Becoming a Group with
a top-class global corporate structure—

We will push ahead with three creation concepts to lay a solid foundation for sustained growth.

The Yamatake Group aims to become a top-class global corporate group as it pursues 10-year, long-term goals. In this section, we ask President and CEO Seiji Onoki what sort of new medium-term management plan and business strategies Yamatake will adopt from fiscal 2007 based on the results of the past three years.

【Operating Results and Assessment of the Previous Three-Year Medium-term Management Plan】
Delivered results above targets, while expanding business and strengthening the management foundation

-How would you summarize the three-year medium-term management plan that ended in fiscal 2006?

Our initial targets for the plan were consolidated net sales of 200 billion yen, consolidated operating income of 13 billion yen, and ROE of 7% or higher. We exceeded these targets by significant amounts. In fiscal 2006, we posted consolidated net sales of 234.6 billion yen, consolidated operating income of 17.3 billion yen, and consolidated ROE of 9.3%. We actually achieved the operating income target in fiscal 2005.

We implemented measures to drive our transformation based on three keywords during this three-year period ended in March 2007: 1) Creating a new business (business structural reform); 2) Creating a new work style (business operation reform); and 3) Building Yamatake spirit (creation of a new corporate culture). Through measures to realize these concepts, we worked to expand the business fields of Building Automation (BA) and Advanced Automation (AA), while laying the foundation for the new Life Automation (LA) field. In the course of this process, we made Kimmon Manufacturing Co., Ltd. and Royal Controls Co., Ltd. group companies and forged an equity-based business alliance with Tem-Tech Lab.

Going beyond simply implementing measures to meet our targets, we invested business resources in facilities and R&D, optimized the production framework, and took other s teps focused on expanding and strengthening the foundations necessary for sustainable growth.



【Long-term Goals and the New Three-year Medium-term Management Plan】
The new three-year mediumterm management plan to strengthen the business foundations built on “humancentered automation”

-Yamatake has set 10-year goals with the aim of achieving sustainable growth over the long term. What steps has the Company taken toward achieving these goals? And what part does the new medium-term management plan have to play?

(Long-term goals)
The Yamatake Group’s long-term goal is to “Focus on the human, building a world of automation created through human ingenuity and technology to become a corporate group with a top-class global corporate structure that enhances the safety and security of its customers, helps to improve their corporate value, and contributes to solutions for global environmental issues.” We used the occasion of our 100th anniversary in fiscal 2006 to revise our corporate philosophy with an eye toward success for the Group in the new century. We designated “azbil” as the new Group symbol and formulated this long-term goal.

We are currently pursuing growth strategies in line with our 10-year, long-term targets. We have set a target for achieving consolidated operating income of 30 billion yen or higher on consolidated net sales in the 300 billion yen range, as a Group that develops business through “human-centered automation” unique to Yamatake, and with a top-class global corporate structure.

We will achieve these long-term goals through the following three steps.

(Period of fostering Yamatake spirit)
The first step, covering the three-year period that has just concluded (April 2004 through March 2007), emphasized fostering the proper stance from which to create a second century for Yamatake. As described in the preceding section, we improved the earnings structure, expanded the business fields of Building Automation and Advanced Automation, and laid the foundation for Life Automation, the third business pillar. With “synergy” as the shared keyword for the Group, we strengthened cooperation along both vertical and horizontal axes of the Company, fostering a culture toward earnings and cooperation as a Group.

（Period of firmly establishing the foundation）

The new medium-term management plan begun in April 2007 (April 2007 through March 2010) is the step for solidifying foundations. Following the Yamatake corporate philosophy of “human-centered automation,” we will solidify our business foundations by remaining mindful of customer satisfaction and ensuring our distinctiveness as we execute the three creation concepts of “Creating a new business, creating a new work style, and building Yamatake spirit” by remaining mindful of customer satisfaction and Yamatake’s unique value. This will ensure that we maintain and drive growth. We will reform our three main business pillars (BA, AA and LA) into high-value-added business structures valued by customers. Under the Group symbol “azbil,” we will strengthen cooperation among the entire Yamatake Group, and implement measures to improve the business structure and earnings of Kimmon Manufacturing, the core company of the Life Automation business. As a group, we will also strengthen the international business, enhance sales cooperation and product development capabilities, and optimize the production framework both in Japan and overseas. As a result of implementing these measures, we expect to meet targets for the fiscal year to March 2010 of consolidated operating income of 23 billion yen or higher, net sales of the 260 billion yen level, and ROE of 9.5% or higher.

(Period of growth)
The period from April 2010 through March 2014 will be the growth phase. We plan to firmly establish businesses based on “human-centered automation” that is the corporate philosophy of the Yamatake Group, developing into a corporate group with a top-class global corporate structure. In doing so, we will leverage a cooperative Yamatake Group culture fostered through the two earlier periods—“Period of fostering Yamatake spirit” and “Period of firmly establishing the foundation”—and high added-value operations. Our goal for this phase, as stated previously, is transformation to an earnings and value-added structure able to generate consolidated operating income of at least 30 billion yen on net sales at the 300 billion yen level.



【Reinforcing Kimmon Manufacturing】
The “Kimmon-Yamatake Jump-up Plan” will generate synergistic benefits through Group collaboration.

-Some concern has been expressed about the lackluster performance at Kimmon Manufacturing, which is expected to be the core of the Life Automation business.

Currently, Kimmon Manufacturing’s business development is being held back by rising prices for raw materials, a cyclical downturn in demand for city gas meters, and other factors that are making for a difficult business environment. However, we anticipate improvement in the business climate from fiscal 2008, with a recovery in demand for city gas meters, for example.

Of course, it is hardly necessary to point out that significant fluctuations in business results that mirror changes in the business climate is less than desirable in terms of business management. In order to improve the business structure and earnings of Kimmon Manufacturing, therefore, we are currently implementing the “Kimmon-Yamatake Jump-up Plan,” which will generate synergistic benefits through Group collaboration. This plan involves cooperation with the Advanced Automation business such as in proposing solutions to major gas companies, and collaboration with the Building Automation business such as encouraging replacement of water meters that have reached the end of their certification period, to generate synergies with Kimmon Manufacturing in sales activities.

Through this plan, we are also seeking to achieve synergies in terms of production, mainly by producing Yamatake products at Kimmon Manufacturing facilities. We further hope to optimize the utilization and placement of personnel, reduce purchasing costs, make more effective use of operating sites, and otherwise utilize business resources on a Group-wide basis, which will lead to the eff icient business development of Kimmon Manufacturing.


【Strengthening Product Development】
Product development “unique to Yamatake” that reflects the needs of customers’ worksites

-As a technology-oriented manufacturer, the development of products and services with features unique to Yamatake is a key factor for growth. What measures are you taking in this regard?

The Yamatake Group, based on its integrated business structure ranging from product development through production, sales, installation and maintenance, has pursued a style of manufacturing “unique to Yamatake” that reflects the needs arising from customers’ worksites in the development of products. To utilize this characteristic, provide for closer coordination in research, product development and engineering, and further strengthen the manufacturing style “unique to Yamatake,” in 2006 we consolidated relevant divisions into the Fujisawa Technology Center. Bringing together product development and engineering personnel from the various Group businesses will allow us to enhance communication and synergies, significantly shortening the process from basic research to product development and engineering. We will thus be able to bring to market more quickly new products that meet market needs. We also plan to merge technology from the Building Automation and Advanced Automation businesses in order to enhance our capacity to provide one-stop solutions for resolving all issues facing factories, from HVAC (heating, ventilating and air conditioning) of factory buildings to control of production lines.


【Targets for Fiscal 2007】
We plan to br ing forward increases in sales and income during fiscal 2007 to ensure that long-term targets are met

-What are your earnings forecasts for fiscal 2007?

In the Building Automation business, we expect construction investment to be brisk, centered on large-scale redevelopment projects in the Tokyo metropolitan area and the manufacturing industry. We also anticipate growing demand for the refurbishment of existing buildings to meet the rising need for energy efficiency in order to achieve the reductions in CO2 emissions mandated by the Kyoto Protocol. In the Advanced Automation business as well, with the global economy growing, we expect capital expenditures to remain firm both in Japan and overseas. With such a favorable business environment, we expect to realize both sales and income growth in both businesses by continually adapting our business reform activities. In the Life Automation business, we expect the business environment to be difficult overall, but for income to remain stable through improved profitability.

As a result, for fiscal 2007, ending March 31, 2008, we forecast net sales of 244.0 billion yen with operating income of 20.0 billion yen. The earnings target is ambitious, representing a 2.6 billion yen increase over fiscal 2006. But we have set these targets in order to achieve our targets of at least 23 billion yen in operating income on sales at the 260 billion yen level for fiscal 2009—the final year of the new medium-term management plan that will guide us toward achieving our long-term goals. We are making a concerted effort to meet these targets.


【Policy on Returns to Shareholders】
We plan to increase dividends in fiscal 2007 to raise shareholder returns

-What is your basic policy on shareholder returns?

The Yamatake Group recognizes that returning earnings to shareholders is an important management theme. Taking into account consolidated earnings, ROE (return on equity) and dividend on equity (DOE), and retained earnings necessary for future business development and strengthening the corporate structure, we will strive to maintain a stable dividend while making every effort to raise the level. In accordance with this policy, as previously announced, we paid a yearend dividend of 25 yen per share. Combined with our interim dividend of 25 yen per share, we paid a full-year dividend applicable to fiscal 2006 of 50 yen per share.

For fiscal 2007, considering that we anticipate benefits from strengthening the Group business st ructure and improved earnings, we plan to increase the full-year dividend on common shares by 10 yen to 60 yen per share to raise shareholder returns.


【CSR and the Environment】
CSR management targets have been incorporated into the three-year medium-term management plan

-A company’s response to CSR and environmental issues has become an essential element in achieving sustainable growth. What efforts are you making in this area?

As a company seeking to be the global standard for automation manufacturers, ensuring CSR management (consisting of social responsibility in business, legal compliance and business ethics, internal controls, and risk management) and being environmentally responsible are necessary conditions that we must of course fulfill. We have therefore set such targets in our three-year medium-term management plan, and are taking proactive steps to achieve them.

One of the characteristics of the Yamatake Group is that we directly contribute to society through our automation business by drawing on the core measurement and control technologies and resources we have established over the years. We are confident that the “human-centered automation” we strive to achieve is an important technology in harmony with the changing social structure, advances in production and research, and such societal values as environmental conservation and energy efficiency. It is also essential for us to adapt to the trend toward ISO certification related to social responsibility, enforcement of the Company Law, the Financial Instruments and Exchange Law and other regulations, and to make preparations against a variety of business risks. We have steadily implemented such measures as setting up frameworks for corporate governance, compliance and risk management, as well as establishing a dedicated department in charge to build and enhance operation of the internal control system. In other areas, we appointed a new external director in fiscal 2007 with the aim of further bolstering corporate governance.

To address environmental issues, the Yamatake Group is reducing the environmental burden of its corporate activities, and utilizing its measurement and control technologies to help resolve the environmental and energy issues faced by its customers and society. Going forward, we will address environmental issues such as energy efficiency from a global perspective.

The Yamatake Group, seeking long-term growth, will in the course of its business activities, as well as its environmental conservation and social responsibility activities, endeavor to meet the expectations of shareholders, customers, and other stakeholders. We look forward to your understanding and support of Yamatake Corporation.


July 2007

We will promote business based on “human-centered automation,” and contribute to society and the global environment through our business.