Notes to Consolidated Financial Results

• I. Developments in the Fiscal Year Ending March 31, 2002
• II. Market Conditions and Results by Business Segment
• III. Non-consolidated Financial Performance and Dividend
• IV. Announcement of Business Structure Reorganization

I. Developments in the Fiscal Year Ending March 31, 2002

1. Yamatake Europe N.V. was established at Brussels, Belgium in April 2001 with the aim to expand Yamatake's natural gas business throughout Europe.
2. A capital investment was made in ESD Co., Ltd. in September 2001 as a strategic move into the agricultural market, where demands anticipated in the advanced management of production and logistics can be met with Yamatake's sensing and control technologies.
3. Yamatake Expert Services Co., Ltd. was launched in January 2002 as a placement company that assigns Yamatake retirees to temporary positions where their expertise is further utilized.

1. Yamatake entered the agricultural market with the launch of its Application Service Provider business. Based on a unique data management system developed by Yamatake, it allows the grower to easily track and manage data of the whole process-from cultivation, logistics through to sales of fruit and vegetables. This service aims to improve food safety and traceability, a growing concern among Japanese consumers.
2. Yamatake started its New Energy business with its offering of a remote monitoring system for decentralized electric power facilities installed at various sites, such as supermarkets and factories.
3. Yamatake's energy measurement system installed at its Fujisawa factory became the model for a consultation business of providing energy-saving solutions to customer's facilities.

1. A new micro-device technology was developed for application to photoacoustic CO2 sensors used in environmental monitoring.
2. Development of a binocular CMOS range image sensor realizes real-time, three-dimensional measurements of very small objects.

The Yamatake Group Environmental Charter was formulated as the environmental guidelines for governing the entire corporate group.

Conditions in Japan's building industry were severe, with decreased capital investments in both the public- and private-sector markets, the latter caused by the slump in the IT sector.

In the new buildings market, a number of large-scale buildings in the Tokyo metropolitan area were completed. However, as an interval year for new constructions, there were not many new buildings constructed during this period. As a result, sales fell sharply compared with the previous fiscal year.

In the buildings renewal market, sales increased thanks to brisk orders for renovations and energy-saving measures of office buildings, hotels and hospitals, as well as sales of energy-saving systems.

In overseas markets, sales also grew, driven by the construction of Japanese-owned factories in China, as well as large-scale projects in Southeast Asia.

Sales were 81,521 million yen, down 7.7% from the previous year. Operating income was 7,557 million yen, a 31.3% decline from last year.

With the worldwide economic slump and weak demand in the IT sector, conditions in the industrial markets also worsened.

In the oil refinery market, orders and sales increased, driven by the demand to meet environmental regulations and the start of large-scale remodeling and renewal projects.

In the energy market, orders and sales grew mainly in LNG-related projects of small to mid-sized gas companies.

In the pharmaceutical and food & beverage markets, sales increased thanks to greater investment in safety-enhancing equipment, which led to expanded sales of manufacturing execution systems (MES).

In the chemical market, orders and sales increased due to the enlarging of facilities.

In the electric and electronic markets, orders fell due to weakening demand in the IT sector.

In the government sector market, orders decreased in public works, such as water filtration plants, which resulted in lower sales.

In overseas markets, sales of control valves and factory automation equipment increased, however, the slowdown of plant projects in Southeast Asia led to lower sales compared to the previous year.

Sales increased 6.3% to 52,743 million yen compared to the previous fiscal year. Operating loss was 245 million yen, a reduction of 571 million yen from a loss of 816 million yen posted last year.

Conditions for control products remained increasingly difficult, impacted by depressed investment in IT-related markets, mainly semiconductors and electric/electronic.

In the industrial sector market, sales promotion of temperature controllers was rewarded with good results. However, with lower capital investment mainly in semiconductors, electric/electronic and machine tool markets, orders and sales of key products, such as sensors and instrumentation & control equipment, fell sharply compared to last year.

In gas flow control components incorporating Yamatake's unique microflow sensor technology, sales increased although volume remained small.

In the residential market, sales increased thanks to brisk orders for air cleaners and built-in floor heating.

In overseas markets, both orders and sales in the southern region of China grew steadily. However, with decreased investment in IT-related equipment in Europe, North America, and Southeast Asia, overall sales plunged.

Sales were 26,427 million yen, falling 26.0% from the previous year. An operating loss of 1,633 million yen was recorded, compared to an operating income of 1.7 billion yen posted last year.

III. Non-consolidated Financial Performance and Dividend

IV. Announcement of Business Structure Reorganization

With the lingering IT recession and worldwide economic slump showing little or no signs of an early recovery, it became necessary for the Yamatake Group to adopt new management measures for further business expansion. The Group announced the following structural reforms to take effect on April 1, 2003:

• Merge Yamatake Corporation, Yamatake Building Systems, Co., Ltd., and Yamatake Industrial Systems, Co. Ltd.
• Adopt the In-house Company System for Group management

Through these structural changes, the Group aims to strengthen the profit base of its 3 Core businesses (BA, IA, CP) as well as develop and expand its Strategic businesses (International, New) into our fourth and fifth core businesses.

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