Note: These figures include inter-segment sales.	Damp-Shape, a durable, lightweight panel offering excellent vibration damping and sound insulation performance, is particularly useful for reducing traffic noise along elevated highways and in tunnels.
Cutting edge production technologies ensure that our heat exchanger tubes provide unparalleled performance in air conditioning, refrigeration, and freezing equipment.	Made of a specially developed aluminum alloy, our aluminum roofing material is a durable, light weight, and attractive.

Demand for rolled aluminum products declined slightly from the previous year due to sluggish demand for construction-related extruded products and aluminum can stock for beverage containers. Despite a recovery in demand for such semiconductor-related products as copper sheets, overall demand for rolled copper products declined because of weak demand for copper tubes for air conditioners. Under these conditions, overall sales volume of rolled aluminum products declined slightly, owing to a decrease in the sales volume of aluminum can stock for beverage containers. Similarly, the overall sales volume of rolled copper products was down because of lower sales volume of copper tubes for air conditioners. These factors, along with declines in sales by such group companies as Shinko-North Co., Ltd., which makes aluminum construction materials, and Kobe Copper (Malaysia) Sdn. Bhd., which manufactures copper tubes for air conditioners, led to a 0.6% decline in sales in the Aluminum and Copper Sector, to 334.6 billion yen. Our R&D activities were concentrated on the development of products in fields that are expected to grow in the future and on products that can create new markets. In aluminum can stock, which is one of our principal products, we proceeded with the development of materials that respond to needs for thinner and lighter cans and established environment-friendly, water-soluble paint and coating technologies for the tops and bottoms of aluminum cans. In automobile-related markets, which are expected to expand sharply, we have been making steady progress in the development and commercialization of aluminum sheets with superior formability and corrosion resistance for use as automobile body panels, automobile door beams made of extruded aluminum, and cast and forged aluminum components for automobiles. In addition, we made important strides in cultivating and expanding new markets by developing materials for vacuum chambers, commercializing our Damp-Shape sound absorbing material for use along highways, developing a case for rechargeable lithium batteries, and developing and commencing sales of a maintenance-free aluminum roofing material that is superior in terms of ease of installation and durability. Our activities in environment-related fields included participation in a public-private sector project in Yokohama for recovering aluminum cans and promoting the use of aluminum from used beverage cans. Together with The Tokyo Electric Power Company, Incorporated, we are also developing new processing technologies for efficiently recovering aluminum from the dross produced during smelting and for effectively using the residual ash. We also worked to develop a high-performance inner grooved copper tube for air conditioners that can use environment-friendly clean coolants. As illustrated by these endeavors, in our role as a leading company, we progressed with aluminum recycling activities and responded to environmental problems by developing various technologies that contribute to the betterment of society. Regarding capital investment in fiscal 1997, we have generally completed the investments needed to respond to an expected rise in domestic demand, concentrating our investments on maintaining and renovating existing production facilities. In recent years, our group companies expanded and strengthened their overseas production facilities to meet growing demand for their products, particularly in China and Southeast Asia. However, due to the economic downturn in Asia, they refrained from investing in new facilities during the year under review and concentrated on maintaining and renovating existing ones instead. Overseas, in our aluminum can stock business, operations are now fully underway and progressing smoothly at KAAL Australia Pty. Ltd., a joint venture with Aluminum Company of America. We will continue to closely monitor trends in demand for aluminum can stock and work to build an optimal supply structure. We manufacture and market aluminum computer disk blanks at Kobe Steel in Japan, Kobe Precision, Inc., in the United States, and Kobe Precision Technology, in Malaysia. Amid robust demand for PCs, we have worked to increase and strengthen production capabilities at these manufacturing bases and are striving to fortify our position as the world's leading supplier of aluminum computer disk blanks. We also operate three bases for manufacturing and marketing copper tubes for air conditioners. These bases are Kobe Steel, in Japan, Kobe Copper Products, Inc., in the United States, and Kobe Copper (Malaysia) Sdn. Bhd., in Malaysia. Using this network, we are responding to demand for copper tubes in various regions of the world. A rise in imported products in the United States due to the strengthening of the dollar, together with the economic slowdown in Southeast Asia accompanying the currency crisis in that region, has led to sluggish sales volume of copper tubes for air conditioners. Nevertheless, we are building a structure capable of responding quickly to new market needs. We anticipate a rise in domestic demand for lightweight aluminum products and copper used as an electronic material. Overseas, despite the current economic slowdown, rising living standards in Asia are expected to support firm demand for aluminum and copper products in the future. While responding to this expected increase in demand, we intend to cultivate new markets by drawing on our strong technology development capabilities. We also plan to strengthen our international competitiveness, focusing on such areas as cost, product quality, and customer service, as we work to maintain our position as one of Japan's leading producers of aluminum and copper products.