INTERIM BUSINESS REPORT 2006
December 1, 2005 to May 31, 2006

NACHI-FUJIKOSHI CORP.
Stock Code: 6474

TO OUR SHAREHOLDERS
It’s our pleasure to report to you about NACHIFUJIKOSHI’s interim business performance forthe interim period ended May 31, 2006.
Business Environment
Despite surging prices for crude oil and raw
materials and other causes for concern,
Japan’s economy continued to mount a steadyrecovery during the period under review.
Growth was supported by strong production
and capital expenditure in the automobile andindustrial machinery sectors, as well as
increased consumer spending. Overseas economic growth was also robust overall, reflecting solid private-sector demand in the U.S.
economy, expansion in China and ASEAN
markets, and a rebounding European market.
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 that has
become a Group trademark. We improved theGroup’s production, sales and service frameworks, both at home and abroad, and took
steps to enhance productivity and bolster supply capabilities.
These actions resulted in net sales of ¥93.1
billion, up 9.7% from the same period of ayear earlier. Sales to the Japanese market
accounted for ¥65.1 billion (up 6.7% year onyear), while overseas sales climbed 17.4% to¥27.9 billion.
Turning to earnings, ordinary income rose
¥1.3 billion, or 25.0% year on year, to ¥6.9
01

billion. This improvement was posted despite
escalating raw material and component prices,higher fixed expenses due to expansion andupgrade of production capacity and other factors during the year. These concerns werelargely offset by improved capacity utilization
stemming from increased sales and production, as well as enhanced productivity and othertotal cost reduction efforts. After accounting foran extraordinary loss due to a loss on the saleand disposal of fixed assets, net income for theperiod under review was ¥3.3 billion.
We have decided, however, to postpone thepayment of interim dividends for the time being.
By segment, sales in the machining segment
climbed 12.2% to ¥34.8 billion. In addition to
healthy sales of cutting tools and machine tools
to the automobile and commercial aircraft
sector, sales were buoyed by sharply higher
growth in sales of industrial robots.
In the components segment, sales increased
10.5% to ¥48.9 billion. This growth stems frominitiatives taken to strengthen our production
framework in Japan and abroad to cope withgrowing demand for high-performance bearings and solenoid valves for automobiles, andhydraulic equipment for the construction equipment sector. We also recorded ¥9.2 billion insales in the materials segment.
Future Prospects
Looking ahead, while relatively firm growth in
the automotive and industrial machinery sectors is expected to continue, issues fueling
future uncertainty also abound. Among these,
sharply higher prices for crude oil and raw
materials, the possibility of an economic slowdown in the U.S. and China, and fluctuationsin the yen-dollar exchange market, are potential issues of concern. In short, the businessenvironment will continue to warrant no optimism for the time being.
Given these circumstances, the NACHIFUJIKOSHI Group will pursue managementthat fosters growth opportunities on a varietyof fronts, whether in marketing, manufacturing, procurement, development, humanresources or finance. In establishing a stableearnings base, we are determined to take profit
growth yet another step forward.
I thank all of our shareholders for your continued support and understanding.
August 2006
Kensuke Imura, President

RESULTS OF OPERATIONSSales by Business Segments (Consolidated)
Special Steels/
Industrial Furnaces
and Others
10%

Overseas Sales

Europe15%

Cutting
Tools
17%

HydraulicEquipment
19%

¥93.1
billionMachine Tools/
Precision Machinery
11%

¥27.9
billion
Asia, Oceania,
and the Middle East
44%

Robots10%

Bearings
33%

Net Sales

Operating Income(¥ billions)Interim

America41%

Ordinary Income(¥ billions)Interim

Full-year(¥ billions)Interim

Full-year

176.0

Full-year

13.2

12.0

158.8

10.0
8.4
7.5

93.1
84.8

6.9

6.2

77.6

5.5

4.3
3.5

2004

2005

2006

2004

2005

2006

2004

2005

2006

02

CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
Item(¥ million)
Interim 2006
(as of May 31,
2006)

Interim 2005
(as of May 31,
2005)

ASSETS:82,43875,290Cash and cash equivalents

9,295

9,129

Notes and accounts receivable

38,68134,806Inventories

29,413

26,778Current assets

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

Other

5,048

4,577

Fixed assets

90,84377,625

Property, plant and equipment

69,301

59,422

Buildings and structures

20,975

17,544

Machinery and equipment

37,93632,641

Land

7,098

6,978

Other

3,290

2,258

448

1,633

Investments and advances

21,093

16,569Investment securities

17,82012,849NET ASSETS:
Shareholders’ Equity
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Revaluations and translation
adjustments
Minority interests

3,273
173,282

3,719
152,916

Total net assets
Total liabilities and net assets

Interim 2006
(December 1,
2005–
May 31, 2006)

Interim 2005
(December 1,
2004–
May 31, 2005)

93,118
7,572
6,927
78
1,041

84,890
6,215
5,543
157
856

5,965
3,373

4,844
2,831

Intangible fixed assets

Other
Total assets

Consolidated Statements of Income
Item

Net sales
Operating income
Ordinary income
Extraordinary income
Extraordinary losses
Income before income taxes andminority interests
Net income
03(¥ million)

Interim 2006
(as of May 31,
2006)

Interim 2005
(as of May 31,
2005)

94,97537,28433,1609,244
15,28628,71615,12380,00534,08029,0858,062
8,777
32,286
19,7908,506
5,087
123,692

9,328
3,167
112,291

45,651
16,074
11,444
18,274(142)

41,971
16,074
11,426
14,573
(102)

2,700
1,238

(1,952)603

49,590173,282

40,624
152,916

Consolidated Statements of Cash Flows
Item

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

Interim 2006
(December 1,
2005–
May 31, 2006)

Interim 2005
(December 1,
2004–
May 31, 2005)

5,648(10,038)
3,408

5,882
(5,158)(5,548)(858)(4,817)

9,231

13,191

8,598

8,373

NON-CONSOLIDATED FINANCIAL STATEMENTS
Non-Consolidated Balance Sheets
Item(¥ million)
Interim 2006
(as of May 31,
2006)

Interim 2005
(as of May 31,
2005)

ASSETS:

Item

Other

2,421

3,589

Fixed assets

88,36575,624

Property, plant and equipment

51,26943,115

Buildings and structures

15,901

12,916

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

Machinery and equipment

27,14923,485

Total liabilities

Land

5,678

5,119

Other

2,540

1,593

336

390

Investments and advances

36,75932,118Investment securities

16,68011,215Equity and investments in
subsidiaries

17,306

16,793

NET ASSETS:
Shareholders’ Equity
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Revaluations and translation
adjustments

Current assets

53,43950,942

Cash and cash equivalents

3,784

5,594

Notes and accounts receivable

31,04026,678Inventories

16,193

15,079Intangible fixed assets

Other

2,772

4,109

Total assets

141,805

126,566

Non-Consolidated Statements of Income

Interim 2005
(as of May 31,
2005)

73,911
40,24018,0905,784
9,795
21,663
12,022

61,93834,615
15,1885,749
6,384
24,92915,864

6,808
2,832

7,774
1,290

95,574

86,86839,175
16,074
11,444
11,782(126)

35,89016,074
11,426
8,474
(85)

7,055

3,807

46,231
141,805

39,698
126,566(¥ million)

Interim 2006
(December 1,
2005–
May 31, 2006)

Interim 2005
(December 1,
2004–
May 31, 2005)

Net sales

76,78469,784

Operating income

5,843

4,723

Ordinary income

Item

Total net assets
Total liabilities and net assets

Interim 2006
(as of May 31,
2006)

5,479

4,340

Extraordinary income

8870

Extraordinary losses

440

360

Income before income taxes

5,126

4,050

Net income

3,189

2,525
04

TOPICS쎲 Development of Safety Confirming Hydraulic Systems

쎲 Expansion of the Engineering Business for Machining[Electromagnetic valve equipped with Legato monitoring switch]
The Company’s high-performance hydraulic equipment for industrial
machinery was honored with the “MachinePart Award” at the third “Manufacturing
Parts Grand Prize.” The Nikkan Kogyo
Shimbun, Ltd., a major business andindustry newspaper in Japan, is the mainsponsor of the prize.
(March 2006)

Newly established bases in the Japanese, American and Chinese markets
specializing in the re-sharpening and recoating of cutting tools are helping
to spur global expansion of the engineering business for machining.

Bold, Lithe

NACHI (Shanghai) Precision Tools Co., Ltd.
Opening of the NACHI Galaxy China showroom
A new company was established in Shanghai specializing in resharpening
and recoating broaches, forming racks and other precision cutting tools.
China is also home to several key NACHI-FUJIKOSHI bases: bearings
manufacturer Shanghai Nachi Bearings Co., Ltd., band saw manufacturer
Shanghai Nachi Saw Corp., and sales company Nachi (Shanghai) Co., Ltd.
(March 2006)

Development of a “safety confirming” systemthat will block operation until safety is confirmed
once a hazard is detected.

쎲 Increasing Corporate Value Through Dedication to the Art
of Manufacturing[NEWS 23 Tetsuya Chikushi]
Reporters from this television news program came to find out more about
why manufacturing specialist NACHI-FUJIKOSHI has gained the attentionof fund managers in Japan.
(Program aired on February 24, 2006)[The Fujikoshi College of Manufacturing] offers a two-year course throughwhich Group employees gain the ability to identify and rectify frontline manufacturing problems, learn leadership skills and how to act with resolve.
Guest lecturers are invited in from universities and from among the Group’s
suppliers, helping to further foster employees’ interdisciplinary knowledge.

NACHI Precision North Carolina Inc.
In the southeastern United States,
where numerous automobile and parts
manufacturers are concentrated, thiscompany is spreading the NACHI Business concept by specializing in the
re-sharpening and recoating of precision machinery.
(May 2006, established in
Charlotte, North Carolina, USA)쎲 Developing Markets in India

The India Representative Office wasestablished on the outskirts of thecapital New Delhi.
(March 2006)05

SHAREHOLDER INFORMATION (As of May 31, 2006)
Number of Outstanding Shares: 249,193,436
Number of Shareholders:
31,758Major Shareholders:

Breakdown of Shareholders

Shareholders

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

Toyota Motor Corporation
The Master Trust Bank of Japan, Ltd. (Trust Account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
Employees Stock Ownership Plan
NACHI WANEI Stockholding
The Bank of New York Europe Limited, Luxembourg

13,182
12,63911,888
11,644
10,361
10,228
9,987

5.29
5.07
4.77
4.67
4.16
4.10
4.01

Individuals
79,488,000
shares(31.9%)

ForeignInvestors
35,714,000
shares
(14.3%)DIRECTORS (As of August 2006)
President andRepresentative Director

Financial
Institutions
93,243,000
shares(37.4%)

Other JapaneseCorporations
38,283,000
shares
(15.4%)

Securities
Companies
2,463,000
shares
(1.0%)

Managing Director

Managing Director

Director

DirectorStanding Corporate Auditor

Hideki Kasahara

Fumihide Hidano

Shohei ItohKiyoshi Nakagawa

Naoto Nakano

Kensuke ImuraManaging Director

Managing Director

Director

DirectorStanding Corporate Auditor

Executive Vice President

Masahiro Nagao

Noriyasu Shiba

Kenji Ishiguro

Masao Itoh

Atsushi Saguchi

Teruo Akashi

Managing Director

Managing Director

Director

Director

Corporate Auditor

Executive Vice President

Yukihiko Tanaka

Satoshi Nomiyama

Makoto Sasaki

Masayuki Higeukon

Kunitame Isaki

Hiroo Honma

Director

Corporate Auditor

Hideo Terakoshi

Eiichi Fukushima

CORPORATE INFORMATION (As of May 31, 2006)
Foundation:
Capital:Number of Employees:
Major Products:
Machining

December 21, 1928
¥16,000 million
5,542 (Consolidated) 2,535 (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, Industrial Furnaces, Coating
Major Domestic Offices and Plants:
Toyama Head Office
1-1-1, Fujikoshi-Honmachi, Toyama 930-8511, JapanTokyo Head Office
Shiodome Sumitomo Bldg. 17F,
1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo 105-0021, Japan
Eastern Japan Main BranchCentral Japan Main BranchWestern Japan Main Branch
Toyama Plant
Higashi-Toyama Plant
Namerikawa Plant

Shiodome Sumitomo Bldg. 17F,
1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo 105-0021, Japan
Nachi Nagoya Bldg., 2-120-3, Takayashiro, Meitou-ku, Nagoya 465-0095, Japan
Nachi Osaka Bldg., 2-3-7, Honjo-nishi, Higashi-Osaka 578-8522, Japan
1-1-1, Fujikoshi-Honmachi, Toyama 930-8511, Japan[Cutting Tools / Machine Tools / Robots / Bearings]
3-1-1, Yoneda-machi, Toyama 931-8511, Japan [Special Steels]
3-2-1, Nakada, Toyama 931-8453, Japan [Hydraulic Equipment]
176, Ogake, Namerikawa 936-0802, Japan[Precision Machinery / Automotive Hydraulics / Industrial Furnaces / Coating / Precision Forming]

Tel: +81-76-423-5111
Tel: +81-3-5568-5111
Tel: +81-3-5568-5280
Tel: +81-52-769-6811
Tel: +81-6-6748-2510
Tel: +81-76-423-5111
Tel: +81-76-438-4411
Tel: +81-76-438-8970
Tel: +81-76-471-2101
06

INVESTOR INFORMATION
Stock Code:6474

Fiscal Year-end:

November 30

Ordinary General Meetingof Shareholders:February

Unit (One tangen):

1,000 shares

Record Date for Shareholders
Entitled to Receive Payment
of Dividends:

Transfer Agent:Transfer Agent's
Administrative Office:November 30(Record date for shareholders entitled to receive
payment of interim dividends: May 31)
The Chuo Mitsui Trust and Banking Company, Ltd.
3-33-1, Shiba, Minato-ku, Tokyo 105-8574, JapanThe Chuo Mitsui Trust and Banking Company, Ltd.
Stock Transfer Agency Department
2-8-4, Izumi, Suginami-ku, Tokyo 168-0063, Japan
Tel: +81-3-3323-7111
Toll-free: 0120-78-2031 (Toll-free in Japan)

Transfer Agent’s 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 JapanTo Request Purchase of Additional Shares for
Holdings Less Than the Minimum Trading Unit
NACHI-FUJIKOSHI has a system that allows thepurchase of additional shares for holdings less than
the normal trading unit. This system enables shareholders with holdings under one tangen (1,000
shares) to purchase the shares needed to meetthis minimum requirement.
Shareholders wishing to sell holdings of less than
one tangen should follow the old procedures forthe buyback of shares.
Please contact the transfer agent (see left) for
more information. (Please note: Shareholders using
the securities depository system should contact
their securities firm.)