Annual Report 2008/2007 Shindengen Electric Manufacturing ... · 2 - SHINDENGEN Annual Report...

Annual Report 2008/2007Year Ended March 31,2008 and 2007

Annual Report 2009/2008Year Ended March 31,2009 and 2008

Shindengen Electric Manufacturing Co., Ltd.

Corporate MissionCorporate Mission

Contents

SHINDENGEN Annual Report - 1

ProfileProfile

Maximizing energy conversion efficiency for the benefit of humanity and society

Contents

Business SegmentShindengen Electric Manufacturing Company has business interests in devices, equipment, and mechatronics businesses.

Foundation

Manufacturing/Sales

Group Organization

Stocks

Shindengen Electric Manufacturing Company started business in 1949 by taking over the semiconductor and rectification departments from Dengen Kogyo, our forerunner.

Development and sales of silicon rectifier devices and rectifiers started in 1958; we started development and sales of switched-mode stabilized power supplies in 1965; field-effect transistors (FETs) in 1975, IC regulators/rectifiers for motorcycles in 1976; and high-speed rectifier devices in 1979. In ICs, we started development and sales of power ICs for switching power supplies in 1987, and power ICs for power-saving type power supplies in 2002.

We established Akita Shindengen Co., Ltd. in 1970, and Higashine Shindengen Co., Ltd. in 1981 as device manufacturing plants. For overseas manufacturing, we established Lumphun Shindengen Co., Ltd. in 1991 and Shindengen Philippines Corp. in 1995. As a manufacturing plant for the power system business of the equipment sector, we established Shindengen Three E Co., Ltd. in 1992. For overseas manufacturing, we started production of power supplies at Lumphun Shindengen Co., Ltd. in 1993. We established Okabe Shindengen Co., Ltd. in 1985 as a manufacturing plant for the car electronics business of the equipment sector. For overseas manufacturing, we established Shindengen (Thailand) Co., Ltd. in 1988, Guangzhou Shindengen Electronic Co., Ltd. in 1994, and PT. Shindengen Indonesia in 2001.

1958: Listed on Tokyo Stock Exchange (started sales as off-market OTC securities)1961: Listed on Second Section of Tokyo Stock Exchange1968: Listed on First Section of Tokyo Stock Exchange as alternative listing

1 Profile

2 Financial Highlights

3 Consolidated Business Overview

4 Dear Shareholders

8 Research and Development

9 Device Business

10 Equipment Business

12 Mechatronics Business

13 Approaches to Environment Protection Activities

14 Management's Discussion and Analysis

16 Financial Section

36 Report of Independent Auditors

37 Company Information

In anticipation of the dawn of a fully fledged network society, the electronics device industry has grown rapidly in recent years as shown by the expansion of the digital home appliance consumer market, advancement of all-IP communications and optical networks, and promotion of eco-friendly and increasingly intelligent vehicles.Under these circumstances, the environment surrounding the power electronics industry, which is where we are positioned, is undergoing rapid and radical changes. While, there are increasing demands for smaller packages, higher efficiency, and greater product functionality; there are demands for countermeasures to global warming and for effective use of energy resources.Since Shindengen Electric Manufacturing Company was founded in 1949, the company has pursued power electronics, such as power semiconductors and switching power supplies, as its primary business. Over the years, we have developed countless products that use unique technologies, and have been relentless in our dedication to meeting the expectations and earning the trust of our customers worldwide.As one of the world's few manufacturers that combines device, circuit, and packaging technologies, we will integrate these core technologies while responding to the changing times and environment, to create popular next-generation products while addressing global environmental protection.Based on the company's corporate mission, we are committed to enhancing our corporate value and to further contribute to society by meeting the various needs of our customers by constantly taking on new challenges.

Corporate MissionCorporate Mission

Contents


ProfileProfile

Maximizing energy conversion efficiency for the benefit of humanity and society

Contents

Business SegmentShindengen Electric Manufacturing Company has business interests in devices, equipment, and mechatronics businesses.

Foundation

Manufacturing/Sales

Group Organization

Stocks

Shindengen Electric Manufacturing Company started business in 1949 by taking over the semiconductor and rectification departments from Dengen Kogyo, our forerunner.

Development and sales of silicon rectifier devices and rectifiers started in 1958; we started development and sales of switched-mode stabilized power supplies in 1965; field-effect transistors (FETs) in 1975, IC regulators/rectifiers for motorcycles in 1976; and high-speed rectifier devices in 1979. In ICs, we started development and sales of power ICs for switching power supplies in 1987, and power ICs for power-saving type power supplies in 2002.

We established Akita Shindengen Co., Ltd. in 1970, and Higashine Shindengen Co., Ltd. in 1981 as device manufacturing plants. For overseas manufacturing, we established Lumphun Shindengen Co., Ltd. in 1991 and Shindengen Philippines Corp. in 1995. As a manufacturing plant for the power system business of the equipment sector, we established Shindengen Three E Co., Ltd. in 1992. For overseas manufacturing, we started production of power supplies at Lumphun Shindengen Co., Ltd. in 1993. We established Okabe Shindengen Co., Ltd. in 1985 as a manufacturing plant for the car electronics business of the equipment sector. For overseas manufacturing, we established Shindengen (Thailand) Co., Ltd. in 1988, Guangzhou Shindengen Electronic Co., Ltd. in 1994, and PT. Shindengen Indonesia in 2001.

1958: Listed on Tokyo Stock Exchange (started sales as off-market OTC securities)1961: Listed on Second Section of Tokyo Stock Exchange1968: Listed on First Section of Tokyo Stock Exchange as alternative listing

●Equipment BusinessOur equipment business consists of the power systems business and car electronics business. The power system business consists of products such as rectifiers for communication stations and mobile base stations, power-centralized monitoring systems, switching power supplies for information and industrial equipment, DC/DC converters for communications, information and industrial equipment, and power supplies for film coating equipment. The car electronics business consists of products such as regulators/rectifiers and CDIs for motorcycles, inverters for general-purpose engines, inverter units for cogeneration systems, and DC/DC converter units for 4-wheel vehicles.

●Device BusinessOur device business consists of semiconductor products and advanced power products. In semiconductor products, we design, manufacture, and sell thyristors such as surge protection devices, centering on diode products including general rectifier diodes, bridge diodes, high-speed rectifier diodes and Zener diodes. In advanced power products, we design, manufacture, and sell power ICs for power-saving power supplies, high-withstand voltage power ICs, DC-DC converter power ICs, and more, in addition to switching elements such as MOSFETs.

●Mechatronics BusinessOur products in mechatronics business consist mainly of various solenoids for actuator products.

Device Business

Mechatronics Business

Equipment Business

Car Electronics

Power System

In anticipation of the dawn of a fully fledged network society, the electronics device industry has grown rapidly in recent years as shown by the expansion of the digital home appliance consumer market, advancement of all-IP communications and optical networks, and promotion of eco-friendly and increasingly intelligent vehicles.Under these circumstances, the environment surrounding the power electronics industry, which is where we are positioned, is undergoing rapid and radical changes. While, there are increasing demands for smaller packages, higher efficiency, and greater product functionality; there are demands for countermeasures to global warming and for effective use of energy resources.Since Shindengen Electric Manufacturing Company was founded in 1949, the company has pursued power electronics, such as power semiconductors and switching power supplies, as its primary business. Over the years, we have developed countless products that use unique technologies, and have been relentless in our dedication to meeting the expectations and earning the trust of our customers worldwide.As one of the world's few manufacturers that combines device, circuit, and packaging technologies, we will integrate these core technologies while responding to the changing times and environment, to create popular next-generation products while addressing global environmental protection.Based on the company's corporate mission, we are committed to enhancing our corporate value and to further contribute to society by meeting the various needs of our customers by constantly taking on new challenges.

2 - SHINDENGEN Annual Report

Shindengen Electric Manufacturing Co., Ltd. and its Subsidiaries For the years ended March 31, 2009 and 2008

● Device BusinessSales were ¥34,951 million (21.9% decrease over the previous term), and operating

loss was ¥3,466 million. Device Business sales decreased largely due to a rapid

decrease in demand for devices from the third quarter following a steep decline in

demand for electronic components triggered by the worldwide economic

deterioration. Operating income resulted in a loss due to a fall in revenue and

operation rate triggered by the rapid decline in demand as well as appreciation of the

yen.

● Equipment BusinessAlthough the Japanese communications market remained strong, sales were ¥45,324

million (9.1% decrease over the previous term) as the motorcycle market, which had

remained solid, slowed coupled with a rapid decline in demand for semiconductor

manufacturing devices triggered by the worldwide economic deterioration. Although

business for the Japanese communications market returned increased profits, demand

for motorcycles in Asian regions started to decline in the third quarter, and operating

income was ¥2,636 million (51.1% decrease over the previous term) due to the

impact of depreciation of Asian currencies.

● Mechatronics BusinessIn Mechatronics business, sales were ¥4,963 million (20.0% decrease over the

previous term) mainly due to sluggish growth of actuator products in the

construction machinery and automotive markets. Operating income amounted to

¥204 million (582.8% increase over the previous term) thanks to improvements in

profits of system equipment products.

Sales proportion by division in fiscal 2008 (Consolidated basis)

For the Year:

Net Sales ¥ 85,239 ¥ 100,827 ¥ 102,054 $ 869,787Operating Income (loss) – 4,036 2,287 6,051 –41,188Net Income (loss) –13,271 –2,627 2,646 –135,427

At Year-ended:

Total Assets ¥ 90,620 ¥ 105,407 ¥ 111,972 $ 924,703Total Shareholders' Equity 26,010 39,920 43,035 265,416

Per Share: (Yen and U.S. dollars)Cash Dividends ¥ 3.50 ¥ 7.00 ¥ 7.00 $ 0.04

2009 2008 2007 2009

Millions of Yen

Thousands ofU.S. Dollars

(Note 1)

Yen U.S. Dollars

Note 1: U.S. Dollar amounts are translated from Japanese Yen, for convenience only, at the rate of ¥98 = U.S.$1.

0

20,000

40,000

60,000

80,000

100,000

120,000

2005 2006 2007 2008 2009

Net Sales

0

20,000

40,000

60,000

80,000

100,000

120,000

2005 2006 2007 2008 2009

Total Assets

05,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Total Shareholder's Equity

2005 2006 2007 2008 2009-200-150-100-50

0

10

20

30

40

50

Current net profit per share

2005 2006 2007 2008 2009

(millions of yen)

(millions of yen) (millions of yen) (yen)

88,98598,785 102,054 100,827

14.79

40.28

30.47

-30.27 -152.99

101,960108,013 111,972

105,407

90,620

26,010

35,828

41,08143,035

39,920

454 437

21 19

-6

FY2006 FY2007 FY2008 FY2009

FY2006 FY2007 FY2008 FY2009

FY2006 FY2007 FY2008 FY2009

Breakdown of sales by destinations and their respective percentages

3.3%Europe 0.1%

Others

57.5%Japan

35.6%Asia

3.5%North America

(Consolidated basis)Breakdown of markets and their respective percentages

5.8%Others

18.0%Home appliance

18.2%Industry

30.5%Vehicle

9.9%Information

17.6%Communication

(Non-consolidated basis)

Note: When a year appears in the text (such as 2008), it refers to the fiscal year.


Financial HighlightsFinancial Highlights

85,239

2005 2006 2007 2008 2009

-2,000-4,000

0

2,000

4,000

6,000

8,000

Operating Income (loss)(millions of yen)

5.439

6,9036,051

2,287

-4,036

2005 2006 2007 2008 2009

-5,000-10,000

0

1,000

2,000

3,000

4,000

Net Income (loss)(millions of yen)

1,201

3,311

2,646

-2,627 -13,271


Shindengen Electric Manufacturing Co., Ltd. and its Subsidiaries For the years ended March 31, 2009 and 2008

● Device BusinessSales were ¥34,951 million (21.9% decrease over the previous term), and operating

loss was ¥3,466 million. Device Business sales decreased largely due to a rapid

decrease in demand for devices from the third quarter following a steep decline in

demand for electronic components triggered by the worldwide economic

deterioration. Operating income resulted in a loss due to a fall in revenue and

operation rate triggered by the rapid decline in demand as well as appreciation of the

yen.

● Equipment BusinessAlthough the Japanese communications market remained strong, sales were ¥45,324

million (9.1% decrease over the previous term) as the motorcycle market, which had

remained solid, slowed coupled with a rapid decline in demand for semiconductor

manufacturing devices triggered by the worldwide economic deterioration. Although

business for the Japanese communications market returned increased profits, demand

for motorcycles in Asian regions started to decline in the third quarter, and operating

income was ¥2,636 million (51.1% decrease over the previous term) due to the

impact of depreciation of Asian currencies.

● Mechatronics BusinessIn Mechatronics business, sales were ¥4,963 million (20.0% decrease over the

previous term) mainly due to sluggish growth of actuator products in the

construction machinery and automotive markets. Operating income amounted to

¥204 million (582.8% increase over the previous term) thanks to improvements in


Sales proportion by division in fiscal 2008 (Consolidated basis)

For the Year:

Net Sales ¥ 85,239 ¥ 100,827 ¥ 102,054 $ 869,787Operating Income (loss) – 4,036 2,287 6,051 –41,188Net Income (loss) –13,271 –2,627 2,646 –135,427

At Year-ended:

Total Assets ¥ 90,620 ¥ 105,407 ¥ 111,972 $ 924,703Total Shareholders' Equity 26,010 39,920 43,035 265,416

Per Share: (Yen and U.S. dollars)Cash Dividends ¥ 3.50 ¥ 7.00 ¥ 7.00 $ 0.04

2009 2008 2007 2009

41.0%Device Business

53.2%Equipment Business

5.8%Mechatronics Business

(millions of yen)

(millions of yen) (millions of yen) (yen)

88,98598,785 102,054 100,827

14.79

40.28

30.47

-30.27 -152.99

101,960108,013 111,972

105,407

90,620

26,010

35,828

41,08143,035

39,920

454 437

21 19

-6

FY2006 FY2007 FY2008 FY2009

FY2006 FY2007 FY2008 FY2009

FY2006 FY2007 FY2008 FY2009

Sales Operating profit

0

10,000

20,000

30,000

40,000

50,000

-4,000-2,000

0

1,000

2,000

3,000

4,000(millions of yen)

(millions of yen)

(millions of yen)

Device Business

0

10,000

20,000

30,000

40,000

50,000

60,000

0

2,000

4,000

6,000

8,000

10,000

12,000

44,77448,617 49,864

6,929 6,913

5,429

2,636

45,468 46,500 44,762

34,9512,110

1,455

-644

-3,466

Equipment Business

0

2,000

4,000

6,000

0

200

400

600

800

1,000

8,000

10,0008,542

6,9376,201

360

262

45

4,963

204


(Non-consolidated basis)



Consolidated Business OverviewConsolidated Business Overview

45,324

Dear ShareholdersDear Shareholders

Kojiroh OdaPresident

SHINDENGEN Annual Report - 54 - SHINDENGEN Annual Report

Breakdown of markets and their respective percentagesSales proportion by division in fiscal 2008

As one of the world's few manufacturers integrating "devices,

power supply circuits, and packaging technologies," we provide

our customers with total solutions for power supplies.

■ Main Business PillarsSHINDENGEN consists of the following three businesses:● Device Business

• Semiconductor products

• Advanced power products● Equipment Business

• Power system business

Power system products, module products, power equipment

• Car electronics business

Car electronics products for motorcycle, general-purpose engine

inverters, and 4-wheel vehicles● Mechatronics Business

• Actuator products

• Others

■ Main Technology PillarsSHINDENGEN focuses on the following technologies and products● Devices

• Diodes

• Thyristors

• MOSFETs

• ICs for power-saving power supplies

• Power ICs● Power Systems

• Rectifiers for communication stations

• Switching power supplies for information/industrial equipment

• DC/DC converter modules

• Power supplies for film coating equipment● Car Electronics

• Motorcycle regulators/rectifiers, CDIs

• Inverters for general-purpose engines

• DC/DC converter units for 4-wheel vehicles

■ Sales by Market The sales by market in 2008 are shown in page 5.

■ Financial Statements for 2008Sales in 2008 were ¥85,239 million (15.5% decrease over the previous

term), and current net profits posted a disappointing loss of ¥13,271

million, for which we apologize to shareholders.

■ Overview of 2008 Financial StatementsSales in 2008 were ¥85,239 million (15.5% decrease over the previous

term). In profits and losses, operating income resulted in a loss of

¥4,036 million due to a loss incurred by revaluation of inventory and

the impact of the appreciation of the yen in addition to a fall in

revenue and operation rate; ordinary income resulted in a loss of

¥6,548 million due to exchange-rate losses in addition to the decline

in operating income. Additionally, the current net loss was ¥13,271

million as a result of posting losses on revaluation of investments in

securities and structural reform costs as extraordinary losses, and of

disposing of deferred tax assets.● Market Trends

Although the Japanese communications market remained strong,

(Consolidated basis) (Non-consolidated basis)


As a world leader in power electronics, we contribute to the development of society and to protection of the world's environment by improving our excellent environmental performance and high reliability.

demand for devices fell rapidly from the third quarter due to a rapid

slowdown in the automotive and digital home appliance markets. In

addition, the business severity was increased by a slowdown in the

Asian motorcycle markets as well as rapid shrinkage of the

manufacturing device market caused by the worsening semiconductor

market trends.

■ Overview by Segment in 2008The actual results of each department (segment) are as follows:

● Device Business

[Consolidated: ¥34,951 million, sales composition: 41.0%]

The device business consists of semiconductor products and advanced

power products.

In semiconductor products, we design, manufacture, and sell various

diodes, surge protection devices, and more.

In advanced power products, we mainly design, manufacture, and sell

power ICs for power-saving power supplies and high-withstand

voltage power ICs.

Device Business sales were ¥34,951 million, a 21.9% decrease over

the previous term. Operating income posted a loss of ¥3,466 million

as a result of a fall in revenue and operation rate triggered by a rapid

decline in demand as well as appreciation of the yen.

● Equipment Business


The equipment business consists of power system products and car

electronics products.

Power system products consist of rectifiers for communication

stations, various switching power supplies, DC/DC converters,

power supplies for film coating equipment, and more.

Car electronics products consist of motorcycle regulators and CDIs,

inverters for general-purpose engines, DC/DC converter units for

4-wheel vehicles, and more.

Equipment Business sales were ¥45,324 (9.1% decrease over the

previous term). Operating income was ¥2,636 million (51.1%

decrease over the previous term) due to a rapid fall in demand for

semiconductor manufacturing devices as well as the impact of the

slowdown in Asian motorcycle markets and the depreciation of

Asian currencies.

● Mechatronics Business


Mechatronics products mainly consist of various solenoids for

actuator products. Sales for Mechatronics business were ¥4,963

million (20.0% decrease over the previous term), due mainly to

sluggish growth of actuator products in the construction machinery


Kojiroh OdaPresident


Breakdown of markets and their respective percentagesSales proportion by division in fiscal 2008

As one of the world's few manufacturers integrating "devices,

power supply circuits, and packaging technologies," we provide

our customers with total solutions for power supplies.

■ Main Business PillarsSHINDENGEN consists of the following three businesses:● Device Business

• Semiconductor products

• Advanced power products● Equipment Business

• Power system business

Power system products, module products, power equipment

• Car electronics business

Car electronics products for motorcycle, general-purpose engine

inverters, and 4-wheel vehicles● Mechatronics Business

• Actuator products

• Others

■ Main Technology PillarsSHINDENGEN focuses on the following technologies and products● Devices

• Diodes

• Thyristors

• MOSFETs

• ICs for power-saving power supplies

• Power ICs● Power Systems

• Rectifiers for communication stations

• Switching power supplies for information/industrial equipment

• DC/DC converter modules

• Power supplies for film coating equipment● Car Electronics

• Motorcycle regulators/rectifiers, CDIs

• Inverters for general-purpose engines

• DC/DC converter units for 4-wheel vehicles

■ Sales by Market The sales by market in 2008 are shown in page 5.

■ Financial Statements for 2008Sales in 2008 were ¥85,239 million (15.5% decrease over the previous

term), and current net profits posted a disappointing loss of ¥13,271

million, for which we apologize to shareholders.

■ Overview of 2008 Financial StatementsSales in 2008 were ¥85,239 million (15.5% decrease over the previous

term). In profits and losses, operating income resulted in a loss of

¥4,036 million due to a loss incurred by revaluation of inventory and

the impact of the appreciation of the yen in addition to a fall in

revenue and operation rate; ordinary income resulted in a loss of

¥6,548 million due to exchange-rate losses in addition to the decline

in operating income. Additionally, the current net loss was ¥13,271

million as a result of posting losses on revaluation of investments in

securities and structural reform costs as extraordinary losses, and of

disposing of deferred tax assets.● Market Trends

Although the Japanese communications market remained strong,

(Consolidated basis) (Non-consolidated basis)


As a world leader in power electronics, we contribute to the development of society and to protection of the world's environment by improving our excellent environmental performance and high reliability.

demand for devices fell rapidly from the third quarter due to a rapid

slowdown in the automotive and digital home appliance markets. In

addition, the business severity was increased by a slowdown in the

Asian motorcycle markets as well as rapid shrinkage of the

manufacturing device market caused by the worsening semiconductor

market trends.

■ Overview by Segment in 2008The actual results of each department (segment) are as follows:

● Device Business


The device business consists of semiconductor products and advanced

power products.

In semiconductor products, we design, manufacture, and sell various

diodes, surge protection devices, and more.

In advanced power products, we mainly design, manufacture, and sell

power ICs for power-saving power supplies and high-withstand

voltage power ICs.

Device Business sales were ¥34,951 million, a 21.9% decrease over

the previous term. Operating income posted a loss of ¥3,466 million

as a result of a fall in revenue and operation rate triggered by a rapid

decline in demand as well as appreciation of the yen.

● Equipment Business


The equipment business consists of power system products and car

electronics products.

Power system products consist of rectifiers for communication

stations, various switching power supplies, DC/DC converters,

power supplies for film coating equipment, and more.

Car electronics products consist of motorcycle regulators and CDIs,

inverters for general-purpose engines, DC/DC converter units for

4-wheel vehicles, and more.

Equipment Business sales were ¥45,324 (9.1% decrease over the

previous term). Operating income was ¥2,636 million (51.1%

decrease over the previous term) due to a rapid fall in demand for

semiconductor manufacturing devices as well as the impact of the

slowdown in Asian motorcycle markets and the depreciation of

Asian currencies.

● Mechatronics Business


Mechatronics products mainly consist of various solenoids for

actuator products. Sales for Mechatronics business were ¥4,963

million (20.0% decrease over the previous term), due mainly to

sluggish growth of actuator products in the construction machinery

5.8%Others

18.0%Home appliance

18.2%Industry

30.5%Vehicle

9.9%Information

17.6%Communication

41.0%Device Business

53.2%Equipment Business

5.8%Mechatronics Business




and automotive markets. Operating income amounted to ¥204

million (582.8% increase over the previous term) thanks to

improvements in profits of system equipment products.

■ Achieving Corporate MissionOur company's business domain is "power supplies, or power

electronics." Our group activities contribute to protecting the global

environment by saving power/energy and play a very important role

in society. We believe that "maximizing energy conversion efficiency

for the benefit of humanity and society" will help expand our group.

We ask our stockholders for still greater understanding and support.

Top InterviewQ1 Looking back at first half year of 2008, what happened?

In the first half, our business fell into the red for the first time in

seven accounting periods, and we suffered a large final operating loss

of more than ¥13 billion. In 2007, we posted a final loss of

¥2.6 billion due to special one-off factors, so we have seen final

losses in two consecutive periods. Market and other information

show that we cannot expect any rapid improvement in orders under

present circumstances. Today, we are at a "crucial moment" in our

business history.

As the first topic to address, we must touch on the abrupt change in

the social and economic environment. The collapse of the US

financial bubble spread quickly to Europe and Asia, resulting in a

stagnant real economy and collapse in demand for manufactured

products. Like many manufacturers, our company is coming under

increasing pressure. Clearly, the business model of small profits and

quick returns developed in the "three Chinas" (mainland China,

Hong Kong, and Taiwan) caused continuing high break-even values

and destroyed the ability to respond rapidly to changes in orders. As

a result, after the sudden halt in economic expansion, every industry

sector has surplus production.

Our corporate structure suffers from the same problems and our

device business has suffered huge damage because of the high ratio

of sales to plants in the "three Chinas." However, the equipment

business, such as Rectifiers and Car Electronics has suffered less.

Q2 What are your opinions on structural reform efforts?

I think there are differences between business areas, but a simple

recovery like in the past cannot be expected in this current recession.

Fields like automobiles, energy, industrial materials, digital

appliances, etc., are seeing a large and accelerating paradigm shift

from wasteful resource consumption to resource saving and

recycling, such as from internal-combustion to hybrid and fuel-cell

vehicles, as well as from fossil fuels to renewable water, wind and

solar energy sources. The development policy is increasingly based

on full commitment to high functionality.

Therefore, it may be difficult to recover based on today's products,

and it is more important to develop products matching customers'

and society's changing needs.

The prospect of no economic recovery based existing products

means that even shifting smoothly to new products will still have

major problems if we have excessive production using inappropriate

facilities. This is the biggest factor in structural reform now.

Q3 What are the structural reform contents?

To improve profits, we must immediately cut excessive fixed costs to

match the scale of current orders. Therefore, we have been reducing

fixed personnel costs and overheads since the previous quarter.

These reductions will be ongoing and in line with structural reforms

in each business area, and I think they will be painful for a while.

Also, to optimize production lines and maintain competitive

strength, we are shifting production overseas while scaling back

foundries and excessive production both in Japan and overseas.

However, we cannot neglect technology improvements because they

are the basis of manufacturing. The future will see a new

development race and we cannot neglect structural changes in the

business environment surrounding our industry.

Learning from the sudden collapse of traditional systems, instead of

development centered on high functionality and model changes

ahead of other businesses to make early-bird profits, rather than

abandon old technologies we are re-evaluating them as stable, safe

and low-cost technologies for reuse as "resources."

Of course, this is occurring against a background of commoditization

and price reductions for basic products, but we have started to

understand that development based on only commitment to high

functionality using easily copied digital technology is irrational.

At our company, I want to cut fixed costs by reducing development

losses and developer fatigue, by improving development efficiency,

and by focusing on analog technology where we excel.

Q4 What are the future issues and prospects?

The issue now is to push through reforms to get closer to the real

heart of the business, while continuing with stopgap structural

reforms from the previous fourth quarter to stem losses.

We have overcome several previous crises, such as the 2001 bursting of

the IT bubble, but we must remember that the results of measures we

implemented then were not incorporated into our company DNA.

Regrettably, we did not learn the lesson of the need for regular structural

reform and scrapping of unprofitable goods and services.

We see this major recession as a chance to become a "muscular business"

by implementing structural reform to "revitalize our DNA." I think our

mission is to hand on this new company to the next generation.

Q5 Finally, are you enthusiastic about a business recovery?

Although there are signs of long-term stagnation, the situation will

reverse someday. While waiting patiently for this reversal, to remove

obstacles to progress, we must tear-down and rebuild many of our

traditional systems, technologies, methods and facilities.

Now, we are in the early tearing-down stage while many new products

for the environment and new energy fields are waiting idly. I want to

overcome this difficult period and prepare for the next generation.


and automotive markets. Operating income amounted to ¥204

million (582.8% increase over the previous term) thanks to

improvements in profits of system equipment products.

■ Achieving Corporate MissionOur company's business domain is "power supplies, or power

electronics." Our group activities contribute to protecting the global

environment by saving power/energy and play a very important role

in society. We believe that "maximizing energy conversion efficiency

for the benefit of humanity and society" will help expand our group.

We ask our stockholders for still greater understanding and support.

Top InterviewQ1 Looking back at first half year of 2008, what happened?

In the first half, our business fell into the red for the first time in

seven accounting periods, and we suffered a large final operating loss

of more than ¥13 billion. In 2007, we posted a final loss of

¥2.6 billion due to special one-off factors, so we have seen final

losses in two consecutive periods. Market and other information

show that we cannot expect any rapid improvement in orders under

present circumstances. Today, we are at a "crucial moment" in our

business history.

As the first topic to address, we must touch on the abrupt change in

the social and economic environment. The collapse of the US

financial bubble spread quickly to Europe and Asia, resulting in a

stagnant real economy and collapse in demand for manufactured

products. Like many manufacturers, our company is coming under

increasing pressure. Clearly, the business model of small profits and

quick returns developed in the "three Chinas" (mainland China,

Hong Kong, and Taiwan) caused continuing high break-even values

and destroyed the ability to respond rapidly to changes in orders. As

a result, after the sudden halt in economic expansion, every industry

sector has surplus production.

Our corporate structure suffers from the same problems and our

device business has suffered huge damage because of the high ratio

of sales to plants in the "three Chinas." However, the equipment

business, such as Rectifiers and Car Electronics has suffered less.

Q2 What are your opinions on structural reform efforts?

I think there are differences between business areas, but a simple

recovery like in the past cannot be expected in this current recession.

Fields like automobiles, energy, industrial materials, digital

appliances, etc., are seeing a large and accelerating paradigm shift

from wasteful resource consumption to resource saving and

recycling, such as from internal-combustion to hybrid and fuel-cell

vehicles, as well as from fossil fuels to renewable water, wind and

solar energy sources. The development policy is increasingly based

on full commitment to high functionality.

Therefore, it may be difficult to recover based on today's products,

and it is more important to develop products matching customers'

and society's changing needs.

The prospect of no economic recovery based existing products

means that even shifting smoothly to new products will still have

major problems if we have excessive production using inappropriate

facilities. This is the biggest factor in structural reform now.

Q3 What are the structural reform contents?

To improve profits, we must immediately cut excessive fixed costs to

match the scale of current orders. Therefore, we have been reducing

fixed personnel costs and overheads since the previous quarter.

These reductions will be ongoing and in line with structural reforms

in each business area, and I think they will be painful for a while.

Also, to optimize production lines and maintain competitive

strength, we are shifting production overseas while scaling back

foundries and excessive production both in Japan and overseas.

However, we cannot neglect technology improvements because they

are the basis of manufacturing. The future will see a new

development race and we cannot neglect structural changes in the

business environment surrounding our industry.

Learning from the sudden collapse of traditional systems, instead of

development centered on high functionality and model changes

ahead of other businesses to make early-bird profits, rather than

abandon old technologies we are re-evaluating them as stable, safe

and low-cost technologies for reuse as "resources."

Of course, this is occurring against a background of commoditization

and price reductions for basic products, but we have started to

understand that development based on only commitment to high

functionality using easily copied digital technology is irrational.

At our company, I want to cut fixed costs by reducing development

losses and developer fatigue, by improving development efficiency,

and by focusing on analog technology where we excel.

Q4 What are the future issues and prospects?

The issue now is to push through reforms to get closer to the real

heart of the business, while continuing with stopgap structural

reforms from the previous fourth quarter to stem losses.

We have overcome several previous crises, such as the 2001 bursting of

the IT bubble, but we must remember that the results of measures we

implemented then were not incorporated into our company DNA.

Regrettably, we did not learn the lesson of the need for regular structural

reform and scrapping of unprofitable goods and services.

We see this major recession as a chance to become a "muscular business"

by implementing structural reform to "revitalize our DNA." I think our

mission is to hand on this new company to the next generation.

Q5 Finally, are you enthusiastic about a business recovery?

Although there are signs of long-term stagnation, the situation will

reverse someday. While waiting patiently for this reversal, to remove

obstacles to progress, we must tear-down and rebuild many of our

traditional systems, technologies, methods and facilities.

Now, we are in the early tearing-down stage while many new products

for the environment and new energy fields are waiting idly. I want to

overcome this difficult period and prepare for the next generation.

-200

-100

0

100

200

0

600

300

900

1200

Profit (¥100 million yen) Sales value (¥100 million)

31

842889

9871020 1008

852

5469 60

22

-40

-132

-26

2003 2004 2005 2006 2007 2008

Operating income Net profit in period Sales value

Overview of structural reforms

Slashing fixed costs• Cut labor costs• Reduce costs• Reduce investment

Squeezing variable costs• Reduce costs of raw materials• Make good use of overseas group members

Optimizing production in Japan and overseas• Consolidate production bases• Accelerate overseas production shift• Consolidate foundry use

Promoting development efficiency• Breakaway from full commitment to high functionality

• Proactively develop analog technology

Selecting orders• Scrap unprofitable products

-1212 33 26

Research and DevelopmentResearch and Development


■ StructureThe group's R&D structure consists mainly of the R&D center,

which is in charge of basic research and applied technology

development; each business department, which is mainly in charge of

product development; and the design and development departments

of the group companies. In power electronics field which is our main

business domain, greater functionality, downsizing and higher

efficiency, and lower noise are key R&D themes. The group will

pursue these research tasks and develop new products meeting

market needs in a timely manner. At the same time, we will work on

R&D based on our Corporate Mission of "maximizing energy

conversion efficiency for the benefit of humanity and society."

■ R&D CostsThe R&D costs in 2008 were ¥4,544 million (4.1% increase over the

previous year) and comprised 5.3% of sales (4.3% in previous year).

■ Major R&D Themes in 2008The key themes of the R&D center include mass-production of SiC

(silicon carbide), which is a promising next-generation material. The

center has focused on the potential of this device since the earliest

stage when SiC substrates were developed and been proactively

researching and developing manufacturing processes and devices.

Today, we are already in the reliability and system verification phase

for SiC devices developed by test production on our own lines, and

practical use is coming closer. In 2009, we will also focus in R&D

into mass production to achieve an early product launch.


The other new R&D themes in the power supply circuit technology

development center include magnetic body technology, which plays

an important role in power supplies. We will not only develop new

power supply circuits and applications to create high-efficiency power

supplies, but will also continue research in new technology domains,

such as magnetic bodies.

■ SummaryWe will proactively continue medium and long-term R&D to

increase our core competence in "devices, power-supply circuits, and

packaging technologies," and to develop new products fusing these

technologies synergistically.

As environmental problems including global warming become more

serious, we aim to contribute to building an eco-friendly society by

offering "environmental performance"-oriented products using "new

power-saving technologies."

Efficiency and quality are both commitments we take seriously. Our leading position in the global market testifies to our quality.

Device BusinessDevice Business

Silicon wafer heat-treatment process

We create new markets by advancing and integrating core technologies. We use our next-generation technologies for research and development to satisfy customers by offering products with ever-increasing environmental performance.

halving the thickness of our conventional products. We also

developed the array-type CB series, which can mount two diode

chips. Both series have excellent reliability and can endure severe

environments such as inside the engine compartments of

automobiles. For the digital home appliance and power supply

markets, we developed a high-speed rectifier diode optimized for

PFC circuits. Additionally, we developed a short bridge diode as a

product meeting the needs of flat-panel TVs. ● Advanced Power Products

We developed high-withstand voltage power ICs with improved

environmental performance for power control, and expanded the

series. Additionally, we developed our original control technology for

high-withstand voltage power ICs for PFC circuit control to expand

sales in power supplies, and expect commercialization soon. We

developed the new Hi-PotMOS series of MOSFETs, achieving both

industry-leading low on-resistance and a high fracture endurance

among planar types.

■ 2009 ForecastThe 2009 sales target is ¥28,000 million (19.9% decrease over the

previous term).

2009 sales are expected to be much lower than the previous year in all

markets, such as home appliances, automotives, industry,

communications, and information, due to the worsening world

economy.

Under these circumstances, we expect some demand expansion in the

automotive market, particularly for eco-friendly vehicles, as well as

increase in demand for devices for environmental and new energy fields.

■ SummaryThe device business plays a central role in our company. Our devices

are used in power devices and car electronics products, and play an

important role in producing cross-business synergy effects.

Having both circuit and device technologies is one of our business

strengths. We can proactively develop new products according to the

needs for circuit technology, and can also provide one-stop solutions

to various customer problems.

Research and DevelopmentResearch and Development


■ StructureThe group's R&D structure consists mainly of the R&D center,

which is in charge of basic research and applied technology

development; each business department, which is mainly in charge of

product development; and the design and development departments

of the group companies. In power electronics field which is our main

business domain, greater functionality, downsizing and higher

efficiency, and lower noise are key R&D themes. The group will

pursue these research tasks and develop new products meeting

market needs in a timely manner. At the same time, we will work on

R&D based on our Corporate Mission of "maximizing energy

conversion efficiency for the benefit of humanity and society."

■ R&D CostsThe R&D costs in 2008 were ¥4,544 million (4.1% increase over the

previous year) and comprised 5.3% of sales (4.3% in previous year).

■ Major R&D Themes in 2008The key themes of the R&D center include mass-production of SiC

(silicon carbide), which is a promising next-generation material. The

center has focused on the potential of this device since the earliest

stage when SiC substrates were developed and been proactively

researching and developing manufacturing processes and devices.

Today, we are already in the reliability and system verification phase

for SiC devices developed by test production on our own lines, and

practical use is coming closer. In 2009, we will also focus in R&D

into mass production to achieve an early product launch.


The other new R&D themes in the power supply circuit technology

development center include magnetic body technology, which plays

an important role in power supplies. We will not only develop new

power supply circuits and applications to create high-efficiency power

supplies, but will also continue research in new technology domains,

such as magnetic bodies.

■ SummaryWe will proactively continue medium and long-term R&D to

increase our core competence in "devices, power-supply circuits, and

packaging technologies," and to develop new products fusing these

technologies synergistically.

As environmental problems including global warming become more

serious, we aim to contribute to building an eco-friendly society by

offering "environmental performance"-oriented products using "new

power-saving technologies."

Efficiency and quality are both commitments we take seriously. Our leading position in the global market testifies to our quality.

Device BusinessDevice Business

Bridge diodes

The device business consists of two products:

semiconductor products, and advanced power products.

■ Key ProductsIn semiconductor products, we design, manufacture, and sell

thyristors such as surge protection devices centered on diode products

such as general rectifier diodes, bridge diodes, high-speed rectifier

diodes, and Zener diodes.

In advanced power products, we design, manufacture, and sell power

IC products such as power ICs for power-saving power supplies,

high-withstand voltage power ICs, DC-DC converter power ICs,

in addition to switching elements such as MOSFETs.

■ 2008 Sales RsultsThe 2008 Device Business sales were ¥34,951 million, a 21.9% decrease

over the previous term. The operating results posted a loss of ¥3,466

million as a result of a fall in revenue and operation rate triggered by a

rapid decline in demand as well as appreciation of the yen.

In semiconductor products, revenues decreased due to a rapid decline

in demand for power diodes for the automotive market, which had

remained solid, in the third quarter, and to the sluggish digital home

appliance and industrial equipment markets.

In advanced power products, revenues decreased due to a rapid

slowdown of power ICs for inverter lighting, which had remained

relatively solid until the second quarter, and to sluggish sales of

switching devices such as MOSFETs for game consoles.

■ 2008 New Product Development Trends● Semiconductor Products

As small surface-mount diode series, we developed the CE series,


High speed rectifier diodes

Photo process

DCar Electronics


Device Business

Power SystemWe create new markets by advancing and integrating core technologies. We use our next-generation technologies for research and development to satisfy customers by offering products with ever-increasing environmental performance.

halving the thickness of our conventional products. We also

developed the array-type CB series, which can mount two diode

chips. Both series have excellent reliability and can endure severe

environments such as inside the engine compartments of

automobiles. For the digital home appliance and power supply

markets, we developed a high-speed rectifier diode optimized for

PFC circuits. Additionally, we developed a short bridge diode as a

product meeting the needs of flat-panel TVs. ● Advanced Power Products

We developed high-withstand voltage power ICs with improved

environmental performance for power control, and expanded the

series. Additionally, we developed our original control technology for

high-withstand voltage power ICs for PFC circuit control to expand

sales in power supplies, and expect commercialization soon. We

developed the new Hi-PotMOS series of MOSFETs, achieving both

industry-leading low on-resistance and a high fracture endurance

among planar types.

■ 2009 ForecastThe 2009 sales target is ¥28,000 million (19.9% decrease over the

previous term).

2009 sales are expected to be much lower than the previous year in all

markets, such as home appliances, automotives, industry,

communications, and information, due to the worsening world

economy.

Under these circumstances, we expect some demand expansion in the

automotive market, particularly for eco-friendly vehicles, as well as

increase in demand for devices for environmental and new energy fields.

■ SummaryThe device business plays a central role in our company. Our devices

are used in power devices and car electronics products, and play an

important role in producing cross-business synergy effects.

Having both circuit and device technologies is one of our business

strengths. We can proactively develop new products according to the

needs for circuit technology, and can also provide one-stop solutions

to various customer problems.

Equipment Business ( Power system / Car electronics )Equipment Business ( Power system / Car electronics



In reliability and ecology, we demand the world's highest standards. The technology we have cultivated in the motorcycle market undergirds our full-scale entrance into the eco-friendly automotive market.

Equipment Business ( Car electronics / Power system )Equipment Business ( Car electronics / Power system )


We aggressively develop environmentally sound products to meet the newest challenges from the environment and from the energy marketplace.

PCar Electronics


Device Business

Power System


The equipment business consists of the power system

business, and the car electronics business.

■ Key ProductsThe power system business consists of products such as rectifiers for

communication stations and mobile base stations, power-centralized

monitoring systems, switching power supplies for

information/industrial equipment, DC/DC converter modules for

communications, information, and industrial equipment, and power

supplies for film coating equipment.

The car electronics business consists of products such as motorcycle

regulators/rectifiers and CDIs, inverters for general-purpose engines,

inverter units for cogeneration systems, and DC/DC converter units

for 4-wheel vehicles.

■ 2008 Sales ResultsEquipment Business sales in 2008 were ¥45,324 million (9.1%

decrease over the previous term), and operating income was ¥2,636

million (51.1% decrease over the previous term), reporting a decrease

in income and profit. This is mainly due to rapid shrinkage in

demand for power supplies for semiconductor manufacturing devices

as well as the impact of the slowdown of the Asian motorcycle

markets, etc.

*See each product description for details by segment.

■ 2009 Sales ForecastThe 2009 sales target is ¥40,100 million (11.5% decrease over the

previous term).


●Power System BusinessPower system products, module products, power equipmentIn power system products, our rectifiers for communication stations

and mobile base stations take top market share in Japan. In module

products, we have a large share in power supplies for storage devices,

which continue to grow with development of all-IP communications

and optical networks. In the environment and new energy market,

we are also working on development of power supplies for power-

saving LED lighting.

■ 2008 Market PerformanceIn power system products, although rectifiers for Next Generation

Networks (NGN) and mobile base stations, as well as power supplies

for storage devices, etc., both remained strong, revenues decreased

due to a fall in demand for power supplies for film coating

equipment triggered by the worsening semiconductor market.

■ 2008 New Product Development TrendsIn power system products, we conducted test production of power

supplies for HVDC (high-voltage DC) power supply units with a

new power supply system aimed at reduction of environmental load

in rectifiers for the communications market. In module products, we

developed a new general-purpose non-insulated DC/DC converter

for the industrial equipment market. In the environment and new

energy fields, we have expanded the lineup of power supplies for

LED lighting. In power supplies for film coating equipment for flat-

panel LCD TVs and photovoltaic power generation panels,

we developed a large-capacity 140-kW type for larger substrates.

■ 2009 FrecastIn power system products, although the Japanese communications

market including Next Generation Networks (NGN) and mobile

base stations is expected to remain strong, we forecast a fall in

revenue from the previous term for the overall power system business

due to sluggish growth in power supplies for semiconductor

manufacturing devices and a fall in demand for power supplies for

storage devices and module products for industrial equipment.

■ SummaryIn the power system business, we are proactively developing products

pursuing environmental performance to develop the environment

and new energy markets as a new revenue pillar. Specifically, we are

developing inverter products for photovoltaic power generation and

high-efficiency power supplies for expanding LED lighting. Success

in this new environment and energy market demands synergy

between semiconductor/IC technologies in the device business and

inverter/packaging technologies in the car electronics business.

We will seek to develop original products by strengthening the links

between each division.

Car electronics products for motorcycles and 4-wheel

vehicles, and inverter products for general-purpose engines

We hold the top world market share of regulators/rectifiers and CDIs

for car electronics products for motorcycles.

As car electronics products for general-purpose engines, we sell

microcomputer controlled sine-wave inverters that supply high-

quality AC waveforms equivalent to commercial power.

Typical car electronics products for 4-wheel vehicles are DC/DC

converter units that convert high voltage to low voltage for hybrid

electric vehicles (HEVs) and fuel cell vehicles (FCVs).

These car electronics products use many in-house devices. Synergy

with the device business is the source of our competitive edge.

■ 2008 Market PerformanceDemand for motorcycles in Asian regions started to decrease in the

third quarter, and revenues decreased due to the impact of

depreciation of Asian currencies.

■ 2008 New Product Development TrendsIn car electronics products, we developed a lighting control device for

LED fog lamps for the first time in the 4-wheel vehicle market.

Additionally, we mass-produced DC/DC converter modules for

hybrid cars. In the motorcycle market, we mass-produced high-

efficiency switch-mode battery chargers for the European, ASEAN,

and Chinese markets. At the same time, in the general-purpose

engine market, we developed inverter power supplies for gas

cogeneration-system control devices targeted at general households

in North America as products for the environment and new energy

markets.

■ 2009 ForecastElectronics products are forecast to stay sluggish in the motorcycle

markets for Japan, North America, Europe, and elsewehere. Demand

is also expected to decline in some Asian regions, such as Indonesia

and Thailand. Demand for inverters used for general-purpose

engines is estimated to remain flat in North America, and this term's

revenues in the car electronics business are forecast to decrease from

the previous term.

■ SummaryIn the key motorcycle market, we will continue to focus on

development of eco-friendly products.

In the increasingly sophisticated motorcycle market,

commercialization of high-current high-efficiency regulator/rectifier

products is urgently required. We will meet these needs using our

proud heat-dissipation packaging technology in addition to

achieving lower losses by using our unique high-efficiency circuits.

We will also release new control units as fuel-efficient fuel injection

(FI) products. We will continue to hold the top world share of the

motorcycle market based on these high level technologies.

The 4-wheel vehicle market is in the midst of a paradigm shift from

the internal combustion engine to electric power. Following this

trend, eco-friendly HEVs and FCVs need high-efficiency power

supplies more than ever. We developed and started mass-production

of DC/DC converter units for HEVs in August 2008; they offer

smaller and higher efficiency than our conventional productions,

fusing our expertise in electronics technologies for motorcycles with

our core competence in "devices, power-supply circuits, and

packaging technologies."

In the environment and new energy field, we also provide control

units for cogeneration systems that are rapidly spreading.

In the future, we will also develop products with potential for

overseas deployment.

As to this business, software development is positioned as an

extremely important task to meet more complicated functions, and

we will also seek to establish/standardize software technology and

educate software engineers.

Rectifier for communication equipment

)



In reliability and ecology, we demand the world's highest standards. The technology we have cultivated in the motorcycle market undergirds our full-scale entrance into the eco-friendly automotive market.

Equipment Business ( Car electronics / Power system )Equipment Business ( Car electronics / Power system )


CCar Electronics

Device Business

Power System


The equipment business consists of the power system

business, and the car electronics business.

■ Key ProductsThe power system business consists of products such as rectifiers for

communication stations and mobile base stations, power-centralized

monitoring systems, switching power supplies for

information/industrial equipment, DC/DC converter modules for

communications, information, and industrial equipment, and power

supplies for film coating equipment.

The car electronics business consists of products such as motorcycle

regulators/rectifiers and CDIs, inverters for general-purpose engines,

inverter units for cogeneration systems, and DC/DC converter units

for 4-wheel vehicles.

■ 2008 Sales ResultsEquipment Business sales in 2008 were ¥45,324 million (9.1%

decrease over the previous term), and operating income was ¥2,636

million (51.1% decrease over the previous term), reporting a decrease

in income and profit. This is mainly due to rapid shrinkage in

demand for power supplies for semiconductor manufacturing devices

as well as the impact of the slowdown of the Asian motorcycle

markets, etc.


■ 2009 Sales ForecastThe 2009 sales target is ¥40,100 million (11.5% decrease over the

previous term).


●Power System BusinessPower system products, module products, power equipmentIn power system products, our rectifiers for communication stations

and mobile base stations take top market share in Japan. In module

products, we have a large share in power supplies for storage devices,

which continue to grow with development of all-IP communications

and optical networks. In the environment and new energy market,

we are also working on development of power supplies for power-

saving LED lighting.

■ 2008 Market PerformanceIn power system products, although rectifiers for Next Generation

Networks (NGN) and mobile base stations, as well as power supplies

for storage devices, etc., both remained strong, revenues decreased

due to a fall in demand for power supplies for film coating

equipment triggered by the worsening semiconductor market.

■ 2008 New Product Development TrendsIn power system products, we conducted test production of power

supplies for HVDC (high-voltage DC) power supply units with a

new power supply system aimed at reduction of environmental load

in rectifiers for the communications market. In module products, we

developed a new general-purpose non-insulated DC/DC converter

for the industrial equipment market. In the environment and new

energy fields, we have expanded the lineup of power supplies for

LED lighting. In power supplies for film coating equipment for flat-

panel LCD TVs and photovoltaic power generation panels,

we developed a large-capacity 140-kW type for larger substrates.

■ 2009 FrecastIn power system products, although the Japanese communications

market including Next Generation Networks (NGN) and mobile

base stations is expected to remain strong, we forecast a fall in

revenue from the previous term for the overall power system business

due to sluggish growth in power supplies for semiconductor

manufacturing devices and a fall in demand for power supplies for

storage devices and module products for industrial equipment.

■ SummaryIn the power system business, we are proactively developing products

pursuing environmental performance to develop the environment

and new energy markets as a new revenue pillar. Specifically, we are

developing inverter products for photovoltaic power generation and

high-efficiency power supplies for expanding LED lighting. Success

in this new environment and energy market demands synergy

between semiconductor/IC technologies in the device business and

inverter/packaging technologies in the car electronics business.

We will seek to develop original products by strengthening the links

between each division.

Car electronics products for motorcycles and 4-wheel

vehicles, and inverter products for general-purpose engines

We hold the top world market share of regulators/rectifiers and CDIs

for car electronics products for motorcycles.

As car electronics products for general-purpose engines, we sell

microcomputer controlled sine-wave inverters that supply high-

quality AC waveforms equivalent to commercial power.

Typical car electronics products for 4-wheel vehicles are DC/DC

converter units that convert high voltage to low voltage for hybrid

electric vehicles (HEVs) and fuel cell vehicles (FCVs).

These car electronics products use many in-house devices. Synergy

with the device business is the source of our competitive edge.

■ 2008 Market PerformanceDemand for motorcycles in Asian regions started to decrease in the

third quarter, and revenues decreased due to the impact of

depreciation of Asian currencies.

■ 2008 New Product Development TrendsIn car electronics products, we developed a lighting control device for

LED fog lamps for the first time in the 4-wheel vehicle market.

Additionally, we mass-produced DC/DC converter modules for

hybrid cars. In the motorcycle market, we mass-produced high-

efficiency switch-mode battery chargers for the European, ASEAN,

and Chinese markets. At the same time, in the general-purpose

engine market, we developed inverter power supplies for gas

cogeneration-system control devices targeted at general households

in North America as products for the environment and new energy

markets.

■ 2009 ForecastElectronics products are forecast to stay sluggish in the motorcycle

markets for Japan, North America, Europe, and elsewehere. Demand

is also expected to decline in some Asian regions, such as Indonesia

and Thailand. Demand for inverters used for general-purpose

engines is estimated to remain flat in North America, and this term's

revenues in the car electronics business are forecast to decrease from

the previous term.

■ SummaryIn the key motorcycle market, we will continue to focus on

development of eco-friendly products.

In the increasingly sophisticated motorcycle market,

commercialization of high-current high-efficiency regulator/rectifier

products is urgently required. We will meet these needs using our

proud heat-dissipation packaging technology in addition to

achieving lower losses by using our unique high-efficiency circuits.

We will also release new control units as fuel-efficient fuel injection

(FI) products. We will continue to hold the top world share of the

motorcycle market based on these high level technologies.

The 4-wheel vehicle market is in the midst of a paradigm shift from

the internal combustion engine to electric power. Following this

trend, eco-friendly HEVs and FCVs need high-efficiency power

supplies more than ever. We developed and started mass-production

of DC/DC converter units for HEVs in August 2008; they offer

smaller and higher efficiency than our conventional productions,

fusing our expertise in electronics technologies for motorcycles with

our core competence in "devices, power-supply circuits, and

packaging technologies."

In the environment and new energy field, we also provide control

units for cogeneration systems that are rapidly spreading.

In the future, we will also develop products with potential for

overseas deployment.

As to this business, software development is positioned as an

extremely important task to meet more complicated functions, and

we will also seek to establish/standardize software technology and

educate software engineers.

Rectifier for communication equipment

Regulators/Rectifiers, CDIs for motorcycle

DC/DC converter units for HEV, FCV

Mechatronics BusinessMechatronics Business



The Shindengen Group uses business as an opportunity to promote environmental management, for the sake of the future of society and the welfare of humanity.

Approaches to Environment Protection ActivitiesApproaches to Environment Protection Activities

For over 40 years, our advanced mechatronic technology and reliable quality have been pillars of the automotive and industrial equipment markets.

Our other business consists of actuator products, system

equipment, and more.

■ ActuatorsRotary solenoids, push-pull solenoids, tubular solenoids, open-frame

solenoids, proportional solenoids and on-off solenoids

Actuator products convert electromagnetic force obtained from

electrical energy directly into kinetic energy. A feature of our

actuator products is the creation of original products fusing circuit

technology with high-level mechatronics technology. Our products

are highly acclaimed in the automotive, hydraulic equipment and

industrial equipment markets, and sales continue to expand.

■ Business ManagementWe design, manufacture and sell solenoid actuator products. The

business is managed by Shindengen Mechatronics Co., Ltd., which

was spun off in February 2002.

■ 2008 Sales ResultsSales in 2008 were ¥4,963 million, a drop of 20.0% compared to the

previous term. Actuator products in the construction machinery and

automotive markets remained sluggish mainly due to the worldwide

economic deterioration. Operating income was ¥204 million

(582.8% increase over the previous term) thanks to improvements in


■ 2008 Market and Development Trends● Actuator Products

Although we forecast growth in proportional solenoids for shift

locks and High/Low switching of HID lamps, and open-frame

MCar Electronics


Device Business

Power System

Solenoids

*1 The coefficient used to calculate CO2 emissions from power consumption is announced annually by the power utility.

*2 The ratio of carbon-free nuclear power in the generation mix dropped due to a decrease in the number of nuclear power plants online during the year.

*3 Our corporate numeric goal for zero emissions is less than 1% of annual landfill rate versus total emissions.

solenoids and on-off solenoids for positioning air suspensions for the

automotive market, we saw a large fall in revenues due to the impact

of a rapidly worsening world economy.

In the construction machinery market, demand for proportional and

on-off solenoids for hydraulic valves fell rapidly, leading to a

substantial fall in revenue.

■ 2009 ForecastThe sales target is ¥4,300 million (13.4% decrease over the previous

term). Actuator products are forecast to remain weak centered on

the automotive market due to the impact of the worsening world

economy.

● Actuator Products

In the automotive market, activities aimed at a new development

theme for shift locks have been strengthened. In the construction

machinery market, we are focused on developing new products for

hydraulic valves meeting the need for downsizing and higher

functionality, and are working proactively with a major construction

machinery manufacturer to develop eco-friendly products meeting

future exhaust gas regulations. Additionally, we will develop

products supporting the growing medical equipment market.

Mechatronics BusinessMechatronics Business



The Shindengen Group uses business as an opportunity to promote environmental management, for the sake of the future of society and the welfare of humanity.

Approaches to Environment Protection ActivitiesApproaches to Environment Protection Activities

Our corporate group is a market leader in power electronics and

promotes development and supply of products such as low-loss

semiconductors, high-efficiency power supplies, etc., with superior

environmental characteristics to save energy, reduce CO2 emissions,

and prevent global warming.

■ CO2 ReductionCO2 emissions from our group factories in Japan totaled 57,783

tonnes in 2008, an increase of 1.2% over 2007 because the CO2

emissions coefficient*1 increased compared to the previous year*2, but

power consumption actually decreased to 102 million kWh or down

3.8% compared to the previous year. Also, heavy oil consumption

dropped to 3,953 kl, a year-on-year decrease of 10.7%.

■ Reduction of Industrial Waste Zero Emission ActivitiesThe domestic plants of the company group have been engaged in

zero emission activities*3 since 2003. As a result, zero emissions were

achieved at all group domestic factories in 2006. Also in 2008, the

annual landfill rate for the entire group was 0.2% compared to total

emissions and each domestic company achieved zero emissions.

■ Amount of Wastes, Recycling Amount, and Recycling Rate of The Company GroupThe corporate emissions and recycling rate for 2008 are shown

below; a high recycling rate of 96.5% was achieved in 2008.

* The above data includes overseas group companies since 2003.

■ Introduction of Environment-Friendly Products● Device Products

ICs for power-saving power supplies: MR8000 Series

■ Major MarketDVD/Blu-Ray Players and Recorders, etc.

■ Saving EnergyThe new ICs for power-saving power supplies add dip-skipping

where one or two partial resonance dips are skipped at light load to

remain on in the normal mode and improve suppression of frequency

oscillation. Also, in the standby mode, the sequence has been

changed so the Z/C terminal shifts to standby for 3 V and above

(reverse of normal). This eliminates the photo-coupler signal and

cuts power consumption by 10 mW compared to conventional

products (MR1722).

■ Saving Natural ResourcesA protection circuit that is activated when an overload continues for

a predetermined time in the normal mode has been added, making it

easier to design DVD/Blu-Ray players and recorders and miniaturize

parts, saving natural resources and cutting labor costs.

Solenoids

*1 The coefficient used to calculate CO2 emissions from power consumption is announced annually by the power utility.

*2 The ratio of carbon-free nuclear power in the generation mix dropped due to a decrease in the number of nuclear power plants online during the year.

*3 Our corporate numeric goal for zero emissions is less than 1% of annual landfill rate versus total emissions.

70,000

60,000

50,000

40,000

30,000

20,000

10,000

01997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

YearElectric power Heavy oil City gas

Change in CO2 emissions of Japan group companies

Change in amount of waste, recycling amount, and recycling rate

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Year

6,000

5,000

4,000

3,000

2,000

1,000

0

(Ton)100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Recycling Waste Recycling rate

Amount of waste, recycling amount, and recycling rate of group in 2008

Efficiency of Traditional and Developed Products

Change in heavy oil consumption of Japan group companies

180

150

120

90

60

30

0’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08

Year

Change in power consumption of Japan group companies

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08

Year

(Ton-CO2)(Ton-CO2)

(Ton-CO2)

Japan Overseas Total

Amount of waste (unit: ton)

Recycling amount (unit: ton)

Recycling rate

38 t

3,123 t

98.8%

153 t

2,191 t

93.5%

191 t

5,314 t

96.5%

Conditions: Vin = 220 V, Po = 7 W

Traditional Product

72.7%

Developed Product

78.3%

Comparison

5.6% UpEfficiency at light load


(1) Significant Accounting Policies and Forward-looking Estimates

The group consolidated financial statements are based on

generally accepted accounting standards in Japan. Estimates,

judgments, and assessments are made on the basis of factors that

are deemed reasonable in the light of past performance and

conditions. However, since estimates invariably involve

uncertainties, actual results may differ from the estimates.

1. Valuation Standards and Methods of Significant Assets

The securities with current price among other securities in the

securities are valuated with the market value method (valuation

difference is processed by the all-net assets-direct-input method,

and sales cost is calculated by the moving average cost method)

based on the market price at the end of the consolidated

accounting term. The securities without current price are

valuated with the cost method by moving average cost method.

In addition, in case of the impairment accounting processing,

when current price at the end of the consolidated accounting

term falls 50% or more compared with that of the acquisition

cost about the securities with current price, the impairment

accounting processing is performed to all of them. When it falls

30% to 50%, the impairment accounting processing is performed

in the order accepted to be required in consideration of recovery

possibility, etc. When it is judged about the securities without

current price that the stock real price fell remarkably due to

aggravation of the financial condition of the issuing company, the

impairment accounting processing is performed about the

amount accepted to be required.

As to the inventory, in the companies that submitted consolidated

financial statements and the domestic consolidated subsidiaries,

although it is mainly valuated with the cost method based on the

periodic average method (the value of balance sheet is calculated

by the book amount write-down method based on decreased

profitability), the cost method based on the last stocking is

adopted in part in the consolidated subsidiaries. In the

consolidated subsidiaries overseas, it is mainly adopted with the

lower of cost or market method based on the moving average cost

method.

2. Appropriating Standards for Important Reserves and

Allowances

In order to prepare for loss incurred by bad debts, the allowance is

appropriated using the historical bad debt rate for non-

problematic accounts, whereas specific accounts such as doubtful

accounts are examined individually for their recoverability and

estimated irrecoverable amount is appropriated.

In order to prepare for paying bonus to employees, the amount

which belongs to this consolidated accounting term is

appropriated for the allowance for bonus payable, among the

prospective amount of the bonus to employees.

As to the retirement allowance, in order to prepare for the

retirement benefit of employees, the amount is appropriated

based on the retirement benefit obligation and the prospective

amount of pension assets at the end of this consolidated

accounting term.

As to the officers’ retirement allowance, it is prepared for the

expenditure of officer’s retirement benefit, and the required

amount is appropriated based on the internal regulations.

3. Deferred Tax Assets

As to the deferred tax assets, recoverable amounts are appropriated

in full consideration of future recoverability.

(2) Analysis of Financial Conditions and Business Performance in This Consolidated Accounting Term

1. Analysis of Balance Sheets

The total assets in this consolidated accounting term were

¥90,620 million (¥14,786 million decrease over the previous

term). This is mainly because trade notes and accounts receivable

decreased by ¥6,153 million, tangible fixed assets decreased by

¥2,807 million, and investment and other assets such as

investment securities decreased by ¥5,922 million.

Liabilities were ¥66,856 million (¥2,094 million increase over the

previous term). This is mainly because notes and accounts

payable decreased by ¥7,104 million, while short-term loans and

long-term loans increased by ¥9,150 million.

The net assets were ¥23,764 million (¥16,881 million decrease

over the previous term). This is mainly because accumulated

earnings decreased by ¥13,898 million, and the valuation of other

marketable securities decreased by ¥1,385 million.

2. Analysis of Income Statements

Sales in this consolidated accounting term were ¥85,239 million

(15.5% decrease over the previous term). The gross margin was

¥8,487 million (42.3% decrease over the previous term), and

operating losses were ¥4,036 million due to cutdown in sales and

loss on revaluation of inventories.

Ordinary loss was ¥6,548 million due to the incurrence of

exchange-rate loss, etc, at non-operating income and expenditure,

and net deficit for the term was ¥13,271 million due to the

record of business structure modification cost and loss on

revaluation of investments in securities at special profit and loss.

(3) Factors with Important Effect on Management Performance and Outlook

Our company group involves taking risks in the field of power

device which include semiconductor and IC products, one of the

core products, the risks caused by the influence of external

environmental changes such as drastic decreasing of demand

accompanied by the deterioration of the world economy or jump

in material costs, tougher competition, and appreciation of the

yen.

Moreover, in the telecommunications infrastructure market,

competition is becoming more severe due to progressive price

reductions accompanying product miniaturization. Furthermore,

the motorcycle market centered on Asia involves unstable devices,

such as sudden changes in demand accompanying country risk.

In the light of those circumstances, our company shall carry out

resolutely the structural improvement such as complete fixed and

proportional cost compression or acceleration of overseas

production transfer and build up secure operating foundation

sustainable against steep external environment variation as well as

fully fledged entering into the field of environment/new energy

such as environment-responsive cars or LED illumination power

supply, etc, which are prospective of expansion and shall aim

continuous development and growth.

(4) Analysis of Financial Source of Capital and Liquidity of Funds

The capital situation of our company was minus of ¥820 million

at cash flow by business activities. This is because of large minus

factor such as net loss before taxes and other adjustments of this

term, etc, even though plus factors such as allowance for

depreciation existed.

In cash flow by investing, it used the fund of ¥1,430 million

which was ¥4,139 million more than that of the previous

consolidated accounting term.

This is mainly because of payment existed for acquisition of

tangible fixed assets due to the conduction of overseas production

transfer of semiconductor products and electric components for

two-wheel vehicles and investing for maintenance/renewal. In

cash flow by investment activities, the group obtained funds of

¥8,585 million, which was ¥8,227 million more than in the

previous consolidated accounting term. This was achieved by

issuing new corporate bonds and by taking long-term and short-

term loans accompanying repayment of corporate bonds and

commitment to repay long-term loans.

As mentioned above, in this consolidated accounting term, funds

of ¥1,430 million used by investing was covered by funds on

hand, funds of ¥8,585 million acquired by financing activities.

At this consolidated accounting term, outstanding balance of

bonds and amount borrowed of our company group was ¥38,377

million due to the conduction of funding by money borrowed for

long-term and short-term aiming to redeem bond or equipment

investment and securing cash plus marketable securities, and

increased ¥9,150 million compared to the end of last consolidated

accounting term. In addition, it is considered that required

liquidity on hand is sufficiently secured since amount outstanding

of cash reserves increased by ¥5,295 million compared to the end

of last consolidated fiscal year and was ¥14,243 million.

Management’s Discussion and Analysis

Future forecasts and statements are based on conditions at the end of this consolidated accounting term (March 31, 2009)

LIABILITIES AND NET ASSETS

Current Liabilities:Short-term borrowings from banks (Note 7) ¥ 7,817 ¥ 3,679 $ 79,766 Current maturities of long-term debt (Note 7) 6,248 3,687 63,751 Lease obligations (Note 7) 287 – 2,933 Notes and accounts payable:

Trade 11,765 18,869 120,046 Acquisition of property and equipment 344 584 3,513

12,109 19,453 123,559 Income taxes payable 29 272 294 Accrued expenses 1,033 1,851 10,540 Other current liabilities 5,736 4,770 58,531

Total current liabilities 33,259 33,712 339,374

Long-term Liabilities:Long-term debt (Note 7) 24,313 21,861 248,092 Lease obligations (Note 7) 1,374 – 14,022 Accrued retirement benefits (Note 8) 7,421 8,609 75,729 Accrued retirement benefits for directors and statutory auditors 60 560 606 Deferred tax liabilities (Note 10) 0 7 1 Other long-term liabilities 430 13 4,388

Total long-term liabilities 33,598 31,050 342,838 Contingent Liabilities (Note 9)

Net Assets: Shareholders’ equity:

Common stock 14,774 14,774 150,751 Authorised: 260,000,000 shares at March 31, 2009 and 2008Issured: 87,027,848 shares at March 31, 2009 and 2008

Capital surplus 13,982 13,983 142,673 Retained earnings (2,641) 11,257 (26,949)Treasury stock (Note 18) (104) (93) (1,059)

Total shareholders’ equity 26,011 39,921 265,416 Valuation and translation adjustments:

Unrealized gain on other securities, net of tax (1,238) 148 (12,631)Foreign currency translation adjustments (1,383) 246 (14,110)

Total valuation and translation adjustments (2,621) 394 (26,741)Minority interests in consolidated subsidiaries 374 331 3,816

Total net assets 23,764 40,646 242,491 ¥90,621 ¥105,408 $924,703

The accompanying notes are an integral part of the statements.

Consolidated Balance SheetsConsolidated Balance SheetsShindengen Electric Manufacturing Co., Ltd. and its SubsidariesAt March 31, 2009 and 2008

ASSETS

Current Assets:Cash and time deposits (Note 4) ¥14,289 ¥ 8,993 $145,808

Trade notes and accounts receivable 17,099 23,252 174,479 Less: allowance for bad debts (263) (54) (2,685)

16,836 23,198 171,794 Inventories (Note 5) 18,564 22,933 189,428 Deferred tax assets (Note 10) 1,189 1,510 12,136 Other current assets 2,099 2,369 21,414

Total current assets 52,977 59,003 540,580

Property, Plant and Equipment:Buildings and structures (Note 7) 32,640 33,461 333,055 Machinery and equipment (Note 7) 57,766 61,724 589,453 Leased assets 1,783 – 18,192

92,189 95,185 940,700 Less: accumulated depreciation (71,852) (72,653) (733,179)

20,337 22,532 207,521 Land (Note 7) 4,876 4,949 49,751 Construction in progress 858 1,398 8,761

Property, plant and equipment – net 26,071 28,879 266,033

Investments and Advances:Investments in securities (Note 6) 7,617 10,250 77,726 Long-term loans and other investments 930 1,233 9,484

Total investments and advances 8,547 11,483 87,210

Deferred Tax Assets (Note 10) 2,335 5,276 23,826 Deferred Charges and Other Assets 691 767 7,054

¥90,621 ¥105,408 $924,703



(Note 3)Millions of Yen

20092009 2008




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LIABILITIES AND NET ASSETS

Current Liabilities:Short-term borrowings from banks (Note 7) ¥ 7,817 ¥ 3,679 $ 79,766 Current maturities of long-term debt (Note 7) 6,248 3,687 63,751 Lease obligations (Note 7) 287 – 2,933 Notes and accounts payable:

Trade 11,765 18,869 120,046 Acquisition of property and equipment 344 584 3,513

12,109 19,453 123,559 Income taxes payable 29 272 294 Accrued expenses 1,033 1,851 10,540 Other current liabilities 5,736 4,770 58,531

Total current liabilities 33,259 33,712 339,374

Long-term Liabilities:Long-term debt (Note 7) 24,313 21,861 248,092 Lease obligations (Note 7) 1,374 – 14,022 Accrued retirement benefits (Note 8) 7,421 8,609 75,729 Accrued retirement benefits for directors and statutory auditors 60 560 606 Deferred tax liabilities (Note 10) 0 7 1 Other long-term liabilities 430 13 4,388

Total long-term liabilities 33,598 31,050 342,838 Contingent Liabilities (Note 9)

Net Assets: Shareholders’ equity:

Common stock 14,774 14,774 150,751 Authorised: 260,000,000 shares at March 31, 2009 and 2008Issured: 87,027,848 shares at March 31, 2009 and 2008

Capital surplus 13,982 13,983 142,673 Retained earnings (2,641) 11,257 (26,949)Treasury stock (Note 18) (104) (93) (1,059)

Total shareholders’ equity 26,011 39,921 265,416 Valuation and translation adjustments:

Unrealized gain on other securities, net of tax (1,238) 148 (12,631)Foreign currency translation adjustments (1,383) 246 (14,110)

Total valuation and translation adjustments (2,621) 394 (26,741)Minority interests in consolidated subsidiaries 374 331 3,816

Total net assets 23,764 40,646 242,491 ¥90,621 ¥105,408 $924,703


Consolidated Balance SheetsConsolidated Balance SheetsShindengen Electric Manufacturing Co., Ltd. and its SubsidariesAt March 31, 2009 and 2008



20092009 2008



20092009 2008


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Shindengen Electric Manufacturing Co., Ltd. and its SubsidariesFor the years ended March 31, 2009 and 2008

Net Sales ¥ 85,239 ¥100,827 $ 869,787

Cost of Sales (Note 12) 76,752 86,107 783,182 Gross profit 8,487 14,720 86,605

Selling, General and Administrative Expenses (Note 11 and 12) 12,523 12,432 127,793 Operating income (loss) (4,036) 2,288 (41,188)

Other Income (Expense):Interest and dividend income 371 470 3,787 Interest expenses (623) (519) (6,355)Exchange loss (1,574) (1,902) (16,066)Loss on disposal of inventories – (754) – Amortization of transition amount for accrued retirement benefits (Note 8) (618) (618) (6,301)Loss on valuation of investment in securities (579) (707) (5,910)Rent income on fixed assets 113 127 1,152 Gain on equity method investment 66 172 676 Gain on technical assistance agreement 103 – 1,046 Gain on sales of investments in securities 55 555 561 Gain on sales of investments in affiliates 54 – 551 Loss on restructuring (Note 13) (1,835) – (18,723)Impairment loss (Note 14) (200) – (2,040)Extraordinary retirement expenses – (139) – Other, net (350) (621) (3,570)

(5,017) (3,936) (51,192)Loss before income taxes and minority interests (9,053) (1,648) (92,380)

Income Taxes (Note 10): Current 782 1,220 7,984 Deferred 3,389 (192) 34,577

4,171 1,028 42,561 (13,224) (2,676) (134,941)

Minority Interests in Net Income (Loss) of Consolidated Subsidiaries 48 (48) 486 Net loss ¥(13,272) ¥ (2,628) $(135,427)

Per Share of Common Stock [Note 2 (10)]: Net loss – basic ¥(152.99) ¥ (30.27) $ (1.56)Net income – diluted ¥ – ¥ – $ – Cash dividends per share for the period ¥ 3.50 ¥ 7.00 $ (0.04)

Weighted Average Number of Shares (Thousands) 86,751 86,801




20092009 2008


Consolidated Statements of Operations

Minority interests in

consolidated subsidiaries

Total net assets

Retainedearnings

Capitalsurplus

Commonstock

Number ofshares issued

Foreigncurrency

translationadjustments

Total valuation, translation adjustment

Unrealized gain on other

securities, net of tax

Treasurystock

(Note 18)

Total shareholders’

equity



Total net assets

Retainedearnings

Capitalsurplus

Commonstock

Foreigncurrency





Treasurystock

(Note 17)

Total Shareholders’

equity

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Consolidated Statements of Changes in Net Assets

Balance at March 31, 2007 87,028 ¥14,774 ¥13,983 ¥14,362 ¥ (83) ¥43,036 ¥ 2,542 ¥ 170 ¥ 2,712 ¥262 ¥46,010 Cash dividends – – – (608) – (608) – – – – (608)Net loss – – – (2,628) – (2,628) – – – – (2,628)Acquisition of treasury stock – – – – (10) (10) – – – – (10)Disposal of treasury stock – – (0) – 0 0 – – – – 0 Change in scope of consolidation – – – 131 – 131 – – – – 131 Net change in items other than shareholder’s equity – – – – – – (2,394) 76 (2,318) 69 (2,249)

Balance at March 31, 2008 87,028 ¥14,774 ¥13,983 ¥11,257 ¥(93) ¥39,921 ¥148 ¥246 ¥394 ¥331 ¥40,646 Cash dividends (Note 18) – – – (607) – (607) – – – – (607)Net loss – – – (13,272) – (13,272) – – – – (13,272)Acquisition of treasury stock – – – – (24) (24) – – – – (24)Disposal of treasury stock – – (1) (5) 13 7 – – – – 7 Change in scope of consolidation – – – (14) – (14) – – – – (14)Net change in items other than shareholder’s equity – – – – – – (1,386) (1,629) (3,015) 43 (2,972)

Balance at March 31, 2009 87,028 ¥14,774 ¥13,982 ¥(2,641) ¥(104) ¥26,011 ¥(1,238) ¥(1,383) ¥(2,621) ¥374 ¥23,764

Balance at March 31, 2008 $150,751 $142,682 $114,873 $ (951) $407,355 $ 1,511 $ 2,503 $ 4,014 $3,381 $414,750 Cash dividends (Note 18) – – (6,197) – (6,197) – – – – (6,197)Net loss – – (135,427) – (135,427) – – – – (135,427)Acquisition of treasury stock – – – (238) (238) – – – – (238)Disposal of treasury stock – (9) (48) 130 73 – – – – 73 Change in scope of consolidation – – (150) – (150) – – – – (150)Net change in items other than shareholder’s equity – – – – – (14,142) (16,613) (30,755) 435 (30,320)

Balance at March 31, 2009 $150,751 $142,673 $(26,949) $(1,059) $265,416 $(12,631) $(14,110) $(26,741) $3,816 $242,491


Millions of Yen

Shareholders’ equity Valuation, translation adjustment and other



Total net assets

Retainedearnings

Capitalsurplus

Commonstock

Number ofshares issued

Foreigncurrency





Treasurystock

(Note 18)

Total shareholders’

equity

Thousands of U.S. Dollars (Note 3)

Shareholders’ equity Valuation, translation adjustment and other



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Retainedearnings

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Foreigncurrency





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(Note 17)

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1. Basis of Presenting Consolidated Financial Statements(1) Accounting Principles and PresentationThe accompanying consolidated financial statements of Shindengen Electric Manufacturing Co., Ltd. ("the Company") and its subsidiaries ("the Companies") are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the applications and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau (a regional branch organization of the Ministry of Finance in Japan) have been reclassified in these accounts for the convenience of readers outside Japan.

(2) Scope of ConsolidationThe Company had 23 subsidiaries (controlling companies – companies whose decision-making is controlled) as of March 31, 2009 and 2008.The consolidated financial statements for the year ended March 31, 2009 and 2008 include the accounts of the Company and its 18 subsidiaries and 19 subsidiaries respectively. The major consolidated subsidiaries were listed below.

Equity ownership percentage

• Akita Shindengen Co., Ltd. 100.0%• Higashine Shindengen Co., Ltd. 100.0%• Okabe Shindengen Co., Ltd. 100.0%• Lumphun Shindengen Co., Ltd. 100.0%• Shindengen (Thailand) Co., Ltd. 100.0%

Effective from the year ended March 31, 2009, following company was excluded from consolidation due to the insignificant scale.• Shanghai Shindengen Com. Equip.

In the accompanying consolidated financial statements, the accounts of the 9 overseas subsidiaries at December 31, 2008 and for the year then ended were consolidated with the accounts of the Company at March 31, 2009 and for the year then ended, as they use a fiscal year ending on December 31 of each year.

The remaining 5 unconsolidated subsidiaries as of March 31, 2009, had insignificant amounts in terms of total assets, net sales, net income/loss and retained earnings and therefore have been excluded from consolidation.

The major unconsolidated subsidiary was listed below.• Shindengen Logistic Co., Ltd.

(3) Elimination and ConsolidationFor the purpose of preparing the consolidated financial statements, all significant inter-company transactions, account balances and unrealized profits among the Companies have been entirely eliminated, and the portion attributable to minority interests is charged (credited) to minority interests.

(4) Investments in Unconsolidated Subsidiaries and AffiliatesThe Company had 5 unconsolidated subsidiaries and 1 affiliate (influencing companies – companies whose financial and operating or business decision making can be influenced to a material degree, and which are not subsidiaries) at March 31, 2009. The investment in 1 affiliate is accounted for by the equity method. Investments in unconsolidated subsidiaries and affiliates not accounted for by the equity method are stated at cost less impairment loss, due to their insignificant effect on the consolidated financial statements.

The affiliate accounted for by the equity method was listed below.• Napino Auto & Electronics Ltd.

Effective from the year ended March 31, 2009, following company was excluded from affiliates, due to sales of the shares.• Mori Electric Co., Ltd.


Cash Flows from Operating Activities:Loss before income taxes and minority interests ¥(9,053) ¥(1,648) $(92,380)Adjustments for:

Depreciation 5,121 5,878 52,259 Interest and dividend income (371) (470) (3,787)Interest expenses 623 519 6,355 Impairment loss 200 – 2,040 Gain on sales of investments in securities (55) (555) (561)Gain on sales of investments in affiliates (54) – (551)Loss on disposal of inventories – 754 – Loss on valuation of investment in securities 579 707 5,910

(Increase) decrease in notes and accounts receivable 4,495 1,811 45,862 (Increase) decrease in inventories 2,639 (338) 26,932 Increase (decrease) in notes and accounts payable (3,428) (384) (34,984)Increase (decrease) in provision for accrued compensation for products allowance – (532) – Other (308) 1,673 (3,136)

Sub total 388 7,415 3,959 Interest and dividend income received 384 468 3,921 Interest expenses paid (613) (521) (6,259)Payment of income taxes (980) (3,404) (9,998)

Net cash provided by (used in) operating activities (821) 3,958 (8,377)Cash Flows from Investing Activities:

Payments for acquisition of investments in securities (37) (2,201) (373)Proceeds from sales of investments in securities 555 1,960 5,668 Payments for acquisition of property, plant and equipment (3,938) (5,051) (40,184)Proceeds from sales of property, plant and equipment 1,690 194 17,243 Payments for acquisition of intangible fixed assets (187) (167) (1,913)Other 487 (305) 4,967

Net cash used in investing activities (1,430) (5,570) (14,592)Cash Flows from Financing Activities:

Increase (decrease) in short-term bank loans, net 4,348 1,581 44,364 Borrowing of long-term debt 8,750 2,700 89,286 Repayment for long-term debt (3,661) (3,780) (37,351)Repayment for finance lease obligation (223) – (2,275)Proceeds from the issuance of bonds – 2,964 – Redemption of bonds – (2,000) – Redemption of convertible bonds – (484) – Cash dividends paid (607) (608) (6,197)Cash dividends paid to minority shareholders (5) (5) (52)Other (16) (10) (166)

Net cash provided by financing activities 8,586 358 87,609 Effect of Exchange Rate Changes on Cash and Cash Equivalents (975) (402) (9,948)Net Increase (Decrease) in Cash and Cash Equivalents 5,360 (1,656) 54,692 Cash and Cash Equivalents at Beginning of Year 8,948 10,531 91,305 Increase in Cash and Cash Equivalents due to Company Newly Consolidated – 73 – Decrease in Cash and Cash Equivalents due to Exclusion of Previously Consolidated Companies (64) – (653)Cash and Cash Equivalents at End of Year (Note 4) ¥14,244 ¥8,948 $145,344



Consolidated Statements of Cash Flows



20092009 2008

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1. Basis of Presenting Consolidated Financial Statements(1) Accounting Principles and PresentationThe accompanying consolidated financial statements of Shindengen Electric Manufacturing Co., Ltd. ("the Company") and its subsidiaries ("the Companies") are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the applications and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau (a regional branch organization of the Ministry of Finance in Japan) have been reclassified in these accounts for the convenience of readers outside Japan.

(2) Scope of ConsolidationThe Company had 23 subsidiaries (controlling companies – companies whose decision-making is controlled) as of March 31, 2009 and 2008.The consolidated financial statements for the year ended March 31, 2009 and 2008 include the accounts of the Company and its 18 subsidiaries and 19 subsidiaries respectively. The major consolidated subsidiaries were listed below.

Equity ownership percentage

• Akita Shindengen Co., Ltd. 100.0%• Higashine Shindengen Co., Ltd. 100.0%• Okabe Shindengen Co., Ltd. 100.0%• Lumphun Shindengen Co., Ltd. 100.0%• Shindengen (Thailand) Co., Ltd. 100.0%

Effective from the year ended March 31, 2009, following company was excluded from consolidation due to the insignificant scale.• Shanghai Shindengen Com. Equip.

In the accompanying consolidated financial statements, the accounts of the 9 overseas subsidiaries at December 31, 2008 and for the year then ended were consolidated with the accounts of the Company at March 31, 2009 and for the year then ended, as they use a fiscal year ending on December 31 of each year.

The remaining 5 unconsolidated subsidiaries as of March 31, 2009, had insignificant amounts in terms of total assets, net sales, net income/loss and retained earnings and therefore have been excluded from consolidation.

The major unconsolidated subsidiary was listed below.• Shindengen Logistic Co., Ltd.

(3) Elimination and ConsolidationFor the purpose of preparing the consolidated financial statements, all significant inter-company transactions, account balances and unrealized profits among the Companies have been entirely eliminated, and the portion attributable to minority interests is charged (credited) to minority interests.

(4) Investments in Unconsolidated Subsidiaries and AffiliatesThe Company had 5 unconsolidated subsidiaries and 1 affiliate (influencing companies – companies whose financial and operating or business decision making can be influenced to a material degree, and which are not subsidiaries) at March 31, 2009. The investment in 1 affiliate is accounted for by the equity method. Investments in unconsolidated subsidiaries and affiliates not accounted for by the equity method are stated at cost less impairment loss, due to their insignificant effect on the consolidated financial statements.

The affiliate accounted for by the equity method was listed below.• Napino Auto & Electronics Ltd.

Effective from the year ended March 31, 2009, following company was excluded from affiliates, due to sales of the shares.• Mori Electric Co., Ltd.


Cash Flows from Operating Activities:Loss before income taxes and minority interests ¥(9,053) ¥(1,648) $(92,380)Adjustments for:

Depreciation 5,121 5,878 52,259 Interest and dividend income (371) (470) (3,787)Interest expenses 623 519 6,355 Impairment loss 200 – 2,040 Gain on sales of investments in securities (55) (555) (561)Gain on sales of investments in affiliates (54) – (551)Loss on disposal of inventories – 754 – Loss on valuation of investment in securities 579 707 5,910

(Increase) decrease in notes and accounts receivable 4,495 1,811 45,862 (Increase) decrease in inventories 2,639 (338) 26,932 Increase (decrease) in notes and accounts payable (3,428) (384) (34,984)Increase (decrease) in provision for accrued compensation for products allowance – (532) – Other (308) 1,673 (3,136)

Sub total 388 7,415 3,959 Interest and dividend income received 384 468 3,921 Interest expenses paid (613) (521) (6,259)Payment of income taxes (980) (3,404) (9,998)

Net cash provided by (used in) operating activities (821) 3,958 (8,377)Cash Flows from Investing Activities:

Payments for acquisition of investments in securities (37) (2,201) (373)Proceeds from sales of investments in securities 555 1,960 5,668 Payments for acquisition of property, plant and equipment (3,938) (5,051) (40,184)Proceeds from sales of property, plant and equipment 1,690 194 17,243 Payments for acquisition of intangible fixed assets (187) (167) (1,913)Other 487 (305) 4,967

Net cash used in investing activities (1,430) (5,570) (14,592)Cash Flows from Financing Activities:

Increase (decrease) in short-term bank loans, net 4,348 1,581 44,364 Borrowing of long-term debt 8,750 2,700 89,286 Repayment for long-term debt (3,661) (3,780) (37,351)Repayment for finance lease obligation (223) – (2,275)Proceeds from the issuance of bonds – 2,964 – Redemption of bonds – (2,000) – Redemption of convertible bonds – (484) – Cash dividends paid (607) (608) (6,197)Cash dividends paid to minority shareholders (5) (5) (52)Other (16) (10) (166)

Net cash provided by financing activities 8,586 358 87,609 Effect of Exchange Rate Changes on Cash and Cash Equivalents (975) (402) (9,948)Net Increase (Decrease) in Cash and Cash Equivalents 5,360 (1,656) 54,692 Cash and Cash Equivalents at Beginning of Year 8,948 10,531 91,305 Increase in Cash and Cash Equivalents due to Company Newly Consolidated – 73 – Decrease in Cash and Cash Equivalents due to Exclusion of Previously Consolidated Companies (64) – (653)Cash and Cash Equivalents at End of Year (Note 4) ¥14,244 ¥8,948 $145,344




Notes to Consolidated Financial Statements

Shindengen Electric Manufacturing Co., Ltd. and its Subsidaries

(5) Translation of Foreign Currency Financial Statements (Accounts of Overseas Subsidiaries)All assets, liabilities and net assets of overseas subsidiaries are translated into Japanese yen using the exchange rates prevailing at the balance sheet date. Shareholders’ equity at the beginning of the year is translated into Japanese yen at the historical rates. Profit and loss accounts for the year are translated into Japanese yen using the exchange rates prevailing at the balance sheet date.Differences in Japanese yen amounts arising from the use of different rates are presented as "Foreign currency translation adjustments" in the accompanying consolidated financial statements.

(6) Revaluation of Assets and Liabilities of SubsidiariesThe Company adopts the "full fair value method" in which all assets and liabilities of the subsidiaries are remeasured at fair value as of the acquisition of the control.

(7) Cash and Cash Equivalents Cash and cash equivalents in the consolidated statements of cash flows are composed of cash in hand, bank deposits, which are able to be withdrawn on demand and short-term investments with an original maturity of three months or less and which represent a minor risk of fluctuation in value.

(8) Gain on Sale of ScrapsUp to the year ended March 31, 2007, gain on sale of scraps had been included in other income. Effective from the year ended March 31, 2008, it was recorded as reduction of cost of sales, due to an increase in effect on the consolidated financial statements. As a result, gross profit and operating income for the year ended March 31, 2008 increased by ¥404 million, but there was no effect on loss before income taxes and minority interests.

(9) Unification of Accounting Policies Applied to Foreign SubsidiariesEffective from the year ended March 31, 2009, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements" (by the Accounting Standards Board of Japan, May 17, 2006) was adopted. As a result, operating loss and loss before income taxes and minority interests for the year ended March 31, 2009 increased by ¥84 million ($859 thousand).

2. Summary of Significant Accounting Policies(1) Financial Instruments

(a) SecuritiesSecurities held by the Company and its subsidiaries are classified as "other securities". Mark-to-market accounting is adopted for other securities. In accordance with this method, these securities with market quotations are carried at fair value that is reasonably determinable based on current market quotes on the balance sheet date, with net unrealized gains and losses, net of related tax, reported separately in net assets. Realized gains or losses on securities sold are determined based on the moving-average method. If fair value is not available, securities are carried at cost, which is determined by the moving-average method.In cases where the fair value of equity securities issued by unconsolidated subsidiaries and affiliates or other securities has declined significantly and such impairment of the value is not deemed temporary, these securities are written down to the fair value and the resulting losses are included in net profit or loss for the period.

(b) DerivativesAll derivatives are carried at fair value, with changes in fair value included in net profit or loss for the period in which they arise, except for derivatives that are designated as "hedging instruments".

(2) InventoriesInventories held by the Company and the domestic consolidated subsidiaries are carried at cost, which is determined principally by the average method (reducing book value of inventories when their contribution to profitability declines). Some domestic consolidated subsidiaries value inventories at cost, which is determined by the latest purchase price method.Inventories held by overseas consolidated subsidiaries are valued at the lower of cost or market value, which is determined by the moving average method.

(Change in accounting policy)Effective from the year ended March 31, 2009, "Accounting Standards for Measurement of Inventories" (by the Accounting Standards Board of Japan, July 5, 2006) was adopted. As a result, operating loss and loss before income taxes and minority interests for the year ended March 31, 2009 increased by ¥1,308 million ($13,342 thousand).

Up to the year ended March 31, 2008, loss on disposal of inventories and loss on valuation of inventories were included in other expense. Effective from the year ended March 31, 2009, the Company changed its accounting policy to include these expenses in cost of sales. As a result, operating loss for the year ended March 31, 2009 increased by ¥478 million ($4,882 thousand), but there is no effect on loss before income taxes and minority interests.

(3) Property, Plant and Equipment (Excluding Leased Assets)Property, plant and equipment are stated at cost. Depreciation for property, plant and equipment held by the Company and its domestic consolidated subsidiaries is calculated using the declining-balance method. Depreciation of property, plant and equipment held by overseas consolidated subsidiaries is calculated primarily by the straight-line method.The estimated useful lives of assets are principally as follows:• Buildings – 3 to 50 years• Machinery and equipment – 4 to 10 years

(Change in accounting policy)Accompanying a revision to Japanese Corporate Income Tax Law, effective from the year ended March 31, 2008, property, plant and equipment acquired after April 1, 2007, are depreciated in accordance with the revised Japanese Corporate Income Tax Law. The effect of this change on the Company’s operating income and loss before income taxes and minority interests for the year ended March 31, 2008, were minimal.

(Additional information)Effective from the year ended March 31, 2008, property, plant and equipment acquired before March 31, 2007, are depreciated evenly over the five years from the year after the completion of depreciation to the limit on depreciable amount. Due to this change, operating income and loss before income taxes and minority interests all decreased by ¥259 million compared with previous method.Effective from the year ended March 31, 2008, the Company changed the estimated useful life of a portion of the production equipment of elemental device based on a reassessment of the assets’ operational lives. This change was made to correspond the depreciation period to the life cycle of the equipment. The effect of this change on the Company’s operating income and loss before income taxes and minority interests for the year ended March 31, 2008, were minimal. Accompanying a revision to Japanese Corporate Income Tax Law, effective from the year ended March 31, 2009, the Company changed the estimated useful lives of property, plant and equipment. The effect of this change on the Company’s operating loss and loss before income taxes and minority interests for the year ended March 31, 2009 were minimal.

(4) Leased AssetsDepreciation of leased assets is calculated based on the straight-line method over the lease period assuming no residual value.Finance lease transactions executed on or before March 31, 2008 that do not involve a transfer of ownership are accounted for using the same method as operating leases.

(Change in accounting policy)Up to the year ended March 31, 2008, finance lease transactions which do not transfer ownership of the assets were accounted for using the same method as operating leases. Effective from the year ended March 31, 2009, "Accounting Standard for Lease Transactions" (by the Accounting Standards Board of Japan, June 17, 1993 (revised at March 30, 2007)), and "Guidance on Accounting Standard for Lease Transactions" (by the Accounting Standards Board of Japan, January 18, 1994 (revised at March 30, 2007)) were adopted. In accordance with the revised standard, finance lease transactions executed on or before March 31, 2008 that do not involve a transfer of ownership are accounted for using the same method as operating leases. The effect of this change on the Company’s operating loss and loss before income taxes and minority interests for the year ended March 31, 2009 were minimal.

(5) Deferred ChargesBond issue expenses are charged to income when incurred.

(Change in accounting policy)Up to the year ended March 31, 2007, bond issue expenses were amortized equally over the three years. Effective from the year ended March 31, 2008, the Company changed its accounting policy to charging bond issue expenses to income when paid, pursuant to the application of "Tentative Solution on Accounting for Deferred Assets" (by The Accounting Standards Board of Japan, August 11, 2006).



(5) Translation of Foreign Currency Financial Statements (Accounts of Overseas Subsidiaries)All assets, liabilities and net assets of overseas subsidiaries are translated into Japanese yen using the exchange rates prevailing at the balance sheet date. Shareholders’ equity at the beginning of the year is translated into Japanese yen at the historical rates. Profit and loss accounts for the year are translated into Japanese yen using the exchange rates prevailing at the balance sheet date.Differences in Japanese yen amounts arising from the use of different rates are presented as "Foreign currency translation adjustments" in the accompanying consolidated financial statements.

(6) Revaluation of Assets and Liabilities of SubsidiariesThe Company adopts the "full fair value method" in which all assets and liabilities of the subsidiaries are remeasured at fair value as of the acquisition of the control.

(7) Cash and Cash Equivalents Cash and cash equivalents in the consolidated statements of cash flows are composed of cash in hand, bank deposits, which are able to be withdrawn on demand and short-term investments with an original maturity of three months or less and which represent a minor risk of fluctuation in value.

(8) Gain on Sale of ScrapsUp to the year ended March 31, 2007, gain on sale of scraps had been included in other income. Effective from the year ended March 31, 2008, it was recorded as reduction of cost of sales, due to an increase in effect on the consolidated financial statements. As a result, gross profit and operating income for the year ended March 31, 2008 increased by ¥404 million, but there was no effect on loss before income taxes and minority interests.

(9) Unification of Accounting Policies Applied to Foreign SubsidiariesEffective from the year ended March 31, 2009, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements" (by the Accounting Standards Board of Japan, May 17, 2006) was adopted. As a result, operating loss and loss before income taxes and minority interests for the year ended March 31, 2009 increased by ¥84 million ($859 thousand).

2. Summary of Significant Accounting Policies(1) Financial Instruments

(a) SecuritiesSecurities held by the Company and its subsidiaries are classified as "other securities". Mark-to-market accounting is adopted for other securities. In accordance with this method, these securities with market quotations are carried at fair value that is reasonably determinable based on current market quotes on the balance sheet date, with net unrealized gains and losses, net of related tax, reported separately in net assets. Realized gains or losses on securities sold are determined based on the moving-average method. If fair value is not available, securities are carried at cost, which is determined by the moving-average method.In cases where the fair value of equity securities issued by unconsolidated subsidiaries and affiliates or other securities has declined significantly and such impairment of the value is not deemed temporary, these securities are written down to the fair value and the resulting losses are included in net profit or loss for the period.

(b) DerivativesAll derivatives are carried at fair value, with changes in fair value included in net profit or loss for the period in which they arise, except for derivatives that are designated as "hedging instruments".

(2) InventoriesInventories held by the Company and the domestic consolidated subsidiaries are carried at cost, which is determined principally by the average method (reducing book value of inventories when their contribution to profitability declines). Some domestic consolidated subsidiaries value inventories at cost, which is determined by the latest purchase price method.Inventories held by overseas consolidated subsidiaries are valued at the lower of cost or market value, which is determined by the moving average method.

(Change in accounting policy)Effective from the year ended March 31, 2009, "Accounting Standards for Measurement of Inventories" (by the Accounting Standards Board of Japan, July 5, 2006) was adopted. As a result, operating loss and loss before income taxes and minority interests for the year ended March 31, 2009 increased by ¥1,308 million ($13,342 thousand).

Up to the year ended March 31, 2008, loss on disposal of inventories and loss on valuation of inventories were included in other expense. Effective from the year ended March 31, 2009, the Company changed its accounting policy to include these expenses in cost of sales. As a result, operating loss for the year ended March 31, 2009 increased by ¥478 million ($4,882 thousand), but there is no effect on loss before income taxes and minority interests.

(3) Property, Plant and Equipment (Excluding Leased Assets)Property, plant and equipment are stated at cost. Depreciation for property, plant and equipment held by the Company and its domestic consolidated subsidiaries is calculated using the declining-balance method. Depreciation of property, plant and equipment held by overseas consolidated subsidiaries is calculated primarily by the straight-line method.The estimated useful lives of assets are principally as follows:• Buildings – 3 to 50 years• Machinery and equipment – 4 to 10 years

(Change in accounting policy)Accompanying a revision to Japanese Corporate Income Tax Law, effective from the year ended March 31, 2008, property, plant and equipment acquired after April 1, 2007, are depreciated in accordance with the revised Japanese Corporate Income Tax Law. The effect of this change on the Company’s operating income and loss before income taxes and minority interests for the year ended March 31, 2008, were minimal.

(Additional information)Effective from the year ended March 31, 2008, property, plant and equipment acquired before March 31, 2007, are depreciated evenly over the five years from the year after the completion of depreciation to the limit on depreciable amount. Due to this change, operating income and loss before income taxes and minority interests all decreased by ¥259 million compared with previous method.Effective from the year ended March 31, 2008, the Company changed the estimated useful life of a portion of the production equipment of elemental device based on a reassessment of the assets’ operational lives. This change was made to correspond the depreciation period to the life cycle of the equipment. The effect of this change on the Company’s operating income and loss before income taxes and minority interests for the year ended March 31, 2008, were minimal. Accompanying a revision to Japanese Corporate Income Tax Law, effective from the year ended March 31, 2009, the Company changed the estimated useful lives of property, plant and equipment. The effect of this change on the Company’s operating loss and loss before income taxes and minority interests for the year ended March 31, 2009 were minimal.

(4) Leased AssetsDepreciation of leased assets is calculated based on the straight-line method over the lease period assuming no residual value.Finance lease transactions executed on or before March 31, 2008 that do not involve a transfer of ownership are accounted for using the same method as operating leases.

(Change in accounting policy)Up to the year ended March 31, 2008, finance lease transactions which do not transfer ownership of the assets were accounted for using the same method as operating leases. Effective from the year ended March 31, 2009, "Accounting Standard for Lease Transactions" (by the Accounting Standards Board of Japan, June 17, 1993 (revised at March 30, 2007)), and "Guidance on Accounting Standard for Lease Transactions" (by the Accounting Standards Board of Japan, January 18, 1994 (revised at March 30, 2007)) were adopted. In accordance with the revised standard, finance lease transactions executed on or before March 31, 2008 that do not involve a transfer of ownership are accounted for using the same method as operating leases. The effect of this change on the Company’s operating loss and loss before income taxes and minority interests for the year ended March 31, 2009 were minimal.

(5) Deferred ChargesBond issue expenses are charged to income when incurred.

(Change in accounting policy)Up to the year ended March 31, 2007, bond issue expenses were amortized equally over the three years. Effective from the year ended March 31, 2008, the Company changed its accounting policy to charging bond issue expenses to income when paid, pursuant to the application of "Tentative Solution on Accounting for Deferred Assets" (by The Accounting Standards Board of Japan, August 11, 2006).



(6) Allowance for Bad Debts The allowance for bad debts is calculated based on the aggregate amount of estimated credit losses for doubtful receivables plus an amount for receivables other than doubtful receivables calculated using historical write-off experience over a certain period.

(7) Accrued Retirement BenefitsAccrued retirement benefits are provided principally at an amount calculated based on the estimated amount incurred at the end of the period, which, in turn, is calculated based on the retirement benefit obligation and the fair value of the pension plan assets at the end of the current fiscal year.The unrecognized transition amount is amortized on the straight-line basis over 15 years, and the unrecognized prior service costs are amortized on the straight-line basis over a term that does not exceed the average remaining service period of employees who are expected to receive benefits under the plans (mainly 13 years) from the year in which they arise, and unrecognized actuarial differences are amortized on the straight-line basis over a term that does not exceed the average remaining service period of employees who are expected to receive benefits under the plans (mainly 13 years) from the next year in which they arise.

(8) Accrued Retirement Benefits for Directors and Statutory AuditorsProvision for retirement benefits for directors and statutory auditors is made at an estimate of the amount to be paid in accordance with the internal rules if all eligible directors and statutory auditors resigned from their posts at the balance sheet date.

(9) Foreign Currency TranslationAll monetary assets and liabilities denominated in foreign currencies, whether long-term or short-term, are translated into Japanese yen at the exchange rates prevailing at the balance sheet date. Resulting gains and losses are included in net profit or loss for the period.

(10) Income TaxesThe income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants’ taxes and enterprise taxes.The Companies adopt deferred tax accounting. Income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities are recognized in respect of temporary differences between the tax bases of assets and liabilities and those as reported in the financial statements. Deferred tax assets relating to tax loss carryforwards are recorded because the Japanese accounting standard requires that the benefit of tax loss carryforwards be estimated and recorded as an asset, with a deduction of the valuation allowance if it is expected that some portion or all of the deferred tax assets will not be realized.

(11) Net Income per ShareNet income per share is based upon the weighted average number of shares of common stock outstanding less the number of treasury stock during each period. Net income per share of common stock adjusted for dilution represents net income per share assuming full conversion of all convertible debentures of the Company outstanding, with a related reduction in interest expenses.

(12) Consumption TaxesConsumption taxes are levied at the flat rate of 5% on all domestic consumption of goods and services (with certain exceptions). The consumption taxes withheld by the Company and its domestic consolidated subsidiaries on its revenues and consumption taxes paid by the Company and its domestic consolidated subsidiaries on its purchases of products, merchandise and services from vendors are not included in the amounts of the respective accounts in the Consolidated Statements of Income, but is recorded as an asset or a liability, as the case may be and the net balance is included in "Other current assets" or "Other current liabilities" in the Consolidated Balance Sheets.

3. United States Dollar AmountsAmounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥98=U.S. $1, the approximate rate of exchange prevailing at March 31, 2009 has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen have been or could be readily converted, realized or settled in U.S. dollars at this rate or any other rate.

4. Cash Flow InformationCash and cash equivalents as of March 31, 2009 and 2008 consisted of:

Cash and time deposits ¥14,289 ¥8,993 $145,808 Time deposits with deposit term of over 3 months (45) (45) (464)Cash and cash equivalents ¥14,244 ¥8,948 $145,344

Significant finance lease transactions without cash flow for the year ended March 31, 2009 were as follows:

Leased assets ¥1,797 $18,342 Lease obligations 1,898 19,370

5. InventoriesInventories held by the Companies as of March 31, 2009 and 2008 consisted of the following:

Finished products ¥ 6,583 ¥10,269 $ 67,177 Raw materials 7,428 8,404 75,792 Work in process 4,553 4,260 46,459 ¥18,564 ¥22,933 $189,428

The cost of sales includes the cut-down of book values by ¥1,298 million ($13,244 thousand), reflecting reduced profitability of inventory held for normal sales purposes.

6. Marketable Securities and Investments in SecuritiesThe acquisition cost, book value per balance sheet for securities with fair value at March 31, 2009 and 2008, were as follows:

(Other securities)

Other securities with values exceeding acquisition costs ¥ 150 ¥ 282 ¥ 132 Other securities with values not exceeding acquisition costs 7,943 6,577 (1,366)

Total ¥8,093 ¥6,859 ¥(1,234)

Other securities with values exceeding acquisition costs ¥6,664 ¥7,297 ¥ 633 Other securities with values not exceeding acquisition costs 2,006 1,630 (376)

Total ¥8,670 ¥8,927 ¥ 257



Thousands ofU.S. DollarsMillions of Yen

(6) Allowance for Bad Debts The allowance for bad debts is calculated based on the aggregate amount of estimated credit losses for doubtful receivables plus an amount for receivables other than doubtful receivables calculated using historical write-off experience over a certain period.

(7) Accrued Retirement BenefitsAccrued retirement benefits are provided principally at an amount calculated based on the estimated amount incurred at the end of the period, which, in turn, is calculated based on the retirement benefit obligation and the fair value of the pension plan assets at the end of the current fiscal year.The unrecognized transition amount is amortized on the straight-line basis over 15 years, and the unrecognized prior service costs are amortized on the straight-line basis over a term that does not exceed the average remaining service period of employees who are expected to receive benefits under the plans (mainly 13 years) from the year in which they arise, and unrecognized actuarial differences are amortized on the straight-line basis over a term that does not exceed the average remaining service period of employees who are expected to receive benefits under the plans (mainly 13 years) from the next year in which they arise.

(8) Accrued Retirement Benefits for Directors and Statutory AuditorsProvision for retirement benefits for directors and statutory auditors is made at an estimate of the amount to be paid in accordance with the internal rules if all eligible directors and statutory auditors resigned from their posts at the balance sheet date.

(9) Foreign Currency TranslationAll monetary assets and liabilities denominated in foreign currencies, whether long-term or short-term, are translated into Japanese yen at the exchange rates prevailing at the balance sheet date. Resulting gains and losses are included in net profit or loss for the period.

(10) Income TaxesThe income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants’ taxes and enterprise taxes.The Companies adopt deferred tax accounting. Income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities are recognized in respect of temporary differences between the tax bases of assets and liabilities and those as reported in the financial statements. Deferred tax assets relating to tax loss carryforwards are recorded because the Japanese accounting standard requires that the benefit of tax loss carryforwards be estimated and recorded as an asset, with a deduction of the valuation allowance if it is expected that some portion or all of the deferred tax assets will not be realized.

(11) Net Income per ShareNet income per share is based upon the weighted average number of shares of common stock outstanding less the number of treasury stock during each period. Net income per share of common stock adjusted for dilution represents net income per share assuming full conversion of all convertible debentures of the Company outstanding, with a related reduction in interest expenses.

(12) Consumption TaxesConsumption taxes are levied at the flat rate of 5% on all domestic consumption of goods and services (with certain exceptions). The consumption taxes withheld by the Company and its domestic consolidated subsidiaries on its revenues and consumption taxes paid by the Company and its domestic consolidated subsidiaries on its purchases of products, merchandise and services from vendors are not included in the amounts of the respective accounts in the Consolidated Statements of Income, but is recorded as an asset or a liability, as the case may be and the net balance is included in "Other current assets" or "Other current liabilities" in the Consolidated Balance Sheets.

3. United States Dollar AmountsAmounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥98=U.S. $1, the approximate rate of exchange prevailing at March 31, 2009 has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen have been or could be readily converted, realized or settled in U.S. dollars at this rate or any other rate.

4. Cash Flow InformationCash and cash equivalents as of March 31, 2009 and 2008 consisted of:

Cash and time deposits ¥14,289 ¥8,993 $145,808 Time deposits with deposit term of over 3 months (45) (45) (464)Cash and cash equivalents ¥14,244 ¥8,948 $145,344

Significant finance lease transactions without cash flow for the year ended March 31, 2009 were as follows:

Leased assets ¥1,797 $18,342 Lease obligations 1,898 19,370

5. InventoriesInventories held by the Companies as of March 31, 2009 and 2008 consisted of the following:

Finished products ¥ 6,583 ¥10,269 $ 67,177 Raw materials 7,428 8,404 75,792 Work in process 4,553 4,260 46,459 ¥18,564 ¥22,933 $189,428

The cost of sales includes the cut-down of book values by ¥1,298 million ($13,244 thousand), reflecting reduced profitability of inventory held for normal sales purposes.

6. Marketable Securities and Investments in SecuritiesThe acquisition cost, book value per balance sheet for securities with fair value at March 31, 2009 and 2008, were as follows:

(Other securities)

Other securities with values exceeding acquisition costs ¥ 150 ¥ 282 ¥ 132 Other securities with values not exceeding acquisition costs 7,943 6,577 (1,366)

Total ¥8,093 ¥6,859 ¥(1,234)

Other securities with values exceeding acquisition costs ¥6,664 ¥7,297 ¥ 633 Other securities with values not exceeding acquisition costs 2,006 1,630 (376)

Total ¥8,670 ¥8,927 ¥ 257




20092009 2008


20092009 2008


2009Millions of Yen

Acquisition cost Book value per balance sheet Difference

2008 Millions of Yen






Other securities with values exceeding acquisition costs $ 1,524 $ 2,873 $ 1,349 Other securities with values not exceeding acquisition costs 81,052 67,111 (13,941)

Total $82,576 $69,984 $(12,592)

The book values per balance sheet of securities without fair value as at March 31, 2009 and 2008 were summarized as follows:

Unlisted equity securities ¥99 ¥561 $1,013

Proceeds, gross realized gains and gross realized losses from the sales of other securities in respect of the years ended March 31, 2009 and 2008, were as follows:

Proceeds ¥555 ¥1,960 $5,668 Gross realized gains 55 555 561

7. Short-Term Borrowings and Long-Term DebtShort-term borrowings and long-term debt at March 31, 2009 and 2008 consisted of the following:

Short-term borrowings from banks ¥ 7,817 ¥ 3,679 $ 79,766 Current portion of long-term debt 6,248 3,687 63,751 Current portion of lease obligations 287 – 2,933 Long-term debt 24,313 21,861 248,092 Lease obligations 1,374 – 14,022

¥40,039 ¥29,227 $408,564

The approximate weighted average interest rate of short-term borrowings from banks as of March 31, 2009 is 1.3%.

Long-term debt as of March 31, 2009 and 2008 consisted of the following:

Long-term loans from banks and other financial institutions ¥20,357 ¥15,344 $207,720 Unsecured convertible-bond-type bonds with stock acquisition rights, due March 31, 2010 204 204 2,082 1.46% bonds due August 7, 2009 2,000 2,000 20,408 1.55% bonds due August 10, 2012 3,000 3,000 30,613 1.49% bonds due August 10, 2012 1,000 1,000 10,204 1.46% bonds due August 10, 2012 1,000 1,000 10,204 2.02% bonds due August 29, 2014 2,000 2,000 20,408 2.13% bonds due August 29, 2014 1,000 1,000 10,204

30,561 25,548 311,843 Less: Current portion of long-term debt (6,248) (3,687) (63,751)

¥24,313 ¥21,861 $248,092


20092009 2008


20092009 2008

2009Thousands of U.S. Dollars



20092009 2008


20092009 2008

The aggregate annual maturity of long-term loans from banks and other financial institutions outstanding as of March 31, 2009, during the succeeding five-year period (except within one year) are as follows:

Years Ending March 31, 2011 ¥4,079 $41,624 2012 3,953 40,335 2013 3,267 33,338 2014 2,855 29,128

The Companies’ assets pledged as collateral for short-term borrowings from banks of ¥760 million ($7,755 thousand) and long-term loans of ¥602 million ($6,143 thousand) from banks as at March 31, 2009 are summarized as follows:

Buildings and structures ¥1,919 $19,583 Machinery and equipment 187 1,910 Land 1,027 10,477

¥3,133 $31,970

8. Retirement Plans and Severance IndemnitiesThe Company and its consolidated domestic subsidiaries have a funded pension program to cover the employees’ retirement benefits. The amount of such retirement benefits is determined by reference to the latest rate of pay, length of service and conditions under which retirement occurs.

Some of the overseas subsidiaries provide defined contribution pension plans.

The reserve for retirement benefits as of March 31, 2009 and 2008 is analyzed as follows:

Projected benefit obligations ¥(18,310) ¥(21,095) $(186,833)Plan assets 4,973 6,121 50,745

(13,337) (14,974) (136,088)Unrecognized transition amount 3,705 4,322 37,806 Unrecognized prior service costs (200) (239) (2,046)Unrecognized actuarial differences 2,413 2,284 24,624

(7,419) (8,607) (75,704)Prepaid pension expenses 2 2 25 Net liability recognized in balance sheets ¥ (7,421) ¥ (8,609) $ (75,729)

Net pension expenses related to retirement benefits for the years ended March 31, 2009 and 2008 were as follows:

Service costs ¥1,145 ¥1,096 $11,689 Interest costs 475 471 4,847 Expected return on plan assets (128) (135) (1,310)Amortization of transition amount 618 618 6,301 Amortization of actuarial differences 263 197 2,681 Amortization of prior service costs (38) (39) (390)Payments for defined contribution pension plan 29 49 301

¥2,364 ¥2,257 $24,119






20092009 2008


20092009 2008





Assumptions used in calculation of the above information were as follows:

Discount rate 2.0 – 2.5% 2.0 – 2.5%Expected rate of return on plan assets 2.0 – 2.5% 2.0 – 2.5%Method of attributing the projected benefits to periods of service straight-line basis straight-line basisAmortization of unrecognized prior service costs 13 years 13 yearsAmortization of transition amount 15 years 15 yearsAmortization of unrecognized actuarial differences 13 years 13 years

9. Contingent LiabilitiesThe Companies were contingently liable for guarantees of loans borrowed by its employees as of March 31, 2009 and 2008 as follows:

Housing loans of employees ¥239 ¥277 $ 2,437

10. Income TaxesAt March 31, 2009 and 2008, significant components of deferred tax assets and liabilities were as follows:

Deferred tax assets:Accrued retirement benefits ¥3,039 ¥3,499 $31,008 Loss carried forward for tax purposes 3,884 464 39,635 Depreciation 528 411 5,387 Accrued bonuses 192 410 1,959 Loss on devaluation of inventories 373 263 3,800 Loss on disposal of inventories 242 317 2,473 Allowance for bad debts 119 106 1,214 Lease rental expenses 226 295 2,309 Accrued retirement benefits for directors and statutory auditors 171 228 1,742 Accounts payable-nontrade – 520 – Enterprise tax payable – 55 – Other 757 826 7,724

Subtotal of deferred tax assets 9,531 7,394 97,251 Less valuation allowance (6,004) (497) (61,263)Total of deferred tax assets 3,527 6,897 35,988

Deferred tax liabilities:Unrealized gain on other securities (0) 104 (2)Special tax-purpose reserve 3 7 27 Other 0 7 1

Total of deferred tax liabilities 3 118 26 Net deferred tax assets ¥3,524 ¥6,779 $35,962

Regarding the difference between the statutory income tax rate and the effective income tax rate for the year ended March 31, 2009 and 2008, loss before income taxes and minority interests were recorded, so the disclosure of reason for the difference are omitted.


20092009 2008

20082009


20092009 2008

11. Major Items in Selling, General and Administrative ExpensesMajor items in selling, general and administrative expenses for the years ended March 31, 2009 and 2008 were as follows:

Freight and transportation ¥2,361 ¥2,559 $24,094 Employees’ salaries and wages 2,667 2,740 27,213 Provision for accrued bonuses to employees 73 172 745 Net pension expenses related to retirement benefits 366 306 3,732 Provision for accrued retirement benefits for directors and statutory auditors 10 71 101 Research and development expenses 2,276 1,295 23,228

12. Research and Development ExpensesResearch and development expenses charged to income for the years ended March 31, 2009 and 2008 were ¥4,544 million ($46,370 thousand) and ¥4,366 million, respectively.

13. Loss on RestructuringLoss on restructuring consists of following two items.

Extraordinary retirement expensesPlacement service cost for the voluntary retirement applicants ¥1,797 ¥ – $18,332

38 – 391

14. Impairment LossFor the year ended March 31, 2009, the Companies recognized impairment loss about following assets group.

(Summary of assets group which recognized impairment loss)

(Recognition of the impairment loss)For the year ended March 31, 2009, the carrying amount of the assets group was reduced to the recoverable amount, due to the decline of the profitability of the assets group, and the Company recognized the impairment loss. The detail of the impairment loss is as follows:

Machinery and equipment ¥180 $1,839 Other 20 201 Total ¥200 $2,040

(Assets grouping)The assets grouping was based on the management accounting classification, taking into account the cash flow interaction from the similarity of manufacturing processes.

(Calculation of recoverable amount)The recoverable amount of the assets group was measured at its value in use and the discount rate used for computation of present value of future cash flows was 4.7%.




20092009 2008


20092009 2008

Manufacturing equipment of machinery product

Machinery and equipment etc.

Obanazawa-shiYamagata-ken

¥200 $2,040

Millions of yenLocationType of assetsUse Thousands of U.S. dollars

Type of assets

Millions of Yen Thousands of U.S. dollars





15. Derivatives and Hedging ActivitiesThe Companies enter into forward currency exchange and currency option contracts to reduce exposure to risk of currency fluctuation on the Companies’ monetary receivables and payables denominated in foreign currencies. In addition, interest rate swap transactions are used in order to minimize the risk of interest rate fluctuation on the Companies’ borrowings.

The Companies have established a control environment, which includes policies and procedures for risk assessment and for the approval, reporting and monitoring of transactions involving derivative financial instruments. The Companies do not hold or issue derivative financial instruments for trading purposes.

The Companies are exposed to certain market risks arising from their forward currency exchange contracts, currency option contracts and interest rate swap transactions. The Companies are also exposed to the risk of credit loss in the event of non-performance by the counter parties to the currency and interest; however, the Companies do not anticipate nonperformance by any of these counter parties, all of whom are financial institutions with high credit ratings.

Outstanding forward currency exchange and currency option contracts as at March 31, 2009 and 2008 are shown below, except for transactions using hedge accounting.

At March 31, 2009Forward currency exchange contracts:

SellU.S. dollars ¥187 ¥196 ¥(9)Indonesia rupiah 79 82 (3)


SellU.S. dollars ¥300 ¥299 ¥1


SellU.S. dollars $1,913 $2,004 $(91)Indonesia rupiah 807 834 (27)

16. Leases(Finance lease transactions which do not transfer ownership of the assets)The leased tangible assets were principally research and development equipments (machinery), and the leased intangible asset was software.Depreciation of leased assets is calculated as described at Note 2 (4). Finance lease transactions executed on or before March 31, 2008 that do not involve a transfer of ownership are accounted for using the same method as operating leases. Certain key information on such lease transactions of the Companies as a lessee for the years ended March 31, 2009 and 2008 is as follows:

Lease rental expenses for the year ¥589 ¥ 702 $6,007

The scheduled maturities of future lease rental payments:Due within one year ¥328 ¥ 526 $3,345 Due over one year 365 567 3,730

¥693 ¥1,093 $7,075

Millions of Yen

Notional principal amount Market value Unrealized gain

Thousands of U.S. Dollars

Notional principal amount Market value Unrealized gain

Millions of Yen

Notional principal amount Market value Unrealized loss


20092009 2008

Leased assets:Assumed purchase cost ¥1,479 ¥2,359 $15,091 Assumed accumulated depreciation (805) (1,294) (8,219)Assumed net book value ¥674 ¥1,065 $6,872

Depreciation ¥ 545 ¥ 652 $ 5,565 Interest expenses 35 47 357

Leased property is depreciated over the lease term by the straight-line method with no residual value. Excess of total lease payments over the assumed acquisition costs is regarded as assumed interest payable and is allocated to each period using the interest method.

(Operating lease transactions)Lease obligations under operating leases at March 31, 2009 and 2008, were as follows:

The scheduled maturities of future lease rental payments:Due within one year ¥ – ¥ 2 $ –

17. Segment Information(1) Industry Segment InformationThe Companies operate principally in the following three industrial segments:

Device DiodesFast Recovery DiodesMOS-FETsThyristorsHybrid ICsPower ICsDC/DC Converter ICs

Equipment Power Supplies for Communication SystemsMonitoring Systems for ElectronicsPower Supplies for Information SystemsPower Supplies for Coating SystemsInvertersAutomotive Electronics ComponentsDC/DC Converters

Other Solenoids

The segment information of the Companies for the years ended March 31, 2009 and 2008 is summarized as follows:

Sales:Outside customers ¥34,952 ¥45,324 ¥4,963 ¥ – ¥85,239 Inter-group 2,047 25 – (2,072) – Total 36,999 45,349 4,963 (2,072) 85,239

Operating costs and expenses: 40,465 42,713 4,758 1,339 89,275 Operating income (loss) (3,466) 2,636 205 (3,411) (4,036)Assets 39,277 24,097 2,310 24,937 90,621 Depreciation 3,361 1,199 128 433 5,121 Impairment loss – 200 – – 200 Capital expenditure 1,984 1,086 329 2,193 5,592




20092009 2008


20092009 2008

Major productsIndustry segment

Millions of Yen

Device For the year ended March 31, 2009 Equipment Other Elimination or corporate Consolidated




Sales:Outside customers ¥44,762 ¥49,864 ¥6,201 ¥ – ¥100,827 Inter-group 1,113 557 – (1,670) – Total 45,875 50,421 6,201 (1,670) 100,827

Operating costs and expenses: 46,541 45,029 6,171 798 98,539 Operating income (666) 5,392 30 (2,468) 2,288 Assets 46,347 28,052 3,936 27,073 105,408 Depreciation 4,222 1,036 175 445 5,878 Capital expenditure 2,684 883 53 838 4,458

Sales:Outside customers $356,647 $462,494 $50,646 $ – $869,787 Inter-group 20,893 250 – (21,143) – Total 377,540 462,744 50,646 (21,143) 869,787

Operating costs and expenses: 412,908 435,841 48,554 13,672 910,975 Operating income (loss) (35,368) 26,903 2,092 (34,815) (41,188)Assets 400,788 245,888 23,566 254,461 924,703 Impairment loss – 2,040 – – 2,040 Depreciation 34,301 12,238 1,307 4,413 52,259 Capital expenditure 20,240 11,086 3,361 22,377 57,064

(Change in accounting policy)• For the year ended March 31, 2008:Up to the year ended March 31, 2007, gain on sale of scraps had been included in other income. Effective from the year ended March 31, 2008, it was recorded as reduction of cost of sales. Due to this change, operating costs and expenses of "Devices" and "Equipment" decreased by ¥382 million and ¥22 million respectively. As a result, operating income (loss) increased (decreased) by the same amounts.

• For the year ended March 31, 2009:Effective from the year ended March 31, 2009, "Accounting Standards for Measurement of Inventories" (by the Accounting Standards Board of Japan, May 17, 2006) was adopted. Due to this change, operating loss of "Devices" increased by ¥761 million ($7,770 thousand), operating income of "Equipment" and "Other" decreased by ¥543 million ($5,540 thousand) and ¥3 million ($31 thousand) respectively.Effective from the year ended March 31, 2009, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements" (by the Accounting Standards Board of Japan, May 17, 2006) was adopted. Due to this change, operating loss of "Devices" increased by ¥42 million ($428 thousand), and operating income of "Equipment" decreased by ¥42 million ($432 thousand).

(Additional information)• For the year ended March 31, 2008:Effective from the year ended March 31, 2008, property, plant and equipment acquired before March 31, 2007, are depreciated evenly over the five years from the year after the completion of depreciation to the limit on depreciable amount. Due to this change, operating costs and expenses of "Devices" and "Equipment" increased by ¥197 million and ¥62 million respectively. As a result, operating income (loss) decreased (increased) by the same amounts.

Millions of Yen




(2) Information by Geographic SegmentSales of the Companies classified by geographic area (inside and outside Japan) for the years ended March 31, 2009 and 2008 are summarized as follows:

Sales:Outside customers ¥59,211 ¥22,829 ¥2,022 ¥1,177 ¥ – ¥85,239 Inter-group 21,992 18,023 8 – (40,023) –

Total 81,203 40,852 2,030 1,177 (40,023) 85,239 Operating costs and expenses: 83,557 39,083 2,076 1,170 (36,611) 89,275 Operating income (loss) (2,354) 1,769 (46) 7 (3,412) (4,036)Assets 57,260 14,320 729 511 17,801 90,621

Sales:Outside customers ¥67,649 ¥27,742 ¥3,354 ¥2,082 ¥ – ¥100,827 Inter-group 27,971 23,543 – – (51,514) –

Total 95,620 51,285 3,354 2,082 (51,514) 100,827 Operating costs and expenses: 92,790 49,306 3,445 2,044 (49,046) 98,539 Operating income 2,830 1,979 (91) 38 (2,468) 2,288 Assets 67,072 21,172 1,191 946 15,027 105,408

Sales:Outside customers $604,190 $232,946 $20,636 $12,015 $ – $869,787 Inter-group 224,411 183,912 74 – (408,397) –

Total 828,601 416,858 20,710 12,015 (408,397) 869,787 Operating costs and expenses: 852,623 398,808 21,177 11,949 (373,582) 910,975 Operating income (loss) (24,022) 18,050 (467) 66 (34,815) (41,188) Assets 584,282 146,124 7,443 5,213 181,641 924,703

(Change in accounting policy)• For the year ended March 31, 2008:Up to the year ended March 31, 2007, gain on sale of scraps had been included in other income. Effective from the year ended March 31, 2008, it was recorded as reduction of cost of sales. Due to this change, operating costs and expenses of "Japan" and "Asia" decreased by ¥44 million, and ¥361 million respectively. As a result, operating income increased by the same amounts.

• For the year ended March 31, 2009:Effective from the year ended March 31, 2009, "Accounting Standards for Measurement of Inventories" (by the Accounting Standards Board of Japan, May 17, 2006) was adopted. Due to this change, operating loss of "Japan" increased by ¥1,308 million ($13,342 thousand).Effective from the year ended March 31, 2009, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements" (by the Accounting Standards Board of Japan, May 17, 2006) was adopted. Due to this change, operating income of "Asia" and "Europe" decreased by ¥82 million ($842 thousand) and ¥1 million ($7 thousand) respectively, operating loss of "North America" increased by ¥1 million ($11 thousand).


Millions of Yen

Japan For the year ended March 31, 2009 Asia North America Europe Elimination or corporate Consolidated

Millions of Yen







(Additional information)• For the year ended March 31, 2008:Effective from the year ended March 31, 2008, property, plant and equipment acquired before March 31, 2007, are depreciated evenly over the five years from the year after the completion of depreciation to the limit on depreciable amount. Due to this change, operating costs and expenses of "Japan" increased by ¥259 million, and operating income decreased by the same amount.

(3) Overseas SalesExport sales of the Companies (meaning the amounts of exports made by the Company and its domestic subsidiaries plus the sales of overseas consolidated subsidiaries) for the years ended March 31, 2009 and 2008 are presented below:

Overseas sales:Asia ¥30,337 ¥35,774 $309,560 North America 3,000 4,249 30,609 Europe 2,789 3,878 28,464 Others 72 50 732

Total ¥36,198 ¥43,951 $369,365

Percentage of such sales against consolidated net sales:Asia 35.6% 35.5%North America 3.5 4.2 Europe 3.3 3.9 Others 0.1 0.0

Total 42.5% 43.6%

18. Consolidated Statements in Changes in Net Assets(1) Categories and Numbers of Treasury Stock

(Shares of treasury stock)Common stock 235 106 36 305 Total 235 106 36 305

(2) Dividends

Ordinary general meeting of shareholders on June 27, 2008 Common stock ¥304 million ¥3.5 March 31, 2008 June 30, 2008Board of directors on November 7, 2008 Common stock ¥303 million ¥3.5 September 30, 2008 December 5, 2008


20092009 2008

Share class Resolution Cash dividends

per shareCash dividends

paid Term endDividend rights

date

Number of shares at beginning of the year(Thousands of shares)

Increase in numbers of shares

(Thousands of shares)

Decrease in numbers of shares


Number of shares at end of the year


19. Subsequent Events(Offer the voluntary retirement program in the Company)At the Board of Directors on April 22, 2009, the Company approved to offer the voluntary retirement program from 35 to 58 years old with over 10 years service in the Company, for the purpose of reducing fixed costs. As a result, 20 employees applied the program, and retired on May 20, 2009. For the applications, the Company will recognize extraordinary loss of approximately ¥100 million ($1,020 thousand) for the year ending March 31, 2010.

(Offer the voluntary retirement programs in 3 consolidated subsidiaries)3 consolidated subsidiaries approved at the Board of Directors to offer the voluntary retirement programs. The summary of the programs are as follows.

(1) Eligibility for the ProgramsEligible employees: With the definite requirementsNumber to whom programs will be offered: Approximately 260 employeesApplication period: May 11 – June 5, 2009

(2) Impact of the OfferWith the full applications to the retirement programs, extraordinary loss will amount to approximately ¥1,200 million ($12,245 thousand).

(Reduce additional paid-in capital and legal reserve of retained earnings, and appropriate the surplus)It was resolved at the annual shareholders’ meeting of the Company held on June 26, 2009, that the Company would reduce its additional paid-in capital (included in capital surplus), transfer it to other capital surplus, and reduce its legal reserve of retained earnings and transfer it to other retained earnings. Furthermore, the Company would appropriate the surplus, based on the Japanese Corporate Law. The summary is as follows.

(1) Reduce Additional Paid-in Capital and Legal Reserve of Retained Earnings(a) Purpose of the Reduction of Additional Paid-in Capital and Legal Reserve of Retained EarningsThe Company would reduce its additional paid-in capital and legal reserve of retained earnings to compensate for the deficit in retained earnings, realize a solid financial condition, drive for the resumption of dividends, secure the capital for future dividends, and assure greater mobility and flexibility in undertaking future capital policy.

(b) Amount of the Reduction of Additional Paid-in Capital and Legal Reserve of Retained EarningsThe additional paid-in capital of ¥13,982 million ($142,673 thousand) as of March 31, 2009 would be reduced by ¥11,000 million ($112,245 thousand).The legal reserve of retained earnings of ¥1,246 million ($12,715 thousand) as of March 31, 2009 would be reduced in its entirety.

(c) Schedule for the Reduction of Additional Paid-in CapitalStart of period for official filing of objections by creditors: May 22, 2009End of period for official filing of objections by creditors: June 21, 2009Reduction of additional paid-in capital becomes effective: June 26, 2009

(d) Schedule for the Reduction of the Legal Reserve of Retained EarningsReduction of legal reserve of retained earnings: June 26, 2009

(2) Appropriate the SurplusBased on the Japanese Corporate Law, the Company would reduce its other capital surplus and general reserve of retained earnings, and transfer the amounts to other retained earnings.Other capital surplus would be reduced by ¥3,475 million ($35,463 thousand) and the general reserve of retained earnings by ¥8,279 million ($84,478 thousand). As a result, other retained earnings would increase by ¥11,754 million ($119,941 thousand).


The Board of Directors

Shindengen Electric Manufacturing Co., Ltd.

We have audited the accompanying consolidated balance sheets of Shindengen Electric Manufacturing Co., Ltd. and consolidated subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of operations, changes in net assets, and cash flows for the years then ended, all expressed in yen. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 and significant 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Shindengen Electric Manufacturing Co., Ltd. and consolidated subsidiaries at March 31, 2009 and 2008, 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.

Supplemental information1. As discussed in Note 19 to the consolidated financial statements, the Company and 3 consolidated subsidiaries have

offered a voluntary retirement program.2. As discussed in Note 19 to the consolidated financial statements, it was resolved at the annual shareholders’ meeting of the

Company held on June 26, 2009, to reduce additional paid-in capital and legal reserve of retained earnings, and appropriate the surplus.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2009 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 3.

June 26, 2009


Report of Independent AuditorsReport of Independent Auditors


■ Subsidiaries & Affiliates

•Sales and Service

Overseas

Shindengen America, Inc.

• Head Office (Chicago)

Phone:+1-847-444-1363

Shindengen (H.K.) Co.,Ltd.

• Head Office (Hong Kong)

Phone:+852-2317-1884

• Taiwan Representative Office

Phone:+886-2-2560-3990

• Shanghai Liaison Office

Phone:+86-21-6270-8000

Shindengen UK Ltd.

• Head Office

Phone:+44-1707-252550

• GERMAN BRANCH

Phone:+49-211-4919680

Shindengen Singapore Pte Ltd.

Phone:+65-6445-0082

Japan

Shindengen Device Commerce Co.,Ltd.

Phone:+81-3-3256-8881

•Manufacturing

Overseas

Lumphun Shindengen Co.,Ltd.

Shindengen Philippines Corp.

PT.Shindengen Indonesia

Guangzhou Shindengen Electronic Co.,Ltd.

Shindengen (Thailand) Co.,Ltd

Japan

Akita Shindengen Co.,Ltd.

Higashine Shindengen Co.,Ltd.

Okabe Shindengen Co.,Ltd.

Shindengen Three E Co.,Ltd.

Shindengen Mechatronics Co.,Ltd.

Shindengen Enterprise Co.,Ltd.

Nippon Vender Net Co.,Ltd.

President

Kojiroh Oda

Managing Director

Masatsugu Konno★

Managing Director

Masato Morikawa★

Director

Noboru Asano★

■ Corporate Data

Established:

August 16, 1949

Listed on Stock Exchange:

June 2, 1958

Capital:

¥14,773,618,008 (as of March 31, 2009)

Total Number of Issued Shares:

87,027,848 (as of March 31, 2009)

Number of Shareholders:

9,471 (as of March 31, 2009)

Number of Employees:

5,940 (Consolidated basis)

992 (Non-consolidated basis)

(as of March 31, 2009)

Head Office:

New-Ohtemachi Bldg., 2-1, Ohtemachi 2-chome,

Chiyoda-ku, Tokyo 100-0004, Japan

Phone: +81-3-3279-4431

Hanno Factory:

10-13, Minamicho, Hanno City, Saitama 357-8585, Japan

Phone: +81-42-973-3111

Osaka Branch Office:

Minami Senba Heart Bldg., 3-2, Minami Senba, 2-chome,

Chuo-ku, Osaka City, Osaka 542-0081, Japan

Phone: +81-6-6264-7770

Nagoya Branch Office:

Nagoya Daiichi Bldg., 19-24, Nishiki 1-chome, Naka-ku,

Nagoya City, Aichi 460-0003, Japan

Phone: +81-52-221-1361

Auditors

Standing Corporate Auditor

Hiroyuki Yamada

Corporate Auditor

Motoji Utsumi

Corporate Auditor

Yuichiro Miyake

■ Board of Directors

Director

Wataru Tomoshige★

Director

Yoshimitsu Arahata★

Director

Yoshinori Suzuki★

Officers

Senior Officer

Masanori Ogasawara

Michio Koyama

Ko Kawame

Officers

Hidemi Nishi

Takaharu Yokoi

★ The Directors concurrently serving as the Officers.

Company InformationCompany Information

www.shindengen.co.jp

SHIN

DE

NG

EN

Annual R

eport 2009/2008 Year E

nded March 31,2009 and 2008

This annual report is printed on recycled paper. Printed in Japan

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Annual Report 2008/2007 Shindengen Electric Manufacturing ... · 2 - SHINDENGEN Annual Report...

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