A N N U A L R E P O R T 1 9 9 8

Image Communication

P R O F I L E

C O N T E N T S

Ricoh Company, Ltd., is a leading global manufacturer of office automationequipment.

Our lineup includes copiers, printers, fax machines, personal computers, andrelated supplies. We are also prominent in digital and conventional cameras,CD-Recordable and CD-ReWritable drives and media, and advanced electronicdevices.

Through Image Communication, our corporate slogan that embodies ourcommitment to excellence in digital and color communication techologies, weare building the equipment and systems that are essential to the modernnetworked office.

The Company has 128 consolidated subsidiaries and affiliates in Japan and205 overseas, together employing around 63,600 people.

O U R F I V E I M A G E C O M M U N I C A T I O N C O N C E P T S1. SUPERIOR IMAGING

We define image information as anything we can see or hear. We developsystems that help businesses reach their goals by effortlessly processing theentire range of image information.

2. OPEN STANDARDS

Open and global de facto standards are vital because many users want toconveniently link our systems with those of other manufacturers.

3. APPLIANCE-LIKE EASE

Products should deliver the plug-and-play ease of household appliances.4. WORKGROUP SUPPORT

Systems should both enhance individual and group productivity through PCnetworks.

5. TOTAL OFFICE COVERAGE

Highly productive equipment should be available to users in all businessenvironments—corporate, mobile, and home offices.

F I N A N C I A L H I G H L I G H T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1T O O U R S H A R E H O L D E R S A N D C U S T O M E R S . . . . . . . . . . . . . . . . . . . . . . . . . . .2M A K I N G T H E C U S T O M E R N O . 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6R E V I E W O F O P E R A T I O N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

I. O F F I C E E Q U I P M E N T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12II. O T H E R B U S I N E S S E S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

F I N A N C I A L S E C T I O N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20R I C O H’S O V E R S E A S N E T W O R K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50M A J O R C O N S O L I D A T E D S U B S I D I A R I E S . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52B O A R D O F D I R E C T O R S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52C O R P O R A T E D A T A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

Aficio, Aficio Color, and Comet Circle are trademarks of Ricoh Company, Ltd. All other marks are the property of their respectiveowners. This publication mentions the A4 and A3 paper sizes, which are about 8.27 x 11.69 inches and 11.69 x 16.54 inches, respectively.

A B O U T T H E C O V E R . . .We would like to thank the people featured on the front cover andelsewhere in this year’s annual report for their tremendouscooperation. Shown on the front cover are:

Top row (from left): John P. Gloria Pacific Bell Janice Mouser Pacific Bell Ollie Gilmore BAX Global

Andrea Berzolla DirefarestampareGiorgio Fiammenghi Direfarestampare

Madeline Vaz Gigante Vaz PartnersPaul Gigante Gigante Vaz Partners

Xavier Weibel France Telecom

Bottom row (from left): Shawn D. Ambwani France Telecom

David DeGrazia VIVUS, Inc. Tertia Holeyfield VIVUS, Inc.

Judy Naujoks Access Print Fritz Blank Motorenwerke Mannheim AG

John De Maio First California Mortgage Peter Brunow Deutsche Bahn

1

0

300

600

900

1200

1500

199819971996199519940

1

2

3

4

5

19981997199619951994

1,403.31,316.1

1,113.01,020.3

968.3

0

7

14

21

28

35

19981997199619951994

30.128.9

21.9

18.6

9.5

0

10

20

30

40

50

19981997199619951994

44.9744.16

33.55

28.54

14.61

1.0

1.82.0 2.2 2.1

Ricoh Company, Ltd., and Consolidated Subsidiaries For the Years Ended March 31, 1997 and 1998

F I N A N C I A L H I G H L I G H T S

Millions of yen1997 1998

Thousands of U.S. dollars

1998

%Change

1998/1997

Notes: (1) Overseas sales include sales of foreign subsidiaries and export sales to unaffiliated foreign customers. See Note 17 to the consolidated financial statements.(2) All dollar figures above and elsewhere in this report refer to U.S. currency. Yen amounts have been translated into U.S. dollars, for the convenience of the reader, at ¥132=$1.

Billion is used in the American sense of one thousand million.

NET SALES AND RETURN ON SALES NET INCOME NET INCOME PER SHARE OF COMMON STOCK

(Billions of Yen, %) (Billions of Yen) (Yen)

For the Year:Net sales ¥1,316,072 ¥ 1,403,348 $10,631,424 6.6%

Domestic 821,004 831,339 6,298,023 1.3Overseas 495,068 572,009 4,333,402 15.5

Net income 28,922 30,131 228,265 4.2

Per Share Data (in yen and dollars):Net income

Basic ¥ 44.16 ¥ 44.97 $ 0.34 1.8%Diluted 38.95 41.35 0.31 6.2

Cash dividends, applicable to the year 12.00 11.00 0.08 -8.3

At Year-End:Total assets ¥ 1,644,896 ¥ 1,660,496 $12,579,515 0.9%Shareholders’ investment 422,923 475,005 3,598,523 12.3

41.3538.95

31.21

26.43

14.47

Basic Diluted

2

The going got tougher in fiscal 1998. So we got going—with record net sales and net income, a

bigger global customer base, and our best product lineup ever.

• Consolidated net sales climbed 6.6%, to ¥1,403.3 billion ($10,631 million). Net income rose

4.2%, to ¥30.1 billion ($228 million). These figures were both up for the fourth straight year.

• Basic net income per share was up 1.8%, to ¥44.97 ($0.34). The diluted figure was up 6.2%, to

¥41.35 ($0.31).

• Return on equity was down 0.3 percentage point, to 6.7%. This may seem low, but it reflected

a 12.3% jump in our total shareholders’ investment through the conversion of convertible bonds

into common stock.

Japan’s economy was bad, which hampered sales of analog machines. But it was great that our

digital machines continued to go from strength to strength. Why? Because companies accept that

these products make a real productivity difference, and the key is connectivity and multifunction-

ality. More on this soon.

Overseas, Aficio, our unified global brand for digital office equipment, took off in the Americas,

Europe, and even elsewhere in Asia.

Analog products are still important, but digital is the future, and a multifunctional one at that, for

more and more customers.

We saw the future in fiscal 1998. In Japan alone, unit sales of our digital products, including mul-

tifunctional systems, soared 40%. We rolled out a wide variety of digital machines domestically

and abroad to match that demand.

Most of these products are truly what you want them to be. Our R&D has harnessed our great

strengths in image processing technologies to deliver tremendous flexibility in terms of network-

ing and multifunctionality. The many benefits include high-resolution copying, laser printing,

scanning, and a host of handy functions like electronic sorting. And throughout our Aficio range

you will find other modular options, like faxing.

T O O U R S H A R E H O L D E R S A N D C U S T O M E R S

3

Once upon a time, you could label our office machines as peripherals. But our multifunctional

systems are central paper and data management tools.

Ricoh is now the No. 1 player in many markets around the world. That didn’t happen by accident.

We’ve come a long way in recent years because we realized from the mid-1980s that we needed to

go local—in sales, service, and in manufacturing where appropriate—to be global.

And in fiscal 1998, we finally captured top spot in digital monochrome copiers in Europe and

North America. We also ranked highly in our other business areas. They are real feathers in the

cap because we’ve also led the Japanese digital copier market since its inception.

Just as telling, 40.8% of our net sales were overseas. That’s a significant jump over fiscal 1994,

for example, when they were 25.7%. The international market will become even more important

to us in the years ahead.

We have accelerated localization throughout the 1990s because of the nature of our offerings.

Keeping our digital products and systems as simple as their analog predecessors means that we

must make larger investments of human and capital resources.

We now maintain five headquarters to coordinate our international sales and customer sup-

port—the Americas; Europe, Africa, and the Middle East; Asia and Oceania; China; and Japan.

Each region is managed autonomously and has genuine decision-making clout. We are extremely

proud of what our people overseas have achieved to date, and we will continue to

provide them with whatever they need to keep serving customers well.

HIROSHI HAMADA (right), chairman, andMASAMITSU SAKURAI, president

4

We’re reducing the operational complexity of digital equipment to the appliance-like press of a

button to make people more creative, productive, and happier. To us at Ricoh, that’s customer

satisfaction.

Complexity should not hamper results. All users need good cost-performance and the ability to

enjoy all the functions their machines are capable of. Whether it be a computer, copier, fax ma-

chine, or printer, an office machine should be an appliance for the many, not a weapon for the few.

Image Communication is Ricoh’s strategy for making the office a better place to work. Through

Image Communication, we are working hard to make the one-touch simplicity of home appliances

central to the ideal office experience.

Our definition of an appliance is a product, system, or service that promotes ease of use at

every level. The customer buys the device, plugs it in, and it’s ready to operate. No more excessive

reliance on manuals. No more complicated software upgrading procedures. Even maintenance is

a snap, since the product has a built-in system that senses trouble before the customer does. Appliance

even covers upgrading and disposal.

In the years ahead, you’ll see many more appliance-like innovations as we strive to make the

office a better place to work.

Fiscal 1999 is already a challenge. But we know we’ll do well.

The Japanese economy has a long way to go before it improves to our satisfaction. But we’re not

waiting around for that to happen. In fact, as we’re a big player in the information technology in-

dustry, our products and services are just what our customers in Japan need to beat adversity.

Based on the instant successes of our many new digital products in the first few months of fis-

cal 1999, we’re sure to hold our own. Overseas, we’re certain to improve our position. Because of

the Japan factor, however, we’re being a little conservative on our financials.

One area we’re very excited about is printers. We recently rolled out our very first color laser

and color inkjet machines in Japan, as well as fast monochrome laser printers, as part of a full print-

er line. We expect them to contribute meaningfully to our results this year. Together, these print-

ers and multifunctional digital systems form part of our strategy to become a world leader in out-

put systems. We’re just as confident about CD-Recordable and CD-ReWritable drives and media

and digital cameras, in which we are now seeing a mass market emerge.

We’ll also maintain the momentum of the Ricoh Product Development System, which we

launched several years ago to improve our margins and bring products to market faster through

parts sharing.

Just as important, we will strive to become an even better corporate citizen, which is central to

customer satisfaction. We have therefore instituted an Environmental Action Plan so we can make

recycling and conserving energy integral to our operations.

There’s every reason to be upbeat about Ricoh. Stay confident. We’ll continue to deliver the

goods.

June 26, 1998

Sincerely,

Hiroshi Hamada, Chairman

Masamitsu Sakurai, President

5

6

“I like the fact that there’s on-site Ricoh

tech support. The response to problems is

always immediate. Ricoh has a reliable

product.”

—John P. Gloria, Maintenance Engineer, Systems Administration Engineering, Pacific Bell, San Ramon, California, U.S.A.

“Our Ricoh is a fast, efficient machine.”

—Janice Mouser, District Staff Associate, Pacific Bell, San Ramon, California, U.S.A.

P a c i f i c B e l l Pacific Bell provides a full range of telecommu-

nications services in California.

A f i c i o 2 0 0 The Aficio 200 delivers 20 copies per minute. It

has a central output tray, which makes it in-

comparably compact. Just as important, it offers

optional faxing and PC printing modules.

7

WHAT WE’RE ALL ABOUT

Customer satisfaction is far more than a slogan at Ricoh. It punctuates everything wethink and do. It powers Image Communication, our corporate slogan. Through it, weaim to maximize user productivity and creativity by efficiently integrating image infor-mation with data and making it far easier to manage. And it is the ultimate determi-nant of Ricoh’s industry position and its long-term viability.

Image Communication has five core components (listed inside the front cover).They all champion the cause of customer satisfaction, which is what we’re all about.

CREATING A USER-FRIENDLY EXPERIENCE

The devil is in the details. This is where we’ve taken the many small steps that consti-tute a giant leap for user-friendliness.

Use any of our Image Communication products and you’ll see what we mean. Ev-erything in our machines targets and delivers the prize of productivity through appli-ance ease. Features mean nothing by themselves. Performance is everything. Weempower users to complete daunting tasks with appliance ease—something not onepersonal computer hardware manufacturer or software developer can truly say. Fiddlygadgets should have no place in today’s offices.

That is why our products are ergonomically designed and externally simple. Theyare your first clue that we shield users from incredible complexity.

User-friendly operating panels embody similar thinking. They offer clear, usefulguidance. They protect you from waste and frustration. Where appropriate, they offerinteresting alternatives. And you can customize more and more models through jobprogramming functions that eliminate repetition for regular tasks.

You can also take advantage of multifunctionality fromour mostly digital products and systems. These includecopying, faxing, printing, and networking modules. And reli-ability is better with multifunctional models because thereare fewer moving parts and less wear and tear on compo-nents like scanners. A crucial and related benefit is quiet op-eration. And what with the expense of renting andmaintaining offices these days, compactness and lower elec-tricity bills are the name of the game.

We must be doing something right. According to indus-try surveys, in 1997 we had the top market share in our mainline digital black-and-white plain-paper copiers in Japan, the United States, and Europe.

M A K I N G T H E C U S T O M E R N O . 1

Satisfaction Fact: In August 1997, J. D. Power AsiaPacific ranked our copiers and fax machines No. 1 in Japanfor customer satisfaction. Our printers placed second in aJanuary 1998 survey.

“I love my job at the Technology Solu-

tions Center because we help satisfy

Ricoh customers. We help by quickly

providing real-time solutions over

the telephone. We can identify poten-

tial problem trends by collecting and

entering statistics on every call into

our Hotline database.”

—Carmine Baratta, Product Specialist,Technology Solutions Center, Ricoh Corpo-ration, West Caldwell, New Jersey, U.S.A.

T h e T e c h n i c a l S u p p o r t H o t l i n eThe Technical Support Hotline is part of RicohCorporation’s Technology Solutions Center,which was developed to provide world-classcustomer support with state-of-the-art technol-ogy. Each call is logged into a database for prob-lem trending, resolution collection, and issueescalation to optimize product performance.

Ricoh Silicon Valley, Inc., devel-oped an Internet-based documentretrieval system that we commer-cialized in Japan in April 1998.This system lets you use a brows-er on any Internet-linked PC toaccess and download digitizedcopies, faxes, and other materialsfrom a Ricoh-maintained server.

8

D i r ef a r e s t a m p a r eDirefarestampare of Milan maintains a fast-

growing network of franchised print centers in

Italy.

A f i c i o E f f i c i e n c yDirefarestampare chose the PC-connective Afi-

cio 401 and Aficio Color 5106 after exhaustive

research and comparitive tests as the best way

to offer digital printing solutions.

“Ricoh’s machines are helping us fulfill our dream

to be the one-stop shop for all the communication

requirements of our growing customer base

throughout the nation.”

—Giorgio Fiammenghi (right), Sales Manager, and AndreaBerzolla, Operations Manager, Direfarestampare, Milan,Italy

B A X G l o b a l I n c.BAX Global offers a comprehensive range of

transportation and logistics services in the Unit-

ed States and around the world.

A f i c i o 5 0 0 The 50-copy-per-minute Aficio 500 is Ricoh’s

flagship monochrome digital model, and has

enjoyed strong demand as an office productivity

enhancer.

“We’ve been using Ricoh copiers in our offices

throughout the United States for the past six years.

The products have proven consistently reliable and

operator-friendly. We’re upgrading many of our

older models to the new Aficio copiers.”

—Ollie Gilmore, BAX Global Inc., Irvine, California, U.S.A.

9

KEEPING PEOPLE HAPPY

We don’t claim to be perfect. But we do ensure the best possible experiences in officeequipment through built-in reliability. We also maintain an extensive global customersupport network that keeps machines in the field running optimally through readilyavailable consumables, regular maintenance, and lightning-fast repairs. Just as impor-tant, we are there to provide timely advice.

Our domestic Customer Support System (CSS) for copiers exemplifies our desireto keep people happy. Linked by telephone lines with more than 260,000 machines inthe field, this diagnostic system responds to pre- and post-breakdown warnings and re-pair requests and provides supplies automatically in line with usage levels. An optionalservice is available to help businesses administer machine access by individuals and de-partments. This system should serve an additional 140,000 users by March 1999. TheCSS is just one of dozens of similar operations around the world that we are readyingfor the next stage in our support efforts.

INTERNAL INITIATIVE

One of the most interesting Ricoh initiatives is set to take customer satisfaction to stel-lar heights into the next century. We have linked everyone in the Ricoh Group—fromdevelopment and design to top management—with a global Lotus Notes network.Quality control personnel use Notes to access our Global Field Problems Reportdatabase to monitor a growing mass of technical, service, and customer feedback infor-mation. Our service operations are the bedrock of this database. The beauty of thissystem is that its documentation empowers our people to please by reducing the needto reinvent the wheel. It also arms everybody with a common tool to address problemsand identify new product and service opportunities at the click of a mouse.

M A K I N G T H E C U S T O M E R N O . 1 “Our Customer Support System

centers serve hundreds of thousands

of Ricoh machines around Japan. A

lot of customers sign up for this

service because it gives them

minimal downtime and maximum

productivity.”

—Yutaka Sakakibara, Leader, Customer Support System,Ricoh Company, Ltd., Tokyo, Japan

C u s t o m e r S u p p o r t S y s t e mRicoh’s Customer Support System is linked bytelephone line to more than 260,000 machinesfitted with special adapters. The adapters sendproblems automatically to a base workstation,which then analyzes the data and fixes minordifficulties.

Satisfaction Fact: A worldwide survey of Aficio 401users found that 77% of them chose this model for its PC-connectivity.

Ricoh Europe B.V. of the Nether-lands extensively uses the GlobalField Problems Report system tohandle information covering tech-nical and service issues with Ricohoperations around the world.

10

“I like my Ricoh digital color copier because it’s re-

liable—like members of my staff whom I can count

on to perform. It’s productive. It’s networked so I

can do many jobs at once without ever leaving my

desk. Best of all, it’s like having an in-house copy

center. It provides brilliant color reproduction and

handles all the finishing aspects you’d expect from

a more expensive machine.”

—Madeline Vaz, Founder, Gigante Vaz Partners,New York City, U.S.A.

G i g a n t e V a z P a r t n e r sGigante Vaz Partners is an advertising firm

based in New York.

N C 5 0 0 6 The NC5006 can be networked and combined

with the Fiery XJ 170 color server system for

highly productive desktop publishing.

F r a n c e T e l e c o m France Telecom is the world’s fourth-largest

telecommunications carrier, with operations in

more than 50 countries and with more than

165,000 employees.

F T 5 8 3 2 The FT5832 cuts ozone emissions, uses a non-

polluting organic photoconductor drum, reuses

waste toner, has a sleep mode, and has its parts

marked to simplify recycling.

“At France Telecom,

we’ve been leasing Ricoh

fax and copy machines

for almost a year. Their

power and reliability

help us to communicate

better. On top of that, we

have experienced no

breakdowns.”

—Xavier Weibel, Information Systems Manager, FranceTelecom – Research and Development, Brisbane, California,U.S.A.

11

CORPORATE CITIZENSHIP—A CRUCIAL CS COMPONENT

We share our customers’ concerns for the environment. We were quick to respond, byestablishing the Environment Promotion Office in 1976. Here, too, we have pursuedongoing improvements in our drive to supremacy in customer satisfaction. Our mostrecent effort is a new set of action guidelines on the environment. These aim to combatglobal warming, use precious resources more efficiently, and prevent pollution. By theend of fiscal 2001, we plan to slash the power consumption of our copiers, fax ma-chines, and printers by at least 30% from 1996 levels. We seek similarly dramatic cutsin carbon dioxide emissions from our plants and offices. Just as important, we plan toboost product recycling to 90%–100%.

At the start of fiscal 1999, we merged our environmental and social contribution de-partments to create the Corporate Environmental Office. The office will be our mainconduit for a new program to contribute more than 1% of our nonconsolidated net in-come to our many grass-roots community programs around the globe.

On top of that, in late 1997 we enhanced a worldwide system to recycle equipmentand toner cartridges. Through this effort, we are preventing materials waste and pollu-tion while incorporating reusable components in a range of remanufactured productsthat our customers can proudly use and rely on.

M A K I N G T H E C U S T O M E R N O . 1 “We’ve established a toner cartridge

recycling system in line with Ricoh’s

global commitment to environmental

protection. It’s great for our

customers. It’s great for the earth.

And it makes good sense to conserve

what are very precious resources.”

—Housam El Jurdi, Vice President,Business Group Manager, Imaging Materi-als Business Group, Ricoh Electronics,Inc., Santa Ana, California, U.S.A.

T o n e r C a r t r i d g e R e c y c l i n gAll Ricoh’s major manufacturing operations re-cycle and remanufacture toner cartridges. Thiseffort conserves precious resources withoutcompromising the quality that customers havecome to expect.

Satisfaction Fact: The Environmental ProtectionAgency of the United States has named us a Partner of theYear for the past three years for our compliance with theAgency’s Energy Star standards.

“At Ricoh Electronics, we believe the

best way to serve the local communi-

ty is through grass-roots activities.

That’s the thinking behind our annu-

al C.A.R.E. Committee barbeque. It’s

a meaningful and fun way to raise

funds.”

—Kim Kline, Manager, Corporate Commu-nications, Ricoh Electronics, Inc., Tustin,California, U.S.A.

Comet Circle is Ricoh’s comprehensive recy-cling concept. The diagram lightens from leftto right to indicate improved resources savings.

12

Ricoh pioneered and is a global leader in digital copiers.Digital machines have become integral to customers’ efforts to im-

prove office productivity through networking. Ricoh has drawn on itsdigital technologies to build a solid lineup of personal computer-connec-tive and multifunctional models. These efforts have helped the Companymaintain its top position in the Japanese market as companies build digi-tally networked offices. We have launched many revolutionary network-able products overseas, as a result of which we are now No. 1 in theUnited States and Europe in core monochrome digital offerings.

FISCAL 1998 PERFORMANCE

In fiscal 1998, sales of copiers and related supplies jumped 7.6%, to¥891.0 billion ($6,750 million). These products constituted 63.5% of netsales, up 0.5 percentage point. Domestic sales slipped 0.6% owing pri-marily to the nation’s prolonged recession.

The story was different overseas, with sales rising 18.5%. This double-digit gain reflected the high popularity of new addi-tions to the Aficio lineup and the expansion of oursales channels abroad.

New Aficio 200, 400, and 500 series machinessold particularly well. The Aficio 200 and 250 de-liver 20 and 25 copies per minute, respectively.They are favored for their central output trays,which make them incomparably compact. Just asimportant, they offer optional faxing and PC print-ing modules.

The Aficio 400, which outputs 40 copies perminute, sold strongly because it delivers nine pow-erful digital capabilities. For example, it can runmultiple copy jobs straight from its massive memo-ry after a single scan. It electronically sorts com-plete sets of documents, eliminating the need forseveral sorter bins, and has a 256-level grayscalephoto mode. The Aficio 401, a sister machine,

R E V I E W O F O P E R A T I O N S

Industry surveys have found that Ricoh was the No. 1 sellerof digital copiers in Europe (source: InfoSource) and theUnited States (source: Dataquest) in 1997. We captured a55.8% market share in Europe and another 39.4% in theUnited States. These results compared with 27.6% and48.5%, respectively, for the previous year. Ricoh has led inJapan since it pioneered digital copiers there in the 1980s.

Pictured is the Gotemba Plant in Shizuoka, the Com-pany’s main facility for the production of digital copiers.

RICOH TOP GLOBALLY IN DIGITAL COPIERS

C O P I E R S A N D R E L A T E D S U P P L I E S

Highli

ghts

of th

e Yea

r

1O F F I C EE Q U I P M E N T

0

200

400

600

800

1000

19981997199619951994

891.0828.4

654.5582.9

544.8

SALES OF COPIERS AND RELATED SUPPLIES

(Billions of Yen)

13

doubles as a high-resolution printer, which is a key additional attractionfor networked offices.

The 50-copy-per-minute Aficio 500 is Ricoh’s flagship monochromedigital model, and has enjoyed strong demand as an office productivityenhancer.

Ricoh continued to expand its color range overseas during the year.The prime introductions were the Aficio Color 2000 series, with threecopies per minute, and the Aficio Color 5000 series, which outputs sixcopies per minute. Both these models are available in their basic configu-rations or connected with an EFI Fiery controller for PC printer users.

Our digital copiers went from strength to strength in Japan, althoughsales of analog models were down slightly. We successfully expanded thedigital IMAGIO series during the term. The IMAGIO MF-P series sold

especially well for its PC networking. Like itsoverseas Aficio-branded counterpart, the IMA-GIO MF250 won a solid following because ofits ultracompact design.

We released more models in the secondhalf of fiscal 1998. Among them was the IMA-GIO MF6550, Ricoh’s fastest digital copier,with a maximum output of 65 copies perminute. We are therefore confident that we canbroaden our customer base for digital machines.

DAVID DEGRAZIA says: “I really enjoy the ef-ficiency the Aficio 401 offers by allowing meto perform all my printing and copying needsright from the desktop.” David is a CorporateCommunications coordinator at VIVUS, Inc.Headquartered in Mountain View, California,VIVUS is a leading developer of advanced ther-apeutic systems for the treatment of impotence.

The networkable Aficio 401 is a 40-copy-per-minutemachine, with top image quality, quiet operation, andmemory-based electronic sorting. JUDY NAUJOKS of Access Print notes that: “Our

Ricoh color copies are easy to sell becausethey’re so good. Reliability and quality areimportant to us. Ricoh has them both.” Judy’scompany is a leading print shop in Emeryville,California.

Linked to an EFI Fiery XJ Plus controller, the AficioColor 5206 outputs up to six color copies per minute,including from computer data, making it simple tocreate posters and publications.

FRITZ BLANK OFMotorenwerke Mannheim AGin Germany, says: “Our machine provides top

quality and quiet operationfor each of the 150,000copies we make every monthon it, and we get quick andreliable service.” His compa-ny is a leading manufacturer of

tractor motors and ship engines.

The FT8982 delivers 82 copies per minute and hasan auto reverse document feeder, a 20-bin sorter/sta-pler, and simple, touch-screen operation.

14

Our domestic color range also grew in fiscal 1998. We brought out thePRETER 610/660, which boasts superb resolution and a host of editingfunctions. Also introduced was the PRETER 310/360/365, a highly af-fordable series employing Ricoh-developed technologies for enhancedimage quality.

With analog machines, we are focusing on environmental friendlyproducts. In fiscal 1998, we commercialized one important model in thisregard. It is the SPIRIO 5000RM, which is remanufactured using 60% re-cycled parts by weight. It underscores our commitment to environmentalprotection.

Ricoh also makes a comprehensive range of wide-format copiers andstencil duplicators, many of which have sold well for their digital and PC-connective capabilities.

LOOKING AHEAD

We expect the trend toward digital networked models tocontinue as customers maintain their focus on office pro-ductivity and creativity. Accordingly, we will bring out ad-ditional offerings that match more specific requirements.This is especially true in Japan, where digital copiers arenow so widely used.

Overseas, we will continue building our identity as amajor digital equipment manufacturer by leveraging our Aficio brand. Wewill draw on increased the capacity of our digital copier plants in theUnited States and Europe. We have also started making digital productsin China to complement our operations in these areas and in Japan.

R E V I E W O F O P E R A T I O N S

JOHN DE MAIO, president of First CaliforniaMortgage, selected the FT7670.

The FT7670 outputs up to 70 copies per minute.This user-friendly model incorporates a sorter/staplerand has many other convenient capabilities.

PETER BRUNOW of Berlin-based Deutsche Bahn,Germany’s national railroad, says: “The FT7650

matches our standards for re-liability and quality, which isimportant for our techno-logical progress, and gives usvery favorable life-cyclecosts.”

The FT7650 is very popular among high-volumeusers for its user-friendly operation and many high-productivity features, such as a sorter/stapler.

Spain’s Ministry of Education has installed manyFT5832s in its offices.

The FT5832 outputs up to 32 copies per minute andincorporates a host of environmentally friendly fea-tures.

15

This business category includes mainline fax machines, as well as print-ers, scanners, software, and other information peripherals.

The main shift in this business category has been toward offering cus-tomer solutions. We provide products and services to help companiesmake the right choices in complex networking and information technolo-gy investments.

Our networkable scanners and printers incorporate in-house-devel-oped digital and image processing technologies. In software, we use oursystems integration capabilities to customize packages.

FISCAL 1998 PERFORMANCE

Sales of communications and information systems rose 4.6%, to ¥322.4billion ($2,443 million). This represented 23.0% of net sales, from 23.4%a year earlier.

C O M M U N I C A T I O N S A N D I N F O R M A T I O N S Y S T E M S

BTicino uses the Aficio FX10 at its headquartersin Varese, Italy, and also has an Aficio 250.

BTicino manufactures electrical sets andequipment and has more than 1,000 employees.

The multifunctional Aficio FX10 machine incor-porates copier, faxing, scanning, printing, and PCfax/modem functions.

0

70

140

210

280

350

19981997199619951994

322.4308.3

287.4283.2269.3

SALES OF COMMUNICATIONS AND INFORMATION

SYSTEMS

(Billions of Yen)

Madrid City Council relies on the FAX1700Lfax machine.

The FAX1700L is a desktop plain-paper laser mod-el that can scan documents into transmission mem-mory while receiving. It delivers high productivityand excellent image reproduction.

16

Sales in this category were solid in Japan, but were even better else-where in Asia, primarily because of the popularity of PC-connective mod-els. Sales of information systems were also good because of our packaged,systems integration approach to computers, printers, software, and services.

COMMUNICATIONS SYSTEMS

Our domestic facsimile operations were generallyhealthy during the term because of computer net-working and other value-added capabilities.

Overseas, the Aficio FX10 was a stellar per-former because of its compact deskside design andmultifunctionality. We commanded positive atten-tion in the marketplace for our new line of mostlyPC-connective plain-paper fax machines. Thesemodels included the FAX3700L, a G3 model de-signed for regular users, and the FAX4700L, whichis upgradeable to G4 transmission. Another top per-former was the FAX1750, a G3 offering designedfor deskside use in small offices.

Domestically, we achieved a powerful market im-pact with high-value-added, multifunctional ma-chines. Principal among these were the RIFAXHD5200 Super and RIFAX SL3200 Super, whichuse the Super G3 protocol to transmit an A4 pageover regular phone lines in just three seconds.

Our RIFAX BL110 Shataro2 (MV310E in the UnitedStates) digital fax-copier reduces power consumption by95% in fax standby mode, an achievement that earned it thePresidential Prize at the 1998 Energy Saving ExcellentAwards, which are sponsored by the Japan Machinery Fed-eration.

Holding the award certificate is Makoto Hashimoto, aRicoh managing director and general manager of the ImageProcessing Products Division.

RICOH MACHINE SCORESENVIRONMENTAL AWARD

Highli

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of th

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JEAN-LOUIS HÉLIN says: “Ricoh France hasequipped the 577 deputies of France’s AssembléeNationale with the FAX1700LF.” Jean-Louisworks for the French National Assembly in Paris,which uses hundreds of Ricoh machines.

The FAX1700LF is a highly efficient desktop plain-paper laser fax machine that offers fast scanning andtransmission.

R E V I E W O F O P E R A T I O N S

17

Featured with the IPSiO Color 2000 is ArisaMizuki, a highly popular actress and pop singer inJapan. Ricoh chose Arisa as the promotional person-ality for its dynamic new IPSiO line of color andmonochrome laser and inkjet printers. The IPSiOColor 2000 color laser printer has become an instantsuccess for its compactness, speed, and affordability.

Ricoh took a final step in its strategy to become theglobal leader in output equipment when it unveiledits all-new line of laser and inkjet printers to an en-thusiastic reception in Tokyo in May 1998.

INFORMATION SYSTEMS

This business area encompasses printers and scanners in Japan and over-seas. Specific domestic offerings are personal computers, software and ser-vices, and Japanese-language word processors.

In Japan, our printer sales focused on mid- and high-volume models.These sold steadily because of their processing speed and multiprotocolcompatibility in networked environments. Demand was particularly good forthe PC LASER NX-110, which outputs 13 pages per minute. Other strongperformers in the PC LASER series were the NX-510, which delivers 20pages per minute for workgroups in multiplatform offices, and the NX-1000,a 38-page-per-minute workhorse that handles up to A3-size paper.

Personal computer sales were up significantly in line with generallyhigh demand in Japan. While constituting a small percentage of sales, PCsare important because they form part of our systems integration business.Ricoh is well positioned to offer systems integration services because of itsdepth of peripherals and software based on proprietary digital and net-working technologies. One example is the very popular Ricoh SolutionGroup Office. We based this on Lotus Notes groupware. It integratesprocessing so users can easily share, store, retrieve, and transmit docu-ments. Our optical character recognition software and Japanese TrueTypefonts for Windows also contributed significantly to sales in fiscal 1998.

Ricoh plans to create an even larger range of innovative hardware andsoftware in the next few years in keeping with its position as a systems in-tegrator and its commitment to Image Communication.

LOOKING AHEAD

We have already taken significant steps to broaden our product line. Earlyin fiscal 1999, we introduced several networkable printers in Japan underthe new brand name of IPSiO. New machines included the IPSiO NX700and NX600 laser printers, which despite their compact appearance canoutput up to 20 and 16 pages per minute, respectively, and handle up toA3-size paper. We introduced the IPSiO NX70, an A4 model for smalland home offices, and the IPSiO Color 2000, our first color laser printer.Just as important, we commercialized the IPSiO JET 300 color inkjet ma-chine and several other printers.

These new printer products complement our copier and fax machineoperations and place us well to become No. 1 in the global market foroutput equipment.

18

2This area encompasses photographic equipment, electronic devices,CD-Recordable (CD-R) and CD-ReWritable (CD-RW) drives

and media, and unit modules for personal computerparts.

Our operations also extend to educational andmeasuring equipment, as well as leasing, finance, and

logistics services that support Ricoh’s overall operations.

FISCAL 1998 PERFORMANCE

Fiscal 1998 sales of other businesses climbed 5.9%, to ¥189.9 billion($1,438 million), and accounted for 13.5% of net sales, from 13.6% in fiscal 1997.

PHOTOGRAPHIC EQUIPMENT

These products sold very well in the Americas and Asia, and demand inJapan was excellent for digital models.

In digital cameras, which we pioneered as personal computer input de-vices, we enjoyed tremendous popularity with the affordable DC-3(RDC-300 overseas), which employs a 350,000-pixel charge-coupled device, and the DC-3Z(RDC-300Z), which incorporates a 3X zoomlens. Both these models won strong supportamong heavy computer users and the generalpublic.

We continued to move up-market in 35mmcompact cameras. These products again did wellin Japan and abroad. The GR1 was again a top-seller, and scored a prestigious camera award inEurope for its 25mm-thick body and compact,high-performance lens.

ELECTRONIC DEVICES

The Company develops and manufactures elec-tronic devices for its image-processing products.We make application-specific integrated circuits(ASICs) and application-specific standard prod-ucts (ASSPs). Our ASICs are principally for

R E V I E W O F O P E R A T I O N S

In January 1998, Ricoh’s RL5S840 voice-recognition large-scaleintegrated circuit captured the ASIC of the Year Award fromthe Semiconductor Industries Newspaper of Japan. The prize wasfor an advanced function that allows the chip to ignore unneed-ed words.

Pictured at the ceremony are (from right) Tamio Murano,general manager of the No. 1 Parts Department of the Elec-tronic Devices Division; Masaru Kuroda, assistant manager ofthe No. 33 Design Office in that department; and Seigo Yasuda,manager of the No. 33 Design Office.

VOICE-RECOGNITION LSIMADE ASIC OF THE YEAR

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O T H E RB U S I N E S S E S

The GR1 won the Best Camera of the Year 1997-1998 from the Technical Image Press Association forits superb body design and exposure control.

The new RDC-4300 incorporates a powerful 3Xzoom lens and a resolution of 1.32 million pixels, andis light, compact, and incredibly simple to use.

0

40

80

120

160

200

19981997199619951994

189.9179.4

171.2154.2154.2

SALES OF OTHER BUSINESSES

(Billions of Yen)

19

proprietary central processing units, digital signal processor cores, andlarge-scale integrated circuits for telecommunications. Our ASSP lineupincludes a CD-R/CD-RW controller and PC card controllers for note-book computers. We also supply general-purpose large-scale integratedcircuits, notably power management chips and real-time clocks.

CD BUSINESS

We entered this area to provide storage for high-volume multimediacomputer data. Complementing our CD-R drives and discs are CD-RWproducts, for which we helped form international technical standards. Weare a top player in these high-growth areas, with a solid market presencein Japan, Europe, North America, and Asia.

During the year, we introduced the instantly successful MP6200 seriesof compact drives. They handle CD-R, CD-RW, and CD-ROM media.

We support our operations with a production network thatencompasses the United States, Europe, and Japan.

LOOKING AHEAD

We expect digital cameras to become widely popular overthe next few years. We are positioning ourselves at the highend of that market. Our first introduction in that area is thelight and compact RICOH DC-4 (RDC-4300 overseas),which pushes the envelope of digital camera design with its3X zoom lens and resolution of 1.32 million pixels.

In fiscal 1999, we will continue to focus our device operations onASICs and ASSPs for image processing and information and telecommu-nications equipment. In addition, we will build on our position as theworld’s only manufacturer of both CD-RW drives and media.

Ricoh is a leading maker of power source integratedcircuits. The Company serves in-house operations andmajor telecommunications equipment manufacturers.

Our new MP6200 series of compact CD-R/RWdrives is compatible with CD-RW, CD-R, and CD-ROM discs. The drives write at double speed and readout at six times speed. They also incorporate randomaccess writing software so they can rewrite or erasedata in single file units.

Ricoh helped standardize CD-RW specifications andwas the first to start mass-production of CD-RW me-dia. Our testing facilities for such media are consid-ered among the best in the world.

20

M A N A G E M E N T’S D I S C U S S I O N A N D A N A L Y S I S O F F I S C A L 1 9 9 8 R E S U L T S

Sales in Japan increased 1.3%, to ¥831.3 billion ($6,298 million). Thisfigure was 59.2% of net sales, down from 62.4%. Overseas sales jumped15.5%, to ¥572.0 billion ($4,333 million). This represented 40.8% of netsales, from 37.6% in fiscal 1997.

During the term, the yen weakened against the U.S. dollar butstrengthened against the deutschemark. The average yen-dollar rate was¥123, from ¥113 in fiscal 1997, and the yen-deutschemark rate was ¥69,from ¥73.

Operating IncomeOperating income advanced 7.6%, to ¥89.7 billion ($680 million).Forward investments boosted fixed costs, which lowered the gross margin1.0 percentage point, to 40.3%.

Selling, general and administrative expenses were up 3.2%, to ¥475.2billion ($3,600 million). This owed primarily to higher research anddevelopment spending. R&D expenditures climbed 8.9%, to ¥70.0 billion($530 million). This constituted 5.0% of net sales, up 0.1 percentagepoint.

In fiscal 1998, ended March 31, 1998, Ricoh maintained its focus on cus-tomer satisfaction, as part of which it broadened the scope of Image Com-munication, its corporate slogan.

These efforts translated into gains in both revenues and earnings forthe fourth consecutive year. Ricoh’s net sales, operating income, incomebefore income taxes, minority interests and equity in earnings of affiliates,and net income were all record highs.

Revenues Net sales advanced 6.6%, to ¥1,403.3 billion ($10,631 million).

In the office equipment category, sales of copiers and related supplieswere up 7.6%, reflecting strong demand for digital models. Sales of com-munications and information systems grew 4.6%. This improvementstemmed from steady performance of Ricoh’s system solutions business,which includes the packaging of computer hardware and software systems.

As a result of these factors, office equipment sales rose 6.8%, to¥1,213.5 billion ($9,193 million). Office equipment constituted 86.5% ofnet sales, from 86.4% a year earlier.

0

16

32

48

64

80

199819971996199519940

2

4

6

8

10

199819971996199519940

400

800

1200

1600

2000

199819971996199519940

20

40

60

80

100

19981997199619951994

CAPITAL EXPENDITURESR&D EXPENDITURE AND PERCENT OF NET SALES TOTAL ASSETS

70.0

64.359.0

55.054.6

94.1

78.7

48.845.444.9

5.6 5.4 5.34.9 5.0

1,238.31,320.6

1,508.51,644.9 1,660.5

(Billions of Yen, %) (Billions of Yen) (Billions of Yen)

21

Income before Income TaxesIncome before income taxes, minority interests and equity in earnings ofaffiliates rose 2.3%, to ¥68.4 billion ($518 million). Net financial expenseswere down 8.5%, to ¥6.3 billion ($48 million). Foreign exchange lossestotaled ¥3.7 billion ($28 million), compared with ¥1.3 billion in exchangegains in fiscal 1997. The other expense included an impairment loss ongoodwill, mainly in the United States, which was ¥5.0 billion ($38million).

Net IncomeNet income advanced 4.2%, to ¥30.1 billion ($228 million).

Total provision for taxes was up 0.9%, to ¥40.2 billion ($305 million).The deferred portion included an increase of ¥1.4 billion, owing to achange in the tax rate in Japan.

The basic and diluted earnings per share of common stock were¥44.97 ($0.34) and ¥41.35 ($0.31), respectively.

Parent company cash dividends per share of common stock were¥11.00 ($0.08). This figure is consistent with management’s commitmentto stable shareholder returns. The previous year’s result was ¥1.00 higherbecause of a special pledge made to holders of 1.5% convertible bonds,due in 2002.

Segment Information SALES BY PRODUCT LINE

1. Office Equipment Copiers and Related SuppliesSales in this segment gained 7.6%, to ¥891.0 billion ($6,750 million).Sales of digital copiers overseas under the Aficio brand contributed signif-icantly to this result. As in the previous term, this area accounted for63.5% of net sales.

Communications and Information Systems Here, sales grew 4.6%, to ¥322.4 billion ($2,443 million). This wasbecause of higher domestic sales of system solution packages ofcomputers, printers, and other equipment and software, as well asincreased sales overseas of computer-connective fax machines. Thissegment accounted for 23.0% of net sales, down 0.4 percentage point.

2. Other Businesses Sales in this category expanded 5.9%, to ¥189.9 billion ($1,438 million).The gain was due mainly to brisk sales of digital cameras and CD-R andCD-RW drives and media. Other businesses represented 13.5% of netsales, down 0.1 percentage point.

0

400

800

1200

1600

2000

IVIIIIIIIVIIIIIIIVIIIIIIIVIIIIIIIVIIIIII0

100

200

300

400

500

199819971996199519940

2

4

6

8

10

19981997199619951994

COMMON STOCK PRICE RANGESHAREHOLDERS’ INVESTMENT AND RETURN ON

SHAREHOLDERS’ INVESTMENT

475.0

422.9401.5377.8

349.9

2.7

5.15.6

7.0 6.7

1994 1995 1996 1997 1998

(Billions of Yen, %) (Yen)

22

SALES BY REGIONRicoh’s sales expanded worldwide in fiscal 1998. Japan accounted for59.2%. The Americas represented 16.4%, Europe 18.0%, and other areas6.4%.

1. Japan Domestic sales rose 1.3%, to ¥831.3 billion ($6,298 million). With Japandeep in recession, sales of copiers were down slightly, for which sales ofinformation equipment more than compensated.

2. The Americas Here, sales rose 12.8%, to ¥230.3 billion ($1,745 million). The gainstemmed from strong sales of digital copiers, assisted by the yen’s depreci-ation.

3. EuropeRegional sales surged 20.3%, to ¥252.0 billion ($1,909 million). Thisreflected expanded sales of digital copiers and stronger sales channels,which offset the yen’s appreciation against European currencies.

4. Other areas Sales in other areas jumped 10.2%, to ¥89.6 billion ($679 million).

Financial PositionAt year-end, total assets were ¥1,660.5 billion ($12,580 million), up 0.9%from the close of fiscal 1997.

Ricoh’s borrowings—short-term borrowings, the current maturitiesof long-term indebtedness, and long-term indebtedness—were down6.5%, to ¥674.9 billion ($5,113 million). The drop followed theconversion of parent company bonds.

Cash Flows At the close of fiscal 1998, cash and cash equivalents stood at ¥141.3billion ($1,071 million), up 28.1%.

Net cash provided by operating activities amounted to ¥47.4 billion($359 million), down from ¥85.6 billion. This decline was mainly becauseof an increase in trade receivables and a decrease in accrued income taxesand accrued expenses and other.

Net cash used in investing activities was ¥1.6 billion ($12 million),down significantly from the ¥111.4 billion recorded a year earlier. Thefall owed mainly to decreases in time deposits and payments for purchasesof available-for-sale securities.

Net cash used in financing activities was ¥16.4 million ($124 million),compared with ¥26.4 million provided by financing activities in fiscal1997. This change reflected a decrease in proceeds from long-termindebtedness.

JapanThe Americas*EuropeOtherTotal

SALES BY PRODUCT LINE

Office Equipment:Copiers and related suppliesCommunications and

information systemsOther BusinessesTotal

SALES BY REGION

1997Thousands ofU.S. dollars

Percentage ofnet salesMillions of yen

Percentage of net salesMillions of yen

1998

¥ 828,387

308,325179,360

¥ 1,316,072

63.0%

23.413.6

100.0%

¥ 891,043

322,425189,880

¥ 1,403,348

63.5%

23.013.5

100.0%

$ 6,750,326

2,442,6131,438,485

$ 10,631,424

1997Thousands ofU.S. dollars

Percentage ofnet salesMillions of yen

Percentage of net salesMillions of yen

1998

¥ 821,004204,157209,54881,363

¥ 1,316,072

62.4%15.515.96.2

100.0%

¥ 831,339230,342252,04289,625

¥ 1,403,348

59.2%16.418.06.4

100.0%

$ 6,298,0231,745,0151,909,409

678,977$10,631,424

* Sales of Latin America, which were previously included in “Other,” have been reclassified as part of “The Americas” (formerly “North America”) category for all periods presented.

23

INDUSTRY SEGMENT INFORMATION BASED ON JAPANESE DISCLOSURE STANDARDS

Net SalesOffice Equipment:

Unaffiliated CustomersIntersegmentTotal

Other Businesses:Unaffiliated CustomersIntersegmentTotal

EliminationsConsolidated

Operating IncomeOffice EquipmentOther BusinessesCorporate and EliminationsConsolidated

Identifiable AssetsOffice EquipmentOther BusinessesCorporate and EliminationsConsolidated

Depreciation and AmortizationOffice EquipmentOther BusinessesCorporate Consolidated

Capital ExpendituresOffice EquipmentOther BusinessesCorporate Consolidated

Thousands ofU.S. dollars

1998

$ 9,192,939—

9,192,939

1,438,48530,894

1,469,379(30,894)

$ 10,631,424

$ 984,6149,242

(314,258)$ 679,598

$ 8,033,4541,415,7353,130,326

$ 12,579,515

$ 373,69783,28012,500

$ 469,477

$ 582,758117,30312,947

$ 713,008

¥ 1,213,468—

1,213,468

189,8804,078

193,958(4,078)

¥ 1,403,348

¥ 129,9691,220

(41,482)¥ 89,707

¥ 1,060,416186,877413,203

¥ 1,660,496

¥ 49,32810,9931,650

¥ 61,971

¥ 76,92415,4841,709

¥ 94,117

Millions of yen

1997

Millions of yen

¥ 1,136,712—

1,136,712

179,3602,835

182,195(2,835)

¥ 1,316,072

¥ 117,3152,028

(35,980)¥ 83,363

¥ 1,010,698176,930457,268

¥ 1,644,896

¥ 42,5006,9471,553

¥ 51,000

¥ 63,04314,0491,574

¥ 78,666

24

GEOGRAPHIC SEGMENT INFORMATION BASED ON JAPANESE DISCLOSURE STANDARDS

JapanUnaffiliated CustomersIntersegmentTotal

The AmericasUnaffiliated CustomersIntersegmentTotal

EuropeUnaffiliated CustomersIntersegmentTotal

OtherUnaffiliated CustomersIntersegmentTotal

EliminationsConsolidatedOperating IncomeJapanThe AmericasEuropeOtherCorporate and EliminationsConsolidatedIdentifiable AssetsJapanThe AmericasEuropeOtherCorporate and EliminationsConsolidated

Thousands ofU.S. dollars

1998

$ 6,409,2271,870,9178,280,144

$ 1,700,05352,561

1,752,614

$ 1,970,40226,765

1,997,167

$ 551,742364,318916,060

(2,314,561)$10,631,424

$ 535,46283,65964,28836,583

(40,394)$ 679,598

$ 7,553,060967,568

1,116,811451,667

2,490,409$ 12,579,515

¥ 846,018246,961

1,092,979

¥ 224,4076,938

231,345

¥ 260,0933,533

263,626

¥ 72,83048,090

120,920(305,522)

¥ 1,403,348

¥ 70,68111,0438,4864,829

(5,332)¥ 89,707

¥ 997,004127,719147,41959,620

328,734¥ 1,660,496

Millions of yen

Net Sales

25

Capital ExpendituresRicoh invested ¥94.1 billion ($713 million) in additions to property, plant,and equipment during the year, up 19.6%. These funds were allocatedmainly to build facilities for CD-R and CD-RW drives and media andcopier consumables.

Key Financial Ratios We have provided the following ratios to facilitate analysis of Ricoh’s oper-ations for fiscal 1996, 1997, and 1998.

FOREIGN CURRENCY RISKIn the ordinary course of business, Ricoh uses foreign exchange forwardcontracts to manage the effects of foreign currency exchange risk onmonetary assets and liabilities denominated in foreign currencies. Thecontracts with respect to the operating activities generally have maturitiesless than six months, while the contracts with respect to the financing ac-tivities have the same maturities as underlying assets and liabilities.

The table below provides information about Ricoh’s major derivativefinancial instruments that are sensitive to foreign currency exchange rates,except for the contracts with respect to the financial activities. For foreignexchange forward contracts, the table presents the notional amounts andweighted average exchange rates. These notional amounts generally areused to calculate the contractual payments to be exchanged under thecontracts.

Fiscal 1996 Fiscal 1997 Fiscal 1998

Return on sales 2.0% 2.2% 2.1%

Return on shareholders’ investment 5.6% 7.0% 6.7%

Current ratio 1.23 1.11 1.04

Debt-to-equity ratio(interest-bearing debt to

shareholders’ investment) 1.63 1.71 1.42

Interest coverage 5.0 6.4 7.8

Market Risk MARKET RISK EXPOSURERicoh is exposed to market risks primarily from changes in foreigncurrency exchange rates and interest rates, which affect outstanding debtand certain assets and liabilities denominated in foreign currencies. In or-der to manage these risks that arise in the normal course of business,Ricoh enters into hedging transactions pursuant to its policies and proce-dures covering such areas as counterparty exposure and hedgingpractices. Ricoh does not hold or issue derivative financial instrumentsfor trading purposes, or to generate income.

Ricoh regularly assesses these market risks based on the policies andprocedures established to protect against adverse effects of these risks andother potential exposures, primarily by reference to the market value ofthe financial instruments. As a result of the latest assessment, Ricoh doesnot anticipate any material losses in these areas.

US$/¥Dfl/¥

FOREIGN EXCHANGE FORWARD CONTRACTS

Contract amountsContract amounts

Thousands ofU.S. dollarsMillions of yen

Average contractualrates

126.6062.83

¥ 35,70129,592

$ 270,462224,182

INTEREST RATE RISKIn the ordinary course of business, Ricoh enters into interest rate swapagreements to reduce interest rate risk and to modify the interest ratecharacteristics of its outstanding debt. These agreements primarilyinvolve the exchange of fixed and floating rate interest payments over thelife of the agreement without the exchange of the underlying principalamounts.

The table on page 26 provides information about Ricoh’s majorderivative and other financial instruments that are sensitive to changes ininterest rates, including interest rate swaps and debt obligations. For debtobligations, the table presents principal cash flows by expected maturitydate and related weighted average interest rates. For interest rate swaps,the table presents notional amounts by expected maturity date andweighted average interest rates. Notional amounts are generally used tocalculate the contractual payments to be exchanged under the contract.

2004 andthereafter

¥ 5,60529,500

——

¥ ——

LONG-TERM INDEBTEDNESS(Excluding Capital Lease Obligations)

Convertible Bonds Bonds Medium-Term Notes Loans Total

Expected maturity dateMillions of yen

2004 and thereafter

¥ ———

53,837¥ 53,837

2003

¥ 40,254——

8,308¥ 48,562

2002

¥ 34,92410,0003,9796,566

¥ 55,469

2001

¥ ——

4,48034,867

¥ 39,347

2000

¥ —65,16413,98716,048

¥ 95,199

1999

¥ ——

6,90993,725

¥ 100,634

Total

¥ 75,17875,16429,355

213,351¥ 393,048

Average interest rate

0.90 %5.815.263.89

INTEREST RATE SWAPS

¥ 290,36549,50010,0002,000

US$ 6010

Expected maturity dateMillions of yen

2003

¥ 120,1001,000

——

¥ ——

Type of swap Notional amounts

(Millions) 2002

¥ 13,1003,000

——

¥ 1,3211,321

2001

¥ 13,6001,000

——

¥ 1,321—

2000

¥ 32,00012,00010,000

—¥ —

—

1999

¥ 105,9603,000

—2,000

¥ 5,284—

Total

¥ 290,36549,50010,0002,000

¥ 7,9261,321

Averagepay rate

2.60 %0.710.554.906.325.46

Receive floating/Pay fixedReceive fixed/Pay floatingReceive floating/Pay floatingReceive fixed/Pay fixedReceive floating/Pay fixedReceive fixed/Pay floating

Average receive rate

0.70 %3.902.005.105.807.58

2004 and thereafter

$ 42,462223,485

——

$ ——

LONG-TERM INDEBTEDNESS(Excluding Capital Lease Obligations)

Convertible Bonds Bonds Medium-Term NotesLoans Total

Expected maturity dateThousands of U.S. dollars

2004 and thereafter

$ ———

407,856$ 407,856

2003

$ 304,954——

62,939$ 367,893

2002

$ 264,57675,75730,14549,742

$ 420,220

2001

$ ——

33,939264,144

$ 298,083

2000

$ —493,667105,962121,576

$ 721,205

1999

$ ——

52,341710,038

$ 762,379

Total

$ 569,530569,424222,387

1,616,295$ 2,977,636

Average interest rate

0.90 %5.815.263.89

INTEREST RATE SWAPS

¥ 290,36549,50010,0002,000

US$ 6010

Expected maturity dateThousands of U.S. dollars

2003

$ 909,8497,576

——

$ ——

Type of swap Notional amounts

(Millions) 2002

$ 99,24322,727

——

$ 10,00810,008

2001

$ 103,0307,576

——

$ 10,008—

2000

$ 242,42490,90975,758

—$ —

—

1999

$ 802,72722,727

—15,152

$ 40,029—

Total

$ 2,199,735375,00075,75815,152

$ 60,04510,008

Averagepay rate

2.60 %0.71 0.554.906.325.46

Receive floating/Pay fixedReceive fixed/Pay floatingReceive floating/Pay floatingReceive fixed/Pay fixedReceive floating/Pay fixedReceive fixed/Pay floating

Average receive rate

0.70 %3.902.005.105.807.58

26

27

CREDIT RISKCredit risk arising from the nonperformance of counterparties to meetthe terms of financial instrument contracts is generally limited to theamounts by which the counterparties’ obligations exceed the obligationsof Ricoh. It is Ricoh’s policy to only enter into financial instrumentcontracts with a diversity of high credit rated financial institutions to min-imize the concentration of credit risk. Therefore, Ricoh does not expectto incur material credit losses on its financial instruments.

Asian Economic CrisisDuring fiscal 1998, many Asian countries experienced severe economiccrisis characterized by reduced economic activity, illiquidity, highlyvolatile foreign currency exchange and interest rates, and unstable equityprices. Ricoh primarily has sales activities through subsidiaries andaffiliates in these countries. While Ricoh’s sales were not significantlyaffected by the crisis, these companies suffered exchange losses due to netliabilities denominated in Japanese yen. However, the overall effect of thecrisis on consolidated results were not material in fiscal 1998. Ricoh doesnot expect the crisis problem in these countries to have a significant effecton consolidated results.

Year 2000Ricoh is currently in the process of remediating its information technolo-gy infrastructure so it can properly handle transactions beyond January 1,2000 (“Year 2000 Compliance”). Ricoh does not expect that the cost tomodify its information technology infrastructure to be Year 2000 compli-ant will be material to its financial condition or results of operations.Ricoh does not anticipate any material disruption in its operations as a re-sult of any failure by Ricoh to be in compliance. Ricoh does not currentlyhave any information concerning the Year 2000 Compliance status of itssuppliers and customers. In the event that any of Ricoh’s significantsuppliers or customers does not successfully and timely achieve Year 2000Compliance, Ricoh’s business or operations could be adversely affected.

Forward-Looking and Cautionary Statements Certain statements contained in this annual report may constituteforward-looking statements, which involve a number of risks,uncertainties and other factors that would cause actual results to differmaterially from those projected or implied elsewhere in this annualreport.

28

For the Year:Net salesCost of salesSelling, general and administrative expensesIncome before income taxes, minority interests and equity in earnings of affiliatesProvision for income taxesNet income

Capital expendituresDepreciation and amortization

Per Share Data (in yen and dollars):Net income:

Basic Diluted

Cash dividends, applicable to the year

At Year-End:Total assetsLong-term indebtednessShareholders’ investmentWorking capital

Return on salesReturn on shareholders’ investment

Common Stock Price Range (in yen and dollars):HighLow

19901989

¥ 835,464550,088257,03831,20720,03615,871

53,82644,300

¥ 26.1823.949.52

¥ 831,62786,147

347,041183,008

1.9%`4.8

¥ 1,3601,010

¥ 729,411463,855231,01037,13023,35717,795

67,14134,223

¥ 28.6826.709.52

¥ 730,22473,136

320,534168,165

2.4%5.8

¥ 1,4401,000

S E L E C T E D F I N A N C I A L D A T A

Ricoh Company, Ltd. and Consolidated SubsidiariesFor the Years Ended March 31

29

$10,631,4246,351,8183,600,008

518,394304,621228,265

713,008469,477

$ 0.340.310.08

$12,579,5152,238,9093,598,523

240,008

——

$ 14.399.62

199819981997199619951994199319921991

¥1,403,348838,440475,20168,42840,21030,131

94,11761,971

¥ 44.9741.3511.00

¥1,660,496295,536475,00531,681

2.1%6.7

¥ 1,9001,270

¥ 1,017,417677,674328,52210,86913,0102,041

75,05756,811

¥ 3.133.13

10.00

¥ 1,235,779309,315357,79586,874

0.2%0.6

¥ 820455

Thousands ofU.S. dollars

¥ 1,003,263645,875322,40238,36527,02513,557

70,77748,868

¥ 20.9020.4810.00

¥ 1,198,717246,853362,988114,809

1.4%3.8

¥ 1,340671

¥ 1,113,030683,406374,24651,02028,25121,869

48,82846,430

¥ 33.5531.2110.00

¥ 1,508,519411,023401,471139,163

2.0%5.6

¥ 1,230650

¥ 1,020,296628,071339,89141,67424,93118,593

45,43744,960

¥ 28.5426.4310.00

¥ 1,320,617386,535377,840142,021

1.8%5.1

¥ 1,020726

¥ 968,318605,958326,35226,16718,2339,520

44,92849,155

¥ 14.6114.4710.00

¥ 1,238,275337,592349,945116,108

1.0%2.7

¥ 849561

¥ 1,021,915657,750327,39717,78414,7165,015

46,74755,846

¥ 7.707.70

10.00

¥ 1,228,959303,599351,60277,318

0.5%1.4

¥ 728402

¥ 1,316,072772,238460,47166,90539,86428,922

78,66651,000

¥ 44.1638.9512.00

¥ 1,644,896386,918422,92377,527

2.2%7.0

¥ 1,5301,050

Millions of yen

30

Current Assets:Cash and cash equivalentsTime depositsMarketable securitiesTrade receivables—

NotesAccountsLess—Allowance for doubtful receivables

Inventories—Finished goodsWork in process and raw materials

Deferred income taxesTotal current assets

Plant and Equipment, at cost:LandBuildingsMachinery and equipmentConstruction in progress

Less—Accumulated depreciation

Investments and Other Assets:Finance receivablesInvestment securitiesInvestments in and advances to affiliatesLease deposits and other

1998

Thousands ofU.S. dollars

$ 1,070,712134,470655,205

607,0302,114,068

(89,250)

1,032,871362,470264,530

6,152,106

315,3641,351,4854,102,288

67,3035,836,440

(3,809,523)2,026,917

2,874,864401,257399,197725,174

4,400,492$ 12,579,515

1998Millions of yen

¥ 110,36470,38295,976

84,934259,384(11,848)

121,36344,82533,058

808,438

40,291163,962515,587

9,185729,025

(481,473)247,552

364,49281,33556,18386,896

588,906¥ 1,644,896

1997

C O N S O L I D A T E D B A L A N C E S H E E T S

ASSETS

Ricoh Company, Ltd. and Consolidated SubsidiariesMarch 31, 1997 and 1998

The accompanying notes to consolidated financial statements are an integral part of these balance sheets.

¥ 141,33417,75086,487

80,128279,057(11,781)

136,33947,84634,918

812,078

41,628178,396541,502

8,884770,410

(502,857)267,553

379,48252,96652,69495,723

580,865¥ 1,660,496

31

1998

Thousands ofU.S. dollars

1998Millions of yen

1997

¥ 212,793121,887

84,737176,68332,773

102,038730,911

386,91849,43633,267

469,62121,441

82,035133,46312,327

194,99218,833(8,590)

(10,137)422,923

¥ 1,644,896

$ 2,106,924767,394

431,1211,684,182

179,871742,606

5,912,098

2,238,909447,311199,182

2,885,402183,492

778,9391,166,864

101,5681,639,470

97,485(108,606)(77,197)

3,598,523$ 12,579,515

¥ 278,114101,296

56,908222,31223,74398,024

780,397

295,53659,04526,292

380,87324,221

102,820154,02613,407

216,41012,868

(14,336)(10,190)475,005

¥ 1,660,496

Current Liabilities:Short-term borrowingsCurrent maturities of long-term indebtednessTrade payables—

NotesAccounts

Accrued income taxesAccrued expenses and other

Total current liabilities

Long-Term Liabilities:Long-term indebtednessEstimated retirement allowancesDeferred income taxes

Minority Interests

Commitments and Contingent Liabilities (Note 15)

Shareholders’ Investment:Common stock, par value ¥50 per share:

Authorized—1,000,000,000 sharesIssued and outstanding—657,375,492 shares in 1997 and

691,546,422 shares in 1998Additional paid-in capitalLegal reserveRetained earningsNet unrealized holding gains on available-for-sale securitiesPension liability adjustmentCumulative translation adjustments

Total shareholders’ investment

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

32

Net SalesCost of Sales

Gross profit

Selling, General and Administrative ExpensesOperating income

Other (Income) Expenses:Interest and dividend incomeInterest expenseForeign currency exchange (gain) loss, netOther, net

Total

Income before Income Taxes, Minority Interests and Equity in Earnings of Affiliates

Provision for Income Taxes:CurrentDeferred

Total

Income before Minority Interests and Equity in Earnings of Affiliates

Minority InterestsEquity in Earnings of AffiliatesNet Income

Per Share of Common Stock:Net income:

Basic Diluted

Cash dividends, applicable to the yearPer American Depositary Share, each

representing 5 shares of common stock:Net income:

Basic Diluted

Cash dividends, applicable to the year

1996

Ricoh Company, Ltd. and Consolidated SubsidiariesFor the Years Ended March 31, 1996, 1997 and 1998

1998

Thousands ofU.S. dollars

1998Millions of yen

1997

¥ 1,403,348838,440564,908

475,20189,707

(5,931)12,2703,695

11,24521,279

68,428

42,108(1,898)40,210

28,2182,1544,067

¥ 30,131

¥ 44.9741.35

¥ 11.00

¥ 224.85206.75

¥ 55.00

$ 10,631,4246,351,8184,279,606

3,600,008679,598

(44,932)92,95527,99285,189

161,204

518,394

319,000(14,379)304,621

213,77316,31830,810

$ 228,265

$ 0.340.31

$ 0.08

$ 1.701.57

$ 0.42

C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E

¥ 1,316,072772,238543,834

460,47183,363

(7,150)14,077(1,302)10,83316,458

66,905

46,672(6,808)39,864

27,0412,1864,067

¥ 28,922

¥ 44.1638.95

¥ 12.00

¥ 220.80194.75

¥ 60.00

¥ 1,113,030683,406429,624

374,24655,378

(6,948)12,455(4,875)3,7264,358

51,020

31,472(3,221)28,251

22,7691,484

584¥ 21,869

¥ 33.5531.21

¥ 10.00

¥ 167.75156.05

¥ 50.00

The accompanying notes to consolidated financial statements are an integral part of these statements.

U.S. dollarsYen

33

Common Stock:Beginning balance

Conversion of convertible bonds; 886,370 shares in 1996, 4,888,423 shares in 1997, and 34,170,930 shares in 1998

Ending balance

Additional Paid-in Capital:Beginning balance

Conversion of convertible bondsEnding balance

Legal Reserve:Beginning balance

Transfer from retained earningsEnding balance

Retained Earnings:Beginning balance

Net incomeCash dividends paidTransfer to legal reserve

Ending balance

Net Unrealized Holding Gains on Available-for-Sale Securities:Beginning balance

Net increase (decrease)Ending balance

Cumulative Translation Adjustments:Beginning balanceAggregate adjustments for the year resulting from

translation of foreign currency financial statementsIncome tax effect on undistributed earnings affected

by rate changes during the yearEnding balance

1998

Thousands ofU.S. dollarsMillions of yen

$ 621,477

157,462$ 778,939

$ 1,011,083155,781

$ 1,166,864

$ 93,3868,182

$ 101,568

$ 1,477,212228,265(57,825)(8,182)

$ 1,639,470

$ 142,674(45,189)

$ 97,485

$ (76,795)

(1,523)

1,121$ (77,197)

19981997

¥ 79,741

2,294¥ 82,035

¥ 131,1792,284

¥ 133,463

¥ 11,471856

¥ 12,327

¥ 174,11628,922(7,190)

(856)¥ 194,992

¥ 29,498(10,665)

¥ 18,833

¥ (18,417)

9,015

(735)¥ (10,137)

¥ 79,375

` 366¥ 79,741

¥ 130,814365

¥ 131,179

¥ 10,741730

¥ 11,471

¥ 159,49221,869(6,515)

(730)¥ 174,116

¥ 21,8857,613

¥ 29,498

¥ (24,467)

7,373

(1,323)¥ (18,417)

1996

Ricoh Company, Ltd. and Consolidated SubsidiariesFor the Years Ended March 31, 1996, 1997 and 1998

The accompanying notes to consolidated financial statements are an integral part of these statements.

C O N S O L I D A T E D S T A T E M E N T S O F S H A R E H O L D E R S’ I N V E S T M E N T

¥ 82,035

20,785¥ 102,820

¥ 133,46320,563

¥ 154,026

¥ 12,3271,080

¥ 13,407

¥ 194,99230,131(7,633)(1,080)

¥ 216,410

¥ 18,833(5,965)

¥ 12,868

¥ (10,137)

(201)

148¥ (10,190)

34

Cash Flows from Operating Activities:Net incomeAdjustments to reconcile net income to net cash

provided by operating activities—Depreciation and amortizationEquity in earnings of affiliates, net of dividends receivedEstimated retirement allowances, netDeferred income taxesLoss on disposal and sales of plant and equipmentImpairment loss of goodwillChanges in assets and liabilities, net of effects from acquisition—(Increase) decrease in trade receivables(Increase) decrease in inventories(Increase) in finance receivables Increase in trade payables(Decrease) increase in accrued

income taxes and accrued expenses and other Other, net

Net cash provided by operating activitiesCash Flows from Investing Activities:

Proceeds from sales of plant and equipmentExpenditures for plant and equipmentPayments for purchases of available-for-sale securitiesProceeds from sales of available-for-sale securitiesDecrease (increase) in investments in and advances to affiliatesDecrease (increase) in time depositsProceeds from sale of subsidiaries’ common stockOther, net

Net cash used in investing activitiesCash Flows from Financing Activities:

Proceeds from long-term indebtednessRepayment of long-term indebtednessIncrease (decrease) in short-term borrowings, netCash dividends paid

Net cash provided by (used in) financing activitiesEffect of Exchange Rate Changes on Cash and Cash EquivalentsNet Increase (Decrease) in Cash and Cash EquivalentsCash and Cash Equivalents at Beginning of YearCash and Cash Equivalents at End of YearSupplemental Disclosures of Cash Flow Information:

Cash Paid during the Year for—InterestIncome taxes

Ricoh Company, Ltd. and Consolidated SubsidiariesFor the Years Ended March 31, 1996, 1997 and 1998

¥ 30,131

61,971(2,300)

278(1,898)1,4325,037

(8,168)(15,387)(14,025)10,479

(18,213)(1,944)47,393

866(93,657)(23,059)49,2403,676

52,841Ñ

8,521(1,572)

30,110(101,062)

62,177(7,633)

(16,408)1,557

30,970110,364

¥ 141,334

¥ 26,47350,631

$ 228,265

469,477(17,424)

2,106(14,379)10,84838,159

(61,879)(116,568)(106,250)

79,386

(137,977)(14,727)359,037

6,561(709,523)(174,689)373,03027,848

400,311Ñ

64,553(11,909)

228,106(765,621)471,038(57,825)

(124,302)11,795

234,621836,091

$ 1,070,712

$ 200,553383,568

1998

Thousands ofU.S. dollars

1998Millions of yen

19971996

¥ 28,922

51,000(3,297)6,244

(6,808)1,6156,510

11,754(10,210)(15,880)

2,441

14,518(1,175)85,634

234(78,302)(41,300)29,502(3,989)

(23,834)—

6,246(111,443)

88,658(79,388)24,301(7,190)26,3813,0463,618

106,746¥ 110,364

¥ 24,15537,987

C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S

¥ 21,869

46,430116

2,054(3,221)

200—

(10,745)2,050

(25,252)3,043

3,4281,723

41,695

3,447(48,828)(38,791)36,310(1,572)

(44,892)9,9265,421

(78,979)

97,287(75,527)(15,988)`(6,515)

(743)864

(37,163)143,909

¥ 106,746

¥ 25,14421,315

The accompanying notes to consolidated financial statements are an integral part of these statements.

35

Ricoh Company, Ltd. and Consolidated Subsidiaries

Ricoh distributes its products primarily through domestic and foreignsales subsidiaries. Overseas, Ricoh distributes not only Ricoh brand prod-ucts but also other brands, such as Gestetner and Savin.

Ricoh manufactures its products primarily in 16 plants in Japan and 8plants overseas, which are located in the United States, United Kingdom,France, and China.

1. NATURE OF OPERATIONSRicoh Company, Ltd. (the “Company”), was established in 1936. TheCompany and significant subsidiaries (“Ricoh” as a consolidated group) isone of the world’s leading suppliers of office automation equipment,including copiers, facsimile machines, data processing systems, printersand related supplies. Ricoh is also well known for its state-of-the-art elec-tronic devices, photographic equipment and others.

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

2. SIGNIFICANT ACCOUNTING AND REPORTING POLICIESThe cost of the securities sold was computed based on the average

cost of each security held at the time of sale.

(e) InventoriesInventories are stated at the lower of average cost or market. Inventorycosts include raw materials, labor and manufacturing overhead.

(f) Plant and EquipmentDepreciation of plant and equipment is computed principally by using thedeclining-balance method over the estimated useful lives. Most of the for-eign subsidiaries have adopted the straight-line method for computingdepreciation, which currently accounts for approximately 29% of the con-solidated depreciation expense.

Effective rates of depreciation for the three years ended March 31,1998 are summarized below:

The accompanying consolidated financial statements of the Company andits consolidated subsidiaries have been prepared in conformity withaccounting principles generally accepted in the United States of America,modified for the accounting for stock splits (see (m) below). Significantaccounting and reporting policies are summarized below:

(a) Principles of ConsolidationThe consolidated financial statements include the accounts of Ricoh.Investments in generally 20% to 50% owned companies are accounted foron the equity basis. All significant intercompany balances and transactionshave been eliminated in consolidation.

(b) Translation of Foreign Currency AccountsUnder the provisions of Statement of Financial Accounting Standards(“SFAS”) No. 52, “Foreign Currency Translation,” assets and liabilitiesare translated at the exchange rates in effect at each fiscal year-end, andincome and expenses are translated at the average rates of exchangeprevailing during each fiscal year. The resulting translation adjustmentsare accumulated in a separate component of shareholders’ investment.

(c) DerivativesGains and losses on hedges of existing assets or liabilities are included inthe carrying amounts of those assets or liabilities and are ultimatelyrecognized in income as part of those carrying amounts. Gains and lossesrelated to qualifying hedges of firm commitments and anticipated transac-tions are deferred and recognized in income, or as adjustments of carryingamounts, when the hedged transaction occurs.

(d) SecuritiesRicoh conforms to SFAS No. 115, “Accounting for Certain Investmentsin Debt and Equity Securities,” which requires certain investments indebt and equity securities to be classified as held-to-maturity, trading, oravailable-for-sale securities. As of March 31, 1997 and 1998, a substantialpart of Ricoh’s investments in debt and equity securities is classified toavailable-for-sale securities. Those classified as available-for-sale arereported at fair value with unrealized gains and losses, net of related taxes,excluded from earnings and reported in a separate component ofshareholders’ investment.

Thousands ofU.S. dollars

1998$ 48,220

19,826

Millions of yen

Aggregate costAccumulated depreciation

¥ 6,3652,617

¥ 4,6792,189

19981997

Certain leased buildings, machinery and equipment are accounted foras capital leases in conformity with SFAS No. 13, “Accounting forLeases.” The aggregate cost included in plant and equipment and relatedaccumulated depreciation as of March 31, 1997 and 1998 were as follows:

7.9%36.8

1997

7.7%36.2

1996

8.0%40.5

1998

BuildingsMachinery and equipment

The related future minimum lease payments and the present value ofthe net minimum lease payments as of March 31, 1998 were ¥4,906 million($37,167 thousand) and ¥3,784 million ($28,667 thousand), respectively.

Ordinary maintenance and repairs are charged to income as incurred.Major replacements and improvements are capitalized. When propertiesare retired or otherwise disposed of, the property and related accumulateddepreciation accounts are relieved of the applicable amounts, and any dif-ferences are included in other income or expenses.

36

(g) GoodwillRicoh has classified as goodwill the cost in excess of fair value of the netassets of major companies acquired in purchase transactions. Goodwill isbeing amortized on a straight-line method over the estimated periodsbenefited, not to exceed 20 years.

(h) Pension and Retirement Allowances PlansRicoh conforms with SFAS No. 87, “Employers’ Accounting forPensions,” in accounting for pension and retirement allowances plans.

(i) Income TaxesRicoh conforms with SFAS No. 109, “Accounting for Income Taxes,”which requires an asset and liability approach for financial accounting andreporting for income taxes.

Income taxes are currently provided for undistributed earnings of for-eign subsidiaries and affiliates.

(j) AdvertisingThe costs of advertising are expensed as incurred.

(k) Impairment Loss on Long-Lived AssetsRicoh conforms with SFAS No. 121, “Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to Be Disposed Of” inaccounting for impairment loss on long-lived assets and certainidentifiable intangibles. In performing the review for recoverability oflong-lived assets and certain identifiable intangibles, Ricoh estimates thefuture cash flows expected to result from the use of the asset and its even-tual disposition. An impairment loss is recognized if the sum of theexpected future cash flows (undiscounted and without interest charges) isless than the carrying amount of the asset. For purposes of such compari-son, portions of unallocated excess of cost over net assets acquired wereattributed to related long-lived assets and identifiable intangible assets,based upon the relative fair values of such assets at acquisition.Measurement of an impairment loss for long-lived assets and identifiableintangibles is based on the fair value of the asset.

(l) Earnings Per ShareIn the year ended March 31, 1998, Ricoh adopted SFAS No. 128, “Earn-ings Per Share,” which establishes standards for computing and present-ing earnings per share (EPS) and requires a dual presentation of basic anddiluted EPS. All EPS’s previously presented have been restated to con-form to the provisions of SFAS No. 128.

(m) Accounting for Stock SplitsThe stock splits of common stock made at various times have beenaccounted for by transferring an amount equivalent to the par value ofsuch stocks from additional paid-in capital to common stock in the case ofcapitalization by resolution of the Board of Directors. However, noaccounting recognition is made for stock splits when common stock

already includes a portion of the proceeds from shares issued at a price inexcess of par value (see Note 12).

In the United States, distributions of shares in comparablecircumstances are required to be accounted for by transferring fromretained earnings amounts equal to the fair market value of the sharesissued, and by increasing additional paid-in capital by the excess of themarket value over par value of the shares issued.

(n) Consolidated Statements of Cash FlowsCash and cash equivalents include highly liquid investments with a matu-rity of three months or less at date of purchase.

The following noncash transactions have been excluded from theconsolidated statements of cash flows:

Millions of yen

Conversion ofconvertible bonds

Capital lease obligations incurred

Assets and liabilities of Gestetner Holdings PLC (see Notes 4 and 7):

Fair value of assets acquiredLiabilities assumed

Thousands ofU.S. dollars

1998

$313,243

13,333

——

(o) Use of EstimatesManagement of the Company has made a number of estimates andassumptions that affect the reported amounts of assets, liabilities, revenuesand expenses, and the disclosure of contingent assets and liabilities, toprepare these financial statements in conformity with generally acceptedaccounting principles. Actual results could differ from those estimates.

(p) ReclassificationsMinority interests which were previously included in the consolidatedstatements of income under the caption “Other Expenses” have beenreclassified to “Minority Interests” for all periods presented. As a result ofthis reclassification, both “Income before Income Taxes, Minority Interestsand Equity in Earnings of Affiliates” and “Income before Minority Interestsand Equity in Earnings of Affiliates” have been increased by ¥1,484 millionin 1996 and ¥2,186 million in 1997 from the amounts previously reported,while net income and earnings per share have not been affected.

(q) New Accounting StandardsThe Financial Accounting Standards Board issued SFAS No. 130,“Reporting Comprehensive Income,” and SFAS No. 131, “DisclosureAbout Segments of an Enterprise and Related Information,” in June 1997,and SFAS No. 132, “Employers’ Disclosures about Pensions and OtherPost Retirement Benefits,” in February 1998. These standards will not af-fect Ricoh’s financial position or results of operations as they only requirechanges in or additions to current disclosures.

1998

¥41,348

1,760

——

¥ 4,578

364

——

¥ 731

223

122,254100,211

19971996

37

accrued expenses, accounting for sales-type leases and providing for theincome tax effect of such adjustments and other temporary differences.

The Company’s financial statements distributed to its shareholders inJapan and filed with the Ministry of Finance in Japan are prepared in con-formity with Japanese accounting principles and accounting practices andare not consolidated. Such financial statements reported the followingamounts for the three years ended March 31, 1998:

3. BASIS OF PRESENTING FINANCIAL STATEMENTSThe accounts of the Company and its domestic subsidiaries aremaintained in yen. The accompanying consolidated financial statementsas of March 31, 1998 and for the three years then ended have beenpresented in yen, and for the convenience of the reader the consolidatedfinancial statements for fiscal 1998 have also been presented in U.S.dollars by arithmetically translating all yen amounts by using theexchange rate of ¥132 to US$1 in effect at March 31, 1998.

The books of the Company and its domestic subsidiaries aremaintained in conformity with Japanese accounting principles andaccounting practices. Foreign subsidiaries maintain their books in confor-mity with those of the countries of their domicile.

The accompanying financial statements are presented on aconsolidated basis and reflect certain adjustments, not recorded in thecompanies’ books, to present them in conformity with accounting princi-ples generally accepted in the United States of America, modified for theaccounting for stock splits (see Note 2 (m)). The principal adjustments re-late to accounting for the bonds with detachable stock purchase warrants,translating bonds in foreign currencies at the current exchange rates,accounting for certain investments in debt and equity securities, account-ing for the impairment of long-lived assets and for long-lived assets to bedisposed of, adjusting estimated retirement allowances and certain other

The amount of retained earnings legally available for distribution(and for the requisite appropriation to legal reserve) is that recorded inthe Company’s books and amounted to ¥157,634 million ($1,194,197thousand) as of March 31, 1998 (see Note 12).

Since 1978, the Company has translated its consolidated financialstatements prepared in conformity with accounting principles generallyaccepted in the United States of America for filing with the Ministry ofFinance in Japan.

Net salesNet income

Thousands ofU.S. dollars

1998

$5,701,750170,492

19981997

¥752,63122,505

¥698,83719,816

1996

¥646,29417,048

Millions of yen

4. ACQUISITIONIn September 1995, Ricoh completed a take-over bid (“TOB”) for Gestet-ner Holdings PLC (“Gestetner”), which had been a 28.8% owned affiliatesince October 1991. As a result of this acquisition, Gestetner became awholly-owned subsidiary which distributes the Gestetner brand name of-fice equipment products primarily supplied by Ricoh in the globalmarketplace.

The initial acquisition in 1991 and the TOB in 1995 were accountedfor as purchase transactions. The excess of purchase price over theestimated fair value of the net assets acquired (goodwill) in the TOB wasimmaterial and written off through the income statement. The goodwillincurred in connection with the initial acquisition was being amortizedover 20 years through March 31, 1997.

At March 31, 1997, in accordance with SFAS No. 121 Ricoh recordedas an impairment loss ¥6,510 million of goodwill which was the remainingbalance of goodwill after the sale of certain Gestetner business to a thirdparty during fiscal 1997. The impairment loss is included in “OtherExpense” in the accompanying consolidated statement of income.

Investment in Gestetner through September 30, 1995 was accountedfor on an equity basis (see Note 7). The post-acquisition period for the 3months ended December 31, 1995, the most recently available Gestetnerfinancial reporting year, was consolidated in the accompanying financialstatements. The following unaudited pro forma information presents theconsolidated results of operations for the year ended March 31, 1996 as ifthe acquisition had occurred as of the beginning of the year presented:

¥ 1,197,24918,956

¥ 29.0827.17

Millions of yen

Net salesNet income

Net income per share of common stockBasicDiluted

1996

Yen

38

5. FINANCE RECEIVABLESFinance receivables as of March 31, 1997 and 1998 are comprised of leasereceivables and installment loans.

The Company’s products are leased to customers primarily throughRicoh Leasing Company, Ltd., a major subsidiary. These leases areaccounted for as sales-type leases in conformity with SFAS No. 13.Revenues from sales-type leases are recognized at the inception of thelease.

Information pertaining to Ricoh’s lease receivables as of March 31,1997 and 1998 is as follows:

As of March 31, 1998, the minimum lease payments receivable due ineach of the next five years and thereafter are as follows:

Installment loans as of March 31, 1997 and 1998 are primarily comprisedof housing loans and term loans aggregating ¥18,794 million and ¥23,782million ($180,167 thousand), respectively.

Thousands ofU.S. dollars

19992000200120022003 2004 and thereafterTotal

$1,022,780854,849642,432395,280150,81120,674

$3,086,826

Millions of yen

¥135,007112,84084,80152,17719,9072,729

¥407,461

Years ending March 31

Minimum leasepayments receivable

Unearned incomeAllowance for doubtfulreceivables

Net lease receivables

Thousands ofU.S. dollars

1998

$3,086,826(312,523)

(79,606)$2,694,697

Millions of yen19981997

¥396,141(40,894)

(9,549)¥345,698

¥407,461(41,253)

(10,508)¥355,700

6. SECURITIESMarketable securities and investment securities as of March 31, 1997 and1998 consist of the following:

Marketable securities:Available-for-sale securities

Investment securities:Available-for-sale securities

Equity securities

Thousands ofU.S. dollars

1998Millions of yen

1998

¥86,487

¥44,3378,629

¥52,966

$655,205

$335,88665,371

$401,257

1997

¥95,976

¥73,6007,735

¥81,335

The investment equity securities as of March 31, 1997 and 1998 primari-ly relate to 20% less owned companies and are stated at cost.

The current and noncurrent security types of available-for-sale secu-rities, and the respective cost, gross unrealized holding gains, gross unre-alized holding losses and fair value as of March 31, 1997 and 1998 are asfollows:

been made at the beginning of the years or of results which may occur inthe future.

The pro forma results of operations are not necessarily indicative of theactual results of operations that would have occurred had the acquisition

39

Millions of yen

Current:Equity securitiesJapanese and foreign governmental bond securities

Corporate debt securitiesBank debt securitiesFund in trust

Noncurrent:Equity securitiesCorporate debt securitiesBank debt securitiesFund in trust

1997

Fair value

Gross unre-alized hold-ing losses

Gross unre-alized hold-

ing gainsFair value

1998Gross unre-alized hold-ing losses

Gross unre-alized hold-

ing gainsCostCost

¥ 1,477

1,07855,7545,100

32,567¥ 95,976

¥ 50,81021,1061,628

56¥ 73,600

¥ 229

—63—19

¥ 311

¥ 3868438

¥ 481

¥ 120

811,899

5563

¥ 2,218

¥ 37,755———

¥ 37,755

¥ 1,586

99753,9185,045

32,523¥ 94,069

¥ 13,44121,1901,631

64¥ 36,326

¥ 2,684

1,08055,4091,190

26,124¥ 86,487

¥ 37,6106,710

—17

¥ 44,337

¥ 111

—153

80¥ 209

¥ 355180

——

¥ 535

¥ 72

831,408

342

¥ 1,608

¥24,696——1

¥24,697

¥ 2,723

99754,0161,190

26,162¥ 85,088

¥ 13,2696,890

—16

¥ 20,175

Thousand of U.S. dollars

Current:Equity securitiesJapanese and foreign governmental bond securitiesCorporate debt securitiesBank debt securitiesFund in trust

Noncurrent:Equity securitiesCorporate debt securitiesBank debt securitiesFund in trust

Fair value

1998Gross unre-alized hold-ing losses

Gross unre-alized hold-

ing gainsCost

$ 20,3338,182

419,7669,015

197,909$ 655,205

$ 284,92550,833

—128

$ 335,886

$ 841—

11323

606$1,583

$2,6891,364

——

$4,053

$ 545629

10,66723

318$ 12,182

$ 187,091——7

$ 187,098

$ 20,6297,553

409,2129,015

198,197$ 644,606

$ 100,52352,197

—121

$ 152,841

40

SalesCosts andexpenses

Net income

Thousands ofU.S. dollars

1998Millions of yen

19981997$ 2,188,000

2,083,773$ 104,227

¥288,816

275,058¥ 13,758

¥ 281,170

268,989¥ 12,181

1996¥ 330,492

327,237¥ 3,255

Operations

Thousands ofU.S. dollars

Fair value$224,220

409,14452,469

$685,833

Cost$217,636

406,28852,371

$676,295

Millions of yenFair value¥29,597

54,0076,926

¥90,530

Cost¥28,728

53,6306,913

¥89,271

Due within one yearDue after one year through five yearsDue after five years

Proceeds from the sale of available-for-sale securities were ¥36,310million, ¥29,502 million and ¥49,240 million ($373,030 thousand) for theyears ended March 31, 1996, 1997 and 1998, respectively.

The gross realized gain on sale of available-for-sale securities was

¥2,969 million ($22,492 thousand), while no significant realized loss wasrecognized for the year ended March 31, 1998.

There were no significant realized gains or losses on sales ofavailable-for-sale securities for the two years ended March 31, 1997.

7. INVESTMENTS IN AND ADVANCES TO AFFILIATESThe investments in and advances to affiliates primarily relate to 20% to50% owned companies. Ricoh’s proportionate share of assets, revenuesand income before income taxes of each of these companies is less than

Ricoh Elemex CorporationKita Kyushu Coca-Cola Bottling Co., Ltd.

Name

Manufacture and sales of office equipment and precision instrumentsBottling and distribution of Coca-Cola products

Principal businessOwnership

interest

44.8%34.1

20% of the corresponding consolidated amounts. These companiesinclude the following two major companies.

The common stock of these two companies are publicly traded. Theaggregate carrying value of the investments in these companies was equalto their underlying book value and amounted to ¥37,465 million($283,826 thousand) as of March 31, 1998. The aggregate quoted market

Financial Position

$ 449,242

176,053109,811

1,087,773$1,822,879

¥ 59,300

23,23914,495

143,586¥240,620

¥ 56,467

18,08820,640

147,503¥242,698

Liabilities and shareholders’investment—

Current liabilitiesShort-term borrowings and long-term indebtedness

Other liabilitiesShareholders’ investment

Assets—Current assetsOther assets

Thousands ofU.S. dollars

1998Millions of yen

1998

$1,157,735665,144

$1,822,879

¥152,82187,799

¥240,620

¥154,34688,352

¥242,698

1997

The contractual maturities of debt securities classified as available-for-sale as of March 31, 1998, regardless of their balance sheet classification, are as follows:

value of these companies was ¥50,674 million ($383,894 thousand) as ofMarch 31, 1998.

Included in equity in earnings of affiliates in the accompanying finan-cial statements was the 28.8% interest in Gestetner, a major affiliatethrough September 30, 1995 (see Note 4).

The underlying book value of the other 20% to 50% ownedcompanies is approximately the same as their carrying value.

Summarized unaudited financial information for all affiliates as ofMarch 31, 1997 and 1998 and for the three years ended March 31, 1998 isas follows (except that Gestetner’s accounts are included using its most recent available financial statements as of September 30, 1995):

41

Shareholder’s investment as of March 31, 1998, decreased despite net in-come earned during the year, attributable primarily to a Korean affiliate’stranslation adjustment due to a significant depreciation of the Koreanwon against other currencies.

The significant transactions of Ricoh with these affiliates for the threeyears ended March 31, 1998 and the related account balances at March31, 1997 and 1998 are summarized as follows:

Income before income taxes, minority interests and equity in earnings of affiliates—DomesticForeign

Thousands ofU.S. dollars

1998Millions of yen

199819971996

$440,48577,909

$518,394

¥58,14410,284

¥68,428

¥ 68,108(1,203)

¥66,095

¥45,6275,393

¥51,020Provision for income taxes—

Current:DomesticForeign

$261,61457,386

319,000

¥34,5337,575

42,108

¥28,1403,332

31,472Deferred:

DomesticForeign

Consolidated provision for income taxes

(2,584)(637)

(3,221)¥28,251

Provision for income taxesShareholders’ investment:

Net unrealized holding gains on available-for-sale securities

Pension liability adjustmentTranslation adjustments

1998Millions of yen

199819971996¥28,251

8,018(6,411)(1,821)

¥28,037

Thousands ofU.S. dollars

Total income taxes were allocated as follows:

As of March 31, 1998, consolidated retained earnings includedundistributed earnings of 20% to 50% owned companies accounted forby the equity method in the amount of ¥38,015 million ($287,992thousand).

Thousands ofU.S. dollars

1998Transactions—

SalesPurchasesDividend income

1998

¥38,33560,0831,767

$290,417455,17413,386

1997

¥24,11247,698

770

1996

¥44,38843,107

700

Thousands ofU.S. dollars

1998Account balances—

ReceivablesPayables

Millions of yen1998

¥17,57119,574

$133,114148,288

1997

¥ 8,01318,003

Millions of yen

Income before income taxes, minority interests and equity in earnings of affiliates and provision for income taxes for the three years ended March 31, 1998are as follows:

8. INCOME TAXES

(2,153)255

(1,898)¥40,210

¥ 41,8314,841

46,672

(9,443)2,635

(6,808)¥39,864

(16,311)1,932

(14,379)$304,621

$304,621

(59,046)(30,083)(1,833)

$213,659

¥40,210

(7,794)(3,971)

(242)¥28,203

¥39,864

(10,935)(2,583)

727¥27,073

Reconciliations of the normal tax rates in Japan with the effective tax rates for the three years ended March 31, 1998 are as follows:

42

Normal tax ratePermanently nondeductible expenses,

net of nontaxable incomeTax benefits not recognized on operating

losses of certain consolidated subsidiariesDecrease in the beginning-of-the-year

balance of the valuation allowance for deferred tax assets

Nondeductible goodwill impairment lossEffect of change in enacted tax rateOther, netEffective tax rate

199851%

3

5

(3)5

—(1)60%

51%

5

2

———(3)55%

1996 199751%

5

0

(3)321

59%

The net changes in the total valuation allowance for the years endedMarch 31, 1996, 1997 and 1998 were an increase of ¥15,324 million, a de-crease of ¥8,655 million and a decrease of ¥2,297 million ($17,402thousand), respectively.

The valuation allowance was established to reduce the deferred tax

Permanently nondeductible expenses include directors’ bonuses andentertainment expenses. Permanently nontaxable income includesdividends received and exported technology fees.

The tax effect of temporary differences giving rise to the consolidateddeferred income tax assets and liabilities at March 31, 1997 and 1998 areas follows:

Deferred income taxes (Current Assets)Lease deposits and otherAccrued expenses and otherDeferred income taxes (Long-Term Liabilities)

Thousands ofU.S. dollars

1998Millions of yen

19981997$ 264,530

129,765(23,560)

(199,182)$ 171,553

¥ 34,91817,129(3,110)

(26,292)¥ 22,645

¥ 33,0588,431(271)

(33,267)¥ 7,951

Assets:Intercompany profits and inventory write-downsAccrued expensesDeferred chargesEstimated retirement allowancesNet operating losses carryforwardOther

Less—Valuation allowance

Liabilities:Sales-type leasesUndistributed earnings of foreign subsidiaries and affiliatesNet unrealized holding gains on available-for-sale securitiesOther

Net deferred tax assets

Thousands ofU.S. dollars

1998

$ 153,78851,11434,288

156,583106,87163,356

566,000(104,220)

$ 461,780

$ (98,462)(45,068)(91,962)(54,735)

$ (290,227)$ 171,553

Millions of yen19981997

¥ 19,3819,7115,164

15,31318,7707,641

75,980(16,054)

¥ 59,926

¥ (17,220)(7,905)

(20,041)(6,809)

¥ (51,975)¥ 7,951

¥ 20,3006,7474,526

20,66914,1078,363

74,712(13,757)

¥ 60,955

¥(12,997)(5,949)

(12,139)(7,225)

¥(38,310)¥ 22,645

Net deferred tax assets as of March 31, 1997 and 1998 are included in the consolidated balance sheets as follows:

assets to the amount that is expected to be realized. The valuationallowance principally relates to the tax effects of net operating lossesrecorded by certain subsidiaries.

At March 31, 1998, certain subsidiaries had net operating lossescarried forward for income tax purposes of approximately ¥38,477 million

43

10. LONG-TERM INDEBTEDNESSLong-term indebtedness as of March 31, 1997 and 1998 consists of the following:

Thousands ofU.S. dollars

1998Millions of yen

(Per share)

Conversionprice

1997 1998Convertible bonds—

1.9%, payable in yen, due March 19981.8%, payable in yen, due March 20021.5%, payable in yen, due March 20020.35%, payable in yen, due March 20030.4%, payable in yen, due September 2002, issued by a consolidated subsidiary

Total convertible bondsBonds—

7.0%, straight bonds, payable in yen, due January 20003.75%, straight bonds, payable in yen, due October 19992.9%, straight bonds, payable in yen, due August 2001Medium-term notes, 0.4%–7.7%, due through 2002

Total bondsUnsecured loans—

Banks and insurance companies, 0.6%–8.0%, due through 2012Japanese government sponsored agencies, 2.9%, due through 2003

Total unsecured loansSecured loans—

Banks and insurance companies, 1.1%–7.1%, due through 2020Capital lease obligations (see Note 2 (f))

TotalLess—Current maturities included in current liabilities

¥1,264.40824.70993.00

1,210.002,296.00

¥ 29,8271,852

37,29239,76810,000

118,739

50,25715,00010,00029,642

104,899

259,727263

259,990

22,3042,873

508,805(121,887)

¥386,918

¥ —1,490

33,43430,25410,00075,178

50,16415,00010,00029,355

104,519

195,470—

195,470

17,8813,784

396,832(101,296)

¥ 295,536

$ —11,288

253,288229,19775,757

569,530

380,030113,63775,757

222,387791,811

1,480,833—

1,480,833

135,46228,667

3,006,303(767,394)

$ 2,238,909

Short-term borrowings as of March 31, 1997 and 1998 consist of the following:Thousands ofU.S. dollars

1998$ 1,589,932

516,992$ 2,106,924

9. SHORT-TERM BORROWINGS AND TRADE NOTES RECEIVABLE DISCOUNTED WITH BANKS

Borrowings, principally from banksCommercial paper and medium-term notes

Millions of yen1998

¥209,87168,243

¥278,114

¥168,50544,288

¥212,793

1997

Weighted averageinterest rate

19982.5%1.9

2.5%1.8

ing losses expire within a five-year period while the remainder principallyhave an indefinite carryforward period.

however, there are no formal compensating balance agreements with anybanks. The weighted average interest rate on these time deposits was0.3% as of March 31, 1998.

The Company and certain of its subsidiaries had unused lines of cred-it amounting to ¥283,898 million ($2,150,742 thousand) of which¥166,366 million ($1,260,348 thousand) related to commercial paper pro-grams and medium-term notes at prevailing interest rates.

The Company and certain of its domestic subsidiaries regularly discounttrade notes receivable on a full recourse basis with banks. These tradenotes receivable discounted are contingent liabilities. The weighted aver-age interest rates on these trade notes receivable discounted were 1.6%and 1.5% as of March 31, 1997 and 1998, respectively.

As is the customary practice in Japan, certain subsidiaries havesubstantial time deposits with banks from which they have short-termborrowings, trade notes receivable discounted and/or long-term loans;

1997

($291,492 thousand), which were available to reduce future income taxes,if any. Approximately ¥20,233 million ($153,280 thousand) of the operat-

44

Service cost-benefits earned during the periodInterest cost on projected benefit obligationActual return on plan assetsNet amortization and deferralNet periodic pension cost

Thousands ofU.S. dollars

1998Millions of yen

199819971996¥ 11,503

10,893(10,924)

5,459¥ 16,931

$ 87,14482,523

(82,758)41,356

$128,265

¥ 7,4378,425

(6,365)(1,961)

¥ 7,536

¥ 9,86110,198

(12,183)6,780

¥ 14,656

Secured loans are collateralized by land and buildings with a bookvalue of ¥28,001 million ($212,129 thousand) as of March 31, 1998.

The convertible bonds are convertible into common stock at the op-tion of the holders, currently at applicable conversion prices per share aslisted in the above table. These conversion prices are subject to adjust-ment in certain events including subsequent stock splits and shares subse-quently issued at less than market value.

The convertible bonds and some straight bonds outstanding as ofMarch 31, 1998 are redeemable at the option of the Company at pricesranging from 103% to 100% of the principal amount under certainconditions as provided in the applicable agreements.

Convertible bonds and the other bonds are subject to certaincovenants such as restrictions on dividends, earnings and certainadditional secured indebtedness, as defined in the agreements. The Com-pany presently estimates that none of such covenants would be applicableto the outstanding bonds.

If all convertible bonds of the Company were converted as of March31, 1998, 60,480 thousand shares of common stock would be issuable.

On April 28, 1998, the Company issued 2.075% unsecured straightbonds of ¥40,000 million ($303,030 thousand) payable in yen, due April28, 2005.

Certain loan agreements provide, among other things, that the lendermay request the Company to submit proposals for appropriations of earn-ings (including payment of dividends) to the lender for its review and ap-proval prior to presentation to the shareholders. The Company has neverbeen requested to submit such proposals for approval. In addition, as iscustomary in Japan, substantially all of the bank borrowings are subject to

general agreements with each bank which provide, among other things,that the banks may request additional security for these loans if there isreasonable and probable cause and may treat any security furnished to thebanks as well as cash deposited as security for all present and futureindebtedness. The Company has never been requested to submit such ad-ditional security.

In March and September 1995, the Company entered intoagreements with the banks under which it assigned to the banksoutstanding obligations to make payment of principal and the 7%interest on the straight bond aggregating to ¥25,000 million and madecash deposits (earning interest of 2.9%) with the banks to fulfill suchobligations. These transactions do not conform to the requirements ofSFAS No. 76, “Extinguishment of Debt”; therefore, the applicableobligations and cash deposits (time deposits) are reflected in theaccompanying balance sheets. The cash deposits are included in lease de-posits and other.

The aggregate annual maturities of long-term indebtednesssubsequent to March 31, 1999 are as follows:

Thousands ofU.S. dollars

2000200120022003 2004 and thereafterTotal

$ 726,364302,341424,303370,977414,924

$ 2,238,909

Millions of yen¥ 95,880

39,90956,00848,96954,770

¥295,536

Years ending March 31

11. PENSION AND RETIREMENT ALLOWANCES PLANSThe Company and certain of its subsidiaries have various trusteednoncontributory employees pension fund (“EPF”) plans coveringsubstantially all of their employees. Under the plans, employees are enti-tled to lump-sum payments at the time of termination or retirement, orto pension payments. Under the terms of the domestic EPF plan, theGovernment welfare pension insurance benefit is substituted andcommingled with the primary benefit provided by the plan.

The amounts of lump-sum or pension payments under the plans are

generally determined on the basis of length of service and remunerationat the time of termination.

It is the Company’s policy to fund amounts required to maintain suf-ficient plan assets to provide for accrued benefits based on a certainpercentage of wage and salary costs. The plan assets consist principally ofinterest-bearing bonds and listed equity securities.

A summary of the components of the net periodic pension cost for1996, 1997 and 1998 is as follows:

45

Actuarial present value of benefit obligations:Vested benefit obligationAccumulated benefit obligationProjected benefit obligation

Plan assets at fair valueProjected benefit obligation in excess of plan assetsUnrecognized net lossUnrecognized net asset at transition, net of amortizationAdditional minimum pension liabilityAccrued pension cost included in estimated retirement allowances

The funded status of the plans referred to above as of March 31, 1997 and 1998 are as follows:

Thousands ofU.S. dollars

1998Millions of yen

1998

¥214,823232,925284,825202,005(82,820)85,875(4,730)

(27,301)¥ 28,976

1997

¥ 186,457201,446249,894180,534(69,360)72,332(5,442)

(17,584)¥ 20,054

$1,627,4471,764,5832,157,7651,530,341(627,424)650,568(35,833)

(206,826)$ 219,515

The actuarial assumptions used in the accounting for the plans as ofMarch 31, 1996, 1997 and 1998 are:

periodic pension cost. Since there is no unrecognized prior service cost,this excess is reported as a separate component of shareholders’investment, at net of tax benefits. The net changes in pension liability ad-justment for the years ended March 31, 1997 and 1998 were both increas-es of ¥2,473 million and ¥5,746 million ($43,530 thousand), respectively.

Employees of certain subsidiaries not covered by the EPF plan anddirectors of Ricoh are primarily covered by unfunded retirementallowances plans.

Under the unfunded plans described in the preceding paragraph, theamounts required if all employees and directors had voluntarily terminat-ed their employment at each balance sheet date are fully accrued. Thepayments to directors are subject to shareholders’ approval. The totalprovisions charged to income under these plans in fiscal 1996, 1997 and1998 were ¥4,486 million, ¥4,498 million and ¥2,942 million ($22,288thousand), respectively.

Discount rateRate of increase in

compensation levelsExpected long-term rate of

return on plan assets

19983.75~7.75%

3.7~5.5%

3.75~8.5%

4.0~8.0%

3.7~6.0%

3.75~8.5%

In accordance with the provisions of SFAS No. 87, the Company wasrequired to record an additional minimum pension liability at March 31,1997 and 1998. This amount represents the excess of the accumulatedbenefit obligations over the fair value of plan assets. This excess is primar-ily attributable to a substantial reduction in the discount rate used in pen-sion calculation and represents a net loss not yet recognized as net

19964.5~9.0%

3.7~6.5%

4.0~9.0%

1997

12. SHAREHOLDERS’ INVESTMENTThe Japanese Commercial Code provides that an amount equivalent toat least 10% of cash dividends paid and other cash outlays resulting fromappropriation of retained earnings with respect to each fiscal or interimsix-month period be appropriated as a legal reserve until such reserveequals 25% of the stated capital. This reserve and additional paid-in capi-tal are not available for dividends but may be used to reduce a deficit byresolution of the shareholders or may be capitalized by resolution of theBoard of Directors.

Semiannual cash dividends are approved by the shareholders after theend of each fiscal period or are declared by the Board of Directors afterthe end of each interim six-month period. Such dividends are payable toshareholders of record at the end of each such fiscal or interim six-monthperiod. At the general meeting held on June 26, 1998, the shareholdersapproved the declaration of a cash dividend on the common stock

totaling ¥3,803 million ($28,811 thousand), which will be paid toshareholders of record as of March 31, 1998, and the relatedappropriation of retained earnings totaling ¥395 million ($2,992thousand) by a transfer to the legal reserve. In accordance with theJapanese Commercial Code, the declaration of this dividend and therelated transfer of retained earnings to the legal reserve have not been re-flected in the consolidated financial statements as of March 31, 1998.

The Japanese Commercial Code provides that at least one-half of theproceeds from shares issued at a price in excess of par value be includedin common stock. In conformity therewith, the Company has divided theprincipal amount of bonds converted into common stock equally betweencommon stock and additional paid-in capital.

46

13. PER SHARE DATAThe following table sets forth the computation of basic and diluted

earnings per share showing the reconciliation of the numerators anddenominators used for the computation.

Dividends per share shown in the consolidated statements of income havebeen presented on an accrual basis and include, in each fiscal year endedMarch 31, dividends approved or to be approved after such March 31, butapplicable to the year then ended.

14. DERIVATIVE FINANCIAL INSTRUMENTSindebtedness, the Company and certain of its subsidiaries have usedinterest rate swap agreements as a means of managing its interestexposure; at March 31, 1997 and 1998, they had ¥379,856 million and¥412,020 million ($3,121,364 thousand) of contractual amounts underinterest rate swap agreements. Interest rate swap transactions generallyinvolve the exchange of fixed and floating rate interest paymentobligations without an exchange of underlying principal amounts. Thedifferentials to be paid or received under the interest rate swapagreements are accrued.

The counterparties to the above financial instrument contracts are

The Company and certain of its subsidiaries enter into various financialinstrument contracts in the normal course of business and in connectionwith the management of its assets and liabilities.

The Company and certain of its subsidiaries enter into foreigncurrency contracts to hedge assets and liabilities denominated in foreigncurrencies. The contracted amounts outstanding as of March 31, 1997 and1998 were ¥135,883 million and ¥134,023 million ($1,015,326 thousand),respectively. Gains or losses on those contracts used to hedge existingassets and liabilities are recognized in income currently.

In connection with short-term borrowings and long-term

Average common shares outstanding

Effect of dilutive securities:Convertible bonds—

1.9%, payable in yen, due March 19981.8%, payable in yen, due March 20021.5%, payable in yen, due March 20020.35%, payable in yen, due March 2003

Diluted common shares outstanding

1998Thousands of Shares

669,959

—1,921

34,66227,810

734,352

1997

655,010

23,6292,603

39,35431,405

752,001

1996

Thousands ofU.S. dollars

19981998Millions of yen

19971996

U.S. dollars19981998

Yen19971996

651,776

23,6334,886

40,279—

720,574

Net income applicable to common shareholders

Effect of dilutive securities:Convertible bonds—

1.9%, payable in yen, due March 19981.8%, payable in yen, due March 20021.5%, payable in yen, due March 20020.35%, payable in yen, due March 2003Other

Diluted net income

¥ 21,869

28635

302——

¥ 22,492

¥ 28,922

28619

292130

(356)¥ 29,293

¥ 30,131

—14

258109

(145)¥ 30,367

$ 228,265

—106

1,955826

(1,098)$ 230,054

¥ 33.5531.21

¥ 44.1638.95

¥ 44.9741.35

$ 0.340.31

Earnings per Share:BasicDiluted

Millions of yen

47

15. COMMITMENTS AND CONTINGENT LIABILITIESAt March 31, 1998, Ricoh had outstanding contractual commitments foracquisition or construction of plant, equipment and other assets aggregat-ing ¥6,523 million ($49,417 thousand).

Ricoh is contingently liable for discounted trade notes receivable on afull recourse basis with banks of ¥410 million ($3,106 thousand) as ofMarch 31, 1998. As of March 31, 1998, Ricoh is also contingently liableas guarantor for employees’ housing loans of ¥2,181 million ($16,523thousand) and an affiliate’s borrowing of ¥1,551 ($11,750 thousand).

Ricoh made rental payments totaling ¥31,119 million in fiscal 1996,

¥37,930 million in fiscal 1997 and ¥37,160 million ($281,515 thousand) infiscal 1998, under operating lease agreements for office space andmachinery and equipment, which are primarily cancellable andrenewable.

At March 31, 1998, the Company and certain of its subsidiaries wereparties to litigation involving routine matters, such as patent rights. In theopinion of management, the ultimate liability, if any, resulting from suchlitigation will not materially affect the consolidated financial position orthe results of operations of Ricoh.

16. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS(a) Cash and cash equivalents, Time deposits, Trade receivables,Short-term borrowings, Trade payables and Accrued expensesThe carrying amounts approximate fair values because of the short matu-rities of these instruments.

(b) Marketable securities and Investment securitiesThe fair value of the marketable securities and investment securities isprincipally based on quoted market price.

(c) Installment loansThe fair value of the installment loans is based on the present value of fu-ture cash flows using estimated interest rates and maturities, discountedusing estimated market discount rates. The carrying amountsapproximate the computed fair values (see Note 5).

(d) Long-term cash depositsThe fair value of the long-term cash deposits is based on the present val-ue of future cash flows using estimated interest rates and maturities,

discounted using estimated market discount rates (see Note 10).

(e) Long-term indebtednessThe fair value of each of the long-term indebtedness instruments is basedon the quoted price in the most active market or the present value offuture cash flows associated with each instrument discounted using thecurrent borrowing rate for similar instruments of comparable maturity.

(f) Interest rate swap agreementsThe fair value of interest rate swap agreements is estimated by obtainingquotes from brokers.

(g) Foreign currency contractsThe fair value of foreign currency contracts (used for hedging purposes)is estimated by obtaining quotes from brokers.

The estimated fair value of the financial instruments as of March 31,1997 and 1998 is summarized as follows:

Marketable securities and Investment securitiesLong-term cash depositsLong-term indebtednessInterest rate swap agreements—net creditForeign currency contracts—net credit

1998Estimatedfair value

$1,056,462210,356

(2,442,826)(3,530)

(56,106)

Carryingamount

$ 1,056,462202,545

(2,238,909)(1,765)

(63,061)

Estimatedfair value

¥ 139,45327,767

(322,453)(466)

(7,406)

Carryingamount

¥ 139,45326,736

(295,536)(233)

(8,324)

Estimatedfair value

¥ 177,31128,602

(418,665)(4,727)(6,473)

Carryingamount

¥ 177,31127,707

(386,918)(144)

(7,479)

1997 1998

Thousands ofU.S. dollars

LimitationsFair value estimates are made at a specific point in time, based on relevantmarket information and information about the financial instrument.These estimates are subjective in nature and involve uncertainties and

matter of significant judgment and therefore cannot be determined withprecision. Changes in assumptions could significantly affect the estimates.

major financial institutions and, therefore, the Company and certain of itssubsidiaries are exposed to credit risk in the event of nonperformance by

counterparties. However, the Company does not anticipatenonperformance by them.

48

17. SEGMENT INFORMATIONRicoh’s industry segments are comprised of office equipment, includingcopiers and related supplies, communications and information systems,and others, including optical equipment and electronic devices. Theoffice equipment segment accounted for 85% in fiscal 1996 and 86% in

fiscal 1997 and 1998 of consolidated sales.Selected data by geographic area for the three years ended March 31,

1998 are as follows:

Sales—Total domesticLess—Transfers to foreign subsidiariesTo unaffiliated customersTotal foreign subsidiariesLess—Transfers to domestic subsidiariesTo unaffiliated foreign customers

ConsolidatedOperating income—

DomesticForeignEliminations

ConsolidatedIdentifiable assets—

DomesticForeignEliminations

TotalInvestments in and advances to affiliatesCorporate assets

ConsolidatedExport sales—

The AmericasEuropeOther

Total

Thousands ofU.S. dollars

1998

$ 8,280,144(1,870,917)6,409,2274,542,280(320,083)

4,222,197$10,631,424

$ 535,462184,303(40,167)

$ 679,598

$ 7,553,0602,513,068(696,386)

9,369,742399,197

2,810,576$12,579,515

$ 44,9629,273

56,970$ 111,205

1998Millions of yen

¥1,092,979(246,961)846,018599,581(42,251)557,330

¥1,403,348

¥ 70,68124,328(5,302)

¥ 89,707

¥ 997,004331,725(91,923)

1,236,80652,694

370,996¥1,660,496

¥ 5,9351,2247,520

¥ 14,679

1997

¥ 1,031,305(199,874)831,431512,893(28,252)484,641

¥ 1,316,072

¥ 73,90615,535(6,078)

¥ 83,363

¥ 977,189301,320

(100,384)1,178,125

56,183410,588

¥ 1,644,896

¥ 5,209927

4,291¥ 10,427

1996

¥ 951,083(138,552)812,531322,061(21,562)300,499

¥ 1,113,030

¥ 51,93112,567(9,120)

¥ 55,378

¥ 892,268245,534(60,676)

1,077,12652,939

378,454¥ 1,508,519

¥ 7,3175,217

17,870¥ 30,404

affiliated foreign distributors and are included in domestic sales to unaffil-iated customers to comply with SFAS No. 14 on financial reporting forsegments.

Intercompany sales between geographic areas are made at cost plusprofit. Operating income by geographic area is sales less expenses relatedto the area’s operating revenue. Identifiable assets are those associatedwith the operations of each geographic area. Export sales are sales to un-

Research and development costsAdvertising costs

18. RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS The following amounts were charged to costs and expenses for the three years ended March 31, 1998:

Thousands ofU.S. dollarsMillions of yen

$530,212166,917

¥ 69,98822,033

¥ 64,29718,551

1997¥ 58,992

14,510

1996 19981998

49

To the Shareholders and the Board of Directorsof Ricoh Company, Ltd.:

We have audited the accompanying consolidated balance sheets of RICOH COMPANY, LTD. (aJapanese corporation) and consolidated subsidiaries as of March 31, 1997 and 1998, and the relatedconsolidated statements of income, shareholders’ investment and cash flows for each of the threeyears in the period ended March 31, 1998, expressed in yen. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the finan-cial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audits provide a reason-able basis for our opinion.

Generally accepted accounting principles in the United States of America require that financialstatements include information concerning a company’s operations in different industries andgeographical areas. The Company has not presented such segment information as would be appro-priate in its consolidated financial statements.

In our opinion, except for the omission of segment information referred to in the precedingparagraph, the consolidated financial statements referred to above present fairly, in all materialrespects, the financial position of Ricoh Company, Ltd. and its consolidated subsidiaries as of March 31, 1997 and 1998, and the results of their operations and their cash flows for each of thethree years in the period ended March 31, 1998, in conformity with accounting principles generallyaccepted in the United States of America (see Note 2).

In our opinion, the translated amounts in the accompanying consolidated financial statements trans-lated into U.S. dollars have been computed on the basis set forth in Note 3.

Tokyo, JapanJune 26, 1998

R E P O R T O F I N D E P E N D E N T P U B L I C A C C O U N T A N T S

50

R I C O H’S O V E R S E A S N E T W O R KAs of March 31, 1998

THE AMERICAS ProductionMexico

Tonermex, S.A. de C.V.United States

Ricoh Electronics, Inc.

Sales and OtherArgentina

Gestetner S.A.C.I.Brazil

Gestetner do Brazil S.A. Canada

Ricoh Canada Inc. Chile

Gestetner Chile S.A. Colombia

Gestetner Colombia S.A. Mexico

Ricoh Mexicana, S.A. de C.V. Peru

Gestetner S.A. Puerto Rico

NRG Distribution Corporation United States

Ricoh CorporationRicoh Finance Corporation Ricoh Silicon Valley, Inc.Ricoh Latin America, Inc. Savin Corporation

Uruguay Gestetner LimitadaNRG Latin America S.A. NRG South America S.A.

Venezuela Gestetner S.A.

EUROPE, AFRICA, AND THE MIDDLE EAST ProductionFrance

Ricoh Industrie France S.A. United Kingdom

Ricoh UK Products Ltd. Ricoh Wellingborough Products Ltd.GR Advanced Materials Ltd.

Spain RIKA Media Technologies Spain, S.A.

Sales and OtherAustria

Ricoh Austria GmbHGestetner Buromaschinen-Verkaufsgesellschaft m.b.H

Belgium NRG Belgium S.A.

Denmark Gestetner A/S

France Ricoh France S.A. Gestetner S.A. NRG France S.A. Rex-Rotary S.A.

Germany Ricoh Deutschland GmbH NRG Office System GmbH

Guernsey NRG International Limited

Hungary Ricoh Hungary Kft.

Ireland Gestetner Ireland Limited

Israel Gestetner (Israel) Limited

Italy Ricoh Italia S.p.A. NRG Italia S.p.A.

51

Netherlands Ricoh Europe B.V. Ricoh Nederland B.V. Ricoh Finance Nederland B.V. Kulk & Kramer Kantoorsystemen BV NRG Benelux BV

Norway Ricoh Norge A.S.

PolandRicoh Polska Sp.zo.o.

RussiaMitsui-Ricoh CIS Ltd.

South AfricaGestetner (Proprietary) Limited

Spain Ricoh España S.A.NRG Comunicaciones S.A.

Sweden Gestetner AB

United Kingdom Ricoh UK Ltd. Gestetner Holdings PLC Midland Copying Consultants Limited NRG Group Limited

ZimbabweGestetner (Private) Limited

ASIA AND OCEANIAProduction China

Ricoh Asia Industry (Shenzhen) Ltd. Ricoh Dianzhuang (Shenzhen) Electronics Co., Ltd. Ricoh International (Shanghai) Co., Ltd.Shanghai Ricoh Facsimile Co., Ltd. Dong Guan Tailien Optical Co., Ltd.

Korea Sindo Ricoh Co., Ltd.

Taiwan Taiwan Ricoh Co., Ltd.

Sales and OtherAustralia

Ricoh Australia Pty, Ltd. Ricoh Office Automation Pty Ltd.Hanimex Pty, Limited Rabbit Photo Holdings Limited

Bangladesh Gestetner Bangladesh Limited

China Ricoh Electronic Technology Ltd. (Shanghai) Ricoh Electronic Technology Ltd. (Beijing)

Hong Kong Ricoh Hong Kong Ltd.Ricoh Asia Industry Ltd.Ricoh Photo Products (Asia) Ltd. Ricoh Component (H.K.) Ltd. Guastalla Trading Co., Ltd. Gestetner China Ltd. Inchcape NRG Ltd. Inchcape NRG H.K. Limited

IndiaRPG Ricoh Ltd.

(Ricoh India Limited from May 21, 1998)Gestetner (India) Limited

MalaysiaInchcape NRG (Malaysia) Sdn. Bhd.

New Zealand Ricoh Office Automation Ltd.Hanimex (NZ) Limited Camera House Limited Viko New Zealand Limited

Pakistan Gestetner (Private) Limited

PhilippinesInchcape NRG (Philippines), Inc.

SingaporeRicoh Asia Pacific Pte. Ltd.Inchcape NRG (Singapore) Pte Ltd.

ThailandInchcape NRG (Thailand) Ltd.

52

As of March 31, 1998

Domestic Ricoh Optical Industries Co., Ltd. Tohoku Ricoh Co., Ltd. Hasama Ricoh, Inc.Ricoh Unitechno Co., Ltd. Ricoh Seiki Co., Ltd. Ricoh Microelectronics Co., Ltd. Ricoh Keiki Co., Ltd. Hokkaido Ricoh Co., Ltd. Miyagi Ricoh Co., Ltd. Niigata Ricoh Co., Ltd. Nagano Ricoh Co., Ltd. Gunma Ricoh Co., Ltd. Tochigi Ricoh Co., Ltd. Saitama Ricoh Co., Ltd. Ibaraki Ricoh Co., Ltd. Chiba Ricoh Co., Ltd. Tokyo Ricoh Co., Ltd. Nishi Tokyo Ricoh Co., Ltd.

B O A R D O F D I R E C T O R SAs of June 26, 1998

Takekuni MiyataKiyoshi SakaiTadatoshi SakamakiTakashi NakamuraKenji Hatanaka Etsuo Kobayashi

Statutory AuditorsAkio Miyazaki Minoru Tajima Hisaaki Koga Katsumi Yamamoto Kenji Matsuishi

ChairmanHiroshi Hamada

PresidentMasamitsu Sakurai

Executive Managing DirectorsKazuhiro Sakai Haruo KamimotoTatsuo Hirakawa

Managing Directors Akira Suzuki Naoto ShibataKoichi EndoYoshinori SakataMasaaki IidaMasami Takeiri Makoto Hashimoto

DirectorsTaisaburo Homae Masayuki Matsumoto Terumoto Nonaka Atsumichi Nagatomi

Kanagawa Ricoh Co., Ltd. Shizuoka Ricoh Co., Ltd. Aichi Ricoh Co., Ltd. Kyoto Ricoh Co., Ltd. Osaka Ricoh Co., Ltd. Hyogo Ricoh Co., Ltd. Hiroshima Ricoh Co., Ltd. Shikoku Ricoh Co., Ltd. Fukuoka Ricoh Co., Ltd. Ricoh Information Systems Co., Ltd. NBS Ricoh Co., Ltd. Ricoh Technonet Co., Ltd. (Tokyo) Ricoh Technonet Co., Ltd. (Osaka) Ricoh Logistics System Co., Ltd. Ricoh Leasing Company, Ltd. Ricoh Engineering Co., Ltd. Giga Networks, Inc. Parts Components Systems Co., Ltd.

Overseas Ricoh Electronics, Inc. Ricoh UK Products Ltd. GR Advanced Materials Ltd.Ricoh Industrie France S.A. Taiwan Ricoh Co., Ltd. Ricoh Asia Industry (Shenzhen) Ltd. Ricoh Corporation Ricoh Europe B.V. Ricoh Deutschland GmbH Ricoh UK Ltd. Gestetner Holdings PLCRicoh España S.A.Ricoh France S.A. Ricoh Italia S.p.A. Ricoh Hong Kong Ltd. Ricoh Asia Industry Ltd.Ricoh Photo Products (Asia) Ltd. Ricoh Asia Pacific Pte. Ltd. Ricoh Finance Nederland B.V.

M A J O R C O N S O L I D A T E D S U B S I D I A R I E S

53

Ricoh Company, Ltd.

Corporate Headquarters15-5, Minami-Aoyama 1-chome,Minato-ku, Tokyo 107-8544, JapanTel: (81) 3-3479-3111Fax: (81) 3-3403-1578

Date of EstablishmentFebruary 6, 1936

Number of Shares Authorized1,000,000,000 shares

Number of Shares Issued (as of March 31, 1998)691,546,422 shares

Stock ListingsTokyo, Osaka, Nagoya, Fukuoka,Sapporo, Hiroshima, Niigata, Kyoto,Amsterdam, Frankfurt, Paris

Independent Public AccountantsArthur Andersen

Transfer Agent for Common StockThe Chuo Trust and Banking Co., Ltd.7-1, Kyobashi 1-chome,Chuo-ku, Tokyo 104-0031, Japan

Depositary and Agent for American Depositary ReceiptsThe Bank of New York101 Barclay Street, 22 WestNew York, NY 10286, U.S.A.Tel: 212-815-2042US toll free: 1-888-269-2377Home Page: http://www.bankofny.com/adr

Listing in the Amsterdam Security Account System on Amsterdam Stock ExchangeNominee Amsterdam Stock Exchange

Depositaries and Agents for Global Bearer CertificatesDeutscher Kassenverein Aktiengesellschaft (DKV)Commerzbank Aktiengesellschaft

Clearing House and Sponsoring Banks for Listing on Bourse de ParisSociété Interprofessionnelle pour la Compensation des Valeurs Mobilières (SICOVAM)Crédit LyonnaisNomura France

C O R P O R A T E D A T A

For further information and additional copies of our annual report and other publications,please write to the Public Relations Department at our corporate headquarters.

Ricoh Corporation5 Dedrick Place, West Caldwell,

New Jersey 07006, U.S.A.Tel: (1) 973-882-2000 Fax: (1) 973-882-2506

Home Page: http://www.ricoh-usa.com/

Ricoh Europe B.V.Groenelaan 3,

P.O. Box 114, 1186 AAAmstelveen, Netherlands

Tel: (31) 20-5474111 Fax: (31) 20-5474154

Home Page: http://www.ricoh-europe.com/

Ricoh Asia Pacific Pte Ltd.#15-01/02 The Heeren, 260 Orchard Road,

Singapore 238855Tel: (65) 830-5888 Fax: (65) 830-5830

Ricoh Hong Kong Ltd.23/F China Overseas Building,

139 Hennessy Road, Wan Chai, Hong KongTel: (852) 2862-2888 Fax: (852) 2866-1120

RICOH COMPANY, LTD.15-5, Minami-Aoyama 1-chome,

Minato-ku, Tokyo 107-8544, JapanTel: (81) 3-3479-3111 Fax: (81) 3-3403-1578

Home Page: http://www.ricoh.co.jp/

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