Profile
Ever since its founding in 1897, Meidensha Corporation has beenworking on the relentless pursuit of new technology and productdevelopments and witnessed steady growth. Our product offerings
cover a wide area, such as generators, substation equipment,
electronic equipment and information equipment. Our mission is
not only to provide these products but also to recommend the bestsolutions on the basis of what a customer values best. In order torealize these best solutions, we engage in the supply of various
products and provide related services such as engineering, facility
management (including operation and maintenance), repair andproduct-life support.

Contents
Financial Highlights ..................................

3

Message from Management .................

4

Operating Performance Highlights ........

6

R & D Highlights ........................................

7

Overseas Operations ...............................

8

Topics .........................................................

9

Financial Section ...................................... 13
Overseas Affiliates .................................... 36
Corporate Data ....................................... 39
Board of Directors .................................... 39

FINANCIAL HIGHLIGHTS
Years ended March 31

2006

Millions of yen
2005

2004

Thousands of U.S. dollars
2006

Net Sales¥183,747¥185,442¥181,560$1,570,487

Net Income

3,252

5,113

2,335

27,795Net Income Per Share (yen, U.S. dollars)

14.12

22.33

10.14

0.12

Cash Dividends Paid

909

682

—

7,769

201,274

180,595

194,163

1,720,291

6,561

6,662

7,278

—

Total Assets
Number of Employees

The consolidated figures in this Annual Report are expressed in yen and solely for the convenience of thereader, translated into United States dollars at the rate of ¥117 = U.S.$1, the approximate exchange rate prevailingon the Tokyo Foreign Exchange Market as of March 31, 2006. See Note 1 to Consolidated Financial Statements.

Net Sales (¥ millions)
250,000

200,000

Net Income (¥ millions)

Total Assets (¥ millions)

10,000250,000

200,000

184,853 181,560 185,442 183,747

197,140

201,274

194,163
180,595

150,000

150,000

5,113
5,000
100,000

100,000

3,252
2,335
50,00050,000

924
0

03

04

05

06

0

0
03

04

05

06

03

04

05

06

Annual Report 2006

3

Message from Management
We, at Meidensha Corporation (“Meiden”) and its Consolidated
Subsidiary Companies (collectively the “Meiden Group” or “theCompany”), share a common philosophy: “Constantly in pursuit of‘Innovation for New Technologies’ and in Contributing to the Wellbeing of the Society at Large.” We aim to do this by drawing on theengineering resources over a century of its history and to become an
excellent company fit for the Twenty-first Century. Our basic
principles are: (1) to provide the best product experiences tocustomers through new and innovative technologies of the highest
quality, (2) to highly value the shareholder’s interests, (3) to focus on
profitability and (4) to utilize resources for the benefit of society. Our
Group’s core strategy is to drive business growth as an engineering
company. The Meiden Group product portfolio includes a wide
spectrum of offerings: generators, substation equipment, electronicequipment, and information and communications products. We not
only offer such products, but also provide optimum customer-driven
solutions using such products for the benefit of the customers. Our
solutions business in Japan includes services such as engineering,
operation, maintenance and management of facilities, which
contributes to the enhancement of the asset values of our customers.
During fiscal year 2005, the Japanese economy showed exportled economic growth and corporate performance and job situation
improvement due to the growth of the global economy. Against
this backdrop, private business capital investment and consumer
spending grew at a solid rate and the economic recovery was steady.
Under these economic circumstances, the Company madevigorous across-the-board efforts to boost sales. Sales for fiscal
2005 totaled 183,747 million yen (consolidated basis); 0.9% downfrom the previous fiscal year.
We made efforts across-the-board to cut expenses, reduce costs,
and improve productivity. As a result, net income before taxes andadjustments came to 4,322 million yen (consolidated basis), and net
income for the year came to 3,252 million yen (consolidated basis).
A year-end dividend of 5 yen per share was declared. This was
an increase of 1 yen per share from the previous fiscal year.
Under these conditions, the Meiden Group is working toincrease sales and profitability. The Meiden Group has adopted a
corporate focus as an “engineering and service company.” We havedeveloped power, transmission and distribution technology, drive
application technology through the experience gained throughindividual product sales. By combining these technologies withnext generation technologies, we are now providing solutions for

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Annual Report 2006

optimized product life cycles in the area of social infrastructure
for the environment, energy and disaster prevention and for such
solutions in private industries and overseas markets. At the sametime, we are optimizing the systems and services that cater to theindividual needs of the customers. We intend to capitalize on the
new business opportunities brought by the renewed interest in newenergy caused by the oil price hikes from last year. We are putting
our management resources into new business and productdevelopment. One example is our alliance discussions with
Siemens Power Generation Corporation (SPGC), a company basedin Orlando, Florida, U.S. We are exploring the alliance possibility
with SPGC in the area of Solid Oxide Fuel Cell (SOFC) Business inJapan. In line with these talks, we are also exploring the project
development using the SOFC system for the early release of SPGC
SOFC in the Japanese market. In order to meet business demandfor our products in overseas markets, we are increasing our sales
and production bases. Another example is the electric motor
production plant that we are building in Hangzhou, China, as partof the reorganization of our electrical motor business.
While shifting some of our management resources into new
business development and overseas market operations, we intend topromote and strengthen existing alliances, such as our two joint
ventures with Hitachi, Ltd. and Fuji Electric Systems Co., Ltd., and a
joint venture with ABB Ltd. of Switzerland. In April 2006, as arealignment of our motor business, we merged our motor
manufacturing business with Kofu Meidensha Electric Mfg. Co., Ltd.
(a company registered in Kofu City, Yamanashi Prefecture anddissolved in June 2006) by establishing Kofu Meidensha Electric Mfg.
Co., Ltd. (a company registered in Chuo City, Yamanashi Prefecture)
as a new motor business company as of April 1, 2006. The newcompany will further consolidate the motor business, which is oneof the core businesses of the Meiden Group. It will strive to bring
down costs and improve efficiency and will introduce newtechnologies and promote innovation. To meet these challenges, theMeiden Group has formulated a new medium-term management
plan for the three-year period from fiscal 2006 to 2008, known as the“Value Up Plan.” The entire Group embarked on the plan on April 1,
2006. This “Value Up Plan” means increase the value on three fronts:
Technology, Human Resources and Business Value. The Meiden
Group aims to become a company with high credibility from society
and to maximize corporate value by securing high levels of profit.
The Group will implement the various policies discussed below.

“Value Up Plan”
a. Basic Policy
1. We will promote technology-driven management in across-functional manner among Sales, Engineering and R & D. We
would like to make already strong businesses and products
stronger. We will develop and promote the new products.
2. Our objective is to free all management resources fromexisting non-core businesses and to invest in our core and strategic
businesses, such as new business development, overseas market
business, engineering & service business, etc.
3. We will promote corporate social responsibility (CSR). We
will cultivate personnel with high social contribution and ecoconsciousness. We will strengthen corporate governance.
b. Key Action Plan:(1) Promote Technology-driven Management
We will put human and financial resources into R & D, We
will develop solid technical bases by reinforcing our R & D
organization, intellectual property strategy and human resources
development. These reinforcement actions will be done in linewith our marketing strategy. We intend to produce high valueadded products.
(2) Develop New Businesses
The Meiden Group will work on the development of new
businesses relating to our core business of Meiden Group. We willreinforce our ability to find the new business possibility and our
support to the business incubation. These actions will lead to theefficient creation and fostering of new businesses.
(3) Strengthen Overseas Market Businesses
We will reinforce efforts to develop new products for the overseas
market, and improve overseas production, after-sales service, andmaintenance service offerings, and promote human resources
development for overseas market business operations. In doing so,
we would like to increase revenues from overseas and make ouroverseas market business operations a key pillar of our business.
(4) Promote CSR-based Management
We will review the Group’s business activities in light ofcompliance (with laws, rules and regulations), environmental
conservation, labor safety and health, customer satisfaction (CS),quality control, etc. We will improve Group-wide CSR initiative andpromote CSR activities as an integral part of corporate strategy.

(5) Strengthen Group Strategy
Each Meiden Group company will promote its organization
to efficiently promote synergy among Meiden Group’s businesses
and thereby maximize the overall corporate value of the Meiden
Group. We will define the inherent challenge that each Meiden
Group company has in terms of (1) the synergy level among
Meiden Group’s businesses and (2) the profitability level. We will
implement policies, including the reform and consolidation of
the Group business, to realize the efficient management of all
Meiden Group companies.
c. Earnings Targets

Sales

Fiscal 2008 consolidated

Fiscal 2008 non-consolidated

210,000 million yen

173,000 million yen

Operating income

11,500 million yen

7,000 million yen

Ratio of current
profits to sales

4.8%

4.0%

Current profits

10,000 million yen

7,000 million yen

Net income

6,000 million yen

4,500 million yen

By firmly executing the Key Action Plan, the Meiden Groupwill be able to address to the management climate changes in a
flexible manner and aims to establish a solid presence in thevarious markets. We ask every shareholder, as well as ourcustomers and business partners, to give us your continued
guidance and support.

Keiji Kataoka, President
Annual Report 2006

5

Operating Performance Highlights
Outline of Meiden Group Profits and Losses
During this fiscal year, the Japanese economy continued to recover as private sector capital investment and consumer spending remained
steady, driven by export growth as well as improved corporate performance and job market conditions.
Against this background, the Meiden Group made vigorous across-the-board efforts to boost sales. Sales for fiscal 2005 totalled 194,127
million yen (consolidated basis), up 1.5% from the previous fiscal year.

SocialInfrastructure
Systems
Business
SectorIndustrial
Systems
Business
Sector6

In the Power, Railways & Private Sector Business Segment, we received orders for the first units of ourelectric double layer capacitor (EDLC)-based dynamic voltage compensator and graphic image analysis system
unit, which identifies pantagraph-alignment abnormalities and analizes trolley lines using train on-board
cameras. We completed our EDLC production plant in March 2006, and it will have a manufacturing capacity of
10,000 units per year by August 2006.
In the Eco & Social Infrastructure Business Segment, we received orders for the first units of our wide-areamonitoring control systems. These control systems use the MEISVY-VS series and the TELEMOT-cdma monitor
control terminals, which utilize CDMA mobile phone networks to reduce the data transmission-related runningcosts of the monitoring system.

In the Information and Communications Business Segment, sales were brisk for our WholesaleFlowermarket Information System and vacuum capacitors for semiconductor manufacturing equipment. As a
new business, we commercialized an IC tag-based rental bridal dress inventory management system and network
gear for Internet security (“Secure Gateway”).
In the Motor Drive Application Business Segment, there was an increase in orders for automatic guided
vehicles (AGVs) and motors for forklifts, which are increasingly going motorized. We are expanding our
production capacity for these products to meet the increase in demand.
In the Dynamometer System Business Segment, we expanded our dynamometer system production plant
to meet active R &D-related business capital investment by the automotive industry.

Engineering
SystemBusiness
SectorIn the Maintenance Service Segment (for heavy electric machinery), we improved our servicing capability
by increasing the number of facility-assessment vehicles and improving our deterioration and energy
conservation diagnosis capabilities. We also worked to improve our offerings in terminal equipment for remotemonitoring systems to expand monitoring applications as well as our capability to monitor more facilities.
Orders have risen as a result.
In the area of Maintenance Service for semiconductor manufacturing equipment, we are developing ourmaintenance service offerings not only for specific models but also by outsourcing services for entire
semiconductor manufacturing production lines.

Other
Business
Sectors

Other Meiden Group businesses and companies include our medical and welfare businesses as well as
marketing companies that cover a vast array of business areas, and our business process outsourcing services,such as accounting and welfare program services for Meiden Group associates. Orders and sales have generally
remained steady in all these business sectors.

Annual Report 2006

R & D Highlights
SocialInfrastructure
Systems
Business
SectorIndustrial
Systems
Business
SectorEngineering
SystemBusiness
SectorOther
Business
Sectors

Relating to our Energy Business Segment, we are participating in the Eco-Energy Web Kenkyukai (EEWK),a research and development group studying a regional network for natural energy. EEWK is working on amodel project, funded by the Ministry of Environment, to develop Global Warning Prevention Technology.
Under this project, EEWK aims at the establishment of a microgrid network that will eventually provide allenergy required at the Kanazawa Industrial Complex Area in Yokohama, Kanagawa Prefecture. It will do thiswithout depending on existing electric utilities by utilizing existing waste heat and energy through use of solar
cells, wind power and other power resource recovery methods. The Company is a key project member and isplaying an important role with respect to comprehensive overall control of the Eco Energy Web System.
For quality power supply products, we developed a power conversion system (PCS) for NaS (sodium-sulfur)
batteries that incorporates a dynamic voltage compensator as well as a load-leveling feature. We developed asystem to reduce voltage fluctuations in traction power lines by absorbing the fluctuations using EDLC.
In the Environmental Business Segment, we developed a medium voltage direct inverter for air blowers
and pumps to promote energy conservation in the water supply and sewage business.

In the Information and Communications Business Segment, we improved our industrial controller andµPIBOC series offerings and increased the functionality of our package software. These actions were takenwith the semiconductor manufacturing segment in mind. In the Solutions Business Segment, we improved ourlarge- and medium-scale Wholesale Flower Market Information System offerings. We also developed an auction
system for pre-owned construction equipment using wireless bidding equipment.
In the Motor Drive Application Business Segment, we established a sensorless control technology for thepermanent magnet (PM) motors installed in hybrid automobiles. We are promoting R & D of this technology
with the aim of seeing it used in mass production hybrid cars.
In the area of our Logistics Systems Business Segment, we have developed AGVs in kit form. Customers canassemble these kits to suit their carrying product needs and build unique AGV systems.
In the Dynamometer Systems Business Segment, we developed high-precision chassis dynamometer systems
for use in testing four-wheel drive vehicles. Other products being developed include the Plus SV engine tester,which makes it possible to conduct engine bench tests that rival chassis dynamometer testing. We developed
technology that is related to the optimization of electronic control units (ECUs), which are vital for engine development.

In the Maintenance Service and Facility Management Service Segment, we are carrying out research on
diagnostic technology aimed at realizing longer facility life. We developed an upgraded or retrofit SCADA System,
which replaces the outdated legacy SCADA System. We also developed the circuit-breaker performance testing
unit, which combines various circuit-breaker testing functions for more efficient maintenance work. The testing
unit integrates required testing functions, and allows users to more efficiently maintain and replace monitoring
and control systems that are becoming obsolete.

In the Medical and Welfare Business Segment, we developed an electronic medical chart system for small
to medium-sized hospitals.

Annual Report 2006

7

Overseas Operations
During the fiscal year 2005 the global economy

In the power generation field, GE Aero Energy

achieved a continued solid economic growth but at a

Products in Texas placed orders for generator for GE

slightly slower pace than fiscal year 2004. In the United

LM6000 gas turbine. We received an order for a 9.9

States, despite high oil prices, monetary tightening andMW biomass power generation plant (using rice husk

hurricane hits, the economy showed the resilience to suchas resource) for Surat Thani Green Energy Co., Ltd.,

impacts and produced a steady growth. China’s economy

in Thailand.

grew, driven by growth in exports, at the rate of morethan 9% in fiscal year 2005.
The East Asian economy, which is Meidensha
Corporation’s major market, posted an over 6% growthin fiscal 2005. The East Asian economy faced the stagnant

In the North American automotive market, aJapanese transplant placed orders for 2 sets of torqueconverter end-of-line tester.
The major products manufactured and shipped
during fiscal year 2005 were as follows:

economic growth in developed countries and a global

In the field of substations, we supplied 23 units ofslowdown in demand in IT and other high-tech industry

mobile substations from a power utility in the Middle East.

sectors during the first half of 2005.
In the US power sector, it showed a 1.8% level
decrease in total net power generation due to warmer

In the power generation field, we supplied andinstalled generators for GE LM6000 gas turbine for GE
Aero Energy Products in Texas.

weather than normal winter. The power retail prices

In the automotive test systems market in the North

increased more than 10% due to steady economic

America, we supplied and installed 8 sets of test systems

growth and the higher oil prices.

for automaker’s technical centers and transplants.

In the automotive market in the US, which has a big

In South Korea, we supplied and installed a power

impact on our dynamometer systems sales, the industry

train tester for Hybrid Electric Vehicles to Seoul National

showed the further sales decline of trucks and truck-

University.

based sport utility vehicle (SUV) in the face of high gas
prices. The consumers opted for crossover (a car-based

As for other Asian market of dynamometers, we
supplied and installed 5 sets of test systems.

SUV) and mid-size and smaller fuel-efficient vehicles.

Another noteworthy events in our overseas operations,

The US auto sales of fiscal year 2006 will be at the level

we established Meiden Hangzhou Drive Systems Co., Ltd.

of 17 million vehicles.

in December, 2005 in Hangzhou, China to manufacture
permanent magnet motors and other industrial motors.

The major products ordered in the fiscal year 2005
were as follows:8

We also established Meiden Korea Co., Ltd. for the businessdevelopment of various MEIDEN products in South Korea

In the field of electric railroad substations, we

in January, 2006. Meiden Shanghai Co., Ltd. was establishedreceived an order for traction substations for Dubai

in March, 2006 for business development of various

Municipality Head Quarters, U.A.E., and from Civil

MEIDEN products as well as services (sourcing andAviation Authority Singapore in Singapore.

engineering services) in China.

Annual Report 2006

Osaki Area Development Project
You will see a different new Osaki in the autumn of 2007.
The Company is promoting an area development project at theWest Exit Area of Osaki Station in Shinagawa-ku, Tokyo. This area
was once housed our factory. The project is centered on
construction of a business and commercial building that will be
30 stories above ground and two stories underground. Next to thisbuilding will be a 15-story building with a business hotel andfitness club. Construction of both buildings is scheduled to becompleted in August 2007. Autumn 2007 will see the birth of“ThinkPark,” a business complex that reflects the best technology
available and takes into account the tenant’s future business needs.

Changing face of Osaki, our “founding place”
Ever since Meidensha Corporation (Meiden) began businessin 1897, our history has been linked to the Osaki area. Now Osaki
is about to undergo a major change. The Osaki Station West Exit
Area is the site of an urban development project zone covering
four blocks, a total area of approximately 6.6 ha, including theCenter Area, the South Area, the Sony Area, and our Meiden Area.
This is a central urban development project that will make use ofcurrent industrial zoned land. The aim of the project is to create a
total urban development zone combining residential, commercial,
and business areas. ThinkPark buildings will be linked directly to
JR Osaki Station, which is served not only by the JR Yamanote Line,

Construction site (as of April 2006)

JR Osaki Station

Artist’s rendering ofThinkPark

East Exit No. 2 Area

Rinkai Line
East Exit No. 1 Area

D AreaOsaki Station
West Exit South Area

East-West
Passageway
Area Planning Zone
and Redevelopment
Promotion Zone
Area Improvement
Planning Zone

Plaza-Like Open
Property

Osaki Station

C AreaSony

Sidewalk-LikeOpen Property (4m)City Facility

Sidewalk-LikeOpen Property (2m)

No. 2 Facility

Pedestrian Deck

Osaki Station
West Exit Central Area

MeidenE East Area

JR Saikyo Line

Area Facility
E South Area

UndergroundBicycle Parking

A AreaB AreaE WestArea

Annual Report 2006

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Motor BusinessRestructured andStrengthened

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Annual Report 2006

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Kofu Meidensha Electric Mfg. Co., Ltd.

Motor Business Company Established by
Combining Spin-offs from Two Companies

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http://www.thinkpark.jp○○

For details, please visit the ThinkPark Web site:

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A full-scale business hotel and a fitness club are being built
in ThinkPark. The hotel will belong to Daiwa Roynet Hotels, a
renowned quality business hotel chain. The hotel will haveapproximately 200 guest rooms.
The fitness club will be operated by Nippon Athletic Service(NAS). The facility will be fully equipped, with a 25 m pool, gym,
and fitness studio in a space of approximately 3,000 m2. With awide range of activities to offer, the facility will be a full-fledged
fitness and relaxation club.

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Hotel and Fitness Club

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This development is a joint project between Meidensha
Corporation and World Trade Center Building, Inc. ThinkPark
Tower will be a 30-story office building that will combine theprestige of the uptown Yamanote district and the innovative spiritof large-scale urban redevelopment. Under this building will be
the shops and restaurants of ThinkPark Plaza, and these add theexcitement of a downtown area. Inside this area, there will be avast, open space that includes Osaki Forest, and this will be aconvenient place for people to convene and relax.

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ThinkPark Tower, ThinkPark Plaza, and the“Osaki Forest”

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This urban zone will become a symbol of the early 21st
century in the southern Tokyo area, based on the concept of “atown where ideas grow.” The 30-story ThinkPark Tower will be
the centerpiece of the area, with shops, restaurants, health carefacilities, hotels, a fitness club, high-rise residential area, park area,
and the Osaki Forest, all arranged in a well-designed manner.

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ThinkPark will be the first large project to berealized in the Osaki Station West Exit Area
Zone Development

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but also the JR Saikyo, JR Shonan Shinjuku and Rinkai Lines. The
next station, Shinagawa Station, has been a Tokaido Shinkansen
station since October 2003, so Shinkansen bullet train service isalso available. This area is attracting interest as a newtransportation hub for Tokyo.

Meidensha Corporation and Kofu Meidensha Electric Mfg.
Co., Ltd. (registered in Kofu City, Yamanashi Prefecture, anddissolved in June 2006) sought to further strengthen Meiden
Group’s core motors business by establishing Kofu Meidensha
Electric Mfg. Co., Ltd. (registered in Chuo City, Yamanashi
Prefecture) as a new motor business company as of April 1, 2006.
The establishment of this new company has meant a restructuringof our Meiden Kofu Factory, where both companies are operatingon the same premises, and where the manufacturing lines belong
to Kofu Meidensha Electric Mfg. Co., Ltd. This reorganization was
done to optimize the production system and streamline backoffice staff, in order to lower overall costs. This was combined withcapital investment to reinforce production capability and put more
people in the engineering divisions to improve our productdevelopment capability. We are aiming to improve ourcompetitiveness in pricing and profitability, and to increase ourtechnological edge. Meiden Group has a long history in the motor
business, extending all the way back to the founding of thecompany in 1897.

PM servo motor

Electric vehicle“Eliica”

A Motor Production Company Established in
Hangzhou, China

In-wheel motor

The words “Meiden: A Motor Company” have long symbolized
our Company, and motor technology is still the Group’s corebusiness.
The motor market encompasses injection molding
machines, forklifts, elevators, construction equipment, andother segments. The demand for motors is expected to remainrobust. Looking to the future, we expect significant demand for
motors to continue in the automotive segment, particularly in
relation to the drive motors for hybrid cars and electric vehicles.
permanent magnet (PM) motors are a core product of the
Meiden Group. We make high performance motors using
powerful rare-earth magnets to reduce size and increase output.
The market for these high-performance motors is expected to
expand in the future.
The new company will become a central force in thedevelopment of our next generation drive application products andwill actively engage in R & D of new technologies, development of
new products, and sales, by drawing on the various resources ofthe Meiden Group as a whole.

The Company established Meiden Hangzhou Drive Systems
Co., Ltd. (MHD), as a motor manufacturing company in Hangzhou
City, Zhejiang Province, China. Production at MHD will begin in
July 2006.
The new company will supply MHD-made motors to elevator
manufacturers and injection molding machine manufacturers thatare operating in China as a means of foreign direct-investment firms
in China. The newly born Kofu Meidensha Electric Mfg. Co., Ltd.
will serve as the mother factory in Japan for MHD, while MHD willserve as the key production base for the China market, which has
shown rapid growth. MHD aims to lower costs and strengthen its
production capabilities. In this way, we aim to achieve further growthin the motor business, which is Meiden Group’s core business.

Groundbreaking by Senior Adviser Shigeo Seko (second from the left)

Annual Report 2006

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Meiden Singapore Strengthens
Transformer Production Capacity

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Our Company and Japan AE Power Systems Corporation (AEPower) have agreed to reinforce an increase in the manufacturing
range of small- and medium-capacity transformers at Meiden
Singapore Pte. Ltd. (MSL) by jointly funding a 1 billion yen capital
expansion. MSL is a joint venture between Meiden and AE Power.
The MSL transformer plant is being enlarged, and the present
capability for producing transformers with 33 kV, 3 MVA capacity
is being upgraded to produce 154 kV, 100 MVA transformers. The
new plant is scheduled to commence operation in July 2006.
This expansion intransformer production
capability will make MSL
a key production unit inSoutheast Asia and MSL
aims to increase sales in
Meiden Singapore Pte. Ltd. (MSL)
that region.

Opening Ceremony for Hojo
Sand Dune Wind Farm

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Our Company has set up a new plant specializing in the
production of electric double layer capacitors (EDLCs) at ourNumazu Works in Numazu City, Shizuoka Prefecture. This factorybegan operating on March 9, 2006. The production facilities
entered full operation in April 2006.
The new factory has assembly lines with the most up-to-date
production equipment available and has increased our EDLC
production capacity from 1,000 units per year to 10,000 units per
year (the equivalent of 700,000 cells). The plant also produces
high-quality capacitors in its spacious clean room, which has afloor space totalling approximately 500 m2.
We are presently receiving numerous inquiries from customers
about our dynamic voltage compensator and other products thatutilize EDLCs. This EDLC production will meet the active sales. The
Company is developing the EDLC business through an across-theboard special sales project organization. It aims to sell in wider
utilities market and industrial system segments and beyond.

○○Beefing up Production and Sales forElectric Double Layer Capacitors

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Annual Report 2006○

Capacitor module○

Meiposs-MCP dynamic voltage
compensator, high-voltage type (2,000 kVA)

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M-CAP cells are composed of twoelectrode sheets with a separator,and multiple cells together make up asingle capacitor. When the capacitors
are connected in series, the desired
voltage can be obtained by changing
the number of capacitors.

The opening ceremony for the Hojo Sand Dune Wind Farm
was held on December 8, 2005. The Company provided this wind
power plant for Hokuei Town, Tottori Prefecture.
The Hojo Sand Dune Wind Farm consists of nine (9) wind
power converter units, type MD 77, 1,500 kW, made by REpower
Systems AG of Germany. The power station has a combined total
output capacity of 13,500 kW, and is the largest such wind power
station operated solely by a local government in Japan. It isestimated that the power station will generate 23,900 MWh ofpower per year, whichcorresponds to theamount of electricity
used by 6,600 ordinary
households yearly. The
power generated here issold to the Chugoku
Electric Power Co., Inc. Hojo Sand Dune Wind Farm

Financial Section
Consolidated Financial Review .......................................... 14
Five-Year Summary ............................................................... 14
Operational Review ............................................................. 15
Consolidated Balance Sheets ............................................ 16
Consolidated Statements of Income ................................ 18
Consolidated Statements of Shareholders’ Equity ........... 19
Consolidated Statements of Cash Flows ........................... 20
Notes to Consolidated Financial Statements ................... 21
Independent Auditors’ Report ............................................ 35

CONSOLIDATED FINANCIAL REVIEW
Outline of Profits and Losses

a 1.3% increase. Operating income, therefore, stood at
6,498 million yen.

During this consolidated fiscal year, the Japanese

The final result was a net income of 3,252 million

economy maintained its upward momentum, driven

yen for this term.

by exports that were a result of positive global
economic trends. Capital investment in the private

Financial Conditions

sector and private consumption increased steadily
against the backdrop of improved corporate businessTotal assets at the end of March 2006 amounted toperformance and a brightening employment

201,274 million yen, an increase of 20,679 million yen.

situation.

As a result of increased inventories, current

Net sales totaled 183,747 million yen, a 0.9%

assets stood at 109,882 million yen, an increase of

decrease over the previous term. Business sector-based

535 million yen. Property, plant and equipment

net sales stood at 53.3% for the Social Infrastructureamounted to 46,501 million yen, an increase of

Systems Sector, 27.5% for the Industrial Systems

10,663 million yen. Total current liabilities amounted to

Sector, 11.1% for the Engineering Sector, and 8.1%

104,758 million yen, an increase of 12,507 million yen,for Others.

and shareholders’ equity stood at 60,417 million yen,

The cost of sales totaled 141,776 million yen, aan increase of 7,597 million yen. As a result, the

0.6% decrease over the previous term. Selling, generalshareholder capital ratio increased 0.7 points fromand administrative expenses totalled 35,473 million yen,

29.3% to 30.0%.

FIVE-YEAR SUMMARY
MEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31)

2006

2005

Millions of yen
2004¥183,747¥185,442¥181,560¥184,853¥200,075

Net income (loss)

3,252

5,113

2,335

924

(3,906)

Net income (loss) per share (yen)

14.12

22.33

10.14

4.58

(19.34)

Cash dividends paid

909

682

–

–

–

Depreciation and amortization

3,872

3,906

4,262

4,921

4,861

Total assets

201,274

180,595

194,163

197,140

205,221

Net property, plant and equipment

46,50135,83843,21540,40640,899

Shareholders’ equity per share (yen)265.64232.19209.91

182.36

176.74

Net sales

14

Annual Report 2006

2003

2002

OPERATIONAL REVIEWSocial Infrastructure Systems

Industrial Systems

This segment includes business related to theconstruction of social infrastructure. We provide
solution services of all kinds in relation to electric power
quality, energy conservation, and related matters, and
we engage in the manufacturing and marketing of all
types of electrical equipment involved in power
generation, transmission, transforming, distribution,and other related functions, for power companies,
government and other public agencies and offices,
railroads, highways, private facilities, and other such
establishments.
We are also involved in the field of water supply andsewerage treatment for local governments. Our activities
include manufacturing and marketing products for thecontrol of treatment equipment and processes of all kinds,
and for the improvement of IT networks. We are further
developing environmental solution services that include
contracting for the maintenance management of water
treatment plants, environmental recycling, and so on.

This segment includes business operations related
to product systems used in the manufacturingindustry, IT, and other general industry operations.
In addition to providing private industry with power
substations, motor vehicle testing systems, andphysical distribution systems, we engage in the
manufacture and marketing of motors, inverters, andother products for use in textile machinery, elevators,
and other such equipment.
We are active in the information and telecommunications field, manufacturing and marketing
component products for industrial computer andnetworking systems. We also provide IT solutions inan effort to promote the greater operational
sophistication and efficiency of corporations and local
governments through the use of IT.

(Millions of yen)

96,73404
05(Millions of yen)

91,30004

53.3%

98,04406

05
06

54,05727.5%

63,72450,503Engineering Systems

OthersThis segment provides services relating to theremote management and monitoring of facilities andthe proposal of measures for extending the life offacilities, energy conservation, and other such services
related primarily to the maintenance of products we
supply. We also engage in the maintenance ofsemiconductor manufacturing equipment and thereconditioning of used manufacturing equipment.

This segment includes marketing companies nottied to specific business fields, and companies that
contract accounting, payroll, and other administrative
functions, as well as welfare services for employees.

(Millions of yen)

(Millions of yen)04

15,43905

15,89806

11.1%

20,35904

15,33005

14,52006

14,841

8.1%

Annual Report 2006

15

CONSOLIDATED BALANCE SHEETSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (as of March 31, 2006 and 2005)

Millions of yen

Thousands of U.S.dollars (Note1)

2006

2005

2006

¥9,981¥10,892$85,308

237

153

2,026

Trade notes

5,593

6,824

47,803

Trade accounts

58,09958,734

496,573

Loans and advances

3,586

1,495

30,650Due from unconsolidated subsidiaries and affiliates

1,976

1,409

16,889Allowance for doubtful accounts

(926)

(478)

(7,915)Inventories (Note 4)

23,564

21,392

201,402

Deferred income taxes (Note 14)

3,646

3,740

31,162Other current assets

4,126

5,186

35,264

109,882

109,347

939,162

Land (Notes 5 and 7)

7,837

8,083

66,983

Buildings and structures

43,02142,008367,701

Machinery and equipment

55,69856,116

476,051

Construction in progress (Note 7)

12,509887

106,915

Less: Accumulated depreciation(72,564)(71,256)(620,205)

46,50135,838397,445

Investment securities (Notes 3 and 7)

26,823

17,723229,256

Investments in unconsolidated subsidiaries and affiliates (Note 3)

9,436

9,857

80,650Long-term loans

98

125

838

Deferred income taxes (Note 14)

40

—

342

Other assets

8,607

7,773

73,564

Allowance for doubtful accounts

(113)

(68)

(966)

44,89135,410383,684¥201,274¥180,595$1,720,291

AssetsCurrent assets:
Cash and time deposits (Note 15)
Marketable securities (Notes 3 and 15)
Receivables:

Total current assets
Property, plant and equipment:

Investment and other assets:

See accompanying notes.

16

Annual Report 2006

Millions of yen

Thousands of U.S.dollars (Note1)

2006

2005

2006

Short-term borrowings (Note 6)¥15,516¥15,872$132,615

Commercial paper (Note 6)

10,000—85,470Current portion of long-term debt (Note 6)

6,293

4,726

53,786

Trade notes

10,33810,35788,359Trade accounts

23,817

21,274

203,564

Due to unconsolidated subsidiaries and affiliates

6,058

6,120

51,778

11,556

10,88998,769Accrued income taxes

364

470

3,111

Accrued bonuses

4,613

4,178

39,427

Other current liabilities

16,20318,366

138,489

104,758

92,252895,368

Long-term debt (Notes 6 and 7)

13,174

16,510112,598

Employees’ severance and retirement benefits (Note 8)

15,05815,347

128,701

Reserve for retirement allowance for directors and corporate auditors

549

682

4,692

Deferred income taxes (Note 14)

4,766

716

40,735

Other long-term liabilities

604

603

5,162

Minority interests

1,948

1,664

16,65017,07017,070145,897

Capital surplus

13,204

14,362

112,855

Retained earnings

19,743

17,550168,744

Net unrealized holding gains on securities

10,774

5,419

92,085

Foreign currency translation adjustment

(342)

(409)

(2,923)

Less: Treasury stock, at cost

(32)

(1,171)(273)

Total shareholders’ equity

60,417

52,821

516,385¥201,274¥180,595$1,720,291

Liabilities and shareholders’ equity
Current liabilities:

Payables:Advances received from customers

Total current liabilities

Contingent liabilities (Note 10)
Shareholders‘ equity (Note 9):
Common stock
Authorized–557,385,000 shares

Issued and outstanding –227,637,704 shares

Annual Report 2006

17

CONSOLIDATED STATEMENTS OF INCOMEMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2006, 2005 and 2004)

Millions of yen

Thousands of U.S.dollars (Note1)

2006

2005

2004

2006

Net sales (Note 13)¥183,747¥185,442¥181,560$1,570,487

Cost of sales (Notes 12 and 13)

141,776

142,617

141,187

1,211,761

Selling, general and administrative expenses (Notes 12 and 13)

35,47335,01435,068303,188

6,498

7,811

5,305

55,538Interest and dividend income

382

417

545

3,265

Interest expense

(627)

(701)

(907)

(5,359)Equity in net loss of affiliated companies(289)(1,626)(127)(2,470)Gains on sales of marketable securities and investment securities

579

5

971

4,949

Loss on devaluation of securities

(37)

(72)

(1)

(316)

Loss on disposal of inventories(21)(1,556)

(404)

(179)

Loss on disposal of fixed assets

(152)

(911)

(191)

(1,299)Gain on sales of property, plant and equipment

3

12,080

23

26

Gains on the release from the substitutional portion of government
Welfare Pension Insurance Scheme (Notes 2 and 8)

—

825

225

—

Development working expenses for the Osaki Station west exit

(59)

(2,289)—(504)

Impairment loss of fixed assets (Note 5)

(250)

—

—

(2,137)

Others(1,704)(2,996)(1,223)(14,565)

4,323

10,987

4,216

36,949Current

329

1,165

347

2,812

Deferred

591

4,232

1,183

5,051

920

5,397

1,530

7,863

Minority interests

151

477

351

1,291

Net income¥3,252¥5,113¥2,335$27,795

Operating income
Other income (expenses):

Income before income taxes and minority interests
Income taxes (Note14):

Yen

U.S.dollars (Note1)

2006

2005

2004

2006

¥14.12¥22.33¥10.14

$0.12

5.00

4.00

3.00

0.04

Amounts per share of common stock (Note 2):
Net income
Cash dividends applicable to the year
See accompanying notes.

18

Annual Report 2006

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
MEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2006, 2005 and 2004)
Millions of yen
Revaluation
Net unrealized Foreign currency
reserve for land, holding gains on translation
net of tax
securities
adjustment

Treasurystock,
at costNumber ofshares issued

Commonstock

CapitalsurplusRetainedearnings

Balance at March 31, 2003
202,025,158
44,227,546
Increase (decrease) due to merger
Net income—
Bonuses to directors and corporate auditors—
Decrease in retained earnings due to reduction of affiliated company—
Adjustments from translation of foreign currency financial statements (Note 2)—
Increase in treasury stock—
Increase in net unrealized holding gains on securities—¥17,070
—
—
—
—
—
—
—

¥12,751
1,611
—
—
—
—
—
—

¥5,756
5,061
2,335
(1)
(3)
—
—
—

¥433
—
—
—
—
—
—
—

¥1,145
(117)
—
—
—
—
—
3,271

¥(316)
—
—
—
—
(78)
—
—

¥(12)
(1,114)
—
—
—
—
(23)
—

Balance at March 31, 2004
246,252,704
Net income—
Cash dividends—
Bonuses to directors and corporate auditors—
Decrease due to reduction of consolidated subsidiary—
Adjustments from translation of foreign currency financial statements (Note 2)—
Increase in treasury stock—
Increase in net unrealized holding gains on securities—

17,070
—
—
—
—
—
—
—

14,362
—
—
—
—
—
—
—

13,148
5,113
(682)
(29)
—
—
—
—

433
—
—
—
(433)
—
—
—

4,299
—
—
—
(0)
—
—
1,120

(394)
—
—
—
—
(15)
—
—

(1,149)
—
—
—
—
—
(22)
—

Balance at March 31, 2005
Net income
Cash dividends
Bonuses to directors and corporate auditors

246,252,704———
Decrease in retained earning due to addition of consolidated subsidiaries—
Adjustments from translation of foreign currency financial statements (Note 2)—
Increase in treasury stock—(18,615,000)
Retirement of treasury stock
Disposal of treasury stock—
Increase in net unrealized holding gains on securities—

17,070
—
—
—
—
—
—
—
—
—

14,362——————(1,158)0—

17,550
3,252
(909)
(38)
(112)
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—

5,419
—
—
—
—
—
—
—
—
5,355

(409)
—
—
—
(4)
97
—
—
—
(26)

(1,171)
—
—
—
—
—
(20)
1,158
1
—

Balance at March 31, 2006

227,637,704

17,07013,204

19,743—

10,774

(342)

(32)

Number ofshares issued

Commonstock

CapitalsurplusRetainedearnings

246,252,704———
Decrease in retained earning due to addition of consolidated subsidiaries—
Adjustments from translation of foreign currency financial statements (Note 2)—
Increase in treasury stock—(18,615,000)
Retirement of treasury stock
Disposal of treasury stock—
Increase in net unrealized holding gains on securities—$145,897
—
—
—
—
—
—
—
—
—

$122,752
—
—
—
—
—
—
(9,897)0—$150,000
27,795(7,769)
(325)
(957)
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—

$46,316
—
—
—
—
—
—
—
—
45,769$(3,496)
—
—
—
(34)
829
—
—
—
(222)

$(10,009)
—
—
—
—
—
(170)
9,897
9
—

Balance at March 31, 2006

$145,897$112,855$168,744—$92,085$(2,923)$(273)

Thousands of U.S.dollars (Note1)

Balance at March 31, 2005
Net income
Cash dividends
Bonuses to directors and corporate auditors

227,637,704

Revaluation
Net unrealized Foreign currency
reserve for land, holding gains on translation
net of tax
securities
adjustment

Treasurystock,
at costAnnual Report 2006

19

CONSOLIDATED STATEMENTS OF CASH FLOWSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2006, 2005 and 2004)

2006

2005

2004

Thousands of
U.S.dollars (Note1)
2006¥4,323¥10,987¥4,21636,949

3,872
625
(382)
289
627
(579)
(3)
152
37
—
1,277
(2,017)
104
(622)
7,703

3,906
1,239
(417)
1,626
701
(5)
(12,080)
911
72
—
(138)
3,613
(515)
1,995
11,895

4,262
2,078
(545)
127
907
(971)
(23)
191
1
25
1,318
(185)
(3,996)
1,865
9,270

33,094
5,342(3,265)2,470
5,359(4,949)
(26)
1,299
316
—
10,915(17,239)889(5,316)
65,838

387
(624)
(532)
—
6,934

424
(694)
167
—
11,792

566
(907)
(544)
(25)
8,360

3,308
(5,333)(4,548)—59,265Investing activities:
Acquisition of marketable securities and investment securities
Proceeds from sales of marketable securities and investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Proceeds from sales of securities issued by subsidiaries which caused the change of consolidation scope
Other-net
Net cash provided by (used in) investing activities

(801)
754
(13,738)72—(1,612)(15,325)(653)
966(3,691)
13,291(411)(2,270)
7,232

(650)
3,580
(4,375)93—(646)(1,998)(6,846)6,444(117,419)
615—(13,777)(130,983)

Financing activities:
Decrease in short-term bank loans
Increase in commercial paper
Proceeds from long-term debt
Repayment of long-term debt
Cash dividends paid
Other-net
Net cash provided by (used in) financing activities
Effects of exchange rate change on cash and cash equivalents
Net Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents due to addition of consolidated subsidiaries
Cash and cash equivalents at end of year (Note 15)(457)
10,0003,000(4,771)
(899)
270
7,143
51
(1,197)
11,044234¥10,081(18,253)—
9,610(6,819)(673)(1,090)(17,225)
(10)
1,789
9,255
—
¥11,044(10,135)—
9,579(6,984)—(453)(7,993)(33)(1,664)
10,919—¥9,255(3,906)85,47025,641(40,778)(7,684)
2,308
61,051
436(10,231)
94,3932,000$86,162

Millions of yen

Operating activities:
Income (loss) before income taxes and minority interests
Adjustments to reconcile income (loss) before income taxes and minority interests
to net cash provided by operating activities:
Depreciation and amortization
Increase in allowancesInterest and dividend income
Equity in net loss of affiliated companies
Interest expense
Gains on sales of marketable securities and investment securities
Gains on sales of property, plant and equipment
Loss on disposal of fixed assets
Loss on devaluation of securities
Merger expense
Decrease (increase) in receivables
Decrease (increase) in inventories
Increase (decrease) in payables
Other-net
Sub-totalInterest and dividend received
Interest expense paid
Income taxes paid
Merger expense paid
Net cash provided by operating activities

See accompanying notes.

20

Annual Report 2006

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES

1. Basis of Presenting
Consolidated Financial
Statements
The accompanying consolidated financial
statements have been prepared in accordance with theprovisions set forth in the Japanese Securities andJapanese yen amounts have been, could have been,or could in the future be, converted into U.S. dollars
at this or any other rate of exchange.

2. Summary of Significant
Accounting Policies

Exchange Law and its related accounting regulations,and in conformity with accounting principlesa)Principles of Consolidation

generally accepted in Japan (“Japanese GAAP”), which

The accompanying consolidated financial

are different in certain respects as to application andstatements include the accounts of the Company anddisclosure requirements of International Financial

its 32 consolidated subsidiaries in 2006 (29 in 2005 andReporting Standards.

28 in 2004). All significant intercompany accounts and

The accounts of overseas subsidiaries are basedtransactions have been eliminated in consolidation. The

on their accounting records maintained in conformity

Company’s remaining subsidiaries, whose total assets,with generally accepted accounting principles

sales, net income and retained earnings are notprevailing in the respective countries of domicile. The

significant in the aggregate in relation to theaccompanying consolidated financial statements havecomparable figures in the consolidated financial

been restructured and translated into English (withstatements, have not been consolidated.

some expanded descriptions and the inclusion of

In the elimination of investments in subsidiaries,

consolidated statements of shareholders’ equity) fromthe assets and liabilities of the subsidiaries, including

the consolidated financial statements of the Company

the portion attributable to minority shareholders, areprepared in accordance with Japanese GAAP and filed

evaluated using the fair value when the Company

with the appropriate Local Finance Bureau of theacquired control of the respective subsidiaries.

Ministry of Finance as required by the Securities andExchange Law. Some supplementary informationb) Equity Method

included in the statutory Japanese language

Investments in affiliated companies (all 20% toconsolidated financial statements, but not required

50% owned and certain others 15% to 20% owned)

for fair presentation, is not presented in theare accounted for by the equity method in the years

accompanying consolidated financial statements.

ended March 31, 2006, 2005 and 2004.

The translation of the Japanese yen amounts

Investments in five affiliated companies areinto U.S. dollars are included solely for theaccounted for by the equity method in 2006, 2005 andconvenience of readers outside Japan, using the2004. Investments in all unconsolidated subsidiaries

prevailing exchange rate at March 31, 2006, which

and other affiliated companies, that would not havewas ¥117 to U.S. $1. The convenience translations

material effect on the consolidated financial statements,

should not be construed as representations that theare stated at cost.

Annual Report 2006

21

c)

Securitiesd) Derivatives and Hedge Accounting

Securities are classified based on the intent ofDerivative financial instruments are stated at fairholding as (a) securities held for trading purposesvalue, and the Company and its consolidated(hereafter, “trading securities”), (b) debt securities

subsidiaries recognize changes in the fair value as gains

intended to be held to maturity (hereafter, “held-to-or losses unless derivative financial instruments are

maturity debt securities”), (c) equity securities issued

used for hedging purposes.

by non-consolidated subsidiaries and affiliatedIf derivative financial instruments are used ascompanies, or (d) all other securities that are nothedges and meet certain hedging criteria, theclassified in any of the above categories (hereafter,

Company and its consolidated subsidiaries defer“available-for-sale securities”).

recognition of gains or losses resulting from changes

The Company and its consolidated subsidiaries

in fair value of derivative financial instruments until

do not have trading securities and held-to-maturity

the corresponding losses or gains on the hedged items

debt securities. Equity securities issued by subsidiaries

are recognized.

and affiliated companies which are not consolidated

However, in cases where forward foreign exchangeor accounted for using the equity method are statedcontracts are used as hedges and meet certain

at the moving-average cost. Available-for-salehedging criteria, forward foreign exchange contracts

securities with no available fair marker values are

and hedged items are accounted for in the following

stated at the moving-average cost.

manner:If the market value of equity securities issued by1.

unconsolidated subsidiaries and affiliated companies

executed to hedge an existing foreign currency

and available-for-sale securities declines significantly,

receivable or payable,

such securities are stated at fair market value and the(a) the difference, if any, between the Japanese yen

difference between fair market value and the carrying

amount of the hedged foreign currency

amount is recognized as loss in the period of thereceivable or payable translated using the spot

decline unless the declines are considered temporary.

rate at the inception date of the contract and the

If the fair market value of equity securities issued bybook value of the receivable or payable isunconsolidated subsidiaries and affiliated companies

recognized in the statement of income in the

not accounted for on the equity method is not readily

period which includes the inception date, andavailable, such securities should be written down to(b) the discount or premium on the contract (thatnet asset value with a corresponding charge in theis, the difference between the Japanese yenstatement of income in the event net asset value

amount of the contract translated using thedeclines significantly unless the decline is considered

contracted forward rate and that translated using

as recoverable.

the spot rate at the inception date of the contract)

Available-for-sale securities with available fairmarket values are stated at fair market value.

22

If a forward foreign exchange contract isis recognized over the term of the contract.
2.

If a forward foreign exchange contract is executed

Unrealized gains and unrealized losses on theseto hedge a future transaction denominated in asecurities are reported, net of applicable income taxes,

foreign currency, the future transaction will be

as a separate component of shareholders’ equity.

recorded using the contracted forward rate, andRealized gains and losses on sale of such securities areno gains or losses on the forward foreign exchange

computed using the moving-average cost.

contract are recognized.

Annual Report 2006

Also, if interest rate swap contracts are used ash) Allowance for Doubtful Accounts

hedge and meet certain hedging criteria, the net

The Company and its consolidated subsidiaries

amount to be paid or received under the interest rate

provide the allowance for doubtful accounts in answap contract is added to or deducted from theamount sufficient to cover possible losses on collection

interest on the assets or liabilities for which the swap

by estimating individually uncollectible amounts andcontract is executed.

applying a percentage based on collection experienceto the remaining accounts.

e)

Inventories

determined by the average method as to raw materials

Employees’ Severance and Retirement
Benefits

and supplies and the specific identification method

The Company and its consolidated subsidiaries

as to finished products, semi-finished products andprovide two types of severance and retirement benefit

work in process.

plans, unfunded lump-sum payment plans and funded

Inventories are stated at cost, which is mainlyi)non-contributory pension plans, under which allf ) Property, Plant and Equipment andDepreciation

eligible employees are entitled to benefits based on thelevel of wages and salaries at the time of retirement or

Depreciation is mainly computed using thetermination, length of service and certain other factors.

declining-balance method over estimated useful lives

The liabilities and expenses for severance andexcept for buildings acquired after March 31, 1998,

retirement benefits are determined based on thewhich are depreciated based on the straight-line

amounts actuarially calculated using certain

method over estimated useful lives.

assumptions.

g)

Impairment of Fixed Assets

The Company and its consolidated subsidiaries
provided allowance for employees’ severance andEffective April 1 2005, the Company and its

retirement benefits based on the estimated amounts

consolidated subsidiaries adopted the new accountingof projected benefit obligation and the fair value ofstandard for impairment of fixed assets (“Opinion

the plan assets at the balance sheet date.

Concerning Establishment of Accounting Standard forPrior service costs are recognized in expenses in

Impairment of Fixed Assets,” issued by the Businessequal amounts over the average of the estimatedAccounting Deliberation Council on August 9, 2002)

remaining service lives of the employees, and actuarial

and “Implementation Guidance for the Accounting

gains and losses are recognized in income or expenses

Standard for Impairment of Fixed Assets” (theusing the straight-line method over the average of the

Financial Accounting Standard Implementation

estimated remaining service lives commencing with

Guidance No. 6, issued by the Accounting Standards

the following period.

Board of Japan on October 31, 2003).

Employees of Japanese companies are

As a result of adopting the new accounting

compulsorily included in the Welfare Pension

standard, income before income taxes and minority

Insurance Scheme operated by the government.

interests decreased by ¥250 million ($2,137 thousand).

Employers are legally required to deduct employees’

Additionally, impairment losses comprising thewelfare pension insurance contributions from theircumulative total have been deducted directly from thepayroll and to pay them to the government together

book value of respective assets in accordance with

with employers’ own contributions. For companies

revised regulations.
Annual Report 2006

23

that have established their own Employees’ Pension

domestic consolidated subsidiaries received approvalFund which meets certain legal requirements, it isfrom the Minister of Health, Labor and Welfare withpossible to transfer a part of their welfare pension

respect to transfer of the substitutional portion of theinsurance contributions (referred to as thebenefit obligation and related pension plan assets“substitutional portion” of the government’s Welfare

funded in previous years, and on March 16, 2005,

Pension Insurance Scheme) to their own Employees’

transferred the related portion of the liability reserves

Pension Fund under the government’s permission andto the Japanese government. As a result, the Company

supervision.

and some domestic consolidated subsidiaries

Based on the newly enacted Defined Benefit

recognized a gain of ¥826 million for the year ended

Corporate Pension Law, the Company and someMarch 31, 2005 as the difference between thedomestic consolidated subsidiaries decided toestimated amount of the transfer and the actual

restructure their Employees’ Pension Fund and werebalance transferred.

permitted by the Minister of Health, Labor andWelfare on October 29, 2003 to be released from theirj)future obligation for payments for the substitutional

The Company and its consolidated subsidiaries

portion of the Welfare Pension Insurance Scheme.

recognize tax effects of temporary differences between

Pension assets for the substitutional portion

the carrying amounts of assets and liabilities for tax

maintained by the Employees’ Pension Fund are to

and financial reporting. The provision for income

be transferred back to the government’s scheme.

taxes is computed based on the pretax income

The Company and some domestic consolidated

included in the consolidated statement of income. The

subsidiaries applied the transitional provisions asasset and liability approach is used to recognizeprescribed in paragraph 47-2 of the JICPA Accounting

expected future tax consequences of temporary

Committee Report No. 13, “Practical Guideline fordifferences between the carrying amounts of assets

Accounting of Retirement Benefits (Interim Report)”,and liabilities for financial reporting purposes and theand the effect of transferring the substitutionalamounts used for income tax purposes.
The Company and some subsidiaries adopted

portion was recognized on the date permission wasreceived from the Ministry of Health, Labor andWelfare. As a result, in the year ended March 31, 2004,
the Company and some consolidated domestic

consolidated tax return system.

k)

Amounts Per Share of Common Stocksubsidiaries recorded gains on the release from the

The computation of net income per share issubstitutional portion of the government’s Welfare

based on the weighted average number of shares of

Pe n s i o n In s u r a n ce S ch e m e a m o u n t i n g tocommon stock outstanding during the year.

¥225 million, which was calculated based on the

For the years ended March 31, 2006, 2005 andamount of the substitutional portion of the projected

2004, diluted net income per share was not shown

benefit obligations as of the permission date, thesince the Company had no securities with dilutive

related pension assets determined pursuant to theeffect.

government formula, and the related unrecognizeditems.
On October 1, 2004, the Company and some24

Income Tax

Annual Report 2006

Cash dividends per share presented in the
consolidated statements of income represent actual
amounts applicable to the respective years.

l)Statements of Cash Flows
In preparing the consolidated statements of cash

flows, cash on hand, readily-available deposits andshort-term highly liquid investments with maturities
that do not exceed three months at the time ofpurchase, are considered to be cash and cash equivalents.

3. Securities
A. The following table summarizes acquisition costs and book values of securities with fair value as of March 31,
2006 and 2005.

2006
Securities with book value (fair value) exceeding acquisition cost:
Equity securities
Securities with book value (fair value) not exceeding acquisition cost:
Equity securities
Bonds

2005
Securities with book value (fair value) exceeding acquisition cost:
Equity securities
Bonds
Securities with book value (fair value) not exceeding acquisition cost:
Equity securities
Bonds

2006
Securities with book value (fair value) exceeding acquisition cost:
Equity securities
Securities with book value (fair value) not exceeding acquisition cost:
Equity securities
Bonds

Acquisition cost

Millions of yen
Book value

Difference¥8,254¥8,254¥26,124¥26,124¥17,870¥17,870

¥15
76
¥91

¥14
75
¥89

¥(1)
(1)
¥(2)

Acquisition cost

Millions of yen
Book value

Difference¥7,2662¥7,268¥16,2963¥16,299¥9,0301¥9,031

¥709
100
¥809

¥672
92
¥764

¥(37)
(8)
¥(45)

Acquisition costThousands of U.S. dollars
Book value

Difference$70,547$70,547$223,282$223,282$152,735$152,735

$129
646
$775

$118
637
$755

$(11)
(9)
$(20)

Annual Report 200625

B. The following table summarizes book values of securities with no fair value as of March 31, 2006 and 2005.
(a) Available-for-sale securities;
Book value
Millions of yen
2006
2005

Non-listed foreign bonds
Non-listed equity securities
Others
Total

¥237
610
—
¥847

¥152
659
1
¥812

Thousands of U.S. dollars
2006$2,025
5,214—$7,239(b) Equity securities issued by subsidiaries and affiliated companies;
Book value
Millions of yen
2006
2005

Investments in unconsolidated subsidiaries
Investments in affiliated companies
Total

¥751
8,685
¥9,436¥833
9,024¥9,857

Thousands of U.S. dollars
2006$6,41974,231$80,650

C. Maturities of available-for-sale securities with maturities as of March 31, 2006 and 2005.
Millions of yen

Year ended
March 31, 2006

Within 1 year

Over 1 year but
within 5 years

Over 5 years but
within 10 years

Over 10 years

Bonds

¥237

—

—

—

Year ended
March 31, 2005

Within 1 year

Over 1 year but
within 5 years

Over 5 years but
within 10 years

Over 10 years

Bonds

¥153

—

—

¥100

Year ended
March 31, 2006

Within 1 year

Over 1 year but
within 5 years

Over 5 years but
within 10 years

Over 10 years

Bonds$2,026———

Millions of yen

Thousands of U.S. dollars

D. Total sales amounts of available-for-sale securities sold, gains and losses, in the years ended March 31, 2006,
2005 and 2004 are follows:

2006

Sales amount
Gains
Losses26

Annual Report 2006

¥754
579
—

Millions of yen
2005

2004

Thousands of U.S. dollars
2006

¥534
9
0

¥3,752971
31$6,4444,949—

4. Inventories
Inventories as of March 31, 2006 and 2005 were as follows.
2006

Millions of yen
2005

Thousands of U.S. dollars
2006

Finished products¥1,918¥1,442$16,393

Semi-finished products

3,095

3,593

26,453Work-in-process

17,24815,183

147,419

Materials and supplies

1,303

1,174

11,137¥23,564¥21,392$201,402

Total

5. Impairment of Fixed Assets
As discussed in Note 2 g, the Company and its consolidated subsidiaries adopted the accounting standard
for impairment of fixed assets. Impairment loss of fixed assets for the year ended March 31, 2006 consisted of thefollowing.
Location

Use

Type

Millions of yen

Thousands of U.S. dollars

Numazu city, Shizuoka Prefecture

Business asset

Land

¥250

$2,137The Company and its consolidated subsidiaries have grouped their fixed assets principally based on
their divisions or business units. Certain consolidated subsidiaries reduced the book value of above assets to
the recoverable amounts because their market value had come down in price and their profitability had
worsened.
Recoverable amounts are stated in net realizable values based on assessments by third-party licensed
appraisers.

6. Short-Term Borrowings, Long-Term Debt and Commercial Paper
Short-term borrowings are bank loans and represented by notes. The weighted average interest rate was
0.8% as of March 31, 2006 and 1.0% as of March 31, 2005, respectively.
Long-term debt and commercial paper as of March 31, 2006 and 2005 consisted of the following.
Millions of yen

Thousands of U.S. dollars

2006

2005

2006

0.4% to 2.8% loans from banks and insurance companies¥19,467¥21,236$166,386

Less: Current portion(6,293)(4,726)(53,786)

Total¥13,174¥16,510$112,598

Commercial paper, bearing interest rates of 0.3%

¥10,000–$85,470

Annual Report 2006

27

The annual maturities of long-term debts as of March 31, 2006 were as follows.
Year ended March 31

Millions of yen

Thousands of U.S. dollars

2007¥6,293$53,786

2008

1,232

10,530

2009

1,476

12,615

2010

1,362

11,641

2011

862

7,368

2012 and thereafter

8,242

70,444

7. Pledged Assets
The following assets were pledged as collateral as of March 31, 2006 and 2005.
Millions of yen

Thousands of U.S. dollars

2006

2005

2006

¥1,479¥1,479$12,641

Investment securities

31

16

265

Construction in progress

8,121

531

69,410Total¥9,631¥2,026$82,316Land

Investment securities of ¥1 million ($9 thousand) were pledged as collateral for borrowing from financial
institutions by an affiliate.
Obligation with collateral pledged as of March 31, 2005 and 2006 was as follows.
Millions of yen

Long-term debt

2006

2005

Thousands of U.S. dollars
2006¥8,400¥8,400$71,795

8. Employees’ Severance and Pension Benefits
The Company and its consolidated subsidiaries adopted the accounting standard for employees’ severance
and retirement benefits, under which the liabilities and expenses for severance and retirement benefits are
determined based on the amounts obtained by actuarial calculations.
The liabilities for severance and retirement benefits included in the liability section of the consolidatedbalance sheets as of March 31, 2006 and 2005 consist of the following:
2006

Millions of yen
2005

Thousands of U.S. dollars
2006¥50,311¥48,710$430,009

Unrecognized prior service costs

3,743

4,203

31,991

Unrecognized actuarial differences(2,831)(4,713)(24,197)

Less fair value of pension assets(20,892)(15,882)(178,564)

Less unrecognized net transition obligation(15,273)(16,971)(130,538)

Liability for severance and retirement benefits¥15,058¥15,347$128,701

Projected benefit obligation

28

Annual Report 2006

1. On October 1, 2004, the Company and some domestic consolidated subsidiaries received approval from
the Minister of Health, Labor and Welfare with respect to transfer of the substitutional portion of thebenefit obligation and related pension plan assets funded in previous years, and on March 16, 2005,
transferred the related portion of the liability reserves to the Japanese government. As a result, the Company
and some domestic consolidated subsidiaries recognized a gain of ¥825 million for the year ended March
31, 2005 as the difference between the estimated amount of the transfer and the actual balance transferred.
2. The Company introduced a new performance-based retirement benefit plan, and revised its retirement
allowance rules on October 1, 2005.
As a result of this revision, the projected benefit obligation decreased by ¥2,114 million and prior service
costs have occurred in the same amount.
3. The prior service costs have been incurred due to the change in the MEIDENSHA employee’s pension
fund agreement in the year ended March 31, 2004.
Included in the consolidated statements of income for the years ended March 31, 2006, 2005 and 2004
are severance and retirement benefit expenses comprising the following:

Millions of yen

Thousands of U.S. dollars

2006

2005

2004

2006

Service costs - benefits earned during the year

¥2,266¥2,422¥3,202$19,368

Interest cost on projected benefit obligation

1,174

1,187

1,665

10,034

Expected return on plan assets

(239)

(181)

(236)

(2,043)

Amortization of prior service costs

(460)

(354)

(41)

(3,932)

Amortization of net transition obligation

1,698

1,698

1,930

14,513

Amortization of actuarial differences

395

373

857

3,376

Employee’s contribution

—

—

(244)

—

¥4,834¥5,145¥7,133$41,316

Severance and retirement benefit expenses

The discount rate and the rate of expected return on plan assets used by the Company and its consolidated
subsidiaries are 2.7% and 2.0% for 2006, 2005, and 2004, respectively.
The estimated amount of all retirement benefits to be paid at the future retirement date is allocated equally
to each service year using the estimated number of total service years. Prior service costs are recognized as an
expense in equal amounts over 10 years, and actuarial gains/losses are recognized in the statement of income
using the straight-line method over 12 to 15 years for 2006 and 2005, and over 13 to 15 years for 2004, respectively.
Annual Report 2006

29

9. Shareholders’ Equity
Under the Commercial Code of Japan, the entire amount of the issue price of shares is required to beaccounted for as capital, although a company may, by resolution of its Board of Directors, account for an amountnot exceeding one-half of the issue price of the new shares as additional paid-in capital, which is included incapital surplus.
Under the Commercial Code, certain amounts of retained earnings equal to at least 10% of cash dividends
and other cash appropriations shall be appropriated and set aside as a legal earnings reserve until the total amountof legal earnings reserve and additional paid-in capital equals 25% of common stock. The total amount of legal
earnings reserve and additional paid-in capital of the Company has been reached to 25% of common stock, andtherefore the Company is not required to provide legal earnings reserve any more. The legal earnings reserve andadditional paid-in capital may be used to eliminate or reduce a deficit by resolution of the shareholders’ meetingor may be capitalized by resolution of the Board of Directors. On condition that the total amount of legal earnings
reserve and additional paid-in capital remains being equal to or exceeding 25% of common stock, they are available
for distribution by the resolution of shareholders’ meeting. Legal earnings reserve is included in retained earnings
in the accompanying financial statements.
The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of the Company in accordance with the Commercial Code.

10. Contingent Liabilities
Contingent liabilities as of March 31, 2006, were as follows.
Millions of yen

Thousands of U.S. dollars

Repurchase of trade notes receivables discounted and endorsed¥376$3,214

Guarantees of loans from banks to employees and unconsolidated subsidiaries and affiliates

551

4,709

11. Lease Information:(1) Finance leases, which do not transfer ownership of properties to lessees, are not capitalized and are accounted
for in the same manner as operating leases. Certain related information are summarized as follows:(i)

Assumed amounts (inclusive of interest) of acquisition cost, accumulated depreciation and net
book value as of March 31, 2006 and 2005, are summarized as follows.

2006

Millions of yen
2005

Thousands of U.S. dollars
2006

Machinery and equipment

¥186

¥171

$1,590

Others

1,242

1,237

10,615

(953)

(709)

(8,145)

¥475

¥699

$4,060Assumed acquisition cost

Accumulated depreciation

30

Annual Report 2006

(ii) Future minimum lease payments, inclusive of interest, as of March 31, 2006 totaled ¥475 million($4,060 thousand), including ¥180 million ($1,538 thousand) due within one year.
(iii) Lease payments, which are equal to assumed depreciation charges for the years ended March 31,
2006, 2005 and 2004, were ¥294 million ($2,513 thousand), ¥523 million and ¥511 million,
respectively.
(iv) Assumed depreciation charges are computed using the straight-line method over lease terms
assuming no residual value.
(2) Lease contracts receivable under non-cancelable operating leases as lessor as of March 31, 2006 totaled¥388 million ($3,316 thousand), including ¥268 million ($2,291 thousand) due within one year.

12. Research and Development Expenses
Research and development expenses are charged to income as incurred. The amounts charged to income forthe years ended March 31, 2006, 2005 and 2004 were ¥5,494 million ($46,957 thousand), ¥6,186 million, and¥6,794 million, respectively.

13. Segment Information
Industry segments:
The Company and its consolidated subsidiaries operate principally in four industrial sectors: Social
Infrastructure Systems, Industrial Systems, Engineering and Other sectors.
The business organization was changed in years ended March 31, 2005 to bring it in line with changes in thebusiness environment, and the method of identifying business segments was changed as follows in order toreflect actual business practices in more appropriate segments:• The former Energy and Environment segments were combined into Social Infrastructure Systems.
• The former Info and Communications and Industrial Systems were combined into Industrial Systems.
• Engineering, formerly included under Others, has been separated for segment disclosure.
Information by industry segments for the years ended March 31, 2006, 2005 and 2004 are as follows:
Millions of yen
Eliminations or
Corporate

Consolidated

Social Infrastructure
Systems

Industrial
Systems

Engineering

OthersTotal¥98,044¥50,503¥20,359¥14,841¥183,747¥—¥183,747

4,804

7,942

251

8,979

21,976(21,976)—

102,848

58,445

20,61023,820205,723(21,976)

183,747

Operating expenses

98,60957,64419,082

23,465

198,800(21,551)

177,249

Operating income (loss)¥4,239¥802¥1,528¥354¥6,923¥(425)¥6,498

Identifiable assets¥69,053¥46,978¥12,441¥5,926¥134,398¥66,876¥201,274

Depreciation and amortization

1,439

803

332

173

2,747

1,125

3,872

Capital expenditures

5,404

518

305

298

6,525

10,554

17,079Year ended March 31, 2006
Net sales:
Outside customers
Inter-segment
Total

Annual Report 200631

Millions of yen
Eliminations or
Corporate

Consolidated

Social Infrastructure
Systems

Industrial
Systems

Engineering

OthersTotal¥91,300¥63,724¥15,898¥14,520¥185,442¥—¥185,442

5,662

7,388

294

8,523

21,867(21,867)—

96,962

71,112

16,192

23,043

207,309(21,867)

185,442

Operating expenses

92,647

68,597

15,21922,141

198,604(20,973)

177,631

Operating income (loss)¥4,315¥2,515¥973¥902¥8,705¥(894)¥7,811

Identifiable assets¥62,254¥49,161¥12,282¥1,382¥125,079¥55,516¥180,595

Depreciation and amortization

1,528

980

342

172

3,022

884

3,906

Capital expenditures

1,101

1,351

315

107

2,874

3,488

6,362

Year ended March 31, 2005
Net sales:
Outside customers
Inter-segment
Total

Millions of yen
Eliminations or
Corporate

Consolidated

Social Infrastructure
Systems

Industrial
Systems

Engineering

OthersTotal¥96,734¥54,058¥15,439¥15,330¥181,560¥—¥181,560

6,618

11,560254

7,841

26,275(26,275)—

103,352

65,61815,69323,171

207,835(26,275)

181,560

Operating expenses

97,206

65,642

15,27622,425200,550(24,295)

176,255

Operating income (loss)¥6,146

¥(24)

¥417

¥746

¥7,285¥(1,980)¥5,305

Identifiable assets¥62,398¥52,779¥14,011¥5,164¥134,351¥59,812¥194,163

Depreciation and amortization

1,673

1,100

363

163

3,299

963

4,262

Capital expenditures

1,714

892

274

132

3,012

1,705

4,717

Year ended March 31, 2004
Net sales:
Outside customers
Inter-segment
Total

Thousands of U.S. dollars
Eliminations or
Corporate

Consolidated

Social Infrastructure
Systems

Industrial
Systems

Engineering

OthersTotal$837,983$431,650$174,009$126,845$1,570,487$—$1,570,487

41,06067,8802,145

76,744

187,829(187,829)—

879,043

499,530

176,154

203,589

1,758,316(187,829)

1,570,487

Operating expenses

842,812492,684

163,094

200,555

1,699,145(184,196)

1,514,949

Operating income (loss)$36,231$6,855$13,060$3,025$59,171$(3,633)$55,538

Identifiable assets$590,197$401,521$106,333$50,650$1,148,701$571,590$1,720,291

Depreciation and amortization

12,299

6,863

2,838

1,479

23,4799,615

33,094

Capital expenditures

46,188

4,427

2,607

2,547

55,76990,205145,974

Year ended March 31, 2006
Net sales:
Outside customers
Inter-segment
Total

32

Annual Report 2006

Information by geographic area is not disclosed due to the Company and its consolidated subsidiaries
substantially in Japan, which represents more than 90% of consolidated net sales and identifiable assets, respectively.
Overseas sales information is not disclosed due to overseas sales being less than 10% of consolidated net sales.

14. Income Taxes
The Company and its consolidated subsidiaries are subject to a number of taxes based on income, which inaggregate, resulted in normal statutory tax rates of approximately 39.69%, 39.69% and 42.69% for the years
ended March 31, 2006, 2005 and 2004, respectively.
The following table summarizes the significant differences between the statutory tax rate and the Company’s
effective tax rate for financial statement purposes for the years ended March 31, 2006, 2005 and 2004.

Statutory tax rate
Permanent difference (Social expenses, etc.)
Per capital inhabitant tax
Net changes in valuation allowance
Decrease (increase) in deferred tax assets due to the change of statutory tax rate
Decrease in net operating loss carry forwards of subsidiaries
due to adoption of consolidated tax return system
Equity in net loss of affiliated companies
Other-net
Effective tax rate

2006

2005

2004

39.69%(3.68)
2.67(18.46)—39.69%(7.68)
1.01
7.86—

42.69%
6.06
2.61(31.20)
6.65

—
2.65
(1.60)
21.27%—
6.31
1.93
49.12%

9.32—
0.16
36.29%

Significant components of deferred tax assets and liabilities of the Company and its consolidated subsidiaries
as of March 31, 2006 and 2005 are as follows.
Millions of yen

Deferred tax assets:
Net operating loss carry forwards
Allowance for retirement benefits
Unrecognized intercompany profit
Bonuses
Other
Gross deferred tax assets
Less: Valuation allowance

Deferred tax liabilities:
Deferred gain on sales of property for tax purpose
Unrealized holding gains on securities
Deferred gain from division of corporation
Other
Gross deferred tax liabilities
Net deferred tax assets

Thousands of U.S. dollars

2006

2005

2006

¥438
5,471
—
1,829
3,730
11,468(1,107)
10,361¥1,826
5,472
132
1,681
3,733
12,844(1,905)
10,939$3,744
46,761—
15,632
31,88098,017(9,461)
88,556

3,215
7,094
1,131
1
11,441¥(1,080)

3,215
3,568
1,132
0
7,915
¥3,02427,47960,6329,667
997,787$(9,231)Annual Report 200633

15. Cash and Cash Equivalents
Reconciliations of cash and time deposits shown in the consolidated balance sheets and cash and cash
equivalents shown in the consolidated statements of cash flows as of March 31, 2006 and 2005 are as follows:

2006

Millions of yen
2005

Thousands of U.S. dollars
2006

Cash and time deposits¥9,981¥10,892$85,308

Short-term securities

100

152

854

¥10,081¥11,044$86,162

Cash and cash equivalents

16. Related Party Transactions
Significant transactions with related parties for the years ended March 31, 2006, 2005 and 2004 are as follows:
Millions of yen
Purchase of finishedproducts

Material supply, etc.

Accounts payable

Secured income
receivable

Japan AE Power Systems Corporation¥6,713¥—¥2,287¥—

Japan Motor & Generator Co., Ltd.

6,715

—

2,963

—

Purchase of finishedproducts

Material supply, etc.

Accounts payable

Secured income
receivable

Japan AE Power Systems Corporation¥6,836¥458¥3,299¥62

Japan Motor & Generator Co., Ltd.

6,833

6,134

2,211

2,079

Purchase of finishedproducts

Material supply, etc.

Accounts payable

Secured income
receivable

Japan AE Power Systems Corporation¥6,936¥258¥3,336¥85

Japan Motor & Generator Co., Ltd.

5,541

5,040

2,026

1,693

Purchase of finishedproducts

Material supply, etc.

Accounts payable

Secured income
receivable

Japan AE Power Systems Corporation$57,376$—$19,547$—

Japan Motor & Generator Co., Ltd.

57,393—25,325—

Year ended March 31, 2006

Millions of yen

Year ended March 31, 2005

Millions of yen

Year ended March 31, 2004

Thousands of U.S. dollars

Year ended March 31, 2006

34

Annual Report 2006

Independent Auditors’ Report
To the Board of Directors of MEIDENSHA CORPORATION:
We have audited the accompanying consolidated balance sheets of MEIDENSHA CORPORATION andconsolidated subsidiaries as of March 31, 2006 and 2005, and the related consolidated statements of income,shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2006, expressed inJapanese yen. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to independently express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of MEIDENSHA CORPORATION and subsidiaries as of March 31, 2006 and2005, and the consolidated results of their operations and their cash flows for each of the three years in the period
ended March 31,2006, in conformity with accounting principles generally accepted in Japan.
Without qualifying our opinion, we draw attendion to the following.
(1) As discussed in Note 13 to the consolidated financial statement, effective April 1 2004, MEIDENSHACORPORATION and its consolidated subsidiaries changed the business segments.
(2) As discussed in Note 2 to the consolidated financial statement, effective April 1 2005, MEIDENSHACORPORATION and its consolidated subsidiaries adopted the new accounting standard for impairment of
fixed assets.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2006 are presented solely for convenience. Our audit also included the translation of yen amounts
into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1 tothe consolidated financial statements.
Tokyo, Japan
June 23, 2006

Annual Report 2006

35

CHINAMEIDEN• DONGGUAN
ELECTRICAL ENGINEERING
CO., LTD.
Yan Wu Industrial District,
Wan Jiang Country, Dongguan,
Guangdong 523049 P.R.China
Phone: 769-2171273
Facsimile: 769-2285250

MEIDEN• SHANGHAISEMICONDUCTOR CO., LTD.

53-1A, No.311, Fu Te Nan Lu,
Wai Gao Qiao Free Trade Zone,
Shanghai 200137, P.R.China
Phone: 21-50483681
Facsimile: 21-50483035

ZHENGZHOU• MEIDEN
ELECTRIC CO., LTD.
No.87 Hehuan Street,
Zhengzhou Hi-Tech Industries
Development Zone,
Zhengzhou, Henan Province,
P.C. 450001, P.R.China
Phone: 371-67848-800
Facsimile: 371-67848-797

SHANGHAI CO., LTD.
• MEIDEN
15D, Hengji Plaza, No.99
Huaihai-Donglu, Huangpu-Qu,
Shanghai P.C. 200021 P.R.China
Phone: 21-63860358
Facsimile: 21-63860058

HONG KONG
PACIFIC (CHINA) LTD.
• MEIDEN
Unit 01-02A, 16/F, Tower 1, Ever Gain
Plaza, 88 Container Port Road,
Kwai Chung, N.T., Hong Kong
Phone: 2503-2468
Facsimile: 2887-8046

36

Annual Report 2006

INDONESIAMEIDEN ENGINEERING• P.T.
INDONESIA
20th Floor, Summitmas I,
Jl. Jenderal Sudirman Kaveling61-62, P.O.BOX 6920/KBY/
Summitmas I
Jakarta Selatan 12190, Indonesia
Phone: 21-520-0612
Facsimile: 21-520-0240

KOREA
KOREA CO., LTD.
• MEIDEN
Royal Building No.410,
5 Dangju-Dong, Chongro-ku,
Seoul, Korea
Phone: 2-736-0232~3
Facsimile: 2-736-0234

MALAYSIAELECTRIC• MEIDEN
ENGINEERING SDN. BHD.
G. 03, Ground Floor, Wisma
Academy, 4A, Jalan 19/1,
46300 Petaling Jaya,
Selangor Darul Ehsan, Malaysia
Phone: 3-79554646
Facsimile: 3-79546466

SINGAPORE
ASIA PTE. LTD.
• MEIDEN5, Jalan Pesawat, Jurong Industrial
Estate, Singapore 619363
Phone: 6268-8222
Facsimile: 6264-4292

SINGAPORE PTE. LTD.
• MEIDEN5, Jalan Pesawat, Jurong Industrial
Estate, Singapore 619363
Phone: 6268-8222
Facsimile: 6264-4292

POWER SOLUTIONS• MEIDEN(SINGAPORE) PTE. LTD.
No.14 Penjuru Close
Singapore 608610
Phone: 6377-5387
Facsimile: 6377-5386

THAILANDMEIDENSHA CO., LTD.
• THAI
11th Floor, TST Tower Building,
21 Viphavadi-Rangsit Road,
Soi Chuei Phung, Jomphol, Jatujak,
Bangkok 10900, Thailand
Phone: 2-273-8954~61
Facsimile: 2-273-8966

ELECTRIC• MEIDEN(THAILAND) LTD.

THE UNITED KINGDOMEUROPE LTD.
• MEIDENNYK Complex, Bradbourne Drive,
Tilbrook, Milton Keynes MK7 8BN,
England, U.K.
Phone: 1908-276000
Facsimile: 1908-276010

THE UNITED STATESAMERICA, INC.
• MEIDEN
27000 Meadowbrook Road,
Meadowbrook Corporate Park,
Suite #209, Novi, Michigan 48377,
U.S.A.
Phone: 248-305-9903
Facsimile: 248-305-9904

898 Moo 2, Bangpa-in Industrial
Estate, Udomsorayuth Rd., Klongjig,
Bangpa-in, Ayudhaya 13160,
ThailandPhone: 35-258258~262
Facsimile: 35-221388

Annual Report 2006

37

CONSOLIDATED SUBSIDIARY COMPANIESMEIDEN SHOJI Co., Ltd.

Meiden Kankyo Service Co., Ltd.

Capital ¥300 million

Sales of electric products and components
Mitomi New Building, 20-18,
Ebisu 1-chome, Shibuya-ku,
Tokyo 150-0013 Japan
Phone: 3-5449-3700 Fax: 3-5449-3701

Capital ¥30 million

Maintenance and control service of water
treatment equipment
Meiko Building, 5-5, Osaki 5-chome,
Shinagawa-ku, Tokyo 141-8616 Japan
Phone: 3-3490-0630 Fax: 3-3490-0623❖ MEIDEN SINGAPORE PTE. LTD.
Capital S$10 million

Manufacture and sales of transformers,
switchgears and circuit-breakers andrelated engineering and constructing
service❖ THAI MEIDENSHA CO., LTD.
Kofu Meidensha Electric Mfg. Co., Ltd.

HOKUTO DENKO CORPORATION

Capital ¥200 million

Capital ¥25 million

Capital TB10 million

Engineering and constructing service

Manufacture and sales of electric motors

Manufacture and sales of electric sensors

825 Nakadate, Chuo-shi,
Yamanashi 490-3801 Japan
Phone: 55-274-7054 Fax: 55-274-7996

22-13, Himonya 4-chome, Meguro-ku,
Tokyo 152-0003 Japan
Phone: 3-3716-3793 Fax: 3-3793-8787❖ MEIDEN ELECTRIC (THAILAND) LTD.

Meiden Plant Engineering &Construction Co., Ltd.

MEIDEN SYSCON Co., Ltd.

❖ P.T.MEIDEN ENGINEERINGINDONESIA

Capital ¥130 million

Constructing service

Capital ¥20 million

Manufacture and sales of switchgear andrelaysMeiko Building, 5-5, Osaki 5-chome,
Shinagawa-ku, Tokyo 141-8616 Japan
Phone: 3-5487-6426 Fax: 3-5487-6487

726-1, Osuwa, Numazu-shi,
Shizuoka 410-0873 Japan
Phone: 559-24-4630 Fax: 559-22-4013

MEIDEN CHEMICAL CO., LTD.

Meiden Kiden Kogyo Co., Ltd.

Capital TB70 million

Manufacture and sales of switchgears

Capital US$320 thousand

Engineering and constructing service❖ MEIDEN EUROPE LTD.
Capital £750 thousand

Capital ¥95 million

Insulating varnish and molded instrumenttransformer
515, Kaminakamizo, Higashimakado-aza,
Numazu-shi, Shizuoka 410-0865 Japan
Phone: 55-923-0238 Fax: 55-923-0886

Capital ¥20 million

Machining and repairing service
127, Nishishinmachi,
Oota-shi, Gunma 373-0847 Japan
Phone: 276-20-6371 Fax: 276-32-7999

MEIDEN MEDIAFRONT CORPORATION
Capital ¥40 million

Meiden Kohsan Co., Ltd.
Capital ¥100 million

Sales of products and materials, and agent
service of insurance
Meiko Building, 5-5, Osaki 5-chome,
Shingawa-ku, Tokyo 141-8616 Japan
Phone: 3-3490-3737 Fax: 3-3490-3906

MEIDEN SOFTWARE CORPORATION

Printing and copy service
Maruki Building, 13-7, Nishigotanda
1-chome, Shinagawa-ku,
Tokyo 141-0031 Japan
Phone: 3-3490-4767 Fax: 3-3779-3083

Meiden Sheet Metal Products
Corporation

Capital ¥90 million

Capital ¥90 million

Engineering and programming of software

Manufacture and sales of sheet metal

809, Oka-Isshikitorimachi, Numazu-shi,
Shizuoka 410-0012 Japan
Phone: 559-23-4966 Fax: 559-23-1191

515, Kaminakamizo, Higashimakado-aza,
Numazu-shi, Shizuoka 410-0865 Japan
Phone: 559-29-5541 Fax: 559-29-5566

MEIDEN FOUNDRY INDUSTRIAL Co., Ltd.

MEIDEN HOIST SYSTEM COMPANY, LTD.

Capital ¥50 million

Manufacture and sales of hoists

4, Nyogetsu, Heisaka-cho, Nishio-shi,
Aichi 444-0305 Japan
Phone: 563-59-6181 Fax: 563-59-4132

496-1, Ittangosewari, Nishibiwajima-cho,
Kiyosu-shi, Aichi 452-8602 Japan
Phone: 52-501-3211 Fax: 52-501-3277

MEIDEN SYSTEM ENGINEERING Co., Ltd.

MSA Co., Ltd.

Capital ¥50 million

38

Capital ¥400 million

Casting

Capital ¥400 million

System engineering of plants

Manufacture and sales of surge arresters

Meiko Building, 5-5, Osaki 5-chome,
Shingawa-ku, Tokyo 141-8616 Japan
Phone: 3-5487-6500 Fax: 3-5487-6516

515, Kaminakamizo, Higashimakado-aza,
Numazu-shi, Shizuoka 410-0865 Japan
Phone: 559-29-4300 Fax: 559-29-4399

Annual Report 2006

Sales of electric products and components❖ MEIDEN PACIFIC (CHINA) LTD.
Capital HK$10 million

Sales of electric products andcomponents, and constructing service❖ MEIDEN AMERICA, Inc.
Capital US$300 thousand

Sales of dynamometer products andengineering and consulting services❖ SHANGHAI MEIDENSEMICONDUCTOR Co., Ltd.
Capital ¥280 million

Remanufacturing and engineering
services of semiconductor manufacturing
devicesPlus 7 domestic subsidiaries.
❖ Please see page 36-37 to find contact
information for overseas affiliates.

CORPORATE DATACORPORATE NAMECOMMON STOCKMEIDENSHACORPORATION(Kabushiki Kaisha Meidensha)

Authorized
576,000,000 shares
Issued227,637,704 shares¥17,070 million($161,038 thousand)HEAD OFFICE
Riverside Building, 36-2,
Nihonbashi Hakozakicho,
Chuo-ku, Tokyo 103-8515 JapanSHAREHOLDERS

FOUNDED

The Sumitomo Trust & Banking
Co., Ltd.

1897

19,944TRANSFER AGENTBOARD OF DIRECTORS(AS OF JUNE 23, 2006)PRESIDENTEXECUTIVE VICE PRESIDENTEXECUTIVE VICE PRESIDENT

Keiji Kataoka

Masaaki Kato

Kennosuke Goto

DIRECTOR AND
SENIOR MANAGINGEXECUTIVE OFFICER
Kosuke Sato

DIRECTORSCORPORATE AUDITORS

Tetsuro Kawakami

SENIOR CORPORATE
AUDITORS

Shigeo Matsumoto

Tadashi Sanada

Nobuyuki Watanabe

Masayuki Tsubonoya

Kazuo Hosoya

Hiroshi Sugiyama
Ken Torikai
Noriyasu Nagai

Annual Report 2006

39

2006-8ME 1L