Services segment, strong results by our electronic devices sales company and higher sales to telecommunications carri- ers led to an increase in overall sales in Europe. Operating income was ·6.6 billion ($63 million), an improvement of ·3.0 billion compared to the prior year, largely related to strong performance in Electronic Devices.  Net sales were ·254.4 billion ($2,401 million), a decline of 1.2% compared to the previous year. This was primarily because of decreased revenue from the FIH group, lower sales of transmission systems, and lower sales of HDDs for servers due to price declines.  The operating loss amounted to ·13.1 billion ($124 mil- lion). Although, the FIH group still ended with a loss, restructuring initiatives completed in fiscal 2002 in trans- mission systems helped to reduce losses in that sector by ·5.6 billion compared to the previous year.  Sales in other regions, including Asia and Australia, totaled ·362.1 billion ($3,416 million), an increase of 30.0% over the previous year. The increase related primarily to higher sales of electronic devices used in digital equipment and HDDs used in notebook PCs. Operating income improved by ·0.7 billion yen, to ·13.5 billion ($127 million). tion in the company’s financial condition. In fiscal 2003, in addition to working to improve the profitability of our busi- ness operations, we took various steps to restore our financial strength, such as selling marketable securities in order to raise the efficiency of asset utilization and converting our Flash memory business, leasing business, and FDK into equity method affiliates.  We also continued efforts to reduce inventories to a target level of 500 billion yen, a reduction by half from their peak level of approximately 1,000 billion yen. At the end of fiscal 2003, inventories had been reduced to ·521.1 billion ($4,916 million), just shy of our target. Going forward, we will accel- erate the implementation of Toyota-style manufacturing innovation throughout the Group and establish new targets in line with progress in applying the percentage-of-completion method in our software and services business. Shareholders’ equity reached ·827.1 billion ($7,804 mil- lion), and the shareholders’ equity ratio rebounded to 21.4%. This increase was a reflection of recovery in earnings from our business operations, gains on sales of marketable securi- ties, transfer of the substitutional portion of the employees’ pension funds, and the effect of Fanuc shares not being accounted for as an equity method affiliate but revaluated at fair market value. We achieved the target we set at the beginning of the fis- cal year to reduce interest-bearing loans to 1,500 billion yen or below, ending the year with a balance of ·1,277.1 billion ($12,048 million). The D/E ratio also improved to 1.54 from 2.51 in the prior fiscal year.  Going forward, we will strive to attain a D/E ratio below 1.0, and continue to pursue higher earnings from our business operations and generate stronger cash flow.  Total assets at the end of fiscal 2003 were ·3,865.5 billion ($36,468 million), a reduction of ·359.7 billion from the end of the previous year. This was attributable to the shift of our Flash memory operation, leasing operation and FDK to equi- ty method affiliates, as well as to sales of marketable securities and other measures that we pursued to improve asset efficiency.  We reduced total current assets by ·56.0 billion from the end of the previous year. Although cash and cash equivalents increased, inventories shrank and, as a result of shifting the leasing business to an equity method affiliate, lease receiv- ables also declined.  Investments and long-term loans declined by ·74.5 billion from the end of the prior fiscal year, primarily as a result of such factors as the sales of Fanuc shares and the shift to equi- ty method affiliate for the leasing operation. Property, plant and equipment less accumulated depreciation decreased by ·187.5 billion, due to the shift to equity method affiliate for the Flash memory business and selectivity in new capital expenditure. Combining current and long-term liabilities, total liabili- ties amounted to ·2,847.9 billion ($26,867 million), a reduction of ·460.4 billion compared to the end of the prior fiscal year. The reduction of ·486.6 billion in interest-bearin g loans was accomplished as a result of restored profitability in business operations, sales of marketable securities, and the shift to equity method affiliate for the leasing operation. Total shareholders’ equity was ·827.1 billion ($7,804 million), and the shareholders’ equity ratio increased to 21.4%. This increase was attributable to such factors as As a result of the deterioration of performance following the collapse of the IT boom and the large charges stemming from restructuring initiatives, there had been significant deteriora- 3. Capital Resources and Liquidity Improvement in Financial Strength Assets, Liabilities, and Shareholders’ Equity  The Americas Other Increase (Decrease) Years ended March 31 2003 2004 rate (%) Net sales (including intersegment sales) Japan..................................................... ·3,888 ·4,071 4.7% Europe ................................................... 543 563 3.7 The Americas ........................................ 278 274 (1.2) Other...................................................... 464 579 24.8 Intersegment elimination ....................... (556) (721) Consolidated net sales............................ ·4,617 ·4,766 3.2% Increase (Decrease) Operating income (loss) Japan..................................................... · 160 ·203 ·42 Europe ................................................... 3 6 3 The Americas ........................................ (18) (13) 5 Other...................................................... 12 13 0 Unallocated operating costs and expenses/intersegment elimination ........................................... (58) (60) (2) Consolidated operating income .............. · 100 ·150 ·49 For reference: Net Sales by Customers’ Geographic Location (¥ Billions) Japan Europe The Americas Other (Years ended March 31) Net Sales and Operating Income by Geographic Segment (· Billions) 31