Consolidated Financial Statements
Shibaura Mechatronics Corporationand Subsidiaries
Years ended March 31, 2005 and 2004
with Report of Independent Auditors

Contents
Consolidated Balance Sheets ………………………………………………… 1
Consolidated Statements of Income …………………………………………… 3
Consolidated Statements of Shareholders’ Equity …………………………… 4
Consolidated Statements of Cash Flows ……………………………………… 5
Notes to Consolidated Financial Statements ………………………………… 7
Report of Independent Auditors ……………………………………………… 16
Supplemental Information …………………………………………………… 17

SHIBAURA MECHATRONICS CORPORATION and SUBSIDIARIES

Consolidated Balance Sheets
March 31,2005

March 31,
2004

(Millions of yen)

2005
(Thousands of
U.S. dollars)(Note 1)

AssetsCurrent assets:
Cash and bank deposits¥ 7,455¥ 4,506$ 69,419

Short-term investments

75

14

695

24,29523,176226,226

(50)

(211)

(462)

Inventories (Note 4)

17,093

18,628159,171

Deferred tax assets (Note 7)

1,176

1,779

10,955

917

982

8,543

50,961

48,874

474,547

280

299

2,601

Buildings and structures

27,061

27,821

251,986

Machinery and equipment

994

1,399

9,258

Construction in progress

289

341

2,692

Total

28,62429,860266,537

Accumulated depreciation(12,932)(13,037)(120,418)

Property, plant and equipment, net

15,692

16,823

146,119

Investment securities (Note 3)

931

498

8,673

Deferred tax assets (Note 7)

2,077

2,236

19,344

750

814

6,978

3,758

3,548

34,995¥ 70,411¥ 69,245$ 655,661

Notes and accounts receivable, trade
Allowance for doubtful accounts

Other current assets
Total current assets

Property, plant and equipment:
Land

Investments and other assets:

Other assets
Total investments and other assets

Total assets

1March 31,
2005

March 31,
2004

(Millions of yen)

2005
(Thousands of
U.S. dollars)(Note 1)

Liabilities and shareholders’ equity
Current liabilities:
Short-term bank loans (Note 5)¥890¥ 1,914

Current portion of long-term debt (Note 5)

1,953

670

18,186

Notes and accounts payable, trade

19,64922,023

182,967

Accrued expenses

3,644

3,672

33,930Accrued income taxes (Note 7)

2,250

377

20,951

Accrued consumption tax

177

82

1,654

Other current liabilities

1,117

2,625

10,401

29,68031,363276,374

Long-term debt (Note 5)

9,875

11,82891,953Retirement benefits (Note 8)

4,525

4,488

42,142

Directors’ retirement benefits

171

142

1,588

3,369

3,333

31,375

17,94019,791167,058

5,868

5,868

54,642

Additional paid-in capital (Note 9)

9,848

9,848

91,700Retained earnings (Note 9)

7,228

2,531

67,309Net unrealized holding gain on other securities

60

48

558

Foreign currency translation adjustments

(20)

(20)

(183)

Less treasury stock, at cost

(193)

(184)

(1,797)

22,791

18,091

212,229¥ 70,411¥ 69,245$ 655,661

Total current liabilities

$

8,285

Long-term liabilities:

Other long-term liabilities
Total long-term liabilities

Contingent liabilities (Note 11)

Shareholders’ equity:
Common stock:
Authorized: 100,000,000 shares
Issued:50,033,312 shares at March 31, 2005 and 2004

Total shareholders’ equity
Total liabilities and shareholders’ equity

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

2

SHIBAURA MECHATRONICS CORPORATION and SUBSIDIARIES

Consolidated Statements of Income
Year ended
March 31,

Year ended March 31,
2005

2004

2005

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

Net sales¥ 88,513¥ 67,521$ 824,217

Cost of sales

67,49254,308628,480

21,021

13,213

195,737

12,197

10,045

113,574

8,824

3,168

82,16317

7162Interest expense

(147)

(179)

(1,372)Equity in earnings of affiliates

262

96

2,443

Gain on sale of land

968

119

9,016

–

(226)

–

(1,664)(1,027)(15,501)

8,260

1,958

76,911

Current

2,370

462

22,064

Deferred

756

517

7,042

3,126

979

29,106979$ 47,805

Gross profit

Selling, general and administrative expenses
Operating income

Other income (expenses):
Interest and dividend income

Loss on devaluation of investment inunconsolidated subsidiary
Other, net
Income before income taxes

IIncome taxes (Note 7):

Net income

¥

5,134

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

3¥

SHIBAURA MECHATRONICS CORPORATION and SUBSIDIARIES

Consolidated Statements of Shareholders' Equity

Number ofshares ofcommonstock

Commonstock

Additional
paid-in
capitalRetainedearnings

Net
unrealized
holding
Foreign
gains oncurrency
othertranslation
securities adjustments

Treasury
stock

¥

¥

(Millions of yen)
Balance as of March 31, 2003

50,033,312¥ 5,868¥ 9,848¥ 1,552

(19)

¥

(2)

Net income

–

–

–

979

–

–

–

Net change

–

–

–

–

67

–

–

Foreign currency translation adjustments

–

–

–

–

–

(18)

–

Net increase in treasury stock

–

–

–

–

–

–

(3)

Balance as of March 31, 2004

50,033,312

5,868

9,848

2,531

48

(20)

(184)

Net income

–

–

–

5,134

–

–

–

Cash dividends

–

–

–

(399)

–

–

–

Bonuses to directors and corporate auditors

–

–

–

(38)

–

–

–

Net change

–

–

–

–

12

–

–

Foreign currency translation adjustments

(181)

0

Net increase in treasury stock

–

–

–

–

Balance as of March 31, 2005

50,033,312¥ 5,868¥ 9,848¥ 7,228

–
¥

60

–
¥

(9)

(20)

¥

(193)

(190)

$ (1,715)(Thousands of U.S. dollars) (Note 1)
Balance as of March 31, 2004

$ 54,642$ 91,700$ 23,569

Net income––

47,805–––

Cash dividends––(3,714)–––

Bonuses to directors and corporate auditors

–

–

(351)

–

–

–

Net change

–

–

–

107

–

–

Foreign currency translation adjustments

–

–

–

–

7

–

Net increase in treasury stock

–

–

–

–

–

(82)

Balance as of March 31, 2005

$54,642$ 91,700$ 67,309(183)$ (1,797)

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

4

$

$

451

558

$

$

SHIBAURA MECHATRONICS CORPORATION and SUBSIDIARIES

Consolidated Statements of Cash Flows
Year ended
March 31,

Year ended March 31,
2005

2004

2005

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

Operating activities
Income before income taxes

¥

1,958

$ 76,911

1,255

1,756

11,686

Reversal of provision for doubtful accounts

(49)

(18)

(458)

Provision for (reversal of) employees’ retirement benefits

66

(97)

615

Interest and dividend income

(17)

(7)

(162)

Interest expense

147

179

1,372

Gain on sale of property and equipment

(967)

(71)

(9,009)

24

84

221

–

226

–

(262)

(96)

(2,443)

Bonuses to directors and statutory auditors

(38)

–

(351)

(Decrease) increase in advances received(1,522)

1,242(14,172)

Increase in notes and accounts receivable, trade(1,119)(4,150)(10,417)

Decrease (increase) in inventories

1,535(3,447)

14,291(Decrease) increase in notes and accounts payable, trade(2,492)

5,995(23,205)

Other, net

215

(251)

2,007

Subtotal

5,036

3,303

46,886

59

86

551

Interest paid

(151)

(178)

(1,402)

Income taxes paid

(596)

(456)

(5,550)Net cash provided by operating activities

4,348

2,755

40,485

Depreciation and amortization

Loss on disposal of property and equipment

8,260

¥

Loss on devaluation of investment inunconsolidated subsidiary
Equity in earnings of unconsolidated
subsidiaries and affiliates

Interest and dividends received

5

Year ended
March 31,

Year ended March 31,
2005

2004

2005

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

Investment activities
Payments for time deposits

(75)

(35)

(695)

Proceeds from time deposits

14

90

136

Proceeds from redemption of bonds

–

11

–

Purchases of property, plant and equipment

(593)

(990)

(5,525)

Proceeds from sale of property, plant and equipment

1,517

1,983

14,124Purchases of intangible fixed assets

–

(28)

–

Purchases of investment securities

(143)

(1)

(1,331)

Increase in short-term loans receivable

–

(184)

–

Increase in long-term loans receivable

–

(132)

–

Collection of long-term loans receivable

15

138

138

(Increase) decrease in other assets

(31)

63

(289)

Net cash provided by investing activities

704

915

6,558

(1,025)(5,375)(9,541)

Proceeds from long-term debt

–

2,600

–

Repayment of long-term debt

(670)

(1,883)(6,244)

–

4,975

–

Redemption of non-interest-bearing convertible bonds–(2,820)–Purchases of treasury stock

(9)

(3)

(82)

(399)

–

(3,714)(2,103)(2,506)(19,581)

0

(1)

(1)

Net increase in cash

2,949

1,163

27,461

Cash and bank deposits at beginning of the year

4,506

3,343

41,9584,506$ 69,419

Financing activities
Decrease in short-term bank loans

Proceeds from issuance of Zero Coupon Japanese yen
convertible notes

Cash dividends paid
Net cash used in financing activities

Effect of exchange rate changes on cash and bank deposits

Cash and bank deposits at end of the year

¥

7,455

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

6¥

SHIBAURA MECHATRONICS CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements
1. Basis of Presentation

March 31, 2005

material to the consolidated financial statements are stated atcost, except for one subsidiary, which is accounted for by the

Shibaura Mechatronics Corporation (the “Company”) and its

equity method.

consolidated subsidiaries (collectively the “Companies”) maintaintheir accounting records and prepare their financial statements in(b) Foreign currency translationaccordance with accounting principles generally accepted in

The revenue and expense accounts of foreign consolidated

Japan. The accompanying consolidated financial statements

subsidiaries are translated into yen at the rate of exchange inhave been prepared in accordance with accounting principles

effect at the balance sheet date. The balance sheet accounts,

generally accepted in Japan, which differ in certain respects fromexcept for the components of shareholders’ equity, are also

the application and disclosure requirements of Internationaltranslated into yen at the rate of exchange in effect at the balance

Financial Reporting Standards, and have been compiled from the

sheet date. The components of shareholders’ equity are

consolidated financial statements prepared by the Company astranslated at their historical exchange rates. Differences arising

required by the Securities and Exchange Law of Japan. For thefrom translations where two exchange rates have been used are

purposes of this document, certain reclassifications have beenpresented as foreign currency translation adjustments, amade to present the accompanying consolidated financial

component of shareholders’ equity in the accompanying

statements in a format that is familiar to readers outside Japan.

consolidated financial statements.

In addition, the notes to the consolidated financial statements
include information that is not required under accounting

All monetary assets and liabilities of the Company and its

principles generally accepted in Japan but which is presented

domestic consolidated subsidiaries denominated in foreign

herein as supplemental information.

currencies are translated at the current exchange rates in effectat each balance sheet date. Gains and losses resulting from the

The accompanying consolidated financial statements are statedsettlement of these items are credited or charged currently toin yen, the currency of the country in which the Company isincome.

incorporated and operates. The translation of yen amounts into
U.S. dollar amounts has been included solely for the convenience(c) Cash and cash equivalentsof readers outside Japan. The translation has been made at the

The Company and its subsidiaries substantially consider all highly

rate of ¥107.39 = U.S. $1.00, the approximate rate of exchange

liquid investments with a maturity of three months or less fromin effect on March 31, 2005. This translation should not be

their purchase dates to be cash equivalents.

construed as a representation that yen could be converted into(d) Securities

U.S. dollars at the above or any other rate.

Available-for-sale securities categorized as other securities withquoted market prices are carried at market value. The difference

2. Summary of Significant Accounting Policies

between the acquisition cost and the carrying value of other(a) Basis of consolidation

securities, including unrealized gains and losses, is recognized as

The accompanying consolidated financial statements include the

a component of shareholders’ equity under “Net unrealizedaccounts of Shibaura Mechatronics Corporation and fiveholding gain on other securities.” The cost of other securities

subsidiaries over which the Company exerts substantial control,sold is computed based on the moving average method. Other

either through majority ownership of voting stock and/or by othersecurities without quoted market prices are stated at cost, basedmeans. All assets and liabilities of the subsidiaries are revalued aton the moving average method.

fair value on acquisition, if applicable. All significant intercompany(e) Derivatives

balances and transactions have been eliminated in consolidation.

Derivatives are stated at fair market value.
Investments in unconsolidated subsidiaries that are not deemed7

(f) Inventories(i) Severance benefits and pension plans

Inventories of the Company and its consolidated subsidiaries are

An allowance for employees’ retirement benefits has beenstated at cost, determined principally by the following methods:

provided, based on the projected retirement benefit obligationand the pension fund assets. Actuarial gain or loss is amortized

Finished goods, raw materials and supplies

effective the year subsequent to the year in which they arise by-- Primarily by the moving average method

the straight-line method over a period of 10 years, which is

Semi-finished goods

shorter than the average remaining years of service of the-- Primarily by individual cost method

employees.

Work in process-- Primarily by individual cost method

The Companies also provide for retirement benefits to directors
and statutory auditors, based on the Companies’ internal rules, at(g) Depreciation and amortization

the amount that would be required to be paid if all directors andDepreciation of property, plant and equipment is generally

statutory auditors retired or resigned at the balance sheet date.

computed by the declining-balance method, based on theestimated useful lives of the respective assets. The straight-line
method is adopted for a certain building acquired during the year(j) Accrual for periodic repairs

ended March 31, 1995, and to all buildings acquired since April

A certain building acquired in the year ended March 31, 1995

1, 1998. The following summarizes the estimated useful lives ofrequires periodic repairs. An accrual for repair expenses isproperty, plant and equipment by major category:recorded based on the current portion of the total expenses
estimated for such repairs.

Buildings and structures

3 – 60 years

Machinery and equipment

2 – 17 years(k) Leases
Finance leases other than those that are deemed to transfer the

Intangible assets are amortized by the straight-line method.

ownership of the leased assets to the lessee are not capitalized,

Development costs for software intended for internal use are

but accounted for by a method similar to that applicable toamortized by the straight-line method over a period of 5 years,

operating leases.

based on the estimated useful life of the software.
(l) Research and development expenses
Development costs for software intended to be sold are amortized

Research and development expenses are charged to incomeby the straight-line method over a period of 3 years (the estimatedwhen incurred.

number of salable years) or at the percentage of the actual
annual volume of sales to the estimated maximum volume of(m) Income taxes

sales, whichever is higher.

Deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax-based reporting of
the assets and liabilities, and are measured using the statutory tax(h) Allowance for doubtful accounts

rates which will be in effect when the differences are expected to

The allowance for doubtful accounts is provided at an amountbe realized.

sufficient to cover possible losses on the collection of receivables.
For the Companies, the amount of the allowance is determinedbased on the historical experience with write-offs, plus anestimate of specific probable doubtful accounts based on areview of the collectibility of individual receivables.

83. Securities
At March 31, 2005 and 2004, securities with quoted market prices classified as other (available-for-sale) securities are summarized as follows:
March 31,2005

March 31,
2005

2004

AmountAmountAmountrecorded inrecorded inrecorded in

Acquisition

the balance

costs

sheet

Difference

Acquisition

the balance

costs

sheet

(Millions of yen)

Acquisition

the balance

costs

sheet

Difference(Millions of yen)

Difference(Thousands of U.S. dollars)

Other securities whose market values
recorded in the balance sheet exceed
their acquisition costs:
Equity securities

¥ 143

¥ 252

¥ 109

¥ 141

¥ 238

¥ 97

$1,330$2,348$ 1,018

Debt securities

–

–

–

–

–

–

–

–

–

Other

–

–

–

–

–

–

–

–

–

Total

¥ 143

¥ 252

¥ 109

¥ 141

¥ 238

¥ 97

$1,330$2,348$ 1,018At March 31, 2005 and 2004, other securities without determinable market prices are summarized as follows:
March 31,2005

March 31,
2004

(Millions of yen)

2005
(Thousands of
U.S. dollars)

Investments in subsidiaries and affiliates:
Unlisted equity securities other than those traded on
the over-the-counter market

¥ 637

¥ 221

$ 5,935

42

39

390

Other unlisted securities other than those traded on
the over-the-counter market

5. Short-Term Bank Loans and Long-Term Debt

4. Inventories
Inventories at March 31, 2005 and 2004 are summarized as follows:
2005

March 31,
2004

(Millions of yen)Finished productsloans ranged principally from 0.50 percent to 3.00 percent at(Thousands ofMarch 31, 2005, and from 0.60 percent to 3.25 percent at March

U.S. dollars)

31, 2004.

¥ 7,810¥ 8,555$ 72,724

Raw materials

129

203

1,199

Work in process

9,154

9,870

85,248¥17,093¥18,628$159,171

Total

The annual interest rates of the Companies’ short-term bankMarch 31,2005

The summary of long-term debt at March 31, 2005 and 2004 is
as follows:

9

2005

March 31,
2004

(Millions of yen)Unsecured:
Zero Coupon Japanese yen
convertible notes (notes
with stock acquisitionrights)¥ 5,000
0.90 percent to 2.10 percent
loans from banks andinsurance companies
due 2005 – 2008
6,823
Loans from Pension Welfare
Service Public Corporationdue 2005 – 2034
5
Total
11,828Current portion(1,953)Long-term debt less current
portion¥ 9,875

March 31,
2005

These lines of credit have commitment fee requirements.

(Thousands of
U.S. dollars)

6. Research and Development Expenses
Research and development expenses charged to income for theyears ended March 31, 2005 and 2004 were as follows:¥ 5,000$ 46,559
Year ended March 31,
2005
2004
(Millions of yen)

7,493

63,533¥2,337

5
12,498(670)

47110,139(18,186)¥11,828$ 91,953¥1,415(Thousands of
U.S. dollars)$21,764

7. Income Taxes
Income taxes applicable to the Company and its domestic
subsidiaries comprised corporation, inhabitants’ and enterprise tax
that, in the aggregate, resulted in a statutory tax rate of 40.6
percent for 2005 and 41.7 percent for 2004. Income taxes of theLoans from the Pension Welfare Service Public Corporation

foreign subsidiaries are based on the tax rates applicable in theirrepresent financing for housing loans to the Company’s

countries of incorporation.

employees, and the same amount is stated as a portion of otherassets (loans to employees). The Company pays the interest on

The major components of deferred tax assets and liabilities as ofsuch loans to the lender and collects the same amount from the

March 31, 2005 and 2004 are summarized as follows:

employees as the borrowers.
On March 8, 2004, the Company issued JPY 5,000 million Zero

March 31,
2005
2004

March 31,
2005

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

Coupon Japanese yen convertible notes (notes with stock
Deferred tax assets:
Employees’ retirement
benefits
Accrued employees’ bonuses
Accrual for periodic repairsEnterprise tax payable
Net loss carried forward
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrecognized holding
gain on other securities
Total deferred tax liabilities
Deferred tax assets, net

acquisition rights) due March 8, 2009. The convertible notes areconvertible during the period from March 22, 2004, to February
20, 2009, at the option of the holder, into shares of common
stock at a price of ¥943 per share, subject to adjustment inspecific circumstances.
The long-term debt subsequent to March 31, 2005, issummarized by maturity as follows:
March 31, 2005
(Millionsof yen)

2006
2007
2008
2009 and thereafter
Total

Year ended
March 31,2005

¥ 1,953
2,670
–
7,205
¥11,828(Thousands of
U.S. dollars)$ 18,186
24,863–67,090$110,139¥1,815
662
150
232
126
409
3,394
(97)
3,297

¥1,783
607
135
50
1,150
466
4,191
(137)
4,054

$16,902
6,167
1,397
2,158
1,171
3,812
31,607(901)
30,706(44)(44)¥3,253(39)(39)¥4,015(407)(407)$30,299

The effective tax rates reflected in the accompanying
consolidated statements of income for the years ended March 31
2005 and 2004 differ from the statutory tax rates for the following
reasons:

At March 31, 2005, the Company has unused committed lines ofcredit with seven banks for efficient financial arrangements for
operating funds aggregating ¥10,000 million ($93,119 thousand).

10

Year ended March 31,
2005
2004

Statutory tax rates
Effect of:
Non-deductible expenses suchas entertainment expenses
Per capita levy of inhabitants’ tax
and others
Changes in valuation allowance
Correction of decrease in deferred tax
assetsdue to change of tax rate
Equity in earnings of unconsolidated
subsidiaries and affiliates
Tax-deductible R&D expenses
Other, net
Effective tax rates

40.6%

Components of net periodic pension cost:
Year ended

41.7%

Year ended March 31,
2005

2004

(Millions of yen)

0.5

1.9

0.2
(0.4)

Service cost - benefits earned
during the year
Interest cost on projected
benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Net periodic pension cost

1.0
2.8

–

2.0

(1.3)
(2.0)
0.2
37.8%

–
–
0.6
50.0%

¥ 508
226
(109)
216
¥ 841

March 31,
2005
(Thousands of
U.S. dollars)¥489$ 4,735

¥

240
(90)
284
923

2,102
(1,019)2,014$ 7,832

The allowance for retirement benefits was determined by thesimplified method by the consolidated subsidiaries and has been
included in service cost – benefits earned during the year.

8. Retirement Benefits
March 31,
2005
2004
Assumptions used in the actuarial calculation:
Actuarial cost method
Projected unit credit method
Discount rate
2.0% per annum 2.5% per annum

The Companies have defined benefit pension plans and lumpsum retirement payment plans which cover substantially all
employees who retire from the Companies. Eligible employees
may also receive additional payments under the plans.

Expected rate of return onplan assets
Amortization period for
actuarial loss

The following is a summary of the plans:
Retirement benefit obligation:
2005

March 31,
2004

(Millions of yen)

Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized actuarial loss
Allowance for retirement
benefits

3.5% per annum

3.5% per annum

10 years (within the employees’
average remaining years of service)

March 31,
2005
(Thousands of
U.S. dollars)¥(8,591)
2,796(5,795)1,270¥(9,191)
3,127(6,064)
1,576$(80,000)
26,038(53,962)
11,820¥(4,525)¥(4,488)$(42,142)

9. Legal Reserve and Additional Paid-In Capital
The Commercial Code of Japan (the “Code”) provides that an
amount equal to at least 10 percent of the amount to be
disbursed as a distribution of earnings shall be appropriated to
the legal reserve until such reserve and the amount of additional
paid-in capital equals 25 percent of the common stock account.
The Code also provides that if the sum of the additional paid-in

The consolidated subsidiaries have adopted a simplified method,

capital account and the legal reserve exceeds 25 percent of theas permitted, to calculate the projected benefit obligation.

common stock account, then the amount of the excess (if any) isavailable for appropriations by resolution of the shareholders.
The retained earnings account in the accompanying consolidated
financial statements at March 31, 2005, included a legal reserveof ¥7,228 million ($67,309 thousand).

11

10. Leases

the Company does not speculate in derivative transactions. The
Company does not anticipate nonperformance by any of the(1) Finance leases

counterparties to the above transactions, all of whom are

Non-cancelable lease transactions are primarily accounted fordomestic financial institutions with high credit ratings.

as operating leases (regardless of whether such leases areclassified as operating or finance leases) except that lease

In accordance with the Company’s policy, derivative transactions

agreements which stipulate the transfer of ownership of theare entered into under the decision-making rules approved by theleased assets to the lessee are accounted for as finance leases.

Management Strategy Committee of the Company. The

Lease expenses related to finance leases accounted for as

department that has the responsibility to enter into such contracts

operating leases amounted to ¥693 million ($6,452 thousand)controls the risk and performance on a daily basis and reports

for the year ended March 31, 2005, and ¥533 million for thethese to management of the Company, if and when necessary.

year ended March 31, 2004.
As of March 31, 2005 and 2004, fair value information for
Future minimum lease payments subsequent to March 31,

derivatives has not been presented, since all derivatives have

2005, for finance lease transactions accounted for as operating

been accounted for as hedges.

leases, are summarized as follows:
March 31, 2005
(MillionsDue within one year

U.S. dollars)¥ 560$ 5,217

Due after one year
Total

(Thousands ofof yen)

962

8,956

¥1,522$14,173(2) Operating leases
March 31, 2005

Due within one year

(Millions(Thousands ofof yen)U.S. dollars)¥

Due after one year
Total

7

$

15
¥

22

71
137

$

208

11. Contingent Liabilities

The Company had the following contingent liabilities:
March 31, 2005

As guarantor for housing
loans of employees(Millions(Thousands ofof yen)U.S. dollars)

¥

$

78

726

12. Derivatives and Hedging Activities
The Company has entered into interest rate swap contracts to
reduce the cost of borrowing. The Company uses these contracts
to manage its exposure to interest rate risk. As a matter of policy,

1213. Segment Information
The business segment information of the Companies for the years ended March 31, 2005 and 2004 is summarized as follows:Business segments
Year ended March 31, 2005

Fine
mechatronics

Electric &vacuumsystems

Vending
machines &systems

Real estateleasing

Total

Eliminations
or unallocated Consoliamounts
dated(Millions of yen)

I. Sales and operating income
Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income¥61,987–
61,98756,701¥ 5,286¥15,046–
15,046
13,810¥ 1,236¥9,496
–
9,496
7,520
¥1,976¥ 1,984
–
1,984
1,251
¥ 733

¥88,513–88,51379,282¥ 9,231

¥

–
(–)
–
407
¥ (407)¥88,513–88,513
79,689¥ 8,824

II. Total assets, depreciation and capital expenditures
Total assets¥38,260
Depreciation
393
Capital expenditures
306¥9,516164
115¥8,296103
166¥10,341595–¥66,4131,255
587¥3,998––¥70,4111,255
587

Year ended March 31, 2004

Fine
mechatronics

Automation
systems &vacuumequipment

Vending
machines &systems

Real estateleasing

Total

Eliminations
or unallocated Consoliamounts
dated(Millions of yen)

I. Sales and operating income
Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income¥45,084–
45,08443,354¥ 1,730¥14,844–
14,844
14,408¥ 436¥5,501
–
5,501
5,056
¥ 445

¥ 2,092
–
2,092
1,269
¥ 823

¥67,521–67,52164,087¥ 3,434

¥

–
(–)
¥
–
266
¥ (266)¥67,521–67,52164,353¥ 3,168

II. Total assets, depreciation and capital expenditures
Total assets¥38,587
Depreciation
737
Capital expenditures608¥11,379
339
261¥4,58881
98¥10,944599
1¥65,498
1,756
968¥3,747––¥69,245
1,756
968

13

Year ended March 31, 2005

Fine
mechatronics

Electric &vacuumsystems

Vending
machines &systems

Real estateleasing

Total

Eliminations
or unallocated Consoliamounts
dated(Thousands of U.S. dollars)

I. Sales and operating income
Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income$577,208–
577,208
527,994$ 49,214$140,104–
140,104
128,596$ 11,508$88,426–
88,42670,021$18,405$ 18,479–
18,47911,654$ 6,825$824,217–
824,217738,265$ 85,952

$

–
–
$
–
3,789
$ (3,789)$824,217–
824,217742,054$ 82,163

II. Total assets, depreciation and capital expenditures
Total assets$356,268
Depreciation
3,656
Capital expenditures
2,847$ 88,615
1,525
1,071

$77,256961
1,548$ 96,295
5,544–$618,434
11,686
5,466$37,227––$655,661
11,686
5,466

Notes:(3) Vending machines & systemsa) Basis of segmentation

Vending machines, ticket vending machines, and others

Business segments are divided into product categories by thesame criteria as applied for internal control purposes.

(4) Real estate leasing
Real estate leasing and management and other businessb) Major products in each business segmentc) Included in eliminations or unallocated amounts of operating(1) Fine mechatronics

expenses are unallocable amounts relating to development

FPD manufacturing equipment (wet cleaning equipment,

expenses incurred for the entire Company as part of the

stripping equipment, etching equipment, developing

Company’s research and development costs.

equipment, PI inkjet coater, cell assembly equipment, outerlead bonder), semiconductor manufacturing equipment (wetd) Included in the eliminations or unallocated amounts of total

cleaning equipment, etching equipment, ashing equipment,

assets were unallocable amounts totaling ¥8,036 million

die bonder, wire bonder, inner lead bonder, flip chip($74,828 thousand) for the year ended March 31, 2005 andbonder), railroad maintenance equipment, non-destructive¥6,980 million for the year ended March 31, 2004, whichinspection, and other items

primarily consisted of surplus funds (cash and bank deposits),(2) Electric & vacuum systems

investment funds (investment securities) of the Company andLaser equipment, microwave equipment, media device

deferred tax assets.

manufacturing equipment (sputtering equipment, vacuum
bonding equipment), industrial vacuum evaporatione) Included in depreciation and capital expenditures were

equipment, rechargeable battery manufacturing equipment,

amortization of and additions to long-term prepaid expenses.

precision parts manufacturing equipment, other automationequipment, vacuum pumps, and otherf) “Automation systems & vacuum equipment” has beenrenamed “Electric & vacuum systems” in order to express the14content of the business more accurately. This change has noarea:

impact on reported figures.

Northeastern Asia–

Taiwan, Korea, China

Other

–

U.S.A., Austria

Geographical segments
14. Per Share Information
No information by geographical segment for the years ended
March 31, 2005, and 2004 has been presented, due to the fact

Basic net income per share is computed based on the netthat the net sales and total assets of operations in Japan

income available for distribution to shareholders of common stock

exceeded 90 percent in all segments.

and the weighted average number of shares of common stock
outstanding during each year. Diluted net income per share iscomputed based on the net income available for distribution toOverseas sales

the shareholders and the weighted average number of shares ofcommon stock outstanding during each year, assuming fullYear ended March 31, 2005

dilution by common stock equivalents. Net assets per share isNortheastern
Asia

Other

computed based on the weighted average number of shares of

Total(Millions of yen)

I. Overseas sales
II. Consolidated net sales
III. % of consolidated net sales¥42,026
47.5%

common stock outstanding during each balance sheet date.

¥3,148¥45,174
88,5133.5%
51.0%

Year ended March 31, 2004
Northeastern
Asia

Other

Net income:– Basic– Diluted
Net assets

Total(Millions of yen)

I. Overseas sales
II. Consolidated net sales
III. % of consolidated net sales¥30,91245.8%¥2,027¥32,939
67,521
3.0%
48.8%

Year ended March 31, 2005
Northeastern
Asia

Other

Total

(Thousands of U.S. dollars)

I. Overseas sales$391,345$29,313 $420,658
II. Consolidated net sales
824,217
III. % of consolidated net sales
47.5%
3.5%
51.0%

Notes:a) Overseas sales are those of the Company and its consolidated
subsidiaries in countries or regions other than Japan.
b) The division of overseas sales into countries or regions andthe names of such countries or regions are as follows:(1)Overseas sales by country or region:
Geographical areas are defined based on geographicalproximity.
(2)Major countries or regions included in each geographical15

Year ended March 31,
2005
2004

Year ended
March 31,
2005

(yen)

( U.S. dollars)¥ 101.92
92.12
456.15¥ 18.8817.59
362.07

$0.95
0.86
4.25

SHIBAURA MECHATRONICS CORPORATION and SUBSIDIARIES

Report of Independent Auditors
Certified Public Accountants
Hibiya Kokusai Bldg.
2-2-3, Uchisaiwai-cho,
Chiyoda-ku, Tokyo, 100-0011
C.P.O. Box 1196, Tokyo 100-8641

Phone:+81-3-3503-1100
Fax: +81-3-3503-1197

The Board of Directors
Shibaura Mechatronics Corporation

We have audited the accompanying consolidated balance sheets of Shibaura Mechatronics Corporation and consolidated subsidiaries asof March 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years
then ended, all expressed in 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 andperform 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
Shibaura Mechatronics Corporation and consolidated subsidiaries at March 31, 2005 and 2004, and the consolidated results of theiroperations and their 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, 2005 arepresented 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 1 to the consolidated financial statements.

June 16, 2005

16

Supplemental Information

Non-Consolidated Balance Sheets
March 31,2005

March 31,
2004

(Millions of yen)

2005
(Thousands of
U.S. dollars)

AssetsCurrent assets:
Cash and bank deposits¥ 4,398¥ 2,837$ 40,950

404

357

3,766

18,10919,037

168,626

(26)

(173)

(242)

15,316

16,997

142,618

Deferred tax assets

626

1,415

5,833

Other current assets

939

1,215

8,743

39,766

41,685370,294

80

99

740

Buildings and structures

15,67027,495145,917

Machinery and equipment

234

825

2,183

Construction in progress

289

341

2,692

Total

16,27328,760151,532

Accumulated depreciation(1,033)(12,459)(9,616)

Property, plant and equipment, net

15,24016,301

141,916

Investment securities

276

265

2,573

Investments in subsidiaries and affiliates

987

691

9,184

1,912

1,927

17,803

590

651

5,496

3,765

3,534

35,056¥58,771¥61,520$547,266

Notes and accounts receivable, trade:
Notes
Accounts
Allowance for doubtful accounts
Inventories

Total current assets

Property, plant and equipment:
Land

Investments and other assets:

Deferred tax assets
Other assets
Total investments and other assets

Total assets

17March 31,
2005

March 31,
2004

2005

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

Liabilities and shareholders’ equity
Current liabilities:
Short-term bank loans¥

Current portion of long-term debt

–

¥

560

$

–

1,920

620

17,880

Notes

3,571

3,614

33,248

Accounts

11,175

15,139104,064

9

1

79

500

1,788

4,658

Accrued expenses

3,142

3,322

29,254

Accrued income taxes

1,162

65

10,824

Other current liabilities

65

138

610

21,54425,247200,617Long-term debt

9,875

11,79591,952

Allowance for retirement benefits

4,321

4,325

40,234

Directors’ retirement benefits

144

113

1,336

Accrual for periodic repairs

369

333

3,440

Other long-term liabilities

3,000

3,000

27,936

17,70919,566

164,898

and 2004

5,868

5,868

54,643

Additional paid-in capital

9,848

9,848

91,700

353

353

3,287

3,587

774

33,400

55

48

518

(193)

(184)

(1,797)

Total shareholders’ equity

19,51816,707

181,751

Total liabilities and shareholders’ equity¥58,771¥61,520$547,266

Notes and accounts payable:

Other
Advances from customers

Total current liabilities
Long-term liabilities:

Total long-term liabilities
Shareholders’ equity:
Common stock:
Authorized: 100,000,000 shares
Issued:50,033,312 shares at March 31, 2005

Legal reserve
Retained earnings
Net unrealized holding gain on other securities
Less treasury stock, at cost18

Supplemental Information

Non-Consolidated Statements of Income
Year ended
March 31,

Year ended March 31,
2005

2004
(Millions of yen)

2005
(Thousands of
U.S. dollars)

Net sales¥ 71,674¥ 56,108$667,416

Cost of sales

58,39147,913543,727

13,283

8,195

123,689

7,810

6,103

72,720

5,473

2,092

50,969Interest and dividend income

184

377

1,709

Interest expense

(128)

(156)

(1,191)Gain on sale of land

968

119

9,017

–

(226)

–

(1,347)(737)(12,545)

5,150

1,469

47,959Current

1,109

(34)

10,331

Deferred

800

644

7,448

1,909

610

17,779859$ 30,180

Gross profit

Selling, general and administrative expenses
Operating income

Other income (expenses):

Loss on devaluation of investment in affiliate
Other, net
Income before income taxes

Income taxes:

Net income

¥

3,241

¥

(Yen)

(U.S. dollars)

Per share of common stock:
Net income
Cash dividends applicable to the year19

¥ 64.11¥ 16.62

7.00

5.00

$

0.60
0.07