Notes to Consolidated Financial Statements

1. Basis of Presenting Consolidated FinancialStatements
The accompanying consolidated financial statements have been
prepared from accounts and records maintained by Toyoda
Automatic Loom Works, Ltd. (the “Company”), and its consolidated
subsidiaries (together, hereinafter referred to as the “Companies”) in
accordance with generally accepted accounting principles in Japan.
Furthermore, these consolidated financial statements have been
prepared based on the consolidated financial statements preparedin accordance with the Japanese Regulations Concerning theTerminology, Forms and Preparation Methods of the Consolidated
Financial Statements (the “Regulations”). Certain reclassifications of
the accounts in the basic financial statements disclosed in Japan
have been made for presentation in a form which is more familiar toreaders outside Japan. These reclassifications do not affect thevalues of total assets, shareholders’ equity, net sales or net income.
The accompanying financial statements are stated in Japaneseyen, the currency of the country in which the Company is incorporatedand operates. Solely for the convenience of readers outside Japan,
yen amounts as of and for the six months ended September 30,
2000, have been translated into U.S. dollars at the rate of ¥108.00
to U.S.$1, the exchange rate prevailing in Tokyo on September 30,
2000. These translations should not be construed as representations that yen amounts have been, could have been or could beconverted into U.S. dollars.

2. Summary of Significant Accounting Policies(a) Consolidation
The Company had 91 and 29 consolidated subsidiaries as of
September 30, 2000 and 1999, respectively. The number ofconsolidated subsidiaries increased by 62 companies, including 59in the BT Industries Group, which the Company acquired in June
2000. Since these companies became newly consolidated subsidiaries
during the six months ended September 30, 2000, and the Company
considered their semiannual closing date as the beginning date ofcontrol, they were consolidated only in the balance sheets.
As of September 30, 2000, the Company had four (three forSeptember 30, 1999) unconsolidated subsidiaries and 19 (10 forSeptember 30, 1999) affiliates. The equity method is applied to theinvestments in two unconsolidated subsidiaries and 12 affiliates.
Both of the above-mentioned unconsolidated subsidiaries and 10
companies of the above-mentioned 12 affiliates belong to the BT
Industries Group.
(b) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments,
generally with original maturities of three months or less, that arereadily convertible to known amounts of cash and are so near
maturity that they present insignificant risk of changes in value becauseof changes in interest rates, in accordance with the Regulations.
(c) Securities
Until the fiscal year ended March 31, 2000, securities that werequoted on stock exchanges had been stated mainly at the lower ofcost, as determined by the moving-average method, or market
value. Other securities had been stated at cost, as determined by
the moving-average method.

From the six months ended September 30, 2000, mark-to-market
accounting has been adopted due to the application of the new
accounting standards for financial instruments. Securities have beenclassified as trading securities, held-to-maturity debt securities, equity
investments in subsidiaries and affiliates, and “other securities.” Neither
trading securities nor held-to-maturity debt securities were ownedby the Companies as of September 30, 2000. Equity investments in
subsidiaries and affiliates have been stated at cost. Other securities
have been measured by using the current method based on suchfactors as market price as of the end of the period. The Companies
have adopted a method in which the accumulated difference between
the market value and the historical cost has been recorded as“unrealized gains on securities” under shareholders’ equity at the netof taxes amount. Securities without market prices have been statedat cost, as determined by the moving-average method.
Due to this change, investment securities increased by ¥949,396
million ($8,790,708 thousand), and unrealized gains on securities of¥558,226 million ($5,168,761 thousand) were stated.
(d) Inventories
Inventories are stated mainly at cost determined by the movingaverage method.
(e) Property, plant and equipment, and depreciation
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment for the Company
and its domestic subsidiaries and affiliates is computed mainly by
the declining-balance method and, for its overseas subsidiaries andaffiliates, is computed mainly by the straight-line method based on
the estimated useful lives of the assets.
(f) Allowances for doubtful accounts
Until the fiscal year ended March 31, 2000, allowances for doubtful
accounts had been provided mainly at the maximum amountdeductible under the tax laws of Japan.
From the six months ended September 30, 2000, they have been
provided at the uncollectible amounts that are estimated by suchmeans as using the percentage of credit losses for ordinary claims
and by examining the feasibility of collection individually for special
claims that seem to be uncollectible.
(g) Provision for retirement and severance benefits
Until the fiscal year ended March 31, 2000, provision for retirement
and severance benefits had been calculated to state liability at thepresent value, based on the amount which would be required if all
employees voluntarily terminated their employment at the end of
the period, less amounts compensated by the qualified retirement
pension plan, which covered 50 percent of the amount of thebenefits of the retired employees after 20 years of employment.
From the six months ended September 30, 2000, the new
accounting standards for retirement benefits have been applied tothe Companies. Provision for retirement and severance benefits has
been calculated as the amount, accepted as being incurred at theend of the period, based upon the Companies’ projected retirement
benefit obligations and pension assets at the fiscal year-end.

TOYODA AUTOMATIC LOOM WORKS, LTD.

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According to this change, for the six months ended September
30, 2000, “cumulative effect of change in accounting standards for
retirement benefits” of ¥19,057 million ($176,455 thousand) wascharged to income and recorded as a special loss. For this period,“gain on securities contribution to employee retirement benefit
trust” of ¥15,080 million ($139,630 thousand) was recorded asa special gain.
(h) Lease transactions
Finance leases other than those that are deemed to transfer theownership of the leased assets to lessees are mainly accounted forby a method similar to that applicable to ordinary operating leases.
(i) Translation
Accounts of overseas consolidated subsidiaries and affiliates
accounted for under the equity method have been translated into
Japanese yen as follows:
1. Assets and liabilities have been translated at the prevailing rate ofexchange at the end of the period.
2. Shareholders’ equity has been translated at the rate prevailingwhen equity was acquired or when a change in equity occurred.
3. Revenue and expenses have been translated at the prevailing
periodical average rate, although the rate at the end of the period
had been used until the six months ended September 30, 1999.
See Note 3(a).
The amended accounting standards for foreign currency transactions
have been applied from the six months ended September 30,
2000. No losses resulted from this change.
From the six months ended September 30, 2000, translation
adjustment, which had been listed under assets in the consolidatedbalance sheets until the fiscal year ended March 31, 2000, has beenshifted under shareholders’ equity and included in minority interests inconsolidated subsidiaries due to the amendment of the Regulations.
(j) Consumption tax
Principally, the consumption tax under the Japanese Consumption
Tax Law withheld by the Companies on sales of goods is notincluded in the amount of net sales in the accompanying consolidated
statements of income. The consumption tax borne by the Companies
under the law on purchases of goods and services, and expenses
are not included in the related amount.

3. Change in Accounting(a) From the fiscal year ended March 31, 2000, revenue andexpenses accounts of overseas consolidated subsidiaries, which
had been translated into Japanese yen at rates of the end of theperiod until the six months ended September 30, 1999, have beentranslated at fiscal average rates. This change was made to present
the operating results more precisely as the significance of the overseas
consolidated subsidiaries had been increasing and their revenue
and expenses were incurred throughout the periods.
(b) The Company’s retirement and severance benefits for directors
and corporate auditors had been previously calculated as expenses
at the time they were awarded. However, to rationalize the loss forthe period, these have been changed to payables at the end of theperiod, as per internal rules, from the six months ended September
30, 2000. Further, “prior years’ addition to provision for retirement
and severance benefits for directors and corporate auditors” wascharged to income and recorded as a special loss.

4. Additional Information
Until the six months ended September 30, 1999, consolidated
statements of cash flows had been prepared in conformity with theaccounting principles prescribed by the Company and accepted by
the independent public accountants. However, from the fiscal year
ended March 31, 2000, they have to be prepared in accordancewith newly prescribed rules in the amended Regulations. Pursuant
to the amendment, the consolidated statements of cash flows forthe six months ended September 30, 1999 were restated to makethe figures comparable with those of the six months ended
September 30, 2000.
According to this change, deposits and securities (stocks had
been stated as marketable securities separately) with original
maturities of over three months have been classified as short-term
investments from the fiscal year ended March 31, 2000.

5. Assets Pledged as Collateral
Investment securities, land, buildings and structures at a book valueof ¥34,228 million ($316,927 thousand) were pledged as collateralfor bank loans or employees’ savings deposits or other liabilities asof September 30, 2000.

6. Contingent Liabilities(k) Appropriation of retained earnings
In the accompanying consolidated statements of shareholders’equity, the approved amount during the relevant period is reflected
for the appropriation of retained earnings of consolidated subsidiaries.
(l) Amounts per share
Net income per share is computed based on the average numberof outstanding shares of common stock during the period.
(m) Derivative transactions
Until the fiscal year ended March 31, 2000, the Companies had notengaged in derivative transactions.
However, from the six months ended September 30, 2000, theCompanies have hedged the foreign currency exchange fluctuation
risk for receivables relating to their exports, principally by forward
exchange contracts.
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TOYODA AUTOMATIC LOOM WORKS, LTD.

Contingent liabilities amounted to ¥17,199 million ($159,251 thousand)as of September 30, 2000.

7. Subsequent Events(a) On October 11, 2000, the Company issued 30 million shares ofnew common stock by resolutions of the Board of Directors held onSeptember 5 and 19, 2000. As a result, common stock and capitalsurplus both increased by ¥27,840 million ($257,778 thousand).
(b) On November 9, 2000, the Board of Directors of the Company
resolved the payment of an interim cash dividend to shareholders ofrecord as of September 30, 2000, of ¥8.00 ($0.074) per share, or a
total of ¥2,266 million ($20,985 thousand).

8. Segment Information(a) Business segments

Sales:
Automobile
Outside customer sales
Inter-segment transactions
Materials Handling Equipment
Outside customer sales
Inter-segment transactions
Textile MachineryOutside customer sales
Inter-segment transactions
Others
Outside customer sales
Inter-segment transactions
Subtotal
Elimination of inter-segment transactions

Millions of yen

Thousands of
U.S. dollars (Note 1)

For the six months
ended September 30

For the six months
ended September 30

2000

1999

2000

¥228,789
1,912¥197,356
1,346$2,118,413
17,705

230,701

198,7022,136,118

82,273–72,785–

761,784–

82,27372,785

761,784

14,399–9,238–

133,329–

14,3999,238

133,329

18,7692,104

11,808
1,529

173,787
19,48520,873

13,337

193,272348,246

294,0623,224,503(4,016)(2,875)(37,190)

Total¥344,230¥291,187$3,187,313

Operating Income (Loss):
Automobile
Materials Handling Equipment
Textile Machinery
OthersElimination of inter-segment transactions¥14,023
6,003
(266)
1,881
(156)

¥11,059
2,952(2,268)(240)
209$129,838
55,586(2,459)17,415(1,448)

Total¥21,485¥11,712$198,932(b) Geographical segments
Millions of yen

Thousands of
U.S. dollars (Note 1)

For the six months
ended September 30

For the six months
ended September 30

200019992000¥287,313
13,624¥241,049
9,201$2,660,301
126,152

300,937

250,250

2,786,453

47,260–42,989–437,593–47,26042,989437,593

9,657
286

7,149
293

89,419
2,649

9,943

7,442

92,068358,140

300,681

3,316,114(13,910)(9,494)(128,801)

Total¥344,230¥291,187$3,187,313

Operating Income:JapanNorth America
OthersElimination of inter-segment transactions¥19,253
2,133
330
(231)

¥ 8,152
3,138
195
227

$178,270
19,746
3,057(2,141)

Total¥21,485¥11,712$198,932

Sales:
Japan
Outside customer sales
Inter-segment transactions
North America
Outside customer sales
Inter-segment transactions
Others
Outside customer sales
Inter-segment transactions
Subtotal
Elimination of inter-segment transactions

TOYODA AUTOMATIC LOOM WORKS, LTD.

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