INTERIM BUSINESS REPORT 2008
December 1, 2007 to May 31, 2008

NACHI-FUJIKOSHI CORP.
Stock Code: 6474

TO OUR SHAREHOLDERS
I am delighted to report to you about NACHIFUJIKOSHI’s interim business performancefor the interim period from December 1,2007 to May 31, 2008.
Business Environment
The operating environment of the NACHIFUJIKOSHI Group during the interim period
under review raised new concerns about how
this environment will impact business performance. Although production of automobiles
and industrial machinery continued toincrease, as did capital expenditure, turmoil
in the financial markets triggered a slowdown
in the U.S. economy, crude oil and raw material prices rose, and the yen’s dramatic
appreciation continued.
Business Progress and Results
In this environment, the NACHI-FUJIKOSHI
Group improved and augmented its systems
on the marketing, manufacturing and development fronts, and vigorously promoted“NACHI Business.” The latter enabled us toprovide linked products, technologies andservices in response both to increasing worldwide automobile production centered onJapanese manufacturers and to the growing
markets of the industrial machinery sectors,
including construction equipment and aircraft.

The colorful triangle on the lower right of thefront cover 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.

1

Net sales for the interim period amounted
to ¥104.8 billion, up 13.2% from the previous fiscal year. Sales to the Japanese market
accounted for ¥72.1 billion (up 16.6% overthe same period last year), while overseas
sales climbed 6.4% to ¥32.7 billion.
Turning to earnings, operating income was¥9.5 billion, up 20.6% over the same period
last year, with ordinary income up 19.2% to¥8.6 billion. Net income for the interim period
under review was ¥4.8 billion, an improvement of 16.0% over the same period lastyear. These improvements came despite rising
raw material prices and energy costs, andhigher fixed expenses due to expansion of
the production system and other factors
during the period. These concerns were outweighed by enhanced productivity and othertotal cost reduction efforts.
We have decided, however, to postpone
the payment of interim dividends at this time.
Future Action
Looking ahead, comparatively firm demand isexpected in the automobile and industrial
machinery sectors on the back of the multipolarization of the world market, especially into
newly emerging countries. However, issues
fueling future uncertainty also abound: highprices for crude oil and raw materials and otherinflationary developments, and an economic
slowdown in the U.S., as well as concern that
this will spread to economies worldwide. All
these factors contribute to a business environment that necessitates an attitude of caution
with respect to management.
Given these circumstances, the NACHIFUJIKOSHI Group will strive to establish astable earnings base by reinforcing the linkage between every aspect of our operations.
I thank all of our shareholders for your continued support and understanding.
August 2008

Kensuke Imura,President

RESULTS OF OPERATIONS (Consolidated)
Sales by Business Segment

Overseas Sales

Special Steels/
Industrial Furnaces
and Others

Cutting Tools

9%
HydraulicEquipment

Asia, Oceania, andthe Middle East

15%

19%
¥104.8billion16%

Machine Tools /Precision Machinery

44%

38%

¥32.7
billionAmerica8%
33%

18%

RobotsBearings

EuropeNet Sales■ Interim■ Full-year(¥ billions)Operating Income■ Interim■ Full-year(¥ billions)

16.7

193.6

186.7

2006(¥ billions)

15.5

92.6

2007

9.5
7.5

2008

64.1

■ Interim■ Full-year

58.2

104.8
93.1

Overseas Sales

2006

7.9

2007

27.9

2008

2006

30.7

2007

32.7

2008

2

TOPICS
1 Identifying Newly Emerging Markets

Eastern Europe: Czech Republic
NACHI CZECH S.R.O.
Expanded production system for highfunction bearings for automobiles

MexicoNACHI MEXICANA ENGINEERING CENTER
Opened an engineering base for re-sharpeningof precision tools and maintenance of robots(April 2008)
China: Shanghai
SHANGHAI NACHI BEARINGS CO., LTD.
NACHI (SHANGHAI) PRECISION TOOLS CO., LTD.
Started production of hydraulic equipment
as well as bearings and cutting tools(April 2008)

Southeast Asia: Thailand
NACHI TECHNOLOGY (THAILAND) CO., LTD.
Expanded functions as ASEAN Business Center

Brazil NACHI BRASIL LTDA.
Expanded production capabilities for bearings
in response to increased demand for automobiles and motorcycles

2 Launch of New Products

Presto MR20

New ultrahard end mill
GSX MILL series
Achieved high-precision,
high-efficiency processing
through joint developmentwith Sumitomo Electric
Hardmetal Corp.
(May 2008)

3

Expanded series of new
platform robots for theindustrial machinery sector(June 2008)

Presto MC20

Inverter drive variable displacement pump hydraulic unit
Compared with hydraulic units of standard machine
tools, automated control of inverters yields energy savings of about 60%.
Awarded the Chairman’s Commendation at the 28th
Commendations for Superior Energy-saving Machines
held by the Japan Machinery Federation.
(February 2008)

3 Developing NACHI Business From New Base in Kyushu(Artist’s impression of the completed Kyushu Plant, scheduled
to open in summer 2009)

Concluded agreement with Kurume City, Fukuoka Prefecture regarding
location of baseWe will establish a core base for conducting NACHI business targeting
East Asia, ASEAN countries and the western Japan region(June 2008)

4 Invested Business Resources in Highly Competitive Products

Established dedicated plant for
precision bearings
Expanded production system forbearings for industrial machinery(Toyama Plant, December 2007)

Established heat treatment plantfor bearings
Expanded production capabilities
for high-function bearings for automobiles and industrial machineryand improved productivity(Mizuhashi Plant, February 2008)

Established dedicated plant for hydraulicsolenoid valves for automobile transmissions
Expanded production capabilities for highfunction direct-operated linear solenoid valves(Namerikawa Plant, December 2007)

5 Promoting Personnel Training and Exchanges
Established “Nachi-Fujikoshi Selva”, a composite multi-functional
training and recreation center
The center offers our dealers and customers around the world
opportunities to get together and participate in workshops orother events.
It also supports the career development of our group associates.
(Toyama Plant, March 2008)
Selva: The name indicates the Amazon Basin and other tropical rainforests, namelyenvironments where a variety of life forms coexist. We hope the center nurtures thecoexistence of a variety of participants.

4FINANCIAL STATEMENTS
Consolidated Balance Sheets
Item(¥ millions)Interim 2008(as of May 31,2008)

Interim 2007(as of May 31,2007)

100,490

91,116ASSETS:Interim 2007(as of May 31,2007)

Current liabilities

LIABILITIES:Current assets
Cash and cash equivalents

19,65916,133

Notes and accounts receivable

43,95041,412Inventories

30,81629,164

Other

6,063

4,405

105,681

94,101

Notes and accounts payable

43,78236,442

Short-term bank loans

33,39536,144

Other accounts payable

8,959

9,017

Other

19,544

12,498Long-term liabilities

39,27837,836

Bonds and long-term debt

29,06624,896

Allowance for retirement benefits

6,699

7,687

Other

3,511

5,253

144,959

131,938

Shareholders’ equity

59,07852,113

Common stock

16,074

16,074

Additional paid-in capital

11,572

11,455Retained earnings

31,604

24,772

Fixed assets

106,357

99,006

Property, plant and equipment

87,11677,182

Total liabilities
NET ASSETS:

Buildings and structures

32,232

24,491

Machinery and equipment

44,572

41,368

Land

7,571

7,576

Other

2,739

3,746

411

398

Investments and advances

18,83021,425

Total assets

206,848

190,123

Intangible fixed assets

Consolidated Statements of Income
Item

Net sales(¥ millions)Interim 2008
(December 1, 2007
–May 31, 2008)

104,874

Interim 2007
(December 1, 2006
–May 31, 2007)

Treasury stock(172)

(189)

227

3,868

Revaluations and translation adjustments
Minority interests

2,582

2,201

Total net assets

61,88958,184

Total liabilities and net assets

206,848

190,123

Consolidated Statements of Cash Flows
Item

Interim 2008
(December 1, 2007
–May 31, 2008)(¥ millions)Interim 2007
(December 1, 2006
–May 31, 2007)

92,657

Cash flows from operating activities

8,588

11,051(8,844)(4,589)Operating income

9,553

7,923

Cash flows from investing activities

Ordinary income

8,619

7,230

Cash flows from financing activities(924)(3,417)

Net increase (decrease) in cash
and cash equivalents

Extraordinary income

7907(1,590)3,097

Extraordinary losses

146364

Cash and cash equivalents
at beginning of the period

20,965

12,643

8,481
4,843

7,772
4,176

Cash and cash equivalents
at end of the period

19,375

15,740

Income before income taxes
and minority interests
Net income

5ItemInterim 2008(as of May 31,2008)

SHAREHOLDER INFORMATION (As of May 31, 2008)
Number of Shares Issued:
Number of Shareholders:Major Shareholders:ForeignInvestors
24,517,000
shares
(9.8%)

249,193,436
34,425

Shareholders

Toyota Motor Corporation
Japan Trustee Services Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
NACHI WANEI Stockholding
Employees’ Stock Ownership PlanBreakdown of Shareholders

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

13,182
12,561
11,888
11,708
11,280

5.29
5.04
4.77
4.70
4.53

FinancialInstitutions
84,829,000
shares(34.1%)

OtherJapaneseCorporations
42,203,000
shares
(16.9%)DIRECTORS (As of August 2008)
President andRepresentative Director

Individuals
68,357,000shares(27.4%)

Stock Ownership
Associations
26,582,000
shares(10.7%)

Securities
Companies
2,702,000 shares(1.1%)

Managing Director

Managing Director

DirectorStanding Corporate Auditor

Managing Director

Managing Director

DirectorStanding Corporate Auditor

Hiroo Honma

Managing DirectorDirector

DirectorStanding Corporate Auditor

Executive Vice President andRepresentative Director

Managing Director

Director

Director

Corporate Auditor

Kensuke Imura

Executive Vice President andRepresentative Director

Masahiro Nagao

Hideki Kasahara
Yukihiko Tanaka
Noriyasu Shiba
Kenji Ishiguro

Kiyoshi Nakagawa
Masayuki Higeukon
Masao Motobayashi*
Makoto Sasaki

CORPORATE INFORMATION (As of May 31, 2008)

Hideo Terakoshi
Zenshiro Kaneko
Hiroshi Yamada
Keiichi Ogino

Naoto Nakano

Atsushi Saguchi*
Teruo Akashi

Eiichi Fukushima** Outside director or outside
corporate auditor

Foundation:December 21, 1928
Capital:¥16 billion
Number of Employees:
5,857 (Consolidated) 2,824 (Non-consolidated)
Major Products:
Machining
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, Japan
Tel: +81-76-423-5111
Tokyo Head Office
Shiodome Sumitomo Bldg. 17F, 1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo 105-0021, Japan		 +81-3-5568-5111
Eastern Japan Main Branch
Shiodome Sumitomo Bldg. 17F, 1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo 105-0021, Japan		 +81-3-5568-5280
Central Japan Main Branch
Nachi Nagoya Bldg., 2-120-3, Takayashiro, Meitou-ku, Nagoya 465-0095, Japan		 +81-52-769-6811
Western Japan Main Branch
Nachi Osaka Bldg., 2-3-7, Honjo-nishi, Higashi-Osaka 578-8522, Japan		 +81-6-6748-2510
Toyama Plant
1-1-1, Fujikoshi-Honmachi, Toyama 930-8511, Japan		 +81-76-423-5111[Cutting Tools / Machine Tools / Robots / Bearings]
Higashi-Toyama Plant
3-1-1, Yoneda-machi, Toyama 931-8511, Japan [Special Steels]		 +81-76-438-4411
3-2-1, Nakada, Toyama 931-8453, Japan [Hydraulic Equipment]		 +81-76-438-8970
Namerikawa Plant
176, Ogake, Namerikawa 936-0802, Japan [Precision Machinery / Hydraulic Equipment / 		 +81-76-471-2101
Automotive Hydraulics / Industrial Furnaces / Coating / Precision Forming]
Major Overseas Subsidiaries:
NACHI AMERICA INC.
17500 Twenty-Three Mile Road, Macomb, Michigan, 48044, U.S.A.
Tel: +1-586-226-5151
NACHI EUROPE GmbH
Bischofstrasse 99, 47809, Krefeld, GERMANY		 +49-(0)2151-65046-0
NACHI TECHNOLOGY (THAILAND) CO., LTD.
3/16 M, 2, Rojana Industrial Estate Nongbua, Ban Khai, Rayong, 21120, THAILAND		 +66-38-961-682
NACHI (SHANGHAI) CO., LTD. Yitong Industry Zone 258, Fengmao Rd. Malu Town, Jiading, Shanghai 201801, CHINA		+86-(0)21-6915-2200

6

INVESTOR INFORMATION
Stock Code:6474

Record Date:

Voting rights at General
Meeting of Shareholders November 30
Year-end dividend
November 30
Interim dividend 		May 31

Ordinary General Meeting ofShareholders:
Unit:

February
1,000 shares

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

FreeURL:

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

To Request Purchase of Additional Shares or Buybackfor Holdings Less Than the Minimum Trading Unit
NACHI-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 (1,000shares) 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.)

Wonders from NACHI, Art in NACHI
Exciting Technology—that’s Art.
What, you may ask, is this Christmas-tree-like object on our front cover?
It is a tool known as a “broach”, used to cut grooves in the turbine disks of
airplanes and generators. Because turbine disk grooves support blades thatrotate at high speeds, they must take complex forms that have been processedwith high precision. We pursued the development of the technology neededto accomplish the processing of these grooves in a simple manner, and in sodoing created this beautiful object that turned out to be a work of art.
In short, when you have truly mastered a technology, you will also have created an artistic masterpiece.
In this sense, we at NACHI-FUJIKOSHI are pursuing art in the course of ourhigh-precision manufacturing activities.