Developing New Stages for Our Core Businesses
Annual Report 2004 For The Year Ended March 31, 2004

Philosophy & Management Vision
SMM Group Corporate Philosophy

Contents

1. Sumitomo Metal Mining Co., Ltd.(“SMM”), in

Consolidated Financial Highlights ......................................... 1
To Our Shareholders ............................................................. 2
Special Feature: Profit Growth Strategy through
New Mid-term Management Plan ................ 6
Our Approach to Corporate Governance and Compliance ..... 9
Review of Operations ............................................................. 10
Financial Section .................................................................... 22
SMM Group .......................................................................... 53
Corporate Data and Investor Information............................... 54
Corporate Officers .................................................................. 55

accordance with the Sumitomo’s Business Spirit,
shall, through the performance of sound corporate
activities, seek to make positive contributions tosociety and to fulfill its responsibilities to its stakeholders, in order to win ever greater trust.
2. SMM shall, based on respect for all individuals andrecognizing each person’s dignity and value, seek to
be a forward-minded and vibrant company.
SMM Group Management Vision
Based on the principles of compliance, environmental protection and operational safety, the Sumitomo
Metal Mining Group shall pursue maximum corporate value through the provision, via its global network, of high-quality materials such as non-ferrous
metals and electronics materials.

Unless specifically stated otherwise, information in this annual
report is as of August 31, 2004.
Forward-looking Statements
Statements made in this annual report with respect to plans,
strategies and future performance that are not historical facts areforward-looking statements. SMM cautions that a number of factors could cause actual results to differ materially from those discussed in the forward-looking statements.

Consolidated Financial Highlights
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIES

Year-on-yearchange (%)

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

2004/2003

2004

2003

2002

2004

For the Year:Net sales ...................................................................
Operating income ....................................................
Recurring profit ........................................................
Income (loss) before income taxes ............................
Net income (loss) .....................................................
Net cash flows from operating activities ....................
Capital expenditures .................................................
Depreciation ............................................................

13.2
37.3
91.0
—
—
23.8
145.9
(2.5)

¥402,131
22,77827,811
31,194
19,88232,32446,54017,824¥355,242
16,593
14,559(7,505)(1,172)
26,10518,92718,283¥330,194
1,147(1,477)(12,588)(6,611)33,37025,37917,822$3,804,816
215,517
263,137
295,146
188,116
305,838
440,344
168,644

At Year-End:Total assets ...............................................................
Shareholders’ equity .................................................
Interest-bearing debt ................................................

10.0
13.3
(4.2)

517,930
253,071
148,351

470,774
223,341
154,799

518,756
236,313167,077

4,900,464
2,394,465
1,403,643

Per Share (Yen, U.S. Dollars):
Net income (loss) .....................................................
Shareholders’ equity .................................................
Cash dividends .........................................................

—
13.3
20.0

34.76
443.296.0(2.05)
391.145.0(11.56)413.28
4.0

0.33
4.19
0.06

Ratios:ROA (%) .................................................................
ROE (%) ..................................................................
Equity ratio (%) .......................................................
Interest-bearing debt to total asset ratio (%) .............
Interest coverage ratio (times) ...................................

—
—
—
—
—

4.02
8.35
48.9
28.6
14.8

—
—
47.4
32.9
9.9

—
—
45.6
32.2
9.1

Years ended March 31

Notes: 1. Recurring profit = Operating income + Nonoperating income - Nonoperating expenses
2. 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.
3. U.S. dollar figures are translated, for convenience only, at the rate of ¥105.69=U.S. $1, the effective rate of exchange prevailing on March 31, 2004.

Net Sales

Operating Income (Loss)Net Income (Loss)(Billions of yen)(Billions of yen)(Billions of yen)

500

30

20

400
20
10
300
10
200
0
0
100

0

-10
’00

’01

Mineral resources

’04

-10

’02

’03

’00

MetalsElectronics & advanced materials

’01

’02

’03

Construction materials

’04

’00

’01

’02

’03

’04

OthersNote: Sum of segments is not consistent with the actual figure because net sales and operating income of each segment include inter-segment transactions.

Consolidated Financial Highlights 1

To Our Shareholders
Koichi Fukushima, President
Consolidated Results for Fiscal Year 2003
In fiscal year 2003 (April 2003–March 2004), therecovery trend in the Japanese economy graduallystrengthened, supported by a turnaround in the business environment that included recovery in the U.S.
economy and higher stock prices. In the non-ferrous
metal industry, the prices of non-ferrous metals such ascopper and nickel soared into the second half of the fiscal year due to strong demand and a series of production difficulties at a major overseas producer. The foreign exchange rate saw the yen strengthen sharply fromthe end of first half into the second half. Electronicsrelated industries enjoyed an improvement in semiconductor demand amid expansion of the digital homeelectronics market.
In this environment, based on the Mid-termManagement Plan that we implemented in fiscal years
2002 and 2003 (hereafter, the previous Mid-termManagement Plan), we sought to further enhance thestrength and flexibility of our corporate structure andboost profitability by reforming business structure and2 To Our Shareholders

cost structure.
In fiscal year 2003, our consolidated net sales totaled¥402.1 billion, up 13.2% from the previous fiscal year.
Operating income increased 37.3% from the previous
fiscal year to ¥22.8 billion, supported by profit growthin all segments, including a return to the black in theConstruction Materials segment due to cost reduction
efforts. As a result of this and an increase in equity inthe earnings of our overseas mining companies andother affiliated companies, recurring profit* surged
91.0% from the previous fiscal year to ¥27.8 billion.
Moreover, net income reached a historical high of ¥19.9
billion compared with a ¥1.2 billion net loss in the previous fiscal year, largely due to a decrease in writedowns of investment securities.
In fiscal year 2003, the final year of the previous Midterm Management Plan, we targeted consolidated ROA
of 3% or better while maintaining a consolidated equity
ratio of at least 40%. Indeed, we achieved this target
with consolidated ROA of 4.0% and a consolidated
equity ratio of 48.9%.

Our basic dividend policy is to link our dividend to
performance while maintaining a stable dividend by
taking into account the development of future business,the reinforcement of corporate structure, and the payout ratio. In fiscal year 2003, we increased our annual
dividend by ¥1 to ¥6 per share in response to theimprovement in the external environment and increases
in both sales and profits through achievement of ourprevious Mid-term Management Plan.
* Recurring profit = Operating income + Non-operating income - Non-operating expenses

Evaluation of the Previous Mid-termManagement Plan
The previous Mid-term Management Plan aimed tobuild a strong and flexible corporate structure and earnings base by implementing a radical reform of businessstructure and cost structure. Not only did we boost asset
efficiency, as demonstrated by the numerical target successes mentioned above, we achieved the following
results that will contribute to the solidification of ourearnings base going forward.
1) Business Structure Reform—Further
Implementation of the Select and Focus Strategy
In our core businesses, we promoted further implementation of the select and focus strategy. In the Mineral
Resources and Metals segments, we tackled large-scale
projects for the medium to long term that are aimed at
establishing a stable procurement of mineral resources
and an expanded production capacity based on demand
growth. In the Electronics Materials business, we sought
to strengthen our business structure by sharpening our
focus on the materials field and promoting organizational flattening. We also spun off our IC packaging
materials business and reorganized overall production
systems.
a) Coral Bay Project: Securing a Stable
Procurement of Nickel Resources
In the area of nickel, the Coral Bay Project, in which
we are investing a total of US$180 million, is progressing smoothly. Located at Rio Tuba in the southern part of Palawan Island, the Philippines, this nickel
oxide ore processing plant was completed at the end

Equity Ratio and ROA Targets Both Achieved
Fiscal Year 2003 Targets: ROA of 3% or better
while maintaining an equity ratio of at least 40%(Billions of yen)

(%)

25
5

50

(%)

20
4

40

15
3

30

10
2

20

5
1

10

0

0

-5
-1

-10

-10
-2

-20
FY1999FY2000Net income (loss) (above left)

FY2001

FY2002

ROA (below left)

FY2003Equity ratio (right)of August 2004 and is scheduled to begin commercial
production in December.
Conventionally, nickel sulfide ore and high-grade
nickel oxide ore (garnierite) have been the principal
raw materials for nickel. A special characteristic of theCoral Bay Project is that it uses as its raw material the
low-grade nickel oxide ore laterite, formerly considered technologically difficult to process. Establishinglaterite ore processing technology and achieving stable
operations are important not only from the standpoint of securing a stable procurement of nickel
resources. By enabling nickel production at a low cost,
it is also of major significance for our efforts to takethe initiative in the global nickel refining industry
going forward.
b) Expanding Production Capacity to Strengthen
Copper Cost-CompetitivenessIn the area of copper, we are gradually expanding
annual production capacity at the Toyo Smelter &Refinery, our domestic copper production site, to450,000 tonnes. In fiscal year 2003, we increased it to
300,000 tonnes and plan to reach 410,000 tonnes by
fiscal year 2006. When the 450,000-tonne system isachieved, the Toyo Smelter & Refinery’s production
capacity will be among the world’s largest in the copper refining industry. To match the forthcoming proTo Our Shareholders 3

duction capacity increase, we have sought to participate in a new mine as a means of securing in-housemineral resources. Although we were unable to achieve
this during the previous Mid-term Management Plan,
we are making every effort to achieve this under thecurrent Mid-term Management Plan.
c) Expanding Profit by Developing a New GoldMine
In the area of gold, we have acquired all the necessary
development permissions for our Pogo Gold Projectin Alaska, the U.S., and have begun construction.
Operations are scheduled to begin in March 2006.
This project is of great significance for us in that it is
the first overseas mine development project in which
we have been the lead developer. Applying the minemanagement experience that we have acquired at our
Hishikari Mine, we are focusing our efforts on asmooth start of operations.
d) Improving Profits at Affiliated Companies
We have made efforts to improve profits at affiliatedcompanies, which included withdrawing from
unprofitable businesses. As a result, the total operating
loss at consolidated subsidiaries in the red shrankfrom ¥5.4 billion in fiscal year 2001 to ¥2.2 billion in
fiscal year 2003. In addition, total operating income
at those in the black increased from ¥2.2 billion fiscal
year 2001 to ¥7.9 billion in fiscal year 2003.
(For details, please see the graph on page 6.)2) Cost Structure Reform—Implementation of
Short-term Measures to Strengthen Profit
As short-term measures to strengthen profit, wereformed our cost structure by implementing a variety
of projects to cut expenses and reform procurement system. As a result, we reduced procurement, personnel
and other costs by ¥8.2 billion in total in fiscal year
2003 compared with fiscal year 2001.
In fiscal year 2004, moreover, we have introduced
ERP (Enterprise Resource Planning) and the SSC(Shared Service Center) we had been promoting preparation as a means of improving support department efficiency. We aim to reduce administrative expenses by
4 To Our Shareholders

approximately 30% by fiscal year 2005 through standardization and improvement of office procedure efficiency and fostering information sharing with ERP as
well as streamlining group companies’ administrative
operations with SSC.
Formulating the New Mid-term Management
Plan
Based on the Corporate Reform Plan (fiscal years 20002001) and the previous Mid-term Management Plan,
we made steady progress in establishing a stronger earnings base. We have now positioned the three-year Midterm Management Plan that started from April 2004
(hereinafter, the new Mid-term Management Plan) as a
new start toward achieving an optimal corporate structure. In order to clarify where that will take us, we havereviewed our corporate philosophy and formulated a
new philosophy for the SMM Group that is based on
the Sumitomo Business Spirit. We also formulated a
new Management Vision based on this philosophy.
(Please refer to “Corporate Philosophy” on the back of
the front page.)
The basic strategy of our new Mid-term Management
Plan is to expand and strengthen core businesses anddevelop new products. We aim for this to put ourselves
among the world’s “non-ferrous majors” in the Mineral
Resources and Metals segments in ten years’ time andgive us “top global shares in each of the products” in ourElectronics Materials and Advanced Materials segment.
1) Further Promotion of Shift to “Mineral Resource+ Refining” Business Model in the Mineral
Resource and Metals Segments
Global demand for copper and nickel is expected to
expand further due to economic development in China
and other Asian countries. In order to fully leverage thisgrowth opportunity, expanding production capacity will
not be enough. We must also secure our own supplies ofmineral resources. To that end, we are already making
steady progress toward completion of the Coral Bay
Nickel Project and the Pogo Gold Project. In addition,
we aim to acquire a stake in a new mine at the earliest
possible date in order to boost our in-house copper ore
ratio from the current 1:2 to 2:3.

2) Top Class Share and Profit Expansion in theElectronics Materials and Advanced Materials
Segment
The electronics-related industries should see demand
continue to expand over the medium to long term
thanks to growth in the digital home appliance market.
We aim to give this business a strong presence byachieving a top global share for each of its main products while remaining focused on actively developing
business in China markets. Specifically, these products
include 1) bonding wire, where we will leverage thestrengths of in-house gold procurement and processing
technologies, 2) nickel paste, where we aim to further
expand sales and enter new areas for multilayer ceramic
capacitors, 3) lead frames, where we have achieved
strong cost-competitiveness by restructuring our production system, and 4) copper-clad polyimide film,
where demand is expected to expand to the highest everlevel due to the extension of its use to LCD TVs. In our
research and development, moreover, we are working tocreate at least five new products that will each reach¥1.0-¥3.0 billion in annual sales by fiscal year 2006.
3) Financial Targets and Maintaining the Financial
Position
By implementing the business strategy describedabove, we aim to achieve consolidated recurring profit
of at least ¥35.0 billion, a 26% increase comparedwith fiscal year 2003, while maintaining a consolidated equity ratio of at least 40% by fiscal year 2006, thefinal year of the plan. Under the previous Mid-termManagement Plan, we adopted ROA as an indicatorthat attached importance to asset efficiency. Under the
new Mid-term Management Plan, however, we havenarrowed the focus to strengthening profitability as

the next step and have set an absolute recurring profit
target. We are currently in a relatively favorable external environment that includes rising prices for nonferrous metals. That, however, is no reason to slacken
our efforts. We will continue to steadily implement
the measures laid out in our new Mid-termManagement Plan.
At the same time, we will continue to maintain oursolid financial position. The capital expenditure that
we have scheduled, mainly for large-scale projects in
the Mineral Resources and Metals segments, will basically be covered by depreciation and income before
income taxes. We thereby plan to keep interest-bearing
debt at its current level.
In Closing
Achieving the “maximization of corporate value”
called for in our Management Vision is not limited tothe business strategies described above. We are also
aware of the importance of further strengthening ourmanagement base with making corporate activities
both efficient and sound by strengthening corporate
governance, solidly establishing a compliance systemthat incorporates the lessons learned from the JCO
criticality accident, fostering a safety-conscious culture, and reinforcing the risk management systemneeded to achieve it. We hope to fulfill our responsibilities to our stakeholders and to contribute to society
by working toward achieving these goals.
All of our management and employees are committed to working in close cooperation to maximize corporate value by steadily implementing the new Midterm Management Plan based on sound business practices. We look forward to your continued support andunderstanding.

August 2004

Koichi Fukushima
President

To Our Shareholders 5

Special Feature: Profit Growth Strategy through
New Mid-term Management Plan
Evaluation of Previous Mid-term Management Plan (Fiscal Years 2002-2003)
Under the previous two-year mid-term management plan that started in fiscal year 2002, SMM undertook
Business Structure Reform and Cost Structure Reform aimed at building a strong and sound corporate structure and improving profitability.
1. Progress with Financial Targets

gradually boosting annual capacity to 450,000 tonnes. We com-

Equity Ratio and ROA Targets Both Achieved

pleted an increase from 270,000 to 300,000 tonnes in fiscal year

In fiscal year 2003, the final year of the plan, we targeted consolidat-

2003 and plan to reach 410,000 tonnes by fiscal year 2006.

ed ROA of 3% or better while maintaining a consolidated equity
ratio of at least 40%. As a result of Business Structure Reform based

We also actively considered prospecting and investing in projects

on a select and focus strategy and Cost Structure Reform, coupled

as means of developing new mines for the stable supply of raw

with our asset streamlining efforts, we achieved consolidated ROA

material required by 450,000 tonnes annual copper productionof 4.0% and consolidated equity ratio of 48.9%, laying the ground-capacity. However, we were unable to make progress in this area

work for strengthening profitability.

under the 2002-2003 plan. We were also studying participation ina new nickel oxide ore project that Inco Ltd. (Canada) is promot-

2. The Results of Business Structure Reform

ing in New Caledonia. As Inco is currently reviewing the plan

1) Applying Select and Focus Strategy to Core Businesses

with the goal of cutting the amount of investment, however, we

We promoted the select and focus strategy in Mineral Resources

will decide whether or not to participate after the review has been

and Metals segments and the Electronics Materials and Advanced

completed.

Materials segment, which are our core businesses.
In the Mineral Resources and Metals segments, we emphasizedpromotion of the large-scale projects outlined below in order to2) Enhancing Efficiency through Alliances and by
Withdrawing from Unprofitable Areas

strengthen profitability in the medium to long term. In the

We enhanced the efficiency of our zinc and sulfuric acid business-

Electronics Materials and Advanced Materials segment, we concen-

es by setting up joint ventures with Mitsui Mining & Smelting

trated management resources in areas such as paste and copper-cladCo., Ltd. and Dowa Mining Co., Ltd., respectively. Also, we soldpolyimide film that use the materials technology in which we areor withdrew from businesses with less prospect and those withstrong, in addition to restructuring businesses.

limited synergy with our core businesses. By the end of fiscal year
2003, we had shut down or sold off 27 of the 94 affiliated com-A) Coral Bay ProjectThis project is the construction of a low-grade nickel oxide oreprocessing plant in the Philippines for producing an intermediate

panies we had as of April 2000.
As a result, the earnings of consolidated subsidiaries improved
as follows.

product of nickel refining. The plan is proceeding smoothly. We
completed construction in August 2004 and commercial production will begin in December.

Earnings of Consolidated Subsidiaries(Operating Income)(Billions of yen)B) Pogo Gold ProjectThis project is in Alaska, the U.S. In May 2004, we received all

10
7.9

5

5.6

4.6

the permissions required to begin construction and are proceedingwith operations scheduled to begin in March 2006. The main ore

2.2

0

deposit is estimated at 152 tonnes of gold reserves and we are targeting annual production of 12 tonnes.

5.4

-1.4

-2.4

-2.2

FY2002

FY2003

-5
-5.4
-7.1

C) Expanding Annual Copper Production to 450,000 Tonnes
We are expanding production facilities at the Toyo Smelter &Refinery, our domestic copper production site, with the goal of
6 Special Feature-10
FY1999FY2000

Unprofitable companies

FY2001

Profitable companies

3. The Results of Cost Structure Reform

In addition, having targeted improvement in supporting depart-As a result of the measures shown below, we cut costs by ¥8.2 bil-ment efficiency by introducing ERP (Enterprise Resourcelion compared with fiscal year 2001 results, which falls slightly

Planning) and converting to SSC (Shared Service Center) in fiscal

short of the fiscal year 2003 target.

year 2003, these were launched one year behind schedule in April
FY2003 Targets(vs. FY2001)

Cost Reduction Project ....................
Procurement Innovation Project ......
Personnel Reduction ........................
Total Cost Reduction ......................

Billions of yen
FY2003 Results

2004. ERP will standardize and improve the efficiency of office

1.2
4.4
2.6
8.2

the redundant office procedures of group companies’ supporting

1.0
5.0
2.4
8.4

procedures and foster information sharing while SSC will integrate
departments. We expect these to reduce supporting department
expenses by approximately 30% in fiscal year 2005 or later.

Essential Features of the New Mid-term Management Plan (Fiscal Years 2004-2006)
Acknowledging the groundwork for strengthening profitability laid by Corporate Reform Plan (fiscal years 2000-2001)
and the previous Mid-term Management Plan, the new Mid-term Management Plan bases its strategy on expanding
and strengthening core businesses and on developing new products. In ten years’ time, we aim for this to put usamong the “non-ferrous majors” in the Mineral Resources and Metals segments and give us “top global shares ineach of the products” in our Electronics Materials and Advanced Materials segment.
2. Specific Measures for Achieving the Numerical

1. Numerical Targets for Fiscal Year 2006
1) Consolidated Financial Targets

Targets
1) Essentials of Our Business Strategy

In fiscal year 2006, the final year of the new Mid-termManagement Plan, we are aiming for recurring profit of at least*For details please refer to the Review of Operations.

¥35.0 billion while maintaining the equity ratio at 40% or higher.

Mineral Resources and Metals Segments:
With a view to ranking among the “non-ferrous majors” in ten

FY2003 Results

Billions of yen
FY2006 Targets

402.1
27.8
19.9
48.9%
148.4

480.0
35.0
25.0
40% or above
165.0

29%

30% or below

own mines from the current 1/2 to 2/3 in the future, we plan toNote: Recurring profit = Operating income + Nonoperating income - Nonoperating expenses

participate in at least one new mine development by fiscal year

Net sales ....................................
Recurring profit ........................
Net income ...............................
Equity ratio (%) ........................
Interest-bearing debt .................
Interest-bearing debt tototal asset ratio (%) ...............

years’ time, we aim to transition from the “ore purchasing andrefining” type of business model to the “mineral resources +refining” type by increasing the level of business resources that
we commit to overseas natural resource development. With copper in particular, in order to boost the ratio produced from our2006.
Our financial targets are based on the following assumptions.
These are based on a thorough analysis of market trends over theElectronics Materials and Advanced Materials Segment:

past ten years.

We aim to turn this business into a major presence by securing
FY2006 Assumptions

FY2003 Results

110
90.7
3.50
320.0
950

113.06
92.8
5.10
377.6
899

Exchange rate (¥/$) ..................
Copper price (¢/lb) ...................
Nickel price ($/lb) ....................
Gold price ($/toz) .....................
Zinc price ($/ton) .....................

top global shares for each of its products through the active
development of China and other Asian markets. Specifically, themain products will be bonding wires, paste, lead frames, and copper-clad polyimide film.

Note: Exchange rate represents an average for the fiscal year.

Special Feature 7

Other Businesses:

3) Research & Development

We aim to place the Construction Materials business on a prof-

We aim to develop at least five new products worth ¥1.0-¥3.0

itable footing by implementing radical measures for improving

billion each in annual sales by fiscal year 2006. Our R&D isefficiency with cost cutting effects of ¥1.9 billion in total. In

focused on the following Electronics Materials and Advanced

addition, we plan to boost net sales in our Environmental busi-

Materials themes from our four core technologies

ness from ¥18.0 billion in fiscal year 2003 to ¥24.0 billion in fis-(separation/refining/crystallization technology, fine powder tech-cal year 2006 by actively promoting our environmental improve-

nology, surface treatment technology, organic resin technology).

ment business and recycling business.

Investment in new product R&D over the three–year period will
be approximately ¥7.0 billion.

2) Net Sales and Operating Income by Segment
Comparing fiscal year 2003 results and fiscal year 2006 targets by• Power storage and generation materials (battery materials, etc.)

segment, the largest planned sales growth is in Mineral Resources• High efficiency energy materials (crystal materials, etc.)

segment (34.4%) and the Electronics Materials and Advanced• Thin-film materials (various target materials, etc.)

Materials segment (32.4%).

• Nano materials (upgrading of functional ink, paste, etc.)

The largest increases in operating income are in Electronics• Thin package materials (upgrading of copper-clad polyimide

Materials and Advanced Materials segment (225%) and thefilm, etc.)

Mineral Resources segment (50%). We aim to maintain profitability in the Construction Materials segment by further improving

4) Investment Plans

efficiency. As a result, in fiscal year 2006 the Mineral Resources

Our investment plan for the three-year period is ¥140.0 billion andsegment should account for about 20% of earnings and the Metals

is centered on the following major projects in the Mineralsegment and Electronics Materials and Advanced Materials seg-

Resources and Metals segments.

ment should account for 30%-40% respectively.
• New copper mine development I (¥23.0 billion)

Net Sales by Segment• New copper mine development II (¥11.0 billion)(Billions of yen)

• Expanding annual copper production to 450,000 tonnes

600
25
10 15

400

15 189

143
290

273

(¥9.0 billion)• Pogo gold project (¥13.5 billion)• Coral Bay project (¥4.0 billion)• New nickel oxide ore project II (¥11.0 billion)200(As of formulation of 2004-2006 plan)
34

25

0
FY2003

FY2006 (Target)

income before income taxes (¥66.0 billion) over three years withOperating Income by Segment

the difference funded through long-term loans, bonds, and com-

(Millions of yen)

40,000

mercial paper. By maintaining interest-bearing debt at the current
300 1,300
12,60030,000391 7 5,612

20,00012,567

12,10010,000
4,460

6,700

0
FY2003

FY2006 (Target)

Mineral resources
MetalsElectronics & advanced materials
Construction materials
OthersNote: Sum of segments is not consistent with the actual figure because net sales and operating
income of each segment include inter-segment transactions.

8 Special Feature

The investment will be covered by depreciation (¥76.0 billion) andlevel, the investment will be aggressive but within reasonable limits.

Our Approach to Corporate Governance and Compliance
Basic Philosophy of Corporate Governance
SMM positions corporate governance as one of the mostimportant management issues for both maximizing corporate
value and ensuring sound management. We believe that astatutory auditor system and executive officer system are themost appropriate approach to creating a governance systemcapable of applying the executive and auditing functions to abusiness in a way that fits our business characteristics. Basedon these systems, we have put in place a governance systemthat enables our directors, statutory auditors, and executive
officers to effectively exercise their functions.

Statutory Auditors
There are four statutory auditors, two of whom are from outside the Company. The two internal statutory auditors apply
their work experience at SMM to their position as statutory
auditor for the commercial code and present their views atimportant meetings such as the Board of Directors andManagement Committee. One of the external auditors is auniversity professor and the other is an attorney. They apply
the expertise of their special fields when they present theirviews to the Board of Directors. Neither of these auditors has
previously worked for any of the SMM Group companies.

Directors, Board of Directors
We currently have seven directors. We believe this size isappropriate to ensure the lively discussions and flexible decision-making in the Board of Directors.

Compliance, Risk Management, and Our
Involvement in the Environment and Society
Taking to heart the lessons of the criticality accident that
occurred in September 1999 at JCO Co., Ltd., one of our
subsidiaries, we designed a Corporate Reform Plan in April
2000 and have attached great importance to compliance inthe conduct of our business.
In April 2004, we established a management philosophy for
the SMM Group and the “SMM Group Code of Conduct” tohelp directors and employees implement it. The Code of
Conduct comprises 17 articles whose subjects, centered oncompliance, include safety, risk management, and consideration for the global environment, and we are actively promoting their implementation.

Executive Officer System
We have reinforced the executive function through clarification of authority and responsibility and through a broad delegation of authority. There are 17 executive officers (seven ofwhom also serve as directors) who carry out their work by
being assigned specific authority for important tasks such as
divisional managers and headquarters office managers.
Remuneration is linked to performance.

Organizational Chart of Corporate Governance
General Shareholders’ Meeting
Election
Board of Directors
Major decision and oversight
Board of
Statutory
Auditors
Operationandaccounting
auditElection and supervision
Auditing

Management
Committee
Deliberations

Auditing
Department
Internal audit

President & Representative
Director, Executive Officers
Execution of business
Headquarters
Divisions
Review
Auditing

Auditing Independent
Registered
Accountant
Accounting
audit

ReviewBusiness Division
Operation ofbusiness

Our Approach to Corporate Governance and Compliance 9

Review of Operations
Contents
At a Glance ........................................................................ 11
Mineral Resources and Metals ............................................ 12
Electronics Materials and Advanced Materials .................... 17
Other Businesses ................................................................ 21

At a Glance
Business Profile
Segment
Mineral Resources

Operations• Exploration, development, production, and sales of
non-ferrous metal resources, domestically and overseas• Geological consulting utilizing mineral resource developing techniques

Main Products and Services
Gold and silver ores, copper concentrates

Metals• 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.

Electronics Materials• Manufacturing, processing and sales of IC packaging
materials, electronics materials, crystal materials, etc.
• Manufacturing and sales of optical communicationmaterials and devices, connectors, switches, electricalcontacts, TV frames, 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)

Advanced Materials• 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 cobaltite), rareearth metal bonded magnets

Other Businesses• Construction materials and housing business• Environmental business (environmental engineering,soil remediation, environmental analysis, irradiation)

Siporex (ALC: autoclaved lightweight
concrete); design and installation of environmental protection equipment; designand execution of corrosion prevention
construction; design and installation related to assessment and remediation of soil
and groundwater contamination; all typesof environmental analysis including waterand soil quality, irradiation sterilization of
medical equipment, etc.

Net Sales by Segment

3.8 2.0

33.9

Operating Income and
Net Cash Flows
from Operating Activities

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

40

50

30

40

20

30

10

20

0

10

4.1

FY 2003
Net Sales:¥402.1 Billion

56.2

-10

0
FY99

Mineral resources

Metals

FY00

Electronics & advanced materials

Note: Percentage of each segment is calculated with
net sales to outside customers which does not include
inter-segment transactions.

FY01

FY02

FY03

Construction materials

FY99

Others

FY00

FY01

FY02

FY03

Net cash flows from operating activities

Note: Sum of segments is not consistent with the actual figure
because operating income of each segment include
inter-segment transactions.

Review of Operations 11

Mineral Resources and Metals
Results for Fiscal Year 2003
In fiscal year 2003, the Mineral Resources segment posted net
sales of ¥25.3 billion, up 2.6% from the previous fiscal year,

Annual Production Volume by Metal(Non-Consolidated)(Thousands of tonne)(Thousands of kg)

300

300

200

200

100

100

and operating income of ¥4.5 billion, up 66.3%. The Metals
segment posted net sales of ¥273.4 billion, up 20.8%, andoperating income of ¥12.6 billion, up 50.9%. This profit
growth is attributable to improvement in domestic demandand higher copper and nickel prices, which offset lower product sales prices due to the strong yen and decreases in dollardenominated processing revenue due to yen conversion.
0

0

Basic Business Strategy
The strengths of our Mineral Resources and Metals segments
are 1) an earnings structure that is relatively immune to indi-

FY1999(Left)

Copper

FY2000

Nickel

FY2001Zinc

FY2002(Right)

FY2003Gold

SilverNotes: 1.Production volume includes outsourced production
2.Nickel includes ferro-nickel

vidual non-ferrous metal prices or supply and demand conditions due to the variety of products handled (nickel, copper,
precious metals, zinc, etc.) and 2) possession of advanced

Estimation of Sales Volume by Metal
FY2003 Results
293,30258,90958,471

FY2006 Targets
410,000
63,00076,000mineral resource development to refining. On the other hand,

Copper (tonne) ....
Nickel (tonne) ......
Gold (kg) .............

in the case of copper and nickel, in particular, demand is

Note: Gold sales volume in FY2006 does not include Pogo.

refining technology and integration of all operations fromexpanding on the back of China’s burgeoning economy, but
the raw materials are becoming increasingly difficult to procure due to the oligopolization of their markets. This makes
securing our own mineral resources an important issue in the
future development of our business.
Under our New Mid-Term Management Plan, therefore, we
are accelerating our transition to a “mineral resources + refining” type business model that fully leverages our strengths in
the refining field by intensifying our efforts to secure newmineral resources under our own control. In addition, we aim
to boost cost-competitiveness based on expanding andstrengthening the scale of production with a view to ranking
among the world’s “non-ferrous majors” in ten years’ time.
12 Review of Operations

Percent change (%)
39.8%
6.9%
30.0%

SMM’s Mines and Refineries

Pogo (under construction)(51%)

Morenci (12%)

Jinglong Copper Co., Ltd. (copper 150, 000 tonnes)
Coral Bay (nickel/cobalt mixed sulfide–nickel 10,000 tonnes,
cobalt 700 tonnes)
Soroako (20.1%)
La Candelaria(16%)

Batu Hijau (copper, gold) (5%)
Figesbal (25.5%)
Northparkes (13.3%)

Harima Smelter (zinc 90,000 tonnes , lead 30,000 tonnes)
Toyo Smelter & Refinery (copper 300,000 tonnes,
gold 60 tonnes, silver 360 tonnes)
Mine (SMM’s interest)
Gold
NickelCopperRefinery (annual production capacity)

Niihama Nickel Refinery (nickel 36,000 tonnes)
Shisaka Plant (zinc oxide 120,000 tonnes *processing capacity)
Hyuga Smelting Co., Ltd. (ferro-nickel 21,000 tonnes)
Hishikari Mine Dept. (100%)

SMM’s Metal Share and Value
By Mine(Thousands of tonne)(Millions of U.S. Dollars)

By Metal(Thousands of tonne)(Millions of U.S. Dollars)

1,000

5,000

2,500

10,000

800

4,000

2,000

8,000

600

3,000

1,500

6,000

400

2,000

1,000

4,000

200

1,000

500

2,000

1
0

Morenci
Northparkes
FigesbalPogo
La Candelaria
SoroakoBatu Hijau
SMM’s Metal Share (left)
CopperGold
NickelCobaltEstimated Value (right)

0

HishikariCoral Bay

0

0

Gold

NickelCopper

SMM’s Metal Share (left)
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 = Copper: 117.9¢/lb, Gold: 400$/toz, Nickel: 5.0$/lb, Cobalt: 16.5$/lb

Review of Operations 13

NickelWe expect demand for nickel, whose principal use is in stainless steel, to continue to expand over the medium to long term,
as we estimate that global production of stainless steel willgrow at an annual rate of approximately 5%, supported by the
rapid expansion of demand in China. As nickel producers havelittle room to expand production, the nickel price rose to
US$5.10/lb in fiscal year 2003, up 54% from the previous fiscal year.
SMM offers a variety of nickel products, including high-will be approximately US$180 million. Commercial produc-

purity electrolytic nickel for electronics materials and ferro-tion is expected to begin in December 2004. SMM will pur-nickel for stainless steel. Notably, we are the only domestic

chase all of the nickel intermediate produced by this projectproducer of electrolytic nickel, for which we use matte chlorine

and refine it into the final electrolytic nickel product. We

leach electrowinning (MCLE) process, a high-quality, high-aim to take the initiative in the global nickel refining businessproductivity hydrometallurgical refining process.

by establishing low-grade nickel oxide ore refining technology including the HPAL (high pressure acid leach) method.

Basic Strategy
In order to secure a stable procurement of raw materials, we2) Establishment of the HPAL Method

have acquired equity in nickel mine operators such as P. T.

The global development of nickel resources formerly depend-

Inco (Soroako, Indonesia) and FIGESBAL (New Caledonia).

ed primarily on nickel sulfide ore and garnierite, a high-grade

As demand growth in China and other factors are making raw

nickel oxide ore. Recently, however, the development andmaterials increasingly scarce, however, we are promoting thepractical application of the HPAL method has made it possi-

following projects in order to establish a stable supply system

ble to recover nickel from laterite, a low-grade nickel oxideby securing our own mineral resources.

ore. Laterite ore exists in large quantities in many areas,
including the Philippines, Indonesia, Australia, Central

1) Coral Bay Project

America, South America, and Africa. Establishing laterite ore

The Coral Bay Project is the construction of a low-grade

processing technology is of great significance from the stand-nickel oxide ore processing plant at Rio Tuba in the southernpoint of a securing a stable nickel supply for the future.

part of Palawan Island, the Philippines, to produce

The Coral Bay Project is based on the practical application

nickel/cobalt mixed sulfide, an intermediate product of theof the HPAL method. Once we have established thisnickel refining process (nickel: 10,000 tonnes per year;

advanced technology, we are considering expanding produc-

cobalt: 700 tonnes per year). Total investment in this project,tion at the Coral Bay Project and starting a new oxide ore

in which SMM is the lead developer holding 54% of shares,

project at an early stage.

Nickel Price (LME)($/lb)

8.0

6.0
FY2003 ave. 5.10

4.0
FY2002 ave. 3.32

Coral Bay Project

14 Review of Operations

2.0
’02/4

7

10

’03/1

4

7

10

’04/1

4

Copper2) Acquiring Stakes in New Mines to Boost Ratio of In-

Due to factors ranging from expansion of the China market

house Oreand recovery in domestic demand to production difficulties at

In the area of mineral resource development, going forwarda major overseas producer, in fiscal year 2003 the copper pricewe aim to achieve an in-house ore ratio of two-thirds for ourrose 29% from the previous fiscal year to US$92.8/lb, hitting aannual production system of 450,000 tonnes. To that end,

six-year high.

we plan to acquire a stake in at least one new mine by fiscal

In 2002, copper consumption in China topped the U.S.’s
2.37 million tonnes to become the highest in the world at 2.68

year 2006 and to seek further opportunities of this typefrom fiscal 2007.

million tonnes. However, the production capacity of China’s

Our sales strategy is to leverage the Toyo Smelter &existing refineries cannot keep up with demand growth, so that

Refinery’s geographical proximity to Asian markets to

the gap between supply and demand continues to widen.

actively promote sales in China and the surrounding areas.

While the scale of China’s copper market is expected to reach 5
million tonnes in 2010, we estimate that more than half of that

3) Reinforcing the Sulfuric Acid Businesswill depend on imports.

The copper refining process yields large amounts of sulfuric
acid as a by-product. This means that annual production of

Basic Strategy

450,000 tonnes of copper will generate 1.2 millions of

The Toyo Smelter & Refinery, our domestic copper produc-

tonnes of sulfuric acid. As the profitability of sulfuric acidtion site, has an in-house ore ratio of about one-half and pur-sales affects the competitiveness of the copper business, thechases the remainder from outside. In addition to expanding

sulfuric acid business becomes an important issue when cop-

our production system to meet demand growth, we are work-

per production is expanded.

ing to secure a stable supply of mineral resources.

SMM formed an alliance with Dowa Mining Co., Ltd. inthe sulfuric acid business and in February 2003 set up the1) Expanding the Production Systemsulfuric acid manufacturing and sales company Acids Co.,

Aiming for annual production of 450,000 tonnes at theLtd. as a joint venture. Through this alliance, we aim to cut

Toyo Smelter & Refinery, we plan to gradually increase thecosts by making production, distribution, and sales morecurrent annual capacity of 300,000 tonnes to 410,000 tonnes

efficient.

by April 2006. Establishing an annual production system of

In addition, as the Coral Bay Project will use approximate-

450,000 tonnes will give the Toyo Smelter & Refinery top

ly 260,000 tonnes of sulfuric acid annually, we will be able

global class production capacity. In addition, aiming toto secure the sales of the amount within the SMM Group.

establish an annual production system of 210,000 tonnes at
Jinlong Copper Co., Ltd., our joint venture holding 20.95%
of shares in Anhui Province, China, we plan to boost the current 150,000 tonnes to 190,000 by fiscal year 2006.

Copper Price (LME)(¢/lb)

150

125

100
FY2003 ave. 92.8

75 FY2002 ave. 72.0

50
’02/4

7

10

’03/1

4

7

10

’04/1

4

Toyo Smelter & Refinery

Review of Operations 15

Precious Metals

1991 and in 1997 formed a joint venture with the non-fer-

In fiscal year 2003, the gold price rose 16% from the previous

rous major Teck Cominco, which has long experience operat-

fiscal year to US$377.6/troy ounce, hitting a seven-year high.

ing mines in Alaska, to continue exploration and study com-

This is in part attributable to geopolitical factors related to con-mercial feasibility. The Pogo Gold Mine has a promisingcerns over the situation in the Middle East.

deposit containing an estimated 152 tonnes of gold. Annual

SMM handles gold and a broad range of other precious met-

production of 12 tonnes is planned.

als such as platinum, palladium, and rhodium that are used, for

In May 2004, we acquired all the necessary development

example, as catalysts and in electronic materials. We are work-

permissions and have begun construction. Total investment

ing to reinforce profitability in both mineral resource develop-

in this development is estimated at approximately US$280

ment and refining through our gold mine project in Alaska, themillion. Although initially scheduled for late 2005, the start ofU.S., and the introduction of a new refining process.

operations is now set for March 2006 as the start of construction was delayed due to the filing of objections by local envi-

Basic Strategy

ronmental groups.

We aim to reinforce profitability by achieving stable operations
at the Hishikari Mine, starting the operations at the Pogo Gold3) Introduction of New Precious Metal Refining Process

Project, and boosting the efficiency of recovery and refining

After being separated and recovered during the copper refining

through introduction of a new precious metal refining process.

process, precious metals — gold, silver, and platinum-groupmetals — are refined. In order to boost precious metal refining

1) Superiority of the Hishikari Mine

capacity in conjunction with the copper production expansion

While the ore of the world’s gold mines has an average gradeat the Toyo Smelter & Refinery, by the end of fiscal year 2004

of 5g of gold per tonne, that of the Hishikari Mine is

we plan to introduce a new precious metal refining process

extremely high at 45-50g. We are currently using the miningthat we developed in-house.

technology that we developed at this mine in the development

By shortening the time required to recover gold from 1.5of overseas mines. Having begun operations in 1985, themonths to seven days, this new process is expected to lower

Hishikari Mine achieved total gold production of 100 tonnes

costs, including interest expense. In addition to gold, silver,in 1999 and currently maintains annual production of 7-8

platinum, palladium, and rhodium, other platinum-group

tonnes. The mine’s reserves are estimated at 150 tonnes (as ofmetals such as iridium and ruthenium can be recovered,

December 2003) and we plan to continue stable operations at

which was difficult with conventional processes. In addition

their current level going forward.

to boosting annual refining capacity from 36 tonnes to 60
tonnes for gold and from 300 tonnes to 360 tonnes for silver,

2) Pogo Gold Project

we expect the new process to have the effect of boosting profit

This is a gold mine development project in Alaska, the U.S.,

by ¥700 million annually.

in which SMM takes the initiative. We began exploration inGold Price (LOCO LONDON)($/toz)450

400
FY2003 ave. 377.6

350
FY2002 ave. 325.6

300
’02/4

7

10

’03/1

16 Review of Operations

4

7

10

’04/1

4

New Precious Metal Refining ProcessElectronics Materials and Advanced Materials
Results for Fiscal Year 2003
In fiscal year 2003, Electronics Materials and Advanced
Materials businesses benefited from the increase in sales volume as expansion of the digital home appliance market supported recovery in the semiconductor market. Net sales rose
7.3% from the previous fiscal year to ¥142.7 billion and operating income grew 36.3% to ¥5.6 billion.
Sales of the principal electronics material products were up
overall, supported by increases in bonding wire exports to

Net Sales by Product
Electronics Materials(Billions of yen)

200

150

100

50

Taiwan and growth in electric paste and crystal materials sales.
Sales of advanced material products also increased mainly0

because we reinforced copper-clad polyimide film production
capacity to meet the rapid growth in demand.

FY1999Packaging materials
Electronics materials

FY2000FY2001

Crystal materials
Others

FY2002

FY2003

PWB

Note: Net sales of electronics materials include in-house transactions.

Basic Business Strategy
Under our previous Mid-term Management Plan, we sharpened the focus of our core products, concentrating on the

Advanced Materials(Billions of yen)

15

materials field where we can leverage our strengths, andimproved our business structure by spinning off our IC pack-10

aging materials business.
Products in this segment are exposed to severe price competitions and short life cycles. In recognition of the difficulty of5surviving without a constant commitment to large market
shares, our new Mid-term Management Plan aims to achieve a
top-class global share for each of our products and to approximately double fiscal year 2003 consolidated operating income

0
FY1999FY2000FY2001

FY2002

FY2003

Powder materials
Functional materials
Battery materials
Circuit board materials
Magnet materials
Othersto ¥12.6 billion by fiscal year 2006.
In the Electronics Materials business, we will aggressively
develop our business in the markets of Southeast Asia andChina, concentrating on core products such as bonding wire,
electric paste, and lead frames.
In the Advanced Materials business, while maintaining copper-clad polyimide film as a mainstay, we will focus efforts on

Main Product by Product Line
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 powder etc.
Circuit Board Materials
Copper-clad polyimide film etc.

Review of Operations 17

SMM’s Production Facilities ofElectronics Materials andAdvanced Materials• Lead Frame
Sumitomo Metal Mining Package Materials Co., Ltd.

Runs IC packaging
materials business

Ohkuchi Electronics Co., Ltd.
Niihama Electronics Co., Ltd.
Sumitomo Metal Mining Asia Pacific Pte. Ltd.

Regional management ofoverseas lead frame business

M-SMM Electronics SDN. BHD.
Sumiko Leadframe Singapore Pte. Ltd.
P.T.SUMIKO LEADFRAME BINTAN
Sumiko Electronics Taiwan Co., Ltd.
Sumiko Leadframe (Thailand) Co., Ltd.
Sumiko Leadframe Chengdu Co., Ltd.
Sumiko Electronics Suzhou Co., Ltd.

Operation scheduled tostart in the fall of 2004

• Bonding Wire
Ohkuchi Electronics Co., Ltd.
Malaysian Electronics Materials SDN. BHD.
Taiwan Sumiko Materials Co., Ltd.
Sumitomo Metal Mining
Electronics Materials (Shanghai) Co., Ltd.
• Electronics Materials
Electronics Division
SMM Precision Co., Ltd.
Shinko Co., Ltd.
Ajimu Electronics Co., Ltd.
Shanghai Sumiko Electronic Paste Co., Ltd.
SMM USA, Inc.
SMMEP Pte. Ltd.
• Advanced Materials
Isoura Plant
Kunitomi District Division
SMM KOREA Co., Ltd.

18 Review of Operations

Location
Tokyo, Japan

Other Products
Tape materials

Kagoshima, Japan

Tape materials, Bonding wire, Recovery andrecycling of precious metals

Ehime, Japan
Singapore
Malaysia
Singapore
Indonesia
TaiwanThailandChengdu,Sichuan Province, China
Suzhou,Jiangsu Province, China
Kagoshima, Japan

Operation scheduled tostart in January 2005

Malaysia
TaiwanShanghai, China

Paste, Crystal materials, etc.
Optical components
PWB
Solder plating of IC
Paste
TV frameTV frame

Tokyo, Japan
Akita, Japan
Nagano, Japan
Oita, Japan
Shanghai, China
the U.S.
Singapore

Metal powder,
Circuit board materials,
Battery materials, etc.
Crystal materials,
Magnet materials
Circuit board materials etc.

Ehime, Japan
Hokkaido, Japan
South Korea

Lead frame, Tape materials, Recovery andrecycling of precious metals
Pasteexpanding sales of battery materials to reinforce our solid position in the Hybrid Electric Vehicle (HEV) market and of ourlight-blocking materials, which are attracting attention for
their property of cutting infrared light.
While the Electronics Materials and Advanced Materials
segment is forecast to benefit from expanding markets, sales
price declines and rapid changes in market and technology
trends are also possible. In setting the numerical targets in our
new Mid-term Management Plan, therefore, we took into
account these risk factors as well as previous product performances.

our cost-competitiveness, we plan to shift production fromJapan to Malaysia and Taiwan and expand production capacity, mainly in Malaysia. To keep up with the expansion of the
China market, moreover, we are building a production base inShanghai, which we aim to bring on stream in January 2005.
By implementing these measures, we are aiming for a net
sales increase of 40% and an increase in global share from
25% to 30%in fiscal year 2006 compared with fiscal year
2003.
Electric Paste
Electric paste is widely used in the chip components installed

Bonding Wirein electronic equipment such as mobile phones, personal com-

Bonding wire is used to connect the electrodes of semiconduc-puters, and home appliances.

tor chips to lead frames. In high-density ICs, gold wire is gen-The nickel paste that we originated for the internal elec-

erally used because of its superior workability and conductivi-

trodes of multilayer ceramic capacitors (MLCC) has beenty. While leveraging our advantage of being able to procure

especially well received by the market and has secured a large

gold in-house, we offer products that combine the highshare. By expanding sales of internal electrode paste and fully

strength and superior bonding characteristics required byentering the market for external electrode paste, we aim toincreasingly multi-pin, narrow-pitch ICs.

increase unit sales volume by 70% in fiscal year 2006 com-

While the bonding wire market is expected to maintain an

pared with fiscal year 2003. In addition, we plan to launch

annual growth rate of around 10%, prices are expected to fall

new high value-added products such as paste for plasma dis-amid the competition with other manufacturers. To reinforce

play panels (PDP), for which demand is expected to expand,Bonding Wire

Electric Paste

Review of Operations 19

and paste for white LEDs (light-emitting diodes).

products such as lead-free products.

By implementing these measures, we aim to increase net

By implementing these measures, we aim to further solidify

sales by 50% in fiscal year 2006 compared with fiscal year

our top global shares in lead frames and increase net sales by

2003.

35% in fiscal year 2006 compared with fiscal year 2003.
Copper-clad Polyimide Film
Copper-clad polyimide film is a flexible board material whose
main usage is in the chip-on-film (COF) boards that package
the ICs that drive LCDs. As their use expanded to LCD TVs
in fiscal year 2003, we expect demand to continue to growrapidly.
Our global share of copper-clad polyimide film in the COF
field for large-scale LCDs exceeds 90%. Going forward we
will enter the market for double-sided boards, whose usage inmobile phones is expected to expand, and aim to achieve a

Lead Frames

global share of at least 50%.

Lead frames are metal frames that form the external leads forsemiconductor devices such as ICs and transistors. SMM has a

In fiscal year 2003, we doubled existing production capacity
to 1.2 million m2 in order to meet growth in orders received.

top 14% share of the global market.

By introducing high-efficiency facilities, we plan to further

IC packaging materials, including lead frames and tapematerials for film are handled by Sumitomo Metal Mining
Package Materials Co., Ltd., which takes responsibility for
operations at eight production sites in Japan and overseas

expand production capacity to 4.0 million m2 by fiscal year
2006.
By implementing these measures, we aim to triple net sales
by fiscal year 2006 compared with fiscal year 2003.

under its integrated management to supply the semiconductor
industries in Japan, South Korea, Taiwan, and China.
In China, in particular, the market is estimated to almost
triple in a few years, as many semiconductor assembly-related
businesses have, in rapid succession, moved into Shanghai andthe surrounding Huadong region. To cope with this demand,
we are building our second production site in China, inSuzhou, Jiangsu Province. It is scheduled to come on stream
in the fall of 2004. In addition, we plan to expand sales byfocusing on commodity lead frames and high value-added

Lead Frames

20 Review of Operations

Copper-clad Polyimide FilmOther Businesses
Construction Materials Business

Recycling Business

Radical Restructuring

As part of our metals business, we recover zinc from the electric

In fiscal year 1999, we spun off our construction materials busi-

arc furnace dust generated in steel production, copper and nickel

ness, whose main product is autoclaved lightweight concrete

from the effluent produced by the plating process, and precious(ALC), as Sumitomo Metal Mining Siporex Co., Ltd. We also

metals from scrapped electronics materials.

endeavored to improve its business structure by integrating its

Moreover, our group company Nippon Catalyst Cycle Co.,

five production sites into two by the end of fiscal year 2002.

Ltd. recovers valuable metals such as molybdenum and vanadi-

Due to the impact of the prolonged construction slump, how-um from the used desulfured catalyst generated when oil isever, the Construction Materials segment posted a ¥400 million

refined. In fiscal year 2003, this company enhanced its annual

operating loss in fiscal year 2002. In response to such situation,

processing capacity from 12,000 tonnes to 15,000 tonnes,

in fiscal year 2003 Siporex radically restructured itself to makeachieving the equivalent of approximately 50% of the desulfured

its business sustainable by targeting a total cost reduction of

catalyst generated domestically.

¥1.9 billion, which consists mainly of personnel reductions andsalary cuts. As a result, operating income of the Construction

Environmental Improvement Business

Materials segment returned to the black (¥7 million) in fiscal

Group companies under the integrated control of our Energy &year 2003.

Environment Business Division and in collaboration with our

The full contribution from the effects of this radical restruc-research laboratories are developing our environmental improve-turing is expected to come through from fiscal year 2004.

ment business. These group companies include Sumicon

Siporex will continue its efforts to improve profitability.

Certech Co., Ltd, which provides assessment and remediation
services for soil and groundwater contamination; Sumiko Eco-

Environmental Businessengineering Co., Ltd., which provides environment-related engi-

Basic Strategy

neering for fuel-gas treatment facilities and corrosion prevention

While the environmental business is expected to enjoy market

for harbor facilities; Sumiko Techno-Research Co., Ltd, which

growth, competition is also likely to become increasingly harshfocuses on environmental research and analysis; and Japanas many companies from various industries enter the market in

Irradiation Service Co., Ltd., which provides radiation process-rapid succession. Given this context, we are promoting the recy-

ing for the sterilization of food packaging materials and medicalcling business and the environmental improvement businessdevices and for use in the modification of industrial materials.

including the remediation of soil and groundwater contamina-

Leveraging our catalyst technology, we developed a technology

tion, where we can leverage the technologies that we have devel-

for rendering nitrate-nitrogen and ammonium-nitrogen in plant

oped in our mineral resources and metals businesses over a peri-

effluents harmless and marketed it as “N-free.” As stricter efflu-

od of many years. We are targeting net sales of ¥24.0 billionent processing regulations have heightened the market needs, wefrom our environmental businesses overall in fiscal year 2006,

are endeavoring to expand business by extending the application

up 30% compared with fiscal year 2003.

of this technology to other substances such as fluorine.
Review of Operations 21

Financial Section

Contents
Management’s Discussion and Analysis ..................
Eleven-Year Financial Summary .............................
Consolidated Balance Sheets ..................................
Consolidated Statements of Operations .................
Consolidated Statements of Shareholders’ Equity ...
Consolidated Statements of Cash Flows .................
Notes to Consolidated Financial Statements ..........
Independent Auditor’s Report ................................

23
30
32
34
35
36
37
52

Management’s Discussion and Analysis
Overview of Businesses

Consolidated Statement of Income

In addition to itself, the businesses of Sumitomo Metal

Net Sales

Mining Co., Ltd. (SMM) include 66 subsidiaries and 14 affili-

Net sales in fiscal year 2003 (from April 1, 2003 to March 31,

ated companies. The three core segments of operations are:2004) increased ¥46,889 million (13.2%) from the previous

1) Mineral Resources, which mines gold, silver, and copper;

fiscal year to ¥402,131 million (US$3,805 million). The

2) Metals, which consists of the smelting business, centered on

Metals segment accounted for 68.0% of net sales.

gold, copper, nickel, and zinc, and the metal process busi-

In fiscal year 2003, the non-ferrous metal industry was char-ness, which manufactures copper elongation products; andacterized by higher prices into the second half for non-ferrous3) Electronics Materials and Advanced Materials, whose elec-

metals such as copper and nickel thanks to strong demand andtronics materials business manufactures electronic compo-

production difficulties at major overseas producers. Althoughnents such as IC packaging materials, crystal materials, andthe foreign exchange rate was stable in the first half, the yen

printed circuit boards, and whose advanced materials busi-

rapidly strengthened from late in the first half into the second

ness manufactures nickel, palladium, and other metal pow-

half. The electronics-related industry, meanwhile, enjoyedders and battery and magnetic materials.

strength in the digital home appliance market and in semicon-

In addition to these three core businesses there are theductor-related demand.

Construction Materials segment, which manufactures Siporex

As a result, Mineral Resources segment sales increased ¥643

(autoclaved lightweight concrete, or ALC) and builds residen-

million to ¥25,315 million (US$ 240 million) from the previ-tial housing, and the Others segment, which runs a nuclear

ous fiscal year, due to higher overseas copper and gold prices

power engineering business and an environmental business.

despite the decrease due to the strong yen impact. Metals seg-This Annual Report presents the consolidated results of thement sales grew ¥47,044 million to ¥273,387 million (US$Company, 40 domestic and overseas consolidated subsidiaries,

2,587 million) from the previous fiscal year, supported mainly

and six affiliates accounted for by the equity method.

by higher prices for and sales growth in nickel and copper.
Electronics Materials and Advanced Materials sales rose
¥9,753 million to ¥142,676 million (US$ 1,350 million)
from the previous fiscal year on the back of overall growth insales of its main products.

Net Sales

Gross Profit(Billions of yen)(Billions of yen)

(%)

500

80

20
16.9

402.1

400
360.3

375.4

60

355.2

300

15

14.6
12.5

330.2

63.4
11.6

51.8

13.4
53.7

45.1

40

10

38.2

200
20

100

0

5

0
FY1999FY2000FY2001

FY2002

FY20030
FY1999FY2000FY2001

FY2002

FY2003Gross Margin (right)

Management’s Discussion and Analysis 23

This is attributable to several factors. Positive factors include

Cost and Expenses
Cost of sales in fiscal year 2003 increased ¥44,939 million

a sharp decrease in write-downs of investment securities from

(14.8%) from the previous fiscal year to ¥348,417 (US$3,297¥17,247 million in the previous fiscal year to ¥998 million

million). The gross margin decreased from 14.6% to 13.4%.

(US$9 million) in fiscal year 2003; an increase in gain on sale

Sales, general, and administrative (SG&A) expenses

of investment securities from ¥108 million in the previous fis-decreased ¥4,235 million from the previous fiscal year to

cal year to ¥4,848 million (US$46 million) in fiscal year 2003;¥30,936 million (US$293 million). This is mainly attributa-

an increase in equity in earnings of affiliated companies fromble to a ¥3,458 million (34.0%) decrease in sales, transporta-¥3,400 million in the previous fiscal year to ¥7,112 million

tion, and overhead expenses to ¥6,719 million.

(US$ 67 million) in fiscal year 2003; and a decrease in the
restructuring charges from ¥3,613 million in the previous fis-

Operating Income

cal year to ¥790 million (US$7 million) in fiscal year 2003.

Operating income grew ¥6,185 million (37.3%) from the pre-

Negative factors include zero gain in fiscal year 2003 on secu-

vious fiscal year to ¥22,778 million (US$216 million), sup-rities contributed to employee retirement benefits trust, com-ported by profit growth in all core businesses and a return topared with a ¥1,845 million gain in the previous fiscal year.
Tax-effect accounting has been in effect since fiscal year

profitability in the Construction Materials segment.

1999 and a negative tax adjustment of ¥9,400 million (US$89

Mineral Resources segment profit grew, supported mainly
by Sumitomo Metal Mining Arizona, Inc. and Hishikari Goldmillion) was posted.

Mine. Metals segment profit rose thanks to higher overseas

Net financial expenses improved ¥361 million, from ¥1,459

nickel prices. This was despite a decline in copper profit due

million (US$12 million) in the previous fiscal year to ¥1,098

to temporary higher raw material prices when overseas copper

million (US$10 million).

prices soared at the end of the fiscal year. Profit was also up in
the Electronics Materials and Advanced Materials segment as

Net Income (Loss)stronger sales of its main products boosted revenue.

In fiscal year 2003, the SMM Group posted net income of¥19,882 million (US$188 million), a sharp improvement fromthe ¥1,172 million net loss posted in the previous fiscal year.

Other Income (Expenses)

Net income per share in fiscal year 2003 was ¥34.76

Other income (expenses) in fiscal year 2003 was ¥8,416 million (US$80 million), compared with a ¥24,098 million loss

(US$0.33), compared with a net loss per share of ¥2.05 in thein the previous fiscal year.

previous fiscal year.

Oparating Income

Net Income (Loss)(Billions of yen)(%)(Billions of yen)

30

7.5

20

19.9

7.2
26.9

15.1
5.7

20

22.8

5.0

10

4.7
16.6

10

4.7

2.5

2.5

0

9.0

-1.2

0.3

0
FY1999FY2000

-6.6

0

1.1

FY2001

Operating Margin (right)

24 Management’s Discussion and Analysis

FY2002

FY2003-10
FY1999FY2000FY2001

FY2002

FY2003

Impact of Exchange Rate Fluctuations

Mineral Resources

Non-ferrous metal profit is closely linked to foreign exchange

Net sales in this segment increased ¥643 million (2.6%) fromrates, which affect all phases of operations, from procurement

the previous fiscal year to ¥25,315 million (US$240 million).

of ores to sales of finished products.

This is attributable to increased sales at Sumitomo Metal

In general, a strong yen is a negative factor for SMM’s earn-

Mining Arizona, Inc. due to higher overseas copper prices andings on a net basis. Although a strong yen has the advantage ofat our Hishikari Mine due to higher overseas gold prices,making ore procurement prices lower for SMM, it also leads

despite the decrease resulting from the stronger yen.

to lower finished product prices and a decrease of smelting

Operating income increased ¥1,778 million (66.3%) frommargins, which are usually denominated in U.S. dollars.

the previous fiscal year to ¥4,460 million (US$42 million).

Although the foreign exchange rate was stable in the first

This is attributable to the profit growth at Sumitomo Metal

half, the yen rapidly strengthened from late in the first half

Mining Arizona, Inc. due to higher overseas copper prices andinto the second half. As a result, the exchange rate for fiscal

the foreign exchange translation impact and at our Hishikariyear 2003 was US$1=¥105.69, compared withGold Mine due to higher gold prices.

US$1=¥121.94 in the previous fiscal year.
A strengthening of the Japanese currency by one yen against

Metalsthe U.S. dollar therefore deteriorates non-consolidated gross

Net sales in this segment increased ¥47,044 million (20.8%)

profit and operating income by ¥300 million.

from the previous fiscal year to ¥273,387 million (US$2,587
million). This is mainly attributable to higher overseas prices

Results by Business Segment

and increased sales volumes for copper, which benefited fromThe following sections are based on segment data. Net salesa recovery in domestic demand from the wire industry and theand operating income for each area include inter-segment

copper elongation industry, and for nickel, which enjoyed vig-transactions.

orous demand for stainless and other special steels and strong
demand for semiconductor-related electronics materials.
Operating income increased ¥4,241 million (50.9%) to¥12,567 million (US$119 million). This is attributable toprofit growth due in large part to higher overseas nickel prices,
despite a decline in copper profit due to temporary higher raw
material prices when overseas copper prices soared at the endof the fiscal year.

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

140133.25130123.90120120.20110
106.15105.69100
FY1999FY2000FY2001

FY2002

FY2003

Management’s Discussion and Analysis 25

Electronics Materials and Advanced Materials

Capital Expenditures and Depreciation

Net sales in this segment increased ¥9,753 million (7.3%) to

Capital expenditures in fiscal year 2003 totaled ¥46,540 mil-¥142,676 million (US$1,350 million). This is attributable tolion (US$440 million), up ¥27,613 million (145.9%) fromsales volume growth on the back of continued strength in thethe previous fiscal year. The Metals segment accounted for

global semiconductor market. This strength was supported by¥27,878 million of this (60.0% of the total) and thegrowth in the digital home appliance market and in demand

Electronics Materials and Advanced Materials segment forfor automobile-mounted ICs as well as by the recovery in per-¥12,168 million (26.1% of the total). Major investment proj-

sonal computer demand.

ects include the expansion, renovation, and rationalization of

Overall sales of SMM’s main electronics materials products

smelting and refining facilities and construction of a new low-

expanded, supported by growth in exports of bonding wire tograde nickel oxide ore processing facility in the Metals seg-

Taiwan and by electric paste and crystal materials. Sales ofment and expansion and renovation of copper-clad polyimide

advanced materials also increased, particularly of copper-clad

film production facilities in the Electronics Materials andpolyimide film, for which we expanded production capacity to

Advanced Materials segment.

meet with rapid growth in orders. Sales at subsidiaries also
increased on strong sales volume supported by mobile phones,

Depreciation decreased ¥459 million (2.5%) from the previous fiscal year to ¥17,824 million (US$169 million).

digital home appliances, and automobile-related demand.
As a result of strong sales on the back of increased sales vol-Research and Development Expenses

umes, operating income increased ¥1,494 million (36.3%) from

Research and development expenses in fiscal year 2003

the previous fiscal year to ¥5,612 million (US$53 million).

increased ¥523 million (13.9%) from the previous fiscal yearto ¥4,286 million (US$41 million). R&D by segment is as

Construction Materials

follows. The Mineral Resources segment is developing con-

Net sales in this segment decreased ¥1,364 million (8.1%)

centration processes for non-ferrous raw material ores and afrom the previous year to ¥15,377 million (US$145 million).

variety of leaching technologies. The Metals segment is con-This is attributable to the sale of the construction materials

centrating on developing non-ferrous smelting and electrolysis

company in fiscal year 2003, although ALC (autoclaved light-

technologies. The Electronics Materials and Advanced

weight concrete) sales declines were stopped by promoting

Materials segment is developing new electronics materials

sales amid turnaround of demand.

technologies, focusing on new semiconductor packaging mate-

Operating income in fiscal year 2003 was ¥7 million

rials. The Construction Materials segment is developing new(US$66,000), returning to profit from the ¥352 million loss

product processing technologies and new products such as

posted in the previous fiscal year. This is a result of efforts tolong-lasting Siporex.

reduce costs by radically restructuring the ALC business.

Capital Expenditures and Depreciation(Billions of yen)

50
46.5

40

30

28.1
25.4

20

20.5
16.6

16.8

FY1999FY200017.8

18.9 18.3

17.8

FY2001

FY2002

FY2003100Capital Expenditures

Depreciation

26 Management’s Discussion and Analysis

Millions of yen

2003

At year-end

Short-term interest-bearing debt due within one year ....
Long-term interest-bearing debt due after one year ........
Total shareholders’ equity ..............................................
Total assets ....................................................................

¥ 61,914
86,437253,071¥517,930

2002(16.6)(16.2)(47.4)(100.0)¥ 78,329
76,470223,341¥470,774(12.0)(16.7)(48.9)(100.0)2001¥ 93,105
73,972
236,313¥518,756(17.9)(14.3)(45.6)(100.0)( ):Percentage to total assets

Long-term debts due after one year increased ¥9,967 million

Financial Position and Liquidity
Financial Position(13.0%) from the end of the previous fiscal year to ¥86,437

Total assets as of March 31, 2004 stood at ¥517,930 million

million (US$818 million), due to appropriations such as fund

(US$4,900 million), up ¥47,156 million (10.0%) from theraising for the investment in Coral Bay Nickel Corporation

end of the previous fiscal year. Current assets rose ¥17,752

mentioned above. As a result, total liabilities excluding minor-(10.2%) to ¥190,978 million (US$1,807 million). The main

ity interests stood at ¥256,265 million (US$2,425 million),factors behind this were a ¥5,723 million increase in cash andup ¥14,829 million (6.1%).

cash equivalents due to fund raising for investment in Coral

Total shareholders’ equity stood at ¥253,071 million

Bay Nickel Corporation and a ¥6,685 million increase in(US$2,394 million), up ¥29,730 million (13.3%) from thenotes and accounts receivable due to higher metal prices.

end of the previous fiscal year. The increase in retained earn-

Net property, plant and equipment stood at ¥190,897 mil-ings due to the sharp turnaround in net income comparedlion (US$1,807 million), up ¥21,524 million (12.7%) fromwith the previous fiscal year and the increase in net unrealized

the end of the previous fiscal year, due to the investment inholding gains on available-for-sale securities due to the higher

Coral Bay Nickel Corporation mentioned above.

market prices of investment securities were far larger than theInvestments and long-term receivables stood at ¥129,740

decrease in foreign currency translation adjustment due to themillion (US$1,228 million), up ¥7,140 million (5.8%) fromthe end of the previous fiscal year. This is mainly attributable
to a ¥16,897 million increase in investment securities due tostrength of the yen mainly against the U.S. dollar.
The equity ratio rose from 47.4% in the previous fiscal year
to 48.9%.

higher market prices, although deferred tax assets decreased¥12,105 million.
Meanwhile, current liabilities stood at ¥138,183 million(US$1,307 million), up ¥902 million (0.7%) from the end of
the previous fiscal year. The current ratio increased from
126% in the previous fiscal year to 138%.

Long-Term Debt Due After One Year

Shareholders’ Equity(Billions of yen)(Times)

125

100

1.0
107.3
0.84

(Billions of yen)

(%)

300

60

0.8
0.75
83.8

75

0.71
74.0

0.69
76.5

86.4

235.2

200

43.2

237.5

236.3

44.8

45.6

47.4

253.1
48.9

223.3

40

0.6

0.59

50

0.4
100

25

20

0.2

0

0
FY1999FY2000Debt to Equity Ratio (right)

FY2001

FY2002

FY20030

0
FY1999FY2000FY2001

FY2002

FY2003Equity Ratio (right)

Management’s Discussion and Analysis 27

Consolidated Statement of Cash Flows

Risk Information

Net cash flows from operating activities in fiscal year 2003

The following types of information contained in this report

improved ¥6,219 million from the previous fiscal year toconcerning the Group’s businesses and management may sub-¥32,324 million (US$306 million), mainly due to the increase

stantially affect the investor’s judgment.

in consolidated operating income compared with the previous
1) Changes in Financial Position and Businessfiscal year.
Net cash flows from investing activities saw outflows

Performancedecrease to ¥17,448 million (US$165 million) in fiscal year

Non-Ferrous Metal Prices

2003 from ¥21,246 million in the previous fiscal year. This is

The prices of non-ferrous metals such as copper, nickel, andmainly attributable to a ¥16,462 million increase from thegold are determined by the London Metal Exchange (LME)previous fiscal year in proceeds from sale of investment securi-

and other international markets (the prices determined byties, and a ¥4,551 million decrease in payments for purchasethese markets are hereinafter referred to as LME and otherof subsidiaries securities, despite a ¥13,522 million increase

market rates). The prices in these markets are affected by thefrom the previous fiscal year in payments for acquisition of

global balance of supply and demand, diverse political andproperty, plant and equipment.

economic conditions, and speculative transactions, as well as

Net cash flows from financing activities saw outflows

by the availability and cost-competitiveness of substitute mate-decrease to ¥9,293 million (US$88 million) in fiscal year 2003

rials. Any significant and sustained decline in the prices offrom ¥14,163 million in the previous fiscal year. This is mainly

metals such as copper, nickel, and gold due to these factors

attributable to a ¥12,000 million decrease from the previous

may cause serious deterioration in the Group’s financial posi-

fiscal year in bond redemptions and an increase in long-termtion and business performance.

debts, despite an increase in payments such as short-term debt
Foreign Exchange Rates

repayment and commercial paper redemption.
As a result of the above, including the effect of foreign

The prices of imported raw materials such as copper concen-

exchange rate fluctuations and consolidated subsidiary

trate and nickel matte are determined according to the U.S.

changes, the year-end balance of cash and cash equivalents was

dollar-denominated LME and other market rates. This is also

¥19,304 million (US$183 million), up ¥5,723 million fromtrue of the sales prices of metals in Japan. For this reason, thethe beginning of the year.

Group’s smelting margins are effectively denominated in U.S.
dollars. The revenue generated by our investments in overseas
mines and electronics materials businesses and by exports ofelectronics materials products is also denominated in foreign
currencies. Any large and sustained impact of a strong yen on
exchanges rates may therefore cause serious deterioration in
the Group’s financial position and business performance.

Net Cash Flows from Operating Activities(Billions of yen)402) Non-Ferrous Metal Raw Materials: Purchase Contract
33.4

32.3

30

Terms and Supply
The Group intends to increase the proportion of non-ferrous

26.1
23.3

metal raw materials such as copper concentrate and nickel

20

matte that it procures from producers in which it has an equi10

ty stake (referred to below as “in-house ore ratio”). Currently,
however, we procure most of these raw materials through0

long-term ore-purchasing contracts with third parties.

-0.8

Although these contracts’ terms for purchasing raw materials-10
FY1999FY2000FY200128 Management’s Discussion and Analysis

FY2002

FY2003are renegotiated annually, it is not always possible to purchasethe required amounts at reasonable prices due to a variety ofmarket factors. Moreover, as product prices are largely deter-

5) Market Volatility, New Product Development, andIntellectual Property Protection

mined by factors directly related to the non-ferrous metals

The markets targeted by the Group’s Electronics Materials andthemselves such as supply and demand, it is generally difficult

Advanced Materials segment are characterized by rapid changes

to shift deterioration in raw material purchasing terms toin technologies used, customer requirements, and product life

product prices.

cycles on the one hand, and the need for large investments of

In addition, raw material supply can be delayed or suspend-

funds and human resources due to the longer time required to

ed due to uncontrollable factors such as bad weather, major

develop new products on the other. In addition, when an exist-

earthquakes, operational accidents, and labor disputes. Any

ing product is outmoded by technological advances, when theconstraint on the Group’s production due to these factors may

new product fails to meet changing customer requirements, andimpact its financial position and business performance.

when a competitor launches a similar product first, returns on
the investment may fall short of plan. In the Electronics

3) Uncertainties of Mining Investment

Materials and Advanced Materials segment in particular, there-

Despite the Group’s aforementioned policy of investing infore, problems with predicting and dealing with technologicalmines in order to boost the in-house ore ratio, however,advances and changes, meeting customer requirements, andminable reserves and mining costs may prove to differ fromlaunching new products can cause serious deterioration in theprospecting-based estimates, impairing the expected return onGroup’s financial position and business performance.

investment. In mine development, a variety of factors includ-

The sales volumes of the Electronics Materials and Advanced

ing environmental administration procedures may delay theMaterials segment’s main products depend on the levels at whichstart of production and increase development costs.

our clients produce mobile phones, personal computers, home

Additional investment or higher mining costs resulting fromappliances, and other products and vary according to factors

these uncertainties inherent in mining investment may impact

such as cyclical changes in demand for the clients’ products,

the Group’s financial position and business performance.

technological innovation, and general economic trends. Any
future decline in demand for products due to these factors can4) Environmental Protection Compliance
The environmental laws of Japan and other countries have a

impact the Group’s financial position and business performance.
Recognizing the importance of acquiring and managing intel-

significant impact on how the Group, and the Minerallectual property rights, the Group takes all the legal measures

Resources and Metals segments in particular, conducts its

required for claiming and protecting them. As it is not always

business. These environmental laws can require a business topossible to establish secure measures to protect intellectual prop-

pay compensation whether or not it was at fault and to pay toerty rights, however, disputes with third parties and unautho-

maintain and manage mines after they have been closed down.

rized implementations by third parties can threaten our benefit-

In addition, mine development and mine operations are sub-ing from the results of our research and development.

ject to a broad range of laws including those regulating worker
safety, worker hygiene, environmental protection, prevention6) International Operationsof pollution caused by mining, mine waste product process-

The Group is developing its businesses internationally by locat-

ing, and toxic substance management. The mining businessing production bases and seeking markets for its products over-also bears the risks and liabilities associated with environmen-

seas. These overseas activities are subject to political and eco-tal pollution and mine waste products. The substantial costs

nomic risks in each country, including 1) political instability, 2)

and potential liabilities of running a mining business in com-changes in laws and regulations governing the environment,

pliance with these laws can push the necessary expenditurelabor, taxes, currency exchange, and trade, 3) limited legal pro-above provisioned amounts.

tection of intellectual property rights or inadequate enforcement,
4) foreign exchange volatility, and 5) confiscation or nationalization of assets. Any of these could prevent the Group fromachieving a return on its investment.
Management’s Discussion and Analysis 29

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

2004

2003

2002

2001

For the Year:Net sales ............................................................................
Gross profit .......................................................................
Operating income .............................................................
Other income (expenses) ...................................................
Income (loss) before income taxes .....................................
Net income (loss) ..............................................................
Net cash flows from operating activities ............................
Capital expenditures ..........................................................
Depreciation .....................................................................

¥402,131
53,714
22,7788,416
31,194
19,88232,32446,54017,824¥355,242
51,764
16,593(24,098)(7,505)(1,172)
26,10518,92718,283¥330,194
38,152
1,147(13,735)(12,588)(6,611)33,37025,37917,822¥375,352
63,372
26,930(11,359)
15,571
15,10323,33928,078
16,774

At Year-End:Total assets ........................................................................
Shareholders’ equity ..........................................................
Long-term debt due after one year .....................................
Interest-bearing debt .........................................................
Working capital ................................................................

517,930
253,071
86,437
148,351
52,795

470,774
223,341
76,470154,799
35,945

518,756
236,31373,972167,077
23,371530,080
237,470
83,839176,998
33,259Per Share (Yen):
Net income (loss) ..............................................................
Shareholders’ equity ..........................................................
Cash dividends ..................................................................

34.76
443.296.0(2.05)
391.145.0(11.56)413.284.0

26.41
415.25
6.0

Ratios:ROA (%) ..........................................................................
ROE (%) ..........................................................................
Equity ratio (%) ................................................................
Interest-bearing debt to total asset ratio (%) ......................
Debt to equity ratio (times) ...............................................
Current ratio (times) .........................................................

4.02
8.35
48.9
28.6
0.59
1.38

—
—
47.4
32.9
0.69
1.26

—
—
45.6
32.2
0.71
1.14

2.81
6.39
44.8
33.4
0.75
1.20

Years ended March 31

30 Eleven-Year Financial Summary

Millions of yen (unless otherwise specified)

1995

1994

2000

1999

1998

1997

1996

¥360,299
45,061
8,990(4,342)
4,648
4,740
(800)
20,49016,611¥350,288
41,190858(12,932)(12,074)(12,495)
22,91232,49923,095¥431,950
62,641
24,622(3,605)
16,876
10,15743,05627,96821,638¥525,076
57,836
21,665(4,294)
14,617
12,884
43,13524,73020,702¥511,887
55,904
19,947(7,553)
12,394
10,683
6,100
25,722
19,889¥464,843
40,2625,169(2,384)
2,785
1,292
721
—
20,917¥446,712
28,914(3,934)
3,543
(391)
1,902
17,780—20,522544,121235,231
107,266
197,624
38,910544,519
226,795
124,535
207,82150,518566,088
243,436
82,356
201,515
26,529586,948
238,056
117,021
224,736
62,726624,419
225,296
171,596285,871
104,854591,446
205,940
197,884
277,289
101,110

594,982
210,902228,255
281,073
131,6448.29
411.345.0(21.85)396.593.0

17.77
425.686.0

22.65
417.206.0

19.18
398.356.0

2.32
370.175.0

3.49
379.32
5.0

0.87
2.05
43.2
36.3
0.84
1.23

—
—
41.7
38.2
0.92
1.31

1.76
4.22
43.0
35.6
0.83
1.13

2.13
5.56
40.6
38.3
0.94
1.31

1.76
4.95
36.1
45.8
1.27
1.53

0.22
0.62
34.8
46.9
1.35
1.63

0.31
0.97
35.4
47.2
1.33
2.02

Eleven-Year Financial Summary 31

Consolidated Balance Sheets
SUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIESASSETSAs of March 31, 2004 and 2003

Current assets:
Cash and cash equivalents ....................................................................................................................
Time deposits ......................................................................................................................................
Receivables:
Notes and accounts receivable (Notes 6 ):Trade ............................................................................................................................................
Non-consolidated subsidiaries and affiliated companies ................................................................
Loans and others:
Non-consolidated subsidiaries and affiliated companies ................................................................
Other ............................................................................................................................................
Allowance for doubtful accounts ......................................................................................................
Inventories (Note 5) ............................................................................................................................
Deferred tax assets (Note 7) .................................................................................................................
Other current assets .............................................................................................................................
Total current assets ....................................................................................................................
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 ......................................................................................................................
Accumulated depreciation ....................................................................................................................
Net property, plant and equipment ...........................................................................................
Deferred tax assets (Note 7) .................................................................................................................
Other assets ...........................................................................................................................................
The accompanying notes are an integral part of those balance sheets.

32 Consolidated Balance Sheets

Millions of yen

Thousands of
U.S. dollars(Note1)

2004

2003

2004

¥ 19,304
449¥ 13,581
448

64,1982,013

57,513
2,135

607,418
19,046

8,395
9,021(1,219)65,004
4,431
19,382
190,978

5,770
4,480
(1,139)68,004
7,035
15,399173,226

79,43185,353(11,534)
615,044
41,925
183,386
1,806,964

64,93861,371(555)

66,03542,169(1,369)614,420580,670(5,251)

203
711
2,904
(474)
129,098

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

1,921
6,727
27,476(4,485)
1,221,478

30,780124,390
265,125
22,066442,361(251,464)
190,897

31,292
127,428
259,809
4,289
422,818(253,445)
169,373

291,229
1,176,933
2,508,515
208,780
4,185,457(2,379,260)
1,806,197

642
6,315
¥ 517,930

12,7475,575¥ 470,774

6,074
59,751$ 4,900,464$

182,647
4,248

LIABILITIES AND SHAREHOLDERS’ EQUITYAs of March 31, 2004 and 2003

Current liabilities:
Bank loans (Note 6) .............................................................................................................................
Long-term debt due within one year (Note 6) ......................................................................................
Commercial paper ...............................................................................................................................
Notes and accounts payable:
Trade ...............................................................................................................................................
Non-consolidated subsidiaries and affiliated companies ...................................................................
Other ...............................................................................................................................................
Accrued income taxes (Note 7) ............................................................................................................
Accrued expenses .................................................................................................................................
Advances received ................................................................................................................................
Accrued restructuring charges ..............................................................................................................
Deferred tax liabilities (Note 7) ............................................................................................................
Other current liabilities ........................................................................................................................
Total current liabilities ..................................................................................................................
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 ..............................................................................................
Other accruals .......................................................................................................................................
Other long-term liabilities ...................................................................................................................
Total long-term liabilities ...........................................................................................................
Minority interest ..................................................................................................................................

Millions of yen

Thousands of
U.S. dollars(Note1)

2004

2003

2004

¥43,798
18,116—¥55,548
19,7813,000$ 414,401
171,407—

34,6302,767
12,339
1,298
3,713
1,888
800
54
18,780138,183
86,437
8,545
15,034
220
1,053
4,018
511
2,264
118,082

27,143
1,333
4,002
1,163
4,759
1,595
—
72
18,885
137,281
76,4701,237
14,605
936
1,068
2,793
449
6,597
104,155

327,656
26,180116,747
12,28135,131
17,864
7,569
511
177,690
1,307,437
817,835
80,850142,246
2,082
9,963
38,017
4,835
21,421
1,117,249

8,594

5,997

81,31388,355
81,187
81,210
16,111(13,267)(525)
253,071¥517,930

88,355
81,18464,183(2,217)(7,763)(401)
223,341¥470,774

835,983
768,162
768,379
152,436(125,528)(4,967)2,394,465$4,900,464

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 .............................................................................................................

Consolidated Balance Sheets 33

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

Operating income (Note 13) .........................................................................................
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 securities contributed to employee retirement benefits trust ............................
Loss on liquidation of subsidiaries .................................................................................
Reversal of allowance (provision) for doubtful account .................................................
Reversal of allowance (provision) for loss on investments ..............................................
Exchange gain (loss) ......................................................................................................
Restructuring charges ....................................................................................................
Loss from realignment of operations .............................................................................
Maintenance cost for ceased projects .............................................................................
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 ........................................................
Gain from valuation of derivative instruments ..............................................................
Amortization of consolidation difference .......................................................................
Equity in earnings of affiliated companies ......................................................................
Other, net .....................................................................................................................
Income (Loss) before income taxes and minority interests .........................................
Income taxes (Note 7):
Current .........................................................................................................................
Deferred ........................................................................................................................

Minority interests in net income (loss) of consolidated subsidiaries ..........................
Net income (loss) .........................................................................................................

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.

34 Consolidated Statements of Operations

Thousands of
U.S. dollars(Note1)

2004

2003

2002

2004

¥402,131¥355,242¥330,194$3,804,816

348,41730,936379,353
22,778303,478
35,171
338,649
16,593292,042
37,005
329,047
1,147

3,296,594
292,705
3,589,299
215,517

1,023(2,121)
4,848
(998)
—
1,746
—
(1,131)
710
271
(642)
(790)
(720)
(745)
—
—
—
(108)
(360)
1,280
32
7,112
(991)
8,416
31,194

1,074(2,533)
108(17,247)
—
(766)
1,845
—
(851)
(301)
(838)
(3,613)
(225)
—
(990)
(398)
(1,391)
—
(465)
240
49
3,400
(1,196)(24,098)(7,505)1,700(3,475)958(8,431)
(335)
3,370
—
(1,341)
(510)
(424)
319
(857)
(3,434)—(1,144)
(777)
—
(442)
—
25
129
1,535
(601)
(13,735)(12,588)

9,679(20,068)
45,870(9,443)—
16,520—(10,701)
6,718
2,564
(6,074)(7,475)(6,812)(7,049)———(1,022)(3,406)
12,111
303
67,291(9,377)
79,629295,146

1,330
9,400
10,73020,464(582)¥ 19,882

329(6,755)(6,426)(1,079)(93)¥ (1,172)437(5,968)(5,531)(7,057)446¥ (6,611)

12,58488,939101,523
193,623(5,507)$ 188,116

yen

U.S. dollars(Note1)Years ended March 31, 2004, 2003 and 2002

Net sales (Note 13) ........................................................................................................
Costs and expenses (Note 13):
Cost of sales ..................................................................................................................
Selling, general and administrative (Note 9) ..................................................................

Millions of yen

¥

34.76
6.00

¥

(2.05)
5.00¥ (11.56)
4.00

$

0.33
0.06

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

Millions of yen

Years ended March 31, 2004, 2003 and 2002

Balance at March 31, 2001 ........................................
Decrease due to change in consolidation ofsubsidiaries...........................................................
Net loss ..................................................................
Adjustments from translation of foreign currency
financial statements..............................................
Adoption of new accounting standard for financial
instruments..........................................................
Treasury stock .........................................................
Cash dividends paid (¥6.00 per share) .....................
Balance at March 31, 2002 ........................................
Increase due to merger of non-consolidated
subsidiaries...........................................................
Decrease due to change in consolidation ofsubsidiaries...........................................................
Net loss ...................................................................
Adjustments from translation of foreign currency
financial statements..............................................
Adjustments for unrealized losses on securities.........
Treasury stock .........................................................
Cash dividends paid (¥4.00 per share) .....................
Balance at March 31, 2003 ........................................
Net income .............................................................
Adjustments from translation of foreign currency
financial statements..............................................
Adjustments for unrealized gains on securities .........
Treasury stock .........................................................
Gain on sale of treasury stock ..................................
Cash dividends paid (¥5.00 per share) .....................
Balance at March 31, 2004 ........................................

Shares ofcommon stock(thousands)

571,873

Commonstock

CapitalSurplusunrealized holding
Retained Netgain(loss) on availearnings able-for-salesecurities¥88,355 ¥81,184 ¥77,937

¥

(48)

Foreign currency Treasurytranslationstock
adjustments¥ (9,956) ¥

(2)

(39)
(6,611)
6,565
2,392
(33)
571,873

88,355

81,184(3,431)
67,856

2,344(3,391)

(35)

164
(378)
(1,172)(4,372)(4,561)(366)
571,873(2,287)¥88,355 ¥81,184 ¥64,183
19,882¥ (2,217)¥(7,763)¥(401)(5,504)
18,328(124)
3571,873(2,855)¥88,355 ¥81,187 ¥81,210¥16,111¥(13,267) ¥(525)Thousands of U.S. dollars (Note 1)

Years ended March 31, 2004, 2003 and 2002

Commonstock

CapitalSurplusunrealized holding
Retained Netgain(loss) on availearnings able-for-salesecurities

Balance at March 31, 2003 ................................................................... $835,983 $768,133 $607,276
Net income ........................................................................................
188,116
Adjustments from translation of foreign currency financial statements
Adjustments for unrealized gains on securities ...................................
Treasury stock ...................................................................................
29
Gain on sale of treasury stock ............................................................
Cash dividends paid ($0.05per share) ................................................
(27,013)
Balance at March 31, 2004 ................................................................... $835,983 $768,162 $768,379$(20,976)

Foreign currency Treasurytranslationstock
adjustments$ (73,451)$(3,794)(52,077)
173,412(1,173)$152,436$(125,528) $(4,967)

The accompanying notes are an integral part of those statements.

Consolidated Statements of Shareholders’ Equity 35

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

Millions of yen

Thousands of
U.S. dollars(Note1)

2004

2003

2002

2004

Income (Loss) before income taxes and minority interests ............................................................

¥ 31,194¥ (7,505)¥(12,588)$ 295,146

Adjustments to reconcile income (loss) before income taxes and minority interests to
net cash provided by 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 ...........................................................................................
Decrease in allowance for loss on investments ..........................................................................
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 ...............................
Maintenance cost for ceased projects .........................................................................................
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 ................................................................................................................................
Interest and dividend received ...................................................................................................
Interest paid ..............................................................................................................................
Payments for additional retirement benefits by realignment of operations .................................
Payments for maintenance costs for ceased project ....................................................................
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 operating activities ...............................................................................

17,824(1,746)(4,848)
998
—
(814)
360
(886)
368
(1,023)
2,121(7,112)
720
—
—
108
7
745
—
1,225
(7,363)
2,632
8,288(7,900)34,8982,206(2,177)
(632)
(717)
—
—
(108)
(7)
(1,139)—32,324

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)
33,370168,644(16,520)(45,870)
9,443—(7,702)
3,406(8,383)
3,482(9,679)20,068(67,291)
6,812
—
—
1,022
66
7,049
—
11,591(69,666)
24,90378,418(74,747)
330,192
20,873(20,598)(5,980)(6,784)——(1,022)(66)(10,777)—
305,838

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 ................................................................................
Increase in loans receivable ........................................................................................................
Collection of loans receivable ....................................................................................................
Other
Net cash used in investing activities .......................................................................................

—(35,245)
4,848(2,046)—
18,438(3,224)
1,392(1,611)(17,448)—(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)—(333,475)
45,870(19,359)—
174,454(30,504)
13,171(15,244)(165,087)

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 used in financing activities .....................................................................................

17,180(9,818)(10,529)(3,000)(10,000)
10,000(124)(2,855)(147)(9,293)

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)

162,551(92,894)(99,622)(28,385)(94,616)
94,616(1,173)(27,013)(1,391)(87,927)

Effect of changes in exchange rate on cash and cash equivalents ................................................
Net increase (decrease) in cash and cash equivalents ..................................................................
Cash and cash equivalents at beginning of fiscal year .................................................................
Increase in cash due to a newly consolidated subsidiary .............................................................
Increase in cash and cash equivalents due to merger of non-consolidated subsidiaries ................
Other decrease in cash and cash equivalents ..............................................................................
Cash and cash equivalents at end of fiscal year ...........................................................................

(772)
4,811
13,581
1,299
—
(387)
¥ 19,304(58)(9,362)
22,76355
125—¥ 13,581

686
3,543
18,806414——¥ 22,763(7,304)45,520128,498
12,291—(3,662)$ 182,647

Years ended March 31, 2004, 2003 and 2002

Cash flows from operating activities:

The accompanying notes are an integral part of those statements.

36 Consolidated Statements of Cash Flows

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

1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Securities and Exchange Law and its related
accounting regulations, and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”),
which are different in certain respects as to application anddisclosure requirements of International Financial ReportingStandards.
The accounts of overseas subsidiaries are based on theiraccounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective
countries of domicile. The accompanying consolidated financial statements have been restructured and translated into
English (with some expanded descriptions and the inclusionof consolidated statements of shareholders’ equity) from theconsolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as
required by the Securities and Exchange Law. Some supplementary information included in the statutory Japanese language consolidated financial statements, but not required forfair presentation, is not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside
Japan, using the prevailing exchange rate at March 31, 2004,
which was ¥105.69 to U.S. $1. 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 other rateof exchange.
2. Summary of significant accounting policies
Consolidation — The consolidated financial statements
include the accounts of the Company and its significant subsidiaries (40 subsidiaries in 2004 and 39 in 2003 and 2002).
All significant intercompany balances and transactions havebeen eliminated. Investments in significant affiliated companies (6 affiliated companies in 2004 and 2003 and 5 affiliatedcompanies in 2002) are accounted for using the equity
method. Investments in material non-consolidated subsidiaries and affiliates over which the Company has the ability
to exercises significant influence over operating and financial
policies of the investees, are accounted for by the equity
method.
In the elimination of investments in subsidiaries, the assets

and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are recorded based on the fairvalue at the time the Company acquired control of the respective subsidiaries.
The consolidation difference between the cost of an investment and the underlying equity in its net assets at the date ofacquisition is being amortized over five years with minor
exceptions.
Accounting standard for impairment of fixed assets — In
the year ended March 31, 2004, the Company did not adopt
early the new accounting standard for impairment of fixed
Assets (“Opinion Concerning Establishment of AccountingStandard for Impairment of Fixed Assets” issued by theBusiness Accounting Deliberation Council on August 9,2002) and the implementation guidance for accounting standard for impairment of fixed assets (the Financial AccountingStandard Implementation Guidance No. 6 issued by the
Accounting Standards Board of Japan on October 31, 2003).
The Company plans to adopt these standards effective April 1,
2004. The Company has begun its analysis of possible
impairment of fixed assets. The Company cannot currently
estimate the effect of adoption of the new standard, because
the Company has not yet completed its analysis.
Cash and cash equivalents and cash flow statements — For
the purpose of the consolidated statements of cash flows, theCompany and its consolidated subsidiaries classify cash on
hand, readily-available bank deposits and short-term highly
liquid investments with maturities of not exceeding threemonths at the time of purchase as cash and cash equivalents.
Allowance for doubtful accounts — The Company and its
consolidated domestic subsidiaries provide a general allowancefor doubtful accounts. Calculation of this allowance is basedon actual collection losses incurred in the past. Additionally,
for accounts receivable considered at risk (bankruptcy, companies under rehabilitation plan, or other similar conditions), an
allowance is booked based on an estimation of the uncollectible amount, on a case by case basis.
Investment securities — Securities are classified into two categories based on the intent of holding; available-for-sale securities and securities issued by non-consolidated subsidiaries
and affiliated companies.
Available-for-sale securities with available fair values are stated at the fair value. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate
Notes to Consolidated Financial Statements 37

component of shareholders’ equity. Other available-for-salesecurities with no available fair values are stated at movingaverage method. Securities issued by non-consolidated subsidiaries and affiliated companies are stated at moving-averagecosts.
Derivatives and hedge accounting — Derivative instruments are stated at fair value. Changes in the fair values arerecognized as gains and losses unless derivative transactions areused 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 fromchanges in fair value of derivative transactions until the related
losses or gains on the hedged items are recognized.
However, in cases where forward foreign exchange contracts
are used as hedges and meet certain hedging criteria, forward
foreign exchange contracts and hedged items are accounted
for in the following manner:(1) If a forward foreign exchange contract is executed to hedge
an existing foreign currency receivable or payable,(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payabletranslated using the spot rate at the inception date of
the contract and the book value of the receivable orpayable is recognized in the income statement in the
period which includes the inception date, and(1) (b) the discount or premium on the contract (that is, thedifference between the Japanese yen amount of thecontract translated using the contracted forward rate
and that translated using the spot rate at the inception
date of the contract) is recognized over the term of thecontract.
(2) If a forward foreign exchange contract is executed to hedge
a future transaction denominated in a foreign currency,
the future transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange contract are recognized.
Also, if interest rate swap contracts are used as hedge and meetcertain hedging criteria, the net amount to be paid or received
under the interest rate swap contract is added to or deductedfrom the interest on the assets or liabilities for which the swap
contract was executed.
The Company evaluates hedge effectiveness monthly bycomparing the cumulative changes in cash flows from or the
38 Notes to Consolidated Financial Statementschanges in fair value 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 aretranslated into Japanese yen at the year-end rates except forshareholders’ 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.
Inventories —(1) Merchandise, finished products, semi-finished products,
work in process and raw materials - Merchandise, finishedproducts, semi-finished products, work in process and raw
materials of precious metals and of electronics materials arestated at cost based on the first-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.
Property, plant and equipment — Property, plant andequipment are stated at cost.
Depreciation of property, plant and equipment is computedby the straight-line method, based on the estimated useful
lives of the assets. The depreciation period generally ranges
from 3 years to 50 years for buildings and structures and 5
years to 17 years for machinery and equipment.
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, in general, based on the length of service, base salary at the time of retirement or severance and thecause 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, 2004, 2003 and 2002 based on the estimated amounts of projected benefit obligation and the fairvalue of the plan assets at those dates.
Actuarial gains and losses are recognized in expenses using
the straight-line method over the average of the estimatedremaining 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 lumpsum benefit plan covering directors and corporate auditors.
Research and development — Research and development
costs are charged to income as incurred.
Bond issue expense — Bond issue expense is charged toincome as incurred.
Accounting for certain lease transactions — Finance leases
which do not transfer ownership to lessees are accounted forin the same manner 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 is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of temporary differences.

3. Securities(1) The following tables summarize acquisition costs, bookvalues and fair value of available-for-sale securities with

Sales — Sales of merchandise and finished products are recognized when the products are shipped to customers.
Bonuses to directors and corporate auditors — Bonuses todirectors and corporate auditors, which are subject to shareholders’ approval at the annual shareholders’ meeting under
the Commercial Code of Japan, are accounted for as an
appropriation of retained earnings.
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 (Accounting Standards 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 pershare is computed based on the weighted-average number ofshares 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 2004 presentation. Thesechanges had no impact on previously reported results of operations or shareholders’ equity.

available fair values as of March 31, 2004 and 2003.

Securities with book values exceeding acquisition costs
Millions of yen

2004
Equity securities .............................................................
Others ............................................................................
Total ............................................................................

2003

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥25,53450¥25,584¥52,58878¥52,666¥27,05428¥27,082¥10,258—¥10,258¥12,846—¥12,846¥2,588—¥2,588

Thousands of U.S. dollars

2004
Equity securities .............................................................
Bonds .............................................................................
Total ............................................................................

Acquisition cost

Book value

Difference$241,593
473$242,066$497,568
738$498,306$255,975
265$256,240

Notes to Consolidated Financial Statements 39

Securities with book values not exceeding acquisition costs
Millions of yen

2004
Equity securities .............................................................
Others ............................................................................
Total ............................................................................

2003

Acquisition cost

Book value

Difference

Acquisition cost

Book value

Difference¥1,263—¥1,263¥1,168—¥1,168

¥(95)
—
¥(95)

¥29,89150¥29,941¥23,452
50¥23,502¥(6,439)—¥(6,439)

Thousands of U.S. dollars

2004
Equity securities .............................................................
Others ............................................................................
Total ............................................................................

Acquisition cost

Book value

Difference$11,950—$11,950$11,051—$11,051$(899)—$(899)(2) The following tables summarize book values of the securities with no available fair values as of March 31, 2004 and 2003:
Available-for-sale securities

Unlisted equity securities ........................................................................................................................

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

¥6,620¥ 5,643$62,636(3) Available-for-sale securities with maturities as of March 31, 2004 and 2003 are as follows:
As of March 31,2004

Millions of yen
one year but Over five years but
Within one year Overwithin five years
within ten years

Mutual funds .................................................................................................................

¥—

¥78

As of March 31,2004¥—

Mutual funds .................................................................................................................

$—

$738

$—

As of March 31, 2003

Total

$738
Millions of yen

one year but Over five years but
Within one year Overwithin five years
within ten years

Mutual funds .................................................................................................................

40 Notes to Consolidated Financial Statements¥78

Thousands of U.S. dollars
one year but Over five years but
Within one year Overwithin five years
within ten years(4) Total sales of available-for-sale securities sold in the year
ended March 31, 2004 amounted to ¥18,438 million($174,454 thousand) and the related gains amounted to¥4,848 million ($45,870 thousand). No losses were recognized in the year ended March 31, 2004.

Total

¥—

¥50

¥—

Total

¥50

Total sales of available-for-sale securities sold in the year
ended March 31, 2003 amounted to ¥1,976 million andthe related gains and losses amounted to ¥373 million and¥265 million, respectively.

4. Derivative transactions
Status of derivative transactions — The Company and its
consolidated subsidiaries utilize derivative transactions inorder to hedge various risks, such as fluctuation of metal
prices, exchange rates and interest rates, in the normal courseof business; such as futures contracts for hedging fluctuationof international price of metals, forward foreign exchange contracts and currency swaps for hedging fluctuation of exchange
rates, and interest swaps for hedging fluctuation of interests offloating-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 a result of changes in the market value.
The Company’s and its consolidated subsidiaries’ exposure tomarket 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 madedefault on their obligation. The derivative transactions aresolely made with highly rated financial institutions, their subsidiaries or LME brokers guaranteed by banks, so that theCompany and its consolidated subsidiaries might reduce therisk of default on an obligation.

Each department of the Company and its consolidated subsidiaries involving derivative transactions have their own rules
for derivative transactions which stipulate purposes and scopeof using derivatives, standards for choosing transaction counterparties, and procedures of reporting and administration.
The derivative transactions are subject to approval by theGeneral Manager of the department in charge after consultingwith 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 withthe transaction counterparties. Also, the internal audit department of the Company regularly examines derivative transactions.
The Company and its consolidated subsidiaries are notexposed to market risk arising from commodity derivativetransactions, 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 the corresponding future contracts. The Company and its consolidated subsidiaries alsoutilize currency derivative transactions to hedge market risk of
exchange rates or interest rates. Taking receivables andpayables denominated in foreign currencies into account, theCompany and its consolidated subsidiaries are not exposed tomarket risk.

Notes to Consolidated Financial Statements 41

The following tables summarize market value information as of March 31, 2004 and 2003 of derivative transactions for which
hedge accounting has not been applied:
Millions of yen

2004

2003

Contracted amountCurrency:
Forward contracts:
Sell position—U.S. dollars .......
Buy position—U.S. dollars .......

Commodity:
Forward contracts:
Sell position—Metal ................
Buy position—Metal ................
Call option contracts:
Buy position—Metal ................

Contracted amount

Total

Over oneyear

Marketvalue

Recognized
gains (losses)

¥

70
4,110
¥ 4,180

¥—
—
¥—

¥

68
4,003
¥
—

¥

2
(107)
¥ (105)¥—
10,069¥——¥—11,382

34¥10,103

—
¥—

¥

325
—

Total

Over oneyear

Marketvalue

Recognized
gains (losses)

¥

36
2,988
¥3,024

¥—
—
¥—

¥

37
3,010
¥ —

¥ (1)
22
¥ 21

¥ —
1,313

¥5,377391¥——¥5,154
386

¥223
(5)

291
¥1,604—¥5,768

—
¥—

¥

—
—

—
¥218

Millions of yen

Thousands of
U.S. dollars

2003

2004

780
17,33032,34917,545¥68,004$ 17,996
167,613233,191
196,244$615,044

Thousands of U.S. dollars

2004
Contracted amountCurrency:
Forward contracts:
Sell position—U.S. dollars .......
Buy position—U.S. dollars .......

Commodity:
Forward contracts:
Sell position—Metal ................
Buy position—Metal ................
Call option contracts:
Buy position—Metal ................

Total

Over oneyear

Marketvalue

Recognized
gains (losses)$ 662
38,887$39,549

$—
—
$—

$

643
37,875$—19(1,012)$ (993)$—
95,269$——$—107,692$—
12,423

322$95,591

—
$—

$

3,075
—

2,753
$15,176$

5. Inventories
Inventories at March 31, 2004 and 2003 consists of the following:

2004
Merchandise ...........................................................................................................................................
Finished products ...................................................................................................................................
Semi-finished products and work in process ...........................................................................................
Raw materials and supplies .....................................................................................................................

6. Bank loans and long-term debt
Bank loans are generally represented by short-term notes(most of which are unsecured) and bank overdrafts, and bore

42 Notes to Consolidated Financial Statements¥ 1,902
17,71524,646
20,741¥65,004¥

interest at annual rates of 0.53% to 6.27% and 0.54% to5.81% at March 31, 2004 and 2003, respectively.

Long-term debt at March 31, 2004 and 2003 consists of the following:

Long-term loans from:
Banks, insurance companies and other financial institutions, maturing through2015 at interest rates of 0.69% to 7.79%:
Secured .............................................................................................................................................
Unsecured .........................................................................................................................................
Government owned banks and government agencies, maturing through2017 at interest rates of 1.00% to 7.04%:
Secured .............................................................................................................................................
Unsecured .........................................................................................................................................
2.2% domestic bonds due in 2004 .......................................................................................................
2.225% domestic bonds due in 2004 ...................................................................................................
2.0% domestic bonds due in 2005 .......................................................................................................
1.6% domestic bonds due in 2003 .......................................................................................................
0.88% domestic bonds due in 2006 .....................................................................................................
1.08% domestic bonds due in 2007 .....................................................................................................
0.51% domestic bonds due in 2008 .....................................................................................................
Amount due within one year ..................................................................................................................

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

83
35,188¥ 3,798
27,654

5,017
8,265

8,659
140

47,46978,201

6,000
10,00010,000—10,00010,00010,000104,553(18,116)¥ 86,437

6,000
10,00010,00010,00010,00010,000—96,251(19,781)¥ 76,470

56,77094,616
94,616—
94,616
94,616
94,616989,242(171,407)$ 817,835

Millions of yen

Thousands of
U.S. dollars¥18,116
14,12028,133
22,37012,786
9,028$171,407
133,598
266,184
211,657
120,976
85,420Millions of yen

Thousands of
U.S. dollars

2003

2004

¥

$

786
332,936

The 1.6% domestic bond was redeemed during the year ended March 31, 2004.

The aggregate annual maturities of long-term debt at March 31, 2004 is as follows:Year ending March 31,

2005 .............................................................................................................................................................................
2006 .............................................................................................................................................................................
2007 .............................................................................................................................................................................
2008 .............................................................................................................................................................................
2009 .............................................................................................................................................................................
Thereafter .....................................................................................................................................................................

Assets pledged as collateral for bank loans and long-term debt at March 31, 2004 and 2003 are as follows:

2004
Notes and accounts receivable
Trade ...................................................................................................................................................
Investment securities
Subsidiaries ..........................................................................................................................................
Other ...................................................................................................................................................
Property, plant and equipment, at net book value ..................................................................................

7. Income taxes
Income taxes in the accompanying consolidated statements ofoperations comprise corporation tax, inhabitants taxes andenterprise tax. The aggregate statutory tax rate in Japan wasapproximately 42.05% for the years ended March 31, 2004,
2003 and 2002.
In terms of calculation of deferred tax assets and liabilities as of

¥

—

131
12,90649,750¥62,787

¥

841

131
6,394
38,641¥46,007

$

—

1,240
122,112
470,716$594,068

March 31, 2004, the Company and its consolidated domestic
subsidiaries used the aggregate statutory tax rate of 40.69% since
the income tax rates for enterprise taxes will be reduced as aresult of revision of the Japanese local tax law effective from theyear commencing on April 1, 2004.
Consolidated overseas subsidiaries are subject to income
taxes of the countries in which they domicile.

Notes to Consolidated Financial Statements 43

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 year ended March 31, 2004:
2004
Statutory tax rate ........................................................................................................................................................................................
Equity in earnings of unconsolidated subsidiaries and affiliated companies ................................................................................................
Effect of elimination of intercompany dividends received ...........................................................................................................................
Difference in tax rates among the Company and its consolidated subsidiaries ............................................................................................
Permanently nondeductible expenses .........................................................................................................................................................
Permanently nontaxable dividends received ................................................................................................................................................
Per capita inhabitant tax .............................................................................................................................................................................
Increase in valuation allowance ...................................................................................................................................................................
Others ........................................................................................................................................................................................................
Effective tax rate .........................................................................................................................................................................................

42.1%
(9.6)
2.6
(1.0)
0.6
(1.5)
0.4
0.6
0.2
34.4%

The Company has not disclosed the significant differences between
the statutory tax rate and the Company’s and its consolidated subsidiaries’ effective tax rate for the years ended March 31, 2003 and2002, 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, 2004
and 2003 are as follows:
Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

Deferred tax assets:
Net operating loss carry forwards .........................................................................................................
Retirement benefits ..............................................................................................................................
Net unrealized holding loss on available-for-sale securities ...................................................................
Allowance for bonus payable ................................................................................................................
Depreciation ........................................................................................................................................
Accrued liquidation loss of subsidiaries ................................................................................................
Allowance for losses on investments .....................................................................................................
Accrued indemnification loss of damages caused by a consolidated subsidiary ......................................
Write-down of investment securities ....................................................................................................
Accrued restructuring charges ..............................................................................................................
Others .................................................................................................................................................
Gross deferred tax assets ...................................................................................................................
Less valuation allowance ......................................................................................................................
Deferred tax assets-less valuation allowance ......................................................................................

¥ 9,029
8,079
—
1,144
190
1,635
225
416
558
413
2,705
24,394(7,219)17,175¥19,595
7,113
1,508
1,312
1,169
1,147
558
422
—
385
2,204
35,413(7,026)28,387$ 85,429
76,440—10,824
1,798
15,470
2,129
3,936
5,280
3,908
25,593230,807(68,304)
162,503

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 ......................................................................................................................

(11,041)
(313)
(253)
(4,114)(797)(751)(1,601)—(1,573)(258)(20,701)

—
(281)
(155)
(3,514)(770)(751)(2,582)
(515)
(970)
(376)
(9,914)(104,466)(2,961)(2,394)(38,925)(7,541)(7,106)(15,148)—(14,883)(2,441)(195,865)

Net deferred tax assets ............................................................................................................................

¥ (3,526)¥18,473$ (33,362)

44 Notes to Consolidated Financial Statements

(Change in effective tax rates to be used in calculating deferredtaxes due to the revised local tax law)
The aggregate statutory income tax rate used for calculationof deferred 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 the assessment by estimation on the basis of the size of business. Based on the change
of income tax rates, for calculation of deferred income tax
assets and liabilities, the Company and consolidated domestic

subsidiaries used the aggregate statutory income tax rates of
42.05% and 40.69% 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, for the year ended March 31, 2003, deferred income
tax assets decreased by ¥436 million, deferred tax liabilities
decreased by ¥14 million, income-taxes-deferred increased by¥369 million and net unrealized holding loss on available-forsale securities increases by ¥53 million compared with what
would have been recorded under the previous local tax law.

8. Retirement benefits and pension costs
The liabilities for severance and retirement benefits includedin the liability section of the consolidated balance sheets as of March 31, 2004 and 2003 consists of the following:

Projected benefit obligation ....................................................................................................................
Fair value of pension assets .....................................................................................................................
Excess of projected benefit obligation over pension assets .......................................................................
Unrecognized actuarial differences .........................................................................................................
Net pension liability recognized in the consolidated balance sheet .......................................................
Prepaid pension expenses .......................................................................................................................
Retirement benefits ..........................................................................................................................

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

¥(46,855)
29,684¥(17,171)
2,521¥(14,650)
14¥(14,664)¥(45,651)
23,834¥(21,817)
7,520¥(14,297)1¥(14,298)$(443,325)
280,859$(162,466)
23,853$(138,613)
132$(138,745)

The Company contributed securities to employee retirement
benefit trust, which are included in the pension assets.
Retirement benefits in the consolidated balance sheets as ofMarch 31, 2004 and 2003 also include estimated liabilities
for the unfunded lump-sum benefit plan covering directors
and corporate auditors (¥370 million ($3,501 thousand) ,¥307 million, respectively).
Included in the consolidated statements of operations for the years ended March 31, 2004, 2003 and 2002 are severance andretirement benefit expense comprised of the following:

Service cost–benefits earned during the year ....................................................................
Interest cost on projected benefit obligation ....................................................................
Expected return on plan assets .........................................................................................
Amortization of actuarial differences ...............................................................................

The Amounts for additional retirement benefits the Company
made for employees for the years ended March 31, 2004,
2003 and 2002 are ¥632 million ($5,980 thousands),¥3,198 million and ¥326 million, respectively.
The discount rates used by the Company are primarily
2.5%, respectively for fiscal years 2004, 2003 and 2002. The
rates of expected return on plan assets used by the Company

Millions of yen

Thousands of
U.S. dollars

2004

2003

2002

2004

¥1,973
986
(466)
867
¥3,360¥2,337
969
(495)
588
¥3,399¥2,573
1,055
(481)
270
¥3,417$18,668
9,329(4,409)8,203$31,791

are primarily 3.5%, respectively for fiscal years 2004, 2003
and 2002. The estimated amount of all retirement benefits to
be paid at the future retirement date is allocated equally toeach service 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.

Notes to Consolidated Financial Statements 45

9. Research and development expense
Research and development expense included in selling, generaland administrative expenses for the years ended March 31,
2004, 2003 and 2002 are ¥4,286 million ($40,553 thousand),¥3,763 million and ¥4,237 million, respectively.
10. Special reserves
For the purpose of obtaining tax benefits, the Company andsome consolidated subsidiaries have set up special reserves
mainly for losses on overseas investments and explorations inaccordance with the Special Taxation Measures Law of Japan.
11. Shareholders’ equity
The diluted net income per share for the years ended March
31, 2004, 2003 and 2002 are not calculated because there
were no securities with dilutive effect.
Under the Commercial Code of Japan, the entire amountof the issue 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 capital surplus.
The Commercial Code requires that an amount equal to atleast 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 of legal earnings reserve and additional paid-in capital

Such reserves, which are included in retained earnings, are¥6,202 million ($58,681 thousand) and ¥7,647 million atMarch 31, 2004 and 2003, respectively.

of the Company has reached 25% of common stock, andtherefore the Company is not required to provide legal earnings reserve any more. The legal earnings reserve and additional paid-in capital may be used to eliminate or reduce a
deficit by resolution of the shareholders’ meeting or may becapitalized 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% ofcommon 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 the Company in accordance with the Code.

12. Contingent liabilities
Contingent liabilities at March 31, 2004 are as follows:

As endorser of notes receivable discounted ....................................................................................................................
As guarantor for loans of:Non-consolidated subsidiaries and affiliated companies ..............................................................................................
Other .........................................................................................................................................................................

46 Notes to Consolidated Financial Statements

Millions of yen

Thousands of
U.S. dollars¥ 510$ 4,826

5,440
3,731
¥9,68151,47135,301$91,59813. Segment information
Business segment information
The primary business segments of the Company and its consolidated subsidiaries include mineral resources, metals, elec-

tronics and advanced materials, construction materials andothers.

Business segment information for the years ended 31 March 2004, 2003 and 2002 are as follows:
2004

Millions of yen
Mineralresources

MetalsElectronics& advanced
materials

Construction
materials

OthersEliminationor corporate

Consolidated

Net sales:
Outside customers...........................................
Inter segment ..................................................
Total¥16,437
8,878
25,315¥226,148
47,239273,387¥136,272
6,404
142,676¥15,370
7
15,377¥ 7,904
2,300
10,204¥—(64,828)(64,828)¥402,131—
402,131

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

20,855¥ 4,460¥52,326
2,947
3,001

260,820¥ 12,567¥219,816
4,676
27,878137,064¥ 5,612¥116,395
8,273
12,16815,370¥
7¥14,125
656
233

9,813
¥ 391
¥39,869472
1,153(64,569)¥ (259)¥ 75,399
800
2,107

379,353¥ 22,778¥517,930
17,82446,540Mineralresources

MetalsElectronics& advanced
materials

Construction
materials

OthersEliminationor corporate

Consolidated

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¥73,158756
2,442

338,649¥ 16,593¥470,774
18,28318,927

Mineralresources

MetalsElectronics& advanced
materials

Construction
materials

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

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)¥19,593
713
515

2003

Millions of yen

2002

Millions of yen
Eliminationor corporate

Consolidated¥16,365
3,621
19,986¥—(42,868)(42,868)¥330,194—
330,194

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

329,047¥ 1,147¥518,756
17,82225,379Notes to Consolidated Financial Statements 47

2004

Thousands of U.S. dollars
Mineralresources

MetalsElectronics& advanced
materials

Net sales:
Outside customers........................................... $155,521
Inter segment ..................................................
84,000
Total
239,521$2,139,729
446,958
2,586,687$1,289,356
60,592
1,349,948$145,425
66
145,491$ 74,785
21,76296,547$— $3,804,816—(613,378)(613,378) 3,804,816

Costs and expenses ............................................ 197,322
Operating income (loss) .................................... $ 42,199
Identifiable assets .............................................. $495,089
Depreciation expense ........................................
27,883
Capital expenditures .........................................
28,3942,467,783$ 118,904$2,079,818
44,243
263,771

1,296,849$ 53,099$1,101,287
78,276
115,129

145,425$
66$133,646
6,207
2,205

92,847$ 3,700$377,226
4,466
10,909(610,927) 3,589,299$ (2,451) $ 215,517$ 713,398 $4,900,464
168,6447,569
440,344
19,936

Construction
materials

OthersEliminationor corporate

Consolidated

Geographic segment information
Geographic segment information for the years ended March 31, 2004, 2003 and 2002 are summarized as follows:
2004

Millions of yen
OthersEliminationor corporate

Consolidated¥29,121758
29,879¥10,094
1,309
11,403¥—(23,226)(23,226)¥402,131—
402,131

14,164¥ 678¥33,748

29,274¥ 605¥38,928

11,324¥
79¥13,776(22,971)¥ (255)¥ 42,549

379,353¥ 22,778¥517,930

Domestic

North
AmericaSoutheast
Asia

OthersEliminationor corporate

Consolidated

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

Domestic

North
AmericaSoutheast
Asia

OthersEliminationor corporate

Consolidated

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

Domestic

North
AmericaSoutheast
Asia

Net sales:
Outside customers ................................................................ ¥348,074
Inter segment .......................................................................
21,159Total ................................................................................. 369,233¥14,842—
14,842

Costs and expenses .................................................................. 347,562
Operating income (loss) .......................................................... ¥ 21,671
Identifiable assets .................................................................... ¥388,929
2003

Millions of yen

2002

48 Notes to Consolidated Financial Statements

Millions of yen

2004

Thousands of U.S. dollars
Eliminationor corporate

Domestic

North
AmericaSoutheast
Asia

Others

Net sales:
Outside customers ................................................................ $3,293,348
Inter segment ....................................................................... 200,199
Total ................................................................................. 3,493,547$140,430—
140,430$275,532
7,172
282,704$ 95,506
12,385
107,891$— $3,804,816—(219,756)(219,756) 3,804,816

Costs and expenses .................................................................. 3,288,504
Operating income (loss) .......................................................... $ 205,043
Identifiable assets .................................................................... $3,679,903

134,015$ 6,415$319,311

276,980$ 5,724$368,323

107,144$
747$130,344(217,344) 3,589,299$ (2,412) $ 215,517$ 402,583 $4,900,464

Consolidated

Information for overseas sales
2004

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

Millions of yen
North
AmericaSoutheast
Asia

East
Asia

OthersTotal¥18,896—
4.7%¥28,916—
7.2%¥75,452—
18.7%¥3,111—
0.8%¥126,375¥402,131
31.4%

2003

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

Millions of yen
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%

2002

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

Millions of yen
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%

2004

Thousands of U.S. dollars
North
AmericaSoutheast
Asia

East
Asia

Others

Total

Overseas net sales ........................................................................................... $178,787
Consolidated net sales.....................................................................................
—
Share of overseas net sales ..............................................................................
4.7%$273,593—
7.2%$713,899—
18.7%$29,435—
0.8%$1,195,714$3,804,816
31.4%

Notes to Consolidated Financial Statements 49

14. 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, 2004 and 2003 are as follows:
Millions of yen

2004
Acquisition cost

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

¥1,490367¥1,857

Accumulated Net book value
depreciation

¥ 857
309
¥1,166

¥633
58
¥691

2003
Acquisition cost

¥1,720308¥2,028

Accumulated Net book value
depreciation

¥ 929
239
¥1,168

¥791
69
¥860

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

¥296
395
¥691

¥353
507
¥860

$2,801
3,737$6,538

Thousands of U.S. dollars

2004
Acquisition cost

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

$14,098
3,472$17,570

Accumulated Net book value
depreciation$ 8,109
2,923$11,032$5,989549$6,538Future lease payment, inclusive of interest at March 31, 2004 and 2003 under such leases are as follows:

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

Total lease expenses and assumed depreciation charges for the years ended March 31, 2004, 2003 and 2002 are as follows:

Total lease expenses .........................................................................................................
Assumed depreciation charge ...........................................................................................

Millions of yen

Thousands of
U.S. dollars

2004

2003

2002

2004

¥330
330

¥466
466

¥555
555

$3,122
3,122

As a lesser
A summary of acquisition cost , accumulated depreciation and net book value at March 31, 2004 and 2003 were as follows:
Millions of yen

Acquisition cost

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

¥382
1
¥383

2004

2003

Accumulated Net book value
depreciation

Accumulated Net book value
depreciation

¥201
1
¥202

¥181
0
¥181

Thousands of U.S. dollars

2004
Acquisition cost

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

50 Notes to Consolidated Financial Statements$3,614
10$3,624

Accumulated Net book value
depreciation$1,89210$1,902$1,7220$1,722Acquisition cost

¥422
1
¥423

¥186
1
¥187

¥236
0
¥236

Future lease receipt, inclusive of interest, at March 31, 2004 and 2003 under such lease were as follows:

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

Millions of yen

Thousands of
U.S. dollars

2004

2003

2004

¥ 34
157
¥191

¥ 42
204
¥246

$ 322
1,485
$1,807

Millions of yen

Thousands of
U.S. dollars

Total revenue and depreciation charges for the years ended March 31, 2004, 2003, and 2002 were as follows:

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

2004

2003

2002

2004

¥35
30

¥42
35

¥58
36

$331
284

15. Subsequent events(1) The following appropriations of retained earnings at March 31, 2004 were approved at the annual general meeting of shareholders of the Company held on June 29, 2004.

Year-end cash dividends ( ¥ 6.00 ($0.057) per share) ....................................................................................................
Bonuses to directors ......................................................................................................................................................

Millions of yen

Thousands of
U.S. dollars¥3,42537$32,410350(2) The Company issued Convertible Bonds after March 31, 2004 as follows.
• Name of the Bonds:
Sumitomo Metal Mining Co., Ltd. Zero Coupon Convertible Bonds due 2009 (the “Bonds”)• Date of payment and date of issuance:
June 21, 2004 (maturity: June 22, 2009)• Total amount of issue of the Bonds:¥20,000 million ($189,233 thousand)• Issue price of the Bonds:
100% of the principal amount of the Bonds• Coupon:
Zero coupon• Conversion price:¥1,001 ($9)
• Exercise period:
On and after June 28, 2004 up to and including June 15, 2009
• Security of the Bonds:
Unsecured and unguaranteed• Use of proceeds:
Net proceeds of the Bonds will be applied towards the repayment of bonds and investments in Cash Management System.
• The Company offered the Bonds for public subscription.

Notes to Consolidated Financial Statements 51

Independent Auditor’s Report
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. andconsolidated subsidiaries as of March 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2004,
expressed in Japanese yen. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to independently 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 require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Sumitomo Metal Mining Co., Ltd. and subsidiaries as ofMarch 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of
the three years in the period ended March 31, 2004, in conformity with accounting principles generally
accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2004 are presented solely for convenience. Our audit also included the translation of yen
amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 1 to the consolidated financial statements.

Tokyo, Japan
June 29, 2004

52 Independent Auditor’s ReportSMM GroupSUMITOMO METAL MINING CO., LTD. AND SUBSIDIARIES

Name

Voting Shares (%)

Branches, Divisions and Laboratories
Head OfficeOsaka Branch
Nagoya Branch
Besshi-Niihama District Division
Harima Smelter
Kunitomi District Division
Electronics Division
Hishikari Mine Department
Ichikawa Research Laboratories
Niihama Research Laboratories
Ome Research Laboratories
London Office
Shanghai Office
Domestic Major Subsidiaries and Affiliated Companies
Mineral Resources
Sumiko Consultants Co., Ltd.
MetalsHyuga 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.
Sumico Lubricant Co., Ltd.
Nittosha Co., Ltd.
Construction Materials
Sumitomo Metal Mining Siporex Co., Ltd.
Igeta Heim Co., Ltd.
Other Services
Sumiko Eco-engineering Co., Ltd.
Sumiko Technical Service Co., Ltd.
SMM Plant Engineering Co., Ltd.
Sumiko Information Systems Co., Ltd.
N. E. Chemcat Corporation*
Nippon Ketjen Co., Ltd.*

Phone

Operations

81-3-3436-7701
81-6-6223-7714
81-52-963-2360
81-897-37-4800
81-794-37-8651
81-135-72-1211
81-428-31-1181
81-995-26-3111
81-47-372-7221
81-897-37-7171
81-428-31-4140
44-020-7246-3865
86-21-6219-4077

100.0

81-3-3827-6134

Geological surveys etc.

60.0
100.0
95.9
50.0

81-982-52-8101
81-3-3847-8011
81-46-274-1606
81-3-3591-3110

Ferro-nickel refining
Brass & Copper production
Casting alloy production
Zinc production etc.

100.0
92.0
100.0
100.0
100.0
100.0
99.7
100.0
90.0

81-995-22-7511
81-265-79-0121
81-897-37-2411
81-978-44-2345
81-42-527-7246
81-45-921-2341
81-54-257-2800
81-3-3344-6835
81-466-48-6200

IC packaging materials production etc.
Printing wiring board production
Lead frame production
Solder plating of IC
IC packaging materials businessElectronic device terminal and connector production
Electronic device precision components production
Lubricants production
Metal product plating etc.

100.0
100.0

81-3-3435-4660
81-3-5452-7591

Construction materials (ALC) production
Ferro-concrete, ALC housing (subcontractor)

100.0
100.0
100.0
100.0
45.6
50.0

81-3-5685-1311
81-897-33-1050
81-897-37-4820
81-3-3436-7788
81-3-3435-5490
81-3-5442-5061

Environmental engineering etc.
Construction, refining etc. (subcontractor)
Refining facility engineering etc.
IT system development
Precious metal catalysts production etc.
Oil refining catalysts production etc.

Overseas Major Subsidiaries and Affiliated Companies
Sumitomo Metal Mining America Inc.
100.0
Sumitomo Metal Mining Arizona Inc.
80.0
SMMA Candelaria Inc.
80.0
Sumitomo Metal Mining Canada Ltd.
100.0
Sumitomo Metal Mining Oceania Pty. Ltd.
100.0
SMM Pogo LLC
100.0
Coral Bay Nickel Corporation
54.0
Sumitomo Metal Mining Asia Pacific Pte. Ltd.
100.0
M-SMM Electronics SDN. BHD.
100.0
Malaysian Electronics Materials SDN. BHD.
100.0
Sumiko Electronics Taiwan Co., Ltd.
70.0
Sumiko Leadframe (Thailand) Co., Ltd.
100.0
P.T.SUMIKO LEADFRAME BINTAN
100.0
Sumiko Leadframe Singapore Pte. Ltd.
100.0
Sumiko Leadframe Chengdu Co., Ltd.
85.0
SMM USA, Inc.
100.0
SMMEP Pte. Ltd.
100.0
COMPAÑIA CONTRACTUAL MINERA CANDELARIA*16.0
P.T. International Nickel Indonesia*
20.1
FIGESBAL*
25.5

1-206-405-2800
1-206-405-2800
1-206-405-2800
1-604-685-3274
61-2-9266-0400
1-206-405-2800
63-2-750-1536
65-6293-4377
60-3-5519-8140
60-3-5519-8302
886-7-365-3592
66-35-226303
62-770-696020
65-6293-4377
86-28-8515-5577
1-760-941-4500
65-6863-1123
56-2-251-1200
62-21-5249003
687-27-2031

Manages mining affiliates in U.S.
Jointly manages Morenci Mine, U.S.
Jointly manages La Candelaria Mine, Chile
Prospecting, consulting
Jointly manages Northparkes Mine, Australia
Pogo Project, Alaska, U.S.
Nickel cobalt mixed sulfide production
Manages overseas lead frame business
Lead frame production
Bonding wire production
Lead frame production
Lead frame production
Lead frame production
Lead frame production
Lead frame production
TV frame production
TV frame production
Manages La Candelaria Mine, Chile
Nickel ore mining and refining
Nickel ore mining etc.

*Affiliated company

SMM Group 53

Corporate Data and Investor Information
As of March 31, 2004

Corporate Data
Head Office11-3, Shimbashi 5-chome, Minato-ku,
Tokyo 105-8716, JapanFounded

1590

Incorporated

1950

Paid-In Capital¥88.3 billion

Number of Employees

2,172Contact Information
IR Department:
11-3, Shimbashi 5-chome
Minato-ku, Tokyo 105-8716, Japan
Phone:
81-3-3436-7921
Facsimile: 81-3-3436-7879
Homepage: http://www.smm.co.jp/

Investor Information
Closing Date
The Company’s books are closed on
March 31 each year.
Regular General Meeting
The regular general meeting of shareholders is held in June each year.
Common Stock
Number of authorized shares:
1,000,000,000 shares
Number of issued and outstanding
shares:571,872,794 shares
Number of shareholders:
57,957

Listing of Shares
Tokyo, Osaka

Public Notices
The Company’s public notices appear in
the Nihon Keizai Shimbun published inTokyo, Japan.

Stock Transaction Units
1,000-share units

Independent Public Accountants
KPMG AZSA & Co.
1-2, Tsukudo-cho, Shinjuku-ku, Tokyo

Stock Transfer Agent
The Sumitomo Trust and Banking
Company, Limited
Head office:5-33, Kitahama 4-chome, Chuo-ku,
Osaka
Stock Transfer Agency Department:
4-4, Marunouchi 1-chome, Chiyodaku, Tokyo

Major Shareholders

Breakdown of Shareholders
Number of shares held
(thousands)

Japan Trustee Services Bank. Ltd. (Trust accounts) ....................
The Master Trust Bank of Japan, Ltd. (Trust accounts) .............
Separately managed money trustee,
Mitsui Asset Trust and Banking Company, Limited “1” .........
Sumitomo Mitsui Banking Corporation ....................................
Bank of New York for Goldman Sachs International (Equity) ...
Japan Trustee Services Bank. Ltd. / The Sumitomo Trust andBanking Co., Ltd. (Retirement benefit trust account) .............
The Chase Manhattan Bank NA London SL Omnibus Account
The Mitsubishi Trust and Banking Corporation (Trust accounts)
Sumitomo Life Insurance Company ..........................................
State Street Bank and Trust Company .......................................

(Thousands of share)

Voting rights(%)

79,86639,483

14.1
7.0

13,635
12,74910,611

2.4
2.3
1.9

9,800
9,405
7,507
7,108
6,276

1.7
1.7
1.3
1.3
1.1

Individuals and Other
22.2%
125,654

Financial Institutions
43.9%
248,499

Foreign Investors
23.8%
134,967

Securities Companies
3.4%
19,397
Other Corporations
6.7%
38,096

Share Performance(Share index: April 1, 2003=100)(Millions of shares)

250

20

200

15

150

10

100

5

50

0
’03/4

SMM (left)

’03/5

’03/6

TOPIX (left)

’03/7

’03/8

’03/9

Trading volume (right)

54 Corporate Data and Investor Information’03/10’03/11 ’03/12

’04/1

’04/2

’04/3

’04/4

’04/5

’04/6

’04/7

Corporate Officers
Director
Susumu Makino

Director
Nobuto Yamaguchi

Representative Director
Chitsura Arakawa

Representative Director
Koichi Fukushima

Directors and Statutory Auditors

Executive Officers

Representative Directors

President

Koichi Fukushima
Chitsura Arakawa

Director
Yukio Ishikawa

Koichi Fukushima

Executive Vice President
Directors
Hirosuke Chihara
Nobuto Yamaguchi
Yukio Ishikawa
Susumu Makino
Masashi Koike

Chitsura Arakawa

Senior Managing Executive Officers
Hirosuke Chihara
Nobuto Yamaguchi

Director
Masashi Koike
Director
Hirosuke Chihara

Executive Officers
Masashi Koike
Ichiro Abe
Kotaro Tomino
Naoki Tajiri
Yoshiaki Hashinaka
Etsu Senda
Kouzou Baba
Nobumasa Kemori

Managing Executive Officers(Standing) Senior Auditor
Isao Shima(Standing) Auditor
Motoki Kitamura

Kouji Aiba
Takeshi Yamane
Yukio Ishikawa
Susumu Makino
Takuro Mochihara

Auditors
Hajime Ohta
Tsutomu Ushijima(As of June 29, 2004)

Corporate Officers 55

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