Financial Report for the Six-Month Period Ended September 30, 2003 (Consolidated)

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Company Name: MAX CO., LTD.

Stock Code: 6454

Head Office: 6-6, Hakozaki-cho, Nihonbashi, Chuo-ku, Tokyo, JAPAN

URL: (http://www.max-ltd.co.jp)

Inquiries: Mitsuo Suzuki, Senior Manager Tel: (03) 3669-0311

Date Approved by Board of Directors: October 23, 2003

Application of U.S. GAAP: No

1. Results for the Six Months Ended September 30, 2003 and 2002

(1) Consolidated Operating Results (Millions of yen, %)

Six months ended Six months ended

Year ended March 31, 2003 September 30, 2003 September 30, 2002

Net sales ¥23,984 8.3% ¥22,140 (8.4)% ¥45,898

Operating income 1,771 1.1 1,751 (35.9) 3,681

Ordinary income 1,820 3.5 1,758 (39.4) 3,822

Net income 1,902 93.3 984 (41.1) 1,328

Net income per share (yen) 36.28 18.02 23.69

Net income per share, diluted (yen) — —

Return on equity (%) 3.5 1.8 2.4

Return on total assets (%) 2.8 1.4 5.4

Ordinary income to net sales (%) 7.6 7.9 8.3

Notes: 1. Investment loss on equity method: six months ended September 30, 2003: JPY—million; six months ended September 30, 2002: JPY— million; year ended March 31, 2003: JPY—million.

2. Average number of shares outstanding (consolidated): 52,435,994 (six months ended September 30, 2003), 54,614,523 (six months ended September 30, 2002), 54,095,100 (year ended March 31, 2003)

3. Changes in accounting methods: None

4. Percentages given for net sales, operating income, ordinary income, and net income reflect the rate of increase (decrease) compared to the previous fiscal year.

(2) Consolidated Financial Position (Millions of yen, %)

Six months ended Six months ended

Year ended March 31, 2003 September 30, 2003 September 30, 2002

Total assets ¥67,402 ¥70,104 ¥68,546

Shareholders’ equity 54,000 54,372 54,071

Shareholders’ equity ratio (%) 80.1 77.6 78.9

Shareholders’ equity per share (yen) ¥1,047.15 ¥1,008.03 ¥1,021.83

Note: The number of issued shares at the end of each period: 51,569,396 (as of September 30, 2003); 53,939,936 (as of September 30, 2002); 52,869,645 (as of March 31, 2003)

(3) Consolidated Cash Flows (Millions of yen)

Six months ended Six months ended

Year ended March 31, 2003 September 30, 2003 September 30, 2002

Net cash provided by operating activities ¥3,436 ¥1,181 ¥2,518

Net cash used in investing activities (285) (823) (722)

Net cash used in financing activities (2,386) (1,886) (3,073)

Cash and cash equivalents at end of year 5,383 4,371 4,623

(4) Scope of Consolidation and Application of the Equity Method

The number of consolidated subsidiaries: 20; consolidated subsidiaries accounted for by the equity method: —; affiliated companies: —

(5) Changes in the Scope of Consolidation and Application of the Equity Method Consolidated subsidiaries: —additions; 1 removal

Financial Report for the Six-Month Period Ended September 30, 2003 (Consolidated)

October 23, 2003 Stock Listings: Each 1st Section of Tokyo and Osaka

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2. Forecast of Consolidated Operating Results from April 1, 2003 to March 31, 2004

(Millions of yen) Year ending March 31, 2004

Net sales ¥48,800

Operating income 3,760

Ordinary income 3,960

Net income 3,120

Note: Forecast net income per share: ¥59.09

These forecasts were based on information possessed by the Max Group at this point in time. More recent data may mean that the actual figures are different than those indicated. A section discussing the aforementioned forecasts appears on page 7 of this docu-ment.

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1. Management Policies

1. Basic Management Policies

The corporate philosophy of MAX CO., LTD., is to expand “Customer Value” by becoming a group in which everyone grows together by enthusiastically combining their strengths. Thanks to all our employees’ strenuous efforts, we are realizing continued growth. This organizational capacity enables us to pursue an expansion in both business and profits as we aim for continued suc-cess and advancement.

Our basic management stance is summarized by the following three points: 1. We will strive to ensure that the management is open.

In an accurate and timely manner, we disclose our business policies and business results, including consolidated earnings, in accordance with the international accounting standards.

2. We will strive to ensure that all employees may participate in the management.

Our employees participate actively in the Company’s management, helping to expand the success of the business through their respective roles.

3. We will strive to realize a management structure in which profit is divided among employees and stockholders. Through these efforts, we endeavor to expand our business and contribute to society.

2. Basic Policy Regarding the Distribution of Profits

Returning profits to our shareholders is one of our most important management policies. With a fundamental emphasis on ROE, we maintain a policy of making dividend payments that are underpinned by the growth in operations.

Regarding the dividends paid to shareholders, we set the lower limit of the payout ratio at 30%. As for the dividends on sharehold-ers’ equity, we are targeting a rate upward of 2%.

Concerning internal capital reserves, we will make use of our current business assets to develop new businesses, expanding into growth markets and other business fields to pay larger dividends to shareholders in the future.

3. Stance and Policy on Reducing the Unit of Investment

Max regards attracting more individual investors as a key management issue and is committed to profit sharing in line with the aforementioned payout ratio and ratio of dividends to shareholders’ equity. Furthermore, Max is endeavoring to enhance its home page and prepare straightforward business reports for individual investors.

Reducing the unit of investment in the purchase of shares is an effective means of attracting more individual investors and revi-talizing the stock market by increasing trade opportunities. However, implementing such an investment unit reduction is expensive, and Max will proceed cautiously while taking into consideration future stock market demands, fluctuations in the Company’s share price, and other critical factors.

4. Medium- to Long-Term Management Strategies and Targets

In the medium term, it is crucial that we create a strong Max that is capable of surviving the competition in the 21st century. To this end, we are reforming the Company’s financial base and rebuilding its profitability structure.

Max has subdivided its marketing division into five sales departments, established new business domains for each of these sales departments, and is working to expand operations by using the Company’s unique marketing activities to raise Max’s innovation ratio (an average of the percentage of net sales accounted for by new products during the past three years) to 30%. In addition, the sales department will strive to create Max fans—repeat buyers—by strengthening ties with customers that have purchased our products and quickly gaining an understanding of customer’s product-related needs, including performance and function, which will lead to new products and services. The manufacturing department is working to reduce production costs through the creation of a manufacturing system in line with customer demand and the development of overseas manufacturing bases. Max will also incorporate market and client requests as quickly as possible regarding quality and functionality into its products, and is committed to creating products that customers will adore. Furthermore, we are reforming Max’s profitability structure by subdividing each business segment into smaller units and implementing controls on sales profit through a profit-margin ratio approach.

As for our management targets, Max aims to maintain its high profitability structure and keep consolidated ordinary income as 10% of net sales.

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5. Issues to Be Addressed by the Company (1) Improving Corporate Value

To raise our ROE over the medium term, Max is rebuilding the profit structure of its existing businesses while implementing measures to promote new businesses. In the office equipment division, Max is leveraging its brand power in regard to staplers and renewing its lineup of stationary products to bolster sales prowess. As market needs for print-on-demand services increase, Max aims to position its automatic stapler business for future growth by focusing on automatic stapler devices and consumables as well as working to expand paper post-processing applications for use in copying machines and printers.

The industrial equipment department is endeavoring to gain a top market position, particularly in regard to its high-pressure nail-er business, and make a foray into the concrete tools and consumables business. In addition, Max is working to expand its home-environment appliances business, which includes such products as bathroom-use dryer/heater/ventilator units, by making standardized installation ventilation systems in homes and offering products that stay ahead of market needs arising from factors including heightened environmental consciousness and the increasing necessity of ventilation equipment.

In the U.S. and European markets, Max will continue to endeavor to expand sales of pneumatic nailers and rebar tiers—which have established a firm foothold in these markets. Max is striving to expand its Southeast Asian operations by working to bolster display equipment sales and enhance cost competitiveness by expanding overseas production.

Max will offer new user-friendly products to bolster customer confidence in the Max brand, which the Company has cultivated through its staplers and pneumatic nailers. Moreover, the Company will enhance its management by improving cash flow and prof-itability.

(2) Environmental Conservation Measures

Max views the issue of environmental conservation as an important task to be addressed. The Company’s initiatives in this direc-tion include its in-house formadirec-tion of the “EMS Committee,” which is devising measures to minimize by-products of corporate activities that pose a burden on the environment. This committee is examining the Company’s activities at every stage, from prod-uct development to manufacturing and waste disposal, to identify ways to reduce waste. On the administrative front, the committee oversees the use of environmentally friendly office supplies.

In addition, Max’s two factories in Gunma Prefecture have acquired ISO 14001 certification.

6. Corporate Governance Policy

Max has adopted an audit system of corporate governance. To respond quickly and appropriately to the rapidly changing operating environment, Max is restructuring its Board of Directors. The Company has appointed several external auditors to the Board of Auditors, which aptly oversees and manages Max Group operations.

Regarding the restructuring of the Board of Directors, Max introduced a Corporate Officer System, delegated decision-making concerning management policies and strategies as well as the oversight of business operations to the Board of Directors, and worked to attain an appropriate number of board members to bring about more substantial and lively debate as well as to ensure a swift and precise decision-making process.

Under the Corporate Officer System, individuals who have been vested with authority by the representative director execute business operations in accordance with management policies and strategies decided by the Board of Directors. The Corporate Officer System helps to expedite the execution of duties and clearly delineate responsibilities.

Through the resolution of these various challenges, we are working continuously to manage this Company in a way that will be valued and deemed trustworthy by our shareholders.

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2. Operating Results and Consolidated Financial Position

1. Consolidated Results for Six-Month Period Ended September 30 (April 1, 2003 to September 30, 2003) (1) Operating Results

As for the Japanese economy during the first six months ended September 30, 2003, conditions continued to be unclear due to the war in Iraq and the spread of SARS centered in Southeast Asia; however, despite some variation between industries, signs pointed to a rebound in capital spending and a budding recovery in certain areas of consumer spending was also evident.

Under these conditions, to develop Max into a company that can grow together with its customers, we formulated and imple-mented specific reforms of the profit structure, allocated management resources to create new business growth, and advanced the reform of employee consciousness founded on every employee working in union with the entire Company to support business growth.

Net sales during the period under review increased 8.3% compared to the same period in the prior fiscal year, to ¥23,984 million, and ordinary income increased 3.5%, to ¥1,820 million.

Furthermore, with the authorization to return certain employee pension fund assets to the government, special gains from the cancellation of insurance totaled ¥1,302 million, and, as a result, net income increased 93.3%, to ¥1,902 million.

Profit/Loss Results (Millions of yen, %)

Six months ended % of Six months ended % of Increase Change year

September 30, 2003 net sales September 30, 2002 net sales (decrease) on year

Net sales ¥23,984 100.0% ¥22,140 100.0% ¥1,844 8.3%

Operating income 1,771 7.4 1,751 7.9 20 1.1

Ordinary income 1,820 7.6 1,758 7.9 61 3.5

Net income 1,902 7.9 984 4.4 917 93.3

Sales, by Segment (Millions of yen, %)

Segment Region Six months ended % of Six months ended % of Increase Change year September 30, 2003 net sales September 30, 2002 net sales (decrease) on year

Office Domestic ¥ 7,705 32.1% ¥ 7,362 33.3% ¥ 343 4.7%

Equipment Foreign 2,294 9.6 2,212 10.0 82 3.7

Total 9,999 41.7 9,574 43.2 425 4.4

Industrial Domestic 11,383 47.5 10,329 46.7 1,054 10.2

Equipment Foreign 2,601 10.8 2,237 10.1 364 16.3

Total 13,984 58.3 12,566 56.8 1,418 11.3

Segment Domestic 19,089 79.6 17,691 79.9 1,398 7.9

Total Foreign 4,895 20.4 4,449 20.1 446 10.0

Total 23,984 100.0 22,140 100.0 1,844 8.3

Net Sales

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Earnings performances by segment in the period under review are as follows:

In the Office Equipment Division, earnings from lettering equipment were down, as companies worked to pare expenses and refrained from buying machines. However, with office equipment, to renew our line of stationery products with a model of our number 10 stapler commemorating the 50th anniversary of its launch, we boosted earnings though the launch of new quick-drying ink pads both for everyday use and for use with personal seals.

Overseas, expanded sales of Letter Twin, a product for printing on electric wire tube, in China and Taiwan boosted earnings in this division.

We also boosted earnings from auto staplers by making proposals to copier manufacturers for new digitalized and networked copier models, and we increased overall production of auto stapler, including an increase of production in China.

As a result, earnings in this division overall increased 4.4% over the first half of the prior fiscal year.

As for the Industrial Equipment Division, earnings from nailers grew in Japan as a result of the rise in new housing starts, and activities to expand marketing through cooperation with major retail outlets based on customer data led to expanded sales of high-pressure nailers, compressors, screw nailers, and other equipment as well as consumables. In the environmental-related equipment business, the implementation of revisions to the Building Standard Law made mechanical ventilation systems mandatory, and sales of 24-hour ventilation systems, particularly for residential housing and rental apartments, grew sharply, and earnings improved.

Overseas, the newly launched rebar tying equipment for tying thick rebar spread in popularity, driving up earnings. As a result, earnings for the entire division climbed 11.3%.

(2) Consolidated Financial Position

Consolidated Cash Flows (Millions of yen)

Six months ended Six months ended Increase Year ended September 30, 2003 September 30, 2002 (decrease) March 31, 2002 Balance of cash and cash equivalents at start of term ¥4,623 ¥5,922 ¥(1,298) ¥5,922

Cash flows from operating activities 3,436 1,181 2,255 2,518

Cash flows from investing activities (285) (823) 538 (722)

Cash flows from financing activities (2,386) (1,886) (500) (3,073)

Effect of exchange rate fluctuations on cash

and cash equivalents (4) (22) 18 (21)

Decrease in cash and cash equivalents 760 (1,551) 2,311 1,298

Balance of cash and cash equivalents

at end of September 30, 2002 5,383 4,371 1,012 4,623

1Cash flows from operating activities

Net cash provided by operating activities during the interim period ended September 30, 2003, rose ¥2,255 million over the first half of the previous fiscal year, to ¥3,436 million primarily due to an increase in net sales boosting income before income taxes to ¥325 million (not including special gains from the cancellation of insurance of ¥1,302 million), a reduction to payments of corpo-rate income taxes paid of ¥1,051, and other factors.

2Cash flows from investing activities

Net cash used in investing activities amounted to ¥285 million. Despite an inflow of ¥935 million from acquisitions and the redemption or disposal of marketable and investment securities, which was ¥538 million higher than the first half of the previous fiscal year, outflows from the acquisition of tangible fixed assets and other factors totaled ¥1,076 million.

3Cash flows from financing activities

Cash flows used in financing activities during the interim period totaled ¥2,386 million, down ¥500 million from the first half of the previous fiscal year, which resulted from ¥559 million in expenditures to buy back Max shares.

Consequently, consolidated cash and cash equivalents at September 30, 2003, rose ¥760 million from ¥4,623 million, to ¥5,383 million.

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Max Group Cash Flow Indices and Trends (%) Six months ended Year ended Six months ended Year ended September 30, 2003 March 31, 2003 September 30, 2002 March 31, 2002

Equity ratio (%) 80.1% 78.9% 77.6% 75.8%

Market value based equity ratio (%) 86.1 66.6 58.9 76.5

Number of years of amortization 0.4 1.2 1.4 1.0

Interest coverage ratio 187.5 63.4 56.3 83.0

Notes: 1. All of the figures in the aforementioned indices were calculated on a consolidated basis. 2. The aforementioned indices were calculated as follows:

• Equity ratio: equity/total assets

• Market value based equity ratio: total market capitalization/total assets • Number of years of amortization: interest-bearing debt/operating cash flow • Interest coverage ratio: operating cash flow/interest payment

3. Total market capitalization was calculated by multiplying the closing stock price at the end of the term by the total number of outstanding shares at the end of the term (excluding treasury shares). The cash flow from operating activities in the consolidated cash flow statement was used as operating cash flow in the calculations above. Interest-bearing debt refers to the portion of debt posted in the consolidated balance sheets upon which interest is paid. The amount from the paid interest column in the consolidated statements of cash flows was used as interest payment in the calculations above.

2. Forecast for Fiscal 2003

(1) Forecasts of operating results and net sales by segment from April 1, 2003 to March 31, 2004 (consolidated)

Despite indications for a pickup in capital spending and improvements in corporate earnings gradually boosting the bottomed out economy, deflation is expected persist and the yen is forecast to appreciate at a faster pace. These and other factors are expected to contribute to an uncertain business environment.

To offset these conditions, Max will strengthen its business competitiveness through establishing and reinforcing core technolo-gies as well as accelerating the cultivation of new businesses.

In the Office Equipment Division, we will seek to expand sales by renewing our existing line of products and expanding in-store displays through business tie-ups with the top vendors in each region.

In the Industrial Equipment Division, we will work to take advantage of the rising trend in domestic housing starts by focusing our efforts on expanding marketing through cooperation with influential retail outlets as well as entering the market for concrete tools by launching new products and expanding our market for rebar tying equipment in Europe and North America. With regard to environmental-related equipment business, demand for 24-hour ventilation systems is projected to rise now that the revised Building Standard Law has taken effect, and Max will respond by launching new products and strengthening efforts to offer pro-posals to boost sales.

For fiscal 2003, we forecast net sales of ¥48,800 million, operating income of ¥3,760 million, ordinary income of ¥3,960 million, and net income of ¥3,120 million.

(Fiscal 2003 Forecast) (Millions of yen, %)

FY2003 Percentage of

FY2002 Percentage of Increase Change year

(Est.) net sales net sales (decrease) on year

Net sales ¥48,800 100.0% ¥45,898 100.0% ¥2,902 6.3%

operating income 3,760 7.7 3,681 8.0 79 2.1

Ordinary income 3,960 8.1 3,822 8.3 138 3.6

Net income 3,120 6.4 1,328 2.9 1,792 234.9

(2) Prospects for a Distribution of Profits

MAX CO., LTD., intends to make a dividend payment in accordance with the Company’s aforementioned policy concerning the distribution of profits. Taking into account the Company’s earnings forecasts, we are targeting an annual dividend payment of ¥22 per share.

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Consolidated Balance Sheets

(Millions of yen, %)

Six months ended Six months ended Year ended Change from September 30, 2003 September 30, 2002 March 31, 2003 FY02 year-end

Increase (decrease)

Assets

Current assets ¥26,069 38.7% ¥27,525 39.3% ¥26,206 38.2% ¥ (136)

Cash and cash deposits 5,383 4,382 4,623 760

Notes and accounts receivable 11,786 11,250 11,724 61

Marketable securities 3,062 5,440 3,516 (454)

Inventories—trade 4,478 5,176 4,881 (403)

Other 1,369 1,295 1,480 (111)

Allowance for doubtful accounts (10) (19) (20) 10

Fixed assets 41,332 61.3 42,579 60.7 42,339 61.8 (1,007)

Tangible fixed assets 18,241 18,806 18,228 12

Buildings and structures 6,274 6,611 6,347 (72)

Machinery, equipment and vehicles 2,827 3,104 2,978 (150)

Land 6,949 6,949 6,949 —

Construction in progress 495 541 369 125

Other 1,694 1,599 1,584 109

Intangible assets 221 138 175 45

Investments and other assets 22,869 23,634 23,934 (1,065)

Investment securities 18,162 17,782 17,710 452

Long-term loans 1,348 1,211 1,191 156

Other 3,364 4,661 5,057 (1,692)

Allowance for doubtful accounts (7) (21) (23) 160

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Consolidated Balance Sheets

(Millions of yen, %)

Six months ended Six months ended Year ended Change from September 30, 2003 September 30, 2002 March 31, 2003 FY02 year-end

Increase (decrease) Liabilities

Current liabilities ¥ 9,965 14.8% ¥10,932 15.6% ¥ 9,874 14.4% ¥ 91

Notes and accounts payable—trade 3,565 4,588 3,364 201

Short-term loans 2,055 2,508 2,105 (50)

Accounts payable—other 1,757 1,727 2,038 (281)

Income taxes payable 795 628 465 329

Consumption taxes payable 145 126 116 29

Accrued bonuses 1,006 758 1,131 (125)

Other 640 594 651 (11)

Long-term liabilities 3,356 5.0 4,729 6.7 4,526 6.6 (1,170)

Long-term loans 150 20 100 50

Reserve for retirement benefits 2,666 4,204 3,905 (1,239)

Reserve for retirement benefits

to directors and corporate auditors 271 209 241 30

Consolidated goodwill 117 125 121 (3)

Other 151 169 158 (7)

Total liabilities 13,321 19.8 15,661 22.3 14,400 21.0 (1,078)

Minority interests 79 0.1 70 0.1 74 0.1 5

Shareholders’ equity

Common stock 12,367 18.3 12,367 17.6 12,367 18.0 —

Capital surplus 10,518 15.6 10,517 15.0 10,517 15.3 0

Retained earnings 35,811 53.1 34,774 49.6 35,119 51.2 692

Discrepancies on revaluation of land (2,152) (3.2) (2,152) (3.1) (2,152) (3.1) —

Net unrealized loss on securities 340 0.5 (328) (0.5) (118) (0.2) 459

Foreign currency exchange adjustment (128) (0.2) (133) (0.2) (128) (0.2) 0

Treasury stock (2,757) (4.1) (673) (1.0) (1,534) (2.2) (1,222)

Total shareholders’ equity 54,000 80.1 54,372 77.6 54,071 78.9 (70)

Total liabilities, minority interests

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Consolidated Statements of Income

(Millions of yen, %) Six months period Six months period

Year ended

ended ended Increase (decrease)

March 31, 2003 September 30, 2003 September 30, 2002

Net sales ¥23,984 100.0% ¥22,140 100.0% ¥1,844 8.3% ¥45,898 100.0%

Cost of sales 14,498 60.4 13,578 61.3 920 27,983 61.0

Gross profit 9,486 39.6 8,561 38.7 924 17,914 39.0

Selling, general and administrative expenses 7,714 32.2 6,810 30.8 904 14,233 31.0

Operating income 1,771 7.4 1,751 7.9 20 1.1 3,681 8.0

Non-operating income 233 1.0 264 1.2 (31) 524 1.1

Interest income 91 127 (36) 232

Dividend income 18 19 (1) 34

Rental income 42 41 0 88

Amortization of consolidation goodwill 3 3 — 7

Other non-operating income 77 71 5 160

Non-operating expenses 184 0.8 257 1.2 (72) 382 0.8

Interest expenses 18 21 (2) 41

Taxes and duties 13 13 0 25

Foreign exchange losses 122 184 (62) 225

Other non-operating expenses 30 38 (7) 91

Ordinary income 1,820 7.6 1,758 7.9 61 3.5 3,822 8.3

Special income 1,480 6.2 0 0.0 1,479 0 0.0

Gains from sales of fixed assets 0 (0) 0

Reversal of allowance for doubtful accounts 6 — 6 —

Gains from sales of investment securities 170 — 170 —

Gains from the return of the portion 1,302 — 1,302 —

of the National Welfare Pension Fund fomerly managed by the Company

Special losses 28 0.1 114 0.5 (86) 1,637 3.6

Losses on sales of fixed assets 46 (46) 58

Losses on retirement of fix assets 28 67 (39) 209

Losses on write-down of investment securities — — 1,369

Net income before income taxes 3,272 13.6 1,644 7.4 1,627 99.0 2,185 4.8

Corporate, inhabitant, and enterprise taxes 862 591 271 1,399

Deferred income taxes 501 62 439 (552)

Minority interests 5 6 (1) 10

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Consolidated Statements of Retained Earnings

(Millions of yen) Six months period Six months period

Year ended

ended ended Increase (decrease)

March 31, 2003 September 30, 2003 September 30, 2002

(Capital surplus)

Balance at the beginning of the period ¥10,517 ¥10,517 ¥ — ¥10,517

Additional paid-in capital at beginning

of the period 10,517 10,517

Increase in capital surplus 0 — 0 —

Net gains from sales of treasury stock 0 — 0 —

Capital surplus at the end of period ¥10,518 ¥10,517 ¥ 0 ¥10,517

(Retained earnings)

Retained earnings at the beginning ¥35,119 ¥35,033 ¥ 85 ¥35,033

of the period

Increase in retained earnings 1,902 984 917 1,328

Net income 1,902 984 917 1,328

Decrease in retained earnings 1,210 1,243 (33) 1,243

Cash dividends 1,163 1,204 (41) 1,204

Bonuses to directors and corporate auditors 47 39 8 39

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Consolidated Statements of Cash Flows

(Millions of yen) Six months Six months

Increase Year ended period ended period ended

(decrease) March 31, 2003 September 30, 2003 September 30, 2002

I. Cash flows from operating activities

Net income before taxes ¥3,272 ¥1,644 ¥1,627 ¥2,185

Depreciation expenses 931 952 (21) 2,088

Amortization of consolidation goodwill (3) (3) — (7)

Decrease in allowance for doubtful accounts (26) (0) (26) 1

Decrease in accrued bonuses (125) (278) 152 94

Decrease in reserve for retirement benefits for employees, 142 (125) 268 (391) directors and corporate auditors

Gains from the return of the portion of the National Welfare Pension (1,302) — (1,302) — Fund formerly managed by the Company

Interest and dividend income (109) (147) 37 (267)

Interest expenses 18 21 (2) 41

Effect of exchange rate changes 6 (2) 9 (0)

Losses from the disposal of fixed assets 28 67 (39) 209

Gains from the sales of fixed assets (0) 0 (0)

Losses from the sales of fixed assets 46 (46) 58

Gains from sales of investment securities (170) — (170) —

Loss on write-down of investment securities — — 1,369

(Increase) decrease in notes and accounts receivable—trade (62) 329 (391) (137)

Decrease (increase) in inventory assets 399 574 (175) 872

Increase (decrease) in notes and accounts payable—trade 204 (876) 1,080 (2,110)

Increase (decrease) in accrued consumption tax payable 29 37 (7) 27

Accrued bonuses to directors and auditors (47) (39) (8) (39)

Increase in other assets 251 (56) 308 (83)

Increase (decrease) in other liabilities (295) (225) (70) 208

Subtotal 3,139 1,917 1,222 4,119

Interest and dividends received 108 129 (21) 280

Interest expenses paid (18) (20) 2 (39)

Corporate income taxes paid 207 (844) 1,051 (1,841)

Net cash provided by operating activities 3,436 1,181 2,255 2,518

II. Cash flows from investing activities

Expenditure for the acquisition of marketable and investment securities (2,481) (1,405) (1,076) (3,834) Proceeds from the redemption or disposal of marketable 3,436 1,424 2,011 4,830

and investment securities

Expenditure for the acquisition of tangible fixed assets (1,076) (856) (220) (1,654)

Proceeds from the sales of tangible fixed assets 8 63 (55) 27

Expenditure for a loan (335) (148) (187) (287)

Proceeds from the repayment of a loan 164 94 69 181

Expenditure for time deposits (0) 0 (0)

Proceeds from the repayment of time deposits 3 (3) 15

Net cash used in investing activities (285) (823) 538 (722)

III. Cash flows from financing activities

Expenditure for the repayment of loans (0) (17) 17 (342)

Expenditure for the acquisition of treasury stock (1,224) (665) (559) (1,526)

Proceeds from the sale of treasury stock 1 — 1 —

Amount paid for dividend payment (1,163) (1,203) 40 (1,204)

Net cash used in financing activities (2,386) (1,886) (500) (3,073)

IV. Effect of exchange rate changes on cash and cash equivalents (4) (22) 18 (21)

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Segment Data

1. Consolidated Business Operations, by Segment

(Millions of yen) Six-month period ended September 30, 2003

Office Industrial

Total Elimination/ Consolidated

Equipment Equipment Corporate

I. Net sales and operating income/loss

(1) Net sales to outside customers ¥9,999 ¥13,984 ¥23,984 ¥— ¥23,984

(2) Intersegment sales

Total 9,999 13,984 23,984 23,984

Operating expenses 8,152 14,060 22,213 22,213

Operating income ¥1,846 ¥ (75) ¥ 1,771 ¥— ¥ 1,771

(Millions of yen) Six-month period ended September 30, 2002

Office Industrial

Total Elimination/ Consolidated

Equipment Equipment Corporate

I. Net sales and operating income

(1) Net sales to outside customers ¥9,574 ¥12,566 ¥22,140 ¥— ¥22,140

(2) Intersegment sales — — — — —

Total 9,574 12,566 22,140 — 22,140

Operating expenses 7,959 12,429 20,388 — 20,388

Operating income ¥1,614 ¥ 136 ¥ 1,751 ¥— ¥ 1,751

(Millions of yen) Year ended March 31, 2003

Office Industrial

Total Elimination/ Consolidated

Equipment Equipment Corporate

I. Net sales and operating income

(1) Net sales to outside customers ¥19,952 ¥25,946 ¥45,898 ¥— ¥45,898

(2) Intersegment sales — — — — —

Total 19,952 25,946 45,898 — 45,898

Operating expenses 16,506 25,711 42,217 — 42,217

Operating income ¥ 3,445 ¥ 235 ¥ 3,681 ¥— ¥ 3,681

(Note) Method of Business Segment Classification 1. Business segments are classified by product line. 2. The leading products of each business segment

Business Category Main Products

Office Equipment Auto staplers, staplers, staples, numbering machines, paper punches, time recorders, check writers, vinyl cutting machines, printing machines, cutter/printers, tube marking machines, brush handwriting software, brush hand-writing plotters, drafting machines, parallel rulers, plotters, etc.

Industrial Equipment Pneumatic nailers, hand tackers, system nailers, collated screw drivers, collated screw nailers, various staples, nails, screws, concrete reinforcing bar tying machines, air compressors, vegetable bunching machines, bag seal-ing machines, dry/heater/ventilators for bathrooms, 24-hour residential ventilation systems with air to air heat exchangers, etc.

2. Segment Data by Location

For the current and previous consolidated fiscal years, Japan accounts for more than 90% of the total net sales of all segments and total assets of all segments, and therefore this information has not been included.

(14)

3. Consolidated Overseas Net Sales

(Millions of yen) Six-month period ended September 30, 2003

The Americas Asia Other Regions Total

I. Overseas net sales ¥1,812 ¥1,973 ¥1,109 ¥ 4,895

II. Consolidated net sales 23,984

III. Overseas net sales as a percentage 7.6% 8.2% 4.6% 20.4%

of consolidated net sales

(Millions of yen) Six-month period ended September 30, 2002

The Americas Asia Other Regions Total

I. Overseas net sales ¥1,639 ¥1,859 ¥949 ¥ 4,449

II. Consolidated net sales 22,140

III. Overseas net sales as a percentage 7.4% 8.4% 4.3% 20.1%

of consolidated net sales

(Millions of yen) Year ended March 31, 2003

The Americas Asia Other Regions Total

I. Overseas net sales ¥3,254 ¥3,786 ¥2,022 ¥ 9,063

II. Consolidated net sales 45,898

III. Overseas net sales as a percentage 7.1% 8.2% 4.4% 19.7%

of consolidated net sales

Notes: 1. Overseas net sales consists of sales by MAX CO., LTD., and its consolidated subsidiaries in countries or regions outside of Japan. 2. The category for country or region depends on the geographical proximity.

3. The main categories can be defined as follows: The Americas: United States and Canada Asia: Malaysia and Singapore

Figure

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References

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