a core businessand applying to them the “select and focus” strategy.
In the Electronics Materials business, we are concentrating on
areas that make the most of the material technologies in which
we specialize. Specifically, we are reinforcing the areas of electric paste, a material used in chip components such as resistors
and multilayer ceramic capacitors, and bonding wire, which isused to connect semiconductor chips to external leads. In the
Advanced Materials business, the key areas are copper-cladpolyimide films for liquid crystal drivers and metal powders
such as nickel powder for multilayer ceramic capacitors.
In April 2002, we spun off our IC packaging materials business, which included lead frames and tape materials, and established Sumitomo Metal Mining Package Materials Co., Ltd. We
have built a system in which the new company is comprehensively responsible for operations at eight domestic and overseas
production sites.
In addition, we are promoting a transition to a business structure with less vulnerability to changes in environments. As aresult of preferential treatment we offered employees taking early
retirement in 2002, the number of employees in the Electronics
Materials segment was reduced by 130, or 20%.

Net Sales by ProductBillions of yen

Billions of yen

200

12

150

9

100

6

50

3

0

'99

'00

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Years ended March 31
Electronics Materials(left)

Packaging materials
Electronics materials

Advanced Materials(right)Functional materials
Battery materials
Powder materials
Magnet materials
OthersCircuit board materials

Crystal materials
OthersPWB

Packaging Materials (Lead frame, Tape materials etc.)
Crystal Materials (GaP, Faraday Rotator, Optical Isolator etc.)
PWB (Printed Wiring Board etc.)
Electronics Materials (Bonding wire, Nickel paste etc.)
Powder Materials (Metal power etc.)
Note : Net sales of electronics materials include in-house transactions.

cally positioning our Shanghai production site. In lead frames, inaddition to the business we are already developing in Chengdu,
Sichuan, we are building a new plant in Suzhou, Jiangsu, as our
second production site in China. It is scheduled to start operations in 2004.
In research and development, we are endeavoring to restructure our R&D system for the most efficient development of thenext generation of new products. In addition to building a system
whose highest priority is to meet customer needs, we aim fortimely and speedy achievements from development by focusing
projects on core technologies such as fine powder technology
and surface treatment technology.

2) Key Strategies
Our key strategies going forward are development of operationsin China and research and development.
Based on the rapid growth in IT-related markets in China, weare developing China strategies for each of our businesses. In
bonding wire, we are reinforcing our production site in Malaysia
and considering adding a production line in China. In electric
paste, we are targeting a large market share in China by strategi-

Review of Operations 15

SMM's Worldwide Production Facilities for Electronics Materials and Advanced Materials
Electronics Materials
Advanced Materials

Kunitomi District Div.
Crystal materials,
Magnet materials

SMM Precision Co., Ltd.
Optical components
Ajimu Electronics
Co., Ltd.
Solder plating of IC

SMM KOREA Co., Ltd.
Circuit board materials etc.

Shinko Co., Ltd.
Printed Wiring Board

Sumiko Electronics Suzhou Co., Ltd.
Lead frame – under construction

Electronics Division
Bonding wire, Paste,
Crystal materials, etc.

Shanghai Sumiko Electronic Paste Co., Ltd.
Paste

Sumitomo Metal Mining
Package Materials Co., Ltd.
Lead frame, Tape materials

Sumiko Leadframe Chengdu Co.,Ltd.
Lead frame

Isoura Plant
Metal powder, Circuit board materials,
Battery materials, etc.
Niihama Electronics Co., Ltd.
Lead frame
Ohkuchi Electronics Co., Ltd.
Lead frame, Tape materials,
Bonding wire, Recovery andrecycling of precious metals

Sumiko Leadframe (Thailand) Co., Ltd.
Lead frame

Sumiko Electronics Taiwan Co., Ltd.
Lead frame
Taiwan Sumiko Materials Co., Ltd.
Bonding wire

P.T.SUMIKO LEADFRAME BINTAN Lead frame
Sumitomo Metal Mining Asia Pacific Pte. Ltd.
(Regional Headquarters of overseas lead frame operations)
Sumiko Leadframe Singapore Pte. Ltd. Lead frame
SMMEP Pte. Ltd. TV frame
M-SMM Electronics SDN. BHD. Lead frame
Malaysian Electronics Materials SDN. BHD. Bonding wire, Paste

16 Review of Operations

SMM USA, Inc.
TV frameStrategy for Electronics Materials BusinessElectric Paste
Electric paste is used in chip components such as conductive
materials, resistors, and protective film for circuits that are
installed in a wide variety of electronic equipment, including
mobile phones, personal computers, and home electric appliances. Among our various electric pastes, the nickel paste formultilayer ceramic capacitors that we developed ahead of therest of the industry has been especially well received by the market and has secured a high global share. To respond to worldwide growth in demand for mobile phones and other electronicequipment, we reinforced our production line for this product in2001. We are also promoting business in China where we expect
demand to expand quickly using our Shanghai sales and production site established in 1996 as a strategic base.

Electric Paste

Bonding Wire
Bonding wire is used to connect the electrodes of semiconductor
chips to lead frames. In high-density ICs, gold wire is generally
used because of its superior workability and conductivity.
While taking advantage of our ability to procure gold in-house,in addition to lowering costs by reducing the gold usage withfine processing, we are achieving the high level of strength in
the high pin and narrow pitch bonding requirements.
While the market for bonding wire is expected to maintain anannual growth rate of around 10%, prices are likely to fall due tothe impact of worldwide price competition. To reinforce ourcost competitiveness, we are transferring domestic production to
Malaysia and will increase production capacity there by 1.6
times in fiscal year 2004, compared with fiscal year 2002. To
achieve a top global market share, we are also considering building a new production line in China.

Bonding Wire

Lead Frames
Lead frames are metal frames that form the external leads forsemiconductor devices such as ICs and transistors. Our IC packaging materials, including lead frames and tape materials, boast
a top share of 12% of the global market. In April 2002, we spunoff our IC packaging materials business and established
Sumitomo Metal Mining Package Materials Co., Ltd. We haveestablished a system in which the new company is comprehensively responsible for operations at eight domestic and overseas
production sites.

In China in particular, with a tripling of the market expected inrecent years, semiconductor assembly-related businesses have,one after the other, advanced into Shanghai and other parts ofthe Huadong region. To handle this demand, we are building oursecond production site in China in Suzhou, Jiangsu, which isnear Shanghai. While it is scheduled to start operations in fiscal
year 2004, we plan to gradually build an integrated production
system that will include plating and stamping facilities byinvesting a total of ¥3.6 billion by fiscal year 2007.

Review of Operations 17

Strategy for
Advanced Materials Business
Copper-clad Polyimide Film
Copper-clad polyimide film is a flexible board material. As
telecommunications devices have become smaller and offered
more functions, the chip-on-film (COF) method, which uses
copper-clad polyimide film, has become standard for the LCD
driver IC packaging in mobile phones. Recently, the transition
to the COF method has also extended to the large thin film transistors (TFTs) used in notebook computers and monitors, resulting in a rapid growth in demand for copper-clad polyimide film.
SMM’s share of the market for COF copper-clad polyimide
film used in large TFTs already exceeds 90% worldwide. In
order to handle the rapid growth in orders, in fiscal year 2003
we plan to invest ¥1.0 billion to build a new production line in
the Isoura Plant, which will double production capacity from thefiscal year 2002 level, to 1.2 million square meters.

Nickel Powder
Nickel powder is used for the internal electrodes of multilayer
ceramic capacitors (MLCCs), which are indispensable in all
types of electronic equipment. Although MLCCs formerly usedpalladium and other precious metals, they were replaced bynickel as precious metal prices soared. Nickel powder is the raw
material for nickel paste, one of our electronics materials, andwe take advantage of our integrated production system that covers everything from raw nickel material to paste. Our nickel
paste has been well received by the market and is used by mostof the world’s MLCC manufacturers.
We aim to expand our market share in this area by introducing
new highly functional products.

Battery Materials
Our materials for batteries include nickel hydroxide for nickelhydrogen batteries and lithium cobaltate and lithium nickel oxide

Nickel Hydroxide

18 Review of Operations

Copper-clad Polyimide Filmfor lithium batteries. Both nickel hydrogen and lithium batteries
are so-called rechargeable batteries. SMM products are used forthe positive electrodes of these batteries. Our strength lies in theability to respond to customer needs through quality products andan integrated production system from raw materials.
Our nickel hydroxide was adopted in batteries for the HybridElectric Vehicle (HEV) of Toyota Motor Corporation and sales
are expanding substantially. We aim to secure orders of thisproduct in tandem with Toyota’s plan to increase HEV production to 300,000 vehicles by fiscal year 2005, seven times production volume in fiscal year 2001.
Our lithium nickel oxide was also adopted in the world’s firstvehicle equipped with light-weight and high-volume lithium
rechargeable batteries. We will be engaged in developing highly
functional lithium batteries to meet expected growth in demandfor vehicle and mobile phone applications.

Magnet Materials
Samarium Ferrous Nitrogen (Sm-Fe-N) is a functional magnet
material that we developed and for which we started full-fledged
sales in the domestic market in fiscal year 2000. Applications of
Sm-Fe-N are expanding for light and small-sized devices due toits stronger magnetism compared with other magnets of thesame weight. We are increasing sales volume of the product as
its properties are widely known.
Applications of Sm-Fe-N will be further broadened when it isused for flexible magnets (rubber magnets) and compoundedwith ferrite magnets. We will focus on developing new markets
for the product, and specifically aim to enter the automotive
industry by enhancing its heat resistance. In conjunction with theincrease in sales of this product, we will reinforce capacity at
our production base, the Kunitomi District Division, where wecurrently have annual production capacity of one hundred
tonnes.
In addition to this, demand for small-size molded magnets for
digital camera shutters is expanding and the products will also
be applied for camera shutters of mobile phone. We will expand
sales in this area based on our superior small-size molding technologies.

Review of Operations:

Environmental Business
Basic Business Strategy
Our “Mid-term Management Plan” positions our environmental
business as an area of concentration. Worth an estimated ¥30 trillion, the domestic environmental market is expected to expand
going forward. As many types of businesses enter it one after theother, however, competition is becoming increasingly harsh.
We are securing a superior position by focusing on environmental businesses that take full advantage of our strengths. These
include the recycling business centered on recovering valuable
metals and the environmental improvement business such as soil
and groundwater contamination where we leverage the wealth oftechnology we have developed through our mineral resources andmetallurgy businesses.

Recycling Business
The recycling business recovers zinc from electric arc furnace(EAF) dust, copper and nickel from the effluent in the platingprocess, and precious metals from electronics materials scrap.
In addition, our subsidiary Nippon Catalyst Cycle Co., Ltd.
recovers valuable metals such as molybdenum and vanadiumfrom the used desulfured catalyst generated when oil is refined.
In fiscal year 2003, we increased annual processing capacity from12,000 tonnes to 15,000 tonnes, thereby securing processing
capacity equivalent to approximately 50% of the desulfured catalyst disposed of domestically.

Environmental Improvement Business
Our environmental improvement business is pursued by groupcompanies under the centralized control of our Energy &Environment Business Division, in collaboration with our
research laboratories. These group companies include Sumicon
Certech Co., Ltd., providing environmental assessment and remediation services for soil and groundwater contamination; SumikoEco-engineering Co., Ltd., involved in environment-related engineering for electronic dust collectors and fuel-gas treatment
equipment and corrosion prevention for harbor facilities; Sumiko
Techno-Research Co., Ltd., focusing on environmental research
and analysis; and Japan Irradiation Service Co., Ltd., working inradiation processing for sterilization of food packaging materials
and medical devices and for use in modification of industrial
materials.
Also, using our catalyst technology, we developed technology
for making the high concentration of nitrate in plant effluents
harmless. The technology is now commercialized as “N-Free,”our processing equipment for removing highly concentrated
nitrate. We have also established technology for treating municipal incinerator fly ash, which is also used by our existing product“SFAT (Sumitomo Fly Ash Treatment).” Orders for both promise
to expand going forward.

Oil-Contaminated Soil Cleaning Equipment

Environmental Improvement Businesses in the SMM Group
Division, Company NameBusiness Content

Energy & Environment
Business Division (SMM)

Coordination of divisions, related companies; SFAT/N-Free businesses; Development of other new businesses

Sumicon Certech Co., Ltd.

Environmental assessment, remediation services for soil, groundwater contamination; Environmental remediation equipment sales

Sumiko Techno-Research Co., Ltd.

Environmental assessment and research for ground, air, water; Research and analysis for metal etc.

Sumiko Eco-engineering Co., Ltd.

Environment-related engineering (electrostatic precipitator, exhaust gas treatment, deodorizer and water treatment system);
Corrosion control for harbor steel structures, industrial facilities on land, and underground pipelines

Japan Irradiation Service Co., Ltd.

Radiation processing for sterilization of food packaging materials and medical devices as well as for use in modification of industrial materials

Review of Operations 19

Topi cs
■ Launch of New “N-Free” Processing Equipment for Removing Highly Concentrated Nitrate

The nitrogen contained in effluents from factories causes eutrophication in oceans and lakes and is a serious cause of water pollution.
In 2001, a revised ministerial ordinance related to the Water
Pollution Control Law was enforced, in which nitrate nitrogen wasadded to the effluent standards as a toxic substance. Furthermore,in April 2004, the regulation of total emissions is scheduled to be
enforced for three enclosed water areas in Japan. Under these circumstances, there is a pressing need to reduce nitrogen contained in
the effluents at factories.
In September 2002, SMM entered the nitrate removal business bylaunching processing equipment under the product name “N-Free.”
The N-Free process, based on our catalyst technology, reduces
nitrate/nitrite nitrogen into harmless nitrogen gas.

“N-Free” Processing Equipment

20 Review of Operations

The conventional type of this equipment does not work well if
concentration of the nitrate exceeds 1000mg/liter. N-Free, however,can process the nitrate regardless of the degree of concentration
thanks to the new catalyst technology for denitrification used in NFree.
We offer the N-Free process/equipment together with our groupcompanies Sumiko Techno-Research Co., Ltd. (environmental
research and analysis) and Sumiko Eco-engineering Co., Ltd.
(environment-related engineering).

Catalyst for “N-Free”

Financial Section:

Management’s Discussion and Analysis
Financial Analysis
In addition to itself, the businesses of Sumitomo Metal Mining
Co., Ltd. (SMM) include 65 subsidiaries and 14 affiliated companies. The three core segments of operations are:
1. Mineral resources, which mines gold, silver, copper;
2. Metallurgy, which consists of the smelting business, centeredon gold, copper, nickel, and zinc and the metal processing
business, which manufactures copper elongation products;
and
3. Electronics Materials and Advanced Materials, whose electronics materials business manufactures electronic components such as IC packaging materials, crystal materials, andprinted circuit boards and whose advanced materials business
manufactures nickel, palladium, and other metal powders andbattery and magnetic materials.
The two peripheral segments are Construction Materials &Housing, which manufactures Siporex (autoclaved lightweight
concrete, ALC) and builds residential housing, and the Others
segment, which runs a nuclear power engineering business.
This Annual Report presents the consolidated results of theCompany, 39 domestic and overseas consolidated subsidiaries,and six affiliates accounted for by the equity method.

Consolidated Statements of Income
Net Sales
Net sales in fiscal year 2002 (from April 1, 2002 to March 31,2003) increased ¥25,048 million (7.6%) from the previous fiscal
year to ¥355,242 million (US$2,955 million). The Metallurgy
segment accounted for 63.7% of net sales.
In fiscal year 2002, although both demand and prices werefavorable for nickel and gold, copper prices remained weakdespite a recovery trend in domestic demand. Meanwhile, theyen maintained modest strength due to the U.S. economic slowdown.
As a result, Metallurgy segment sales increased, supported by
the increases in nickel prices and sales volume which partly

resulted from the recovery in semiconductor-related electronics
materials demand. Although IT-related demand failed to recover fully, Electronics Materials and Advanced Materials sales
also increased, supported by general growth in the sales volumeof its mainstay products in response to the temporary rally in thefirst half after the previous fiscal year’s global IT slump ended.
Cost and Expenses
Cost of sales in fiscal year 2002 increased ¥11,436 million(3.9%) from the previous fiscal year to ¥303,478 million(US$2,525 million). The gross margin increased from 11.6% to14.6%.
Sales, general, and administrative (SGA) expenses decreased¥1,834 million from the previous fiscal year to ¥35,171 million(US$293 million).
This is mainly attributable to a ¥1,434 million (12.4%)
decrease to ¥10,177 million in sales, transportation and overhead
expenses, which accounted for 28.9% of SGA expenses.
Operating Income
Operating income surged by approximately 14 times, from
¥1,147 million in the previous fiscal year to ¥16,593 million(US$138 million) in fiscal year 2002, due to profit growth in all
three core segments.
The Mineral Resources segment increased a sharp 220.0%
from the previous fiscal year, recovering to the fiscal year 2000
level, supported by the Hishikari Gold Mine’s profit growth that
resulted from higher gold prices. The Metallurgy segment
improved sharply from the previous fiscal year’s slump, by
135.7%, due to the higher overseas market prices and sales volume of nickel. The Electronics Materials and Advanced
Materials segment recovered to profitability from the previous
fiscal year’s loss, supported by the strong profit growth at theCompany and most subsidiaries that resulted from sales recovery and by cost-cutting effects.

Net Sales

Gross Profit

Billions of yen

Billions of yen

%

500

80

20
41.2

350.3

360.3

375.4

330.2

45.1

63.4

38.2

51.8

355.2
16.9

400
60

14.6
11.8

300

12.5

15

11.6

40

10

20

5

200

100

0

'99

Years ended March 31

'00

'01

'02

'03

0

'99

'00

'01

'02

'03

0

Years ended March 31
Gross Margin (right)

Financial Section 21

Other Income (Expenses)
In other income (expenses) in fiscal year 2002, the deficit
amount grew by ¥10,363 million (75.4%), resulting in a loss of¥24,098 million (US$200 million). This is attributable to several factors. Positive factors include an increase in equity in earnings of unconsolidated subsidiaries and affiliated companies of¥1,865 million (121.5%) from the previous fiscal year to ¥3,400
million (US$28 million) and a decrease in expenses related to
the realignment of operations from ¥3,434 million in the previous fiscal year to ¥225 million (US$2 million) in fiscal year
2002. Negative factors include a sharp increase in write-downsof investment securities from ¥8,431 million (US$70 million) in
the previous fiscal year to ¥17,247 million (US$143 million) in
fiscal year 2002, a loss on sale and disposal of property, plant,
and equipment of ¥766 million (US$6 million) in fiscal year
2002 versus a gain of ¥3,370 million (US$28 million) in the previous fiscal year, and a ¥3,613 million (US$30 million) expenses related to the restructuring charges.
Tax-effect accounting has been applied since fiscal year 1999,
and a negative tax adjustment of ¥6,755 million (US$56 million) was posted. Net financial expenses improved by ¥316 million, from ¥1,775 million (US$15 million) in the previous fiscal
year to ¥1,459 million (US$12 million).

affect per share data for fiscal year 2002.

Net Income (Loss)
In fiscal year 2002, the SMM Group posted a net loss of ¥1,172
million (US$10 million), despite a substantial improvement of¥5,439 million (US$45 million) compared with the previous fiscal year’s ¥6,611 million (US$55 million) net loss.
Net loss per share in fiscal year 2002 was ¥2.05 (US$0.02),
compared with net loss of ¥11.56 (US$0.10) in the previous fiscal year. From fiscal year 2002, we are applying “AccountingStandard for Earnings Per Share” (Accounting Standards Board
Statement No. 2) and “Implementation Guidance for AccountingStandard for Earnings Per Share” (Financial Standards
Implementation Guidance No. 4). However, this does not

Mineral Resources
Net sales in this segment increased ¥1,380 million (5.9%) fromthe previous fiscal year to ¥24,672 million (US$205 million).
This is attributable to the increase in sales resulting from thesales volume growth and the effect of the complete switchoverin fiscal year 2002 by Sumitomo Metal Mining Arizona, Inc. tosales of copper metal produced by the SX-EW process (solvent
extraction/electrowinning, a low-cost wet refining method)
despite the decrease in sales that resulted from Sumiko
Development and Construction Co., Ltd.’s withdrawal from theurban civil engineering business in the previous fiscal year. The
sales growth at SMM’s Hishikari Mine that resulted from higher

Oparating Income

Net Income (Loss)

Billions of yen

30

0.9

9.0

26.9

1.1

16.6

Impact of Exchange Rate Fluctuations
Profit of non-ferrous metal operations is closely linked to foreign exchange rates, which affect the entire process, from procurement of ores to the sales of finished products. In general, aweak yen is a positive factor for SMM’s earnings on a net basis.
Although a weak yen has the disadvantage of making ore procurement prices higher for SMM, it also leads to higher finishedproduct prices and an increase of smelting margins which areusually denominated in U.S. dollars. Despite temporary weakness in the first half, the yen was strong on average during fiscal
year 2002. The average exchange rate was ¥121.94 to the U.S.
dollar in fiscal year 2002, compared with ¥125.13 in the previous fiscal year.
A weakening of the Japanese currency by one yen against the
U.S. dollar therefore adds ¥300 million to non-consolidated
gross profit, operating income, and recurring profit.
Results by Business Segment
The following sections are based on segment data. Net sales
and operating income for each area include inter-segment transactions.

%

Billions of yen

7.5

20

7.2

-12.5

4.7

15.1

-6.6

-1.2

'99

'00

'01

'02

'03

15
10
5.0

20
4.7

5
0

2.5

10

2.5

-5
-10

0.3

0.2
0

'99
'00
Years ended March 31
Operating Margin (right)

22 Financial Section

'01

'02

'03

0.0

-15

Years ended March 31

gold prices also contributed.
Operating income increased ¥1,844 million (220.0%) from theprevious fiscal year to ¥2,682 million (US$22 million). This is
attributable to various factors. On the negative side was theconsolidation for the first time of SMM Pogo LLC, which is stillin the preparatory stage of mine development. On the positive
were the profit growth at Hishikari Mine resulting from sales
growth and sharp improvement in profit at Sumitomo Metal
Mining Arizona, Inc. resulting from cost-cutting and sales volume growth despite continued weakness in copper prices.
Metallurgy
Net sales in this segment increased ¥29,160 million (14.8%)
from the previous term to ¥226,343 million (US$1,883 million).
This is mainly attributable to price increases in overseas nickel
market, the sales volume growth that resulted from the continued strength of nickel for stainless and other special steels, andthe recovery in nickel for semiconductor-related electronics
materials. The increase in sales that resulted from higher overseas market prices for gold also contributed.
Operating income increased ¥4,793 million (135.7%) from theprevious fiscal year to ¥8,326 million (US$69 million). In addition to the profit growth from increased nickel sales, this is
attributable to Sumitomo Metal Mining Brass & Copper Co.,
Ltd.’s profit growth resulting from the recovery in semiconductor and IT-related demand and from strength in the automobilerelated area and to profit growth resulting from cost-cutting.
Electronics Materials and Advanced Materials
Net sales in this segment increased ¥21,938 million (19.8%)
from the previous fiscal year to ¥132,923 million (US$1,106
million). This increase represents a recovery equivalent to morethan 60% of the previous fiscal year’s sales decline due to thetemporary rally in the first half of fiscal year 2002 in global
semiconductor markets, mainly in Asia.
Overall sales of SMM’s main electronics materials products

expanded due to the sales volume growth that resulted fromincreased exports of bonding wire and pastes, mainly to Taiwan,
and from the recovery in markets for crystal materials. At thesame time, overall sales of advanced materials products such as
metal powders and copper-clad polyimide film expanded, supported by the completion of user inventory adjustment andrecovery in electronic device-related markets. Sales at subsidiaries also increased on the whole, as sales volumes atdomestic and Asian packaging material-related and electronic
component-related businesses rallied.
Operating income recovered from a ¥4,388 million loss in theprevious fiscal year to a ¥4,118 million (US$34 million) profit
in fiscal year 2002, supported by the large growth in profit at theCompany and most subsidiaries that resulted from these net
sales recoveries.
Construction Materials & Housing
Net sales in this segment decreased ¥4,875 million (22.6%)
from the previous term to ¥16,741 million (US$139 million).
This is partly attributable to the lower sales at Sumitomo Metal
Mining Siporex Co., Ltd. and Sumiko Tatsumi Construction
Materials Co., Ltd. that resulted from the general slump in theconstruction industry. The completion of Igeta Heim Co., Ltd.’sbusiness reduction plan in fiscal year 2002 was an additional
factor.
The segment posted an operating loss of ¥352 million (US$3
million) due to unfavorable business environment, resulting in a
¥86 million deterioration from the previous fiscal year despite
efforts to cut fixed costs.
Capital Expenditures and Depreciation
Capital expenditures in fiscal year 2002 totaled ¥18,927 million(US$157 million). The Electronics Materials and Advanced
Materials segment accounted for ¥9,506 million (50.2%) of thisand the Metallurgy segment for ¥5,005 million (26.4%). Major
construction completed during the year under review includes
Capital Expenditures and Depreciation

Yen-Dollar Exchange Rate (Year-End)
Yen / Dollar

Billions of yen

140

40
32.5
133.25

23.1

20.5

28.1

16.6

16.8

25.4

18.9

17.8

18.3

130
30
123.90120

120.55120.2020

110106.15
10
100

0

'99

Years ended March 31

'00

'01

'02

'03

0

'99

'00

'01

'02

'03

Years ended March 31
Capital Expenditures

Depreciation

Financial Section 23

Millions of yen
As of March 31

2001

2002

2003

Short-term Interest-bearing debt due within one year .................................................. ¥ 78,329 (16.6) ¥ 93,105 (17.9) ¥ 93,159 (17.6)
76,470 (16.2)
Long-term Interest-bearing debt due after one year .....................................................
83,839 (15.8)
73,972 (14.3)
Total Shareholders’ equity ............................................................................................ 223,341 (47.4) 236,313 (45.6) 237,470 (44.8)
Total assets .................................................................................................................... ¥470,774 (100.0) ¥518,756 (100.0) ¥530,080 (100.0)( ): Percentage to total assets

Financial Position
Total assets as of March 31, 2003 stood at ¥470,774 million(US$3,917 million), down ¥47,982 million (9.2%) from the endof the previous fiscal year. Current assets fell ¥13,822 million(7.4%) to ¥173.226 million. This is mainly attributable to a
¥9,076 million decrease in cash and cash equivalents and time

deposits and to a ¥9,696 decrease in inventories.
Net property, plant and equipment stood at ¥169,373 million(US$1,409 million), down ¥10,168 million from the end of theprevious fiscal year, due to a ¥7,722 million decrease in machinery and equipment.
Investments and long-term receivables stood at ¥122,600 million (US$1,020 million), down ¥24,957 million. This is mainly
attributable to a ¥31,033 million decrease in investment securities despite an ¥8,519 million increase in deferred tax assets.
Meanwhile, current liabilities stood at ¥137,281 million(US$1,142 million), down ¥26,396 million (16.1%) from theend of the previous fiscal year. This is mainly attributable to a
¥12,000 million decrease in corporate bonds due within one
year, a ¥6,427 million decrease in employees’ deposits, and a¥5,776 million decrease in bank loans. As a result, the working
capital ratio increased from 1.14 in the previous fiscal year to
1.26 times.
Long-term debts due after one year stood at ¥76,470 million(US$636 million), up ¥2,498 million (3.4%) from the end of theprevious fiscal year, due to appropriations for bond redemption
and capital expenditures. As a result, total liabilities excluding
minority interests stood at ¥241,436 million (US$2,009 million),
down ¥34,568 million.
Total shareholders’ equity stood at ¥223,341 million(US$1,858 million), down ¥12,972 (5.5%) from the end of theprevious fiscal year. This is attributable to a ¥4,561 million
decrease in net unrealized holding gain on available-for-sale

Shareholders’ Equity

Long-Term Debt Due After One Year

expansion and renovation of production facilities for copperclad polyimide film in the Electronics Materials and Advanced
Materials segment and the expansion, renovation, and rationalization of copper smelting facilities in the Metallurgy segment.
Depreciation increased ¥461 million (2.6%) to ¥18,283 million (US$152 million).
Research and Development Expenses
Research and Development expenses in fiscal year 2002 totaled¥3,763 million (US$31 million). By segment, the Mineral
Resources segment is developing concentration process of nonferrous raw material ores and various leaching technologies.
The Metallurgy segment is mainly developing non-ferrous
smelting and electrolysis technologies. The Electronics
Materials and Advanced Materials segment is developing electronic material technologies, concentrating on new semiconductor packaging materials. The Construction Materials & Housing
segment is developing new product processing technologies andnew products such as long-lasting Siporex.

Financial Position and Liquidity

Billions of yen 226.8

235.2

237.5

236.3

223.3

250

Billions of yen

125

124.5

107.3

83.8

74.0

76.5

Times

1.0

0.92
0.84

200

100

0.75

0.8
0.71

0.69

150

75

0.6

100

50

0.4

50

25

0.2

0

'99

Years ended March 31

24 Financial Section

'00

'01

'02

'03

0

'99

'00

Years ended March 31
Debt to Equity Ratio (right)

'01

'02

'03

0.0

securities and to a ¥4,372 million decrease in foreign currencytranslation adjustment. However, because liabilities decreased ina larger amount than shareholders’ equity, the equity ratio rosefrom 45.6% in the previous fiscal year to 47.4%.
Consolidated Statement of Cash Flows
Cash and cash equivalents, including the effect of foreignexchange rate fluctuations, stood at ¥13,581 million (US$113
million) at the end of the fiscal year 2002, down ¥9,182 million(40.3%) from the beginning of the year.
Net cash flows from operating activities in fiscal year 2002
decreased ¥7,265 million from the previous fiscal year to¥26,105 million. This is attributable to an increase in payments
consisting mainly of a ¥12,749 million increase from the previous fiscal year in trade receivables and ¥7,018 million decrease
from the previous fiscal year in trade payables, despite theincrease due to the sharp increase in consolidated operating
income compared with the previous fiscal year.
Net cash flows from investing activities saw outflows totaling¥21,246 million, a ¥5,000 million increase from the previous
fiscal year. This is mainly attributable to the decrease in proceeds from sale of investment securities (¥2,222 million) and to
the decrease in collection of loans receivable (¥4,246 million).
Net cash flows from financing activities saw outflows totaling¥14,163 million, basically the same as the previous fiscal year’slevel, because the increase in payments resulting from thereduction of bank loans (¥5,586 million) and from the increasein bond redemptions (¥4,000 million) was basically the sameamount as the increase in earnings resulting from the commercial paper issuance (¥5,500 million) and from the increase inlong-term debts (¥3,378 million).
As a result of the above, including the effect of foreignexchange rate fluctuations and consolidated subsidiary changes,
the year-end balance of cash and cash equivalents was ¥13,581
million, down ¥9,182 million from the beginning of the year.

Risk Management
SMM’s operations are exposed to various risks, including fluctuations in metal prices, foreign exchange rates, and interest
rates. SMM engages in derivatives transactions as an efficientmeans of hedging these risks. In commodities, forward contracts are used to hedge metal price fluctuations, forward contracts to hedge foreign exchange rate fluctuations, and interest
rate swaps are used to hedge interest rate fluctuations. Strictly
within the limits dictated by real demand in production and sales
activities and by payables and receivables, our derivatives transactions are never for speculative purposes.
Reflecting on the critical accident at JCO Co., Ltd., we are
acutely aware of the importance of risk management and in July
2000 we established a Risk Management Committee as a central
mechanism for identifying and managing risk. Subsequently,
we have been studying systems for identifying and managing
risk throughout the Group. In August 2001, we launched a risk
management system, of which ensuring strict compliance is oneof key elements.
At the same time, we are going back to the basics in manufacturing and taking a fresh look at safety and environmental
issues. As part of these initiatives, we aim to build an environmental management system, whose importance will continue togrow, by implementing the ISO 14000 series of standards
throughout the Group.
Per Share Data
From fiscal year 2002, we are applying “Accounting Standards
Board Statement No. 2 Accounting Standard for Earnings Per
Share” (September 25, 2002) and “Financial Standards
Implementation Guidance No. 4 Implementation Guidance for
Accounting Standard for Earnings Per Share” (September 25,2002). This change does not affect the consolidated financial
statements.

Net Cash Provided by Operating Activities
Billions of yen

40
22.9

-0.8

23.3

33.4

26.1

'99

'00

'01

'02

'03

30

20

10

0

-10

Years ended March 31

Financial Section 25

Eleven-Year Summary
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIES

Years ended March 31

Net sales .................................................................................
Gross profit .............................................................................
Operating income ...................................................................
Other income (expense) ..........................................................
Net income (loss) ....................................................................
Net income (loss) per share (¥) ..............................................
Dividends per share (¥) ..........................................................
Return on average shareholders’ equity (%) ..........................
Net cash provided by (used in) operating activities ...............
Capital expenditures ...............................................................
Depreciation ...........................................................................

2003

2002

2001

2000

¥355,242
51,764
16,593(24,098)(1,172)(2.05)
5.00—
26,10518,92718,283¥330,194
38,152
1,147(13,735)(6,611)(11.56)
4.00—
33,37025,37917,822¥375,352
63,372
26,930(11,359)
15,103
26.41
6.00
6.39
23,33928,078
16,774¥360,299
45,061
8,990(4,342)
4,740
8.29
5.00
2.05
(800)
20,49016,611¥470,774
223,34147.4
76,470154,799
0.69
35,9451.26¥518,756
236,31345.6
73,972167,077
0.71
23,371
1.14¥530,080
237,470
44.8
83,839176,998
0.75
33,2591.20¥544,121
235,23143.2
107,266
197,6240.84
38,9101.23

For the Year:

Total assets .............................................................................
Shareholders’ equity ...............................................................
Equity ratio (%) ......................................................................
Long-term debt due after one year .........................................
Total debt ................................................................................
Debt to equity ratio (times) ....................................................
Working capital ......................................................................
Working capital ratio (times) .................................................
Note: “N/A” indicates that figures have not been disclosed.

26 Financial Section

Millions of yen

1999

1998

1997

1996

1995

1994

1993

¥350,288
41,190858(12,932)(12,495)(21.85)
3.00—
22,91232,49923,095¥431,950
62,641
24,622(3,605)
10,157
17.77
6.00
4.22
43,05627,96821,638¥525,076
57,836
21,665(4,294)
12,884
22.65
6.00
5.56
43,13524,73020,702¥511,887
55,904
19,947(7,553)
10,683
19.18
6.00
4.95
6,100
25,722
19,889¥464,843
40,2625,169(2,384)
1,292
2.32
5.00
0.62
721
N/A
20,917¥446,712
28,914(3,934)
3,543
1,902
3.49
5.00
0.97
17,780N/A
20,522¥507,951
45,018
8,550
2,377
6,197
12.33
7.00
3.45
23,684
N/A
N/A¥544,519
226,795
41.7
124,535
207,8210.92
50,5181.31¥566,088
243,43643.0
82,356
201,5150.83
26,5291.13¥586,948
238,05640.6
117,021
224,736
0.94
62,7261.31¥624,419
225,29636.1
171,596285,871
1.27
104,854
1.53¥591,446
205,940
34.8
197,884
277,289
1.35
101,1101.63¥594,982
210,90235.4
228,255
281,073
1.33
131,6442.02¥616,672
179,926
29.2
221,926
321,131
1.78
105,878
1.58

Financial Section 27

Consolidated Balance Sheets
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIESASSETSAs of March 31, 2003 and 2002

Millions of yen

Thousands of
U.S. dollars(Note1)

2002

2003

2003

Current assets:
Cash and cash equivalents (Note 13) ............................................................................................... ¥ 13,581
448Time deposits ...................................................................................................................................
Receivables:
Notes and accounts receivable (Notes 6 and 13):57,513
Trade .........................................................................................................................................
2,135
Non-consolidated subsidiaries and affiliated companies ..........................................................
Loans and others:
5,770
Non-consolidated subsidiaries and affiliated companies ..........................................................
4,480
Other .........................................................................................................................................
(1,139)Allowance for doubtful accounts .................................................................................................
68,004Inventories (Note 5) .........................................................................................................................
7,035
Deferred tax assets (Note 7) ............................................................................................................
15,399Other current assets ..........................................................................................................................
Total current assets ................................................................................................................... 173,226¥ 22,763
342$

112,987
3,727

62,182360

478,478
17,762

3,274
5,821
(673)
77,7004,480
10,799187,048

48,00337,271(9,476)565,757
58,527
128,112
1,441,148

66,03542,169(1,369)64,83375,120(1,068)549,376
350,824(11,389)

303
825
3,408
(1,518)109,853

419
704
4,820
(1,499)143,329

2,521
6,864
28,352(12,629)
913,919

31,292
127,428
259,809
4,289
422,818
Accumulated depreciation ............................................................................................................... (253,445)
Net property, plant and equipment ........................................................................................... 169,373

32,243
130,421268,8902,680
434,234(254,693)
179,541

260,333
1,060,133
2,161,473
35,682
3,517,621(2,108,527)
1,409,094

12,7475,575¥ 470,774

4,228
4,610
¥ 518,756

106,048
46,381$ 3,916,590

Investments and long-term receivables:
Investment securities (Notes 3 and 6):
Non-consolidated subsidiaries and affiliated companies .............................................................
Other .............................................................................................................................................
Allowance for loss on investments ..................................................................................................
Loans:
Non-consolidated subsidiaries and affiliated companies .............................................................
Other .............................................................................................................................................
Other long-term receivables ............................................................................................................
Allowance for doubtful accounts .....................................................................................................

Property, plant and equipment (Note 6):
Land .................................................................................................................................................
Buildings and structures ..................................................................................................................
Machinery and equipment ...............................................................................................................
Construction in progress ..................................................................................................................

Deferred tax assets (Note 7) .............................................................................................................
Other assets .......................................................................................................................................
The accompanying notes are an integral part of those balance sheets.

28 Financial Section

LIABILITIES AND SHAREHOLDERS’ EQUITYAs of March 31, 2003 and 2002

Millions of yen

Thousands of
U.S. dollars(Note1)

2002

2003

¥ 62,684
30,421—$ 462,130
164,567
24,95828,338
1,791
4,828
1,048
4,460
884
25
29,198
163,677

225,815
11,09033,295
9,676
39,592
13,270599
157,113
1,142,105

2003

Current liabilities:
Bank loans (Note 6) ............................................................................................................................ ¥ 55,548
19,781Long-term debt due within one year (Note 6) ....................................................................................
3,000
Commercial paper ...............................................................................................................................
Notes and accounts payable (Note 13):
27,143
Trade ...............................................................................................................................................
1,333
Non-consolidated subsidiaries and affiliated companies ................................................................
4,002
Other ................................................................................................................................................
1,163
Accrued income taxes (Note 7) ...........................................................................................................
4,759
Accrued expenses ................................................................................................................................
1,595
Advances received ..............................................................................................................................
72
Deferred tax liabilities (Note 7) ..........................................................................................................
18,885
Other current liabilities .......................................................................................................................
Total current liabilities ................................................................................................................. 137,281

Long-term debt (Note 6) .....................................................................................................................
Deferred tax liabilities (Note 7) ..........................................................................................................
Accrued retirement benefits (Note 8) ................................................................................................
Accrued restructuring charges ..........................................................................................................
Accrued indemnification loss on damages caused by a consolidated subsidiary ..........................
Accrued liquidation loss of subsidiaries ............................................................................................
Accrued realignment loss of operations ............................................................................................
Other accruals .....................................................................................................................................
Other long-term liabilities ..................................................................................................................
Total long-term liabilities ..........................................................................................................

76,4701,237
14,605
936
1,068
2,793
—
449
6,597
104,155

73,972533
23,104
2,491
1,329
1,724
3,108
437
5,629
112,327

636,190
10,291
121,506
7,787
8,885
23,236—
3,735
54,884
866,514

Minority interest ..................................................................................................................................

5,997

6,439

49,89288,355
81,18464,183(2,217)(7,763)(401)
223,341¥470,774

88,355
81,18467,856
2,344(3,391)(35)
236,313¥518,756

735,067
675,408
533,968(18,444)(64,584)(3,336)
1,858,079$3,916,590

Contingent liabilities (Note 12)

Shareholders’ equity (Note 11):
Common stock
Authorized - 1,000,000,000 shares
Issued -571,872,794 shares ............................................................................................................
Capital Surplus ...................................................................................................................................
Retained earnings (Note 10) ...............................................................................................................
Net unrealized holding gain (loss) on available-for-sale securities ....................................................
Foreign currency translation adjustment .............................................................................................
Treasury stock, at cost .........................................................................................................................
Total shareholders’ equity ............................................................................................................

Financial Section 29

Consolidated Statements of Operations
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIES

Years ended March 31, 2003, 2002 and 2001

Millions of yen

Thousands of
U.S. dollars(Note1)

2003

2002

2001

2003

Net sales (Note 14) .......................................................................................................... ¥355,242
Costs and expenses (Note 14):
Cost of sales .................................................................................................................. 303,478
35,171
Selling, general and administrative (Note 9) .................................................................
338,649
16,593Operating income (Note 14) ..........................................................................................

¥330,194¥375,352$2,955,424

292,042
37,005
329,047
1,147

311,980
36,442
348,422
26,9302,524,775
292,604
2,817,379
138,045

1,074(2,533)
108(17,247)
—
(766)
—
1,845
—
(851)
(301)
(3,613)
(225)
—
(990)
(398)
(1,391)
—
(465)
—
—
49
3,400
(1,794)(24,098)

1,700(3,475)958(8,431)
(335)
3,370
—
—
(1,341)
(510)
(424)
(857)
(3,434)—(1,144)
(777)
—
(442)
—
—
—
129
1,535
(257)
(13,735)

2,241(4,370)5,867(3,415)
—
5,153
1,000
—
(1,045)(1,433)—(8,195)—(2,328)(1,621)————(5,858)
(665)
131
4,078
(899)
(11,359)

8,935(21,073)899(143,486)—(6,373)—
15,349—(7,080)(2,504)(30,058)(1,872)—(8,236)(3,311)(11,572)—(3,869)——408
28,286(14,926)(200,483)(7,505)(12,588)

15,571(62,438)329(6,755)(6,426)(1,079)437(5,968)(5,531)(7,057)

945
(694)
251
15,3202,737(56,198)(53,461)(8,977)(93)
Minority interests in net income (loss) of consolidated subsidiaries .........................
Net income (loss) ............................................................................................................ ¥ (1,172)446¥ (6,611)(217)¥ 15,103

Other income (expenses):
Interest and dividend income ........................................................................................
Interest expense .............................................................................................................
Gain on sale of investment securities ............................................................................
Write-down of investment securities .............................................................................
Write-down of subsidiary securities ..............................................................................
Gain (Loss) on sale and disposal of property, plant and equipment .............................
Gain on insurance ..........................................................................................................
Gain on securities contributed to employee retirement benefits trust ...........................
Loss on liquidation of subsidiaries ................................................................................
Provision for doubtful account ......................................................................................
Provision for loss on investments .................................................................................
Restructuring charges ....................................................................................................
Loss from realignment of operations .............................................................................
Loss from indemnification of damages caused by a consolidated subsidiary ..............
Loss from suspension of operating activity of a consolidated subsidiary .....................
Loss from disposal of inventories .................................................................................
Write-off of obsolete inventories ..................................................................................
Casualty loss ..................................................................................................................
Loss on sales of securities of an affiliated company .....................................................
Amortization of net transition obligation (Note 8) ........................................................
Loss on penalty for specific contracts of a consolidated subsidiary ..............................
Amortization of consolidation difference .....................................................................
Equity in earnings of affiliated companies ....................................................................
Other, net .......................................................................................................................

Income (Loss) before income taxes ..............................................................................
Income taxes (Note 7):
Current ...........................................................................................................................
Deferred .........................................................................................................................

Yen

Amounts per share of common stock:
Net income (loss) ........................................................................................................... ¥Cash dividends applicable to the year ............................................................................
The accompanying notes are an integral part of those statements.

30 Financial Section(2.05)
5.00¥ (11.56)
4.00

¥

26.41
6.00

$

(773)
(9,750)U.S. dollars(Note1)$(0.02)
0.04

Consolidated Statements of Shareholders’ Equity
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIES

Millions of yen
Years ended March 31, 2003, 2002 and 2001

Shares ofcommon stock Common
stock(thousands)

CapitalSurplusunrealized holding Foreign currency Treasury
Retained Net(loss) on available- translation
earnings gain
stock
for-sale securities
adjustments

Balance at March 31, 2000 .......................................... 571,873 ¥88,355 ¥81,184 ¥65,693
Net income .................................................................
15,103Adjustments from translation offoreign currency financial statements ....................
Adoption of new accounting standard forfinancial instruments ..............................................
Treasury stock ............................................................
Cash dividends paid (¥5.00 per share) .......................
(2,859)Balance at March 31, 2001 .......................................... 571,873 88,355 81,184 77,937
Decrease due to change inconsolidation of subsidiaries ..................................
(39)
Net income .................................................................
(6,611)
Adjustments from translation offoreign currency financial statements ....................
Adoption of new accounting standard forfinancial instruments ..............................................
Treasury stock ............................................................
Cash dividends paid (¥6.00 per share) .......................
(3,431)
Balance at March 31, 2002 .......................................... 571,873 88,355 81,184 67,856
Increase due to merger of
non-consolidated subsidiaries ................................
164
Decrease due to change inconsolidation of subsidiaries ..................................
(378)
Net income .................................................................
(1,172)Adjustments from translation offoreign currency financial statements ....................
Adjustments for unrealized losses on securities .......
Treasury stock ............................................................
Cash dividends paid (¥4.00 per share) .......................
(2,287)
Balance at March 31, 2003 .......................................... 571,873 ¥88,355 ¥81,184 ¥64,183

¥

—

¥

—

¥

(1)

(9,956)
(48)
(1)
(48)

(9,956)

(2)

6,565
2,392
(33)
2,344

(3,391)(35)(4,372)(4,561)(366)¥(2,217)¥ (7,763) ¥(401)Thousands of U.S. dollars (Note 1)
Years ended March 31, 2003, 2002 and 2001

Commonstock

CapitalSurplusunrealized holding Foreign currency Treasury
Retained Net(loss) on available- translation
earnings gain
stock
for-sale securities
adjustments

Balance at March 31, 2002 ......................................................... $735,067 $675,408 $564,526
Increase due to merger of
non-consolidated subsidiaries ...............................................
1,364
Decrease due to change in consolidation of subsidiaries .........
(3,145)
Net income ...............................................................................
(9,750)Adjustments from translation offoreign currency financial statements ...................................
Adjustments for unrealized losses on securities .....................
Treasury stock ..........................................................................
Cash dividends paid ($0.03 per share) .....................................
(19,027)
Balance at March 31, 2003 ......................................................... $735,067 $675,408 $533,968$ 19,501$(28,211) $ (291)(36,373)(37,945)(3,045)$(18,444)$(64,584) $(3,336)

The accompanying notes are an integral part of those statements.

Financial Section 31

Consolidated Statements of Cash Flows
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIES

Years ended March 31, 2003, 2002 and 2001

Millions of yen

Thousands of
U.S. dollars(Note1)

2003

2002

2001

2003

Income (Loss) before income taxes .................................................................................. ¥ (7,505)¥(12,588)¥ 15,571$ (62,438)

Cash flows from operating activities:

Adjustments to reconcile net income (loss) to net cash providedby (used in) operating activities:
Depreciation ..................................................................................................................
Loss (Gain) on sale and disposal of property, plant and equipment .............................
Gain on sale of investment securities ............................................................................
Write-down of investment securities .............................................................................
Write-down of subsidiary securities ..............................................................................
Loss on sales of securities of an affiliated company .....................................................
Provision for (Reversal of) doubtful accounts ..............................................................
Increase (Decrease) in retirement benefits ....................................................................
Interest and dividend income ........................................................................................
Interest expense .............................................................................................................
Equity in earnings of affiliated companies ....................................................................
Loss from realignment of operations ............................................................................
Restructuring charges ....................................................................................................
Gain on securities contributed to employee retirement benefits trust ...........................
Casualty loss ..................................................................................................................
Loss from indemnification of damages caused by a consolidated subsidiary ...............
Loss from suspension of operating activity of a consolidated subsidiary .....................
Loss on liquidation of subsidiaries ................................................................................
Decrease (Increase) in trade receivables .......................................................................
Decrease (Increase) in inventories ................................................................................
Increase (Decrease) in trade payables ...........................................................................
Others ............................................................................................................................
Sub total .....................................................................................................................
Proceeds from interest and dividend income ................................................................
Payments for interest paid .............................................................................................
Payments for additional retirement benefits by realignment of operations ..................
Payments for suspension of operating activity in a consolidated subsidiary ................
Payments for restructuring charges ...............................................................................
Payments for recovery costs ..........................................................................................
Payments for indemnification of damages caused by a consolidated subsidiary ..........
Payments for income taxes ............................................................................................
Other ..............................................................................................................................
Net cash provided by (used in) operating activities ...................................................

18,283766(108)
17,247
301
465
485
(658)
(1,074)
2,533(3,400)90
3,042(1,845)
—
233
990
1,069
4,269
9,387
(3,769)(9,264)
31,537
2,338(2,633)(3,198)
(962)
(201)
—
(233)
(460)
(83)
26,105

17,822(3,370)
(958)
8,431
1,403
—
(1,338)1,180(1,700)3,475(1,535)
3,434
315
—
442
247
1,144
2,280
17,018(3,280)3,249
1,877
37,5483,001(3,649)(326)(1,075)
(315)
(442)
(247)
(905)
(220)
33,37016,774(5,153)(5,867)
3,415
—
—
(391)
6,278
(2,241)
4,370(4,078)
—
8,830
—
—
2,328
1,621
2,481
(2,738)(5,921)(3,300)(246)
31,733
3,559(4,446)—(1,525)(975)—(4,072)(881)(54)
23,339152,105
6,373(899)
143,486
2,504
3,869
4,035
(5,474)(8,935)21,073(28,286)749
25,308(15,349)
—
1,938
8,236
8,894
35,51678,095(31,356)(77,073)
262,371
19,451(21,905)(26,606)(8,003)(1,672)—(1,938)(3,827)(691)
217,180

Cash flows from investing activities:
Proceeds from sale of marketable securities .....................................................................
Payments for acquisition of property, plant and equipment .............................................
Proceeds from sale of property, plant and equipment .......................................................
Payments for purchases of investment securities ..............................................................
Payments for purchase of subsidiaries securities ..............................................................
Proceeds from sale of investment securities .....................................................................
Payments for acquisition of newly consolidated subsidiary’s stock .................................
Increase in loans receivable ..............................................................................................
Collection of loans receivable ...........................................................................................
Other .................................................................................................................................
Net cash provided by (used in) investing activities ...................................................

—(21,723)
5,715(60)(4,566)
1,976—(3,381)
648
145(21,246)

53(26,778)
5,080
(456)
(265)
4,198
—
(2,633)
4,894(339)(16,246)267(23,922)
9,388
(84)
(932)
13,608(481)(5,014)3,300(378)(4,248)—(180,724)
47,546(499)(37,987)
16,439—(28,128)
5,391
1,207
(176,755)

Cash flows from financing activities:
Proceeds from issuance of long-term debt ........................................................................
Repayments of long-term debt ..........................................................................................
Net decrease in bank loans ................................................................................................
Net increase (decrease) in commercial paper ...................................................................
Payments for redemption of bonds ...................................................................................
Proceeds from issuance of bonds ......................................................................................
Increase in treasury stocks ................................................................................................
Cash dividends paid ..........................................................................................................
Other .................................................................................................................................
Net cash provided by (used in) financing activities ...................................................

12,875(8,367)(7,393)3,000(22,000)
10,000(366)(2,287)375(14,163)

12,264(11,134)(1,807)(2,500)(18,000)
10,000(33)(3,434)377(14,267)

4,103(9,604)(428)(7,500)(10,000)—(1)(2,866)207(26,089)

107,113(69,609)(61,506)
24,958(183,028)
83,195(3,045)(19,027)
3,121(117,828)

Effect of changes in exchange rate on cash and cash equivalents ....................................
(58)
Net increase (decrease) in cash and cash equivalents .......................................................
(9,362)
Cash and cash equivalents at beginning of fiscal year ......................................................
22,763
Increase in cash due to a newly consolidated subsidiary ..................................................
55
Increase in cash due to merger of non-consolidated subsidiaries .....................................
125
Cash and cash equivalents at end of fiscal year ................................................................ ¥ 13,581

686
3,543
18,806414—¥ 22,763

945(6,053)24,859——¥ 18,806(483)(77,886)
189,375458
1,040$ 112,987

The accompanying notes are an integral part of those statements.

Notes to Consolidated Financial Statements
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIES

1. Basis of presenting consolidated financial statements
The Company, a Japanese corporation, and its consolidated domestic
subsidiaries maintain their accounts and records in accordance withthe provisions set forth in the Japanese Commercial Code and the
Securities and Exchange Law and in conformity with accounting principles and practices generally accepted in Japan. The accounts of consolidated overseas subsidiaries are based on their accounting records
maintained in conformity with generally accepted accounting principles and practices prevailing in the respective countries of domicile.
Certain accounting principles and practices generally accepted inJapan are different from International Accounting Standards and standards in other countries in certain respects as to application and disclosure requirements. Accordingly, the accompanying financial statements are intended for use by those who are informed about Japanese
accounting principles and practices.
The accompanying consolidated financial statements are a translation of the audited consolidated financial statements of the Company
which were prepared in accordance with accounting principles andpractices generally accepted in Japan from the accounts and records
maintained by the Company and its consolidated subsidiaries andwere filed with the appropriate Local Finance Bureau of the Ministryof Finance as required by the Securities and Exchange Law.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made in the consolidated financial
statements issued domestically in order to present them in a form
which is more familiar to readers outside Japan. The consolidated
statements of shareholders’ equity for 2003, 2002 and 2001 have been
prepared for the purpose of inclusion in the accompanying consolidated financial statements, although such statements were not required fordomestic purposes and were not filed with the regulatory authorities.
The translation of the Japanese yen amounts into U.S. dollars areincluded solely for the convenience of readers, using the prevailingexchange rate at March 31, 2003, which was ¥120.20 to U.S.$1.00.
The convenience 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 U.S. dollars at this or any otherrate of exchange.
2. Summary of significant accounting policies
Consolidation — The consolidated financial statements include theaccounts of the Company and its significant subsidiaries (39 subsidiaries in 2003, 2002 and 2001). All significant intercompany balances and transactions have been eliminated. Investments in significant affiliated companies (6 affiliated companies in 2003 and 5 affiliated companies in 2002 and 2001) are accounted for using the equity
method. Investments in non-consolidated subsidiaries and affiliates
over which the Company has the ability to exercise significant influence over operating and financial policies of the investees, areaccounted for by the equity method.
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minor-

ity shareholders, are recorded based on the fair value at the time theCompany acquired control of the respective subsidiaries.
The consolidation difference between the cost of an investment andthe underlying equity in its net assets at the date of acquisition is
being amortized over five years with minor exceptions.
Cash and cash equivalents and cash flow statements — For the
purpose of the consolidated statements of cash flows, the Company
and its consolidated subsidiaries classify cash on hand, readily-available bank deposits and short-term highly liquid investments withmaturities of not exceeding three months at the time of purchase as
cash and cash equivalents.
Allowance for doubtful accounts — The Company and its consolidated domestic subsidiaries provide a general allowance for doubtful
accounts. Calculation of this allowance is based on actual collection
losses incurred in the past. Additionally, for accounts receivable considered at risk (bankruptcy, companies under rehabilitation plan), an
allowance is booked based on an estimation of the uncollectible
amount, on a case by case basis.
Investment securities — Effective from the year ended March 31,
2002, the Company adopted new accounting standards for financial
instruments, prospectively and recorded ¥2,403 million of net unrealized losses on available–for-sale securities as a separate component ofshareholders’ equity on a net of tax basis. Under the new standards,
unrealized gains and losses on securities classified as available-forsale with readily-determinable fair values, are reported in a separate
component of shareholders’ equity, net of applicable income taxes.
Securities issued by non-consolidated subsidiaries and affiliated companies are stated at moving average costs. Prior to April 1, 2001,
securities were stated at moving average cost.
Derivatives and hedge accounting — The new accounting standard
for financial instruments, effective from the year ended March 31,
2001, requires companies to state derivative transactions at fair value
and to recognize changes in the fair value as gains or losses unlessderivative transactions are used for hedging purposes.
If derivative transactions are used as hedges and meet certain hedging criteria, the Company and its domestic consolidated subsidiaries
defer recognition of gains or losses resulting from changes in fairvalue of derivative transactions until the related losses or gains on thehedged items are recognized.
However, in cases where forward foreign exchange contracts areused as hedges and meet certain hedging criteria, forward foreignexchange contracts and hedged items are accounted for in the following manner:(1) If a forward foreign exchange contract is executed to hedge anexisting foreign currency receivable or payable,(a) the difference, if any, between the Japanese yen amount of thehedged foreign currency receivable or payable translated using

Financial Section 33

the spot rate at the inception date of the contract and the bookvalue of the receivable or payable is recognized in the income
statement in the period which includes the inception date, andfirst-in, first-out (FIFO) method. Others are stated at cost based on
the last-in, first-out (LIFO) method.
(2) Supplies - Supplies are stated at the weighted average cost.

(b) the discount or premium on the contract (that is, the difference
between the Japanese yen amount of the contract translatedusing the contracted forward rate and that translated using the
spot rate at the inception date of the contract) is recognizedover the term of the contract.
(2) If a forward foreign exchange contract is executed to hedge afuture transaction denominated in a foreign currency, the futuretransaction will be recorded using the contracted forward rate, andno gains or losses on the forward foreign exchange contract arerecognized.
Also, if interest rate swap contracts are used as hedge and meet certain hedging criteria, the net amount to be paid or received under theinterest rate swap contract is added to or deducted from the intereston the assets or liabilities for which the swap contract was executed.
The Company evaluates hedge effectiveness monthly by comparing
the cumulative changes in cash flows from or the changes in fairvalue of hedged items and the corresponding changes in the hedging
derivative instruments.
Foreign currency translation — Receivables and payables denominated in foreign currencies are translated into Japanese yen at the
year-end rates.
Balance sheets of consolidated overseas subsidiaries are translated
into Japanese yen at the year-end rates except for shareholders’ equity
accounts, which are translated at the historical rates. Income statements of consolidated overseas subsidiaries are translated at average
rates except for transactions with the Company, which are translated
at the rates used by the Company.
Effective April 1, 2000, the Company and its consolidated domestic
subsidiaries adopted the revised accounting standard for foreign currency translation, “Opinion Concerning Revision of AccountingStandard for Foreign Currency Translation”, issued by the BusinessAccounting Deliberation Council on October 22, 1999 (the “Revised
Accounting Standard”). Under the Revised Accounting Standard,
long-term receivables and payables denominated in foreign currencies
are also translated into Japanese yen at the year-end rate.
The effect on the consolidated income statement of adopting the
Revised Accounting Standard is a decrease in income before income
taxes by ¥129 million compared with what would have been recorded
under the previous accounting standard.
Due to the Revised Accounting Standard adopted from the year
ended March 31, 2001, the Company and its domestic subsidiaries
have reported foreign currency translation adjustments in the shareholders’ equity and minority interests.
Inventories —(1) Merchandise, finished products, semi-finished products, work inprocess and raw materials - Merchandise, finished products, semifinished products, work in process and raw materials of precious
metals and of electronics materials are stated at cost based on the

34 Financial Section

Property, plant and equipment — Property, plant and equipment
are stated at cost.
Depreciation of property, plant and equipment is computed by thestraight-line method, based on the estimated useful lives of the assets.
The depreciation period generally ranges from 3 years to 50 years forbuildings and structures and 5 years to 17 years for machinery andequipment.
Retirement benefits — Under the terms of the Company’s retirement
plan, substantially all employees are entitled to a lump-sum payment
at the time of retirement. The amount of retirement benefits is, ingeneral, based on the length of service, base salary at the time ofretirement or severance and the cause thereof. The Company and certain consolidated domestic subsidiaries also have a non-contributory
funded pension plan, which covers substantially all employees.
The Company may make payments for additional retirement benefits for employees which payments have not been included in the actuarial calculation of the projected benefit obligation. The Company
and its consolidated domestic subsidiaries provided allowance for
employees’ severance and retirement benefits at March 31, 2003 and2002 based on the estimated amounts of projected benefit obligationand the fair value of the plan assets at those dates.
Actuarial gains and losses are recognized in expenses using thestraight-line method over the average of the estimated remaining service lives of ten years commencing with the following period.
Accrued retirement benefits in the consolidated balance sheets also
include estimated liabilities for the unfunded lump-sum benefit plan
covering directors and corporate auditors.
The excess of the projected benefit obligation over the total of thefair value of pension assets as of April 1, 2000 and the liabilities forseverance and retirement benefits recorded as of April 1, 2000 (the“net transition obligation”) amounted to ¥5,858 million. The entire net
transition obligation arising from adoption of the new accounting
standard for employees’ severance and retirement benefits issued by
the Business Accounting Deliberation Council effective April 1, 2000,
was fully recognized as expenses in the year ended March 31, 2001.
As a result of the adoption of the new accounting standard, in theyear ended March 31, 2001, severance and retirement benefit expenses increased by ¥5,426 million and income before income taxes
decreased by ¥5,523 million compared with what would have beenrecorded under the previous accounting standard.
Research and development — Research and development costs arecharged to income as incurred.
Bond issue expense — Bond issue expense is charged to income as
incurred.
Accounting for certain lease transactions — Finance leases whichdo not transfer ownership to lessees are accounted for in the samemanner as operating leases.
Income taxes — The Company and its consolidated subsidiaries recognize tax effects of temporary differences between the financial
statement basis and the tax basis of assets and liabilities. The provision for income taxes is computed based on the pretax income included in the statement of operations. The asset and liability approach isused to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences.
Sales — Sales of merchandise and finished products are recognizedwhen the products are shipped to customers.
Bonuses to directors and corporate auditors — Bonuses to directors and corporate auditors, which are subject to shareholders’ approvalat the annual shareholders’ meeting under the Commercial Code ofJapan , are accounted for as an appropriation of retained earnings.
Accounting standard for treasury stock and reversal of statutory
reserves — Effective April 1, 2002, the Company and its consolidated domestic subsidiaries adopted the new accounting standard fortreasury stock and reversal of statutory reserves (AccountingStandards Board Statement No.1, “Accounting Standards for Treasury
Stock and Reversal of Statutory Reserves”, issued by the Accounting

3. Securities
Investment securities at March 31, 2003 and 2002 consisted of available–for-sale securities. Available-for-sale securities are recorded atfair value, with net unrealized holding gains and losses excluded fromincome and included as a component of shareholders’ equity, net of
applicable income taxes.

Standards Board of Japan on February 21, 2002). The adoption of the
new accounting standard had no impact on the consolidated financial
statements.
Earnings per share — Effective April 1, 2002, the Company and its
consolidated domestic subsidiaries adopted the new accounting standard for earnings per share and related guidance (AccountingStandards Board Statement No.2, “Accounting Standard for Earnings
Per Share” and Financial Standards Implementation Guidance No.4,“Implementation Guidance for Accounting Standard for Earnings Per
Share”, issued by the Accounting Standards Board of Japan on
September 25, 2002).
The adoption of the new accounting standard had no impact on the
consolidated financial statements.
Amounts per share of common stock — Net income per share iscomputed based on the weighted average number of shares of common stock in issue during each fiscal year.
Cash dividends per share represent the actual amount applicable to
the respective fiscal year.
Reclassifications — Certain prior year amounts have been reclassified
to conform to the 2003 presentation. These changes had no impact onpreviously reported results of operations or shareholders’ equity.

(1) The following tables summarize acquisition costs, book values
and fair value of securities with available fair values as of March
31, 2003 and 2002:(a) Available-for-sale securities
Securities with book values exceeding acquisition costs
Millions of yen

2002

2003

Equity securities ........................................................................
Bonds ........................................................................................
Total ........................................................................................

Acquisition
cost

Book value

Difference

Acquisition
cost

Book value

Difference¥10,258—¥10,258¥12,846—¥12,846¥2,588—¥2,588¥26,862
16¥26,878¥36,938
16¥36,954¥10,0760¥10,076

Thousands of U.S. dollars

2003

Equity securities ........................................................................
Bonds ........................................................................................
Total ........................................................................................

Acquisition
cost

Book value

Difference$85,341—$85,341$106,872—$106,872$21,531—$21,531

Financial Section 35

Other securities
Millions of yen

2002

2003

Equity securities ........................................................................
Others ........................................................................................
Total ........................................................................................

Acquisition
cost

Book value

Difference

Acquisition
cost

Book value

Difference¥29,89150¥29,941¥23,452
50¥23,502¥(6,439)—¥(6,439)¥37,648
102¥37,750¥31,83965¥31,904¥(5,809)(37)¥(5,846)

Thousands of U.S. dollars

2003

Equity securities ........................................................................
Others ........................................................................................
Total ........................................................................................

Acquisition
cost

Book value

Difference$248,677
416$249,093$195,108
416$195,524$(53,569)—$(53,569)(2) The following tables summarize book values of the securities with no available fair values as of March 31, 2003 and 2002:
Available-for-sale securities
Millions of yen

Thousands of
U.S. dollars

2003

2002

Book value

Non marketable equity securities .................................................................................................................... ¥5,643¥6,067$46,947(3) Available-for-sale securities with maturities as of March 31, 2003 and 2002 are as follows:
Millions of yen

As of March 31, 2003

Bonds .................................................................................................................................
Others .................................................................................................................................
Total ...................................................................................................................................

Withinone yearOver one year
but within five
years

Over five years
but within ten
years

Total

¥—
—
¥—

¥—
50
¥ 50

¥—
—
¥—

¥—
50
¥ 50

Withinone yearOver one year
but within five
years

Over five years
but within ten
years

Total

$—
—
$—

$ —
416
$416

$—
—
$—

$ —
416
$416

As of March 31, 2003

Bonds .................................................................................................................................
Others .................................................................................................................................
Total ...................................................................................................................................

36 Financial Section

Thousands of U.S. dollars

Millions of yen

As of March 31, 2002

Bonds .................................................................................................................................
Others .................................................................................................................................
Total ...................................................................................................................................

(4) Total sales of available-for-sale securities sold in the year ended
March 31, 2003 amounted to ¥1,976 million ($16,439 thousand) andthe related gains and losses amounted to ¥373 million ($3,103 thousand) and ¥265 million ($2,205 thousand), respectively.

4. Derivative transactions
Status of derivative transactions — The Company and its consolidated subsidiaries utilize derivative transactions in order to hedge various risks, such as fluctuation of metal prices, exchange rates andinterest rates, in the normal course of business; such as futures contracts for hedging fluctuation of international price of metals, forward
foreign exchange contracts and currency swaps for hedging fluctuation of exchange rates, and interest swaps for hedging fluctuation ofinterests of floating-rate bonds and term loans payable.
Derivative transactions of the Company and its consolidated subsidiaries cause market risk and credit risk. Market risk is the potential
loss the Company and its consolidated subsidiaries may incur as aresult of changes in the market value. The Company’s and its consolidated subsidiaries’ exposure to market risk are determined by a number of factors, including fluctuation of market prices, exchange rates
and interest rates. Credit risk is the potential loss the Company and its
consolidated subsidiaries could incur if the counterparties made default
on their obligation. The derivative transactions are solely made withhighly rated financial institutions, their subsidiaries or LME brokers
guaranteed by banks, so that the Company and its consolidated subsidiaries might reduce the risk of default on an obligation.
Each department of the Company and its consolidated subsidiaries
involving derivative transactions have their own rules for derivative

Withinone yearOver one year
but within five
years

Over five years
but within ten
years

Total

¥—
—
¥—

¥16
—
¥16

¥—
65
¥65

¥16
65
¥81

Total sales of available-for-sale securities sold in the year ended
March 31, 2002 amounted to ¥4,188 million and the related gains andlosses amounted to ¥1,097 million and ¥131 million, respectively.

transactions which stipulate purposes and scope of using derivatives,
standards for choosing transaction counterparties, and procedures ofreporting and administration. The derivative transactions are subject
to approval by the General Manager of the department in charge after
consulting with related departments. Based on these rules, the person
in charge sets up the position. Then, the results are reported to the
Directors monthly.
The derivative positions are confirmed semi-annually with thetransaction counterparties. Also, the internal audit department of theCompany regularly examines derivative transactions.
The Company and its consolidated subsidiaries are not exposed tomarket risk arising from commodity derivative transactions, because
the risk of fluctuation of market prices, that is caused by time lag
between purchase and sale of materials and products, is hedged by thecorresponding future contracts. The Company and its consolidated
subsidiaries also utilize currency derivative transactions to hedge market risk of exchange rates or interest rates. Taking receivables andpayables denominated in foreign currencies into account, the Company
and its consolidated subsidiaries are not exposed to market risk.
The contracted amount of interest swap is the notional amount only,
and not to be considered as an index for measuring market risk or
credit risk of the Company and its consolidated subsidiaries.

Financial Section 37

The following tables summarize market value information as of March 31, 2003 and 2002 of derivative transactions for which hedge accounting
has not been applied:
Millions of yen

2002

2003
Contracted amountOver one
Total
year

Currency:
Forward contracts:
Sell position - U.S. dollars .....................
Buy position - U.S. dollars .....................

Commodity:
Futures contracts:
Sell position - Metal ...............................
Buy position - Metal ..............................

Contracted amountOver one
Total
year

Market Recognizedvalue gains(losses)Market Recognized
gains
value
(losses)

¥

36
2,988
¥3,024

¥—
—
¥—

¥

37
3,010

¥ (1)
22
¥ 21

¥

51
2,410
¥2,461

¥—
—
¥—

¥

52
2,434

¥ (1)
24
¥ 23

¥5,377391¥5,768¥——¥—¥5,154
386

¥223
(5)
¥218

¥

¥—
—
¥—

¥

—
—

¥—
—
¥—

¥

—
—
—

Thousands of U.S. Dollars

2003
Contracted amountOver one
Total
year

Currency:
Forward contracts:
Sell position - U.S. dollars .....................
Buy position - U.S. dollars .....................

Commodity:
Futures contracts:
Sell position - Metal ...............................
Buy position - Metal ..............................

Market Recognizedvalue gains(losses)$300
24,858$25,158

$—
—
$—

$

308
25,041

$

(8)
183
$ 175

$44,734
3,253$47,987$——$—$42,879
3,211$1,855(42)$1,813

5. Inventories
Inventories at March 31, 2003 and 2002 consisted of the following:
Millions of yen

Thousands of
U.S. dollars

2002

2003

2003
Merchandise ................................................................................................................................................ ¥ 780
Finished products ........................................................................................................................................ 17,330
Semi-finished products and work in process ............................................................................................... 32,349
Raw materials and supplies ......................................................................................................................... 17,545¥68,004

6. Bank loans and long-term debt
Bank loans are generally represented by short-term notes (most ofwhich are unsecured) and bank overdrafts, and bore interest at annual
rates of 0.54% to 5.81% and 0.43% to 5.11% at March 31, 2003 and2002, respectively.

38 Financial Section¥

888
19,352
34,05523,405¥77,700$

6,489
144,177
269,126
145,965$565,757

Long-term debt at March 31, 2003 and 2002 consisted of the following:
Millions of yen

Thousands of
U.S. dollars

2002

2003

¥ 4,630
18,717$ 31,597
230,066

12,801
245
7,000
6,000
15,00010,00010,00010,00010,000—104,393(30,421)¥ 73,972

72,0381,165—
49,916—
83,19583,19583,19583,19583,195
800,757(164,567)$ 636,190

Millions of yen

Thousands of
U.S. dollars

2003
Long-term loans from:
Banks, insurance companies and other financial institutions,maturing through 2007 at interest rates of 0.8425% to 7.79%:
Secured ................................................................................................................................................ ¥ 3,798
Unsecured ............................................................................................................................................
27,654Government owned banks and government agencies,
maturing through 2017 at interest rates of 1.00% to 7.04%:
Secured ................................................................................................................................................
8,659
Unsecured ............................................................................................................................................
140
1.75% domestic bonds due in 2002 .......................................................................................................
—
2.2% domestic bonds due in 2004 .........................................................................................................
6,000
1.825% domestic bonds due in 2002 .....................................................................................................
—
2.225% domestic bonds due in 2004 .....................................................................................................
10,0002.0% domestic bonds due in 2005 .........................................................................................................
10,0001.6% domestic bonds due in 2003 .........................................................................................................
10,0000.88% domestic bonds due in 2006 .......................................................................................................
10,0001.08% domestic bonds due in 2007 .......................................................................................................
10,00096,251
Amount due within one year ................................................................................................................... (19,781)¥ 76,470
The 1.75% and 1.825% domestic bonds were redeemed during the year ended March 31, 2003.

The aggregate annual maturities of long-term debt at March 31, 2003 were as follows:Year ending March 31,

2004 .............................................................................................................................................................................
2005 .............................................................................................................................................................................
2006 .............................................................................................................................................................................
2007 .............................................................................................................................................................................
2008 .............................................................................................................................................................................
Thereafter ....................................................................................................................................................................

¥19,781
43,432
10,938
11,707
10,361
32$164,567
361,33190,99897,39686,198267

Millions of yen

Thousands of
U.S. dollars

2002

2003

Assets pledged as collateral for bank loans and long-term debt at March 31, 2003 and 2002 were as follows:

2003
Notes and accounts receivable
Trade ......................................................................................................................................................... ¥ 841
Investment securities
131
Subsidiaries ...............................................................................................................................................
6,394
Other ..........................................................................................................................................................
Property, plant and equipment, at net book value ....................................................................................... 38,641¥46,007

7. Income taxes
Income taxes in the accompanying consolidated statements of operations comprise corporation tax, inhabitants taxes and enterprise tax.
The aggregate statutory tax rate in Japan was approximately 42.05%

¥

953

131
9,839
42,640¥53,563

$

6,997

1,090
53,195
321,472$382,754

for the years ended March 31, 2003, 2002 and 2001.
Consolidated overseas subsidiaries are subject to income taxes of
the countries in which they domicile.

Financial Section 39

The following table summarizes the significant differences between the statutory tax rate and the Company’s and its consolidated subsidiaries’
effective tax rate for financial statement purposes for the years ended March 31, 2001:
2001
Statutory tax rate ........................................................................................................... 42.1%
Equity in earnings of unconsolidated subsidiaries and affiliated companies ............... (9.8)
Effect of elimination of counterparty dividends received .............................................
3.8
Difference in tax rates among the Company and its consolidated subsidiaries ............ (0.6)
Permanently nondeductible expenses ...........................................................................
1.9
Permanently nontaxable dividends received ................................................................. (6.0)
Per capita inhabitant tax ................................................................................................
0.6
Decrease in valuation allowance ................................................................................... (29.3)
Others ............................................................................................................................ (1.1)
Effective tax rate ...........................................................................................................
1.6%

The Company has not disclosed the significant differences between thestatutory tax rate and the Company’s and its consolidated subsidiaries’
effective tax rate for the year ended March 31, 2003 and 2002, because
it has incurred a loss before income taxes and minority interests.
Significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities as of March 31, 2003 and 2002 are
as follows:
Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Deferred tax assets:
Net operating loss carry forwards ........................................................................................................ ¥19,595
Retirement benefits ..............................................................................................................................
7,113
Net unrealized holding loss on available-for-sale securities ...............................................................
1,508
Allowance for bonus payable ..............................................................................................................
1,312
Depreciation .........................................................................................................................................
1,169
Accrued liquidation loss of subsidiaries ..............................................................................................
1,147
Allowance for losses on investments ...................................................................................................
558
Accrued indemnification loss of damages caused by a consolidated subsidiary .................................
422
Write-down of investment securities ...................................................................................................
—
Accrued realignment loss of operations ..............................................................................................
—
Accrued restructuring charges .............................................................................................................
—
Others ...................................................................................................................................................
2,589
Gross deferred tax assets .................................................................................................................. 35,413
Less valuation allowance ..................................................................................................................... (7,026)
Deferred tax assets-less valuation allowance ................................................................................... 28,387¥10,310
6,798
—
1,078
1,051
726
—
525
2,186
1,304
1,042
2,536
27,556(7,293)
20,263$ 163,020
59,176
12,546
10,915
9,725
9,542
4,642
3,511
—
—
—
21,540294,617(58,453)
236,164

Deferred tax liabilities:
Net unrealized holding gain on available-for-sale securities ...............................................................
Reserve for losses on overseas investment .........................................................................................
Accrual for special depreciation of fixed assets ..................................................................................
Deferred gains on properties for tax purpose .......................................................................................
Reserve for explorations ......................................................................................................................
Gain on securities contributed to employee retirement benefits trust .................................................
Depreciation .........................................................................................................................................
Allowance for doubtful accounts .........................................................................................................
Accumulated earnings of overseas subsidiaries ...................................................................................
Others ...................................................................................................................................................
Deferred tax liabilities ......................................................................................................................

—
(281)
(155)
(3,514)(770)(751)(2,582)
(515)
(970)
(376)
(9,914)(1,827)(355)(172)(3,926)(977)—(2,404)(968)(1,166)(318)(12,113)—(2,338)(1,289)(29,235)(6,406)(6,248)(21,481)(4,285)(8,070)(3,127)(82,479)

Net deferred tax assets ........................................................................................................................... ¥18,473¥ 8,150$ 153,685

40 Financial Section

(Change in effective tax rates to be used in calculating deferred taxes
due to the revised local tax law)
The aggregate statutory income tax rate used for calculation ofdeferred income tax assets and liabilities was 42.05% for the year
ended March 31, 2002. Effective for the year commencing on April 1,
2004 or later, according to the revised local tax law, income tax rates
for enterprise taxes will be reduced as a result of introducing theassessment by estimation on the basis of the size of business. Basedon the change of income tax rates, for calculation of deferred income
tax assets and liabilities, the Company and consolidated domestic sub-sidiaries used the aggregate statutory income tax rates of 42.05% and40.69% for current items and non-current items, respectively, at March
31, 2003.
As a result of the change in the aggregate statutory income tax rates,
deferred income tax assets decreased by ¥436 million ($3,627 thousand), deferred tax liabilities decreased by ¥14 million ($116 thousand), income-taxes-deferred increased by ¥369 million ($3,070 thousand) and net unrealized holding loss on available-for-sale securities
increases by ¥53 million ($441 thousand) compared with what would
have been recorded under the previous local tax law.

8. Retirement benefits and pension costs
As explained in Note 2. Significant Accounting Policies, effective
April 1, 2000, the Company and its domestic subsidiaries adopted the
new accounting standard for employees’ severance and retirement
benefits, under which the liabilities and expenses for severance andretirement benefits are determined based on the amounts obtained byactuarial calculations.
The liabilities for severance and retirement benefits included in theliability section of the consolidated balance sheet as of March 31,
2003 and 2002 consists of the following:

Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Projected benefit obligation ................................................................................................................... ¥(45,651)
Fair value of pension assets ...................................................................................................................
23,834
Excess of projected benefit obligation over pension assets ................................................................... ¥(21,817)
Unrecognized actuarial differences ........................................................................................................
7,520
Net pension liability recognized in the consolidated balance sheet ....................................................... ¥(14,297)
Prepaid pension expenses .......................................................................................................................
1
Retirement benefits ................................................................................................................................ ¥(14,298)¥(45,566)
17,390¥(28,176)
5,362¥(22,814)30¥(22,844)$(379,792)
198,286$(181,506)
62,562$(118,944)
8$(118,952)

The Company contributed securities to employee retirement benefit
trust, which are included in the pension assets.
Retirement benefits in the consolidated balance sheets as of March
31, 2003 and 2002 also include estimated liabilities for the unfunded
lump-sum benefit plan covering directors and corporate auditors(¥307 million ($2,554 thousand) and ¥260 million, respectively).
Included in the consolidated statements of operations for the years ended March 31, 2003, 2002 and 2001 are severance and retirement benefit
expense comprised of the following:
Millions of yen

Thousands of
U.S. dollars

2003

2002

2001

2003

Service cost–benefits earned during the year .............................................................................. ¥2,337
Interest cost on projected benefit obligation ...............................................................................
969
Expected return on plan assets ....................................................................................................
(495)
Amortization of actuarial differences ..........................................................................................
588
Amortization of entire net transition obligation ..........................................................................
—¥3,399¥2,573
1,055
(481)
270
—
¥3,417¥2,212
982
(507)
—
5,858
¥8,545$19,443
8,061(4,118)
4,892—$28,278

The Amounts for additional retirement benefits the Company madefor employees for the years ended March 31, 2003 and 2002 are¥3,198 million ($26,606 thousand) and ¥326 million, respectively.
The discount rate and the rate of expected return on plan assets usedby the Company are primarily 2.5 % and 3.5 %, respectively in fiscal

year 2003 and 2002. The estimated amount of all retirement benefits
to be paid at the future retirement date is allocated equally to eachservice year using the estimated number of total service years.
Actuarial gains and losses are recognized in income statement using
the straight-line method in ten years.

Financial Section 41

9. Research and development expense
Research and development expense included in selling, general andadministrative expenses for the years ended March 31, 2003, 2002
and 2001 were ¥3,763 million ($31,306 thousand), ¥4,237 millionand ¥3,484 million, respectively.

10. Special reserves
For the purpose of obtaining tax benefits, the Company and someconsolidated subsidiaries have set up special reserves mainly for losses on overseas investments and explorations in accordance with theSpecial Taxation Measures Law of Japan.

11. Shareholders’ equity
The diluted net income per share for the years ended March 31, 2003
and 2002 are not calculated because there were no securities withdilutive effect. For calculating diluted net income per share, the number of shares outstanding were adjusted by assuming full conversionof the outstanding convertible bonds and full exercise of the outstanding warrants.
Under the Commercial Code of Japan, the entire amount of theissue price of shares is required to be accounted for as capital,
although a company may, by resolution of its Board of Directors,
account for an amount not exceeding one-half of the issue price of the
new shares as additional paid-in capital, which is included in capitalsurplus.
Effective October 1, 2001, the Commercial Code provides that an
amount equal to at least 10% of cash dividends and other cash appropriations shall be appropriated and set aside as a legal earnings
reserve until the total amount of legal earnings reserve and additional
paid-in capital equals 25% of common stock. The total amount oflegal earnings reserve and additional paid-in capital of the Company
has been reached to 25% of common stock, and therefore theCompany is not required to provide legal earnings reserve any more.
The legal earnings reserve and additional paid-in capital may be used

Such reserves included in retained earnings at March 31, 2003 and2002 were ¥7,647 million ($63,619 thousand) and ¥7,331 million,
respectively.

to eliminate or reduce a deficit by resolution of the shareholders’meeting or may be capitalized by resolution of the Board of directors.
On condition that the total amount of legal earnings reserve and additional paid-in capital remains equal to or exceeds 25% of common
stock, they are available for distribution by the resolution of shareholders’ meeting. Legal earnings reserve is included in retained earnings in the accompanying consolidated financial statements.
The maximum amount that the Company can distribute as dividends
is calculated based on the non-consolidated financial statements of theCompany and in accordance with the Code.
At the June 26, 1998 annual meeting, the Company’s shareholders
approved certain changes in the articles of incorporation of theCompany including an article of treasury stock purchase program, sothat the Company could retire its own shares acquired in a timely
manner by offsetting the cost of the treasury stock against retained
earnings within the maximum limit of 57,100 thousand shares by resolution of the Board of Directors. There was no acquisition of treasury stock for this purpose during the year ended March 31, 2001.
At the June 27, 2002 annual meeting, the Company’s shareholders
approved the deletion of this clause in accordance with the abolitionof the related law.

12. Contingent liabilities
Contingent liabilities at March 31, 2003 and 2002 were as follows:
Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

As endorser of notes receivable discounted ................................................................................................ ¥ 788
As guarantor for loans of:Non-consolidated subsidiaries and affiliated companies .......................................................................... 10,042
Other ..........................................................................................................................................................
4,246¥15,076¥ 2,129

$

7,002
4,813
¥13,944

83,54435,324$125,424

42 Financial Section

6,556

13. Effect of bank holiday on March 31, 2002
As financial institutions in Japan were closed on March 31, 2002 due
to holidays amounts that would normally be settled on March 31,
2002 were collected or paid on the following business day, April 1,
2002 and the Company and its consolidated subsidiaries accounted

for accordingly. The effects of the settlements on April 1, 2002 ascompared with what would have been settled on March 31, 2002 aresummarized below:

Cash and cash equivalents .........................................................................................................................
Notes receivable trade ................................................................................................................................
Notes payable trade ....................................................................................................................................
Notes payable other ...................................................................................................................................
Notes receivable discounted ......................................................................................................................

14. Segment information
Business segment information — The primary business segments of
the Company and its consolidated subsidiaries include mineral
resources, metallurgy, electronics & advanced materials, construction
materials & housing and others.
(Change in the business segment information)
In the year ended March 31, 2002, the Company and its consolidated
subsidiaries changed the grouping of business segments due to thechange of the business operation. The Company and its consolidated

2003

2002

—
—
—
—
—

Decreased by ¥97 million
Increased by ¥1,751 million
Increased by ¥1,313 million
Increased by ¥341 million
Increased by ¥434 million

subsidiaries converted advanced materials from metallurgy segment toelectronics materials segment, which was changed its name to electronics & advanced materials.
The change was made for better presentation of segment information inline with the current business operations.
Segment information for the years ended March 31, 2001 have been
restated to conform to the fiscal 2003 and 2002 segmentation as
follows:
Millions of yen

2003
MineralResources

Metallurgy

Electronics& advanced
materials

Net sales:
Outside customers ...............................................
Inter segment .......................................................
Total ................................................................

¥15,566
9,106
24,672¥186,442
39,901
226,343¥127,788
5,135
132,923¥16,456
285
16,741¥ 8,990
3,385
12,375¥—(57,812)(57,812)¥355,242—
355,242

Costs and expenses ................................................
Operating income (loss) ........................................
Identifiable assets ..................................................
Depreciation expense ............................................
Capital expenditures ..............................................

21,990¥ 2,682¥50,981
3,238
1,414

218,017¥ 8,326¥183,202
4,419
5,005

128,805¥ 4,118¥111,101
8,792
9,506

17,093¥ (352)¥16,542622
133

11,740¥ 635¥35,790456
427(58,996)¥ 1,184¥ 73,158
756
2,442

338,649¥ 16,593¥470,774
18,28318,927

Construction
materials& housing

OthersEliminationor corporate

Consolidated

Millions of yen

2002
MineralResources

Metallurgy

Electronics& advanced
materials

Construction
materials& housing

Others

Net sales:
Outside customers ...............................................
Inter segment .......................................................
Total ................................................................

¥15,351
7,941
23,292¥171,150
26,033
197,183¥107,331
3,654
110,985¥19,997
1,619
21,616¥16,365
3,621
19,986¥—(42,868)(42,868)¥330,194—
330,194

Costs and expenses ................................................
Operating income (loss) ........................................
Identifiable assets ..................................................
Depreciation expense ............................................
Capital expenditures ..............................................

22,454¥ 838¥54,710
3,217
2,794

193,650¥ 3,533¥178,033
3,978
9,336

115,373¥ (4,388)¥119,151
8,675
11,236

21,882¥ (266)¥19,593713
515

18,160¥ 1,826¥38,771549
418(42,472)¥ (396)¥108,498
690
1,080

329,047¥ 1,147¥518,756
17,82225,379Eliminationor corporate

Consolidated

Financial Section 43

Millions of yen

2001
MineralResources

Metallurgy

Electronics& advanced
materials

Net sales:
Outside customers ..........................................
Inter segment ..................................................
Total ............................................................

¥16,987
6,626
23,613¥177,795
27,032
204,827¥143,058
3,275
146,333¥24,82852
24,880¥12,684
2,390
15,074¥—(39,375)(39,375)¥375,352—
375,352

Costs and expenses ............................................
Operating income (loss) ....................................
Identifiable assets .............................................
Depreciation expense ........................................
Capital expenditures .........................................

21,253¥ 2,360¥57,258
2,956
4,420

189,406¥ 15,421¥173,208
3,953
7,387

136,374¥ 9,959¥128,184
7,982
14,962

25,184¥ (304)¥25,222746
243

14,740¥ 334¥45,382549
282(38,535)¥ (840)¥100,826
588
784

348,422¥ 26,930¥530,080
16,77428,078Construction
materials& housing

OthersEliminationor corporate

Thousands of U.S. dollars

2003
MineralResources

Metallurgy

Electronics& advanced
materials

Construction
materials& housing

Others

Net sales:
Outside customers .......................................... $129,501
Inter segment ..................................................
75,757
Total ............................................................ 205,258$1,551,098
331,955
1,883,053$1,063,128
42,7201,105,848$136,905
2,371
139,276

Costs and expenses ........................................... 182,945
Operating income (loss) .................................... $ 22,313
Identifiable assets ............................................. $424,135
Depreciation expense ........................................
26,938
Capital expenditures .........................................
11,764

1,813,785$ 69,268$1,524,143
36,764
41,639

1,071,589$ 34,259$ 924,301
73,14579,085142,205$ (2,929)$137,621
5,175
1,106

(The effects of changes in accounting policies on segment information)(1) Retirement benefits and pension costs (in the year ended March
31, 2001)
As explained in Note 2. Significant Accounting Policies, effective
April 1, 2000, the Companies and its consolidated domestic subsidiaries adopted the new accounting standard for employees’ severance and retirement benefits. The effect of this change on the segment
information were to increase operating income of mineral resources,
metallurgy, electronics & advanced materials and others by ¥15 million, ¥110 million, ¥211 million and ¥76 million and decrease operating income of construction materials & housing by ¥17 million, in theyear ended March 31, 2001, respectively.
(2) Foreign currency translation (in the year ended March 31, 2001)
As explained in Note 2. Significant Accounting Policies, effective

44 Financial Section

Consolidated

Eliminationor corporate

Consolidated$ 74,792
28,162102,954$—(480,965)(480,965)$2,955,424—
2,955,424

97,670$ 5,284$297,754
3,794
3,552

(490,815)$ 9,850$ 608,636
6,289
20,3162,817,379$ 138,045$3,916,590
152,105
157,462

April 1, 2000, the Companies and its consolidated domestic subsidiaries adopted the new accounting standard for foreign currencytranslation. The effect of this change on the segment information
were to decrease identifiable assets of Elimination or corporate by¥10,861 million in the year ended March 31, 2001.
(3) Financial instruments (in the year ended March 31, 2002)
As explained in Note 2. Significant Accounting Policies, effectivefrom the year ended March 31, 2002, the Company adopted new
accounting standards for financial instruments. The effect of thischange on the segment information were to decrease identifiable
assets of metallurgy by ¥110 million and increase identifiable assetsof electronics & advanced materials by ¥19 million, construction
materials & housing by ¥2 million and elimination or corporate by¥4,319 million in the year ended March 31, 2002.

Geographic segment information —Geographic segment information for the years ended March 31, 2003, 2002 and 2001 are summarized as follows:
Millions of yen

2003
Eliminationor corporate

Domestic

North
AmericaSoutheast
Asia

Others

Net sales:
Outside customers ....................................................................
Intersegment .............................................................................
Total .....................................................................................

¥307,302
14,377
321,679¥15,04225
15,067¥23,686964
24,650¥ 9,212
1,758
10,970¥—(17,124)(17,124)¥355,242—
355,242

Costs and expenses .....................................................................
Operating income (loss) .............................................................
Identifiable assets .......................................................................

305,161¥ 16,518¥349,986

15,559¥ (492)¥32,725

24,243¥ 407¥17,846

10,576¥ 394¥12,947(16,890)¥ (234)¥ 57,270

338,649¥ 16,593¥470,774

Consolidated

Millions of yen

2002
Eliminationor corporate

Domestic

North
AmericaSoutheast
Asia

Others

Net sales:
Outside customers ....................................................................
Intersegment .............................................................................
Total .....................................................................................

¥291,605
9,225
300,830¥13,50410
13,514¥17,772524
18,296¥ 7,313
1,421
8,734

¥

—
(11,180)(11,180)¥330,194—
330,194

Costs and expenses .....................................................................
Operating income (loss) .............................................................
Identifiable assets .......................................................................

296,322¥ 4,508¥360,839

15,717¥ (2,203)¥36,245

19,353¥ (1,057)¥19,118

8,861¥ (127)¥13,930(11,206)¥26¥ 88,624

329,047¥ 1,147¥518,756

Consolidated

Millions of yen

2001
Domestic

North
AmericaSoutheast
Asia

OthersEliminationor corporate

Net sales:
Outside customers ....................................................................
Intersegment .............................................................................
Total .....................................................................................

¥328,608
10,334
338,942¥14,92218
14,940¥23,663718
24,381¥ 8,159
1,155
9,314

¥

—
(12,225)(12,225)¥375,352—
375,352

Costs and expenses .....................................................................
Operating income (loss) .............................................................
Identifiable assets .......................................................................

313,854¥ 25,088¥376,180

14,766¥ 174¥36,099

23,407¥ 974¥19,900

8,711
¥ 603
¥12,095(12,316)¥91¥ 85,806

348,422¥ 26,930¥530,080

Consolidated

Thousands of U.S. dollars

2003
Domestic

North
AmericaSoutheast
Asia

OthersEliminationor corporate

Consolidated

Net sales:
Outside customers .................................................................... $2,556,589
Intersegment .............................................................................
119,609
Total ..................................................................................... 2,676,198$125,141208
125,349$197,055
8,020
205,075$ 76,639
14,626
91,265$—(142,463)(142,463)$2,955,424—
2,955,424

Costs and expenses ..................................................................... 2,538,777
Operating income (loss) ............................................................. $ 137,421
Identifiable assets ....................................................................... $2,911,697

129,443$ (4,094)$272,255

201,689$ 3,386$148,469

87,986$ 3,279$107,713(140,516)$ (1,947)$ 476,456

2,817,379$ 138,045$3,916,590

Financial Section 45

(The effects of changes in accounting policies on segment information)(1) Retirement benefits and pension costs(in the year ended March 31, 2001)
As explained in Note 2. Significant Accounting Policies, effective
April 1, 2000, the Company and its consolidated domestic subsidiaries adopted the new accounting standard for employees’ severance and retirement benefits. The effect of this change on the segment
information was to increase operating income of Japan by ¥395 million in the year ended March 31, 2001.
(2) Foreign currency translation (in the year ended March 31, 2001)
As explained in Note 2. Significant Accounting Policies, effective
April 1, 2000, the Companies and its consolidated domestic sub-sidiaries adopted the new accounting standard for foreign currencytranslation. The effect of this change on the segment information
were to decrease identifiable assets of elimination or corporate by¥10,861 million in the year ended March 31,2001.
(3) Financial instruments (in the year ended March 31, 2002)
As explained in Note 2. Significant Accounting Policies, effectivefrom the year ended March 31, 2002, the Company adopted new
accounting standards for financial instruments. The effect of thischange on the segment information was to decrease identifiable assetsof domestic by ¥89 million and increase identifiable assets of elimination or corporate by ¥4,319 million in the year ended March 31, 2002.

Information for overseas sales
Millions of yen

2003

Overseas net sales ....................................................................................................
Consolidated net sales ..............................................................................................
Share of overseas net sales .......................................................................................

North
AmericaSoutheast
Asia

East Asia

OthersTotal¥18,075—
5.1%¥25,385—
7.1%¥61,743—
17.4%¥2,386—
0.7%¥107,589¥355,242
30.3%
Millions of yen

2002

Overseas net sales ....................................................................................................
Consolidated net sales ..............................................................................................
Share of overseas net sales .......................................................................................

North
AmericaSoutheast
Asia

East Asia

OthersTotal¥17,158—
5.2%¥17,993—
5.5%¥52,590—
15.9%¥3,770—1.1%¥ 91,511¥330,194
27.7%
Millions of yen

2001
North
AmericaSoutheast
Asia

East Asia

OthersTotal¥18,736—
5.0%¥21,681—5.8%¥53,258—
14.2%¥5,278—
1.4%¥ 98,953¥375,352
26.4%

North
AmericaSoutheast
Asia

East Asia

Others

Total

Overseas net sales .................................................................................................... $150,374
Consolidated net sales ..............................................................................................
—
Share of overseas net sales .......................................................................................
5.1%$211,190—
7.1%$513,669—
17.4%$19,850—
0.7%$ 895,083$2,955,424
30.3%

Overseas net sales ....................................................................................................
Consolidated net sales ..............................................................................................
Share of overseas net sales .......................................................................................

Thousands of U.S. dollars

2003

15. Information for certain leases
As a lessee — A summary of assumed amounts inclusive of interest of acquisition cost, accumulated depreciation and net book value of financeleases accounted for in the same manner as operating leases at March 31, 2003 and 2002 were as follows:
Millions of yen

2002

2003

Acquisition Accumulated Net book Acquisition Accumulated Net bookcost
depreciation value
cost
depreciation value

Acquisition Accumulated Net bookcost
depreciation
value

2003

Machinery and equipment ...........
Others ..........................................
Total ..........................................

46 Financial Section

Thousands of U.S. dollars¥1,720308¥2,028¥ 929
239¥1,168

¥791
69
¥860

¥2,164334¥2,498¥1,172247¥1,419¥ 992
87¥1,079$14,310
2,562$16,872$7,7291,988$9,717$6,581574$7,155

Future lease payment, inclusive of interest at March 31, 2003 and 2002 under such leases were as follows:
Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Due within one year ........................................................................................................................................... ¥353
Due after one year .............................................................................................................................................. 507
Total ................................................................................................................................................................. ¥860

¥ 445
634
¥1,079$2,937
4,218$7,155

Millions of yen

Thousands of
U.S. dollars

Total expenses and assumed depreciation charges for the years ended March 31, 2003, 2002 and 2001 were as follows:

2003

2002

2001

2003

Total expenses .......................................................................................................................................... ¥466
Assumed depreciation charge .................................................................................................................. 466

¥555
555

¥591
591

$3,877
3,877

As a lessor — A summary of acquisition cost , accumulated depreciation and net book value at March 31, 2003 and 2002 were as follows:
Millions of yen

2003

Machinery and equipment ...........
Others ..........................................
Total ..........................................

Thousands of U.S. dollars

2002

2003

Acquisition Accumulated Net book Acquisition Accumulated Net bookcost
depreciation value
cost
depreciation value

Acquisition Accumulated Net bookcost
depreciation value

¥422
1
¥423

¥186
1
¥187

¥236
0
¥236

¥423
1
¥424

¥151
0
¥151

$3,511
8$3,519

¥272
1
¥273

$1,5488$1,556$1,9630$1,963Future lease receipt, inclusive of interest, at March 31, 2003 and 2002 under such lease were as follows:
Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Due within one year ........................................................................................................................................... ¥ 42
Due after one year .............................................................................................................................................. 204
Total ................................................................................................................................................................. ¥246

¥ 45
246
¥291

$ 349
1,697
$2,046

Total revenue and depreciation charges for the year ended March 31, 2003, 2002 and 2001 were as follows:
Millions of yen

Total revenues ................................................................................................................................
Depreciation charge ........................................................................................................................

Thousands of
U.S. dollars

2003

2002

2001

2003

¥42
35

¥58
36

¥51
24

$349
291

16. Subsequent events
On June 27, 2003 the shareholders of the Company approved payment of an annual cash dividend of ¥5.0 ($0.04) per share or total of¥2,855 million ($23,752 thousand) to shareholders of record at March
31, 2003.

Financial Section 47

Report of Independent Public Accountants
To the Board of Directors of Sumitomo Metal Mining Co., Ltd.
We have audited the accompanying consolidated balance sheets of Sumitomo Metal Mining Co., Ltd. and subsidiaries as ofMarch 31, 2003 and 2002, and the related consolidated statements of operations, shareholders’ equity and cash flows foreach of the three years in the period ended March 31, 2003, expressed in Japanese yen. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards, generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates madeby 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, the consolidated financial position of Sumitomo Metal Mining Co., Ltd. and subsidiaries as of March 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2003, inconformity with accounting principles generally accepted in Japan as described in Note 1 to the consolidated financial
statements.
Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements. Sumitomo Metal
Mining Co., Ltd. and domestic subsidiaries prospectively adopted the new Japanese accounting standards for financial
instruments effective April 1, 2001, for financial instruments and employees’ retirement benefits and the revised Japanese
accounting standard for foreign currency translation effective April 1, 2000.
The consolidated financial statements as of and for the year ended March 31, 2003 have been translated into United States
dollar solely for the convenience of the reader. We have recomputed the translation and, in our opinion, the consolidated
financial statements expressed in yen have been translated into United States dollars on the basis set forth in Note 1 to theconsolidated financial statements.

Tokyo, Japan
June 27, 2003

48 Report of Independent Public Accountants

SMM Group
Branches, Divisions & Laboratories

Principal Affiliated Companies

Overseas Affiliated Companies

Head Office11-3, Shimbashi 5-chome
Minato-ku, Tokyo 105-8716, Japan
Phone : 81-3-3436-7701
Facsimile : 81-3-3434-2215

MINERAL RESOURCES
Sumiko Consultants Co., Ltd.*

Sumitomo Metal Mining
America Inc.*
900 Fourth Avenue, Suite 3950
Seattle, WA 98164, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814

M-SMM Electronics SDN. BHD.*
Lots 7 & 9, Jalan Ragum 15/17
40200 Shah Alam Selangor
Darul Ehsan, Malaysia
Phone : 60-3-5519-8140
Facsimile : 60-3-5519-8110

Sumitomo Metal Mining
Arizona Inc.*
900 Fourth Avenue, Suite 3950
Seattle, WA 98164, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814

Malaysian Electronics
Materials SDN. BHD.*
Lots 7 & 9, Jalan Ragum 15/17
40200 Shah Alam Selangor
Darul Ehsan, Malaysia
Phone : 60-3-5519-8302
Facsimile: 60-3-5519-8305

Osaka Branch
5-33, Kitahama 4-chome
Chuo-ku, Osaka 541-0041, Japan
Phone : 81-6-6223-7718
Facsimile : 81-6-6223-7755
Nagoya Branch
1-6, Higashi-Sakura 1-chome
Higashi-ku, Nagoya 461-0005, Japan
Phone : 81-52-963-2360
Facsimile : 81-52-963-2365
Fukuoka Branch
10-1, Kami-gofukumachi
Hakata-ku, Fukuoka 812-0036,
Japan
Phone : 81-92-282-8620
Facsimile : 81-92-282-8631
Besshi-Niihama District Div.
5-3, Nishibara-cho 3-chomeNiihama, Ehime 792-8555, Japan
Phone : 81-897-37-4800
Facsimile : 81-897-37-4804
Harima Smelter346-4, Miyanishi
Harima-cho, Kako-gun
Hyogo 675-0145, Japan
Phone : 81-794-37-8651
Facsimile : 81-794-37-0223
Kunitomi District Div.
351-1, Kunitomi, Kyowa-cho
Iwanai-gun, Hokkaido
048-2143, Japan
Phone : 81-135-72-1211
Facsimile : 81-135-72-1200
Electronics Div.
6-1, Suehiro-cho 1-chome
Ome, Tokyo 198-8601, Japan
Phone : 81-428-31-1181
Facsimile : 81-428-31-9170
Hishikari Mine Dept.
3844, Maeme, Hishikari-cho
Isa-gun, Kagoshima 895-2701, Japan
Phone : 81-995-26-3111
Facsimile : 81-995-26-4130
Ichikawa Research Laboratories
18-5, Nakakokubun 3-chome
Ichikawa, Chiba 272-8588, Japan
Phone : 81-47-372-7221
Facsimile : 81-47-372-9133
Niihama Research Laboratories
17-3, Isoura-cho
Niihama, Ehime 792-0002, Japan
Phone : 81-897-37-7171
Facsimile : 81-897-37-7173
Ome Research Laboratories
6-1, Suehiro-cho 1-chome
Ome, Tokyo 198-8601, Japan
Phone : 81-428-31-1160
Facsimile : 81-428-31-3428

METALLURGY ANDMETAL FABRICATION
Hyuga Smelting Co., Ltd.*
Sumitomo Metal Mining Brass &Copper Co., Ltd.*
Taihei Metal Industry Co., Ltd.*MS Zinc co., Ltd.
ELECTRONICS AND ADVANCED
MATERIALS
Ohkuchi Electronics Co., Ltd.*
Shinko Co., Ltd.*
Niihama Electronics Co., Ltd.*
Ajimu Electronics Co., Ltd.*
Sumitomo Metal Mining
Package Materials Co., Ltd.*
Sumiko Tec Co., Ltd.*
Fuji Electronics Industries Co., Ltd.*
Sumiko STF Co., Ltd.*
Sumico Lubricant Co., Ltd.*
Nittosha Co., Ltd.*CONSTRUCTION MATERIALSAND HOUSING
Sumitomo Metal Mining Siporex
Co., Ltd.*
Igeta Heim Co., Ltd.*
Sumiko Tatsumi Construction
Materials Co., Ltd.*OTHER SERVICES
Sumiko Eco-engineering Co., Ltd.*
Sumiko Technical Service Co., Ltd.*
Sumiko Information Systems
Co., Ltd.*N. E. Chemcat Corporation
Nippon Ketjen Co., Ltd.
Overseas OfficeLondon OfficeVintners Place
68 Upper Thames Street
London EC4V 3BJ, U.K.
Phone : 44-020-7246-3865
Facsimile : 44-020-7246-3931
Shanghai Office
RM1105,11th Floor
Shanghai International Trade Center
2201 Yan An Road WestShanghai, China
Phone : 86-21-6219-4077
Facsimile : 86-21-6219-0466

SMMA Candelaria Inc.*
Corporation Trust Center, 1209
Orange Street, Wilmington,
Delaware, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814
Sumitomo Metal Mining
Canada Ltd.*602-700 West Georgia Street
P.O. Box 10150
Pacific Center, Vancouver
B.C. V7Y1C6, Canada
Phone : 1-604-685-3274
Facsimile : 1-604-685-3276
Sumitomo Metal Mining
Oceania Pty. Ltd.*
Level 21, Governor Phillip Tower
1 Farrer Place, Sydney
N.S.W. 2000, Australia
Phone : 61-2-9247-6511
Facsimile : 61-2-9247-6599
COMPAÑIA CONTRACTUALMINERA CANDELARIAAVENIDA APOQUINDO 4499 4˚
PISO SANTIAGO CHILE
Phone : 56-2-251-1200
Facsimile : 56-2-251-1290
SMM Pogo LLC
900 Fourth Avenue, Suite 3950
Seattle, WA 98164, U.S.A.
Phone : 1-206-405-2800
Facsimile : 1-206-405-2814
P.T. International Nickel
Indonesia
Bapindo Plaza II, 22nd Floor
Jalan Jend Sudirman Kav 54-55
Jakarta, Indonesia
Phone : 62-21-5249003
Facsimile : 62-21-5249010
FIGESBAL
21-23, rue de L’Alma
BP C4 Noumea Cedex
New Caledonia
Phone : 687-27-2031
Facsimile : 687-27-2922
Sumitomo Metal Mining
Asia Pacific Pte. Ltd.*
No. 35/41, Kallang PlaceSingapore 339163
Phone : 65-6293-4377
Facsimile : 65-6296-6482

Sumiko Electronics Taiwan
Co., Ltd.*
16. East 7th St., N.E.P.Z.
Kaohsiung, Taiwan, R.O.C.
Phone : 886-7-365-3592
Facsimile : 886-7-361-2458
Sumiko Leadframe (Thailand)Co., Ltd.*
1/49 Rojana Industrial Park Moo 5,
Tambol kanham, Ampbur Utai,
Ayutthaya 13210, Thailand
Phone : 66-35-226303
Facsimile : 66-35-226308
P.T.SUMIKO LEADFRAME BINTAN*
Lots D6&D7, Bintan Industrial
Estate, Lobam/Bintan, Riau
Province, Indonesia
Phone : 62-770-696020
Facsimile: 62-770-696025
Sumiko Leadframe Singapore
Pte.Ltd.*
No.35/41 Kallang Place, Singapore
339163
Phone : 65-6293-4377
Facsimile: 65-6296-6482
Sumiko Leadframe Chengdu
Co., Ltd.*
No: 7,Xin Yuan Nan,Er Lu,
Singapore Industrial Park, Chengdu
Hi-Tech Development Zone,
Sichuan, China.
Phone : 86-28-8515-5577
Facsimile: 86-28-8518-0228
SMM USA, Inc.*
4055 Calle Platino, Oceanside,CA
92056,U.S.A.
Phone : 1-760-941-4500
Facsimile: 1-760-941-0900
SMMEP Pte. Ltd.*No. 6 Tuas Avenue 20
Singapore 638820
Phone : 65-6863-1123
Facsimile : 65-6863-2062*Consolidated subsidiaries

SMM Group 49

Corporate Data/Investor Information
As of March 31, 2003

Corporate Data
FOUNDED
1590

NUMBER OF EMPLOYEES2,182

INCORPORATED1950

CONTACT INFORMATIONIR Dept. :11-3, Shimbashi 5-chome
Minato-ku, Tokyo 105-8716, JapanPhone: 81-3-3436-7921
Facsimile : 81-3-3436-7879

HEAD OFFICE
11-3, Shimbashi 5-chome, Minato-ku, Tokyo 105-8716, Japan
PAID-IN CAPITAL¥88.3 billion

Investor Information
CLOSING DATEThe Company’s books are closed on March 31 each year.

STOCK TRANSACTION UNITS
1,000-share units

REGULAR GENERAL MEETING
The regular general meeting of shareholders is held in June eachyear.

STOCK TRANSFER AGENTThe Sumitomo Trust and Banking Company, Limited
Head office:5-33, Kitahama 4-chome, Chuo-ku, Osaka

COMMON STOCK
Number of authorized shares:
1,000,000,000 shares
Number of issued and outstanding shares:
571,872,794 shares
LISTING OF SHARESTokyo and Osaka stock exchanges

Stock Transfer Agency Department:
4-4, Marunouchi 1-chome, Chiyoda-ku, Tokyo
PUBLIC NOTICESThe Company’s public notices appear in the Nihon Keizai
Shimbun published in Tokyo, Japan.
INDEPENDENT PUBLIC ACCOUNTANTS
Asahi & Co.
1-2, Tsukudo-cho, Shinjuku-ku, Tokyo

PRINCIPAL SHAREHOLDERS
Number of shares held
(thousands)
Japan Trustee Services Bank. Ltd. (Trust accounts) ........................................................................................................
The Master Trust Bank of Japan, Ltd. (Trust accounts) ..................................................................................................
Sumitomo Mitsui Banking Corporation ...........................................................................................................................
Separately managed money trustee, Mitsui Asset Trust and Banking Company, Limited “1” .......................................
Pension trustee, Mitsui Asset Trust and Banking Company, Limited “2” ......................................................................
Japan Trustee Services Bank. Ltd. / The Sumitomo Trust and Banking Co., Ltd. (Retirement benefit trust account) ...
UFJ Trust Bank, Limited. (Trust accounts “A”) ..............................................................................................................
Sumitomo Corporation .....................................................................................................................................................
Sumitomo Life Insurance Company ................................................................................................................................
The Mitsubishi Trust and Banking Corporation (Trust accounts) ...................................................................................

50 Corporate Data/Investor Information

78,45230,564
20,16815,536
15,244
11,885
11,645
9,905
9,108
8,505

Percentage ofvoting rights

13.9 %
5.4
3.6
2.7
2.7
2.1
2.1
1.8
1.6
1.5

Corporate Officers

DIRECTORDIRECTOR

Takeshi Yamane

Nobuto Yamaguchi

DIRECTOR

Masashi Koike

REPRESENTATIVE DIRECTOR

REPRESENTATIVE DIRECTOR

DIRECTOR

Chitsura Arakawa

Koichi Fukushima

Hirosuke Chihara

DIRECTORS ANDSTATUTORY AUDITORSEXECUTIVE OFFICERS(As of July 22, 2003)(As of July 22, 2003)

REPRESENTATIVE DIRECTORSPRESIDENT

Koichi Fukushima
Chitsura Arakawa
DIRECTORS

Koichi Fukushima
EXECUTIVE VICE PRESIDENT
Chitsura Arakawa

EXECUTIVE OFFICERS
Ryoichi Suzuki
Yukio Ishikawa
Takuro Mochihara

Hirosuke Chihara

SENIOR MANAGING EXECUTIVE

Susumu Makino

Nobuto Yamaguchi

OFFICER

Masashi Koike

Takeshi Yamane
Masashi Koike(STANDING) SENIOR AUDITOR
Isao Shima(STANDING) AUDITOR
Masahide Tsuno

Hirosuke Chihara
MANAGING EXECUTIVE OFFICERS

Ichiro Abe
Kotaro Tomino

Akira Ichinose

Naoki Tajiri

Koji Aiba

Yoshiaki Hashinaka

Nobuto Yamaguchi
Takeshi Yamane

AUDITORS
Hajime Ohta
Tsutomu Ushijima

Corporate Officers 51