The Shimadzu Corporation

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2 The Shimadzu Corporation Shimadzu Corporation (the Company), listed on the Tokyo Stock Exchange (TSE Code: 7701), is a precision instruments maker, which provides various industries around the world with analytical, medical, aircraft and industrial instruments and services. The largest and most profitable segment of the Company is Chemical Analysis Instruments. Above all, chromatography used in research and development, quality assurance, and environmental analysis in pharmaceutical, food, chemical and petrochemical companies, and government institutes is the mainstay product. Geographically, the Company focuses on developing countries especially China. The Company expects stronger demand in environmental preservation, food safety and R&D in China. Headquartered in Kyoto, Japan, its sales and services bases cover all the major markets around the world. Its production facilities are located in Japan, China, the U.S. and the U.K. In fiscal year 2008, earnings per share (EPS) amounted to 28.92, a decrease of from the previous year. The Company currently has more than 9,670 employees at March 31, C o n t e n t s Operational Highlights 1 To Our Shareholders 2 Board of Directors 6 Business Segment Information 7 Ecology-Oriented Activities 12 Financial Section 13 Investor Information / Stock Information 39

3 Operational Highlights G lobal demand has receded due to the economic downturn precipitated by the fi nancial crisis that occurred during the latter half of 2008, and the adverse effects have been compounded by a strong yen. Although we intensifi ed marketing and efforts to raise demand from the public sector, both net sales and profi ts declined. V ersus the previous fi scal year, net sales were down 5.9%, operating income was down 28.9%, ordinary income was down 25.7%, and net income was down 37.8%. However, sales of mainstay chromatographs were up 3.3% year over year to 65.1 billion due to the success of efforts to raise demand from the public sector in Japan and orders generated by the extra demand stimulated in China. W e continued actively investing in China, where we see prospects for further growth going forward. We expanded our service functions in Shanghai and established new sales locations in Wuhan (Hubei province) and Shenyang (Liaoning province). Our equity ratio increased 2.8 percentage points versus the previous fi scal year to 52.3%, due to such factors as a decline in interest-bearing debt and an increase in retained earnings. We further bolstered our balance sheet. D espite sales decline throughout this harsh period, we achieved a positive free cash flow of 2.5 billion. Financial Highlights millions, except per share data Years ended March Net sales 272, , , , ,559 Operating income Operating income margin 19, % 27, % 25, % 21, % 20, % Net income 8,537 13,725 13,379 11,316 11,902 Earnings per share (yen) Return on equity Return on assets 5.7% 6.1% 9.4% 8.0% 9.9% 8.1% 10.0% 6.8% 13.1% 6.7% Shimadzu Annual Report 009 1

4 Shimadzu Annual Report 2009 Akira Nakamoto, President and Chief Executive Officer

5 To Our Shareholders I just recently assumed my new position as president. I look forward to spearheading our efforts to achieve sustained growth and a solid earnings base in the aim of turning us into a truly global corporation. I will spare no effort in building Shimadzu into a premier global brand.the financial crisis that occurred during the latter half of last year gave rise to a harsh economic environment. I will tackle the challenges posed head on by accelerating our globalization efforts, cutting costs, and taking other steps. I sincerely request the continued support of all of our investors. Overview of Earnings, Financial Position, and Cash Flows In fiscal 2009, ended March 31, 2009, Japanese economic activity plunged as never before from the second half as domestic capital investment, personal consumption, and exports dropped significantly in response to a global recession and financial crisis. Compounding recessions in the United States and Europe, China, India, and other emerging economies lost momentum. The Company responded by stepping up marketing to build demand, reinforcing its sales and service structure in China, and streamlining production. These efforts were insufficient to overcome the impacts of the recession and a higher yen, causing revenues and earnings to decline. Earnings per share fell 37.8%. Regarding our financial position, by the end of the term, we boosted our equity ratio 2.8 percentage points, to 52.3%, due to such factors as a decline in interest-bearing debt and an increase in retained earnings and we further bolstered our balance sheet. Despite a decline in sales throughout this harsh period, we achieved a positive free cash flow of 2.5 billion. Net cash used in financing activities was 11.8 billion, reflecting corporate bond redemptions. Dividends We paid an annual dividend of 9 per share, comprising interim and year-end payments of 4.5 per share. The dividend policy of the Company was of balancing earnings and our commitment to stable dividends. We shoud make efforts to improve business results and strengthen profitability and our financial position while boosting return on equity. And we should invest sufficient internal reserves in capital expenditure and research & development for driving future growth. Shimadzu Annual Report 2009

6 Business Segment Results Analytical and Measuring Instruments Sales of mainstay chromatographs rose 3.3%, to 65.1 billion, reflecting higher revenues in China because of food safety issues. On the other hand, the recession caused demand to plummet for surface analyzers for semiconductor and electrical industries and for material testing and nondestructive inspection machines. Another negative factor was a fall in the results at a subsidiary that had benefited from a Middle Eastern demand spike in the previous fiscal year. Segment sales thus decreased 7.3% from a year earlier, to billion, while operating income declining 19.2%, to 21.2 billion. Medical Systems Sales in China and the Middle East soared on solid demand growth. Domestic revenues diminished, however, owing to strict business conditions for hospitals and to medical fee revisions. In North America operating income was down significantly because of higher selling, general and administrative expenses. Segment sales thus decreased 6.2%, to 51.1 billion, while operating income dropped 56.0%, to 1.2 billion. Aircraft Equipment and Industrial Machinery Segment sales were down 1.6%, to 63.1 billion, while operating income fell 24.2%, to 4.9 billion. Aircraft Equipment Aircraft equipment sales decreased 11.7%, to 27.4 billion. Domestic sales were down significantly, as we completed deliveries for the previous term of new aircraft equipment prototypes and decreased aircraft repair parts to the Japan Forces. Sales of equipment for passenger aircraft of the Boeing Company were down because of the high yen mainly. Industrial Machinery Industrial Machinery sales rose 7.9%, to 35.7 billion. In the Segment, demand for many of our products reflects economic trends very sensitively. Still, we greatly increased sales to Taiwan of chemical vapor deposition equipment for solar cells. Sales of turbomolecular pumps equipped semiconductor and liquid crystal manufacturing machines were up owing to the consolidation of business in that field. Sales of hydraulic equipment for forklift trucks shrunk in the second half because of the recession. Net Sales Breakdown by Business Segment millions 300, , , , ,000 50, , , , Analytical and Measuring Instruments Medical Systems Aircraft Equipment and Industrial Machinery Other , , Years ended March 31 % figures denote the contribution of each segment to total sales. Shimadzu Annual Report 2009

7 Growth Strategies The Company is anticipated that our operating conditions for the years ahead are unclear due to foreign exchanges and raw materials price volatility. And the Company is concerned about how affect the real economy by credit crunch since the second half of last year. We will devote fiscal 2010 to tackling the challenges of the harsh economic climate and urgently strengthen our earnings structure. We will take the following medium-term steps and actively slash overall costs while bolstering profitability. Growth Strategy Priorities We strive actively to broaden our business such as food safety, environmental protection, clean energy, and the life sciences by enlarging demand in emerging countries and the government's economic stimulus packages. And we also strive to make more demand from the Mega-Pharmacies, which are giant pharmaceutical companies in the U.S. and Europe, strategically expand digital medical systems and clinical applications. Expand Services and Consumables Businesses We aim to build our services and consumables capabilities in our Analytical and Measuring Instruments business to provide total solutions and drive further growth. In particular, we will accelerate our capabilities in supplying separation columns for chromatographs. Strengthen Global Business Structure We have become more concerned about foreign exchange volatility as we have globalized our businesses year by year. As we must continue to expand globally, it will become critical for us to better shield ourselves from such fluctuations. We will therefore localize our operations in regions overseas. In China, for example, we will quickly build a structure whereby development, procurement, production, sales, and services are all within that nation. Conclusion I just recently assumed my new position as president. I look forward to spearheading our efforts to achieve sustained growth and a solid earnings base in the aim of turning us into a truly global corporation. I will spare no effort in building Shimadzu into a premier global brand. The financial crisis that occurred during the latter half of last year gave rise to a harsh economic environment. I will tackle the challenges posed head on by accelerating our globalization efforts, cutting costs, and taking other steps. I sincerely request the continued support of all of our investors. Net Sales Breakdown by Geographical Segment millions 300, , , , ,000 50, , , , , , Years ended March 31 % figures denote the contribution of each segment to total sales. Japan North and South America Europe Asia - Oceania June 26, 2009 Akira Nakamoto President and Chief Executive Officer Shimadzu Annual Report 2009

8 Board of Directors Front row: Shigehiko Hattori, Chairman of the Board Back row: Akira Nakamoto, President and Chief Executive Officer Takayuki Kato, Senior Managing Director Ichiro Kowaki, Managing Director Yukio Yoshida, Managing Director (left to right) Shigehiko Hattori Chairman of the Board Takayuki Kato Senior Managing Director Yutaka Nakamura Director Hiroyuki Fujii Director Akira Nakamoto President and Chief Executive Officer Ichiro Kowaki Managing Director Yukio Yoshida Managing Director Satoru Suzuki Director Osamu Ando Director Katsutoshi Nishihara Director Yasunori Tokumasu Director Yoshikazu Yoshida Director Shimadzu Annual Report 2009

9 Business Segment Information For the Well-being of both Mankind and the Earth Analytical and Measuring Instruments 8 Medical Systems 10 Aircraft Equipment and Industrial Machinery 11 Shimadzu Annual Report 009 7

10 Shimadzu Corporation globally provides various fields with analytical, medical, aircraft and industrial instruments and services. The Company fully supports the business expansion and R&D sophistication of clients by providing these instruments and services. Constantly striving for the development of high valueadded instruments and services, the Company aims to continually boost customer satisfaction. Analytical and Measuring Instruments Products and Customers The businesses of the Segment are divided into five sub-segments, which are general analytical instruments for mainly pharmaceutical, chemical and life sciences; surface analyzers for mainly electronics; environmental analyzers for environmental preservation; and testing and non-destructive inspection machines mainly for materials. The percentage of sales are as follows: general analytical instruments 62%, surface analyzers 7%, environmental analyzers 7%, testing and non-destructive inspection machines 11%, and other 13%. The mainstay product is chromatography, which makes up more than 40% of the sales in the Segment and is used in R&D, quality assurance, and environmental analysis by pharmaceutical, food, chemical and petrochemical companies, and governmental institutes. Chromatography is the representative product of general analytical instruments. The other representative product of general analytical instruments is spectrometers used in research and development in chemical and environmental analysis. Manufacturing Opened Techical Support Center in Shanghai (November, 2008) Net Sales and Operating Income millions 200,000 Net Sales 150, , ,453 Participated in Analytica China (Shanghai, October, 2008) Operating Income 149, , ,403 The Segment assembles instruments in Japan, China, the Philippines, the U.S. and the U.K. In Japan, the Kyoto factory maintains an environmental management system in accordance with the requirements of ISO and has changed to a new manufacturing system to shorten lead time, so called Just- in-time System. 100,000 50, ,705 21,891 26,120 26,198 21, Years ended March 31 Shimadzu Annual Report 2009

11 Investment Net Sales by Region Research and Development The Segment eagerly pursues research and development activities, continually updating the existing products and commercializing new cutting-edge products. The Segment s research and development expenditures for fiscal 2009 were 4.19 billion. Asia-Oceania Europe North and South America 11% 25% 10% 54% Japan Capital Expenditures The Segment s capital expenditures for fiscal 2009 were 3.31 billion. This is mostly due to maintenance and upgrades of existing facilities. Employees At March 31, 2009, the Segment employed 5,393 employees, with over 2,390 located overseas. The increase of 4% compared with previous period is primarily due to increased sales and service activities in China and Europe. Chromatography The chromatography business consists of high-performance liquid chromatographs(hplc), mass spectrometers(ms), and gas chromatographs(gc), instruments, consumables, including columns and other parts, and service activities. In fiscal 2009 the chromatography business totaled 65.1 billion, increasing 3.3% from a year earlier. In China very strong double digit growth was achieved due to rapidly increasing demand for food analysis with regard to melamine. Chromatography separates compounds of various kinds of samples and identifies chemical types and quantity very precisely. Especially MS has a high level of performance in terms of identification. Major customers of LC & MS come from pharmaceutical, life science, and industrial companies, in addition to academies and institutes. And major customers of GC & MS come from chemical and petrochemical companies, in addition to academies, institutes and environmental agencies. New high-spec ultra-fast liquid chromatographs (UFLC) enable chemical analysis in a very short time compared with conventional HPLC. Shimadzu Annual Report

12 Medical Systems Products and Customers The Segment provides diagnostic imaging systems and services to hospitals and clinics. Sales of X-ray imaging systems make up over 80% of Segment sales. The rest of the sales comes from the following diagnostic systems: computed tomography (CT) scanners, of which, the limited single-slice type, ultrasound systems, and nuclear systems including positron emission tomography CT (PET-CT). The Segment promotes the expansion of digitalized X-ray imaging systems energetically. The Segment enforces alliances with government medical institutes in developing new imaging technology which helps reduce radiation to patients, and with private companies in sales. Net Sales and Operating Income Net Sales Operating Income millions 60,000 45,000 30,000 15, ,423 50,112 51,050 46,277 44,291 2,300 2,140 2,138 2,677 1, Years ended March 31 Manufacturing The Segment assembles instruments in Japan and China. In Japan, the Kyoto and the Shimane factories maintain environmental management systems in accordance with the requirements of ISO Net Sales by Region Asia-Oceania 27% Investment Research and Development The Segment eagerly pursues progress in research and development activities, continually updating existing products and commercializing new cutting-edge products. The Segment s research and development expenditures for fiscal 2009 were 2.99 billion. Europe North and South America 8% 15% 50% Japan Capital Expenditures The Segment s capital expenditures for fiscal 2009 were 1.64 billion. This is due to the maintenance of existing facilities and the construction of a new facility. Employees At March 31, 2009, the Segment employed 1,667 employees, with over 560 located overseas. The increase of 5% compared with previous period is due to the acquisition of a development facility in North America and increased sales and service activities in China and the U.A.E. 10 Shimadzu Annual Report 2009

13 Aircraft Equipment and Industrial Machinery Products and Customers The Segment is composed of two businesses. One is aircraft equipment and the other is industrial machinery. The aircraft equipment business provides mainly flight control systems, air conditioning systems for cockpits and cabins, and head-up-displays, which provide symbols and data at eye level for fighter pilots, to the Japan Self-Defense Forces and to airlines globally, through several types of Boeing passenger aircraft. The industrial machinery business provides mainly turbomolecular pumps installed in semiconductor and flat panel display production equipment on board, chemical vapor deposition equipment for solar cells and hydraulic equipment for forklift trucks and construction machinery. In November 2007, the Company consolidated the turbomolecular pump business into a larger scale business by acquiring the same business of Mitsubishi Heavy Industries Ltd. Net Sales and Operating Income millions 70,000 60,000 50,000 40,000 30,000 20,000 10, ,306 27,577 24,729 Aircraft Equipment Net Sales Industrial Machinery Net Sales Operating Income 52,460 Aircraft Equipment Net Sales by Region 26,674 25,786 57,042 28,823 28,219 2,846 3,909 4,210 64,162 63,122 33,096 31, ,428 35,694 6,401 4,854 Years ended March 31 Manufacturing North and South America Other 1% The Segment assembles instruments in Japan and China. In Japan, the Kyoto and the Kanagawa factories maintain environmental management systems in accordance with the requirements of ISO The Tianjin factory in China is involved in the production of hydraulic equipment. 10% 89% Japan Investment Research and Development The Segment s research and development expenditures for fiscal 2009 were 1.52 billion. Industrial Machinery Net Sales by Region Asia-Oceania Capital Expenditures The Segment s capital expenditures for fiscal 2009 were 2.44 billion. This is mostly due to the maintenance and upgrades of existing facilities. Europe 3% 37% 7% 53% Japan Employees At March 31, 2009, the Segment employed 1,155 employees, with over 940 located in Japan. The increase of 3% compared with previous period is primarily due to the increase in the number of subsidiaries domestically and outside of Japan. North and South America Shimadzu Annual Report

14 Ecology-Oriented Activities Shimadzu is actively involved in ecologyoriented activities across its business operations and in providing support for academic projects. In keeping with our management principle of Realizing the Well-being of Mankind and the Earth, the Shimadzu Group is committed to making steady efforts to tackle these important issues. Environmental Management Systems The majority of Shimadzu s plants are ISO certified and are implementing an integrated environmental management system. The Company also works hard to reduce the environmental burden of its operating activities at the segment level, such as reducing energy consumption and CO2 emissions, reducing and recycling waste, eliminating the use of substances that damage the ozone layer, and decreasing the amount of packaging used. Activities of tree-planting campaigns The Company has been actively increasing planted areas at Sanjo Works in Kyoto, which plays a central role in production, and the Company takes part in tree-planting campaigns. The Company is improving the mountains by planting trees in Kyoto, Japan. This activity depends on mainly volunteer work of the Company employees and their families. Furthermore in the Philippines, the Company engaged in public tree-planting plans actively through local employee actions. Support for Academic Projects Since 1996, the Company has been continuously supporting environmental management projects at the United Nations University. The project is aimed at monitoring environmental pollution and accumulating environmental data in Asia. There are 11 Asian countries participating in the fifth phase of the project, Environmental Monitoring and Governance in the East Asian Hydrosphere Monitoring of Persistent Organic Compounds in Asia, which started in We have been supporting the project in various ways, including providing financial support, lending analysis equipment, and conducting analysis method training. We are committed to providing support to ensure the success of the project. 12 Shimadzu Annual Report 2009

15 Financial Section Management s Discussion and Analysis 14 Consolidated Balance Sheets 18 Consolidated Statements of Income 20 Consolidated Statements of Changes in Equity 21 Consolidated Statements of Cash Flows 23 Notes to Consolidated Financial Statements 25 Independent Auditor s Report 38 Shimadzu Annual Report

16 Management s Discussion and Analysis Consolidated Results of Operations and Financial Position Overview The Japanese economy took a dramatic turn for the worse in the second half of the fiscal year ended March 31, 2009, as exports, industrial production, and capital spending were all impacted by the turmoil in the financial market and the global economic slowdown. A downturn in the Chinese economy was alleviated to some extent by measures aimed at boosting domestic consumption, but the US and European economies contracted sharply, and the Indian and Russian economies also lost momentum. The following table shows sales by region: Millions of Yen Years ended March Japan 156, ,111 North and South America 27,611 30,646 Europe 22,654 22,710 Asia Oceania 65,694 64,504 Total 272, ,971 We launched a new three-year medium-term management plan at the start of the fiscal year ended March 31, 2009, with a view to building Shimadzu into a premier global brand, and we have since been working to achieve sustainable growth by bolstering our marketing efforts while simultaneously implementing functional and process reforms aimed at strengthening our earnings base and actively promoting new products tailored specifically to our customers needs. Net sales and income However, we were unable to overcome severe downturns in demand both at home and abroad and the impact of a sharply strong yen in the second half of the fiscal year (from October onwards). Net sales fell 5.9% to 272,833 million, operating income fell 28.9% to 19,613 million, ordinary income fell 25.7% to 17,731 million, and net income fell 37.8% to 8,537 million. Net assets Over the course of the fiscal year ended March 31, 2009, our total assets declined 22,675 million to 281,156 million, reflecting declines of 11,271 million in cash and time deposits and of 7,987 million in trade notes and accounts receivable. Net assets fell 3,406 million to 147,306 million, as a result of a 6,067 million increase in retained earnings and of a 7,751 million decrease in foreign currency translation adjustments. Our net assets to total assets ratio climbed 2.8 percentage points to 52.3% at the end of this fiscal year compared to the end of last fiscal year. The follwing table shows debt and debt-to-equity ratio: Millions of Yen At March Debt 133, ,118 Debt- to- Equity Ratio (times) Cash Flow Summary Cash and cash equivalents declined 11,403 million versus March 31, 2008, to 23,673 million at March 31, Net cash provided by operating activities was 12,923 million in the fiscal year ended March 31, 2009, down 6,279 million versus the previous fiscal year, as income before income taxes and minority interests decreased by 8,408 million. Net cash used in investing activities was 10,441 million in the fiscal year ended March 31, 2009, down 4,978 million versus the previous fiscal year as capital expenditures amounted to 9,890 million. Net cash used in financing activities was 11,757 million the fiscal year ended March 31, 2009, versus a net inflow of 4,083 million in the previous fiscal year, a change of 15,840 million. Corporate bond redemptions totaled 15,000 million, dividend payments amounted to 2,805 million, and new borrowings brought in net income of 7,770 million. Millions of Yen Years ended March Net cash provided by operating activities Net cash used by investing activities Net cash (used) provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Increase in cash and cash equivalents due to inclusion of subsidiaries in consolidation Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 12,923 19,203 (10,441) (15,420) (11,758) 4,083 (2,631) 198 (11,907) 8, ,077 26,907 23,673 35, Shimadzu Annual Report 2009

17 Cash flow ratios are summarized below: Years ended March Years to repay debt (years) Interest coverage ratio (times) Results of Operations and Financial Position by Segment Analytical and Measuring Instruments This segment s net sales in the fiscal year ended March 31, 2009, were 7.3% lower compared with the previous fiscal year, while operating income fell 19.2% year over year. The following table shows the results of operations and financial position of this segment: Millions of Yen Years ended March Net sales, total Sales to customers Inter-segment trade 152, , , , Operating costs 131, ,304 Operating income 21,171 26,198 Assets 117, ,626 Depreciation 3,161 2,689 Capital expenditures 3,313 3,824 The domestic market was generally sluggish. A boost to public-sector demand from supplementary budgets associated with the government s economic stimulus packages was not enough to offset the impact of slowdowns in private-sector capital spending and R&D demand in the fiscal second half. Sales of mass spectrometers rose on the back of enhancements to our product lineup and a greater emphasis on public-sector demand, but sales of large analytical devices failed to match their strength of the previous fiscal year, and sales were also down for spectrometers, industrial X-ray inspection systems and testing machines as demand tapered off in the fiscal second half. The segment booked strong sales of high-performance liquid chromatographs, mass spectrometers, and gas chromatographs in China as concerns over food safety and environmental issues continued to drive demand. However, total overseas sales declined as demand from the North American, European, and Indian markets dropped off sharply in the fiscal second half. Medical Systems This segment s net sales in the fiscal year ended March 31, 2009, were 6.2% lower compared with the previous fiscal year, while operating income fell 56.0% year over year. The following table shows the results of operations and financial position of this segment: Millions of Yen Years ended March Net sales, total Sales to customers Inter-segment trade 51,061 51,050 Sales to the domestic market fell as the market for X-ray imaging systems was impacted by an April 2008 revision of medical service fees that caused hospitals to focus their budgets on monitor-based diagnostic systems. Overseas sales were somewhat stronger, however, on the back of solid demand for digitized products in China, Europe, and the Middle East. Especially the sales in China expanded widely ,531 54, Operating costs 49,884 51,853 Operating income 1,177 2,677 Assets 38,585 40,682 Depreciation Capital expenditures 1,636 1,371 Shimadzu Annual Report

18 Aircraft Equipment and Industrial Machinery This segment s net sales in the fiscal year ended March 31, 2009, were 1.6% lower compared with the previous fiscal year, while operating income fell 24.2% year over year. The following table shows the results of operations and financial position of this segment: Millions of Yen Years ended March Net sales, total Sales to customers Inter-segment trade 63,214 63,122 In Japan, aircraft equipment market sales were down after delivery of the prototypes of the next-model patrol aircraft (XP-1) to the Japan naval force and the next-model cargo plane (C-X) to the Japan air force, while overseas sales were hit by a rapid downturn in demand for passenger aircraft. Industrial machinery sales were up over the year as a whole, although sales of turbomolecular pumps fell away in the fiscal second half as stagnation in semiconductor-related markets affected demand for products such as liquid crystal panels and glass coatings. Sales of chemical vapor deposition (CVD) equipment for solar panels rose on the back of continued demand from Taiwan although the solar power industry did appear to cut back on its capital spending in the fiscal second half while sales of hydraulic equipment were down sharply year over year as demand dropped away from October 2008 onwards. Other This segment s net sales in the fiscal year ended March 31, 2009, were 11.3% lower compared with the previous fiscal year, while operating income fell 3.8% year over year. This segment consists of rent mainly. The following table shows the results of operations and financial position of this segment: 92 64,232 64,162 Operating costs 58,360 57,831 Operating income 4,854 6,401 Assets 74,299 71,603 Depreciation 2,299 1,646 Capital expenditures 2,445 4, Millions of Yen Years ended March Net sales, total Sales to customers Inter-segment trade 7,216 6, ,008 7, Operating costs 5,461 6,184 Operating income 1,755 1,824 Assets 12,099 12,531 Depreciation Capital expenditures Forward-Looking Information The Company see considerable uncertainty over the near term, with major causes for concern including the exchange rate and commodity price volatility, a widening and deepening financial crisis, and the potential impact of financial market turmoil and credit contraction on real economic activity and the entire global economy. The following table shows forecast sales, income and EPS for fiscal 2009, ended March 2010, that the Company expected at the beginning of this fiscal year: Millions of Yen Years ended March Net sales, year first half Operating income, year first half Ordinary income, year Net income, year EPS, year first half first half first half 255, ,000 12,000 4,000 10,500 3,600 6,900 2, , ,959 19,613 12,046 17,731 11,846 8,537 7,875 Yen We will continue to follow our current three-year mediumterm management plan which covers the period from April 2008 through March 2011 with a view to build Shimadzu into a premier global brand, bolstering our marketing efforts to maintain growth, and implementing various functional and process reforms aimed at strengthening our earnings base. Also this year, we intend to implement a number of emergency measures designed to maintain profit levels in the face of less benign economic conditions, seeking to prevent erosion of our 16 Shimadzu Annual Report 2009

19 sales revenue at the same time as undertaking significant costcutting initiatives. Under our medium-term management plan, we aimed at 320 billion in net sales and 36 billion in operating income, with over 42% of net sales coming from overseas, fiscal 2011, ended March 31, We are revising those goals due to the sharp recession that began in the second half of 2008 and the unforeseeable economic outlook. Analytical and Measuring Instruments We expect the domestic market to start recovering in the second half of the year provided that capital spending breaks out of its recent slump, while in overseas markets we expect to see strong demand driven by various environmental and safety considerations, including green-procurement initiatives, conversion to biofuels and other alternative energy technologies, environmental pollution in emerging markets, food safety problems in China, and a tightening of chemicals-related regulations in Europe and Asia. We also anticipate solid R&D demand driven by medical research and other sectors of the life sciences market. We intend to further boost the profitability of this segment by focusing on these growth markets while strengthening our global marketing capabilities, expanding our presence in the after-sales market, promoting localization in the Chinese market, and making various other improvements to production and logistical efficiency. outlook for semiconductor-related markets remains far from certain, but we will nevertheless be positioning ourselves for an eventual recovery by cutting costs of turbomolecular pumps and otherwise variously improving our earnings structure. Forward-Looking Information Is Subject to Risks and Uncertainty These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these statements as a result of various factors. This forward-looking information speaks only as of the date hereof. Shimadzu disclaims any obligation to update or publicly announce any revisions to this forward-looking information to reflect future events, conditions or circumstances. Medical Systems The domestic market is likely to remain weak as most hospitals operating environments remain challenging, and conditions are unlikely to be much better in overseas markets in view of the lingering financial uncertainty and the impact of adverse exchange rate fluctuations. Our efforts to boost profitability within this segment will therefore center on cost reductions, production reforms, increased sales of clinical applications, and improvements to our sales and services teams. Aircraft Equipment and Industrial Machinery We expect to post solid sales in the domestic aircraft equipment market due to demand for repair parts and the commencement of the F-15 fighter modernization program, but we are anticipating a further decline in overseas demand for passenger aircraft. Within the industrial machinery sector, increased domestic production of solar panels is likely to boost demand for CVD equipment, and the global solar energy market also appears to offer good growth prospects from a medium- to long-term perspective in view of national policies such as the U.S. government s Green New Deal. The near-term Shimadzu Annual Report

20 Shimadzu Corporation and Consolidated Subsidiaries Consolidated Balance Sheets March 31, 2009 and 2008 Thousands of U.S. Dollars Millions of Yen (Note 3) ASSETS CURRENT ASSETS: Cash and cash equivalents... 23,673 35,077 $ 241,561 Time deposits ,378 Marketable securities (Note 4) Trade receivables: Notes and accounts (Note 9)... 79,251 87, ,684 Allowance for doubtful receivables... (1,008) (880) (10,286) Net trade receivables... 78,243 86, ,398 Inventories (Note 5)... 68,734 66, ,367 Deferred tax assets (Note 11)... 6,556 6,122 66,898 Prepaid expenses and other current assets... 3,197 4,988 32,622 Total current assets , ,378 1,849,224 PROPERTY, PLANT AND EQUIPMENT (Note 6): Land... 18,809 18, ,929 Buildings and structures... 65,114 65, ,429 Machinery, equipment and vehicles... 19,482 20, ,796 Tools, furniture and fixtures... 26,638 26, ,816 Lease assets... 5,323 54,316 Construction in progress... 1, ,490 Total , ,576 1,394,776 Accumulated depreciation... (69,079) (64,787) (704,888) Net property, plant and equipment... 67,609 66, ,888 INVESTMENTS AND OTHER ASSETS: Investment securities (Note 4)... 7,500 11,862 76,531 Investments in unconsolidated subsidiaries and associated companies ,816 Software... 4,660 4,445 47,551 Long-term receivables... 1, ,949 Deferred tax assets (Note 11)... 11,599 12, ,357 Other assets... 6,823 7,313 69,623 Total investments and other assets... 32,323 37, ,827 TOTAL , ,831 $2,868,939 See notes to consolidated financial statements. 18 Shimadzu Annual Report 2009

21 Thousands of U.S. Dollars Millions of Yen (Note 3) LIABILITIES AND EQUITY CURRENT LIABILITIES: Shortterm loans (Note 6)... 11,540 3,713 $ 117,755 Current portion of long-term debt (Notes 6 and 12)... 12,020 16, ,653 Trade notes and accounts payable... 45,754 52, ,878 Other payables (Note 9)... 9,442 11,725 96,347 Advances from customers... 3,684 5,148 37,592 Income taxes payable... 2,239 2,671 22,847 Accrued expenses and other current liabilities (Note 6)... 11,751 11, ,908 Total current liabilities... 96, , ,980 LONG-TERM LIABILITIES: Long-term debt (Notes 6 and 12)... 13,449 22, ,235 Liability for retirement benefits (Note 7)... 16,827 19, ,704 Long-term deposit (Note 6)... 5,872 6,205 59,918 Other long-term liabilities (Note 11)... 1,272 1,014 12,980 Total long-term liabilities... 37,420 49, ,837 COMMITMENTS AND CONTINGENT LIABILITIES (Notes 12, 13 and 14) EQUITY (Notes 8 and 16): Common stock, authorized, 800,000,000 shares; issued, 296,070,227 shares... 26,649 26, ,929 Capital surplus... 35,188 35, ,061 Retained earnings... 93,642 87, ,531 Net unrealized gain on available-for-sale securities... 1,587 3,212 16,193 Foreign currency translation adjustments... (9,531) (1,779) (97,255) Treasury stock-at cost 970,422 shares in 2009 and 865,864 shares in (624) (536) (6,367) Total , ,308 1,499,092 Minority interests ,030 Total equity , ,713 1,503,122 TOTAL , ,831 $2,868,939 Shimadzu Annual Report

22 Shimadzu Corporation and Consolidated Subsidiaries Consolidated Statements of Income Years Ended March 31, 2009 and 2008 Thousands of U.S. Dollars Millions of Yen (Note 3) NET SALES (Notes 9 and 17) , ,971 $2,784,010 OPERATING COSTS AND EXPENSES: Cost of sales (Notes 9 and 12) , ,378 1,712,877 Selling, general and administrative expenses (Notes 10 and 12)... 85,358 84, ,000 Total operating costs and expenses (Note 17) , ,374 2,583,877 Operating income (Note 17)... 19,613 27, ,133 OTHER INCOME (EXPENSES): Interest and dividend income ,051 Interest expense... (524) (707) (5,347) Foreign exchange loss, net... (1,022) (1,494) (10,429) Loss on disposal of inventories... (1,275) Loss on devaluation of inventories... (1,753) (17,888) Loss on write-down of investment securities... (1,320) (8) (13,470) Other, net... (170) (971) (1,734) Other expenses, net... (4,392) (3,967) (44,817) INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS... 15,221 23, ,316 INCOME TAXES (Note 11): Current... 4,914 5,753 50,143 Deferred... 1,746 4,126 17,816 Total income taxes... 6,660 9,879 67,959 MINORITY INTERESTS IN NET INCOME NET INCOME... 8,537 13,725 $ 87,112 Yen U.S. Dollars PER SHARE OF COMMON STOCK (Notes 2.p and 15): Basic net income $0.30 Cash dividends applicable to the year See notes to consolidated financial statements. 20 Shimadzu Annual Report 2009

23 Shimadzu Corporation and Consolidated Subsidiaries Consolidated Statements of Changes in Equity Years Ended March 31, 2009 and 2008 Millions of Yen Number of Unrealized Shares of Gain on Common Available- Stock Common Capital Retained for-sale Outstanding Stock Surplus Earnings Securities BALANCE, APRIL 1, ,305,228 26,649 35,188 76,396 5,465 Net income... 13,725 Appropriations: Cash dividends, 8.5 per share... (2,510) Adjustment of retained earnings for newly consolidated subsidiaries... (37) Net change in the year... (2,253) Purchase of treasury stock... (100,865) BALANCE, MARCH 31, ,204,363 26,649 35,188 87,574 3,212 Net income... 8,537 Appropriations: Cash dividends, 9.5 per share... (2,804) Effect of changes in accounting policies applied to foreign subsidiaries Adjustment of retained earnings for newly consolidated subsidiaries Net change in the year... (1,625) Purchase of treasury stock... (104,558) BALANCE, MARCH 31, ,099,805 26,649 35,188 93,642 1,587 Thousands of U.S. Dollars (Note 3) Unrealized Gain on Available- Common Capital Retained for-sale Stock Surplus Earnings Securities BALANCE, MARCH 31, $271,929 $359,061 $893,612 $ 32,776 Net income... 87,112 Appropriations: Cash dividends, $0.10 per share... (28,612) Effect of changes in accounting policies applied to foreign subsidiaries... 2,204 Adjustment of retained earnings for newly consolidated subsidiaries... 1,215 Net change in the year... (16,583) Purchase of treasury stock... BALANCE, MARCH 31, $271,929 $359,061 $955,531 $ 16,193 See notes to consolidated financial statements Shimadzu Annual Report

24 Millions of Yen Foreign Currency Translation Treasury Minority Total Adjustments Stock Total Interests Equity BALANCE, APRIL 1, (1,649) (419) 141, ,204 Net income... 13,725 13,725 Appropriations: Cash dividends, 8.5 per share... (2,510) (2,510) Adjustment of retained earnings for newly consolidated subsidiaries... (37) (37) Net change in the year... (130) (2,383) (169) (2,552) Purchase of treasury stock... (117) (117) (117) BALANCE, MARCH 31, (1,779) (536) 150, ,713 Net income... 8,537 8,537 Appropriations: Cash dividends, 9.5 per share... (2,804) (2,804) Effect of changes in accounting policies applied to foreign subsidiaries Adjustment of retained earnings for newly consolidated subsidiaries Net change in the year... (7,752) (9,377) (10) (9,387) Purchase of treasury stock... (88) (88) (88) BALANCE, MARCH 31, (9,531) (624) 146, ,306 Thousands of U.S. Dollars (Note 3) Foreign Currency Translation Treasury Minority Total Adjustments Stock Total Interests Equity BALANCE, MARCH 31, $(18,153) $(5,469) $1,533,756 $4,133 $1,537,889 Net income... 87,112 87,112 Appropriations: Cash dividends, $0.10 per share... (28,612) (28,612) Effect of changes in accounting policies applied to foreign subsidiaries... 2,204 2,204 Adjustment of retained earnings for newly consolidated subsidiaries... 1,215 1,215 Net change in the year... (79,102) (95,685) (103) (95,788) Purchase of treasury stock... (898) (898) (898) BALANCE, MARCH 31, $(97,255) $(6,367) $1,499,092 $4,030 $1,503,122 See notes to consolidated financial statements 22 Shimadzu Annual Report 2009

25 Shimadzu Corporation and Consolidated Subsidiaries Consolidated Statements of Cash Flows Years Ended March 31, 2009 and 2008 Thousands of U.S. Dollars Millions of Yen (Note 3) OPERATING ACTIVITIES: Income before income taxes and minority interests... 15,221 23,630 $ 155,316 Adjustments for: Income taxes paid... (4,350) (9,222) (44,388) Depreciation and amortization... 8,503 6,279 86,765 Increase (decrease) in accrued bonuses... (747) 62 (7,622) Provision for retairement benefits for employees... (570) (1,279) (5,816) Gain on securities contribution to employees' retirement benefits trust... (1,451) (14,806) Net loss on sales and write-down of investment securities... 1, ,347 Net loss on sales and disposals of property, plant and equipment ,500 Foreign exchange loss, net Allowance for doubtful receivables (96) 2,694 Changes in assets and liabilities, net of effects from newly consolidated subsidiaries: Decrease in trade receivables... 3,731 1,966 38,071 Increase in inventories... (8,458) (1,247) (86,306) Decrease in trade payables... (3,142) (3,033) (32,061) Other, net... 2,361 1,541 24,091 Total adjustments... (2,298) (4,427) (23,449) Net cash provided by operating activities... 12,923 19, ,867 INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment and other assets ,010 Purchases of property, plant and equipment and other assets... (9,890) (11,305) (100,918) Proceeds from sale of marketable securities ,316 Purchases of marketable securities... (256) Proceeds from sale of investment securities Purchases of investment securities... (154) (788) (1,571) Purchases from minority interests... (186) Acquisition of business, net cash expended... (3,024) Payments made to long-term receivables... (600) (527) (6,122) Collection of long-term receivables Other, net... (238) (89) (2,430) Net cash used in investing activities... (10,441) (15,420) (106,541) FORWARD... 2,482 3,783 $ 25,326 Shimadzu Annual Report

26 Thousands of U.S. Dollars Millions of Yen (Note 3) FORWARD... 2,482 3,783 $ 25,326 FINANCING ACTIVITIES: Net increase (decrease) in short-term loans... 8,310 (2,923) 84,796 Borrowing of long-term debt... 1,001 1,070 10,214 Repayments of long-term debt... (2,736) (933) (27,918) Issuance of commercial paper... 4,000 10,500 40,816 Redemption of commercial paper... (4,000) (10,500) (40,816) Issuance of unsecured bonds... 9,943 Redemption of bonds... (15,000) (153,061) Cash dividends paid... (2,813) (2,524) (28,704) Redemption of construction cooperation fund... (432) (432) (4,408) Other, net... (88) (118) (899) Net cash provided (used in) financing activities... (11,758) 4,083 (119,980) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS... (2,631) 198 (26,847) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... (11,907) 8,064 (121,501) CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIES, BEGINNING OF YEAR ,133 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR... 35,077 26, ,929 CASH AND CASH EQUIVALENTS, END OF YEAR... 23,673 35,077 $241,561 Additional information : Asset acquired and liabilities assumed from acquisition of business Current assets Fixed assets... 2,095 Other Consideration in acquisition of business... 3,024 See notes to consolidated financial statements. 24 Shimadzu Annual Report 2009

27 Shimadzu Corporation and Consolidated Subsidiaries Notes to Consolidated Financial Statements Years Ended March 31, 2009 and BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements of Shimadzu Corporation (the "Company") and its significant subsidiaries (together, the "Companies") have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards. In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2008 consolidated financial statements to conform to the classifications used in SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidation The consolidated financial statements as of March 31, 2009 include the accounts of the Company and its 32 (32 in 2008) domestic subsidiaries and 44 (39 in 2008) overseas subsidiaries. Consolidation of the remaining subsidiaries would not have a material effect on the accompanying consolidated financial statements. Under the control concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated. Investments in one (six in 2008) unconsolidated subsidiaries and three (four in 2008) associated companies are accounted for on the cost basis. The effect on the consolidated financial statements of not applying the equity method is immaterial. All significant intercompany transactions and accounts have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Companies is eliminated. b. Cash Equivalents Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits which mature or become due within three months of the date of acquisition. c. Marketable and Investment Securities Marketable and investment securities are classified and accounted for, depending on management's intent, as follows: i) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity are reported at amortized cost. ii) available-for-sale securities, which represent securities not classified as either trading securities or held-to-maturity debt securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income. d. Inventories Finished products of the Company are stated at moving average cost. Those held by domestic subsidiaries are stated principally at the most recent purchase price which approximates cost using the first-in, first-out method, while those held by overseas subsidiaries are stated principally at the lower of cost or market using the first-in, first-out method. Work in process is stated principally at the specifically identified cost. Other inventories are stated principally at moving average cost. Prior to April 1, 2008, inventories were stated at cost. In July 2006, the Accounting Standards Board of Japan ( ASBJ ) issued ASBJ Statement No.9, Accounting Standard for Measurement of Inventories. This standard requires that inventories held for sale in the ordinary course of business be measured at the lower of cost or net selling value, which is defined as the selling price less additional estimated manufacturing costs and estimated direct selling expenses. The replacement cost may be used in place of the net selling value, if appropriate. The standard also requires that inventories held for trading purposes be measured at the market price. The Company applied this new accounting standard for measurement of inventories effective April 1, The effect of this change was to decrease operating income by 1,154 million ($11,776 thousand) and income before income taxes and minority interests by 1,274 million ($13,000 thousand). The effect of the application above on segment information is described in Note 17. e. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its domestic subsidiaries is computed substantially by the declining-balance method at rates based on the estimated useful lives of the assets, except that the straight-line method is applied to the buildings and lease assets of the Company and its domestic subsidiaries. Shimadzu Annual Report

28 Overseas subsidiaries compute depreciation by the straightline method at rates based on the estimated useful lives of the assets. The range of useful lives is principally from three to 75 years for buildings and structures, from four to 17 years for machinery, equipment and vehicles and from two to 15 years for tools, furniture and fixtures. The useful lives of lease assets are the terms of the respective leases. Effective April 1, 2008, the Company and certain domestic subsidiaries changed the estimated useful lives of the machinery and equipment, considering the economic circumstances under which they operate in accordance with the revised corporate tax law. The effect of this treatment was to decrease income before income taxes and minority interests for the year ended March 31, 2009 by 148 million ($1,510 thousand). The effect of the treatment above on segment information is described in Note 17. f. Long-lived assets The Company and the domestic subsidiaries review their longlived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. g. Retirement and Pension Plans The Company and certain domestic subsidiaries have three retirement and pension plans covering most employees, consisting of the cash-balance type of defined benefit pension plan, lump-sum severance payment plan and defined contribution plan or an advance payment system. Under defined contribution plan or an advance payment system, employees can adopt whichever they consider more preferable. Other domestic subsidiaries have non-contributory funded pension plan and lump-sum severance payment plan. Certain foreign subsidiaries have non-contributory funded pension plan. The Company and subsidiaries which have non-contributory funded pension plan accounted for retirement benefits based on projected benefit obligations and plan assets at the balance sheet date. The Company has an employees retirement benefit trust for payments of retirement benefits. The securities which were contributed to and are held in this trust are qualified as plan assets. Effective June 29, 2007, the Company abolished the program of retirement benefits to directors and corporate auditors. The outstanding balance as of June 29, 2007 was reclassified to other long-term liabilities as of March 31, Domestic subsidiaries provide for the liability at the amount which would be required, if all directors and corporate auditors terminated their offices at the end of each financial period. The accrued provisions are not funded and any amounts payable upon retirement are included in other longterm liabilities as of March 31, 2009 and h. Research and Development Costs Research and development costs are charged to income as incurred. i. Allowance for Doubtful Receivables The allowance for doubtful receivables is stated in amounts considered to be appropriate based on the Companies' past credit loss experience and an evaluation of potential losses in the receivables outstanding. j. Leases In March 2007, the ASBJ issued ASBJ Statement No.13, Accounting Standard for Lease Transactions, which revised the previous accounting standard for lease transactions issued in June The revised accounting standard for lease transactions is effective for fiscal years beginning on or after April 1, Under the previous accounting standard, finance leases that deem to transfer ownership of the leased property to the lessee were to be capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain as if capitalized information is disclosed in the note to the lessee s financial statements. The revised accounting standard requires that all finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. The Company applied the revised accounting standard effective April 1, The effect of this change on the consolidated statement of income was none. All other leases are accounted for as operating leases. k. Income Taxes The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying 26 Shimadzu Annual Report 2009

29 amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences. The Companies file a tax return under the consolidated corporate-tax system, which allows companies to base tax payments on the combined profits or losses of the parent company and its wholly owned domestic subsidiaries. l. Appropriations of Retained Earnings Appropriations of retained earnings are reflected in the consolidated financial statements for the following year upon shareholders' approval. m. Foreign Currency Transactions All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. Foreign exchange gains and losses are recognized in the fiscal periods in which they occur. n. Foreign Currency Financial Statements The balance sheet accounts of the consolidated overseas subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical exchange rate. Differences arising from such translation are shown as Foreign currency translation adjustments in a separate component of equity. Revenue and expense accounts of the consolidated overseas subsidiaries are translated into yen at the average exchange rate. o. Derivative Financial Instruments The Companies use derivative financial instruments to manage their exposures to fluctuations in foreign exchange. Foreign currency exchange forward contracts are utilized by the Companies to reduce foreign currency exchange risk. The Companies do not enter into derivatives for trading or speculative purposes. The foreign currency forward contracts are measured at the fair value at the balance sheet date and the unrealized gains / losses are recognized in income. p. Amounts per Share Basic net income per share is computed by dividing net income available to common shareholders by the weightedaverage number of common shares outstanding for the period. Diluted net income per share is not disclosed because there are not dilutive securities outstanding. Cash dividends per share presented in the accompanying consolidated statements of income are the dividends applicable to the respective years, including dividends to be paid after the end of the year. q. New Accounting Pronouncement - Business Combinations On December 26, 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No.21, Accounting Standard for Business Combinations. Major accounting changes under the revised accounting standard are as follows; (1) The current accounting standard for business combinations allows companies to apply the pooling of interests method of accounting when certain specific criteria are met such that the business combination is essentially regarded as a uniting-of-interests. The revised standard requires to account for such business combination by the purchase method and the pooling of interests method of accounting is no longer allowed. (2) The current accounting standard accounts for the research and development costs to be charged to income as incurred. Under the revised standard, an in-process research and development (IPR&D) acquired by the business combination is capitalized as an intangible asset. (3) The current accounting standard accounts for a bargain purchase gain (negative goodwill) to be systematically amortized within 20 years. Under the revised standard, the acquirer recognizes a bargain purchase gain in profit or loss on the acquisition date after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed with a review of such procedures used. This standard is applicable to business combinations undertaken on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or after April 1, Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method The current accounting standard requires to unify accounting policies within the consolidation group. However, the current guidance allows to apply the equity method for the financial statements of its foreign associated company which have been prepared in accordance with generally accepted accounting principles in their respective jurisdictions without unification of accounting policies. On December 26, 2008, the ASBJ issued ASBJ Statement No.16 (Revised 2008), Revised Accounting Standard for Equity Method of Accounting for Investments. The new standard requires adjustments to be made to conform the associate s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate s financial statements are used in applying the Shimadzu Annual Report

30 equity method unless it is impractible to determine adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United States tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; 5) recording the prior years' effects of changes in accounting policies in the income statement where retrospective adjustments to the financial statements have been incorporated; and 6) exclusion of minority interests from net income, if contained. This standard is applicable to equity method of accounting for investments effective on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or after April 1, Asset Retirement Obligations On March 31, 2008, the ASBJ published a new accounting standard for asset retirement obligations, ASBJ Statement No.18 Accounting Standard for Asset Retirement Obligations and ASBJ Guidance No.21 Guidance on Accounting Standard for Asset Retirement Obligations. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost. This standard is effective for fiscal years beginning on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or before March 31, U.S. DOLLAR AMOUNTS The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of 98 to $1, the approximate rate of exchange at March 31, Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate. 4. MARKETABLE AND INVESTMENT SECURITIES Marketable and investment securities as of March 31, 2009 and 2008 consisted of the following: Thousands of Millions of Yen U.S. Dollars Current - Government bonds and other Non-current - Equity securities... 7,500 11,862 $ 76,531 The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2009 and 2008 were as follows: Millions of Yen March 31, 2009 Unrealized Unrealized Fair Cost Gains Losses Value Securities classified as - Available-for-sale - Equity securities... 4,454 2, ,056 Millions of Yen March 31, 2008 Unrealized Unrealized Fair Cost Gains Losses Value Securities classified as: Available-for-sale - Equity securities... 5,999 6, ,406 Held-to-maturity Thousands of U.S. Dollars March 31, 2009 Unrealized Unrealized Fair Cost Gains Losses Value Securities classified as - Available-for-sale - Equity securities... $45,449 $30,020 $3,469 $72,000 Available-for-sale securities whose fair value is not readily determinable as of March 31, 2009 and 2008 were as follows: 28 Shimadzu Annual Report 2009

31 Available-for-sale - Carrying amount Thousands of Millions of Yen U.S. Dollars Equity securities $4,531 Proceeds from sales of available-for-sale securities for the years ended March 31, 2009 and 2008 were 27 million ($276 thousand) and 1 million, respectively. Gross realized gains on these sales, computed on the moving average cost basis, were 13 million ($133 thousand) and immaterial for the years ended March 31, 2009 and 2008, respectively. Gross realized losses on these sales, computed on the moving average cost basis, were 1 million ($10 thousand) and 9 million for the years ended March 31, 2009 and 2008, respectively. 5. INVENTORIES Inventories at March 31, 2009 and 2008 consisted of the following: Thousands of Millions of Yen U.S. Dollars Finished products... 26,852 22,884 $274,000 Semi-finished products... 6,892 7,512 70,327 Work in process... 20,924 22, ,510 Raw materials and supplies... 14,066 13, ,530 Total... 68,734 66,001 $701, SHORT-TERM LOANS AND LONG-TERM DEBT Short-term loans primarily consisted of bank overdrafts and financing agreements with banks which are renewable on an annual basis and bear interest at annual rates ranging from 0.75% to 6.34% and from 0.88% to 7.34% at March 31, 2009 and 2008, respectively. Long-term debt at March 31, 2009 and 2008 consisted of the following: Thousands of Millions of Yen U.S. Dollars % unsecured bonds, due April , % unsecured bonds, due April ,000 10,000 $102, % unsecured bonds, due March ,000 10, ,041 Loans, principally from banks,due serially to 2014 with interest rates ranging from 1.04% to 6.00% (0.60% to 6.04%, due serially to 2014 at March 31, 2008)... 3,102 4,089 31,653 Obligations under finance leases... 2,367 24,153 Total... 25,469 39, ,888 Less portion due within one year.. (12,020) (16,533) (122,653) Long-term debt, less current portion... 13,449 22,556 $137,235 The aggregate annual maturities of long-term debt outstanding at March 31, 2009 were as follows: Thousands of Year ending March 31, Millions of Yen U.S. Dollars ,020 $122, , ,699 17, , , , and thereafter Total... 25,469 $259,888 At March 31, 2009, the following assets were pledged as collateral for short-term bank loans and long-term debt: Millions of Thousands of Yen U.S. Dollars Property, plant and equipment, net of accumulated depreciation... 4,827 $49,255 Millions of Thousands of Yen U.S. Dollars Related liabilities: Other current liabilities $ 3,398 Long-term deposit... 5,872 59,918 Total... 6,205 $63, RETIREMENT AND PENSION PLANS The Company have severance payment plans for employees. In addition, domestic subsidiaries have severance payment plans for directors and corporate auditors. Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the basic rate of pay at the time of termination, length of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance payment from the Company or from certain domestic consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age or certain other conditions. The liability for retirement benefits for directors and corporate auditors were 265 million ($2,704 thousand) and 237 million at March 31, 2009 and 2008, respectively (Note 2. g). The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders of each subsidiary. The liability for employees' retirement benefits at March 31, 2009 and 2008 consisted of the following: Shimadzu Annual Report

32 Thousands of Millions of Yen U.S. Dollars Projected benefit obligation... 50,650 52,137 $516,837 Fair value of plan assets... (23,877) (30,130) (243,643) Unrecognized prior service cost... 3,601 3,921 36,745 Unrecognized actuarial loss... (13,547) (6,496) (138,235) Net liability... 16,827 19,432 $171,704 The components of net periodic benefit costs for the years ended March 31, 2009 and 2008 were as follows: Thousands of Millions of Yen U.S. Dollars Service cost... 2,580 2,548 $26,327 Interest cost ,013 10,051 Expected return on plan assets... (705) (723) (7,194) Amortization of prior service cost... (320) (320) (3,265) Recognized actuarial loss ,214 Net periodic benefit costs... 3,247 2,689 $33,133 Defined contribution pension expense ,153 Total... 3,556 2,936 $36,286 Assumptions used for the years ended March 31, 2009 and 2008 were set forth as follows: Discount rate % 2.0% Expected rate of return on plan assets % 3.3% Amortization period of prior service cost years 15 years Recognition period of actuarial gain / loss years 15 years, Charged/credited Charged/credited to income from to income from the next period the next period 8. EQUITY Since May 1, 2006, Japanese companies have been subject to the Companies Act of Japan (the Companies Act ). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below: (a) Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company cannot do so because it does not meet all the above criteria. The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and additional requirements. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than 3 million. (b) Increases / decreases and transfer of common stock, reserve and surplus The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve and additional paidin capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders. (c) Treasury stock and treasury stock acquisition rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights. 30 Shimadzu Annual Report 2009

33 9. RELATED PARTY TRANSACTIONS Net sales and purchases representing transactions of the Companies with unconsolidated subsidiaries and associated companies for the years ended March, 31, 2009 and 2008 were as follows: Thousands of Millions of Yen U.S. Dollars Net sales $ 6,031 Purchases... 1,082 2,084 11,041 The balances due to or from these unconsolidated subsidiaries and associated companies at March 31, 2009 and 2008 were as follows: Thousands of Millions of Yen U.S. Dollars Trade accounts receivable $ 908 Other payables , RESEARCH AND DEVELOPMENT COSTS Research and development costs charged to income were 9,136 million ($93,224 thousand) and 8,795 million for the years ended March 31, 2009 and 2008, respectively. 11. INCOME TAXES The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 41% for both of the years ended March 31, 2009 and The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2009 and 2008 were as follows: Thousands of Millions of Yen U.S. Dollars Current: Deferred tax assets: Accrued bonuses... 2,131 2,428 $21,745 Unrealized profit included in inventories... 1,597 1,893 16,296 Loss on devaluation of inventories ,459 Enterprise taxes ,735 Allowance for doubtful receivables ,551 Other... 2,019 2,301 20,602 Total... 6,996 6,992 71,388 Less valuation allowance... (396) (551) (4,041) Total deferred tax assets... 6,600 6,441 $67,347 Deferred Tax Liability $ 500 Net deferred tax assets... 6,556 6,122 $66,898 Net deferred tax liabilities (included in other current liabilities)... 5 $ 51 Noncurrent: Deferred tax assets: Liability for retirement benefits... 13,006 13,429 $132,714 Depreciation... 3,449 3,713 35,194 Tax loss carryforwards ,388 Goodwill ,347 Loss on impairment of long-lived assets ,939 Other... 1,721 1,233 17,561 Total... 19,614 19, ,143 Less valuation allowance... (2,240) (923) (22,857) Total deferred tax assets... 17,374 18,901 $177,286 Deferred tax liabilities: Gain on securities contributed to employees retirement benefit trust... 4,112 3,524 $ 41,959 Special reserves (included in retained earnings) ,174 Unrealized gain on available-for-sale securities... 1,016 2,202 10,367 Other ,561 Total deferred tax liabilities... 5,984 6,478 $ 61,061 Net deferred tax assets... 11,599 12,584 $118,357 Net deferred tax liabilities (included in other long-term liabilities) $ 2,133 The above net deferred tax assets and liabilities represented the aggregate amounts of each separate taxpayer s net deferred Shimadzu Annual Report

34 tax assets or liabilities. As the difference between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statement of income for the year ended March 31, 2008 is not more than 5% of the normal effective statutory tax rate, a reconciliation has not been disclosed. A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statement of income for the year ended March 31, 2009 was as follows: 2009 Normal effective statutory tax rate % Valuation allowance Expenses not permanently deductible for income tax Per capita inhabitant tax Tax credit for research and development costs... (2.9) Difference in subsidiaries' tax rates... (7.1) Other, net Actual effective tax rate % 12. LEASES LESSEE The Companies lease certain offices space, computer equipment and other assets. Total rental expenses for the years ended March 31, 2009 and March 31,2008 were 4,817 million ($ 49,155 thousand) and 5,709 million, respectively. Lease payments under finance lease of 510 million were included in rental expenses for the year ended March 31, The minimum rental commitments under noncancellable operating leases at March 31, 2009 and March 31, 2008 were as follows: Thousands of Millions of Yen U.S.Dollars Due within one year $3,520 Due after one year ,633 Total ,183 $9,153 Pro forma information for the year ended March 31, 2008 Pro forma information for the year ended March 31, 2008 of leased property such as acquisition cost, accumulated depreciation, obligations under finance leases and depreciation expense for finance leases that do not transfer ownership of the leased property to the lessee on an "as if capitalized" basis was as follows: Millions of Yen 2008 Machinery Furniture and and Vehicles Fixtures Total Acquisition cost... 1,510 1,292 2,802 Accumulated depreciation ,656 Net leased property ,146 Obligations under finance leases: Millions of Yen 2008 Due within one year Due after one year Total... 1,147 The amount of obligations under finance leases includes the imputed interest expense portion. Depreciation expense, which is not reflected in the accompanying consolidated statement of income, computed by the straight-line method was 510 million ($5,100 thousand) for the year ended March 31, The minimum rental commitments under noncancellable operating leases at March 31, 2008 were as follows: Millions of Yen 2008 Due within one year Due after one yearr Total... 1,183 LESSOR Future lease income under non-cancelable operating leases at March 31, 2009 and 2008 were as follows: Thousands of Millions of Yen U.S.Dollars Due within one year $ 9,979 Due after one year... 3,689 4,600 37,643 Total... 4,667 5,568 $47, DERIVATIVES The Companies enter into foreign currency forward contracts to hedge foreign exchange risk associated with certain assets and liabilities denominated in foreign currencies. All derivative transactions are entered into to hedge foreign currency exposures incorporated within its business. Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets or liabilities - except credit related market risk. Because the counterparties to these derivatives are limited to major international financial institutions, the Companies do not anticipate any losses arising from credit risk. 32 Shimadzu Annual Report 2009

35 Derivative transactions entered into by the Companies have been made in accordance with internal policies under the supervision of the director in charge of the Finance Department. The contract or notional amounts of derivatives which are shown in the following table do not represent the amounts exchanged by the parties and do not measure the Company s exposure to credit or market risk. The Company had the following derivative contracts outstanding at March 31, 2009 and 2008: In Thousands Millions of Yen 2009 Contract Unrealized or notional Fair gains amount value (losses) Forward exchange contracts: Selling U.S. $... $38,170 3,744 (214) Selling Euro... Euro12,441 1,613 (114) Buying U.S. $... $ Buying Euro... Euro Buying Japanese Yen... JPY 5,512 6 In Thousands Millions of Yen 2008 Contract Unrealized or notional Fair gains amount value (losses) Forward exchange contracts: Selling U.S. $... $32,486 3, Selling Euro... Euro 8,521 1,336 (1) Buying U.S. $... $ (1) Buying Euro... Euro Buying Japanese Yen... JPY In Thousands Thousands of U.S. Dollars 2009 Contract Unrealized or notional Fair gains amount value (losses) Forward exchange contracts: Selling U.S. $... $38,170 38,204 (2,184) Selling Euro... Euro12,441 16,459 (1,163) Buying U.S. $... $ Buying Japanese Yen... JPY 5, The fair value was estimated based on quotes from financial institutions. 14. CONTINGENT LIABILITIES Contingent liabilities at March 31, 2009 for trade notes discounted with banks, for trade notes endorsed and for loans guaranteed amounted to 600 million ($6,122 thousand), 3 million ($31 thousand) and 373 million ($3,806 thousand), respectively. 15. NET INCOME PER SHARE Millions of Thousands of Yen shares Yen Dollars Net Weighted income average shares EPS For the year ended March 31, 2009: Basic EPS Net income available to common shareholders... 8, , $0.30 For the year ended March 31, 2008: Basic EPS Net income available to common shareholders... 13, , $0.46 Diluted EPS for the years ended March 31, 2009 and 2008, respectively, is not disclosed because no dilutive securities are outstanding. 16. SUBSEQUENT EVENTS (a) On May 12, 2009, the Board of Directors of the Company resolved to propose a cash dividend of 4.5 ($0.05) per share to shareholders of record as of March 31, 2009, or total of 1,328 million ($13,551 thousand), for approval at the general shareholders meeting to be held on June 26, Appropriations of retained earnings as of March 31, 2009: Millions of Yen Thousands of U.S. Dollars Year-end cash dividends, 4.5 ($0.05) per share... 1,328 $13,551 (b) Pursuant to the resolution of the Board of Directors meeting of the Company held on March 27, 2009, the Company executed the borrowings from the financial institutions as follows: Borrowed from: The Bank of Tokyo-Mitsubishi UFJ, Ltd., including three other parties Use of fund: Redemption of 0.88% unsecured bonds Amount: 10,000 million ($102,041 thousand) Interest rate: based on market interest rate Date of execution: April 27, 2009 Duration: 5 years Collateral/Guarantee: None Shimadzu Annual Report

36 17. SEGMENT INFORMATION Information about industry segments, geographical segments and sales to foreign customers of the Companies for the years ended March 31, 2009 and 2008 was as follows: (1) Industry Segments a. Sales and Operating Income Millions of Yen 2009 Aircraft Analytical Medical Equipment and Systems and Measuring and Industrial Eliminations/ Instruments Equipment Machinery Other Corporate Consolidated Sales to customers ,403 51,050 63,122 6, ,833 Intersegment sales (1,236) Total sales ,578 51,061 63,214 7,216 (1,236) 272,833 Operating expenses ,407 49,884 58,360 5,461 8, ,220 Operating income... 21,171 1,177 4,854 1,755 (9,344) 19,613 Millions of Yen 2008 Aircraft Analytical Medical Equipment and Systems and Measuring and Industrial Eliminations/ Instruments Equipment Machinery Other Corporate Consolidated Sales to customers ,334 54,423 64,162 7, ,971 Intersegment sales (1,302) Total sales ,502 54,531 64,232 8,008 (1,302) 289,971 Operating expenses ,304 51,854 57,831 6,184 8, ,374 Operating income... 26,198 2,677 6,401 1,824 (9,503) 27,597 Thousands of U.S. Dollars 2009 Aircraft Analytical Medical Equipment and Systems and Measuring and Industrial Eliminations/ Instruments Equipment Machinery Other Corporate Consolidated Sales to customers... $1,555,133 $520,919 $644,102 $63,856 $2,784,010 Intersegment sales... 1, ,776 $(12,612) Total sales... 1,556, , ,041 73,632 (12,612) 2,784,010 Operating expenses... 1,340, , ,510 55,724 82,735 2,583,877 Operating income... $ 216,030 $ 12,011 $ 49,531 $17,908 $(95,347) $ 200, Shimadzu Annual Report 2009

37 b. Assets, Depreciation and Capital expenditures Millions of Yen 2009 Aircraft Analytical Medical Equipment and Systems and Measuring and Industrial Eliminations/ Instruments Equipment Machinery Other Corporate Consolidated Assets ,291 38,585 74,299 12,099 38, ,156 Depreciation... 3, , ,548 8,503 Capital expenditures... 3,313 1,636 2, ,486 8,990 Millions of Yen 2008 Aircraft Analytical Medical Equipment and Systems and Measuring and Industrial Eliminations/ Instruments Equipment Machinery Other Corporate Consolidated Assets ,626 40,682 71,603 12,531 50, ,831 Depreciation... 2, , ,279 Capital expenditures... 3,824 1,371 4, ,457 12,386 Thousands of U.S. Dollars 2009 Aircraft Analytical Medical Equipment and Systems and Measuring and Industrial Eliminations/ Instruments Equipment Machinery Other Corporate Consolidated Assets... $1,196,847 $393,725 $758,153 $123,459 $396,755 $2,868,939 Depreciation... 32,255 10,173 23,459 5,082 15,796 86,765 Capital expenditures... 33,806 16,695 24,949 1,122 15,163 91,735 Note: Eliminations/Corporate include unallocated operating expenses of 9,361 million ($95,520 thousand) and 9,518 million for the years ended March 31, 2009 and 2008, respectively, consisting principally of general corporate expenses incurred by the administration of the Company, fundamental research and development expenses and advertisement expenses. Eliminations/Corporate include corporate assets of 40,656 million ($414,857 thousand) and 52,415 million as of March 31, 2009 and 2008, respectively, consisting principally of working funds and investing funds held by the Company and assets attributed to Company s administration headquarters. As discussed in Note 2.d, effective April 1, 2008, the Company applied ASBJ Statement No.9, Accounting Standard for Measurement of Inventories. The effect of this change was to decrease operating income of Analytical and Measuring Instruments by 234 million ($ 2,388 thousand), operating income of Medical Systems and Equipment by 939 million ($ 9,581 thousand) and increase operating income of Aircraft Equipment and Industrial Machinery by 19 million ($ 194 thousand) for the year ended March 31, As discussed in Note 2.e, effective April 1, 2008, the Company and certain domestic subsidiaries changed the estimated useful lives for the machinery equipment. The effect of this change was to decrease operating income of Analytical and Measuring Instruments by 43 million ($ 439 thousand), operating income of Medical Systems and Equipment by 44 million ($ 449 thousand) and operating income of Aircraft Equipment and Industrial Machinery by 60 million ($ 612 thousand)for the year ended March 31, Shimadzu Annual Report

38 (2) Geographical Segments Millions of Yen 2009 North and Asia South Oceania and Eliminations/ Japan America Europe Africa Corporate Consolidated Sales to customers ,755 23,788 21,629 46, ,833 Intersegment sales... 37,494 7,820 1,902 4,365 (51,581) Total sales ,249 31,608 23,531 51,026 (51,581) 272,833 Operating expenses ,075 29,279 22,146 47,073 (43,353) 253,220 Operating income... 20,174 2,329 1,385 3,953 (8,228) 19,613 Assets ,325 17,227 14,071 26,480 30, ,156 Millions of Yen 2008 North and Asia South Oceania and Eliminations/ Japan America Europe Africa Corporate Consolidated Sales to customers ,489 27,219 22,556 40, ,971 Intersegment sales... 38,089 6,595 2,175 3,149 (50,008) Total sales ,578 33,814 24,731 43,856 (50,008) 289,971 Operating expenses ,160 31,495 22,511 39,665 (41,457) 262,374 Operating income... 27,418 2,319 2,220 4,191 (8,551) 27,597 Assets ,703 19,339 19,652 26,027 38, ,831 Thousands of U.S. Dollars 2009 North and Asia South Oceania and Eliminations/ Japan America Europe Africa Corporate Consolidated Sales to customers... $1,844,439 $242,735 $220,704 $476,132 $2,784,010 Intersegment sales ,592 79,796 19,408 44,541 $(526,337) Total sales... 2,227, , , ,673 (526,337) 2,784,010 Operating expenses... 2,021, , , ,336 (442,378) 2,583,877 Operating income... $ 205,857 $ 23,765 $ 14,133 $ 40,337 $ (83,959) $ 200,133 Assets... $1,972,704 $175,786 $143,582 $270,204 $ 306,663 $2,868,939 Note: Eliminations/Corporate include unallocated operating expenses of 9,361 million ($95,520 thousand) and 9,518million for the years ended March 31, 2009 and 2008, respectively, consisting principally of general corporate expenses incurred by the administration of the Company, fundamental research and development expenses and advertisement expenses. Eliminations/Corporate include corporate assets of 40,656 million ($414,857 thousand) and 52,415 million as of March 31, 2009 and 2008, respectively, consisting principally of working funds and investing funds held by the Company and assets attributed to Company s administration headquarters. As discussed in Note 2.d, effective April 1, 2008, the Company applied ASBJ Statement No.9, Accounting Standard for Measurement of Inventories. The effect of this change was to decrease operating income of Japan by 1,154 million ($ 11,776 thousand) for the year ended March 31, As discussed in Note 2.e, effective April 1, 2008, the Company changed the useful lives for the machinery of the Company and its consolidated domestic subsidiaries. The effect of this change was to decrease operating income of Japan by 148 million ($ 1,510 thousand) for the year ended March 31, Shimadzu Annual Report 2009

39 (3) Sales to Foreign Customers Millions of Yen North and Asia South Oceania and America Europe Africa Total ,611 22,654 65, , ,646 22,710 64, ,860 Thousands of U.S. Dollars North and Asia South Oceania and America Europe Africa Total $281,745 $231,163 $670,347 $1,183,255 Shimadzu Annual Report

40 Deloitte Touche Tohmatsu Shijokarasuma FT Square 20, Naginataboko-cho Karasuma-higashiiru, Shijo-dori Shimogyo-ku, Kyoto Japan Tel: +81 (75) Fax: +81 (75) INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Shimadzu Corporation: We have audited the accompanying consolidated balance sheets of Shimadzu Corporation and consolidated subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of income, changes in equity, and cash flows for the years then ended, all expressed in Japanese yen. These consolidated financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Shimadzu Corporation and consolidated subsidiaries as of March 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan. As discussed in Notes 2.d. and 2.j. to the consolidated financial statements, the Company changed its method of accounting for measurement of inventories and capitalizing finance leases as of April 1, Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 3. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan. June 23, Shimadzu Annual Report 2009

41 Investor Information (As of March 31, 2009) Shares of Common Stock: Capital: Authorized: 800,000,000 Issued and Outstanding: 296, 070, billion Number of Shareholders: 30,013 Stock Listings: Transfer Agent of Common Stock: Tokyo, Osaka Mitsubishi UFJ Trust and Banking Corporation Independent Certified Public Accountants: Deloitte Touche Tohmatsu For Further Information, Contact: Annual Meeting of Shareholders: Investor Relations Group Corporate Strategy Planning Dept. The annual meeting of shareholders of the Company is normally held in June each year in Kyoto, Japan Stock Information Yen 1,300 1,100 Shimadzu (Left Scale) TOPIX (Right Scale) TOPIX 2,000 1, , , , except market capitalization Years ended March Stock price range (Tokyo Stock Exchange) High Low Fiscal year-end 1, , , ,021 Number of shares (fiscal year-end, in millions) Market capitalization (fiscal year-end, in millions of yen) 186, , , , , ,820 Dividend

42