Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
Years ended March 31, 1999 and 2000
with Independent Auditors’ Report

Yodogawa Steel Works, Ltd.
Consolidated Financial Statements
Years ended March 31, 1999 and 2000

Contents

Consolidated Financial Statements
Independent Auditors’ Report on Consolidated Financial Statements ...................................................................1
Consolidated Balance Sheets..........................................................................................................................................2
Consolidated Statements of Income ..............................................................................................................................4
Consolidated Statements of Shareholders’ Equity......................................................................................................5
Consolidated Statement of Cash Flows.........................................................................................................................6
Notes to Consolidated Financial Statements................................................................................................................8Independent Auditors’ Reporton Consolidated Financial Statements
The Board of Directors and Shareholders
Yodogawa Steel Works, Ltd.
We have audited the consolidated balance sheets of Yodogawa Steel Works, Ltd. and consolidated
subsidiaries as of March 31, 1999 and 2000, the related consolidated statements of income and shareholders’equity for the two years then ended, and the consolidated statement of cash flows for the year ended March
31, 2000, all expressed in yen. Our audits were made in accordance with auditing standards, procedures andpractices generally accepted and applied in Japan 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 accompanying consolidated financial statements, expressed in yen, present fairly the
consolidated financial position of Yodogawa Steel Works, Ltd. and consolidated subsidiaries at March 31,
1999 and 2000, the consolidated results of their operations for the two years then ended, and their cash flows
for the year ended March 31, 2000 in conformity with accounting principles and practices generally acceptedin Japan applied on a consistent basis.
As described in Note 1 to the consolidated financial statements, Yodogawa Steel Works, Ltd. andconsolidated subsidiaries have adopted new accounting standards for consolidation and tax-effectaccounting in the preparation of their consolidated financial statements for the year ended March 31, 2000.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2000 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 describedin Note 2 to the consolidated financial statements.

Osaka, Japan
June 29, 2000

See Note 1 to the consolidated financial statements which explains the basis of preparation of theconsolidated financial statements of Yodogawa Steel Works, Ltd. under Japanese accounting principles
and practices.

Yodogawa Steel Works, Ltd.
Consolidated Balance Sheets
March 31, 1999 and 2000

Millions of yen
1999
2000
AssetsCurrent assets:
Cash and cash equivalents
Short-term investments
Marketable securities (Note 3)
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates
Trade
Less allowance for doubtful receivables
Inventories
Deferred income taxes (Note 6)
Other current assets
Total current assets

Property, plant and equipment, at cost (Note 4):Land
Buildings and structures
Machinery and equipment
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net

Investments and other assets:
Investments in securities (Note 3)
Investments in and advances to unconsolidated
subsidiaries and affiliates
Deferred income taxes (Note 6)
Other assets
Total investments and other assets
Foreign currency translation adjustments

Total assets

2

Thousands of
U.S. dollars(Note 2)2000

¥ 37,442
2,520
22,354¥ 31,578
2,163
20,704$ 297,485
20,377
195,045

20,543
21,974(213)
29,872–
3,455
137,947

12,18132,789(217)
31,732947
4,806
136,683

114,753
308,893(2,044)
298,935
8,921
45,275
1,287,640

20,32841,602
112,623
10,899(114,801)
70,651

22,501
48,051
120,218
11,260(125,232)
76,798211,974452,671
1,132,529
106,076(1,179,764)
723,486

1,197

2,041

19,228

4,032
–
1,944
7,173

4,443
1,549
2,968
11,001

41,856
14,593
27,959103,636

3,034

4,924

46,387¥218,805¥ 229,406$ 2,161,149

Millions of yen
1999
2000
Liabilities and shareholders’ equity
Current liabilities:
Short-term bank loans (Note 4)
Current portion of long-term debt (Note 4)
Notes and accounts payable:
Unconsolidated subsidiaries and affiliates
Trade
Construction
Accrued expenses
Accrued income taxes
Reserve for losses on restructuring
Other current liabilities
Total current liabilities

Thousands of
U.S. dollars(Note 2)2000

¥ 10,000–¥ 13,330
2,570$ 125,577
24,211

2,248
19,954
2,448
3,766
1,999
–
1,842
42,257855
25,401
3,322
3,762
447
269
2,439
52,395

8,055
239,293
31,29535,4404,211
2,534
22,978493,594

16,795

15,768148,545

–
8,003
1,424
433
26,655

285
8,603
1,474
493
26,623

2,685
81,046
13,886
4,643
250,805

11,181

13,703129,091

23,221–
23,611–
91,923–23,221
23,611
393
90,940–218,756
222,4313,702
856,712

Total shareholders’ equity(43)
138,712(1,480)136,685(13,942)
1,287,659

Total liabilities and shareholders’ equity¥218,805¥229,406$2,161,149

Long-term liabilities:
Long-term debt (Note 4)
Deferred income taxes on land revaluation reserve(Notes 6 and 7)
Retirement allowances
Guarantee deposits (Note 4)
Other long-term liabilities
Total long-term liabilities
Minority interests and otherContingent liabilities (Note 10)
Shareholders’ equity (Note 5):
Common stock, ¥50 par value:
Authorized:
March 31, 1999 - 792,166,000 shares
March 31, 2000 - 781,945,000 shares
Issued:March 31, 1999 - 222,538,086 shares
March 31, 2000 - 212,317,086 shares
Additional paid-in capitalLand revaluation reserve (Note 7)
Retained earnings (Note 11)Less treasury stock, at cost - 94,737 shares in 1999 and
4,938,831 shares in 2000

See notes to consolidated financial statements.
3

Yodogawa Steel Works, Ltd.
Consolidated Statements of Income
Years ended March 31, 1999 and 2000

Millions of yen
1999
2000
Net sales (Note 12)
Cost of sales (Note 12)
Gross profit

Thousands of
U.S. dollars(Note 2)
2000

¥153,127
126,449
26,678¥153,991
130,738
23,253$1,450,692
1,231,634
219,058

20,4896,189

19,8103,443

186,623
32,435

1,173
(503)
9
(1,257)
489

613
(645)
2,479
(330)
170

5,775
(6,076)23,354(3,109)
1,602

(697)
(348)
–
–
256
5,311

(337)
56
(1,266)
(269)
(817)
3,097

(3,175)528(11,927)(2,534)(7,697)
29,176

2,594
–

1,121
(271)

10,561(2,553)

2,594

850

8,008

Income before minority interests

2,717

2,247

21,168

Minority interests in earnings of consolidated subsidiaries

(806)

(600)

(5,652)¥ 1,911¥ 1,647

Selling, general and administrative expenses (Notes 8 and
12)Operating income (Note 12)
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sales of marketable equity securities
Loss on revaluation of marketable equity securities
Gain on sales of property, plant and equipment
Loss on sales or disposal of property, plant andequipment
Equity in (losses) earnings of affiliates
Loss on liquidation of a subsidiary
Provision for reserve for losses on restructuring
Other, net
Income before income taxes and minority interests
Income taxes (Note 6):
Current
Deferred

Net income¥8.40

15,516

U.S. dollars(Note 2)

Yen
Amounts per share:
Net income

$

¥7.71

$0.07

See notes to consolidated financial statements.
4

Yodogawa Steel Works, Ltd.
Consolidated Statements of Shareholders’ Equity
Years ended March 31, 1999 and 2000

Thousands of
U.S. dollars(Note 2)
2000

Millions of yen
1999
2000
Common stock
Balance at beginning and end of the year
Additional paid-in capital
Balance at beginning of the year
Add:
Transfer from retained earnings
Balance at end of the year
Retained earnings
Balance at beginning of the year
Add:
Net income
Cumulative adjustment arising from initialadoption of tax-effect accounting
Increase resulting from initial inclusion ofsubsidiaries in consolidation
Increase due to merger of an unconsolidated
subsidiary
Deduct:Cash dividends paid
Bonuses to directors and statutory auditors
Bonuses to employees of an overseas subsidiary
Transfer to additional paid-in capital
Retirement of treasury stock
Balance at end of the year

¥23,221¥23,221$218,756¥23,611¥23,611$222,431

0¥23,611

0¥23,6110$222,431¥95,243¥91,923$865,972

1,911

1,647

15,516–

1,745

16,439–1,198

11,286

8

–

–

1,591
78
12
0
3,558
¥91,923

1,507
76
7
0
3,983
¥90,940

14,197716
66
037,522$856,712

See notes to consolidated financial statements.
5

Yodogawa Steel Works, Ltd.
Consolidated Statement of Cash Flows
Years ended March 31, 1999 and 2000

Cash flows from operating activities
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Amortization of goodwill arising from consolidation
Equity in earnings of affiliates
Loss on revaluation of marketable equity securities
Loss on liquidation of a subsidiary
Provision for reserve for losses on restructuring
Increase in retirement allowances
Decrease in accrued bonuses
Increase in allowance for doubtful receivables
Interest and dividend income
Interest expense
Gain on sales of marketable equity securities
Gain on sales of property, plant and equipment
Loss on sales or disposal of property, plant and equipment
Decrease in notes and accounts receivable
Increase in inventories
Decrease in notes and accounts payable
Payments for bonuses to directors, statutory auditors and employees ofan overseas subsidiary
Other
SubtotalInterest and dividend income received
Interest expense paid
Payments for liquidation of a subsidiary
Income taxes paid
Net cash provided by operating activities

Millions ofyen

Thousands of
U.S. dollars(Note 2)

2000

2000

¥

3,097

$

29,176

9,874
(61)
(56)
330
1,266
269
295
(84)
898
(613)
645
(2,479)
(170)
246
7,204
(1,191)(7,278)93,019
(575)
(528)
3,109
11,927
2,534
2,779
(791)
8,460
(5,775)
6,076(23,354)(1,602)
2,317
67,866(11,220)(68,563)

(103)
355

(970)
3,345

12,444575(648)(1,206)(2,792)

117,230
5,417(6,105)(11,361)(26,302)

8,373

78,8796

Yodogawa Steel Works, Ltd.
Consolidated Statement of Cash Flows (continued)
Years ended March 31, 1999 and 2000

Cash flows from investing activities
Payments for time deposits with a maturity of more than three months
Proceeds from time deposits with a maturity of more than three months
Payments for purchases of marketable securities
Proceeds from sales of marketable securities
Purchases of property, plant, and equipment
Proceeds from sales of property, plant, and equipment
Payments for purchases of other assets
Payments for purchases of investments in securities
Proceeds from sales of investments in securities
Increase in loans receivable

Millions ofyen

Thousands of
U.S. dollars(Note 2)

2000

2000

¥

Collection of loans receivable
Net cash used in investing activities
Cash flows from financing activities
Increase in short-term bank loans
Issuance of long-term debt
Repayment of long-term debt
Purchases of treasury stock
Cash dividends paid to the Company’s shareholders
Cash dividends paid to minority shareholders of consolidated subsidiaries
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents arising from initial consolidation ofsubsidiaries
Cash and cash equivalents at end of the year¥

(7,745)8,291(2,853)7,131(13,945)
239
(58)
(777)
164
(1,230)224$(72,963)
78,106(26,877)
67,179(131,371)
2,252
(546)
(7,320)
1,545(11,587)
2,110(10,559)(99,472)

200
400
(439)
(3,983)(1,507)
(585)

1,884
3,768
(4,136)(37,522)(14,197)(5,511)(5,914)(55,714)(484)(4,560)(8,584)(80,867)

37,442352,7272,720

25,62531,578$297,485

See notes to consolidated financial statements.
7

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements
March 31, 2000

1. Summary of Significant Accounting Policies(a)Basis of Preparation
The accompanying consolidated financial statements of Yodogawa Steel Works, Ltd. (the “Company”)
and its consolidated subsidiaries have been prepared in accordance with accounting principles andpractices generally accepted and applied in Japan and have been compiled from those prepared by theCompany as required under the Securities and Exchange Law of Japan. Accordingly, theaccompanying consolidated financial statements are not intended to present the consolidated financial
position, results of operations and cash flows in accordance with accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.
In addition, the notes to the consolidated financial statements include information which is not required
under accounting principles generally accepted in Japan but is presented herein as additional
information.
The Company has initially prepared a consolidated statement of cash flows for the year ended March
31, 2000 as required by a recent amendment to the Securities and Exchange Law of Japan.
Certain reclassifications of previously reported amounts have been made to the consolidated financial
statements for the year ended March 31, 1999 to conform them to the 2000 presentation. Such
reclassifications have had no effect on consolidated net income or shareholders’ equity.

(b)Basis of Consolidation
As required by a recent amendment to the Securities and Exchange Law, effective April 1, 1999, theaccompanying consolidated financial statements include the accounts of the Company and all its
subsidiaries over which substantial control is exerted through either majority ownership of voting stock
and/or by other means. All significant intercompany balances and transactions have been eliminatedin consolidation.
Investments in affiliates (companies over which the Company has the ability to exercise significant
influence) are stated at cost plus equity in their undistributed earnings or losses. Consolidated net
income includes the Company’s equity in the current net income or loss of such companies, after theelimination of unrealized intercompany profits.

8

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)(b)Basis of Consolidation (continued)
All assets and liabilities of the subsidiaries are revalued on acquisition, if applicable. The difference,not significant in amount, between the cost of investments in subsidiaries and equity in their net assets
at the date of acquisition is amortized over a period of five years on a straight-line basis.
Before the adoption of the new accounting standard, subsidiaries and affiliates included only
companies in which the Company held a majority ownership and companies owned 20% to 50% by theCompany, respectively.
The financial statements of a consolidated subsidiary whose fiscal year end is December 31 have been
included in consolidation on the basis of a full fiscal year after making the appropriate adjustments for
significant transactions during the period from its fiscal year end to the Company’s balance sheet date.

(c)

Foreign Currency Translation
Current monetary assets denominated in foreign currencies are translated into yen at the rates of
exchange in effect at the balance sheet date. Other assets denominated in foreign currencies aretranslated at their historical rates. All revenues and expenses associated with foreign currencies aretranslated at the rates of exchange prevailing when such transactions were made. The resulting
exchange losses and gains are charged or credited to income.
Revenue and expense accounts of the foreign consolidated subsidiary and its balance sheet accounts(except for shareholders’ equity) are translated into yen at the rate of exchange in effect at the balance
sheet date. Components of shareholders’ equity are translated at their respective historical rates of
exchange.
Translation differences are presented as “Foreign currency translation adjustments” in theaccompanying consolidated balance sheets.

(d)

Cash Equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cashon hand, deposits with banks withdrawable on demand, and short-term investments which are readily
convertible to cash subject to an insignificant risk of changes in value and which were purchased withan original maturity of three months or less.

9

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)(e)Marketable Securities and Investments in Securities
Marketable securities are primarily stated at the lower of cost or market, cost being determined by themoving average method.

(f)Inventories
Inventories are stated at cost principally determined by the last-in, first-out method.
Inventories in foreign consolidated subsidiary are stated at the lower of cost or market, cost being
determined by the moving average method.

(g)

Property, Plant and Equipment and Depreciation
Property, plant and equipment is stated on the basis of cost.
Depreciation of property, plant and equipment is calculated by the declining-balance method over theuseful lives of the respective assets as prescribed in the Corporation Tax Law, except that thestraight-line method is applied to buildings (except for structures attached to the buildings) acquired
subsequent to April 1, 1998.
Effective April 1, 1998, the Company and its domestic consolidated subsidiary shortened the useful
lives of buildings (except for structures attached to the buildings) in accordance with a recent revision
to the Corporation Tax Law. The effect of this change in useful lives was to increase depreciation
expense by ¥104 million and to decrease operating income and income before income taxes andminority interests by ¥104 million for the year ended March 31, 1999 from the amounts which would
have been recorded if the useful lives applied in the previous year had been followed.
Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged toincome as incurred.
Depreciation of property, plant and equipment at a foreign consolidated subsidiary is calculated by thestraight-line method in conformity with the requirements of its country of domicile.

10

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)(h)Research and Development Costs and Computer Software
Research and development costs are charged to income as incurred.
Expenditures relating to the development of computer software intended for internal use are charged toincome when incurred, except if these are deemed to contribute to the generation of future income or
cost savings. Such expenditures are capitalized as assets and amortized by the straight-line method
over their estimated useful life, which is generally five years.

(i)

Bond Issuance Expenses
Bond issuance expenses are charged to income as incurred.

(j)

LeasesThe Company and its consolidated subsidiaries lease certain equipment under noncancelable leaseagreements referred to as finance leases. Finance leases other than those which transfer theownership of the leased property to the lessees are accounted for as operating leases.

(k) Income Taxes
Up to the fiscal year ended March 31, 1999, deferred income taxes were not provided for timing
differences in the recognition of income and expenses for financial and tax reporting purposes.
Effective April 1, 1999, the Company and its consolidated subsidiaries adopted accounting for theinterperiod allocation of income taxes in accordance with an amendment to the Securities and Exchange
Law. The cumulative effect of this change in method of accounting is reported as “cumulative
adjustment arising from initial adoption of tax-effect accounting” in the consolidated statements ofshareholders’ equity. The effect of this change was that deferred income taxes - current assets,deferred income taxes - non-current assets, deferred income taxes - non-current liabilities arising fromland revaluation, and retained earnings at March 31, 2000 increased by ¥947 million ($8,921 thousand),¥1,549 million ($14,593 thousand), ¥285 million ($2,685 thousand), and ¥2,041 million ($19,228
thousand), respectively, and net income for the year then ended increased by ¥296 million ($2,789
thousand).

11

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)(l)Retirement Allowances and Pension Plans
Employees of the Company and its consolidated subsidiaries are covered by an employees’ retirement
allowances plan and an employees’ pension plan. The employees’ retirement allowances plan
provides for a lump -sum payment determined by reference to the basic salary, length of service andconditions under which the termination occurs. The employees’ pension plan, which is a funded
non-contributory plan, partially covers the benefits under the employees’ retirement allowances plan toemployees who retire after fifteen or more years of service.
Retirement allowances are stated at the amount which would be required to be paid if all employees
covered by the retirement allowances plan voluntarily terminated their employment at the balance sheet
date, less the assets of the pension fund.
The directors and statutory auditors of the Company and its domestic subsidiaries are customarily
entitled to lump -sum payments under the unfunded retirement allowances plan. Retirement allowances
for directors and statutory auditors have been made at estimated amounts based on the Company’s
internal rules.

(m) Amounts per Share
The computation of consolidated net income per share is based on the weighted average number ofshares of common stock outstanding during each year.

2. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter ofarithmetic computation only, at the rate of ¥106.15 = U.S.$1.00, the approximate exchange rate prevailing on
March 31, 2000. The translation should not be construed as a representation that yen have been, could
have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

12

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

3. Marketable Securities and Investments in Securities
Information with respect to the book and marketable securities included in current assets, investments insecurities at March 31, 2000 is summarized as follows:
Millions of yen
Marketable securities:
Equity securities
Debt securities

Book valueMarket value¥¥

Other securities
Investments in securities:
Equity securities
Debt securities¥

16,392401
891

39,164418
876

17,68440,458

298
524

457
740

822

1,197

18,506¥

41,655

Thousands of U.S. dollars
Book valueMarketable securities:
Equity securities
Debt securities$

Other securities
Investments in securities:
Equity securities
Debt securities$

154,423
3,778
8,393

Market value$

368,950
3,938
8,252

166,594

381,140

2,807
4,937

4,305
6,971

7,744

11,276

174,338$

392,416

The corresponding information at March 31, 1999 is disclosed on a non-consolidation basis. See Note 3 tothe non-consolidated financial statements.

13

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

4. Short-Term Bank Loans, Long-Term Debt and Guarantee Deposits
Short-term bank loans at March 31, 1999 represented overdrafts at an annual interest rate of approximately
0.9%. Short-term bank loans at March 31, 2000 represented overdrafts and notes payable to banks. At
March 31, 2000, overdrafts and notes payable to banks amounted to ¥12,530 million ($118,041 thousand) at
an annual interest rate of approximately 0.74%, and ¥800 million ($7,536 thousand) at an annual interest rateof approximately 1.4%, respectively.
Long-term debt at March 31, 1999 and 2000 was as follows:
Thousands of
U.S. dollars

Millions of yen
1999
1.8% unsecured bonds, payable in yen,due 2003
2.0% unsecured bonds, payable in yen,due 2004
Unsecured loans from banks and an insurancecompany, due from 2001 through 2003, at interest
rates ranging from 1.24% to 1.91%
6.3% unsecured bonds, payable in Taiwan dollars,due 2001¥

Less current portion
¥

5,000

2000

¥

5,000

2000

$

47,103

5,000

5,000

47,103

5,000

6,708

63,194

1,795

1,630

15,356

16,795–

18,338(2,570)172,756(24,211)

16,795¥

15,768$148,545

The aggregate annual maturities of long-term debt subsequent to March 31, 2000 are summarized as follows:
Millionsof yenThousands of
U.S. dollars

¥

2,570
5,740
5,028
5,000

$

24,21154,07547,367
47,103¥

18,338$

172,756

Year ending March 31,
2001
2002
2003
2004

14

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

4. Short-Term Bank Loans, Long-Term Debt and Guarantee Deposits (continued)
The assets pledged as collateral for short-term bank loans at March 31, 2000 were as follows:

Property, plant and equipment, at net book value

Millionsof yenThousands of
U.S. dollars¥30,885$290,956

Guarantee deposits consisted principally of guarantee deposits from tenants at annual interest rates from 1%
to 4%. The aggregate annual maturities of guarantee deposits subsequent to March 31, 2000 are
summarized as follows:
Millions ofyen

Thousands of
U.S. dollars

¥

3
3
3
3
3
1,459

$

28
28
28
28
28
13,746¥ 1,474$

13,886

Year ending March 31,
2001
2002
2003
2004
2005
2006 and thereafter

5. Shareholders’ Equity
The Commercial Code provides that an amount equivalent to at least 10% of cash dividends and other cash
appropriations from retained earnings be transferred to the legal reserve until such reserve equals 25% ofcommon stock. The legal reserve may be used to reduce or eliminate a deficit or may be transferred tocommon stock through suitable shareholders’ and directors’ action, but is not available for the payment ofdividends. At March 31, 2000, ¥3,250 million ($30,617 thousand) of retained earnings of the Company was
designated as a legal reserve.

15

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

6. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprise corporation,enterprise and inhabitants’ taxes which, in the aggregate, resulted in statutory tax rates of approximately
47.4% for 1999 and 42.0% for 2000. The effective tax rates reflected in the accompanying consolidated
statements of income differ from the statutory tax rates primarily due to the effect of timing differences in therecognition of certain income and expenses for tax and financial reporting purposes and the effect ofpermanent non-deductible expenses.
A reconciliation of the statutory tax rate and the effective tax rate for the year ended March 31, 2000 as apercentage of income before income taxes and minority interests is as follows:
Statutory tax rate
Investment tax credit
Income not taxable for tax purposes
Excess allowance for doubtful receivables
Unrecognized deferred tax assets for tax loss carryforward of
subsidiaries
Differences in tax rates applicable to foreign subsidiaries
Cash dividends received from foreign subsidiaries
Other
Effective tax rate

42.0%
(18.5)
(5.8)
13.0
2.7
(12.2)
6.1
2.8
30.1%

16

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

6. Income Taxes (continued)
Effective April 1, 1999, the Company and its consolidated subsidiaries commenced the interperiod allocationof income taxes. Deferred income taxes reflect the tax effect of the temporary differences between theamounts of the assets and liabilities recorded for financial and tax reporting purposes. The significant
components of the deferred tax assets and liabilities of the Company and its consolidated subsidiaries as ofMarch 31, 2000 are summarized as follows:

Deferred tax assets - current:
Accrued enterprise tax
Accrued bonuses
Reserve for losses on restructuring
Loss on valuation of securities investment trusts
Investment tax credit
Loss on valuation of inventories
Allowance for doubtful receivables
Tax loss carryforward of subsidiaries
Other

Millions ofyen

Thousands of
U.S. dollars

¥

$

55
162
113
177
288
92
400
85
60

518
1,526
1,065
1,667
2,713
867
3,768
801
565

Less valuation allowance

1,432
(485)

13,490(4,569)Total deferred tax assets - current¥ 947$ 8,921¥1,567
571
123
200
51

$14,762
5,379
1,159
1,884
481

(963)

(9,072)¥1,549$14,593¥ (285)$ (2,685)

Deferred tax assets - non-current:
Retirement allowances for employees
Retirement allowances for directors and statutory auditors
Allowances for doubtful receivables
Depreciation
Other
Reserve for deferred taxation on contributions for acquisition ofproperty
Total deferred tax assets - non-current
Deferred tax liabilities - non-current:
Land revaluation reserve17

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

7. Revaluation of Land
At March 31, 2000, Hakuyo Sangyo Co., Ltd., a domestic consolidated subsidiary, revalued its land held forbusiness use in accordance with the “Law on Land Revaluation.” The difference on the land revaluation
has been accounted for as land revaluation reserve under shareholders’ equity at the net amount of tax effectand the allocation to minority interests. The method followed for this land revaluation was determined inaccordance with the “Enforcement Act Concerning Land Revaluation.” The related book value before andafter the revaluation was as follows:
Millions
Thousands ofof yenU.S. dollars
As of March 31, 2000:
Book value before revaluation
Book value after revaluation¥ 1,019
2,375

$

9,600
22,374

8. Research and Development Costs
Research and development costs included in selling, general and administrative expenses for the years ended
March 31, 1999 and 2000 were as follows:

Millions of yen

Thousands of
U.S. dollars

1999

2000

2000

¥717

¥679

$6,397

9. Leases
The following pro forma amounts present the acquisition costs, accumulated depreciation and net bookvalue of the leased property as of March 31, 2000, which would have been reflected in the balance sheets if
finance leases other than those which transfer the ownership of the leased property of the Company and its
consolidated subsidiaries (which are currently accounted for as operating leases) were capitalized:
Millions of yen
1999
Accumu -lated
Acquisi-t depreci-ati
ion costsonMachinery andequipme
nt

¥536

¥264

Net
book
value

¥272

2000
Accumu -lated
Acquisi-t depreci-ati
ion cost
on

¥544

¥264

Net
book
value

Thousands of U.S. dollars
2000
Accumu -latedNet
Acquisi-t depreci-ati
book
ion costs
on
value

¥280

$5,125$2,487$2,63818

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

9. Leases (continued)
The related lease payments and depreciation for the years ended March 31, 1999 and 2000 were as follows:
Thousands of
U.S. dollars

Millions of yen

Lease payments
Depreciation expense

1999

2000

2000

¥100
100

¥100
100

$942
942

Depreciation is calculated by the straight-line method over the respective lease terms.
The related future minimum payments (including the interest portion thereon) subsequent to March 31, 2000
under finance leases other than those which transfer the ownership of the leased property to the Company
and its consolidated subsidiaries are summarized as follows:
Millionsof yenThousands of
U.S. dollars

¥

101
179

$

951
1,687

¥

280

$

2,638

Year ending March 31,
2001
2002 and thereafter

10. Commitments and Contingent Liabilities
The Company and its consolidated subsidiaries enter into forward foreign currency exchange contracts,
interest rate swap agreements, and other agreements to manage its risk exposure to fluctuations in foreign
currency exchange rates and interest rates. At March 31, 2000, no such contracts or agreements remained
open.
The corresponding information at March 31, 1999 is disclosed on a non-consolidation basis. See Note 11 to
the non-consolidated financial statements.

19

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

10. Commitments and Contingent Liabilities (continued)
At March 31, 2000, the Company and its consolidated subsidiaries had the following contingent liabilities:

As guarantor of housing loans of employees and indebtedness of
unconsolidated subsidiaries
Trade notes receivable discounted with banks

Millionsof yenThousands of
U.S. dollars

¥

$

553
2,627

5,210
24,748

11. Segment Information
The Company and its consolidated subsidiaries are primarily engaged in the manufacture and sale of avariety of steel products such as steel sheets, construction materials, prefabricated structures and homefurnishings, steel rolls and billets, and gratings. The Company also engages in other activities such as realestate rental and engineering.
The business and geographical segments information of the Company and its consolidated subsidiaries forthe years ended March 31, 1999 and 2000 are outlined as follows:Business Segments
Year ended March 31, 1999
Millions of yen

I. Sales and operating
incomeSales to third parties
Intergroup sales andtransfers
Total sales
Operating expenses
Operating income(loss)
II. Assets, depreciationand capital
expenditures
Total assets
Depreciation
Capital expenditures

Steel sheet
products

Electric
furnaceproducts

Other

Total

Eliminations
and general
corporate
assets¥137,251¥13,064¥ 2,812¥153,127¥–
137,251
130,831–
13,064
13,391

1,857
4,669
3,520

¥ 6,420¥ (327)¥125,836
5,491
2,373

¥14,678819
1,344

Consolidated–¥153,127

1,857
154,984
147,742(1,857)(1,857)(804)–
153,127
146,938¥ 1,149¥ 7,242¥ (1,053)¥ 6,189¥11,441249
164¥151,955
6,559
3,881

¥ 66,850
177
220¥218,805
6,736
4,101

20

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

11. Segment Information (continued)
Year ended March 31, 2000
Millions of yen

I. Sales and operating
incomeSales to third parties
Intergroup sales andtransfers
Total sales
Operating expenses
Operating income(loss)
II. Assets, depreciationand capital
expenditures
Total assets
Depreciation
Capital expenditures

Steel sheet
products

Electric
furnaceproducts

Other

Total

Eliminations
and general
corporate
assets¥136,700¥11,705¥ 5,586¥153,991¥

1
136,701
132,969–
11,705
12,047

12,18017,766
16,732

12,181
166,172
161,748¥ 3,732¥ (342)¥ 1,034¥ 4,424¥¥129,237
8,548
12,224¥12,750801
159¥21,735
412
442¥163,722
9,761
12,825

Consolidated–¥153,991(12,181)(12,181)(11,200)–
153,991
150,548(981)¥ 3,443¥ 65,684
113
166¥229,406
9,874
12,991Eliminations
and general
corporate
assetsConsolidated

Year ended March 31, 2000
Thousands of U.S. dollars

I. Sales and operating
incomeSales to third parties
Intergroup sales andtransfers
Total sales
Operating expenses
Operating income(loss)
II. Assets, depreciationand capital
expenditures
Total assets
Depreciation
Capital exp enditures

Steel sheet
products

Electric
furnaceproducts

Other

Total

$1,287,800$110,268$52,624$1,450,692

10
1,287,810
1,252,652–
110,268
113,490

114,743
167,367
157,626

114,753
1,565,445
1,523,768$

35,158$ (3,222)$ 9,741$$1,217,494
80,528115,158$120,113
7,546
1,498

$204,758
3,881
4,164

$1,542,365
91,955
120,820

41,677$$–$1,450,692(114,753)(114,753)(105,511)–
1,450,692
1,418,257(9,242)$ 618,784
1,064
1,563

$

32,435$2,161,149
93,019122,383

21

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

11. Segment Information (continued)
Business Segments (continued)
As mentioned in Note 1, the Company and its domestic consolidated subsidiary shortened the useful lives ofbuildings. The effect of this change on the above information for the year ended March 31, 1999 was toincrease operating expenses for steel sheet products, electric furnace products and other by ¥72 million, ¥11
million and ¥21 million, respectively, over the amounts which would have been recorded if the useful lives
applied in the previous year had been followed.

Geographical Segments

Japan
I. Sales and operating income
Sales to third parties
Interarea sales andtransfers
Total sales
Operating expenses
Operating income
II. Assets

II. Assets

Consolidated¥120,308¥32,819¥153,127¥–¥153,127

1,664
121,972
117,241¥ 4,731–
32,81931,361¥ 1,458

1,664
154,791
148,602¥ 6,189(1,664)(1,664)(1,664)¥––
153,127
146,938¥ 6,189¥139,080¥ 24,159¥163,239¥ 55,566¥218,805

Japan
I. Sales and operating income
Sales to third parties
Interarea sales andtransfers
Total sales
Operating expenses
Operating income

Year ended March 31, 1999
Millions of yen
Eliminations
and general
Southeast
corporate
Asia
Total
assetsYear ended March 31, 2000
Millions of yen
Eliminations
and general
Southeast
corporate
Asia
Total
assetsConsolidated¥122,955¥31,036¥153,991¥–¥153,991

4,797
127,752
126,387¥ 1,365–
31,03628,958¥ 2,078

4,797
158,788
155,345¥ 3,443(4,797)(4,797)(4,797)¥––
153,991
150,548¥ 3,443¥150,040¥23,735¥173,775¥ 55,631¥229,406

22

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements (continued)

11. Segment Information (continued)
Geographical Segments (continued)

I. Sales and operating income
Sales to third parties
Interarea sales andtransfers
Total sales
Operating expenses
Operating income
II. Assets

Japan

Year ended March 31, 2000
Thousands of U.S. dollars
Eliminations
and general
Southeast
corporate
Asia
Total
assets$1,158,313$292,379$1,450,692$–$1,450,692

45,191
1,203,504
1,190,645$ 12,859–
292,379
272,803$ 19,576

45,191
1,495,883
1,463,448$ 32,435(45,191)(45,191)(45,191)$––
1,450,692
1,418,257$ 32,435$1,413,471$223,599$1,637,070$ 524,079$2,161,149

Consolidated

As mentioned in Note 1, the Company and its domestic consolidated subsidiary shortened the useful lives ofbuildings. The effect of this change on the above information for the year ended March 31, 1999 was toincrease operating expenses for the Japan segment by ¥104 million over the amount which would have beenrecorded if the useful lives applied in the previous year had been followed.
Overseas sales, which include export sales of the Company and its domestic consolidated subsidiaries andsales (other than exports to Japan) of the foreign consolidated subsidiary, totaled ¥39,903 million and¥37,383 million ($352,171 thousand), or 26.1% and 24.3% of the consolidated net sales for the years ended
March 31, 1999 and 2000, respectively.

12. Subsequent Event
The following appropriations of retained earnings, which have not been reflected in the accompanying
consolidated financial statements for the year ended March 31, 2000, were approved at a shareholders’meeting held on June 29, 2000:

Cash dividends of ¥3.5 ($0.03) per share
Transfer to legal reserve
Bonuses to directors and statutory auditors

Millions ofyen

Thousands of
U.S. dollars

¥743
80
50

$7,000754
471

23