BUSINESS REPORT 2006
December 1, 2005 to November 30, 2006

NACHI-FUJIKOSHI CORP.
Stock Code: 6474

TO OUR SHAREHOLDERS
It’s our pleasure to report to you about NACHIFUJIKOSHI’s business performance for the
fiscal year ended November 30, 2006.
Business Environment
During the period under review, Japan’s
economy maintained its modest recovery. This
reflected higher capital expenditure and improved employment conditions, although fluctuations in crude oil and raw material prices
and other causes for concern were still apparent. Overseas economic growth was also robust
overall, reflecting solid growth in the U.S.
economy, expansion in China and ASEAN
markets, and a rebounding European economy.
Business Progress and Results
In this environment, the NACHI-FUJIKOSHI
Group worked on the marketing, manufacturing and development fronts to promote the“NACHI Business” concept in the global
market, capitalizing on the sophisticated,interconnected business management thathas become a Group trademark. We improved
and augmented the Group’s production framework and equipment, both at home andabroad, and took steps to enhance productivity and bolster supply capabilities. We also
responded to flourishing demand in the automobile and industrial machinery sectors by
supplying reliable products and technologies
offering high performance and high precision.

About the Cover Design
The triangle symbolizes the notion of “SeiHan-Go,” or “Fusing discrete and opposing
ideas into one,” the Group corporate philosophy implicit in the meaning of “Fuji” inour name.

01

These actions resulted in net sales of ¥186.7
billion, up 6.1% from the previous fiscal year.
Sales to the Japanese market accounted for¥128.4 billion (up 1.6% year on year), while
overseas sales climbed 17.6% to ¥58.2 billion.
Turning to earnings, ordinary income rose
¥2.1 billion, or 17.7% year on year, to ¥14.1
billion. This improvement was posted despite
rising raw material and component prices,higher fixed expenses due to improvement of
the production framework and other factors
during the year. These concerns were largely
offset by improved capacity utilization stemming from increased sales and production, as
well as enhanced productivity and other total
cost reduction efforts. After accounting for an
extraordinary loss due to operational streamlining expenses, net income for the year underreview was ¥7.3 billion.
Cash Dividends
In recognition of business performance during the year and as a token of appreciation toshareholders for their dedicated support andto meet their expectations, the Company
intends to pay a cash dividend of ¥8 per share,
an increase of ¥1 from the previous fiscal year.
Future Action
Looking ahead, firm growth is expected tocontinue in the industrial machinery sector,
while capital expenditure in the automobile

sector is expected to enter a temporary correction phase. Meanwhile, issues fueling future
uncertainty also abound: price trends in crude
oil and raw material markets, economic slowdown in the U.S., and fluctuations in the yendollar exchange market all contribute to abusiness environment that will continue towarrant no optimism for the time being.
Given these circumstances, the NACHIFUJIKOSHI Group will strive to establish astable earnings base by reinforcing the interconnections between every aspect of our operations and setting our business on a solid
footing. Moreover, we will strive to boost corporate value by upholding the NACHI brand,a name trusted across the globe in the manufacturing field.
I thank all of our shareholders for yourcontinued support and understanding.
February 2007
Kensuke Imura, President

RESULTS OF OPERATIONSSales by Business Segments

Overseas Sales

Special Steels/
Industrial Furnaces
and Others

Cutting Tools

10%
HydraulicEquipment

Europe

17%

15%

19%

10%

¥186.7billion10%

Machine Tools/
Precision Machinery¥58.2
billion40%

America45%

Robots34%
Asia, Oceania,
and the Middle East

Bearings

Net Sales(¥ billions)

Consolidated
Non-consolidated

Operating Income(¥ billions)

Consolidated
Non-consolidated

Ordinary Income(¥ billions)

Consolidated
Non-consolidated

02

THE NACHI BUSINESS NETWORK—Contributing to the Progress of theAutomobiles Products for a safe, comfortable and smooth ride

Aircraft Achieving high productivity and high-precision
processing for jet engine components

Steering

Turbine discs
and blades

Bullet Trains

Small Shovels Massive power in an

Ensuring high speed,
safety and comfort

energy efficient, compact package

Engines

Transmissions

Constant-velocity(CV) joints

Wheel drive
motorsUndercarriages

Swing motors

Products used in everything from automobiles, aircraft, bullet trains, small— Technologies that create, handle and drive everything. And there’s
Machining & Robots

Components

Supporting production line automation with the required highperformance and high precision

In pursuit of greater safety andPrecision tools
Machine tools

03

Ultra-precise processing
machinery with nano-level
precision

Large-sized glass substratetransfer robot

High-performance
bearings

World of Product Manufacturing
Industrial Machinery Realizing outstanding precision and efficiency

Electrical & Electronic Devices
From home appliances to IT

Injection molding
machines

Machinetools

Homes & Lifestyle Familiar parts of everyday life

DIY products
Aspheric lenses usedin digital equipment
Seismic isolator

Moveable roof domes

shovels, and machine tools to mobile phones, digital cameras and LCD TVs
always something new on the horizon. “Wonders from NACHI, Art in NACHI”
Materials & Heat Treatment
Supporting high performance andsuperb quality

comfortSpecial steels

Hydraulic equipment
for construction andindustrial machines

Solenoid valves forautomobiles

Coating, carburizing and other surface
modification technologies
04

FINANCIAL STATEMENTS
Consolidated Balance Sheets
Item(¥ millions)2006(As of November
30, 2006)

2005(As of November
30, 2005)

ASSETS:
90,89479,544

Cash and cash equivalents

13,406

10,027

Notes and accounts receivable

42,22036,850Inventories

30,09728,336

Deferred tax assets

3,047

2,480

Other

2,417

2,146

Allowance for doubtful accounts

(294)

(297)

Fixed assets

95,21384,427

Property, plant and equipment

72,39363,360

Buildings and structures

21,744

19,444

Machinery and equipment

39,731

34,714

Land

7,226

6,967

Construction in progress

1,852

981

Other

Current assets

1,838

1,252

Intangible fixed assets

429

532

Software

332

410

96

122

Investments and advances

22,39020,534

Investment securities

19,23017,405Other

Long-term loans receivable

150

90

Deferred tax assets

866

1,003

2,181

2,078

(38)

(42)

186,107

163,972

Other
Allowance for doubtful accounts
Total assets

Consolidated Statements of Income
Item

Net sales
Operating income
Ordinary income
Extraordinary income
Extraordinary losses
Income before income taxes
and minority interests
Net income05(¥ millions)

2006(For the year ended
November 30, 2006)

2005(For the year ended
November 30, 2005)

186,722
15,555
14,161624
1,594

176,014
13,252
12,032310
2,850

13,191
7,304

9,492
5,179

Item

LIABILITIES:Current liabilities
Notes and accounts payable
Short-term bank loans
Other accounts payable
Other
Long-term liabilities
Bonds and long-term debt
Allowance for retirement benefits
Other
Total liabilities
MINORITY INTERESTS:
Minority interests
SHAREHOLDERS’ EQUITY:
Common stock
Additional paid-in capital
Retained earnings
Unrealized gains on availablefor-sale securities
Translation adjustments
Treasury stock
Total shareholders’ equity
Total liabilities, minority interestsand shareholders’ equity
NET ASSETS:
Shareholders’ equity
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Revaluations and translation adjustments
Unrealized gains on availablefor-sale securities
Translation adjustments
Minority interests
Total net assets
Total liabilities and net assets

2006(As of November
30, 2006)

2005(As of November
30, 2005)

91,25935,98833,867
9,282
12,12039,98926,6198,171
5,197
131,248

88,54836,33430,916
8,715
12,581
29,364
15,983
8,969
4,411
117,913

–

564

–
–
–

16,074
11,435
16,747

–
–
–
–

6,732
(5,382)(112)
45,495–

163,972

49,91816,074
11,452
22,548
(157)
3,283

–
–
–
–
–
–

7,531
(4,247)
1,656
54,859186,107–––––

Consolidated Statements of Cash Flows
Item

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase (decrease) in cash
and cash equivalents
Cash and cash equivalents
at beginning of the year
Cash and cash equivalents
at end of the year

2006
(For the year ended
November 30, 2006)

10,221(18,812)
11,627(¥ millions)
2005(For the year ended
November 30, 2005)

14,674(11,062)(7,779)3,186(4,009)9,231

13,191

12,6439,231

Consolidated Statement of Changes in Shareholders’ Equity (For the year ended November 30, 2006)
Item

Commonstock

Shareholders’ equity
Additional
Retained
Treasurypaid-inearnings
stock
capitalBalance as of November 30, 2005
Changes during the fiscal year
Dividends from retained earnings
Bonuses for directors appropriatedfrom earnings
Net income
Acquisition of treasury stock
Disposal of treasury stock
Decrease in retained earnings accompanying
increase in consolidated subsidiaries
Minimum pension liability adjustmentsof overseas subsidiary
Other
Net changes in items other thanshareholders’ equity
Total changes during the fiscal year
Balance as of November 30, 2006

16,074

11,435–
16,074ASSETS:
Current assets
Fixed assets
Total assets
LIABILITIES:Current liabilities
Long-term liabilities
Total liabilities
SHAREHOLDERS’ EQUITY:
Common stock
Additional paid-in capital
Retained earnings
Unrealized gains on availablefor-sale securities
Treasury stock
Total shareholders’ equity
Total liabilities and shareholders’ equity
NET ASSETS:
Shareholders’ equity
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Revaluations and translation
adjustments
Total net assets
Total liabilities and net assets

16
11,452(112)

44,145

6,732(5,382)

1,349

Minority
interests

Total
net assets

564

46,059(1,741)(1,741)(1,741)

(95)
7,304

(95)
7,304
(58)
30

(95)
7,304
(58)
30

(8)

(8)

(8)

330
10

330
10

330
10

16

Non-consolidated Balance Sheets
Item

16,747(¥ millions)

Revaluations and translation adjustments
Total
Unrealized gains
Total revaluations
shareholders’ on available-for- Translation and translation
sale securities adjustments adjustments
equity5,801
22,548(¥ millions)2006(As of November
30, 2006)

2005(As of November
30, 2005)

62,161
93,175
155,336

52,31682,781135,098

72,63433,526106,161

68,28622,42790,714–––

16,074
11,435
10,429

–
–
–
–

6,539
(95)
44,383135,098

41,813
16,074
11,452
14,426
(140)

–
–
–
–
–

7,361
49,175
155,336

–
–
–

(58)
13

(44)
(157)

5,772
49,918

799
799
7,531

1,135
1,135
(4,247)

1,934
1,934
3,283

Non-consolidated Statements of Income

1,092
1,092
1,656

3,026
8,799
54,859(¥ millions)

2006(For the year ended
November 30, 2006)

2005(For the year ended
November 30, 2005)

Net sales

154,708

144,929

Operating income

11,7609,664

Ordinary income

10,704

8,841

Item

Extraordinary income

89

90

Extraordinary losses

1,021

1,498

Income before income taxes

9,772

7,433

Net income

5,834

4,480

06

TOPICS
Topics1 Launch of Major NACHI Dealers Conference
Making contacts that transcend industries and regions, deepening partnerships
In November 2006, NACHI-FUJIKOSHI invited dealers representing 45 major
companies from such fields as cutting tools,
bearings and hydraulics to a conference designed
to make contacts that cut across existing business frameworks. The ultimate aim was to improve
NACHI Business.
(November 2006)

Topics2 Global Expansion of the Engineering Business
NACHI-FUJIKOSHI is nurturing new businesses through newly established bases in Japan and overseas specializing inengineering services, including the re-sharpening and recoating of cutting tools and robot maintenance.

NACHI Engineering EstablishedWe set up NACHI Engineering Co., Ltd. to consolidate and expand various engineering services, including for machine tools and robots, along with our showrooms anddemonstration facilities. This move will enhance our technical support for customers.
(Ayase City, Kanagawa Prefecture. Completion scheduled for April 2007)

NACHI (Shanghai) Precision Tools Co., Ltd.
Established in Shanghai in March 2006 as a basefor precision tool engineering services, this company will advance business in the Chinese market
together with bearings manufacturer Shanghai
NACHI Bearings Co., Ltd., band saw manufacturer
Shanghai NACHI Saw Corp. and sales company
NACHI (Shanghai) Co., Ltd.

NACHI Precision North Carolina Inc.
Located in the southeastern United States, home to numerous automakers, this company has begun a business involving the re-sharpening and recoating of precision
cutting tools.
(Established May 2006)

07

Opening of the NACHI Galaxy
China showroom

Topics3 Synergies Through Alliances
At the 23rd Japan International Machine Tool Fair (JIMTOF
2006), NACHI-FUJIKOSHI exhibited jointly with Sumitomo Electric Hardmetal Corp. in the cutting tool sector,
and with GPA (Gear Production Alliance), Kashifuji WorksLtd. and Kanzaki Kokyukoki Manufacturing Co., Ltd. inthe machine tool sector. The exhibitions were instrumental
in promoting the attractions of the latest processing technology to customers from Japan and overseas.

Topics4 New Product—the Artis SC400LC Clean Robot
We recently launched sales of this 6-axis, multi-jointed clean
robot boasting the world’s best handling capabilities. This
newly developed robot safely, precisely and speedily handles
glass substrates for increasingly larger flat panel displays.
Exquisite, Masterful

FUJIKOSHI Hospital—Part of the FUJIKOSHI Story
FUJIKOSHI Hospital began as a medical clinic for FUJIKOSHI
employees that was opened by founder Kohki Imura in 1934. The
clinic expanded as the company grew and has contributed to thedevelopment of the region’s healthcare as one of Toyama prefecture’s
leading general hospitals. In 1951, we agreed to the prefecture’s request
to administer the hospital, which became the present-day Toyama
Prefectural Central Hospital.
In 1958, we built a new FUJIKOSHI Hospital at the side of thecompany’s present-day main entrance. Then in 1989, the hospital
moved to a new building in front of the main entrance to commemorate the company’s 60th anniversary.
In the fall of 2006, an extra 1,830 square meters of wards wereadded in a 3-storey wing on the west side of the hospital, thereby
expanding the existing area to 6,560 square meters.
In addition to an upgraded Health Center, the new wing features
wider corridors and larger doors for barrier-free access. The hospitalfirst floor is divided into a Checkup Center, and internal medicine rooms

for outpatient consultation and treatment, to offer greater convenience
to both people receiving medical checkups and outpatients.
The second floor holds the Dialysis Center, whose activities werepreviously dispersed among three separate locations. The wards andsmaller patients’ rooms that used to be on the third and fourth floors
are now also on one floor.
Our founder was well known for a calligraphic scroll that read “ahealthy spirit and a healthy
body.” True to this, the hospital
aims to provide meticulous
healthcare, increasing thewellbeing and deepening thetrust of everyone who uses it.
11-65 Higashi Ishi-gane-machi, Toyama 930-0964, Japan
Tel: 076-424-2881

08

SHAREHOLDER INFORMATION (As of November 30, 2006)
Number of Shares Issued: 249,193,436
Number of Shareholders:
34,487
Major Shareholders:Shareholders

The Master Trust Bank of Japan, Ltd.
Toyota Motor Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Employees Stock Ownership Plan
NACHI WANEI Stockholding

Breakdown of Shareholders

Number of shares
held (thousand)Shareholding
ratio (%)

13,862
13,182
11,888
10,470
10,395

5.56
5.29
4.77
4.20
4.17

ForeignInvestors
25,004,000
shares
(10.0%)

Financial
Institutions
91,067,000
sharesOther(36.5%)
Japanese
Corporations
39,738,000
shares
(16.0%)DIRECTORS (As of February 21, 2007)
President andRepresentative Director

Kensuke Imura
Executive Vice President
and Representative Director

Hiroo Honma
Executive Vice President
and Representative Director

Masahiro Nagao

Stock Ownership
Associations
23,867,000
shares
(9.6%)
Securities
Companies
3,131,000 shares(1.3%)

Managing Director

Managing Director

DirectorStanding Corporate Auditor

Hideki Kasahara

Kiyoshi Nakagawa

Masayuki Higeukon

Naoto Nakano

Managing Director

Director*

DirectorStanding Corporate Auditor*

Yukihiko Tanaka

Masao Motobayashi

Zenshiro Kaneko

Atsushi Saguchi

Managing Director

Director

DirectorStanding Corporate Auditor

Fumihide Hidano

Makoto Sasaki

Hiroshi Yamada

Teruo Akashi

Managing Director

Director

Director

Corporate Auditor*

Noriyasu Shiba

Hideo Terakoshi

Keiichi Ogino

Eiichi Fukushima

Managing Director*Outside director or outside
corporate auditor

Kenji Ishiguro

Origin of the Corporate Name “FUJIKOSHI”
NACHI-FUJIKOSHI CORP. was founded in the city of Toyama in 1928.
Kohki Imura, the founder, named the company FUJIKOSHI in orderto give concrete expression to his creed that self sufficiency in machine tool supply is indispensable to Japan’s economic prosperity.
The first two characters “ 不二 ” which read “Fuji” were pickedfrom the Buddhist scriptures. A passage in the scriptures says
“Justice and injustice appear to be different things. The truth is thatthey are “Fuji” (not two). They are one and the same”.
In other words, the true comprehension of objects is attainable
only through penetrating observation from high above, ignoring thesuperficial appearances of such objects.
The third Chinese character “越” which reads “koshi,” has the samepronunciation as “高志” which means the general area along the Japan
Sea since old days, and leads to the “Art” which we are aiming.
With these words, we are also aiming to improve technologies
and to enhance the corporate value.
09

Individuals
66,384,000
shares(26.6%)

Origin of the Trademark “NACHI”
NACHI brand name comes from “KUMANO-NACHI-TAISHA,” theGrand Shrine, that is the origin of Japan. It expresses strong entrepreneurial will.
In 1929, the Emperor Showa made a tour of the Kansai district
to inspect industries as part of the encouragement of domestic
production, and personally inspected a FUJIKOSHI hacksaw bladethat was on display as an example of an outstanding domestic product at the Osaka Prefectural Office.
Overjoyed at the honor of entertaining the Emperor’s special
attention, Kohki Imura decided to name his product “NACHI” after
the name of the latest naval cruiser to be made in Japan, the verysame vessel that the Emperor was sailing on for his tour.
Fujikoshi, in the early days of Showa, was still a fledging machine
tool supplier. For Imura, “NACHI” was the word that best identified
FUJIKOSHI products with the dignity of the Emperor.

CORPORATE INFORMATION (As of November 30, 2006)
Foundation:
Capital:Number of Employees:
Major Products:
Machining

December 21, 1928
¥16 billion
5,613 (Consolidated)

2,633 (Non-consolidated)

Cutting Tools, Forming Tools, Cutting Saws, Precision Forming, Machine Tools,
Precision Machinery, Machining Systems
RobotsRobot Systems, Electronic Equipment
Components
Bearings, Hydraulic Equipment, Automotive Parts, Seismic Isolation Systems
Materials & Heat Treatment Special Steels, Coating, Industrial Furnaces
Major Domestic Offices and Plants:
Toyama Head Office
1-1-1, Fujikoshi-Honmachi, Toyama 930-8511, Japan
Tel: +81-76-423-5111
Tokyo Head Office
Shiodome Sumitomo Bldg. 17F,
1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo 105-0021, Japan
Tel: +81-3-5568-5111
Eastern Japan Main Branch Shiodome Sumitomo Bldg. 17F,
1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo 105-0021, Japan
Tel: +81-3-5568-5280
Central Japan Main Branch Nachi Nagoya Bldg., 2-120-3, Takayashiro, Meitou-ku, Nagoya 465-0095, Japan
Tel: +81-52-769-6811
Western Japan Main Branch Nachi Osaka Bldg., 2-3-7, Honjo-nishi, Higashi-Osaka 578-8522, Japan
Tel: +81-6-6748-2510
Toyama Plant
1-1-1, Fujikoshi-Honmachi, Toyama 930-8511, Japan
Tel: +81-76-423-5111[Cutting Tools / Machine Tools / Robots / Bearings]
Higashi-Toyama Plant
3-1-1, Yoneda-machi, Toyama 931-8511, Japan [Special Steels]
Tel: +81-76-438-4411
3-2-1, Nakada, Toyama 931-8453, Japan [Hydraulic Equipment]
Tel: +81-76-438-8970
Namerikawa Plant
176, Ogake, Namerikawa 936-0802, Japan
Tel: +81-76-471-2101[Precision Machinery / Automotive Hydraulics / Industrial Furnaces / Coating / Precision Forming]
Major Domestic Subsidiaries:
NACHI Kanto Co., Ltd.
Shiodome Sumitomo Bldg. 17F,
1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo 105-0021, Japan
Tel: +81-3-5568-5190
NACHI Kansai Co., Ltd.
Nachi Osaka Bldg., 2-3-7, Honjo-nishi, Higashi-Osaka 578-8522, Japan
Tel: +81-6-6748-2530
NACHI Tokai Co., Ltd.
Nachi Nagoya Bldg., 2-120-3, Takayashiro, Meitou-ku, Nagoya 465-0095, Japan
Tel: +81-52-769-6911

OVERSEAS OFFICESCZECH/Bearings
SHANGHAI/Tools & Bearings
DONGGUAN/Bearings
SPAIN/Bearings
INDIA Representative Office(March 2006)

AMERICA/Tools
KOREA/
Hydraulic Equipment
TAIWAN/Bearings

AMERICA/Bearings

AMERICA/
Robotic Systems
NORTH CAROLINA
Engineering Base(May 2006)

THAILAND/Bearings
SINGAPORE/Tools

BRAZIL/Bearings & Tools

10

INVESTOR INFORMATION
Stock Code:6474

Record Date:

Voting rights at General
Meeting of Shareholders
Year-end dividendInterim dividend

Ordinary General Meetingof Shareholders:February

Unit:

1,000 shares

To Request Purchase of Additional Shares for
Holdings Less Than the Minimum Trading Unit
November 30
November 30
May 31

Shareholders’ Register Custodian: The Chuo Mitsui Trust and Banking Company, Ltd.
3-33-1, Shiba, Minato-ku, Tokyo 105-8574, Japan
Shareholders’ Register Custodian
Administrative Office:

The Chuo Mitsui Trust and Banking Company, Ltd.
Stock Transfer Agency Department
2-8-4, Izumi, Suginami-ku, Tokyo 168-0063, Japan
Toll-free: 0120-78-2031 (Toll-free in Japan)

Shareholders’ Register Custodian
Handling Office:

The Chuo Mitsui Trust and Banking Company, Ltd.,
Branches throughout Japan
Japan Securities Agents, Ltd.,
Head office and branches throughout Japan

Stock Transfer Fees:

Free

URL:

http://www.nachi-fujikoshi.co.jp/

Printed in JapanNACHI-FUJIKOSHI has introduced a system that allows
the purchase of additional shares for holdings lessthan the normal trading unit. This system enables
shareholders with holdings under trading unit (1,000
shares) to purchase the shares needed to meet thisminimum requirement.
Also, shareholders wishing to sell holdings of lessthan trading unit can follow procedures for the buybackof shares.
Please contact the Shareholders’ Register Custodian(see left) for more information. (Please note: Shareholders
using the securities depository system should contact
their securities firm.)