Contents
1

An Outline of the Toshiba Machine Group
Corporate Information2

Foreword

4

Financial Highlights (consolidated)

5

Overseas Operations for Fiscal 2006

6

Overseas Offices
Financial Review

810Consolidated Balance Sheets

11

Consolidated Statements of Shareholders’ Equity

12

Consolidated Statements of Cash Flows

13
23

Notes to Consolidated Financial Statements

24

Directors & Auditors

Consolidated Statements of Income

Report of Independent Auditors

An Outline of the Toshiba Machine GroupA highly respected integrated machine building group, internationallyrespected for its total capability in the production of quality plastic processing
machinery, die-casting machines, machine tools, precision machinery, hydraulicequipment, semiconductor manufacturing equipment, 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
Machine Group's global-type solution business provides customers in such various
industries as the automobile, data communications and semiconductors with totalsatisfaction by the careful analysis and recommending of optimum-type solutions
to their requirements.

Corporate Information (as of March 31, 2006)
Company name:TOSHIBA MACHINE CO., LTD.

Headquarters:

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

Established:

1938

Capital:¥12,484 million (US$106 million)

Shares of Common Stock
Issued and Outstanding:

166,885,530 shares

Number of Shareholders:

10,905

Number of employees:

1,564 (Consolidated: 3,336)

1

Foreword
The Japanese economy continued to gradually recover due to increased private-sector
plant and equipment investment, resumption in personal consumption, and the completion of
inventory adjustment in the IT (information technology) industry in the latter half of theyear. Overseas, China, with strong robust growth, continued to lead the Asian region. The
United States, supported by domestic demand, continued in its economic expansion, while
Europe maintained its gradual business recovery.
The Japanese domestic machine industry enjoyed generally favorable conditions due toincreased domestic and overseas demand.
The Toshiba Machine Group, based on their corporate CS (Customer Satisfaction) policy,
continued in its concerted efforts to secure orders, develop new products, and pioneer new
domestic and overseas growth markets for their injection molding machines, plastic
extrusion machines, die-casting machines, machine tools, electronic control equipment andsemiconductor manufacturing equipment resulted in a 13.8% increase over the previous termin consolidated total orders received, totaling ¥159,014 million (US$1,354 million), and a 16.8%
increase, totaling ¥144,356 million (US$1,229 million), in consolidated net sales over theprevious term. (An exchange rate of US$1.00 = ¥117.47 shall be used throughout this report).
The increased sales of our products in combination with various business rationalization
efforts resulted in a pre-tax consolidated profit of ¥15,604 million (US$133 million), an increaseof 44.9% over the previous term, and a net consolidated profit of ¥10,482 million (US$89
million), an increase of 47.8% over the previous term, our third consecutive year of increased
revenue and fourth consecutive year of increased profits.
Hence, we are pleased to announce that a fiscal yearend dividend of ¥8 (US$0.07) per
share was distributed to our stockholders for the period ending on March 31, 2006, anincrease of ¥3 (US$0.03) per share over the previous year, for a total annual dividend of ¥12(US$0.1) per share, up from ¥7 (US$0.06) for the previous term.
On April 1, 2006, a subsidiary was established in New Delhi, India, to market and service
Toshiba Machine Group products in that region. Additionally, to further strengthen ourgroup management network, Fuji seiki Corporation became a 100% fully owned subsidiary of
the Toshiba Machine Co. Ltd. through an exchange of stock on the same day.
As for the general outlook, despite many uncertainties such as volatile energy costs and2the risk of an international economic slowdown, the Japanese domestic economy is expected
to continue in its gradual recovery.
Under such business conditions, the Toshiba Machine Group implemented their ACTION
PROGRAM G1500 last year to help further promote and sell their products in new markets.
They also implemented their TOSHIBA MACHINE ACTION PROGRAM G1500II (TM-AP
G1500II) on April 1, 2006, along with the continuing of various strategy based reforms andadvanced technologies for further enhancement of business performance and profitability, as
well as continued emphasis on increased productivity through the promotion of various
rationalization and efficiency-oriented measures, as well as the creation of environmentallyfriendly, quality products based on ISO9001 and 14001 standards, and as a responsible
corporate citizen, observe all rules and regulations, and fulfill all social responsibilities.

Reiji Nakajima
President
July, 2006

3

FINANCIAL HIGHLIGHTS (consolidated)

Net sales

2006

2005

2004

2003

2002

¥144,356¥123,573¥110,658¥97,297¥104,599¥85,598¥77,627¥68,455¥74,495¥25,742¥25,430¥25,786¥28,636¥12,233¥7,601¥3,056¥1,468¥10,178¥5,104¥1,239¥(2,010)¥2,940

¥817

¥193

¥413

¥7,093¥4,153¥1,052¥(1,924)¥42.48¥24.71¥6.29¥(11.53)

¥7.00

¥4.00

¥3.00

¥—

¥145,057¥148,309¥136,278¥140,035¥47,624¥42,230¥37,525¥37,306¥2,004¥1,774¥1,275¥2,378¥1,825¥1,800¥2,050¥2,289¥2,512¥3,194¥2,587¥2,951

3,310

3,068

3,380

3,565

$1,228,875
Cost of sales¥98,394$837,609

Selling, general andadministrative expenses$250,370

Operating income¥16,551¥29,411$140,896
Income (loss) before income
taxes and minority interests¥16,715$142,291

Income taxes¥5,995$51,034

Net income (loss)¥10,482$89,231

Per common share:
Net income (loss)¥63.16$0.54

Cash dividends¥12.00$0.10

Total assets¥172,477$1,468,264

Shareholders' equity¥60,347$513,723

Capital expenditure(property, plant and equipment)$26,356

Depreciation¥1,891¥3,096$16,098
R & D Cost

¥2,808$23,904

Number of employees

3,336

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

4

Overseas Operations for Fiscal 2006
During fiscal year 2006, we enjoyedfavorable exports of our molding machinery

Net Sales

144,356

Millions of yen

roducts

18,221 Other P

and semiconductor manufacturing
123,573
16,619equipment to the Asian region. Supported
by domestic demand, increased overseas

110,658

sales were also recorded for the UnitedStates market.
Due to such favorable economic

104,599

97,297

27,19831,13429,990molding machines, die-casting machines andmachine tools continued to be our leading
export products, with the Asian region,

Tools

24,90965,756yMachiner

78,72849,33649,426

approximately 48.9% of total consolidated
In terms of machine types, injection

MachineMolding

60,865

million), an 18.5% increase over thesales.

28,332

17,971

27,975overseas sales of ￥70,602 million (US$601
previous year, contributing to

16,286ductorSemicon turing
anufacMt
19,084 Equipmen

18,658

conditions, increased foreign demand forour products resulted in total consolidated

Total

2004

2003

2002

2005

2006

Note : From the fiscal year ending on March 31,2005 [Semiconductor
manufacturing equipment] is listed separately from [Other products]
Total
144,356

Total Sales & Overseas Sales
Millions of yen

principally China, Korea, Taiwan, Indonesia,

Sales

123,573

and Thailand, being our largest markets.
110,658

During the current fiscal year, theToshiba Machine Group plans to continue

104,599

97,297in the further enhancement of theirregional sales and service networks, alongwith the providing of machines ofincreasingly higher standards of quality, as
57,172well as a total type of Solution Businessbased on our value chain of products.

44,096

2002

59,580Overseas70,602

Sales

45,515

2004

2003

2005

2006

Export Percentages by Major Products
Other
Products
Semiconductor
Manufacturing
Equipment

Molding
Machinery

13%
13%
54%
20%

MachineTools

5Overseas Offices■Nouth America■■Europe■■South East Asia■

TOSHIBA MACHINE CO., AMERICA
Chicago Head Office

TOSHIBA MACHINE (EUROPE) G.m.b.H.
Head Office

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/

Karl-Arnold-Strasse 2a, 47877
・・Willich-Munchheide,
GERMANYTel : [49]-(0)2154-9275-0
Fax : [49]-(0)2154-9275-75

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

U.K. Branch

Kuala Lumpur Branch

Los Angeles Office

60 Burners Lane, Kiln Farm,
Milton Keynes MK11 3HD
UNITED KINGDOMTel : [44]-(0)1908-562327
Fax : [44]-(0)1908-562348

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

1440 South Balboa Avenue,
Ontario, CA 91761, U.S.A.
Tel : [1]-909-923-4009
Fax : [1]-909-923-7258

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 MACHINERY CO., LTD.
USA Branch
755 Greenleaf Avenue,
Elk Grove Village, IL 60007, U.S.A.
Tel : [1]-847-593-1616
Fax : [1]-847-593-9741

TOSHIBA MACHINE MACHINERY CO., LTD.
Canada Branch
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/

6

Ho Chi Minh Officee Town,8th Floor,364,
Chong Hoa Street,Tan Binh District,
Ho Chi Minh City,VIETNAM
Tel : [84]-(0)8-810-8658
Fax : [84]-(0)8-810-6816

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

Chonburi Branch
656 Sukumvit Road, Tambol Seansuk,
Ampur Muang, Chonburi 20130,
THAILAND
Tel : [66]-(0)38-341-670
Fax : [66]-(0)38-341-759

■East Asia■
SHANGHAI TOSHIBA MACHINE CO., LTD.
Head Office4788, Jin Du Road,
Xinzhuang Industry Zone,
Shanghai, 201108,
PEOPLE'S REPUBLIC OF CHINA
Tel : [86]-(0)21-5442-0606
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
Beijing Fortune Building, Room No. 2014,
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

Tianjin Office12-32, Xinshuiyuan,Youyinan Road,Hexi
District,Tianjin,300221
PEOPLE'S REPUBLIC OF CHINA
Tel : [86]-(0)22-8836-3056
Fax : [86]-(0)22-2416-0380

Suzhou Office
3F, Room C1, Gui Du Tower No. 8,
Zhong Xin Road, Suzhou, 215021
PEOPLE'S REPUBLIC OF CHINA
Tel : [86]-(0)512-6761-9211
Fax : [86]-(0)512-6761-0380

Dalian Office
No. 171-8, Dongbei Avenue,
Development Zone, Dalian, 116600
PEOPLE'S REPUBLIC OF CHINA
Tel : [86]-(0)411-8732-7911
Fax : [86]-(0)411-8732-6899■South Asia■

Guangzhou Office

TOSHIBA MACHINE (INDIA) PVT. LTD.

Room 707, No.93, Linhexi Road, Tianhe
District, Guangzhou, 510610
PEOPLE'S REPUBRIC OF CHINA
Tel : [86]-(0)20-8755-1180
Fax : [86]-(0)20-8755-1185

No.1006, Antriksh Bhawan22, Kasturba
Gandhi Marg, New Delhi, 110001,
INDIA
Tel : [91]-(0)11-6632-6159
Fax : [91]-(0)11-6632-6161

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 318-319, 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

NuFlare Technology, Inc.
Korea Branch
Wonchang B/D 4th Floor 1000-2,3,
Yeongtong-dong, Suwon Si
Yeongtong-gu, Gyeonggi-Do, Korea 443-813
Tel : [82]-(0)70-7017-1136
Fax : [82]-(0)31-202-0435

7

Financial Review

CONSOLIDATED BALANCE SHEETSTOSHIBA MACHINE CO., LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 2006 and 2005
Thousands of
U.S. dollars

Millions of yen
ASSETS

2006

2005

2006

Cash and time deposits (Note 12)¥39,410¥ 26,619$335,490

Notes and accounts receivable, trade56,142

52,578477,926

(433)

(430)

(3,686)55,70952,148474,240

Finished products

3,032

3,945

25,811Work in process

31,67025,569269,600

Raw materials and supplies

2,207

2,162

18,788Current assets:

Allowance for doubtful receivables
Net receivables
Inventories:

Total inventories

36,90931,676314,199

Deferred tax assets (Note 11)

2,540

2,164

21,623

Other current assets

1,337

1,622

11,381

Total current assets

135,905

114,229

1,156,933

Property, plant and equipment, net(Notes 5 and 10)

22,844

22,208

194,467

735

663

6,257

153

153

1,302

11,488

6,537

97,795Long-term loans

282

337

2,401

Deferred tax assets (Note 11)

342

89

2,911

Other investments

728

841

6,198

12,993

7,957

110,607¥172,477¥145,057$1,468,264

Intangible Assets
Investments and other assets:
Investments in:
Unconsolidated subsidiaries andaffiliates
Other securities (Note 4)

Total investments and other assets
Total assets

See accompanying notes to financial statements.

8Thousands of
U.S. dollars

Millions of yen
LIABILITIES AND SHAREHOLDERS' EQUITY

2006

2005

2006

¥26,809¥26,452$228,220

Current portion of long-term debt (Notes 6 and 10)

1,538

762

13,093

Notes and accounts payable, trade

40,992

34,779348,957

Income taxes payable

5,323

4,444

45,314

Accrued expenses

6,240

5,736

53,120

Advances received

4,780

2,768

40,691Other current liabilities

2,193

731

18,66887,87575,672748,063

Long-term debt (Notes 6 and 10)

9,840

11,37883,766

Deferred tax liabilities (Note 11)

2,937

1,570

25,002

Accrued employees' retirement benefits (Note 7)

9,116

8,004

77,603

21,893

20,952

186,371

109,768

96,624934,434

2,362

809

20,107

12,485

12,485106,282

Additional paid-in capital

19,53819,405

166,323

Retained earnings

23,423

14,461

199,396

Unrealized holding gain on securities, net of tax

5,753

2,747

48,974Foreign currency translation adjustments

(159)

(653)

(1,353)

(693)

(821)

(5,899)60,34747,624

513,723¥172,477¥145,057$1,468,264

Current liabilities:
Short-term bank loans (Notes 6 and 10)

Total current liabilities
Long-term liabilities:

Total long-term liabilities
Total liabilities
Contingent liabilities (Note 8 and Note 15)
Minority interest in consolidated subsidiaries
Shareholders' equity:
Common stock
Authorized

360,000,000 shares

Issued166,885,530 shares

Treasury stock, at cost
(1,717,748 shares in 2006, 2,056,612 shares in 2005)
Total shareholders' equity
Total liabilities and shareholders' equity

See accompanying notes to financial statements.

9

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

Years ended March 31, 2006 and 2005
Thousands of
U.S. dollars

Millions of yen
2006¥144,356
98,39445,962
29,411
16,551

2005¥123,573
85,59837,97525,742
12,2332006$1,228,875
837,609391,266
250,370
140,896

129
718
2,488
3,335

98
26
472
596

1,098
6,112
21,18028,390

471

521

4,010

—

356

—

818

827

6,963

1,366
516
3,171

—
947
2,651

11,6294,393
26,995

16,715

10,178142,291

Income before minority interest
Minority interest in income of
consolidated subsidiaries
Net income

7,189(1,194)
5,995
10,7204,597(1,657)
2,940
7,238

61,199(10,165)
51,034
91,257238¥10,482

145¥7,0932,026$89,231

Net income per share of common stock¥63.16¥42.48

U.S. dollars$0.54

Net sales
Cost of sales (Note 13)
Gross profit
Selling, general and administrative expenses (Note 13)
Operating income
Other income:Interest and dividends
Gain on sales of property, plant and equipment
OthersOther expenses:
Interest
Special benefits for employees retired
under early retirement program
Amortization of transitional obligation for
employee's retirement benefits (Note 7)
Gain on sales of investment inconsolidated subsidiaries
OthersIncome before income taxes
and minority interest
Income taxes:(Note 11)
Current
DeferredYen

See accompanying notes to financial statements.

10

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

Years ended March 31, 2006 and 2005

Balance at March 31, 2004

Number of
SharesCommonstockMillions of yen
Additional
paid in
Retained
capitalearnings

166,885,530￥12,485￥19,405

Net income

Unrealized
gain onsecurities,net￥8,517￥2,286

Translation Treasury
adjustments
stock(￥453)

(￥10)

7,093
(811)

Cash dividends￥42,230
7,093

Purchase of treasury stock
Increase due to newly consolidated subsidiaries

Total

(811)

11

11

(1,001)(1,001)

Bonuses to directors andstatutory auditors

(29)

(29)

Merger of consolidated subsidiaries

(129)

(129)

Liquidation of consolidated subsidiary

(1)

(1)

Unrealized gain on securities

461

Change in translation adjustments
Balance at March 31, 2005

166,885,530

461
(200)

12,485

19,405

Net income

14,461

2,747

(653)

(200)

(821)

10,482

47,624
10,482

Exchange of stock forshares of affiliated company

133

133

Purchase of treasury stock(14)

Cash dividends(1,485)(14)(1,485)

Bonuses to directors andstatutory auditors(35)

Unrealized gain on securities

(35)
3,006

Change in translation adjustments

3,006
494

494

Exchange of treasury stock,or decrease sales of treasury stock,net
Balance at March 31, 2006

166,885,530￥12,485￥19,538￥23,423￥5,753(￥159)

142

142(￥693)￥60,347

Thousands of U.S. dollars

Balance at March 31, 2005

Commonstock

Additional
paid in
CapitalRetainedearnings

Unrealized
gain onsecurities,net$106,282$165,190$123,104$23,385

Net income

Translation Treasury
adjustments
stock($5,559)($6,989)

89,231

Total$405,413
89,231

Exchange of stock forshares of affiliated company

1,133

1,133

Purchase of treasury stock(119)

Cash dividend(119)(12,641)(12,641)

(298)

(298)

Bonuses to directors andstatutory auditors
Unrealized gain on securities

25,589Change in translation adjustments

25,589
4,206

4,206

Exchange of treasury stock,or decrease sales of treasury stock,net
Balance at March 31, 2006

$106,282$166,323$199,396$48,974($1,353)

1,209

1,209

($5,899)$513,723

See accompanying notes to financial statements.

11

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

Years ended March 31, 2006 and 2005
Millions of yen
2006
2005
Operating Activities:
Income before income taxes and¥16,715
minority interest
Adjustments to reconcile income before income taxes
and minority interest to net cash provided by operating activities:
Depreciation and amortization
1,891
Allowance for doubtful receivables
2
Employees' retirement benefit,
less payments
1,113
Gain on sale of investment inconsolidated subsidiaries(1,366)
Loss (gain) on sales and disposal ofproperty, plant and equipment(540)
Loss on settlement of dispute(1,181)
Changes in operating assets and liabilities:
Notes and accounts receivables, trade(3,565)Inventories(5,233)
Notes and accounts payables, trade
6,213
Advances received
2,012
Accrued expenses
499
Income taxes paid
(6,320)
Others2,949
Net cash provided by operating activities
13,189Investing Activities:
Purchases of property, plant and equipment(2,330)
Proceeds from sales of property, plant and equipment
844
Payments of long-term loan receivables(15)
Repayments of long-term loan receivables
67
Proceeds from sales of investment in consolidated subsidiaries 2,400
Others48
Net cash provided (used) in investing activities
1,014
Financing Activities:
Increase (decrease) in short-term bank loans
357
Repayments of long-term debt
(761)
Purchases of treasury stock(15)
Cash dividends paid
(1,485)
Others(3)
Net cash used in financing activities(1,907)
Effect of exchange rate changes oncash and cash equivalents
495
Net cash increased in cash and
12,791
cash equivalents
Cash and cash equivalents at the beginning of year
26,619—
Increases in newly consolidated subsidiaries—
Decreases on liquidation of consolidated subsidiaries
Cash and cash equivalents at end of year
¥39,410(Note 12)

12

Thousands of
U.S. dollars
2006¥10,178$142,292

1,825
(115)

16,098
17

903

9,475

—

(11,629)232—(4,597)(10,054)(1,797)(3,416)
2,582
570
(553)
(1,016)
(654)
8,739

(30,348)(44,548)
52,89017,128
4,248(53,801)
25,104112,275(1,448)
248
(36)
73
—
(62)
(1,225)(19,835)
7,185
(128)
570

(14,897)
(748)

3,039
(6,478)

(810)

(128)

(1,001)—(17,456)(12,641)(26)(16,234)(73)(10,015)4,214
108,887

36,112(6)

226,603——¥26,619$335,490

528

20,431409
8,632

See accompanying notes to financial statements.

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

1. Basis of Presenting Consolidated
Financial Statements
The accompanying consolidated financial
statements of Toshiba Machine Co., Ltd. (theCompany ) and consolidated subsidiaries areprepared on the basis of accounting principles
generally accepted in Japan, which are different
in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards, and are compiled from theconsolidated financial statements prepared by
the Company as required by the Securities andExchange Law of Japan. The preparation ofthese 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 dates of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. The consolidated statements of shareholders' equity have been prepared to supply
additional information.
The consolidated balance sheets, statements
of income and cash flows incorporate certain
reclassifications and rearrangements in order topresent these statements in forms which are
more familiar to readers of these statements
outside of Japan. In addition, the notes to theconsolidated financial statements include information which is not required under generally
accepted accounting principles and practice inJapan 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 the Company and its
subsidiaries (together the Companies ).
Certain subsidiaries which are not material are
not consolidated.
All significant intercompany transactions
and accounts and unrealized intercompany profits among consolidated entities are eliminated inconsolidation.
The difference between the cost and underlying interest in net equity of consolidated sub-sidiaries at the time of acquisition, which isincluded in intangible assets of the accompanying consolidated balance sheets, is deferred andamortized within the five-year period.
Investments in affiliates (15 to 50 percentowned companies ) in which the ability to exercise significant influence exist, except immaterial investments, are stated at cost plus equity inundistributed earning (losses) of investees.
Consolidated net income includes theCompany's share of the current net earnings ofsuch companies, after elimination of unrealizedintercompany profits.
(b) Translation of Foreign Currencies
Monetary assets and liabilities denominatedin foreign currencies are translated into
Japanese yen at the exchange rate prevailing at
the balance-sheet dates except for those hedged
by a forward contract, which are translatedusing 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 the respective balance sheet dates andall income and expense accounts are translated
at average rates for the respective periods. The
components of shareholders' equity are translated at their historical exchange rates.
(c) Securities
Securities owned by the Companies havebeen classified into two categories, held-to-maturity securities and other securities, in accordance with the accounting standard for financial instruments.
Held-to-maturity debt securities are carriedat amortized cost. Marketable securities classified as other securities are carried at fair value
with any changes in unrealized gain or loss, netof 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, deter-13mined by the specific identification method forfinished products and work in process, and by
the moving average method for raw materialsandsupplies.
(e) Allowance for doubtful receivables
The allowance for doubtful receivables isstated based on the default ratio sustained overa specific period in the past and the estimateduncollectible amount based on the analysis ofcertain individual accounts, including probablebad debts and claims in bankruptcy.
This amount is considered sufficient to coverpossible losses on collection.
(f) Bonuses
The bonuses to the employees are paid
twice a year and accrued based on estimatedamounts to be paid in the subsequent period.
Bonuses to directors and statutory auditors,
which are subject to approval by the shareholders, are an appropriation of retained earnings
and not charged to income.
(g) Depreciation of property, plant and equipment
Depreciation of buildings is computed, withminor exceptions, by the straight-line method
and other depreciation of property, plant andequipment is computed by the declining balance method over the estimated useful lives ofrespective assets. Principally ranging fromthree to sixty years for buildings and fromthree to twenty-two years for machinery,equipment and vehicle.
(h) Amortization of intangible assets
Computer software used internally by theCompany and consolidated subsidiaries is amortized by the straight -line method over the relevant economic useful lives (5 years). The others
including patent right are computed by thestraight -line method over the estimated useful
lives of respective assets.
(i) Finance Leases
Finance leases, which do not transfer ownership of the leased assets to the lessees, areaccounted for in the same manner as operatingleases.
(j) Derivative financial instruments
All derivatives are stated at fair value. Gainsor losses arising from changes in fair value are14

charged or credited to income for the period inwhich they arise, except for derivatives that aredesignated as hedging instruments.Gains orlosses arising from changes in fair value of thederivatives designated as hedging instruments
are deferred as assets or liabilities to be off-set
against gains or losses on the underlying
hedged assets and liabilities.
(k) Income Taxes
The Companies accrue current income taxes
based on taxable income.
The Companies include many items forfinancial reporting purpose which, in the case of
expenses, are not currently deductible and in
the case of income, are not currently taxable.
Income tax effects on temporary differences
between tax and financial reporting purposes
reflected as deferred income taxes in the consolidated financial statements using the asset andliability method.
(l) Employees’ Retirement Benefits
Accrued employees' retirement benefits areprovided based on the projected retirement benefit obligation less the fair value of 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.
(m) Appropriation of Retained Earnings
Under the Commercial Code of Japan, theappropriation of retained earnings with respect
to a given financial period is made by resolutionof the shareholders at a general meeting to beheld subsequent to the close of such financial
period. The accounts for that period do not,therefore, reflect such appropriations. See Notes
14.
(n) Amounts per Share of Common Stock
Net income (loss) per share is computed
based on the weighted-average number ofshares of 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.

3. U.S. Dollar Amounts(o) Statements of Cash Flows
In preparing the statements of cash flows,
cash on hand, readily available deposits andshort-term highly liquid investments with maturities of not exceeding three months at the timeof purchase are considered to be cash and cash
equivalents.

U.S. dollar amounts are included solely forthe convenience of the readers and have beentranslated at the rate of U.S.$1.00=¥117.47,theapproximate exchange rate prevailing in theJapanese foreign exchange market on March
31, 2006. This translation should not be construed as a representation that the yenamounts actually represent, have been, or could
be converted into U.S. dollars.

(p) Reclassifications
Certain accounts in the consolidated financial statements for the year ended March 31,
2005 have been reclassified to conform to the2006 presentation.

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

Equity securities

Carrying
value

2006
Marketvalue

Unrealized
gains

Carrying
value

2005
Marketvalue

Unrealized
gains¥1,820¥11,371¥9,551¥1,881¥6,442¥4,561¥1,820¥11,371¥9,551¥1,881¥6,442¥4,561Thousands of U.S. dollars
2006
Carrying
MarketUnrealized
value
value
gains
Equity securities$15,493$96,799$81,306$15,493$96,799$81,306

15

5. Property, Plant and Equipment
Property, plant and equipment at March 31, 2006 and 2005 consisted of the following:

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

Millions of yen
2006
2005
¥6,071¥6,08130,78330,31530,19331,063
565
575
7,546
7,423
1,439
361
76,59775,818(53,753)(53,610)¥22,844¥22,208

Thousands of
U.S. dollars
2006$51,681
262,050
257,027
4,810
64,23812,250652,056(457,589)$194,467

Depreciation expense for the years ended March 31, 2006 and 2005 were ¥ 1,891 million ($16,098 thousand) and ¥ 1,825 million, respectively.

6. Short-term Bank Loans and Long-term Debt
The annual interest rates applicable to the short-term bank loans outstanding on March 31,
2006 and 2005 ranged principally from 0.55% to 5.56% and from 0.52% to 4.70%, respectively. Longterm debt on March 31, 2006 and 2005 consisted of the following:
Millions of yen
2006
2005
Loans, principally from Japanese banks andinsurance companies, with pledged assets as
collateral(See Note 10), maturing 2007-2010,
interest 1.31%-2.27%
Less current portion¥11,378
11,3781,538¥9,84012,14012,140762¥11,378

Thousands of
U.S. dollars
2006$96,859
96,85913,093$83,766

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

Millions of yen
Year ending March 31
2007
2008
2009
2010
2011 and later

16¥1,538
1,140
8,690
10
—
¥11,378

Thousands of
U.S. dollars$13,093
9,705
73,976
85—$96,859

7. Employees’ Retirement Benefits
The severance indemnity regulations of the Company and certain subsidiaries provides forbenefit payments based on the employees' 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 full cost of the benefits to a trust bankwhich act as the trustees.
The liability for employees' retirement benefits at March 31, 2006 and 2005 consisted of the following:
Millions of yen
2006
2005
Projected benefit obligation

Thousands of
U.S. dollars
2006¥18,688¥18,557$159,087

(807)

(744)

(6,870)

Unrecognized transitional obligation(7,193)(8,011)(61,232)

Unrecognized actuarial loss

(1,572)(1,798)(13,382)

Accrued retirement benefits obligation¥9,116¥8,004$77,603

Fair value of plan assets

The components of net periodic 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

¥1,033¥1,007$8,794

Interest cost

316

311

2,690

(7)

(7)

(60)

Recognized actuarial loss

818

239

6,963

Amortization of transitional obligation

280

827

2,384

¥2,440¥2,377$20,771

Expected return on plan assets

Certain consolidated subsidiaries have adopted the conventional method in calculating theirprojected benefit obligation.
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

2006
2.0%
1.0%
15 years
10 years

2005
2.0%
1.0%
15 years
10 years17

8. Contingent Liabilities
On March 31, 2006, contingent liabilities for notes discounted in the ordinary course of businessand for loans guaranteed by the Company, principally on behalf of non-consolidated subsidiaries
and affiliated companies, amounted to ¥316 million ($2,690 thousand) and ¥1,084 million ($9,228
thousand), respectively.

9. Leases
Finance leases of the Companies other than those where ownership of the leased assets istransferred 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, 2006 and 2005, which would have been reflected in the consolidated balance sheets if
these arrangements have been accounted for as finance leases:

Acquisition Costs

Millions of yen
2006
2005

Thousands of
U.S. dollars
2006

Machinery, equipment and vehicles

¥910

¥893

$7,747

Tools, furniture and fixtures

1,840

2,010

15,663Less-Accumulated depreciation(1,408)(1,386)(11,986)

Net book value¥1,342¥1,517$11,424

Future lease payments (including the interest portion thereon) subsequent to March 31, 2006
for finance leases accounted for as operating leases are as follows:
Millions of yen
2006

Thousands of
U.S. dollars
2006

Due within one year¥524

$4,461

Due after one year

818

6,963

¥1,342$11,424

Periodic lease charges, as a lessee, charged to income for the years ended March 31, 2006 and2005 were ¥ 589 million ($5,014 thousand) and ¥ 586 million, respectively.

10. Pledged Assets
The following assets were pledged as collateral at March 31, 2006:
Land
Machinery and equipment, net
Buildings, net

Millions of yen¥1,372526
3,017¥4,915

Thousands of
U.S. dollars$11,679
4,478
25,683$41,840

The preceding collaterals were pledged to secure long-term debt amounting to ￥96 million($817 thousand), short-term bank loans amounting to ￥587 million ($4,997 thousand), (See Note 6).

18

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 tax rates for theyears ended March 31, 2006 and 2005 are approximately 39.8% and 39.8%, respectively.
The reconciliation between the statutory rate and effective tax rate of income taxes for theyears ended March 31, 2006 and 2005 are as follows:
2006

2005

39.8 %

39.8 %Per capita portion of Inhabitant Tax

0.3

0.5

Non-taxable revenue

0.1

0.1

Non-deductible expense

0.3

0.5

Unrealized intercompany profit on fixed assets

(0.2)

(0.0)

Change in valuation allowance

(0.2)

(9.0)

Difference in tax rate of consolidated subsidiaries

(1.0)

(1.1)

Other

(3.2)

(1.9)

Effective tax rate

35.9 %

28.9 %

Statutory tax rate

The significant components of 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 employees bonuses¥1,324¥1,005$11,271

Allowance for doubtful accounts

129

155

1,098

Devaluation of inventories

170

161

1,447

Devaluation of securities

226

226

1,924

2,866

2,127

24,398

320

117

2,724

Other

1,023

1,206

8,709

Total deferred tax assets¥6,058¥4,997$51,571

Valuation allowance(2,097)(2,490)(17,852)

Net deferred tax assets¥3,961¥2,507$33,719(218)—(1,856)

—

(15)

—

Unrealized gain on securities(3,797)(1,809)(32,323)

Deferred tax liabilities(¥4,015)(¥1,824)($34,179)(¥54)(¥683)($460)

Accrued employees' retirement benefits
Unrealized gain on inventories

Deferred tax liabilities:
Deferral of gain on sale of fixed assets
Depreciation

Net deferred tax assets (liabilities)

1912.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, 2006 and 2005 is presented as follows:
Thousands ofMillions of yen
U.S. dollars
2006
2005
2006
Cash and time deposits¥39,410¥26,619$335,490

Cash and cash equivalents¥39,410¥26,619$335,490

13.Research and development costs
Research and development costs charge to income were ¥2,808 million ($23,904 thousand)and ¥2,512 million for the years ended March 31, 2006 and 2005, respectively.

14.Shareholders’ Equity
The Commercial Code of Japan (the Code ) provides that an amount equal to at least 10%of the amount to be disbursed as distribution of earnings be appropriated to the legal reserve
until the sum of the legal reserve and additional paid-in capital account equals 25% of the common stock account. The Code provides that neither additional paid-in capital nor the legal
reserve is available for dividends, but both may be used to reduce or eliminate a deficit by resolution of the shareholders or may be transferred to common stock upon approval by the
Board of Directors. The Code further provides that if the total amount of additional paid-in capital and the legal reserve exceeds 25% of the amount of common stock, the excess may be distributed to the shareholders either as a return of capital or as dividends subject to theapproval of the shareholders. The Company's shares of common stock have no par value inaccordance with the Code.
The new Corporation Law of Japan (the Law ) , which superseded most of the provisionsof the Code, went into effect on May 1, 2006. The Law stipulates similar requirements on distribution of earnings to those of the Code. Under the Law, however, such distributions can bemade at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met.

15. Segment information(A) Business segment information
The companies' business is classified into the following four segments based on the similarities oftype and 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
Semiconductor Equipment: Electron beam lithography system, Epitaxial reactor system
Other Products: Hydraulic equipment, Electronic controls
The tables below present sales, operating expenses and operating income information by businesssegment.
Year ended March 31, 2006

Sales
Operating expenses
Operating income
Identifiable assets
Depreciation
Capital expenditure

20

Molding
Machinery¥78,733
70,523
8,210
69,023955
2,108MachineTools¥28,426
24,715
3,711
31,760225
222

Millions of yen
Semiconductor
Other
Eliminations
Consolidated
Equipment
Products and/or corporate¥19,087¥22,937¥(4,827)¥144,356
17,39020,246(5,069)127,805
1,697
2,691
242
16,55125,85433,732
12,108172,477
305
406
—
1,891
240
526
—
3,096

Year ended March 31, 2005

Sales
Operating expenses
Operating income
Identifiable assets
Depreciation
Capital expenditure

Molding Machine
Machinery Tools¥65,764¥25,082
60,09722,0895,667
2,993
56,751
23,480
927
203
782
268

Millions of yen
Semiconductor
Other
Eliminations
Consolidated
Equipment
Products and/or corporate¥16,342¥20,238¥(3,853)¥123,573
14,636
18,263(3,745)111,340
1,706
1,975
(108)
12,23323,887
31,8499,090
145,057
323
372
—
1,825
214
740
—
2,004

Molding
MachineMachinery
Tools$670,239 $241,985
600,349
210,394
69,89031,591
587,580
270,367
8,130
1,915
17,945
1,890

Thousands of U.S.dollars
Semiconductor
Other
Eliminations
Consolidated
Equipment
Products and/or corporate$162,484$195,258$(41,091) $1,228,875
148,038
172,350(43,152)
1,087,979
14,44622,9082,061
140,896
220,090
287,154
103,073
1,468,264
2,597
3,456
—
16,098
2,043
4,478
—
26,356

Year ended March 31, 2006

Sales
Operating expenses
Operating income
Identifiable assets
Depreciation
Capital expenditure(B) Geographic segment information of the companies for the years ended March 31, 2006 and 2005 wereas follows:Year ended March 31, 2006
Japan
¥137,415
121,819
15,596145,368

Net sales
Cost and expenses
Operating income
Identifiable assets

North America¥9,154
8,969
185
4,949

Millions of yen
Asia
Total
¥11,022¥157,591
10,185140,973837
16,6187,100
157,417

Eliminations Consolidated¥(13,235) ¥144,356(13,168)
127,805(67)
16,551
15,060172,477

North America¥7,829
7,707
122
4,846

Millions of yen
Asia
Total
¥7,453¥136,291
6,985
123,989468
12,302
6,038
136,401

Eliminations Consolidated¥(12,718) ¥123,573(12,649)
111,340(69)
12,2338,656
145,057

Year ended March 31, 2005
Japan
¥121,009
109,297
11,712
125,517

Net sales
Cost and expenses
Operating income
Identifiable assets
Year ended March 31, 2006
Net sales
Cost and expenses
Operating income
Identifiable assets

Japan$1,169,788
1,037,022
132,766
1,237,490

Thousands of U.S.dollars
North America
Asia
Total
Eliminations Consolidated$77,926$93,828 $1,341,542 $(112,667) $1,228,875
76,351
86,703
1,200,076(112,097) 1,087,979
1,575
7,125
141,466(570)
140,896
42,13060,441
1,340,061
128,203
1,468,264

21

(C) Sales to foreign customers for the years ended March 31, 2006 and 2005 were as follows:Year ended March 31, 2006
North America
Sales to foreign customers
Net sales
Ratio of sales to foreign Customers (%)¥48,914¥2,908¥70,602———144,356

13.0

33.9

2.0

48.9

North America
Net sales
Ratio of sales to foreign Customers (%)

Ratio of sales to foreign Customers (%)

Total¥40,354¥4,452¥59,580———

123,573

12.0

32.7

3.5

48.2

North America
Net sales

Millions of yen
Asia
Other

¥14,774

Year ended March 31, 2006
Sales to foreign customers

Total¥18,780

Year ended March 31, 2005
Sales to foreign customers

Millions of yen
Asia
Other

Thousands of U.S.dollars
Asia
Other

Total

$159,871$416,396$24,755$601,022———

1,228,875

13.0

33.9

2.0

48.9

16. Related Party Transactions
During the years ended March 31, 2006 and 2005, the Company and its consolidated subsidiaries had operational transaction with Toshiba Corporation, a 33.9% shareholder of theCompany. A summary of the significant transaction with Toshiba Corporation for the year ended,
March 31, 2006 is as follows. There were no transaction with Toshiba Corporation for the year
ended March 31, 2005.
Millions of yen
2006
2005

Thousands of
U.S. dollars
2006

For the year:
Sales of investment inconsolidated subsidiaries¥2,400—$20,431¥2,400—$20,431

17. Accounting Changes(a) Accounting standard for the impairment of fixed assets
In the year ended March 31, 2006, the Company has adopted new accounting standards for the
impairment of fixed assets in accordance with Accounting Standards for the Inpairment of Fixed
Assets and Implementation Guidance for Accounting Standards for the Impairment of fixed
assets .
The effect on net income of the adoption of this new accounting standard was nil for the year
ended March 31, 2006.
(b) Accounting standard for employee retirement and severance benefits
In the year ended March 31, 2006, the Company adopted the partial amendment of Corporate
Accounting Standard No. 3 regarding Employee Retirement and Severance Benefits issued on
March 16, 2005.
The effect on net income of the adoption of this new accounting standard was nil for the year
ended March 31, 2006.

22

Report of Independent Auditors
The Board of Directors
Toshiba Machine Co., Ltd.
We have audited the accompanying consolidated balance sheets of Toshiba Machine Co., Ltd.(the"Company") and consolidated subsidiaries as of March 31, 2006 and 2005, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years then ended, all expressed inyen. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we 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, 2006 and 2005, and the consolidated results of their operations and their cash flows for theyears then ended in conformity with accounting principles generally accepted in Japan.
The U. S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2006 are presented solely for convenience. Our audit also included thetranslation of yen amounts into U. S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 3.

June 28, 200623

Directors & Auditors

Directors President
Reiji Nakajima
Senior Managing Director
Kosei Takeyama
Managing Directors
Yoshi Atobe
Mitsuji Yokoyama
Directors
Hideo Tanaka
Fumihisa Yano
Hiroshi Hanai
Masaki Ikuta
Akinori Ide
Yukio Iimura
Auditors

Fumio Kamahora
Michinori Tanaka
Yuji Ogawa
Toshitake Takagi

24