Contents

ProfileFinancial Highlights

01

As the corporation which is relied by the society

12

To Our Shareholders

02

Environmental Activities 2004 in Shibaura

14

Topics 2004 in Shibaura

05

Board of Directors

15

Financial Review

08

Investor Information

16

Five-Year Summary

11

Shibaura Mechatronics Corporation started operations in 1939, the successor to Shibaura Engineering
Works Co., Ltd. famous as one Japan's largest manufacturers of heavy electrical equipment. Buildingon this heritage, the Company made major contributions to the infrastructure that supported Japan's
industrial development, by supplying electric power equipment, particularly industrial motors.
In 1998, Shibaura Mechatronics repositioned itself and established a new corporate identity as"The Provider of Infrastructure for The Digital Age." Since then, dramatic innovations in our businessstructure have made us a provider of essential manufacturing equipment for the electronic componentsthat support social progress.
The 21st century is the age of IT and of the environment. To fulfill the demands of this century,
the Company is determined to become "e-Shibaura," a truly IT-based enterprise, and "E-Shibaura," anenterprise that places priority on the Earth's environment. In other words, as "e & E-Shibaura" we will
supply products and services suited to this age of IT and the environment, and pursue global businessexpansion by encouraging innovative attitudes and thinking among our employees.

History
1939

1932

Tokyo Electric Company

1949

1991 1996

Oct.,1998

Tokyo Shibaura Electric Co., Ltd. (now, Toshiba Corporation)

Shibaura Engineering Works Co., Ltd.

(Industrial Mechatronics Business)

Toshiba Automation Co., Ltd.
Manufacturing automation equipment

Toshiba Mechatronics Co., Ltd.
Semiconductor manufacturing
equipment and others

SHIBAURA MECHATRONICS CORPORATION

Shibaura Engineering Works Co., Ltd.
Electric motors

Tokuda Seisakusho Co., Ltd.

Shibaura Engineering Works Co., Ltd.
Motors, flat panel displays manufacturing
equipment and others

Vacuum equipment

Cover Photo

Forward-Looking Statements

DVD Vacuum Bonding Equipment

This annual report contains forward-looking statements
concerning Shibaura's future plans, strategies andperformance. These forward-looking statements are nothistorical facts, rather they represent assumptions andbeliefs based on data currently available. Furthermore,they are subject to a number of risks and uncertainties
that, relate to economic conditions, worldwide megacompetition in the electronics business, customer
demand, foreign currency exchange rates, tax rules,
regulations and other factors. Shibaura therefore wishes
to caution readers that actual results may differ materiallyfrom our expectations.

This breakthrough equipment integrates the discadhesive coating function with our original vacuum
bonding function in a single piece of equipment. Thisvalue-added, high-tech solution won a high evaluationand the Chairman's Awards from the Japan Vacuum
Industry Association in May 2005.
The equipment supports all major formats; notonly DVD but next generation BD (Blu-ray Disc) and
HD DVD.

Financial Highlights

Financial Highlights
Consolidated

Millions of yen

Thousands of
U.S. dollars

Years ended March 31

Years ended March 31

2005

Net sales¥

Operating income

2004

88,513¥

2005

67,521

8,824$

824,217

3,168

82,163

Net income

5,134

979

47,805

Total assets

70,411

69,245655,661

Total shareholders' equity

22,791

Net income per share

18,091

212,229¥101.92

¥

18.88

$

0.95

¥

71,674¥

56,108$667,416

Non-consolidated
Net sales
Operating income

5,473

2,092

50,969Net income

3,241

859

30,180Total assets

58,771

61,520547,266

Total shareholders' equity

19,51816,707

181,751

Net income per share

¥

64.11

Note 1:

¥

16.62

$

0.60

The U.S. dollar amounts in this report represent
translations of Japanese yen, for convenience only, atthe rate of ¥107.39 = U.S.$1.00, as of March 31, 2005.

Net Sales

Net Income

Total Shareholders’ Equity

Net Income Per Share(¥ Billions)(¥ Billions)(¥ Billions)

(¥)

71

68

63
55

55
45

20
72

3.2

19 19
17 17

20
18
16

64.1

17

56

44

18.9
16.6

1.0
0.9

-0.1

-2.2

-2.8
-22.4
-23.4

-1.1 -1.4-1.2 -1.5

-28.4
-29.2

2004

2003

2002

2005

-44.3

2001

2005

2004

2003

2002

2001

2005

2004

2003

2002

2001

2005

2004

2003

2002

2001

Consolidated

101.9

23

5.1

89

Non-consolidated01

To Our Shareholders

To Our Shareholders
Shibaura Mechatronics defines itself as "The Provider

managementof Infrastructure for the Digital Age." Through thecomply with rules, and work towards achievement of theprovision of manufacturing equipment for electronic

management

components,

displays,activities. Steady promotion of these measures willsemiconductors and optical discs, the Company

assure the Company achieves its target of becoming acontributes to the realization of a rich, abundant

truly trusted industry leader.

societyasparticularly

an

flat

infrastructure

panel

providerpromotingitsbusinesses,

responsibility

throughforappropriate

results,business

Financial Results in Fiscal 2004

theCompany

derives inspiration from a corporate philosophy thatIn the first half of fiscal 2004, the domestic economy

promotes "Innovation in All Things," "Pursuit of Rationality"

saw continued positive capital expenditure, thanks toand "Respect for Humanity," and targets realization of aincreased exports and capital expenditure resulting fromglobal business group characterized by speed andrecovery in overseas economies since the latter half ofdynamism. Guided by this management vision andfiscal 2003, and increased sales and profit on the part

philosophy, the Company is evolving a top-down-typeof domestic corporations. The second half broughtstyle of management innovation activity, "SM2005," thatconcerns about the impact on results from inventory

fosters an approach to business - BCM, or Balanced

adjustment in digital consumer products, which brought

CTQ Management - that is able to identify key issues,a leveling off to a previously growing market, as well as

apply the innovative statistical measures of six-sigma,

increased prices for ferrous materials and rising oil

and cultivate businesses that achieve high growth andprices.

profitability. Combining this with "Active," a bottom-up-

In the flat panel displays market, where thetype of in-house self-actualization program that seeks

Company has key customers, demand for panels for PC

to increase job satisfaction and raise morale, allows themonitors and TVs increased, and sales of LCD panel

continued evolution toward a dynamic business group.

manufacturing

The Company promotes business on the basic
profitability." It is essential that we listen closely to thevoices of our customers, quickly and accurately gaugechanging market needs, and steadily promote themeasures necessary for us to contribute to the world
throughourbusiness

activities.

In

addition,allemployees must share the management vision, set andaccomplish

realistic

targets,

executeequipment

moved

favorably.

Insemiconductor device manufacturing equipment, steadyprinciple of "continuous growth and strengthened highcommitment

Shigeki Morita
President and Chief Executive Officer

02

visiontakes

supporting

digitalization and the networked society.
In

that

To Our Shareholders

capital expenditure continued, thanks to the marked
expansion in demand for digital consumer products,
including digital cameras, mobile phones and DVD
players, a driving force in the market. At the same time,
the optical disc industry witnessed positive investment

business plan for the coming three years that takes

in media device manufacturing equipment to meet

into account changes in economic trends and theincreased demand for DVD recorders, though that trend

business environment, both in Japan and in overseas.

leveled off in the second half on a move to delay

Under the mid-term plan, the Company positions

investment timing. Vending Machines & Systems saw a"continuous

healthy rise in sales, thanks to a wave of replacement

profitability" as its basic guiding principle and isdemand for tobacco and ticket vending machines able topromoting measures to "identify and cultivate new

accept Japan's new bank notes.

businesses" and "secure and expand orders andIn this business environment, and by giving top

sales."

growthAnotherandconcernstrengthenedistoimprovehighfinancialpriority to securing orders, the Company secured orders

strength by focusing on improved cash flow, collectingwith a value of 79.5 billion yen. Sales in every businessaccounts receivable at an early stage and reducing

segment exceeded forecasts made at the beginning of

inventories. Moves to "promote efficient management"

the fiscal year. As a result of these and other factors,

will target a stronger, more stable profit structure

consolidated sales established a new record of 88.5

throughbillion yen, a 31% increase against the previous fiscal

Group's global production and further reductions inyear. In profit and loss, as a result of increased grossfixed costs.

profit on sales that far surpassed the original plan;

optimizationof

Shibaura

Mechatronics

Shibaura Mechatronics is determined to increase

Company-wide

the number of products with a No.1 market share, andmanagement innovation activity "SM2005" and cost

to deliver to customers new, high value-added products

reduction activities; and improved profitability thoughthat put significance on COO (Cost of Ownership), at athecosts,

speedy and continuous pace. The Company's first

consolidated recurring profit increased by 5.2 billion yen

priority is to secure orders and to promote proactive

to 7.3 billion yen, a record high. Consolidated net profit

marketing activities in Japan and overseas, especially

increased by 4.2 billion yen to 5.1 billion yen.

in areas of new technology. In flat panel displays

promotionofexecution

rationalizationofmeasuresthroughtoreducefixed

manufacturing equipment, the Company will enter new

Looking Ahead

fields, among them SED and OLED. Orders and businessenquiries are favorable, especially for new generation

At the start of fiscal 2005, the Company responded todevices, such as for manufacturing equipment for large

this business environment by defining a mid-term

substrates and bonding equipment for LCD panels.

03

To Our Shareholders

Semiconductors has already seen a recovery in demand

Manufacturers

facecontinued

evolutioninfor assembly equipment, and we now look forward to a

globalization and a business environment of increasing

rise in orders and sales associated with new technology

severity. However, Shibaura Mechatronics will promote

processes and 300mm wafers, as well as in wafer

businesses

inspection equipment, a business that was recently

manufacturingtransferred to the Company. In the media device

manufacturing" and that "manufacturing equipment isequipment,a driving force of IT." Japan has the ability to create

demandfor

DVD-related

equipmentaware

equipment

is

that

lead

management

innovation

activity

Company-wide"SM2005,"

andmobilephones,digitalinthecamerasfield

globalinformation products with such products as DVD,

the

IT

Japanese

the

to

of

"it

promoterelatedgeneration

thatmakerscontinues to be favorable. In addition, we will eagerly
measuresnext

proudlyandofdigitaldigitalTVs.

promote our "human resource strategy," under which

Shibaura Mechatronics is determined to deliver thewe train and utilize human resources to strengthen our

manufacturing

operating base.

transition to this next step forward for IT at an earlyequipment

required

to

make

the

stage, and will continue to devote itself to becoming the

Toward the Future"best choice partner" for its customers.

Since positioning the goal of being "The Provider offorward to the future growth and development ofInfrastructure for The Digital Age" at the heart of its

Shibaura

activities

Shibaura

success, I hope that we can rely on your continued

into

understanding and support.

I sincerely hope that you will join me in looking

andMechatronics
electronics

new
has

businessmadecomponent

in

deep

1998,
inroads

manufacturingtheMechatronics.

As

we

work

for

furtherequipment

business (hop). The Company responded positively toAugust 2005

the bursting of the IT bubble in 2001, using it as anopportunity to remake itself, and promoted radical
innovations in its organization, financial capabilities
and management culture that led to record sales andprofit in fiscal 2004, and that also showed thestrengthoftheCompany

nowbusiness

structure(step).

The

highlyShigeki Morita

profitable business structure: sales of more than 100

President and Chief Executive Officer

targets

achievementofabillion yen, an ROS of more than 10%, and an equity
ratio of more than 40% in fiscal 2007, the last year
for the current mid-term business plan (jump).

04

Topics 2004 in Shibaura

Topics 2004 in Shibaura
Market leading products significantly
contributed to improved business results

our equipment.
Sixth is the ticket vending machines that sellmeal tickets at highway service areas. They are number

Products that boast a leading share in the global or

one in the Japanese market.

domestic market greatly contributed to improved resultsin fiscal 2004. The ability to create diverse products that
win top shares in their market reflect our efforts toassure a precise understanding of the market and its
needs; our cultivation of the high-tech base necessary
for the timely commercialization of products integrating
value that customers understand and appreciate; andtop notch after-sales service and support.
The first product area where we have claimed the
top

share

of

the

world

marketis

LCD

cleaning

Wet cleaning equipment

equipment. Our wet cleaning equipment for glass
substrates draws on our experience and capabilities todeliver support for large-sized, sixth-generation andafter substrates. A notable innovation here is the newOuter lead bonder

configuration of the VIP (Vertical Integrated Processor)
series. The low COO* of this equipment supports us in
winning orders.
Second is the outer lead bonder that assembles
driver ICs around the panel in the LCD module
manufacturing process. Our equipment offers superb
precision and productivity, characteristics that have
won an unrivaled top share in production of large
screen LCD TVs.

Inner lead bonder

Third is the inner lead bonder that attaches driver
ICs for LCDs to the TCP (Tape Carrier Package). Thisequipment also supports the transition from TCP to COF

Single layer sputtering
equipment(Chip on Film), which is accompanied by a narrowing of
the lead pitch of LCD driver ICs.
Fourth

and

fifth

are

integral

to

the

DVD

production process: the sputtering equipment that forms
films on polycarbonate disc and the vacuum bonding
equipment that facilitates the process. One particularadvantage of our bonding equipment is that vacuumbased bonding eliminates air bubbles on the discsurface. The ability to manufacture discs with aconsistent high quality has won positive evaluations for

Vacuum bonding equipment*COO (Cost of Ownership):
Indicates to customers the economic efficiency of equipment. It is based oncomprehensive evaluation and quantification of the cost of equipment itself,
the floor area it takes up once installed, material consumption during
manufacturing and maintenance costs.

Ticket vending machine05

Topics 2004 in Shibaura

Promotion of global management

Taiwan, Korea and China, and strengthening our ability
to engage the global market.

Just over half of sales are now generated overseas,

Taiwan is the most important of our overseas

andmarkets and accounts for the lion's share of overseas

capabilities an increasingly important concern. We aresales. Reinforcing the number of local hires at Shibaura

promoting localization of equipment installation and on-

Mechatronics

site support in cooperating with subsidiaries in the U.S.,

results in expanded sales of equipment for flat panel

makingcultivation

of

our

overseaspresence

TaiwanCorporation

produced

positivedisplays (FPD), semiconductors and DVD. In order todeepen relations with Taiwanese customers, we will
Japan

China

TaiwanOthersKorea

4%continue to reinforce sales and service systems, and to8%

strengthen cooperation with our subsidiary.
Our Korean subsidiary, SCK Co., Ltd., has bolstered

12%
Sales byregions
Fiscal 2004

its ability to meet demand from Korean manufacturers by
49%

starting its own manufacturing operations, with a focus on
LCD cleaning equipment. We are providing expert support
by dispatching human resources, and hope to reinforce the27%company's capabilities through this cooperation.
The fast pace of economic growth in China isreflected in our own increased sales: by 2% in 2003 and
8% in 2004. We are securing a broader customer base,and we must maintain that by assuring our sales and

SCK CO., LTD.

service capabilities. At this point, we have establishedKorea

offices in five locations: Shanghai, Nanjing, Beijing,
Suzhou and Shenzhen. Looking forward, we will now

SHIBAURA MECHATRONICSCORPORATIONSHIBAURA MECHATRONICS(SHANGHAI) CO., LTD.

Japan

China

establish bases in other major regions, in turn. We plan toincrease the number of sales and service personnel as afirst step to further expansion of business.
The essence of global management is the ability tooffer comprehensive support close to the customers. We
will proactively promote further localization of business asa tool for achieving higher levels of customer satisfaction.

SHIBAURA MECHATRONICS
TAIWAN CORPORATION

TaiwanEfficient management by the
expansion of manufacturing systems
and the business reforms
In readiness for fast growing demand for digital home
appliances, we are strengthening our systems to
producemanufacturing

semiconductors

SCK CO., LTD.

06

and

DVD

equipment
discs.

for

FPD,

ThoroughgoingTopics 2004 in Shibaura

SHIBAURA HI-TECH CORPORATION

reforms and rationalization at Yokohama Operations
andSagamino

Operationsaresupportingusinachieving our goal of increased p r o d u c t i o nandenhanced

LCD

efficiency.

Consolidationof

SHIBAURA MECHATRONICS CORPORATION

manufacturing equipment to Yokohama Operations
Equipment development, development of core technologies

was a notable step in this direction.
Overall group manufacturing capabilities wereenhanced by the July 2004 establishment of Shibaura

Domestic

Hi-Tech Corporation in partnership with our parent
company,

Toshiba

Corporation

(51%

owned

SHIBAURA PRECISION CO., LTD.

by

Shibaura Mechatronics Corporation, 49% by Toshiba
Corporation).

The

strongtechnology

andMachine manufacturing

designcapabilities of this new company are not only being

SHIBAURA HI-TECH CORPORATION

applied to the production and assembly processes of
FPD and semiconductors, but also to the developmentofmanufacturing

equipment

tosupportComprehensive
Cooperating companies
From manufacturing designs tothe completion of assembly

Designing and manufacturingof bonding equipment, etc.

emerging

businesses at Toshiba Corporation.
Consolidation

at

Yokohama

OperationsofOverseas

operations previously carried out at two locations has

SCK CO., LTD. (Korea)

provided a significant boost in efficiency for Shibaura
Precision Co., Ltd., a subsidiary that uses advanced

Manufacturing of cleaning
equipment, etc.

technology and machining skills to produce precision
machined parts for our equipment.
In another area, we are enhancing cooperation withbusiness partners that prove themselves able to handle

In

April

2005,

Shibaura

Vending

Machinebusiness from design through to assembly, as a means to

Corporation, the Shibaura Mechatronics Group company

maximize efficient use of our own resources and assure a

responsible for sales and services of vending machines,

system able to respond quickly and efficiently.

was the surviving company in a merger with Shibaura

Overseas, we provide human resources to support

EMS

Co.,

Ltd.,

which

develops

andmanufactures

our Korean subsidiary, SCK Co., Ltd. and to strengthen

vending machines. In fiscal 2004, both companies

its manufacturing systems for products such as LCD

achieved record sales and profits. Nonetheless, thecleaning equipment.

vending machine business is expected to see a severe

Another business reform involved the February

market environment, where the long-term trend is to a2005 transfer of our industrial robot business to Toshiba

decrease in the installed machine base. In these

Machine Co., Ltd., another Toshiba Group company.

circumstances, forward - looking moves were taken toThis move will allow us to concentrate our management

achieve accelerated management decision making andresources on manufacturing FPD, semiconductor andproduct development, and to assure that both are

DVD production equipment, and supports a tighter focus

directly linked to the market and able to generate

in our management base.

further improvements in competitiveness and efficiency.

07

Financial Review

Financial Review

Net Sales(¥ Billions)
88.5
71.1

Shibaura Mechatronics Corporation and Subsidiaries
Years ended March 31

67.5
54.9

54.8

Sales Situation
In the beginning of the fiscal term under review, the Japanese economy saw upturns in exports

2005

2004

2003

2002

2001

and capital expenditure, on the strength of recovery in overseas economies and continuing
capital expenditure by companies in Japan. The second fiscal half was more uncertain. Within
the growth trend, leveling-off in demand prompted uncertainty about the future.

Operating Income

In the electronics sector, where the Company finds most of its customer, demand rose(¥ Billions)
8.8

for flat panel displays for application in TVs, resulting in favorable sales of LCD panel
manufacturing equipment. In semiconductors, capital expenditure was steady and continuous
on an expanding market for the digital consumer products, including digital cameras and DVD

3.3

3.2

players. In the optical disc industry, there was positive investment growth in media device
manufacturing equipment to meet growing market demand for DVD-related products. The
second half was less confident, as a leveling-off in demand prompted decisions to defer capital

2005

2004

-1.5

2003

2002

2001

-1.5

investment. In tobacco and ticket vending machines, the main products in Vending Machines &Systems, sales were favorable on replacement demand for vending machines able to accept
Japan's new bank notes.

Sales by Segment

In this business environment, and by giving top priority to securing orders, the company(¥ Billions)
88.5
71.1

were a record high of 88,513 million yen, a 31% increase against the previous fiscal term. The

67.5
54.9

secured sales that surpassed the original business plan. Consolidated sales for the full year

54.8

company also secured orders in the amount of 79,547 million yen.

Analysis of Profit and Loss
2005

2004

2003

2002

2001

In profit and loss, as a result of increased gross profit on sales that exceeded initial plans; thepromotion of cost cuts through company-wide management innovation activity "SM2005;" andReal estate leasing
Vending machines & systems
Electric & vacuum systems
Fine mechatronics

improved profitability as a result of successful execution of measures to reduce fixed costs, theCompany recorded its highest ever consolidated recurring profit of 7,291 million yen, an
increase of 5,222 million yen against the previous term, while consolidated net profit was 5,134

Overseas Sales by Region

million yen, an increase of 4,155 million yen against the previous term.

(¥ Billions)
45.2
27.9

Segment Information

32.9
24.0

26.6

1. Fine Mechatronics Segment
Shibaura succeeded in winning the top share in the market for cleaning equipment for largesized glass substrates and outer lead bonders for LCD panels, both areas where the Company

2005

2004

supported by demand for leading-edge technology to process 300mm wafers and for

2003

Other regions-U.S.A., Austria, etc.
Northeastern Asia-Taiwan, Korea, China

2002

2001

enjoys notable competitive advantages. Sales of LCD panel manufacturing equipment were

Major countries or regions included ineach geographical area;

also favorable, supported by capital expenditure in Japan, Korea and Taiwan.
In semiconductor manufacturing equipment, sales of dry process equipment were
semiconductor cleaning equipment. In assembly equipment, the company secured the No.1

08

Financial Review

ROS
(%)
8.2

market share in TAB bonders and recorded advances in both orders and sales, most

4.1

3.1

notably on strong demand for bonding equipment for LCD drivers and ICs for small form
factor digital devices.
As a result, consolidated segment sales surpassed the original plan to reach 61,987

2005

2004

-3.9
2003

2001

million yen to 5,286 million yen.

-3.4
2002

million yen, a 37% gain on the previous year, while operating profit increased by 3,556

2. Electronic & Vacuum Systems Segment
As DVD-related capital expenditure was underpinned by the continued diffusion of DVDrelated products, the Company achieved the top share in the global market for DVD
sputtering equipment and vacuum bonding equipment, resulting in increased sales for

ROE
(%)
25.1

media devices manufacturing equipment.
In the automotive industry, a new area of business for the Company, orders werereceived for microwave equipment and plasticization coating equipment. Sales of laser

14.3 *Note 1

equipment were also favorable.
5.6

As a result, consolidated segment sales were 15,046 million yen, a 1% increaseagainst the previous term, while operating profit increased by 800 million yen from the

-0.7

2005

2004

-8.0
2003

2001

-5.9
2002

previous term to 1,236 million yen.

3. Vending Machines & Systems Segment
While the market for tobacco vending machines continued to follow a downward trend,enhanced marketing activities allowed the company to raise its market share. The sector
also saw stronger than expected demand for vending machines able to read Japan's newbank notes, in both the modification and replacement markets, and for both tobacco and

ROI
(%)

ticket vending machines.

25.9

As a result, consolidated segment sales reached a record 9,496 million yen, a 73%
increase against the previous term, and operating profit soared by 1,531 million yen to 1,976
million yen.

8.9 *Note 1
6.3

2005

-5.0
2004

-4.4

2003

2001

operating profit decreased by 90 million yen to 733 million yen.

-2.2

2002

4. Real Estate Lease Segment
Consolidated sales were 1,984 million yen, a 5% decrease against the previous term, andR&D Expenditure
In R&D, Shibaura Mechatronics Group is active in promoting research activities that range frominvestigation of fundamental technologies to new product development, at the headquarters
R&D department, divisional R&D groups and development groups, and at the technology
departments of consolidated subsidiaries. Approximately 270 researchers undertake R&D in
Shibaura Mechatronics Group, and group-wide R&D expenditure in fiscal 2004 was 2,337

Note 1:The dotted bar in 2001 indicatesvalues excluding the increase inretirement benefit allowance.

09

Financial Review

million yen, including 406 million yen directed toward research into fundamental technologies.
The achievements and R&D expenditure of each business unit was as follows.

R&D Expenses(¥ Billions)
2.7
2.3

2.3

1. Fine Mechatronics Segment
In LCD manufacturing equipment, R&D funds were directed to development of the vertical
wet processor VIP series, which makes significant contributions to lower COO, and to a

1.4

1.4

high-speed outer lead bonder for large-sized TVs that realizes a high level of productivity. In
semiconductor manufacturing equipment, R&D funds supported the development of a newion chemical etching machine and porous low-k film ashing equipment. Total R&D
expenditure in this segment was 1,304 million yen.

2005

2004

2003

2002

2001

2. Electronic & Vacuum Systems Segment
In the laser equipment area, R&D funds were used for the development of a soft laser
marker for 300mm wafer, LD (Laser Diode) pumped high-power YAG laser processing

Capital Expenditures

equipment, and a solar cell module laser processing equipment. In the vacuum equipment(¥ Billions)area, R&D funds were used for DVD-use multilayer film forming and single-layer film

1.0

forming sputtering equipment, vacuum bonding equipment and photo catalyst sputtering

1.0

equipment. Total R&D expenditure in this segment was 409 million yen.
0.7
0.6
0.5

3. Vending Machines & Systems Segment
R&D funds were used to achieve minor changes in tobacco vending machine in thevending machine business and to develop new ticket vending machines. Total R&D

2004

2003

2002

2001

2005

expenditure in this segment was 216 million yen.

Financial Condition
Total assets at the end of the fiscal year under review increased by 1,166 million yen to

D/E Ratio

70,411 million yen. The main contributory factor to this higher figure was current assets,(%)

which increased by 2,087 million yen from the previous term to 50,961 million yen. This

114.8
99.0

was primarily due an increase in notes receivable and accounts receivable from higher
79.7

91.3

sales, and increased cash equivalents from liquidation of other debts. Although fixed assets
55.8

rose on the acquisition of tangible fixed assets and investment made to establish
subsidiaries, total fixed asserts decreased by 921 million yen to 19,450 million yen. Thislargely reflected effort of promote asset reduction, including the decision to reduce holdingsof real estate.

2005

2004

2003

2002

2001

Total liabilities at the end of the fiscal year were 3,534 million yen lower, at 47,620
million yen. Current liabilities eased by 1,683 million yen to 29,680 million yen, due toreductions in notes payable and accounts payable resulting from increased debt payment forpurchases in the past year, increased income tax payable from the record high net profit, andreduced income tax payable resulted from advance payment in accordance with sales posting.
Fixed liabilities increased by 1,851 million yen to 17,940 million yen, due to payments made forthe long-term loans or transfers to short-term loans.
Total shareholder equity at the end of the fiscal year under review increased by 4,700
million yen to 22,791 million yen. The major contributory factor was the achievement of record
net profit.

10

Financial Review

Cash Flow
Free Cash Flows(¥ Billions)

The Company's consolidated-base cash and cash equivalents (hereafter "funds") at the end of
the fiscal year increased by 2,949 million yen to 7,455 million yen. The situation in each

4.5

category of cash flow and the reasons why are as follow.

5.1
3.7

1. Cash flow from operating activities
Funds from operating activities in the fiscal year under review increased by 4,348 million
yen, against an increase of 2,755 million yen in the previous fiscal year. The primary reason

-3.0
-4.2
2004

2003

2002

2001

payment for purchase liabilities and increased notes and accounts receivable as a result of2005

for this increase was that, although there were decreases in funds resulting from increased
increased sales, record high income before income taxes and minority interest, earlycollection of notes and accounts receivable, and inventory reduction through the promotionof management efficiency all supported an increase of funds.

2. Cash flow from investing activities
The increase in funds from investing activities was 704 million yen, against an increase of
915 million yen in the previous fiscal year. This increase was achieved despite theacquisition of tangible fixed assets and investments or additional investment in subsidiaries,
and was primarily due to the sale of unused land to promote our policy of asset reduction.

3. Cash flow from financing activities
The decrease in funds from financing activities was 2,103 million yen, against a decrease of
2,506 million yen in previous fiscal year. The underlying reasons were payments made forlong-term and short-term loans and payment of dividends.

Five-Year Summary
Consolidated

Millions of yen

Thousands of
U.S. dollars

Years ended March 31

Years ended March 31

2005

2004

2003

2002

2001

2005

Net sales
Cost of sales
Operating income (loss)
Income (loss) before income taxes
Net income (loss)¥ 88,513
67,492
8,824
8,260
5,134

¥ 67,521
54,308
3,168
1,958
979

¥ 54,761
45,428(1,502)(2,172)(1,416)¥ 54,917
44,519(1,536)(1,810)(1,118)¥ 71,117
55,175
3,262(1,197)(141)$ 824,217
628,480
82,16376,91147,805

Depreciation and amortization
R&D expenses

1,255
2,337

1,756
1,415

2,080
1,409

2,144
2,313

2,065
2,685

11,686
21,76418.88¥ (28.40)¥ (22.46)

Net income (loss) per share¥ 101.92¥¥(2.83)$

0.95

Total assets
Total shareholders' equity

70,411
22,791

69,24518,091

63,615
17,066

67,647
18,51475,394
19,704

655,661
212,229

Number of employees

1,441

1,486

1,586

1,719

1,756

1,441

11

As the corporation which is relied by the society

As the corporation which is relied by the society
We understand corporate governance to mean theenvironmental aspects is essential to secure and evenfunction of overseeing business administration in suchenhance corporate value.

a way as to increase medium- and long-term enterprise

Our "Code of Conduct" provides the foundation forshareholders,compliance with laws, social norms, ethics, and the likecustomers, employees and society. In responding toand risk management by clearly stipulating standards tostakeholder expectations, we promote CSR activities, inbe observed by all company officers and employees, thethe belief that proactive participation that goes beyond

primary players in achieving increased enterprise value.

value

for

all

of

our

stakeholders:the economic aspect to embrace the social andCorporate Governance Structureteam,

2. We have established a Management Audit Division toconsisting of 12 directors of the board, and the auditing

monitor the execution of business and promoteteam, consisting of four corporate auditors (two frominternal controls. This division reports directly to theoutside the Company), assure full transparency in their

President and is charged with audit managerial

decision-making and auditing functions, respectively.

propriety and efficiency, mainly on the basis ofBoth teams constantly consider means to improvebusiness performance. Audits (especially complianceexisting systems.

audits) by corporate auditors and audits of accounts

Shibaura

The

Mechatronics'

statusoftopmanagement

implementationofmeasuresby certified public accountants combine with onanother to provide an auditing function for legal

related to corporate governance is as follows:

issues. We have also built a system in which each
1. We have two outside corporate auditors. Outside
directors

andoutsidecorporate

auditors

aredivision

performs

voluntary

auditsunder

supervision of the Management Audit Division.

supported by the General Affairs Division. We havenot set up non-mandatory committees (such as anominating, compensation or audit committee).

Shareholders’ Meeting
Appoint / Dismiss
Board of Directors / Directors

Appoint / Dismiss
Statutory Audit

Board of Auditors / Auditors

CEO

Each Operating Division / Internal Audit

12

Management Audit

Management Audit Division

Accounting AuditortheAs the corporation which is relied by the society

CSR Promotion Structure
Starting from the base of legal compliance, Shibaura hassignificanceconsistently adopted a proactive approach to CSR-

organization, the "CSR Committee," to promote a

relatedsystematic approach to CSR.

concerns

andactivities,

particularly

in

of

CSR

by

establishingadedicated

Guided by policies defined by the CSR Committee,

connection with efforts to enhance customer andenvironmental

our Risk Compliance Committee, Social and ES (Employee

protection and to contribute to society. Most recently, in

Satisfaction) Activity Committee and Earth Environment

April 2005, we reaffirmed our recognition of theConference are developing their own initiatives.

employeesatisfaction,

promoteReportManagement Audit Division

CEO

Audit

Board of Directors
CSR Committee

Risk Compliance Committee

ReportSocial & ES Activities Committee

Auditors

Conference on Global Environment

Risk Compliance Structure
Shibaura Mechatronics Group promotes risk management

A system has been put in place to assure an early

as an essential means for minimizing damage from sudden

and positive response if and when risk-related issues door unexpected events, in order to protect and sustain

arise. This includes a "Risk Consultation Hotline" tocorporate value. The Company fosters a corporate culture

facilitate early reporting of risk issues, to prevent any

that positions legal compliance as the basis of management

emerging risk growing to become a significant problem.

practices, that seeks to wins the trust of society, and that
promotes a positive approach to risk control.

CSR Committee

CEO

Emergency Response System

Risk Compliance Committee

CRO*1

Significant Crisis, Risk Response Organization

Supervise: General Affairs Division

Risk Management Committee

Risk Owner*2

General Crisis, Risk Response Organization

Risk Consultation Hotline

Person Responsible*1: CRO (Chief Risk-Compliance Management Officer)*2: Risk Owner (head of the department facing the risk issue)

13

Environmental Activities 2004 in Shibaura

Environmental Activities 2004 in Shibaura
Considering the Environment(Environment Basic Concept)

companies. Shibaura Mechatronics Group is making

For Shibaura Mechatronics Group, the environment is a

Bringing Environmental Concerns toBusiness Activities

concerted efforts to promote environmental conservation.

management concern where we share common values.
In promoting business as "The Provider of Infrastructure
for The Digital Age," and "e&E-Shibaura" we consider

Activities to promote reduced environmental burdens

the relationship between business activities and theare an integral part of moves for business expansion.

environment from three important perspectives.

Quantitative

tools

are

used

to

measurethe

Our ultimate objective is to minimize environmental

environmental inputs and outputs of business activities,

burdens and to work toward harmony with the environment

and analysis of the results points the way to dealing within our business activities, from product development tocauses and reducing environmental loads. For example,

manufacturing and sales. In this connection, we promote

this approach allowed us to cut the ratio of CO 2

measures to save energy, reduce emissions and optimize

emissions to value added to products from 6.46t-CO 2

management of chemicals. Our next concern is to develop

per billion yen of added value in fiscal 2003 to 5.10t-

and deliver manufacturing equipment that supports our

CO 2 per billion yen in 2004.

customers in their own environmental management that supports them in using less energy and resources inmanufacturing. We build reduced energy and materials

Manufacturing Environmentally
Conscious Products

consumption into our equipment, and this is proving
effective in optimizing utilization of resources. Our third

Promotion of environmentally conscious products (ECP)

concern is to produce equipment that imposes fewer

seeks to minimize environmental burdens generated

environmental loads and that also support manufacture ofthroughout the product life cycle. A company-wide

products that do the same. Equipment from Shibaura isenvironmental

used to manufacture environmentally-friendly products suchtargets for reduced loads and assesses key factors, suchas automobile exhaust gas scrubbers and solar batteries.

as electricity and materials consumption, at every stage

Since

2005,

the

Companyhassystematicallyloadassessment

process

promotesfrom product planning to development, design andenhanced promotion of environmental conservation in all

manufacture.

operations, manufacturing facilities and related domestic

superior ECP results are certified as Excellent ECP.

WithinECP,

products

thatachieve

Contributing to Products that Impose
Lower Environmental Burdens
Our microwave equipment contributes to reducing

CO2 emissions to value added ratio

Excellent ECP

environmental(t-CO2 / billion yen)burdensfromdiesel-powered

automobiles, though use in the drying system necessary
9.2

8
5.6 5.9

6.5 6.5
5.1

5Number of ECP
To sales ratio

for manufacturing exhaust gas treatment unit for diesel
engines. YAG laser equipment plays an important role20in the manufacture of solar batteries, in the patterningof thin film solar battery modules.

5

2005

2004

2004

2005

2003

2002

2001

1991

14

Board of Directors

Board of Directors

Standing, from left ;Masaji Mito, Ryoji Miura, Kunihiko Yokoyama, Tsunemasa Tokura, Noboru Tamura, Ryoso Kawabe, Mikio Haga,
Yasutomo Fujimori, Satoshi Shimoda, Nobuyuki Yamaura, Osamu Watanabe, Tadashi Matsumoto

Sitting, from left ;Michiro Ishii, Toshimichi Sanada, Shigeki Morita, Choichi Kimura

Corporate Auditors

Directors
President and Chief Executive Officer

Vice President

Tsunemasa Tokura

Shigeki Morita

Yasutomo Fujimori

Satoshi Shimoda

Noboru Tamura

Tadashi Matsumoto

Executive Vice President

Nobuyuki Yamaura

Ryoji Miura

Toshimichi Sanada

Kunihiko Yokoyama

Choichi Kimura

Osamu Watanabe
Masaji Mito

Senior Vice President

Ryoso Kawabe

Michiro Ishii
Mikio Haga

15

Investor Information

Investor Information
As of March 31, 2005

Date Established

October 12, 1939

Capital5,868 Million-Yen

Number of Employees

Consolidated : 1,441
Non-consolidated : 844

Common Stock

Authorized : 100,000,000 shares
Issued and outstanding : 50,033,312 shares

Number of Shareholders

5,579

Stock Listing

Tokyo Stock Exchange (Code:6590)

Transfer Agent for Common Stock

The Chuo Mitsui Trust and Banking Co., Ltd.
33-1 Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Independent Auditor

Ernst & Young ShinNihon

Headquarters

2-5-1, Kasama, Sakae-ku, Yokohama 247-8610, Japan
TEL:+81-45-897-2421 FAX:+81-45-897-2470
http://www.shibaura.co.jp/

Stock Price Range
2005

2004

2002

2001

High (yen)

1,081

985

604

710

1,330

Low (yen)

590

409

201

253

445

Major Shareholders

16

2003

Shares(thousands)(%)

Toshiba Corporation

18,977

37.9

Japan Trustee Service Bank, Ltd. (trust accounts)

3,972

7.9

The Master Trust Bank of Japan, Limited (trust accounts)

3,009

6.0

Trust and Custody Services Bank, Ltd. (securities investment trust account)

1,865

3.7