Annual Report 2000

HISTORY
1939

Founded to succeed part of motor business of

PROFILE
Shibaura Mechatronics Corporation was founded

former Shibaura Engineering Works Co., Ltd.

in 1939, when Shibaura Engineering Works Co.,

(now Toshiba Corporation)Ltd.(now Toshiba Corporation) split off its industrial

1942

Operations begin at Ofuna works

motor manufacturing operations.

1943

Operations begin at Obama works

1969

The Company is listed on the Tokyo Stockand the Internet, markets for semiconductor devices

Exchange (Second Section)and LCDs have recovered from recession, and the

The Company is listed on the Tokyo Stock

optical disc industry, especially DVDs, has been

1972

Exchange (First Section)
1991

Merger with Tokuda Seisakusho Co., Ltd.,taking over that company’s electronics andvacuum equipment business

1995

Research and development building in Ofuna
works completed

1996

ISO9001 certification obtained (Ofuna works)

1997

ISO14001 certification obtained

1998

In the age of widespread use of mobile equipment

growing rapidly. Under such circumstances, theCompany has evolved into a high-tech and global“provider of infrastructure for the digital age,” making semiconductor, LCD, and optical disc manufacturing equipment, as well as automated equipment,
laser systems, and vending machines.
We plan to target further growth as we aim to(Toshiba Mechatronics Co., Ltd. : now

become a “billion dollar company” in the 21st cen-

Sagamino operations)tury, with net sales of ¥100 billion for the Shibaura

Ofuna and Sagami works integrated

Group.

(Ofuna works renamed as Yokohama
operations)
Small motor production shifted to Shibaura
Nidec Corporation
Merger with Toshiba Mechatronics Co., Ltd.,

Contents

taking over that company’s mechatronics
Financial Highlights .......................................... 1

business
Corporate name changed to Shibaura
Mechatronics Corporation
1999

2000

ISO14001 certification obtained

Message from the President .............................. 2
Segment & Regional Information ..................... 5
Report of the Managing Board .......................... 5(Yokohama operations)

Financial Section ............................................... 8

Convertible bonds issued in Euromarket

Report of Independent Certified

ISO9001 certification obtained

Public Accountants ....................................... 20(Sagamino operations)

Organization Chart .......................................... 24
Board of Directors ........................................... 25
Corporate Data ................................................ 26

FINANCIAL HIGHLIGHTS

Thousands of U.S.
dollars

Millions of yen

2000

1999

2000

Years ended 31st MarchConsolidated
Net sales¥

75,935¥43,875$715,358

Operating income

2,735

501

25,765

Net income

-215

-111

-2,032

Total shareholders' equity

19,684

16,127

185,435

Total assets

83,09060,770782,767

Net income per share

¥

-4.65

¥

-2.80

$

-0.04

¥

52,562¥

41,548$495,175

Non-Consolidated
Net sales
Operating income

1,995

321

18,797

610

212

5,760

Total shareholders' equity

21,176

16,598

199,493

Total assets

66,691

59,830628,273

Net income

Net income per share

¥

13.18

¥

4.63

$

0.12

Note1: The U.S. dollar amounts in this report represent translation of Japanese yen for commence only at the rate of ¥ 106.15=U.S.$ 1.00,as of 31st March ,2000

Net Sales

Net Income

Total Assets(¥ billions)(¥ billions)(¥ billions)

Total Shareholders'Equity1.0(¥ billions)
20

80

800

0.8
16

60

600

0.6

12
40

400

0.4

200

8
20

0.2

0

0

96

97

98

4

0

99 2000

0

96

97

98

99 2000

96

97

98

99 2000

-0.2

96

97

98

99 2000

Years ended 31st March■ Consolidated■ Non consolidated

Note2: Amounts in fiscal 1996 and 1997 indicate the financial results of Shibaura Engineering Works Co., Ltd. before the merger with Toshiba Mechatronics Co., Ltd.

1

MESSAGE FROM THE PRESIDENT

Tadao Sumi
President and Chief Executive Officer

TO OUR SHAREHOLDERS

by collapse of the "bubble economy" and the shift of motor

Shibaura Mechatronics Corporation is a high-tech, global

production to China and Thailand, because of the yen's

company headquartered in Yokohama City, Japan. It makes

appreciation. Consequently, it was difficult to maintainand supplies manufacturing equipment for semiconductors,

employee job security.

LCDs, and optical discs, as well as automated machines,
devices, and vending machines.
The Company started operations as Shibaura Engineer-Now, three years later, we have successfully implemented a number of major business structural reforms, suchas the sale of the Company's DC motor business, shift ofing Works Co., Ltd., in 1939 when Toshiba Corporation

our small motor business to a newly established joint

split off part of its heavy electrical business, focusing on

venture company (Shibaura Nidec Corporation), the merger

motors. It celebrated its 60th anniversary in October 1999.

with Toshiba Mechatronics Co., Ltd., and the adoption of

In 1991, the Company merged with Tokuda Seisakusho

our new name. As a result, Shibaura Mechatronics Corpora-Co., Ltd., a manufacturer of vacuum pumps and equipment.

tion has been reborn as a major "provider of infrastructure

In 1998, we merged with Toshiba Mechatronics Co., Ltd.,for the digital age."and changed our name to Shibaura Mechatronics Corporation.

2

FISCAL 1999 IN REVIEWWhen I was appointed president in June 1997, theIn fiscal 1999, Shibaura Mechatronics reported record-highCompany faced a critical situation. Productivity of ourresults in three areas: consolidated net sales of ¥75.9 billion

domestic plants was extremely low due to recession caused(¥52.6 billion on non-consolidated basis), consolidated

operating income of ¥2.7 billion (¥2.0 billion on non-development of 11 items that we have nominated as com-consolidated basis), and consolidated ordinary income of

memorative products for the 60th anniversary. We will¥1.5 billion (¥1.2 billion on non-consolidated basis).

introduce those new products to the market in stages,

These achievements resulted from the market recovery
for semiconductor manufacturing equipment, our expanded

beginning in April 2000, and we anticipate that suchproducts will account for 38% of net sales in fiscal 2000.

share of markets in Taiwan and Korea for LCD manufacturing equipment, and increased demand for optical disc (CD

BECOMING A BILLION DOLLAR

and DVD) manufacturing equipment, boosted by the arrival

COMPANYof multimedia era.

In the age of consolidated accounting, the next challenge

The Company made a number of major achievements infor Shibaura Group is to become a "billion dollar company"

fiscal 1999. In April, we established Shibaura Mechatronics

in fiscal 2001. First, we aim to achieve net sales of ¥100

Taiwan Corporation, a wholly owned subsidiary, inbillion. Our customers are leading companies in their

Hsinchu, Taiwan, to expand sales and strengthen services inrespective fields, from domestic and overseas makers ofthat market. When the huge earthquake occurred in Taiwan

semiconductors and LCDs to producers of automatedin September 1999, customers appreciated the quick action

equipment and cigarette vending machines. For this reason,

taken by that subsidiary to provide support services.

we think that it is key to survive steadily through the 21st

In October 1999, the Company concluded a comprehensive technical collaboration agreement with Toshiba

century, when winners and losers will be distinguishedmore severely.

Corporation's Corporate Manufacturing Center. Making use

At the beginning of fiscal 2000, we embarked on a newof Toshiba's high potential in manufacturing technology, themedium-term management plan. The essence of the plan isCompany will strengthen its ability to develop new prod-

to target profitability not only through sheer size but also

ucts and provide necessary services to customers in Japanby maximizing profit in every plant, operation, division,and overseas.

and business unit, as well as at all affiliated companies.

Also in October 1999, the Company launched a commemorative campaign for its 60th anniversary to reinforce

SM2001 CAMPAIGN

its brand name. In these ways, we continue to raise our

In order to ensure the success of the medium-term manage-

name recognition at home and abroad. We are accelerating

ment plan, we will promote a program called SM2001

3

Campaign throughout the Shibaura Group over a two-year

human-focused society and cultivate a corporate culture

period until the end of fiscal 2001.The goal of the campaign

accordingly.

is to become a highly profitable corporation with consolidated net sales of ¥100 billion and ROE of 10% in fiscal
2001. Instead of former QC circle activities, which werebased on voluntary bottom-up activities within workgroups, the SM2001 Campaign will utilize statisticalmethods, including Six Sigma methodology, as well as
computerized technologies. In each work place, we will
promote the synergistic benefits of both bottom-up and topdown activities, which we believe will lead directly to an

Corporate Identity

improved corporate performance in the short term.
The best way to become a "billion dollar company" is to

GLOBAL CUSTOMER BASE

express our human culture in order to attract customers,

The widespread use of mobile equipment and the Internet

both in Japan and overseas, who visit us for businesshas quickly made our market global in nature. Due to our

discussions and on-site inspections. We believe that such a

success in Taiwan and Korea, overseas sales reached 47%

corporate culture will encourage customers to remain closeof net sales in fiscal 1999. In February 2000, the Company

to us for a long time.

issued convertible bonds in the Euromarket. If the bonds

We ask our shareholders and business partners for their

are converted to common stock, it is expected that almost

continuing support and understanding for our future en-

20% of the Company's shares will be held by non-Japanesedeavors.

investors. For this reason, we intend to actively deploy
investor relations activities targeting both Japanese andJune 2000

foreign shareholders.
One of the Company's corporate philosophies is torespect humanity. As intensifying competition makes
survival tougher than ever, it is important to foster a

4

TADAO SUMI
President and Chief Executive Officer

SEGMENT & REGIONAL INFORMATION■ Consolidated Sales by Segment(¥ Billions)■ Consolidated Overseas Sales byGeograhital Region

Years ended 31st March

2000(¥ Billions)

75.9

1999

52.2

0

2000

27.5

1999

43.9

1998

Years ended 31st March

40
Electronic equipment

Automation equipment

Others

10.5

1998

80

Electric power components

9.0

0

10
Northeastern Asia

20

30

OthersNote: Major countries or regions included in each geographical area
Northeastern Asia — Korea, Taiwan
Others — U.S.A., the Netherlands

REPORT OF THE MANAGING BOARD

Fine Mechatronics Division

Major products of the Fine Mechatronics Division include wet process equipment, such as LCD
cleaning and stripping equipment. As a result of the Company's reorganization in 1999, cell
assemblers, outer lead bonders, and other equipment were added to our line-up. Under the new
system, we are now a full-scale producer of flat panel display manufacturing equipment.

Vice President

Choichi Kimura

In fiscal 1999, the Division reported record-high sales of ¥22.3 billion. This was due tosubstantial capital expenditures by LCD panel manufacturers in Taiwan, as well as to warm
acceptance of our technological capabilities, mainly in wet cleaning.
The flat panel display market is expected to grow by 20% to 30% per year due to active
demand for notebook PC and LCD monitors. However, the outlook for the latter half of fiscal 2000
is unclear, with concerns about an excess supply of equipment. Nevertheless, fully aware of therapid shift toward large-scale glass panel sizes, we intend to maintain our market share bydeveloping products ahead of our competitors. Moreover, we will seek to increase sales byentering the semiconductor cleaning business.

Wet spin cleaning
Equipment
5

Semiconductor Manufacturing
Manufacturing
Equipment Division

The Semiconductor Manufacturing Equipment Division was established in fiscal 1999 as result of
the Company's reorganization. The Division manufactures and sells dry etching and ashingequipment for wafer processes, as well as wire bonders, die bonders, and automated molding
machines for semiconductor assembly.

Vice President

Michiro Ishii

Sales of the Division in fiscal 1999 reached in ¥9.9 billion owing to recovery of the semiconductor manufacturing equipment industry, which began in the latter part of 1999 after the market
reached bottom in 1998.
Fiscal 2000 and beyond will see further rapid progress in semiconductor device speed andminiaturization. We also expect to see more and more factories undertake full-scale production of
12-inch wafers. Under these circumstances, the Division intends to expand its business bymounting state-of-the-art ashing/etching chambers for low-dielectric-constant materials onto thehigh-speed ALLEGRO 12-inch wafer platform. We will also incorporate our new CMP slurry forpolishing copper devices. In addition, we will expand our line of flip-chip bonders for CSP, COP,and other new types of packaging, which is expected to generate growth in the future.

High-speed platform“ALLEGRO”

Electronic & Vacuum Equipment Division

The Electronic & Vacuum Division manufactures and sells disc-sputtering equipment for CDs andDVDs, sputtering equipment used in electromagnetic shields for cellular phones and PCs, andSenior Vice President

cartesian robots for industrial use.

Toshimichi Sanada

Sales of the above products in fiscal 1999 were ¥5.4 billion, up 35% compared with theprevious fiscal year.
The market for disc-sputtering equipment is growing rapidly because of active CD-R/RW
production, particularly in Taiwan. DVDs have also become very popular thanks to the success of
SCE’S (Sony Computer Entertainment Co.,Ltd.) “Play Station II”. In this period of market growth,
the Division intends to expand market share by promoting its reputation as a top domestic
manufacturer of sputtering equipment, especially its OCTAVA sputtering equipment for CD/DVDRW/RAM and Stella sputtering equipment for CD/DVD-ROM/R, on the world stage.
Utilizing a wealth of vacuum technology expertise accumulated over many years, we expect toexpand our sputtering equipment businesses to the field of such as printed wire boards, automobile
mirrors, and light reflecting boards.
6

Sputtering system for CD-RW,
DVD-RAM “OCTAVA-II”

Automation & Laser Systems Division

The Automation & Laser Systems Division was formed as a new business upon the Company's
reorganization in 1999. It handles the Company's operations in industrial-use automation
systems and YAG laser systems.
In fiscal 1999, the Division generated sales of ¥8.2 billion despite overall sluggish capital

Vice President

Iwao Komatsu

expenditures in Japan. This sales was attributable to the healthy performance of mobile
products, especially cellular phones, and to increased sales of automated manufacturing
equipment for rechargeable batteries, laser welders, and semiconductor markers.
In the future, the Division will develop and manufacture automated systems, namely
rechargeable battery manufacturing equipment, paper cup forming machines, and paper
picking equipment. In laser processing equipment, we will focus on new marking equipment,
new pulse-form controlled welders, high-output LD (laser diode) pumped YAG lasers, anddrillers for precision printed boards.
Paper cup forming machine

Vending Machine & Systems Division

The Vending Machine & Systems Division manufactures and sells cigarette and ticket vending
machines.
In fiscal 1998, Division sales grew as cigarette companies increased installation of vending

Excutive Vice President

Kunihiko Wada

machines. In fiscal 1999, the number of new machines declined as new installations slowed. As aresult, sales of the Division fell to ¥4.4 billion.
The market remains depressed, reflecting various environmental trends, including tougher
smoking restrictions and slowing population growth. To expand our business in existing products
and enter the multimedia market, we will accelerate development of card-operated vending
machines, which we have consistently brought to market ahead of our competitors. We will also
develop vending machines that can handle electronic money, as well as information terminals
utilizing Internet technology.
We intend to raise market share and enlarge the scope of our business by promoting snack andgeneral-purpose vending machines, as well as beverage vending machines, for which demand is
expected to rise in the future. Hereafter, we will develop information equipment using the mostadvanced IT, EC, and network technologies as the core business of the Division.

Ticket vending
machine7

FINANCIAL SECTION

Shibaura Mechatronics Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS
31st March,

1998

1999

31st March,

2000

2000
Thousands ofMillions of yen

U.S. dollars

ASSETS(Note 1)

Current assets:
Cash and bank deposits¥ 2,681¥ 2,855¥ 5,745$ 54,130

Marketable securities (Notes 3 and 5)

424

343

479

4,509

Notes and accounts receivable, trade17,402

19,40327,821

262,096

Allowance for doubtful accounts

(144)

(134)

(117)

(1,100)Inventories (Note 4)

6,961

11,12318,192

171,378

Other current assets

938

570

1,705

16,052

Total current assets

28,262

34,16053,825507,065

583

454

611

5,753

Buildings

23,29627,52928,801

271,329

Machinery and equipment

21,072

10,26912,456

117,346

Construction in progress

1,902

148

650

6,125

46,85338,40042,518400,553(20,547)(13,571)(16,467)(155,129)

26,30624,82926,051

245,424

762

832

800

7,542

Other assets

1,103

949

2,414

22,737

Allowance for doubtful accounts

(213)

(0)

(0)

(1)

1,652

1,781

3,214

30,278¥56,220¥60,770¥83,090$782,767

Property, plant and equipment (Note 5):
Land

Total
Accumulated depreciation
Net property, plant and equipment

Investments and other assets:
Investment securities (Notes 3 and 5)

Total investments and other assets

Total assets

8

31st March,

31st March,

1998

1999

2000

2000
Thousands ofMillions of yen

U.S. dollars

LIABILITIES AND SHAREHOLDERS’ EQUITY(Note 1)

Current liabilities:
Short-term bank loans (Note 5)¥ 11,913¥ 12,734¥ 17,275$ 162,741

Notes and accounts payable

10,933

10,386

24,634232,074

Accrued expenses

3,106

2,791

4,416

41,605

Accrued income taxes (Note 7)

778

65

847

7,977

Accrued consumption tax

279

0

100

943

Other current liabilities

1,400

1,613

1,457

13,724

Total current liabilities

28,40927,58948,729459,064

Bonds (Note 5)

5,000

5,000

2,990

28,168Long-term debt (Note 5)

4,164

6,635

5,848

55,092

Employees’ retirement benefits (Note 8)

2,910

1,988

2,415

22,748

Directors’ retirement benefits (Note 8)

204

229

149

1,407

Other long-term liabilities

3,193

3,202

3,275

30,853

Total long-term liabilities

15,471

17,054

14,677138,268

49,863,822 shares at 31st March, 2000

3,155

3,776

5,783

54,479Additional paid-in capital (Note 9)

4,776

7,759

9,763

91,971Retained earnings (Notes 9 and 14)

Long-term liabilities:

Contingent liabilities (Note 11)
Shareholders’ equity:
Common stock, ¥50 par value:
Authorized:100,000,000 shares
Issued:33,455,333 shares at 31st March, 1998,
45,865,834 shares at 31st March, 1999,

4,409

4,592

4,138

38,989Less treasury stock, at cost

(0)

(0)

(0)

(4)

Total shareholders’ equity

12,34016,127

19,684

185,435¥ 56,220¥ 60,770

83,090$ 782,767

Total liabilities and shareholders’ equity¥

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

9

Shibaura Mechatronics Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONSYear ended
Years ended 31st March,

1998

1999

31st March,

2000

2000
Thousands ofMillions of yen

U.S. dollars(Note 1)

Net sales¥52,192¥43,875¥ 75,935$715,358

Cost of sales

40,58533,86859,853563,848

11,607

10,007

16,082

151,510

11,112

9,506

13,347125,745

495

501

2,735

25,765Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income

77

73

25

241

(552)

(438)

(478)

(4,504)Gain on transfer of business

—

387

—

—

Equlity in losses of affiliates

—

(314)

—

—

Interest expense

Gain on sale of land

1,783

—

932

8,784

Exchange loss on foreign currency transactions

(656)

—

—

—

—

—

(2,730)(25,724)

Special retirement payments
Special amortization of past service coats ofdefined benefit pension plan
Other net
Income before income taxes

—

—

(320)

(3,015)

(165)

(164)

(1,132)(10,672)

982

45

(968)

(9,125)

Income taxes (Note 7):—

Current

700

133

847

7,984

Deferred

17

23

(281)

(2,648)

Minority interests in loss of consolidated sudsidiaries

(67)

—

(1,319)(12,429)¥332¥(111)¥(215)$(2,032)

Net income (loss)

Per share of common stockYen

Net income (loss)¥9.95¥(2.80)¥(4.65)$(0.04)

Cash dividends applicable to the period

3.00

3.00

5.00

0.04

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

10

U.S. dollars

Shibaura Mechatronics Corporation and SubsidiariesC O N S O L I D AT E D S TAT E M E N TS O F S H A R E H O L D E R S ’ E QU I T Y
Number of sharesof common stock

Common stock

Additional

Retainedpaid-in capitalearnings

Millions of yen

Balance as of 31st March, 1997

33,455,333¥ 3,155¥ 4,776¥ 4,474

—

—

—

332

—

—

—

(284)

Cash dividends paid

—

—

—

(100)

Bonuses to directors and statutory auditors

—

—

—

(13)

33,455,333

3,155

4,776

4,409

12,410,501

621

2,983

394

—

—

—

(111)

—

—

—

0

—

—

—

(100)

45,865,834

3,776

7,759

4,592

Net income
Decrease in earnings arising from inclusionof consolidated subsidiaries

Balance as of 31st March, 1998
Increase due to merger
Net loss
Increase in earnings arising from inclusion ofaffiliated companies accounted for by the equity method
Cash dividends paid
Balance as of 31st March, 1999
Cumulative effect on a change of accounting principles

—

—

—

338

Net loss

—

—

—

(215)

—

—

—

(440)

3,997,988

2,007

2,004

—

49,863,822¥5,783¥9,763¥4,138Decrease in earnings arising from inclusionof consolidated subsidiaries
Cash dividends paid
Conversion of convertible bonds
Balance as of 31st March, 2000

(137)

Thousands of U.S. dollars

Balance as of 31st March, 1999

$35,572$73,101$43,260

Cumulative effect on a change of accounting principles

—

—

3,194

Net loss——(2,032)

Decrease in earnings arising from inclusion of consolidated subsidiaries——(4,137)

Cash dividends paid——

(1,296)

18,907

18,870—$54,479$91,971$38,989

Conversion of convertible bonds
Balance as of 31st March, 2000

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

11

Shibaura Mechatronics Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended
31st March,

Years ended 31st March,

1998

1999

2000

2000
Thousands ofMillions of yen

U.S. dollars(Note 1)OPERATING ACTIVITIES:
Income before income taxes
Adjustments to reconcile net income (loss) to net cash (used in)provided by operating activities:
Depreciation and amortization
Provision for (reversal of) doubtful accounts
Provision for or(reversal of) employees’
retirement allowancesInterest and dividend income
Interest expense
Bond issuance expenses
Gain on sale of property and equipment
Loss on disposal of property and equipment
Gain on sale of marketable and investment securities
Loss (gain) on revaluation of marketable and investment securities
Translation losses (gains)
Equity in earnings of unconsolidated
subsidiaries and affiliates
Special retirement payments
Bonuses to directors and statutory auditors
Changes in assets and liabilities;(Increase)decrease in notes and accounts receivable
Increase in inventories(Decrease) increase in notes and accounts payable
Other
SubtotalInterest and dividends received
Interest payments
Payments of special retirement
Income tax payments
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES

¥ 982

¥ 45

¥ (968)$ (9,125)

2,330
14

2,502
(278)

3,302
(56)

31,109
(530)

(48)
(77)
552
—
(1,783)
153
—
33
656

(143)
(73)
438
—
—
82
(49)
42
(5)

(1,049)
(25)
478
202
(923)
38
(3)
(37)
—

(9,880)
(241)
4,504
1,903
(8,694)
362
(30)
(356)
—

—
—
(13)

(432)
—
—

—
2,730
—

—
25,724
—

(477)
(617)
(1,271)
(879)
(445)
76
(407)
—
99

4,424
(1,638)(3,618)
(434)
862
72
(438)
—
(785)

(2,367)(5,425)
11,237
(734)
6,400
25
(436)
(2,730)(73)(22,296)(51,111)
105,859(6,910)60,288239(4,110)(25,724)
(687)

(677)

(289)

3,186

30,006———73(2,402)
2,525
622
—
40
—
112

—
—
(496)
695
(3,053)
—
—
(927)
10
4,244
249

(654)
477
(2,098)2,001(1,287)
2,490
—
(307)
85
—
98

(6,162)
4,494(19,771)
18,853(12,126)
23,462—(2,900)
802
—
931

970

722

805

7,583

Increase (decrease) in short-term loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from issuance of stock to minority shareholders
Cash dividends paid
OthersNET CASH USED IN FINANCING ACTIVITIES
Effect of exchange rate changes on cash and bank deposits
Net increase (decrease) in cash

826
17
(927)
—
—
—
(100)
—
(184)
—
109

(2,832)3,000(1,017)
—
—
—
(100)
—
(949)
—
(516)

(4,861)
805
(576)
6,797
(5,000)
600
(137)
(0)
(2,372)
12
1,631(45,799)
7,589(5,431)64,040(47,103)
5,652(1,296)(0)(22,348)
122
15,363

Cash and bank deposits at beginning of the year
Increase (decrease) arising from exclusion/inclusion ofsubsidiaries from/in consolidation
Cash arising from merger
Cash and bank deposits at end of the year

2,389

2,681

2,855

26,902183—¥ 2,681(182)872¥ 2,855

1,259—¥ 5,745

11,865—$ 54,130

INVESTMENT ACTIVITIES:
Pyments for deposits
Proceeds of time deposits
Purchases of marketable securities
Proceeds from sale of marketable securities
Purchases of property and equipment
Proceeds from sale of property, plant and equipment
Increase in net assets due to change in scope of consolidation
Purchases of marketable securities
Proceeds from sale of investment securities
Proceeds from disposition of businesses
Decrease in other assets
NET CASH PROVIDED BYINVESTING ACTIVITIESFINANCING ACTIVITIES:The accompanying notes are an integral part of the consolidated financial statements.

12

Shibaura Mechatronics Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
31st March, 2000

For the years ended 31st March, 1998, 1999 and 2000, seven, six andfive investments in unconsolidated subsidiaries, respectively, are statedat cost because they have no material effect on the consolidated financial
statements.

1. Basis of Presenting Financial Statements
Shibaura Mechatronics Corporation (the “Company”) and its consolidated
subsidiaries (collectively the “Companies”) maintain their accounting
records and prepare their financial statements in accordance with accounting principles and practices generally accepted in Japan. The accompanying consolidated financial statements have been prepared from the financial
statements filed with the Ministry of Finance as required by the Securities
and Exchange Law of Japan. Accordingly, the accompanying financial
statements are not intended to present the consolidated financial positions,
results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions otherthan Japan. For the purposes of this document, certain reclassifications
have been made to present the accompanying consolidated financial statements in a format which is familiar to readers outside Japan.
Effective the year ended 31st March, 2000, under revised disclosure requirements, consolidated statements of cash flows have been adopted as acomponent of the basic financial statements. The Company has madecertain reclassifications to the consolidated statements of cash flows for theyears ended 31st March, 1998 and 1999 to conform these to the 2000 presentation.
The accompanying consolidated financial statements are stated in yen, thecurrency of the country in which the Company is incorporated and operates.
The translation of yen amounts into U.S. dollar amounts has been included
solely for the convenience of readers outside Japan. The translation has
been made at the rate of ¥106.15 = U.S.$1.00, the approximate rate ofexchange on 31st March, 2000. This translation should not be construed asa representation that yen could be converted into U.S. dollars at the above or
any other rate.

(c) Elimination of Intercompany Investments and Relevant Shareholders’EquityThe Company’s investment in each consolidated subsidiary and theCompany’s interest in the consolidated subsidiaries have been eliminated asof the date of each acquisition.
(d) Elimination of Unrealized Profits or Losses
a. Unrealized profits or losses resulting from intercompany transactions
relating to assets remaining within the Companies have been eliminated.
b. In connection with the elimination of unrealized profits or losses relating
to “Property, plant and equipment” and “Intangible assets”, the related
depreciation and amortization have been adjusted accordingly.
(e)Translation of Items in the Financial Statements of Overseas Subsidiaries
and Affiliates
Items in the financial statements of overseas subsidiaries and affiliates
are translated into yen at the exchange rate in effect at the balance-sheet
dates of such subsidiaries, except for the components of shareholders’equity, which are translated at their historical rates. The resulting foreign
currency translation adjustment is included in other assets.

(f)

Cash and Cash Equivalents
The Company and its subsidiaries substantially consider all highly liquid
investments with a maturity of three months or less from the purchasedate, are to be cash equivalents.

(g)

Inventories
Inventories of the Company and its consolidated subsidiaries are statedat cost determined principally by the following methods:
Finished goods, raw materials
and supplies– – Primarily by the moving average method

2. Summary of Significant Accounting Policies(a) Scope of Consolidation
The accompanying consolidated financial statements include the accounts of Shibaura Mechatronics Corporation and two subsidiaries forthe year ended 31st March, 1998, one subsidiary for the year ended 31st
March, 1999 and four subsidiaries for the year ended 31st March, 2000.
Effective the year ended 31st March, 2000, the scope of consolidation
has been changed from including subsidiaries whose voting interests are
owned 50% or more by the parent, to an expansion of the scope to a
include subsidiaries whose voting interests are owned more than 40%
but less than 50% by the parent, whose making decisions concerning its
operations are significantly affected by the parent through financial or
technical support, personnel, transactions, and so forth. For the years
ended 31st March, 1998, 1999 and 2000, seven, six and five subsidiaries,
respectively, have been excluded from the scope of consolidation. The
exclusion of these subsidiaries is not material to the consolidated financial statements.
(b) Application of the Equity Method of Accounting
The accounts of Shibaura Nidec Corporation were initially included in
the consolidated financial statements for the year ended 31st March,
1999 by the equity method of accounting. However, Shibaura Nidec
Corporation was consolidated effective the year ended 31st March, 2000
as a result of a change in the scope of consolidation adopted by theCompany.

Partially finished goods– – Primarily by individual cost method
Work in process– – Primarily by individual cost method(h)Property, Plant and Equipment
Depreciation of property, plant and equipment is generally computed by
the declining-balance method based on the estimated useful lives of therespective assets as stipulated by the Corporation Income Tax Law ofJapan and the related regulations. The straight-line method is adopted
for a certain building acquired during the year ended 31st March, 1995,
and to all buildings acquired since 1st April, 1998.

(i)

Severance Benefits and Pension Plans
The Company’s employees are generally covered by an employee retirement allowances plan, which upon termination of employment provides for a lump-sum payment determined by reference to the current
rate of pay, length of service and conditions under which the termination
occurs. Accrued severance benefits are stated at 50 per cent. of theamount which would be required to be paid if all employees covered by
the plan voluntarily terminated their employment as of the balance sheetdate.
Two of the consolidated subsidiaries state their accrued severance benefits at the full amount which would be required to be paid if all employ13

ees covered by the plan voluntarily terminated their employment at thedate of the balance sheet.
The employee pension plan, which is a funded non-contributory plan,
was instituted to replace all the benefits under the retirement allowances
plan with respect to employees who retire at the mandatory retirementage. The Company’s employees who retire before the mandatory retirement age are also eligible to receive a pension from the pension planin addition to the benefits under the retirement allowances plan.
In addition, the Company provides for retirement benefits to directors
and statutory auditors based on the Company’s internal rules at theamount which would be required to be paid if all directors and statutory
auditors retired at the balance sheet date.
(j)Liability for Periodic Repairs
A certain building acquired in the year ended 31st March, 1995 requires
periodic repairs. An accrual for the related repair expenses is recorded
based on the current portion of the total expenses estimated for such
repairs.

31st March,

1998

31st March,

1999

2000

Marketable securities:
Cost (carrying value)

¥286

¥343

¥381

$3,590Aggregate market value
Unrealized gain

403
¥117

393
¥ 50

620
¥239

5,847
$2,257

Cost (carrying value)

¥ 25

¥ 23

¥ 23

$ 221

Aggregate market value

46

49

50

480

¥ 21

¥ 26

¥ 27

$ 259

Investment securities:

Unrealized gain

4. Inventories
Inventories at 31st March, 1998, 1999 and 2000 are summarized as follows:
31st March,

1998

31st March,

1999

2000

(l)

LeasesFinance leases other than those which are deemed to transfer the ownership of the leased assets to the lessee are not capitalized, but are accounted for by a method similar to that applicable to operating leases.
Research and Development Expenses
Research and development expenses are charged to income when incurred.

(m) Per Share Information
Net income (loss) per share of common stock is based on the weighted
average number of shares of common stock outstanding during eachperiod. Cash dividends per share shown for each period in the consolidated statements of operations represent dividends applicable to therespective period.
(n)Income Taxes
Deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax-based reporting of theassets and liabilities and are measured using the enacted tax rates andlaws which will be in effect when the differences are expected to reverse.
Effective 1st April, 1999, in accordance with a change in accounting
principles, the method of accounting for income taxes has been changed
to adopting tax-effect accounting whereas tax-effect accounting wasapplied only to limited temporary differences in previous years. The
effect of this change was to increase deferred tax assets by ¥445 million(current assets by ¥319 million and other assets by ¥126 million), toincrease net income by ¥302 million and to increase consolidated retained earnings by ¥640 million for the year ended 31st March, 2000.

3. Marketable and Investment Securities
A comparison of the aggregate carrying and market values of marketable
and investment securities at 31st March, 1998, 1999 and 2000 is as follows:

14

Finished products

2000(Thousands of
U.S. dollars)(Millions of yen)

(k)

2000
(Thousands of
U.S. dollars)(Millions of yen)

¥3,901¥ 5,820¥ 8,185

Raw materials

274

128

219

$ 77,112
2,061

Work in process

2,786

5,175

9,788

92,205

Total¥6,961¥11,123¥18,192$171,378

5. Short-Term Bank Loans and Other Long-Term Debt
The interest rates of the Companies for annual short-term bank loans at 31st
March, 1998, 1999 and 2000 principally ranged from 0.85 per cent to 1.63
per cent., from 0.62 per cent. to 1.15 per cent. and from 0.57 per cent. to 1.13
per cent., respectively.
A summary of bonds and long-term debt at 31st March, 1998,1999 and 2000
is as follows:
31st March,

1998

31st March,

1999

2000

2000
(Thousands of
U.S. dollars)(Millions of yen)Unsecured:Non-interest bearing convertible bonds due March 2004–

¥ 2,990$ 28,168

5,000

5,000

–

–

5,079

5,500

5,800

54,640

90

37

51

482

1.31 per cent. to 3.19 per cent.
loans payable from banksdue2000 – 2003

–

1,950

2,600

24,494Loans payable from Pension
Welfare Service Public
Corporation due
2000 – 2034

4

2

1

15

10,173(1,009)12,489(854)

11,442(2,604)

107,799(24,539)¥ 9,164¥ 11,635¥ 8,838$ 83,260

2.8 per cent. straight bonds due
October 2000
0.33 per cent. to 5.10 per cent.
loans payable from banks
and insurance companies
due 2000 – 2003
Loans payable from Pension
Welfare Service Public
Corporation due
2000 – 2034

¥

–

¥

Secured:

Total
Current portionLong-term debt less current portion

Loans payable from the Pension Welfare Service Public Corporation are forhousing loans to the Company’s employees and the same amount is stated asa portion of other assets (loans receivable from employees). The Company
pays the interest on such loans to the lender and collects the same amountfrom the employees as the borrowers.
On 7th February, 2000, the Company issued Euro yen 7,000 million($65,944 thousand) non-interest bearing convertible bonds due March 2004
without security. The convertible bonds are convertible into shares of common stock of the Company at ¥1,003.00 per share, subject to certain adjustments, during the period from 21st February, 2000 to 24th March, 2004.
On 18th February, 2000, the Company entered into a debt assumption
agreement with the Sakura Bank regarding its 2.8 per cent. straight bonds
due October 2000 (the “Bonds”), under which the Sakura Bank assumed theobligation to redeem the Bonds from the bondholders in exchange for receiving the amount necessary for the redemption of the Bonds from theCompany. The Bonds were eliminated from the Company’s books of account as of 31st March, 2000; however, the Company still has a contingent
liability to the bondholders until the bonds have been fully redeemed.
At 31st March, 2000 the following assets were pledged as collateral for
certain of the above loans:
31st March, 2000

Marketable and investment securities
Property, plant and equipment pledged as collateral for industrial factory foundation, at net bookvalue:Land
Buildings
Machinery and equipment(Millions of yen)(Thousands of U.S.
dollars)¥ 242$ 2,281

452,303
6¥2,596426
21,69654$24,457

The aggregate annual maturities of long-term debt subsequent to 31st March,
2000 are summarized as follows:

7. Income Taxes
Income taxes applicable to the Company and its domestic subsidiaries comprised corporation tax, inhabitants’ taxes and enterprise tax which, in theaggregate, resulted in statutory tax rates of approximately 48 per cent., 46
per cent. and 42 per cent. for 1998, 1999 and 2000, respectively. Income
taxes of the foreign subsidiaries are based generally on the tax rates applicable in their countries of incorporation. The effective tax rates reflected in
the accompanying consolidated statements of operations differ from thestatutory tax rates primarily due to the effect of timing differences in therecognition of certain income and expenses such as employees’ bonuses,
employees’ retirement benefits, periodic repair expenses, etc. for tax andfinancial reporting purposes and the effect of permanent nondeductible
expenses.

8. Pension Plan
On 1st October, 1999, the Company’s noncontributory defined benefits
pension plan has been integrated into one plan from the two plans of theformer Shibaura Engineering Works Co., Ltd. (“SEW”) and the former
Toshiba Mechatronics Corporation (“TM”) who merged during the year
ended 31st March, 1999. As of 31st March, 2000, the financial information
for this pension fund was not available. Pension assets at 31st March, 1998
and 1999 were ¥2,111 million and ¥2,409 million (¥1,862 million for SEW at
31st March, 1999 and ¥547 million for TM at 31st December, 1998), respectively. Prior service costs for SEW and TM were being amortized over
35 years and 8 months, and 13 years and 6 months, respectively, for the years
ended 31st March, 1998 and 1999.

9. Legal Reserve and Additional Paid-In Capital
The Commercial Code of Japan provides that an amount equivalent to atleast 10% of all cash appropriations of retained earnings, and exactly 10% ofinterim cash dividends, must be appropriated to the legal reserve until suchreserve equals 25% of the stated amount of common stock.
The Code also provides that neither additional paid-in capital nor the legal
reserve is available for dividends, but both may be used to eliminate or
reduce a deficit by resolution of the shareholders or may be transferred tocommon stock by resolution of the Board of Directors.

31st March, 2000
(Millions of yen)(Thousands of U.S.
dollars)

2001¥2,604$24,539

2002

3,504

33,011

2003
2004 and thereafter
Total

804

7,571

4,530

42,678¥11,442$107,799

Retained earnings in the accompanying financial statements include the legal
reserve of ¥513 million ($4,834 thousand) as of 31st March, 2000.

10. Leases
Non-cancelable lease transactions are primarily accounted for as operatingleases (whether such leases are classified as operating or finance leases)
except that lease agreements which stipulate the transfer of ownership ofthe leased assets to the lessee, are accounted for as finance leases. Lease
expenses related to finance leases accounted for as operating leases
amounted to ¥301 million, ¥425 million and ¥ 699 million ($ 6,585 thousand) for the years ended 31st March, 1998,1999 and 2000, respectively.

6. Research and Development Expenses
Research and development expenses charged to income for the three years
ended 31st March, 2000 were as follows:
Years ended 31st March

1998

1999

Years ended 31st March,

2000(Millions of yen)

¥1,994¥1,443Future minimum lease payments subsequent to 31st March, 2000 for
finance lease transactions accounted for as operating leases are summarized as follows:(Millions of yen)(Thousands of U.S.
dollars)

Due within one year

¥ 689

$ 6,491

Due after one year

2,219

20,904

Total¥2,908$27,395

2000(Thousands of U.S. dollars)¥2,11531st March, 2000

$19,92415

11. Contingent Liabilities

Interest Rate Related Transactions

The Company had the following contingent liabilities:

For the year ended 31st March, 1998
Contract
Amounts

Unrealized(loss)

Fair value(Millions of yen)

31st March, 2000
(Millions of yen)(Thousands of U.S.
dollars)

As guarantor for housing loans of employees¥ 160$1,508

As joint guarantor with agencies regarding lease
contracts of agencies’ customers

170

1,602

As guarantor for bank loans of subsidiaries

671

6,322

¥1,001$9,432

Total contingent liabilities(Including
portion in excess
of one year)

Interest rate swaps:
Receipts floating/payments fixed¥500¥(500)

¥(29)

¥(29)

For the year ended 31st March, 1999
Contract
Amounts(Including
portion in excess
of one year)

Fair value

Unrealized(loss)(Millions of yen)Interest rate swaps:

As to a contingent liability regarding a debt assumption agreement, seeNote 5.

Receipts floating/payments fixed¥6,000¥(6,000)¥(149)¥(149)For the year ended 31st March, 2000
Contract
Amounts

12. Merger and Transfer of BusinessOn 26th May, 1998, the former Shibaura Engineering Works Co., Ltd.
(“SEW”) entered into an agreement to merge with the former Toshiba
Mechatronics Corporation (“TM”) as of 1st October, 1998. SEW, as thesurviving company, whose name was changed to Shibaura Mechatronics
Corporation (the “Company”) after the merger, issued shares of its common
stock to TM’s shareholders on a 1:4.19 share basis, for a total of 12,410,501
shares which comprised all the outstanding shares of TM’s common stock.
The Company took over all the assets and liabilities of TM, which were
accounted for based on TM’s financial statements as of 31st March, 1998,
with certain adjustments made to reflect the operating results up to themerger date.
In addition, on 26th May, 1998, the Company entered into an agreement tosell its small-sized motor business (the “Motor Business”) as of 1st October,1998 to Shibaura Nidec Corporation (“SN”), formerly named S.E.C. Inc., awholly-owned subsidiary of the Company, for consideration of ¥3,000
million. The Company’s loans payable related to the small-sized motor
business are to be repaid by the Company and sourced by funds collectedfrom SN. At the same time SN increased its capital from ¥10 million to¥1,000 million with funds financed by the Company, Nidec Corporation
and Toshiba Corporation, which held 40%, 40% and 20% of its shares,
respectively, after the increase.

13. Derivative and Hedging Activities
The Company has entered into interest rate swap contracts to reduce thecost of certain borrowings. As a matter of policy, the Company does not
speculate in derivative transactions. The Company uses these contracts tomanage its exposure to interest rate risks. The Company does not anticipate
nonperformance by any of the counterparties to the above transactions, allof whom are domestic financial institutions with high bond ratings.
In accordance with the Company’s policy, derivative transactions are entered into under the decision-making rules approved by the Management
Strategy Committee of the Company. The department which has the responsibility to enter into such contracts controls the risks and performanceon a daily basis and, if necessary, reports these to management of theCompany.

16(Including
portion in excess
of one year)

Unrealized(loss)

Fair value(Millions of yen)Interest rate swaps:
Receipts floating/payments fixed¥6,000¥(6,000)¥(154)¥(154)For the year ended 31st March, 2000
Contract
Amounts(Including
portion in excess
of one year)

Unrealized(loss)

Fair value(Thousands of U.S. dollars)Interest rate swaps:
Receipts floating/payments fixed$56,523$(56,523)$(1,454)$(1,454)

The contract amounts appearing in the above tables do not fully represent themarket risk amounts relating to derivative transactions.

14. Subsequent event
The following appropriations of retained earnings, which have not beenreflected in the accompanying financial statements for the year ended 31st
March, 2000, have been approved at a shareholders’ meeting held on 15th
June, 2000:
15th June, 2000
(Millions of yen)(Thousands of U.S.
dollars)

Cash dividends (¥5 = $0.047 per share)¥249$2,348Bonuses to directors and statutory auditors

26

244

Transfer to legal reserve

27

259

15. Segment Information
The business segment information of the Company and its consolidated
subsidiaries for the years ended 31st March, 1998, 1999 and 2000 is summarized as follows:Business segments
Year ended 31st March, 1998
Applied electric
equipment

Electric components

Real estate leasing

Eliminations
or unallocated amounts

Total

Consolidated(Millions of yen)

I. Sales and operating income
Sales to external customers¥13,976¥35,709¥2,507¥52,192

–

–

–

–

(–)

–

Total sales

13,97635,7092,507

52,192–

52,192

Operating expenses

14,57933,666

1,190

49,435

2,262

51,697

Operating income (loss)¥(603)¥2,043¥1,317¥2,757¥(2,262)¥495

Total assets¥12,350¥26,856¥14,628¥53,834¥2,386¥56,220

Depreciation

748

954

649

2,351

59

2,410

Capital expenditures

201

3,265

1

3,467

3

3,470

Intersegment sales or transfers¥–¥52,192

II. Total assets, depreciationand capital expenditures

Notes:

equipment for semiconductors, electronic parts, optical devices and soforth, and the non-destructive inspection business and other.

a) Basis of segmentation(3) Real estate leasing:
Real estate leasing and management and other.

Business segments are divided into product categories by the same criteria
applied for internal control purposes.

c) Included in eliminations or unallocated amounts of operating expenses were
unallocable amounts totaling ¥2,262 million for the year ended 31st March,
1998 which consisted of expenses incurred in the control department of theCompany’s head office such as the General Affairs Department.

b) Major products in each business segment:(1) Electric components:
Motors for household electrical appliances such as air conditioners,
washing machines and others, motors for hot water-supply facilities,
motors for automatic doors, motors for home use, water-supply
pumps, power supplies for communication equipment and others.

d) Included in eliminations or unallocated amounts of total assets were unallocable amounts totaling ¥3,573 million for the year ended 31st March,
1998, which primarily consisted of surplus funds (cash and marketablesecurities) and leased buildings of the Company. For the year ended 31st
March, 1999, such eliminations or unallocated amounts primarily consistedof surplus funds (cash and marketable securities).

(2) Applied electric equipment
Equipment for railroad maintenance, electric power tools, bolttightening tools, cartesian coordinate robots, vending machines, ticket
vending machines, entrance/exit gate control systems, environmentrelated machinery, LCD manufacturing equipment, manufacturinge) Included in depreciation was amortization and in capital expenditures,
additions to long-term prepaid expenses.

Year ended 31st March, 1999
Electric powercomponents

Electric equipment

Automation
Equipment

Real estate leasing

Eliminations
or unallocatedamounts

Total

Consolidated(Millions of yen)

I.

Sales and operating income

Sales to external customers¥

Intersegment sales or transfers

7,194

¥

21,250¥12,928

¥

2,503

¥

43,875¥–¥43,875

–

–

–

–

–

(–)

–

Total sales

7,194

21,25012,9282,503

43,875–43,875

Operating expenses

8,232

20,862

12,686

1,342

43,122

252

43,374

Operating income (loss)¥(1,038)

¥

388

¥

242

¥

1,161

¥

753

¥

(252)

¥

501

¥

–

¥

27,407¥

16,350¥14,047¥57,804

¥

2,966

¥

60,770II. Total assets, depreciationand capital expenditures
Total assets
Depreciation

324

1,052

472

650

2,498

–

2,498

Capital expenditures

327

1,327

250

2

1,906

–

1,906

17

Year ended 31st March, 2000
Electric powercomponents

Electric equipment

Automation
Equipment

Real estate leasing

Eliminations
or unallocatedamounts

Total

Consolidated(Millions of yen)

I.

Sales and operating income

Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income

II. Total assets, depreciationand capital expenditures
Total assets
Depreciation
Capital expenditures¥¥¥

18,519–18,51917,813706
15,966
669
728

¥

¥
¥

39,351–39,351
38,438913
35,857
1,018
714

¥

15,721–
15,721
15,408313¥¥

16,340
540
111

¥

¥
¥

2,344
–
2,344
1,325
1,019
13,401
652
11

¥

¥
¥

75,935–75,93572,984
2,951¥¥

81,564
2,879
1,564

¥

–
(–)
–
216
(216)

¥

1,526
–
–

¥

¥

75,935–75,93573,2002,735
83,0902,879
1,564Year ended 31st March, 2000
Electric powercomponents

Electric equipment

Automation
Equipment

Real estate leasing

Eliminations
or unallocatedamounts

Total

Consolidated(Thousands of U.S. dollars)

I.

Sales and operating income

Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income$$

II. Total assets, depreciationand capital expenditures
Total assets
Depreciation
Capital expenditures

174,461–
174,461
167,809
6,652$$150,411
6,302
6,860

$

370,712–370,712362,114
8,598

$

$

148,104–
148,104
145,150
2,954$$153,935
5,090
1,048

$

$

337,793
9,593
6,722

Notes:

22,081–
22,081
12,4809,601$$

715,358–
715,358
687,553
27,805$

126,2476,142
108$768,386
27,127
14,738

$

$
$

–
(–)
–
2,040
(2,040)$715,358–
715,358
689,593
25,765$$782,767
27,127
14,73814,381––ment into two segments: electric equipment and automation equipment following the merger with Toshiba Mechatronics Corporation. These changes weremade to reflect more accurately the actual business of the Company.

a) Changes in components of segments
In connection with the business transfer to Shibaura Engineering Works Co.,
Ltd., the Company moved its electric power tools section to the segment ofelectric components and the name was then changed to electric power components. In addition, the Company divided the segment of applied electric equip-

Previous segment information by business for the year ended 31st March, 1998,
which would have been applicable for the same categories as those presented forthe years ended 31st March, 1999 and 2000 is as follows:Year ended 31st March, 1998
Electric powercomponents

Electric equipment

Automation
Equipment

Real estate leasing

Eliminations
or unallocatedamounts

Total

Consolidated(Millions of yen)

I.

Sales and operating income

Sales to external customers¥

Intersegment sales or transfers
Total sales
Operating expenses
Operating income (loss)

18,571¥

22,370

¥

8,744

¥

2,507

¥

52,192¥–¥

52,192

–

–

–

–

–

(–)

–

18,571

22,370

8,744

2,507

52,192–

52,192

19,18420,091

8,970

1,190

49,435

2,262

51,697

¥

(613)

¥

2,279

¥

(226)

¥

1,317

¥

2,757

¥

(2,262)¥495¥

15,969¥17,097

¥

6,140

¥

14,628¥53,834

¥

2,386

¥

56,220II. Total assets, depreciationand capital expenditures
Total assets
Depreciation
Capital expenditures

872
316

613
2,784

b) Change in the method of allocation of operating expenses
Effective the year ended 31st March, 1999, the Company began to allocate
administrative expenses incurred in the General Affairs Department of theCompany to each segment based on the allocation method as that used for
management control purposes. In previous years, such administrative expenses
were not allocated to each segment. This change was made to reflect more
appropriately operating income by business segment after the merger with
Toshiba Mechatronics Corporation, to establish reasonable standards to allocate
such expenses, and to clarify the responsibility for profit by segment and, thus,

18

218
366

648
1

2,351
3,467

59
3

2,410
3,470

to strengthen management control by business segment.
The effect of this change decreased operating income by ¥236 million in theelectric power components segment, by ¥883 million in the electronic equipment segment, by ¥601 million in the automation equipment segment and by¥162 million in the real estate leasing segment from the operating income which
would have been recorded under the method applied in previous years. Thischange, however, had no effect on consolidated operating income for the year
ended 31st March, 1999.

c) Major products in each business segment.
(1) Electric power components:
Motors for household electrical appliances such as air conditioners, washing machines and other, motors for hot water-supply facilities, motors forautomatic doors, motors for home use, water-supply pumps, power supplies
for communication equipment, equipment for railroad maintenance, electric
power tools, bolt-tightening tools and other.
(2) Electronic equipment
LCD manufacturing equipment (wet cleaning equipment, stripping equipment, etching equipment, cell assembly equipment, outer lead bonding
equipment, semiconductor manufacturing equipment (etching equipment,
ashing equipment, die-bonding equipment, wire-bonding equipment, automatic molding equipment), media devices manufacturing equipment(sputtering equipment, vacuum plating equipment), magnetically levitatedtransportation systems, high-speed chip mounting equipment, soldering
paste printing equipment, the non-destructive inspection business andothers.
(3) Automation equipment
Picture tube manufacturing equipment, automatic envelope filling andsealing systems, precision parts manufacturing equipment, media devices
manufacturing equipment, laser applied processing equipment, microwave
applied equipment, cartesian coordinate robots, vending machines (forcigarettes, food, dry batteries, films, groceries and others), ticket vending
machines (for food tickets, admission tickets and other), entrance/exit gate
control systems, environment-related machines (mini-recycling mills andother) and other.
(4) Real estate leasing
Real estate leasing and management and other.
d)Included in eliminations or unallocated amounts of operating expenses areunallocable amounts relating to development expenses incurred for the entire
company as part of the Company’s research and development costs.

e)Included in the eliminations or unallocated amounts of total assets were unallocable amounts totaling ¥4,006 million and ¥6,581 million ($62,004 thousand) for the years ended 31st March, 1999 and 2000, respectively, whichprimarily consisted of surplus funds (cash and marketable securities) of theCompany.

f)g)Included in depreciation was amortization, and in capital expenditures, additions of long-term prepaid expenses.
There were no assets belonging to the electric power components business at
31st March, 1999 and 2000 because this business segment was transferred to
Shibaura Engineering Works Co., Ltd. during the year then ended.

Geographical segments

Overseas sales
Year ended 31st March, 1998
Northeastern Asia

Other

Total

(Millions of yen)I.

Overseas sales

II.

Consolidated net sales

III. % of consolidated net sales¥7,096¥3,357

13.6%

6.4%

¥10,453
52,19220.0%

Year ended 31st March, 1999
Northeastern Asia

Other

Total

(Millions of yen)I.

Overseas sales

II.

Consolidated net sales

III. % of consolidated net sales¥6,508¥2,536

14.8%

5.8%

¥ 9,044
43,875
20.6%

Year ended 31st March, 2000
Northeastern Asia

Other

Total

(Millions of yen)I.

Overseas sales

II.

Consolidated net sales

III. % of consolidated net sales¥24,267¥3,232

32.0%

4.2%

¥ 27,499
75,935
36.2%

Year ended 31st March, 2000
Northeastern Asia

Other

Total

(Thousands of U.S. dollars)

I.

Overseas sales

II.

Consolidated net sales

III. % of consolidated net sales$228,611$30,447

32.0%

4.2%

$259,058
715,358
36.2%

Notes:a)Overseas sales are those of the Company and its consolidated subsidiaries incountries or regions other than Japan.

b)

The division of overseas sales into countries or regions and the names of suchcountries or regions are as follows:(1) Overseas sales by country or region:
Geographical areas are divided into categories based on their geographical proximity.
(2) Major countries or regions included in each geographical area:
Northeastern Asia
Korea, Taiwan
Other
U.S.A., the Netherlands

No information by geographical segment for the years ended 31st March, 1998,
1999 and 2000 has been presented due to the fact that the net sales and total assets ofoperations in Japan exceeded 90% of those in all segments.

19

R EPORT OF I NDEPENDENT C ERTIFIED P UBLIC A CCOUNTANTS

The Board of Directors
Shibaura Mechatronics Corporation
We have examined the accompanying consolidated balance sheets of Shibaura Mechatronics Corporation andconsolidated subsidiaries as of 31st March, 1998, 1999 and 2000, and the related consolidated statements of operations,shareholders’ equity and cash flows for each of the three years in the period ended 31st March, 2000, all expressed inyen. Our examinations were made in accordance with auditing standards, procedures and practices generally accepted
and applied in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures
as we considered necessary in the circumstances.
In our opinion, the financial statements refered to above expressed in yen, present fairly the consolidated financial
position of Shibaura Mechatronics Corporation and consolidated subsidiaries at 31st March, 1998, 1999 and 2000, andthe consolidated results of their operations and their cash flows for each of the three years in the period ended 31st
March, 2000 in conformity with accounting principles and practices generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended 31st
March, 2000 are presented solely for convenience. Our examination 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.
As discussed in Note 15 to the consolidated financial statements, the Company has changed the presentation of its
business segments in connection with the business transfer to Shibaura Engineering Works Co., Ltd. This change wasmade to reflect more accurately the actual business of the Company. In addition, effective the year ended 31st March,
1999, the Company began to allocate administrative expenses incurred in the General Affairs Department of theCompany to each segment based on the allocation method which it uses for management control purposes. In previous
years, such administrative expenses were not allocated to each segment. This change was made to reflect operating
income by more appropriately business segment after the merger with Toshiba Mechatronics Corporation and toestablish more reasonable standards for allocating such expenses as well as to clarify the responsibility for profit bysegment and, thus, to strengthen management control over each business segment.

Tokyo Japan
15th June, 2000

20

SUPPLEMENTAL INFORMATION
Shibaura Mechatronics Corporation and Subsidiaries

NON-CONSOLIDATED BALANCE SHEETS
31st March,

1998

1999

31st March,

2000

2000
Thousands ofMillions of yen

U.S. dollars

ASSETS
Current assets:
Cash and bank deposits¥1,984¥2,539¥4,299$40,497

Marketable securities

424

344

473

4,452

Notes

5,779

4,493

3,732

35,162

Accounts

10,76014,206

16,184

152,459

(131)

(115)

(87)

(818)

6,593

10,855

15,295144,092

—

—

271

2,553

Other current assets

1,289

611

722

6,805

Total current assets

26,69832,93340,889385,202

179

254

138

1,299

Buildings

22,781

27,33827,468258,762

Machinery and equipment

19,92910,071

9,919

93,445Construction in progress

1,900

148

219

2,066

Total

44,78937,81137,744355,572

Accumulated depreciation(20,251)(13,434)(15,044)(141,722)

24,53824,37722,700213,850

Investment securities

370

483

399

3,762

Investment in subsidiaries and affiliates

900

1,149

1,590

14,973

Deferred taxes

—

—

96

907

Other assets

1,009

888

1,017

9,580

Allowance for doubtful accounts

(213)

(0)

(0)

(1)

Total investments and other assets

2,066

2,520

3,102

29,221¥53,302¥59,830¥66,691$628,273

Notes and accounts receivable, trade:

Allowance for doubtful accounts
Inventories
Deferred taxes

Property, plant and equipment:
Land

Net property, plant and equipment
Investments and other assets:

Total assets

21

NON-CONSOLIDATED BALANCE SHEETS
31st March,

1998

1999

31st March,

2000

2000
Thousands ofMillions of yen

U.S. dollars

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term bank loans¥10,552¥11,810¥5,970$56,241

1,009

854

2,603

24,521

Notes

5,080

4,950

7,868

74,122

Accounts

3,934

4,675

11,331

106,743

Other

1,196

95

51

478

Current portion of long-term debt
Notes and accounts payable

Advances from customers

219

594

554

5,216

3,888

3,032

4,045

38,112

Accrued income taxes

660

63

772

7,278

Accrued consumption tax

246

—

—

—

Accrued expenses

Other current liabilities

248

208

147

1,384

Total current liabilities

27,032

26,28133,341

314,095

Long-term liabilities:
Bonds

5,000

5,000

2,990

28,168Long-term debt

2,584

6,635

4,025

37,916

Employees’ retirement allowances

2,823

1,891

1,796

16,925

Directors’ retirement allowances

204

223

134

1,259

Liability for periodic repairs

172

202

229

2,155

Other long-term liabilities

3,000

3,000

3,000

28,262

Total long-term liabilities

13,783

16,951

12,174

114,685

3,155

3,776

5,783

54,479

4,776

7,760

9,763

91,971

Shareholders’ equity:
Common stock, ¥50 par value:
Authorized: 100,000,000 shares
Issued and outstanding:
33,455,333 shares at 31st March, 1998,
45,865,834 shares at 31st March, 1999,
49,863,822 shares at 31st March, 2000
Additional paid-in capital
Legal reserve

22

392

487

500

4,716

Retained earnings

4,164

4,575

5,130

48,327

Total shareholders’ equity

12,487

16,59821,176

199,493

Total liabilities and shareholders’ equity¥53,302¥59,830¥66,691$628,273

Supplemental Information
Shibaura Mechatronics Corporation and Subsidiaries

NON-CONSOLIDATED STATEMENTS OF OPERATIONSYear ended 31st
March,

Years ended 31st March,

1998

1999

2000

2000
Thousands ofMillions of yen

U.S. dollars

Net sales¥49,031¥41,548¥52,562$495,175

Cost of sales

38,51332,54942,681

402,086

Gross profit

10,518

8,999

9,881

93,089Selling, general and administrative expenses

10,265

8,678

7,886

74,292

253

321

1,995

18,797

Operating income
Other income (expenses):
Interest and dividend income

79

113

30

282

Interest expense

(406)

(437)

(336)

(3,171)Gain on sale of land

1,722

—

932

8,784

—

—

(991)

(9,333)Special retirement payments
Gain on transfer of business

—

422

—

—

(89)

(115)

(497)

(4,681)

1,560

304

1,133

10,678Current

590

92

795

7,489

Deferred

—

—

(272)

(2,571)

¥969

¥212

¥610

$5,760¥28.98¥4.63¥13.18

$0.12

3.00

3.00

5.00

0.04

Other net
Income before income taxes
Income taxes:

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

Yen

U.S. dollars

23

ORGANIZATION CHART
As of 1st April, 2000

Export Control Division
GM Osamu Ushiku

General Affairs Division
GM Shintaro Kujiraoka

Information & Communications System Division
GM Michio Tsuruoka

Finance & Accounting Division
Board of Directors

GM Kiyoshi Ozawa

Corporate Planning Division
GM Toshio Yokouchi

Chief Executive Officer
Tadao Sumi

Board of Corporate Auditors

Technology Planning & Coordination Division
GM Kouichi Hyoudou

Research & Development Division
GM Yasutomo Fuzimori

Seibu Branch Office
GM Kunihiko Yokoyama

Fine Mechatronics Company
CP Yoshio Amano

Fine Mechatronics Division
GM Choichi Kimura

Semiconductor Manufacturing Equipment Division
GM Michiro Ishii

Automation systems & Electronic, Vaccuum
Equipment Company
CP Toshimichi Sanada

Automation & Laser Systems Division
GM Iwao Komatsu

Electronic & Vacuum Equipment Division
GM Toshimichi Sanada

Vending Machines & Systems Company
CP Kunihiko Wada

Vending Machines & Systems Division
GM Kunihiko Wada

Abbreviations
CP: Company President
GM: General Manager

Manufacturing Company
CP Hiroshi Yamamoto

Yokohama Operations
GM Shunichi Kato

Sagamino Operations
GM Hiroshi Yamamoto

Obama Works
GM Harumichi Konaka

Precision Machining Center
GM Norio Fujimoto24

BOARDO F

DIRECTORSAs of 31st March, 2000

Standing, from left ; Kazuhiko Kojima , Toshimichi Sanada ,Goro Iketani , Toshio Yokouchi , Yoshio Amano , Hajime Okado, Noboru Saito ,Fujio Tsuchiya , Hitoshi Hirano, Toshio Tsukuno
Sitting, from left ; Tetsurou Yanagiya , Osamu Ushiku , Tadao Sumi , Kunihiko Wada , Hiroshi Yamamoto , Kiyoshi Ozawa

President andChief Executive Officer:
Tadao Sumi

Vice President:
Toshio Yokouchi

Executive Vice President:
Kunihiko Wada
Assistant to President
President of Vending Machines & Systems Company
General Manager of Vending Machines & Systems Division
General Manager of Tokyo Bay OfficeTetsurou Yanagiya
Assistant to President
Chief Technical Officer
Chief Procurement Officer(Technology Planning & Coordination Division)(Research & Development Division)

Choich Kimura

Senior Vice President:
Hiroshi Yamamoto
Chief Manufacturing Officer
General Manager of Sagamino Operations(Precision Machining Center)
Executive Quality Leader

As of 15th June, 2000
General Manager of Corporate Planning Group(General Affairs Group)
General Manager of Fine Mechatronics Division

Iwao Komatsu
General Manager of Automation & Laser Systems Division
Michiro Ishii
General Manager of Semiconductor Manufacturing
Equipment Division
Shunichi Kato
General Manager of Yokohama Operations
Assistant to Chief Manufacturing Officer
Auditors:

Osamu Ushiku
Hajime Okado
Yasuaki Nakazawa (Outside)
Toshio Tsukuno (Outside)

Kiyoshi Ozawa
General Manager of Finance & Accounting Group
Yoshio Amano
President of Fine Mechatronics Company(Marketing Planning Group)(Seibu Branch Office)General Manager of Export Control Division
General Manager of Tokyo Office
Toshimichi Sanada
President of Automation Systems & Electronic,
Vacuum Equipment Company
General Manager of Electronic & Vacuum Equipment Division

25

CORPORATE DATA
■ Date of Established
October, 1939
■ Paid-in Capital
5,783Million-Yen■ Common Stock
Issued 49,863,822 shares■ Number of Employees
1,329■ Stock Listngs
The Tokyo Stock Exchange■ Shareholders
6,056■ Major Shareholders
Toshiba Corporation 23,477,463 shares (47.08%)■ Accounting Auditor
Century Showa Ota & Co.

■ Stock Prices on the Tokyo Stock Exchange

1500

1000

500

1997

1998

1999

2000

(As of 31st March , 2000)

1000-1 Kasama-cho, Sakae-ku
Yokohama-shi, 247-8560, Japan
TEL: 81-45-897-2421
FAX: 81-45-897-2470
http://www.shibaura.co.jp/

Printed on Recycled Paper
SEB-0003 IT 0006