Financial Review
Non-Consolidated Operating Results
On a non-consolidated basis, net sales for fiscal 1998, ended 31st
March, 1998, totaled ¥170,318 million (US$1,310 million), an
increase of 1.8% over fiscal 1997.
During fiscal 1998, conditions in the Japanese textile industry
were generally difficult, with weak consumer spending and sluggish market conditions. Textile sales amounted to ¥88,479 million(US$681 million), down 3.1% from fiscal 1997 and accounting for
51.9% of total sales, down 2.7 percentage points. A depreciation of
the yen against other major currencies and a restructuring of the
product lineup were favorable factors, and profit improved slightly.
Non-textile sales increased 7.8% to ¥81,839 million (US$630
million), thanks to growth in sales of ABS products. On the other
hand, profit declined due to intensified competition resulting
from the economy’s move into recession. The ratio of non-textile sales to total sales was 48.1%, up 2.7 percentage points.*
Cost of sales increased 1.6% to ¥150,925 million (US$1,161
million). The ratio of cost of sales to net sales decreased 0.2 percentage points to 88.6%. Selling, general and administrative expenses increased 4.8% to ¥16,357 million (US$126 million). Costsand expenses increased 1.9% to ¥167,282 million (US$1,287 million). Despite the slight increase in net sales, the rise in costs andexpenses resulted in a decline of 3.2% in operating income to¥3,036 million (US$23 million). Other income (net) declined
33.2% to ¥562 million (US$4 million), due mainly to a devaluation of securities held. Consequently, income before income taxes
amounted to ¥3,598 million (US$28 million), down 9.6%. Income taxes amounted to ¥1,790 million (US$14 million). As aresult, net income was ¥1,808 million (US$14 million), a decreaseof 8.1% from fiscal 1997. Net income per share was ¥7.64(US$0.06), down ¥0.68 (US$0.01). Return on equity decreased
0.1 percentage point to 1.1%.
The total dividend per share for fiscal 1998 was ¥7.00 (US$0.05),
the same as for fiscal 1997. Cash dividends totaled ¥1,655 million (US$13 million), representing a payout ratio of 91.6%, up
7.5 percentage points. It is Nisshinbo’s intention to maintain dividends at a stable level.
*For details of divisional results, please see “Review of Operations.”

Non-Consolidated Financial Position
Total assets as of 31st March, 1998 stood at ¥249,829 million(US$1,922 million), down 0.2% from fiscal 1997. Despite increases in inventory and receivables from subsidiaries and affiliates, current assets decreased 2.1% to ¥130,375 million (US$1,003
million). The decline was attributable to decreases in time deposits and marketable securities. Property, plant and equipment
declined 1.1% to ¥77,894 million (US$599 million), mainly because depreciation costs exceeded capital investment. A rise in16

investments in and advances to subsidiaries and affiliates contributed to an 8.0% increase in investments and other assets to¥41,560 million (US$320 million).
Current liabilities increased 72.2% to ¥56,727 million (US$436
million), due mainly to the transfer from long-term liabilities of
convertible bonds maturing March 1999. Due to this transfer andrepayment of the said convertible bonds, long-term liabilities decreased 49.0% to ¥26,154 million (US$201 million).
Total current and long-term liabilities amounted to ¥82,881
million (US$638 million), down 1.6%. Shareholders’ equity was¥166,948 million (US$1,284 million), up 0.5% over fiscal 1997.
Shareholders’ equity ratio was 66.8%, up 0.4 percentage points.
Shareholders’ equity per share was ¥706.08 (US$5.43), an increaseof ¥3.32 (US$0.03).

Consolidated Results
On a consolidated basis, net sales for fiscal 1998 totaled ¥240,249
million (US$1,848 million), up 2.6% over fiscal 1997 and representing 1.41 times the non-consolidated figure, slightly higher thanfiscal 1997. Inclusion of Nisshinbo do Brasil Industria Textil Ltda.
in the consolidated results pushed up textile sales 3.7% to ¥98,919
million (US$761 million). Sales of automobile brakes increased
15.4% to ¥39,844 million (US$306 million), thanks to an increasein sales of ABS products. Among other businesses**, the machine
tools and real estate sectors recorded good sales, the former fueledby a boom in overseas demand. Overall, sales of other businesses,
however, were adversely affected by sluggish domestic demand anddecreased 2.8% to ¥101,486 million (US$781 million). The ratiosof textile, automobile brake, and other sales to total sales were 41.2%,
16.6%, and 42.2%, respectively.
Operating income was ¥3,989 million (US$31 million), down
12.2% and representing 1.31 times the non-consolidated figure,compared to the figure of 1.45 recorded for fiscal 1997. Other
expenses (net) of ¥602 million (US$5 million) were incurred as aresult of devaluation of securities held and exchange losses suffered by Kohbunshi (Thailand) Ltd., a subsidiary in Thailand,following the currency crisis in Asia.
Net income was ¥1,087 million (US$8 million), down 53.9%
and representing 0.60 times the non-consolidated figure. This
was attributable to a decrease in the net income of the Company
and Japan Radio Co., Ltd., a domestic affiliate, accounted for on
the equity method, and exchange losses incurred by P.T. Nikawa
Textile Industry, an Indonesian affiliate, accounted for on theequity method. Net income per share was ¥4.60 (US$0.04). Return on equity on a consolidated basis decreased 0.7 percentage
points to 0.5%.
**Other businesses include machine tools, chemical products, papers, electronic equipment, realestate, and other businesses.

Six-Year Summary( millions of yen)
1993

1994

1995

1996

1997

1998

179,4172,730
6,967
161,203
265,646
60.7
4.4
15,467
11,783

162,4102,317
2,934
162,442
263,903
61.6
1.8
10,38911,420166,194
4,721
3,067
163,897
267,791
61.2
1.9
16,023
11,416

155,360
910
3,723
165,905
248,48166.8
2.2
17,252
12,143

167,272
3,137
1,968
166,163
250,419
66.4
1.2
10,071
11,281

170,318
3,036
1,808
166,948249,82966.8
1.1
10,502
10,957

Per Share (in yen):
Net Income
Shareholders’ Equity
Cash Dividends

29.48
682.147.00

12.42
687.337.00

12.97
693.197.00

15.75
701.687.00

8.32
702.767.00

7.64
706.087.00

Number of Employees

6,328

6,134

6,051

5,445

5,145

5,102

241,880
5,947
10,095
192,906
338,846

219,870
4,252
3,924
194,412
328,881

224,269
5,250
1,708
197,509345,886

216,721
1,100
2,195
198,139
325,754234,268
4,541
2,359
198,758
328,427

240,249
3,989
1,087
199,373
329,102

Non-Consolidated:
Net Sales
Operating Income
Net Income
Shareholders’ Equity
Total Assets
Shareholders’ Equity Ratio (%)
Return on Equity (%)
Capital Investment
Depreciation

Consolidated:
Net Sales
Operating Income
Net Income
Shareholders’ Equity
Total Assets

17

Nisshinbo Industries, Inc.

Non-Consolidated Balance Sheets
31st March, 1998 and 1997

ASSETS(millions of yen)
1998
1997

(thousands of
US dollars)(Note 1)
1998

Current assets:
Cash and cash equivalents
Cash................................................................................................................
Time deposits.................................................................................................
Marketable securities (Note 4) .........................................................................
Receivables
Notes receivable, trade ..................................................................................
Accounts receivable, trade ............................................................................
Subsidiaries and affiliates ..............................................................................
Other ..............................................................................................................
Less allowance for doubtful accounts...........................................................
Inventories (Note 3)..........................................................................................
Other current assets ..........................................................................................
Total current assets ....................................................................................

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

Investments and other assets:
Investment securities (Note 4) .........................................................................
Investments in and advances to subsidiaries and affiliates (Note 4)..............
Other ..................................................................................................................

See Notes to Non-Consolidated Financial Statements.

18

¥

1,448
21,00822,456
13,796¥899
23,01423,913
19,129$

11,139161,600
172,739
106,123

4,742
19,692
25,616621
50,671(507)
50,16443,514445
130,375

4,412
20,86323,456529
49,260(412)
48,84840,974318
133,182

36,477
151,477
197,046
4,777
389,777(3,900)385,877
334,723
3,423
1,002,885

7,791
68,361
164,522613
241,287(163,393)
77,894

7,541
67,056160,333306
235,236(156,472)
78,76459,931
525,854
1,265,554
4,715
1,856,054(1,256,869)
599,185

15,68324,944933
41,560¥ 249,829

15,937
21,443
1,093
38,473¥ 250,419

120,638
191,877
7,177
319,692$ 1,921,762

LIABILITIES AND SHAREHOLDERS’ EQUITY(millions of yen)
1998
1997

(thousands of
US dollars)(Note 1)
1998

Current liabilities:
Short-term bank loans (Note 5).......................................................................
Current portion of long-term debt (Note 5) ...................................................
PayablesAccounts payable, trade................................................................................
Subsidiaries and affiliates .............................................................................
Other..............................................................................................................
Employees’ savings deposits .............................................................................
Accrued expenses ..............................................................................................
Accrued income taxes (Note 7) ........................................................................
Other current liabilities.....................................................................................
Total current liabilities .............................................................................

Long-term liabilities:
Long-term debt (Note 5) ..................................................................................
Accrued severance benefits (Note 6)................................................................
Other long-term liabilities ...............................................................................

¥

10,24025,489¥10,260177$

78,769196,069

6,864
2,258
2,690
11,812
4,849
2,441
1,576
320
56,727

7,442
2,382
2,610
12,434
5,612
2,475
1,640
351
32,94952,80017,36920,69390,86237,30018,777
12,123
2,462
436,362352
17,655
8,147
26,15426,365
16,841
8,101
51,307

2,708
135,808
62,669201,185

27,58820,401
6,897
112,062
166,948¥ 249,829

27,58819,7096,897
111,969
166,163¥ 250,419

212,215
156,93153,054
862,015
1,284,215$ 1,921,762

Commitments and contingencies (Note 11)

Shareholders’ equity (Notes 9 and 12):
Common stock:
Authorised — 400,000,000 shares
Issued with par value of ¥50 per share —236,443,939 shares ...................................................................................
Additional paid-in capital.................................................................................
Legal reserve ......................................................................................................
Retained earnings .............................................................................................

19

Nisshinbo Industries, Inc.

Non-Consolidated Statements of Income
Years ended 31st March, 1998 and 1997

(millions of yen)
1998
1997

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

(thousands of
US dollars)(Note 1)1998

¥ 170,318¥ 167,272$ 1,310,139

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

150,925
16,357167,282

148,527
15,608164,135

1,160,962
125,823
1,286,785

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

3,036

3,137

23,3542,286(650)(1,074)
562

2,461
(817)
(803)
841

17,585(5,000)(8,262)
4,323

3,598

3,978

27,677

Costs and expenses:

Other income (expenses):
Interest and dividend income ..........................................................................
Interest expenses ...............................................................................................
Other, net (Note 10) .........................................................................................

Income before income taxes ..............................................................................................................
Income taxes (Note 7).........................................................................................................................
Net income ..........................................................................................................................................

¥

1,790
1,808

¥

2,010
1,968

(yen)

$

13,76913,908(US dollars)

Per share:
Net income .......................................................................................................
Cash dividends .................................................................................................

See Notes to Non-Consolidated Financial Statements.

20

¥

7.64
7.00

¥

8.32
7.00

$

0.06
0.05

Nisshinbo Industries, Inc.

Non-Consolidated Statements of Shareholders’ Equity
Years ended 31st March, 1998 and 1997

(millions of yen)
1998
1997

(thousands of
US dollars)(Note 1)
1998

27,58827,586$ 212,2152—

Common stock:
Balance at beginning of year
(1998 — 236,443,939 shares; 1997 — 236,439,099 shares)........................
Add:
Conversion of convertible bonds (1997 — 4,840 shares)...........................
Balance at end of year
(1998 and 1997 — 236,443,939 shares).......................................................

¥

¥

—
¥

27,588¥27,588$ 212,215¥

19,709¥19,706$ 151,608¥—
692
20,401¥

3—
19,709—5,323$ 156,931

Balance at beginning of year .............................................................................
Add:
Transfer from retained earnings ..................................................................
Balance at end of year .......................................................................................

¥

6,897

¥

6,896

$

53,054

¥

—
6,897

¥

1
6,897

$

—
53,054

Balance at beginning of year .............................................................................
Add:
Net income....................................................................................................
Deduct:Cash dividends ..............................................................................................
Directors’ bonuses ........................................................................................
Transfer to legal reserve................................................................................
Balance at end of year .......................................................................................

¥ 111,969¥ 111,717$ 861,300

1,808

1,968

13,908(1,655)(60)—¥ 112,062(1,655)(60)(1)¥ 111,969(12,731)(462)—$ 862,015

Additional paid-in capital:
Balance at beginning of year .............................................................................
Add:
Conversion of convertible bonds.................................................................
Business acquisition......................................................................................
Balance at end of year .......................................................................................
Legal reserve:

Retained earnings:

See Notes to Non-Consolidated Financial Statements.

21

Nisshinbo Industries, Inc.

Non-Consolidated Statements of Cash Flows
Years ended 31st March, 1998 and 1997

(thousands of
US dollars)(Note 1)
1998

(millions of yen)
1998
1997

Cash flows from operating activities:
Net income .....................................................................................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation ..........................................................................................................
Provision for doubtful receivables .......................................................................
Provision for severance benefits ...........................................................................
Payment of severance benefits ..............................................................................
Loss on sale of property, plant and equipment ...................................................
Gain on sale of marketable securities....................................................................
(Gain) loss on sale of investment securities..........................................................
Write-down of marketable securities and investment securities .......................
Changes in operating assets and liabilities:
Receivables ....................................................................................................
Inventories ....................................................................................................
Other current assets ......................................................................................
Payables..........................................................................................................
Employees’ savings deposits ........................................................................
Accrued expenses ..........................................................................................
Accrued income taxes ..................................................................................
Other current liabilities.................................................................................
Net cash provided by operating activities ..........................................

¥

1,808

¥

1,968

$

13,908

10,957
95
1,542
(728)
362
(925)
79
1,114

11,281
36
1,377
(755)
763
(880)
(25)
714

84,284731
11,862(5,600)2,785(7,115)607
8,569(1,411)(2,540)
(127)
(622)
(763)
(34)
(64)
(31)
8,712

(945)
601
26
1,198
(462)
(286)
1,273
10
15,894(10,854)(19,538)(977)(4,785)(5,869)
(262)
(492)
(238)
67,016

58
144,820378
187,907446
1,114,000—(10,502)(139,330)53(10,071)(187,636)—(80,785)(1,071,769)(3,430)447
160(7,777)(1,853)—
7(11,215)(26,384)
3,438
1,231
(59,823)

Cash flows from financing activities:
Repayment of long-term debt .......................................................................................
Increase in other long-term liabilities ..........................................................................
Decrease in short-term bank loans ...............................................................................
Cash dividends paid .......................................................................................................
Directors’ bonuses paid .................................................................................................
Net cash used in financing activities ...................................................

(703)
46
(20)
(1,655)(60)(2,392)

(830)
1,354
—
(1,655)(60)(1,191)(5,408)354(153)(12,731)(462)(18,400)

Net increase (decrease) in cash and cash equivalents .....................................................................
Cash and cash equivalents at beginning of year ..............................................................................
Cash and cash equivalents at end of year .........................................................................................

(1,457)
23,91322,456

3,488
20,42523,913(11,207)
183,946$ 172,739

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment ................................................
Proceeds from sale of marketable securities .................................................................
Proceeds from sale of investment securities and investments
in and advances to subsidiaries and affiliates ...........................................................
Payment for purchase of property, plant and equipment ...........................................
Payment for purchase of marketable securities ............................................................
Payment for purchase of investment securities andinvestments in and advances to subsidiaries and affiliates ......................................
Business acquisition .......................................................................................................
Other, net .......................................................................................................................
Net cash used in investing activities ...................................................

Cash paid during the year for:
Interest ............................................................................................................................
Income taxes ...................................................................................................................

See Notes to Non-Consolidated Financial Statements.

22

¥

¥

650
1,435

¥

¥

815
222

$

5,000
11,038

Nisshinbo Industries, Inc.

Notes to Non-Consolidated Financial Statements

1. Basis of presenting financial statements:
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Japanese
Securities and Exchange Law and its related accounting regulations and in conformity with generally accepted accounting
principles and practices in Japan.
In preparing these financial statements, however, certain reclassifications have been made to the financial statements issued
domestically in Japan in order to present them in a form which is more familiar to readers outside Japan.
A statement of cash flows is not required for domestic reporting purposes but is presented herein for the readers’ convenience.
In addition, the accompanying footnotes include information which is not required under generally accepted accounting
principles and practices in Japan but is presented herein as additional information.
The United States dollar ($) amounts included herein are given solely for convenience and are stated, as a matter ofarithmetical computation only, at the rate of ¥130 = $1, the approximate exchange rate at 31st March, 1998. The translations
should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be,converted into United States dollars.
2. Summary of significant accounting policies:(a) Foreign currency transactions
Short-term receivables and payables in foreign currencies are translated into Japanese yen at the current exchange rates as of
the balance sheet dates. Investments in and advances to subsidiaries and affiliates and long-term debt in foreign currencies aretranslated at the historical rates effective at the dates of transaction from which such accounts were originated.
(b) Cash and cash equivalents
In reporting cash flows, the Company considers cash and time deposits with maturities of one year or less to be cash and cash
equivalents. Such time deposits may be withdrawn on demand without diminution of principal.
(c) Investments
Current and non-current portfolios of marketable debt and equity securities are stated at the lower of cost or market. Other
investments are stated at cost.
(d) Inventories
Inventories are stated at the lower of cost or market, cost being determined by the average cost method.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed on the declining balance method over theirestimated useful lives.
(f) Accrued severance benefits
The annual provision for severance payments is calculated to state the liability at the amount that would be required if all
employees eligible for severance payments should terminate their employment at the balance sheet date, less amounts funded.
Such provision includes those for directors and statutory auditors of the Company. Normal and prior service costs of theCompany’s non-contributory pension plan are charged to income and funded currently.
(g) Income taxes
Income taxes are provided for amounts currently payable for each fiscal year. No tax effect of temporary differences between
tax and financial reporting purposes is recognised.
3. Inventories:
Inventories at 31st March, 1998 and 1997 were as follows:

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

¥¥(millions of yen)
1998
1997

(thousands of
US dollars)
1998

31,042
5,936
6,536
43,514$ 238,785
45,66150,277$ 334,723¥¥

29,5785,150
6,246
40,97423

4. Marketable equity securities:
At 31st March, 1998 and 1997, the aggregate cost and market value of current and non-current portfolios of marketable equity
securities included in marketable securities, investment securities and investments in subsidiaries and affiliates were summarised
as follows:(thousands of
US dollars)
1998(millions of yen)
1998
1997

Current portfolios:
Cost and carrying amount ...........................................................................................
Market value .................................................................................................................
Non-current portfolios:
Cost and carrying amount ...........................................................................................
Market value .................................................................................................................

¥

12,80247,098¥21,396
128,945

14,09160,600$20,972
171,041

98,477362,292
164,585
991,885

5. Short-term bank loans and long-term debt:
Short-term bank loans at 31st March, 1998 and 1997 were represented substantially by notes issued by the Company to banks,
generally due in 365 days. The annual interest rates applicable to the short-term bank loans at 31st March, 1998 and 1997 were1.0% to 1.6%.
Long-term debt at 31st March, 1998 and 1997 consisted of the following:(thousands of
US dollars)
1998(millions of yen)
1998
1997

Long-term debt with collateral:
4.65% loan from a bank, maturing serially to 2002 ...................................................
Non-interest bearing loan from a governmental institutematuring serially to 1999 .........................................................................................
Long-term debt without collateral:
1.7% convertible bonds, convertible into common
stock at ¥1,800.50, due in 1999 ................................................................................
Less current portion .........................................................................................................

¥

315

¥

385

$

2,423

214

321

1,646

25,312
25,841(25,489)¥352

25,836
26,542(177)
26,365

194,708
198,777(196,069)
$
2,708

¥

Annual maturities of long-term debt were as follows:Year ending 31st March,
1999............................................................................................................................
2000............................................................................................................................
2001............................................................................................................................
2002............................................................................................................................
2003 and thereafter ...................................................................................................

(millions of yen)

¥

¥

24

25,489177
70
70
35
25,841(thousands of US dollars)$ 196,070
1,362
538
538
269
$ 198,777

At 31st March, 1998 and 1997, net book value of assets pledged as collateral for long-term loans from a bank and agovernmental institute was as follows:(thousands of
US dollars)
1998(millions of yen)
1998
1997

Property, plant and equipment ....................................................................................
Investment securities ....................................................................................................

¥

3
79
82

¥

¥
¥

3
79
82

$
$

23
608
631

6. Retirement and pension plans:
Under most circumstances, employees terminating their employment are entitled to lump-sum severance payments based on
the rate of pay at termination, years of service and certain other factors.
Provisions for severance payments charged to income for the years ended 31st March, 1998 and 1997 were ¥1,542 million($11,862 thousand) and ¥1,377 million, respectively.
In addition to the lump-sum severance payments described above, most employees are covered by the Company’s noncontributory pension plan. Pension costs charged to income for the years ended 31st March, 1998 and 1997 were ¥68 million($523 thousand).
7. Income taxes:
Japanese taxes on income applicable to the Company would normally result in an aggregate tax rate of approximately 51%.
The effective income tax rates on income before income taxes in the accompanying non-consolidated financial statements
differ from the normal Japanese tax rates. The principal reasons for such differences are (a) the accounting policy of notproviding for deferred income taxes arising from temporary differences between financial and tax reporting and (b) certain
expenses which are not deductible for income tax purposes.
8. Leasing arrangements:
The Company leases machinery and other facilities under non-cancellable agreements.
Future minimum rental payments on the above leases are as follows:Year ending 31st March,
1999............................................................................................................................
2000............................................................................................................................
2001............................................................................................................................
2002 ...........................................................................................................................
2003 and thereafter ...................................................................................................

(millions of yen)

¥

443
293
202
121
47

(thousands of US dollars)

$

3,408
2,254
1,554
931
362

Rental expenses charged to income for the years ended 31st March, 1998 and 1997 were ¥685 million ($5,269 thousand) and¥721 million, respectively.

25

9. Shareholders’ equity:
The Japanese Commercial Code provides that an amount equal to at least 10% of all cash payments which are made as an
appropriation of retained earnings be appropriated as a legal reserve until such reserve equals 25% of stated value of capital stock.
This reserve is not available for dividends but may be used to reduce a deficit by resolution of the shareholders or may becapitalised by resolution of the Board of Directors.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividend is applicable.
In addition, a semi-annual interim dividend may be paid upon resolution of the Board of Directors, subject to limitations
imposed by the Code.
The computation of net income per share is based on the weighted average number of shares of common stock outstanding
during each fiscal year.
10. Other income (expenses) — Other, net:
Other income (expenses) — Other, net consisted of the following:(thousands of
US dollars)
1998(millions of yen)
1998
1997

Loss on sale of property, plant and equipment ..............................................................
Gain on sale of securities ..................................................................................................
Devaluation of securities ..................................................................................................
Other, net ..........................................................................................................................

(¥

362) (¥
846(1,114)(444)
1,074) (¥(¥763) ($
905
(714)
(231)
803) ($

2,785)
6,508(8,569)(3,416)
8,262)

11. Commitments and contingencies:
Contingent liabilities at 31st March, 1998 and 1997 for trade notes discounted with banks amounted to ¥600 million ($4,615
thousand) and ¥2,000 million, respectively. Contingent liabilities at 31st March, 1998 and 1997 for loans guaranteed amounted to¥8,912million ($68,554 thousand) and ¥1,373 million, respectively.
Commitments for capital expenditures outstanding at 31st March, 1998 and 1997 were in the approximate amounts of ¥7,863
million ($60,485 thousand) and ¥3,918 million, respectively.
12. Subsequent events:
On 26th June, 1998, the shareholders authorised the appropriation of retained earnings as follows:(millions of yen)

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

26

¥

828
60

(thousands of US dollars)

$

6,369
462

Report of Independent Certified Public Accountants on Non-Consolidated Financial Statements
To the Board of Directors
Nisshinbo Industries, Inc.
We have examined the non-consolidated balance sheet of Nisshinbo Industries, Inc. as of 31st March, 1997, and therelated statements of income, shareholders’ equity and cash flows for the year then ended, all expressed in Japaneseyen. Our examination was made in accordance with generally accepted auditing standards in Japan and, accordingly,
included such tests of the accounting records and such other auditing procedures as we considered necessary in thecircumstances.
In our opinion, the non-consolidated financial statements referred to above present fairly the financial position of
Nisshinbo Industries, Inc. as of 31st March, 1997, and the results of its operations and its cash flows for the year thenended, in conformity with generally accepted accounting principles in Japan applied on a basis consistent with that ofthe preceding year.
The United States dollar amounts shown in the non-consolidated financial statements have been translated solely
for convenience. We have reviewed this translation and, in our opinion, the non-consolidated financial statements
expressed in Japanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba

Harutaka Kataoka

Certified Public Accountant

Certified Public Accountant

27th June, 1997
Tokyo, Japan

Report of Independent Certified Public Accountant on Non-Consolidated Financial Statements
To the Board of Directors
Nisshinbo Industries, Inc.
I have examined the non-consolidated balance sheet of Nisshinbo Industries, Inc. as of 31st March, 1998, and therelated statements of income, shareholders’ equity and cash flows for the year then ended, all expressed in Japaneseyen. My examination was made in accordance with generally accepted auditing standards in Japan and, accordingly,
included such tests of the accounting records and such other auditing procedures as I considered necessary in thecircumstances.
In my opinion, the non-consolidated financial statements referred to above present fairly the financial position of
Nisshinbo Industries, Inc. as of 31st March, 1998, and the results of its operations and its cash flows for the year thenended, in conformity with generally accepted accounting principles in Japan applied on a basis consistent with that ofthe preceding year.
The United States dollar amounts shown in the non-consolidated financial statements have been translated solely
for convenience. I have reviewed this translation and, in my opinion, the non-consolidated financial statements
expressed in Japanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba
Certified Public Accountant

26th June, 1998
Tokyo, Japan

27

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Balance Sheets
31st March, 1998 and 1997

ASSETS(millions of yen)
1998
1997

(thousands of
US dollars)(Note 1)
1998

Current assets:
Cash and cash equivalents
Cash ................................................................................................................
Time deposits .................................................................................................
Marketable securities (Note 4) ..........................................................................
Receivables
Notes receivable, trade...................................................................................
Accounts receivable, trade .............................................................................
Non-consolidated subsidiaries and affiliates ................................................
Other...............................................................................................................
Less allowance for doubtful accounts ...........................................................
Inventories (Note 3)...........................................................................................
Other current assets............................................................................................
Total current assets....................................................................................

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

Investments and other assets:
Investment securities (Note 4)...........................................................................
Investments in and advances to non-consolidated
subsidiaries and affiliates (Note 4)................................................................
Other ...................................................................................................................

28

¥

5,615
33,007
38,622
15,635¥

3,671
33,672
37,343
20,332$

43,192
253,900
297,092
120,269

12,39432,711
19,165869
65,139(681)
64,45852,851
1,141
172,707

12,832
34,004
17,278766
64,880(587)
64,29349,030629
171,627

95,338
251,623
147,423
6,685
501,069(5,238)495,831406,546
8,777
1,328,515

14,64088,761
196,196
1,159
300,756(193,011)
107,745

14,07584,759184,020310
283,164(177,871)
105,293

112,615
682,777
1,509,200
8,915
2,313,508(1,484,700)
828,808

18,81818,128144,754

28,004
1,828
48,650¥ 329,102

31,643
1,736
51,507¥ 328,427

215,415
14,062374,231$ 2,531,554

(millions of yen)
1998
1997

(thousands of
US dollars)(Note 1)
1998

30,39526,473

29,108531$ 233,808
203,638

19,181
1,049
3,374
23,604
5,394
4,002
1,843
516
92,227

20,825
1,324
3,206
25,355
6,131
4,051
2,486
565
68,227

147,546
8,069
25,954
181,569
41,49330,785
14,177
3,969
709,439

5,548
21,2638,740
35,551

31,05920,224
8,517
59,80042,677
163,561
67,231
273,469

546
1,405

199
1,443

4,200
10,80827,58820,401
6,897
144,488
199,374(1)
199,373¥ 329,102

27,58819,7096,897
144,565
198,759(1)
198,758¥ 328,427

212,215
156,93153,054
1,111,446
1,533,646(8)
1,533,638$ 2,531,554

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

Long-term liabilities:
Long-term debt (Note 5) ..................................................................................
Accrued severance benefits (Note 6)................................................................
Other long-term liabilities ................................................................................

Adjustments on foreign currency statement translation................................................................
Minority interests in consolidated subsidiaries...............................................................................

¥¥

Commitments and contingencies (Note 11)

Shareholders’ equity (Notes 9 and 12):
Common stock:
Authorised — 400,000,000 shares
Issued with par value of ¥50 per share —236,443,939 shares ...................................................................................
Additional paid-in capital.................................................................................
Legal reserve ......................................................................................................
Retained earnings .............................................................................................
Less shares in treasury.......................................................................................

29

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Income
Years ended 31st March, 1998 and 1997

(millions of yen)
1998
1997

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

(thousands of
US dollars)(Note 1)
1998

¥ 240,249¥ 234,268$ 1,848,069

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

211,305
24,955236,260

206,977
22,750229,727

1,625,423
191,961
1,817,384

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

3,989

4,541

30,6852,278(1,649)(1,231)
(602)

2,341
(1,741)(265)
335

17,523(12,685)(9,469)(4,631)

3,387

4,876

26,054

2,434

3,312

18,723

953
88
46
1,087

1,564
317
478
2,359

7,331
677
354
8,362

Costs and expenses:

Other income (expenses):
Interest and dividend income ..........................................................................
Interest expenses ...............................................................................................
Other, net (Note 10) .........................................................................................

Income before income taxes, minority interests andequity in earnings of affiliates .......................................................................................................
Income taxes (Note 7).........................................................................................................................
Income before minority interests andequity in earnings of affiliates .......................................................................................................
Minority interests ...............................................................................................................................
Equity in earnings of affiliates ...........................................................................................................
Net income...........................................................................................................................................

¥

¥

(yen)

$

(US dollars)

Per share:
Net income ........................................................................................................
Cash dividends ..................................................................................................

See Notes to Consolidated Financial Statements.

30

¥

4.60
7.00

¥

9.98
7.00

$

0.04
0.05

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Shareholders’ Equity
Years ended 31st March, 1998 and 1997

(millions of yen)
1998
1997

(thousands of
US dollars)(Note 1)
1998

27,58827,586$ 212,2152—

Common stock:
Balance at beginning of year
(1998 — 236,443,939 shares; 1997 — 236,439,099 shares)........................
Add:
Conversion of convertible bonds (1997 — 4,840 shares) .........................
Balance at end of year
(1998 and 1997 — 236,443,939 shares).......................................................

¥

¥

—
¥

27,588¥27,588$ 212,215¥

19,709¥19,706$ 151,608¥—
692
20,401¥

3—
19,709—5,323$ 156,931

Balance at beginning of year .............................................................................
Add:
Transfer from retained earnings ..................................................................
Balance at end of year .......................................................................................

¥

6,897

¥

6,896

$

53,054

¥

—
6,897

¥

1
6,897

$

—
53,054

Balance at beginning of year .............................................................................
Add:
Net income....................................................................................................
Adjustments due to increase in consolidated subsidiaries .........................
Adjustments due to increase in ownership interest in
20%~50% owned affiliates ......................................................................
Deduct:Cash dividends ..............................................................................................
Directors’ and statutory auditors’ bonuses .................................................
Transfer to legal reserve................................................................................
Adjustments due to decrease in consolidated subsidiaries.........................
Balance at end of year .......................................................................................

¥ 144,565¥ 143,955$ 1,112,038

1,087
1,191

2,359
190

8,362
9,162

78

(200)

600

(1,655)
(86)
—
(692)
¥ 144,488(1,655)(83)(1)—¥ 144,565(12,731)(662)—(5,323)$ 1,111,446

Additional paid-in capital:
Balance at beginning of year .............................................................................
Add:
Conversion of convertible bonds.................................................................
Business acquisition......................................................................................
Balance at end of year .......................................................................................
Legal reserve:

Retained earnings:

Treasury stock at cost:
Balance at beginning of year .............................................................................
Deduct: sold.......................................................................................................
Balance at end of year .......................................................................................

(¥
(¥

1) (¥
—
1) (¥

4) ($
3
1) ($

8)
—
8)

See Notes to Consolidated Financial Statements.

31

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
Years ended 31st March, 1998 and 1997
(thousands of
US dollars)(Note 1)
1998

(millions of yen)
1998
1997

Cash flows from operating activities:
Net income .....................................................................................................................
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation ..........................................................................................................
Equity in earnings of affiliates ..............................................................................
Provision for doubtful receivables .......................................................................
Provision for severance benefits ...........................................................................
Payment of severance benefits ..............................................................................
Loss on sale of property, plant and equipment ...................................................
Gain on sale of marketable securities....................................................................
(Gain) loss on sale of investment securities and investments inand advances to non-consolidated subsidiaries and affiliates ........................
Write-down of marketable securities and investment securities ........................
Unrealized exchange losses ...................................................................................
Other ......................................................................................................................
Changes in operating assets and liabilities:
Receivables ....................................................................................................
Inventories ....................................................................................................
Other current assets ......................................................................................
Payables..........................................................................................................
Employees’ savings deposits ........................................................................
Accrued expenses ..........................................................................................
Accrued income taxes ..................................................................................
Other current liabilities.................................................................................
Net cash provided by operating activities ..........................................

¥

1,087

¥

2,359

$

8,362

13,634
(46)
94
1,977
(942)
386
(1,053)

13,266
(478)
(5)
1,761
(1,045)835(1,318)104,877(354)
723
15,208(7,246)
2,969(8,100)

82
1,142
1,144
2,396

(21)
653
—
562

631
8,785
8,800
18,431(259)(3,821)(512)(1,751)
(737)
(49)
(643)
(49)
12,080(1,418)
257
150
2,180
(383)
(241)
1,374
(41)
18,447(1,993)(29,393)(3,939)(13,469)(5,669)(377)(4,946)(377)
92,923

109
193,402432
227,197838
1,487,708

52(12,333)(188,479)

106(12,213)(225,598)

400(94,869)(1,449,838)(1,815)151(8,913)(1,916)700(11,292)(13,962)
1,161(68,562)

Cash flows from financing activities:
Proceeds from issuance of long-term debt ...................................................................
Repayment of long-term debt .......................................................................................
Increase in other long-term liabilities ...........................................................................
Increase in short-term bank loans ................................................................................
Cash dividends paid .......................................................................................................
Directors’ and statutory auditors’ bonuses paid ..........................................................
Net cash used in financing activities ...................................................

165(1,136)223
601(1,655)(86)(1,888)452(3,756)1,382
304(1,655)(83)(3,356)

1,269(8,738)
1,716
4,623(12,731)(662)(14,523)

Net increase in cash and cash equivalents .......................................................................................
Cash and cash equivalents at beginning of year ..............................................................................
Cash and cash equivalents at end of year .........................................................................................

1,279
37,34338,622

3,799
33,54437,343

9,838
287,254$ 297,092

1,586
1,406

$

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment ................................................
Proceeds from sale of marketable securities .................................................................
Proceeds from sale of investment securities and investments
in and advances to non-consolidated subsidiaries and affiliates ............................
Payment for purchase of property, plant and equipment ...........................................
Payment for purchase of marketable securities ............................................................
Payment for purchase of investment securities andinvestments in and advances to non-consolidated subsidiaries and affiliates .......
Other, net .......................................................................................................................
Net cash used in investing activities ...................................................

Cash paid during the year for:
Interest ............................................................................................................................
Income taxes ...................................................................................................................

See Notes to Consolidated Financial Statements.

32

¥

¥

1,411
2,597

¥

¥

10,854
19,977

Nisshinbo Industries, Inc. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
1. Basis of presenting financial statements:
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in theJapanese Securities and Exchange Law and its related accounting regulations and in conformity with generally accepted
accounting principles and practices in Japan.
In preparing these financial statements, however, certain reclassifications have been made to the financial statements issued
domestically in Japan in order to present them in a form which is more familiar to readers outside Japan.
A statement of cash flows is not required for domestic reporting purposes but is presented herein for the readers’ convenience.
In addition, the accompanying footnotes include information which is not required under generally accepted accounting
principles and practices in Japan but is presented herein as additional information.
The United States dollar ($) amounts included herein are given solely for convenience and are stated, as a matter ofarithmetical computation only, at the rate of ¥130 = $1, the approximate exchange rate at 31st March, 1998. The translations
should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be,converted into United States dollars.
2. Summary of significant accounting policies:(a) Basis of consolidation
The accompanying consolidated financial statements include the accounts of Nisshinbo Industries, Inc. (“Nisshinbo”) and its
majority-owned subsidiaries (together “Nisshinbo and its consolidated subsidiaries”).
Investments in 20~50% owned affiliates were accounted for by the equity method.
Intercompany transactions and accounts have been eliminated.
(b) Foreign currency transactions
Short-term receivables and payables in foreign currencies are translated into Japanese yen at the current exchange rates as of thebalance sheet dates.
Investments in and advances to subsidiaries and affiliates and long-term debt in foreign currencies are translated at thehistorical rates effective at the dates of transaction from which such accounts were originated.
(c) Foreign currency financial statements
Assets, liabilities, income and expenses of foreign subsidiaries are translated into Japanese yen at the current exchange rates asof the balance sheet date.
(d) Cash and cash equivalents
In reporting cash flows, Nisshinbo and its consolidated subsidiaries consider cash and time deposits with maturities of one year
or less to be cash and cash equivalents. Such time deposits may be withdrawn on demand without diminution of principal.
(e) Investments
Current and non-current portfolios of marketable debt and equity securities are stated at the lower of cost or market. Other
investments are stated at cost.
(f) Inventories
Inventories are stated principally at the lower of cost or market, cost being substantially determined by the average cost
method.
(g) Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed principally on the declining balance method overtheir estimated useful lives.
(h) Accrued severance benefits
The annual provision for severance payments is calculated to state the liability at the amount that would be required if all
employees eligible for severance payments should terminate their employment at the balance sheet date, less amounts funded.
With minor exceptions, such provision includes those for directors and statutory auditors of Nisshinbo and its consolidated
subsidiaries. Normal and prior service costs of Nisshinbo and its consolidated subsidiaries’ non-contributory pension plans arecharged to income and funded currently.
(i) Income taxes
Income taxes are provided for amounts currently payable for each fiscal year. No tax effect of temporary differences between
tax and financial reporting purposes is recognised.

33

3. Inventories:
Inventories at 31st March, 1998 and 1997 were as follows:

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

¥¥(millions of yen)
1998
1997

(thousands of
US dollars)
1998

33,7699,747
9,335
52,851$ 259,762
74,97771,807$ 406,546¥¥

31,6859,261
8,084
49,0304. Marketable equity securities:
At 31st March, 1998 and 1997, the aggregate cost and market value of current and non-current portfolios of marketable equity
securities included in marketable securities, investment securities and investments in non-consolidated subsidiaries and affiliates
were summarised as follows:

Current portfolios:
Cost and carrying amount ............................................................................................
Market value ..................................................................................................................
Non-current portfolios:
Cost and carrying amount ............................................................................................
Market value ..................................................................................................................

¥(millions of yen)
1998
1997

(thousands of
US dollars)
1998

13,42948,275

14,741
61,868$ 103,300
371,346

37,423
174,625305,654
1,015,608¥

39,735132,029

5. Short-term bank loans and long-term debt:
Short-term bank loans at 31st March, 1998 and 1997 were principally represented by 180 to 365 days notes issued by Nisshinbo
and its consolidated subsidiaries to banks. The annual interest rates applicable to the short-term bank loans at 31st March, 1998
and 1997 were 1.0% to 9.5% and 1.0 % to 6.9%, respectively.
Long-term debt at 31st March, 1998 and 1997 consisted of the following:(millions of yen)
1998
1997

Long-term debt with collateral:
Loans from banks maturing serially to 2002, ranging from 1.2% to 4.7% ................
Non-interest bearing loan from a governmental institutematuring serially to 1999 ..........................................................................................
Long-term debt without collateral:
Loans from banks maturing serially to 2001, ranging from 1.6% to 3.4% ................
1.7% convertible bonds, convertible into common
stock at ¥1,800.50, due in 1999 ................................................................................
8.3% notes, due in 1999 ................................................................................................
Capital lease obligations, due through 2010 ................................................................
Less current portion ..........................................................................................................

34

¥

1,231

¥

1,155

(thousands of
US dollars)
1998

$

9,469

214

321

1,646

394

751

3,031

25,312
3,958
912
32,021(26,473)¥
5,548

25,836
3,527—
31,590(531)
31,059194,708
30,446
7,015
246,315(203,638)$ 42,677¥

Annual maturities of long-term debt were as follows:Year ending 31st March,
1999............................................................................................................................
2000............................................................................................................................
2001............................................................................................................................
2002............................................................................................................................
2003 and thereafter ...................................................................................................

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

26,473
4,458
215
127
748
32,021$ 203,638
34,292
1,654
977
5,754
$ 246,315

At 31st March, 1998 and 1997, net book value of assets pledged as collateral for short-term bank loans and long-term loans
from banks and a governmental institute was as follows:(thousands of
US dollars)
1998(millions of yen)
1998
1997

Property, plant and equipment ........................................................................................
Investment securities.........................................................................................................

¥

3,186
79
3,265

¥

¥
¥

4,617
79
4,696

$
$

24,507608
25,115

6. Retirement and pension plans:
Under most circumstances, employees terminating their employment are entitled to lump-sum severance payments based on
the rate of pay at termination, years of service and certain other factors.
Provisions for severance payments charged to income for the years ended 31st March, 1998 and 1997 were ¥1,977 million($15,208 thousand) and ¥1,761 million, respectively.
In addition to the lump-sum severance payments described above, most employees are covered by Nisshinbo and its
consolidated subsidiaries’ non-contributory pension plans. Pension costs charged to income for the years ended 31st March, 1998
and 1997 were ¥236 million ($1,815 thousand) and ¥232 million, respectively.
7. Income taxes:
Japanese taxes on income applicable to Nisshinbo and its domestic consolidated subsidiaries would normally result in an
aggregate tax rate of approximately 51%.
The effective income tax rates on income before income taxes, minority interests and equity in earnings of affiliates in theaccompanying consolidated financial statements differ from the normal Japanese tax rates. The principal reasons for suchdifferences are (a) the accounting policy of not providing for deferred income taxes arising from temporary differences between
financial and tax reporting and (b) certain expenses which are not deductible for income tax purposes.
8. Leasing arrangements:
The Company and its consolidated subsidiaries lease machinery and other facilities under non-cancellable agreements.
Future minimum rental payments on the above leases are as follows:Year ending 31st March,
1999............................................................................................................................
2000............................................................................................................................
2001 .........................................................................................................................................
2002............................................................................................................................
2003 and thereafter ...................................................................................................

(millions of yen)

¥

825
621
458
346
334

(thousands of US dollars)

$

6,346
4,777
3,523
2,662
2,569

Rental expenses charged to income for the years ended 31st March, 1998 and 1997 were ¥1,066 million ($8,200 thousand) and¥1,198 million, respectively.

35

9. Shareholders’ equity:
The Japanese Commercial Code provides that an amount equal to at least 10% of all cash payments which are made as an
appropriation of retained earnings be appropriated as a legal reserve until such reserve equals 25% of stated value of capital stock.
This reserve is not available for dividends but may be used to reduce a deficit by resolution of the shareholders or may becapitalised by resolution of the Board of Directors.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividend is applicable.
In addition, a semi-annual interim dividend may be paid upon resolution of the Board of Directors, subject to limitations
imposed by the Code.
The computation of net income per share is based on the weighted average number of shares of common stock outstanding
during each fiscal year.
10. Other income (expenses) — Other, net:
Other income (expenses) — Other, net consisted of the following:(thousands of
US dollars)
1998(millions of yen)
1998
1997

Loss on sale of property, plant and equipment ..............................................................
Gain on sale of securities...................................................................................................
Devaluation of securities ..................................................................................................
Other, net ..........................................................................................................................

(¥

386) (¥
971(1,142)(674)
1,231) (¥(¥835) ($
1,339
(653)
(116)
265) ($

2,969)
7,469(8,785)(5,184)9,469)

11. Commitments and contingencies:
Contingent liabilities at 31st March, 1998 and 1997 for trade notes discounted with banks and tradenotes delivered withendorsements for payments amounted to ¥2,004 million ($15,415 thousand) and ¥4,119 million, respectively. Contingent
liabilities at 31st March, 1998 and 1997 for loans guaranteed amounted to ¥2,690 million ($20,692 thousand) and ¥1,386 million,
respectively.
Commitments for capital expenditures outstanding at 31st March, 1998 and 1997 were in the approximate amounts of ¥8,045
million ($61,885 thousand) and ¥3,946 million, respectively.
12. Subsequent events:
On 26th June, 1998, Nisshinbo’s shareholders authorised the appropriation of retained earnings as follows:(millions of yen)

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

36

¥

828
60

(thousands of US dollars)

$

6,369
462

Report of Independent Certified Public Accountants on Consolidated Financial Statements
To the Board of Directors
Nisshinbo Industries, Inc.
We have examined the consolidated balance sheet of Nisshinbo Industries, Inc. and consolidated subsidiaries as of
31st March, 1997, and the related statements of income, shareholders’ equity and cash flows for the year then ended,
all expressed in Japanese yen. Our examination was made in accordance with generally accepted auditing standards inJapan and, accordingly, included such tests of the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the financial position of
Nisshinbo Industries, Inc. and consolidated subsidiaries as of 31st March, 1997, and the results of their operations andtheir cash flows for the year then ended, in conformity with generally accepted accounting principles in Japan applied
on a basis consistent with that of the preceding year.
The United States dollar amounts shown in the consolidated financial statements have been translated solely forconvenience. We have reviewed this translation and, in our opinion, the consolidated financial statements expressedin Japanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba

Harutaka Kataoka

Certified Public Accountant

Certified Public Accountant

27th June, 1997
Tokyo, Japan

Report of Independent Certified Public Accountant on Consolidated Financial Statements
To the Board of Directors
Nisshinbo Industries, Inc.
I have examined the consolidated balance sheet of Nisshinbo Industries, Inc. and consolidated subsidiaries as of
31st March, 1998, and the related statements of income, shareholders’ equity and cash flows for the year then ended,
all expressed in Japanese yen. My examination was made in accordance with generally accepted auditing standards inJapan and, accordingly, included such tests of the accounting records and such other auditing procedures as I
considered necessary in the circumstances.
In my opinion, the consolidated financial statements referred to above present fairly the financial position of
Nisshinbo Industries, Inc. and consolidated subsidiaries as of 31st March, 1998, and the results of their operations andtheir cash flows for the year then ended, in conformity with generally accepted accounting principles in Japan applied
on a basis consistent with that of the preceding year.
The United States dollar amounts shown in the consolidated financial statements have been translated solely forconvenience. I have reviewed this translation and, in my opinion, the consolidated financial statements expressed inJapanese yen have been translated into US dollars on the basis described in Note 1.

Masami Tsukeshiba
Certified Public Accountant

26th June, 1998
Tokyo, Japan37

Board of Directors and Statutory Auditors
President

Senior Executive Director

DirectorStanding Statutory Auditor

Akihiro Mochizuki

Keiji Okumura

Osamu Kitauchi

Shinsuke Takahashi

Senior Executive Director

Director

Statutory Auditor

Atsushi Mihara

Seiji Yamamoto

Morio Yatabe

Director

Statutory Auditor

Yoshikazu Sashida

Tetsuo Furuya

Executive Director

Director

Statutory Auditor

Yukio Hosoya

Tadashi Nakai

Akira Onishi

Executive Director

Director

Hisao Ishikawa

Koushi Fujino

Executive Director

Director

Tsuyoshi Sugaizumi

Hisayoshi Arata

Executive Director

Director

Yoshimasa Hasegawa

Hiroshi Nogami
Director

Akira Baba
Director

Director

Suguru Miyazu

Kenji Tasaki

Corporate Data
Founded:February 5, 1907

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

Osaka Branch:

2-4-2, Kitakyuhoji-cho, Chuo-ku, Osaka 541-0057
Tel: 06-267-5501 Fax: 06-267-5679

Nagoya Branch:

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

New York Representative Office:1345 Avenue of the Americas (23rd Floor), New York, NY 10105-302, U.S.A.
Tel: 212-698-5000 Fax: 212-541-9871

Hong Kong Representative Office:Room 1126, Ocean Centre, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong
Tel: 2736-7886 Fax: 2730-2181

Nisshinbo do Brasil Industria
Textil Ltda.:

Av. Paulista 1009, 11˚andar Cj. 1101/1103, CEP 01311-100, São Paulo, s.p., Brasil
Tel: 011-289-9255 Fax: 011-288-7902

Nisshinbo California Inc.:

2885 South Cherry Avenue, Fresno, CA 93706, U.S.A.
Tel: 209-486-6241 Fax: 209-264-6417

Nisshinbo Automotive Corporation:

42355 Merrill Road, Sterling Heights, MI 48314, U.S.A.
Tel: 810-997-1000 Fax: 810-997-1010

Nisshinbo Europe B.V.:

World Trade Center, Strawinskylaan B1425 1077XX Amsterdam, The Netherlands
Tel: 020-5753349 Fax: 020-5753350

Nisshinbo Hong Kong Limited:

Room 1126, Ocean Centre, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong
Tel: 2736-7886 Fax: 2730-2181

Employees:

5,102

Common Stock:
Par Value:¥50 — US$0.38

Authorized:

400,000,000 shares

Issued:236,443,939 shares¥27,588 million — US$212 million

Shareholders:38(As of March 31, 1998)

13,635

Organization Chart39