During fiscal 1999, ended March 20, 1999, the consolidated sales of HORIBA, Ltd., increased 8%, to ¥67,597 million. However, profits were affected by intense price competition in domestic markets, the economic downturn in Southeast Asia, and the sudden appreciation of the yen in the second half of the fiscal year. Mainly due to these factors, operating income fell 46%, to ¥2,914 million, and net income dropped 64%, to ¥577 million.

The advance of consolidated sales reflects higher sales of engine emissions analyzers in overseas markets as well as the inclusion of the Company's French subsidiary Instruments S.A. (ISA) in consolidated results for the first time on a full fiscal year basis. In contrast sales of semiconductor-related equipment suffered as chip makers around the world adjusted to a dip in the silicon cycle.

The Company's consolidated subsidiaries performed well during the year, with total sales rising 9%.

Looking at consolidated sales by product category, sales of engine measurement instruments & systems expanded 16%, with large-scale models making a large contribution to sales growth; sales of analytical instruments & systems jumped 37%, primarily due to the inclusion of ISA; and medical diagnostic instruments & systems sales expanded 21%. In contrast sales of semiconductor instruments & systems plunged 39%, due to the aforementioned weakness in demand.

Amid challenging circumstances, HORIBA implemented business strategies that will enable it to respond to the changes brought about by the accelerating pace of globalization in the 21st century. We are working to establish superior global positions in each of our market segments, specifically, by developing an integrated operating structure that is able to customize advanced Group technologies to meet local needs and supply products reliably and quickly. This ongoing process involves allocating resources throughout a network of bases and subsidiaries to maximize the efficiency of product development, manufacture, and marketing activities.

HORIBA was one of the first Japanese analytical equipment makers to establish operations overseas. We believe that operating as a global organization is crucial to survival in the 21st century. Therefore, we have gradually strengthened a tripolar international network centered on Japan, Europe, and the United States, where bases are focusing on the development of production technologies, basic scientific technologies, and computer software technologies, respectively. Employees at overseas bases now account for approximately half of all Group employees.

The benefits of cooperation among HORIBA Group companies are evident in the range of systems and equipment that have set performance standards in such fields as engine emissions analysis and medical diagnosis, where collaborative efforts between HORIBA and ABX S.A., the Company's French subsidiary, have yielded significant gains. Also, in analytical and semiconductor systems and equipment, HORIBA is merging its technologies with those of STEC Inc. (presently HORIBA STEC, Co.,Ltd.) a semiconductor equipment manufacturing subsidiary, and the ISA Group, which is the world's largest manufacturer of classical spectroscopic systems and components, to support advances in the manufacturing processes for microprocessors, flat panel displays, and other high-tech products.

The Company has undertaken extensive investment in facilities to remain in the vanguard of measurement and analytical technologies and increase its marketing power. In May 1999, the HORIBA Group's ability to assist automakers develop next-generation low emission engines was enhanced when new vehicle exhaust gas emission equipment installed at the Ann Arbor, Michigan, facility of Horiba Instruments Incorporated, was brought on line. In April 1999, ABX Hematology Inc., a local subsidiary of ABX, opened its own premises in Irvine, California, in a move to strengthen HORIBA's ability to capture a greater share of the market for medical analyzers in North America.

HORIBA is also progressing with work on a global computer-based information network to link its Group companies throughout the world and thereby improve access to resources for approximately 3,000 employees.

Creating value for customers is the key to raising sales in a low-growth economy. HORIBA aims to achieve this through the timely supply of products that are the optimal solutions to its customers business needs. To this end, we are implementing various Companywide measures under our Ultra-Quick Supplier Campaign, which began in fiscal 1998. Efforts to reform development, production, and sales processes have yielded a range of benefits, including operating cost savings and inventory reductions. In devising methods to raise productivity, our focus is always on time. To raise customer satisfaction, we will continue with activities to raise the speed of decision making and strategy implementation.

In fiscal 1999, HORIBA will progress with measures to strengthen its position as a leading maker of analytical systems and equipment. In doing so, we aim to improve the ability of industry to protect the environment and raise the quality of life in communities around the world.

July 1999

Atsushi Horiba
President and CEO