TM1: Compressed Lead Times Policies toward Growth GROWTH POLICIES THAT MAKE TOSHIBA A WINNER TOSHIBA CORPORATION 9 average annual sales growth of 8% and of realizing ¥180 billion in combined operat- ing income from these two domains in fiscal 2005. In the social infrastructure domain, our target is operating income of ¥70 billion in fiscal 2005, which we expect to achieve even if the average sales increase is as low as 2% a year. In all three of these core domains, we expect overseas sales to account for 50% of net sales in fiscal 2005, up 10% from the fiscal year under review. Through the 01 Action Plan and our new mid-term business plan, we expect consolidated net sales to increase to ¥6,600 billion by fiscal 2005, and project operat- ing income of at least ¥270 billion. We also expect to reduce the debt-to-equity ratio to less than 160%. The direction technology will take in com- ing years is strongly in Toshiba’s favor. Industry-leading know-how in the digital, mobile and network areas will sustain us in developing innovative technologies, as growth engines for products that will drive the creation of promising new markets. Our strengths include rich capabilities in wireless and mobile technologies, such as Bluetooth™, wireless LAN, MPEG4 digi- tal image compression, portable PCs, lithium-ion secondary batteries and fuel cells. Accelerated R&D will be directed at integrating these and other advanced tech- nologies in differentiated products that come to market at least one step ahead of products from other companies. Toward that goal, we will continue to promote a high level of investment in R&D, following on from fiscal 2002’s ¥340 billion with a total investment of ¥1,100 billion in the three years to fiscal Among the provisions of our latest mid- term business plan is the “TM1 Movement,” or “Time to Market No. 1.” Building on our successes so far, we will make the TM1 Movement an essential part of new product launches. We will promote successive reductions in lead times and use them to achieve rapid gains in market share and improved sales and profits. In August 2002, we brought new PCs to the marketplace by placing priority on time and on cross-functional cooperation across sales and marketing, product planning, de- velopment, procurement and production. As a result, we met the demand spike at the start of European and U.S. school years— the intense, back-to-school market that can make a big difference to the bottom line— with products that met sales goals and made a positive contribution to our profit and loss figures. We were also able to close August 2002 as the number one portable PC vendor in the U.S. retail market. We have already mentioned our resolve to get products to market ahead of our com- petitors. That is more than just ambition. Through MI 2001, the six-sigma-based management initiative introduced in 1999, we have promoted concerted efforts to maximize efficiency and cut lead times at every stage, from product planning to mar- ket launch. We have also achieved some notable successes. In the same period, we will also promote significant capital expenditure, from ¥204 billion in fiscal 2002, to ¥840 billion. Here too, the emphasis will be on our growth domains, with about 75% of expenditure earmarked for semiconductors and other growth areas. 2005. Reflecting Toshiba’s commitment to boost profitability, about three-fourths of research funding will be channeled to the high-growth domains.