Toshiba Corp. Annual Report 2001

FY2001 Annual Report · Toshiba Corp.

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TOSHIBA ANNUAL REPORT 2001
Year ended March 31, 2001

there for you

BASIC COMMITMENT
OF THE TOSHIBA GROUP

We, the Toshiba Group companies, based on our total commitment to
people and to the future, are determined to help create a higher quality
of life for all people, and to do our part to help ensure that progress
continues within the world community.

COMMITMENT TO PEOPLE
We endeavor to serve the needs of all people, especially our customers,
shareholders, and employees, by implementing forward-looking
corporate strategies while carrying out responsible and responsive
business activities. As good corporate citizens, we actively contribute to
further the goals of society.

COMMITMENT TO THE FUTURE
By continually developing innovative technologies centering on
the fields of Electronics and Energy, we strive to create products
and services that enhance human life, and which lead to a thriving,
healthy society. We constantly seek new approaches that help realize the
goals of the world community, including ways to improve the global
environment.

Committed to People,
Committed to the Future.

FINANCIAL HIGHLIGHTS

TO OUR SHAREHOLDERS

FEATURE

Value chain

Innovative technologies

Initiative

TOSHIBA AND THE ENVIRONMENT

BOARD OF DIRECTORS, EXECUTIVE OFFICERS
AND STATUTORY AUDITORS

REVIEW OF OPERATIONS AND FINANCIAL SECTION

MANAGEMENT’S DISCUSSION AND ANALYSIS

CONSOLIDATED FINANCIAL STATEMENTS

GLOBAL NETWORK

CONSOLIDATED SUBSIDIARIES

INVESTOR REFERENCE

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements concerning Toshiba’s future plans, strategies and performance. These forward-looking statements are not historical
facts, rather they represent assumptions and beliefs based on economic, financial and competitive data currently available. Furthermore, they are subject to a number of
risks and uncertainties that, without limitation, relate to economic conditions, worldwide mega-competition in the electronics business, customer demand, foreign currency
exchange rates, tax rules, regulations and other factors. Toshiba therefore wishes to caution readers that actual results may differ materially from our expectations.

F I N A N C I A L H I G H L I G H T S
Toshiba Corporation and its subsidiaries
Years ended March 31, 2001 and 2000

Net sales—Japan

—Overseas

Net sales
Operating income
Income (loss) before income taxes and minority interest
Net income (loss)
Research and development expenditures
Total assets
Shareholders’ equity

Per share of common stock:
Net income (loss)—basic

—diluted

Cash dividends

Number of employees

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥3,753,052
2,198,305

¥3,514,068
2,235,304

$30,266,549
17,728,266

5,951,357
232,133
188,099
96,168
327,915
5,724,564
1,047,925

5,749,372
100,969
(44,844)
(32,903)
334,398
5,780,006
1,060,099

47,994,815
1,872,040
1,516,927
775,548
2,644,476
46,165,839
8,451,008

Yen

U.S. dollars

¥29.88
29.71
10.00

¥(10.22)
(10.22)
3.00

188,042

190,870

$0.241
0.240
0.081

Notes: 1. Unless indicated otherwise, all dollar figures herein refer to U.S. currency. Yen amounts have been translated into U.S. dollars, for convenience only,

at the rate of ¥124=US$1.

2. Basic earnings per share is computed based on the weighted-average number of shares of common stock outstanding during the period. Diluted

earnings per share assumes the dilution that would occur if dilutive convertible debentures were converted into common stock.

3. Beginning with the fiscal year ended March 31, 2001, the company has adopted Statement of Financial Accounting Standards (SFAS) No. 115,
“Accounting for Certain Investments in Debt and Equity Securities.” Prior period data through the fiscal year ended March 31, 2000 have been
restated to conform with SFAS No. 115.

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’99

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NET SALES

(¥ billion)

NET INCOME
(LOSS)

(¥ billion)

SHAREHOLDERS’
EQUITY

(¥ billion)

T O O U R S H A R E H O L D E R S

TAIZO NISHIMURO, Chairman of the Board (left), and
TADASHI OKAMURA, President and Chief Executive Officer (right)

Summary of Fiscal 2000

Fiscal 2000, ended March 31, 2001, saw Toshiba make substan-

Operating Results

tial advances towards the growth targets of its mid-term business

plan. We achieved a 4% increase in consolidated net sales to

¥5,951.4 billion (US$ 47,995 million), and net income before income taxes improved

substantially over the previous year to ¥188.1 billion (US$1,517 million).

Toshiba’s operating environment was defined by dynamic change. In the first half of the

year, we were on course to achieve the targets laid out in our mid-term business plan

for the period to fiscal 2002 with a year to spare. We were, however, unable to main-

tain this momentum in the second half. From December 2000, our operations were

hampered by slowing PC demand in the United States, freefalling semiconductor prices

way beyond projections, and waning IT-related investment in Japan. Despite these chal-

lenges, we adhered to our basic management policy. We continued to dedicate time

and resources to restructuring our management to make it more market-centric. And

we are steeling ourselves with ever-greater commitment to achieve our goals.

A Group Vision to Guide
Toshiba’s Actions

Toward the end of fiscal 2000, Toshiba articulated a management
vision to take the Group forward in the 21st century: “To grow with

excellence as the leading-edge, Internet-ready enterprise globally

“TO GROW WITH EXCELLENCE

by accelerating innovation with agility, and to create a 21st century of success hand in

AS THE LEADING-EDGE,

INTERNET-READY ENTER-

PRISE GLOBALLY BY ACCEL-

ERATING INNOVATION WITH

hand with our customers.”

With this management vision, we devote ourselves to excellence. We will accelerate

the speed of innovation. We will be first to market with differentiated products and

AGILITY, AND TO CREATE A

services that draw on state-of-the-art technologies and we will further our business

21ST CENTURY OF SUCCESS

globally. Success together with our customers is essential. Championing market-centric

HAND-IN-HAND WITH OUR

management, we will strive to identify customers’ needs. The final piece of the puzzle

CUSTOMERS.”

will be our Internet-ready approach. We are keenly aware of our responsibility as a

leading global company to spearhead the information age. As such, we will promote

evolutionary Internet-based business operations on a worldwide scale.

Specific actions are already underway. Model CRM (customer relationship

management) and SCM (supply chain management) systems for our PC and semicon-

ductor businesses are already being deployed, and will be extended to cover compa-

ny-wide operations. We are interactively networking our businesses with customers

and other business partners. Through our network, we listen intently to the “Voice Of

Customer” (VOC) as a means to provide excellent products and services responsive to

their needs in a timely manner. Faced with swift, unending IT innovation, we are mov-

ing quickly to establish a versatile structure for adapting our collaborative commerce

(c-Commerce) business processes.

Getting Internet-rea dy

Corporate competitiveness underpins profitable and sustainable

growth. Enhancing this competitiveness requires greater

management efficiency and speed. That’s why we are getting

ourselves Internet-ready.

To achieve our Internet-ready goals, we are seeking to raise the efficiency of our global

production system. A new system, which we call Digital Manufacturing, will be intro-

duced throughout the Toshiba Group. Through the new system, manufacturing

processes and information will be converted into digital data. This will enable us to

shorten lead-times and pare costs from product development through manufacturing.

We will also establish an IT infrastructure for collaborative engineering (c-Engineering).

This collaborative framework allows for the integration of processes and sharing of in-

formation at all operational levels from product planning through design, procurement,

production and sales, both within and outside the company. Sales and service initiatives

will also be at the forefront of our Internet-ready drive. Here, systems are already in

place in PC and semiconductor business, including global CRM and SCM systems, both

rooted in Toshiba’s VOC approach. We plan to introduce such systems company-wide

as early as possible.

To stay globally competitive, we will be expeditious in creating an Internet-ready

system that applies IT across all manufacturing, sales and R&D opera-

tions, and that integrates our customers and business partners.

Activating Our Business

In fiscal 2001, we will galvanize our business through three

initiatives: reinforcing the in-house company system; intro-

ducing the Toshiba Value Created (TVC) management index

to enhance corporate value; and establishing a new executive compensation program.

(cid:1) Reinforcing the In-house Company System

In April 2001, we carried out organizational reforms with the view to reinforcing our in-

house company system. First, we established the e-Solutions Company, which unifies

the IT solutions business units of the other in-house companies, to strengthen business

execution. As Toshiba’s autonomous vehicle for engaging in the IT business, the e-

Solutions Company will quickly grow its service businesses in system integration, in-

cluding networking, and in ASP services and platform maintenance. The company will

also channel its energies into establishing de facto standards for digital interactive

broadcasting. The company’s activities will embrace all aspects of the digital broad-

casting business from broadcasting equipment to the e-platform business standard

and content.

We also launched a second in-house company, the Mobile Communications Company.

Responsible for a number of growth areas in mobile devices, including next-generation

cellular phones and PDAs, this new organization will facilitate the shift of resources to

mobile operations, allowing the Mobile Communications Company to conduct business

more promptly and effectively.

(cid:1) Toshiba Value Created (TVC)

Since the in-house company system started, Toshiba has cultivated a mindset toward

maximizing returns on capital invested, and boosted cash flows. To sharpen our focus

on improving corporate value further, a new core management yardstick—Toshiba

Value Created (TVC)—will become effective from the current fiscal year.

We will apply TVC in setting mid-term business plan targets and evaluating individual

investment plans. In addition, our system for evaluating the business performance of

each in-house company will be altered to incorporate TVC.

(cid:1) New Executive Compensation Program

Toshiba will introduce an Executive Stock Increase Plan for executives in July 2001 to

underline responsibility for business performance. This will drive Toshiba’s manage-

ment executives to create greater corporate value and align their interests with those

of shareholders. Under the plan, executives will be requested to contribute a fixed

portion of their annual remuneration toward purchasing Toshiba shares on a regular

basis. The new plan will thus see our executives, mainly executive officers, taking a

stake in Toshiba alongside our shareholders. The ultimate goal is to encourage greater

sensitivity toward Toshiba’s corporate value among executives.

Mid-term Business Pl an:

For all that our business environment is shrouded in uncertainty,

Concept and Strategy

we will continue to direct the motive power of the IT revolution to

drive Toshiba’s continued growth. We will remain intensively fo-

cused on IT-related businesses. Meanwhile, we will continue leveraging our legacy busi-

nesses, including home appliances and power systems, through which we generate

stable earnings streams. Our efforts here will include cultivating new businesses and

restructuring operations based on strategic alliances.

Toshiba’s mid-term business plan to fiscal 2003, ending March 31, 2004, sets the tar-

gets of consolidated net sales of ¥7,900 billion, net income of ¥200 billion and ROE

of 14.4%. In IT, the most promising future growth area, Toshiba will reinforce its key

component businesses, including electronic devices, concentrate resources on mobile-

and network-related equipment, and expand and reinforce solution services to en-

hance customer satisfaction with all Toshiba products. The combined impact of these

strategies will be to position Toshiba as a totally Internet-ready company in the fields

of industry, society and the home. 90% of sales growth in fiscal 2003 is expected to

derive from IT-related businesses.

Innovation and Growt h

We would like to close this review by restating a point we made at

the beginning of fiscal 2000. We will continue to be decisive in pur-

suing the goals of our mid-term plan. In each of Toshiba Group’s

many diverse businesses, we will continue evolving with the aim of market-centric

management rooted in VOC, and listen intently to the market to meet the expectations

of our stakeholders—particularly our shareholders, customers and employees—and to

earn Toshiba recognition as a respected and valued company.

We are determined to start the 21st century as we mean to continue—in prosperity.

The Toshiba Group will work together with its customers and shareholders to overcome

the challenges before us, and to ensure profitable, sustainable growth in the years to

come.

June 2001

Taizo Nishimuro
Director
Chairman of the Board

Tadashi Okamura
Director
President and Chief Executive Officer

enhancing your liv

Underlying Toshiba’s capabilities is

a corporate value-chain that brings

a unifying cohesion to the company’s

advance towards excellence in IT.

Drawing on the best and most inspired

of the work of the individual in-house

companies, the value chain drives

value-added, cross-company contacts

and projects in components, hardware,

infrastructure, system solutions and

content. It guides Toshiba to enhanced

growth in the three key areas of mobile

applications, broadband networks

and components.

our visions

es with our technology

Ekimae Tanken Club: This portal is attracting a growing number of members with popular information services
for cellular phone users and new value-added services, including a hotel reservation system.
(http://ekitan.com) (Left)

Modem & PC Card: The world’s first BluetoothTM compatible PC card and the BluetoothTM Wireless Modem
Station combine to provide wireless Internet access within a maximum range of 100 meters. (Center)

Portable PCs: Toshiba’s portable PCs have been the world’s top sellers for seven consecutive years. Drawing
on the technologies and components showcased in these computers, Toshiba will stake out a leading position
in the mobile market. (Right)

Mobile Value Chain: Seamlessly Linking Operations From Components to Content

The Toshiba inter-company value chain is multidimensional, cutting across all operations from components and terminals to applications,

content distribution and platforms. Today, multimedia communications are revolutionizing a mobile market that is fast moving beyond

simple voice communications. To ensure a leading presence in the mobile arena, we reinforced our value chain in April 2001 with the

establishment of the Mobile Communications Company. The company has a twofold mission: to commercialize next-generation cellular

phones, mobile information terminals and other high-end mobile communications devices; and to push further into the global marketplace.

Mobile devices are a Toshiba forte. We command a high share of the North American CDMA cellular phone market. In Japan, we have a

proven track record of delivering results in personal digital cellular (PDC), CDMA and personal handy system (PHS) phones. Add to that the

fact that we have sold more portable PCs worldwide than anyone else for seven consecutive years. The next-generation cellular phones

that we will supply to NTT DoCoMo, Inc. in the Japanese market in fiscal 2001, will add to our legacy.

Next-generation cellular phones will process moving images and high volumes of data at approximately 200 times the speed of existing

phones. Toshiba’s hallmark high-value-added components will help to build our share in this market. Our phones will incorporate:

*The world’s first single-chip MPEG-4 LSI and other high-performance semiconductors

*LCDs supporting high-resolution moving images

*High-volume, slimline batteries

*BluetoothTM technology enabling direct wireless communication with other digital devices

With the rollout of next-generation phones, we will reinforce our global business expansion. In Europe, we will ally with Siemens AG, to

launch the world’s first dual-mode handsets, compatible with both W-CDMA and GSM, in 2003. Siemens is among the preeminent producers

of GSM handsets in Europe. We will seek to join this elite group by fusing our W-CDMA technology with Siemens’ GSM technology to create

a unique mobile handset. We will also unveil our next-generation cellular phones in China from the first quarter of 2002, and in Brazil from

the first quarter of 2003.

The unyielding advance of the Internet has placed one-to-one interaction at the heart of business. We are staying ahead by focusing on

total solutions, from development of killer content through to systems for producing content and for mobile e-commerce.

The Ekimae Tanken Club (http://ekitan.com), a popular site providing train schedules and connections, road maps and other informa-

tion, has seen an increase in members paying to use the service through Japanese cellular phone carriers. We will expand the site’s

e-commerce with the introduction of hotel reservation and other services. In a related move, we have purchased the travel site @Travel.

Other Net-based initiatives abound. Our FreshEye portal site (http://www.fresheye.com) offers a comprehensive search engine. NewsWatch

(http://www.newswatch.co.jp) is a business information service providing users with personalized news. And we have begun distributing

music online at du-ub.com (http://www.du-ub.com), a site with a finger on the pulse of content distribution in the broadband era.

We plan to enter the Personal Digital Assistant (PDA) market in Japan. Our PDAs will encapsulate Toshiba’s capabilities as a company

dedicated to excellence. They will harness our smaller, more lightweight technologies, state-of-the-art mobile chipsets, and other applications,

BluetoothTM and Toshiba-brand services. Our aim is to nurture mobile operations as a second revenue stream after portable PCs.

value chain

we integrate

The photographs show
conceptual products.

innovative technologies

we invent

Setting the De Facto Standards in High-Value-Added Components

Semiconductors, LCDs, batteries, memory cards and other essential enabling technologies are at the center of Toshiba’s components busi-

ness; and at the heart of the mobile and network era that is now dawning. We are striving to generate higher earnings by setting de facto

standards in key components, as we continue our tireless pursuit of inventions that will create new markets.

Advances in semiconductors translate into new capabilities for products and new business for Toshiba. Aware of that, we continue to culti-

vate innovative technologies. For example, we have developed a high-performance system LSI that integrates multiple function blocks into

one chip. We are spearheading new concepts in the mobile market, networks, digital appliances and other growth areas, capitalizing on our

traditional strengths in semiconductor operations and our ability to deliver products tailored to customer needs. The Toshiba-developed

NAND flash memory is a global standard; we boast the top share in the world market for discrete devices; and we jointly developed the

CPU for PlayStation®2 with Sony Computer Entertainment, Inc. (SCEI). These achievements underpin our forward drive as an industry

frontrunner.

Alongside advances in technology, we are sharpening our focus on customers, and teaming up in product development with leading indus-

try powerhouses to slash time to market. These partnerships are creating synergies in important ways. For instance, we are collaborating

with SCEI and IBM Corporation to develop a “supercomputer on a chip” that will provide an essential and scalable platform for the broad-

band network era. We are also working with Infineon Technologies AG on MPEG-4 interface specifications and Ferroelectric Random Access

Memory (FeRAM). With Fujitsu Limited and Taiwan’s Winbond Electronics Corporation, we are advancing leading-edge DRAM technologies

using 0.13 and 0.11µm process design rules. And together with Sony Corporation, we are developing state-of-the-art process technologies

and 0.10 and 0.07µm process technologies for system LSIs.

After leading the world in the development and manufacture of large-sized low-temperature polysilicon TFT LCDs, we are now delivering

displays for diverse applications in next-generation cellular phones and mobile information terminals. As we do so, we are also reinforcing

our manufacturing capacity for these fast, bright, high-resolution displays, through a Singapore-based joint venture with Matsushita Electric

Industrial Co., Ltd. that will be the world’s largest TFT production facility when it comes on line in July 2002. Among the anticipated bene-

fits from this operation are enhanced cost competitiveness and a larger share of a larger market. Of course, we are exploring the potential

of low-temperature polysilicon TFTs to the full. One innovation, achieved in conjunction with Microsoft Corporation, was to fix the specific-

ation for an easy to read eBook—and then went on to commercialize the product.

Looking further to the future, mass production of next-generation OLED panels is targeted for fiscal 2002. Here, we combine breakthroughs

in bringing full-color visual imaging to this bright, low-power display, with the high-speed drive circuits developed for our industry-leading

low-temperature polysilicon TFT LCDs.

In line with our emphasis on the mobile arena, our battery business focuses on lithium-ion rechargeable batteries, ideally suited to mobile

products. A&T Battery Corporation, formerly a rechargeable battery manufacturing joint venture between Toshiba and Asahi Kasei

Corporation, has been made a wholly owned subsidiary. This will enable us to participate in the mobile product development process from

the planning stage. And it will shorten development times and further sharpen our focus on creating super-slim high-volume batteries that

will boost our market share.

Memory cards and card slots will be ubiquitous in future, an integral, essential part of all digital devices. From this premise, we are leading

the way in creating high-capacity memory cards that set de facto standards for the industry. Toshiba’s SmartMediaTM card already boasts

an overwhelming market share in digital still cameras. The SD Memory Card, developed jointly with Matsushita Electric Industrial Co., Ltd.

and SanDisk Corporation of the U.S., offers greater security for visual and audio media applications—and very much more—thanks to built-

in copyright protection functions. The SD Forum publishes standards for use of the card that are supported by the hundreds of companies

that are working to bring SD to their products.

In all strategic components our goals are the same: to define the de facto standard and to boost earnings by constantly

challenging ourselves to develop evolutionary, state-of-the-art products.

*PlayStation is a registered trademark of Sony Computer Entertainment, Inc.

Mobile Disk: The size of a credit card, this 1.8-inch 2-gigabyte removable hard disk drive slips into the pocket
and neatly into a PC card slot. Target applications include personal mobile equipment and car navigation
systems. (Top)

SmartMediaTM: The memory card of choice in digital still cameras, where an overwhelming market share has
made SmartMediaTM the clear de facto standard. (Right)

PC Cards: The SmartMediaTM and the SD Memory Card compatible Adapter PC Card supports storage of
images and music, including MP3 files. Its versatility illustrates Toshiba’s support for all aspects of mobile
multimedia. (Far right)

Digital “FACE”: The centerpiece of home networks, these digital TVs can interface with digital memory devices
and are the first in the industry equipped with a SmartMediaTM slot. (Left)

Sensation du Cinéma: Toshiba is moving into content, and planned and produced Sensation du Cinéma,
transmitted on December 1, 2000, the first day of BS digital broadcasting in Japan. (Center)

WOWOW: Toshiba BS digital broadcasting equipment at WOWOW, Inc. A monumental market share reflects
the expertise and acclaimed solutions prowess that go into Toshiba’s broadcasting systems. (Facing page)

Pioneering New Initiatives, Shaping Visionary Business Models Beyond the Hardware Realm

Attaining industry leadership in digital broadcasting is one of our clear targets. We are working from a solid footing, including the highest

share of Japan’s broadcasting equipment market. MediaServe Corporation, our digital broadcasting subsidiary, spearheads these efforts.

We also have unparalleled experience in personal authentication and settlement functions for interactive services, and in television re-

ceivers—fast transforming to become home interactive information terminal and content production. We are taking full advantage of

these strengths to shape new B2B2C business models that integrate all upstream and downstream processes and make full use of the

promise of broadband solutions via digital broadcasting. Our integrated approach embraces three key areas: broadcasting equipment

business; television-based commerce services and content; and home-use hardware. Following the launch of BS digital broadcasting in

December 2000, and with digital terrestrial broadcasting to commence in 2003, we have moved to get businesses up and running quickly.

In the broadcasting business, our renowned strength in analog systems, where we control around half of the market, helped us capture

crucial equipment orders from five of six BS digital broadcasters and six of eight data broadcasters. Drawing on this competitive advantage,

we aim to seize a high share of the digital terrestrial market as new demand emerges. To this end, we acquired Oki Electric Industry Co.,

Ltd.’s wireless transmission business for broadcasting stations, and entered into an alliance with NTT Data Corporation to jointly develop

total solutions systems for digital terrestrial broadcasting.

In television commerce, Toshiba, Matsushita Electric Industrial Co., Ltd. and other companies established ePF Network Corporation, a joint

endeavor dedicated to standardizing receiver storage-type datacasting services, service use protocols and other digital broadcasting relat-

ed areas. Toshiba and eight others also established e-Port Channel Corporation to promote storage-type datacasting services. The compa-

ny will develop a broad spectrum of services. For example, around 1,000 virtual shopping malls will be opened, from which

up-to-the-minute product information, films, music, and games software will be downloadable to receivers. In particular, we will tap our ex-

pertise in providing interactive services—we run Japan’s only interactive service via analog data broadcasting—to stay ahead of the pack.

We will, for example, launch our own advertising initiatives interweaving TV shopping, TV banking, content distribution, real-time marketing

research (including customer perception surveys before bringing products to market), and service coupons. Working in collaboration with

Nippon Shinpan Co., Ltd., we have developed an approval and settlement system for swift personal authentication of large volumes of response

data received following broadcasts. In these and many other ways, we seek to reap the benefits of our pioneering initiatives in this field.

The growth of the digital broadcasting business hinges on the provision of highly entertaining content. We have been honing our television

program production skills through two subsidiaries, MediaServe Corporation and Toshiba Digital Frontiers Inc. Also responsible for produc-

tion of TV programs is TOSKADOMAIN Co., Ltd., a joint venture between Toshiba and Kadokawa Shoten Publishing Co., Ltd. Our proactive

efforts to develop content can be evidenced in other alliances, too. In music, we are working with Toshiba-EMI Ltd. In movie production, we

operate a joint venture, Towani Corporation, in a tie-up with Nippon Television Network Corporation and Warner Bros. And we work together

with Amuse Pictures, Inc. to distribute foreign films to Japanese cinemas and to develop the movie redistribution/video business.

In home-use hardware, we directed core in-house technologies and capabilities, including Toshiba-developed LSIs, application software and

display technologies, to roll out a line of digital broadcasting receivers. To get our storage-type services for TV commerce underway, we are

championing the concept of home networks and developing technologies that link PCs and mobile tools to HDD, DVD and D-VHS recorders

and other storage media.

initiative

we unite

T O S H I B A A N D T H E E N V I R O N M E N T

Fiscal 2001 heralded the start of Toshiba’s third voluntary environmental plan,

which also sets targets for the Mid-Term Environmental Plan, integrating envi-

ronmental protection activities and goals with business operations. In February

2001, Toshiba’s 10th Environmental Technology Exhibition, an event open to the

public, showcased efforts to cast Toshiba as a recycling-oriented company. Other

initiatives in fiscal 2000 included the introduction of environmental accounting

and “green procurement.”

Results of the Secon d

Toshiba’s second voluntary environmental plan ended in fiscal

Voluntary Environmen tal Plan

and Vision for the Future

2000. The plan set out 12 targets, including implementation

of product assessments and reducing the volume of parts and

materials that pose challenges in recycling. Toshiba is pleased to announce that the

majority of these targets were achieved.

The third voluntary environmental plan, launched in fiscal 2001, widens its coverage

to all processes from manufacturing to recycling. Key goals include reducing the

volume of chemical waste and other waste for processing, recycling end-of-life prod-

ucts, employing lead-free solder, and engaging in “green procurement.” The plan

adds substantial momentum to Toshiba’s comprehensive efforts to become a truly

recycling-oriented company.

Efforts to Prevent

Global Warming

Toshiba is continually developing products offering enhanced

energy efficiency. Toshiba takes a proactive approach to energy

conservation at its offices, and is working to prevent global

warming through dedicated efforts to reduce CO2 emissions. Toshiba has set itself
the target of reducing the ratio of CO2 emissions to net sales by 25% by fiscal 2010
compared with fiscal 1990 levels. Currently, Toshiba is achieving levels 1% above

those it is obliged to meet under energy conservation laws. In fiscal 2000, Toshiba

reduced CO2 emissions by 3% compared with the previous fiscal year, and 2% com-
pared with fiscal 1990. The ratio of CO2 emissions to net sales improved 11% year
on year, and by 17% compared with fiscal 1990.

In semiconductor and LCD production, the ratio of CO2 emissions to net sales im-
proved 25% on fiscal 1990 levels, despite a 34% increase in CO2 emissions. CO2
emissions from operations connected to information & communications and social

infrastructure systems, power systems and home appliances declined by between

40–46%.

Reducing the Environmental

Toshiba is committed to becoming a recycling-oriented compa-

Burden from Production

to Recycling

ny that reduces environmental loads in all product processes

from manufacturing to use and reuse. Under this concept,

Toshiba engages in a diverse range of environmental initiatives, including effective

use of resources, efforts to prevent global warming, enhanced control of chemical

substances, development of environmentally responsible products, and recycling

end-of-life products. Profiled below are just some of Toshiba’s activities.

(cid:1) Zero Emission of Waste Products
Measures to control environmental loads start with efforts to cut consumption of

electricity, heavy oils, kerosene and water, as well as the volume of chemicals and

waste. The total waste generated by the Toshiba Group in fiscal 2000 amounted to

186,000 tons, a 4,000 ton increase reflecting rising net sales. However, 91% of this

was recycled and the 7,000 tons sent to landfills represented a 1,000 ton decrease

from the previous year. Toshiba will work to improve its technologies in this area,

and the third voluntary environmental plan targets zero emission of waste products

(no more than 1% of total emissions as processed waste) by fiscal 2003.

(cid:1) Environmentally Conscious Products (ECPs)
Toshiba positions the creation of environmentally conscious products (ECPs) that

reduce environmental loads as a fundamental manufacturing concept. Particular

attention is paid to design, environmental assessments and environmental labeling.

Toshiba-formulated basic provisions for environmental labeling stipulate labeling

methods for in-house systems and environmental performance of products.

Individual environmental standards for major products other than PCs have also

been established. Toshiba is stepping up its use of lead-free solder, and home

washing machines, tumble dryers, microwave ovens and other home appliances

were manufactured with lead-free solder in fiscal 2000.

One major result in ECPs was the Super Power Eco Series, an air conditioning system

for retail premises that received Japan’s Energy Conservation Prize. Commercialized

in February 2001, the system contains a new type of refrigerant that reduces power

consumption to 46% of levels recorded 8 years ago. That makes the Super Power

Eco Series the industry’s most efficient performer. Toshiba’s portable PCs were also

the first to receive Blue Angel accreditation, Germany’s highly respected environ-

mental labeling standard, in December 2000.

(cid:1) Recycling End-of-life Products
Toshiba is actively engaged in developing recycling technologies, building group-

wide environmental mechanisms and minimizing costs. With a view to applying recy-

cling technologies and proving new technologies, Toshiba established Nishinihon

Consumer Electronics Recycle Co., Ltd. in fiscal 1998 to recycle end-of-life home

appliances in Kita-Kyushu. The company is achieving a high recycling ratio through

manual disassembly, machine crushing and use of separation equipment, and is

appropriately disposing of freon and other environmentally-harmful substances. To

recover and recycle end-of-life PCs from businesses, Toshiba established recycling

centers in 10 locations in major urban areas in Japan, with the Toshiba PC Recycling

Center at the core.

For more information, please visit http://www.toshiba.co.jp/env/english

The Toshiba Medium-Term Environmental Management Plan

Items

FY2002 targets

Voluntary plan targets (FY2005)

Zero emissions
Reduce chemical emissions
Reduce CO2 emissions/sales
“Green procurement”

Product information

Reduce power consumption
vs. product performance
Use of lead-free solder

2% of waste sent to landfills
10% reduction vs. FY2000
18% reduction vs. FY1990
Set green procurement targets using FY2000
as the reference year
20% of products in each category to be
environmentally compatible
10% reduction vs. FY2000

By FY2003
30% reduction vs. FY2003 in FY2005
25% reduction vs. FY1990 in FY2010
Set green procurement targets using FY2000
as the reference year
50% of products in each category to be
environmentally compatible
30% reduction vs. FY2000

Eliminate lead-based solder from all major new
products in key home appliance categories

Eliminate lead-based solder from all products
by 2003
Complete elimination steps by December 2004

Eliminate all HCFCs*

—

*Hydrochlorofluorocarbons are a refrigerant used in air conditioners and many other products.

TOSHIBA2001-AR(E)/1-32 01.7.28 6:02 PM ページ16

B O A R D O F D I R E C T O R S

Taizo Nishimuro*
Director
Chairman of the Board

Tadashi Okamura*
Director
President and Chief
Executive Officer

Kiyoaki Shimagami*
Director

Yasuo Morimoto*
Director

Tomohiko Sasaki
Director

Tetsuya Mizoguchi
Director

Takeshi Iida
Director

Hiroo Okuhara
Director

Tadashi Matsumoto
Director

Kozo Wada
Director

Kosaku Inaba
Director

Sakutaro Tanino
Director

Yasuhiko Torii
Director

*Representative Director

E X E C U T I V E O F F I C E R S

S T A T U T O R Y A U D I T O R S

Akinobu Kasami
Kenjiro Hayashi
Susumu Terao
Shunsaku Hashimoto
Eiichi Kakei

(As of June 27, 2001)

Corporate

Company

Kiyoaki Shimagami
Senior Executive Vice President
Yasuo Morimoto
Senior Executive Vice President
Tomohiko Sasaki
Executive Vice President
Tetsuya Mizoguchi
Executive Vice President
Takeshi Iida
Executive Vice President
Yuji Kiyokawa
Senior Vice President
Tadashi Matsumoto
Senior Vice President
Kaoru Kubo
Senior Vice President
Masaki Matsuhashi
Senior Vice President
Toshitake Takagi
Vice President
Sadazumi Ryu
Vice President
Toshio Yonezawa
Vice President
Makoto Azuma
Vice President
Yoshiaki Sato
Vice President

Hiroo Okuhara
Senior Vice President
Shinsuke Kawamura
Vice President
Tsuyoshi Kimura
Senior Vice President
Tsutomu Miyamoto
Vice President
Atsutoshi Nishida
Senior Vice President
Ginzo Yamazaki
Vice President
Yoshihiro Nitta
Vice President
Toshiyuki Oshima
Senior Vice President
Yasuo Ozaki
Vice President
Masao Niwano
Vice President
Takeshi Nakagawa
Senior Vice President
Susumu Kohyama
Senior Vice President
Shigeo Koguchi
Vice President
Katsuji Fujita
Vice President
Eisaburo Hamano
Vice President
Yasusuke Sumitomo
Vice President
Masamichi Katsurada
Vice President
Makoto Nakagawa
Senior Vice President

REVIEW OF OPERATIONS AND

FINANCIAL SECTION

AT A GLANCE

REVIEW OF OPERATIONS

RESEARCH AND DEVELOPMENT

MANAGEMENT’S DISCUSSION AND ANALYSIS

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF SHAREHOLDERS‘ EQUITY 43

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT ACCOUNTANTS

A T A G L A N C E

2001 Toshiba In-house Companies

(cid:1)

iVALUE CREATION COMPANY

Tsutomu Kawada,
President

Building on Internet-based information services centering on the B2C market-

place, the company is now active in a range of areas that includes portal sites

and other webtop services, content production and distribution and ASP ser-

vices for mobile users. The future focus will be on broadband Internet-related

business for the mobile market.

e-SOLUTIONS COMPANY

Hiroo Okuhara,
President

A philosophy of cooperative creation and value for customers underpins oper-

ations in four key sectors: systems integration and solutions services extending

from manufacturing industries to e-government; e-Net business to develop

Internet trading forums; comprehensive digital broadcasting services from

broadcasting equipment to TV commerce; and platform development for new

areas, such as wireless access and ITS.

SOCIAL INFRASTRUCTURE SYSTEMS COMPANY

Tsuyoshi Kimura,
President

Advanced systems support the private and public sectors in areas as diverse

as railroads, water treatment, aviation, traffic, the environment, industrial plant

and electric power transmission and distribution. Integrated solutions services

extend from system construction to operation and maintenance. The compa-

ny’s alliances with other global leaders contribute to enhanced international

competitiveness.

DIGITAL MEDIA NETWORK COMPANY

Atsutoshi Nishida,
President

Bringing the latest technological advances to state-of-the-art networks opens

the way to new possibilities and lifestyles in the home and the office. The

company embeds wireless solutions including BluetoothTM, along with MPEG-4

and other important advances, into the hardware supporting today’s networks,

including PCs, digital TVs and other visual products, DVD drives, SD Memory

Cards and other storage devices.

MOBILE COMMUNICATIONS COMPANY

Tetsuya Mizoguchi,
President

Next-generation cellular phones and mobile terminals support strategic moves

toward a dominant position in the high-growth mobile devices market. Entry

into the European market has been achieved through an alliance with Siemens

AG under a global marketing strategy that also embraces early entry into the

Chinese and Brazilian markets.

POWER SYSTEMS & SERVICES COMPANY

Toshiyuki Oshima,
President

Advanced capabilities cover generating equipment, systems and services in

nuclear, thermal and hydroelectric power generation, power transmission and

distribution and system monitoring. As Japan’s leading energy systems

supplier, the company is enhancing its competitiveness through alliances

with Japanese and international partners, and extending business to the

global stage.

SEMICONDUCTOR COMPANY

Takeshi Nakagawa,
President

From its leading position across a broad product range, the company is focus-

ing on network devices, digital consumer equipment, mobile devices and other

growth markets. As it bolsters its line-up of discrete components, high-value-

added memories and system LSIs, the company also pursues strategic al-

liances that pave the way to joint development of next-generation products

that will strengthen its competitive edge.

DISPLAY DEVICES & COMPONENTS COMPANY

Eisaburo Hamano,
President

Strategic support for high-value-added products incorporating LCDs, SED,

rechargeable batteries and other key devices point the way to growth. As it

ramps up production capacity for polysilicon TFT LCDs, the company looks to

the future with the development of OLED panels and other next-generation

products. In its battery operations, the company specializes in lithium-ion

rechargeable batteries, essential components of mobile products.

MEDICAL SYSTEMS COMPANY

Masamichi Katsurada,
President

Technological excellence translates into an overwhelming share of the Japanese

market for diagnostic imaging equipment and systems, such as diagnostic X-ray

systems, CT systems, MRI systems and diagnostic ultrasound systems, and a solid

base for continued growth in the world market. Close relationships nurtured

with customers support the company in providing optimized medical systems

solutions that combine PACS, hospital information systems and ASP services.

HOME APPLIANCES COMPANY

Makoto Nakagawa,
President

Market-winning refrigerators, washing machines and other compact home

appliances are designed and developed from the customer’s perspective.

A move into the global market is reinforced by technological alliances with

leading global manufacturers that support moves to boost Toshiba’s brand

equity in China, other parts of Asia, Africa, the Middle East and elsewhere.

R E V I E W O F O P E R A T I O N S

8
5
8
,
1

7
2
8
,
1

6
9
7
,
1

’99 ’00 ’01

NET SALES

(¥ billion)

SHARE OF SALES (%)
Years ended Mar. 31 1999 2000 2001
29.4 28.5 26.3

Information
&
Communications
and
Industrial
Systems

Segment sales declined 2% to ¥1,827.0 billion (US$14,734

million) despite strong performances from automated infor-

mation equipment and steady results in telecommunication

systems. Furthermore, a stagnant market and fierce price

competition contributed to a 28% decline in operating in-

come to ¥27.3 billion (US$220 million). In fiscal 2001, the

segment will expand its IT operations by developing even

more competitive IT solutions through strategic investment of resources, alliances and

other initiatives.

The diverse markets served by the Information and Industrial Systems & Services
Company in fiscal 2000 embraced government, manufacturing, distribution, financial
institutions, telecommunications, broadcasting, social infrastructure, transport, and the
space industry. Seeking to enhance support for these customers, and to hone business
efficiency, Toshiba decided to divide the company into two new in-house companies
and launched the e-Solutions Company and the Social Infrastructure Systems Company
in April 2001.

The e-Solutions Company brings together system IT-related operations from the in-house
companies and fuses them in a dedicated organization active in four strategic areas. The
first of these is consulting, systems integration (SI) and solutions for manufacturing, dis-
tribution, logistics and government, provided on the basis of “on-site best-fit solutions.”
Second is e-Net business, and provision of forums for e-commerce, among them online
procurement and television commerce—areas where Toshiba as a whole is taking the ini-
tiative—and Application Service Provider (ASP) services to support them. The third area
focuses on total solutions in digital broadcasting services, integrating upstream through
downstream processes, from broadcasting equipment to television commerce and con-
tent. Finally, the company’s platform business builds the basic platforms essential for SI
solutions, and offers fixed wireless access systems, Intelligent Transport Systems (ITS)
and other platforms.

The e-Solutions business
Driven by government requirements on one side and stiffening price competition on the
other, Toshiba’s government information systems business is developing dedicated ad-
ministration and e-commerce systems for public administration: G-EC Solutions. In
March 2001, Toshiba reached agreement with Japan Information Processing Service
Co., Ltd. and Mitsubishi Electric Corporation to work together to develop and market
G-EC Solutions.

The Toshiba-made terminals for
Japan’s new toto sports lottery
won Japan’s Fiscal 2000 Good
Design Award. The online terminals
can be found in over 6,000 loca-
tions nationwide.

Toshiba’s Network Switching Equip-
ment assures the integrity of sub-
marine optical systems, restoring
connections in the event of inter-
ruption by automatically selecting
the shortest recovery route.

State-of-the-art monitoring and control
systems improve reliability for this water-
treatment system. An ergonomic design for
the monitoring room itself ensures a comfort-
able, operator-centered work environment.

In the automated information equipment field, Toshiba won a number of large contracts.
These included automatic teller machines (ATMs) and automatic letter processing systems
for the Ministry of Posts and Telecommunications, sports lottery terminals and ticket
checkers for the Japan Sports Advancement Lottery Ltd., and toll collection systems for
the Japan Highway Public Corporation.

The market for broadcasting systems in Japan is expanding, with the launch of BS digital
broadcasting in December 2000 and digital terrestrial broadcasting scheduled to com-
mence in 2003. Toshiba delivered broadcasting equipment to WOWOW Inc. and other
companies during fiscal 2000. In November 2000, Toshiba, Matsushita Electric Industrial
Co., Ltd. and other companies established ePF Network Corporation, a joint endeavor
dedicated to planning storage-type datacasting and interactive data broadcasting
services. Through these and other initiatives, Toshiba will engage in platform operation,
interactive marketing and other businesses.

In e-Net business, Toshiba focused on the launch of the e-ingBiz.com e-marketplace.
An online vehicle for Toshiba’s procurement activities, e-ingBiz.com is also an open
e-marketplace that has already signed up 1,100 vendors.

Toshiba’s Social Infrastructure operations were boosted by an agreement with Matsushita
Electric Industrial Co., Ltd. in March 2001 to jointly develop information system solutions
for manufacturing plants. The tie-up will initially concentrate on three-dimensional computer
aided design (CAD), product data management (PDM) and electronic documents filing.

During fiscal 2000, Toshiba reinforced its capabilities and operations in systems and
services with a series of new companies. Knowledge Integration Services Co., Ltd., estab-
lished in June, provides consulting services on information databasing and sharing. Toshiba
Location Information Co., Ltd., established in April 2001, by five partners, including Alps
Electric Co., Ltd., and Video Research Ltd., seeks leadership in the positioning information-
related business. Toshiba Logistics Solutions Corporation, also established in April 2001,
further advances Toshiba’s logistics-related operations.

Toshiba’s Social Infrastructure Systems Business
Toshiba’s Social Infrastructure Systems business develops, builds, installs and maintains
essential infrastructure and state-of-the-art industrial systems. Competitive core products
provide the leverage that enables this new company to offer comprehensive top-notch
solutions to customers around the world.

Social infrastructure, the invisible thread that runs through and sustains our modern soci-
ety, is a key area where Toshiba is seeking enhanced earnings. One area of emphasis is
extended capabilities in public systems, primarily water supply and drainage systems.
Another is the move into new business, including O&M (Operation & Maintenance) and
PFI (Private Finance Initiative) operations. During fiscal 2000, the Taiwan Shinkansen
consortium of Toshiba and six other Japanese companies, established two new compa-
nies to promote work on the Taiwan high-speed rail project. In August 2000, The Taiwan
Shinkansen Corporation was set up to supply electrical and machine systems. And in
March 2001, Taiwan Shinkansen Maintenance Service Corporation began its mission to
provide operation and maintenance services. Toshiba will focus on large-scale projects
and transport and information-related fields overseas amid continuing curbs on plant
and capital investment in Japan.

The industrial systems sector encountered a severe operating environment. Here, boosting
cost competitiveness was a key theme. To this end, in April 2000 Toshiba spun off the
manufacturing and sales divisions of the industrial equipment segment into two separate
companies. In October 2000, Toshiba and General Electric Company established a joint
venture, Toshiba GE Automation Systems Corporation, to market industrial control systems
and provide systems integration services. Toshiba will proactively extend its facility solu-
tions and energy solutions operations as new business models able to adapt to flexibly
changing market structures. In space systems, Toshiba and NEC Corporation jointly estab-
lished NEC TOSHIBA Space Systems, Ltd. in April 2001, which will take over their respec-
tive space operations by October 2001. This move will strengthen Toshiba’s domestic
operations base and enhance global competitiveness.

Toshiba has long been a dominant force in medical systems, and in fiscal 2000 sales
were on the whole strong. Falling sales of diagnostic ultrasound equipment and nuclear
medicine equipment were offset by brisk sales of high-speed multi-slice X-ray CT systems
and sales growth in magnetic resonance imaging (MRI) systems. Major contracts included
a multi-slice X-ray CT system sold to Kyushu University Faculty of Medicine’s University
Hospital, and an MRI system sold to Tohoku University School of Medicine’s University
Hospital. Responding to diversifying customer needs and changes in the market environ-
ment, the Medical Systems Company integrated its domestic sales and service opera-
tions in Toshiba Medical Systems Co., Ltd. in July 2000, bringing together former
Toshiba Medical Systems Co., Ltd. and eight regional service companies, including
Toshiba Medical Tokyo Services Co., Ltd. The October transfer of business planning to
Nasu Operations established Nasu as the global headquarters for Toshiba’s medical sys-
tems business, with functions covering strategic planning, R&D and manufacturing.

Moving quickly to address medical industry trends toward higher management efficiency,
Toshiba has been bolstering its systems solutions business for medical institutions. In July
2000, Toshiba allied with NTT Communications Corporation to launch ASP services in
this regard.

In elevators, Toshiba promoted market-centric management. The Elevator and Building
Systems Company, an in-house company, and the former Toshiba Elevator Corporation
were amalgamated in January 2001 to form Toshiba Elevator and Building Systems
Corporation. The key tasks of the new company are to develop market-centric products
and to respond quickly to customers under an integrated system extending from
development, manufacturing and sales through to maintenance. In fiscal 2000, a new
model of the space-saving, energy-conserving machine-room-less SPACELTM elevator
was launched, and continued to post high sales.

When Taiwan’s high-speed rail project starts
operation between Taipei and Kaohsiung
in 2005, it will rely on electrical and control
systems designed and produced by Toshiba.

Launched in March 2001, the Excelart
high field MRI system for general
hospitals incorporates Pianissimo, the
world’s best noise reduction technology.

Toshiba’s keen attention to design
is clear to see in these elevators in
a Singapore shopping center.

Digital
Media

The continuing wave of digitization brought increased demand

for mobile, network and visual equipment and generated a

4% rise in segment sales to ¥1,578.6 billion (US$12,731 mil-

lion). However, operating income declined 51% to ¥23.8 bil-

lion (US$192 million) largely as a result of sluggish PC sales

in a slowing U.S. economy. In fiscal 2001, this segment has

seen extensive restructuring in overseas PC operations.

Through the enhancement and fusion of technologies and core competence in AVC4—

audio visual products, computers, communications and cards—and in optical and mag-

netic disks, the segment will concentrate efforts on creating value that epitomizes the

approaching broadband era.

Established in April 2000, the iValue Creation Company offers information services that
provide the infrastructure for the Internet and mobile Internet. Of particular note among
advanced websites operated by Toshiba, the Ekimae Tanken Club (http://ekitan.com)
has seen its technology adopted by other leading sites in Japan, and now boasts over
350,000 paying members who use cellular phones to access its services. In fiscal 2000,
Toshiba also launched Application Service Provider (ASP) services for other companies’
websites. Early success includes support for Matsui Securities Co., Ltd. and other securi-
ties companies offering share information and share transaction services via cellular
phones. The iValue Creation Company is venturing into new business domains with high
B2C and e-commerce growth potential, such as travel, finance, and music distribution.

The scope of the Digital Media Network Company covers computer network equipment,
PCs, data storage media and other peripherals, visual products and mobile devices. The
company’s energies are focused on development of innovative products with high cus-
tomer appeal, and its advantages include market-leading know-how in bridge media,
BluetoothTM, MPEG-4 and other technologies that are adding new capabilities and value
to mobile products.

9
7
5
,
1

8
1
5
,
1

6
0
4
,
1

’99 ’00 ’01

NET SALES

(¥ billion)

The launch of “Net Business Platform” operations in Japan brought to market Toshiba’s
solution for an optimized balance of hardware and software. Overseas, continuing strong
performances from cable modems ensured Toshiba’s position among the elite in this market.

SHARE OF SALES (%)
Years ended Mar. 31 1999 2000 2001
23.1 23.3 22.7

Toshiba retained its lead as the world’s largest seller of portable PCs for the seventh con-
secutive year. However, global sales declined 7% to ¥710.0 billion as the U.S. slowdown
made itself felt. Efforts to restructure the PC business in the U.S. include aggressive pro-
motion of direct sales to companies and continuing to bring high-value-added products to
market. In the consumer market, Toshiba worked to differentiate its products from those
of its competitors by enhancing Configuration-to-Order (CTO) products, and also initiated
direct sales. Despite intense competition in Europe, Toshiba continued to attract high
support, maintaining the market leadership it has enjoyed since creating the business. In
Japan, Toshiba recorded an all-time high in PC sales, which increased nearly 25% year
on year.

Bridge media of the mobile age. The SD Memory Card
offers high-level copy protection and high-volume storage
capacity; SmartMediaTM offers simplicity and versatility.

Toshiba firsts in commercializing BluetoothTM products
include the BluetoothTM PC Card and Wireless Modem
Station, and the BluetoothTM wireless link for data transfer
from a PC to an LCD projector.

Products imbued with Toshiba’s individuality continue to hit the market. For example,
in fiscal 2000, Toshiba commercialized the world’s first PC with CD-ROM, CD-R/RW and
DVD-ROM multi-drive. Production of portable PC models for the U.S. market was trans-
ferred from Toshiba America Information Systems Inc. to Toshiba Information Equipment
(Philippines), Inc., and Toshiba began producing portable PCs in China in June 2000.
These, and other operations, are integrated into Toshiba’s advanced supply chain man-
agement (SCM) and customer relationship management (CRM) that are raising manage-
ment efficiency and enhancing individual customer response capabilities worldwide.

In mobile devices, Toshiba recorded higher earnings on the back of domestic demand
for Internet-enabled cellular phones and the migration from old products to color LCD
terminals. Given the approaching launch of next-generation cellular phones and the rapid
penetration of mobile devices, Toshiba has transferred its operations in this area from
the Digital Media Network Company to a new in-house company, the Mobile
Communications Company, established in April 2001.

In data storage media, Toshiba achieved higher earnings for fiscal 2000 as a whole, as
steady growth in the first half dampened the effects of a rapid slump in demand in the
U.S. PC market from the fourth quarter onward. Toshiba continues to boast a high share
in DVD drives, commanding around half the total market share for high-value-added
slim DVD-ROMs worldwide. Toshiba’s multi-drives, which combine a slim CD-R/RW and
DVD-ROM to stay ahead of customer needs, proved highly popular. In HDDs, the main
goals for the current fiscal year are creating higher storage capacity, building HDDs into
various digital products other than PCs, and expanding the market for 1.8-inch HDDs
for mobile devices.

Toshiba’s wide range of visual equipment includes color TVs, projection TVs, DVD players
and LCD data projectors. Higher earnings were posted for color TVs for the Japanese
market, where Toshiba was first in the industry to commercialize BS digital TV receivers,
and continued to bolster its line-up of flat- and wide-screen TVs. Toshiba’s Digital “FACE,”
series of BS digital Hi-Vision TVs turned in a strong performance. These TVs offer interac-
tive services and are equipped with audio-visual digital network functions, including the
industry’s first SmartMediaTM card slot. Overseas demand for color TVs was steady, with
projection TVs particularly popular in North America and elsewhere. Enhanced software
drove substantial sales growth for DVD players worldwide, including North America,
which accounts for around 60% of the global market.

The popularity of PCs and cellular phones has created new lifestyle scenarios using mobile
audio-visual network functions. Toshiba will support this trend and open up new markets
with products that include digital cameras, portable digital audio players and portable
DVD players.

The Dynabook V Series multi-function drive
plays DVDs and creates CDs; its Fine Super
View LCD offers outstanding picture clarity.
The popular Libretto mini-notebook packs
a high-resolution wide screen and responsive
keyboard for smooth typing.

The combination of a BS Digital Hi-Vision TV with the
RD-2000, hybrid HDD and DVD-RAM reader creates
the perfect means to enjoy digital entertainment.

A big seller for U.S.-based Audiovox,
this new CDMA phone comes in 800M,
1.9G and AMPS formats. In Japan, an
extended lineup of cdmaOne cellular
phones feature color screens and
Internet connectivity.

Power
Systems

This segment as a whole turned in a steady performance

in fiscal 2000, exemplified by strong growth primarily in

North America, that helped push consolidated net sales

up 2% year on year to ¥582.7 billion (US$4,699 million).

Operating income surged to ¥17.5 billion (US$141 million),

up 87% from the previous fiscal year. At the same time, how-

ever, restrained plant and capital investment by electric utili-

ties, as well as other factors, led to a sharp drop in orders, which fell 46% to ¥345.1

billion (US$2,783 million).

Steady net sales in the Power Systems Company reflected strong sales growth in the
North American market, where the power supply industry struggled to keep up with
demand. Orders plummeted, however, as a number of negative factors came into play.
Among these were a decline in large-scale reconstruction projects for nuclear power plants
in fiscal 2000, and plant and capital investment curbs by Japanese power companies.
Furthermore, Japanese power companies, which are pushing ahead with streamlining of
operations to brace themselves for the start of deregulation of electricity retailing, curbed
their plant and capital investment. And price competition heated up in overseas markets.

Major projects completed in fiscal 2000 included construction of power generation
equipment at Tokyo Electric Power Co., Inc.’s Shinagawa No. 1 Thermal Power Station,
construction of reactor facilities at Unit No. 3 of Onagawa Nuclear Power Station, operat-
ed by Tohoku Electric Power Co., Inc., and at Units No. 4 and No. 5 of Chubu Electric
Power Co., Inc.’s Shonan Thermal Power Plant. Major orders included regular inspection
and reconstruction work at Tokyo Electric Power’s Fukushima No. 1 Nuclear Power
Station, and a large-scale substation construction project for Kuwait’s Ministry of
Electricity and Water.

In October 2000, Toshiba reached basic agreement with Mitsubishi Electric Corporation
on a comprehensive alliance in the power transmission and distribution business. The aim
of the alliance is to increase both companies’ development and production efficiencies
and expand their overseas businesses. Three key initiatives will spur Toshiba to become
an elite global player in this field:
•Technological collaboration aimed at increasing efficiency in product development
•Mutual OEM supply to improve productivity
•Joint purchasing of parts and materials to lowering costs

Both companies will also jointly explore the possibility of combining overseas sales and
engineering forces in the future.

1
7
5

3
8
5

1
2
5

’99 ’00 ’01

NET SALES

(¥ billion)

SHARE OF SALES (%)
Years ended Mar. 31 1999 2000 2001
8.4
8.5

8.8

Toshiba is the main contractor for
the 1140MW substation at TEPCO’s
Shinagawa No. 1 Thermal Power Station.
This 1300˚C gas turbine combined-cycle
power plant is scheduled to commence
operation in July 2001.

Toshiba is now able to replace the core
shroud of nuclear reactors, a vital safety
feature, in a shorter timeframe.

In overseas markets, Toshiba reinforced its presence in Asia, primarily China. Rising power
demand in China has been accompanied by fast-paced infrastructure development of
transmission networks geared toward upping power transmission efficiency, while con-
trolling expansion of generation facilities. In October 2000, Toshiba, together with XJ
Electric Corporation, a leading manufacturer in the Chinese power transmission control
and protection field, and Henan Electric Power Construction Co., Ltd., a wholly owned
subsidiary of Henan Electric Power Corporation, established a joint venture to manu-
facture, sell, maintain and provide services for automated power distribution systems.
Toshiba also set up two manufacturing ventures to respectively produce gas insulated
switchgears and vacuum circuit breakers—key components in power transmission
networks for ensuring a stable power supply and increasing reliability.

In March 2000, Toshiba and International Fuel Cells Corporation (IFC) established
Toshiba International Fuel Cells Corporation (TIFC), a joint undertaking that will engage
in all aspects of fuel cell operations from development through maintenance. Global al-
liances transcending industry spheres and borders are driving mega-competition in the
industry. TIFC will weather this by expanding the traditional realm of on-site cells to deliv-
er fuel cells for residential applications. In Japan and the rest of Asia, TIFC will accelerate
its R&D efforts with a view to marketing fuel cells for commercial applications by 2004.
Success will allow TIFC to take center stage as a pioneer in a promising field.

Toshiba supplied the main nuclear power equipment for the world’s first 500kV
underground substation, TEPCO’s Shin-Toyosu Substation.

Electronic
Devices
&
Components

A year-on-year increase of 13% carried consolidated net sales

for fiscal 2000 to ¥1,551.4 billion (US$12,511 million). As

the segment moved into the black for the first time since fiscal

1998, operating income climbed to ¥116.4 billion (US$938

million). Among contributory factors were firm sales of discrete

devices, memories and system LSIs even though semiconductor

demand waned with the slowdown in the PC and peripherals

market in the second half. And earnings from LCD displays surged with the expanding

market for mobile devices. Toshiba is realigning its businesses in dramatic fashion,

with moves directed at developing products that excite the market and generate

stable earnings.

DRAM spot prices entered into a downward spiral in September 2000 that quickly made
its impact felt on Toshiba’s business. In the second half of the year, manufacturers signifi-
cantly scaled back production of PCs and peripherals and the mobile communications
and consumer electronics markets lost momentum, as demand dipped below the first-half
level. Despite this, robust performances in discrete devices, system LSIs and memories
in the first half of the year drove the Semiconductor Company to an 18% year-on-year
increase in sales to ¥1,100 billion. Cost-cutting measures and Management Innovation
2001 yielded operational gains, and these and other factors translated into a substantial
improvement in operating income.

1
5
5
,
1

3
7
3
,
1

7
3
1
,
1

’99 ’00 ’01

NET SALES

(¥ billion)

SHARE OF SALES (%)
Years ended Mar. 31 1999 2000 2001
18.6 21.1 22.4

The company will continue to adhere to its policy of ensuring “growth with profit” in semi-
conductor operations. This will involve targeting growth markets such as network devices,
digital consumer equipment and mobile devices.

In discrete devices, strong sales were recorded by photo couplers and other optical semi-
conductors, and small signal transistors for cellular phones—despite a slowdown in the
second half of the year. Discrete devices are a stable source of high earnings for the
Semiconductor Company, which is determined to remain the industry leader in this area.
Efforts to this end will focus on cultivating promising growth areas, notably telecommuni-
cations and digital consumer equipment. In partnership with Toyoda Gosei Co., Ltd., Toshiba
developed a gallium nitride-based white LED (Light Emitting Diode) that combines Toyoda
Gosei’s LED with Toshiba’s phosphors. It is scheduled for mass production from November
2001. With future improvements in luminosity, the white LED is expected to become an
adequate replacement for incandescent lamps.

In memories, price erosion from September 2000 on brought considerable challenges.
While mid-density NAND flash memories sold well, the slow development of the portable
digital audio player market pulled down demand for high-density products. And, despite
the rapid slowdown in the cellular phone market in the second half, NOR flash memories
stacked with SRAM in a high-density single multi-chip package (MCP) saw robust sales.
DRAMs, SRAMs and flash memories will continue to be the mainstay products in this
area. The company will also shift quickly to high-value-added DRAMs, including direct
RambusTM DRAM, in line with a strategy of reducing its reliance on PC markets. Toshiba
began developing FeRAMs (Ferroelectric Random Access Memory), next-generation
memories, with Infineon Technologies AG in January 2001. The joint venture aims to
develop a 32-megabit FeRAM by the end of 2002. This alliance will enable Toshiba to
expedite its R&D initiatives, and speed introduction of FeRAM to the rapidly expanding
cellular phone market.

Steady demand for system LSIs utilizing leading-edge processes was tempered by slow-
ing second-half sales of LSIs for audio products in China, for PCs and cellular phones,
bipolar LSIs for consumer products, LCD drivers and other products. All of these products
turned in strong performances in the first half of the year. Toshiba will work to deliver
added value by targeting close relations with leading companies in high-demand sectors.
A broad range of areas will be spotlighted, including digital consumer equipment, games
consoles, peripherals, cellular phones, telecommunications, networks, and automotives.
Allying with UK-based ARM, Toshiba was licensed the ARM946E-STM 32-bit embedded
Reduced Instruction Set Computer (RISC) microprocessor core, a move that has enabled
Toshiba to expand its intellectual property (IP) cores for system LSIs. At the same time,
drawing on its technological prowess in manufacturing, Toshiba will offer seminal solutions
for the embedded LSI market. In March 2001, Toshiba, Sony Computer Entertainment,

The clean room at Oita Operations
produces system LSIs for digital
consumer equipment, networks
and communications equipment.
A new annex, opened in April
2001, has expanded operating
scale and technological capabilities.

Toshiba is shifting its DRAM busi-
ness to high-value-added products.
A competitive advantage in high-
speed DRAMs, supports penetra-
tion of non-PC areas, including
digital consumer equipment.

Inc. (SCEI) and IBM Corporation reached a basic agreement to jointly develop an ad-
vanced general purpose processor architecture for a new wave of devices in the emerging
broadband era. The companies will collectively invest more than US$400 million over
the next five years to design a “supercomputer-on-a-chip.” Under the agreement, the
three companies will establish a joint development center within an IBM facility in Texas.
At its peak, the center will be staffed with nearly 300 skilled engineers dedicated to the
development project.

In the process of restructuring its operations, Toshiba has focused firmly on the selection
and concentration on core businesses. In October 2000, Toshiba and Dai Nippon
Printing Co., Ltd. established D.T. Circuit Technology Co., Ltd., a joint venture to develop,
produce and market build-up boards and functional circuit modules. In January 2001,
Toshiba and U.S.-based Amkor Technology Inc. established a joint venture, Amkor Iwate
Co., Ltd., to undertake contract semiconductor assembly and test services. Amkor Iwate
will assemble globally competitive high-end semiconductor products capitalizing on both
companies’ cutting-edge technologies, including bridge-chip packages, and global purchas-
ing channels.

Plummeting prices spurred by intense competition defined the burgeoning market for
LCD displays and stifled earnings significantly. In this environment, Toshiba will aggres-
sively direct resources to its high-value-added low-temperature polysilicon TFT LCDs.

In April 2001, Toshiba and Matsushita Electric Industrial Co., Ltd. established a joint ven-
ture in Singapore to manufacture low-temperature polysilicon TFT LCDs. Full-scale pro-
duction, at what will be the world’s largest manufacturing plant of its kind, is set to
commence in July 2002. The companies will invest around ¥123 billion in the venture,
and projections call for a monthly production volume of 55,000 730(cid:1)920mm boards
in fiscal 2003.

Toshiba plans to bring to market OLED panels, which are expected to be used in cellular
phones and PDAs, in the first half of 2002.

During fiscal 2000, Toshiba set about restructuring its battery operations. As a complement
to its mobile strategy, Toshiba is specializing in lithium-ion rechargeable batteries. In line
with this decision, the company agreed in September 2000 to transfer Toshiba Battery
Co., Ltd.’s nickel metal hydride battery operations to SANYO Electric Co., Ltd. The follow-
ing December, Toshiba made A&T Battery Corporation—formerly a joint venture with
Asahi Kasei Corporation—into a wholly owned subsidiary. In a related move, the Battery
Energy Division was established in January 2001 to amalgamate battery R&D and sales
functions. This move will allow Toshiba to make effective use of pooled resources and to
derive new synergies in its battery operations.

With this LSI, Toshiba will bring MPEG-4
to next-generation cellular phones.
Functions include a video phone.

The cutting-edge system LSI digital
TV chipset, developed for the
December 2000 start of BS digital
broadcasting in Japan.

Toshiba has reinforced its leadership
in low-temperature polysilicon LCDs
by integrating a DAC and SRAM,
cutting cost and power consumption.

8
0
7

0
6
6

’99 ’00 ’01

NET SALES

(¥ billion)

SHARE OF SALES (%)
Years ended Mar. 31 1999 2000 2001
11.6 10.1 10.2

Home
Appliances

Consolidated net sales for this segment rose 7% to ¥708.3

billion (US$5,712 million) thanks to rising demand for refrig-

erators, washing machines and other large home appliances

that offer added convenience. Operating income was ¥18.4

billion (US$149 million), up 3.4 times year on year. The pri-

mary goal in the segment is a business structure capable of

generating stable earnings. Moves toward that will include

continued cost cutting, sales channel development, enlargement of the components

business, and a move into China and other emerging markets.

Sales of refrigerators, washing machines and other large home appliances increased as
Toshiba’s steady stream of innovative products kept it a step ahead of competitors, and
domestic demand surged in the run up to the April 2001 introduction of recycling fees on
four types of end-of-life home appliances. Market share grew in refrigerators, microwave
ovens and rice cookers. The Home Appliances Company also raised Toshiba brand equity
in China and other overseas markets, and expanded operations for DC fan motors—built
into foodservice appliances and refrigerators—and a range of other components.

September 2000 saw Toshiba introduce three new refrigerators to the Plasma Senzo
series, each equipped with a deodorizing function around 10 times more powerful than in
conventional models. Refrigerators for hotel kitchens also posted steady sales.

Robust demand for Toshiba washing machines was again evident in the year under review.
Particularly popular with consumers were new products with unique features. The DD
Inverter Washing Machine, for example, excels in quiet performance. Toshiba’s world-
first DD inverter drum-type washer-dryer Ginga 21 dampens noise and vibration in all
stages of its cycle. The latest model can be used with all makes of household detergents
another industry first.

Toshiba’s small household appliances such as vacuum cleaners, microwave ovens and
rice cookers were again well received by the market. Acclaim was especially notable for a
cordless vacuum cleaner and an emission-free vacuum cleaner with an exhaust recycling
system. The Zenmen Onkan microwave oven also hit the market. Equipped with an 8-
element infrared sensor capable of sensing temperatures in eight areas of the turntable,
its inverter control makes it possible to simultaneously cook at different temperatures.

A key element of Toshiba’s global marketing strategy is to establish manufacturing and
sales alliances. Toshiba will proactively collaborate with Scandinavia-based AB Electrolux,
the world’s largest producer of home appliances. The alliance will continue to focus on
technological exchanges, joint product development, product sourcing, mutual compo-
nents supply and environmental initiatives. In refrigerators, Toshiba undertakes a number
of activities, including technology transfer, with Egypt’s El Araby Co. From April 2001,
refrigerators produced by El Araby will be sold in Africa, predominantly Egypt, under
the Toshiba brand name.

Powerful plasma deodorizing and
antibacterial functions have made
Plasma Senzo refrigerators winners
in the market.

The DD inverter motor of the fully
automatic Ginga 21 washer-dryer
dampens noise and vibration during
its cycle. It can now also be used with
all brands of detergent in Japan.

China is another key area for expanding the Toshiba brand strategy through technology-
sharing tie-ups with leading companies. Production of Toshiba refrigerators in China
began in fiscal 2000. Following the inking of a second-phase five-year technology-sharing
agreement and a trademark licensing agreement with Xi’an Changling Refrigerator Co.,
Ltd., Toshiba also concluded a technology-sharing agreement for fully automatic washing
machines with GD Midea Holding Co., Ltd. Production of washing machines under the
GD Midea brand began during the year. Toshiba also entered into a technology-sharing
alliance regarding DD drum-type washing machines. Further exchanges will be deepened
in a broad range of areas with Shangdong Xiaoya Group Co., Ltd. This alliance will cover
microwave ovens, IH rice cookers and other small appliances, as well as motor operations,
molds and design.

Since its merger in April 1999, Toshiba Carrier Corporation has delivered steady results,
posting positive net income for two consecutive years. This growth has been spurred
notably by high market acclaim for the Daiseikai series of compact air conditioners.

Sales at Toshiba Lighting & Technology Corporation also improved, largely thanks to the
exemplary performance of E-Series fluorescent lighting. Specially designed for develop-
ment and manufacturing facilities, the E-Series system offers easy installation and high
levels of energy and resource conservation.

The cordless “Magic Cyclone Cleaner” uses a nickel metal
hydride rechargeable battery and Toshiba’s “Magic Cyclone”
vacuum technologies to create a small, lightweight but
powerful vacuum cleaner.

Negative ions generated by the Plasma Ion Daiseikai
air conditioner give rooms a natural feeling.

This segment’s primary revenue streams are leasing and other

financial services, real estate operations, including leasing

and sales, and logistics operations. Consolidated net sales for

Others

the year increased 30% to ¥695.7 billion (US$5,611 million).

Operating income was ¥27.2 billion, (US$219 million) up 2%

year on year.

6
9
6

4
3
5

’99 ’00 ’01

NET SALES

(¥ billion)

SHARE OF SALES (%)
Years ended Mar. 31 1999 2000 2001
10.0
8.8

8.2

Research
and
Development

The corporate R&D Center currently focuses its efforts on the

mobile sector, networks, key components, software, the envi-

ronment and other growth areas. The Center performs basic

research and market-centric R&D, and develops the technolo-

gies that will provide the collective foundations of the Toshiba

Group as a whole. The ultimate goal is to bring forth break-

through products to shape the future.

In fiscal 2000, group-wide R&D expenditures totaled ¥327.9 billion (US$2,645 million),
with IT-related fields accounting for a little more than 60%. Toshiba will continue to
concentrate on developing individual technologies that set Toshiba’s products apart
from others, as well as work to expedite the R&D process.

HierocryptTM, a Next-Generation Encryption Algorithm
HierocryptTM is a next-generation encryption algorithm that can be widely applied across
online businesses. Highly secure, offering high speed and scalability on all platforms,
HierocryptTM features Toshiba’s independently developed nested Substitution Permutation
Network (SPN) structure, which offers superior security against every conceivable form
of hacking. At present, Toshiba has proposed HierocryptTM as an encryption algorithm for
government procurement and for standardization by the International Standardization
Organization (ISO) and the International Electrotechnical Commission (IEC). Toshiba has
also recommended the algorithm to Project NESSIE (New European Schemes for Signature,
Integrity and Encryption). Toshiba is now ready to provide a variety of HierocryptTM solu-
tions for electronic commerce, content protection, mobile services and digital broadcasting.

MPEG-4 Transfer Protocol Adopted as the Global Standard
Jointly proposed by Toshiba, NEC Corporation, Oki Electric Industry Co., Ltd., Matsushita
Electric Industrial Co., Ltd. and NTT Corporation to the Internet Engineering Task Force
(IETF), the MPEG-4 Realtime Transport Protocol (RTP) has become the global standard
for image and audio distribution on the Internet, next-generation cellular phones and
other applications. MPEG-4 RTP has been designated as a standard specification by
the ITU Telecommunication Standardization Sector (ITU-T) and by the Third Generation
Partnership Project (3G-PP), which determines standards for image distribution on
Wideband Code Division Multiple Access (W-CDMA) next-generation cellular phones.
These moves will enable images to be distributed over various media, including Internet
telephones. Diverse uses include bringing teleconferencing images, TV programs and
movies to cellular phones and computers.

HierocryptTM is
a highly secure
encryption algorithm.

s
d
n
u
o
r
8
~
6

Plaintext (128bit)

Ciphertext (128bit)

S S S S

S: Substitution
P: Permutation

a
n
g
S

Photon

Source

Current

Gate

Drain

Quantum dot layer

Electron channel

(cid:1)(cid:2)(cid:2) (cid:4)(cid:5)

A single photon sensor brings quantum
encryption closer.

Toshiba created a single-electron
transistor (SET) circuit through
formation of nanometer-scale undu-
lations on a semiconductor circuit
board. The result confirmed room-
temperature operation of a single-
electron transistor circuit.

Successful Development of Single Photon Sensor Realizes the Ultimate Concept
in Encryption
Toshiba Research Europe Ltd. in the UK has developed a highly sensitive, low-noise, single
photon sensor that is critical to the application of quantum encryption. Realizing the ulti-
mate concept in encryption, the quantum encryption system carries digital data of an en-
cryption key on a stream of single photons via an optical fiber, making eavesdropping to
gain unauthorized access to data completely impossible. Toshiba introduced a compound-
semiconductor quantum dot structure to a Field Effect Transistor (FET) device. By doing
so, it became the first company to successfully detect single photons coming into the
quantum dot structure as electrical signal output from the FET structure.

XML Database Engine for Knowledge Management
Companies accumulate vast amounts of data. Extensible Markup Language (XML), a next-
generation Internet language that seamlessly integrates a variety of data, is attracting
attention as a means to manage such data. Toshiba has developed an XML Database
Engine for a knowledge management system that realizes high-speed retrieval and high-
level analysis of huge volumes of XML data, including sales data, memos and mail.
The capabilities of the XML query language developed by Toshiba surpass those of
Structured Query Language (SQL) used in Relational Databases. Use of the engine sup-
ports easy development of powerful XML-based knowledge management systems.

GigaBaseTM Distributed Memory Data Management Middleware
GigaBaseTM, Toshiba’s newly developed distributed database management system (DBMS),
achieves a maximum 100-speed transaction processing performance and alleviates burdens
on systems engineering. GigaBaseTM uses the increasingly rich resources of machine mem-
ories and communications capabilities to provide a new platform for network-oriented
system integration that fuses operating systems, communications and databases. Since
the system employs a data structure that makes maximum use of the characteristics of
computer memories, it is 10 to 100 times faster than conventional DBMS that store data
on hard disk drives. GigaBaseTM enables systems engineers to accurately estimate sys-
tems performance at the design stage. This not only raises the productivity of system
development, but also provides greater flexibility in design change, load distribution,
performance tuning and system expansion.

Successful Room-temperature Operation of a Single-electron Transistor Circuit for
High-level Information Processing
Toshiba is the first company in the world to have succeeded in room-temperature oper-
ation of a single-electron transistor circuit. The circuit has an element structure charac-
terized by undulation in the order of several nanometers on a semiconductor surface.
Previously such circuits operated only at temperatures under –200˚C using liquid nitro-
gen or liquid helium as a coolant. The new circuit was achieved by creating an extremely
thin silicon layer of 2.5 nanometers and optimizing chemical processing techniques on its
surface, which in turn formed nanometer-scale undulations. Single-electron devices will
be used to develop DRAMs with 1,000 times the memory capacity of present versions,
and super-high-speed, low-power-consumption LSIs. For example, the incorporation of
this technology in cellular phones has allowed for highly sophisticated functions, including
sound input and image recognition.

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S

Five-Year Summary
Toshiba Corporation and its subsidiaries
Years ended March 31

Net sales
Cost of sales
Selling, general and administrative expenses
Operating income
Income (loss) before income taxes
and minority interest

Income taxes
Net income (loss)

Per share of common stock:

Net income (loss)

—Basic
—Diluted
Cash dividends

Total assets
Shareholders’ equity

Capital expenditures
(property, plant and equipment)
Depreciation
R&D Expenditures

Number of employees

Millions of yen, except per share amounts

2001

2000

1999

1998

1997

¥5,951,357
4,323,525
1,395,699
232,133

¥5,749,372
4,254,444
1,393,959
100,969

¥5,300,902
3,890,622
1,379,797
30,483

¥5,458,498
3,960,158
1,416,046
82,294

¥5,521,887
3,932,585
1,391,471
197,831

188,099
96,145
96,168

(44,844)
(4,530)
(32,903)

11,218
20,901
(9,095)

18,748
17,313
14,723

125,456
71,593
67,077

¥29.88
29.71
10.00
¥5,724,564
1,047,925

¥(10.22)
(10.22)
3.00
¥5,780,006
1,060,099

¥(2.83)
(2.83)
6.00
¥6,101,929
1,128,753

¥ 4.57
4.57
10.00
¥6,166,323
1,305,946

¥20.84
20.06
10.00
¥5,933,205
1,388,827

269,545
308,294
327,915

188,042

298,512
329,630
334,398

190,870

375,464
309,836
316,703

198,000

339,584
291,418
322,928

186,000

341,020
252,732
332,555

186,000

Notes: 1. Basic earnings per share is computed based on the weighted-average number of shares of common stock outstanding during the period. Diluted

earnings per share assumes the dilution that would occur if dilutive convertible debentures were converted into common stock.

2. Beginning with the fiscal year ended March 31, 2001, the company has adopted Statement of Financial Accounting Standards (SFAS) No. 115,
“Accounting for Certain Investments in Debt and Equity Securities.” Prior period data through the fiscal year ended March 31, 2000 have been
restated to conform with SFAS No. 115.

Results of
Operations

Net Sales

Consolidated net sales in fiscal 2000, the year ended March 31, 2001, increased 4% compared to the
previous year, to ¥5,951.4 billion ($US47,995 million), marking the second consecutive year of top-line
growth. This was primarily attributable to the strong performance of semiconductors and LCDs on the back
of increased demand for digital devices, as well as brisk sales of mobile communications devices and home
appliances. In terms of average exchange rates, the euro declined significantly from ¥115 in fiscal 1999 to
¥100 in fiscal 2000, while the U.S. dollar also declined from ¥111 to ¥109. Net sales were accordingly
down by ¥90 billion. Consolidated figures include the results of 209 subsidiaries in Japan and 114 overseas.

By region, sales in Japan increased 7% to ¥3,753.1 billion (US$30,267 million). Overseas sales declined
2% to ¥2,198.3 billion (US$17,728 million) and accounted for 37% of net sales, down from 39% in
the previous fiscal year. Overseas production increased 6% from ¥980.0 billion to ¥1,040.0 billion
(US$8,387 million).

Information & Communications and Industrial Systems—Sales decreased 2% from the previous
year to ¥1,827.0 billion (US$14,734 million). Sales for government, medical and elevator systems were
slightly increased but these gains were outweighed by lower sales in systems projects for the distribution
industry and small and medium-sized enterprises, and on industrial-use electrical products, due to the
impact of curbs on capital expenditures. Overseas sales rose 17% to ¥390.5 billion (US$3,149 million).

Digital Media—Sales increased 4% compared with the previous year, to ¥1,578.6 billion (US$12,731
million). Overseas, segment sales were down 7% to 964.0 billion (US$7,774 million). Total PC sales
declined from ¥760.0 billion to ¥710.0 billion (US$5,726 million) despite a good domestic perfor-
mance. The decline reflected decreases in volumes and prices caused by economic slowdown in the
U.S. The lowering of PC sales was offset, however, by strong sales in computer network systems, mobile
communications devices and DVD-ROM devices, leading to the overall increase in sales in this segment.

Power Systems—Sales rose 2% over the previous year to ¥582.7 billion (US$4,699 million).
This reflected the achievement of higher sales in nuclear power projects and strong demand for turbine
airfoils in North America. Overseas sales increased 72% to 73.1 billion (US$589 million) compared with
42.6 billion one year earlier.

Electronic Devices & Components—Sales climbed 13% over the previous year to ¥1,551.4 billion
(US$12,511 million). Overseas sales declined 9% to 675.5 billion (US$5,448 million), caused by eco-
nomic slowdown in the U.S.

Semiconductor sales were particularly strong, increasing 18% to ¥1,100.0 billion (US$8,871 million).
This was attributable to sharp growth in system LSIs, strong demand in discrete components for mobile
devices and NAND flash for memory cards, and good performance of DRAMs. In addition, LCD sales
saw substantial growth both in Japan and overseas, principally for TFT LCD screens for notebook and
desktop PCs, cellular phones, PDAs and other mobile terminals.

Home Appliances—Sales rose 7% from the previous year to ¥708.3 billion (US$5,712 million). This
growth reflected brisk sales of refrigerators, washing machines, air conditioners and other appliances, as
well the inclusion of sales of Harison Toshiba Lighting Co., Ltd., which became a consolidated subsidiary
in October 2000. Overseas, segment sales were up 17% to 39.9 billion (US$322 million).

Others—Sales soared 30% over the previous year, to ¥695.7 billion (US$5,611 million). This was
mainly due to growth of intersegment sales reflected from increasing procurement of parts and materials
by Asian subsidiaries.

Net Sales by Region

Years ended March 31

Japan
North America
Asia
Europe
Other

Net sales

Millions of yen

2001

2000

1999

¥3,753,052
828,671
728,969
519,186
121,479

¥3,514,068
906,165
636,317
546,645
146,177

¥3,184,764
842,999
585,086
559,824
128,229

¥5,951,357

¥5,749,372

¥5,300,902

Net Income

Note: Net sales by region are determined based upon the locations of the customers. Therefore, this information is different

from the net sales for geographic segments in segment information on page 37, which are determined based upon
where the sales originated.

Japan—The operating environment in Japan was favorable in the first half of the year, but the economic
outlook became particularly uncertain and presented difficulties in the second half. Nevertheless, strong
demand for PCs, semiconductors and LCDs, coupled with growth in refrigerators, washing machines,
air conditioners, other home appliances and wide-screen TVs, resulted in a 7% increase in net sales to
¥3,753.1 billion (US$30,267 million).

North America—The North American market was defined by rapid changes in the economic environ-
ment during the year, exemplified by an apparent slowdown in the U.S. economy. Net sales were down
9% from the previous year at ¥828.7 billion (US$6,683 million), mainly on account of sluggish sales of
PCs and peripherals.

Asia—Net sales increased 15% over the previous year to ¥729.0 billion (US$5,879 million). Digital
media products were the main contributor to the sales increase, underpinned by a robust Asian economy.

Europe—Deceleration of economic growth in Europe and the impact of a weak euro led to a 5% decline
in net sales, to ¥519.2 billion (US$4,187 million).

Cost of sales rose 2% to ¥4,323.5 billion (US$34,867 million) in line with the increase in consolidated
net sales. Nevertheless, the gross profit ratio improved by 1.4 percentage points and selling, general
and administrative expenses were held to a similar level as the previous year at ¥1,395.7 billion
(US$11,256 million). Accordingly, operating income rose by 2.3 times over the previous year, to
¥232.1 billion (US$1,872 million). The increase in operating income was attributable to several main
factors: strong demand for semiconductors and LCDs; the positive effects of manufacturing improve-
ments and restructuring of Management Innovation 2001 and other initiatives; improved earnings in
home appliances owing to brisk sales of new products; and improved income from power systems.
Earnings have now increased sharply for two straight years.

Information & communications and industrial systems posted a 28% decline in operating income com-
pared to the previous year, to ¥27.3 billion (US$220 million). Higher earnings in medical systems were
outweighed by the lower sales from information systems on account of curbs on customers’ capital
expenditures, as well as price declines triggered by fierce competition.

In digital media, DVD-ROMs generated higher earnings. Operating income on the whole, however,
fell 51% from the previous year, to ¥23.8 billion (US$192 million) as a result of a sharp decrease in
earnings in PCs, mainly owing to lower sales in the U.S.

Power systems recorded an 87% increase in operating income to ¥17.5 billion (US$141 million). This
primarily reflected higher earnings in the nuclear power sector.

In electronic devices & components, semiconductors recorded substantially higher earnings in the first
half of the year, supported by strong sales on the back of increased demand for digital devices. Although

growth slowed due to falling DRAM prices and sluggish market conditions in the second half, semicon-
ductors dramatically recovered earnings for the year. Benefiting from these higher earnings, as well as a
strong performance in LCDs, electronic devices & components reversed a prior year loss of ¥23.5 billion
to post operating income of ¥116.4 billion (US$938 million), a ¥139.9 billion improvement.

Operating income in home appliances increased significantly by 3.4 times from the previous year, to
¥18.4 billion (US$149 million). In addition to a stronger operating framework owing to restructuring
initiatives, this result reflected cost savings in manufacturing and marketing, and the overall strong
performance of home appliances, particularly washing machines and refrigerators.

Others posted a 2% rise in operating income to ¥27.2 billion (US$219 million).

Toshiba estimates that the net effect of foreign exchange movements during the fiscal year was a ¥44.0
billion decrease in operating income. This consists of a ¥90.0 billion decline in net sales offset by a ¥33.0
billion reduction of costs at overseas subsidiaries, and a ¥13.0 billion decrease in procurement expenses.

Other income included a ¥35.9 billion (US$290 million) gain from the contribution of marketable securi-
ties to employee retirement benefit trusts. Net financial expenses increased from a net expense of ¥21.5
billion to a net expense of ¥22.9 billion. A lower interest expense was recorded as a result of lower
interest rates in Japan and decreasing debt, but this was outweighed by a decline in dividend income.
In addition, a charge for FDC litigation settlement in the U.S. was included in the previous year’s expense.

As a result, income before income taxes and minority interest was ¥188.1 billion (US$1,517 million),
a ¥232.9 billion improvement on the previous year’s loss of ¥44.8 billion. Income taxes expense was
¥96.1 billion (US$775 million), up ¥100.7 billion on the previous year. Equity in income of affiliated
companies also improved due in particular to a strong performance from Toshiba Machine Co., Ltd.
Net income accordingly increased to ¥96.2 billion (US$776 million), a ¥129.1 billion improvement
on the previous year’s net loss of ¥32.9 billion.

The following segment information is based on Japanese accounting standards. Following a review of
management jurisdiction in April 2000, Toshiba has partially realigned industry segments in Digital
Media, Electronic Devices & Components, and Others. Consolidated financial data for previous years
have been reclassified to conform with the current segments.

Segment
Information

Industry Segments

Years ended March 31

Net sales:

Information & Communications and Industrial Systems

Unaffiliated customers
Intersegment

Total
Digital Media

Unaffiliated customers
Intersegment

Total
Power Systems

Unaffiliated customers
Intersegment

Total

Electronic Devices & Components

Unaffiliated customers
Intersegment

Total

Home Appliances

Unaffiliated customers
Intersegment
Total
Others

Unaffiliated customers
Intersegment

Total
Eliminations
Consolidated

Millions of yen

Thousands of
U.S. dollars

2001

2000

1999

2001

¥1,694,743
132,264
1,827,007

¥1,698,803
159,476
1,858,279

¥1,651,068
145,081
1,796,149

$13,667,282
1,066,645
14,733,927

1,429,710
148,880
1,578,590

1,378,017
139,675
1,517,692

1,238,559
167,920
1,406,479

11,529,920
1,200,645
12,730,565

568,244
14,423
582,667

553,322
17,359
570,681

503,863
16,714
520,577

4,582,613
116,314
4,698,927

1,332,711
218,640
1,551,351

1,204,047
169,204
1,373,251

1,009,928
127,295
1,137,223

10,747,669
1,763,226
12,510,895

676,820
31,497
708,317

636,054
23,840
659,894

695,588
12,028
707,616

5,458,226
254,008
5,712,234

249,129
446,592
695,721
(992,296)
¥5,951,357

279,129
254,985
534,114
(764,539)
¥5,749,372

201,896
331,703
533,599
(800,741)
¥5,300,902

2,009,105
3,601,548
5,610,653
(8,002,386)
$47,994,815

Years ended March 31

Operating income (loss):

Information & Communications and Industrial Systems
Digital Media
Power Systems
Electronic Devices & Components
Home Appliances
Others
Eliminations

Consolidated

Identifiable assets:

Millions of yen

Thousands of
U.S. dollars

2001

2000

1999

2001

27,277
23,846
17,457
116,354
18,429
27,153
1,617

38,102
48,361
9,342
(23,524)
5,354
26,694
(3,360)

44,794
50,080
13,946
(67,044)
(33,538)
20,655
1,590

219,976
192,306
140,782
938,339
148,621
218,976
13,040

¥ 232,133

¥ 100,969

30,483

$ 1,872,040

Information & Communications and Industrial Systems
Digital Media
Power Systems
Electronic Devices & Components
Home Appliances
Others
Corporate and Eliminations

Consolidated

¥1,423,786
692,459
632,643
1,441,406
417,088
1,138,414
(21,232)

¥1,313,427
629,926
668,068
1,468,014
366,029
1,268,282
66,260

¥1,483,642
659,587
723,984
1,569,524
488,739
1,112,285
64,168

$11,482,145
5,584,347
5,101,960
11,624,242
3,363,613
9,180,758
(171,226)

¥5,724,564

¥5,780,006

¥6,101,929

$46,165,839

Note: Indentifiable assets for prior periods have been restated to reflect adoption of SFAS No. 115.

Depreciation and amortization:

Information & Communications and Industrial Systems
Digital Media
Power Systems
Electronic Devices & Components
Home Appliances
Others
Corporate

Consolidated

Capital expenditures:

50,366
28,110
15,572
184,496
21,884
39,388
—

54,458
25,278
16,725
192,254
22,822
37,224
—

36,134
25,477
17,267
174,765
24,090
35,222
—

406,177
226,694
125,581
1,487,871
176,484
317,645
—

¥ 339,816

¥ 348,761

¥ 312,955

$ 2,740,452

Information & Communications and Industrial Systems
Digital Media
Power Systems
Electronic Devices & Components
Home Appliances
Others
Corporate

Consolidated

47,171
27,367
12,467
157,879
20,713
37,152
—

51,362
42,969
7,236
156,671
16,377
44,157
—

39,587
33,893
15,138
232,605
20,030
39,004
—

380,411
220,702
100,540
1,273,218
167,040
299,613
—

¥ 302,749

¥ 318,772

¥ 380,257

$ 2,441,524

Geographic Segments

Years ended March 31

Net sales:
Japan

Unaffiliated customers
Intersegment

Total

North America

Unaffiliated customers
Intersegment

Total

Asia

Unaffiliated customers
Intersegment

Total

Europe

Unaffiliated customers
Intersegment

Total

Other

Unaffiliated customers
Intersegment

Total

Eliminations

Consolidated

Operating income (loss):

Japan
North America
Asia
Europe
Other

Eliminations

Consolidated

Identifiable assets:

Japan
North America
Asia
Europe
Other

Corporate and Eliminations

Consolidated

Millions of yen

Thousands of
U.S. dollars

2001

2000

1999

2001

¥ 4,168,795
1,066,351

¥ 3,889,623
1,093,459

¥ 3,547,089
953,186

$ 33,619,315
8,599,604

5,235,146

4,983,082

4,500,275

42,218,919

738,294
139,552

877,846

508,888
436,618

945,506

484,721
14,269

498,990

50,659
2,819

53,478

816,804
104,994

921,798

478,269
305,842

784,111

506,595
10,649

517,244

58,081
4,918

62,999

788,687
75,575

864,262

379,562
223,686

603,248

541,246
10,919

552,165

44,318
7,218

51,536

5,953,984
1,125,419

7,079,403

4,103,936
3,521,113

7,625,049

3,909,040
115,073

4,024,113

408,540
22,734

431,274

(1,659,609)

(1,519,862)

(1,270,584)

(13,383,943)

¥ 5,951,357

¥ 5,749,372

¥ 5,300,902

$ 47,994,815

¥ 193,258
6,642
31,246
5,493
655

(5,161)

58,734
12,411
23,216
2,989
742

2,877

21,169
(11,712)
9,128
4,529
1,588

5,781

$ 1,558,532
53,565
251,984
44,298
5,282

(41,621)

¥ 232,133

¥ 100,969

30,483

$ 1,872,040

¥ 4,783,739
413,777
323,183
205,960
34,276

¥ 4,975,486
261,545
276,451
188,000
28,558

¥ 5,200,828
302,076
280,037
207,020
27,493

$ 38,578,540
3,336,911
2,606,315
1,660,968
276,420

(36,371)

49,966

84,475

(293,315)

¥ 5,724,564

¥ 5,780,006

¥ 6,101,929

$ 46,165,839

Note: Indentifiable assets for prior periods have been restated to reflect adoption of SFAS No. 115.

Research and
Development

Capital
Expenditures

Financial
Position

Consolidated R&D expenditures declined 2% to ¥327.9 billion (US$2,644 million). This was 5.5% of
net sales, compared with 5.8% in the previous year. By segment, R&D expenditures in information &
communications and industrial systems were ¥82.3 billion (US$664 million). Major themes were infor-
mation control systems technology, such as ITS and e-commerce systems, medical equipment, imaging
systems and other technologies. R&D expenditures in digital media were ¥54.4 billion (US$439 million),
comprising R&D on Bluetooth™-compatible products, mobile information tools, BS digital TVs, DVDs
and other visual and information equipment. R&D expenditures in power systems were ¥23.1 billion
(US$186 million), including for energy plants, power supply equipment, control and maintenance tech-
nologies and new types of fuel cells. In electronic devices & components, ¥145.2 billion (US$1,171
million) was expensed to develop system LSIs, memories and discrete semiconductors, as well as on
advanced fine process technologies, polysilicon LCDs, organic EL panels and lithium-ion rechargeable
batteries. R&D expenditures in home appliances totaled ¥17.7 billion (US$143 million). The main pur-
pose of this expenditure was to improve functions and energy conservation technologies in electrical
home appliances. R&D expenditures in others were ¥5.2 billion (US$42million).

In making capital investments, Toshiba adopts a basic strategy of focusing resources on growth areas.
Capital expenditures, which include investments in property, plant and equipment of ¥269.5 billion
(US$2,174 million), amounted to ¥302.7 billion (US$2,442 million), a 5% decline compared with the
previous fiscal year. The major focus of investments was the electronic devices & components segment.

Capital expenditures for electronic devices & components were ¥157.9 billion (US$1,273 million).
These investments were made to increase manufacturing capacity for semiconductors and LCDs, and
construct development facilities for semiconductors. The main facilities were a clean room for manufac-
turing advanced system LSIs at the Oita Operations, NAND flash memory manufacturing facilities at the
Yokkaichi Operations, and facilities for developing leading-edge LSIs at Yokohama Operations.

Capital expenditures in information & communications and industrial systems amounted to ¥47.2 bil-
lion (US$380 million), primarily in facilities for information system developments, broadcasting and
network services.

In digital media, capital expenditures in facilities for developing and manufacturing new products for PCs
and cellular phones were ¥27.4 billion (US$221 million), including PC manufacturing facilities at Toshiba
Information Equipment (Philippines), Inc. Capital expenditures in power systems were ¥12.4 billion
(US$101 million), including for upgrading infrastructure facilities, ¥20.7 billion (US$167 million) in home
appliances, mainly for facilities for developing and manufacturing new products, and ¥37.1 billion
(US$300 million) in others.

As of March 31, 2001, total assets were ¥5,724.6 billion (US$46,166 million), a decrease of ¥55.4 bil-
lion from the previous year. Current assets climbed ¥26.9 billion to ¥3,090.1 billion (US$24,920 mil-
lion) due to increases in cash and cash equivalents and accounts receivable, trade. Marketable securities
and other investments, included in the long-term receivables and investments category, sharply declined
as a result mainly of the contribution of marketable equity securities to employee retirement benefit
trusts. Property, plant and equipment stood at ¥1,439.8 billion (US$11,611 million), down ¥20.0 bil-
lion from a year ago, due to lower levels of capital expenditures.

Toshiba worked to reduce its interest-bearing liabilities using strong cash flows. These efforts were
partially offset by the new inclusion in consolidated results of Dominion Semiconductor, L.L.C. and
Harison Toshiba Lighting Co., Ltd., and by an increase due to foreign exchange conversion. Nevertheless,
total debt fell by ¥179.7 billion to ¥1,787.6 billion (US$14,416 million). Shareholders’ equity decreased
by ¥12.2 billion, despite the increase in net income. This was attributable to an additional recognition
of the minimum pension liability adjustment, and a decline in unrealized gains on marketable securities
following the aforementioned contribution to a retirement benefit trust.

Cash Flows

Net cash provided by operating activities totaled ¥453.6 billion (US$3,658million), up on the previous
year’s total of ¥435.9 billion. Decrease in inventories was not as large as the previous year. But net in-
come was substantially improved, and adjustment of deferred income taxes, as non-cash expense, also
increased from a year ago. Net income for fiscal year 2000 included a ¥35.9 billion non-cash gain from
securities contribution to employee retirement benefit trusts, and that was eliminated in adjustment to
net cash.

Net cash used in investing activities decreased from ¥293.2 billion in the previous year to ¥176.7 bil-
lion (US$1,425 million). Although proceeds from sale of securities declined year on year, less cash was
used for the acquisition of property and equipment .

Net cash used in financing activities increased from ¥158.7 billion in the previous year to ¥285.6 billion
(US$2,304 million). This was mainly the result of debt repayments, net of ¥260.1 billion as part of con-
tinuous efforts to reduce interest-bearing liabilities, and an increase in dividends paid. (The decline in
debt on the balance sheets is lower than the net cash out for debt on the statements of cash flows. This
is because the debt on the balance sheet reflects an increase in debt of newly consolidated subsidiaries
and the effect of foreign currency translation adjustments.)

In addition to the above items, the effect of exchange rate changes was a positive ¥31.1 billion
(US$251 million). This resulted in a net increase of ¥22.4 billion in cash and cash equivalents, bringing
the total to ¥487.6 billion (US$3,932 million) as of March 31, 2001.

Principal Subsidiaries and Affiliated Companies

As of March 31, 2001

Consolidated Subsidiaries:

Japan

Toshiba Battery Co., Ltd.

Toshiba TEC Corporation

U.S.A.

Toshiba America, Inc.

Affiliated Companies:

Japan

Percentage held by Group

100

Toshiba Ceramics Co., Ltd.

100

C O N S O L I D A T E D B A L A N C E S H E E T S
Toshiba Corporation and its subsidiaries
As of March 31, 2001 and 2000

ASSETS

Current assets:

Cash and cash equivalents
Notes and accounts receivable, trade—

Notes (Note 5)
Accounts (Note 5)
Allowance for doubtful notes and accounts

Finance receivables, net (Note 5)
Inventories (Note 6)
Prepaid expenses and other current assets (Note 14)

Millions of yen

Thousands of
U.S. dollars
(Note 3)

2001

2000

2001

¥ 487,595

¥ 465,237

$ 3,932,218

205,844
1,018,246
(27,410)
222,976
819,633
363,207

207,939
988,044
(27,551)
245,097
837,188
347,252

1,660,032
8,211,661
(221,049)
1,798,194
6,609,944
2,929,089

Total current assets

3,090,091

3,063,206

24,920,089

Long-term receivables and investments:

Long-term receivables
Long-term finance receivables, net (Note 5)
Investments in and advances to affiliated companies (Note 7)
Marketable securities and other investments (Notes 4 and 8)

Property, plant and equipment (Note 8):

Land
Buildings
Machinery and equipment
Construction in progress

Less—Accumulated depreciation

18,957
341,492
132,485
252,303

745,237

19,613
334,853
146,296
360,279

861,041

152,879
2,753,968
1,068,427
2,034,702

6,009,976

175,873
1,157,875
3,046,897
66,539

169,621
1,070,924
3,014,433
54,988

1,418,331
9,337,701
24,571,750
536,605

4,447,184
(3,007,428)

4,309,966
(2,850,221)

35,864,387
(24,253,452)

1,439,756

1,459,745

11,610,935

Other assets (Notes 9 and 14)

449,480

396,014

3,624,839

The accompanying notes are an integral part of these statements.

¥ 5,724,564

¥ 5,780,006

$ 46,165,839

LIABILITIES AND SHAREHOLDERS’ EQUITY

2001

2000

2001

Millions of yen

Thousands of
U.S. dollars
(Note 3)

Current liabilities:

Short-term borrowings (Note 8)
Current portion of long-term debt (Note 8)
Notes payable, trade
Accounts payable, trade
Accounts payable, other and accrued expenses
Accrued income and other taxes
Advance payments received
Other current liabilities

¥ 526,865
270,466
182,377
897,245
336,153
55,239
283,074
329,431

¥ 587,252
258,177
173,417
842,211
342,105
44,972
297,974
302,526

$4,248,911
2,181,177
1,470,782
7,235,847
2,710,911
445,476
2,282,855
2,656,702

Total current liabilities

2,880,850

2,848,634

23,232,661

Long-term liabilities:

Long-term debt (Note 8)
Accrued pension and severance costs (Note 9)
Other liabilities

990,305
633,642
33,231

1,121,920
585,881
38,739

7,986,331
5,110,016
267,992

1,657,178

1,746,540

13,364,339

Minority interest in consolidated subsidiaries

138,611

124,733

1,117,831

Shareholders’ equity:

Common stock, ¥50 par value—

Authorized—10,000,000,000 shares
Issued and outstanding:

2001—3,219,014,736 shares
2000—3,219,006,450 shares

Additional paid-in capital
Retained earnings (Notes 8 and 15)
Accumulated other comprehensive income (loss) (Note 15)

Commitments and contingent liabilities (Note 18)

274,921
—
285,732
713,667
(226,395)

—
274,919
285,729
643,250
(143,799)

2,217,105
—
2,304,290
5,755,379
(1,825,766)

1,047,925

1,060,099

8,451,008

¥5,724,564

¥5,780,006

$46,165,839

C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
Toshiba Corporation and its subsidiaries
For the years ended March 31, 2001 and 2000

Sales and other income:

Net sales
Interest and dividends
Other income (Notes 4 and 9)

Costs and expenses:

Cost of sales (Note 10)
Selling, general and administrative (Notes 10 and 11)
FDC litigation settlement (Note 12)
Interest
Other (Note 13)

Millions of yen

Thousands of
U.S. dollars
(Note 3)

2001

2000

2001

¥5,951,357
18,230
110,601

¥5,749,372
21,793
85,200

$47,994,815
147,016
891,943

6,080,188

5,856,365

49,033,774

4,323,525
1,395,699
—
41,102
131,763

4,254,444
1,393,959
106,385
43,256
103,165

34,867,137
11,255,637
—
331,468
1,062,605

5,892,089

5,901,209

47,516,847

Income (loss) before income taxes and minority interest

188,099

(44,844)

1,516,927

Income taxes (Note 14):

Current
Deferred

53,223
42,922

96,145

52,397
(56,927)

(4,530)

429,218
346,145

775,363

Income (loss) before minority interest

91,954

(40,314)

741,564

Minority interest in income (loss) of consolidated subsidiaries

Income (loss) from consolidated companies
Equity in income of affiliated companies (Note 7)

5,140

86,814
9,354

(1,728)

(38,586)
5,683

41,451

700,113
75,435

Net income (loss)

96,168

¥ (32,903)

775,548

Per share of common stock (Note 16):

Net income (loss)

—Basic
—Diluted

Cash dividends

The accompanying notes are an integral part of these statements.

Exact yen

U.S. dollars
(Note 3)

¥29.88
¥29,71

¥(10.22)
¥(10.22)

$0.241
$0.240

¥10.00

¥ 3.00

$0.081

C O N S O L I D A T E D S T A T E M E N T S O F S H A R E H O L D E R S ’ E Q U I T Y
Toshiba Corporation and its subsidiaries
For the years ended March 31, 2001 and 2000

Millions of yen

Common
stock

Additional
paid-in
capital

Retained
earnings

Accumulated
other
comprehensive
income (loss)

Total

Balance at March 31, 1999

¥ 274,916

¥ 285,727

¥ 685,809

¥ (117,699) ¥ 1,128,753

Conversion of convertible debentures
Comprehensive income (loss):

Net loss
Other comprehensive income (loss),
net of tax (Note 15)—
Unrealized gains on securities (Note 4)
Foreign currency translation adjustments
Minimum pension liability

adjustment (Note 9)

Comprehensive income (loss)

Cash dividends

(32,903)

4,457
(45,788)

15,231

(59,003)

(9,656)

Balance at March 31, 2000

274,919

285,729

643,250

(143,799)

1,060,099

Conversion of convertible debentures
Comprehensive income (loss):

Net income
Other comprehensive income (loss),
net of tax (Note 15)—
Unrealized gains on securities (Note 4)
Foreign currency translation adjustments
Minimum pension liability

adjustment (Note 9)

Comprehensive income (loss)

Cash dividends

96,168

(41,959)
50,052

(90,689)

13,572

(25,751)

Balance at March 31, 2001

¥274,921

¥285,732

¥713,667

¥(226,395) ¥1,047,925

Thousands of U.S. dollars (Note 3)

Common
stock

Additional
paid-in
capital

Retained
earnings

Accumulated
other
comprehensive
income (loss)

Total

Balance at March 31, 2000

$ 2,217,089 $ 2,304,266 $ 5,187,500 $ (1,159,669) $ 8,549,186

Conversion of convertible debentures
Comprehensive income (loss):

Net income
Other comprehensive income (loss),
net of tax (Note 15)—
Unrealized gains on securities (Note 4)
Foreign currency translation adjustments
Minimum pension liability
adjustment (Note 9)

Comprehensive income (loss)

Cash dividends

775,548

(338,379)
403,645

(731,363)

109,451

(207,669)

Balance at March 31, 2001

$2,217,105 $2,304,290 $5,755,379 $(1,825,766) $8,451,008

The accompanying notes are an integral part of these statements.

C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
Toshiba Corporation and its subsidiaries
For the years ended March 31, 2001 and 2000

Cash flows from operating activities:

Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities—
Depreciation and amortization
(Reversal of) accrual for pension and severance costs, less payments
Deferred income taxes (tax benefit)
Equity in income of affiliated companies
Gain on sale and disposal of property and securities, net
Minority interest in income (loss) of consolidated subsidiaries
Decrease (increase) in notes and accounts receivable, trade
Decrease in finance receivables, net
Decrease in inventories
Increase in other current assets
Decrease in long-term receivables
(Increase) decrease in long-term finance receivables, net
Increase in notes and accounts payable, trade
Increase (decrease) in accrued income and other taxes
Decrease in advance payments received
(Decrease) increase in accounts payable, other and others

Millions of yen

Thousands of
U.S. dollars
(Note 3)

2001

2000

2001

¥ 96,168

¥ (32,903)

$ 775,548

339,816
(10,667)
42,922
(9,354)
(30,758)
5,140
34,857
22,255
51,755
(70,750)
695
(6,639)
13,804
8,672
(17,415)
(16,860)

348,761
9,013
(56,927)
(5,683)
(27,165)
(1,728)
(14,852)
14,563
136,351
(16,678)
23,327
284
44,407
(17,831)
(7,169)
40,176

2,740,452
(86,024)
346,145
(75,435)
(248,048)
41,451
281,105
179,476
417,379
(570,565)
5,605
(53,540)
111,323
69,935
(140,444)
(135,968)

Net cash provided by operating activities

453,641

435,946

3,658,395

Cash flows from investing activities:

Proceeds from sale of property and securities
Acquisition of property and equipment
Purchase of securities
Decrease in investments in affiliated companies
Decrease (increase) in other assets and other

Net cash used in investing activities

Cash flows from financing activities:
Proceeds from long-term debt
Repayment of long-term debt
Dividends paid
Decrease in short-term borrowings

Net cash used in financing activities

36,339
(257,448)
(13,126)
19,272
38,216

103,409
(298,512)
(31,172)
13,985
(80,864)

293,056
(2,076,193)
(105,855)
155,419
308,194

(176,747)

(293,154)

(1,425,379)

233,929
(398,669)
(25,598)
(95,310)

302,376
(289,712)
(9,458)
(161,882)

1,886,524
(3,215,073)
(206,435)
(768,629)

(285,648)

(158,676)

(2,303,613)

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

31,112

22,358

(16,631)

(32,515)

250,903

180,306

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

465,237

497,752

3,751,912

¥ 487,595

¥ 465,237

$ 3,932,218

Supplemental disclosure of cash flow information:

Cash paid during the year for—

Interest

Income taxes

The accompanying notes are an integral part of these statements.

¥ 52,789

¥ 63,324

$ 425,718

¥ 61,161

¥ 44,476

$ 493,234

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Toshiba Corporation and its subsidiaries

Company
Operations

Summary of
Significant
Accounting
Policies

Toshiba Corporation and its subsidiaries are engaged in the research and development, manufacturing
and sales of high-technology electronic and energy products, which span (1) information & communica-
tions and industrial systems, (2) digital media, (3) power systems, (4) electronic devices & components,
(5) home appliances, and (6) others. For the years ended March 31, 2001 and 2000, sales in information
& communications and industrial systems represented the most significant portion of the company’s total
sales, approximately 30 percent. Sales in digital media and electronic devices & components represented,
each over 20 percent of the company’s sales, while sales in power systems, home appliances and others
were approximately equal in amount, each representing approximately 10 percent of the company’s sales.
The products are manufactured and marketed throughout the world with approximately 60 percent of
sales in Japan and the remainder in North America, Asia, Europe and elsewhere.

Preparation of Financial Statements—

The company and its domestic subsidiaries maintain their records and prepare their financial statements
in accordance with accounting principles generally accepted in Japan, and its foreign subsidiaries in
conformity with those of the countries of their domicile.

Certain adjustments and reclassifications have been incorporated in the accompanying consolidated
financial statements to conform with accounting principles generally accepted in the United States of
America. These adjustments were not recorded in the statutory books.

Basis of Consolidation and Investments in Affiliated Companies—

The consolidated financial statements include the accounts of the company and those of its subsidiaries.
All significant intercompany transactions and accounts are eliminated in consolidation.

Investments in affiliated companies (20 to 50 percent-owned companies) in which the ability to exercise
significant influence exists are stated at cost plus equity in undistributed earnings (losses). Net consolidat-
ed income (loss) includes the company’s equity in the current net earnings (losses) of such companies,
after elimination of unrealized intercompany profits.

Goodwill recognized at the time of investments in subsidiaries and affiliated companies is amortized on
a straight-line basis over the estimated period of benefit.

Use of Estimates—

The preparation of the consolidated financial statements in conformity with accounting principles gener-
ally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Consolidated Statement of Cash Flows—

For purposes of the statement of cash flows, the company considers all highly liquid investments
purchased with original maturities of three months or less to be cash equivalents.

Foreign Currency Translation—

The assets and liabilities of foreign subsidiaries that operate in a local currency environment are trans-
lated into Japanese yen at applicable current exchange rates at year end. Income and expense items
are translated at average exchange rates prevailing during the year. The effects of these translation
adjustments are included in other comprehensive income (loss) and reported as a component of share-
holders’ equity. Exchange gains and losses resulting from foreign currency transactions and translation
of assets and liabilities denominated in foreign currencies are included in the consolidated statements
of income.

Revenue Recognition—

Revenue, other than under long-term contracts, is generally recognized when it is realized or realizable
and earned. Revenue is considered to be realized or realizable and earned when there is persuasive
evidence of an arrangement, the product has been delivered or the services have been provided to the
customers, the sales price is fixed or determinable, and collectibility is reasonably assured.

In December 1999. the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No.
101 (SAB101), “Revenue Recognition in Financial Statements.” SAB101 provides guidance on applying
generally accepted accounting principles to revenue recognition issues in financial statements. The
company adopted SAB101 in the fiscal year ended March 31,2001 and the adoption did not have a
material impact on the company’s results of operations or financial condition.

Revenue under long-term contracts is generally recorded under the percentage of completion method.

Marketable Securities and Other Investments—

In the financial year ended March 31, 2001, the company adopted Statement of Financial Accounting
Standards (SFAS) No.115, ”Accounting for Certain Investments in Debt and Equity Securities,” retroac-
tively to April 1,1994. In the prior years, marketable equity securities and other marketable securities
(current) were stated at the lower of cost or market in the aggregate. Under this statement, all debt and
equity securities owned by the company are classified as available-for-sale securities and are reported
at fair value with unrealized gains and losses, net of related taxes, excluded from earnings and reported
in other comprehensive income (loss) until realized. In accordance with Accounting Principles Board
Opinion No.20, “Accounting Changes,” the company restated the prior years’ consolidated financial
statements to reflect the effects of the retroactive adoption of SFAS No. 115. A summary of the effects
of the restatement is presented in Note 19. Other investments were stated at cost less any significant
decline in fair value assessed to be other than temporary.

Realized gains and losses on the sale of securities are based on the average cost of all the units of a
particular security held at the time of sale.

Inventories—

Raw materials, and finished products and work in process for stock sales items are stated at the lower
of cost or market, cost being determined principally by the average method. Finished products and
work in process for contract items are stated at the lower of cost or estimated realizable value, cost
being determined by accumulated production costs.

Effective April 1, 1999, the company changed its method of accounting for the costs of finished products
and work in process for stock sales items from the first-in, first-out method to the average method. The
company believes that the average method provides a better matching of costs and revenues, and this
accounting change resulted in insignificant effects on cost of sales and inventories.

In accordance with general industry practice, items with long manufacturing periods are included among
inventories even when not realizable within one year.

Property, Plant and Equipment and Depreciation—

Property, plant and equipment, including significant renewals and additions, are carried at cost.
Maintenance and repairs, including minor renewals and betterments, are charged to income as incurred.

Depreciation is computed generally by the declining-balance method at rates based on the estimated
useful lives of the related assets, according to general class, type of construction and use.

Income Taxes—

The provision for income taxes is computed based on the pre-tax income included in the consolidated
statements of income. Deferred income taxes are recorded to reflect the expected future tax conse-
quences of temporary differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements, and are measured by applying currently enacted tax laws.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a
tax benefit will not be realized.

Accrued Pension and Severance Costs—

The company and its subsidiaries have various retirement benefit plans covering substantially all em-
ployees. Current service costs of the retirement benefit plans are accrued in the period. The unrecognized
net obligation existing at initial application of SFAS No.87 and prior service costs resulting from amend-
ments to the plans are amortized over the average remaining service period of employees expected to
receive benefits. Unrecognized actuarial losses that exceed 10 percent of the greater of the projected
benefit obligation or the fair value of plan assets are also amortized over the average remaining service
period of employees expected to receive benefits.

Net Income Per Share—

Basic net income per share (EPS) is computed based on the weighted-average number of shares of com-
mon stock outstanding during each period. Diluted EPS assumes the dilution that could occur if dilutive
convertible debentures were converted into common stock.

Financial Instruments—

The company uses a variety of derivative financial instruments, which include forward exchange con-
tracts, interest rate swap agreements and currency swap agreements, for the purpose of currency ex-
change rate and interest rate risk management. Refer to Note 17 for descriptions of these financial
instruments, including the methods used to account for them.

Comprehensive Income—

Under Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income,”
comprehensive income is defined as total changes in shareholders’ equity except capital transactions.
The company’s comprehensive income (loss) is comprised of net income (loss) and other comprehensive
income (loss) representing changes in unrelized gains on securities, foreign currency translation adjust-
ments and minimum pension liability adjustment. Comprehensive income (loss) and its components are
disclosed in the consolidated statements of shareholders’ equity and in Note 15.

Recent Pronouncements—

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities.” SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS No. 133 requires that all deriva-
tives be recognized as either assets or liabilities in the balance sheet and be measured at fair value. The
fair value adjustments are recorded in current earnings or other comprehensive income, depending on
whether a derivative instrument is designated as part of a hedge transaction and, if it is, the type of
hedge transaction. In June 1999, FASB issued SFAS No.137, “Accounting for Derivative Instruments
and Hedging Activities—Deferral of the Effective Date of SFAS No.133,” which defers the effective date
of SFAS No.133 for one year. Therefore, in the case of the company, SFAS No.133 is effective for the
fiscal year beginning April 1, 2001. Adoption of this statement will not have a material impact on the
company’s results of operations or financial condition.

In September 2000, FASB issued SFAS No. 140, “Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities—a replacement of SFAS No. 125”. This statement revises the
criteria for accounting for securitizations, other financial asset transfers and collateral and introduces new
disclosures, but otherwise carries forward most of the provisions of SFAS No. 125. This statement is ef-
fective for recognition and reclassification of collateral and for disclosures relating to securitization trans-
actions and collateral for fiscal year ended March 31, 2001. Other provisions of this statement are
effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. Adoption of the portions of this statement will not have a material impact on the com-
pany’s results of operations or financial condition.

Reclassifications—

Certain reclassifications of previously reported amounts have been made to conform with current classifications.

U.S. Dollar
Amounts

Marketable
Securities
and Other
Investments

U.S. dollar amounts are included solely for convenience. These translations should not be construed as
representations that the yen amounts actually represent, or have been or could be converted into, U.S.
dollars. The amounts shown in U.S. dollars are not intended to be computed in accordance with generally
accepted accounting principles for the translation of foreign currency amounts. The rate of ¥124=US$1,
the approximate current rate of exchange at March 31, 2001, has been used throughout for the pur-
pose of presentation of the U.S. dollar amounts in the accompanying consolidated financial statements.

The aggregate cost, gross unrealized holding gains and losses, and aggregate fair value for marketable
equity securities and debt securities classified as available-for-sale securities by security type at March
31, 2001 and 2000 are as follows:

March 31, 2001:

Equity securities
Debt securities

March 31, 2000:

Equity securities
Debt securities

March 31, 2001:

Equity securities
Debt securities

Millions of yen

Gross
unrealized
holding gains

Gross
unrealized
holding losses

Cost

Fair value

¥ 89,261
4,308

¥ 62,308
342

¥12,736
161

¥138,833
4,489

¥ 93,569

¥ 62,650

¥12,897

¥143,322

¥ 109,272
13,163

¥ 139,991
76

¥ 12,462
0

¥ 236,801
13,239

¥ 122,435

¥ 140,067

¥ 12,462

¥ 250,040

Thousands of U.S. dollars

Gross
unrealized
holding gains

Gross
unrealized
holding losses

Fair value

Cost

$719,847
34,742

$502,484
2,758

$102,710
1,298

$1,119,621
36,202

$754,589

$505,242

$104,008

$1,155,823

At March 31, 2001, debt securities mainly consist of corporate debt securities.

Contractual maturities of debt securities classified as available-for-sale were as follows at March
31, 2001:

Due within one year
Due after one year

Millions of yen

Thousands of
U.S. dollars

Cost

Fair value

Cost

¥1,364
2,944

¥4,308

¥1,366
3,123

$11,000
23,742

¥4,489

$34,742

Fair value

$11,016
25,186

$36,202

The proceeds from sales of available-for-sale securities for the years ended March 31, 2001 and 2000
were ¥23,774 million ($191,726 thousand) and ¥94,106 million, respectively. The gross realized gains
on those sales for the years ended March 31, 2001 and 2000 were ¥5,443 million ($43,895 thousand)
and ¥48,248 million, respectively. The gross realized losses on those sales for the years ended March
31, 2001 and 2000 were ¥1,992 million ($16,065 thousand) and ¥936 million, respectively.

Finance
Receivables and
Securitizations

Finance receivables comprise the following:

March 31

Investment in financing leases:

Total minimum lease payments receivable
Estimated executory costs
Unearned income
Estimated residual values

Less—Allowance for doubtful accounts

Less—Current portion

Other finance receivables
Less—Allowance for doubtful accounts

Less—Current portion

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥ 321,444) ¥ 351,138
(14,670)
(17,126)
5,889

(12,579)
(15,576)
3,725

$ 2,592,290)
(101,444)
(125,612)
30,040

297,014

325,231

2,395,274

(1,339)

(2,021)

(10,798)

295,675
(97,475)

323,210
(105,318)

2,384,476
(786,089)

¥ 198,200

¥ 217,892

$ 1,598,387

¥ 278,658
(9,865)

¥ 267,938
(11,198)

$ 2,247,242
(79,556)

268,793
(125,501)

256,740
(139,779)

2,167,686
(1,012,105)

¥ 143,292

¥ 116,961

$ 1,155,581

Investment in financing leases consists of sales-type and direct financing leases mainly of information
systems, medical equipment, agricultural and industrial equipment and others.

Other finance receivables represent transactions in a variety of forms, including commercial loans, and
installment sales of consumer products manufactured by the company.

At March 31, 2001, the contractual maturities of minimum lease payments of the investment in financing
leases and the other finance receivables are as follows:

Year ending March 31

2002
2003
2004
2005
2006
Thereafter

Investment in financing leases

Other finance receivables

Millions
of yen

¥104,773
85,855
63,967
40,967
19,744
6,138

Thousands of
U.S. dollars

$ 844,943
692,379
515,863
330,379
159,226
49,500

Millions
of yen

¥130,037
55,896
28,613
18,162
12,638
33,312

Thousands of
U.S. dollars

$1,048,686
450,774
230,750
146,468
101,919
268,645

¥321,444

$2,592,290

¥278,658

$2,247,242

Allowance for doubtful accounts is provided upon past loss experience and the estimation of mortgaged
asset values.

During the year ended March 31, 2001, the company and certain subsidiaries sold trade receivables
with an aggregate principal amount of ¥875,421 million ($7,059,847 thousand) and finance receiv-
ables with an aggregate principal amount of ¥109,107 million ($879,895 thousand) in securitization
transactions. Proceeds from new securitizations of trade receivables and finance receivables for the
year ended March 31, 2001 were ¥767,147 million ($6,186,669 thousand) and ¥93,040 million
($750,323 thousand), respectively. These transactions meet the sales criteria under Statement of
Financial Accounting Standards No.125. In these securitizations, servicing responsibilities and subordi-
nated interests are generally retained. The company and certain subsidiaries received servicing fees of
¥405 million ($3,266 thousand) for the year ended March 31, 2001. The investors and the securitiza-
tion trusts, associated with these sales of trade receivables and finance receivables, have no recourse
to the company’s or subsidiaries’ assets for failure of debtors to pay when due.

In the year ended March 31, 2001, the company and certain subsidiaries recognized pre-tax losses of
¥2,323 million ($18,734thousand) on the securitization of the trade receivables and pre-tax gains of
¥1,358 million ($10,952thousand) on the securitization of the finance receivables. The resulting gain
or loss on securitization transactions is determined by allocating the carrying amount of the transferred
financial assets between the assets sold and the retained interests based on their relative fair value at
the date of the transfer. The fair value is estimated based on the present value of the future expected
cash flows estimated using management’s best estimates of the key assumptions.

Inventories

Inventories comprise the following:

March 31

Finished products
Work in process:

Long-term contracts
Other

Raw materials

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥345,183

¥314,778

$2,783,734

148,462
201,060
124,928

194,092
208,605
119,713

1,197,274
1,621,452
1,007,484

¥819,633

¥837,188

$6,609,944

Investments
in Affiliated
Companies

Of the affiliated companies which are accounted for by the equity method, the investment in common
stock of the listed companies is carried at ¥62,327 million ($502,637 thousand) and ¥77,377 million
at March 31, 2001 (five companies) and 2000 (six companies), respectively. The company’s invest-
ments in these companies had a market value of ¥78,671 million ($634,444 thousand) and ¥92,678
million at March 31, 2001 and 2000, respectively, based on quoted market prices at those dates.

Summarized financial information of the affiliated companies accounted for by the equity method is
shown below:

March 31

Current assets
Other assets including property, plant and equipment

Total assets

Current liabilities
Long-term liabilities
Shareholders’ equity

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥412,480
251,477

¥448,114
422,441

$3,326,452
2,028,040

¥663,957

¥870,555

$5,354,492

¥296,864
71,908
295,185

¥362,081
141,824
366,650

$2,394,065
579,903
2,380,524

Total liabilities and shareholders’ equity

¥663,957

¥870,555

$5,354,492

Years ended March 31

Sales

Net income

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥688,527

¥749,582

$5,552,637

¥ 18,636

¥ 13,854

$ 150,290

Short-term
Borrowings and
long-Term Debt

A summary of transactions and balances with the affiliated companies accounted for by the equity
method is presented below:

Years ended March 31

Sales

Purchases

March 31

Notes and accounts receivable, trade

Other receivables

Notes and accounts payable

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥ 16,450

¥ 14,733

$132,661

¥122,261

¥133,174

$985,976

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥ 7,201

¥ 4,545

$ 58,073

¥ 4,265

¥ 1,711

$ 34,395

¥30,433

¥29,877

$245,427

Short-term borrowings at March 31, 2001 and 2000 comprise the following:

March 31

Loans, principally from banks, including bank overdrafts,
with weighted-average interest rate of 1.13 percent
at March 31, 2001 and 0.82 percent at March 31, 2000:
Secured
Unsecured

Commercial paper with weighted-average interest rate of
5.31 percent at March 31, 2001 and 6.20 percent
at March 31, 2000

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥ 7,940
491,194

5,172
573,588

$ 64,032
3,961,242

27,731

8,492

223,637

¥526,865

¥587,252

$4,248,911

Substantially all of the short-term borrowings are with banks which have written basic agreements with
the company to the effect that, with respect to all present or future loans with such banks, the company
shall provide collateral (including sums on deposit with such banks) or guarantors immediately upon
the bank’s request and that any collateral furnished pursuant to such agreements or otherwise will be
applicable to all indebtedness to such banks.

At March 31, 2001, the company and subsidiaries had unused committed lines of credit from short-
term financing arrangements aggregating ¥158,475 million ($1,278,024 thousand), of which ¥30,975
million ($249,798 thousand) was in support of the company’s commercial paper. These lines of credit
have commitment fee requirements.

Long-term debt at March 31, 2001 and 2000 comprise the following:

March 31

Loans, principally from banks and insurance companies,
due 2001 to 2034 with interest ranging from
zero percent to 13.50 percent at March 31, 2001
and due 2000 to 2034 with interest ranging from
zero percent to 13.50 percent at March 31, 2000:
Secured
Unsecured

Unsecured yen bonds,
due 2001 to 2008 with interest ranging from
0.7 percent to 3.025 percent at March 31, 2001
and due 2001 to 2008 with interest ranging from
0.8 percent to 3.025 percent at March 31, 2000
Euro yen medium-term notes,
due 2001 to 2008 with interest ranging from
zero percent to 2.34 percent at March 31, 2001
and due 2000 to 2008 with interest ranging from
zero percent to 2.39 percent at March 31, 2000
(swapped for floating rate (LIBOR, etc.) or
fixed rate yen obligations)

6.75 percent Euro U.S. dollar medium-term notes due 2008
(swapped for fixed rate yen obligations)

1.8 percent unsecured yen convertible debentures
due 2002 convertible currently at ¥724 per share
Unsecured yen bonds of subsidiaries,
due 2002 to 2004 with interest ranging from
0.95 percent to 3.0 percent at March 31, 2001
and due 2000 to 2004 with interest ranging from
0.95 percent to 3.1 percent at March 31, 2000
1.825percent secured yen bonds of a subsidiary
due 2004
Euro yen or U.S. dollar medium-term notes of subsidiaries,
due 2001 to 2011 with interest ranging from
zero percent to 7.26 percent at March 31, 2001
and due 2000 to 2010 with interest ranging from
0.03 percent to 6.61 percent at March 31, 2000
(swapped for floating rate (LIBOR, etc.) U.S. dollar,
Yen or Euro obligations)

2.2 percent secured yen convertible debentures
of a subsidiary due 2002 convertible currently
at ¥1,095.8 per share
Zero percent unsecured yen convertible debentures
of a subsidiary due 2004 convertible currently
at ¥803 per share

Less—Portion due within one year

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

57,883
538,697

49,913
568,485

466,798
4,344,331

438,422

500,000

3,535,661

58,925

62,975

475,202

630

5,081

17,736

17,742

143,032

19,000

29,000

153,226

300

—

2,419

118,341

140,345

954,363

8,017

64,653

2,820

2,990

22,742

1,260,771
(270,466)

1,380,097
(258,177)

10,167,508
(2,181,177)

¥ 990,305

¥1,121,920

$ 7,986,331

Certain of the secured loan agreements contain provisions which permit the lenders to require additional
collateral. Substantially all of the unsecured loan agreements permit the lenders to require collateral or
guarantors for such loans. Certain of the secured and unsecured loan agreements require prior approval
by the banks and trustees before any distributions (including cash dividends) may be made from current
or retained earnings.

Assets pledged as collateral for short-term borrowings and long-term debt at March 31, 2001 are property,
plant and equipment with a book value of ¥57,941 million ($467,266 thousand) and marketable securities
and other investments of ¥4,935 million ($39,798 thousand).

The convertible yen debentures agreements (1) establish certain restrictions on the payment of divi-
dends and (2) permit early redemption of the debentures at the option of the company and a
subsidiary, in whole or in part, at defined prices.

At March 31, 2001, 24,497 thousand shares of common stock would be issued upon conversion of all
convertible debentures of the company.

The aggregate annual maturities of long-term debt are as follows:

Year ending March 31

2002
2003
2004
2005
2006
Thereafter

Millions of yen

¥ 270,466
287,635
242,028
125,267
95,784
239,591

Thousands of
U.S. dollars

$ 2,181,177
2,319,637
1,951,839
1,010,218
772,452
1,932,185

¥1,260,771

$10,167,508

Accrued
Pension and
Severance Costs

All employees whose services with the company and its subsidiaries are terminated are usually entitled
to lump-sum severance indemnities determined by reference to their current basic rate of pay, length of
service and conditions under which the termination occurs. The obligation for the severance indemnity
benefits is provided for through accruals and funding of tax-qualified non-contributory pension plans
and contributory trusteed employee pension funds.

Certain subsidiaries have tax-qualified non-contributory pension plans which cover all or a part of the in-
demnities payable to qualified employees at the time of termination. The funding policy for the plans is to
contribute amounts required to maintain sufficient plan assets to provide for accrued benefits, subject to
the limitation on deductibility imposed by Japanese income tax laws.

The company and several subsidiaries also have contributory trusteed employee pension funds. The
contributory employee pension funds are comprised of a portion covering part of the severance indem-
nity benefits and another portion covering social security benefits, to which the company, subsidiaries
and employees make contributions. During the years ended March 31, 2001 and 2000, the company
and several subsidiaries have amended the regulations of both the severance indemnity benefits portion
and the social security benefits portion under the contributory trusteed employee pension funds. The
amendment related to the social security benefits portion for 2000 reflected the revisions of the Japanese
Welfare Pension Insurance Law. These amendments resulted in the reduction of the projected benefit
obligations of the funds.

Net periodic pension and severance cost for 2001 and 2000 included the following components:

Years ended March 31

Service cost—benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of unrecognized net obligation at transition
Amortization of prior service cost
Recognized actuarial loss

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥ 62,801
60,380
(40,788)
12,025
(3,212)
13,350

¥ 52,427
58,185
(32,154)
12,025
4,364
18,551

$ 506,460
486,935
(328,935)
96,976
(25,903)
107,661

Net periodic pension and severance cost

¥104,556

¥113,398

$ 843,194

A weighted-average discount rate of 3.5 percent, an expected long-term rate of return on plan assets of
4.0 percent, and an assumed rate of increase in salary levels of 2.1 percent and 2.3 percent were used
in measuring the pension obligations at March 31, 2001 and 2000, respectively.

The changes in the benefit obligations and plan assets and reconciliations of net amount recognized to
funded status and accrued pension and severance costs for 2001 and 2000 were as follows:

March 31

Change in benefit obligation:

Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Plan amendments
Actuarial loss
Benefits paid
Foreign currency exchange impact

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥1,752,086
62,801
60,380
9,210
(15,838)
52,602
(99,042)
1,611

¥1,693,146
52,427
58,185
8,141
(69,740)
111,976
(100,736)
(1,313)

$14,129,726
506,460
486,935
74,274
(127,726)
424,210
(798,726)
12,992

Benefit obligation at end of year

1,823,810

1,752,086

14,708,145

Change in plan assets:

Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Plan participants’ contributions
Benefits paid
Foreign currency exchange impact

987,517
(56,975)
138,782
9,210
(36,108)
1,716

775,027
176,910
61,173
8,141
(32,503)
(1,231)

7,963,847
(459,476)
1,119,210
74,274
(291,193)
13,838

Fair value of plan assets at end of year

1,044,142

987,517

8,420,500

Funded status
Unrecognized actuarial loss
Unrecognized net obligation at transition
Unrecognized prior service cost

779,668
(495,740)
(61,189)
43,690

764,569
(371,771)
(73,214)
30,462

6,287,645
(3,997,903)
(493,460)
352,339

Net amount recognized

¥ 266,429

¥ 350,046

$ 2,148,621

Amounts recognized in the consolidated balance sheets
consist of:
Accrued pension and severance costs
Intangible asset
Accumulated other comprehensive income (loss),

gross of tax

Net amount recognized

¥ 633,642
(17,499)

¥ 585,881
(42,752)

$ 5,110,016
(141,121)

(349,714)

(193,083)

(2,820,274)

¥ 266,429

¥ 350,046

$ 2,148,621

Accumulated benefit obligation at end of year

¥1,677,784

¥1,573,398

$13,530,516

In the year ended March 31, 2001, the company and certain subsidiaries contributed certain marketable
equity securities, not including those of its subsidiaries and affiliated companies, and cash to employee
retirement benefit trusts, with no cash proceeds thereon. The securities and the cash held in these trusts
are qualified as plan assets. The fair value of these securities at the time of contribution, including the
contributed cash, was ¥89,016 million ($717,871 thousand). Upon contribution of these available-for-
sale securities, a net unrealized gain of ¥35,942 million ($289,855 thousand) was realized and included
in “other income” in the consolidated statements of income.

10.

Research and
Development

11.

Advertising

12.

FDC Litigation
Settlement

13.

Foreign Exchange
Gains and Losses

14.

Income Taxes

Research and development costs are charged to expense as incurred and amounted to ¥327,915 million
($2,644,476 thousand) and ¥334,398 million for the years ended March 31, 2001 and 2000, respectively.

Advertising costs are expensed as incurred. Advertising expenses amounted to ¥57,106 million
($460,532 thousand) and ¥60,560 million for the years ended March 31, 2001 and 2000, respectively.

In October 1999, the company reached a settlement in a class-action lawsuit in the U.S. brought by
two owners of its notebook personal computers (PCs) concerning the floppy-disk drive controller incor-
porated in PCs. They alleged that the floppy-disk controller (FDC) may, under certain circumstances,
cause data to be lost or corrupted when it is written to a floppy disk. The class settlement was approved
by the court in January 2000, and became final in March 2000. The company has reflected a ¥106,385
million loss in its financial results for the year ended March 31, 2000 in connection with the settlement
payment and other performance obligations under the settlement agreement.

For the years ended March 31, 2001 and 2000, the net foreign exchange loss was ¥7,776 million
($62,710 thousand) and ¥2,414 million, respectively.

The company is subject to a number of different taxes based on income which, in the aggregate, indi-
cate a normal statutory tax rate in Japan of approximately 42.1 percent for the years ended March 31,
2001 and 2000. A reconciliation between the reported income tax expense (benefit) and the amount
computed by multiplying the income (loss) before income taxes and minority interest by the applicable
normal statutory tax rate is as follows:

Years ended March 31

Computed expected income tax expense (benefit)
Increase in taxes resulting from:

Non-deductible expenses for tax purposes
Net valuation allowance for losses of subsidiaries
Tax rate difference relating to reclassification adjustments
for gains on securities

Other

Income tax expense (benefit)

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥79,190

¥(18,879)

$638,629

3,979
2,256

4,061
6,659

4,664
4,759

4,471
455

32,089
18,193

32,750
53,702

¥96,145

¥ (4,530)

$775,363

The significant components of deferred tax assets and deferred tax liabilities recorded on the consoli-
dated balance sheets as of March 31, 2001 and 2000 are as follows:

March 31

Gross deferred tax assets:

Inventories
Accrued pension and severance costs
Tax loss carryforwards
Minimum pension liability adjustment
Accrued bonus
Other

Valuation allowance for deferred tax assets

Deferred tax assets

Gross deferred tax liabilities:

Retained earnings appropriated for tax allowable reserves
Unrealized gains on securities
Gain on securities contributed to employee
retirement benefit trusts

Other

Deferred tax liabilities

Net deferred tax assets

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥ 23,823
81,520
34,695
147,230
29,168
151,555

¥ 25,037
90,548
58,397
81,288
25,228
109,737

$ 192,121
657,419
279,798
1,187,339
235,226
1,222,218

467,991
(42,197)

390,235
(46,759)

3,774,121
(340,298)

425,794

343,476

3,433,823

(17,064)
(21,157)

(14,653)
(53,837)

(137,613)
(170,621)

(17,763)
(13,473)

—
(15,512)

(143,250)
(108,654)

(69,457)

(84,002)

(560,138)

¥356,337

¥259,474

$2,873,685

Net current and non-current deferred tax assets at March 31, 2001 and 2000 are reflected in the con-
solidated balance sheets under the captions of prepaid expenses and other current assets, ¥122,946
million ($991,500 thousand) and ¥116,232 million, and other assets, ¥233,391 million ($1,882,185
thousand) and ¥143,242 million, respectively.

The net changes in the total valuation allowance for the years ended March 31, 2001 and 2000 were
a decrease of ¥4,562 million ($36,790 thousand) and an increase of ¥4,575 million, respectively.

Available corporate tax loss carryforwards of the company and certain subsidiaries at March 31, 2001
amounted to approximately ¥86,861 million ($700,492 thousand), the majority of which will expire
during the period from 2002 through 2006. Realization is dependent on the company and such sub-
sidiaries generating sufficient taxable income prior to expiration of the tax loss carryforwards. Although
realization is not assured, management believes it is more likely than not that all of the deferred tax
assets, less valuation allowance, will be realized. The amount of such net deferred tax assets considered
realizable, however, could be reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.

Deferred income tax liabilities have not been provided on undistributed earnings of foreign subsidiaries
and affiliated companies deemed indefinitely reinvested in foreign operations. It is not practicable to
estimate the amount of the deferred income tax liabilities on such earnings.

15.

Shareholders’
Equity

Retained Earnings—

Retained earnings at March 31, 2001 and 2000 include the legal reserve of ¥80,933 million ($652,685
thousand) and ¥79,576 million, respectively. The Japanese Commercial Code provides that an amount
equal to at least 10 percent of cash dividends and other distributions from retained earnings paid by
the parent company and its Japanese subsidiaries be appropriated as a legal reserve. No further appro-
priations are required when the legal reserve of each legal entity equals 25 percent of its stated capital.
The legal reserve is not available for dividends but may be used to reduce a deficit or may be transferred
to stated capital.

The amount of retained earnings available for dividends is based on the parent company’s retained
earnings determined in accordance with generally accepted accounting principles and the Commercial
Code in Japan. Retained earnings at March 31, 2001 include year-end dividends of ¥16,095 million
($129,798 thousand) for the year ended March 31, 2001 which are expected to be formally approved
at the general shareholders’ meeting held in June 2001, and will be payable subsequently.

Accumulated Other Comprehensive Income (Loss)—

An analysis of the changes in accumulated other comprehensive income (loss) for the years ended
March 31, 2001 and 2000 is shown below:

March 31

Unrealized gains on securities:
Balance at beginning of year
Current-period change

Balance at end of year

Foreign currency translation adjustments:

Balance at beginning of year
Current-period change

Balance at end of year

Minimum pension liability adjustment:

Balance at beginning of year
Current-period change

Balance at end of year

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥ 70,687
(41,959)

¥ 66,230
4,457

$ 570,056
(338,379)

¥ 28,728

¥ 70,687

$ 231,677

¥(105,990) ¥ (60,202) $ (854,758)
403,645
(45,788)

50,052

¥ (55,938) ¥(105,990) $ (451,113)

¥(108,496) ¥(123,727) $ (874,968)
(731,363)
15,231

(90,689)

¥(199,185) ¥(108,496) $(1,606,331)

Total accumulated other comprehensive income (loss):

Balance at beginning of year
Current-period change

Balance at end of year

¥(143,799) ¥(117,699) $(1,159,669)
(666,097)
(26,100)

(82,596)

¥(226,395) ¥(143,799) $(1,825,766)

Tax effects allocated to each component of other comprehensive income (loss) for the years ended
March 31, 2001 and 2000 are shown below:

For the year ended March 31, 2001:

Unrealized gains on securities:

Unrealized holding gains arising during period
Less: reclassification adjustment for gains included
in net income

Foreign currency translation adjustments
Minimum pension liability adjustment

Millions of yen

Pre-tax
amount

Tax benefit
(expense)

Net-of-tax
amount

¥ (29,752)

¥ 12,530

¥(17,222)

(45,527)
50,438
(156,630)

20,790
(386)
65,941

(24,737)
50,052
(90,689)

Other comprehensive income (loss)

¥(181,471)

¥ 98,875

¥(82,596)

For the year ended March 31, 2000:

Unrealized gains on securities:

Unrealized holding gains arising during period
Less: reclassification adjustment for gains included
in net income

Foreign currency translation adjustments
Minimum pension liability adjustment

¥ 46,160

¥(19,433)

¥ 26,727

(42,028)
(46,425)
26,306

19,758
637
(11,075)

(22,270)
(45,788)
15,231

Other comprehensive income (loss)

¥ (15,987)

¥(10,113)

¥ (26,100)

16.

Net Income
Per Share

17.

Financial
Instruments

For the year ended March 31, 2001:

Unrealized gains on securities:

Unrealized holding gains arising during period
Less: reclassification adjustment for gains included
in net income

Foreign currency translation adjustments
Minimum pension liability adjustment

Thousands of U.S. dollars

Pre-tax
amount

Tax benefit
(expense)

Net-of-tax
amount

$ (239,936) $101,049

$(138,887)

(367,153)
406,758
(1,263,145)

167,661
(3,113)
531,782

(199,492)
403,645
(731,363)

Other comprehensive income (loss)

$(1,463,476) $797,379

$(666,097)

A reconciliation of the numerators and denominators between basic and diluted net income per share (EPS) for
the years ended March 31, 2001 and 2000 is as follows:

Years ended March 31

Net income (loss) available to common shareholders
Net income effect of dilutive convertible debentures

Net income (loss) available to common shareholders

and assumed conversions

Years ended March 31

Number of shares for basic EPS computations:

Weighted—average number of shares of common stock
outstanding for the year

Incremental shares from assumed conversions of dilutive
convertible debentures

Number of shares for diluted EPS computations

Years ended March 31

Net income (loss) per share of common stock

—Basic

—Diluted

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥96,168
186

¥(32,903)
—

$775,548
1,500

¥96,354

¥(32,903)

$777,048

Thousands of shares

2001

2000

3,218,982

3,218,976

24,499

—

3,243,481

3,218,976

Exact yen

U.S. dollars

2001

2000

2001

¥29.88

¥29.71

¥(10.22)

$0.241

$0.240

The company operates internationally, giving rise to exposure to market risks from fluctuations in for-
eign currency exchange and interest rates. In the normal course of its risk management efforts, the com-
pany employs a variety of derivative financial instruments, which are comprised principally of foreign
currency forward exchange contracts, interest rate swap agreements and currency swap agreements, to
reduce its exposures. The company does not hold or issue financial instruments for trading purposes.
The company does not anticipate any credit loss from nonperformance by the counterparties to foreign
exchange contracts, interest rate swap agreements and currency swap agreements.

The company and several subsidiaries have entered into forward exchange contracts with banks as
hedges against assets and liabilities denominated in foreign currencies. The forward exchange contracts
related to accounts receivable and payable, and commitments on future trade transactions denominated
in foreign currencies mature primarily within a few months subsequent to the balance sheet date. Gains
and losses explicitly deferred, arising from contracts related to future trade transactions, are insignifi-
cant. As these foreign exchange forward contracts are utilized solely for hedging purposes, the resulting
gains or losses are offset against foreign exchange gains or losses on the underlying hedged assets and
liabilities. Gains and losses related to qualifying hedges of firm commitments denominated in foreign
currencies are deferred and are recognized in income when the hedged transaction occurs.

Interest rate swap agreements and currency swap agreements are used to limit the company’s exposure
to losses in relation to underlying debt instruments and a certain foreign currency denominated accounts
receivable resulting from adverse fluctuations in foreign currency exchange and interest rates. These
agreements mature during the period 2001 to 2011. The related differentials to be paid or received
under the interest rate swaps are recognized in interest expense over the terms of the agreements.
Currency swaps are accounted for in a manner similar to the accounting for forward exchange contracts.

The company’s forward exchange contract amounts, the aggregate notional principal amounts of inter-
est rate swap agreements and the principal amounts of currency swap agreements outstanding at March
31, 2001 and 2000 are summarized below:

March 31

Forward exchange contracts:
To sell foreign currencies
To buy foreign currencies
Interest rate swap agreements
Currency swap agreements

Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

¥157,532
30,829
432,884
132,836

¥240,949
60,569
401,136
84,588

$1,270,419
248,621
3,491,000
1,071,258

The estimated fair values of the company’s financial instruments at March 31, 2001 and 2000 are
summarized as follows:

Millions of yen

2001

2000

Thousands of
U.S. dollars

2001

Carrying
amount

Estimated
fair value

Carrying
amount

Estimated
fair value

Carrying
amount

Estimated
fair value

¥ 143,292 ¥ 145,043 ¥ 116,961 ¥ 119,443 $ 1,155,581 $ 1,169,702

(1,260,771)

(1,299,526)

(1,380,097)

(1,400,086)

(10,167,508)

(10,480,048)

March 31

Nonderivatives:

Assets—

Long-term finance
receivables, net

Liabilities—

Long-term debt,
including current
portion
Derivative financial
instruments:

Forward exchange
contracts
Interest rate swap
agreements
Currency swap agreements

(592)

(5,474)

1,849

5,308

(4,774)

(44,145)

—
(9,403)

(5,042)
(10,038)

—
4,550

(3,416)
5,355

—
(75,831)

(40,661)
(80,952)

The above table excludes the financial instruments for which fair values approximate their carrying
values and those related to leasing activities.

In assessing the fair value of these financial instruments, the company has used a variety of methods
and assumptions, which were based on estimates of market conditions and risks existing at that time.
For certain instruments, including cash and cash equivalents, notes and accounts receivable, trade,
finance receivables, net, short-term borrowings, notes payable, trade, accounts payable, trade and
accounts payable, other and accrued expenses, it was assumed that the carrying amount approximated
fair value for the majority of these instruments because of their short maturities. Quoted market prices
were used for a part of marketable securities and other investments. Other techniques, such as estimat-
ed discounted value of future cash flows, and replacement cost, have been used to determine fair value
for the remaining financial instruments. These estimated fair values are not necessarily indicative of the
amounts that could be realized in a current market exchange.

Marketable securities and other investments includes investment securities which represent holdings in
a number of non-public companies. The aggregate carrying amount of these investments in non-public
companies was ¥103,147 million ($831,831 thousand) and ¥90,690 million at March 31, 2001 and
2000, respectively. However, the corresponding fair value of these investments at those dates was not
computed as such estimation was not practicable.

18.

Commitments
and Contingent
Liabilities

Commitments outstanding at March 31, 2001 for the purchase of property, plant and equipment
approximated ¥46,486 million ($374,887 thousand).

Rental expense for the years ended March 31, 2001 and 2000 aggregated ¥81,503 million ($657,282
thousand) and ¥79,299 million, respectively. Substantially all such rental expenses are related to
cancellable leases for office space, warehouses, and employees’ residential facilities. Such leases are
customarily renewed.

At March 31, 2001, contingent liabilities, principally for loans guaranteed, approximated ¥466,403
million ($3,761,315 thousand).

Management of the company believes that there are no legal actions pending against the company and
its subsidiaries which could result in damages against the company which would have a material effect
on the company’s consolidated financial statements.

19.

Restatement
of Financial
Statements

The company has applied SFAS No. 115 in the fiscal year ended March 31, 2001 and restated its prior
years’ consolidated financial statements. The effects of the restatements on the consolidated balance
sheet as of March 31, 2000 and the related consolidated statements of income and shareholders’
equity for the year then ended are as follows:

Consolidated balance sheet:

March 31

Marketable securities
Other investments
Marketable securities and other investments
Investments in and advances to affiliated companies
Other assets
Minority interest in consolidated subsidiaries
Retained earnings
Accumulated other comprehensive income (loss)

Consolidated statement of income:

Year ended March 31

Income taxes—deferred
Minority interest in loss of consolidated subsidiaries
Equity in income of affiliated companies
Net loss

Year ended March 31

Per share of common stock:

Net loss—basic and diluted

Consolidated statement of shareholders’ equity:

Year ended March 31

Other comprehensive income (loss), net of tax

Unrealized gains on securities

Millions of yen

2000

As previously
reported

¥ 93,140
139,534
—
142,247
449,851
124,887
635,966
(214,486)

As restated

—
—
360,279
146,296
396,014
124,733
643,250
(143,799)

Millions of yen

2000

As previously
reported

¥(61,398)
(1,735)
6,108
(28,000)

As restated

¥(56,927)
(1,728)
5,683
(32,903)

Exact yen

2000

As previously
reported

As restated

¥(8.70)

¥(10.22)

Millions of yen

2000

As previously
reported

As restated

¥—

¥4,457

R E P O R T O F I N D E P E N D E N T A C C O U N T A N T S

PricewaterhouseCoopers
Kasumigaseki Bldg., 32nd Floor
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo 100-6088, Japan

April 27, 2001

To the Board of Directors of
Toshiba Corporation

We have audited the accompanying consolidated balance sheets of Toshiba Corporation and its subsidiaries as of March
31, 2001 and 2000, and the related consolidated statements of income, shareholders’ equity and cash flows for the years
then ended, stated in yen. These financial statements are the responsibility of the Company’s management. Our responsi-
bility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial state-
ments are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements do not include segment information required to be disclosed in
accordance with Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosures about Segments of an
Enterprise and Related Information.”

In our report dated April 28, 2000, we expressed an opinion that the consolidated financial statements present fairly, in all
material respects, the financial position of Toshiba Corporation and its subsidiaries at March 31, 2000 and 1999, and the
results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally
accepted in the United States of America, except for the effects of the departure from SFAS No. 115, “Accounting for Certain
Investments in Debt and Equity Securities,” and the omission of segment information. As described in Notes 2 and 19, the
Company has applied SFAS No. 115 and restated its prior years’ consolidated financial statements. Accordingly, our pre-
sent opinion on the prior year’s consolidated financial statements, as presented herein, is different from that expressed in
our previous report.

In our opinion, except for the omission of segment information discussed in the third paragraph of this report, the consolidat-
ed financial statements audited by us present fairly, in all material respects, the financial position of Toshiba Corporation
and its subsidiaries at March 31, 2001 and 2000, and the results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United States of America.

G L O B A L N E T W O R K

Overseas Offices

Overseas Subsidiaries
and Affiliates

LATIN AMERICA

Buenos Aires

EUROPE

Moscow

AFRICA

Johannesburg

MIDDLE EAST

Baghdad

Abu Dhabi

ASIA

Beijing

Shanghai

Manila

Bangkok

Jakarta

New Delhi

NORTH AMERICA

Toshiba of Canada, Ltd.
Markham, Ontario, Canada

Toshiba America, Inc.
New York, New York, U.S.A.

Toshiba America Capital Corporation
New York, New York, U.S.A.

Toshiba America Research, Inc.
Morristown, New Jersey, U.S.A.

Toshiba America Medical Systems, Inc.
Tustin, California, U.S.A.

Toshiba America MRI Inc.
South San Francisco, California, U.S.A.

LATIN AMERICA

Toshiba de Mexico, S.A. de C.V.
Mexico City, Mexico

Toshiba Electromex, S.A. de C.V.
Ciudad Juárez, Mexico

GE Toshiba Turbine Components de

Mexico S.R.L de C.V

Monterrey, Mexico

Toshiba de Venezuela C.A.
Caracas, Venezuela

Toshiba Medical do Brasil Ltda.
São Paulo, Brazil

Semp Toshiba Amazonas S.A.
Manaus, Brazil

T and S Servicos Industrias s/c Ltda.
São Paulo, Brazil

Toshiba America Information Systems, Inc.
Irvine, California, U.S.A.

Toshiba do Brasil, S.A.
São Paulo, Brazil

Toshiba America Consumer Products, Inc.
Wayne, New Jersey, U.S.A.

EUROPE

Toshiba International Corporation
Houston, Texas, U.S.A.

Toshiba America Electronic Components,

Inc.

Irvine, California, U.S.A.

Toshiba Display Devices Inc.
Horseheads, New York, U.S.A.

Dominion Semiconductor, L.L.C.
Manassas, Virginia, U.S.A.

Semiconductor America, Inc.
Irvine, California, U.S.A.

Toshiba Venture Capital, Inc.
Palo Alto, California, U.S.A.

Toshiba America Venture Capital, Inc.
New York, New York, U.S.A.

Toshiba Satellite Broadband, Inc.
Wilmington, Delaware, U.S.A.

Pacific Fuel Cell Capital (U.S.A), Inc.
Wilmington, Delaware, U.S.A.

Toshiba GE Automation Systems

International, L.L.C.

Wilmington, Delaware, U.S.A.

GE Toshiba Automation Systems, L.L.C.
Wilmington, Delaware, U.S.A.

Semiconductor North America, Inc.
Irvine, California, U.S.A.

Toshiba America Medical Credit, Inc.
Tustin, California, U.S.A.

Flash Vision, L.L.C.
Manassas, Virginia, U.S.A.

Toshiba Hawaii, Inc.
Honolulu, Hawaii, U.S.A.

Toshiba of Europe Ltd.
London, U.K.

Toshiba International Finance (UK) Plc.
London, U.K.

Toshiba Research Europe Ltd.
Cambridge, U.K.

Toshiba Medical Systems Ltd.
Crawley, U.K.

Toshiba Information Systems (UK) Ltd.
Weybridge, U.K.

Toshiba International (Europe) Ltd.
West Drayton, U.K.

Toshiba Electronics (UK) Ltd.
Camberley, U.K.

Toshiba Electronics Scandinavia AB
Bromma, Sweden

Toshiba International Finance

(Netherlands) B.V.

Haarlem, The Netherlands

Toshiba Medical Systems Europe B.V.
Zoetermeer, The Netherlands

Toshiba Medical Systems B.V.
Zoetermeer, The Netherlands

Toshiba Medical Systems NV/SA
Antwerpen, Belgium

Toshiba Medical Systems GmbH
Neuss, Germany

Toshiba Memory Semiconductor

Taiwan Corp.
Kaohsiung, Taiwan

Toshiba Electronics Taiwan Corporation
Taipei, Taiwan

Toshiba Sales and Services Sdn. Bhd.
Selangor, Malaysia

Toshiba Electronics Malaysia Sdn. Bhd.
Selangor, Malaysia

Toshiba Electronics Trading (Malaysia)

Taiwan Toshiba International

Procurement Corp.

Taipei, Taiwan

Toshiba Information Equipment

(Philippines), Inc.
Laguna, Philippines

Toshiba Vietnam Consumer Products

Co., Ltd.

Ho Chi Minh City, Vietnam

Toshiba Thailand Co., Ltd.
Bangkok, Thailand

Thai Toshiba Electric Industries Co., Ltd.
Bangkok, Thailand

Toshiba Consumer Products (Thailand)

Co., Ltd.

Pathumthani, Thailand

Toshiba Display Devices (Thailand)

Co., Ltd.

Pathumthani, Thailand

Toshiba Semiconductor (Thailand) Co., Ltd.
Pathumthani, Thailand

Sdn. Bhd.

Selangor, Malaysia

Toshiba Capital (Asia) Ltd.
Singapore

Toshiba Asia Pacific Pte., Ltd.
Singapore

Toshiba Medical Systems Asia Pte., Ltd.
Singapore

Toshiba Video Products Pte., Ltd.
Singapore

Toshiba Singapore Pte., Ltd.
Singapore

Toshiba Electronics Asia (Singapore)

Pte., Ltd.

Singapore

P.T. Toshiba Consumer Products

(Indonesia)
Bekasi, Indonesia

P.T. Toshiba Display Devices Indonesia
Besasi, Indonesia

P.T. Tosjaya Abadi Ventura
Jakarta, Indonesia

OCEANIA

Toshiba (Australia) Pty., Ltd.
Sydney, Australia

Toshiba International Corporation

Pty., Ltd.

Sydney, Australia

(As of March 31, 2001)

Toshiba Europe GmbH
Neuss, Germany

Toshiba Semiconductor GmbH
Braunschweig, Germany

Toshiba Electronics Europe GmbH
Düsseldorf, Germany

Toshiba Medical France S.A.
Puteaux, France

Toshiba Systèmes (France) S.A.
Puteaux, France

Toshiba Medical Systems Gesellschaft

m.b.H.

Wiener Neudorf, Austria

Toshiba Medical Systems AG
Oetwil am See, Switzerland

Toshiba Medical Systems S.R.L.
Rome, Italy

Toshiba Medical Systems S.A.
Madrid, Spain

ZAO Toshiba Medical Systems
Moscow, CIS

MIDDLE EAST

Toshiba Gulf FZE
Dubai, UAE

ASIA

Toshiba (China) Co., Ltd.
Beijing, The People’s Republic of China

Toshiba Technology Development

(Shanghai) Co., Ltd.

Shanghai, The People’s Republic of China

Toshiba Dalian Co., Ltd.
Dalian, The People’s Republic of China

Hangzhi Machinery & Electronics Co., Ltd.
Hangzhou, The People’s Republic of China

Dalian Toshiba Television Co., Ltd.
Dalian, The People’s Republic of China

Toshiba Computer System (Shanghai)

Co., Ltd.

Shanghai, The People’s Republic of China

Changzhou Toshiba Transformer Co., Ltd.
Changzhou, The People’s Republic of China

Wuxi Huazhi Semiconductor Co., Ltd.
Wuxi, The People’s Republic of China

Jiangxi Toshiba Electronic Materials

Co., Ltd.

Ganzhou, The People’s Republic of China

Toshiba Hong Kong Ltd.
Shatin, Hong Kong

Toshiba Electronics Asia, Ltd.
Kowloon, Hong Kong

Toshiba Electronics Korea Corporation
Seoul, The Republic of Korea

C O N S O L I D A T E D S U B S I D I A R I E S

A F F I L I A T E D C O M P A N I E S
A C O U N T E D B Y T H E
E Q U I T Y M E T H O D

Domestic

A&T Battery Corporation

Device Link, Inc.

FreshEye Corporation

Overseas

Domestic

Changzhou Toshiba Transformer Co., Ltd.

D.T. Circuit Technology Co., Ltd.

Dalian Toshiba Television Co., Ltd.

Dominion Semiconductor, L.L.C.

Display Technologies, Inc.

GE Toshiba Silicones Co., Ltd.

Nishishiba Electric Co., Ltd.

Fukuoka Toshiba Electronics Corporation

GE Toshiba Automation Systems, L.L.C.

Harison Toshiba Lighting Co., Ltd.

Iwate Toshiba Electronics Co., Ltd.

Joint Fuel Co., Ltd.

Hangzhi Machinery & Electronics Co., Ltd.

TMA Electric Corporation

P.T. Toshiba Consumer Products Indonesia

Topcon Corporation

P.T. Toshiba Display Devices Indonesia

Toshiba Ceramics Co., Ltd.

Kaga Toshiba Electronics Corporation

Pacific Fuel Cell Capital (U.S.A.), Inc.

Toshiba GE Turbine Service Co., Ltd.

Kitashiba Electric Co., Ltd.

Shibaura Mechatronics Corporation

Term Corporation

Semiconductor America, Inc.

Semiconductor North America, Inc.

Shenyang Toshiba Elevator Co., Ltd.

Toshiba Air Conditioning Co., Ltd.

TEC America, Inc.

Toshiba Battery Co., Ltd.

Toshiba Building & Lease Co., Ltd.

Toshiba Capital Corporation

TEC Singapore Electronics Pte. Ltd.

TIM Electronics Sdn. Bhd.

Toshiba (Australia) Pty., Ltd.

Toshiba Carrier Air conditioning Systems Corporation

Toshiba (China) Co., Ltd.

Toshiba Carrier Corporation

Toshiba Chemical Corporation

Toshiba Credit Corporation

Toshiba Device Corporation

Toshiba Digital Frontiers Inc.

Toshiba America Business Solutions, Inc.

Toshiba America Capital Corporation

Toshiba America Consumer Products, Inc.

Toshiba America Electronic Components, Inc.

Toshiba America Information Systems, Inc.

Toshiba Electric Appliances Co., Ltd.

Toshiba America Medical Systems, Inc.

Toshiba Elevator and Building Systems Corporation

Toshiba America MRI Inc.

Toshiba Elevator Products Corporation

Toshiba America Venture Capital, Inc.

Toshiba Engineering Corporation

Toshiba Finance Corporation

Toshiba America, Inc.

Toshiba Asia Pacific Pte., Ltd.

Toshiba GE Automation Systems Corporation

Toshiba Capital (Asia) Ltd.

Toshiba GE Turbine Components Co., Ltd.

Toshiba Chemical Singapore Pte., Ltd.

Toshiba Hokuto Electronics Corporation

Toshiba Compressor (Taiwan) Corporation

Toshiba Home Technology Corporation

Toshiba Computer Systems (Shanghai) Co., Ltd.

Toshiba Industrial Products Manufacturing

Toshiba Consumer Products (Thailand) Co., Ltd.

Toshiba Machine Co., Ltd.

Toshiba Tungaloy Co., Ltd.

Toshiba-EMI Limited

Plus 5 others

Overseas

Flash Vision, L.L.C.

GE Toshiba Turbine Components de Mexico S.R.L.

de C.V.

Guangdong Meizhi Compressor Limited

Guangdong Meizhi Motor Limited

Kumdong Lighting Co., Ltd.

Semp Toshiba Amazonas S.A.

Shanghai GFC Toshiba Elevator Co., Ltd.

Thai Toshiba Electric Industries Co., Ltd.

Toshiba Carrier (Thailand) Co., Ltd.

Toshiba Carrier UK Ltd.

Plus 3 others

(As of March 31, 2001)

Corporation

Toshiba Industrial Products Sales Corporation

Toshiba Information Equipments Co., Ltd.

Toshiba Information Systems (Japan) Corporation

Toshiba Kansai Lifestyle-electronics Corporation

Toshiba Lighting & Technology Corporation

Toshiba Logistics Corporation

Toshiba Medical Finance Co., Ltd.

Toshiba Medical Systems Co., Ltd.

Toshiba Microelectronics Corporation

Toshiba Multi Media Devices Co., Ltd.

Toshiba Plant Kensetsu Co., Ltd.

Toshiba Shutoken Lifestyle-Electronics Corporation

Toshiba Tec Corporation

Toshiba Video Products Japan Co., Ltd.

Toyo Carrier Engineering Co., Ltd.

Yokkaichi Toshiba Electronics Corporation

Plus 162 others

Toshiba Dalian Co., Ltd.

Toshiba Display Devices (Thailand) Co., Ltd.

Toshiba Display Devices Inc.

Toshiba do Brasil, S.A.

Toshiba Electronics (UK) Ltd.

Toshiba Electronics Asia, Ltd.

Toshiba Electronics Europe GmbH

Toshiba Electronics Malaysia Sdn. Bhd.

Toshiba Electronics Taiwan Corporation

Toshiba Europe GmbH

Toshiba GE Automation Systems International, L.L.C.

Toshiba Information Equipment (Philippines), Inc.

Toshiba Information Systems (UK) Ltd.

Toshiba International Corporation

Toshiba International Finance (Netherlands) B.V.

Toshiba International Finance (UK) Plc.

Toshiba Medical Systems Asia Pte., Ltd.

Toshiba Medical Systems Europe B.V.

Toshiba Satellite Broadband, Inc.

Toshiba Semiconductor (Thailand) Co., Ltd.

Toshiba Semiconductor GmbH

Toshiba Singapore Pte., Ltd.

Toshiba Systemes (France) S.A.

Toshiba TEC Europe Imaging Systems S.A.

Toshiba Venture Capital, Inc.

Toshiba Video Products Pte., Ltd.

Wuxi Huazhi Semiconductor Co., Ltd.

Wuxi Tochemi Electro Chemical Co., Ltd.

Plus 55 others

I N V E S T O R R E F E R E N C E

PRINCIPAL SHAREHOLDERS

(%)

The Sakura Bank, Ltd. ................................................................3.88
The Dai-ichi Mutual Life Insurance Company .............................3.78
Nippon Life Insurance Company ................................................3.36
Japan Trustee Service Bank, Ltd. ...............................................2.72
State Street Bank and Trust Company .......................................2.46
The Chase Manhattan Bank NA London ....................................2.01
Employees Stock Ownership Plan ..............................................1.67
The Nippon Fire & Marine Insurance Co., Ltd. ...........................1.55
The Mitsubishi Trust and Banking Corporation ..........................1.55
Shinsei Bank, Ltd. .......................................................................1.52

Notes: 1. On April 1, 2001, The Sakura Bank and The Sumitomo Bank,

Limited, merged to form Sumitomo Mitsui Banking Corporation.
2. On April 1, 2001, The Nippon Fire & Marine Insurance Co., Ltd.
and The Koa Fire & Marine Insurance Co., Ltd. merged to form
NIPPONKOA Insurance Co., Ltd.

(As of March 31, 2001)

TOSHIBA CORPORATION

FOUNDED

July 1875

CAPITAL

¥274,921 million
(US$2,217 million)

EMPLOYEES

188,042

COMMON STOCK

Authorized:
10,000,000,000 shares

Issued: 3,219,014,736 shares

No. of shareholders: 438,469

Average holding: 7,341 shares

TRANSFER AGENT

The Chuo Mitsui Trust
and Banking Co., Ltd.

HEADQUARTERS

1-1, Shibaura 1-chome,
Minato-ku, Tokyo 105-8001,
Japan

For further information, please contact:

Toshiba Corporation
Corporate Communications Office
1-1, Shibaura 1-chome, Minato-ku, Tokyo 105-8001, Japan
Phone: (03) 3457-2096 Facsimile: (03) 5444-9202
or via the Internet at:
http://www.toshiba.co.jp/about/ir/index_j.htm

Product names may be trademarks of their respective companies.

Printed on recycled paper

Printed in Japan