NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 BASIS OF PREPARING CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements of Fuji Electric Holdings Co., Ltd. (the Company ) and consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Securities and Exchange Law of Japan. In preparing these statements, certain reclassifications and rearrangements have been made to the consolidated financial statements prepared domestically in Japan in order to present these statements in a form that is more familiar to readers outside Japan. In addition, the notes to the consolidated financial statements include additional information which is not required under accounting principles generally accepted in Japan. Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Principles of Consolidation The consolidated financial statements for the year ended March 31, 2006 include the accounts of the Company and its 67 significant subsidiaries (61 in 2005 and 59 in 2004) (together, the Companies ). Under the control or influence concept, the accompanying consolidated financial statements include the accounts of the Company and, with minor exceptions, those of its subsidiaries, whether directly or indirectly controlled, and those companies over which the Companies have the ability to exercise significant influence are accounted for by the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Companies is eliminated. The Company does not consolidate nor applies the equity method to subsidiaries or affiliates whose gross assets, net sales, net income (loss) and retained earnings are not significant to the consolidated financial statements. Investments in unconsolidated subsidiaries and affiliates are accounted for by the cost method. The balance sheet date of the certain consolidated subsidiaries is December 31. If necessary, the significant transactions that arose during the period from January 1 through March 31 have been adjusted. In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are evaluated using the fair value at the time the Company acquired control of the respective subsidiaries. The excess of the Company s equity in the net assets at the respective dates of acquisition over the cost of its investments in consolidated subsidiaries, is being amortized over a period of 5 years. The amount of excess is included in OTHER LONG- TERM LIABILITIES on the consolidated balance sheet as of March 31, 2006. The amount of excess was 2,757 million ($23,566 thousand) at March 31, 2006. b. Cash Equivalents For the purpose of the statement of cash flows, the Companies consider all short-term, highly liquid instruments with a maturity of three months or less to be cash equivalents. c. Inventories Raw materials are stated at cost determined by the most recent purchase price method. Finished goods and work in process are stated at actual cost determined by accumulated production cost for contract items or average cost for regular production items, except that finished goods of certain consolidated subsidiaries are priced by the most recent purchase price method. In accordance with accounting practices generally accepted in the heavy electric industry, inventories include items with a manufacturing period exceeding one year. d. Securities Securities classified as other securities are stated at fair value. Unrealized gains and losses, net of taxes, are reported in a separate component of shareholders equity. Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. 71

e. Depreciation Depreciation is computed by the declining-balance method at rates based on the estimated useful lives of the assets, while the straight-line method is applied to the buildings of the Company and domestic subsidiaries acquired after April 1, 1998. The range of useful lives is from 7 to 50 years for buildings and from 5 to 13 years for machinery and equipment. f. Long-lived Assets In August 2002, the Business Accounting Council issued a Statement of Opinion, Accounting for Impairment of Fixed Assets, and in October 2003, the Accounting Standards Board of Japan (ASB) issued ASB Guidance No. 6, Guidance for Accounting Standard for Impairment of Fixed Assets. These new pronouncements were effective for fiscal years beginning on or after April 1, 2005. The Companies adopted the new accounting standard for impairment of fixed assets as of April 1, 2005. The effect of adoption of the new accounting standard for impairment of fixed assets was to decrease income before income taxes and minority interests for the year ended March 31, 2006 by 596 million ($5,099 thousand). The effects on the segment information were immaterial. g. Allowance for Doubtful Accounts The allowance for doubtful accounts 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. h. Retirement Benefits The Company and its domestic consolidated subsidiaries have contributory funded pension plans, non-contributory funded pension plans and unfunded retirement benefit plans as defined benefit plans. Certain domestic subsidiaries have defined contribution pension plans. The Companies accounted for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The transitional obligation, determined as of April 1, 2000, is being amortized over ten years. The prior service cost is amortized by the straight-line method over the expected remaining working lives of the then-active employee participants. The actuarial gains and losses are amortized by the straightline method over the expected remaining working lives of the then-active employee participants from the next period in which they arise, respectively. Amortization of actuarial difference was classified as extraordinary loss due to the significance of the amount at March 31, 2003. However, due to the reorganization of the Company s structure, the Company was divided into a holding company and subsidiaries during the year ended March 31, 2004. Due to the change, the actuarial difference recorded at the Company was transferred to the holding company and subsidiaries. The actuarial difference was, then, amortized at each subsidiary level based on the amortization periods set by each subsidiary. As a result, amortization expense for the year ended March 31, 2004 was no longer significant. Accordingly, the amortization expense for the actuarial differences were included in cost of sales and selling, general and administrative expenses for the years ended March 31, 2004, 2005 and 2006. By the same token, the plan assets significantly exceeded project benefit obligation. As a result, unrecognized actuarial gain became extremely large mainly because the Company s employees decreased to a large extent. To eliminate this excess, in April 2004, marketable securities held in the employee retirement benefit trust were returned to the Company. Due to the large decrease in the number of employees, the unrecognized actuarial gain calculated by the proportion of the plan assets to trusted assets was recognized in the accompanying statement of income as an extraordinary gain. In March 2004, the Company and its certain domestic consolidated subsidiaries contributed certain marketable securities with the carrying amount of 3,663 million to the employee retirement benefit trust for the pension plans, and recognized a non-cash gain of 14,693 million. The securities held in this trust were qualified as plan assets. From the year ended March 31, 2006, the Company adopted the revised Accounting Standard for severance payments. The effects of this change were immaterial. The effects on the segment information were also immaterial. i. Reserve for Directors Retirement Benefits In the year ended March 31, 2006, the Company and some of its subsidiaries changed their accounting for directors retirement benefits. In the year ended March 31, 2005, directors retirement benefits were expensed as incurred. From the year ended March 31, 2006, accrued retirement benefits for directors were provided mainly at the amount of their compensation at the time of termination calculated based on its internal regulations. This change was made to justify periodic accounting of profit and loss and to return to a healthy financial characteristic. As a result of this change, operating income and ordinary income decreased by 360 million ($3,082 thousand), and income before income taxes and minority interests decreased by 1,091 million ($9,330 thousand) for the year ended March 31,2006. The effects on the segment information were immaterial. 72

j. Research and Development Costs Research and development costs are charged to income as incurred. k. Leases Finance leases other than those that are deemed to transfer the ownership of the leased assets to the lessees are accounted for by the method that is applicable to ordinary operating leases. l. Revenue Recognition Sales of products are generally recognized as delivery is made. Sales of installation products are recognized when installation is completed. m. Income Taxes The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The Company filed a joint tax return at the beginning of the fiscal year ended March 31, 2004, which allows companies to file tax payments on the combined basis of profits or losses of the parent company and its wholly owned domestic subsidiaries. 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 amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences. n. Foreign Currency Transactions All monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the statements of income to the extent that they are not hedged by forward exchange contracts. o. Foreign Currency Financial Statements Assets, liabilities, revenue and expense accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for shareholders equity, which is translated at the historical rate. Differences arising from such translation are included in minority interests in consolidated subsidiaries and Foreign currency translation adjustments as a separate component of shareholders equity. p. Derivatives and Hedging Activities The Companies enter into derivative financial instruments ( derivatives ), including foreign currency forward contracts to hedge foreign exchange risk associated with certain assets and liabilities denominated in foreign currencies and interest rate swap agreements as a means of managing its interest rate exposures on certain assets and liabilities. Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: a) All derivatives are recognized as either assets or liabilities and measured at fair value, and forward contracts applied for forecasted transactions are measured at fair value but the unrealized gains/losses are deferred until the underlying transactions are completed if the forward contracts qualify for hedge accounting. b) Trade receivables and trade payables denominated in foreign currencies for which foreign exchange forward contracts are used to hedge the foreign currency fluctuations are translated at the contracted rate if the forward contracts qualify for hedge accounting. c) The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements are recognized and included in interest expense or income. q. The Functional Currencies of the Consolidated Foreign Subsidiaries In the year ended March 31, 2006, some of the consolidated foreign subsidiaries changed the functional currencies to the U.S. dollar from their local currencies by the changes of local accounting standards. The effects of this change were immaterial. The effects on the segment information were also immaterial. r. Accounting for Consumption Taxes The Japanese consumption taxes withheld and consumption taxes paid are not included in the accompanying consolidated statements of income. s. Net Income per Share Net income per share is computed by dividing net income available to common shareholders, which is more precisely computed than under previous practices, by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits. Diluted net income per share is not disclosed because it is anti-dilutive. 73

Note 3 U.S. DOLLAR AMOUNTS The U.S. dollar amounts included in accompanying consolidated financial statements and notes thereto represent the arithmetic results of translating yen into dollars at 117=U.S.$1, the approximate exchange rate at March 31, 2006. The U.S. dollar amounts are presented solely for the convenience of the readers outside Japan. Note 4 SECURITIES Information regarding the marketable securities classified as other securities at March 31, 2006, 2005 and 2004 were as follows: Millions of yen Carrying Unrealized Unrealized March 31, 2006 Cost amounts gains losses Marketable securities classified as other securities Equity securities... 113,604 282,824 169,253 33 Debt securities... Others... 51 52 1 113,655 282,876 169,254 33 March 31, 2005 Marketable securities classified as other securities Equity securities... 114,866 177,358 62,696 204 Debt securities... Others... 101 105 4 114,967 177,463 62,700 204 March 31, 2004 Marketable securities classified as other securities Equity securities... 108,865 170,522 63,185 1,528 Debt securities... 7 7 0 Others... 154 162 8 109,026 170,691 63,193 1,528 (Note 3) Carrying Unrealized Unrealized March 31, 2006 Cost amounts gains losses Marketable securities classified as other securities Equity securities... $970,979 $2,417,304 $1,446,612 $287 Debt securities... Others... 440 448 8 $971,419 $2,417,752 $1,446,620 $287 74

Other securities whose fair value is not readily determinable as of March 31, 2006, 2005 and 2004 were as follows: Carrying amounts Others Unquoted securities... 4,191 4,753 4,616 $ 35,825 Preferred shares... 5,000 5,500 5,500 42,735 Preferred stock... 5,050 5,050 5,050 43,162 Total... 14,241 15,303 15,166 $121,722 Sales of other securities: Proceeds from sales of other securities for the years ended March 31, 2006, 2005 and 2004 were 2,396 million ($20,483 thousand), 12,613 million and 25,334 million, respectively. Gross realized gains and losses on these sales, computed on the moving average cost basis, were 1,033 million ($8,830 thousand) and 1 million ($5 thousand), respectively, for the year ended March 31, 2006, 4,892 million and 25 million, respectively, for the year ended March 31, 2005 and 16,323 million and 290 million, respectively, for the year ended March 31, 2004, always excepting the sales of public bond investment trusts and money management funds. The carrying values of debt securities by contractual maturities for securities classified as other securities at March 31, 2006, 2005 and 2004 were as follows: Debt Other Debt Other Debt Other Debt Other securities securities securities securities securities securities securities securities Due in one year or less... 0 0 7 $ 3 $ Due after one year through five years... 1 1 1 11 Due after five years through ten years... 1 1 1 4 5 Due after ten years... Total... 2 2 9 4 $19 $ 75

Note 5 INVENTORIES Inventories at March 31, 2006, 2005 and 2004 comprised the following: Finished goods... 50,423 55,651 57,497 $ 430,969 Work in process... 69,223 63,126 54,160 591,648 Raw materials... 17,796 16,299 14,253 152,105 137,442 135,076 125,910 $1,174,722 Note 6 PLEDGED ASSETS AND FINANCIAL ASSETS ACCEPTED AS COLLATERAL The amounts of assets pledged as collateral for trade payables, short-term debt and long-term debt at March 31, 2006, 2005 and 2004 were as follows: Time deposits... 60 60 270 $ 513 Investment securities... 732 492 245 6,263 Property, plant and equipment... 41,748 33,037 31,595 356,817 42,540 33,589 32,110 $363,593 Note 7 SHORT-TERM DEBT AND LONG-TERM DEBT Short-term debt at March 31, 2006, 2005 and 2004 consisted of the following: Loans, principally from banks... 59,275 65,733 86,705 $506,625 Commercial paper... 47,700 77,000 94,300 407,692 106,975 142,733 181,005 $914,317 The weighted average interest rates on short-term debt at March 31, 2006, 2005 and 2004 were 0.80%, 0.34% and 0.29%, respectively. 76

Long-term debt at March 31, 2006, 2005 and 2004 consisted of the following: Loans, principally from banks and insurance companies... 48,071 55,700 62,005 $ 410,863 Bonds issued by the Companies: 1.02% Yen bonds due 2006... 20,000 20,000 20,000 170,940 1.06% Yen bonds due 2006... 20,000 20,000 20,000 170,940 1.07% Yen bonds due 2007... 8,000 8,000 8,000 68,376 1.11% Yen bonds due 2007... 12,000 12,000 12,000 102,564 1.12% Yen bonds due 2007... 7,000 7,000 7,000 59,829 1.15% Yen bonds due 2007... 13,000 13,000 13,000 111,111 0.83% Yen bonds due 2008... 10,000 10,000 10,000 85,470 1.08% Yen bonds due 2009... 20,000 20,000 20,000 170,940 1.14% Yen bonds due 2010... 10,000 10,000 10,000 85,471 168,071 175,700 182,005 1,436,504 Less: Portion due within one year... 45,370 8,610 4,283 387,785 122,701 167,090 177,722 $1,048,719 The weighted average interest rates on loans, principally from banks and insurance companies, at March 31, 2006, 2005 and 2004 were 1.17%, 1.22% and 1.53%, respectively. As of March 31, 2006, the aggregate annual maturities of long-term debt during the next five years are as follows: 2007... 45,370 $ 387,785 2008... 58,366 498,858 2009... 41,206 352,190 2010... 8,456 72,280 2011 thereafter... 14,673 125,391 168,071 $1,436,504 Note 8 RETIREMENT BENEFITS The Company and its domestic consolidated subsidiaries have corporate pension, tax-qualified pension plans and lump-sum payment plans as defined benefit plans. A certain subsidiary has a defined contribution pension plan. In addition, the Companies pay other retirement benefits other than the above plans. 77

The liability (asset) for employees retirement benefits at March 31, 2006, 2005 and 2004 consisted of the following: Projected benefit obligation... (221,518) (206,994) (216,555) $(1,893,320) Fair value of plan assets... 246,201 177,759 178,118 2,104,290 Excess projected benefit obligation over plan assets... 24,683 (29,235) (38,437) 210,970 Unrecognized transitional obligation... 5,822 7,266 8,710 49,769 Unrecognized actuarial loss... 20,916 75,262 80,579 178,777 Unrecognized prior service cost... (10,018) (10,442) (1,671) (85,643) Carrying amount... 41,403 42,851 49,181 353,873 Prepaid pension expense... 51,733 51,142 55,997 442,166 Net liability... (10,330) (8,291) (6,816) $ (88,293) In computing projected benefit obligation, several simplified methods are permitted to small companies, and certain subsidiaries have adopted such methods. Due to the reorganization of the Companies, the Company was divided into a holding company and its subsidiaries during the year ended March 31, 2004. By the same token, the plan assets significantly exceeded project benefit obligation. As a result, unrecognized actuarial gain became extremely large mainly because the Company s employees decreased to a large extent. To eliminate this excess, in April 2004, marketable securities held in the employee retirement benefit trust were returned to the Company. Due to the large decrease in the number of employees, the unrecognized actuarial gain calculated by the proportion of the plan assets to trusted assets was recognized in the accompanying statement of income as an extraordinary gain. The effect of this transaction is as follows: Millions of yen Decrease in plan assets... (10,440) Recognized actuarial gain... 3,555 Increase in liability for severance payments... (6,885) 2005 78

The components of net periodic benefit costs for the years ended March 31, 2006, 2005 and 2004 were as follows: Service cost... 7,146 6,940 7,914 $ 61,083 Interest cost... 4,370 5,042 5,568 37,355 Expected return on plan assets... (2,706) (2,470) (1,516) (23,129) Amortization of transitional obligation... 1,443 1,443 1,745 12,340 Recognized actuarial loss... 6,123 6,471 21,551 52,341 Amortization of prior service cost... (797) (1,019) (139) (6,833) Net periodic benefit costs... 15,579 16,407 35,123 133,157 Gain on withdrawing pension assets in trust... (3,554) Gain on transferring the substitutional portion of the pension obligations and related assets to the government... (297) Contributory portion to a defined contribution pension plan... 96 101 69 820 Loss on end of retirement benefits plans... 335 Total... 15,675 12,657 35,527 $133,977 Special additional termination benefits which have been excluded from the amounts shown in the above table were 1,336 million ($11,426 thousand), 3,572 million and 2,844 million for the years ended March 31, 2006, 2005 and 2004, respectively, and were charged to income as paid. The employees contributory portion has been excluded from the components of net periodic pension and severance costs. Assumptions used for the years ended March 31, 2006, 2005 and 2004 were as follows: 2006 2005 2004 Decrease in projected benefit obligation... 2.5% 2.5% 2.5% Decrease in liability for severance payments... mainly 2.5% mainly 2.5% mainly 2.5% The transitional obligation, determined as of the beginning of the year, is being amortized over ten years. The prior service cost is amortized by the straight-line method over the expected remaining working lives of the then-active employee participants. The actuarial gains and losses are amortized by the straightline method over the expected remaining working lives of the then-active employee participants from the next period in which they arise, respectively. 79

Note 9 SHAREHOLDERS EQUITY Japanese companies are subject to the Japanese Commercial Code (the Code ). The Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends and certain other appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriated as a legal reserve (a component of retained earnings) until such reserve and additional paid-in capital equals 25% of common stock. Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividends are applicable. Semiannual interim dividends may also be paid upon resolution of the Board of Directors, subject to certain limitations imposed by the Code. Note 10 RESEARCH AND DEVELOPMENT COSTS Research and development costs charged to income were 29,021 million ($248,045 thousand), 27,224 million and 28,568 million for the years ended March 31, 2006, 2005 and 2004, respectively. Note 11 EXTRAORDINARY LOSS, NET Extraordinary loss, net, for the years ended March 31, 2006, 2005 and 2004 was as follows: Extraordinary income Gain on sales of property, plant and equipment... 3,347 1,131 6,390 $ 28,609 Gain on sales of investment securities... 1,033 4,893 2,064 8,830 Recognized actuarial gain... 3,554 Gain on securities contribution to employee retirement benefit trust... 14,693 Others... 751 300 Extraordinary loss Loss on sales of property, plant and equipment... (4,960) (2,657) (2,805) (42,399) Loss on devaluation of investment securities... (1,024) (2,598) (8,752) Loss on disposal of inventories... (924) (4,511) (7,903) Loss on reserve for directors retirement benefits in prior years... (730) (6,248) Special termination benefits... (495) (2,721) (4,239) Recognized actuarial loss... (13,927) Loss on restructuring production system... (1,906) Others... (3,915) (3,810) (5,850) (33,437) (7,668) (5,968) (1,041) $(65,539) Due to the materiality of the balance for special severance payments, the amount was presented as a separate item for the year ended March 31, 2005. 80

Note 12 INCOME TAXES The components of income taxes for the years ended March 31, 2006, 2005 and 2004 were as follows: Current... 13,264 4,331 7,489 $113,375 Deferred... 1,987 4,367 (166) 16,983 15,251 8,698 7,323 $130,358 The Company and domestic subsidiaries are subject to corporate income tax, prefectural and municipal inhabitants taxes and enterprise tax, based on income. The significant components of deferred tax assets and liabilities at March 31, 2006, 2005 and 2004 were as follows: Deferred tax assets Liability for severance payments... 29,368 29,048 32,236 $ 251,012 Investment securities... 3,752 3,719 3,105 32,069 Inventories... 3,642 3,869 3,528 31,136 Tax loss carryforwards... 5,508 7,017 11,902 47,085 Accrued employee benefits... 8,135 7,851 7,370 69,537 Tangible fixed assets... 2,814 2,894 3,222 24,054 Other... 7,782 6,505 4,650 66,487 Gross deferred tax assets... 61,001 60,903 66,013 521,380 Less: Valuation allowance... (6,971) (4,732) (3,906) (59,582) Total deferred tax assets... 54,030 56,171 62,107 461,798 Deferred tax liabilities Unrealized gain on other securities... (68,773) (25,301) (25,024) (587,805) Gain on securities contribution to employee retirement benefit trust... (35,409) (36,246) (41,402) (302,643) Investment securities... (3,549) (3,549) (30,339) Retained earnings appropriated for tax deductible reserves... (363) (360) (397) (3,104) Others... (27) (43) (50) (230) Gross deferred tax liabilities... (108,121) (65,499) (66,873) (924,121) Net deferred tax assets (liabilities)... (54,091) (9,328) (4,766) $(462,323) 81

The reconciliation between the statutory income tax rate and the effective tax rate for the years ended March 31, 2006, 2005 and 2004 was as follows: 2006 2005 2004 Statutory income tax rate... 40.7% 40.7% 42.1% Permanent difference resulting from expenses not deductible for income tax purposes... 5.3 9.0 11.2 Permanent difference resulting from non-taxable income, including dividends received... (1.7) (3.4) (14.3) Valuation allowance... 5.3 5.1 17.9 Tax credit... (6.0) Other... 1.0 2.1 (0.1) Effective income tax rate... 44.6% 53.5% 56.8% Note 13 SUPPLEMENTAL CASH FLOW INFORMATION The Company sold a significant portion of the ownership of Fuji Logistics Co., Ltd., which was excluded from consolidation as of March 31, 2005. The breakdown of assets and liabilities of Fuji Logistics Co., Ltd. as of March 31, 2004 was as follows: Millions of yen Current assets... 11,753 Fixed assets... 10,726 Total assets... 22,479 Current liabilities... 8,273 Long-term liabilities... 3,829 Total liabilities... 12,102 2004 Note 14 SIGNIFICANT NON-CASH TRANSACTIONS The Company contributed certain other securities with a carrying amount of 3,663 million for the year ended March 31, 2004 to employees retirement benefit trusts for the Company s contributory pension plans, and recognized a non-cash gain of 14,693 million for the year ended March 31, 2004. Note 15 CONTINGENT LIABILITIES Contingent liabilities at March 31, 2006, 2005 and 2004 were as follows: Notes discounted and endorsed... 21 649 575 $ 183 Guarantees... 8,049 9,948 12,596 68,800 82

Note 16 LEASES Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligation under finance lease, lease expense, depreciation expense and interest expense of finance leases that do not transfer ownership of the leased property to the lessee on an as if capitalized basis for the years ended March 31, 2006, 2005 and 2004 were as follows: Machinery and Machinery and Machinery and Machinery and Equipment Equipment Equipment Equipment Acquisition cost... 117,764 89,348 78,110 $1,006,537 Accumulated depreciation... 44,409 31,739 22,838 379,566 Net leased property... 73,355 57,609 55,272 $ 626,971 Obligations under finance leases: Due within one year... 22,465 15,853 14,854 $192,014 Due after one year... 52,659 42,948 41,488 450,076 Total... 75,124 58,801 56,342 $642,090 Lease expense, depreciation expense and interest expense under finance leases: Lease expense... 21,932 17,745 14,726 $187,457 Depreciation expense... 21,384 17,003 14,234 182,777 Interest expense... 1,372 1,402 1,147 11,730 The minimum rental commitments under noncancellable operating leases: Due within one year... 165 $ Due after one year... 319 Total... 484 $ 83

Note 17 DERIVATIVES The Companies, which operate globally, are exposed to market risk arising from fluctuations in foreign currency exchange rates and enter into derivative financial instruments for the purpose of reducing such risk. The Companies also enter into interest rate swap agreements as a means of managing their interest rate exposure. The Companies do not hold or issue derivatives for speculative or dealing purposes. Because the counterparties to these derivatives are limited to authentic financial institutions, the Companies do not anticipate any losses arising from credit risk. All derivative transactions are entered into to hedge foreign currency exposures incorporated within business. Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets or liabilities. Derivative transactions entered into by the Companies have been made in accordance with the Companies policies. The execution and control of derivatives, which is based on the application of each section, are controlled by the Finance Department. Each derivative transaction is periodically reported to the management and each section. Fair Value of Derivative Financial Instruments: The fair value of the Companies derivative financial instruments at March 31, 2006, 2005 and 2004 were as follows: Millions of yen 2006 2005 2004 Contract Unrealized Contract Unrealized Contract Unrealized Amount Fair Value Gain/Loss Amount Fair Value Gain/Loss Amount Fair Value Gain/Loss Foreign currency forward contracts: Receivables:... 7,221 7,329 (108) 3,217 3,267 (50) 4,472 4,306 166 Euro... 415 414 1 1,185 1,133 52 Canada dollars... 126 124 2 Total... 7,221 7,329 (108) 3,632 3,681 (49) 220 (Note 3) 2006 Contract Unrealized Amount Fair Value Gain/Loss Foreign currency forward contracts: Receivables:... $61,721 $62,645 $(924) Euro... Canada dollars... Total... $61,721 $62,645 $(924) Foreign currency forward contracts which qualify for hedge accounting for the years ended March 31, 2006, 2005 and 2004 and such amounts which are assigned to the associated assets and liabilities and were recorded on the balance sheets at March 31, 2006, 2005 and 2004, are excluded from disclosure of market value information. 84

Note 18 SEGMENT INFORMATION The Companies primary business activities include (1) Energy & Electric Systems, (2) ED&C Drive Systems, (3) Electronic Devices, (4) Retail Systems and (5) Others. A summary of net sales, operating costs and expenses, and operating income (loss) by segment of business activities for the years ended March 31, 2006, 2005 and 2004 were as follows: Millions of yen Energy & Elimination Electric ED&C Drive Electronic Retail and Consolidated 2006 Systems Systems Devices Systems Others Total Corporate Total Sales Unaffiliated customers... 383,643 170,522 169,053 160,939 13,120 897,277 897,277 Intersegment... 14,554 11,989 4,349 1,256 39,083 71,231 (71,231) Total sales... 398,197 182,511 173,402 162,195 52,203 968,508 (71,231) 897,277 Operating costs and expenses... 391,173 174,608 155,207 156,322 50,065 927,375 (71,110) 856,265 Operating income... 7,024 7,903 18,195 5,873 2,138 41,133 (121) 41,012 Total assets... 318,713 131,381 149,568 92,355 44,666 736,683 253,371 990,054 Depreciation and amortization... 4,632 1,797 6,707 1,337 920 15,393 328 15,721 Capital expenditure... 4,206 2,188 17,342 2,028 826 26,590 216 26,806 Millions of yen Energy & Elimination Electric ED&C Drive Electronic Retail and Consolidated 2005 Systems Systems Devices Systems Others Total Corporate Total Sales Unaffiliated customers... 361,410 165,757 137,599 167,208 12,226 844,200 844,200 Intersegment... 13,384 12,536 5,637 904 33,532 65,993 (65,993) Total sales... 374,794 178,293 143,236 168,112 45,758 910,193 (65,993) 844,200 Operating costs and expenses... 371,590 171,641 133,738 160,663 44,020 881,652 (64,270) 817,382 Operating income... 3,204 6,652 9,498 7,449 1,738 28,541 (1,723) 26,818 Total assets... 307,428 131,665 128,497 106,191 48,801 722,582 159,830 882,412 Depreciation and amortization... 4,428 1,933 7,633 1,271 842 16,107 438 16,545 Capital expenditure... 3,767 1,813 7,950 1,200 545 15,275 539 15,814 85

Millions of yen Energy & Retail Support Elimination Electric ED&C Drive Equipment & and Consolidated 2004 Systems Systems Electronics Systems Others Total Corporate Total Sales Unaffiliated customers... 393,689 157,272 126,738 150,199 28,300 856,198 856,198 Intersegment... 9,460 10,790 2,937 561 47,434 71,182 (71,182) Total sales... 403,149 168,062 129,675 150,760 75,734 927,380 (71,182) 856,198 Operating costs and expenses... 402,649 165,684 119,896 148,683 73,403 910,315 (71,564) 838,751 Operating income... 500 2,378 9,779 2,077 2,331 17,065 382 17,447 Total assets... 313,066 137,800 131,062 106,521 51,321 739,770 168,290 908,060 Depreciation and amortization... 4,023 2,261 7,904 1,441 1,666 17,295 380 17,675 Capital expenditure... 4,236 1,523 6,219 728 1,513 14,219 240 14,459 (Note 3) Energy & Elimination Electric ED&C Drive Electronic Retail and Consolidated 2006 Systems Systems Devices Systems Others Total Corporate Total Sales Unaffiliated customers... $3,279,008 $1,457,454 $1,444,899 $1,375,552 $112,126 $7,669,039 $ $7,669,039 Intersegment... 124,390 102,475 37,175 10,738 334,035 608,813 (608,813) Total sales... 3,403,398 1,559,929 1,482,074 1,386,290 446,161 8,277,852 (608,813) 7,669,039 Operating costs and expenses... 3,343,358 1,492,380 1,326,561 1,336,085 427,901 7,926,285 (607,783) 7,318,502 Operating income... $ 60,040 $ 67,549 $ 155,513 $ 50,205 $ 18,260 $ 351,567 $ (1,030) $ 350,537 Total assets... $2,724,045 $1,122,922 $1,278,366 $ 789,360 $381,747 $6,296,440 $2,165,567 $8,462,007 Depreciation and amortization... 39,590 15,365 57,329 11,434 7,848 131,566 2,802 134,368 Capital expenditure... $ 35,951 $ 18,707 $ 148,228 $ 17,337 $ 7,045 $ 227,268 $ 1,850 $ 229,118 Overseas sales, which include export sales of the Company and its domestic consolidated subsidiaries and sales (other than exports to Japan) of the foreign consolidated subsidiaries, for the years ended March 31, 2006, 2005 and 2004 were summarized as follows: Millions of yen North Asia (except Year ended March 31, 2006 America Europe for China) China Other Total Overseas sales... 17,643 19,721 125,988 31,216 9,580 204,148 Consolidated net sales... 897,277 Overseas sales as a percentage of consolidated net sales... 2.0% 2.2% 14.0% 3.5% 1.1% 22.8% Millions of yen North Year ended March 31, 2005 America Europe Asia Other Total Overseas sales... 14,735 12,843 101,906 13,056 142,540 Consolidated net sales... 844,200 Overseas sales as a percentage of consolidated net sales... 1.7% 1.5% 12.1% 1.6% 16.9% 86

Millions of yen North Year ended March 31, 2004 America Europe Asia Other Total Overseas sales... 19,249 16,197 88,602 5,235 129,283 Consolidated net sales... 856,198 Overseas sales as a percentage of consolidated net sales... 2.2% 1.9% 10.3% 0.7% 15.1% (Note 3) North Asia (except Year ended March 31, 2006 America Europe for China) China Other Total Overseas sales... $150,803 $168,563 $1,076,821 $266,810 $81,864 $1,744,861 Consolidated net sales... $7,699,039 Overseas sales as a percentage of consolidated net sales... 2.0% 2.2% 14.0% 3.5% 1.1% 22.8% GEOGRAPHIC INFORMATION Millions of yen North Asia (except Elimination and Consolidated Year ended March 31, 2006 Japan America Europe for China) China Total Corporate Total Sales Unaffiliated customers... 823,937 8,721 14,158 18,032 32,429 897,277 897,277 Intersegment... 55,611 775 608 17,107 10,989 85,090 (85,090) Total sales... 879,548 9,496 14,766 35,139 43,418 982,367 (85,090) 897,277 Operating costs and expenses... 843,441 9,257 14,507 32,963 41,681 941,849 (85,584) 856,265 Operating income... 36,107 239 259 2,176 1,737 40,518 494 41,012 Total assets... 703,755 4,304 5,904 25,143 25,942 765,048 225,006 990,054 (Note 3) North Asia (except Elimination and Consolidated Year ended March 31, 2006 Japan America Europe for China) China Total Corporate Total Sales Unaffiliated customers... $7,042,197 $74,546 $121,014 $154,127 $277,155 $7,669,039 $ $7,669,039 Intersegment... 475,316 6,619 5,194 146,207 93,925 727,261 (727,261) Total sales... $7,517,513 $81,165 $126,208 $300,334 $371,080 $8,396,300 $ (727,261) $7,669,039 Operating costs and expenses... 7,208,906 79,117 123,990 281,728 356,249 8,049,990 (731,488) 7,318,502 Operating income... $ 308,607 $ 2,048 $ 2,218 $ 18,606 $ 14,831 $ 346,310 $ 4,227 $ 350,537 Total assets... $6,015,004 $36,789 $ 50,470 $214,903 $221,706 $6,538,872 $1,923,135 $8,462,007 Notes: 1. Classification of the geographic segments is determined by geographical location. 2. The principal countries and regions belonging to geographic segments other than Japan: (1) North America... U.S.A., Canada (2) Europe... Germany, France, U.K. (3) Asia (except for China)... Taiwan, Singapore For the years ended March 31, 2005 and 2004, sales from operations in Japan represented more than 90% of consolidated net sales. As a result, geographic information is not required to be disclosed in accordance with accounting principles generally accepted in Japan. 87

Note 19 SUBSEQUENT EVENTS a. Issuance of Bonds On June 1, 2006, the Company issued 30,000 million ($256,410 thousand) zero coupon convertible bonds with stock acquisition rights. The bonds are due June 1, 2016. b. Appropriations of Retained Earnings The following appropriations of retained earnings at March 31, 2006 were approved at the Company s shareholders meeting held on June 27, 2006: Year-end cash dividends, 4.0 ($0.034) per share... 2,860 $24,446 Bonuses to directors... 50 427 88