PROFILEEver since its founding in 1897, Meidensha Corporation has been working
on the relentless pursuit of new technology and product developments andwitnessed steady growth. Our product offerings cover a wide area, such as
generators, substation equipment, electronic equipment and informationequipment. Our mission is not only to provide these products but also torecommend the best solutions on the basis of what a customer values best. In
order to realize 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 and product-life support.

CONTENTSFINANCIAL HIGHLIGHTS

3MESSAGE FROM MANAGEMENT

4

TOPICS

6

OPERATING PERFORMANCE HIGHLIGHTS

8OVERSEAS OPERATIONS

10

R & D HIGHLIGHTS11

ENVIRONMENTAL PERFORMANCE

12

FINANCIAL SECTION

13OVERSEAS AFFILIATES36

CORPORATE DATA

39

BOARD OF DIRECTORS

39

FINANCIAL HIGHLIGHTS
Years ended March 31

Millions of yen

Thousands of U.S. dollars

2007

2006

2005

2007

Net Sales¥194,194¥183,747¥185,442$1,645,712

Net Income

2,314

3,252

5,113

19,610Net Income Per Share (yen, U.S. dollars)

10.18

14.12

22.33

0.09

Cash Dividends Paid

1,137

909

682

9,635

223,386

201,274

180,595

1,893,102

6,775

6,561

6,662

—

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 ¥118 = U.S.$1, the approximate exchange rate prevailingon the Tokyo Foreign Exchange Market as of March 31, 2007. See Note 1 to Consolidated Financial Statements.

Net Sales (¥ millions)

Net Income (¥ millions)
10,000250,000

Total Assets (¥ millions)
250,000
223,386

200,000

194,194

200,000

181,560 185,442 183,747

201,274

194,163
180,595

150,000

150,000
5,113
5,000

100,000

100,000
3,252
2,335

2,314

50,000050,000

04

05

06

07

0

04

05

06

07

0

04

05

06

07

Annual Report 20073

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 pursuitof ‘Innovation for New Technologies’ and in Contributing to the
Well-being of the Society at Large.” We aim to do this by drawing
on the engineering resources of over a century of its history andto become an excellent company fit for the Twenty-first Century.
Our basic principles are: (1) to provide the best productexperiences to customers through new and innovative technologiesof 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 businessgrowth as an engineering company. The Meiden Group productportfolio includes a wide spectrum of offerings: generators,
substation equipment, electronic equipment, and information andcommunications products. We not only offer such products, butalso provide optimum customer-driven solutions using suchproducts for the benefit of the customers. Our solutions businessin Japan includes services such as engineering, operation,
maintenance and management of facilities, which contributes tothe enhancement of the asset values of our customers.
During fiscal 2006, the Japanese economy showed solid
continuous growth due to business capital investment and personal
consumption and economic growth against the background of
corporate profitability increase and job situation improvement.
In the Heavy Electrical Industry Market in Japan, the market
suffered a further decline in demand and a lowering of market prices
due to several factors, including a curb in public sector capital
investment. The Company faced a very challenging market situation.
Under these economic circumstances, the Company madevigorous across-the-board efforts to boost sales. Sales for fiscal
2006 totaled 194,193 million yen (consolidated basis); 5.79% up
from 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
and adjustments came to 4,934 million yen (consolidated basis),and net income for the year came to 2,313 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 technologies anddrive application technology from the experiences gained through4

Annual Report 2007individual product sales. By combining these technologies withnext generation technologies, we are now providing solutions for
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 new energy caused by the
recent oil price hikes. We are putting our management resources
into new business and product development. One example isthat we built a new Electric Double Layer Capacitor (EDLC)
factory at Meiden Numazu Works, Numazu City, Shizuoka
Prefecture, in March 2006. We are enhancing the factory to
produce a large volume of EDLC and are working hard to develop
various EDLC applications. Another is our alliance with SiemensPower Generation Corporation (SPGC), a company based in
Orlando, Florida, U.S. We are developing a Solid Oxide Fuel Cell
(SOFC) system using the SPGC SOFC unit for the JapaneseMarket, which could see a market release of the SOFC system ina few years.
In order to meet business demand for our products in overseas
markets, we are increasing our sales and production bases. Anotherexample is the electric motor production plant that we built in
Hangzhou, China, which began production in November 2006, asa measure for reinforcing our motor and drive business. For the
North American auto market, we established a new company in
the Greater Detroit Area, Michigan. This company will engage inthe contract research service for car and component development
and we are aiming for service commencement in January 2008.
To improve productivity through cost reductions and businessprocess streamlining, we intend to promote and strengthen existing
alliances, such as our joint ventures with Hitachi, Ltd., and Fuji
Electric Systems Co., Ltd., and with ABB Ltd. of Switzerland. In
April 2006, as a realignment of our motor business, we establisheda new motor business company jointly with our sister company.
This company is called Kofu Meidensha Electric Mfg. Co., Ltd., acompany registered in Chuo City, Yamanashi Prefecture. Throughthese activities, we are working hard to improve profitability.
To meet these challenges, the Meiden 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 (3) fronts: Technology, Human
Resources and Business Value. The Meiden Group aims to becomea company with an excellent corporate reputation 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 strong businesses and products stronger. We
will develop and promote 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 theoverseas market, and improve overseas production, after-sales
service, and maintenance service offerings, and promote humanresources development for overseas market business operations.
In doing so, we would like to increase revenues from overseas
and make our overseas market business operations a key pillarof 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 toefficiently promote synergy among Meiden Group’s businesses andthereby 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 Groupbusiness, to realize the efficient management of all Meiden Group
companies.
c. Earnings Targets
Fiscal 2008 Consolidated Fiscal 2008 Non-Consolidated
Sales

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 of the Value Up Plan,
the Meiden Group will be able to address to the management
climate changes in a flexible and fast manner and aims to establish
a solid presence in the various markets. We ask every shareholder,as well as our customers and business partners, to give us yourcontinued guidance and support.

Keiji Kataoka, President
Annual Report 2007

5

TOPIC 1

Osaki Area Development: The ThinkPark ProjectThinkPark to open in October 2007.
The Company is realizing a zone development project called“ThinkPark” in the West Exit area of JR Osaki Station in
Shinagawa City, Tokyo. The main building is a 30-story businessand commercial building that has another two stories
underground. The other is a 15-story building that will hold abusiness hotel and fitness club. Both buildings are in the final
stage of construction work and will be completed in latesummer of 2007. The official opening of “ThinkPark” isscheduled for October 2007. “ThinkPark” is a business complex
with due design consideration given to the best technology andthe future needs of our tenants.

ThinkPark Tower, ThinkPark Plaza,and “Osaki Forest”
This development is a joint project by Meidensha Corporationand World Trade Center Building, Inc., a Tokyo-based company.
ThinkPark Tower is a 30-story office building in theprestigious location of the upper Yamanote district in Tokyo,
with advanced zone development made possible under a zoning
permit for large-scale urban development areas. The 1st and2nd floors will comprise ThinkPark Plaza, with shops andrestaurants buzzing with the excitement found in a busy
metropolitan downtown area.

6

Annual Report 2007

Osaki Forest, which is a spacious open zone inside theThinkPark Zone, is a public space where people can gather for casualconversation, social exchanges, relaxation, exercise, and so on.

Hotel and Fitness Club
ThinkPark also has a full-scale business hotel and fitness club.
The hotel is a highly reputed business hotel of a Daiwa Roynet
Hotels chain, which is famous for its comfort and quality.
It will have approximately 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, agym, and a studio, taking up a space of approximately 3,000 m2.
With a wide range of activities to offer, this will be a full-fledged
fitness and relaxation club.

For details, please visit the ThinkPark Web site:
http://www.thinkpark.jp

TOPIC 2

Memorial Events for the110th Anniversary
As an expression of appreciation for the local community, we will hold “Meet the Music Sessions” and“Handicraft Sessions.”
This year marks the 110th year of our Company. As an
expression of special thanks to the local community that supported
our Company, we plan to hold a number of special memorial events.
Beginning with Hosui Elementary School, which has a special
historical relation with the Company, we will hold several “Meet theMusic Sessions” and “Handicraft Sessions” for elementary and juniorhigh schools in Shinagawa City, Tokyo, from April to November 2007,
in close cooperation with the Shinagawa City Board of Education.

Our relationship with Shinagawa City, Tokyo
Osaki, in Shinagawa City, Tokyo, is a place associated with
the Company’s history, from its founding to the present.
The Company was founded by Mr. Shigemune Hosui in 1897.
In 1913, the Company opened its Osaki factory. Until the end of
the 1980s, Osaki served as a production base for generators,
motors, transformers, and our other core products.
The Company subsequently built new plants in Numazu City in
Shizuoka Prefecture, in Ohta City in Gunma Prefecture, and in otherlocations, to keep up with vigorous demand. Osaki’s presence as a
production base was weakened. In 1993, however, the Meiden R&D
Center was completed there, and this autumn, ThinkPark will be born
there as a business complex, incorporating the latest technology andtaking into account the future needs of our tenants. At the same time,
Osaki will once again become the real head office of the Company.

Meiden “Meet the Music Session”
The students will experience live performances byprofessionals, allowing them to learn the joys of music.
We asked the Tokyo Metropolitan Symphony Orchestra toperform.
One of the following music groups will visit the schools: String
Quartet, Brass Quintet, or Woodwind Quintet.

Meiden “Handicraft Sessions”
The main objectives are: to provide the kids with hands-on
experience in making products themselves and allow them toexperience the fun of handicrafts work.
With the cooperation of CoreNet (Co-Operation Program ofRetired Executives Network), which is a non-profit organization,
the children will make a motor-based small vehicle using theScroller handicraft kit.
Aside from Shinagawa City, the Company will hold othermemorial events in other communities with key production units.
These are: Ohta City, in Gunma Prefecture, Numazu City in
Shizuoka Prefecture, Kiyosu City in Aichi Prefecture, and Chuo
City in Yamanashi Prefecture. We plan to organize memorial
events, including concerts, and support local cultural activities
to express our special thanks to the people in each community.

* Hosui Elementary School has a distinguished history. It was established in 1918, financed solely by Mrs. Take Shigemune, the Company’s second president and thewife of the Company’s founder (Mr. Hosui Shigemune). She personally donated the school to Shinagawa City to fulfill the wishes of her husband.

Annual Report 2007

7

OPERATING PERFORMANCE HIGHLIGHTS
Social Infrastructure Systems Business Sector
In the Power, Railways & Private Sector Business Segment, we continued efforts toincrease the sales of Electric Double Layer Capacitor (EDLC) applied products. The current
EDLC production capacity at the factory is 15,000 units per year. As an EDLC-applied
product, we received our first order for our regenerative power storage system in fiscal
year 2006. In the Wind Power Business, we completed a total 25.5 MW wind farm project,
the Hachiryu Wind Farm in Akita Prefecture, and started commercial operation,
supplying power to Tohoku Electric Power Co., Inc. from October 2006.
In the Environmental Engineering Segment, we continued efforts to increase
orders for water treatment facility renovation projects. We also promoted the businessgrowth of operation and maintenance services business for water processing facilities.
In addition to our conventional business of facility management outsourcing services,
we received an order for broad business process outsourcing (“BPO”) service fromthe local government water utilities by forming a joint venture with other partners
for an advanced BPO business.
In the International Business Segment, we continued efforts to enhance theoverseas production units to improve production capacity and service quality. During
fiscal year 2006, we completed a new transformer factory at Meiden Singapore Pte.
Ltd. to produce 100 MVA class transformers, and started commercial operation.

Electric Double Layer Capacitor

Hachiryu Wind Farm

Meiden Singapore

BPO service

Industrial Systems Business Sector
In the Information and Communication Business Segment, we continued efforts
to drive the sales of industrial computer and controller, vacuum capacitors andpulse power generators, etc. which are our key products in this business segment.
During fiscal year 2006, we achieved a growth in orders for these products due tothe steady growth of the semiconductor manufacturing machinery industry.
In the Motor Drive Application Business Segment, we achieved good order
growth of motor drive systems for electric forklifts due to increased interest in its
eco-friendly feature. In order to meet demand, we established a new company called

8

Annual Report 2007

Industrial controller

Kofu Meidensha Electric Mfg. Co., Ltd., registered in Chuo City, Yamanashi Prefecture,in April 2006 by merging with our subsidiary company as a part of our consolidation
program for the motor drive business unit. We also constructed a motor
manufacturing factory in Hangzhou City, China, as Meiden Hangzhou Drive Systems
Co., Ltd. The factory commenced production in November 2006.
In the Dynamometer System Business Segment, we achieved order and revenue
growth due to the active R & D spending of the auto industry.
Vacuum capacitors

Hangzhou factory

Dynamometer system

Engineering System Business Sector
In the Maintenance Service and Facility Management Service Segment, we
continued efforts to drive the growth of the service business to meet the need forenergy savings demand caused by the rising eco-consciousness of our customers.
We reinforced servicing capability to meet the growth of demand for maintenanceservice due to the solid growth of service demand in the Japanese Market and due tothe economic growth of the East Asian Region. We achieved order growth byoutsourcing service of maintenance work; by extending facility product life throughlifecycle engineering; and by diagnostic service of facilities in the environmental
engineering sector, etc. The maintenance and repair service for wind power facilities
became our new key service offering.
In the area of Maintenance Service for semiconductor manufacturing equipment,
we increased the scope of service for servicing items, we continued efforts to develop
the business process outsourcing service for the maintenance work of the total
semiconductor production line of the device manufacturing companies, etc.
We aim to drive the growth of the service business.

Rotary machine insulation diagnostic van

Semiconductor

Other Business Sectors
Other Meiden Group businesses and companies include the marketing companies, which cover a vast array of business areas, the welfare
program service for Meiden Group associates, and business process outsourcing service on accounting work. Orders and revenue remained
steady for all these business sectors.

Annual Report 2007

9

OVERSEAS OPERATIONS
During fiscal year 2006, the global economy achieved
solid economic growth, led by surging Chinese and Indian
economies and the growth of industrial and emergingmarket countries. In the United States, the growth rate
slowed to around the 2% level due to a weakness in the
housing sector and the volatility of oil prices. China’s
economy grew, driven by a growth in exports, at the rate ofmore than 9%.
The East Asian economy, which is Meidensha
Corporation’s major market, posted a growth of around 6%
in fiscal 2006. Singapore in particular showed a strong
performance of around 7%, despite the negative impact of
the rise in world oil prices.
In the US power sector, there was a 4.6% increase in total
net power generation due to an increase in coal-fired plants,
nuclear power and wind power.
In the automotive market in the US, which has a large
impact on our dynamometer systems sales, the industry
showed a sales decline in pickup trucks, sport-utility vehicles
and minivans, which was influenced by a shift in buyer
preference toward smaller, more fuel-efficient vehicles. US
auto sales in fiscal year 2006 totaled 16.3 million vehicles.
The major products ordered in fiscal year 2006 were as
follows:
In the field of substations, we received orders for
substations for Rabigh Refining & Petrochemical Company,
which is a joint venture between Saudi Arabian Oil Co.
(“Saudi Aramco”) and Sumitomo Chemical Co., Ltd., for thedevelopment of an integrated refinery and petrochemicals
complex in Saudi Arabia. We also received orders for mobile
substations for the Middle East.
In the field of electric railroad substations, we received
an order for a traction substation for Dubai Municipality
Headquarters, U.A.E.
In the power generation field, we received an order for a
10 MW biomass power generation plant (using waste
coconut shells as a resource) for the Seguntor Bioenergy
Power Plant Project in Malaysia and for a 10 MW biomass

10

Annual Report 2007

power generation plant (using empty fruit bunches (EFB)
as a resource) for the Kina Biopower Power Plant Project in
Malaysia. We also received orders for diesel generating
systems for the Middle East.
In the Asia-Pacific automotive market (outside Japan),an Asian automaker placed orders for transmission testers.
We also received orders for test systems for a Japanese
automaker’s technical center and its factory in Asia.
The Major products manufactured and shipped during
fiscal year 2006 were as follows:
In the field of electric railroad substations, we shippedand installed traction substations for the Dubai Metro
Project, U.A.E.
In the dynamometer field in North America, we supplied
and installed several test systems for engine transmissions
and engine benches for several Japanese automakers’
factories.
In the Asia-Pacific automotive market (outside Japan),we supplied and installed a transmission tester to Seoul
National University. We also shipped and supplied test
systems for one Japanese and several Asian automakers fortheir technical centers and factories in Asia.
In the field of power generation, we shipped andinstalled a 9.9 MW biomass power generation plant (using
rice husks as a resource) for the Surat Thani Green EnergyCo., Ltd., in Thailand.
Other noteworthy events in our overseas operations
included a celebration of our anniversary year andceremonial parties for Thai Meidensha Co., Ltd. (40thanniversary ceremony in Bangkok in August 2006) and P.T.
Meiden Engineering Indonesia (15th anniversary ceremonyin Jakarta in December 2006.) These events were attended
by representatives from key accounts, partners, theirassociates and Meiden Group Company representatives.
There were new factory opening ceremonies for Meiden
Singapore Pte. Ltd. in September 2006 (for a new 100 MWclass transformer factory) and for Meiden Hangzhou Drive
Systems Co., Ltd. in Hangzhou City, China, in November 2006
(for a new motor manufacturing factory.)

R & D HIGHLIGHTS
Social Infrastructure Systems Business Sector
Energy Business Segment
We are constantly enhancing the technologies used in our high-quality power supply products to meet the needs of our customers.
We have developed an Electric Double Layer Capacitor (EDLC) applied power network stabilizing system and a 10 MW Class large
capacity dynamic voltage compensator. In fiscal year 2006, we made a number of innovations and advances in Microgrid-related
technologies. The Microgrid System can stabilize the power supply in a given Microgrid. This system can effectively utilize the power
generated by several different energy sources. Our innovations include: programs to optimize power source facility planning andoperation modes and to develop the Microgrid control system to realize islanding operation within the Microgrid power network.
We have developed the world’s first 72kV-class vacuum circuit breaker to be free of SF6 gas. SF6 gas is considered a greenhouse gas.

Environmental Engineering Business Segment
Water quality control in water processing is our core technology. On top of that, we added technologies relating to operation,
facility maintenance, design and engineering. Drawing on these engineering resources, we developed a solutions business forthe water utilities segment.
We are constantly developing technologies for membrane-based water treatment systems for water supply and sewage
plants and technologies for advanced processing for removal of nitrogen and phosphorus from sewage water.

Industrial Systems Business Sector
Information and Communications Business Segment
With good sales, we are constantly improving the pulse power generator and vacuum condenser for the semiconductor
manufacturing industry in terms of its performance and reliability.
We are also enhancing our product portfolio: (1) for application software to smoothly operate the semiconductor
manufacturing system and (2) for an industrial controller to be pre-installed in the semiconductor manufacturing system. We
are aiming to drive sales growth.

Motor Drive Application Business Segment
We are focusing innovations on the development of a highly efficient, energy-saving compact permanent magnet synchronous
motor. Combining this motor with the inverter, we are developing variable speed systems for elevator and forklift applications.

Dynamometer Systems Business Segment
We are constantly developing our various dynamometer-based testing systems for the auto industry, for applied technology
development or other application needs. Our efforts at innovation include: development of an engine bench to simulate a reallife exhaust piping layout (whose simulation-based layout evaluation was difficult using conventional technology) and thedevelopment of a drivetrain bench using an engine-simulating motor that can duplicate engine-like performance behavior.

Engineering System Business Sector
We are constantly developing our diagnostic technology so that we can understand and detect the deterioration condition ofelectrical facilities while power is being supplied. Our development is addressing the need to reduce facility management costs forelectrical systems and extend product life. With these innovations, we are enhancing our (product) lifecycle engineering service.

Annual Report 200711

Environmental Performance
ChemicalSubstances

EnergyWater• Electric Power5,250 MWh
• Fuel Oil 2,240 kL• Fuel Gas 2,003 km3• City Water 78 kt• Industrial Water
103 kt• Ground Water
1,288 kt

Greenhouse
Gases• PRTR (Excluding VOC)
171 t
• VOC
457 t

Meiden Group

Discharge into
Public Waters• SF6

795 kgEmissions to
Air• Waste Water
1,235 kt

• CO2

30,440 t-CO2

• VOC

85 t

• BOD

• SF6

617 kg

5,731 kgTransportation• Weight of Product41,012 t• Transportation CO2
1,235 t-CO2

Waste• Emissions

9,719 t• Recycled

9,395 t

PRTR: Pollutant Release and Transfer Register
VOC: Volatile Organic Compounds

Trends in CO2, Specific Consumption

12

Trends in VOC

Trends in Waste and Recycling Rates(t)
50,000

(%)
100

(t)
500

(%)
100

(t)
10,000(%)
100

40,000

80

400

80

8,000

80

30,000

60

300

60

6,000

60

20,000

40

200

40

4,000

40

10,000

20

100

20

2,000

20

0

0

0

0

0

1990
CO2 Emissions

Annual Report 2007

2004 2005 2006 (year)
Specific Consumption

1990
2004 2005 2006 (year)
Discharge Rate
Amount HandledCompared with 2000 (%)
Amount Discharged

2004
2005
Emissions2006 (year)
Recycling Rate0

Financial Section
Consolidated Financial Review

14Five-Year Summary

14

Operational Review

15

Consolidated Balance Sheets

16

Consolidated Statements of Income

18

Consolidated Statements of Shareholders’ Equity/Changes
in Net Assets

19

Consolidated Statements of Cash Flows20

Notes to Consolidated Financial Statements

21

Independent Auditors’ Report

35

CONSOLIDATED FINANCIAL REVIEW
Outline of Profits and Losses

cut expenses however, influenced by declining prices

During this consolidated fiscal year, the Japaneseand other factors, income before tax and minority

economy showed further expansion of corporate

interests declined by 612 million yen over the previous

profits and improvement in the job situation. Against

fiscal year to 4,935 million yen. Net income for the year

this backdrop, capital investment and consumer

declined by 938 million yen to 2,314 million yen.

spending grew, exports also increased, and thecontinuing economic recovery was steady.
On the other hand, the heavy electric industry

Financial Conditions

experienced further decrease in demand and drop in

Total assets at the end of March 2007 amounted toprices because of diminishing public investment and

223,386 million yen, an increase of 22,112 million yen.

related factors. The industry therefore continues to

As a result of increased receivables and inventories,

face an extremely challenging business climate.

current assets stood at 116,229 million yen, an increase

Under these economic circumstances, theof 6,347 million yen. Property, plant and equipment

Company and consolidated subsidiaries have made aamounted to 61,523 million yen, an increase ofsustained sales effort, yielding major increases in the

15,022 million yen. Total current liabilities amounted

Industrial Systems Business Sector. The result was thatto 112,901 million yen, an increase of 8,143 million yen,sales rose 5.7% over the fiscal year to 194,194 million

and net assets stood at 64,135 million yen, an increaseyen.

of 3,718 million yen, compared to last year’s
We made group-wide-effort to reduce costs andshareholders’ equity.

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

2007

2006

Millions of yen
2005¥194,194¥183,747¥185,442¥181,560¥184,853

Net income (loss)

2,314

3,252

5,113

2,335

924

Net income (loss) per share (yen)

10.18

14.12

22.33

10.14

4.58

Cash dividends paid

1,137

909

682

–

–

Depreciation and amortization

4,369

3,872

3,906

4,262

4,921

Total assets

223,386

201,274

180,595

194,163

197,140

Net property, plant and equipment

61,52346,50135,83843,21540,406

Shareholders’ equity per share (yen)272.20265.64232.19209.91

182.36

Net sales

14

Annual Report 2007

2004

2003

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 andmarketing of all types of electrical equipment involvedin power generation, transmission, transforming,
distribution, and other related functions, for powercompanies, government and other public agencies andoffices, railroads, highways, private facilities, and othersuch 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, and so on.

This segment includes business operations related
to product systems used in the manufacturing industry,IT, and other general industry operations. In addition
to providing private industry with power substations,motor vehicle testing systems, and logistics support
systems, we engage in the manufacture and marketingof motors, inverters, and other 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)
05

(Millions of yen)

91,30005

06

98,044

07

95,395

49.1%

06
07

63,72431.1%

50,50360,456Engineering 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)
8.0%

11.8%
05
06
07

15,89820,35922,91105

14,52006

14,84107

15,432

Annual Report 200715

CONSOLIDATED BALANCE SHEETSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (as of March 31, 2007 and 2006)

Millions of yen

Thousands of U.S.dollars (Note1)

2007

2006

2007

¥5,452¥9,981$46,203

34

237

288

Trade notes (Note 3)

6 ,515

5,593

55,212

Trade accounts

65,28458,099553,254

Loans and advances

2,273

3,586

19,263Due from unconsolidated subsidiaries and affiliates

1,584

1,976

13,424

Allowance for doubtful accounts

(955)

(926)

(8,093)Inventories (Note 5)

29,67923,564

251,517

Deferred income taxes (Note 16)

2,852

3,646

24,169Other current assets

3,511

4,126

29,755116,229

109,882

984,992

Land (Notes 6 and 9)

7,989

7,837

67,703

Buildings and structures

43,391

43,021

367,720

Machinery and equipment (Note 7)

53,121

55,698450,178

Construction in progress (Note 9)23,907

12,509202,602

Less: Accumulated depreciation(66,885)(72,564)(566,822)

61,52346,501

521,381

Investment securities (Notes 4 and 9)27,602

26,823233,915

Investments in unconsolidated subsidiaries and affiliates (Note 4)

9,216

9,436

78,102Long-term loans

82

98

695

Deferred income taxes (Note 16)

45

40

381

Other assets

8,831

8,607

74,839Allowance for doubtful accounts

(142)

(113)

(1,203)

45,63444,891

386,729¥223,386¥201,274$1,893,102

AssetsCurrent assets:
Cash and time deposits (Note 17)
Short term securities (Notes 4 and 17)
Receivables:

Total current assets
Property, plant and equipment:

Net property, plant and equipment
Investment and other assets:

Total investment and other assets
Total assets
See accompanying notes.

16

Annual Report 2007

Millions of yen
Liabilities, minority interests and shareholders’ equity/Net assets
Current liabilities:
Short-term borrowings (Note 8)
Commercial paper (Note 8)
Current portion of long-term debt (Note 8)
Payables:Trade notes (Note 3)
Trade accounts
Due to unconsolidated subsidiaries and affiliates
Advances received from customers
Accrued income taxes
Accrued bonuses for employees
Other current liabilities
Total current liabilities
Long-term debt (Notes 8 and 9)
Employees’ severance and retirement benefits (Note 10)
Reserve for retirement allowance for directors and corporate auditors
Deferred income taxes (Note 16)
Other long-term liabilities
Minority interests
Contingent liabilities (Note 12)
Shareholders‘ equity (Note 2):
Common stock
Authorized–557,385,000 shares
Issued and outstanding –227,637,704 shares
Capital surplus
Retained earnings
Net unrealized holding gains on securities
Foreign currency translation adjustment
Less: Treasury stock, at cost
Total shareholders’ equity
Net assets (Notes 2 and 11)
Common stock
Authorized–576,000,000 shares
Issued and outstanding –227,637,704 shares
Capital surplus
Retained earnings
Less:Treasury stock, at cost
Unrealized gains on securities, net of taxes
Unrealized losses on hedging derivatives, net of taxes
Foreign currency translation adjustment
Minority interests
Total net assets
Total liabilities, minority interest and shareholders’ equity/net assets

Thousands of U.S.dollars (Note1)

2007

2006

2007

¥9,81420,0001,519¥15,516
10,0006,293$83,169
169,492
12,873

11,05926,538
5,921
9,976
4,624
4,472
18,978112,901
27,827
15,505
426
1,721
871
—

10,33823,817
6,058
11,556364
4,613
16,203
104,758
13,174
15,058
549
4,766
604
1,948

93,720224,898
50,17884,542
39,18637,898160,832
956,788
235,822
131,398
3,610
14,585
7,382
—

—
—
—
—
—
—
—

17,07013,204
19,743
10,774(342)(32)
60,417

—
—
—
—
—
—
—

17,07013,204
20,681(57)
11,063
(37)
(73)
2,284
64,135¥223,386

—
—
—
—
—
—
—
—
—
¥201,274

144,661
111,898
175,263(483)
93,754(314)(618)
19,356
543,517$1,893,102

Annual Report 2007

17

CONSOLIDATED STATEMENTS OF INCOMEMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2007, 2006 and 2005)

2007

Millions of yen
2006

2005

Thousands of U.S.dollars (Note1)
2007

Net sales (Note 15)¥194,194¥183,747¥185,442$1,645,712

Cost of sales (Notes 14 and 15)

152,731

141,776

142,617

1,294,331

Selling, general and administrative expenses (Notes 14 and 15)

35,23835,47335,014

298,627

6,225

6,498

7,811

52,754

Interest and dividend income

471

382

417

3,992

Interest expense

(606)

(627)

(701)

(5,136)Equity in net income (loss) of affiliated companies

180

(289)

(1,626)

1,525

Gains on sales of marketable securities and investment securities

272

579

5

2,305

Loss on devaluation of securities

(127)

(37)

(72)

(1,076)

Loss on disposal of inventories

(100)

(21)

(1,556)(847)

Loss on disposal of fixed assets

(337)

(152)

(911)

(2,856)

Gain on sales of property,plant and equipment

217

312,080

1,839

Gains on the release from the substitutional portion of government
Welfare Pension Insurance Scheme (Notes 2 and 10)

—

—

825

—

Development working expenses for the Osaki station west exit

(93)

(59)

(2,289)(788)

Impairment loss of fixed assets (Note 6)

—

(250)

—

—

(1,167)(1,704)(2,996)(9,890)

4,935

4,323

10,987

41,822Current

1,325

329

1,165

11,229

Past

3,655

—

—

30,974

Deferred(2,421)

591

4,232

(20,517)

2,559

920

5,397

21,686

Minority interests

62

151

477

526

Net income¥2,314¥3,252¥5,113$19,610

Operating income
Other income (expenses):

OthersIncome before income taxes and minority interests
Income taxes (Note 16):

Yen

U.S.dollars (Note1)

2007

2006

2005

2007

¥10.18¥14.12¥22.33

$0.09

5.00

5.00

4.00

0.04

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

18

Annual Report 2007

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY/CHANGES IN NET ASSETSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2007, 2006 and 2005)
Millions of yen
Number ofshares issued

Commonstock

CapitalsurplusRetainedearnings

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
246,252,704
Net income—
Cash dividends—
Bonuses to directors and corporate auditors—
Decrease in retained earnings due to addition of consolidated subsidiaries—
Adjustments from translation of foreign currency financial statements (Note 2)—
Increase in treasury stock—
Retirement of treasury stock(18,615,000)
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

17,07013,204

19,743—

10,774

(342)

(32)

227,637,704

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

Treasurystock,
at costMillions of yen

Shareholders’ equity at March 31, 2006 aspreviously reported
Reclassification due to adoptionof new accounting standards for presentation of
net assets in the balance sheet at April 1, 2006
Net assets at April 1, 2006
Net income
Cash dividends
Bonuses to directors and corporate auditors
Decrease in retained earnings due to addition of
consolidated subsidiaries
Acquisition of treasury stock
Disposal of treasury stock
Net changes during the year
Balance at March 31, 2007

Treasurystock,
at costUnrealized Unrealized losses Foreign
gains onon hedging
currency
securities, net derivatives, net translationof taxesof taxes
adjustment

Minority
interests

Total

Number ofshares issued

Commonstock

CapitalsurplusRetainedearnings

222,637,704¥17,070¥13,204¥19,743¥(32)¥10,774¥—¥(342)¥—¥60,417

222,637,704

17,07013,204

19,7432,314(1,137)(46)(32)

10,774

—

(342)

1,948
1,948

1,948
62,3652,314(1,137)
(46)

(193)
(26)
1

0
222,637,704

17,07013,204

20,681(57)

289
11,063

(37)
(37)

269
(73)

336
2,284

(193)
(26)
1
857
64,135

Thousands of U.S.dollars (Note1)
Number ofshares issued

Commonstock

CapitalsurplusRetainedearnings

Net assets at April 1, 2006
Net income
Cash dividends
Bonuses to directors and corporate auditors
Decrease in retained earnings due to addition of
consolidated subsidiaries
Acquisition of treasury stock
Disposal of treasury stock
Net changes during the year

222,637,704 $144,661 $111,898 $167,314
19,610(9,635)(390)

Balance at March 31, 2007

222,637,704

Treasurystock,
at cost$(271)

Unrealized Unrealized losses Foreign
gains onon hedging
currency
securities, net derivatives, net translationof taxesof taxes
adjustment$91,305$—$(2,898)

Minority
interests$16,508 $528,517
19,610(9,635)
(390)

2,449

(314)

2,280

2,847

(1,636)
(220)
8
7,263

93,754

(314)

(618)

19,356

543,517(1,636)(220)
8144,661

111,898

175,263

(483)

Total

Annual Report 2007

19

CONSOLIDATED STATEMENTS OF CASH FLOWSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2007, 2006 and 2005)

2007

2006

2005

Thousands of
U.S.dollars (Note1)
2007¥4,935¥4,323¥10,987

41,822Millions 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

4,369

3,872

3,906

37,025

Increase (decrease) in allowances

(200)

625

1,239

(1,695)Interest and dividend income

(471)

(382)

(417)

(3,992)Equity in net loss (income) of affiliated companies

(180)

289

1,626

(1,525)Interest expense

606

627

701

5,136

Gains on sales of marketable securities and investment securities

(272)

(579)

(5)

(2,305)

Gains on sales of property, plant and equipment

(217)

(3)

(12,080)(1,839)Loss on disposal of fixed assets

337

152

911

2,856

Loss on devaluation of securities

124

37

72

1,051

Decrease (increase) in receivables(8,466)

1,277

(138)

(71,746)(49,542)

Decrease (increase) in inventories(5,846)(2,017)

3,613

Increase (decrease) in payables

6,412

104

(515)

54,339Other-net

3,283

(622)

1,995

27,822

4,414

7,703

11,89537,407

Sub-totalInterest and dividend received

473

387

424

4,008

Interest expense paid

(805)

(624)

(694)

(6,822)

Income taxes paid

(453)

(532)

167

(3,839)

3,629

6,934

11,79230,754Purchase of marketable securities and investment securities

(585)

(801)

(653)

(4,958)Proceeds from sales of marketable securities and investment securities

526

754

966

4,458

(20,312)(13,738)(3,691)(172,136)

Net cash provided by operating activities
Investing activities:

Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment

28

72

13,291

237

Proceeds from sales of securities issued by subsidiaries which caused the change of consolidation scope

—

—

(411)

—

Other-net(1,214)(1,612)(2,270)(10,287)(21,557)(15,325)

7,232(182,686)

Decrease in short-term bank loans(5,870)(457)(18,253)(49,746)

Increase in commercial paper

10,00010,000—84,746

Proceeds from long-term debt

16,170

3,000

9,610

137,034

Repayment of long-term debt

(6,358)(4,771)(6,819)(53,881)

Cash dividends paid

(1,126)

(899)

(673)

(9.542)

186

270(1,090)1,575

Net cash provided by (used in) financing activities

13,002

7,143(17,225)

110,186

Effects of exchange rate change on cash and cash equivalents

175

51

(10)

1,483

Net Increase (decrease) in cash and cash equivalents(4,751)(1,197)

1,789(40,263)

Cash and cash equivalents at beginning of year

10,081

11,0449,255

85,433

156

234

—

1,321

¥5,486¥10,081¥11,044$46,491

Net cash provided by (used in) investing activities
Financing activities:

Other-net

Increase in cash and cash equivalents due to addition of consolidated subsidiaries
Cash and cash equivalents at end of year (Note 17)
See accompanying notes.

20

Annual Report 2007

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 the provisions set
forth in the Japanese Securities and Exchange Law and its
related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as toapplication and disclosure requirements of International
Financial Reporting Standards.
The accounts of overseas subsidiaries are based on theiraccounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective
countries of domicile. The accompanying consolidated
financial statements have been restructured and translated
into English (with some expanded descriptions and theinclusion of consolidated statements of shareholders’ equity
for 2006) from the consolidated financial statements of theCompany prepared in accordance with Japanese GAAP and
filed with the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Securities andExchange Law. Some supplementary information includedin the statutory Japanese language consolidated financial
statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial
statements.
The consolidated balance sheet as of March 31, 2007,
which has been prepared in accordance with the new
accounting standard as discussed in Note 2 (b), is presented
with the consolidated balance sheet as of March 31, 2006,
prepared in accordance with the previous presentation rules.
Also, as discussed in Note 2 (c), the consolidated
statement of changes in net assets for the year ended March
31, 2007, has been prepared in accordance with the new
accounting standard. The accompanying consolidated
statement of shareholders’ equity for the year ended March
31, 2006, was voluntarily prepared for the purpose ofinclusion in the consolidated financial statements, althoughsuch statements were not required to be filed with the Local
Finance Bureau.
The translation of the Japanese yen amounts into U.S.
dollars are included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at March
31, 2007, which was ¥118 to U.S. $1. The conveniencetranslations should not be construed as representations that

the Japanese 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 Policiesa)Principles of Consolidation

The accompanying consolidated financial statements
include the accounts of the Company and its 36 consolidated
subsidiaries in 2007 (32 in 2006 and 29 in 2005). All
significant intercompany accounts and transactions havebeen eliminated in consolidation. The Company’s remaining
subsidiaries, whose total assets, sales, net income and retained
earnings are not significant in the aggregate in relation to
the comparable figures in the consolidated financial
statements, have not been consolidated.
In the elimination of investments in subsidiaries, theassets and liabilities of the subsidiaries, including the portion
attributable to minority shareholders, are evaluated using
the fair value when the Company acquired control of therespective subsidiaries.

b)

Accounting Standard for Presentation of
Net Assets in the Balance Sheet

Effective from the year ended March 31, 2007, theCompany and its consolidated subsidiaries adopted the new
accounting standard, “Accounting Standard for Presentationof Net Assets in the Balance Sheet” (Statement No. 5 issued
by the Accounting Standards Board of Japan on December
9, 2005), and the implementation guidance for theaccounting standard for presentation of net assets in thebalance sheet (the Financial Accounting Standard
Implementation Guidance No. 8 issued by the AccountingStandards Board of Japan on December 9, 2005),(collectively referred to as “the New Accounting Standards”).
The consolidated balance sheet as of March 31, 2007
prepared in accordance with the New Accounting Standards,
is comprised of three sections covering assets, liabilities andnet assets sections. The consolidated balance sheet as ofMarch 31, 2006, prepared pursuant to the previous
presentation rules is comprised of four sections covering
assets, liabilities, minority interests and shareholders’ equity.
Under the New Accounting Standards, the following
items are presented differently at March 31, 2007 comparedto March 31, 2006. The net assets section includes unrealized
gains/losses on hedging derivatives, net of taxes. Under the

Annual Report 200721

previous presentation rules, unrealized gains/losses on
hedging derivatives were included in the assets or liabilities
section without considering the related income tax effects.
Minority interest is included in the net assets section atMarch 31, 2007. Under the previous presentation rules,
companies were required to present minority interests
between the non-current liabilities and shareholders’ equity
sections.
The adoption of the New Accounting Standards had
no impact on the consolidated statement of income for theyear ended March 31, 2007. Also, if the New AccountingStandards had not been adopted at March 31, 2007, theshareholders’ equity amounting to 61,888 million ($524,475)
thousand would have been presented.

c)Accounting Standard for Statement of
Changes in Net Assets

Effective from the year ended March 31, 2007, theCompany and its consolidated subsidiaries adopted the new
accounting standard, “Accounting Standard for Statementof Changes in Net Assets” (Statement No. 6 issued by the
Accounting Standards Board of Japan on December 27,2005), and the implementation guidance for the accounting
standard for statement of changes in net assets (the Financial
Accounting Standard Implementation Guidance No. 9 issued
by the Accounting Standards Board of Japan on December
27, 2005), (collectively referred to as “the Additional New
Accounting Standards”).
The Company prepared the accompany ing
consolidated statement of changes in net assets for the year
ended March 31, 2007, in accordance with the Additional
New Accounting Standards. The accompanying consolidated
statement of shareholders’ equity for the year ended March
31, 2006, which was voluntarily prepared for inclusion in
the consolidated financial statements, has not been adapted
to the new presentation rules of 2007.

d) Equity Method
Investments in affiliated companies (all 20% to 50%
owned and certain others 15% to 20% owned) are accounted
for by the equity method in the years ended March 31, 2007,
2006 and 2005.
Investments in five affiliated companies are accounted
for by the equity method in 2007, 2006 and 2005. Investments
in all unconsolidated subsidiaries and other affiliatedcompanies, that would not have material effect on the
consolidated financial statements, are stated at cost.

e)Securities

Securities are classified based on the intent of holdingas (a) securities held for trading purposes (hereafter, “trading
22

Annual Report 2007

securities”), (b) debt securities intended to be held tomaturity (hereafter, “held-to-maturity debt securities”), (c)equity securities issued by non-consolidated subsidiaries andaffiliated companies, or (d) all other securities that are notclassified in any of the above categories (hereafter, “availablefor-sale securities”).
The Company and its consolidated subsidiaries do nothave trading securities and held-to-maturity debt securities.
Equity securities issued by subsidiaries and affiliatedcompanies which are not consolidated or accounted for using
the equity method are stated at the moving-average cost.
Available-for-sale securities with no available fair marker
values are stated at the moving-average cost.
If the market value of equity securities issued byunconsolidated subsidiaries and affiliated companies andavailable-for-sale securities declines significantly, suchsecurities are stated at fair market value and the difference
between fair market value and the carrying amount isrecognized as loss in the period of the decline unless thedeclines are considered temporary. If the fair market valueof equity securities issued by unconsolidated subsidiaries
and affiliated companies not accounted for on the equity
method is not readily available, such securities should be
written down to net asset value with a corresponding charge
in the statement of income in the event net asset value
declines significantly unless the decline is considered as
recoverable.
Available-for-sale securities with available fair market
values are stated at fair market value. Unrealized gains andunrealized losses on these securities are reported, net of
applicable income taxes, as a separate component of net
assets. Realized gains and losses on sale of such securities
are computed using the moving-average cost.

f)Derivatives and Hedge Accounting

Derivative financial instruments are stated at fair value,
and the Company and its consolidated subsidiaries recognizechanges in the fair value as gains or losses unless derivative
financial instruments are used for hedging purposes.
If derivative financial instruments are used as hedges
and meet certain hedging criteria, the Company and its
consolidated subsidiaries defer recognition of gains or losses
resulting from changes in fair value of derivative financial
instruments until the corresponding losses or gains on thehedged items are recognized.
However, in cases where forward foreign exchange
contracts are used as hedges and meet certain hedging
criteria, forward foreign exchange contracts and hedged
items are accounted for in the following manner:

1.

If a forward foreign exchange contract is executed tohedge an existing foreign currency receivable orpayable,(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payabletranslated using the spot rate at the inception date of
the contract and the book value of the receivable orpayable is recognized in the statement of income in
the period which includes the inception date, and(b) the discount or premium on the contract (that is, thedifference between the Japanese yen amount of thecontract translated using the contracted forward rate
and that translated using the spot rate at the inception
date of the contract) is recognized over the term of
the contract.
2.
If a forward foreign exchange contract is executed tohedge a future transaction denominated in a foreign
currency, the future transaction will be recorded using
the contracted forward rate, and no gains or losses on
the forward foreign exchange contract are recognized.
Also, if interest rate swap contracts are used as hedge
and meet certain hedging criteria, the net amount to be paidor received under the interest rate swap contract is added toor deducted from the interest on the assets or liabilities forwhich the swap contract is executed.

g)

Inventories

Inventories are stated at cost, which is mainly
determined by the average method as to raw materials andsupplies and the specific identification method as to finishedproducts, semi-finished products and work in process.

h ) Property, Plant and Equipment andDepreciation
Depreciation is mainly computed using the decliningbalance method over estimated useful lives except forbuildings acquired after March 31, 1998, which are
depreciated based on the straight-line method over estimateduseful lives.

i)

Impairment of Fixed Assets

Effective April 1 2005, the Company and its
consolidated subsidiaries adopted the new accounting
standard for impairment of fixed assets (“Opinion
Concerning Establishment of Accounting Standard for
Impairment of Fixed Assets,” issued by the BusinessAccounting Deliberation Council on August 9, 2002) and“Implementation Guidance for the Accounting Standard for
Impairment of Fixed Assets” (the Financial AccountingStandard Implementation Guidance No. 6, issued by the

Accounting Standards Board of Japan on October 31, 2003).
As a result of adopting the new accounting standard,
income before income taxes and minority interests decreasedby ¥250 million for the year ended March 31, 2006.
Additionally, impairment losses comprising the
cumulative total have been deducted directly from the bookvalue of respective assets in accordance with revised
regulations.

j)Allowance for Doubtful Accounts

The Company and its consolidated subsidiaries
provide the allowance for doubtful accounts in an amountsufficient to cover possible losses on collection by estimating
individually uncollectible amounts and applying apercentage based on collection experience to the remaining
accounts.

k)

Employees’ Severance and Retirement
Benefits

The Company and its consolidated subsidiaries
provide two types of severance and retirement benefit plans,
unfunded lump-sum payment plans and funded noncontributory pension plans, under which all eligible
employees are entitled to benefits based on the level of wages
and salaries at the time of retirement or termination, lengthof service and certain other factors.
The liabilities and expenses for severance andretirement benefits are determined based on the amounts
actuarially calculated using certain assumptions.
The Company and its consolidated subsidiaries
provided allowance for employees’ severance and retirement
benefits based on the estimated amounts of projected benefit
obligation and the fair value of the plan assets at the balance
sheet date.
Prior service costs are recognized in expenses in equalamounts over the average of the estimated remaining service
lives of the employees, and actuarial gains and losses arerecognized in income or expenses using the straight-line
method over the average of the estimated remaining service
lives commencing with the following period.
Employees of Japanese companies are compulsorily
included in the Welfare Pension Insurance Scheme operated
by the government. Employers are legally required to deduct
employees’ welfare pension insurance contributions fromtheir payroll and to pay them to the government together
with employers’ own contributions. For companies that haveestablished their own Employees’ Pension Fund which meets
certain legal requirements, it is possible to transfer a part oftheir welfare pension insurance contributions (referred toas the “substitutional portion” of the government’s Welfare
Annual Report 200723

Pension Insurance Scheme) to their own Employees’ Pension
Fund under the government’s permission and supervision.
Based on the newly enacted Defined Benefit Corporate
Pension Law, the Company and some domestic consolidated
subsidiaries decided to restructure their Employees’ Pension
Fund and were permitted by the Minister of Health, Laborand Welfare on October 29, 2003 to be released from their
future obligation for payments for the substitutional portionof the Welfare Pension Insurance Scheme. Pension assets forthe substitutional portion maintained by the Employees’
Pension Fund are to be transferred back to the government’s
scheme.
The Company and some domestic consolidated
subsidiaries applied the transitional provisions as prescribedin paragraph 47-2 of the JICPA Accounting Committee
Report No. 13, “Practical Guideline for Accounting ofRetirement Benefits (Interim Report)”, and the effect oftransferring the substitutional portion was recognized on
the date permission was received from the Ministry of
Health, Labor and Welfare. As a result, in the year ended
March 31, 2004, the Company and some consolidated
domestic subsidiaries recorded gains on the release from thesubstitutional portion of the government’s Welfare Pension
Insurance Scheme amounting to ¥225 million, which was
calculated based on the amount of the substitutional portionof the projected benefit obligations as of the permission date,
the related pension assets determined pursuant to thegovernment formula, and the related unrecognized items.
On October 1, 2004, the Company and some domestic
consolidated subsidiaries received approval from the
Minister of Health, Labor and Welfare with respect to transferof the substitutional portion of the benefit obligation andrelated 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, theCompany 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.

l)Income Tax

The Company and its consolidated subsidiaries
recognize tax effects of temporary differences between the
carrying amounts of assets and liabilities for tax and financial
reporting. The provision for income taxes is computed basedon the pretax income included in the consolidated statementof income. The asset and liability approach is used torecognize expected future tax consequences of temporary
differences between the carrying amounts of assets and24

Annual Report 2007

liabilities for financial reporting purposes and the amounts
used for income tax purposes.
The Company and some subsidiaries adopted
consolidated tax return system.

m) Interest Cost on Borrowing Included in
Acquisition Cost of Fixed Assets
The company capitalizes interest cost on borrowing
before the operation of the fixed asset as part of the cost of
construction in progress on the Osaki Station West Exit Area
Project. The capitalized interest cost recorded as a part ofconstruction in progress for the year ended March 31, 2007,
amounted to 242 million yen.

n) Amounts Per Share of Common Stock
The computation of net income per share is based on
the weighted average number of shares of common stock
outstanding during the year.
For the years ended March 31, 2007, 2006 and 2005,
diluted net income per share was not shown since theCompany had no securities with dilutive effect.
Cash dividends per share presented in the consolidated
statements of income represent actual amounts applicableto the respective years.

o)Statements of Cash Flows

In preparing the consolidated statements of cash flows,
cash on hand, readily-available deposits and short-term
highly liquid investments with maturities that do not exceed
three months at the time of purchase, are considered to be
cash and cash equivalents.

p) Translation of Foreign Currency Accounts
and Financial Statements
Receivables and payables denominated in foreign
currencies are translated into Japanese yen at the year-end
rates.
Financial statements of consolidated overseas
subsidiaries are translated into Japanese yen at the year-end
rate, except that net asset accounts are translated at historicalrates and statement of income items resulting fromtransactions with the Company at the rates used by theCompany.
Foreign currency translation adjustments resulting
from translation of foreign currency financial statements
were presented separately in the foreign currency translation
adjustment and minority interests in the consolidatedbalance sheets.

3. Trade Notes Receivable and Payable Matured on March 31, Which Is a Bank
Holiday
The year-end date of March 31, 2007, was a bank holiday. The amount of unsettled trade notes receivable and payablethat matured on March 31, 2007, in the financial statement are as follows;
Millions of yen

Trade notes receivable
Trade notes payable

2007

2006

Thousands of U.S. dollars
2007

¥461
39

¥—
—

$3,907331

4. Securities
A. The following table summarizes acquisition costs and book values of securities with fair value as of March 31, 2007 and 2006.

2007
Securities with book value (fair value) exceeding acquisition cost:
Equity securities
Securities with book value (fair value) not exceeding acquisition cost:
Equity securities
OthersAcquisition cost

Millions of yen
Book value

Difference¥8,193¥8,193¥26,519¥26,519¥18,325¥18,325

¥306
74
¥380

¥272
55
¥327

¥(35)
(18)
¥(53)

Millions of yen

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

Book value

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

¥15
76
¥91

¥14
75
¥89

¥(1)
(1)
¥(2)

Thousands of U.S. dollars

2007
Securities with book value (fair value) exceeding acquisition cost:
Equity securities
Securities with book value (fair value) not exceeding acquisition cost:
Equity securities
OthersAcquisition cost

Book value

Difference$69,432$69,432$224,737$224,737$155,297$155,297$2,593627$3,220$2,305466$2,771$(297)(152)$(449)

B. The following table summarizes book values of securities with no fair value as of March 31, 2007 and 2006.
(a) Available-for-sale securities;
Book value
Millions of yen
2007
2006

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

¥34
757
—
¥791

¥237
610
—
¥847

Thousands of U.S. dollars
2007

$288
6,415
—
$6,703

Annual Report 200725

(b) Equity securities issued by subsidiaries and affiliated companies;
Book value
Millions of yen
2007
2006

Investments in unconsolidated subsidiaries
Investments in affiliated companies
Total

¥344
8,872
¥9,216¥751
8,685¥9,436

Thousands of U.S. dollars
2007$2,91575,187$78,102

C. Maturities of available-for-sale securities with maturities as of March 31, 2007 and 2006.
Millions of yen

Year ended
March 31, 2007

Within 1 year

Over 1 year but
within 5 years

Over 5 years but
within 10 years

Over 10 years

Others

¥34

—

—

—

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

—

—

—

Millions of yen

Thousands of U.S. dollars

Year ended
March 31, 2007

Within 1 year

Over 1 year but
within 5 years

Over 5 years but
within 10 years

Over 10 years

Others

$288

—

—

—

D. Total sales amounts of available-for-sale securities sold, gains and losses, in the years ended March 31, 2007, 2006 and2005 are follows:
2007

Millions of yen
2006

2005

Thousands of U.S. dollars
2007

¥311
272
—

¥754
579
—

¥534
9
0

$2,636
2,305
—

2007

2006

Thousands of U.S. dollars
2007

Finished products¥2,897¥1,918$24,551

Semi-finished products

3,682

3,095

31,203Work-in-process

21,156

17,248179,288

Materials and supplies

1,944

1,303

16,475¥29,679¥23,564$251,517

Sales amount
Gains
Losses5. Inventories
Inventories as of March 31, 2007 and 2006 were as follows.
Millions of yen

Total

6. Impairment of Fixed Assets
As discussed in Note 2 i, the Company and its consolidated subsidiaries adopted the accounting standard for impairmentof fixed assets. Impairment loss of fixed assets for the year ended March 31, 2006 consisted of the following.

26

Location

Use

Type

Millions of yen

Numazu city, Shizuoka Prefecture

Business asset

Land

¥250

Annual Report 2007

The Company and its consolidated subsidiaries have grouped their fixed assets principally based on their divisions orbusiness 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.

7. Subsidies received from the Japanese Government
The Company received a portion of the acquisition costs of certain tangible fixed assets from the Japanese Government.
The aggregated amount of the subsidies deducted from the acquisition costs of the tangible fixed assets as of March 31,
2007, was ¥1,235 million ($10,446 thousand).

8. 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 1.6% as ofMarch 31, 2007 and 0.8% as of March 31, 2006, respectively.
Long-term debt and commercial paper as of March 31, 2007 and 2006 consisted of the following.
Millions of yen

Thousands of U.S. dollars

2007

2006

2007

0.4% to 6.0% loans from banks and insurance companies¥29,346¥19,467$248,695

Less: Current portion(1,519)(6,293)(12,873)

Total¥27,827¥13,174$235,822

Commercial paper, bearing interest rates of 0.6%

¥20,000¥10,000$169,492

The annual maturities of long-term debts as of March 31, 2007 were as follows.
Year ended March 31

Millions of yen

Thousands of U.S. dollars

2008¥1,519$12,873

2009

2,453

20,788

2010

6,284

53,254

2011

4,463

37,822

2012

2,940

24,9152013 and thereafter

11,687

99,043

Commitment Line Agreement
The Company renewed an agreement with a syndicate of 16 Japanese banks to set up a commitment line by multiple
finance institutions for Meidensha Corporation in Japan.
The unexecuted balance of lending commitments at the company as of March 31, 2007 and 2006 were as follows:
Millions of yen

Total lending commitments:
Less amounts currently executed:
Unexecuted balance

2007

2006

Thousands of U.S. dollars
2007¥30,000¥25,000$254,237

8,100

11,25068,644¥21,900¥13,750$185,593

Annual Report 200727

9. Pledged Assets
The following assets were pledged as collateral as of March 31, 2007 and 2006.

2007

Millions of yen
2006

Thousands of U.S. dollars
2007¥1,479¥1,479$12,534

32

31

271

Construction in progress

19,0298,121

161,263

Total¥20,540¥9,631$174,068

2007

2006

Thousands of U.S. dollars
2007¥14,000¥8,400$118,644

Land
Investment securities

Obligation with collateral pledged as of March 31, 2007 and 2006 was as follows.
Millions of yen

Long-term debt

Investment securities of ¥2 million ($17 thousand) were pledged as collateral for borrowing from financial institutions
by an affiliate.
An affiliate engaged in the wind farm business has a project finance loan that is secured by pledged business assets
amounting to ¥2,280 million ($19,322 thousand).
Total business assets of this affiliate are amounting to ¥3,390 million ($28,729 thousand).

10. Employees’ Severance and Pension Benefits
The Company and its consolidated subsidiaries adopted the accounting standard for employees’ severance andretirement 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 consolidated balance sheets
as of March 31, 2007 and 2006 consist of the following:
Millions of yen

Projected benefit obligation
Unrecognized prior service costs
Unrecognized actuarial differences
Less fair value of pension assets
Less unrecognized net transition obligation
Liability for severance and retirement benefits

Thousands of U.S. dollars

2007

2006

2007

¥51,681
2,074(1,896)(22,779)(13,575)¥15,505¥50,311
3,743(2,831)(20,892)(15,273)¥15,058$437,974
17,576(16,068)(193,042)(115,042)(131,398 )1. On October 1, 2004, the Company and some domestic consolidated subsidiaries received approval from the Ministerof Health, Labor and Welfare with respect to transfer of the substitutional portion of the benefit obligation andrelated pension plan assets funded in previous years, and on March 16, 2005, transferred the related portion of theliability 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 estimatedamount of the transfer and the actual balance transferred.

28

Annual Report 2007

2. The Company introduced a new performance-based retirement benefit plan, and revised its retirement allowancerules on October 1, 2005.
As a result of this revision, the projected benefit obligation decreased by ¥2,114 million and prior service costs haveoccurred in the same amount.
3. The prior service costs have been incurred due to the change in the MEIDENSHA employee’s pension fundagreement in the year ended March 31, 2004.
Included in the consolidated statements of income for the years ended March 31, 2007, 2006 and 2005 are severance
and retirement benefit expenses comprising the following:

Service costs - benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of prior service costs
Amortization of net transition obligation
Amortization of actuarial differences
Employee’s contribution
Severance and retirement benefit expenses

2007

Millions of yen
2006

2005

Thousands of U.S. dollars
2007¥2,080
1,226
(495)
(405)
1,698
290
—
¥4,394¥2,266
1,174
(239)
(460)
1,698
395
—
¥4,834¥2,422
1,187
(181)
(354)
1,698
373
—
¥5,145$17,627
10,390(4,195)(3,432)
14,3902,457—$37,237

The discount rate and the rate of expected return on plan assets used by the Company and its consolidated subsidiaries
are 2.7% and 3.0% for 2007, 2.7% and 2.0% for 2006 and 2005, respectively.
The estimated amount of all retirement benefits to be paid at the future retirement date is allocated equally to eachservice year using the estimated number of total service years. Prior service costs are recognized as an expense in equalamounts 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 2007, 2006 and 2005, respectively.

11. Net Assets
As described in Note 2 (b), net assets comprise four subsections, which are the owners’ equity, accumulated gains(losses) from valuation and translation adjustments, and minority interests.
The Japanese Corporate Law (“the Law”) became effective on May 1, 2006, replacing the Japanese Commercial Code(“the Code”). The Law is generally applicable to events and transactions occurring after April 30, 2006 and for fiscal years
ending after that date.
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half ofthe price of the new shares as additional paid-in capital, which is included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of
the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in-capital and legal earnings
reserve must be set aside as additional paid-in-capital or legal earnings reserve. Legal earnings reserve is included in retained
earnings in the accompanying consolidated balance sheets.
Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate amount ofcash dividends and other cash appropriations as legal earnings reserve until the total of legal earnings reserve and additional
paid-in capital equaled 25% of common stock.
Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit bya resolution of the shareholders’ meeting or could be capitalized by a resolution of the Board of Directors. Under the Law,both of these appropriations generally require a resolution of the shareholders’ meeting.

Annual Report 2007

29

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Code, however,on condition that the total amount of legal earnings reserve and additional paid-in capital remained equal to or exceeded
25% of common stock, they were available for distribution by resolution of the shareholder’s meeting. Under the Law, alladditional paid-in-capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated
financial statements of the Company in accordance with Japanese laws and regulations.
At the annual shareholders’ meeting held on June 28, 2007, the shareholders approved cash dividends amounting to
1,136 million ($9,627 thousand). Such appropriations have not been accrued in the consolidated financial statements as ofMarch 31, 2007. Such appropriations are recognized in the period in which they are approved by the shareholders.

12. Contingent Liabilities
Contingent liabilities as of March 31, 2007 and 2006, were as follows.

2007

Millions of yen
2006

Thousands of U.S. dollars
2007

Repurchase of trade notes receivables discounted and endorsed

¥767

¥376

$6,500

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

363

551

3,076

13. 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, 2007 and 2006, are summarized as follows.
Millions of yen

Thousands of U.S. dollars

2007

2006

2007

Machinery and equipment

¥161

¥186

$1,364

Others

945

1,242

8,009

(772)

(953)

(6,542)

¥334

¥475

$2,831

Assumed acquisition cost

Accumulated depreciation(ii) Future minimum lease payments, inclusive of interest, as of March 31, 2007 totaled ¥334 million($2,831 thousand), including ¥159 million ($1.347 thousand) due within one year.
(iii) Lease payments, which are equal to assumed depreciation charges for the years ended March 31, 2007,
2006 and 2005, were ¥192 million ($1,627 thousand), ¥294 million and ¥523 million, respectively.
(iv) Assumed depreciation charges are computed using the straight-line method over lease terms assuming noresidual value.
(2)

Lease contracts receivable under non-cancelable operating leases as lessor as of March 31, 2007 totaled ¥119 million($1,008 thousand), including ¥68 million ($576 thousand) due within one year.

30

Annual Report 2007

14. Research and Development Expenses
Research and development expenses are charged to income as incurred. The amounts charged to income for the years
ended March 31, 2007, 2006 and 2005 were ¥6,041 million ($51,195 thousand), ¥5,494 million, and ¥6,186 million, respectively.

15. 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 the businessenvironment, and the method of identifying business segments was changed as follows in order to reflect actual businesspractices 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, 2007, 2006 and 2005 are as follows:
Millions of yen
Eliminations or
Corporate

Consolidated

Social Infrastructure
Systems

Industrial
Systems

Engineering

OthersTotal¥95,395¥60,456¥22,911¥15,432¥194,194¥—¥194,194

5,126

6,497

394

9,372

21,389(21,389)—

100,52166,95323,30524,804

215,583(21,389)

194,194

Operating expenses

97,41465,54321,51024,044

208,511(20,542)

187,969

Operating income (loss)¥3,107¥1,410¥1,795¥760¥7,072¥(847)¥6,225

Identifiable assets¥75,996¥51,107¥18,288¥31,928¥177,319¥46,067¥223,386

Depreciation and amortization

1,683

754

317

142

2,896

1,473

4,369

Capital expenditures

2,795

812

294

13,66917,5703,944

21,514

Eliminations or
Corporate

Consolidated

Year ended March 31, 2007
Net sales:
Outside customers
Inter-segment
Total

Millions of yen
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 200731

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

Thousands of U.S. dollars
Eliminations or
Corporate

Consolidated$1,645,712$—$1,645,712

79,424

181,263(181,263)—

197,500

210,204

1,826 ,975

(181,263)

1,645,712

555,449

182,288

203,764

1,767,043(174,085)

1,592,958$26,331$11,949$15,212$6,440$59,932$(7,178)$52,754$644,034$433,110$154,983$270,576$1,502,703$390,398$1,893,102

Depreciation and amortization

14,263

6,390

2,686

1,203

24,542

12,48337,025

Capital expenditures

23,686

6,881

2,492

115,839

148,898

33,424

182,322Social Infrastructure
Systems

Industrial
Systems

Engineering

OthersTotal$808,432$512,339$194,161$130,780

43,44155,0593,339

851,873

567,398

Operating expenses

825,542

Operating income (loss)
Identifiable assets

Year ended March 31, 2007
Net sales:
Outside customers
Inter-segment
Total

Geographic area:
Information by geographic area is not disclosed due to the Company and its consolidated subsidiaries substantially inJapan, which represents more than 90% of consolidated net sales and identifiable assets, respectively.
Overseas sales:
Overseas sales information for the year ended March 31, 2007 is as follows: the information for 2006 is not disclosed
due to overseas sales being less than 10% of consolidated net sales.
Millions of yen

Year ended March 31, 2007

Asia

Other Areas

Total¥21,146¥3,628¥24,774

Consolidated net sales——¥194,194

Percentage of consolidated net sales

10.9

1.9

12.8

Overseas sales

32

Annual Report 2007

Thousands of U.S. dollars

Year ended March 31, 2007

Asia

Other Areas

Total$179,203$30,746$209,949

Consolidated net sales——$1,645,712

Percentage of consolidated net sales

10.9

1.9

12.8

Overseas sales

16. Income Taxes
The Company and its consolidated subsidiaries are subject to a number of taxes based on income, which in aggregate,
resulted in normal statutory tax rates of approximately 39.69% for the years ended March 31, 2007, 2006 and 2005, 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, 2007, 2006 and 2005.
2007

2006

2005

39.69%

39.69%

39.69%

Permanent difference (Social expenses, etc.)

5.99(3.68)(7.68)Per capital inhabitant tax

2.39

2.67

1.01

Net changes in valuation allowance

1.52(18.46)

7.86

Equity in loss (income) of affiliated companies(1.44)

2.65

6.31

Tax deduction(7.41)——

Additional taxes

7.58

—

—

Statutory tax rates variance of overseas subsidiaries

1.93

—

—

Other-net

1.61(1.60)

1.93

51.86%

21.27%

49.12%

Statutory tax rate

Effective tax rateSignificant components of deferred tax assets and liabilities of the Company and its consolidated subsidiaries as ofMarch 31, 2007 and 2006 are as follows.
2007

Millions of yen
2006

Thousands of U.S. dollars
2007

Net operating loss carry forwards

¥150

¥438

$1,271

Allowance for retirement benefits

5,654

5,471

47,915

Bonuses

1,783

1,829

15,110

Other

3,012

3,730

25,526

10,59911,46889,822(1,033)(1,107)(8,754)

9,566

10,361

81,068Deferred tax assets:

Gross deferred tax assets
Less: Valuation allowance

Deferred tax liabilities:
—

3,215

—

Unrealized holding gains on securities

Deferred gain on sales of property for tax purpose

7,261

7,094

61,534

Deferred gain from division of corporation

1,131

1,131

9,585

—

1

—

Gross deferred tax liabilities

8,392

11,441

71,119Net deferred tax assets¥1,174¥(1,080)$9,949Other

Annual Report 200733

17. 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, 2007 and 2006 are as follows:
Millions of yen

Cash and time deposits

2007

2006

Thousands of U.S. dollars
2007¥5,452¥9,981$46,203

34

100

288

¥5,486¥10,081$46,491

Short-term securities
Cash and cash equivalents

18. Related Party Transactions
Significant transactions with related parties for the years ended March 31, 2007, 2006 and 2005 are as follows:
Millions of yen
Purchase of finishedproducts

Material supply, etc.

Accounts payable

Secured income
receivable

Japan AE Power Systems Corporation¥7,044¥—¥2,525¥—

Japan Motor & Generator Co., Ltd.

6,372

—

2,320

—

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$59,695$—$21,398$—

Japan Motor & Generator Co., Ltd.

54,000—19,661—

Year ended March 31, 2007

Millions of yen

Year ended March 31, 2006

Millions of yen

Year ended March 31, 2005

Thousands of U.S. dollars

Year ended March 31, 200734

Annual Report 2007

Independent Auditors’ Report
To the Board of Directors of MEIDENSHA CORPORATION:
We have audited the accompanying consolidated balance sheets of MEIDENSHA CORPORATION and consolidated
subsidiaries as of March 31, 2007 and 2006, the related consolidated statements of income for the three years in the period
ended March 31, 2007, the consolidated statement of changes in net assets for the year ended March 31, 2007, the consolidated
statement of shareholders’ equity for the years ended March 31, 2006, and the consolidated statements of cash flows for thethree years in the period ended March 31, 2007 and 2006 expressed in Japanese 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 requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial 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 and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of MEIDENSHA CORPORATION and subsidiaries as of March 31, 2007 and 2006, and theconsolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2007,
in conformity with accounting principles generally accepted in Japan.
Without qualifying our opinion, we draw attention to the following.
As discussed in Note 2 to the consolidated financial statements, effective April 1, 2005, MEIDENSHA CORPORATION
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, 2007 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 to the consolidated financial
statements.

Tokyo, Japan
June 28, 2007

Annual Report 2007

35

OVERSEAS AFFILIATES (AS OF JULY, 2007)

CHINA
MEIDEN• DONGGUAN
ELECTRICAL ENGINEERING
CO., LTD.
Yan Wu Industrial District,
Wan Jiang Country, Dongguan,
Guangdong P.C. 523049 P.R.China
Phone: 86-769-22285210
Facsimile: 86-769-22285250•

SHANGHAI MEIDENSEMICONDUCTOR CO., LTD.
53-1A, No.311, Fu Te Nan Lu,
Wai Gao Qiao Free Trade Zone,
Shanghai P.C. 200137, P.R.China
Phone: 86-21-50483681
Facsimile: 86-21-50483035

HANGZHOU• MEIDEN
DRIVE SYSTEMS CO., LTD.
No.168, Hongxing Road, Qiaonan
District, Xiaoshan Economic &Technological Development Zone,
Hangzhou, Zhejiang, P.C. 311231
P.R.Chaina
Phone: 86-571-8369-6808
Facsimile: 86-571-8369-6818

36

Annual Report 2007

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: 86-371-67848800
Facsimile: 86-371-67848797

SHANGHAI CO., LTD.
• MEIDEN
15D, Hengji Plaza, No.99
Huaihai-Donglu, Huangpu-Qu,
Shanghai, P.C. 200021, P.R.China
Phone: 86-21-63860358
Facsimile: 86-21-63860058

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: 852-2503-2468
Facsimile: 852-2887-8046

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: 62-21-520-0612
Facsimile: 62-21-520-0240

KOREA
KOREA CO., LTD.
• MEIDEN
Royal Building No.410,
5 Dangju-Dong, Chongro-ku,
Seoul, Korea
Phone: 82-2-736-0232~3
Facsimile: 82-2-736-0234

MALAYSIA
ELECTRIC• MEIDEN
ENGINEERING SDN. BHD.
G. 03, Ground Floor,
Wisma Academy, 4A, Jalan 19/1,
46300 Petaling Jaya,
Selangor Darul Ehsan, Malaysia
Phone: 60-3-79554646
Facsimile: 60-3-79546466

SINGAPOREASIA PTE. LTD.
• MEIDEN5, Jalan Pesawat, Jurong Industrial
Estate, Singapore 619363
Phone: 65-6268-8222
Facsimile: 65-6264-4292

SINGAPORE PTE. LTD.
• MEIDEN5, Jalan Pesawat, Jurong Industrial
Estate, Singapore 619363
Phone: 65-6268-8222
Facsimile: 65-6264-4292

POWER SOLUTIONS• MEIDEN(SINGAPORE) PTE. LTD.
14 Penjuru Close
Singapore 608610
Phone: 65-6377-5387
Facsimile: 65-6377-5386

THAILANDMEIDENSHA CO., LTD.
• THAI
15th Floor, Rasa Tower II,
555 Phaholyothin Road, Chatuchak,Chatuchak, Bangkok
10900,Thailand
Phone: 66-2792-4200
Facsimile: 66-2792-4299

ELECTRIC• MEIDEN(THAILAND) LTD.
898 Moo 2, Bangpa-in Industrial
Estate, Udomsorayuth Rd., Klongjig,
Bangpa-in, Ayudhaya 13160,
ThailandPhone: 66-35-258258
Facsimile: 66-35-221388

UNITED ARAB EMIRATESCORPORATION• MEIDENSHA
Room 905, AI Reem Tower
AI Maktoum Street, Deira,
P.O.Box 117841, Dubai,
United Alab Emirates
Phone: 971-4-229-9653
Facsimile: 971-4-229-9654

THE UNITED STATESAMERICA, INC.
• MEIDEN
15800 Centennial Drive, NorthvilleTownship, MI 48168, U.S.A.
Phone: 1-734-656-1400
Facsimile: 1-734-459-1863

TECHNICAL CENTER• MEIDENNORTH AMERICA LLC
15810 Cetennial Drire, NorthvilleTownship, MI 48168, U.S.A.
Phone: 1-734-656-1400
Facsimile: 1-734-459-1863

THE UNITED KINGDOMEUROPE LTD.
• MEIDENNYK Complex Bradbourne Drive,
Tilbrook, Milton Keynes MK7 8BN,
England, U.K.
Phone: 44-1908-276000
Facsimile: 44-1908-276010

Annual Report 2007

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

Kofu Meidensha Electric Mfg. Co., Ltd.

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

HOKUTO DENKO CORPORATION

Capital ¥400 million

Capital ¥25 million

Manufacture and sales of electric motors

Manufacture and sales of electric sensors

825 Nakadate, Chuo-shi,
Yamanashi 490-3801 Japan
Phone: 55-274-7910 Fax: 55-274-7946

22-13, Himonya 4-chome, Meguro-ku,
Tokyo 152-0003 Japan
Phone: 3-3716-3686 Fax: 3-3793-8787

Meiden Plant Engineering &Construction Co., Ltd.

MEIDEN SYSCON Co., Ltd.

Capital ¥130 million

Constructing service
Meiko Building, 5-5, Osaki 5-chome,
Shinagawa-ku, Tokyo 141-8616 Japan
Phone: 3-5487-6437 Fax: 3-5487-6487

MEIDEN CHEMICAL CO., LTD.
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

Manufacture and sales of switchgear andrelays726-1, Osuwa, Numazu-shi,
Shizuoka 410-0873 Japan
Phone: 55-924-4630 Fax: 55-922-4013

Meiden Kiden Kogyo Co., Ltd.
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: 3-3490-4821 Fax: 3-3490-4910

Meiden Sheet Metal Products
Corporation

Capital ¥60 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: 55-923-4966 Fax: 55-923-1191

515, Kaminakamizo, Higashimakado-aza,
Numazu-shi, Shizuoka 410-0865 Japan
Phone: 55-929-5555 Fax: 55-929-5566

MEIDEN FOUNDRY INDUSTRIAL Co., Ltd.

MEIDEN HOIST SYSTEM COMPANY, LTD.

Capital ¥50 million

Casting

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

Capital S$25.4 million

Manufacture and sales of transformers,
switchgears and circuit-breakers and related
engineering and constructing service❖ THAI MEIDENSHA CO., LTD.
Capital TB20 million

Engineering and constructing service❖ MEIDEN ELECTRIC (THAILAND) LTD.
Capital TB70 million

Manufacture and sales of switchgears❖ P.T.MEIDEN ENGINEERINGINDONESIA
Capital US$320 thousand

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

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$6.3 million

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

Remanufacturing and engineering servicesof semiconductor manufacturing devices❖ MEIDEN HANGZHOU DRIVESYSTEMS Co., Ltd.
Capital US$5.7 million

Manufacture and sales of electrical morors❖ DONGGUAN MEIDEN ELECTRICAL
ENGINEERING CO., LTD.
Capital HK$8.4 million

Manufacture and sales of switchgears andslaes of electric products and components❖ MEIDEN ZHENGZHOU ELECTRIC
CO., LTD.,
Capital CNY20 million

Manufacture and sales of surge arresters❖ MEIDEN SHANGHAI CO., LTD.
Capital ¥50 million

Sales of electric products and components❖ MEIDEN TECHNICAL CENTERNORTH AMERICA LLC
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: 3-5487-6514 Fax: 3-5487-6516

515, Kaminakamizo, Higashimakado-aza,
Numazu-shi, Shizuoka 410-0865 Japan
Phone: 55-929-4300 Fax: 55-929-4399

Annual Report 2007

❖ MEIDEN SINGAPORE PTE. LTD.

Capital US$6 million

Testing service of engine and drive train

Plus 7 domestic subsidiaries.
❖ Please see page 36-37 to find contact information foroverseas affiliates.

CORPORATE DATACORPORATE NAMECOMMON STOCKMEIDENSHA CORPORATION(Kabushiki Kaisha Meidensha)

HEAD OFFICE

Authorized
576,000,000 shares
Issued227,637,704 shares¥17,070 million($161,038 thousand)Riverside Building, 36-2, Nihonbashi Hakozakicho,
Chuo-ku, Tokyo 103-8515 JapanSHAREHOLDERS
19,259(From September 18)
ThinkPark Tower, 2-1-1, Osaki, Shinagawa-ku,
Tokyo 141-6029 Japan

TRANSFER AGENTThe Sumitomo Trust & Banking Co., Ltd.

FOUNDED
1897

BOARD OF DIRECTORS(AS OF JUNE 28, 2007)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

Yasuo Matoi

Tadashi Sanada

Nobuyuki Watanabe

Masayuki Tsubonoya

Kazuo Hosoya

Hiroshi Sugiyama
Ken Torikai
Noriyasu Nagai
Junzo Inamura

Annual Report 2007

39