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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2003

Commission file number 2-76735

TDK KABUSHIKI KAISHA

(Exact name of Registrant as specified in its charter)


TDK CORPORATION

(Translation of Registrants name into English)


Japan

(Jurisdiction of incorporation or organization)




13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272, Japan

(Address of principal executive offices)


Securities registered pursuant to Section 12(b) of the Act.

|                           |  |                                          
|-------------------------- |  | -----------------------------------------
|Title of each class        |  | Name of each exchange on which registered
|                          
|American Depositary Shares |  | New York Stock Exchange                  
|                          
|Common stock               |  | New York Stock Exchange                  

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 the issuers classes of
capital or common stock as of the close of the period covered by the annual
report.

Common stock

Outstanding as of March 31, 2003: 132,625,184 shares (excluding treasury stock)


Indicate by a 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 [X]          No [   ].

Indicate by a check mark which financial statement item the registrant has
elected to follow.

Item 17 [X]          Item 18 [   ].





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TABLE OF CONTENTS



|                                                  |                                                                                       |                                            |  |  |  |  |  | 
|------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART 1                                           
|                                                  | Item 1. Identity of Directors, Senior Management and Advisers                        
|                                                  | Item 2. Offer Statistics and Expected Timetable                                      
|                                                  | Item 3. Key Information                                                              
|                                                  | Item 4. Information on the Company                                                   
|                                                  | Item 5. Operating and Financial Review and Prospects                                 
|                                                  | Item 6. Directors, Senior Management and Employees                                   
|                                                  | Item 7. Major Shareholders and Related Party Transaction                             
|                                                  | Item 8. Financial Information                                                        
|                                                  | Item 9. The Offer and Listing                                                        
|                                                  | Item 10. Additional Information                                                      
|                                                  | Item 11. Quantitative and Qualitative Disclosures about Market Risk                  
|                                                  | Item 12. Description of Securities Other than Equity Securities                      
|PART 2                                           
|                                                  | Item 13. Defaults, Dividend Arrearages and Delinquencies                             
|                                                  | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|                                                  | Item 15. Controls and Procedures                                                     
|                                                  | Item 16A. Audit Committee Financial Expert                                           
|                                                  | Item 16B. Code of Ethics                                                             
|PART 3                                           
|                                                  | Item 17. Financial Statements                                                        
|                                                  |                                                                                       | Independent Auditors Report              
|                                                  |                                                                                       | Consolidated Financial Statements         
|                                                  |                                                                                       | Notes to Consolidated Financial Statements
|                                                  |                                                                                       | Schedule II                               
|                                                  | Item 18. Financial Statements                                                        
|                                                  | Item 19. Exhibits                                                                    
|SIGNATURES                                       
|EXHIBITS                                         
|EX-12.(a) 302 Certification of CEO of the Company
|EX-12.(b) 302 Certification of CFO of the Company
|EX-13.(a) 906 Certification of CEO of the Company
|EX-13.(b) 906 Certification of CFO of the Company
|EX-14 ARTICLES OF INCORPORATION                  
|EX-15 SHARE HANDLING REGULATIONS                 



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All information contained in this Report is as of March 31, 2003 unless
otherwise specified. Fiscal 2003, fiscal 2002, fiscal 2001 and fiscal 2000 of
this Report indicate TDK Corporations fiscal period of the fiscal years ended
March 31, 2003, 2002, 2001 and 2000, respectively.

The figures in this Report are expressed in yen and, solely for the
convenience of the reader, are translated into United States dollars at the
rate of ¥120 = U.S.$1, the approximate exchange rate prevailing on the Tokyo
Foreign Exchange Market as of March 31, 2003. (See Note 2 of the Notes to
Consolidated Financial Statements.) On June 30, 2003 the noon buying rate for
yen cable transfers in New York City as reported by the Federal Reserve Bank of
New York was ¥119.87 = $1.

Forward-Looking Statements

This report contains forward-looking statements, including projections,
plans, policies, management strategies, targets, schedules, understandings and
evaluations, about TDK Corporation (TDK) and its group companies (TDK and its
group companies are referred to also as TDK where the context so requires)
that are not historical facts. These forward-looking statements are based on
current forecasts, estimates, assumptions, plans, beliefs and evaluations in
light of information available to management at the time this report was
prepared.

In preparing forecasts and estimates, TDK has used as their basis, certain
assumptions as necessary, in addition to confirmed historical facts. However,
due to their nature, there is no guarantee that these statements and
assumptions will prove to be accurate in the future. TDK therefore wishes to
caution readers that these statements, facts and certain assumptions contained
in this report are subject to a number of risks and uncertainties and may prove
to be inaccurate.

The electronics markets in which TDK operates are highly susceptible to
rapid changes. Furthermore, TDK operates not only in Japan, but in many other
countries. As such, factors that can have significant effects on its results
include, but are not limited to, shifts in technology, demand, prices,
competition, economic environments and foreign exchange rates.

2



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PART 1




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

|                                             |                             |   |                                           |       |                   |   |         |         |      |   |         |        |      |   |         |        |  |   |         |        |  |   |                     |      | 
|-------------------------------------------- | --------------------------- | - | ----------------------------------------- | ----- | ----------------- | - | ------- | ------- | ---- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  | - | ------------------- | ---- | 
|                                             |                             |   |                                           |       |                   |   |         |         |      |   |         |        |      |   |         |        |  |   |         |        |  |   | Thousands
of       
|                                             |                             |   |                                           |       |                   |   |         |         |      |   |         |        |      |   |         |        |  |   |         |        |  |   | dollars,
except per
|                                             |                             |   | Millions of yen, except per share amounts |       | share
amounts (1)
|                                             |                             |   |                                           |       |                  
|                                             |                             |   | 2003                                      |       | 2002              |   | 2001    |         | 2000 |   | 1999    |        | 2003
|                                             |                             |   |                                           |       |                   |   |         |         |      |   |         |        |     
|Net sales                                    |                             | ¥ | 608,880                                   |       |                   | ¥ | 570,511 |         |      | ¥ | 679,086 |        |      | ¥ | 664,713 |        |  | ¥ | 676,250 |        |  | $ | 5,074,000           |     
|Cost of sales                                |                             |   | 459,616                                   |       |                   |   | 464,620 |         |      |   | 496,083 |        |      |   | 475,340 |        |  |   | 473,760 |        |  |   | 3,830,133           |     
|Selling, general and
administrative expenses |                             |   | 121,839                                   |       |                   |   | 123,741 |         |      |   | 131,074 |        |      |   | 114,766 |        |  |   | 126,174 |        |  |   | 1,015,325           |     
|Restructuring cost                           |                             |   | 5,345                                     |       |                   |   | 25,872  |         |      |   |        |        |      |   |        |        |  |   |        |        |  |   | 44,542              |     
|Income (loss) before                         |                             |   |                                           |       |                   |   |         |         |      |   |         |        |      |   |         |        |  |   |         |        |  |   |                     |     
|income taxes                                 |                             |   | 18,081                                    |       |                   |   | (43,697 | )       |      |   | 64,516  |        |      |   | 73,414  |        |  |   | 75,425  |        |  |   | 150,675             |     
|Net income (loss)                            |                             |   | 12,019                                    |       |                   |   | (25,771 | )       |      |   | 43,983  |        |      |   | 50,730  |        |  |   | 46,345  |        |  |   | 100,158             |     
|Per Common Share:                            |                             |   |                                           |       |                   |   |         |         |      |   |         |        |      |   |         |        |  |   |         |        |  |   |                     |     
|                                             | Net income (loss) /Basic    |   | ¥                                         | 90.56 |                   |   | ¥       | (193.91 | )    |   | ¥       | 330.54 |      |   | ¥       | 380.89 |  |   | ¥       | 347.96 |  |   | $                   | 0.75 | 
|                                             | Net income (loss) /Diluted  |   |                                           | 90.56 |                   |   |         | (193.91 | )    |   |         | 330.54 |      |   |         | 380.89 |  |   |         | 347.96 |  |   |                     | 0.75 | 
|                                             | Cash dividends              |   |                                           | 45.00 |                   |   |         | 60.00   |      |   |         | 60.00  |      |   |         | 65.00  |  |   |         | 60.00  |  |   |                     |      | 
|                                             | U.S. Dollar equivalents (2) |   | $                                         | 0.38  |                   |   | $       | 0.45    |      |   | $       | 0.55   |      |   | $       | 0.58   |  |   | $       | 0.50   |  |   |                     |      | 

|                                            |  |                                                                     |         |                |  |      |         |      |  |      |         |      |  |   |         |  |  |   |         |  |  |           |           | 
|------------------------------------------- |  | ------------------------------------------------------------------- | ------- | -------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- |  |  | --------- | --------- | 
|                                            |  |                                                                     |         |                |  |      |         |      |  |      |         |      |  |   |         |  |  |   |         |  |  | Thousands
|                                            |  | Millions of yen, except per share amounts and exchange rate for yen |         | of
dollars (1)
|                                            |  |                                                                     |         |               
|                                            |  | 2003                                                                |         | 2002           |  | 2001 |         | 2000 |  | 1999 |         | 2003
|                                            |  |                                                                     |         |                |  |      |         |      |  |      |         |     
|Net working capital                         |  | ¥                                                                   | 315,948 |                |  | ¥    | 288,865 |      |  | ¥    | 306,771 |      |  | ¥ | 310,842 |  |  | ¥ | 331,750 |  |  | $         | 2,632,900 | 
|Total assets                                |  |                                                                     | 747,337 |                |  |      | 749,910 |      |  |      | 820,177 |      |  |   | 775,992 |  |  |   | 743,512 |  |  |           | 6,227,808 | 
|Short-term indebtedness                     |  |                                                                     | 1,919   |                |  |      | 2,312   |      |  |      | 5,879   |      |  |   | 1,933   |  |  |   | 3,817   |  |  |           | 15,992    | 
|Long-term indebtedness                      |  |                                                                     | 94      |                |  |      | 459     |      |  |      | 1,004   |      |  |   | 46      |  |  |   | 1,787   |  |  |           | 783       | 
|Stockholders Equity                        |  |                                                                     | 553,885 |                |  |      | 583,927 |      |  |      | 637,749 |      |  |   | 571,013 |  |  |   | 535,398 |  |  |           | 4,615,708 | 
|Number of shares outstanding (in
thousands) |  |                                                                     | 132,625 |                |  |      | 132,860 |      |  |      | 133,019 |      |  |   | 133,190 |  |  |   | 133,190 |  |  |           |           | 

|                                       |  |         |        |          |  |      |        |     |  |  |        |  |  |  |        | 
|-------------------------------------- |  | ------- | ------ | -------- |  | ---- | ------ | --- |  |  | ------ |  |  |  | ------ | 
|Yen exchange rates per U.S. dollar (3) |  | Average |        | Term end |  | High |        | Low
|                                       |  |         |        |          |  |      |        |    
|Year ended March 31:                   |  |         |        |          |  |      |        |     |  |  |        |  |  |  |        | 
|1999                                   |  |         | 128.10 |          |  |      | 118.43 |     |  |  | 147.14 |  |  |  | 108.83 | 
|2000                                   |  |         | 110.02 |          |  |      | 102.73 |     |  |  | 124.45 |  |  |  | 101.53 | 
|2001                                   |  |         | 111.64 |          |  |      | 125.54 |     |  |  | 125.54 |  |  |  | 104.19 | 
|2002                                   |  |         | 125.64 |          |  |      | 132.70 |     |  |  | 134.77 |  |  |  | 115.89 | 
|2003                                   |  |         | 121.10 |          |  |      | 118.07 |     |  |  | 133.40 |  |  |  | 115.71 | 
|2004 (through June 30, 2003)           |  |         | 119.48 |          |  |      | 119.87 |     |  |  | 120.55 |  |  |  | 115.94 | 
|                                       |  |         |        |          |  |      |        |     |  |  |        |  |  |  |        | 
|January, 2003                          |  |         |        |          |  |      |        |     |  |  | 120.18 |  |  |  | 117.80 | 
|February, 2003                         |  |         |        |          |  |      |        |     |  |  | 121.30 |  |  |  | 117.14 | 
|March, 2003                            |  |         |        |          |  |      |        |     |  |  | 121.42 |  |  |  | 116.47 | 
|April, 2003                            |  |         |        |          |  |      |        |     |  |  | 120.55 |  |  |  | 118.25 | 
|May, 2003                              |  |         |        |          |  |      |        |     |  |  | 119.50 |  |  |  | 115.94 | 
|June, 2003                             |  |         |        |          |  |      |        |     |  |  | 119.87 |  |  |  | 117.46 | 

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---

|Notes: |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | Translated, except for cash dividend amounts, for convenience of the reader
into U.S. dollars at the rate of ¥120 = $1, the approximate rate on the Tokyo
Foreign Exchange Market on March 31, 2003.                                                                                                                                                                                                                                                                                                    
|      
|(2)    |  | Computed based on the rates specified in Note (3) below on the respective
dates of semi-annual payments for each year.                                                                                                                                                                                                                                                                                                                                                                                  
|      
|(3)    |  | Based on the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York. The average rates are computed based on the exchange rates
on the last day of each month during the year.                                                                                                                                                                                                                           
|      
|(4)    |  | TDK adopted the Emerging Issues Task Force issue 01-9 (EITF 01-9),
Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendors Products) from the fiscal beginning April 1, 2002.
Certain amounts from the fiscal year 2000 have been reclassified, with no
effect on net income (loss), to conform to the fiscal year 2003 presentation.
The effect of EITF 01-9 on TDKs consolidated financial statements for prior to
fiscal year 2000 were not material.

B. Capitalization and indebtedness

Not applicable.

C. Reasons for the offer and use of proceeds

Not applicable.

D. Risk factors

Economic conditions

The Japanese economy has experienced a prolonged recession since the early
1990s, which has become serious. In addition, the global economy has taken a
downturn, concurrently with setbacks in the global information technology
industry. These recessionary conditions have resulted in sluggish consumer
spending and weakened corporate capital expenditures in many industries. For
example, the mobile phone market on which TDK had concentrated investment
capital resources in recent years has been particularly hard hit. TDK
currently does not foresee a rapid turnaround in the Japanese or global economy
in the near term. As a result, these conditions could adversely affect TDKs
business results and financial conditions.

Currency exchange rate fluctuations

TDK is exposed to risks of foreign currency exchange rate fluctuations as
TDKs consolidated financial statements are presented in Japanese yen, which
are thereby affected by foreign exchange rate changes. These changes affect
TDKs international business transactions and the costs and prices of TDKs
products and services in overseas countries in relation to the yen. They can
also affect the yen value of TDKs investments in overseas assets and
liabilities. Although TDK is taking measures to reduce or hedge against
foreign currency exchange risks, foreign exchange rate fluctuations could
adversely affect TDKs businesses, financial conditions or operation results.

TDKs growth strategies outside of Japan

Corporate strategies include expanding TDKs businesses in markets outside
of Japan. However, in many of these markets, TDK may face risks such as
political instability, economic uncertainty, cultural and religious differences
and labor relation problems, as well as foreign exchange risks. TDK may also
face barriers in understanding the commercial and business customs in foreign
countries, including difficulties in timely collection of accounts

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receivable or in building and expanding relationships with potential customers,
subcontractors or parts suppliers. TDK may also experience various political
and legal
restrictions, including restrictions on foreign investment or the
repatriation of profits on invested capital, nationalization of local industry,
changes in export or import restrictions or foreign exchange controls, and
changes in the tax system or rate of taxation in countries where TDK operates
business. Moreover, the products exported overseas may include tariffs, in
addition to other barriers or shipping costs, which may make TDKs products
less competitive. Finally, expanding its overseas business may require
significant investments long before TDK realizes returns on such investments,
and increased investments may result in expenses growing at a faster rate than
revenues.

Production in China

TDK has been expanding TDKs operations in China by establishing local
supply networks for customers who have been rapidly expanding their business in
China. Deregulation has been promoted in China since its membership in the
World Trade Organization (WTO). However, TDK has concerns that political and
economic conditions in China pose possible risks beyond TDKs control that may
adversely affect TDKs operations.

Intense competition

TDK produces a broad range of products and therefore faces many different
types of competitors, from large international companies to relatively small,
rapidly growing, and highly specialized organizations. TDK may choose not to
fund or invest in one or more of its businesses to the same degree as its
competitors in those businesses do, or it may not be able to do so in a timely
manner or at all. While TDK believes it is a leading global manufacturer of
advanced, high-quality and value-added electronic products, TDK cannot assure
that it will be able to compete effectively in the future. These competitors
may have greater financial, technical, and marketing resources available to
them than TDK has in the respective businesses in which they compete.

Rapid declines in product prices

While some of the factors that drive competition vary by product area,
price is a factor relevant in substantially all of TDKs businesses. For the
year ending March 31, 2004, TDK expects prices in many product areas in which
it deals with to decline significantly or more rapidly than in the previous
fiscal years. TDK believes that this trend will affect its moderate
profitability.

Technological changes and development of attractive new products

TDK derives a substantial portion of its revenues from sales of innovative
new products. TDK expects that sales of its new products will continue to
account for a substantial portion of its revenues, and TDK expects its future
growth to rely primarily on the development and sale of innovative new
products. However, TDK may fail to introduce new products in response to
technological changes in a timely manner. TDKs failure to anticipate and
grasp unexpected changes in the industry and the market, and to develop
attractive new products may reduce its future growth and profitability. TDK
must predict with reasonable accuracy both future demand and new technologies
that will be available to meet such demand. If TDK fails to do so, it will not
be able to compete in new markets and this could adversely affect TDKs
financial results and growth prospects.

The alliances and strategic investments

In TDKs technological development process, it carries out many activities
with other companies in the form of collaboration, technological tie-ups, or
joint ventures to optimize management resources and to utilize the synergy of
combined technologies. TDKs reliance

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on the strategy of partnering with third
parties is increasing and TDK will continue to take a positive approach to
exploiting these opportunities. However, if differences arise among the
parties due to managerial, financial and/or other reasons, TDK may not
enjoy the results of these relationships, and thereby TDKs business results
and financial condition may be adversely affected.

Product liability

TDK manufactures various products at its plants worldwide in accordance
with internationally accepted quality-control standards. TDK cannot be
certain, however, that all of its products are defect-free and may not be
recalled at some later date. A large-scale product recall or a successful
products liability claim against TDK could result in significant costs or have
a negative impact on TDKs reputation, which may in turn lead to a decrease in
sales, adversely affecting its business results and financial condition.

Intellectual property

TDKs success depends on its ability to obtain patents, licenses and other
intellectual property rights covering its products and product design and
manufacturing processes. The proceedings for obtaining intellectual property
protection can be long and expensive. Patents may not be granted on currently
pending or future applications or may not be of sufficient scope or strength to
provide TDK with enough protection or commercial advantage. In addition,
effective copyright and trade secret protection may be unavailable or limited
in some countries, and TDKs trade secrets may be vulnerable to disclosure or
misappropriation by employees, contractors or others. Competitors or other
third parties may also develop technologies that are protected by patents and
other intellectual property rights, making such technologies unavailable or
available only on terms unfavorable to TDK. In certain cases, litigation may
also be necessary to enforce TDKs intellectual property rights or to defend
against intellectual property infringement claims brought against TDK by third
parties, thereby incurring additional costs and the passage of time before TDK
can secure their intellectual property rights, in addition to the possible
negation of its rights.

Recruit and retain skilled employees

TDK may fail to recruit skilled employees, particularly scientific and
technical personnel, which are limited in number. TDKs future success depends
largely on its ability to attract and retain certain key personnel, including
scientific, technical and management personnel. TDK anticipates that it will
need to hire additional skilled personnel in all areas of its business.
Industry demand for skilled employees, however, exceeds the number of personnel
available and the competition for attracting and retaining these employees,
especially scientific and technical employees, is intense. Because of this
intense competition for these skilled employees, TDK may be unable to retain
its existing personnel or attract additional qualified employees in the future.
If TDK is unable to retain skilled employees and attract additional qualified
employees to keep up with its future business needs, this may adversely affect
its business and results of operations.

Dependent on the ability of third parties

TDKs manufacturing operations depend on obtaining deliveries of raw
materials, components, equipment and other supplies in adequate quality and
quantity in a timely manner. Since the products TDK purchases are often
complex, it may be difficult for TDK to substitute one supplier for another or
one component for another in a timely manner or at all. Some components are
only available from a limited number of suppliers. Although TDK believes that
it selects only reliable suppliers, shortages could occur in critical materials
due to the interruption of supply or increased industry demand and may
adversely affect TDKs operations.

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Governmental regulations

TDK is subject to governmental regulations in Japan and other countries in
which it conducts its business, including environmental laws and regulations,
governmental approvals required for conducting business and investments, laws
and regulations governing electric and electronic product safety, national
security-related laws and regulations and export/import laws and regulations,
as well as commercial, antitrust, patent, product liability, consumer and
business taxation laws and regulations. To the extent that TDK cannot comply
with these laws and regulations, TDKs activities would be limited. In
addition, these laws and regulations could increase TDKs operating costs.
Accordingly, these regulations could adversely affect TDKs business results
and financial condition.

Interest rate fluctuations

TDK is exposed to the risk of interest rate fluctuations, which, despite
the measures taken by TDK to hedge a portion of its exposure to interest rate
fluctuations, may affect its overall operational costs and the value of its
financial assets and liabilities.

OEM business

TDK caters its OEM business to electronic manufacturers, personal computer
(PC) makers, and other large-scale businesses worldwide. Sales to business
customers in these areas are significantly affected by the respective
customers business results and by factors that are beyond TDKs control.
Further, price-cutting to meet customer demands may cause a reduction in TDKs
profit margin. The under-performance of a customers business, the unexpected
termination of contracts, changes in the purchasing practices of TDKs OEM
customers or aggressive price cutting to satisfy a large business customers
demands may adversely affect TDKs business results and financial condition.




Item 4. Information on the Company

A. History and development of the Company

History

TDK Corporation is a corporation (kabushiki kaisha) formed under Japanese
law. Our principal place of business is at 13-1, Nihonbashi
1-chome, Chuo-ku,
Tokyo 103-8272, Japan. The telephone number is +81-3-5201-7102.

TDK is the worlds leading manufacturer of magnetic recording media,
ferrite products and recording device products, and a major producer of
inductor, ceramic and other components. TDK is a Tokyo-based company founded
in 1935 to commercialize ferrite.

Historically, TDKs growth has been centered on ferrite, a material
invented in 1933 by Doctor Yogoro Kato and Doctor Takeshi Takei. Ferrite is
indispensable as a magnetic substance in the manufacture of electronic
equipment. It is a magnetic material with a ceramic structure composed of iron
oxide and other metallic oxides. Its advantages over other magnetic materials
include higher resistivity and thus lower eddy current loss while maintaining
superior permeability and flux density. Based on its strong materials
knowledge and production technology, TDK expanded into ceramic capacitors and
magnetic recording tapes in the early 1950s, ferrite magnets and coil
components in the early 1960s. In the early 1980s, TDK began production of a
magnetic head, continuing development to its modern day product the HDD head.
Since the 1990s, TDK has promoted the establishment of world-wide research and
development organizations and environmental management efforts. TDK has
continued to broaden its product development programs by building up expertise
in semiconductor technology and new recording-related products.

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B. Business overview

Sales by product category

TDK now manufactures and sells a broad range of electronic components and
magnetic recording media. TDKs sales are generated by two business segments:
electronic materials and components, and recording media and systems. The
following is a breakdown of consolidated net sales of TDK and its consolidated
subsidiaries by business segment for fiscal 2003, 2002, 2001 and 2000:

|                                     |                           |           |         |          |                   |          |         |          |         |          |             |          |         |          |         |          |         |          |         |         |         |         | 
|------------------------------------ | ------------------------- | --------- | ------- | -------- | ----------------- | -------- | ------- | -------- | ------- | -------- | ----------- | -------- | ------- | -------- | ------- | -------- | ------- | -------- | ------- | ------- | ------- | ------- | 
|                                     |                           |           |         |          | 2003              |          | 2002    |          | 2001    |          | 2000        |          | 2003   
|                                     |                           |           |         |          |                   |          |         |          |         |          |             |          |        
|                                     |                           |           |         |          | (millions of yen) |          |         |          |         |          | (millions  
|                                     |                           |           |         |          | (%)               |          |         |          |         |          | of dollars)
|Electronic Materials and
Components: |                           |           |         |          |                   |          |         |          |         |          |             |          |         |          |         |          |         |          |         |        
|                                     | Electronic materials      |           |         | ¥168,949 |                   |          |         | ¥161,846 |         |          |             | ¥212,133 |         |          |         | ¥174,897 |         |          | $       | 1,407.9 |        
|                                     |                           |           | (27.8   | )        |                   |          | (28.4   | )        |         |          | (31.2       | )        |         |          | (26.3   | )        |         |          |         |        
|                                     | Electronic devices        |           |         | 112,729  |                   |          |         | 105,937  |         |          |             | 145,216  |         |          |         | 129,025  |         |          |         | 939.4   |        
|                                     |                           |           | (18.5   | )        |                   |          | (18.6   | )        |         |          | (21.4       | )        |         |          | (19.4   | )        |         |          |         |        
|                                     | Recording devices         |           |         | 175,986  |                   |          |         | 147,004  |         |          |             | 169,140  |         |          |         | 200,748  |         |          |         | 1,466.5 |        
|                                     |                           |           | (28.9   | )        |                   |          | (25.7   | )        |         |          | (24.9       | )        |         |          | (30.2   | )        |         |          |         |        
|                                     | Semiconductors and Others |           |         | 14,865   |                   |          |         | 18,099   |         |          |             | 25,583   |         |          |         | 21,026   |         |          |         | 123.9   |        
|                                     |                           |           |         | (2.4     | )                 |          |         | (3.2     | )       |          |             | (3.8     | )       |          |         | (3.2     | )       |          |         |         |        
|                                     |                           |           |         |          |                   |          |         |          |         |          |             |          |         |          |         |          |         |          |         |        
|                                     |                           | Sub total |         |          | 472,529           |          |         |          | 432,886 |          |             |          | 552,072 |          |         |          | 525,696 |          |         |         | 3,937.7 |        
|                                     |                           |           | (77.6   | )        |                   |          | (75.9   | )        |         |          | (81.3       | )        |         |          | (79.1   | )        |         |          |         |        
|                                     |                           |           |         |          |                   |          |         |          |         |          |             |          |         |          |         |          |         |          |         |        
|Recording Media and Systems          |                           |           | 136,351 |          |                   |          | 137,625 |          |         |          | 127,014     |          |         |          | 139,017 |          |         |          | 1,136.3 |        
|                                     |                           |           | (22.4   | )        |                   |          | (24.1   | )        |         |          | (18.7       | )        |         |          | (20.9   | )        |         |          |         |        
|                                     |                           |           |         |          |                   |          |         |          |         |          |             |          |         |          |         |          |         |          |         |        
|                                     |                           |           | Total   |          |                   | ¥608,880 |         |          |         | ¥570,511 |             |          |         | ¥679,086 |         |          |         | ¥664,713 |         |         | $       | 5,074.0 | 
|                                     |                           |           | (100.0  | )        |                   |          | (100.0  | )        |         |          | (100.0      | )        |         |          | (100.0  | )        |         |          |         |        
|                                     |                           |           |         |          |                   |          |         |          |         |          |             |          |         |          |         |          |         |          |         |        



---

|Notes: |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | TDK adopted the Emerging Issues Task Force issue 01-9 (EITF 01-9),
Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendors Products) from the fiscal beginning April 1, 2002.
Certain amounts from the fiscal year 2000 have been reclassified, with no
effect on net income (loss), to conform to the fiscal year 2003 presentation.
The effect of EITF 01-9 on TDKs consolidated financial statements for prior to
fiscal year 2000 were not material.
|      
|(2)    |  | The business segment information is required by the Japanese Securities
Exchange Law. The segment information is unaudited.                                                                                                                                                                                                                                                                                                                                                                             

Electronic Materials and ComponentsTDKs electronic materials and components
are divided into four principal categories: (i) electronic materials; (ii)
electronic devices; (iii) recording devices; and (iv) semiconductors and
others. Overall business results of each category in fiscal 2003 compared to
fiscal 2002 are as followings.

(i)  Electronic materialsThe electronics materials sector is broadly divided
into two product sectors: capacitors, and ferrite cores and magnets.

In capacitors, sales of multilayer chip capacitors, which account for the
majority of capacitor sales, increased on the strength of the digitalization of
audio and visual equipment and increasing use of electronics in automotive
applications. Hampering further growth were calls for price discounts from
customers.

In ferrite and magnets, overall sales of ferrite cores slipped year on
year, despite strong demand for cores used in LCD backlights and power supplies
for audio and visual products.

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The drop in sales was the result of the failure
of demand to recover for cores used in IT-related information and communications applications, and lower sales of
deflection yoke cores, a key component of TVs and computer monitors, as well as
other products due to stiff competition. Magnet sales increased as firm demand
from the automobile and parts fields carried over from the previous fiscal
year. Overall, sales of ferrite cores and magnets edged down slightly year on
year.

(ii)  Electronic devicesInductive devices, the largest product category in
this sector, recorded higher sales, reflecting the growth use of automotive
electronics as well as growth in demand for digital audio and visual products
such as DVD players and digital still cameras. These are the same factors that
are driving growth in the capacitor sector. This allowed TDK to absorb the
effects of price discounts and production cutbacks, mainly by manufacturers of
audio and visual products, in fourth quarter.

Sales of high-frequency components, a large proportion of which are used
in communications applications, particularly mobile phones, were hamstrung by a
soft mobile phone market. While sales volumes have been trending upward since
the summer of 2002, following a period of parts inventory reductions by
customers, demands for price reductions from customers have been more severe
than in other electronic components sectors due to the continuing supply glut.
Overall, sales increased, but they did not increase to the same extent as
volumes.

In other products, sales increased. Sales of DC-DC converters for video
game systems were higher for the year despite cutbacks to production levels
beginning in the latter half of the third quarter. Power supplies for LCD
projectors and other PCs and peripherals also benefited from strong demand.
The sector was further boosted by brisk sales of actuators and chip varistors
used in PCs and peripherals and in communications products.

(iii)  Recording devicesTDKs share of the HDD head market has partially
recovered as 40 gigabyte/disk HDD heads won back customers. Additionally, the
average number of heads used per HDD did not decline as rapidly as had been
expected. Total demand remained high as a result, and sales climbed. Sales of
other heads fell due to a drop-off in demand and other factors.

During fiscal 2003, demand for HDD units and HDD heads rose over 10
percent despite a slight increase in demand for PCs. The demand for HDD units
seems to be the result of increased repurchase demand for HDD units, demand for
PCs, and new demand for video game consoles and HDD video recorders. Regarding
demand for HDD heads, the average number of heads used per HDD declined
slightly due to a slower-than-expected transition from 40 gigabyte/disk HDD
heads to 80 gigabyte/disk HDD heads.

(iv)  Semiconductors and othersSales declines in this sector reflected a
sharp drop in sales of semiconductors for set-top box modems and LAN/WAN
applications due to the continuing low levels of investment in communications
infrastructure equipment. Another factor was lower sales of anechoic chambers
due to a string of project cancellations and postponements prompted by the
global economic downturn and uncertain economic outlook.

Recording Media and SystemsAudiotape sales shrank further from the previous
fiscal year as the long-term decline in demand continued due to the market
shift to optical media. While there is a similar long-term decline in demand
for videotapes due to the rising popularity of optical media and DVD software,
sales rose slightly during the year, boosted by demand stemming from the 2002
FIFA World Cup. In optical media, demand for CD-Rs and DVDs was buoyant, but
this strength was negated by falling MD demand and lower sales prices of CD-Rs,
resulting in largely flat sales overall. Tape-based data storage media for
computers, which obtained new-standard LTO* (Linear Tape-Open) verification in
the previous fiscal year, and software also recorded sales gains. This segment
moved back into the black for the first time in three fiscal years as the
results of major structural reforms began to show through. Looking ahead, TDK
will build on this momentum by gaining

9



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certification for new tape-based data
storage media standards and working on the
commercialization of Blu-ray discs, which are referred to as the next
generation in optical discs.

*     Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks of
HP, IBM and Seagate RSS in the U.S., other countries or both.

Marketing and Distribution in Japan

Marketing channels

TDK markets electronic materials and components in Japan through its sales
division, which had approximately 309 sales representatives at March 31, 2003.

In Japan, TDK markets magnetic recording tapes, optical disks and PC cards
through 6 district sales offices with a staff of 126. Approximately 44 percent
of domestic sales of TDK brand products are made to approximately 132
distribution agents. These agents in turn sell TDK brand products to over
26,000 retailers in Japan. Remaining TDK brand products are sold directly to
approximately 7,000 retail stores in Japan. OEM sales are made to certain
manufacturers as well.

Operations outside Japan

TDK has 52 direct and indirect foreign subsidiaries as follows: 27
manufacture various product lines and distribute their products in their
country of operation and other countries; 19 are sales subsidiaries which
exclusively handle products manufactured by TDK; 1 is a holding company for the
administration of TDKs U.S. operations; 1 is a holding company for the
administration of TDKs European operations; 1 is a company for research and
development in Ireland; 1 is a company for research and development in the
U.S.; 1 is a company for design and development for semiconductors in the U.S.
and 1 is a local management company for the administration of TDKs Chinese
operations. Principal manufacturing or assembly operations are conducted by
subsidiaries in the following countries:

|               |  |                                                                     
|-------------- |  | --------------------------------------------------------------------
|China          |  | - GMR heads, magnetic heads, inductors, ferrite cores and capacitors
|United States  |  | - GMR heads, capacitors, ICs, inductors and ferrite magnets         
|Luxembourg     |  | - Videotapes and CD-Rs                                              
|Taiwan         |  | - Capacitors, ferrite cores and power supplies                      
|Philippines    |  | - GMR heads                                                         
|Thailand       |  | - Audiotapes and rare-earth metal magnets                           
|Malaysia       |  | - Capacitors and high-frequency components                          
|Korea          |  | - Capacitors and inductors                                          
|Hungary        |  | - Capacitors and ferrite cores                                      
|Hong Kong      |  | - Ferrite cores                                                     
|United Kingdom |  | - Network adaptors                                                  

In addition, TDK has sales subsidiaries in Germany, the United Kingdom,
the United States, Hong Kong, Singapore, Australia, Sweden, Italy, Brazil,
Poland, France and China.

TDK is pursuing a policy of expanding overseas production, which enables
TDK to more easily adapt to fluctuating exchange rates and potential trade
barriers. Production outside Japan as a percentage of sales outside Japan was
76.9 percent in fiscal 2003, 75.7 percent in fiscal 2002, and 85.1 percent in
fiscal 2001.

10



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Consolidated net sales of TDK and consolidated subsidiaries by
geographical area for fiscal 2003, 2002, 2001 and 2000 were as follows:

|              |       |  |          |          |      |  |       |        |      |  |          |          |  |  |                       |        |   |  |          |          |  |  |       |        |   |                      |          |          |  |  |       |        |   |   |         |         | 
|------------- | ----- |  | -------- | -------- | ---- |  | ----- | ------ | ---- |  | -------- | -------- |  |  | --------------------- | ------ | - |  | -------- | -------- |  |  | ----- | ------ | - | -------------------- | -------- | -------- |  |  | ----- | ------ | - | - | ------- | ------- | 
|              |       |  | 2003     |          | 2002 |  | 2001  |        | 2000 |  | 2003    
|              |       |  |          |          |      |  |       |        |      |  |         
|              |       |  |          |          |      |  |       |        |      |  |          |          |  |  | (millions of yen) (%) |        |   |  |          |          |  |  |       |        |   | (millionsof dollars)
|              |       |  |          |          |      |  |       |        |      |  |          |          |  |  |                       |        |   |  |          |          |  |  |       |        |   |                     
|Japan         |       |  | ¥172,818 |          |      |  | (28.4 | )      |      |  | ¥178,771 |          |  |  | (31.3                 | )      |   |  | ¥239,336 |          |  |  | (35.2 | )      |   |                      | ¥251,244 |          |  |  | (37.8 | )      |   | $ | 1,440.1 |        
|North America |       |  | 82,792   |          |      |  | (13.6 | )      |      |  | 86,471   |          |  |  | (15.2                 | )      |   |  | 120,130  |          |  |  | (17.7 | )      |   |                      | 107,801  |          |  |  | (16.2 | )      |   |   | 692.0   |        
|Europe        |       |  | 77,191   |          |      |  | (12.7 | )      |      |  | 76,604   |          |  |  | (13.4                 | )      |   |  | 93,632   |          |  |  | (13.8 | )      |   |                      | 82,907   |          |  |  | (12.5 | )      |   |   | 643.3   |        
|Other         |       |  | 276,079  |          |      |  | (45.3 | )      |      |  | 228,665  |          |  |  | (40.1                 | )      |   |  | 225,988  |          |  |  | (33.3 | )      |   |                      | 222,761  |          |  |  | (33.5 | )      |   |   | 2,298.6 |        
|              |       |  |          |          |      |  |       |        |      |  |          |          |  |  |                       |        |   |  |          |          |  |  |       |        |   |                      |          |          |  |  |       |        |   |   |         |        
|              | Total |  |          | ¥608,880 |      |  |       | (100.0 | )    |  |          | ¥570,511 |  |  |                       | (100.0 | ) |  |          | ¥679,086 |  |  |       | (100.0 | ) |                      |          | ¥664,713 |  |  |       | (100.0 | ) |   | $       | 5,074.0 | 
|              |       |  |          |          |      |  |       |        |      |  |          |          |  |  |                       |        |   |  |          |          |  |  |       |        |   |                      |          |          |  |  |       |        |   |   |         |        

Net sales in each geographic area are based on the location of TDK
entities where the external sales are generated.

Competition

In electronic materials and components, rapid technological renovation
makes technological improvement a particularly significant competitive factor
in the industry. Product performance characteristics, reliability, price, and
the diversity of product line-ups are also significant competitive factors. In
general, TDKs ferrite and other products compete with similar products made of
other materials. For many applications in which specific performance
characteristics are required, however, competition with other materials is not
significant.

In Japan and elsewhere, the markets in which TDK sells its products are
highly competitive. TDK believes that the principal elements of competition in
recording media and systems are brand recognition, product quality, and
marketing strategy. While the Japanese, American and European optical disks
markets have grown in terms of volume, they have continued to be plagued by
severe price competition. However, TDK has consistently promoted
internationalization in manufacturing and marketing and has maintained
strategic sales in regions where high profitability is expected. Meanwhile,
TDK has implemented further cost-reduction programs and is increasing its
competitive strength in other ways, notably through the expansion of overseas
production.

Raw Materials and Sources of Supply

TDK purchases a wide variety of raw materials, machines, tools and parts
for use in the manufacture of its products. The principal raw materials
purchased include polymer modules, used to mould tape cassette bodies and in
packaging, iron oxide, base film for magnetic tape and various electronic and
mechanical parts. For manufacture in Japan, TDK purchases such raw materials
from approximately 1,900 different sources, primarily in Japan. However, TDK
purchases base tape from mainly three suppliers in Japan, although alternative
sources of supply exist. Recently TDK increased its purchases from overseas
and also increased local procurement of raw materials. No single source
accounted for more than 10 percent of total purchases for fiscal 2003.

Environmental Protection Activities

TDK is going all out to achieve zero emission status at all sites in Japan
and five sites overseas. Having formulated a fundamental environmental plan,
TDK Environmental

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Action 2010, TDK is committed to contributing to the creation of a
society oriented toward recycling.

The plan contains nine action points that were established based on the
nature of TDKs business activities, and sets medium- and long-term goals.
Furthermore, the TDK Environmental Action 2010 clearly defines the roles and
responsibilities of regional groups, business groups and the head office.

Overview of TDK Environmental Action 2010



| | 1. |  | Enhancement of Environmental Management Systems
| | -- |  | -----------------------------------------------
|
| | 2. |  | Strict Observance of Laws                      
|
| | 3. |  | Risk Management                                
|
| | 4. |  | Information Management                         
|
| | 5. |  | Global Warming Countermeasures                 
|
| | 6. |  | Waste Countermeasures                          
|
| | 7. |  | Chemical Waste Release Controls                
|
| | 8. |  | Regional and Social Contributions              
|
| | 9. |  | Product Development                            

Based on the understanding that implementation and experience are the most
important elements in environmental measures, TDK believes that the promotion
of TDK Environmental Action 2010 will enhance TDKs corporate value.

During fiscal 2003, five TDK business locations in Japan, including the
Mikumagawa Plant, achieved zero emission status, bringing the total number of
TDK sites to reach this exacting target to seven. As of March 31, 2003, the
TDK group in Japan as a whole was recycling 92.4% of all the waste it
generates.

C. Organizational structure

The following table lists the significant subsidiaries owned by TDK.

|                                |  |                      |  |                  |       |   |  | 
|------------------------------- |  | -------------------- |  | ---------------- | ----- | - |  | 
|Name of company                 |  | Head office location |  | Percentage owned
|                                |  |                      |  |                 
|SAE Magnetics (H.K.) Ltd.       |  | Hong Kong            |  |                  | 100.0 | %
|TDK Recording Media Europe S.A. |  | Luxembourg           |  |                  | 100.0 | %
|TDK U.S.A. Corporation          |  | New York, U.S.A      |  |                  | 100.0 | %

12



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D. Property, plants and equipment

TDKs manufacturing operations are conducted primarily at 35 plants in
Japan and 21 plants overseas.

The following table sets forth information, as of March 31, 2003, with
respect to TDKs manufacturing facilities, approximately 85 percent [in terms
of floor space] of which are owned by TDK.

|                         |          |           |    |              |  |                                 |        |  |  |                                                                       |  |  |  | 
|------------------------ | -------- | --------- | -- | ------------ |  | ------------------------------- | ------ |  |  | --------------------------------------------------------------------- |  |  |  | 
|                         |          |           |    | Number of    |  | Floor space                     |        |  |  |                                                                      
|                         |          |           |    | Principal    |  | (thousands of                   |        |  |  |                                                                      
|Location                 |          | factories |    | square feet) |  | Principal products manufactured
|                         |          |           |    |              |  |                                
|                         | Japan    |           |    |              |  |                                 |        |  |  |                                                                       |  |  |  | 
|Akita                    |          |           | 17 |              |  |                                 | 2,168  |  |  | Capacitors, ferrite cores, inductors
and high-frequency components   
|Nagano                   |          |           | 4  |              |  |                                 | 1,146  |  |  | GMR heads and optical disks                                          
|Chiba                    |          |           | 2  |              |  |                                 | 713    |  |  | Rare-earth metal magnets, ferrite
cores and high-frequency components
|Yamanashi                |          |           | 3  |              |  |                                 | 603    |  |  | GMR heads and data storage tapes                                     
|Oita                     |          |           | 1  |              |  |                                 | 471    |  |  | Videotapes                                                           
|Shizuoka                 |          |           | 3  |              |  |                                 | 464    |  |  | Ferrite magnets                                                      
|Yamagata                 |          |           | 3  |              |  |                                 | 311    |  |  | Inductors                                                            
|Iwate                    |          |           | 1  |              |  |                                 | 298    |  |  | Capacitors                                                           
|Ibaraki                  |          |           | 1  |              |  |                                 | 112    |  |  | Display                                                              
|                         | Overseas |           |    |              |  |                                 |        |  |  |                                                                       |  |  | 
|China                    |          |           | 5  |              |  |                                 | 2,498  |  |  | GMR heads, magnetic
heads, inductors,
ferrite cores and capacitors   
|United States of America |          |           | 4  |              |  |                                 | 561    |  |  | GMR heads, capacitors, ICs, inductors
and ferrite magnets            
|Luxembourg               |          |           | 1  |              |  |                                 | 362    |  |  | Videotapes and CD-Rs                                                 
|Taiwan                   |          |           | 1  |              |  |                                 | 345    |  |  | Capacitors, ferrite
cores and power supplies                         
|Philippines              |          |           | 1  |              |  |                                 | 344    |  |  | GMR heads                                                            
|Thailand                 |          |           | 1  |              |  |                                 | 285    |  |  | Audiotapes and rare-earth metal magnets                              
|Malaysia                 |          |           | 2  |              |  |                                 | 270    |  |  | Capacitors and
high-frequency components                             
|Korea                    |          |           | 1  |              |  |                                 | 164    |  |  | Capacitors and inductors                                             
|Hungary                  |          |           | 1  |              |  |                                 | 160    |  |  | Capacitors and ferrite cores                                         
|Hong Kong                |          |           | 3  |              |  |                                 | 42     |  |  | Ferrite cores                                                        
|United Kingdom           |          |           | 1  |              |  |                                 | 2      |  |  | Network adaptors                                                     
|                         |          |           |    |              |  |                                 |        |  |  |                                                                       | 
|Total                    |          |           | 56 |              |  |                                 | 11,319 |  |  |                                                                       |  | 

TDK considers all of its principal manufacturing facilities and other
significant properties to be in good condition and adequate to meet the needs
of its operations. TDK owns each of its significant properties.

As of March 31, 2003, TDK excluded 1 plant in Japan, 2 plants in the
Americas and 1 plant in Europe from above table because these plants have
stopped their operations in order to improve TDKs profitability in connection
with the implementation of TDKs restructuring.

13



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In addition, TDK utilizes additional floor space at the above plants and
elsewhere for laboratories, office buildings, and employee housing and welfare
facilities with an aggregate floor space of 6,454 thousand square feet, of
which approximately 54 percent are owned by TDK and the remaining balances are
leased to TDK.




Item 5. Operating and Financial Review and Prospects

A. Operating Results

Results of Operations

|                                    |  |                       |           |           |  |      |           |      |  |  |           |             |  |   |         |  
|----------------------------------- |  | --------------------- | --------- | --------- |  | ---- | --------- | ---- |  |  | --------- | ----------- |  | - | ------- | -
|                                    |  | Years ended March 31, |           |           |  |     
|                                    |  |                       |           |           |  |     
|                                    |  | 2003                  |           | 2002      |  | 2001 |           | 2003
|                                    |  |                       |           |           |  |      |           |     
|                                    |  | (millions of yen)     |           | (millions
|                                    |  |                       |           |           |  | (%)  |           |      |  |  |           | of
dollars)
|Net sales                           |  |                       | ¥608,880  |           |  |      | ¥570,511  |      |  |  | ¥679,086  |             |  | $ | 5,074.0 |  
|                                    |  |                       | (100.0    | )         |  |      | (100.0    | )    |  |  | (100.0    | )           |  |   |         |  
|Cost of sales                       |  |                       | 459,616   |           |  |      | 464,620   |      |  |  | 496,083   |             |  |   | 3,830.1 |  
|                                    |  |                       | (75.5     | )         |  |      | (81.4     | )    |  |  | (73.1     | )           |  |   |         |  
|Selling, general                    |  |                       | 121,839   |           |  |      | 123,741   |      |  |  | 131,074   |             |  |   | 1,015.3 |  
|and administrative expenses         |  |                       | (20.0     | )         |  |      | (21.7     | )    |  |  | (19.3     | )           |  |   |         |  
|Restructuring cost                  |  |                       | 5,345     |           |  |      | 25,872    |      |  |  |          |             |  |   | 44.6    |  
|                                    |  |                       | (0.9      | )         |  |      | (4.5      | )    |  |  |          |             |  |   |         |  
|Other income (other deductions)     |  |                       | (3,999    | )         |  |      | 25        |      |  |  | 12,587    |             |  |   | (33.3   | )
|                                    |  |                       | (-0.6     | )         |  |      |          |      |  |  | (1.9      | )           |  |   |         |  
|Income taxes and minority interests |  |                       | 6,062     |           |  |      | (17,926   | )    |  |  | 20,533    |             |  |   | 50.5    |  
|                                    |  |                       | (1.0      | )         |  |      | (-3.1     | )    |  |  | (3.0      | )           |  |   |         |  
|                                    |  |                       |           |           |  |      |           |      |  |  |           |             |  |   |         |  
|Net income (loss)                   |  |                       | ¥  12,019 |           |  |      | ¥ (25,771 | )    |  |  | ¥  43,983 |             |  |   | $100.2  |  
|                                    |  |                       | (2.0      | )         |  |      | (-4.5     | )    |  |  | (6.5      | )           |  |   |         |  
|                                    |  |                       |           |           |  |      |           |      |  |  |           |             |  |   |         |  

Sales by Region

|                                   |  |                       |          |           |  |      |          |      |  |  |          |             |  |   |         | 
|---------------------------------- |  | --------------------- | -------- | --------- |  | ---- | -------- | ---- |  |  | -------- | ----------- |  | - | ------- | 
|                                   |  | Years ended March 31, |          |           |  |     
|                                   |  |                       |          |           |  |     
|                                   |  | 2003                  |          | 2002      |  | 2001 |          | 2003
|                                   |  |                       |          |           |  |      |          |     
|                                   |  | (millions of yen)     |          | (millions
|                                   |  |                       |          |           |  | (%)  |          |      |  |  |          | of
dollars)
|Japan                              |  |                       | ¥165,503 |           |  |      | ¥164,804 |      |  |  | ¥221,279 |             |  | $ | 1,379.2 | 
|                                   |  |                       | (27.2    | )         |  |      | (28.9    | )    |  |  | (32.6    | )           |  |   |         | 
|Americas                           |  |                       | 106,060  |           |  |      | 109,452  |      |  |  | 126,269  |             |  |   | 883.8   | 
|                                   |  |                       | (17.4    | )         |  |      | (19.2    | )    |  |  | (18.6    | )           |  |   |         | 
|Europe                             |  |                       | 78,740   |           |  |      | 79,639   |      |  |  | 96,263   |             |  |   | 656.2   | 
|                                   |  |                       | (12.9    | )         |  |      | (13.9    | )    |  |  | (14.2    | )           |  |   |         | 
|Asia (excluding Japan) and Oceania |  |                       | 255,901  |           |  |      | 214,377  |      |  |  | 234,063  |             |  |   | 2,132.5 | 
|                                   |  |                       | (42.0    | )         |  |      | (37.6    | )    |  |  | (34.4    | )           |  |   |         | 
|Middle East and Africa             |  |                       | 2,676    |           |  |      | 2,239    |      |  |  | 1,212    |             |  |   | 22.3    | 
|                                   |  |                       | (0.5     | )         |  |      | (0.4     | )    |  |  | (0.2     | )           |  |   |         | 
|                                   |  |                       |          |           |  |      |          |      |  |  |          |             |  |   |         | 
|Net sales                          |  |                       | ¥608,880 |           |  |      | ¥570,511 |      |  |  | ¥679,086 |             |  | $ | 5,074.0 | 
|                                   |  |                       | (100.0   | )         |  |      | (100.0   | )    |  |  | (100.0   | )           |  |   |         | 
|                                   |  |                       |          |           |  |      |          |      |  |  |          |             |  |   |         | 

This summary of sales by region is based on the location of the customer.

14



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##### Table of Contents



Fiscal 2003 Compared to Fiscal 2002

Sales

Consolidated net sales increased 6.7 percent to ¥608.9 billion ($5,074
million) in fiscal 2003, the year ended March 31, 2003, from ¥570.5 billion in
fiscal 2002, the year ended March 31, 2002. TDKs operating environment in
fiscal 2003 remained as very severe as it was during the previous fiscal year.
The bellwether U.S. economy, the driving force of the world economy, appeared
to gradually move back onto a recovery footing after taking a step backwards at
the start of 2002. However, in the closing months of 2002, consumer and
corporate sentiment nosedived due to stagnant demand and tumbling share prices.
The Japanese and European economies, which are highly reliant on external
demand, felt the effects of the U.S. slowdown. Asia, including China, fared
relatively well, but this region is nowhere near becoming a leading force in
the world economy just yet.

The increase in sales in this difficult operating environment reflects a
recovery in TDKs share of the HDD head market and rising demand for electronic
components, which is being fueled by the digitalization of audio and visual
equipment and the increasing use of electronics in automobiles.

In the electronics materials and components segment, net sales rose 9.2
percent to ¥472.5 billion ($3,938 million) in fiscal 2003, from ¥432.9 billion
in fiscal 2002. In the electronic materials sector, sales rose 4.4 percent,
from ¥161.8 billion to ¥168.9 billion ($1,408 million). Sales of multilayer
chip capacitors, a mainstay of capacitor products, increased on the strength of
the digitalization of audio and visual equipment and increasing use of
electronics in automobiles. Sales of ferrite cores and magnets edged down
slightly year on year due to reduced demand for ferrite cores used in
IT-related information and communications applications, despite increased
magnet sales in the automobile and parts fields. In the electronic devices
sector, sales increased 6.4 percent, from ¥105.9 billion to ¥112.7 billion
($939 million). Inductive devices recorded higher sales, reflecting the
growing use of automotive electronics as well as growth in demand for digital
audio and visual products. However, sales of high-frequency components, a
large proportion of which are used in communications applications, particularly
mobile phones, declined with demands for price reductions from customers having
been severe due to the continuing supply glut. Recording devices sales climbed
19.7 percent, from ¥147.0 billion to ¥176.0 billion ($1,467 million). This
increase was due to a recovery in TDKs market share amid firm overall demand
in the HDD head market. TDKs 40 gigabyte/disk HDD heads were instrumental in
winning back customers. In the semiconductors and others sector, sales dipped
17.9 percent, from ¥18.1 billion to ¥14.9 billion ($124 million). Sales of
semiconductors for communications applications dropped sharply due to the
continuing low levels of investment in communication infrastructure equipment.

In the recording media and systems segment, sales edged down slightly by
0.9 percent, to ¥136.4 billion ($1,136 million) in fiscal 2003 from ¥137.6
billion in fiscal 2002. There were several reasons. Audiotape sales continued
to shrink from the previous fiscal year as the long-term decline in demand
continued due to the market shift to optical media. While there is a similar
long-term decline in demand for videotapes due to the rising popularity of
optical media and DVD software, sales rose slightly during the year, boosted by
demand stemming from the 2002 FIFA World Cup. In optical media, demand for
CD-Rs and DVDs was buoyant, but this strength was negated by falling MD demand
and lower sales prices of CD-Rs, resulting in largely flat sales overall.
Tape-based data storage media for computers, which obtained new-standard LTO*
(Linear Tape-Open) verification in the previous fiscal year, and software also
recorded sales gains.

* Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks
of HP, IBM and Seagate RSS in the U.S., other countries or both.

15



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##### Table of Contents



By region, sales in Japan increased 0.4 percent to ¥165.5 billion ($1,379
million) in fiscal 2003 from ¥164.8 billion in fiscal 2002. There was a 9.3
percent increase in overseas sales year on year to ¥443.4 billion ($3,695
million) in fiscal 2003 from ¥405.7 billion in fiscal 2002. Overseas sales
accounted for 72.8 percent of consolidated net sales.

While robust demand was recorded for capacitors and DC-DC converters for
video game systems, sales in Japan were largely unchanged due to lower sales in
the recording media and systems segment as audiotape demand declined.

In Asia (excluding Japan) and Oceania, sales increased due to higher sales
in recording devices, as TDK regained market share, and higher sales in
electronic materials and electronic devices.

In the Americas, sales declined as lower sales in the electronic materials
and components segment out-weighed higher sales in other areas, particularly
for tape-based data storage media for computers.

In Europe, sales declined. Sales of automotive components in the
electronics materials and components segment were strong. However, total sales
in this region were brought down by waning demand for high-frequency components
for mobile phones, particularly GSM-format phones, and falling demand for
audiotapes and MDs in the recording media and systems segment.

Effect of foreign exchange movements

In fiscal 2003, overseas sales accounted for 72.8 percent of consolidated
net sales, up 1.7 percentage points. As a result, fluctuations in foreign
exchange rates have a significant effect on TDKs consolidated sales and
income. During fiscal 2003, the yen appreciated 2.4 percent in relation to the
U.S. dollar and depreciated 9.5 percent in relation to the euro, based on TDKs
average internal exchange rates. Overall, TDK estimates that exchange rate
movements during fiscal 2003 had the net effect of reducing net sales by about
¥2.8 billion, in relation to the prior fiscal year. TDK conducts a large share
of business activities outside Japan as one way to offset the impact of
exchange-rate fluctuations. Such activities include manufacturing and sales,
as well as research, design and procurement. In-region production in fiscal
2003 represented 111.3 percent of sales in Asia (excluding Japan) and Oceania,
28.6 percent in the Americas, and 33.0 percent in Europe. Overseas production
accounted for 56.0 percent of total sales in fiscal 2003, compared with 53.8
percent one year earlier, and for 76.9 percent of overseas sales, compared with
75.7 percent one year earlier. The rise in the percentage of overseas
production in fiscal 2003 is mainly due to higher production in Asia in the
electronic materials and components segment as a result of an increase in the
occupation utilization rate of plants located in China, which increased in line
with sales growth resulting from a recovery in market share in recording
devices.

TDK and certain overseas subsidiaries hedge exposure to foreign exchange
movements by entering into forward foreign exchange contracts and swaps for
some foreign currency-denominated obligations. Foreign exchange risks arising
in operating activities are hedged by using forward foreign exchange contracts.
In principle, TDKs policy is to hedge up to 50 percent of expected foreign
currency-denominated accounts receivable for each month for the next six
months. Due to the global nature of operations, management realizes that
currency movements continue to have the potential to exert a material influence
on consolidated performance.

Cost and expenses

The cost of sales decreased 1.1 percent from ¥464.6 billion in fiscal 2002
to ¥459.6 billion ($3,830 million) in fiscal 2003 despite an increase in net
sales, and fell from 81.4 percent to 75.5 percent of net sales, respectively.
This reflected both an improvement in the capacity utilization rate
accompanying higher sales, and cutbacks in expenses and various

16



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##### Table of Contents



cost improvements resulting from structural reforms. These benefits
outweighed strong downward pressure on prices and adverse effects of foreign
exchange movements. As a result, gross profit increased 41.0 percent.

Selling, general and administrative expenses decreased ¥1.9 billion from
¥123.7 billion in fiscal 2002 to ¥121.8 billion ($1,015 million) in fiscal
2003, and decreased from 21.7 percent to 20.0 percent of net sales,
respectively. This was because TDK managed to hold expenses to an increase of
only 1.5 percent, although sales rose 6.7 percent, thanks to thoroughgoing
expenditure reviews. Research and development expenses represented 5.2 percent
of net sales, compared with 6.8 percent in the previous fiscal year. In
addition, TDK recognized restructuring costs of ¥5.3 billion ($45 million) for
structural reforms, but this was a sharp decrease from the ¥25.9 billion
recognized in the previous fiscal year.

During the year ended March 31, 2003, TDK recorded a restructuring charge
of ¥5.3 billion ($44.5 million). As a result of the restructuring, a total of
1,302 regular employees were terminated through March 31, 2003. TDK and
domestic subsidiaries released 237 employees in Japan and overseas subsidiaries
released 1,065 employees mainly in the Americas and Europe. TDK recorded a
workforce reduction charge of approximately ¥2.3 billion ($19.6 million)
relating primarily to severances. TDK recorded a restructuring charge of ¥3.0
billion ($25.0 million) mainly relating to losses on the disposal of property,
plant and equipment in Japan, in the Americas and in Europe.

The downturn in the U.S. economy from the fourth quarter ended March 31,
2001 and the recent reduction in IT investment volume on a world-wide basis had
an adverse effect on TDK. Under the circumstances, TDK believes offering
competitive pricing is essential to maintaining its advantageous position in
the market of electronic components. Additionally, many of TDKs customers who
manufacture consumer products have transferred their manufacturing facilities
to Asian countries, in particular China. As a result, TDK, as a supplier of
electronic components to these customers, will be required to transfer certain
of its factories to these Asian countries in order to meet the customers
logistical needs. Given the global economic conditions, TDK decided to
restructure its organization to improve its competitive and financial position
on a world-wide basis. The structural reforms implemented over the past two
years, including manufacturing plant integration and closure, reduction of
headcount and other rationalization plans, were accomplished almost on schedule
through March 31, 2003.

Through March 31, 2003, TDK has paid ¥5.1 billion ($42.7 million) of the
¥5.3 billion ($44.5 million) restructuring charges. TDK anticipates that
substantially all of the remaining restructuring costs will be paid by the end
of first quarter of fiscal 2004.

Other income and deductions

Other expenses increased ¥4.0 billion from the previous fiscal year,
mainly on account of a ¥3.1 billion increase in loss on securities (net of
gain) and a ¥2.1 billion rise in foreign exchange losses included in other
deductions, offset by a ¥1.3 billion increase in equity in earnings of
affiliates.

Income taxes and minority interests

The ratio of income taxes and income tax benefit to income (loss) before
income taxes (the effective tax rate) decreased from 38.9 percent in fiscal
2002 to 29.3 percent in fiscal 2003. The decrease reflects the higher amounts
of income earned in China during fiscal 2003, which were taxed at rates lower
than TDKs effective rate for all other jurisdictions in which it pays income
taxes. The difference between TDKs statutory tax rate of 41 percent and its
effective tax rate is principally due to differences in statutory rates of
foreign subsidiaries and the generation of net operating loss carryforwards
currently reserved. Loss of minority interests are caused by the net income at
the subsidiaries with the minorities.

17



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##### Table of Contents



Net income (loss)

TDK posted a net income of ¥12.0 billion ($100 million), resulting in net
income per share of ¥90.56 ($0.75) for fiscal 2003 as compared to minus ¥193.91
in fiscal 2002. The return on equity was 2.1 percent, compared to minus 4.2
percent in fiscal 2002. Cash dividends paid during the fiscal year totaled ¥45
($0.38). This dividend is the sum of the June 2002 year-end dividend of ¥20
and the November 2002 interim dividend of ¥25. Shareholders of record on March
31, 2003 received a cash dividend of ¥25 per share at the end of June 2003.

Fiscal 2002 Compared to Fiscal 2001

Sales

Consolidated net sales decreased 16.0 percent from ¥679.1 billion in
fiscal 2001 to ¥570.5 billion in fiscal 2002, the year ended March 31, 2002,
despite an increase in sales in the recording media and systems segment. This
result reflected sharply lower sales in the electronic materials and components
segment. Sales were affected by inventory corrections at TDKs customers in a
broad range of categories. These corrections were prompted by two main
factors: the slowdown in the U.S. economy from the fourth quarter of fiscal
2001, and a global downturn in IT investment. Prolonging the correction period
was a huge surplus of inventories across a broad spectrum of electronic
components. An overly optimistic outlook for worldwide demand for mobile
phones and PCs was to blame for this situation.

In the electronic materials and components segment, net sales fell 21.6
percent from ¥552.1 billion to ¥432.9 billion. In the electronic materials
sector, sales decreased 23.7 percent, from ¥212.1 billion to ¥161.8 billion.
The majority of the decrease reflected sharply lower sales of components for
use in mobile phones and PCs. Sales were substantially lower for multilayer
chip capacitors and high-frequency components used in mobile phones and other
communications equipment on account of a dramatic drop-off in orders. Sales of
ferrite cores and magnets also fell for use in data-communications devices,
such as ADSL (Asymmetric Digital Subscriber Lines) devices, PCs and
peripherals, and AV products. In the electronic devices sector, sales
decreased 27.0 percent, from ¥145.2 billion to ¥105.9 billion. Sales of
inductive devices decreased due to falling demand for audio and visual
products, PCs and peripherals, and communications. High-frequency components
experienced large decrease in sales as a result of a slowdown in demand for
mobile phone. Recording devices sales decreased 13.1 percent, from ¥169.1
billon to ¥147.0 billion. In HDDs, sales dropped in the first half of fiscal
2002, reflecting two factors: TDK lost market share in mainstream 30
gigabyte/disk HDD heads and demand dropped as customers reduced inventories.
In fiscal 2002s second half, however, TDK regained some lost market share on
strong demand for its next-generation 40 gigabyte/disk HDD heads, which helped
to limit the overall decrease in sector sales. In the semiconductors and
others sector, sales decreased 29.3 percent, from ¥25.6 billion to ¥18.1
billion due to a continuation of sluggish demand for communications
infrastructure equipment and PCs, which drove demand for TDKs products in
fiscal 2001.

Recording media and systems sales increased 8.4 percent to ¥137.6 billion
in fiscal 2002 from ¥127.0 billion in fiscal 2001. In addition to the yens
depreciation, this rise can be attributed to higher sales of recording
equipment, which TDK started to sell in the second half of fiscal 2001.
Audiotape and videotape sales declined due to the increasingly widespread use
of optical media. However, sales of CD-Rs, which account for a substantial
proportion of TDKs optical media sales, rose as higher volumes outweighed
price falls.

By region, sales in Japan decreased 25.5 percent to ¥164.8 billion in
fiscal 2002 from ¥221.3 billion in fiscal 2001 and overseas sales fell 11.4
percent to ¥405.7 billion in fiscal
18Table of Contents

2002 from ¥457.8 billion in fiscal 2001. Overseas sales accounted for
71.1 percent of consolidated net sales.

In Japan, sales of multilayer chip capacitors and high-frequency
components for mobile phones decreased amid generally lackluster demand. Sales
of PC- and peripheral-related products, including recording devices, also
dropped. Moreover, the recording media and systems segment posted lower sales
due to falling demand and prices.

In Asia (excluding Japan) and Oceania, sales were hit hard by slumping
demand for electronic materials and electronic devices, as well as lower sales
of recording devices, which represent a high share of total sales.

In the Americas, sales dropped due to a dramatic fall in sales of
semiconductors and electronic components for communications equipment and PCs,
amid a market downturn. The extent of the decline, however, was limited by
higher sales in the recording media and systems segment, which got a boost from
recording equipment sales, and the beneficial effect of the yens depreciation
against the U.S. dollar.

In Europe, orders slumped for multilayer chip capacitors and
high-frequency components for GSM-format mobile phones, resulting in sharply
lower sales of electronic materials and electronic devices. This decrease
outweighed higher sales in the recording media and systems segment and
depreciation of the yen against the euro.

Effect of foreign exchange movements

In fiscal 2002, overseas sales accounted for 71.1 percent of consolidated
net sales, up 3.7 percentage points. As a result, fluctuations in foreign
exchange rates have a significant effect on TDKs consolidated sales and
income. During fiscal 2002, the yen weakened against most other major
currencies. The yen depreciated 13 percent in relation to the U.S. dollar and
10 percent in relation to the euro, based on TDKs average internal exchange
rates. Overall, TDK estimates that exchange rate movements during fiscal 2002
had the net effect of increasing net sales by approximately ¥40.8 billion in
relation to fiscal 2001.

TDK conducts a large share of business activities outside Japan as one way
to offset the impact of exchange-rate fluctuations. Such activities include
manufacturing and sales, as well as research, design and procurement.
In-region production in fiscal 2002 represented 113.2 percent of sales in Asia
(excluding Japan) and Oceania, 27.3 percent in the Americas, and 43.4 percent
in Europe. Overseas production accounted for 53.8 percent of total sales in
fiscal 2002, compared with 57.4 percent one year earlier, and for 75.7 percent
of overseas sales, compared with 85.1 percent one year earlier. The fall in
the percentage of overseas production in fiscal 2002 is mainly due to lower
production in the U.S. and the switch in the recording media and systems
segment to purchasing externally produced recording media.

TDK and certain of its overseas subsidiaries hedge exposure to foreign
exchange movements by entering into forward foreign exchange contracts and
swaps for some foreign currency-denominated obligations. Due to the global
nature of operations, management realizes that currency movements continue to
have the potential to exert a material influence on consolidated performance.

Cost and expenses

The cost of sales decreased 6.3 percent in fiscal 2002, but rose from 73.1
percent to 81.4 percent of net sales. This reflected both the deterioration of
the capacity utilization rate due to lower sales caused by a sharp decrease in
orders, and the strong downward pressure on prices. Gross profit declined 42.1
percent, as cost-cutting efforts and the beneficial effects of the yens
depreciation were outweighed by negative factors.

19



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##### Table of Contents



Selling, general and administrative expenses decreased ¥7.3 billion from
fiscal 2001. This was primarily because of an overall reduction in various
expenses, including personnel and advertising costs. Research and development
expenses represented 6.8 percent of net sales, compared with 5.4 percent in the
previous year. In addition, TDK booked restructuring costs of ¥25.9 billion
for business structural reforms, which increased the extent of the net loss.
Through March 31, 2002, TDK had paid ¥14,600 million of the ¥25,872 million
restructuring charges. TDK had paid all of the remaining restructuring costs
by the end of first quarter of fiscal 2003.

Other income and deductions

Other revenues decreased ¥12.6 billion from fiscal 2001, mainly on account
of a ¥13.5 billion decrease in gain on securities (net of loss), principally by
contributing investment securities to a pension trust.

Income taxes and minority interests

The ratio of income taxes and income tax benefit to income (loss) before
income taxes (the effective tax rate) increased from 30.7 percent in fiscal
2001 to 38.9 percent in fiscal 2002. The increase reflects the lower amounts
of income earned in China during fiscal 2002, which were taxed at rates lower
than TDKs effective rate for all other jurisdictions in which it pays income
taxes. The difference between TDKs statutory tax rate of 41 percent and its
effective tax rate in fiscal 2001 was principally due to differences in
statutory rates for foreign subsidiaries. Gain of minority interests are
caused by the net loss at the subsidiaries with the minorities.

Net income (loss)

TDK posted a net loss of ¥25.8 billion, resulting in a net loss per share of
¥193.91. The return on equity deteriorated from 7.3 percent to minus 4.2
percent. Cash dividends paid during the fiscal year totaled ¥60. This
dividend is the sum of the June 2001 year-end dividend of ¥30 and the November
2001 interim dividend of ¥30. Shareholders of record on March 31, 2002
received a cash dividend of ¥20 per share at the end of June 2002.

20



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##### Table of Contents



Segment Information

The following industry and geographic segment information is required by
the Japanese Securities Exchange Law. The segment information is unaudited.

Industry Segment Information

|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |           | 
|----------------------------------- | --------------------------------- | ---------------- | ---------------------- | ----------------------- | -------- | -------------------- | ---------- | ---------------------- | -------- | -------- | ---------- | ------- | -------- | -------- | ---------- | --------- | --------- | --------- | --------- | 
|                                    |                                   |                  |                        |                         |          | Years ended March 31 |            |                        |          |         
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |         
|                                    |                                   |                  |                        |                         |          | 2003                 |            | 2002                   |          | 2001     |            | 2003   
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |        
|                                    |                                   |                  |                        |                         |          | (millions of yen)    |            | (thousands
of dollars)
|ELECTRONIC MATERIALS AND COMPONENTS |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |          
|                                    | Net sales                         |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |          
|                                    |                                   |                  | Unaffiliated customers |                         |          | ¥472,529             |            |                        |          | ¥432,886 |            |         |          | ¥552,072 |            |           | $         | 3,937,742 |          
|                                    |                                   |                  | Intersegment           |                         |          |                     |            |                        |          |         |            |         |          |         |            |           |           |          |          
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    |                                   |                  |                        | Total revenue           |          |                      | 472,529    |                        |          |          | 432,886    |         |          |          | 552,072    |           |           |           | 3,937,742 | 
|                                    |                                   |                  | (100.0                 | %)                      |          |                      | (100.0     | %)                     |          |          | (100.0     | %)      |          |          | (100.0     | %)       
|                                    | Operating expenses                |                  |                        | 451,993                 |          |                      |            | 469,232                |          |          |            | 486,714 |          |          |            | 3,766,608 |          
|                                    |                                   |                  | (95.7                  | %)                      |          |                      | (108.4     | %)                     |          |          | (88.2      | %)      |          |          | (95.7      | %)       
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    |                                   |                  |                        | Operating profit (loss) |          |                      | ¥  20,536  |                        |          |          | ¥ (36,346  | )       |          |          | ¥  65,358  |           |           | $         | 171,134   | 
|                                    |                                   |                  | (4.3                   | %)                      |          |                      | (-8.4      | %)                     |          |          | (11.8      | %)      |          |          | (4.3       | %)       
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    | Identifiable assets               |                  |                        | 495,144                 |          |                      |            | 513,218                |          |          |            | 572,087 |          |          |            | 4,126,200 |          
|                                    | Depreciation and amortization     |                  |                        | 53,015                  |          |                      |            | 56,031                 |          |          |            | 55,472  |          |          |            | 441,792   |          
|                                    | Capital expenditures              |                  |                        | 38,882                  |          |                      |            | 55,046                 |          |          |            | 91,509  |          |          |            | 324,017   |          
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|RECORDING MEDIA AND SYSTEMS         |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |          
|                                    | Net sales                         |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |          
|                                    |                                   |                  | Unaffiliated customers |                         |          | ¥136,351             |            |                        |          | ¥137,625 |            |         |          | ¥127,014 |            |           | $         | 1,136,258 |          
|                                    |                                   |                  | Intersegment           |                         |          |                     |            |                        |          |         |            |         |          |         |            |           |           |          |          
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    |                                   |                  |                        | Total revenue           |          |                      | 136,351    |                        |          |          | 137,625    |         |          |          | 127,014    |           |           |           | 1,136,258 | 
|                                    |                                   |                  | (100.0                 | %)                      |          |                      | (100.0     | %)                     |          |          | (100.0     | %)      |          |          | (100.0     | %)       
|                                    | Operating expenses                |                  |                        | 134,807                 |          |                      |            | 145,001                |          |          |            | 136,049 |          |          |            | 1,123,392 |          
|                                    |                                   |                  | (98.9                  | %)                      |          |                      | (105.4     | %)                     |          |          | (107.1     | %)      |          |          | (98.9      | %)       
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    |                                   |                  |                        | Operating profit (loss) |          |                      | ¥    1,544 |                        |          |          | ¥   (7,376 | )       |          |          | ¥   (9,035 | )         |           | $         | 12,866    | 
|                                    |                                   |                  | (1.1                   | %)                      |          |                      | (-5.4      | %)                     |          |          | (-7.1      | %)      |          |          | (1.1       | %)       
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    | Identifiable assets               |                  |                        | 96,761                  |          |                      |            | 109,055                |          |          |            | 114,182 |          |          |            | 806,342   |          
|                                    | Depreciation and amortization     |                  |                        | 4,774                   |          |                      |            | 5,889                  |          |          |            | 8,107   |          |          |            | 39,783    |          
|                                    | Capital expenditures              |                  |                        | 2,569                   |          |                      |            | 3,731                  |          |          |            | 7,943   |          |          |            | 21,408    |          
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|ELIMINATIONS AND CORPORATE          |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |          
|                                    |                                   | Corporate assets |                        |                         | ¥155,432 |                      |            |                        | ¥127,637 |          |            |         | ¥133,908 |          |            | $         | 1,295,266 |          
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|TOTAL                               |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |          
|                                    | Net sales                         |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |          
|                                    |                                   |                  | Unaffiliated customers |                         |          | ¥608,880             |            |                        |          | ¥570,511 |            |         |          | ¥679,086 |            |           | $         | 5,074,000 |          
|                                    |                                   |                  | Intersegment           |                         |          |                     |            |                        |          |         |            |         |          |         |            |           |           |          |          
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    |                                   |                  |                        | Total revenue           |          |                      | 608,880    |                        |          |          | 570,511    |         |          |          | 679,086    |           |           |           | 5,074,000 | 
|                                    |                                   |                  | (100.0                 | %)                      |          |                      | (100.0     | %)                     |          |          | (100.0     | %)      |          |          | (100.0     | %)       
|                                    | Operating expenses                |                  |                        | 586,800                 |          |                      |            | 614,233                |          |          |            | 622,763 |          |          |            | 4,890,000 |          
|                                    |                                   |                  | (96.4                  | %)                      |          |                      | (107.7     | %)                     |          |          | (91.7      | %)      |          |          | (96.4      | %)       
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    |                                   |                  |                        | Operating profit (loss) |          |                      | ¥  22,080  |                        |          |          | ¥ (43,722  | )       |          |          | ¥  56,323  |           |           | $         | 184,000   | 
|                                    |                                   |                  | (3.6                   | %)                      |          |                      | (-7.7      | %)                     |          |          | (8.3       | %)      |          |          | (3.6       | %)       
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          
|                                    | Identifiable and corporate assets |                  |                        | 747,337                 |          |                      |            | 749,910                |          |          |            | 820,177 |          |          |            | 6,227,808 |          
|                                    | Depreciation and amortization     |                  |                        | 57,789                  |          |                      |            | 61,920                 |          |          |            | 63,579  |          |          |            | 481,575   |          
|                                    | Capital expenditures              |                  |                        | 41,451                  |          |                      |            | 58,777                 |          |          |            | 99,452  |          |          |            | 345,425   |          
|                                    |                                   |                  |                        |                         |          |                      |            |                        |          |          |            |         |          |          |            |           |           |           |          



---

|Notes: |  |                                                                                                                                                                                                                       
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | Operating profit (loss) is defined as net sales less cost of sales and selling, general and administrative
expenses (excluding the amortization of certain identifiable intangibles in 2001), and restructuring costs.

21



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##### Table of Contents



|(2) |  | Depreciation and
amortization in 2001 does not include the amortization of certain identifiable
intangibles.                                                                                                                                                                                                                                                                                                          
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | TDK adopted the Emerging Issues Task Force Issue 01-9 (EITF 01-9),
Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendors Products) from the fiscal year beginning April 1,
2002 and certain amounts in the fiscal year from 2001s segment information
have been reclassified, with no effect on operating profit (loss), to conform
to the fiscal 2003 presentation.

Geographic Segment Information

|                           |                                  |                         |  |                      |          |                       |  |          |          |      |  |          |          |   |   |           |           |  
|-------------------------- | -------------------------------- | ----------------------- |  | -------------------- | -------- | --------------------- |  | -------- | -------- | ---- |  | -------- | -------- | - | - | --------- | --------- | -
|                           |                                  |                         |  | Years ended March 31 |          |                       |  |         
|                           |                                  |                         |  |                      |          |                       |  |         
|                           |                                  |                         |  | 2003                 |          | 2002                  |  | 2001     |          | 2003
|                           |                                  |                         |  |                      |          |                       |  |          |          |     
|                           |                                  |                         |  | (millions of yen)    |          | (thousandsof dollars)
|JAPAN                      |                                  |                         |  |                      |          |                       |  |          |          |      |  |          |          |   |   |          
|                           |                                  | Net sales               |  |                      | ¥334,882 |                       |  |          | ¥328,214 |      |  |          | ¥458,874 |   |   | $         | 2,790,683 |  
|                           |                                  | Operating profit (loss) |  |                      | 5,193    |                       |  |          | (33,252  | )    |  |          | 39,504   |   |   |           | 43,275    |  
|                           |                                  | Identifiable assets     |  |                      | 326,128  |                       |  |          | 341,815  |      |  |          | 389,195  |   |   |           | 2,717,733 |  
|AMERICAS                   |                                  |                         |  |                      |          |                       |  |          |          |      |  |          |          |   |   |          
|                           |                                  | Net sales               |  |                      | 101,784  |                       |  |          | 101,910  |      |  |          | 131,392  |   |   |           | 848,200   |  
|                           |                                  | Operating loss          |  |                      | (1,082   | )                     |  |          | (12,712  | )    |  |          | (1,394   | ) |   |           | (9,017    | )
|                           |                                  | Identifiable assets     |  |                      | 73,845   |                       |  |          | 84,403   |      |  |          | 94,166   |   |   |           | 615,375   |  
|EUROPE                     |                                  |                         |  |                      |          |                       |  |          |          |      |  |          |          |   |   |          
|                           |                                  | Net sales               |  |                      | 78,462   |                       |  |          | 78,941   |      |  |          | 95,503   |   |   |           | 653,850   |  
|                           |                                  | Operating profit (loss) |  |                      | (3,547   | )                     |  |          | (3,184   | )    |  |          | 2,236    |   |   |           | (29,558   | )
|                           |                                  | Identifiable assets     |  |                      | 48,108   |                       |  |          | 52,188   |      |  |          | 62,618   |   |   |           | 400,900   |  
|ASIA AND OTHERS            |                                  |                         |  |                      |          |                       |  |          |          |      |  |          |          |   |   |          
|                           |                                  | Net sales               |  |                      | 314,918  |                       |  |          | 268,364  |      |  |          | 298,706  |   |   |           | 2,624,317 |  
|                           |                                  | Operating profit        |  |                      | 20,640   |                       |  |          | 1,700    |      |  |          | 20,982   |   |   |           | 172,000   |  
|                           |                                  | Identifiable assets     |  |                      | 193,637  |                       |  |          | 194,057  |      |  |          | 197,502  |   |   |           | 1,613,642 |  
|ELIMINATIONS AND CORPORATE |                                  |                         |  |                      |          |                       |  |          |          |      |  |          |          |   |   |          
|                           |                                  | Net sales               |  |                      | 221,166  |                       |  |          | 206,918  |      |  |          | 305,389  |   |   |           | 1,843,050 |  
|                           |                                  | Operating profit (loss) |  |                      | (876     | )                     |  |          | (3,726   | )    |  |          | 5,005    |   |   |           | (7,300    | )
|                           |                                  | Identifiable assets     |  |                      | 105,619  |                       |  |          | 77,447   |      |  |          | 76,696   |   |   |           | 880,158   |  
|TOTAL                      |                                  |                         |  |                      |          |                       |  |          |          |      |  |          |          |   |   |          
|                           |                                  | Net sales               |  |                      | ¥608,880 |                       |  |          | ¥570,511 |      |  |          | ¥679,086 |   |   | $         | 5,074,000 |  
|                           |                                  | Operating profit (loss) |  |                      | 22,080   |                       |  |          | (43,722  | )    |  |          | 56,323   |   |   |           | 184,000   |  
|                           |                                  | Identifiable assets     |  |                      | 747,337  |                       |  |          | 749,910  |      |  |          | 820,177  |   |   |           | 6,227,808 |  
|OVERSEAS SALES             |                                  |                         |  |                      |          |                       |  |          |          |      |  |          |          |   |   |          
|                           |                                  | Americas                |  |                      | ¥106,060 |                       |  |          | ¥109,452 |      |  |          | ¥126,269 |   |   | $         | 883,833   |  
|                           |                                  | Europe                  |  |                      | 78,740   |                       |  |          | 79,639   |      |  |          | 96,263   |   |   |           | 656,167   |  
|                           |                                  | Asia and others         |  |                      | 258,577  |                       |  |          | 216,616  |      |  |          | 235,275  |   |   |           | 2,154,808 |  
|                           | Overseas sales total             |                         |  | ¥443,377             |          |                       |  | ¥405,707 |          |      |  | ¥457,807 |          |   | $ | 3,694,808 |          
|                           | Percentage of consolidated sales |                         |  | 72.8                 | %        |                       |  | 71.1     | %        |      |  | 67.4     | %        |   |   | 72.8      | %        



---

|Notes: |  |                                                                                                                                                                                                                       
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | Operating profit (loss) is defined as net sales less cost of sales and
selling, general and administrative expenses (excluding the amortization of
certain identifiable intangibles in 2001), and restructuring costs.

22



---



##### Table of Contents



|(2) |  | TDK adopted the Emerging Issues Task Force Issue 01-9 (EITF 01-9),
Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendors Products) from the fiscal year beginning April 1,
2002 and certain amounts in the fiscal year from 2001s segment information
have been reclassified, with no effect on operating profit (loss), to conform
to the fiscal 2003 presentation.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | Net sales in each geographic area are based on the location of TDK entities
where the sales are generated.                                                                                                                                                                                                                                                                                                            
|   
|(4) |  | Overseas sales are based on the location of the customers.                                                                                                                                                                                                                                                                                                                                                            

B. Liquidity and capital resources

Operating capital requirements

TDKs requirements for operating capital primarily are for the purchase of
raw materials and parts for use in the manufacture of its products. Also,
operating expenses, including manufacturing expenses and SGA expenses, require
a substantial amount of operating capital. Payroll and payroll-benefits, and
marketing expenses, such as those incurred for advertising and sales promotion,
account for a significant portion of operating expenses. TDKs expenditure for
R&D is recorded as a part of various operating expenses, and payroll for
R&D-related personnel accounts for a material portion of R&D expenses. The
necessary funds for these expenses are provided internally from profits,
reduction of inventories and other sources.

Capital Expenditures

In fiscal 2003, capital expenditures on a cash basis were ¥41.5 billion
($345 million), compared with ¥58.8 billion in fiscal 2002. With no signs of a
broad-based economic recovery and growing uncertainty about the future, TDK
emphasized cash flows and concentrated capital expenditures on strategically
important business fields. Among major overseas projects were HDD head
facility expansions and upgrades in China and the U.S., and the expansion of
production facilities for electronic materials and components in China. In
Japan, multilayer chip capacitors and other electronic materials and components
production and research facilities, and production and research facilities for
HDD heads were significant elements of capital outlays. The funds for these
capital expenditures were provided by internal resources generated from
depreciation and profits.

In fiscal 2002, capital expenditures on a cash basis were ¥58.8 billion,
compared with ¥99.5 billion in fiscal 2001. Due to the significant uncertainty
about the future amid the prolonged worldwide recession, TDK emphasized cash
flows and concentrated capital expenditures in strategically important business
fields. Among major overseas projects were HDD head facility expansions and
upgrades in China and the U.S., and the expansion of production facilities for
electronic materials and components in China. In Japan, multilayer chip
capacitors and other electronic materials and components production and
research facilities, and production and research facilities for HDD heads were
significant elements of capital outlays.

Fiscal 2001 capital expenditures on a cash basis totaled ¥99.5 billion,
compared with ¥84.8 billion in fiscal 2000. The large increase represents
TDKs aggressive actions to move rapidly to take advantage of opportunities in
strategic market sectors. Among major overseas projects were HDD head facility
expansions and upgrades in China and the U.S., and an expansion of production
facilities for electronic materials and components in China. In Japan,
production facilities for multilayer chip capacitors and other electronic
materials, including the construction of a new plant, and production and
research facilities for HDD heads were significant elements of capital outlays.

23



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##### Table of Contents



Off-balance sheet arrangements

As part of its ongoing business, TDK does not participate in transactions
with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which have been
established for the purpose of facilitating off-balance sheet arrangements or
other limited purposes.

On March 31, 2003, commitments outstanding for the purchase of property,
plant and equipment approximated ¥5.9 billion ($49 million). Contingent
liabilities for guarantees of loans of TDKs employees and affiliates amounted
to approximately ¥7.2 billion ($60 million). TDK forecasts the use of ¥50.0
billion in capital expenditures for fiscal 2004, primarily for production
facilities and rationalization measures. Actual capital expenditures could
differ from this forecast as a result of factors such as shifts in technology,
demand, prices, competition, economic environments and foreign exchange rates.

Contractual obligations at March 31, 2003 are summarized as follows:

|                         |                  |  |                                       |        |        |  |              |       |               |  |  |       |  |  |  |       | 
|------------------------ | ---------------- |  | ------------------------------------- | ------ | ------ |  | ------------ | ----- | ------------- |  |  | ----- |  |  |  | ----- | 
|                         |                  |  | Payments Due by Period (Yen millions)
|                         |                  |  |                                      
|                         |                  |  |                                       |        |        |  | Less than    |       |               |  |  |       |  |  | 
|                         |                  |  | Total                                 |        | 1 year |  | 1 to 5 years |       | After 5 years
|                         |                  |  |                                       |        |        |  |              |       |              
|Contractual obligations: |                  |  |                                       |        |        |  |              |       |               |  |  |       |  |  |  |      
|                         | Long-term debt   |  |                                       | 582    |        |  |              | 488   |               |  |  | 94    |  |  |  |      | 
|                         | Operating leases |  |                                       | 13,108 |        |  |              | 4,245 |               |  |  | 7,791 |  |  |  | 1,072 | 

TDKs basic policy is to pay a stable dividend over the long term
depending on operation results. Funds for paying dividends are allocated from
internal funds.

Regarding the shortfall in pension assets, TDK is currently considering
the actions to take in response to certain recent reforms to the pension
system, including transferring the substitutional portion of employee pension
fund liabilities to the government.

TDK has various employees pension plans covering employees. The unfunded
amount as of March 31, 2003 was ¥104.1 billion ($867 million). The unfunded
amount increased significantly by ¥31.5 billion as compared with last year due
to a decrease in the discount rate and a low return on plan assets. However,
out of this amount, ¥85.0 billion ($708 million) was accrued on the
consolidated balance sheet as of March 31, 2003. TDK contributes to the
Employees Pension Fund in conformity with governmental regulations, which
require an employer to contribute to the Fund systematically in accordance with
cost allocation methods and contribute special pension premiums in order to
fund the unfunded portion over 20 years at the maximum if such unfunded portion
exceeds the specified level prescribed in the regulations. Therefore, although
there is no immediate substantial cash funding requirement, TDKs cash funding requirement may be affected in the long term by changes in interest rates,
returns on assets and governmental regulations.

Regarding loans, in principle, TDKs policy is to use funds provided by
the parent company to meet the financing requirements of group companies.
However, certain of TDKs overseas subsidiaries have their own credit
facilities with which they borrow funds.

Regarding TDKs capital expenditure plans, TDKs policy is to rigorously
select investments in the strategic fields of IT home electronic appliances,
high-speed and large-capacity networks and car electronics. Capital
expenditures will be funded using internally generated funds.

24



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##### Table of Contents



Financial Management

Operating capital and capital expenditures are cash generated through
operating activities in principle. To improve capital efficiency, to the
extent possible, TDK will centralize financial management in the Head Office
through the introduction of a cash management system (CMS). Surplus funds are
invested with an emphasis on low risk. Funds from within the group will be
utilized, to the extent possible, to extend financing to subsidiaries that
cannot procure operating capital or funds for capital expenditures themselves.

Cash flows for fiscal 2003, 2002 and 2001 are summarized as follows:

|                                                                                        |  |                       |          |                      |  |      |          |      |  |  |          |   |  |   |        |  
|--------------------------------------------------------------------------------------- |  | --------------------- | -------- | -------------------- |  | ---- | -------- | ---- |  |  | -------- | - |  | - | ------ | -
|                                                                                        |  | Years ended March 31, |          |                      |  |      |          |      |  | 
|                                                                                        |  |                       |          |                      |  |      |          |      |  | 
|                                                                                        |  | 2003                  |          | 2002                 |  | 2001 |          | 2003
|                                                                                        |  |                       |          |                      |  |      |          |     
|                                                                                        |  | (millions of yen)     |          | (millionsof dollars)
|Net income (loss)                                                                       |  |                       | ¥ 12,019 |                      |  |      | ¥(25,771 | )    |  |  | ¥ 43,983 |   |  | $ | 100.2  |  
|Adjustments to reconcile net income
(loss) to net cash provided by operating
activities |  |                       | 92,339   |                      |  |      | 67,275   |      |  |  | 23,614   |   |  |   | 769.5  |  
|                                                                                        |  |                       |          |                      |  |      |          |      |  |  |          |   |  |   |        |  
|Net cash provided by operating activities                                               |  |                       | 104,358  |                      |  |      | 41,504   |      |  |  | 67,597   |   |  |   | 869.7  |  
|                                                                                        |  |                       |          |                      |  |      |          |      |  |  |          |   |  |   |        |  
|Net cash used in investing activities                                                   |  |                       | (46,645  | )                    |  |      | (57,903  | )    |  |  | (92,538  | ) |  |   | (388.7 | )
|Net cash used in financing activities                                                   |  |                       | (7,925   | )                    |  |      | (13,202  | )    |  |  | (8,814   | ) |  |   | (66.0  | )
|Effect of exchange rate changes on cash
and cash equivalents                            |  |                       | (4,998   | )                    |  |      | 4,445    |      |  |  | 10,153   |   |  |   | (41.7  | )
|                                                                                        |  |                       |          |                      |  |      |          |      |  |  |          |   |  |   |        |  
|Net change in cash and cash equivalents                                                 |  |                       | ¥ 44,790 |                      |  |      | ¥(25,156 | )    |  |  | ¥(23,602 | ) |  | $ | 373.3  |  
|                                                                                        |  |                       |          |                      |  |      |          |      |  |  |          |   |  |   |        |  

Fiscal 2003 cash and cash equivalents increased ¥44.8 billion to ¥170.6
billion ($1,421 million), from ¥125.8 billion in the previous fiscal year.
Operating activities provided net cash of ¥104.4 billion ($870 million), a
year-on-year increase of ¥62.9 billion. This reflected mainly a ¥37.8 billion
increase in net income to ¥12.0 billion ($100 million); a decrease of ¥4.1
billion in depreciation and amortization to ¥57.8 billion ($482 million); a
decrease in inventories of ¥14.3 billion ($119 million); and an increase of
¥6.7 billion ($56 million) in trade payables. Regarding the shortfall in
pension assets, TDK is currently considering reforms to the pension system,
including transferring the substitutional portion of employee pension fund
liabilities.

Investing activities used net cash of ¥46.6 billion ($389 million), a
decrease of ¥11.3 billion, from ¥57.9 billion in the previous fiscal year. The
main factor was a ¥17.3 billion decrease in capital expenditures to ¥41.5
billion ($345 million). Regarding research and development expenses, TDKs
policy is to focus investments in the strategic fields of IT home electronic appliances, high-speed and large-capacity networks and car
electronics. Funds for research and development will be appropriated from
internal funds.

Financing activities used net cash of ¥7.9 billion ($66 million), ¥5.3
billion less than the ¥13.2 billion in cash used in the previous fiscal year.
This mainly represented a ¥3.3 billion decrease in repayments of short-term
debt and a ¥2.0 billion decrease in dividends paid.

Regarding fund procurement costs, TDK has long-term corporate credit
ratings of AA- and A1 from Standard & Poors and Moodys, respectively.
Furthermore, Standard & Poors gives TDK their highest short-term credit
rating, A-1+, and TDKs U.S. subsidiaries have been given the highest rating of
P-1 by Moodys. These ratings allow TDK to procure funds if needed at low
interest rates.

TDKs basic policy is to pay a stable dividend over the long term. Funds
for paying dividends are allocated from internal funds.

With unstable financial conditions expected to continue in Japan, TDKs
policy is to maintain a high level of liquidity. TDK thus has no immediate
plans to repurchase stock.

TDK estimates that operating cash flows and other internal resources will
provide adequate liquidity in fiscal 2004. Regarding cash flows for the fiscal
year ending March 31,

25



---



##### Table of Contents



2004 and onward, TDK expects to provide the necessary
funds from operating cash flows by increasing profitability and improving the
return on assets.

Fiscal 2002 cash and cash equivalents decreased ¥25.2 billion to ¥125.8
billion. Operating activities provided cash of ¥41.5 billion, ¥26.1 billion
less than a year earlier. The main reason for the decrease was the net loss of
¥25.8 billion, which partly resulted from the implementation of structural
reforms. Investing activities used net cash of ¥57.9 billion, a decrease of
¥34.6 billion year on year. The main factor was a decrease in capital
expenditures of ¥40.7 billion. Financing activities used net cash of ¥13.2
billion, ¥4.4 billion more than in the previous fiscal year. This mainly
represented the repayment of ¥4.3 billion in short- and long-term debt at
overseas subsidiaries. Cash dividends paid were ¥8.0 billion, the same level
as in the previous fiscal year.

Fiscal 2001 cash and cash equivalents decreased ¥23.6 billion to ¥150.9
billion. Net cash provided by operating activities was ¥26.3 billion less than
in fiscal 2000. Depreciation and amortization increased ¥14.1 billion, but
this was offset by a ¥6.7 billion decrease in net income and a net ¥6.4 billion
increase in cash used by changes in trade receivables, inventories and trade
payables. In addition, the overall decrease in net cash provided by operating
activities reflected adjustments for a gain on contribution of equity
securities to a pension trust of ¥12.5 billion and contribution of cash and
cash equivalents to a pension trust of ¥15.3 billion. Investing activities
used net cash of ¥92.5 billion, ¥6.2 billion less than in fiscal 2000.
Although capital expenditures increased ¥14.7 billion over the previous year,
there was a decrease in payment for purchase of investments of ¥16.5 billion
and proceeds from maturities of marketable securities of ¥3.8 billion. Net
cash used in financing activities was ¥4.0 billion lower than in fiscal 2000
due to an increase of ¥4.5 billion in short-term debt. As in fiscal 2000,
dividends paid accounted for the majority of financing cash requirements.

Capital resources at March 31, 2003, 2002 and 2001 are summarized as follows:

|                                               |  |                       |            |           |  |      |            |      |  |  |            |             |  |   |         | 
|---------------------------------------------- |  | --------------------- | ---------- | --------- |  | ---- | ---------- | ---- |  |  | ---------- | ----------- |  | - | ------- | 
|                                               |  | Years ended March 31, |            |           |  |      |            |      |  | 
|                                               |  |                       |            |           |  |      |            |      |  | 
|                                               |  | 2003                  |            | 2002      |  | 2001 |            | 2003
|                                               |  |                       |            |           |  |      |            |     
|                                               |  | (millions of yen)     |            | (millions
|                                               |  |                       |            |           |  | (%)  |            |      |  |  |            | of
dollars)
|Short-term debt                                |  |                       | ¥    1,431 |           |  |      | ¥    1,655 |      |  |  | ¥    5,120 |             |  | $ | 11.9    | 
|                                               |  |                       | (0.3       | )         |  |      | (0.3       | )    |  |  | (0.8       | )           |  |   |         | 
|Current installments of long term debt         |  |                       | 488        |           |  |      | 657        |      |  |  | 759        |             |  |   | 4.1     | 
|                                               |  |                       | (0.1       | )         |  |      | (0.1       | )    |  |  | (0.1       | )           |  |   |         | 
|Trade notes payable                            |  |                       | 824        |           |  |      | 849        |      |  |  | 791        |             |  |   | 6.9     | 
|                                               |  |                       | (0.1       | )         |  |      | (0.1       | )    |  |  | (0.1       | )           |  |   |         | 
|Long-term debt, excluding current installments |  |                       | 94         |           |  |      | 459        |      |  |  | 1,004      |             |  |   | 0.8     | 
|                                               |  |                       | (0.0       | )         |  |      | (0.1       | )    |  |  | (0.2       | )           |  |   |         | 
|Stockholders equity                           |  |                       | 553,885    |           |  |      | 583,927    |      |  |  | 637,749    |             |  |   | 4,615.7 | 
|                                               |  |                       | (99.5      | )         |  |      | (99.4      | )    |  |  | (98.8      | )           |  |   |         | 
|                                               |  |                       |            |           |  |      |            |      |  |  |            |             |  |   |         | 
|Total capital                                  |  |                       | ¥556,722   |           |  |      | ¥587,547   |      |  |  | ¥645,423   |             |  | $ | 4,639.4 | 
|                                               |  |                       | (100.0     | )         |  |      | (100.0     | )    |  |  | (100.0     | )           |  |   |         | 
|                                               |  |                       |            |           |  |      |            |      |  |  |            |             |  |   |         | 

TDK currently has no capital market debt outstanding. However, TDK
maintains long-term corporate credit ratings of AA- and A1 from Standard &
Poors and Moodys, respectively. Furthermore, Standard & Poors gives TDK
their highest short-term credit rating, A-1+ and TDKs U.S. subsidiaries have
been given the highest rating of P-1 by Moodys.

Total assets amounted to ¥747.3 billion ($6,228 million) at March 31,
2003, down ¥2.6 billion from ¥749.9 billion at the previous fiscal year-end.
Among current assets, cash and cash equivalents increased ¥44.8 billion, from
¥125.8 billion to ¥170.6 billion ($1,421 million), while net trade receivables
decreased ¥2.8 billion, from ¥142.8 billion to ¥140.0 billion ($1,167 million),
and inventories were down ¥17.2 billion, from ¥91.1 billion to ¥73.9

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billion
($616 million). And property, plant and equipment decreased ¥39.7 billion,
from ¥265.6 billion to ¥225.9 billion ($1,883 million), as TDK reviewed capital
expenditures.

Total liabilities, meanwhile, increased ¥28.7 billion, from ¥161.4 billion
to ¥190.1 billion ($1,584 million). Accrued expenses decreased ¥7.6 billion,
from ¥35.7 billion to ¥28.1 billion ($234 million) due to the payment during
the year of retirement allowances to employees who applied for a special
voluntary retirement package offered as part of structural reforms implemented
in fiscal 2002. Trade payables increased ¥4.4 billion, from ¥52.6 billion to
¥57.0 billion ($475 million), and retirement and severance benefits increased
¥35.0 billion, from ¥50.0 billion to ¥85.0 billion ($708 million).

Total stockholders equity declined by a total of ¥30.0 billion, from
¥583.9 billion to ¥553.9 billion ($4,616 million). Accumulated other
comprehensive loss rose ¥34.8 billion, from ¥44.0 billion to ¥78.8 billion
($657 million), due to a ¥18.7 billion rise in foreign currency translation
adjustments and ¥15.8 billion increase in minimum pension liability
adjustments. Offsetting these increases to some extent was a ¥5.8 billion rise
in retained earnings, from ¥520.1 billion to ¥525.9 billion ($4,383 million).

Total assets amounted to ¥749.9 billion as of March 31, 2002, a decrease
of ¥70.3 billion from ¥820.2 billion at the previous fiscal year-end. Among
current assets, cash and cash equivalents declined ¥25.1 billion, from ¥150.9
billion to ¥125.8 billion. Net trade receivables decreased ¥13.8 billion, from
¥156.6 billion to ¥142.8 billion, and inventories were down ¥25.3 billion, from
¥116.4 billion to ¥91.1 billion. In addition, no prepaid pension cost was
recognized as of March 31, 2002, which amounted to ¥41.3 billion as of March
31, 2001, and there was a ¥34.3 billion increase in long-term deferred income
taxes, from ¥2.7 billion to ¥37.0 billion.

Total liabilities decreased ¥17.6 billion, from ¥179.0 billion to ¥161.4
billion. An ¥18.2 billion increase in retirement and severance benefits, from
¥31.8 billion to ¥50.0 billion, was offset by a decrease of ¥12.1 billion in
trade payables, ¥64.7 billion to ¥52.6 billion, and ¥17.1 billion in income taxes, from ¥19.6 billion to ¥2.5
billion. In addition, debt, accrued expenses and other items decreased. Total
stockholders equity declined by a total of ¥53.8 billion from ¥637.7 billion
to ¥583.9 billion. This reflected a decrease of ¥36.1 billion in retained
earnings, from ¥556.2 billion to ¥520.1 billion, mainly due to the net loss for
fiscal 2002. Accumulated other comprehensive loss increased ¥19.1 billion,
from ¥24.9 billion to ¥44.0 billion, due to an increase in minimum pension
liability adjustments and a decrease in foreign currency translation
adjustments.

Total assets amounted to ¥820.2 billion as of March 31, 2001, an increase
of ¥44.2 billion from ¥776.0 billion at the previous fiscal year-end. Cash and
cash equivalents declined by ¥23.6 billion, from ¥174.5 billion to ¥150.9
billion. Net trade receivables decreased by ¥5.9 billion, from ¥162.5 billion
to ¥156.6 billion, but inventories increased ¥31.6 billion, from ¥84.8 billion
to ¥116.4 billion, mainly due to a sudden drop in orders for mobile phone
components in the fiscal years fourth quarter.

Current liabilities increased due to an increase in income taxes and other
factors, although trade payables decreased ¥6.1 billion, from ¥70.8 billion to
¥64.7 billion, as orders for mobile phone components dropped sharply in the
fourth quarter of fiscal 2001. Short- and long-term debt represents almost
entirely the loans that TDK is obligated to hold until contractual repayment
dates. The increase in fiscal 2001 primarily reflects debt at Headway
Technologies. Retirement and severance benefits fell by ¥25.0 billion, from
¥56.8 billion to ¥31.8 billion. This was attributable to the establishment of
a pension trust. Total stockholders equity increased 11.7 percent, from
¥571.0 billion to ¥637.7 billion. Foreign currency translation adjustments
decreased as a weaker yen increased yen translations of overseas assets. The
change also reflected movements in the minimum pension liability adjustments.

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For a discussion of financial instruments, see Note 14 Risk Management
Activities and Derivative Financial Instruments, Note 15 Fair Value of
Financial Instruments and Note 6 Short-Term and Long-Term Debt in Item 17
Financial Statements.

C. Research and development, patents and licenses, etc.

R&D expenditures amounted to ¥31.9 billion ($266 million), 5.2 percent of
net sales in fiscal 2003, ¥38.6 billion, 6.8 percent of net sales in fiscal
2002 and ¥37.0 billion, 5.4 percent of net sales in fiscal 2001.

In its R&D activities, TDK continues to work on strengthening and
expanding development of new products that respond to diversification in the
electronics market. In particular, TDK is concentrating on next-generation
recording-related products, micro electronics modules for mobile
communications-related applications, and energy-efficient, environmentally
friendly devices based on materials and design technologies. Furthermore, TDK
is using its reservoir of technologies to conduct efficient R&D activities
concentrating on three strategic areas: IT home electronic appliances,
high-speed and large-capacity networks and car electronics. On April 1, 2003,
TDK established the Application Center with the aim of quickly responding to
market shifts and rising customer needs in strategic fields.

In the recording media and systems field, TDK is pushing ahead with
research on next-generation DVD-related products, including DVR Blue, while in
the electronic components field R&D themes are development of tunnel-junction
MR heads, research in next-generation magnetic recording technologies,
improving high-frequency-related components for mobile communications applications and improving wireless
LAN-related products. Moreover, in EMC-related areas, which draw on TDKs
materials technologies, TDK is working toward the commercialization of products
designed for the increasingly higher frequencies used in electronic devices.

R&D at TDK is conducted by four labs  the Corporate Research and
Development Center, the Materials Research Center, the Information Technology
Development Center and the HMS (Hybrid Material Solutions) Research Center -
and the Application Center, Silicon Systems Development Department, the New
Business Development Department, the Production Engineering Development
Department as well as the R&D functions of each operating group. Each facility
is developing new products in its area of responsibility. The Corporate
Research and Development Center is primarily responsible for research in thin
film-related technology, while the Materials Research Center mainly conducts
research in magnetic and dielectric materials that use powder metallurgy. The
Information Technology Development Center conducts research in next-generation
recording and communications technologies, and the HMS Research Center conducts
research in hybrid multilayer development technologies and related areas.

In terms of overseas R&D activities, TDK is conducting R&D projects in
collaboration with leading universities in the U.S. and U.K., and overseas R&D
subsidiaries are making use of local technological resources. In China, where
TDK is aiming to establish and develop an operating base capable of supporting
growth, R&D activities are being carried out in the area of electronic
components and materials. In addition, consolidated subsidiaries are pushing
ahead with various R&D themes. TDK Semiconductor Corporation is developing
semiconductors for LAN/WAN applications and Headway Technologies, Inc. is
developing next-generation HDD heads.

Although TDK has a variety of patents in Japan and other countries, and
licenses from others, it believes that termination of any one of its patents or
licenses or related group of patents or licenses would not materially adversely
affect its business. Total income from its patents and licenses was ¥0.2
billion ($1.7 million) in fiscal 2003, ¥0.3 billion in fiscal 2002 and ¥0.4
billion in fiscal 2001. TDK paid ¥10.2 billion ($85.3 billion) in fiscal 2003,
¥6.1

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billion in fiscal 2002 and ¥6.4 billion in fiscal 2001 mainly for the
royalties under the optical disk license. TDK does not believe that
acquisition of new proprietary patents or other companies patents would have a
material effect on operating results in the future.

D. Trend information

Economic environment

Macroeconomic conditions remained severe in fiscal 2003. The bellwether
U.S. economy, the driving force of the world economy, appeared to gradually
move back onto a recovery footing after taking a step backwards at the start of
2002. However, in the closing months of 2002 consumer and corporate sentiment
nosedived due to stagnant demand and tumbling share prices. The Japanese and
European economies, which are highly reliant on external demand, felt the
effects of the U.S. slowdown. Asia, including China, fared relatively well,
but this region is nowhere near becoming a leading force in the world economy
just yet.

TDK shook off this difficult operating environment to post a 6.7 percent
increase in consolidated net sales, to ¥608,880 million, in fiscal 2003.
Growth was paced by the electronics materials and components segment, with
recording devices, in particular, posting higher sales on the back of a
recovery in TDKs share of the HDD-head market. Consolidated net income also bounced back. TDK recorded a sharp increase
in net income to ¥12,019 million, reversing a net loss in fiscal 2002 of
¥25,771 million. The turnaround stems from structural reforms implemented
during the past two years.

Given the challenge TDK faced in fiscal 2003, TDK worked to generate
profits with the presumption that our top line would not grow. TDKs
accomplishments of the past year were a major step toward building a base that
can once again generate sustained earnings growth. TDK lowered its break-even
point by reining in fixed costs. TDK overhauled its profit structure by
concentrating resources on selected businesses. And TDK raised production
efficiency. These measures allowed TDK to hit its initial operating income
target of ¥20 billion. While fixed costs have been trimmed as planned, TDK has
not seen the improvements it hoped for in respect of the variable expense
ratio. This is because languishing demand and a supply glut caused sales
prices to drop sharply.

With challenging external conditions in mind, TDK is determined to make
further refinements to its profit structure by tackling several ongoing themes.
These include achieving greater rationalization of its existing product
lineup; making TDK more competitive in terms of cost by raising productivity;
ceasing to produce products that TDK cannot count on to contribute to earnings;
and increasing sales of highly profitable products.

As TDK turns its focus to the year ahead, one factor is almost certain to
remain constant  macroeconomic conditions will continue to stagnate.
Heretofore, much of the money in the world has been channeled into the U.S.,
which has set the tone for the world economy. But now this flow of money has
changed. Two causes are falling share prices in the U.S. and increasing
euro-denominated foreign currency reserves held by many countries. Net capital
inflows prevented the U.S. economy from contracting, but now that these inflows
are declining, the U.S. economy has lost some of its momentum. That said, for
the time being, it is difficult to see another country replacing the U.S. as
the key growth driver in the world economy. One other external factor casting
a pall over our operating environment is the protracted stagnation in demand
and fall in prices in the electronics industry.

The stagnation in demand is the result of three main forces. One is that
the markets for PCs and mobile phones are now being shaped by replacement
demand. These markets will likely tread water until applications for
harnessing the potential of broadband emerge. Secondly, we are still in a
period of correction following the excessive capital expenditures. The third
reason is structural economic reforms brought about by the Internet. Given
this

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situation, no major expansion in demand in the electronics industry can be
expected for the time being.

Regarding falling sales prices, two main factors suggest that the downward
trend will persist. One is excess supply resulting from an increase in the
supply capabilities of companies in Asia, including china, and excess capacity
that is a remnant of the IT bubble. A second reason is that Internet-based
sales are exerting downward pressure on prices of products of all kinds.

It is with these difficult macroeconomic conditions in mind that we will
advance TDKs businesses in the current fiscal year.

Looking forward

Fundamental management policy

TDK was established in 1935 as the worlds first company to commercialize
a magnetic material called ferrite. In the ensuing years, TDK has grown as a
result of its originality based on TDKs founding spirit: Contributes to
culture and industry through creativity and with the flexibility to rapidly
adjust to changes in the business environment.

Fundamental policy for distribution of earnings

Returning earnings to shareholders is one of TDKs highest management
priorities. As such, TDK allocates earnings based on a broad range of factors
including the return on equity (ROE), dividends as a percentage of equity (DOE)
and TDKs performance. Retained earnings are used in many ways to make TDK
more competitive. Funds are required to support research and development
programs to respond to the rapid technological advances in the electronic
industry. TDK must also create new technologies in such fields as optical and
magnetic recording media, mobile communications, large-capacity recording
devices, semiconductor-related products and data communications. In addition,
TDK works to develop new products and technologies to respond to increasingly
borderless nature of markets.

Medium- and long-term management strategy

Operating circumstances surrounding corporations have drastically changed
as we move towards a global society. This has been demonstrated by the rapid
permeation of broadband and the growing demand for digital apparatus such as
plasma display and DVD recorders. Several important changes in the world are
occurring at the same time. We are moving towards a Ubiquitous* society,
worldwide economic recession looms, globalization continues and China continues
to gain economic power. Under such business circumstances, each individual
corporation is required to navigate increasingly severe competition by
providing higher corporate value to all stakeholders concerned, which in turn
is accomplished by fully utilizing true originality and expertise. TDK will
aim at the creation of a corporate structure that is able to quickly adapt to
changes and needs in this era, and achieve new corporate value that is required
in the 21st century.

*     Ubiquitous means to exist everywhere simultaneously.

Looking to the fiscal year ending March 2004, firstly, a stagnant
macro-economy will linger. Money flow to the U.S., the single leader of the
world economy up to this point, has changed because, among other factors, U.S.
stock prices faltered and many countries foreign exchange reserves shifted
into Euro currency. There was no shrinking of the U.S. economy because less
money entered it, but, as a result of the decrease in the inflow of money into
the U.S., economic growth slowed. Nevertheless, it seems no country will be
able to replace the U.S. as the world economic leader for the moment. Another
problem is prolonging stagnant demand as well as continued reduction of sales
prices in the electronic industry.

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Furthermore, there is little hope for a
strong demand expansion in the immediate future for the following reasons among
others: (1) PCs and mobile phones have entered the replacement market, and
demand will plateau until applications making maximum use of broadband are
brought out; (2) Overinvestment made by corporations during the IT bubble
economy will continue to be rectified (cutting down capital expenditure); and
(3) Structural changes to the economy attributed to the Internet. Downward
trends in sales prices will also probably continue for the following reasons: (1) Increase of supply capacity of China and Asia, as well as
oversupply attributed to excess production capacity acquired during the IT
bubble economy; and (2) Reduction of sales prices due to distribution via the
Internet. TDK believes that business in the coming year will be developed
successfully by those who understand the seriousness of these prolonged and
difficult external factors.

Although it is forecasted that the business environment will be
challenging, as discussed above, TDK regards the fiscal year ending March 2004
as a starting year for fresh growth of TDK. TDK puts the utmost emphasis on
building a structure that ensures profits even under circumstances hindering
sales growth, and that ensures sales growth even when markets are sluggish.
During the fiscal year ending March 31, 2004, TDK will strive for all-out
implementation of structural reforms of this sort and shift the nature of its
approach (or the way of thinking) in order to keep up with the era of speed and
uncertainty in which we live. TDK plans to construct a sturdy foundation
resistant to sharp fluctuations of markets in an attempt to increase
profit-earning and growing capacities.

To provide business partners at the right time with new products that they really want

It is expected that the electronic industry will be able to achieve
further leaps in the medium term, yet, as mentioned before, there is little
hope for a strong expansion in demand in the immediate future. Corporations,
however, must grow. In order to ensure sales growth during periods when
markets are sluggish, timely supply of unique and new products wanted by the
markets is essential. In addition, a high degree of expertise should be
utilized to link such timely supply with profitability.

We will strive towards the timely supply of products by further working on
the development of materials, one of our strengths, and enhancing the process
technology for attractive new products utilizing TDKs material developments.
We will also work to learn what our business partners really want and combine
our discoveries to make full use of TDKs strengths. In other words, we will
endeavor to strengthen the characteristics as an e-material solution
provider, the fundamental position we pursue, and to carry out structural
reforms to increase the sales ratio of profitable new products. We have already
implemented some measures to lay the groundwork for these goals.

(1)  Narrowing Down Themes of Development and Reviewing of Such Themes on
a Short Period Cycle

We have marked out IT Home Electronic Appliances, High-Speed and
Large-Capacity Networks and Car Electronics, all of which are expected to
grow in the future, as three key areas, and further narrowed down the existing
themes of development to themes that can make full use of TDKs strengths. We
will follow up the progress of these themes as well as review the themes on a
shorter period cycle in order to keep up with the speed of the market movement.

(2)  Structural Reform for Sales Organization and Establishment of
Application Center

To meet rapidly changing markets and the many needs of TDKs business
partners with TDKs strengths effectively, we will change our sales systems to
new systems that place emphasis on the three key areas above, and try to
quickly grasp the needs of business partners. In addition, TDK has newly
established an application center for the purpose of making appropriate
development and support, such as effective combination or utilization of TDKs strengths, so that it can supply at the right time
with new products.

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(3)  Establishment of Intellectual Property Center

Intellectual property, such as patents, is becoming more important. TDK
will newly establish an intellectual property center as a specialized division
and pursue business development focusing equally on business, development and
intellectual property.

To improve variable cost ratio

During the fiscal year ended March 31, 2003, it was not possible for TDK
to improve the variable cost ratio enough, for several reasons, including the
influence of substantial price discounts. It is expected that stringent
requirements for discount of labeled prices will continue, and TDK will gain a
stronger structure only if it continues to offer price reductions dictated by
the market. Thus we will work to improve the variability of unprofitable
products and increase productivity.

Reforms of corporate culture

The importance of speed has increased the need for a reduction in the
lead-time of development, production and distribution. There is much that has
yet to be reformed at TDK to respond to these changes. In particular, we
consider reform of TDKs consciousness a fundamental issue. Therefore, we will
innovate to change cultures within the company that no longer adapt to the
surrounding environment and the markets. TDK will make every effort to
originate a culture in which it recognizes reality and more aggressively and
raises consciousness of the need for speed, as well as the dangers of not
appreciating market realities.

With respect to corporate governance, which is getting a great deal of
attention in terms of business operation, TDK introduced a Corporate Officer
System during the fiscal year under review and clearly defined responsibilities
of management for the execution of business. TDK will continue to enrich this
point.

This year, as for macro-economy, unforeseeable circumstances may continue
as in the previous fiscal year. Meanwhile, it seems that the electronic
industry, to which TDK belongs and which is expected to achieve a further
development in the long-term, is at a plateau, heading towards the broadband
age in the society heading for Ubiquitous, which is expected to realize in
the near future. Under these circumstances, in the fiscal year ending March
2004, TDK will push ahead thoroughly with the second stage of structural
reforms, which place the utmost emphasis on an increase of profit-earning
capacity, and strive to enhance value of the firm in the medium term by laying
the groundwork.

Critical accounting policies

In December 2001, the Securities and Exchange Commission (SEC) of the
United States of America issued disclosure guidance for critical accounting
policies, Financial Reporting Release No. 60. The SEC defines critical
accounting policies as those that require application of managements most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and
may change in subsequent periods.

The following is not intended to be a comprehensive list of all of TDKs
accounting policies. TDKs significant accounting policies are more fully
described in Note 1 to the Consolidated Financial Statements. In many cases,
the accounting treatment of a particular transaction is specifically dictated
by accounting principles generally accepted in the United States of America,
with no need for managements judgment in their application. There are also
areas in which managements judgment in selecting an available alternative
would not produce a materially different result.

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TDK has identified the following as critical accounting policies:
impairment of long-lived assets, valuation of inventories, goodwill and other
intangible assets, pension benefit costs, and deferred tax assets.

Impairment of long-lived assets

TDKs long-lived assets and certain identifiable intangibles are reviewed
for impairment whether events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. This review is performed
using estimates of future cash flows. If the carrying amount of the asset is
considered to be impaired, impairment charge is recorded for the amount by
which the carrying value of asset exceeds its fair value. Management believes
that the estimates of future cash flows and fair values are reasonable,
however, changes in estimates resulting in lower future cash flows and fair
value due to unforeseen changes in business assumptions could negatively affect
the valuation of those long-lived assets and significantly affect TDKs
financial position and results of operations. TDK makes investments with due
prudence, taking sufficiently into consideration the future profitability of
products and the recoverability of investments.

Valuation of inventories

Inventories are stated at the lower of cost or net realizable value. Net
realizable value is the estimated selling price less the estimated costs of
completion and the estimated cost necessary to make a sale. TDK routinely
reviews its inventories for their salability and for indications of
obsolescence to determine if inventories should be written-down to net
realizable value. In estimating the net realizable value of its inventories,
TDK considers the age of the inventory and likelihood of spoilage on changes in
market demand for its inventories. Management believes the judgments and
estimates are reasonable, however, changes in actual future demand or market
conditions could require additional inventory write-downs. TDKs policy is to
mitigate the risk of write-downs, to the extent possible, by reducing the level
of inventories through shorter production lead-times.

Goodwill and other intangible assets

Goodwill and other intangible assets that are determined to have an
indefinite life are not amortized and are tested for impairment on an annual
basis and between annual tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of these assets below their
carrying amount. Fair value for these assets is determined using a discounted
cash flow analysis, which is based on an authorized business plan. Management
believes that the estimates of future cash flows and fair value are reasonable,
however, changes in estimates resulting in lower future cash flows and fair
value due to unforeseen changes in business assumption could negatively affect
the valuations.

Pension benefit costs

Employee pension benefit costs and obligations are dependent on
assumptions used by actuaries in calculating such amounts. These assumptions
include discount rates, retirement rates and mortality rates which are based
upon current statistical data, as well as salary growth, long-term return on
plan assets and other factors. Changes in assumptions will affect TDKs
financial position and results of operations. A decrease in the discount rate
leads to an increase in actuarial pension benefit obligations that could lead
to an increase in net periodic pension cost through amortization of
unrecognized actuarial gain or losses. An increase in the expected return on
plan assets may decrease net periodic pension cost in the current year.
However, the difference between the expected return and the actual return on
those assets, could negatively affect net income in future years.

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Deferred tax assets

TDK has significant deferred tax assets, which are subject to
realizability assessment. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Management considered the schedule reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred tax
assets are deductible, management believes that it is more likely than not that
all of the deferred tax assets less valuation allowance will be realized.
However, in the event future projections for income are not realized or are
realized in lesser amounts or in cases where management changes the assessment
of realization of deferred tax assets based on other factors, deferred tax
assets may be determined not to be realizable which then would result in
additional income tax expense adversely affecting net income.

New accounting pronouncements

New Accounting Standard

In May 2000, the Emerging Issues Task Force reached a final consensus on
Issue 00-14 (EITF 00-14), Accounting for Certain Sales Incentives. EITF
00-14 addresses accounting and reporting standards for sales incentives such as
coupons or rebates that are provided by vendors or manufacturers and are
exercisable by customers at the point of sale.
     In January 2001, the Emerging Issues Task Force also reached a final
consensus on a portion of Issue 00-22 (EITF 00-22), Accounting for Points
and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers
for Free Products or Services to Be Delivered in the Future. EITF 00-22
addresses accounting and reporting standards for sales incentives such as
royalty programs or rebates that are offered to customers by vendors only if
the customer completes a specified cumulative level of revenue transactions
with the vendor or remains a customer of the vendor for a specified time
period.
     In April 2001, the Emerging Issues Task Force also reached a final
consensus on a portion of Issue 00-25 (EITF 00-25), Vendor Income Statement
Characterization of Consideration to a Purchaser of the Vendors Products or
Services. EITF 00-25 addresses the income statement characterization of
consideration, other than that directly addressed in EITF 00-14, from a vendor
(typically a manufacturer or distributor) to a customer (typically a retailer
or wholesaler) in connection with the sale to the customer of the vendors
products or promotion of sales of the vendors products by the
customer. EITF 00-14 and EITF 00-25 were subsequently codified in and superseded by
Issue 01-9 (EITF 01-9), Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendors Products) on which the Emerging
Issues Task Force reached a final consensus.
     TDK adopted EITF 01-9 on April 1, 2002. However, consolidated financial
statements for the prior periods have been reclassified to comply with the
income statement display requirements. The adoption results in a reduction in
net sales for the years ended March 31, 2002 and 2001 of ¥4,518 million and
¥10,825 million, respectively, and corresponding decrease in selling, general
and administrative expenses, with no effect on net income.

In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.146 (SFAS 146), Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force Issue 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). The provisions of SFAS
146 are effective for exit or disposal activities that are initiated after
December 31, 2002. The adoption of SFAS 146 did not have a material effect on
TDKs consolidated financial positions and results of operations.

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In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 requires that a liability be recorded in the guarantors
balance sheet upon issuance of a guarantee. In addition, FIN 45 requires
disclosures about the guarantees that an entity has issued. TDK adopted the
recognition provisions of FIN 45 prospectively to guarantees issued after
December 31, 2002. The disclosure provisions of FIN 45 are effective for
consolidated financial statements as of March 31, 2003. The adoption of FIN 45
did not have a material effect on TDKs consolidated financial positions and
results of operations.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities,
an interpretation of ARB No. 51. FIN 46 addresses the consolidation by
business enterprises on variable interest entities as defined in the
interpretation. FIN 46 applies immediately to variable interests in variable
interest entities created after January 31, 2003, and to variable interests in
variable interest entities obtained after January 31, 2003. TDK will apply FIN
46 to variable interest entities created before February 1, 2003 by September
30, 2003. The impact on TDKs consolidated financial statements is immaterial.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.143 (SFAS 143), Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
associated asset retirement costs. SFAS 143 applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS 143 requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized
as part of the carrying amount of the long-lived asset and subsequently
allocated to expense over the assets useful life. TDK is required to adopt
the provisions of SFAS 143 on April 1, 2003. Currently, the effect on TDKs consolidated financial statements of
adopting SFAS 143 has not been determined.

In January 2003, the Emerging Issues Task Force reached a final consensus
on Issue 03-2 (EITF 03-2), Accounting for the Transfer to the Japanese
Government of the Substitutional Portion of Employee Pension Fund Liabilities.
EITF 03-2 addresses accounting for a transfer to the Japanese government of a
substitutional portion of an Employees Pension Fund (EPF) plan, which is a
defined benefit pension plan established under the Welfare Pension Insurance
Law. EITF 03-2 requires employers to account for the separation process of the
substitutional portion from the entire EPF plan (which includes a corporation
portion) upon completion of the transfer to the government of the
substitutional portion of the benefit obligation and related plan assets. The
separation process is considered 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. TDK
has not decided whether it will transfer the substitutional portion to the
government. Accordingly, the impact on TDKs financial statements, if any,
cannot be determined until a decision is made and the substitutional portion of
the benefit obligation and plan assets are transferred to the government.

In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150 (SFAS 150), Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS 150 requires that certain financial instruments, which under previous
guidance could be accounted for as equity, be classified as liabilities in
statements of financial position. SFAS 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. TDK does not

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expect the adoption of
SFAS 150 to have a material effect on TDKs consolidated financial position and
result of operations.




Item 6. Directors, Senior Management and Employees

A. Directors and senior management

Directors, corporate officers and corporate auditors of TDK as of June 27,
2003 and their respective business experience are listed below.

Directors

|                                   |  |                                                                                                                                                                                                                                                   
|---------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name (Date of birth)               |  | Position, responsibility and brief personal record                                                                                                                                                                                                
|                                   |  |                                                                                                                                                                                                                                                   
|Hajime Sawabe
(Jan. 9, 1942)       |  | Representative Director, President and CEO  since June 1998
- 1996 Director of TDK                                                                                                                                                               
|                                   |  |                                                                                                                                                                                                                                                   
|Hirokazu
Nakanishi
(Mar. 13, 1944) |  | Director, Senior Vice President  since June 2002
In charge of General Manager of China Business Development Group
- 1996 Director of TDK                                                                                                         
|                                   |  |                                                                                                                                                                                                                                                   
|Jiro Iwasaki
(Dec. 6, 1945)        |  | Director, Senior Vice President  since June 2002
In charge of General Manager of Administration Group and Environment
- 1996 Director of TDK                                                                                                     
|                                   |  |                                                                                                                                                                                                                                                   
|Shinji Yoko
(Jan. 2, 1948)         |  | Director, Senior Vice President  since June 2002
In charge of General Manager of Electronic Components Sales and Marketing Group
- 1998 Director of TDK                                                                                          
|                                   |  |                                                                                                                                                                                                                                                   
|Takeshi Nomura
(Mar. 8, 1952)      |  | Director, Senior Vice President  since June 2002
In charge of General Manager of Material Research Center, General Manager of
Intellectual Properties Center and General Manager of Information Technology
Research Center
- 1998 Director of TDK
|                                   |  |                                                                                                                                                                                                                                                   
|Mitsuaki Konno
(Dec. 28, 1944)     |  | Director  since June 2002
In charge of General Manager of Management Review and Support Department
- 2001 General Manager of Management Review and Support Department                                                                            
|                                   |  |                                                                                                                                                                                                                                                   
|Yasuhiro Hagihara
(Oct. 19, 1937)  |  | Director*  since June 2002
- 1971 Admitted to the bar in Washington D.C., U.S.A.
- 1979 Partner of Graham & James L.L.P.
- 2000 Partner of Squire, Sanders & Dempsey L.L.P.                                                                      

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Corporate Officers

|                                   |  |                                                                                                                                                                                                                                                                                                                           
|---------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name (Date of birth)               |  | Position, responsibility and brief personal record                                                                                                                                                                                                                                                                        
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Kiyoshi Ito
(May 28, 1944)         |  | Corporate Officer, Senior Vice President  since June 2002
In charge of General Manager of Circuit Devices Business Group
- 2000 Director of TDK                                                                                                                                                                          
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Takehiro Kamigama
(Jan. 12, 1958)  |  | Corporate Officer, Senior Vice President  since June 2003
In charge of General Manager of Data Storage and Thin Film Technology Components Business Group
- 2002 Corporate Officer of TDK                                                                                                                                
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Katsuhiro Fujino
(Sep. 27, 1944)   |  | Corporate Senior Officer  since June 2002
In charge of General Manager of Ferrite and Magnet Products Business Group
- 2000 Director of TDK                                                                                                                                                                              
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Takeshi Ohwada
(Jul. 18, 1944)     |  | Corporate Senior Officer  since June 2002
In charge of General Manager of SCM Group
- 1998 Director of TDK                                                                                                                                                                                                               
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Kunihiro Fukushima
(Feb. 26, 1945) |  | Corporate Officer  since June 2002
In charge of President of Osaka Regional Headquarters, Deputy General Manager of Electronic
Components Sales and Marketing Group and General Manager of West Japan Sales Department
- 2002 President of Osaka Regional Headquarters and General Manager of West Japan Sales Department
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Yukio Hirokawa
(Feb. 19, 1947)     |  | Corporate Officer  since June 2002
In charge of General Manager of Network Devices Business Group
- 2002 General Manager of Network Devices Business Group                                                                                                                                                               
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Masatoshi Shikanai
(Oct. 3, 1949)  |  | Corporate Officer  since June 2002
In charge of General Manager of Recording Media and Solutions Business Group
- 2001 General Manager of Recording Media and Solutions Business Group                                                                                                                                   
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Yukio Harada
(Oct. 1, 1945)        |  | Corporate Officer  since June 2002
In charge of General Manager of Power Systems Business Group
- 2001 General Manager of Power Systems Business Group                                                                                                                                                                   
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Yoshitomo Suzuki
(Jan. 21, 1944)   |  | Corporate Officer  since June 2002
In charge of General Manager of Akita General Affairs Department
- 2001 General Manager of Material Products Division                                                                                                                                                                 
|                                   |  |                                                                                                                                                                                                                                                                                                                           
|Michinori Katayama
(Dec. 9, 1946)  |  | Corporate Officer  since June 2002
In charge of General Manager of Corporate Communications Department
- 2001 General Manager of Corporate Communications Department                                                                                                                                                     

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|                                 |  |                                                                                                                                                                                                                 
|-------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name (Date of birth)             |  | Position, responsibility and brief personal record                                                                                                                                                              
|                                 |  |                                                                                                                                                                                                                 
|Kenryo Namba
(Jan. 6, 1947)      |  | Corporate Officer  since June 2002
In charge of General Manager of Corporate Research and Development Center
- 2001 General Manager of Corporate Research and Development Center                               
|                                 |  |                                                                                                                                                                                                                 
|Takaya Ishigaki
(Apr. 10, 1953)  |  | Corporate Officer  since June 2003
In charge of Deputy General Manager of Circuit Devices Business Group and General Manager of Capacitors Group
-2001 Deputy General Manager of Circuit Devices Business Group
|                                 |  |                                                                                                                                                                                                                 
|Minoru Takahashi
(Feb. 12, 1948) |  | Corporate Officer  since June 2003
In charge of General Manager of Sensors and Actuators Business Division
-2002 General Manager of Sensors and Actuators Business Division                                    

Corporate Auditors

|                                |  |                                                                                                                                                                                    
|------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name (Date of birth)            |  | Position, responsibility and brief personal record                                                                                                                                 
|                                |  |                                                                                                                                                                                    
|Takuma Otsuka
(Feb. 23, 1944)   |  | Corporate Auditor  since June 2000
- 1998 Director of TDK                                                                                                                         
|                                |  |                                                                                                                                                                                    
|Masaaki Miyoshi
(Sep. 3, 1947)  |  | Corporate Auditor  since June 2003
- 2000 President of Korea TDK Co., Ltd.                                                                                                        
|                                |  |                                                                                                                                                                                    
|Osamu
Nakamoto
(Apr. 8, 1942)   |  | Corporate Auditor*  since June 2000
- 1974 Registration as a Lawyer
- 1981 Partner of the Law Firm of Hamada & Matsumoto
- 2002 Partner of the Law Firm of Mori Hamada & Matsumoto
|                                |  |                                                                                                                                                                                    
|Kazutaka Kubota
(Oct. 11, 1942) |  | Corporate Auditor*  since June 2003
- 2002 President of Asahigin Research Institute, Ltd.
- 2002 Corporate Auditor of Saitama Railway Corporation                                 
|                                |  |                                                                                                                                                                                    
|Kaoru
Matsumoto
(Dec. 8, 1947)  |  | Corporate Auditor*  since June 2003
- 1976 Registration as a Certified Public Accountant
- 1977 Establishment of Kaoru Matsumoto & Co.                                            



---

|Notes |  |                                                                                                                                                                                                  
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|(*)   |  | All of TDKs Directors (except Yasuhiro Hagihara), Corporate Officers
and Corporate Auditors (except Osamu Nakamoto, Kazutaka Kubota and Kaoru
Matsumoto) have been engaged on a full-time basis.

B. Compensation



|(a) |  | The aggregate direct remuneration, including bonuses but excluding
retirement allowances, paid by TDK during the years ended March 31, 2003
and 2002 to all Directors and Corporate Auditors of TDK who served during
each of those years was approximately ¥246 million ($2.1 million) and ¥256
million, respectively.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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(b)  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
general meeting of shareholders for approval. After shareholder approval
is obtained, the amount of the retirement allowance for a Director or
Corporate Auditor is fixed in the case of the Director by the Board of
Directors and in the case of the Corporate Auditor among the Corporate
Auditors, and generally reflects his position at the time of retirement,
the length of his service as a Director or Corporate Auditor and his
contribution to TDKs performance. The aggregate amount set aside as lump
sum retirement allowance by TDK during fiscal 2003 and fiscal 2002 for
Directors and Corporate Auditors of TDK totaled approximately ¥43 million
($358 thousand) and ¥131 million, respectively. In addition, with
introduction of a Corporate Officer system (See Item 6.C. Board
practices), the remuneration system at large was looked over again and a
lump sum retirement allowance for Directors was abolished. As decided by
the Director of the present office at the meeting of shareholders held on
June 27, 2002, the conventional retirement reserve fund shall be frozen,
and it shall be paid after a general meeting of shareholders have approved
to make payment, which vote shall take place at the time of the Directors
retirement.

TDK has a stock option plan for Directors and any other employees. See
Item 6.E. Share ownership.

C. Board practices

TDKs Articles of Incorporation provide for a Board of Directors of not
more than ten members. Directors are elected at the general meeting of
shareholders for a year term of office and may serve any number of consecutive
terms. The Board of Directors has the ultimate responsibility for the
administration of the affairs of TDK.

The Board of Directors may appoint from among the Directors referred to
above one or more Representative Directors. Each of the Representative
Directors has the authority to represent TDK generally in the conduct of its
affairs.

TDK introduced a Corporate Officer system in June 2002 to improve
management efficiency and speed up decision-making. Corporate Officers are
basically elected at the meeting of the Board of Directors held immediately
after the ordinary general meeting of shareholders for a year term, but may
serve any number of terms upon appointment of the Board of Directors each time
following the expiration of the term. With respect to each expiration of the
term of office of Corporate Officers, see Item 6.B. Compensation. The Board
of Directors may elect from among Corporate Officers one or more Senior Vice
Presidents and Corporate Senior Officers. Each of the Corporate Officers has
the authority individually to operate businesses of which he or she is in
charge under the control of the Board of Directors and Representative
Directors.

The Corporate Auditors of TDK, which are elected at the general meeting of
shareholders and whose number shall not exceed five, are not required to be
certified public accountants. One or more Standing Corporate Auditors is
required to be elected from among Corporate Auditors. Each Corporate Auditor
has the statutory duty to examine the financial statements and business reports
to be submitted by the Board of Directors to the general meeting of
shareholders and also to supervise the administration by Directors but is not
entitled to vote. TDK established a Board of Corporate Auditors (at least one
of which must be from outside TDK) and the term of the Corporate Auditors is
four years.

In addition to Corporate Auditors, TDK is required to appoint independent
certified public accountants. The primary duty of certified public accountants
is to examine the financial statements proposed to be submitted by the Board of
Directors to the general meetings of shareholders and the reporting of their
opinion thereon to the Corporate Auditors as well as to the Directors.

There are no family relationships between any Director or Corporate
Officer or Corporate Auditor and any other Director or Corporate Officer or
Corporate Auditor of TDK.

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##### Table of Contents



D. Employees

The following table lists the number of TDK full-time employees as of
March 31, 2003, 2002 and 2001.

|                                    |       |       |       |          |  |       |        |        |  |  |        |        | 
|----------------------------------- | ----- | ----- | ----- | -------- |  | ----- | ------ | ------ |  |  | ------ | ------ | 
|As of March 31, 2003                |       | Japan |       | Overseas |  | Total
|                                    |       |       |       |          |  |      
|Electronic materials and components |       |       | 7,341 |          |  |       | 19,781 |        |  |  | 27,122 |       
|Recording media and systems         |       |       | 1,212 |          |  |       | 1,867  |        |  |  | 3,079  |       
|Corporate                           |       |       | 1,477 |          |  |       | 27     |        |  |  | 1,504  |       
|                                    |       |       |       |          |  |       |        |        |  |  |        |       
|                                    | Total |       |       | 10,030   |  |       |        | 21,675 |  |  |        | 31,705 | 

|                                    |       |       |       |          |  |       |        |        |  |  |        |        | 
|----------------------------------- | ----- | ----- | ----- | -------- |  | ----- | ------ | ------ |  |  | ------ | ------ | 
|As of March 31, 2002                |       | Japan |       | Overseas |  | Total
|                                    |       |       |       |          |  |      
|Electronic materials and components |       |       | 8,298 |          |  |       | 18,794 |        |  |  | 27,092 |       
|Recording media and systems         |       |       | 1,362 |          |  |       | 2,197  |        |  |  | 3,559  |       
|Corporate                           |       |       | 1,568 |          |  |       | 30     |        |  |  | 1,598  |       
|                                    |       |       |       |          |  |       |        |        |  |  |        |       
|                                    | Total |       |       | 11,228   |  |       |        | 21,021 |  |  |        | 32,249 | 

|                                    |       |       |        |          |  |       |        |        |  |  |        |        | 
|----------------------------------- | ----- | ----- | ------ | -------- |  | ----- | ------ | ------ |  |  | ------ | ------ | 
|As of March 31, 2001                |       | Japan |        | Overseas |  | Total
|                                    |       |       |        |          |  |      
|Electronic materials and components |       |       | 10,324 |          |  |       | 21,948 |        |  |  | 32,272 |       
|Recording media and systems         |       |       | 1,523  |          |  |       | 2,322  |        |  |  | 3,845  |       
|Corporate                           |       |       | 1,105  |          |  |       | 29     |        |  |  | 1,134  |       
|                                    |       |       |        |          |  |       |        |        |  |  |        |       
|                                    | Total |       |        | 12,952   |  |       |        | 24,299 |  |  |        | 37,251 | 

TDK considers its employee relations to be excellent; there have been no
significant strikes or labor disputes.

All full-time employees in Japan, except management and certain other
personnel, must become union members. Approximately 82 percent of full-time
employees of TDK are members of the TDK Labor Union, which is affiliated with
ZENKIN RENGO. About 51 percent of the full-time employees of TDK and its
domestic subsidiaries are members of unions affiliated with ZENKIN RENGO.

As is customary in Japan, TDK negotiates with the TDK Labor Union for
annual wage increases, and twice a year for bonuses. TDK also renews the terms
and conditions of labor contracts, other than those relating to wage and
bonuses, every year.

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##### Table of Contents



E. Share ownership

The following table lists the number of shares owned by the Directors,
Corporate Officers and Corporate Auditors of TDK as of June 27, 2003. The
total number is 23,500 as shown below, and this number constituted 0.02% of all
outstanding shares.

|                                 |  |                                                                            |  |                  |             | 
|-------------------------------- |  | -------------------------------------------------------------------------- |  | ---------------- | ----------- | 
|Name                             |  | Position                                                                   |  | Number of shares
|                                 |  |                                                                            |  |                 
|Hajime Sawabe
Hirokazu Nakanishi |  | Representative Director, President and
CEO
Director, Senior Vice President |  |                  | 6,000
1,000 | 
|Jiro Iwasaki                     |  | Director, Senior Vice President                                            |  |                  | 2,000       | 
|Shinji Yoko                      |  | Director, Senior Vice President                                            |  |                  | 1,000       | 
|Takeshi Nomura                   |  | Director, Senior Vice President                                            |  |                  | 1,000       | 
|Mitsuaki Konno                   |  | Director, Corporate Officer                                                |  |                  | 2,000       | 
|Yasuhiro Hagihara                |  | Director (outside)                                                         |  |                  | 0           | 
|                                 |  |                                                                            |  |                  |             | 
|Kiyoshi Ito                      |  | Corporate Officer, Senior Vice President                                   |  |                  | 1,000       | 
|Takehiro Kamigama                |  | Corporate Officer, Senior Vice President                                   |  |                  | 0           | 
|Katsuhiro Fujino                 |  | Corporate Senior Officer                                                   |  |                  | 1,100       | 
|Takeshi Ohwada                   |  | Corporate Senior Officer                                                   |  |                  | 1,000       | 
|Kunihiro Fukushima               |  | Corporate Officer                                                          |  |                  | 1,000       | 
|Yukio Hirokawa                   |  | Corporate Officer                                                          |  |                  | 1,200       | 
|Masatoshi Shikanai               |  | Corporate Officer                                                          |  |                  | 300         | 
|Yukio Harada                     |  | Corporate Officer                                                          |  |                  | 500         | 
|Yoshitomo Suzuki                 |  | Corporate Officer                                                          |  |                  | 0           | 
|Michinori Katayama               |  | Corporate Officer                                                          |  |                  | 500         | 
|Kenryo Namba                     |  | Corporate Officer                                                          |  |                  | 2,000       | 
|Takaya Ishigaki                  |  | Corporate Officer                                                          |  |                  | 0           | 
|Minoru Takahashi                 |  | Corporate Officer                                                          |  |                  | 0           | 
|                                 |  |                                                                            |  |                  |             | 
|Takuma Otsuka                    |  | Full-time Corporate Auditor                                                |  |                  | 1,000       | 
|Masaaki Miyoshi                  |  | Full-time Corporate Auditor                                                |  |                  | 900         | 
|Osamu Nakamoto                   |  | Corporate Auditor (outside)                                                |  |                  | 0           | 
|Kazutaka Kubota                  |  | Corporate Auditor (outside)                                                |  |                  | 0           | 
|Kaoru Matsumoto                  |  | Corporate Auditor (outside)                                                |  |                  | 0           | 
|                                 |  |                                                                            |  |                  |             | 
|Total                            |  |                                                                            |  |                  | 23,500      | 

Stock option plans

TDK obtained approval of the Ordinary General Meeting of Shareholders held
on June 27, 2003 regarding the issue of stock acquisition rights as stock
options (the Stock Acquisition Rights) for Board members and select senior
executives, pursuant to Articles 280-20 and 280-21 of the Japanese Commercial
Code, as amended. Upon approval, the Board of Directors has adopted
resolutions to issue at no charge an aggregate of 2,547 Stock Acquisition
Rights, each representing a stock option to purchase 100 shares of common stock
of TDK, to the current 7 Directors on the Board, 13 Corporate Officers and 159
select senior executives. The Stock Acquisition Rights issued on August 7,
2003 are exercisable during the period from August 1, 2005 to July 31, 2009.
The amount to be paid by qualified persons upon the exercise of the Stock
Acquisition Rights is set initially at ¥6,954 per share of common stock, which
was calculated by a formula approved by shareholders at the annual shareholders
meeting and is subject to an adjustment in certain events, including but not
limited to a stock split, stock dividend and the issuance of new shares at a
price less than the current market price of the shares of TDK. The exercise
price of each Stock Acquisition

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Right was equal to or greater than the fair market value of TDKs common
stock on the date of grant.

TDK obtained approval of the Ordinary General Meeting of Shareholders held
on June 27, 2002 regarding the issue of stock acquisition rights as stock
options (the Stock Acquisition Rights) for Board members and select senior
executives, pursuant to Articles 280-20 and 280-21 of the Japanese Commercial
Code, as amended. Upon approval, the Board of Directors has adopted
resolutions to issue at no charge an aggregate of 2,236 Stock Acquisition
Rights, each representing a stock option to purchase 100 shares of common stock
of TDK, to the current 7 Directors on the Board, 12 Corporate Officers and 178
select senior executives. The Stock Acquisition Rights issued on August 9,
2002 are exercisable during the period from August 1, 2004 to July 31, 2008.
The amount to be paid by qualified persons upon the exercise of the Stock
Acquisition Rights is set at ¥5,909 per share of common stock, which was
calculated by a formula approved by shareholders at the annual shareholders
meeting and is subject to an adjustment in certain events, including but not
limited to a stock split, stock dividend and the issuance of new shares at a
price less than the current market price of the shares of TDK. The exercise
price of each Stock Acquisition Right was equal to or greater than the fair
market value of TDKs common stock on the date of grant. To cover these
options TDK purchased on the TSE a total of 223,600 common shares with an
aggregate purchase price of ¥1,209 million from August 12, 2002 through August
19, 2002.

The Ordinary General Meeting of Shareholders held on June 28, 2001
approved the implementation of TDKs stock option plan for Directors and
certain employees of TDK, and the purchase of TDKs own shares for transfer to
them under the plan, pursuant to Article 210-2 of the Japanese Commercial Code.
Stock options (rights to purchase common shares) were provided to the then 12
Directors on the Board and 184 associate directors and officials in amounts
ranging from 500 to 10,000 common shares each, exercisable from August 1, 2003
to April 30, 2007, at an exercise price of ¥6,114 per share, which was
calculated by a formula approved by shareholders at the annual shareholders
meeting and is subject to an adjustment in certain events, including but not
limited to a stock split, stock dividend and the issuance of new shares at a
price less than the current market price of the shares of TDK. The exercise
price of each stock option was equal to or greater than the fair market value
of TDKs common stock on the date of grant. To cover these options TDK
purchased on the TSE a total of 158,000 common shares with an aggregate
purchase price of ¥917 million from July 2, 2001 through July 23, 2001.

The Ordinary General Meeting of Shareholders held on June 29, 2000
approved the implementation of TDKs stock option plan for Directors and
certain employees of TDK, and the purchase of TDKs own shares for transfer to
them under the plan, pursuant to Article 210-2 of the Japanese Commercial Code.
Stock options (rights to purchase common shares) were provided to the then 13
Directors on the Board and 191 associate directors and officials in amounts
ranging from 500 to 10,000 common shares each, exercisable from August 1, 2002
to April 30, 2006, at an exercise price of ¥15,640 per share, which was
calculated by a formula approved by shareholders at the said annual
shareholders meeting and is subject to an adjustment in certain events,
including but not limited to a stock split, stock dividend and issue of new
shares at price less than the current market price of the shares of TDK. The
exercise price of each stock option was equal to or greater than the fair
market value of TDKs common stock on the date of grant. To cover these
options TDK purchased on the TSE a total of 170,400 common shares with an
aggregate purchase price of ¥2,665 million from July 3, 2000 through August 2,
2000.

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Employees Shareholding Association

As of March 31, 2003, the number of members of the TDK Employees
Shareholding Association totaled 1,725. The Employees Shareholding Association
accepts new memberships in March and September of every year. Members are
entitled to purchase shares of TDK, the maximum amount being ¥50,000 a month.
In addition, members have received a monthly subsidy equivalent to 5% of the
purchase price of shares. The subsidy amounted to ¥20 million ($167 thousand)
for fiscal 2003. The total amount of TDK shares having voting rights owned by
the TDK Employees Shareholding Association was as follows:

|               |  |                                             |  |                |  |                 
|-------------- |  | ------------------------------------------- |  | -------------- |  | ----------------
|Title of class |  | Identity of person or group                 |  | Amount owned   |  | Percent of class
|               |  |                                             |  |                |  |                 
|Common stock   |  | TDK Employees
     Shareholding Association |  | 472,455
shares |  | 0.35%           




Item 7. Major Shareholders and Related Party Transaction

A. Major shareholders

The table below lists the number of TDK shares held by holders of 5% or
more of TDK shares and their percentage ownership as of March 31, 2003:

|                                                     |  |                |        |            |  |  |      |  
|---------------------------------------------------- |  | -------------- | ------ | ---------- |  |  | ---- | -
|                                                     |  | Shares owned   |        |            |  | 
|Name of major shareholder                            |  | (in thousands) |        | Percentage
|                                                     |  |                |        |           
|Japan Trustee Services Bank, Ltd. (Trust account)    |  |                | 10,149 |            |  |  | 7.62 | %
|The Master Trust Bank of Japan, Ltd. (Trust
account) |  |                | 6,773  |            |  |  | 5.08 | %

Major shareholders do not have voting rights different from other
shareholders, subject to the limitation on exercise as set forth in Item 10.
B. Memorandum and Articles of Association  Common Stock  Voting rights.

At March 31, 2003, there were 6,014,085 registered ADRs outstanding and
360 registered holders, of which 6,013,585 ADRs were held by 213 registered
U.S. holders.

The Depositary of ADRs of TDK is Citi Bank N.A. of New York.

TDK is not, directly or indirectly, owned or controlled by another
corporation or by any foreign government.

B. Related party transaction

Since the beginning of TDKs last full fiscal year, TDK has not transacted
with, nor does TDK currently plan to transact with, a related party, except for
transactions among TDK group companies.

C. Interests of experts and counsel

None.

43



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Item 8. Financial Information

A. Consolidated statements and other financial information

Consolidated financial statements

Refer to Consolidated Financial Statements and Notes to Consolidated
Financial Statements (See Item 17).

Export sales

Finished goods and materials sent out of Japan are mainly bound for
consolidated subsidiaries of TDK, and are not, therefore, recorded as exports
on a consolidated basis. For this reason, the proportion of exports to total
net sales is not significant.

Legal proceedings

There are no material pending legal proceedings, other than ordinary
routine litigations incidental to the business, to which TDK or any of its
subsidiaries is a party or of which any of their property is the subject.

Dividend policy

TDK considers the return of profits to shareholders one of the important
matters of management, and will distribute profits with comprehensive reference
to the level of return on equity (ROE), dividends on equity (DOE) and trends
hereafter in the business results. At the ordinary general meeting of
shareholders held on June 27, 2003, a year-end cash dividend per share was
approved at the rate of 25.0 yen. TDK had already paid an interim dividend of
25.0 yen per share to each shareholder; accordingly the annual cash dividend
per share was 50.0 yen.

B. Significant changes

No significant change has occurred since the date of the annual financial
statements.

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Item 9. The Offer and Listing

A. Offer and listing details

The primary market for TDKs shares of common stock (Common Stock) is the
Tokyo Stock Exchange (the TSE). The shares are traded on the First Section
of that exchange and are also listed on the Osaka Securities Exchange in Japan.
In addition, TDKs shares are listed on the New York Stock Exchange in the
form of American Depositary Receipts (ADRs), on the Euronext Brussels Stock
Exchanges in the form of Bearer Depositary Receipts, on the London Stock
Exchange in the form of shares of TDK.

The following table sets forth for the periods indicated the reported high
and low sales prices of TDKs shares of common stock on the TSE (both in yen
and translated into U.S. dollars per American Depositary Share) and the
reported high and low bid prices for American Depositary Shares of which each
represents one share of common stock, as reported by the New York Stock
Exchange.

|              |  |                  |  |                      |        |                      |  |          |       |                    |  |     |        |                  |  |             |       |  |  |  |        |  |  |  |       |  |  | 
|------------- |  | ---------------- |  | -------------------- | ------ | -------------------- |  | -------- | ----- | ------------------ |  | --- | ------ | ---------------- |  | ----------- | ----- |  |  |  | ------ |  |  |  | ----- |  |  | 
|              |  |                  |  |                      |        |                      |  |          |       |                    |  |     |        | Translated into  |  |             |       |  |  |  |        | 
|              |  |                  |  |                      |        |                      |  |          |       |                    |  |     |        | U.S. dollars per |  | U.S. market
|              |  |                  |  |                      |        | Yen per share of     |  | American |       | price per American
|Calendar year |  | Common stock (1) |  | Depositary Share (2) |        | Depositary Share (3)
|              |  |                  |  |                      |        |                     
|              |  |                  |  |                      |        | High                 |  | Low      |       | High               |  | Low |        | High             |  | Low        
|              |  |                  |  |                      |        |                      |  |          |       |                    |  |     |        |                  |  |            
|1998          |  | Year             |  |                      | 11,350 |                      |  |          | 6,700 |                    |  |     | 87.90  |                  |  |             | 56.28 |  |  |  | 90.25  |  |  |  | 58.00 | 
|1999          |  | Year             |  |                      | 15,010 |                      |  |          | 8,160 |                    |  |     | 145.16 |                  |  |             | 68.11 |  |  |  | 143.00 |  |  |  | 67.00 | 
|2000          |  | Year             |  |                      | 17,200 |                      |  |          | 9,400 |                    |  |     | 159.63 |                  |  |             | 85.53 |  |  |  | 157.50 |  |  |  | 89.13 | 
|2001          |  | 1st Quarter      |  |                      | 11,510 |                      |  |          | 6,600 |                    |  |     | 98.12  |                  |  |             | 53.12 |  |  |  | 103.00 |  |  |  | 54.00 | 
|              |  | 2nd Quarter      |  |                      | 8,670  |                      |  |          | 5,740 |                    |  |     | 70.49  |                  |  |             | 45.77 |  |  |  | 69.00  |  |  |  | 47.15 | 
|              |  | 3rd Quarter      |  |                      | 6,950  |                      |  |          | 5,000 |                    |  |     | 56.92  |                  |  |             | 41.53 |  |  |  | 56.40  |  |  |  | 41.25 | 
|              |  | 4th Quarter      |  |                      | 7,000  |                      |  |          | 4,800 |                    |  |     | 56.07  |                  |  |             | 39.74 |  |  |  | 54.81  |  |  |  | 40.75 | 
|2002          |  | 1st Quarter      |  |                      | 7,810  |                      |  |          | 5,320 |                    |  |     | 60.68  |                  |  |             | 39.67 |  |  |  | 59.00  |  |  |  | 40.00 | 
|              |  | 2nd Quarter      |  |                      | 7,380  |                      |  |          | 5,340 |                    |  |     | 56.23  |                  |  |             | 43.70 |  |  |  | 57.00  |  |  |  | 44.90 | 
|              |  | 3rd Quarter      |  |                      | 5,970  |                      |  |          | 4,700 |                    |  |     | 49.56  |                  |  |             | 38.03 |  |  |  | 49.65  |  |  |  | 38.25 | 
|              |  | 4th Quarter      |  |                      | 5,500  |                      |  |          | 4,060 |                    |  |     | 44.25  |                  |  |             | 32.66 |  |  |  | 44.25  |  |  |  | 32.95 | 
|2003          |  | 1st Quarter      |  |                      | 5,310  |                      |  |          | 4,300 |                    |  |     | 43.61  |                  |  |             | 35.92 |  |  |  | 44.36  |  |  |  | 37.70 | 
|              |  | 2nd Quarter      |  |                      | 6,020  |                      |  |          | 3,810 |                    |  |     | 50.00  |                  |  |             | 31.46 |  |  |  | 49.80  |  |  |  | 32.40 | 
|              | 
|              |  | Period           |  |                      |        |                      |  |          |       |                    |  |     |        |                  |  |             |       |  |  |  |        |  |  |  |       | 
|              |  |                  |  |                      |        |                      |  |          |       |                    |  |     |        |                  |  |            
|2003          |  | January          |  |                      | 5,280  |                      |  |          | 4,750 |                    |  |     | 44.35  |                  |  |             | 39.57 |  |  |  | 44.36  |  |  |  | 39.25 | 
|              |  | February         |  |                      | 5,310  |                      |  |          | 4,830 |                    |  |     | 43.61  |                  |  |             | 39.93 |  |  |  | 43.75  |  |  |  | 40.02 | 
|              |  | March            |  |                      | 5,150  |                      |  |          | 4,300 |                    |  |     | 43.50  |                  |  |             | 35.92 |  |  |  | 43.80  |  |  |  | 37.70 | 
|              |  | April            |  |                      | 4,840  |                      |  |          | 3,810 |                    |  |     | 39.84  |                  |  |             | 31.46 |  |  |  | 40.90  |  |  |  | 32.40 | 
|              |  | May              |  |                      | 5,400  |                      |  |          | 4,090 |                    |  |     | 45.19  |                  |  |             | 34.18 |  |  |  | 45.49  |  |  |  | 34.55 | 
|              |  | June             |  |                      | 6,020  |                      |  |          | 5,280 |                    |  |     | 50.00  |                  |  |             | 44.13 |  |  |  | 49.80  |  |  |  | 44.76 | 



---

Notes:

|(1) |  | As reported by the Tokyo Stock Exchange.                                                                                      
|--- |  | ------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Translated at the spot selling rate for dollars prevailing in Tokyo on
the date when each such high or low price was reported.
|   
|(3) |  | As reported by the New York Stock Exchange.                                                                                   

B. Plan of distribution

Not applicable.

C. Markets

See Item 9.A. Offer and listing details.

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D. Selling shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the issue

Not applicable.




Item 10. Additional Information

A. Share capital

Not applicable.

B. Memorandum and articles of association

Organization

TDK is a joint stock corporation (kabushiki kaisha)incorporated in Japan
under the Commercial Code (shoho)of Japan. It is registered in the Commercial
Register (shogyo tokibo)maintained by the Tokyo Legal Affairs Bureau.

Objects and purposes

Article 2 of the Articles of Incorporation of TDK provides that its
purpose is to engage in the following lines of business:



| |  |  | Manufacture and sale of electric machinery and appliances;                                                                                                                                                                           
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Manufacture and sale of magnetic materials such as ferrite and magnet;                                                                                                                                                               
|
| |  |  | Manufacture and sale of electronic machinery and appliances such as
automatic inserting machine for electronic components, automatic mounter
for electronic components, and electronic measuring equipment and of
components thereof;
|
| |  |  | Manufacture and sale of recording media such as magnetic tape, floppy
disk and optical disk and of data writing, reading and storage equipment
therefor;                                                                             
|
| |  |  | Manufacture and sale of ceramic materials such as electricity inductive
ceramics, piezoelectric ceramics, semiconductor ceramics and electricity
insulating ceramics;                                                                
|
| |  |  | Manufacture and sale of circuit components such as coil and transformers;                                                                                                                                                            
|
| |  |  | Manufacture and sale of semiconductor;                                                                                                                                                                                               
|
| |  |  | Manufacture and sale of stabilizing power supplies (units to stabilize
electric current or voltage);                                                                                                                                 
|
| |  |  | Manufacture and sale of machinery and appliances for medical use and
medical instruments and of components thereof;                                                                                                                  
|
| |  |  | Manufacture and sale of single crystal materials and each product
applying the same;                                                                                                                                                 

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| |  |  | Manufacture and sale of precious metals, precious stones, artificial
precious stones and each product applying or utilizing the same;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Manufacture and sale of outer wall materials of buildings and structures;                                                            
|
| |  |  | Designing and contracting of construction work;                                                                                      
|
| |  |  | Development, production, sale and grant of license of software;                                                                      
|
| |  |  | Manufacture, sale and contracting of applied product, machinery and tools
and equipment of each of the foregoing; and                
|
| |  |  | Any and all businesses incidental or relating to each of the foregoing.                                                              

Common Stock

General

Set forth below is information relating to TDKs Common Stock, including
brief summaries of the relevant provisions of TDKs Articles of Incorporation
and Share Handling Regulations, as currently in effect, and of the Commercial
Code of Japan and related legislation. The discussion of the Commercial Code
below reflects certain amendments to the Commercial Code, which became
effective on April 1, 2003.

In order to assert shareholders rights against TDK, a shareholder must
have its name and address registered on TDKs register of shareholders, in
accordance with TDKs Share Handling Regulations. The registered beneficial
holder of deposited shares underlying the ADSs is the Depositary for the ADSs.
Accordingly, holders of ADSs will not be able directly to assert shareholders
rights to TDK.

Authorized capital

Article 5 of the Articles of Incorporation of TDK provides that the total
number of shares authorized to be issued by TDK is four hundred and eighty
million (480,000,000) shares.

As of March 31, 2003, 133,189,659 shares of Common Stock without having
any par value were issued and outstanding.

The concept of par value of shares of capital stock is eliminated under
the Commercial Code of Japan. Thus, all shares of capital stock of TDK have no
par value.

Dividends

The Articles of Incorporation of TDK provide that the accounts shall be
closed on March 31 of each year and that dividends, if any, shall be paid to
shareholders, beneficial shareholders and pledgees of record as of the end of
such day. 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 is submitted to the Board of Corporate
Auditors of TDK and to independent certified public accountants and then
submitted 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. In addition to year-end dividends,
the Board of Directors may by its resolution declare a cash distribution
pursuant to Article 293-5 of the Commercial Code (an interim dividend) to
shareholders, beneficial shareholders and pledgees of record as of the end of
each September 30, without shareholders approval, but subject to the
limitations described below.

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The Commercial Code provides that a company may not make any distribution
of profit by way of dividends or interim dividends for any fiscal period unless
it has set aside in its legal reserve an amount equal to at least one-tenth of
the amount paid by way of appropriation of retained earnings for such fiscal
period or of the amount of such interim dividends until the aggregate amount of
additional paid-in capital and legal reserve equals to one-quarter of its
stated capital. Under the Commercial Code, TDK is permitted to distribute
profits by way of year-end or interim 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;                                                                                                                                                               
|
| | (v)   |  | the excess, if any, of unamortized expenses incurred in preparation
for commencement of business and in connection with research and
development over the aggregate of amounts referred to in (ii), (iii) and
(iv) above; and              
|
| | (vi)  |  | if certain assets of TDK are stated at market value on such balance
sheet pursuant to the provisions of the Commercial Code, the excess, if
any, of the aggregate amount of their market value over the aggregate
acquisition cost thereof.

In the case of interim dividends, the net assets are calculated by
reference to the non-consolidated balance sheet as at the last closing of TDKs
accounts, but adjusted to reflect; (x) any subsequent payment by way of
appropriation of retained earnings and transfer to legal reserve in respect
thereof; (y) any subsequent transfer of retained earnings to stated capital;
and (z) if TDK has been authorized, pursuant to a resolution of an ordinary
general meeting of shareholders, to purchase shares of its Common Stock (see
Acquisition by TDK of its Common Stock), the total amount of the purchase price
of such shares so authorized by such resolution that may be paid by TDK,
provided that interim dividends may not be paid where there is a risk that at
the end of the fiscal year there might not be any excess of net assets over the
aggregate of the amounts referred to in (i) through (vi) above.

In Japan, the ex-dividend date and the record date for dividends precede
the date of determination of the amount of the dividends to be paid.

Under its Articles of Incorporation, TDK is not obligated to pay any
dividends which are left unclaimed for a period of three years after the date
on which they first became payable.

Stock splits

TDK may at any time split shares in issue into a greater number of shares
by resolution of the Board of Directors, and may amend its Articles of
Incorporation to increase the number of the authorized shares to be issued in
proportion to the relevant stock split in principle pursuant to a resolution of
the Board of Directors rather than a special resolution of a general meeting of
shareholders which is otherwise required for amending the Articles of
Incorporation.

In the event of a stock split, generally, shareholders will not be
required to exchange share certificates for new share certificates, but
certificates representing the additional shares resulting from the stock split
will be issued to shareholders. When a stock split is to be made, TDK must
give public notice of the stock split, specifying the record date therefor, at
least two weeks prior to such record date. In addition, promptly after the
stock split takes
48Table of Contents

effect, TDK must give notice to each shareholder specifying the number of shares
to which such shareholder is entitled by virtue of the stock split.

General meeting of shareholders

The ordinary general meeting of shareholders of TDK for each fiscal year
is normally held in June in each year in Ichikawa-shi, Chiba, Japan. In
addition, TDK may hold an extraordinary general meeting of shareholders
whenever necessary by giving notice of convocation thereof at least two weeks
prior to the date set for the meeting.

Notice of convocation of a shareholders meeting setting forth the place,
time and purpose thereof, must be mailed to each shareholder having voting
rights (or, in the case of a non-resident shareholder, to his or her standing
proxy or mailing address in Japan) at least two weeks prior to the date set for
the meeting. Under the 2002 Amendments, such notice may be given to
shareholders by electronic means, subject to the consent by the relevant
shareholders. The record date for an ordinary general meeting of shareholders
is March 31 of each year.

Any shareholder or group of shareholders holding at least 3 percent of the
total number of voting rights for a period of six months or more may require
the convocation of a general meeting of shareholders for a particular purpose.
Unless such shareholders meeting is convened promptly or a convocation notice
of a meeting which is to be held not later than six weeks from the day of such
demand is dispatched, the requiring shareholder may, upon obtaining a court
approval, convene such shareholders meeting.

Any shareholder or group of shareholders holding at least 300 voting
rights or 1 percent of the total number of voting rights for a period of six
months or more may propose a matter to be considered at a general meeting of
shareholders by submitting a written request to a Representative Director at
least six weeks prior to the date set for such meeting.

Voting rights

So long as TDK maintains the unit share system (see New Unit share
system) a holder of shares constituting one or more whole units is entitled to
one voting right per unit of shares subject to the limitations on voting rights
set forth in the following paragraph. Except as otherwise provided by law or
by the Articles of Incorporation, a resolution can be adopted at a general
meeting of shareholders by a majority of the number of voting rights of all the
shareholders represented at the meeting. The Commercial Code and TDKs
Articles of Incorporation provide, however, that the quorum for the election of
Directors and Corporate Auditors shall not be less than one-third of the total
number of voting rights of all the shareholders. TDKs shareholders are not
entitled to cumulative voting in the election of Directors and Corporate
Auditors. A corporate shareholder who holds more than one-quarter of the total
voting rights that are directly or indirectly owned by TDK may not exercise its
voting rights with respect to shares of Common Stock of TDK that it owns.
Shareholders may exercise their voting rights through proxies, provided that
the proxies are also shareholders holding voting rights. TDKs shareholders
also may cast their votes in writing. Shareholders may also exercise their
voting rights by electronic means when the Board of Directors decides to permit
such method of exercising voting rights.

The Commercial Code provides that in order to amend the Articles of
Incorporation and in certain other instances, including a reduction of stated
capital, the removal of a Director or Corporate Auditor, dissolution, merger or
consolidation with a certain exception under which shareholders resolution is
not required, the transfer of the whole or an important part of the business,
the taking over of the whole of the business of any other corporation with a
certain exception under which shareholders resolution is not required, share
exchange or share transfer for the purpose of establishing 100 %
parent-subsidiary relationships with a certain exception under which
shareholders resolution is not required, splitting of the corporation into two
or more corporations with a certain exception under which shareholders
49Table of Contents

resolution is not required, or any offering of new shares at a specially
favorable price (or any offering of share acquisition rights to subscribe for
or acquire shares of capital stock (stock acquisition rights) or bonds with
share acquisition rights at a specially favorable exercise conditions) to any
persons other than shareholders, the quorum shall be one-third of the total
voting rights of all the shareholders and the approval by at least two-thirds
of the voting rights of all the shareholders represented at the meeting is
required (the special shareholders resolutions).

Issue of additional shares and pre-emptive rights

Holders of TDKs shares of Common Stock have no pre-emptive rights under
its Articles of Incorporation. 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
price mentioned under Voting rightsabove. The Board of Directors may,
however, determine that shareholders shall be given subscription rights
regarding a particular issue of new shares, in which case such rights must be
given on uniform terms to all shareholders as at a record date of which not
less than two weeks prior public notice must be given. Each of the
shareholders to whom such rights are given must also be given notice of the
expiry thereof at least two weeks prior to the date on which such rights
expire.

Rights to subscribe for new shares may be made generally transferable by
the Board of Directors. Whether TDK will make subscription rights generally
transferable in future rights offerings will depend upon the circumstances at
the time of such offerings. If subscription rights are not made generally
transferable, transfers by a non-resident of Japan or a corporation organized
under the laws of a foreign country or whose principal office is located in a
foreign country will be enforceable against TDK and third parties only if TDKs
prior written consent to each such transfer is obtained. When such consent is
necessary in the future for the transfer of subscription rights, TDK intends to
consent, on request, to all such transfers by such a non-resident or foreign
corporation.

Subject to certain requirements, TDK may issue share acquisition rights by
a resolution of the Board of Directors. Holders of share acquisition rights
may exercise their rights to acquire a certain number of shares within the
exercise period as prescribed in the terms of their share acquisition rights.
Upon exercise of share acquisition rights, TDK will be obliged to issue the
relevant number of new shares or alternatively to transfer the necessary number
of existing shares held by it (treasury stock).

Liquidation rights

In the event of a liquidation of TDK, the assets remaining after payment
of all debts and liquidation expenses and taxes will be distributed among
shareholders in proportion to the respective numbers of shares of common stock
held.

Record date

March 31 is the record date for TDKs year-end dividends. So long as TDK
maintains in its Articles of Incorporation a provision for the unit of shares,
the shareholders and beneficial shareholders who are registered as the holders
of one unit of shares or more in TDKs registers of shareholders and/or
beneficial shareholders at the end of each March 31 are also entitled to
exercise shareholders rights 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, TDK may set a record date for
determining the shareholders and/or beneficial shareholders entitled to other
rights and for other purposes by giving at least two weeks prior public
notice.

The price of shares generally goes ex-dividends or ex-rights on Japanese
stock exchanges on the third business day prior to a record date (or if the
record date is not a
50Table of Contents

business day, the fourth business day prior thereto), for the purpose of
dividends or rights offerings.

Acquisition by TDK of its Common Stock

TDK may acquire its own shares through a stock exchange on which such
shares are listed (pursuant to an ordinary resolution of an ordinary general
meeting of shareholders), by way of tender offer (pursuant to an ordinary
resolution of an ordinary general meeting of shareholders), or by purchase from
a specific party other than a subsidiary of TDK (pursuant to a special
resolution of an ordinary general meeting of shareholders) or from a subsidiary
of TDK (pursuant to a resolution of the Board of Directors). When such
acquisition is made by TDK from a specific party other than a subsidiary of
TDK, any other shareholder may make a demand to a Representative Director, more
than five calendar days prior to the relevant shareholders meeting, that TDK
also purchase the shares held by such shareholder. Any such acquisition of
shares must satisfy certain requirements, including that the total amount of
the purchase price may not exceed the amount of the retained earnings available
for dividend payments after taking into account any reduction, if any, of the
stated capital, additional paid-in capital or legal reserve (if such reduction
of the stated capital, additional paid-in capital or legal reserve has been
authorized pursuant to a resolution of the relevant ordinary general meeting of
shareholders), minus the amount to be paid by way of appropriation of retained
earnings for the relevant fiscal year and the amount to be transferred to
stated capital. However, if it is anticipated that the net assets on the
balance sheet as at the end of the immediately following fiscal year will be
less than the aggregate amount of the stated capital, additional paid-in
capital and other items as described in (i) through (vi) of Dividendsabove,
TDK may not acquire such shares.

Shares acquired by TDK may be held by it for any period or may be
cancelled by resolution of the Board of Directors. TDK may also transfer to
any person the shares held by it, subject to a resolution of the Board of
Directors, and subject also to other requirements similar to those applicable
to the issuance of new shares, as described in Issue of additional shares and
pre-emptive rightsabove. TDK may also utilize its treasury stock for the
purpose of transfer to any person upon exercise of share 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.

New Unit share system

A new unit share system called tangen-kabushiki has been introduced.

Pursuant to the Articles of Incorporation of TDK, 100 shares of TDK
constitutes one unit. Although the number of shares constituting a new unit is
included in the Articles of Incorporation, any amendment to the Articles of
Incorporation reducing (but not increasing) the number of shares constituting a
unit or eliminating the provisions for the unit of shares may be made by the
resolution of the Board of Directors rather than by the special shareholders
resolution, which is otherwise required for amending the Articles of
Incorporation. The number of shares constituting one new unit, however, cannot
exceed 1,000 or one two-hundredth (1/200) of all issued shares.

Voting rights under the new unit share system

Under the new unit share system, shareholders shall have one voting right
for each unit of shares that they hold. Any number of shares less than a full
unit will carry no voting rights.

-Share certificates for less than a unit

Unless TDKs Board of Directors adopts a resolution to eliminate the
provision for the unit shares from the Articles of Incorporation or the
shareholders amend the Articles of

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Incorporation by a
special shareholders resolution to eliminate the provision not to issue share
certificates for less than a unit of shares, a share certificate for any number
of shares less than a unit will in general not be issued. As the transfer of
shares normally requires the delivery of the share certificates therefor, any
fraction of a unit for which no share certificates are issued is not
transferable.

 Repurchase by TDK of shares constituting less than a unit

A holder of shares constituting less than one unit may require TDK to
purchase such shares at their market value in accordance with the provisions of
the Share Handling Regulations of TDK.

 Effect of the unit share system on holders of ADRs

A holder who owns ADRs evidencing less than 100 ADSs will indirectly own
less than a whole unit of shares of Common Stock. Although, as discussed
above, under the unit share system holders of less than a unit have the right
to require TDK 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 Common Stock representing less than a unit and,
therefore, are unable, as a practical matter, to exercise the rights to require
TDK to purchase such underlying shares unless TDKs Articles of Incorporation
are amended to eliminate the provision not to issue share certificates for the
numbers of shares less than a unit. As a result, access to the Japanese
markets by holders of ADRs through the withdrawal mechanism will not be
available for dispositions of shares of Common Stock in lots less than a unit.
The unit share system does not affect the transferability of ADSs, which may be
transferred in lots of any size.

Reporting of substantial shareholdings

The Securities and Exchange Law of Japan and regulations thereunder
require any person who has become, beneficially and solely or jointly, a holder
of more than 5 percent of the total issued shares of capital stock of a company
listed on any Japanese stock exchange or whose shares are traded on the
over-the-counter market in Japan to file with the Director-General of a
competent Local Finance Bureau of the Ministry of Finance within five business
days a report concerning such shareholdings.

A similar report must also be filed in respect of any subsequent change of
1 percent or more in any such holding or any change in material matters set out
in reports previously filed, with certain exceptions. For this purpose, shares
issuable to such person upon conversion of convertible securities or exercise
of share subscription warrants or share acquisition rights are taken into
account in determining both the number of shares held by such holder and the
issuers total issued share capital. Copies of such report must also be
furnished to the issuer of such shares and all Japanese stock exchanges on
which the shares are listed or (in the case of shares traded over-the-counter)
the Japan Securities Dealers Association.

Except for the general limitation under Japanese anti-trust and
anti-monopoly regulations against holding of shares of capital stock of a
Japanese corporation which leads or may lead to a restraint of trade or
monopoly, and except for general limitations under the Commercial Code or TDKs
Articles of Incorporation on the rights of shareholders applicable regardless
of residence or nationality, there is no limitation under Japanese laws and
regulations applicable to TDK or under its Articles of Incorporation on the
rights of non-resident or foreign shareholders to hold the shares of Common
Stock of TDK or exercise voting rights thereon.

There is no provision in TDKs Articles of Incorporation that would have
an effect of delaying, deferring or preventing a change in control of TDK and
that would operate only with respect to merger, consolidation, acquisition or
corporate restructuring involving TDK.

52



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C. Material contracts

None.

D. Exchange controls

Japanese Foreign Exchange Regulations

The Foreign Exchange and Foreign Trade Law of Japan, frequently referred
to as the Foreign Exchange Law, and the cabinet orders and ministerial
ordinances thereunder govern the issuance of shares by companies and the
acquisition and holding of shares by exchange non-residents and foreign
investors under the Foreign Exchange Law.

Exchange non-residents are:



| |  | individuals who do not reside in Japan; and                   
| | - | --------------------------------------------------------------
|
| |  | corporations whose principal offices are not located in Japan.

Generally, branches and other offices located within Japan of non-resident
corporations are regarded as exchange residents of Japan and branches and other
offices of Japanese corporations located outside Japan are regarded as exchange
non-residents of Japan.

Foreign investors are:



| |  | individuals who do not reside in Japan;                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan; and                                                                                                                                                                                                                              
|
| |  | corporations in which more than 50% of the shares are held by individuals who do not reside in Japan and/or corporations
which are organized under the laws of foreign countries or whose principal offices are located outside Japan or a majority of
the officers (or officers having the power of representation) are persons who do not reside in Japan.

Due to the amendments to the Foreign Exchange Law effective on April 1,
1998, all aspects of foreign exchange and foreign trade transactions that were
previously subject to licensing or other prior notifications or approvals, with
minor exceptions, were changed to require only post-transaction reporting.
However, the Minister of Finance of Japan will have the power to impose
licensing requirements for transactions in limited circumstances.

Potential Consequences Resulting from an Acquisition of Listed Shares

In the event that a foreign investor acquires shares of a Japanese company
listed on a Japanese stock exchange or traded on an over-the-counter market in
Japan (listed shares) and if the foreign investors direct and indirect total
holdings are 10% or more of the issued shares of the company after the
acquisition, the foreign investor must file a report of the acquisition with
the Minister of Finance and any other competent Minister within 15 days from
and including the date of such acquisition. However, in certain limited
circumstances (including the case where the acquisition of the shares reaches
10%), a prior notification of such an acquisition must be filed with the
Minister of Finance and any other competent Minister, who may then modify or
prohibit the proposed acquisition. The acquisition of shares by exchange
non-residents as a result of stock splits is not subject to any of the
foregoing requirements.

Potential Consequences Resulting from Dividends and Proceeds of Sales

Under the current Foreign Exchange Law, dividends paid on, and the
proceeds of sales in Japan of, shares held by exchange non-residents may, in
general, be converted into foreign currency and repatriated abroad.

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Potential Consequences Resulting
from the Sale of Securities to Exchange Non-Resident

A Japanese resident is required to file a report with the Minister of
Finance concerning the transfer of securities for value exceeding ¥100 million
to an exchange non-resident within 20 days of the date of the transfer. If an
exchange resident issues or offers its securities for value of ¥1 billion or
more outside Japan, the exchange resident must file a report of the issuance or
offering of securities with the Minister of Finance within 20 days of the date
of the closing.

American Depositary Shares

The deposit of shares of Common Stock by a non-resident of Japan, the
issuance of ADRs in exchange therefor and the withdrawal of the underlying
shares of Common Stock upon surrender of ADRs are not subject to any
formalities or restrictions referred to under Potential Consequences Resulting
from an Acquisition of Listed Shares above, except where, as a result of such
deposit or withdrawal, the aggregate number of shares held by the depositary
(or its nominee) or the holder surrendering ADRs, as the case may be, would be
10% or more of the total outstanding shares of Common Stock, in which event the
reporting to the Minister of Finance of Japan may be required as outlined in
the second sentence under the same heading.

Reporting of Substantial Shareholdings

The Securities and Exchange Law of Japan, as amended, requires any person
who has become a beneficial holder (including certain sole or joint holders) of
more than five percent of the total outstanding voting shares of a company
listed on any Japanese stock exchange or traded on the over-the-counter markets
in Japan, to file with the Minister of Finance of Japan, within five business
days, a report concerning such share holdings, with certain exceptions in case
the issuer thereof is a foreign company. A similar report must also be made
(with certain exceptions) if the ratio of such holding subsequently changes by
one percent or more. Copies of any such report must also be furnished to the
issuer of such shares and to all Japanese stock exchanges on which the shares
are listed or the Japan Securities Dealers Association in the case of
over-the-counter shares. For this purpose, shares issuable upon conversion of
convertible securities or exercise of warrants are taken into account in
determining both the number of shares held by such holder and the issuers
total number of outstanding shares.

E. Taxation

Dividends, Stock Splits and Repurchase

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 are not subject to Japanese income tax. However, a transfer of
retained earnings or legal reserve (but, in general, not additional paid-in
capital) to stated capital (whether made in connection with a stock split or
otherwise) is treated as a dividend payment to shareholders for Japanese tax
purposes and is, in general, subject to Japanese income tax.

In the absence of any applicable tax treaty, convention or agreement
reducing the maximum rate of withholding tax, the rate of Japanese withholding
tax applicable to dividends paid by Japanese corporations to a non-resident or
non-Japanese corporation, is 20 percent. At the date of this document Japan
has reduced this, generally to 15 percent for portfolio investors, in an
agreement with the United States of America.

Acquisition or Disposal of Shares or ADRs

Gains derived by a non-resident of Japan or a non-Japanese corporation
from the sale outside Japan of Shares or ADRs, or from the sale of Shares or
ADRs within Japan by a

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non-resident of Japan or a non-Japanese corporation not having a permanent
establishment in Japan are in general not subject to Japanese income tax.

Japanese inheritance and gift taxes at progressive rates may be payable by
an individual who has acquired Shares or ADRs as a legatee, heir or donee.

F. Dividends and paying agents

Not applicable.

G. Statements by experts

Not applicable.

H. Documents on display

According to the Securities Exchange Act of 1934, as amended, TDK is
subject to the requirements of informational disclosure. TDK files various
reports and other information, including Form 20-F and Annual Reports, to the
Securities Exchange Commission and the New York Stock Exchange. These reports
may be inspected at the following sites.



| |  | Securities Exchange Commission:
450 Fifth Street, N.W., Washington D.C. 20549
| |  | -----------------------------------------------------------------------------
|
| |  | New York Stock Exchange:
20 Broad Street, New York, New York 10005           

Form 20-F is also available at the Electronic Data Gathering, Analysis,
Retrieval system (EDGAR) website maintained by the Securities Exchange Commission.



| |  | Securities Exchange Commission Home Page:
http://www.sec.gov
| |  | ------------------------------------------------------------

I. Subsidiary information

Not applicable.




Item 11. Quantitative and Qualitative Disclosures about Market Risk

Market risk exposure

TDK is subject to market risk associated with changes in stock prices,
interest rates and foreign currency exchange rates. Foreign exchange risk is
considered as the primary market risk exposure. TDK has a policy for the
procedures and controls to manage market risk sensitive instruments. In order
to hedge interest rate risk and foreign currency exchange rate risk, TDK uses
derivative financial instruments. TDK does not hold or issue derivative
financial instruments for trading purposes.

Foreign exchange and interest rate risk

Forward exchange contracts and currency swap contracts have been entered
into to hedge adverse effects of foreign currency exchange rate fluctuations
mainly on foreign-currency-denominated trade receivables and
foreign-currency-denominated forecasted transactions.

At March 31, 2003 and 2002, TDK and certain of its subsidiaries had
forward exchange contracts to sell and buy foreign currencies (principally U.S.
dollars, Euro and

55



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Malaysian ringgit) for a contract amount of ¥19,016 million ($158,467
thousand) and ¥7,577 million, respectively.

TDK and one of its subsidiaries have currency swaps and interest rate and
currency swaps with certain financial institutions to limit their exposure to
fluctuations in foreign exchange rates and interest rates involved mainly in
loans made by TDK to its subsidiaries in a total amount of ¥13,794 million
($114,950 thousand) and ¥13,269 million at March 31, 2003 and 2002,
respectively. These swaps require TDK and the subsidiary to pay principally
euros and U.S. dollars and to receive Japanese yen at a specified rate on
specific dates. The remaining terms of these swaps range from two months to
2.5 years as of March 31, 2003.

TDKs exposure to market risk for changes in interest rates relates
primarily to its debt securities. TDK has debt securities with fixed rates.
TDK, to the extent possible, plans to limit debt securities to short-term debt
securities. TDK believes that the fair values of interest rate sensitive
instruments as of March 31, 2003 and 2002, and potential, near-term losses
affecting future earnings, fair values, and/or cash flows from reasonable
near-term changes in interest rates are immaterial.

Stock price risk

TDKs exposure to market risk involving changes in stock prices relates to
its equity securities categorized as available-for-sale securities. TDK holds
these securities in order to maintain business relationships with investee
companies for TDKs activities and has a policy and control procedures for
these stock holdings. The aggregate cost and fair value of these equity
securities were ¥3,384 million ($28,200 thousand) and ¥3,566 million ($29,716
thousand) as of March 31, 2003, and ¥4,389 million and ¥4,985 million as of
March 31, 2002, respectively. As of March 31, 2003, the industries in which
the issuers operate were mainly communications and electronic equipment, and
the cost and fair value of the equity securities were ¥3,124 million ($26,032
thousand) and ¥3,184 million ($26,530 thousand). And as of March 31, 2002, the
industry in which the issuers operate was mainly communications equipment, and
the cost and fair value of the equity securities were ¥3,661 million and ¥3,917
million, respectively.




Item 12. Description of Securities Other than Equity Securities

Not applicable.

56



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PART 2




Item 13. Defaults, Dividend Arrearages and Delinquencies

None.




Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.




Item 15. Controls and Procedures

(a)  Evaluations of disclosure controls and procedures

TDKs Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of its disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2003
(the Evaluation Date), the end of the period covered by this Annual Report,
have concluded that, as of the Evaluation Date, TDKs disclosure controls and
procedures were adequate and effective and designed to ensure that material
information relating to TDK and its consolidated subsidiaries is made known to
the Chief Executive Officer and the Chief Financial Officer by others within
TDK and its consolidated subsidiaries.

(b)  Changes in internal controls

There were no significant changes in TDKs internal controls subsequent to
the Evaluation Date.




Item 16A. Audit Committee Financial Expert

Not applicable to this annual report, which covers a fiscal year ending
prior to July 15, 2003.




Item 16B. Code of Ethics

Not applicable to this annual report, which covers a fiscal year ending
prior to July 15, 2003.

57



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PART 3




Item 17. Financial Statements

Index of Consolidated Financial Statements of TDK Corporation and subsidiaries:

|                                                                                                  |  |      |    | 
|------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                  |  | Page
|                                                                                                  |  |     
|Independent Auditors Report                                                                      |  |      | 59 | 
|Consolidated Balance Sheet as of March 31, 2003 and 2002                                          |  |      | 60 | 
|Consolidated Statements of Operations
for the years ended March 31, 2003, 2002 and 2001           |  |      | 62 | 
|Consolidated Statements of Stockholders Equity
for the years ended March 31, 2003, 2002 and 2001 |  |      | 63 | 
|Consolidated Statements of Cash Flows
for the years ended March 31, 2003, 2002 and 2001           |  |      | 64 | 
|Notes to Consolidated Financial Statements                                                        |  |      | 65 | 
|Schedule for the years ended March 31, 2003, 2002 and 2001:                                       |  |      |    | 
|Schedule II  Valuation and Qualifying Accounts                                                   |  |      | 89 | 

Schedules other than those listed above have been omitted as they are not
applicable or the information is presented in the consolidated financial
statements and related notes.

Financial statements of 50 percent or less owned persons accounted for by
the equity method have been omitted as, in the aggregate, they do not meet the
tests of a significant subsidiary at a 20 percent level as of or for the years
ended March 31, 2003, 2002 and 2001.

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Independent Auditors Report

The Board of Directors and Stockholders

TDK Corporation:


We have audited the consolidated financial statements of TDK Corporation and
subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The segment information required to be disclosed in financial statements under
accounting principles generally accepted in the United States of America is not
presented in the accompanying consolidated financial statements. Foreign
issuers are presently exempted from such disclosure requirement in Securities
Exchange Act filings with the Securities and Exchange Commission of the United
States of America.

In our opinion, except for the omission of the segment information referred to
in the preceding paragraph, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of TDK
Corporation and subsidiaries as of March 31, 2003 and 2002, and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 31, 2003, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

The consolidated financial statements as of and for the year ended March 31,
2003, have been translated into United States dollars solely for the
convenience of the reader. We have recomputed the translation and, in our
opinion, the consolidated financial statements expressed in yen have been
translated into United States dollars on the basis set forth in note 2 to the
consolidated financial statements.

/s/ KPMG



Tokyo, Japan
May 7, 2003

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Consolidated balance sheets
As of March 31, 2003 and 2002

|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |           |           | 
|---------------------------------------- | -------------------------------------------------- | ---------------------------------- | --------------------- | -------- | -------------- | ------- | ------------ | ------- | ------- | ------- | --------- | --------- | --------- | --------- | 
|                                         |                                                    |                                    |                       |          |                |         | U.S. Dollars
|                                         |                                                    |                                    |                       |          |                |         | (Thousands) 
|                                         |                                                    |                                    |                       |          | Yen (Millions) |         | (Note 2)    
|                                         |                                                    |                                    |                       |          |                |         |              |         |        
|                                         |                                                    |                                    |                       |          | 2003           |         | 2002         |         | 2003   
|                                         |                                                    |                                    |                       |          |                |         |              |         |        
|ASSETS                                   |                                                    |                                    |                       |          |                |         |              |         |         |         |           |          
|Current assets:                          |                                                    |                                    |                       |          |                |         |              |         |         |         |           |          
|                                         | Cash and cash equivalents                          |                                    |                       | ¥170,551 |                |         |              | 125,761 |         |         | $         | 1,421,258 |          
|                                         | Trade receivables:                                 |                                    |                       |          |                |         |              |         |         |         |           |           |          
|                                         |                                                    | Notes                              |                       |          | 7,750          |         |              |         | 8,219   |         |           |           | 64,584    |          
|                                         |                                                    | Accounts                           |                       |          | 135,123        |         |              |         | 138,378 |         |           |           | 1,126,025 |          
|                                         |                                                    | Allowance for doubtful receivables |                       |          | (2,850         | )       |              |         | (3,770  | )       |           |           | (23,750   | )        
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          
|                                         |                                                    |                                    | Net trade receivables |          |                | 140,023 |              |         |         | 142,827 |           |           |           | 1,166,859 | 
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          
|                                         | Inventories (Note 5)                               |                                    |                       | 73,917   |                |         |              | 91,149  |         |         |           | 615,975   |          
|                                         | Income tax receivables (Note 7)                    |                                    |                       | 2,765    |                |         |              | 8,289   |         |         |           | 23,042    |          
|                                         | Prepaid expenses and other current assets (Note 7) |                                    |                       | 33,706   |                |         |              | 31,180  |         |         |           | 280,883   |          
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          
|                                         | Total current assets                               |                                    |                       | 420,962  |                |         |              | 399,206 |         |         |           | 3,508,017 |          
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          
|Investments and advances(Notes 4 and 12) |                                                    |                                    | 22,578                |          |                |         | 24,265       |         |         |         | 188,150   |          
|Property, plant and equipment, at cost:  |                                                    |                                    |                       |          |                |         |              |         |         |         |           |          
|                                         | Land                                               |                                    |                       | 21,284   |                |         |              | 23,739  |         |         |           | 177,367   |          
|                                         | Buildings                                          |                                    |                       | 178,959  |                |         |              | 183,450 |         |         |           | 1,491,325 |          
|                                         | Machinery and equipment                            |                                    |                       | 489,131  |                |         |              | 507,589 |         |         |           | 4,076,091 |          
|                                         | Construction in progress                           |                                    |                       | 9,362    |                |         |              | 13,301  |         |         |           | 78,017    |          
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          
|                                         |                                                    |                                    | 698,736               |          |                |         | 728,079      |         |         |         | 5,822,800 |          
|                                         | Less accumulated depreciation                      |                                    |                       | 472,829  |                |         |              | 462,489 |         |         |           | 3,940,242 |          
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          
|                                         |                                                    | Net property, plant and equipment  |                       |          | 225,907        |         |              |         | 265,590 |         |           |           | 1,882,558 |          
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          
|Goodwill(Note 17)                        |                                                    |                                    | 14,131                |          |                |         | 11,500       |         |         |         | 117,758   |          
|Intangible assets(Note 17)               |                                                    |                                    | 16,418                |          |                |         | 7,265        |         |         |         | 136,817   |          
|Deferred income taxes(Note 7)            |                                                    |                                    | 43,948                |          |                |         | 37,021       |         |         |         | 366,233   |          
|Other assets                             |                                                    |                                    | 3,393                 |          |                |         | 5,063        |         |         |         | 28,275    |          
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          
|                                         |                                                    |                                    | ¥747,337              |          |                |         | 749,910      |         |         | $       | 6,227,808 |          
|                                         |                                                    |                                    |                       |          |                |         |              |         |         |         |           |           |          

See accompanying notes to consolidated financial statements.

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|                                                       |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |         | 
|------------------------------------------------------ | ----------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | -------- | -------------- | ------- | ------------ | ------- | ------- | ------- | - | --------- | --------- | ------- | 
|                                                       |                                                                                     |                                                                           |          |                |         | U.S. Dollars
|                                                       |                                                                                     |                                                                           |          |                |         | (Thousands) 
|                                                       |                                                                                     |                                                                           |          | Yen (Millions) |         | (Note 2)    
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |        
|                                                       |                                                                                     |                                                                           |          | 2003           |         | 2002         |         | 2003   
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                   |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |          
|Current liabilities:                                   |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |          
|                                                       | Short-term debt (Note 6)                                                            |                                                                           |          | ¥    1,431     |         |              |         | 1,655   |         |   | $         | 11,925    |        
|                                                       | Current installments of long-term debt (Note 6)                                     |                                                                           |          | 488            |         |              |         | 657     |         |   |           | 4,067     |        
|                                                       | Trade payables:                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |        
|                                                       |                                                                                     | Notes                                                                     |          |                | 824     |              |         |         | 849     |   |           |           | 6,867   | 
|                                                       |                                                                                     | Accounts                                                                  |          |                | 56,136  |              |         |         | 51,760  |   |           |           | 467,800 | 
|                                                       | Accrued salaries and wages                                                          |                                                                           |          | 11,483         |         |              |         | 11,247  |         |   |           | 95,692    |        
|                                                       | Accrued expenses (Note 16)                                                          |                                                                           |          | 28,088         |         |              |         | 35,665  |         |   |           | 234,066   |        
|                                                       | Income taxes payables (Note 7)                                                      |                                                                           |          | 1,057          |         |              |         | 2,546   |         |   |           | 8,808     |        
|                                                       | Other current liabilities (Note 7)                                                  |                                                                           |          | 5,507          |         |              |         | 5,962   |         |   |           | 45,892    |        
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |        
|                                                       |                                                                                     | Total current liabilities                                                 |          |                | 105,014 |              |         |         | 110,341 |   |           |           | 875,117 | 
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |        
|Long-term debt, excluding current installments(Note 6) |                                                                                     |                                                                           | 94       |                |         |              | 459     |         |         |   | 783       |          
|Retirement and severance benefits(Note 8)              |                                                                                     |                                                                           | 84,971   |                |         |              | 49,992  |         |         |   | 708,092   |          
|Deferred income taxes(Note 7)                          |                                                                                     |                                                                           | 13       |                |         |              | 598     |         |         |   | 108       |          
|Commitments and contingent liabilities(Note 13)        |                                                                                     |                                                                           |         |                |         |              |        |         |         |   |          |          
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |        
|                                                       | Total liabilities                                                                   |                                                                           |          | 190,092        |         |              |         | 161,390 |         |   |           | 1,584,100 |        
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |        
|Minority interests                                     |                                                                                     |                                                                           | 3,360    |                |         |              | 4,593   |         |         |   | 28,000    |          
|Stockholders equity:                                  |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |          
|                                                       | Common stock                                                                        |                                                                           |          |                |         |              |         |         |         |   |           |           |        
|                                                       |                                                                                     | Authorized 480,000,000 shares;
Issued 133,189,659 shares in 2003 and 2002 |          |                | 32,641  |              |         |         | 32,641  |   |           |           | 272,008 | 
|                                                       | Additional paid-in capital                                                          |                                                                           |          | 63,051         |         |              |         | 63,051  |         |   |           | 525,425   |        
|                                                       | Legal reserve (Note 9)                                                              |                                                                           |          | 15,953         |         |              |         | 15,683  |         |   |           | 132,942   |        
|                                                       | Retained earnings (Note 9)                                                          |                                                                           |          | 525,919        |         |              |         | 520,143 |         |   |           | 4,382,658 |        
|                                                       | Accumulated other comprehensive income (loss) (Notes 7, 8 and 11)                   |                                                                           |          | (78,824        | )       |              |         | (43,999 | )       |   |           | (656,867  | )      
|                                                       | Treasury stock at cost; 564,475 shares in 2003
and 330,083 shares in 2002 (Note 10) |                                                                           |          | (4,855         | )       |              |         | (3,592  | )       |   |           | (40,458   | )      
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |        
|                                                       | Total stockholders equity                                                          |                                                                           |          | 553,885        |         |              |         | 583,927 |         |   |           | 4,615,708 |        
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |        
|                                                       |                                                                                     |                                                                           | ¥747,337 |                |         |              | 749,910 |         |         | $ | 6,227,808 |          
|                                                       |                                                                                     |                                                                           |          |                |         |              |         |         |         |   |           |           |        

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Consolidated statements of operations
For the years ended March 31, 2003, 2002 and 2001

|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |           |         |           | 
|-------------------- | --------------------------------------------------------------------------- | --------------------------------------- | ------------------------ | ---------- | -------------------------- | ------- | ------------ | ------- | ------- | ------- | ------ | ------- | ------ | ------- | ----------- | --------- | ------- | --------- | 
|                     |                                                                             |                                         |                          |            |                            |         | U.S. Dollars
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         | (Thousands)
|                     |                                                                             |                                         |                          |            | Yen (Millions)             |         | (Note 2)    
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |       
|                     |                                                                             |                                         |                          |            | 2003                       |         | 2002         |         | 2001    |         | 2003  
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |       
|Revenues:            |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |          
|                     | Net sales                                                                   |                                         |                          | ¥608,880   |                            |         |              | 570,511 |         |         |        | 679,086 |        |         | $           | 5,074,000 |        
|                     | Interest and dividend income                                                |                                         |                          | 1,379      |                            |         |              | 2,033   |         |         |        | 5,089   |        |         |             | 11,491    |        
|                     | Gain on securities (net of loss) (Note 4)                                   |                                         |                          |           |                            |         |              |        |         |         |        | 13,450  |        |         |             |          |        
|                     | Other income                                                                |                                         |                          | 2,017      |                            |         |              | 2,284   |         |         |        | 2,437   |        |         |             | 16,809    |        
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |           |        
|                     |                                                                             |                                         | Total revenues           |            |                            | 612,276 |              |         |         | 574,828 |        |         |        | 700,062 |             |           |         | 5,102,300 | 
|Costs and expenses:  |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |          
|                     | Cost of sales                                                               |                                         |                          | 459,616    |                            |         |              | 464,620 |         |         |        | 496,083 |        |         |             | 3,830,133 |        
|                     | Selling, general and administrative expenses                                |                                         |                          | 121,839    |                            |         |              | 123,741 |         |         |        | 131,074 |        |         |             | 1,015,325 |        
|                     | Restructuring cost (Note 16)                                                |                                         |                          | 5,345      |                            |         |              | 25,872  |         |         |        |        |        |         |             | 44,542    |        
|                     | Interest expense                                                            |                                         |                          | 577        |                            |         |              | 1,264   |         |         |        | 490     |        |         |             | 4,808     |        
|                     | Loss on securities (net of gain) (Note 4)                                   |                                         |                          | 3,298      |                            |         |              | 207     |         |         |        |        |        |         |             | 27,483    |        
|                     | Other deductions                                                            |                                         |                          | 3,520      |                            |         |              | 2,821   |         |         |        | 7,899   |        |         |             | 29,334    |        
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |           |        
|                     |                                                                             |                                         | Total costs and expenses |            |                            | 594,195 |              |         |         | 618,525 |        |         |        | 635,546 |             |           |         | 4,951,625 | 
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |           |        
|                     |                                                                             | Income (loss) before income taxes       |                          |            | 18,081                     |         |              |         | (43,697 | )       |        |         | 64,516 |         |             |           | 150,675 |          
|Income taxes(Note 7) |                                                                             |                                         | 5,296                    |            |                            |         | (16,994      | )       |         |         | 19,792 |         |        |         | 44,133      |          
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |           |        
|                     |                                                                             | Income (loss) before minority interests |                          |            | 12,785                     |         |              |         | (26,703 | )       |        |         | 44,724 |         |             |           | 106,542 |          
|Minority interests   |                                                                             |                                         | (766                     | )          |                            |         | 932          |         |         |         | (741   | )       |        |         | (6,384      | )        
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |           |        
|                     |                                                                             | Net income (loss)                       |                          |            | ¥  12,019                  |         |              |         | (25,771 | )       |        |         | 43,983 |         |             | $         | 100,158 |          
|                     |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |           |        
|                    
|                    
|                     |                                                                             |                                         |                          |            | Yen (except number of      |         |              |         |        
|                     |                                                                             |                                         |                          |            | common shares outstanding) |         | U.S. Dollars
|                     |                                                                             |                                         |                          |            |                            |         |             
|Amounts per share:   |                                                                             |                                         |                          |            |                            |         |              |         |         |         |        |         |        |         |             |          
|                     | Basic net income (loss) per share                                           |                                         |                          | ¥    90.56 |                            |         |              | (193.91 | )       |         |        | 330.54  |        |         | $           | 0.75      |        
|                     | Diluted net income (loss) per share                                         |                                         |                          | 90.56      |                            |         |              | (193.91 | )       |         |        | 330.54  |        |         |             | 0.75      |        
|                     | Weighted average basic and diluted common shares
outstanding (in thousands) |                                         |                          | 132,716    |                            |         |              | 132,900 |         |         |        | 133,064 |        |         |             |           |        
|                     | Cash dividends paid during the year (Note 9)                                |                                         |                          | ¥    45.00 |                            |         |              | 60.00   |         |         |        | 60.00   |        |         | $           | 0.38      |        

See accompanying notes to consolidated financial statements.

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Consolidated statements of stockholders equity
For the years ended March 31, 2003, 2002 and 2001

|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|---------------------------------------------------------------- | ---------------------------------------------------------------------- |  | -------------- | --------- | ------------ |  | ------- | ------- | ---- |  | ------- | ------- | ----------- | - | --------- | --------- | -
|                                                                 |                                                                        |  |                |           | U.S. Dollars
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         | (Thousands)
|                                                                 |                                                                        |  | Yen (Millions) |           | (Note 2)    
|                                                                 |                                                                        |  |                |           |              |  |         |         |     
|                                                                 |                                                                        |  | 2003           |           | 2002         |  | 2001    |         | 2003
|                                                                 |                                                                        |  |                |           |              |  |         |         |     
|Common stock:                                                    |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |          
|                                                                 | Balance at beginning of period                                         |  |                | ¥  32,641 |              |  |         | 32,641  |      |  |         | 32,641  |             |   | $         | 272,008   |  
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|                                                                 | Balance at end of period                                               |  |                | 32,641    |              |  |         | 32,641  |      |  |         | 32,641  |             |   |           | 272,008   |  
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|Additional paid-in capital:                                      |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |          
|                                                                 | Balance at beginning of period                                         |  |                | 63,051    |              |  |         | 63,051  |      |  |         | 63,051  |             |   |           | 525,425   |  
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|                                                                 | Balance at end of period                                               |  |                | 63,051    |              |  |         | 63,051  |      |  |         | 63,051  |             |   |           | 525,425   |  
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|Legal reserve(Note 9):                                           |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |          
|                                                                 | Balance at beginning of period                                         |  |                | 15,683    |              |  |         | 13,409  |      |  |         | 13,302  |             |   |           | 130,692   |  
|                                                                 | Transferred from retained earnings                                     |  |                | 270       |              |  |         | 2,274   |      |  |         | 107     |             |   |           | 2,250     |  
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|                                                                 | Balance at end of period                                               |  |                | 15,953    |              |  |         | 15,683  |      |  |         | 13,409  |             |   |           | 132,942   |  
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|Retained earnings(Note 9):                                       |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |          
|                                                                 | Balance at beginning of period                                         |  |                | 520,143   |              |  |         | 556,165 |      |  |         | 520,276 |             |   |           | 4,334,525 |  
|                                                                 | Net income (loss)                                                      |  |                | 12,019    |              |  |         | (25,771 | )    |  |         | 43,983  |             |   |           | 100,158   |  
|                                                                 | Cash dividends                                                         |  |                | (5,973    | )            |  |         | (7,977  | )    |  |         | (7,987  | )           |   |           | (49,775   | )
|                                                                 | Transferred to legal reserve                                           |  |                | (270      | )            |  |         | (2,274  | )    |  |         | (107    | )           |   |           | (2,250    | )
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|                                                                 | Balance at end of period                                               |  |                | 525,919   |              |  |         | 520,143 |      |  |         | 556,165 |             |   |           | 4,382,658 |  
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|Accumulated other comprehensive income (loss)(Notes 7,8 and
11): |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |          
|                                                                 | Balance at beginning of period                                         |  |                | (43,999   | )            |  |         | (24,851 | )    |  |         | (58,257 | )           |   |           | (366,659  | )
|                                                                 | Other comprehensive income (loss) for the period, net of tax           |  |                | (34,825   | )            |  |         | (19,148 | )    |  |         | 33,406  |             |   |           | (290,208  | )
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|                                                                 | Balance at end of period                                               |  |                | (78,824   | )            |  |         | (43,999 | )    |  |         | (24,851 | )           |   |           | (656,867  | )
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|Treasury stock(Note 10):                                         |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |          
|                                                                 | Balance at beginning of period                                         |  |                | (3,592    | )            |  |         | (2,666  | )    |  |         |        |             |   |           | (29,933   | )
|                                                                 | Acquisition of treasury stock                                          |  |                | (1,263    | )            |  |         | (926    | )    |  |         | (2,666  | )           |   |           | (10,525   | )
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|                                                                 | Balance at end of period                                               |  |                | (4,855    | )            |  |         | (3,592  | )    |  |         | (2,666  | )           |   |           | (40,458   | )
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|Total stockholders equity                                       |                                                                        |  | ¥553,885       |           |              |  | 583,927 |         |      |  | 637,749 |         |             | $ | 4,615,708 |          
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|Disclosure of comprehensive income (loss):                       |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |          
|                                                                 | Net income (loss) for the period                                       |  |                | ¥  12,019 |              |  |         | (25,771 | )    |  |         | 43,983  |             |   | $         | 100,158   |  
|                                                                 | Other comprehensive income (loss) for the period, net of
tax (Note 11) |  |                | (34,825   | )            |  |         | (19,148 | )    |  |         | 33,406  |             |   |           | (290,208  | )
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  
|                                                                 | Total comprehensive income (loss) for the period                       |  |                | ¥(22,806  | )            |  |         | (44,919 | )    |  |         | 77,389  |             |   | $         | (190,050  | )
|                                                                 |                                                                        |  |                |           |              |  |         |         |      |  |         |         |             |   |           |           |  

See accompanying notes to consolidated financial statements.

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Consolidated statements of cash flows
For the years ended March 31, 2003, 2002 and 2001

|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |          |  
|------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------- |  | -------------- | ------- | ------------ |  | ------- | ------- | ---- |  | ------- | ------- | ----------- | - | --------- | -------- | -
|                                      |                                                                                          |                                           |  |                |         | U.S. Dollars
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         | (Thousands)
|                                      |                                                                                          |                                           |  | Yen (Millions) |         | (Note 2)    
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |     
|                                      |                                                                                          |                                           |  | 2003           |         | 2002         |  | 2001    |         | 2003
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |     
|Cash flows from operating activities: |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |          
|                                      | Net income (loss)                                                                        |                                           |  | ¥  12,019      |         |              |  | (25,771 | )       |      |  | 43,983  |         |             | $ | 100,158   |         
|                                      | Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|                                      | Depreciation and amortization                                                            |                                           |  | 57,789         |         |              |  | 61,920  |         |      |  | 67,973  |         |             |   | 481,575   |         
|                                      | Loss on disposal of property and equipment                                               |                                           |  | 4,845          |         |              |  | 6,436   |         |      |  | 5,144   |         |             |   | 40,375    |         
|                                      | Deferred income taxes                                                                    |                                           |  | 4,301          |         |              |  | (13,797 | )       |      |  | (10,986 | )       |             |   | 35,842    |         
|                                      | Loss (gain) on securities                                                                |                                           |  | 3,298          |         |              |  | 207     |         |      |  | (13,450 | )       |             |   | 27,483    |         
|                                      | Contribution of cash and cash equivalents to pension trust                               |                                           |  |               |         |              |  |        |         |      |  | (15,315 | )       |             |   |          |         
|                                      | Changes in assets and liabilities:                                                       |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|                                      | Decrease (increase) in trade receivables                                                 |                                           |  | (2,256         | )       |              |  | 18,517  |         |      |  | 22,365  |         |             |   | (18,800   | )       
|                                      | Decrease (increase) in inventories                                                       |                                           |  | 14,277         |         |              |  | 28,776  |         |      |  | (23,607 | )       |             |   | 118,975   |         
|                                      | Increase (decrease) in trade payables                                                    |                                           |  | 6,691          |         |              |  | (14,806 | )       |      |  | (18,969 | )       |             |   | 55,758    |         
|                                      | Increase (decrease) in income taxes payables, net                                        |                                           |  | 2,265          |         |              |  | (25,223 | )       |      |  | 4,642   |         |             |   | 18,875    |         
|                                      | Other  net                                                                              |                                           |  | 1,129          |         |              |  | 5,245   |         |      |  | 5,817   |         |             |   | 9,409     |         
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|                                      |                                                                                          | Net cash provided by operating activities |  |                | 104,358 |              |  |         | 41,504  |      |  |         | 67,597  |             |   |           | 869,650  |  
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|Cash flows from investing activities: |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |          
|                                      | Capital expenditures                                                                     |                                           |  | (41,451        | )       |              |  | (58,777 | )       |      |  | (99,452 | )       |             |   | (345,425  | )       
|                                      | Proceeds from sales and maturities of investments                                        |                                           |  | 1,511          |         |              |  | 323     |         |      |  | 6,253   |         |             |   | 12,592    |         
|                                      | Payment for purchase of investments                                                      |                                           |  | (7,306         | )       |              |  | (3,116  | )       |      |  | (692    | )       |             |   | (60,883   | )       
|                                      | Other  net                                                                              |                                           |  | 601            |         |              |  | 3,667   |         |      |  | 1,353   |         |             |   | 5,008     |         
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|                                      |                                                                                          | Net cash used in investing activities     |  |                | (46,645 | )            |  |         | (57,903 | )    |  |         | (92,538 | )           |   |           | (388,708 | )
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|Cash flows from financing activities: |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |          
|                                      | Proceeds from long-term debt                                                             |                                           |  | 211            |         |              |  | 46      |         |      |  | 614     |         |             |   | 1,758     |         
|                                      | Repayment of long-term debt                                                              |                                           |  | (646           | )       |              |  | (777    | )       |      |  | (1,536  | )       |             |   | (5,383    | )       
|                                      | Increase (decrease) in short-term debt, net                                              |                                           |  | (254           | )       |              |  | (3,568  | )       |      |  | 2,761   |         |             |   | (2,117    | )       
|                                      | Payment to acquire treasury stock                                                        |                                           |  | (1,263         | )       |              |  | (926    | )       |      |  | (2,666  | )       |             |   | (10,525   | )       
|                                      | Dividends paid                                                                           |                                           |  | (5,973         | )       |              |  | (7,977  | )       |      |  | (7,987  | )       |             |   | (49,775   | )       
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|                                      |                                                                                          | Net cash used in financing activities     |  |                | (7,925  | )            |  |         | (13,202 | )    |  |         | (8,814  | )           |   |           | (66,042  | )
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|                                      | Effect of exchange rate changes on cash and cash equivalents                             |                                           |  | (4,998         | )       |              |  | 4,445   |         |      |  | 10,153  |         |             |   | (41,650   | )       
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|                                      | Net increase (decrease) in cash and cash equivalents                                     |                                           |  | 44,790         |         |              |  | (25,156 | )       |      |  | (23,602 | )       |             |   | 373,250   |         
|                                      | Cash and cash equivalents at beginning of period                                         |                                           |  | 125,761        |         |              |  | 150,917 |         |      |  | 174,519 |         |             |   | 1,048,008 |         
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         
|                                      | Cash and cash equivalents at end of period                                               |                                           |  | ¥170,551       |         |              |  | 125,761 |         |      |  | 150,917 |         |             | $ | 1,421,258 |         
|                                      |                                                                                          |                                           |  |                |         |              |  |         |         |      |  |         |         |             |   |           |         

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations and Summary of Significant Accounting Policies

(a) Nature of Operations

TDK is a multinational manufacturer of ferrite products and a producer of
inductor, ceramic and other components and recording media and systems. TDK, a
Tokyo-based company founded in 1935 to commercialize ferrite, now manufactures
and sells a broad range of products. TDKs two business segments are
electronic materials and components, and recording media and systems, which
accounted for 78% and 22% of net sales, respectively, for the year ended March
31, 2003. The main products which are manufactured and sold by the two
business segments are as follows:

a) Electronic materials and components products:

Ferrite cores, Ceramic capacitors, High-frequency components,
Inductors, GMR heads, and Semiconductors

b) Recording media and systems products:

Audio tapes, Video tapes, CD-Rs, MDs, DVDs, and PC cards
           TDK sells electronic materials and components products to electric and
communication equipment manufacturers and audio equipment manufacturers, mainly
in Asia and Japan, and recording media and systems products to distribution
agents and audio equipment manufacturers, mainly in Japan, Europe, and North
America.

(b) Basis of Presentation

TDK and its domestic subsidiaries maintain their books of account in
conformity with financial accounting standards of Japan, and its foreign
subsidiaries in conformity with those of the countries of their domicile.

The consolidated financial statements presented herein reflect certain
adjustments, not recorded on the primary books of TDK and subsidiaries, to
present the financial position, results of operations, and cash flows in
conformity with accounting principles generally accepted in the United States
of America. Such adjustments relate principally to accounting for issue costs
for debt with stock purchase warrants, retirement and severance benefits and
impairment of long-lived assets including goodwill.

(c) Consolidation Policy

The consolidated financial statements include the accounts of TDK and its
subsidiaries. The investments in affiliates in which TDKs ownership is 20% to
50% and TDK exercises significant influence over their operating and financial
policies are accounted for by the equity method.

All significant intercompany accounts and transactions have been
eliminated in consolidation.

(d) Cash Equivalents

Cash equivalents include all highly liquid debt instruments purchased with
an original maturity of three months or less.

(e) Marketable Securities

TDK classifies its debt and equity securities into one of three
categories: trading, available-for-sale, or held-to-maturity. Trading
securities are bought and held principally for the purpose of selling them in
the near term. Held-to-maturity securities are those securities in which TDK
has the ability and intent to hold the security until maturity. All securities
not included in trading or held-to-maturity are classified as
available-for-sale.

Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains
and losses on trading securities are included in earnings. Unrealized holding
gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate

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component of accumulated other comprehensive income until realized.

(f) Inventories

Inventories are stated at the lower of cost or market. Cost is determined
principally by the average method.

(g) Depreciation

Depreciation of property, plant and equipment is principally computed by
the declining-balance method for assets located in Japan and of certain foreign
subsidiaries and by the straight-line method for assets of other foreign
subsidiaries based on the following estimated useful lives:

|                        |  |              
|----------------------- |  | -------------
|Buildings               |  | 3 to 60 years
|Machinery and equipment |  | 2 to 22 years

(h) Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.

(i) Stock Option Plan

Statement of Financial Accounting Standards No. 123 (SFAS 123),
Accounting for Stock-Based Compensation defines a fair value based method of
accounting for a stock option. SFAS 123 gives an entity a choice of
recognizing related compensation expense by adopting the fair value method or
to continue measure compensation using the intrinsic value-based method
prescribed under Accounting Principles Board Opinion No. 25 (APB 25),
Accounting for Stock Issued to Employees, the former standard. As such,
stock-based compensation cost is recognized by TDK only if the market price of
the underlying common stock exceeds the exercise price on the date of grant.
TDK chose to use the measurement prescribed by APB 25, and no compensation cost
for the stock option plan has been incurred in fiscal 2003, fiscal 2002 and
fiscal 2001. The following table illustrates the effect on net income (loss)
and net income (loss) per share if the fair-value-based method had been applied
to all outstanding and unvested awards with such costs recognized ratably over
the vesting period of the underlying instruments.

|                                                                                                                            |             |  |            |          |              |  |         |         |      |  |        |        |  |   |         |      | 
|--------------------------------------------------------------------------------------------------------------------------- | ----------- |  | ---------- | -------- | ------------ |  | ------- | ------- | ---- |  | ------ | ------ |  | - | ------- | ---- | 
|                                                                                                                            |             |  | Yen        |          | U.S. Dollars
|                                                                                                                            |             |  | (Millions) |          | (Thousands) 
|                                                                                                                            |             |  |            |          |             
|                                                                                                                            |             |  | 2003       |          | 2002         |  | 2001    |         | 2003
|                                                                                                                            |             |  |            |          |              |  |         |         |     
|Net income (loss), as reported                                                                                              |             |  | ¥12,019    |          |              |  | (25,771 | )       |      |  | 43,983 |        |  | $ | 100,158 |     
|Deduct total stock-based
employee compensation expense
determined under
fair-value-based method for
all rewards, net of tax |             |  | (241       | )        |              |  | (280    | )       |      |  | (207   | )      |  |   | (2,008  | )   
|                                                                                                                            |             |  |            |          |              |  |         |         |      |  |        |        |  |   |         |     
|Pro forma net income (loss)                                                                                                 |             |  | 11,778     |          |              |  | (26,051 | )       |      |  | 43,776 |        |  |   | 98,150  |     
|Basic and diluted net income (loss) per share:                                                                              |             |  |            |          |              |  |         |         |      |  |        |        |  |   |         |     
|                                                                                                                            | As reported |  |            | ¥  90.56 |              |  |         | (193.91 | )    |  |        | 330.54 |  |   | $       | 0.75 | 
|                                                                                                                            | Pro forma   |  |            | 88.74    |              |  |         | (196.02 | )    |  |        | 328.98 |  |   |         | 0.74 | 

In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148 (SFAS 148), Accounting
for Stock-Based Compensation  Transition and Disclosure, which amends FASB
Statement No. 123 (SFAS 123), Accounting for Stock-Bases Compensation.
SFAS 148 provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. In addition, SAFS 148 amends the disclosure requirements of SFAS
123 to require more prominent and more frequent disclosures in

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financial statements about the effects of stock-based compensation. The
transition guidance and annual disclosure provisions of SAFS 148 are effective
for fiscal years ending after December 15, 2002. The adoption of SFAS 148 did
not have a material effect on TDKs consolidated financial position and results
of operations.

(j) Advertising Costs

Advertising costs are expensed as incurred.

(k) Foreign Currency Translation

Foreign currency financial statements have been translated in accordance
with Statement of Financial Accounting Standards No. 52 (SFAS 52), Foreign
Currency Translation. Under SFAS 52, the assets and liabilities of TDKs
subsidiaries located outside Japan are translated into Japanese yen at the
rates of exchange in effect at the balance sheet date. Revenue and expense
items are translated at the average exchange rates prevailing during the year.
Gains and losses resulting from foreign currency transactions are included in
other income (deductions), and those resulting from translation of financial
statements are generally excluded from the statements of operations and are
accumulated in stockholders equity as a component of accumulated other
comprehensive income (loss).

(l) Use of Estimates

Management of TDK has made a number of estimates and assumptions relating
to the reporting of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles in the
United States of America. Significant items subject to such estimates and
assumptions include the valuation of intangible assets, property, plant and
equipment, trade receivables, inventories, and deferred income tax assets, and
assumptions related to the estimation of actuarial determined employee benefit
obligations. Actual results could differ from those estimates.

(m) Accounting for the Impairment or Disposal of Long-Lived Assets

In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 (SFAS 144), Accounting for the
Impairment or Disposal of Long-Lived Assets which supersedes both Statement of
Financial Accounting Standards No.121 (SFAS 121), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of 
and the accounting and reporting provisions of APB Opinion No.30 (Opinion
30), Reporting the Results of Operations  Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment of a business
(as previously defined in that Opinion). SFAS 144 retains the fundamental
provisions in SFAS 121 for recognizing and measuring impairment losses on
long-lived assets held for use and long-lived assets to be disposed of by sale,
while also resolving significant implementation issues associated with SFAS
121. TDK adopted the provision of SFAS 144 on April 1, 2002. The adoption of
SFAS 144 did not have a material effect on TDKs consolidated financial
position or results of operations.

TDKs long-lived assets and certain identifiable intangibles with finite
useful lives are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
(undiscounted and without interest charges) expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.

(n) Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.141 (SFAS 141), Business Combinations,
and Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill
and Other Intangible

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Assets. SFAS 141 requires the use of the purchase method of accounting
for business combinations. SFAS 141 also specifies the types of acquired
intangible assets that are required to be recognized and reported separately
from goodwill and those acquired intangible assets that are required to be
included in goodwill. Under SFAS 142 goodwill is no longer amortized, but
instead is tested for impairment at least annually. Intangible assets are
amortized over their respective estimated useful lives and reviewed for
impairment in accordance with Statement of Financial Accounting Standards
No.144, Accounting for the Impairment or Disposal of Long-Lived Assets. Any
recognized intangible asset determined to have an indefinite useful life will
not be amortized, but instead is tested for impairment until its life is
determined to no longer be indefinite.

TDK conducts its annual impairment test at the end of each fiscal year.

(o) Derivative Financial Instruments

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. In June 2000, the Financial Accounting
Standards Board also issued Statement of Financial Accounting Standards No. 138
(SFAS 138), Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of FASB Statement No. 133. Both standards
establish accounting and reporting standards for derivative instruments and for
hedging activities, and require that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. SFAS 133, as amended, and 138 are effective for fiscal years
beginning after June 15, 2000. TDK adopted SFAS 133 and 138 as of April 1,
2001. The cumulative effect adjustment upon the adoption of SFAS 133 and 138,
net of the related income tax effect, resulted in a decrease to accumulated
other comprehensive income of approximately ¥90 million. This amount was
reclassified from accumulated other comprehensive income to earnings during the
year ended March 31, 2002. TDK has not elected to apply hedge accounting
subsequent to the adoption of SFAS 133 and 138, and changes in the fair value
of derivatives are recognized in earnings in the period of the changes.

Prior to the adoption of SFAS 133 and 138, TDK and certain of its
subsidiaries used derivative financial instruments with off-balance-sheet risk,
such as currency swaps, interest rate swaps, forward foreign exchange contracts
and currency option contracts, to limit their exposure to fluctuations in
foreign exchange rates and interest rates. Gains and losses on foreign
exchange instruments that qualified for hedge accounting treatment were
recognized in the same period in which gains or losses from the transaction
being hedged were recognized. The differential to be paid or received on
interest rate swap agreements was recognized over the life of the agreement as
an adjustment to interest expense. Derivative financial instruments that did
not meet the criteria for hedge accounting were marked to market.

(p) Net Income per Share

Basic net income per share has been computed by dividing net income
available to common stockholders by the weighted-average number of common
shares outstanding during each year. Diluted net income per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the income of TDK. Stock options
were not included in the calculation of diluted earnings per share for the
years ended March 31, 2003, 2002 and 2001 as their effect would be antidilutive.

(q) Revenue Recognition

TDK recognized revenue when (i) persuasive evidence of an arrangement
exists which is generally in the form of a purchase order or a signed contract;
(ii) delivery has occurred and title and risk of loss have transferred; (iii)
the sales price is fixed and determinable, and (iv) collectibility is probable.

(r) New Accounting Standards

Accounting for Consideration
Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)

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In May 2000, the Emerging Issues Task Force reached a final consensus on
Issue 00-14 (EITF 00-14), Accounting for Certain Sales Incentives. EITF
00-14 addresses accounting and reporting standards for sales incentives such as
coupons or rebates that are provided by vendors or manufacturers and are
exercisable by customers at the point of sale.

In January 2001, the Emerging Issues Task Force also reached a final
consensus on a portion of issue 00-22 (EITF 00-22), Accounting for Points
and Certain Other Time-Based or Volume-Based Sales Incentives Offers, and
Offers for Free Products or Services to Be Delivered in the Future. EITF
00-22 addresses accounting and reporting standards for sales incentives such as
royalty programs or rebates that are offered to customers by vendors only if
the customer completes a specified cumulative level of revenue transactions
with the vendor or remains a customer of the vendor for a specified time
period.

In April 2001, the Emerging Issues Task Force also reached a final
consensus on a portion of Issue 00-25 (EITF 00-25), Vendor Income Statement
Characterization of Consideration to a Purchaser of the Vendors Products or
Services. EITF 00-25 addresses the income statement characterization of
consideration, other than that directly addressed in EITF 00-14, from a vendor
(typically a manufacturer or distributor) to a customer (typically a retailer
or wholesaler) in connection with the sale to the customer of the vendors
products or promotion of sales of the vendors products by the customer. EITF
00-14 and EITF 00-25 were subsequently codified in and superseded by Issue 01-9
(EITF 01-9), Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendors Products) on which the Emerging Issues
Task Force reached a final consensus.

TDK adopted EITF 01-9 on April 1, 2002. However, consolidated financial
statements for the prior periods have been reclassified to comply with the
income statement display requirements. The adoption results in a reduction in
net sales for the years ended March 31, 2002 and 2001 of ¥4,518 million and
¥10,825 million, respectively, and corresponding decrease in selling,
general and administrative expenses, with no effect on net income.

Accounting for Costs Associated with Exit or Disposal Activities

In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146 (SFAS 146), Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force Issue 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Cost to Exit an Activity
(including Certain costs Incurred in a Restructuring). The provisions of SFAS
146 are effective for exit or disposal activities that are initiated after
December 31, 2002. The adoption of SFAS 146 did not have a material effect on
TDKs consolidated financial positions and results of operations.

Guarantors Accounting and Disclosure Requirements for Guarantees

In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 requires that a liability be recorded in the guarantors
balance sheet upon issuance of a guarantee. In addition, FIN 45 requires
disclosures about the guarantees that an entity has issued. TDK adopted the
recognition provisions of FIN 45 prospectively to guarantees issued after
December 31, 2002. The disclosure provisions of FIN 45 are effective for
consolidated financial statements as of March 31, 2003. The adoption of FIN 45
did not have a material effect on TDKs consolidated financial positions and
results of operations.

Consolidation of Variable Interest Entities

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No.46 (FIN 46), Consolidation of Variable Interest Entities,
an interpretation of ARB No.51. FIN 46 addresses the consolidation by
business enterprises of variable interest entities as defined in the
interpretation. FIN 46 applies immediately to variable interests in variable
interest entities created after January 31, 2003, and to variable interest
entities obtained after January 31, 2003. TDK will apply FIN 46 to variable
interest entities created before February 1, 2003 by September 30, 2003. The
impact on TDKs

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consolidated financial statements is immaterial.

New Accounting Standards Not Yet Adopted

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.143 (SFAS 143), Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
associated asset retirement costs. SFAS 143 applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal operation of a
long-lived assets, except for certain obligations of lessees. SFAS 143
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized
as part of the carrying amount of the long-lived asset and subsequently
allocated to expense over the assets useful life. TDK is required to adopt
the provisions of SFAS 143 on April 1, 2003. Currently, the effect on TDKs
consolidated financial statements of adopting SFAS 143 has not been determined.

In January 2003, the Emerging Issues Task Force reached a final consensus
on Issue 03-2 (EITF 03-2), Accounting for the Transfer to the Japanese
Government of the Substitutional Portion of Employee Pension Fund Liabilities.
EITF 03-2 addresses accounting for a transfer to the Japanese government of a
substitutional portion of an Employees Pension Fund (EPF) plan, which is a
defined benefit pension plan established under the Welfare Pension Insurance
Law. EITF 03-2 requires employers to account for the separation process of the
substitutional portion from the entire EPF plan (which includes a corporation
portion) upon completion of the transfer to the government of the
substitutional portion of the benefit obligation and related plan assets. The
separation process is considered 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 assets required to be transferred to the
government should be accounted for and separately disclosed as a subsidy. TDK
has not decided whether it will transfer the substitutional portion to the
government. Accordingly, the impact on TDKs financial statements, if any, can
not be determined until a decision is made and the substitutional portion of
the benefit obligation and plan assets are transferred to the government.

In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150 (SFAS 150), Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS 150 requires that certain financial instruments, which under previous
guidance could be accounted for as equity, be classified as liabilities in
statements of financial position. SFAS 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. TDK does not expect the adoption of SFAS 150 to have a material effect
on TDKs consolidated financial position and result of operations.

(s) Reclassifications

Certain reclassifications have been made to the prior years consolidated
financial statements to conform to the presentation used for the year ended
March 31, 2003.

2. Financial Statement Translation

The consolidated financial statements are expressed in yen, the functional
currency of TDK. Supplementally, however, the Japanese yen amounts as of and
for the year ended March 31, 2003, have also been translated into U.S. dollar
amounts, solely for the convenience of the reader, at the rate of ¥120=U.S.$1,
the approximate exchange rate on the Tokyo Foreign Exchange Market on March 31,
2003. This translation should not be construed as a representation that the
amounts shown could be converted into U.S. dollars at such rate.

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3. Foreign Operations

Amounts included in the consolidated financial statements relating to
subsidiaries operating in foreign countries are summarized as follows:

|                  |  |                |          |             |  |      |         |      |  |  |         |   |  |              |           | 
|----------------- |  | -------------- | -------- | ----------- |  | ---- | ------- | ---- |  |  | ------- | - |  | ------------ | --------- | 
|                  |  |                |          |             |  |      |         |      |  |  |         |   |  | U.S. Dollars
|                  |  | Yen (Millions) |          | (Thousands)
|                  |  |                |          |            
|                  |  | 2003           |          | 2002        |  | 2001 |         | 2003
|                  |  |                |          |             |  |      |         |     
|Net assets        |  |                | ¥304,645 |             |  |      | 312,539 |      |  |  | 317,844 |   |  | $            | 2,538,708 | 
|Net sales         |  |                | 436,062  |             |  |      | 391,740 |      |  |  | 439,750 |   |  |              | 3,633,850 | 
|Net income (loss) |  |                | 9,101    |             |  |      | (20,519 | )    |  |  | (5,239  | ) |  |              | 75,842    | 

4. Investments and Advances

Investments and advances at March 31, 2003 and 2002, are as follows

|                          |  |                |            |             |  |      |        |  |  |              |         | 
|------------------------- |  | -------------- | ---------- | ----------- |  | ---- | ------ |  |  | ------------ | ------- | 
|                          |  |                |            |             |  |      |        |  |  | U.S. Dollars
|                          |  | Yen (Millions) |            | (Thousands)
|                          |  |                |            |            
|                          |  | 2003           |            | 2002        |  | 2003
|                          |  |                |            |             |  |     
|Marketable securities     |  |                | ¥    6,064 |             |  |      | 8,283  |  |  | $            | 50,533  | 
|Nonmarketable securities  |  |                | 1,406      |             |  |      | 4,864  |  |  |              | 11,717  | 
|Investments in affiliates |  |                | 11,861     |             |  |      | 6,524  |  |  |              | 98,842  | 
|Other                     |  |                | 3,247      |             |  |      | 4,594  |  |  |              | 27,058  | 
|                          |  |                |            |             |  |      |        |  |  |              |         | 
|                          |  |                | ¥ 22,578   |             |  |      | 24,265 |  |  | $            | 188,150 | 
|                          |  |                |            |             |  |      |        |  |  |              |         | 

Investments in affiliates accounted for by the equity method consist of
26.1% of the common stock of Semiconductor Energy Laboratory Co., Ltd., a
research and development company, 50.0% of the common stock of Tokyo Magnetic
Printing Co., Ltd., a magnetic products manufacturing company, and six other
affiliated companies, collectively, which are not significant. The unamortized
portion of the excess of cost over TDKs share of net assets of affiliated
companies was ¥562 million ($4,683 thousands) at March 31, 2003. In accordance
with SFAS 142, this equity-method goodwill is no longer amortized, but is being
analyzed for impairment.

Investments and advances include available-for-sale securities.
Information with respect to such securities at March 31, 2003 and 2002, is as
follows:

As of March 31, 2003

|                          |                   |      |        |        |  |        |            |            |            |  |    |    |  |  |       |       | 
|------------------------- | ----------------- | ---- | ------ | ------ |  | ------ | ---------- | ---------- | ---------- |  | -- | -- |  |  | ----- | ----- | 
|                          |                   |      |        |        |  |        | Gross      |            | Gross      |  |    |    | 
|                          |                   |      |        |        |  |        | Unrealized |            | Unrealized |  |    |    | 
|                          |                   |      |        |        |  |        | Holding    |            | Holding    |  |    |    | 
|Yen (Millions):           |                   | Cost |        | Gains  |  | Losses |            | Fair Value
|                          |                   |      |        |        |  |        |            |           
|Investments and advances: |                   |      |        |        |  |        |            |            |            |  |    |    |  |  |       |      
|                          | Equity securities |      |        | ¥3,384 |  |        |            | 193        |            |  |    | 11 |  |  |       | 3,566 | 
|                          | Debt securities   |      |        | 2,495  |  |        |            | 3          |            |  |    |   |  |  |       | 2,498 | 
|                          |                   |      |        |        |  |        |            |            |            |  |    |    |  |  |       |      
|                          |                   |      | ¥5,879 |        |  |        | 196        |            |            |  | 11 |    |  |  | 6,064 |      
|                          |                   |      |        |        |  |        |            |            |            |  |    |    |  |  |       |      

As of March 31, 2002

|                          |                   |      |        |        |  |        |            |            |            |  |   |   |  |  |       |       | 
|------------------------- | ----------------- | ---- | ------ | ------ |  | ------ | ---------- | ---------- | ---------- |  | - | - |  |  | ----- | ----- | 
|                          |                   |      |        |        |  |        | Gross      |            | Gross      |  |   |   | 
|                          |                   |      |        |        |  |        | Unrealized |            | Unrealized |  |   |   | 
|                          |                   |      |        |        |  |        | Holding    |            | Holding    |  |   |   | 
|Yen (Millions):           |                   | Cost |        | Gains  |  | Losses |            | Fair Value
|                          |                   |      |        |        |  |        |            |           
|Investments and advances: |                   |      |        |        |  |        |            |            |            |  |   |   |  |  |       |      
|                          | Equity securities |      |        | ¥4,389 |  |        |            | 596        |            |  |   |  |  |  |       | 4,985 | 
|                          | Debt securities   |      |        | 3,274  |  |        |            | 24         |            |  |   |  |  |  |       | 3,298 | 
|                          |                   |      |        |        |  |        |            |            |            |  |   |   |  |  |       |      
|                          |                   |      | ¥7,663 |        |  |        | 620        |            |            |  |  |   |  |  | 8,283 |      
|                          |                   |      |        |        |  |        |            |            |            |  |   |   |  |  |       |      

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As of March 31, 2003

|                          |                   |      |        |        |  |        |            |            |            |  |    |    |  |  |        |        | 
|------------------------- | ----------------- | ---- | ------ | ------ |  | ------ | ---------- | ---------- | ---------- |  | -- | -- |  |  | ------ | ------ | 
|                          |                   |      |        |        |  |        | Gross      |            | Gross      |  |    |    | 
|                          |                   |      |        |        |  |        | Unrealized |            | Unrealized |  |    |    | 
|                          |                   |      |        |        |  |        | Holding    |            | Holding    |  |    |    | 
|U.S. Dollars (Thousands): |                   | Cost |        | Gains  |  | Losses |            | Fair Value
|                          |                   |      |        |        |  |        |            |           
|Investments and advances: |                   |      |        |        |  |        |            |            |            |  |    |    |  |  |        |       
|                          | Equity securities |      | $      | 28,200 |  |        |            | 1,608      |            |  |    | 92 |  |  |        | 29,716 | 
|                          | Debt securities   |      |        | 20,792 |  |        |            | 25         |            |  |    |   |  |  |        | 20,817 | 
|                          |                   |      |        |        |  |        |            |            |            |  |    |    |  |  |        |       
|                          |                   | $    | 48,992 |        |  |        | 1,633      |            |            |  | 92 |    |  |  | 50,533 |       
|                          |                   |      |        |        |  |        |            |            |            |  |    |    |  |  |        |       

Debt securities classified as available-for-sale at March 31, 2003 mature
in fiscal 2004 through 2006 (weighted average remaining term of 1.3 years).

The proceeds from sale and settlement of available-for-sale securities are
¥1,511 million ($12,592 thousand), ¥323 million and ¥6,253 million for the
years ended March 31, 2003, 2002 and 2001, respectively. The gross realized
gains on the sale and settlement of available-for-sale securities are ¥4
million ($33 thousand), ¥120 million and ¥999 million for the years ended March
31, 2003, 2002 and 2001, respectively. The gross realized loss on the sale and
settlement of available-for-sale securities is ¥74 million for the years ended
March 31, 2001. TDK recorded a write-down of
¥3,302 million ($27,517 thousand) and ¥327
million on certain available-for-sale securities representing
other-than-temporary declines in the fair value of the available-for-sale
securities for the years ended March 31, 2003 and 2002, respectively. During
2001, TDK contributed equity securities of ¥34,573 million to a pension trust.
The gross realized gains and losses on this contribution are ¥13,329 million
and ¥811 million, respectively.

5. Inventories

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

|                |  |            |         |              |  |      |        |  |  |   |         | 
|--------------- |  | ---------- | ------- | ------------ |  | ---- | ------ |  |  | - | ------- | 
|                |  | Yen        |         | U.S. Dollars
|                |  | (Millions) |         | (Thousands) 
|                |  |            |         |             
|                |  | 2003       |         | 2002         |  | 2003
|                |  |            |         |              |  |     
|Finished goods  |  |            | ¥33,151 |              |  |      | 38,671 |  |  | $ | 276,258 | 
|Work in process |  |            | 21,681  |              |  |      | 25,348 |  |  |   | 180,675 | 
|Raw materials   |  |            | 19,085  |              |  |      | 27,130 |  |  |   | 159,042 | 
|                |  |            |         |              |  |      |        |  |  |   |         | 
|                |  |            | ¥73,917 |              |  |      | 91,149 |  |  | $ | 615,975 | 
|                |  |            |         |              |  |      |        |  |  |   |         | 

6. Short-Term and Long-Term Debt

Short-term debt and weighted average interest rates at March 31, 2003 and
2002, are as follows:

|                      |  |            |        |              |  |                  |       |      |  |      |        |  |  |  |      |   |  |  |      |  
|--------------------- |  | ---------- | ------ | ------------ |  | ---------------- | ----- | ---- |  | ---- | ------ |  |  |  | ---- | - |  |  | ---- | -
|                      |  | Yen        |        | U.S. Dollars |  | Weighted average
|                      |  | (Millions) |        | (Thousands)  |  | interest rate   
|                      |  |            |        |              |  |                 
|                      |  | 2003       |        | 2002         |  | 2003             |       | 2003 |  | 2002
|                      |  |            |        |              |  |                  |       |      |  |     
|Short-term bank loans |  |            | ¥1,431 |              |  |                  | 1,655 |      |  | $    | 11,925 |  |  |  | 2.54 | % |  |  | 4.35 | %

At March 31, 2003, unused short-term credit facilities for issuance of
commercial paper amounted to ¥36,060 million ($300,500 thousand).

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Long-term debt at March 31, 2003 and 2002, is set forth below:

|                                                                             |  |            |     |              |  |      |       |  |  |   |       | 
|---------------------------------------------------------------------------- |  | ---------- | --- | ------------ |  | ---- | ----- |  |  | - | ----- | 
|                                                                             |  | Yen        |     | U.S. Dollars
|                                                                             |  | (Millions) |     | (Thousands) 
|                                                                             |  |            |     |             
|                                                                             |  | 2003       |     | 2002         |  | 2003
|                                                                             |  |            |     |              |  |     
|Loans from banks, unsecured, due fiscal 2003
(weighted average: 2002-13.79%) |  | ¥          |    |              |  |      | 140   |  |  | $ |      | 
|Other (weighted average: 2003-9.98%,
2002-10.19%)                            |  |            | 582 |              |  |      | 976   |  |  |   | 4,850 | 
|                                                                             |  |            |     |              |  |      |       |  |  |   |       | 
|                                                                             |  |            | 582 |              |  |      | 1,116 |  |  |   | 4,850 | 
|Less current installments                                                    |  |            | 488 |              |  |      | 657   |  |  |   | 4,067 | 
|                                                                             |  |            |     |              |  |      |       |  |  |   |       | 
|                                                                             |  | ¥          | 94  |              |  |      | 459   |  |  | $ | 783   | 
|                                                                             |  |            |     |              |  |      |       |  |  |   |       | 

The aggregate annual maturities of long-term debt outstanding at March 31,
2003, are as follows:

|                      |  |                |      |             |  |              |       | 
|--------------------- |  | -------------- | ---- | ----------- |  | ------------ | ----- | 
|                      |  |                |      |             |  | U.S. Dollars
|                      |  | Yen (Millions) |      | (Thousands)
|                      |  |                |      |            
|Year ending March 31, |  |                |      |             |  |              |       | 
|2004                  |  |                | ¥488 |             |  | $            | 4,067 | 
|2005                  |  |                | 87   |             |  |              | 725   | 
|2006                  |  |                | 7    |             |  |              | 58    | 
|                      |  |                |      |             |  |              |       | 
|                      |  |                | ¥582 |             |  | $            | 4,850 | 
|                      |  |                |      |             |  |              |       | 

As is customary in Japan, short-term and long-term bank loans are made
under general agreements that provide that under certain circumstances security
and guarantees for present and future indebtedness will be given upon request
of the bank, and that the bank shall have the right, as the obligations become
due, or in the event of their default, to offset cash deposits against such
obligations due the bank.

7. Income Taxes

TDK and its domestic subsidiaries are subject to a national corporation
tax of 30%, an inhabitants tax of between 5.2% and 6.2% and a deductible
enterprise tax of between 9.6% and 10.1%, which in the aggregate resulted in a
statutory rate of approximately 41% in the years ended March 31, 2003, 2002 and
2001.

Amendments to Japanese tax regulations were enacted into law on March 24,
2003. As a result of this amendment, the statutory income tax rate was reduced
from approximately 41% to 40% effective from April 1, 2004. Current income
taxes were calculated at the rate of 41%, in effect for the years ended March
31, 2003, 2002 and 2001, respectively.

Deferred tax assets and liabilities expected to be settled or realized by
March 31, 2004 were calculated at the rate of 41%, and those expected to be
settled or realized after April 1, 2004 were calculated at the rate of 40%.

The effects of the income tax rate reduction on deferred income tax
balances as of March 31, 2003 reduced the net deferred tax asset by
approximately ¥1,044 million ($8,700 thousand).

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The effective tax rate of TDK for the years ended March 31, 2003, 2002 and
2001, are reconciled with the Japanese statutory tax rate in the following
table:

|                                                          |                    |  |       |      |      |  |       |       |    |  |       |      |  
|--------------------------------------------------------- | ------------------ |  | ----- | ---- | ---- |  | ----- | ----- | -- |  | ----- | ---- | -
|                                                          |                    |  | 2003  |      | 2002 |  | 2001 
|                                                          |                    |  |       |      |      |  |      
|Japanese statutory tax rate                               |                    |  | 41.0  | %    |      |  | (41.0 | )%    |    |  | 41.0  | %   
|Expenses not deductible for tax purposes                  |                    |  | 0.5   |      |      |  | 0.2   |       |    |  | 0.3   |     
|Non taxable income                                        |                    |  | (2.4  | )    |      |  | (1.0  | )     |    |  | (0.0  | )   
|Amortization of goodwill                                  |                    |  |      |      |      |  |      |       |    |  | 1.4   |     
|Difference in statutory tax rates of foreign subsidiaries |                    |  | (22.6 | )    |      |  | (3.0  | )     |    |  | (14.1 | )   
|Change in the valuation allowance                         |                    |  | 14.8  |      |      |  | 4.8   |       |    |  | (0.3  | )   
|Change in enacted tax laws and rates                      |                    |  | 5.8   |      |      |  |      |       |    |  |      |     
|Currency translation adjustment                           |                    |  | (3.3  | )    |      |  |      |       |    |  |      |     
|Special tax deduction                                     |                    |  | (4.7  | )    |      |  | (2.0  | )     |    |  | (3.2  | )   
|Other                                                     |                    |  | 0.2   |      |      |  | 3.1   |       |    |  | 5.6   |     
|                                                          |                    |  |       |      |      |  |       |       |    |  |       |     
|                                                          | Effective tax rate |  |       | 29.3 | %    |  |       | (38.9 | )% |  |       | 30.7 | %
|                                                          |                    |  |       |      |      |  |       |       |    |  |       |     

Total income taxes for the years ended March 31, 2003, 2002 and 2001 are
allocated as follows:

|                                  |                                             |   |            |         |              |  |         |         |      |  |        |        |   |   |         |         |  
|--------------------------------- | ------------------------------------------- | - | ---------- | ------- | ------------ |  | ------- | ------- | ---- |  | ------ | ------ | - | - | ------- | ------- | -
|                                  |                                             |   | Yen        |         | U.S. Dollars
|                                  |                                             |   | (Millions) |         | (Thousands) 
|                                  |                                             |   |            |         |             
|                                  |                                             |   | 2003       |         | 2002         |  | 2001    |         | 2003
|                                  |                                             |   |            |         |              |  |         |         |     
|Income (loss) before income taxes |                                             | ¥ | 5,296      |         |              |  | (16,994 | )       |      |  | 19,792 |        |   | $ | 44,133  |        
|Stockholders equity:             |                                             |   |            |         |              |  |         |         |      |  |        |        |   |   |         |        
|                                  | Foreign currency translation
adjustments    |   |            | (242    | )            |  |         | 642     |      |  |        | (1,893 | ) |   |         | (2,017  | )
|                                  | Net unrealized gains (losses) on securities |   |            | (166    | )            |  |         | 436     |      |  |        | (6,404 | ) |   |         | (1,383  | )
|                                  | Minimum pension liability adjustments       |   |            | (10,950 | )            |  |         | (24,901 | )    |  |        | 9,587  |   |   |         | (91,250 | )
|                                  |                                             |   |            |         |              |  |         |         |      |  |        |        |   |   |         |        
|Total income taxes                |                                             | ¥ | (6,062     | )       |              |  | (40,817 | )       |      |  | 21,082 |        |   | $ | (50,517 | )      
|                                  |                                             |   |            |         |              |  |         |         |      |  |        |        |   |   |         |        

Income (loss) before income taxes and income taxes for the years ended
March 31, 2003, 2002 and 2001, are summarized as follows:

|                |      |          |         |   |        |         |              |   |          |        |         |   |         |         |         |   |        |        
|--------------- | ---- | -------- | ------- | - | ------ | ------- | ------------ | - | -------- | ------ | ------- | - | ------- | ------- | ------- | - | ------ | -------
|                |      |          |         |   | Income |         |              |   |          |        |         |   |         |         |         |   |       
|                |      |          |         |   | (loss) |         |              |   |          |        |         |   |         |         |         |   |       
|                |      |          |         |   | Before |         | Income Taxes
|                |      |          |         |   | Income |         |             
|                |      |          |         |   | Taxes  |         | Current      |   | Deferred |        | Total  
|                |      |          |         |   |        |         |              |   |          |        |        
|Yen (Millions): |      |          |         |   |        |         |              |   |          |        |         |   |         |         |         |  
|                | 2003 |          |         |   |        |         |              |   |          |        |         |   |         |         |         |   |       
|                |      | Japanese |         |   | ¥      | 6,932   |              |   |          | (1,929 | )       |   |         | 5,977   |         |   |        | 4,048  
|                |      | Foreign  |         |   |        | 11,149  |              |   |          | 2,924  |         |   |         | (1,676  | )       |   |        | 1,248  
|                |      |          |         |   |        |         |              |   |          |        |         |   |         |         |         |  
|                |      | ¥        | 18,081  |   |        |         | 995          |   |          |        | 4,301   |   |         |         | 5,296   |  
|                |      |          |         |   |        |         |              |   |          |        |         |   |         |         |         |  
|                | 2002 |          |         |   |        |         |              |   |          |        |         |   |         |         |         |   |       
|                |      | Japanese |         |   | ¥      | (20,395 | )            |   |          | (660   | )       |   |         | (14,483 | )       |   |        | (15,143
|                |      | Foreign  |         |   |        | (23,302 | )            |   |          | (2,537 | )       |   |         | 686     |         |   |        | (1,851 
|                |      |          |         |   |        |         |              |   |          |        |         |   |         |         |         |  
|                |      | ¥        | (43,697 | ) |        |         | (3,197       | ) |          |        | (13,797 | ) |         |         | (16,994 | )
|                |      |          |         |   |        |         |              |   |          |        |         |   |         |         |         |  
|                | 2001 |          |         |   |        |         |              |   |          |        |         |   |         |         |         |   |       
|                |      | Japanese |         | ¥ | 64,394 |         |              |   | 25,832   |        |         |   | (10,662 | )       |         |   | 15,170 |        
|                |      | Foreign  |         |   | 122    |         |              |   | 4,946    |        |         |   | (324    | )       |         |   | 4,622  |        
|                |      |          |         |   |        |         |              |   |          |        |         |   |         |         |         |  
|                |      | ¥        | 64,516  |   |        |         | 30,778       |   |          |        | (10,986 | ) |         |         | 19,792  |  
|                |      |          |         |   |        |         |              |   |          |        |         |   |         |         |         |  

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|                          |      |          |         |        |        |              |       |          |         |       |        |  |         |   |        |  |        | 
|------------------------- | ---- | -------- | ------- | ------ | ------ | ------------ | ----- | -------- | ------- | ----- | ------ |  | ------- | - | ------ |  | ------ | 
|                          |      |          |         | Income |        |              |       |          |         |       |        |  |         |   |        | 
|                          |      |          |         | (loss) |        |              |       |          |         |       |        |  |         |   |        | 
|                          |      |          |         | Before |        | Income Taxes
|                          |      |          |         | Income |        |             
|                          |      |          |         | Taxes  |        | Current      |       | Deferred |         | Total
|                          |      |          |         |        |        |              |       |          |         |      
|U.S. Dollars (Thousands): |      |          |         |        |        |              |       |          |         |       |        |  |         |   |        | 
|                          | 2003 |          |         |        |        |              |       |          |         |       |        |  |         |   |        |  |       
|                          |      | Japanese |         | $      | 57,767 |              |       |          | (16,076 | )     |        |  | 49,809  |   |        |  | 33,733 | 
|                          |      | Foreign  |         |        | 92,908 |              |       |          | 24,367  |       |        |  | (13,967 | ) |        |  | 10,400 | 
|                          |      |          |         |        |        |              |       |          |         |       |        |  |         |   |        | 
|                          |      | $        | 150,675 |        |        |              | 8,291 |          |         |       | 35,842 |  |         |   | 44,133 | 
|                          |      |          |         |        |        |              |       |          |         |       |        |  |         |   |        | 

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
2003 and 2002, are as follows:

|                          |                                                                               |                                      |   |            |        |              |  |        |        |   |   |         |         |  
|------------------------- | ----------------------------------------------------------------------------- | ------------------------------------ | - | ---------- | ------ | ------------ |  | ------ | ------ | - | - | ------- | ------- | -
|                          |                                                                               |                                      |   | Yen        |        | U.S. Dollars
|                          |                                                                               |                                      |   | (Millions) |        | (Thousands) 
|                          |                                                                               |                                      |   |            |        |             
|                          |                                                                               |                                      |   | 2003       |        | 2002         |  | 2003  
|                          |                                                                               |                                      |   |            |        |              |  |       
|Deferred tax assets:      |                                                                               |                                      |   |            |        |              |  |        |        |   |   |        
|                          | Trade accounts receivable, principally due to
allowance for doubtful debt     |                                      | ¥ | 486        |        |              |  | 609    |        |   | $ | 4,050   |        
|                          | Inventories                                                                   |                                      |   | 625        |        |              |  | 552    |        |   |   | 5,208   |        
|                          | Accrued business tax                                                          |                                      |   | 31         |        |              |  |       |        |   |   | 258     |        
|                          | Accrued expenses                                                              |                                      |   | 3,215      |        |              |  | 3,042  |        |   |   | 26,792  |        
|                          | Retirement and severance benefits                                             |                                      |   | 9,465      |        |              |  | 5,374  |        |   |   | 78,875  |        
|                          | Net operating loss carryforwards                                              |                                      |   | 13,215     |        |              |  | 16,494 |        |   |   | 110,125 |        
|                          | Tax credit carryforwards                                                      |                                      |   | 1,429      |        |              |  | 2,294  |        |   |   | 11,908  |        
|                          | Minimum pension liability adjustments                                         |                                      |   | 38,613     |        |              |  | 28,615 |        |   |   | 321,775 |        
|                          | Other                                                                         |                                      |   | 2,218      |        |              |  | 3,764  |        |   |   | 18,484  |        
|                          |                                                                               |                                      |   |            |        |              |  |        |        |   |   |        
|                          |                                                                               | Total gross deferred tax assets      |   |            | 69,297 |              |  |        | 60,744 |   |   |         | 577,475 |  
|                          |                                                                               | Less valuation allowance             |   |            | (9,690 | )            |  |        | (7,444 | ) |   |         | (80,750 | )
|                          |                                                                               |                                      |   |            |        |              |  |        |        |   |   |        
|                          |                                                                               | Net deferred tax assets              |   | ¥          | 59,607 |              |  |        | 53,300 |   |   | $       | 496,725 |  
|                          |                                                                               |                                      |   |            |        |              |  |        |        |   |   |        
|Deferred tax liabilities: |                                                                               |                                      |   |            |        |              |  |        |        |   |   |        
|                          | Investments, principally due to differences
in valuation                      |                                      |   | (6,420     | )      |              |  | (6,156 | )      |   |   | (53,500 | )      
|                          | Undistributed earnings of foreign subsidiaries                                |                                      |   | (738       | )      |              |  | (714   | )      |   |   | (6,150  | )      
|                          | Property, plant and equipment, principally
due to differences in depreciation |                                      |   | (515       | )      |              |  | (1,334 | )      |   |   | (4,292  | )      
|                          | Net unrealized gains on securities                                            |                                      |   | (77        | )      |              |  | (241   | )      |   |   | (642    | )      
|                          | Other                                                                         |                                      |   | (514       | )      |              |  | (1,025 | )      |   |   | (4,283  | )      
|                          |                                                                               |                                      |   |            |        |              |  |        |        |   |   |        
|                          |                                                                               | Total gross deferred tax liabilities |   |            | (8,264 | )            |  |        | (9,470 | ) |   |         | (68,867 | )
|                          |                                                                               |                                      |   |            |        |              |  |        |        |   |   |        
|                          |                                                                               | Net deferred tax assets              |   | ¥          | 51,343 |              |  |        | 43,830 |   |   | $       | 427,858 |  
|                          |                                                                               |                                      |   |            |        |              |  |        |        |   |   |        

The net changes in the total valuation allowance for the years ended March
31, 2003, 2002 and 2001, are an increase of ¥2,246 million ($18,717 thousand),
¥1,798 million and ¥4,687 million, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those
temporary differences become deductible. Management considered the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not TDK will realize the benefits of these deductible
differences, net of the existing valuation allowance at March 31, 2003.

At March 31, 2003, TDK and certain subsidiaries have net operating loss
carryforwards for income tax purposes of ¥36,023 million ($300,192 thousand)
which are available to offset future taxable income, if any.

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Periods available to offset future taxable income vary in each tax
jurisdiction and range from one year to an indefinite period as follows:

|                   |  |                |        |             |  |              |         | 
|------------------ |  | -------------- | ------ | ----------- |  | ------------ | ------- | 
|                   |  |                |        |             |  | U.S. Dollars
|                   |  | Yen (Millions) |        | (Thousands)
|                   |  |                |        |            
|Within 1 year      |  | ¥              | 68     |             |  | $            | 567     | 
|1 to 5 years       |  |                | 14,076 |             |  |              | 117,300 | 
|5 to 20 years      |  |                | 11,400 |             |  |              | 95,000  | 
|Indefinite periods |  |                | 10,479 |             |  |              | 87,325  | 
|                   |  |                |        |             |  |              |         | 
|                   |  | ¥              | 36,023 |             |  | $            | 300,192 | 
|                   |  |                |        |             |  |              |         | 

Certain subsidiaries have tax credit carryforwards for income tax purposes
of ¥1,429 million ($11,908 thousand) which are available to reduce future
income taxes, if any. Approximately ¥455 million ($3,792 thousand) of the tax
credit carryforwards expire in fiscal 2018, while the remainder have an
indefinite carryforward period.

Net deferred income tax assets and liabilities at March 31, 2003 and 2002,
are reflected in the accompanying consolidated balance sheets under the
following captions:

|                                               |  |            |        |              |  |      |        |   |  |   |         |  
|---------------------------------------------- |  | ---------- | ------ | ------------ |  | ---- | ------ | - |  | - | ------- | -
|                                               |  | Yen        |        | U.S. Dollars
|                                               |  | (Millions) |        | (Thousands) 
|                                               |  |            |        |             
|                                               |  | 2003       |        | 2002         |  | 2003
|                                               |  |            |        |              |  |     
|Prepaid expenses and other current assets      |  | ¥          | 7,555  |              |  |      | 7,961  |   |  | $ | 62,958  |  
|Deferred income taxes (noncurrent assets)      |  |            | 43,948 |              |  |      | 37,021 |   |  |   | 366,233 |  
|Other current liabilities                      |  |            | (147   | )            |  |      | (554   | ) |  |   | (1,225  | )
|Deferred income taxes (noncurrent liabilities) |  |            | (13    | )            |  |      | (598   | ) |  |   | (108    | )
|                                               |  |            |        |              |  |      |        |   |  |   |         |  
|                                               |  | ¥          | 51,343 |              |  |      | 43,830 |   |  | $ | 427,858 |  
|                                               |  |            |        |              |  |      |        |   |  |   |         |  

As of March 31, 2003, TDK did not recognize deferred tax liabilities of
approximately ¥43,083 million ($359,025 thousand) for certain portions of
undistributed earnings of foreign subsidiaries because TDK currently does not
expect those unremitted earnings to reverse and become taxable to TDK in the
foreseeable future. A deferred tax liability will be recognized when TDK
expects that it will recover those undistributed earnings in a taxable manner,
such as through receipt of dividends or sale of the investments. As of March
31, 2003, the undistributed earnings of these subsidiaries are approximately
¥178,373 million ($1,486,442 thousand).

8. Retirement and Severance Benefits

TDK and certain subsidiaries have noncontributory retirement and severance
plans that provide for pension or lump-sum payment benefits, based on length of
service and certain other factors, to employees who retire or terminate their
employment for reasons other than dismissal for cause. In addition, the
majority of the employees of TDK are covered by a contributory pension plan,
whose benefits are based on length of service and certain other factors and
include a portion representing the government social security welfare pension.
TDKs funding is in accordance with income tax and welfare pension regulations.
In addition, in September 2000, TDK contributed equity securities with a fair
value of ¥34,573 million and cash of ¥15,315 million to the pension trust. TDK
also has an unfunded retirement plan for statutory auditors.

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Reconciliations of beginning and ending balances of the benefit
obligations and the fair value of the plan assets are as follows:

|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|--------------------------------------------------------------------------- | ------------------------------------------------ | - | ---------- | ------- | ------------ |  | ------- | ------- | - | - | --------- | --------- | -
|                                                                            |                                                  |   | Yen        |         | U.S. Dollars
|                                                                            |                                                  |   | (Millions) |         | (Thousands) 
|                                                                            |                                                  |   |            |         |             
|                                                                            |                                                  |   | 2003       |         | 2002         |  | 2003   
|                                                                            |                                                  |   |            |         |              |  |        
|Change in benefit obligations:                                              |                                                  |   |            |         |              |  |         |         |   |   |           |          
|                                                                            | Benefit obligations at beginning of period       |   | ¥          | 238,838 |              |  |         | 230,733 |   |   | $         | 1,990,317 |  
|                                                                            | Service cost                                     |   |            | 9,383   |              |  |         | 8,924   |   |   |           | 78,192    |  
|                                                                            | Interest cost                                    |   |            | 5,985   |              |  |         | 6,359   |   |   |           | 49,875    |  
|                                                                            | Plan participants contributions                 |   |            | 621     |              |  |         | 660     |   |   |           | 5,175     |  
|                                                                            | Plan amendments                                  |   |            | (4,838  | )            |  |         | (16,816 | ) |   |           | (40,317   | )
|                                                                            | Actuarial loss (gain)                            |   |            | 11,594  |              |  |         | 21,359  |   |   |           | 96,617    |  
|                                                                            | Benefits paid                                    |   |            | (10,346 | )            |  |         | (12,752 | ) |   |           | (86,217   | )
|                                                                            | Translation adjustment                           |   |            | (612    | )            |  |         | 371     |   |   |           | (5,100    | )
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|                                                                            | Benefit obligations at end of period             |   |            | 250,625 |              |  |         | 238,838 |   |   |           | 2,088,542 |  
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|Change in plan assets:                                                      |                                                  |   |            |         |              |  |         |         |   |   |           |          
|                                                                            | Fair value of plan assets at beginning of period |   |            | 166,253 |              |  |         | 179,558 |   |   |           | 1,385,442 |  
|                                                                            | Actual return on plan assets                     |   |            | (17,914 | )            |  |         | (15,584 | ) |   |           | (149,283  | )
|                                                                            | Employer contributions                           |   |            | 7,293   |              |  |         | 9,564   |   |   |           | 60,775    |  
|                                                                            | Plan participants contributions                 |   |            | 621     |              |  |         | 660     |   |   |           | 5,175     |  
|                                                                            | Benefits paid                                    |   |            | (9,400  | )            |  |         | (8,154  | ) |   |           | (78,333   | )
|                                                                            | Translation adjustment                           |   |            | (280    | )            |  |         | 209     |   |   |           | (2,333    | )
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|                                                                            | Fair value of plan assets at end of period       |   |            | 146,573 |              |  |         | 166,253 |   |   |           | 1,221,443 |  
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|Funded status                                                               |                                                  |   | (104,052   | )       |              |  | (72,585 | )       |   |   | (867,099  | )        
|Unrecognized net transition obligation
being recognized over 18 years       |                                                  |   | (6,377     | )       |              |  | (7,708  | )       |   |   | (53,142   | )        
|Unrecognized net actuarial loss                                             |                                                  |   | 142,621    |         |              |  | 117,092 |         |   |   | 1,188,508 |          
|Unrecognized prior service benefit                                          |                                                  |   | (20,312    | )       |              |  | (16,816 | )       |   |   | (169,267  | )        
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|Net amount recognized                                                       |                                                  | ¥ | 11,880     |         |              |  | 19,983  |         |   | $ | 99,000    |          
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|Amounts recognized in consolidated balance sheets consist of:               |                                                  |   |            |         |              |  |         |         |   |   |           |          
|                                                                            | Retirement and severance benefits                |   |            | (84,971 | )            |  |         | (49,992 | ) |   |           | (708,092  | )
|                                                                            | Intangible assets                                |   |            | 251     |              |  |         | 134     |   |   |           | 2,092     |  
|                                                                            | Accumulated other comprehensive income           |   |            | 96,600  |              |  |         | 69,841  |   |   |           | 805,000   |  
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|Net amount recognized                                                       |                                                  | ¥ | 11,880     |         |              |  | 19,983  |         |   | $ | 99,000    |          
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  
|Actuarial present value of accumulated benefit
obligations at end of period |                                                  | ¥ | 229,466    |         |              |  | 215,808 |         |   | $ | 1,912,217 |          
|                                                                            |                                                  |   |            |         |              |  |         |         |   |   |           |           |  

Net periodic benefit cost for the years ended March 31, 2003, 2002 and
2001, consisted of the following:

|                                         |                                                    |  |      |        |              |  |            |        |      |  |  |        |             |  |   |         |  
|---------------------------------------- | -------------------------------------------------- |  | ---- | ------ | ------------ |  | ---------- | ------ | ---- |  |  | ------ | ----------- |  | - | ------- | -
|                                         |                                                    |  | Yen  |        | U.S. Dollars
|                                         |                                                    |  |      |        |              |  | (Millions) |        |      |  |  |        | (Thousands)
|                                         |                                                    |  |      |        |             
|                                         |                                                    |  | 2003 |        | 2002         |  | 2001       |        | 2003
|                                         |                                                    |  |      |        |              |  |            |        |     
|Components of net periodic benefit cost: |                                                    |  |      |        |              |  |            |        |      |  |  |        |             |  |   |        
|                                         | Service cost                                       |  | ¥    | 9,383  |              |  |            | 8,924  |      |  |  | 10,923 |             |  | $ | 78,192  |  
|                                         | Interest cost                                      |  |      | 5,985  |              |  |            | 6,359  |      |  |  | 6,390  |             |  |   | 49,875  |  
|                                         | Expected return on plan assets                     |  |      | (3,678 | )            |  |            | (4,321 | )    |  |  | (4,417 | )           |  |   | (30,650 | )
|                                         | Amortization of transition assets                  |  |      | (1,331 | )            |  |            | (1,331 | )    |  |  | (1,331 | )           |  |   | (11,092 | )
|                                         | Recognized actuarial loss                          |  |      | 5,963  |              |  |            | 3,461  |      |  |  | 2,598  |             |  |   | 49,691  |  
|                                         | Amortization of unrecognized
prior service benefit |  |      | (1,342 | )            |  |            |       |      |  |  |       |             |  |   | (11,183 | )
|                                         |                                                    |  |      |        |              |  |            |        |      |  |  |        |             |  |   |         |  
|                                         | Net periodic benefit cost                          |  | ¥    | 14,980 |              |  |            | 13,092 |      |  |  | 14,163 |             |  | $ | 124,833 |  
|                                         |                                                    |  |      |        |              |  |            |        |      |  |  |        |             |  |   |         |  

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The weighted-average discount rates used in determining the present value
of benefit obligations and expected long-term rate of return on assets were
2.1% and 2.6% for 2003 and 2002, respectively. The rates of increase in future
compensation levels were 3.0% for 2003 and 2002.

Plan assets comprise primarily listed stock, bonds and other
interest-bearing securities.

9. Legal Reserve and Dividends

The Japanese Commercial Code, amended effective on October 1, 2001,
provides that an amount equal to at least 10% of cash dividends and of certain
other items be appropriated as a legal reserve until an aggregated amount of
additional paid-in capital and the legal reserve equals 25% of common stock.
The portion of such aggregated amount in excess of 25% of common stock may
become available for dividends subsequent to release to retained earnings.
Certain foreign subsidiaries are also required to appropriate earnings to legal
reserves under the laws of the respective countries.

Cash dividends and appropriations to the legal reserve charged to retained
earnings during the periods represent dividends paid out during the periods and
related appropriations to the legal reserve. The accompanying consolidated
financial statements do not include any provision for the dividend proposed by
the Board of Directors of ¥25 ($0.21) per share aggregating ¥3,316 million
($27,633 thousand) in respect of the year ended March 31, 2003, or for the
related appropriation to the legal reserve.

Cash dividends per common share are computed based on dividends paid for
the year.

10. Stock Option Plan

TDK obtained approval of the Ordinary General Meeting of Shareholders held
on June 27, 2002 regarding the issue of stock acquisition rights as stock
options (the Stock Acquisition Rights) for Board members and select senior
executives, pursuant to Articles 280-20 and 280-21 of the Japanese Commercial
Code, as amended. Upon approval, the Board of Directors has adopted
resolutions to issue at no charge an aggregate of 2,236 Stock Acquisition
Rights, each representing a stock option to purchase 100 share of common stock
of TDK, to the current 7 Directors on the Board and 190 select senior
executives. The Stock Acquisition Rights issued on August 9, 2002 are
exercisable during the period from August 1, 2004 to July 31, 2008. The amount
to be paid by qualified persons upon the exercise of each Stock Acquisition
Rights is set at ¥5,909 ($49.24) per share of common stock, which was
calculated by a formula approved by shareholders at the said annual
shareholders meeting and is subject to an adjustment in certain events,
including but not limited to a stock split, stock dividend and issue of new
shares at a price less than the current market price of the shares of TDK. The
exercise price of each Stock Acquisition Right was equal to or greater than the
fair market value of TDKs common stock on the date of grant. To cover these
options TDK purchased on the Tokyo Stock Exchange (TSE) a total of 223,600
common shares with an aggregate purchase price of ¥1,209 million ($10,075
thousand) from August 12, 2002 through August 19, 2002.

The Ordinary General Meeting of Shareholders held on June 28, 2001
approved to implement TDKs stock option plan for Directors and certain
employees of TDK, and to purchase TDKs own shares for transfer to them under
the plan, pursuant to Article 210-2 of the Japanese Commercial Code. Stock
options (rights to purchase common shares) were provided to the then 12
Directors on the Board and 184 associate directors and officials in amounts
ranging from 500 to 10,000 common shares each, exercisable from August 1, 2003
to April 30, 2007, at an exercise price of ¥6,114 per share, which was
calculated by a formula approved by shareholders at the said annual
shareholders meeting and is subject to an adjustment in certain events,
including but not limited to a stock split, stock dividend and issue of new
shares at price less than the current market price of the shares of TDK. The
exercise price of each stock option was equal to or greater than the fair
market value of TDKs common stock on the date of grant. To cover these
options TDK purchased on TSE a total of 158,000 common shares with an aggregate
purchase price of ¥917 million from July 2, 2001 through July 23, 2001.

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The Ordinary General Meeting of Shareholders held on June 29, 2000
approved to implement TDKs stock option plan for Directors and certain
employees of TDK, and to purchase TDKs own shares for transfer to them under
the plan, pursuant to Article 210-2 of the Japanese Commercial Code. Stock
options (rights to purchase common shares) were provided to the then 13
Directors on the Board and 191 associate directors and officials in amounts
ranging from 500 to 10,000 common shares each, exercisable from August 1, 2002
to April 30, 2006, at an exercise price of ¥15,640 per share, which was
calculated by a formula approved by shareholders at the said annual
shareholders meeting and is subject to an adjustment in certain events,
including but not limited to a stock split, stock dividend and issue of new
shares at price less than the current market price of the shares of TDK. The
exercise price of each stock option was equal to or greater than the fair
market value of TDKs common stock on the date of grant. To cover these
options TDK purchased on TSE a total of 170,400 common shares with an aggregate
purchase price of ¥2,665 million from July 3, 2000 through August 2, 2000.

A summary of the status of TDKs three stock option plans as of March 31,
2003, 2002 and 2001, and of the activity during the years ending on those dates
is as follows:

|                                 |  |           |         |                  |  |           |        |                  |  |           |         |                  |  |                  |        |  |  |     |         |              |  |  |        |  |  |  |        | 
|-------------------------------- |  | --------- | ------- | ---------------- |  | --------- | ------ | ---------------- |  | --------- | ------- | ---------------- |  | ---------------- | ------ |  |  | --- | ------- | ------------ |  |  | ------ |  |  |  | ------ | 
|                                 |  | 2003      |         | 2002             |  | 2001      |        | 2003            
|                                 |  |           |         |                  |  |           |        |                 
|                                 |  | Number of |         | Weighted average |  | Number of |        | Weighted average |  | Number of |         | Weighted average |  | Weighted average
|                                 |  | shares    |         | exercise price   |  | shares    |        | exercise price   |  | shares    |         | exercise price   |  | exercise price  
|                                 |  |           |         |                  |  |           |        |                  |  |           |         |                  |  |                 
|                                 |  |           |         |                  |  | Yen       |        |                  |  |           |         | Yen              |  |                  |        |  |  | Yen |         | U.S. Dollars
|Outstanding at
beginning of year |  |           | 328,400 |                  |  |           | 11,057 |                  |  |           | 170,400 |                  |  |                  | 15,640 |  |  |     |        |              |  |  |       |  |  |  | 92.14  | 
|Granted                          |  |           | 223,600 |                  |  |           | 5,909  |                  |  |           | 158,000 |                  |  |                  | 6,114  |  |  |     | 170,400 |              |  |  | 15,640 |  |  |  | 49.24  | 
|Exercised                        |  |           |        |                  |  |           |       |                  |  |           |        |                  |  |                  |       |  |  |     |        |              |  |  |       |  |  |  |       | 
|Forfeited or Expired             |  |           | 1,000   |                  |  |           | 5,909  |                  |  |           |        |                  |  |                  |       |  |  |     |        |              |  |  |       |  |  |  | 49.24  | 
|Outstanding at end
of year       |  |           | 551,000 |                  |  |           | 8,977  |                  |  |           | 328,400 |                  |  |                  | 11,057 |  |  |     | 170,400 |              |  |  | 15,640 |  |  |  | 74.81  | 
|Exercisable at end
of year       |  |           | 170,400 |                  |  |           | 15,640 |                  |  |           |        |                  |  |                  |       |  |  |     |        |              |  |  |       |  |  |  | 130.33 | 

Information about stock options outstanding at March 31, 2003 is as follows:

| |                          |  |                     |         |                  |  |                  |     |  |  |     |        |              |  |  |        | 
| | ------------------------ |  | ------------------- | ------- | ---------------- |  | ---------------- | --- |  |  | --- | ------ | ------------ |  |  | ------ | 
| |                          |  | Options Outstanding
| |                          |  |                    
| |                          |  |                     |         |                  |  | Weighted         |     |  |  |     |        |              |  | 
| |                          |  | Number              |         | average          |  |                  |     |  |  |     |        |             
| |                          |  | outstanding at      |         | remaining        |  | Weighted average
| | Range of exercise prices |  | March 31, 2003      |         | contractual life |  | exercise price  
| |                          |  |                     |         |                  | 
| | Yen                      |  |                     |         |                  |  |                  |     |  |  | Yen |        | U.S. Dollars
| | 5,909                    |  |                     | 222,600 |                  |  |                  | 5.3 |  |  |     | 5,909  |              |  |  | 49.24  | 
| | 6,114                    |  |                     | 158,000 |                  |  |                  | 4.1 |  |  |     | 6,114  |              |  |  | 50.95  | 
| | 15,640                   |  |                     | 170,400 |                  |  |                  | 3.1 |  |  |     | 15,640 |              |  |  | 130.33 | 
| |                          |  |                     |         |                  |  |                  |     |  |  |     |        |              |  |  |       
| | 5,909 to 15,640          |  |                     | 551,000 |                  |  |                  | 4.3 |  |  |     | 8,977  |              |  |  | 74.81  | 
| |                          |  |                     |         |                  |  |                  |     |  |  |     |        |              |  |  |       

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The fair value of these stock options was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions:

|                        |  |      |                |           |  |           |        |  |  |  |        | 
|----------------------- |  | ---- | -------------- | --------- |  | --------- | ------ |  |  |  | ------ | 
|                        |  | 2003 |                | 2002      |  | 2001     
|                        |  |      |                |           |  |          
|Grant-date fair value   |  |      | ¥1,569 ($13.08 | )         |  |           | ¥1,567 |  |  |  | ¥4,127 | 
|Expected life           |  |      | 4.0 years      | 3.9 years |  | 3.9 years
|Risk-free interest rate |  |      | 0.35%          |           |  |           | 0.34%  |  |  |  | 0.89%  | 
|Expected volatility     |  |      | 39.96%         |           |  |           | 39.86% |  |  |  | 37.92% | 
|Expected dividend yield |  |      | 0.80%          |           |  |           | 1.03%  |  |  |  | 0.40%  | 

11. Other Comprehensive Income (Loss)

Change in accumulated other comprehensive income (loss) for the years
ended March 31, 2003, 2002 and 2001, are as follows:

|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  
|---------------------------------------------------- | ------------------------------ |  | ---- | ------- | ---- |  | ---------- | ------- | ---- |  |  | ------- | ------------ |  | - | -------- | -
|                                                     |                                |  |      |         |      |  | Yen        |         |      |  |  |         | U.S. Dollars
|                                                     |                                |  |      |         |      |  | (Millions) |         |      |  |  |         | (Thousands) 
|                                                     |                                |  |      |         |     
|                                                     |                                |  | 2003 |         | 2002 |  | 2001       |         | 2003
|                                                     |                                |  |      |         |      |  |            |         |     
|Foreign currency translation adjustments:            |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |         
|                                                     | Balance at beginning of period |  | ¥    | (7,773  | )    |  |            | (23,798 | )    |  |  | (50,237 | )            |  | $ | (64,775  | )
|                                                     | Adjustments for period         |  |      | (18,747 | )    |  |            | 16,025  |      |  |  | 26,439  |              |  |   | (156,225 | )
|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  
|                                                     | Balance at end of period       |  |      | (26,520 | )    |  |            | (7,773  | )    |  |  | (23,798 | )            |  |   | (221,000 | )
|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  
|Net unrealized gains (losses) on securities:         |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |         
|                                                     | Balance at beginning of period |  |      | 379     |      |  |            | (329    | )    |  |  | 6,499   |              |  |   | 3,158    |  
|                                                     | Adjustments for period         |  |      | (269    | )    |  |            | 708     |      |  |  | (6,828  | )            |  |   | (2,242   | )
|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  
|                                                     | Balance at end of period       |  |      | 110     |      |  |            | 379     |      |  |  | (329    | )            |  |   | 916      |  
|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  
|Minimum pension liability adjustments:               |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |         
|                                                     | Balance at beginning of period |  |      | (36,605 | )    |  |            | (724    | )    |  |  | (14,519 | )            |  |   | (305,042 | )
|                                                     | Adjustments for period         |  |      | (15,809 | )    |  |            | (35,881 | )    |  |  | 13,795  |              |  |   | (131,741 | )
|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  
|                                                     | Balance at end of period       |  |      | (52,414 | )    |  |            | (36,605 | )    |  |  | (724    | )            |  |   | (436,783 | )
|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  
|Total accumulated other comprehensive income (loss): |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |         
|                                                     | Balance at beginning of period |  |      | (43,999 | )    |  |            | (24,851 | )    |  |  | (58,257 | )            |  |   | (366,659 | )
|                                                     | Adjustments for period         |  |      | (34,825 | )    |  |            | (19,148 | )    |  |  | 33,406  |              |  |   | (290,208 | )
|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  
|                                                     | Balance at end of period       |  | ¥    | (78,824 | )    |  |            | (43,999 | )    |  |  | (24,851 | )            |  | $ | (656,867 | )
|                                                     |                                |  |      |         |      |  |            |         |      |  |  |         |              |  |   |          |  

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Tax effects allocated to each component of other comprehensive income
(loss) and reclassification adjustments for the years ended March 31, 2003,
2002 and 2001, are as follows:

|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |         |        |  
|---- | ----------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------------------- | ------- | ---------- | ------- | ------------- | ---- | ---------- | ------ | ------- | ------- | ------- | ------ | -
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      | Yen        |        |         |         |        
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      | (Millions) |        |         |         |        
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |        
|     |                                           |                                                                                                                               |                                                                        |                               |         | Before tax |         | Tax (expense) |      | Net-of-tax
|     |                                           |                                                                                                                               |                                                                        |                               |         | Amount     |         | or benefit    |      | amount    
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |           
|2003 |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |        
|     | Foreign currency translation adjustments: |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |        
|     |                                           | Amount arising during the year on investments in foreign entities held
at end of period                                       |                                                                        | ¥                             | (19,751 | )          |         |               | 242  |            |        |         | (19,509 | )      
|     |                                           | Reclassification adjustments for the portion of gains and losses
realized upon liquidation of investments in foreign entities |                                                                        |                               | 762     |            |         |               |     |            |        |         | 762     |        
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |        
|     |                                           |                                                                                                                               | Net foreign currency translation adjustments                           |                               |         | (18,989    | )       |               |      | 242        |        |         |         | (18,747 | )     
|     | Unrealized gains (losses) on securities:  |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |        
|     |                                           | Unrealized holding gains arising for period                                                                                   |                                                                        |                               | 104     |            |         |               | (41  | )          |        |         | 63      |        
|     |                                           | Reclassification adjustments for (gains) losses realized in net income                                                        |                                                                        |                               | (539    | )          |         |               | 207  |            |        |         | (332    | )      
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |        
|     |                                           |                                                                                                                               | Net unrealized gains (losses)                                          |                               |         | (435       | )       |               |      | 166        |        |         |         | (269    | )     
|     | Minimum pension liability adjustments     |                                                                                                                               |                                                                        | (26,759                       | )       |            |         | 10,950        |      |            |        | (15,809 | )      
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |        
|     | Other comprehensive income (loss)         |                                                                                                                               | ¥                                                                      | (46,183                       | )       |            |         | 11,358        |      |            |        | (34,825 | )      
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |        
|2002 |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |        
|     | Foreign currency translation adjustments  | ¥                                                                                                                             | 16,667                                                                 |                               |         |            | (642    | )             |      |            | 16,025 |        
|     | Unrealized gains (losses) on securities:  |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |        
|     |                                           | Unrealized holding gains arising for period                                                                                   |                                                                        |                               | 1,144   |            |         |               | (436 | )          |        |         | 708     |        
|     | Minimum pension liability adjustments     |                                                                                                                               |                                                                        | (60,782                       | )       |            |         | 24,901        |      |            |        | (35,881 | )      
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |        
|     | Other comprehensive income (loss)         |                                                                                                                               | ¥                                                                      | (42,971                       | )       |            |         | 23,823        |      |            |        | (19,148 | )      
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |        
|2001 |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |        
|     | Foreign currency translation adjustments  | ¥                                                                                                                             | 24,546                                                                 |                               |         |            | 1,893   |               |      |            | 26,439 |        
|     | Unrealized gains (losses) on securities:  |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |        
|     |                                           | Unrealized holding gains (losses) arising for period                                                                          |                                                                        |                               | (691    | )          |         |               | 242  |            |        |         | (449    | )      
|     |                                           |                                                                                                                               | Reclassification adjustments for (gains) losses realized in net income |                               |         | (12,541    | )       |               |      | 6,162      |        |         |         | (6,379  | )     
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |        
|     |                                           |                                                                                                                               |                                                                        | Net unrealized gains (losses) |         |            | (13,232 | )             |      |            | 6,404  |         |         |         | (6,828 | )
|     | Minimum pension liability adjustments     |                                                                                                                               |                                                                        | 23,382                        |         |            |         | (9,587        | )    |            |        | 13,795  |        
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |        
|     | Other comprehensive income (loss)         |                                                                                                                               | ¥                                                                      | 34,696                        |         |            |         | (1,290        | )    |            |        | 33,406  |        
|     |                                           |                                                                                                                               |                                                                        |                               |         |            |         |               |      |            |        |         |         |        





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|     |                                          |                                                                                                                               |   |                                              |          |            |          |               |       |              |       |          |          |   |          |  
|---- | ---------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | - | -------------------------------------------- | -------- | ---------- | -------- | ------------- | ----- | ------------ | ----- | -------- | -------- | - | -------- | -
|     |                                          |                                                                                                                               |   |                                              |          |            |          |               |       | U.S. Dollars |       |          |          |  
|     |                                          |                                                                                                                               |   |                                              |          |            |          |               |       | (Thousands)  |       |          |          |  
|     |                                          |                                                                                                                               |   |                                              |          |           
|     |                                          |                                                                                                                               |   |                                              |          | Before tax |          | Tax (expense) |       | Net-of-tax  
|     |                                          |                                                                                                                               |   |                                              |          | amount     |          | or benefit    |       | amount      
|     |                                          |                                                                                                                               |   |                                              |          |            |          |               |       |             
|2003 |                                          |                                                                                                                               |   |                                              |          |            |          |               |       |              |       |         
|     | Foreign currency translation adjustments |                                                                                                                               |   |                                              |          |            |          |               |       |              |       |          |         
|     |                                          | Amount arising during the year on investments in foreign entities
held at end of period                                       |   | $                                            | (164,592 | )          |          |               | 2,017 |              |       |          | (162,575 | )
|     |                                          | Reclassification adjustments for the portion of gains and losses
realized upon liquidation of investments in foreign entities |   |                                              | 6,350    |            |          |               |      |              |       |          | 6,350    |  
|     |                                          |                                                                                                                               |   |                                              |          |            |          |               |       |              |       |          |          |  
|     |                                          |                                                                                                                               |   | Net foreign currency translation adjustments |          |            | (158,242 | )             |       |              | 2,017 |          |          |   | (156,225 | )
|     | Unrealized gains (losses) on securities: |                                                                                                                               |   |                                              |          |            |          |               |       |              |       |          |         
|     |                                          | Unrealized holding gains arising for period                                                                                   |   |                                              | 867      |            |          |               | (342  | )            |       |          | 525      |  
|     |                                          | Reclassification adjustments for (gains) losses realized in net income                                                        |   |                                              | (4,492   | )          |          |               | 1,725 |              |       |          | (2,767   | )
|     |                                          |                                                                                                                               |   |                                              |          |            |          |               |       |              |       |          |          |  
|     |                                          |                                                                                                                               |   | Net unrealized gains (losses)                |          |            | (3,625   | )             |       |              | 1,383 |          |          |   | (2,242   | )
|     | Minimum pension liability adjustments    |                                                                                                                               |   | (222,991                                     | )        |            |          | 91,250        |       |              |       | (131,741 | )       
|     |                                          |                                                                                                                               |   |                                              |          |            |          |               |       |              |       |          |          |  
|     | Other comprehensive income (loss)        |                                                                                                                               | $ | (384,858                                     | )        |            |          | 94,650        |       |              |       | (290,208 | )       
|     |                                          |                                                                                                                               |   |                                              |          |            |          |               |       |              |       |          |          |  

12. Leases

TDK occupy offices and other facilities under various cancellable lease
agreements expiring in fiscal 2004 through 2005. Lease deposits made under
such agreements, aggregating ¥1,838 million ($15,317 thousand) and ¥1,896
million, at March 31, 2003 and 2002, respectively, are included in investments
and advances on the accompanying consolidated balance sheets.

The following is a schedule by years of future minimum rental payments
required under operating leases that have initial or remaining noncancellable
lease terms in excess of one year as of March 31, 2003:

|                      |             |   |            |       |              |   |         |        | 
|--------------------- | ----------- | - | ---------- | ----- | ------------ | - | ------- | ------ | 
|                      |             |   | Yen        |       | U.S. Dollars
|                      |             |   | (Millions) |       | (Thousands) 
|                      |             |   |            |       |             
|Year ending March 31, |             |   |            |       |              |   |         |       
|                      | 2004        |   | ¥          | 4,245 |              |   | $       | 35,375 | 
|                      | 2005        |   |            | 2,861 |              |   |         | 23,842 | 
|                      | 2006        |   |            | 2,087 |              |   |         | 17,392 | 
|                      | 2007        |   |            | 1,673 |              |   |         | 13,941 | 
|                      | 2008        |   |            | 1,170 |              |   |         | 9,750  | 
|                      | Later years |   |            | 1,072 |              |   |         | 8,933  | 
|                      |             |   |            |       |              |   |         |        | 
|                      |             | ¥ | 13,108     |       |              | $ | 109,233 |       
|                      |             |   |            |       |              |   |         |        | 

13. Commitments and Contingent Liabilities

At March 31, 2003, commitments outstanding for the purchase of property,
plant and equipment approximated ¥5,925 million ($49,375 thousand).

TDK and certain of its subsidiaries provide guarantees to third parties of
bank loans of its employees. The guarantees for the employees are principally
made for their housing loans. For each guarantees issued, if the employees
default on a payment, TDK would be required to make payments under its
guarantees. The maximum amount of undiscounted payments TDK would have to make
in the event of default is ¥7,247 million ($60,392 thousand) at March 31, 2003.
As of March 31, 2003, TDKs guarantees that were issued or

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amended after December 31, 2002 are not material.

Several claims and legal actions against TDK and certain subsidiaries are
pending. Provision has been made for the estimated liabilities for certain
items. In the opinion of management, based upon discussion with counsel, any
additional liability will not materially affect the consolidated financial
position and results of operations of TDK.

14. Risk Management Activities and Derivative Financial Instruments

TDK and its subsidiaries operate internationally which exposes them to the
risk of changes in foreign exchange rates and interest rates, and therefore
utilize derivative financial instruments to reduce these risks. TDK and its
subsidiaries do not hold or issue financial instruments for trading purposes.
TDK is exposed to credit related losses in the event of nonperformance by the
counterparties to those financial instruments, but does not expect any
counterparties to fail to meet their obligations given their high credit
ratings. The credit exposure of currency swaps, interest rate and currency
swaps, interest rate swaps and forward foreign exchange contracts is
represented by the fair values of contracts with a positive fair value at the
reporting date.

TDK and one of its subsidiaries have currency swaps and interest rate and
currency swaps with certain financial institutions to limit their exposure to
fluctuations in foreign exchange rates and interest rates involved mainly in
loans made by TDK to its subsidiaries in a total amount of ¥13,794 million
($114,950 thousand) and ¥13,269 million at March 31, 2003 and 2002,
respectively. These swaps require TDK and the subsidiary to pay principally
euros and U.S. dollars and to receive Japanese yen at a specified rate on
specific dates. The remaining terms of these swaps range from two months to
2.5 years as of March 31, 2003. Gains or losses on currency swaps are included
in interest expense, other income or other deductions in the consolidated
statements of operations. The Swap contracts are measured at fair value and
are included in prepaid expenses and other current assets or other current
liabilities, as the case may be, in the consolidated balance sheets.

Forward exchange contracts have been entered into to hedge adverse effects
of foreign currency exchange rate fluctuations mainly on
foreign-currency-denominated trade receivables and foreign-currency-denominated
forecasted transactions.

At March 31, 2003 and 2002, TDK and certain of its subsidiaries had
forward exchange contracts to sell and buy foreign currencies (principally U.S.
dollars, Euro and Malaysian ringgit) for a contract amount of ¥19,016 million
($158,467 thousand) and ¥7,577 million, respectively.

15. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of financial instruments in cases for which it is practicable:

(a) Cash and cash equivalents, Trade receivables, Short-term debt, Trade payables, Accrued salaries and wages, Accrued expenses, and Other current liabilities.

The carrying amount approximates fair value because of the short maturity
of these instruments.

(b) Investments and advances

The fair values of investments and advances are estimated based on quoted
market prices for these instruments. For other securities for which there are
no quoted market prices, a reasonable estimate of fair values could not be made
without incurring excessive costs. Additional information pertinent to the
value of unquoted investments is provided below.

(c) Long-term debt

The fair values of each of TDKs long-term debts are estimated based on
the amount of future cash flows associated with each instrument discounted
using TDKs current borrowing rate for similar debt of comparable maturity, or
based on the quoted market prices for the

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same or similar issues.

(d) Currency Swaps, Currency and Interest Rate Swaps, Interest Rate Swaps and Forward Foreign Exchange Contracts

The fair values of currency swaps, currency and interest rate swaps,
interest rate swaps and forward foreign exchange contracts are estimated by
obtaining quotes from financial institutions.

The carrying amounts and estimated fair values of TDKs financial
instruments at March 31, 2003 and 2002, are summarized as follows:

|                     |                                           |                                        |  |                      |  |  |  |      |        |   |  |      |       |  
|-------------------- | ----------------------------------------- | -------------------------------------- |  | -------------------- |  |  |  | ---- | ------ | - |  | ---- | ----- | -
|                     |                                           |                                        |  | Yen (Millions)      
|                     |                                           |                                        |  |                     
|As of March 31, 2003 |                                           | Carrying amount                        |  | Estimated fair value
|                     |                                           |                                        |  |                     
|Nonderivatives:      |                                           |                                        |  |                      |  |  |  |      |        |   |  |     
|Assets:              |                                           |                                        |  |                      |  |  |  |      |        |   |  |     
|                     | Investments and advances for which it is: |                                        |  |                      |  |  |  |      |        |   |  |      |      
|                     |                                           | Practicable to estimate fair value     |  |                      |  |  |  |      | ¥7,089 |   |  |      | 7,089 |  
|                     |                                           | Not practicable to estimate fair value |  |                      |  |  |  |      | 1,406  |   |  |      |      |  
|Liability:           |                                           |                                        |  |                      |  |  |  |      |        |   |  |     
|                     | Long-term debt, including current portion |                                        |  |                      |  |  |  | (582 | )      |   |  | (582 | )    
|Derivatives:         |                                           |                                        |  |                      |  |  |  |      |        |   |  |     
|                     | Currency and interest rate swaps in a:    |                                        |  |                      |  |  |  |      |        |   |  |      |      
|                     |                                           | Gain position                          |  |                      |  |  |  |      | 6      |   |  |      | 6     |  
|                     |                                           | Loss position                          |  |                      |  |  |  |      | (293   | ) |  |      | (293  | )
|                     | Forward foreign exchange contracts in a:  |                                        |  |                      |  |  |  |      |        |   |  |      |      
|                     |                                           | Gain position                          |  |                      |  |  |  |      | 42     |   |  |      | 42    |  
|                     |                                           | Loss position                          |  |                      |  |  |  |      | (3     | ) |  |      | (3    | )

|                     |                                           |                                        |  |                      |  |  |  |        |         |   |  |        |        |  
|-------------------- | ----------------------------------------- | -------------------------------------- |  | -------------------- |  |  |  | ------ | ------- | - |  | ------ | ------ | -
|                     |                                           |                                        |  | Yen (Millions)      
|                     |                                           |                                        |  |                     
|As of March 31, 2002 |                                           | Carrying amount                        |  | Estimated fair value
|                     |                                           |                                        |  |                     
|Nonderivatives:      |                                           |                                        |  |                      |  |  |  |        |         |   |  |       
|Assets:              |                                           |                                        |  |                      |  |  |  |        |         |   |  |       
|                     | Investments and advances for which it is: |                                        |  |                      |  |  |  |        |         |   |  |        |       
|                     |                                           | Practicable to estimate fair value     |  |                      |  |  |  |        | ¥10,507 |   |  |        | 10,507 |  
|                     |                                           | Not practicable to estimate fair value |  |                      |  |  |  |        | 4,864   |   |  |        |       |  
|Liability:           |                                           |                                        |  |                      |  |  |  |        |         |   |  |       
|                     | Long-term debt, including current portion |                                        |  |                      |  |  |  | (1,116 | )       |   |  | (1,116 | )     
|Derivatives:         |                                           |                                        |  |                      |  |  |  |        |         |   |  |       
|                     | Currency and interest rate swaps in a:    |                                        |  |                      |  |  |  |        |         |   |  |        |       
|                     |                                           | Gain position                          |  |                      |  |  |  |        | 64      |   |  |        | 64     |  
|                     |                                           | Loss position                          |  |                      |  |  |  |        | (379    | ) |  |        | (379   | )
|                     | Forward foreign exchange contracts in a:  |                                        |  |                      |  |  |  |        |         |   |  |        |       
|                     |                                           | Gain position                          |  |                      |  |  |  |        | 1       |   |  |        | 1      |  
|                     |                                           | Loss position                          |  |                      |  |  |  |        | (60     | ) |  |        | (60    | )

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|                     |                                           |                                        |  |                          |        |   |  |        |        |  
|-------------------- | ----------------------------------------- | -------------------------------------- |  | ------------------------ | ------ | - |  | ------ | ------ | -
|                     |                                           |                                        |  | U.S. Dollars (Thousands)
|                     |                                           |                                        |  |                         
|As of March 31, 2003 |                                           | Carrying amount                        |  | Estimated fair value    
|                     |                                           |                                        |  |                         
|Nonderivatives:      |                                           |                                        |  |                          |        |   |  |       
|Assets:              |                                           |                                        |  |                          |        |   |  |       
|                     | Investments and advances for which it is: |                                        |  |                          |        |   |  |        |       
|                     |                                           | Practicable to estimate fair value     |  | $                        | 59,075 |   |  |        | 59,075 |  
|                     |                                           | Not practicable to estimate fair value |  |                          | 11,717 |   |  |        |       |  
|Liability:           |                                           |                                        |  |                          |        |   |  |       
|                     | Long-term debt, including current potion  |                                        |  | (4,850                   | )      |   |  | (4,850 | )     
|Derivatives:         |                                           |                                        |  |                          |        |   |  |       
|                     | Currency and interest rate swaps in a:    |                                        |  |                          |        |   |  |        |       
|                     |                                           | Gain position                          |  |                          | 50     |   |  |        | 50     |  
|                     |                                           | Loss position                          |  |                          | (2,442 | ) |  |        | (2,442 | )
|                     | Forward foreign exchange contracts in a:  |                                        |  |                          |        |   |  |        |       
|                     |                                           | Gain position                          |  |                          | 350    |   |  |        | 350    |  
|                     |                                           | Loss position                          |  |                          | (25    | ) |  |        | (25    | )

The carrying amounts of the nonderivative assets and liabilities are
included in the consolidated balance sheets under the indicated captions. The
carrying amounts of the currency swaps, the currency and interest rate swaps,
the interest rate swaps and forward foreign exchange contracts in a gain
position are included in prepaid expenses and other current assets, while those
in a loss position are included in other current liabilities.

It is not practicable to estimate the fair value of investments in
untraded companies. Management believes that the carrying amounts approximate
fair value.

Limitations

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

16. Restructuring Charges

During the year ended March 31, 2003, TDK recorded a restructuring charge
of ¥5,345 million ($44,542 thousand). As a result of the restructuring, a
total of 1,302 regular employees were terminated through March 31, 2003. TDK
and domestic subsidiaries released 237 employees in Japan and overseas
subsidiaries released 1,065 employees mainly in the Americas and Europe. TDK
recorded a workforce reduction charge of approximately ¥2,346 million ($19,550
thousand) relating primarily to severances. TDK recorded a restructuring
charge of ¥2,999 million ($24,992 thousand) mainly relating to losses in the
disposal of property, plant and equipment in Japan, in the Americas and in
Europe.

The downturn in the U.S. economy from the fourth quarter ended March 31,
2001 and the recent reduction in IT investment volume on a world-wide basis had
an adverse effect on TDK. Under the circumstances, TDK believes offering
competitive pricing is essential to maintaining its advantageous position in
the market of electronic components. Additionally, many of TDKs customers who
manufacture consumer products have transferred their manufacturing facilities
to Asian countries, in particular China. As a result, TDK, as a supplier of
electronic components to these customers, will be required to transfer certain
of its factories to these Asian countries in order to meet the customers
logistical needs. Given the global economic conditions, TDK decided to
restructure its organization to improve its competitive and financial position
on a world-wide basis. The structural reforms implemented over the past two
years, including manufacturing plant integration and closure, reduction of
headcount and other rationalization plans, have almost been accomplished on
schedule through March 31, 2003.

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During the year ended March 31, 2002, TDK recorded a restructuring charge
of ¥25,872 million. As a result of the restructuring, a total of 5,066 regular
employees were terminated across all business functions, operating units and
geographic regions through March 31, 2002. TDK recorded a workforce reduction
charge of approximately ¥19,884 million relating primarily to severances. In
Japan, TDK released 853 employees, and domestic subsidiaries released 1,709
employees. Overseas subsidiaries released 2,504 employees mainly in the
Americas and Asia (excluding Japan). TDK recorded a restructuring charge of
¥5,988 million mainly relating to losses in the disposal of property, plant and
equipment in Japan and in the Americas. TDK reorganized several production
lines to strengthen the competitive power of the existing plant in Asia.

Changes of the restructuring liabilities for the years ended March 31,
2003 and 2002, are outlined as follows:

|                   |  |                |            |                     |  |                     |       |           |                     |                     |        |       |  |  |        |  |  |  |       |  |  |  |        | 
|------------------ |  | -------------- | ---------- | ------------------- |  | ------------------- | ----- | --------- | ------------------- | ------------------- | ------ | ----- |  |  | ------ |  |  |  | ----- |  |  |  | ------ | 
|                   |  | Yen (millions)
|                   |  |               
|                   |  | 2003           |            | 2002               
|                   |  |                |            |                    
|                   |  |                |            |                     |  | Loss on disposal of |       |           | Loss on disposal of |                     |        |       | 
|                   |  | Workforce      |            | property, plant and |  |                     |       | Workforce |                     | property, plant and
|                   |  | reduction      |            | equipment           |  | Total               |       | reduction |                     | equipment           |        | Total
|                   |  |                |            |                     |  |                     |       |           |                     |                     |        |      
|Beginning balance  |  |                | ¥11,272    |                     |  |                     |      |           |                     |                     | 11,272 |       |  |  |       |  |  |  |      |  |  |  |       | 
|Costs and expenses |  |                | 2,346      |                     |  |                     | 2,999 |           |                     |                     | 5,345  |       |  |  | 19,884 |  |  |  | 5,988 |  |  |  | 25,872 | 
|Payments           |  |                | 13,392     |                     |  |                     | 2,999 |           |                     |                     | 16,391 |       |  |  | 8,612  |  |  |  | 5,988 |  |  |  | 14,600 | 
|                   |  |                |            |                     |  |                     |       |           |                     |                     |        |       |  |  |        |  |  |  |       |  |  |  |        | 
|Ending balance     |  |                | ¥      226 |                     |  |                     |      |           |                     |                     | 226    |       |  |  | 11,272 |  |  |  |      |  |  |  | 11,272 | 
|                   |  |                |            |                     |  |                     |       |           |                     |                     |        |       |  |  |        |  |  |  |       |  |  |  |        | 

|                   |  |                          |         |  |  |  |        |  |  |  |         |  |  |  |  |  |  |  |  |  |  |  |  | 
|------------------ |  | ------------------------ | ------- |  |  |  | ------ |  |  |  | ------- |  |  |  |  |  |  |  |  |  |  |  |  | 
|                   |  | U.S. Dollars (Thousands)
|                   |  |                         
|Beginning balance  |  | $                        | 93,933  |  |  |  |       |  |  |  | 93,933  | 
|Costs and expenses |  |                          | 19,550  |  |  |  | 24,992 |  |  |  | 44,542  | 
|Payments           |  |                          | 111,600 |  |  |  | 24,992 |  |  |  | 136,592 | 
|                   |  |                          |         |  |  |  |        |  |  |  |         | 
|Ending balance     |  | $                        | 1,883   |  |  |  |       |  |  |  | 1,883   | 
|                   |  |                          |         |  |  |  |        |  |  |  |         | 

Restructuring liabilities are included in Accrued expenses in the
consolidated balance sheet.

Through March 31,2003, TDK has paid ¥5,119 million ($42,659 thousand) of
the ¥5,345 million ($44,542 thousand) restructuring charges. TDK anticipates
that substantially all of the remaining restructuring costs will be paid by the
end of first quarter of fiscal 2004.

Through March 31,2002, TDK had paid ¥14,600 million of the ¥25,872 million
restructuring charges. TDK had paid all of the remaining restructuring costs
by the end of first quarter of fiscal 2003.

17. Goodwill and Other Intangible Assets

TDK adopted Statement of Financial Accounting Standards No.142 (SFAS
142), Goodwill and Other Intangible Assets, effective April 1, 2001. Under
SFAS 142, goodwill is no longer amortized but is reviewed for impairment
annually, or more frequently if certain indicators arise. In addition, the
statement requires reassessment of the useful lives of previously recognized
intangible assets. With the adoption of SFAS 142, TDK ceased amortization of
goodwill as of April 1, 2001. As of March 31, 2003, TDK completed a goodwill
impairment test. No impairment was indicated at that time.

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The components of acquired intangible assets excluding goodwill at March
31, 2003 and 2002, are as follows:

|                              |          |  |                |         |              |  |            |       |        |  |              |        |             |  |       |        |  |  |  |       |  |  |       |       | 
|----------------------------- | -------- |  | -------------- | ------- | ------------ |  | ---------- | ----- | ------ |  | ------------ | ------ | ----------- |  | ----- | ------ |  |  |  | ----- |  |  | ----- | ----- | 
|                              |          |  | Yen (Millions)
|                              |          |  |               
|                              |          |  | 2003           |         | 2002        
|                              |          |  |                |         |             
|                              |          |  | Gross          |         |              |  |            |       |        |  |              |        | Gross       |  |       |        |  |  |  |       | 
|                              |          |  | Carrying       |         | Accumulated  |  |            |       |        |  | Carrying     |        | Accumulated |  |       |        | 
|                              |          |  | Amount         |         | Amortization |  | Net Amount |       | Amount |  | Amortization |        | Net Amount 
|                              |          |  |                |         |              |  |            |       |        |  |              |        |            
|Amortized intangible assets:  |          |  |                |         |              |  |            |       |        |  |              |        |             |  |       |        |  |  |  |       |  |  |       |      
|                              | Patent   |  |                | ¥11,213 |              |  |            | 1,122 |        |  |              | 10,091 |             |  |       | 1,339  |  |  |  | 897   |  |  |       | 442   | 
|                              | Software |  |                | 6,985   |              |  |            | 3,471 |        |  |              | 3,514  |             |  |       | 6,401  |  |  |  | 2,672 |  |  |       | 3,729 | 
|                              | Other    |  |                | 2,235   |              |  |            | 692   |        |  |              | 1,543  |             |  |       | 2,430  |  |  |  | 479   |  |  |       | 1,951 | 
|                              |          |  |                |         |              |  |            |       |        |  |              |        |             |  |       |        |  |  |  |       |  |  |       |      
|                              | Total    |  |                | 20,433  |              |  |            | 5,285 |        |  |              | 15,148 |             |  |       | 10,170 |  |  |  | 4,048 |  |  |       | 6,122 | 
|                              |          |  |                |         |              |  |            |       |        |  |              |        |             |  |       |        |  |  |  |       |  |  |       |      
|Unamortized
intangible assets |          |  | ¥   1,270      |         |              |  |            |       |        |  | 1,270        |        |             |  | 1,143 |        |  |  |  |       |  |  | 1,143 |      
|                              |          |  |                |         |              |  |            |       |        |  |              |        |             |  |       |        |  |  |  |       |  |  |       |      

|                              |          |   |                          |         |              |  |            |        |  |  |        |         |  |  |  |  |  |  |  |  |  |  |  |  | 
|----------------------------- | -------- | - | ------------------------ | ------- | ------------ |  | ---------- | ------ |  |  | ------ | ------- |  |  |  |  |  |  |  |  |  |  |  |  | 
|                              |          |   | U.S. Dollars (Thousands)
|                              |          |   |                         
|                              |          |   | Gross                    |         |              |  |            |        |  |  |       
|                              |          |   | Carrying                 |         | Accumulated  |  |            |        | 
|                              |          |   | Amount                   |         | Amortization |  | Net Amount
|                              |          |   |                          |         |              |  |           
|Amortized intangible assets:  |          |   |                          |         |              |  |            |        |  |  |        |        
|                              | Patent   |   | $                        | 93,442  |              |  |            | 9,350  |  |  |        | 84,092  | 
|                              | Software |   |                          | 58,208  |              |  |            | 28,925 |  |  |        | 29,283  | 
|                              | Other    |   |                          | 18,625  |              |  |            | 5,766  |  |  |        | 12,859  | 
|                              |          |   |                          |         |              |  |            |        |  |  |        |        
|                              | Total    |   |                          | 170,275 |              |  |            | 44,041 |  |  |        | 126,234 | 
|                              |          |   |                          |         |              |  |            |        |  |  |        |        
|Unamortized
intangible assets |          | $ | 10,583                   |         |              |  |            |        |  |  | 10,583 |        
|                              |          |   |                          |         |              |  |            |        |  |  |        |        

The patent addition during the year ended March 31, 2003 principally
represents an acquisition to accelerate TDKs position at the leading edge of
refining materials and process technologies in electronics materials and
components.

Aggregate amortization expense for the years ended March 31, 2003, 2002
and 2001 are ¥1,762 million ($14,683 thousand), ¥1,394 million and ¥1,027
million, respectively. Estimated amortization expense for the next five years
is: ¥2,358 million in 2004, ¥1,999 million in 2005, ¥1,791 million in 2006,
¥1,399 million in 2007, and ¥1,090 million in 2008.

The changes in the carrying amount of goodwill by segment for the year
ended March 31, 2003 is as follows:

|                       |  |                |         |           |  |       |     |  |  |  |        |  
|---------------------- |  | -------------- | ------- | --------- |  | ----- | --- |  |  |  | ------ | -
|                       |  | Yen (Millions)
|                       |  |               
|                       |  | Electronic     |         | Recording |  |       |     | 
|                       |  | materials and  |         | media and |  |       |     | 
|                       |  | components     |         | systems   |  | Total
|                       |  |                |         |           |  |      
|April 1, 2001          |  |                | ¥11,002 |           |  |       | 497 |  |  |  | 11,499 |  
|Additions              |  |                | 106     |           |  |       |    |  |  |  | 106    |  
|Translation adjustment |  |                | (105    | )         |  |       |    |  |  |  | (105   | )
|                       |  |                |         |           |  |       |     |  |  |  |        |  
|March 31, 2002         |  |                | 11,003  |           |  |       | 497 |  |  |  | 11,500 |  
|Additions              |  |                | 3,553   |           |  |       |    |  |  |  | 3,553  |  
|Translation adjustment |  |                | (922    | )         |  |       |    |  |  |  | (922   | )
|                       |  |                |         |           |  |       |     |  |  |  |        |  
|March 31, 2003         |  |                | ¥13,634 |           |  |       | 497 |  |  |  | 14,131 |  
|                       |  |                |         |           |  |       |     |  |  |  |        |  

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|                       |  |                          |         |           |  |       |       |  |  |  |         |  
|---------------------- |  | ------------------------ | ------- | --------- |  | ----- | ----- |  |  |  | ------- | -
|                       |  | U.S. Dollars (Thousands)
|                       |  |                         
|                       |  | Electronic               |         | Recording |  |       |       | 
|                       |  | materials and            |         | media and |  |       |       | 
|                       |  | components               |         | systems   |  | Total
|                       |  |                          |         |           |  |      
|March 31, 2002         |  | $                        | 91,691  |           |  |       | 4,142 |  |  |  | 95,833  |  
|Additions              |  |                          | 29,608  |           |  |       |      |  |  |  | 29,608  |  
|Translation adjustment |  |                          | (7,683  | )         |  |       |      |  |  |  | (7,683  | )
|                       |  |                          |         |           |  |       |       |  |  |  |         |  
|March 31, 2003         |  | $                        | 113,616 |           |  |       | 4,142 |  |  |  | 117,758 |  
|                       |  |                          |         |           |  |       |       |  |  |  |         |  

The goodwill addition during the year ended March 31, 2003 principally
represents the excess of purchase price over the fair value of assets acquired
and liabilities assumed for several immaterial acquisitions made during the
year.

Reconciliation of reported net income (loss) and net income (loss) per
share to the amounts adjusted for the exclusion of goodwill amortization for
the years ended March 31, 2003, 2002 and 2001, are as follows:

|                                               |                                    |  |                                     |           |                    |  |      |         |      |  |  |        |  |  |              |         | 
|---------------------------------------------- | ---------------------------------- |  | ----------------------------------- | --------- | ------------------ |  | ---- | ------- | ---- |  |  | ------ |  |  | ------------ | ------- | 
|                                               |                                    |  |                                     |           |                    |  |      |         |      |  |  |        |  |  | U.S. Dollars
|                                               |                                    |  | Yen                                 |           | (Thousands except 
|                                               |                                    |  | (Millions except per share amounts) |           | per share amounts)
|                                               |                                    |  |                                     |           |                   
|                                               |                                    |  | 2003                                |           | 2002               |  | 2001 |         | 2003
|                                               |                                    |  |                                     |           |                    |  |      |         |     
|Net income (loss):                             |                                    |  |                                     |           |                    |  |      |         |      |  |  |        |  |  |              |        
|                                               | Reported net income (loss)         |  |                                     | ¥12,019   |                    |  |      | (25,771 | )    |  |  | 43,983 |  |  | $            | 100,158 | 
|                                               | Goodwill amortization
(net of tax) |  |                                     |          |                    |  |      |        |      |  |  | 2,149  |  |  |              |        | 
|                                               |                                    |  |                                     |           |                    |  |      |         |      |  |  |        |  |  |              |        
|                                               | Adjusted net income (loss)         |  |                                     | ¥12,019   |                    |  |      | (25,771 | )    |  |  | 46,132 |  |  | $            | 100,158 | 
|                                               |                                    |  |                                     |           |                    |  |      |         |      |  |  |        |  |  |              |        
|Basic and diluted net income (loss) per share: |                                    |  |                                     |           |                    |  |      |         |      |  |  |        |  |  |              |        
|                                               | Reported net income (loss)         |  |                                     | ¥   90.56 |                    |  |      | (193.91 | )    |  |  | 330.54 |  |  | $            | 0.75    | 
|                                               | Goodwill amortization
(net of tax) |  |                                     |          |                    |  |      |        |      |  |  | 16.15  |  |  |              |        | 
|                                               |                                    |  |                                     |           |                    |  |      |         |      |  |  |        |  |  |              |        
|                                               | Adjusted net income (loss)         |  |                                     | ¥   90.56 |                    |  |      | (193.91 | )    |  |  | 346.69 |  |  | $            | 0.75    | 
|                                               |                                    |  |                                     |           |                    |  |      |         |      |  |  |        |  |  |              |        

18. Supplementary Information

|                            |              |  |            |         |              |  |        |        |      |  |        |        |  |   |         |         |  
|--------------------------- | ------------ |  | ---------- | ------- | ------------ |  | ------ | ------ | ---- |  | ------ | ------ |  | - | ------- | ------- | -
|                            |              |  | Yen        |         | U.S. Dollars
|                            |              |  | (Millions) |         | (Thousands) 
|                            |              |  |            |         |             
|                            |              |  | 2003       |         | 2002         |  | 2001   |        | 2003
|                            |              |  |            |         |              |  |        |        |     
|(a) Statement of Operations |              |  |            |         |              |  |        |        |      |  |        |        |  |   |         |        
|Research and development    |              |  | ¥31,862    |         |              |  | 38,630 |        |      |  | 36,970 |        |  | $ | 265,517 |        
|Rent                        |              |  | 9,410      |         |              |  | 11,538 |        |      |  | 9,616  |        |  |   | 78,417  |        
|Maintenance and repairs     |              |  | 11,534     |         |              |  | 11,437 |        |      |  | 14,649 |        |  |   | 96,117  |        
|Advertising costs           |              |  | 5,546      |         |              |  | 10,489 |        |      |  | 12,398 |        |  |   | 46,217  |        
|(b) Statement of Cash Flows |              |  |            |         |              |  |        |        |      |  |        |        |  |   |         |        
|Cash paid during year for:  |              |  |            |         |              |  |        |        |      |  |        |        |  |   |         |        
|                            | Interest     |  |            | ¥646    |              |  |        | 1,162  |      |  |        | 555    |  |   | $       | 5,383   |  
|                            | Income taxes |  |            | ¥(1,270 | )            |  |        | 22,026 |      |  |        | 26,163 |  |   | $       | (10,583 | )

Noncash activities

In 2003 and 2002, there were no material noncash investing and financing
activities.

In 2001, TDK contributed equity securities of ¥34,573 million to a pension
trust.

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Schedule II

TDK CORPORATION AND SUBSIDIARIES

Valuation and Qualifying Accounts
(In millions of yen)
Years ended March 31, 2003, 2002 and 2001

|                                   |  |              |        |            |  |             |      |             |  |        |     |  |  |  |      |            |  |  |       | 
|---------------------------------- |  | ------------ | ------ | ---------- |  | ----------- | ---- | ----------- |  | ------ | --- |  |  |  | ---- | ---------- |  |  | ----- | 
|                                   |  | Balance at   |        |            |  |             |      |             |  |        |     |  |  |  |      | Balance at
|                                   |  | beginning of |        | Charged to |  | Bad debts   |      | Translation |  | end of
|                                   |  | period       |        | earnings   |  | written off |      | adjustment  |  | period
|                                   |  |              |        |            |  |             |      |             |  |       
|Year ended March 31, 2003:         |  |              |        |            |  |             |      |             |  |        |     |  |  |  |      |            |  |  |       | 
|Allowance for doubtful receivables |  |              | ¥3,770 |            |  |             | (218 | )           |  |        | 440 |  |  |  | (262 | )          |  |  | 2,850 | 
|                                   |  |              |        |            |  |             |      |             |  |        |     |  |  |  |      |            |  |  |       | 
|Year ended March 31, 2002:         |  |              |        |            |  |             |      |             |  |        |     |  |  |  |      |            |  |  |       | 
|Allowance for doubtful receivables |  |              | ¥2,740 |            |  |             | 917  |             |  |        | 90  |  |  |  | 203  |            |  |  | 3,770 | 
|                                   |  |              |        |            |  |             |      |             |  |        |     |  |  |  |      |            |  |  |       | 
|Year ended March 31, 2001:         |  |              |        |            |  |             |      |             |  |        |     |  |  |  |      |            |  |  |       | 
|Allowance for doubtful receivables |  |              | ¥2,945 |            |  |             | (329 | )           |  |        | 160 |  |  |  | 284  |            |  |  | 2,740 | 
|                                   |  |              |        |            |  |             |      |             |  |        |     |  |  |  |      |            |  |  |       | 

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Item 18. Financial Statements

Not applicable.




Item 19. Exhibits

Documents filed as exhibits to this annual report are as follows:

1.(a)      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of CEO of the Company

1.(b)      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of CFO of the Company

2.(a)      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CEO of the Company

2.(b)      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CFO of the Company

3.           ARTICLES OF INCORPORATION (English translation)

4.           SHARE HANDLING REGULATIONS (English translation)

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SIGNATURES

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

|      |  |                 |     |                                                  
|----- |  | --------------- | --- | -------------------------------------------------
|      |  |                 |     | TDK Corporation
(Registrant)                     
|     
|     
|     
|Date: |  | August 11, 2003 | By: | /s/ Hajime Sawabe
Hajime Sawabe
President and CEO

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EXHIBITS

Documents filed as exhibits to this annual report are as follows:



|Exhibit 12.(a) |  | Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 of CEO of the Company
|-------------- |  | ---------------------------------------------------------------------------------------------
|              
|Exhibit 12.(b) |  | Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 of CFO of the Company
|              
|Exhibit 13.(a) |  | Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 of CEO of the Company
|              
|Exhibit 13.(b) |  | Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 of CFO of the Company
|              
|Exhibit 14.    |  | ARTICLES OF INCORPORATION (English translation)                                              
|              
|Exhibit 15.    |  | SHARE HANDLING REGULATIONS (English translation)                                             

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