TOYO KANETSU K.K.

TOYO KANETSU K.K. Annual Report 2004

Global Reports LLC

Profile Toyo Kanetsu K.K.(TKK) was established on May 16,1941. Since that time TKK has continued to meet the requirements of industry through our policy "Customer First". The Plant & Machinery Systems Division started in 1950 when highly-rated in-house welding technology was applied to the construction of welded petroleum tanks. Since then, our expertise has expanded to provide a full line of highly safe and economical tanks offering the structural integrity needed for large-capacity installations, such as crude oil storage tanks, LNG and LPG cryogenic storage tanks, and high-pressure spherical tanks. TKK has successfully constructed some of the largest above-ground storage tanks in the world, including crude oil tanks and LNG tanks each with a capacity of 180,000kl. With over 4,800 tank installations across the world, TKK is recognized as a leader in the field, and we continue to set new records for size and safety. The high-level fabrication technology and rich construction experience built up over the years have received high praise from all corners of the globe. In recognition of this capability, in 1958, our Chiba Plant was authorized by the API (American Petroleum Institute), the first plant to be so honored in Japan. In 1994, we were the first tank manufacturer in Japan to obtain the ISO 9001 certificate, and this international evaluation of our skill reinforces our determination to provide total engineering support, including civil engineering, piping and instrumentation. The Architecture Systems Division commenced operations in 1989 with the manufacture of apartment houses composed of modular steel frame structures. The division extended its activities to apartment buildings, shops, offices, etc., with pre-fabricated panel technology. The pre-fabrication factory, being located adjacent to Chiba Plant, provides steel frame structure boxes and steel frame panels of high quality at low cost and quick delivery. Additionally, the division undertakes planning, engineering, and construction of buildings, shops, and/or warehouses as they apply to material handling systems. The Material Handling Systems Division commenced operations in 1953 with the manufacture of prototype material handling equipment. Since that time, the division has always played a major role in the history of material handling in Japan by supplying the most advanced systems in each generation. Utilizing the experience and know-how obtained, the division has contributed to virtually every

industrial field by developing and manufacturing advanced products such as the Distribution Center System, the Truck Terminal System, the Food Distribution Processing Center, the Production Line System, the Food Production Factory System, the Airport Baggage Handling System, the Postal Sorting System, the Apparel System, etc. In the allocation/picking systems field as well as the associated Information Technology (IT) field, we have received high marks from our customers. New concepts such as SCM (Supply Chain Management) and e-commerce have been incorporated into our systems to provide the best solutions. The division obtained ISO 9001 certificate in 1999. The Material Handling Systems Division became a subsidiary company of TKK under the name of Toyo Kanetsu Solutions K.K.in 2002 in order to maximize the efficiency and also to vitalize TKK Group companies. The Chiba Plant is situated on a spacious 160,000m2 site in Kisarazu City, in the Keiyo Industrial Belt, and is equipped with its own 350-meter long, 6-meter deep ship loading facility. Tanks and material handling systems equipment are manufactured here, under the careful eyes of the TKK quality control teams. TKK will continue to supply the technology and reliability that have made us an internationally recognized leader in the industry, while continuing our commitment to research and development. TKK provides advanced technology to answer the needs of today. . . and tomorrow.

Contents Financial Highlights 2 Message from the President 3 Board of Directors and Corporate Auditors 4 Line of Business 4 Qualifications 4 Subsidiaries and Affiliated Companies 5 Consolidated Balance Sheets 6 Consolidated Statements of Operations 8 Consolidated Statements of Shareholders' Equity 9 Consolidated Statements of Cash Flows 10 Notes to the Consolidated Financial Statements 11 Report of Certified Public Accountants 22 Corporate Data 23

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Toyo Kanetsu K.K. and Consolidated Subsidiaries

Financial Highlights

Millions of yen Thousands of

U.S.dollars 2004 2003 2002 2001 2000 2004 For the years ended 31st March: Net sales ¥ 43,914 ¥ 36,662 ¥ 39,729 ¥ 37,502 ¥ 30,551 $415,497 Material Handling Systems 17,550 15,487 15,338 22,697 13,477 166,052 Plant and Machinery Systems 10,386 7,543 7,342 6,286 10,632 98,269 Architecture Systems 9,280 9,499 10,808 5,814 3,860 87,803 Others 6,698 4,133 6,241 2,705 2,582 63,373 Operating income (loss) 923 372 (1,639) 179 (3,219) 8,732 Net income (loss) 1,042 (2,333) (15,997) (712) (4,537) 9,857 Cash dividends - - - - - - At 31st March: Current assets 21,024 18,643 21,369 28,528 36,700 198,921 Investments and advances 16,103 11,525 13,402 23,276 10,488 152,363 Net property, plant and equipment 17,052 17,966 20,680 15,030 15,946 161,341 Intangibles and deferred charges 280 295 191 213 254 2,645 Foreign currency translation adjustment - - - - 656 - Total assets 54,459 48,429 55,642 67,047 64,044 515,268 Current liabilities 16,893 18,864 22,625 24,539 21,722 159,839 Long-term debt 5,135 3,617 5,692 6,377 4,883 48,588 Deferred tax liabilities on revaluation of land 1,111 1,126 1,537 10,509 Accrued retirement benefits 5,141 5,179 5,405 169 - 48,644 Other long-term liabilities 7 92 82 123 180 63 Minority interests in consolidated subsidiaries 19 20 20 37 124 177 Shareholders' equity 24,013 19,531 20,281 35,802 37,135 227,203 Order backlog 34,701 40,266 35,767 34,841 30,355 328,328

Yen

U.S.dollars

Per share: Net income (loss) ¥ 7.53 ¥ (16.85) ¥ (115.32) ¥ (5.14) ¥ (32.75) $ 0.07 Cash dividends - - - - - - Shareholders' equity 173.55 141.18 146.21 258.07 267.99 $ 1.64 Number of shareholders 16,078 17,102 17,705 17,653 18,315 Number of employees 564 573 588 755 879 *U.S.dollar amounts in this annual report represent translations of Japanese yen at the rate of 105.69=$1.00 solely for the reader's convenience.

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Message from the President Our consolidated net sales for the year ending March 2004, were ¥43.9 billion (US$415 million), representing 19.8% increase from the year before. This significant improvement is mainly supported by favorable condition of Plant and Machinery systems business. In terms of profit, consolidated operating profit ¥1.4 billion (US$13 million) were archived, representing 120.3% increase from the year before, and consolidated net profit ¥1.0 billion (US $9 million) were recorded. Progression and Results of Sales During this fiscal year, the domestic economy has enjoyed a steady recovery in general. Against the backdrop of improved economic circumstances overseas, capital expenditure are gradually picked up, and imports and manufacturing are gained its momentum. According to the Bank of Japan’s Short-term Economic Survey, conducted in March this year, the diffusion index (DI) for business sentiment of major companies in the non-manufacturing industry shows a positive figure, for the first time in about seven years and four months. Business results have improved centered on imports, and the overall economy is improving supported by the positive sentiment emanating from an increase in share prices.

Material Handling Systems Despite a tough environment for securing new orders, we have been actively carrying out our sales activities, mainly for IT-based material handling system such as; the Picking System for the CO-OP and Warehouse Management System (WMS). For further improvements in customer satisfaction levels, we also modified our sales system, with the establishment of new “Regional sales department”, and the integration with subsidiaries for service provision. As a result, orders received for this fiscal year were JPY 14.1 billion (US$133 million), up 1.3% increase from the year previous. Sales were JPY17.5 billion (US$166 million), up 13.3% from the year before, with contribution from sales for the Co-op, mass retailers, and subcontracted transport services, and of large construction projects for the new Chubu International Airport and Haneda Airport etc, have started from this year. Plant & Machinery Systems We have been positively carrying out sales activities not only in conventional regions, such as South East Asia, the Middle East, and Africa, but also new regions, like USA, Central and South America, Europe, and China, in a bid to secure more orders for low temperature and ultra-low temperature tanks for which inquiries are frequently received in relation to the worldwide increase in demand for LNG and LPG as a clean energy source. As a result, the customer range and sales regions could expand as well as receiving orders for LNG tanks from Australia and Europe. Furthermore, in Iran, which is the largest destination for our tank delivery success, our international competitiveness based on our extensive achievements, technological prowess as a specialist manufacturer, and the strength of our overseas processing plants, has been highly evaluated, and a large volume of our export orders for LPG tank materials was received. The amount of orders received for this fiscal year were JPY8.8 billion (US$83 million), down 32.3% from the year previous, while sales were JPY10.3 billion (US$98 million), up 37.7% from the year before. The Architecture Systems Although the market environment remains tough, the volume of orders received and sales in the apartment complex construction field in which we concentrate has climbed step-by-step, and a steady profit structure has been maintained. The environment in the system construction and general construction fields also remains severe, such as a hike in the price of some construction materials, but we strive to further increase our profitability by thoroughly eliminating unprofitable services and implementing strict cost management. In terms of the Steel Pipe Piling service that has been implemented as a new business, both the volume of orders received and sales have increased this year, and further growth is expected. Orders received for this fiscal year were JPY8.7 billion (US$82 million), down 13.5% from the year previous, on sales of ¥9.2 billion (US$87 million), down 2.3% from the year before. Other Businesses The business handled by Group companies other than the above have been making efforts to expand and develop their business in each area. As a result, sales were JPY6.6 billion (US$63 million), up 62.1% from the year before.

Future Issues for the Company In terms of the future economic prospects, the current trend of economic recovery seems set to continue, although not without concerns, such as significant fluctuations in the exchange rate, and sudden rises in steel product prices, and there are some delays in the recovery of the employment situation. Under such circumstances, we aim to achieve a more effective management to further improve our profits based on the target of having all profit items into the black, as the result of measures taken over the last two years, such as restructuring the profit structure, reorganization of affiliates, and improvements in our financial potency. We are also endeavoring to strengthen corporate governance for the entire group by continuously improving our financial strength from the previous fiscal year bearing in mind the maximization of corporate value for the entire group, and aim to implement effective and sound corporate activities.

June 2004

Shigeaki Kiyota President & Representative Director

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Board of Directors and Auditors Board of Directors

Chairman ... ..................................................................... Masaaki Sehata President & Representative Director ............................... Shigeaki Kiyota Managing & Representative Director .............................. Takeshi Mizukami Director .......................................................................... Sadao Arita Auditors ......................................................................... Teruo Nojo

.......................................................................... Masaharu Hino

.......................................................................... Yoshifumi Muraki

.......................................................................... Koichi Endo

Line of Business Plant & Machinery Systems:

�� Floating Roof Tank �� Cone Roof Tank �� Dome Roof Tank �� Low Temperature Tank �� Spherical Gas Holder �� Cryogenic Tank and Other Storage Tanks

Total Plant Engineering, Erection / Installation Including Civil, Piping, Instrumentation Works. Engineering, Manufacturing and Erection/Installation of Steel

Architecture Systems:

�� Apartments �� Offices �� Shops �� Medical Facilities �� Houses �� Warehouses �� Multi-purpose of Buildings

Total Architectural Engineering / Manufacturing

Material Handling Systems: �� Distribution Center System �� Truck Terminal System �� Production Line System �� Food Production Factory System �� Food Processing Center System �� Baggage Handling System �� Postal Sorting System �� Hanger Sorter System

Engineering, Manufacturing and Installation of Systems’ Facilities, their relative Civil Works and Architectural Works. Third Party Logistics

Qualification - Authorized manufacturer of welded oil/gas storage-tanks by American Petroleum Institute (API). - Quality Management System to ISO 9001 certified by Bureau Veritas Quality International (BVQI) for flat bottomed vertical cylindrical

storage tank for low temperature service. - Quality Management System to ISO 9001 certified by Bureau Veritas Quality International (BVQI) for Baggage Handling System ,Slide

Shoe Type Sorting Conveyor and Wheel Up Sorting Conveyor (Head office and Chiba plant).

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Subsidiaries, Affiliated Companies and Line of Business Subsidiaries which are consolidated, and affiliated companies which are accounted for by the equity method, are as follows.

Consolidated Subsidiaries Toyo Kanetsu Solutions K.K. Share Capital : 100.0%

Line of Business : Material Handling Systems K-Techno Inc. Share Capital 100.0% Line of Business Consulting & Maintenance of Material Handling System Toko Leasing Co., Ltd. Share Capital : 100.0% Line of Business : Rental/Leasing, & Insurance Toyo Service System K.K. Share Capital : 100.0% Line of Business : Real Estate Management, Welfare Facilities Management, Gardening/

Floriculture Business Property, Plant & Equipment Maintenance.

Global Eight Co. Share Capital : 84.0% Line of Business : Commodity & Foodstuffs Trading P.T. Toyo Kanetsu Indonesia Share Capital : 86.0% Line of Business : Storage Tanks/ Pressure Vessels/ Onshore & Offshore Steel Structures Al Ghallilah Engineering & Construction L.L.C. Share Capital : 65.0% Line of Business : Storage Tanks/ Pressure Vessels / Onshore & Offshore Steel Structures

TKK Engineering Pty. Ltd. Share Capital : 100.0% Line of Business : Storage Tanks/ Pressure Vessels/ Onshore & Offshore Steel Structures,

Ranch Management

Roo Tourist Pty. Ltd. Share Capital : 100.0% Line of Business : Tourism

TKK-USA,INC Share Capital Line of Business

: :

100.0% Storage Tanks/ Pressure Vessels / Onshore & Offshore Steel Structures

Affiliated Companies Toyo Koken K.K.

(Equity Method) Share Capital : 39.3% Line of Business : Industrial Machineries

Toyo Miyama Co., Ltd. Share Capital : 50.0% Line of Business : Unit House Prefabrication Katayama Co. Share Capital : 22.0% Line of Business : Architectural Management Manavis Co., Ltd. Share Capital : 20.6% Line of Business : Cosmetics, Cleaning Products Toyo Kanetsu (Malaysia) Sdn. Bhd. Share Capital : 49.0% Line of Business : Material Handling Systems, Storage Tanks/ Pressure Vessels / Onshore

& Offshore Steel Structures

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Consolidated Balance Sheets As at March 31, 2004 and 2003

ASSETS

Millions of Yen

Thousands of U.S. Dollars

(Note 3) 2004 2003 2004 Current Assets: Cash in hand and at bank (Note 4) ¥6,728 ¥5,951 $63,657 Marketable securities (Notes 4 and 5) 5 5 48 Notes and accounts receivable 9,359 6,326 88,548 Less: Allowance for doubtful accounts (593) 560 (5,611) 8,766 5,766 82,937 Inventories (Notes 6) 3,734 5,521 35,334 Other current assets 1,791 1,400 16,945

Total current assets 21,024 18,643 198,921 Property, Plant and Equipment (Note 8):

Buildings and structures 11,767 11,697 111,339 Machinery and equipment 4,882 5,643 46,187 Land (Note 2(8)) 9,976 10,007 94,391 Leased assets (Note 13) 4,501 4,913 42,582 Construction in progress - 6 - Less: Accumulated depreciation (14,074) (14,300) (133,160)

Total property, plant and equipment 17,052 17,966 161,339

Investments and Advances: Investments in securities (Notes 7 and 8) 12,051 7,058 114,023 Long-term loans receivable 1,755 1,655 16,610 Other investments 2,949 3,629 27,902 Less: Allowance for doubtful accounts (652) 817 (6,172)

Total investments and advances 16,103 11,525 152,363 Intangibles and Deferred Charges: Intangible fixed assets 280 295 2,645 Other - - -

Total intangibles and deferred charges 280 295 2,645 ¥54,459 ¥48,429 $515,268

The accompanying notes are an integral part of the financial statements.

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LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY

Millions of Yen


(Note 3) 2004 2003 2004 Current Liabilities: Short-term debt (Note 8) ¥9,106 ¥10,092 $86,159 Notes and accounts payable 2,082 1,442 19,701 Accrued income taxes (Note 10) 100 115 951 Accrued liabilities 3,176 3,052 30,049 Advances from customers 1,897 3,605 17,946 Other current liabilities 532 558 5,033

Total current liabilities 16,893 18,864 159,839 Long-Term Liabilities:

Long-term debt (Note 8) 5,135 3,617 48,588 Deferred tax liabilities on revaluation of land (Note 2(8)) Deferred tax liabilities Accrued retirement benefits (Note 9)

1,111 2,140 5,141

1,126 -

5,179

10,509 20,245 48,644

Other long-term liabilities 7 92 63 Total long-term liabilities 13,534 10,014 128,049

Minority Interests in Consolidated Subsidiaries 19 20 177 Contingent Liabilities (Note 15)

Shareholders' Equity: Common stock: Authorized: 297,000,000 shares Issued: 138,730,741 shares 18,580 18,580 175,798 Additional paid-in capital 3,064 3,062 28,995 Accumulated deficit (1,985) (3,049) (18,784) Unrealized gains on revaluation of land (Note 2(8)) 1,619 1,641 15,318 Net unrealized holding gains (losses) on investment securities 3,418 (3) 32,340 Foreign currency translation adjustments (639) (656) (6,052) 24,057 19,575 227,615

Less: Treasury stock, at cost (44) (44) (412) Total shareholders’ equity 24,013 19,531 227,203

¥54,459 ¥48,429 $515,268

The accompanying notes are an integral part of the financial statements

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Consolidated Statements of Operations For the years ended March 31, 2004 and 2003

Millions of Yen


(Note 3) 2004 2003 2004 Net Sales ¥43,914 ¥36,662 $415,497 Cost of Sales (Note 12) 39,978 32,570 378,259

Gross profit 3,936 4,092 37,238 Selling, General and Administrative Expenses (Notes11 and 12) 3,013 3,720 28,506

Income from operations 923 372 8,732 Other Income (Expenses):

Interest and dividend income 194 154 1,835 Interest expense (340) (376) (3,212) Exchange loss (80) (60) (758) Equity in income of unconsolidated subsidiaries and affiliates 673 503 6,368 Other, net 73 61 686

520 282 4,919 Income (loss) before special items 1,443 654 13,651

Special Profit (Loss):

Loss on sale or disposal of property, plant and equipment, net (192) (587) (1,814) Provision for bad debts (53) (70) (498) Employees’ retirement benefit expense (Note 2 (11)) (211) - (1,996) Loss on write-down of investment securities (4) (2,720) (37) Loss on sale of investment securities (8) (16) (75) Gain on sale of investment securities 360 123 3,402 Other, net (218) 13 (2,066)

(326) (3,257) (3,084) Income (loss) before income taxes and minority interests 1,117 (2,603) 10,567

Income Taxes (Note 10):

Current 90 104 856 Deferred (15) (374) (146)

75 (270) 710 Minority Interests in Loss of Consolidated Subsidiaries 0

0

0

Net Income (loss) ¥1,042 ¥(2,333) $9,857

Yen U.S. Dollars

(Note 3) Per Share (Note 2 (14))

Net income (loss)

¥7.53

¥(16.85)

$0.07

The accompanying notes are an integral part of the financial statements

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The accompanying notes are an integral part of the financial statements.

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Consolidated Statements of Shareholders' Equity For the years ended March 31, 2004 and 2003

Millions o f Yen�

Number of Shares of Common

Stock Common

Stock

Additional Paid-in Capital

Accumulated Deficit

Unrealized gains on

revaluation of land

Net unrealized holding losses on investment

securities

Foreign currency

translation adjustments

Treasury stock

Balance at March 31, 2002 138,730,741 ¥18,580 ¥21,085 ¥(19,254) ¥2,118 ¥(1,541) ¥(706) ¥(1) Net loss for the year - - - (2,333) - - - - Realized gains on revaluation of land - - - 515 (515) - - - Transfer from additional paid-in

capital to accumulated deficit - - (18,023) 18,023 - - - -

Decrease in statutory tax rate - - - - 38 - - -

Foreign currency translation adjustments - - - - - - 50 -

Net unrealized holding gains on investments

- - - - - 1,538 - -

Purchase of treasury stock - - - - - - - (43) Balance at March 31, 2003 138,730,741 ¥18,580 ¥3,062 ¥(3,049) ¥1,641 ¥(3) ¥(656) ¥(44)

Net income for the year - - - 1,042 - - - - Realized gains on revaluation of land - - - 22 (22) - - -

Gain on disposition of treasury stock - - 2 - - - - 0

Foreign currency translation adjustments - - - - - - 17 - Net unrealized holding gains on

investments - - - - - 3,421 - -

Balance at March 31, 2004 138,730,741 ¥18,580 ¥3,064 ¥(1,985) ¥1,619 ¥3,418 ¥(639) ¥(44)

Thousands of U.S. Dollars (Note 3)

Number of Shares of Common

Stock Common

Stock

Additional Paid-in Capital

Accumulated Deficit

Unrealized gains on

revaluation of land

Net unrealized holding losses on investment

securities

Foreign currency

translation adjustments

Treasury stock

Balance at March 31, 2003 138,730,741 $175,798 $28,979 $(28,852) $15,529 $(30) $(6,211) $(417) Net income for the year - - - 9,857 - - - -

Realized gains on revaluation of land - - - 211 (211) - - -

Gain on disposition of treasury stock - - 16 - - - - 5

Foreign currency translation adjustments - - - - - - 159 -

Net unrealized holding gains on investments

- - - - - 32,370 - -

Balance at March 31, 2004 138,730,741 $175,798 $28,995 $(18,784) $15,318 $32,340 $(6,052) $(412)

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Consolidated Statements of Cash Flows For the years ended March 31, 2004 and 2003

Millions of Yen


(Note 3) 2004 2003 2004 Cash Flows from Operating Activities:

Income (loss) before income taxes and minority interests ¥1,117 ¥(2,603) $10,567 Adjustments for:

Depreciation and amortization 1,149 1,353 10,873 Decrease in provision for allowance for doubtful accounts (132) (206) (1,249) Decrease in provision for employees’ retirement benefits (38) (225) (359) Interest and dividend income (194) (154) (1,835) Interest expense 340 376 3,212 Equity in income of unconsolidated subsidiaries and affiliates (673) (503) (6,368) Loss on write-down of investment securities 4 2,710 37

(Increase) decrease in notes and accounts receivables (2,556) 2,551 (24,182) (Increase) decrease in inventories 1,808 (197) 17,111 Increase (decrease) in notes and accounts payable 749 (336) 7,090 Increase (decrease) in advances from customers (1,708) 1,624 (16,163) Other 565 598 5,343

Sub total 431 4,988 4,077 Interest and dividend income received 202 164 1,912 Interest expense paid (321) (373) (3,033) Income taxes paid (105) (14) (997)

Net cash provided by operating activities 207 4,765 1,959 Cash Flows from Investing Activities:

Increase in time deposits (over 3-month term) (134) - (1,269) Payments for purchase of property, plant and equipment (530) (415) (5,017) Proceeds from sales of property, plant and equipment 23 1,433 214 Payments for purchase of investment securities (245) (168) (2,322) Proceeds from sales of investment securities 1,134 899 10,730 Increase in long-term loans receivable (206) (411) (1,945) Other 3 72 31

Net cash provided by investing activities 45 1,410 422 Cash Flows from Financing Activities:

Decrease in short-term debt, net (2,065) (3,311) (19,535) Proceeds from long-term debt 4,810 196 45,510 Repayment of long-term debt (2,242) (2,579) (21,210) Payment for security deposit for loan of investment securities - (1,500) - Other (6) (9) (60)

Net cash provided by (used in) financing activities 497 (7,203) 4,705 Effect of Exchange Rate Changes on Cash and Cash Equivalents (106) (73) (1,000) Net Increase (decrease) in Cash and Cash Equivalents 643 (1,101) 6,086 Cash and Cash Equivalents at Beginning of Year 5,956 7,057 56,351 Cash and Cash Equivalents at End of Year ¥6,599 ¥5,956 $62,437 The accompanying notes are an integral part of the financial statements.

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��

Notes to the Consolidated Financial Statements �� 1. Basis of Presenting Consolidated Financial Statements The accompanying consolidated financial statements of Toyo Kanetsu Kabushiki Kaisha (the "Company") and its subsidiaries (collectively, the "Companies") are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Securities and Exchange Law of Japan. The accounts of overseas consolidated subsidiaries are based on their financial statements prepared in conformity with generally accepted accounting principles and practices prevailing in the respective countries in which the subsidiaries are incorporated. Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau in Japan have been reclassified in these accounts for the convenience of readers outside Japan. 2. Summary of Significant Accounting Policies (1) Principles of Consolidation and Investments in Affiliated Companies The consolidated financial statements include the accounts of the Company and those of its subsidiaries in which it has control. The consolidated financial statements include, with exceptions that are not material, the accounts of its ten subsidiaries (nine subsidiaries in 2003). All significant inter-company transactions and accounts and unrealized inter-company profits are eliminated on consolidation. Investments in unconsolidated subsidiaries and affiliated companies in which the Company has significant influence are accounted under the equity method. These unconsolidated subsidiaries and affiliated companies for which the equity method is applied total four and five at March 31, 2004 and 2003, respectively. Consolidated net income includes the Company’s equity in current earnings of those companies after elimination of unrealized inter-company profits. The excess of the cost over the underlying net equity of investments in consolidated subsidiaries as well as companies accounted for on an equity basis, is deferred and amortized on a straight-line basis over a period of five years from the date of acquisition. Five and four subsidiaries were consolidated on the basis of their fiscal years ended at December 31, 2003 and 2002. Material differences in inter-company transactions and accounts arising from the use of the different fiscal year-end are appropriately adjusted in consolidation. (2) Re-measurement of Assets and Liabilities of the Subsidiaries Full portion of the assets and liabilities of the subsidiaries is marked to fair value as of the acquisition of the control. (3) Cash and Cash Equivalents Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits able to be withdrawn on demand and short-term investments with an original maturity of three months or less and which represent a minor risk of fluctuations in value. (4) Allowance for Doubtful Accounts The allowance for doubtful accounts is provided at an amount for receivables other than doubtful receivables calculated using historical write-off experience from certain prior periods plus the amount of possible losses from un-collectible receivables based on the management’s estimate. (5) Inventories Inventories are valued at cost as determined by the following methods:

Raw materials……………………….Moving average method Work in process and supplies ……… Accumulated materials and production cost

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(6) Financial Instruments (a) Derivatives All derivatives are stated at fair value except for certain derivatives that are designated as "hedging instruments" (see (c) Hedge Accounting below). (b) Securities Securities held by the Company and its subsidiaries are classified into two categories; “Investments of the Company in equity securities issued by unconsolidated subsidiaries and affiliates” are accounted for by the equity method. Other investments in debt and equity securities are classified as “Other securities”. The adoption of the mark-to-market accounting to “Other securities” with market quotation becomes effective for the ended March 31, 2004. As a result of this adoption, “Other securities” with market quotation are stated at fair value with any unrealized holding gains and losses, net of tax, being reported in Shareholders’ equity as “Net unrealized holding losses on investment securities”. “Other securities” without market quotation are stated at cost. “Other securities” which have characteristics of cash equivalents are presented as Marketable Securities (current) and the remaining of “Other securities” are presented as Investments in Securities (non-current). The costs of “Other securities” sold are determined by the moving average method. (c) Hedge Accounting Gains or losses arising from changes in fair value of the derivatives designated as "hedging instruments" are deferred as an asset or liability and included in net profit or loss in the same period during which the gains and losses on the hedged items or transactions are recognized. However, in cases where forward exchange contracts used as hedges meet certain hedging criteria, the existing foreign currency receivables or payables are translated at their contract rates. In addition, if interest-rate swap contracts and meet certain hedging criteria, the net amount to be paid or received under these swap contracts are added to or deducted from the interest on the liabilities for which the swap contract was executed. The derivatives designated as hedging instruments by the Company are principally interest swaps and forward exchange contracts. The related hedged items are trade accounts receivable and payable, and long-term bank loans. The Company has a policy to utilize the above hedging instruments in order to reduce the Company's exposure to the risk of foreign exchange and interest rate fluctuations. Thus, the Company's purchases of the hedging instruments are limited to, at maximum, the amounts of the hedged items. The Company evaluates effectiveness of its hedging activities by reference to the accumulated gains or losses on the hedging instruments and the related hedged items from the commencement of the hedges. (7) Property, Plant and Equipment Property, plant and equipment are stated at cost. Cost of maintenance, repairs and minor renewals is charged to current operations; major renewals and betterments are capitalized. Depreciation is mainly computed using the declining-balance method, except for the buildings acquired after April 1, 1998 to which the straight-line method is applied for the Company and domestic subsidiaries. The principal estimated useful lives range from 3 to 50 years for buildings and from 2 to 17 years for machinery and equipment. Depreciation of overseas subsidiaries is computed using the straight-line method. (8) Revaluation of Land In accordance with the “Law of Land Revaluation” promulgated on March 31, 1998 and the “Law Related to the Revision of the Law of Land Revaluation” promulgated on March 31, 2001, the Company has revaluated its business purpose land. Among the revaluation difference, the amount related to tax is recognized as deferred taxes liability and the revaluation difference, net of tax, is recognized as a component of shareholder’s equity. Method of the revaluation

The revaluation was performed based on the fixed assets tax revaluation amount set up in the “Law of Land Revaluation” No.2 article 3, and is calculated based on the land prices set up in the “Law of Land Revaluation” No.2 article 4 with certain reasonable adjustments as follows: Date of the revaluation: March 31, 2002 Land before revaluation: ¥7,189 million Land after revaluation: ¥ 10,844 million

Upon sales of the land revaluated as above, the corresponding unrealized gains on revaluation of such land was transferred directly to accumulated deficit. The excess of the book value over the current market value of such revaluated land held at March 31, 2004 amounted to ¥2,468 million ($23,347 thousand) at that time.

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(9) Intangible Assets Amortization of intangible assets is computed using the straight-line method. Software costs for internal-use are amortized over their expected useful lives (5 years) on a straight-line basis. (10) Income Taxes Income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants taxes and enterprise taxes. Income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities are recognized in respect of temporary differences between the tax basis of assets and liabilities and those as reported in the consolidated financial statements. (11) Accrued Retirement Benefits Accrued retirement benefits to employees of the Company and its major consolidated subsidiaries is provided based on the estimated present value of projected benefit obligations and fair value of funded plan assets. For other insignificant consolidated subsidiaries, accrued retirement benefits to employees is calculated using a simple method. Actuarial gains (losses) are charged as deduction from expense or expense in the year of occurrences.

�

Employees’ retirement benefit expense reported as special loss [¥211 million ($1,996 thousand)] is amounts of contractual obligation. Depletion of plan assets is caused by enormous voluntary retirements of one of subsidiaries. (12) Accounting for Finance Leases Leases that transfer substantially all the risks and rewards of ownership of the assets are accounted for as capital leases, except that leases not transferring ownership of the assets at the end of the lease term are accounted for as operating lease, in accordance with accounting principles and practices generally accepted in Japan.

(13) Sales Recognition Basis The Company uses the percentage-of- completion method for the recognition of sales and gross profit in respect of certain contracts that take more than one year to complete. In all other cases, sales and gross profit are recorded when the relevant items are completed or delivered. (14) Earnings Per Share The computation of net income per common share is based on the weighted average number of outstanding shares of common stock. Effective from the year ended March 31, 2003, the Company adopted the Statement of Financial Accounting Standard No. 2 “Earnings per Share” issued by the Accounting Standards Board of Japan. However, adopting of this new statement had no effect on net loss per share for the period. (15) Accounting for Treasury Stock and Reversal of Capital and Legal Reserves Effective for the year ended March 31, 2003, the Company adopted the Statement of Financial Accounting Standard No. 1 “Accounting for Treasury Stock and Reversal of Capital and Legal Reserves” issued by the Accounting Standards Board of Japan. However, the effect on net income for the period of adopting this new statement was immaterial. (16) Accounting standard for impairment of fixed assets On August 9, 2002, the Business Accounting Council in Japan issued "Accounting Standard for Impairment of Fixed Assets". The standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss shall be recognized in the income statement by reducing the carrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling price and value in use. The standard shall be effective for fiscal years beginning April 1, 2005. However, an earlier adoption is permitted for the years beginning April 1, 2004 and for fiscal years ending between March 31, 2004 and March 30, 2005. The Company has not applied the earlier adoption for the year ended March 31, 2004. The amount of influence by “Accounting Standard for Impairment of Fixed Assets” is not clear at present, because the Company has not estimated it.

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3. United States Dollar Amounts Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥105.69=U.S. $1, the approximate rate of exchange prevailing at March 31, 2004 has been used in translation. The inclusion of such amounts are not intended to imply that Japanese yen have been or could be readily converted, realized or settled in U.S. dollars at this rate or any other rates. 4. Cash and Cash Equivalents Cash and Cash Equivalents as at March 31, 2004 and 2003 consisted of:

Millions of Yen


March 31 2004 2003 2004 Cash in hand and at bank ¥6,728 ¥5,951 $63,657 Time deposits, over 3-month term (134) - (1,268) Short-term investments included in marketable securities 5 5 48 Cash and Cash Equivalents ¥6,599 ¥5,956 $62,437

5. Marketable Securities Marketable Securities as at March 31, 2004 and 2003 were as follows:

Millions of Yen


March 31 2004 2003 2004 Bonds and others ¥5 ¥5

$48

6. Inventories Inventories as at March 31, 2004 and 2003 were as follows:

Millions of Yen


March 31 2004 2003 2004 Work in process ¥ 3,156 ¥ 4,880 $29,860 Other 578 641 5,474 ¥3,734 ¥5,521 $35,334

7. Investments in Securities Investments in securities as at March 31, 2004 and 2003were as follows:

Millions of Yen


March 31 2004 2003 2004 Listed equity securities and bonds ¥9,213 ¥4,595 $87,171 Unlisted equity securities and bonds 2,838 2,463 26,852 ¥12,051 ¥7,058 $114,023 Investments in unconsolidated subsidiaries and affiliates included in investments in securities

¥1,421 ¥554

$13,448

The aggregate acquisition cost, gross unrealized gains and losses and carrying amount on the balance sheet, which were revalued to the related fair value, of other securities with market quotations at March 31, 2004and 2003 were as follows:

At March 31, 2004 Millions of Yen

Acquisition cost Unrealized gains Unrealized

losses Carrying amount

Equity securities ¥3,924 5,314 ¥(50) ¥9,189 Bonds - - - - Others 31 - (6) 24

Total ¥3,955

5,314 ¥(56)

¥9,213

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Equity securities ¥4,665 ¥376 ¥(466) ¥4,575 Bonds - - - - Others 31 - (11) 20

Total ¥4,696

¥376 ¥(477)

¥4,595

At March 31, 2004 Thousands of U.S. Dollars



Equity securities $37,128 $50,281 $(470) $86,939 Bonds - - - - Others 288 - (56) 232

Total $37,416

50,281 $(526)

$87,171 During the year ended March 31, 2003, certain other securities with market quotations were written down by ¥2,654 million, respectively. The Company writes down the book value of other securities when the market value declines by more than 50%, or the market value declines by than 30% but less than 50% and the Company management determines the decline to be other than temporary. Proceeds from sale of other securities were ¥1,127 million ($10,665 thousand) and ¥906 million for the year ended March 31, 2004 and 2003, respectively. On those sales, gross realized gains were ¥360 million ($3,403 thousand) and ¥123 million, and gross realized losses were ¥8 million ($75 thousand) and ¥16million, respectively. 8. Short-Term Debt and Long-Term Debt Short-term debt consists principally of bank overdrafts, bearing interest at a weighted average annual rate of 2.1% and 2.2% at March 31, 2004 and 2003, respectively. Short-term debt as at March 31, 2004 and 2003 was as follows:

Millions of Yen


March 31 2004 2003 2004 Bank over draft Secured ¥2,098 ¥ 3,299 $19,851 Unsecured 3,140 4,503 29,710 Current portion of long-term debt 3,868 2,290 36,598 ¥9,106 ¥10,092 $86,159

Long-term debt as at March 31, 2004 and 2003 was as follows:

Millions of Yen Thousands of

U.S. Dollars March 31 2004 2003 2004 Payable to domestic banks, insurance companies and others, with interest rates shown below (* 1)

Secured ¥4,265 ¥2,238 $40,354 Unsecured 4,738 3,669 44,832 9,003 5,907 85,186 Less: Current portion of long-term debt 3,868 (2,290) (36,598) ¥5,135 ¥3,617 $48,588

March 31 2004 2003 (*1) Interest rates 1.6%to3.4%

1.4 % to3.0 %

Annual maturities of long-term debt at March 31, 2004 are as follows:

Year ending on March 31,


U.S. Dollars 2005 ¥3,868 $36,598 2006 3,793 35,888 2007 1,013 9,585 2008 269 2,545 2009 and thereafter 60 570 ¥9,003 $85,186

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Assets pledged as collateral for short-term debt and long-term debt as at March 31, 2004 and 2003 were as follows:


U.S. Dollars March 31 2004 2003 2004 Investments in securities ¥3,601 ¥1,743 $34,071 Buildings (at net book value) 1,711 1,819 16,189 Machinery (at net book value) 56 57 530 Land 7,383 7,353 69,855 ¥12,751 ¥10,972 $120,645

9. Retirement Benefit Plan Employees whose service with the Company and certain domestic subsidiaries is terminated are, in most circumstances, entitled to lump-sum severance payments determined by reference to current basic rate of pay and length of service and the circumstances in which, the termination occurs. The company and domestic subsidiaries have a funded non-contributory and contributory pension plan for employees. Under the plan, employees are entitled to receive a pension for 10 years from their retirement date, determined by reference to current basic rates of pay at the time of termination, length of service and the conditions under which the termination occurred. The accrued retirement benefits as of March 31, 2004 and 2003 are analyzed as follows:

Millions of Yen


2004 2003 2004 Projected benefit obligations ¥(5,616) ¥(5,600) $(53,133) Plan assets 475 421 4,489 Net unreserved projected benefit obligations (5,141) (5,179) (48,644) Accrued retirement benefits recognized in balance sheets ¥(5,141) ¥(5,179) $(48,644)

Net pension and severance costs related to the retirement benefit plans for the year ended March 31, 2004 and 2003 were as follows:

Millions of Yen


2004 2003 2004 Service cost ¥265 ¥270 $2,503 Interest cost 84 99 797 Expected return on plan assets Net amortization

- (78)

(12) 45

- (733)

Net pension and severance costs ¥271 ¥402 $2,567 Assumptions used in calculation of the above information were as follows:

As of March 31 2004 2003 Discount rate 1.5 % 1.5 % Expected rate of return on plan assets 0.0 % 1.0 % Method of attributing the projected benefit obligations to periods of services

Straight- line basis Straight- line basis

Amortization of net obligation at transition Expensed in a lump sum

Expensed in a lump sum

Amortization of unrecognized actuarial differences Expensed in the year of occurrences

Expensed in the year of occurrences

10. Income Taxes The Company and its domestic subsidiaries are subject to several taxes based on income, which in the aggregate resulted in the statutory tax rate of approximately 42.05% for the years ended March 31, 2004 and 2003. Foreign subsidiaries are subject to income taxes of the countries in which they operate. The reconciliation of the statutory tax rate to the effective income tax rate for the years ended March 31, 2004 is as follows:

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2004 Statutory tax rate 42.05% Reconciliation

Valuation allowance

(37.49) Nondeductible expenses 3.71 Tax loss carryforwards (2.28) Other 0.75

Effective income tax rate 6.74% At March 31, 2004 and 2003, significant components of deferred tax assets and liabilities were as follows:

Millions of Yen Thousands of U.S.Dollars

2004 2003 2004 Deferred tax assets

Tax loss carryforwards ¥6,480 ¥6,090 $61,307 Accrued severance and pension costs for employees 988 2,146 9,352 Accrued bonus 25 32 232 Allowance for doubtful accounts 507 1,050 4,795 Loss on write-down of investments Loss on write-down of inventories Write-offs Other

124 14 10 19

- - - 2

1,173 129 99

183 8,167 9,320 77,270

Less: valuation allowance (8,162) (9,315) (77,221)

Gross deferred tax assets 5 5 49 Deferred tax liabilities

Deferred tax liabilities on revaluation of land Net unrealized gains on investments in securities

1,111 2,140

1,126 -

10,509 20,245

Gross deferred tax liabilities ¥ 3,251 ¥1,126 $30,754 11. Selling General and Administrative Expenses Selling, general and administrative expenses for the years ended March 31, 2004 and 2003 comprised the following:

Millions of Yen


Year ended March 31 2004 2003 2004 Salaries and remuneration ¥1,247 ¥1,327 $11,803 Accrued bonuses 65 54 617 Pension and severance costs 149 240 1,414 Others 1,552 2,099 14,672 ¥3,013 ¥3,720 $28,506

12. Research and Development Costs Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years ended March 31, 2004 and 2003 were ¥82 million ($776 thousand) and ¥95 million, respectively. 13. Leases A. Lessee Leases that transfer substantially all the risks and rewards of ownership of the assets are accounted for as capital leases, except that leases not transferring ownership of the assets at the end of the lease term are accounted for as operating lease, in accordance with accounting principles and practices generally accepted in Japan. Leased assets under finance leases that do not transfer ownership of the leased assets at the end of the lease term, if capitalized, comprise the followings:

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Acquisition

Cost Accumulated Depreciation Net book value

Machinery, equipment and delivery equipment ¥1,544 ¥550 ¥994 Tools, furniture and fixture 2,248 429 1,819

Total ¥3,792 ¥979 ¥2,813


Acquisition


Machinery, equipment and delivery equipment ¥ 1,179 ¥308 ¥871 Tools, furniture and fixture 1,033 212 821

Total ¥2,212 ¥520 ¥1,692


Acquisition


Machinery, equipment and delivery equipment $14,609 $5,204 $9,405 Tools, furniture and fixture 21,270 4,059 17,211

Total $35,879 $9,263 $26,616 The amounts of outstanding future lease payments due at March 31 including the portion of interest thereon were summarized as follows:

Millions of Yen


March 31 2004 2003 2004 Future lease payment Within one year ¥685 ¥371 $6,481 Over one year 2,217 1,400 20,977 ¥2,902 ¥1,771 $27,458

Lease rental expenses on such finance lease contracts for the years ended March 31, 2004 and 2003 are as follows:

Millions of Yen


Year ended March 31 2004 2003 2004 Lease rental expenses ¥658 ¥256 $6,226 Depreciation 600 227 5,677 Interest expense 87 42 823

B. Lessor Finance leases that do not transfer ownership of the leased property to lessor are accounted for as rental transaction. Leased assets under financial leases comprise the followings:


Acquisition Cost

Accumulated Depreciation Net book value

Buildings and structures ¥2,070 ¥740 ¥1,330 Machinery, equipment and delivery equipment 1,297 956 341 Tools, furniture and fixture 1,144 703 441

Total ¥4,511 ¥2,399 ¥2,112

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Acquisition


Buildings and structures ¥2,095 ¥493 ¥1,602 Machinery, equipment and delivery equipment 1,700 1,235 465 Tools, furniture and fixture 1,129 684 445

Total ¥4,924 ¥2,412 ¥2,512


Acquisition


Buildings and structures $19,586 $7,002 $12,584 Machinery, equipment and delivery equipment 12,272 9,046 3,226 Tools, furniture and fixture 10,823 6,650 4,173

Total $42,681 $22,698 $19,983 The amounts of outstanding future lease revenue due at March 31 including the portion of interest thereon were summarized as follows:

Millions of Yen


March 31 2004 2003 2004 Future lease revenue Within one year ¥1,722 ¥1,278 $16,293 Over one year 4,753 3,201 44,971 ¥6,475 ¥4,479 61,264

Lease rental revenue, depreciation and interest income equivalent on such finance lease contracts for the years ended March 31, 2004 and 2003are as follows:

Millions of Yen


Year ended March 31 2004 2003 2004 Lease rental revenue ¥955 ¥1,055 $9,036 Depreciation 526 657 4,977 Interest income 429 397 4,059

14. Derivative and Hedging Activities The Companies use forward currency exchange contracts to hedge against the exchange rate risk associated with monetary receivables and payables denominated in foreign currencies. Interest rate swap transactions are used in order to minimize the risk of fluctuation in interest rates on borrowings. The Companies have established a control environment that includes policies and procedures for risk assessments and for the approval, reporting and monitoring of transactions involving derivative financial instruments. The Companies do not hold or issue derivative financial instruments for trading purposes. The Companies are exposed to certain market risks arising from their forward exchange contracts and swap agreements. The Companies are also exposed to the risk of credit loss in the event of non-performance by the counterparts to the currency and interest; however, the Companies do not anticipate nonperformance by any of these counterparts all of whom are financial institutions with high credit ratings. 15. Contingent Liabilities As at March 31, 2004, the Companies are contingently liable for notes receivable discounted and endorsed and guarantees of loans made to unconsolidated subsidiaries and affiliates as follows:

March 31, 2004


U.S. Dollars Guarantees of loans from banks Notes receivable discounted and endorsed

¥ 1,144 83

$10,824 785

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16. Segment Information (1) Industry Segment Information The operations of the Company and its consolidated subsidiaries for the years ended March 31, 2004 and 2003 are summarized by product group as follows:

Millions of Yen

Year ended March 31, 2004

Material Handling System

Division

Plant & Machinery

System Division

Architecture System Division Other Sub Total

Elimination or

Corporate Assets*

Consolidated Total

Sales Sales to external customers ¥17,550 ¥10,386 ¥9,280 ¥6,698 ¥43,914 ¥ - ¥ 43,914 Inter-segment sales - - 3 1,164 1,167 (1,167) - Total 17,550 10,386 9,283 7,862 45,081 (1,167) 43,914 Operating costs and expenses 17,364 9,819 9,152 7,572 43,907 (916) 42,991 Operating income 186 567 131 290 1,174 (251) 923 Assets 15,315 9,208 8,000 10,011 42,534 11,925 54,459 Depreciation 242 143 22 701 1,108 41 1,149 Capital expenditure 113 79 7 368 567 13 580

Millions of Yen


Material Handling System

Division

Plant & Machinery

System Division

Architecture System

Division Other Sub Total

Elimination or Corporate

Assets* Consolidated

Total Sales Sales to external customers ¥15,487 ¥7,543 ¥9,499 ¥4,133 ¥ 36,662 ¥ - ¥ 36,662 Inter-segment sales - - - 1,052 1,052 (1,052) - Total 15,487 7,543 9,499 5,185 37,714 (1,052) 36,662 Operating costs and expenses 15,372 7,268 9,348 4,471 36,459 (169) 36,290 Operating income (loss) 115 275 151 714 1,255 (883) 372 Assets 17,140 7,031 3,885 9,027 37,083 11,346 48,429 Depreciation 268 149 23 872 1,312 41 1,353 Capital expenditure 164 103 14 237 518 25 543

* Corporate assets consist of cash in hand and at banks, investment in securities and the assets belonging to the administration department of the Company. Corporate assets at March 31, 2004 and 2003 were ¥14,442 million ($ 136,644 thousand) and ¥12,920 million, respectively.



Material Handling

System Division

Plant & Machinery

System Division

Architecture System

Division Other Sub Total

Elimination or Corporate

Assets Consolidated

Total Sales Sales to external customers $166,052 $98,269 $87,803 $63,373 $415,497 $ - $415,497 Inter-segment sales - - 26 11,013 11,039 (11,039) - Total 166,052 98,269 $87,829 74,386 426,536 (11,039) 415,497 Operating costs and expenses 164,293 92,902 86,593 71,639 415,427 (8,662) 406,765 Operating income 1,759 5,367 1,236 2,747 11,109 (2,377) 8,732 Assets 144,907 87,126 75,695 94,714 402,442 112,826 515,268 Depreciation 2,291 1,352 209 6,636 10,488 385 10,873 Capital expenditure 1,067 743 66 3,486 5,362 123 5,485

(2) Geographic Segment Information Segment information classified by geographic area was omitted because a majority of the Companies’ operations were performed in Japan.

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(3) Export sales and sales by overseas subsidiaries

Millions of Yen

Year ended March 31, 2004 South-east

Asia

Middle east

Other

Total Overseas sales ¥676 ¥1,793 ¥2,225 ¥4,694 Consolidated Sales - - - ¥43,914 Ratio 1.5% 4.1% 5.1% 10.7%

Millions of Yen

Year ended March 31, 2003 South-east

Asia Middle east Other Total Overseas sales ¥602 ¥2,448 ¥1,513 ¥4,563 Consolidated sales - - - 36,662 Ratio 1.7% 6.7% 4.1% 12.5%

Thousand of U.S. Dollars Year ended March 31, 2004

South -east Asia Middle east Other Total

Overseas sales $6,396 $16,965 $21,052 $44,413 Consolidated sales - - - $415,497 Ratio 1.5% 4.1% 5.1% 10.7%

* Major countries included in the above geographic areas are as follows: South-east Asia:…..Thailand Middle east:……….Iran

Other: ……………..Trinidad and Tobago, Australia

17. Related Party Transactions Material transactions of the Company with its related companies and individuals, excluding transactions with consolidated subsidiaries which are eliminated in the consolidated financial statements and other than those disclosed elsewhere in these financial statements, for the years ended March 31, 2004 and 2003 were as follows:

Millions of Yen/Thousands of U.S. Dollars Transactions Resulting Accounting Balance

Year ended March 31 At March 31,

Name of Related Company

Paid-in Capital

Principal Business

Equity Ownership Percentage

by the Company

Description of the

Company’s Transactions 2004 2003 Account 2004 2003

Toyo Koken K.K. ¥897 39% Loans made ¥803 ¥425 Short-term ¥1,392 ¥ 588

million

Produce and sale of electric-driven

winches

$(7,598) loans $(13,171)

¥490 Long-term ¥451 $(4,636) loans $(4,267)

¥100 Long-term Toyo Miyama Co.,

Ltd. million Architectural

business 50% loans ¥1,000 $(9,462)

¥1,950

Guarantee obligation

¥1,025 $(9,698)

¥925

The terms and conditions of the above transactions are on an arm's-length basis.

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Corporate Data Head Office 19-20, Higashisuna 8-Chome, Koto-ku, Tokyo 136-8666, Japan Tel: (03) 5857-3333 Fax: (03) 5657-3170 URL: http://www.toyokanetsu.co.jp Date of Establishment 16th May, 1941 Common Stock Par Value : ¥50 Authorized : 297,000,000 Issued : 138,730,741

Security Traded Tokyo Stock Exchange Market, 1st Section Transfer Agent and Registrar The Mitsubishi Trust and Banking Corporation 4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo 100-8212, Japan Annual Meeting The annual Meeting of Shareholders is normally held in June in Tokyo, Japan

Offices, Subsidiaries and Affiliates Domestic Offices

Toyo Kanetsu K.K. Osaka Sales Office 8-5, Kyomachibori 1-chome, Nishi-ku, Osaka 550-0003, Japan Tel: (06) 6447-0325 Fax: (06) 6444-5731 Toyo Kanetsu K.K. Chiba Plant 2 Tsukiji, Kisarazu-shi, Chiba 292-0835, Japan Tel: (0438) 36-7161 Fax: (0438) 36-8211

Domestic Subsidiaries & Affiliates

K-Techno Inc. 10 Hon-cho, Naka-ku, Yokohama-shi, Kanagawa 213-0005, Japan Tel: (045) 641-0131 Fax: (045) 641-0151 Toko Leasing Co., Ltd. 19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan Tel: (03) 3640-5164 Fax: (03) 5606-6377 Toyo Service System K.K. 19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan Tel: (03) 5857-3200 Fax: (03) 5857-3201 Global Eight Co. 19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan Tel: (03) 3699-1601 Fax: (03) 3699-4330 Toyo Koken K.K. 19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan Tel: (03) 5857-3162 Fax: (03) 5857-3199

Manavis Co., Ltd. 15-9, Chidori, Urayasu-shi, Chiba 279-0032, Japan Tel: (047) 380-5800 Fax: (047) 380-1166 Katayama Co. 22-13, Shinjuku 6-chome, Shinjuku-ku, Tokyo 160-0022, Japan Tel: (03) 3352-0611 Fax: (03) 3352-0674 Toyo Miyama Co., Ltd. 2 Tsukiji, Kisarazu-shi, Chiba 292-0835, Japan Tel: (0438) 37-2233 Fax: (0438) 37-2201

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Overseas Subsidiaries & Affiliates P.T. Toyo Kanetsu Indonesia (Jakarta Head Office) Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11, Jakarta 10220, Indonesia Tel: +62 (21) 570-7805 / 7739 Fax: +62 (21) 570-3950 (Batam Fabrication Plant) Jl. Tenggiri, Batu Ampar, Batam, Indonesia Tel: +62 (778) 412158 / 412159 Fax: +62 (778) 412157 TKK Engineering Pty. Ltd. 34 Windarra Drive, City Beach, W.A. 6015, Australia Tel: +61 (8) 9385-8682 Fax: +61 (8) 9385-7356 Toyo Kanetsu (Malaysia) Sdn. Bhd. Sublot 51, 1st Floor, Medan Jaya Commercial Centre, 97000 Bintulu, Sarawak, Malaysia Tel: +60 (86) 338122 Fax: +60 (86) 338123 Al Ghallilah Engineering & Construction L.L.C. P.O. Box 121, Postal Code 118, Al Harthy Complex, Sultanate of Oman TKK-USA,INC.

8955 Katy Freeway Suite 202 Houston TX 77024,USA

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