SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 20-F‘

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934ORÈ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2003
OR‘

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period fromtoCommission file number: 1-7952

Kyocera Kabushiki Kaisha
Kyocera Corporation(Exact name of Registrant as specified in its charter)(Translation of Registrant’s name into English)

Japan

6, Takeda, Tobadono-cho, Fushimi-ku,
Kyoto 612-8501, Japan(Jurisdiction of incorporation or organization)(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of Each Class

Name of Each Exchange On Which Registered

American Depositary Shares (“ADSs”)
New York Stock Exchange
Common Stock (“Shares”)*
New York Stock Exchange* Not for trading, but only in connection with the registration of the ADSs.
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock asof the close of the period covered by the annual report.
As of March 31, 2003, 184,964,360 shares of common stock were outstanding, comprised of 181,144,406
Shares and 3,819,954 ADSs (equivalent to 3,819,954 Shares).
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes È No ‘
Indicate by check mark which financial statement item the Registrant has elected to follow.
Item 17 ‘ Item 18 È

TABLE OF CONTENTS
Page

Cautionary Statement Regarding Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4PART I
Item 1.
Identity of Directors, Senior Management and Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Offer Statistics and Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Capitalization and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Reasons for the Offer and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. History and Development of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Property, Plants and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 5.
Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Research and Development, Patent and Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Trend Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. Tabular Disclosure of Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Directors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Board Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Major Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Interests of Experts and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Consolidated Statements and Other Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Significant Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Offering and Listing Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. Expenses of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 10. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Memorandum and Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Exchange Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2

6
6
6
6
8
8
8
13
13
14
22
25
27
27
42
46
46
47
47
47
47
52
52
54
54
61
61
61
62
62
62
63
64
64
65
65
65
65
65
66
66
66
72
72
72

F. Dividends and Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G. Statement by Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H. Documents on Display . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I. Subsidiary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11.
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.
Description of Securities Other Than Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

77
77
77
77
77
80

PART II
Item 13.
Item 14.
Item 15.
Item 16A.
Item 16B.
Item 16C.
Item 16D.

Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Material Modification to Rights of Security Holders and Use of Proceeds . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Financial Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exemptions from the Listing Standards for Audit Committees . . . . . . . . . . . . . . . . . . . . . . .

81
81
81
81
81
81
81

PART IV
Item 17.
Item 18.
Item 19.

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

82
82
82

Cautionary Statement Regarding Forward-Looking Statements
This annual report on Form 20-F contains “forward-looking statements” within the meaning of Section 21Eof the U.S. Securities and Exchange Act of 1934. To the extent that statements in this Form 20-F do not relate
strictly to historical or current facts, they may constitute forward-looking statements. These forward-looking
statements are based upon our current assumptions and beliefs in the light of the information currently available
to us, but involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and otherfactors may cause our actual actions or results to differ materially from those discussed in or implied by theforward-looking statements. We undertake no obligation to publicly update any forward-looking statement after
the date of this annual report, but investors are advised to consult any further disclosures by us in our subsequent
filings pursuant to the U.S. Securities Exchange Act of 1934.
Important risks, uncertainties and other factors that may cause our actual results to differ materially fromour expectations are generally set forth in Item 3.D of this Form 20-F and include, without limitation:•

the effect of adverse economic trends in our principal markets–in particular, our dependence on growthin the semiconductor and mobile phone handset components markets and the current prolonged market
downturn in each of those markets;•the effect of foreign exchange fluctuations on our results of operations, particularly between the yen andeach of the U.S. dollar and the Euro, in which we make significant sales;•

the level of continuing demand for, and timing of sales of, our existing products;•

Kyocera’s ability to launch innovative products and otherwise meet the advancing technicalrequirements of our customers, particularly in the highly competitive markets for ceramics,
semiconductors and electronic components;•

the level of continuing demand for existing products of our competitors and the pricing of those
products, and their ability to introduce new products;•

the extent and pace of future growth or contraction in information technology-related markets aroundthe world, including those for communications and personal computers;•

declining prices for our products and services;•

the effect of future acquisitions on our financial condition and results of operations;•the effect of prevailing interest rates and the performance of equity and other financial markets
generally;•

the timing of new product introductions and market acceptance for our new products;•

an increase in the incidence of product returns;

and other risks discussed under “Risk Factors” and elsewhere in this annual report.
Presentation of Certain information
As used in this Form 20-F, reference to “the Company” is to Kyocera Corporation; and references to“Kyocera”, “we”, “our” and “us” are to Kyocera Corporation and, except as the context otherwise requires, itsconsolidated subsidiaries.
Also, as used in this annual report:•“U.S. dollar” or “$” means the lawful currency of the United States of America, “yen” or “¥” means thelawful currency of Japan and “Euro” means the lawful currency of the European Union.

•“U.S. GAAP” means accounting principles generally accepted in the United States of America, and“Japanese GAAP” means accounting principles generally accepted in Japan.
4

•“ADS” means an America Depositary Share, each representing one share of Kyocera’s common stock,and “ADR” means an American Depositary Receipt evidencing ADSs.

•“fiscal 2003” refer to Kyocera’s fiscal year ended March 31, 2003, and other fiscal years are referred toin a corresponding manner.

•

Unless otherwise indicated and except for per share amounts and exchange rates, Japanese yen amounts
and U.S. dollars amounts without any units, such as “¥1,000 ($10)”, are in millions for both currencies
in this Form 20-F.

•

Unless otherwise indicated, we have translated Japanese yen amounts for the year ended March 31,
2003 and as of March 31, 2003 presented in this Form 20-F into U.S. dollars solely for yourconvenience. The rate we used for such translations was ¥118.00 = $1.00, which was the noon buying
rate in New York City for cable transfers in foreign currencies as certified for customs purposes by theFederal Reserve Bank of New York on March 31, 2003, rounded to the nearest yen. These translations
do not imply that the yen amounts actually represent, or have been or could be converted into,
equivalent amounts in U.S. dollars.

5

PART I
Item 1.

Identity of Directors, Senior Management and Advisers

Not Applicable.
Item 2.

Offer Statistics and Expected Timetable

Not Applicable.
Item 3.

Key Information

A. Selected Financial Data
The selected consolidated financial data set forth below for each of the five fiscal years ended March 31,
2003 have been derived from the Company’s consolidated financial statements that were prepared in accordancewith accounting principles generally accepted in the United States of America (U.S. GAAP).
You should read the U.S. GAAP selected consolidated financial data set forth below together with“Operating and Financial Review and Prospects” and the Company’s consolidated financial statements includedin this Form 20-F.

6

Earnings per share in the following table is computed based on Statement of Financial AccountingStandards (SFAS) No. 128, “Earnings per share.” Basic earnings per share is computed based on the weighted
average number of shares outstanding during each period. Diluted earnings per share assumes the dilution that
could occur if all options and warrants were exercised and resulted in the issuance of common stock. Cashdividends per share are those declared with respect to the earnings for the respective periods for which dividends
were proposed by the Board of Directors. Dividends are charged to retained earnings in the year in which they
are paid.
(Yen in millions, U.S. dollars and shares in thousands, except per share amounts andexchange rates)
1999
2000
2001
2002
2003
2003

For the years ended March 31:
Net sales . . . . . . . . . . . . . . . . . . . . ¥ 725,326 ¥ 812,626 ¥1,285,053 ¥1,034,574 ¥1,069,770 $ 9,065,847
Profit from operations . . . . . . . . . .
55,77092,151
207,200
51,561
83,388706,678
Income before cumulative effectof change in accounting
principle . . . . . . . . . . . . . . . . . . .
28,24550,345219,529
33,791
43,421
367,975
Net income . . . . . . . . . . . . . . . . . .
28,24550,345219,529
31,953
41,165
348,856
Earnings per share :Income before cumulative effectof change in accounting
principle:
Basic . . . . . . . . . . . . . . . . . . . . . ¥ 148.41 ¥ 265.72 ¥ 1,161.20 ¥ 178.74 ¥ 233.02 $1.97
Diluted . . . . . . . . . . . . . . . . . . . .
148.41
265.34
1,157.83
178.59232.97
1.97
Net income:Basic . . . . . . . . . . . . . . . . . . . . .
148.41265.72
1,161.20
169.02220.91
1.87
Diluted . . . . . . . . . . . . . . . . . . . .
148.41
265.34
1,157.83
168.88220.86
1.87
Weighted average number ofshares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . .
190,318
189,467
189,053
189,050
186,338
Diluted . . . . . . . . . . . . . . . . . . . .
190,318
189,739
189,604
189,204
186,382
Cash dividends declared per share:
Per share of common stock . . . . . .
60
60
60
60
60
0.51
At March 31:
Total assets . . . . . . . . . . . . . . . . . . ¥1,137,167 ¥1,217,158 ¥1,728,056 ¥1,645,458 ¥1,635,014 $13,856,051
Long-term debt . . . . . . . . . . . . . . .
36,10321,09052,30696,856
60,736
514,712
Common stock . . . . . . . . . . . . . . . .
115,703
115,703
115,703
115,703
115,703
980,534
Stockholders’ equity . . . . . . . . . . .
769,493
798,450 1,022,065 1,039,478 1,003,500
8,504,237
Depreciation . . . . . . . . . . . . . . . . . . . ¥ 50,820 ¥ 53,546 ¥ 67,096 ¥ 76,252 ¥ 64,988 $ 550,746
Capital expenditures . . . . . . . . . . . .
58,37364,731
105,944
54,631
40,614344,186
Exchange rate (Yen=US$1):
Period-end . . . . . . . . . . . . . . . . . . . ¥ 118.00 ¥ 103.00 ¥ 126.00 ¥ 132.70 ¥ 118.07
Average . . . . . . . . . . . . . . . . . . . . .
128.49110.67110.96125.05121.94High . . . . . . . . . . . . . . . . . . . . . . . .
147.14124.45125.54134.77133.40Low . . . . . . . . . . . . . . . . . . . . . . . .
108.83101.53104.19115.89115.71

7

The following table shows the exchange rates for Japanese yen per $1.00 based upon the noon buying rate in
New York City for cash transfers in foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York:Year ended March 31,

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High

Low

Average

Period-end¥147.14124.45125.54134.77133.40¥108.83
101.53104.19115.89115.71¥128.49
110.67110.96125.05121.94¥118.43102.73125.54132.70118.07121.42120.55
119.50119.87120.55120.47116.47118.25115.94117.46117.24116.71118.69119.90117.37118.33118.70118.66118.07119.07119.50119.87120.42116.71

Calendar Year 2003

March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The noon buying rate for Japanese yen on September 5, 2003 was $1.00 = ¥117.06.
The following is a five-year summary of dividends declared per share stated in Japanese yen and U.S.
dollars based on the exchange rates at each respective payment date.
Year ended March 31,

Yen

Dollar1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60.00
60.00
60.00
60.00
60.00

0.50
0.57
0.51
0.49
0.51

B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk Factors
You should carefully read the risks described below before making an investment decision.
Continued or increasing weakness in the Japanese or global economy may significantly reduce demand forour products
The Japanese economy has experienced a prolonged recession since the early 1990s, which has grownincreasingly serious. Price levels on the Tokyo Stock Exchange declined to levels of nearly 20 years ago. The
banking system is reported to be in serious difficulty, which may result in tightening of credit. In addition, theglobal economy has taken a downturn since the third quarter of fiscal 2001. These recessionary conditions haveresulted in sluggish consumer spending and weakened corporate capital expenditures on a variety of products,
including many of the products sold by the secondary manufacturers which are our primary customers. This hascaused these manufacturers to cut production. The markets for semiconductors and components for mobile phonehandsets and PC-related equipment, on which we are substantially dependent for our growth, have been8particularly hard hit since calendar year of 2001. This slow demand in IT-related markets adversely affected sales
volumes and prices of components. The Japanese and U.S. economies are not expected to show a strong recovery
through fiscal 2004.
We sell a diverse variety of products and in each of our businesses we are subject to intense competitive
pressures, including in terms of price, technological change, product development, quality and speed ofdelivery, and these pressures are likely to increase in the near term
We sell a wide variety of products and therefore face a broad range of competitors from large international
companies to relatively small, rapidly growing and highly specialized organizations. We have a variety ofbusinesses in different industries while many of our competitors specialize in one or more of these businessareas. As a result, we may not fund or invest in certain of our businesses to the same degree as our competitors,
or these competitors may have greater financial, technical, and marketing resources available to them than the
portion of our business against which they compete. While some of the factors that drive competition vary by
product area, price and speed of delivery are factors in all areas of our business. Price pressure in particular has
been intense, with average prices for components declining significantly during the previous three fiscal years.
This trend has been particularly evident in IT related markets, which contributed approximately 80% of our sales
revenues in fiscal 2003. We expect this price pressure to continue in fiscal 2004.
In production businesses in which we produce specialized parts for our customers’ products, our competitive
position depends significantly on being involved early in the process of creating a new product that fits ourcustomer’s needs. This requires maintaining close ties with our customers so that we can ensure that we are able
to meet required specifications and be the first supplier to create and deliver the product.
Our gross margins may be reduced if we cannot maintain these important relationships or market share or if
we are forced in the future to further reduce prices in response to the actions of our competitors, as in fiscal 2003.
Our products are difficult to manufacture, and small manufacturing defects can adversely affect our
production yields and our operating results
The manufacture of the majority of our products is a highly complex and precise process. We ordinarily
outsource the fabrication of certain components and sub-assemblies of our products, often to sole source
suppliers or a limited number of suppliers. We have experienced occasional delays in obtaining components andsub-assemblies because the manufacturing process for these items is very complex and requires a long lead time.
The revenues derived from sales of our products will be materially and adversely affected if we are unable toobtain a high quality, reliable and timely supply of these components and subassemblies. In addition, any
reduction in the precision of these components will result in sub-standard end products and will cause delays andinterruptions in our production cycle.
Within our manufacturing facilities, minute impurities, difficulties in the production process or other factors
can cause a substantial percentage of our products to be rejected or non-functional. These factors can result in
lower than expected production yields, which delay product shipments and may materially and adversely affectour operating results. Because the majority of our costs of manufacture are relatively fixed, production yield andcapacity utilization rate are critical to our financial results.
Since over 60 percent of our revenues has been from foreign sales in recent years, various export risks may
disproportionately affect our revenues
Sales to customers located outside Japan accounted for 60.4% of our revenues in fiscal 2003. We believethat international sales will continue to account for a significant percentage of our revenues. Therefore, thefollowing export risks may disproportionately affect our revenues:•

a strong yen may make our products less attractive to foreign purchasers;•

political and economic instability may inhibit export of our products;9

•

we may experience difficulties in the timeliness of collection of foreign accounts receivable and beforced to write off receivables from foreign customers;•

tariffs and other barriers may make our products less cost competitive;•

shipping costs of our products may increase;•

we may have difficulty in staffing and managing our international operations; and•the laws of certain foreign countries may not adequately protect our trade secrets and intellectual
property.

Unexpected changes in economic, political and legal conditions in China, in which we are becoming
increasingly active, may have an adverse effect on our business
Based on our expectation that the Chinese markets for cellular telephones and information technologyrelated products, including personal computers and printers, will continue to grow rapidly, we have been making
substantial investments in new production and marketing facilities in China. We now have three principal
production facilities, located in Shanghai, Dongguan and Guiyang, and we plan to make substantial additional
investments to increase production capacity at these sites and to increase our marketing and distribution
capabilities in China. Although the Chinese economy has been growing at a rapid rate in recent years, and thecentral government has been increasingly utilizing market forces as opposed to central economic planning,
growth has been uneven among various regions of the country and among various sectors of the economy.
Unexpected changes in the central government’s economic policy or in the business climate including those due
to changes in institutional systems in various parts of the country may adversely affect its telecommunication andinformation technology-related markets, in which we seek to sell our products. In addition, China is in theprocess of developing a comprehensive system of laws and regulations dealing with economic matters, andforeign businesses currently active in the country, such as Kyocera, face risks and uncertainties including
enforcement of contractual terms, administrative intrusion by local governments and difficulty with expatriationof profits. Manufacture and sales of our products were adversely impacted by Severe Acute Respiratory
Syndrome (SARS) in China and elsewhere in the world, and a recurrence of SARS or the outbreak of a similardisease could have an adverse impact on our results of operations.
Currency exchange rate fluctuations could adversely affect our financial results
We conduct business in countries outside of Japan, which exposes us to fluctuations in foreign currency
exchange rates. For example, when we sell products to our sales subsidiaries overseas, we receive payment inforeign currency and generally collect within 90 days. We may enter into short-term forward exchange or option
contracts to hedge this risk according to our outlook on future exchange rates; nevertheless, fluctuations inforeign currency exchange rates could have an adverse effect on our business. Fluctuations in foreign currency
exchange rates may affect our results of operations and the value of our foreign assets, which in turn may
adversely affect reported earnings and the comparability of period-to-period results of operations. Changes incurrency exchange rates may affect the relative prices at which we and foreign competitors sell products in thesame market. In addition, changes in the value of the relevant currencies may affect the cost of imported items
required in our operations.
Industry demand for skilled employees, particularly engineering and technical personnel, exceeds the numberof personnel available
Our future success depends, in part, on our ability to attract and retain certain key personnel, including
engineering, operational and management personnel. We anticipate that we will need to hire additional skilled
personnel in all areas of our business. The competition for attracting and retaining these employees, especiallyengineers in key fields, including telecommunications equipment and software design, digital signal processing
and optical instrument development, is intense. Because of this intense competition for these skilled employees,
10we may be unable to retain our existing personnel or attract additional qualified employees in the future. If weare unable to retain skilled employees and attract additional qualified employees to keep up with our expansion,
our business, financial condition and results of operations will be materially and adversely affected.
Insufficient protection of our trade secrets and patents could have a significant adverse impact on ourcompetitive position
Our success and competitive position depend on protecting our trade secrets and other intellectual property.
Our strategy is to rely both on trade secrets and patents to protect our manufacturing and sales processes andproducts, but reliance on trade secrets is only an effective business practice insofar as trade secrets remain
undisclosed and a proprietary product or process is not reverse engineered or independently developed. We takecertain measures to protect our trade secrets, including executing non-disclosure agreements with certain of ouremployees, joint venture partners, customers and suppliers. If parties breach these agreements or the measures wetake are not properly implemented, we may not have an adequate remedy. Disclosure of our trade secrets orreverse engineering of our proprietary products, processes or devices could materially and adversely affect ourbusiness, financial condition and results of operations.
We are actively pursuing patents on some of our recent inventions, but these patents may not be issued.
Even if these patents are issued, they may be challenged, invalidated or circumvented. In addition, the laws ofcertain other countries, such as China where we have increasing operations, may not protect our intellectual
property to the same extent as Japanese laws.
We may require licenses to continue to manufacture and sell certain of our products, the expense of which
may adversely affect our results of operations
From time to time we have received, and may receive in the future, notice of claims of infringement of otherparties’ proprietary rights and licensing offers to commercialize third party patent rights. Although we are notcurrently involved in any litigations relating to our intellectual property except in the ordinary course of ourbusiness, we cannot assure that:•

infringement claims (or claims for indemnification resulting from infringement claims) will not be
asserted against us,•

future assertions against us will not result in an injunction against the sale of infringing or allegedly
infringing products or otherwise significantly impair our business and results of operations; or•

we will not be required to obtain licenses, the expense of which may adversely affect our results ofoperations.

Future initiatives and in-process research and development may not produce the desired results
We intend to expand our product lines to satisfy customer demand in our target markets. Unexpected
technical delays in completing these initiatives could lengthen development schedules and result in lower
revenues based on the products or technologies developed from these initiatives. There can be no assurance thatthe products derived from our in-process research and development activities will achieve market acceptance.
We may have to incur impairment losses on our investments in equity securities
We hold investments in equity securities of companies not affiliated with us, which we generally hold on along-term basis for business relationship purposes. A substantial portion of these investments consists of sharesof common stock of public companies in Japan, including Japanese banks and other financial institutions. As of
March 31, 2003, the aggregate fair value of equity securities included in available-for-sale securities was¥212,902 ($1,804), with gross unrealized gains in the amount of ¥2,671 ($23) and gross unrealized losses in the11amount of ¥49,711 ($421). If there is a decline in the fair value, i.e., the market price, of the shares we hold in
those companies over a period of time, and we determine that the decline is other than temporary under theguidance of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, we will need torecord an impairment loss for the applicable fiscal period. During fiscal 2003, we recorded losses on devaluationof investment securities in the amount of ¥2,883 ($24), mainly due to a substantial fall in the market value ofJapanese bank shares we hold. For some of the equity securities we own, including the KDDI shares we own, we
intend to keep our ownership at the current level in light of the importance of our business relationships with theissuers of these equity securities. For other equity securities in our portfolio, although we may dispose of themover time, market conditions may not permit us to do so at the time, speed or price we may wish.
As a holder of ADSs, you will have fewer rights than a shareholder has and you will have to act through thedepositary to exercise those rights
The rights of shareholders under Japanese law to take various actions, including voting their shares,
receiving dividends and distributions, bringing derivative actions, examining a company’s accounting books andrecords and exercising appraisal rights, are available only to holders of record. Because the depositary, throughits custodian agents, is the record holder of the Shares underlying the ADSs, only the depositary can exercise
those rights in connection with the deposited Shares. The depositary will make efforts to vote the Shares
underlying your ADSs as instructed by you and will pay to you the dividends and distributions collected from us.
However, in your capacity as an ADS holder, you will not be able to bring a derivative action, examine our
accounting books and records or exercise appraisal rights through the depositary.
Rights of shareholders under Japanese law may be more limited than under the law of other jurisdictions
Our Articles of Incorporation, Regulations of the Board of Directors, Regulations of the Board of Corporate
Auditors and the Japanese Commercial Code govern our corporate affairs. Legal principles relating to suchmatters as the validity of corporate procedures, directors’ and officers’ fiduciary duties and shareholders’ rights
may be different from those that would apply if we were a U.S. company. Shareholders’ rights under Japanese
law may not be as extensive as shareholders’ rights under the laws of the United States. You may have moredifficulty in asserting your rights as a shareholder than you would as a shareholder of a U.S. corporation. In
addition, Japanese courts may not be willing to enforce liabilities against us in actions brought in Japan which are
based upon the securities laws of the United States or any U.S. state.
Because of daily price range limitations under Japanese stock exchange rules, you may not be able to sell yourshares of our Common Stock at a particular price on any particular trading day, or at all
Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between
bids and offers. These exchanges are order-driven markets without specialists or market makers to guide priceformation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation
limits for each stock, based on the previous day’s closing price. Although transactions may continue at the
upward or downward limit price if the limit price is reached on a particular trading day, no transactions may takeplace outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily
limit may not be able to sell his or her shares at such price on a particular trading day, or at all.
Foreign exchange fluctuations may affect the dollar value of our ADSs and dividends payable to holders of
our ADSs
Market prices for our ADSs may fall if the value of the yen declines against the U.S. dollar. In addition, theU.S. dollar amount of cash dividends and other cash payments made to holders of our ADSs would be reduced if
the value of the yen declines against the U.S. dollar.

12

Item 4.

Information on the Company

A. History and Development of the Company
The Company is a joint stock corporation that was incorporated under the laws of Japan in 1959 with thename Kyoto Ceramic Kabushiki Kaisha. The name of the Company was changed to Kyocera Kabushiki Kaisha(or Kyocera Corporation) in 1982. Our corporate headquarters is at 6 Takeda Tobadono-cho, Fushimi-ku, Kyoto
612-8501, Japan. Our telephone number is +81-75-604-3500.
Our business originally consisted of the manufacture of ceramic parts for electronic equipment. In the
1960’s, we moved into the design and production of fine ceramic parts, ceramic integrated circuit (“IC”)
packages, and electronic components. In the 1970s, we began to produce ceramic cutting tools, ceramics for
medical and dental uses, jewelry and solar energy products.
In the 1980’s we diversified into new strategic fields. In 1982, we merged with Cybernet Electronics
Corporation, a communications equipment manufacturer in which we had made an equity investment three years
earlier. We expanded into another new business field through the acquisition of Yashica Co., Ltd., a camera andcamera lens manufacturer, and played a leading role in the establishment of DDI Corporation (now KDDI
Corporation), which has become one of Japan’s leading providers of telecommunications services. In 1989, we
gained a presence in the electronic connector market through our acquisition of Elco Corporation.
In the 1990’s, we strengthened our position as an internationally integrated electronic components
manufacturer through our merger with AVX Corporation, a maker of capacitors and other passive electronic
components, in January1990.
In the middle of the 1990’s, Kyocera developed two main business categories, its “Components Business,”in which Kyocera provides parts and devices such as fine ceramics parts, semiconductor parts and electronic
components and devices, with the secondary manufacturer mainly in IT industrial fields, and its “Equipment
Business,” in which Kyoceras manufactures and sells information and communication equipment and optical
instruments, such as mobile handsets, PHS-related products, copiers, printers, and cameras, to distributors ordirectly to customers.
Since 2000, we have further enhanced our position as a market leader in telecommunications andinformation equipment. In February 2000, we acquired the code division multiple access (“CDMA”) mobile
phone handset business of QUALCOMM Inc. to create our United States subsidiary, Kyocera Wireless Corp. In
April 2000, we invested ¥12,000 in Kyocera Mita Corporation, a manufacturer of copiers and other document
solutions equipment, to make it a wholly-owned subsidiary, and in April 2002, we transferred the Company’s
printer business into Kyocera Mita Corporation to further enhance our information equipment business by
pursuing group synergies.
In addition, we also strengthened our Components Business resources to become a leading company in ITrelated applications. In August 2002, Kyocera made Toshiba Chemical Corporation (now Kyocera Chemical
Corporation) a wholly-owned subsidiary through a stock swap in order to reinforce its electronic parts andmaterials business by pursuing group synergies between fine chemical technologies and fine ceramic
technologies. In August 2003, Kyocera made Kinseki, Limited (Kinseki), a major producer of artificial crystalrelated products, a wholly-owned subsidiary through a stock swap to strengthen its Electronic Device Group. To
further enhance its organic circuit board business, Kyocera also made an agreement with IBM Corporation and
IBM Japan, Ltd. for the transfer from IBM Japan to Kyocera of its Surface Laminar Circuitry (“SLC”) business.
In September 2003, Kyocera completed the transfer of IBM Japan’s SLC business from IBM Japan to a newlyestablished wholly-owned subsidiary of Kyocera.
With the aim of becoming more global enterprise and enhancing its profitability, Kyocera has been
expanding its production in China by establishing three production bases located respectively in Shanghai,13

Dongguan and Guiyang. In addition, Kyocera established a new sales company, Kyocera (Tianjin) Sales andTrading Corporation, in March 2003 to cultivate the Chinese market. We intend to market both locallymanufactured products and imported products in the Chinese market.
B. Business Overview
Overview
We are engaged in numerous high-tech fields, including fine ceramics, electronics, telecommunications,
automotive components, medical and dental implants, solar energy and IT solution services and networks. Our
manufacturing and distribution operations are conducted worldwide. As of March 31, 2003, we have 123
subsidiaries and 9 affiliates outside Japan and 22 subsidiaries and 7 affiliates in Japan. Our customers include
individuals, corporations, governments and governmental agencies. For information on our sales by category ofactivity and information on our sales by geographic area and product segment, see “Results of Operations” under
Item 5. A of this Form 20-F.
Business Strategy
Kyocera’s business strategy is to promote “high-value-added diversification” to be a creative company that
continues to grow. To achieve this goal, we seek to enhance profitability of our Components Business and to
expand sales and enhance profitability of our Equipment Business. In our Components Business, we intend toseek increased market share of our products in areas of comparative strength. In addition, we seek to create anddevelop new, valuable markets and pursue comprehensive cost reduction by establishing a globally optimized
production base. In our Equipment Business, we seek to expand our telecommunications equipment business toachieve market leadership in business fields such as the development, manufacture, sale and after-sale servicingof CDMA handset and personal handy phone system (“PHS”)-related products, in addition to developing ahighly profitable document solutions business through the establishment of a trusted brand by strengthening sales
channels and product dominance.
In order to achieve our growth, we are now focusing on businesses that support telecommunications andinformation processing, environmental protection and the quality of life. More than 80% of our revenue for fiscal
2003 was derived from products related to IT markets. These range from electronic components, semiconductor
parts and fiber-optic components, to telecommunications equipment and information equipment.
We believe material technologies have great potential in environmental protection. Advanced crystalprocessing expertise has made us a leading producer of solar cells and solar electric generation systems. Ourpollution-reducing ceramic engine parts, film-less digital cameras and cartridge-free printers and copiers further
reflect our commitment to the environment and the well-being of future generations.
To enhance the quality of life, we have developed electronic and structural components for the medical
industry. As the average life expectancy increases in Japan and worldwide, we are striving to improve the qualityof life through the manufacture of products such as medical and dental implants. We also intend to offer thepromise of a higher quality of life, including through the development of recrystallized gemstones, still anddigital cameras, and even amusement and multimedia services.
In the years to come, we will pursue growth using our internal knowledge and resources in materials,
components, equipment, IT solution services and networks. Through ongoing customer-oriented research anddevelopment, we will seek to create new technologies, products, and markets that contribute to growth in ourmarkets.

14

Operations
Our business is highly diversified with our operations classified into four operating segments: (1) Fine
Ceramics Group, (2) Electronic Device Group, (3) Equipment Group and (4) Others. Our principal products andservices offered in each segment are shown below.
(1)

Fine Ceramics Group
Packages for surface mount devices (“SMD”), optical communications packages and components,
microprocessor unit (“MPU”) packages, semiconductor fabrication equipment components/LCD (liquid
crystal display) fabrication equipment components, cutting tools, jewelry, gas turbine parts, exhaust gas
purification components, residential and industrial photovoltaic generating systems, solar cells and modules,
orthopedic and dental implants, applied ceramic products.

(2)

Electronic Device Group
Ceramic chip capacitors, tantalum capacitors, timing devices, connectors, high-frequency modules,
thermal printheads, LCDs, amorphous silicon drums.

(3)

Equipment GroupCDMA (code division multiple access) and PDC (personal digital communication) handsets, PHSrelated products, wireless local loop (“WLL”) systems, “ECOSYS” printers, network copiers, SLR (singlelens reflex) cameras, compact zoom cameras, digital cameras and equipment for optical-related applications.

(4)

OthersTelecommunications networks systems, computer networks systems, consulting, finance and leasing,
manufacturing and sales of electronic component materials, electrical insulating materials and synthetic
resin moldings.

(a)Fine Ceramics Groupi.

Fine Ceramic Parts:
Products in this product line are widely used in the computing, telecommunications, automotive andvarious industrial sectors. These products are made from a variety of ceramic materials, such as siliconcarbide, zircon, and silicon nitrides, as well as alumina, utilizing their characteristics of conductivity,
corrosion and wear resistance.
Products we manufacture in this product line include alumina substrates, which are thin ceramic bases
used by manufacturers for hybrid integrated circuit (“IC”) foundations. We also produce substrates forthermal printheads and resistors, slide pads for computer disk memories, parts for LCD fabricationequipment, sapphire substrates for LCD projectors, parts for semiconductor fabrication equipment,
mechanical seals for pumps, engine components for the automobile industry, friction discs and thread guides
for yarn texturing machines in the textile industry, rings for fishing rods, nozzles, and parts for papermaking machinery.

ii.

Semiconductor Parts:
This product line mostly comprises ceramic IC packages and ceramic packages for othersemiconductor products and for electronic components. Ceramic packages have the characteristics of being
air and water tight and corrosion resistant and also have the ability to dissipate heat efficiently. In addition,
they have a superior capacity for use in high frequency and embedded passive components.
15

The most common types of the ceramic IC packages we make are multilayer packages, including SMD
packages and pin grid arrays. We also produce opto-electronic packages and ceramic parts for fiber-optic
communications connectors. SMD packages are used for surface acoustic wave (“SAW”) filters andoscillators, which are mostly inserted into cellular handsets. Pin grid arrays are sold to manufacturers of
MPUs and of other logic ICs, which are principally inserted into information equipment and peripherals. We
also produce ceramic packages for charge-coupled-devices (“CCDs”) and complementary metal oxide
semiconductor (“CMOS”) devices, which are mainly used in camera-equipped mobile handsets. In addition,
we produce organic packages for high-end application specific integrated circuits (“ASICs”).
iii.

Consumer-Related Products:
This product line consists of cutting tools, recrystallized jewelry, BIOCERAM, solar systems andapplied ceramic products.
Cutting tools are used for metal processing in industrial production, particularly in the automotive
industry. In January 2001 we acquired Tycom Corporation (renamed to Kyocera Tycom Corporation), a
major U.S. manufacturer of carbide cutting tools for the PCB industry. We are pursuing efficiencies
between its global manufacturing and sales facilities and our cutting tools business and aim to become aleader in this market.
Recrystallized jewelry comprises mainly synthetic emeralds, alexandrines and rubies. These stones are
manufactured using a single crystal growth technology developed by us, and are chemically and physicallyequivalent to natural stones. We plan to introduce new recrystallized jewelry products to meet consumer
needs and to expand sales networks by operating new retail shops in Japan.
We produce solar cells and modules, solar cell applied equipment, and residential and industrial
photovoltaic generating systems. We plan to expand our solar cell production capacity in Japan and willcommence our production in China. In May 2003 we established a subsidiary for the production and sales ofsolar modules in China. This company, Kyocera (Tjianjin) Solar Energy Co., Ltd., is 90% owned by us and
10% owned by the Tianjin Yiquing Group. It is located in the Tianjin Economic Technological
Development Area in Tianjin, China, and we expect to begin production operations at this subsidiary in
October. We continue to expand our sales of photovoltaic solar power generating systems in Japanese andoverseas markets.
We produce BIOCERAM dental and orthopedic implants and are developing new products with a wide
range of orthopedic and dental applications, including artificial knee joint replacement systems, ceramicmaterials to help heal hip fractures and a system for setting dentures magnetically in ceramic-based dental
implants.

(b)

Electronic Device GroupOur electronic device group focuses on electronic components and devices for telecommunications andcomputing equipment. These fields create demand for miniature timing devices such as TCXOs(temperature compensated crystal oscillators) and VCOs (voltage-controlled oscillators), and miniatureceramic capacitors with high capacitance, tantalum capacitors, and high-frequency modules, as well as thinfilm products such as thermal printheads, amorphous silicon drums and LCDs. We believe that we are oneof the leading suppliers of TCXOs on a worldwide basis.
In 1995, we established a subsidiary in Shanghai, China to manufacture and sell ceramic capacitors andother electronic components in this fast-growing market. We are continuing to expand our offshore
production of electronic devices, both to improve earnings and to raise price competitiveness. As a part ofthis strategy, we commenced full-scale production of timing devices in Shanghai, in addition to productionof ceramic capacitors commenced there in January 2001. In addition, we established a sales company,
Kyocera (Tianjin) Sales and Trading Corporation, which we will market Kyocera products made both inChina and around the world at the beginning of fiscal 2004.
16

AVX Corporation and its consolidated subsidiaries (AVX), which manufactures and markets ceramic
and tantalum capacitors and other passive components for telecommunications and computing equipment, is
an important part of our strategy in the Electronic Device Group. With its global manufacturing and sales
network, AVX is a major contributor to our sales worldwide.
In August 2003, we made Kinseki a wholly-owned subsidiary through a stock swap. Kinseki’s
technologies for the manufacture of artificial crystals and related applications will enhance the position of
Kyocera as a general electronic components manufacturer that is versed in the telecommunications andinformation processing industries.
(c)Equipment Groupi.

Telecommunications equipment:This product line includes CDMA and PDC handsets and PHS-related products. These products areproduced mainly for KDDI and KDDI’s subsidiaries, as well as for other Asian and U.S.
telecommunications companies. KDDI is a telecommunications service company which we established in1984 as an affiliated company when the telecommunications business, which had previously beenmonopolized by a national telephone company, was opened to private companies. KDDI and KDDI’s
subsidiaries are engaged in providing long distance and international telephone services, cellular and PHS
services.
One of our major areas in the telecommunications equipment business is cellular handset. This
technology has become one of the fastest growing mobile phone protocols. The Company mainly operates
its manufacturing, sales and development of CDMA and PDC handsets in Japan, collaborating closely with
KDDI. To strengthen our CDMA handset business, we acquired the consumer CDMA mobile phone handset
business of QUALCOMM Inc. in February 2000 and established a United States subsidiary, Kyocera
Wireless Corp. Our CDMA handsets manufacturing, sales and development are also conducted in South
Korea, where we collaborate closely with SK TELETECH Co., Ltd., our joint venture with SK Telecom. In
addition to these three bases, in December 2001, we established a local joint venture in Guiyang, China,
called Kyocera Zhenhua Communication Equipment Co., Ltd., for the development, manufacture, sale andafter-sales servicing of telecommunications equipment. This joint venture commenced production ofCDMA-protocol mobile phone handsets for the Chinese market in January 2002.
With regard to telecommunications equipment, we aim to become a leader in the CDMA market bypursuing a global marketing strategy at bases in Japan, the United States, Korea and China, and to optimize
our global product development and production structure.
The other major area in telecommunications equipment in which we operate is PHS-related business.
This business was expanded by cultivating new markets overseas through our three telecom systems basedon PHS technology. Specifically, we seek to expand sales of mobile PHS systems through the expansion of
PHS handsets and base stations in China. We also promote sales of WLL systems in countries where fixedphone networks are not as yet widespread. Furthermore, we will promote Wireless Internet Systems, whichenables internet services to be used at broadband speed with wireless technology.

ii.

Information Equipment:
The major products in this product line comprise page printers marketed under the name “ECOSYS”,
which are based on cartridge-free technology, and digital copiers.
In April 2000, Kyocera Mita Corporation became one of our wholly-owned subsidiaries. In April 2002,
the Company’s ECOSYS printer unit was merged into this subsidiary, enabling us to build a unified
presence in the document solutions business. Further efficiencies have resulted from the merger of ourprinter and copier sales operations with those of Kyocera Mita Corporation. We have enhanced its productline through the introduction of long-life printers, copiers and color machines with low running costs, as
17well as strengthened our sales network. In addition, we are reducing costs by consolidating development andmanufacturing facilities, both in Japan and overseas, and by building copiers and printers on common
engines and components.
To bolster price competitiveness, we commenced full-scale production of printers and copiers in a new,integrated manufacturing facility in China in December 2001. We continue to develop a comprehensive lineof long-service-life printers, copiers, multi-function peripherals and color-capable document solutions
equipment.
iii.

Optical Instruments:
This product line includes compact cameras, SLR cameras and lenses and digital cameras. These
products are sold under the brand names “Kyocera” mostly in Japan and “Yashica” overseas, while our“CONTAX” brand high-end cameras are sold worldwide.
We are seeking to strength our digital camera development and production while reducing costs andraising margins through local production in China. At our Dongguan Shilong plant, we expanded productionof digital cameras through our joint venture, Dongguan Shilong Kyocera Optics Co., Ltd. We focus ondeveloping new digital cameras which will meet customer demand and integrate our technological resourcesin electronic devices, packages and lenses, creating digital camera modules and units for camera-equipped
mobile phones and automotive monitors.

(d)OthersThis segment includes revenues from telecommunication network systems, financial services such asleasing and credit financing, office renting services, and other services in Japan and Asia. This segment also
includes manufacture and sales of electric insulators and synthetic resin molded parts.
Kyocera Leasing Co., Ltd., a wholly-owned subsidiary in Japan, is principally involved in providing
credit financing services and commercial leasing services for copiers, printers and other equipment. It
therefore supports the operations of our Equipment Group.
Kyocera Communication Systems Co., Ltd., a Japanese subsidiary, is involved in the IT solutions
business through provision of Internet data center services, a rapidly expanding business segment in thetelecommunications and information processing market. Kyocera Communication Systems Co., Ltd. alsooffers network systems and telecommunication engineering services, such as constructing mobile
communications network base stations. Kyocera Communication Systems Co., Ltd. also plans to merge its
systems integration, network and security operators to provide integrated corporate IT solutions using new
telecommunications infrastructure.
Kyocera Chemical Corporation, which joined Kyocera in August 2002, mainly produces electric
insulators and synthetic resin molded parts for the semiconductors and electronics industries. We seek toincorporate fine chemical technologies in products in our fine ceramics group, electronic device group andother divisions.

Sales and Distribution
Our products are marketed worldwide by our own sales personnel, as well as through sales companies,
compensated solely on a commission basis and by independent distributors. We have regional sales and design
application personnel in strategic locations to provide technical and sales support for independent manufacturers’
representatives and independent distributors. We believe that this combination of distribution channels provides ahigh level of market penetration and efficient coverage of our customers on a cost-effective basis.
Most of our sales of fine ceramic parts, semiconductor parts and electronic devices worldwide are madedirectly to manufacturers who incorporate them into their own products. However, end products manufactured byus, such as ceramic cutting tools, recrystallized jewelry, solar energy products and various other consumer goods,
18tend to be sold to distributors and wholesalers. Jewelry sales are made mainly through direct sales shops andagencies in Japan. Sales of consumer solar energy products are made through direct sales shops, as well as
through sales distributors. BIOCERAM (orthopedic and dental implants) are supplied in some cases directly todentists and hospitals. Our domestic sales of telecommunications equipment comprise sales mainly to KDDI and
its subsidiaries. Most of our page printer and copier sales, both in the domestic market and abroad, are madeunder our own brand name through distributors and wholesalers. Sales of optical instruments are made mainly toretail shops in Japan and overseas and, to a lesser extent, distributors abroad. Finance revenues are generated
from services provided to companies within and outside our group in Japan. Office renting and other services aremainly provided to companies outside our group in Asia. Our telecommunication network systems and services
support mobile and PHS carriers through the installation and maintenance of base stations.
Domestic sales are made in yen, while overseas sales are made in a variety of currencies, but predominantly
in U.S. dollars and Euro.
Sources and Availability of Raw Materials and Supplies
We purchase a variety of raw materials. The principal ones in terms of volume are alumina (a mineralsubstance produced from bauxite and from which aluminum is made), zircon, titania, silicon nitride, Tungsten
and Tantalum, used for the products of our Fine Ceramics Group and Electronic Device Group, such as fineceramic parts, semiconductor parts, cutting tools and electronic components, and each subject to price volatility.
On a cost basis, gold, which is primarily used in the production process for IC packages and is also subject toprice volatility, is the most significant raw material. Our policy is to protect ourselves from fluctuations in theprice of gold by keeping a small gold inventory and by pricing products generally on a “gold adder” system sothat customers pay for the gold contained in semiconductor parts at a rate which approximates our cost. Our main
supplies are ICs, Liquid Crystals and Printed Circuit Board, used for the products of our Electronic Device Groupand Equipment Group, such as thin-film devices, mobile handsets, printers, copiers, and optical instruments.
As we typically receive our supply of these raw materials and supplies from several large companies which
we feel are reliable sources, we have not generally experienced, and we do not anticipate, any difficulty inobtaining raw materials or supplies, or in meeting fuel requirements. Oil price volatility may also affect ourpurchase price of certain oil-related supplies, the prices of such supplies have been steady in recent years.
During the year ended March 31, 2003, no single supplier accounted for a significant amount of ourconsolidated purchases of raw materials and supplies. However, a number of components and sub-assemblies
used in our products are sourced to sole source suppliers. These tend to be complex, precision components thatare sometimes produced only by a limited number of suppliers or a single supplier that may own intellectual
property related to the component or sub-assembly.
Patents and Licenses
Our success and competitive position depend on a number of significant patents, licenses and trade secrets
relating to our manufacturing and sales processes and products. The following table sets forth information, as ofMarch 31, 2003, with respect to our significant patents and license agreements. Under all of the following
agreements, we are permitted to produce products using the licensed technology and we pay a fee to thecounterparty based on the amount of sales of those products.
Counterparty

Country

Contents

PeriodHitachi Displays, Ltd.

Japan

License under patents
regarding liquid crystal
display elements

From April 1, 1993 to March
31, 2007Philips Electronics N.V.

Netherlands

License under patents
regarding optical disk system

From June 28, 1993 to
expiration of respective
patents

19

Counterparty

Country

Contents

PeriodSemiconductor Energy
Laboratory Co., Ltd.

Japan

License under patents
regarding amorphous silicon
drums and devices using suchdrums

From February 15, 1994 to
expiration of respective
patents

International Business
Machines Corporation

United States

License under patents
regarding ceramic products,
electric and electronic partsand components

From June 30, 1995 to
expiration of respective
patents

License under patents
regarding information
processing systems
Qualcomm Incorporated

United States

License under patents
regarding cellular phones
using CDMA technology

From August 31, 1996 to
expiration of respective
patents

Solar Physics Corporation

United States

License under patents
regarding amorphous silicon
drums and devices using suchdrums

From February 5, 1997 to
expiration of respective
patents

Qinetiq Limited

UnitedKingdom

License under patents
regarding liquid crystal
panelsFrom April 1, 1997 to
expiration of respective
patents

Johnson Marthey
Semiconductor Packages, Inc.

United States

License regarding
semiconductor packages andprinted circuit boards

From June 11, 1997 toJune 11, 2007

Philips Electronics N.V.

Netherlands

License under patents
regarding global system
mobile communication(“GSM”) cellular handsets

From February 15, 1999 to
February 11, 2009

NEC CorporationJapan

License under patents
regarding PDC handsets andPHS handsets

From July 1, 2000 to
September 14, 2010

Advanced Ceramics Research
Incorporated

United States

License to use technology
and patents regarding ceramic
fiber

From September 15, 2000 to
expiration of respective
patents

Ricoh Company, LTDJapan

License under patents
regarding electronic photo
printer

From June 1, 2001 to
May 31, 2006

Lucent Technologies GRL
Corporation

United States

License under patents
regarding wireless subscriber
equipment

From August 28, 2001 to
December 31, 2004

Motorola Incorporated

United States

License under patents
regarding cellular phone

From January 1, 2002 to
December 31, 2003

Eastman Kodak Company

United States

License under patents
regarding digital camera
technologies

From April 1, 2002 to
March 31, 201220

Counterparty

Country

Contents

PeriodForgent Networks, Inc./
Compression Labs, Inc.

UnitedStatesLicense under patents
regarding digital camera
technologies

From October 30, 2002 to
expiration of respective
patents

Toshiba CorporationJapan

License under patents
regarding aluminum nitride

From January 1, 2003 to
December 31, 2007

Seiko Epson CorporationJapan

License under patents
regarding LCD panel modules(Super twisted nematic“STN”)

From January 1, 2003 to
December 31, 2007

Koninklijke Philips Electronics
N.V.

Netherlands

License under patents
regarding PDC handsets andPHS handsets

From March 19, 2003 to
expiration of respective
patents

As our license with Motorola Incorporated is set to expire at the end of December 2003, we intend tonegotiate to enter into another new license agreement, which will cover Motorola’s technologies currently usedby us and some new technologies.
Competitive Position(a)Fine Ceramics Group

Products in this group are highly specialized to the needs of our customers, who are primarily secondary
manufactures who incorporate our products in to their own Therefore, our competitive position is largely
dependent on maintaining close contacts with, and being first to meet the needs of, secondary manufacturers. We
compete with different ceramic manufacturers depending on the products. In the semiconductor parts business,
our goal is to further strengthen our competitive position by becoming a “Total Package Supplier” in the world
market. We are the world market leader by sales volume in the manufacture of ceramic IC packages. To offer
opportunities for higher-added-value products, we are strengthening our R&D activities to develop new
applications for telecommunication areas such as wireless and optical communications. SMD packages are one
such example. We believe that we can maintain our market leadership in the area of ceramic packages and satisfy
customer needs by applying our technological and managerial expertise.
In the plastic package field, we are a relative late comer and we compete with plastic electronic device
manufacturers. To strengthen our technology expertise, we acquired the Surface Laminar Circuitry business of
IBM Japan in September 2003.
(b)

Electronic Device GroupWe entered this area of production as we increased our capability to produce technologically advanced
products for the Fine Ceramics Group, so we are a relative late comer in the field. The products in this group arelargely standardized, so competition is based on price, quality and delivery time. Kyocera is one of the major
manufacturers by sales volume of capacitors and timing devices. Most of our competitors in this group are
Japanese manufacturers, however, AVX, a U.S. subsidiary, competes against overseas manufacturers in
producing tantalum capacitors.
Our thin-film products, such as thermal printheads or amorphous silicon drums, are market leading products
in applications for printer or copier overwhelmingly.
(c)Equipment GroupIn the Japanese market, our main competitors for cellular handsets are Japanese manufacturers, thoughforeign manufactures are increasingly penetrating the Japanese handset market. In the U.S. cellular handset
21

market, Kyocera competes with U.S., European and Asian manufacturers, and we are a leading producer ofCDMA cellular handsets by units sold. In terms of PHS-related equipment, our main competitors are Japanesemanufacturers. We also compete with Japanese and U.S. manufacturers producing information equipment suchas copiers and printers on a global basis. In the optical instruments field, Japanese manufacturers are our maincompetitors.
Government Regulation
There are some governmental regulations specifically applicable to Kyocera’s industry, however, they
currently do not have material effects on Kyocera’s business.
C. Organizational Structure
We have 161 subsidiaries and affiliates as of March 31, 2003. Our management structure is based on ourgroup segments structure. Therefore, the management of each segment is conducted uniformly regardless ofwhether a group’s operations are conducted by us as the parent company or by one of our subsidiaries.
The following table sets forth information, as of March 31, 2003, with respect to our significant subsidiaries,
organized by group.
Country ofIncorporation

Percentage
held by
KyoceraJapan

100.00%

Sale of solar energy products

Kyocera America, Inc.

United States

100.00%

Manufacture and sale of semiconductor
parts

Kyocera Industrial Ceramics Corporation

United States

100.00%

Manufacture and sale of fine ceramicrelated products and sale of electronic
devices

Kyocera Solar, Inc.

United States

100.00%

Manufacture and sale of solar energy
products

Kyocera Tycom Corporation

United States

100.00%

Manufacture and sale of micro drills

Kyocera Mexicana, S.A. de C.V.

Mexico100.00%Assembly and plating services

Kyocera Asia Pacific Pte. Ltd.

Singapore

100.00%

Sale of fine ceramic-related products
and electronic devices

Shanghai Kyocera Electronics Co., Ltd.

China

90.00%

Manufacture and sale of fine ceramicrelated products and electronic devices

Kyocera Precision Tools Korea Co., Ltd.

Korea

90.00%

Manufacture and sale of cutting tools

Kyocera Fineceramics GmbHGermany

100.00%

Sale of fine ceramic-related products
and electronic devices

Japan

100.00%

Manufacture and sale of electronic
devicesName

Main Business

Fine Ceramics Group
Kyocera Solar Corporation

Electronic Device Group
Kyocera Elco Corporation

22

Country ofIncorporation

Percentage
held by
KyoceraUnited States

70.10%

Manufacture and sale of electronic
devicesIndonesia

100.00%

Manufacture and sale of electronic
devices

Kyocera Elco Korea Co., Ltd.

Korea

100.00%

Manufacture and sale of electronic
devices

Kyocera Elco Hong Kong Ltd.

Hong Kong

100.00%

Sale of electronic devices

Kyocera Mita CorporationJapan

100.00%

Manufacture and sale of informationequipment

Kyocera Mita Japan CorporationJapan

100.00%

Sale of information equipment

Kyocera Optec Co., Ltd.

Japan

100.00%

Manufacture and sale of optical
instruments

Kyocera Wireless Corp.

United States

100.00%

Manufacture and sale oftelecommunications equipment

Kyocera Mita America, Inc.

United States

100.00%

Sale of information equipment

Kyocera Mita Industrial Co., (H.K.) Ltd.

Hong Kong

100.00%

Manufacture of informationequipment

China

90.00%

Manufacture and sale of informationequipment

Kyocera Mita Europe B.V.

Netherlands

100.00%

Sale of information equipment

Kyocera Mita Deutschland GmbHGermany

100.00%

Sale of information equipment

Kyocera Mita (U.K.) Ltd.

United Kingdom

100.00%

Sale of information equipment

Kyocera Mita France S.A.

France100.00%

Sale of information equipment

Kyocera Mita Italia S.P.A.

Italy

100.00%

Sale of information equipment

Australia

100.00%

Sale of information equipment

United States

100.00%

Sale of optical instruments

Kyocera Yashica do Brasil Indústria eComércio Ltda.

Brazil100.00%

Manufacture and sale of optical
instruments

Kyocera Zhenhua Communication
Equipment Co., Ltd.

China

70.00%

Manufacture and sale oftelecommunications equipment

Yashica Hong Kong, Co., Ltd.

Hong Kong

100.00%Intermediary services as to sale of
optical instruments

Universal Optical Industries, Ltd.

Hong Kong

100.00%

Manufacture and sale of optical
instruments

China

90.00%

Manufacture and sale of optical
instruments

Name

AVX Corporation
P.T. Kyocera Indonesia

Main Business

Equipment Group

Kyocera Mita Office Equipment(Dongguan) Co., Ltd.

Kyocera Mita Australia PTY. LTD.
Kyocera Optics, Inc.

Dongguan Shilong Kyocera Optics Co.,
Ltd.

23

Name

Country ofIncorporation

Percentage
held by
KyoceraMain BusinessYashica Kyocera GmbHGermany

100.00%

Sale of optical instruments

Kyocera Leasing Co., Ltd.

Japan

100.00%

Various leasing services, property
management and financing services

Kyocera Communication Systems Co., Ltd.

Japan

76.30%Development and sale of software

Kyocera Realty Development Co., Ltd.

Japan

100.00%Real estate services

Hotel Kyocera Co., Ltd.

Japan

100.00%Hotel management and operations

Kyocera International Co., Ltd.

Japan

100.00%Insurance and travel agency

Kyocera Chemical CorporationJapan

100.00%

Manufacture and sale of electronicmaterials

Hong Kong

100.00%Real estate leasing

China

100.00%Real estate leasing

Others

Piazza Investment Co., Ltd.
Shanghai Kyocera Realty Development
Co., Ltd.

In addition to the above consolidated subsidiaries, Kyocera has 99 other consolidated subsidiaries as ofMarch 31, 2003, including Kyocera International Inc., a 100% owned U.S. subsidiary which is a holding
company established to own Kyocera’s subsidiaries in North America. Kyocera also has interests in threesubsidiaries accounted for by the equity method and 16 affiliates accounted for by the equity method as ofMarch 31, 2003.
AVX, in our Electronic Device Group, is one of our most significant subsidiaries. Most of the electronic
devices we produce for overseas sales are distributed by AVX by utilizing AVX’s wide range of marketing
channels. In addition, we market passive components produced by AVX to the Japanese market. With respect tomanufacturing and research and development, we utilize AVX’s manufacturing process for ceramic capacitors to
improve productivity and to enhance our competitiveness. AVX also introduced materials technologies from us
into its ceramic capacitor production. We have been seeking better ways to cooperate in expanding our electronic
device businesses. Currently, seven of our directors are members of AVX’s board of directors. AVX’s chief
executive officer is one of our directors. Within our Electronic Device Group, we have a close relationship with
AVX in marketing, manufacturing, and research and development, and we are seeking and pursuing synergies tobe a leading passive component manufacturer.
AVX posted a net loss of $12,438 thousand in fiscal 2003, compared to net loss of $7,232 thousand in fiscal
2002. As a result of this net loss, our results of operations and financial condition for fiscal 2003 were adversely
affected. See Item 5.A of this Form 20-F.
In May 2003 we established a 90%-owned subsidiary, Kyocera (Tjianjin) Solar Energy Co., Ltd., for the
production and sales of solar modules in China. See Item 4.B for a discussion of this subsidiary.
In August 2003, Kyocera made Kinseki, Limited, a major producer of artificial crystal-related products inJapan, a wholly-owned subsidiary through a stock swap.
In September 2003, Kyocera completed the transfer of IBM Japan’s SLC business from IBM Japan to a
newly-established wholly-owned subsidiary of Kyocera. This business included manufacturing facilities in Yasu,
Japan.
24

D. Property, Plants and Equipment
Our manufacturing operations are conducted in Japan, the United States, Mexico, El Salvador, Brazil, theUnited Kingdom, Germany, France, the Czech Republic, Singapore, South Korea, Hong Kong, China, Taiwan,
Malaysia, Indonesia and Israel. As of March 31, 2003, we had property, plants and equipment with a net bookvalue of ¥249,505 ($2,114). During the five years ended March 31, 2003, we invested ¥324,293 ($2,748) for
additions to property, plants and equipment. Our property, plants and equipment are not subject to any material
encumbrances or environmental issues.
The following table sets forth information, as of March 31, 2003, with respect to our manufacturing
facilities with floor space of more than 100,000 square feet.
Name of Plant

Location

StatusFloor Space(thousands ofsquare feet)

Lease
Expires

Principal Products
Manufactured

Japan
Hokkaido Kitami Plant

Kitami, Hokkaido

Owned

294

Fine ceramic parts,
Communications
equipment, Electronic
components

Fukushima Tanakura Plant

Tanakura, Fukushima

Owned

124

Communications
equipment

Koriyama Plant

Koriyama, Fukushima

Owned

152

Electronic parts andmaterials

Nagano Okaya Plant

Okaya, Nagano

Owned

400

Optical instruments,
Electronic components

Kawasaki Plant

Kawasaki, Kanagawa

Owned

172

Electronic parts andmaterials

Kawaguchi Plant

Kawaguchi, Saitama

Owned

497

Electronic parts andmaterials

Ise PlantIse, Mie

Owned

102

Solar cells

Tamaki Plant

Tamaki, Mie

Owned

175

Printers and Copiers

Shiga Plant

Gamo and Yokaichi,
Shiga

Owned

1,718

Osaka Hirakata Plant

Hirakata, Osaka

Owned

428

Printers and Copiers

Kagoshima Sendai Plant

Sendai, Kagoshima

Owned

1,500

Semiconductor parts,
Electronic components,
Fine ceramic parts

Kagoshima Kokubu Plant

Kokubu, Kagoshima

Owned

1,941

Semiconductor parts,
Electronic components,
Fine ceramic parts

Kagoshima Hayato Plant

Hayato, Kagoshima

Owned

232

Electronic components

25

Fine ceramic parts,
Semiconductor parts,
Electronic components,
Solar heat accumulating
system, Solar cells

Name of Plant

Lease
Expires

Principal Products
Manufactured

Location

StatusFloor Space(thousands ofsquare feet)

Balboa Plant

San Diego, California

Owned

288

Campus Plant

San Diego, California

Leased424

Mountain Home Plant

Mountain Home, North
Carolina

Owned

137

Fine ceramic parts

Myrtle Plant

Myrtle Beach, South
Carolina

Owned

559

Electronic components

Olean Plant

Olean, New York

Owned

110

Electronic components

Raleigh Plant

Raleigh, North Carolina

Owned

206

Electronic components

South Carolina Plant

Fountain Inn, Carolina

Owned

350

Printers and Copiers

Tijuana Plant

Tijuana

Owned

120

Semiconductor parts,
Electronic components

Chihuahua Plant

Chihuahua

Owned

124

Electronic components

San Salvador

Owned

233

Electronic components

Paignton Plant

Paignton, England

Owned

128

Electronic components

Coleraine Plant

Coleraine, Northern
Ireland

Owned

185

Electronic components

Betzdorf

Owned

102

Electronic components

Beaune Plant

BeauneLeased228

2007

Electronic components

Saint-Apollinaire Plant

Saint-Apollinaire

Leased321

2007

Electronic components

Lanskroun Plant

Lanskroun

Leased232

2017

Electronic components

Lanskroun Plant

Lanskroun

Owned

230

Electronic components

Uherske Hradiste Plant

Uherske Hradiste

Owned

224

Electronic components

Hong Kong

Owned

371

Printers and Copiers

United States
Semiconductor parts
2005

Communications
equipment

MexicoEl Salvador
San Salvador Plant
United Kingdom

Germany
Betzdorf Plant
FranceCzech RepublicHong Kong
Hong Kong Plant

26

Name of Plant

Location

StatusFloor Space(thousands ofsquare feet)

Lease
Expires

Principal Products
Manufactured

China
Shilong Plant

Dongguan, Canton

Owned

954

Printers and Copiers

Shilong Plant

Dongguan, Canton

Leased470

2004

Tools, Optical
instruments, Electronic
components

Shanghai Pudong Plant

ShanghaiLeased

1,026

2023

Fine ceramic parts,
Semiconductor parts
Electronic components

PenangOwned

149

Electronic components

Singapore

Owned

128

Electronic parts andmaterials

Jerusalem Plant

Leased100

Malaysia
Penang Plant
Singapore
Singapore Plant

IsraelJerusalem Plant

2004

Electronic components

As part of our acquisition of Kinseki in August 2003, we acquired 4 plants with floor space of more than
100,000 square feet, as set forth in the following table.
Name of Plant

Location

Lease
Expires

Principal Products
Manufactured

StatusFloor Space(thousands ofsquare feet)

Higashine, Yamataga

Owned

379

Electronic parts

Thailand

Owned

264

Electronic parts

Philippines

Leased135

Japan
Yamagata Higashine Plant
ThailandThailand Plant
Philippines
Philippines Plant

2046

Electronic parts

As part of our acquisition of the SLC business of IBM Japan Ltd. in September 2003, we acquired the leaseof the Yasu Site plant in Shiga, Japan, which has 137 thousands square feet of floor space. And this lease will
expire in 2008.
Item 5.

Operating and Financial Review and Prospects

A. Results of Operations
You should read the discussion of our financial condition and results of operations together with ourconsolidated financial statements and information included in this annual report. This discussion and analysis
contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may
differ materially from those anticipated in these forward-looking statements as a result of certain factors,
including, but not limited to, those set forth under Item 3.D and elsewhere in this Form 20-F.
27

Overview
2001% of sales
2002
2003

% change year to year
2001/2002 2002/2003

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69.1

100.0
76.9

100.0
74.4

(19.5)(10.4)

3.4
0.1

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . .

30.9
14.8

23.1
18.1

25.6
17.8

(39.7)
(1.2)

14.3
1.2

Profit from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.1

5.0

7.8

(75.1)

61.7

Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transaction gains (losses), net . . . . . . . . . . . . . . . .
Equity in earnings of affiliates and unconsolidated subsidiaries . . .
Loss on devaluation of investment in an affiliate . . . . . . . . . . . . . . .
Losses on devaluation of investment securities . . . . . . . . . . . . . . . .
Gain on stock issuance of an affiliate . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.6
(0.2)
0.7
0.2
—
(0.0)
13.6
0.1

0.7
(0.2)
0.5
0.2
—
(0.6)
—
(0.2)

0.5
(0.1)
(0.5)
0.3
(0.5)
(0.3)
—
(0.1)

(9.6)
—
(44.8)(29.4)————(28.9)
—
—
98.3
—
—
—
—

15.0

0.4

(0.7)

(98.0)—

Income before income taxes, minority interests andcumulative effect of change in accounting principle . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31.1
12.4

5.4
2.1

7.1
3.1

(86.2)(86.7)

37.3
53.8

Income before minority interests and cumulative effect ofchange in accounting principle . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18.7
(1.6)

3.3
(0.0)

4.0
0.1

(85.8)
—

26.9
—

17.1

3.3

4.1

(84.6)

28.5

—

(0.2)

(0.3)

—

—

17.1

3.1

3.8

(85.4)

28.8

Income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle-net oftaxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net Sales
In fiscal 2003, net sales of Kyocera increased by 3.4% compared with fiscal 2002. This increase in sales wasdue mainly to increased sales in our Equipment Business, particularly in telecommunications equipment andinformation equipment. Despite reduced component inventory adjustments around the world and resurgence indemand in the mobile handsets market, continuing price erosion for components has led to reduced sales inKyocera’s Components Business, which consists of the Fine Ceramics Group and Electronic Device Group.
Domestic sales, which accounted for 39.6% of total sales, increased by 3.6% compared with fiscal 2002.
This was due primarily to growing sales in CDMA mobile handsets with a built-in camera and fine ceramic partsfor LCD projectors. Sales in overseas markets, which accounted for 60.4% of total sales, increased by 3.3%
compared with fiscal 2002, due mainly to strong demand for information equipment, such as copiers and printers,
and for telecommunications equipment, in particular, PHS-related products. The yen’s appreciation against the
U.S. dollar and other currencies produced a negative impact of approximately ¥1,800 ($15) on net sales
compared with fiscal 2002. Sales in overseas markets are denominated primarily in the U.S. dollar and, to alesser extent, in Euro and the yen. Overseas sales consist of sales of exports from Japan and sales of locallymanufactured products. In fiscal 2003, although the yen appreciated against the U.S. dollar resulting in a negative
impact on our consolidated net sale, the yen depreciated against Euro resulting in a positive impact on our28

consolidated net sales. As a result, the net impact of foreign currency fluctuations was a relatively minor impact
of approximately ¥1,800 ($15) on Kyocera’ consolidated net sales in total. If the foreign exchange rates
prevailing in each quarter of fiscal 2002 were applied to foreign currency-denominated sales in the corresponding
quarter in fiscal 2003, the sum of the quarterly consolidated sales for fiscal 2003 so calculated would have been
greater than the actual annual consolidated sales for fiscal 2002 by approximately 3.6%, compared with theincrease of 3.4% between the actually recorded annual consolidated sales for these fiscal years. In fiscal 2002,
Kyocera’s net sales decreased by 19.5% compared with fiscal 2001. This decline in sales was due mainly todecreased sales in our Components Businesses caused by the rapid global downturn in the information
technology (IT) industry and the resulting depressed demand for Kyocera’s products, especially components formobile handsets, personal computer (PC)-related equipment and optical communications devices. In addition, thelower demand affecting our Components Businesses and inventory adjustments by electronics manufacturescaused significant price erosion in components markets.
Domestic sales, which accounted for 39.6% of total sales, decreased by 16.8% compared with fiscal 2001.
This was due primarily to tough price competition and lower demand in components for mobile handsets, PCrelated equipment and optical communications devices. Domestic sales in the Equipment Group, including salesof information equipment and optical instruments, expanded steadily. Sales in overseas markets, which
accounted for 60.5% of total sales, decreased by 21.2% compared with fiscal 2001, due mainly to weak demandfor components combined with price erosion, although the yen’s depreciation in fiscal 2002 against the U.S.
dollar and other currencies produced a positive impact of approximately ¥71,600. The yen’s depreciation had aparticularly positive impact on sales for the Equipment Group. In fiscal 2002, the yen depreciated against the
U.S. dollar and Euro, which had a positive impact on Kyocera’s sales. If the foreign exchange rates prevailing ineach quarter of fiscal 2001 were applied to foreign currency-denominated sales in the corresponding quarter infiscal 2002, the sum of the quarterly consolidated sales for fiscal 2002 would have been lower than the actual
annual consolidated sales for fiscal 2001 by approximately 25%, compared with the decrease of 19.5% between
the actually recorded annual consolidated sales for these fiscal years.
The Company’s exports from Japan, comprising its shipping to overseas subsidiaries for resale, included
sales denominated in U.S. dollar of $586 and $641 in fiscal 2003 and fiscal 2002, respectively, and sales
denominated in Euro of 112 and 325 in fiscal 2003 and 2002, respectively.
Kyocera’s production operations overseas are situated in Asia, Europe, North America and South America.
Sales of products manufactured overseas accounted for 32.5% and 34.2% of Kyocera’s sales in fiscal 2003 and2002, respectively. These consisted mainly of sales by AVX and Kyocera Wireless Corp. and its consolidated
subsidiaries (KWC). AVX contributed ¥100,686 ($853) to sales in fiscal 2003 and ¥114,314 in fiscal 2002, andKWC contributed ¥131,412 ($1,114) in fiscal 2003 and ¥135,626 in fiscal 2002. If the foreign exchange rates
prevailing in fiscal 2002 were applied to sales of products manufactured overseas in fiscal 2003, it would haveaccounted for approximately 33% of Kyocera’s net sales.
In fiscal 2003, Kyocera expanded its production in China. Kyocera seeks to further expand production
volume of components, information equipment and telecommunications equipment in China. Additionally, at the
beginning of fiscal 2004, Kyocera established a new sales subsidiary in China, which will deal in Kyocera’s
products manufactured in China as well as its products imported into China.
A detailed analysis and discussion about Kyocera’s net sales by operating segments appear in “Segment
Operations” in this Item 5 A.
Cost of sales and gross profit
Gross profit increased by 14.3% in fiscal 2003 to ¥273,512 ($2,318). Gross profit ratio increased by 2.5
points from 23.1% to 25.6%. This is mainly because of an increase in sales in our Equipment Group, in addition
to a large decrease in restructuring charges related to U.S. subsidiaries compared to those recorded in fiscal 2002.
29

Gross profit declined considerably by 39.7% in fiscal 2002 to ¥239,373. This was due to reduced demandfor products of our Fine Ceramics Group and Electronics Device Group and to sharp falls in unit prices
accompanying a rapid global downturn in IT-related markets. In addition, cost of sales included a restructuring
charge of approximately ¥7,900 to cover costs of inventory write-downs at our U.S. subsidiaries.
SG&A expenses and profit from operations
Selling, general and administrative (SG&A) expenses in fiscal 2003 increased by 1.2% to ¥190,124($1,611). Although the restructuring charge included in SG&A expenses in fiscal 2002 in relation to our U.S.
subsidiaries decreased, SG&A expenses increased in fiscal 2003 principally as a result of Kyocera Chemical
Corporation and its consolidated subsidiaries (KCC) becoming consolidated subsidiaries and an increase in R&D
expenses for new products at Kyocera Mita Corporation and its consolidated subsidiaries (KMC). As apercentage of net sales, SG&A expenses fell by 0.3 points, from 18.1% to 17.8%. Although SG&A expenses infiscal 2003 increased, a significant increase in gross profit of 14.3% compared with fiscal 2002 resulted in a
substantial rise in profit from operations, which rose by 61.7% to ¥83,388 ($707). SG&A expenses declined by
1.2% in fiscal 2002 to ¥187,812. Although a restructuring charge related to our U.S. subsidiaries ofapproximately ¥3,800 to cover the costs of personnel reductions was included, SG&A expenses in fiscal 2002
decreased mainly as a result of a decrease in direct expenses for sales as a consequence of the decrease in net
sales. As a percentage of net sales, SG&A expenses rose by 3.3 points, from 14.8% to 18.1%. In fiscal 2002, theproportional decrease in gross profit was higher than the decrease in SG&A expenses. Consequently, profit fromoperations decreased by 75.1%, compared with fiscal 2001 to ¥51,561.
Interest and dividend income
Interest and dividend income in fiscal 2003 decreased by 28.9% to ¥5,194 ($44) compared with fiscal 2002.
This was due principally to a decrease in the Company’s interest income received from bank deposits
denominated in the U.S. dollar in a comparatively low interest rate environment in the United States recently.
This decrease in interest income also reflects the Company’s fund management policy to minimize financial risks
by investing in lower-risk assets that also provide lesser interest income. Dividend income in fiscal 2003 was flatcompared with fiscal 2002 because the Company did not materially purchase or sell securities. Interest anddividend income in fiscal 2002 decreased by 9.6% compared with fiscal 2001. This was due mainly to lower
interest income received by the Company as a result of lower interest rates in Japan.
Interest expense
Interest expense decreased substantially by 46.1% in fiscal 2003, principally as a result of a decrease ininterest bearing debts from the repayment by Kyocera Mita Corporation in February 2002 of all of the liabilities
deferred pursuant to its rehabilitation plan earlier than had been set forth in its rehabilitation plan. In addition,
KMC and Kyocera International Inc. and its consolidated subsidiaries (KII) reduced their borrowings in fiscal
2003.
In fiscal 2002, interest expense increased by 24.1% compared with fiscal 2001, mainly because the yen’s
depreciation against the U.S. dollar affected the amounts of interest payments of our subsidiaries in the UnitedStates when translated into yen for purpose of our financial statements.
Foreign currency translation
The foreign exchange rate of the yen against the U.S. dollar appreciated sharply in the first quarter of fiscal
2003 from the previous depreciatory trend in fiscal 2002. As a result, the average yen-dollar exchange rate was
2.4% lower than in fiscal 2002. Against the Euro, the yen depreciated substantially in the fourth quarter of fiscal
2003 resulting in depreciation of approximately 9.0% during fiscal 2003. Foreign currency transaction losses, net
was ¥5,405 ($46), principally as a result of the yen being worth 9.8% more against the U.S. dollar at March 31,
2003 compared with at March 31, 2002. This resulted in losses arising from the translation of cash deposits and30

trade receivables denominated in foreign currencies. The yen depreciated against both the U.S. dollar and theEuro during fiscal 2002, falling approximately 12.6% and 11.0% in value, respectively, against these currencies
over the year as a whole. As stated previously, the resulting foreign currency translation gains mainly reflected
Kyocera’s cash deposits and receivables denominated in foreign currencies. Kyocera typically enters into
forward exchange contracts to minimize currency exchange risks on foreign currency denominated receivables
and payables, usually in small amounts. It has no significant unhedged monetary assets, liabilities or firm
contract-related commitments denominated in foreign currencies other than restricted cash, certain time deposits
and the functional currencies of Kyocera’s overseas operations. Kyocera confines its use of foreign currency
derivative financial instruments to the hedging of its foreign exchange exposures, and does not utilize derivativetransactions for trading purposes.
Gains and losses from investments
Kyocera’s equity in earnings of affiliates and unconsolidated subsidiaries in fiscal 2003 increased by 98.3%,
to ¥3,092 ($26) due principally to a decrease in a loss of Kinseki, Limited (Kinseki). An increase in profit of SK
TELETECH CO., LTD. also positively affected equity in earnings. In December 2002, the Company acquired
additional stakes in Kinseki, thereby increasing its stake in Kinseki from 27.95% to 28.09%. The Company madeKinseki a wholly-owned subsidiary through a stock swap on August 1, 2003. Detailed information is described in
Note 23 to our Consolidated Financial Statements included in this form 20-F. Equity in earnings of affiliates andunconsolidated subsidiaries declined 29.4% in fiscal 2002. This decline was due principally to discontinuance ofthe equity method for its investment in common stock of KDDI from the second half of fiscal 2001 and a loss ofKinseki. In fiscal 2003, Kyocera recognized losses on devaluation of investment securities amounting to ¥2,883($24), which was attributable mainly to a prolonged decline in the market value of Japanese bank shares held by
the Company. Kyocera also recognized a loss on devaluation of its investment in Kinseki amounting to ¥5,159($44), due to a substantial fall in its market value. In fiscal 2002, losses recognized on devaluation of investment
securities were ¥5,771, which were also attributable mainly to the sharp decline in the market value of Japanesebank shares held by the Company.
Taxes
Kyocera’s effective tax rate of 43.1% in fiscal 2003 was higher than that of 38.5% in fiscal 2002. This wasdue mainly to a decrease in income of foreign subsidiaries taxed at lower rates than the Japanese statutory tax
rate of 42.0% and recognition of a loss on devaluation of an investment in an affiliate, which was considered apermanent difference for the purpose of tax calculations. Kyocera’s effective tax rate of 38.5% in fiscal 2002 waslower than that of 40.1% in fiscal 2001. This was due mainly to an increase in the proportion of equity inearnings of affiliates and unconsolidated subsidiaries to income before income taxes in fiscal 2002 comparedwith fiscal 2001.
Minority interests
Minority interests were principally related to AVX, which had an approximately 30% minority ownershipinterest in fiscal 2003. Lower earnings at AVX resulted in a gain in minority interests in fiscal 2003 from a small
loss in fiscal 2002.
Cumulative effect of change in accounting principle
On April 1, 2002, Kyocera adopted the Statement of Financial Accounting Standards Board (SFAS) No.
141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets.” In the first half of fiscal
2003, Kyocera completed an impairment review of its goodwill, which indicated that there was an impairment
loss on goodwill related to the acquisition of Kyocera Tycom Corporation and its consolidated subsidiaries(KTC), which manufactures and supplies micro drills for the IT industry, from the initial application of thesestatements. The impairment loss of ¥3,175 ($27) was recorded as a cumulative effect of change in accounting
31

principle in accordance with the provisions of SFAS No.142. Kyocera also wrote off ¥919 ($8) of unamortizeddeferred credit related to an excess over cost arising from an investment in Taito Corporation that was accounted
for by the equity method as a cumulative effect of change in accounting principle in accordance with theprovisions of SFAS No.141. On April 1, 2001, Kyocera adopted SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended by SFAS No. 138, “Accounting for Certain Derivative
Instruments and Certain Hedging Activities -an Amendment of SFAS No. 133.” In accordance with the transition
provisions of SFAS No. 133, Kyocera recorded a one-time, non-cash unrealized loss of ¥106, net of taxes, inaccumulated other comprehensive income to recognize derivatives that are designated as cash flow hedges andqualify for hedge accounting. Kyocera also recorded a one-time, non-cash realized loss of ¥1,838, net of taxes, inthe consolidated statement of income as a cumulative effect of change in accounting principle to record thosederivatives that are designated as cash flow hedges but not qualified for hedge accounting (loss of ¥1,518) andthose derivatives that are designated as cash flow hedges but for which hedge accounting was not adopted (lossof ¥320).
Segment Operations
Operating segments
The following table shows a breakdown of our total consolidated net sales and operating profit duirng thelast three fiscal years for our four operating segments: Fine Ceramics Group, Electronic Device Group,
Equipment Group and Others.
2001

Yen and U.S. dollars in millions
2002
2003

2003

Segment net sales :Fine Ceramics Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic Device Group . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . .

¥ 363,026 ¥392,700
467,362
79,790(17,825)

252,879 ¥
234,938
478,293
86,116(17,652)

238,867 $2,024
227,962
1,932
529,784
4,490
86,214731(13,057)(111)¥1,285,053¥1,034,574¥1,069,770$9,066¥¥¥

18,797
11,81640,020
7,244

$ 159
100
339
62

Segment operating profit :Fine Ceramics Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic Device Group . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88,771
126,455
28,318
6,839

20,137
4,372
24,413
7,438

250,383

56,36077,877660

Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates and unconsolidated
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on stock issuance of an affiliate . . . . . . . . . . . . . . . .
Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . .

(25,243)(2,508)(5,382)

(46)

2,209
174,076(1,203)

1,559
—
(13)

3,092
—
450

26
—
4

Income before income taxes . . . . . . . . . . . . . . . . . . . .

¥ 400,222

76,037$ 644¥

55,398¥Commencing in fiscal 2003, R&D-related expenses of the Company associated with fundamental
technological research, previously included within “Others” have been allocated to the respective operating
segments to allow management to better assess R&D expenditures on a segment -by-segment basis. Accordingly,
Kyocera has also restated previously published operating profit of such operating segments for fiscal 2002 and2001, respectively.
32

Fine Ceramics Group
Sales for this segment in fiscal 2003 decreased by 5.5% compared with fiscal 2002. Decreased revenues
from optical communications components, such as parts for fiber-optic connectors and packages for opticalcommunications devices, were offset by rising sales of parts for semiconductor and liquid crystal display (LCD)
fabrication equipment, sapphire substrates for LCD projectors, ceramic packages for image sensors and SMD
packages for mobile phones, as well as solar energy systems. Operating profit for this segment in fiscal 2003
dropped by 6.7% from fiscal 2002, due mainly to a decline in sales of components for the opticalcommunications market.
Sales for this segment in fiscal 2002 decreased by 30.3% due mainly to depressed global demand for mobile
handsets, PC-related equipment and optical fiber communications devices, together with significant falls incomponents prices. Operating profit for this segment dropped by 77.3%, and profitability declined by 16.5
points, from 24.5% in fiscal 2001 to 8.0% in fiscal 2002. This was mainly attributable to lower sales volumes andprice erosion.
Electronic Device Group
Sales for this segment in fiscal 2003 fell by 3.0% compared with fiscal 2002, due mainly to continued
severe price erosion with respect to general passive components. A recovery in demand for mobile phonecomponents, including ceramic capacitors and timing devices such as TCXOs, after handset manufactures hadlargely eliminated excess components inventories, led to an increase in shipping volume compared with fiscal
2002, which somewhat compensated for lower prices. Operating profit for this segment improved significantly
by 170.3% from fiscal 2002 due principally to improved productivity through expanding production volume in
China and a decrease in one-off expenses associated with structural reforms at AVX, that were recorded in fiscal
2002. The structural reforms at AVX included the integration of production bases and personnel reductions
coupled with increased efficiency in its production operations in the United States. During fiscal 2004, we areconsidering several strategic measures to improve future profitability. These measures may result in one-time
expenses, including those relating to the reorganization of production bases and start-up cost from thecommencement of micro device businesses such as production of SAW filters, decoupling devices and LED
chips in Japan.
Sales for this segment in fiscal 2002 dropped by 40.2%, due principally to a decrease in demand forcomponents for mobile handsets and PC-related equipment. Global demand for ceramic capacitors, tantalum
capacitors and timing devices, such as TCXOs and VCOs, was particularly weak. Price competition also
intensified as electronics equipment manufacturers undertook inventory adjustments. Segment operating profit
declined 96.5% compared with fiscal 2001, due mainly to decreased production volumes and steep falls in unit
prices of many components. The plunge in profit also reflected one-off charges related to restructuring initiatives
at AVX. These activities at AVX had a negative impact on this segment’s operating profit of approximately¥7,400 in fiscal 2002.
Equipment Group
Sales for this segment increased by 10.8% compared with fiscal 2002, due mainly to an increase in sales of
information equipment such as printers and copiers at KMC and telecommunications equipment such as CDMAhandsets and PHS-related products. Sales at KMC grew sharply by approximately 15% compared with fiscal
2002. This growth reflected the successful introduction of new copiers, which share common parts or engineswith page printers and the enhanced brand name of KMC. In telecommunications equipment business, a camera
equipped CDMA 1x phone in Japan and CDMA 1x phones in the U.S, as well as the introduction of CDMAhandsets to the Chinese market, contributed to an increase in sales. In addition, sales of PHS-related products
expanded strongly overseas, especially in China and Thailand. However, sales of optical instruments decreased,because an increase in sales of digital cameras was overwhelmed by shrinking of the still camera market.
33

Operating profit for this segment grew to 63.9% compared with fiscal 2002, due mainly to sales growth ininformation equipment and telecommunications equipment.
In fiscal 2002, sales increased by 2.3% compared with fiscal 2001, due mainly to an increase in sales ofprinters and copiers at KMC. Sales of CDMA handsets also increased steadily both in the U.S. and Japan due tothe successful introduction of new models. Operating profit for this segment fell 13.8% from fiscal 2001, due to adecrease in profit contribution from telecommunications equipment as a result of a one-off charge ofapproximately ¥3,700 to cover restructuring initiatives at KWC, including inventory write-downs and personnel
reductions. The yen’s depreciation against the U.S dollar also negatively affected operating profits at KWC.
Others
Revenues for this segment in fiscal 2003 were flat compared with fiscal 2002. Though eight months of salesof Kyocera Chemical Corporation amounting to ¥ 18,158 ($154), were added to this segment from August 2002,
finance revenue of Kyocera Leasing Co., Ltd. (KLC) and the telecommunications engineering services andinformation systems businesses at Kyocera Communication Systems Co., Ltd. (KCCS) each decreased.
Operating profit for this segment decreased by 2.6% compared with fiscal 2002, due principally to increased
sales at KCCS.
In fiscal 2002, segment revenues increased by 7.9% compared with fiscal 2001, due mainly to expanded
sales of real estate at KLC. Operating profit for this segment increased by 8.8% in fiscal 2002.
Corporate
Corporate losses in fiscal 2003 were ¥5,382 ($46), an increase of ¥2,874 ($24) compared with fiscal 2002.
In fiscal 2003, Kyocera recognized losses on devaluation of investment securities amounting to ¥2,883 ($24),
which was attributable mainly to a prolonged decline in the market value of Japanese bank shares held by theCompany, even after the recognition of large losses of ¥5,771 on investment securities in fiscal 2002. Kyocera
also recorded a loss on devaluation of its investment in Kinseki, which was accounted for by equity method in
fiscal 2003, amounting to ¥5,159 ($44), due to a substantial fall of its market value.
Corporate losses in fiscal 2002 decreased compared with fiscal 2001 due mainly to an increase in internal
revenue of the Company as a result of revision of the transaction rules between Corporate and operating
segments, although the Company recorded losses on devaluation of investment securities in consequence of thedownturn in the Japanese stock market.
Geographic segments
The following table shows a breakdown of our total consolidated net sales for each of the last three years,
distinguishing between domestic and overseas sales and, in respect of overseas sales, showing the geographicalareas in which such sales were made:2001

Years ended March 31,(Yen and U.S. dollars in millions)
2002
2003

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 490,923
United States . . . . . . . . . . . . . . . . . . . . . . .
348,109
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
217,456
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . .
163,487
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,078
Total . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,285,053¥ 408,561
289,517
148,349
141,493
46,654¥1,034,574¥ 423,190
264,755
178,384
144,293
59,148¥1,069,770

2003$3,586
2,244
1,512
1,223
501
$9,066In the above table, the amounts shown by geographical area reflect sales based on the location of ourcustomers.
34

In fiscal 2003, sales in Japan increased by 3.6% compared with fiscal 2002, due primarily to growing
demand for telecommunications equipment, in particular, mobile handsets and fine ceramic parts. Sales in the
United States decreased by 8.6%, due mainly to a decrease in sales of optical communications components suchas ceramic packages and optical fiber connector components. In Asia, sales increased by 20.2% compared withfiscal 2002. Products of our Electronic Device Group and telecommunications equipment such as CDMAhandsets and PHS-related products mainly contributed to expanded sales in this region. Sales in Europe increasedby 2.0%, due mainly to sales growth of information equipment including printers and copiers. In fiscal 2002,
sales in each region decreased compared with fiscal 2001, especially in Asia. Sales in Japan fell 16.8% due tosluggish demand for products of our Fine Ceramics Group and Electronic Device Group. Sales in the UnitedStates decreased by 16.8% due to weak demand for components used in optical communications networks, optoelectronic packages and other components supplied to the electronics industry. In Asia, lower sales ofcomponents for PC-related equipment contributed to a decline in sales of 31.8% compared with fiscal 2001.
Sales in Europe decreased by 13.5% compared with fiscal 2001, despite sales growth in information equipment,
due mainly to depressed demand for mobile phone components.
Critical Accounting Policies and Estimates
Kyocera’s consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires the use of
estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date offinancial statements and the reported amounts of revenues and expenses during the periods presented. Actual
results may differ from these estimates, judgments and assumptions. An accounting estimate in Kyocera’s
financial statements is a critical accounting estimate if it requires Kyocera to make assumptions about mattersthat are highly uncertain at the time the accounting estimate is made, and either different estimates that Kyocera
reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely
to occur from period to period, would have a material impact on the presentation of Kyocera’s financial
condition, changes in financial condition or results of operations. Kyocera has identified the following criticalaccounting policies with respect to its financial presentation.
Allowances for doubtful accounts
Kyocera maintains allowances for doubtful accounts related to both trade and finance receivables for
estimated losses resulting from customers’ inability to make timely payments, including interest on financereceivables. Kyocera’s estimates are based on various factors including the length of past due payments,
historical experience and current business environments. In circumstances where it is aware of a specificcustomer’s inability to meet its financial obligations, a specific allowance against these amounts is provided
considering the fair value of assets pledged by the customer as collateral. The amounts of allowances for
doubtful accounts will be affected if the financial condition of Kyocera’s customers worsens due to thedeterioration of economic conditions in Japan or in Kyocera’s major overseas markets. Moreover, a decline in
the fair value of assets pledged by Kyocera’s customers as collateral for Kyocera’s receivables will have amaterial effect on the amounts of allowances for doubtful accounts provided. The amounts of receivables andrelated allowance for doubtful accounts are charged off if the financial condition of Kyocera’s customer isassumed to be significantly deteriorated following a specific examination by management. A substantial
portion of allowances for doubtful accounts is recorded with respect to finance receivables of KLC, in our
Others segment, which provides credit financing services and commercial leasing services. Based on thefactors discussed above, we set for KLC estimated recovery percentages that are applied to the amounts ofreceivables to determine future cash flow. On a case-by-case basis, adjustments are made to the amounts ofallowances so determined in light of particular customers’ circumstances. We continuously monitor thecorrelation between the allowances so determined and the actual loss experienced, and make an appropriate
modification to the schedule of percentages for determining allowance amounts. At March 31, 2003, Kyocera
had ¥49,578 ($420) of allowances for doubtful accounts against ¥206,480 ($1,750) of finance receivables,
which comprise over 80% of Kyocera’s allowances for doubtful accounts.
35

Inventory valuation
Kyocera estimates the amount of write-downs required to properly value inventory. Write-downs areprovided for excess, slow-moving and obsolete inventory as well as valuation losses required to adjust recorded
cost to its market value. Kyocera generally considers all inventory aged over 12 months to be slow-moving or
obsolete. Kyocera also records inventory write-downs based on its projections of future demand, market
conditions and related management-led initiatives even though the age of corresponding inventory is shorter than
12 months. In fiscal 2003, as a result of continuous strict controls and adjustments on inventories, Kyocera
recognized inventory write-downs of approximately ¥6,966 ($59). The amounts of these inventory write-downs
by operating segments appear in Note 19 to our Consolidated Financial Statements included in this Form 20-F. A
substantial portion of these inventory write-downs was recorded with respect to components for opticalcommunications devices, mobile handsets and computer-related equipment. Inventories of mobile handsets,
information equipment and optical instruments were also written down. These products were subject to adecrease in demand and a decline in price, or became obsolete because of their short product lives. The majorityof Kyocera’s inventories are produced for the information technology industry. Each of these products generally
has a short a product life, and is susceptible to market demand and price fluctuations. Inventory write-downs
primarily affect our Fine Ceramics Group, Electronic Device Group and Equipment Group. If market conditions
and demand in the information technology industry are less favorable than Kyocera’s projections, additional
write-downs may be required. As management assumes that global market conditions will continue to be severe,
Kyocera may need to record some inventory write-downs for fiscal 2004 and possibly for subsequent fiscal
periods.
Impairment of securities and investments
Kyocera records impairment charges for debt and equity securities and investments in affiliates andunconsolidated subsidiaries accounted for by the equity method when it believes that the decline in value is otherthan temporary. Kyocera regularly reviews each security and investment for impairment based on the extent towhich the fair value is less than cost, the duration of the decline, the anticipated recoverability of fair value in the
future and the financial condition of the issuer. Poor operating results of the issuers of these securities, which
include Japanese banks, or adverse changes in the market may cause additional impairment losses in future
periods. Kyocera records impairment charges, if any, as Corporate losses. In fiscal 2003, Kyocera recognized
losses on devaluation of investment securities amounting to ¥2,883 ($24), which was attributable mainly to a
prolonged declines in the market value of Japanese bank shares held by the Company. Kyocera also recognized
loss on the devaluation of its investment in Kinseki, which was accounted for by equity method in fiscal 2003,
amounting to ¥5,159 ($44) due to a substantial fall in its market value.
Currently, the Company’s equity interest in KDDI is 13.5%. The price fluctuation of KDDI shares may
affect Kyocera’s financial condition. At March 31, 2003, the unrealized loss on KDDI shares held by theCompany was ¥48,598 ($412). Due to the 1.4% raise of the market price of KDDI shares per unit during fiscal
2003, the unrealized loss was ¥2,864 ($24) less than that at March 31, 2002, which was ¥51,462. Kyocera
determined a decline in its market value is temporary because operating results of KDDI grew steadily in fiscal
2003 and accordingly, the performance of KDDI shares may be considered in a rising trend. Subsequent toMarch 31, 2003, the market value of KDDI shares increased, and the unrealized loss was recovered in June.
Detailed information on the gross unrealized gain or loss appears in Note 4 to our Consolidated Financial
Statements included in this Form 20-F.
Impairment of long-lived assets
At least annually, although in some cases more often if events or changes in circumstances require such a
review, Kyocera reviews the carrying value of its long-lived assets held and used and to be disposed of, including
goodwill and other intangible assets. The carrying value of a long-lived asset is considered impaired when the
anticipated undiscounted cash flow from the asset is less than its carrying value. Goodwill and intangible assets
36

that are not subject to amortization are considered to be impaired if the carrying amounts exceed their fair value.
In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of thelong-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a current
interest rate. The cash flows used in both assessing impairment and determining fair value are typically derived
from the expected cash flows determined by management’s estimates and judgments. Significant impairment
losses may be incurred in future periods if information technology market conditions deteriorate and Kyocera
determines that the carrying amount of long-lived assets cannot be recovered through future cash flows. In thefirst half on fiscal 2003, Kyocera completed an impairment review of its goodwill, which indicated that there wasan impairment loss on goodwill related to the acquisition of Kyocera Tycom Corporation (KTC), which
manufactures and supplies micro drills for the information technology industry. The impairment loss of ¥3,175($27) has been recorded in our Fine Ceramics Group as a cumulative effect of change in accounting principle.
Kyocera, with the assistance of a third party appraiser, arrived at the implied fair value of goodwill using a
discounted cash flow methodology taking into account sluggishness in KTC’s markets. At March 31, 2003, theremaining carrying amount of goodwill related to the acquisition of KTC was ¥2,859 ($24), and Kyocera
cautiously continues to review its fair value in fiscal 2004. Kyocera’s total carrying amounts of goodwill bysegments and intangible assets at March 31, 2003 are described in Note 8 to our Consolidated Financial
Statements included in this Form 20-F. In fiscal 2003, Kyocera also implemented an annual valuation of longlived assets, and as a result, determined that there were no indications of impairment on long-lived assets otherthan goodwill.
Deferred tax assets
Kyocera records deferred tax assets with valuation allowances to adjust their carrying amounts when it
believes that it is more likely than not that the assets will not be realized. The valuation of deferred tax assets
principally depends on the estimation of future taxable income and feasible tax planning strategies. If futuretaxable income is lower than expected due to future market conditions or poor operating results, significant
adjustments to deferred tax assets may be required. At March 31, 2003, deferred tax assets, net of deferred tax
liabilities, was ¥45,190 ($383), which Kyocera considers will reasonably be realized in the future compared withthe amounts of taxable income and income taxes in fiscal 2003. There were no material discrepancies between
expected and actual taxable income in terms of deferred tax asset calculations in recent years.
Benefit plans
Projected benefit obligations and plan assets are determined on an actuarial basis and are significantly
affected by the assumptions used in their calculation, such as discount rates, the expected long-term rate of returnon plan assets, the rate of increase in compensation levels and other assumptions. Kyocera determines thediscount rate by referencing the yield on high quality fixed income securities such as Japanese Government
Bonds. The expected return on plan assets is determined based on the rate of historical earnings and Kyocera’s
expectation of future performance of the funds in which plan assets are invested. The rate of increase incompensation levels is determined based mainly on results of operations and inflation. Kyocera annually reviews
the assumptions underlying its actuarial calculations, making adjustments based on current market conditions, if
necessary.
Because of the prolonged recession in the Japanese economy and the week performance of Japanese andglobal stock markets, Kyocera determined to decrease its assumptions of the discount rate and the expected longterm rate of return on plan assets used in a calculation of its benefit plans in fiscal 2003. This decrease in theseassumptions led to an increase in projected benefit obligations and net periodic pension cost. These increases
have negative impacts on Kyocera’s results of operations and financial position. For instance, the Company,
which has a substantial portion of accrued pension cost in its consolidated balance sheet, changed its assumptionof the discount rate from 2.5% to 2.0%. In consequence of this decrease in these assumption, the Company’s
projected benefit obligations at March 31, 2003 increased approximately by ¥17,700 ($150). Due mainly to these
decreases in these discount rate assumptions, Kyocera was required to record an additional minimum pension37

liability in its consolidated financial statement in accordance with SFAS No. 87 “Employer’s Accounting for
Pensions.” At March 31, 2003, Kyocera recorded minimum pension liability adjustments in accumulated othercomprehensive income of ¥10,931 ($93), net of taxes of ¥6,702 ($57). If Japanese and global financial markets’
performance continues to stagnate, Kyocera may be required to decrease its assumptions on the discount rate andthe expected long-term rate of return on plan assets. A decrease in such assumptions will lead to an increase inprojected benefit obligations and net periodic pension costs. Particularly, an increase in projected benefit
obligations may negatively affect Kyocera’s accrued pension and severance costs in the consolidated balance
sheet and labor costs included in cost of sales and selling, general and administrative expenses in the
consolidated statement of income. An increase in accumulated benefit obligations may also require Kyocera torecord additional minimum pension liability in accumulated other comprehensive income.
Contingencies
Kyocera is subject to various lawsuits and claims which arise in the ordinary course of business. Kyocera
consults with legal counsel and assesses the likelihood of adverse outcomes of these contingencies. Kyocera
records liabilities for these contingencies when the likelihood of an adverse outcome is probable and the amountis reasonably estimable. In making these estimates, Kyocera considers the progress of the lawsuits, the situationsof other companies that are subject to similar lawsuits and other relevant factors. The amounts of liabilities
accrued are based on estimates and may be significantly affected by further developments or the resolution ofthese contingencies in the future. The Company has a lawsuit with U.S. based LaPine Technology Corporation(LTC), Prudential-Bache Trade Corporation (presently renamed Prudential-Bache Trade Services, Inc.) for the
alleged breach of an agreement by the Company in connection with the reorganization of LTC. Details of thislawsuit are described in Note 14 to our Consolidated Financial Statements included in this Form 20-F. If theCompany is ultimately unsuccessful in this lawsuit, the Company may be required to pay damages, inclusive ofcosts and interest as of September 2, 2003, of approximately ¥56,050 ($475) to LTC. The Company owns one
third of the outstanding stock of LaPine Holding Company, which in turn owns 100% of the stock of LTC.
Therefore, one third of the net assets of LTC after the payment of damages, inclusive of costs and interest to date,
any excess of liability for this contingency from the Company will be ultimately reimbursed to the Company.
Taking into account this equity interest, the Company has set aside accrued litigation expenses of approximately¥41,862 ($355) at March 31, 2003 in respect of any potential adverse judgment in this case, and any excess ofliability for this contingency would be incurred as an expense. In light of this contingency, the Company believes
that such an expense would not have a significant effect on Kyocera’s consolidated results of operations andfinancial position in fiscal 2004.
Revenue recognition
Kyocera recognizes sales when title and risks have passed to customers, the sales prices are fixed ordeterminable, and collectibility of the resulting receivable is reasonably assured. Revenue from our Fine
Ceramics Group, Electronic Device Group and Equipment Group are recognized principally upon delivery tocustomers. Revenue from direct financing leases is recognized over the term of the leases and amortization ofunearned lease income is recognized using the interest method. Interest income on installment loans is
recognized on an accrual basis. Interest income is no longer accrued at the time the collection of the interest is
past due 1 year or more, or the collection of the principal is past due 6 months or more. The interest received
from cash payments on impaired loans are recorded as income, unless the collectibility of the remaining
investments is doubtful, in which case the cash receipt is recorded as collection of the principal.
New Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143 “Accounting for
Asset Retirement Obligations.” SFAS No. 143 requires full recognition of asset retirement obligations on thebalance sheet from the point in time at which a legal obligation exists. The obligation is required to be measured
at fair value. The carrying value of the asset or assets to which the retirement obligation relates would be
increased by an amount equal to the liability recognized. This amount would then be included in the depreciable38

base of the asset and charged to income over its life as depreciation. This statement is effective for fiscal years
beginning after June 15, 2002. Kyocera does not expect that the adoption of SFAS No. 143 will have a material
impact on Kyocera’s financial position or results of operations.
In July 2002, FASB issued SFAS No.146, “Accounting for Costs Associated with Exit or Disposal
Activities.” This statement addresses the accounting and reporting of costs associated with exit and disposal
activities, including restructuring activities that were accounted for pursuant to the guidance in Emerging Issues
Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” The statement requires recording
costs associated with exit or disposal activities at their fair values when a liability has been incurred. This
statement was effective for exit or disposal activities that were initiated after December 31, 2002. The adoptionof this statement did not have a material impact on Kyocera’s consolidated results of operations and financial
position.
In November 2002, the EITF reached a consensus on EITF 00-21, “Revenue Arrangements with Multiple
Deliverables.” EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve thedelivery or performance of multiple products, services and/or rights to use assets. EITF 00-21 is effective forfiscal periods beginning after June 15, 2003. Kyocera does not expect that the adoption of EITF 00-21 will have amaterial impact on Kyocera’s consolidated results of operations and financial position.
In November 2002, FASB issued Interpretation (FIN) No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which clarifies therequired disclosures to be made by a guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. FIN No. 45 also requires a guarantor to recognize, at the inception of
the guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement
provision of this interpretation were applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements in this interpretation were effective for financial statements ofinterim or annual reports for periods ended after December 15, 2002. The adoption of FIN No. 45 did not have amaterial impact on Kyocera’s consolidated results of operations and financial position.
In December 2002, FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition
and Disclosure,” which amends SFAS No. 123, “Accounting for Stock Based Compensation,” and provides
alternative methods to transition for a voluntary change to the fair value based method of accounting for stock
options. The transition provisions of SFAS No. 148 are currently not applicable to Kyocera as it continues toadopt the intrinsic value based method of accounting for stock options. In addition, SFAS No. 148 requires more
frequent disclosure of the effects of an entity’s accounting policy with respect to stock-based compensation.
Annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002, andKyocera adopted the annual disclosure provisions of SFAS No. 148 in its financial statements for the year ended
March 31, 2003.
In January 2003, FASB issued FIN No. 46, “Consolidation of Variable Interest Entities.” Variable interest
entities often are created for a single specified purpose, for example, to facilitate securitization, leasing, hedging,
research and development, or other transactions or arrangements. This interpretation of Accounting Research
Bulletin No. 51, “Consolidated Financial Statements,” defines what these variable interest entities are andprovides guidelines on how to identity them and also on how an enterprise should assess its interests in a variableinterest entity to decide whether to consolidate that entity. Generally, FIN No. 46 applies to variable interest
entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest
after that date. For existing variable interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003, the provision of this interpretation will apply no later than the beginning of thefirst interim or annual reporting period beginning after June 15, 2003. Currently, Kyocera does not have any
material variable interest entities and the adoption of FIN No. 46 does not have a significant impact on Kyocera’s
consolidated results of operations and financial position.
39

In April 2003, FASB issued SFAS No. 149, “Amendment of Statement No. 133 on Derivative Instruments
and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments andHedging Activities.” The Company will be required to adopt SFAS No.149 for contracts entered into or modified
after June 30, 2003 except for certain items related to the implementation provisions of SFAS No. 133. The
adoption of SFAS No. 149 requires prospective adoption and is not expected to have a material affect on the
Kyocera’s consolidated results of operations and financial position.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.” SFAS No. 150 requires certain financial instruments withcharacteristics of both liabilities and equity to be classified as a liability (or an asset in some circumstances).
SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise
effective at the beginning of the first interim period beginning after June 15, 2003. Currently, the adoption of
SFAS No. 150 will not have material impact on Kyocera’s consolidated results of operations and financial
position.
Investment in Kyocera Chemical Corporation
On May 16, 2002, the Boards of Directors of both the Company and Toshiba Chemical Corporation, which
manufactures and sells electronic parts and materials, decided to make Toshiba Chemical Corporation a whollyowned subsidiary of the Company through a stock swap, in order to reinforce the electronic parts and materials
businesses held by Toshiba Chemical Corporation and mainly our Fine Ceramics Group, Electronic Device
Group. The Company and Toshiba Chemical Corporation made a stock swap agreement in which 0.022 shares of
the Company would be allocated to one share of Toshiba Chemical. On August 1, 2002, the Company issued
990,990 shares of Common Stock of the Company for this stock swap and Toshiba Chemical Corporation was
renamed as Kyocera Chemical Corporation. Detailed information appears in Note 3 to our Consolidated
Financial Statements in this Form 20-F.
Implementation of the KMC Rehabilitation Plan
Under its original rehabilitation plan approved by the Osaka District Court on January 18, 2000, Kyocera
Mita Corporation was obliged to pay its debts in full by July 2009. However, Kyocera considered it necessary tolift the restrictions imposed on Kyocera Mita Corporation’s management under the rehabilitation plan in order toaccelerate the continuous expansion of Kyocera Mita Corporation’s document solutions business. For thispurpose, Kyocera Mita Corporation’s board of directors decided to pay its debts ahead of schedule by revising
the rehabilitation plan. The revised plan was approved by the Osaka District Court. Pursuant to the revised
rehabilitation plan, Kyocera Mita Corporation paid its debts in full in February 2002, and the district court
concluded that Kyocera Mita Corporation had performed all of its obligations under the rehabilitation plan.
LaPine Litigation
The Company has a lawsuit with U.S. based LaPine Technology Corporation (LTC), Prudential-Bache
Trade Corporation (presently renamed Prudential-Bache Trade Services, Inc.), et al. for the alleged breach of anagreement by the Company in connection with the reorganization of LTC. Details of this lawsuit are describedunder “Legal Proceedings” in Note 14 to our Consolidated Financial Statements included in this Form 20F. If theCompany is ultimately unsuccessful in this lawsuit, the Company may be required to pay damages, inclusive ofcosts and interest as of September 2, 2003, of approximately ¥56,050 ($475) to LTC. The Company owns one
third of the outstanding stock of LaPine Holding Company, which in turn owns 100% of the stock of LTC.
Therefore, one third of the net assets of LTC after the payment of damages, inclusive of costs and interest to date,
any excess of liability for this contingency from the Company will be ultimately reimbursed to the Company.
40

Taking into account this equity interest, the Company has set aside accrued litigation expenses of approximately¥41,862 ($355) at March 31, 2003 in respect of any potential adverse judgment in this case, and any excess ofliability for this contingency would be incurred as an expense. In light of this contingency, the Company believes
that such an expense would not have a significant effect on Kyocera’s consolidated results of operations andfinancial position in fiscal 2004.
Return of Substitutional Portion of Employee’s Pension Fund
In January 2003, EITF released Issue No. 03-2, “Accounting for the Transfer to the Japanese Government of
the Substitutional Portion of Employee Pension Fund Liabilities.” EITF Issue No. 03-2 addresses accounting fora transfer to the Japanese government of a substitutional portion of an Employee Pension Fund plan (EPF), which
is a defined benefit pension plan established under the Japanese Welfare Pension Insurance Law (JWPIL). EITF
Issue No. 03-2 requires employers to account for the entire separation process of a substitutional portion from anentire plan (including a corporate portion) upon completion of the transfer to the government of the substitutional
portion of the benefit obligation and related plan assets as the culmination of a series of steps in a single
settlement transaction. Under this approach, the difference between the fair value of the obligations and the assets
required to be transferred to the government should be accounted for and separately disclosed as a subsidy and a
proportionate amount of net unrecognized gain or loss related to the entire EPF would be recognized as asettlement gain or loss. As a resultof enactment of the “Defined Benefit Corporate Pension Plan Law,” theCompany and certain of its domestic subsidiaries were approved by the Ministry of the Health, Labor andWelfare in Japan for an exemption from the obligation for benefits related to future employee service under thesubstitutional portion in fiscal 2003. They also plan to submit another application for separation of the remaining
substitutional portions (that is, the benefit obligation related to past services). After their applications areapproved by the government, the remaining benefit obligation of the substitutional portions (that amount earned
by past services), as well as the related government-specified portions of the plan assets of the EPF, will betransferred to the government. Gain related to this separation process shall be recognized upon completion of thetransfer to the government of the substitutional portions of the benefit obligations and related plan assets. The
Company and its subsidiaries have not yet decided the dates of completion. Kyocera estimates that special gains
of approximately ¥15,700 ($133) will be recognized if the transfers are completed by March 31, 2004. This is aforward-looking statement, and actual results could differ from this estimation, including as a result of thetransfers not happening as anticipated or other factors.
Investment in Kinseki Limited
On May 21, 2003, the Company and Kinseki, at the meetings of their respective Boards of Directors,
resolved that the Company should make Kinseki a wholly-owned subsidiary (100% owned subsidiary) throughstock swap, and entered into a Stock Swap Agreement, which provides the ratio of allocation shall be 0.100
shares of the Company to one Kinseki share. Subsequently, the Agreement was approved at the Ordinary General
Shareholders Meeting of Kinseki held on June 27, 2003, and it was decided that the effective date of the stock
swap was to be August 1, 2003. Pursuant to Article 358 of the Commercial Code (Easy Method for Stock Swap),
the Company’s approval of the Stock Swap Agreement at a General Shareholders Meeting was not required. We
believe that Kinseki’s technologies for the manufacture of artificial crystals and related application technologies
will enhance the superior position of Kyocera as a general electronic components manufacturer that is versed in
the telecommunications and information processing industries. Pursuant to the Agreement, the Company will
allocate a total 2,529,154 of shares of Common Stock of the Company that it holds to Kinseki’s shareholders.
Business Transfer from IBM Japan Ltd.
The Company, IBM Corporation and IBM Japan, Ltd. reached an agreement for the transfer from IBM
Japan to Kyocera of the SLC (laminated high-density printed circuit board) business at the Yasu Site of IBM
Japan, and have executed a business transfer agreement relating thereto. Kyocera incorporated a new, successor
company at the location of the Yasu Site of IBM Japan, which undertakes the operation of the transferred41

business. As a result of the business transfer, Kyocera seeks to further enhance its organic circuit board business(chip carriers, boards, etc.) through synergistic effects among the wide range of materials technologies, products
and analysis developed by Kyocera, and the innovative SLC technologies, encompassing design, manufacturing,
engineering and packaging technology, of IBM Japan. (*SLC: Surface Laminar Circuitry is the registeredtrademark of IBM for laminated high-density printed circuit boards developed by IBM Corporation.)
Purchase of Own Stock
Pursuant to resolution of the Company’s Board of Directors on April 25, 2003, the Company submitted a
proposal to the General Meeting of Shareholders on June 25, 2003 to authorize the purchase of its own stock forthe purpose of implementing flexible capital policies and to utilize for the timely business development inaccordance with the changes in the business environment, up to the lesser of an aggregate amount of 5,000,000
shares or an aggregate purchase price of ¥ 50,000 ($424). This purchase of stock of the Company was authorizedat the General Meeting of Shareholders of the Company on June 25, 2003 pursuant to Article 210 of theCommercial Code.
B. Liquidity and Capital Resources
Assets, liabilities and stockholders’ equity
Kyocera’s total assets at March 31, 2003 decreased by ¥10,444 ($89) to ¥1,635,014 ($13,856), compared with
¥1,645,458 at March 31, 2002. Cash and cash equivalents rose by ¥17,411 ($148) to ¥298,310 ($2,528). Restrictedcash decreased by ¥3,141 ($27) to ¥56,368 ($478) at March 31, 2003. This cash has been deposited with a financial
institution to minimize facility fees for a letter of credit in relation to ongoing litigation (see Note 14 to our
Consolidated Financial Statements included in this Form 20-F).
As a result of KCC becoming a consolidated subsidiary of Kyocera, and the increased net sales recognized
by KMC, trade note receivables increased by ¥10,079 ($85) to ¥35,446 ($300), and trade account receivables
increased by ¥5,510 ($47) to ¥179,750 ($1,523). Short-term and long-term finance receivables declined by¥9,959 ($84) to ¥156,982 ($1,330) at March 31, 2003, due mainly to collection of receivables for the sale of thereal estate. Finance lease receivables of KLC are included in both short-term and long-term finance receivables.
Inventories decreased by ¥22,650 ($192) to ¥183,156 ($1,552), mainly as a result of inventory reduction at
KMC and AVX as well as at the Company.
Securities and other investments increased by ¥6,478 ($55) to ¥308,137 ($2,611), due to the purchase ofbonds which offset a decline in the fair value of stocks.
Total property, plant and equipment at cost, net of accumulated depreciation, decreased by ¥19,118 ($162)
to ¥249,505 ($2,114), due to more depreciation than capital expenditure.
Kyocera’s total liabilities at March 31, 2003 increased by ¥31,504 ($267) to ¥569,954 ($4,830), comparedwith ¥538,450 at March 31, 2002. This reflected an increase in accounts payable caused by increased purchasesof raw materials and other inputs by our Equipment Group, and an increase in accrued pension cost due to KCC
becoming a consolidated subsidiary.
Interest bearing debts, including both short-term borrowings and long-term debt, decreased by ¥17,317($147) to ¥198,820 ($1,685), due primarily to a decrease in KMC’s debt.
Minority interests in subsidiaries, principally AVX, decreased by ¥5,970 ($51) to ¥61,560 ($522), from ¥67,530 at March 31, 2002 due mainly to the yen’s appreciation against the U.S. dollar.
42

Stockholders’ equity decreased by ¥35,978 ($305) to ¥1,003,500 ($8,504), from ¥1,039,478 at March 31,
2002, due to purchase of treasury stock of ¥42,010 ($356), a cash dividend of ¥11,222 ($95) and a decrease of¥33,444 ($283) in accumulated other comprehensive income, offsetting an increase of ¥41,165 ($349) instockholders’ equity by the earnings for fiscal 2003.
Accumulated other comprehensive income included foreign currency translation adjustments, which
decreased in absolute amount by ¥20,578 to ¥(14,977) ($(127)), due to the yen’s appreciation. In addition,
minimum pension liability adjustment of ¥(10,931) ($(93)) was included. Consequently, the stockholders’ equity
ratio at March 31, 2003 was 61.4%, 1.8 points lower compared with 63.2% at March 31, 2002.
Cash flow
Net cash provided by operating activities in fiscal 2003 increased by ¥19,825 ($168) to ¥160,754 ($1,362)
from ¥140,929 in fiscal 2002. This was due mainly to net income increasing by ¥9,212 ($78) to ¥41,165 ($349)
compared with fiscal 2002. An increase in notes and accounts payable which resulted from an increase ofpurchases within our Equipment Group near the fiscal year end contributed to an increase in net cash provided byoperating activities, but this increase was offset by a net increase in receivables and diminution in the effect oflosses on and a decrease in inventories. A decrease in payments for income taxes, which was due to a decrease intaxable income in fiscal 2002, also contributed to the increase in net cash provided by operating activities. In
fiscal 2002, net cash provided by operating activities decreased slightly by ¥8,262 to ¥140,929 from ¥149,191 in
fiscal 2001, despite a significant decrease in net income of ¥187,576, which was mostly offset by increases in
non-cash revenues and expense adjustments primarily caused by stock issuances of an affiliate and related
deferred taxes in 2001. A decrease in net income was also offset by a decrease in receivables and inventories.
This decrease was partially mitigated by a decrease in notes and accounts payable and accrued income taxes. The
decreases in receivables, payables and inventories were caused by decreased sales and Kyocera’s efforts to
reduce inventory. Accrued income taxes decreased due to a decrease in taxable income.
Net cash used in investing activities in fiscal 2003 increased by ¥7,374 ($62) to ¥58,512 ($496) from¥51,138 in fiscal 2002. This was due primarily to a decrease in proceeds from maturities of securities, despite acontinuous decrease in capital expenditures mainly within our Fine Ceramics Group. In fiscal 2002, net cash used
in investing activities decreased by ¥99,078 to ¥51,138 from ¥150,216 in fiscal 2001. This was due primarily to adecrease in capital expenditures within the Fine Ceramics Group and Electronic Device Group. As the global
slump in IT-related markets caused demand for components to plunge, Kyocera imposed strict controls on capital
expenditures.
Net cash used in financing activities in fiscal 2003 increased by ¥56,266 ($477) to ¥74,662 ($633) from
¥18,396 in fiscal 2002. This was due mainly to a significant increase in purchases of treasury stock. In fiscal
2002, net cash used in financing activities amounted to ¥18,396, compared to cash provided by ¥12,331 in fiscal
2001. This was due primarily to a decrease in short-term borrowings. In February 2002, Kyocera Mita
Corporation completed implementation of its rehabilitation plan by accelerating payment of its debts under its
rehabilitation plan. Kyocera Mita Corporation paid all of the debt under the rehabilitation plan by issuing longterm debt to banks.
At March 31, 2003, the yen’s appreciation against the U.S. dollar had a negative impact on cash and cash
equivalents in the amount of ¥10,169 ($86). At March 31, 2002, the yen’s depreciation against the U.S. dollar
had a positive impact on cash and cash equivalents totaling ¥8,171.
Cash and cash equivalents increased in fiscal 2003 by ¥17,411 ($148) from ¥280,899 to ¥298,310 ($2,528).
Cash and cash equivalents increased in fiscal 2002 by ¥79,566 from ¥201,333 to ¥280,899.
Capital resources
Kyocera’s primary source of liquidity is cash generated by operations. We finance operations of certain of
our subsidiaries primarily through borrowings from financial institutions. Detailed information on these43

subsidiaries appears below under “Contractual obligations.” At March 31, 2003, Kyocera’s working capitaldecreased by ¥86,911 ($737) to ¥456,848 ($3,872), compared to ¥543,759 at March 31, 2002. The decrease wasdue mainly to increases in short-term borrowings and trade payables. Kyocera is attempting to increase cash
generated by operations and keep high liquidity by reducing inventories with efforts to shorten lead-time and byenhancing collectibility of trade receivables.
Cash from operations generally has been sufficient for Kyocera to fund its working capital requirements andto fulfill its future capital expenditures, commitments and obligations. As short-term forecasted cash expenditure,
Kyocera expects to use cash in capital expenditures, purchasing its own stock, paying cash dividends or otherpurposes. In fiscal 2003, capital expenditures decreased by ¥14,017 ($119) to ¥40,614 ($344), compared with
¥54,631 in fiscal 2002. Research and development expenses increased by ¥6,869 ($58) to ¥47,268 ($401),
compared with ¥40,399 in fiscal 2002. Almost all of these capital expenditures were funded by cash in hand andcash generated by operations. In fiscal 2004, Kyocera is planning capital expenditures in the aggregate amount ofapproximately ¥41,000 ($347), mainly on plants primarily within our Fine Ceramics Group and Electronic
Device Group, and within our Equipment Group on improvement in production efficiencies in thetelecommunications equipment division and expanding production in China in the information equipment
division. Kyocera is planning to spend research and development expenses in the aggregate amount ofapproximately ¥44,000 ($373), mainly on development of components for the telecommunications andinformation processing market and for the automotive devices market within our Fine Ceramics Group andElectronic Device Group, and on development of mobile handsets and information equipment such as printersand copiers within our Equipment Group. We believes that to create new products, develop technologies andachieve highly profitable operations in the future, Kyocera should invest its resources continuously fordeveloping new business areas and for improving its existing technologies.
The Company submitted a proposal to the general meeting of shareholders on June 26, 2002 and was
authorized to purchase its own stock. The Company completed this purchase of its own stock on September 9,
2002, having purchased an aggregate amount of 5,000,000 shares representing an aggregate purchase price of¥41,414 ($351) funded by cash in hand and cash generated by operations. On April 25, 2003, the Company’s
Board of Directors decided to acquire up to 5,000,000 shares of the Company’s common stock at an aggregate
purchase price of no more than ¥50,000 ($424) in order to implement flexible capital policies and to utilize suchshares for timely business development in accordance with the changes in the business environment. Thisdecision was approved by the general meeting of shareholders held on June 25, 2003.
The Company paid cash dividends of ¥11,222 ($95) in fiscal 2003. Subsequent to March 31, 2003, theCompany’s Board of Directors declared a cash dividend of ¥5,549 ($47) on June 26, 2003 to stockholders ofrecord on March 31, 2003. The dividend declared was approved by the general meeting of shareholders held on
June 25, 2003. We believe that cash generated by operations and cash in hand will be sufficient to fund its cash
dividend disbursements mentioned above at least through fiscal 2004. Thus, we do not currently intend to use
other external financing sources, which would influence credit ratings given by rating agencies. If, however, cash
generated by operations is not sufficient, Kyocera has other financing sources available to it, such as short-termor long-term borrowings and issuances of debt or equity securities. The Company maintains good business
relationships with several major Japanese financial institutions.
Kyocera’s ability to generate cash through operations is highly dependent on operational results of its
component business for telecommunications and information processing industries and equipment business,
which cover a substantial portion of Kyocera’s products in its three main business segments. Sales ofcomponents for mobile handsets, computers and optical communication devices are materially affected by rapid
fluctuations in selling prices and demand. Sales of equipment, particularly mobile handsets and informationequipments, are also exposed to sharp changes in their demand. Future deteriorations in the selling prices of or
demand products for telecommunications and information processing industries could adversely affect Kyocera’s
operating results and financial position, including its ability to fund its capital expenditures, and could result in
reduced liquidity.
44

Contractual obligations
At March 31, 2003, Kyocera’s contractual obligations mainly comprised short-term borrowings and longterm debt including debt due within one year, which amounted to ¥107,886 ($914) and ¥90,934 ($771),
respectively. Over 80% of this debt was attributable to KMC and KLC. Kyocera Mita Corporation completed
implementation of its rehabilitation plan by accelerating the payment of debt under its rehabilitation plan andpaid all of this debt by borrowing long-term debt from banks in February 2002. In fiscal 2003, KMC reduced its
borrowings, which resulted in a decrease in Kyocera’s interest bearing debts. KLC provides financial services
such as credit financing and leasing. Due to the nature of its operations, KLC had approximately ¥84,302 ($714)
of short-term borrowings and ¥67,254 ($570) of long-term debt from banks and other financial institutions at
March 31, 2003 as the primary source of funding for operating its business. Kyocera also has foreign currencydenominated debt. However, the proportion of the foreign currency-denominated debt to its total debt is notmaterial. The following tables provide information about Kyocera’s contractual obligations with expectedmaturity dates.
Contractual obligations(Yen in millions)Less than
1 year2-3 years

4-5 years

Thereafter

Total

Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt (due within one year) . . . . . . . . . . . . . . . .

¥107,886
30,198—46,482

—
7,831

—
6,423

¥107,886
90,934

Total Contractual Obligations . . . . . . . . . . . . . . . . . . . . . .

¥138,084

46,482

7,831

6,423

¥198,820

Contractual obligations(U.S. dollars in millions)Less than
1 year2-3 years

4-5 years

Thereafter

Total

Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt (due within one year) . . . . . . . . . . . . . . . .

$

914
256

—
394

—
66

—
55

$

914
771

Total Contractual Obligations . . . . . . . . . . . . . . . . . . . . . .

$

1,170

394

66

55

$

1,685

In addition to contractual obligations shown in the above tables, Kyocera recognizes that contractual
obligations for the acquisition or construction of property, plant and equipment are relatively material, and its
outstanding balances at March 31, 2003 amount to approximately ¥11,617 ($98), mostly due within one year. A
foreign subsidiary also has a supply agreement for a significant portion of its anticipated material used inoperation in its ordinary course of business. The following tables provide information about this agreement withexpected maturity dates.
A supply agreement(Yen in millions)Less than
1 year2-3 years

4-5 years

Thereafter

Total

13,557

13,467——27,024

A supply agreement(U.S. dollars in millions)Less than
1 year2-3 years

115

114

4-5 years

Thereafter——

Kyocera anticipates that funds to be required to fulfill these debt obligations and commitments will be
generated internally from operations.

45

Total

229

Significant customer
In fiscal 2003, Kyocera’s sales to KDDI amounted to ¥115,778 ($981) which slightly exceeded 10.0% of its
net sales. KDDI provides telecommunication services, and Kyocera sells mainly telecommunications equipment
to KDDI. For more information on our relationship with KDDI, see Item 7.B. of this Form 20-F.
C. Research and Development, Patent and Licenses, etc.
We are deeply committed to the constant pursuit of technological advancement in order to invent anddevelop new materials and new products, to improve and enhance existing products and to identify new
applications for them and for the technology related to them.
Basic research and development activities are carried out at three research laboratories: the Kagoshima
R&D Center, which concentrates on ceramic materials and processing technology, the Yokohama R&D Center,
which works on technology relating to communications equipment, and the Keihanna R&D Center located in
Kyoto, which carries out research on electronic and optical devices. In addition, each product division which is incharge of a product category or sub-category has its own research and development department staffed with anumber of engineers working on improving existing products and manufacturing processes, as well as developing
new products.
Research and development expenses for the years ended March 31, 2001, 2002 and 2003 amounted to¥35,128, ¥40,399 and ¥47,268 ($400,576), respectively.
We have a variety of patents in Japan and other countries, and hold licenses for the use of patents fromothers. Details are set forth in Item 4 B “Patents and Licenses” in this Form 20F.
D. Trend Information
The following statements contains forward looking statements. They are based on estimates andassumptions of our management about the future and are subject to significant uncertainty. You should read thesestatement in conjunction with the “Risk Factors” under Item 3.D, which describe factors that may contribute toactual events or our results of operations differing from that stated in the forward looking statements below,
including changes in the Japanese or world economies and demand for our products.
The information below should be read in conjunction with Item 5 of this annual report, which contains someof the trend information required by this item.
The results for the three months ended June 30, 2003
With respect to our first quarter financial results, which cover the three months period ended June 30, 2003,
please refer to our report on Form 6-K filed on July 29, 2003.
Impact of SARS
Our first quarter financial results were negatively affected by the outbreak of Severe Acute Respiratory
Syndrome (SARS), which dulled consumption and production in the Chinese market. As a result, net sales during
the first quarter were almost flat compared with the same period of the previous year. We cannot predict whether
our financial results will be affected by SARS in future quarters, or whether there will further breakouts of SARS
in the in the future.
Market Trends
We believe that from the second quarter of fiscal 2004, the prospects for economic conditions that affect ourmarkets include a potential return to stability in the Asian economy as the SARS crisis settles down, continued
46

sluggishness in the European economy, and a slow recovery in the U.S. economy. Because the Japanese economy
is strongly affected by the U.S. economy, the future for Japan remains unclear.
In the electronics industry, we anticipate a continued increase in demand for personal computers, as well as
digital AV equipment such as digital cameras and DVDs. We also anticipate that production of mobile handsets
will increase, due to growing demand for color LCDs and camera equipped models. However, trends for personal
consumption remain unclear throughout our markets globally.
To make ourselves further competitive through cost reductions, we plan to expand production forcomponents, telecommunications equipment and information equipment in China, while commencing productionof solar modules for photovoltaic generating systems during fiscal 2004.
To cultivate markets and expand sales, we will utilize a sales company in China which markets anddistributes our products manufactured in China as well as those imported into China.
Regarding price erosion, we expect severe price competition to continue in fiscal 2004. We will makeefforts to reduce costs by expanding production volume in China, and to improve profitability throughintroduction of new high-value-added components such as miniature size products. However, we cannot predict
how such initiatives will affect our overall operating margins, which may continue to decrease.
E. Off-Balance Sheet Arrangements
Not Applicable.
F. Tabular Disclosure of Contractual Obligations
Not Applicable.
Item 6.

Directors, Senior Management and Employees

A. Directors and Senior Management
The following table shows the Company’s Directors and Corporate Auditors as of June 30, 2003.
Name

Date of Birth

Position

Since

Kazuo Inamori

January 30, 1932

Chairman Emeritus and Director

1959

Kensuke Itoh

December 17, 1937

Chairman of the Board andRepresentative Director

1975

Yasuo Nishiguchi

October 9, 1943

Representative Director andPresident, Executive Officer

1987(President
since 1999)

Masahiro Umemura

August 8, 1943

Representative Director andExecutive Vice President,
Executive Officer (General
Manager of Corporate
Development Division)

1991

Michihisa Yamamoto

November 13, 1942

Representative Director andExecutive Vice President,
Executive Officer (General
Manager of Corporate General
Affairs Division)

1987

47

Name

Date of Birth

Position

Since

Yuzo Yamamura

December 4, 1941

Director (President and Representative
Director of KYOCERA ELCOCORPORATION)

2003

Naoyuki Morita

April 8, 1942

Director (President and Representative
Director of KYOCERACOMMUNICATION SYSTEMS
CO., LTD.)

2003

Koji Seki

December 8, 1937

Director (President and Representative
Director of KYOCERA MITA CORP.)

1989

Noboru Nakamura

October 6, 1944

Director (Vice President andRepresentative Director of KYOCERACHEMICAL CORP.)

1991

Isao Kishimoto

November 30, 1943

Director (President and Representative
Director of KINSEKI, LIMITED)

1993

Hisao Hisaki

July 2, 1946

Director and Managing Executive
Officer (Executive Vice President of
KYOCERA (TIANJIN) SALES AND
TRADE CORP.)

1991

Rodney N. Lanthorne

February 5, 1945

Director (President of KYOCERAINTERNATIONAL, INC.)

1989

John S. Gilbertson

December 4, 1943

Director (CEO and President of AVX
CORPORATION)

1995

Atsushi Mori

September 9, 1937

Full-time Corporate Auditor

2002

Yuji Itoh

November 6, 1936

Full-time Corporate Auditor

1998

Yasuo Akashi

May 29, 1944

Full-time Corporate Auditor

2003

Osamu Nishieda

January 10, 1943

Corporate Auditor

1993

Shinji Kurihara

August 25, 1927

Corporate Auditor

2003

Kazuo Inamori has served as the Chairman Emeritus and Director of Kyocera Corporation since 1997. He
became a Director when he founded the Kyocera Corporation in 1959, a Managing Director in 1962, and a Senior
Managing Director in 1964.
Kensuke Itoh has served as the Chairman of the Board and Representative Director of Kyocera Corporation
since 1999. He became a Director in 1975, a Managing Director in 1979, and a Senior Managing Director in
1981. He joined Kyocera Corporation in 1959 and has served as Representative Director of Kyocera Realty
Development Co., Ltd. and Representative Director of Hotel Kyocera Co., Ltd.
Yasuo Nishiguchi has served as the President and Representative Director of Kyocera Corporation since1999. He became a Director in 1987, a Managing Director in 1989 and a Senior Managing and Representative
Director in 1992. He joined Kyocera Corporation in 1975 and has served as the Representative Director of
Kyocera Mita Corp., Representative Director of Kyocera Leasing Co., Ltd., Representative Director of Kyocera
Communication Systems Co., Ltd., Representative Director of Kyocera ELCO Corp., Chairman of the Board of
Directors of Shanghai Kyocera Electronics Co., Ltd., Chairman of the Board of Directors of Dongguan Shilong
Kyocera Optics Co., Ltd., Chairman of the Board of Directors of Kyocera Zhenhua Communication Equipment
Co., Ltd., Chairman of the Board of Directors of Kyocera Mita Office Equipment (Dongguan) Co., Ltd.,48

Chairman of the Board of Directors of Kyocera (Tianjin) Sales and Trading Corp., Chairman of the Board of
Directors of Kyocera (Tjianjin) Solar Energy Co., Ltd., and Representative Director of Kyocera Optec Co., Ltd.
Masahiro Umemura has served as an Executive Vice President and Representative Director of Kyocera
Corporation since 1999. He became a Director in 1991, a Managing Director in 1993 and a Senior Managing andRepresentative Director in 1997. He joined Kyocera Corporation in 1966 and has served as General Manager of
the Corporate Development Division of the Company and the Chairman of the Board of Directors of Shanghai
Kyocera Realty Development Co., Ltd.
Michihisa Yamamoto has served as an Executive Vice President and Representative Director of Kyocera
Corporation since 1999. He became a Director in 1987, a Managing Director in 1989 and a Senior Managing andRepresentative Director in 1992. He joined Kyocera Corporation in 1970 and has served as a General Manager of
the Corporate General Affairs Division of the Company and the Chairman of the Board of Directors of Shanghai
Kyocera Trading Co., Ltd.
Yuzo Yamamura rejoined Kyocera Corporation as a Director in 2003. He first became a Director in 1987,
and retired in 1993. He rejoined Kyocera Corporation as a Senior Managing and Representative Director in 1995
and retired again in 1999. He originally joined Kyocera Corporation in 1965 and has served as the President andRepresentative Director of Kyocera ELCO Corp.
Naoyuki Morita rejoined Kyocera Corporation as a Director in 2003. He first became a Director in 1987, aManaging Director in 1989 and a Senior Managing and Representative Director in 1995, and he retired in 1999.
He originally joined Kyocera Corporation in 1967 and has served as the President and Representative Director of
Kyocera Communication Systems Co., Ltd.
Koji Seki rejoined Kyocera Corporation as a Director in 2003. He first became a Director in 1989 and aManaging Director in 1999, and he retired in 2001. He originally joined Kyocera Corporation in 1982 and has
served as the President and Representative Director of Kyocera Mita Corp. and Kyocera Mita Japan Corp.
Noboru Nakamura has served as a Director of Kyocera Corporation since 2003. He became a Director in
1991, a Managing Director in 1995, a Senior Managing and Representative Director in 1997 and an Executive
Vice President and Representative Director in 1999. He joined Kyocera Corporation in 1967 and has served as an
Executive Vice President and Representative Director of Kyocera Chemical Corporation.
Isao Kishimoto has served as a Director of Kyocera Corporation since 2003. He became a Director in 1993,
a Managing Director in 1997 and a Senior Managing Director in 2001 . He joined Kyocera Corporation in 1967
and has served as the President and Representative Director of Kinseki, Limited.
Hisao Hisaki has served as a Director of Kyocera Corporation since 1991. He joined Kyocera Corporationin 1969 and has served as an Executive Vice President of Kyocera Tianjin Sales and Trading Corp.
Rodney N. Lanthorne has served as a Director of Kyocera Corporation since 2003. He became a Director in
1989, a Managing Director in 1990 and a Senior Managing and Representative Director in 1999. He joined
Kyocera International, Inc. in 1979 and has served as the President and Director of Kyocera International, Inc.
John S. Gilbertson has served as a Director of Kyocera Corporation since 2003. He became a Director in1995 and a Managing Director in 1999. He joined AVX Corporation in 1981 and has served as the President andChief Executive Officer of AVX Corporation.
Atsushi Mori has served as a Full-time Corporate Auditor of Kyocera Corporation since 2002. He served asa Director from 1989 until becoming a Corporate Auditor. He became a Managing Director in 1995 and a Senior
Managing and Representative Director of Kyocera Corporation in 1997. He joined Kyocera Corporation in 1989.
49

Yuji Itoh has served as a Full-time Corporate Auditor of Kyocera Corporation since 1998. He served as a
Director from 1989 until becoming a Corporate Auditor. He became a Managing Director in 1993. He joined
Kyocera Corporation in 1972.
Yasuo Akashi has served as a Full-time Corporate Auditor of Kyocera Corporation since 2003. He served asa Senior Managing and Representative Director of Kyocera Corporation from 1997. He became a Director in1991 and a Managing Director in 1993. He joined Kyocera Corporation in 1967
Osamu Nishieda has served as a Corporate Auditor of Kyocera Corporation since 1993. He has served as an
In-House Council of the Company.
Shinji Kurihara has served as a Corporate Auditor of Kyocera Corporation since 2003. He has served as theRepresentative Director of Takeda Management Institution.
With the approval of Shareholders’ Meeting held on June 25, 2003, the Company introduced an “executive
officer system” as now permitted under the Commercial Code of Japan. Objectives for introducing this system
are to establish corporate governance appropriate for a global corporation, together with a decision making
system responsive to the business environment, and to train the next generation of senior executives. The
following table shows the Company’s Executive Officers as of June 30, 2003.
Name

Position

Yasuo Nishiguchi

Representative Director and President

Masahiro Umemura

Representative Director and Executive Vice President,(General Manager of Corporate Development Division)

Michihisa Yamamoto

Representative Director and Executive Vice President,(General Manager of Corporate General Affairs Division)

Hisao Hisaki

Director and Managing Executive Officer(Executive Vice President of KYOCERA (TIANJIN) SALES AND TRADING CORP.)

Isao Yukawa

Managing Executive Officer(General Manager of Corporate Solar Energy Division)

Hisashi Sakumi

Managing Executive Officer(Deputy General Manager of Corporate General Affairs Division)

Hideki Ishida

Managing Executive Officer(General Manager of Corporate Business Systems Administration Division)

Tsutomu Yamori

Managing Executive Officer(General Manager of Personnel Division)

Masahiro Inoue

Managing Executive Officer(General Manager of Corporate Optical Equipment Division)

Eiichi Toriyama

Managing Executive Officer(General Manager of Corporate Electronic Components Sales Division)

Makoto Kawamura

Managing Executive Officer(General Manager of Corporate Cutting Tool Division)

Tatsumi Maeda

Managing Executive Officer(General Manager of Corporate Business Strategy Division)

Akiyoshi Okamoto

Senior Executive Officer(President of SHANGHAI KYOCERA ELECTRONICS CO., LTD.)

Takashi Itoh

Senior Executive Officer(General Manager of Corporate Purchasing Division)
50

Name

Position

Masato Takeda

Senior Executive Officer(General Manager of Corporate R&D Division for Components and Devices)

Yoshihiko Nishikawa

Senior Executive Officer(General Manager of Corporate Legal Affairs and Intellectual Property Division)

Susumu Ohshima

Senior Executive Officer(General Manager of Corporate Semiconductor Components Sales Division)

Koji Mae

Senior Executive Officer(General Manager of Organic Material Components Division)

Tetsuo Kuba

Executive Officer(General Manager of Corporate Fine Ceramics Division)

Osamu Nomoto

Executive Officer(General Manager of Ceramic Packages Division)

Gen Takayasu

Executive Officer(General Manager of Communication Devices Division)

Nobuhiro Ochiai

Executive Officer(General Manager of Corporate Capacitor Division)

Shigeru Osaka

Executive Officer(General Manager of Corporate Electronic Devices Division)

Yasuyuki Yamamoto

Executive Officer(General Manager of Corporate Mobile Communication Equipment Division)

Junichi Jinno

Executive Officer(General Manager of Corporate Communication Systems Equipment Division)

Keijiro Minami

Executive Officer(General Manager of Thin Film Devices Division)

Goro Yamaguchi

Executive Officer(Deputy General Manager of Corporate Semiconductor Components Sales Division)

Junzo Katsuki

Executive Officer(Deputy General Manager of Corporate Electronic Components Sales Division)

Yukihiro Takarabe

Executive Officer(Deputy General Manager of Corporate Cutting Tool Division)

Takashi Naruko

Executive Officer(General Manager of Jewelry and Application Products Division)

Hidenori Miyata

Executive Officer(Deputy General Manager of Corporate R&D Division for Components and Devices)

Masakazu Mitsuda

Executive Officer(Deputy General Manager of Corporate Business Systems Administration Division)

Yoshihito Ota

Executive Officer(General Manager of Corporate Executives Office)51

B. Compensation
The aggregate amount of compensation, including bonuses, paid by the Company and its subsidiaries in thefiscal year ended March 31, 2003 to all Directors, Officers and Corporate Auditors of the Company and its
subsidiaries was ¥753 ($6).
In accordance with customary Japanese business practice, when a Director or Corporate Auditor retires, a
proposal to pay a lump sum retirement allowance is submitted to the ordinary general meeting of shareholders forapproval. After such approval, the amount to be paid is fixed by the Board of Directors in accordance with theCompany’s internal regulations. Annual provisions are made in the accounts of the Company for the estimatedcost of the retirement allowance for Directors and Corporate Auditors.
The annual provisions and costs charged to income for such retirement allowance for the year ended
March 31, 2003 were ¥109 ($1).
We have neither disclosed to our shareholders nor otherwise made public any of the information specified inthis item for individually named Directors, Officers or Corporate Auditors.
C. Board Practices
In accordance with the requirements of the Commercial Code of Japan (the “Commercial Code”), ourArticles of Incorporation provide for not more than five Corporate Auditors. Corporate Auditors, of whom atleast one (or, in the case of Corporate Auditors to be elected at the ordinary general meeting of shareholders in orafter June 2006, at least half of them) must be from outside of the Company, are elected at a general meeting ofshareholders, and the normal term of office of a Corporate Auditor is four years. However, Corporate Auditors
may serve any number of consecutive terms. Corporate Auditors form the Board of Corporate Auditors.
Corporate Auditors are under a statutory duty to oversee the administration of our affairs by the Directors, toexamine our financial statements and business reports to be submitted by the Board of Directors to the general
meetings of shareholders and to report their opinions thereon to the shareholders. They are obliged to attend
meetings of the Board of Directors and to express their opinions, but they are not entitled to vote. Corporate
Auditors also have a statutory duty to provide their report on the audit report prepared by our independentcertified public accountants to the Board of Corporate Auditors, which must submit its audit report to the Boardof Directors. The Board of Corporate Auditors will also determine matters relating to the duties of the Corporate
Auditors, such as audit policy and methods of investigation of our affairs.
The Company has no remuneration committee. Matters of remuneration are decided by top management asa group. None of our Directors have contracts with us providing for benefits upon termination. It is customary toprovide lump-sum severance benefits to Directors and Corporate Auditors upon retirement and we provide such
benefits in accordance with our internal regulations.
There is no arrangement or understanding between any Director or Corporate Auditor and any other person
pursuant to which he was elected as a Director or a Corporate Auditor.
There is no family relationship between any Director or Corporate Auditor and any other Director or
Corporate Auditor.
Pursuant to home country practices exemptions granted to us by the New York Stock Exchange, we are
permitted to follow certain corporate governance practices complying with relevant Japanese laws and Japanesestock exchange rules, which are different from those required by U.S. domestic companies under the New York
Stock Exchange’s listing standards. The New York Stock Exchange rules and our current practices relating tocorporate governance have the following significant differences:•

Audit Committee. The New York Stock Exchange requires that a listed company have an audit
committee consisting of at least three independent directors, and that the audit committee be charged
52

with the responsibility of selecting, monitoring and communicating with the outside auditor of thecompany. We do not have an audit committee with functions called for by the New York Stock
Exchange rules.
•

Shareholder Approval Policy. Pursuant to the amendment to the corporate governance standards that
was approved by the Securities and Exchange Commission on June 30, 2003, the New York Stock
Exchange requires, with limited exeptions, that shareholder approval be obtained with respect to any
equity-compensation plan, which is generally defined as a plan or other arrangement that provides forthe delivery of equity securities (either newly issued or treasury shares) of the listed company to any
employee, director or other service provider as compensation for services. We follow relevant Japaneselaws which, as discussed in “Capital stock—Voting rights” under Item 10.B of this Form 20-F,
generally require us to obtain shareholder approval only if stock options are to be issued with “speciallyfavorable” conditions.
The New York Stock Exchange also requires that, with certain exceptions specified in its rules,
shareholder approval be obtained prior to issuance of common stock or securities convertible into or
exercisable for common stock (1) to a director, an officer, a substantial security holder or a party related
to any of them if the number of shares of common stock which are to be issued or are issuable upon
conversion exceeds 1% of the number of shares of common stock or voting power outstanding before
the issuance, (2) in any transaction or series of transactions, if the voting power of the common stock isequal to or exceeds 20% of the voting power outstanding before the issuance or if the number of sharesof the common stock is equal to or exceeds 20% of the number of shares outstanding before theissuance, and (3) that will result in a change of control of the issuer. We follow relevant Japanese laws
which, as discussed in “Capital stock—Voting rights” under Item 10.B of this Form 20-F, generally
require us to obtain shareholder approval with respect to the issuance of common stock or securities
convertible into or exercisable for common stock only if common stock is to be issued at a “speciallyfavorable” price or convertible securities are to be issued with “specially favorable” conditions or stockacquisition rights to acquire shares are to be issued with “specially favorable” conditions.

On June 6, 2002, the Corporate Accountability and Listing Standards Committee of the New York Stock
Exchange issued a report recommending that the Exchange adopt significant changes to its corporate governancelisting standards. On August 16, 2002, the New York Stock Exchange filed with the Securities and Exchange
Commission proposed changes to its corporate governance standards which reflect the findings of theCommittee. The areas of corporate governance covered by the proposed changes include the definition and roleof independent directors, committees under the board of directors, corporate governance guidelines, codes ofbusiness conduct and ethics, shareholder approval of equity-compensation plans, and annual certifications bychief executive officers. On June 30, 2003, the Securities and Exchange Commission approved the portion of the
proposed corporate governance standards relating to shareholder approval of equity-compensation plans, which is
described under “Shareholder Approval Policy” above. Also, in light of the promulgation by the Securities andExchange Commission of Rule 10A-3 pursuant to Section 301 of the Sarbanes-Oxley Act, on April 4, 2003, the
New York Stock Exchange filed with the Securities and Exchange Commission an amendment to the remainderof its proposed rule changes in order to reflect the requirements of Rule 10A-3. That portion of the proposed rulechanges, as amended, will become effective upon the Securities and Exchange Commission’s approval.
The proposed rule changes, as amended, will generally continue to grant home country practices exemptions
to non-U.S. companies listed on the New York Stock Exchange, including us, but, pursuant to the requirementsof Rule 10A-3, those provisions of the amended corporate governance standards that implement the requirementsof Rule 10A-3 will be applicable to listed non-U.S. Companies. Among such requirements, a foreign private
issuer listed on the New York Stock Exchange will be required to have an audit committee consisting of at least
three directors all of whom must be independent under the standards set forth in paragraph (b) of Rule 10A-3,
and the audit committee will be required to be directly responsible for the appointment, compensation, retention
and oversight of the work of the accounting firm engaged (including resolution of disagreements between
management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report53

or performing other audit, review or attest services for the issuer, unless one or more of the exemptions set forthin Rule 10A-3 apply. Pursuant to paragraph (a)(5) of Rule 10A-3, the amended corporate governance standardsof the New York Stock Exchange implementing the requirements of the rule will become applicable to foreign
private issuers listed on the New York Stock Exchange on July 31, 2005.
As described above in this Item 6.A of this Form 20-F, we have a Board of Corporate Auditors which
examines the financial statements and business reports of the Company which are submitted by the Board of
Directors to the general meeting of shareholders and supervise the administration by the Directors of theCompany’s affairs. The Company plans to take appropriate steps with respect to its corporate governance system
by July 31, 2005 so that its Board of Corporate Auditors would satisfy the conditions set forth in paragraph (c)(3)of Rule 10A-3, for the purpose of availing itself of the general exemption provided by that paragraph from theamended corporate governance standards of the New York Stock Exchange implementing the requirements ofRule 10A-3, including the requirements relating to the independence of the audit committee members andresponsibilities of the audit committee.
The rights of ADR holders, including their rights relating to corporate governance practice, are provided in
the Amended and Restated Deposit Agreement and an amendment thereto which are included in an exhibit to thisForm 20-F. See also Item 10.B of this Form 20-F.
D. Employees
At March 31, 2003, Kyocera had 49,420 employees, of whom 10,757 work in the Fine Ceramics Group,
18,014 work in the Electronic Device Group, 15,405 work in the Equipment Group, 3,263 work for Others and
1,981 work in Corporate. Kyocera’s number of employees at March 31, 2003 increased by 5,185 compared with
the number of employees of 44,235 at March 31, 2002, due mainly to an increase in the number of employees at
subsidiaries in China. Kyocera’s number of employees at March 31, 2002 decreased by 6,878 compared with thenumber of employees of 51,113 at March 31, 2001, due mainly to the restructuring activities of foreignsubsidiaries.
As of March 31, 2003, the Company had 13,937 employees, and their average age and average service years
were 36.6 and 13.9, respectively.
Most regular employees of Kyocera Corporation, other than management, become members of the Kyocera
Union. Over 90% of Kyocera Corporation’s regular employees are members of this union. The Kyocera Union is
only open to Kyocera Corporation employees, not to our Japanese or overseas subsidiaries. The employees atthree of our subsidiaries in Japan are unionized, otherwise employees at our Japanese subsidiaries are notunionized. In the United States our employees are generally unionized and in other countries subsidiaries areunionized on a case by case basis. Employees of our overseas subsidiaries belong to labor unions organized byindustry, as opposed to a company specific union like the Kyocera Union. There is no material item to be
specifically addressed regarding relationships between labor and management.
E. Share Ownership
As of March 31, 2003, as a group, the Company’s Directors, Corporate Auditors and Executive Officers
owned 8,544 thousand or 4.6% of the shares of common stock of the Company, and 18,525 ADSs of theCompany. The numbers of shares owned by each Directors, Corporate Auditors and Executive Officers areshown in the following table.
Name

Title

Number of SharesKazuo Inamori

Chairman Emeritus and Director

6,806,165

Kensuke Itoh

Chairman of the Board and Representative
Director

557,072

54

Name

Title

Number of Shares

Yasuo Nishiguchi

President and Representative Director

4,095

Masahiro Umemura

Executive Vice President and Representative
Director

5,000

Michihisa Yamamoto

Executive Vice President and Representative
Director

9,232

Yuzo Yamamura

Director

82,000

Naoyuki Morita

Director

5,600

Koji Seki

Director

4,318

Noboru Nakamura

Director

3,000

Isao Kishimoto

Director

3,000

Hisao Hisaki

Director

3,171

Rodney N. Lanthorne

Director

3,291 (ADR)John S. Gilbertson

Director

15,234 (ADR)

Atsushi Mori

Corporate Auditor

10,000

Yuji ItohCorporate Auditor

2,037

Yasuo Akashi

Corporate Auditor

6,323

Osamu Nishieda

Corporate Auditor

1,000,137

Shinji Kurihara

Corporate Auditor—

Isao Yukawa

Managing Executive Officer

1,200

Hisashi Sakumi

Managing Executive Officer

9,000

Hideki Ishida

Managing Executive Officer

1,000

Tsutomu Yamori

Managing Executive Officer

1,600

Masahiro Inoue

Managing Executive Officer

1,000

Eiichi Toriyama

Managing Executive Officer

1,000

Makoto Kawamura

Managing Executive Officer

1,000

Tatsumi Maeda

Managing Executive Officer

1,100

Akiyoshi Okamoto

Senior Executive Officer

4,864

Takashi Itoh

Senior Executive Officer

9,000

Masato Takeda

Senior Executive Officer

1,000

Yoshihiko Nishikawa

Senior Executive Officer

2,102

Susumu Ohshima

Senior Executive Officer

1,000

Koji Mae

Senior Executive Officer

2,200

Tetsuo Kuba

Executive Officer—

Osamu Nomoto

Executive Officer

115

Gen Takayasu

Executive Officer

400

Nobuhiro Ochiai

Executive Officer

300

55

Name

Title

Number of Shares

Shigeru Osaka

Executive Officer—

Yasuyuki Yamamoto

Executive Officer—

Junichi Jinno

Executive Officer—

Keijiro Minami

Executive Officer

200

Goro Yamaguchi

Executive Officer

3,400

Junzo Katsuki

Executive Officer—

Yukihiro Takarabe

Executive Officer

100

Takashi Naruko

Executive Officer

300

Hidenori Miyata

Executive Officer

100

Masakazu Mitsuda

Executive Officer

500

Yoshihito Ota

Executive Officer

500

Total

8,544,131 shares
and18,525 ADSs

Stock Option Plans
On May 19, 1999, the Board of Directors decided to submit a resolution to the stockholders for approval of
the implementation of the Company’s first stock option plan (Plan 1) for all Directors and certain key employees
and to purchase shares of the Company’s own common stock for transfer to them under the plan. Upon theapproval of shareholders at the ordinary general meeting of shareholders held on June 29, 1999, stock options
were granted as of September 7, 1999 to 36 Directors to acquire 6,000 to 16,000 shares of common stock each,and to 858 key employees to acquire 1,200 shares of common stock each. The exercise price has been set at¥8,029 per share. In order to cover the options for Plan 1, the Company purchased 1,325,600 shares of common
stock during August 1999 on the Tokyo Stock Exchange at an aggregate purchase price of approximately ¥9,714
million.
On May 17, 2000, the Board of Directors decided to submit a resolution to the stockholders for approval of
introduction of a second stock option plan (Plan 2) for certain key employees and authorized the purchase of76,800 shares of the Company’s common stock. This stock option plan was approved by our shareholders at theordinary general meeting of shareholders held on June 29, 2000. Stock options were granted as of September 8,2000 to 64 key employees to acquire 1,200 shares of common stock each. The exercise price has been set at¥18,900 per share. In order to cover the options for Plan 2, the Company purchased 76,800 shares of common
stock during August 2000 on the Tokyo Stock Exchange at an aggregate purchase price of approximately ¥1,283
million.
On May 16, 2001 the Board of Directors decided to submit a resolution to the stockholders for approval of
introduction of a third stock option plan (Plan 3) for certain Directors and key employees and to purchase 59,200
shares of the Company’s common stock. In accordance with the approval of our shareholders at the ordinary
general meeting of shareholders held on June 27, 2001, stock options were granted as of September 7, 2001 tonine Directors to acquire amounts ranging from 1,000 to 2,400 shares of common stock each, and 72 key
employees to acquire 600 shares of common stock each. The exercise price has been set at ¥9,470 per share. In
order to cover the options for Plan 3, the Company purchased 59,200 shares of its own common stock in August
2001 on the Tokyo Stock Exchange at an aggregate purchase price of approximately ¥506 million.
56

On April 26, 2002, the Company’s Board of Directors decided to submit a resolution to the stockholders forapproval of the issuance of stock acquisition rights (Plan 4) (as a result of the recent amendments to theCommercial Code, “stock options” are currently called “stock acquisition rights”) to Corporate Auditors andcertain key employees of the Company, and Directors and certain key employees of its subsidiaries. Such stockacquisition rights entitle the holders thereof to acquire 143,600 shares of common stock of the Company in theaggregate. In accordance with the approval of shareholders at the ordinary general meeting of shareholders heldon June 26, 2002, the stock acquisition rights were issued as of September 2, 2002 to 385 persons to acquireamounts ranging from 300 to 1,500 shares of common stock each. The exercise price has been set at ¥9,290 per
share. The Company covered the stock acquisition rights for Plan 4 by utilizing its holdings of common stock of
the Company (treasury stock).
As of August 31, 2003, the amount of common stock to be issued upon the exercise of all outstanding
options issued to Directors, Corporate Auditors and Executive Officers is set forth in further detail in thefollowing table. Note, however, that there can be no assurances that the options described above will be exercisedin whole or in part.
Option Holder

Title

Total Options
Outstanding

Exercise Price per
Share

Expiration Date

Kazuo Inamori

Chairman Emeritus
and Director

16,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Kensuke Itoh

Chairman of theBoard and
Representative
Director

16,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Yasuo Nishiguchi

President andRepresentative
Director

10,900 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Masahiro Umemura

Executive Vice
President andRepresentative
Director

12,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Michihisa Yamamoto

Executive Vice
President andRepresentative
Director

9,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Yuzo Yamamura

Director———

Naoyuki Morita

Director

3,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Koji Seki

Director

4,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Noboru Nakamura

Director

12,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Isao Kishimoto

Director

8,000 (Plan 1)
1,000(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Hisao Hisaki

Director

5,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Rodney N. Lanthorne

Director

10,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

John S. Gilbertson

Director

8,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Atsushi Mori

Corporate Auditor

3,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Yuji ItohCorporate Auditor

1,500 (Plan 4)

9,290 Yen (Plan 4)

September 30, 2003

Yasuo Akashi

Corporate Auditor

10,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

57

TitleTotal Options
Outstanding

Exercise Price per
Share

Expiration Date

Osamu Nishieda

Corporate Auditor

—

—

—

Shinji Kurihara

Corporate Auditor

—

—

—

Isao Yukawa

Managing Executive
Officer

6,000 (Plan 1)
1,000(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Hisashi Sakumi

Managing Executive
Officer

6,000 (Plan 1)
1,000(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Hideki Ishida

Managing Executive
Officer

4,500 (Plan 1)
1,000(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Tsutomu Yamori

Managing Executive
Officer

4,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Masahiro Inoue

Managing Executive
Officer

4,500 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Eiichi Toriyama

Managing Executive
Officer

900 (Plan 1)
2,400(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Makoto Kawamura

Managing Executive
Officer

600 (Plan 1)
2,400(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Tatsumi Maeda

Managing Executive
Officer

1,200 (Plan 1)
2,400(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Akiyoshi Okamoto

Senior Executive
Officer

4,500 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Takashi Itoh

Senior Executive
Officer

4,500 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Masato Takeda

Senior Executive
Officer

4,500 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Yoshihiko Nishikawa

Senior Executive
Officer

6,000 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Susumu Ohshima

Senior Executive
Officer

900 (Plan 1)
2,400(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Koji Mae

Senior Executive
Officer

1,200 (Plan 1)
2,400(Plan 3)

8,029 Yen (Plan 1)
9,470 Yen (Plan 3)

September 30, 2003

Tetsuo Kuba

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Osamu Nomoto

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Gen Takayasu

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Nobuhiro Ochiai

Executive Officer

900 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Shigeru Osaka

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Yasuyuki Yamamoto

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Junichi Jinno

Executive Officer

900 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Keijiro Minami

Executive Officer

600 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Goro Yamaguchi

Executive Officer

900 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Option Holder

58

TitleTotal Options
Outstanding

Exercise Price per
Share

Expiration Date

Junzo Katsuki

Executive Officer

900 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Yukihiro Takarabe

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Takashi Naruko

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Hidenori Miyata

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Masakazu Mitsuda

Executive Officer

800 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

Yoshihito Ota

Executive Officer

1,200 (Plan 1)

8,029 Yen (Plan 1)

September 30, 2003

192,000 (Plan 1)
16,000 (Plan 3)
1,500 (Plan 4)——

Option Holder

Total

On April 25, 2003, the Company’s Board of Directors decided to submit a resolution to the stockholders forapproval of the issuance of stock acquisition rights (Plan 5) to Directors, Corporate Auditors, Corporate
Executive Officers and certain key employees of the Company and its subsidiaries. Such stock acquisition rights
entitle the holders thereof to acquire 1,100,000 shares of common stock of the Company in the aggregate. In
accordance with the approval of our shareholders at the ordinary general meeting of shareholders held on June25, 2003, the stock acquisition rights were issued as of September 1, 2003 to 1,390 persons to acquire amounts
ranging from 600 to 8,000 shares of common stock each, or to acquire 1,070,100 shares of common stock in theaggregate. The exercise price and the exercisable period have been set at ¥7,900 per share, and from October 1,
2003 to September 30, 2008, respectively. The company will cover the stock acquisition rights for Plan 5 byutilizing its holdings of common stock of the Company (treasury stock).
The following table shows the stock options of Plan 5 issued to Directors, Corporate Auditors and Executive
Officers.
Option Holder

Title

Total Options
Outstanding

Kazuo Inamori

Chairman Emeritus and Director

8,000

Kensuke Itoh

Chairman of the Board and Representative
Director

8,000

Yasuo Nishiguchi

President and Representative Director

8,000

Masahiro Umemura

Executive Vice President and Representative
Director

6,000

Michihisa Yamamoto

Executive Vice President and Representative
Director

6,000

Yuzo Yamamura

Director

6,000

Naoyuki Morita

Director

6,000

Koji Seki

Director

6,000

Noboru Nakamura

Director

6,000

Isao Kishimoto

Director

5,500

Hisao Hisaki

Director

5,000

Rodney N. Lanthorne

Director

4,500

John S. Gilbertson

Director

4,500

Atsushi Mori

Corporate Auditor

3,000

59

Option Holder

Title

Total Options
Outstanding

Yuji ItohCorporate Auditor

3,000

Yasuo Akashi

Corporate Auditor

3,000

Osamu Nishieda

Corporate Auditor—

Shinji Kurihara

Corporate Auditor—

Isao Yukawa

Managing Executive Officer

4,000

Hisashi Sakumi

Managing Executive Officer

4,000

Hideki Ishida

Managing Executive Officer

4,000

Tsutomu Yamori

Managing Executive Officer

4,000

Masahiro Inoue

Managing Executive Officer

4,000

Eiichi Toriyama

Managing Executive Officer

4,000

Makoto Kawamura

Managing Executive Officer

4,000

Tatsumi Maeda

Managing Executive Officer

4,000

Akiyoshi Okamoto

Senior Executive Officer

3,000

Takashi Itoh

Senior Executive Officer

3,000

Masato Takeda

Senior Executive Officer

3,000

Yoshihiko Nishikawa

Senior Executive Officer

3,000

Susumu Ohshima

Senior Executive Officer

3,000

Koji Mae

Senior Executive Officer

3,000

Tetsuo Kuba

Executive Officer

2,500

Osamu Nomoto

Executive Officer

2,500

Gen Takayasu

Executive Officer

2,500

Nobuhiro Ochiai

Executive Officer

2,500

Shigeru Osaka

Executive Officer

2,500

Yasuyuki Yamamoto

Executive Officer

2,500

Junichi Jinno

Executive Officer

2,500

Keijiro Minami

Executive Officer

2,500

Goro Yamaguchi

Executive Officer

2,500

Junzo Katsuki

Executive Officer

2,500

Yukihiro Takarabe

Executive Officer

2,500

Takashi Naruko

Executive Officer

2,500

Hidenori Miyata

Executive Officer

2,500

Masakazu Mitsuda

Executive Officer

2,500

Yoshihito Ota

Executive Officer

2,500

Total

176,00060

Item 7.

Major Shareholders and Related Party Transactions

A. Major Shareholders
As far as is known to the Company, it is not, directly or indirectly, owned or controlled by any othercorporation or by the Japanese or any foreign government, and there is no arrangement which may at a
subsequent date result in a change in control of the Company.
Under the Securities and Exchange Law of Japan, any person that becomes a holder (together with its
related persons) of 5% of the total issued voting shares of a company listed on any Japanese stock exchange(including ADSs representing such shares) must file a report with the Director of the relevant Local Finance
Bureau and send a copy of such report to the company. A similar report must also be filed if the percentage
holding of a holder of more than 5% of the total issued voting shares of a company increases or decreases by 1%
or more. According to such reports filed with the Company between January 1, 1998 and June 25, 2003,
currently there are no 5% or greater beneficial shareholders of the Company.
According to Citibank N.A., depositary for Kyocera’s ADSs, as of March 31, 2003, 3,816,903 shares ofKyocera’s common stock were held in the form of ADSs and there were 908 ADS holders of record in the UnitedStates. According to Kyocera’s register of shareholders, as of March 31, 2003, there were 91,022 holders of theCompany’s common stock of record worldwide. As of March 31, 2003, there were 121 record holders ofKyocera’s common stock with addresses in the United States, holding 14,776,474 shares of the outstanding
common stock on that date. Because some of these shares were held by brokers or other nominees, the number ofrecord holders with addresses in the United States might not fully show the number of beneficial owners in the
United States.
B. Related Party Transactions
Significant customer
In fiscal 2003, Kyocera’s sales to KDDI amounted to ¥115,778 ($981), which slightly exceeded 10.0% of its
net sales. KDDI provides telecommunication services, and Kyocera sells mainly telecommunications equipment
to KDDI. The Company made an equity investment in KDDI when it was founded, and currently a director of theCompany is a member of the board of directors of KDDI. At March 31, 2003, the Company’s equity interest inKDDI is 13.5%. Kyocera serves KDDI as an independent vendor in terms of price determination, remittancecondition and product distribution. All of the agreements and ongoing contractual commitments between
Kyocera and KDDI have been made on an arm’s-length basis. Kyocera expects that KDDI will remain asignificant customer in the future.
Investments in and advances to affiliates
As of March 31, 2003, the Company owned a 28.09% interest in Kinseki, a major manufacture of crystal
related components, a 27.48% interest in SK TELETECH CO., LTD., a manufacture of communicationequipment device and a 36.02% interest in Taito Corporation (Taito), which operates amusement businesses. On
December 5, 2002, the Company acquired an additional 50,000 shares of Kinseki. As a result of the acquisition,
the Company’s equity interest in Kinseki increased form 27.95% to 28.09%. The difference between investment
and equity of net assets to Kinseki was ¥5,159 ($44) at March 31, 2003.
The Company recognized losses on devaluation of investment to Kinseki, amounting ¥5,159 ($44) due to a
substantial fall in its market value in fiscal 2003.
On August 1, 2003, Kyocera made Kinseki a wholly-owned subsidiary through a stock swap. From thisdate, Kinseki will be a consolidated subsidiary for purposes of our financial statements. Prior to this date, Kinseki
continued to be accounted for under the equity method.
61

At March 31, 2002, the unamortized excess of the Company’s equity in the underlying net assets of Taito
over its investments was ¥919. Upon adoption of SFAS No. 141, Kyocera wrote off ¥919 ($8) of unamortizeddeferred credit related to an excess over cost arising from its investment in Taito that was accounted for by theequity method as a cumulative effect of change in accounting principle in the first half of fiscal 2003.
As of March 31, 2002 and 2003, Kyocera’s trade receivables from affiliates were ¥679 and ¥832 ($7),
respectively, and in fiscal 2001, 2002 and 2003, Kyocera’s sales to affiliates were ¥53,808, ¥2,387 and ¥3,080($26). As the Company’s equity interest in KDDI decreased from 25.16% to 15.30%, and consequently KDDIwas no longer affiliate of Kyocera from October 1, 2001, Kyocera’s sales to affiliates in fiscal 2002 decreased
significantly compared with fiscal 2001.
C. Interests of Experts and Counsel
Not Applicable.
Item 8.

Financial Information

A. Consolidated Statements and Other Financial Information
Financial Statements
The information required by this item is set forth beginning on page F-2 of this Form 20-F.
Legal Proceedings
The following are material pending, concluded and settled legal proceedings (other than routine litigation
incidental to the business) to which the Company or any of its subsidiaries is a party or to which any of theirproperty is subject.
On September 1, 1994, the International Chamber of Commerce issued its award with respect to thearbitration between the Company and LaPine Technology Corporation (LTC), Prudential-Bache Trade
Corporation (PBTC) (presently renamed Prudential-Bache Trade Services, Inc.), et al. for the alleged breach ofan agreement by the Company in connection with the reorganization of LTC. The award ordered the Company to
pay to LTC and PBTC as damages, approximately ¥30,326 ($257,000), including interest, arbitration costs andattorneys’ fees. The Company filed a motion to vacate, modify and correct the award in the U.S. District Court
for the Northern District of California pursuant to an agreement between the parties providing for broad judicial
examination of arbitration awards. LTC and PBTC filed a motion to confirm the award. On December 11, 1995,
the District Court ruled that the agreement between the parties concerning judicial examination of the award wasinvalid and granted the motion filed by LTC and PBTC without examining the merits of the arbitration award.
On January 9, 1996, the Company appealed to the Ninth Circuit Court of Appeals. On December 9, 1997, theNinth Circuit, reversed the District Court, concluded that the provisions in the parties’ arbitration agreement
providing for broad judicial review were valid and ordered the case returned to the District Court for review of
the award under the standards agreed to by the parties. On April 4, 2000, the District Court issued an orderconfirming the arbitrators’ conclusions of law in Phase 1 of the arbitration. On October 2, 2000, the District
Court entered its initial decision on Phase 2 of the arbitration award, which consists of the money damages
award. The Court confirmed all of the arbitrators’ findings of facts and conclusions of law, except for one
important finding of fact about LTC’s profitability in the second quarter of 1987. The Court ruled that thearbitrators’ finding that LTC achieved an operating profit in the second quarter of 1987 was not supported bysubstantial evidence. Subsequently, on March 6, 2001, the District Court entered an order confirming Phase 2 of
the award, except for the one finding of fact vacated by its October 2, 2000 ruling. The Court’s March 6, 2001
order includes the confirmation of the Arbitrators’ award of damages. On April 3, 2001, the Company filed its
62

Notices of Appeal of the District Court’s orders confirming the arbitral award. On May 17, 2001, the District
Court entered its amended judgment, ordering compensation to be paid by the Company to LTC and PBTC in an
aggregate amount of ¥50,472 ($427,728) plus prejudgment and postjudgment interest. On May 25, the Company
filed Notices of Appeal of the judgment. On June 21, 2001, the District Court entered an order awarding LTC
and PBTC attorneys’ fees and disbursements. On July 5, 2001, the Company filed Notices of Appeal of thatorder. The Company’s appeal brief was filed in the Ninth Circuit Court of Appeals on August 29, 2001. The
Company filed a Reply Brief on December 5, 2001. A hearing was held in the Ninth Circuit Court of Appeals on
May 13, 2002. The Ninth Circuit Court of Appeals issued panel decision on July 23, 2002, affirming the District
Court’s judgment and award in its entirety. According to the judgment, the Company’s compensation to be paid
was approximately ¥53,454 ($453,000), inclusive of prejudgment and postjudgment interest. The Company filed
a Petition for Rehearing and Rehearing En Banc on August 6, 2002, seeking a rehearing of its appeal before thepanel that issued the opinion, and before an en banc panel of eleven Ninth Circuit Judges. On October 1, 2002,
the Ninth Circuit Court of Appeals entered an order directing LTC and PBTC to file a response to the Company’s
petition. On October 11, 2002, LTC and PBTC filed a response opposing a rehearing of the appeal. On October30, 2002, the Ninth Circuit Court of Appeals entered an order granting the Company leave to file a reply to the
response filed by LTC and PBTC. On December 17, 2002, the Ninth Circuit Court of Appeals entered an order
granting the Company’s petition for en banc review, and withdrawing the July 23 panel decision.
On August 29, 2003, an en banc panel of the Ninth Circuit Court of Appeals issued a decision that overruled
the Court of Appeals panel decision of December 9, 1997. The en banc panel decision concluded that the judicial
review provision of the parties’ arbitration agreement was unenforceable, and reinstated the December 11, 1995
order of the District Court that granted the motion of LTC and PBTC to confirm the award. The Company ispresently reviewing the August 29, 2003 decision of the en banc panel of the Court of Appeals to determine
whether the Company will seek review in the Supreme Court of the United States.
If the Company is ultimately unsuccessful in reversing any aspect of the current adverse judgment, theCompany may be required to pay damages, inclusive of costs and interest as of September 2, 2003, ofapproximately ¥56,050 ($475,000). The Company owns one third of the outstanding stock of LaPine Holding
Company, which in turn owns 100% of the stock of LTC. Therefore, one third of net assets of LTC after thepayment of damages, inclusive of costs and interest to date, any excess of liability for this contingency from theCompany will be ultimately reimbursed to the Company. Taking into account this equity interest, the Company
has set aside accrued litigation expenses of approximately ¥41,862($354,763) at March 31, 2003 in respect ofany potential adverse judgment in this case, and any excess of liability for this contingency would be incurred as
an expense. In light of this contingency, the Company believes that such an expense would not have a significant
effect on Kyocera’s consolidated results of operations and financial condition in fiscal 2004. In connection withthis litigation, in 1995 the Company purchased from a bank a letter of credit, which remains in place as security
for the arbitral award. In order to minimize facility fees for the letter of credit, the Company deposited ¥56,368($477,695) in cash on hand restricted for use at March 31, 2003. Kyocera is involved in litigation, and disputes in
addition to the above. However, based on the information available, management believes that damages, if any,
resulting from these actions will not have a significant effect on the consolidated financial statements.
Dividend Policy
Since becoming a public company, we have endeavored to increase dividends to our shareholders as ourbusiness improves. We have also sought to provide substantial dividends through share distributions and stock
splits when appropriate, in order to benefit shareholders. We will continue to seek to improve profits and cash
flow per share in order to increase our dividends to shareholders while maintaining a sufficiently high level ofcapital to undertake strategic investments.
B. Significant Changes
Except as disclosed in this annual report, there have been no significant changes since March 31, 2003.
63

Item 9.

The Offer and Listing

A. Offering and Listing Details
Price Range of Shares
The principal non-United States market on which the shares of Common Stock of the Company are traded is
the Tokyo Stock Exchange, the largest stock exchange in Japan. The American Depositary Shares of theCompany, each representing one share of Common Stock of the Company, are traded on the New York Stock
Exchange. Citibank, N.A. acts as the Depositary in respect of the American Depositary Shares. Common Stockof the Company is also listed on the Osaka Securities Exchange in Japan.

*

Fiscal Year ended March 31

Tokyo Stock Exchange
Price per Share ofCommon Stock (yen)
High
Low

New York Stock
Exchange
Price per American
Depositary Share(dollars)*
High
Low

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 7,460
28,00019,50012,90010,070¥4,800
6,200
9,000
7,000
5,630

$ 59.00
280.94186.60105.7280.27$39.13
50.75
73.82
53.77
47.96

Most Recent 6 months

High

Low

High

Low

March, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,460
6,320
6,600
7,320
8,150
7,520

5,630
5,570
5,660
6,610
6,730
6,400

54.25
53.25
55.50
61.34
68.20
64.00

48.20
47.25
48.12
55.89
57.02
54.50

The prices of American Depositary Shares are based upon reports by the NYSE, with all fractional figuresrounded up to the nearest two decimal points.

64

The following table shows the information about high and low sales prices for each quarterly period in thetwo fiscal years ended March 31, 2003 in respect of the shares of Common Stock of the Company on the Tokyo
Stock Exchange, and the American Depositary Shares on the New York Stock Exchange.
For Voting Securities by Fiscal Quarter
2002
1st

Common Stock:Market price per share (A) . . . . . . . . . . . . . . . . . . . . . . . . . .

—High
—Low

Cash dividends paid per share . . . . . . . . . . . . . . . . . . . . . . . .
American Depositary Share
Market price per share (B) . . . . . . . . . . . . . . . . . . . . . . . . . . —High—Low
Cash dividends paid per share (C) . . . . . . . . . . . . . . . . . . . . .

2nd

3rd

4th

¥12,900 ¥11,020
10,070
7,000
30.00
—

¥9,960 ¥10,390
7,230
7,200
30.00
—

$105.72 $ 87.61
82.40
59.33
0.24
—

$80.73 $ 77.74
59.80
53.77
0.24
—

2003
1st

Common Stock:Market price per share (A) . . . . . . . . . . . . . . . . . . . . . . . . . .

—High
—Low

Cash dividends paid per share . . . . . . . . . . . . . . . . . . . . . . . .
American Depositary Share
Market price per share (B) . . . . . . . . . . . . . . . . . . . . . . . . . . —High—Low
Cash dividends paid per share (C) . . . . . . . . . . . . . . . . . . . . .

2nd

3rd

4th

¥10,070 ¥ 9,130
7,800
7,700
30.00
—

¥8,410 ¥ 7,140
6,520
5,630
30.00
—

$ 80.27 $ 75.93
62.21
64.35
0.25
—

$67.17 $ 59.63
55.22
47.96
0.24
—

(A) Price on the Tokyo Stock Exchange(B) Price on the New York Stock Exchange(C) Translated into U.S. dollars based on the exchange rates at each respective payment date
B. Plan of Distribution
Not Applicable.
C. Markets
See Item 9.A. of this Form 20-F for information on the markets on which our common stock is listed orquoted.
D. Selling Shareholders
Not Applicable.
E. Dilution
Not Applicable.
F. Expenses of the Issue
Not Applicable.
65

Item 10.

Additional Information

A. Share Capital
Not Applicable.
B. Memorandum and Articles of Association
Organization
The Company is a joint stock corporation (kabushiki kaisha) incorporated in Japan under the Commercial
Code. It is registered in the Commercial Register maintained by the Kyoto Local Registry Office of the Ministryof Justice.
Objects and Purposes
The objects of the Company are set forth in Article 2 of its Articles of Incorporation, as follows:(1) Manufacture and sale of and research on fine ceramics and various kinds of products utilizing fine ceramics;(2) Manufacture and sale of and research on single crystal materials and various kinds of products utilizing
single crystal materials;(3) Manufacture and sale of and research on composite materials;(4) Manufacture and sale of and research on specialty plastics;(5) Manufacture and sale of and research on measurement instruments for electronics;(6) Manufacture and sale of and research on electronic and electric instruments and parts thereof;(7) Manufacture and sale of and research on component parts of automobiles;(8) Manufacture and sale of and research on precious metals, precious stones and semiprecious stones andvarious kinds of products utilizing precious metals, precious stones and semiprecious stones;(9) Manufacture and sale of and research on accessories and interior and exterior decorations and ornaments;(10) Wholesales and retail sale of health foods;(11) Manufacture and sale of and research on material and equipment for medical use;(12) Manufacture and sale of and research on equipment utilizing solar energy;(13) Manufacture and sale of and research on optical machinery and instruments and precision machinery andinstruments and parts hereof;(14) Manufacture and sale of and research on machinery and equipment for business use and machinery andequipment for industrial use and parts thereof;(15) Manufacture and sale of and research on photosensitive materials for photographic use;(16) Design, control and contract of construction relating to public works, building, electric equipment andpiping construction;(17) Sale, purchase, lease, maintenance and brokerage of real estate;(18) Lease, maintenance and management of facilities relating to sports, recreation, medical care, hotels andrestaurants, and the travel agency business;(19) Road freight handling and warehousing;(20) Business relating to non-life insurance agency and life insurance canvassing, and general leasing, factoring
and finance business;66

(21) Sale and purchase of various kinds of plants and technology related thereto;(22) Design and sale of software relating to computers;(23) Disposition through sale and the like and acquisition through purchase and the like of patents and otherindustrial property rights and know-how appertaining to the preceding items and acting as intermediary insuch transactions;(24) Businesses relating to import and export of any of the foregoing items; and(25) All commercial activities relating or incidental to any of the foregoing.
Directors
Under the Commercial Code, the Board of Directors has the ultimate responsibility for the management of
the Company and each Representative Director, who is elected from among the members of the Board of
Directors, has the statutory authority to represent the Company in all respects. Under both the Commercial Codeand the Regulations of the Board of Directors of the Company, the Directors must refrain from engaging in any
business competing with the Company unless approved by the Board of Directors and any Director who has amaterial interest in the subject matter of a resolution to be taken by the Board of Directors cannot vote in such
resolution. The Commercial Code and the Articles of Incorporation of the Company provide that remuneration of
Directors and Corporate Auditors shall be determined at a general meeting of shareholders.
Except as stated below, neither the Commercial Code nor the Company’s Articles of Incorporation makeany special provision as to a Director’s or Corporate Auditor’s power to vote in connection with theircompensation; or the borrowing powers exercisable by a Representative Director (or a Director who is given
power by a Representative Director to exercise such powers), their retirement age or requirement to hold any
shares of capital stock of the Company.
The Commercial Code specifically requires a resolution of the Board of Directors for a joint stock
corporation to acquire or dispose of material assets; to borrow substantial amounts of money; to employ ordischarge from employment important employees, such as executive officers; and to establish, change or abolisha material corporate organization such as a branch office. The Regulations of the Board of Directors of theCompany require a resolution of the Board of Directors for the Company’s borrowing or lending of significant
amounts of money or giving of a guarantee of a significant amount of debt. There is no written rule as to what
constitutes a “significant” amount in these contexts. The Regulations of the Board of Directors of the Company
also require a resolution of the Board of Directors to approve any transaction between a Director and theCompany, allocation of the remuneration and bonuses of Directors as previously determined or approved by thegeneral meeting of shareholders and determination of the amount and manner of payment of retirement
allowances or condolence money payable to Directors, the determination of which has been previously entrusted
to the Board of Directors by the general meeting of shareholders.
Capital Stock
Authorized capital
Article 5 of the Articles of Incorporation of the Company provides that the total number of sharesauthorized for issuance by the Company is 600,000,000 shares. If shares of common stock are retired, the numberof shares so retired shall be deducted from the total number of shares authorized to be issued by the Company.
Dividends
The Articles of Incorporation of the Company provide that the fiscal year of the Company shall be a period
commencing on April 1 in each year and ending on March 31 of the following year, and the accounts of eachfiscal year shall be settled on March 31 of each year. Correspondingly, the Articles of Incorporation provide that67

dividends shall be paid to shareholders or pledgees who are registered on the shareholders register of theCompany as of the end of March 31 in each year. After the close of the fiscal period, the Board of Directors
prepares, among other things, a proposed allocation of profits for dividends and other purposes; this proposal issubmitted to the Corporate Auditors of the Company and to independent certified public accountants and thensubmitted for approval to the ordinary general meeting of shareholders, which is normally held in June each year.
In addition to provisions for dividends, if any, and for the legal reserve and other reserves, the allocation of
profits customarily includes a bonus to Directors and Corporate Auditors. In addition to year-end dividends, theCompany may, by resolution of the Board of Directors, distribute cash as interim dividends, pursuant to Article
293-5 of the Commercial Code (an “interim dividend”) to shareholders or pledgees of record at the end of each
September 30, without shareholders’ approval, but subject to the limitation described below.
The Commercial Code provides that a company may not make any distribution of profit by way of year-end
dividends or interim dividends for any fiscal period unless it sets aside in its legal reserve an amount equal to atleast (A) one-tenth of the amount paid out by it as appropriation of retained earnings (including any payments ofyear-end dividend and bonuses to Directors and Corporate Auditors) for such fiscal period or (B) one-tenth of
any interim dividend, as the case may be, until the sum of its legal reserve and its additional paid-in capital is atleast one-quarter of its stated capital.
Under the Commercial Code, the Company is permitted to distribute profits by way of year-end dividends
out of the excess of its net assets over the aggregate of:(i)

its stated capital;(ii) its additional paid-in capital;(iii) its accumulated legal reserve;(iv) the legal reserve to be set aside in respect of the fiscal period concerned and any other proposed
payment by way of appropriation of retained earnings; and(v) such other amounts as are set forth in an ordinance of the Ministry of Justice of Japan.
The Company may also pay interim dividends out of the excess of its net assets as appearing on its nonconsolidated balance sheet as of the last day of the immediately preceding fiscal year, over the aggregate of theamounts stated in (i) through (iv) above and (w) any amount subsequently paid by way of appropriation ofretained earnings, (x) any amount subsequently transferred from retained earnings to stated capital, (y) if theCompany has been authorized by a resolution of an ordinary general meeting of shareholders to purchase Shares,
the total amount of the purchase price of such Shares to be paid by the Company and (z) such other amounts as
are set out in an ordinance of the Ministry of Justice of Japan. The Company may not pay any interim dividends
where there is a risk that at the end of the fiscal year net assets might be less than the aggregate of the amounts
referred to in (i) through (v) above.
In Japan the “ex-dividend” date and the record date for dividends precede the date of determination of theamount of the dividend to be paid. The market price of shares generally goes ex-dividend on the third business
day prior to the record date.
Under its Articles of Incorporation, the Company is not obligated to pay any dividends that are not collected
within three years from the date when the payment thereof became due.
General Meeting of Shareholders
Pursuant to the Articles of Incorporation of the Company, an ordinary general meeting of shareholders of
the Company shall be convened within three months after the last day of each fiscal year, either in Kyoto City orat the Shiga Factory of the Company. In addition, the Company may hold an extraordinary general meeting ofshareholders whenever necessary.
68

Notice of a shareholders’ meeting, setting forth the place, time and purpose thereof, must be mailed to eachshareholder having voting rights (or, in the case of a non-resident shareholder, to the resident proxy or mailingaddress thereof in Japan) at least two weeks prior to the date set for the meeting. Under the Commercial Code,such notice may be given to shareholders by electronic means, subject to the consent by the relevant
shareholders.
Any shareholder holding at least 300 voting rights (see “‘Unit’ share system” below) or one percent of thetotal number of voting rights for six months or more may propose a matter to be considered at a general meetingof shareholders by submitting a written request to a Representative Director at least eight weeks prior to the dateset for such meeting.
Voting rights
A holder of shares constituting one or more whole units is entitled to one vote for each whole unit of shares,
except that neither the Company nor a corporate shareholder of which more than one-quarter of the total voting
rights are directly or indirectly held by the Company has voting rights in respect of the shares held by it. Except
as otherwise provided by law or by the Articles of Incorporation of the Company, a resolution can be adopted at a
general meeting of shareholders by a majority of the total number of voting rights. Under the Commercial Codeand the Company’s Articles of Incorporation, however, the quorum for the election of Directors and Corporate
Auditors is one-third of the total number of voting rights. The Company’s shareholders are not entitled tocumulative voting in the election of Directors. Shareholders may exercise their voting rights through proxies,
provided that the proxies are also shareholders holding voting rights. The Company’s shareholders also may casttheir votes in writing. Holders of shares who do not attend a general meeting of shareholders may also exercise
their voting rights by electronic means if the Board of Directors approves such method of exercising voting
rights.
The Commercial Code provides that certain important matters shall be approved by a “special resolution” ofa general meeting of shareholders, where the quorum is one-third of the total number of voting rights and theapproval of at least two-thirds of the voting rights represented at the meeting is required. Such matters include
any amendment to the Articles of Incorporation (except for increasing the number of the authorized shares inconnection with a stock split and reducing the number of shares constituting a full unit or abolishing the conceptof a unit share entirely in connection with the unit share system), the reduction of stated capital, the removal of a
Director or Corporate Auditor, the dissolution, merger or consolidation of the Company, the “share transfer” or“share exchange” (which creates a parent and a wholly-owned subsidiary relationship between the Company andanother company pursuant to the Commercial Code), the transfer of the whole or a substantial part of theCompany’s business, the takeover of the entire business of another company, a “corporate split” under theCommercial Code, any offer to persons other than the shareholders of new shares or existing shares held by theCompany at a “specially favorable” price, any grant to persons other than the shareholders of rights to subscribe
for or acquire shares from the Company (shinkabu-yoyakuken; “stock acquisition rights”) subject to “speciallyfavorable” conditions, or any offer to persons other than the shareholders of bonds with stock acquisition rights
subject to “specially favorable” conditions.
Under the Commercial Code, the Company’s shareholders will possess various rights, such as the right toreview and make copies of its Articles of Incorporation and the register of shareholders, to convene a general
meeting of shareholders, to propose a matter to be considered at a general meeting of shareholders, and to bringderivative actions, depending upon the number of shares held by them and the duration of their shareholding.
Subscription rights
Holders of the Company’s shares of capital stock have no pre-emptive rights under its Articles ofIncorporation. Authorized but unissued shares may be issued at such times and upon such terms as the Board of
Directors determines, subject to the limitations as to the offering of new shares at a “specially favorable” price69

mentioned under “Voting rights” above. The Board of Directors may, however, determine that shareholders of aparticular class of stock shall be given subscription rights regarding a particular issue of new shares of that class,in which case such rights must be given on uniform terms to all shareholders of that class of stock as at a record
date of which not less than two weeks’ prior public notice must be given. Each of the shareholders to whom suchrights are given must also be given notice of the expiry thereof at least two weeks prior to the date on which suchrights expire.
Liquidation rights
In the event of a liquidation of the Company, the assets remaining after payment of all debts and liquidation
expenses and taxes will be distributed among the holders of our shares of common stock in proportion to therespective numbers of shares held by each holder.
Record date
March 31 is the record date for the determination of shareholders entitled to receive the Company’s yearend dividends and to vote at the ordinary general meeting of shareholders with respect to the fiscal year ending
on such March 31. September 30 is the record date for interim dividends. In addition, the Company may set a
record date for determining the shareholders and/or beneficial shareholders entitled to other rights and for otherpurposes by giving at least two weeks prior public notice.
Repurchase by the Company of its capital stock
The Company may acquire shares (i) by way of purchase on any Japanese stock exchange on which sharesare listed or by way of tender offer (in either case pursuant to an ordinary resolution of an ordinary general
meeting of shareholders), (ii) from a specific shareholder other than the Company’s subsidiaries (pursuant to a
special resolution of an ordinary general meeting of shareholders) or (iii) from any of the Company’s subsidiaries(pursuant to a resolution of the Board of Directors). In the case of (ii) above, any other shareholder may make arequest directly to a Representative Director, more than five days prior to the relevant shareholders’ meeting, that
the Company acquire the shares held by this shareholder.
Any such acquisition of shares must satisfy certain requirements, including that the total amount of thepurchase price may not exceed the amount of the retained earnings available for year-end dividend payments plus
the amount of any reduction of the stated capital, additional paid-in capital or legal reserve (if this reduction is
authorized by a resolution of the relevant general meeting of shareholders) minus the sum of the amount to be
paid by way of appropriation of retained earnings and the amount of retained earnings to be transferred to thestated capital in respect of the relevant fiscal year pursuant to a resolution of the general meeting of shareholders.
However, if it is anticipated that the net assets, as stated on the Company’s non-consolidated balance sheet at theend of the immediately following fiscal year, will be less than the aggregate amount of the items described in (i)through (v) in “Capital stock—Dividends” above, the Company may not purchase these shares.
The Commercial Code permits the Company to hold shares acquired by it as treasury stock. Treasury stock
may be held by the Company for any time period and may be cancelled by resolution of its Board of Directors.
The Company may also transfer to any person shares held by it as treasury stock, subject to a resolution of its
Board of Directors, and subject also to other requirements similar to those applicable to the issuance of newshares. The Company may also utilize its treasury stock for the purpose of transfer to any person upon exercise ofstock acquisition rights or for the purpose of acquiring another company by way of merger, share exchange or
corporate split through exchange of treasury stock for shares or assets of the acquired company. No specificapproval by the Board of Directors or shareholders at a shareholders meeting is required for this utilization oftreasury stock, although the grant of the relevant stock acquisition rights or the relevant merger, share exchange
or corporate split must be approved, as the case may be, by the Board of Directors or shareholders at theCompany’s shareholders’ meeting.
70

“Unit” share system
Under the Company’s Articles of Incorporation, 100 shares constitute one “unit”. The Board of Directors
will be permitted to reduce the number of shares constituting a unit or to abolish the unit share system in its
entirety by amending the Company’s Articles of Incorporation without approval by shareholders. The number ofshares constituting a unit may not exceed 1,000 shares or one-two hundredths (1/200) of the number of all issued
shares, whichever is smaller.
No share certificates may be issued with respect to any shares constituting less than one unit. Consequently,
no certificates for shares other than a full unit or an integral multiple thereof will be issued (except for the
purpose of protection of the holders of shares constituting less than one unit). As the transfer of shares normallyrequires delivery of the relevant share certificates, any fraction of a unit for which no share certificates are issued
will not be transferable.
A holder of shares constituting less than one unit may require the Company to purchase such shares at theirmarket value.
Under the unit share system, a shareholder will have one vote for each unit of shares held by it. Shares notconstituting a full unit will carry no voting rights. Except as otherwise described above, holders of sharesconstituting less than one unit will have all the rights granted to shareholders under the Commercial Code.
A holder who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole unit.
Although, as discussed above, under the unit share system holders of less than a unit have the right to require theCompany to purchase their shares, holders of ADRs evidencing ADSs that represent other than integral multiples
of whole units are unable to withdraw the underlying shares of capital stock representing less than a unit and,
therefore, are unable, as a practical matter, to exercise the rights to require the Company to purchase such
underlying shares. As a result, access to the Japanese markets by holders of ADRs through the withdrawal
mechanism will not be available for dispositions of shares in lots of less than a unit. The unit share system does
not affect the transferability of ADSs, which may be transferred in lots of any size.
Miscellaneous
The Securities and Exchange Law of Japan requires any person who has become, beneficially and solely or
jointly, a holder of more than five percent of the total issued voting shares of the Company to file a reportconcerning such shareholdings with the Director of the relevant Local Finance Bureau of the Ministry of Financewithin five business days.
For this purpose, shares to be issued or transferred to these persons upon the exercise of stock acquisitionrights are included in determining both the size of the holding and the Company’s total issued voting sharecapital.
A similar report must also be filed in respect of any subsequent change of one percent or more in any suchholding, with certain exceptions. (For this purpose, any shares of the Company issuable to such person upon
conversion of convertible securities or exercise of stock acquisition rights, of which none are currently
outstanding, would be taken into account in determining both the number of shares held by such holder and theCompany’s total issued share capital.) Copies of such report must also be furnished to the Company and to all
Japanese stock exchanges on which the shares of the Company are listed.
Except for the general limitation under Japanese anti-trust and anti-monopoly regulations against holding ofshares of capital stock of a Japanese corporation which leads or may lead to a restraint of trade or monopoly, andexcept for general limitations under the Commercial Code or the Company’s Articles of Incorporation on therights of shareholders applicable regardless of residence or nationality, there is no limitation under Japanese laws
71

and regulations applicable to the Company or under its Articles of Incorporation on the rights of non-resident or
foreign shareholders to hold or exercise voting rights on the shares of capital stock of the Company.
There is no provision in the Company’s Articles of Incorporation that would have an effect of delaying,deferring or preventing a change in control of the Company and that would operate only with respect to merger,
acquisition or corporate restructuring involving the Company.
Daily Price Fluctuation Limits under Japanese Stock Exchange Rules
Share prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between
bids and offers. These exchanges set daily price limits, which limit the maximum range of fluctuation within asingle trading day. Daily price limits are set according to the previous day’s closing price or special quote.
Although transactions may continue at the upward or downward limit price if the limit price is reached on aparticular trading day, no transactions may take place outside these limits. Consequently, an investor wishing tosell at a price above or below the relevant daily limit may not be able to sell his or her shares at such price on aparticular trading day, or at all.
On September 5, 2003, the closing price of our shares of Common Stock on the Tokyo Stock Exchange was¥7,790 per share. The following table shows the daily price limit for a stock on the Tokyo Stock Exchange with aclosing price of between ¥5,000 and ¥10,000 per share, as well as the daily price limit if our per share price wereto rise to between ¥10,000 and ¥20,000, or fall to between ¥3,000 and ¥5,000. Other daily price limits would
apply if our per share price moved to other ranges.

Selected Daily Price Limits
Previous Day’s Closing Price or Special Quote

Over ¥3,000 Less than ¥5,000
Over ¥5,000 Less than ¥10,000
Over ¥10,000 Less than ¥20,000

Maximum Daily Price Movement¥ 500¥1,000¥2,000For a history of the trading price of our shares of Common Stock on the Tokyo Stock Exchange, see Item
9.A of this Form 20-F.
C. Material Contracts
During the preceding two years we have not entered into any material contracts, other than in the ordinary
course of business.
D. Exchange Controls
There is no foreign exchange control in Japan that may materially affect the import or export of capital,
including the availability of cash and cash equivalents for use by the Company, or the remittance of dividends orother payments to nonresident holders of the Company’s shares or of ADRs evidencing ADSs.
E. Taxation
Japanese Taxation
The following is a discussion summarizing material Japanese tax consequences to an owner of shares or
ADSs who is a non-resident of Japan or a non-Japanese corporation without a permanent establishment in Japanto which the relevant income is attributable. The statements regarding Japanese tax laws set forth below are72

based on the laws in force and as interpreted by the Japanese taxation authorities as at the date hereof. Thesestatements are subject to changes in the applicable Japanese laws or double taxation conventions occurring afterthat date. This summary is not exhaustive of all possible tax considerations which may apply to a particularinvestor. Potential investors should satisfy themselves as to:•the overall tax consequences of the ownership and disposition of shares or ADSs, including specificallythe tax consequences under Japanese law,•

the laws of the jurisdiction of which they are a resident, and•any tax treaty between Japan and their country of residence, by consulting their own tax advisers.

Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese withholding tax on
dividends paid by Japanese corporations. Stock splits, subject to the following, are not subject to Japaneseincome tax.
The Convention Between the United States of America and Japan for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “Treaty”), establishes the maximum rateof Japanese withholding tax which may be imposed on dividends paid to an United States resident or corporation
not having a “permanent establishment” in Japan. A “permanent establishment” in Japan is generally a fixedplace of business for industrial or commercial activity in Japan. Under the Treaty, the maximum withholding rate
for most shareholders is limited to 15% of the gross amount actually distributed. However, the maximum rate is
10% of the gross amount actually distributed, if the recipient is a corporation and•during the part of the paying corporation’s taxable year which precedes the date of payment of thedividend and during the whole of its immediately preceding taxable year, if any, at least 10% of thevoting shares of the paying corporation were owned by the recipient corporation, and•the amount of interest or dividends (other than interest derived from the conduct of a banking,insurance, or financing businesses and dividends or interest received form subsidiaries corporations)
received by the paying corporation during such immediately preceding taxable year is not more than
25% of its gross income.

For purposes of the Treaty and Japanese tax law, U.S. holders of ADRs will be treated as the owners of theshares underlying the ADSs evidenced by the ADRs.
Japan has income tax treaties, conventions or agreements, which generally provide that the rate ofwithholding tax may not exceed 15% for portfolio investors, with, among others, Australia, Belgium, Canada,
Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States of America. The withholding
tax rate is further reduced if investors and the Company have some capital relationship as provided for in an
applicable tax treaty.
In general, the rate of Japanese withholding tax applicable to dividends paid by the Company to nonresidents or non-Japanese corporations is 20%. With respect to dividends paid by the Company to any corporate
or individual shareholders (including those shareholders who are non-residents of Japan or non-Japanese
corporations), except for any individual shareholder who holds 5% or more of the outstanding total of the sharesissued by the relevant Japanese corporation, the said 20% withholding tax rate is reduced to (i) 10% fordividends due and payable before December 31, 2003, (ii) 7% for dividends due and payable on or after January
1, 2004 but on or before March 31, 2008 and (iii) 15% for dividends due and payable on or after April 1, 2008.
Under Japanese tax law, whichever is the lower of the maximum rate provided in the relevant tax treaty,
convention or agreement and the Japanese statutory rate will be applicable.
Gains derived from the sale outside Japan of the shares or ADSs by a non-resident of Japan or a nonJapanese corporation are in general not subject to Japanese income or corporation taxes. In addition, gains
73derived from the sale of shares or ADSs within Japan by a non-resident of Japan or non-Japanese corporation nothaving a permanent establishment in Japan are in general not subject to Japanese income or corporation taxes
The Company has paid or will pay any stamp, registration or similar tax imposed by Japan in connection
with the issue of the shares, except that the Company will not pay any tax payable in connection with the transfer
or sale of the shares by a holder thereof.
Japanese inheritance and gift taxes at progressive rates may be payable by an investor who has acquired
shares or ADRs as legatee, heir or donee.
United States Taxation
The following discusses United States federal income tax consequences of the ownership of shares or ADSs.
It only applies to holders of shares who hold their ADSs as capital assets. It does not address special classes ofholders, some of whom may be subject to special rules including:•tax-exempt entities,•

certain insurance companies,•

broker-dealers,•

traders in securities that elect to mark to market,•

investors liable for alternative minimum tax,•

investors that hold shares or ADSs as part of a straddle or a hedging or conversion transaction,•

U.S. holders (as defined below) whose functional currency is not the U.S. dollar, or•investors that actually or constructively own 10% or more of the Company’s voting stock.

This discussion is based on the tax laws of the United States, including the Internal Revenue Code of 1986,
as amended, its legislative history, existing and proposed regulations and administrative and judicial
interpretations, as currently in effect, as well as on the Treaty. These laws are subject to change, possibly on aretroactive basis. In addition, this discussion is based in part upon the representations of the depositary and theassumption that each obligation in the deposit agreement relating to the ADRs and any related agreement will be
performed in accordance with its terms.
For purposes of this discussion, a “U.S. holder” is a beneficial owner of shares or ADSs that is:•a citizen or resident of the United States,•

a domestic corporation,•an estate whose income is subject to United States federal income tax regardless of its source, or•a trust if a United States court can exercise primary supervision over the trust’s administration and one
or more United States persons are authorized to control all substantial decisions of the trust.

This discussion addresses only United States federal income taxation. An investor should consult his own
tax advisor regarding the United States federal, state and local and other tax consequences of owning anddisposing of shares or ADSs in his particular circumstances.
In general, and taking into account the earlier assumptions, for United States federal income tax purposes, if
the investor holds ADRs evidencing ADSs, the investor will be treated as the owner of the shares represented bythose ADSs. Exchanges of shares for ADSs, and ADSs for shares, generally will not be subject to United Statesfederal income tax.
74

The discussion under the headings “Taxation of Dividends” and “Taxation of Capital Gains” assumes that
the Company will not be treated as a passive foreign investment company (PFIC) for U.S. federal income tax
purposes. For a discussion of the rules that apply if the Company is treated as a PFIC, see the discussion under
the heading below “PFIC Rules.”Taxation of Dividends
Under the United States federal income tax laws, if the investor is a U.S. holder, the gross amount of any
dividend paid by the Company out of its current or accumulated earnings and profits, as determined for UnitedStates federal income tax purposes, is subject to United States federal taxation. If the investor is a non-corporate
U.S. holder, dividends paid after December 31, 2002 and before January 1, 2009 that constitute qualified
dividend income will be taxable at a maximum rate of 15% provided that the shares or ADSs are held for morethan 60 days during the 120-day period beginning 60 days before the ex-dividend date and meet other holding
period requirements. Dividends paid with respest to shares or ADSs will be qualified dividend income. The
investor must include any Japanese tax withheld from the dividend payment in this gross amount even though hedoes not in fact receive it.
The dividend is ordinary income that the investor must include in income when the investor, in the case ofshares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will
not be eligible for the dividends-received deduction.
The amount of the dividend distribution that the investor must include in his income as a U.S. holder will be
the U.S. dollar value of the Japanese yen payments made, determined at the spot Japanese yen/U.S. dollar rate on
the date the dividend distribution is includible in the investor’s income, regardless of whether the payment is infact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during
the period from the date the investor includes the dividend payment in income to the date he converts thepayment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax
rate applicable to qualified dividend income. The gain or loss generally will be from sources within the UnitedStates for foreign tax credit limitation purposes.
Distributions in excess of current and accumulated earnings and profits, as determined for United Statesfederal income tax purposes, will be treated as a return of capital to the extent of the investor’s basis in the sharesor ADSs and thereafter as capital gain.
Subject to certain limitations, the Japanese tax withheld in accordance with the Treaty and paid over toJapan will be creditable against the investor’s United States federal income tax liability. Special rules apply indetermining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax
rate. To the extent a refund of the tax withheld is available to the investor under Japanese law or under theTreaty, the amount of tax withheld that is refundable will not be eligible for credit against the investor’s UnitedStates federal income tax liability. Please see “Japanese Taxation,” above, for the procedures for obtaining a tax
refund.
Dividends constitute income from sources outside the United States, but generally will be “passive income”
or “financial services income.” Passive income or financial services income must be treated separately from othertypes of income for purposes of computing the foreign tax credit allowable to the investor.
Distributions of additional shares to the investor with respect to shares or ADSs that are made as part of a
pro rata distribution to all shareholders of the Company generally will not be subject to United States federal
income tax.
Taxation of Capital Gains
If the investor is a U.S. holder and the investor sells or otherwise disposes of his shares or ADSs, theinvestor will recognize capital gain or loss for United States federal income tax purposes equal to the difference75between the U.S. dollar value of the amount that the investor realizes and his tax basis, determined in U.S.
dollars, in his shares or ADSs. Capital gain of a non-corporate U.S. holder that is recognized on or after May 6,
2003 and before January 1, 2009 is generally taxed at a maximum rate of 15% where the holder has a holding
period greater than one year. Additionally, gain or loss will generally be from sources within the United States
for foreign tax credit limitation purposes.
PFIC Rules
The Company believes that shares and ADSs should not be treated as stock of a PFIC for United Statesfederal income tax purposes for its most recent taxable year. However, this conclusion is a factual determination
made annually and thus may be subject to change.
In general, if the investor is a U.S. holder, the Company will be a PFIC with respect to the investor if for anyof its taxable years in which the investor held the Company’s ADSs or shares:•

at least 75% of the Company’s gross income for the taxable year is passive income, or•at least 50% of the value, determined on the basis of a quarterly average of the company’s assets, areattributable to assets that produce or are held for the production of passive income.

Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties
derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income.
If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation istreated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, andas receiving directly its proportionate share of the other corporation’s income.
If the Company is treated as a PFIC, and the investor is a U.S. holder that did not make a mark-to-market
election, as described below, the investor will be subject to special rules with respect to:•

any gain the investor realizes on the sale or other disposition of his shares or ADSs and•any “excess distribution” that the Company makes to the investor (generally, any distributions to theinvestor during a single taxable year that are greater than 125% of the average annual distributions
received by the investor in respect of the shares or ADSs during the three preceding taxable years or, if
shorter, the investor’s holding period for the shares or ADSs.)

Under these rules:•

the gain or excess distribution will be allocated ratably over the investor’s holding period for the sharesor ADSs,•

the amount allocated to the taxable year in which the investor realized the gain or excess distribution
will be taxed as ordinary income,•the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate ineffect for that year, and•the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax
attributable to each such year.

Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions
by a PFIC.
If the investor owns shares or ADSs in a PFIC that is treated as marketable stock, the investor may make amark-to-market election. If the investor makes this election, the investor will not be subject to the PFIC rules
described above. Instead, in general, the investor will include as ordinary income each year the excess, if any, of76

the fair market value of his shares or ADSs at the end of the taxable year over his adjusted basis in his shares or
ADSs, and the investor will recognize the additional gain, if any, on sale or other disposition of his shares or
ADSs as ordinary income for that taxable year. The investor will also be allowed to take an ordinary loss inrespect of the excess, if any, of the adjusted basis of his shares or ADSs over their fair market value at the end of
the taxable year or over their final sale or disposition prices, but only to the extent of the net amount ofpreviously included income as a result of the mark-to-market election. The investor’s basis in the shares or ADSs
will be adjusted to reflect any such income or loss amounts.
If the investor owns shares or ADSs during any year that Kyocera is a PFIC he must file Internal Revenue
Service Form 8621.
F. Dividends and Paying Agents
Not Applicable.
G. Statement by Experts
Not Applicable.
H. Documents on Display
We are subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance
therewith, we will file annual reports on Form 20-F within six months of our fiscal year-end and other reports
and information on Form 6-K with the Securities and Exchange Commission. These reports and otherinformation can be inspected at the public reference room at the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. You can also obtain copies of such material by mail from the public
reference room of the Securities and Exchange Commission at prescribed fees. You may obtain information on
the operation of the Securities and Exchange public reference room by calling the Securities and Exchange
Commission in the United States at 1-800-SEC-0330. The Securities and Exchange Commission also maintains a
web site at www.sec.gov that contains reports, proxy statements and other information regarding registrants thatfile electronically with the Securities and Exchange Commission. As a foreign private issuer, we are exempt fromthe rules under the Securities Exchange Act of 1934 prescribing the furnishing and content of proxy statements toshareholders.
I.

Subsidiary Information
Not Applicable.

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

Kyocera is exposed to market risk, including changes in foreign exchange rates, interest rates and equity
prices. In order to hedge against these risks, Kyocera uses derivative financial instruments. Kyocera does nothold or issue derivative financial instruments for trading purposes. Kyocera regularly assesses these market risks
based on policies and procedures established to protect against adverse effects of these risks and other potential
exposures, primarily by reference to the market value of financial instruments. Although Kyocera may be
exposed to losses in the event of non-performance by counterparties, Kyocera believes that its counterparties are
creditworthy and does not expect such losses, if any, to be significant. There are no material quantitative changes
in market risk exposure at March 31, 2003, when compared to March 31, 2002.
In the normal course of business, Kyocera also faces risks that are either nonfinancial or nonquantifiable.
Such risks principally include country risk, credit risk, and legal risk, and are not represented in the following
tables.
77Foreign Exchange Risk:
Kyocera enters into foreign currency forward contracts to hedge certain existing assets and liabilities
denominated in foreign currencies, principally the U.S. dollar and Euro. All such contracts currently in effect will
mature generally within three months. The tables below provide information about Kyocera’s major foreign
currency forward contracts existing at March 31, 2003, setting forth the contract amounts and weighted averageexchange rates related to the U.S. dollar, Euro and the STG, which account for Kyocera’s foreign currency
forward transactions. The contract amounts are generally used to calculate the contractual payments to beexchanged under the contracts.

Forward exchange contracts to sell foreign currencies

Yen in millions (Pay/Receive)(Except average contractual rates)
US$/Yen US$/STG Euro/Yen

Contract amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average contractual rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥17,5354
119.79¥18,360 ¥21,255
(332)
(634)
1.59
125.45

Forward exchange contracts to purchase foreign currencies

Yen in millions(Receive/Pay)(Except averagecontractual rates)
US$/Yen Yen/STG

Contract amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average contractual rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 6,014105
118.02¥450
4189.32

Forward exchange contracts to sell foreign currencies

U.S. dollars in thousands(Pay/Receive)
US$/Yen
US$/STG
Euro/Yen

Contract amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$148,602
34$155,593 $180,127(2,814)(5,373)Forward exchange contracts to purchase foreign currencies

U.S. dollars
in thousands(Receive/Pay)
US$/Yen Yen/STG

Contract amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$50,966
890$3,81434

Kyocera also enters into foreign currency swap agreements to hedge against exposures to foreign currency
fluctuations of certain assets, principally those denominated in the U.S. dollar.
The table below presents contract amounts and weighted average exchange rates by expected (contracted)
maturity date. The contract amounts are generally used to calculate the contractual payments to be exchanged
under the contracts.
Foreign currency swaps

Yen in millions

Contract amount¥587 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted
average pay
rate(US$/Yen)

2004

Expected maturity date2005 2006 2007 2008

117.45

¥587

—

—

—

—

Foreign currency swaps

Contract amount$4,975 . . . . . . . . . . . . . . . . . . . . . . . .

Thereafter

Total

Fair
value

—

¥587

¥(10)

U.S dollars in thousands
Weighted
average pay
rate(US$/Yen)

2004

2005

2006

2007

2008

Thereafter

Total

Fair
value

117.45$4,975

—

—

—

—

—

$4,975$(85)

Expected maturity date78

Interest Rate Risk:
Kyocera enters into interest rate swaps and other contracts, which are mainly utilized by a Japanesesubsidiary, KLC, to reduce market risk exposure to changes in interest rates.
The tables below provide information about Kyocera’s derivative financial instruments and other financial
instruments that are sensitive to changes in interest rates. For interest rate swaps, the tables below present
notional principal amounts and weighted average interest rates by expected (contracted) maturity dates. Notionalamounts are used to calculate the contractual payments to be exchanged under the contracts.
Other finance receivables (including due within one year)

Yen in millions
Expected maturity date

Averageinterest
rate

Other finance receivable . . . . . . . . . . .

2004

2005

2006

2007

Thereafter

2008

Fair
value

Total

3.38% ¥27,595 56,969 30,037 576 1,064 32,494 ¥148,735 ¥151,041

Long term debt (including due within one year)

Yen in millions
Expected maturity date
Averagepay rate

Loans, principally from banks . . . . . . . . .

2004

2005

2006

2007

2008

Thereafter

Total

1.50% ¥30,198 43,222 3,260 5,260 2,571 6,423 ¥90,934 ¥91,731

Interest rate swap

Yen in millions
Expected maturity date

Notional principal amount

Averagereceive Averagerate
pay rate(Variable to Fixed)¥93,870 . . . . . . . . . . . . . . . . . . . . . .

0.61% 1.53% ¥25,348 49,026 6,496 —

2004

2005

2006

2007 2008—

Thereafter

Averageinterest
rate

Total

Fair
value

13,000 ¥93,870 ¥(2,243)

Other finance receivables (including due within one year)

Other financereceivables . . . . . . . . . . .

Fair
value

U.S dollars in thousands
Expected maturity date

2004

2005

2006

2007

2008

Thereafter

Total

Fair
value

3.38% $233,856 482,788 254,551 4,881 9,017 275,373 $1,260,466 $1,280,008

Long term debt (including due within one year)

U.S dollars in thousands
Expected maturity date

Averagepay rate

Loans, principally frombanks . . . . . . . . . . . . . . . . . .

2004

2005

2006

2007

2008

Thereafter

Total

Fair
value

1.50% $255,915 366,288 27,627 44,576 21,788 54,433 $770,627 $777,381

Interest rate swap

Yen in millions and U.S dollars in thousands
Expected maturity date
ThereFair
2005
2006 2007 2008
after
Total
value

Notional principal amount

Averagereceive Averagerate
pay rate(Variable to Fixed)¥93,870 . . . . . . . . . . . . . . . .

0.61% 1.53% $214,813 415,475 55,051 —

2004

79

—

110,169 $795,508 $(19,008)

Equity Price Risk:
Kyocera has marketable equity and debt securities, which are classified as available-for-sale and are carriedin the consolidated balance sheets at fair value. Changes in fair value are recognized as other comprehensive
income, net of taxes, as a separate component of stockholders’ equity. Gross unrealized losses on marketable
equity securities, which was ¥49,711 ($421), included ¥48,598 ($412) derived from a decline in the market valueof KDDI shares held by the Company Detailed information appears in Note 4 to our Consolidated Financial
Statements included in this Form 20-F.
Kyocera evaluates whether declines in fair value of debt and equity securities with readily determinable fairvalues are other-than-temporary. Other-than-temporary declines in fair value are recorded as a realized loss witha new cost basis. This evaluation is based mainly on the duration and the extent to which the fair value is lessthan cost and anticipated recoverability of fair value in the future.
Other-than-temporary loss on debt and equity securities with readily determinable fair values for the years
ended March 31, 2001, 2002 and 2003 amounted to ¥471, ¥5,061 and ¥2,717 ($23), respectively. At March 31,
2003, Kyocera held the following available-for-sale marketable equity and debt securities.
Yen in millions and U.S. dollars in thousands
March 31, 2003
Cost
Fair Value
Cost
Fair Value

Due within 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after 1 year to 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12.

¥ 20,005
23,622
23,054259,942¥ 19,985
23,497
18,694
212,902$ 169,534
200,187
195,373
2,202,898$ 169,364
199,127
158,424
1,804,254¥326,623¥275,078$2,767,992$2,331,169

Description of Securities Other Than Equity Securities

Not Applicable.

80

PART II
Item 13.

Defaults, Dividend Arrearages and Delinquencies

None.
Item 14.

Material Modification to Rights of Security Holders and Use of Proceeds

None.
Item 15.

Controls and Procedures

The Company’s management, with the participation of its principal executive and principal financial
officers, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules
13a-15(e) under the U.S. Securities Exchange Act of 1934) as of March 31, 2003. Based on that evaluation, theCompany’s principal executive and principal financial officers concluded that the disclosure controls andprocedures were effective as of that date.
No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) under
the U.S. Securities Exchange Act of 1934) occurred during the year ended March 31, 2003 that has materiallyaffected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 16A. Audit Committee Financial Expert
Not Applicable.
Item 16B. Code of Ethics
Not Applicable.
Item 16C. Principal Accountant Fees and Services
Not Applicable.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not Applicable.

81

PART IV
Item 17.

Financial Statements

In lieu of responding to this item, we have responded to Item 18 of this Form 20-F.
Item 18.

Financial Statements

The information required by this item is set forth beginning on page F-1 of this Form 20-F.
Description

(1)
(2)
(3)
(4)
(5)
(6)
(7)

Page

Report of Independent Auditors related to the Consolidated Financial Statements listed
below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at March 31, 2002 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the years ended March 31, 2001, 2002 and 2003 . . . .
Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2001, 2002
and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended March 31, 2001, 2002 and2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to The Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE II. Valuation and Qualifying Accounts for the years ended March 31, 2001,
2002 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 19.

Exhibits

Exhibit
NumberDescription

1.1
1.2
1.3
1.4
2.1
2.2

8.1
12.1
12.2
13.1
13.2
14.1

F-1
F-2 & F-3
F-4
F-5 & F-6
F-7
F-8 to F-45
F-46

Articles of Incorporation (English translation)
Share Handling Regulations of the Company (English translation)
Regulations of the Board of Directors of the Company (English translation)(incorporated byreference to the Registrant’s annual report on Form 20-F filed on September 19, 2002)
Regulations of the Board of Corporate Auditors of the Company (English translation)(incorporated
by reference to the Registrant’s annual report on Form 20-F filed on September 19, 2002)
Specimen common stock certificate of the Company (incorporated by reference to the Registrant’s
annual report on Form 20-F filed on September 24, 2001)
Amended and Restated Deposit Agreement, dated as of June 29, 1998 among the Company, Citibank
N.A. as Depositary and all owners and holders from time to time of American Depositary Receipts,
including the form of American Depositary Receipt, as amended by Amendment No.1 thereto, dated
as of January 5, 1999 (incorporated by reference to the Registrant’s annual report on Form 20-F filed
on September 24, 2001)
List of Significant Subsidiaries (See “Organizational Structure” in Item 4.C. of this Form 20-F)
Certification of the principal executive officer of the Company required by Rule 13a-14(a)Certification of the principal financial officer of the Company required by Rule 13a-14(a)Certification of the principal executive officer of the Company required by Rule 13a-14(b) andSection 1350 of Chapter 63 of Title 18 of the United States CodeCertification of the principal financial officer of the Company required by Rule 13a-14(b) andSection 1350 of Chapter 63 of Title 18 of the United States CodeConsent of PricewaterhouseCoopers with respect to the financial statements included in this Form
20-F

The Company has not included as exhibits certain instruments with respect to its long-term debt, the amountof debt authorized under each of which does not exceed 10% of its total assets, and it agrees to furnish a copy of
any such instrument to the Securities and Exchange Commission upon request.
82

Report of Independent Auditors
To the Board of Directors and Stockholders ofKyocera Corporation
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in allmaterial respects, the financial position of Kyocera Corporation and its consolidated subsidiaries at March 31,
2002 and 2003, and the results of their operations and their cash flows for each of the three years in the period
ended March 31, 2003 in conformity with accounting principles generally accepted in the United States ofAmerica. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial statement schedule are theresponsibility of the Company’s management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted our audits of these statements inaccordance with auditing standards generally accepted in the United States of America, which require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principles used and significant estimates madeby management, and evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion.
As discussed in Note 1 to the consolidated financial statements, Kyocera changed its method of accounting
for derivative instruments and hedging activities in the year ended March 31, 2002. Also, as discussed in Note 1
to the consolidated financial statements, Kyocera changed its method of accounting for business combination andgoodwill and other intangible assets in the year ended March 31, 2003.
/s/

PricewaterhouseCoopers

PricewaterhouseCoopers
Osaka, Japan
June 6, 2003

F-1

Kyocera Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31, 2002 and 2003
(Yen in millions and U.S. dollars and shares in thousands—Note 2)
ASSETS

2002

Current assets:
Cash and cash equivalents (Note 13) . . . . . . . . . . . . . . . . . . . . . . . ¥ 280,899
Restricted cash (Notes 13 and 14) . . . . . . . . . . . . . . . . . . . . . . . . . .
59,509
Short-term investments (Notes 4 and 13) . . . . . . . . . . . . . . . . . . . .
10,902
Trade receivables (Notes 7 and 9):
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,367
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
174,240
Short-term finance receivables (Notes 5, 9 and 13) . . . . . . . . . . . .
83,196

2003

2003¥ 298,310
56,36814,651$ 2,528,051
477,695
124,161

35,446
179,750
31,254300,390
1,523,305
264,864

Less allowances for doubtful accounts and sales returns . . . .

282,803(11,110)

246,450(7,703)

2,088,559(65,280)

Inventories (Notes 6 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

271,693
205,806
51,99722,061

238,747
183,156
52,136
19,0542,023,279
1,552,169
441,831
161,475

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

902,867

862,422

7,308,661

Investments and advances:
Investments in and advances to affiliates and unconsolidated
subsidiaries (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities and other investments (Notes 4 and 13) . . . . . . . . . . . . .

26,206
301,659

24,398308,137

206,7632,611,330

327,865

332,535

2,818,093

Long-term finance receivables (Notes 5, 9 and 13) . . . . . . . . . . . . . . . .

83,745

125,728

1,065,492

Property, plant and equipment, at cost (Note 9):Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,834
189,024568,717
11,59653,973203,387
587,076
5,483

457,398
1,723,619
4,975,220
46,466

Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . .

816,171(547,548)

849,919(600,414)

7,202,703(5,088,254)

Goodwill (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

268,623
30,757
16,202
15,399249,505
25,70315,06824,053

2,114,449
217,822
127,695
203,839¥1,645,458¥1,635,014$13,856,051

The accompanying notes are an integral part of these statements.
F-2

LIABILITIES AND STOCKHOLDERS’ EQUITY

2002

Current liabilities:
Short-term borrowings (Notes 9 and 13) . . . . . . . . . . . . . . . . . . . . ¥ 106,880
Current portion of long-term debt (Notes 9 and 13) . . . . . . . . . . . .
12,401
Notes and accounts payable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78,627
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,236
Accrued liabilities:
Payroll and bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,572
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,359
Litigation expenses (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . .
45,333
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,344
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,3562003¥ 107,886
30,198

2003$

914,288
255,915

98,10528,428

831,398
240,915

33,05928,06041,862
23,387
14,589280,161
237,797354,763
198,195
123,636

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .

359,108

405,574

3,437,068

Long-term debt (Notes 9 and 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued pension and severance costs (Note 10) . . . . . . . . . . . . . . . . . . .
Deferred income taxes (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96,85649,54928,045
4,892

60,73674,90622,8795,859

514,712634,797
193,890
49,652

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

538,450

569,954

4,830,119

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

67,53061,560521,695

Authorized 600,000 shares; issued 191,309 shares at March
31, 2003 and 190,318 shares at March 31, 2002 . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . .

115,703
158,228
798,407(22,750)

115,703
167,675
828,350(56,194)

980,534
1,420,974
7,019,915(476,220)

Common stock in treasury, at cost (Note 11):
6,345 shares at March 31, 2003 and 1,276 shares at
March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,110)(52,034)(440,966)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .

1,039,478

1,003,500

8,504,237¥1,645,458¥1,635,014$13,856,051

Commitments and contingencies (Note 14)
Stockholders’ equity (Note 15):
Common stock:F-3

Kyocera Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
For the three years ended March 31, 2003
(Yen in millions and U.S. dollars and shares in thousands, except per share amounts—Note 2)
2001

2002

2003

2003

Net sales (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,285,053
887,765¥1,034,574
795,201¥1,069,770
796,258$9,065,847
6,747,949

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . .

397,288
190,088239,373
187,812273,512190,124

2,317,898
1,611,220

Profit from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

207,200

51,561

83,388706,678

8,082(2,140)
9,494

7,304
(2,655)
5,238

5,194
(1,432)(5,405)44,017(12,136)(45,805)

2,209
—
(587)
174,076
1,888

1,559
—
(5,771)—(1,838)

3,092(5,159)(2,883)—(758)

26,203(43,720)(24,432)—(6,424)

Other income (expenses):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transaction gains (losses), net (Note 12) . . . . . .
Equity in earnings of affiliates and unconsolidated subsidiaries(Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on devaluation of investment in an affiliate (Note 7) . . . . . .
Losses on devaluation of investment securities (Note 4) . . . . . . .
Gain on stock issuance of an affiliate (Note 18) . . . . . . . . . . . . . .
Other, net (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

193,022

3,837(7,351)(62,297)

Income before income taxes, minority interests andcumulative effect of change in accounting principle . . . . .

400,222

55,39876,037644,381

Income taxes (Note 16):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

102,01158,47634,187(12,879)

33,665(885)

285,296(7,500)160,487

21,30832,780277,796239,735(20,206)

34,090(299)

43,257
164366,585
1,390

219,529

33,791

43,421

367,975—(1,838)(2,256)(19,119)

Income before minority interests and cumulative effect ofchange in accounting principle . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle-net of taxes of¥233 for the year ended March 31, 2002 (Note 1, 7 and 8) . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share (Note 20):
Income before cumulative effect of change in accounting principle:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared per share:
Per share of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of shares of common stock outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-4¥ 219,529¥

31,953¥

41,165$ 348,856¥ 1,161.20
1,157.83¥

178.74178.59¥233.02232.97

$

1.97
1.97

—
—

(9.72)(9.71)(12.11)(12.11)(0.10)(0.10)

1,161.20
1,157.83

169.02168.88220.91220.86

1.87
1.87

60.00

60.00

60.00

0.51

189,053
189,604

189,050
189,204

186,338
186,382

Kyocera Corporation and Consolidated Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the three years ended March 31, 2003
(Yen in millions and U.S. dollars and shares in thousands—Note 2)
CommonStock

Balance, March 31, 2000 (189,075) . . . . . . . . ¥115,703
Net income for the year . . . . . . . . . . . . . . .
Foreign currency translation
adjustments . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized losses on securities—net oftaxes of ¥11,016 (Note 4) . . . . . . . . . . . .
Reclassification adjustments for net losses
on securities—net of taxes of ¥5(Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional
Paid-in Capital¥157,768

Retained
Earnings(Note 15)¥569,610
219,529

Accumulated Other
Comprehensive Income Treasury Stock Comprehensive(Note 15)
(Notes 11)
Income¥(35,518)¥ (9,113)¥219,529

31,06431,064(15,213)(15,213)(6)(6)

Total comprehensive income for theyear . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥235,374

Cash dividends . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock (119) . . . . . . . . .
Reissuance of treasury stock (101) . . . . . . .
Balance, March 31, 2001 (189,057) . . . . . . . .
Net income for the year . . . . . . . . . . . . . . .
Foreign currency translation
adjustments . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized losses on securities—net oftaxes of ¥16,575 (Note 4) . . . . . . . . . . . .
Reclassification adjustments for net losses
on securities—net of taxes of ¥0(Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting
principle for derivative financial
instruments (Note 1) . . . . . . . . . . . . . . . .
Net unrealized losses on derivative
financial instruments (Note 12) . . . . . . .
Reclassification adjustments for net losses
on derivative financial instruments(Note 12) . . . . . . . . . . . . . . . . . . . . . . . . .

(11,342)(1,849)1,017

415
115,703

158,183

777,797
31,953(19,673)(9,945)¥ 31,953

20,44520,445(23,102)(23,102)

5

5

(106)

(106)

(379)

(379)

60

60

Total comprehensive income for theyear . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 28,876

Cash dividends . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock (83) . . . . . . . . . .
Reissuance of treasury stock (68) . . . . . . . .
Balance, March 31, 2002 (189,042) . . . . . . . .
Net income for the year . . . . . . . . . . . . . . .
Foreign currency translation
adjustments . . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment—
net of taxes of ¥6,702 (Note 10) . . . . . . .
Net unrealized losses on securities—net oftaxes of ¥1,599 (Note 4) . . . . . . . . . . . . .
Reclassification adjustments for net losses
on securities—net of taxes of ¥150
(Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized losses on derivative
financial instruments (Note 12) . . . . . . .

(11,343)
(628)
463

45
115,703

158,228F-5

798,407
41,165(22,750)(10,110)¥ 41,165(20,578)(20,578)(10,931)(10,931)(2,238)(2,238)

209

209

(146)

(146)

Common
Stock

Additional
Paid-in Capital

Retained
Earnings(Note 15)

Reclassification adjustments for net
losses on derivative financial
instruments (Note 12) . . . . . . . . . . . . .

Accumulated Other
Comprehensive Income Treasury Stock Comprehensive(Note 15)
(Notes 11)
Income240

240

Total comprehensive income for theyear . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock issuance for acquisition of a
subsidiary (991) . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock (5,080) . . . . . .
Reissuance of treasury stock (11) . . . . . .
Stock option plan of a subsidiary(Note 11) . . . . . . . . . . . . . . . . . . . . . . .

¥9,381(11,222)(42,015)91

066

Balance, March 31, 2003 (184,964) . . . . . . ¥115,703¥ 167,675¥ 828,350¥ (56,194)¥ (52,034)

Balance, March 31, 2002 . . . . . . . . . . . . . . . $980,534
Net income for the year . . . . . . . . . . . . . .
Foreign currency translation
adjustments . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment—
net of taxes of $56,797 (Note 10) . . . .
Net unrealized losses on securities—net
of taxes of $13,551 (Note 4) . . . . . . . .
Reclassification adjustments for net
losses on securities—net of taxes of$1,271 (Note 4) . . . . . . . . . . . . . . . . . .
Net unrealized losses on derivative
financial instruments (Note 12) . . . . . .
Reclassification adjustments for net
losses on derivative financial
instruments (Note 12) . . . . . . . . . . . . .

$1,340,915$6,766,161
348,856$(192,797)$ (85,678)$ 348,856(174,390)(174,390)(92,635)(92,635)(18,966)(18,966)

1,771

1,771

(1,237)(1,237)

2,034

2,034

Total comprehensive income for theyear . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock issuance for acquisition of a
subsidiary . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . .
Stock option plan of a subsidiary(Note 11) . . . . . . . . . . . . . . . . . . . . . . .
Balance, March 31, 2003 . . . . . . . . . . . . . . . $980,534

7,721$ 65,433
79,500(95,102)(356,059)
771

0
559
$1,420,974$7,019,915$(476,220)

The accompanying notes are an integral part of these statements.
F-6$(440,966)

Kyocera Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
For the three years ended March 31, 2003
(Yen in millions and U.S. dollars in thousands—Note 2)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Losses on inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates and unconsolidated subsidiaries . . . . . . . . . . . . . . . . .
Loss on devaluation of investment in an affiliate (Note 7) . . . . . . . . . . . . . . . . . . . . . .
Losses on devaluation of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on stock issuance of an affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle (Note 1, 7 and 8) . . . . . . . . . . . .
Foreign currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in assets and liabilities:
Decrease (increase) in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in notes and accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2001

2002

2003

2003

¥ 219,529¥ 31,953¥ 41,165$ 348,856

74,1724,273
2,816
58,476
20,206(2,209)—587(174,076)—(10,080)

88,497
3,593
11,872(12,879)
299(1,559)
—
5,771
—
1,838
(6,280)75,320(2,060)
6,966
(885)
(164)
(3,092)
5,159
2,883
—
2,256
5,139

638,305(17,458)
59,034(7,500)(1,390)(26,203)43,72024,432—
19,11943,551(56,147)(58,087)(9,531)45,12420,201
12,150
6,041(4,254)55,04740,443
4,683(41,600)(37,923)(4,424)
2,299
(701)

(948)
11,067
1,128
13,2474,380
1,319(1,259)(867)(8,034)
93,7889,559
112,263
37,119
11,178(10,670)(7,347)

Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(70,338)

108,976

119,589

1,013,466

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

149,191

140,929

160,754

1,362,322

Cash flows from investing activities:
Payments for purchases of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for purchases of held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for purchases of investments and advances . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and maturities of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for purchases of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of businesses, net of cash acquired (Note 21) . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8,702)(62,315)(3,377)
7,762
20,995(103,132)
9,473(6,535)368(3,986)(767)(47,402)(13,588)(465)
44,934
38,697(59,031)1,809(10,669)(60)(6,959)1,596(21,562)(30,682)(1,035)
6,892
27,458(40,481)
3,122(6,620)4,058(1,477)
1,815(182,729)(260,017)(8,771)
58,407
232,695(343,059)
26,458(56,102)34,390(12,517)
15,381

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(150,216)(51,138)(58,512)(495,864)

Cash flows from financing activities:
Increase (decrease) in short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of liabilities deferred pursuant to the rehabilitation plan . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,71730,129(27,032)(11,145)(12,325)(1,736)723(30,345)
60,043(9,659)(25,609)(12,773)(628)
575(3,475)
1,568(19,152)—(12,382)(42,010)789(29,449)
13,288(162,305)—(104,932)(356,017)
6,686

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,331(18,396)(74,662)(632,729)

Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . .

11,083

8,171(10,169)(86,178)

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

22,389178,944

79,566201,333

17,411
280,899

147,551
2,380,500

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

¥ 201,333¥280,899¥298,310$2,528,051

The accompanying notes are an integral part of these statements.
F-7

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements(Yen in millions and U.S. dollars and shares in thousands, except per share amounts—Note 2)
1.

ACCOUNTING POLICIES:

Financial Statements Presentation:
The accounts of Kyocera Corporation (the “Company”) and its Japanese subsidiaries are generally maintained toconform with Japanese accounting practices. Adjustments, including the applicable income tax effects, which are
not recorded in the Company’s books of account, have been made to the accompanying consolidated financial
statements in order to present them in conformity with accounting principles generally accepted in the UnitedStates of America. Such adjustments include principally: (1) accounting for investments in certain debt andequity securities; (2) derivative financial instruments; (3) accounting for pensions; (4) accounting for bonds withwarrants; (5) equity method of accounting for investments in common stock; and (6) goodwill and other
Intangible assets.
Basis of Consolidation and Accounting for Investments in Affiliated Companies:
The consolidated financial statements include the accounts of the Company and its significant subsidiaries(“Kyocera” as a consolidated group). All significant inter-company transactions and accounts are eliminated.
Investments in 20% to 50% owned companies and insignificant subsidiaries are accounted for by the equity
method, whereby Kyocera includes in net income its equity in earnings or losses of these companies, and records
its investments at cost adjusted for such equity in earnings or losses.
Revenue Recognition:
Kyocera recognizes sales when title and risks have passed to customers, the sales prices are fixed ordeterminable, and collectibility of the resulting receivable is reasonably assured.
Revenue from Fine ceramics group, Electronic device group and Equipment group are recognized,
principally upon delivery to customers. Revenue from direct financing leases is recognized over the term of theleases and amortization of unearned lease income is recognized using the interest method. Interest income on
installment loans is recognized on an accrual basis. Interest income is no longer accrued at the time the collectionof the interest is past due 1 year or more, or the collection of the principal is past due 6 months or more. Theinterest received from cash payments on impaired loans is recorded as income, unless the collectibility of theremaining investments is doubtful, in which case the cash receipt is recorded as collection of the principal.
Cash and Cash Equivalents:
Cash and cash equivalents include time deposits, certificates of deposit and short-term commercial notes withoriginal maturities of three months or less.
Translation of Foreign Currencies:
Assets and liabilities of consolidated foreign subsidiaries and affiliates accounted for by the equity method aretranslated into Japanese yen at the exchange rates in effect on the respective balance sheet dates. Operating
accounts are translated at the average rates of exchange for the respective years. Translation adjustments result
from the process of translating foreign currency financial statements into Japanese yen. These translation
adjustments, which are not included in the determination of net income, are reported in other comprehensive
income.
F-8

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Assets and liabilities denominated in foreign currencies are translated at the exchange rates in effect at therespective balance sheet dates, and resulting transaction gains or losses are included in the determination of net
income.
Allowances for doubtful accounts:
Kyocera maintains allowances for doubtful accounts related to both trade and finance receivables for estimatedlosses resulting from customers’ inability to make timely payments, including interest on finance receivables.
Kyocera’s estimates are based on various factors including the length of past due payments, historical experienceand current business environments. In circumstances where it is aware of specific customer’s inability to meet its
financial obligations, a specific allowance against these amounts is provided considering the fair value of assets
pledged by the customer as collateral. The amounts of allowances for doubtful accounts will be affected if thefinancial condition of Kyocera’s customers worsens due to the deterioration of economic conditions in Japan orin Kyocera’s major overseas markets. Moreover, a decline in the fair value of assets pledged by Kyocera’s
customers as collateral for Kyocera’s receivables will have a material effect on the amounts of allowances for
doubtful accounts provided. The amounts of receivables and related allowance for doubtful accounts are charged
off if the financial condition of Kyocera’s customer is assumed to be significantly deteriorated as a result ofspecific examination by management.
Inventories:
Inventories are stated at the lower of cost or market. Cost is determined by the average method for approximately
61% and 51% of finished goods and work in process at March 31, 2002 and 2003, respectively, and by the firstin, first-out method for all other inventories.
Kyocera recognizes estimated write-down of inventories for excess, slow-moving and obsolete inventories.
Property, Plant and Equipment and Depreciation:
Kyocera provides for depreciation of buildings, machinery and equipment over their estimated useful lives
primarily on the declining balance method. The principal estimated useful lives used for computing depreciation
are as follows:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 50 years
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 20 years
The cost of maintenance, repairs and minor renewals is charged to expense in the year incurred; major
renewals and betterments are capitalized.
In general, when assets are sold or otherwise disposed of, the profits or losses thereon, computed on thebasis of the difference between depreciated costs and proceeds, are credited or charged to income in the year of
disposal, and costs and accumulated depreciation are removed from the accounts.
Goodwill and Other Intangible Assets:
On April 1, 2002, Kyocera adopted Statement of Financial Accounting Standards (SFAS) No. 141, “Business
Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 (1) requires that thepurchase method of accounting be used for all business combinations initiated after June 30, 2001, as well as allpurchase method business combinations completed after June 30, 2001, (2) provides specific criteria for the
F-9

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
initial recognition and measurement of intangible assets apart from goodwill, and (3) requires that unamortizeddeferred credit related to an excess over cost be written off immediately as an extraordinary gain instead of being
deferred and amortized. SFAS No. 141 also requires that the unamortized deferred credit related to an excess
over cost arising from an investment that was acquired before July 1, 2001, must be written-off immediately andrecognized as the cumulative effect of a change in accounting principle. SFAS No. 142 requires that goodwill
and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment atleast annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible
assets with definite useful lives be amortized over their respective estimated useful lives to their estimatedresidual values, and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets.”Upon adoption of SFAS No. 141, Kyocera evaluated its existing intangible assets and goodwill that wereacquired in a prior purchase business combination, and made any necessary reclassifications required by SFAS
No. 141. Upon the adoption of SFAS No. 142, Kyocera reassessed the useful lives and residual values of allexisting intangible assets.
The principal estimated amortization for intangible assets are as follows:
Patent rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 8 years
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 5 years
In addition, to the extent an intangible asset was identified as having an indefinite useful life, Kyocera tested
the intangible asset for impairment in accordance with the provisions of SFAS No.142 at the beginning of theperiod.
In connection with the transitional goodwill impairment evaluation, SFAS No. 142 required Kyocera toperform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To
accomplish this, Kyocera identified its reporting units and determined the carrying value of each reporting unit
by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting
units as of the date of adoption. To the extent a reporting unit’s carrying amount exceeded its fair value, anindication existed that the reporting unit’s goodwill was impaired. In the second step, Kyocera compared theimplied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s fair value to allof its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation inaccordance with SFAS No. 141, to its carrying amount, both of which would be measured as of the date ofadoption. The impairment loss is measured based on the amount by which the carrying amount exceeds theimplied fair value of goodwill.
Impairment of long-lived assets
At least annually, although in some cases more often if events or changes in circumstances require such a review,
Kyocera reviews the recoverability of the carrying value of its long-lived assets and intangible assets withdefinite useful lives. The carrying value of a long-lived assets and intangible assets with definite useful lives are
considered to be impaired when the expected undiscounted cash flow from the asset is less than its carrying
value. A loss is recognized based on the amount by which the carrying value exceeds the fair value of the longlived assets and intangible assets with definite useful lives.
Derivative Financial Instruments:
Kyocera utilizes derivative financial instruments to manage its exposure resulting from fluctuations of foreign
currencies and interest rates. These derivative financial instruments include foreign currency swaps, foreign
F-10

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
currency forward contracts, interest rate swaps and interest rate options. Kyocera does not hold or issue suchderivative financial instruments for trading purposes.
Effective April 1, 2001, Kyocera adopted SFAS No. 133, “Accounting for Derivative Instruments andHedging Activities,” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain
Hedging Activities—an Amendment of FASB Statement No. 133.” Upon the adoption of SFAS No. 133, allderivatives are recorded as either assets or liabilities on the balance sheet and measured at fair value. Changes in
the fair value of derivatives are charged in current earnings. However cash flow hedges which meet the criteria of
SFAS No. 133 may qualify for hedge accounting treatment. Changes in the fair value of the effective portion ofthese hedge derivatives are deferred in other comprehensive income and charged to earnings when the underlying
transaction being hedged occurs.
Kyocera designated certain interest rate swaps and interest rate options as cash flow hedges under SFAS No.
133. Foreign currency swaps and foreign currency forward contracts are entered into as hedges of existing
foreign currency denominated assets and liabilities and as such do not qualify for special hedge accounting.
Accordingly, Kyocera records changes in fair value of all foreign currency swaps and foreign currency forward
contracts currently in earnings. It is expected that such changes will be offset by corresponding gains or losses on
the underlying assets and liabilities.
Kyocera formally documents all relationships between hedging instruments and hedged items, as well as its
risk management objective and strategy for undertaking various hedge transactions. This process includes allderivatives designated as cash flow hedge are linked to specific assets and liabilities on the balance sheet.
Kyocera also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives
that are used in hedging transactions are highly effective in offsetting cash flows of hedged items. When it isdetermined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge,
Kyocera discontinues hedge accounting prospectively. When hedge accounting is discontinued, the derivative
will continue to be carried on the balance sheet at its fair value, with deferred unrealized gains or losses charged
immediately in current earnings.
In accordance with the transition provisions of SFAS No. 133, on April 1, 2001, Kyocera recorded a onetime and non-cash unrealized loss of ¥106, net of taxes, in accumulated other comprehensive income torecognize derivatives that are designated as cash flow hedges and qualify for hedge accounting. Kyocera also
recorded a one-time and non-cash realized loss of ¥1,838, net of taxes, in the consolidated statement of income asa cumulative effect of change in accounting principle to record those derivatives that are designated as cash flow
hedges, but not qualified for hedge accounting (loss of ¥1,518) and are designated as cash flow hedges, but for
which hedge accounting was not adopted (loss of ¥320).
Earnings and Cash Dividends per Share:
Earnings per share is computed based on SFAS No. 128, “Earnings per Share.”
Basic earnings per share is computed based on the weighted average number of shares outstanding during
each period. Diluted earnings per share assumes the dilution that could occur if all options and warrants were
exercised and resulted in the issuance of common stock.
Cash dividends per share is those declared with respect to the earnings for the respective periods for which
dividends were proposed by the Board of Directors. Dividends are charged to retained earnings in the year inwhich they are paid.
F-11

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Research and Development Expenses and Advertising Expenses:
Research and development expenses and advertising expenses are charged to operations as incurred.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Standards:
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143 “Accounting for Asset
Retirement Obligations.” SFAS No. 143 requires full recognition of asset retirement obligations on the balance
sheet from the point in time at which a legal obligation exists. The obligation is required to be measured at fairvalue. The carrying value of the asset or assets to which the retirement obligation relates would be increased byan amount equal to the liability recognized. This amount would then be included in the depreciable base of theasset and charged to income over its life as depreciation. This statement is effective for fiscal years beginning
after June 15, 2002. Kyocera does not expect that the adoption of SFAS No. 143 will have a material impact on
Kyocera’s financial position or results of operations.
In July 2002, FASB issued SFAS No.146, “Accounting for Costs Associated with Exit or Disposal
Activities.” This statement addresses the accounting and reporting of costs associated with exit and disposal
activities, including restructuring activities that were accounted for pursuant to the guidance in Emerging Issues
Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” The statement requires recording
costs associated with exit or disposal activities at their fair values when a liability has been incurred. This
statement was effective for exit or disposal activities that were initiated after December 31, 2002. The adoptionof this statement did not have a material impact on Kyocera’s consolidated results of operations and financial
position.
In November 2002, the EITF reached a consensus on EITF 00-21, “Revenue Arrangements with Multiple
Deliverables.” EITF Issue No.00- 21 provides guidance on how to account for arrangement that involve thedelivery or performance of multiple products, services and/or right to use assets. EITF 00-21 is effective forfiscal periods beginning after June 15, 2003. Kyocera does not expect that the adoption of EITF 00-21 will have amaterial impact on Kyocera’s consolidated results of operations and financial position.
In November 2002, FASB issued Interpretation (FIN) No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which clarifies therequired disclosures to be made by a guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. FIN No. 45 also requires a guarantor to recognize, at the inception of
the guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement
provision of this interpretation were applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements in this interpretation were effective for financial statements ofinterim or annual reports ended after December 15, 2002. The adoption of FIN No. 45 did not have a material
impact on Kyocera’s consolidated results of operations and financial position.
In December 2002, FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition
and Disclosure,” which amends SFAS No. 123, “Accounting for Stock Based Compensation,” and provides
F-12

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
alternative methods to transition for a voluntary change to the fair value based method of accounting for stock
options. The transition provisions of SFAS No. 148 are currently not applicable to Kyocera as it continues toadopt the intrinsic value based method of accounting for stock options. In addition, SFAS No. 148 requires more
frequent disclosure of the effects of an entity’s accounting policy with respect to stock-based compensation.
Annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002 andKyocera adopted the annual disclosure provisions of SFAS No. 148 in the financial statements for the year ended
March 31, 2003.
In January 2003, FASB issued FIN No. 46, “Consolidation of Variable Interest Entities.” Variable interest
entities often are created for a single specified purpose, for example, to facilitate securitization, leasing, hedging,
research and development, or other transactions or arrangements. This interpretation of Accounting Research
Bulletin No. 51, “Consolidated Financial Statements,” defines what these variable interest entities are andprovides guidelines on how to identity them and also on how an enterprise should assess its interests in a variableinterest entity to decide whether to consolidate that entity. Generally, FIN No. 46 applies to variable interest
entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest
after that date. For existing variable interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003, the provision of this interpretation will apply no later than the beginning of thefirst interim or annual reporting period beginning after June 15, 2003. Currently, Kyocera does not have any
material variable interest entities and the adoption of FIN No. 46 does not have a significant impact on Kyocera’s
consolidated results of operations and financial position.
In January 2003, EITF released Issue No. 03-2, “Accounting for the Transfer to the Japanese Government of
the Substitutional Portion of Employee Pension Fund Liabilities.” EITF Issue No. 03-2 addresses accounting fora transfer to the Japanese government of a substitutional portion of an Employee Pension Fund plan (EPF) which
is a defined benefit pension plan established under the Japanese Welfare Pension Insurance Law (JWPIL). EITF
Issue No. 03-2 requires employers to account for the entire separation process of a substitutional portion from anentire plan (including a corporate portion) upon completion of the transfer to the government of the substitutional
portion of the benefit obligation and related plan assets as the culmination of a series of steps in a single
settlement transaction. Under this approach, the difference between the fair value of the obligation and the assets
required to be transferred to the government should be accounted for and separately disclosed as a subsidy and a
proportionate amount of net unrecognized gain or loss related to the entire EPF would be recognized as asettlement gain or loss. As a result of enactment of the “Defined Benefit Corporate Pension Plan Law,” theCompany and its certain domestic subsidiaries were approved by the Ministry of the Health, Labor and Welfare
in Japan for an exemption from the obligation for benefits related to future employee service under thesubstitutional portion in fiscal 2003. They also plan to submit another applications for separation of theremaining substitutional portion (that is, the benefit obligation related to past services). After their applications
are approved by the government, the remaining benefit obligation of the substitutional portions (that amountearned by past services) as well as the related government-specified portions of the plan assets of the EPF will betransferred to the government. Gain related to this separation process shall be recognized upon completion of thetransfer to the government of the substitutional portions of the benefit obligations and related plan assets. The
Company and its subsidiaries have not yet decided the dates of the completion. Kyocera estimates the special
gains of approximately ¥15,700 ($133,051) will be recognized if the transfers are completed by March 31, 2004.
Actual results could differ from this estimation.
In April 2003, FASB issued SFAS No. 149, “Amendment of Statement No. 133 on Derivative Instruments
and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments andHedging Activities.” The Company will be required to adopt SFAS No.149 for contracts entered into or modified
F-13

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
after June 30, 2003 except for certain items related to the implementation provisions of SFAS No. 133. The
adoption of SFAS No. 149 requires prospective adoption and is not expected to have a material affect on the
Kyocera’s consolidated results of operations and financial position.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.” SFAS No. 150 requires certain financial instruments withcharacteristics of both liabilities and equity to be classified as a liability (or an asset in some circumstances).
SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise
effective at the beginning of the first interim period beginning after June 15, 2003. Currently, the adoption of
SFAS No. 150 will not have material impact on Kyocera’s consolidated results of operations and financial
position.
2.

DOLLAR AMOUNTS:

The consolidated financial statements presented herein are expressed in the Japanese yen, and, solely for theconvenience of the readers, have been translated into the U.S. dollar for 2003 at the rate of ¥118=US$1, the rate
prevailing on March 31, 2003. This translation should not be construed as a representation that the yen amounts
shown could be so converted into the U.S. dollar at ¥118=US$1 or at any other rate.
3.

INVESTMENT IN KYOCERA CHEMICAL CORPORATION:

On May 16, 2002, the Board of Directors of the Company and Toshiba Chemical Corporation, which
manufactures and sells electronic parts and materials, decided that the Company would make Toshiba Chemical
Corporation a wholly-owned subsidiary of the Company through stock swap in order to reinforce the business ofelectronic parts and materials held by Toshiba Chemical Corporation and Fine ceramics group, Electronic device
group, and other divisions of Kyocera. The Company and Toshiba Chemical Corporation made an agreement ofstock swap in which 0.022 shares of the Company would be allocated to one share of Toshiba Chemical
Corporation. On August 1, 2002, the Company issued 990,990 shares of common stock of the Company for thisstock swap and Toshiba Chemical Corporation was renamed as Kyocera Chemical Corporation (KCC).
Operating results of KCC and its consolidated subsidiaries were included in Kyocera’s consolidated results ofoperations from the date of the stock swap. Condensed balance sheets of KCC on August 1, 2002 are as follows:
August 1, 2002

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥16,400
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,944¥35,344$138,983
160,542$299,525

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥13,207
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,154
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,361
Minority interests in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
223
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,760¥35,344$111,924
77,576
189,500
1,890
108,135$299,525

On August 1, 2002, the estimated fair value of net assets for KCC and its subsidiaries was ¥12,760($108,136), and it was larger than the purchase price of ¥9,431 ($79,924), which was calculated based on the
average stock price of KCC during a few days before and after the date the Company and Toshiba Chemical
Corporation reached an agreement on the stock swap. The excess of the fair value of net assets over the purchaseF-14

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
price was ¥3,329 ($28,212), which resulted in a write down of non-current assets to the extent of the excess ofthe fair value over the cost.
The following are the unaudited pro forma combined results of operations of Kyocera for the years ended
March 31, 2002 and 2003, as if the investment in KCC had taken place at the beginning of respective periods.
The results of operations for KCC and its subsidiaries before the investment, which were included in the pro
forma combined results, were prepared in accordance with accounting principles generally accepted in Japan andcontained an expense for restructual reforms of ¥3,534 and a valuation loss for deferred tax assets of ¥3,635 as
one-off charges for the year ended March 31,2002.
The unaudited pro forma combined results of operations are presented for comparative purposes only andare not necessarily indicative of the results of operations that may occur in the future or that would have occurred
had the acquisitions been in effect on the dates indicated.
2002

Years ended March 31,
2003
2003

Pro forma net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,065,535 ¥1,079,605
Pro forma net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,61839,201$9,149,195
332,212Pro forma net income per share: *basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$¥108.49108.41¥210.00209.95

1.78
1.78

*

The number of shares used to compute pro forma basic and diluted net income per share for the respective
period includes the 990,990 shares issued for KCC as if the shares were issued at the beginning of therespective periods.

4.

INVESTMENTS IN DEBT AND EQUITY SECURITIES:

Available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from income
and reported in other comprehensive income, net of tax. Held-to-maturity securities are recorded at amortizedcost. In gross unrealized losses on equity securities, ¥48,598 ($411,847) was derived from a decline in the market
value of the shares of KDDI Corporation (KDDI) held by the Company.
Kyocera evaluates whether the declines in fair value of debt and equity securities with readily determinable
fair values are other-than-temporary. Other-than-temporary declines in fair value are recorded as a realized loss
with a new cost basis. This evaluation is based mainly on the duration and the extent to which the fair value isless than cost, and the anticipated recoverability in fair value.
Other-than-temporary loss on debt and equity securities with readily determinable fair values for the years
ended March 31, 2001, 2002 and 2003 amounted to ¥471, ¥5,061 and ¥2,717 ($23,025), respectively.

F-15

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Investments in debt and equity securities at March 31, 2002 and 2003, included in short-term investments(current assets) and in securities and other investments (non-current assets) are summarized as follows:
March 31,
2002

Cost*

Available-for-salesecurities:
Corporate debt
securities . . . . . . . . ¥ 28,127 ¥ 27,838
Other debt
securities . . . . . . . .
24,056
21,821Equity securities . . . . 262,039 216,100
Total available-for-salesecurities . . . . . . . . . . . .

2003

Gross
Gross
Aggregate Unrealized Unrealized
Fair Value
Gains
Losses

¥

19

¥

Gross
Gross
Aggregate Unrealized Unrealized
Fair Value
Gains
LossesCost*

308 ¥ 29,754 ¥ 29,610

¥

6

¥

150

4
6,163

2,239
52,10236,927259,942

32,566
212,902

4
2,671

4,365
49,711

314,222265,759

6,186

54,649326,623

275,078

2,681

54,22631,091

30,6261466

19,24019,190050

12,591

12,5684

27

25,27625,32751

043,682

43,1945493

44,51644,51751

50

Total investments in debt
and equity securities . . . ¥357,904 ¥308,953¥6,191¥55,142 ¥371,139 ¥319,595¥ 2,732¥54,276

March 31, 2003
Gross
Aggregate
Unrealized
Fair Value
Gains

Gross
Unrealized
Losses

Held-to-maturity
securities:
Corporate debt
securities . . . . . . . .
Other debt
securities . . . . . . . .
Total held-to-maturity
securities . . . . . . . . . . . .

Cost*

Available-for-sale securities:
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . $ 252,153
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
312,941
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,202,898$ 250,932
275,983
1,804,254$

51
34
22,635$

Total available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . .

2,767,992

2,331,169

22,720459,543

Held-to-maturity securities:
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

163,051
214,203

162,627
214,636

0
433

424
0

Total held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . .

377,254377,263433

424

Total investments in debt and equity securities . . . . . . . . . . . . $3,145,246$2,708,432$23,153$459,967*

1,272
36,992421,279

Cost represents amortized cost for debt securities and acquisition cost for equity securities. The cost basis of
the individual securities is written down to fair value as a new cost basis when other-than-temporary
impairment is recognized.
F-16

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
At March 31, 2003, the contractual maturities of available-for-sale and held-to-maturity securities are
summarized as follows:
Available-for-Sale
Aggregate
Cost
Fair Value

Due within 1
year . . . . . . . ¥ 20,005
Due after 1 year
to 5 years . . .
23,622
Due after 5
years . . . . . . .
23,054Equitysecurities . . . 259,942¥326,623

March 31, 2003
Held-to-Maturity
Available-for-Sale
Aggregate
Aggregate
Cost
Fair Value
Cost
Fair Value

Held-to-Maturity
Aggregate
Cost
Fair Value¥ 19,985¥14,650¥14,633$ 169,534$ 169,364$124,152$124,009

23,497

29,86629,884200,187

199,127

253,102253,254

18,694——

195,373

158,424——

212,902——2,202,898

1,804,254——¥275,078¥44,516¥44,517$2,767,992$2,331,169$377,254$377,263

Proceeds from sales of available-for-sale securities and the related gross realized gains and losses for theyears ended March 31, 2001, 2002 and 2003 are as follows:
Years ended March 31,
2001
2002
2003
2003

Proceeds from sales of available-for-sale securities . . . . . . . .
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,000——¥8,589
402
198

¥13
4
4

$110
34
34

For the purpose of computing gains and losses, the cost of those securities is determined by the moving averagemethod.

F-17

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
5.

FINANCE RECEIVABLES:

Finance receivables at March 31, 2002 and 2003 consist of the following:
2002

March 31,
2003

2003

Investments in financing leases (a):Minimum lease payments receivable . . . . . . . . . . . . . . . . . . .
Unearned lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 11,714 ¥(981)

9,299 $
(761)

78,805(6,449)Less—allowance for doubtful accounts (c) . . . . . . . . . . . . . . . . . . .

10,733
(407)

8,538
(371)

72,356(3,144)

Less—current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,326(4,388)

8,167(3,579)69,212(30,331)

¥

5,938

¥

4,588

$

38,881Other finance receivables (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less—allowance for doubtful accounts (c) . . . . . . . . . . . . . . . . . . .

207,743(51,383)

197,942(49,207)

1,677,475(417,009)

Less—current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156,360(78,553)

148,735(27,595)

1,260,466(233,855)¥ 77,807¥121,140$1,026,611¥ 83,745¥125,728$1,065,492(a) Investments in financing leases consist primarily of direct financing leases of telecommunication equipment
and information systems. Future minimum lease payments to be received for each of the five fiscal years
and thereafter are as follows:
Years ending March 31,

2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥3,979
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,444
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,754
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
794
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
310
2009 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18$33,720
20,712
14,864
6,729
2,627
153

¥9,299$78,805(b) Other finance receivables consist primarily of installment loans to affiliates and other parties.
Investments in loans of ¥21,020 and ¥17,769 ($150,585) at March 31, 2002 and 2003 are considered to be
impaired, for which valuation allowances at March 31, 2002 and 2003 are provided of ¥15,951 and ¥14,128($119,729), respectively, calculated under SFAS No.114, “Accounting by Creditors for Impairment Loan”
and included in allowances for doubtful accounts.
The average recorded investments in impaired loans for the years ended March 31, 2002 and 2003 are¥24,461 and ¥19,174 ($162,492), respectively. The related recognized interest income for the years ended
March 31, 2002 and 2003 are ¥129 and ¥83 ($703), respectively.
The principal amount of the loan on which interest income is no longer accrued at March 31, 2002 and 2003
are ¥47,721 and ¥46,323 ($392,568), respectively. The loan, on which the collection of the principal is past
due ninetydays or more and on which interest income is still accrued, at March 31, 2002 and 2003 are¥1,893 and ¥404 ($3,424), respectively.
F-18

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)(c) Changes in allowances for doubtful accounts on finance receivables are as follows:
2001

6.

2002

2003

2003

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision charged to income . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥56,222 ¥53,635 ¥51,790 $438,898
3,614
1,096
927
7,856
(6,201) (2,941) (3,139) (26,601)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥53,635¥51,790¥49,578$420,153

INVENTORIES:

Inventories at March 31, 2002 and 2003 are as follows:
2002

7.

2003

2003

Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥103,070
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,196
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,540¥ 83,163
41,89958,094$ 704,771
355,076492,322¥205,806¥183,156$1,552,169

INVESTMENTS IN AND ADVANCES TO AFFILIATES:The Company owns a 28.09% interest in Kinseki, Ltd (Kinseki)., a major manufacturer of crystal related
components, a 27.48% interest in SK TELETECH CO., LTD., a manufacturer of communication equipment
device and a 36.02% interest in Taito Corporation (Taito), which operates in the electronic amusement business.
On December 5, 2002, the company acquired an additional 50,000 Kinseki. As a result of the acquisition,
the Company’s equity interest in Kinseki increased from 27.95% to 28.09%.
The difference between investment and equity of net asset to Kinseki was ¥5,159 ($43,720) at March 31,
2003.
The Company recognized losses on devaluation of investment in Kinseki, amounting ¥5,159 ($43,720) due
to a substantial fall in its market value in fiscal 2003.
At March 31, 2002, the unamortized excess of the Company’s equity in the underlying net assets of Taito
over its investments was ¥919. Upon adoption of SFAS No. 141, Kyocera wrote off ¥919 ($7,788) of
unamortized deferred credit related to an excess over cost arising from its investment in Taito that was accounted
for by the equity method as a cumulative effect of change in accounting principle in the first half of fiscal 2003.
Summarized financial information concerning affiliates, accounted for by the equity method is as follows:
March 31,
2003

2003

¥ 87,420
64,239$ 740,848
544,398¥151,057¥151,659$1,285,246

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 44,653
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,888¥ 38,400
14,226$ 325,424
120,559¥ 59,541¥ 52,626$ 445,983

Kyocera’s investments in and advances to affiliates . . . . . . . . . . . . ¥ 26,206
Kyocera’s trade receivables from affiliates . . . . . . . . . . . . . . . . . . .
679¥ 24,285
832$ 205,805
7,051

2002

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 81,415
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,642
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-19

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
2001

Years ended March 31,
2002
2003

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥990,110 ¥135,332 ¥163,024
Profit from operations . . . . . . . . . . . . . . . . . . . . . . . . .
52,9894,898
13,983
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,695
82
8,360
Kyocera’s equity in earnings of affiliates . . . . . . . . . .
1,748
1,284
2,833
Kyocera’s sales to affiliates . . . . . . . . . . . . . . . . . . . . .
53,808
2,387
3,080

2003

$1,381,559
118,500
70,84724,008
26,102

The aggregate market value of investments in those listed affiliates at March 31, 2002 and 2003 was¥24,312 and ¥15,206 ($128,864), respectively.
8.

GOODWILL AND OTHER INTANGIBLE ASSETS:

On April 1, 2002, Kyocera adopted SFAS No. 142, “Goodwill and Other Intangible Assets” (See Note 1
regarding the procedure of SFAS No. 142).
Intangible assets subject to amortization and Intangible assets having an identifiable life are summarized asfollows:
2002
Gross Carrying Accumulated
AmountAmortization

March 31,2003
Gross Carrying Accumulated
AmountAmortization

2003
Gross Carrying Accumulated
AmountAmortization

Patent rights . . . . . . . . .
Software . . . . . . . . . . . .
Other . . . . . . . . . . . . . . .

¥23,362
7,919
3,700

¥12,906
4,764
1,322

¥24,044
8,652
3,111

¥13,114
6,008
1,891

$203,763
73,322
26,364$111,136
50,91516,025

Total . . . . . . . . . . .

¥34,981¥18,992¥35,807¥21,013$303,449$178,076

The carrying amount of intangible assets having an identifiable life at March 31, 2002 and 2003 was ¥213and ¥274 ($2,322), respectively.
As a result of reassessment of the useful life of intangible assets required by SFAS No. 142, Kyocera
determined that there were no intangible assets which will no longer be amortized. Intangible assets acquired
during the year ended March 31, 2003 totaled ¥9,865 ($83,602) and primarily consist of Patent rights of ¥7,645($64,788) and Software of ¥1,875 ($15,890).
The weighted average amortization period for Patent rights and Software are 5 years and 4 years,
respectively.
Total amortization of intangible assets during FY 2003 amounted to ¥10,332 ($87,559).
The estimated aggregate amortization expense for intangible assets for the next five years is as follows:
Years ending March 31,

2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥7,020
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,886
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,467
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
815
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
400
F-20

$59,492
32,932
12,432
6,907
3,390

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
The changes in the carrying amounts of goodwill by operating segment for the years ended March 31, 2002 and2003 are as follows:
Fine ceramics
group

Electric device
group

Balance at March 31, 2001 . . . . . . . . . . . . . . . . . . .
Goodwill acquired during year . . . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . .
Translation adjustments and reclassification toother accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 11,085—(587)¥ 19,915—(1,978)685

Balance at March 31, 2002 . . . . . . . . . . . . . . . . . . .
Goodwill acquired during year . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . .
Translation adjustments and reclassification toother accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equipment
group

Others

Total

833
841
(163)

¥ —
192
—

¥ 31,833
1,033(2,728)

605

(671)

—

619

11,183—(3,175)

18,542
—
—

840
115
—

192
5
—

30,757120(3,175)

(933)

(768)

(298)

—

(1,999)Balance at March 31, 2003 . . . . . . . . . . . . . . . . . .

¥ 7,075¥ 17,774

¥

657

¥ 197

¥ 25,703

Balance at March 31, 2002 . . . . . . . . . . . . . . . . . . .
Goodwill acquired during year . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . .
Translation adjustments and reclassification toother accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 94,771—(26,907)$157,135——$ 7,119975—(7,907)(6,508)(2,525)—(16,940)

Balance at March 31, 2003 . . . . . . . . . . . . . . . . . .

$ 59,957$150,627$ 5,569$1,669$217,822¥$1,627 $260,652
42
1,017
—
(26,907)

In the first half of fiscal 2003, Kyocera completed an impairment review of its goodwill, which indicated that
there was an impairment loss on goodwill related to the acquisition of Kyocera Tycom Corporation and its
consolidated subsidiaries (KTC), which manufactures and supplies micro drills for the IT industry, from theinitial application of these statements. The impairment loss of ¥3,175 ($26,907) has been recorded as acumulative effect of change in accounting principle. Kyocera, with the assistance of a third party appraiser,
arrived at the implied fair value of goodwill using a discounted cash flow methodology taking into accountsluggishness in KTC’s markets. Kyocera also reviewed goodwill and other intangible assets for impairment in
the forth quarter of fiscal 2003 and no impairment loss was recognized.
Prior to the adoption of SFAS No. 142, accumulated amortization for goodwill at March 31, 2002 amounted
to ¥22,276.

F-21

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Amounts previously reported for income before cumulative effect of change in accounting principle and net
income and basic and diluted earnings per share (EPS) for the years ended March 31, 2001 and 2002 arereconciled to amounts adjusted to exclude the amortization expense related to goodwill and deferred credit underthe equity method as follows:
Years ended March 31,
2001
2002

Reported income before cumulative effect of change in accounting principle . . . . . . . . . . .
Adjustment:
Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred credit under the equity method . . . . . . . . . . . . . . . . . . . . . . .

¥ 219,529¥33,791

2,459
(131)

2,728
(263)

Adjusted income before cumulative effect of change in accounting principle . . . . . . . . . . .

¥ 221,857¥36,256

Reported net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment:
Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred credit under the equity method . . . . . . . . . . . . . . . . . . . . . . .

¥ 219,529¥31,953

2,459
(131)

2,728
(263)

Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 221,857¥34,418

Reported basic EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment:
Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred credit under the equity method . . . . . . . . . . . . . . . . . . . . . . .

¥1,161.20¥178.74

13.01(0.69)

14.43(1.39)

Adjusted basic EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,173.52¥191.78

Reported diluted EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment:
Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred credit under the equity method . . . . . . . . . . . . . . . . . . . . . . .

¥1,157.83¥178.59

12.97(0.69)

14.42(1.39)

Adjusted diluted EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,170.11¥191.62

Reported basic EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment:
Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred credit under the equity method . . . . . . . . . . . . . . . . . . . . . . .

¥1,161.20¥169.02

13.01(0.69)

14.43(1.39)

Adjusted basic EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,173.52¥182.06

Reported diluted EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment:
Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred credit under the equity method . . . . . . . . . . . . . . . . . . . . . . .

¥1,157.83¥168.88

12.97(0.69)

14.42(1.39)

Adjusted diluted EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,170.11¥181.91

Per share data:
Income before cumulative effect of change in accounting principle:

Net income:F-22

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
9.

SHORT-TERM BORROWINGS AND LONG-TERM DEBT:

Short-term borrowings at March 31, 2002 and 2003 are comprised of the following:
Loans, principally from banks with average interest rate of 0.93% and 0.94% at March 31, 2002 and 2003,
respectively.
2002

Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2003

2003

¥ 19,745
87,135¥5,800
102,086$ 49,152
865,136¥106,880¥107,886$914,288

Long-term debt at March 31, 2002 and 2003 are comprised of the following:
Loans, principally from banks with interest ranging from 0.54% to 13.85% and from 0.55% to 7.50% at March
31, 2002 and 2003, respectively.
2002

2003

2003

Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 24,840
84,417¥ 14,814
76,120$ 125,542
645,085

Less, portion due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . .

109,257(12,401)

90,934(30,198)

770,627(255,915)¥ 96,856¥ 60,736$ 514,712

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥43,222
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,2602007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,2602008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,571
2009 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,423$366,288
27,62744,576
21,78854,433¥60,736$514,712

Aggregate maturities of long-term debt at March 31, 2003 are as follows:
Years ending March 31,

Kyocera’s assets pledged as collateral for short-term borrowings and long-term debt at March 31, 2002 and2003, are summarized as follows:

Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net of accumulated depreciation . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-23

2002

2003

2003

¥ 33,111
28,651
23,334
16,49812,912¥ 7,716
23,5889,254
12,444
5,958$ 65,390
199,898
78,424105,458
50,491¥114,506¥58,960$499,661

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
10.

BENEFIT PLANS:

Domestic:
The Company and certain subsidiaries have adopted Employee Pension Fund (“EPF”), which was establishedpursuant to the Japanese Welfare Pension Insurance Law (“JWPIL”). Benefits under the EPF generally are basedon the current rate of base salary, employee’s position, length of service and conditions under which thetermination occurs. In accordance with the JWPIL, a portion of the government’s social security pension
program, under which the employer and employee contribute an equal amount, is contracted out to the Company(substitutional portion). The Company and certain subsidiaries add to it its own non-contributory pension plan
(corporate portion). The combined pension plan is managed and operated by banks, which act as the trustees.
Kyocera is currently conducting a provision to transfer of its substitutional portion of an EPF to theJapanese government. Detailed information about this provision and its effect on kyocera’s financial position andresults of operations is described in Notes 1 on page 39.
Kyocera’s funding policy is to contribute annually the amount that is required by applicable laws andregulations.
In February 2002, the Company decided to revise the qualification age for pensioners, effective April 2002.
This amendment reduced the projected benefit obligation of the pension plans for the Company. This effect of
the reduction in the projected benefit obligation has been reflected as a prior service cost not yet recognized.
The unfunded plans of certain domestic consolidated subsidiaries have been excluded, as they are notmaterial.
Kyocera, with respect to directors and corporate auditors, provides for lump-sum severance benefits.
While Kyocera has no legal obligation, it is a customary practice in Japan to make lump-sum payments to a
director or a corporate auditor upon retirement. An annual provision is made in the accounts for the estimatedcost of this termination plan, which is not funded.

F-24

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
March 31,
2002

2003

2003

Change in benefit obligations:Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . ¥167,452 ¥159,504 $1,351,729
Increase by acquisition of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .
—18,372
155,695
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,2339,450
80,085Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,933
4,294
36,390Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,440
974
8,254
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,858)(76)(644)
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14,314)
21,895
185,551
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,382)(3,444)(29,187)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . .
Increase by acquisition of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

159,504

210,969

1,787,873

97,944—(6,266)9,873
1,440(2,316)100,675
9,289(1,716)
13,732974(3,197)853,178
78,720(14,542)
116,373
8,254(27,093)

Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

100,675

119,757

1,014,890

Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost not yet recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(58,829)
46,456(34,213)
2,902(91,212)70,544(32,406)
1,959(772,983)
597,830(274,627)
16,602

Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ (43,684) ¥ (51,115) $ (433,178)

Amounts recognized in the statements of financial position consist of:
Accrued benefit liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . .

(43,684)—

Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ (43,684) ¥ (51,115) $ (433,178)

Years ended March 31,
2002
2003

2001

Net pension cost includes the following components:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . .
Amortization of transition obligation . . . . . . . . . . .
Amortization of prior service cost . . . . . . . . . . . . .
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . .
Net periodic pension cost . . . . . . . . . . . . . . . .

¥Assumptions used in the accounting are:Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of increase in compensation levels: . . . . . . . .
Expected long-term rate of return on plan assets . .

F-25(65,853)
14,738(558,076)
124,898

2003

11,359 ¥5,294(4,219)
943
171
872

10,233 ¥4,933(4,393)943(1,441)2,016

9,450 $ 80,085
4,294
36,390(1,763) (14,941)
943
7,991
(1,882) (15,949)
1,287
10,907

14,42012,291 ¥

12,3292.5%-3.0%
3.0%-4.0%
3.5%-4.5%

¥

2.5%
3.0%
3.5%-4.5%

2.0%
3.0%
1.3%-4.0%$104,483

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Foreign:a.

Pension plans

Kyocera International, Inc. and its consolidated subsidiaries (KII) and AVX Corporation and its consolidated
subsidiaries (AVX), which are both consolidated U.S. subsidiaries of the Company, maintain non-contributory
defined benefit pension plans in the U.S. and contributory defined benefit pension plans outside the U.S. The KII
plan covers substantially all full-time employees in the United States, of which benefits are based on years ofservice and the employees’ average compensation. The AVX plans provide a flat benefit formula to the U.S.
employees covered under collective bargaining agreements and a percentage of final pay benefit formula for
European salaried employees and certain hourly paid employees. Funding policies for these plans are tocontribute the statutory required amounts to appropriate trust or governmental funds.
The following table sets forth the funded status of the KII and AVX plans:
2002

March 31,
2003

2003

Change in benefit obligations:Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥16,027 ¥17,436 $147,763
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
594
560
4,746
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,022
1,081
9,161
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
80
678
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(130)
1,856
15,729Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(737)
(698)
(5,915)
Plan amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15——
Foreign exchange adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
564(1,457) (12,348)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,436

18,858

159,814

17,150
(944)
379
81
(737)
—
539

16,468(2,134)
995
80
(612)
(88)
(1,296)

139,559(18,085)8,432
678(5,186)(746)(10,983)

Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,46813,413

113,669

Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost not yet recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(968)
83
49

(5,445)5,011
40(46,145)
42,466339

Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ (836) ¥ (394) $ (3,340)

Amounts recognized in the statements of financial position consist of:
Accrued benefit liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (836) ¥ (4,031) $ (34,161)
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—49
415
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . .
—3,588
30,406
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-26¥ (836) ¥ (394) $ (3,340)

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Years ended March 31,
2002
2003

2001

Net pension cost includes the following
components:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . .
Amortization of transition obligation . . . . . . . .
Amortization of prior service cost . . . . . . . . . .
Recognized actuarial gain . . . . . . . . . . . . . . . . .
Net periodic pension cost . . . . . . . . . . . . .
Assumptions used in the accounting:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of increase in compensation levels . . . . . .
Expected long-term rate of return on plan
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b.

¥

437 ¥
912
(1,289)
(6)
1
(137)

594 ¥
1,022
(1,306)
(4)
(1)
(58)

(82) ¥

247 ¥

2003

560 $ 4,746
1,081
9,161
(1,179) (9,991)
—
—
7
59
60
508
529

6.00-7.75%
2.50-4.50%

6.00%-7.30%
3.00%-4.50%

5.75%-6.75%
1.50%-4.50%

6.50-9.00%

7.00%-9.00%

7.50%-8.50%$ 4,483

Savings plans

KII and AVX maintain retirement savings plans which allow eligible U.S. employees to defer part of their annualcompensation. AVX also maintains a non-qualified deferred compensation program which permits key
employees to annually elect to defer a portion of their compensation until retirement.
Contributions to the plans for the years ended March 31, 2001, 2002 and 2003 were ¥1,286, ¥1,255 and¥1,099 ($9,314), respectively.
11.

STOCK OPTIONS PLANS:

Domestic:
The Company provides all directors and certain key employees of the Company with stock option plans. Under
the plans, they were granted options to purchase the Company’s shares of common stock at a price determined bymultiplying by 1.1 the average market price of the Company’s common stock in previous month of the date of
the grant. The options granted in 2000 and 2001 vest equally and are exercisable over 4 years. The options
granted in 2002 vest equally and are exercisable over 2 years. The options granted in 2003 vest and are
exercisable over 1 year. As of March 31, 2003, the Company reserved 1,342,600 shares of its common stock forthe plan.

F-27

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
The following table summarizes information on stock option plans for the years ended March 31, 2001,
2002 and 2003:
Number of Options

Weighted Average

Exercise Price

Balance, March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,243,600¥ 8,029

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76,800(52,300)(19,500)

18,9008,029
8,029

Balance, March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,248,600

8,698

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59,200(29,400)(26,100)

9,470
8,029
8,029

Balance, March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,252,300

8,764

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

143,600(10,700)(42,600)

9,290
8,029
8,598

$ 78.73
68.04
72.86

Balance, March 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,342,600

8,831

74.84

Weighted average contractual life 0.5 years . . . . . . . . . . . .
Weighted average contractual life 1.5 years . . . . . . . . . . . .

1,267,000
75,600¥ 8,230
18,900$ 69.75
160.17

Exercisable options:
March 31, 2001
Exercise price ¥8,029 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise price ¥18,900 . . . . . . . . . . . . . . . . . . . . . . . . . . .

542,600
19,200¥ 8,029
18,900Total options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

561,800

8,401

March 31, 2002
Exercise price ¥8,029 and ¥9,470 . . . . . . . . . . . . . . . . . .
Exercise price ¥18,900 . . . . . . . . . . . . . . . . . . . . . . . . . . .

842,600
38,4008,080
18,900Total options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

881,000

8,551

March 31, 2003
Exercise price ¥8,029, ¥9,470 and ¥9,290 . . . . . . . . . . .
Exercise price ¥18,900 . . . . . . . . . . . . . . . . . . . . . . . . . .

1,267,000
56,7008,230
18,900$ 69.75
160.17

Total options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,323,700

8,687

73.62

The fair value of options at the date of grant for the years ended 2001, 2002 and 2003 were calculated using
the Black Scholes model with the following assumptions:2001

Years ended March 31,
2002
2003

2003

Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 4,884¥ 1,835¥ 1,294$10.97
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.997%
0.068%
0.005%
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 years
2 years
1 yearVolatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.791% 52.540% 51.970%
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.317%
0.749%
0.738%
F-28

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Foreign:
AVX has two stock option plans. Under the 1995 stock option plan, as amended, AVX may grant options toemployees for the purchase of up to an aggregate of 9,300,000 shares of common stock. Under the NonEmployee Directors’ stock option plan, as amended, AVX may grant options to non-employee directors for thepurchase of up to an aggregate of 650,000 shares of common stock. Under both plans, the exercise price of each
option shall not be less than the market price of AVX’s stock on the date of grant and with a maximum term of
10 years. The options granted under the 1995 stock option plan vest as to 25% annually and options granted
under the Non-Employee Directors’ stock option plan vest as to one third annually.
The following table summarizes the transactions of AVX’s stock option plans for the years ended March 31,
2001, 2002 and 2003:
Number of
Options

Weighted Average
Exercise Price

3,504,528$ 9.61

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,367,500
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (757,234)
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(64,400)

23.84
10.51
11.46

Balance, March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,050,394

14.22

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

120,000(562,794)(87,000)

22.23
9.10
18.47

Balance, March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,520,600

15.20

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

915,655(141,700)(54,700)

15.86
9.01
20.70

Balance, March 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,239,855

15.48

Price range $15.44 to $29.30 (weighted average contractual life 7.8 years) . . . .
Price range $7.50 to $13.00 (weighted average contractual life 5.5 years) . . . . .
Exercisable options:
March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,947,900
2,291,955$22.259.73

1,458,594
1,888,825
2,459,650$10.05
12.31
13.65

Balance, March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The calculated for fair value at the date of grant for each option granted during the years ended March 31,
2001, 2002 and 2003 was $8.95 to $17.24, $10.91 and $5.00 to $9.18, respectively. The fair value of options at
the date of grant was calculated using the Black Scholes model with the following weighted averageassumptions:2001

Years ended March 31,
2002
2003

Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.6%
6.6% 2.34-3.9%
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 years
4 years
4 years
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57-65%
60%
60%
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.47-0.82%
0.92% 0.71-1.39%
F-29

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Kyocera Wireless Corporation and its consolidated subsidiaries (KWC) provide all key employees withstock options. The options become vested gradually over a four-year period provided participants remain a KWC
employee. The exercise price shall not be less than 85% of the fair market value of the common stock at the time
the option is granted, and the grant has a maximum term of 10 years. Since KWC is not traded on any stock
exchange, the KWC Board is responsible for determining the fair market value using reasonable means. KWC
may grant options to all key employees for the purchase of up to an aggregate of 3,800,000 shares of common
stock. For the year ended March 31, 2003, KWC recognized compensation expense of ¥50($424)—net of taxesof ¥35($297) for its variable stock option plan, under Accounting Principles Board Opinion (APB) No. 25,“Accounting for Stock Issued to Employees.”
The following table summarizes information on the stock option plan for the years ended March 31, 2001,
2002 and 2003:

Number of Options

Weighted
Average
Exercise Price

Balance, March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—$—Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

417,025—(3,575)

2.18
—
2.18

Balance, March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

413,450

2.18

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

464,400—(45,807)

2.97
—
2.39

Balance, March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

832,043

2.61

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,555,875—(58,815)

2.41
—
2.67

Balance, March 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,329,103

2.46

Price range $2.18 to $3.45 (weighted average contractual life 9.4 years) . . .
Exercisable options:
March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,329,103

2.46

71,296
210,939
1,767,183

2.18
2.32
2.31

The fair value of options at the date of grant for the years ended 2001, 2002 and 2003 were calculated using
the Black Scholes model with the following weighted average assumptions:2001

Years ended March 31,
2002
2003

Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.03
$ 2.26$ 1.68Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.8%
4.5%
3.4%
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years
5 years
5 years
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45%
45%
45%
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
F-30

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Pro forma fair value information:
SFAS No. 123 “Accounting for Stock-Based Compensation” allows a company to record compensation expense
for stock-based compensation plans at fair value or provide pro forma disclosures. Kyocera has chosen tocontinue to account for stock-based compensation using the method, APB No. 25, under which no compensation
expense for fixed stock options granted at or above fair market value is recognized. Accordingly, nocompensation expense has been recognized by the Company and AVX. KWC recognized ¥50 ($424)—net oftaxes of ¥35 ($297) in the Consolidated Statements of Income, as compensation expense under APB No. 25,
because KWC has a variable stock option plan. Had compensation expense for Kyocera’s stock options beenrecognized based on the grant dates under the methodology prescribed by SFAS No. 123, Kyocera’s net income
and earnings per share for the years ended March 31, 2001, 2002 and 2003 would have been impacted as shownin the following table:
2001

Income before cumulative effect of change in accounting principle,
as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add : Stock-based employee compensation expense included inreported Income before cumulative effect of change inaccounting principle—net of taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Deduct : Total stock-based employee compensation expense
determined under fair value based method for all awards—net oftaxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years ended March 31,
2002
2003

2003

¥ 219,529¥33,791¥43,421$367,975

—

—

50

424

(1,034)(1,190)(1,559)(13,212)

218,495

32,601

41,912355,187—(1,838)(2,256)(19,119)

Pro forma net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 218,495¥30,763¥39,656$336,068

Earnings per share :Income before cumulative effect of change in accounting principle :Basic, as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic, pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted, as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted, pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,161.20
1,155.74
1,157.83
1,153.08¥178.74172.45178.59172.38¥233.02224.93232.97224.91$

Net income :Basic, as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic, pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted, as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted, pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,161.20
1,155.74
1,157.83
1,153.08

169.02
162.73168.88162.66220.91212.82220.86212.81

Pro forma income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle—net of taxesof ¥233 for the year ended March 31, 2002 . . . . . . . . . . . . . . . . . .

12.

1.97
1.91
1.97
1.91
1.87
1.80
1.87
1.80

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES:

Kyocera’s activities expose it to a variety of market risks, including the effects of changes in foreign currency
exchange rates and interest rates. Over sixty percent of Kyocera’s revenues are generated from overseas
customers, which exposes it to foreign currency exchange rates fluctuations. These financial exposures aremonitored and managed by Kyocera as an integral part of its overall risk management program. Kyocera’s risk
management program focuses on the unpredictability of financial markets and seeks to reduce the potentiallyadverse effects that the volatility of these markets may have on its operating results.
F-31

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Kyocera maintains a foreign currency risk management strategy that uses derivative financial instruments,
such as foreign currency forward contracts, swaps and options, to minimize the volatility in its cash flows causedby changes in foreign currency exchange rates. Movements in foreign currency exchange rates pose a risk to
Kyocera’s operations and competitive position, since exchange rates changes may affect the profitability, cash
flows, and business and/or pricing strategies of non Japan-based competitors. These movements affect crossborder transactions that involve, but not limited to, direct export sales made in foreign currencies and raw
material purchases incurred in foreign currencies.
Kyocera maintains an interest rate risk management strategy that uses derivative financial instruments, suchas interest rate swaps and options, to minimize significant, unanticipated cash flow fluctuations caused byinterest rate volatility.
By using derivative financial instruments to hedge exposures to changes in exchange rates and interest rates,
Kyocera exposes itself to credit risk. Credit risk is the failure of the counterparty to perform under the terms ofthe derivative contract. When the fair value of a derivative contract is positive, the counterparty owes Kyocera,
which creates repayment risk for Kyocera. When the fair value of a derivative contract is negative, Kyocera owes
the counterparty and, therefore, it does not possess repayment risk. Kyocera minimizes the credit (or repayment)risk in derivative financial instruments by (1) entering into transactions with creditworthy counterparties, (2)limiting the amount of exposure to each counterparty, and (3) monitoring the financial condition of its
counterparties.
Cash Flow Hedges
Kyocera uses interest rate swaps and options mainly to convert a portion of its variable rate debt to fixed rates.
For the years ended 2002 and 2003, Kyocera recognized a net gain of ¥306 and a net loss of ¥710 ($6,017)(reported as other income (expenses)—other, net in the consolidated statement of income), which represented theineffective portion of cash flow hedges.
Kyocera also charged a previously deferred net loss of ¥60 and ¥240 ($2,034) to interest expense in the
consolidated statement of income for the years ended 2002 and 2003, as a result of the execution of thecorresponding transaction.
At March 31, 2003, ¥331 ($2,805), net of tax, was recorded as unrealized losses on derivative instruments
accumulated in other comprehensive income, which represented changes in fair value of the effective portion of
cash flow hedges which qualify and have been designated for hedge accounting treatment. These deferred losses
are anticipated to be charged to earnings during the next eighteen months as the underlying transactions occur.
Other Derivatives
Kyocera’s main direct foreign export sales and some import purchases are denominated in the customers’ andsuppliers’ local currency, principally the U.S. dollar, Euro and STG. Kyocera purchases foreign currency swaps
and forward contracts with terms normally lasting less than three months to protect against the adverse effects
that exchange-rate fluctuations may have on foreign-currency-denominated trade receivables and payables.
Kyocera does not adopt hedge accounting for such derivatives. The gains and losses on both the derivatives andthe foreign-currency-denominated trade receivables and payables are recorded as foreign currency transaction(losses) gains in the consolidated statements of income.
F-32

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
The aggregate contract amounts of derivative financial instruments are as follows:
2002

Currency swaps* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency forward contracts to sell* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency forward contracts to purchase* . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*Hedge accounting is not adopted.

F-33

¥

669
56,582
6,146
127,908

March 31,
2003

¥

587
63,074
7,289
93,8702003$ 4,975
534,525
61,771
795,508

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
13.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The fair values of financial instruments at March 31, 2002 and 2003 and the methods and assumptions used toestimate the fair value are as follows:

Fair Value

March 31,
2003
Carrying
AmountFair Value¥ 280,899
59,509¥ 298,310
56,368¥ 298,310
56,368$ 2,528,051
477,695$ 2,528,051
477,695

10,887

14,651

14,633

124,161

124,008

78,576

27,59527,600233,855

233,898

301,186

308,137

308,155

2,611,330

2,611,483

82,069121,140

123,441

1,026,611

1,046,110¥ 813,126¥ 826,201¥ 828,507$ 7,001,703$ 7,021,245

2002
Carrying
AmountNon-derivatives:
Assets:Cash and cash
equivalents (a) . . . . . ¥ 280,899
Restricted cash (a) . . . .
59,509
Short-term investments(b) . . . . . . . . . . . . . .
10,902
Short-term financereceivables (c) . . . . .
78,553
Securities and otherinvestments(b) (c) . . . . . . . . . . . .
301,659
Long-term financereceivables (c) . . . . .
77,807¥ 809,329
Liabilities:
Short-termborrowings (a) . . . . .
Current portion of
long-term debt (c) . .
Long-term debt (c) . . .

2003
Carrying
AmountFair Value¥(106,880) ¥(106,880) ¥(107,886) ¥(107,886) $ (914,288) $ (914,288)(12,401)(96,856)(12,407)(97,456)(30,198)(60,736)(30,244)(61,487)(255,915)(514,712)(256,305)(521,076)¥(216,137) ¥(216,743) ¥(198,820) ¥(199,617) $(1,684,915) $(1,691,669)
Derivatives:
Currency swaps (d) . . . ¥Foreign currency
forward contracts tosell (d) . . . . . . . . . . .
Foreign currency
forward contracts topurchase (d) . . . . . . .
Interest rate
swaps (d) . . . . . . . . .

3

¥

3

¥

(10) ¥(10) $(85) $

(85)

(779)

(779)

(1,142)(1,142)(9,678)(9,678)

25

25

108

108

915

915

(1,640)(1,640)(2,243)(2,243)(19,008)(19,008)

Both short-term finance receivables and long-term finance receivables in the above do not include
investments in direct financing leases.
(a) The carrying amount approximates fair value because of the short maturity of these instruments.
(b) The fair value is based on quoted market prices.
(c) The fair value is estimated by discounting cash flows, using current interest rates for instruments withsimilar terms and remaining maturities.
(d) The fair value is estimated based on quotes from financial institutions.
F-34

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
14.

COMMITMENTS AND CONTINGENCIES:At March 31, 2003, Kyocera had contractual obligations for the acquisition or construction of property, plant andequipment aggregating approximately ¥11,617 ($98,449) principally within one year.
The Company guarantees the debt of unconsolidated subsidiaries aggregating ¥700 ($5,932) at March 31,
2003. The financial guarantees are made in the form of commitments and letters of awareness issued to financial
institutions and generally obligate the Company to make payments in the event of default by the borrowers. The
Company knows no event of default.
A foreign subsidiary has a material supply agreement for a significant portion of its anticipated material
used in its operations. Under the agreement, during the year ended March 31, 2003, the foreign subsidiarypurchased ¥15,733 ($133,331) and is obligated to purchase ¥27,024 ($229,017) in total for next three years.
Kyocera rents certain office space, stores and other premises under cancelable leases, which are customarily
renewed. However, total rental expense is not significant in relation to total operating expenses.
Kyocera is subject to various lawsuits and claims, which arise, in the ordinary course of business. Kyocera
consults with legal counsel and assesses the likelihood of adverse outcomes of these contingencies. Kyocera
records liabilities for these contingencies when the likelihood of an adverse outcome is probable and the amountis reasonably estimable.
The following are material pending, concluded and settled legal proceedings (other than routine litigation
incidental to the business) to which the Company or any of its subsidiaries is a party or to which any of theirproperty is subject.
On September 1, 1994, the International Chamber of Commerce issued its award with respect to thearbitration between the Company and LaPine Technology Corporation (LTC), Prudential-Bache Trade
Corporation (PBTC) (presently renamed Prudential-Bache Trade Services, Inc.), et al. for the alleged breach ofan agreement by the Company in connection with the reorganization of LTC. The award ordered the Company to
pay to LTC and PBTC as damages, approximately ¥30,326 ($257,000), including interest, arbitration costs andattorneys’ fees. The Company filed a motion to vacate, modify and correct the award in the U.S. District Court
for the Northern District of California pursuant to an agreement between the parties providing for broad judicial
examination of arbitration awards.
LTC and PBTC filed a motion to confirm the award. On December 11, 1995, the District Court ruled thatthe agreement between the parties concerning judicial examination of the award was invalid and granted the
motion filed by LTC and PBTC without examining the merits of the arbitration award. On January 9, 1996, theCompany appealed to the Ninth Circuit Court of Appeals. On December 9, 1997, the Ninth Circuit, reversed theDistrict Court, concluded that the provisions in the parties’ arbitration agreement providing for broad judicial
review were valid and ordered the case returned to the District Court for review of the award under the standards
agreed to by the parties.
On April 4, 2000, the District Court issued an order confirming the arbitrators’ conclusions of law in Phase
1 of the arbitration. On October 2, 2000, the District Court entered its initial decision on Phase 2 of thearbitration award, which consists of the money damages award. The Court confirmed all of the arbitrators’
findings of facts and conclusions of law, except for one important finding of fact about LTC’s profitability in thesecond quarter of 1987. The Court ruled that the arbitrators’ finding that LTC achieved an operating profit in thesecond quarter of 1987 was not supported by substantial evidence. Subsequently, on March 6, 2001, the District
F-35

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Court entered an order confirming Phase 2 of the award, except for the one finding of fact vacated by its October
2, 2000 ruling. The Court’s March 6, 2001 order includes the confirmation of the Arbitrators’ award of damages.
On April 3, 2001, the Company filed its Notices of Appeal of the District Court’s orders confirming the arbitralaward.
On May 17, 2001, the District Court entered its amended judgment, ordering compensation to be paid by theCompany to LTC and PBTC in an aggregate amount of ¥50,472 ($427,728) plus prejudgment and postjudgmentinterest. On May 25, the Company filed Notices of Appeal of the judgment.
On June 21, 2001, the District Court entered an order awarding LTC and PBTC attorneys’ fees anddisbursements. On July 5, 2001, the Company filed Notices of Appeal of that order. The Company’s appeal brief
was filed in the Ninth Circuit Court of Appeals on August 29, 2001.
The Company filed a Reply Brief on December 5, 2001. A hearing was held in the Ninth Circuit Court ofAppeals on May 13, 2002. The Ninth Circuit Court of Appeals issued panel decision on July 23, 2002, affirming
the District Court’s judgment and award in its entirety. According to the judgment, the Company’s compensation
to be paid was approximately ¥53,454 ($453,000), inclusive of prejudgment and postjudgment interest. The
Company filed a Petition for Rehearing and Rehearing En Banc on August 6, 2002, seeking a rehearing of its
appeal before the panel that issued the opinion, and before an en banc panel of eleven Ninth Circuit Judges. On
October 1, 2002, the Ninth Circuit Court of Appeals entered an order directing LTC and PBTC to file a responseto the Company’s petition. On October 11, 2002, LTC and PBTC filed a response opposing a rehearing of theappeal. On October 30, 2002, the Ninth Circuit Court of Appeals entered an order granting the Company leave to
file a reply to the response filed by LTC and PBTC.
On December 17, 2002, the Ninth Circuit Court of Appeals entered an order granting the Company’s
petition for en banc review, and withdrawing the July 23 panel decision. Oral argument on the Company’s
petition was scheduled for March 25, 2003. On March 21, 2003, an en banc panel of the Ninth Circuit Court ofAppeals entered an order taking the oral argument for the Company’s petition off calendar so that the court could
have the benefit of supplemental briefing from the parties on the issue of whether a contract between private
parties may bind a federal court to apply a different standard of review from the standard specified in the Federal
Arbitration Act. On April 29, 2003, the parties filed supplemental briefs addressing the issues raised by the enbanc panel of Ninth Circuit judges. Argument on the appeal has not as yet been rescheduled.
If the Company is ultimately unsuccessful in reversing any aspect of the current adverse judgment, theCompany may be required to pay damages, inclusive of costs and interest to date, of at least ¥55,696 ($472,000).
The Company owns one third of the outstanding stock of LaPine Holding Company, which in turn owns
100% of the stock of LTC. Therefore, one third of net assets of LTC after the payment of damages, inclusive ofcosts and interest to date, any excess of liability for this contingency from the Company will be ultimately
reimbursed to the Company. Taking into account this equity interest, the Company has set aside accrued
litigation expenses of approximately ¥41,862 ($354,763) at March 31, 2003 in respect of any potential adverse
judgment in this case, and any excess of liability for this contingency would be incurred as an expense. In light ofthis contingency, the Company believes that such an expense would not have a significant effect on Kyocera’s
consolidated results of operations and financial condition in fiscal 2004.
In connection with this litigation, in 1995 the Company purchased from a bank a letter of credit, which
remains in place as security for the arbitral award. In order to minimize facility fees for the letter of credit, theCompany deposited ¥56,368 ($477,695) in cash on hand restricted for use at March 31, 2003.
F-36

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Kyocera is involved in litigation, and disputes in addition to the above. However, based on the information
available, management believes that damages, if any, resulting from these actions will not have a significant
effect on the consolidated financial statements.
15.

STOCKHOLDERS’ EQUITY:

Under the Commercial Code of Japan (the “Code”), the entire amount of the issue price of new shares issued isrequired to be capitalized as stated capital, although the Company may, by resolution of its Board of Directors,
capitalize an amount not exceeding one-half of the issue price of the new shares as additional paid-in capital.
The Code requires a domestic company to appropriate as a legal reserve an amount equal to at least 10% of
the amount paid out by it as appropriation of retained earnings (including any payment by way of annual
dividend and bonuses to Directors and Statutory Auditors) for the period or equal to 10% of any interim dividend
until the sum of the legal reserve and the additional paid-in capital equals 25% of its stated capital. The legal
reserve and additional paid-in capital may be transferred to stated capital through suitable director actions or used
to reduce a deficit through suitable stockholder actions. The appropriated legal reserve at March 31, 2003
included in retained earnings was ¥18,171 ($153,992).
The Code provides certain restrictions on payment of dividends in connection with the repurchased treasury
stock. At March 31, 2003, the Company reserved ¥52,034 ($440,966) of treasury stock repurchased mainly forstock options, which are restricted as to the payment of cash dividends. The amount of statutory retained earningsof the Company available for the payment of dividends to stockholders at March 31, 2003 was ¥453,726($3,845,136)
The Company’s Board of Directors, with subsequent approval by the stockholders, has declared annual
appropriations of retained earnings for various purposes, totaling ¥473,128 ($4,009,559) at March 31, 2003. Any
disposition of such appropriations shall be at the discretion of the Board of Directors and stockholders. Suchappropriations have not been segregated from retained earnings in the accompanying consolidated financial
statements.
Kyocera’s equity in retained earnings or deficits of affiliates and unconsolidated subsidiaries accounted forby the equity method of accounting aggregating ¥4,888 ($41,424) at March 31, 2003 was included in retained
earnings.

F-37

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Changes in accumulated other comprehensive income are as follows:
Foreign Currency Minimum Pension Net Unrealized
Net Unrealized Gains Total Accumulated
Translation
Liability
Gains (Losses) on (Losses) on Derivative
Comprehensive
Adjustments
Adjustments
Securities
Financial Instruments
IncomeBalance, March 31, 2000 . . . .
Net change for theyear . . . . . . . . . . . . . .

¥ (45,908)—¥ 10,390—¥ (35,518)

31,064—(15,219)—

15,845

Balance, March 31, 2001 . . . .
Net change for theyear . . . . . . . . . . . . . .

(14,844)—(4,829)—(19,673)

20,445—(23,097)(425)(3,077)

Balance, March 31, 2002 . . . .
Net change for theyear . . . . . . . . . . . . . .

5,601

—

(27,926)(425)(22,750)(20,578)(10,931)(2,029)94(33,444)

Balance, March 31, 2003 . . . .

¥ (14,977)¥(10,931)¥ (29,955)¥ (331)¥ (56,194)

Balance, March 31, 2002 . . . .
Net change for theyear . . . . . . . . . . . . . .

$ 47,466$—$(236,661)$(3,602)$(192,797)(174,390)(92,635)(17,195)

797(283,423)

Balance, March 31, 2003 . . . .

$(126,924)$(92,635)$(253,856)$(2,805)$(476,220)

16.

¥

¥

INCOME TAXES:

Income before income taxes and income taxes are made up of the following components:
2001

2002

2003

2003

Income before income taxes:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥287,921
112,301¥ 51,749
3,649¥71,715
4,322$607,754
36,627

Total income before income taxes . . . . . . . . . . . . . . .

¥400,222¥ 55,398¥76,037$644,381

Income taxes:
Current income taxes:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 63,581
38,430¥ 30,335
3,852¥32,554
1,111$275,881
9,415

Total current income taxes . . . . . . . . . . . . . . . . . . . . .

102,011

34,18733,665285,296

Deferred income taxes:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59,944(1,468)(9,181)(3,698)

(830)
(55)

(7,034)(466)

Total deferred income taxes . . . . . . . . . . . . . . . . . . . .

58,476(12,879)(885)(7,500)Total income taxes . . . . . . . . . . . . . . . . . . . . . . .

¥160,487¥ 21,308¥32,780$277,796

In Japan, a company is subject to a number of taxes, based on income, which in the aggregate indicate
normal statutory income tax rates of approximately 42.0%.
F-38

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Reconciliation between the Japanese statutory income tax rate and Kyocera’s effective tax rate is as follows:
2001

2002

2003

Japanese statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.0% 42.0% 42.0%
Income of foreign subsidiaries taxed at lower than statutory tax rates . . . . . . . . . . . . . . . . . (2.2) (2.4) (1.0)
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.3
0.3
(0.8)
Decrease in income taxes resulting from equity in earnings . . . . . . . . . . . . . . . . . . . . . . . . . (0.2) (1.0) (1.6)
Devaluation of investment in an affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ——2.9Tax rate change* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ——(0.5)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.2
(0.4)
2.1
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*40.1% 38.5% 43.1%

On March 31, 2003, the Japanese National Diet approved various changes to the calculation of the statutory
local enterprise tax. The statutory tax rate for using calculation of deferred tax assets and deferred tax
liabilities, of which temporary difference will be realized after April 1, 2004, was changed from 42.0% to
41.0% or 40.0%, which was determined by the local tax rate of prefectures, in which the Company and eachsubsidiary locate. As a result of this change, the amount of deferred tax liabilities, net of deferred tax assets,
decreased by ¥418 ($3,542) and the amount of deferred income tax in fiscal 2003 decreased by ¥418($3,542).

The components of the deferred tax assets and deferred tax liabilities at March 31, 2002 and 2003 are as
follows:
2002

2003

2003

Deferred tax assets:
Enterprise tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,588 ¥ 2,401 $ 20,347
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,45013,560114,915
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,079
8,072
68,407
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,732
22,618
191,678
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,95035,899304,229
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,79728,234
239,271
Net unrealized losses on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,302
21,120178,983
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—3,480
29,492
Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,641
15,028
127,356
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,679
5,312
45,017
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130,218
155,724
1,319,695
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11,009) (20,855)(176,737)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥119,209 ¥134,869 $1,142,958
Deferred tax liabilities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,108
Gain on public stock issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86,148Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
669
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 87,925

¥

2,777
86,148754¥ 89,679$

23,534730,068
6,390$ 759,992

At March 31, 2003, Kyocera had net losses carried forward of approximately ¥45,834 ($388,424), which
would be available to offset future taxable income. Approximately 25% of these net losses carry forward will
expire within next five fiscal years and the remaining 75% will not expire.
F-39

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
No provisions for income taxes have been made on undistributed earnings of subsidiaries and affiliates as
distributions from the domestic companies would be essentially free from additional taxation, and substantiallyall of the unremitted earnings of foreign subsidiaries and affiliates are either permanently reinvested or, if
remitted, would result in nominal tax by utilization of available foreign tax credits. Undistributed earnings ofsubsidiaries and affiliates were approximately ¥214,549 ($1,818,212) at March 31, 2003.
The net changes in the total valuation allowance for the years ended March 31, 2002 and 2003 were adecrease of ¥1,115 and an increase of ¥9,846 ($83,441), respectively.
17.

IMPLEMENTATION OF THE REHABILITATION PLAN:

Kyocera Mita Corporation went bankrupt in August 1998 and submitted its rehabilitation plan to the Osaka
District Court on October 5, 1999. This plan was approved by creditors on January 14, 2000 and then accepted by
the district court on January 18, 2000. On April 29, 2000, the Company acquired 100% of the equity of Kyocera
Mita Corporation.
Kyocera Mita Corporation submitted the revision of its rehabilitation plan to the Osaka District Court inNovember 2001. Kyocera Mita Corporation had planned to pay the debts under its rehabilitation plan by July2009 in accordance with the plan accepted by the district court on January 18, 2000. Kyocera Mita Corporation
paid all of the debts under the rehabilitation plan in February 2002 in accordance with the revised plan. On
March 5, 2002, the District Court concluded that Kyocera Mita Corporation had fulfilled all obligations under its
rehabilitation plan.
18.

SUPPLEMENTAL EXPENSE INFORMATION AND DDI-KDD-IDO MERGER:

Research and development expenses for the years ended March 31, 2001, 2002 and 2003 amounted to ¥35,128,¥40,399 and ¥47,268 ($400,576), respectively.
Advertising expenses for the years ended March 31, 2001, 2002 and 2003 amounted to ¥9,494, ¥11,211 and¥11,189 ($94,822), respectively.
Shipping and handling costs for the years ended March 31, 2001, 2002 and 2003 amounted to ¥9,638,¥8,993 and ¥10,107 ($85,653), respectively, and were included in selling, general and administrative expenses in
the consolidated statements of income.
On October 1, 2000, DDI Corporation (DDI), which provides telecommunications services, merged withKDD Corporation (KDD) and IDO Corporation (IDO), and DDI, the surviving company was named KDDI
Corporation (KDDI). Under the terms of the merger agreements, KDD stockholders received one share of KDDI
common stock (¥5,000 par value) for every 92.1 common shares of KDD (¥500 par value) held; and IDO
stockholders received one share of KDDI common stock for every 2.9 common shares of IDO (¥50,000 par
value) held. DDI issued 1,345,260.60 shares of common stock for the merger. Prior to the merger, DDI issued
123,448 shares of common stock to Toyota Motor Corporation.
As a result of these transactions described above, the Company recognized a ¥174,076 gain on stock
issuance of an affiliate. The Company recognized deferred income taxes on this gain on stock issuance. The
Company’s equity interest in KDDI decreased from 25.16% to 15.30%. The Company discontinued the equity
method for investments in common stock of KDDI from the second half of fiscal 2001. In relation to the decreaseof the Company’s equity interest in KDDI, the Company’s indirect equity interest in DDI POCKET, Inc., which
provides Personal Handyphone System (PHS) services, also decreased. The Company’s equity interest in DDI
F-40

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
POCKET, Inc., decreased from 33.68% to 13.35%. Consequently, from the second half of fiscal 2001, theCompany also discontinued the equity method for investments in common stock of DDI POCKET, Inc.
19.

SEGMENT REPORTING:

Kyocera adopts SFAS No.131, “Disclosures about Segments of an Enterprise and Related Information”.
Fine ceramics group consists of fine ceramic parts, automotive parts, semiconductor parts, cutting tools,
Jewelry, BIOCERAM, solar energy products and applied ceramic products. Electronic device group consists ofelectronic components and thin-film products. Equipment group consists of telecommunications equipment,
information equipment and optical instruments. Others previously consisted of telecommunication network
systems, financial services such as leasing and credit financing, research and development division, and officerenting services. However, based on a reorganization of the group structure on August 1, 2002, management
reviewed segment reporting and decided to reflect the accomplishment of fundamental research and development
division to each operating segment from the prospective point of view that the effort will lead advancement ofachievement.
This change has been made in order to clarify the closer substance of the business of Kyocera.
Segment information for the years ended March 31, 2001 and 2002 have been restated to conform to fiscal
2003 presentation.
Intersegment sales, operating revenue and transfers are made with reference to prevailing market price.
Transactions between reportable segments are immaterial and not shown separately.
Segment operating profit represents net sales, less related costs and operating expenses, excluding corporate
revenue and expenses, equity in earnings, gain on stock issuance by an affiliate, income taxes, minority interest
and cumulative effect of change in accounting principle.
Segment assets represent those assets associated with a specific operating segment. Corporate assets consist
primarily of cash and cash equivalents, the corporate headquarter’s facilities and various other investments andassets that are not specific to each operating segment.
Sales to KDDI and its consolidated subsidiaries, which is mainly included in Equipment group, for the years
ended 2001, 2002 and 2003 comprised of approximately 8.2%, 10.2% and 10.8% of consolidated net sales,
respectively.

F-41

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Information by operating segments at March 31, 2001, 2002 and 2003 and for each of the years then ended
is summarized on the following page:
Operating segments
2001

Net sales:
Fine ceramics group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic device group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating profit:
Fine ceramics group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic device group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliates and unconsolidated subsidiaries . . . . . . . . . . . . . . . .
Gain on stock issuance of an affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets:Fine ceramics group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic device group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in and advances to affiliates and unconsolidated subsidiaries . . . . . . . .
Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization:
Fine ceramics group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic device group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥88,771 ¥
126,455
28,3186,839
250,383(25,243)
2,209
174,076(1,203)¥ 400,222 ¥

¥

¥

¥

¥
Capital expenditures:
Fine ceramics group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic device group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-42

2003

20,137 ¥
4,372
24,4137,438
56,360(2,508)
1,559
—
(13)
55,398 ¥18,797 $
11,81640,0207,244
77,877(5,382)3,092—
450
76,037 $159,297
100,136
339,152
61,390659,975(45,610)
26,203—
3,813
644,381¥ 247,053 ¥ 201,442 ¥ 179,052 $ 1,517,390
375,711349,322333,392
2,825,356
314,278
283,778
280,848
2,380,068
217,393
230,319
252,041
2,135,940
1,154,435
1,064,861
1,045,333
8,858,754
612,515
618,036
600,853
5,091,975
26,095
26,206
24,398
206,763(64,989)(63,645)(35,570)(301,441)¥1,728,056 ¥1,645,458 ¥1,635,014 $13,856,051¥
Losses on inventories:
Fine ceramics group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic device group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2003¥ 363,026 ¥ 252,879 ¥ 238,867 $ 2,024,297
392,700
234,938
227,962
1,931,881
467,362478,293529,784
4,489,695
79,79086,116
86,214730,627(17,825)(17,652)(13,057)(110,653)¥1,285,053 ¥1,034,574 ¥1,069,770 $ 9,065,847¥
Valuation allowance for receivables:
Fine ceramics group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic device group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2002

¥

20,87630,733
17,275
3,612
1,676
74,172
260
11
607
3,638
217
4,733
324
555
1,922
15
—
2,816

32,82348,275
17,3524,853
2,641¥ 105,944

¥

¥
¥

¥
¥

¥
¥

¥

24,53032,81725,331
3,613
2,206
88,497

¥

202
396
849
1,219
53
2,719

¥

2,585
7,279
1,981
27
—
11,872¥

14,536
16,112
15,0095,249
3,725
54,631

¥

¥

¥

¥

¥

18,33725,87024,4454,158
2,510
75,320

$

129
21
814
653
164
1,781

$

$

$

1,973
2,250
2,343
400
—
6,966

$

8,095
13,501
13,311
4,115
1,592
40,614$$$

155,399
219,237
207,161
35,237
21,271
638,305
1,093
178
6,898
5,534
1,390
15,093
16,72019,06819,8563,390—
59,03468,602
114,415
112,805
34,873
13,491
344,186

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
Information for revenue from external customers by product shipment destination and long-lived assets
based on physical location as of and for the years ended March 31, 2001, 2002 and 2003 are summarized asfollows:
Geographic segments
Net sales:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States of America . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-lived assets:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States of America . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2001

2002

2003

2003

¥ 490,923
348,109
217,456
163,487
65,078¥ 408,561
289,517
148,349
141,493
46,654¥ 423,190
264,755
178,384
144,293
59,148$3,586,356
2,243,686
1,511,729
1,222,822
501,254¥1,285,053¥1,034,574¥1,069,770$9,065,847¥ 204,961
64,396
20,37331,3079,921¥ 186,403
62,17831,55430,531
7,563¥ 183,778
46,28634,201
24,342
5,148$1,557,441
392,254289,839
206,288
43,627¥ 330,958¥ 318,229¥ 293,755$2,489,449

There are no individually material countries with respect to revenue from external customers and long-lived
assets in Asia, Europe and Others.
20.

EARNINGS PER SHARE:

A reconciliation of the numerators and the denominators of basic and diluted earnings per share (EPS)
computations is as follows:
2001

Income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 219,529
Cumulative effect of change in accounting principle . . . . . . . . . .
—Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
219,529

2002

2003

2003

¥ 33,791 ¥ 43,421 $367,975(1,838)(2,256) (19,119)
31,953
41,165
348,856

Basic earnings per share:
Income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,161.20—
1,161.20

178.74(9.72)
169.02233.02(12.11)220.911.97(0.10)
1.87

Diluted earnings per share:
Income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,157.83—
1,157.83

178.59(9.71)
168.88232.97(12.11)220.861.97(0.10)
1.87

Basic weighted average number of shares outstanding: . . . . . . . .
Dilutive effect of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted average number of shares outstanding . . . . . . .

189,053551
189,604

189,050154
189,204

186,33844
186,382

F-43

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
21. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental information related to the consolidated statements of cash flows is as follows:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of business:
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . .
Stock issuance for acquisition . . . . . . . . . . . . . . . . . . . . . . . . .
Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥

2001

2002

2003

2003

3,998
81,810¥ 5,299
72,111¥ 3,230
32,012$ 27,373
271,288¥103,370 ¥ 543 ¥ 32,015 $ 271,314(91,277)(456) (22,584) (191,390)——(9,381)(79,500)(12,461)(27)(4,108)(34,814)¥(368) ¥60

¥ (4,058) $ (34,390)

22. RECLASSIFICATIONS:
Certain reclassifications of previously reported amounts have been made to the consolidated balance sheets at
March 31, 2002, the consolidated statements of income for the year ended March 31, 2001, and the consolidated
statements of cash flows for the years ended March 31, 2001 and 2002, and corresponding footnote disclosures toconform to the current year presentation. Such reclassifications have no effect on net assets, net income and cash
flows.
23. SUBSEQUENT EVENTS:
Subsequent to March 31, 2003, the Company’s Board of Directors declared a cash dividend of ¥5,548 ($47,017)
payable on June 26, 2003 to stockholders of record on March 31, 2003. The dividend declared is subject toapproval by the stockholders at the meeting held on June 25, 2003.
On April 25, 2003, the Company’s Board of Directors decided to submit a resolution to the stockholders forapproval of the issuance of stock acquisition rights to directors, statutory auditors, corporate executive officers
and certain key employees of the Company and its subsidiaries. This issuance of stock acquisition rights is
intended to enable the grant of stock options and the kind and the maximum number of shares to be issued is
1,100,000 shares of common stock of the Company.
On April 25, 2003, the Company’s Board of Directors decided to submit a resolution to the stockholders forapproval of acquisition of up to 5,000,000 shares of the Company’s common stock at an aggregated purchaseprice of no more than ¥50,000 ($423,729) in order to implement flexible capital policies and to utilize for thetimely business development in accordance with the changes in the business environment.
These resolutions were approved by the stockholders at the meeting held on June 25, 2003.
On May 21, 2003, the Company and Kinseki, at the meetings of their respective Boards of Directors,
resolved that the Company should make Kinseki a wholly-owned subsidiary (100% owned subsidiary) throughstock swap, and entered into Stock Swap Agreement, which provides the ratio of allocation shall be 0.100 sharesof the Company to one Kinseki share. Subsequently the Agreement was approved at the Ordinary General
Shareholders Meeting of Kinseki held on June 27, 2003, and it was decided that the effective date of the stock
swap would be August 1, 2003.
Pursuant to the Agreement, the Company will allocate a total of 2,529,154 shares of Common Stock of theCompany that it holds to Kinseki’s shareholders.
Kyocera believes that Kinseki’s technologies for the manufacture of artificial crystals and related
application technologies will enhance the superior position of Kyocera as a general electronic components
manufacturer that is versed in the telecommunications and information processing industries.
F-44

Kyocera Corporation and Consolidated Subsidiaries
Notes to The Consolidated Financial Statements—(Continued)
24.

SEMIANNUAL FINANCIAL DATA (UNAUDITED):
Six months ended
September 30, 2001 March 31, 2002

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . .
Income before cumulative effect of changein accounting principle . . . . . . . . . . . . . .
Cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per share:
Income before cumulative effect ofchange in accounting principle . . . .
Cumulative effect of change inaccounting principle . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share:
Income before cumulative effect ofchange in accounting principle . . . .
Cumulative effect of change inaccounting principle . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . .

Six months ended
September 30, 2002 March 31, 2003

¥520,378
123,942¥514,196
115,431¥ 517,003
125,578¥ 552,767
147,934

20,941

12,85019,38324,038(1,838)
19,103—
12,850(2,256)
17,127—24,038¥ 110.76¥(9.72)
101.04¥ 110.62(9.70)
100.92

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . .
Income before cumulative effect of changein accounting principle . . . . . . . . . . . . . .
Cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per share:
Income before cumulative effect ofchange in accounting principle . . . .
Cumulative effect of change inaccounting principle . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . .

67.98

¥

—
67.98

¥

67.95

103.27¥(12.02)
91.25

¥

—
67.95

103.22129.95—129.95¥129.95(12.01)
91.21—
129.95$4,381,381
1,064,220$4,684,466
1,253,678

164,263

203,712(19,119)
145,144—
203,712

$

0.88

$

(0.11)
0.77

Diluted earnings per share:
Income before cumulative effect ofchange in accounting principle . . . .
Cumulative effect of change inaccounting principle . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . .

$

0.87

1.10
—
1.10

$

(0.10)
0.77

1.10
—
1.10

Earnings per share are computed on the weighted average number of shares outstanding during each six-month
period.
The sum of the six months’ earnings per share does not equal the year-to-date earnings per share due tochanges in average share calculations.
F-45

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
For the years ended March 31, 2001, 2002 and 2003

Description

Balanceat
Beginningof Period

Yen in millions
Column C
Column D
Additions
ChargedCharged (Credited)to Costs
to otherandAccounts
Deductions
Expenses(A)(B)

For the year ended March 31, 2001:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Allowance for sales returns . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for valuation losses on inventories . . . . . . . . .

¥59,807
4,196
13,293¥ 4,867
1,279—¥3,064763—¥ 7,651
408
5,803¥60,087
5,830
7,490

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥77,296¥ 6,146¥3,827¥13,862¥73,407

For the year ended March 31, 2002:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Allowance for sales returns . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for valuation losses on inventories . . . . . . . . .

¥60,087
5,830
7,490

¥ 2,428
1,185
1,281

¥1,103463—¥ 4,953——¥58,665
7,478
8,771

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥73,407¥ 4,894¥1,566¥ 4,953¥74,914

For the year ended March 31, 2003:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Allowance for sales returns . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for valuation losses on inventories . . . . . . . . .

¥58,665
7,478
8,771

¥

596
(2,656)
1,441¥ (157)(615)—¥ (3,114)——¥55,990
4,207
10,212

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥74,914¥ (619)¥ (772)¥ (3,114)¥70,409

Column A

Column B

Column E

Balanceat End ofPeriod(A) Foreign currency translation adjustments and beginning balance of newly consolidated subsidiaries(B) Charge-offs
Schedules other than that above are omitted for the reason that they are not required or are not applicable, or
the required information is shown in the financial statements or notes thereto.
Financial statements of unconsolidated subsidiaries and 50% or less owned persons accounted for by theequity method have been omitted because they are in the aggregate not significant and the conditions forinclusion otherwise are not present.

F-46

SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Company certifies
that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Kyocera Corporation(Company)
By/s/

HIDEKI ISHIDA

Hideki Ishida
Managing Executive Officer
General Manager of Corporate Finance Division

September 11, 2003

INDEX OF EXHIBITS
Exhibit
NumberDescription

1.1

Articles of Incorporation (English translation)

1.2

Share Handling Regulations of the Company (English translation)

1.3

Regulations of the Board of Directors of the Company (English translation)(incorporated byreference to the Registrant’s annual report on Form 20-F filed on September 19, 2002)

1.4

Regulations of the Board of Corporate Auditors of the Company (English translation)(incorporated
by reference to the Registrant’s annual report on Form 20-F filed on September 19, 2002)

2.1

Specimen common stock certificate of the Company (incorporated by reference to the Registrant’s
annual report on Form 20-F filed on September 24, 2001)

2.2

Amended and Restated Deposit Agreement, dated as of June 29, 1998 among the Company, Citibank
N.A. as Depositary and all owners and holders from time to time of American Depositary Receipts,
including the form of American Depositary Receipt, as amended by Amendment No.1 thereto, dated
as of January 5, 1999 (incorporated by reference to the Registrant’s annual report on Form 20-F filed
on September 24, 2001)

8.1

List of Significant Subsidiaries (See “Organizational Structure” in Item 4.C. of this Form 20-F)

12.1

Certification of the principal executive officer of the Company required by Rule 13a-14(a)12.2

Certification of the principal financial officer of the Company required by Rule 13a-14(a)13.1

Certification of the principal executive officer of the Company required by Rule 13a-14(b) andSection 1350 of Chapter 63 of Title 18 of the United States Code

13.2

Certification of the principal financial officer of the Company required by Rule 13a-14(b) andSection 1350 of Chapter 63 of Title 18 of the United States Code

14.1

Consent of PricewaterhouseCoopers with respect to the financial statements included in this Form
20-F