##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 20-F
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2007
 Commission file number 2-76735
 TDK KABUSHIKI KAISHA
 
  TDK CORPORATION
 
   
   
   Title of each class
    
    Name of each exchange on which registeredAmerican Depositary Shares
    
    New York Stock ExchangeCommon stock
    
    New York Stock Exchange
   
    
   
  þ o
  o þ
  þ o
  þ o o
  þ o
  o þ
   - 1 -




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TABLE OF CONTENTS  PART 1Item 1. Identity of Directors, Senior Management and AdvisersItem 2. Offer Statistics and Expected TimetableItem 3. Key InformationItem 4. Information on the CompanyItem 4A. Unresolved Staff CommentsItem 5 Operating and Financial Review and ProspectsItem 6. Directors, Senior Management and EmployeesItem 7. Major Shareholders and Related Party TransactionItem 8. Financial InformationItem 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and Qualitative Disclosures about Market RiskItem 12. Description of Securities Other than Equity SecuritiesPART 2Item 13. Defaults, Dividend Arrearages and DelinquenciesItem 14. Material Modifications to the Rights of Security Holders and Use of ProceedsItem 15. Controls and ProceduresItem 16A. Audit Committee Financial ExpertItem 16B. Code of EthicsItem 16C. Principal Accountant Fees and ServicesItem 16D. Exemptions from Listing Standards for Audit CommitteesItem 16E. Purchases of Equity Securities by the Issuer and Affiliated PurchasersPART 3Item 17. Financial StatementsItem 18. Financial StatementsItem 19. ExhibitsSIGNATURESEX-1.1 ARTICLES OF INCORPORATION(ENGLISH TRANSLATION)EX-1.2 REGULATIONS OF THE BOARD OF DIRECTORS(ENGLISH TRANSLATIONS)EX-1.3 REGULATIONS OF THE BOARD OF CORPORATE AUDITORS(ENGLISH TRANSLATION)EX-2.1 SHARE HANDLING REGULATIONS(ENGLISH TRANSLATION)EX-8.1 LIST OF SIGNIFICANT SUBSIDIARIESEX-11.1 TDK CODE OF ETHICS(ENGLISH TRANSLATION)EX-12.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF CEO OF THE COMPANYEX-12.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF CFO OF THE COMPANYEX-13.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF CEO OF THE COMPANYEX-13.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF CFO OF THE COMPANY    Table of Contents    Forward-Looking Statements
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PART 1
 
 Item 1.
    
    Identity of Directors, Senior Management and Advisers
 A.
    
    Directors and senior management
 Not applicable.
 B.
    
    Advisers
 Not applicable.
 C.
    
    Auditors
 Not applicable.
 
 Item 2.
    
    Offer Statistics and Expected Timetable
 A.
    
    Offer statistics
 Not applicable.
 B.
    
    Method and expected timetable
 Not applicable.
 - 3 -




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Item 3.
    
    Key Information
 A.
    
    Selected financial data
  Income Statement Data
 Thousands ofU.S. dollars,except pershareMillions of yen, except per share amounts
    
    amounts(1)2007
    
    2006
    
    2005
    
    2004
    
    2003
    
    2007Net sales
    
    ¥
    862,025
    
    
    ¥
    795,180
    
    
    ¥
    657,853
    
    
    ¥
    655,792
    
    
    ¥
    604,865
    
    
    $
    7,305,297Cost of sales
    
    
    622,819
    
    
    
    585,780
    
    
    
    484,323
    
    
    
    476,407
    
    
    
    459,552
    
    
    
    5,278,127Gross profit
    
    
    239,206
    
    
    
    209,400
    
    
    
    173,530
    
    
    
    179,385
    
    
    
    145,313
    
    
    
    2,027,170Selling, general and
administrative expenses
    
    
    159,106
    
    
    
    142,052
    
    
    
    119,886
    
    
    
    122,875
    
    
    
    115,569
    
    
    
    1,348,356Transfer to the government
of the substitutional portion
of Employees Pension Fund:Subsidy from the government
    
    
    
    
    
    
    
    
    
    
    (33,533
    )
    
    
    
    
    
    
    
    
    
    
    Loss on settlement
    
    
    
    
    
    
    
    
    
    
    27,347
    
    
    
    
    
    
    
    
    
    
    
    Restructuring cost
    
    
    510
    
    
    
    6,825
    
    
    
    
    
    
    
    
    
    
    
    5,197
    
    
    
    4,322Operating income
    
    
    79,590
    
    
    
    60,523
    
    
    
    59,830
    
    
    
    56,510
    
    
    
    24,547
    
    
    
    674,492Income from continuing
operations before income taxes
    
    
    88,665
    
    
    
    66,103
    
    
    
    60,728
    
    
    
    55,847
    
    
    
    20,552
    
    
    
    751,398Income from continuing
operations
    
    
    70,125
    
    
    
    44,411
    
    
    
    36,965
    
    
    
    43,355
    
    
    
    13,593
    
    
    
    594,280Loss from discontinued
operations
    
    
    
    
    
    
    310
    
    
    
    3,665
    
    
    
    1,254
    
    
    
    1,574
    
    
    
    Net income
    
    
    70,125
    
    
    
    44,101
    
    
    
    33,300
    
    
    
    42,101
    
    
    
    12,019
    
    
    
    594,280Per Common Share:Income from continuing
operations per share:Basic
    
    ¥
    529.88
    
    
    ¥
    335.84
    
    
    ¥
    279.41
    
    
    ¥
    327.27
    
    
    ¥
    102.42
    
    
    $
    4.49Diluted
    
    
    529.29
    
    
    
    335.54
    
    
    
    279.25
    
    
    
    327.15
    
    
    
    102.42
    
    
    
    4.49Loss from discontinued
operations per share:Basic
    
    ¥
    
    
    
    ¥
    (2.34
    )
    
    ¥
    (27.70
    )
    
    ¥
    (9.47
    )
    
    ¥
    (11.86
    )
    
    $
    Diluted
    
    
    
    
    
    
    (2.34
    )
    
    
    (27.69
    )
    
    
    (9.46
    )
    
    
    (11.86
    )
    
    
    Net income per share:Basic
    
    ¥
    529.88
    
    
    ¥
    333.50
    
    
    ¥
    251.71
    
    
    ¥
    317.80
    
    
    ¥
    90.56
    
    
    $
    4.49Diluted
    
    
    529.29
    
    
    
    333.20
    
    
    
    251.56
    
    
    
    317.69
    
    
    
    90.56
    
    
    
    4.49Cash dividends
    
    ¥
    100.00
    
    
    ¥
    80.00
    
    
    ¥
    60.00
    
    
    ¥
    50.00
    
    
    ¥
    45.00U.S. Dollar equivalents (2)
    
    $
    0.85
    
    
    $
    0.68
    
    
    $
    0.56
    
    
    $
    0.47
    
    
    $
    0.38
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Balance Sheet Data
 Millions of yen, except per share amounts
    
    Thousands ofand exchange rate for yen
    
    U.S. dollars(1)2007
    
    2006
    
    2005
    
    2004
    
    2003
    
    2007Net working capital (3)
    
    ¥
    449,830
    
    
    ¥
    397,131
    
    
    ¥
    379,746
    
    
    ¥
    360,555
    
    
    ¥
    315,948
    
    
    $
    3,812,118Total assets
    
    
    989,304
    
    
    
    923,503
    
    
    
    808,001
    
    
    
    770,319
    
    
    
    747,337
    
    
    
    8,383,932Short-term indebtedness
    
    
    3,527
    
    
    
    6,427
    
    
    
    103
    
    
    
    416
    
    
    
    1,919
    
    
    
    29,890Long-term indebtedness
    
    
    532
    
    
    
    405
    
    
    
    81
    
    
    
    27
    
    
    
    94
    
    
    
    4,508Retirement and severance
benefits
    
    
    32,290
    
    
    
    26,790
    
    
    
    28,839
    
    
    
    73,521
    
    
    
    84,971
    
    
    
    273,644Stockholders equity
    
    
    762,712
    
    
    
    702,419
    
    
    
    639,067
    
    
    
    576,219
    
    
    
    553,885
    
    
    
    6,463,661Number of shares outstanding
(in thousands)
    
    
    132,434
    
    
    
    132,267
    
    
    
    132,245
    
    
    
    132,409
    
    
    
    132,625
 Exchange Rate Information
 Yen exchange rates per U.S. dollar(4)
    
    Average
    
    Term end
    
    High
    
    LowYear ended March 31:2003
    
    
    121.10
    
    
    
    118.07
    
    
    
    133.40
    
    
    
    115.712004
    
    
    112.75
    
    
    
    104.18
    
    
    
    120.55
    
    
    
    104.182005
    
    
    107.28
    
    
    
    107.22
    
    
    
    114.30
    
    
    
    102.262006
    
    
    113.67
    
    
    
    117.48
    
    
    
    120.93
    
    
    
    104.642007
    
    
    116.55
    
    
    
    117.56
    
    
    
    121.81
    
    
    
    110.072008 (through August 31, 2007)
    
    
    119.91
    
    
    
    115.83
    
    
    
    124.09
    
    
    
    113.81Month of 2007:March 2007
    
    
    
    
    
    
    
    
    
    
    118.15
    
    
    
    116.01April 2007
    
    
    
    
    
    
    
    
    
    
    119.84
    
    
    
    117.69May 2007
    
    
    
    
    
    
    
    
    
    
    121.79
    
    
    
    119.77June 2007
    
    
    
    
    
    
    
    
    
    
    124.09
    
    
    
    121.08July 2007
    
    
    
    
    
    
    
    
    
    
    123.34
    
    
    
    118.41August 2007
    
    
    
    
    
    
    
    
    
    
    119.76
    
    
    
    113.81
 
 Notes:(1)
    
    Translated, except for cash dividend amounts, for convenience of the reader
into U.S. dollars at the rate of ¥118 = $1, the approximate rate on the
Tokyo Foreign Exchange Market on March 31, 2007.(2)
    
    Translated based on the rates specified in Note (4) below on the respective
dates of semi-annual payments for each year.(3)
    
    Net working capital is defined as current assets less current liabilities.(4)
    
    Based on the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York. The average rates are computed based on the exchange
rates on the last day of each month during the year. B.
    
    Capitalization and indebtedness
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C.
    
    Reasons for the offer and use of proceeds
  D.
    
    Risk factors
 Our business is exposed to fluctuations in economic conditions that may adversely affect our
business results and financial condition.
  Fluctuations in currency exchange rates could adversely affect our business results and
financial condition.
   We are susceptible to risks involved with selling our products in markets outside of
Japan.
  A slow-down of the Chinese economy, adverse changes in political and economic policies
of the Chinese government, or other factors in China may reduce our growth and profitability.
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We may not be able to compete effectively with respect to prices, which would have a material
adverse effect on our profitability.
   Rapid changes in technology could adversely affect our business and hurt our competitive
position.
  Claims of product liability and other issues associated with the quality of our products
could adversely affect our business results and brand name.
   Our proprietary technology is difficult to protect and unauthorized use of our proprietary
technology by third parties may reduce the value of our products and brand and impair our ability
to compete effectively.
   - 7 -




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Our business may suffer if we are sued for infringing upon the intellectual property rights
of third parties.
   Our success depends on attracting and retaining highly-skilled employees, and we would
suffer material adverse effects if we are unable to do so.
   We are dependent on certain raw materials and other products, and our business will
suffer if we are unable to procure such materials.
   Increased government regulation of our industry or changes in those regulations, whether in
Japan or overseas, may limit our ability to compete effectively.
    - 8 -




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Fluctuations in interest rates may have an adverse effect on our profitability.
  We are developing a business strategy whereby we sell to a concentrated number of Original
Equipment Manufacturers (OEMs), and are thus susceptible to adverse changes with respect to the
business of such OEMs.
     Our operations depend on facilities throughout the world and are subject to forces of nature
that could disrupt our ability to serve our customers.
  If we are unable to comply with the various environmental laws and regulations to which we
are subject, we may have to withdraw from certain business activities, which would have an
adverse effect on our brand and business operations.
   - 9 -




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Japans Unit Share System could affect access to Japanese markets by holders of American
Depositary Shares (ADSs), which could adversely affect the price of our shares.
  Holders of American Depositary Shares have limited rights, which could adversely affect the
price of our shares.
   - 10 -




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Item 4.
    
    Information on the Company
 A.
    
    History and development of the Company
 History
      - 11 -




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B.
    
    Business overview
 Sales by product category
   Years ended March 312007
    
    
    2006
    
    
    2005
    
    
    2007(millions of yen)
    
    
    (millions of(%)
    
    
    U.S. dollars)Electronic Materials and Components:Electronic materials
    
    ¥
    199,243
    
    
    ¥
    180,766
    
    
    ¥
    174,800
    
    
    $
    1,688.5(23.1
    )
    
    
    (22.7
    )
    
    
    (26.6
    )Electronic devices
    
    
    198,199
    
    
    
    154,680
    
    
    
    116,387
    
    
    
    1,679.7(23.0
    )
    
    
    (19.5
    )
    
    
    (17.7
    )Recording devices
    
    
    304,822
    
    
    
    315,928
    
    
    
    234,578
    
    
    
    2,583.2(35.4
    )
    
    
    (39.7
    )
    
    
    (35.7
    )Other electronic components
    
    
    56,557
    
    
    
    36,376
    
    
    
    19,449
    
    
    
    479.3(6.5
    )
    
    
    (4.6
    )
    
    
    (2.9
    )Sub total
    
    
    758,821
    
    
    
    687,750
    
    
    
    545,214
    
    
    
    6,430.7(88.0
    )
    
    
    (86.5
    )
    
    
    (82.9
    )Recording Media
    
    
    103,204
    
    
    
    107,430
    
    
    
    112,639
    
    
    
    874.6(12.0
    )
    
    
    (13.5
    )
    
    
    (17.1
    )Total
    
    ¥
    862,025
    
    
    ¥
    795,180
    
    
    ¥
    657,853
    
    
    $
    7,305.3(100.0
    )
    
    
    (100.0
    )
    
    
    (100.0
    )
 
 Note:The business segment information, in addition to being an Item 4 requirement,
is required by the Japanese Securities Exchange Law. Segment information is
unaudited. Electronic Materials and Components segment
 (i) Electronic materials
   - 12 -




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(ii) Electronic devices
     (iii) Recording devices
   (iv) Other electronic components
  Recording Media
    
 *Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks of HP, IBM and
Quantum in the U.S. and other countries.


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Marketing channels in Japan
   Operations outside Japan
  
    
    30 manufacture various product lines and distribute their products in their country
of operation and other countries;
    
    21 are sales subsidiaries which exclusively handle products manufactured by TDK;
    
    1 is a holding company for the administration of TDKs U.S. operations;
    
    1 is a holding company for the administration of TDKs European operations;
    
    1 is a company for research and development in Ireland;
    
    2 are companies for research and development in the U.S.;
    
    1 is a company for engineering service for magnetic heads in Singapore;
    
    1 is a local management company for the administration of TDKs Chinese operations;
    
    1 is a company for engineering service for magnetic heads in China;
    
    1 is a company for engineering service for magnetic heads in South Korea;
    
    1 is a holding company for the administration of Lambdas U.S. operations;
    
    1 is a company for the administration in Canada;
    
    1 is a holding company for the administration of Lambdas European operations;
    
    3 are dormant companies and 3 are companies in the course of liquidation
  China
    
    HDD heads, inductors, ferrite cores, capacitors, transformer, power supplies and ferrite magnetsUnited States
    
    HDD heads, capacitors, ferrite magnets and power suppliesTaiwan
    
    Capacitors, ferrite cores and power suppliesPhilippines
    
    HDD headsThailand
    
    Audiotapes, rare-earth metal magnets and power suppliesMalaysia
    
    Capacitors and high-frequency componentsSouth Korea
    
    Capacitors and inductorsHungary
    
    Capacitors and ferrite coresHong Kong
    
    Ferrite cores
   - 14 -




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Years ended March 312007
    
    
    2006
    
    
    2005
    
    
    2007(millions of yen) (%)
    
    
    (millions ofU.S. dollars)Japan
    
    ¥
    187,056
    
    
    
    (21.7
    )
    
    ¥
    168,554
    
    
    
    (21.2
    )
    
    ¥
    159,487
    
    
    
    (24.2
    )
    
    $
    1,585.2North America
    
    
    75,862
    
    
    
    (8.8
    )
    
    
    65,931
    
    
    
    (8.3
    )
    
    
    58,850
    
    
    
    (9.0
    )
    
    
    642.9Europe
    
    
    82,721
    
    
    
    (9.6
    )
    
    
    74,846
    
    
    
    (9.4
    )
    
    
    71,085
    
    
    
    (10.8
    )
    
    
    701.0Asia and others
    
    
    516,386
    
    
    
    (59.9
    )
    
    
    485,849
    
    
    
    (61.1
    )
    
    
    368,431
    
    
    
    (56.0
    )
    
    
    4,376.2Total
    
    ¥
    862,025
    
    
    
    (100.0
    )
    
    ¥
    795,180
    
    
    
    (100.0
    )
    
    ¥
    657,853
    
    
    
    (100.0
    )
    
    $
    7,305.3
 
 Note:Net sales in each geographic area are based on the location of TDK entities
where the external sales are generated. Patents and Licenses
  Competition
   - 15 -




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Raw Materials and Sources of Supply
   C.
    
    Organizational structure
  - 16 -




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D.
    
    Property, plants and equipment
   Number of
    
    Floor spaceprincipal
    
    (thousands ofLocation
    
    factories
    
    square feet)
    
    Principal products manufacturedJapanAkita
    
    
    16
    
    
    
    2,066
    
    
    Capacitors, ferrite cores, inductors and high-frequency componentsNagano
    
    
    4
    
    
    
    1,150
    
    
    HDD heads and optical disksChiba
    
    
    1
    
    
    
    663
    
    
    Rare-earth metal magnets, ferrite cores and power suppliesYamanashi
    
    
    3
    
    
    
    603
    
    
    HDD heads and data storage tapesOita
    
    
    1
    
    
    
    471
    
    
    VideotapesShizuoka
    
    
    2
    
    
    
    465
    
    
    Ferrite magnetsYamagata
    
    
    3
    
    
    
    345
    
    
    InductorsIwate
    
    
    1
    
    
    
    298
    
    
    CapacitorsIbaraki
    
    
    3
    
    
    
    217
    
    
    Display and power suppliesNiigata
    
    
    1
    
    
    
    54
    
    
    Power suppliesOverseasChina
    
    
    7
    
    
    
    5,147
    
    
    HDD heads, inductors, ferrite cores, capacitors, transformer, power supplies and ferrite magnetsUnited States of America
    
    
    7
    
    
    
    746
    
    
    HDD heads, capacitors, ferrite magnets and power suppliesPhilippines
    
    
    1
    
    
    
    441
    
    
    HDD headsThailand
    
    
    2
    
    
    
    435
    
    
    Audiotapes, rare-earth metal magnets and power suppliesTaiwan
    
    
    1
    
    
    
    380
    
    
    Capacitors, ferrite cores and power suppliesMalaysia
    
    
    2
    
    
    
    364
    
    
    Capacitors and high-frequency componentsSouth Korea
    
    
    1
    
    
    
    164
    
    
    Capacitors and inductorsHungary
    
    
    1
    
    
    
    160
    
    
    Capacitors and ferrite coresUnited Kingdom
    
    
    1
    
    
    
    42
    
    
    Power suppliesChina (Hong Kong)
    
    
    1
    
    
    
    42
    
    
    Ferrite coresIsrael
    
    
    1
    
    
    
    28
    
    
    Power suppliesTotal
    
    
    60
    
    
    
    14,281
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Item 4A.
    
    Unresolved Staff Comments
  - 18 -




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Item 5.
    
    Operating and Financial Review and Prospects
 Overview
             - 19 -




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A.
    
    Operating Results
 Results of Operations
 Years ended March 312007
    
    
    2006
    
    
    2005
    
    
    2007(millions of yen)
    
    (thousands(%)
    
    
    of dollars)Net sales
    
    ¥
    862,025
    
    
    ¥
    795,180
    
    
    ¥
    657,853
    
    
    $
    7,305,297(100.0
    )
    
    
    (100.0
    )
    
    
    (100.0
    )Cost of sales
    
    
    622,819
    
    
    
    585,780
    
    
    
    484,323
    
    
    
    5,278,127(72.3
    )
    
    
    (73.7
    )
    
    
    (73.6
    )Gross profit
    
    
    239,206
    
    
    
    209,400
    
    
    
    173,530
    
    
    
    2,027,170(27.7
    )
    
    
    (26.3
    )
    
    
    (26.4
    )Selling, general and administrative expenses
    
    
    159,106
    
    
    
    142,052
    
    
    
    119,886
    
    
    
    1,348,356(18.4
    )
    
    
    (17.9
    )
    
    
    (18.2
    )Transfer to the government of
the substitutional portion of
Employees Pension Fund:Subsidy from the government
    
    
    
    
    
    
    
    
    
    
    (33,533
    )
    
    
    
    
    
    
    
    
    
    
    (-5.1
    )Loss on settlement
    
    
    
    
    
    
    
    
    
    
    27,347
    
    
    
    
    
    
    
    
    
    
    
    (4.2
    )Restructuring cost
    
    
    510
    
    
    
    6,825
    
    
    
    
    
    
    
    4,322(0.1
    )
    
    
    (0.8
    )
    
    
    Operating income
    
    
    79,590
    
    
    
    60,523
    
    
    
    59,830
    
    
    
    674,492(9.2
    )
    
    
    (7.6
    )
    
    
    (9.1
    )Other income (other deductions)
    
    
    9,075
    
    
    
    5,580
    
    
    
    898
    
    
    
    76,906(1.1
    )
    
    
    (0.7
    )
    
    
    (0.1
    )Income taxes and minority interests, net of tax
    
    
    18,540
    
    
    
    21,692
    
    
    
    23,763
    
    
    
    157,118(2.2
    )
    
    
    (2.7
    )
    
    
    (3.6
    )Loss from discontinued operations
    
    
    
    
    
    
    310
    
    
    
    3,665
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.5
    )Net income
    
    ¥
    70,125
    
    
    ¥
    44,101
    
    
    ¥
    33,300
    
    
    $
    594,280(8.1
    )
    
    
    (5.5
    )
    
    
    (5.1
    )
 Sales by Region
 Years ended March 312007
    
    
    2006
    
    
    2005
    
    
    2007(millions of yen)
    
    (thousands(%)
    
    of dollars)Japan
    
    ¥
    171,352
    
    
    ¥
    173,658
    
    
    ¥
    184,025
    
    
    $
    1,452,136(19.9
    )
    
    
    (21.8
    )
    
    
    (28.0
    )North and South America
    
    
    103,124
    
    
    
    90,192
    
    
    
    77,813
    
    
    
    873,932(11.9
    )
    
    
    (11.4
    )
    
    
    (11.8
    )Europe
    
    
    83,545
    
    
    
    75,895
    
    
    
    71,702
    
    
    
    708,009(9.7
    )
    
    
    (9.5
    )
    
    
    (10.9
    )Asia (excluding Japan) and Oceania
    
    
    499,505
    
    
    
    451,710
    
    
    
    321,612
    
    
    
    4,233,093(58.0
    )
    
    
    (56.8
    )
    
    
    (48.9
    )Middle East and Africa
    
    
    4,499
    
    
    
    3,725
    
    
    
    2,701
    
    
    
    38,127(0.5
    )
    
    
    (0.5
    )
    
    
    (0.4
    )Net sales
    
    ¥
    862,025
    
    
    ¥
    795,180
    
    
    ¥
    657,853
    
    
    $
    7,305,297(100.0
    )
    
    
    (100.0
    )
    
    
    (100.0
    )
  - 21 -




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##### Table of Contents



Segment Information
  Industry Segment Information
 Years ended March 312007
    
    2006
    
    2005
    
    2007(millions of yen)
    
    (thousandsof dollars)ELECTRONIC MATERIALS AND COMPONENTSNet salesExternal sales
    
    ¥
    758,821
    
    
    ¥
    687,750
    
    
    ¥
    545,214
    
    
    $
    6,430,687Intersegment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    758,821
    
    
    
    687,750
    
    
    
    545,214
    
    
    
    6,430,687(100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)Operating expenses
    
    
    677,046
    
    
    
    613,417
    
    
    
    477,694
    
    
    
    5,737,678(89.2
    %)
    
    
    (89.2
    %)
    
    
    (87.6
    %)
    
    
    (89.2
    %)Operating income
    
    ¥
    81,775
    
    
    ¥
    74,333
    
    
    ¥
    67,520
    
    
    $
    693,009(10.8
    %)
    
    
    (10.8
    %)
    
    
    (12.4
    %)
    
    
    (10.8
    %)Identifiable assets
    
    
    735,204
    
    
    
    672,596
    
    
    
    537,593
    
    
    
    6,230,542Depreciation and amortization
    
    
    62,605
    
    
    
    53,599
    
    
    
    47,409
    
    
    
    530,551Capital expenditures
    
    
    68,394
    
    
    
    71,070
    
    
    
    57,192
    
    
    
    579,610RECORDING MEDIANet salesExternal sales
    
    ¥
    103,204
    
    
    ¥
    107,430
    
    
    ¥
    112,639
    
    
    $
    874,610Intersegment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    103,204
    
    
    
    107,430
    
    
    
    112,639
    
    
    
    874,610(100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)Operating expenses
    
    
    105,389
    
    
    
    121,240
    
    
    
    120,329
    
    
    
    893,127(102.1
    %)
    
    
    (112.9
    %)
    
    
    (106.8
    %)
    
    
    (102.1
    %)Operating income (loss)
    
    ¥
    (2,185
    )
    
    ¥
    (13,810
    )
    
    ¥
    (7,690
    )
    
    $
    (18,517
    )(-2.1
    %)
    
    
    (-12.9
    %)
    
    
    (-6.8
    %)
    
    
    (-2.1
    %)Identifiable assets
    
    
    75,442
    
    
    
    79,109
    
    
    
    84,160
    
    
    
    639,339Depreciation and amortization
    
    
    2,732
    
    
    
    4,941
    
    
    
    5,397
    
    
    
    23,152Capital expenditures
    
    
    2,046
    
    
    
    2,841
    
    
    
    3,813
    
    
    
    17,339ELIMINATIONS AND CORPORATECorporate assets
    
    ¥
    178,658
    
    
    ¥
    171,798
    
    
    ¥
    186,248
    
    
    $
    1,514,051TOTALNet salesExternal sales
    
    ¥
    862,025
    
    
    ¥
    795,180
    
    
    ¥
    657,853
    
    
    $
    7,305,297Intersegment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    862,025
    
    
    
    795,180
    
    
    
    657,853
    
    
    
    7,305,297(100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)Operating expenses
    
    
    782,435
    
    
    
    734,657
    
    
    
    598,023
    
    
    
    6,630,805(90.8
    %)
    
    
    (92.4
    %)
    
    
    (90.9
    %)
    
    
    (90.8
    %)Operating income
    
    ¥
    79,590
    
    
    ¥
    60,523
    
    
    ¥
    59,830
    
    
    $
    674,492(9.2
    %)
    
    
    (7.6
    %)
    
    
    (9.1
    %)
    
    
    (9.2
    %)Identifiable and corporate assets
    
    
    989,304
    
    
    
    923,503
    
    
    
    808,001
    
    
    
    8,383,932Depreciation and amortization
    
    
    65,337
    
    
    
    58,540
    
    
    
    52,806
    
    
    
    553,703Capital expenditures
    
    
    70,440
    
    
    
    73,911
    
    
    
    61,005
    
    
    
    596,949
 - 22 -




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##### Table of Contents



Geographic Segment Information
 Years ended March 312007
    
    2006
    
    2005
    
    2007(millions of yen)
    
    (thousandsof dollars)JAPANNet sales (1)
    
    ¥
    397,147
    
    
    ¥
    360,210
    
    
    ¥
    339,493
    
    
    $
    3,365,653Operating income
    
    
    31,277
    
    
    
    49,437
    
    
    
    26,382
    
    
    
    265,059Identifiable assets
    
    
    363,203
    
    
    
    347,942
    
    
    
    305,717
    
    
    
    3,077,992NORTH AND SOUTH AMERICANet sales (1)
    
    
    111,689
    
    
    
    105,979
    
    
    
    87,594
    
    
    
    946,517Operating income
    
    
    7,869
    
    
    
    9,995
    
    
    
    5,496
    
    
    
    66,687Identifiable assets
    
    
    99,585
    
    
    
    100,611
    
    
    
    70,844
    
    
    
    843,941EUROPENet sales (1)
    
    
    84,329
    
    
    
    76,240
    
    
    
    71,682
    
    
    
    714,653Operating income (loss)
    
    
    (3
    )
    
    
    (9,996
    )
    
    
    (5,125
    )
    
    
    (25
    )Identifiable assets
    
    
    50,941
    
    
    
    45,729
    
    
    
    44,961
    
    
    
    431,703ASIA AND OTHERSNet sales (1)
    
    
    572,979
    
    
    
    531,824
    
    
    
    400,866
    
    
    
    4,855,754Operating income
    
    
    41,515
    
    
    
    12,607
    
    
    
    33,551
    
    
    
    351,822Identifiable assets
    
    
    387,002
    
    
    
    348,008
    
    
    
    263,621
    
    
    
    3,279,678ELIMINATIONS AND CORPORATENet sales (1)
    
    
    304,119
    
    
    
    279,073
    
    
    
    241,782
    
    
    
    2,577,280Operating income (loss)
    
    
    1,068
    
    
    
    1,520
    
    
    
    474
    
    
    
    9,051Identifiable assets
    
    
    88,573
    
    
    
    81,213
    
    
    
    122,858
    
    
    
    750,618TOTALNet sales
    
    ¥
    862,025
    
    
    ¥
    795,180
    
    
    ¥
    657,853
    
    
    $
    7,305,297Operating income
    
    
    79,590
    
    
    
    60,523
    
    
    
    59,830
    
    
    
    674,492Identifiable and corporate assets
    
    
    989,304
    
    
    
    923,503
    
    
    
    808,001
    
    
    
    8,383,932OVERSEAS SALES (2)Americas
    
    ¥
    103,124
    
    
    ¥
    90,192
    
    
    ¥
    77,813
    
    
    $
    873,932Europe
    
    
    83,545
    
    
    
    75,895
    
    
    
    71,702
    
    
    
    708,009Asia and others
    
    
    504,004
    
    
    
    455,435
    
    
    
    324,313
    
    
    
    4,271,220Overseas sales total
    
    ¥
    690,673
    
    
    ¥
    621,522
    
    
    ¥
    473,828
    
    
    $
    5,853,161Percentage of consolidated sales
    
    
    80.1
    %
    
    
    78.2
    %
    
    
    72.0
    %
    
    
    80.1
    %
 
 Notes:(1)
    
    Net sales in each geographic area are based on the location of TDK
entities where the sales are generated.(2)
    
    Overseas sales are based on the location of the customers. - 23 -




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Sales
          - 24 -




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- 25 -




---



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Net Sales Geographic Segments
     - 26 -




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Effect of foreign exchange movements
     - 27 -




---



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Cost and expenses
    Other income and deductions
  Income taxes and minority interests
  Net income
    - 28 -




---



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Sales
        - 29 -




---



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- 30 -




---



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Effect of foreign exchange movements
     - 31 -




---



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Cost and expenses
    Other income and deductions
  Income taxes and minority interests
  Net income
   - 32 -




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- 33 -




---



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Discontinued Operations
  Yen (Millions)2006
    
    2005Net sales
    
    ¥
    45
    
    
    
    2,242Loss from operations before income taxes
(including loss on disposal of ¥224 million
in 2006)
    
    
    310
    
    
    
    3,509Income tax expense
    
    
    
    
    
    
    156Loss from discontinued operations
    
    ¥
    310
    
    
    
    3,665
  - 34 -




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B.
    
    Liquidity and capital resources
 Operating capital requirements
  Capital Expenditures
           - 35 -




---



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- 36 -




---



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Financial Management
   Years ended March 312007
    
    
    2006
    
    
    2005
    
    
    2007(millions of yen)
    
    
    (millionsof dollars)Income from continuing operations
    
    ¥
    70,125
    
    
    ¥
    44,411
    
    
    ¥
    36,965
    
    
    $
    594.3Adjustments to reconcile net income to
net cash provided by operating
activities
    
    
    75,358
    
    
    
    44,707
    
    
    
    58,284
    
    
    
    638.6Net cash provided by operating activities
    
    
    145,483
    
    
    
    89,118
    
    
    
    95,249
    
    
    
    1,232.9Net cash used in investing activities
    
    
    (81,488
    )
    
    
    (104,782
    )
    
    
    (62,359
    )
    
    
    (690.6
    )Net cash used in financing activities
    
    
    (15,862
    )
    
    
    (7,125
    )
    
    
    (9,629
    )
    
    
    (134.4
    )Net cash provided by (used in)
discontinued operations
    
    
    
    
    
    
    (414
    )
    
    
    (1,625
    )
    
    
    Effect of exchange rate changes on cash
and cash equivalents
    
    
    2,019
    
    
    
    10,712
    
    
    
    2,717
    
    
    
    17.1Net change in cash and cash equivalents
    
    ¥
    50,152
    
    
    ¥
    (12,491
    )
    
    ¥
    24,353
    
    
    $
    425.0
       - 37 -




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- 38 -




---



##### Table of Contents



Years ended March 312007
    
    
    2006
    
    
    2005
    
    
    2007(millions of yen)
    
    
    (millions(%)
    
    
    
    
    
    
    of dollars)Short-term debt
    
    ¥
    3,013
    
    
    ¥
    4,469
    
    
    ¥
    
    
    
    $
    25.5(0.4
    )
    
    
    (0.6
    )
    
    
    (
    )Current installments of long term debt
    
    
    514
    
    
    
    1,958
    
    
    
    103
    
    
    
    4.4(0.0
    )
    
    
    (0.3
    )
    
    
    (0.0
    )Long-term debt, excluding current installments
    
    
    532
    
    
    
    405
    
    
    
    81
    
    
    
    4.5(0.1
    )
    
    
    (0.1
    )
    
    
    (0.0
    )Stockholders equity
    
    
    762,712
    
    
    
    702,419
    
    
    
    639,067
    
    
    
    6,463.7(99.5
    )
    
    
    (99.0
    )
    
    
    (100.0
    )Total capital
    
    ¥
    766,771
    
    
    ¥
    709,251
    
    
    ¥
    639,251
    
    
    $
    6,498.1(100.0
    )
    
    
    (100.0
    )
    
    
    (100.0
    )
        - 39 -




---



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- 40 -




---



##### Table of Contents



Restructuring Costs
      - 41 -




---



##### Table of Contents



C.
    
    Research and development, patents and licenses, etc.
      
    
    The Materials R&D Center is responsible for research in magnetic and dielectric
materials that use powder metallurgy.
 
    
    The Advanced Process Technology Center facilitates the use of cutting-edge process
technologies.
 
    
    The Devices Development Center conducts research in new devices.
 
    
    The Application Center devises the necessary applied technologies with the aim of
keeping TDK in step with market trends and customer needs.
   - 42 -




---



##### Table of Contents



D.
    
    Trend information
 Economic environment
       
 - 43 -




---



##### Table of Contents



Critical accounting policies
    Impairment of long-lived assets
   Valuation of inventories
   - 44 -




---



##### Table of Contents



Purchase Accounting
    Goodwill and other intangible assets
  Pension benefit costs
     - 45 -




---



##### Table of Contents



Deferred tax assets
  - 46 -




---



##### Table of Contents



New accounting pronouncements
 New Accounting Standards
     - 47 -




---



##### Table of Contents



E.
    
    Off-Balance Sheet Arrangements
  F.
    
    Tabular Disclosure of Contractual Obligations
   Payments Due by Period (Yen in millions)Total
    
    Less than1 year
    
    1 to 3years
    
    3 to 5years
    
    After 5yearsContractual obligations:Long-term debt
    
    
    ¥1,046
    
    
    
    514
    
    
    
    479
    
    
    
    53
    
    
    
    Operating leases
    
    
    17,134
    
    
    
    5,659
    
    
    
    6,468
    
    
    
    2,119
    
    
    
    2,888Contributions to
defined benefit plans
    
    
    4,411
    
    
    
    4,411
    
    
    
    
    
    
    
    
    
    
    
    Purchase
commitment of raw
materials
    
    
    6,196
    
    
    
    4,443
    
    
    
    1,753
    
    
    
    
    
    
    
    Purchase
commitment of
property, plant and
equipment
    
    
    18,882
    
    
    
    18,882
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    47,669
    
    
    
    33,909
    
    
    
    8,700
    
    
    
    2,172
    
    
    
    2,888
 G.
    
    Safe Harbor
   - 48 -




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##### Table of Contents



Item 6.
    
    Directors, Senior Management and Employees
 A.
    
    Directors and senior management
  Directors
 Name (Date of birth)
    
    Position, responsibility and brief personal recordHajime Sawabe

    

    Representative Director, Chairman and CEO  since June 2006(Jan. 9, 1942)
    
    
    
    
    
    Director of TDK since June 1996
    
    
    Appointed Representative Director, President and CEO in June 1998Takehiro Kamigama

    
    Representative Director, President and COO  since June 2006(Jan. 12, 1958)
    
    
    
    
    
    Appointed General Manager of Data Storage Components Business Group in October 2001
    
    
    Corporate Officer of TDK since June 2002
    
    
    Appointed Senior Vice President of TDK in June 2003
    
    
    Appointed General Manager of TDK Data Storage and Thin Film
Technology Components Business Group in June 2003
    
    
    Appointed Director, Executive Vice President of TDK in June 2004Jiro Iwasaki

    
    Director, Executive Vice President  since June 2006(Dec. 6, 1945)

    
    In charge of TDK General Manager of Administration Group and
Environment
    
    
    Director of TDK since June 1996
    
    
    General Manager of TDK Administration Group and Environment since June 2002
    
    
    Appointed TDK Senior Vice President in June 2002Shinji Yoko

    
    Director, Senior Vice President  since June 2002(Jan. 2, 1948)

    
    In charge of TDK General Manager of Electronic Components
Sales and Marketing Group
    
    
    Director of TDK since June 1998
    
    
    Appointed Deputy General Manager of TDK Electronic
Components Business Group, General Manager of High Frequency Devices Division in April 2000
    
    
    General Manager of TDK Electronic Components Sales and Marketing Group since June 2002Yasuhiro Hagihara

    
    Director  since June 2002(Oct. 19, 1937)
    
    
    
    
    
    Admitted to the bar in Washington D.C., U.S.A. in April 1971
    
    
    Elected Partner of Graham & James L.L.P. in January 1979
    
    
    Partner of Squire, Sanders & Dempsey L.L.P. since July 2000
    
    
    Partner of Squire, Sanders Gaikokuho Kyodo Jigyo Horitsu Jimusho since April 2005
 - 49 -




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##### Table of Contents



Name (Date of birth)
    
    Position, responsibility and brief personal recordSeiji Enami
    
    Director, Senior Vice President and CFO since June 2007(Sep. 14, 1947)

    
    In charge of General Manager of Finance and Accounting
Department
    
    
    Appointed General Manager of TDK Recording Media and
Systems Business Group Industrial Sales Department in April 2000
    
    
    General Manager of TDK Finance and Accounting Department since April 2001
    
    
    CFO of TDK since June 2004
    
    
    Director of TDK since June 2005Minoru Takahashi

    
    Director, Senior Vice President  since June 2007(Feb. 12, 1948)

    
    In charge of General Manager of TDK Technology Group,
General Manager of Materials & Process Development Center
and Technology, Intellectual Properties
    
    
    Appointed General Manager of TDK Sensors and Actuators Business
Division, General Manager of Business Promotions Department in April 2002
    
    
    Appointed Corporate Officer of TDK in June 2003
    
    
    Appointed General Manager of TDK Sensors and Actuators Business Group in October 2003
    
    
    Appointed General Manager of TDK Technology Group,
General Manager of Devices Development Center and Technology, Intellectual Properties in April 2005
    
    
    Senior Vice President of TDK since June 2006
    
    
    General Manager of TDK Technology Group, General
Manager of Materials & Process Development Center and Technology, Intellectual Properties since April 2007
 - 50 -




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##### Table of Contents



Corporate Officers
 Name (Date of birth)
    
    Position, responsibility and brief personal recordTakeshi Nomura
    
    Corporate Officer, Senior Vice President  since June 2002(Mar. 8, 1952)
    
    In charge of General Manager of Ferrite and Magnet
Products Business Group
    
    
    Appointed Director of TDK in June 1998
    
    
    Appointed General Manager of TDK Materials Research
Center, General Manager of Intellectual Properties Center in July 2002
    
    
    Appointed General Manager of Materials Research Center,
General Manager of Intellectual Properties Center, General Manager of Information Technology Research Center
and Technology in July 2003
    
    
    Appointed General Manager of TDK Technology Group, General
Manager of Intellectual Properties Center and Technology in January 2004
    
    
    Appointed General Manager of TDK Technology Group, General
Manager of TDK Intellectual Properties Center, General Manager of TDK Devices Development Center and
Technology in July 2004
    
    
    General Manager of TDK Ferrite and Magnet Products Business
Group since April 2005Takaya Ishigaki
    
    Corporate Officer, Senior Vice President  since June 2005(Apr. 10, 1953)
    
    In charge of General Manager of Capacitors Business Group
    
    
    Appointed Deputy General Manager of Circuit Devices Business Group,
Capacitor Group Senior Manager, General Manager of Multilayer Ceramics Manufacturing Department in
October 2001
    
    
    Appointed Corporate Officer of TDK in June 2003
    
    
    Appointed General Manager of TDK Circuit Devices Business
Group, Capacitor Group Senior Manager in April 2005
    
    
    General Manager of TDK Capacitors Business Group since April 2007Michinori Katayama
    
    Corporate Officer, Senior Vice President  since June 2006(Dec. 9, 1946)
    
    In charge of General Manager of TDK Corporate
Communications Department
    
    
    General Manager of TDK Corporate Communications Department since January 1999
    
    
    Appointed TDK Corporate Officer in June 2002
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Name (Date of birth)
    
    Position, responsibility and brief personal recordRaymond Leung
    
    Corporate Officer, Senior Vice President  since June 2007(Apr. 18, 1956)
    
    In charge of General Manager of China Operation Group,
Chairman of SAE Magnetics (H.K.) Ltd.
    
    
    Appointed President of SAE Magnetics (H.K.) Ltd. in October 2000
    
    
    Appointed Deputy General Manager of TDK Data Storage and
Thin Film Technology Components Business Group in June 2004
    
    
    Appointed TDK Corporate Officer in June 2004
    
    
    Appointed Vice Chairman of SAE Magnetics (H.K.) Ltd. in April 2005
    
    
    General Manager of TDK China Operation Group since April 2005
    
    
    Chairman of SAE Magnetics (H.K.) Ltd. since July 2006Shiro Nomi
    
    Corporate Officer, Senior Vice President  since June 2007(May 8, 1949)
    
    In charge of General Manager of Corporate Strategy
Corporate Planning Department
    
    
    Appointed General Manager of TDK Corporate Planning Department in July 2000
    
    
    General Manager of TDK Corporate Strategy Corporate Planning Department since October 2001
    
    
    Appointed TDK Corporate Officer in June 2005
    
    
    Appointed General Manager of TDK Corporate Strategy
Management Review & Support Department in April 2006Shinichi Araya
    
    Corporate Officer, Senior Vice President  since June 2007(Mar. 7, 1952)
    
    In charge of General Manager of TDK Magnetics Business Group
    
    
    Appointed General Manager of Mechatronics Division in January 1999
    
    
    Appointed General Manager of TDK Mechatronics Division, General Manager
of Production Engineering Development Department in April 2000
    
    
    Appointed Deputy General Manager of TDK Production Engineering
Development Center in April 2001
    
    
    Appointed General Manager of TDK Production Engineering
Development Department in October 2001
    
    
    Appointed Deputy General Manager of TDK Circuit Devices Business
Group, Inductor Group Senior Manager in April 2002
    
    
    Appointed TDK Corporate Officer in June 2005
    
    
    General Manager of TDK Magnetics Business Group since April 2007
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Name (Date of birth)
    
    Position, responsibility and brief personal recordMasatoshi Shikanai
    
    Corporate Officer  since June 2002(Oct. 3, 1949)
    
    In charge of General Manager of Corporate Strategy
Management Review & Support Department
    
    
    Appointed General Manager of TDK Recording Media and
Systems Business Group Europe Division in April 2000
    
    
    Appointed Deputy General Manager of TDK Recording
Media and Systems Business Group in February 2001
    
    
    Appointed General Manager of TDK Recording Media and
Solutions Business Group in October 2001
    
    
    General Manager of TDK Corporate Strategy Management
Review & Support Department since July 2006Shunji Itakura
    
    Corporate Officer  since June 2005(Nov. 15, 1947)
    
    In charge of General Manager of TDK Display Business
Department
    
    
    Appointed President of TDK (Malaysia) Sdn. Bhd. in January 1999
    
    
    General Manager of TDK Display Business Department since April 2001Kenichiro Fujihara
    
    Corporate Officer  since June 2007(Jul. 23, 1949)
    
    In charge of Deputy General Manager of TDK Electronic
Components Sales & Marketing Group
    
    
    Appointed General Manager of Electronic Components Sales &
Marketing Group Sales Division 1 in April 2003
    
    
    Deputy General Manager of TDK Electronic Components Sales &
Marketing Group since April 2006Shinya Yoshihara
    
    Corporate Officer  since June 2007(May 31, 1955)
    
    In charge of General Manager of TDK Technology Group
Production Engineering Development Center
    
    
    Appointed General Manager of TDK Technology Group
Production Engineering Development Department in April 2002
    
    
    General Manager of TDK Technology Group Production
Engineering Development Center since January 2004
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Corporate Auditors
 Name (Date of birth)
    
    Position, responsibility and brief personal recordMasaaki Miyoshi
    
    Corporate Auditor  since June 2003(Sep. 3, 1947)
    
    
    
    
    
    Appointed President of Korea TDK Co., Ltd. in July 2000Noboru Hara
    
    Corporate Auditor  since June 2007(Dec. 24, 1949)
    
    
    
    
    
    Appointed General Manager of TDK Administration
Group General Affairs Department in October 2001Kaoru Matsumoto
    
    Corporate Auditor  since June 2003(Dec. 8, 1947)
    
    
    
    
    
    Registration as a Certified Public Accountant in March 1976
    
    
    Establishment of Kaoru Matsumoto & Co. since November 1977Ryoichi Ohno
    
    Corporate Auditor  since June 2004(Nov. 3, 1958)
    
    
    
    
    
    Appointed Senior Vice President and Chief Financial Officer
of The Gibraltar Life Insurance Co., Ltd. in September 2001
    
    
    Appointed Finance Vice President of Prudential Financial Inc. in September 2001
    
    
    Appointed Executive Vice President and Chief Financial
Officer of The Gibraltar Life Insurance Co., Ltd. in July 2005
    
    
    Director of Prudential Life Insurance Co., Ltd. since July 2006
    
    
    Prudential Financial Inc., Japan Representative Office
Regional CFO-Japan (USGAAP Reporting) since February 2007Yukio Yanase
    
    Corporate Auditor  since June 2007(Jun. 15, 1944)
    
    
    
    
    
    Appointed Deputy President of ORIX Corporation in February 2005
    
    
    Appointed Director and Deputy President of ORIX Corporation in June 2005
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B.
    
    Compensation
 (1)
    
    The aggregate direct remuneration, including bonuses but excluding retirement allowances,
paid by TDK during the years ended March 31, 2007 and 2006 to all Directors and Corporate
Auditors of TDK who served during each of those years was approximately ¥285 million ($2,415
thousand) and  ¥250 million, respectively. During fiscal 2007, TDKs Directors and Corporate
Officers as of June 28, 2007 received 107 and 87 stock acquisition rights as stock options,
respectively. Each right represents an option to purchase 100 shares of common stock of TDK.
Further details regarding the grants are listed below. For a discussion of other material
terms of the issuance of these stock acquisitions rights, please see Item 6.E. Share
ownership. TDK does not disclose individual remuneration for each Director and Corporate
Auditor and aggregate direct remuneration for Corporate Officers except for compensation in
the form of stock acquisition rights, because such disclosure is not required under Japanese
law. Corporate Auditors do not receive stock acquisition rights.
 Number of stockacquisition rightsgranted individuallyName
    
    Position
    
    during fiscal 2007DirectorsHajime Sawabe
    
    Representative Director, Chairman and CEO
    
    
    27Takehiro Kamigama
    
    Representative Director, President and COO
    
    
    27Jiro Iwasaki
    
    Director, Executive Vice President
    
    
    20Shinji Yoko
    
    Director, Senior Vice President
    
    
    13Yasuhiro Hagihara
    
    Director (outside)
    
    
    1Seiji Enami
    
    Director, Senior Vice President and CFO
    
    
    7Minoru Takahashi
    
    Director, Senior Vice President
    
    
    12107Corporate OfficersTakeshi Nomura
    
    Corporate Officer, Senior Vice President
    
    
    13Takaya Ishigaki
    
    Corporate Officer, Senior Vice President
    
    
    12Michinori Katayama
    
    Corporate Officer, Senior Vice President
    
    
    12Raymond Leung
    
    Corporate Officer, Senior Vice President
    
    
    10Shiro Nomi
    
    Corporate Officer, Senior Vice President
    
    
    6Shinichi Araya
    
    Corporate Officer, Senior Vice President
    
    
    6Masatoshi Shikanai
    
    Corporate Officer
    
    
    6Shunji Itakura
    
    Corporate Officer
    
    
    6Kenichiro Fujihara
    
    Corporate Officer
    
    
    8Shinya Yoshihara
    
    Corporate Officer
    
    
    887
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(2)
    
    TDK stopped providing for retirement allowances for directors from the day after TDKs Board of
Directors passed a resolution on June 27, 2002 abolishing the directors retirement allowance
system. Consequently, current directors remuneration comprises monthly remuneration, a
results-linked bonus and stock options for a stock-linked compensation plan, and does not include
retirement allowances. Directors retirement allowances reserved through June 27, 2002 will be
paid to applicable directors when they retire upon approval by TDKs General Meeting of
Shareholders. The retirement allowance system for TDKs corporate auditors was abolished by a
resolution of the Board of Corporate Auditors on March 22, 2007. Accordingly, TDK stopped
providing reserves for retirement allowances for corporate auditors from the day after the
111th Ordinary General Meeting of Shareholders held on June 28, 2007. Consequently,
current corporate auditors remuneration comprises only monthly remuneration stipulated by TDKs
internal regulations, and does not include retirement allowances. Corporate auditors retirement
allowances reserved through June 28, 2007, will be paid to applicable corporate auditors when they
retire upon approval by TDKs General Meeting of Shareholders. The total amount of corporate
auditors retirement allowances provided for as of March 31, 2007 and 2006 was approximately ¥14
million ($119 thousand) and approximately ¥14 million, respectively.
  C.
    
    Board practices
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Significant differences in corporate governance practices between TDK and U.S. listed
companies on the New York Stock Exchange1.
    
    Directors Independence
 kansayaku-kai
   2.
    
    Definition of Independent Director
   
    
    The director is, or has been within the last three years, an employee of the listed
company, or an immediate family member is, or has been within the last three years, an
executive officer, of the listed company.
    
    The director has received, or has an immediate family member who has received, during
any twelve-month period within the last three years, more than $100,000 in direct
compensation from the listed company, other than director and committee fees and pension
or other forms of deferred compensation for prior service (provided such compensation is
not contingent in any way on continued service).
    
    The director or an immediate family member is a current partner of a firm that is the
companys internal or external auditor; the director is a current employee of such a firm;
the director has an immediate family member who is a current employee of such a firm and
who participates in the firms audit, assurance or tax
compliance (but not tax planning) practice; or the director or an immediate family member
was within the last three years (but is no longer) a partner or employee of such a firm and
personally worked on the listed companys audit within that time.
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
    
    The director or an immediate family member is, or has been within the last three years,
employed as an executive officer of another company where any of the listed companys
present executive officers at the same time serves or served on that companys compensation
committee.
    
    The director is a current employee, or an immediate family member is a current
executive officer, of a company that has made payments to, or received payments from, the
listed company for property or services in an amount which, in any of the last three
fiscal years, exceeds the greater of $1 million, or 2 percent of such other companys
consolidated gross revenues.
   3.
    
    Corporate Auditors
  kaikei sanyo
  4.
    
    Regularly Scheduled Sessions without Management
  5.
    
    Nominating / Corporate Governance Committee
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6.
    
    Compensation Committee
    (1)
    
    With respect to any item of compensation in a definitive amount, such amount;(2)
    
    With respect to any item of compensation not in a definitive amount, a
concrete method for the calculation thereof; and(3)
    
    With respect to non-monetary items as compensation, the specific contents
thereof.
 7.
    
    Audit Committee
  (i)
    
    TDK has a Board of Corporate Auditors (kansayaku-kai) established and
selected pursuant to the Company Law;(ii)
    
    The Company Law requires the board of corporate auditors to be separate from
the board of directors;(iii)
    
    Under the Company Law, the corporate auditors are not elected by management,
but by the shareholders at a shareholders meeting. In addition, no executive officer
of TDK is a member of the Board of Corporate Auditors;
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(iv)
    
    The Company Law prohibits a corporate auditor from serving as a director,
manager or other employee of the company or any of its subsidiaries, or as an
accounting officer (kaikei sanyo) or executive officer of any subsidiary of the
company. The Company Law requires a Company with Board of Corporate Auditors to have
at least half of the corporate auditors thereof be outside auditors as such term is
defined in the Company Law. As such, the Company Law provides for the standards for
independence of the board of corporate auditors from the management of TDK;(v)
    
    The Company Law provides that an accounting auditor (kaikei kansanin) must be
appointed at a shareholders meeting. However, it also provides that in order to
submit a proposal concerning an appointment of an accounting auditor to a
shareholders meeting, the directors must obtain the consent of the Board of Corporate
Auditors and that the Board of Corporate Auditors may demand that the directors
include the appointment of an accounting auditor in the agenda of a shareholders
meeting. In addition, the Company Law provides that the Board of Corporate Auditors
may dismiss an accounting auditor for causes such as breach of his or her duties that
are enumerated in the Company Law. Further, pursuant to the Company Law and Company
Accounting Regulations thereunder, the board of corporate auditors audit the financial
statements separately from an audit by the accounting auditor, and if the board of
corporate auditors believes that the manner or result of an audit by the accounting
auditors is not reasonable, it must indicate its objections and the reasons therefor
in the audit report. To this end, a corporate auditor may, if necessary for the
performance of his/her duties, request the accounting auditor to provide a report
thereon. As such, in accordance with the Company Law, the Board of Corporate Auditors
of TDK is responsible, to the extent permitted by law, for the appointment, retention
and supervision of the work of a registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit, review or
attest services for TDK; and(vi)
    
    Under Japanese law, the establishment of the procedures for the receipt,
retention, and treatment of complaints and their confidential, anonymous submission by
employees is a responsibility of the board of directors, not the corporate auditors or
the board of corporate auditors, and thus, the Board of Directors of TDK has
established such procedures. Each Corporate Auditor of TDK may, however, investigate
the status of such procedures at any time and state his/her opinion at a meeting of
the Board of Directors if he/she considers it necessary. In addition, each Corporate
Auditor of TDK has the authority to engage independent counsel and other advisers if
such engagement is necessary to carry out his/her duties. Furthermore, each Corporate
Auditor may require TDK to pay any and all expenses necessary for carrying out his/her
duties, including compensation of any advisers employed by him/her and ordinary
administrative expenses.
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8.
    
    Corporate Governance Guidelines
  9.
    
    Code of Business Conduct and Ethics
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D.
    
    Employees
  As of March 31, 2007
    
    Japan
    
    Overseas
    
    TotalElectronic materials and components
    
    
    7,724
    
    
    
    40,520
    
    
    
    48,244Recording media
    
    
    881
    
    
    
    802
    
    
    
    1,683Corporate
    
    
    1,644
    
    
    
    43
    
    
    
    1,687Total
    
    
    10,249
    
    
    
    41,365
    
    
    
    51,614
 As of March 31, 2006
    
    Japan
    
    Overseas
    
    TotalElectronic materials and components
    
    
    7,697
    
    
    
    42,419
    
    
    
    50,116Recording media
    
    
    993
    
    
    
    1,258
    
    
    
    2,251Corporate
    
    
    1,516
    
    
    
    40
    
    
    
    1,556Total
    
    
    10,206
    
    
    
    43,717
    
    
    
    53,923
 As of March 31, 2005
    
    Japan
    
    Overseas
    
    TotalElectronic materials and components
    
    
    6,938
    
    
    
    26,112
    
    
    
    33,050Recording media
    
    
    1,128
    
    
    
    1,465
    
    
    
    2,593Corporate
    
    
    1,436
    
    
    
    36
    
    
    
    1,472Total
    
    
    9,502
    
    
    
    27,613
    
    
    
    37,115
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E.
    
    Share ownership
  Number ofshares ofNumber of
    
    common stockshares of
    
    underlyingcommon
    
    stock acquisi-Name
    
    Position
    
    stock
    
    tion rightsHajime Sawabe
    
    Representative Director, Chairman and CEO
    
    
    10,000
    
    
    
    36,500Takehiro Kamigama
    
    Representative Director, President and COO
    
    
    3,300
    
    
    
    29,700Jiro Iwasaki
    
    Director, Executive Vice President
    
    
    2,000
    
    
    
    8,000Shinji Yoko
    
    Director, Senior Vice President
    
    
    1,000
    
    
    
    23,900Yasuhiro Hagihara
    
    Director (outside)
    
    
    1,000
    
    
    
    2,600Seiji Enami
    
    Director, Senior Vice President and CFO
    
    
    1,100
    
    
    
    3,400Minoru Takahashi
    
    Director, Senior Vice President
    
    
    200
    
    
    
    5,400Takeshi Nomura
    
    Corporate Officer, Senior Vice President
    
    
    1,000
    
    
    
    29,100Takaya Ishigaki
    
    Corporate Officer, Senior Vice President
    
    
    1,000
    
    
    
    6,600Michinori Katayama
    
    Corporate Officer, Senior Vice President
    
    
    500
    
    
    
    8,800Raymond Leung
    
    Corporate Officer, Senior Vice President
    
    
    
    
    
    
    4,600Shiro Nomi
    
    Corporate Officer, Senior Vice President
    
    
    300
    
    
    
    3,000Shinichi Araya
    
    Corporate Officer, Senior Vice President
    
    
    
    
    
    
    1,500Masatoshi Shikanai
    
    Corporate Officer
    
    
    300
    
    
    
    4,600Shunji Itakura
    
    Corporate Officer
    
    
    600
    
    
    
    2,300Kenichiro Fujihara
    
    Corporate Officer
    
    
    
    
    
    
    1,300Shinya Yoshihara
    
    Corporate Officer
    
    
    500
    
    
    
    3,700Masaaki Miyoshi
    
    Full-time Corporate Auditor
    
    
    1,000
    
    
    
    Noboru Hara
    
    Full-time Corporate Auditor
    
    
    500
    
    
    
    1,600Kazutaka Kubota
    
    Corporate Auditor (outside)
    
    
    
    
    
    
    Kaoru Matsumoto
    
    Corporate Auditor (outside)
    
    
    
    
    
    
    Ryoichi Ohno
    
    Corporate Auditor (outside)
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    24,300
    
    
    
    176,600
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Stock option plans
    Kaisha-ho
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Title of class
    
    Identity of person or group
    
    
    Amount owned
    
    
    Percent of classCommon stock
    
    TDK Employees Shareholding Association
    
    463,327 shares
    
    
    0.35%
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##### Table of Contents



Item 7.
    
    Major Shareholders and Related Party Transaction
 A.
    
    Major shareholders
  Shares ownedName of major shareholder
    
    (in thousands)
    
    PercentageThe Master Trust Bank of Japan, Ltd. (Trust
account)
    
    
    14,313
    
    
    
    10.75
    %Japan Trustee Services Bank, Ltd. (Trust account)
    
    
    11,459
    
    
    
    8.60
    %
     B.
    
    Related party transaction
  C.
    
    Interests of experts and counsel
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Item 8.
    
    Financial Information
 A.
    
    Consolidated statements and other financial information
 Consolidated financial statements
   Export sales
  Legal proceedings
  Dividend policy
  B.
    
    Significant changes
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##### Table of Contents



Item 9.
    
    The Offer and Listing
 A.
    
    Offer and listing details
   U.S. marketYen per share of
    
    
    price per AmericanCommon stock(1)
    
    
    Depositary Share(2)High
    
    
    Low
    
    
    High
    
    
    LowAnnual highs and lowsYear ended March 31, 2003
    
    
    7,380
    
    
    
    4,060
    
    
    
    57.00
    
    
    
    32.95Year ended March 31, 2004
    
    
    8,350
    
    
    
    3,810
    
    
    
    77.86
    
    
    
    32.40Year ended March 31, 2005
    
    
    8,630
    
    
    
    6,790
    
    
    
    80.10
    
    
    
    61.40Year ended March 31, 2006
    
    
    10,230
    
    
    
    7,250
    
    
    
    85.40
    
    
    
    62.50Year ended March 31, 2007
    
    
    10,360
    
    
    
    7,990
    
    
    
    89.00
    
    
    
    69.89Quarterly highs and lowsYear ended March 31, 20061st quarter
    
    
    8,020
    
    
    
    7,250
    
    
    
    74.35
    
    
    
    68.022nd quarter
    
    
    8,740
    
    
    
    7,480
    
    
    
    79.25
    
    
    
    67.053rd quarter
    
    
    10,230
    
    
    
    7,530
    
    
    
    85.40
    
    
    
    62.504th quarter
    
    
    9,070
    
    
    
    7,730
    
    
    
    76.29
    
    
    
    66.50Year ended March 31, 20071st quarter
    
    
    10,000
    
    
    
    7,990
    
    
    
    89.00
    
    
    
    69.892nd quarter
    
    
    9,470
    
    
    
    8,190
    
    
    
    80.49
    
    
    
    70.493rd quarter
    
    
    9,920
    
    
    
    8,520
    
    
    
    83.04
    
    
    
    73.554th quarter
    
    
    10,360
    
    
    
    9,120
    
    
    
    87.96
    
    
    
    77.76Year ending March 31, 20081st quarter
    
    
    11,940
    
    
    
    9,770
    
    
    
    97.08
    
    
    
    81.90Monthly highs and lowsMarch 2007
    
    
    10,350
    
    
    
    9,120
    
    
    
    87.96
    
    
    
    78.67April 2007
    
    
    10,910
    
    
    
    10,040
    
    
    
    90.73
    
    
    
    85.75May 2007
    
    
    11,100
    
    
    
    9,770
    
    
    
    91.19
    
    
    
    81.90June 2007
    
    
    11,940
    
    
    
    10,900
    
    
    
    97.08
    
    
    
    90.26July 2007
    
    
    11,990
    
    
    
    10,230
    
    
    
    99.25
    
    
    
    85.01August 2007
    
    
    9,920
    
    
    
    8,720
    
    
    
    85.62
    
    
    
    74.25
 
 Notes:(1)
    
    As reported by the Tokyo Stock Exchange.(2)
    
    As reported by the New York Stock Exchange. B.
    
    Plan of distribution
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C.
    
    Markets
  D.
    
    Selling shareholders
  E.
    
    Dilution
  F.
    
    Expenses of the issue
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Item 10.
    
    Additional Information
 A.
    
    Share capital
  B.
    
    Memorandum and articles of association
 Organization
 (kabushiki kaisha (Shoho) Kaishaho (shogyo tokibo)
 Objects and purposes
  (1)
    
    Manufacture and sale of electric machinery and appliances;(2)
    
    Manufacture and sale of magnetic materials such as ferrite and magnet;(3)
    
    Manufacture and sale of electronic machinery and appliances such as automatic
inserting machine for electronic components, automatic mounter for electronic
components, and electronic measuring equipment and of components thereof;(4)
    
    Manufacture and sale of recording media such as magnetic tape, floppy disk and
optical disk and of data writing, reading and storage equipment therefor;(5)
    
    Manufacture and sale of ceramic materials such as electricity inductive ceramics,
piezoelectric ceramics, semiconductor ceramics and electricity insulating ceramics;(6)
    
    Manufacture and sale of circuit components such as coils and transformers;(7)
    
    Manufacture and sale of semiconductor;(8)
    
    Manufacture and sale of stabilizing power supplies (units to stabilize electric
current or voltage);(9)
    
    Manufacture and sale of machinery and appliances for medical use and medical
instruments and of components thereof;(10)
    
    Manufacture and sale of single crystal materials and each product applying the
same;(11)
    
    Manufacture and sale of precious metals, precious stones, artificial precious
stones and each product applying or utilizing the same;(12)
    
    Manufacture and sale of outer wall materials of buildings and structures;(13)
    
    Designing and contracting of construction work;(14)
    
    Development, production, sale and grant of license of software;
 - 72 -




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##### Table of Contents



(15)
    
    Manufacture, sale and contracting of applied product, machinery and tools and
equipment of each of the foregoing; and(16)
    
    Any and all businesses incidental or relating to each of the foregoing.
 Directors
  (a)
    
    a director is not entitled to vote on a proposal or arrangement or contract in
which the director is materially interested;(b)
    
    the remuneration and retirement allowances for directors are determined at a
general meeting of shareholders and within the upper limit approved at the shareholders
meeting, the Board of Directors will determine the amount of compensation for each
director, however, the Board of Directors may, by its resolution, leave such decision to
the discretion of the companys representative director;(c)
    
    the Board of Directors have authority to approve long-term borrowing of ¥10
billion or more by resolution passed at a duly convened meeting of the Board of
Directors. The Representative Director is authorized by the Board of Directors to make
final decisions with respect to long-term borrowings in an amount less than ¥10 billion
and short-term borrowings (including issuance of commercial paper);(d)
    
    there are no provisions requiring the mandatory retirement of directors at a
specified age; and(e)
    
    share ownership is not required in order to be eligible to serve as a director.
 Common Stock
 General
    - 73 -




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##### Table of Contents



Authorized capital
    Dividends
 i.e.
 (a)
    
    TDKs Articles of Incorporation provide that the Board of Directors has the
authority to determine to make distributions of Surplus;(b)
    
    the normal term of office of TDKs directors terminates on or prior to the date
of conclusion of the ordinary general meeting of shareholders held for the last fiscal
year ending within one year from the election of the directors; and
 - 74 -




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##### Table of Contents



(c)
    
    TDKs non-consolidated annual financial statements and certain documents for the
latest fiscal year present fairly its assets and profit or loss, as required by the
Regulations of Company Accounting of Japan (February 7, 2006, the Ministry of Justice
Ordinance No. 13) (the Company Accounting Regulations).
    Restriction on Distributions of Surplus
        - 75 -




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##### Table of Contents



(a)
    
    the book value of TDKs treasury stock;(b)
    
    the amount of consideration for the treasury stock disposed of by TDK after the end of the
last fiscal year; and(c)
    
    certain other amounts set forth in the Company Accounting Regulations, including (if the sum
of one-half of goodwill and deferred assets does not exceed the total of stated capital,
paid-in capital, legal reserve and other capital surplus, each such amount being that
appearing on the non-consolidated balance sheet as of the end of the last fiscal year) the
amount that the said sum less the total of stated capital, paid-in capital and legal reserve.
 renketsu
haito kisei tekiyo kaisha
  - 76 -




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##### Table of Contents



Stock splits
   Consolidation of shares
  General meeting of shareholders
     Voting rights
 Unit share system, below
 - 77 -




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##### Table of Contents




    
    a reduction of stated capital,
    
    amendment of the Articles of Incorporation (except amendments which the Board
of Directors are authorized to make under the Company Law as described in
Stock Splits and Unit Share Systems),
    
    removal of a Director or Corporate Auditor,
    
    establishment of a 100 percent parent-subsidiary relationship by way of share
exchange or share transfer,
    
    a dissolution, merger or consolidation,
    
    a corporate separation,
    
    the transfer of the whole or an important part of the Companys business,
 - 78 -




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##### Table of Contents




    
    the taking over of the whole of the business of any other corporation,
    
    any issuance of new shares at a specially favourable price, stock acquisition
rights (shinkabu yoyakuken) with specially favourable conditions or bonds
with stock acquisition rights (shinkabu yoyakuken-tsuki shasai) with specially
favourable conditions to persons other than shareholders,
    
    release of part of Directors or Corporate Auditors liabilities to the Company,
    
    distribution of Surplus in kind with respect to which shareholders are not
granted the right to require the Company to make such distribution in cash
instead of in kind,
    
    purchase of shares by the Company from a specific shareholder other than its
subsidiaries, and
    
    consolidation of shares.
 Subscription rights
 Voting rights
 Stock acquisition rights
  Liquidation rights
  Liability to Further Calls or Assessments
  - 79 -




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##### Table of Contents



Share Registrar
  Record date
   Acquisition of TDKs own shares
   Distribution of Surplus
 Voting Rights
  - 80 -




---



##### Table of Contents



Unit share system
      Reporting of substantial shareholdings
   - 81 -




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##### Table of Contents



C.
    
    Material contracts
  D.
    
    Exchange controls
 Japanese Foreign Exchange Regulations
   
    
    individuals who do not reside in Japan; and
    
    corporations whose principal offices are not located in Japan.
   
    
    individuals who do not reside in Japan;
    
    corporations which are organized under the laws of foreign
countries or whose principal offices are located outside
Japan; and
    
    corporations in which more than 50 percent of the shares are
held (directly or indirectly) by individuals who do not reside
in Japan and/or corporations which are organized under the
laws of foreign countries or whose principal offices are
located outside Japan or a majority of the officers (or
officers having the power of representation) are persons who
do not reside in Japan, who make a foreign direct investment
as defined in the Foreign Exchange Law.
   - 82 -




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- 83 -




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E.
    
    Taxation
  Japanese Tax
     - 84 -




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##### Table of Contents



U.S. Tax
  
    
    certain financial institutions;
    
    insurance companies;
    
    dealers and traders in securities or foreign currencies;
    
    persons holding TDK shares or ADRs as part of a hedge, straddle,
conversion or other integrated transaction;
    
    persons whose functional currency for U.S. federal income tax purposes
is not the U.S. dollar;
    
    partnerships or other entities classified as partnerships for U.S.
federal income tax purposes;
    
    persons liable for the alternative minimum tax;
    
    tax-exempt organizations;
    
    persons holding TDK shares or ADRs that own or are deemed to own 10
percent or more of any class of TDK stock; or
    
    persons who acquired TDK shares or ADRs pursuant to the exercise of
any employee stock option or otherwise as compensation.
   
    
    a citizen or resident of the United States;
    
    a corporation, or other entity taxable as a corporation, created or
organized in or under the laws of the United States or any political
subdivision thereof; or
    
    an estate or trust the income of which is subject to U.S. federal
income taxation regardless of its source.
 - 85 -




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##### Table of Contents



United States Taxation with respect to shares of Common Stock and ADRs
 Taxation of Capital Gains
  Taxation of Dividends
   - 86 -




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##### Table of Contents



Passive Foreign Investment Companies
  
    
    gain realized on the sale or other disposition of shares or ADRs; and
    
    any excess distributions to a U.S. holder (generally, an excess distribution is
any distribution from a PFIC during a single taxable year that is greater than 125
percent of the average annual distributions received by a U.S. holder in respect
of the shares or ADRs during the three preceding taxable years or, if shorter,
such U.S. holders holding period for the shares or ADRs).
  
    
    the gain or excess distribution will be allocated ratably over the holding
period for the shares or ADRs,
    
    the amount allocated to the taxable year in which the U.S holder realized the
gain or excess distribution and any taxable year prior to the first year in which
TDK was a PFIC will be taxed as ordinary income,
    
    the amount allocated to each other year, with certain exceptions, will be taxed
at the highest tax rate in effect for that year, and
    
    the interest charge generally applicable to underpayments of tax will be
imposed in respect of the tax attributable to each such year.
   - 87 -




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##### Table of Contents



Treaty Between U.S. and Japan
   Foreign Tax Credit
  Information Reporting and Backup Withholding
   F.
    
    Dividends and paying agents
  - 88 -




---



##### Table of Contents



G.
    
    Statements by experts
  H.
    
    Documents on display
         I.
    
    Subsidiary information
  - 89 -




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##### Table of Contents



Item 11.
    
    Quantitative and Qualitative Disclosures about Market Risk
  Foreign exchange risk
    2007
    
    
    2006Forward exchange contracts(millions of yen)
    
    
    Average
    
    
    (millions of yen)
    
    
    AverageContract
    
    
    Fair
    
    
    contractual
    
    
    Contract
    
    
    Fair
    
    
    contractualamounts
    
    values
    
    rate
    
    amounts
    
    value
    
    rateTo sell Euro / receive Yen
    
    ¥
    4,677
    
    
    ¥
    (4
    )
    
    
    155.92
    
    
    ¥
    5,669
    
    
    ¥
    (4
    )
    
    
    141.73To sell USD / receive Yen
    
    
    3,604
    
    
    
    78
    
    
    
    120.11
    
    
    
    1,183
    
    
    
    12
    
    
    
    118.30To sell USD / receive Euro
    
    
    153
    
    
    
    (2
    )
    
    
    13.12
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    ¥
    8,434
    
    
    ¥
    72
    
    
    
    
    
    
    ¥
    6,852
    
    
    ¥
    8
 Currency option contracts(millions of yen)
    
    
    Average
    
    
    (millions of yen)
    
    
    AverageContract
    
    
    Fair
    
    
    contractual
    
    
    Contract
    
    
    Fair
    
    
    contractualamounts
    
    value
    
    rate
    
    amounts
    
    value
    
    rateTo sell USD / receive USD
    
    ¥
    5,400
    
    
    ¥
    82
    
    
    
    120.00
    
    
    ¥
    4,675
    
    
    ¥
    (27
    )
    
    
    116.88To sell USD / receive Yen
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,359
    
    
    
    23
    
    
    
    118.00To sell Euro / receive Euro
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    840
    
    
    
    (4
    )
    
    
    141.30Total
    
    ¥
    5,400
    
    
    ¥
    82
    
    
    
    
    
    
    ¥
    10,874
    
    
    ¥
    (8
    )
 Interest rate risk
  - 90 -




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##### Table of Contents



Stock price risk
   2007
    
    2006Yen (Millions)
    
    Yen (Millions)Cost
    Gross
    Gross
    Fair value
    
    Cost
    Gross
    Gross
    Fair valueunrealized
    unrealized
    
    
    
    
    
    
    
    unrealized
    unrealizedholding
    holding
    
    
    
    
    
    
    
    holding
    holdinggains
    losses
    
    
    
    
    
    
    
    gains
    losses¥ 11,919
    3,566
    
    488
    
    14,997
    
    
    9,246
    2,859
    
    2
    
    12,103
 
 Item 12.
    
    Description of Securities Other than Equity Securities
 A.
    
    Debt securities
  B.
    
    Warrants and rights
  C.
    
    Other securities
  D.
    
    American depositary shares
  - 91 -




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##### Table of Contents



PART 2
 
 Item 13.
    
    Defaults, Dividend Arrearages and Delinquencies
  
 Item 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15.
    
    Controls and Procedures
 (a)
    
    Evaluation of Disclosure Controls and Procedures
   (b)
    
    Managements Report on Internal Control over Financial Reporting
  (1)
    
    pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the company;(2)
    
    provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and(3)
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of TDKs assets that could have a material
effect on the financial statements.
 - 92 -




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##### Table of Contents



Internal Control-Integrated Framework
  (c)
    
    Attestation Report of Registered Public Accounting Firm
 .
 (d)
    
    Changes in Internal Controls over Financial Reporting
  
 Item 16A.
    
    Audit Committee Financial Expert
 Significant differences in
corporate governance practices between TDK and U.S. listed companies on the New York Stock Exchange
 
 Item 16B.
    
    Code of Ethics
  - 93 -




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##### Table of Contents



Item 16C.
    
    Principal Accountant Fees and Services
   Years ended March 312007
    
    2006Audit fees
    
    
    1,071
    
    
    
    609Audit-related fees
    
    
    14
    
    
    
    131Tax fees
    
    
    308
    
    
    
    279All other fees
    
    
    19
    
    
    
    0Total
    
    
    1,412
    
    
    
    1,019
    Audit and Non-Audit Services Pre-Approval Policy
   (i)
    
    The Retainer has received a letter of confirmation from such public accounting
firm that the public accounting firm is neither the Outside Auditor nor a person
associated with the Outside Auditor; and(ii)
    
    The Retainer has confirmed that such public accounting firm does not appear on
the list of persons associated with the Outside Auditor, which is contained in the
database system (Pre-Approval Database) within the TDK intranet system.
  - 94 -




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##### Table of Contents



(i)
    
    the service to be rendered shall fall under any of the types listed in above
explanation for audit fees, audit-related fees and tax fees;(ii)
    
    the engagement to render the service shall commence within one year from the time
when the Board of Directors adopts this Policy;(iii)
    
    the fee for the service to be rendered shall be less than 40,000,000 yen
(Individual Fee Limit); and(iv)
    
    the total amount of fees payable to the Outside Auditor by TDK on account of
non-audit services with respect to any fiscal year shall not exceed the total amount of
audit fees payable to the Outside Auditor by TDK with respect to such year (Overall Fee
Limit).
    - 95 -




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##### Table of Contents



(i)
    
    Whether the Outside Auditor cannot function in the role of management;(ii)
    
    Whether the Outside Auditor cannot audit its own work; and(iii)
    
    Whether the Outside Auditor cannot serve in an advocacy role for its client.
  
 Item 16D.
    
    Exemptions from Listing Standards for Audit Committees
   
    
    the Board of Corporate Auditors is established pursuant to the Company Law;
    
    as required by the Company Law, the Board of Corporate Auditors is separate from the
Board of Directors;
    
    the Board of Corporate Auditors is not elected by the management of TDK and no
executive officer of TDK is a member of the Board of Corporate Auditors;
    
    the Company Law provides for the standards for independence of the Board of Corporate
Auditors from the management of TDK;
    
    in accordance with the Company Law, the Board of Corporate Auditors of TDK is
responsible, to the extent permitted by law, for the appointment, retention and
supervision of the work of a registered public accounting firm engaged for the purpose of
preparing or issuing an audit report or performing other audit, review or attest services
for TDK; and
    
    Under the Company Law, the establishment of the procedures for the receipt, retention,
and treatment of complaints and their confidential, anonymous submission by employees is a
responsibility of the board of directors, not the corporate auditors or the board of
corporate auditors, and thus, the Board of Directors of TDK has established such
procedures. In addition, each Corporate Auditor of TDK has the authority to engage
independent counsel and other advisers if such engagement is necessary to carry out
his/her duties. Furthermore, each Corporate Auditor may require TDK to pay any and all
expenses necessary for carrying out his/her duties, including compensation of any advisers
employed by him/her and ordinary administrative expenses.
  - 96 -




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##### Table of Contents



Item 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  (c) TotalNumber of
    
    (d) MaximumShares
    
    Number ofPurchased as
    
    Shares that May(a) Total
    
    (b) Average
    
    Part of Publicly
    
    Yet BeNumber
    
    Price Paid
    
    Announced
    
    Purchased Underof Shares
    
    per Share
    
    Plans or
    
    the Plans orPeriod
    
    Purchased
    
    (Yen)
    
    Programs
    
    ProgramsApril 1 to April 30, 2006
    
    
    119
    
    
    
    9,083.78
    
    
    
    
    
    
    
    May 1 to May 31, 2006
    
    
    145
    
    
    
    9,482.41
    
    
    
    
    
    
    
    June 1 to June 30, 2006
    
    
    101
    
    
    
    9,002.48
    
    
    
    
    
    
    
    July 1 to July 31, 2006
    
    
    691
    
    
    
    8,569.25
    
    
    
    
    
    
    
    August 1 to August 31, 2006
    
    
    248
    
    
    
    8,934.27
    
    
    
    
    
    
    
    September 1 to September 30, 2006
    
    
    369
    
    
    
    9,135.01
    
    
    
    
    
    
    
    October 1 to October 31, 2006
    
    
    468
    
    
    
    9,660.45
    
    
    
    
    
    
    
    November 1 to November 30, 2006
    
    
    58
    
    
    
    9,130.34
    
    
    
    
    
    
    
    December 1 to December 31, 2006
    
    
    277
    
    
    
    9,175.49
    
    
    
    
    
    
    
    January 1 to January 31, 2007
    
    
    447
    
    
    
    9,826.67
    
    
    
    
    
    
    
    February 1 to February 28, 2007
    
    
    316
    
    
    
    9,987.22
    
    
    
    
    
    
    
    March 1 to March 31, 2007
    
    
    184
    
    
    
    9,508.04
    
    
    
    
    
    
    
    Total
    
    
    3,423
    
    
    
    9,279.36
    
    
    
    
    
    
    
    
 
 Note:
    Under the Company Law, a holder of shares constituting less than one full unit may request TDK to purchase such shares at their market value (See Item 10. Additional Information
Common Stock Unit share system). All purchases described in the above table were made pursuant to such requests by shareholders. - 97 -




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##### Table of Contents



PART 3
 
 Item 17.
    
    Financial Statements
  PageReport of Independent Registered Public Accounting Firm
    
    
    99Consolidated Statements of Income
for the years ended March 31, 2007, 2006 and 2005
    
    
    101Consolidated Balance Sheets as of March 31, 2007 and 2006
    
    
    102Consolidated Statements of Stockholders Equity
for the years ended March 31, 2007, 2006 and 2005
    
    
    104Consolidated Statements of Cash Flows
for the years ended March 31, 2007, 2006 and 2005
    
    
    105Notes to Consolidated Financial Statements
    
    
    106Schedule for the years ended March 31, 2007, 2006 and 2005:Schedule II  Valuation and Qualifying Accounts
    
    
    147
   - 98 -




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Report of Independent Registered Public Accounting Firm
 
        
 - 99 -




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Report of Independent Registered Public Accounting Firm
 
        
 - 100 -




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##### Table of Contents



Consolidated statements of income
 U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)2007
    
    2006
    
    2005
    
    2007Net sales (Notes 20 and 24)
    
    ¥
    862,025
    
    
    
    795,180
    
    
    
    657,853
    
    
    $
    7,305,297Cost of sales (Note 24)
    
    
    622,819
    
    
    
    585,780
    
    
    
    484,323
    
    
    
    5,278,127Gross profit
    
    
    239,206
    
    
    
    209,400
    
    
    
    173,530
    
    
    
    2,027,170Selling, general and administrative expenses (Note 24)
    
    
    159,106
    
    
    
    142,052
    
    
    
    119,886
    
    
    
    1,348,356Transfer to the government of the substitutional
portion of Employees Pension Fund (Note 8):Subsidy from the government
    
    
    
    
    
    
    
    
    
    
    (33,533
    )
    
    
    Loss on settlement
    
    
    
    
    
    
    
    
    
    
    27,347
    
    
    
    Restructuring cost (Note 16)
    
    
    510
    
    
    
    6,825
    
    
    
    
    
    
    
    4,322Operating income
    
    
    79,590
    
    
    
    60,523
    
    
    
    59,830
    
    
    
    674,492Other income (deductions):Interest and dividend income
    
    
    7,025
    
    
    
    3,605
    
    
    
    1,692
    
    
    
    59,534Interest expense
    
    
    (200
    )
    
    
    (149
    )
    
    
    (967
    )
    
    
    (1,695
    )Equity in earnings of affiliates
    
    
    1,489
    
    
    
    1,368
    
    
    
    1,765
    
    
    
    12,619Gain (loss) on securities, net (Note 4)
    
    
    (212
    )
    
    
    (286
    )
    
    
    (142
    )
    
    
    (1,797
    )Foreign exchange gain (loss)
    
    
    973
    
    
    
    948
    
    
    
    (856
    )
    
    
    8,245Other  net
    
    
    0
    
    
    
    94
    
    
    
    (594
    )
    
    
    09,075
    
    
    
    5,580
    
    
    
    898
    
    
    
    76,906Income from continuing operations
before income taxes
    
    
    88,665
    
    
    
    66,103
    
    
    
    60,728
    
    
    
    751,398Income taxes (Note 7)
    
    
    16,985
    
    
    
    21,057
    
    
    
    23,284
    
    
    
    143,940Income from continuing operations
before minority interests
    
    
    71,680
    
    
    
    45,046
    
    
    
    37,444
    
    
    
    607,458Minority interests, net of tax
    
    
    1,555
    
    
    
    635
    
    
    
    479
    
    
    
    13,178Income from continuing operations
    
    
    70,125
    
    
    
    44,411
    
    
    
    36,965
    
    
    
    594,280Discontinued operations (Note 21):Loss from
operations of discontinued business(including loss on disposal of ¥224 million in 2006)
    
    
    
    
    
    
    310
    
    
    
    3,509
    
    
    
    Income tax expense
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    Loss from discontinued operations
    
    
    
    
    
    
    310
    
    
    
    3,665
    
    
    
    Net income
    
    ¥
    70,125
    
    
    
    44,101
    
    
    
    33,300
    
    
    $
    594,280
 Amounts per share:Yen (except number of
    
    U.S. Dollarscommon shares outstanding)
    
    (Note 2)Income from continuing operations per share (Note 19):Basic
    
    ¥
    529.88
    
    
    
    335.84
    
    
    
    279.41
    
    
    $
    4.49Diluted
    
    
    529.29
    
    
    
    335.54
    
    
    
    279.25
    
    
    
    4.49Loss from discontinued operations per share (Note 19):Basic
    
    
    
    
    
    
    (2.34
    )
    
    
    (27.70
    )
    
    
    Diluted
    
    
    
    
    
    
    (2.34
    )
    
    
    (27.69
    )
    
    
    Net income per share (Note 19):Basic
    
    ¥
    529.88
    
    
    
    333.50
    
    
    
    251.71
    
    
    $
    4.49Diluted
    
    
    529.29
    
    
    
    333.20
    
    
    
    251.56
    
    
    
    4.49Weighted
average basic common shares outstanding (in thousands) (Note 19)
    
    
    132,342
    
    
    
    132,239
    
    
    
    132,293Weighted
average diluted common shares outstanding (in thousands) (Note 19)
    
    
    132,488
    
    
    
    132,355
    
    
    
    132,376Cash dividends paid during the year (Note 9)
    
    ¥
    100.00
    
    
    
    80.00
    
    
    
    60.00
    
    
    $
    0.85
 See accompanying notes to consolidated financial statements.
 - 101 -




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##### Table of Contents



Consolidated balance sheets
  U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)ASSETS
    
    2007
    
    2006
    
    2007Current assets:Cash and cash equivalents
    
    ¥
    289,169
    
    
    
    239,017
    
    
    $
    2,450,585Short-term investments
    
    
    11,071
    
    
    
    
    
    
    
    93,822Marketable securities (Note 4)
    
    
    1,063
    
    
    
    56
    
    
    
    9,008Trade receivables (Note 20):Notes
    
    
    9,546
    
    
    
    7,899
    
    
    
    80,899Accounts (Note 24)
    
    
    175,079
    
    
    
    185,224
    
    
    
    1,483,720Allowance for doubtful receivables
    
    
    (6,311
    )
    
    
    (4,064
    )
    
    
    (53,483
    )Net trade receivables
    
    
    178,314
    
    
    
    189,059
    
    
    
    1,511,136Inventories (Note 5)
    
    
    89,789
    
    
    
    88,968
    
    
    
    760,924Income tax receivables (Note 7)
    
    
    276
    
    
    
    265
    
    
    
    2,339Assets held for sale (Note 17)
    
    
    2,125
    
    
    
    4,110
    
    
    
    18,008Prepaid expenses
and other current assets (Notes 7, 8 and 24)
    
    
    43,563
    
    
    
    45,278
    
    
    
    369,178Total current assets
    
    
    615,370
    
    
    
    566,753
    
    
    
    5,215,000Investments in securities(Note 4)
    
    
    32,641
    
    
    
    28,757
    
    
    
    276,619Property, plant and equipment, at cost:Land
    
    
    21,696
    
    
    
    21,790
    
    
    
    183,864Buildings
    
    
    194,005
    
    
    
    187,810
    
    
    
    1,644,110Machinery and equipment
    
    
    508,972
    
    
    
    482,398
    
    
    
    4,313,322Construction in progress
    
    
    14,605
    
    
    
    12,687
    
    
    
    123,771739,278
    
    
    
    704,685
    
    
    
    6,265,067Less accumulated depreciation
    
    
    (492,575
    )
    
    
    (461,020
    )
    
    
    (4,174,364
    )Net property, plant and equipment
    
    
    246,703
    
    
    
    243,665
    
    
    
    2,090,703Goodwill(Note 18)
    
    
    17,539
    
    
    
    19,453
    
    
    
    148,636Intangible assets(Notes 8 and 18)
    
    
    31,005
    
    
    
    29,478
    
    
    
    262,754Deferred
income taxes(Notes 7 and 8)
    
    
    9,666
    
    
    
    7,287
    
    
    
    81,915Other assets(Notes 8 and 12)
    
    
    36,380
    
    
    
    28,110
    
    
    
    308,305¥
    989,304
    
    
    
    923,503
    
    
    $
    8,383,932
 See accompanying notes to consolidated financial statements.
 - 102 -




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##### Table of Contents



U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS EQUITY
    
    2007
    
    2006
    
    2007Current liabilities:Short-term debt (Note 6)
    
    ¥
    3,013
    
    
    
    4,469
    
    
    $
    25,534Current installments of long-term debt (Note 6)
    
    
    514
    
    
    
    1,958
    
    
    
    4,356Trade payables:Notes
    
    
    4,155
    
    
    
    4,353
    
    
    
    35,212Accounts (Note 24)
    
    
    77,616
    
    
    
    80,336
    
    
    
    657,763Accrued salaries and wages
    
    
    24,562
    
    
    
    19,010
    
    
    
    208,153Accrued expenses (Notes 8, 16 and 24)
    
    
    36,555
    
    
    
    43,524
    
    
    
    309,788Income taxes payables (Note 7)
    
    
    13,245
    
    
    
    9,155
    
    
    
    112,246Other current liabilities (Note 7)
    
    
    5,880
    
    
    
    6,817
    
    
    
    49,830Total current liabilities
    
    
    165,540
    
    
    
    169,622
    
    
    
    1,402,882Long-term debt, excluding current installments(Note 6)
    
    
    532
    
    
    
    405
    
    
    
    4,508Retirement and severance benefits(Note 8)
    
    
    32,290
    
    
    
    26,790
    
    
    
    273,644Deferred income taxes(Note 7)
    
    
    7,526
    
    
    
    5,314
    
    
    
    63,780Other noncurrent liabilities
    
    
    6,501
    
    
    
    4,979
    
    
    
    55,093Total liabilities
    
    
    212,389
    
    
    
    207,110
    
    
    
    1,799,907Minority interests
    
    
    14,203
    
    
    
    13,974
    
    
    
    120,364Commitments and contingent liabilities(Notes 12 and 13)Stockholders equity:Common stockAuthorized 480,000,000 shares;
issued 133,189,659 shares in 2007 and 2006;
outstanding 132,434,205 shares in 2007
and 132,266,828 shares in 2006
    
    
    32,641
    
    
    
    32,641
    
    
    
    276,619Additional paid-in capital
    
    
    63,695
    
    
    
    63,237
    
    
    
    539,788Legal reserve (Note 9)
    
    
    18,844
    
    
    
    17,517
    
    
    
    159,695Retained earnings (Note 9)
    
    
    671,350
    
    
    
    618,259
    
    
    
    5,689,406Accumulated other comprehensive income (loss) (Notes 7, 8 and 11)
    
    
    (17,846
    )
    
    
    (21,946
    )
    
    
    (151,237
    )Treasury stock at cost; 755,454 shares in 2007
and 922,831 shares in 2006 (Note 10)
    
    
    (5,972
    )
    
    
    (7,289
    )
    
    
    (50,610
    )Total stockholders equity
    
    
    762,712
    
    
    
    702,419
    
    
    
    6,463,661¥
    989,304
    
    
    
    923,503
    
    
    $
    8,383,932
 - 103 -




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##### Table of Contents



Consolidated statements of stockholders equity
  Common stock
    
    Additional
paid-in capital
    
    Legal reserve
    
    Retainedearnings
    
    Accumulatedothercomprehensiveincome (loss)
    
    Treasury stock
    

Total
stock-holders equity(Note 9)
    
    (Note 9)
    
    (Notes 7, 8 and 11)
    
    (Note 10)Balance at March 31, 2004
    
    ¥
    32,641
    
    
    ¥
    63,051
    
    
    ¥
    16,497
    
    
    ¥
    560,756
    
    
    ¥
    (90,387
    )
    
    ¥
    (6,339
    )
    
    ¥
    576,219Non-cash
compensation charges under stock option plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,938
    )
    
    
    
    
    
    
    
    
    
    
    (7,938
    )Transferred to legal reserve
    
    
    
    
    
    
    
    
    
    
    421
    
    
    
    (421
    )
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,300
    
    
    
    
    
    
    
    
    
    
    
    33,300Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,636
    
    
    
    
    
    
    
    5,636Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,941
    
    
    
    
    
    
    
    32,941Net unrealized gains (losses) on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    153Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,030Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,672
    )
    
    
    (1,672
    )Exercise of stock option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140
    )
    
    
    
    
    
    
    568
    
    
    
    428Balance at March 31, 2005
    
    ¥
    32,641
    
    
    ¥
    63,051
    
    
    ¥
    16,918
    
    
    ¥
    585,557
    
    
    ¥
    (51,657
    )
    
    ¥
    (7,443
    )
    
    ¥
    639,067Non-cash
compensation charges under stock option plans
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,578
    )
    
    
    
    
    
    
    
    
    
    
    (10,578
    )Transferred to legal reserve
    
    
    
    
    
    
    
    
    
    
    599
    
    
    
    (599
    )
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,101
    
    
    
    
    
    
    
    
    
    
    
    44,101Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,100
    
    
    
    
    
    
    
    26,100Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,719
    
    
    
    
    
    
    
    2,719Net unrealized gains (losses) on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    892
    
    
    
    
    
    
    
    892Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,812Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (955
    )
    
    
    (955
    )Exercise of stock option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (222
    )
    
    
    
    
    
    
    1,109
    
    
    
    887Balance at
March 31, 2006 (as previously reported)
    
    ¥
    32,641
    
    
    ¥
    63,237
    
    
    ¥
    17,517
    
    
    ¥
    618,259
    
    
    ¥
    (21,946
    )
    
    ¥
    (7,289
    )
    
    ¥
    702,419Adjustment
for the cumulative effect on prior years of
the adoption of SAB No. 108 (Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,287
    )
    
    
    
    
    
    
    
    
    
    
    (2,287
    )Balance at
March 31, 2006 (after adjustment)
    
    
    32,641
    
    
    
    63,237
    
    
    
    17,517
    
    
    
    615,972
    
    
    
    (21,946
    )
    
    
    (7,289
    )
    
    
    700,132Non-cash
compensation charges under stock option plans
    
    
    
    
    
    
    458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    458Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,230
    )
    
    
    
    
    
    
    
    
    
    
    (13,230
    )Transferred to legal reserve
    
    
    
    
    
    
    
    
    
    
    1,327
    
    
    
    (1,327
    )
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,125
    
    
    
    
    
    
    
    
    
    
    
    70,125Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,383
    
    
    
    
    
    
    
    4,383Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,290
    
    
    
    
    
    
    
    2,290Net unrealized gains (losses) on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    76Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,874Adjustment
to initially apply SFAS 158, net of tax (Note 8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,649
    )
    
    
    
    
    
    
    (2,649
    )Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    (32
    )Exercise of stock option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    
    
    
    
    1,349
    
    
    
    1,159Balance at March 31, 2007
    
    ¥
    32,641
    
    
    ¥
    63,695
    
    
    ¥
    18,844
    
    
    ¥
    671,350
    
    
    ¥
    (17,846
    )
    
    ¥
    (5,972
    )
    
    ¥
    762,712U.S. Dollars (Thousands) (Note 2)Balance at
March 31, 2006 (as previously reported)
    
    $
    276,619
    
    
    $
    535,907
    
    
    $
    148,449
    
    
    $
    5,239,483
    
    
    $
    (185,983
    )
    
    $
    (61,771
    )
    
    $
    5,952,704Adjustment
for the cumulative effect on prior years of the adoption of SAB No. 108 (Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,382
    )
    
    
    
    
    
    
    
    
    
    
    (19,382
    )Balance at
March 31, 2006 (after adjustment)
    
    
    276,619
    
    
    
    535,907
    
    
    
    148,449
    
    
    
    5,220,101
    
    
    
    (185,983
    )
    
    
    (61,771
    )
    
    
    5,933,322Non-cash
compensation charges under stock option plans
    
    
    
    
    
    
    3,881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,881Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112,119
    )
    
    
    
    
    
    
    
    
    
    
    (112,119
    )Transferred to legal reserve
    
    
    
    
    
    
    
    
    
    
    11,246
    
    
    
    (11,246
    )
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    594,280
    
    
    
    
    
    
    
    
    
    
    
    594,280Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,144
    
    
    
    
    
    
    
    37,144Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,407
    
    
    
    
    
    
    
    19,407Net unrealized gains (losses) on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    644
    
    
    
    
    
    
    
    644Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    651,475Adjustment
to initially apply SFAS 158, net of tax (Note 8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,449
    )
    
    
    
    
    
    
    (22,449
    )Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (271
    )
    
    
    (271
    )Exercise of stock option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,610
    )
    
    
    
    
    
    
    11,432
    
    
    
    9,822Balance at March 31, 2007
    
    $
    276,619
    
    
    $
    539,788
    
    
    $
    159,695
    
    
    $
    5,689,406
    
    
    $
    (151,237
    )
    
    $
    (50,610
    )
    
    $
    6,463,661
 See accompanying notes to consolidated financial statements.
 - 104 -




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##### Table of Contents



Consolidated
statements of cash flows
 U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)2007
    
    2006
    
    2005
    
    2007Cash flows from operating activities:Net income
    
    ¥
    70,125
    
    
    
    44,101
    
    
    
    33,300
    
    
    $
    594,280Loss from discontinued operations, net of tax
    
    
    
    
    
    
    310
    
    
    
    3,665
    
    
    
    Income
from continuing operations
    
    
    70,125
    
    
    
    44,411
    
    
    
    36,965
    
    
    
    594,280Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    65,337
    
    
    
    58,540
    
    
    
    52,806
    
    
    
    553,703Loss on disposal of property and equipment
    
    
    2,649
    
    
    
    3,220
    
    
    
    1,190
    
    
    
    22,449Deferred income taxes
    
    
    (1,878
    )
    
    
    (696
    )
    
    
    (5,532
    )
    
    
    (15,915
    )Loss (gain) on securities, net
    
    
    212
    
    
    
    286
    
    
    
    142
    
    
    
    1,797Gain on sale of a subsidiary
    
    
    
    
    
    
    
    
    
    
    (1,799
    )
    
    
    Changes in assets and liabilities, net of effects
of acquisition of businesses:Decrease (increase) in trade receivables
    
    
    11,241
    
    
    
    (16,886
    )
    
    
    (7,343
    )
    
    
    95,263Decrease (increase) in inventories
    
    
    892
    
    
    
    (287
    )
    
    
    3,461
    
    
    
    7,559Decrease (increase) in other current assets
    
    
    6,202
    
    
    
    (8,748
    )
    
    
    1,149
    
    
    
    52,559Increase (decrease) in trade payables
    
    
    (5,272
    )
    
    
    7,101
    
    
    
    245
    
    
    
    (44,678
    )Increase (decrease) in accrued expenses
    
    
    (7,068
    )
    
    
    12,347
    
    
    
    (2,496
    )
    
    
    (59,898
    )Increase (decrease) in income taxes payables, net
    
    
    4,004
    
    
    
    (10,689
    )
    
    
    14,464
    
    
    
    33,932Increase (decrease) in retirement and severance
benefits, net
    
    
    (74
    )
    
    
    981
    
    
    
    2,519
    
    
    
    (627
    )Other  net
    
    
    (887
    )
    
    
    (462
    )
    
    
    (522
    )
    
    
    (7,517
    )Net cash provided by operating activities
    
    
    145,483
    
    
    
    89,118
    
    
    
    95,249
    
    
    
    1,232,907Cash flows from investing activities:Capital expenditures
    
    
    (70,440
    )
    
    
    (73,911
    )
    
    
    (61,005
    )
    
    
    (596,949
    )Proceeds from sale of short-term investments
    
    
    20,046
    
    
    
    
    
    
    
    
    
    
    
    169,881Payment for purchase of short-term investments
    
    
    (31,089
    )
    
    
    
    
    
    
    
    
    
    
    (263,466
    )Proceeds from sale and maturity of investments in securities
    
    
    23
    
    
    
    4,263
    
    
    
    1,788
    
    
    
    195Payment for purchase of investments in securities
    
    
    (3,638
    )
    
    
    (4,227
    )
    
    
    (2,424
    )
    
    
    (30,831
    )Acquisition of businesses, net of cash acquired
    
    
    
    
    
    
    (32,868
    )
    
    
    (1,496
    )
    
    
    Proceeds from sale of property, plant and equipment
    
    
    3,678
    
    
    
    3,373
    
    
    
    999
    
    
    
    31,170Acquisition of minority interests
    
    
    (6
    )
    
    
    (2,587
    )
    
    
    
    
    
    
    (51
    )Proceeds from sale of discontinued operations
    
    
    
    
    
    
    1,538
    
    
    
    
    
    
    
    Other  net
    
    
    (62
    )
    
    
    (363
    )
    
    
    (221
    )
    
    
    (525
    )Net cash used in investing activities
    
    
    (81,488
    )
    
    
    (104,782
    )
    
    
    (62,359
    )
    
    
    (690,576
    )Cash
flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    269
    
    
    
    218
    
    
    
    Repayment of long-term debt
    
    
    (2,143
    )
    
    
    (218
    )
    
    
    (164
    )
    
    
    (18,161
    )Increase (decrease) in short-term debt, net
    
    
    (1,456
    )
    
    
    3,688
    
    
    
    (330
    )
    
    
    (12,339
    )Proceeds from exercise of stock options
    
    
    1,159
    
    
    
    887
    
    
    
    428
    
    
    
    9,822Cash paid to acquire treasury stock
    
    
    (32
    )
    
    
    (955
    )
    
    
    (1,672
    )
    
    
    (271
    )Dividends paid
    
    
    (13,230
    )
    
    
    (10,578
    )
    
    
    (7,938
    )
    
    
    (112,119
    )Other  net
    
    
    (160
    )
    
    
    (218
    )
    
    
    (171
    )
    
    
    (1,356
    )Net cash used in financing activities
    
    
    (15,862
    )
    
    
    (7,125
    )
    
    
    (9,629
    )
    
    
    (134,424
    )Cash flows of discontinued operationsOperating cash flows:
    
    
    
    
    
    
    (407
    )
    
    
    (1,458
    )
    
    
    Investing cash flows:
    
    
    
    
    
    
    (4
    )
    
    
    (166
    )
    
    
    Financing cash flows:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Effect of exchange rate changes on
cash and cash equivalents from discontinued operations
    
    
    
    
    
    
    (3
    )
    
    
    (1
    )
    
    
    Net cash used in discontinued operations
    
    
    
    
    
    
    (414
    )
    
    
    (1,625
    )
    
    
    Effect of exchange rate changes on cash and cash
equivalents
    
    
    2,019
    
    
    
    10,712
    
    
    
    2,717
    
    
    
    17,110Net increase (decrease) in cash and cash equivalents
    
    
    50,152
    
    
    
    (12,491
    )
    
    
    24,353
    
    
    
    425,017Cash and cash equivalents at beginning of period
    
    
    239,017
    
    
    
    251,508
    
    
    
    227,155
    
    
    
    2,025,568Cash and cash equivalents at end of period
    
    ¥
    289,169
    
    
    
    239,017
    
    
    
    251,508
    
    
    $
    2,450,585
 See accompanying notes to consolidated financial statements.
 - 105 -




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##### Table of Contents



1. Nature of Operations and Summary of Significant Accounting Policies
 (a) Nature of Operations
  (i)
    
    Electronic materials and components products:Multilayer ceramic chip capacitors, Rare-earth magnets, Inductors, Switching power
supplies, HDD heads, and Organic electroluminescent (EL) display
 (ii)
    
    Recording media products:Audio tapes, Video tapes, CD-Rs, MDs, DVDs, and Tape-based data storage media for
computers
  (b) Basis of Presentation
   (c) Consolidation Policy
   (d) Cash Equivalents and Short-term Investments
  (e) Allowance for Doubtful Receivables
  - 106 -




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##### Table of Contents



(f) Investments in Securities
     (g) Inventories
   (h) Property, Plant and Equipment
  Buildings
    
    3 to 60 yearsMachinery and equipment
    
    2 to 22 years
 - 107 -




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##### Table of Contents



(i) Income Taxes
   (j) Stock Option Plan
   - 108 -




---



##### Table of Contents



Yen(Millions)2006
    
    2005Income from continuing operations, as reported
    
    
    ¥44,411
    
    
    
    36,965Add compensation expense recognized under intrinsic value method
    
    
    186
    
    
    
    Deduct total stock-based employee compensation expense determined under fair-value-based method for all awards
    
    
    (607
    )
    
    
    (438
    )Pro forma income from continuing operations
    
    
    ¥43,990
    
    
    
    36,527
 YenBasic income from continuing operations per share:As reported
    
    
    ¥335.84
    
    
    
    279.41Pro forma
    
    
    332.66
    
    
    
    276.11Diluted income from continuing operations per share:As reported
    
    
    ¥335.54
    
    
    
    279.25Pro forma
    
    
    332.39
    
    
    
    275.98
 Yen(Millions)2006
    
    2005Net income, as reported
    
    
    ¥44,101
    
    
    
    33,300Add compensation expense recognized under intrinsic value method
    
    
    186
    
    
    
    Deduct total stock-based employee compensation expense
determined under fair-value-based method for all awards
    
    
    (607
    )
    
    
    (438
    )Pro forma net income
    
    
    ¥43,680
    
    
    
    32,862
 YenBasic net income per share:As reported
    
    
    ¥333.50
    
    
    
    251.71Pro forma
    
    
    330.32
    
    
    
    248.40Diluted net income per share:As reported
    
    
    ¥333.20
    
    
    
    251.56Pro forma
    
    
    330.05
    
    
    
    248.29
 (k) Research and Development Expenses
  (l) Advertising Costs
  (m) Shipping and Handling Fees and Costs
  - 109 -




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##### Table of Contents



(n) Foreign Currency Translation
  (o) Use of Estimates
  (p) Accounting for the Impairment or Disposal of Long-Lived Assets
  (q) Goodwill and Other Intangible Assets
   (r) Derivative Financial Instruments
  (s) Net Income per Share
  - 110 -




---



##### Table of Contents



(t) Revenue Recognition
        - 111 -




---



##### Table of Contents



(u) Considering the Effects of Prior Year Misstatements
  (v) New Accounting Standards Not Yet Adopted
  - 112 -




---



##### Table of Contents



(w) Reclassifications
  2. Financial Statement Translation
  3. Foreign Operations
  U.S. DollarsYen (Millions)
    
    
    (Thousands)2007
    
    
    2006
    
    
    2005
    
    
    2007Net assets
    
    ¥
    490,186
    
    
    
    435,381
    
    
    
    360,925
    
    
    $
    4,154,119Net sales
    
    
    674,969
    
    
    
    626,626
    
    
    
    498,336
    
    
    
    5,720,076Net income
    
    
    47,599
    
    
    
    28,582
    
    
    
    17,362
    
    
    
    403,381
 - 113 -




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##### Table of Contents



4. Marketable Securities and Investments in Securities
  U.S. DollarsYen (Millions)
    
    
    (Thousands)2007
    
    
    2006
    
    
    2007Short-term marketable securities
    
    ¥
    1,063
    
    
    
    56
    
    
    $
    9,008Long-term marketable securities
    
    
    15,912
    
    
    
    13,042
    
    
    
    134,847Nonmarketable securities
    
    
    357
    
    
    
    596
    
    
    
    3,026Investments in affiliates
    
    
    16,372
    
    
    
    15,119
    
    
    
    138,746¥
    33,704
    
    
    
    28,813
    
    
    $
    285,627
  As of
March 31, 2007
 Gross
    
    
    GrossUnrealized
    
    
    UnrealizedHolding
    
    
    HoldingYen (Millions):
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueEquity securities
    
    ¥
    11,919
    
    
    
    3,566
    
    
    
    488
    
    
    
    14,997Debt securities
    
    
    1,983
    
    
    
    
    
    
    
    5
    
    
    
    1,978¥
    13,902
    
    
    
    3,566
    
    
    
    493
    
    
    
    16,975
 As of March 31, 2006
 Gross
    
    
    GrossUnrealized
    
    
    UnrealizedHolding
    
    
    HoldingYen (Millions):
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueEquity securities
    
    ¥
    9,246
    
    
    
    2,859
    
    
    
    2
    
    
    
    12,103Debt securities
    
    
    1,002
    
    
    
    
    
    
    
    7
    
    
    
    995¥
    10,248
    
    
    
    2,859
    
    
    
    9
    
    
    
    13,098
 As of March 31, 2007
 Gross
    
    
    GrossUnrealized
    
    
    UnrealizedHolding
    
    
    HoldingU.S. Dollars (Thousands):
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueEquity securities
    
    $
    101,008
    
    
    
    30,220
    
    
    
    4,136
    
    
    
    127,092Debt securities
    
    
    16,805
    
    
    
    
    
    
    
    42
    
    
    
    16,763$
    117,813
    
    
    
    30,220
    
    
    
    4,178
    
    
    
    143,855
    - 114 -




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##### Table of Contents



5.
    
    Inventories
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2007Finished goods
    
    ¥
    38,546
    
    
    
    36,826
    
    
    $
    326,661Work in process
    
    
    22,158
    
    
    
    23,490
    
    
    
    187,780Raw materials
    
    
    29,085
    
    
    
    28,652
    
    
    
    246,483¥
    89,789
    
    
    
    88,968
    
    
    $
    760,924
 6.
    
    Short-Term and Long-Term Debt
  Yen
    
    U.S. Dollars
    
    Weighted average(Millions)
    
    (Thousands)
    
    interest rate2007
    
    2006
    
    2007
    
    2007
    
    2006Short-term bank
loans  unsecured
    
    ¥3,013
    
    4,469
    
    $25,534
    
    1.81%
    
    1.63%
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2007Loans from banks, unsecured (weighted average: 20060.96%)
    
    ¥
    
    
    
    
    1,700
    
    
    $
    Loans from banks, secured, due fiscal 20092012
(weighted average: 20070.93%, 20060.95%)
    
    
    255
    
    
    
    345
    
    
    
    2,161Lease obligation (weighted average: 20075.16%,
20065.78%)
    
    
    791
    
    
    
    318
    
    
    
    6,7031,046
    
    
    
    2,363
    
    
    
    8,864Less current installments
    
    
    514
    
    
    
    1,958
    
    
    
    4,356¥
    532
    
    
    
    405
    
    
    $
    4,508
 - 115 -




---



##### Table of Contents



U.S. DollarsYen (Millions)
    
    (Thousands)Year ending March 31,2008
    
    ¥
    514
    
    
    $
    4,3562009
    
    
    386
    
    
    
    3,2712010
    
    
    93
    
    
    
    7882011
    
    
    35
    
    
    
    2972012
    
    
    18
    
    
    
    152¥
    1,046
    
    
    $
    8,864
    7.
    
    Income Taxes
    2007
    
    2006
    
    2005Japanese statutory tax rate
    
    
    40.4
    %
    
    
    40.4
    %
    
    
    40.4
    %Expenses not deductible for tax purposes
    
    
    1.1
    
    
    
    1.6
    
    
    
    1.1Non taxable income
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (0.2
    )Difference in statutory tax rates of foreign
subsidiaries
    
    
    (15.0
    )
    
    
    (13.9
    )
    
    
    (10.5
    )Change in the valuation allowance
    
    
    (1.1
    )
    
    
    4.7
    
    
    
    3.8Investment tax credit
    
    
    (0.5
    )
    
    
    (0.1
    )
    
    
    (1.2
    )Research and development tax credit
    
    
    (4.5
    )
    
    
    (1.4
    )
    
    
    (3.6
    )Residual tax effect in minimum pension liability
adjustments
    
    
    
    
    
    
    
    
    
    
    (7.5
    )Additional tax related to prior years income
    
    
    
    
    
    
    1.7
    
    
    
    17.0Other
    
    
    (1.0
    )
    
    
    (1.0
    )
    
    
    (1.0
    )Effective tax rate
    
    
    19.2
    %
    
    
    31.9
    %
    
    
    38.3
    %
 - 116 -




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##### Table of Contents



Yen
    
    U.S.Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2005
    
    2007Income from continuing operations
    
    ¥
    16,985
    
    
    
    21,057
    
    
    
    23,284
    
    
    $
    143,940Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    Stockholders equity, accumulated other
comprehensive income (loss):Foreign currency translation adjustments
    
    
    4
    
    
    
    8
    
    
    
    8
    
    
    
    34Net unrealized gains (losses) on
securities
    
    
    88
    
    
    
    849
    
    
    
    (148
    )
    
    
    746Minimum pension liability adjustments
    
    
    1,037
    
    
    
    2,074
    
    
    
    29,538
    
    
    
    8,788Pension liability adjustments to
initially apply SFAS 158
    
    
    (1,022
    )
    
    
    
    
    
    
    
    
    
    
    (8,661
    )Total income taxes
    
    ¥
    17,092
    
    
    
    23,988
    
    
    
    52,838
    
    
    $
    144,847
  Income FromContinuingOperationsBefore Income
    
    Income TaxesTaxes
    
    Current
    
    Deferred
    
    TotalYen (Millions):2007Japanese
    
    ¥
    35,189
    
    
    
    11,947
    
    
    
    537
    
    
    
    12,484Foreign
    
    
    53,476
    
    
    
    6,916
    
    
    
    (2,415
    )
    
    
    4,501¥
    88,665
    
    
    
    18,863
    
    
    
    (1,878
    )
    
    
    16,9852006Japanese
    
    
    28,004
    
    
    
    11,160
    
    
    
    657
    
    
    
    11,817Foreign
    
    
    38,099
    
    
    
    10,593
    
    
    
    (1,353
    )
    
    
    9,24066,103
    
    
    
    21,753
    
    
    
    (696
    )
    
    
    21,0572005Japanese
    
    
    36,836
    
    
    
    22,261
    
    
    
    (5,026
    )
    
    
    17,235Foreign
    
    
    23,892
    
    
    
    6,555
    
    
    
    (506
    )
    
    
    6,04960,728
    
    
    
    28,816
    
    
    
    (5,532
    )
    
    
    23,284U.S. Dollars (Thousands):2007Japanese
    
    $
    298,212
    
    
    
    101,245
    
    
    
    4,551
    
    
    
    105,796Foreign
    
    
    453,186
    
    
    
    58,610
    
    
    
    (20,466
    )
    
    
    38,144$
    751,398
    
    
    
    159,855
    
    
    
    (15,915
    )
    
    
    143,940
 - 117 -




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##### Table of Contents



Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2007Deferred tax assets:Trade accounts receivable, principally due to
allowance for doubtful receivables
    
    ¥
    712
    
    
    
    433
    
    
    $
    6,034Inventories
    
    
    1,191
    
    
    
    1,005
    
    
    
    10,093Accrued business tax
    
    
    702
    
    
    
    370
    
    
    
    5,949Accrued expenses
    
    
    7,049
    
    
    
    5,145
    
    
    
    59,737Retirement and severance benefits
    
    
    11,298
    
    
    
    11,884
    
    
    
    95,746Net operating loss carryforwards
    
    
    21,132
    
    
    
    20,116
    
    
    
    179,085Tax credit carryforwards
    
    
    1,413
    
    
    
    684
    
    
    
    11,975Minimum pension liability adjustments
    
    
    
    
    
    
    2,269
    
    
    
    Pension liability adjustments
    
    
    2,247
    
    
    
    
    
    
    
    19,042Property, plant and equipment, principally due to
differences in depreciation
    
    
    4,019
    
    
    
    3,153
    
    
    
    34,059Other
    
    
    1,700
    
    
    
    1,835
    
    
    
    14,406Total gross deferred tax assets
    
    
    51,463
    
    
    
    46,894
    
    
    
    436,126Less valuation allowance
    
    
    (22,233
    )
    
    
    (20,298
    )
    
    
    (188,415
    )Net deferred tax assets
    
    ¥
    29,230
    
    
    
    26,596
    
    
    $
    247,711Deferred tax liabilities:Investments, principally due to differences
in valuation
    
    
    (6,139
    )
    
    
    (6,030
    )
    
    
    (52,025
    )Undistributed earnings of foreign subsidiaries
    
    
    (3,378
    )
    
    
    (3,948
    )
    
    
    (28,627
    )Net unrealized gains on securities
    
    
    (1,597
    )
    
    
    (1,223
    )
    
    
    (13,534
    )Acquired intangible assets
    
    
    (5,255
    )
    
    
    (4,990
    )
    
    
    (44,534
    )Other
    
    
    (1,186
    )
    
    
    (1,086
    )
    
    
    (10,051
    )Total gross deferred tax liabilities
    
    
    (17,555
    )
    
    
    (17,277
    )
    
    
    (148,771
    )Net deferred tax assets
    
    ¥
    11,675
    
    
    
    9,319
    
    
    $
    98,940
  - 118 -




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##### Table of Contents



U.S. DollarsYen (Millions)
    
    (Thousands)Within 1 year
    
    ¥
    1,037
    
    
    $
    8,7881 to 5 years
    
    
    5,958
    
    
    
    50,4915 to 20 years
    
    
    14,994
    
    
    
    127,068Indefinite periods
    
    
    46,041
    
    
    
    390,178¥
    68,030
    
    
    $
    576,525
   Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)2007
    
    
    2006
    
    
    2007Prepaid expenses and other current assets
    
    ¥
    9,615
    
    
    
    7,401
    
    
    $
    81,483Deferred income taxes (noncurrent assets)
    
    
    9,666
    
    
    
    7,287
    
    
    
    81,915Other current liabilities
    
    
    (80
    )
    
    
    (55
    )
    
    
    (678
    )Deferred income taxes (noncurrent
liabilities)
    
    
    (7,526
    )
    
    
    (5,314
    )
    
    
    (63,780
    )¥
    11,675
    
    
    
    9,319
    
    
    $
    (98,940
    )
  8.
    
    Retirement and Severance Benefits
   - 119 -




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##### Table of Contents



Yen(Millions)Before
    
    
    
    
    
    Afterapplication of
    
    
    
    
    
    application ofSFAS 158
    
    Adjustments
    
    SFAS 158Assets:Prepaid expenses
and other current assets
    
    ¥
    43,090
    
    
    
    473
    
    
    ¥
    43,563Intangible assets
    
    
    31,105
    
    
    
    (100
    )
    
    
    31,005Deferred income taxes
(noncurrent assets)
    
    
    9,117
    
    
    
    549
    
    
    
    9,666Other assets
    
    
    32,077
    
    
    
    4,303
    
    
    
    36,380Liabilities:Accrued expenses
    
    
    35,384
    
    
    
    1,171
    
    
    
    36,555Retirement and severance
benefits
    
    
    25,566
    
    
    
    6,724
    
    
    
    32,290Minority interests
    
    
    14,224
    
    
    
    (21
    )
    
    
    14,203Stockholders equity:Accumulated other
comprehensive income
(loss)
    
    
    (15,197
    )
    
    
    (2,649
    )
    
    
    (17,846
    )
 - 120 -




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##### Table of Contents



U.S. Dollars(Thousands)Before
    
    
    
    
    
    Afterapplication of
    
    
    
    
    
    application ofSFAS 158
    
    Adjustments
    
    SFAS 158Assets:Prepaid expenses
and other current assets
    
    $
    365,170
    
    
    
    4,008
    
    
    $
    369,178Intangible assets
    
    
    263,601
    
    
    
    (847
    )
    
    
    262,754Deferred
income taxes (noncurrent assets)
    
    
    77,262
    
    
    
    4,653
    
    
    
    81,915Other assets
    
    
    271,839
    
    
    
    36,466
    
    
    
    308,305Liabilities:Accrued expenses
    
    
    299,864
    
    
    
    9,924
    
    
    
    309,788Retirement and severance
benefits
    
    
    216,661
    
    
    
    56,983
    
    
    
    273,644Minority interests
    
    
    120,542
    
    
    
    (178
    )
    
    
    120,364Stockholders equity:Accumulated other
comprehensive income
(loss)
    
    
    (128,788
    )
    
    
    (22,449
    )
    
    
    (151,237
    )
  Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)2007
    
    
    2006
    
    
    2007Change in benefit obligations:Benefit obligations at beginning of period
    
    ¥
    193,292
    
    
    
    184,997
    
    
    $
    1,638,068Service cost
    
    
    6,781
    
    
    
    6,587
    
    
    
    57,466Interest cost
    
    
    4,186
    
    
    
    4,050
    
    
    
    35,475Actuarial gain
    
    
    (7,260
    )
    
    
    (336
    )
    
    
    (61,525
    )Benefits paid
    
    
    (6,275
    )
    
    
    (6,447
    )
    
    
    (53,178
    )Acquisition
    
    
    
    
    
    
    3,600
    
    
    
    Others
    
    
    159
    
    
    
    (63
    )
    
    
    1,347Translation adjustment
    
    
    102
    
    
    
    904
    
    
    
    864Benefit obligations at end of period
    
    
    190,985
    
    
    
    193,292
    
    
    
    1,618,517Change in plan assets:Fair value of plan assets at beginning of period
    
    
    172,860
    
    
    
    142,648
    
    
    
    1,464,915Actual return on plan assets
    
    
    11,043
    
    
    
    28,124
    
    
    
    93,585Employer contributions
    
    
    6,210
    
    
    
    6,050
    
    
    
    52,627Benefits paid
    
    
    (5,140
    )
    
    
    (5,815
    )
    
    
    (43,559
    )Acquisition
    
    
    
    
    
    
    1,467
    
    
    
    Others
    
    
    (49
    )
    
    
    
    
    
    
    (415
    )Translation adjustment
    
    
    137
    
    
    
    386
    
    
    
    1,161Fair value of plan assets at end of period
    
    
    185,061
    
    
    
    172,860
    
    
    
    1,568,314Funded status
    
    ¥
    (5,924
    )
    
    
    (20,432
    )
    
    $
    (50,203
    )
 - 121 -




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Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)Other assets
    
    ¥
    27,537
    
    
    $
    233,365Accrued expenses
    
    
    (1,171
    )
    
    
    (9,924
    )Retirement and severance benefits
    
    
    (32,290
    )
    
    
    (273,644
    )¥
    (5,924
    )
    
    $
    (50,203
    )
  Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)Net actuarial loss
    
    ¥
    29,969
    
    
    $
    253,974Prior service benefit
    
    
    (23,883
    )
    
    
    (202,398
    )¥
    6,086
    
    
    $
    51,576
  Yen(Millions)Funded status
    
    ¥
    (20,432
    )Unrecognized net transition obligation
being recognized over 18 years
    
    
    (1,276
    )Unrecognized net actuarial loss
    
    
    45,280Unrecognized prior service benefit
    
    
    (26,254
    )Net amount recognized
    
    ¥
    (2,682
    )
  Yen(Millions)Prepaid pension cost
    
    ¥
    18,289Retirement and severance benefits
    
    
    (26,790
    )Intangible assets
    
    
    99Accumulated other comprehensive loss
    
    
    5,720Net amount recognized
    
    ¥
    (2,682
    )
  Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)2007
    
    
    2006
    
    
    2007Accumulated benefit obligation
    
    ¥
    176,886
    
    
    
    175,073
    
    
    $
    1,499,034
 - 122 -




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Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2007Plans with projected benefit
obligations in excess of plan assets:Projected benefit obligations
    
    ¥
    67,333
    
    
    
    66,613
    
    
    $
    570,619Fair value of plan assets
    
    
    41,534
    
    
    
    37,405
    
    
    
    351,983Plans with accumulated benefit
obligations in excess of plan assets:Accumulated benefit obligations
    
    
    60,908
    
    
    
    60,200
    
    
    
    516,169Fair value of plan assets
    
    
    40,607
    
    
    
    36,584
    
    
    
    344,127
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2005
    
    2007Service cost-benefits earned during the year
    
    ¥
    6,781
    
    
    
    6,587
    
    
    
    6,806
    
    
    $
    57,466Interest cost on projected benefit obligation
    
    
    4,186
    
    
    
    4,050
    
    
    
    5,359
    
    
    
    35,475Expected return on plan assets
    
    
    (4,878
    )
    
    
    (3,386
    )
    
    
    (3,180
    )
    
    
    (41,339
    )Amortization of transition assets
    
    
    (1,276
    )
    
    
    (1,331
    )
    
    
    (1,331
    )
    
    
    (10,814
    )Recognized actuarial loss
    
    
    1,545
    
    
    
    3,445
    
    
    
    5,696
    
    
    
    13,093Amortization of unrecognized prior service
benefit
    
    
    (2,029
    )
    
    
    (2,041
    )
    
    
    (1,522
    )
    
    
    (17,195
    )Settlement gain, net
    
    
    
    
    
    
    
    
    
    
    (6,186
    )
    
    
    ¥
    4,329
    
    
    
    7,324
    
    
    
    5,642
    
    
    $
    36,686
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)Net actuarial loss
    
    ¥
    981
    
    
    $
    8,314Prior service benefit
    
    
    (2,013
    )
    
    
    (17,059
    )
 Assumptions
  2007
    
    2006Discount rate
    
    
    2.4
    %
    
    
    2.2
    %Assumed rate of increase in future compensation levels
    
    
    3.0
    %
    
    
    3.0
    %
  2007
    
    2006
    
    2005Discount rate
    
    
    2.2
    %
    
    
    2.2
    %
    
    
    2.1
    %Assumed rate of increase in future compensation levels
    
    
    3.0
    %
    
    
    3.0
    %
    
    
    3.0
    %Expected long-term rate of return on plan assets
    
    
    3.2
    %
    
    
    2.7
    %
    
    
    2.2
    %
 - 123 -




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##### Table of Contents



Plan assets
  2007
    
    2006Equity securities
    
    
    62.7
    %
    
    
    65.4
    %Debt securities
    
    
    24.5
    %
    
    
    26.1
    %Cash
    
    
    2.6
    %
    
    
    2.2
    %Other
    
    
    10.2
    %
    
    
    6.3
    %100.0
    %
    
    
    100.0
    %
  Contributions
  Estimated future benefit payments
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)Year ending March 31,2008
    
    ¥
    7,309
    
    
    $
    61,9412009
    
    
    7,568
    
    
    
    64,1362010
    
    
    8,041
    
    
    
    68,1442011
    
    
    8,039
    
    
    
    68,1272012
    
    
    8,388
    
    
    
    71,0852013  2017
    
    ¥
    41,229
    
    
    $
    349,398
 - 124 -




---



##### Table of Contents



9.     Legal Reserve and Dividends
   10.     Stock Option Plan
 (a)
    
    TDK
    - 125 -




---



##### Table of Contents



- 126 -




---



##### Table of Contents



WeightedWeighted
    
    average
    
    AggregateNumber
    
    average
    
    remaining
    
    intrinsicof
    
    exercise
    
    contractual
    
    valueshares
    
    price
    
    term
    
    (1)Yen
    
    Years
    
    Yen(Millions)2007Outstanding at beginning of year
    
    
    828,200
    
    
    ¥
    8,244Granted
    
    
    116,900
    
    
    
    7,497Exercised
    
    
    170,400
    
    
    
    6,787Forfeited or Expired
    
    
    121,700
    
    
    
    15,212Outstanding at end of year
    
    
    653,000
    
    
    
    7,191
    
    
    
    4.3
    
    
    
    1,978Exercisable at end of year
    
    
    465,800
    
    
    
    6,618
    
    
    
    4.1
    
    
    
    1,678Expected to vest after end of year
    
    
    187,200
    
    
    
    8,618
    
    
    
    4.8
    
    
    
    3002006Outstanding at beginning of year
    
    
    868,600
    
    
    ¥
    8,293Granted
    
    
    115,200
    
    
    
    6,397Exercised
    
    
    139,700
    
    
    
    6,308Forfeited or Expired
    
    
    15,900
    
    
    
    14,563Outstanding at end of year
    
    
    828,200
    
    
    
    8,244Exercisable at end of year
    
    
    504,300
    
    
    
    8,3082005Outstanding at beginning of year
    
    
    739,300
    
    
    ¥
    8,358Granted
    
    
    234,300
    
    
    
    8,147Exercised
    
    
    71,700
    
    
    
    5,979Forfeited or Expired
    
    
    33,300
    
    
    
    13,695Outstanding at end of year
    
    
    868,600
    
    
    
    8,293Exercisable at end of year
    
    
    380,600
    
    
    
    9,275
 (1) The aggregate intrinsic value is calculated as
the difference between the exercise price of the underlying awards and the
closing stock price of ¥10,220 ($86.61) of our common stock on March 30, 2007. - 127 -




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##### Table of Contents



WeightedWeighted
    
    averageNumber
    
    average
    
    remaining
    
    Aggregateof
    
    exercise
    
    contractual
    
    intrinsicshares
    
    price
    
    term
    
    valueU.S. Dollars
    

Years
    
    U.S. Dollars(Thousands)2007Outstanding at beginning of year
    
    
    828,200
    
    
    $
    69.86Granted
    
    
    116,900
    
    
    
    63.53Exercised
    
    
    170,400
    
    
    
    57.52Forfeited or Expired
    
    
    121,700
    
    
    
    128.92Outstanding at end of year
    
    
    653,000
    
    
    
    60.94
    
    
    
    4.3
    
    
    $
    16,763Exercisable at end of year
    
    
    465,800
    
    
    
    56.08
    
    
    
    4.1
    
    
    
    14,220Expected to vest after end of year
    
    
    187,200
    
    
    
    73.03
    
    
    
    4.8
    
    
    
    2,542
  Options OutstandingWeightedaverageNumber
    
    remainingoutstanding at
    
    contractual
    
    Weighted averageRange of exercise prices
    
    March 31, 2007
    
    term
    
    exercise priceYen
    
    
    
    
    
    (years)
    
    Yen
    
    U.S. Dollars1
    
    
    44,900
    
    
    
    18.8
    
    
    
    1
    
    
    
    0.015,909
    
    
    60,200
    
    
    
    1.3
    
    
    
    5,909
    
    
    
    50.086,114
    
    
    19,500
    
    
    
    0.1
    
    
    
    6,114
    
    
    
    51.816,954
    
    
    144,200
    
    
    
    2.3
    
    
    
    6,954
    
    
    
    58.938,134
    
    
    90,600
    
    
    
    4.3
    
    
    
    8,134
    
    
    
    68.938,147
    
    
    197,000
    
    
    
    3.3
    
    
    
    8,147
    
    
    
    69.049,072
    
    
    96,600
    
    
    
    5.3
    
    
    
    9,072
    
    
    
    76.881 to 9,072
    
    
    653,000
    
    
    
    4.3
    
    
    
    7,191
    
    
    
    60.94
  The Stock Acquisition Rights  the exercise price is equal to or greater than the market price of
the stock on the grant date
 2007
    
    
    
    2006
    
    
    
    2005Grant-date fair value
    
    
    ¥1,976
    
    
    
    ¥2,325
    
    
    
    ¥2,223($16.75
    )Expected life
    
    4.0 years

    
    4.0 years

    

    4.0 yearsRisk-free interest rate
    
    
    1.23
    %
    
    
    0.54
    %
    
    
    0.59
    %Expected volatility
    
    
    32.76
    %
    
    
    38.93
    %
    
    
    46.30
    %Expected dividend yield
    
    
    1.00
    %
    
    
    0.96
    %
    
    
    0.85
    %
 - 128 -




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##### Table of Contents



The Stock Acquisition Rights  the exercise price is less than the market price of the stock on
the grant date
 2007
    
    2006Grant-date fair value
    
    
    ¥8,139
    
    
    
    ¥7,235($68.97
    )Expected life
    
    5.5 years

    
    5.5 yearsRisk-free interest rate
    
    
    1.47
    %
    
    
    0.47
    %Expected volatility
    
    
    38.84
    %
    
    
    44.46
    %Expected dividend yield
    
    
    0.96
    %
    
    
    0.80
    %
 (b) Densei-Lambda
   - 129 -




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##### Table of Contents



11.
    
    Other Comprehensive Income (Loss)
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2005
    
    2007Foreign currency translation adjustments:Balance at beginning of period
    
    ¥
    (21,071
    )
    
    
    (47,171
    )
    
    
    (52,807
    )
    
    $
    (178,568
    )Adjustments for period
    
    
    4,383
    
    
    
    26,100
    
    
    
    5,636
    
    
    
    37,144Balance at end of period
    
    
    (16,688
    )
    
    
    (21,071
    )
    
    
    (47,171
    )
    
    
    (141,424
    )Net unrealized gains (losses) on
securities:Balance at beginning of period
    
    
    1,693
    
    
    
    801
    
    
    
    648
    
    
    
    14,348Adjustments for period
    
    
    76
    
    
    
    892
    
    
    
    153
    
    
    
    644Balance at end of period
    
    
    1,769
    
    
    
    1,693
    
    
    
    801
    
    
    
    14,992Minimum pension liability adjustments:Balance at beginning of period
    
    
    (2,568
    )
    
    
    (5,287
    )
    
    
    (38,228
    )
    
    
    (21,763
    )Adjustments for period
    
    
    2,290
    
    
    
    2,719
    
    
    
    32,941
    
    
    
    19,407Adjustment for application of
SFAS158
    
    
    278
    
    
    
    
    
    
    
    
    
    
    
    2,356Balance at end of period
    
    
    
    
    
    
    (2,568
    )
    
    
    (5,287
    )
    
    
    Pension liability adjustments:Adjustment for application of
SFAS158
    
    
    (2,927
    )
    
    
    
    
    
    
    
    
    
    
    (24,805
    )Balance at end of period
    
    
    (2,927
    )
    
    
    
    
    
    
    
    
    
    
    (24,805
    )Total accumulated other comprehensive income (loss):Balance at beginning of period
    
    
    (21,946
    )
    
    
    (51,657
    )
    
    
    (90,387
    )
    
    
    (185,983
    )Adjustments for period
    
    
    6,749
    
    
    
    29,711
    
    
    
    38,730
    
    
    
    57,195Adjustment for application of
SFAS158
    
    
    (2,649
    )
    
    
    
    
    
    
    
    
    
    
    (22,449
    )Balance at end of period
    
    ¥
    (17,846
    )
    
    
    (21,946
    )
    
    
    (51,657
    )
    
    $
    (151,237
    )
 - 130 -




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##### Table of Contents



Yen(Millions)TaxBefore tax
    
    (expense)
    
    Net-of-taxamount
    
    or benefit
    
    amount2007Foreign currency translation adjustments:Amount arising during the year on
investments in foreign entities held at
end of period
    
    ¥
    4,298
    
    
    
    (4
    )
    
    
    4,294Reclassification adjustments for the
portion of gains and losses realized upon
liquidation of investments in foreign
entities
    
    
    89
    
    
    
    
    
    
    
    89Net foreign currency translation
adjustments
    
    
    4,387
    
    
    
    (4
    )
    
    
    4,383Unrealized gains (losses) on securities:Unrealized holding gains arising for period
    
    
    171
    
    
    
    (91
    )
    
    
    80Reclassification adjustments for (gains)
losses realized in net income
    
    
    (7
    )
    
    
    3
    
    
    
    (4
    )Net unrealized gains (losses)
    
    
    164
    
    
    
    (88
    )
    
    
    76Minimum pension liability adjustments
    
    
    3,327
    
    
    
    (1,037
    )
    
    
    2,290Other comprehensive income (loss)
    
    ¥
    7,878
    
    
    
    (1,129
    )
    
    
    6,7492006Foreign currency translation adjustments
    
    ¥
    26,108
    
    
    
    (8
    )
    
    
    26,100Unrealized gains (losses) on securities:Unrealized holding gains arising for period
    
    
    2,128
    
    
    
    (856
    )
    
    
    1,272Reclassification adjustments for (gains)
losses realized in net income
    
    
    (387
    )
    
    
    7
    
    
    
    (380
    )Net unrealized gains (losses)
    
    
    1,741
    
    
    
    (849
    )
    
    
    892Minimum pension liability adjustments
    
    
    4,793
    
    
    
    (2,074
    )
    
    
    2,719Other comprehensive income (loss)
    
    ¥
    32,642
    
    
    
    (2,931
    )
    
    
    29,7112005Foreign currency translation adjustments:Amount arising during the year on
investments in foreign entities held at end of period
    
    ¥
    5,870
    
    
    
    (8
    )
    
    
    5,862Reclassification adjustments for the
portion of gains and losses realized upon
liquidation and sale of investments in
foreign entities
    
    
    (226
    )
    
    
    
    
    
    
    (226
    )Net foreign currency translation
adjustments
    
    
    5,644
    
    
    
    (8
    )
    
    
    5,636Unrealized gains (losses) on securities:Unrealized holding gains arising for period
    
    
    676
    
    
    
    (119
    )
    
    
    557Reclassification adjustments for (gains)
losses realized in net income
    
    
    (671
    )
    
    
    267
    
    
    
    (404
    )Net unrealized gains (losses)
    
    
    5
    
    
    
    148
    
    
    
    153Minimum pension liability adjustments
    
    
    62,479
    
    
    
    (29,538
    )
    
    
    32,941Other comprehensive income (loss)
    
    ¥
    68,128
    
    
    
    (29,398
    )
    
    
    38,730
 - 131 -




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##### Table of Contents



U.S. Dollars(Thousands)TaxBefore tax
    
    (expense)
    
    Net-of-taxamount
    
    or benefit
    
    amount2007Foreign currency translation adjustments:Amount arising during the year on investments
in foreign entities held at end of period
    
    $
    36,424
    
    
    
    (34
    )
    
    
    36,390Reclassification adjustments for the portion of
gains and losses realized upon liquidation of
investments in foreign entities
    
    
    754
    
    
    
    
    
    
    
    754Net foreign currency translation
adjustments
    
    
    37,178
    
    
    
    (34
    )
    
    
    37,144Unrealized gains (losses) on securities:Unrealized holding gains arising for period
    
    
    1,449
    
    
    
    (771
    )
    
    
    678Reclassification adjustments for (gains)
losses realized in net income
    
    
    (59
    )
    
    
    25
    
    
    
    (34
    )Net unrealized gains (losses)
    
    
    1,390
    
    
    
    (746
    )
    
    
    644Minimum pension liability adjustments
    
    
    28,195
    
    
    
    (8,788
    )
    
    
    19,407Other comprehensive income (loss)
    
    $
    66,763
    
    
    
    (9,568
    )
    
    
    57,195
 12.
    
    Leases
   Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)Year ending March 31,2008
    
    ¥
    5,659
    
    
    $
    47,9582009
    
    
    3,916
    
    
    
    33,1862010
    
    
    2,552
    
    
    
    21,6272011
    
    
    1,209
    
    
    
    10,2462012
    
    
    910
    
    
    
    7,712Later years
    
    
    2,888
    
    
    
    24,475¥
    17,134
    
    
    $
    145,204
 - 132 -




---



##### Table of Contents



13.
    
    Commitments and Contingent Liabilities
     14.
    
    Risk Management Activities and Derivative Financial Instruments
    - 133 -




---



##### Table of Contents



15.
    
    Fair Value of Financial Instruments
  (a)
    
    Cash and cash equivalents, Short-term investments, Trade receivables, Other current assets,
Short-term debt, Trade payables,  Accrued salaries and wages, Accrued expenses, Income taxes
payables and Other current liabilities.
  (b)
    
    Marketable securities and Investments in securities
  (c)
    
    Long-term debt
  (d)
    
    Forward Foreign Exchange Contracts and Foreign Currency Option Contracts
  - 134 -




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##### Table of Contents



Yen (Millions)As of March 31, 2007
    
    Carrying amount
    
    Estimated fair valueNonderivatives:Assets:Investments in securities
and other assets for
which it is:Practicable to estimate fair value
    
    ¥
    23,608
    
    
    
    23,608Not practicable to estimate fair value
    
    
    563
    
    
    
    Liability:Long-term debt, including current portion
    
    
    (1,046
    )
    
    
    (1,046
    )Derivatives:Forward foreign exchange contracts in a:Gain position
    
    
    78
    
    
    
    78Loss position
    
    
    (6
    )
    
    
    (6
    )Currency option contracts in a:Gain position
    
    
    82
    
    
    
    82Loss position
    
    
    
    
    
    
    
 Yen (Millions)As of March 31, 2006
    
    Carrying amount
    
    Estimated fair valueNonderivatives:Assets:Investments in securities and other assets
for which it is:Practicable to estimate fair value
    
    ¥
    20,497
    
    
    
    20,497Not practicable to estimate fair value
    
    
    801
    
    
    
    Liability:Long-term debt, including current portion
    
    
    (2,363
    )
    
    
    (2,363
    )Derivatives:Forward foreign exchange contracts in a:Gain position
    
    
    8
    
    
    
    8Loss position
    
    
    
    
    
    
    Currency option contracts in a:Gain position
    
    
    
    
    
    
    Loss position
    
    
    (8
    )
    
    
    (8
    )
 U.S. Dollars (Thousands)As of March 31, 2007
    
    Carrying amount
    
    Estimated fair valueNonderivatives:Assets:Investments in securities and other assets
for which it is:Practicable to estimate fair value
    
    $
    200,068
    
    
    
    200,068Not practicable to estimate fair value
    
    
    4,771
    
    
    
    Liability:Long-term debt, including current
portion
    
    
    (8,864
    )
    
    
    (8,864
    )Derivatives:Forward foreign exchange contracts in a:Gain position
    
    
    661
    
    
    
    661Loss position
    
    
    (51
    )
    
    
    (51
    )Currency option contracts in a:Gain position
    
    
    695
    
    
    
    695Loss position
    
    
    
    
    
    
    
 - 135 -




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##### Table of Contents



Limitations
  16.
    
    Restructuring Cost
    - 136 -




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##### Table of Contents



Yen (Millions)Impairment
    
    Gain onWorkforce
    
    on property,
    
    sales ofreduction
    
    plant and
    
    assets held
    
    Otherobligations
    
    equipment
    
    for sale
    
    liabilities
    
    TotalMarch 31, 2005
    
    ¥
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Costs and expenses
    
    
    3,309
    
    
    
    2,594
    
    
    
    
    
    
    
    922
    
    
    
    6,825Payments
    
    
    286
    
    
    
    
    
    
    
    
    
    
    
    242
    
    
    
    528Non-cash adjustments
    
    
    
    
    
    
    2,594
    
    
    
    
    
    
    
    
    
    
    
    2,594March 31, 2006
    
    ¥
    3,023
    
    
    
    
    
    
    
    
    
    
    
    680
    
    
    
    3,703Costs and expenses
    
    
    441
    
    
    
    190
    
    
    
    
    
    
    
    412
    
    
    
    1,043Income
    
    
    
    
    
    
    
    
    
    
    (533
    )
    
    
    
    
    
    
    (533
    )Payments
    
    
    3,432
    
    
    
    
    
    
    
    
    
    
    
    1,032
    
    
    
    4,464Non-cash adjustments
    
    
    
    
    
    
    190
    
    
    
    (533
    )
    
    
    
    
    
    
    (343
    )March 31, 2007
    
    ¥
    32
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    92U.S. Dollars (Thousands)March 31, 2006
    
    $
    25,618
    
    
    
    
    
    
    
    
    
    
    
    5,762
    
    
    
    31,380Costs and expenses
    
    
    3,737
    
    
    
    1,610
    
    
    
    
    
    
    
    3,492
    
    
    
    8,839Income
    
    
    
    
    
    
    
    
    
    
    (4,517
    )
    
    
    
    
    
    
    (4,517
    )Payments
    
    
    29,084
    
    
    
    
    
    
    
    
    
    
    
    8,746
    
    
    
    37,830Non-cash adjustments
    
    
    
    
    
    
    1,610
    
    
    
    (4,517
    )
    
    
    
    
    
    
    (2,907
    )March 31, 2007
    
    $
    271
    
    
    
    
    
    
    
    
    
    
    
    508
    
    
    
    779
   17.
    
    Assets Held for Sale
   - 137 -




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##### Table of Contents



Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    
    
    2006
    
    
    
    2007Assets held for saleNet property, plant and equipment
    
    ¥
    2,125
    
    
    
    4,110
    
    
    $
    18,008
 18.
    
    Goodwill and Other Intangible Assets
  Yen (Millions)2007Gross Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Net AmountAmortized intangible assets:Patent
    
    ¥
    13,388
    
    
    
    3,888
    
    
    
    9,500Customer relationships
    
    
    11,001
    
    
    
    1,333
    
    
    
    9,668Software
    
    
    9,660
    
    
    
    5,890
    
    
    
    3,770Other
    
    
    6,884
    
    
    
    1,824
    
    
    
    5,060Total
    
    
    40,933
    
    
    
    12,935
    
    
    
    27,998Unamortized intangible assets
    
    ¥
    3,007
    
    
    
    
    
    
    
    3,007
 Yen (Millions)2006Gross Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Net AmountAmortized intangible assets:Patent
    
    ¥
    10,350
    
    
    
    3,226
    
    
    
    7,124Customer relationships
    
    
    10,673
    
    
    
    441
    
    
    
    10,232Software
    
    
    9,268
    
    
    
    5,389
    
    
    
    3,879Other
    
    
    7,024
    
    
    
    1,658
    
    
    
    5,366Total
    
    
    37,315
    
    
    
    10,714
    
    
    
    26,601Unamortized intangible assets
    
    ¥
    2,877
    
    
    
    
    
    
    
    2,877
 U.S. Dollars (Thousands)2007Gross Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Net AmountAmortized intangible assets:Patent
    
    $
    113,458
    
    
    
    32,949
    
    
    
    80,509Customer relationships
    
    
    93,229
    
    
    
    11,297
    
    
    
    81,932Software
    
    
    81,864
    
    
    
    49,915
    
    
    
    31,949Other
    
    
    58,339
    
    
    
    15,458
    
    
    
    42,881Total
    
    
    346,890
    
    
    
    109,619
    
    
    
    237,271Unamortized intangible assets
    
    $
    25,483
    
    
    
    
    
    
    
    25,483
  - 138 -




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##### Table of Contents



Yen (Millions)Electronicmaterials and
    
    Recordingcomponents
    
    media
    
    TotalMarch 31, 2005
    
    ¥
    9,210
    
    
    
    
    
    
    
    9,210Additions
    
    
    9,782
    
    
    
    
    
    
    
    9,782Deductions
    
    
    (401
    )
    
    
    
    
    
    
    (401
    )Translation adjustment
    
    
    862
    
    
    
    
    
    
    
    862March 31, 2006
    
    
    19,453
    
    
    
    
    
    
    
    19,453Additions
    
    
    8
    
    
    
    
    
    
    
    8Deductions
    
    
    (1,978
    )
    
    
    
    
    
    
    (1,978
    )Translation adjustment
    
    
    56
    
    
    
    
    
    
    
    56March 31, 2007
    
    ¥
    17,539
    
    
    
    
    
    
    
    17,539
 U.S. Dollars (Thousands)Electronicmaterials and
    
    Recordingcomponents
    
    media
    
    TotalMarch 31, 2006
    
    $
    164,856
    
    
    
    
    
    
    
    164,856Additions
    
    
    68
    
    
    
    
    
    
    
    68Deductions
    
    
    (16,763
    )
    
    
    
    
    
    
    (16,763
    )Translation adjustment
    
    
    475
    
    
    
    
    
    
    
    475March 31, 2007
    
    $
    148,636
    
    
    
    
    
    
    
    148,636
   - 139 -




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##### Table of Contents



19.
    
    Net Income per Share
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2005
    
    2007Income from
continuing
operations available
to common
stockholders
    
    ¥
    70,125
    
    
    
    44,411
    
    
    
    36,965
    
    
    $
    594,280Loss from
discontinued
operations available
to common
stockholders
    
    
    
    
    
    
    310
    
    
    
    3,665
    
    
    
    Net income available
to common
stockholders
    
    ¥
    70,125
    
    
    
    44,101
    
    
    
    33,300
    
    
    $
    594,280
 Number of shares (Thousands)2007
    
    2006
    
    2005Weighted average
common shares
outstanding  Basic
    
    
    132,342
    
    
    
    132,239
    
    
    
    132,293Effect of dilutive
stock options
    
    
    146
    
    
    
    116
    
    
    
    83Weighted average
common shares
outstanding  Diluted
    
    
    132,488
    
    
    
    132,355
    
    
    
    132,376
 Yen
    
    U.S. Dollars2007
    
    2006
    
    2005
    
    2007Income from
continuing
operations per
share:Basic
    
    ¥
    529.88
    
    
    
    335.84
    
    
    
    279.41
    
    
    $
    4.49Diluted
    
    
    529.29
    
    
    
    335.54
    
    
    
    279.25
    
    
    
    4.49Loss from
discontinued
operations per
share:Basic
    
    
    
    
    
    
    (2.34
    )
    
    
    (27.70
    )
    
    
    Diluted
    
    
    
    
    
    
    (2.34
    )
    
    
    (27.69
    )
    
    
    Net income per share:Basic
    
    ¥
    529.88
    
    
    
    333.50
    
    
    
    251.71
    
    
    $
    4.49Diluted
    
    
    529.29
    
    
    
    333.20
    
    
    
    251.56
    
    
    
    4.49
  20.
    
    Business and Credit Concentrations
    - 140 -




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##### Table of Contents



21.
    
    Discontinued Operations
   Yen (Millions)2006
    
    2005Net sales
    
    ¥
    45
    
    
    
    2,242Loss from operations before income taxes (including
loss on disposal of ¥224 million in 2006)
    
    
    310
    
    
    
    3,509Income tax expense
    
    
    
    
    
    
    156Loss from discontinued operations
    
    ¥
    310
    
    
    
    3,665
 22.
    
    Sale of a Subsidiary
  - 141 -




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##### Table of Contents



23.
    
    Acquisition
   Yen(Millions)Current assets
    
    ¥
    23,176Property, plant and equipment
    
    
    9,673Intangible assets
    
    
    13,686Goodwill
    
    
    4,854Other assets
    
    
    5,090Total assets acquired
    
    
    56,479Current liabilities
    
    
    (13,429
    )Noncurrent liabilities
    
    
    (9,583
    )Minority interests
    
    
    (9,265
    )Total liabilities assumed
    
    
    (32,277
    )Net assets acquired
    
    ¥
    24,202
   - 142 -




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##### Table of Contents



Yen(Millions)2006
    
    2005Net sales
    
    ¥
    816,431
    
    
    ¥
    702,566Income from continuing operations
    
    
    44,188
    
    
    
    35,354Loss from discontinued operations
    
    
    310
    
    
    
    3,665Net income
    
    
    43,878
    
    
    
    31,689
 Yen2006
    
    2005Income from continuing operations
per share:Basic
    
    ¥
    334.15
    
    
    
    267.24Diluted
    
    
    333.86
    
    
    
    267.07Loss from discontinued operations
per share:Basic
    
    ¥
    (2.34
    )
    
    
    (27.70
    )Diluted
    
    
    (2.34
    )
    
    
    (27.69
    )Net income per share:Basic
    
    ¥
    331.81
    
    
    
    239.54Diluted
    
    
    331.52
    
    
    
    239.38
   24.
    
    Related party transaction
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2007Due from
    
    ¥
    4,134
    
    
    
    5,515
    
    
    $
    35,034Due to
    
    
    4,211
    
    
    
    5,179
    
    
    
    35,686
 - 143 -




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##### Table of Contents



Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2005
    
    2007Gross purchase
    
    ¥
    54,067
    
    
    
    56,003
    
    
    
    52,405
    
    
    $
    458,195Less raw materials
sold with no
mark-up
    
    
    (43,327
    )
    
    
    (46,580
    )
    
    
    (43,786
    )
    
    
    (367,178
    )Net purchases
    
    
    10,740
    
    
    
    9,423
    
    
    
    8,619
    
    
    
    91,017Research and
development
expenses
    
    
    1,642
    
    
    
    2,141
    
    
    
    2,089
    
    
    
    13,915Sales
    
    
    217
    
    
    
    249
    
    
    
    198
    
    
    
    1,839
 25.
    
    Subsequent events
 Imations acquisition of TDK brand recording media business
 
   
    
    TDK Marketing Corporation: Subsidiary in Japan (100 percent of outstanding shares
directly held by TDK)
    
    TDK (Australia) Pty. Ltd.: Subsidiary in Australia (75 percent of outstanding shares
directly held by TDK)
    
    TDK Polska Sp. Z.o.o.: Subsidiary in Poland (100 percent of outstanding shares
indirectly held by TDK)
    
    TDK Marketing Europe GmbH: Subsidiary in Germany (100 percent of outstanding shares
indirectly held by TDK)
    
    TDK Recording Media (Hong Kong) Co., Ltd.: Subsidiary in China (Hong Kong) (100
percent of outstanding shares indirectly held by TDK)
    
    TDK Online Services Corporation: Subsidiary in U.S.A. (100 percent of outstanding
shares indirectly held by TDK)
   
    
    TDK Electronics Corporation: Processing plant, certain assets and liabilities were
transferred to Imation
    
    TDK Singapore (Pte) Ltd.: Certain assets and liabilities were transferred to Imation
    
    TDK (Shanghai) International Trading Co., Ltd.: Certain assets and liabilities were
transferred to Imation
  - 144 -




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##### Table of Contents



Purchase and retirement of treasury stock
   Receipt of reinvestigation decision regarding correction notices based on transfer pricing taxation
   - 145 -




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##### Table of Contents



26.
    
    Supplementary Information
 Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2007
    
    2006
    
    2005
    
    2007(a) Statement of IncomeResearch and development
    
    
    ¥50,058
    
    
    
    45,528
    
    
    
    36,348
    
    
    $
    424,220Rent
    
    
    8,794
    
    
    
    7,739
    
    
    
    7,349
    
    
    
    74,525Maintenance and repairs
    
    
    13,494
    
    
    
    13,732
    
    
    
    11,090
    
    
    
    114,356Advertising costs
    
    
    4,570
    
    
    
    4,828
    
    
    
    4,926
    
    
    
    38,729(b) Statement of Cash FlowsCash paid during year for:Interest
    
    
    ¥239
    
    
    
    749
    
    
    
    331
    
    
    
    $2,025Income taxes
    
    
    ¥15,364
    
    
    
    32,789
    
    
    
    13,740
    
    
    $
    130,203
 Noncash activities
   Yen(Millions)Short-term debt assumed in connection with business acquisition
    
    
    ¥781Long-term debt assumed in connection with business acquisition
    
    
    2,107
  - 146 -




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##### Table of Contents



Schedule II
 
 Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atbeginning
    
    
    Charged to
    
    
    
    
    
    
    Bad debts
    
    
    Translation
    
    
    end ofof period
    
    
    earnings
    
    
    Acquisition
    
    
    written off
    
    
    adjustment
    
    
    periodYear ended
March 31, 2007:Allowance for
doubtful receivables
    
    ¥
    4,064
    
    
    
    2,405
    
    
    
    
    
    
    
    234
    
    
    
    76
    
    
    
    6,311Year ended
March 31, 2006:Allowance for
doubtful receivables
    
    ¥
    2,560
    
    
    
    322
    
    
    
    1,033
    
    
    
    71
    
    
    
    220
    
    
    
    4,064Year ended
March 31, 2005:Allowance for
doubtful receivables
    
    ¥
    2,000
    
    
    
    598
    
    
    
    
    
    
    
    106
    
    
    
    68
    
    
    
    2,560
 - 147 -




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##### Table of Contents



Item 18.
    
    Financial Statements
  
 Item 19.
    
    Exhibits
  1.1
    
    ARTICLES OF INCORPORATION (English translation)1.2
    
    REGULATIONS OF THE BOARD OF DIRECTORS (English translation)1.3
    
    REGULATIONS OF THE BOARD OF CORPORATE AUDITORS (English translation)2.1
    
    SHARE HANDLING REGULATIONS (English translation)8.1
    
    List of Significant Subsidiaries11.1
    
    TDK CODE OF ETHICS (English translation)12.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of CEO of the
Company12.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of CFO of the
Company13.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CEO of the
Company13.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CFO of the
Company
 - 148 -




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##### Table of Contents



SIGNATURES
  TDK Corporation
(Registrant)Date:  September 18, 2007
    By:
    /s/Hajime SawabeHajime SawabeRepresentative Director,
Chairman and CEO - 149 -