EXHIBIT 1

[FINANCIAL STATEMENTS]

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Consolidated balance sheets (Unaudited)

				Yen (Millions)
				September 30,			September 30,			March 31,
ASSETS				2001			2002			2002
Current assets:
	Cash and cash equivalents				¥126,709			¥147,822			¥125,761
	Trade receivables:
		Notes			8,148			8,178			8,219
		Accounts			123,577			132,918			138,378
		Allowance for doubtful receivables			(2,721	)		(3,300	)		(3,770	)
			Net trade receivables		129,004			137,796			142,827
	Inventories				117,409			83,714			91,149
	Income tax receivables				1,453			1,889			8,289
	Prepaid expenses and other current assets				30,201			35,079			31,180
			Total current assets		404,776			406,300			399,206
Investments and advances (Notes 2 and 5)					22,173			19,309			24,265
Property, plant and equipment, at cost:
	Land				22,569			23,611			23,739
	Buildings				180,519			180,385			183,450
	Machinery and equipment				497,858			496,859			507,589
	Construction in progress				31,898			8,989			13,301
					732,844			709,844			728,079
	Less accumulated depreciation				455,367			465,804			462,489
			Net property, plant and equipment		277,477			244,040			265,590
	Goodwill				10,830			10,712			11,500
	Intangible assets				7,772			6,796			7,265
	Deferred income taxes				20,483			36,021			37,021
	Other assets				5,424			4,496			5,063
					¥748,935			¥727,674			¥749,910

See accompanying notes to consolidated financial statements.

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										Yen (Millions)
				September 30,			September 30,			March 31,
LIABILITIES AND STOCKHOLDERS' EQUITY				2001			2002			2002
Current liabilities:
	Short-term debt				¥2,912			¥1,463			¥1,655
	Current installments of long-term debt				742			371			657
	Trade payables:
		Notes			732			663			849
		Accounts			48,851			55,233			51,760
	Accrued salaries and wages				11,838			12,452			11,247
	Other accrued expenses				18,794			13,779			12,510
	Income taxes				2,730			2,484			2,546
	Other current liabilities				20,267			13,238			29,117
		Total current liabilities			106,866			99,683			110,341
Long-term debt, excluding current installments					612			255			459
Retirement and severance benefits					33,294			58,318			49,992
Deferred income taxes					9			398			598
		Total liabilities			140,781			158,654			161,390
Minority interests					4,220			4,425			4,593
Stockholders’ equity:
	Common stock
		Authorized 480,000,000 shares;
		Issued 133,189,659 shares at September 30, 2001 and 2002, and March 31, 2002			32,641			32,641			32,641
	Additional paid-in capital				63,051			63,051			63,051
	Legal reserve (Note 3)				15,710			15,955			15,683
	Retained earnings (Note 3)				551,705			521,859			520,143
	Accumulated other comprehensive income (loss) (Note 4)				(55,591	)		(64,100	)		(43,999	)
	Treasury stock at cost;
			328,455 shares at September 30, 2001, 555,567 shares at September 30, 2002 and 330,083 shares at March 31, 2002		(3,582	)		(4,811	)		(3,592	)
		Total stockholders’ equity			603,934			564,595			583,927
Commitments and contingent liabilities (Note 6)
					¥748,935			¥727,674			¥749,910

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Consolidated statements of income (Unaudited)

								Yen (Millions)
		Six months			Six months
		ended September			ended September			Year ended
		30, 2001			30, 2002			March 31, 2002
Net sales			¥270,786			¥296,380			¥570,511
Cost of sales			213,309			223,738			464,620
	Gross profit		57,477			72,642			105,891
Selling, general and administrative expenses			60,288			59,196			123,741
Restructuring cost			—			3,427			25,872
	Operating income (loss)		(2,811	)		10,019			(43,722	)
Other income (deductions) :
Interest and dividend income			1,288			708			2,033
Interest expense			(672	)		(198	)		(1,264	)
Foreign exchange gain (loss)			(514	)		(1,699	)		618
Other — net			(373	)		(1,194	)		(1,362	)
			(271	)		(2,383	)		25
	Income (loss) before income taxes		(3,082	)		7,636			(43,697	)
Income taxes:
Current			1,786			223			(3,197	)
Deferred			(5,363	)		2,533			(13,797	)
			(3,577	)		2,756			(16,994	)
	Income (loss) before minority interests		495			4,880			(26,703	)
Minority interests			1,337			(235	)		932
	Net income (loss)		¥1,832			¥4,645			¥(25,771	)

Amounts per share:

	Yen (except number of common shares outstanding)
Basic and diluted net income (loss) per share		¥13.78	¥34.98	¥(193.91	)
Weighted average and diluted common shares outstanding in thousands		132,940	132,802	132,900
Cash dividends paid (Note 3)		¥30.00	¥20.00	¥60.00

See accompanying notes to consolidated financial statements.

Note: TDK adopted the Emerging Issues Task Force Issue 01-9 (“EITF 01-9”), “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” from the fiscal year beginning April 1, 2002 and the prior year’s consolidated financial statements have been restated for the change, accordingly.

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Consolidated statements of stockholders’ equity (Unaudited)

								Yen (Millions)
		Six months ended			Six months ended
		September 30,			September 30,			Year ended March
		2001			2002			31, 2002
Common stock:
	Balance at beginning of period		¥32,641			¥32,641			¥32,641
	Balance at end of period		32,641			32,641			32,641
Additional paid-in capital:
	Balance at beginning of period		63,051			63,051			63,051
	Balance at end of period		63,051			63,051			63,051
Legal reserve (Note 3):
	Balance at beginning of period		13,409			15,683			13,409
	Transferred from retained earnings		2,301			272			2,274
	Balance at end of period		15,710			15,955			15,683
Retained earnings (Note 3):
	Balance at beginning of period		556,165			520,143			556,165
	Net income (loss)		1,832			4,645			(25,771	)
	Cash dividends		(3,991	)		(2,657	)		(7,977	)
	Transferred to legal reserve		(2,301	)		(272	)		(2,274	)
	Balance at end of period		551,705			521,859			520,143
Accumulated other comprehensive income (loss) (Note 4):
	Balance at beginning of period		(24,851	)		(43,999	)		(24,851	)
	Other comprehensive income (loss) for the period, net of tax		(30,740	)		(20,101	)		(19,148	)
	Balance at end of period		(55,591	)		(64,100	)		(43,999	)
Treasury stock:
	Balance at beginning of period		(2,666	)		(3,592	)		(2,666	)
	Acquisition of treasury stock		(916	)		(1,219	)		(926	)
	Balance at end of period		(3,582	)		(4,811	)		(3,592	)
Total stockholders’ equity			¥603,934			¥564,595			¥583,927
Disclosure of comprehensive income (loss):
	Net income (loss) for the period		¥1,832			¥4,645			¥(25,771	)
	Other comprehensive income (loss) for the period, net of tax (Note 4)		(30,740	)		(20,101	)		(19,148	)
	Total comprehensive income (loss) for the period		¥(28,908	)		¥(15,456	)		¥(44,919	)

See accompanying notes to consolidated financial statements.

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Consolidated statements of cash flows (Unaudited)

										Yen (Millions)
				Six months ended			Six months ended
				September 30,			September 30,			Year ended March
				2001			2002			31, 2002
Cash flows from operating activities:
	Net income (loss)				¥1,832			¥4,645			¥(25,771	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			29,062			28,503			61,920
		Loss on disposal of property and equipment			226			2,441			6,436
		Deferred income taxes			(5,363	)		2,533			(13,797	)
		Loss (gain) on securities			(117	)		949			207
		Changes in assets and liabilities:
			Decrease in trade receivables		24,980			306			18,517
			Decrease (increase) in inventories		(3,218	)		4,616			28,776
			Increase (decrease) in trade payables		(13,874	)		5,451			(14,806	)
			Increase (decrease) in income taxes		(16,838	)		62			(17,181	)
		Other — net			5,752			(5,436	)		(2,797	)
			Net cash provided by operating activities		22,442			44,070			41,504
Cash flows from investing activities:
	Capital expenditures				(38,094	)		(14,472	)		(58,777	)
	Proceeds from sale of investments				326			11			323
	Payment for purchase of investments				(1,859	)		(30	)		(3,116	)
	Other — net				2,568			1,146			3,667
			Net cash used in investing activities		(37,059	)		(13,345	)		(57,903	)
Cash flows from financing activities:
	Proceeds from long-term debt				46			35			46
	Repayment of long-term debt				(459	)		(439	)		(777	)
	Decrease in short-term debt				(1,973	)		(60	)		(3,568	)
	Payment to acquire treasury stock				(916	)		(1,219	)		(926	)
	Dividends paid				(3,991	)		(2,657	)		(7,977	)
			Net cash used in financing activities		(7,293	)		(4,340	)		(13,202	)
	Effect of exchange rate changes on cash and cash equivalents				(2,298	)		(4,324	)		4,445
	Net increase (decrease) in cash and cash equivalents				(24,208	)		22,061			(25,156	)
	Cash and cash equivalents at beginning of period				150,917			125,761			150,917
	Cash and cash equivalents at end of period				¥126,709			¥147,822			¥125,761

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Summary of Significant Accounting Policies

(a) Financial Statements

     The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of TDK and all its subsidiaries.

     The segment information is presented in accordance with the accounting principles generally accepted in Japan. The segment information required to be disclosed in financial statements under accounting principles generally accepted in the United States of America is not presented in the accompanying consolidated financial statements.

     In the opinion of management, all adjustments necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of the operating results which may be expected for any other interim period or for the year. For further information, refer to the March 31, 2002 consolidated financial statements and notes thereto included in TDK Corporation and Subsidiaries Annual Report 2002. Consolidated financial statements ended March 31, 2002 are audited while consolidated financial statements ended September 30, 2001 and 2002 are unaudited.

(b) Consolidation Policy

     The consolidated financial statements include the accounts of TDK and its subsidiaries. The investments in affiliates in which TDK’s ownership is twenty percent (20%) to fifty percent (50%) are accounted for by the equity method.

     All significant intercompany accounts and transactions have been eliminated in consolidation.

(c) Cash Equivalents

     Cash equivalents include all highly liquid debt instruments purchased with an original maturity of three months or less.

(d) Marketable Securities

     TDK classifies its debt and equity securities into one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which TDK has the ability and intent to hold the security until maturity. All securities not included in trading or held-to-maturity are classified as available-for-sale.

     Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income until realized.

(e) Inventories

     Inventories are stated at the lower of cost or market. Cost is determined principally by the average method.

(f) Depreciation

     Depreciation of property, plant and equipment is principally computed by the declining-balance method for assets located in Japan and for certain foreign subsidiaries and by the straight-line method for assets of other foreign subsidiaries based on the following estimated useful lives:

Buildings	3 to 60 years
Machinery and equipment	2 to 22 years

(g) Income Taxes

     Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

(h) Retirement and Severance Benefits

     TDK accounts for and provides disclosures about its defined benefit pension and retirement plans in accordance with Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions” and with Statement of Financial Accounting

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Standards No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits”.

(i) Advertising Costs

     Advertising costs are expensed as incurred.

(j) Foreign Currency Translation

     The assets and liabilities of TDK’s subsidiaries located outside Japan are translated into Japanese yen at the rates of exchange prevailing at the balance sheet date. Revenue and expense items are translated at the average exchange rate during the year.

(k) Use of Estimates

     Management of TDK has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles in the United States of America. Actual results could differ from those estimates.

(l) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

     TDK’s long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows (undiscounted and without interest charges) expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

(m) Goodwill and Other Intangible Assets

     In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Business Combinations”, and Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”. SFAS 141 requires the use of the purchase method of accounting for business combinations. SFAS 141 also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill and those acquired intangible assets that are required to be included in goodwill. Under SFAS 142 goodwill is no longer amortized, but instead is tested for impairment at least annually. Intangible assets are amortized over their respective estimated useful lives and reviewed for impairment in accordance with Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”. Any recognized intangible asset determined to have an indefinite useful life will not be amortized, but instead is tested for impairment until its life is determined to no longer be indefinite.

     TDK adopted early the provisions of SFAS 142 on April 1, 2001.

(n) Derivative Financial Instruments

     TDK and certain of its subsidiaries use derivative financial instruments, such as currency swaps, currency option contracts and forward foreign exchange contracts, to limit their exposure to fluctuations in foreign exchange rates and interest rates.

     In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (“SFAS 133”), “Accounting for Derivative Instruments and Hedging Activities”. In June 2000, the Financial Accounting Standards Board also issued Statement of Financial Accounting Standards No. 138 (“SFAS 138”), “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133”. Both standards establish accounting and reporting standards for derivative instruments and for hedging activities, and require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. SFAS 133, as amended, and 138 are effective for fiscal years beginning after June 15, 2000. TDK adopted SFAS 133 and 138 as of April 1, 2001. The cumulative effect adjustment upon the adoption of SFAS 133 and 138, net of the related income tax effect, resulted in a decrease to other comprehensive income of approximately ¥90 million. This amount was reclassified from other comprehensive income to earnings during the year ended March 31, 2002. TDK has not elected to apply hedge accounting subsequent to the adoption of SFAS 133 and 138, and changes in the fair value of derivatives are recognized in earnings in the period of the changes.

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(o) Net Income per Share

     Basic net income per share has been computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during each year. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or any other arrangement resulted in the issuance of common stock that participates in distribution of income of TDK.

(p) Revenue Recognition

     TDK recognizes revenue when persuasive evidence of an arrangement including title transfer exists, delivery has occurred, the sales price is fixed or determinable, and collectibility is probable.

(q) Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)

     In May 2000, the Emerging Issues Task Force reached a final consensus on Issue 00-14 (“EITF 00-14”), “Accounting for Certain Sales Incentives”. EITF 00-14 addresses accounting and reporting standards for sales incentives such as coupons or rebates that are provided by vendors or manufacturers and are exercisable by customers at the point of sale.

     In April 2001, the Emerging Issues Task Force also reached a final consensus on a portion of Issue 00-25 (“EITF 00-25”), “Vendor Income Statement Characterization of Consideration to a Purchaser of the Vendor’s Products or Services”. EITF 00-25 addresses the income statement characterization of consideration, other than that directly addressed in EITF 00-14, from a vendor (typically a manufacturer or distributor) to a customer (typically a retailer or wholesaler) in connection with the sale to the customer of the vendor’s products or promotion of sales of the vendor’s products by the customer.

     In November 2001, EITF 00-14 and EITF 00-25 were subsequently codified in and superseded by Issue 01-9 (“EITF 01-9”), “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” on which the Emerging Issues Task Force reached a final consensus. TDK adopted EITF 01-9 on April 1, 2002. The adoption of EITF 01-9 did not have a material effect on TDK’s consolidated financial position or results of operations.

(r) Accounting for the Impairment of Disposal of Long-Lived Assets

     In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets” which supersedes both Statement of Financial Accounting Standards No. 121 (“SFAS 121”), “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and the accounting and reporting provisions of APB Opinion No. 30 (“Opinion 30”), “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 retains the fundamental provisions in SFAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS 121. TDK adopted the provision of SFAS 144 on April 1, 2002. Adoption of SFAS 144 did not have a material effect on TDK’s consolidated financial position or results of operations.

(s) New Accounting Standards Not Yet Adopted

     In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations”. SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived assets, except for certain obligations of lessees. SFAS 143 requires that the fair value of liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and subsequently allocated to expense over the asset’s useful life. TDK is required to adopt the provisions of SFAS 143 on April 1, 2003. Currently, the effect on TDK’s consolidated financial statements of adopting SFAS 143 has not been determined.

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     In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146 (“SFAS 146”), “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. Currently, the effect on TDK’s consolidated financial statements of adopting SFAS 146 has not been determined.

2. Marketable Securities and Investments and Advances

     Marketable securities and investments and advances consist of available-for-sale securities. Information with respect to such securities at September 30, 2001 and 2002, and at March 31, 2002, are as follows:

September 30, 2001

				Gross		Gross
				Unrealized		Unrealized
				Holding		Holding
Yen (Millions):		Cost		Gains		Losses		Fair Value
Investments and advances:
	Equity securities		¥3,695		99		435		3,359
	Debt securities		2,864		32		—		2,896
			¥6,559		131		435		6,255

September 30, 2002

				Gross		Gross
				Unrealized		Unrealized
				Holding		Holding
Yen (Millions):		Cost		Gains		Losses		Fair Value
Investments and advances:
	Equity securities		¥5,766		150		2,622		3,294
	Debt securities		3,287		12		—		3,299
			¥9,053		162		2,622		6,593

March 31, 2002

				Gross		Gross
				Unrealized		Unrealized
				Holding		Holding
Yen (Millions):		Cost		Gains		Losses		Fair Value
Investments and advances:
	Equity securities		¥4,389		596		—		4,985
	Debt securities		3,274		24		—		3,298
			¥7,663		620		—		8,283

3. Legal Reserve and Dividends

     Cash dividends and appropriations to the legal reserve charged to retained earnings during the periods represent dividends paid out during the periods and related appropriations to the legal reserve. The accompanying consolidated financial statements do not include any provision for the dividend proposed by the Board of Directors of ¥25 per share aggregating ¥3,316 million in respect of the six months ended September 30, 2002, or for the related appropriation to the legal reserve.

     Cash dividends per common share are computed based on dividends paid for each period presented.

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4. Other Comprehensive Income (Loss)

     Change in accumulated other comprehensive income (loss) for the six months ended September 30, 2001 and 2002, and the year ended March 31, 2002, are as follows:

								Yen (Millions)
		September 30, 2001			September 30, 2002			March 31, 2002
Foreign currency translation adjustments:
	Balance at beginning of period		¥(23,798	)		¥(7,773	)		¥(23,798	)
	Adjustments for period		(7,457	)		(15,542	)		16,025
	Balance at end of period		(31,255	)		(23,315	)		(7,773	)
Net unrealized gains (losses) on securities:
	Balance at beginning of period		(329	)		379			(329	)
	Adjustments for period		128			(1,959	)		708
	Balance at end of period		(201	)		(1,580	)		379
Minimum pension liability adjustments:
	Balance at beginning of period		(724	)		(36,605	)		(724	)
	Adjustments for period		(23,411	)		(2,600	)		(35,881	)
	Balance at end of period		(24,135	)		(39,205	)		(36,605	)
Total accumulated other comprehensive income (loss):
	Balance at beginning of period		(24,851	)		(43,999	)		(24,851	)
	Adjustments for period		(30,740	)		(20,101	)		(19,148	)
	Balance at end of period		¥(55,591	)		¥(64,100	)		¥(43,999	)

5. Leases

     TDK and its subsidiaries occupy offices and other facilities under various cancellable lease agreements expiring in fiscal 2003 through 2004. Lease deposits made under such agreements, aggregating ¥1,952 million and ¥1,856 million at September 30, 2001 and 2002, respectively, and ¥1,896 million at March 31, 2002, are included in investments and advances on the accompanying consolidated balance sheets.

     The followings are schedules of future minimum rental payments required under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of September 30, 2001 and 2002, and March 31, 2002:

						Yen (Millions)
		September 30, 2001		September 30, 2002		March 31, 2002
Less 1 year			¥3,535		¥4,402		¥4,968
Over 1 year			8,477		8,697		9,990
	Total		¥12,012		¥13,099		¥14,958

6. Contingent Liabilities

     Contingent liabilities for guarantees of loans of TDK’s employees and affiliates at September 30, 2001 and 2002, and March 31, 2002, are as follows:

					Yen (Millions)
	September 30, 2001		September 30, 2002		March 31, 2002
Contingent liabilities for guarantees of loans of TDK’s employees and affiliates		¥8,426		¥7,485		¥8,224

     Several claims and legal actions against TDK and certain subsidiaries are pending. Provisions have been made for the estimated liabilities for certain items. In the opinion of management based upon discussion with counsel, any additional liability will not materially affect the consolidated financial position and results of operations of TDK.

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7. Risk Management Activities and Derivative Financial Instruments

     TDK and its subsidiaries operate internationally which exposes them to the risk of changes in foreign exchange rates and interest rates, and therefore it utilizes derivative financial instruments to reduce these risks. TDK and its subsidiaries do not hold or issue financial instruments for trading purposes. TDK is exposed to credit related losses in the event of nonperformance by the counterparties to those financial instruments, but does not expect any counterparties to fail in meeting their obligations given their high credit ratings. The credit exposure of currency swaps, interest rate and currency swaps, interest rate swaps, forward foreign exchange contracts and currency option contracts are represented by the fair values of contracts with a positive fair value at the reporting date.

     TDK and one of its subsidiaries have currency swaps and interest rate and currency swaps with certain financial institutions to limit their exposure to fluctuations in foreign exchange rates and interest rates involved mainly in loans made by TDK to its subsidiaries. Gains or losses on currency swaps are included in interest expenses, other income or other deductions in the consolidated statements of income. The swap contracts are measured at fair value and are included in prepaid expenses and other current assets or other current liabilities, as the case may be, in the consolidated balance sheets.

     Forward exchange contracts and currency option contracts have been entered into to hedge adverse effects of foreign currency exchange rate fluctuations mainly on foreign-currency-denominated trade receivables and foreign-currency-denominated forecasted transactions.

     TDK and certain subsidiaries had forward exchange contracts to sell and buy foreign currencies at September 30, 2001 and 2002, and at March 31, 2002.

     Written foreign currency option contracts are entered into in combination with purchased option contracts to offset premium amounts to be paid for purchased option contracts. Notional amounts, exercise dates and exercise prices of both written and purchased contracts are the same. All foreign currency option contracts and forward exchange contracts are measured at their fair values by recognizing a foreign exchange gain or loss on the consolidated statements of income, and such gains or losses are included in prepaid expenses and other current assets or other current liabilities, as the case may be, in the consolidated balance sheet.

     The contract amounts, carrying amounts and estimated fair values of TDK’s financial instruments at September 30, 2001 and 2002, and at March 31, 2002, are summarized as follows:

							Yen (Millions)
September 30, 2001		Contract		Carrying			Estimated
		amount		amount			fair value
Forward foreign exchange contracts			¥34,336		¥358			¥358
Currency option contracts
	Purchased		123		(1	)		(1	)
	Written		1,661		(1	)		(1	)
Currency swap agreements and interest rate and currency swap agreements for loans to its subsidiaries			18,406		(68	)		(68	)

						Yen (Millions)
September 30, 2002	Contract		Carrying			Estimated
	amount		amount			fair value
Forward foreign exchange contracts		¥17,549		¥(84)		¥	(84)
Currency swap agreements and interest rate and currency swap agreements for loans to its subsidiaries		13,613		(48	)		(48	)

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	Yen (Millions)
March 31, 2002	Contract		Carrying			Estimated
	amount		amount			fair value
Forward foreign exchange contracts		¥7,577		¥(59	)		¥(59	)
Currency swap agreements and interest rate and currency swap agreements for loans to its subsidiaries		13,269		(315	)		(315	)

Limitations

     Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

8. Goodwill and Other Intangible Assets

     Under Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”, goodwill is no longer amortized but is reviewed for impairment annually, or more frequently if certain indicators arise. In addition, the statement requires reassessment of the useful lives of previously recognized intangible assets. With the adoption of SFAS 142, TDK ceased amortization of goodwill as of April 1, 2001. As of March 31, 2002, TDK completed a goodwill impairment test. No impairment was indicated at that time.

     The components of acquired intangible assets excluding goodwill at September 30, 2001, September 30, 2002 and March 31, 2002, are as follows:

													Yen (Millions)
			September 30, 2001				September 30, 2002				March 31, 2002
			Gross Carrying		Accumulated		Gross Carrying		Accumulated		Gross Carrying		Accumulated
			Amount		Amortization		Amount		Amortization		Amount		Amortization
Amortized intangible assets:
	Software			¥5,907		2,249		¥6,535		2,892		¥6,401		2,672
	Other			3,403		975		3,326		1,122		4,032		1,376
		Total		9,310		3,224		9,861		4,014		10,433		4,048
Unamortized intangible assets				¥1,686				¥949				¥880

     Aggregate amortization expense for the six months ended September 30, 2001 and 2002 are ¥754 million and ¥738 million, respectively and for the year ended March 31, 2002 is ¥1,394 million. Estimated amortization expense for the next five years is: ¥720 million in the 2nd half of 2003, ¥1,266 million in 2004, ¥882 million in 2005, ¥693 million in 2006, and ¥320 million in 2007.

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     The changes in the carrying amount of goodwill by segment for the six months ended September 30, 2001 and 2002, and the year ended March 31, 2002 are as follows:

						Yen (Millions)
	Electronic
	materials and			Recording media
	components			and systems		Total
Balance as of April 1, 2001		¥11,002			¥497		¥11,499
Goodwill acquired during period		66			—		66
Impairment losses		—			—		—
Goodwill written off related to sale of business unit		—			—		—
Translation adjustment		(735	)		—		(735	)
Balance as of September 30, 2001		¥10,333			¥497		¥10,830

						Yen (Millions)
	Electronic
	materials and			Recording media
	components			and systems		Total
Balance as of March 31, 2002		¥11,003			¥497		¥11,500
Goodwill acquired during period		—			—		—
Impairment losses		—			—		—
Goodwill written off related to sale of business unit		—			—		—
Translation adjustment		(788	)		—		(788	)
Balance as of September 30, 2002		¥10,215			¥497		¥10,712

						Yen (Millions)
	Electronic
	materials and			Recording media
	components			and systems		Total
Balance as of April 1, 2001		¥11,002			¥497		¥11,499
Goodwill acquired during year		106			—		106
Impairment losses		—			—		—
Goodwill written off related to sale of business unit		—			—		—
Translation adjustment		(105	)		—		(105	)
Balance as of March 31, 2002		¥11,003			¥497		¥11,500

9. Supplementary Information

							Yen (Millions)
		Six months ended		Six months ended			Year ended March
		September 30, 2001		September 30, 2002			31, 2002
(a) Statement of Income
Research and development			¥19,065		¥15,649			¥38,630
Rent			5,435		4,830			11,538
Maintenance and repairs			5,836		5,514			11,437
Advertising costs			4,618		2,684			10,489
(b) Statement of Cash Flows
Cash paid during six months for:
	Interest		¥673		¥193			¥1,162
	Income taxes		¥19,830		¥(6,239	)		¥22,026

Noncash activities
There were no material noncash investing and financing activities.

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10. Segment Information

(a) Industry segment information

Six months ended September 30, 2001

														Yen (Millions)
			Electronic			Recording						Eliminations
			materials &			media &						and
			component			systems			Sub total			corporate		Total
Net sales
	Unaffiliated customers			¥209,607			¥61,179			¥270,786			—		¥270,786
	Intersegment			—			—			—			—		—
		Total		209,607			61,179			270,786			—		270,786
Operating expenses				210,329			63,268			273,597			—		273,597
Operating income (loss)				¥(722	)		¥(2,089	)		¥(2,811	)		—		¥(2,811	)

Six months ended September 30, 2002

											Yen (Millions)
		Electronic		Recording					Eliminations
		materials &		media &					and
		components		systems			Sub total		corporate		Total
Net sales
Unaffiliated customers			¥234,272		¥62,108			¥296,380		—		¥296,380
Intersegment			—		—			—		—		—
	Total		234,272		62,108			296,380		—		296,380
Operating expenses			223,557		62,804			286,361		—		286,361
Operating income (loss)			¥10,715		¥(696	)		¥10,019		—		¥10,019

Year ended March 31, 2002

														Yen (Millions)
			Electronic			Recording						Eliminations
			materials &			media &						and
			components			systems			Sub total			corporate		Total
Net sales
Unaffiliated customers				¥432,886			¥137,625			¥570,511			—		¥570,511
	Intersegment			—			—			—			—		—
		Total		432,886			137,625			570,511			—		570,511
Operating expenses				469,232			145,001			614,233			—		614,233
Operating income (loss)				¥(36,346	)		¥(7,376	)		¥(43,722	)		—		¥(43,722	)

(Notes)	1. Segment classification
	Segments are classified by the similarity of the product, the product’s character, the manufacturing method and      the selling market.
	2. Principal products in each segment
	Electronic materials & components:
	Ferrite cores, Ceramic capacitors, High-frequency components, Inductors, GMR heads and Semiconductors
	Recording media & systems:
	Audio tapes, Video tapes, CD-Rs, MDs, DVDs and PC cards

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3. TDK adopted the Emerging Issues Task Force Issue 01-9 (“EITF 01-9”), “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” from the fiscal year beginning April 1, 2002 and the prior year’s consolidated financial statements have been restated for the change, accordingly.

(b) Geographic segment information

Six months ended September 30, 2001

																			Yen (Millions)
											Asia and					Eliminations
			Japan		Americas			Europe			others		Sub total			and corporate			Total
Net sales
	Unaffiliated customers			¥92,204		¥41,558			¥36,243			¥100,781		¥270,786			—			¥270,786
	Intersegment			74,923		6,102			1,258			22,539		104,822			(104,822	)		—
		Total		167,127		47,660			37,501			123,320		375,608			(104,822	)		270,786
Operating expenses				166,389		52,588			38,373			123,315		380,665			(107,068	)		273,597
Operating income (loss)				¥738		¥(4,928	)		¥(872	)		¥5		¥(5,057	)		¥2,246			¥(2,811	)

Six months ended September 30, 2002

																		Yen (Millions)
											Asia and				Eliminations
			Japan		Americas			Europe			others		Sub total		and corporate			Total
Net sales
Unaffiliated customers				¥90,338		¥43,019			¥33,507			¥129,516		¥296,380		—			¥296,380
	Intersegment			83,557		7,919			655			19,471		111,602		(111,602	)		—
		Total		173,895		50,938			34,162			148,987		407,982		(111,602	)		296,380
Operating expenses				171,231		51,247			36,457			139,117		398,052		(111,691	)		286,361
Operating income (loss)				¥2,664		¥(309	)		¥(2,295	)		¥9,870		¥9,930		¥89			¥10,019

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Year ended March 31, 2002

																				Yen (Millions)
												Asia and					Eliminations
			Japan			Americas			Europe			others		Sub total			and corporate			Total
Net sales
	Unaffiliated customers			¥178,771			¥86,808			¥76,604			¥228,328		¥570,511			—			¥570,511
	Intersegment			149,443			15,102			2,337			40,036		206,918			(206,918	)		—
		Total		328,214			101,910			78,941			268,364		777,429			(206,918	)		570,511
Operating expenses				361,466			114,622			82,125			266,664		824,877			(210,644	)		614,233
Operating income (loss)				¥(33,252	)		¥(12,712	)		¥(3,184	)		¥1,700		¥(47,448	)		¥3,726			¥(43,722	)

(Notes)	1.	Geographic segments are based on the location of the seller.
	2.	Principal nations in each geographic segment excluding Japan:
			Americas: United States of America
			Europe: Luxembourg, Germany
			Asia and others: Hong Kong, Taiwan, and Singapore
	3.	TDK adopted the Emerging Issues Task Force Issue 01-9 (“EITF 01-9”), “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” from the fiscal year beginning April 1, 2002 and the prior year’s consolidated financial statements have been restated for the change, accordingly.

(c) Overseas sales

Six months ended September 30, 2001
							Yen (Millions)
	Americas		Europe		Asia and others		Total
Sales by region		¥50,463		¥37,817		¥97,336		¥185,616
Net sales								270,786
Ratio to overseas sales of net sales (%)		18.6		14.0		35.9		68.5

Six months ended September 30, 2002
							Yen (Millions)
	Americas		Europe		Asia and others		Total
Sales by region		¥56,294		¥34,368		¥121,429		¥212,091
Net sales								296,380
Ratio to overseas sales of net sales (%)		19.0		11.6		41.0		71.6

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Year ended March 31, 2002

							Yen (Millions)
	Americas		Europe		Asia and others		Total
Sales by region		¥109,452		¥79,639		¥216,616		¥405,707
Net sales								570,511
Ratio to overseas sales of net sales (%)		19.2		13.9		38.0		71.1

(Notes)	1.	Overseas sales are classified by the geographic areas of the buyer.
	2.	Principal nations in each region excluding Japan:
			Americas: United States of America
			Europe: Germany, United Kingdom, and France
			Asia and others: Singapore, Hong Kong, and Malaysia
	3.	Overseas sales are net sales of TDK and its consolidated subsidiaries in the countries and regions other than Japan.
	4.	TDK adopted the Emerging Issues Task Force Issue 01-9 (“EITF 01-9”), “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” from the fiscal year beginning April 1, 2002 and the prior year’s consolidated financial statements have been restated for the change, accordingly.

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