762, Mesaki-cho, Fuchu,
Hiroshima 726-8628, Japan
Telephone: 81-847-41-1111
http://www.ryobi-group.co.jp/

RYOBI LIMITED ANNUAL REPORT 2006

ANNUAL REPORTFor the year ended March 31, 2006

2 0 06This annual report was printed by a Ryobi printing press using 100% recycled paper and soybean ink.

Printed in Japan
Copyright©2006 Ryobi Limited. All Rights Reserved.

PROFILE

CORPORATE INFORMATION

Since its establishment as a die casting manufacturer in December 1943, Ryobi Limited has

CORPORATE DATA

accumulated innovative technologies by making components for automobiles, electronics,

Company NameRYOBI LIMITED

telecommunications and other industries. Ryobi has leveraged these technologies and drawn on its

Established
December 16, 1943

experience to diversify into the manufacture of printing equipment, power tools and builders'
hardware. Ryobi is all around you, making an enjoyable, comfortable daily lifestyle possible.

Head Office762, Mesaki-cho, Fuchu, Hiroshima 726-8628, Japan
Telephone: 81-847-41-1111

Major Products
Die cast products
Printing equipment(offset printing presses, page layout software, etc.)
Power tools(electric power tools, lawn and garden equipment, etc.)
Builders’ hardware(door closers, hinges, architectural hardware, etc.)

Tokyo Branch
5-2-8, Toshima, Kita-ku, Tokyo 114-8518, Japan
Telephone: 81-3-3927-5541
Toranomon Office
Toranomon Central Building
1-7-1, Nishi-Shinbashi, Minato-ku, Tokyo 105-0003, Japan
Telephone: 81-3-3927-5541

MANAGEMENT MEMBERS(As of June 29, 2006)

66.7%
DIE CASTINGS
As a world-leading die casting manufacturer,
Ryobi supplies various industries with die castproducts such as automobile components
including cylinder blocks and transmission
cases.

Net Salesby Segment
for Fiscal 2006

CORPORATE AUDITORSStanding Corporate Auditor
Corporate Auditor
Outside Corporate Auditors

14.4%
POWER TOOLS AND
BUILDERS’ HARDWARE
Ryobi provides an extensive range ofpower tools and lawn and garden
equipment for both professional anddo-it-yourself needs, as well as builders'
hardware such as door closers to enhancesafety and comfort in homes and offices.

18.9%

Ryobi offers high-precision, multi-functional offset
printing presses, and develops total printing systems
for all stages of printing from prepress to press andpost-press.

CONSOLIDATED FINANCIAL HIGHLIGHTS 1

FINANCIAL SECTION 6

TOPICS 4

CORPORATE INFORMATION 27

Number of Shares Issued
171,230,715

Items containing forward-looking statements such as performance forecasts, future trends, and strategies are based upon management's assumptions inlight of the information available as of the end of the fiscal year under review and may contain various risks and uncertainties. The Ryobi Group cautions that

Printing equipment and related product sales
Power tools and lawn and garden equipment sales
Die casting manufacturing
Die casting manufacturing
Cast aluminum and die casting manufacturing and sales
Secondary aluminum alloy bullion manufacturing and sales
Power tools and lawn and garden equipment manufacturing and sales
Die casting manufacturing and sales
Die casting manufacturing and sales
Die and die casting manufacturing and sales(Founded in April 2005, production operations planned to begin in November 2006)
Power tools, lawn and garden equipment and builders’ hardware manufacturing and sales
Financial operations

SHAREHOLDER INFORMATION(As of March 31, 2006)

Forward-Looking Statements

Corporate Officers

Hiroshi Urakami
Susumu Yoshikawa
Takao Tanaka
Takashi Yokoyama
Mikio Kamura
Shiro Muroya
Koji Ishii
Akira Urakami
Kenjiro Suzuki
Kuniyuki Ito
Naomichi Honkawa
Kazuaki Danjo
Shoji Osawa
Hideki Domoto

MAJOR CONSOLIDATED SUBSIDIARIES

Ryobi Dalian Machinery Co., Ltd. (P.R.C.)
Ryobi Finance Corporation (U.S.A.)A MESSAGE FROM THE MANAGEMENT 2CORPORATE OFFICERS
Chief Executive Officer
Chief Operating Officer
Executive Corporate Officers

Shozo Kobayashi
Hiroaki Takahashi
Kunihiro Toyota
Tairo Katoh

Ryobi Imagix Co. (Japan)
Ryobi Sales Co. (Japan)
Ryobi Mirasaka Co. (Japan)
Ryobi Mitsugi Co. (Japan)
Tokyo Light Alloy Co., Ltd. (Japan)
lkuno Co. (Japan)
Ryobi Power Tool Co. (Japan)
Ryobi Die Casting (USA), Inc. (U.S.A.)
Ryobi Aluminium Casting (UK), Limited (U.K.)
Ryobi Die Casting Dalian Co.,Ltd. (P.R.C.)

PRINTING EQUIPMENTCONTENTSCORPORATE GOVERNANCE 5

BOARD OF DIRECTORS
Chairman and Representative Director
Hiroshi Urakami
President and Representative Director
Susumu Yoshikawa
Directors
Takao Tanaka
Takashi Yokoyama
Mikio Kamura
Shiro Muroya
Koji Ishii
Akira Urakami
Kenjiro Suzuki
Outside Director
Satoshi Ohoka

Listing
Common Stock—Tokyo

Transfer Agent
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi,1-chome Chiyoda-ku,
Tokyo 100-8212, Japan

its actual actions and performance may differ significantly from these forward-looking statements due to numerous factors outside of Group's control suchas, but not limited to: general economic conditions, the business environment, trends in market demand and foreign exchange rates.
RYOBI LIMITED ANNUAL REPORT 2006

27

CONSOLIDATED FINANCIAL HIGHLIGHTS(For the years ended March 31, 2006, 2005 and 2004)

Thousands of
U.S. dollars(Note 2)Millions of yen

2006

2005

2004

2006

Net sales ................................................................................

¥171,232¥157,964¥155,251$1,457,666

Operating income..................................................................

13,214

10,834

10,347

112,488

Net income ............................................................................

8,636

6,581

12,81273,517

Total assets............................................................................

¥177,865¥157,420¥160,574$1,514,131

Total shareholders’ equity.....................................................

66,75655,29450,040568,281

For the fiscal period:

As of fiscal year-end:

U.S. dollars(Note 2)Yen

Per share data:
Net income ...............................................................................

¥Cash dividends ..........................................................................

51.31

¥

10.00

39.33

¥

76.40

7.50

$

0.437

7.50

0.085

Notes: 1. Net income per share figures are based on the weighted average number of shares outstanding each year.
2. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader at ¥117.47=US$1, the exchange rate prevailing on March 31, 2006.

NET SALESOPERATING INCOME

NET INCOME

Millions of yen

Millions of yen

Millions of yen

200,000

15,00015,000184,282
13,214

171,232
156,139 156,458 155,251 157,964

160,000

10,347

10,139120,000

9,000

80,0006,000

12,812
12,00012,00010,834

9,000

8,452

8,636

6,581

6,364
6,000

4,471

0

3,000 2,907

3,000

40,000

2001

2002

2003

2004

2005

2006

0

2001

2002

2003

2004

2005

RYOBI LIMITED ANNUAL REPORT 2006

2006

0

2001

2,081

2002

2003

2004

2005

2006

1

A MESSAGE FROM THE MANAGEMENT

Hiroshi Urakami

Susumu Yoshikawa

Chairman and CEO

President and COO

CREATE A SOUND AND DYNAMICCORPORATION THROUGH TECHNOLOGY,
TRUST AND CHALLENGE

Guided by its corporate philosophy, “Create a sound and dynamic corporation throughtechnology, trust and challenge,“ the Ryobi Group aims to become established as an
indispensable part of society by creating innovative, top-quality products and services thatmeet the needs of customers and society at large. While developing its Die Castings
Business in tandem with its finished products, Ryobi continues to make every effort toreinforce market competitiveness and improve its earnings power in order to become acompany of greater presence in each of its business fields.
Amid the growing interest in corporate social responsibility (CSR), the Ryobi Group
regards the implementation of its corporate philosophy as CSR promotion itself. With this in

2

RYOBI LIMITED ANNUAL REPORT 2006

mind, Ryobi will strive for the thorough implementation of corporate governance including
appropriate disclosure of information, compliance with statutory regulations, risk management and other related activities.
During fiscal 2006, ended March 31, 2006, the Japanese economy remained on track
toward a gradual recovery, owing to increased capital investment and healthier employment
conditions on the back of improved corporate earnings. Future trends appear unpromising,
however, given raw material prices that spiraled upward and continued to hover at highlevels, combined with stagnant performance at U.S.-based automobile manufacturers.
Under these circumstances, the Ryobi Group implemented various measures including
advancing aggressive marketing activities, developing new products responsive to customer
needs, cutting costs and expenses, and increasing operational efficiency.
During the fiscal year under review, Ryobi experienced growth in revenues and earnings.
Consolidated net sales rose 8.4% from the previous fiscal year to ¥171.2 billion. Domestic
net sales increased 7.8% to ¥123.7 billion, while overseas net sales climbed 10.0% to ¥47.5
billion. On the earnings front, operating income jumped 22.0% to ¥13.2 billion and net
income surged 31.2% to ¥8.6 billion.
Sales in both the Die Castings Business and the Printing Equipment Business were brisk,
contributing to increased revenues for the second consecutive year. Ryobi achieved recordhigh operating income and the fourth consecutive year of growth, owing to increased sales
and its efforts toward cost reduction. Net income grew for the first time in two years.
In the outlook for fiscal 2007, ending March 31, 2007, there are several concerns including escalating oil prices in the global market, increased raw material prices that continue tohover at high levels, trends in the U.S. economy and the fluctuation of exchange rates. Amidsuch a severe operating environment, Ryobi will improve its product development,
marketing and production capabilities. Moreover, Ryobi will strive to reinforce its market
competitiveness and earnings power through further efforts toward cost reduction andproductivity improvement.
As Ryobi continues to expand and intensify its efforts to be a sound and dynamic
corporation, we humbly ask for your continued understanding and support.

June 2006

Hiroshi Urakami

Susumu Yoshikawa

Chairman and CEO

President and COO

RYOBI LIMITED ANNUAL REPORT 2006

3

TOPICSDIE CASTINGSIn March 2006, Ryobi Aluminium Casting (UK), Limited
made its debut at the EUROGUSS 2006 die casting exhibition held in Germany. Ryobi introduced its state-of-the-art
technologies with presentations of automobile components such as engine blocks and subframes. Future sales
increases are anticipated as the exhibition enjoyed an
excellent turnout with visitors from around Europe andother parts of the world.
Exhibiting at EUROGUSS 2006

PRINTING EQUIPMENT
Ryobi has been expanding the factory building at its
Hiroshima East Plant since September 2005 in order toimprove production capacity for medium-size offset
printing presses. A new facility was completed in April
2006 and commenced printing press assembly. Full-scale
operations are scheduled to be implemented in October
2006.

New facility for production of offset printing presses

POWER TOOLS AND BUILDERS’ HARDWARE
During the fiscal year under review, Ryobi released inJapan the professional-use, cordless impact driver BID-140
that utilizes a 14.4V lithium-ion battery. Its strong torquerealizes speedy work, and the torque can be adjusted to
two levels depending on the type of screws and material.
Furthermore, the BID-140 is equipped with three doublecolored LED lights for efficient work in dark places.
Ryobi also introduced to market a new door closer fordoors that are used in combination with indoor screens.

Cordless impact driver BID-140

Recently in Japan, kitchen doors fitted with fly screens on
the inside have been increasing in number. The gap
between the door and fly screen is narrow, making it
difficult for conventional door closers to be installed.
Ryobi's new product, however, minimizes components toenable installation within this narrow gap.

4

RYOBI LIMITED ANNUAL REPORT 2006

Door closer S1002PAM

CORPORATE GOVERNANCE
Based on its corporate philosophy, "Create a sound and dynamic corporation through technology, trust and challenge,"
Ryobi carries out its social responsibility in pursuit of the creation of sustainable value and a better society. This is fundamental to the general management of the Ryobi Group. Social responsibility does not end at offering valuable goods
and services; it entails the provision of active disclosure of information, compliance with statutory regulations, risk management and social contribution activities. In order to foster and develop ourselves in accordance with this corporate
philosophy while carrying out such social responsibilities, it is important to establish and implement a corporate
governance system that is appropriate for Ryobi.

CORPORATE GOVERNANCE STRUCTURE
Management Structure

Compliance Structure

Ryobi has adopted the corporate auditor system. In June

Ryobi established the Ryobi Compliance Committee to2000, Ryobi introduced a corporate officer system, inassure that corporate activities are conducted equitably,

which all directors other than an outside director concur-

ethically, and in compliance with statutory regulations,

rently hold positions as corporate officers. After carefully

according to Ryobi's Code of Conduct and corresponding

examining the efficacy of the outside director, Ryobi

Standards of Conduct.

appointed its first in June 2006.
The Board of Directors implements decision-making

Risk Management Structure

related to important matters and supervision of the execu-

Ryobi has drawn up risk management regulations and ation of operations. The Corporate Operating Committee,

manual for management of individual risks in order to pre-composed primarily of corporate officers, reviews thevent the occurrence of risk and to ensure a rapid response

progress of the execution of operations. Along with theseto such occurrences. In addition, Ryobi established thestructures, Ryobi established the Compensation

Risk Management Office and the Risk Countermeasure

Committee to make decisions regarding remuneration of

Headquarters to formulate countermeasures when risks

directors, and the Personnel and Organization Committee

occur and to respond in a timely and appropriate manner.

to nominate directors and corporate officers for optimizing
the placement and nurturing of personnel, and the func-

Ryobi continues its efforts to establish a better corporate

tionality of the organization.

structure with an eye on social trends, complying with
relevant rules and regulations.

G en era l M e e t i n g o f S h a r e h o l d e r s

Board of Directors(10 Directors
one of which is an outside director)

Compensation Committee
Personnel andOrganization Committee

Audit

Board of Corporate Auditors

Independent Auditors(Four Corporate Auditors
two of which are outside auditors)

Direction andSupervision
Accounting Audit

Corporate Operating Committee(14 Corporate Officers)

Ryobi Compliance Committee
Risk Countermeasure
Headquarters (as needed)
Risk Management Office(permanent)

Legal and Audit Section(for internal auditing)Operational Audit

Each Business Division
and Group Companies

RYOBI LIMITED ANNUAL REPORT 2006

5

FINANCIAL SECTIONFISCAL PERIOD COMPARATIVE SUMMARY
RYOBI LIMITED AND CONSOLIDATED SUBSIDIARIES(For the years ended March 31)

Millions of yen

2006

2005

2004

2003

2002

2001

Net sales ..............................................

¥171,232¥157,964¥155,251¥156,458¥156,139¥184,282

Cost of sales ........................................

135,088

125,157

123,749

126,536

126,113

144,567

Gross profit ..........................................

36,14432,80731,50229,92230,026

39,715expenses.............................................

22,93021,973

21,155

21,47023,662

29,576

Operating income ...............................

13,214

10,834

10,347

8,452

6,364

10,139

Income taxes .......................................

4,206

3,902

3,608

1,504

2,188

(1,150)Net income ..........................................

8,636

6,581

12,812

4,471

2,081

2,907

Total assets..........................................

¥177,865¥157,420¥160,574¥165,487¥165,401¥193,001

Total shareholders’ equity ..................

66,75655,29450,04038,36633,37929,501

Interest-bearing debt ..........................

39,82344,502

53,63869,731

77,76396,899For the fiscal period:

Selling, general and administrative

As of fiscal year-end:

Yen

Per share data:
Net income ..........................................

¥ 51.31¥ 39.33¥ 76.40¥ 26.26¥ 12.19¥ 17.04

Shareholders’ equity ...........................

398.35330.62299.05227.84195.55172.81

Cash dividends ....................................

10.00

7.50

7.50

—

—

—

4.1

5.5

%

Other data:
Operating income margin ..................

7.7

6.9

6.7

5.4

Net income margin .............................

5.0

4.2

8.3

2.9

1.3

1.6

Return on assets (ROA) ......................

5.2

4.1

7.9

2.7

1.2

1.3

Return on equity (ROE) .......................

14.2

12.5

29.0

12.5

6.6

9.2

Shareholders’ equity ratio...................

37.5

35.1

31.2

23.2

20.2

15.3

Asset turnover ratio (times) ................

1.02

0.99

0.95

0.95

0.87

0.85

Millions of yen

Capital expenditure .............................

¥ 11,232¥ 7,595

5,773¥ 4,117¥ 3,943¥ 4,541

Depreciation and amortization ...........

6,067

5,439

¥

5,201

5,631

6,198

7,002

Free cash flow .....................................

7,196

8,076

15,773

12,027

12,58428,032

Number of employees (persons) .......

5,464

5,334

5,364

5,669

6,090

6,480

Notes: 1. Net income per share figures are based on the weighted average number of shares outstanding each year.
2. Cash dividends per share are the amounts applicable to the respective years, including dividends to be paid after the end of the year.

6

RYOBI LIMITED ANNUAL REPORT 2006

MANAGEMENT’S DISCUSSION AND ANALYSISANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS(1) Summary of Significant Accounting Policies
The consolidated financial statements of the Ryobi Group have been prepared in conformity with accounting principles generally accepted in Japan. The financial statements of overseas subsidiaries have been prepared in conformity with accounting
principles generally accepted in each country.
(2) Analysis of Operating Results for the Fiscal Year Ended March 31, 2006
Net Sales
Ryobi's consolidated net sales increased compared with the corresponding period of the previous fiscal year. Despite a drop insales in the Power Tools and Builders' Hardware Business, sales were up in both the Die Castings and the Printing Equipment
Businesses.
In the Die Castings Business, Ryobi saw increased revenues stemming from robust sales to domestic automobile manufacturers. The Printing Equipment Business also increased revenues, owing to strong export sales of medium-size offset
printing presses (for B2, A2 and B3 paper sizes), small-size printing presses (for A3 paper size) and digital printing presses. In
the Power Tools and Builders' Hardware Business, though sales of builders' hardware increased, export sales of power tools
were down, resulting in an overall decline in revenues.
Consequently, consolidated net sales for the fiscal year under review rose 8.4% year on year to ¥171,232 million.
Operating Income
Ryobi enjoyed growth in operating income, reflecting the increase in net sales and efforts to reduce input costs. In the fiscal
year under review, the cost of sales to net sales ratio was 78.9%, improving 0.3% compared with previous year, despite theimpact from the increase in raw material costs. In line with the sales increase, packing and transport costs rose in the selling,
general and administrative expenses category, and research and development costs also increased.
By business segment, overall profit climbed in the Die Castings Business, due to increased sales and efforts to reduce
input costs and improve productivity against external pressures such as a rise in aluminum prices. Earnings rose in the Printing
Equipment Business, from increased sales and accelerated cost reductions. In the Power Tools and Builders' Hardware
Business, however, Ryobi saw a decline in earnings due to stagnant sales and increased production costs.
As a result, operating income was up 22.0% year on year to ¥13,214 million, marking record-high profit and the fourth consecutive year of growth.

NET SALESOPERATING INCOME

Millions of yen

Millions of yen

200,000

15,000184,282
13,214

177,232
160,000

156,139

156,458

155,251

157,964

12,00010,347

10,139120,0000

9,000

80,0000

6,000

40,0000

3,000

10,834

8,452

6,364

0

2001

2002

2003

2004

2005

2006

0

2001

2002

2003

2004

RYOBI LIMITED ANNUAL REPORT 2006

2005

2006

7

Net Income

NET INCOME

An increase in other income was attributed to retirement benefit payment to directors that did not recur in the fiscal year

Millions of yen

15,000under review, and a smaller loss on devaluation of investment

12,812in securities. As a result of these factors, consolidated net
12,000income for the period surged 31.2% to ¥8,636 million.

9,000

8,636

Operating Results by Business Segment

6,581
6,000

Die Castings

4,471

Sales in the Die Castings Business climbed 8.4% year on year
3,000

to ¥114,320 million, while operating income significantly

2,907
2,081

increased 26.3% to ¥7,162 million. The ratio of operating0

income to sales was 6.3%, compared with 5.4% in the previ-

2001

2002

2003

2004

2005

ous fiscal year.
In the fiscal year under review, Ryobi experienced steadysales to domestic automobile manufacturers. Despite theimpact from the high cost of raw materials including aluminum, overall operating income increased due to increased
sales and initiatives to reduce input costs and improve productivity.
NET SALES BY BUSINESS SEGMENT
DIE CASTINGSPRINTING EQUIPMENT

Millions of yen

POWER TOOLS AND
BUILDERS’ HARDWARE

Millions of yen

Millions of yen

100,000

100,000

80,00080,00080,00060,00060,00060,00040,00040,00040,000120,000

114,320
107,762 106,309 105,491

107,754
99,099100,000

120,000

120,000

50,83420,0000

20,000

2001

2002

2003

2004

2005

2006

0

23,173 22,693 22,741 24,349

2001

2002

2003

2004

27,69432,307

32,77825,046 23,799 24,779 24,605

20,000

2005

2006

0

2001

2002

2003

2004

2005

2006

OPERATING INCOME BY BUSINESS SEGMENT
DIE CASTINGSPRINTING EQUIPMENT

Millions of yen

POWER TOOLS AND
BUILDERS’ HARDWARE

Millions of yen

10,000Millions of yen

10,00010,000

8,099
8,000

7,162

8,000

8,000

6,000

6,000

6,149
6,000

5,509

5,670

5,669

4,285
4,000

4,000

4,000

3,051
2,272
2,000

2,000

743
0

8

2001

2002

2003

2004

2005

2006

0

2,000

1,289

2001

1,866

638
2002

1,581

2,024

2,113

2004

2005

1,767

555
2003

2004

2005

2006

RYOBI LIMITED ANNUAL REPORT 2006

0

2001

2002

2003

2006

2006

Printing Equipment
Sales in the Printing Equipment Business rose 16.7% compared with the previous fiscal year to ¥32,307 million. Operating
income jumped 40.5% to ¥4,285 million, resulting in a ratio of operating income to sales of 13.3%, up from 11.0% in the previous fiscal year.
Sales in this segment were bolstered by a favorable performance in export markets of medium-size offset printing presses(for B2, A2 and B3 paper sizes), small-size printing presses (for A3 paper size), and digital printing presses. Increased profit was
attributed to sales growth and accelerated efforts toward cost reduction.
Power Tools and Builders’ Hardware
Sales in the Power Tools and Builders' Hardware Business edged down 0.7% to ¥24,605 million, while operating income
declined 16.4% to ¥1,767 million. The ratio of operating income to sales stood at 7.2%, down from 8.5% in the previous fiscal
year.
Despite increased sales in builders' hardware, export sales of power tools decreased, resulting in an overall decline in revenues. Profit in this segment was down due to weak sales and increased production costs.
(3) Analysis of Capital Resources and Liquidity
Total Assets, Total Liabilities and Shareholders' Equity
Total assets as of March 31, 2006 increased ¥20,445 million compared with the corresponding period of the previous fiscal
year to ¥177,865 million. The major components were an increase in notes and accounts receivable along with inventories in
the current assets category, and an increase in property, plant and equipment, as well as investments in securities due to risingstock prices in the market.
Total liabilities rose ¥8,966 million year on year to ¥110,168 million, owing to an increase in notes and accounts payable.
Excluding discounted notes receivable, interest-bearing debt decreased ¥4,679 million from a year earlier to ¥39,823 million.
Total shareholders' equity amounted to ¥66,756 million as of March 31, 2006, an increase of ¥11,462 million from the previous fiscal year, reflecting the increase in net income and net unrealized gain on available-for-sale securities. Accounting forthese factors, the shareholders' equity ratio was 37.5%.

TOTAL ASSETS &TOTAL SHAREHOLDERS’ EQUITYOPERATING INCOME MARGIN &NET INCOME MARGIN

ROE & ROA

Millions of yen%%

200,000 193,001

10

30

29.0

177,865
165,401 165,487

8.3

160,574 157,420

25

8150,000

6.9
6

7.7
20

6.7
5.5

100,000

15

5.4
5.0
4

50,04050,00029,50133,37912.5
1055,294

9.2
7.9

2.9

38,366

2

1.6

14.2

12.5

4.2

4.1

66,756

6.6

5

1.3

2.7
0

2001

2002

2003

2004

2005

2006

0

2001

2002

2003

TOTAL ASSETSOPERATING INCOME MARGIN

TOTAL SHAREHOLDERS’ EQUITYNET INCOME MARGIN

2004

2005

RYOBI LIMITED ANNUAL REPORT 2006

2006

0

1.3

1.2

2001

2002

ROE

ROA

2003

4.1

2004

2005

5.2

2006

9

Liquidity
The Ryobi Group’s free cash flow (the sum of net cash from operating activities and net cash from investing activities)
decreased ¥880 million to ¥7,196 million, from ¥8,076 million in the previous fiscal year. This was mainly attributed to a ¥1,611
million increase in expenses for the purchase of property, plant and equipment, representing capital expenditure towardmachinery and equipment. On the other hand, net cash provided by operating activities was up ¥978 million due to the rise in
net income.
In net cash used in financing activities, repayment of interest-bearing debt decreased ¥3,806 million year on year, owing toincreased capital expenditure.
The Ryobi Group has positioned adequate cash flows as needed for its financial strategy. In principle, the Ryobi Group utilizes cash generated from operating activities as the primary source of its capital expenditure while taking into consideration
overall investment efficiency.
Major cash flow indicators and trends are summarized in the following table:
2006

2005

Shareholders’ equity ratio (%).........................................................................................

37.5

35.1

Shareholders’ equity ratio at fair market value (%)........................................................

81.5

51.8

Interest-bearing debt—repayment years.......................................................................

2.6

3.1

Interest coverage ratio (%)..............................................................................................

22.5

19.5

Notes: Shareholders’ equity ratio: Shareholders’ equity / total assets
Shareholders’ equity ratio at fair market value: Shareholders’ equity at fair market value / total assets
Interest-bearing debt—repayment years: Interest-bearing debt / net cash from operating activities
Interest coverage ratio: Net cash from operating activities / interest payment
1. Each of the indicators identified in the preceding table is calculated based on figures from Ryobi’s consolidated financial statements.
2. Fair market value is calculated using the closing market price of Ryobi’s publicly listed shares as of the fiscal year-end multiplied by the number of common sharesissued and outstanding (excluding treasury stock).
3. Interest-bearing debt includes all liabilities, which incur interest in connection with liabilities listed on Ryobi’s consolidated balance sheet.
4. Net cash from operating activities is taken from Ryobi’s consolidated statements of cash flows.
5. Interest payment is the amount of interest paid and is taken from Ryobi’s consolidated statements of cash flows.

CASH FLOWCAPITAL EXPENDITURE &DEPRECIATION AND AMORTIZATIONSHAREHOLDERS’ EQUITY RATIO &INTEREST-BEARING DEBT

Millions of yen

Millions of yen

Millions of yen

20,00012,000120,000

%

40
37.5

11,23215,15915,000 14,774
10,00013,137
13,25814,187

15,16535.1

11,66096,89910,00031.2

90,000

5,000

8,000

4,113

30

77,763

7,595

69,731

7,002
0

(553)

6,000

(3,132)-5,00023.2
6,198(6,483)

6,067
5,439

(7,969)(10,399)

3,943

4,000

20

53,63844,50239,82310

30,000(15,990)

2,000(17,670)-20,000(32,598)
2001

2002

2003

2004

2005

2006

0

2001

2002

2003

2004

2005

2006

0

2001

2002

2003

CASH FROM OPERATING ACTIVITIESCAPITAL EXPENDITURE

SHAREHOLDERS’ EQUITY RATIOCASH FROM INVESTING ACTIVITIESDEPRECIATION AND AMORTIZATIONINTEREST-BEARING DEBT

CASH FROM FINANCING ACTIVITIES

10

20.2
15.3

4,117

-15,000-35,000

60,000

4,541(6,111)(8,024)-10,000

5,631 5,773
5,201

RYOBI LIMITED ANNUAL REPORT 2006

2004

2005

0
2006

(4) Business Segment Strategy
Die Castings
Ryobi is planning to increase sales in the Die Castings Business through the development of high-quality, high-value-added
products, combined with efforts to reinforce R&D capabilities and the optimal application of its Japan, U.S. and Europe manufacturing structure. In order to strengthen its global strategic structure, Ryobi is establishing a production site in Dalian,
China. Furthermore, Ryobi will unite manufacturing and sales divisions at home and overseas to curtail costs and enhance
productivity.
In the automobile-related sector, Ryobi will bolster its technical capabilities in response to demands for more lightweightvehicles by making aluminum die-casting power train components and frames. At the same time, Ryobi will strengthen its abilities to address calls for large orders and production with processing needs.
In addition, Ryobi will work to uncover new opportunities and cultivate demand in fields unrelated to the automobile sector, including the electronics and communications industries, and fields with requirements for high recyclability.
Printing Equipment
Pursuing high-precision, multicolor printing with increasingly advanced functionality, Ryobi continues to reinforce its development, production and market capacities for new products in order to further consolidate its standing in the global market.
Furthermore, Ryobi will strive to expand product lineups to meet market needs through the development of environmentallyfriendly products, as well as products that respond to advancements in information technology and digitization.
Moreover, Ryobi will reinforce and expand manufacturing capacity at its Hiroshima East Plant in response to increased
demand for medium-size offset printing presses for B2, A2 and B3 paper sizes.
Power Tools and Builders’ Hardware
In the power tools business, which includes electric power tools, lawn and garden and other equipment, Ryobi offers productsthat meet a variety of demands from professionals to DIY enthusiasts. Ryobi will enhance its productivity by utilizing manufacturing systems in Japan and Dalian, China, as well as its product development system based on the concept of "small,lightweight and compact." In addition, Ryobi aims to enhance its competitiveness through efforts to foster product planningand market capabilities, as well as productivity.
In the builders' hardware business, our mainstay door closers are manufactured mainly at the subsidiary in Dalian, China,
and an affiliated company in Taiwan. By developing distinct products, promoting cost reduction through productivity enhancement and reinforcing price competitiveness, Ryobi is aiming for higher profitability.

Forward-Looking Statements
Items containing forward-looking statements such as performance forecasts, future trends, and strategies are based upon managements' assumptions inlight of the information available as of the end of the fiscal year under review and may contain various risks and uncertainties. The Ryobi Group cautions thatits actual actions and performance may differ significantly from these forward-looking statements due to numerous factors outside of the Group's control
such as, but not limited to: general economic conditions, business environment, trends in market demand and foreign exchange rates.

RYOBI LIMITED ANNUAL REPORT 2006

11

CONSOLIDATED BALANCE SHEETSRYOBI LIMITED AND CONSOLIDATED SUBSIDIARIES(As of March 31, 2006 and 2005)

Thousands of
U.S. dollars(Note 1)Millions of yen

ASSETS

2006

2005

2006

Cash and cash equivalents ..................................................................

¥ 16,097¥ 15,303$ 137,031

Time deposits (Note 6) ........................................................................

2,402

2,736

20,44842,691

38,270363,420

Current assets

Notes and accounts receivable (Note 6)
Trade .................................................................................................
Unconsolidated subsidiaries and affiliates .....................................

125

119

1,064

Other .................................................................................................

2,148

1,535

18,286

Allowance for doubtful accounts ....................................................

(65)

(101)

(553)

Inventories (Note 4) .............................................................................

31,91927,528

271,720

Deferred tax assets (Note 9) ...............................................................

1,386

2,129

11,799Prepaid expenses and other ...............................................................

189

228

1,608

Total current assets .........................................................................

96,89287,747

824,823

Land ......................................................................................................

19,577

19,557

166,655

Buildings and structures .....................................................................

40,54838,381

345,177

Machinery and equipment ..................................................................

85,40781,039727,054

Construction in progress .....................................................................

2,435

962

20,729Property, plant and equipment (Notes 5 and 6)

Total ..................................................................................................

147,967

139,939

1,259,615

Accumulated depreciation ..................................................................

(87,661)(85,102)(746,241)

Net property, plant and equipment .................................................

60,306

54,837513,374

14,856

9,428

126,466

unconsolidated subsidiaries and affiliates ........................................

408

340

3,473

Intangible fixed assets .........................................................................

1,828

1,638

15,561

Deferred tax assets (Note 9) ...............................................................

1,312

1,120

11,169Other ....................................................................................................

2,348

2,494

19,988

Allowance for doubtful accounts ........................................................

(85)

(184)

(723)

Investments and other assets
Investments in securities (Note 3) ......................................................
Investments in and advances toTotal investments and other assets ................................................

20,667

14,836

175,934

Total ..................................................................................................

¥177,865¥157,420$1,514,131

See notes to consolidated financial statements.

12

RYOBI LIMITED ANNUAL REPORT 2006

Thousands of
U.S. dollars(Note 1)Millions of yen

LIABILITIES AND SHAREHOLDERS' EQUITY

2006

2005

2006

Short-term borrowings (Note 6) ..........................................................

¥ 19,841¥ 19,806$ 168,903

Current portion of long-term debt (Note 6) ........................................

6,584

11,03356,04835,40030,236

301,354

Current liabilities

Notes and accounts payable
Trade .................................................................................................
Unconsolidated subsidiaries and affiliates .....................................

425

416

3,618

Other ................................................................................................

8,873

5,494

75,534

Accrued expenses ...............................................................................

4,589

4,372

39,065

Income taxes payable .........................................................................

3,374

490

28,722Other current liabilities (Note 9) ..........................................................

4,503

4,533

38,333

Total current liabilities ......................................................................

83,58976,380711,577

Long-term debt (Note 6) .....................................................................

13,39813,663

114,055

Accrued severance indemnities (Note 7) ...........................................

6,906

6,879

58,789Long-term liabilities

Other long-term liabilities (Note 9) ......................................................

6,275

4,280

53,418

Total long-term liabilities .................................................................

26,57924,822

226,262

Minority interests ..................................................................................

941

924

8,011

Commitments and contingent liabilities (Notes 11,12 and 13)
Shareholders' equity (Notes 8 and 15)
Common stock
Authorized: 500,000,000 shares
Issued: 171,230,715 shares ............................................................

18,472

18,472

157,249

Capital surplus .....................................................................................

23,681

23,588201,592

Retained earnings ...............................................................................

25,88518,503

220,354

Land revaluation reserve (Note 5) .......................................................

626

626

5,329

Unrealized gain on available-for-sale securities .................................

6,229

3,029

53,026

Foreign currency translation adjustments .........................................

(7,370)(8,094)(62,740)

(767)

(830)

(6,529)Treasury stock (3,648,152 shares in 2006;
3,986,172 shares in 2005) ..................................................................
Total shareholders' equity ...............................................................

66,75655,294568,281

Total ..................................................................................................

¥177,865¥157,420$1,514,131

RYOBI LIMITED ANNUAL REPORT 2006

13

CONSOLIDATED STATEMENTS OF INCOME
RYOBI LIMITED AND CONSOLIDATED SUBSIDIARIES(For the years ended March 31, 2006 and 2005)

Thousands of
U.S. dollars(Note 1)Millions of yen

2006

2005

2006

Net sales .................................................................................................

¥171,232¥157,964$1,457,666

Cost of sales ...........................................................................................

135,088

125,157

1,149,979

Gross profit .......................................................................................

36,14432,807

307,687

Selling, general and administrative expenses ...................................

22,93021,973

195,199

Operating income ............................................................................

13,214

10,834112,488

Interest and dividends .........................................................................

177

139

1,507

Other ....................................................................................................

1,525

1,669

12,982

Total other income ...........................................................................

1,702

1,808

14,489Interest .................................................................................................

679

720

5,780

Loss on disposal of property, plant and equipment ..........................

411

518

3,499

Other ....................................................................................................

769

761

6,546

Other income

Other expenses

Total other expenses .......................................................................

1,859

1,999

15,825

Income before income taxes and minority interests .........................

13,057

10,643111,152

3,677

712

31,302

Deferred ...............................................................................................

529

3,190

4,503

Total income taxes ...........................................................................

4,206

3,902

35,805

Minority interests ..................................................................................

215

160

1,830

Income taxes (Note 9)
Current ..................................................................................................

Net income .............................................................................................

¥

8,636

¥

6,581

$

73,517
U.S. dollars(Note 1)Yen

Per share of common stock (Note 2(n))
Net income ...........................................................................................
Cash dividends applicable to the year ................................................
See notes to consolidated financial statements.

14

RYOBI LIMITED ANNUAL REPORT 2006

¥

51.31
10.00

¥

39.33
7.50

$

0.437
0.085

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYRYOBI LIMITED AND CONSOLIDATED SUBSIDIARIES(For the years ended March 31, 2006 and 2005)
Millions of yen
Issuednumber ofshares ofcommon stock(thousands)

Balance at April 1, 2004 .....................
Net income ......................................
Cash dividends, ¥7.50 per share .....
Unrealized gain on available-for-salesecurities decrease ........................
Foreign currency translation
adjustments ...................................
Disposal of treasury stock(332,532 shares) ............................
Repurchase of treasury stock(414,181 shares) ............................
Other net increase in treasury
stock (5,871 shares) .......................
Balance at March 31, 2005 ................
Net income ......................................
Cash dividends, ¥7.50 per share .....
Unrealized gain on available-for-salesecurities increase .........................
Foreign currency translation
adjustments ...................................
Disposal of treasury stock(344,950 shares) ............................
Repurchase of treasury stock(8,830 shares) .................................
Other net decrease in treasury
stock (1,900 shares) .......................
Balance at March 31, 2006 ................

Commonstock

CapitalsurplusRetainedearnings

171,231 ¥18,472 ¥23,524 ¥13,176
—
—
—
6,581
—
—
—
(1,254)Land
revaluation
reserve

Unrealized
Foreign
gain oncurrency
available-fortranslation-sale securities adjustments

Treasury
stock

¥626
—
—

¥3,125——¥(8,205)——¥(678)
—
—

—

—

—

—

—

(96)

—

—

—

—

—

—

—

—

111

—

—

—

64

—

—

—

—

41

—

—

—

—

—

—

—

(184)

—
171,231———
18,472———
23,588———18,503
8,636(1,254)

—
626
—
—

—
3,029
—
—

—
(8,094)
—
—

(9)
(830)
—
—

—

—

—

—

—

3,200

—

—

—

—

—

—

—

—

724

—

—

—

93

—

—

—

—

69

—

—

—

—

—

—

—

(6)

—
—
—
—
171,231 ¥18,472 ¥23,681 ¥25,885

—
¥626

—
¥6,229—¥(7,370)0¥(767)

Thousands of U.S. dollars (Note 1)

Balance at March 31, 2005 ................
Net income ......................................
Cash dividends, $0.064 per share ..
Unrealized gain on available-for-salesecurities increase .........................
Foreign currency translation
adjustments ...................................
Disposal of treasury stock(344,950 shares) ............................
Repurchase of treasury stock(8,830 shares) .................................
Other net decrease in treasury
stock (1,900 shares) ....................
Balance at March 31, 2006 ................

$157,249 $200,800 $157,512—— 73,517—— (10,675)$5,329 $25,785 $(68,903) $(7,066)
—
—
—
—
—
—
—
—

—

—

—

—

27,241

—

—

—

—

—

—

—

6,163

—

—

792

—

—

—

—

588

—

—

—

—

—

—

(51)

—
—
—
$157,249 $201,592 $220,354———
0$5,329 $53,026 $(62,740) $(6,529)

See notes to consolidated financial statements.

RYOBI LIMITED ANNUAL REPORT 2006

15

CONSOLIDATED STATEMENTS OF CASH FLOWSRYOBI LIMITED AND CONSOLIDATED SUBSIDIARIES(For the years ended March 31, 2006 and 2005)

Thousands of
U.S. dollars(Note 1)Millions of yen

2006

2005

2006

¥ 13,057¥ 10,643$ 111,152

Operating activities
Income before income taxes and minority interests ..........................
Adjustments for:
Income taxes - paid ...........................................................................

(674)

(962)

(5,738)Depreciation and amortization ..........................................................

6,072

5,444

51,690Loss on sales or disposals of property, plant and equipment ........

395

484

3,363

Changes in assets and liabilities
Increase in notes and accounts receivable ..................................

(4,689)(888)(39,917)

Increase in inventories ...................................................................

(4,025)(278)(34,264)

Increase in notes and accounts payable ......................................

5,536

885

47,127

Decrease in accrued expenses .....................................................

(132)

(688)

(1,124)

Other, net ...........................................................................................

(375)

(453)

(3,192)

Net cash provided by operating activities ................................

15,165

14,187129,097(8,197)(6,586)(69,780)

Proceeds from sale of property, plant and equipment .......................

64

526

545

Other .....................................................................................................

164

(51)

1,396

Net cash used in investing activities .........................................

(7,969)(6,111)(67,839)

Investing activities
Purchase of property, plant and equipment ........................................

Financing activities
Proceeds from long-term debt .........................................................

6,347

3,600

54,031

Repayments of long-term debt ........................................................

(11,142)(10,333)(94,850)

Decrease in short-term borrowings, net ..........................................

(443)(2,311)(3,771)

Acquisition of treasury stock ............................................................

(6)

(184)

(51)

Cash dividends paid ..........................................................................

(1,254)(1,254)(10,675)

Other ..................................................................................................

15

83

127

Net cash used in financing activities .........................................

(6,483)(10,399)(55,189)and cash equivalents ............................................................................

81

31

690

Net increase (decrease) in cash and cash equivalents .......................

794(2,292)

6,759

Cash and cash equivalents at beginning of year ................................

15,303

17,595130,272

Cash and cash equivalents at end of year ...........................................

¥ 16,097¥ 15,303$137,031¥¥$

Foreign currency translation adjustments on cash

Additional cash flow information
Interest paid .......................................................................................
See notes to consolidated financial statements.

16

RYOBI LIMITED ANNUAL REPORT 2006

673

729

5,729

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RYOBI LIMITED AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2006 and 2005

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forthin the Japanese Securities and Exchange Law and its related accounting regulations, and in conformity withaccounting principles generally accepted in Japan, which
are different in certain respects as to application and disclosure requirements of International Financial ReportingStandards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been madeto the consolidated financial statements issued domestically in order to present them in a form which is more familiar
to readers outside Japan. In addition, certain reclassifications have been made in the 2005 consolidated financial
statements to conform to the classifications used in 2006.
The notes to the consolidated financial statements
include information which is not required under accounting
principles generally accepted in Japan but is presented
herein as additional information.
The consolidated financial statements are stated inJapanese yen, the currency of the country in which Ryobi
Limited (“the Company”) is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar
amounts are included solely for the convenience of readers
outside Japan and have been made at the rate of ¥117.47
to $1, the approximate rate of exchange at March 31, 2006.
Such translations should not be construed as representations that the Japanese yen amounts could be converted
into U.S. dollars at that or any other rate.
2. Summary of Significant Accounting Policies(a) Consolidation
The consolidated financial statements include the accountsof the Company and its significant subsidiaries (“the Ryobi
Group”). Under the control or influence concept, thosecompanies in which the Company, directly or indirectly, isable to exercise control over operations are fully consolidated, and those companies over which the Ryobi Group has
the ability to exercise significant influence are accounted
for by the equity method.
(i) Consolidated subsidiaries
The major consolidated subsidiaries are listed below:
Tokyo Light Alloy Co., Ltd. (Japan)
Ryobi Holdings (USA), Inc.
Ryobi Die Casting (USA), Inc.
(ii) Affiliates
The major affiliate accounted for by the equity method
is Ryobi-Tech Corporation (Taiwan).
The number of consolidated subsidiaries and affiliates
accounted for by the equity method as of March 31, 2006
and 2005 was as follows:
Consolidated subsidiaries ....................................
Affiliates .................................................................

2006

2005

15
3

14
3

The number of unconsolidated subsidiaries and affiliates
not accounted for by the equity method as of March 31,
2006 and 2005 was as follows:

Unconsolidated subsidiaries ................................
Affiliates .................................................................

2006

2005

3
1

3
0

The investments in such unconsolidated subsidiaries arestated at cost. If the equity method of accounting had been
applied to the investments in these companies, the effecton the accompanying consolidated financial statements
would not be material.
All significant inter-company transactions, account balances and unrealized profits among the companies havebeen eliminated.
The excess of the cost of an acquisition over the fairvalue of the net assets of the acquired subsidiary at thedate of acquisition is being amortized over a period of 5
years.
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand,deposits with banks and financial institutions which are
unrestricted as to withdrawal or use, and which have original maturities of three months or less.
(c) Inventories
Inventories are valued at cost for the Company and domestic subsidiaries and the lower of cost or market for foreignsubsidiaries. Cost is determined by methods according to
the classification of inventories as follows:(i) Finished products and work in process
The average method for the Company and domestic
subsidiaries.
Foreign subsidiaries mainly adopt the first-in first-out
method.
(ii) Raw materials, supplies and purchased goods
Die castings ........ Average method
Others ................. Last purchase invoice pricemethodForeign subsidiaries mainly adopt the first-in first-out
method.
(d) Marketable and investment securities
Marketable and investment securities are classified andaccounted for, depending on management’s intent, as
follows:i) trading securities, which are held for the purpose of earning capital gains in the near term are reported at fair value,
and the related unrealized gains and losses are included inincome, ii) held-to-maturity debt securities, which are
expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost,and iii) available-for-sale securities, which are not classified
as either of the aforementioned securities, are reported atfair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component ofshareholders’ equity.
Non-marketable available-for-sale securities are stated atcost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment of theCompany and its consolidated domestic subsidiaries is

RYOBI LIMITED ANNUAL REPORT 200617

primarily computed by the declining-balance method at
rates based on the estimated useful lives of the assets,
while the straight-line method is principally applied to theproperty, plant and equipment of consolidated foreign subsidiaries. The range of useful lives is from 3 to 50 years forbuildings and structures, and from 2 to 20 years formachinery and equipment.
(f) Long-lived assets
The Ryobi Group adopted the new accounting standard for
impairment of fixed assets from the year ended March 31,
2004. The Ryobi Group reviews its long-lived assets for
impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group
may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows
expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment
loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount,which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the asset or the
net selling price at disposition.
No impairment losses were recognized for the year end
March 31, 2006 and 2005.
(g) Accrued severance indemnities and pension plan
The Company and domestic consolidated subsidiaries havea contributory or a non-contributory funded pension planand unfunded pension plans, which cover substantially allof their employees. Certain foreign consolidated subsidiaries have defined benefit pension plans.
Effective April 1, 2000, the Ryobi Group adopted a new
accounting standard for employees’ retirement benefits
and accounted for the liability for retirement benefits basedon the projected benefit obligations and plan assets at thebalance sheet date. The amount of the transitional obligation of ¥9,092 million ($77,398 thousand), determined as of
the beginning of this fiscal year, is amortized over ten
years. Unrecognized prior service cost is amortized at the
beginning of this fiscal year by using straight-line method
over employees’ remaining service period or shorter period(primarily 15 years). Unrecognized net actuarial loss isamortized from the next fiscal year by using the straightline method over the employees’ remaining service period
or less (primarily 15 years).
(h) Leases
All leases are accounted for as operating leases. Under
Japanese accounting standards for leases, finance leases
that deem to transfer ownership of the leased property to
the lessee are to be capitalized, while other finance leases
are permitted to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed
in the notes to the lessee’s financial statements.
(i) Income taxes
The Ryobi Group adopted an accounting method for interperiod allocation of income taxes based on the asset andliability method.
Deferred income taxes are recorded to reflect the impact
of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes. These deferred taxes aremeasured by applying currently enacted tax laws to thetemporary differences.

18(j) Appropriation of retained earnings
Appropriations of retained earnings at each year end arereflected in the financial statements for the following year
upon shareholder’s approval.
(k) Translation of foreign currency accounts
All current and non-current receivables and payables
denominated in foreign currencies are translated into
Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translations are recognized in the income statement to the extent
that they are not hedged by forward exchange contracts.
(l) Translation of foreign currency financial statements(accounts of foreign subsidiaries)
The balance sheet accounts of the consolidated overseas
subsidiaries are translated into yen at the current exchange
rates as of the balance sheet date except for shareholders’equity, which is translated at the historical exchange rate.
Differences arising from such translation are shown as“Foreign currency translation adjustments” in a separate
component of shareholders’ equity.
Revenue and expense accounts of the consolidated
overseas subsidiaries are translated into yen at the averageexchange rate.
(m) Derivative and hedging activities
The Ryobi Group uses derivative financial instruments tomanage its exposure to fluctuations in foreign exchange
and interest rates. Foreign exchange forward contracts andinterest rate swaps are utilized by the Ryobi Group to
reduce foreign currency exchange and interest rate risks.
The Ryobi Group does not enter into derivatives for tradingor speculative purposes.
Derivative financial instruments and foreign currencytransactions are classified and accounted for as follows:a) all derivatives be recognized as either assets or liabilities
and measured at fair value, and gains or losses on derivative translations are recognized in the income statement
and b) for derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of highcorrelation and effectiveness between the hedging instruments and the hedged items, gains or losses onderivatives are deferred until of maturity of the hedgedtransaction.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured
at market value but the differential paid or received under
the swap agreements are recognized and included in interest expense or income.
(n) Per share information
Basic net income per share is computed by dividing net
income available to common shareholders, by the weighted-average number of common shares outstanding for theperiod, retroactively for stock splits.
Diluted net income per share is not calculated because
no dilutive instruments were issued and outstanding forthe years ended March 31, 2006 and 2005.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends
applicable to the respective years including dividends to be
paid after the end of the year.
(o) New accounting pronouncements
a. Business combination and business separation
In October 2003, the Business Accounting Council (BAC)
issued a Statement of Opinion, Accounting for Business

RYOBI LIMITED ANNUAL REPORT 2006

Combinations, and on December 27, 2005 the AccountingStandards Board of Japan (ASBJ) issued AccountingStandard for Business Separations and ASBJ Guidance
No.10, Guidance for Accounting Standard for Business
Combinations and Business Separations. These new
accounting pronouncements are effective for fiscal years
beginning on or after April 1, 2006.
The accounting standard for business combinations
allows companies to apply the pooling of interests methodof accounting only when certain specific criteria are met
such that the business combination is essentially regarded
as a uniting-of-interests. These specific criteria are as
follows:(i) the consideration for the business combination consists
solely of common shares with voting rights,(ii) the ratio of voting rights of each predecessor shareholder group after the business combination is nearly equal,
and(iii) there are no other factors that would indicate any control exerted by any shareholder group other than voting
rights.
For business combinations that do not meet the unitingof-interests criteria, the business combination isconsidered to be an acquisition and the purchase methodof accounting is required. This standard also prescribes theaccounting for combinations of entities under common
control and for joint ventures. Goodwill, including negative
goodwill, is to be systematically amortized over 20 years or
less, but is also subject to an impairment test.
Under the accounting standard for business separations,in a business separation where the interests of the investor
no longer continue and the investment is settled, the difference between the fair value of the consideration received
for the transferred business and the book value of net
assets transferred to the separated business is recognized
as a gain or loss on business separation in the statement ofincome. In a business separation where the interests of theinvestor continue and the investment is not settled, nosuch gain or loss on business separation is recognized.
b. Stock options
On December 27, 2005, the ASBJ issued AccountingStandard for Stock Options and related guidance. The newstandard and guidance are applicable to stock options
newly granted on and after May 1, 2006.
This standard requires companies to recognize compensation expense for employee stock options based on thefair value at the date of grant and over the vesting period as
consideration for receiving goods or services. The standard
also requires companies to account for stock options granted to non-employees based on the fair value of either thestock option or the goods or services received. In the balance sheet, the stock option is presented as a stockacquisition right as a separate component of shareholders’equity until exercised. The standard covers equity-settled,share-based payment transactions, but does not cover
cash-settled, share-based payment transactions. In addition, the standard allows unlisted companies to measure
options at their intrinsic value if they cannot reliably estimate fair value.
c. Bonuses to directors and corporate auditors
Prior to the fiscal year ended March 31, 2005, bonuses todirectors and corporate auditors were accounted for as a
reduction of retained earnings in the fiscal year following

approval at the general shareholders meeting. The ASBJ
issued ASBJ Practical Issues Task Force (PITF) No.13,
Accounting treatment for bonuses to directors and corporate auditors, which encouraged companies to record
bonuses to directors and corporate auditors on the accrualbasis with a related charge to income, but still permitted
the direct reduction of such bonuses from retained earnings after approval of the appropriation of retained
earnings.
The ASBJ replaced the above accounting pronouncement by issuing a new accounting standard for bonuses todirectors and corporate auditors on November 29, 2005.
Under the new accounting standard, bonuses to directors
and corporate auditors must be expensed and are nolonger allowed to be directly charged to retained earnings.
This accounting standard is effective for fiscal years ending
on or after May 1, 2006. The companies must accrue
bonuses to directors and corporate auditors at the year end
to which such bonuses are attributable.
3. Marketable Securities and Investments in Securities
Information regarding each category of the securities classified as trading, held-to-maturity and available-for-sale atMarch 31, 2006 and 2005 was as follows:
Millions of yen

2006
Cost

Available-for-sale:
Corporate shares ...
Bonds ......................
Others .....................
Total .............................

¥3,076100
10¥3,186

Unrealized
gain

Unrealized
loss

Fair value¥10,454

¥(10)
(4)
(0)
¥(14)

¥13,52096
10¥13,626——¥10,454

Millions of yen

2005
Cost

Available-for-sale:
Corporate shares ...
Bonds ......................
Others .....................
Total .............................

¥3,007100
10¥3,117

Unrealized
gain

Unrealized
loss

Fair value¥5,096

¥(7)
(1)
(0)
¥(8)

¥8,09699
10¥8,205——¥5,096

Thousands of U.S. dollars

2006
Unrealized
gain

Unrealized
loss

Fair value$26,186 $ 88,993
851
—
85
—
$27,122 $ 88,993$ (85)(34)(0)$ (119)$115,094817
85$115,996

Cost

Available-for-sale:
Corporate shares ...
Bonds ......................
Others .....................
Total .............................

Available-for-sale securities whose fair value was notreadily determinable as of March 31, 2006 and 2005 was
as follows:

RYOBI LIMITED ANNUAL REPORT 2006

19

Thousands of
U.S. dollars

Millions of yen

Available-for-sale:
Corporate shares .......................

2006

2005

2006

¥1,230¥1,223$10,471

short-term borrowings were 1.7% and 1.3%, at March 31,
2006 and 2005, respectively.
Commercial paper included short-term borrowings totaling ¥1,967 million at March 31, 2005.
Long-term debt at March 31, 2006 and 2005 consisted of
the following:

The book value of available-for-sale securities by contractual maturity for securities classified as available-for-sale atMarch 31, 2006 and 2005 are as follows:
Thousands of
U.S. dollars

Millions of yen

Due in one year or less ..................
Due after one year
through five years ........................
Due after five years
through ten years .........................
Total .................................................

2006

2005

2006

—

¥ —

$

100

100

851

10
¥ 110

—
¥100

85
$ 936

¥

—

4. Inventories
Inventories at March 31, 2006 and 2005 consisted of thefollowing:
Millions of yen

Finished products
and purchased goods ................
Work in process ..........................
Raw materials and supplies .......
Total ..............................................

2005

2006

¥13,512
11,741
6,666¥31,919¥12,283
10,0595,186¥27,528$115,025
99,94956,746$271,720

5. Land Revaluation
Under the “Law of Land Revaluation” a subsidiary elected a
one-time revaluation of its own-use land to a value basedon real estate appraisal information as of March 31, 2002.
The resulting land revaluation excess represents unrealized appreciation of land and is stated, net of income taxes,
as a component of shareholders’ equity. There is no effecton the consolidated statement of income. Continuous
readjustment is not permitted unless the land value subsequently declines significantly such that the amount of thedecline in value should be removed from the land revaluation excess account and related deferred tax liabilities.
The details of the one-time revaluation as of March 31,
2002 were as follows:
Millions of yen

Thousands of
U.S. dollars

¥ 275
1,981

$ 2,341
16,864¥ 626$ 5,329

As of March 31, 2006, the carrying amount of the land
after the above one-time revaluation exceeded the market
value by ¥654 million ($5,567 thousand).
6. Short-term Borrowings and Long-term Debt
The annual weighted average interest rates applicable to

20

2006

Loans principally frombanks and insurancecompanies with interest
rates ranging from
1.19% to 5.11%:
Secured.........................................
Unsecured ...................................
Total ..............................................
Less: Current portion ..................
Long-term debt
less current portion ...................

2005

Thousands of
U.S. dollars

2006¥ 1,458 ¥ 1,553
18,524
23,143
19,982
24,696(6,584) (11,033)$ 12,412
157,691
170,103(56,048)¥13,398$114,055¥13,663

The aggregate annual maturities of long-term debt at
March 31, 2006 were as follows:

Thousands of
U.S. dollars

2006Land before revaluation .......................
Land after revaluation ..........................
Land revaluation reserve, net ofincome taxes of ¥675 million($5,746 thousand) and attribution ofminority interest of ¥405 million($3,448 thousand) .............................

Millions of yen

Years ending March 31

Millions of yen

2007 ...................................................... ¥ 6,584
2008 ......................................................
3,835
2009 ......................................................
3,432
2010 ......................................................
2,693
2011 ......................................................
3,416
2012 and thereafter .............................
22
Total ..................................................... ¥19,982

Thousands of
U.S. dollars$ 56,048
32,647
29,21622,92529,080187$170,103

The assets of the Ryobi Group pledged as collateral for
short-term borrowings and long-term debt with banks andother financial institutions at March 31, 2006 and 2005
were as follows:
Millions of yen

2006

Net book value of property:
Buildings and structures ..............
Machinery and equipment ...........
Land ...............................................
Time deposit .................................
Notes and accounts receivable ..
Total ...................................................

¥4,145
2,279
2,869
4

2005

¥ 3,738
2,017
2,867
108
—
2,311
¥9,297 ¥11,041

Thousands of
U.S. dollars

2006$35,286
19,401
24,423
34—$79,144

7. Accrued Severance Indemnities and Pension Plan
The Company and its certain consolidated subsidiaries
have severance payment plans for employees. Under mostcircumstances, employees terminating their employment
are entitled to retirement benefits determined based on therate of pay at the time of termination, years of service andcertain other factors. Such retirement benefits are made in
the form of a lump-sum severance payment from theCompany or from certain consolidated subsidiaries andannuity payments from a trustee. Employees are entitled tolarger payments if the termination is involuntary, by retirement at the mandatory retirement age, by death, or byvoluntary retirement at certain specific ages prior to the
mandatory retirement age.

RYOBI LIMITED ANNUAL REPORT 2006

The liabilities for employees’ retirement benefits at
March 31, 2006 and 2005 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

Projected benefit obligation ................¥ 31,065 ¥30,962 $264,450
Fair value of plan assets ...................... (22,818) (18,177) (194,245)
Unrecognized prior service cost ......... 2,664
2,883
22,678Unrecognized actuarial loss ................ (1,527) (5,694) (12,999)
Unrecognized transitional obligation .. (2,482) (3,103) (21,129)
Prepaid pension cost ...........................
4
8
34
Net liabilities ......................................... ¥ 6,906 ¥ 6,879 $ 58,789

The components of net periodic retirement benefit costs
for the years ended March 31, 2006 and 2005 were as
follows:
Millions of yen

2006

2005

Thousands of
U.S. dollars

2006

Service cost ............................................. ¥1,175 ¥1,009 $10,002
Interest cost ............................................
717
668
6,104
Expected return on plan assets .............
(658)
(562)
(5,601)
Amortization of prior service cost .........
(219)
(219)
(1,864)
Recognized actuarial loss ......................
511
445
4,350
Amortization of transitional obligation ..
621
651
5,286
Net periodic retirement benefit costs ... ¥2,147 ¥1,992 $18,277

Assumptions used for the years ended March 31, 2006
and 2005 were set forth as follows:
2006

2005

Discount rate ............................................... 2.0%~2.5%
Expected rate of return on plan assets .....
3.5%
Amortization of prior service cost .............. Primarily
15 years
Recognition period of actuarial
gain / loss ................................................... Primarily
15 years
Amortization of transitional obligation ...... 10 years

2.5%
3.5%
Primarily
15 years
Primarily
15 years
10 years

8. Shareholders’ Equity
Through May 1, 2006, Japanese companies are subject to
the Commercial Code of Japan (the “Code”).
The Code requires that all shares of common stock be
issued with no par value and at least 50% of the issue priceof new shares is required to be recorded as common stockand the remaining net proceeds are required to be presented as additional paid-in capital, which is included in capitalsurplus. The Code permits Japanese companies, upon
approval of the Board of Directors, to issue shares to existing shareholders without consideration by way of a stock
split. Such issuance of shares generally does not give rise
to changes within the shareholders’ accounts.
The Code also provides that an amount of 10% or moreof the aggregate amount of cash dividends and certain
other appropriations of retained earnings associated withcash outlays applicable to each period (such as bonuses todirectors) shall be appropriated as a legal reserve (a component of retained earnings) until the total of such reserve
and additional paid-in capital equals 25% of common
stock. The amount of total legal reserve and additional
paid-in capital that exceeds 25% of the common stock may

be available for dividends by resolution of the shareholders
after transferring such excess in accordance with the Code.
In addition, the Code permits the transfer of a portion of
additional paid-in capital and legal reserve to the common
stock by resolution of the Board of Directors.
The Code allows Japanese companies to purchase treasury stock and dispose of such treasury stock upon
resolution of the Board of Directors. The aggregate purchased amount of treasury stock cannot exceed theamount available for future dividends plus the amount ofcommon stock, additional paid-in capital or legal reservethat could be transferred to retained earnings or other capital surplus other than additional paid-in capital upon
approval of such transfer at the annual general meeting ofshareholders.
In addition to the provision that requires an appropriation
for a legal reserve in connection with the cash outlays, theCode also imposes certain limitations on the amount of
capital surplus and retained earnings available for dividends. The amount of capital surplus and retained earnings
available for dividends under the Code was ¥22,073 million($187,903 thousand) as of March 31, 2006, based on theamount recorded in the parent company’s general books ofaccount.
Dividends are approved by the shareholders at a meeting
held subsequent to the end of the fiscal year to which thedividends are applicable. Semiannual interim dividends
may also be paid upon resolution of the Board of Directors,
subject to certain limitations imposed by the Code.
On May 1, 2006, a new corporate law (the “Corporate
Law”) became effective, which reformed and replaced theCode with various revisions that would, for the most part,be applicable to events or transactions which occur on orafter May 1, 2006 and for the fiscal years ending on or after
May 1, 2006. The significant changes in the Corporate Law
that affect financial and accounting matters are summarized below;(a) Dividends
Under the Corporate Law, companies can pay dividends
at any time during the fiscal year in addition to the year-end
dividend upon resolution at the shareholders meeting. For
companies that meet certain criteria such as; (1) having theBoard of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term ofservice of the directors is prescribed as one year rather
than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except
for dividends in kind) if the company has prescribed so in
its articles of incorporation.
The Corporate Law permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject toa certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a
year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. Under
the Code, certain limitations were imposed on the amountof capital surplus and retained earnings available for dividends. The Corporate Law also provides certain limitations
on the amounts available for dividends or the purchase oftreasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but theamount of net assets after dividends must be maintained
at no less than ¥3 million.

RYOBI LIMITED ANNUAL REPORT 200621

(b) Increases / decreases and transfer of common stock,reserve and surplus
The Corporate Law requires that an amount equal to
10% of dividends must be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in
capital (a component of capital surplus) depending on theequity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve
and additional paid-in capital equals 25% of the common
stock. Under the Code, the aggregate amount of additional
paid-in capital and legal reserve that exceeds 25% of thecommon stock may be made available for dividends by resolution of the shareholders. Under the Corporate Law, thetotal amount of additional paid-in capital and legal reserve
may be reversed without limitation of such threshold. The
Corporate Law also provides that common stock, legal
reserve, additional paid-in capital, other capital surplus andretained earnings can be transferred among the accounts
under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available
for distribution to the shareholders which is determined by
specific formula.
Under the Corporate Law, stock acquisition rights, whichwere previously presented as a liability, are now presented
as a separate component of shareholders’ equity.
The Corporate Law also provides that companies canpurchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights arepresented as a separate component of shareholders’ equity or deducted directly from stock acquisition rights.
On December 9, 2005, the Accounting Standards Boardof Japan (ASBJ) published a new accounting standard forpresentation of shareholders’ equity. Under this accounting
standard, certain items which were previously presented
as liabilities are now presented as components of shareholders’ equity. Such items include stock acquisition rights,
minority interest, and any deferred gain or loss on derivatives accounted for under hedge accounting. This standard
is effective for fiscal years ending on or after May 1, 2006.
9. Income Taxes
The Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in theaggregate, resulted in normal effective statutory tax rates
of 39.5% for the years ended March 31, 2006 and 2005.
The tax effects of significant temporary differences andtax loss carryforwards which resulted in deferred tax assets
and liabilities at March 31, 2006 and 2005 were as follows:

Millions of yen

2006

2005

Thousands of
U.S. dollars

2006

Deferred tax assets:
Accrued severance cost ................ ¥ 2,658 ¥ 2,464 $ 22,627
Tax loss carryforwards ................... 16,563
16,594140,998
Other ...............................................
3,499
2,918
29,786
Valuation allowance ....................... (17,287) (15,768) (147,161)
Deferred tax assets ........................ ¥ 5,433 ¥ 6,208 $ 46,250
Deferred tax liabilities:
Unrealized gain on available-for-sale securities ........................ ¥ (4,129) ¥ (2,012) $ (35,149)
Other ...............................................
(1,973) (2,263)(16,796)
Deferred tax liabilities .................... ¥ (6,102) ¥ (4,275) $ (51,945)
Net deferred tax assets (liabilities).. ¥ (669) ¥ 1,933 $ (5,695)

The reconciliation between the normal effective statutory
tax rate for the years ended March 31, 2006 and 2005 andthe actual effective tax rates reflected in the accompanying
consolidated statements of income was as follows:
Normal effective statutory tax rate ............
Valuation allowance ....................................
Other, net ....................................................
Actual effective tax rate ..............................

2006

2005

39.5%
(5.8)
(1.5)
32.2%

39.5%
(4.1)
1.3
36.7%

10. Research and Development Costs
Research and development costs were ¥1,740 million($14,812 thousand) and ¥1,554 million for the years ended
March 31, 2006 and 2005, respectively.
11. Leases
Lease expenses on such finance lease contracts withoutownership transfer amounted to ¥882 million ($7,508 thousand) and ¥1,074 million, for the years ended March 31,
2006 and 2005, respectively.
Millions of yen

2006

Machinery and equipment ........
Other assets ...............................
Total ............................................

Acquisition
cost

Accumulated
depreciation

Net leased
property¥ 4,611
1,391¥ 6,002¥ 2,039
1,219¥ 3,258¥ 2,572172¥ 2,744

Millions of yen

2005

Machinery and equipment ........
Other assets ...............................
Total ............................................

Acquisition
cost

Accumulated
depreciation

Net leased
property¥ 5,111
1,684¥ 6,795¥ 2,058
1,194¥ 3,252¥ 3,053490¥ 3,543

Thousands of U.S. dollars

2006

Machinery and equipment ........
Other assets ...............................
Total ............................................

22

RYOBI LIMITED ANNUAL REPORT 2006

Acquisition
cost

Accumulated
depreciation

Net leased
property$ 39,253
11,841$ 51,094$ 17,358
10,377$ 27,735$ 21,895
1,464$ 23,359

Depreciation expense and interest expense, which are
not reflected in the accompanying statements of income,computed by the straight-line method and the interest
method were ¥882 million ($7,508 thousand) and ¥1,074
million for the years ended March 31, 2006 and 2005,
respectively.
Future minimum lease payments of the Ryobi Group asof March 31, 2006 and 2005 under noncancelable financeleases that do not transfer ownership of leased assets tothe lessee were as follows:
Thousands of
U.S. dollars

Millions of yen

Current .........................................
Non-current ..................................
Total ..............................................

2006

2005

2006

¥ 687
2,057
¥2,744¥ 867
2,676¥3,543$ 5,848
17,511$23,359

Future minimum lease payments of the Ryobi Group asof March 31, 2006 and 2005 under noncancelable operating leases are as follows:

All derivative transactions are related to qualified hedges
of interest and foreign currency exposures incorporated
with its business. Market risk of these derivatives is basically offset by opposite movements in the value of hedged
assets. The Ryobi Group does not hold or issue derivatives
for speculative or trading purposes.
Market risk is the exposure created by potential fluctuations in market conditions, including interest or foreignexchange rates. The Ryobi Group does not anticipate any
losses arising from credit risk because the counterparties
to these derivatives are limited to major international financial institutions.
The execution of derivatives is controlled by the Finance
Department of the Company, and by the Finance Divisionof consolidated subsidiaries. Derivative transactions havebeen made in accordance with internal policies which regulate the authorization and credit limit amounts.
The Ryobi Group had the following derivatives contracts
outstanding as of March 31, 2006 and 2005.
Millions of yen

2006
Thousands of
U.S. dollars

Millions of yen

Current .........................................
Non-current ..................................
Total ..............................................

2006

2005

2006

¥ 471
146
¥ 617

¥ 525
491
¥1,016$4,0091,243$5,252

Interest swap:
Fixed rate payment,
floating rate receipt .............

12. Contingent Liabilities
The Ryobi group had the following contingent liabilities at
March 31, 2006 and 2005.
Thousands of
U.S. dollars

Millions of yen

Trade notes discounted ..............
Guarantees and similar items
Bank loans ...............................
Leases ......................................
Total ..............................................

2006

2005

2006

¥ 810

¥ 668

$ 6,895

170
2,119¥3,099189
2,685¥3,542

1,447
18,039$26,381

13. Derivatives
The Ryobi Group enters into foreign exchange forward contracts and interest rate swaps to hedge risk and reduce
exposure to fluctuations in market values of foreignexchange rates and interest rates associated with certain
assets and liabilities.

Contract
amountFair value

Unrealized
gain (loss)

¥100

¥(0)

¥(0)

Millions of yen

2005

Interest swap:
Fixed rate payment,
floating rate receipt .............

Contract
amountFair value

Unrealized
gain (loss)

¥100

¥(2)

¥(2)

Thousands of U.S. dollars

2006Interest swap:
Fixed rate payment,
floating rate receipt .............

Contract
amountFair value

Unrealized
gain (loss)

$ 851

$(0)

$(0)

Note: Derivatives which qualify for hedge accounting were excluded from themarket value information in 2006 and 2005.

RYOBI LIMITED ANNUAL REPORT 2006

23

14. Segment Information
The segment information classified by industry and geographical market area is presented below with respect to the years
ended March 31, 2006 and 2005.
(1) Industry segment information
The Ryobi Group operates in three industry segments according to the product groups which are:—Die castings (“Die castings”)—Printing equipment (“Printing equipment”)—Electric power tools, lawn and garden equipment and builders’ hardware (“Power tools and builders’ hardware”)
Millions of yen

2006

Net sales:
Unaffiliated customer ...................................................
Intersegment ................................................................
Total .................................................................................
Operating costs and expenses ........................................
Operating income ............................................................
Total assets ......................................................................
Depreciation and amortization .........................................
Capital expenditure ..........................................................

Die castings

Printing equipment¥114,320212
114,532
107,370¥ 7,162¥ 98,259
4,865¥ 9,626¥32,307

Power tools andbuilders’ hardware¥24,6053
24,60822,841¥ 1,767¥24,498
749
¥ 502

—
32,30728,022¥ 4,285¥26,509453¥ 1,104

Eliminations /corporate

Consolidated—¥171,232

¥

(215)
(215)
(215)
¥
0
¥28,599———

171,232
158,018¥ 13,214¥177,865
6,067¥ 11,232

Eliminations /corporate

Consolidated—¥ 157,964¥

Millions of yen

2005

Net sales:
Unaffiliated customer ...................................................
Intersegment ................................................................
Total .................................................................................
Operating costs and expenses ........................................
Operating income ............................................................
Total assets ......................................................................
Depreciation and amortization .........................................
Capital expenditure ..........................................................

Die castings

Printing equipment¥ 105,491
225
105,716
100,047¥ 5,669¥ 84,370
4,170¥ 6,467¥27,694

Power tools andbuilders’ hardware¥24,779
2
24,781
22,668¥ 2,113¥23,953
751
¥ 514

—
27,694
24,643¥ 3,051¥24,809
518
¥ 614

¥

(227)
(227)
(228)
¥
1
¥24,288———

157,964
147,130¥ 10,834¥ 157,420
5,439¥ 7,595

Eliminations /corporate

Consolidated—$1,457,666¥

Thousands of U.S. dollars

2006

Net sales:
Unaffiliated customer ...................................................
Intersegment ................................................................
Total .................................................................................
Operating costs and expenses ........................................
Operating income ............................................................
Total assets ......................................................................
Depreciation and amortization .........................................
Capital expenditure ..........................................................

Die castings

Printing equipment$ 973,185
1,805
974,990914,021$ 60,969$ 836,460
41,415$ 81,944$ 275,023—
275,023
238,546$ 36,477$ 225,666
3,856$ 9,398

Power tools andbuilders’ hardware$ 209,458
25
209,483
194,441$ 15,042$ 208,547
6,376$ 4,274$(1,830)(1,830)(1,830)$0$243,458$———
1,457,666
1,345,178$ 112,488$1,514,131
51,647$ 95,616

The amounts of corporate assets as of March 31, 2006 and 2005 included in the “Eliminations or corporate assets”
were ¥28,613 million ($243,577 thousand) and ¥24,317 million, respectively, which mainly consist of cash, securities
and long-term investment assets (investments in securities).

24

RYOBI LIMITED ANNUAL REPORT 2006

(2) Geographical segment information
Millions of yen

2006

Net sales:
Unaffiliated customer ...................................................
Intersegment ................................................................
Total .................................................................................
Operating costs and expenses ........................................
Operating income ............................................................
Total assets ......................................................................

Japan

North
AmericaOtheroverseas¥147,296
2,290
149,586
138,680¥ 10,906¥121,737¥17,229
184
17,413
16,111¥ 1,302¥15,150¥ 6,707
5,225
11,932
10,970¥ 962¥14,111

Eliminations /corporate

Consolidated—¥171,232(7,699)(7,699)(7,743)¥44¥26,867

171,232
158,018¥ 13,214¥177,865

Eliminations /corporate

Consolidated¥—

Millions of yen

2005
Japan

Net sales:
Unaffiliated customer ...................................................
Intersegment ................................................................
Total .................................................................................
Operating costs and expenses ........................................
Operating income ............................................................
Total assets ......................................................................

¥ 133,909
2,128
136,037
127,410¥ 8,627¥109,803

North
AmericaOtheroverseas¥ 17,384¥ 6,671
4,672
11,343
10,109¥ 1,234¥ 12,662—
17,384
16,460¥924¥ 12,285—¥ 157,964(6,800)(6,800)(6,849)¥49¥ 22,670

157,964
147,130¥ 10,834¥ 157,420¥—

Thousands of U.S. dollars

2006

Net sales:
Unaffiliated customer ...................................................
Intersegment ................................................................
Total .................................................................................
Operating costs and expenses ........................................
Operating income ............................................................
Total assets ......................................................................

Japan

North
AmericaOtheroverseas

Eliminations /corporate

Consolidated$1,253,903
19,494
1,273,397
1,180,556$ 92,841$1,036,324$146,667
1,567
148,234
137,150$ 11,084$128,969$ 57,096
44,479101,575
93,386$ 8,189$120,124$—$1,457,666(65,540)(65,540)(65,914)$374$228,714

1,457,666
1,345,178$ 112,488$1,514,131—

The amounts of corporate assets as of March 31, 2006 and 2005 included in the “Eliminations or corporate assets” were¥28,613 million ($243,577 thousand) and ¥24,317 million, respectively, which mainly consist of cash, securities and longterm investment assets (investments in securities).
(3) Export sales and sales by overseas subsidiaries
Export sales of the companies (i.e., export amounts madeby the Company and its domestic subsidiaries) plus thesales by overseas consolidated subsidiaries for the years
ended March 31, 2006 and 2005 are presented below:
Thousands of
U.S. dollars

Millions of yen

2006

15. Subsequent Event
On June 29, 2006, the shareholders of the Company authorized the following appropriation of retained earnings forthe year ended March 31, 2006.

2005

2006

Export sales and sales byoverseas subsidiaries:
North America ............................. ¥22,997 ¥20,712
Europe .......................................... 15,685 15,450
Other ............................................
8,878
7,083
Total .................................................. ¥47,560 ¥43,245
Percentage of such sales against
consolidated net sales:
North America ............................. 13.4% 13.1%
Europe ..........................................
9.2
9.8
Other ............................................
5.2
4.5
Total .................................................. 27.8% 27.4%$195,769
133,523
75,577$404,869

Cash dividends .....................................
Bonuses to directors ...........................
Total .....................................................

RYOBI LIMITED ANNUAL REPORT 2006

Millions of yen

Thousands of
U.S. dollars¥1,67843¥1,721$14,284366$ 14,650

25

26

RYOBI LIMITED ANNUAL REPORT 2006

PROFILE

CORPORATE INFORMATION

Since its establishment as a die casting manufacturer in December 1943, Ryobi Limited has

CORPORATE DATA

accumulated innovative technologies by making components for automobiles, electronics,

Company NameRYOBI LIMITED

telecommunications and other industries. Ryobi has leveraged these technologies and drawn on its

Established
December 16, 1943

experience to diversify into the manufacture of printing equipment, power tools and builders'
hardware. Ryobi is all around you, making an enjoyable, comfortable daily lifestyle possible.

Head Office762, Mesaki-cho, Fuchu, Hiroshima 726-8628, Japan
Telephone: 81-847-41-1111

Major Products
Die cast products
Printing equipment(offset printing presses, page layout software, etc.)
Power tools(electric power tools, lawn and garden equipment, etc.)
Builders’ hardware(door closers, hinges, architectural hardware, etc.)

Tokyo Branch
5-2-8, Toshima, Kita-ku, Tokyo 114-8518, Japan
Telephone: 81-3-3927-5541
Toranomon Office
Toranomon Central Building
1-7-1, Nishi-Shinbashi, Minato-ku, Tokyo 105-0003, Japan
Telephone: 81-3-3927-5541

MANAGEMENT MEMBERS(As of June 29, 2006)

66.7%
DIE CASTINGS
As a world-leading die casting manufacturer,
Ryobi supplies various industries with die castproducts such as automobile components
including cylinder blocks and transmission
cases.

Net Salesby Segment
for Fiscal 2006

CORPORATE AUDITORSStanding Corporate Auditor
Corporate Auditor
Outside Corporate Auditors

14.4%
POWER TOOLS AND
BUILDERS’ HARDWARE
Ryobi provides an extensive range ofpower tools and lawn and garden
equipment for both professional anddo-it-yourself needs, as well as builders'
hardware such as door closers to enhancesafety and comfort in homes and offices.

18.9%

Ryobi offers high-precision, multi-functional offset
printing presses, and develops total printing systems
for all stages of printing from prepress to press andpost-press.

CONSOLIDATED FINANCIAL HIGHLIGHTS 1

FINANCIAL SECTION 6

TOPICS 4

CORPORATE INFORMATION 27

Number of Shares Issued
171,230,715

Items containing forward-looking statements such as performance forecasts, future trends, and strategies are based upon management's assumptions inlight of the information available as of the end of the fiscal year under review and may contain various risks and uncertainties. The Ryobi Group cautions that

Printing equipment and related product sales
Power tools and lawn and garden equipment sales
Die casting manufacturing
Die casting manufacturing
Cast aluminum and die casting manufacturing and sales
Secondary aluminum alloy bullion manufacturing and sales
Power tools and lawn and garden equipment manufacturing and sales
Die casting manufacturing and sales
Die casting manufacturing and sales
Die and die casting manufacturing and sales(Founded in April 2005, production operations planned to begin in November 2006)
Power tools, lawn and garden equipment and builders’ hardware manufacturing and sales
Financial operations

SHAREHOLDER INFORMATION(As of March 31, 2006)

Forward-Looking Statements

Corporate Officers

Hiroshi Urakami
Susumu Yoshikawa
Takao Tanaka
Takashi Yokoyama
Mikio Kamura
Shiro Muroya
Koji Ishii
Akira Urakami
Kenjiro Suzuki
Kuniyuki Ito
Naomichi Honkawa
Kazuaki Danjo
Shoji Osawa
Hideki Domoto

MAJOR CONSOLIDATED SUBSIDIARIES

Ryobi Dalian Machinery Co., Ltd. (P.R.C.)
Ryobi Finance Corporation (U.S.A.)A MESSAGE FROM THE MANAGEMENT 2CORPORATE OFFICERS
Chief Executive Officer
Chief Operating Officer
Executive Corporate Officers

Shozo Kobayashi
Hiroaki Takahashi
Kunihiro Toyota
Tairo Katoh

Ryobi Imagix Co. (Japan)
Ryobi Sales Co. (Japan)
Ryobi Mirasaka Co. (Japan)
Ryobi Mitsugi Co. (Japan)
Tokyo Light Alloy Co., Ltd. (Japan)
lkuno Co. (Japan)
Ryobi Power Tool Co. (Japan)
Ryobi Die Casting (USA), Inc. (U.S.A.)
Ryobi Aluminium Casting (UK), Limited (U.K.)
Ryobi Die Casting Dalian Co.,Ltd. (P.R.C.)

PRINTING EQUIPMENTCONTENTSCORPORATE GOVERNANCE 5

BOARD OF DIRECTORS
Chairman and Representative Director
Hiroshi Urakami
President and Representative Director
Susumu Yoshikawa
Directors
Takao Tanaka
Takashi Yokoyama
Mikio Kamura
Shiro Muroya
Koji Ishii
Akira Urakami
Kenjiro Suzuki
Outside Director
Satoshi Ohoka

Listing
Common Stock—Tokyo

Transfer Agent
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi,1-chome Chiyoda-ku,
Tokyo 100-8212, Japan

its actual actions and performance may differ significantly from these forward-looking statements due to numerous factors outside of Group's control suchas, but not limited to: general economic conditions, the business environment, trends in market demand and foreign exchange rates.
RYOBI LIMITED ANNUAL REPORT 2006

27

762, Mesaki-cho, Fuchu,
Hiroshima 726-8628, Japan
Telephone: 81-847-41-1111
http://www.ryobi-group.co.jp/

RYOBI LIMITED ANNUAL REPORT 2006

ANNUAL REPORTFor the year ended March 31, 2006

2 0 06This annual report was printed by a Ryobi printing press using 100% recycled paper and soybean ink.

Printed in Japan
Copyright©2006 Ryobi Limited. All Rights Reserved.