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Profile KOITO MANUFACTURING CO., LTD. has led to the way in optics since 1915, when it developed the fresnel lens for Japan’s first railway signals. Today, the Company’s integrated optical and elec- tronic technologies – as applied in its lighting equip- ment for automobiles, aircraft parts, and other products – continue a tradition of global innovation for safety. Contents Message From the President. 1 The Koito Group. 2 Board of Directors . 14 Financial Section . 15 Six-Year Summary . 15 Management’s Discussion and Analysis of Operations . 15 Consolidated Balance Sheets . 18 Consolidated Statements of Income . 20 Consolidated Statements of Shareholders’ Equity . 21 Consolidated Statements of Cash Flows . 22 Notes to the Consolidated Financial Statements . 23 Report of Independent Certified Public Accountants. 30 Corporate Directory . 31 Message From the President technical associates, has 18% of the cornerstone of our operations in this global OEM market for automotive part of the world. Its product line, lighting equipment and 19% for sig- which was limited until recently to nalling lamps. signalling lamps, has been expanded to include headlamps. In June, we Expanded Consolidation Creates were officially designated a mem- Significant Sales Gains ber of Europe’s Advanced Front In fiscal 1999, the Koito Group Lighting Systems (AFS) project, switched to the principle of actual demonstrating the excellent repu- control as the standard for consoli- tation of our technical expertise in dation. This expanded the scope of Europe. We opened a Europe tech- consolidation to include most Koito nical center in Belgium to assist Eu- Group members, including the ropean automobile manufacturers Reinforcing Koito Group Power in a seven foreign subsidiaries. Largely in product development. This Severe Operating Climate because of this increase, consoli- should lead to higher level of or- In fiscal 1999, the year ended March dated sales rose ¥49,800 million ders in Europe. In Japan, Nissei 31, 1999, Japan’s economy re- from the previous year to ¥275,934 Industries Co., Ltd. and Koa Elec- mained mired in a severe recession million. Regarding earnings, group- tric Co., Ltd. were merged on April with no signs of recovery. The pace wide efforts were made to stream- 1, 1999. These companies are spe- of domestic automobile sales re- line operations and cut costs. cialized manufacturers of miniature flected this difficult climate. Al- However, profit margins fell as pro- bulbs and electrical equipment. The though exports to the U.S. and duction volumes in the non-auto- merger will bolster the Koito Europe were higher, shipments to motive electrical equipment Group’s stature in this field by Asia declined as economic turmoil divisions declined. Consequently eliminating overlapping R&D efforts slowed demand. As a result, auto- net income fell ¥400 million from and creating an organization that mobile production in Japan fell the previous fiscal year to ¥3,846 can better withstand competitive 7.5% from the previous fiscal year million. forces. In this manner, we are trans- to 9.96 million units. forming the Koito Group into an Changes in Europe and Corporate entirely new entity as we approach Despite these challenges, the Koito Reform the 21st century. We believe that Group has been reinforcing its op- Demand for automotive lighting even greater accomplishments lie erating bases in all three major mar- equipment has matured in Japan. ahead for the Koito Group and, on kets: the U.S., Europe and Asia. We However the global market will behalf of the management, I re- are determined to position ourselves continue to expand. To exploit this spectfully ask for your continued to succeed in the next century. Dur- trend, we have adopted a strategy understanding and support. ing the past year, North American of converting foreign affiliates into Lighting, Inc., THAI KOITO COM- subsidiaries. In Europe, Britax Vega PANY LIMITED and Koito Europe Limited became a wholly owned Limited became subsidiaries. The subsidiary at the end of March 1999. Junsuke Kato Koito Group, including foreign sub- Now renamed Koito Europe Lim- President sidiaries, affiliates and overseas ited, the company will become the September 1999 1 The Koito Group Overseas Network The Koito Group’s Global Strategy Automobile output in Japan has fallen below the 10 million level and no substantial growth is likely in the future. On a global scale, however, the automobile industry will continue to expand. As this growth takes place, Koito is deter- mined to raise its worldwide mar- ket share by upgrading R&D and Shanghai Koito Automotive Lamp Co., Ltd. manufacturing capabilities through- out the entire group. Koito started establishing operations outside Japan in the 1980s. Pres- ently, there are production facilities in seven major overseas markets: U.S., Thailand, U.K., China, Taiwan, South Korea and India. During fis- cal 1999, which ended March 31, 1999, the joint-venture manufactur- ing companies in the U.S., Thailand and U.K. each became Koito sub- Koito Europe Limited sidiaries. The seven overseas manu- facturing companies, all of which had been equity-method affiliates in the prior fiscal year, became con- solidated subsidiaries in fiscal 1999. These seven companies draw on Koito’s expertise in automotive lighting to supply products that meet local requirements. They sell products to the U.S. Big Three and other leading automobile makers in India Japan Lighting Ltd. all parts of the world. 2 Inhee Lighting Co., Ltd. North American Lighting, Inc. KOITO MANUFACTURING CO., LTD. Ta Yih Industrial Co., Ltd. THAI KOITO COMPANY LIMITED 3 The Koito Group KOITO MANUFACTURING CO., LTD. KOITO MANUFACTURING CO., consumption. Demand for GDHL is LTD. (“Koito”) is Japan’s largest growing. Although this technology manufacturer of automobile lighting still cost about 3 to 5 times more equipment. As the nucleus of the than halogen lamps, prices are entire Koito Group, this company expected to fall as production vol- is focusing on reinforcing the umes climb. group’s operating base. In the past year ended March 1999, three over- In June 1999, Koito became the first seas joint ventures were converted non-European company to become into subsidiaries: North American an official member of the Advanced Lighting, Inc. (U.S.A.), THAI KOITO Front Lighting System (AFS) project. COMPANY LIMITED (Thailand) and The original 16 AFS project mem- Britax Vega Limited (U.K.). bers are automobile and automo- bile parts manufacturers from six Founded: April 1, 1915 Incorporated: April 1, 1936 Outside Japan, products are fabri- European countries and Koito par- Head office: Takanawa, Minato-ku, cated at network of 20 overseas ticipates on behalf of Japan. The Tokyo, Japan President: Junsuke Kato bases, including the operations of purpose of the AFS project is the Business lines: Automotive lighting equipment, aircraft parts, other products overseas business partners receiv- development of a system to control Capital: ¥14,270 million (non-consolidated) ing technical assistance. The goal is front lighting system in response to Sales: ¥143,215 million (non-consolidated) in year to to double their combined sales to changes in driving conditions such March 1999 ¥120 billion by increasing produc- as weather, the presence of cars and Employees: 4,601 (end of March 1999, non- consolidated) tion volumes. In comparison, Koito the surrounding area, and drawing Major customers: TOYOTA MOTOR CORPORATION, NISSAN MOTOR CO., LTD., alone generated sales of ¥143,215 up legislation to make them man- MITSUBISHI MOTORS CORPORATION, million in fiscal 1999. Less than 10% datory. Mazda Motor Corporation, SUZUKI MOTOR CORPORATION, of this was exports from Japan be- DAIHATSU MOTOR CO., LTD., cause most overseas demand is met Environmental protection receives Fuji Heavy Industries Ltd., HONDA MOTOR CO., LTD., through local production. top priority at Koito. One illustrat- ISUZU MOTORS LIMITED, HINO MOTORS, LTD., ing is research that will lead to a NISSAN DIESEL MOTOR CO., LTD., Yamaha Motor Co., Ltd. Much growth in future production shift in reflector manufacturing from will come from gas discharge head- FRP to thermo resin materials. FRP lamps (GDHL). Plans call for rais- is a thermoset resin that does not ing annual output to 450 thousand decompose even at high tempera- pairs by fiscal 2000, 2.5 times more tures. Thermo resin can be easily than in fiscal 1998. GDHL use the converted into pellets for recycling. electro-discharge phenomenon to With most research complete, Koito produce light with a balanced com- is now finalizing plans to commer- position that is close to natural day- cialize a reflector made from a light and provides better visibility. thermo resin. Twice the brightness of conven- tional halogen lamps can be ob- Technical Center tained with much less power 4 North American Lighting, Inc. (U.S.A.) Founded: April, 1983 North American Lighting, Inc. (NAL) Head office: Flora, Illinois, U.S.A. President: Daniel Robusto has been manufacturing automobile Business lines: Manufacturing and marketing lighting products and marketing automotive lighting equipment Capital: $18.5 million (¥2,220 million) them to all automobile manufactur- Major shareholders: Koito 90%, Ichikoh Industries, Ltd. 10% ers in North America, including Sales: $304.3 million (¥36,521 million) in year to May 1999 Japanese car makers’ transplants Employees: Approximately 2,120 Major customers: General Motors, since 1983. NAL has become the Ford Motor Company, Daimler Chrysler, largest independent automobile owned by Hella North America, in- Toyota Motor Manufacturing lighting equipment manufacturer in creasing its stake in NAL from 40% Kentucky Inc., New United Motor Manufactur- North America. The company be- to 90%. Koito plans to give NAL the ing Inc., Nissan Motor Manufacturing gan as a joint venture with Hella support it needs to expand aggres- Corp.U.S.A., Honda Of America Manufactur- North America Inc., a wholly sively in North America. Growth ing Inc. owned subsidiary in the U.S.

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