EIZO NANAO CORPORATION

Financial Highlights
Eizo Nanao Corporation and Subsidiaries
Thousands of
U.S. Dollars

Millions of Yen

2005

2006

2007

2007

¥ 91,094¥ 85,058¥ 95,611$ 810,263

Operating income

10,425

11,88011,656

98,780Net income

6,411

7,257

7,713

65,364

Total assets

65,86974,59083,563

708,161

Total equity

41,55349,62356,340477,458¥ 277.39¥ 314.79¥ 339.35

40.00

55.00

70.00

Years ended March 31:
Net sales

As of March 31:

Per share data: (Yen and U.S. Dollars)
Basic net income
Cash dividends applicable to the year

Note : U.S. dollar amounts are provided solely for convenience at the rate of ¥118 to US$1, the approximate exchange rate at March 31, 2007.

FlexScan®

AirView® QuadColorEdge®

RadiForce®

FORIS.TV®

$

2.88
0.59

Net Sales

Operating Income

Net Income

Net Sales by Products

Millions of Yen

Millions of Yen

Millions of Yen

Millions of Yen
7,713

95,61191,094

11,8807,257

11,656

5,764
48,71985,058
10,425

Monitor for Computer use
Other

6,411

36,611

2005

2006

2007

Total Equity
56,340Millions of Yen

2005

2007

2005

2006

2007

Basic Net Income per
Share

Total Equity per Share

Yen

Yen

49,623339.35314.792005

5,144
51,1325,209
43,60036,2492006

39,3352007

2,478.62
2,178.63

277.3941,553

2005

2006

Amusement Monitor

1,823.40

2006

2007

2005

2006

2007

2005

2006

2007



Consolidated Balance Sheets
Eizo Nanao Corporation and Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen
March 31, 2007 and 2006

2007

2007

2006

ASSETS
CURRENT ASSETS:
19,506$ 133,314

3,393

2,402

28,754

Trade notes

584

2,651

4,949

Trade accounts

20,4389,736

173,203

Other

169

444

1,432

Allowance for doubtful receivables

(358)

(160)

(3,034)Inventories (Note 4)

10,18913,536

86,347

Deferred tax assets (Note 9)

3,068

1,992

26,000

955

428

8,094

54,16950,535459,059

Land

3,080

2,641

26,102

Buildings and structures

10,783

7,959

91,381

Machinery and equipment

2,873

2,767

24,347

Furniture and fixtures

3,791

3,589

32,127

Construction in progress

155

1

1,314

20,682

16,957

175,271(9,982)(9,631)(84,593)

10,7007,326

90,67817,413

15,551

147,568

60

44

508

Other assets

1,652

1,134

14,001

Allowance for doubtful receivables(431)

Cash and cash equivalents
Short-term investments (Note 3)¥ 15,731¥Notes and accounts receivables:

Prepaid expenses and other current assets
Total current assets
PROPERTY, PLANT AND EQUIPMENT (Note 5):

Total
Accumulated depreciation
Net property, plant and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3)
Deferred tax assets (Note 9)

Total investments and other assets
TOTAL

See notes to consolidated financial statements.

(3,653)

18,694¥ 83,563¥

16,729158,424

74,590$ 708,161

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2007

2007

2006

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term bank loans (Note 6)¥Current portion of long-term debt (Note 6)

911

Notes and accounts payables:¥ 10,275

12,202$ 87,076

3,050

1,508

25,847

Income taxes payable

3,805

2,082

32,246

Accrued expenses

3,624

3,306

30,712

804

538

6,814

21,55819,656

182,695

Trade accounts
Other

Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Note 6)

26

Liability for retirement benefits (Note 7)

1,801

1,719

15,263

Deferred tax liabilities (Note 9)

3,236

3,153

27,424

628

413

5,321

5,665

5,311

48,008

4,426

4,426

37,508

Capital surplus

4,314

4,314

36,559Retained earnings

41,016

34,769347,593

Unrealized gain on available-for-sale securities

6,629

6,266

56,178

(43)

(151)

(363)

(2)

(1)

(17)

Other long-term liabilities
Total long-term liabilities
COMMITMENTS AND CONTINGENT LIABILITIES(Notes 11 and 12)
EQUITY (Notes 8 and 13):
Common stock—authorized, 65,000,000 shares;
issued, 22,731,160 shares in 2007 and 2006

Foreign currency translation adjustments
Treasury stock—at cost, 798 shares in 2007 and698 shares in 2006
Total equity
TOTAL

56,340¥ 83,563¥

49,623

477,458

74,590$ 708,161

Consolidated Statements of Income
Eizo Nanao Corporation and Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2007

Years ended March 31, 2007 and 2006

NET SALES

2007

2006

¥ 95,611¥85,058$ 810,263

COST OF SALES (Note 10)70,60062,060598,305

Gross profit

25,011

22,998211,958

13,355

11,118113,178

11,656

11,88098,780

207

115

1,754

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 10)
Operating income
OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense(1)

Loss on disposal of property, plant and equipment—net(55)

Loss on impairment of long-lived assets (Note 5)(12)Foreign exchange (loss) gain—net

(2)

130

(17)

369

(54)

3,127

Other income—net

507

148

4,296

INCOME BEFORE INCOME TAXES

12,163

12,028103,076

Current

5,670

3,931

48,051

Deferred(1,220)840(10,339)

4,450

4,771

37,7127,257$ 65,364

Other—net

(466)

(42)

(102)

INCOME TAXES (Note 9):

Total income taxes
NET INCOME

¥

7,713

¥

Yen
Years ended March 31, 2007 and 2006

U.S. Dollars

2007

2007

2006

PER SHARE OF COMMON STOCK (Note 2.p):
Basic net income
Cash dividends applicable to the year

See notes to consolidated financial statements.

¥ 339.35
70.00

¥

314.79
55.00

$

2.88
0.59

Consolidated Statements of Changes in Equity
Eizo Nanao Corporation and Subsidiaries

Years ended March 31, 2007 and 2006

BALANCE, APRIL 1, 2005
Net income
Cash dividends, ¥50 per share
Bonuses to directors
Net increase in unrealized gain on
available-for-sale securities
Net change in foreign currencytranslation adjustments
BALANCE, MARCH 31, 2006
Net income
Cash dividends, ¥60 per share
Bonuses to directors
Net increase in unrealized gain on
available-for-sale securities
Net change in foreign currencytranslation adjustments
Purchase of treasury stock
BALANCE, MARCH 31, 2007

Thousands

Millions of Yen

IssuedNumber of
Shares ofCommon Stock

Unrealized
Foreign
Gain onCurrency
Retained Available-for-sale Translation
Earnings
Securities Adjustments

CommonStockCapitalSurplus22,731 ¥ 4,426 ¥ 4,314 ¥ 28,754 ¥ 4,236 ¥
7,257(1,136)(106)(176) ¥

TreasuryStock(1) ¥ 41,553
7,257(1,136)
(106)

2,030

22,731

4,426

4,314

34,7697,713(1,364)
(102)

6,266

2,030
25
(151)

(1)

363

25
49,623
7,713(1,364)
(102)
363

108
22,731 ¥ 4,426 ¥ 4,314 ¥ 41,016 ¥ 6,629 ¥

Total
Equity(43) ¥

108
(1)
(1)
(2) ¥ 56,340

Thousands of U.S. Dollars (Note 1)

Years ended March 31, 2007 and 2006

BALANCE, MARCH 31, 2006
Net income
Cash dividends, $0.51 per share
Bonuses to directors
Net increase in unrealized gain on
available-for-sale securities
Net change in foreign currencytranslation adjustments
Purchase of treasury stock
BALANCE, MARCH 31, 2007

CommonStockCapitalSurplus

Unrealized
Foreign
Gain onCurrency
Retained Available-for-sale Translation
Earnings
Securities Adjustments$ 37,508 $ 36,559 $ 294,653 $ 53,102 $ (1,280) $
65,364(11,560)
(864)
3,076

Total
Equity(8) $420,534
65,364(11,560)
(864)
3,076

917
$ 37,508 $ 36,559 $347,593 $ 56,178 $

TreasuryStock(363) $

917
(9)
(9)
(17) $477,458

See notes to consolidated financial statements.

Consolidated Statements of Cash Flows
Eizo Nanao Corporation and Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2007

Years ended March 31, 2007 and 2006

OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes—paidDepreciation and amortization
Reversal of doubtful receivables
Loss on disposal of property, plant and equipment
Bonuses to directors
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable
Decrease (increase) in inventories
Decrease in notes and accounts payable
Increase (decrease) in accrued expenses
Increase in liability for retirement benefits
Other—net
Total adjustments
Net cash provided by operating activities
INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Proceeds from sales of short‑term investments and investment securities
Purchases of short‑term investments and investment securities
Payment for purchase of newly consolidated subsidiary, net of cash acquired(Increase) decrease in other assets
Net cash used in investing activities
FINANCING ACTIVITIES:(Decrease) increase in short‑term bank loans
Repayments of long‑term debt
Dividends paid
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
ON CASH AND CASH EQUIVALENTS
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
DECREASE IN CASH AND CASH EQUIVALENTS RESULTINGFROM EXCLUSION FROM CONSOLIDATIONCASH AND CASH EQUIVALENTS, END OF YEAR

See notes to consolidated financial statements.

¥ 12,163

¥

2007

2006
12,028$ 103,076(3,967)
1,288
195
55
(102)

(4,046)
1,300
(99)
42
(106)

(33,619)
10,915
1,653
466
(864)

(8,339)3,508(2,047)494
82
331(8,502)
3,661

4,752
(5,096)
(354)
(69)
44
(134)
(3,766)
8,262(70,669)
29,729(17,347)
4,186
695
2,804
(72,051)
31,025(3,141)
9,303(11,532)
(168)
(436)
(5,974)(1,425)
7,666(7,450)(609)
15(1,803)(26,619)
78,839(97,729)(1,424)(3,694)(50,627)

(79)

(669)

(1,362)(1,441)9(11)(1,138)(1,140)(11,542)(12,211)

48

16

406

¥

5,335
14,171$ (31,407)
165,305¥

19,506(584)$ 133,314(3,706)
19,506(69)¥ 15,731¥Notes to Consolidated Financial Statements
Eizo Nanao Corporation and Subsidiaries

1. BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS
The accompanying consolidated financial statements have been preparedin accordance with the provisions set forth in the Japanese Securities andExchange Law and its related accounting regulations, and in conformity
with accounting principles generally accepted in Japan ("Japanese GAAP"),
which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
On December 27, 2005, the Accounting Standards Board of Japan(the "ASBJ") published a new accounting standard for the statement ofchanges in equity, which is effective for fiscal years ending on or after May
1, 2006. The consolidated statement of shareholders' equity, which waspreviously voluntarily prepared in line with the international accounting
practices, is now required under Japanese GAAP and has been renamed "theconsolidated statement of changes in equity" in the current fiscal year.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in a form
which is more familiar to readers outside Japan.
The consolidated financial statements are stated in Japanese yen,
the currency of the country in which EIZO NANAO CORPORATION (the"Company") is incorporated and operates. The translations of Japanese yenamounts into U.S. dollar amounts are included solely for the convenience ofreaders outside Japan and have been made at the rate of ¥118 to $1, theapproximate rate of exchange at March 31, 2007. Such translations should
not be construed as representations that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements as of March 31,
2007 and 2006 include the accounts of the Company and its 11 (11 in 2006)
subsidiaries (together, the "Group").
Under the control concept, those companies in which the Company,
directly or indirectly, is able to exercise control over operations are fully
consolidated.
The excess of cost over net assets of subsidiaries acquired is charged toincome when incurred.
All significant intercompany balances and transactions have been
eliminated in consolidation. All material unrealized profit included in assets
resulting from transactions within the Group is eliminated.
During the year ended March 31, 2007, Tech Source, Inc. has been
included in consolidation as a result of the acquisition of its sharesthroughout Eizo Nanao Technologies Inc.
During the year ended March 31, 2007, USHITSU ELECTRONICS
INDUSTRIAL Co., Ltd. has been excluded from consolidation as it is no longer
controlled by the Company.
b. Cash Equivalents—Cash equivalents are short-term investments thatare readily convertible into cash and that are exposed to insignificant risk ofchanges in value.
Cash equivalents include time deposits, certificate of deposit andcommercial paper, all of which mature or become due within three monthsof the date of acquisition.
c. Inventories—Inventories are stated at cost substantially determined by
the average method for finished products and work in process, and by themoving-average method for raw materials.
d. Short-term Investments and Investment Securities—Shortterm investments and investment securities are classified and accounted
for depending on management's intent. Available-for-sale securities, which
represent securities not classified as either trading securities or held-tomaturity debt securities, are reported at fair value, with unrealized gains andlosses, net of applicable taxes, reported as a separate component of equity.
The cost of available-for-sale securities sold is determined based on themoving-average method.
Non-marketable available-for-sale securities are stated at cost determinedby the moving-average method.
For other than temporary declines in fair value, investment securities are
reduced to net realizable value by a charge to income.
e. Property, Plant and Equipment—Property, plant and equipment
are stated at cost. Depreciation of property, plant and equipment of theCompany and its domestic subsidiaries is computed substantially by the
declining-balance method at rates based on the estimated useful lives of theassets, while the straight-line method is applied to buildings acquired after
April 1, 1998 of the Company and its domestic subsidiaries, and all property,
plant and equipment of foreign subsidiaries. The range of useful lives isprincipally from 15 to 50 years for buildings and structures, 10 years formachinery and equipment, and from 2 to 6 years for furniture and fixtures.
f. Long-lived Assets—In August 2002, the Business Accounting Council
issued a Statement of Opinion, "Accounting for Impairment of Fixed Assets,"
and in October 2003 the ASBJ issued ASBJ Guidance No. 6, "Guidance
for Accounting Standard for Impairment of Fixed Assets." These newpronouncements were effective for fiscal years beginning on or after April 1,2005 with early adoption permitted for fiscal years ending on or after March
31, 2004.
The Group adopted the new accounting standard for impairment of fixed
assets as of April 1, 2004.
The Group reviews its long-lived assets for impairment whenever eventsor changes in circumstance indicate the carrying amount of an asset or asset
group may not be recoverable. An impairment loss would be recognized
if the carrying amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from the continued use
and eventual disposition of the asset or asset group. The impairment loss
would be measured as the amount by which the carrying amount of theasset exceeds its recoverable amount, which is the higher of the discounted
cash flows from the continued use and eventual disposition of the asset or
the net selling price at disposition.
g. Retirement and Pension Plans—The Company and certain
subsidiaries have a defined contribution pension plan, non-contributory
funded pension plan and unfunded retirement benefit plans which coversubstantially all of their employees.
The Group accounted for the liability for retirement benefits based on the
projected benefit obligations and plan assets at the balance sheet date.
Retirement benefits to directors and corporate auditors are previouslyprovided at the amount which would be required if all directors andcorporate auditors retired at the balance sheet date.
In June 2004, the retirement benefit system was abolished, and theamount required to be paid at the time of the abolishment will be paid to
directors and corporate auditors upon their retirement.
h. Research and Development Costs—Research and development
costs are charged to income as incurred.
i. Leases—All leases are accounted for as operating leases. Under
Japanese accounting standards for leases, finance leases that deem totransfer ownership of the leased property to the lessee are to be capitalized,
while other finance leases are permitted to be accounted for as operatinglease transactions if certain "as if capitalized" information is disclosed in thenotes to the lessee's financial statements.
j. Bonuses to Directors—Prior to the fiscal year ended March 31,
2005, bonuses to directors were accounted for as a reduction of retained
earnings in the fiscal year following approval at the general shareholders
meeting. The ASBJ issued ASBJ Practical Issues Task Force ("PITF") No. 13,"Accounting Treatment for Bonuses to Directors and Corporate Auditors,"
which encouraged companies to record bonuses to directors on the accrualbasis with a related charge to income, but still permitted the direct reductionof such bonuses from retained earnings after approval of the appropriationof retained earnings.
The ASBJ replaced the above accounting pronouncement by issuing a
new accounting standard for bonuses to directors and corporate auditors
on November 29, 2005. Under the new accounting standard, bonuses todirectors must be expensed and are no longer allowed to be directly charged
to retained earnings. This accounting standard is effective for fiscal years
ending on or after May 1, 2006. The companies must accrue bonuses todirectors at the year end to which such bonuses are attributable.
The Company adopted the new accounting standard for bonuses todirectors and corporate auditors in the year ended March 31, 2007. The
effect of adoption of this accounting standard was to decrease income
before income taxes for the year ended March 31, 2007 by ¥110 million($932 thousand).
k. Income Taxes—The provision for income taxes is computed based on
the pretax income included in the consolidated statements of income. The
asset and liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted tax laws to thetemporary differences.
l. Appropriations of Retained Earnings—Appropriations of retained
earnings are reflected in the financial statements for the following year uponshareholders' approval.
m. Foreign Currency Transactions—All short-term and long-termmonetary receivables and payables denominated in foreign currencies aretranslated into Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translation are recognizedin the statement of income.
n. Foreign Currency Financial Statements—The balance sheet
accounts of the foreign subsidiaries are translated into Japanese yen at thecurrent exchange rate as of the balance sheet date except for equity, which
is translated at the historical rate.
Differences arising from such translation were shown as "Foreigncurrency translation adjustments" in a separate component of equity.
Revenue and expense accounts of foreign subsidiaries are translated into
yen at the average exchange rate.
o. Derivatives and Hedging Activities—The Group uses derivative
financial instruments to manage its exposures to fluctuations in foreignexchange. Foreign exchange forward contracts and currency options
contracts are utilized by the Group to reduce foreign currency exchangerisks. The Group does not enter into derivatives for trading or speculative
purposes.
Derivative financial instruments and foreign currency transactions areclassified and accounted for as follows: all derivatives be recognized aseither assets or liabilities and measured at fair value, and gains or losses onderivative transactions are recognized in the statement of income.
The foreign currency forward contracts and currency options contracts
employed to hedge foreign exchange exposures for export sales and importpurchases are measured at the fair value and the unrealized gains/losses arerecognized in income.
p. Per Share Information—Basic net income per share is computed by
dividing net income available to common shareholders by the weightedaverage number of common shares outstanding for the period.
Cash dividends per share shown in the consolidated statements ofincome are presented on an accrual basis and include interim dividends paid
and year-end dividends to be approved after balance sheet date.
Diluted net income per share of common stock is not disclosed hereinbecause the Company has not issued any securities that are potentiallydilutive for the years ended March 31, 2007 and 2006.
q. New Accounting Pronouncements
Measurement of Inventories—Under Japanese GAAP, inventories are
currently measured either by the cost method, or at the lower of cost or
market. On July 5, 2006, the ASBJ issued ASBJ Statement No. 9, "AccountingStandard for Measurement of Inventories," which is effective for fiscal
years beginning on or after April 1, 2008 with early adoption permitted.
This standard requires that inventories held for sale in the ordinary courseof business be measured at the lower of cost or net selling value, which isdefined as the selling price less additional estimated manufacturing costs
and estimated direct selling expenses. The replacement cost may be used inplace of the net selling value, if appropriate. The standard also requires thatinventories held for trading purposes be measured at the market price.
Lease Accounting—On March 30, 2007, the ASBJ issued ASBJ Statement
No. 13, "Accounting Standard for Lease Transactions," which revised theexisting accounting standard for lease transactions issued on June 17, 1993.
Under the existing accounting standard, finance leases that deem totransfer ownership of the leased property to the lessee are to be capitalized,
however, other finance leases are permitted to be accounted for as operatinglease transactions if certain "as if capitalized" information is disclosed in thenote to the lessee's financial statements.
The revised accounting standard requires that all finance leasetransactions should be capitalized. The revised accounting standard forlease transactions is effective for fiscal years beginning on or after April 1,2008 with early adoption permitted for fiscal years beginning on or after
April 1, 2007.
Unification of Accounting Policies Applied to Foreign Subsidiaries
for the Consolidated Financial Statements—Under Japanese GAAP,a company currently can use the financial statements of foreign subsidiaries

which are prepared in accordance with generally accepted accounting
principles in their respective jurisdictions for its consolidation process unlessthey are clearly unreasonable. On May 17, 2006, the ASBJ issued ASBJ PITF
No. 18, "Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for the Consolidated Financial Statements." The newtask force prescribes: (1) the accounting policies and procedures applied toa parent company and its subsidiaries for similar transactions and events
under similar circumstances should in principle be unified for the preparationof the consolidated financial statements, (2) financial statements preparedby foreign subsidiaries in accordance with either International Financial
Reporting Standards or the generally accepted accounting principles in the
United States tentatively may be used for the consolidation process, (3)however, the following items should be adjusted in the consolidation process
so that net income is accounted for in accordance with Japanese GAAP
unless they are not material;(1) Amortization of goodwill(2)	Actuarial gains and losses of defined benefit plans recognized outside
profit or loss
(3) Capitalization of intangible assets arising from development phases(4)	Fair value measurement of investment properties, and the revaluation
model for property, plant and equipment, and intangible assets(5) Retrospective application when accounting policies are changed(6) Accounting for net income attributable to a minority interest
The new task force is effective for fiscal years beginning on or after April
1, 2008 with early adoption permitted.

Millions of Yen
Unrealized
Gains

Cost

Unrealized
LossesFair
Value

March 31, 2007
Securities classified asavailable-for-sale:
Equity securities¥ 3,619 ¥ 11,200 ¥
4,095

Debt securities
OthersTotal

62 ¥ 14,757

1

6

1,852
1
¥ 9,566 ¥ 11,202 ¥

4,090

10
1,843
78 ¥ 20,690

March 31, 2006
Securities classified asavailable-for-sale:
Equity securities¥ 2,074 ¥ 10,566 ¥

OthersTotal

9 ¥ 12,631

2,705

Debt securities

19

2,533
¥ 7,312 ¥ 10,566 ¥

2,686

23
2,510
51 ¥ 17,827

Thousands of U.S. Dollars
Unrealized
Gains

Cost

Unrealized
LossesFair
Value

March 31, 2007
Securities classified asavailable-for-sale:

3. SHORT-TERM INVESTMENTS AND INVESTMENT
SECURITIES

Equity securities

Short-term investments and investment securities as of March 31, 2007 and2006 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2007

2006

$ 30,669 $ 94,915 $
34,703

Debt securities

2007

OthersTotal

34,66185
15,619661 $175,339

Available-for-sale securities whose fair values are not readily determinable
as of March 31, 2007 and 2006 were as follows:
Carrying Amount¥

OthersTotal

51

15,6968$ 81,068 $ 94,932 $

Short-term investments:
Debt securities

525 $125,059

9¥

1,199 ¥

1,302 $ 10,161

2,194

1,100

3,393 ¥2007

18,5932,402 $ 28,754

Thousands of
U.S. Dollars

Millions of Yen

2007

2006

Available-for-sale—¥

Equity securities

116 ¥

126 $

983

Investment securities:
Marketable equity securities¥ 14,757 ¥

12,631 $ 125,059

Non-marketable equity securities

116

126

983

Debt securities

894

1,384

7,576

1,646

1,410

13,950

OthersTotal¥ 17,413 ¥

15,551 $ 147,568

The carrying amounts and aggregate fair values of the securities classified asavailable-for-sale at March 31, 2007 and 2006 were as follows:

The carrying values of debt securities and others by contractual maturities
for securities classified as available-for-sale at March 31, 2007 are as
follows:

Due in one year or less¥Millions of Yen

Thousands of U.S. Dollars

Available-for-sale

Available-for-sale

3,633

$

30,788Due after one year throughfive years
Due after five years through

1,499

12,703ten years
Due over ten years

160

1,356

			 Total

543
¥

5,835

4,602
$

49,44910

4. INVENTORIES

2007

Inventories at March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2007

3,343 $ 33,093

Work in process

1,314

1,095

11,136

Raw materials and supplies

4,970

9,098

42,118

			 Total

¥

2007

2006

3,905 ¥

Finished products¥ 10,189 ¥

13,536 $ 86,347

5. LONG-LIVED ASSETS
The total loss on impairment of long-lived assets for the year ended March
31, 2007 amounted to ¥12 million ($102 thousand). The contents of
impairment are mainly land of ¥11 million ($93 thousand).
The recoverable amount of the assets is measured by net realizable value
based on reasonable estimates, either real estate appraised value by a third
party or the assessed value for property tax purposes.

6. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2006 consisted of a bank loan.
Long-term debt at March 31, 2006 consisted of the following:
Millions of Yen

2006
Unsecured loans from banks, due through 2010,
Less current portion

26

Thousands of
U.S. Dollars

Millions of Yen

Fair value of plan assets
Unrecognized actuarial gain (loss)
			 Net liability

¥

2007

2006

2,233 ¥

2,160 $ 18,924

(615)

(553)

(5,212)

60

(11)

509

1,678 ¥

1,596 $ 14,221

The components of net periodic benefit costs for the years ended March 31,
2007 and 2006 are as follows:

11

Interest cost

41

39

347

Recognized actuarial (gain) loss

(1)

13

377 ¥

410 $

			 Net periodic benefit costs

¥

(8)

3,195

Assumptions used for the years ended March 31, 2007 and 2006 are set
forth as follows:
2007

2006

Discount rate

2.00%

2.00%

Expected rate of return on plan assets

1.25%

0.75%

Recognition period of actuarial gain/loss

5 years

5 years

According to the enactment of the Defined Contribution Pension Plan Law in
October 2001, the Company and certain domestic subsidiaries implemented
a defined contribution pension plan in April 2004, by which a portion of theseverance lump-sum payment plan and defined benefit pension plans were
terminated. The effect of this transfer was to increase income before income
taxes by ¥140 million and was recorded as gain on transfer of pension planin the consolidated statements of income for the year ended March 31,
2005.
The liability for retirement benefits at March 31, 2007 and 2006 fordirectors and corporate auditors is ¥123 million ($1,042 thousand) and ¥123
million, respectively.

On and after May 1, 2006, Japanese companies are subject to a newcorporate law of Japan (the "Corporate Law"), which reformed and replaced
the Commercial Code of Japan with various revisions that are, for the mostpart, applicable to events or transactions which occur on or after May 1,
2006 and for the fiscal years ending on or after May 1, 2006. The significant
changes in the Corporate Law that affect financial and accounting matters
are summarized below:
a. Dividends	Under the Corporate Law, companies can pay dividends at any time
during the fiscal year in addition to the year-end dividend upon resolution
at the shareholders meeting. For companies that meet certain criteriasuch as; (1) having the Board of Directors, (2) having independent
auditors, (3) having the Board of Corporate Auditors, and (4) the term ofservice of the directors is prescribed as one year rather than two years
of normal term by its articles of incorporation, the Board of Directors
may declare dividends (except for dividends in kind) at any time
during the fiscal year if the company has prescribed so in its articles ofincorporation. The Company meets all the above criteria.
The Corporate Law permits companies to distribute dividends-inkind (non-cash assets) to shareholders subject to a certain limitation andadditional requirements.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporation of thecompany so stipulate. The Corporate Law provides certain limitations on
the amounts available for dividends or the purchase of treasury stock.
The limitation is defined as the amount available for distribution to
the shareholders, but the amount of net assets after dividends must be
maintained at no less than ¥3 million.
b.	Increases/Decreases and Transfer of Common Stock, Reserveand Surplus
	The Corporate Law requires that an amount equal to 10% of dividends

The Company and its certain subsidiaries have severance payment plans for
employees, directors and corporate auditors.
Under most circumstances, employees terminating their employment
are entitled to retirement benefits determined based on the rate of pay at
the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment
from the Company or from certain subsidiaries and annuity payments froma trustee. Employees are entitled to larger payments if the termination
is involuntary, by retirement at the mandatory retirement age, by death,or by voluntary retirement at certain specific ages prior to the mandatory
retirement age.
The liability for employees' retirement benefits at March 31, 2007 and2006 consisted of the following:
2007

2,856

(11)

7. RETIREMENT AND PENSION PLANS¥

358 $

¥

8. EQUITY¥

Long-term debt, less current portion

2007

2006

337 ¥

Service cost37

with interest ranging from 1.4% to 2.9% for 2006 ¥Projected benefit obligation

Thousands of
U.S. Dollars

Millions of Yen

must be appropriated as a legal reserve (a component of retained
earnings) or as additional paid-in capital (a component of capitalsurplus) depending on the equity account charged upon the payment ofsuch dividends until the total of aggregate amount of legal reserve andadditional paid-in capital equals 25% of the common stock. Under the
Corporate Law, the total amount of additional paid-in capital and legal
reserve may be reversed without limitation. The Corporate Law also
provides that common stock, legal reserve, additional paid-in capital,
other capital surplus and retained earnings can be transferred among theaccounts under certain conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
	The Corporate Law also provides for companies to purchase treasury
stock and dispose of such treasury stock by resolution of the Board of
Directors. The amount of treasury stock purchased cannot exceed theamount available for distribution to the shareholders which is determinedby specific formula.
Under the Corporate Law, stock acquisition rights, which werepreviously presented as a liability, are now presented as a separate
component of equity.
The Corporate Law also provides that companies can purchase bothtreasury stock acquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.

9. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national
and local income taxes which, in the aggregate, resulted in a normal
effective statutory tax rate of approximately 40.4% for the years ended
March 31, 2007 and 2006.
The tax effects of significant temporary differences and tax loss
carryforwards which resulted in deferred tax assets and liabilities at March
31, 2007 and 2006 are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007
¥

1,078 ¥736 $

9,136

685

5,686

530

665

4,492

1,150

1,321

9,746

671

Pension and severance costs
Tax loss carryforwards
Accrued expenses
Other

2,232

1,004

18,915Less valuation allowance(1,219)(1,196)(10,331)

4,442

3,215

37,644

			 Total

2007
Current assets—Deferred tax assets

¥

2007

2006

3,068 ¥

1,992 $ 26,000

Investments and other assets—
60

Deferred tax assets

Deferred tax liabilities:

508

44

Current liabilities—(30)

Other current liabilities(253)

Long-term liabilities—
Deferred tax liabilities
Net deferred tax liabilities(3,236)¥(138) ¥

(3,153)(27,424)(1,117) $

(1,169)A reconciliation between the normal effective statutory tax rates andthe actual effective tax rates reflected in the accompanying consolidated
statement of income for the year ended March 31, 2007 is as follows:
2007
Normal effective statutory tax rate

40.4%

Tax credit for research expenses(2.4)

Decrease in less valuation allowance(1.6)

Other—net

0.2

Actual effective tax rate

36.6%

The difference between the normal effective statutory tax rate for the year
ended March 31, 2006 and the actual effective tax rate is not exceeding 5%of the normal effective statutory tax rate.
At March 31, 2007, certain subsidiaries have tax loss carryforwards
aggregating approximately ¥1,412 million ($11,966 thousand) which areavailable to be offset against taxable income of such subsidiaries in futureyears. These tax loss carryforwards, if not utilized, will expire as follows:

2007

2006

Deferred tax assets:
Inventories

Thousands of
U.S. Dollars

Millions of Yen

Year Ending March 31

Millions of Yen

2009

¥

Thousands of
U.S. Dollars

2 $

18

2010

2

18

2011

36

305

2012 and thereafter
Total

¥

1,372

11,625

1,412 $

11,966

10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥4,176 million($35,390 thousand) and ¥3,805 million for the years ended March 31, 2007
and 2006, respectively.

Unrealized gain on		 available-for-sale securities(4,497)(4,251)(38,110)

Other

(83)

(81)

(703)

			 Total(4,580)(4,332)(38,813)(1,117) $

(1,169)Net deferred tax liabilities¥(138) ¥

Deferred assets (liabilities) were included in the consolidated balance sheets
as follows:1211. LEASES

12. DERIVATIVESThe Group leases certain machinery, equipment and other assets. Totallease payments under financing leases arrangements that do not transfer
ownership of the leased property to the Company and its domestic
subsidiaries were ¥7 million ($59 thousand) and ¥143 million for the years
ended March 31, 2007 and 2006, respectively.
Pro forma information of leased property carried by finance leases that
do not transfer ownership of the leased property to the lessee on an "as if
capitalized" basis as of and for the years ended March 31, 2007 and 2006
was as follows:

The Group enters into derivative contracts, including foreign currency
forward contracts and currency options contracts to hedge foreign exchange
risk associated with certain assets and liabilities denominated in foreign
currencies.
All derivative transactions are entered into to hedge foreign currency
exposures incorporated within its business. Accordingly, market risk in thesederivatives is basically offset by opposite movements in the value of hedged
assets or liabilities.
Because the counterparties to these derivatives are limited to majorinternational financial institutions, the Group does not anticipate any losses
arising from credit risk.
Derivative transactions entered into by the Group have been made inaccordance with internal policies which regulate the authorization and credit
limit amount.
The Group had the following derivatives contracts outstanding at March
31, 2007 and 2006:

Millions of Yen

2007

2006

MachineryandEquipment

Acquisition cost¥Accumulated depreciation
			 Net leased property¥MachineryandEquipment

Total

Total

31 ¥

31 ¥

38 ¥

38

16

16

18

18

15 ¥

15 ¥

20 ¥

20

Millions of Yen

Thousands of U.S. Dollars

2007

2007
MachineryandEquipment

Acquisition cost$Accumulated depreciation
			 Net leased property$Contract
Amount

Total

263

136

136

forward contracts—

127 $

127

Buying Japanese ¥Unrealized
Gain

Fair
Value

¥ 590 ¥

2 ¥

2 ¥ 282 ¥

1 ¥

1

2007

2007

Thousands of
U.S. Dollars

6 ¥
9
15 ¥

¥
¥

2007

2006
7 $
13
20 $

51
76
127

The amount of obligations under finance leases includes the imputed interest
expense portion.
Depreciation expense, which is not reflected in the accompanying
consolidated statements of income, computed by the straight-line method,was ¥7 million ($59 thousand) and ¥143 million for the years ended March
31, 2007 and 2006, respectively.
The minimum rental commitments under noncancelable operating leases
at March 31, 2007 and 2006 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007

13

Contract
AmountThousands of U.S. Dollars

Millions of Yen

Due within one year
Due after one year
			 Total

Unrealized
Gain

Fair
Value

Foreign currency

263 $

Obligations under finance leases:

Due within one year
Due after one year
			 Total

2006

¥
¥

107 ¥
235
342 ¥

2006
102 $
259
361 $

2007
907
1,991
2,898

Contract
AmountFair
Value

Unrealized
Gain

Foreign currency
forward contracts—
Buying Japanese ¥$5,000 $

17 $

17

The contract or notional amounts of derivatives which are shown in theabove table do not represent the amounts exchanged by the parties and do
not measure the Group's exposure to credit or market risk.

13. SUBSEQUENT EVENT
The following appropriations of retained earnings at March 31, 2007 wereapproved at the Board of Directors meeting held on May 21, 2007:
Millions of Yen

Year-end cash dividends, ¥40 ($0.34) per share¥

Thousands of
U.S. Dollars

909 $

7,703

14. SEGMENT INFORMATION
Information about industry segments, geographical segments and sales toforeign customers of the Group for the years ended March 31, 2007 and2006 is as follows:(1) Industry Segments
The Group is primarily engaged in the manufacture, development andsales of products in the visual display system and related products.
Under Japanese accounting regulations, the Group is not required todisclose industry segment information because its main industry segment
represented more than 90% of its operations.
(2) Geographical Segments
The geographical segments of the Group for the years ended March 31, 2007
and 2006 are summarized as follows:
Millions of Yen
2007
North
AmericaJapan¥ 89,280
5,154
94,43479,781¥ 14,653¥ 52,732

Sales to customers
Interarea transfer
			 Total sales
Operating expenses
Operating income (loss)
			 Total assets¥

Eliminations/
Corporate

Europe

2,421

¥

3,910
¥

2,421
2,653
(232) ¥
1,272 ¥

¥
¥

3,910
3,791
119
2,263

¥
¥

Consolidated¥

95,611(5,154)(5,154)(2,270)(2,884) ¥27,296 ¥95,611
83,955
11,656
83,563Thousands of U.S. Dollars
2007
North
AmericaJapan$ 756,610
43,678800,288676,110$ 124,178$ 446,881

Sales to customers
Interarea transfer
			 Total sales
Operating expenses
Operating income (loss)
			 Total assets

Eliminations/
Corporate

EuropeConsolidated$

20,517$33,136$ 810,263$$

20,51722,483(1,966) $10,780 $33,13632,127
1,009
19,178$ (43,678)(43,678)
810,263(19,237)
711,483$ (24,441) $ 98,780$ 231,322 $ 708,161

Millions of Yen
2006
North
AmericaJapan

Sales to customers
Interarea transfer
			 Total sales
Operating expenses
Operating income (loss)
			 Total assets¥

79,224
4,330
83,55468,924
14,63042,556

¥
¥

¥

2,625

Europe¥Eliminations/
Corporate

3,209
¥

2,625
2,599
26
643

¥
¥

¥
¥

3,209
3,270
(61) ¥
1,916 ¥

Consolidated¥

85,058(4,330)(4,330)(1,615)(2,715) ¥29,475 ¥85,05873,178
11,88074,590(3) Sales to Foreign Customers
Sales to foreign customers for the years ended March 31, 2007 and 2006
consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2007
North America

¥

2,511

2007

2006
¥

2,625

$

21,280Europe19,001

16,870161,025

Other

1,905

1,645

16,144

21,140$ 198,449

			 Total¥ 23,417¥

14

Independent Auditors’ Report
Eizo Nanao Corporation

INDEPENDENT AUDITORS' REPORTTo the Board of Directors of
EIZO NANAO CORPORATION:
We have audited the accompanying consolidated balance sheets of EIZO NANAO CORPORATION (the"Company") and subsidiaries as of March 31, 2007 and 2006, and the related consolidated statements of income,changes in equity, and cash flows for the years then ended, all expressed in Japanese yen. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of EIZO NANAO CORPORATION and subsidiaries as of March 31, 2007 and2006, and the consolidated results of their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in Japan.
Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts
are presented solely for the convenience of readers outside Japan.

June 22, 200715

Group Network(As of October, 2007)

Eizo Europe AB
Eizo GmbH
Eizo Europe AB

Eizo Nanao AG

Eizo Nanao
Technologies Inc.
Headquarters

Eizo Nanao Corporation
Headquarters

Tech Source, Inc.
Eizo Nanao Technologies Inc.

East Coast
OfficeEast Coast Office

Eizo Nanao Corporation Headquarters
Overseas Group Companies
Overseas Distribution

Overseas Network
Eizo Nanao Technologies Inc.
Headquarters
5710 Warland Drive Cypress, CA 90630, U.S.A.
Phone: +1-562-431-5011 Fax: +1-562-431-4811
East Coast Office
One Center Court, Unit D Totowa, NJ 07512, U.S.A.
Phone: +1-973-785-8838 Fax: +1-973-785-8839
Eizo Europe AB
Lövängsvägen 14 194 61 Upplands Väsby, Sweden
Phone: +46-8-594 105 00 Fax: +46-8-590 91 575

Eizo Nanao Corporation
Domestic Network
Domestic Support Network

Eizo Nanao AG
Moosacherstrasse 6, Au, CH-8804 Wädenswil, Switzerland
Phone: +41-0-44-782 24 40 Fax: +41-0-44-782 24 50
Eizo GmbH
Siemensallee 84, 76187 Karlsruhe, Germany
Tech Source, Inc.
3340 Edgewater Dr. Orlando, FL 32804, U.S.A.
Phone: +1-407-262-7100 Fax: +1-407-339-2554
Domestic Network
Eizo Nanao MS Corporation
37-9 Re, Jike, Hakui, Ishikawa 925-8566, Japan
Phone: +81 767 22-7121 Fax: +81 767 22-6601

Nanao Agency Corporation
153 Shimokashiwano, Hakusan, Ishikawa 924-8566, Japan
Phone: +81 76 274-0035 Fax: +81 76 274-2416

Irem Software Engineering Inc.
655 Fukudome, Hakusan, Ishikawa 924-8533, Japan
Phone: +81 76 277-3800 Fax: +81 76 277-3622

EIZO Engineering Corporation
153 Shimokashiwano, Hakusan, Ishikawa 924-8566, Japan
Phone: +81 76 274-2448 Fax: +81 76 274-0041

Eizo Support Network Corporation
153 Shimokashiwano, Hakusan, Ishikawa 924-8566, Japan
Phone: +81 76 274-2424 Fax: +81 76 274-2416
16

Corporate Data
(As of March 31, 2007)

Board of Directors andStatutory Auditors(As of June 21, 2007)

Company Name
Eizo Nanao Corporation

Board of Directors

EstablishedMarch 1968

President and CEO
Yoshitaka Jitsumori

Capital¥4,425,745,500

Executive Vice President
Tsutomu Tanabe

Address
153 Shimokashiwano, Hakusan,
Ishikawa, 924-8566, Japan
Phone: +81-76-275-4121
Fax: +81-76-275-4125

Directors
Kazuya Maeda
Eiji Tsurumi
Masaki Ono
Yuichi Murai
Shigekazu Wakamura

Employees on a Consolidated Basis
1,224
Business Activities
Development, design, manufacturing
and sale of display monitors andperipherals, amusement products, andimaging system software.

Statutory Auditors
Standing Corporate Auditor
Katsuhiro Hori
Corporate Auditors
Shuji Taniho
Masakatsu Atarashi
Masafumi Kubo

Managing Officer
Executive Managing Officer
Kazuya Maeda
Senior Managing Officer
Yoji Shimakura
Managing Officer
Eiji Tsurumi
Masaki Ono
Yuichi Murai
Shigekazu Matsumoto
Kazuhide Shimura
Muneharu Yamamoto
Toshimine Hiraki
Kazuhiko Deminami
17

Shareholders‘ Information(As of March 31, 2007)

Total Number of Shares Authorized
65,000,000
Number of Shares Issued
22,731,160
Shares Listed On
The first section of the Tokyo Stock Exchange
Number of Shareholders
12,759Major Shareholders

The Master Trust Bank of Japan, Ltd.
(Investment Trust Account)
Yasutaka Murata
Tsuneo Murata
Naoki Murata
Tetsu Takashima
Masayuki Murata
Hiroshi Murata
Japan Trustee Service Bank, Ltd.
(Investment Trust Account)
The Hokkoku Bank, Ltd.
State Street Bank and Trust Company

Distribution of Shares
by Type of Shareholders

Number of Shares Held(Thousands)

Percentage of
Voting Rights (%)

1,290

5.6

1,135
1,135
1,135
1,133
1,095
902

4.9
4.9
4.9
4.9
4.8
3.9

753

3.3

500
432

2.2
1.9

Distribution of Sharesby Number of Shares

Financial Institutions
4,633,700 shares
Securities Firms
474,580 shares

500,000 or more
2,155,640 shares

100,000 or more
5,808,200 shares
50,000 or more
1,597,945 shares

1,000,000 or more
6,925,700 shares

10,000 or more
1,958,446 shares

Other Firms
605,000 shares

Individuals and others
11,983,852 shares

Foreign Companies
5,033,230 shares

under 100980 shares

Treasury Stock798 shares

100 or more
1,536,411 shares

5,000 or more
419,500 shares

500 or more
649,298 shares

1,000 or more
1,679,040 shares

18

EIZO NANAO CORPORATION
153 Shimokashiwano‚ Hakusan, Ishikawa 924-8566, Japan
Tel: +81-76-275-4121, Fax: +81-76-275-4125
http://www.eizo.com/
Printed on 100% Recycled Paper