Contents
1

An Outline of the Toshiba Machine Group
Corporate Information2

Foreword

4

Financial Highlights (consolidated)

5

Overseas Operations for Fiscal 2003

6

Overseas Offices
Financial Review

810Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders’ Equity

11

Consolidated Statements of Cash Flows12

Notes to Consolidated Financial Statements

20

Independent Auditors’ Report

21

Directors & Auditors

An Outline of the Toshiba Machine GroupThe Toshiba Machine Group, an integrated machine builder with longstanding
international renown for their total capability and quality, excels in the production ofplastic processing machinery, die-casting machines, printing presses, machine tools,
hydraulic equipment, semiconductor manufacturing equipment, precision
machinery, and electronic controls.

Based on their highly innovative technology, expertise, and experience nurtured
over decades as one of the world’s leading machine builders, the Toshiba MachineGroup’s global-type solution business provides customers in such various industries as
the automobile, data communications and semiconductors with total satisfaction by
the careful analysis and recommending of optimum-type solutions to theirrequirements.

Corporate Information (as of March 31, 2003)
Company name:TOSHIBA MACHINE CO., LTD.

Headquarters:

2068-3, Ooka, Numazu-shi,
Shizuoka-ken 410-8510, Japan

Established:

1938

Capital:¥12,484 million (US$104 million)

Shares of Common Stock
Issued and Outstanding:

166,885,530 shares

Number of Shareholders:

19,586

Number of employees:

1,621 (consolidated:3,380)

1

Foreword
Plagued by a continuing deflationary spiral and depressed stock market prices, prospects for a
Japanese economic recovery remained bleak.
Overseas, the Asian region, centered on China, enjoyed expanded economic growth, while theAmerican and European economies experienced depressed growth.
The machine industry was also beset by bleak economic conditions due to continued weak
demand caused by constraints placed on plant and equipment investments.
Under such circumstances, the Toshiba Machine Group, based on their CS (Customer
Satisfaction) corporate policy, as well as their continuous effort to secure orders, develop new
products, and promote their Solution Business strategy resulted in an increase in orders received
for injection molding machines, die-casting machines, hydraulic equipment, and printingpresses.
This, however, was offset by a decrease in orders received for machine tools, extrusion
machines, and semiconductor equipment, which resulted in a total of ¥93,090 million (US$ 774
million), virtually unchanged over the previous term (an exchange rate of ¥120.20=US$1.00 shallbe used throughout this text).
As for sales volume, an increase in demand for our injection molding machines, die-castingmachines and semiconductor equipment did not compensate for the large decrease in demandfor our machine tools and printing presses resulting in a 7.0% decrease over the previous term,
totaling ¥97,296 million (US$ 809 million).
In terms of profit and loss, increased demand for our injection molding machines, die-castingmachines, and high precision machines, along with further improvement and rationalization of
our management systems resulted in a pre-tax consolidated profit of ¥938 million (US$ 8
million), and a net consolidated profit of ¥1,052 million (US$ 9 million) after including theproceeds from the liquidation of a former factory site.
In regards to the stock dividend, despite the absence of a mid-term dividend, a dividend of¥3.00 (US$ 0.02 ) per share was distributed for the fiscal year ended on March 31, 2003.
On June 6, 2002, a subsidiary was established in Shanghai, China for the express purpose ofbuilding our first overseas production facilities; and for improved business efficiency, theSemiconductor and Machine Tool Divisions (not including high precision machinery) were madeinto two separate subsidiary companies on August 1, 2002 and October 1, 2002, respectively.

2The general economic outlook is expected to remain bleak due to such factors as stagnant
domestic investment in plant and equipment, depressed consumer spending, world economic
uncertainty caused by the unstable situation in Iraq, as well as the lingering problem of nonperforming loans.
Under such bleak economic conditions, and in order that they be able to overcome various
business upheavals, changing market trends and remain a vital force within the industry, theToshiba Machine Group on April 1, 2003 implemented their TOSHIBA MACHINE ACTION
PROGRAM 21 Advanced II (TM-AP21 Ad. II) to further strengthen their various business units,
and increase the volume of orders received and total sales.
As for manufacturing, we plan to continue the rationalization of our operations, in addition to
the further improvement of our product quality and environment based on ISO 9001 and 14001.

Reiji Nakajima
President
July, 2003

3

FINANCIAL HIGHLIGHTS (consolidated)
In millions of yen (thousands of U.S. dollars) except for number of
employees and per-share data.

2003

2002

2001

2000

1999

¥97,297¥104,599¥127,359¥109,283¥125,352¥74,495¥92,048¥80,852¥90,694¥28,636¥30,883¥30,310¥33,779¥1,468¥4,428¥(1,879)¥879

Income (loss) before income ¥1,239
taxes and minority interests $10,308¥(2,010)¥2,123¥(8,779)¥(856)

¥193

¥413

¥733

¥171

¥524

¥(1,924)¥1,558¥(8,661)¥(1,326)¥(11.53)¥9.33¥(51.90)¥(7.95)

¥—

¥—

¥—

¥2.00

¥140,035¥166,588¥153,563¥159,579¥37,306¥39,620¥36,075¥43,971¥2,378¥2,565¥2,953¥4,100¥2,289¥2,610¥3,313¥3,467¥2,951¥2,749¥3,035

¥—

3,565

3,814

3,999

—

Net sales$809,459¥68,455

Cost of sales$569,509¥25,786

Selling, general andadministrative expenses$214,526

Operating income (loss)¥3,056$25,424

Income taxes$1,606¥1,052

Net income (loss)$8,752Per common share:¥6.29

Net income (loss)

$0.05
¥3.00

Cash dividends$0.02¥136,278

Total assets$1,133,760
Shareholders’ equity¥37,525$312,188¥1,275

Capital expenditure(property, plant and equipment)$10,607

Depreciation¥2,050$17,055

R & D expenditure¥2,587$21,522

Number of employees

4

3,380

Overseas Operations for Fiscal 2003
During the fiscal term under review, theIraqi war and the effects of the September 11,

Net Sales

Millions of yen

127,359

2001 terrorist attacks continued to have an
adverse influence on the North American

125,352

economy, while Asia, centered on China,

24,009104,599

30,06842,15629,99027,975

17,971

casting machines more than compensated forthe decrease in sales of our machine tools

58,404over the previous term, contributing toducts

Other Pro
MachineTools

49,42649,336

MoldingyMachiner

50,33559,187

total consolidated overseas sales of Yen 45,515
million (US$ 379 million ), a 3.2% increase

Total

29,102our injection molding machines and die-and semiconductor equipment, resulting in

97,297

27,19829,846

showed signs of an economic recovery.
Under such conditions, increased sales of

38,887109,283

2001

2000

1999

2002

2003

approximately 46.8% of overall consolidated
total sales.

Total Sales & Overseas Sales
Millions of yen

127,359

In terms of machine types, injection
molding machines and die-casting machines

125,352

104,599

109,283

were our leading export products, while the97,297s

Total Sale

Asian region, principally China, Korea,
Taiwan, Indonesia, and Thailand, was the
major destination for approximately 60% of
our exports.
During the current fiscal year, we plan tofurther enhance our regional sales andservice networks, along with the providing of

55,13943,247even higher quality machines and theimplementation of a total type of Solution

1999

44,09645,515

Overseas

Sales

46,007

2001

2000

2002

2003

Business based on our value chain of quality
products.

Export Percentages by Major Products

Other
Products

Molding
Machinery
26%

58%
16%
MachineTools

5Overseas Offices
Overseas Subsidiaries and Branch Office♦ North America ♦TOSHIBA MACHINE CO., AMERICA
Chicago Head Office♦ South East Asia ♦TOSHIBA MACHINE S.E. ASIA PTE. LTD.
Head Office

755 Greenleaf Avenue,
Elk Grove Village, IL 60007, U.S.A.
Tel : [1]-847-593-1616
Fax : [1]-847-593-0897
URL http://www.toshiba-machine.com/

No. 24 Tuas Avenue 4,
Singapore 639374, SINGAPORE
Tel : [65]-68611455
Fax : [65]-68612023

Beijing Fortune Building, Room No. 303,
5 Dong Sanhuan Bei-Lu, Chaoyang
District, Beijing, 100004,
PEOPLE’S REPUBLIC OF CHINA
Tel : [86]-(0)10-6590-8977
Fax : [86]-(0)10-6590-8979

Kuala Lumpur Office

Tianjin Office

Los Angeles Office1481 South Balboa Avenue, Ontario,
CA 91761, U.S.A.
Tel : [1]-909-923-4009
Fax : [1]-909-923-7258

70-G, Jalan SS21/62,
Damansara Utama, 47400 Petaling Jaya,
Selangor Darul Ehsan, MALAYSIA
Tel : [60]-(0)3-77297544
Fax : [60]-(0)3-77297545

Room No. B901, Jindong Building,
No. 99, Liuwei Road, Hedong District,Tianjin, 300171,
PEOPLE’S REPUBLIC OF CHINA
Tel : [86]-(0)22-2416-0311
Fax : [86]-(0)22-2416-0380

New Jersey OfficePenang Office1578 Sussex Turnpike, Randolph,
NJ 07869, U.S.A.
Tel : [1]-973-252-9956
Fax : [1]-973-252-9959

No. 61, Jalan Prai Jaya 4,
Bandar Prai Jaya, 13600 Prai, Penang,
MALAYSIA
Tel : [60]-(0)4-3980086
Fax : [60]-(0)4-3989652

Atlanta Office6478 Putnam Ford Drive, Suite #106,
Woodstock, GA 30189, U.S.A.
Tel : [1]-678-494-8005
Fax : [1]-678-494-8006

New York Office
10 Corporate Park Drive, Suite C,
Hopewell Junction, NY 12533, U.S.A.
Tel : [1]-845-896-0692
Fax : [1]-845-896-1724

TOSHIBA MACHINE CO. CANADA LTD.
6 Shields Court, Suite 101, Markham,
Ontario, L3R 4S1, CANADA
Tel : [1]-905-479-9111
Fax : [1]-905-479-6098
URL http://www.toshibamachine.on.ca/♦ Europe ♦TOSHIBA MACHINE (EUROPE) G.m.b.H.
Karl-Arnold-Strasse 2a, 47877
Willich-Münchheide, GERMANY
Tel : [49]-(0)2154-9275-0
Fax : [49]-(0)2154-9275-75

TOSHIBA MACHINE CO., LTD.
U.K. BRANCH
60 Burners Lane, Kiln Farm,
Milton Keynes MK11 3HD,
UNITED KINGDOMTel : [44]-(0)1908-562327
Fax : [44]-(0)1908-562348

6

Jakarta Office
Rukan Pesona Indah Kapuk A/12A,
JL. Raya Kapuk Kamal 20A, Jakarta,
14470, INDONESIA
Tel : [62]-(0)21-5561760
Fax : [62]-(0)21-5561750

TOSHIBA MACHINE (THAILAND) CO., LTD.
TMT SERVICE & ENGINEERING CO., LTD.
127/28 Panjathanee Tower, 23rd
Floor, Nonthree Road,
Khwaeng Chong Nonthree,
Khet Yannawa, Bangkok, 10120,
THAILAND
Tel : [66]-(0)2-681-0158
Fax : [66]-(0)2-681-0162♦ East Asia ♦SHANGHAI TOSHIBA MACHINE CO., LTD.
Head Office
405 Citic Pent-Ox Metropolis,
1085 Pudong Avenue,
Shanghai, 200135,
PEOPLE’S REPUBLIC OF CHINA
Tel : [86]-(0)21-5885-0606
Fax : [86]-(0)21-5866-2450
1F Block, 223 Fu Te Bei Street,
Wai Gao Qiao Free Trade Zone,
Shanghai, 200131,
PEOPLE’S REPUBLIC OF CHINA

Beijing Office

TOSHIBA MACHINE (SHANGHAI) CO., LTD.
4788, Jin Du Road,
Xinzhuang Industry Zone,
Shanghai, 201108,
PEOPLE’S REPUBLIC OF CHINA
Tel : [86]-(0)21-5442-5455
Fax : [86]-(0)21-5442-5466

TOSHIBA MACHINE HONG KONG LTD.
Head Office
Suite 1010, 10th Floor, Tower 3,
China Hong Kong City,
33 Canton Road, Tsim Sha Tsui,
Kowloon, HONG KONG
Tel : [852]-2735-1868
Fax : [852]-2735-1872

Shenzhen Office
Room 811, Century Plaza Hotel,
Kin Chit Road, Shenzhen, 518001,
PEOPLE’S REPUBLIC OF CHINA
Tel : [86]-(0)755-8232-0453
Fax : [86]-(0)755-8234-3497

TOSHIBA MACHINE TAIWAN CO., LTD.
No. 62, Lane 188, Jui-Kuang Road,
Nei-Hu District, Taipei, TAIWAN
Tel : [886]-(0)2-2659-6558
Fax : [886]-(0)2-2659-6381

Financial Review

7

CONSOLIDATED BALANCE SHEETSTOSHIBA MACHINE CO., LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 2003 and 2002ASSETS
Current assets:
Cash and time deposits (Note 13)
Marketable securities (Note 4)
Notes and Accounts receivable, trade
Allowance for doubtful receivables
Net receivables
Inventories:
Finished products
Work in process
Raw materials and supplies
Total inventories
Deferred taxes (Note 11)
Other current assets
Total current assets
Property, plant and equipment, net(Notes 5,6 and 10)
Intangible Assets
Investments and other assets:
Investments in:
Unconsolidated subsidiaries andaffiliates
Other securities (Note 4)Long-term loans
Deferred taxes (Note 11)
Other investments
Total investments and other assets
Total assets

Millions of yen
2003
2002

Thousands of
U.S. dollars
2003¥32,455
34
46,756(556)
46,200¥ 31,606
34
49,420(915)
48,505$270,008
283
388,985(4,625)384,360

7,158
18,535758
26,451635
1,228
107,003

6,992
18,401
767
26,160587
1,429
108,32159,551
154,201
6,306
220,058
5,283
10,216890,208

22,66624,471

188,569

409

436

3,402

734
3,563
460
313
1,130
6,200
¥136,278

384
4,749
552
369
753
6,807
¥140,035

6,107
29,642
3,827
2,604
9,401
51,581$1,133,760

See accompanying notes to financial statements

8

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term bank loans (Notes 6 and 10)
Current portion of long-term debt (Notes 6 and 10)
Notes and Accounts payable
Income taxes payable
Accrued expenses
Advances received
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 6 and 10)
Deferred taxes (Note 11)
Accrued employees’ retirement benefits (Note 7)
Total long-term liabilities
Total liabilities
Minority interest in consolidated subsidiaries
Shareholders’ equity:
Common stock
Authorized– 360,000,000 shares
Issued166,885,530 shares
Additional paid-in capital
Retained earnings
Unrealized holding gain on securities
Foreign currency translation adjustments
Treasury stock, at cost
(31,033 shares in 2003, 4,025 shares in 2002)
Total shareholders’ equity
Contingent liabilities (Note 8)
Total liabilities and shareholders’ equity

Thousands of
U.S. dollars
2003

Millions of yen
2003
2002
¥40,580
16,26925,255
239
4,604
1,136
618
88,701¥ 42,480
5,785
22,123
265
4,104
1,621
1,001
77,379$337,604
135,349
210,108
1,988
38,3039,451
5,142
737,945

1,488
681
7,305
9,474
98,175578

17,723
1,173
6,380
25,276102,655
74

12,3795,666
60,77478,819816,764
4,808

12,485
19,405
4,866
957
(181)

12,485
19,405
3,791
1,631
(5)

103,869
161,439
40,482
7,962(1,506)

(7)

(1)

(58)

37,52537,306

312,188¥136,278¥140,035$1,133,760

See accompanying notes to financial statements

9

CONSOLIDATED STATEMENTS OF OPERATIONSTOSHIBA MACHINE CO., LTD. AND CONSOLIDATED SUBSIDIARIES

years ended March 31, 2003 and 2002
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Other income:Interest and dividends
Gain on sales of property, plant and equipment
Gain on sales of offset rotary presses business
OthersMillions of yen
2003
2002
¥97,297¥104,599
68,45574,49528,84230,10425,78628,636
3,056
1,468

Thousands of
U.S. dollars
2003$809,459
569,509239,950
214,526
25,424

90
582
—
603
1,275

161
—
1,500
616
2,277

749
4,842
—
5,017
10,608

969
167

1,261
—

8,062
1,389

—
—
—
1,956
3,092

777
714
877
2,126
5,755

—
—
—
16,27325,724

Income(loss) before income taxes
and minority interests
Income taxes:(Note 11)
Current
Deferred
Minority interests in loss of consolidated subsidiaries
Net income (loss)

1,239
193
121
72
6
¥1,052(2,010)
413
162
251
499
¥(1,924)

10,308
1,606
1,007
599
50
$8,752

Net income (loss) per share of common stock¥6.29¥(11.53)

U.S. dollars$0.05

Other expenses:
Interest
Loss on sales of investment securities
Special benefits for employees retired
under early retirement program
Restructuring expenses related to printing presses business
Loss on disposal of inventories
OthersYen

See accompanying notes to financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYTOSHIBA MACHINE CO., LTD. AND CONSOLIDATED SUBSIDIARIES

years ended March 31, 2003 and 2002
Balance at March 31, 2001
Net loss
Bonuses to directors andstatutory auditors
Balance at March 31, 2002
Net income
Increase on consolidated subsidiaries
Bonuses to directors and statutory auditors
Balance at March 31, 2003

Balance at March 31, 2002
Net income
Increase on consolidated subsidiaries
Bonuses to directors and statutory auditors
Balance at March 31, 2003

10

Number of
Shares
166,885,530

Millions of yen
CommonAdditional paidstock
in capital
12,485
19,405Retainedearnings
5,725(1,924)(10)

166,885,530

12,485

19,405

166,885,530¥12,485¥19,405

3,791
1,052
32
(9)
¥4,866

Thousands of U.S. dollars
CommonAdditional paid
Retainedstock
in capitalearnings$103,869$161,439$31,539
8,752
266
(75)
$103,869$161,439$40,482
See accompanying notes to financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWSTOSHIBA MACHINE CO., LTD.AND CONSOLIDATED SUBSIDIARIES

years ended March 31, 2003 and 2002
Millions of yen
2003
2002
Operating Activities:
Income (loss) before income taxes and¥1,239minority interests
Adjustments to reconcile income (loss) before income taxes
and minority interests to net cash provided by operating activities:
Depreciation and amortization
2,116
Allowance for doubtful receivables(362)
Employees’ retirement benefit,
less payments
669
Devaluation of marketable securities
25
Loss (gain) on sales and disposal ofproperty, plant and equipment(524)
Gain on sales of offset rotary presses business—Changes in operating assets and liabilities:
Notes and accounts receivables, trade
2,881
Inventories(254)
Notes and accounts payables, trade
3,145
Advances received(484)
Accrued expenses
431
Income taxes paid
(192)
Others888
Net cash provided by operating activities
9,578
Investing Activities:
Purchase of property, plant and equipment(1,157)
Sale of property, plant and equipment
1,008
Payment of long-term loan receivables(9)
Repayment of long-term loan receivables
108
Investments to a subsidiary(470)
Gain on sales of offset rotary presses business—
Others(748)
Net cash used in investing activities(1,268)Financing Activities:
Decrease in short-term bank loans(1,901)
Proceeds from long-term debt
50
Repayment of long-term debt
(3,800)Bond redemption(2,000)Net cash used in financing activities(7,651)
Effect of exchange rate changes oncash and cash equivalents(175)
Net cash increased (decreased) in cash andCash equivalents
484
Cash and cash equivalent at the beginning of year
31,611
Increase in consolidated subsidiaries
365
Cash and cash equivalents at end of year
¥32,460(Note 13)

Thousands of
U.S. dollars
2003¥(2,010)$10,308

2,289
(20)

17,604(3,012)

(188)
57

5,566
208

599
(1,500)(4,359)—14,654596(10,771)(161)(1,399)
(563)
(287)
1,296

23,968(2,113)
26,165(4,027)
3,586(1,597)
7,387
79,684(2,142)
334
(18)
155
—
1,500
(61)
(232)

(9,626)
8,386
(75)
899
(3,910)—(6,223)(10,549)(7,617)800(3,374)—(10,191)(15,815)416(31,614)(16,639)(63,652)

144(1,456)(8,983)40,594—

4,027
262,987
3,036¥31,611$270,050

See accompanying notes to financial statements.

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTOSHIBA MACHINE CO., LTD. AND CONSOLIDATED SUBSIDIARIES

1. Basis of Presenting Consolidated
Financial Statements
The consolidated balance sheets, statements ofoperations and cash flows are prepared fromthose which are in accordance with accounting
principles generally accepted and applied inJapan, which may differ in some material respects
from accounting principles generally accepted incountries and jurisdictions other than Japan. The
preparation of these financial statements requires
management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues
and expenses during the reporting period. Actual
results could differ from these estimates. The consolidated statements of shareholders’ equity havebeen prepared to supply additional information.
The consolidated balance sheets, statements ofoperations and cash flows incorporate certain
reclassifications and rearrangements in order topresent these statements in forms which are morefamiliar to readers of these statements outside ofJapan. In addition, the notes to the consolidated
financial statements include information which is
not required under generally accepted accounting principles and practice in Japan but is presented herein as additional information.

2. Summary of Significant Accounting
Policies(a) Basis of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The consolidated financial statements include
the accounts of Toshiba Machine Co., Ltd. (the“Company”) and, certain subsidiaries which are
not material are not consolidated, those of its subsidiaries (together the “Companies”).
All significant intercompany transactions andaccounts and unrealized intercompany profits are
eliminated in consolidation.
The difference between the cost and underlying net equity of investments in consolidated subsidiaries at the time of acquisition is deferred andamortized over five-year period.
Investments in affiliates (15 to 50 percentowned companies ) in which the ability to exercise significant influence exist, except not material, are stated at cost plus equity in undistributed

12

earning (losses).
Net consolidated income (losses) includes theCompany’s share of the current net earnings (losses) of such companies, after elimination of unrealized intercompany profits.
(b) Translation of Foreign Currencies
Monetary assets and liabilities denominated inforeign currencies are translated into Japanese
yen at the exchange rate prevailing at the balancesheet date except for those hedged by a forward
contract, which are translated using the contracted rate .
The foreign exchange gains and losses fromtranslation are recognized in the consolidated
statements of income to the extent that they are
not hedged by foreign exchange derivatives.
All assets and liabilities of foreign subsidiaries
and affiliates are translated at current rates at therespective balance sheet dates and all income andexpense accounts are translated at average rates
for the respective periods. The components ofshareholders’ equity are translated at their historical exchange rates.
(c) Securities
Securities owned by the group have been classified into two categories, held-to-maturity securities and other securities, in accordance withaccounting standard for financial instruments.
Held-to-maturity securities are carried at amortized cost. Marketable securities classified as othersecurities are carried at fair value with any
changes in unrealized gain or loss, net of income
taxes, directly included in shareholders equity.
Non-marketable securities classified as othersecurities are carried at cost. Cost of securities
sold is determined by the moving averagemethod.
(d) Inventories
Inventories are stated at the cost, determinedby the identified cost for finished products andwork in process, and by the moving averagemethod for raw materials and supplies.
(e) Allowance for doubtful receivables
The allowance for doubtful receivables is stated based on the default ratio sustained over a specific period in the past and the estimated uncollectible amount based on the analysis of certain

individual accounts, including probable bad debts
and claims in bankruptcy.
This amount is considered sufficient to coverpossible losses on collection.
(f) Bonuses
The bonus to the employees are paid twice ayear and accrued based on estimated amounts to
be paid in the subsequent period. Bonuses todirectors and statutory auditors, which are subject
to approval by the shareholders, are an appropriation of retained earnings and not charged toincome.
(g) Depreciation of property, plant and equipment
Depreciation of building is computed, withminor exceptions, by the straight-line method andother depreciation of property, plant and equipment is computed by the declining balancemethod based on Japanese tax laws.
(h) Finance Leases
Finance leases, which do not transfer ownership of the leased assets to the lessees are accounted for in the same manner as operating leases.
(i) Income Taxes
The Companies accrue income taxes based on
taxable income.
The Companies include many items for financial reporting purpose which, in the case of
expenses, are not currently deductible and in thecase of income, are not currently taxable.
Income taxes based on temporary differences
between tax and financial reporting purposes arereflected as deferred income taxes in the consolidated financial statements using the asset and liability method.
( j ) Employee’s Retirement Benefits
Accrued employees’ retirement benefits areprovided based on the projected retirement benefit obligation and fair value of the plan assets at
year-end.
The unrecognized transitional obligation is
being amortized over 15 years. Actuarial gain orloss is amortized by the straight-line method over
the average remaining years of service of employees.
(k) Legal Reserve
On October1, 2001, an amendment to theCommercial Code of Japan (the “Code”) became
effective. The amendment eliminates the stated

per value of the Company’s outstanding shares
which results in all outstanding shares having no
per value at March 31,2002. Before the date on
which the amendment came into effect, theCompany’s share of common stock had a pervalue of ¥50 per shares.
Under the Code, the Company and domestic
subsidiaries are required to appropriate as a legal
reserve an amount of retained earnings equal toat least 10% of cash dividends and other distributions for each period until such reserve and theamount of capital surplus equals 25% of the common stock. The code also provides that, to theextent that the sum of capital surplus and legal
reserve exceeds 25% of the common stock, theamount of any such excess is available for appropriations by resolution of the shareholders.
(l) Amounts per Share of Common Stock
Net income (loss) per share is computed
based on the weighted-average number of sharesof common stock outstanding during each year.
Diluted net income per share is not presented
since the Company has never issued any securities
with a dilutive effect, such as bonds with warrants
and convertible bonds.
Cash dividends per share represent the actual
amount declared as applicable to the respective
years.
(m) Statements of Cash Flows
In preparing the statements of cash flows, cashon hand, readily available deposits and short-term
highly liquid investments with maturities of notexceeding three months at the time of purchaseare considered to be cash and cash equivalents.
(n) Reclassifications
Certain accounts in the consolidated financial
statements for the year ended March 31, 2002
have been reclassified to conform to the 2003 presentation.

3. U.S. Dollar Amounts
U.S. dollar amounts are included solely for theconvenience of the reader and have been translated at the rate of ¥120.20=US$1,the approximate
exchange rate prevailing in the Japanese foreignexchange market on March 31, 2003. This translation should not be construed as a representationthat the yen amounts actually represent, havebeen, or could be converted into U.S. dollars.

13

4. Securities
Information regarding marketable securities classified as other securities included in investment
securities were as follows:
Millions of yen
Carrying
value

2003
Marketvalue

Carrying
value

2002
Marketvalue

Unrealized
gains

Unrealized
gains

Equity securities¥1,819¥3,418¥1,599¥1,859¥4,604¥2,745

Debt securities

10

10

0

10

10

0

¥1,829¥3,428¥1,599¥1,869¥4,614¥2,745

Thousands of U.S. dollars
2003
Carrying
MarketUnrealized
value
value
gains
Equity securities$15,133$28,436$13,303

Debt securities

83

83

0

$15,216$28,519$13,303

5. Property, Plant and Equipment
Property, plant and equipment at March 31, 2003 and 2002 consisted of the following:

Land
Buildings and structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Construction in progress
Less accumulated depreciation

Millions of yen
2003
2002
¥6,328¥6,77330,57430,36732,25533,519
600
631
7,500
7,562
65
273
77,322
79,125(54,656)(54,654)¥22,666¥24,471

Thousands of
U.S. dollars
2003$52,646
254,359
268,344
4,992
62,396541
643,278(454,709)$188,569

Depreciation expense for the years ended March 31, 2003 and 2002 were ¥ 2,050 million ($ 17,055
thousand) and ¥ 2,289 million, respectively.

6. Short-term Bank Loans and Long-term Debt
The annual interest rates applicable to the loans outstanding on March 31, 2003 ranged principallyfrom 0.51% to 4.99%. Long-term debt on March 31, 2003 and 2002 consisted of the following:

1st Bonds due 2003 interest 2.9%
¥2,000,000,000 fixed rate Bonds due 2002
Loans, principally from Japanese banks andinsurance companies, with pledged assets as
collateral, maturing 2004 – 2009 ,interest 2.09 % – 2.60 %Less current portion

14

Millions of yen
2003
2002
¥3,000¥3,000—2,000

14,757
17,757
16,269
¥1,48818,50823,508
5,785¥17,723

Thousands of
U.S. dollars
2003$24,958—

122,771
147,729
135,350$12,379

The aggregate annual maturities of long-term debt March 31, 2003 are as follows:Year ending March 31
2004
2005
2006
2007
2008 and later

Millions of yen

Thousands of
U.S. dollars¥16,269
748
212
438
90
¥17,757$135,349
6,223
1,764
3,644
749
$147,729

As of March 31, 2003 property, plant and equipment with a net book value of approximately ¥6,371
million ($53,003 thousand) were pledged as collateral for long-term debt. In case of default and certain other specified events, as is customary in Japan, additional collateral must be pledged if requiredby lending institutions under certain circumstances. Generally banks have the right to offset cash
deposited with them against any debt or obligation that becomes due.

7. Retirement and Severance Benefits
The severance indemnity regulation of the Companies provide for benefit payments based on theemployee’s current basic rate of pay and length of service. The Company and certain subsidiaries have a
non-contributory funded pension plan for employees. The Company and certain subsidiaries pay the fullcost of the benefits to a bank which act as the trustees. The funded status of employees’ retirement benefits at March 31, 2003 and 2002 were as follows:
Millions of yen
2003
2002

Thousands of
U.S.dollars
2003¥20,926¥20,183$174,093

Fair value of plan assets(1,035)(1,129)(8,611)

Unrecognized transitional obligation(9,765)(10,601)(81,239)

Unrecognized actuarial loss

(2,821)(2,073)(23,469)

Accrued retirement benefits obligation¥7,305¥6,380$60,774

Projected benefit obligation

The components of net periodic benefit costs for the year ended March 31, 2003 and 2002 were as follows:
Millions of yen
2003
2002

Thousands of
U.S. dollars
2003

Service cost

¥1,247¥1,205$10,374

Interest cost

503

530

4,185

Expected return on plan assets

(36)

(40)

(300)

Recognized actuarial loss

228

206

1,897

Amortization of transitional obligation

835

1,163

6,947

¥2,777¥3,064$23,103

Assumptions used in the accounting for the projected benefit obligation were as follows:
Discount rate
Expected rate of return on plan assets
Amortization period of transitional obligation
Amortization period of actuarial loss/gain

2003
2.5%
4.0%
15 years
10 years

2002
3.0%
4.0%
15 years
10 years15

8. Contingent Liabilities
On March 31, 2003 contingent liabilities for notes discounted in the ordinary course of businessand for loans guaranteed by the Company, principally on behalf of non-consolidated subsidiaries andaffiliated companies, amounted to ¥418 million ($3,478 thousand) and ¥609 million ($5,067 thousand), respectively.

9. Leases
Finance leases of the Companies other than those where ownership of the leased assets is transferred to the lessee, are accounted for as operating leases. The following pro forma amounts represent
the acquisition costs, accumulated depreciation and net book value of the leased assets at March 31,
2003 and 2002, which would have been reflected in the consolidated balance sheet if these arrangements have been accounted for as finance leases:
Thousands ofAcquisition Costs

Millions of yen
2003
2002

U.S. dollars
2003

Machinery, equipment and vehicles

¥664

¥896

$5,524Tools, furniture and fixtures

2,262

2,765

18,819Less-Accumulated depreciation(1,531)(1,986)(12,737)

Net book value¥1,395¥1,675$11,606

Future lease payments (including the interest portion thereon) subsequent to March 31,2003 forfinance leases accounted for as operating leases are as follows:
Millions of yen
2003
2002

Thousands of
U.S. dollars
2003

2004

¥625

¥709

$5,2002005 and there after

770

966

6,406

¥1,395¥1,675$11,606

Periodic lease charges to the Companies, as a lessee, charged to income for the years ended March
31, 2003 and 2002 are ¥ 794 million ($6,606 thousand) and ¥ 986 million, respectively.

10. Pledged Assets
The following assets were pledged as collateral at March 31, 2003:
Land, property, plant and equipment(Net of accumulated depreciation)

Millions of yen¥6,371Thousands of
U.S. dollars$53,003

The preceding collaterals were pledged to secure long-term debt amounting to ¥296 million($2,463 thousand), short-term bank loans amounting to ¥743 million ($6,181 thousand) and bonds
amounting to ¥3,000 million ($24,958 thousand).

11. Income Taxes
Income taxes in Japan applicable to the Companies generally comprise Corporation Tax,Enterprise Tax and Prefectural and Municipal Inhabitants taxes. The statutory rates for the years
ended March 31, 2003 and 2002 are approximately 41.1%.
The reconciliation of the differences between the statutory rate and effective tax rate of income
taxes for the year ended March 31, 2003 is as follows:

16

2003
41.1 %

Statutory tax rate
Per capita portion of Inhabitant Tax

4.0

Non-taxable revenue for tax purpose(6.8)

Non-deductible expense for tax purpose

5.7

Unrealized intercompany profit on fixed asset(19.0)

Change in valuation allowance(7.1)

Effect of change in statutory tax rate

(1.3)

Other

(1.0)

Effective tax rate

15.6 %

Reconciliation between the statutory tax rate and the effective tax rate for the year ended March
31, 2002 is not presented, as permitted, since the Company incurred a loss before income tax for theyear then ended.
The significant components of deferred tax assets and liabilities at March 31, 2003 and 2002 are as follows:
Thousands of
U.S. dollars
2003

Millions of yen
2003
2002
Deferred tax assets:
¥160

¥148

$1,331

Allowance for doubtful accounts

52

113

433

Devaluation of inventories

82

25

682

Devaluation of securities

50

53

416

Accrued employees’ retirement benefits

172

270

1,431

Unrealized gain on inventories

101

134

840

Other

331

213

2,754

¥948

¥956

$7,887

Depreciation

13

30

108

Unrealized gain on securities

668

1,143

5,558

Deferred tax liabilities¥681¥1,173$5,666

Net deferred tax (liabilities) assets¥267¥(217)$2,221

Accrued employees bonuses

Deferred tax assets
Deferred tax liabilities:

Due to the change in the corporate enterprise tax rate effective for tax period ending March 31,2005,
the Company’s normal statutory tax rate will change from 41.1% to 39.8% for the year ending March
31,2005. As a result, net deferred tax assets decreased by ¥15million ($125 thousand) at March 31,2003,
and deferred tax expense for the year ended March 31,2003 increased by the corresponding amount.

12. Derivatives
The Company enters into interest rate floor contracts to manage interest rate exposures on certain
liabilities. This derivative transaction is utilized solely for hedging purposes under the Company’s
internal control rules and is subjected to supervision by the Board of Directors.
The contract amounts and estimated fair value of the derivative transactions outstanding at March
31, 2003 and 2002 are as follows:
Millions of yen

2003
Contract
amount

Fair
value

¥—

¥—

2002
Unrealized Contract
gains (losses) amount

Fair
value

Unrealized
gains (losses)

¥( 0)

¥( 0)

Interest rate floor contracts
Sell:

¥—

¥100

17

13. Cash and cash equivalents.
Reconciliation between cash and time deposits in the consolidated balance sheets and cash andcash equivalents in the statements of cash flows at March 31, 2003 and 2002 is presented as follows:
Thousands of
U.S. dollars
2003

Millions of yen
2003
2002
Cash and time deposits¥32,455¥ 31,606$270,008

Short-term investments

¥5

¥5

$42

¥32,460¥ 31,611$270,050

Cash and cash equivalents

14. Segment information(A) Business segment information
The companies’ business is classified into the following three segments based on the similarities of typeand nature of business:
Molding Machinery: Injection molding machines, Die casting machines, Plastic extrusion
Machine Tools: Large size machine tools, Portal type machine tools, Machining centers, Horizontal
boring machines, High-precision machines
Other Products: Semiconductor manufacturing equipment, Hydraulic equipment, Rotogravure presses, Electronic controls
The tables bellow present sales, operating expenses and operating profit information by business segment.
Year ended March 31, 2003

Sales
Operating expenses
Operating income (loss)
Identifiable assets
Depreciation
Capital expenditure

MachineTools¥18,118
19,370(1,252)
20,386356
328

Molding
Machinery¥49,432
47,311
2,121
49,067794
351

Millions of yen
MachineOther
Eliminations
Consolidated
Tools
Products and/or corporate¥27,992¥30,381¥(3,206)¥104,599
28,17930,851(3,210)103,131
(187)
(470)
4
1,468
26,39951,975
12,594140,035
554
941
—
2,289
829
1,198
—
2,378

Molding
Machinery$410,507
387,870
22,637409,376
2,962
2,729

Thousands of U.S.dollars
MachineOther
Eliminations
Consolidated
Tools
Products and/or corporate$150,733$280,923$(32,704)$809,459
161,149
268,236(33,220)784,035(10,416)
12,687516
25,424
169,601
463,660
91,123
1,133,760
8,752
5,341
—
17,055
3,760
4,118
—
10,607

Year ended March 31, 2002

Sales
Operating expenses
Operating income (loss)
Identifiable assets
Depreciation
Capital expenditure
Year ended March 31, 2003

Sales
Operating expenses
Operating income (loss)
Identifiable assets
Depreciation
Capital expenditure

18

Millions of yen
Other
Eliminations
Consolidated
Products and/or corporate¥33,767¥(3,931)¥97,297
32,242(3,993)
94,241
1,525
62
3,056
55,732
10,953
136,278
642
—
2,050
495
—
1,275

Molding
Machinery¥49,343
46,622
2,721
49,207
1,052
452

(B) Geographic segment information of the companies for the year ended March 31,2003 and 2002 were as
follows:
North America¥10,252
10,658(406)
8,227Millions of yen
Asia
Total
¥3,686¥106,579
3,538
103,896
148
2,683
2,936
123,445

Eliminations Consolidated¥(9,282)¥97,297(9,655)94,241373
3,056
12,833
136,278

Japan¥97,685
95,8291,856
113,367

North America¥14,378
14,688(310)
10,646

Millions of yen
Asia
Total
¥2,885¥114,948
2,868
113,385
17
1,563
2,042
126,055

Eliminations Consolidated¥ (10,349) ¥104,599(10,254)
103,131(95)
1,468
13,980140,035

Japan$770,724
746,256
24,468934,126

Thousands of U.S.dollars
North America
Asia
Total
Eliminations Consolidated$85,291$30,665$886,680$(77,221)$809,459
88,66929,434864,359(80,324)
784,035(3,378)1,231
22,321
3,103
25,42468,444
24,426
1,026,996
106,764
1,133,760

Year ended March 31, 2003
Net sales
Cost and expenses
Operating income
Identifiable assets

Japan¥92,641
89,7002,941
112,282

Year ended March 31, 2002
Net sales
Cost and expenses
Operating income
Identifiable assets
Year ended March 31, 2003
Net sales
Cost and expenses
Operating income
Identifiable assets(C) Sales to foreign customers for the years ended March 31,2003 and 2002 were as follows:Year ended March 31, 2003
North America
Sales to foreign customers
Net sales
Ratio of Sales to foreign Customers (%)¥29,341¥3,707¥45,515———

97,297

12.8

30.2

3.8

46.8

North America

Net sales
Ratio of Sales to foreign Customers (%)

Ratio of Sales to foreign Customers (%)

Total¥22,853¥4,140¥44,096———

104,599

16.4

21.8

4.0

42.2

North America

Net sales

Millions of yen
Asia
Other

¥17,103

Year ended March 31, 2003
Sales to foreign customers

Total¥12,467

Year ended March 31, 2002
Sales to foreign customers

Millions of yen
Asia
Other

Thousands of U.S.dollars
Asia
Other

Total

$103,719$244,101$30,840$378,660———

809,459

12.8

30.2

3.8

46.8

15. Other
Consolidated subsidiaries Toshiba Machine Company., America (“TMA”) has been involved civil
lawsuit for which an adverse decision was reached at the trial court level during 2003.
TMA has appealed the decision based upon the advice of legal counsel. The loss is estimated torange between $2.2million and $9.2 million, including interest. The lower end of the range has been
accrued as of March 31, 2003 in accordance with an opinion of legal counsel.

19

Independent Auditors’ Report
The Board of Directors and Shareholders
Toshiba Machine Co., Ltd.
We have audited the accompanying consolidated balance sheets of Toshiba Machine Co., Ltd.
and consolidated subsidiaries as of March 31, 2003 and 2002, and the related consolidated
statements of operations, shareholders’ equity, and cash flows for the years then ended, allexpressed in yen. These financial statements are the responsibility of the Company’s
management. Our responsibility is to independently express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices
generally accepted and applied in Japan. Those standards, procedures and practices require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Toshiba Machine Co., Ltd. and consolidated
subsidiaries at March 31, 2003 and 2002, and the consolidated results of their operations andtheir cash flows for the years then ended in conformity with accounting principles and practices
generally accepted in Japan.
The U. S. dollar amounts in the accompanying consolidated financial statements with respect
to the year ended March 31, 2003 are presented solely for convenience. Our audit also included
the translation of yen amounts into U. S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 3 to the consolidated financial statements.

June 27, 2003

See Note 1 to the consolidated financial statements which explains the basis of preparation of theconsolidated financial statements of Toshiba Machine Co., Ltd. and consolidated subsidiaries underJapanese accounting principles and practices.

20

Directors & Auditors

Directors

President
Reiji Nakajima
Senior Managing Director
Yasuhiro Kuroki
Managing Director
Tamotsu Mukai
Directors
Katsuhiko Goto
Kazuo Hanzawa
Kosei Takeyama
Yoshi AtobeMichinori Tanaka

Auditors

Motoyasu Morita
Kazutaka Yamashita
Fumio Kamahora
Yoshinori Kubota

21