Contents
1

An Outline of the Toshiba Machine Group
Corporate Information2

Foreword

4

Financial Highlights (consolidated)

5

Overseas Operations for Fiscal 2004

6

Overseas Offices
Financial Review

810Consolidated Balance Sheets
Consolidated Statements of Income
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 GroupA highly respected integrated machine building group, internationally respected
for its total capability in the production of quality plastic processing machinery, diecasting machines, machine tools, precision machinery, hydraulic equipment,
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 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, 2004)
Company name:TOSHIBA MACHINE CO., LTD.

Headquarters:

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

Established:

1938

Capital:¥12,484 million (US$118 million)

Shares of Common Stock
Issued and Outstanding:

166,885,530 shares

Number of Shareholders:

19,913

Number of employees:

1,493 (Consolidated: 3,068)

1Foreword
Although the fiscal year under review showed hints of a gradual economic recovery due tostrong exports and an increase in private sector plant and equipment investments, the Japanese
domestic economy continued to be plagued by weak consumer demand and a long-term
deflationary spiral.
Internationally, China continued to be the Asian center of economic growth, while Europe
experienced continued depressed growth despite a gradual recovery in the American economy.
The Japanese domestic machine industry enjoyed overall growth due to an upturn in exports
and an increase in private sector plant and equipment investments.
Under such circumstances, the Toshiba Machine Group, based on their CS (Customer
Satisfaction) corporate policy, as well as their continuous efforts to secure orders, develop new
products, and seek new growth markets resulted in an increase in orders received for theirinjection molding machines, die-casting machines, plastic extrusion, machine tools, highprecision machines, semiconductor equipment, and hydraulic equipment totaling ¥117,591
million (US$1,113 million), a 26.3% increase over the previous term (an exchange rate of¥105.69=US$1.00 shall be used throughout this report).
In regards to sales volume, an overall increase in all of our products resulted in a total of¥110,658 million (US$1,047 million), a 13.7% increase over the previous year.
As a result of the increased demand for our products, especially our various types of molding
machines, semiconductor equipment and high precision machines, and the further
rationalization of our production and management systems, the Toshiba Machine Group had aconsolidated operating income of ¥7,601 million (US$72 million), a 148.7% increase over theprevious year, a consolidated pre-tax profit of ¥5,564 million (US$53 million), and a net
consolidated profit of ¥4,153 million (US$39 million).
In regards to the stock dividend, we are most pleased to announce to our stockholders that afiscal yearend dividend of ¥4.00 (US$0.04) per share was distributed for the period ending on
March 31, 2004, an increase of ¥1.00 (US$0.01) per share over the previous year.
In October of 2003, an opening ceremony was held to commemorate the completion of thefactory of Toshiba Machine (Shanghai) Co., Ltd. our first foreign subsidiary dedicated to theoverseas production of our machines. Despite increased exports and private sector investment inplant and equipment, the general economic outlook is likely to remain bleak due to such factors

2

as the instability in the foreign exchange rates, the unstable situation in Iraq, and the threat ofterrorism.
Under such uncertain conditions, and to more readily adopt to various economic upheavals, aswell as the easier shifting of resources to meet constantly evolving market conditions, on April 1,
2004, the Toshiba Machine Group implemented their TOSHIBA MACHINE ACTION
PROGRAM Advanced III (TM-AP21 Ad. III) to further strengthen their business units, andenhance their business performance as well as their profitability.

Reiji Nakajima
President
July, 2004

3

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

2004

2003

2002

2001

2000

¥110,658¥97,297¥104,599¥127,359¥109,283¥68,455¥74,495¥92,048¥80,852¥25,786¥28,636¥30,883¥30,310¥3,056¥1,468¥4,428¥(1,879)

Income (loss) before income ¥5,104
taxes and minority interests $48,292¥1,239¥(2,010)¥2,123¥(8,779)

¥817

¥193

¥413

¥733

¥171

¥1,052¥(1,924)¥1,558¥(8,661)¥6.29¥(11.53)¥9.33¥(51.90)

¥3.00

¥—

¥—

¥—

¥136,278¥140,035¥166,588¥153,563¥37,525¥37,306¥39,620¥36,075¥1,275¥2,378¥2,565¥2,953¥2,050¥2,289¥2,610¥3,313¥2,587¥2,951¥2,749¥3,035

3,380

3,565

3,814

3,999

Net sales$1,047,005¥77,627

Cost of sales$734,478¥25,430

Selling, general andadministrative expenses$240,609

Operating income (loss)¥7,601$71,918

Income taxes$7,730¥4,153

Net income (loss)$39,294
Per common share:¥24.71

Net income (loss)

$0.23
¥4.00

Cash dividends$0.04¥148,309

Total assets$1,403,245
Shareholders’ equity¥42,230$399,565¥1,774

Capital expenditure(property, plant and equipment)$16,785

Depreciation¥1,800$17,031

R & D expenditure¥3,194$30,220

Number of employees

4

3,068

Overseas Operations for Fiscal 2004
During the fiscal year under review, China
led the Asian region in overall economic

Net Sales

Millions of yen

growth, while the American economy
experienced a gradual economic recovery
despite depressed growth in Europe.

109,283

Under such economic conditions,overseas

sales

of

¥ 57,172

million104,599
27,19830,06827,97558,404and the Asian region, principally China,

2000

29,99018,65849,426

2001

2002

Other Pro
MachineTools

17,971
MoldingyMachiner

49,3362004

2003

Total Sales & Overseas Sales
Millions of yen

Korea, Taiwan, Indonesia, and Thailand,

110,658

127,359

continued to be the leading destination for
approximately 56% of our exports.

31,13450,335In terms of machine types, injection
continued to be our leading export products,

ducts

97,29760,865

51.7% of total consolidated sales.
molding machines and die-casting machines

Total

29,102(US$541million), a 25.6% increase over theprevious year, contributing to approximately

38,887

29,846

expanded foreign demand for our machine
products resulted in total consolidated

110,658

127,359

104,599

109,283s

Total Sale

97,297

During the current fiscal year, we willcontinue in the further enhancement of ourregional sales and service networks, alongwith providing our customers with machines

57,172of increasingly higher standards of quality, as
well as a total type of Solution Business basedon our value chain of products.

55,13944,096

2001

2002

Sales

45,51546,007

2000

Overseas

2003

2004

Export Percentages by Major Products

Other
Products

Molding
Machinery
29%

56%
15%

MachineTools

5Overseas Offices♦ 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 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

Los Angeles OfficeAtlanta 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.
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/♦ Europe ♦TOSHIBA MACHINE (EUROPE) G.m.b.H.
Head OfficeKarl-Arnold-Strasse 2a, 47877
Willich-Münchheide, GERMANY
Tel : [49]-(0)2154-9275-0
Fax : [49]-(0)2154-9275-75

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.

Beijing OfficeSuzhou 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

TOSHIBA MACHINE (SHANGHAI) 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

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♦ East Asia ♦SHANGHAI TOSHIBA MACHINE CO., 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

4788, 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 CHINATOSHIBA MACHINE HONG KONG LTD.
Head OfficeShenzhen 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, 2004 and 2003

ASSETS
Current assets:
Cash and time deposits (Note 12)
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 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
2004
2003

Thousands of
U.S. dollars
2004¥36,10734
50,529(542)
49,987¥ 32,455
34
46,756(556)
46,200$341,631
322
478,087(5,128)472,959

5,810
20,3491,712
27,871
737
2,252
116,988

7,158
18,535758
26,451635
1,228
107,00354,972
192,535
16,198
263,705
6,973
21,3081,106,898

22,196

22,666210,010

486

409

4,598

1,405
5,680
374
145
1,035
8,639
¥148,309

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

13,29453,742
3,539
1,372
9,792
81,739$1,403,245

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
(39,175 shares in 2004, 31,033 shares in 2003)
Total shareholders’ equity
Contingent liabilities (Note 8)
Total liabilities and shareholders’ equity

Thousands of
U.S. dollars
2004

Millions of yen
2004
2003
¥41,348
748
32,240
632
6,112
2,157
1,408
84,645¥40,580
16,26925,255
239
4,604
1,136
618
88,701$391,2207,077
305,043
5,980
57,83020,40913,321
800,880

12,1401,512
7,100
20,752
105,397
682

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

114,864
14,306
67,178196,348997,228
6,453

12,485
19,405
8,517
2,286
(453)

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

118,128
183,60380,585
21,629(4,286)

(10)

(7)

(95)

42,23037,525399,565¥148,309¥136,278$1,403,245

See accompanying notes to financial statements

9

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

years ended March 31, 2004 and 2003
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
OthersOther expenses:
Interest
Loss on sales of investment securities
Special benefits for employees retired
under early retirement program
Amortization of transitional obligation for
employees retirement benefits (Note 7)
OthersMillions of yen
2004
2003
¥110,658¥97,297
77,62768,45533,031
28,84225,43025,786
7,601
3,056

Thousands of
U.S. dollars
2004$1,047,005
734,478
312,527
240,609
71,918

100
785
441
1,326

90
582
603
1,275

946
7,427
4,173
12,546

695
—

969
167

6,576
—

894

—

8,459

835
1,399
3,823

835
1,121
3,092

7,900
13,23736,172

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

5,104
817
727
90

1,239
193
121
72

48,292
7,730
6,879
851

134
¥4,153(6)¥1,052

1,268$39,294

Net income per share of common stock¥24.71¥6.29

U.S. dollars
$0.23

Yen

See accompanying notes to financial statements.

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

years ended March 31, 2004 and 2003
Balance at March 31, 2002
Net income
Increase on consolidated subsidiaries
Bonuses to directors and statutory auditors
Balance at March 31, 2003
Net income
Cash dividends
Bonuses to directors and statutory auditors
Balance at March 31, 2004

Balance at March 31, 2003
Net income
Cash dividends
Bonuses to directors and statutory auditors
Balance at March 31, 2004

10

Number of
Shares
166,885,530

Millions of yen
CommonAdditional paidstock
in capital¥12,485¥19,405

166,885,530

12,485

19,405

166,885,530¥12,485¥19,405

Retainedearnings¥3,791
1,052
32
(9)
4,866
4,153
(500)
(2)
¥8,517

Thousands of U.S. dollars
CommonAdditional paid
Retainedstock
in capitalearnings$118,128$183,603$46,040
39,294(4,731)(18)$118,128$183,603$80,585
See accompanying notes to financial statements.

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

years ended March 31, 2004 and 2003
Millions of yen
2004
2003
Operating Activities:
Income before income taxes and¥5,104
minority interests
Adjustments to reconcile income before income taxes
and minority interests to net cash provided by operating activities:
Depreciation and amortization
1,800
Allowance for doubtful receivables(54)
Employees’ retirement benefit,
less payments(204)
Devaluation of marketable securities
40
Loss (gain) on sales and disposal ofproperty, plant and equipment(602)
Changes in operating assets and liabilities:
Notes and accounts receivables, trade(3,774)Inventories(1,420)Notes and accounts payables, trade
6,985
Advances received
1,020
Accrued expenses
1,508
Income taxes paid
(334)
Others(199)
Net cash provided by operating activities
9,870
Investing Activities:
Purchase of property, plant and equipment(1,541)
Sale of property, plant and equipment
889
Payment of long-term loan receivables(7)
Repayment of long-term loan receivables
98
Investments to a subsidiary(719)
Others(65)
Net cash used in investing activities(1,345)
Financing Activities:
Decrease in short-term bank loans
768
Proceeds from long-term debt
11,400
Repayment of long-term debt
(13,269)
Bond redemption(3,000)Cash dividends paid
(500)
Net cash used in financing activities(4,601)
Effect of exchange rate changes oncash and cash equivalents(272)
Net cash increased in cash andCash equivalents
3,652
Cash and cash equivalent at the beginning of year
32,460
Increase in consolidated subsidiaries—
Cash and cash equivalents at end of year
¥36,112(Note 12)

Thousands of
U.S. dollars
2004¥1,239$48,292

2,050
(362)

17,031
(511)

669
25

(1,930)378(524)(5,696)

2,881
(254)
3,145
(484)
431
(192)
954
9,578

(35,708)(13,436)
66,0909,651
14,268(3,160)(1,883)93,386(1,157)
1,008
(9)
108
(470)
(748)
(1,268)(14,580)
8,411
(66)
927
(6,803)(615)(12,726)(1,901)50(3,800)(2,000)—(7,651)

7,266
107,863(125,546)(28,385)(4,731)(43,533)(175)(2,574)484
31,611
365(34,553)
307,125—¥32,460$341,678

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 accompanying consolidated financial
statements of Toshiba Machine Co.,Ltd. (the“Company”) 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 theCompany as required by the securities andExchange Law of Japan. The preparation of thesefinancial statements requires management tomake estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the consolidated financial statements andthe reported amounts of revenues and expenses
during the reporting period. 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 ofincome and cash flows incorporate certain reclassifications and rearrangements in order to present 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 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.

12

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
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 with theaccounting 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 purposes 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
Under the Commercial code of Japan (the“Code”) the Company and domestic subsidiaries
are required to appropriate as a legal reserve anamount of retained earnings equal to at least 10%of cash dividends and other distributions for eachperiod until such reserve and the amount of capital surplus equals 25% of the common stock. The
code also provides that, to the extent that the sumof capital surplus and legal reserve exceeds 25%of the common stock, the amount of any suchexcess is available for appropriations by resolutionof 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 sharerepresent 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, 2003
have been reclassified to conform to the 2004 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 ¥105.69=U.S.$1,the approximate
exchange rate prevailing in the Japanese foreignexchange market on March 31, 2004. 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

2004
Marketvalue

Carrying
value

2003
Marketvalue

Unrealized
gains

Unrealized
gains

Equity securities¥1,794¥5,587¥3,793¥1,819¥3,418¥1,599Debt securities

—

—

—

10

10

0

¥1,794¥5,587¥3,793¥1,829¥3,428¥1,599Thousands of U.S. dollars
2004
Carrying
MarketUnrealized
value
value
gains
Equity securities$16,974$52,862$35,888

Debt securities

—

—

—

$16,974$52,862$35,888

5. Property, Plant and Equipment
Property, plant and equipment at March 31, 2004 and 2003 consisted of the following:

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

Millions of yen
2004
2003
¥6,237¥6,32830,362
30,57432,24732,255
593
600
7,384
7,500
112
65
76,93577,322(54,739)(54,656)¥22,196¥22,666

Thousands of
U.S. dollars
2004$59,012287,274
305,109
5,611
69,865
1,060
727,931(517,921)$210,010

Depreciation expense for the years ended March 31, 2004 and 2003 were ¥ 1,800 million ($ 17,031
thousand) and ¥ 2,050 million, respectively.

6. Short-term Bank Loans and Long-term Debt
The annual interest rates applicable to the loans outstanding on March 31, 2004 ranged principallyfrom 0.49% to 2.30%. Long-term debt on March 31, 2004 and 2003 consisted of the following:

1st Bonds due 2003 interest 2.9%
Loans, principally from Japanese banks andinsurance companies, with pledged assets as
collateral, maturing 2005 – 2010 ,interest 1.31 % – 2.16 %Less current portion

14

Millions of yen
2004
2003
—
¥3,00012,88812,888748¥12,140

14,757
17,757
16,269
¥1,488

Thousands of
U.S. dollars
2004—

121,941
121,941
7,077$114,864

The aggregate annual maturities of long-term debt March 31, 2004 are as follows:Year ending March 31
2005
2006
2007
2008
2009 and later

Millions of yen

Thousands of
U.S. dollars

¥748
210
474
40
11,416¥12,888$7,077
1,987
4,485
378
108,014$121,941

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 full cost of the benefits to a bank which act as thetrustees.
The liability for employees retirement benefits at March 31, 2004 and 2003 consisted of the following:
Millions of yen
2004
2003

Thousands of
U.S.dollars
2004¥18,667¥20,926$176,620

Fair value of plan assets(1,001)(1,035)(9,471)

Unrecognized transitional obligation(8,930)(9,765)(84,492)

Unrecognized actuarial loss

(1,636)(2,821)(15,479)

Accrued retirement benefits obligation¥7,100¥7,305$67,178

Projected benefit obligation

The components of net periodic benefit costs for the year ended March 31, 2004 and 2003 were as follows:
Millions of yen
2004
2003

Thousands of
U.S. dollars
2004

Service cost

¥1,187¥1,247$11,231

Interest cost

420

503

3,974

(8)

(36)

(75)

Recognized actuarial loss

326

228

3,084

Amortization of transitional obligation

835

835

7,900

¥2,760¥2,777$26,114

Expected return on plan assets

Certain consolidated subsidiaries have adopted the conventional method in calculating their projected 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

2004
2.0%
1.0%
15 years
10 years

2003
2.5%
4.0%
15 years
10 years15

8. Contingent Liabilities
On March 31, 2004 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 ¥231 million ($2,186 thousand) and ¥978 million ($9,253 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,
2004 and 2003, 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
2004
2003

U.S. dollars
2004

Machinery, equipment and vehicles

¥920

¥664

$8,705Tools, furniture and fixtures

2,040

2,262

19,302Less-Accumulated depreciation(1,566)(1,531)(14,817)

Net book value¥1,394¥1,395$13,190

Future lease payments (including the interest portion thereon) subsequent to March 31,2004 forfinance leases accounted for as operating leases are as follows:
Millions of yen
2004

Thousands of
U.S. dollars
2004

Due within one year¥532

$5,034Due after one year

862

8,156

¥1,394$13,190

Periodic lease charges to the Companies, as a lessee, charged to income for the years ended March
31, 2004 and 2003 are ¥ 763 million ($7,219 thousand) and ¥ 794 million, respectively.

10. Pledged Assets
The following assets were pledged as collateral at March 31, 2004:
Land, property, plant and equipment(Net of accumulated depreciation)

Millions of yen¥4,169Thousands of
U.S. dollars$39,446

The preceding collaterals were pledged to secure long-term debt amounting to ¥296 million($2,801 thousand), short-term bank loans amounting to ¥586 million ($5,545 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, 2004 and 2003 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, 2004 and 2003 are as follows:

16

2004

2003

41.1 %

41.1 %Per capita portion of Inhabitant Tax

0.9

4.0

Non-taxable revenue for tax purpose

0.5

(6.8)

Non-deductible expense for tax purpose

1.2

5.7

Unrealized intercompany profit on fixed asset(0.1)(19.0)

Change in valuation allowance(27.7)(7.1)

Effect of change in statutory tax rate

—

(1.3)

Other

0.1

(1.0)

Effective tax rate

16.0 %

15.6 %

Statutory tax rate

The significant components of deferred tax assets and liabilities at March 31, 2004 and 2003 are as follows:
Millions of yen
2004
2003

Thousands of
U.S. dollars
2004

Deferred tax assets:
¥230

¥160

$2,176

Allowance for doubtful accounts

42

52

397

Devaluation of inventories

98

82

927

Devaluation of securities

4

50

38

Accrued employees’ retirement benefits

69

172

653

Unrealized gain on inventories

84

101

795

Other

355

331

3,359

¥882

¥948

$8,345

(17)

(13)

(161)

Unrealized gain on securities(1,495)(668)(14,145)

Deferred tax liabilities(¥1,512)(¥681)($14,306)(¥630)(¥267)($5,961)

Accrued employees bonuses

Deferred tax assets
Deferred tax liabilities:
Depreciation

Net deferred tax (liabilities) assets

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. 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, 2004 and 2003 is presented as follows:
Millions of yen
2004
2003

Thousands of
U.S. dollars
2004

Cash and time deposits¥36,107¥32,455$341,631

Short-term investments

¥5

¥5

$47

¥36,112¥32,460$341,678

Cash and cash equivalents1713. Research and development costs
Research and development costs charged to income were ¥3,194 million ($30,220 thousand)and ¥2,587 million for the years ended March 31,2004 and 2003 respectively.

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, Electronic controls
The tables bellow present sales, operating expenses and operating profit information by business segment.
Year ended March 31, 2004

Sales
Operating expenses
Operating income
Identifiable assets
Depreciation
Capital expenditure

MachineTools¥18,843
18,247596
22,474212
150

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

Millions of yen
MachineOther
Eliminations
Consolidated
Tools
Products and/or corporate¥18,118¥33,767¥(3,931)¥97,297
19,37032,242(3,993)
94,241(1,252)
1,525
62
3,056
20,38655,732
10,953
136,278
356
642
—
2,050
328
495
—
1,275

Molding
Machinery$575,948
536,70239,246542,284
9,518
3,766

Thousands of U.S.dollars
MachineOther
Eliminations
Consolidated
Tools
Products and/or corporate$178,285$325,840$(33,068) $1,047,005
172,646
297,682(31,943)
975,087
5,639
28,158(1,125)71,918
212,641
546,012102,308
1,403,245
2,006
5,507
—
17,031
1,419
11,600—16,785

Year ended March 31, 2003

Sales
Operating expenses
Operating income (loss)
Identifiable assets
Depreciation
Capital expenditure
Year ended March 31, 2004

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

18

Millions of yen
Other
Eliminations
Consolidated
Products and/or corporate¥34,438¥(3,495)¥110,658
31,462(3,376)103,057
2,976
(119)
7,601
57,708
10,813
148,309
582
—
1,800
1,226
—
1,774

Molding
Machinery¥60,872
56,724
4,148
57,314
1,006
398

(b) Geographic segment information of the companies for the year ended March 31,2004 and 2003 were as
follows:
North America¥10,941
10,838103
7,491

Millions of yen
Asia
Total
¥3,083¥120,369
3,019
112,984
64
7,385
2,065
135,275

Eliminations Consolidated¥(9,711) ¥110,658(9,927)103,057
216
7,601
13,034
148,309

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

Year ended March 31, 2004
Net sales
Cost and expenses
Operating income
Identifiable assets

Japan¥106,345
99,127
7,218
125,719

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, 2004
Net sales
Cost and expenses
Operating income
Identifiable assets

Japan$1,006,197
937,903
68,294
1,189,507

Thousands of U.S.dollars
North America
Asia
Total
Eliminations Consolidated$103,520$29,170 $1,138,887$(91,882) $1,047,005
102,545
28,565
1,069,013(93,926)
975,087
975
605
69,874
2,044
71,91870,877
19,5381,279,922
123,323
1,403,245(c) Sales to foreign customers for the years ended March 31,2004 and 2003 were as follows:Year ended March 31, 2004
North America
Sales to foreign customers
Net sales
Ratio of Sales to foreign Customers (%)¥32,243¥5,856¥57,172———

110,658

17.2

29.1

5.4

51.7

North America

Net sales
Ratio of Sales to foreign Customers (%)

Ratio of Sales to foreign Customers (%)

Total¥29,341¥3,707¥45,515———

97,297

12.8

30.2

3.8

46.8

North America

Net sales

Millions of yen
Asia
Other

¥12,467

Year ended March 31, 2004
Sales to foreign customers

Total¥19,073

Year ended March 31, 2003
Sales to foreign customers

Millions of yen
Asia
Other

Thousands of U.S.dollars
Asia
Other

Total

$180,462$305,071$55,407$540,940———

1,047,005

17.2

29.1

5.4

51.7

15. Other
Consolidated subsidiaries Toshiba Machine Company., America (“TMA”) has been involved in a
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 $9.3 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
Toshiba Machine Co., Ltd.
We have audited the accompanying consolidated balance sheets of Toshiba Machine Co., Ltd.
and consolidated subsidiaries as of March 31, 2004 and 2003, and the related consolidated
statements of income, shareholders’ equity, and cash flows for the years then ended, all expressedin yen. 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, 2004 and 2003, and the consolidated results of their operations andtheir cash flows for the years then ended in conformity with accounting principles generally
accepted in Japan.
The U. S. dollar amounts in the accompanying consolidated financial statements with respect
to the year ended March 31, 2004 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.

June 29, 200420

Directors & Auditors

Directors

President
Reiji Nakajima
Managing Directors
Kazuo Hanzawa
Katsuhiko Goto
Directors
Kosei Takeyama
Yoshi AtobeMichinori Tanaka
Mitsuji Yokoyama
Hideo Tanaka

Auditors

Motoyasu Morita
Kazutaka Yamashita
Fumio Kamahora
Yoshinori Kubota

21