EL DEBATE BIOÉTICO EN TORNO A LAS CÉLULAS

2) Allowance for bonuses to employees

Allowance for bonuses to employees is provided based on the esti- mated amounts to cover the bonuses to be paid to the employees. (Additional information)

Regarding the bonuses to be paid to the employees of the Company and its certain subsidiaries, the final fixed amounts at the end of each fiscal year were provided as an accrued expense in the past. However, with effect from the current consolidated fiscal year, in accordance with the revised salary and wage rule which became effective on April 1, 2006, the bonus amounts are determined taking the performance results into consideration and therefore the esti- mated amounts to be paid to employees are provided as allowance for bonuses to employees.

3) Allowance for bonuses to directors

Allowance for bonuses to directors is provided based on the estimat- ed amount to cover the bonuses to be paid to the directors. (Accounting policy change)

With effect from the current consolidated fiscal year,“Accounting Standard for Directors’Bonus”(ASBJ Statement No. 4) issued by the Accounting Standards Board of Japan (ASBJ) dated November 29, 2005, was applied. As a result, operating income, ordinary income, income before income taxes and minority interests were reduced by ¥94 million, respectively.

4) Liability for severance and retirement benefits

Liability for severance and retirement benefits for employees is pro- vided based on the estimated amounts of the projected benefit obli- gation and the fair value of plan assets at the end of this consolidat- ed fiscal year.

Unrecognized actuarial gain or loss is amortized using the straight- line method over the average remaining service period (five years), which is shorter than the average remaining service years for employees at the time of their occurrence for each consolidated fis- cal year, since the following fiscal year of recognition.

However, regarding the former retirement benefit plan of the former Sumisho Electronics Co., Ltd., unrecognized actuarial gain or loss is amortized over 13 years.

Employees’prior service cost is amortized over five years.

5) Retirement benefits for directors and corporate auditors

The Company has accrued retirement benefits for directors and cor- porate auditors at the amount that would be required in the event that all directors and corporate auditors retired at the balance sheet date using their retirement benefit rules.

(4) Accounting for leases

(5) Accounting for hedging activities

1) Hedge accounting

Deferred hedge accounting is applied for hedging activities. Foreign currency receivables and payables hedged by forward foreign curren- cy contracts are translated at their respective contract rates.

2) Hedging instruments and hedged items

Hedging instruments: forward foreign currency contracts Hedged items: foreign currency receivables and payables

3) Hedging policy

Derivative financial instruments are used according to the volume of planned import transactions, for the purpose of reducing foreign exchange risks only.

4) Method of evaluation of hedging effectiveness

As forward foreign currency contracts with the same due dates and the same amounts denominated in the same foreign currency as the hedged items are appropriated in compliance with the risk manage- ment policy at the conclusion of the forward foreign currency con- tracts, a high correlation between hedging instruments and hedged items is guaranteed regardless of the subsequent fluctuation in the exchange market. Therefore, an evaluation of the hedging effective- ness at the consolidated closing date is omitted.

5) Other

As all the derivative transactions are conducted with Japanese financial institutions with a high credit rating, we believe that credit risk due to the default of such business partners is low.

(6) Accounting for consumption taxes

Transactions subject to consumption taxes and local consumption taxes are recorded at amounts exclusive of the consumption taxes.

5. Valuation of Assets and Liabilities of Consolidated Subsidiaries

The full portion of the assets and liabilities of the consolidated subsidiary is recorded at fair value as of the acquisition of control.

6. Amortization of Goodwill (positive or negative)

The amount of goodwill is equally amortized over a period of five to ten years on a straight-line basis. If the amount is small and insignificant, it is amortized in a lump sum at its occurrence.

Significant changes in items to prepare for consoliclated financial state- ments

(Accounting Standard for Presentation of Net Assets in the Balance Sheet)

With effect from the current consolidated fiscal year,“Accounting Standard for Presentation of Net Assets in the Balance Sheet”(ASBJ Statement No. 5) and“Implementation Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet”(ASBJ Guidance No. 8) issued by the ASBJ on December 9, 2005, were applied. The amount corresponding to the former“Shareholders’Equity”is ¥90,907 million.

Due to the application of the Accounting Standard, the presentation of net assets in the consolidated balance sheet as of March 31, 2007, is prepared in accordance with the regulation on the Corporate Law (Ordinance of the Ministry of Justice No. 87, last revised on December 22, 2006) .

Additional Information

(Classification of cost of sales and selling, general and administrative expenses)

At production department, expenses incurred in software development had been recognized as cost of sales. From this consolidated fiscal year, the expenses incurred in the department for personnel engaging in sales and administrative work, following reinforcement of sales activities resulting from review of unified production/sales operations, are posted on selling, general and administrative expenses.

As a result, cost of sales decreased by ¥1,548 million, pushing up gross profit by the same amount compared with the amount should the conventional accounting policies have been applied.

II. Notes to consolidated balance sheet

1. Accumulated depreciation of property and equipment ¥12,545 million

2. Notes matured on the balance sheet date

Notes matured on the balance sheet date are accounted for based on the actual clearance date at the clearing house.

Since the balance sheet date of the current consolidated fiscal year fell on a bank holiday, the following amounts of notes matured on the bal- ance sheet date are included in the outstanding balance of each account: Notes receivable ¥96 million

Notes payable ¥126 million

III. Notes to consolidated statement of changes in net assets

1. Number of outstanding shares issued at the current balance sheet date

54,291,447 common shares

2. Matters concerning dividends from surplus

Matters concerning dividends from surplus distributed during the current consolidated fiscal year

June 28, 2006 at

the regular shareholders’ October 26, 2006 at

Resolved on meeting the BoD meeting

Type of shares Common shares Common shares Aggregated amount

of dividends ¥705 million ¥705 million Dividends per share ¥13.00 ¥13.00

Record date March 31, 2006 September 30, 2006 Effective date June 29, 2006 December 8, 2006

Matters concerning dividends from surplus to be distributed after the balance sheet date

Resolved on May 16, 2007 at the BoD meeting

Type of shares Common shares

Source of dividends Retained earnings Aggregated amount of dividends ¥796 million

Dividends per share ¥15.00

Record date March 31, 2007

Effective date June 13, 2007

IV. Notes to per share information Net assets per share ¥1,712.27 Net income per share ¥80.91

[English Translation of the Auditors’Report Originally Issued in the Japanese Language]