INTERIM BUSINESS REPORT 2007
December 1, 2006 to May 31, 2007

NACHI-FUJIKOSHI CORP.
Stock Code: 6474

TO OUR SHAREHOLDERS
It’s our pleasure to report to you on NACHIFUJIKOSHI’s business performance for theinterim period from December 1, 2006 to May
31, 2007.
Business Environment
Japan’s economy continued to post a modest
recovery during the period under review
despite supply and demand adjustments andthe postponement of capital expenditure incertain sectors. The economy was chiefly supported by growth in corporate earnings backed
by healthy exports, coupled with signs of an
upturn in domestic demand due to an
improved employment picture. Looking overseas, although the U.S. economy has slowed,
the global economy remained firm overalllargely atop expansion in Asian markets anda rebounding economy in Europe.
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 becomea Group trademark. We improved and augmented the Group’s production framework andequipment, both at home and abroad, and took
steps to enhance productivity and bolster supply capabilities. We also responded to flourishing demand in the automobile and industrial

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.

1machinery sectors by supplying reliable products and technologies offering high performance and high precision.
These actions resulted in net sales of ¥92.6
billion, virtually unchanged from the same
period a year earlier. Sales to the Japanesemarket accounted for ¥61.8 billion (down
5.0% year on year), while overseas sales were
¥30.7 billion (up 10.1%).
Turning to earnings, operating income was¥7.9 billion, up 4.6% year on year, with ordinary income up 4.4% to ¥7.2 billion. This
improvement came despite rising raw material and component prices, higher fixed
expenses due to improvement of the production framework and other factors during theperiod. These concerns were largely offset by
improved profitability with respect to exports,
as well as enhanced productivity and othertotal cost reduction efforts. After accounting
for extraordinary income due mainly to gains
from the sale of investment securities, net
income for the interim period under review was¥4.1 billion, an improvement of ¥0.8 billion
year on year.
We have decided, however, to postpone thepayment of interim dividends for the time being.
Future Action
Looking ahead, firm growth is expected tocontinue in the industrial machinery sector.
Capital expenditure trends in the automobile,electrical and electronic device sectors, however, are somewhat less certain. Meanwhile,
issues fueling future uncertainty also abound:high prices for crude oil and raw materials,
economic slowdown in the U.S., and fluctuations in the currency exchange markets all
contribute to a business environment that willcontinue to warrant guarded optimism for thetime being.
Given these circumstances, the NACHIFUJIKOSHI Group will strive to establish a stableearnings base by reinforcing the interconnections between every aspect of our operations.
In closing, I would like to thank all of ourshareholders for your continued support andunderstanding.
August 2007

Kensuke Imura,President

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

Cutting Tools

9%
HydraulicEquipment

Overseas Sales

Europe

17%

20%

¥92.6
billion17%
9%

Machine Tools/
Precision Machinery

42%

¥30.7
billionAmerica

10%
41%

Robots35%

Asia, Oceania,
and the Middle East

Bearings

Net SalesInterim
Full-year(¥ billions)Operating Income

Interim
Full-year(¥ billions)

Overseas Sales

Interim
Full-year(¥ billions)

58.2

15.5

186.7
176.0

49.5

13.2

93.1
84.8

2005

7.5

92.6

2007

2005

27.9
23.8

6.2

2006

30.7

7.9

2006

2007

2005

2006

2007

2

FINANCIAL STATEMENTS
Consolidated Balance Sheets(¥ millions)Interim 2007(as of May 31,
2007)

Interim 2006
(as of May 31,
2006)

91,11682,438Cash and cash equivalents

16,133

9,295

Notes and accounts receivable

41,412

38,681Item

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

Interim 2006
(as of May 31,
2006)

94,10136,442

94,97537,284

Short-term bank loans

36,14433,160

Other accounts payable

9,017

9,244

Other

12,49815,286Item

LIABILITIES:Current assets

Inventories

29,164

29,413

Other

4,405

5,048

Current liabilities
Notes and accounts payable

37,83628,716

Bonds and long-term debt

24,89615,123

Allowance for retirement benefits

7,687

8,506

Other

5,253

5,087

131,938

123,692

Long-term liabilities

99,006

Fixed assets

90,843

Property, plant and equipment

77,182

69,301

Buildings and structures

24,491

20,975NET ASSETS:

Machinery and equipment

41,36837,936

Shareholders’ equity

52,11345,651

Common stock

16,074

16,074

7,098

Additional paid-in capital

11,455

11,444

3,290

Retained earnings

24,772

18,274

7,576

Land

3,746

Other

Total liabilities

Treasury stock
398

448

Investments and advances

21,42521,093

Total assets

190,123

173,282

Intangible fixed assets

Consolidated Statements of Income
Item(¥ millions)Interim 2007
(December 1, 2006
–May 31, 2007)

Interim 2006
(December 1, 2005
–May 31, 2006)(142)

Revaluations and translation adjustments

3,868

2,700

Minority interests

2,201

1,238

Total net assets

58,184

49,590Total liabilities and net assets

190,123

173,282

Consolidated Statements of Cash Flows
Item

Interim 2007
(December 1, 2006
–May 31, 2007)(¥ millions)Interim 2006
(December 1, 2005
–May 31, 2006)

Net sales

92,657

93,118Operating income

7,923

7,572

Cash flows from operating activities
Cash flows from investing activities

11,051(4,589)5,648(10,038)

Ordinary income

7,230

6,927

Cash flows from financing activities(3,417)

3,408

3,097

(858)

12,6439,231

15,7408,598

Net increase (decrease) in cash

Extraordinary income

907

78

Extraordinary losses

364

1,041

and minority interests

7,772

5,965

Cash and cash equivalents

Net income

4,176

3,373

at end of the period

Income before income taxes

3

(189)

and cash equivalents
Cash and cash equivalents
at beginning of the period

Consolidated Statement of Changes in Shareholders’ Equity Interim 2007 (December 1, 2006–May 31, 2007)
Item

Balance as of November 30, 2006

Commonstock

Shareholders’ equity
Additional
Retained
Treasurypaid-inearnings
stock
capital16,074

11,452

Changes during the period
Dividends from retained earnings
Net income
Acquisition of treasury stock
Disposal of treasury stock
Increase/decrease due to consolidationof equity method affiliates
Other
Net changes in items other thanshareholders’ equity

3

(31)
3

12
21
(214)

799

584

545

1,129

–

3

2,223

(31)

2,195

(214)

799

584

545

3,324

16,074

11,455

24,772(189)

52,1137,316(3,447)

3,868

2,201

58,184Non-consolidated Balance Sheets
Item54,859(1,989)
4,176
(31)
6

12
21

3,283

1,656

(1,989)
4,176
(31)
6

(3)

(4,247)Total
net assets

49,918

15
21

7,531

Minority
interests(157)(1,989)4,176

Total changes during the period
Balance as of May 31, 2007

22,548(¥ millions)

Revaluations and translation adjustments
Total
Unrealized gains
Total revaluations
shareholders’ on available-for- Translation and translation
sale securities adjustments adjustments
equity(¥ millions)Interim 2007(as of May 31,
2007)

Non-consolidated Statements of Income

Interim 2006
(as of May 31,
2006)

ASSETS:
Current assets
Fixed assets
Property, plant and equipment
Intangible fixed assets
Investments and advances

56,892
95,47057,954296
37,22053,43988,36551,269336
36,759Total assets

152,363

141,805

Current liabilities
Long-term liabilities

70,56531,80373,911
21,663

Total liabilities

102,368

95,574

Shareholders’ equity
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Revaluations and translation
adjustments

42,815
16,074
11,455
15,453(168)

39,175
16,074
11,444
11,782
(126)

7,179

7,055

Total net assets

49,994

46,231

Total liabilities and net assets

152,363

141,805

LIABILITIES:

ItemInterim 2007
(December 1, 2006
–May 31, 2007)(¥ millions)Interim 2006
(December 1, 2005
–May 31, 2006)

Net sales
Operating income

74,4895,332

76,784
5,843

Ordinary income

5,179

5,479

Extraordinary income

836

88

Extraordinary losses

374

440

Income before income taxes

5,641

5,126

Net income

3,016

3,189

NET ASSETS:

4

TOPICS
Topics1 Bolstering the Engineering BusinessOpening of NACHI Engineering
This newly established base specializes in engineering services, including the re-sharpening
and recoating of cutting tools and robot maintenance. The company also offers high-quality
consulting services for proposing optimal cutting tools and processing methods for the manufacturing processes of its customers.
(Ayase City, Kanagawa Prefecture, May 2007)
Upgrading and Expanding the Mechanical Engineering Business for the Global Market
NACHI (Shanghai) Precision Tools Co., Ltd. (Shanghai, China)
NACHI Precision North Carolina Inc. (North Carolina, USA)

Topics2 Promoting the Development of Materials Technology
Establishment of R&D Material
We have consolidated R&D for materials, heat treatment and coatings at the Higashi-Toyama
Plant, and upgraded the facility to company status. Work at the plant is currently focusedon the development on magnesium alloys and other new materials, as well as developing
potential applications.
(Higashi-Toyama Plant, May 2007)

Topics3 Expanding Alliances
Joint Development with Sankyo Tateyama Aluminium, Inc.
The respective technologies of both companies enabled the creation of a production
method for high-quality magnesium alloy
sheets. Going forward, we will strive to spur
expansion in the market for magnesium
alloys by promoting this material for a wide
range of sectors, from electrical and electronic devices and IT, to automobiles andindustrial machinery.
(May 2007)

Symbio “GS MILL” Series Jointly Developed with Sumitomo Electric HardMetal Corp.
The Symbio GS MILL series of world-classcutting tools, which offer advantages in terms
of productivity, and resource and energy conservation, has earned a strong reputation.
With Symbio GS MILL, NACHI-FUJIKOSHI
has captured this coveted “Monodzukuri
Manufacturing Award (Machine Parts Award)”
for the third consecutive year.
(Award sponsored by The Nikkan Kogyo
Shimbun, March 2007)

Revolutionary Production Method for Special Steels Developed by Tohoku University
Joint Development of the World’s Hardest Ultra-fine Wires
This breakthrough emerged by combining the carbide-derived carbon (CDC) process developed by Tohoku
University with NACHI-FUJIKOSHI technology for the production of ultra-fine wires with high hardness.
Beyond machinery and electronic components, we are identifying applications for CDC process-Micron
Hard technology in a wide range of fields, including for use in medical-use components.
(January 2007)
5

SHAREHOLDER INFORMATION (As of May 31, 2007)
Number of Shares Issued:
Number of Shareholders:Major Shareholders:

Breakdown of Shareholders

249,193,436
33,188

Shareholders

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

Number of shares
held (thousands)

Shareholding
ratio (%)

13,97813,182
12,14011,888
10,746
10,543

5.61
5.29
4.87
4.77
4.31
4.23

ForeignInvestors
29,677,000
shares(11.9%)
Financial
Institutions
91,689,000
shares(36.8%)

Other
Japanese
Corporations
38,904,000
shares(15.6%)DIRECTORS (As of August, 2007)
President andRepresentative Director

Individuals
61,223,000
shares(24.6%)

Stock Ownership
Associations
24,431,000
shares
(9.8%)
Securities
Companies
3,266,000 shares(1.3%)

Managing Director

Managing Director

DirectorStanding Corporate Auditor

Hideki Kasahara

Kenji Ishiguro

Hideo Terakoshi

Naoto Nakano

Managing Director

Managing Director

DirectorStanding Corporate Auditor*

Yukihiko Tanaka

Kiyoshi Nakagawa

Masayuki Higeukon

Atsushi Saguchi

Hiroo Honma

Managing Director

Director*

DirectorStanding Corporate Auditor

Executive Vice President andRepresentative Director

Fumihide Hidano

Masao Motobayashi

Zenshiro Kaneko

Teruo Akashi

Managing Director

Director

Director

Corporate Auditor*

Noriyasu Shiba

Makoto Sasaki

Hiroshi Yamada

Eiichi Fukushima

Kensuke Imura
Executive Vice President andRepresentative Director

Masahiro Nagao

Director

Keiichi Ogino* Outside director or outside
corporate auditor

CORPORATE INFORMATIONFoundation:
Capital:Number of Employees:
Major Products:
Machining
RobotsComponents
Materials & Heat Treatment
Major Domestic Offices and Plants:
Toyama Head Office
Tokyo Head OfficeToyama Plant
Higashi-Toyama Plant

December 21, 1928
¥16 billion
5,700 (Consolidated) 2,730 (Non-consolidated)
Cutting Tools, Forming Tools, Cutting Saws, Precision Forming, Machine Tools,
Precision Machinery, Machining Systems
Robot Systems, Electronic Equipment
Bearings, Hydraulic Equipment, Automotive Parts, Seismic Isolation Systems
Special Steels, Coating, Industrial Furnaces
1-1-1, Fujikoshi-Honmachi, Toyama 930-8511, Japan
Shiodome Sumitomo Bldg. 17F,
1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo 105-0021, Japan
1-1-1, Fujikoshi-Honmachi, Toyama 930-8511, Japan
3-1-1, Yoneda-machi, Toyama 931-8511, Japan
3-2-1, Nakada, Toyama 931-8453, Japan
176, Ogake, Namerikawa 936-0802, Japan

Namerikawa Plant
Major Overseas Subsidiaries:
NACHI AMERICA INC.
17500 Twenty-Three Mile Road, Macomb, Michigan, 48044, U.S.A.
NACHI EUROPE GmbH
Bischofstrasse 99, 47809, Krefeld, GERMANY
NACHI TECHNOLOGY (THAILAND) CO., LTD.
3/16 M, 2, Rojana Industrial Estate Nongbua, Ban Khai, Rayong, 21120, THAILAND
NACHI (SHANGHAI) CO., LTD. Yitong Industry Zone 258, Fengmao Rd. Malu Town, Jiading,Shanghai 201801, CHINA

Tel: +81-76-423-5111
Tel: +81-3-5568-5111
Tel: +81-76-423-5111
Tel: +81-76-438-4411
Tel: +81-76-438-8970
Tel: +81-76-471-2101
Tel: +1-586-226-5151
Tel: +49-(0)2151-65046-0
Tel: +66-38-961-682
Tel: +86-(0)21-6915-2200

6

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/

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 (1,000
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.)

OVERSEAS OFFICESCZECH/Bearings
SHANGHAI/Tools & Bearings
DONGGUAN/Bearings
SPAIN/Bearings
INDIA/
Representative Office

AMERICA/Tools
KOREA/
Hydraulic Equipment

AMERICA/Bearings

AMERICA/
Robotic Systems
AMERICA/Engineering Base

TAIWAN/Bearings

THAILAND/Bearings
SINGAPORE/Tools

Manufacturing Companies
Sales Companies

Printed in Japan

BRAZIL/Bearings & Tools