Annual Report 2001 · Sales in the Electronics Industry-related Products division, which includes...

DISCO CORPORATIONAnnual Report 2001

DISCO A/R01本文 01.8.16 9:58 AM ページ 2

ContentsCONSOLIDATED FINANCIAL HIGHLIGHTS 1 TO OUR SHAREHOLDERS 2 ESSENTIAL PRODUCTS 6 TOPICS 8 REVIEW OF OPERATIONS 10 FINANCIAL SECTION 12DISCO NETWORK 31 CORPORATE DATA /DIRECTORS AND AUDITORS 32 DISCO VALUES 33

At the core of Disco’s 11 consolidated

subsidiaries and affiliates, Disco Corporation’s

business domain is high-precision processing in

the semiconductor and electronics component

industries. Since its founding in 1937, Disco has

pursued technological development in its three

areas of “kiru” (cutting), “kezuru” (grinding) and

“migaku” (polishing), and now maintains a

position as market leader in precision diamond

wheels, precision systems and products and the

application technologies that optimally match

these two areas. The Company’s mainstay dicing

saws hold a substantial market share in Japan and

around the world. Disco uses these overwhelming

market strengths to carry out global business

development.

Profile


DISCO CORPORATION ANNUAL REPORT 2001 1

Consolidated Financial HighlightsDISCO CORPORATION and consolidated subsidiaries

THOUSANDS OFMILLIONS OF YEN U.S. DOLLARS

YEARS ENDED MARCH 31 2001 2000 2001

Net sales........................................................................................................................... ¥74,112 ¥ 51,266 $597,677

Operating income ........................................................................................................... 20,993 10,911 169,298

Net income...................................................................................................................... 11,811 4,872 95,250

Total shareholders’ equity ............................................................................................... 51,601 40,846 416,137

Total assets....................................................................................................................... 86,435 67,055 697,057

YEN U.S. DOLLARS

Net income per share...................................................................................................... ¥367.76 ¥230.41 $2.97

PERCENT

Return on equity ............................................................................................................. 25.6% 14.3%

Note: The accounting period of consolidated subsidiaries in the 1997 fiscal year was 15 months due to a change in the closing date of the accounting period from December 31 to March 31.

’97 ’98 ’99 ’00 ’01

(Yen)

Net Income per Share

’97 ’98 ’99 ’00 ’01

(%)

Return on Equity

’97 ’98 ’99 ’00 ’01

(Millions of yen)

Net Income

’97 ’98 ’99 ’00 ’01

(Millions of yen)

25.0

16.6

8.0

14.3

25.6

Net Sales

37,77540,665

33,590

51,266

74,112

4,5113,798

2,099

4,872

11,811

225.43

183.49

99.93

230.41

367.76


2 DISCO CORPORATION ANNUAL REPORT 20001

Disco’s Core Competencies: “Kiru,” “Kezuru,” and “Migaku” Technologies

QCOULD YOU TELL US ABOUT THE STRENGTHS OF DISCO’S PRECISION PRODUCT

SYSTEMS AND THE COMPANY’S BUSINESS DEVELOPMENT IN THIS AREA?

To Our Shareholders

A Since its founding in 1937, Disco has been involved in technologies

focused on precision cutting, grinding and polishing based on abra-

sive cut-off and grinding wheels.

Amid Company business expansion, we clarified the course the

Company should take by establishing a process of trial and error, a corpo-

rate mission and other aids in the form of “Disco Values” in 1997. The

mission established that Disco should specialize in cutting, grinding and

polishing technologies in line with its core mission of craftsmanship. In

providing these technologies to customers, Disco’s expertise extends not

only to equipment and precision diamond wheels—to the hardware as it

were—but also to the methods for using this hardware (applications tech-

nologies). And we have been tireless in our continuing efforts to boost the

level of our technologies in these areas.

Application technology in particular being the Company’s forte, Disco

has 25 devices and approximately 2,000 varieties of blades and wheels on

hand at its application laboratory for customers to determine for themselves

what kind of application technology they need. The use of our application

laboratory by customers numbers roughly 1,200 cases per year.

The application laboratory does not only function as a place for Disco

to meet new customers, and for customers to learn about new materials, but

also for the Company to gather data for use in developing future products

that meet customer needs.

Left: Kenichi Sekiya, Chairman and C.E.O.

Right: Hitoshi Mizorogi, President and C.O.O.



Another Fiscal Year of Record Performance

QCAN YOU EXPLAIN THE COMPANY’S PERFORMANCE IN THE FISCAL YEAR ENDED

MARCH 31, 2001?

AIn semiconductors and electronic components, our core markets,

capital investment continued at a robust pace from the previous fiscal

year up through the first half of the fiscal year under review, especially for

digital product applications. However, these industries entered an inventory

correction phase in the fourth quarter of the fiscal year, and capital invest-

ment dropped off dramatically. Overall, it was a year of severe swings in the

operating environment. Nevertheless, if we consider the year in its entirety,

both capital investment and production showed solid year-on-year growth.

Amid these conditions, Disco continued efforts from the previous fiscal

year to boost production capacity. The Company also carried out aggressive

and finely targeted marketing activities. The result of these efforts was that,

despite the growing sense of a business slowdown in the second half, orders

for the year as a whole rose considerably compared with the previous fiscal

year. Consolidated net sales increased 44.6% to ¥74,112 million (US$597.7

million), and operating income expanded 92.4% to ¥20,993 million

(US$169.3 million). Net income increased 142.4% to ¥11,811 million

(US$95.3 million), as the Company set new records for sales and earnings

for the second consecutive fiscal year. Net income per share grew from

¥230.41 in the previous fiscal year to ¥367.76 (US$2.97), before a stock

adjustment following a split in May 2000.

Sales in the Electronics Industry-related Products division, which

includes such mainstay products as dicing saws, surface grinders and cutting

saws, showed especially strong growth, expanding 50.1% to ¥70,558 million

(US$569.0 million). Sales in the Industrial Products division declined

2.3% to ¥2,758 million (US$22.2 million) owing to restrictions on public-

works projects. In the Other Products division, the Company moved ahead

with a shift in business models from a project-based strategy aimed at

spurring sales growth to a new business model based on sales of proprietary

products, meant to secure higher profit margins. As such, sales in the divi-

sion declined 45.0% to ¥796 million (US$6.4 million).

Applications Expanding in Semiconductor and Electronic Component Fields

QTELL US ABOUT THE COMPANY’S MEDIUM- AND LONG-TERM STRATEGY AND

ITS PROGRESS IN DEVELOPMENT AND OVERSEAS EXPANSION.

AWe expect rapid growth in the information telecommunications

market, which has been symbolized by the spread of the Internet and

the surge in IT investment, to become a significant source of growth for the

semiconductor and electronic components industries going forward.

Accordingly, there has been considerable growth in recent years in the

market for digital networking equipment. Production of semiconductors

and electronic components has expanded in line with these trends, and we



QLASTLY, COULD YOU EXPLAIN MANAGEMENT’S OUTLOOK, PLANNED INVESTMENT AND

THE NEW MANAGEMENT TEAM IN THE UPCOMING FISCAL YEAR?

AWe expect to see contributions to performance from new products

developed to respond to technological innovations in the industry,

including dicing saws for 300mm wafers and grinders for IC cards and other

ultrathin chips. However, given current order conditions, there is still

considerable uncertainty as to the timing of a recovery in capital invest-

ment in the semiconductor and electronic component industries, and we

expect the operating environment to be harsh overall.

While companies in the semiconductor industry have moved toward

greater capital investment in response to the well-known three- to four-year

“silicon cycle,” the investment continues to cyclically expand and contract.

Despite such small fluctuations in the short-term, however, expansion in

market scale and technological innovation continue unabated over the

medium term in the semiconductor equipment industry, a pattern believed

to be somewhat predetermined.

have seen an increasing movement toward greater compactness, lighter

weight and more advanced functions.

New market needs in precision cutting technology will increasingly

expand along with the debuting of new materials and products.

We believe the largest determinants for future growth will be to seize

technological trends and market needs accurately and promptly, develop

highly advanced high-quality products to be manufactured and marketed in

a timely manner at a reasonable price.

In recent product development, we realized ultrathin ICs and singula-

tion systems for Chip Size Packages (CSPs), which have experienced a

sudden increase in demand for use in the back-end process of semiconduc-

tor manufacturing, and a new dicing-before-grinding (DBG) system that

can handle thin-wafer slicing required for a variety of products. These new

products, including integrated circuit (IC) cards and ultrathin IC, have

been developed through an alliance with other companies. Another

example is the DFD6360 dicing saw for large-diameter wafers like the new

300mm types. With items such as these, Disco has developed and marketed

new products that match emerging technological innovations. The

Company has also developed a variety of technological applications for

cutting electronic components made from a wide variety of non-silicon

materials. Laser module parts for optical communications handled by the

subsidiary TECNISCO Ltd. are also winning high regard.

Overseas, Disco has worked to construct a global network to help meet

the growing and diversifying needs of its worldwide customer base. We

intend to strengthen our position with an eye toward the digital networking

market, mainly in the world markets for PCs and cellular phone handsets,

where we expect growth to continue going forward, albeit at a weaker pace

than before. One focus of our energies will be the Chinese market, where

rapid growth in semiconductor investment is still expected.



I believe that the current recession provides the very incentive needed

to spur research and development, and aims to take advantage of the next

upswing in the silicon cycle by aggressively investing in research and devel-

opment at its outset. Similarly, Disco aims to continue efforts at implement-

ing a variety of systems that match remuneration and salaries with

performance, increasing outsourcing of manufacturing and back-office func-

tions, enhancing flexibility of the cost structure through promotion of

outside component procurement and raising efficiency.

In capital investment, we believe it is absolutely essential to take a

medium- and long-term perspective toward expanding our production

system and to avoid being too fixated on short-term performance. In recog-

nition of this fact, we increased the number of buildings at the Kuwabata

Plant within our Hiroshima Works and established a new Nagatani Plant to

manufacture essential components. In addition, as part of measures to

counter risks of natural disasters or other factors that could temporarily halt

infrastructure functions, in March 2001, we acquired a 29,800 square-meter

plot for use as plant space in Shisui, in Chiba’s Imba-gun.

In addition, to make for swifter, more accurate management amid

intense changes in the operating environments for the semiconductor and

electronic components industries, we relieved Kenichi Sekiya of the burden

of President, which he had shouldered since July 1998. On 28 June, Hitoshi

Mizorogi, Executive Vice President of Disco and President of PS Company,

was promoted to President and Chief Operating Officer (C.O.O.). With

the new management team in place, we are committed to constructing a

business system that allows us to respond rapidly and with flexibility to

changes in our operating environment.

We ask for the continued support and cooperation of our shareholders

as we move toward these goals in the current fiscal year.

Kenichi Sekiya

Chairman and C.E.O.

Hitoshi Mizorogi

President and C.O.O.



Essential Products

Role Played by Disco Products (Dicing Saws) in the Semiconductor

Manufacturing Process

Around the world, digital prod-

ucts such as PCs, cellular phone

handsets, home game consoles,

DVDs and digital cameras are important

parts of a thriving and robust business. The

heart of these products is the IC chip (semi-

conductor), which is made from semicon-

ductor-processing equipments, including

dicing saws.

As digital products have gotten more

compact, thinner and more highly inte-

grated, IC chips have been forced to follow

suit, and semiconductor-processing equip-

ments have progressed accordingly.

With high integration of IC chips, not

only can digital products be more compact,

they can also handle a variety of functions

simultaneously, with enhanced performance,

lower energy costs and increased reliability.

IC-chip production starts with a thin,

disc-shaped silicon wafer, on the surface of

which hundreds of circuits are created.

These circuits are then cut and separated

one-by-one and assembled into packages.

The process of making circuits on the surface

of the silicon wafer is referred to as the front-

end process, while the cutting and separating

of the chips and everything after is known

as the back-end process. Semiconductor-

processing equipments have been developed

to respond to each of these process phases.

The front-end process is also called the

“diffusion process” and is made up of

300–400 smaller processes. Major examples

of such processes include “wafer insertion,”

as well as “thin film deposition,” in which

thin films are formed from a variety of mate-

rials; “lithography,” in which the thin films

are subjected to patterning and etching and

processed into specific shapes; “impurity

addition,” in which a tiny amount of impuri-

ties are added to the silicon to achieve con-

ductivity; and “properties check,” in which

the IC chips are examined one-by-one on

the completed wafer. Upon completion of

the process, IC circuits are created on the

silicon wafer.

FRONT-END PROCESS (DIFFUSION PROCESS)

THIN FILM

DEPOSITION

WAFER

INSERTION

LITHOGRAPHY IMPURITY

ADDITION

PROPERTIES

CHECK

SEMICONDUCTOR MANUFACTURING PROCESS


The back-end process includes “dicing,”

in which the completed chips are cut and

separated; “mounting,” in which only non-

defective chips are added to the lead frame;

“bonding,” whereby electrodes on the chip

are connected to electrodes on the lead

frame through thin metal wires; and “seal-

ing,” where the IC chip is then sealed and

preserved in a plastic mold. The final steps

involve plating the lead, cutting and separat-

ing the ICs one-by-one from the lead frame

and trimming and forming the lead into a

variety of shapes, then selecting the ICs

based on product specifications, and check-

ing and testing the chips for reliability.

These processes are called “trim and form-

ing,” “selection” and “testing,” respectively.

After these processes are through, the pro-

duct is complete.

Disco’s mainstay dicing saws are semi-

conductor-processing equipment used in the

very first step of the back-end process, dic-

ing. Recent versions of IC chips are as small

as 0.25mm in length per side, which requires

precision to the micron (1/1000mm) level to

be cut from the silicon wafer, and processing

quality that is completely free from distor-

tions and cracks.

Disco’s dicing saw has become the mar-

ket leader through technological capabilities

at the micron level and product quality that

its competitors are unable to match. With a

recent trend toward large-diameter silicon

wafers and the emergence of 300mm (12-

inch) models, semiconductor processing is

advancing hand in hand with the need for

more minute silicon wafer processing. Disco

has already released a dicing saw for 300mm

wafers, and the reaction from the market has

been favorable.


ROCESS) BACK-END PROCESS

RITY

TION

PROPERTIES

CHECK

DICING MOUNTING BONDING SEALING TRIM AND

FORMING

SELECTION TESTING

DICING

DFD 6360 Dicing Saw

DISCO A/R01本文 01.8.16 9:59 AM ページ 10


Topics

Expanded Facilities at Hiroshima Work’s Kuwabata Plant; Construction of

New Nagatani Plant

Disco takes a medium- and long-

term perspective toward expand-

ing its production system, one

that is not fixed on fluctuations in short-

term performance alone. The Company

already maintains a plant in Kure, Hiro-

shima, as a production facility for precision

diamond wheels and industrial-use diamond

wheels, and another in Kuwabata for man-

ufacturing of equipment and precision

diamond wheels. Additional plant facilities

were constructed within the Kuwabata Plant

during the fiscal year under review to re-

spond to an increase in orders for semicon-

ductor wafer dicing and grinding equipment.

The Company’s newly constructed

Nagatani Plant near Kuwabata serves as a

manufacturing facility for essential compo-

nents, including air spindles needed in such

areas as precision processing of equipment.

The new facility takes up 11,452 square

meters of floor space on a building site total-

ing 19,072 square meters, and began its oper-

ations in April 2001. As a result of these

measures, the Company’s production facili-

ties will now be able to respond with greater

speed and flexibility to changes in the envi-

ronment, even when faced with a sharp rise

in orders.

Nagatani plant

Kuwabata plant

The Kuwabata Plant went on line in

January 1990 as a production facility for

equipment and other products. From January

to November 2000, six more buildings were

constructed with total floor space of 32,800

square meters (bringing the total floor space

of the Kuwabata Plant complex to 50,334

square meters) on a building site totaling

103,055 square meters.

DISCO A/R01本文 01.8.16 9:59 AM ページ 11


Users in the semiconductor and

electronic components indus-

tries are demanding increasingly

more advanced and diverse technologies,

with requests for compatibility with large-

diameter and ultrathin wafers, increased

productivity with manufacturing equipment

and development of new precision diamond

wheels and applications technologies to

handle an array of new materials.

The trend toward large-diameter, or

300mm wafers, is an especially good ex-

ample. Twice as many IC chips can fit on

each wafer compared with the current

200mm wafer, which means

substantial reductions in manufactur-

ing costs for semiconductor manufacturers.

As such, the movement toward 300mm is

likely to be a key factor in determining

future technological trends in the semicon-

ductor and semiconductor equipment

industries.

According to Semiconductor Equipment

and Materials International (SEMI), manu-

facture of 200mm wafers will remain at high

levels through 2001, but should begin to

gradually decline in subsequent years. Manu-

facture of 300mm wafers will begin in 2001

as pilot projects or as a medium-scale

production basis, with mass production

beginning on a world-scale in 2002 and

2003. Monthly production should, according

to SEMI, reach one million wafers in 2005.

In December 2000, Disco released its

DFD6360 dicing saw: a fully automatic,

300mm-compatible model with considerably

more throughput than previous models. The

DFD6360 dicing saw employs a facing dual

spindle configuration for 30% faster through-

put. In addition, it occupies 30% less floor

space than previous models, creating the

world’s smallest such apparatus in terms of

surface area. The DFD6360 runs on a

Windows NT-compatible operating system

and features a touch panel for increased ease

of operation.

DFD6360

Fully Automatic Dicing Saw for 300mm Wafers

300mm wafer

200mm wafer

IC CHIP

DFD6360/Fully Automatic Dicing Saw for 300mm Wafers

DISCO A/R01本文 01.8.16 9:59 AM ページ 12


Review of Operations

Digital products in the information

telecommunications and con-

sumer electronics sectors have

been growing steadily in recent years, includ-

ing PCs, personal digital assistants (PDAs),

home game consoles, DVD players, IC cards

and digital cameras. Production of semicon-

ductors and electronic components has risen

sharply in line with this expansion, and we

have seen notable technological progress in

terms of compactness, lightweight and

advanced functionality. Against this back-

drop, there has been a sharp increase in

demand for Disco’s proprietary ultraprecision

processing technologies, of “kiru,” “kezuru”

and “migaku.” The Company’s Electronics

Industry-related Products division focuses on

manufacturing and marketing such products

as mainstay dicing saws, surface grinders,

cutting saws, precision diamond blades and

precision electronic compo-

nents. Orders for dicing saws,

grinders and precision

diamond wheels rose in the

fiscal year under review, owing

to robust capital investment

among manufacturers of semiconduc-

tors and electronic components in the

first half of the term, the start of full-scale

production of CSPs and an increase in

demand for the Company’s products caused

by a trend toward more compact electronic

components. Sales of precision electronic

components manufactured and marketed by

subsidiary TECNISCO Ltd., also rose

sharply, with activity particularly strong

among components related to optical com-

munications. As the Company was able to

meet its targets for boosting equipment

production capacity, the division set a new

record with a 50.1% increase in sales to

¥70,558 million.

Disco’s precision systems products and

diamond wheels hold a large share of the

overseas market as well. Sales overseas were

up 1.4 times for the fiscal year; by region,

this strong performance was fairly evenly bal-

anced, with sales in North America, Asia

and Europe at 1.5, 1.4 and 1.4 times the

previous fiscal year levels, respectively.

These robust results overseas are attributed

to the high ratings assigned to Disco’s prod-

ucts and technologies, which satisfy user

needs in the three areas of equipment,

diamond wheels and application technolo-

gies, as technological development acceler-

ates in semiconductors and electronic

components both domestically and abroad.

’97

’98

’99

’00

’01

(Millions of yen)Sales by Division

40,665

33,590

51,266

74,112

Electronic Industry-related Products Industrial Products Other Products

37,775

Precision diamond wheels

Electronics Industry-related Products Division


DISCO A/R01本文 01.8.16 9:59 AM ページ 13


Disco has placed a strong emphasis on

research and development geared toward

products and technological applications that

can respond to increasing demand in Japan

and overseas. R&D expenses for the fiscal

year under review rose 15.7% to ¥2,011

million.

The Company expects to see contribu-

tions to business performance emerging in

the following fiscal year from new products

that were designed to match emerging tech-

nological trends, including 300mm wafer-

compatible products, the DBG system for

processing of IC cards, stacked ICs and other

ultrathin chips, and surface grinders. How-

ever, given the current orders environment,

there are still uncertainties surrounding

the timing of a recovery in production and

capital investment among semiconductor

and electronic component manufacturers.

As such, management expects the overall

operating environment to be difficult.

Industrial Products DivisionThe Industrial Products division manufac-

tures and markets such products as industrial

diamond wheels and cut-off wheels, as well

as its mainstay cutting and grinding tools for

construction and civil engineering indus-

tries. Cutting and grinding tools for indus-

trial use differ from the Company’s other

processing equipment in that these items are

consumable, and therefore relatively

shielded from the impacts of the capital

investment cycle. Disco is aiming for global

activities in this business area, and

currently maintains production facilities

in Korea and Italy. The Company is also

making aggressive efforts to shorten delivery

times and to develop new products and tech-

nologies. Against a backdrop of restrained

public works projects, sales for the fiscal year

under review declined 2.2% to ¥2,758

million.

Other Products DivisionThe Other Products division focuses on the

manufacture, marketing and installation of

natural stone tiles and development and

sales of computer software. During the fiscal

year under review, the Company moved

ahead with a shift in business models in its

natural-stone-tiles business from a project-

based strategy aimed at spurring sales growth

to a new business model based on sales of

individual products, meant to secure higher

profit margins. As such, sales in the division

declined 44.9% to ¥796 million.

Industrial

diamond wheels

Industrial Products Division

Surface Grinder


DISCO A/R01本文 01.8.16 9:59 AM ページ 14


Financial ReviewDISCO CORPORATION and consolidated subsidiaries

Net SalesFor the fiscal year ended March 31, 2001,consolidated net sales rose 44.6% to ¥74,112million (US$597.7 million) partly as a resultof aggressive, finely targeted marketing activi-ties. Sales to foreign customers accounted for56.2% of net sales.

By region, sales to customers in NorthAmerica totaled ¥8,711 million (US$70.3million), or 11.8% of net sales; sales to cus-tomers in Asia (excluding Japan) were¥24,858 million (US$200.5 million), or33.5% of the total; and sales to customers inEurope reached ¥8,092 million (US$65.3 mil-lion), representing 10.9% of net sales.

By division, sales in the ElectronicsIndustry-related Products division soared50.1% to ¥70,558 million (US$569.0 mil-lion). Sales in the Industrial Products divisionslipped 2.2% to ¥2,758 million (US$22.2 mil-lion) amid restrained public works projects.Sales in the Other Products division fell44.9% to ¥796 million (US$6.4 million) fol-lowing a shift in business models to a newbusiness model based on sales of individualproducts to secure higher profit margins. Sales

of Electronics Industry-related Products,including dicing saws, surface grinders andprecision diamond wheels, accounted for ahigh proportion of net sales at 95.2%.Industrial Products accounted for 3.7% of netsales, with Other Products making up theremaining 1.1%.

Net IncomeOn the back of record sales and earnings forthe second consecutive year, gross profitsoared 47.2% to ¥38,446 million (US$310.0million), and the gross profit margin increased1.0 percentage point to 51.9%, reflectinghigher production efficiency. Selling, generaland administrative (SG&A) expenses rose14.8% to ¥17,453 million (US$140.8 mil-lion). However, this increase was absorbed byhigher sales, and SG&A as a percentage ofnet sales improved 6.1 percentage points to23.5%.

As a result, the operating profit marginincreased 7.0 percentage points to 28.3%, andoperating income soared 92.4% to ¥20,993million (US$169.3 million). Amortization oftransition difference arising from change in


accounting for retirement benefits was ¥564million (US$4.5 million), and provision forretirement benefits for directors and auditorswas ¥264 million (US$2.1 million). Otherexpenses—net fell 82.3% to ¥380 million(US$3.1 million).

Income before income taxes and minorityinterests soared 135.1% to ¥20,613 million(US$166.2 million), while net incomejumped 142.4% from ¥4,872 million(US$39.3 million) to ¥11,811 million(US$95.3 million). Net income per shareincreased from ¥230.41 in the previous fiscalyear to ¥367.76 (US$2.97).

Cash FlowIn cash flows from operating activities, netincome was ¥11,811 million (US$95.3 mil-lion) and depreciation and amortization was¥1,913 million (US$15.4 million). Loss onsales or disposals of property, plant and equip-ment was ¥55 million (US$0.4 million).

Cash was provided by an increase in notesand accounts payable—trade of ¥4,829 mil-lion (US$38.9 million) and an increase inaccrued income taxes of ¥2,097 million

’97 ’98 ’99 ’00 ’01

(Millions of yen)

Net Sales

37,77540,665

33,590

51,266

74,112

’97 ’98 ’99 ’00 ’01

(Millions of yen)

Operating Income

8,288 8,667

3,971

10,911

20,993

’97 ’98 ’99 ’00 ’01

(Billions of yen)

Cash Flows

3.7

4.2

2.3

4.4

–1.4

2.2

2.3

2.0

8.0

6.1

6.7

–0.5 –0.5

–2.1

8.8

Net Cash provided by Operating ActivitiesNet Cash used in Investing ActivitiesNet Cash provided by (used in)Financing Activities

DISCO A/R01財務 01.8.16 10:18 AM ページ 1


(US$16.9 million). However, these sourceswere partially offset by an increase in notesand accounts receivable—trade of ¥3,617 mil-lion (US$29.2 million) and an increase ininventories of ¥8,363 million (US$67.4 mil-lion). As a result, net cash provided by oper-ating activities was ¥8,759 million (US$70.6million), compared with ¥8,016 million inthe previous fiscal year.

Net cash used in investing activities was¥6,068 million (US$48.9 million). A substan-tial ¥6,313 million (US$50.9 million) in pur-chases of property, plant and equipment cou-pled with purchases of investment securitiesof ¥235 million (US$1.9 million) were keyfactors for this figure, with decrease in otherassets of ¥433 million (US$3.5 million)slightly offsetting total cash used.

Net cash used in financing activities was¥2,069 million (US$16.7 million). Thelargest source of cash expenditures was fromshort-term bank loans—net of ¥1,379 million(US$11.1 million).

In aggregate, cash and cash equivalents,end of year increased ¥971 million to ¥18,892million (US$152.4 million).

Financial PositionTotal current assets were ¥61,829 million(US$498.6 million), up 28.2%, or ¥13,582million, from the previous fiscal year. Timedeposits decreased ¥630 million to ¥12,079million (US$97.4 million). Notes andaccounts receivable—trade rose 24.6%, or¥4,168 million, to ¥21,092 million (US$170.1million).

Inventories increased 72.3% to ¥19,279million (US$155.5 million). Net property,plant and equipment climbed 47.5% to¥19,312 million (US$155.8 million).

Consequently, total assets at the fiscalyear-end climbed 28.9%, or ¥19,380 million,to ¥86,435 million (US$697.1 million).

Total current liabilities fell 44.3%, or¥9,907 million, to ¥32,289 million (US$260.4million). Notes and accounts payable—traderose 51.8%, or ¥4,865 million, to ¥14,252million (US$114.9 million), and accruedincome taxes soared 56.8% to ¥7,224 million(US$58.3 million) reflecting considerableincome growth during the period. In long-term liabilities, accrued retirement benefitsincreased 7.1%, or ¥166 million, to ¥2,490


million (US$20.1 million). Interest-bearingdebt (long-term debt, short-term bank loansand current portion of long-term debt) fell28.6%, or ¥1,349 million, to ¥3,374 million(US$27.2 million) mostly from the absence oflong-term debt.

As a result of the above factors, total lia-bilities surged 32.7%, or ¥8,574 million, to¥34,783 million (US$280.5 million).Retained earnings were ¥31,473 million(US$253.8 million), an increase of 54.0%compared with the previous fiscal year. As aresult, total shareholders’ equity climbed26.3% to ¥51,601 million (US$416.1 million).

The ratio of shareholders’ equity to totalassets was 59.7%, down 1.2 percentage pointsfrom 60.9% in the previous fiscal year. Returnon assets (ROA) increased 6.4 percentagepoints to 15.4%, and return on equity (ROE)was 25.6%, compared with 14.3% in the previous fiscal year.

’97 ’98 ’99 ’00 ’01

(Millions of yen)

Total Assets

38,122

46,893

41,018

67,055

86,435

’97 ’98 ’99 ’00 ’01

(Millions of yen)/(%)

Shareholders’ Equity/Shareholders’ Equity Ratio

20,063

25,59327,057

40,846

51,601

’97 ’98 ’99 ’00 ’01

(%)

Return on Assets andReturn on EquityShareholders’ Equity Ratio

Shareholders’ Equity

Return on Equity=Net Income/Average Shareholders' EquityReturn on Assets=Net Income/Average Total Assets

52.6

54.6

66.0

60.9

59.7

25.0

16.6

8.9

8.0

14.3

9.0

11.8

4.8

15.4

25.6

DISCO A/R01財務 01.8.16 10:18 AM ページ 2


Consolidated Balance SheetsDISCO CORPORATION and consolidated subsidiaries


(Note 3)

MARCH 31, 2001 AND 2000 2001 2000 2001

ASSETS

CURRENT ASSETS:

Cash (Note 4) ............................................................................................................ ¥ 6,813 ¥ 5,837 $ 54,944

Time deposits (Note 4).............................................................................................. 12,079 12,709 97,411

Marketable securities (Notes 5 and 8) ...................................................................... — 552 —

Notes and accounts receivable—trade...................................................................... 21,092 16,924 170,097

Allowance for doubtful receivables........................................................................... (52) (80) (419)

Inventories (Note 6).................................................................................................. 19,279 11,192 155,476

Deferred tax assets (Note 11) .................................................................................... 837 335 6,750

Prepaid expenses and other current assets ................................................................ 1,781 778 14,362

Total current assets ............................................................................................... 61,829 48,247 498,621

PROPERTY, PLANT AND EQUIPMENT (Note 8):

Land............................................................................................................................ 5,708 4,452 46,032

Buildings and structures............................................................................................. 12,538 8,018 101,113

Machinery and equipment ........................................................................................ 7,979 5,997 64,347

Tools, furniture and fixtures....................................................................................... 3,121 2,664 25,169

Construction in progress............................................................................................ 548 1,124 4,420

Total ...................................................................................................................... 29,894 22,255 241,081

Accumulated depreciation ........................................................................................ (10,582) (9,160) (85,339)

Net property, plant and equipment...................................................................... 19,312 13,095 155,742

INVESTMENTS AND OTHER ASSETS:

Investment securities (Note 5).................................................................................. 1,162 387 9,371

Investments in unconsolidated subsidiaries and

associated companies (Note 7)................................................................................ 559 698 4,508

Leasehold land ........................................................................................................... 587 565 4,734

Deferred tax assets (Note 11) .................................................................................... 1,761 2,018 14,202

Other .......................................................................................................................... 1,225 1,328 9,879

Total investments and other assets ...................................................................... 5,294 4,996 42,694

TRANSLATION ADJUSTMENTS............................................................................. — 717 —

TOTAL............................................................................................................................ ¥ 86,435 ¥ 67,055 $ 697,057

See accompanying notes to consolidated financial statements.

DISCO A/R01財務 01.8.16 10:18 AM ページ 3


(Note 3)

MARCH 31, 2001 AND 2000 2001 2000 2001

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Short-term bank loans (Note 8) ............................................................................... ¥ 1,874 ¥ 3,137 $ 15,113

Current portion of long-term debt (Note 8) ............................................................ 1,500 83 12,097

Notes and accounts payable—trade.......................................................................... 14,252 9,387 114,935

Accrued expenses....................................................................................................... 2,073 1,693 16,718

Accrued income taxes (Note 11).............................................................................. 7,224 4,608 58,258

Other current liabilities ............................................................................................. 5,366 3,474 43,275

Total current liabilities ......................................................................................... 32,289 22,382 260,396

LONG-TERM LIABILITIES:

Long-term debt (Note 8)........................................................................................... — 1,503 —

Accrued retirement benefits (Note 9) ...................................................................... 2,490 2,324 20,081

Other long-term liabilities......................................................................................... 4 — 32

Total liabilities ...................................................................................................... 34,783 26,209 280,509

MINORITY INTERESTS.............................................................................................. 51 — 411

SHAREHOLDERS’ EQUITY (Notes 10 and 18):

Common stock, ¥50 par value—authorized 72,000,000 shares;

issued and outstanding 32,117,125 shares in 2001 and

21,411,417 shares in 2000 ....................................................................................... 9,771 9,771 78,798

Additional paid-in capital ......................................................................................... 10,637 10,637 85,782

Retained earnings ...................................................................................................... 31,473 20,439 253,815

Translation adjustument............................................................................................ (311) — (2,508)

Other securities valuation difference ........................................................................ 32 — 258

Total ...................................................................................................................... 51,602 40,847 416,145

Treasury stock—at cost, 100 shares in 2001 and 67 shares in 2000......................... (1) (1) (8)

Total shareholders’ equity..................................................................................... 51,601 40,846 416,137

CONTINGENT LIABILITIES (Note 16).................................................................... — — —

TOTAL............................................................................................................................ ¥ 86,435 ¥ 67,055 $ 697,057


DISCO A/R01財務 01.8.16 10:18 AM ページ 4


Consoidated Statements of IncomeDISCO CORPORATION and consolidated subsidiaries


(Note 3)

YEARS ENDED MARCH 31, 2001 AND 2000 2001 2000 2001

NET SALES.................................................................................................................... ¥ 74,112 ¥ 51,266 $ 597,677

COST OF SALES (Notes 9 and 12) ............................................................................. 35,666 25,155 287,629

Gross profit............................................................................................................ 38,446 26,111 310,048

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 9 and 12)........................................................................................................ 17,453 15,200 140,750

Operating income................................................................................................. 20,993 10,911 169,298

OTHER INCOME (EXPENSES):Interest and dividend income.................................................................................... 114 108 919Interest expense ......................................................................................................... (121) (130) (976)Loss on sales or disposals of property, plant and equipment..................................... (55) (49) (444)Loss on disposal of inventories .................................................................................. (101) (168) (815)Devaluation loss on marketable securities ................................................................ — (21) —Commission income .................................................................................................. 168 127 1,355Foreign exchange gain (loss) ..................................................................................... 608 (464) 4,903Equity in loss of associated companies ...................................................................... (144) (185) (1,161)Provisions for prior service costs of retirement benefits ........................................... — (1,172) —Devaluation loss on golf membership ....................................................................... (59) (182) (476)Amortization of transition difference arising from change inaccounting for retirement benefits .......................................................................... (564) — (4,548)

Provision for retirement benefits for directors and auditors..................................... (264) — (2,129)Other—net................................................................................................................. 38 (8) 308

Other expenses—net............................................................................................ (380) (2,144) (3,064)

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS.................. 20,613 8,767 166,234

INCOME TAXES (Note 11) ......................................................................................... 8,802 3,940 70,984

INCOME BEFORE MINORITY INTERESTS............................................................ 11,811 4,827 95,250

MINORITY INTERESTS.............................................................................................. — (45) —

NET INCOME ............................................................................................................... ¥ 11,811 ¥ 4,872 $ 95,250

U.S. DOLLARSYEN (Note 3)

AMOUNT PER SHARE OF COMMON STOCK:

Net income ................................................................................................................ ¥ 367.76 ¥ 230.41 $ 2.97

Cash dividends applicable to the year....................................................................... 40.00 20.00 0.32


DISCO A/R01財務 01.8.16 10:18 AM ページ 5

MILLIONS OF YEN

OTHERNUMBER OF ADDITIONAL RETAINED SECURITIESSHARES OF COMMON PAID-IN EARNINGS TRANSLATION VALUATION TREASURY

YEARS ENDED MARCH 31, 2001 AND 2000 COMMON STOCK STOCK CAPITAL (Note 10) ADJUSTMENT DIFFERENCE STOCK

BALANCE, APRIL 1, 1999 ..................... 21,011,417 ¥5,649 ¥ 6,516 ¥ 14,892 ¥ — ¥ — ¥ 0

Cumulative effects of change

in accounting for income taxes.......... 1,134

Net income........................................... 4,872

Cash dividends, ¥20 per share ............. (420)

Bonuses to directors.............................. (39)

Common stock issued under

public offering..................................... 400,000 4,122 4,121

Purchase of treasury stock .................... (1)

BALANCE, MARCH 31, 2000 ............... 21,411,417 ¥9,771 ¥ 10,637 ¥ 20,439 — — (1)

Net income........................................... 11,811

Cash dividends, ¥40 per share ............. (696)


Common stock increase

due to stock split................................. 10,705,708 — —

Adoption of the new accounting

standards (Notes 2d and 1) ................ (311) 32

BALANCE, MARCH 31, 2001 ............ 32,117,125 ¥9,771 ¥10,637 ¥ 31,473 ¥ (311) ¥ 32 ¥(1)

THOUSANDS OF U.S. DOLLARS (Note 3)

OTHERNUMBER OF ADDITIONAL RETAINED SECURITIESSHARES OF COMMON PAID-IN EARNINGS TRANSLATION VALUATION TREASURY

COMMON STOCK STOCK CAPITAL (Note 10) ADJUSTMENT DIFFERENCE STOCK

BALANCE, MARCH 31, 2000 ............... 21,411,417 $78,798 $85,782 $ 164,831 $ — $ — $(8)

Net income........................................... 95,250

Cash dividends,

¥40 ($0.32) per share ......................... (5,613)


Common stock increase

due to stock split................................. 10,705,708 — —

Adoption of the new accounting

standards (Notes 2d and 1) ................ — — (2,508) 258

BALANCE, MARCH 31, 2001 ............ 32,117,125 $78,798 $85,782 $ 253,815 $(2,508) $258 $(8)



Consoidated Statements of Shareholders’ EquityDISCO CORPORATION and consolidated subsidiaries

DISCO A/R01財務 01.8.16 10:18 AM ページ 6


Consoidated Statements of Cash FlowsDISCO CORPORATION and consolidated subsidiaries


(Note 3)

YEARS ENDED MARCH 31, 2001 AND 2000 2001 2000 2001

OPERATING ACTIVITIES:Net income ................................................................................................................ ¥ 11,811 ¥ 4,872 $ 95,250Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization ............................................................................ 1,913 1,543 15,427Loss on sales or disposals of property, plant and equipment ............................... 55 49 444Devaluation loss on marketable securities........................................................... — 21 —Devaluation loss on golf membership .................................................................. 59 182 476Loss on disposal of inventories ............................................................................. 101 168 815Equity in loss of associated companies................................................................. 144 185 1,161Increase in notes and accounts receivable—trade .............................................. (3,617) (7,778) (29,169)Increase in inventories ......................................................................................... (8,363) (2,994) (67,444)Increase in notes and accounts payable—trade................................................... 4,829 7,828 38,944Increase in accrued income taxes......................................................................... 2,097 2,237 16,911Increase in retirement benefits............................................................................. 165 1,387 1,331Other—net ........................................................................................................... (435) 316 (3,509)

Net cash provided by operating activities ...................................................... 8,759 8,016 70,637

INVESTING ACTIVITIES:Purchases of property, plant and equipment ............................................................. (6,313) (778) (50,911)Proceeds from sales of property, plant and equipment ............................................. 27 63 218Purchases of investment securities ............................................................................ (235) (49) (1,895)Proceeds from sales of investment securities............................................................. 3 — 24Proceeds from sales of intangible assets..................................................................... 17 — 137Investments in associated companies........................................................................ — (14) —Acquisition of Xiamen Chang Jiang Stoneware Co., Ltd., net of cash acquired ................................................................................................. — (165) —

Decrease (Increase) in other assets ........................................................................... 433 (1,017) 3,491

Net cash used in investing activities .............................................................. (6,068) (1,960) (48,936)

FINANCING ACTIVITIES:Short-term bank loans—net ..................................................................................... (1,379) (1,227) (11,121)Proceeds from long-term debt ................................................................................... — 200 —Repayment of long-term debt.................................................................................... (2) (107) (16)Proceeds from issuance of common stock ................................................................. — 8,243 —Cash dividends paid................................................................................................... (697) (420) (5,621)Other .......................................................................................................................... 9 (1) 73

Net cash provided by (used in) financing activities ...................................... (2,069) 6,688 (16,685)

EFFECT OF TRANSLATION ADJUSTMENT ......................................................... 349 (199) 2,815

NET CHANGE IN CASH AND CASH EQUIVALENTS ....................................... 971 12,545 7,831

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.............................. 17,921 5,376 144,524

CASH AND CASH EQUIVALENTS, END OF YEAR............................................. ¥ 18,892 ¥ 17,921 $ 152,355


DISCO A/R01財務 01.8.16 10:18 AM ページ 7


Notes to Consoidated Financial StatementsDISCO CORPORATION and consolidated subsidiaries

The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth inthe Japanese Securities and Exchange Law and its relatedaccounting regulations, and in conformity with accountingprinciples generally accepted in Japan, which may differ insome material respects from accounting principles and prac-tices generally accepted in countries and jurisdictions otherthan Japan.

In preparing the consolidated financial statements, cer-tain reclassifications and rearrangements have been made to

the consolidated financial statements issued domestically inorder to present them in a format which is more familiar toreaders outside Japan. In addition, the notes to the consoli-dated financial statements include information which is notrequired under accounting principles generally accepted inJapan but is presented herein as additional information.

Certain reclassifications have been made to the consoli-dated financial statements for the year ended March 31,2000 to conform to the classifications used for the year endedMarch 31, 2001.

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

a. Principles of Consolidation — The accompanying consol-idated financial statements include the accounts ofDISCO CORPORATION (the Company) and its signifi-cant subsidiaries (collectively, the Companies). Consoli-dation of the remaining subsidiaries would not have amaterial effect on the accompanying consolidated finan-cial statements.

All significant intercompany accounts and transac-tions have been eliminated in consolidation. All materialunrealized profit included in assets resulting from transac-tions within the Companies is eliminated.

Investments in significant associated companies arestated at their underlying equity value, and an appropriateportion of the loss of such companies is included in con-solidated income. Remaining investments in unconsoli-dated subsidiaries and an associated company areaccounted for on a cost basis. The effect on the consoli-dated financial statements of not applying the equitymethod was immaterial.

The excess of cost over net assets of subsidiariesacquired is charged to income in the period of acquisition.

b. Cash and Cash Equivalents — For purposes of the consol-idated statements of cash flows, the Company considersall highly liquid investments, including time deposits witha maturity of three months or less when purchased, to becash equivalents.

c. Inventories — Inventories of the Company and its con-solidated domestic subsidiaries are stated at cost. The costof finished goods and work in process is determined prin-cipally by the job-identification-cost method or average-cost method. The cost of merchandise and raw materialsof the Company and its consolidated domestic subsidiariesare determined principally by the average cost method.

Merchandise and finished goods of the foreign sub-sidiaries are stated at the lower of cost (determined by theaverage cost method) or market value.

d. Marketable and Investment Securities — Effective fromthe year ended March 31, 2001, the Company adoptedthe new accounting standard for financial instruments(“Opinion Concerning Establishment of AccountingStandard for Financial Instruments”, the BusinessAccounting Deliberation Council, January 22, 1999).This accounting standard requires the Company to

classify its debt and equity securities into one of the fol-lowing three categories; trading, held-to-maturity, orother securities. Based on this classification, all securitiesof the companies are classified as other securities. TheCompany has no trading and held-to maturity securities.As the result of the adoption of this standard, securitiesamounting to ¥552 million ($4,452 thousand) werereclassified from current assets to “Investment securities”in the non-current assets section of consolidated balancesheets.

Other securities with fair market value are principallycarried at the fair market value. The difference betweenthe acquisition cost and the carrying value of other securi-ties, including unrealized gains and losses, net of relatedtax effect, is recognized in “Other securities valuation dif-ference” as a separate component of shareholders’ equityuntil realized. Other investments are stated at cost. Thecost of other securities sold is principally computed basedon the moving average method.

In prior years, current and non-current publicly tradedmarketable securities were stated at the lower of cost ormarket. Other investments were stated at cost. Cost wasdetermined by the average method.

e. Derivatives — The Company is exposed to risks arisingfrom fluctuations in foreign currency exchange rates andinterest rates. In order to manage those risks, theCompany enters into certain derivative contracts, includ-ing foreign exchange contracts and interest rate swaps.Foreign exchange contracts are utilized to manage risksarising from foreign currency receivables from export offinished goods and forecasted foreign currency sales trans-actions. Interest rate swaps are utilized to manage interestrate risk for debts. The Company has no derivatives fortrading purposes.

f. Property, Plant and Equipment — Property, plant andequipment are stated at cost. Depreciation is computedprincipally by the declining-balance method at ratesbased on the estimated useful lives of the assets. Thestraight-line method has been applied to newly acquiredbuildings since April 1, 1998 in accordance with Japanesetax regulations. The range of useful lives is principallyfrom 3 to 38 years for buildings and structures, from 3 to10 years for machinery and equipment, and from 2 to 20

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DISCO A/R01財務 01.8.16 10:18 AM ページ 8


years for tools, furniture and fixtures.g. Retirement Benefits — Employees of the Company and

consolidated domestic subsidiaries are covered by anunfunded, non-contributory, defined benefit retirementplan. In addition, the Company and two of the domesticsubsidiaries have funded, non-contributory, defined bene-fit pension plan, the funds of which are entrusted to a pri-vate life insurance company and a trust bank. Certainconsolidated overseas subsidiaries have defined contribu-tion retirement plan.

Beginning April 1, 1999, the Company changed itsmethod of determining the liability for retirement bene-fits from 40% to 100% of the voluntary terminationvested benefits at each balance sheet date. The Companymade this accounting change to more accurately reflectits liability for retirement benefits and the full cost of theprogram. The Company recognized a charge of ¥395 mil-lion, net of tax benefit, as the cumulative effect of thisaccounting change in the year ended March 31, 2000.

Effective from the year ended March 31, 2001, theCompany and consolidated domestic subsidiaries adoptedthe new accounting standard for retirement benefits(“Opinion Concerning Establishment of AccountingStandard for Retirement Benefits”, The Business Ac-counting Deliberation Council, June 16, 1998). In accor-dance with this standard, the provisions for employeeretirement benefits are provided based on the estimatedretirement benefit obligation and the pension assets. As aresult of the adoption of this standard in the current year,retirement benefit cost decreased by ¥260 million ($2,097thousand), and ordinary profit increased by ¥260 million($2,097 thousand). The transition difference of ¥564 mil-lion ($4,548 thousand) arising from the adoption of thenew accounting standard was charged to income in theyear ended March 31, 2001, and the amortization cost wasincluded in other expenses. As a result, income beforeincome taxes decreased by ¥304 million ($2,452 thousand).

The annual provisions for the unfunded retirementbenefits to directors and statutory auditors of theCompany and two of the consolidated subsidiaries werecalculated to accrue the liability required if all directorsand statutory auditors retired at each balance sheet date.

h. Research and Development Costs — Effective April 1,1999, research and development costs are charged toincome when incurred in accordance with the newlyissued financial accounting standard, “AccountingStandards for Research and Development Costs.”

Deferred research and development costs of ¥109 mil-lion as of April 1, 1999 were charged to income for theyear ended March 31, 2000.

i. Income Taxes — Effective April 1, 1999, the Companyand domestic consolidated subsidiaries adopted the newlyissued financial accounting standard, “Accounting forIncome Taxes.” Under the new standard, deferred taxesare recognized for the estimated tax effects of temporarydifferences between the financial reporting and the taxbasis of assets and liabilities. Deferred tax assets and liabil-

ities are measured using enacted tax rates applicable tothe periods in which the temporary differences areexpected to be recovered or settled. In prior years, incometaxes had been provided only based upon taxable incomefor the Company and domestic consolidated subsidiariesand deferred income taxes had been recorded only for theconsolidated foreign subsidiaries.

The amount of deferred income taxes attributable tothe net tax effects of the temporary differences at April 1,1999, was reflected as an adjustment to the retained earn-ings brought forward from the previous year. The cumula-tive effect of adopting the new accounting standard was¥1,134 million, which was directly added to the retainedearnings brought forward from March 31, 1999. Theeffect for the year ended March 31, 2000 was to increasenet income by ¥989 million.

j. Appropriations of Retained Earnings — Appropriationsof retained earnings at each year end are reflected in theconsolidated financial statements in the following yearafter shareholders’ approval has been obtained.

k. Per Share Information — The computation of netincome per share is based on the weighted average num-ber of shares of common stock outstanding during eachyear. The average number of common shares used in thecomputation was 32,116,904 shares for 2001 and21,411,417 shares for 2000. On May 19, 2000, the Com-pany effected a three-for-two stock split in the form of astock divided. Shareholders of record as of March 31,2000 received one additional share of common stock forevery two shares they owned on this date.

Cash dividends per share are based on cash dividendsdeclared with respect to income for the year.

l. Foreign Currency Translation — In accordance with theaccounting standards for foreign currency translationissued by The Business Accounting Deliberation Council,foreign currency transactions are translated into Japaneseyen at the rates in effect at the transaction date.

Effective from the year ended March 31, 2001, theCompany and consolidated domestic subsidiaries adoptedthe revised accounting standard for foreign currencytransactions (“Opinion Concerning Establishment ofAccounting for Foreign Currency Transactions”, TheBusiness Accounting Deliberation Council, October 22,1999). In adopting this standard, there was no materialeffect on the consolidated financial statements.

As of the year end, receivables and payables denomi-nated in foreign currencies are translated into Japaneseyen at exchange rates in effect at the balance sheet date.Resulting translation effects, including gains and losses onsettlement, are credited or charged to current income. Inprior years, non-current receivables and payables denomi-nated in foreign currencies were translated using Japaneseyen at historical rates.

Investment securities, investments in unconsolidatedsubsidiaries and associated companies denominated in for-eign currencies are translated into yen at the historicalrates prevailing at the date of transaction.

DISCO A/R01財務 01.8.16 10:18 AM ページ 9


The consolidated financial statements presented herein areexpressed in yen and, solely for the convenience of thereaders, have been translated into United States dollars atthe rate of ¥124=U.S.$1, the approximate exchange rate

prevailing on the Tokyo Exchange Market on March 30,2001. This translation should not be construed as a presen-tation that the amounts shown could be converted intoUnited States dollars at such rate.

3. FINANCIAL STATEMENT TRANSLATION

Carrying amounts and aggregate market values of quoted securities at March 31, 2001 and 2000 were as follows:

5. MARKETABLE AND INVESTMENT SECURITIES


2001 2000 2001

Carrying amount ¥530 ¥552 $4,274Aggregate market value 582 841 4,694

As described in Note 2 to the consolidated financial statements, quoted securities are included in investment securities as non-current assets in 2001.

Inventories at March 31, 2001 and 2000 consisted of the following:

6. INVENTORIES


2001 2000 2001

Merchandise ¥ 2,483 ¥ 1,843 $ 20,024Finished goods 1,413 1,119 11,395Work in process 6,780 4,142 54,678Raw materials and supplies 8,603 4,088 69,379Total ¥19,279 ¥11,192 $155,476

Foreign exchange contracts are marked to market eachmonth and included in other liabilities, with offsettinggain or loss included in other expense (the fair valuemethod). In prior years, the exchange gains or losses aris-ing from the forward exchange contracts were deferredand recognized as income or loss ratably over the contractterm. Other exchange gains and losses were recognized inthe fiscal periods in which they occurred.

The financial statements of the overseas subsidiariesare translated into Japanese yen, the reporting currency,as follows: all assets and liabilities are translated at theyear end exchange rates; shareholders’ equity accounts aretranslated at historical rates; and revenue and expenseitems are translated at average rates. As a result of amend-

ment to the Regulations Concerning Terminology, Formsand Preparation Method of Consolidated FinancialStatements in the current year foreign currency transla-tion adjustments are included in the Shareholders’ equitysection of the consolidated financial statements. In prioryears these adjustments were classified in the Assets sec-tion of the consolidated financial statements.

m. Leases — Leases are accounted for principally as operatingleases. Under Japanese accounting standards for leases,finance leases that do not transfer ownership of the leasedproperty to the lessee are permitted to be accounted for asrental transactions if certain “as if capitalized” informa-tion is disclosed in the notes to the lessee’s consolidatedfinancial statements.

A reconciliation of the cash and cash equivalents per balance sheet to the statement of cash flows was as follows:

4. CASH AND CASH EQUIVALENTS


2001 2000 2001

Cash ¥ 6,813 ¥ 5,837 $ 54,944Time deposits 12,079 12,709 97,411Time deposits with maturities over three months — (625) —Cash and cash equivalents ¥18,892 ¥17,921 $152,355

DISCO A/R01財務 01.8.16 10:18 AM ページ 10



2001 2000 2001

Collateralized 1.7% yen bond, due 2001 ¥ 500 ¥ 500 $ 4,032Loans from banks and other financial institutions, due through 2001 with interest rates ranging from 1.1% to 1.9% and from 1.1% to 6.0% at March 31, 2001 and 2000, respectively 1,000 1,086 8,065

Total 1,500 1,586 12,097Less current portion (1,500) (83) (12,097)Long-term debt, less current portion — ¥1,503 $ —

Short-term bank loans at March 31, 2001 and 2000 con-sisted of notes to banks and bank overdrafts. The annualinterest rates applicable to the short-term bank loansranged from 0.62% to 9.53% and 0.75% to 4.2% at March

31, 2001 and 2000, respectively. Long-term debt at March 31, 2001 and 2000 consisted of

the following:

8. SHORT-TERM BANK LOANS AND LONG-TERM DEBT

The assets pledged as collateral for short-term bank loans and long-term debt at March 31, 2001 and 2000 were as follows:


2001 2000 2001

Land ¥ 693 ¥ 693 $ 5,589Buildings and structures — net 814 865 6,564Marketable securities — 160 —

Total ¥1,507 ¥1,718 $12,153

Collateralized short-term bank loans and long-term debt at March 31, 2001 and 2000 were as follows:THOUSANDS OF

MILLIONS OF YEN U.S. DOLLARS

2001 2000 2001

Short-term bank loans ¥500 ¥ — $4,032Long-term debt — 516 —

Investments in unconsolidated subsidiaries and associated companies at March 31, 2001 and 2000 were as follows:

7. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED COMPANIES

EQUITYTHOUSANDS OF

OWNERSHIPMILLIONS OF YEN U.S. DOLLARS

PERCENTAGE* 2001 2000 2001

Subsidiaries:DISCO-SEA AMERICA, INC. 85.0% ¥121 ¥121 $ 976DISCO TECHNOLOGY (SHANGHAI) CO., LTD. 100.0 50 28 403DISCO HI-TEC (THAILAND) CO., LTD.** 49.3 0 — 0

Associated companies:DD DIAMOND CORPORATION 50.0 116 103 936S.E.A. UTENSILI DIAMANTATI S.p.A. 50.0 266 432 2,145DISCO-SEA EUROPE S.r.l.*** 50.5 6 14 48

Total ¥559 ¥698 $4,508

* Direct and indirect ownership at March 31, 2001.** DISCO HI-TEC (THAILAND) CO., LTD. was formed on May 20, 1999.

*** The Company and S.E.A. UTENSILI DIAMANTATI S.p.A. directly owns 26.56% and 54.36% of DISCO-SEA EUROPE S.r.l., respectively.

DISCO A/R01財務 01.8.16 10:18 AM ページ 11


Under most circumstances, the employees of the Companyand the consolidated domestic subsidiaries are entitled tolump-sum retirement benefits based on their rate of pay atthe time of termination, years of service and certain otherfactors. If the termination is involuntary or caused by death,the employee is usually entitled to greater payments than inthe case of voluntary termination.

Directors and statutory auditors are not covered by theabove plan. Liability for retirement benefits to directors andstatutory auditors of the Company and two of the consoli-

dated subsidiaries included in the accompanying consoli-dated balance sheets amounted to ¥828 million ($6,678thousand) and ¥1,109 million at March 31, 2001 and 2000,respectively. Amounts payable to them upon retirement aresubject to the approval of the shareholders.

For the year ended March 31, 2000 total provisions forretirement benefits and pension costs charged to income andthe fund assets of the fund under a non-contributory pensionplan amounted to ¥1,773 million and ¥1,564 million,respectively.

9. RETIREMENT BENEFITS

Net periodic employees retirement benefit cost for the year ended March 31, 2001 consisted of the following:


Service cost — benefits earned during the year ¥300 $2,419Interest cost on projected benefit obligation 100 807Expected return on plan assets (34) (274)Amortization of transition difference 564 4,548

Net periodic costs ¥930 $7,500

Reconciliations of ending balances of the benefit obligations and the fair value of the plan assets for the year ended March 31,2001 are as follows:


Benefit obligations at end of year ¥3,611 $29,121Fair value of plan assets at end of year (1,952) (15,742)Unrecognized actuarial loss 3 24Accrued retirement benefits ¥1,662 $13,403

Actuarial assumptions:Method of allocating benefit obligations Pro-rated on years of serviceDiscount rate 3.0%Expected long-term rate of return on plan assets 2.2%Amortization term of charging actuarial loss 3 years started from year ended March 31, 2002Amortization term of charging transition difference arisingfrom the adoption of the new accounting standard 1 year (year ended March 31, 2001)

The Japanese Commercial Code (the Code) requires at least50% of the issue price of new shares, with a minimum of thepar value thereof, to be designated as stated capital as deter-mined by resolution of the Board of Directors. Proceeds inexcess of amounts designated as stated capital are credited toadditional paid-in capital.

The Code also requires companies to appropriate fromretained earnings to legal reserve an amount equal to at least10% of all cash payments which are made as an ap-propriation of retained earnings until such reserve equals25% of stated capital. This reserve is not available for divi-dends but may be used to reduce a deficit by resolution of the shareholders.

The Company may transfer portions of additional paid-incapital and legal reserve to stated capital by resolution of theBoard of Directors. The Company may also transfer portionsof unappropriated retained earrings, available for dividends,to stated capital by resolution of the shareholders.

Under the Code, the Company may issue new commonshares to existing shareholders without consideration as astock split pursuant to resolution of the Board of Directors.The Company may make such a stock split to the extent theaggregate par value of the shares outstanding after the stocksplit does not exceed the stated capital. However, theamount calculated by dividing the total amount of share-holders’ equity by the number of outstanding shares after the

10.SHAREHOLDERS’ EQUITY

DISCO A/R01財務 01.8.16 10:18 AM ページ 12

Significant components of deferred tax assets and liabilities at March 31, 2001 and 2000 were as follows:THOUSANDS OF


2001 2000 2001

Deferred tax assets:Property, plant and equipment, leasehold land and other assets — intercompany profits ¥ 731 ¥ 987 $ 5,895

Inventory — intercompany profits 553 363 4,460Liability for retirement benefits 568 806 4,580Accrued business taxes 576 366 4,645Accrued bonus 274 168 2,210Net operating loss carryforwards 310 309 2,500Other 684 182 5,516

Total deferred tax assets 3,696 3,181 29,806Valuation allowance (334) (310) (2,693)

Net deferred tax assets 3,362 2,871 27,113

Deferred tax liabilities:Undistributed earnings of foreign subsidiaries 688 441 5,548Others 87 77 702

Total deferred tax liabilities 775 518 6,250Net deferred tax assets ¥2,587 ¥2,353 $20,863


The Company and its consolidated domestic subsidiaries aresubject to a number of taxes based on income which, in theaggregate, resulted in a normal statutory tax rate of approxi-mately 42.0% in 2001 and 2000.

Income taxes for the year ended March 31, 2001 and2000 consisted of current and deferred income tax expense(benefit) as follows:

11. INCOME TAXES


2001 2000 2001

Current ¥9,236 ¥4,929 $74,484Deferred (434) (989) (3,500)

¥8,802 ¥3,940 $70,984


2001 2000 2001

Deferred gain on sales of property, plant and equipment ¥65 ¥72 $524Contribution gain from a local government 8 9 65

Total ¥73 ¥81 $589

stock split shall not be less than ¥50 ($0.40).Dividends are approved by the shareholders at a meeting

held subsequent to the fiscal year to which the dividends areapplicable. Semiannual interim dividends may also be paidupon resolution of the Board of Directors, subject to certainlimitations imposed by the Code.

Retained earnings at March 31, 2001 included ¥11,970million ($96,532 thousand) which is designated as general

reserves, but is available for future dividends subject toapproval by the shareholders and legal reserve requirements.The Special Taxation Measures Law and Corporate Tax Lawpermit companies to take as tax deductions certain reserves ifprovided through appropriation of retained earnings. UnderJapanese tax laws, these reserves must be reversed to taxableincome in future years. These reserves included in retainedearnings at March 31, 2001 and 2000, were as follows:

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Research and development costs charged to income for theyears ended March 31, 2001 and 2000 were ¥2,106 million

($16,984 thousand) and ¥1,839 million, respectively.

12.RESEARCH AND DEVELOPMENT COSTS

The effective tax rate differs from the normal tax rate at March 31, 2001 and 2000 for the following reasons:

2001 2000

Japanese normal income tax rate 42.0% 42.0%Increases (reductions) resulting from:

Taxes on undistributed earnings of foreign subsidiaries 0.2 1.1Tax benefits not recognized on operating losses of subsidiaries 0.2 1.1Expenses not deductible for tax purposes 0.2 0.6Taxes on consolidated adjustments on dividends received from subsidiaries 1.7 4.3Foreign tax credit in relation to dividends received from foreign subsidiaries (1.2) (2.8)Other — net (0.4) (1.4)

Effective income tax rate 42.7% 44.9%

Finance leases other than those which are deemed to transferthe ownership of the leased assets to lessees are generallyaccounted for by the method that is applicable to ordinaryoperating leases.

Acquisition costs, accumulated depreciation and net bal-ance of leased tools, furniture and fixtures as of March 31,2001 and 2000, if they had been capitalized, were as follows:

13. LEASES


2001 2000 2001

Acquisition cost ¥2,382 ¥1,270 $19,210Accumulated depreciation 657 740 5,299

Net balance ¥1,725 ¥ 530 $13,911

The amount of acquisition costs, accumulated depreciation and net balance under finance leases includes the imputed interestexpense portion.

Obligations under finance leases as of March 31, 2001 and 2000 were as follows:THOUSANDS OF


2001 2000 2001

Due within one year ¥ 237 ¥219 $ 1,911Due after one year 1,488 311 12,000

Total ¥1,725 ¥530 $13,911

Net deferred tax assets at March 31, 2001 and 2000 were included in the following accounts:THOUSANDS OF


2001 2000 2001

Current assets — deferred tax assets ¥ 837 ¥ 335 $ 6,750Non current assets — deferred tax assets 1,761 2,018 14,202Current liabilities — other current liabilities (7) — (57)Long-term liabilities — other long-term liabilities (4) — (32)

Total ¥2,587 ¥2,353 $20,863

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The Companies were contingently liable for trade notesendorsed with recourse amounting to ¥47 million ($379thousand) as of March 31, 2001.

Contingent liabilities for guarantees of loans of DISCO-SEA AMERICA, INC. amounted to ¥89 million ($720thousand) as of March 31, 2001.

16.CONTINGENT LIABILITIES

14.DERIVATIVESContract amount and fair value of foreign exchange contracts and the interest rate swap at March 31, 2001 and 2000 are asfollows:


2001 2000 2001

Forward — to sell foreign currencies:U.S. dollar

Contract amount ¥3,300 ¥— $26,613Estimated fair value 3,388 — 27,323Unrealized loss (88) — (710)

EuroContract amount 974 — 7,855Estimated fair value 983 — 7,927Unrealized loss (9) — (72)

Pay — fixed interest rate swap:Contract amount ¥200 ¥200 $1,613Estimated fair value (1) (1) (8)Unrealized loss (1) (1) (8)

Cash paid during the year for:


2001 2000 2001

Interest ¥ 48 ¥ 127 $ 387Income taxes 6,705 1,703 54,073

15.SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

The amount of obligations under finance leases includesthe imputed interest expense portion.

Total lease payments under finance lease arrangementsthat do not transfer ownership of the leased property to the

lessee were ¥269 million ($2,169 thousand) and ¥255 million for the years ended March 31, 2001 and 2000, respectively.

Obligations under operating leases as of March 31, 2001 and 2000 were as follows:THOUSANDS OF


2001 2000 2001

Due within one year ¥ 127 ¥ 57 $ 1,024Due after one year 1,400 57 11,291

Total ¥1,527 ¥114 $12,315

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a. Operations in Different IndustriesInformation about operations in different industries of the Companies for the years ended March 31, 2001 and 2000 were asfollows:

17.SEGMENT INFORMATION

(1) Sales and operating income

MILLIONS OF YEN

INDUSTRY INDUSTRY INDUSTRY ELIMINATIONSA B C (CORPORATE) CONSOLIDATED

Year Ended March 31, 2001Sales to customers ¥70,558 ¥2,758 ¥ 796 ¥ — ¥74,112Intersegment sales — 91 100 (191) —

Total sales 70,558 2,849 896 (191) 74,112Operating expenses 46,408 2,826 1,164 2,721 53,119Operating income ¥24,150 ¥ 23 ¥ (268) ¥(2,912) ¥20,993

MILLIONS OF YEN


Year Ended March 31, 2000Sales to customers ¥46,998 ¥2,822 ¥1,446 ¥ — ¥51,266Intersegment sales 1 64 65 (130) —

Total sales 46,999 2,886 1,511 (130) 51,266Operating expenses 33,331 2,901 1,736 2,387 40,355Operating income ¥13,668 ¥ (15) ¥ (225) ¥(2,517) ¥10,911

THOUSANDS OF U.S. DOLLARS


Year Ended March 31, 2001Sales to customers $569,016 $ 22,242 $ 6,419 $ — $597,677Intersegment sales — 733 807 (1,540) —

Total sales 569,016 22,975 7,226 (1,540) 597,677Operating expenses 374,258 22,790 9,387 21,944 428,379Operating income $194,758 $ 185 $ (2,161) $(23,484) $169,298

(2) Assets, depreciation and capital expendituresMILLIONS OF YEN


Year Ended March 31, 2001Assets ¥58,185 ¥4,901 ¥925 ¥22,424 ¥86,435Depreciation 1,399 102 17 395 1,913Capital expenditures 6,782 59 11 1,297 8,149Year Ended March 31, 2000Assets ¥36,009 ¥4,575 ¥1,063 ¥25,408 ¥67,055Depreciation 1,012 83 5 442 1,542Capital expenditures 2,352 25 2 229 2,608

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b. Foreign OperationsThe foreign operations of the Companies for the years ended March 31, 2001 and 2000 were summarized as follows:

MILLIONS OF YEN

NORTH ELIMINATIONSJAPAN AMERICA ASIA EUROPE (CORPORATE) CONSOLIDATED

Year Ended March 31, 2001Sales

Outside customers ¥46,490 ¥8,819 ¥10,630 ¥8,173 ¥ — ¥74,112Interarea 20,160 — 55 7 (20,222) —

Total sales 66,650 8,819 10,685 8,180 (20,222) 74,112Operating expenses 45,626 7,834 9,403 7,288 (17,032) 53,119Operating income ¥21,024 ¥ 985 ¥ 1,282 ¥ 892 ¥ (3,190) ¥20,993

Assets ¥56,368 ¥4,105 ¥ 4,040 ¥3,856 ¥ 18,066 ¥86,435

MILLIONS OF YEN



Outside customers ¥32,917 ¥5,851 ¥6,783 ¥5,715 ¥ — ¥51,266Interarea 13,459 68 9 2 (13,538) —

Total sales 46,376 5,919 6,792 5,717 (13,538) 51,266Operating expenses 34,304 5,398 6,089 5,434 (10,870) 40,355Operating income ¥12,072 ¥ 521 ¥ 703 ¥ 283 ¥ (2,668) ¥10,911

Assets ¥34,243 ¥3,004 ¥3,897 ¥3,018 ¥ 22,893 ¥67,055




Outside customers $374,919 $71,121 $85,726 $65,911 $ — $597,677Interarea 162,581 — 443 57 (163,081) —

Total sales 537,500 71,121 86,169 65,968 (163,081) 597,677Operating expenses 367,952 63,177 75,831 58,774 (137,355) 428,379Operating income $169,548 $ 7,944 $10,338 $ 7,194 $ (25,726) $169,298

Assets $454,581 $33,105 $32,581 $31,097 $ 145,693 $697,057



Year Ended March 31, 2001Assets $469,234 $39,524 $7,460 $180,839 $697,057Depreciation 11,282 823 137 3,185 15,427Capital expenditures 54,693 476 89 10,460 65,718

Notes: Industry A consists of dicing saws, grinders, cutting saws and precision diamond wheels.Industry B consists of industrial diamond wheels and cut-off wheels.Industry C consists of software and processed natural stones.Unallocated operating expenses included in “Eliminations (Corporate)” consists principally of general corporate expenses incurred by the Administration Headquarters of the Companywhich amounted to ¥3,117 million ($25,137 thousand) and ¥2,733 million for the years ended March 31, 2001 and 2000, respectively.

Corporate assets included in “Eliminations (Corporate)” amounted to ¥22,466 million ($181,177 thousand) and ¥25,487 million at March 31, 2001 and 2000, respectively.As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for retirement benefits in 2000. The effect of this change was to decrease “Operating income” in Industry A, Industry B and Corporate for the year ended March 31, 2000 by ¥67 million, ¥9 million and ¥12 million, respectively.

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The following appropriations of retained earnings of the Company at March 31, 2001 were approved at the annual meeting ofshareholders held on June 28, 2001:

18.SUBSEQUENT EVENT


Year-end cash dividends, ¥25 ($0.20) per share ¥803 $6,476Bonuses to directors 54 435Transfer to legal reserve 86 694

Notes: “North America” includes operations located primarily in the United States and Canada.“Asia” includes operations located primarily in Singapore and Malaysia.“Europe” includes operations located primarily in Germany, France and the United Kingdom.

As discussed in Note 2 to the consolidated financial state-ments, the Company changed its method of accounting forretirement benefits in 2000. The effect of this change was to

decrease “Operating income” in Japan and Corporate for theyear ended March 31, 2000 by ¥77 million and ¥12 million,respectively.

c. Sales to Foreign CustomersSales to foreign customers for the years ended March 31, 2001 and 2000 were summarized as follows:

MILLIONS OF YEN

NORTHAMERICA ASIA EUROPE TOTAL

Year Ended March 31, 2001Sales to foreign customers ¥8,711 ¥24,858 ¥8,092 ¥41,661Total net sales to domestic and

foreign customers ¥74,112Sales to foreign customers as a percentage of total net sales 11.8% 33.5% 10.9% 56.2%

Year Ended March 31, 2000Sales to foreign customers ¥5,717 ¥17,373 ¥5,962 ¥29,052Total net sales to domestic and

foreign customers ¥51,266Sales to foreign customers as a percentage of total net sales 11.2% 33.9% 11.6% 56.7%


NORTHAMERICA ASIA EUROPE TOTAL

Year Ended March 31, 2001Sales to foreign customers $70,250 $200,468 $65,258 $335,976Total net sales to domestic and

foreign customers $597,677Sales to foreign customers as a percentage of total net sales 11.8% 33.5% 10.9% 56.2%

Notes: “North America” mainly includes sales to the United States and Canada.“Asia” mainly includes sales to Singapore, Malaysia, Taiwan and Korea.“Europe” mainly includes sales to Germany, France and the United Kingdom.

DISCO A/R01財務 01.8.16 10:18 AM ページ 18


Independent Auditors’ ReportDISCO CORPORATION and consolidated subsidiaries

To the Board of Directors and Shareholders ofDISCO CORPORATION:

We have audited the consolidated balance sheets of DISCO CORPORATION and consolidated subsidiaries as of March 31, 2001and 2000, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended, allexpressed in yen. Our audits were made in accordance with auditing standards, procedures and practices generally accepted andapplied in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as weconsidered necessary in the circumstances.

In our opinion, the accompanying consolidated financial statements, expressed in yen, present fairly the consolidated financialposition of DISCO CORPORATION and consolidated subsidiaries at March 31, 2001 and 2000, and the consolidated results oftheir operations and their cash flows for the years then ended in conformity with accounting principles and practices generallyaccepted in Japan.

As described in Note 2 to the consolidated financial statements, DISCO CORPORATION and consolidated subsidiaries haveadopted new accounting standards for financial instruments and retirement benefits, and adopted the revised accounting standardfor foreign currency transactions in preparing their consolidated financial statements for the year ended March 31, 2001.

As described in Note 2 to the consolidated financial statements, DISCO CORPORATION and consolidated subsidiaries adoptednew accounting standards for consolidation, research and development costs and tax-effect accounting in the preparation of theirconsolidated financial statements for the year ended March 31, 2000.

As discussed in Note 2 to the consolidated financial statements, in 2000 the Company changed its method of accounting forretirement benefits for the year ended March 31, 2000.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2001are presented solely for convenience of the readers. Our audit also included the translation of yen amounts into U.S. dollaramounts and, in our opinion, such translation has been made on the basis described in Note 3 to the consolidated financialstatements.

Tokyo, JapanJune 28, 2001

See Note 1 to the consolidated financial statements which explains the basis of preparing the consolidated financial statements of DISCO CORPORATION and consolidated subsidiaries underJapanese accounting principles and practices.

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Disco Network

■ Overseas Subsidiaries (Electronics Industry-related Products)● Overseas Sales Agencies (Electronics Industry-related Products)● Overseas Group Companies (Industrial Products) ● Domestic Group Companies

DISCO HI-TEC EUROPE GmbH

DISCO HI-TEC (SINGAPORE) PTE, LTD.

DISCO HI-TEC (THAILAND) CO., LTD.

NEW TRONICS CO.

DISCO HI-TEC (MALAYSIA) SDN. BHD.

D.I CORP.

AUROTECH SYSTEMS (Philippines), INC.

HAPPY POLE, LTD.

DISCO TECHNOLOGY (SHANGHAI) CO., LTD.

DD DIAMOND CORP.

DISCO HI-TEC AMERICA, INC.

DISCO-SEA AMERICA, INC.

DISCO CORPORATIONTECNISCO Ltd.DISCO ENGINEERING SERVICE, Ltd.DSD, Ltd.DISTON SPACE CORP.

DISCO HI-TEC UK LTD.

DISCO HI-TEC FRANCE SARLS.E.A. UTENSILI DIAMANTATI S.p.A.

DISCO-SEA EUROPE S.r.l.

DISCO A/R01財務 01.8.16 10:18 AM ページ 20


Corporate Data

Name: DISCO CORPORATIONRegistered Office:14-3, Higashi Kojiya 2-chome, Ota-ku, Tokyo, Japan

Founded: May 5, 1937

Incorporated: March 2, 1940

Capitalization:¥9,770,937,005 (32,117,125 shares) (as of March 31, 2001)

Stock Listed: Tokyo Stock Exchange First Section(Securities Identification Code: 6146)

Employees: 1,046 (as of March 31, 2001)

Offices:Head OfficeKure Plant (Hiroshima)Kuwabata Plant (Hiroshima)Nagatani Plant (Hiroshima)Domestic Network:Osaka Branch Office, Kyushu Branch Office (Kumamoto), KureRegional Office, Sendai Regional Office, Nagoya Regional Office, SuwaRegional Office and AS Company Ibaraki Service Center

International Network:DISCO HI-TEC AMERICA, INC.

USA Head OfficeEastern Regional Sales & Service OfficeSoutheastern Regional Sales & Service OfficeCentral Regional Sales & Service OfficeSouthwestern Regional Sales & Service OfficeNorthwest Regional Sales & Service Office

DISCO HI-TEC EUROPE GmbHEurope Head OfficeDISCO HI-TEC FRANCE SARLDISCO HI-TEC UK LTD.

DISCO HI-TEC (SINGAPORE) PTE, LTD.South Asia Head OfficeDISCO HI-TEC (MALAYSIA) SDN. BHD.Penang Regional OfficeDISCO HI-TEC (THAILAND) CO., LTD.

DISCO TECHNOLOGY (SHANGHAI) CO., LTD.Affiliated Companies:TECNISCO Ltd.DISCO ENGINEERING SERVICE, Ltd.DSD, Ltd.DISTON SPACE CORPORATIONDD DIAMOND CORPORATIONS.E.A. UTENSILI DIAMANTATI S.p.A.DISCO-SEA AMERICA, INC.DISCO-SEA EUROPE S.r.l.

Directors and Auditors

Chairman and Chief Executive Officer

Kenichi Sekiya

President and Chief Operating Officer

Hitoshi Mizorogi

Executive Director

Iwao Sekiya

Directors

Tsutomu NakayamaHideyuki SekiyaKikuo MeraKeiichi KajiyamaTakao MizorogiTakao TamuraKeizo SekiyaKazuma Sekiya

Standing Auditors

Susumu TamariYoshitaka Kawasaki

Auditors

Masakazu TakishimaHajime Kitani

(As of June 28, 2001)

Corporate Data/Directors and Auditors

Feel free to access our “Investor Relations” corner at http://www.disco.co.jp/

DISCO A/R01財務 01.8.16 10:19 AM ページ 21


Disco Values

DISCO Style

DISCO’S CULTURE EXXCELLENT

NO, THIS IS NOT A MISSPELLING! THIS IS THE WAY DISCOSPELLS EXCELLENT TO EMPHASIZE THE EXCELLENCE THAT WESTRIVE FOR.

DISCO is a company that is particular about its corporate culture. Wewanted to express this culture by adding an extra “X” to the spelling ofexcellent. In other words, we endeavor to produce the very best in all aspectsof our business activities, and we are not satisfied with just mere excellence.

The new level of “Exxcellent” that we are pursuing refers to a new type ofexcellence that can not be found anywhere. In DISCO this concept isexpressed with the phrase “Only One.”

By promoting the value of “Only One”, it is our wish to satisfy ourstakeholders, such as customers, suppliers and investors, so that they feelassured about choosing and working with DISCO.

It is this relationship, with the sense of providing total satisfaction to thestakeholders that expresses DISCO’s meaning of existence. The further weincrease their satisfaction, the greater both our businesses will grow.

While maintaining a commitment to its culture,DISCO’s challenge for a new excellence will continue.

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DISCO CORPORATION

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