BUSINESS REPORT 2005
December 1, 2004 to November 30, 2005

NACHI-FUJIKOSHI CORP.

TO OUR SHAREHOLDERS
It’s our pleasure to report to you about NACHIFUJIKOSHI’s business performance for the fiscal year ended November 30, 2005
Business Environment
The business climate in Japan held to a recovery
track during the fiscal year under review. Led bystrong production and capital expenditure in theautomobile and industrial machinery sectors, theeconomy saw improvements in corporate performance, particularly in the manufacturing sector, as well as firm consumer spending andother gains. Overseas economic growth was also
robust overall despite steep price hikes of crude
oil and raw materials worldwide. In addition tosolid private-sector demand in the U.S.
economy, growth was spurred by market
expansion in China and other Asian nations anda 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 framework and equipment,
both at home and abroad, and took steps toenhance productivity and bolster supply
capabilities. We also responded to needs in theautomobile and industrial machinery sectors
by providing high-performance, high-precisionand reliable products and technologies.

About the Cover Design
The colorful triangle symbolizes the notion of“Sei-Han-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 ¥176.0
billion, up 10.8% from the previous fiscal year.
Sales to the Japanese market accounted for¥126.4 billion (up 12.7% year on year), while
overseas sales rose 6.2% to ¥49.5 billion.
Turning to earnings, ordinary income
climbed ¥3.5 billion, or 42.1% year on year,to ¥12.0 billion. This improvement was posted
despite escalating raw material and component prices, higher fixed expenses due toexpansion and upgrade of production capacity 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 a loss on the sale and disposal of fixed
assets, net income was ¥5.1 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 ¥7 per share,
an increase of ¥2 from the previous fiscal year.
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. Amongthese, sharply higher prices for crude oil andraw materials, the specter of an economic

slowdown in the U.S. and China, and fluctuations in the yen-dollar exchange market, arepotential issues of concern. In short, the business environment will continue to warrant
guarded optimism for the time being.
Given this climate, the NACHI-FUJIKOSHI
Group will pursue management that fosters
growth opportunities on a variety of fronts,
whether in marketing, manufacturing, procurement, development, human resources orfinance. In establishing a dependable earnings base, we are determined to take profit
growth yet another step forward. Moreover, we
will strive to boost corporate value by upholding the NACHI brand, a name trusted acrossthe globe in the manufacturing field.
I thank all of our shareholders for yourcontinued support and understanding.
March 2006
Kensuke Imura, President

RESULTS OF OPERATIONSSales by Business Segments (Consolidated)

Overseas Sales

Other
3%

Special Steels/
Industrial Furnaces
8%

Europe16%

Cutting
Tools
17%
HydraulicEquipment
18%¥176.0billionBearings
34%

Net Sales

Machine Tools/
Precision Machinery
10%

¥49.5
billionAmerica38%

Robots10%
Asia, Oceania,
and the Middle East
46%

Operating Income

Ordinary Income

02

TOPICS
쎲 Production Framework

쎲 Awarded the “Machine Part Award” of the“Manufacturing Parts Grand Prize”

High-precision carbide end mills(“Mold Meister Ball”)

Expanded factory producing hydraulicpumps and motors for industrial machines

쎲 Opened the Fujikoshi School of
Manufacturing

New factory for large-sized robots

New main factory for precise
broach production03

쎲 Enhanced
Capabilities at
a Base in Europe(Germany)쎲 President Interviewed
for Weekly Toyo Keizai (October 22, 2005)쎲 Brands
In giving new brand names for each product group, NACHI-FUJIKOSHI is highlighting the superior features of its products andbringing a new flare to the manufacturing world.
Machining
Fruitful, Sustaining
High-function round tools

Precise, Enduring
Precision cutting tools

Keen, Prolific

SymbioAG mill square

Metal band saws

SymbioGS mill hardball

Components
Fundamental, Reliable

Quest
Non-contact sealed ballscrew support bearings

High-function bearings for industrial machines

LegatoSolenoid control valves
with monitoring switch

Bold, Lithe
High-function hydraulic equipment for industrial machines

RobotsQuick, Rigorous
Welding and general handling robots

Dignified, Strong
Heavy duty/payload handling robots

PrestoST series
Forte
SC700

Exquisite, Masterful
Clean robots

Artis
Glass substrate handling robot
SJ120C04

THE NACHI BUSINESS NETWORK—Contributing to the Progress of the World
Automobiles

Aircraft

Products for a safe, comfortable and smooth ride

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

Steering
Turbine discs
and blades

Bullet Trains

Small Shovels

Ensuring high speed, safety andcomfort

Massive power in an energy
efficient, compact package

Engines

Transmissions

Constant-velocity(CV) joints

Undercarriages

Wheel drive motors
and 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 high performance and high precision

In pursuit of greater safety andPrecision tools
Machine tools

05

Ultra-precise processing
machinery with nano-level
precision

Large-sized glass
substrate transfer robot

High-performance
bearings

of Product Manufacturing
Industrial Machinery

Electrical & Electronic Devices

Realizing outstanding precision and efficiency

From home appliances to IT

Machine tools

Injection molding machines

Homes & Lifestyle
Familiar parts of everyday life

DIY products

Moveable roof domes

Aspheric lenses usedin digital cameras andDVD players

Seismic isolator

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 and superb quality

comfortSpecial steels

Hydraulic equipment
for construction andindustrial machines

Solenoid valves forautomobiles

Coating, carburizing and other surface
modification technologies

06

CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
Item(¥ million)
2005(As of November
30, 2005)

2004(As of November
30, 2004)

ASSETS:79,54475,375

Cash and cash equivalents

10,027

14,060Notes and accounts receivable

36,85032,620Inventories

28,336

23,697

Other

4,329

4,996

Fixed assets

Current assets

84,42775,923

Property, plant and equipment

63,36057,456

Buildings and structures

19,444

16,241

Machinery and equipment

34,714

31,193

Land

6,967

6,893

Other

2,233

3,128

532

2,082

Investments and advances

20,534

16,384

Investment securities

17,405

11,817

3,128
163,972

4,567
151,299

2005(For the year
ended November
30, 2005)

2004(For the year
ended November
30, 2004)

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

158,891
10,021
8,464
51
1,648

9,492
5,179

6,867
4,105

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
and minority interests
Net income

07(¥ million)

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
SHAREHOLDERS’ EQUITY:
Common stock
Additional paid-in capital
Retained earnings
Profit on valuation of stock
Translation adjustments
Treasury stock
Total shareholders’ equity
Total liabilities, minority interestsand shareholders’ equity

2005(As of November
30, 2005)

2004(As of November
30, 2004)

88,54836,33428,916
8,715
14,581
29,364
15,98377,90432,274
31,633
6,054
7,941
34,91821,577

8,969
4,411
117,913
564

9,379
3,961
112,822605

16,074
11,435
16,747
6,732(5,382)(112)
45,495

16,074
11,42013,0373,305(5,881)(85)
37,871

163,972

151,299

Consolidated Statements of Cash Flows
Item

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

2005(For the year
ended November
30, 2005)

2004(For the year
ended November
30, 2004)

14,674(11,062)(7,779)13,929(8,558)(2,072)(4,009)3,346

13,191

9,844

9,231

13,191NON-CONSOLIDATED FINANCIAL STATEMENTS
Non-Consolidated Balance Sheets
Item(¥ million)
2005(As of November
30, 2005)

2004(As of November
30, 2004)

52,31649,040ASSETS:

Item

2005(As of November
30, 2005)

2004(As of November
30, 2004)

68,28638,425
14,987
5,865
9,008
22,427
12,8307,314
2,283

57,522
31,57017,278
3,980
4,692
26,362
16,890
8,231
1,240

Other

2,922

3,112

Fixed assets

82,78172,750Property, plant and equipment

46,722

40,720

Buildings and structures

14,503

11,888LIABILITIES: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

24,816

22,640Total liabilities

90,714

83,884

Land

5,753

4,674

Other

1,648

1,517

378

284

Investments and advances

35,67931,744

Investment securities

16,554

11,003Equity and investments
in subsidiaries

SHAREHOLDERS’ EQUITY:
Common stock
Additional paid-in capital
Retained earnings
Profit on valuation of stock
Treasury stock

16,074
11,435
10,4296,539(95)

16,074
11,420
7,252
3,227
(68)

16,30915,967

Total shareholders’ equity

44,38337,9052,815
135,098

4,773
121,790

Total liabilities, minority interestsand shareholders’ equity

135,098

121,790

Current assets
Cash and cash equivalents

5,123

8,834

Notes and accounts receivable

28,341

25,120Inventories

15,93011,973

Intangible fixed assets

Other
Total assets

Non-Consolidated Statements of Income
Item

Net sales
Operating income
Ordinary income
Extraordinary income
Extraordinary losses
Income before income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings(¥ million)

2005(For the year
ended November
30, 2005)

2004(For the year
ended November
30, 2004)

144,929
9,664
8,841
90
1,498
7,433
4,480
3,395
7,876

128,406
6,500
5,304
53
1,404
3,953
2,294
2,404
4,699

Appropriation of Retained Earnings
Item

Unappropriated retained earnings(¥ million)
2005

7,876

This was appropriated as follows.
Dividends (¥7 per share)
Directors’ bonuses
Earnings carried forward to
the following year

1,741
95
6,039

08

SHAREHOLDER INFORMATION (As of November 30, 2005)
Breakdown of Shareholders

Number of Outstanding Shares: 249,193,436
Number of Shareholders:
32,216
Major Shareholders:Shareholders

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

13,182
12,137
11,15910,545
10,088
9,117
6,509

5.29
4.87
4.48
4.23
4.05
3.66
2.61

TOYOTA MOTOR CORPORATIONThe Master Trust Bank of Japan, Ltd.
UFJ Bank Limited
Employees Stock Ownership Plan
NACHI WANEI Stockholding
Japan Trustee Services Bank, Ltd.
The Hokuriku Bank, Ltd.

Individuals
83,761,000
shares(33.6%)

ForeignInvestors
31,038,000
shares(12.5%)

Financial
Institutions
87,104,000
shares(35.0%)

Other
Japanese
Corporations
38,128,000
shares(15.3%)

Securities
Companies
9,160,000
shares
(3.6%)DIRECTORS (As of February 22, 2006)
President andRepresentative Director

Managing Director

Director

DirectorStanding Corporate Auditor

Masahiro Nagao

Shohei ItohKiyoshi Nakagawa

Naoto Nakano

Kensuke ImuraManaging Director

Director

DirectorStanding Corporate Auditor

Executive Vice President

Yukihiko Tanaka

Kenji Ishiguro

Masao Itoh

Atsushi Saguchi

Teruo Akashi

Managing Director

Director

Director

Corporate Auditor

Executive Vice President

Fumihide Hidano

Makoto Sasaki

Masayuki Higeukon

Kunitame Isaki

Hiroo Honma

Managing Director

Director

Corporate Auditor

Managing Director

Noriyasu Shiba

Hideo Terakoshi

Eiichi Fukushima

Hideki Kasahara

Managing Director

Satoshi Nomiyama

Origin of the Corporate Name “FUJIKOSHI”

Origin of the Trademark “NACHI”

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 picked fromthe Buddhist scriptures. A passage in the scriptures says “Justice andinjustice appear to be different things. The truth is that they 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 the superficial 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 toenhance the corporate value.

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 toinspect industries as part of the encouragement of domestic production, and personally inspected a FUJIKOSHI hacksaw blade that wason 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 very same 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.

09

CORPORATE INFORMATION (As of February 22, 2006)
Foundation:
Capital:Number of Employees:
Major Products:
Machining

December 21, 1928
¥16,000 million
5,383 (Consolidated) 2,543 (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, 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 Offices:

CZECH / Bearings
SHANGHAI / Tools & Bearings
SPAIN / Bearings

DONGGUAN / Bearings
THAILAND / Bearings
SINGAPORE / Tools

AMERICA / Tools
KOREA /
Hydraulic Equipment

AMERICA / Bearings

AMERICA /Robotic Systems

TAIWAN/ Bearings

BRASIL / Bearings & Tools

10

INVESTOR INFORMATION
Fiscal Year-end:

November 30

Ordinary General Meetingof Shareholders:February

Record Date for Shareholders
Entitled to Receive Payment
of Dividends:

November 30(Record date for shareholders entitled to receive
payment of interim dividends: May 31)

Transfer Agent and Registrar:

The Chuo Mitsui Trust and Banking Company, Ltd.
3-33-1, Shiba, Minato-ku, Tokyo 105-8574, Japan

Transfer Agent:

The 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
Since February 2005, NACHI-FUJIKOSHI has
adopted a system that allows the purchase ofadditional shares for holdings less than the minimum trading unit (tangen). This new system now
enables shareholders with holdings below one
tangen (1,000 shares) to purchase the shares
needed to meet this 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.)